UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 2001
Commission file number 1-5560
ALPHA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2302115
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SYLVAN ROAD, WOBURN, MASSACHUSETTS 01801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 935-5150
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. [X] Yes [ _ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JANUARY 27,2002
----- ------------------------------
COMMON STOCK, PAR VALUE $.25 PER SHARE 44,227,173
Alpha Industries, Inc. and Subsidiaries
TABLE OF CONTENTS
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PAGE
PART 1 FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets - December 30, 2001 (Unaudited) and April 1, 2001........... 3
Consolidated Statements of Operations - Three Month and Nine Month Periods Ended
December 30, 2001 and December 31, 2000 (Unaudited)...................................... 4
Consolidated Statements of Cash Flows - Nine Month Periods Ended
December 30, 2001 and December 31, 2000 (Unaudited)...................................... 5
Notes to Interim Consolidated Financial Statements....................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................ 9
PART 2 OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K..................................................... 14
================================================================================
2
Alpha Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
DEC. 30, APRIL 1,
2001 2001
(UNAUDITED)
===================================================================================================================================
ASSETS
Current assets
Cash and cash equivalents............................................................ $ 45,888 $ 68,802
Short-term investments (note 2)...................................................... 83,622 84,982
Accounts receivable, trade, less allowance for doubtful
accounts of $1,046 and $921.................................................... 27,112 36,984
Inventories (note 3)................................................................ 10,223 15,661
Prepayments and other current assets................................................. 4,848 3,169
Prepaid income taxes................................................................. 5,951 735
Deferred income taxes................................................................ 8,599 9,668
-------------- -------------
Total current assets....................................................... 186,243 220,001
-------------- -------------
Property, plant and equipment, less accumulated depreciation and
amortization of $93,270 and $78,247.................................................. 131,359 114,196
Other assets................................................................................ 7,302 2,822
-------------- -------------
Total assets................................................................ $ 324,904 $ 337,019
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt................................................. $ 129 $ 129
Accounts payable..................................................................... 12,185 20,820
Accrued liabilities
Payroll and related expenses....................................................... 4,123 7,283
Other accrued liabilities.......................................................... 3,327 3,481
-------------- -------------
Total current liabilities.................................................. 19,764 31,713
-------------- -------------
Long-term debt, less current maturities..................................................... 139 235
Other long-term liabilities................................................................. 2,461 2,081
Deferred income taxes....................................................................... 2,742 3,812
-------------- -------------
Total liabilities.......................................................... 25,106 37,841
-------------- -------------
Commitments and contingencies (note 6)
Stockholders' equity
Common stock par value $.25 per share: authorized
100,000,000 shares; issued 44,184,177 and 43,520,880 shares........................ 11,046 10,880
Additional paid-in capital........................................................... 231,360 221,147
Retained earnings.................................................................... 57,392 67,179
Less - Treasury shares of --- and 26,539 at cost.................................... --- 28
-------------- -------------
Total stockholders' equity................................................. 299,798 299,178
-------------- -------------
Total liabilities and stockholders' equity................................. $ 324,904 $ 337,019
============== =============
===================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
3
Alpha Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
THREE MONTH NINE MONTH
PERIODS ENDED PERIODS ENDED
DEC. 30, DEC. 31, DEC. 30, DEC. 31,
2001 2000 2001 2000
================================================================================================================================
Net sales................................................ $ 33,090 $ 78,684 $ 98,312 $217,573
Cost of sales.......................................... 21,935 42,326 67,718 117,930
Research and development expenses...................... 9,557 9,534 29,266 26,243
Selling and administrative expenses.................... 5,546 11,405 18,317 32,146
Merger-related expenses............................... 2,128 --- 2,128 1,786
------------ ----------- ----------- --------
Operating (loss) income.................................. (6,076) 15,419 (19,117) 39,468
Interest expense......................................... (7) (16) (36) (54)
Interest income and other, net........................... 1,188 2,143 4,546 6,022
------------ ----------- ----------- --------
(Loss) income before income taxes........................ (4,895) 17,546 (14,607) 45,436
(Benefit) provision for income taxes..................... (1,615) 5,966 (4,820) 15,448
------------- ----------- ----------- --------
Net (loss) income........................................ $ (3,280) $ 11,580 $ (9,787) $ 29,988
============= =========== =========== ========
Basic (loss) earnings per share.......................... $ (0.07) $ 0.27 $ (0.22) $ 0.70
============= =========== =========== ========
Diluted (loss) earnings per share........................ $ (0.07) $ 0.26 $ (0.22) $ 0.67
============= =========== =========== ========
Shares used in computing:
Basic (loss) earnings per share.......................... 44,162 43,147 43,933 42,882
============ =========== =========== ========
Diluted (loss) earnings per share........................ 44,162 44,784 43,933 44,760
============ =========== =========== ========
================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
4
Alpha Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
NINE MONTH PERIODS ENDED
DEC. 30, DEC. 31,
2001 2000
===================================================================================================================================
CASH PROVIDED BY OPERATIONS:
Net (loss) income........................................................................... $ (9,787) $ 29,988
Adjustments to reconcile net (loss) income to net cash provided by operations:
Depreciation and amortization of property, plant and equipment............................ 15,532 11,492
Net gain on sale of property, plant and equipment......................................... (59) (28)
Deferred income taxes..................................................................... (1) ---
Increase (decrease) in other long-term liabilities........................................ 380 (33)
(Increase) decrease in other assets....................................................... (4,480) 66
Changes in operating assets and liabilities:
Accounts receivable .................................................................... 9,872 (18,719)
Inventories............................................................................. 5,438 (4,576)
Prepayments and other current assets.................................................... (6,895) (5,514)
Accounts payable........................................................................ (8,635) (2,243)
Other accrued liabilities and expenses.................................................. 2,802 20,467
---------- ----------
Net cash provided by operations....................................................... 4,167 30,900
---------- ----------
CASH USED IN INVESTING:
Additions to property, plant and equipment............................................... (32,779) (38,140)
Proceeds from sale of property, plant and equipment...................................... 143 28
Purchases of short-term investments...................................................... (110,990) (94,257)
Maturities of short-term investments..................................................... 112,350 104,620
---------- ----------
Net cash used in investing............................................................ (31,276) (27,749)
---------- ----------
CASH PROVIDED BY FINANCING:
Payments on long-term debt.................................................................. (96) (2,960)
Proceeds from sale of stock................................................................. 366 238
Exercise of stock options................................................................... 3,925 6,356
---------- ----------
Net cash provided by financing........................................................ 4,195 3,634
---------- ----------
Net (decrease) increase in cash and cash equivalents.......................................... (22,914) 6,785
Cash and cash equivalents, beginning of period................................................ 68,802 23,219
---------- ----------
Cash and cash equivalents, end of period...................................................... $ 45,888 $ 30,004
========== ==========
===================================================================================================================================
Supplemental cash flow disclosures:
Cash paid for income taxes.......................................................... $ 145 $ 1,854
========== =========
Cash paid for interest.............................................................. $ 34 $ 51
========== =========
Supplemental disclosure of non-cash operating activities:
Tax benefit associated with the exercise of stock options............................ $ 4,878 $ 16,150
========== =========
Compensation expense related to stock options........................................ $ 89 $ 137
========== =========
Contribution of treasury shares to Savings and Retirement Plan....................... $ 423 $ 1,077
========== =========
Contribution of common shares to Savings and Retirement Plan......................... $ 726 ---
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
5
Alpha Industries, Inc. and Subsidiaries
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The interim financial information included herein is unaudited. In addition, the
financial information does not include all disclosures required under accounting
principles generally accepted in the United States of America because certain
footnote information included in the Company's annual report to shareholders has
been omitted and such information should be read in conjunction with the prior
year's annual report. However, the financial information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods. The Company considers the disclosures adequate to make the
information presented not misleading.
NOTE 2 SHORT-TERM INVESTMENTS
The Company's short-term investments are classified as held-to-maturity. These
investments consist primarily of commercial paper and securities issued by
various federal agencies and corporations with original maturities of more than
90 days and less than one year. Such short-term investments are carried at
amortized cost, which approximates fair value, due to the short period of time
to maturity. Gains and losses are included in investment income in the period
they are realized.
NOTE 3 INVENTORIES
DEC. 30, APRIL 1,
Inventories consist of the following: 2001 2001
==================================================================================================================
(in thousands)
Raw materials............................................................. $ 3,793 $ 5,187
Work-in-process........................................................... 4,434 7,868
Finished goods............................................................ 1,996 2,606
----------- ----------
$ 10,223 $ 15,661
=========== ==========
NOTE 4 SEGMENT INFORMATION
The Company is organized into two reportable segments as follows:
SEMICONDUCTOR PRODUCTS:
The Semiconductor Products segment designs and manufactures gallium arsenide
integrated circuits, other discrete semiconductors and multi-chip modules
primarily for the global wireless communications and broadband markets.
CERAMIC PRODUCTS:
The Ceramic Products segment designs and manufactures technical ceramic and
magnetic products for the global wireless infrastructure and broadband markets.
6
Alpha Industries, Inc. and Subsidiaries
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 SEGMENT INFORMATION (CONTINUED)
The table below presents selected financial data by business segment for the
periods indicated.
THREE MONTH NINE MONTH
PERIODS ENDED PERIODS ENDED
------------------------------------ ---------------------------------
DEC. 30, DEC. 31, DEC. 30, DEC. 31,
2001 2000 2001 2000
---------------- --------------- --------------- ------------
(in thousands)
Net Sales
---------
Semiconductor Products.......................... $ 26,463 $ 65,866 $ 79,454 $ 179,796
Ceramic Products................................ 6,627 12,818 18,858 37,777
-------------- -------------- -------------- ------------
$ 33,090 $ 78,684 $ 98,312 $ 217,573
============== ============== ============== ============
Operating (Loss) Income
-----------------------
Semiconductor Products.......................... $ (4,238) $ 13,179 $ (16,543) $ 34,799
Ceramic Products................................ 290 2,240 (446) 6,455
Merger-related expenses......................... (2,128) --- (2,128) (1,786)
-------------- -------------- -------------- ------------
$ (6,076) $ 15,419 $ (19,117) $ 39,468
============== ============== ============== ============
DEC. 30, APRIL 1,
2001 2001
--------------- ------------
(in thousands)
Net Long-Lived Assets
---------------------
Semiconductor Products.............................................................. $ 115,289 $ 97,568
Ceramic Products.................................................................... 16,070 16,628
-------------- ------------
$ 131,359 $ 114,196
============== ============
Total Assets
------------
Semiconductor Products.............................................................. $ 143,058 $ 138,614
Ceramic Products.................................................................... 26,626 29,217
Corporate ...................................................................... 155,220 169,188
-------------- ------------
$ 324,904 $ 337,019
============== ============
NINE MONTH PERIODS ENDED
---------------------------------
DEC. 30, DEC. 31,
2001 2000
-------------- ------------
(in thousands)
Total Capital Expenditures
--------------------------
Semiconductor Products............................................................. $ 31,078 $ 33,360
Ceramic Products................................................................... 1,701 4,780
-------------- ------------
$ 32,779 $ 38,140
============== ============
SIGNIFICANT CUSTOMERS
During the three months ended December 30, 2001, one customer accounted for
approximately 34% of the Company's net sales. During the three months ended
December 31, 2000, two customers accounted for approximately 27% and 10%,
respectively, of the Company's net sales. For the nine months ended December 30,
2001, one customer accounted for approximately 32% of the Company's net sales.
For the nine months ended December 31, 2000, two customers accounted for
approximately 28% and 13%, respectively, of the Company's net sales. As of
December 30, 2001 and April 1, 2001, one customer accounted for approximately
29% and 16%, respectively, of the Company's gross accounts receivable.
7
Alpha Industries, Inc. and Subsidiaries
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5 EARNINGS PER SHARE
A reconciliation of the weighted average number of shares outstanding used in
the computation of the basic and diluted (loss) earnings per share for the three
month and nine month periods ended December 30, 2001 and December 31, 2000 is as
follows:
THREE MONTH NINE MONTH
PERIODS ENDED PERIODS ENDED
-------------------------------------- ------------------------------------
DEC. 30, DEC. 31, DEC. 30, DEC. 31,
2001 2000 2001 2000
---------------- ---------------- ---------------- ---------------
(in thousands)
Weighted average shares (basic).................... 44,162 43,147 43,933 42,882
Effect of dilutive stock options................... --- 1,637 --- 1,878
-------- --------- --------- ---------
Weighted average shares (diluted).................. 44,162 44,784 43,933 44,760
======== ========= ========= =========
For the periods ended December 30, 2001 and December 31, 2000, options to
purchase approximately 6.6 million and 1.2 million shares, respectively, were
outstanding but not included in the computation of diluted (loss) earnings per
share because their effect would have been antidilutive.
NOTE 6 COMMITMENTS AND CONTINGENCIES
The Company is party to suits and claims arising in the normal course of
business. Management believes these are adequately provided for or will result
in no material additional liability to the Company.
NOTE 7 MERGER WITH CONEXANT SYSTEMS, INC.'S WIRELESS BUSINESS
On December 16, 2001, the Company, Conexant Systems, Inc. (Conexant) and
Washington Sub, Inc., a wholly owned subsidiary of Conexant, entered into a
definitive agreement providing for the combination of Conexant's wireless
business with the Company. Under the terms of the agreement, Conexant will spin
off its wireless business, including its gallium arsenide wafer fabrication
facility located in Newbury Park, California, but excluding certain assets and
liabilities, to be followed immediately by a merger of this wireless business
into the Company with the Company as the surviving company in the merger.
Immediately after the merger, the Company will have approximately 140 million
fully diluted shares outstanding, with current shareholders of the Company
owning approximately 33 percent and current shareholders of Conexant owning
approximately 67 percent of the Company's outstanding shares on a fully diluted
basis.
The merger is to be accounted for as a reverse acquisition whereby Conexant is
treated as the acquirer and Alpha as the acquiree primarily because Conexant
shareholders owned a majority of the combined company as of the announcement
date. Purchase accounting will be performed on Alpha based upon its fair market
value for a reasonable period of time before and after the announcement date of
the merger.
Upon completion of the merger, the Company will purchase Conexant's
semiconductor assembly, module manufacturing and test facility, located in
Mexicali, Mexico, and certain related operations, for $150 million. The Company
will be exploring options for financing this purchase.
The boards of directors of both the Company and Conexant have approved the
definitive agreement. Completion of the proposed merger is subject to
regulatory approvals, receipt of a ruling by the IRS that the Conexant wireless
business spin-off qualifies as tax-free, a Company shareholder vote to
approve the merger, and satisfaction of all other closing conditions. The
proposed merger is expected to be completed in the second quarter of calendar
year 2002.
8
Alpha Industries, Inc. and Subsidiaries
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
We design, develop, manufacture and market proprietary radio frequency,
microwave frequency and millimeter wave frequency integrated circuits, discrete
semiconductors and integrated modules for the wireless and broadband
communications markets. We also design, develop, manufacture and market
proprietary technical ceramic and magnetic products for the wireless
infrastructure and broadband markets.
MERGER WITH CONEXANT SYSTEMS, INC.'S WIRELESS BUSINESS
On December 16, 2001, the Company, Conexant Systems, Inc. (Conexant) and
Washington Sub, Inc., a wholly owned subsidiary of Conexant, entered into a
definitive agreement providing for the combination of Conexant's wireless
business with the Company. Under the terms of the agreement, Conexant will spin
off its wireless business, including its gallium arsenide wafer fabrication
facility located in Newbury Park, California, but excluding certain assets and
liabilities, to be followed immediately by a merger of this wireless business
into the Company with the Company as the surviving company in the merger.
Immediately after the merger, the Company will have approximately 140 million
fully diluted shares outstanding, with current shareholders of the Company
owning approximately 33 percent and current shareholders of Conexant owning
approximately 67 percent of the Company's outstanding shares on a fully diluted
basis.
The merger is to be accounted for as a reverse acquisition whereby Conexant is
treated as the acquirer and Alpha as the acquiree primarily because Conexant
shareholders owned a majority of the combined company as of the announcement
date. Purchase accounting will be performed on Alpha based upon its fair market
value for a reasonable period of time before and after the announcement date of
the merger.
Upon completion of the merger, the Company will purchase Conexant's
semiconductor assembly, module manufacturing and test facility, located in
Mexicali, Mexico, and certain related operations, for $150 million. The Company
will be exploring options for financing this purchase.
The boards of directors of both the Company and Conexant have approved the
definitive agreement. Completion of the proposed merger is subject to
regulatory approvals, receipt of a ruling by the IRS that the Conexant wireless
business spin-off qualifies as tax-free, a Company shareholder vote to
approve the merger, and satisfaction of all other closing conditions. The
proposed merger is expected to be completed in the second quarter of calendar
year 2002.
RESULTS OF OPERATIONS
The following table shows our statement of operations data as a percentage of
sales for the periods indicated.
THREE MONTH NINE MONTH
PERIODS ENDED PERIODS ENDED
-------------------------------- ---------------------------------
DEC. 30, DEC. 31, DEC. 30, DEC. 31,
2001 2000 2001 2000
-------------- ------------- -------------- --------------
Net sales.......................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ..................................... 66.3 53.8 68.9 54.2
--------- -------- --------- --------
Gross margin....................................... 33.7 46.2 31.1 45.8
Research and development expenses.................. 28.9 12.1 29.8 12.1
Selling and administrative expenses................ 16.8 14.5 18.6 14.8
Merger-related expenses........................... 6.4 --- 2.2 0.8
--------- -------- --------- --------
Operating (loss) income............................ (18.4) 19.6 (19.4) 18.1
Other income, net.................................. 3.6 2.7 4.6 2.7
--------- -------- --------- --------
(Loss) income before income taxes.................. (14.8) 22.3 (14.9) 20.9
(Benefit) provision for income taxes............... (4.9) 7.6 (4.9) 7.1
---------- -------- ---------- --------
Net (loss) income................................. (9.9)% 14.7% (10.0)% 13.8%
========== ======== ========== ========
NET SALES. Net sales decreased 57.9% to $33.1 million for the three months ended
December 30, 2001 from $78.7 million for the same period last year. For the
first nine months of fiscal 2002, net sales decreased 54.8% to $98.3 million
from $217.6 million for the first nine months of fiscal 2001. Orders decreased
66.5% to $25.6 million for the three months ended December 30, 2001, compared
with $76.4 million for the same period last year. The decline in net sales and
orders continues to be the result of a downturn in the wireless handset,
wireless infrastructure and broadband markets. This downturn had a significant
effect on both of our business segments: Semiconductor Products and Ceramic
Products. Deliveries to one customer represented approximately 34% of our total
net sales for the three months ended December 30, 2001 compared to two
customers, which represented approximately 27% and 10%, respectively, of our
total net sales for the same period last year. Deliveries to one customer
represented approximately 32% of our total net sales for the first nine months
of fiscal 2002 compared to two customers, which represented approximately 28%
and 13%, respectively, of our total net sales for the comparable period last
year.
GROSS PROFIT. Gross profit decreased 69.3% to $11.2 million or 33.7% of net
sales for the three months ended December 30, 2001 from $36.4 million or 46.2%
of net sales for the comparable period last year. For the first nine months of
fiscal 2002, gross profit decreased 69.3% to $30.6 million or 31.1% of net sales
compared with $99.6 million or 45.8% of net sales for the same period last year.
This decline continues to be the result of the decrease in net sales and the
resulting underutilization of manufacturing capacity.
9
Alpha Industries, Inc. and Subsidiaries
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
0.2% to $9.6 million or 28.9% of net sales for the three months ended December
30, 2001 from $9.5 million or 12.1% of net sales for the comparable period last
year. For the first nine months of fiscal 2002, research and development
expenses increased 11.5% to $29.3 million or 29.8% of net sales from $26.2
million or 12.1% of net sales for the comparable period last year. The increase
in research and development expenses continues to be the result of our
commitment to design new products and processes and address new opportunities to
meet our customers' demands. This sustained effort to meet our customers'
changing product requirements is highlighted by our focus on the migration from
individual chips to integrated radio frequency module solutions.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
decreased 51.4% to $5.5 million or 16.8% of net sales for the three months ended
December 30, 2001 from $11.4 million or 14.5% of net sales for the comparable
period last year. For the nine months ended December 30, 2001, selling and
administrative expenses decreased $13.8 million to $18.3 million or 18.6% of net
sales from $32.1 million or 14.8% of net sales for the comparable period last
year. The decline in selling and administrative expenses was primarily
attributable to a reduction in workforce, reduced discretionary spending and a
reduction in sales commission expenses.
During the three months and nine months ended December 30, 2001, we incurred
approximately $2.1 million in merger-related expenses associated with our
proposed merger with the wireless business of Conexant Systems, Inc. (Conexant),
which was announced on December 17, 2001. During the nine months ended December
31, 2000, we incurred approximately $1.8 million in expenses associated with our
acquisition of Network Device, Inc. (NDI), which was completed on April 24,
2000.
OTHER INCOME (EXPENSE), NET. Other income, net, for the three months and nine
months ended December 30, 2001 decreased $946,000 and $1.5 million,
respectively, over the comparable periods last year. These decreases were
primarily attributable to a decline in interest income as a result of lower
interest rates.
BENEFIT FOR INCOME TAXES. The benefit for income taxes has been recorded based
on the current estimate of our effective tax rate of 33%. This rate differs from
the statutory federal income tax rate primarily because of state and federal tax
credits. Our effective tax rate for the full fiscal year may be modified based
on future operating results.
BUSINESS SEGMENTS
The table below displays net sales and operating income by business segment for
the periods indicated. Merger related expenses which, are not related to a
specific business segment, are illustrated separately below.
THREE MONTH NINE MONTH
PERIODS ENDED PERIODS ENDED
------------------------------ ----------------------------------
DEC. 30, DEC. 31, DEC. 30, DEC. 31,
2001 2000 2001 2000
------------- ------------- -------------- ---------------
(in thousands)
Net sales
---------
Semiconductor Products....................... $ 26,463 $ 65,866 $ 79,454 $ 179,796
Ceramic Products............................. 6,627 12,818 18,858 37,777
------------ ------------ ------------- --------------
$ 33,090 $ 78,684 $ 98,312 $ 217,573
============ ============ ============= ==============
Operating (Loss) Income
-----------------------
Semiconductor Products....................... $ (4,238) $ 13,179 $ (16,543) $ 34,799
Ceramic Products............................. 290 2,240 (446) 6,455
Merger-related expenses...................... (2,128) --- (2,128) (1,786)
------------ ------------ ------------- --------------
$ (6,076) $ 15,419 $ (19,117) $ 39,468
============ ============ ============= ==============
10
Alpha Industries, Inc. and Subsidiaries
SEMICONDUCTOR PRODUCTS. Net sales for the Semiconductor Products segment
decreased 59.8% to $26.5 million for the three months ended December 30, 2001
from $65.9 million for the same period last year. For the first nine months of
fiscal 2002, net sales for the Semiconductor Products segment decreased 55.8% to
$79.5 million from $179.8 million for the same period last year. The decrease
was primarily attributable to a downturn in both of our targeted markets,
wireless communications and broadband.
Operating (loss) income for the Semiconductor Products segment decreased to an
operating loss of $4.2 million and $16.5 million, respectively, for the three
months and nine months ended December 30, 2001 compared to operating income of
$13.2 million and $34.8 million, respectively, for the comparable periods last
year. The decline was primarily the result of lower revenue, underutilization of
capacity and the continued investment in research and development during the
three months ended December 30, 2001 and first nine months of fiscal 2002 when
compared to the same periods last year.
CERAMIC PRODUCTS. Net sales for the Ceramic Products segment for the three
months ended December 30, 2001 decreased 48.3% to $6.6 million from $12.8
million for the same period last year. For the first nine months of fiscal 2002,
net sales for the Ceramic Products segment decreased 50.1% to $18.9 million from
$37.8 million for the same period last year. The decline was primarily
attributable to a downturn in the wireless infrastructure and broadband markets.
Operating income for the Ceramic Products segment for the three months ended
December 30, 2001 decreased 87.1% to $290,000 from $2.2 million for the same
period last year. For the first nine months of fiscal 2002, operating (loss)
income for the Ceramic Products segment decreased to an operating loss of
$446,000 compared to operating income of $6.5 million for the comparable period
last year. The decline was primarily the result of lower revenue generated
during the three months ended December 30, 2001 and first nine months of fiscal
2002 when compared to the same periods last year.
MERGER-RELATED EXPENSES
During the three months and nine months ended December 30, 2001, we incurred
approximately $2.1 million in merger-related expenses associated with our
proposed merger with Conexant's wireless business, which was announced on
December 17, 2001. During the nine months ended December 31, 2000, we incurred
approximately $1.8 million in expenses associated with our acquisition of NDI,
which was completed on April 24, 2000.
FINANCIAL CONDITION
At December 30, 2001, working capital totaled $166.5 million and included $129.5
million in cash, cash equivalents and short-term investments. Annualized
inventory turns for the nine months ended December 30, 2001 decreased to 8.8,
compared to 9.5 for the comparable period last year. Additionally, days sales
outstanding included in accounts receivable for the nine months ended December
30, 2001 increased to 75 days compared to 66 days for the comparable period last
year. We continued to manage our working capital during the downturn in the
wireless communications and broadband markets. We reduced inventory levels and
managed our investment in capital expenditures, while maintaining our commitment
to investment in research and development and maintaining our manufacturing
capability.
Capital expenditures for the nine months ended December 30, 2001 totaled $32.8
million. Of the $32.8 million, approximately $31.1 million related to the
Semiconductor Products segment as we continued our investment in major capital
initiatives in the semiconductor gallium arsenide (GaAs) wafer fabrication
operation and the integrated circuit (IC) and discrete semiconductor assembly
and test areas. We are creating a GaAs IC production line that will allow the
manufacture of product on six-inch wafers. As of December 30, 2001, we have
spent approximately $25 million on this production line and we expect to
complete this project within twelve months at an estimated cost of approximately
$30 million. Once this new six-inch wafer production line is in operation, we
plan to convert our existing four-inch wafer production areas to six-inch, as
future demand requires. Improvements in manufacturing capabilities at our
ceramics facilities accounted for approximately $1.7 million.
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Alpha Industries, Inc. and Subsidiaries
We believe that anticipated cash from operations and available funds, including
the net proceeds from our fiscal 2000 stock offering, will be adequate to fund
our currently planned working capital and capital expenditure requirements, at
least through fiscal 2002.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued Statements
No. 141, "Business Combinations" (SFAS 141), and No. 142, "Goodwill and Other
Intangibles" (SFAS 142). SFAS 141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interest method of accounting
for business combinations. SFAS 141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet certain criteria. SFAS 141 applies to all business combinations initiated
after June 30, 2001 and for purchase business combinations completed on or after
July 1, 2001. The Company has adopted the provisions of SFAS 141.
SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized.
In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 supersedes
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30 for the disposal of a business
segment. SFAS 144 establishes a single accounting model, based on the framework
established in SFAS 121, for long-lived assets to be disposed of by sale. The
Statement also broadens the presentation of discontinued operations to include
disposals of a component of an entity and provides additional implementation
guidance with respect to the classification of assets as held-for-sale and the
calculation of an impairment loss. The Company is required to adopt SFAS 144
effective April 1, 2002. The adoption of SFAS 144 is not expected to have a
material impact on the Company's financial statements.
OTHER MATTERS
Safe Harbor Statement - Except for the historical information, this report
contains forward-looking statements. These statements reflect our current
expectations and predictions of future results, accomplishments and other
matters, all of which are inherently subject to risks and uncertainties. Actual
results may differ materially from those anticipated in forward-looking
statements, based on various factors. Such factors include, but are not limited
to: variations in projected financial results for the fourth quarter of fiscal
year 2002 and fiscal year 2002, expected benefit, timing and success of our
product development efforts, our ability to maintain and improve product yields,
to participate in new wireless interface standards and applications, and to
develop and market new products and technologies, the timing and extent of
recovery in the infrastructure, broadband and wireless markets, the success of
our various strategic relationships, our ability to predict customer orders, the
disproportionate impact of our business relationships with our larger customers,
erosion of selling prices or margins, modification of our plans or intentions,
and market developments, competitive pressures and changes in economic
conditions that vary from our expectations. Furthermore, additional factors
relate to our proposed merger with the wireless communications business of
Conexant Systems, Inc., including but not limited to the following: the expected
benefits and timing of the merger, our ability to successfully integrate the
merged businesses, operations, personnel and customers, and our ability to
accurately forecast the financial results and prospects of the post-merger
enterprise. Additional information on these and other factors that may cause
actual results and our performance to differ materially is included in the
Company's periodic reports filed with the Securities and Exchange Commission,
including but not limited to our Form 10-K for the year ended April 1, 2001 and
subsequently filed Forms 10-Q and Form 8-K. Copies may be obtained by contacting
the Company or the SEC. We caution readers not to place undue reliance upon any
such forward-looking statements, which speak only as of the date made. We do not
undertake or accept any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement to reflect any change in
our expectations or any change in events, conditions or circumstance on which
any such statement is based.
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Alpha Industries, Inc. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession
b) Agreement and Plan of Reorganization dated as of December 16, 2001 by and among Conexant
Systems, Inc., Washington Sub, Inc. and Alpha Industries, Inc. (excluding exhibits). (1)
c) Contribution and Distribution Agreement dated as of December 16, 2001 by and between
Conexant Systems, Inc. and Washington Sub, Inc. (excluding exhibits). (1)
d) Mexican Stock and Asset Purchase Agreement dated as of December 16, 2001 by and between
Conexant Systems, Inc. and Alpha Industries, Inc. (excluding exhibits). (1)
e) U.S. Asset Purchase Agreement dated as of December 16, 2001 by and between Conexant
Systems, Inc. and Alpha Industries, Inc. (excluding exhibits). (1)
(b) Reports on Form 8-K
On December 19, 2001, a Form 8-K was filed stating that the Company entered into an Agreement
and Plan of Reorganization dated as of December 16, 2001 with Conexant Systems, Inc. and
Washington Sub, Inc., a wholly-owned subsidiary of Conexant.
(1) Incorporated by reference to the exhibits filed with our Form 8-K dated
December 16, 2001.
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Alpha Industries, Inc. and Subsidiaries
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.
Date: February 8, 2002
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Registrant
/s/ David J. Aldrich
--------------------------------------
David J. Aldrich
Chief Executive Officer
President
Director
/s/ Paul E. Vincent
--------------------------------------
Paul E. Vincent
Chief Financial Officer
Principal Financial Officer
Principal Accounting Officer
Secretary
14