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 SEPTEMBER 29, 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.
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(Exact name of registrant as specified in its charter)
Delaware 22-2582106
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
141 Mt. Bethel Road
Warren, New Jersey 07059
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(Address of principal executive offices) (Zip Code)
(908) 668-5000
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(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 October
22, 2001 was 30,356,649.
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - September
29, 2001 and December 31, 2000.
Condensed consolidated statements of operations
and comprehensive income (loss) - Three and nine
months ended September 29, 2001 and September 30,
2000.
Condensed consolidated statements of cash flows -
Nine months ended September 29, 2001 and September
30, 2000.
Notes to condensed consolidated financial
statements - September 29, 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 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)
September 29, 2001 December 31, 2000
------------------ -----------------
(unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 23,857 $ 95,116
Marketable securities 31,612 53,254
Accounts receivable, net 12,550 21,794
Inventory 17,736 22,969
Prepaid expenses and other current assets 5,328 3,475
Deferred taxes -- 3,035
--------- ---------
Total current assets 91,083 199,643
Marketable securities 54,252 17,791
Property and equipment:
Equipment and furniture 135,654 137,819
Leasehold improvements 33,964 32,767
Projects in process 17,518 19,083
--------- ---------
187,136 189,669
Less accumulated depreciation and amortization 88,454 83,034
--------- ---------
98,682 106,635
Goodwill and other intangibles, net of amortization 20,354 --
Deferred taxes -- 23,102
Other assets 6,327 5,302
--------- ---------
Total assets $ 270,698 $ 352,473
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,541 $ 10,985
Accrued liabilities 5,091 6,824
Current maturities of capital lease obligations 151 250
Accrued restructuring costs 1,542 597
Current maturities of long-term debt 262 1,000
--------- ---------
Total current liabilities 18,587 19,656
Other long-term liabilities 2,281 1,985
Long-term debt, less current portion 45 2,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 144,000,000 shares authorized, 30,355,168
and 30,027,760 issued and outstanding at September 29, 2001 and
December 31, 2000, respectively 304 300
Additional paid-in capital 331,792 329,362
Accumulated deficit (83,503) (1,118)
Accumulated other comprehensive income 1,192 288
--------- ---------
Total stockholders' equity 249,785 328,832
--------- ---------
Total liabilities and stockholders' equity $ 270,698 $ 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 Nine months ended
----------------------------------- -----------------------------------
Sept. 29, 2001 Sept. 30, 2000 Sept. 29, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
Net sales $ 16,340 $ 51,075 $ 63,757 $ 141,597
Cost of sales 18,197 24,810 65,636 69,778
------------ ------------ ------------ ------------
Gross (loss) profit (1,857) 26,265 (1,879) 71,819
Research and development expenses 9,478 10,852 29,501 30,821
Selling and administrative expenses 6,872 7,121 20,881 19,885
Restructuring charges 5,701 -- 7,401 --
Purchased in-process R&D -- -- 3,800 --
------------ ------------ ------------ ------------
Operating (loss) income (23,908) 8,292 (63,462) 21,113
Interest income, net 1,506 2,756 5,461 7,876
Gain (loss) on sale of equipment 3 15 (46) 1,353
------------ ------------ ------------ ------------
(Loss) income before income taxes (22,399) 11,063 (58,047) 30,342
Provision for income taxes -- 3,986 24,338 11,119
------------ ------------ ------------ ------------
Net (loss) income $ (22,399) $ 7,077 $ (82,385) $ 19,223
============ ============ ============ ============
Basic (loss) earnings per share $ (0.74) $ 0.24 $ (2.73) $ 0.65
============ ============ ============ ============
Weighted average common
shares outstanding 30,323,356 29,880,442 30,190,556 29,655,966
============ ============ ============ ============
Diluted (loss) earnings per share $ (0.74) $ 0.23 $ (2.73) $ 0.61
============ ============ ============ ============
Weighted average common and
dilutive securities outstanding 30,323,356 31,241,801 30,190,556 31,655,258
============ ============ ============ ============
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS)
Three months ended Nine months ended
-------------------------------- -------------------------------
Sept. 29, 2001 Sept. 30, 2000 Sept. 29, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
Net (loss) income $ (22,399) $ 7,077 $ (82,385) $ 19,223
Unrealized gain on
marketable securities 1,023 192 1,016 103
Foreign currency translation
adjustment (16) -- (99) --
Reclassification adjustment:
Net realized gain previously in
other comprehensive income -- -- (13) --
--------- --------- --------- ---------
Comprehensive (loss) income $ (21,392) $ 7,269 $ (81,481) $ 19,326
========= ========= ========= =========
See accompanying notes.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Nine months ended
------------------------------
Sept. 29, 2001 Sept. 30, 2000
-------------- --------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (82,385) $ 19,223
Adjustments to reconcile net (loss) income to net cash (used)
provided by operating activities:
Depreciation 18,783 16,253
Amortization 1,917 226
Loss on asset impairment 5,058 --
Purchased in-process research and development 3,800 --
Deferred taxes 24,338 11,181
Amortization of premium (discount) on marketable securities 959 (230)
Realized gain on sales of marketable securities 13 --
Loss (gain) on sale of equipment 46 (1,353)
Provision for litigation settlement -- (6,436)
Changes in operating assets and liabilities
Accounts receivable 10,622 (8,998)
Inventory 6,526 (7,375)
Prepaid expenses and other assets (1,797) (2,507)
Accounts payable 170 (2,515)
Accrued and other liabilities (926) 566
--------- ---------
Net cash (used) provided by operating activities (12,876) 18,035
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment (14,481) (32,693)
Purchases of marketable securities (99,215) (67,510)
Proceeds from sale of marketable securities 84,440 24,301
Purchase of Telcom Devices, net of cash acquired (27,927) --
Proceeds from sale of equipment 35 1,342
--------- ---------
Net cash used in investing activities (57,148) (74,560)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 2,434 10,958
Repayment of debt (3,322) (750)
Payment of capital lease obligations (347) (314)
--------- ---------
Net cash (used) provided by financing activities (1,235) 9,894
--------- ---------
Net decrease in cash and cash equivalents (71,259) (46,631)
Cash and cash equivalents at beginning of period 95,116 149,895
--------- ---------
Cash and cash equivalents at end of period $ 23,857 $ 103,264
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Interest paid $ 137 $ 230
Taxes paid -- 46
Acquisition of equipment under capital leases 248 357
See accompanying notes.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - SEPTEMBER 29, 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 nine
month periods ended September 29, 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.
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. The Company has not yet determined the
impact, if any, on its earnings or financial position of the required impairment
tests of goodwill.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets". This statement will be effective for fiscal years beginning after
December 15, 2001. This statement establishes a single accounting model, based
upon the framework established in FAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", for long-lived
assets to be disposed of by sale and to address significant implementation
issues. The Company is in the process of assessing the impact of the adoption of
this statement on its financial position, results of operations and cash flows.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories consist of the following:
September 29, 2001 December 31, 2000
------------------ -----------------
Raw materials $ 7,142 $ 5,526
Work in process 12,759 14,329
Finished goods 8,630 8,942
---------- ----------
28,531 28,797
Reserves (10,795) (5,828)
---------- ----------
Total $ 17,736 $ 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.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - SEPT. 29, 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
4. EARNINGS PER SHARE
The reconciliation of shares used to calculate basic and diluted
earnings per share consists of the following:
Three months ended Nine months ended
-------------------------------- -------------------------------
Sept. 29, 2001 Sept. 30, 2000 Sept. 29, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
Weighted average common shares
outstanding used to calculate
basic earnings per share 30,323,356 29,880,442 30,190,556 29,655,966
Net effect of diluted stock options
based upon the treasury stock
method using an average market
price -* 1,361,359 -* 1,999,292
---------- ---------- ---------- ----------
Weighted average common and
dilutive securities outstanding
used to calculate diluted
earnings per share 30,323,356 31,241,801 30,190,556 31,655,258
========== ========== ========== ==========
* - The dilutive stock options are not included as their effect is
anti-dilutive.
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 Nine months ended
------------------------------ -----------------------------
Sept. 29, 2001 Sept. 30, 2000 Sept. 29, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
Cellular and PCS Applications $ 6,095 $ 20,732 $ 18,373 $ 69,615
Cable and Broadcast Applications 7,838 23,586 35,314 55,874
Fiber Optic Applications 2,407 6,757 10,070 16,108
------------- ------------- ------------- ------------
Total $ 16,340 $ 51,075 $ 63,757 $ 141,597
============= ============= ============= ============
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 Nine months ended
------------------------------- ------------------------------
Sept. 29, 2001 Sept. 30, 2000 Sept. 29, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
Europe $ 1,634 $ 7,709 $ 8,122 $ 27,599
Asia 4,894 13,557 23,352 31,562
U.S.A. and Canada 6,554 17,258 20,854 53,341
Latin America 3,258 12,551 11,429 29,095
------------- ------------- ------------- ------------
Total $ 16,340 $ 51,075 $ 63,757 $ 141,597
============= ============= ============= ============
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.
7
6. ACQUISITION OF TELCOM DEVICES (CONT.)
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 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 accounted for
the time value of money, as well as the risks of realization of the cash flows.
The following unaudited pro-forma consolidated financial information
reflects the results of operations for the nine months ended September 29, 2001
and September 30, 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.
Nine months ended
-------------------------------
Sept. 29, 2001 Sept. 30, 2000
-------------- --------------
Pro-forma revenue $ 66,217 $ 147,975
Pro-forma net (loss) income $ (79,198) $ 17,451
Pro-forma net (loss) income per share
Basic $ (2.62) $ 0.59
Diluted $ (2.62) $ 0.55
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 CHARGES
During the third quarter of 2001, the Company recorded a restructuring
charge of $5,701 for an impairment of fixed assets and for severance and related
benefits costs of workforce reductions. The charge consists of $4,506 for an
impairment of certain manufacturing and research fixed assets as they are
surplus to the Company's foreseeable operating levels and research activities.
Certain of these assets are held-for-sale and an estimated recoverable value of
$1,000 has been included in other current assets. A charge of $1,195 was
recorded for severance and related benefits costs for workforce reductions
undertaken in the third quarter. Combined with the restructuring charge recorded
in the second quarter of 2001, the Company's restructuring charges total $7,401.
The charges consist primarily of $1,945 for severance and related benefits costs
for workforce reductions and $5,306 for impairment of fixed assets. The
workforce reductions eliminate approximately 100 positions throughout the
Company and $1,105 of benefits were paid through September 29, 2001.
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
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 Nine months ended
------------------------------- ------------------------------
Sept. 29, 2001 Sept. 30, 2000 Sept. 29, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 111.4 48.6 102.9 49.3
------ ------ ------ ------
Gross (loss) profit (11.4) 51.4 (2.9) 50.7
Research and development expenses 58.0 21.2 46.3 21.8
Selling and administrative expenses 42.1 13.9 32.8 14.0
Restructuring charge 34.9 -- 11.6 --
Purchased in-process R&D -- -- 6.0 --
------ ------ ------ ------
Operating (loss) income (146.3) 16.3 (99.5) 14.9
Interest income, net 9.2 5.4 8.6 5.6
Gain (loss) on sale of equipment -- -- (0.1) 1.0
------ ------ ------ ------
(Loss) income before income taxes (137.1) 21.7 (91.0) 21.5
Provision for income taxes -- 7.8 38.2 7.9
------ ------ ------ ------
Net (loss) income (137.1%) 13.9% (129.2%) 13.6%
====== ====== ====== ======
NET SALES. Net sales during the third quarter of 2001 decreased 68.0%
to $16.3 million, compared to $51.1 million for the third quarter of 2000. For
the nine months ended September 29, 2001, net sales were $63.8 million, a 55.0%
decrease from net sales of $141.6 million for the nine months ended September
30, 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 were 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 70.6% during the third quarter of 2001 to $6.1 million
from $20.7 million in the third quarter of 2000. For the nine months ended
September 29, 2001, net sales of integrated circuits for cellular and PCS
applications decreased 73.6% to $18.4 million from $69.6 million in the nine
month period ended September 30, 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 66.8% during the third quarter of 2001 to $7.8 million from $23.6
million in the third quarter of 2000. For the nine months ended September 29,
2001, net sales of integrated circuits for cable and broadcast applications
decreased 36.8% to $35.3 million from $55.9 million in the nine month period
ended September 30, 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 64.4% during the
third quarter of 2001 to $2.4 million from $6.8 million in the third quarter of
2000. For the nine months ended September 29, 2001, net sales of integrated
circuits for fiber optic applications decreased 37.5% to $10.1 million from
$16.1 million in the nine month period ended September 30, 2000. Net sales for
the third quarter and nine months ended September 30, 2001 include $1.3 and $4.9
million, respectively 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.
GROSS MARGIN. Gross margin for the third quarter of 2001 decreased to
(11.4%) of net sales, compared with 51.4% of net sales in the comparable period
of the prior year. For the nine months ended September 29, 2001, gross margin
decreased to (2.9%) from 50.7% of net sales for the nine months ended September
30, 2000. The decline in gross margin in the quarter results primarily from
lower net sales, lower production and consequent lower absorption of fixed
costs. In addition to lower sales and absorption impacts, the decline in gross
margin for the nine months ended September 29, 2001 includes an $11.1 million
inventory charge, which was partially offset by the inclusion of Telcom Devices
in the current year results. The inventory charge primarily related to excess,
slow-moving, and obsolete inventories. Excluding the charge for inventories,
gross margin during the nine months ended September 29, 2001 was 14.4%.
RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense decreased 12.7% during the third quarter of 2001 to $9.5 million from
$10.8 million during the third quarter of 2000. As a percentage of sales,
research and development expense increased to 58.0% in the third quarter of 2001
from 21.2% in the third quarter of 2000. Company sponsored research and
development expense decreased 4.3% during the nine month period ended September
29, 2001 to $29.5 million. As a percent of sales, company funded research and
9
development increased to 46.3% during the nine month period ended September 29,
2001 from 21.8% in the nine month period ended September 30, 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. The 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
decreased 3.5% during the third quarter of 2001 to $6.9 million from $7.1
million in the third quarter of 2000. The decrease was primarily due to a
decrease in consulting services partially offset by $0.9 million of intangibles
amortization in connection with the Telcom acquisition. As a percentage of
sales, selling and administrative expenses increased to 42.1% in the third
quarter of 2001 from 13.9% in the third quarter of 2000. Selling and
administrative expenses increased 5.0% during the nine month period ended
September 29, 2001 to $20.9 million from $19.9 million in the nine month period
ended September 30, 2000. The increase was primarily due to the inclusion of
intangibles amortization in connection with the Telcom acquisition, partially
offset by a decrease in consulting services. As a percentage of sales, selling
and administrative expenses increased to 32.8% during the nine month period
ended September 29, 2001 from 14.0% in the nine month period ended September 30,
2000.
RESTRUCTURING CHARGES. During the third quarter of 2001, the Company
recorded a restructuring charge of $5.7 million for an impairment of fixed
assets and for severance and related benefits costs of workforce reductions. The
charge consists of $4.5 million for an impairment of certain manufacturing and
research fixed assets as they are surplus to the Company's foreseeable operating
levels and research activities. Certain of these assets are held-for-sale and an
estimated recoverable value of $1,000 has been included in other current assets.
A charge of $1.2 million was recorded for severance and related benefits costs
of workforce reductions undertaken in the third quarter. In the nine months
ended September 29, 2001, the Company has recorded restructuring charges of $7.4
million. The charges consist primarily of $1.9 million for severance and related
benefits costs of workforce reductions and $5.3 million for impairment of fixed
assets. The workforce reductions eliminate approximately 100 positions
throughout the Company and $1.1 million of benefits were paid through September
29, 2001. The anticipated annual benefit from these restructuring charges is
expected to approximate $9.8 million from the annualized rate of the first
quarter of 2001. Combining this benefit with savings from other eliminated
positions, results in a total anticipated annual savings of $11.8 million.
INTEREST INCOME, NET. Net interest income decreased 45.4% to $1.5
million during the third quarter of 2001 from $2.8 million during the third
quarter of 2000. Net interest income decreased 30.7% during the nine month
period ended September 29, 2001 to $5.5 million from $7.9 million in the nine
month period ended September 30, 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 nine month period ended September
30, 2000 the Company sold equipment resulting in a $1.4 million gain.
PROVISION FOR INCOME TAXES. During the second quarter of 2001, the
Company recorded a valuation allowance of $26.8 million 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 September 29, 2001, we had $23.8 million in cash and cash
equivalents and $85.9 million in marketable securities for a total combined
balance of $109.7 million. The Company had $0.3 million outstanding under a term
loan as of the end of the third quarter, 2001.
Operating activities used $12.9 million in cash during the nine month
period ended September 29, 2001. Investing activities, which primarily consisted
of purchases of equipment of $14.5 million, net purchases of marketable
securities of $14.8 million, and the purchase of Telcom of $27.9 million, used
$57.1 million of cash during the nine month period ended September 29, 2001.
Financing activities, which primarily relates to the repayment of bank debt,
used $1.2 million during the nine month period ended September 29, 2001.
As of September 29, 2001, we had purchase commitments of approximately
$3.3 million for equipment, 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.
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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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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 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K during the quarter ended September 29, 2001.
The Company did not file any reports on Form 8K during the quarter
ended September 29, 2001.
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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: October 23, 2001
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