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, 2005
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 2, 2005, there were 28,326,616 shares of Common Stock ($.001 par value per share) outstanding.
DSP GROUP, INC.
1
PART 1. FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
CONDENSED CONSOLIDATED BALANCE SHEETS
(US dollars in thousands)
| March 31, 2005 |
December 31, 2004 |
||||||
| (Unaudited) |
(Audited) |
||||||
| ASSETS |
|||||||
| CURRENT ASSETS: |
|||||||
| Cash and cash equivalents |
$ | 35,140 | $ | 60,827 | * | ||
| Short-term investments |
20,483 | 14,313 | * | ||||
| Held-to-maturity marketable securities |
62,948 | 60,184 | |||||
| Trade receivables, net |
13,537 | 5,976 | |||||
| Deferred income taxes |
1,168 | 1,168 | |||||
| Other accounts receivable and prepaid expenses |
2,476 | 2,213 | |||||
| Inventories |
10,770 | 9,469 | |||||
| Total current assets |
146,522 | 154,150 | |||||
| PROPERTY AND EQUIPMENT, NET |
11,115 | 6,683 | |||||
| LONG-TERM ASSETS: |
|||||||
| Long-term held-to-maturity marketable securities |
205,655 | 195,671 | |||||
| Long-term prepaid expenses and lease deposits |
641 | 628 | |||||
| Deferred income taxes |
1,410 | 1,410 | |||||
| Severance pay fund |
3,868 | 3,437 | |||||
| Intangible assets, net |
3,197 | 3,482 | |||||
| Goodwill |
1,500 | 1,500 | |||||
| Total assets |
$ | 373,908 | $ | 366,961 | |||
| * | Reclassified. |
Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
2
DSP GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(US dollars in thousands)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (Unaudited) |
(Audited) |
|||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Trade payables |
$ | 12,001 | $ | 7,830 | ||||
| Accrued compensation and benefits |
6,549 | 9,421 | ||||||
| Income taxes payables |
13,394 | 17,083 | ||||||
| Accrued expenses and other accounts payable |
12,954 | 13,353 | ||||||
| Total current liabilities |
44,898 | 47,687 | ||||||
| LONG-TERM LIABILITIES: |
||||||||
| Accrued severance pay |
4,056 | 3,784 | ||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock, $ 0.001 par value - Authorized shares: 5,000,000 at March 31, 2005 and December 31, 2004; Issued and outstanding shares: none at March 31, 2005 and December 31, 2004 |
— | — | ||||||
| Common stock, $0.001 par value - Authorized shares: 50,000,000 at March 31, 2005 and December 31, 2004; Issued and outstanding: 28,241,284 and 27,954,133 shares at March 31, 2005 and December 31, 2004, respectively |
28 | 28 | ||||||
| Additional paid-in capital |
187,547 | 187,471 | ||||||
| Treasury stock |
(24,030 | ) | (29,797 | ) | ||||
| Accumulated other comprehensive income |
17 | 65 | ||||||
| Retained earnings |
161,392 | 157,723 | ||||||
| Total stockholders’ equity |
324,954 | 315,490 | ||||||
| Total liabilities and stockholders’ equity |
$ | 373,908 | $ | 366,961 | ||||
Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(US dollars in thousands, except per share amounts)
| Three months ended March 31, | ||||||
| 2005 |
2004 | |||||
| Revenues |
$ | 40,163 | $ | 38,708 | ||
| Costs of revenues |
22,244 | 19,858 | ||||
| Gross profit |
17,919 | 18,850 | ||||
| Operating expenses: |
||||||
| Research and development |
9,399 | 7,554 | ||||
| Sales and marketing |
2,886 | 2,803 | ||||
| General and administrative |
1,865 | 1,806 | ||||
| Total operating expenses |
14,150 | 12,163 | ||||
| Operating income |
3,769 | 6,687 | ||||
| Interest and other income, net |
2,272 | 2,125 | ||||
| Capital gains from sale of available-for-sale marketable securities |
— | 21,317 | ||||
| Income before taxes on income |
6,041 | 30,129 | ||||
| Taxes on income |
1,034 | 10,015 | ||||
| Net income |
$ | 5,007 | $ | 20,114 | ||
| Net earnings per share: |
||||||
| Basic |
$ | 0.18 | $ | 0.70 | ||
| Diluted |
$ | 0.17 | $ | 0.66 | ||
See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(US dollars in thousands)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Net cash provided by (used in) operating activities |
$ | (5,518 | ) | $ | 11,949 | |||
| Investing activities |
||||||||
| Purchase of held-to-maturity marketable securities and short-term investments |
(26,674 | ) | (49,343 | ) | ||||
| Proceeds from maturity of held-to-maturity marketable securities and short-term investments |
7,402 | 52,731 | ||||||
| Purchases of property and equipment |
(5,402 | ) | (376 | ) | ||||
| Proceeds from sale of available-for-sale marketable securities |
— | 26,420 | ||||||
| Net cash provided by (used in) investing activities |
(24,674 | ) | 29,432 | |||||
| Financial activities |
||||||||
| 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 |
4,505 | 3,274 | ||||||
| Net cash provided by financing activities |
4,505 | 3,274 | ||||||
| Increase (decrease) in cash and cash equivalents |
$ | (25,687 | ) | $ | 44,655 | |||
| Cash and cash equivalents at the beginning of the period |
$ | 60,827 | $ | 36,812 | ||||
| Cash and cash equivalents at the end of the period |
$ | 35,140 | $ | 81,467 | ||||
See notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(US dollars in thousands)
| Three Months Ended March 31, 2005 |
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, 2004 |
27,954 | $ | 28 | $ | 187,471 | $ | (29,797 | ) | $ | 157,723 | $ | 65 | $ | 315,490 | |||||||||||||||
| Net income |
— | — | — | — | 5,007 | — | $ | 5,007 | $ | 5,007 | |||||||||||||||||||
| Unrealized gain from hedging activities, net |
— | — | — | — | — | (48 | ) | (48 | ) | (48 | ) | ||||||||||||||||||
| Total comprehensive income |
$ | 4,959 | |||||||||||||||||||||||||||
| Issuance of Treasury Stock upon purchase of Common Stock under employee stock purchase plan |
32 | ( | * | — | 650 | (48 | ) | — | 602 | ||||||||||||||||||||
| Issuance of Treasury Stock upon exercise of stock options by employees |
255 | ( | * | 76 | 5,117 | (1,290 | ) | — | 3,903 | ||||||||||||||||||||
| Balance at March 31, 2005 |
28,241 | $ | 28 | $ | 187,547 | $ | (24,030 | ) | $ | 161,392 | $ | 17 | $ | 324,954 | |||||||||||||||
| Three Months Ended March 31, 2004 |
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| 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 |
— | — | — | ||||||||||||||||||||||||||