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 March 31, 2004
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: 000-50391
SIGMATEL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 74-2691412 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
3815 South Capital of Texas Highway
Building 3, Suite 300
Austin, Texas 78704
(512) 381-3700
(Address and telephone number of principal executive offices)
Indicate by check mark whether 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) had 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 Exchange Act Rule 12b-2).
Yes ¨ No x
The number of shares outstanding of the Registrant’s Common Stock, $0.0001 par value, was 35,132,306 as of April 15, 2004.
SIGMATEL, INC.
FORM 10-Q
| Page No. | ||||
| PART I: | INTERIM FINANCIAL INFORMATION | |||
| Item 1. |
||||
| Condensed Balance Sheets as of March 31, 2004 and December 31, 2003 |
3 | |||
| Condensed Statements of Operations for the Three months ended March 31, 2004 and March 31, 2003 |
4 | |||
| Condensed Statements of Cash Flows for the Three months ended March 31, 2004 and March 31, 2003 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 3. |
20 | |||
| Item 4. |
30 | |||
| PART II: | OTHER INFORMATION | |||
| Item 1. |
31 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
31 | ||
| Item 3. |
32 | |||
| Item 4. |
32 | |||
| Item 5. |
32 | |||
| Item 6. |
32 | |||
| 33 | ||||
2
CONDENSED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 29,817 | $ | 61,841 | ||||
| Short-term investments |
91,736 | 49,420 | ||||||
| Accounts receivable, net |
16,416 | 15,989 | ||||||
| Inventories, net |
10,529 | 9,904 | ||||||
| Prepaid expenses and other current assets |
2,005 | 1,333 | ||||||
| Total current assets |
150,503 | 138,487 | ||||||
| Property, equipment and software, net |
4,146 | 3,792 | ||||||
| Intangible assets, net |
4,387 | 4,476 | ||||||
| Other assets |
535 | 122 | ||||||
| Total assets |
$ | 159,571 | $ | 146,877 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 9,472 | $ | 13,466 | ||||
| Accrued payroll |
712 | 870 | ||||||
| Other accrued expenses |
2,321 | 2,561 | ||||||
| Deferred revenue |
4,548 | 3,645 | ||||||
| Current portion of capital lease obligations |
50 | 48 | ||||||
| Total current liabilities |
17,103 | 20,590 | ||||||
| Capital lease obligations, net of current portion |
50 | 63 | ||||||
| Other liabilities |
115 | 116 | ||||||
| Total liabilities |
17,268 | 20,769 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $.0001 par value; 170,000,000 shares authorized; shares issued and outstanding: 35,217,817 and 35,127,861 at 2004 and 34,270,961 and 34,181,005 at 2003, respectively |
4 | 3 | ||||||
| Additional paid-in capital |
181,901 | 173,737 | ||||||
| Notes receivable from stockholders |
(12 | ) | (115 | ) | ||||
| Deferred stock-based compensation |
(2,682 | ) | (3,678 | ) | ||||
| Treasury stock, 89,956 common shares, at cost |
(741 | ) | (741 | ) | ||||
| Accumulated deficit |
(36,167 | ) | (43,098 | ) | ||||
| Total stockholders’ equity |
142,303 | 126,108 | ||||||
| Total liabilities and stockholders’ equity |
$ | 159,571 | $ | 146,877 | ||||
The accompanying notes are an integral part of these condensed financial statements.
3
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues |
$ | 31,500 | $ | 12,876 | ||||
| Cost of goods sold (1) |
14,784 | 7,338 | ||||||
| Gross Profit |
16,716 | 5,538 | ||||||
| Operating Expenses: |
||||||||
| Research and development (1) |
6,083 | 3,662 | ||||||
| Selling, general and administrative (1) |
2,899 | 1,538 | ||||||
| Amortization of deferred stock-based compensation |
995 | 239 | ||||||
| Total operating expenses |
9,977 | 5,439 | ||||||
| Operating income |
6,739 | 99 | ||||||
| Other income (expense): |
||||||||
| Interest income |
341 | 9 | ||||||
| Interest expense |
(8 | ) | (723 | ) | ||||
| Total other income (expense) |
333 | (714 | ) | |||||
| Income (loss) before income taxes |
7,072 | (615 | ) | |||||
| Income taxes |
141 | — | ||||||
| Net income (loss) |
6,931 | (615 | ) | |||||
| Deemed dividends on preferred stock |
— | (8,176 | ) | |||||
| Net income (loss) attributable to common stockholders |
$ | 6,931 | $ | (8,791 | ) | |||
| BASIC NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE |
$ | 0.20 | $ | (1.50 | ) | |||
| DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE |
$ | 0.18 | $ | (1.50 | ) | |||
| WEIGHTED AVERAGE SHARES USED TO COMPUTE: |
||||||||
| Basic net income (loss) attributable to common stockholders per share |
34,486,515 | 5,845,938 | ||||||
| Diluted net income (loss) attributable to common stockholders per share |
38,446,198 | 5,845,938 | ||||||
(1) Amounts exclude amortization of deferred stock-based compensation as follows: |
||||||||
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cost of goods sold |
$ | 50 | $ | 6 | ||||
| Research and development |
606 | 180 | ||||||
| Selling, general & administrative |
339 | 53 | ||||||
| Total |
$ | 995 | $ | 239 | ||||
The accompanying notes are an integral part of these condensed financial statements.
4
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 6,931 | $ | (615 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
1,005 | 675 | ||||||
| Amortization of deferred stock-based compensation |
995 | 239 | ||||||
| Other non-cash expenses |
50 | 536 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable, net |
(428 | ) | (2,746 | ) | ||||
| Inventories, net |
(624 | ) | 850 | |||||
| Prepaid expenses and other assets |
(1,084 | ) | (672 | ) | ||||
| Accounts payable |
(2,386 | ) | (1,019 | ) | ||||
| Accrued expenses |
(397 | ) | 300 | |||||
| Deferred revenue and other liabilities |
902 | 103 | ||||||
| Net cash provided by (used in) operating activities |
4,964 | (2,349 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Purchase of short-term investments |
(42,316 | ) | — | |||||
| Purchase of property and equipment |
(2,878 | ) | (614 | ) | ||||
| Net cash used in investing activities |
(45,194 | ) | (614 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from long-term debt |
— | 5,150 | ||||||
| Repayments under revolving line of credit, net |
— | (8,123 | ) | |||||
| Proceeds from (payments on) capital lease obligations |
(11 | ) | 15 | |||||
| Proceeds from issuance of convertible preferred stock, net of issuance costs |
— | 8,090 | ||||||
| Proceeds from notes receivable from stockholders |
104 | 18 | ||||||
| Proceeds from issuance of common stock, net of issuance costs |
8,113 | — | ||||||
| Net cash provided by financing activities |
8,206 | 5,150 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(32,024 | ) | 2,187 | |||||
| Cash and cash equivalents, beginning of period |
61,841 | 2,859 | ||||||
| Cash and cash equivalents, end of period |
$ | 29,817 | $ | 5,046 | ||||
The accompanying notes are an integral part of these condensed financial statements.
5
Notes to Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed financial statements of SigmaTel, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to interim financial statements. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three month periods ended March 31, 2004 and 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.
2. Follow-on Equity Offering
On February 18, 2004, the Securities and Exchange Commission declared effective the Company’s registration statement, which the Company filed on Form S-1 under the Securities Act of 1933 in connection with a follow-on offering of its common stock. Under this registration statement, the Company registered 9,830,422 shares of its common stock, including 1,282,229 shares subject to the underwriters’ overallotment option (of which 212,229 shares were exercised), with a public offering price of $25.01 per share. The Company registered 250,000 of these shares on its behalf and 9,580,422 on behalf of certain stockholders of the Company. The Company received $5.3 million in proceeds after deducting the underwriters fees and transaction costs.
3. Significant Accounting Policies
For a description of what the Company believes to be the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our financial statements, refer to our Form 10-K filed with the Securities and Exchange Commission. There have been no changes in our critical accounting policies since December 31, 2003.
Accounting for Stock-Based Compensation
Employee stock awards under the Company’s compensation plans are accounted for in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, Financial Accounting Standards Board Interpretation No. 44, Emerging Issues Task Force (“EITF”) Issue No. 00-23, and related interpretations. The Company accounts for equity awards issued to non-employees in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, and EITF Issue No. 96-18, Accounting for Equity Instruments that are Issued to other than Employees for Acquiring, or in Conjunction with Selling Goods or Services and related interpretations. The following table illustrates the effect on net income (loss) as if the Company had applied the fair value recognition provisions of SFAS No. 123 (in thousands, except share data):
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Net income (loss) attributable to common stockholders, as reported |
$ | 6,931 | $ | (8,791 | ) | |||
| Add: Stock-based employee compensation expense recognized in net income (loss) attributable to common stockholders |
995 | 239 | ||||||
| Deduct: Stock-based employee compensation expense determined under the fair value based method for all employee awards |
(1,421 | ) | (458 | ) | ||||
| Pro forma net income (loss) attributable to common stockholders |
$ | 6,505 | $ | (9,010 | ) | |||
| Pro forma basic net income (loss) attributable to common stockholders per share |
$ | 0.19 | $ | (1.54 | ) | |||