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 September 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 OCTOBER 24, 1999
COMMON STOCK, PAR VALUE $.25 PER SHARE 19,529,371
2
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
PART 1 FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - September 26, 1999 and March 28, 1999................... 3
Consolidated Statements of Income - Quarters and Six Months Ended
September 26, 1999 and September 27, 1998............................................. 4
Consolidated Statements of Cash Flows - Six Months Ended
September 26, 1999 and September 27, 1998............................................. 5
Notes to Consolidated Financial Statements............................................ 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................. 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk....................... 12
PART 2 OTHER INFORMATION
Item 1 - Legal Proceedings................................................................ 12
Item 4 - Submission of Matters to a Vote of Security Holders.............................. 12
Item 6 - Exhibits and Reports on Form 8-K................................................. 13
- --------------------------------------------------------------------------------
2
3
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
SEPTEMBER 26, MARCH 28,
1999 1999
(UNAUDITED) (AUDITED)
- ---------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents .................................... $ 19,001 $ 14,029
Short-term investments (Note 2)............................... 109,512 9,731
Accounts receivable, trade, less allowance for doubtful
accounts of $789 and $741 .................................. 27,996 22,972
Inventories (Note 3).......................................... 9,192 8,773
Prepayments and other current assets.......................... 2,420 796
Deferred tax assets........................................... 2,500 6,522
-------- --------
Total current assets................................. 170,621 62,823
-------- --------
Property, plant and equipment, less accumulated depreciation and
amortization of $66,798 and $62,204 .......................... 52,337 42,497
Other assets........................................................ 1,498 1,361
-------- --------
$224,456 $106,681
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt.......................... $ 111 $ 912
Accounts payable.............................................. 11,091 10,700
Accrued liabilities:
Payroll, commissions and related expenses................... 5,540 7,292
Other accrued liabilities................................... 639 1,232
-------- --------
Total current liabilities............................ 17,381 20,136
-------- --------
Long-term debt...................................................... 433 713
-------- --------
Other long-term liabilities......................................... 1,788 1,626
-------- --------
Deferred tax liabilities............................................ 3,350 3,192
-------- --------
Commitments and contingencies (Note 6)
Stockholders' equity
Common stock par value $.25 per share: authorized
30,000,000 shares; issued 19,523,971 and 16,051,311 shares.. 4,881 4,013
Additional paid-in capital.................................... 168,672 58,872
Retained earnings............................................. 28,049 18,276
Less - Treasury shares 42,219 and 62,379 shares at cost....... 88 133
Unearned compensation-restricted stock...................... 10 14
-------- --------
Total stockholders' equity........................... 201,504 81,014
-------- --------
$224,456 $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)
SECOND QUARTER ENDED SIX MONTHS ENDED
SEPT. 26, SEPT. 27, SEPT. 26, SEPT. 27,
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
Net sales................................... $ 41,769 $ 29,626 $ 80,374 $ 59,581
Cost of sales............................. 23,356 16,763 44,856 33,895
Research and development expenses......... 4,698 2,891 9,084 5,913
Selling and administrative expenses....... 6,854 5,422 13,288 10,919
-------- -------- -------- --------
Operating income............................ 6,861 4,550 13,146 8,854
Interest expense............................ (17) (81) (74) (170)
Interest income and other, net.............. 1,569 215 2,199 416
-------- -------- -------- --------
Income before income taxes.................. 8,413 4,684 15,271 9,100
Provision for income taxes.................. 3,029 468 5,498 910
-------- -------- -------- --------
Net income.................................. $ 5,384 $ 4,216 $ 9,773 $ 8,190
======== ======== ======== ========
Net income per share basic.................. $ 0.28 $ 0.27 $ 0.54 $ 0.52
======== ======== ======== ========
Net income per share diluted................ $ 0.26 $ 0.26 $ 0.51 $ 0.51
======== ======== ======== ========
Weighted average common shares basic........ 19,423 15,772 18,178 15,741
======== ======== ======== ========
Weighted average common shares diluted...... 20,594 16,131 19,230 16,116
======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------
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)
SIX MONTHS ENDED
SEPT. 26, SEPT. 27,
1999 1998
- -------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income.................................................................. $ 9,773 $ 8,190
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization of property, plant and equipment............ 4,594 3,806
Deferred taxes............................................................ 4,180 --
Contribution of treasury shares to Savings and Retirement Plan............ 561 481
Amortization of unearned compensation - restricted stock, net............. 4 45
Increase (decrease) in other liabilities and long-term benefits........... 162 (130)
Increase in other assets.................................................. (161) (18)
Change in assets and liabilities
Accounts receivable...................................................... (5,024) (1,674)
Inventories.............................................................. (419) (1,653)
Other current assets..................................................... (1,624) (716)
Accounts payable......................................................... 391 418
Other accrued liabilities and expenses................................... (2,345) (430)
--------- ---------
Net cash provided by operations........................................ 10,092 8,319
--------- ---------
Cash flows from investing activities:
Purchases of short-term investments......................................... (123,686) (12,724)
Maturities of short-term investments........................................ 23,905 2,978
Additions to property, plant and equipment.................................. (14,434) (5,131)
--------- ---------
Net cash used in investing activities.................................. (114,215) (14,877)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt.................................................. (1,081) (937)
Deferred charges related to long-term debt.................................. 24 (6)
Payments on capital lease obligations....................................... -- (8)
Proceeds from sale of stock................................................. 109,485 98
Exercise of stock options................................................... 667 203
--------- ---------
Net cash provided by (used in) financing activities.................... 109,095 (650)
--------- ---------
Net increase (decrease) in cash and cash equivalents.......................... 4,972 (7,208)
Cash and cash equivalents, beginning of period................................ 14,029 14,356
--------- ---------
Cash and cash equivalents, end of period...................................... $ 19,001 $ 7,148
========= =========
- ------------------------------------------------------------------------------------------------------------
Supplemental cash flow disclosures:
Cash paid for income taxes ................................................... $ 2,968 $ 595
========= =========
Cash paid for interest ....................................................... $ 76 $ 154
========= =========
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
SEPT. 26, MARCH 28,
Inventories consist of the following: 1999 1999
- ----------------------------------------------------------------------------------------------------
(in thousands)
Raw materials......................................................$ 3,275 $ 3,852
Work-in-process.................................................... 3,917 3,034
Finished goods..................................................... 2,000 1,887
---------- ---------
$ 9,192 $ 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 SIX MONTHS ENDED
------------------------ ------------------------
SEPT. 26, SEPT. 27, SEPT. 26, SEPT. 27,
1999 1998 1999 1998
--------- --------- --------- ---------
Sales
- -----
Wireless Semiconductor Products.... $26,186 $14,288 $50,184 $28,358
Application Specific Products...... 7,182 9,930 13,767 19,821
Ceramic Products................... 8,401 5,408 16,423 11,402
------- ------- ------- -------
$41,769 $29,626 $80,374 $59,581
======= ======= ======= =======
Operating Income
- ----------------
Wireless Semiconductor Products.... $ 3,841 $ 1,455 $ 7,538 $ 2,269
Application Specific Products...... 1,977 2,933 3,667 6,205
Ceramic Products................... 1,043 162 1,941 380
------- ------- ------- -------
$ 6,861 $ 4,550 $13,146 $ 8,854
======= ======= ======= =======
SEPT. 26, MARCH 28,
1999 1999
--------- ---------
(in thousands)
Total Assets
- ------------
Wireless Semiconductor Products......................................$ 55,046 $ 41,508
Application Specific Products........................................ 10,377 10,751
Ceramic Products..................................................... 22,955 20,119
Corporate............................................................ 136,078 34,303
-------- --------
$224,456 $106,681
======== ========
SIGNIFICANT CUSTOMER
During the quarters ended September 26, 1999 and September 27, 1998, one
customer accounted for approximately 34% and 24%, respectively, of the Company's
sales. During the six months ended September 26, 1999 and September 27, 1998,
one customer accounted for approximately 33% and 25%, 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
six months ended September 26, 1999 and September 27, 1998 is as follows:
QUARTERS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
SEPT. 26, SEPT. 27, SEPT. 26, SEPT. 27,
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands)
Weighted average shares (basic)..................... 19,423 15,772 18,178 15,741
Effect of dilutive stock options.................... 1,171 359 1,052 375
------ ------ ------ ------
Weighted average shares (diluted)................... 20,594 16,131 19,230 16,116
====== ====== ====== ======
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
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 Six Months Ended
----------------------- -----------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1999 1998 1999 1998
--------- --------- --------- ---------
Sales ................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................ 55.9 56.6 55.8 56.9
----- ----- ----- -----
Gross margin ......................... 44.1 43.4 44.2 43.1
Research and development expenses .... 11.3 9.7 11.3 9.9
Selling and administrative expenses... 16.4 18.3 16.5 18.3
----- ----- ----- -----
Operating income ..................... 16.4 15.4 16.4 14.9
Other income (expense), net .......... 3.7 0.4 2.6 0.4
----- ----- ----- -----
Income before income taxes ........... 20.1 15.8 19.0 15.3
Provision for income taxes ........... 7.2 1.6 6.8 1.5
----- ----- ----- -----
Net income ........................... 12.9% 14.2% 12.2% 13.8%
===== ===== ===== =====
SALES. Sales increased 41.0% to $41.8 million for the second quarter of fiscal
2000 from $29.6 million for the second quarter of fiscal 1999. For the first six
months of fiscal 2000, sales increased 34.9% to $80.4 million from $59.6 million
for the first six months of fiscal 1999. Orders increased 49.0% to $44.2 million
for the second quarter of fiscal 2000 compared to $29.7 million for the same
period last year. Orders for the first six months of fiscal 2000 increased 50.3%
to $86.2 million compared with $57.3 million for the same period last year. The
increase in sales and orders continues to be the result of increased demand for
wireless products and our penetration into additional handset platforms.
Deliveries to one customer represented approximately 34% of our total sales for
the second quarter of fiscal 2000 compared with 24% for the same period last
year. Deliveries to one customer represented approximately 33% of our total
sales for the first six months of fiscal 2000 compared with 25% for the
comparable period last year.
GROSS PROFIT. Gross profit increased 43.1% to $18.4 million or 44.1% of sales
for the second quarter of fiscal 2000 from $12.9 million or 43.4% of sales for
the comparable period last year. For the first six months of fiscal 2000 gross
profit increased 38.3% to $35.5 million or 44.2% of sales compared with $25.7
million or 43.1% of sales for the same period last year. The increase in gross
margin was primarily a result of improved operating efficiencies, particularly
in our Wireless Semiconductor Group, which continued to leverage capacity and
improve yields.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
62.5% to $4.7 million or 11.3% of sales for the second quarter of fiscal 2000
from $2.9 million or 9.7% of sales compared with the same period last year. For
the first half of fiscal 2000, research and development expenses increased 53.6%
to $9.1 million or 11.3% of sales from $5.9 million or 9.9% 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. 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.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses totaled
$6.9 million or 16.4% of sales for the second quarter of fiscal 2000 compared
with $5.4 million or 18.3% of sales for the same period last year. For the first
six months of fiscal 2000, selling and administrative expenses totaled $13.3
million or 16.5% compared to $10.9 million or 18.3% of sales for the first half
of fiscal 1999. The increase in selling and administrative expenses reflect
increased sales commissions resulting from higher sales volumes, while the
decrease in selling and administrative expenses as a percentage of sales was
attributable to our continued efforts to control administrative costs.
8
9
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
OTHER INCOME (EXPENSE), NET. Interest expense for the second quarter and first
six months of fiscal 2000 decreased $64 thousand and $96 thousand, respectively,
over the comparable periods last year due to a decline in outstanding
borrowings. Interest income for the second quarter and six months ended
September 26, 1999 increased $1.6 million and $203 thousand, 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 six 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 Six Months Ended
------------------------ --------------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
1999 1998 1999 1998
--------- --------- --------- ---------
Sales
- -----
Wireless Semiconductor Products.... $26,186 $14,288 $50,184 $28,358
Application Specific Products ..... 7,182 9,930 13,767 19,821
Ceramic Products .................. 8,401 5,408 16,423 11,402
------- ------- ------- -------
$41,769 $29,626 $80,374 $59,581
======= ======= ======= =======
Operating Income
- ----------------
Wireless Semiconductor Products.... $ 3,841 $ 1,455 $ 7,538 $ 2,269
Application Specific Products ..... 1,977 2,933 3,667 6,205
Ceramic Products .................. 1,043 162 1,941 380
------- ------- ------- -------
$ 6,861 $ 4,550 $13,146 $ 8,854
======= ======= ======= =======
WIRELESS SEMICONDUCTOR PRODUCTS. Sales for the Wireless Semiconductor Products
Group increased 83.3% to $26.2 million for the second quarter of fiscal 2000
from $14.3 million for the same quarter last year. For the first half of fiscal
2000, sales for the Wireless Semiconductor Group increased 77.0% to $50.2
million from $28.4 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 164.0% to $3.8
million for the second quarter of fiscal 2000 from $1.5 million for the
comparable quarter last year. For the six months ended September 26, 1999,
operating income increased 232.2% to $7.5 million from $2.3 million for the
comparable period last year. The increase was primarily attributable to 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 second quarter of fiscal 2000 decreased 27.7% to $7.2 million from $9.9
million for the comparable quarter last year. For the first six months of fiscal
2000, sales for Application Specific Products decreased 30.5% to $13.8 million
from $19.8 million. This decrease was due to a reduction of volume on some of
our few remaining defense contracts and exiting from certain small product lines
in the group.
Operating income for the Application Specific Products Group decreased 32.6% to
$2.0 million for the second quarter of fiscal 2000 from $2.9 million for the
same quarter last year. For the first six months of fiscal 2000, operating
income for Application Specific Products decreased 40.9% to $3.7 million from
$6.2 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 second quarter and first half of
fiscal 2000.
9
10
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
CERAMIC PRODUCTS. Sales for the Ceramics Group for the second quarter increased
55.3% to $8.4 million from $5.4 million for the same quarter last year. For the
first half of fiscal 2000, sales for the Ceramics Group increased 44.0% to $16.4
million from $11.4 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 543.8% to $1.0 million from
$162 thousand for the second quarter and increased 410.8% to $1.9 million from
$380 thousand for the first six months of fiscal 2000 compared with the same
periods last year. The increase in operating income was primarily the result of
improved operating efficiencies, including the leveraging of capacity and
increased manufacturing automation.
FINANCIAL CONDITION
At September 26, 1999, working capital totaled $153.2 million and included
$128.5 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 $14.4 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 September 26, 1999, we had two lines of credit totaling $15 million which
expired on September 30, 1999. We expect to replace these lines with a $10
million unsecured revolving line of credit. We believe that our current cash
position, together with continued cash generated from operations and the
expected $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 have initiated a
company-wide Year 2000 project under the direction of senior management. We have
evaluated our products and have determined that our products are not date
sensitive. We do not expect Year 2000 exposure for products sold.
We have completed a comprehensive inventory of our internal information systems.
Over the last several years, we have invested in new computer hardware and
software to improve our business operations. All such systems were required to
be Year 2000 compliant as a condition of purchase. We have completed testing of
our critical information systems. As a result of this testing, we do not believe
that any critical systems will cause a significant interruption of our business.
Certain systems require minor upgrades. These upgrades are expected to be
completed by November 1999 and the costs are not expected to be material.
10
11
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
We have also completed a comprehensive inventory of our equipment and
facilities. We have substantially completed testing of critical items to ensure
that they are compliant. As a result of our testing to date, we do not believe
that any critical items will result in a significant disruption to our business.
We have completed formal communication with significant suppliers, customers,
financial institutions and other third parties with which we have a material
relationship in order to determine whether those entities have adequate plans in
place to ensure their Year 2000 preparedness. As a result of our communications,
we have not identified any issues with respect to these third parties.
At this time, we have not developed a "worst case" scenario or an overall
contingency plan and do not intend to do so unless, as a result of ongoing
testing and evaluation, we believe these plans are warranted. Based upon our
assessment to date, we believe adequate time will be available to ensure
alternatives can be developed, assessed and implemented, if necessary, prior to
a Year 2000 issue having a negative impact on our operations. However, we cannot
assure that such modifications and conversions, if required, will be completed
on a timely basis.
We have not prepared estimates of costs to remediate Year 2000 problems.
However, based on currently available information, including the results of our
assessment to date, we do not believe that the costs associated with Year 2000
compliance will have a material adverse effect on our business, results of
operations or financial condition.
Although we believe our planning efforts are 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.
11
12
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 September 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 $544 thousand at September 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.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) On September 13, 1999, Alpha Industries, Inc. held its Annual
Meeting of Stockholders.
b) At the Meeting, the Stockholders elected James W. Henderson and
Sidney Topol as Class 1 Directors each to hold office for a
three-year term until the 2002 Annual Meeting of Stockholders and
until their successors have been duly elected and qualified.
Votes were cast as follows: Mr. Henderson 16,355,616 for and
117,188 withheld, and Mr. Topol 16,443,047 for and 29,757
withheld.
12
13
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) Amended and restated Credit Agreement dated October 1, 1997
between Alpha Industries, Inc., and Trans-Tech Inc. and
Fleet Bank of Massachusetts and Silicon Valley Bank (Filed
as Exhibit 4(f) to the Quarterly Report on Form 10-Q for the
quarter ended December 28, 1997)*; and as amended by First
Amendment dated September 30, 1998. (Filed as Exhibit 4(d)
to the Annual Report on Form 10-K for the fiscal year ended
March 28, 1999)*.
(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)
13
14
ALPHA INDUSTRIES, INC. AND SUBSIDIARIES
(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 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.(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
September 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.
14
15
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: November 8, 1999
----------------
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
15