UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 2002 | ||
| 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 0-24758
MICRO LINEAR CORPORATION
Delaware (State or other jurisdiction of incorporation or organization) |
94-2910085 (I.R.S. Employer Identification Number) |
|
2050 Concourse Drive San Jose, California (Address of principal executive offices) |
95131 (Zip Code) |
Registrant’s telephone number, including area code: (408) 433-5200
Indicate by check mark whether the Registrant (1) has filed all reports 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 of the Registrant’s Common Stock outstanding as of July 31, 2002, net of shares held in treasury, was 12,077,313.
TABLE OF CONTENTS
| PAGE | |
PART I. |
FINANCIAL INFORMATION |
||
Item 1. |
Financial Statements |
3 | |
| Unaudited Consolidated Condensed Balance Sheets at June 30, 2002 and December 31, 2001 | 3 | ||
| Unaudited Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2002 and 2001 | 4 | ||
| Unaudited Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2002 and 2001 | 5 | ||
Notes to Unaudited Consolidated Condensed Financial Statements |
6 | ||
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 | |
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
21 | |
PART II. |
OTHER INFORMATION |
||
Item 1. |
Legal Proceedings |
23 | |
Item 6. |
Exhibits and Reports on Form 8-K |
23 | |
SIGNATURES |
24 | ||
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MICRO LINEAR CORPORATION
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
| June 30, | December 31, | ||||||||||
| 2002 | 2001 | ||||||||||
Assets |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 13,529 | $ | 14,888 | |||||||
Short-term investments |
10,416 | 13,018 | |||||||||
Accounts receivable, net |
2,337 | 1,301 | |||||||||
Inventories |
4,494 | 3,632 | |||||||||
Other current assets |
1,234 | 1,135 | |||||||||
Total current assets |
32,010 | 33,974 | |||||||||
Property, plant and equipment, net |
9,344 | 10,326 | |||||||||
Other assets |
147 | 213 | |||||||||
Total assets |
$ | 41,501 | $ | 44,513 | |||||||
Liabilities and Stockholders’ Equity |
|||||||||||
Current liabilities: |
|||||||||||
Accounts payable |
$ | 3,688 | $ | 2,361 | |||||||
Accrued compensation and benefits |
1,737 | 1,679 | |||||||||
Deferred income on shipments to distributors |
2,508 | 2,888 | |||||||||
Accrued commissions |
255 | 282 | |||||||||
Other accrued liabilities |
1,887 | 1,950 | |||||||||
Current portion of long-term debt |
239 | 239 | |||||||||
Total current liabilities |
10,314 | 9,399 | |||||||||
Long-term debt |
2,188 | 2,308 | |||||||||
Total liabilities |
12,502 | 11,707 | |||||||||
Stockholders’ equity: |
|||||||||||
Common stock |
15 | 15 | |||||||||
Additional paid-in capital |
60,087 | 59,945 | |||||||||
Notes receivable from stockholders |
— | (6 | ) | ||||||||
Accumulated deficit |
(10,895 | ) | (7,000 | ) | |||||||
Accumulated other comprehensive income |
25 | 85 | |||||||||
Treasury stock |
(20,233 | ) | (20,233 | ) | |||||||
Total stockholders’ equity |
28,999 | 32,806 | |||||||||
Total liabilities and stockholders’ equity |
$ | 41,501 | $ | 44,513 | |||||||
See accompanying notes to unaudited consolidated condensed financial statements.
3
MICRO LINEAR CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| THREE MONTHS ENDED | SIX MONTHS ENDED | ||||||||||||||||||
| JUNE 30, | JUNE 30, | ||||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||||
Net revenues |
$ | 8,884 | $ | 5,927 | $ | 14,475 | $ | 9,350 | |||||||||||
Cost of revenues |
3,768 | 2,830 | 6,239 | 4,292 | |||||||||||||||
Gross margin |
5,116 | 3,097 | 8,236 | 5,058 | |||||||||||||||
Operating expenses: |
|||||||||||||||||||
Research and development |
4,094 | 3,966 | 8,268 | 7,462 | |||||||||||||||
Selling, general and administrative |
2,247 | 2,506 | 4,087 | 4,860 | |||||||||||||||
Total operating expenses |
6,341 | 6,472 | 12,355 | 12,322 | |||||||||||||||
Loss from operations |
(1,225 | ) | (3,375 | ) | (4,119 | ) | (7,264 | ) | |||||||||||
Interest and other income |
142 | 698 | 437 | 1,563 | |||||||||||||||
Interest and other expense |
(65 | ) | (1,060 | ) | (134 | ) | (1,243 | ) | |||||||||||
Loss before provision for taxes |
(1,148 | ) | (3,737 | ) | (3,816 | ) | (6,944 | ) | |||||||||||
Provision for income taxes |
2 | — | 79 | — | |||||||||||||||
Net loss |
$ | (1,150 | ) | $ | (3,737 | ) | $ | (3,895 | ) | $ | (6,944 | ) | |||||||
Basic: |
|||||||||||||||||||
Net loss per share |
$ | (0.10 | ) | $ | (0.31 | ) | $ | (0.32 | ) | $ | (0.58 | ) | |||||||
Weighted average number of shares used in
per share computation |
12,064 | 11,894 | 12,063 | 11,894 | |||||||||||||||
Diluted: |
|||||||||||||||||||
Net loss per share |
$ | (0.10 | ) | $ | (0.31 | ) | $ | (0.32 | ) | $ | (0.58 | ) | |||||||
Weighted average number of shares used in
per share computation |
12,064 | 11,894 | 12,063 | 11,894 | |||||||||||||||
See accompanying notes to unaudited consolidated condensed financial statements.
4
MICRO LINEAR CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| Six Months Ended | ||||||||||
| June 30, | ||||||||||
| 2002 | 2001 | |||||||||
Net cash used in operating activities |
$ | (3,722 | ) | $ | (6,350 | ) | ||||
Investing activities: |
||||||||||
Purchase of capital equipment |
(95 | ) | (1,094 | ) | ||||||
Proceeds from notes receivable |
— | 2,038 | ||||||||
Purchases of short-term investments |
(4,549 | ) | (10,699 | ) | ||||||
Sales of short-term investments |
7,091 | 13,962 | ||||||||
Net cash provided by investing activities |
2,447 | 4,207 | ||||||||
Financing activities: |
||||||||||
Principal payments on debt |
(120 | ) | (111 | ) | ||||||
Proceeds from issuance of common stock |
36 | 19 | ||||||||
Net cash used in financing activities |
(84 | ) | (92 | ) | ||||||
Net decrease in cash and cash equivalents |
(1,359 | ) | (2,235 | ) | ||||||
Cash and cash equivalents at beginning of period |
14,888 | 17,664 | ||||||||
Cash and cash equivalents at end of period |
$ | 13,529 | $ | 15,429 | ||||||
See accompanying notes to unaudited consolidated condensed financial statements.
5
MICRO LINEAR CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Description of Business
Micro Linear Corporation is a worldwide supplier of integrated circuits to the communications market. Our products are used in high-speed networks, including wireless networks, supporting broadband digital voice, data and video transmission in the enterprise and the home. Our headquarters are in San Jose, California. In addition to our San Jose engineering group, we have design centers in Salt Lake City, Utah and Cambridge, England. We operate in a single industry segment, and serve our customers through worldwide direct sales, manufacturer’s representatives, and distributors.
2. Summary of Significant Accounting Policies
Fiscal Year
We report results of operations on the basis of fifty-two or fifty-three week periods, ending on the Sunday closest to December 31. Fiscal year 2001 ended on December 30, 2001. The second quarter of 2001 ended on July 1, 2001. The second quarter of 2002 ended on June 30, 2002. For presentation purposes, the unaudited consolidated condensed financial statements refer to the calendar month or year end of each period.
Principles of Consolidation
The consolidated financial statements include the accounts of Micro Linear Corporation and our subsidiary in the United Kingdom. All significant intercompany accounts and transactions have been eliminated.
Basis of Presentation
The unaudited consolidated condensed financial statements included herein have been prepared by us in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary to state fairly our financial position, results of operations, and cash flows for the periods presented.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. The unaudited consolidated condensed financial statements and notes should be read in conjunction with the consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 30, 2001, filed with the Securities and Exchange Commission on April 1, 2002.
Use of Estimates
In conformity with generally accepted accounting principles, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3. Financial Statement Details
Inventories consist of the following (in thousands):
| June 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
Work-in-process |
$ | 1,881 | $ | 1,535 | |||||
Finished goods |
2,613 | 2,097 | |||||||
Total inventories |
$ | 4,494 | $ | 3,632 | |||||
6
Property, plant and equipment consist of the following (in thousands):
| June 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
Land |
$ | 2,850 | $ | 2,850 | |||||
Buildings and improvements |
5,519 | 5,519 | |||||||
Machinery and equipment |
14,200 | 14,105 | |||||||
Assets held for sale |
3,414 | 3,414 | |||||||
Property, plant and equipment |
$ | 25,983 | $ | 25,888 | |||||
Accumulated depreciation and amortization |
16,639 | 15,562 | |||||||
Property, plant and equipment, net |
$ | 9,344 | $ | 10,326 | |||||
Related Party Transaction
In May 2002, Timothy Richardson was elected as President and Chief Executive Officer of the Company. We extended a bridge loan to Mr. Richardson in June 2002, to assist him in purchasing a home in California pending the sale of his existing residence. The $450,000 loan is secured by a first mortgage on Mr. Richardson’s home in Georgia. The loan bears interest at the prime rate, which is 4.75%. Principal and interest will be due upon sale of the Georgia home or, if earlier, six months after the date of the loan.
Provision for Taxes
The provision for income taxes for the six months ended June 30, 2002 consists of foreign taxes. No benefit for income taxes was recorded in the United States, as we believe that the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that we have recorded a full valuation allowance.
Comprehensive Income
For the three and six months ended June 30, 2002 and 2001, comprehensive loss, which consists of the net loss for the periods and unrealized gain or loss on short-term marketable securities, is as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Net Loss |
$ | (1,150 | ) | $ | (3,737 | ) | $ | (3,895 | ) | $ | (6,944 | ) | |||||
Accumulated Other Comprehensive
Income (Loss): |
|||||||||||||||||
Unrealized gain (loss) on
marketable securities, net |
(5 | ) | 3 | (60 | ) | 42 | |||||||||||
Comprehensive Loss |
$ | (1,155 | ) | $ | (3,734 | ) | $ | (3,955 | ) | $ | (6,902 | ) | |||||
Earnings Per Share
Following is a reconciliation of the basic and diluted loss per share computations (in thousands, except per share amounts):
| Three Months Ended June 30, | ||||||||||||||||||||||||
| 2002 | 2001 | |||||||||||||||||||||||
| Loss | Shares | Per- | Loss | Shares | Per- | |||||||||||||||||||
| (Numerator) | (Denominator) | Share Amount | (Numerator) | (Denominator) | Share Amount | |||||||||||||||||||
Basic Loss Per Share: |
||||||||||||||||||||||||
Net loss available to common
stockholders |
$ | (1,150 | ) | 12,064 | $ | (0.10 | ) | $ | (3,737 | ) | 11,894 | $ | (0.31 | ) | ||||||||||
Diluted Loss Per Share: |
||||||||||||||||||||||||
Net loss available to common
stockholders assuming
dilution |
$ | (1,150 | ) | 12,064 | $ | (0.10 | ) | $ | (3,737 | ) | 11,894 | $ | (0.31 | ) | ||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||
| 2002 | 2001 | |||||||||||||||||||||||
| Loss | Shares | Per- | Loss | Shares | Per- | |||||||||||||||||||
| (Numerator) | (Denominator) | Share Amount | (Numerator) | (Denominator) | Share Amount | |||||||||||||||||||
Basic Loss Per Share: |
||||||||||||||||||||||||
Net loss available to common
stockholders |
$ | (3,895 | ) | 12,063 | &n | |||||||||||||||||||