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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 March 31, 2003

 

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 0-23006

 

 

DSP GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

  

94-2683643

(State or other jurisdiction of
incorporation or organization)

  

(I.R.S. employer
identification number)

3120 Scott Boulevard,
Santa Clara, California

  

95054

(Address of Principal Executive Offices)

  

(Zip Code)

 

Registrant’s telephone number, including area code: (408) 986-4300

 

 

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  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

 

As of May 1, 2003, there were 27,439,324 shares of Common Stock ($.001 par value per share) outstanding.

 

Table of Contents

 

INDEX

 

DSP GROUP, INC.

 

           

Page No.

PART I. FINANCIAL INFORMATION

      

Item 1.

   

Financial Statements (Unaudited)

      
    

Condensed consolidated balance sheets—March 31, 2003 and December 31, 2002

    

2

    

Condensed consolidated statements of income—Three months ended March 31, 2003 and 2002

    

4

    

Condensed consolidated statements of cash flows—Three months ended March 31, 2003 and 2002

    

5

    

Condensed consolidated statements of stockholders’ equity—Three months ended March 31, 2003 and 2002

    

6

    

Notes to condensed consolidated financial statements—March 31, 2003

    

7

Item 2.

   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    

12

Item 3.

   

Quantitative and Qualitative Disclosures About Market Risk

    

23

Item 4.

   

Controls and Procedures

    

23

PART II. OTHER INFORMATION

      

Item 6.

   

Exhibits and Reports on Form 8-K

    

23

SIGNATURES

    

24

CERTIFICATIONS

    

25

 

1

Table of Contents

 

PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

DSP GROUP, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(US dollars in thousands)

 

    

March 31,
2003

   

December 31,
2002

    

(Unaudited)

   

(Audited)

ASSETS

              

CURRENT ASSETS:

              

Cash and cash equivalents

   

$

37,137

   

$

39,919

Marketable securities

   

 

55,536

   

 

45,371

Trade receivables, less allowance for returns of $123 in March 31, 2003 and December 31, 2002 and for doubtful accounts of $328 in March 31, 2003 and $339 in December 31, 2002

   

 

11,359

   

 

4,873

Deferred income taxes

   

 

1,685

   

 

1,685

Other accounts receivable and prepaid expenses

   

 

1,474

   

 

1,352

Inventories

   

 

6,290

   

 

6,916

Assets of discontinued operations

   

 

2,665

   

 

4,737

    
  

Total current assets

   

 

116,146

   

 

104,853

    
  

PROPERTY AND EQUIPMENT, NET

   

 

4,677

   

 

4,690

    
  

LONG-TERM ASSETS:

              

Long-term marketable securities

   

 

147,026

   

 

150,692

Investments in equity securities of traded companies

   

 

12,231

   

 

12,031

Long-term prepaid expenses and lease deposits

   

 

381

   

 

386

Severance pay fund

   

 

1,790

   

 

1,616

Goodwill

   

 

5,804

   

 

5,804

    
  

Total long-term assets

   

 

167,232

   

 

170,529

    
  

Total assets

   

$

288,055

   

$

280,072

    
  

 

Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date.

 

See notes to condensed consolidated financial statements.

 

2

Table of Contents

DSP GROUP, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(US dollars in thousands)

 

    

March 31, 2003

     

December 31,
2002

    

(Unaudited)

     

(Audited)

LIABILITIES AND STOCKHOLDERS’ EQUITY

                

CURRENT LIABILITIES:

                

Trade payables

   

$

8,742

 

   

$

6,745

Accrued compensation and benefits

   

 

3,541

 

   

 

4,556

Income taxes payable

   

 

7,860

 

   

 

7,328

Accrued expenses and other accounts payable

   

 

10,802

 

   

 

9,668

    
  

Total current liabilities

   

 

30,945

 

   

 

28,297

    
  

LONG-TERM LIABILITIES:

                

Accrued severance pay

   

 

1,832

 

   

 

1,686

Deferred income taxes

   

 

2,470

 

   

 

2,371

    
  

Total long-term liabilities

   

 

4,302

 

   

 

4,057

    
  

STOCKHOLDERS’ EQUITY:

                

Preferred Stock, $0.001 par value:

                

Authorized shares—5,000,000 as of March 31, 2003 and December 31, 2002; Issued and outstanding shares—none as of March 31, 2003 and December 31, 2002

   

 

—  

 

   

 

—  

Common Stock, $0.001 par value:

                

Authorized shares—50,000,000 as of March 31, 2003 and December 31, 2002; Issued and outstanding shares—27,343,281 as of March 31, 2003 and 27,247,947 as of December 31, 2002

   

 

27

 

   

 

27

Additional paid-in capital

   

 

157,267

 

   

 

156,443

Treasury stock

   

 

(85

)

   

 

—  

Accumulated other comprehensive income

   

 

672

 

   

 

476

Retained earnings

   

 

94,927

 

   

 

90,772

    
  

Total stockholders’ equity

   

 

252,808

 

   

 

247,718

    
  

Total liabilities and stockholders’ equity

   

$

288,055

 

   

$

280,072

    
  

 

Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date.

 

See notes to condensed consolidated financial statements.

 

3

Table of Contents

DSP GROUP, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(US dollars in thousands, except per share amounts)

 

    

Three months ended
March 31,

  
    

2003

   

2002

  

Revenues

   

$

29,011

   

$

21,126

 

Costs of revenues

   

 

16,777

   

 

12,612

 

    
  

Gross profit

   

 

12,234

   

 

8,514

 

    
  

Operating expenses:

                

Research and development

   

 

5,120

   

 

4,904

 

Sales and marketing

   

 

2,316

   

 

1,936

 

General and administrative

   

 

1,581

   

 

930

 

Aborted spin-off expenses and other

   

 

—  

   

 

865

 

    
  

Total operating expenses

   

 

9,017

   

 

8,635

 

    
  

Operating income (loss)

   

 

3,217

   

 

(121

)

Interest and other income, net

   

 

1,924

   

 

2,609

 

    
  

Income before taxes on income

   

 

5,141

   

 

2,488

 

Taxes on income

   

 

874

   

 

313

 

    
  

Net income from continuing operations

   

 

4,267

   

 

2,175

 

Net income from discontinued operations of Ceva

   

 

—  

   

 

515

 

    
  

Net income

   

$

4,267

   

$

2,690

 

    
  

Net earnings per share from continuing operations:

                

Basic

   

$

0.16

   

$

0.08

 

    
  

Diluted

   

$

0.15

   

$

0.08

 

    
  

Net earnings per share from discontinued operations:

                

Basic

   

$

—  

   

$

0.02

 

    
  

Diluted

   

$

—  

   

$

0.02

 

    
  

Net earnings per share (combined):

                

Basic

   

$

0.16

   

$

0.10

 

    
  

Diluted

   

$

0.15

   

$

0.10

 

    
  

 

See notes to condensed consolidated financial statements.

 

4

Table of Contents

DSP GROUP, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(US dollars in thousands)

 

      

Three Months Ended March 31,

  
      

2003

       

2002

  

Net cash provided by operating activities

     

$

2,607

 

     

$

2,562

 

Investing activities

                      

Purchase of held-to-maturity marketable securities

     

 

(37,611

)

     

 

(29,990

)

Proceeds from sales and maturity of held-to-maturity marketable securities

     

 

30,141

 

     

 

17,893

 

Purchases of property and equipment

     

 

(618

)

     

 

(325

)

Investment in available-for-sale marketable securities

     

 

—  

 

     

 

(2,000

)

Cash received from (distributed to) discontinued operations

     

 

2,072

 

     

 

(254

)

      
    

Net cash used in investing activities

     

 

(6,016

)

     

 

(14,676

)

Financial activities

                      

Purchase of treasury stock

     

 

(389

)

     

 

—  

 

Issuance of Common Stock and Treasury Stock for cash upon exercise of options and upon purchase of Common Stock under employee stock purchase plan by employees

     

 

1,016

 

     

 

1,275

 

      
    

Net cash provided by financing activities

     

 

627

 

     

 

1,275