UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-14864
LINEAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2778785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1630 McCarthy Boulevard
Milpitas, California 95035
(408) 432-1900
(Address of principal executive offices,
including zip code and telephone number)
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 [ ]
There were 317,860,803 shares of the Registrant's Common Stock issued
and outstanding as of April 27, 2001.
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q/A (Amendment No. 1) amends Item 1 of Part I
of the Quarterly Report on Form 10-Q filed by the Company on May 15, 2001. To
the extent this amended filing is inconsistent with the Company's original
Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2001, the
original filing is hereby superseded and amended. To the extent that the
original filing is unaffected by this amendment, the original filing has not
been updated to reflect events subsequent to the periods covered or the date of
the original filing.
On April 17, 2001, after the end of the third quarter, the Company announced it
would increase its quarterly dividend per share from $0.03 per share to $0.04
per share for stockholders of record on April 27, 2001. In its original Form
10-Q the Company reported its dividend at $0.04 per share for the quarter and
$0.10 per share for the nine months of fiscal 2001 rather than the $0.03 and
$0.09, respectively, actually paid during the quarter.
2
LINEAR TECHNOLOGY CORPORATION
FORM 10-Q/A
THREE AND NINE MONTHS ENDED APRIL 1, 2001
INDEX
Page
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the 4
three and nine months ended April 1, 2001 and
April 2, 2000
Condensed Consolidated Balance Sheets at April 1, 2001 5-6
and July 2, 2000
Condensed Consolidated Statements of Cash Flows for the 7
nine months ended April 1, 2001 and April 2, 2000
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial 9-11
Condition and Results of Operations
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
April 1, April 2, April 1, April 2,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 282,021 $ 185,075 $ 772,612 $ 494,900
Cost of sales 65,192 47,435 181,814 126,942
--------- --------- --------- ---------
Gross profit 216,829 137,640 590,798 367,958
--------- --------- --------- ---------
Expenses:
Research and development 28,532 19,435 78,766 56,077
Selling, general and administrative 25,460 19,394 70,382 53,078
--------- --------- --------- ---------
53,992 38,829 149,148 109,155
--------- --------- --------- ---------
Operating income 162,837 98,811 441,650 258,803
Interest income 16,738 11,141 47,834 30,003
--------- --------- --------- ---------
Income before income taxes 179,575 109,952 489,484 288,806
Provision for income taxes 53,872 34,085 146,845 89,531
--------- --------- --------- ---------
Net income $ 125,703 $ 75,867 $ 342,639 $ 199,275
========= ========== ========= =========
Basic earnings per share $ 0.40 $ 0.24 $ 1.08 $ 0.64
========= ========== ========= =========
Shares used in the calculation
of basic earnings per share 317,098 312,119 316,453 309,927
========= ========== ========= =========
Diluted earnings per share $ 0.38 $ 0.23 $ 1.03 $ 0.61
========= ========== ========= =========
Shares used in the calculation of diluted
earnings per share 331,801 329,536 332,689 326,774
========= ========== ========= =========
Cash dividends per share $ 0.03 $ 0.02 $ 0.09 $ 0.06
========= ========== ========= =========
<FN>
See accompanying notes
</FN>
4
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
April 1, July 2,
2001 2000
---------- ----------
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 338,491 $ 230,455
Short-term investments 1,090,943 945,103
Accounts receivable, net of allowance for
doubtful accounts of $803 ($803 at
July 2, 2000) 120,918 69,326
Inventories:
Raw materials 7,069 5,201
Work-in-process 11,392 8,880
Finished goods 4,509 7,831
---------- ----------
Total inventories 22,970 21,912
Deferred tax assets 32,246 32,246
Prepaid expenses and other current assets 20,741 11,061
---------- ----------
Total current assets 1,626,309 1,310,103
---------- ----------
Property, plant and equipment, at cost:
Land, building and improvements 129,976 91,670
Manufacturing and test equipment 300,789 234,042
Office furniture and equipment 3,343 3,249
---------- ----------
434,108 328,961
Less accumulated depreciation and
amortization (157,183) (131,808)
---------- ----------
Net property, plant and equipment 276,925 197,153
---------- ----------
$1,903,234 $1,507,256
========== ==========
See accompanying notes
5
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES & SHAREHOLDERS' EQUITY
(In thousands)
April 1, July 2,
2001 2000
---------- ----------
(unaudited) (audited)
Current liabilities:
Accounts payable $ 14,278 $ 16,829
Accrued payroll and related benefits 50,251 57,710
Deferred income on shipments to distributors 51,836 34,488
Income taxes payable 53,342 31,916
Other accrued liabilities 32,000 27,734
---------- ----------
Total current liabilities 201,707 168,677
Deferred tax liabilities 16,382 16,382
Shareholders' equity:
Common stock, $0.001 par value per share,
2,000,000 shares authorized; 317,779
shares issued and outstanding at
April 1, 2001 (315,167 shares
at July 2, 2000) 577,270 467,474
Retained earnings 1,107,875 854,723
---------- ----------
Total shareholders' equity 1,685,145 1,322,197
---------- ----------
$1,903,234 $1,507,256
========== ==========
See accompanying notes
6
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(unaudited)
Nine Months Ended
-----------------
April 1, April 2,
2001 2000
----------- -----------
Cash flow from operating activities:
Net income $ 342,639 $ 199,275
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 25,375 18,351
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (51,593) (12,059)
Decrease (increase) in inventories (1,058) (4,304)
Decrease (increase) in deferred tax assets,
prepaid expenses and other current assets (9,678) (1,230)
Increase (decrease) in accounts payable,
accrued payroll, income taxes payable and
other accrued liabilities 15,681 4,080
Tax benefit from stock option transactions 73,080 65,640
Increase (decrease) in deferred income 17,348 5,067
Increase (decrease) in deferred tax liabilities -- (475)
----------- -----------
Cash provided by operating activities 411,794 274,345
----------- -----------
Cash flow from investing activities:
Purchase of short-term investments (1,216,810) (469,608)
Proceeds from sales and maturities of short-term
investments 1,070,970 229,710
Purchase of property, plant and equipment (105,147) (53,412)
----------- -----------
Cash used in investing activities (250,987) (293,310)
----------- -----------
Cash flow from financing activities:
Issuance of common stock under employee stock plans 38,937 38,276
Purchase of common stock (63,259) --
Payment of cash dividends (28,449) (18,549)
----------- -----------
Cash (used in) provided by financing activities (52,771) 19,727
----------- -----------
Increase (decrease) in cash and cash equivalents 108,036 762
Cash and cash equivalents, beginning of period 230,455 154,220
----------- -----------
Cash and cash equivalents, end of period $ 338,491 $ 154,982
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 52,112 $ 32,179
=========== ===========
<FN>
See accompanying notes
</FN>
7
LINEAR TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim financial statements and information are unaudited; however, in the
opinion of management all adjustments necessary for a fair and accurate
presentation of the interim results have been made. All such adjustments
were of a normal recurring nature. The results for the three months and
nine months ended April 1, 2001 are not necessarily an indication of
results to be expected for the entire fiscal year. All information reported
in this Form 10-Q/A should be read in conjunction with the Company's annual
consolidated financial statements for the fiscal year ended July 2, 2000
included in the Company's Annual Report to Shareholders. The accompanying
balance sheet at July 2, 2000 has been derived from audited financial
statements as of that date. There were no material differences between
comprehensive income and net income for all periods presented. Because the
Company is viewed as a single operating segment for management purposes, no
segment information has been disclosed.
2. The Company operates on a 52/53 week year ending on the Sunday nearest June
30. Fiscal 2001 will consist of 52 weeks, compared to 53 weeks for fiscal
2000.
3. Basic earnings per share is calculated using the weighted average shares of
common stock outstanding during the period. Diluted earnings per share is
calculated using the weighted average shares of common stock outstanding,
plus the dilutive effect of stock options calculated using the treasury
stock method. The following table sets forth the reconciliation of weighted
average common shares outstanding used in the computation of basic and
diluted earnings per share:
Three Months Ended Nine Months Ended
------------------ -----------------
April 1, April 2, April 1, April 2,
2001 2000 2001 2000
---------- ---------- ---------- ---------
Numerator - Net income $ 125,703 $ 75,867 $ 342,639 $ 199,275
---------- ---------- ---------- ---------
Denominator for basic earnings
per share - weighted average
shares 317,098 312,119 316,453 309,927
Effect of dilutive securities -
employee stock options 14,703 17,417 16,236 16,847
---------- ---------- ---------- ---------
Denominator for diluted
earnings per share 331,801 329,536 332,689 326,774
---------- ---------- ---------- ---------
Basic earnings per share $ 0.40 $ 0.24 $ 1.08 $ 0.64
========== ========== ========== ============
Diluted earnings per share $ 0.38 $ 0.23 $ 1.03 $ 0.61
========== ========== ========== ============
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The table below states the income statement items for the three and
nine months ended April 1, 2001 and April 2, 2000 as a percentage of net sales
and provides the percentage change in absolute dollars of such items comparing
the interim periods ended April 1, 2001 to the corresponding periods from the
prior fiscal year:
Three Months Ended Nine Months Ended
------------------ -----------------
April 1, April 2, Increase/ April 1, April 2, Increase/
2001 2000 (Decrease) 2001 2000 (Decrease)
-------- -------- --------- -------- -------- ---------
Net sales 100.0% 100.0% 52% 100.0% 100.0% 56%
Cost of sales 23.1 25.6 37 23.5 25.7 43
----- ----- ----- -----
Gross profit 76.9 74.4 58 76.5 74.3 61
----- ----- ----- -----
Expenses:
Research & development 10.1 10.5 47 10.2 11.3 40
Selling, general &
administrative 9.0 10.5 31 9.1 10.7 33
----- ----- ----- -----
19.1 21.0 39 19.3 22.1 37
----- ----- ----- -----
Operating income 57.7 53.4 65 57.2 52.3 71
Interest income 5.9 6.0 50 6.2 6.1 59
----- ----- ----- -----
Income before income taxes 63.7% 59.4% 63 63.4% 58.4% 69
===== ===== ===== =====
Effective tax rates 30.0% 31.0% 30.0% 31.0%
===== ===== ===== =====
Net sales for the quarter ended April 1, 2001 were a record $282.0
million, an increase of $96.9 million or 52% over net sales for the same quarter
of the previous year. Although the average selling price increased slightly, the
principal cause for this increase was higher unit shipments. Sales increased in
all major geographic areas, with the USA and international remaining their same
percentage of sales at 45% and 55% respectively as in the prior year. Within
international, Europe was 25% of sales, Japan 14%, and other geographical areas
primarily the rest of Asia 16%. Relative to end-market applications, sales
increased significantly over the prior year's quarter in each of the Company's
three major end markets, with the most growth occurring in communications,
followed by industrial and computer.
Net sales for the nine months ended April 1, 2001 increased $277.7
million or 56% over net sales for the same period of the previous year. This
increase was due to higher unit shipments, as the average selling price was
largely unchanged. Sales increased in all geographic areas and in all major end
markets, led by communications.
Gross profit increased $79.2 million or 58% and $222.8 million or 61%
for the third quarter and first nine months of fiscal 2001, respectively, over
the corresponding periods in fiscal 2000. The improvement in gross profit as a
percentage of net sales was due to the favorable effect of fixed costs allocated
across a higher sales base and improved manufacturing efficiencies and yields
achieved at the Company's fabrication, assembly and test facilities, partially
offset by costs associated with the start-up of the new wafer fabrication plant
in Milpitas.
Research and development ("R&D") expenses increased by $9.1 million or
47% and $22.7 million or 40% for the third quarter and first nine months of
fiscal 2001, respectively, as compared to the same periods in fiscal 2000. The
increases in R&D expenses compared to the prior year periods were due to
increases in staffing levels of design engineering personnel, which resulted in
higher compensation costs; increased profit sharing costs driven by the
increases in sales and profitability; and development costs in new product
areas.
9
Selling, general and administrative expenses ("SG&A") increased by $6.1
million or 31% and $17.3 million or 33% for the third quarter and first nine
months of fiscal 2001, respectively, as compared to the same periods in fiscal
2000. The increases in SG&A expenses compared to the prior year periods were due
primarily to an increase in staffing levels to support the increased sales
volume; higher profit sharing costs and higher commissions resulting from the
increase in sales; and higher legal costs related to patent protection and
infringement.
Interest income was $16.7 million and $47.8 million for the third
quarter and first nine months of fiscal 2001, an increase of $5.6 million and
$17.8 million, respectively, over the corresponding periods of fiscal 2000. The
increase in interest income resulted from an increase in the cash and investment
balances and a slightly higher average interest rate versus the comparable
periods of the prior fiscal year.
The Company's effective tax rate for the third quarter and the first
nine months of fiscal 2001 was 30.0%, down from 31.0% in fiscal 2000. The lower
tax rate is due primarily to increased business activity in foreign
jurisdictions with lower tax rates, an increase in tax-exempt interest income,
the R&D credit and the Company's foreign sales corporation.
Factors Affecting Future Operating Results
Except for historical information contained herein, the matters set
forth in this Form 10-Q/A, including the statements in the following paragraphs,
are forward-looking statements that are dependent on certain risks and
uncertainties including such factors, among others, as the timing, volume and
pricing of new orders received and shipped during the quarter, timely ramp-up of
new facilities, the timely introduction of new processes and products, general
conditions in the world economy and financial markets and other factors
described below.
In the short-term the Company, as with other semiconductor companies,
has seen a slowdown in net bookings. As the quarter progressed cancellations
continued to increase and bookings decreased both significantly across all
business areas, in all geographical areas and in all end-markets. North American
business activity was the weakest, particularly in the networking communications
area. While many customers are dealing with demand issues and excess inventory,
the Company has added to its capacity having put its new Milpitas wafer
fabrication plant into operation for the full quarter. The convergence of these
three events has caused lead times to drop thereby reducing the need for
customers to book orders at the current time. The Company is not expecting
bookings to strengthen significantly soon, but as lead times remain low, turns
business, business that is booked and shipped within the same quarter, should
increase late in the quarter. The Company had been growing at a 50%-60% rate
year over year for several quarters and some correction is not surprising. The
short-term will be difficult as volume curtails and we believe next quarter
could be 20%-30% lower in sales than the quarter just ended. As in past economic
downturns the Company estimates that its profitability as a percentage of sales
will not change significantly on the forecasted lower sales. We continue to
believe this is more of a short-term correction than a severe general economic
problem as design-in activity at customers is very active and the demand for
high performance proprietary analog solutions in new generation end products
continues strong. The long-term prospects for the business are excellent and the
Company continues to invest in the plant infrastructure and technical talent to
maximize its opportunities.
Estimates of future performance are uncertain, and past performance of
the Company may not be a good indicator of future performance due to factors
affecting the Company, its competitors, the semiconductor industry and the
overall economy. The semiconductor industry is characterized by rapid
technological change, price erosion, cyclical market patterns, periodic
oversupply conditions, occasional shortages of materials, capacity constraints,
variations in manufacturing efficiencies and significant expenditures for
capital equipment and product development. Furthermore, new product
introductions and patent protection of existing products are critical factors
for future sales growth and sustained profitability. The Company's headquarters
and a portion of its manufacturing facilities and research and development and
certain other critical business operations are located near major earthquake
fault lines in California. Consequently the Company could be adversely affected
in the event of a major earthquake. In addition, California is currently
experiencing the threat of interruption in the availability of electricity. To
date the impact on the Company has been negligible. However, electricity is a
critical resource to the Company without which its products could not be
manufactured. In the three and nine month periods ended April 1, 2001,
electricity costs represented less than 1% of sales.
10
Although the Company believes that it has the product lines,
manufacturing facilities and technical and financial resources for its current
operations, sales and profitability can be significantly affected by the above
and other factors. Additionally, the Company's common stock could be subject to
significant price volatility should sales and/or earnings fail to meet
expectations of the investment community. Furthermore, stocks of high technology
companies are subject to extreme price and volume fluctuations that are often
unrelated or disproportionate to the operating performance of these companies.
Liquidity and Capital Resources
At April 1, 2001, cash, cash equivalents and short-term investments
totaled $1,429.4 million, and working capital was $1,424.6 million.
During the first nine months of fiscal 2001, the Company generated
$411.8 million of cash from operating activities. Additionally, the Company
generated $38.9 million in proceeds from common stock issued under employee
stock option and stock purchase plans.
During the first nine months of fiscal 2001, significant cash
expenditures included net purchases of short-term investments of $145.8 million
and $105.1 million for the purchase of capital assets, primarily manufacturing
equipment for the Company's fabrication, assembly and test facilities. The
Company also paid $63.3 million to repurchase 1.4 million shares of its common
stock and $28.4 million for cash dividends to stockholders representing $0.03
per share per quarter. In April 2001, the Company's Board of Directors declared
an increase in the quarterly cash dividend to $0.04 per share to be paid during
the June quarter of fiscal 2001. The payment of future dividends will be based
on quarterly financial performance.
Historically, the Company has satisfied its liquidity needs through
cash generated from operations and the placement of equity securities. Given its
strong financial condition and performance, the Company believes that current
capital resources and cash generated from operating activities will be
sufficient to meet its liquidity and capital expenditures requirements for the
foreseeable future.
11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
On January 11, 2001, the Company filed a report on Form
8-K relating to the change of the Company's state of
incorporation from California to Delaware.
12
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.
LINEAR TECHNOLOGY CORPORATION
DATE: May 16, 2001 BY /s/Paul Coghlan
----------------------------
Paul Coghlan
Vice President, Finance &
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
13