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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, 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 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 3, 2004, there were 29,156,849 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, 2004 and December 31, 2003    2
     Condensed consolidated statements of income—Three months ended March 31, 2004 and 2003    4
     Condensed consolidated statements of cash flows—Three months ended March 31, 2004 and 2003    5
     Condensed consolidated statements of stockholders’ equity—Three months ended March 31, 2004 and 2003    6
     Notes to condensed consolidated financial statements—March 31, 2004    7
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    11
Item 3.    Quantitative and Qualitative Disclosures About Market Risk    25
Item 4.    Controls and Procedures    25
PART II. OTHER INFORMATION     
Item 1.    Legal Proceedings    25
Item 6.    Exhibits and Reports on Form 8-K    25
SIGNATURES    26

 

1

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PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

DSP GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(US dollars in thousands)

 

     March 31,
2004
    December 31,
2003
     (Unaudited)    (Audited)

ASSETS

              

CURRENT ASSETS:

              

Cash and cash equivalents

    $ 81,467    $ 36,812

Marketable securities and bank deposits

      27,324      42,490

Trade receivables, less allowance for returns of $123 in March 31, 2004 and December 31, 2003 and for doubtful accounts of $768 in March 31, 2004 and $708 in December 31, 2003

      15,061      15,844

Deferred income taxes

      1,326      1,326

Other accounts receivable and prepaid expenses

      1,106      1,462

Inventories

      9,022      8,466
    
  

TOTAL CURRENT ASSETS

      135,306      106,400
    
  

PROPERTY AND EQUIPMENT, NET

      6,959      7,108
    
  

LONG-TERM ASSETS:

              

Long-term marketable securities

      208,005      197,071

Investments in equity securities of traded companies

      28,428      47,138

Long-term prepaid expenses and lease deposits

      544      513

Severance pay fund

      2,608      2,360

Intangible assets, net

      1,923      2,076

Goodwill

      5,804      5,804
    
  

TOTAL LONG-TERM ASSETS

      247,312      254,962
    
  

TOTAL ASSETS

    $ 389,577    $ 368,470
    
  

 

Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date.

 

See notes to condensed consolidated financial statements.

 

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DSP GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(US dollars in thousands)

 

     March 31,
2004
    December 31,
2003
  
     (Unaudited)    (Audited)  

LIABILITIES AND STOCKHOLDERS’ EQUITY

                

CURRENT LIABILITIES:

                

Trade payables

    $ 17,556    $ 11,221  

Accrued compensation and benefits

      5,643      9,000  

Income taxes payables

      19,249      11,107  

Accrued expenses and other accounts payable

      14,375      14,185  
    
  

TOTAL CURRENT LIABILITIES

      56,823      45,513  

LONG-TERM LIABILITIES:

                

Accrued severance pay

      2,690      2,555  

Deferred income taxes

      9,784      14,592  

Other long-term liabilities

      1,429      1,429  
    
  

TOTAL LONG-TERM LIABILITIES

      13,903      18,576  
    
  

STOCKHOLDERS’ EQUITY:

                

Preferred stock, $0.001 par value
- Authorized shares - 5,000,000 at March 31, 2004 and December 31, 2003; issued and outstanding shares - none at March 31, 2004 and December 31, 2003

      —        —    

Common stock, $0.001 par value
- Authorized shares: 50,000,000 at March 31, 2004 and December 31, 2003; issued and outstanding shares: 28,845,049 at March 31, 2004 and 28,615,884 at December 31, 2003

      29      29  

Additional paid-in capital

      177,350      174,700  

Treasury stock

      —        (1,192 )

Accumulated other comprehensive income

      14,127      23,045  

Retained earnings

      127,345      107,799  
    
  

TOTAL STOCKHOLDERS’ EQUITY

      318,851      304,381  
    
  

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $ 389,577    $ 368,470  
    
  

 

Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date.

 

See notes to condensed consolidated financial statements.

 

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DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(US dollars in thousands, except per share amounts)

 

    

Three months ended

March 31,

     2004
    2003

Revenues

    $ 38,708    $ 29,011

Costs of revenues

      19,858      16,777
    
  

Gross profit

      18,850      12,234
    
  

Operating expenses:

              

Research and development

      7,554      5,120

Sales and marketing

      2,803      2,316

General and administrative

      1,806      1,581
    
  

Total operating expenses

      12,163      9,017
    
  

Operating income

      6,687      3,217

Interest and other income, net

      2,125      1,924

Capital gains from sale of available-for-sale marketable securities

      21,317      —  
    
  

Income before taxes on income

      30,129      5,141

Taxes on income

      10,015      874
    
  

Net income

    $ 20,114    $ 4,267
    
  

Net earnings per share:

              

Basic

    $ 0.70    $ 0.16
    
  

Diluted

    $ 0.66    $ 0.15
    
  

 

See notes to condensed consolidated financial statements.

 

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DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(US dollars in thousands)

 

     Three Months Ended
March 31,
  
     2004
     2003
  

Net cash provided by operating activities

    $ 11,949     $ 2,607  

Investing activities

                 

Purchase of held-to-maturity marketable securities

      (49,343 )     (37,611 )

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

      52,731       30,141  

Purchases of property and equipment

      (376 )     (618 )

Proceeds from sale of available-for-sale marketable securities

      26,420       —    

Cash received from discontinued operations

      —         2,072  
    
 

Net cash provided by (used in) investing activities

      29,432       (6,016 )

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

      3,274       1,016  
    
 

Net cash provided by financing activities

      3,274       627  
    
 

Increase (decrease) in cash and cash equivalents

    $ 44,655     $ (2,782 )
    
 

Cash and cash equivalents at the beginning of the period

    $ 36,812     $ 39,919  
    
 

Cash and cash equivalents at the end of the period

    $ 81,467     $ 37,137  
    
 

 

See notes to condensed consolidated financial statements.

 

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DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(US dollars in thousands)

 

Three Months Ended

March 31, 2004

  

Number of

Common

Stock

    

Common

Stock

    

Additional

Paid-In

Capital

  

Treasury

Stock

    

Retained

Earnings

    

Other

Comprehensive

Income (Loss)

     Total
Comprehensive
Income
    

Total

Stockholders’

Equity

  

Balance at December 31, 2003

   28,616     $ 29     $ 174,700   $ (1,192 )   $ 107,799     $ 23,045             $ 304,381  

Net income

   —         —         —       —         20,114       —       $ 20,114       20,114  

Unrealized gain on available-for-sale marketable securities, net

   —         —         —       —         —         (8,719 )     (8,719 )     (8,719 )

Unrealized loss from hedging activities, net

   —         —         —       —         —         (199 )     (199 )     (199 )
                                               
       

Total comprehensive income

                                               $ 11,196          
                                               
       

Issuance of Common Stock upon exercise of stock options by employees

   178       ( *     2,650     —         —         —                 2,650  

Issuance of Treasury Stock upon purchase of Common Stock under employee stock purchase plan

   32       ( *     —       732       (326 )     —                 406  

Issuance of Treasury Stock upon exercise of stock options by employees

   19       ( *     —       460       (242 )     —                 218  
   
 
 
 
 
 
 
 

Balance at March 31, 2004

   28,845     $ 29     $ 177,350   $ —       $ 127,345     $ 14,127       —       $ 318,851  
   
 
 
 
 
 
 
 

Three Months Ended

March 31, 2003

                                              

Balance at December 31, 2002

   27,248     $ 27     $ 156,443   $ —       $ 90,772