3Ware 1999 Annual Report Download

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ANNUAL REPORT FISCAL 1999
T
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ILICON
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T
ODAY
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LOBAL
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OMMUNICATIONS
APPLIED MICRO CIRCUITS CORPORATION

Table of contents

  • Page 1
    APPLI ED M I CRO CI RCUI TS CORPORATI ON T H E S I L I C O N I N N O V A T I O N B E H I N D T O D A Y 'S G L O B A L C O M M U N I C A T I O N S A N N U A L R E P O R T F I S C A L 1 9 9 9

  • Page 2
    ... and development, availability of demand for integrated circuits, general overall economic conditions and the risk factors that are detailed in the Company's Annual Report on Form 10 -K for the year ended March 31, 1999 and the Company's other filings with the Securities and Exchange Commission.

  • Page 3
    ... impacted by the merger-related costs of $2.3 million, net of tax, or $0.08 per diluted share. ** T he operating margin for the fourth quarter of Fiscal 1999 excluding the merger-related costs of $2.3 million was 27%. A M C C 1 1 9 9 9

  • Page 4
    .... AMCC is one of these companies. During fiscal 1999, we strengthened our capabilities to meet these new industry... over the past year. T he Company emerged from its twelfth consecutive profitable quarter with annual net revenues exceeding $100 million for the first time in our history. 5x 2 ,5...

  • Page 5
    ...'s all-time high net revenues of $105 million represent an increase of 37% over the $76.6 million reported in fiscal 1998. Net income for fiscal 1999 also increased to $17.1 million, or $0.62 per share ($19.4 million, or $0.71 per share, excluding merger-related costs of $2.3 million, or $0.08 per...

  • Page 6
    Customers in the communications market are searching for one partner who can deliver end-to-end solutions in silicon that enable faster time to market. T hat partner is AMCC. In April 1998, AMCC acquired Ten Mountains Design, furthering the Company's capabilities in providing high-speed physical ...

  • Page 7
    ...standard solutions for our customers' application-specific needs. During fiscal 1999, we also signed a Silicon Germanium (SiGe) agreement with IBM...cores for high-speed SONET systems. March 1 9 9 9 Exceeded $100 million in annual net revenues for the first time in the Company's history. March 1 9 9 ...

  • Page 8
    Innovations in communications are bringing the world closer together, including an ever-increasing convergence of datacom and telecom. 1998 was the first year that data accounted for a larger percentage of communications traffic than voice. In just five years, data traffic is expected to account for...

  • Page 9
    POWERIN G TOM O R R O W 'S COM M U N I C AT I O N S N ETWORKS T O D AY ' S SONET M ARKET SOLUTION 100% TYPE Inte g r a te d % Custom e r Re ve nue ASSP ASIC Disc r e te OC- 3 OC- 1 2 OC- 4 8 OC- 1 9 2 "Silicon Cycle": As technologies mature, their revenue attributes increasingly...

  • Page 10
    ...and SONET / SDH physical-layer transceivers, clock and data recovery units, framers, mappers, pointer processors, amplifiers and laser drivers. During fiscal 1999, the Company expanded its solutions with product advancements for today's high-speed, high-bandwidth 2.5 Gbps (gigabits-per-second) OC-48...

  • Page 11
    ADVAN CED SOLUTION S FOR EVO LVI N G M ARKETS 35 N um be r of N e w Products 30 25 20 15 10 5 0 FY 9 2 FY 9 3 FY 9 4 FY 9 5 FY 9 6 FY 9 7 FY 9 8 FY 9 9 N EW PRODUCT AN N OUN CEM EN TS AD D I T I ON AL M ARKET S AMCC has made significant in-roads into emerging markets with products such...

  • Page 12
    G AT E L O S S A R Y ( A U T O M A T E D T E S T E Q U I P M E N T ) Equipment that is used for the comprehensive testing of ICs, printed circuit boards and electronic systems. Generally, AT E equipment requires ICs that operate at faster speeds and have more precise timing than the ICs being ...

  • Page 13
    ... Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors 14 15 23 24 25 26 27 40 A M C C 11 1 9 9 9

  • Page 14
    ...E D FIN AN CIAL D ATA C O N D E N S E D C O N S O L I D AT E D S T AT E M E N T S O F O P E R AT I O N S March 31, (in thousands, except per share data) 1995 1996 1997 1998 1999 Net revenues Increase (decrease) in revenues over prior year Cost of revenues Gross profit % of revenues Research and...

  • Page 15
    ...5,131 13,335 2,937 21,403 7,558 121,694 $112,834 $150,655 March 31, (in thousands, except employee data) 1995 1996 1997 1998 1999 Working capital Total long-term debt and capital lease obligations Total long-term debt and capital lease obligations to equity ratio Additions to property, equipment...

  • Page 16
    ...1998 to reflect the acquisition of Cimaron Communications Corporation completed on March 17, 1999 as if the companies had been combined for the full year. M ARKET ...high, low and quarter-end sale prices of the Common Stock as reported by Nasdaq (rounded to the nearest 1⁄8). T he Company's Common ...

  • Page 17
    ... thereto included elsewhere in this Annual Report and in conjunction with the Company 's Annual Report on Form 10-K. This discussion...outstanding stock and stock options of Cimaron. T he financial statements for fiscal 1999 have been prepared as if the companies had been combined for the full year...

  • Page 18
    ... increase in absolute dollars in revenues attributed to these other markets was primarily due to $10.0 million of shipments in the year ended March 31, 1999, relating to the partial fulfillment of an end-of-life order from Raytheon Systems Co. Total sales to Raytheon Systems Co. accounted for 16% of...

  • Page 19
    ...million, or 18.6% of net revenues, for the year ended March 31, 1998. T he increase in SG& A expenses for the year ended March 31, 1999 was primarily due to a $2.1 million increase in personnel costs, a $500,000 increase in commissions earned by third-party sales representatives, a $500,000 increase...

  • Page 20
    ...IN COM E TAX ES . T he Company's annual effective tax rate for the year ended March 31, 1999, which approximated statutory rates, was 37.4% compared to ...acquisition, offset in part by the increase in operating income in fiscal 1999. DEFERRED COM PEN SATION . In connection with the grant of ...

  • Page 21
    M A N A G E M E N T ' S D I S C U S S I O N A N D A N A LY S I S O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S T he Company is in the process of communicating with its critical external suppliers to determine the extent to which the Company may be vulnerable to ...

  • Page 22
    ... capital lease and debt obligations. IN COM E TAX ES . T he Company's annual effective tax rate for the year ended March 31, 1998 was 2.6%. T his was..., cash equivalents and short-term investments. Working capital as of March 31, 1999 was $103.6 million, compared to $77.4 million as of March 31...

  • Page 23
    ...respectively. Net cash provided by operating activities in fiscal 1999 primarily reflected net income before depreciation and amortization expense plus... reasonable terms or at all. M ARKET RISK At March 31, 1999, the Company's investment portfolio includes fixed-income securities of $73 million...

  • Page 24
    M A N A G E M E N T ' S D I S C U S S I O N A N D A N A LY S I S O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S F A C T O R S T H A T M A Y A F F E C T F U T U R E R E S U LT S T he Company's results of operations have varied significantly in the past and may ...

  • Page 25
    ...AT E D S TAT E M E N T S OF INCOME Fiscal Year Ended March 31, (in thousands, except per share data) 1997 1998 1999 Net revenues Cost of revenues Gross profit Operating expenses: Research and development Selling, general and administrative Merger-related costs Total operating expenses Operating...

  • Page 26
    ... investments-available-for-sale Accounts receivable, net of allowance for doubtful accounts of $350 and $177 at March 31, 1998 and 1999, respectively Inventories Deferred income taxes Notes receivable from officer and employees Other current assets Total current assets Property and equipment, net...

  • Page 27
    ... - - 26,612 - - - - - - - - - - - - $(2,123) - - (33) - (1,341) 17,133 - - - - - - (1,341) 17,133 (33) 17,100 investments, net of tax benefit Total comprehensive income Balance, March 31, 1999 See accompanying notes. $266 $102,525 $(33) $ 21,514 $(455) $121,694 A M C C 25 1 9 9 9

  • Page 28
    ... D AT E D S TAT E M E N T S OF CASH FLOWS Fiscal Year Ended March 31, (in thousands) 1997 1998 1999 Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Write-offs of inventories Amortization of ...

  • Page 29
    ...stock and stock options of Cimaron. The accompanying financial statements for fiscal 1999 have been prepared as if the companies had been combined for the ...estimated fair value with unrealized gains and losses excluded from earnings and reported, net of tax, in comprehensive income. T he basis for ...

  • Page 30
    ... E N T S Available-for-sale securities by contractual maturity are as follows (in thousands): March 31, 1999 Due in one year or less Due after one year through two years Greater than two years $48,918... and assumptions that affect the amounts reported in the financial statements and disclosures ...

  • Page 31
    ... amounts. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. T hrough March 31, 1999, the Company has not experienced any such impairments. ADVERTISIN G COST Advertising costs are expensed as incurred. REVEN UES Revenues related to product sales...

  • Page 32
    ...'s results of operations and cash flows for the three-month period ended March 31, 1999 have been added directly to the retained earnings and cash flows of AMCC and excluded from reported fiscal 1999 results of operations. T he combined Company realized a charge in the fourth quarter of fiscal...

  • Page 33
    ... $25,983 7,476 13,219 46,678 (29,460) $17,218 $34,413 7,641 16,654 58,708 (35,580) $23,128 March 31, 1998 1999 Other accrued liabilities (in thousands): Income taxes payable Accrued merger-related costs Other $ 888 - 1,456 $2,344 $3,329 1,893 1,985 $7,207 T he cost and accumulated amortization...

  • Page 34
    ...). T he Company paid off the outstanding balance of $565,000 including accrued interest on April 1, 1999. Principal maturities of the notes payable at March 31, 1999 are as follows: Year Ended March 31, (in thousands) 2000 2001 2002 2003 2004 $1,862 1,394 1,495 1,603 503 $6,857 5 . STOCKHOLDERS...

  • Page 35
    ... Stock were authorized for issuance under the Incentive Plan. At March 31, 1999, 564,358 restricted shares had been issued under the Incentive Plan. Options ...interest rate of 6%; an expected life of four to five years; no annual dividends; and an expected volatility of .89. For purposes of pro ...

  • Page 36
    ...AN CIAL S TAT E M E N T S T he Company's pro forma information follows: Year Ended March 31, (in thousands) 1997 1998 1999 Net income: As reported Pro forma Earnings per share: As reported: Basic Diluted Pro forma: Basic Diluted Weighted fair value of options granted during the year $ 1.24 $ 0.35...

  • Page 37
    ...") was approved by the stockholders on August 4, 1998. A total of 400,000 shares are authorized for issuance under the 1998 Purchase Plan. At March 31, 1999, 23,308 shares had been issued under the 1998 Purchase Plan. Under the terms of the plans, purchases are made semiannually on January 31 and...

  • Page 38
    ...35% - (1) - 1 (5) 3 4 37% Significant components of the Company's deferred tax assets and liabilities for federal and state income taxes as of March 31, 1998 and 1999 are as shown on the following page. At March 31, 1998, the effective tax rate is computed based on a full reduction of the valuation...

  • Page 39
    ... Net deferred tax assets - $3,882 101 $4,573 $1,814 - 242 898 242 239 447 3,882 $1,850 1,719 313 298 - 47 447 4,674 At March 31, 1999, the Company has federal alternative minimum tax and federal and state research and development tax credit carryforwards of approximately $447,000, $195,000 and $103...

  • Page 40
    NOTES TO C O N S O L I D AT E D FIN AN CIAL S TAT E M E N T S Annual future minimum lease payments, including machinery and equipment under capital leases as of March 31, 1999 are as follows: Year Ending March 31, Operating Leases Capital Leases 2000 2001 2002 2003 2004 T hereafter Total ...

  • Page 41
    NOTES TO C O N S O L I D AT E D FIN AN CIAL S TAT E M E N T S Net revenues by geographic region were as follows (in thousands): Year Ended March 31, 1997 1998 1999 Net revenues: United States Canada Europe and Israel Asia $34,424 10,943 8,216 3,885 $57,468 $44,448 14,204 13,773 4,193 $76,...

  • Page 42
    REPORT OF ERNST & YOUNG L L P, INDEPENDENT AUDITORS THE BOARD OF DIRECTORS A P P L I E D M I C R O C I R C U I T S C O R P O R AT I O N We have audited the accompanying consolidated balance sheets of Applied Micro Circuits Corporation as of March 31, 1998 and 1999...31, 1998 and 1999, and the ...

  • Page 43
    ...stockholders and other interested investors. For additional copies of this report, the Form 10-K or other information, please contact: AMCC... of their respective owners. The AMCC annual meeting of stockholders will be held at 10:00 a.m. on Tuesday, August 3, 1999, at AMCC's facility located at 6290...

  • Page 44
    APPLI ED M I CRO CI RCUI TS CORPORATI ON APPLIED M ICRO 6 2 9 0 CIRCUITS C O R P O R AT I O N SEQUENCE DRIVE CALIFORN IA 9 2 1 2 1 -4 3 5 8 4 5 0 -9 3 3 3 SAN DIEGO, TELEPHONE (8 5 8 )