SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 000-31029-40
MICROTUNE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 75-2883117 | |
| (State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification Number) |
2201 10th Street
Plano, Texas 75074
(Address of principal executive office and zip code)
(972) 673-1600
(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, as amended, 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 filing requirements for the past 90 days. YES ¨ NO x
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of June 30, 2003, approximately 50,332,277 shares of the Registrant’s Common Stock, $0.001 par value per share were outstanding.
Microtune, Inc.
FORM 10-Q
March 31, 2003
Caution Regarding Forward-Looking Statements
Throughout this quarterly report on this Form 10-Q, there are forward-looking statements that are based upon our current expectations, estimates and projections about our business and our industry, and that reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as “if,” “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” and other similar terms. These forward-looking statements include, among other things, projections of our future financial performance, our anticipated growth, our planned improvements to our internal and disclosure controls, our strategies and trends we anticipate in our businesses and the markets in which we operate and the competitive nature and anticipated growth of those markets.
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PART I.
Financial Information
Microtune, Inc.
(in thousands, except per share data)
(unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 96,727 | $ | 106,278 | ||||
| Accounts receivable, net |
6,920 | 7,625 | ||||||
| Inventories |
6,986 | 11,852 | ||||||
| Other current assets |
8,178 | 2,008 | ||||||
| Total current assets |
118,811 | 127,763 | ||||||
| Property and equipment, net |
12,814 | 17,805 | ||||||
| Intangible assets, net |
9,636 | 10,599 | ||||||
| Other assets and deferred charges |
928 | 929 | ||||||
| Total assets |
$ | 142,189 | $ | 157,096 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 8,611 | $ | 8,681 | ||||
| Accrued compensation |
1,547 | 1,434 | ||||||
| Accrued expenses |
12,752 | 15,009 | ||||||
| Total current liabilities |
22,910 | 25,124 | ||||||
| Other non-current liabilities |
1,575 | 1,283 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.001 par value |
||||||||
| Authorized – 25,000 shares Issued and outstanding shares – none |
— | — | ||||||
| Common stock, $0.001 par value |
||||||||
| Authorized – 150,000 shares Issued and outstanding shares – 49,961 and 49,917 respectively |
50 | 50 | ||||||
| Additional paid-in capital |
436,606 | 437,787 | ||||||
| Unearned stock compensation |
(5,953 | ) | (8,865 | ) | ||||
| Loans receivable from stockholders |
(397 | ) | (397 | ) | ||||
| Accumulated other comprehensive loss |
(988 | ) | (988 | ) | ||||
| Accumulated deficit |
(311,614 | ) | (296,898 | ) | ||||
| Total stockholders’ equity |
117,704 | 130,689 | ||||||
| Total liabilities and stockholders’ equity |
$ | 142,189 | $ | 157,096 | ||||
See accompanying notes.
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Microtune, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| Three Months Ended March 31, |
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| 2003 |
2002 |
|||||||
| (Restated – Note 2) | ||||||||
| Net revenue |
$ | 12,622 | $ | 18,264 | ||||
| Cost of revenue |
10,401 | 11,189 | ||||||
| Gross margin |
2,221 | 7,075 | ||||||
| Operating expenses: |
||||||||
| Research and development: |
||||||||
| Stock option compensation |
1,205 | 2,577 | ||||||
| Other |
6,565 | 9,077 | ||||||
| 7,770 | 11,654 | |||||||
| Selling, general and administrative: |
||||||||
| Stock option compensation |
413 | 758 | ||||||
| Other |
6,447 | 5,260 | ||||||
| 6,860 | 6,018 | |||||||
| Restructuring costs |
1,403 | 54 | ||||||
| Amortization of intangible assets |
1,081 | 2,684 | ||||||
| Total operating expenses |
17,114 | 20,410 | ||||||
| Loss from operations |
(14,893 | ) | (13,335 | ) | ||||
| Other income (expense): |
||||||||
| Interest income |
412 | 821 | ||||||
| Foreign currency losses, net |
(150 | ) | (348 | ) | ||||
| Other |
78 | (118 | ) | |||||
| Loss before provision for income taxes |
(14,553 | ) | (12,980 | ) | ||||
| Income tax expense |
163 | 71 | ||||||
| Net loss |
$ | (14,716 | ) | $ | (13,051 | ) | ||
| Basic and diluted loss per common share |
$ | (0.30 | ) | $ | (0.25 | ) | ||
| Weighted-average shares used in computing basic and diluted loss per common share |
49,773 | 52,389 | ||||||
See accompanying notes.
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Microtune, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| March 31, |
||||||||
| 2003 |
2002 |
|||||||
| (Restated– Note 2) |
||||||||
| Operating activities: |
||||||||
| Net loss |
$ | (14,716 | ) | $ | (13,051 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities, |
||||||||
| Depreciation |
2,169 | 1,691 | ||||||
| Amortization of intangible assets |
1,081 | 2,684 | ||||||
| Non-cash restructuring costs |
111 | — | ||||||
| Foreign currency losses, net |
388 | 348 | ||||||
| Amortization of deferred stock option compensation |
1,618 | 3,335 | ||||||
| Allowance for uncollectible accounts receivable |
— | 90 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
1,055 | 620 | ||||||
| Inventories |
(616 | ) | (172 | ) | ||||
| Other assets |
184 | 1,713 | ||||||
| Accounts payable |
(70 | ) | (1,669 | ) | ||||
| Accrued expenses |
(1,965 | ) | (2,932 | ) | ||||
| Accrued compensation |
113 | 104 | ||||||
| Net cash used in operating activities |
(10,648 | ) | (7,239 | ) | ||||
| Investing activities: |
||||||||
| Purchases of property and equipment |
(227 | ) | (1,244 | ) | ||||
| Sale of property and equipment |
199 | 429 | ||||||
| Proceeds from sale of Philippine manufacturing assets |
1,648 | — | ||||||
| Loans receivable |
(130 | ) | (122 | ) | ||||
| Acquisition of intangible assets |
(118 | ) | (150 | ) | ||||
| Net cash provided by (used in) investing activities |
1,372 | (1,087 | ) | |||||
| Financing activities: |
||||||||
| Proceeds from issuance of common stock |
113 | 93 | ||||||
| Loans receivable from stockholders |
— | (261 | ) | |||||
| Other, net |
— | (61 | ) | |||||
| Net cash provided by (used in) financing activities |
113 | (229 | ) | |||||
| Effect of foreign currency exchange rate changes on cash |
(388 | ) | (348 | ) | ||||
| Net decrease in cash and cash equivalents |
(9,551 | ) | (8,903 | ) | ||||
| Cash and cash equivalents at beginning of period |
106,278 | 173,149 | ||||||
| Cash and cash equivalents at end of period |
$ | 96,727 | $ | 164,246 | ||||
See accompanying notes.
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Microtune, Inc.
Notes to Consolidated Financial Statements
March 31, 2003
(unaudited)
1. Summary of Significant Accounting Policies
Description of business
Microtune, Inc. was incorporated on May 28, 1996 and commenced operations on August 21, 1996. We operate in a single industry segment, designing and marketing radio frequency (RF) silicon and subsystem module solutions for the worldwide broadband communications and transportation electronics markets. We also design and market selected Bluetooth™wireless connectivity products.
General
The accompanying unaudited financial statements as of and for the three months ended March 31, 2003 and 2002 have been prepared by us, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
In the opinion of management, all adjustments which are of a normal and recurring nature and are necessary for a fair presentation of the financial position, results of operations, and cash flows as of and for the three months ended March 31, 2003 have been made. Results of operations for the three months ended March 31, 2003, are not necessarily indictive of results of operations to be expected for the entire year or any other period.
Consolidation
Our Consolidated Financial Statements include the financial statements of Microtune and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
We make estimates, judgments and assumptions that affect the amounts reported in the financial statements and the disclosures made in the accompanying notes, including reserves for inventory, warranty costs, determining the collectibility of accounts receivable, the valuation of deferred tax assets and other amounts. We also use estimates, judgments and assumptions to determine the remaining economic lives and carrying values of purchased intangibles, property and equipment and other long-lived assets. We believe that the estimates, judgments and assumptions upon which we rely are appropriate and correct based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenue and expense during the periods presented. If there are material differences between these estimates, judgments or assumptions and actual facts, our financial statements will be affected.
Cash and Cash Equivalents
We consider highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of bank deposits, money market funds and asset-backed commercial paper. Our investments in asset-backed commercial paper are comprised of high-quality securities in accordance with our investment policy.
Inventories
Our inventories are stated at the lower of standard cost, which approximates actual cost determined on a first-in, first-out basis, or estimated realizable value. Adjustments to reduce our inventories to estimated realizable value, including allowances for excess and obsolete inventories, are determined quarterly by comparing inventory levels of individual materials and parts to historical usage rates, current backlog and estimated future sales. Actual amounts realized upon the sale of inventories may differ from estimates used to determine inventory valuation allowances due to changes in customer demand, technology changes and other factors.
Property and Equipment
Our property and equipment is stated at cost, net of accumulated depreciation. We calculate depreciation using the straight-line method over the estimated useful lives of the assets, which range from 3 to 7 years. We amortize leasehold improvements using the straight-line method over the lesser of their estimated useful lives or remaining lease terms.
Intangible Assets
Our intangible assets, which consist primarily of a customer base, patents, developed technologies, and employment and non-compete agreements, have been recorded as the result of our business or asset acquisitions and are being amortized on the straight-line basis over 3 to 7 years.
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