SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.
Or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
Commission File No. 0-25662
ANADIGICS, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2582106
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
141 Mt. Bethel Road
Warren, New Jersey 07059
- ----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(908) 668-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of the registrant's common stock as of July 27,
2001 was 30,320,646.
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - June 30, 2001 and
December 31, 2000.
Condensed consolidated statements of operations and
comprehensive income (loss) - Three and six months ended June
30, 2001 and July 2, 2000.
Condensed consolidated statements of cash flows - Six months
ended June 30, 2001 and July 2, 2000.
Notes to condensed consolidated financial statements - June
30, 2001.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
2
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements (unaudited)
ANADIGICS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)
June 30, 2001 December 31, 2000
------------- -----------------
(unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 38,695 $ 95,116
Marketable securities 24,269 53,254
Accounts receivable, net 12,671 21,794
Inventory 16,994 22,969
Prepaid expenses and other current assets 5,665 3,475
Deferred taxes - 3,035
--------- ---------
Total current assets 98,294 199,643
Marketable securities 61,036 17,791
Property and equipment:
Equipment and furniture 138,183 137,819
Leasehold improvements 33,809 32,767
Projects in process 22,584 19,083
--------- ---------
194,576 189,669
Less accumulated depreciation and amortization 86,904 83,034
--------- ---------
107,672 106,635
Goodwill and other intangibles, net of amortization 21,266 -
Deferred taxes - 23,102
Other assets 5,217 5,302
--------- ---------
Total assets $ 293,485 $ 352,473
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,116 $ 10,985
Accrued liabilities 5,759 6,824
Current maturities of capital lease obligations 254 250
Accrued restructuring costs 1,257 597
Current maturities of long-term debt 254 1,000
--------- ---------
Total current liabilities 20,640 19,656
Other long-term liabilities 2,183 1,985
Long-term debt, less current portion 135 2,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 144,000,000 shares authorized, 30,268,593
and 30,027,760 issued and outstanding at June 30, 2001 and
December 31, 2000, respectively 303 300
Additional paid-in capital 331,144 329,362
Accumulated deficit (61,105) (1,118)
Accumulated other comprehensive income 185 288
--------- ---------
Total stockholders' equity 270,527 328,832
--------- ---------
Total liabilities and stockholders' equity $ 293,485 $ 352,473
========= =========
See accompanying notes.
3
ANADIGICS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share amounts)
Three months ended Six months ended
-------------------------------- -------------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
--------------- ------------- --------------- -------------
(unaudited) (unaudited)
Net sales $ 18,897 $ 47,517 $ 47,418 $ 90,522
Cost of sales 26,235 23,135 47,440 44,968
------------ ------------ ------------ ------------
Gross (loss) profit (7,338) 24,382 (22) 45,554
Research and development expenses 9,972 10,181 20,023 19,970
Selling and administrative expenses 7,369 6,627 14,010 12,764
Restructuring charges 1,700 - 1,700 -
Purchased in-process R&D 3,800 - 3,800 -
------------ ------------ ------------ ------------
Operating (loss) income (30,179) 7,574 (39,555) 12,820
Interest income, net 1,594 2,621 3,955 5,120
Gain (loss) on sale of equipment 11 290 (49) 1,339
------------ ------------ ------------ ------------
(Loss) income before income taxes (28,574) 10,485 (35,649) 19,279
Provision for income taxes 26,814 3,879 24,338 7,133
------------ ------------ ------------ ------------
Net (loss) income $ (55,388) $ 6,606 $ (59,987) $ 12,146
============ ============ ============ ============
Basic (loss) earnings per share $ (1.84) $ 0.22 $ (1.99) $ 0.41
============ ============ ============ ============
Weighted average common
shares outstanding 30,183,105 29,810,187 30,126,585 29,543,727
============ ============ ============ ============
Diluted (loss) earnings per share $ (1.84) $ 0.21 $ (1.99) $ 0.38
============ ============ ============ ============
Weighted average common and
dilutive securities outstanding 30,183,105 31,782,288 30,126,585 31,774,482
============ ============ ============ ============
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
Three months ended Six months ended
-------------------------------- -------------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
--------------- ------------- --------------- -------------
(unaudited) (unaudited)
Net (loss) income $(55,388) $ 6,606 $(59,987) $ 12,146
Unrealized loss on
marketable securities (263) (97) (7) (89)
Foreign currency translation
adjustment (11) - (83) -
Reclassification adjustment:
Net realized gain previously in
other comprehensive income (2) - (13) -
-------- -------- -------- --------
Comprehensive (loss) income $(55,664) $ 6,509 $(60,090) $ 12,057
======== ======== ======== ========
See accompanying notes.
4
ANADIGICS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Six months ended
-------------------------------------
June 30, 2001 July 2, 2000
--------------- --------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (59,987) $ 12,146
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 12,279 10,182
Amortization 974 101
Loss on asset impairment 552 -
Purchased in-process research and development 3,800 -
Deferred taxes 24,338 7,134
Amortization of premium (discount) on marketable securities 399 (132)
Realized gain on sales of marketable securities 13 -
Loss (gain) on sale of equipment 49 (1,339)
Provision for litigation settlement - (6,436)
Changes in operating assets and liabilities
Accounts receivable 10,501 (3,837)
Inventory 7,268 (5,767)
Prepaid expenses and other assets (2,024) (1,194)
Accounts payable 1,745 1,388
Accrued and other liabilities (485) 975
--------- ---------
Net cash (used) provided by operating activities (578) 13,221
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment (11,559) (24,069)
Purchases of marketable securities (82,873) (35,159)
Proceeds from sale of marketable securities 68,183 16,747
Purchase of Telcom Devices, net of cash acquired (27,927) -
Proceeds from sale of equipment 32 1,342
--------- ---------
Net cash used in investing activities (54,144) (41,139)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 1,785 10,541
Repayment of debt (3,240) (500)
Payment of capital lease obligations (244) (176)
--------- ---------
Net cash (used) provided by financing activities (1,699) 9,865
--------- ---------
Net decrease in cash and cash equivalents (56,421) (18,053)
Cash and cash equivalents at beginning of period 95,116 149,895
--------- ---------
Cash and cash equivalents at end of period $ 38,695 $ 131,842
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 121 $ 156
Taxes paid - 46
Acquisition of equipment under capital leases 248 203
See accompanying notes.
5
ANADIGICS, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - JUNE 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited, condensed, consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
month periods ended June 30, 2001 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2001.
The condensed, consolidated balance sheet at December 31, 2000 has been
derived from the audited financial statements at that date but does not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
The condensed, consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories consist of the following:
JUNE 30, 2001 DECEMBER 31, 2000
---------------- ------------------
Raw materials $ 7,594 $ 5,526
Work in process 13,512 14,329
Finished goods 9,114 8,942
----------- ----------
30,220 28,797
Reserves (13,226) (5,828)
----------- ----------
Total $ 16,994 $ 22,969
=========== ==========
3. LEGAL PROCEEDINGS
The court-approved settlement of the previously-disclosed consolidated
securities class action, captioned In re ANADIGICS, Inc. Securities Litigation,
No. 98-CV-917 (MLC) (D.N.J.), and shareholder's derivative lawsuit, captioned
Deegan v. Rosenzweig, No. 98-CV-3640 (MLC) (D.N.J.), became final and was funded
in January 2000. The total settlement payment (including the costs of
administering the settlement) was $11.8 million, of which approximately $5.3
million was paid on behalf of ANADIGICS, Inc. by the Company's insurers.
4. EARNINGS PER SHARE
The reconciliation of shares used to calculate basic and diluted
earnings per share consists of the following:
Three months ended Six months ended
------------------------------ -----------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
---------------- ------------ ------------- ------------
Weighted average common shares
outstanding used to calculate
basic earnings per share 30,183,105 29,810,187 30,126,585 29,543,727
Net effect of diluted stock options
based upon the treasury stock
method using an average market
price -* 1,972,101 -* 2,230,755
---------- ---------- ---------- ----------
Weighted average common and
dilutive securities outstanding
used to calculate diluted
earnings per share 30,183,105 31,782,288 30,126,585 31,774,482
========== ========== ========== ==========
* - The dilutive stock options are not included as their effect is
anti-dilutive.
6
ANADIGICS, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - JUNE 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
5. REVENUE SOURCES
The Company classifies its revenues based upon the end application of
the product in which its integrated circuits are used. Net sales by end
application are regularly reviewed by the chief operating decision-maker and are
as follows:
Three months ended Six months ended
------------------------------ -----------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
------------- ------------- ------------- ------------
Cellular and PCS Applications $ 5,933 $ 25,508 $ 12,278 $ 48,883
Cable and Broadcast Applications 8,409 16,989 27,477 32,293
Fiber Optic Applications 4,555 5,020 7,663 9,346
------------- ------------- ------------- ------------
Total $ 18,897 $ 47,517 $ 47,418 $ 90,522
============= ============= ============= ============
The Company primarily sells to four geographic regions: Europe, Asia,
U.S.A. and Canada, and Latin America. The geographic region is determined by the
destination of the shipped product. Net sales to each of the four geographic
regions are as follows:
Three months ended Six months ended
------------------------------ -----------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
------------- ------------- ------------- ------------
Europe $ 4,009 $ 10,135 $ 6,488 $ 19,890
Asia 5,486 8,786 18,458 18,005
U.S.A. and Canada 5,593 19,057 14,301 36,082
Latin America 3,809 9,539 8,171 16,545
------------- ------------- ------------- ------------
Total $ 18,897 $ 47,517 $ 47,418 $ 90,522
============= ============= ============= ============
6. ACQUISITION OF TELCOM DEVICES
On April 2, 2001, ANADIGICS, Inc. acquired Telcom Devices Corp.
("Telcom"), a manufacturer of indium phosphide based photodiodes for the
telecommunications and data communications markets. The acquisition was
accounted for using the purchase method of accounting. The results of operations
of Telcom are included in that of the Company from the date of purchase. There
are no significant differences between the accounting policies of ANADIGICS and
Telcom.
The cash consideration paid on April 2, 2001, for 100% of Telcom's
stock was $28,000. In addition, the Company incurred $300 in acquisition-related
costs. The total purchase price of $28,300 was allocated, on a preliminary
basis, to the assets acquired and liabilities assumed, based on their fair
values (as determined by an appraisal) as follows:
Fair value of tangible assets $5,522
Fair value of liabilities assumed (1,369)
In-process research and development 3,800
Process technology 3,400
Covenant not to compete 800
Deferred tax liability (1,831)
Goodwill 17,978
------
Total purchase price $28,300
In addition, contingent purchase consideration of up to $17,000 may be
payable if certain sales and profit targets are reached over the twelve months
ending March 31, 2002. Any payments of contingent purchase consideration would
increase the goodwill attributed to Telcom. We are unable to assess the
probability of any contingent purchase consideration that may be due and have
therefore excluded it from our fair value allocation.
The process technology, covenant not-to-compete and goodwill are being
amortized using the straight-line method over their respective estimated useful
lives, which range from two to seven years. The Company recorded a charge of
$3,800 representing the fair value of certain acquired research and development
projects relating to 40 GB/s photodiode and autobondable and auto eutectic
bonding that were determined to have not reached technological feasibility and
do not have alternative future uses. The fair-value of such projects was
determined based on discounted net cash flows. These cash flows were based on
management's estimates of future revenues and expected profitability of each
technology. The rate used to discount these projected cash flows accounting for
the time value of money, as well as the risks of realization of the cash flows.
7
6. ACQUISITION OF TELCOM DEVICES (cont.)
The following unaudited pro-forma consolidated financial information
reflects the results of operations for the three and six months ended June 30,
2001 and July 2, 2000, as if the acquisition of Telcom had occurred on December
31, 1999 and after giving effect to purchase accounting adjustments. The charge
for purchased in-process R&D is not included in the pro-forma results, because
it is non-recurring.
Three months ended Six months ended
------------------------------ -----------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
------------- ------------- ------------- ------------
Pro-forma revenue $ 18,897 $ 49,527 $ 49,878 $ 94,152
Pro-forma net (loss) income $ (51,588) $ 5,811 $ (56,800) $ 10,333
Pro-forma net (loss) income
per share
Basic $ (1.71) $ 0.19 $ (1.89) $ 0.35
Diluted $ (1.71) $ 0.18 $ (1.89) $ 0.33
These pro-forma results have been prepared for comparative purposes
only and do not purport to be indicative of what operating results would have
been had the acquisition actually taken place on December 31, 1999. In addition,
these results are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from the combined operations.
7. RESTRUCTURING CHARGE
During the second quarter of 2001, the Company recorded a restructuring
charge of $1,700. The charge consisted primarily of $750 for severance and
related benefits costs of a workforce reduction and $800 for impairment of fixed
assets.
8. INCOME TAXES
During the second quarter of 2001, the Company recorded a valuation
allowance of $26,814 against the carrying value of its deferred tax asset.
Deferred tax assets require a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of the deferred tax
assets may not be realized. Whereas realization of the deferred tax assets is
dependent upon the timing and magnitude of future taxable income prior to the
expiration of the deferred tax attributes, management has recorded a full
valuation allowance. The amount of the deferred tax assets considered
realizable, however, could change if estimates of future taxable income during
the carry-forward period are changed.
8
ANADIGICS, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the unaudited consolidated statements of
operations data as a percent of net sales for the periods presented:
Three months ended Six months ended
--------------------------------- ------------------------------
June 30, 2001 July 2, 2000 June 30, 2001 July 2, 2000
------------- ------------- ------------- ------------
(unaudited) (unaudited)
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 138.8 48.7 100.0 49.7
----- ----- ----- -----
Gross (loss) profit (38.8) 51.3 - 50.3
Research and development expenses 52.8 21.4 42.2 22.1
Selling and administrative expenses 39.0 14.0 29.6 14.0
Restructuring charge 9.0 - 3.6 -
Purchased in-process R&D 20.1 - 8.0 -
----- ----- ----- -----
Operating (loss) income (159.7) 15.9 (83.4) 14.2
Interest income, net 8.4 5.6 8.3 5.7
Gain (loss) on sale of equipment 0.1 0.6 (0.1) 1.5
----- ----- ----- -----
(Loss) income before income taxes (151.2) 22.1 (75.2) 21.4
Provision for income taxes 141.9 8.2 51.3 8.0
----- ----- ----- -----
Net (loss) income (293.1%) 13.9% (126.5%) 13.4%
====== ==== ====== ====
NET SALES. Net sales during the second quarter of 2001 decreased 60.2%
to $18.9 million, compared to $47.5 million for the second quarter of 2000. For
the six months ended June 30, 2001, net sales were $47.4 million, a 47.6%
decrease from net sales of $90.5 million for the six months ended July 2, 2000.
The decline in net sales is due to the significant downturn in demand
experienced across each of the Company's product lines. The wireless and
broadband markets are soft due to high component inventories at most of our
customers and lower end-consumer demand.
Specifically, net sales of integrated circuits for cellular and PCS
applications decreased 76.7% during the second quarter of 2001 to $5.9 million,
which includes billings of $1.0 million associated with a customer's end-of-life
product, from $25.5 million in the second quarter of 2000. For the six months
ended June 30, 2001, net sales of integrated circuits for cellular and PCS
applications decreased 74.9% to $12.2 million from $48.9 million in the six
month period ended July 2, 2000. The decrease was primarily due to decreased
demand for our multi-band, multi-mode power amplifier integrated circuits used
in wireless telephone handsets.
Sales of integrated circuits for cable and broadcast applications
decreased 50.5% during the second quarter of 2001 to $8.4 million from $17.0
million in the second quarter of 2000. For the six months ended June 30, 2001,
net sales of integrated circuits for cable and broadcast applications decreased
14.9% to $27.5 million from $32.3 million in the six month period ended July 2,
2000. The decrease was primarily due to decreased demand for our integrated
circuit reverse amplifiers and converters used in digital set-top boxes, cable
modems, and our integrated circuit line amplifiers used as repeaters in cable
television distribution networks.
Sales of integrated circuits for fiber optic telecommunications and
data communications ("fiber optic") applications decreased 9.3% during the
second quarter of 2001 to $4.6 million from $5.0 million in the second quarter
of 2000. For the six months ended June 30, 2001, net sales of integrated
circuits for fiber optic applications decreased 18.1% to $7.7 million from $9.3
million in the six month period ended July 2, 2000. Net sales for the second
quarter and six months ended June 30, 2001 include $3.6 million of Telcom's
sales since its acquisition on April 2, 2001. The reduction in sales of
integrated circuits for fiber optic applications was primarily due to lower
capital spending in the fiber optic markets.
Generally, selling prices for same product sales were lower during 2001
as compared to 2000.
Due to overall market conditions and inventory corrections throughout
the wireless and fiber markets, we will continue to experience a sequential
decline in our revenue during the third quarter of 2001.
GROSS MARGIN. Gross margin for the second quarter of 2001 decreased to
(38.8%) of net sales, compared with 51.3% of net sales in the comparable period
of the prior year. For the six months ended June 30, 2001, gross margin
decreased to break-even from 50.3% of net sales for the six months ended July 2,
2000. The decline in gross margin results from lower net sales, lower absorption
of fixed costs, start-up costs associated with the ramp of the Company's new HBT
Power Amplifier modules offset by the above-mentioned end-of-product life
billing during the second quarter, and includes a $7.6 million and a $11.1
million inventory charge in the three and six month periods ended June 30, 2001,
respectively. The charge primarily related to excess, slow-moving, and obsolete
inventories. Excluding the charge for inventories, gross margin during the
second quarter of 2001 was 1.6% and 23.4% for the six months ended June 30,
2001.
9
RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense decreased 2.1% during the second quarter of 2001 to $10.0 million from
$10.2 million during the second quarter of 2000. As a percentage of sales,
research and development expense increased to 52.8% in the second quarter of
2001 from 21.4% in the second quarter of 2000. Company sponsored research and
development expense increased 0.3% during the six month period ended June 30,
2001 to $20.0 million. As a percent of sales, company funded research and
development increased to 42.2% during the six month period ended June 30, 2001
from 22.1% in the six month period ended July 2, 2000.
PURCHASED IN-PROCESS R&D. The Company expensed purchased in-process
research and development costs of $3.8 million as a result of the Telcom
acquisition on April 2, 2001. This charge represents the fair value of certain
acquired research and development projects that were determined to have not
reached technological feasibility and do not have alternative future uses.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses
increased 11.2% during the second quarter of 2001 to $7.4 million from $6.6
million in the second quarter of 2000. The increase was primarily due to
intangibles amortization in connection with the Telcom acquisition and ongoing
selling and administrative costs, partially offset by a decrease in consulting
services. As a percentage of sales, selling and administrative expenses
increased to 39.0% in the second quarter of 2001 from 14.0% in the second
quarter of 2000. Selling and administrative expenses increased 9.8% during the
six month period ended June 30, 2001 to $14.0 million from $12.8 million in the
six month period ended July 2, 2000. The increase was primarily due to the
inclusion of intangibles amortization in connection with the Telcom acquisition
and ongoing selling and administrative costs. As a percentage of sales, selling
and administrative expenses increased to 29.6% during the six month period ended
June 30, 2001 from 14.0% in the six month period ended July 2, 2000.
RESTRUCTURING CHARGE. During the second quarter of 2001, the Company
recorded a restructuring charge of $1.7 million. The charge consisted of $0.75
million for severance and related benefits costs of a workforce reduction, $0.8
million for impaired fixed assets and $0.15 million for facilities cancellation
costs. The anticipated annual benefit from these charges is expected to
approximate $3.1 million. Combining this benefit with savings from other
eliminated positions, results in a total anticipated annual savings of $5.1
million.
INTEREST INCOME, NET. Net interest income decreased 39.2% to $1.6
million during the second quarter of 2001 from $2.6 million during the second
quarter of 2000. Net interest income decreased 22.8% during the six month period
ended June 30, 2001 to $4.0 million from $5.1 million in the six month period
ended July 2, 2000. The decreases were primarily due to lower balances of cash
and marketable securities and generally lower interest rates.
GAIN ON SALE OF EQUIPMENT. During the second quarter of 2000, the
Company sold equipment, which resulted in a gain on the sale of approximately
$0.3 million. During the six month period ended June 30, 2000 the Company sold
equipment resulting in a $1.3 million gain.
PROVISION FOR INCOME TAXES. During the second quarter of 2001, the
Company recorded a valuation allowance of $26,814 against the carrying value of
its deferred tax asset. Whereas realization of deferred tax assets is dependent
upon the timing and magnitude of future taxable income prior to the expiration
of the deferred tax attributes, management has recorded a full valuation
allowance in 2001.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, we had $38.7 million in cash and cash equivalents
and $85.3 million in marketable securities for a total combined balance of $124
million. The Company had $0.4 million outstanding under a term loan as of the
end of the second quarter, 2001. As of June 30, 2001, we also had available
$15.0 million under a credit facility. The credit facility expired on July 1,
2001.
Operating activities used $0.6 million in cash during the six month
period ended June 30, 2001. Investing activities, which primarily consisted of
purchases of equipment of $11.6 million, net purchases of marketable securities
of $14.7 million, and the purchase of Telcom of $27.9 million, used $54.1
million of cash during the six month period ended June 30, 2001. Financing
activities, which primarily relates to the repayment of bank debt, used $1.7
million during the six month period ended June 30, 2001.
As of June 30, 2001, we had purchase commitments of approximately $5.5
million for equipment and furniture, and leasehold improvements.
We believe that our sources of capital, including internally generated
funds, will be adequate to satisfy anticipated capital needs for the next twelve
months and beyond. Our anticipated capital needs may include acquisitions of
complementary businesses or technologies, or investments in other companies.
However, we may elect to finance all or part of our future capital requirements
through additional equity or debt financing. There can be no assurance that such
additional financing would be available on satisfactory terms.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
On July 20, 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets" ("FAS 142"). This
statement will be effective for fiscal years beginning after December 15, 2001.
Under the provisions of FAS 142, the cost of certain of the Company's intangible
assets will no longer be subject to amortization but will be reviewed annually
for impairment. Management anticipates that upon adoption of FAS 142 the annual
amortization of goodwill that would have approximated $2.6 million will no
longer be required for 2002 and beyond.
10
RISKS AND UNCERTAINTIES
Except for historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties,
including, but not limited to, order rescheduling or cancellation, changes in
customer's forecasts of product demand, timely product and process development,
individual product pricing pressure, variation in production yield, changes in
estimated product lives, difficulties in obtaining components and assembly
services needed for production of integrated circuits, change in economic
conditions of the various markets we serve, as well as the other risks detailed
from time to time in the Company's reports filed with the Securities and
Exchange Commission, including the report on Form 10-K for the year ended
December 31, 2000 and the Registration Statement on Form S-3 (Registration No.
333-83889). These forward-looking statements can generally be identified as such
because the context of the statement will include words such as we "believe",
"anticipate", "expect", or words of similar import. Similarly, statements that
describe our future plans, objectives, estimates or goals are forward-looking
statements. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. Important factors that could cause actual results and
developments to be materially different from those expressed or implied by such
statements include those factors discussed herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in interest rates primarily from our
investments in certain available-for-sale securities. Our available-for-sale
securities consist of fixed income investments (U.S. Treasury and Agency
securities and commercial paper). We continually monitor our exposure to changes
in interest rates from our available-for-sale securities. Accordingly, we
believe that the effects of changes in interest rates are limited and would not
have a material impact on our financial condition or results of operations.
However, it is possible that we are at risk if interest rates change in an
unfavorable direction. The magnitude of any gain or loss will be a function of
the difference between the fixed rate of the financial instrument and the market
rate and our financial condition and results of operations could be materially
affected.
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ANADIGICS, Inc.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Company was not a party to any material pending legal proceedings
other than ordinary routine litigation incidental to its business, which
litigation would not, in the opinion of the Company's management, have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 24, 2001 at
which the Company's stockholders voted on:
(a) The election of three Class III Directors of ANADIGICS to hold office
until 2004.
(b) To approve an amendment and restatement of the Employee Stock Purchase
Plan that extends the Plan through December 31, 2005 and increases the
number of shares issuable thereunder by 850,000 to 1,693,750.
(c) The ratification of Ernst & Young, LLP as independent auditors of
ANADIGICS for the fiscal year ending December 31, 2001.
The three matters listed above were voted upon and approved by the
shareholders of the Company as follows:
(a) The election of David Fellows as a Class III Director was approved by
holders of 26,827,739 shares of the Company's outstanding capital
stock. Holders of 116,219 shares withheld from voting on such election.
The election of Ronald Rosenzweig as a Class III Director was approved
by holders of 26,830,056 shares of the Company's outstanding capital
stock. Holders of 113,902 shares withheld from voting on such election.
The election of Lewis Solomon as a Class III Director was approved by
holders of 26,818,555 shares of the Company's outstanding capital
stock. Holders of 125,403 shares withheld from voting on such election.
(b) Amendment to the Employee Stock Purchase Plan to extend the Plan
through December 31, 2005 and to increase the number of issuable shares
by 850,000 to 1,693,750 was approved by holders of 15,729,435 shares of
the Company' outstanding stock. Holders of 756,952 shares voted against
the amendment, and holders of 10,457,571 shares abstained.
(c) The ratification of the appointment of Ernst & Young LLP as independent
auditors was approved by holders of 26,797,545 shares of the Company's
outstanding capital stock. Holders of 57,135 shares voted against the
ratification, and holders of 89,278 shares abstained from voting on
such ratification.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K during the quarter ended June 30, 2001.
The Company filed Form 8-K on April 6, 2001 relating to the acquisition
of Telcom Devices Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANADIGICS, INC.
By: /s/ Thomas C. Shields
------------------------------
Thomas C. Shields
Senior Vice President
and Chief Financial Officer
Dated: July 31, 2001
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