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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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)
2801 ORCHARD PARKWAY, SAN JOSE, CALIFORNIA, 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 526-0300
(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 [ ]
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.
8,654,156 shares of common stock at May 1, 1997
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WEITEK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS OF DISCONTINUED OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
March 31, 1997 December 31, 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 3,540 $ 2,878
Accounts receivable, net of allowances of $0 and $484 3,478 556
Assets held for sale - 595
Prepaid expenses and other 581 157
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$ 7,599 $ 4,186
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 165 $ 211
Accrued compensation and employee benefits 359 417
Other current liabilities 642 691
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Total current liabilities 1,166 1,319
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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, 8,654,156 and 8,654,156 shares outstanding 23,141 23,141
Retained earnings (deficit) (16,708) (20,274)
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Total shareholders' equity 6,433 2,867
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$ 7,599 $ 4,186
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See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF DISCONTINUED OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31, 1997 March 30,1996
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Net revenue $ 4,204 $ 960
Cost of revenue 83 4,035
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Gross margin 4,121 (3,075)
Research and development - 1,880
Sales and marketing - 560
General and administrative 837 500
Severance costs - 410
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Income (loss) from discontinued operations 3,284 (6,425)
Interest and other income (net) 282 60
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Income (loss) from discontinued operations before income taxes 3,566 (6,365)
Provision for income taxes - -
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Net income (loss) from discontinued operations $ 3,566 $ (6,365)
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Earnings (loss) per share from discontinued operations $ .41 $ (.74)
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Weighted average common shares 8,654 8,642
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See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS OF DISCONTINUED OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31, 1997 March 30, 1996
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Cash flows from discontinued operating activities:
Net income (loss) from discontinued operations $ 3,566 $ (6,365)
Adjustments to reconcile net income (loss) from discontinued
operations to net cash used by discontinued operating activities:
Depreciation and amortization - 433
Changes in assets and liabilities:
Accounts receivable (2,922) 1,236
Inventories 815
Prepaid expenses and other assets (424) 68
Accounts payable (46) (769)
Accrued compensation and employee benefits (58) 306
Other liabilities (49) 815
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Net cash provided (used) by discontinued operations 67 (3,461)
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Cash flows from investing activities:
Proceeds from (purchase of) equipment and
leasehold improvements 595 (336)
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Net cash provided (used) by investing activities 595 (336)
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Cash flows from financing activities:
Issuance of capital stock - 46
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Net cash provided by financing activities - 46
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Net increase (decrease) in cash and cash equivalents 662 (3,751)
Cash and cash equivalents at beginning of period 2,878 6,028
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Cash and cash equivalents at end of period $ 3,540 $ 2,277
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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, 1996 included in the Company's 1996 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 - Discontinued Operations:
As of March 31, 1997, management estimated that all costs expected to be
incurred as a direct result of the discontinuance of the Company's operations
would amount to approximately $1.0 million. These estimated costs exceed
expected licensing revenue and recoveries from the sale of assets which are
estimated to be approximately $570,000. Accordingly, the estimated licensing
revenue, recoveries from the sale of assets and costs to be incurred are
included in the financial statements for the quarter ended March 31, 1997. The
costs to be incurred as a direct result of the discontinuance of the Company's
operations consist of the following (in thousands):
Quarter ended
March 31, 1997
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Employee severance and related costs $ 359
Administrative costs 310
Legal and professional fees associated with the bankruptcy proceedings 93
Other legal and professional costs 239
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$ 1,001
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Note 3 - Consolidated Condensed Balance Sheet Detail:
(In thousands)
March 31, 1997 December 31, 1996
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Assets held for sale, net book value:
Machinery and equipment $ - $ 438
Furniture and fixtures - 343
Leasehold improvements - 159
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- 940
Valuation allowance - (345)
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$ - $ 595
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Other current liabilities:
Legal and professional costs $ 332 $ 691
Administrative costs 310 -
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$ 642 $ 691
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Note 4 - Earnings (Loss) per Share:
Earnings (loss) per share is computed using the weighted average number of
common shares and, where dilutive, common share equivalents outstanding during
the period.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS
128 requires the disclosure of basic and diluted earnings per share data and is
effective for fiscal years ending after December 15, 1997. The adoption of SFAS
128 would have no effect on earnings per share data for the three months ended
March 31, 1997 and 1996.
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WEITEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF DISCONTINUED OPERATIONS
RESULTS OF DISCONTINUED OPERATIONS
When used in the following report, the words "projects", "expects", "intends"
and similar expressions are intended to identify forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the risk
factors set forth below and elsewhere in this Form 10-Q. A number of factors may
impact the outcome of actual results, but in particular, (i) the outcome of
pending claims filed with the Bankruptcy Court by certain creditors of the
Company (ii) the amount, if any, received by the Company from the sale of its
remaining assets and technology (iii) additional claims of which the Company is
not currently aware and which the Company may have to satisfy prior to any
liquidating distribution to shareholders and (iv) the costs associated with
winding up the affairs of the Company.
OVERVIEW
On December 11, 1996 the Company filed a voluntary plan of reorganization (the
"Plan") under Chapter 11 of the U.S. Bankruptcy Code with the United States
Bankruptcy Court, Northern District of California, San Jose Division (the
"Bankruptcy Court"). The Company filed the Plan in connection with the signing
of an asset purchase agreement (the "Rockwell Agreement") with Rockwell
Semiconductor Systems, Inc. ("Rockwell"). Under the terms of the Rockwell
Agreement, Rockwell agreed to pay approximately $3,124,000 to acquire certain of
the Company's assets and a non-exclusive license to certain of the Company's
technology. While awaiting approval of the Plan by the Bankruptcy Court, the
Company provided contract engineering services to Rockwell and received
permission from the Bankruptcy Court to permit Rockwell to use the Company's San
Jose, California design facilities and hire the Company's engineers and other
employees sought by Rockwell. The Plan, which includes the Rockwell Agreement as
well as the disposition of all other remaining assets and technology of the
Company, was approved by the Bankruptcy Court on March 20, 1997. Pursuant to the
approved Plan, the Company has sold substantially all of its remaining assets
and its technology and intends to wind up its affairs in the first half of 1997.
In 1997, the Company expects to make a liquidating distribution to its
shareholders in an amount estimated to be between $0.55 and $0.75 per share.
The actual amount of the liquidating distribution may vary depending on
several factors including, but not limited to the following: (i) the outcome
of pending claims filed with the Bankruptcy Court by certain creditors of the
Company (ii) the amount, if any, received by the Company from the sale of its
remaining assets and technology (iii) additional claims of which the Company
is not currently aware and which the Company may have to satisfy prior to any
liquidating distribution to shareholders and (iv) the costs associated with
winding up the affairs of the Company.
NET REVENUE
Net revenue in the first quarter of 1997 was $4.2 million compared to net
revenue of $1.0 million in the first quarter of 1996. Approximately 66% of the
net revenue in the first quarter of 1997 was derived from recognition of the
Rockwell Agreement with another 24% from technology licensing agreements. During
the first quarter of 1996, approximately 31% of total revenue was derived from a
fully paid, non-exclusive technology license agreement.
International net revenue was not significant in either the first quarter of
1997 or 1996.
Rockwell, Intel and SGS-Thomson represented approximately 72%, 12% and 10%
respectively of revenue for the first quarter of 1997. In the first quarter of
1996, Invidia, Rave Computer and Force Computer represented approximately 31%,
23% and 19% of revenue respectively. No other customer represented 10% or more
of the Company's net revenue during these periods.
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GROSS MARGIN
The Company's gross margin was $4.1 million in the first quarter of 1997,
compared to a negative margin of $3.1 million in the first quarter of 1996. The
gross margin in the first quarter of 1997 was derived primarily from the
Rockwell Agreement and technology licensing agreements which have little or no
associated cost of revenue. The Company recorded reserves of $3.3 million in the
first quarter of 1996 related to inventory and committed purchases.
EXPENSES
As a percentage of net revenue, expenses were 20% in the first quarter of 1997,
compared to 349% in the first quarter of 1996. The percentage decrease is
primarily due to the sharp increase in net revenue and a reduction in absolute
expense dollars. In absolute dollars, expenses decreased to $0.8 million from
$3.4 million in the first quarter of 1996. Expenses for the first quarter of
1997 include $1.0 million in estimated costs to be incurred during the phase out
period offset by a reduction in a previously recorded accrued liability of $0.7
million assumed by the Company's insurance carrier. Expenses for the first
quarter of 1996 included severance costs of approximately $0.4 million and costs
related to the relocation of the Company's headquarters of approximately $0.2
million.
Research and development expenses: There were no research and development
expenses in the first quarter of 1997. Research and development expenses were
$1.9 million in the first quarter of 1996. No employees were involved in
research and development activities in the first quarter of 1997.
Sales and marketing expenses: There were no sales and marketing expenses in the
first quarter of 1997. Sales and marketing expenses were $0.6 million in the
first quarter of 1996. No employees were involved in sales and marketing
activities in the first quarter of 1997.
General and administrative expenses: As a percentage of net revenue, general and
administrative expenses were 20% in the first quarter of 1997, compared to 52%
in the first quarter of 1996. The percentage decrease is primarily due to the
sharp increase in net revenue. In absolute dollars, general and administrative
expenses decreased to $0.8 million from $0.9 million in the first quarter of
1996. General and administrative expenses for the first quarter of 1997 includes
$1.0 million in estimated costs to be incurred during the phase out period
offset by a reduction in a previously recorded accrued liability of $0.7 million
assumed by the Company's insurance carrier. General and administrative expenses
for the first quarter of 1996 included severance costs of approximately $0.4
million and costs related to the relocation of the Company's headquarters of
approximately $0.2 million.
PROVISION FOR INCOME TAXES
The Company recorded no tax provision in the first quarter of 1997 due to
recognition of certain charges for tax purposes which were previously recorded
for financial reporting purposes. The Company recorded no tax benefit in the
first quarter of 1996. 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. In the event of a change in control as defined by the
Internal Revenue Code, the Company's utilization of its net operating loss carry
forwards and tax credits is subject to substantial annual limitations.
NET INCOME
The Company generated net income of $3.6 million in the first quarter of 1997
compared to a net loss of $6.4 million in the first quarter of 1996.
In the fourth quarter of 1996, the Company decided to discontinue all its
operations. As of March 31, 1997, future charges related to employee salary and
severance costs, legal and other costs associated with bankruptcy proceedings,
and the windup of the Company's affairs were estimated to be approximately $1.0
million. Future revenue, consisting primarily of technology licensing revenue
was estimated to be approximately $0.6 million. The future charges and revenue
were included in net income for the first quarter of 1997.
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LIQUIDITY AND CAPITAL RESOURCES OF DISCONTINUED OPERATIONS
At March 31, 1997, the Company's cash and cash equivalents balance was $3.5
million and working capital was $3.5 million. In addition, at March 31, 1997
approximately $1.7 million was being held in Bankruptcy Court mandated escrow.
The amount held in escrow increased to approximately $3.9 million as of May 1,
1997. The amounts held in escrow represent proceeds from the Rockwell Agreement,
technology license agreements and the sale of other assets occurring during the
phase out period. At March 31, 1997 the Company had no available credit
facilities.
CERTAIN RISKS
Actual results may differ materially from those described herein. Factors which
may cause such results (including the amount of any liquidating distribution to
shareholders) to differ include, but are not limited to the following: (i) the
outcome of pending claims filed with the Bankruptcy Court by certain creditors
of the Company (ii) the amount, if any, received by the Company from the sale
of its remaining assets and technology (iii) additional claims of which the
Company is not currently aware and which the Company may have to satisfy prior
to any liquidating distribution to shareholders and (iv) the costs associated
with winding up the affairs of the Company.
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WEITEK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1997
PART II
Item 1. Legal Proceedings
On March 20, 1997, the Bankruptcy Court approved the Plan. The
Plan subsequently became effective upon the consummation of the
Rockwell Agreement.
Item 4. Submission of Matters to a Vote of Security Holders
On February 14, 1997, a ballot was mailed to all security holders
of the Company, as well as certain of the Company's creditors,
soliciting their vote on or before March 11, 1997 to accept or
reject the Plan. Accompanying the ballot was a Disclosure
Statement approved by the Bankruptcy Court, the Plan and the
Rockwell Agreement. The affirmative vote of more than two-thirds
of the holders of outstanding equity and security interest was
received which was sufficient to approve the Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 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 13, 1997 /s/ RICHARD H. BOHNET
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Richard H. Bohnet
* Responsible Person
* As of the date of this filing, the Registrant no longer has any persons
serving as executive officers or members of its board of directors. Pursuant to
the Registrant's Plan of Reorganization approved by the United States Bankruptcy
Court on March 20, 1997, Mr. Bohnet, the former President and Chief Executive
Officer of the Registrant, is designated as the Responsible Person empowered to
do all things necessary and appropriate to meet the Registrant's obligations.
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Exhibit Index
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27.1 Financial Data Schedule