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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 6, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-21970
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ACTEL CORPORATION
(Exact name of Registrant as specified in its charter)
California 77-0097724
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
955 East Arques Avenue
Sunnyvale, California 94086-4533
(Address of principal executive offices) (Zip Code)
(408) 739-1010
(Registrant's telephone number, including area code)
--------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
Number of shares of Common Stock outstanding as of May 19, 2003:
24,541,325.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
ACTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
Three Months Ended
--------------------------------------
Apr. 6, Apr. 7, Jan. 5,
2003 2002 2003
---------- ---------- ----------
Net revenues............................................................ $ 34,341 $ 33,060 $ 34,103
Costs and expenses:
Cost of revenues..................................................... 14,729 12,784 13,512
Research and development............................................. 9,513 9,737 10,135
Selling, general, and administrative................................. 11,032 10,711 10,726
Amortization of acquisition-related intangibles................... 681 681 681
---------- ---------- ----------
Total costs and expenses....................................... 35,955 33,913 35,054
---------- ---------- ----------
Loss from operations.................................................... (1,614) (853) (951)
Interest income and other, net of expense............................... 992 1,488 858
Losses on sales and write-downs of equity investments................... - (123) (2,574)
---------- ---------- ----------
(Loss) income before tax (benefit) provision............................ (622) 512 (2,667)
Tax (benefit) provision................................................. (853) 117 (836)
---------- ---------- ----------
Net income (loss)....................................................... $ 231 $ 395 $ (1,831)
========== ========== ==========
Net income (loss) per share:
Basic................................................................ $ 0.01 $ 0.02 $ (0.08)
========== ========== ==========
Diluted.............................................................. $ 0.01 $ 0.02 $ (0.08)
========== ========== ==========
Shares used in computing net income (loss) per share:
Basic................................................................ 24,338 24,170 24,126
========== ========== ==========
Diluted.............................................................. 25,087 25,388 24,126
========== ========== ==========
See Notes to Unaudited Consolidated Condensed Financial Statements
ACTEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited, in thousands)
Apr. 6, Jan. 5,
2003 2003*
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 14,302 $ 18,207
Short-term investments.............................................................. 124,486 115,622
Accounts receivable, net............................................................ 17,982 17,615
Inventories, net.................................................................... 32,873 34,591
Deferred income taxes............................................................... 23,439 28,054
Prepaid expenses and other current assets........................................... 4,546 4,968
------------ ------------
Total current assets.......................................................... 217,628 219,057
Property and equipment, net............................................................ 16,630 16,204
Goodwill, net.......................................................................... 32,142 32,142
Other assets, net...................................................................... 26,490 25,918
------------ ------------
$ 292,890 $ 293,321
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 9,607 $ 11,500
Accrued salaries and employee benefits.............................................. 5,203 7,280
Other accrued liabilities........................................................... 3,760 3,879
Deferred income on shipments to distributors........................................ 26,582 26,459
------------ ------------
Total current liabilities..................................................... 45,152 49,118
Deferred compensation plan liability................................................... 1,926 1,889
------------ ------------
Total liabilities............................................................. 47,078 51,007
Commitments and contingencies
Shareholders' equity:
Common stock........................................................................ 24 24
Additional paid-in capital.......................................................... 171,750 168,428
Retained earnings .................................................................. 73,521 73,290
Unearned compensation cost ......................................................... (145) (179)
Accumulated other comprehensive income ............................................. 662 751
------------ ------------
Total shareholders' equity.................................................... 245,812 242,314
------------ ------------
$ 292,890 $ 293,321
============ ============
- ----------------------------------------
* Derived from the consolidated audited financial statements included in our
report on Form 10-K for the fiscal year ended January 5, 2003.
See Notes to Unaudited Consolidated Condensed Financial Statements
ACTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended
--------------------------
Apr. 6, Apr. 7,
2003 2002
------------ ------------
Operating activities:
Net income......................................................................... $ 231 $ 395
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................... 2,606 2,529
Stock compensation cost recognized.............................................. 34 34
Changes in operating assets and liabilities:
Accounts receivable.......................................................... (367) (3,487)
Inventories.................................................................. 1,718 (738)
Deferred income taxes........................................................ 5,036 26
Prepaid expenses and other current assets.................................... (182) (873)
Accounts payable, accrued salaries and employee benefits, and other accrued
liabilities.............................................................. (5,038) (1,312)
Deferred income on shipments to distributors................................. 123 (419)
------------ ------------
Net cash provided by (used in) operating activities................................ 4,161 (3,845)
Investing activities:
Purchases of property and equipment................................................ (2,351) (1,989)
Purchases of available-for-sale securities......................................... (45,657) (33,749)
Sales and maturities of available for sale securities.............................. 36,645 36,763
Changes in other long term assets.................................................. (25) 103
------------ ------------
Net cash provided by (used in) investing activities................................ (11,388) 1,128
Financing activities:
Common stock issuance under employee stock plans................................... 3,322 2,571
------------ ------------
Net cash provided by financing activities.......................................... 3,322 2,571
Net decrease in cash and cash equivalents.............................................. (3,905) (146)
Cash and cash equivalents, beginning of period......................................... 18,207 7,912
------------ ------------
Cash and cash equivalents, end of period............................................... $ 14,302 7,766
============ ============
Supplemental disclosures of cash flow information and non-cash investing and
financing activities:
Cash (received)/paid during the period for taxes....................................... (4,926) (382)
See Notes to Unaudited Consolidated Condensed Financial Statements
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited consolidated condensed financial statements of
Actel Corporation have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
Actel Corporation and its consolidated subsidiaries are referred to as
"we," "us," or "our." The discussion and analysis of our financial condition and
results of operations are based upon our unaudited consolidated condensed
financial statements, which have been prepared in accordance with accounting
principles for interim financial statements generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, and expenses and the related disclosure of contingent assets and
liabilities. The United States Securities and Exchange Commission (SEC) has
defined the most critical accounting policies as the ones that are most
important to the portrayal of an issuer's financial condition and results and
require management to make its most difficult and subjective judgments, often as
a result of the need to make estimates of matters that are inherently uncertain.
Based upon this definition, our most critical policies include: inventories;
impairment of investments in other companies; intangible assets and goodwill;
income taxes; and legal matters. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ materially from these estimates. We
also have other key accounting policies, such as policies for revenue
recognition and accounts receivable. These other policies either do not
generally require us to make estimates and judgments that are as difficult or as
subjective, or are less likely to have a material impact on our financial
condition or results of operations for a given period. Further information
regarding all of these policies, as well as the estimates and judgments
involved, was disclosed in our Annual Report on Form 10-K for the year ended
January 5, 2003 (2002 Form 10-K). During the quarter ended April 6, 2003, there
were no significant changes to any critical accounting policies or to the
related estimates and judgments involved in applying these policies.
The unaudited consolidated condensed financial statements include our
accounts and our wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated on consolidation. The interim
financial statements should be read in conjunction with the audited financial
statements included in our 2002 Form 10-K. The results of operations for the
quarter ended April 6, 2003, are not necessarily indicative of results that may
be expected for the entire fiscal year, which ends January 4, 2004.
Income Taxes
We account for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes," which requires that deferred tax assets and liabilities be
recognized using enacted tax rates for the effect of temporary differences
between the book and tax bases of recorded assets and liabilities. SFAS No. 109
also requires that deferred tax assets be reduced by a valuation allowance if it
is more likely than not that some or all of the deferred tax assets will not be
realized. We evaluate annually the realizability of our deferred tax assets by
assessing our valuation allowance and, if necessary, we adjust the amount of
such allowance. The factors used to assess the likelihood of realization are our
forecast of future taxable income and available tax planning strategies that
could be implemented to realize the net deferred tax assets.
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At April 6, 2003, we had a net deferred tax asset of $37.3 million after
consideration of deferred tax liabilities and a valuation allowance. In order to
fully utilize the $37.3 million of deferred tax assets, taxable income in the
amount of approximately $123 million must be earned in future periods. For
proper valuation of deferred tax assets under SFAS No. 109 in situations where a
company has incurred a three-year cumulative loss before taxes in recent years,
significant negative evidence is considered to exist in the evaluation of the
company's ability to generate future taxable income. In evaluating available
positive evidence, expectations of future taxable income on an extended time
horizon are rarely sufficient to overcome the negative evidence of recent
cumulative losses. Failure to achieve positive taxable income in 2003 would
result in a cumulative three year loss before tax, which would result in
significant negative evidence under SFAS No. 109 regarding the realizability of
our net deferred tax assets and would probably result in additional tax
provisions being recorded on the income statement in 2003. Factors that may
affect our ability to achieve sufficient forecasted taxable income include, but
are not limited to, increased competition, a decline in sales or margins, loss
of market share, delays in product availability, and technological obsolescence.
Product Warranty
Our product warranty accrual includes specific accruals for known product
issues and an accrual for an estimate of incurred but unidentified product
issues based on historical activity. Due to effective product testing and the
short time between product shipment and the detection and correction of product
failures, the warranty accrual based on historical activity and the related
expense for known product issues were not significant as of or for the first
quarter of 2003 and the fourth and first quarters of 2002.
2. Impact of Recently Issued Accounting Standards
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities," an interpretation of Accounting
Research Bulletin (ARB) No. 51, "Consolidated Financial Statements." FIN 46
establishes accounting guidance for consolidation of a variable interest entity
(VIE), formerly referred to as special purpose entities. A VIE is an entity in
which the equity investors do not have a controlling interest or the equity
investment at risk is insufficient to finance the entity's activities without
receiving additional subordinated financial support from the other parties. FIN
46 applies to any business enterprise, both public and private, that has a
controlling interest, contractual relationship, or other business relationship
with a VIE. FIN 46 provides guidance for determining when an entity, the Primary
Beneficiary, should consolidate another entity, a VIE, that functions to support
the activities of the Primary Beneficiary. By June 15, 2003, corporations must
fully consolidate assets and liabilities covered by FIN 46 in their financial
statements. Full disclosure, as well as consolidation, if applicable, of any
newly created agreements after January 31, 2003, must begin immediately. We
believe that we do not currently have any contractual relationship or other
business relationship with a VIE and therefore the adoption of FIN 46 is not
expected to have any effect on our consolidated financial position or results of
operations.
3. Goodwill and Other Acquisition-Related Intangibles
During 1999 and 2000, we completed the acquisitions of AutoGate Logic,
Inc., Prosys Technology, Inc. (Prosys), and GateField Corporation (GateField),
resulting in a significant amount of goodwill and identified intangible assets.
At April 6 and January 5, 2003, we had $32.1 million of net goodwill. At the
beginning of 2002, we adopted Statement of Financial Accounting Standards (SFAS)
No. 142, "Accounting for the Impairment of Disposal of Long-Lived Assets," which
addresses the financial accounting and reporting standards for goodwill and
other intangible assets subsequent to their acquisition. This standard requires
that goodwill no longer be amortized, and instead be tested for impairment
annually or more frequently if certain events or changes in circumstances
indicate that the carrying value may not be recoverable. We completed our annual
goodwill impairments tests as of January 5, 2003, and noted no impairment. Our
next annual impairment test will be performed in the fourth quarter of 2003.
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At April 6, 2003, we have definite lived intangible assets arising from
prior business acquisitions with a net book value of $6.6 million, which are
being amortized on a straight line basis over their estimated lives. In
accordance with SFAS No. 144, we recognize impairment losses on long-lived
assets when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the net book value of
those assets. The impairment loss, if any, is measured by comparing the fair
value of the asset to its carrying value. Fair value is based on discounted cash
flows using present value techniques identified in SFAS No. 144. Currently,
there are no indicators of impairment that indicate that fair value is less than
the carrying value and would require us to write the asset down to its fair
value.
We made no acquisitions of intangible assets during the first quarter of
2003. Identified intangible assets as of April 6, 2003, consisted of the
following:
Gross Accumulated
Assets Amortization Net
---------- ------------ ----------
(in thousands)
Acquisition-related developed technology................................ $ 11,454 $ (5,825) $ 5,629
Other acquisition-related intangibles................................... 2,600 (1,764) 836
Acquired patents........................................................ 516 (418) 98
---------- ---------- ----------
Total identified intangible assets............................. $ 14,570 $ (8,007) $ 6,563
========== ========== ==========
Identified intangible assets as of January 5, 2003, consisted of the following:
Gross Accumulated
Assets Amortization Net
---------- ------------ ----------
(in thousands)
Acquisition-related developed technology................................ $ 11,454 $ (5,253) $ 6,201
Other acquisition-related intangibles................................... 2,600 (1,681) 919
Acquired patents........................................................ 516 (392) 124
---------- ---------- ----------
Total identified intangible assets............................. $ 14,570 $ (7,326) $ 7,244
========== ========== ==========
All of our identified intangible assets are subject to amortization.
Amortization of identified intangibles included the following:
Three Months Ended
--------------------------------------
Apr. 6, Apr. 7, Jan. 5,
2003 2002 2003
---------- ---------- ----------
(in thousands)
Acquisition-related developed technology................................ $ 572 $ 572 $ 572
Other acquisition-related intangibles................................... 83 83 83
Acquired patents........................................................ 26 26 26
---------- ---------- ----------
Total amortization expense..................................... $ 681 $ 681 $ 681
========== ========== ==========
Based on the carrying value of identified intangible assets recorded at April 6,
2003, and assuming no subsequent impairment of the underlying assets, the annual
amortization expense is expected to be $2.7 million for 2003, $2.7 million for
2004, $1.9 million for 2005, and none thereafter.
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Inventories
Inventories consist of the following:
Apr. 6, Jan. 5,
2003 2003
------------ ------------
(in thousands)
Inventories:
Purchased parts and raw materials................................................... $ 3,764 $ 4,066
Work-in-process..................................................................... 25,249 26,484
Finished goods...................................................................... 3,860 4,041
------------ ------------
$ 32,873 $ 34,591
============ ============
Inventory is stated at the lower of cost (first-in, first-out) or market (net
realizable value). We believe that a certain level of inventory must be carried
to maintain an adequate supply of product for customers. This inventory level
may vary based upon either orders received from customers or internal forecasts
of demand for these products. Other considerations in determining inventory
levels include the stage of products in the product life cycle, design win
activity, manufacturing lead times, customer demands, strategic relationships
with foundries, and competitive situations in the marketplace. Should any of
these factors have a result other than anticipated, inventory levels may be
adversely affected.
We write down our inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated realizable value based upon assumptions about future demand and market
conditions. To address this difficult, subjective, and complex area of judgment,
we apply a methodology that includes assumptions and estimates to arrive at the
net realizable value. First, we identify any inventory that has been previously
reserved in prior periods. This inventory remains reserved until sold,
destroyed, or otherwise dispositioned. Second, our quality assurance personnel
examine inventory line items that may have some form of obsolescence due to
non-conformance with electrical or mechanical standards. Third, we assess the
inventory not otherwise identified to be reserved against product history and
forecasted demand, typically six months. Finally, the result of this methodology
is analyzed by us in light of the product life cycle, design win activity, and
competitive situations in the marketplace to derive an outlook for consumption
of the inventory and the appropriateness of the resulting inventory levels. If
actual future demand or market conditions are less favorable than those we have
projected, additional inventory write-downs may be required.
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share in accordance with SFAS No. 128, "Earnings per Share":
Three Months Ended
----------------------------------------
Apr. 6, Apr. 7, Jan. 5,
2003 2002 2003
------------ ---------- ----------
(in thousands, except per share amounts)
Basic:
Average common shares outstanding....................................... 24,338 24,170 24,126
Shares used in computing net income per share........................... 24,338 24,170 24,126
========== ========== ==========
Net income (loss)....................................................... $ 231 $ 395 $ (1,831)
========== ========== ==========
Net income (loss) per share............................................. $ 0.01 $ 0.02 $ (0.08)
========== ========== ==========
Diluted:
Average common shares outstanding....................................... 24,338 24,170 24,126
Net effect of dilutive stock options - based on the treasury stock method 749 1,218 -
---------- ---------- ----------
Shares used in computing net income per share........................... 25,087 25,388 24,126
========== ========== ==========
Net income (loss)....................................................... $ 231 $ 395 $ (1,831)
========== ========== ==========
Net income (loss) per share............................................. $ 0.01 $ 0.02 $ (0.08)
========== ========== ==========
6. Comprehensive Income (Loss)
The components of comprehensive income (loss), net of tax, are as follows:
Three Months Ended
--------------------------------------
Apr. 6, Apr. 7, Jan. 5,
2003 2002 2003
---------- ---------- ----------
(in thousands)
Net income (loss)....................................................... $ 231 $ 395 $ (1,831)
Unrealized gain (loss) on available-for-sale securities 78 (406) 140
Less reclassification adjustment for gains included in net income (loss) (167) (15) (3)
---------- ---------- ----------
Other comprehensive income (loss)....................................... (89) (421) 137
---------- ---------- ----------
Total comprehensive income (loss)....................................... $ 142 $ (26) $ (1,694)
========== ========== ==========
Accumulated other comprehensive income is presented on the accompanying
consolidated condensed balance sheets and consists of the accumulated net
unrealized gain (loss) on available-for-sale securities.
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Significant Events
During the first quarter of 2003, we signed a ten-year $27.4 million
non-cancelable lease for our principal facilities and executive offices in
Mountain View, California. The new lease agreement expires in 2014.
During the first quarter of 2003, we also consolidated our distribution
channel in by terminating our agreement with Pioneer, leaving Unique as our sole
distributor in North America. The loss of Unique as a distributor could have a
materially adverse effect on our business, financial condition, or results of
operations.
8. Stock Based Compensation
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure an Amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for companies
making a voluntary change to fair value-based accounting for stock-based
employee compensation. We continue to account for our stock option plans under
the intrinsic value recognition and measurement principles of APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations.
Effective for interim periods beginning after December 15, 2002, SFAS No. 148
also requires disclosure of pro-forma results on a quarterly basis as if the
company had applied the fair value recognition provisions of SFAS No. 123.
As the exercise price of all options granted under these plans was equal to
the market price of the underlying common stock on the grant date, no
stock-based employee compensation cost, other than acquisition-related
compensation, is recognized in net income. The following table illustrates the
effect on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS No. 123, as amended, to options granted under the
stock option plans and under our Employee Stock Purchase Program, collectively
called "options." For purposes of this pro-forma disclosure, the estimated value
of the options is amortized ratably to expense over the options' vesting
periods. Because the estimated value is determined as of the date of grant, the
actual value ultimately realized by the employee may be significantly different.
Our pro forma information is as follows:
Three Months Ended
----------------------------------------
Apr. 6, Apr. 7, Jan. 5,
2003 2002 2003
------------ ---------- ----------
(in thousands, except per share amounts)
Reported amounts under intrinsic value method:
Stock based employee compensation cost, net of related tax, included in
net income........................................................... $ 0 $ 0 $ 0
Net income (loss)....................................................... $ 231 $ 395 $ (1,831)
Earnings per share:
Basic................................................................ $ 0.01 $ 0.02 $ (0.08)
Diluted.............................................................. $ 0.01 $ 0.02 $ (0.08)
Pro Forma amounts under fair value method:
Pro Forma stock based employee compensation cost, net of related tax.... $ 3,865 $ 5,328 $ 4,475
Pro forma net income (loss)............................................. $ (3,634) $ (4,933) $ (6,306)
Pro forma earnings per share:
Basic................................................................ $ (0.15) $ (0.20) $ (0.26)
Diluted.............................................................. $ (0.15) $ (0.20) $ (0.26)
ACTEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SFAS No. 123 requires the use of option pricing models that were not
developed for use in valuing employee stock options. The Black-Scholes
option-pricing model was developed for use in estimating the fair value of
short-lived exchange traded options that have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions, including the option's expected life and the
price volatility of the underlying stock. Because our employee stock options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in our opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of employee stock options.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Actel Corporation and its consolidated subsidiaries are referred to as
"we," "us," or "our." You should read the information in this Quarterly Report
on Form 10-Q with the Risk Factors at the end of Part I of our Annual Report on
Form 10-K for the year ended January 5, 2003 (2002 Form 10-K). Unless otherwise
indicated, the information in this Quarterly Report is given as of May 19, 2003,
and we undertake no obligation to update any of the information, including
forward-looking statements. {Forward-looking statements made under the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 are
bracketed}. The Risk Factors could cause actual results to differ materially
from those projected in the forward-looking statements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of
operations is based upon our unaudited consolidated condensed financial
statements, which have been prepared in accordance with accounting principles
for interim financial statements generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues, and
expenses and the related disclosure of contingent assets and liabilities. The
SEC has defined the most critical accounting policies as those that are most
important to the portrayal of our financial condition and results and also
require us to make the most difficult and subjective judgments, often as a
result of the need to make estimates of matters that are inherently uncertain.
Based upon this definition, our most critical policies include: inventories;
impairment of investments in other companies; intangible assets and goodwill;
income taxes; and legal matters. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ materially from these estimates. In
addition, if these estimates or their related assumptions change in the future,
it could result in material expenses being recognized on the income statement.
We also have other key accounting policies, such as policies for revenue
recognition and accounts receivable. These other policies either do not
generally require us to make estimates and judgments that are as difficult or as
subjective, or they are less likely to have a material impact on our reported
results of operations for a given period. Further information regarding all of
these policies, as well as the estimates and judgments involved, were disclosed
in our 2002 Form 10-K. During the quarter ended April 6, 2003, there were no
significant changes to any critical accounting policies or to the related
estimates and judgments involved in applying these policies.
Results of Operations
Net Revenues
Net revenues were $34.3 million for the first quarter of 2003, a 1%
increase from the fourth quarter of 2002 and a 4% increase from the first
quarter of 2002. Quarterly net revenues increased sequentially due to a 26%
increase in unit shipments of field programmable gate arrays (FPGAs), which was
partially offset by a 21% decrease in the overall average selling price (ASP) of
FPGAs. Quarterly net revenues increased from a year ago due to a 16% increase in
unit shipments and a 12% decrease in ASP. Unit volumes and ASP levels fluctuate
primarily because of changes in the mix of products sold. Our product portfolio
includes many products ranging from devices with lower ASPs, which typically
sell in higher volumes, to devices with higher ASPs, which typically sell in
lower volumes. Sales of military and aerospace products, which have higher ASPs,
made up a lower percentage of shipments in the first quarter of 2003 compared to
the first and fourth quarters of 2002. In addition, sales to customers in the
consumer market (which typically purchase lower ASP devices in higher volumes)
constituted a higher percentage of net revenues for the first quarter of 2003
compared to the first and fourth quarters of 2002. These two factors contributed
to the increase in units shipped and the decrease in ASP.
Gross Margin
Gross margin was 57.1% of net revenues for the first quarter of 2003
compared with 60.4% for the fourth quarter of 2002 and 61.3% for the first
quarter of 2002. Gross margin for the first quarter of 2003 decreased due to the
shift in mix within product categories as the revenue from the higher margin
military and aerospace products decreased from the first and fourth quarters of
2002 to the first quarter of 2003, while revenue increased from other new
products which are still achieving low margins. New products are typically
introduced at competitive selling prices while the cost structure is optimized
over time to achieve higher margins. If a new product achieves a high level of
sales shortly after introduction, lower margins are generally achieved in the
early stages as the cost structure continues to be optimized over time.
We seek to reduce costs by improving wafer yields, negotiating price
reductions with suppliers, increasing the level and efficiency of our testing
and packaging operations, achieving economies of scale by means of higher
production levels, and increasing the number of die produced per wafer,
principally by shrinking the die size of our products. No assurance can be given
that these efforts will continue to be successful. Our capability to shrink the
die size of our FPGAs is dependent on the availability of more advanced
manufacturing processes. Due to the custom steps involved in manufacturing
antifuse and (to a lesser extent) flash FPGAs, we typically obtain access to new
manufacturing processes later than our competitors using standard manufacturing
processes.
Research and Development (R&D)
R&D expenditures were $9.5 million, or 28% of net revenues, for the first
quarter of 2003 compared with $10.1 million, or 30% of net revenues, for the
fourth quarter of 2002 and $9.7 million, or 30% of revenues, for the first
quarter of 2002. R&D spending for the first quarter of 2003 decreased
sequentially due to lower spending for masks and prototype wafers.
Selling, General, and Administrative (SG&A)
SG&A expenses were $11.0 million, or 32% of net revenues, for the first
quarter of 2003 compared with $10.7 million, or 31% of net revenues, for the
fourth quarter of 2002 and $10.7 million, or 32% of net revenues, for the first
quarter of 2002. The sequential increase in SG&A spending for the first quarter
of 2003 was due to increased legal expenses related to the drafting and
negotiation of contracts and an increase in marketing expenses in support of our
ProASIC Plus and AX families.
Amortization of Acquisition-Related Intangibles and Expenses
Amortization of acquisition-related intangibles and expenses was $0.7
million for all periods presented. Due to the implementation of FAS No. 142 in
the first quarter of 2002, the amortization of goodwill was eliminated. See Note
3 of Notes to Unaudited Consolidated Condensed Financial Statements for further
discussion of FAS No. 142 and 144.
Interest Income and Other, Net
Interest income and other, net was $1.0 million for the first quarter of
2003 compared with $0.9 million for the fourth quarter of 2002 and $1.5 million
for the first quarter of 2002. The sequential increase resulted from gains
realized in the first quarter of 2003 in our short-term investment accounts. The
lower interest rates available in the market during the first quarter of 2003
was the primary factor in the decrease in interest income in the first quarter
of 2003, compared with the first quarter of 2002.
Losses on Sales and Write-Downs of Equity Investments
There were no losses on sales and write-downs of equity investments in the
first quarter of 2003 compared with losses on sales and write-downs of $2.6
million for the fourth quarter of 2002 and losses on sales $0.1 million for the
first quarter of 2002. There were no sales of equity investments during the
first quarter of 2003 and comparisons of fair values to our carrying values did
not suggest any impairment in our equity investments. Comparisons of fair value
to carrying values did suggest impairment of our equity investments during the
fourth quarter of 2002, which resulted in the loss of $2.6 million in the fourth
quarter of 2002. The $0.1 million loss in the first quarter of 2002 was the
result of partial sales of a publicly traded equity investment.
Tax Provision
The tax benefit was $0.9 million for the first quarter of 2003 compared
with $0.8 million for the fourth quarter of 2002 and a provision of $0.1 million
for the first quarter of 2002. The $0.8 million tax credit for the first quarter
of 2003 is based on the pre-tax loss of $0.6 million and the impact of tax
credits for research and development activities. The $0.8 million tax benefit in
the fourth quarter of 2002 was based on a pre-tax loss of $2.7 million which
included unrealized losses on equity investments of $2.6 million which were not
deductible in the fourth quarter of 2002 and did not impact the tax provision in
the fourth quarter of 2002.
Our tax position is based on the estimated annual tax rate in compliance
with SFAS No. 109, "Accounting for Income Taxes." Significant components
affecting the effective tax rate include federal R&D credits, income from
tax-exempt securities, the state composite rate, and recognition of certain
deferred tax assets subject to valuation allowances.
Liquidity and Capital Resources
Our cash, cash equivalents, and short-term investments were $138.8 million
at the end of the first quarter of 2003 compared with $133.8 million at the
beginning of the year.
Cash provided by operating activities was $4.2 million for the first three
months of 2003, compared with net use of $3.8 million for the first three months
of 2002. The increase in cash provided by operations resulted primarily from
changes in operating assets and liabilities that consumed less cash in the first
three months of 2003 than in the first three months of 2002. The most
significant changes in operating assets that consumed less cash in 2003 or
provided cash were accounts receivable, which increased by $0.4 million in the
first quarter of 2003 compared with an increase of $3.5 million in the first
quarter of 2002; deferred income taxes, which decreased by $5.0 million in the
first quarter of 2003 due to a $5.0 million tax refund, compared with no
increase or decrease the first quarter of 2002; and inventories, which decreased
by $1.7 million in the first quarter of 2003 compared with an increase of $0.7
million in the first quarter of 2002. Cash was partially used in a reduction of
accounts payable and other short term liabilities, which decreased by $5.0
million compared with a decrease of $1.3 million in the first quarter of 2002.
The $5.0 million tax refund was a refund of taxes paid in prior years based on a
carry back of net operating losses generated in 2001.
Capital expenditures were $2.4 million for the first quarter of 2003
compared with $2.0 million for the first quarter of 2002. Sales of common stock
under employee stock plans provided $3.3 million of cash during the first
quarter of 2003 compared with $2.6 million for the first quarter of 2002.
We meet all of our funding needs for ongoing operations with internally
generated cash flows from operations and with existing cash and short-term
investment balances. {We believe that existing cash, cash equivalents, and
short-term investments, together with cash generated from operations, will be
sufficient to meet our cash requirements for the next four quarters.} A portion
of available cash may be used for investment in or acquisition of complementary
businesses, products, or technologies. Wafer manufacturers have at times
demanded financial support from customers in the form of equity investments and
advance purchase price deposits, which in some cases have been substantial.
Should we require additional capacity, we may be required to incur significant
expenditures to secure such capacity.
We believe that the availability of adequate financial resources is a
substantial competitive factor. To take advantage of opportunities as they
arise, or to withstand adverse business conditions when they occur, it may
become prudent or necessary for us to raise additional capital. We monitor the
availability and cost of potential capital resources, including equity and debt,
with a view toward raising additional capital on terms that are acceptable to
us. No assurance can be given that additional capital would become available on
acceptable terms if needed.
Factors Affecting Future Operating Results
Our operating results are subject to general economic conditions and a
variety of risks characteristic of the semiconductor industry (including booking
and shipment uncertainties, wafer supply fluctuations, and price erosion) or
specific to us, any of which could cause our operating results to differ
materially from past results. See the Risk Factors set forth at the end of Part
I of our 2002 Annual Report which are incorporated herein by this reference.
During the first quarter of 2003, we signed a ten-year $27.4 million
non-cancelable lease for our principal facilities and executive offices in
Mountain View, California. The new lease agreement expires in 2014. During the
first quarter of 2003, we also consolidated our distribution channel by
terminating our agreement with Pioneer, leaving Unique as our sole distributor
in North America. The loss of Unique as a distributor could have a materially
adverse effect on our business, financial condition, or results of operations.
We account for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes," which requires that deferred tax assets and liabilities be
recognized using enacted tax rates for the effect of temporary differences
between the book and tax bases of recorded assets and liabilities. SFAS No. 109
also requires that deferred tax assets be reduced by a valuation allowance if it
is more likely than not that some or all of the deferred tax assets will not be
realized. We evaluate annually the realizability of our deferred tax assets by
assessing our valuation allowance and, if necessary, we adjust the amount of
such allowance. The factors used to assess the likelihood of realization are our
forecast of future taxable income and available tax planning strategies that
could be implemented to realize the net deferred tax assets.
At April 6, 2003, we had a net deferred tax asset of $37.3 million after
consideration of deferred tax liabilities and a valuation allowance. In order to
fully utilize the $37.3 million of deferred tax assets, taxable income in the
amount of approximately $123 million must be earned in future periods. For
proper valuation of deferred tax assets under SFAS No. 109 in situations where a
company has incurred a three-year cumulative loss before taxes in recent years,
significant negative evidence is considered to exist in the evaluation of the
company's ability to generate future taxable income. In evaluating positive
evidence available, expectations of future taxable income on an extended time
horizon are rarely sufficient to overcome the negative evidence of recent
cumulative losses. Failure to achieve positive taxable income in 2003 would
result in a cumulative three year loss before tax, which would result in
significant negative evidence under SFAS No. 109 regarding the realizability of
our of net deferred tax assets and probably result in additional tax provisions
being recorded on the income statement in 2003. Factors that may affect our
ability to achieve sufficient forecasted taxable income include, but are not
limited to, increased competition, a decline in sales or margins, loss of market
share, delays in product availability, and technological obsolescence.
Additional Quarterly Information
The following table presents certain unaudited quarterly results for each
of the eight quarters in the period ended April 6, 2003. In our opinion, all
necessary adjustments (consisting only of normal recurring accruals) have been
included in the amounts stated below to present fairly the unaudited quarterly
results when read in conjunction with our audited consolidated condensed
financial statements and notes thereto included in our 2002 Form 10-K. However,
these quarterly operating results are not indicative of the results for any
future period.
Three Months Ended
-----------------------------------------------------------------------------------------------
Apr. 6, Jan. 5, Oct. 6, Jul. 7, Apr. 7, Jan. 6, Sep. 30, Jul. 1,
2003 2003 2002 2002 2002 2002 2001 2001
--------- --------- --------- --------- --------- --------- --------- -----------
(in thousands except per share amounts)
Statements of Operations Data:
Net revenues.................... $ 34,341 $ 34,103 $ 32,912 $ 34,293 $ 33,060 $ 32,059 $ 32,006 $ 36,460
Gross profit.................... 19,612 20,591 19,229 21,337 20,276 19,567 16,734 18,888
Loss from operations............ (1,614) (951) (1,587) (282) (853) (4,086) (6,188) (4,233)
Net income (loss)............... 231 (1,831) 1,107 404 395 (2,531) (2,334) (2,631)
Net income (loss) per share:
Basic........................ $ 0.01 $ (0.08) $ 0.05 $ 0.02 $ 0.02 $ (0.11) $ (0.10) $ (0.11)
========= ========= ========= ========= ========= ========= ========= =========
Diluted...................... $ 0.01 $ (0.08) $ 0.04 $ 0.02 $ 0.02 $ (0.11) $ (0.10) $ (0.11)
========= ========= ========= ========= ========= ========= ========= =========
Shares used in computing net
income (loss) per share:
Basic........................ 24,338 24,126 24,531 24,382 24,170 23,987 23,852 23,642
========= ========= ========= ========= ========= ========= ========= =========
Diluted...................... 25,087 24,126 24,959 26,036 25,388 23,987 23,852 23,642
========= ========= ========= ========= ========= ========= ========= =========
Three Months Ended
-----------------------------------------------------------------------------------------------
Apr. 6, Jan. 5, Oct. 6, Jul. 7, Apr. 7, Jan. 6, Sep. 30, Jul. 1,
2003 2003 2002 2002 2002 2002 2001 2001
--------- --------- --------- --------- --------- --------- --------- -----------
As a Percentage of Net Revenues:
Net revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.................... 57.1% 60.4% 58.4 62.2 61.3 61.0 52.3 51.8
Loss from operations............ (4.7) (2.8) (4.8) (0.8) (2.6) (12.7) (19.3) (11.6)
Net income (loss)............... 0.7 (5.4) 3.4 1.2 1.2 (7.9) (7.3) (7.2)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of April 6, 2003, our investment portfolio (other than strategic
investments) consisted primarily of corporate bonds, floating rate notes, and
federal and municipal obligations. The principal objectives of our investment
activities are to preserve principal, meet liquidity needs, and maximize yields.
To meet these objectives, we only invest in high credit quality debt securities
with average maturities of less than two years. We also limit the percentage of
total investments that may be invested in any one issuer. Corporate investments
as a group are also limited to a maximum percentage of our investment portfolio.
We are exposed to financial market risks, including changes in interest
rates and marketable equity security prices. All of the potential changes noted
below are based on sensitivity analysis performed on our financial position and
expected operating levels at April 6, 2003. Actual results may differ
materially.
Our investments are subject to interest rate risk. An increase in interest
rates could subject us to a decline in the market value of our investments.
These risks are mitigated by our ability to hold these investments to maturity.
A hypothetical 100 basis point increase in interest rates would result in a
reduction of approximately $1.3 million in the fair value of our
available-for-sale securities held at April 6, 2003.
Our strategic investments in marketable equity securities are subject to
equity price risks. We typically do not attempt to reduce or eliminate market
exposure on these securities. Assuming a 10% adverse change, the marketable
strategic equity securities would decrease in value by less than $0.1 million,
based on the value of the portfolio as of April 6, 2003.
Item 4. Controls and Procedures
Quarterly Evaluation of Our Disclosure Controls and Internal Controls
Within the 90 days prior to the date of this Quarterly Report on Form 10-Q,
we evaluated the effectiveness of the design and operation of our "disclosure
controls and procedures" (Disclosure Controls) and our "internal controls and
procedures for financial reporting" (Internal Controls). This evaluation (the
Controls Evaluation) was performed under the supervision and with the
participation of management, including our Chief Executive Officer (CEO) and
Chief Financial Officer (CFO).
CEO and CFO Certifications
Immediately following the Signatures section of this Quarterly Report,
there are "Certifications" of the CEO and the CFO. The Certifications (Rule
13a-14 Certifications) are required in accordance with Rule 13a-14 of the
Securities Exchange Act of 1934 (Exchange Act). This Controls and Procedures
section of the Quarterly Report includes the information concerning the Controls
Evaluation referred to in the Rule 13a-14 Certifications and it should be read
in conjunction with the Rule 13a-14 Certifications for a more complete
understanding of the topics presented.
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act, such as
this Quarterly Report, is recorded, processed, summarized, and reported within
the time periods specified in the SEC's rules and forms. Disclosure Controls are
also designed to ensure that such information is accumulated and communicated to
our management, including the CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure. Internal Controls are procedures
designed to provide reasonable assurance that (1) our transactions are properly
authorized; (2) our assets are safeguarded against unauthorized or improper use;
and (3) our transactions are properly recorded and reported, all to permit the
preparation of our financial statements in conformity with generally accepted
accounting principles.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives
will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with its policies or
procedures. Because of the inherent limitations in a cost-effective control
system, our management, including the CEO and CFO, does not expect that our
Disclosure Controls and our Internal Controls will prevent or detect all
potential errors and fraud. Accordingly, misstatements due to error or fraud may
occur and not be detected.
Scope of the Controls Evaluation
The evaluation of our Disclosure Controls and our Internal Controls
included a review of the controls' objectives and design, our implementation of
the controls, and the effect of the controls on the information generated for
use in this Quarterly Report. In the course of the Controls Evaluation, we
sought to identify data errors, controls problems, or acts of fraud and confirm
that appropriate corrective actions, including process improvements, were being
undertaken. This type of evaluation is performed on a quarterly basis so that
the conclusions of management, including the CEO and CFO, concerning controls
effectiveness can be reported in our Quarterly Reports on Form 10-Q and Annual
Report on Form 10-K. Our Internal Controls are also evaluated on an ongoing
basis by personnel in our Finance organization, as well as by our independent
auditors, who evaluate our Internal Controls in connection with determining
their auditing procedures related to their report on our annual financial
statements and not to provide assurance on our Internal Controls. The overall
goals of these various evaluation activities are to monitor our Disclosure
Controls and our Internal Controls, and to modify them as necessary; our intent
is to maintain the Disclosure Controls and the Internal Controls as dynamic
systems that change as conditions warrant.
Among other matters, we sought in our evaluation to determine whether there
were any "significant deficiencies" or "material weaknesses" in our Internal
Controls, and whether we had identified any acts of fraud involving personnel
with a significant role in our Internal Controls. This information was important
both for the Controls Evaluation generally, and because items 5 and 6 in the
Rule 13a-14 Certifications of the CEO and CFO require that the CEO and CFO
disclose that information to our Board's Audit Committee and our independent
auditors, and report on related matters in this section of the Quarterly Report.
In professional auditing literature, "significant deficiencies" are referred to
as "reportable conditions," which are control issues that could have a
significant adverse effect on the ability to record, process, summarize, and
report financial data in the financial statements. Auditing literature defines
"material weakness" as a particularly serious reportable condition where the
internal control does not reduce to a relatively low level the risk that
misstatements caused by error or fraud may occur in amounts that would be
material in relation to the financial statements and the risk that such
misstatements would not be detected within a timely period by employees in the
normal course of performing their assigned functions. We also sought to deal
with other controls matters in the Controls Evaluation, and in each case if a
problem was identified, we considered what revision, improvement, and/or
correction to make in accordance with our ongoing procedures.
From the date of the Controls Evaluation to the date of this Quarterly
Report, there have been no significant changes in Internal Controls or in other
factors that could significantly affect Internal Controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Conclusions
Based upon the Controls Evaluation, our CEO and CFO have concluded that,
subject to the limitations noted above, our Disclosure Controls are effective to
ensure that material information relating to Actel Corporation and its
consolidated subsidiaries is made known to management, including the CEO and
CFO, particularly during the period when our periodic reports are being
prepared, and that our Internal Controls are effective to provide reasonable
assurance that our financial statements are fairly presented in conformity with
generally accepted accounting principles.
PART II - OTHER INFORMATION
Item 5. Other Information
Under Section 10A(i)(2) of the Securities Exchange Act, as added by Section
202 of the Sarbanes-Oxley Act of 2002, we are required to disclose non-audit
services to be performed by our external auditor that have been approved by our
Audit Committee. Non-audit services are defined in the law as services other
than those provided in connection with an audit or a review of the financial
statements of an issuer. On January 16, 2003, the Audit Committee preapproved
engagements of Ernst & Young LLP, our external auditor, for the following
non-audit services: tax savings projects.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
- ------------------ ------------------------------------------------------------
99.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
On April 23, 2003, we announced our financial results for the quarter ended
April 6, 2003. The full text of the press release issued in connection with the
announcement was attached as Exhibit 99.1 to our Current Report on Form 8-K
filed with the SEC on April 23, 2003.
SIGNATURE
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.
ACTEL CORPORATION
Date: May 20, 2003 /s/ Jon A. Anderson
----------------------------------
Jon A. Anderson
Vice President of Finance
and Chief Financial Officer
(as principal financial officer
and on behalf of Registrant)
CERTIFICATIONS
I, John C. East, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Actel Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 20, 2003 /s/ John C. East
--------------------------------------
John C. East
President and Chief Executive Officer
I, Jon A. Anderson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Actel Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 20, 2003 /s/ Jon A. Anderson
--------------------------------
Jon A. Anderson
Vice President of Finance
and Chief Financial Officer