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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, 2012

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: 0-17739

 

 

 

LOGO

RAMTRON INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   84-0962308

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1850 Ramtron Drive, Colorado Springs, CO   80921
(Address of principal executive offices)   (Zip Code)

(Registrant’s telephone number, including area code: (719) 481-7000

 

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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

Indicate the number of shares of the issuer’s outstanding common stock, as of the latest practicable date:

 

35,528,425 shares

 

As of October 31, 2012

Common Stock, $0.01 par value  

 

 

 


Table of Contents

TABLE OF CONTENTS

 

         Page  

PART I - FINANCIAL INFORMATION

  

Item 1 -

 

Unaudited Financial Statements:

  
 

Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

     3   
 

Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2012 and 2011

     4   
 

Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2012

     5   
 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011

     6   
 

Notes to Consolidated Financial Statements

     7   

Item 2 -

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     19   

Item 3 -

 

Quantitative and Qualitative Disclosures About Market Risk

     26   

Item 4 -

 

Controls and Procedures

     27   

PART II - OTHER INFORMATION

  

Item 1-

 

Legal Proceedings

     27   

Item 1A -

 

Risk Factors

     28   

Item 2 -

 

Unregistered Sales of Equity Securities and use of Proceeds

     28   

Item 3 -

 

Defaults Upon Senior Securities

     29   

Item 4 -

 

Mine Safety Disclosures

     29   

Item 5 -

 

Other Information

     29   

Item 6 -

 

Exhibits

     29   

 

2


Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

(Except for December 31, 2011 Balance Sheet)

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

(Amounts in thousands, except par value and per share amounts)

 

     September 30,
2012
    December 31,
2011
 
     (unaudited)        
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 1,255      $ 4,736   

Accounts receivable, less allowances of $2,766 and $2,307, respectively

     5,064        7,556   

Inventories

     16,670        20,250   

Deferred income taxes, net

     —          338   

Other current assets

     833        1,187   
  

 

 

   

 

 

 

Total current assets

     23,822        34,067   

Inventories, long-term

     4,368        2,581   

Property, plant and equipment, net

     21,055        23,072   

Intangible assets, net

     2,765        2,703   

Long-term deferred income taxes, net

     —          5,687   

Other assets

     374        466   
  

 

 

   

 

 

 

Total assets

   $ 52,384      $ 68,576   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current liabilities:

    

Accounts payable

   $ 3,077      $ 6,185   

Accrued liabilities

     2,333        2,601   

Current portion of long-term debt

     3,139        4,202   
  

 

 

   

 

 

 

Total current liabilities

     8,549        12,988   

Other long-term liabilities

     210        210   

Long-term debt, less current portion

     5,613        7,711   
  

 

 

   

 

 

 

Total liabilities

     14,372        20,909   
  

 

 

   

 

 

 
Commitments and Contingencies (Note 7)     

Stockholders’ equity:

    

Preferred stock, $.01 par value, 10,000,000 shares authorized: 0 shares issued and outstanding

     —          —     

Common stock, $.01 par value, 50,000,000 shares authorized: 35,450,311 and 34,838,240 shares issued and outstanding, respectively

     355        348   

Additional paid-in capital

     267,677        266,668   

Accumulated other comprehensive loss

     (416     (378

Accumulated deficit

     (229,604     (218,971
  

 

 

   

 

 

 

Total stockholders’ equity

     38,012        47,667   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 52,384      $ 68,576   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

3


Table of Contents

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011

(Amounts in thousands, except per share amounts)

(Unaudited)

 

     Three
Months Ended
September 30,

2012
    Three
Months Ended
September 30,

2011
    Nine
Months Ended
September 30,

2012
    Nine
Months Ended
September 30,

2011
 

Revenue:

        

Product sales

   $ 11,963      $ 21,736      $ 41,127      $ 48,712   

License fees

     —          227        —          655   
  

 

 

   

 

 

   

 

 

   

 

 

 
     11,963        21,963        41,127        49,367   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

        

Cost of product sales

     8,154        10,729        22,152        25,044   

Research and development

     3,485        4,988        10,071        13,756   

Sales and marketing

     2,527        2,648        6,949        7,313   

General and administrative

     3,075        1,786        5,758        5,666   
  

 

 

   

 

 

   

 

 

   

 

 

 
     17,241        20,151        44,930        51,779   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (5,278     1,812        (3,803     (2,412

Interest expense

     (202     (192     (638     (612

Other income (expense), net

     (2     81        (15     37   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax (provision) benefit

     (5,482     1,701        (4,456     (2,987

Income tax (provision) benefit

     (5,665     (529     (6,177     1,097   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (11,147   $ 1,172      $ (10,633   $ (1,890
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss, net of tax:

        

Foreign currency translation adjustments

     (19     (16     (38     (37
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ (11,166   $ 1,156      $ (10,671   $ (1,927
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

        

Basic and diluted

   $ (0.33   $ 0.04      $ (0.31   $ (0.07
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     34,200        31,748        34,095        29,073   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     34,200        32,102        34,095        29,073   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

4


Table of Contents

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(Amounts in thousands, except par value amounts)

(Unaudited)

 

     Common Stock
($.01 Par Value)
     Additional
Paid-in
    Accumulated
Other
Comprehensive
    Accumulated     Stockholders’  
     Shares      Amount      Capital     (Loss)     Deficit     Equity  

Balances, December 31, 2011

     34,838       $ 348       $ 266,668      $ (378   $ (218,971   $ 47,667   

Exercise of options

     94         1         213            214   

Stock-based compensation expense

           1,146            1,146   

Shares and cash issued for restricted stock and restricted stock units (1)

     518         6         (350         (344

Foreign currency translation adjustments

             (38       (38

Net loss

               (10,633     (10,633
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balances, September 30, 2012

     35,450       $ 355       $ 267,677      $ (416   $ (229,604   $ 38,012   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

(1) Includes shares withheld from vested restricted stock and restricted stock units to satisfy the minimum withholding requirement for federal and state taxes.

See accompanying notes to consolidated financial statements.

 

5


Table of Contents

RAMTRON INTERNATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011

(Unaudited)

(Amounts in thousands)

 

     September 30,     September 30,  
     2012     2011  

Cash flows from operating activities:

    

Net loss

   $ (10,633   $ (1,890

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

    

Depreciation

     2,994        1,571   

Amortization

     190        190   

Bad debt expense

     156        (33

Stock-based compensation

     1,146        1,346   

Deferred income taxes

     6,025        (1,153

Imputed interest on note payable

     15        25   

Provision for inventory write-off and scrap

     881        659   

Net loss from asset disposals

     7        —     

Changes in assets and liabilities:

    

Accounts receivable

     2,336        (1,714

Inventories

     912        (11,937

Accounts payable and accrued liabilities

     (3,359     7,313   

Deferred revenue

     —          (484

Other

     446        947   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     1,116        (5,160
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property, plant and equipment

     (611     (5,269

Proceeds from sale of assets

     14        —     

Purchase of intellectual property

     (252     (194
  

 

 

   

 

 

 

Net cash used in investing activities

     (849     (5,463
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from line of credit

     4,375        1,500   

Payments on line of credit

     (4,375     (1,500

Principal payments on debt

     (3,580     (2,588

Net issuance (purchase) of common stock

     (131     11,484   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (3,711     8,896   
  

 

 

   

 

 

 

Effect of foreign currency

     (37     (45
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (3,481     (1,772
  

 

 

   

 

 

 

Cash and cash equivalents, beginning of period

     4,736        9,945   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 1,255      $ 8,173   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for interest

   $ 577      $ 620   
  

 

 

   

 

 

 

Cash paid for income taxes

   $ 104      $ 86   
  

 

 

   

 

 

 

Property, plant and equipment financed by capital leases

   $ 404      $ 370   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

RAMTRON INTERNATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Description of Business. We are a fabless semiconductor company that designs, develops and markets specialized semiconductor memory and integrated semiconductor solutions, which are used in many markets for a wide range of applications. We pioneered the integration of ferroelectric materials into semiconductor products, which enabled the development of a new class of nonvolatile memory, called ferroelectric random access memory (F-RAM). F-RAM products merge the advantages of multiple memory technologies into a single device that retains information without a power source, can be read from and written to at very fast speeds, written to many times, consumes low amounts of power, and can simplify the design of electronic systems. In many cases, we are the sole provider of F-RAM enabled semiconductor products, which facilitates close customer relationships, long application lifecycles and the potential for high-margin sales.

We also integrate with our memory products wireless communication capabilities as well as analog and mixed-signal functions such as microprocessor supervision, tamper detection, timekeeping, and power failure detection functions. This has enabled new classes of products that address the growing market need for more functional, efficient and cost effective semiconductor products.

Our revenue is derived from the sale of our products and from license, development and royalty arrangements entered into with a limited number of established semiconductor manufacturers involving the development and sale of specific applications and products based on our technologies. Product sales have been made to various customers for use in a variety of applications including utility meters, office equipment, automobiles, electronics, telecommunications, disk array controllers, and industrial control devices, among others.

The accompanying unaudited, interim consolidated financial statements at September 30, 2012, and for the three and nine months ended September 30, 2012 and 2011, and the audited balance sheet at December 31, 2011, have been prepared from the books and records of Ramtron International Corporation (the “Company,” “we,” “our,” or “us”). The preparation of our consolidated financial statements and related disclosures are in conformity with generally accepted accounting principles in the United States. Certain amounts reported in prior periods have been reclassified to conform to the current presentation.

The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2011, which includes all disclosures required by GAAP. The results of operations for the period ended September 30, 2012, are not necessarily indicative of expected operating results for the full year.

Use of Estimates. The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying notes. Examples include the estimate of useful lives of our property, plant and equipment, and intellectual property costs, valuation allowances associated with our deferred tax assets, valuation allowance for sales returns associated primarily with our sales to distributors, fair value estimates used in our intangible asset impairment tests, and the valuation of stock-based compensation. The statements reflect all normal recurring adjustments, which, in the opinion of the Company’s management, are necessary for the fair presentation of financial position, results of operations and cash flows for the periods presented.

New Accounting Standards. In June 2011, the FASB issued an accounting pronouncement that provides new guidance on the presentation of comprehensive income (FASB ASC Topic 220) in financial statements. Entities are required to present total comprehensive income either in a single, continuous statement of comprehensive income or in two separate, but consecutive, statements. Under the single-statement approach, entities must include the components of net income, a total for net income, the components of other comprehensive income and a total for comprehensive income. The Company has elected the single statement approach. The provisions for this pronouncement are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

 

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Table of Contents

NOTE 2. INVENTORIES

Inventories consist of the following as of September 30, 2012 and December 31, 2011:

 

(in thousands)    September 30,
2012
    December 31,
2011
 

Finished goods

   $ 4,703      $ 4,018   

Work in process - current portion

     12,419        16,930   

Provision for scrap and obsolescence

     (452     (698
  

 

 

   

 

 

 
   $ 16,670      $ 20,250   
  

 

 

   

 

 

 

Work in process - long-term (1)

   $ 4,368      $ 2,581   
  

 

 

   

 

 

 

 

(1) Long-term inventory relates to items that the Company does not forecast to sell within one year, based upon expected sales as a result of our analysis of current orders, backlog and forecast of future demand. Management believes this inventory will be sold in the future and is fully recoverable.

NOTE 3. OTHER CONSOLIDATED FINANCIAL STATEMENT DETAIL

Other Current Assets consist of:

 

(in thousands)   September 30,
2012
    December 31,
2011
 

Prepaid expenses

  $ 511      $ 783   

Prepaid insurance

    57        170   

Supplies inventory

    244        231   

Other

    21        3   
 

 

 

   

 

 

 

Total

  $ 833      $ 1,187   
 

 

 

   

 

 

 

Accrued Liabilities consist of:

 

(in thousands)   September 30,
2012
    December 31,
2011
 

Compensation-related liabilities

  $ 631      $ 1,827   

Accrued property taxes

    128        188   

Accrued external commissions

    221        230   

Merger related liabilities

    921        —     

Other

    432        356   
 

 

 

   

 

 

 

Total

  $ 2,333      $ 2,601   
 

 

 

   

 

 

 

 

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NOTE 4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of:

 

(in thousands)   

Estimated

Useful Lives

(In Years)

   September 30,
2012
    December 31,
2011
 

Land

   —      $ 668      $ 668   

Buildings and improvements

   7, 10 and 18      7,343        7,343   

Equipment

   3 and 5      23,691        23,998   

Office furniture and equipment

   5 and 7      385        764   

Leasehold Improvements

   3 and 10      7,101        6,719   

Construction in progress

   —        946        1,046   
     

 

 

   

 

 

 
        40,134        40,538   

Less accumulated depreciation and amortization

        (19,079     (17,466
     

 

 

   

 

 

 
      $ 21,055      $ 23,072   
     

 

 

   

 

 

 

Depreciation expense for property, plant and equipment was $1.0 million and $.5 million for the three months ended September 30, 2012 and 2011, respectively, and $3.0 million and $1.6 million for the nine months ended September 30, 2012 and 2011, respectively.

NOTE 5. INTANGIBLE ASSETS

Intangible assets consist of:

 

(in thousands)    September 30,
2012
    December 31,
2011
 

Patents and core technology

   $ 4,925      $ 4,672   

Accumulated amortization

     (2,160     (1,969
  

 

 

   

 

 

 

Intangible assets, net

   $ 2,765      $ 2,703   
  

 

 

   

 

 

 

Amortization expense for intangible assets was $64,000 for each of the three month periods ended September 30, 2012 and 2011, and $190,000 for each of the nine month periods ended September 30, 2012 and 2011. Estimated amortization expense for intangible assets is $250,000 annually for the years ending 2012 through 2016, and a total of $1,600,000 thereafter.

NOTE 6. LONG-TERM DEBT

 

(in thousands)    September 30,
2012
    December 31,
2011
 

Long-term debt:

    

Capital leases

   $ 2,994      $ 4,246   

National Semiconductor promissory note

     493        478   

Mortgage note

     3,321        3,439   

Term loan

     1,944        3,750   
  

 

 

   

 

 

 
     8,752        11,913   

Current maturities of long-term debt

     (3,139     (4,202
  

 

 

   

 

 

 

Total

   $ 5,613      $ 7,711   
  

 

 

   

 

 

 

 

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On February 29, 2012, we executed an Amended and Restated Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank (“SVB”). The Loan Agreement provides for a maximum of $7.5 million working capital line of credit and a $6.0 million term loan with a fixed interest rate of 6.5% per annum. The borrowing base under the line of credit includes eligible accounts receivable and eligible raw materials, work in process and finished goods inventory, capped at $1.0 million for domestic inventory and $3.0 million for export inventory, further reduced by 50% of the outstanding balance under our term loan. The Loan Agreement provides for interest on the line of credit at a floating rate equal to the SVB prime lending rate plus 1.75% to 2.25% per annum depending upon cash balances maintained at SVB and borrowing base availability, with an expiration date of February 28, 2013. The Loan Agreement also required an additional principal payment against the term loan of $875,000 before March 31, 2012, which reduced our remaining 27 monthly principal payments to approximately $93,000 each, plus accrued interest. Security for the Loan Agreement includes all of the Company’s assets except for real estate and leased equipment. The Company draws upon the line of credit for working capital purposes and to fund capital requirements as needed.

As of September 30, 2012, we did not have an outstanding balance on the secured line of credit facility and had net availability of $3.2 million.

We are required to comply with certain covenants under the Loan Agreement, calculated on a monthly basis. These covenants include requirements to maintain a minimum EBITDA level, a minimum liquidity ratio and restrictions on certain business actions, such as payment of cash dividends, without the consent of SVB. As of September 30, 2012, we were in compliance with all such covenants except for our minimum EBITDA covenant requirement for the month ended September 30, 2012. We have obtained a waiver from SVB on this covenant for the months ending September 30, 2012 and October 31, 2012. We have also received consent for our change in control and merger with Cypress Semiconductor Corporation. See “Note 12” Subsequent Events.

The Company currently has six capital leases outstanding totaling $3.0 million, with terms between two and three years and effective interest rates between 9% and 10%. Under these leases, we have standby letters of credit in favor of three of the lessors for approximately $800,000. As a result of the merger with Cypress and the change of control provisions in the capital lease agreements, on October 10, 2012 we became in default on five of these leases. One lessor has agreed to waive the default if we pay our accelerated buy out and rent totaling approximately $300,000. We are currently negotiating with one other lessor who holds four capital leases.

In April 2004, we entered into a patent interference settlement agreement with National Semiconductor Corporation. The Company is required to pay National Semiconductor Corporation $250,000 annually through 2013. As of September 30, 2012, the present value of this promissory note was $489,000. We discounted the note at 5.75%. The face value of this note as of September 30, 2012 was $500,000.

On December 15, 2005, the Company, through its subsidiary, Ramtron LLC, for which Ramtron International Corporation serves as sole member and sole manager, closed on its mortgage loan facility with American National Insurance Company. Ramtron LLC entered into a promissory note evidencing the loan with the principal amount of $4,200,000, with a maturity date of January 1, 2016, bearing interest at 6.17%. We are obligated to make monthly principal and interest payments of $30,500 until January 2016, and a balloon payment of $2,757,000 in January 2016. Ramtron LLC also entered into an agreement for the benefit of American National Insurance Company securing our real estate as collateral for the mortgage loan facility.

Payments of our outstanding promissory notes and leases are as follows as of September 30, 2012:

 

(in thousands)      2012          2013          2014          2015          2016          Total    

Term loan

   $ 278       $ 1,110       $ 556       $ 0       $ 0       $ 1,944   

National Semiconductor promissory note

     250         250         0         0         0         500   

Mortgage note

     41         168         179         190         2,743         3,321   

Capital leases

     473         1,467         1,388         0         0         3,328   

Less amount representing interest on the capital leases and promissory note

                    (341
                 

 

 

 

Total debt

                  $ 8,752   
                 

 

 

 

 

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The carrying amounts and estimated fair values of our long-term debt, which are our only material financial instruments, are as follows:

 

     September 30, 2012      December 31, 2011  
(in thousands)    Carrying
Amount
     Estimated
Fair Value
     Carrying
Amount
     Estimated
Fair Value
 

Term loan

   $ 1,944       $ 1,942       $ 3,750       $ 3,758   

National Semiconductor promissory note

     493         489         478         473   

Capital leases

     2,994         3,094         4,246         4,271   

Mortgage note

     3,321         3,238         3,439         3,389   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 8,752       $ 8,763       $ 11,913       $ 11,891   
  

 

 

    

 

 

    

 

 

    

 

 

 

The above fair values were estimated based on discounted future cash flows. Differences from carrying amounts are attributable to changes in the weighted average interest rate used, subsequent to when the transactions occurred.

NOTE 7. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company has commitments under non-cancelable operating leases expiring through 2014 for various equipment, software, and facilities. Minimum future annual lease payments for leases that have initial or remaining non-cancelable terms in excess of one year as of September 30, 2012, were as follows:

 

Years Ending December 31:    Operating
Leases

(in  thousands)
 

2012 (October to December)

   $ 63   

2013

     189   

2014

     39   
  

 

 

 

Total

   $ 291   
  

 

 

 

Total expense on all operating leases was $611,000 and $528,000 for the three months ending September 30, 2012 and 2011, respectively, and $1.7 and $1.6 million for the nine months ending September 30, 2012 and 2011, respectively.

Manufacturing Alliances

In 2007, the Company and Texas Instruments (“TI”) entered into a commercial manufacturing agreement for F-RAM memory products, which was amended in 2011 and 2012. Under that agreement, the Company provides certain design, testing and other activities associated with product development, and TI provides certain foundry and related services. As amended, the agreement provides for automatic renewals unless it is terminated for cause or notice of termination without cause is given prior to the end of any renewal period. If notice of termination without cause is given, the agreement terminates three years thereafter and the Company may place last orders and take delivery of product during the following year. The agreement contains various obligations of the parties, including obligations for us regarding minimum orders and negotiated pricing of products we purchase.

On July 20, 2012, we executed a manufacturing and license partnering agreement with ROHM Co., Ltd. (“ROHM”), which provides for ROHM to manufacture F-RAM semiconductor product wafers for us on ROHM’s established manufacturing line, as well as for our distribution of certain products manufactured by ROHM. Under the terms of the agreement, the Company and ROHM also cross-licensed our F-RAM and certain related intellectual property and technology. There are currently no material purchase commitments or contingencies in connection with this agreement.

 

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Purchase Commitments

At September 30, 2012, the Company had certain commitments which were not included on the consolidated balance sheet at that date. These include outstanding capital purchase commitments of approximately $75,000 and wafer purchase commitments of approximately $2.2 million under current purchase orders, and $4.9 million related to minimum monthly purchase commitments under an existing supplier contract, through September 30, 2015. The Company also has approximately $1.8 million of additional investment banking and legal fees associated with the Cypress Semiconductor Corporation merger (the “Merger”) that are due at the time of the closing of the merger, which is expected to take place during the fourth quarter of 2012. See “Note 12” Subsequent Events.

Contingencies

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. We cannot be certain that third parties will not make a claim of infringement against us or against our semiconductor company licensees in connection with their use of our technology. Any claims, even those without merit, could be time consuming to defend, result in costly litigation and diversion of technical and management personnel, or require us to enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us or one of our semiconductor manufacturing licensees in connection with use of our technology could materially and adversely impact the Company’s results of operations.

In June 2009, the Company received a summons by the trustee in the bankruptcy of Finmek S.p.A. and its affiliates (Finmek) to appear before the Padua, Italy court overseeing the bankruptcy. The claims of the trustee in bankruptcy are that payments totaling approximately $2.8 million made to the Company for products shipped to Finmek prior to its bankruptcy filing in May 2004 are recoverable based on an alleged awareness of the Finmek affiliates’ insolvency at the time the payments were made. After the first hearing held in 2010 and the second hearing in 2011, in 2013 all parties will submit their final motions. We intend to vigorously contest the trustee’s claims. We are unable to estimate a range of possible liability, if any, that we may incur as result of the trustee’s claims and have not recorded any expense or liability in the consolidated financial statements as of September 30, 2012.

On October 15, 2012, Paul Dent (“Plaintiff Dent”) filed a complaint in the Court of Chancery in the State of Delaware, captioned Dent v. Ramtron International Corporation, et al., Docket No. 7950-VCP (the “Delaware Action”). Plaintiff purports to bring this action as a class action on behalf of himself and other similarly situated Ramtron stockholders. Plaintiff Dent alleges that the Individual Defendants breached their fiduciary duties in connection with the Merger Agreement reached with Cypress in which Cypress would acquire all of the outstanding shares of the Company for $3.10 in cash, and the Board of Directors’ recommendation that Ramtron shareholders tender their shares in Cypress’ tender offer. Specifically, the complaint alleges that the Individual Defendants violated their fiduciary duties by failing to engage in a competitive process and failing to disclose fully all material information relating to the recommendation to stockholders to tender shares to Cypress. The complaint seeks, among other things, injunctive relief as follows: an order declaring the action to be properly maintainable as a class action, an order enjoining Defendants from consummating the Merger, an order rescinding, to the extent already implemented, the Merger or any of the terms thereof, or granting Plaintiffs and the Class rescissory damages, an order directing Defendants to account to Plaintiff and the class for all damages suffered as a result of the alleged wrongdoing, and an award of attorneys’ fees and costs. On October 22, 2012, Plaintiff Dent moved for Expedited Proceedings in the Delaware Action. Also on November 5, 2012, Plaintiff Dent moved for a Preliminary Injunction in the Delaware Action. A hearing on plaintiff Dent’s motion for Preliminary Injunction has been set for November 19, 2012. The Company believes the lawsuit is without merit and intends to defend it vigorously.

In October 2012, Allan P. Weber (“Plaintiff Weber”), a purported Ramtron stockholder, filed a putative class action complaint against the Company, certain of its officers and directors (the “Individual Defendants” or, collectively with the Company, the “Defendants”), and Cypress and its wholly-owned subsidiary Rain Acquisition Corporation, in the District Court for El Paso County, Colorado, captioned Weber v. Balzer, et al., Docket No. 2012cv4782. Plaintiff Weber alleges that the Individual Defendants breached their fiduciary duties in connection with the Merger

 

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Agreement reached with Cypress in which Cypress would acquire all of the outstanding shares of the Company for $3.10 in cash, and the Board’s recommendation that Ramtron shareholders tender their shares in Cypress’ tender offer. Specifically, the complaint alleges that the Individual Defendants violated their fiduciary duties by failing to take steps to maximize the value of Ramtron to its public stockholders and took steps to avoid competitive bidding, failed to properly value Ramtron, and ignored or did not protect against conflicts of interest. The complaint seeks, among other things, relief as follows: an order declaring the action to be a class action and certifying Plaintiff Weber as the class representative and his counsel as class counsel, an order enjoining preliminarily and permanently the Merger, an order rescinding the Merger or awarding Plaintiff and the class rescissory damages in the event the Merger is consummated prior to entry of the court’s final judgment, an order directing Defendants to account to Plaintiff and the class for all damages suffered and profits and any special benefits obtained by Defendants as a result of the alleged wrongdoing, and an award of attorneys’ fees and costs. The Company believes the lawsuit is without merit and intends to defend it vigorously.

The Company is involved in other legal matters in the ordinary course of business. Although the outcomes of any such legal actions cannot be predicted, management believes that there are no pending legal proceedings against or involving the Company for which the outcome would likely to have a material adverse effect upon the Company’s financial position or results of operations.

NOTE 8. STOCK-BASED COMPENSATION

Stock-based Compensation Plans

On June 5, 2012, our stockholders approved the 2012 Incentive Award Plan (the “2012 Plan”), which reserves a total of 3,879,864 shares of our common stock for issuance under stock option or restricted stock grants. Of these reserved shares, 379,864 remained available for issuance under our previous 2005 Incentive Award Plan (the “2005 Plan”) at June 5, 2012. In accordance with the terms of the 2012 Plan, these shares were carried forward to and included in the reserve of shares available for issuance pursuant to the 2012 Plan. From January 1, 2012 through June 5, 2012, stock option and restricted stock grants were made under the 2005 Plan. As of June 5, 2012, the 2005 Plan and the previous and expired 1995 Stock Option Plan, as amended, are only relevant to grants outstanding under these plans or forfeitures that increase the available shares under the 2012 Plan.

The exercise price of all non-qualified stock options must be no less than 100% of the Fair Market Value on the effective date of the grant under the 2012 Plan, and the maximum term of each grant is seven years. The 2012 Plan permits the issuance of incentive stock options, the issuance of restricted stock, and other types of awards. The exercise of stock options and issuance of restricted stock and restricted stock units is satisfied by issuing authorized unissued common stock or treasury stock. As of September 30, 2012, we had not granted any incentive stock options under either the 2012 Plan or the 2005 Plan.

At September 30, 2012, the number of shares available for future grant under the 2012 Plan was 3,877,864.

Total stock-based compensation recognized in our consolidated statement of income was as follows:

 

    Three months ended     Nine months ended  
(in thousands)   September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

Income Statement Classifications:

       

Cost of Sales

  $ 66      $ 76      $ 218      $ 150   

Research and development

    96        161        320        368   

Sales and marketing

    76        53        208        217   

General and administrative

    107        268        400        611   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 345      $ 558      $ 1,146      $ 1,346   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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Stock Options

Stock options granted become exercisable in full or in installments pursuant to the terms of each agreement evidencing options granted. As of September 30, 2012, there was approximately $920,000 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested options granted to our employees and directors, which will be recognized over a weighted-average period of three years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

For grants issued during 2012, the fair value for stock options was estimated at the date of grant using the Black-Scholes option pricing model, which requires management to make certain assumptions. Expected volatility was estimated based on the historical volatility of our stock over the past 6 years, which approximates the calculated expected term of our options over the past 10 years, a period we considered a fair indicator of future exercises. We based the risk-free interest rate that we use in the option valuation model on U.S. Treasury Notes with remaining terms similar to the expected terms on the options. Forfeitures are estimated at the time of grant based upon historical experience. We do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model.

The assumptions used to value option grants for the quarter ended September 30, 2012 are as follows:

 

Risk free interest rate

     1.0

Expected dividend yield

     0

Expected term (in years)

     6.0 years   

Expected volatility

     68

The weighted average fair value per share of options granted during the nine months ended September 30, 2012 and 2011 were $1.28 and $1.60, respectively.

The following table summarizes stock option activity related to our plans for the nine months ended September 30, 2012:

 

     Number of
Stock Options
    Weighted Average
Exercise Price Per Share
 
     (in thousands)        

Outstanding at December 31, 2011

     3,962      $ 2.88   

Granted

     163      $ 2.17   

Forfeited

     —          —     

Exercised

     (106   $ 2.31   

Cancellations

     (88   $ 3.50   
  

 

 

   

Outstanding at September 30, 2012

     3,931      $ 2.85   
  

 

 

   

The intrinsic value of $1,943,000 for outstanding options is the difference between the market value as of September 28, 2012, and the exercise price of the options that are below the market value. The closing market value of the Company’s common stock as of September 28, 2012, was $3.08 as reported by the Nasdaq Global Market composite index.

Restricted Stock

Restricted stock grants generally vest one to four years from the date of grant. No exercise price or cash payment is required for the release of the restricted stock. The fair value of the Company’s common stock at the time of grant is amortized to expense on a straight-line basis over the vesting period. As of September 30, 2012, there was approximately $1.9 million of unrecognized compensation cost related to non-vested restricted shares, which will be recognized over a weighted-average period of 2.9 years.

 

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A summary of non-vested restricted shares during the nine months ended September 30, 2012, is as follows:

 

     Number of
Restricted
Shares
    Weighted Average
Grant Date Fair
Value Per Share
 
     (in thousands)        

Outstanding at December 31, 2011

     985      $ 2.53   

Granted

     628      $ 2.09   

Forfeited

     (381   $ 2.52   

Vested/Released

     (40   $ 2.56   
  

 

 

   

Outstanding at September 30, 2012

     1,192      $ 2.30   
  

 

 

   

Restricted Stock Units

Restricted stock units represent rights to receive shares of common stock at a future date. No exercise price or cash payment is required for receipt of restricted stock units or the shares issued in settlement of the award. The fair value of the Company’s common stock at the time of the grant is amortized to expense on a straight-line basis over the vesting period.

A summary of the Company’s restricted stock units, as of September 30, 2012, is as follows:

 

     Number of
Restricted
Units
    Weighted Average
Remaining
Contractual Term
 
     (in thousands)     (in years)  

Outstanding at December 31, 2011

     252     

Granted

     —       

Forfeited

     (21  

Vested/Released

     (68  
  

 

 

   

Outstanding at September 30, 2012

     163        .66   
  

 

 

   

As of September 30, 2012, approximately $280,000 remained in unrecognized compensation costs related to unvested outstanding restricted stock units, with a weighted-average recognition period of 1 year.

NOTE 9. INCOME TAXES

The Company estimates its annual effective tax rate at the end of each quarter. In making these estimates, the Company considers, among other things, annual pre-tax income, the application and interpretation of tax laws, treaties and judicial developments, in collaboration with its tax advisors.

The following table presents the provision for income taxes and the effective tax rates:

 

     Nine months ended  
(in thousands)    September 30,
2012
    September 30,
2011
 

Loss before income taxes

   $ (4,456   $ (2,987

(Provision for) benefit from income taxes

     (6,177     1,097   

Effective tax rate

     (138.6 %)      36.7

 

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The Company accounts for income taxes using the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards.

A valuation allowance is required to the extent it is more likely than not that a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the Company’s net deferred tax asset is dependent upon the Company’s ability to generate future taxable income in appropriate tax jurisdictions to obtain the benefit of net operating loss carry forwards. Management considers the projected future taxable income and tax planning strategies in making this assessment.

Due to the recent softness in the semiconductor industry, uncertainty surrounding the tender offer which caused certain of our distributors to take a cautious stance in regards to placing orders, and uncertainty surrounding future tax strategies, we have determined that it is more likely than not that our deferred tax asset will not be realized based upon available evidence. Therefore, we have established a full valuation allowance against this deferred tax asset, resulting in an increase to the tax provision of $5.6 million for the quarter ended September 30, 2012.

Any significant increase or reduction in estimated future taxable income may require the Company to record additional adjustments to the valuation allowance. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in such period and could have a significant impact on the period’s earnings.

At September 30, 2012 and December 31, 2011, our deferred tax asset and related valuation allowance were as follows:

 

(in thousands)    September 30,
2012
    December 31,
2011
 

Gross deferred tax assets

   $ 28,565      $ 30,384   

Less valuation allowance

     (28,565     (24,359
  

 

 

   

 

 

 

Net deferred tax assets

   $ —        $ 6,025   
  

 

 

   

 

 

 

NOTE 10. EARNINGS PER SHARE

Basic net income (loss) per share is computed by dividing reported net income (loss) available to common stockholders by weighted average shares outstanding. Diluted net income per share reflects the potential dilution assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.

The following table sets forth the calculation of net income (loss) per common share for the three and nine months ended September 30, 2012 and 2011:

 

    Three months ended     Nine months ended  
(in thousands, except per share amounts)   September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

Net income (loss)

  $ (11,147   $ 1,172      $ (10,633   $ (1,890
 

 

 

   

 

 

   

 

 

   

 

 

 

Common shares outstanding:

       

Historical common shares outstanding at beginning of period

    35,448        28,442        34,838        27,540   

Less: Non-vested restricted stock at beginning of period

    (1,293     (391     (985     (191

Weighted average common shares issued during period

    45        3,697        242        1,724   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares at end of period - basic

    34,200        31,748        34,095        29,073   
 

 

 

   

 

 

   

 

 

   

 

 

 

Effect of other dilutive securities:

       

Options

    —          115        —          —     

Restricted stock

    —          239        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares at end of period - diluted

    34,200        32,102        34,095        29,073   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

       

- basic and diluted

  $ (0.33   $ 0.04      $ (0.31   $ (0.07
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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As of September 30, 2012 and September 30, 2011, we had equity instruments or obligations that could create future dilution to the Company’s common stockholders and are not currently classified as outstanding common shares of the Company. The following table details the shares of common stock that are excluded from the calculation of earnings per share (prior to the application of the treasury stock method) due to their impact being anti-dilutive:

 

     Three months ended      Nine months ended  
(in thousands)    September 30,
2012
     September 30,
2011
     September 30,
2012
     September 30,
2011
 

Stock Options

     3,931         2,603         3,931         4,173   

Restricted stock/units

     1,355         581         1,355         1,256   

NOTE 11. SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

Our operations are conducted through one business segment. Our business develops, manufactures and sells ferroelectric nonvolatile random access memory products, integrated products, and licenses the technology related to such products.

We sell our products to direct customers and to electronic components distributors. Net sales by customer type, by geographic area based on product shipping destination, and to significant customers were as follows:

 

    Three months ended     Nine months ended  
    September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 
Percentage of net sales:        

Sales to distributors

    70     85     75     78

Sales to direct customers

    30     15     25     22
 

 

 

   

 

 

   

 

 

   

 

 

 
    100     100     100     100
 

 

 

   

 

 

   

 

 

   

 

 

 
Geographic area net sales:        

United States

    14     9     14     9

International

    86     91     86     91
 

 

 

   

 

 

   

 

 

   

 

 

 
    100     100     100     100
 

 

 

   

 

 

   

 

 

   

 

 

 
Significant distributors/customers:        

Tokyo Electron Device

    13     10     14     10

MSC Vertriebs GMBH

    5     8     5     11

 

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Except as presented above, no other direct customer or distributor accounted for greater than 10% of our net sales for the three or nine months ended September 30, 2012, or September 30, 2011.

Balances due from our significant distributors or direct customers at September 30, 2012 and December 31, 2011, as a percentage of total gross accounts receivable, were as follows:

 

     Percentage of Gross Accounts Receivable  
     September 30,
2012
    December 31,
2011
 

Tokyo Electron Device

     13     11

Action Technology

     7     23

No other direct customer or distributor accounted for more than 10% of our accounts receivable as of September 30, 2012 or December 31, 2011.

NOTE 12. SUBSEQUENT EVENTS

On September 19, 2012, we announced that the Company had entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cypress Semiconductor Corporation, a Delaware corporation (“Cypress”), and Rain Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Cypress (“Purchaser”), pursuant to which, among other things, Cypress caused Purchaser to amend its June 21, 2012 offer to purchase all of the outstanding shares of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”), including associated preferred stock purchase rights (the “Rights” and, together with the Company Common Stock, the “Shares”), for $3.10 per Share (the “Offer Price”), net to the seller in cash (as amended, the “Offer”).

On October 10, 2012, at the closing of the Offer, Purchaser accepted for payment 23,290,666 shares of common stock that had been validly tendered and not withdrawn pursuant to the offer and commenced a subsequent offering period for all remaining untendered shares of common stock. An additional 559,785 shares of common stock were tendered subject to guarantee delivery procedures. Also on October 10, 2012, immediately following the closing of the offer, all of the directors of Ramtron resigned from our board of directors, other than Theodore J. Coburn, William G. Howard, Jr. and William L. George. Immediately following the resignation of such directors, the remaining directors of Ramtron appointed T.J. Rodgers, Brad W. Buss, Dana C. Nazarian, Neil Weiss, Cathal Phelan and Thomas Surrette, each of whom was designated by Purchaser, to our board of directors.

On October 17, 2012, the subsequent offering period expired, and Purchaser acquired an additional 2,622,273 shares of common stock that were validly tendered during the subsequent offering period. Included in this amount were 478,150 shares of common stock originally tendered in the Offer pursuant to guaranteed delivery procedures. The subsequent merger of Purchaser into the Company pursuant to the Merger Agreement is expected to occur in the fourth quarter of 2012, and, if the merger is consummated, we will thereafter become a wholly-owned subsidiary of Cypress.

As a result of the purchase of Shares in the Offer, Cypress controls approximately 78% of our outstanding common stock as of the date of this report. Due to the change in control that has occurred as a result of the purchase of the Shares by Purchaser in the Offer, the Company’s management is currently assessing additional cash requirements and other issues relating to assignment of leases, our mortgage, change of control contracts with officers and management of the company, severance payments, and outstanding equity awards.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS; FACTORS AFFECTING FUTURE RESULTS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto and other financial data included elsewhere herein. Certain statements under this caption constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, and, as such, are based on current expectations and are subject to certain risks and uncertainties. You should not place undue reliance on these forward-looking statements for many reasons including those risks discussed under Part II- Item 1A “Risk Factors,” and elsewhere in our Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K for the year ended December 31, 2011. Forward-looking statements may be identified by the use of forward-looking words or phrases such as “will,” “may,” “believe,” “expect,” “intend,” “anticipate,” “could,” “should,” “plan,” “estimate,” “targeting,” and “potential,” or other similar words. The information included in this Form 10-Q is provided as of the filing date with the Securities and Exchange Commission and future events or circumstances could differ significantly from the forward-looking statements included herein.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Significant Estimates. The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying notes. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we re-evaluate our judgments and estimates including those related to bad debts and sales returns and allowances, inventories, long-lived assets, intangible assets, income taxes, accrued expenses, stock compensation accruals, and other contingencies. We base our estimates and judgments on our historical experience, market trends, financial forecasts and projections and on other assumptions that we believe are reasonable under the circumstances, and apply them on a consistent basis. Any factual errors or errors in these estimates and judgments may have a material impact on our financial condition and operating results.

Recognition of Revenue. Revenue from product sales to direct customers and distributors is recognized upon shipment as we generally do not have any post-shipment obligations and allow limited rights of return to certain customers. In the event a situation occurs to create a post-shipment obligation, we would defer revenue recognition until the specific obligation was satisfied. We defer recognition of sales to distributors when we are unable to make a reasonable estimate of product returns, or due to insufficient historical product return information. The revenue recorded is dependent upon estimates of expected customer returns and sales discounts based upon both historical data and management estimates.

Revenue from licensing programs is recognized over the period we are required to provide services under the terms of the agreement. Revenue from royalties is recognized upon the notification to us of shipment of product from our technology license partners to direct customers.

Inventory Valuation/Scrap. We write-down our inventory, with a resulting increase in our scrap expense, for estimated obsolescence or lack of marketability for the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Our forecasts, including forecasts for future demand, are developed using a bottom-up approach with input from our field sales force and supply chain management teams. These forecasts, coupled with our backlog, are then compared to our inventory levels. Any excess is included in our inventory allowance reserve.

In recent periods, estimates of future demand were difficult to determine due to the supply constraints we experienced when our previous wafer foundry ceased the production of wafers for us. During the transition to another wafer foundry, we underestimated demand, as well as the amount of time it would take to establish the new foundry for production. This situation forced us to put customers on allocation. As a result of this allocation, some customers placed orders beyond their actual needs at the time. As we began to fill those orders, many customers rescheduled shipments to later dates, which caused our inventory levels to rise. We have since revised our policy and require customers to give a 60-day notice when rescheduling shipment dates, which is an industry standard.

Allowance for Doubtful Accounts and Returns. We seek to maintain a stringent credit approval process although our management must make significant judgments in assessing our customers’ ability to pay at the time of shipment.

 

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Despite this assessment, from time to time, customers are unable to meet their payment obligations. If we are aware of a customer’s inability to meet its financial obligations to us, we record an allowance to reduce the receivable to the amount we believe we will be able to collect from the customer. For all other customers, we record an allowance based upon the amount of time the receivables are past due and collection attempts. If actual accounts receivable collections differ from these estimates, an adjustment to the allowance may be necessary with a resulting effect on operating expense. We continue to monitor our customers’ credit worthiness, and use judgment in establishing the estimated amounts of customer receivables that will ultimately not be collected.

An allowance for sales returns is established based on historical and current trends in product returns and customer rebates. Our distributors have a right to return products under certain conditions. We recognize revenue on shipments to distributors at the time of shipment, along with a reserve for estimated returns based on historical data and future estimates. Also, certain distributors are granted rebates if specific end customers purchase our products. We estimate these rebates at the time of sale and record a related allowance. At September 30, 2012 and December 31, 2011, the Company’s allowance for sales returns and bad debt expense was $2.8 million and $2.3 million, respectively.

Deferred Income Taxes. As part of the process of preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to estimate our income taxes on a consolidated basis. We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts recorded in the consolidated financial statements, and for operating loss and tax credit carryforwards. Realization of the recorded deferred tax assets depends upon the generation of sufficient taxable income in future years to obtain benefit from the reversal of net deductible temporary differences and from tax credit and operating loss carryforwards. A valuation allowance is provided to the extent that management deems it more likely than not that the net deferred tax assets will not be realized. The amount of deferred tax assets considered realizable is subject to adjustment up or down in future periods if estimates of future taxable income are changed. Future adjustments could materially affect our financial results and, among other effects, could cause us not to achieve our projected results.

In assessing the potential to realize our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will not realize the benefits of these deductible differences. Therefore, we have fully reserved our deferred tax asset.

Intangible Assets. Intangible assets are recorded at cost and are amortized on a straight-line basis over their estimated useful lives, ranging from 15 to 17 years, and reviewed for impairment when events or changes in circumstances indicate that the intangible asset may be impaired. The amounts capitalized for patents are primarily the cost of securing the patent. Expenditures incurred to renew or extend the life of intangible assets are expensed.

Long-lived Assets. We review the carrying values of long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Under current standards, the assets must be carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. However, if projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived asset. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance, and may differ from actual cash flows.

Warranty Costs. We make periodic provisions for expected warranty costs. Historically, warranty costs have been insignificant.

 

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Share-based Payment Assumptions. We estimate volatility, forfeitures, and expected term of our options granted based upon historical data. All of these variables have an effect on the estimated fair value of our share-based awards.

RESULTS OF OPERATIONS

Highlights:

Merger with Cypress Semiconductor Corporation

On September 19, 2012, we announced that the Company had entered into Merger Agreement with Cypress Semiconductor Corporation and Rain Acquisition Corp, pursuant to which, among other things, Cypress caused Purchaser to amend its June 21, 2012 offer to purchase all of the outstanding shares of common stock, par value $0.01 per share, of the Company, including associated preferred stock purchase rights, for $3.10 per Share, net to the seller in cash.

On October 10, 2012, at the closing of the Offer, Purchaser accepted for payment 23,290,666 shares of common stock that had been validly tendered and not withdrawn pursuant to the offer and commenced a subsequent offering period for all remaining untendered shares of common stock. An additional 559,785 shares of common stock were tendered subject to guarantee delivery procedures. Also on October 10, 2012, immediately following the closing of the offer, all of the directors of Ramtron resigned from our board of directors, other than Theodore J. Coburn, William G. Howard, Jr. and William L. George. Immediately following the resignation of such directors, the remaining directors of Ramtron appointed T.J. Rodgers, Brad W. Buss, Dana C. Nazarian, Neil Weiss, Cathal Phelan and Thomas Surrette, each of whom was designated by Purchaser, to our board of directors.

On October 17, 2012, the subsequent offering period expired, and Purchaser acquired an additional 2,622,273 shares of common stock that were validly tendered during the subsequent offering period. Included in this amount were 478,150 shares of common stock originally tendered in the Offer pursuant to guaranteed delivery procedures. The subsequent merger of Purchaser into the Company pursuant to the Merger Agreement is expected to occur in the fourth quarter of 2012, and, if the merger is consummated, we will thereafter become a wholly-owned subsidiary of Cypress.

Due to the recent softness in the semiconductor industry, uncertainty surrounding the tender offer which caused certain of our distributors to take a cautious stance in regards to placing orders, and uncertainty surrounding future tax strategies, we have determined that it is more likely than not that our deferred tax asset will not be realized based upon available evidence. Therefore, we have established a full valuation allowance against this deferred tax asset, resulting in an increase to the tax provision of $5.6 million for the quarter ended September 30, 2012.

PERIOD COMPARISONS FOR THE

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

Revenue

 

(in thousands, except average selling price)    Three
Months
Ended
September  30,
2012
           Three
Months
Ended
September  30,
2011
     Nine
Months
Ended
September  30,
2012
           Nine
Months
Ended
September  30,
2011
 

Product sales

   $ 11,963         $ 21,736       $ 41,127         $ 48,712   

% change compared to prior period

        (45 %)            (16 %)   

Units shipped

     12,034           18,872         35,333           43,986   

% change compared to prior period

        (36 %)            (20 %)   

Average selling price

   $ 0.99         $ 1.15       $ 1.16         $ 1.11   

% change compared to prior period

        (14 %)            5  

Other revenue

     —           $ 227         —           $ 655   

% change compared to prior period

        %              %     

Total revenue

   $ 11,963         $ 21,963       $ 41,127         $ 49,367   

% change compared to prior period

        (46 %)            (17 %)   

 

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Three Months:

For the three months ended September 30, 2012, product revenue decreased $9.7 million, or 45%, compared to the same period last year. The decrease in revenue resulted from shipping 6.8 million fewer units than the same quarter last year, as demand in the semiconductor industry softened and the worldwide economy declined. In addition, increased revenue for the prior year quarter was primarily driven by the fulfillment of delinquent backlog created by supply constraints we experienced during 2011. Compared to the year-ago quarter, our average selling price decreased 14%, from $1.15 to $.99 per unit, due to a relative increase in low-density product sales, which have a lower average selling price.

We reported no other revenue for the three months ended September 30, 2012, compared to $227,000 for license and development fees during the same quarter last year in connection with a license fee arrangement that expired in 2011.

Nine Months:

For the nine months ended September 30, 2012, product revenue decreased $7.6 million, or 16%, compared to the same period last year. Total units shipped decreased 20% and our average selling price increased 5%, from $1.11 to $1.16 per unit, compared to the same period last year. The increase in average selling price for the nine months ended September 30, 2012 was due to an increase in high-density product sales.

We reported no other revenue for the nine months ended September 30, 2012, compared to $665,000 for license and development fees during the same period last year in connection with a license fee arrangement that expired in 2011.

Cost of Product Sales

 

     Three months ended     Nine months ended  
(in thousands)    September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

Cost of product sales

   $ 8,154      $ 10,729      $ 22,152      $ 25,044   

Gross margin percentage

     32     51     46     49

Three Months:

Cost of product sales was $8.2 million for the three months ended September 30, 2012, which was a decrease of $2.6 million from the same quarter last year. This decrease was due to a 36% decrease in units shipped. Product gross margin for the three months ended September 30, 2012 decreased by 19%, to 32%, compared with 51% for the same period last year. This decrease was due primarily to under applied fixed manufacturing overhead, combined with an increase in scrap provision.

Nine Months:

Cost of product sales for the nine months ended September 30, 2012 was $22.2 million, which was a decrease of $2.9 million from the same period in 2011. This decrease was due to a 20% decrease in units shipped. Product gross margin for the nine months ended September 30, 2012 decreased by 3%, to 46%, compared with 49% for the same period last year. This decrease was due primarily to under applied fixed manufacturing overhead.

Research and Development Expense

 

      Three months ended     Nine months ended  
(in thousands)    September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

Research and development expense

   $ 3,485      $ 4,988      $ 10,071      $ 13,756   

Percent of total revenue

     29     23     25     28

 

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Three Months:

Research and development expense for the three months ended September 30, 2012 was $3.5 million, which was a $1.5 million decrease from the same period in 2011. This decrease was due primarily to purchasing fewer engineering wafers and target materials as well as lower consulting costs. These cost reductions were partially offset by increased depreciation expense.

Nine Months:

Research and development expense for the nine months ended September 30, 2012 was $10.1 million, which was a $3.7 million decrease from the same period in 2011. This decrease was due primarily to a reduction in engineering wafer costs and lower contract maintenance costs at our wafer foundry in Burlington, Vermont. These cost reductions were partially offset by increased depreciation expense.

Sales and Marketing Expense

 

     Three months ended     Nine months ended  
(in thousands)    September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

Sales and marketing expense

   $ 2,527      $ 2,648      $ 6,949      $ 7,313   

Percent of total revenue

     21     12     17     15

Three Months

Sales and marketing expense was $2.5 million for the three months ended September 30, 2012, which was a decrease of $121,000 from the same period in 2011. This decrease was due primarily to a reduction in sales commissions and travel expenses.

Nine Months

Sales and marketing expense was $6.9 million for the nine months ended September 30, 2012, which was a $364,000 decrease from the same period in 2011. This decrease was due primarily to a reduction in sales commissions and variable compensation. These reductions were partially offset by higher compensation costs due to head count increases in our sales and marketing departments.

General and Administrative Expense

 

     Three months ended     Nine months ended  
(in thousands)    September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

General and administrative expense

   $ 3,075      $ 1,786      $ 5,758      $ 5,666   

Percent of total revenue

     26     8     14     11

Three Months

General and administrative expense in the three months ended September 30, 2012 was $3.1 million, which was a $1.3 million increase from the same period in 2011. This increase was due primarily to Merger-related fees of $1.9 million, partially offset by decreased variable compensation expenses of $450,000.

Nine Months

General and administrative expense for the nine months ended September 30, 2012 was $5.8 million, which was a $92,000 increase from the same period in 2011. Merger-related expenses of $2.1 million contributed to this increase, which were partially offset by decreases in salary and variable compensation expenses of $1.6 million and travel expenses of $200,000.

 

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Other Non-Operating Income (Expenses)

 

     Three months ended     Nine months ended  
(in thousands)    September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 

Interest expense

   $ (202   $ (192   $ (638   $ (612

Other income (expense)

   $ (2   $ 81      $ (15   $ 37   

Income tax (provision) benefit

   $ (5,665   $ (529   $ (6,177   $ 1,097   

Three Months

Interest expense was $202,000 for the three months ended September 30, 2012, which was a slight increase from the three months ended September 30, 2011.

Other expense was $2,000 for the three months ended September 30, 2012, compared with $81,000 in other income for the same period in 2011. During 2011 the company recorded $80,000 in foreign exchange gains.

For the three months ended September 30, 2012, we recorded a $5.7 million income tax provision in connection with the write-off of our deferred tax asset. During the three months ended September 30, 2011, the Company recorded a $529,000 income tax provision.

Nine Months

Interest expense was $638,000 during the nine months ended September 30, 2012, which was a $26,000 increase from the nine months ended September 30, 2011.

Other expense was $15,000 for the nine months ended September 30, 2012, compared to $37,000 in other income for the nine months ending September 30, 2011. The income in 2011 was due primarily to foreign exchange gains.

During the nine months ended September 30, 2012, we recorded an income tax provision of $6.2 million, primarily due to the write-off of our deferred tax asset during the third quarter of 2012. During the nine months ended September 30, 2011, we recorded an income tax benefit of $1.1 million.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Summary

Our cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011, are summarized as follows:

 

(in thousands)    2012     2011  

Cash provided by (used in):

    

Operating activities

   $ 1,116      $ (5,160

Investing activities

     (849     (5,463

Financing activities

     (3,711     8,896   

Effect of exchange rate changes on cash

     (37     (45
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

   $ (3,481   $ (1,772
  

 

 

   

 

 

 

 

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Cash Flows from Operating Activities

The net amount of cash provided by operating activities during the nine months ended September 30, 2012 was $1.1 million, which was due primarily to our net loss adjusted by non-cash items resulting in a cash increase of $800,000. Working capital provided a net increase in cash of $300,000 due primarily to a decrease in accounts receivable and inventory for the year.

Cash used for operating activities during the nine months ended September 30, 2011 was $5.2 million. Cash generated from operations, after adjusting for non-cash items, was $700,000. Cash was used to fund a $13.6 million increase in inventory and accounts receivable, which was partially offset by a $7.3 million increase in accounts payable and accrued liabilities.

Cash Flows from Investing Activities

The net amount of cash used in investing activities during the nine months ended September 30, 2012 was $849,000, which was primarily related to photomask capital purchases.

The net amount of cash used in investing activities during the nine months ended September 30, 2011 was $5.5 million, which was primarily related to capital purchases related to photomasks and test equipment to expand our back-end test and assembly capacity.

Cash Flows from Financing Activities

The net amount of cash used in financing activities during the nine months ended September 30, 2012 of $3.7 million was primarily for principal payments on debt.

The net amount generated by financing activities during the nine months ended September 30, 2011 of $8.9 million was due to the receipt of proceeds from an $11.5 million issue of common stock, offset by $2.6 million of principal payments on debt.

Liquidity

The Company had $1.3 million in cash and cash equivalents at September 30, 2012. We also had approximately $3.2 million available to us under our $7.5 million secured line of credit facility with SVB. As of September 30, 2012, we had no borrowings outstanding under this line of credit facility, which currently is scheduled to expire on February 28, 2013.

Our future liquidity depends primarily on revenue, gross margins, control of operating expenses, management of our working capital and capital expenditures, and our ability to borrow under our secured line of credit facility or obtain additional financing.

As of September 30, 2012, we have recorded liabilities associated with transaction fees for the Merger in excess of $1.7 million, and estimate an additional $1.8 million to be incurred in the quarter ending December 31, 2012. As a result of the Merger, we could also incur accelerated payments on our leases and other debt due to change of control provisions in the associated agreements. We may also incur additional cash requirements relating to the assignment of leases, our mortgage, change in control agreements with officers and management of the company, severance payments to employees, and payments relating to outstanding equity awards. For example, estimated golden parachute payments to the officers of the Company in connection with their change in control agreements could be in excess of $3.5 million. The above payments, combined with an expected reduction in revenue associated with the softening in the semiconductor industry and overall economy, as well as reduced orders due to the uncertainty associated with the Merger, could severely impact the funding of our operations. However, the expected closing of the Merger with Cypress during the quarter ending December 31, 2012 will alleviate this risk.

Debt Instruments

On February 29, 2012, we executed an Amended and Restated Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank (“SVB”). The Loan Agreement provides for a maximum of $7.5 million working capital line of credit and a $6.0 million term loan with a fixed interest rate of 6.5% per annum. The borrowing base under

 

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the line of credit includes eligible accounts receivable and eligible raw materials, work in process and finished goods inventory, capped at $1 million for domestic inventory and $3 million for export inventory, further reduced by 50% of the outstanding balance under our term loan. The Loan Agreement provides for interest on the line of credit at a floating rate equal to the SVB prime lending rate plus 1.75% to 2.25% per annum depending upon cash balances maintained at SVB and borrowing base availability, with an expiration date of February 28, 2013. The Loan Agreement also required an additional principal payment against the term loan of $875,000 before March 31, 2012, which reduced our remaining 27 monthly principal payments to approximately $93,000 each, plus accrued interest. Security for the Loan Agreement includes all of the Company’s assets except for real estate and leased equipment. The Company draws upon the loan facility for working capital purposes and to fund capital requirements as needed.

As of September 30, 2012 we did not have a balance outstanding on the secured line of credit facility and a net availability $3.2 million.

We are required to comply with certain covenants under the Loan Agreement, calculated on a monthly basis. These covenants include requirements to maintain a minimum EBITDA level, a minimum liquidity ratio and restrictions on certain business actions, such as payment of cash dividends, without the consent of SVB. As of September 30, 2012, we were in compliance with all such covenants except for our minimum EBITDA covenant requirement for the month ended September 30, 2012. We have obtained a waiver from SVB on this covenant for the months ending September 30, 2012 and October 31, 2012. We have also received consent for our change in control and Merger with Cypress Semiconductor Corporation.

We currently have six capital leases outstanding, totaling approximately $3.0 million, with terms between two and three years and effective interest rates between 9% and 10%. These leases have standby letters of credit in favor of three of the lessors for approximately $800,000. As a result of the Merger with Cypress and the change of control provisions in the capital lease agreements, on October 10, 2012 we became in default on five of these leases. One lessor has agreed to waive the default if we pay our accelerated buy out and rent totaling approximately $300,000. We are currently negotiating with one other lessor who holds four capital leases.

In April 2004, we entered into a patent interference settlement agreement with National Semiconductor Corporation. We are required to pay National Semiconductor Corporation $250,000 annually through 2013. We expect to make the 2012 payment, which was due in April, during the second half of 2012. As of September 30, 2012, the present value of this promissory note is $489,000. We recorded this note at the discounted present value assuming an annualized discount rate of 5.75%. The face value of this note as of September 30, 2012 was $500,000.

On December 15, 2005, Ramtron LLC, our wholly-owned subsidiary, closed on a mortgage loan facility with American National Insurance Company. Ramtron LLC entered into a promissory note evidencing the loan with the principal amount of $4.2 million, with a maturity date of January 1, 2016, bearing interest at 6.17%. We are obligated to make monthly principal and interest payments of $30,500 until January 2016 and a balloon payment of $2,757,000 in January 2016. Ramtron LLC also entered into an agreement for the benefit of American National Insurance Company securing our real estate as collateral for the mortgage loan facility.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. We do not use derivative financial instruments in our investment portfolio. Our investment portfolio is generally comprised of U.S. money market accounts and cash deposits. Our policy is to invest in instruments that meet high credit quality standards and have maturities of less than one and one half years with an overall average maturity of less than 90 days. These securities are subject to interest rate risk and could decline in value if there is a major change in interest rates. Due to the short duration of the securities in which we have balances outstanding, and the conservative nature of our debt instruments, a 10% move in interest rates over a one-year period would have an immaterial effect on our financial position, results of operations and cash flows.

The interest rate on our current secured line of credit facility is set as a floating rate equal to the SVB prime lending rate plus 1.75% to 2.25% per year. If we had outstanding borrowings of $7.5 million under our existing secured line of credit facility, the current credit limit, a 10% move in the interest rate over a one-year period would have an approximate $30,000 effect on our results of operations and cash flow.

Interest payable on the Company’s mortgage note is fixed at 6.17% over the term of the loan. In addition, our capital leases are based upon fixed rates negotiated at the inception of the lease.

Foreign Currency Exchange Rate Risk. The majority of our sales, research and development and marketing expenses are now transacted in U.S. dollars.

 

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures and Related CEO and CFO Certifications

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In connection with the preparation of this Quarterly Report on Form 10-Q, as of September 30, 2012, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective.

Changes in Internal Control and Financial Reporting

There were no changes in the Company’s internal control over financial reporting during its most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In June 2009, the Company received a summons by the trustee in the bankruptcy of Finmek S.p.A. and its affiliates (Finmek) to appear before the Padua, Italy court overseeing the bankruptcy. The claims of the trustee in bankruptcy are that payments totaling approximately $2.8 million made to the Company for products shipped to Finmek prior to its bankruptcy filing in May 2004 are recoverable based on an alleged awareness of the Finmek affiliates’ insolvency at the time the payments were made. After the first hearing held in 2010 and the second hearing in 2011, in 2013 all parties will submit their final motions. We intend to vigorously contest the trustee’s claims. We are unable to estimate a range of possible liability, if any, that we may incur as result of the trustee’s claims and have not recorded any expense or liability in the consolidated financial statements as of September 30, 2012.

On October 15, 2012, Paul Dent (“Plaintiff Dent”) filed a complaint in the Court of Chancery in the State of Delaware, captioned Dent v. Ramtron International Corporation, et al., Docket No. 7950-VCP (the “Delaware Action”). Plaintiff purports to bring this action as a class action on behalf of himself and other similarly situated Ramtron stockholders. Plaintiff Dent alleges that the Individual Defendants breached their fiduciary duties in connection with the Merger Agreement reached with Cypress Semiconductor Corporation (“Cypress”) in which Cypress would acquire all of the outstanding shares of the Company for $3.10 in cash, and the Board’s recommendation that Ramtron shareholders tender their shares in Cypress’ tender offer. Specifically, the complaint alleges that the Individual Defendants violated their fiduciary duties by failing to engage in a competitive process and failing to disclose fully all material information relating to the recommendation to stockholders to tender shares to Cypress. The complaint seeks, among other things, injunctive relief as follows: an order declaring the action to be properly maintainable as a class action, an order enjoining Defendants from consummating the Merger, an order rescinding, to the extent already implemented, the Merger or any of the terms thereof, or granting Plaintiffs and the Class rescissory damages, an order directing Defendants to account to Plaintiff and the class for all damages suffered as a result of the alleged wrongdoing, and an award of attorneys’ fees and costs. On October 22, 2012, Plaintiff Dent moved for Expedited Proceedings in the Delaware Action. Also on November 5, 2012, Plaintiff Dent moved for a Preliminary Injunction in the Delaware Action. A hearing on plaintiff Dent’s motion for Preliminary Injunction has been set for November 19, 2012. The Company believes the lawsuit is without merit and intends to defend it vigorously.

In October 2012, Allan P. Weber (“Plaintiff Weber”), a purported Ramtron stockholder, filed a putative class action complaint against the Company, certain of its officers and directors (the “Individual Defendants” or, collectively

 

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with the Company, the “Defendants”), and Cypress and its wholly-owned subsidiary Rain Acquisition Corporation, in the District Court for El Paso County, Colorado, captioned Weber v. Balzer, et al., Docket No. 2012cv4782. Plaintiff Weber alleges that the Individual Defendants breached their fiduciary duties in connection with the Merger Agreement reached with Cypress in which Cypress would acquire all of the outstanding shares of the Company for $3.10 in cash, and the Board’s recommendation that Ramtron shareholders tender their shares in Cypress’ tender offer. Specifically, the complaint alleges that the Individual Defendants violated their fiduciary duties by failing to take steps to maximize the value of Ramtron to its public stockholders and took steps to avoid competitive bidding, failed to properly value Ramtron, and ignored or did not protect against conflicts of interest. The complaint seeks, among other things, relief as follows: an order declaring the action to be a class action and certifying Plaintiff Weber as the class representative and his counsel as class counsel, an order enjoining preliminarily and permanently the Merger, an order rescinding the Merger or awarding Plaintiff and the class rescissory damages in the event the Merger is consummated prior to entry of the court’s final judgment, an order directing Defendants to account to Plaintiff and the class for all damages suffered and profits and any special benefits obtained by Defendants as a result of the alleged wrongdoing, and an award of attorneys’ fees and costs. The Company believes the lawsuit is without merit and intends to defend it vigorously.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, carefully consider the factors discussed in Part I, Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially adversely affect our business, financial condition and/or operating results. In addition to the risks and uncertainties described in our Annual Report, and within this and other subsequent Quarterly Reports, we believe our business and results of operations are subject to the following risks:

The time required of our management and employees, the general disruption to our operations, and additional cost due to the proposed Merger transaction with Cypress could adversely affect our business and results of operations.

While the Merger is pending, a substantial amount of the attention of management and employees is being directed toward the completion of the Merger and transition activities and, therefore, may be diverted from day-to-day operations which could adversely affect our relationship with customers, suppliers, and other strategic partners and negatively impact our revenues and earnings. In addition, current and prospective employees may be uncertain about their future roles following the completion of the Merger, which could impair our ability to attract prospective employees and retain and motivate current employees. Further, significant additional costs have been and may continue to be incurred for professional fees, including legal fees for related litigation that has been or may be filed, and other investment banking and legal fees related to the Merger transaction. The impact of these factors could adversely affect our business and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Purchases of Equity Securities:

 

Period    Total
Number of
Shares
Purchased
     Average
Price Paid
per Share
     Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
     Maximum
Number of
Shares That May
Yet Be
Purchased Under
the Plans or
Programs
 

July 1 – July 31 2012 (1)

     16,408       $ 2.83         —           —     

Aug 1 – Aug 31 2012 (1)

     4,956       $ 2.63         —           —     

Sept 1 – Sept 30 2012(1)

     1,722       $ 2.88         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     23,086       $ 2.77         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Represents shares withheld from vested restricted stock awards to satisfy the minimum withholding requirement for federal and state taxes.

 

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits:

 

  31.1

   Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

  31.2

   Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

  32.1

   Certification Pursuant to 18 U.S.C. Section 1350 of Principal Executive Officer

  32.2

   Certification Pursuant to 18 U.S.C. Section 1350 of Principal Financial Officer

101.INS

   XBRL Instance document *

101.SCH

   XBRL Taxonomy extension schema *

101.CAL

   XBRL Taxonomy extension calculation linkbase *

101.DEF

   XBRL Taxonomy extension definition linkbase *

100.LAB

   XBRL Taxonomy extension label linkbase *

101.PRE

   XBRL Taxonomy extension presentation linkbase *

Notes to Exhibits List:

 

 

* Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income (Loss) for the quarters and nine months ended September 30, 2012 and 2011, (ii) Condensed Consolidated Balance Sheet at September 30, 2012 and December 31, 2011, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 and (iv) Notes to Condensed Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

RAMTRON INTERNATIONAL CORPORATION

(Registrant)

/s/ Gery E. Richards

Gery E. Richards
Chief Financial Officer
(Principal Accounting Officer and
Duly Authorized Officer of the Registrant)
Date: November 9, 2012

 

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