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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 1, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___TO _____
COMMISSION FILE NUMBER 0-17191
WEITEK CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2709963
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1060 EAST ARQUES AVENUE, SUNNYVALE, CALIFORNIA 94086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 738-8400
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,409,255 shares of common stock at May 1, 1995
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WEITEK CORPORATION
FORM 10-Q/A
FOR THE QUARTER ENDED
APRIL 1, 1995
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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WEITEK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
April 1, 1995 December 31, 1994
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ASSETS
Current assets:
Cash $ 2,349 $ 1,532
Short-term investments 4,708 7,032
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Total cash and short-term investments 7,057 8,564
Accounts receivable, net of allowances
of $816 and $756 4,078 4,143
Inventories 1,827 2,588
Prepaid expenses and other 460 412
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Total current assets 13,422 15,707
Equipment and leasehold improvements, net 1,776 1,731
Other assets 2 2
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$ 15,200 $ 17,440
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,102 $ 5,314
Accrued compensation and employee benefits 1,696 2,006
Other current liabilities 1,030 982
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Total current liabilities 6,828 8,302
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Commitments
Shareholders' equity:
Preferred stock, 1,000,000 shares authorized, no par
value, no shares outstanding -- --
Common stock, 50,000,000 shares authorized, no par
value, 8,350,732 and 8,293,839 shares outstanding 22,494 22,335
Retained earnings (deficit) (14,122) (13,197)
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Total shareholders' equity 8,372 9,138
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$ 15,200 $ 17,440
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See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
April 1, 1995 April 2, 1994
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Net revenue $ 5,900 $10,300
Cost of revenue 3,835 5,080
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Gross margin 2,065 5,220
Research and development 2,003 2,479
Sales and marketing 723 1,991
General and administrative 364 545
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Operating income (loss) (1,025) 205
Other income 100 95
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Income (loss) before income taxes (925) 300
Provision for income taxes -- 75
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Net income (loss) $ (925) $ 225
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Earnings (loss) per share $ (.11) $ .03
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Weighted average common
shares and equivalents 8,321 8,754
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See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
April 1, 1995 April 2, 1994
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Cash flows from operating activities:
Net income (loss) $ (925) $ 225
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 327 380
Changes in assets and liabilities:
Accounts receivable 65 939
Inventories 761 (1,429)
Prepaid expenses and other (48) (413)
Accounts payable (1,212) (86)
Accrued compensation and employee benefits (310) 440
Income taxes payable -- 75
Other liabilities 48 (171)
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Net cash used by operating activities (1,294) (40)
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Cash flows from investing activities:
Equipment and leasehold improvements (372) (254)
Decrease in short-term investments 2,324 234
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Net cash provided (used) by investing activities 1,952 (20)
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Cash flows from financing activities:
Issuance of capital stock 159 283
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Net cash provided by financing activities 159 283
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Net increase in cash 817 223
Cash, beginning of period 1,532 2,723
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Cash, end of period $ 2,349 $ 2,946
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See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Interim Statements:
The accompanying unaudited consolidated condensed financial statements have
been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, contain all adjustments necessary
to fairly present the financial information included therein. While the
Company believes that the disclosures are adequate to make the information not
misleading, it is suggested that this financial data be read in conjunction
with the audited consolidated financial statements and notes thereto for the
year ended December 31, 1994 included in the Company's 1994 Annual Report to
the Securities and Exchange Commission on Form 10-K. Results for the interim
period presented are not necessarily indicative of results for the entire year.
Note 2 - Consolidated Condensed Balance Sheet Detail:
(In thousands)
April 1, 1995 December 31, 1994
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Inventories:
Raw materials $ 81 $ 587
Work-in-process 994 1,530
Finished goods 752 471
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$ 1,827 $ 2,588
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Equipment and leasehold improvements:
Machinery and equipment $12,383 $12,010
Furniture and fixtures 1,086 1,086
Leasehold improvements 372 373
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13,841 13,469
Less accumulated depreciation and amortization 12,065 11,738
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$ 1,776 $ 1,731
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Note 3 - Earnings (Loss) per Share:
Earnings (loss) per share are computed using the weighted average number of
common shares and, where dilutive, common share equivalents outstanding during
the period.
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WEITEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUE
Net revenue in the first quarter of 1995 was $5.9 million compared to net
revenue of $10.3 million in the first quarter of 1994. Unit sales of
integrated circuits in the first quarter of 1995 decreased by 32% and overall
average selling prices declined by 15% from the first quarter of 1994. The
decrease in unit sales was primarily attributable to decreased shipments of the
Company's user interface products. The decline in average selling prices was
due to the continued shift in product mix toward products with lower average
selling prices, particularly user interface products.
International net revenue was 28% of total net revenue in the first quarter of
1995 compared to 20% of net revenue in the first quarter of 1994. The increase
in international net revenue was due primarily to increased shipments of user
interface products to Japan.
Sales of the Company's products to Siemens Corporation represented 27% of net
revenue and sales to Ryoyo, a Japanese distributor, represented 24% of net
revenue in the first quarter of 1995. Diamond Multimedia Systems accounted for
16% of net revenue in the first quarter of 1995 and 40% of net revenue in the
first quarter of 1994. No other customer represented 10% or more of the
Company s net revenue during these periods.
GROSS MARGIN
The Company's gross margin was 35% in the first quarter of 1995, down from 51%
in the first quarter of 1994, primarily due to a shift in product mix. The
Company anticipates that its overall gross margin percentage will continue to
be highly dependent on product mix, as the Company's user interface products
typically carry gross margin percentages lower than the Company's SPARC POWER
uP processor. Overall, as sales of user interface products have come to
represent a larger share of total revenues, gross margin as a percentage of
revenue has declined below historical levels of 45% to 50%. In order to
prevent margins from declining below current levels, the Company needs to
introduce cost-effective new products on a timely basis and continue to execute
on its cost reduction programs. As the Company introduces new products and
qualifies multiple sources of supply for these products, the Company increases
the risk that it could experience significant fluctuation in manufacturing
yields and hence, product cost and gross margin. While the Company's
manufacturing engineering personnel work very closely with its suppliers to
stabilize and improve manufacturing yields, the Company's gross margin could be
adversely affected if these efforts were to be unsuccessful.
Substantially all of the semiconductor wafers used to manufacture the Company's
products are processed to its specifications by four outside suppliers. The
Company believes that its wafer requirements do not justify the high cost of
owning and operating a fabrication facility, and that these manufacturing
arrangements provide it with flexibility in choosing process technologies. The
Company's reliance on third party manufacturers involves several risks,
however, including the absence of guaranteed capacity, the possible
unavailability of or delays in obtaining access to certain process
technologies, and the absence of control over wafer delivery schedules,
manufacturing yields and production costs.
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OPERATING EXPENSES
As a percentage of net revenue, operating expenses were 52% in the first
quarter of 1995, compared to 49% in the first quarter of 1994. In absolute
dollars, total operating expenses decreased to $3.1 million from $5.0 million
in the first quarter of 1994. The Company restructured its operations in the
fourth quarter of 1994 and decreased its workforce by approximately 25%,
resulting in a decrease in operating expenses in the first quarter of 1995.
Research and development expenses increased as a percentage of net revenue to
34% in the first quarter of 1995 from 24% in the first quarter of 1994. In
absolute dollars, research and development expenses decreased to $2.0 million
in the first quarter of 1995 from $2.5 million in the prior year period. The
lower expense level in the first quarter of 1995 is due to lower staffing
levels and productivity improvements resulting from the Company's continued
investment in design automation tools. Approximately 60% of the Company's
employees are involved in research and development activities.
Sales and marketing expenses decreased as a percentage of net revenue to 12% in
the first quarter of 1995 from 19% in the first quarter of 1994. In absolute
dollars, sales and marketing expenses decreased from $2.0 million in the first
quarter of 1994 to $0.7 million in the first quarter of 1995, due primarily to
lower staffing levels and decreased promotional expenditures.
General and administrative expenses increased as a percentage of net revenue to
6% in the first quarter of 1995 from 5% in the first quarter of 1994. In
absolute dollars, general and administrative expenses decreased from $0.5
million in the first quarter of 1994 to $0.4 million in the first quarter of
1995, due primarily to lower staffing levels.
PROVISION FOR INCOME TAXES
The Company recorded no tax benefit in the first quarter of 1995 compared to a
provision of 25% in the first quarter of 1994. The Company has exhausted its
ability to carry back losses against prior years income; however, the Company
has the ability to carry forward certain tax attributes to offset future
regular federal and state income taxes payable. Consequently, if the Company
is profitable in future periods, the Company's effective tax rate in such
periods may be somewhat below the statutory rate.
NET INCOME
The Company generated a net loss of $0.9 million in the first quarter of 1995
compared to net income of $0.2 million in the first quarter of 1994. As a
percentage of revenue, the net loss was 16% in the first quarter of 1995,
compared to net income of 2% in the first quarter of 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of April 1, 1995, the Company's principal source of liquidity was $7.1
million of cash and short-term investments. The Company also has a line of
credit, secured by cash and short-term investments, which allows for borrowings
of up to $2.4 million, after allocation of $0.1 million of the facility to
letters of credit.
During August 1990, the Company's Board of Directors approved a plan to
repurchase outstanding shares of the Company's common stock on the open market.
The Company did not repurchase any shares during the first quarter of 1995.
The Company has suffered recurring losses from operations and has an
accumulated deficit that raise doubt about its ability to continue as a going
concern. During 1994, the Company took certain steps to reduce its overhead
and other expenses, including a workforce reduction and consolidation of
facilities. The Company is currently focusing its R&D efforts on a new product
that is expected to begin shipping in production volumes in the latter part of
1995. While management believes that its cash and short-term investments
balances will adequately fund the Company s anticipated cash needs through the
end of 1995, any delay in the new product introduction or weakness in market
demand could impact the Company's ability to reduce its operating losses and
cause liquidity problems. Management is currently engaged in discussions with
several financial institutions and believes that additional financing can be
obtained in 1995, if necessary. However, there can be no assurance that the
Company will be successful in obtaining sufficient financing.
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OUTLOOK: ISSUES AND RISKS
The Company anticipates that over the next two quarters, revenue from its user
interface processors will be flat to down from first quarter of 1995 levels.
In addition, shipments of the SPARC POWER uP processor are expected to be down
from first quarter levels. Unless the Company's overall revenues increase
substantially from current levels, the Company will not be profitable and will
begin to experience liquidity problems if it is unable to reduce or eliminate
losses from operations. If the Company does experience significant revenue
growth, it may require additional working capital to fund such growth.
Nearly all of Company's R&D effort is focused on a new mainstream graphics
product that is currently anticipated to ship in production volumes in the
latter part of 1995. Any delay in the introduction of this product or weakness
in market demand could severely impact the Company's ability to increase
revenue and reduce operating losses. In addition, an inability to gain access
to sufficient cost-effective wafer fabrication capacity or a delay in on-going
product cost reduction programs or any further weakness in market demand for
the Company's current products could also negatively impact future operating
results and liquidity.
The semiconductor industry continues to experience a shortage of high
performance sub-micron wafer fabrication capacity. The Company is in the
process of qualifying one or more additional sources of wafer supply for its
products. There are technical as well as financial risks involved in
qualifying an additional source of wafer supply. There can be no assurance
that the Company will be successful in its efforts to maintain or increase
wafer supply in a timely manner. The results of operations would be adversely
affected if the Company were to experience additional constraints in its supply
of wafers from its existing suppliers or if the Company were unable to obtain
an adequate supply of cost-effective wafers from new sources in a timely
manner.
The user interface market is characterized by intense competition, rapid
technological change, evolving industry standards and frequent new product
introductions, resulting in short product life cycles and continuous price
erosion. The Company's results may be adversely affected by the actions of
existing or future competitors, including the development of new technologies,
the introduction of new products and the reduction of prices by such
competitors to gain or retain market share. The Company believes that its
ability to compete successfully depends on elements both within and outside its
control, including successful and timely development of new products and
technologies, external market conditions, product performance and price, access
to sufficient and cost-effective wafer fabrication capacity (especially
high-performance sub-micron processes), alliances with major independent
software vendors and development partners, name recognition, access to advanced
process technologies, customer support and availability of compatible
applications software and software development tools. There can be no
assurance that the Company will be able to compete successfully as to these
factors.
The Company's future operating results may be affected by a variety of other
factors, including fluctuations in manufacturing yields, availability of wafer
fabrication capacity, production cost increases, the timing of new product
introductions by the Company and its competitors, fluctuations in operating
expenses, the cancellation or rescheduling of orders by its customers, and by
general economic conditions, such as a prolonged recessionary period, or
fluctuations in foreign exchange rates. Accordingly, historical trends should
not be used to anticipate results or trends in future periods, and past
financial performance should not be considered as a reliable indicator of
future performance.
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WEITEK CORPORATION
FORM 10-Q/A
FOR THE QUARTER ENDED
APRIL 1, 1995
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Report on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEITEK CORPORATION
Date: May 11, 1995 /s/ Barry L. Cox
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Barry L. Cox
President and Chief Executive Officer
/s/ Paul K. Kidman
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Paul K. Kidman
Director of Finance
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Exhibit Index
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Exhibit 27 Financial Data Schedule
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