SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended April 30, 1995 Commission File Number 1-6395
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SEMTECH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 95-2119684
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
652 Mitchell Road, Newbury Park, California 91320
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 498-2111
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N/A
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(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 has 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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Number of shares of Common Stock,
$ .01 par value, outstanding at April 30, 1995: 4,895,741.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that these condensed financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K.
In the opinion of the Company, these unaudited statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of Semtech Corporation and subsidiaries as
of April 30, 1995, and the results of their operations and the changes in their
cash flow for the three months then ended.
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE FIGURES)
THREE MONTHS ENDED
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APRIL 30, MAY 1,
1995 1994
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NET SALES $9,315 $5,647
Cost of sales 5,749 3,882
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Gross profit 3,566 1,765
Operating expenses 1,997 1,555
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Operating income 1,569 210
Other income (expense) -
Interest, net 8 8
Miscellaneous 0 (11)
Foreign currency transaction loss 0 (4)
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Income before taxes 1,577 203
Provision for taxes 489 53
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NET INCOME $1,088 $ 150
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NET INCOME PER SHARE:
Primary $ .20 $ .03
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Fully diluted $ .20 $ .03
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
APRIL 30, JANUARY 29,
1995 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,035 $ 2,837
Temporary investments 479 821
Receivables, net 5,675 4,501
Income taxes refundable 80 71
Inventories 6,635 6,662
Other current assets 147 181
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TOTAL CURRENT ASSETS 16,051 15,073
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PROPERTY, PLANT AND EQUIPMENT, NET 3,755 3,446
OTHER ASSETS 397 443
DEFERRED INCOME TAXES 39 39
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TOTAL ASSETS $20,242 $19,001
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of Credit $ - $ 175
Current maturities of long-term debt 297 268
Accounts payable 1,682 1,721
Accrued liabilities 1,456 1,253
Income taxes payable 674 286
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TOTAL CURRENT LIABILITIES 4,109 3,703
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LONG-TERM DEBT, LESS CURRENT MATURITIES 586 799
SHAREHOLDERS' EQUITY:
Common Stock, $0.01 par value,
15,000,000 authorized 64 64
Additional paid-in capital 8,233 8,242
Retained earnings 7,499 6,411
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15,796 14,717
Cumulative translation adjustment (249) (218)
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TOTAL SHAREHOLDERS' EQUITY 15,547 14,499
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TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $20,242 $19,001
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED
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APRIL 30, MAY 1,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES -
Net income $ 1,088 $ 150
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation and amortization 227 275
Changes in assets and liabilities:
Receivables (1,174) 38
Inventories 27 (639)
Other assets 80 -
Accounts payable and accrued liabilities 164 (242)
Income tax refundable (9) -
Income taxes payable 388 (99)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 791 (517)
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CASH FLOWS FROM INVESTING ACTIVITIES -
Temporary cash investments 342 1
Additions to property, plant and equipment (536) (235)
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NET CASH USED BY INVESTING ACTIVITIES (194) (234)
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CASH FLOWS FROM FINANCING ACTIVITIES -
Net line of credit activity (175) (113)
Repayment of debt (184) (29)
Additions to debt - 514
Receipts on notes receivables - 5
Stock options and debentures exercised 65 34
Other (74) -
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (368) 411
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Effect of exchange rate changes on cash (31) 0
Net increase (decrease) in cash and cash equivalents 198 (340)
Cash and cash equivalents at beginning of period 2,837 2,873
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,035 2,533
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SEMTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. INCOME TAXES -
Effective February 1, 1993, the Company changed its method of accounting for
income taxes to comply with the provisions of Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS No. 109,
deferred income tax assets or liabilities are computed based on the temporary
difference between the financial statement and income tax bases of assets and
liabilities using the statutory marginal income tax rate in effect for the year
in which the differences are expected to reverse. Deferred income tax expenses
or credits are based on the changes in the deferred income tax assets or
liabilities from period to period.
The income tax provision for the three months ended April 30, 1995 consisted of
income tax expense of $466,000 on the income of the Company's U.S. operations
and income tax expense of $23,000 on the income from the Company's foreign
operation. In the prior year three month period ended May 1, 1994, the Company
incurred income tax expense of $37,000 on the income of the Company's U.S.
operations and income tax expense of $16,000 on income from the Company's
foreign operation.
2. INCOME PER SHARE -
Primary net income per share of common stock has been computed based on the
weighted average number of common and common equivalent shares outstanding.
Fully diluted income per share of common stock was determined on the assumption
that all outstanding convertible debentures were converted under the if-
converted method, as follows:
THREE MONTHS ENDED
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APRIL 30, MAY 1,
1995 1994
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PRIMARY......... 5,311,000 4,641,000
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FULLY DILUTED... 5,481,000 5,133,000
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3. TEMPORARY INVESTMENTS -
Temporary investments consist of commercial paper and government and
corporate obligations with original maturities in excess of three months and are
carried at cost, which approximates market.
4. INVENTORIES -
Inventories consisted of the following:
APRIL 30, JANUARY 29,
1995 1995
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RAW MATERIALS........................... $1,086,000 $1,175,000
WORK IN PROCESS......................... 4,142,000 4,100,000
FINISHED GOODS.......................... 1,407,000 1,387,000
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TOTAL $6,635,000 $6,662,000
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5. LONG-TERM DEBT -
Long-term debt at April 30, 1995 consists mainly of $749,000 of notes
payable and $134,000 of outstanding 8.5% Convertible Subordinated Debentures
issued under the Company's Key Management Convertible Subordinated Debenture
Purchase Plan to key employees and retirees of the Company. Notes payable
consists of a fixed rate loan in the amount of $457,000 used for the acquisition
of equipment, the loan on the Company's Scotland facility in the amount of
$268,000, and long-term obligations due on capital leases of $24,000.
6. LINE OF CREDIT -
The Company maintains a credit arrangement with a financial institution for
a working capital and equipment acquisition line of credit of up to $5,000,000
extending to August 1996 at an interest rate of 30 day rolling commercial paper
plus 2 percent. The arrangement is collateralized by the Company's domestic
assets and contains provisions regarding current ratios, debt to worth, and net
worth. As of April 30, 1995, the Company had no borrowings outstanding against
the line. The Company also maintains an overdraft credit line in the amount of
300,000 pounds sterling at its wholly owned foreign subsidiary, and has obtained
a commitment from its bank to expand the line to 1,000,000 pounds sterling on a
formula line basis.
7. STATEMENT OF CASH FLOWS -
The Company had the following non-cash activities for each of the respective
periods:
THREE MONTHS ENDED
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APRIL 30, MAY 1,
1995 1994
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Non-cash activities -
Debentures converted to stock $ 0 $5,000
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Interest paid in the three months ended April 30, 1995 was $33,000
compared to $43,000 in the three months ended May 1, 1994. Income taxes paid in
the three month period ended April 30, 1995 was $208,500 and income taxes paid
in the three months ended May 1, 1994 was $153,000.
8. SIGNIFICANT CUSTOMERS
For the three months ended April 30, 1995, one customer accounted for 14% of
the Company's revenue and another customer accounted for 10% of the Company's
revenue. As of April 30, 1995, the Company had receivables from these two
customers of $615,333 and $440,206, respectively.
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Item 2. Management's Discussion and Analysis of Financial Conditions and
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Results of Operations
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(l) Material Changes in Financial Condition
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At April 30, 1995, the Semtech Corporation (the "Company") had working
capital of $11,942,000, compared with $11,370,000 at January 29, 1995 - an
increase of $572,000. The increase was primarily due to the Company's higher
level of shipments and profitability during the three months ended April 30,
1995. The increased shipments were the result of increased demand for the
Company's line of linear regulators and transient voltage protection devices
("TVS"). Currently, the Company's linear regulators are primarily used to power
microprocessors in desktop personal computers. The Company's TVS products are
sold into several different markets including, the data communications,
telecommunications, and the personal computer and peripherals markets.
During the quarter, the Company generated $198,000 of cash and cash equivalents.
Operating cash flow was $791,000. The Company's accounts receivable increased
by $1,174,000 during the quarter. The increase in accounts receivable is the
result of the Company's higher shipment rate and the timing of those shipments.
The Company's inventories declined for the second consecutive quarter. The
Company plans to continue to actively manage inventories to minimize inventory
being carried and to maximize inventory turns. During the first quarter, the
Company used cash to repay debt totaling $359,000 and to pay for capital
equipment totaling $536,000. The capital investments were made to increase
capacity for wafer fabrication, assembly and test. The ratio of current
assets to current liabilities at April 30, 1995, was 3.9 to 1, compared to 4.1
to 1 at January 29, 1995.
The following leverage ratios indicate the extent to which the Company has
been financed with debt:
APRIL 30, JANUARY 29,
1995 1995
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Long-term debt as a % of total
capitalization* 3.6% 5.2%
Total debt to total capitalization* 5.5% 8.1%
*Total capitalization is defined as the sum of long-term debt and
shareholders' equity.
The Company is continuing the process of implementing its strategic plan to
expand its product lines that serve the computer, data communications and
telecommunications markets. In the past three years the Company has made
significant investments in the development and promotion of new products.
Commitments for new equipment necessary to achieve the Company's objectives for
improving manufacturing efficiencies and producing new products have been made.
In the first quarter ended April 30, 1995 the Company committed $769,000 for new
equipment purchases. The commitments made in the first quarter were to increase
assembly capacity at our sub-contractors in the Far East, increase test capacity
in the Company's Corpus Christi plant and in the Far East and to continue the
conversion of our Corpus Christi wafer fabrication facility to 4" wafers from 3"
wafers. Outstanding obligations for capital equipment were $521,000 at April 30,
1995, compared to $149,000 at January 30, 1995. Future capital acquisitions will
continue to be based on economic conditions of the Company's markets and the
Company's ability to utilize such assets effectively. The Company intends to
finance the majority of its capital investments and ongoing operations from
internally generated funds and its on-hand cash balances. Some use of the
Company's equipment financing line is possible. The Company believes that
current internal cash flows, together with the Company's cash and cash
equivalents, temporary investments, and the Company's credit facilities are
sufficient to support all currently anticipated future investments in equipment
and facilities.
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(2) Material Changes in Results of Operations
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The following information is provided to further explain certain financial
information shown in the Consolidated Condensed Statements of Operations for the
three months ended April 30, 1995, and May 1, 1994.
THREE MONTH PERIOD ENDED APRIL 30, 1995, COMPARED WITH THE THREE MONTH PERIOD
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ENDED MAY 1, 1994:
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REVENUES -
Revenues for the first quarter ended April 30, 1995 were $9,315,000 compared
to $5,647,000 in the first quarter ended May 1, 1994, an increase of 65%.
Revenues increased due to Company's ability to increase production at its
Corpus Christi wafer fabrication facility, introduce new products, increase
the Company's production capacity at sub-contractors in the Far East and the
continued shift in the personal computer market to microprocessors which run on
less than 5 volts (3.3 volts). The primary product which has driven the
Company's increased revenues are the Company's line of linear regulators which
it markets under the name "EZ Regulators." EZ Regulators are currently sold
primarily to the manufacturers of personal computer motherboards. Most of these
manufacturers, who are customers of the Company, are located in the Far East.
The Company's line of TVS products also has been a factor in the increased
shipments reported the last two consecutive quarters. Total sales to customers
located in the Far East increased to 29% of total revenue in the three months
ended April 30, 1995 compared to less than 2% of total revenue in prior year
first quarter.
New orders were $10,429,000 in the first quarter of fiscal year 1996 versus
$6,012,000 in the first quarter, an increase of 73%. Commercial products
accounted for approximately 70% of orders received in three months ended April
30, 1995 compared to 50% of the orders in the prior year first quarter. The
increased bookings were the result of the Company's ability to generate more
orders for its family of EZ Regulators which are currently being principally
used to power microprocessors which are powered by less than 5 volts, typically
3.3 volts. The Company's EZ Regulators are primarily used in desktop personal
computers. In recent months, the Company has been able to obtain orders from
several new customers, including some of the larger PC motherboard manufacturers
in the Far East. The Company's line of TVS devices also has contributed to the
growth in orders on a quarter to quarter basis. Orders from customers located
in the Far East increased to 29% of total orders in the three months ended
April 30, 1995 compared to 8% of total orders in prior year first quarter.
The Company maintains its belief that the military market will continue to
decline in the future. As a result the Company has made significant investments
in new products, primarily targeted for the telecommunications, data
communications and computer markets.
COSTS AND EXPENSES -
COST OF GOODS SOLD -
Gross profit margins as a percentage of net sales increased to 38% in the
first quarter of fiscal 1996, compared to 31% in the same period last year.
Gross margins have improved over the last two consecutive quarters due to the
significant increase in shipments of EZ Regulators and TVS products which
generally have higher margins than the Company's military products. Gross
margins have also been favorably impacted by the increased utilization of the
Company's Corpus Christi wafer fabrication facility.
OPERATING EXPENSES -
Operating costs and expenses increased 28% in the three months ended April
30, 1995 compared with the quarter ended May 1, 1994. Operating expenses as a
percentage of net sales were 21% in the current quarter, compared to 28% in the
prior year. The decrease in operating expenses as a percentage of sales was due
to the increase in sales. The increase in the gross operating expenses was due
to variable selling costs associated with higher sales volume, accruals of
year-end supplemental compensation and the addition of two senior sales and
marketing professionals to Semtech's team.
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OTHER -
Other income of $8,000 was realized in the quarter ended April 30, 1995,
compared to other expense of $7,000 in the prior year's first quarter. The
other income and expenses are primarily interest income and expense.
INDUSTRY TRENDS AND OUTLOOK
The Company has experienced growth over the past year. A majority of this
growth has come from products used in personal computers and data communications
applications. The commercial semiconductor industry in which the Company's
products are used are characterized by rapid changes and short product life
cycles. The Company has experienced fluctuations in its results of operations.
Factors that affect the Company's results of operations include the volume and
timing of orders received, changes in the mix of products sold, competitive
pricing pressures, the Company's ability to introduce new products on a timely
basis, fluctuations in manufacturing yields, cyclical semiconductor industry
conditions and new products introduced by competitors. As a result of the
foregoing or other factors, there can be no assurance that the Company will not
experience fluctuations in future operating results on a quarterly or annual
basis.
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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The Company is involved in legal matters which are routine to the
nature of its business. Management is of the opinion that the ultimate
resolution of all such matters will not have a material adverse effect on the
accompanying consolidated condensed financial statements.
Item 2. Changes in Securities
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The Company has registered 8.5% Convertible Subordinated Debentures due
1996 (the "Debentures") in the principal amount of $3,100,000. The Debentures
are subordinated to existing and future senior indebtedness and are convertible
at any time into one share of the Company's Common Stock at a conversion rate of
one common share per $1.00 face value of Debentures. At April 30, 1995,
$3,089,000 of Debentures were issued, and $134,000 were outstanding. The balance
of $2,955,000 of Debentures have been converted to Common Stock, canceled or
redeemed.
Item 3. Defaults upon Senior Securities
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Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
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(a) The 1995 Annual Meeting of Shareholders of the Company was duly held on
June 8, 1995.
(b) Inapplicable, as (i) proxies for the meeting were solicited pursuant to
Regulation 14 under the Act; (ii) there was no solicitation in
opposition to the management's nominees as listed in the Proxy
Statement; and (iii) all of such nominees were duly elected.
(c) Other matters voted upon at the meeting (i) Amendment to the 1994 Long-
term Stock Incentive Plan in which there were 2,451,592 affirmative
votes, 143,674 negative votes and 33,506 abstaining votes (ii)
Amendment to the 1994 Non-Employee Directors Stock Option Plan in which
there were 2,539,085 affirmative votes, 154,886 negative votes and
35,391 abstaining votes (iii) Increase in the authorized shares
outstanding from 10 million to 15 million in which there were 3,850,725
affirmative votes, 90,897 negative votes and 29,930 abstaining votes.
(d) Not applicable
Item 5. Other Information
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Not applicable.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
11.1 -Computation of per share earnings - See Note 2 of Notes to
Consolidated Condensed Financial Statements.
27 -Financial Data Schedule, Article 5
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
April 30, 1995.
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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.
SEMTECH CORPORATION
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Registrant
Date: June 12, 1995 /s/ JOHN D. POE
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John D. Poe
President and
Chief Executive Officer
Date: June 12, 1995 /s/ DAVID G. FRANZ, JR.
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David G. Franz, Jr.
Vice President Finance and
Chief Financial Officer,
Secretary and Treasurer
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