SIRF TECHNOLOGY HOLDINGS INC - 10-Q Quarterly Report

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

¨	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

000-50669

SiRF TECHNOLOGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware		94-3245315
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)

148 E. Brokaw Road, San Jose, California		95112
(Address of principal executive office)		(Zip Code)

(408) 467-4010

(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 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 ¨ No x (1)

(1) The registrant has been subject to the filing requirements of the Securities Exchange Act of 1934 since the effective date of its Registration Statement on Form S-1 (April 21, 2004) and has filed all required reports since the effective date.

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

45,562,213 shares of the Registrant’s common stock were outstanding as of April 30, 2004.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	42
Item 4.	Submission of Matters to a Vote of Security Holders	42
Item 6.	Exhibits and Reports on Form 8-K	44
SIGNATURES		45
EXHIBIT INDEX		46

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

SiRF TECHNOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	March 31, 2004 (Unaudited)			December 31, 2003 (1)
ASSETS
Current Assets:
Cash and cash equivalents	$	18,604		$	16,715
Marketable securities		820			827
Accounts receivable, net		10,144			8,467
Inventories		8,566			7,968
Prepaid expenses and other current assets		3,072			1,457

Total current assets		41,206			35,434
Long-term investments		3,099			3,248
Property and equipment, net		2,554			2,531
Goodwill		28,052			28,052
Identified intangible assets, net		17,815			18,973
Other long-term assets		785			390

Total assets	$	93,511		$	88,628

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities:
Accounts payable	$	4,724		$	5,602
Accounts payable to related parties		137			782
Accrued payroll and related benefits		1,553			1,410
Income taxes payable		118			244
Other accrued liabilities		1,952			1,850
Deferred margin on shipments to distributors		555			517
Advance contract billings		460			567
Current portion of long-term obligations		718			556

Total current liabilities		10,217			11,528
Long-term obligations		2,676			2,910
Commitments and Contingencies
Convertible preferred stock		138,213			138,213
Stockholders’ Deficit:
Common stock		1			1
Additional paid-in-capital		36,443			36,013
Deferred stock compensation		(6,754	)		(8,686	)
Accumulated other comprehensive income		24			22
Accumulated deficit		(87,309	)		(91,373	)

Total stockholders’ deficit		(57,595	)		(64,023	)

Total liabilities and stockholders’ deficit	$	93,511		$	88,628

(1)	The condensed consolidated balance sheet information in this column was derived from SiRF Technology Holdings, Inc. audited consolidated financial statements for the year ended December 31, 2003.

See accompanying notes.

SiRF TECHNOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2004		2003
Revenue:
Product revenue	$	24,306	$	11,240
License royalty revenue		4,052		45

Net revenue		28,358		11,285
Cost of revenue:
Cost of product revenue (a)		12,099		5,380
Cost of license royalty revenue		—		—

Total cost of revenue		12,099		5,380

Gross profit		16,259		5,905

Operating expenses:
Research and development		5,111		3,042
Sales and marketing		2,645		2,189
General and administrative		1,360		983
Amortization of acquisition-related intangibles		1,158		613
Stock compensation expense (b)		1,734		171

Total operating expenses		12,008		6,998

Operating income (loss)		4,251		(1,093	)
Other income (expense), net		27		22

Net income (loss) before income taxes		4,278		(1,071	)
Provision (benefit) for income taxes		214		(66	)

Net income (loss)		4,064		(1,005	)
Deemed dividend to preferred stockholders		—		468

Net income (loss) applicable to common stockholders	$	4,064	$	(1,473	)

Net income (loss) per share:
Basic	$	0.53	$	(0.22	)

Diluted	$	0.10	$	(0.22	)

Weighted average number of shares used in per share calculations
Basic		7,726		6,681

Diluted		41,500		6,681

(a) Cost of product revenue includes:
Stock compensation	$	225	$	40

(b) Stock compensation expense (net of amounts included in cost of product revenue):
Research and development	$	773	$	(104	)
Sales and marketing		472		103
General and administrative		489		172

	$	1,734	$	171

See accompanying notes.

SiRF TECHNOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2004			2003
Operating activities:
Net income (loss)	$	4,064		$	(1,005	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock compensation expense		1,983			217
Depreciation and amortization		474			320
Amortization of acquired identified intangible assets		1,158			613
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(1,677	)		(200	)
Inventories		(598	)		167
Prepaid expenses and other current assets		(1,714	)		(125	)
Other long-term assets		33			24
Accounts payable		(1,523	)		1,101
Accrued payroll and related benefits		143			6
Income taxes payable		(126	)		—
Other accrued liabilities		267			58
Advance contract billings		(107	)		(32	)
Deferred margin on shipments to distributors		38			166

Net cash provided by operating activities		2,415			1,310

Investing activities:
Acquisition of a development-stage company, net of cash		—			(63	)
Purchases of available-for-sale investments		—			(1,000	)
Maturities and sales of available-for-sale investments		151			1,291
Purchases of property and equipment		(460	)		(238	)

Net cash used by investing activities		(309	)		(10	)

Financing activities:
Payments on borrowings		—			(500	)
Principal payments under debt obligations		(14	)		(11	)
Payments on litigation settlement obligation		(261	)		(125	)
Proceeds from issuance of common stock, net of repurchases		58			26

Net cash used in financing activities		(217	)		(610	)

Net increase in cash and cash equivalents		1,889			690
Cash and cash equivalents at beginning of period		16,715			8,229

Cash and cash equivalents at end of period	$	18,604		$	8,919

Supplemental disclosure of cash flow information
Deferred stock compensation	$	27		$	—

Preferred stock and related warrants issued in connection with acquisitions	$	—		$	10,988

See accompanying notes.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Summary of Significant Accounting Policies

Organization

SiRF Technology Holdings, Inc. (“SiRF”) is the holding company for SiRF Technology, Inc. (“SiRF Technology”), which develops and markets semiconductor products designed to enable location awareness in high-volume mobile consumer devices and commercial applications. SiRF Technology was incorporated in the state of California in February 1995 and reincorporated in the state of Delaware in September 2000. SiRF was incorporated in the state of Delaware in June 2001 when all of SiRF Technology’s capital was exchanged for SiRF capital.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of SiRF have been prepared in accordance with generally accepted accounting principles for interim financial information, consistent in all material respects with those applied in SiRF’s audited financial statements included in SiRF’s Form S-1 as filed with the Securities and Exchange Commission, and pursuant to instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2004, and results of operations and cash flows for all periods presented have been made. The condensed consolidated balance sheet at December 31, 2003, has been derived from the audited financial statements at that date. The condensed consolidated financial statements include SiRF and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

These condensed consolidated financial statements should be read in conjunction with SiRF’s audited financial statements as included in SiRF’s Form S-1 as filed with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 2004, are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year ending December 31, 2004.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect

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