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 JUNE 29, 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 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
July 16, 1997 was 14,501,770.
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - June 29, 1997 and
December 31, 1996.
Condensed consolidated statements of income - Three and six months
ended June 29, 1997 and June 30, 1996.
Condensed consolidated statements of cash flows - Six months ended
June 29, 1997 and June 30, 1996.
Notes to condensed consolidated financial statements - June 29, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 4. Submission of Matters to a Vote of Security Holders
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I
FINANCIAL STATEMENTS
Item 1. Financial Statements (unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
ANADIGICS, Inc.
(Amounts in thousands, except share and per share amounts)
June 29, 1997 Dec. 31, 1996 *
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,202 $ 23,112
Marketable securities 9,008
Accounts receivable, net 14,372 10,696
Inventory - Note 2 12,561 8,901
Prepaid expenses and other current assets 1,617 1,221
Deferred taxes 699 699
Total current assets 54,451 53,637
Cash and cash equivalents 2,102
Marketable securities 35,960
Property and equipment:
Equipment and furniture 51,433 40,151
Leasehold improvements 3,955 3,710
Projects in process 28,538 6,702
Less accumulated depreciation
and amortization 25,598 21,830
58,328 28,733
Deferred taxes 4,131 4,131
Deposits 695 495
Total assets $ 155,667 $ 86,996
Liabilities and stockholders' equity - Note 3
Current liabilities:
Accounts payable $ 9,908 $ 7,173
Accrued liabilities 4,581 3,671
Income taxes payable 6,050 3,676
Current maturities of capital
lease obligations 623 1,292
Total current liabilities 21,162 15,812
Capital lease obligations, less
current portion 463 627
Total liabilities 21,625 16,439
Stockholders' equity
Common stock, $0.01 par value, 68,000,000 shares
authorized, 14,501,770 and 12,564,678, issued
and outstanding at June 29, 1997 and
December 31, 1996, respectively 145 126
Additional paid-in capital 155,483 98,800
Accumulated deficit (21,586) (28,369)
Total stockholders' equity 134,042 70,557
Total liabilities and stockholders'
equity $ 155,667 $ 86,996
* The condensed balance sheet at December 31, 1996 has been derived from
the audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Further, certain amounts as of
December 31, 1996 have been reclassified to conform with the June 29, 1997
presentation. See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
ANADIGICS, Inc.
(Amounts in thousands, except per share amounts)
Three months ended Six months ended
06/29/97 06/30/96 06/29/97 06/30/96
(unaudited) (unaudited)
Net sales $24,969 $15,862 $47,829 $29,437
Cost of sales 13,159 8,254 25,480 15,090
Gross profit 11,810 7,608 22,349 14,347
Research and development expenses 4,185 3,284 7,624 6,162
Selling and administrative expenses 3,028 2,063 5,774 4,031
Operating income 4,597 2,261 8,951 4,154
Interest expense 63 90 116 214
Interest income 1,066 411 1,681 849
Income before income taxes 5,600 2,582 10,516 4,789
Provision for income taxes 1,988 516 3,733 958
Net income $3,612 $2,066 $6,783 $3,831
Net income per share of
common stock (1) $0.24 $0.16 $0.46 $0.30
Weighted average common and
common equivalent shares
outstanding (1) 15,158,874 12,895,889 14,618,166 12,729,110
(1) - Historical share and per share data have been restated to reflect a
3-for-2 stock split.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
ANADIGICS, Inc.
(Amounts in thousands)
Six months ended
June 29, 1997 June 30, 1996
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $6,783 $3,831
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,114 1,765
Amortization 695 1,119
Changes in operating assets and liabilities:
Accounts receivable (3,676) (1,633)
Inventory (3,660) (1,690)
Prepaid expenses and other current assets (396) (869)
Deferred taxes (107)
Deposits (200) (222)
Accounts payable 2,735 1,147
Accrued liabilities 910 745
Income taxes payable 2,374 178
Net cash provided by operating activities 8,679 4,264
Cash flows from investing activities:
Purchase of plant and equipment (33,404) (6,163)
Purchase of marketable securities (31,489) (5,529)
Proceeds from sale of marketable securities 4,537 13,688
Net cash (used in) provided by investing
activities (60,356) 1,996
Cash flows from financing activities:
Payment of capital lease obligations (833) (872)
Exercise of warrants 3,610
Issuance of common stock 56,702 254
Net cash provided by financing activities 55,869 2,992
Net increase in cash and cash equivalents 4,192 9,252
Cash and cash equivalents at beginning of period 23,112 6,394
Cash and cash equivalents at end of period $27,304 $15,646
Supplemental cash flow information:
Interest paid $116 $214
Taxes paid $654 $320
ANADIGICS, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) -
June 29, 1997
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, condensed, consolidated 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 six month periods ended June 29, 1997 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1997. For further information, refer to the financial statements for
the year ended December 31, 1996 and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, ANADIGICS Foreign Sales Corporation.
All significant intercompany accounts have been eliminated in consolidation.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
June 29, 1997 Dec. 31, 1996
Raw materials $ 1,498 $ 1,278
Work in process 8,622 6,291
Finished goods 2,441 1,332
$ 12,561 $ 8,901
3. Stockholders' Equity
On January 30, 1997, the Company declared a stock dividend of one share of
common stock for each two shares of common stock outstanding. The dividend
was payable on February 20, 1997 to holders of record on February 10, 1997.
Accordingly, the financial statements have been retroactively restated to
reflect the three-for-two stock split.
On February 20, 1997, the Company successfully completed a public offering
of an additional 1,875,000 shares of common stock. The Company intends to
use the net proceeds from the public offering of approximately $55.4 million
to purchase capital equipment and leasehold improvements, and for general
corporate purposes, including working capital. Accordingly, the remaining
portion of the proceeds received from the public offering which was
designated for the purchase of capital equipment and to make leasehold
improvements of $38.1 million has been classified as long term as of June
29, 1997.
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 consolidated statements of
operations data as a percent of net sales for the periods presented:
Statement of Operations
Three months ended Six months ended
06/29/97 06/30/96 06/29/97 06/30/96
(unaudited) (unaudited)
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 52.7% 52.0% 53.3% 51.3%
Gross profit 47.3% 48.0% 46.7% 48.7%
Research and development expenses 16.8% 20.7% 15.9% 20.9%
Selling and administrative expenses 12.1% 13.0% 12.1% 13.7%
Operating income 18.4% 14.3% 18.7% 14.1%
Interest expense 0.3% 0.6% 0.2% 0.7%
Interest income 4.3% 2.6% 3.5% 2.9%
Income before income taxes 22.4% 16.3% 22.0% 16.3%
Provision for income taxes 7.9% 3.3% 7.8% 3.3%
Net income 14.5% 13.0% 14.2% 13.0%
Second Quarter 1997 (Ended June 29, 1997) Compared to Second Quarter 1996
Ended June 30, 1996)
Net Sales. Net sales during the second quarter of 1997 increased 57% to
$25.0 million from $15.9 million in the second quarter of 1996. Second
quarter 1997 sales of integrated circuits ("IC" or "ICs") for cellular and
personal communication system ("PCS") applications increased $9.0 million to
$12.9 million from $3.9 million in the second quarter of 1996 as demand for
digital power amplifier ICs increased. Sales of ICs for the digital GSM,
CDMA and TDMA standards accounted for over 80% of the cellular and PCS sales
during the second quarter of 1997. Second quarter 1997 sales of ICs for
cellular and PCS applications increased 7% from the first quarter of 1997.
Sales of ICs for cable television ("CATV") applications increased 57% during
second quarter of 1997 to $5.9 million from $3.8 million in the second
quarter of 1996 as demand for wide-band analog and digital CATV tuner ICs
increased. The Company expects sales of ICs for CATV infrastructure,
particularly line amplifiers, to increase from second quarter 1997 levels
but this increase may not be sufficient to offset an unexpected seasonal slow
down in sales of ICs for CATV tuner applications. Sales of ICs for fiber
optic telecommunications and data communication applications decreased
3% during the second quarter of 1997 to $3.2 million from $3.3 million
in the second quarter of 1996. Sales of ICs for direct broadcast satellite
("DBS") applications decreased 33% during the second quarter of 1997 to $2.7
million from $4.0 million in the second quarter of 1996 as incentive
programs for DBS equipment manufacturers initiated in 1996 are no longer
in place.
Engineering service sales, which reflect customers' contributions to research
and development, decreased $0.6 million during the second quarter of 1997 to
$0.3 million from $0.9 million in the second quarter of 1996. Generally,
selling prices for same product sales were lower in the second quarter of
1997 compared to the same period in 1996.
Gross Margin. Gross margin during the second quarter of 1997 declined to
47.3% from 48.0% in the second quarter of 1996. The decline in gross margin
was due to a shift in sales mix to lower margin products, mostly offset by
improved manufacturing efficiency. In comparison to the first quarter of
1997, the gross margin improved in the second quarter of 1997 to 47.3% from
46.1%. The improvement in gross margin from the first quarter of 1997 to the
second quarter of 1997 was the result of manufacturing efficiency and
improved yields.
Research and Development. Company sponsored research and development expense
increased 27% during the second quarter of 1997 to $4.2 million from $3.3
million during the second quarter of 1996. As a percent of sales, it declined
to 16.8% in the second quarter of 1997 from 20.7% in the second quarter of
1996. During the second quarter of 1997, the Company spent approximately
two-thirds of its research and development on ICs for cellular, PCS and
other wireless applications.
In comparison to the first quarter of 1997, Company sponsored research and
development expense increased 22% during the second quarter of 1997 to $4.2
million from $3.4 million. As a percentage of sales, it increased to 16.8%
in the second quarter of 1997 from 15.0% in the first quarter of 1997. The
Company expects that research and development expense will continue to
increase from quarter to quarter during the second half of 1997, both in
absolute dollars and as a percentage of sales.
Selling and Administrative. Selling and administrative expenses increased
47% during the second quarter of 1997 to $3.0 million from $2.1 million in
the second quarter of 1996. As a percentage of sales, selling and
administrative expenses declined to 12.1% in the second quarter of 1997
from 13.0% in the second quarter of 1996.
Interest Income. Interest income increased $0.7 million to $1.1 million
during the second quarter of 1997 from $0.4 million during the second
quarter of 1996. The increase was due to higher invested cash balances
following the receipt of proceeds from the public offering of the Company's
common stock on February 20, 1997.
Provision for Income Taxes. The provision for income taxes during the second
quarter of 1997 was recorded at an estimated annual effective tax rate of
35.5% of pre-tax income.
Six Months 1997 (Ended June 29, 1997) Compared to Six Months 1996
(Ended June 30, 1996)
Net Sales. Net sales during the six month period ended June 29, 1997
increased 62% to $47.8 million from $29.4 million in the six month period
ended June 30, 1996. Sales of ICs for cellular and personal communication
system ("PCS") applications increased $18.1 million during the six month
period ended June 29, 1997 to $24.9 million from $6.8 million in the six
month period ended June 30, 1996. Sales of ICs for the digital GSM, CDMA
and TDMA standards accounted for over 80% of the cellular and PCS sales
during the six month period ended June 29, 1997. Net sales of ICs for cable
television applications for the six month period ended June 29, 1997
increased 48% to $10.6 million from $7.1 million in the six month period
ended June 30, 1996 as demand for wide-band CATV tuner and infrastructure
ICs increased.
Sales of ICs for fiber optic telecommunication and data communication
applications decreased 6% during the six month period ended June 29, 1997
to $5.7 million from $6.1 million in the six month period ended June 30,
1996. Sales of ICs for direct broadcast satellite applications decreased
24% during the six month period ended June 29, 1997 to $5.7 million from
$7.6 million in the six month period ended June 30, 1996 as demand for low
noise block converter ICs decreased. Generally, selling prices for same
product sales were lower in the first half of 1997 compared to the same
period in 1996. Engineering service sales, which reflect customers'
contributions to research and development, decreased $0.9 million during
the six month period ended June 29, 1997 to $0.9 million from $1.8 million
in the six month period ended June 30, 1996.
Gross Margin. Gross margin during the six month period ended June 29, 1997
declined to 46.7% from 48.7% in the six month period ended June 30, 1996.
The decline in gross margin was due primarily to a shift in sales mix to
lower margin products, partially offset by higher volume and manufacturing
efficiency.
Research and Development. Company sponsored research and development expense
increased 24% during the six month period ended June 29, 1997 to $7.6
million from $6.2 million in the six month period ended June 30, 1996. As
a percent of sales, company funded research and development declined to
15.9% in the six month period ended June 29, 1997 from 20.9% in the six
month period ended June 30, 1996.
Selling and Administrative. Selling and administrative expenses increased
43% during the six month period ended June 29, 1997 to $5.8 million from
$4.0 million in the six month period ended June 30, 1996. As a percentage
of sales, selling and administrative expenses decreased to 12.1% in the six
month period ended June 29, 1997 from 13.7% in the six month period ended
June 30, 1996.
Interest Income. Interest income increased $0.9 million to $1.7 million
during the six month period ended June 29, 1997 from $0.8 million in the
six month period ended June 30, 1996. The increase was due to higher
invested cash balances following the receipt of proceeds from the public
offering of the Company's common stock on February 20, 1997.
Provision for Income Taxes. The provision for income taxes during the six
month period ended June 29, 1997 was recorded at an estimated annual
effective tax rate of 35.5% of pre-tax income.
Liquidity and Capital Resources
As of June 29, 1997, the Company had $27.3 million in cash and cash
equivalents and $36.0 million in marketable securities. All of the
marketable securities and approximately $2.1 million of the cash and cash
equivalents as of June 29, 1997 have been designated for the purchase of
capital equipment and to make leasehold improvements. No amounts were
drawn on the Company's credit facilities during the six month period
ended June 29, 1997.
Net cash provided by financing activities was $55.9 million during the
six month period ended June 29, 1997. On February 26, 1997, the Company
received $55.4 million in net proceeds from a public offering of 1,875,000
shares of common stock.
Net cash provided by operations was $8.7 million during the six month
period ended June 29, 1997, compared to $4.3 million provided by operations
during the six month period ended June 30, 1996. The increase in cash
provided by operations during the six months ended June 29, 1997 of $4.4
million was primarily due to an increase in net income before depreciation
expense of $4.3 million.
Net cash used in investing activities was $60.4 million during the six month
period ended June 29, 1997. Purchases of equipment and leasehold
improvements (primarily for the new four-inch wafer fabrication facility)
totaled $33.4 million and net purchases of marketable securities totaled
$27.0 million during the six month period ended June 29, 1997.
The Company expects to spend approximately $34 million on equipment and
furniture and approximately $6 million on leasehold improvements during
the twelve month period ending June 30, 1998. At June 29, 1997 the Company
had committed to purchase approximately $10 million of equipment and
furniture, and leasehold improvements, including approximately $8 million
for the Company's new four-inch wafer fab.
The Company originally planned to commence production at its new four-inch
wafer fab in the fourth quarter of 1997 due to anticipated production
capacity limitations at the Company's existing fab at that time. However,
investments in new equipment and manufacturing productivity improvements
completed during the first half of 1997 have significantly increased
production capacity at the Company's existing fab. Assuming additional
production capacity expansion plans for the Company's existing fab are
successfully completed during the second half of 1997, the Company believes
it can support its current and anticipated production needs through the
third quarter of 1998 with its existing fab. Consequently, the Company now
plans to begin depreciating the new four-inch wafer fab in the third quarter
of 1998, concurrent with the commencement of production. Nevertheless, the
Company may choose to commence production of certain products in the new
four-inch wafer fab prior to the third quarter of 1998 should the Company's
business grow beyond the capacity of the Company's existing fab at that
time. (See Risks and Uncertainties)
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.
Effect of Changes in Accounting Principles
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" which is required to be adopted for the
Company's year ending December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact of applying Statement 128 would have resulted in an
increase in basic earnings per share for the second quarter ended June 29,
1997 and June 30, 1996 of $0.01. Statement 128 would have had no effect
on the calculation of diluted earnings per share for these quarters.
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 (as that term is described in the
Securities Act of 1933, as amended) that involve 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, 1996. These forward-looking statements can
generally be identified as such because the context of the statement
will include words such as the Company "believes", "anticipates", "expects",
or words of similar import. Similarly, statements that describe the
Company's future plans, objectives, estimates or goals are forward-looking
statements. The cautionary statements made in this Form 10-Q should be
read as being applicable to all related forward-looking statements
wherever they appear in this Form 10-Q. Important factors that could cause
actual results and developments to be materially different from those
expressed or implied by such statements include those factors discussed
herein.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 29, 1997 at
which the Company's stockholders voted on:
(a) An amendment to the Amended and Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock by
34,000,000 to 68,000,000.
(b) An amendment to the Amended and Restated Certificate of Incorporation
to permit the Board of Directors to amend the bylaws of the Company.
(c) An amendment to the 1995 Long Term Incentive and Share Award Plan to
increase the number of shares issuable thereunder by 1,500,000 to
2,775,000.
(d) The ratification of Ernst & Young LLP as independent auditors of
ANADIGICS, Inc. for the fiscal year ending December 31, 1997.
Each of the four matters listed above were voted upon and approved by the
shareholders as follows.
The amendment of the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
by 34,000,000 to 68,000,000 shares was approved by holders of 12,016,252
shares of the Company's outstanding capital stock. Holders of 858,294 shares
voted against the amendment, holders of 33,636 shares abstained, and 148,789
broker non-votes were received.
The amendment of the Company's Amended and Restated Certificate of
Incorporation to permit the Board of Directors to amend the bylaws of the
Company was approved by holders of 8,182,189 shares of the Company's
outstanding capital stock. Holders of 4,592,029 shares voted against the
amendment, holders of 70,352 shares abstained, and 212,401 broker non-votes
were received.
The amendment of the Company's 1995 Long Term Incentive and Share Award Plan
was approved by holders of 5,200,104 shares of the Company's outstanding
capital stock. Holders of 4,314,142 voted against the amendment, holders
of 47,954 shares abstained, and 3,494,771 broker non-votes were received.
The ratification of the appointment of Ernst & Young LLP as independent
auditors was approved by holders of 13,025,154 shares of the Company's
outstanding capital stock. Holders of 5,395 shares voted against the
ratification, and holders of 26,422 shares abstained from voting on such
ratification.
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) Reports on Form 8-K during the quarter ended June 29, 1997.
The Company did not file any reports on Form 8-K during the quarter
ended June 29, 1997.
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: July 17, 1997
ANADIGICS, Inc.
EXHIBIT INDEX
Page
Exhibit 11. Statement Re: Computation of Earnings Per Share (unaudited) 16
Exhibit 27. Financial Data Schedule 17
ANADIGICS, Inc.
Exhibit 11. Statement Re: Computation of Earnings Per Share (unaudited)
Three months ended Six months ended
06/29/97 06/30/96 06/29/97 06/30/96
Average shares outstanding 14,493,766 12,308,430 13,950,604 12,219,189
Net effect of dilutive
stock options - based on
treasury stock method
using average market price 665,108 587,459 667,562 509,921
Totals 15,158,874 12,895,889 14,618,166 12,729,110
Net income (in thousands) $3,612 $2,066 $6,783 $3,831
Per share amount $0.24 $0.16 $0.46 $0.30