1
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
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 December 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number 1-5560
--------
ALPHA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2302115
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SYLVAN ROAD, WOBURN, MASSACHUSETTS 01801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 935-5150
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JANUARY 30, 2000
COMMON STOCK, PAR VALUE $.25 PER SHARE 19,887,482
2
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
PART 1 FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - December 26, 1999 and March 28, 1999..... 3
Consolidated Statements of Income - Quarters and Nine Months Ended
December 26, 1999 and December 27, 1998................................ 4
Consolidated Statements of Cash Flows - Nine Months Ended
December 26, 1999 and December 27, 1998................................ 5
Notes to Consolidated Financial Statements............................. 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 9
Item 3 - Quantitative and Qualitative Disclosures About Market Risk........ 13
PART 2 OTHER INFORMATION
Item 1 - Legal Proceedings................................................. 13
Item 6 - Exhibits and Reports on Form 8-K.................................. 14
- --------------------------------------------------------------------------------
2
3
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
DECEMBER 26, MARCH 28,
1999 1999
(UNAUDITED) (AUDITED)
- --------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents...................... $ 27,850 $ 14,029
Short-term investments (Note 2)................ 108,041 9,731
Accounts receivable, trade, less allowance
for doubtful accounts of $712 and $741....... 27,691 22,972
Inventories (Note 3)........................... 9,324 8,773
Prepayments and other current assets........... 2,485 796
Deferred tax assets............................ 2,493 6,522
-------- --------
Total current assets.................. 177,884 62,823
-------- --------
Property, plant and equipment, less accumulated
depreciation and amortization of $69,233
and $62,204.................................... 59,383 42,497
Other assets......................................... 1,561 1,361
-------- --------
$238,828 $106,681
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt........... $ 111 $ 912
Accounts payable............................... 12,733 10,700
Accrued liabilities:
Payroll, commissions and related expenses.... 5,314 7,292
Other accrued liabilities.................... 628 1,232
-------- --------
Total current liabilities............. 18,786 20,136
-------- --------
Long-term debt ...................................... 404 713
-------- --------
Other long-term liabilities.......................... 1,857 1,626
-------- --------
Deferred tax liabilities............................. 3,380 3,192
-------- --------
Commitments and contingencies (Note 6)
Stockholders' equity (Note 7)
Common stock par value $.25 per share: authorized
30,000,000 shares; issued 19,775,423 and
16,051,311 shares............................ 4,944 4,013
Additional paid-in capital..................... 175,198 58,872
Retained earnings.............................. 34,346 18,276
Less - Treasury shares 37,078 and 62,379 shares
at cost...................................... 77 133
Unearned compensation-restricted stock....... 10 14
-------- --------
Total stockholders' equity............ 214,401 81,014
-------- --------
$238,828 $106,681
======== ========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
3
4
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
THIRD QUARTER ENDED NINE MONTHS ENDED
DEC. 26, DEC. 27, DEC. 26, DEC. 27,
1999 1998 1999 1998
- --------------------------------------------------------------------------------
Net sales............................. $47,463 $32,489 $127,837 $92,070
Cost of sales....................... 26,484 18,151 71,340 52,046
Research and development expenses... 5,332 3,397 14,416 9,310
Selling and administrative
expenses.......................... 7,598 5,809 20,886 16,728
------- ------- -------- -------
Operating income...................... 8,049 5,132 21,195 13,986
Interest expense...................... (20) (61) (94) (231)
Interest income and other, net........ 1,810 231 4,009 647
------- ------- -------- -------
Income before income taxes............ 9,839 5,302 25,110 14,402
Provision for income taxes............ 3,542 530 9,040 1,440
------- ------- -------- -------
Net income............................ $ 6,297 $ 4,772 $ 16,070 $12,962
======= ======= ======== =======
Net income per share basic............ $ 0.32 $ 0.30 $ 0.86 $ 0.82
======= ======= ======== =======
Net income per share diluted.......... $ 0.31 $ 0.29 $ 0.82 $ 0.80
======= ======= ======== =======
Weighted average common shares basic.. 19,660 15,835 18,671 15,773
======= ======= ======== =======
Weighted average common shares
diluted............................. 20,605 16,402 19,688 16,211
======= ======= ======== =======
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
4
5
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
NINE MONTHS ENDED
DEC. 26, DEC. 27,
1999 1998
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income.............................................. $ 16,070 $ 12,962
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization of property, plant
and equipment...................................... 7,029 5,806
Deferred taxes........................................ 9,128 --
Contribution of treasury shares to Savings and
Retirement Plan.................................... 850 707
Amortization of unearned compensation - restricted
stock, net......................................... 4 58
Increase (decrease) in other liabilities and long-
term benefits...................................... 231 (488)
Increase in other assets.............................. (230) (178)
Change in assets and liabilities
Accounts receivable ................................. (4,719) (818)
Inventories.......................................... (551) (942)
Prepayments and other current assets................. (1,689) (1,295)
Accounts payable..................................... 2,033 1,503
Other accrued liabilities and expenses............... (2,582) 1,495
--------- --------
Net cash provided by operations.................... 25,574 18,810
--------- --------
Cash flows from investing activities:
Purchases of short-term investments..................... (142,925) (16,908)
Maturities of short-term investments.................... 44,615 6,079
Additions to property, plant and equipment.............. (23,915) (11,117)
--------- --------
Net cash used in investing activities.............. (122,225) (21,946)
--------- --------
Cash flows from financing activities:
Payments on long-term debt.............................. (1,110) (1,407)
Deferred charges related to long-term debt.............. 30 12
Payments on capital lease obligations................... -- (8)
Proceeds from sale of stock............................. 109,446 98
Exercise of stock options............................... 2,106 518
--------- --------
Net cash provided by (used in) financing
activities...................................... 110,472 (787)
--------- --------
Net increase (decrease) in cash and cash equivalents...... 13,821 (3,923)
Cash and cash equivalents, beginning of period............ 14,029 14,356
--------- --------
Cash and cash equivalents, end of period.................. $ 27,850 $ 10,433
========= ========
- --------------------------------------------------------------------------------
Supplemental cash flow disclosures:
Cash paid for income taxes ............................... $ 3,078 $ 903
========= ========
Cash paid for interest.................................... $ 118 $ 218
========= ========
Noncash transaction from financing activities:
Tax benefit associated with the exercise of
stock options........................................ $ 4,911 $ --
========= ========
The accompanying notes are an integral part of these financial statements.
5
6
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The interim financial information included herein is unaudited. In addition, the
financial information does not include all disclosures required under generally
accepted accounting principles because certain note information included in the
Company's annual report to shareholders has been omitted and such information
should be read in conjunction with the prior year's annual report. However, the
financial information reflects all adjustments (consisting solely of normal
recurring adjustments), which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods. The Company considers the
disclosures adequate to make the information presented not misleading.
NOTE 2 SHORT-TERM INVESTMENTS
The Company's short-term investments are classified as held-to-maturity. These
investments consist primarily of commercial paper and bonds with original
maturities of more than 90 days. Such short-term investments are carried at
amortized cost, which approximates fair value, due to the short period of time
to maturity. Gains and losses are included in investment income in the period
they are realized.
NOTE 3 INVENTORIES
DEC. 26, MARCH 28,
Inventories consist of the following: 1999 1999
- --------------------------------------------------------------------------------
(in thousands)
Raw materials.............................. $3,038 $3,852
Work-in-process............................ 4,651 3,034
Finished goods............................. 1,635 1,887
------ ------
$9,324 $8,773
====== ======
NOTE 4 SEGMENT INFORMATION
The Company is organized into three reportable segments as follows:
WIRELESS SEMICONDUCTOR PRODUCTS:
The Wireless Semiconductor segment designs and manufactures gallium arsenide
integrated circuits and other discrete semiconductors for the global market for
wireless telephone handsets, wireless data and other applications.
APPLICATION SPECIFIC PRODUCTS:
The Application Specific segment designs and manufactures a broad range of
gallium arsenide and silicon devices and components for satellite,
instrumentation, defense and other communications markets.
CERAMIC PRODUCTS:
The Ceramics segment designs and manufactures technical ceramic and magnetic
products for wireless telephony infrastructure and other wireless markets.
6
7
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
NOTE 4 SEGMENT INFORMATION (CONTINUED)
The table below presents selected financial data by business segment for the
periods indicated.
QUARTERS ENDED NINE MONTHS ENDED
------------------ -------------------
DEC. 26, DEC. 27, DEC. 26, DEC. 27,
1999 1998 1999 1998
------- ------- -------- -------
SALES
Wireless Semiconductor Products..... $31,496 $17,945 $ 81,680 $46,303
Application Specific Products....... 7,815 7,676 21,582 27,497
Ceramic Products.................... 8,152 6,868 24,575 18,270
------- ------- -------- -------
$47,463 $32,489 $127,837 $92,070
======= ======= ======== =======
OPERATING INCOME
Wireless Semiconductor Products..... $ 5,012 $ 2,503 $ 12,550 $ 4,772
Application Specific Products....... 1,996 1,895 5,663 8,100
Ceramic Products.................... 1,041 734 2,982 1,114
------- ------- -------- -------
$ 8,049 $ 5,132 $ 21,195 $13,986
======= ======= ======== =======
DEC. 26, MARCH 28,
1999 1999
-------- --------
(in thousands)
TOTAL ASSETS
Wireless Semiconductor Products........................... $ 61,589 $ 41,508
Application Specific Products............................. 10,907 10,751
Ceramic Products.......................................... 23,662 20,119
Corporate................................................. 142,670 34,303
-------- --------
$238,828 $106,681
======== ========
SIGNIFICANT CUSTOMER
During the quarters ended December 26, 1999 and December 27, 1998, one customer
accounted for approximately 35% and 32%, respectively, of the Company's sales.
During the nine months ended December 26, 1999 and December 27, 1998, one
customer accounted for approximately 34% and 27%, respectively, of the Company's
sales.
NOTE 5 EARNINGS PER SHARE
A reconciliation of the weighted average number of shares outstanding used in
the computation of the basic and diluted earnings per share for the quarters and
nine months ended December 26, 1999 and December 27, 1998 is as follows:
QUARTERS ENDED NINE MONTHS ENDED
------------------ ------------------
DEC. 26, DEC. 27, DEC. 26, DEC. 27,
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
Weighted average shares (basic).......... 19,660 15,835 18,671 15,773
Effect of dilutive stock options......... 945 567 1,017 438
------ ------ ------ ------
Weighted average shares (diluted)........ 20,605 16,402 19,688 16,211
====== ====== ====== ======
NOTE 6 COMMITMENTS AND CONTINGENCIES
The Company is party to suits and claims arising in the normal course of
business. Management believes these are adequately provided for or will result
in no significant additional liability to the Company.
7
8
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
NOTE 7 SUBSEQUENT EVENT
On January 27, 2000, the Company's Board of Directors approved a two-for-one
stock split, to be effected in the form of a stock dividend or stock
distribution, subject to stockholder approval of an increase in the authorized
shares of the Company's common stock to 100 million shares. The Company will
seek approval of the share increase at a Special Meeting of Stockholders to be
held on March 28, 2000. Subject to receiving such stockholder approval, the
stock split will be payable on April 19, 2000 to shareholders of record as of
March 29, 2000.
The data for the third quarters ended December 26, 1999 and December 27, 1998,
respectively, if restated to reflect the stock split, are basic net income per
share of $0.16 and $0.15; diluted net income per share of $0.15 and $0.15; basic
weighted average shares of 39.3 and 31.7 million and diluted weighted average
shares of 41.2 and 32.8 million. The data for the nine months ended December 26,
1999 and December 27, 1998, respectively, if restated to reflect the stock
split, are basic net income per share of $0.43 and $0.41; diluted net income per
share of $0.41 and $0.40; basic weighted average shares of 37.3 and 31.5 million
and diluted weighted average shares of 39.4 and 32.4 million.
8
9
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table shows our statement of operations data as a percentage of
sales for the periods indicated:
Quarters Ended Nine Months Ended
------------------- -------------------
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1999 1998 1999 1998
-------- -------- -------- --------
Sales.................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales ......................... 55.8 55.9 55.8 56.5
----- ----- ----- -----
Gross margin........................... 44.2 44.1 44.2 43.5
Research and development expenses...... 11.2 10.5 11.3 10.0
Selling and administrative expenses.... 16.0 17.9 16.3 18.2
----- ----- ----- -----
Operating income....................... 17.0 15.7 16.6 15.3
Other income (expense), net............ 3.8 0.5 3.0 0.5
----- ----- ----- -----
Income before income taxes............. 20.8 16.2 19.6 15.8
Provision for income taxes............. 7.5 1.6 7.0 1.6
----- ----- ----- -----
Net income............................. 13.3% 14.6% 12.6% 14.2%
===== ===== ===== =====
SALES. Sales increased 46.1% to $47.5 million for the third quarter of fiscal
2000 from $32.5 million for the third quarter of fiscal 1999. For the first nine
months of fiscal 2000, sales increased 38.8% to $127.8 million from $92.1
million for the first nine months of fiscal 1999. The increase in sales
continues to be the result of increased demand for wireless products and our
penetration into additional handset platforms. Deliveries to one customer
represented approximately 35% of our total sales for the third quarter of fiscal
2000 compared with 32% for the same period last year. Deliveries to one customer
represented approximately 34% of our total sales for the first nine months of
fiscal 2000 compared with 27% for the comparable period last year.
GROSS PROFIT. Gross profit increased 46.3% to $21.0 million or 44.2% of sales
for the third quarter of fiscal 2000 from $14.3 million or 44.1% of sales for
the comparable period last year. For the first nine months of fiscal 2000, gross
profit increased 41.2% to $56.5 million or 44.2% of sales compared with $40.0
million or 43.5% of sales for the same period last year. The increase in gross
margin for the year to date was primarily a result of improved operating
efficiencies, particularly in our Wireless Semiconductor and Ceramics Groups,
which continued to leverage capacity and improve yields.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
57.0% to $5.3 million or 11.2% of sales for the third quarter of fiscal 2000
from $3.4 million or 10.5% of sales compared with the same period last year. For
the first nine months of fiscal 2000, research and development expenses
increased 54.8% to $14.4 million or 11.3% of sales from $9.3 million or 10% of
sales for the comparable period last year. The increase in research and
development expenses is primarily attributable to the development of processes
and products in the Wireless Semiconductor Products Group. For the third quarter
and first nine months of fiscal 2000, over 75% of our total research and
development expenses were focused on the Wireless Semiconductor Products Group's
efforts in developing GaAs integrated circuits and other high volume wireless
products.
9
10
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses totaled
$7.6 million or 16.0% of sales for the third quarter of fiscal 2000 compared
with $5.8 million or 17.9% of sales for the same period last year. For the first
nine months of fiscal 2000, selling and administrative expenses totaled $20.9
million or 16.3% compared to $16.7 million or 18.2% of sales for the first nine
months of fiscal 1999. The increase in selling and administrative expenses
reflects increased sales commissions resulting from higher sales volumes as well
as increased costs related to training, recruiting and an increased sales force.
The decrease in selling and administrative expenses as a percentage of sales was
attributable to our continued efforts to control administrative costs.
OTHER INCOME (EXPENSE), NET. Interest expense for the third quarter and first
nine months of fiscal 2000 decreased $41 thousand and $137 thousand,
respectively, over the comparable periods last year due to a decline in
outstanding borrowings. Interest income for the third quarter and nine months
ended December 26, 1999 increased $1.6 million and $3.5 million, respectively,
over the comparable periods last year as a result of higher levels of cash, cash
equivalents and short-term investments.
PROVISION FOR INCOME TAXES. Our effective tax rates for the first nine months of
fiscal 2000 and 1999 were 36% and 10%, respectively. Last year's rate differed
from statutory rates primarily as a result of the utilization of net operating
loss carryforwards.
BUSINESS SEGMENTS
The table below displays sales and operating income by business segment for the
periods indicated.
Quarter Ended Nine Months Ended
------------------- -------------------
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1999 1998 1999 1998
-------- -------- -------- --------
SALES
Wireless Semiconductor Products.... $31,496 $17,945 $ 81,680 $46,303
Application Specific Products...... 7,815 7,676 21,582 27,497
Ceramic Products................... 8,152 6,868 24,575 18,270
------- ------- -------- -------
$47,463 $32,489 $127,837 $92,070
======= ======= ======== =======
OPERATING INCOME
Wireless Semiconductor Products.... $ 5,012 $ 2,503 $ 12,550 $ 4,772
Application Specific Products...... 1,996 1,895 5,663 8,100
Ceramic Products................... 1,041 734 2,982 1,114
------- ------- -------- -------
$ 8,049 $ 5,132 $ 21,195 $13,986
======= ======= ======== =======
WIRELESS SEMICONDUCTOR PRODUCTS. Sales for the Wireless Semiconductor Products
Group increased 75.5% to $31.5 million for the third quarter of fiscal 2000 from
$17.9 million for the same quarter last year. For the first nine months of
fiscal 2000, sales for the Wireless Semiconductor Group increased 76.4% to $81.7
million from $46.3 million for the same period last year. The increase was
primarily the result of increased demand for wireless products and our
penetration into additional handset platforms.
Operating income for the Wireless Semiconductor Group increased 100.2% to $5.0
million for the third quarter of fiscal 2000 from $2.5 million for the
comparable quarter last year. For the nine months ended December 26, 1999,
operating income increased 163.0% to $12.6 million from $4.8 million for the
comparable period last year. The increase was primarily attributable to
increased sales and improved operating efficiencies as this group continued to
leverage capacity and improve yields. In addition, this group continued its
focus on the development of processes and products for the wireless market,
while continuing to control administrative costs.
APPLICATION SPECIFIC PRODUCTS. Sales for the Application Specific Products Group
for the third quarter of fiscal 2000 remained relatively constant compared to
the comparable quarter last year. For the first nine months of fiscal 2000,
sales for Application Specific Products decreased 21.5% to $21.6 million from
$27.5 million. This decrease was the result of a reduction of volume on some of
our few remaining defense contracts and from discontinuing certain products in
the group.
10
11
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
Operating income for the Application Specific Products Group increased 5.3% to
$2.0 million for the third quarter of fiscal 2000 from $1.9 million for the same
quarter last year. For the first nine months of fiscal 2000, operating income
for Application Specific Products decreased 30.1% to $5.7 million from $8.1
million for the comparable period last year. This group continued to realign its
cost structure to current volumes, reporting gross margins of over 50% and
operating margins of over 25% for the third quarter and first nine months of
fiscal 2000.
CERAMIC PRODUCTS. Sales for the Ceramics Group for the third quarter increased
18.7% to $8.2 million from $6.9 million for the same quarter last year. For the
first nine months of fiscal 2000, sales for the Ceramics Group increased 34.5%
to $24.6 million from $18.3 million for the same period last year. The increase
is due primarily to increased demand for wireless infrastructure products.
Operating income for the Ceramics Group increased 41.8% to $1.0 million from
$734 thousand for the third quarter and increased 167.7% to $3.0 million from
$1.1 million for the first nine months of fiscal 2000 compared with the same
periods last year. The increase in operating income was primarily the result of
increased sales and improved operating efficiencies, including the leveraging of
capacity and increased manufacturing automation.
FINANCIAL CONDITION
At December 26, 1999, working capital totaled $159.1 million and included $135.9
million in cash, cash equivalents and short-term investments, compared with
$42.7 million of working capital at the end of fiscal 1999. In June 1999, we
completed a public offering of our common stock that raised net proceeds of
$109.4 million. Uses of cash included $23.9 million for capital expenditures as
we continued our investment in the semiconductor GaAs wafer fabrication
operation and the integrated circuit and discrete semiconductor assembly and
test areas, as well as for improved manufacturing capabilities at the ceramics
manufacturing facility.
The expansion of the GaAs fabrication facility in Massachusetts has allowed us
to significantly increase our current capacity. The new clean room space is
complete and in use, and additional manufacturing equipment has been installed
and brought to full productivity. Since demand for our GaAs products continues
to increase strongly, we have accelerated the second phase of expansion in our
fab. This phase involves the installation of additional production equipment,
without the need for additional clean room construction. We expect this second
phase to cost approximately $12 million and to be complete by the summer of
2000. We are also examining various options that would allow another significant
expansion of our GaAs capacity, through acquisition or construction.
At December 26, 1999, we had a $10 million unsecured revolving line of credit.
We believe that our current cash position, together with continued cash
generated from operations and the $10 million line of credit, will provide us
with adequate funds to support our current operating needs and allow us to
undertake and complete these expansion projects.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
establishes accounting and reporting standards for derivatives and hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. SFAS No. 133 will be effective for our fiscal year 2002. We are currently
evaluating SFAS No.133. We do not expect this new statement to have a material
effect on our consolidated financial position, results of operations or cash
flow.
YEAR 2000
The Year 2000 issue relates to the inability of certain computer software
programs to properly recognize and process date sensitive information relative
to the Year 2000 and beyond. To address this issue, we undertook a company-wide
Year 2000 project under the direction of senior management. As part of this
project, we evaluated our products and determined that our products are not date
sensitive. We completed a comprehensive inventory of our internal information
systems, equipment and facilities. All critical items were tested to determine
compliance and minor upgrades were completed. We also completed formal
communication with significant suppliers, customers, financial
11
12
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
institutions and other third parties with which we have a material relationship
in order to determine whether those entities had adequate plans in place to
ensure their Year 2000 preparedness.
As of the date of this filing, we have not experienced any significant Year 2000
problems with our internal systems or equipment, nor have we detected any
significant Year 2000 problems affecting our customers or suppliers. In
addition, the costs associated with Year 2000 compliance have not been
significant and we do not expect any potential additional costs to have a
material adverse effect on our business, results of operations or financial
condition. However, we will continue to monitor our information systems,
facilities, equipment and relationships with third parties. Although we believe
our planning efforts have been adequate to address our Year 2000 compliance
concerns, we cannot guarantee that we will not experience unanticipated negative
consequences or material costs caused by undetected errors or defects in the
technology used in our internal systems or that third parties upon which we rely
will not experience similar negative consequences.
OTHER MATTERS
Safe Harbor Statement - Except for the historical information contained herein,
this report contains forward-looking statements that constitute the Company's
current intentions, hopes, beliefs, expectations or predictions of the future,
which are, therefore, inherently subject to risks and uncertainties. The
Company's actual results could differ materially from those anticipated in the
Company's forward-looking statements based on various factors, including without
limitation: cancellation or deferral of customer orders, dependence on a small
number of large customers, difficulties in the timely development and market
acceptance of new products, market developments that vary from the current
public expectations concerning the growth of wireless communications,
difficulties in manufacturing new or existing products in sufficient quantity or
quality, increased competitive pressures, decreasing selling prices for the
Company's products, or changes in economic conditions. Further information on
factors that could affect the Company's performance is included in the Company's
periodic reports filed with the SEC, including but not limited to the Company's
Form 10-K for the year ended March 28, 1999, and subsequent Forms 10-Q. The
Company cautions readers not to place undue reliance upon any such
forward-looking statements, which speak only as of the date made. The Company
expressly disclaims any obligations or undertaking to release publicly any
updates or revisions to any such statements to reflect any change in the
Company's expectations or any change in events, conditions or circumstances on
which any such statement is based.
12
13
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
PART I
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in the value of a short-term
investment and a financial instrument caused by fluctuations in investment
prices and interest rates.
The Company handles market risks in accordance with established policies. The
Company's risk-management activities include "forward-looking statements" that
involve risk and uncertainties. Actual results could differ materially from
those projected in the forward-looking statements.
Investment Price Risk
The fair value of the Company's short-term investment portfolio at December 26,
1999 approximated carrying value due to its short-term duration. Market risk,
estimated as the potential decrease in fair value resulting from a hypothetical
10% decrease in interest rates for the issues contained in the investment
portfolio, is considered not to be material because of the short-term nature of
the investments.
Interest Rate Risk
The carrying value of the Company's long-term debt, including current
maturities, was approximately $515 thousand at December 26, 1999. Due to the
nature of the debt instruments, management has determined that the fair value
was not materially different from the quarter-end carrying value.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The Company does not have any material pending legal proceedings other than
routine litigation incidental to its business.
The Company has been notified by federal and state environmental agencies of its
potential liability with respect to the Spectron, Inc. Superfund site in Elkton,
Maryland. Several hundred other companies have also been notified about their
potential liability regarding this site. The Company continues to deny that it
has any responsibility with respect to this site other than as a DE MINIMIS
party. Management is of the opinion that the outcome of the aforementioned
environmental matter will not have a material effect on the Company's operations
or financial position.
13
14
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3) Certificate of Incorporation and By-laws.
(a) Restated Certificate of Incorporation (Filed as Exhibit 3(a) to
Registration Statement on Form S-3 (Registration No.
33-63857))*.
(b) Amended and restated By-laws of the Corporation dated April 30,
1992 (Filed as Exhibit 3(b) to the Annual Report on Form 10-K
for the year ended March 29, 1992)*.
(4) Instruments defining rights of security holders, including
indentures.
(a) Specimen Certificate of Common Stock (Filed as Exhibit 4(a) to
Registration Statement on Form S-3 (Registration No.
33-63857))*.
(b) Loan and Security Agreement dated December 15, 1993 between
Trans-Tech, Inc., and County Commissioners of Frederick County
(Filed as Exhibit 4(h) to the Quarterly Report on Form 10-Q for
the quarter ended July 3, 1994)*.
(c) Revolving Credit Agreement dated November 1, 1999 between Alpha
Industries, Inc., and Trans-Tech Inc. and Fleet Bank of
Massachusetts and Silicon Valley Bank.
(10) Material Contracts.
(a) Alpha Industries, Inc., 1986 Long-Term Incentive Plan as
amended (Filed as Exhibit 10(a) to the Quarterly Report on Form
10-Q for the quarter ended October 2, 1994)*.(1)
(b) Alpha Industries, Inc., Employee Stock Purchase Plan as amended
October 22, 1992 (Filed as Exhibit 10(b) to the Annual Report
on Form 10-K for the fiscal year ended March 28, 1993)* and
amended August 22, 1995 (Filed as Exhibit 10(b) to the Annual
Report on Form 10-K for the fiscal year ended March 31,
1996)*.(1)
(c) SERP Trust Agreement between the Registrant and the First
National Bank of Boston as Trustee dated April 8, 1991 (Filed
as Exhibit 10(c) to the Annual Report on Form 10-K for the
fiscal year ended March 31, 1991)*.(1)
(d) Alpha Industries, Inc., Long-Term Compensation Plan dated
September 24, 1990 (Filed as Exhibit 10(i) to the Annual Report
on Form 10-K for the fiscal year ended March 29, 1992)*;
amended March 28, 1991 (Filed as Exhibit 10(a) to the Quarterly
Report on Form 10-Q for the quarter ended June 27, 1993)* and
as further amended October 27, 1994 (Filed as Exhibit 10(f) to
the Annual Report on Form 10-K for the fiscal year ended April
2, 1995)*.(1)
(e) Severance Agreement dated May 20, 1997 between the Registrant
and David J. Aldrich (Filed as Exhibit 10(g) to the Annual
Report on Form 10-K for the fiscal year ended March 30,
1997)*.(1)
(f) Severance Agreement dated January 14, 1997 between the
Registrant and Richard Langman (Filed as Exhibit 10(h) to the
Annual Report on Form 10-K for the fiscal year ended March 30,
1997)*.(1)
(g) Consulting Agreement dated August 13, 1992 between the
Registrant and Sidney Topol (Filed as Exhibit 10(p) to the
Annual Report on Form 10-K for the fiscal year ended April 3,
1994)*.(1)
(h) Alpha Industries, Inc., 1994 Non-Qualified Stock Option Plan
for Non-Employee Directors (Filed as Exhibit 10(r) to the
Quarterly Report on Form 10-Q for the quarter ended October 2,
1994)*.(1)
(i) Alpha Industries Executive Compensation Plan dated January 1,
1995 and Trust for the Alpha Industries Executive Compensation
Plan dated January 3, 1995 (Filed as Exhibit 10(p) to the
Annual Report on Form 10-K for the fiscal year ended April 2,
1995)*.(1)
(j) Alpha Industries, Inc. Savings and Retirement 401(k) Plan dated
July 1, 1996 (Filed as Exhibit
14
15
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
10(n) to the Annual Report on Form 10-K for the fiscal year
ended March 30, 1997)*.
(k) Severance Agreement dated September 4, 1998 between the
Registrant and Paul E. Vincent (Filed as Exhibit 10(n) to the
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 1998)*.(1)
(l) Severance Agreement dated December 11, 1998 between the
Registrant and Jean-Pierre Gillard (Filed as Exhibit 10(r) to
the Quarterly Report on Form 10-Q for the fiscal quarter ended
December 27, 1998)*.(1)
(m) Alpha Industries, Inc., 1997 Non-Qualified Stock Option Plan
for Non-Employee Directors. (Filed as Exhibit 10 (r) to the
Annual Report on Form 10-K for the fiscal year ended March 29,
1998)*.(1)
(n) Alpha Industries, Inc. 1996 Long-Term Incentive Plan (Filed as
Exhibit 99 to Registration Statement on Form S-8 filed January
22, 1999)*.(1)
(o) Alpha Industries, Inc. 1999 Employee Long-Term Incentive Plan
dated April 27, 1999 (Filed as Exhibit 10(q) to the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 27,
1999)*.(1)
(p) Severance Agreement dated September 13, 1999 between the
Registrant and Thomas C. Leonard (Filed as Exhibit 10(p) to the
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 26, 1999)*.(1)
(11) Statement re computation of per share earnings.**
(27) Financial Data Schedules.
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the fiscal quarter ended December
26, 1999.
- -------------------
* Not filed herewith. In accordance with Rule 12b-32 promulgated pursuant to the
Securities Exchange Act of 1934, as amended, reference is hereby made to
documents previously filed with the Commission, which are incorporated by
reference herein.
** Reference is made to Note 5 of the notes to Consolidated Financial Statements
on Page 7 of this Quarterly Report on Form 10-Q, which Note 5 is hereby
incorporated by reference herein.
(1) Management Contracts.
15
16
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
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.
Date: FEBRUARY 9, 2000
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Registrant
/s/ Thomas C. Leonard
--------------------------------------
Thomas C. Leonard
Chief Executive Officer
Vice Chairman, Board of Directors
/s/ Paul E. Vincent
--------------------------------------
Paul E. Vincent
Chief Financial Officer
Principal Financial Officer
Principal Accounting Officer
16