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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 SEPTEMBER 30, 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 000-31029-40

 


 

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 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 ¨

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 22, 2004, approximately 51,470,118 shares of the Registrant’s Common Stock, $0.001 par value per share, were outstanding.

 



Table of Contents

Microtune, Inc.

 

FORM 10-Q

SEPTEMBER 30, 2004

 

INDEX

 

     Page

Part I. Financial Information

    

Item 1. Financial Statements

   3

Consolidated Balance Sheets at September 30, 2004 and December 31, 2003 (unaudited)

   3

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2004 and 2003 (unaudited)

   4

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (unaudited)

   5

Notes to Consolidated Financial Statements (unaudited)

   6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

   32

Item 4. Controls and Procedures

   33

Part II. Other Information

    

Item 1. Legal Proceedings

   33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

   36

Item 6. Exhibits

   36

Signatures

   37

 

Caution Regarding Forward-Looking Statements

 

Throughout this quarterly report on Form 10-Q, we make 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,” “continue,” and other similar terms. These forward-looking statements include, among other things, projections of our future financial performance and our anticipated growth, descriptions of our strategies, the trends we anticipate in our businesses and the markets in which we operate, and the competitive nature and anticipated growth of those markets.

 

We caution readers that forward-looking statements are only predictions, based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements. In addition to the other information in this report, we encourage you to review the information regarding the risks and uncertainties associated with our business set forth under the caption “Factors Affecting Future Operating Results and Stock Price” below and in our other filings with the Securities and Exchange Commission (SEC). We caution readers not to rely on these forward-looking statements, which reflect management’s analysis only as of the date of this report. We undertake no obligation to revise or update any forward-looking statement for any reason.

 

2


Table of Contents

PART I.

Financial Information

 

Item 1. Financial Statements

 

Microtune, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

(unaudited)

 

     September 30,
2004


    December 31,
2003


 
Assets                 

Current assets:

                

Cash and cash equivalents

   $ 74,145     $ 53,337  

Short-term investments

     —         6,045  

Accounts receivable, net

     7,500       4,260  

Inventories

     6,385       4,165  

Other current assets

     1,510       4,309  
    


 


Total current assets

     89,540       72,116  

Property and equipment, net

     5,981       7,504  

Long-term investments

     6,581       14,028  

Intangible assets, net

     3,004       6,564  

Other assets and deferred charges

     278       447  
    


 


Total assets

   $ 105,384     $ 100,659  
    


 


Liabilities and Stockholders’ Equity                 

Current liabilities:

                

Accounts payable

   $ 6,610     $ 7,195  

Accrued compensation

     1,355       1,182  

Accrued expenses

     4,292       3,945  

Deferred revenue

     301       147  
    


 


Total current liabilities

     12,558       12,469  

Other non-current liabilities

     1,216       1,466  

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 – 51,470 and 51,157 respectively

     52       51  

Additional paid-in capital

     436,770       436,025  

Unearned stock compensation

     (377 )     (1,124 )

Loans receivable from stockholders

     —         (30 )

Accumulated other comprehensive loss

     (1,027 )     (960 )

Accumulated deficit

     (343,808 )     (347,238 )
    


 


Total stockholders’ equity

     91,610       86,724  
    


 


Total liabilities and stockholders’ equity

   $ 105,384     $ 100,659  
    


 


 

See accompanying notes.

 

3


Table of Contents

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2004

    2003

    2004

    2003

 

Net revenue

   $ 16,268     $ 8,975     $ 40,777     $ 35,573  

Cost of revenue

     9,402       10,549       23,242       30,036  
    


 


 


 


Gross margin

     6,866       (1,574 )     17,535       5,537  

Operating expenses:

                                

Research and development:

                                

Stock option compensation

     158       375       522       2,057  

Other

     3,682       5,014       10,863       17,243  
    


 


 


 


       3,840       5,389       11,385       19,300  

Selling, general and administrative:

                                

Stock option compensation

     47       121       191       1,667  

Other

     6,716       9,510       22,777       23,687  
    


 


 


 


       6,763       9,631       22,968       25,354  

Restructuring

     9       (478 )     108       (378 )

Amortization of intangible assets

     1,047       1,047       3,182       3,183  
    


 


 


 


Total operating expenses

     11,659       15,589       37,643       47,459  
    


 


 


 


Loss from operations

     (4,793 )     (17,163 )     (20,108 )     (41,922 )

Other income (expense):

                                

Interest income

     242       492       647       1,085  

Foreign currency gains (losses), net

     263       (218 )     (387 )     1,106  

Settlement of patent and anti-trust litigation

     —         —         22,500       —    

Other

     (166 )     (127 )     411       88  
    


 


 


 


Income (loss) before provision for income taxes

     (4,454 )     (17,016 )     3,063       (39,643 )

Income tax expense (benefit)

     (568 )     125       (367 )     370  
    


 


 


 


Net income (loss)

   $ (3,886 )   $ (17,141 )   $ 3,430     $ (40,013 )
    


 


 


 


Net income (loss) per common share:

                                

Basic

   $ (0.08 )   $ (0.34 )   $ 0.07     $ (0.80 )
    


 


 


 


Diluted

   $ (0.08 )   $ (0.34 )   $ 0.06     $ (0.80 )
    


 


 


 


Weighted-average common shares outstanding:

                                

Basic

     51,264       50,505       51,334       50,149  
    


 


 


 


Diluted

     51,264       50,505       53,653       50,149  
    


 


 


 


 

See accompanying notes.

 

4


Table of Contents

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

     Nine Months Ended
September 30,


 
     2004

    2003

 

Operating activities:

                

Net income (loss)

   $ 3,430     $ (40,013 )

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

                

Depreciation

     1,876       5,491  

Amortization of intangible assets

     3,182       3,183  

Write-off of patent costs

     492       —    

Non-cash restructuring costs

     (35 )     1,360  

Foreign currency (gains) losses, net

     387       (1,106 )

Amortization of deferred stock option compensation

     713       3,724  

Gain on sale of property and equipment

     (251 )     (955 )

Allowance for uncollectible accounts receivable

     18       —    

Other non-cash charges

     —         491  

Changes in operating assets and liabilities:

                

Accounts receivable, net

     (3,258 )     5,094  

Inventories

     (2,220 )     888  

Other assets

     2,637       1,143  

Accounts payable

     (476 )     (1,326 )

Accrued expenses

     376       (7,308 )

Other liabilities

     (250 )     468  

Accrued compensation

     173       246  
    


 


Net cash provided by (used in) operating activities

     6,794       (28,620 )

Investing activities:

                

Purchases of property and equipment

     (369 )     (533 )

Proceeds from sale of property and equipment

     267       467  

Proceeds from sale of Philippine manufacturing assets

     51       2,697  

Sale of Netherlands subsidiary

     —         (934 )