SECURITIES AND EXCHANGE COMMISSION
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FORM 10-Q
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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended January 26, 2003 or | ||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
0-21488
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CATALYST SEMICONDUCTOR, INC.
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| Delaware (State or other jurisdiction of incorporation or organization) |
77-0083129 (I.R.S. Employer Identification No.) |
|
| 1250 Borregas Avenue Sunnyvale, California (Address of Registrant’s principal executive offices) |
94089 (Zip Code) |
(408) 542-1000
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 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 o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of the Registrant’s Common Stock as of February 14, 2003 was 16,539,504.
CATALYST SEMICONDUCTOR, INC.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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Item 1. Consolidated Financial Statements |
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Unaudited Condensed Consolidated Balance Sheets |
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at January 31, 2003 and April 30, 2002 |
3 | ||||
Unaudited Condensed Consolidated Statements of Operations for the three and nine |
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month periods ended January 31, 2003 and 2002 |
4 | ||||
Unaudited Condensed Consolidated Statements of Cash Flows for the nine month |
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periods ended January 31, 2003 and 2002 |
5 | ||||
Notes to Unaudited Condensed Consolidated Financial Statements |
6 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and |
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Results of Operations |
10 | ||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
25 | ||||
Item 4.
Controls and Procedures |
25 | ||||
PART II. OTHER INFORMATION |
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Item 4. Submission of Matters to a Vote of Security Holders |
26 | ||||
Item 5. Other Information |
27 | ||||
Item 6. Exhibits and Reports on Form 8-K |
27 | ||||
SIGNATURES |
28 | ||||
CERTIFICATIONS |
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INDEX TO EXHIBITS |
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2
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CATALYST SEMICONDUCTOR, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| January 31, | April 30, | |||||||||||
| 2003 | 2002 | |||||||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 21,918 | $ | 26,295 | ||||||||
Short term investments |
7,980 | — | ||||||||||
Accounts receivable, net |
7,443 | 8,929 | ||||||||||
Inventories, net |
7,913 | 8,749 | ||||||||||
Other assets |
1,020 | 1,537 | ||||||||||
Total current assets |
46,274 | 45,510 | ||||||||||
Property and equipment, net |
2,660 | 2,414 | ||||||||||
Total assets |
$ | 48,934 | $ | 47,924 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ | 4,212 | $ | 4,701 | ||||||||
Accounts payable-related parties |
124 | 412 | ||||||||||
Accrued expenses |
3,486 | 2,367 | ||||||||||
Deferred gross profit on shipments to distributors |
1,632 | 1,816 | ||||||||||
Total current liabilities |
3,454 | 9,296 | ||||||||||
Other tax related credits |
— | 3,262 | ||||||||||
Total liabilities |
3,454 | 12,558 | ||||||||||
Stockholders’ equity: |
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Preferred stock, $.001 par value, 2,000 shares authorized; |
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No shares issued or outstanding |
— | — | ||||||||||
Common stock, $.001 par value, 45,000 shares authorized; 19,151 shares |
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issued and 16,813 shares outstanding at January 31, 2003 and |
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18,696 shares issued and 17,002 shares outstanding at April 30, |
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2002 |
19 | 19 | ||||||||||
Additional paid in capital |
52,201 | 48,755 | ||||||||||
Treasury stock, 2,339 shares at January 31, 2003 and 1,694 shares at |
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April 30, 2002 |
(6,764 | ) | (5,105 | ) | ||||||||
Accumulated deficit |
(5,986 | ) | (8,303 | ) | ||||||||
Accumulated other comprehensive income |
10 | — | ||||||||||
Total stockholders’ equity |
39,480 | 35,366 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 48,934 | $ | 47,924 | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
CATALYST SEMICONDUCTOR, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| January 31, | January 31, | January 31, | January 31, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Net revenues |
$ | 11,207 | $ | 10,654 | $ | 35,711 | $ | 30,336 | |||||||||
Cost of revenues |
7,089 | 6,892 | 21,182 | 19,877 | |||||||||||||
Gross profit |
4,118 | 3,762 | 14,529 | 10,459 | |||||||||||||
Research and development |
1,269 | 1,140 | 3,753 | 3,190 | |||||||||||||
Selling, general and administrative |
2,451 | 2,584 | 7,333 | 8,251 | |||||||||||||
Income (loss) from operations |
398 | 38 | 3,443 | (982 | ) | ||||||||||||
Interest income, net |
83 | 126 | 237 | 589 | |||||||||||||
Income (loss) before income taxes |
481 | 164 | 3,680 | (393 | ) | ||||||||||||
Income tax provision |
167 | — | 1,363 | 49 | |||||||||||||
Net income (loss) |
$ | 314 | $ | 164 | $ | 2,317 | $ | (442 | ) | ||||||||
Net income (loss) per share: |
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Basic |
$ | 0.02 | $ | 0.01 | $ | 0.14 | $ | (0.02 | ) | ||||||||
Diluted |
$ | 0.02 | $ | 0.01 | $ | 0.13 | $ | (0.02 | ) | ||||||||
Weighted average common shares: |
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Basic |
16,774 | 17,669 | 16,813 | 17,704 | |||||||||||||
Diluted |
18,176 | 20,477 | 18,492 | 17,704 | |||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
CATALYST SEMICONDUCTOR, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Nine Months Ended | ||||||||||||
| January 31, | January 31, | |||||||||||
| 2003 | 2002 | |||||||||||
Cash flows from operating activities: |
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Net income (loss) |
$ | 2,317 | $ | (442 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash |
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provided by operating activities: |
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Depreciation of property and equipment |
787 | 767 | ||||||||||
Provision for doubtful accounts receivable |
— | 200 | ||||||||||
Provision for excess and obsolete inventory |
(56 | ) | (12 | ) | ||||||||
Loss on sale of fixed assets |
11 | — | ||||||||||
Changes in assets and liabilities: |
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Accounts receivable |
1,486 | 2,667 | ||||||||||
Inventories |
892 | (1,020 | ) | |||||||||
Other assets |
517 | 327 | ||||||||||
Accounts payable (including related parties) |
(777 | ) | (122 | ) | ||||||||
Accrued expenses |
1,070 | (596 | ) | |||||||||
Deferred gross profit on shipments to distributors |
(184 | ) | (428 | ) | ||||||||
Net cash provided by operating activities |
6,063 | 1,341 | ||||||||||
Cash flows from investing activities: |
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Purchase of short term investments |
(7,964 | ) | — | |||||||||
Acquisition of fixed assets |
(1,044 | ) | (421 | ) | ||||||||
Cash used in investing activities |
(9,008 | ) | (421 | ) | ||||||||
Cash flows from financing activities: |
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Common stock issuances |
227 | 65 | ||||||||||
Treasury stock purchases |
(1,659 | ) | (417 | ) | ||||||||
Payment of line of credit |
— | (2,025 | ) | |||||||||
Payment of long-term debt and capital lease obligations |
— | (58 | ) | |||||||||
Net cash used in financing activities |
(1,432 | ) | (2,435 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents |
(4,377 | ) | (1,515 | ) | ||||||||
Cash at beginning of the period |
26,295 | 30,534 | ||||||||||
Cash at end of the period |
$ | 21,918 | $ | 29,019 | ||||||||
Supplemental non-cash information: |
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Deferred compensation on exercised stock options |
$ | 156 | $ | 25 | ||||||||
Supplemental cash flow disclosures: |
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Cash paid during the period for: |
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Interest paid |
$ | — | $ | 29 | ||||||||
Income taxes paid |
$ | — | $ | 18 | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
5
CATALYST SEMICONDUCTOR, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Basis of Presentation:
In the opinion of the management of Catalyst Semiconductor, Inc. (Company), the unaudited condensed consolidated interim financial statements included herein have been prepared on the same basis as the April 30, 2002 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein. The consolidated statements include the accounts of the Company’s wholly owned subsidiary, Nippon Catalyst KK, a sales organization in Japan and Catalyst Semiconductor Romania Com SRL, our European design center. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (SEC). 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 April 30, 2002. The results of operations for the three month period ended January 31, 2003 are not necessarily indicative of the results to be expected for the entire year ending April 30, 2003 or any other future period. Certain prior period balances have been reclassified to conform to the current period presentation.
The Company’s business is highly cyclical and has been subject to significant downturns at various times which have been characterized by reduced product demand, production overcapacity and significant erosion of average selling prices. In the most recent two quarters ended January 2003, the combined effects of decreased shipments with minimal changes in prices have resulted in decreasing revenues and margins. The Company could experience further downward trends in product pricing or volume in the future which could further adversely affect its operating results.
The Company’s fiscal year and its first, second and third fiscal quarters end on the Sunday closest to April 30, July 31, October 31 and January 31, respectively. For purposes of financial statement presentation, the year end date is expressed as April 30 and the quarter end dates are expressed as July 31, October 31 and January 31, respectively.
Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Through January 31, 2003, the Company had $10,000 of other comprehensive income resulting from unrealized gains from its investment activities. Comprehensive income for the three and nine month periods ended January 31, 2003 amounted to $324,000 and $2,327,000, respectively.
Note 2 — Net Income (Loss) Per Share:
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period and excludes the dilutive effect of stock options. Diluted net income (loss) per share gives effect to all dilutive potential common shares outstanding during a period. In computing diluted net income (loss) per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options.
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A reconciliation of the numerators and denominators of the basic and diluted income (loss) per share is presented below:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| January 31, | January 31, | January 31, | January 31, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Net income (loss) |
$ | 314 | $ | 164 | $ | 2,317 | $ | (442 | ) | ||||||||
Shares calculation: |
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Weighted average shares outstanding-basic |
16,774 | 17,669 | 16,813 | 17,704 | |||||||||||||
Effect of dilutive securities: |
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Stock options |
1,402 | 2,808 | 1,679 | — | |||||||||||||
Weighted average shares outstanding-diluted |
18,176 | 20,477 | 18,492 | 17,704 | |||||||||||||
Net income (loss) per share: |
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Basic |
$ | 0.02 | $ | 0.01 | $ | 0.14 | $ | (0.02 | ) | ||||||||
Diluted |
$ | 0.02 | $ | 0.01 | $ | 0.13 | $ | (0.02 | ) | ||||||||
Options to purchase 716,000 shares of common stock at prices from $4.07 to $9.50 per share outstanding during the quarter ended January 31, 2003 and options to purchase 1,722,000 shares of common stock at prices from $4.07 to $9.50 per share outstanding during the quarter ended January 31, 2002 were not included in the computation of diluted income per share because the inclusion of such options would have been antidilutive.
Options to purchase 716,000 shares of common stock at prices from $4.07 to $9.50 per share outstanding during the nine months ended January 31, 2003 and options to purchase 6,021,000 shares of common stock at prices from $0.11 to $9.50 per share outstanding during the nine months ended January 31, 2002 were not included in the computation of diluted income (loss) per share because the inclusion of such options would have been antidilutive.
7
Note 3 — Balance Sheet Components (in thousands):
| January 31, | April 30, | ||||||||
| 2003 | 2002 | ||||||||
Accounts receivable: |
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Accounts receivable |
$ | 8,393 | $ | 9,879 | |||||
Less: Allowance for doubtful accounts |
(950 | ) | (950 | ) | |||||
| $ | 7,443 | $ | 8,929 | ||||||
Inventories: |
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Work-in-process |
$ | 7,010 | $ | 5,590 | |||||
Finished goods |
903 | 3,159 | |||||||
| $ | 7,913 | $ | 8,749 | ||||||
Property and equipment: |
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Engineering and test equipment |
$ | 6,286 | $ | 5,884 | |||||