Back to GetFilings.com



 
UNITED STATES
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 October 27, 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 1-6395
 
 
SEMTECH CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Delaware
  
95-2119684
(State or other jurisdiction
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
200 Flynn Road, Camarillo, California, 93012-8790
(Address of principal executive offices, Zip Code)
 
Registrant’s telephone number, including area code: (805) 498-2111
 
 
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 has required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
 
Indicate by check mark, whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨
 
Number of shares of Common Stock, $0.01 par value per share, outstanding at November 29, 2002: 73,091,614
 

 
PART I—FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS
 
The consolidated condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K.
 
In the opinion of the Company, these unaudited statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of Semtech Corporation and subsidiaries as of October 27, 2002, and the results of their operations for the three and nine months then ended and their cash flows for the nine months then ended.
 
The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year.

2

 
SEMTECH CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
 
    
Three Months Ended
   
Nine Months Ended
    
October 27, 2002
   
October 28,
2001
   
October 27, 2002
   
October 28,
2001
Net sales
   
$
47,168
   
$
43,745
   
$
148,427
   
$
144,805
Cost of sales
   
 
20,736
   
 
19,616
   
 
63,583
   
 
77,595
    
  
  
  
Gross profit
   
 
26,432
   
 
24,129
   
 
84,844
   
 
67,210
    
  
  
  
Operating costs and expenses:
                            
Selling, general and administrative
   
 
8,790
   
 
7,982
   
 
26,018
   
 
25,912
Product development and engineering
   
 
7,912
   
 
7,150
   
 
23,709
   
 
22,517
One-time costs
   
 
1,202
   
 
—  
   
 
1,202
   
 
2,727
    
  
  
  
Total operating costs and expenses
   
 
17,904
   
 
15,132
   
 
50,929
   
 
51,156
    
  
  
  
Operating income
   
 
8,528
   
 
8,997
   
 
33,915
   
 
16,054
Interest and other income, net
   
 
10,649
   
 
3,670
   
 
13,368
   
 
7,920
    
  
  
  
Income before provision for taxes
   
 
19,177
   
 
12,667
   
 
47,283
   
 
23,974
Provision for taxes
   
 
6,137
   
 
3,547
   
 
13,164
   
 
6,713
    
  
  
  
Net income
   
$
13,040
   
$
9,120
   
$
34,119
   
$
17,261
    
  
  
  
Earnings per share:
                            
Earnings per share—  
                            
Basic
   
$
0.18
   
$
0.13
   
$
0.47
   
$
0.25
Diluted
   
$
0.17
   
$
0.12
   
$
0.44
   
$
0.22
Weighted average number of shares—  
                            
Basic
   
 
73,389
   
 
70,605
   
 
73,139
   
 
69,505
Diluted
   
 
76,721
   
 
78,338
   
 
77,430
   
 
77,559

3

SEMTECH CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share data)
 
    
October 27,
2002 (Unaudited)
     
January 27,
2002
ASSETS
                
Current assets:
                
Cash and cash equivalents
   
$
144,560
 
   
$
46,300
Temporary investments
   
 
232,764
 
   
 
324,870
Receivables, less allowances
   
 
21,111
 
   
 
19,181
Inventories
   
 
20,070
 
   
 
22,728
Income taxes refundable
   
 
—  
 
   
 
2,019
Deferred income taxes
   
 
11,973
 
   
 
11,786
Other current assets
   
 
2,955
 
   
 
3,372
    
  
Total current assets
   
 
433,433
 
   
 
430,256
Property, plant and equipment, net
   
 
52,270
 
   
 
51,516
Investments with maturities in excess of 1 year
   
 
106,260
 
   
 
172,332
Deferred income taxes
   
 
26,025
 
   
 
27,659
Other assets
   
 
5,228
 
   
 
8,638
    
  
TOTAL ASSETS
   
$
623,216
 
   
$
690,401
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   
$
7,148
 
   
$
7,341
Accrued liabilities
   
 
11,578
 
   
 
16,845
Deferred revenue
   
 
2,240
 
   
 
1,936
Income taxes payable
   
 
3,146
 
   
 
1,099
Other current liabilities
   
 
62
 
   
 
65
    
  
Total current liabilities
   
 
24,174
 
   
 
27,286
Convertible subordinated notes
   
 
256,970
 
   
 
364,320
Commitments and contingencies
                
Stockholders’ equity:
                
Common stock, $0.01 par value, 250,000,000 shares authorized, 73,815,727 issued and 73,086,427 outstanding on October 27, 2002 and 72,148,573 issued and outstanding on January 27, 2002
   
 
738
 
   
 
722
Treasury stock, 729,300 shares at cost
   
 
(7,805
)
   
 
—  
Additional paid-in capital
   
 
182,436
 
   
 
162,856
Retained earnings
   
 
165,585
 
   
 
131,459
Accumulated other comprehensive income
   
 
1,118
 
   
 
3,758
    
  
Total stockholders’ equity
   
 
342,072
 
   
 
298,795
    
  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   
$
623,216
 
   
$
690,401
    
  

4

 
SEMTECH CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
    
Nine Months Ended
  
    
October 27,
2002
     
October 28,
2001
  
Cash flows from operating activities:
                  
Net income
   
$
34,119
 
   
$
17,261
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
7,127
 
   
 
6,048
 
Deferred income taxes
   
 
1,447
 
   
 
(25,208
)
Tax benefit of stock option exercises
   
 
8,845
 
   
 
29,818
 
Gain on repurchase of long-term debt
   
 
(11,223
)
   
 
(2,283
)
Loss on disposition of property, plant and equipment
   
 
614
 
   
 
—  
 
Provision for doubtful accounts
   
 
131
 
   
 
—  
 
Changes in assets and liabilities:
                  
Receivables
   
 
(2,061
)
   
 
17,119
 
Inventories
   
 
2,658
 
   
 
7,770
 
Other assets
   
 
3,828
 
   
 
1,171
 
Accounts payable and accrued liabilities
   
 
(5,460
)
   
 
(13,136
)
Deferred revenue
   
 
304
 
   
 
—  
 
Income taxes payable
   
 
4,066
 
   
 
1,708
 
Other liabilities
   
 
(3
)
   
 
(274
)
    
  
Net cash provided by operating activities
   
 
44,392
 
   
 
39,994
 
    
  
Cash flows from investing activities:
                  
Temporary investments, net
   
 
92,106
 
   
 
(184,625
)
Long-term investments, net
   
 
66,072
 
   
 
(50,826
)
Proceeds on sale of assets
   
 
—  
 
   
 
1,174
 
Additions to property, plant and equipment
   
 
(8,476
)
   
 
(11,563
)
    
  
Net cash provided by (used in) investing activities
   
 
149,702
 
   
 
(245,840
)
    
  
Cash flows from financing activities:
                  
Exercise of stock options
   
 
10,739
 
   
 
19,559
 
Cost of buyback of convertible subordinated notes
   
 
(96,127
)
   
 
(32,573
)
Stock repurchase
   
 
(7,806
)
   
 
(32,221
)
    
  
Net cash used in financing activities
   
 
(93,194
)
   
 
(45,235
)
    
  
Effect of exchange rate changes on cash and cash equivalents
   
 
(2,640
)
   
 
115
 
Net increase (decrease) in cash and cash equivalents
   
 
98,260
 
   
 
(250,966
)
Cash and cash equivalents at beginning of period
   
 
46,300
 
   
 
323,182
 
    
  
Cash and cash equivalents at end of period
   
$
144,560
 
   
$
72,216
 
    
  

5

 
SEMTECH CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 
1.  Earnings Per Share
 
Basic earnings per common share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options. The weighted average number of shares used to compute basic earnings per share in the third quarters of fiscal years 2003 and 2002 were 73,389,000 and 70,605,000, respectively. For the first nine months of fiscal years 2003 and 2002, the weighted average number of shares used to compute basic earnings per share were 73,139,000 and 69,505,000, respectively.
 
Diluted earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding plus the dilutive effect of outstanding stock options, or 76,721,000 and 78,338,000 in the third quarters of fiscal years 2003 and 2002, respectively. For the first nine months of fiscal years 2003 and 2002, the number of shares used to compute diluted earnings per share were 77,430,000 and 77,559,000, respectively.
 
Options to purchase approximately 4,751,000 and 76,000, respectively, were not included in the computation of third quarters of fiscal years 2003 and 2002 diluted net income per share because such options were considered anti-dilutive. For the first nine months of fiscal years 2003 and 2002, options to purchase approximately 1,737,000 and 215,000 shares, respectively, were not included in the computation of diluted net income per share because such options were considered anti-dilutive. Shares associated with the Company’s outstanding convertible subordinated notes are not included in the computation of earning per share as they are anti-dilutive.
 
2.  Business Segments and Concentrations of Risk
 
The Company operates in three reportable segments: Standard Semiconductor Products, Rectifier and Assembly Products, and Other Products. Included in the Standard Semiconductor Products segment are the Power Management, Protection, Test and Measurement (formerly High Performance), Advanced Communications and Human Input Device product lines. The Rectifier and Assembly Products segment includes the Company’s line of assembly and rectifier products. The Other Products segment is made up of custom integrated circuit (IC) and foundry sales.
 
The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Form 10-K for the year ended January 27, 2002. The Company evaluates segment performance based on net sales and operating income of each segment. Management does not track segment data or evaluate segment performance on additional financial information. As such, there are no separately identifiable statements of income data below operating income. The Company does not track balance sheet items by individual reportable segments.
 
    
Three Months Ended
     
Nine Months Ended
  
Net Sales
   
October 27,
2002
     
October 28,
2001
     
October 27,
2002
     
October 28,
2001
  
Standard Semiconductor Products
   
$
45,252