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 SEPTEMBER 29, 1996.
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 No. 0-25662
ANADIGICS, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
22-2582106
(I.R.S. Employer Identification No.)
35 Technology Drive, Warren, New Jersey 07059
(Address of principal executive offices)
(908) 668-5000
(Registrant's telephone number, including area code)
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 [ ]
The number of shares outstanding of the registrant's common stock as of
September 29, 1996 was 8,324,002.
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed balance sheets - September 29, 1996 and December 31, 1995.
Condensed statements of income - Three and nine months ended
September 29, 1996 and September 30, 1995.
Condensed statements of cash flows - Nine months ended
September 29, 1996 and September 30, 1995.
Notes to condensed financial statements - September 29, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I
FINANCIAL STATEMENTS
Item 1. Financial Statements (unaudited)
CONDENSED BALANCE SHEETS
ANADIGICS, Inc.
(Amounts in thousands)
Sept. 29, 1996 Dec. 31, 1995 *
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 19,401 $ 6,394
Marketable securities 11,418 22,788
Accounts receivable, net 9,479 7,379
Inventory - Note 2 8,352 8,735
Prepaid expenses and other current assets 1,216 981
Deferred taxes 291 184
Total current assets 50,157 46,461
Equipment and furniture 39,644 31,951
Leasehold improvements 3,578 2,586
Less accumulated depreciation and amortization 20,234 16,060
22,988 18,477
Deferred taxes 1,032 1,032
Deposits 501 280
Total assets $ 74,678 $ 66,250
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 3,330 $ 2,671
Accrued liabilities 3,093 4,027
Income taxes payable 2,933 2,092
Current maturities of capital lease
obligations 1,509 1,718
Total current liabilities 10,865 10,508
Capital lease obligations, less current portion 830 1,919
Total liabilities 11,695 12,427
Stockholders' equity - Note 3
Common stock 83 77
Common stock non-voting - 3
Common stock subscribed (2) (2)
Additional paid-in capital 97,958 94,105
Accumulated deficit (35,056) (40,360)
Total stockholders' equity 62,983 53,823
Total liabilities and equity $ 74,678 $ 66,250
* The condensed balance sheet at December 31, 1995 has been derived
from the audited financialstatements at that date but does not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. See Notes to Condensed
Financial Statements.
CONDENSED STATEMENTS OF INCOME
ANADIGICS, Inc.
(Amounts in thousands, except per share amounts)
Three months ended Nine months ended
09/29/96 09/30/95 09/29/96 09/30/95
(unaudited)(unaudited) (unaudited) (unaudited)
Net sales $ 17,005 $13,555 $46,442 $36,990
Cost of sales 11,136 6,429 26,226 17,636
Gross profit 5,869 7,126 20,216 19,354
Research and development exp 2,756 2,825 8,918 8,736
Selling and administrative exp 1,619 1,849 5,650 4,906
Operating income 1,494 2,452 5,648 5,712
Interest expense 84 121 299 528
Interest income 432 437 1,281 853
Income before income taxes 1,842 2,768 6,630 6,037
Provision for income taxes 369 441 1,326 1,389
Net income $1,473 $2,327 $5,304 $4,648
Net income per share $0.17 $0.28 $0.62 $0.63
CONDENSED STATEMENTS OF CASH FLOWS
ANADIGICS, Inc.
(Amounts in thousands)
Nine months ended
Sept. 29, 1996 Sept. 30, 1995
(unaudited) (unaudited)
Cash flow from operating activities:
Net income $5,304 $4,648
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,818 1,827
Amortization 1,603 1,678
Changes in operating assets and liabilities:
Accounts receivable (2,100) (1,855)
Inventory 383 (1,432)
Prepaid expenses and other current assets (235) (235)
Deferred taxes (107)
Deposits (221) 138
Accounts payable 659 2,786
Accrued liabilities (934) 2,717
Income taxes payable 841 1,389
Net cash provided by operating activities 8,011 11,661
Cash flows from investing activities:
Purchase of plant and equipment (8,932) (7,879)
Purchase of marketable securities (8,955) -
Proceeds from sale of marketable securities 20,270 -
Net cash provided by (used in) investing activities 2,383 (7,879)
Cash flows from financing activities:
Payment of capital lease obligations (1,298) (1,532)
Payment of notes payable (1,896)
Payment of long-term debts (1,187)
Exercise of warrants 3,610
Exercise of options 298
Issuance of common stock 3 25,199
Net cash provided by financing activities 2,613 20,584
Net increase in cash and cash equivalents 13,007 24,366
Cash and cash equivalents at beginning of period 6,394 4,564
Cash and cash equivalents at end of period $19,401 $28,930
Non-cash investing and financing activities:
Acquisition of plant and equipment under
financing leases $104
Conversion of operating leases to capital leases 1,060
$1,164
Interest paid $275 $529
Taxes paid $592 $529
ANADIGICS, Inc.
Notes to Condensed Financial Statements (unaudited) - September 29, 1996
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine
months ended September 29, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information, refer to the financial statements for the year ended December
31, 1995 and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
Sept. 29 Dec. 31
1996 1995
Raw materials $ 996 $ 882
Work in process 5,106 6,137
Finished goods 2,250 1,716
$ 8,352 $ 8,735
3. Stockholders' Equity
Common stock consists of the following: Sept. 29 Dec. 31
1996 1995
Common stock, $0.01 par value; 34,000,000 shares authorized,
8,277,061 and 7,735,957 shares issued and outstanding at
September 29, 1996 and December 31, 1995, respectively $83 $77
Common stock, non-voting $0.01 par value; 1,000,000 shares
authorized, 46,941 and 347,781 shares issued and outstanding
at September 29, 1996 and December 31, 1995, respectively - $3
ANADIGICS, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations
The following table sets forth unaudited statements of operations data as a
percent of net sales for the periods presented:
Statements of Operations
Three months ended Nine months ended
09/29/96 09/30/95 09/29/96 09/30/95
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.5% 47.4% 56.5% 47.7%
Gross profit 34.5% 52.6% 43.5% 52.3%
Research and development exp 16.2% 20.8% 19.2% 23.6%
Selling and administrative exp 9.5% 13.6% 12.2% 13.3%
Operating income 8.8% 18.2% 12.1% 15.4%
Interest expense 0.5% 0.9% 0.6% 1.4%
Interest income 2.5% 3.2% 2.7% 2.3%
Income before income taxes 10.8% 20.5% 14.2% 16.3%
Provision for income taxes 2.1% 3.3% 2.8% 3.7%
Net income 8.7% 17.2% 11.4% 12.6%
Third Quarter 1996 (Ended September 29, 1996) Compared to Third Quarter
1995 (Ended September 30, 1995)
Net Sales. Net sales during the third quarter of 1996 increased 25% to $17.0
million from $13.6 million in the third quarter of 1995. Third quarter 1996
sales of integrated circuits ("IC" or "ICs") for direct broadcast satellite
applications increased 38% to $4.5 million from $3.3 million in the third
quarter of 1995 as demand for low noise block ("LNB") converters increased.
Sales of ICs for cellular and personal communication applications increased
27% during the third quarter of 1996 to $5.6 million from $4.4 million in the
third quarter of 1995 as demand for power amplifiers ICs increased. Sales of
ICs for cable television applications increased 19% during the third quarter
of 1996 to $3.3 million from $2.8 million in the third quarter of 1995.
Sales of ICs for fiber optic telecommunications and data communication
applications increased 12% during the third quarter of 1996 to $2.8 million
from $2.5 million in the third quarter of 1995. Engineering service sales,
which reflect customers' contributions to research and development,
increased $0.1 million during the third quarter to $0.8 million from $0.7
million in the third quarter of 1995.
Gross Margin. Gross margin during the third quarter of 1996 declined to 34.5%
from 52.6% in the third quarter of 1995 primarily due to lower production
yields and increased start-up costs associated with the Company's newer
products. Generally lower IC selling prices also contributed to the decline
in gross margin during the third quarter of 1996 compared to the same period
in 1995.
On October 1, 1996, the Company began producing substantially all of its
products using 4 inch wafers, instead of 3 inch wafers.
Research and Development. Company funded research and development expense
of $2.8 million was unchanged from the third quarter of 1995. As a percent of
sales, company funded research and development declined to 16.2 % in the
third quarter of 1996 from 20.8% in the third quarter of 1995. Total research
and development spending, which includes company funded and customer funded
research and development, decreased 3.0% during the third quarter of 1996 to
$3.1 million from $3.2 million in the third quarter of 1995 as certain
engineering resources were temporarily allocated to manufacturing sustaining
activities to support the start-up of newly developed products. The Company
continues to spend approximately one-half of its research and development on
ICs for cellular and personal communication applications.
Selling and Administrative. Selling and administrative expenses decreased 12%
during the third quarter of 1996 to $1.6 million from $1.8 million in the
third quarter of 1995. As a percentage of sales, it declined to 9.5% in the
third quarter of 1996 from 13.6% in the third quarter of 1995. Lower legal
costs and reductions in performance-based incentive compensation were mainly
responsible for the decrease.
Provision for Income Taxes. The provision for income taxes during the third
quarter of 1996 was recorded at an estimated annual effective tax rate of 20%
of pre-tax income.
Nine Months 1996 (Ended September 29, 1996) Compared to Nine Months 1995
(Ended September 30, 1995)
Net Sales. Net sales during the nine month period ended September 29, 1996
increased 26% to $46.4 million from $37.0 million in the nine month period
ended September 30, 1995. Net sales of ICs for cable television applications
for the nine month period ended September 29, 1996 increased 39% to $10.4
million from $7.5 million in the nine month period ended September 30, 1995
as demand for tuner ICs from set-top box manufacturers increased. Sales of
ICs for fiber optic telecommunication and data communication applications
increased 30% during the nine month period ended September 29, 1996 to $8.9
million from $6.8 million in the nine month period ended September 30, 1995.
Sales of ICs for direct broadcast satellite applications increased 23%
during the nine month period ended September 29, 1996 to $12.1 million from
$9.9 million in the nine month period ended September 30, 1995. Sales of ICs
for cellular and personal communication system applications increased 7%
during the nine month period ended September 29, 1996 to $12.3 million from
$11.5 million in the nine month period ended September 30, 1995. Engineering
service sales, which reflect customers' contributions to research and
development, increased $1.5 million during the nine month period ended
September 29, 1996 to $2.7 million from $1.2 million in the nine month
period ended September 30, 1995.
Gross Margin. Gross margin during the nine month period ended September 29,
1996 declined to 43.5% from 52.3% in the nine month period ended September
30, 1995. The decline in gross margin was due primarily to generally lower
IC prices and lower production yields associated with the production start
of newer products in the third quarter of 1996.
Research and Development. Company sponsored research and development expense
increased 2% during the nine month period ended September 29, 1996 to $8.9
million from $8.7 million in the nine month period ended September 30, 1995.
As a percent of sales, company funded research and development declined to
19.2% in the nine month period ended September 29, 1996 from 23.6% in the
nine month period ended September 30, 1995. Total research and development
spending, which includes company funded and customer funded research and
development, increased 11% during the nine month period ended September
29, 1996 to $10.6 million from $9.5 million in the nine month period ended
September 30, 1995.
Selling and Administrative. Selling and administrative expenses increased
15% during the nine month period ended September 29, 1996 to $5.7 million
from $4.9 million in the nine month period ended September 30, 1995. As a
percentage of sales, selling and administrative expenses decreased to 12.2%
in the nine month period ended September 29, 1996 from 13.3% in the nine
month period ended September 30, 1995. Sales and marketing expenses
increased 26% due in part to increases in commissions paid to sales
represenatatives and advertising expenses associated with the Company's
newer products. General and administrative expense increased 6% due in part
to increases in consulting and legal fees.
Interest expense. Interest expense declined during the nine month period
ended September 29, 1996 to $0.2 million from $0.4 million in the nine month
period ended September 30, 1995 on lower levels of indebtedness.
Interest income. Interest income increased 50% to $1.3 million during the
nine month period ended September 29, 1996 from $0.9 million in the nine
month period ended September 30, 1995 on higher average invested cash
balances.
Provision for Income Taxes. The provision for income taxes during the nine
month period ended September 29, 1996 was recorded at an estimated annual
effective tax rate of 20% of pre-tax income.
As of December 31, 1995 and through the nine month period ended September 29,
1996, deferred tax assets of approximately $17.5 million, net of valuation
allowances of approximately $16.2 million were recorded. The valuation
allowances were recorded to the extent that, based upon the Company's
judgment, it was more likely than not that such deferred tax assets would
not be fully realized. The Company continues to assess the value of its
deferred tax assets and related valuation allowances and, based upon its
recent profitability levels and estimates to be made in the fourth quarter
of future profits, may adjust the recorded valuation allowances during the
fourth quarter of 1996. Any such adjustment would reflect the Company's
assessment, at the time of such adjustment, of the likelihood that the
deferred tax assets will be realized. The amount of a valuation allowance
adjustment in the fourth quarter would have a dollar for dollar impact on
the Company's net income in such quarter (See "Risks and Uncertainties").
Liquidity and Capital Resources
As of September 29, 1996, the Company had $19.4 million in cash and cash
equivalents and $11.4 million in marketable securities. Sales and purchases
of marketable securities provided a net increase of $11.3 million of cash
and cash equivalents during the first nine months of 1996. As of September
29, 1996, there were no balances outstanding on the Company's $15.0 million
revolving credit facilities.
Operations generated $8.0 million in cash during the nine month period ended
September 29, 1996 after the impact of an increase in accounts receivable
of $2.1 million.
Net cash generated by financing activities was $2.6 million during the nine
months ended September 29, 1996. In May, 1996 warrants to purchase 209,270
shares of Common Stock were exercised at an exercise price of $17.25 per
share, resulting in $3.6 million in cash flows from this financing activity.
Shares of Common Stock outstanding at September 29, 1996 were 8,324,002
compared to 8,005,583 shares at September 30, 1995.
Purchases of equipment and furniture totaled $8.9 million during the nine
month period ended September 29, 1996. The equipment acquired includes
items to upgrade and increase wafer fabrication capacity and other
production capacity as well as equipment for research and development. As
of September 29, 1996, the Company had committed to purchase $14.5 million
of equipment and furniture, and leasehold improvements.
The Company expects to spend approximately $35 million on equipment and
furniture and approximately $13 million on leasehold improvements during
the twelve month period ended September 30, 1997. The Company believes that
its sources of capital, including internally generated funds and existing
bank credit facilities, will be adequate to satisfy anticipated capital
needs for the next twelve months. Nevertheless, the Company may elect to
finance its future capital requirements through additional equity or debt
financing.
Risks and Uncertainties
Except for historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operation
contains forward-looking statements that are subject to risks and
uncertainties, including timely product and process development, individual
product pricing pressure, order rescheduling or cancellation, variation in
production yield, difficulties in obtaining components and assembly services
needed for production of integrated circuits, change in economic conditions
of the various markets the Company serves, as well as the other risks
detailed from time to time in the Company's reports filed with the
Securities and Exchange Commission, including the report on Form 10-K for
the year ended December 31, 1995.
ANADIGICS, Inc.
PART II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit 11. - Statement Re: Computation of Earnings Per Share
(unaudited)
Exhibit 27. - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the quarter
ended September 29, 1996.
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.
ANADIGICS, INC.
By: /s/ John F. Lyons
John F. Lyons
Senior Vice President
and Chief Financial Officer
Dated: October 15, 1996
ANADIGICS, Inc.
EXHIBIT INDEX
Page
Exhibit 11. Statement Re: Computation of Earnings Per Share (unaudited)..14
Exhibit 27. Financial Data Schedule ...................................15
ANADIGICS, Inc.
Exhibit 11. Statement Re: Computation of Earnings Per Share (unaudited)
Three months ended Nine months ended
09/29/96 09/30/95 09/29/96 09/30/95
Average shares outstanding 8,321,371 8,002,545 8,204,967 6,977,757
Net effect of dilutive stock options -
based on treasury stock method
using average market price 375,808 428,039 351,988 352,864
Totals 8,697,179 8,430,584 8,556,955 7,330,621
Net income (in thousands) $1,473 $2,327 $5,304 $4,648
Per share amount $0.17 $0.28 $0.62 $0.63