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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 29, 2003.
Or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
Commission File No. 0-25662
ANADIGICS, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2582106
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
141 Mt. Bethel Road
Warren, New Jersey 07059
- ------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
(908) 668-5000
----------------------------------------------------
(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 Act). Yes [ X ] No [ ]
The number of shares outstanding of the Registrant's common stock as of April
28, 2002 was 30,674,033.
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - March 29, 2003 and
December 31, 2002.
Condensed consolidated statements of operations and
comprehensive loss - Three months ended March 29, 2003 and March
30, 2002.
Condensed consolidated statements of cash flows - Three months
ended March 29, 2003 and March 30, 2002.
Notes to condensed consolidated financial statements - March 29,
2003.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
Certifications
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS (unaudited)
ANADIGICS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
March 29, 2003 December 31, 2002
-------------- -----------------
(unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 25,483 $ 24,343
Marketable securities 76,266 74,038
Accounts receivable 10,108 9,016
Inventories 13,866 13,277
Prepaid expenses and other current assets 4,981 4,600
--------- ---------
Total current assets 130,704 125,274
Marketable securities 42,870 57,137
Property and equipment:
Equipment and furniture 123,629 123,328
Leasehold improvements 38,372 37,473
Projects in process 5,382 5,371
--------- ---------
167,383 166,172
Less accumulated depreciation and amortization 102,173 97,572
--------- ---------
65,210 68,600
Other assets 4,724 4,660
--------- ---------
Total assets $ 243,508 $ 255,671
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,499 $ 7,434
Accrued liabilities 4,596 4,733
Accrued restructuring costs 3,056 2,956
--------- ---------
Total current liabilities 15,151 15,123
Long-term debt, less current portion 66,700 66,700
Other long-term liabilities 2,821 2,760
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 144,000,000 shares
authorized, 30,674,033 issued and outstanding at
March 29, 2003 and December 31, 2002 307 307
Additional paid-in capital 334,162 334,162
Accumulated deficit (176,365) (164,124)
Accumulated other comprehensive income 732 743
--------- ---------
Total stockholders' equity 158,836 171,088
--------- ---------
Total liabilities and stockholders' equity $ 243,508 $ 255,671
========= =========
See accompanying notes.
3
ANADIGICS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months ended
------------------------------------
March 29, 2003 March 30, 2002
-------------- --------------
(unaudited) (unaudited)
Net sales $ 16,087 $ 19,521
Cost of sales 16,079 19,005
---------- ----------
Gross profit 8 516
Research and development expenses 7,157 7,578
Selling and administrative expenses 4,518 5,279
Restructuring and other charges 625 2,715
Asset impairment charges - 3,244
---------- ----------
Operating loss (12,292) (18,300)
Interest income 1,013 1,681
Interest expense (941) (1,442)
Other (expense) income (21) 2
---------- ----------
Loss before cumulative effect
of accounting change (12,241) (18,059)
Cumulative effect of accounting change - (8,010)
---------- ----------
Net loss $ (12,241) $ (26,069)
========== ==========
Basic and diluted loss per share
Loss before cumulative effect
of accounting change $ (0.40) $ (0.59)
Net loss $ (0.40) $ (0.85)
Weighted average common and dilutive
securities outstanding 30,674,033 30,570,828
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(DOLLARS IN THOUSANDS)
Three months ended
------------------------------------
March 29, 2003 March 30, 2002
-------------- --------------
(unaudited) (unaudited)
Net loss $ (12,241) $ (26,069)
Unrealized losses on marketable securities (29) (965)
Foreign currency translation adjustment 6 (55)
Reclassification adjustment:
Net realized loss previously recognized
in other comprehensive income 12 31
---------- ----------
Comprehensive loss $ (12,252) $ (27,058)
========== ==========
See accompanying notes.
4
ANADIGICS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Three months ended
---------------------------------
March 29, 2003 March 30, 2002
--------------- --------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(12,241) $(26,069)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Cumulative effect of accounting change - 8,010
Depreciation 4,699 5,055
Amortization 300 545
Amortization of premium on marketable securities 570 668
Impairment of long-lived assets - 3,244
Loss on disposal of equipment 25 -
Changes in operating assets and liabilities:
Accounts receivable (1,092) (1,430)
Inventory (589) 2,018
Prepaid expenses and other assets (726) (204)
Accounts payable 65 2,389
Accrued liabilities and other liabilities 30 685
-------- --------
Net cash used in operating activities (8,959) (5,089)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment (1,341) (373)
Purchases of marketable securities (31,310) (27,318)
Proceeds from sale of marketable securities 42,750 12,974
-------- --------
Net cash provided by (used in) investing activities 10,099 (14,717)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of capital lease obligations - (56)
Repayments of long-term debt - (65)
Issuance of common stock - 20
-------- --------
Net cash used in financing activities - (101)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,140 (19,907)
Cash and cash equivalents at beginning of period 24,343 63,102
-------- --------
Cash and cash equivalents at end of period $ 25,483 $ 43,195
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ - $ 5
Taxes paid - 115
See accompanying notes.
5
ANADIGICS, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- MARCH 29, 2003
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited, condensed, consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they 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. Operating results for the three month
period ended March 29, 2003 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2003.
The condensed, consolidated balance sheet at December 31, 2002 has been
derived from the audited financial statements at that date but does not include
all the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.
The condensed, consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Effective January 1, 2002, the Company completed the first of the required
impairment tests of goodwill required under Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets (FAS 142), which was
adopted as of that date. Under the new rules, goodwill is no longer subject to
amortization but is reviewed for potential impairment, upon adoption and
thereafter annually or upon the occurrence of an impairment indicator. As a
result of completing the required test, the Company recorded a charge
retroactive to the adoption date for the cumulative effect of the accounting
change in the amount of $8,010 ($0.26 per share) representing the excess of the
carrying value of a reporting unit (Telcom) as compared to its estimated fair
value. The change modified the first quarter's previously reported net loss of
$18,059 ($0.59 per share) to $26,069 ($0.85 per share).
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). FAS
143 requires that asset retirement obligations that are identifiable upon
acquisition and construction, and during the operating life of a long-lived
asset be recorded as a liability using the present value of the estimated cash
flows. A corresponding amount would be capitalized as part of the asset's
carrying amount and amortized to expense over the asset's useful life. The
Company adopted the provisions of FAS 143 effective January 1, 2003 and there
was no impact on the financial statements.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146) which nullifies EITF Issue
No. 94-3. FAS 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred, whereas EITF
No. 94-3 had recognized the liability at the commitment date to an exit plan.
The Company adopted the provisions of FAS 146 for exit or disposal activities
initiated during the period ended March 29, 2003.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the recognition
of certain guarantees as liabilities at fair market value and is effective for
guarantees issued or modified after December 31, 2002. The Company adopted the
disclosure requirement of FIN 45 and there was no impact on the financial
statements from the fair market value provisions. The Company provides for
warranty obligations, by a current charge to income, an amount it estimates, by
examining historical returns and other information it deems critical, will be
needed to cover future warranty costs for products sold during the period.
Warranty reserve movements in the quarter included $54 in actual charges, $2 in
additional provisions resulting in the balance of $321 at March 29, 2003.
In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends
Statement No. 123, Stock-Based Compensation,(FAS 123) to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, FAS 148 amends
the requirements of FAS 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
disclosure provisions of FAS 148 are effective for periods ending after December
15, 2002 and have been incorporated as below.
6
STOCK BASED COMPENSATION
As permitted by FAS 123, the Company has elected to follow the intrinsic
value method under Accounting Principle Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25) and related interpretations in accounting for
its employee stock option plans. Under APB 25, no compensation expense is
recognized at the time of option grant when the exercise price of the Company's
employee stock options equals the fair market value of the underlying common
stock on the date of grant.
The following table illustrates the effect on net loss and loss per common
share as if the Company had applied the fair value method to measure stock-based
compensation, required under the disclosure provisions of FAS 123:
Three months ended
-----------------------------
March 29, 2003 March 30, 2002
-------------- --------------
Net loss, as reported .......................... $ (12,241) $ (26,069)
Stock based compensation expense under fair
value reporting .............................. (1,897) (3,201)
---------- ----------
Pro forma net loss ............................. $ (14,138) $ (29,270)
---------- ----------
Loss per share
Net loss, as reported
Basic .......................................... $ (0.40) $ (0.85)
Diluted ........................................ $ (0.40) $ (0.85)
Pro forma net loss
Basic .......................................... $ (0.46) $ (0.96)
Diluted ........................................ $ (0.46) $ (0.96)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
March 29, 2003 December 31, 2002
--------------- -----------------
Raw materials $ 4,240 $ 4,316
Work in process 9,650 10,080
Finished goods 6,868 6,015
----------- ----------
20,758 20,411
Reserves (6,892) (7,134)
----------- ----------
Total $ 13,866 $ 13,277
----------- ----------
3. LOSS PER SHARE
The reconciliation of shares used to calculate basic and diluted loss per
share consists of the following:
Three months ended
---------------------------------
March 29, 2003 March 30, 2002
--------------- --------------
Weighted average common shares
outstanding used to calculate
basic loss per share 30,674,033 30,570,828
Net effect of dilutive securities
based upon the treasury stock method
using an average market price -* -*
------------ -----------
Weighted average common and
dilutive securities outstanding
used to calculate diluted loss
per share 30,674,033 30,570,828
============ ===========
* Any dilution arising from the Company's outstanding stock options or shares
potentially issuable upon conversion of the Convertible notes are not included
as their effect is anti-dilutive.
7
4. REVENUE SOURCES
The Company classifies its revenues based upon the end application of the
product in which its integrated circuits are used. Net sales by end application
are regularly reviewed by the chief operating decision maker and are as follows:
Three months ended
---------------------------------
March 29, 2003 March 30, 2002
---------------- --------------
Broadband $ 7,512 $ 10,502
Wireless 8,575 9,019
------------- -----------
Total $ 16,087 $ 19,521
============= ===========
The Company primarily sells to three geographic regions: Asia, U.S.A. and
Canada, and Other. The geographic region is determined by the destination of the
shipped product. Net sales to each of the three geographic regions are as
follows:
Three months ended
---------------------------------
March 29, 2003 March 30, 2002
-------------- --------------
Asia $ 4,719 $ 7,465
U.S.A. and Canada 10,464 10,451
Other 904 1,605
----------- ------------
Total $ 16,087 $ 19,521
=========== ============
5. RESTRUCTURING CHARGES
During the first quarter of 2003, the Company recorded restructuring
charges of $625 pertaining to severance and related benefits of workforce
reductions undertaken in the quarter. The workforce reductions eliminate
approximately 19 operations and administrative positions to whom $122 of
benefits were paid through March 29, 2003.
During the first quarter of 2002, the Company recorded restructuring
charges of $5,959 after curtailing certain fiber-optic research activities and
consolidating facilities at its Warren headquarters. The restructuring charges
included $2,185 for facilities consolidation costs and $3,244 for an impairment
of certain leasehold improvements and research fixed assets. A charge of $530
was recorded for severance and related benefits of workforce reductions.
6. LONG-TERM DEBT
On November 27, 2001, the Company issued $100,000 aggregate principal amount
of 5% Convertible Senior Notes ("Convertible notes") due November 15, 2006.
During the third quarter of 2002, the Company repurchased and retired $33,300
principal amount of the Convertible notes. The outstanding notes are convertible
into shares of common stock at any time prior to their maturity or prior
redemption by the Company. The notes are convertible into shares of common stock
at a rate of 47.619 shares for each $1,000 principal amount (convertible at a
price of $21.00 per share), subject to adjustment. Interest is payable
semi-annually on May 15 and November 15 of each year.
7. SUBSEQUENT EVENTS
On March 31, 2003, the Company acquired certain assets and liabilities of the
wireless LAN power amplifier business of RF Solutions for an initial payment of
$2,800 and contingent consideration, based on achieving certain revenue
milestones over the next 12 months, of up to 3 million shares of the Company's
common stock.
8
ANADIGICS, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth unaudited consolidated statements of
operations data as a percent of net sales for the periods presented:
Three months ended
---------------------------------
March 29, 2003 March 30, 2002
-------------- --------------
Net sales 100.0% 100.0%
Cost of sales 100.0% 97.4%
----- -----
Gross profit - 2.6%
Research and development expenses 44.5% 38.8%
Selling and administrative expenses 28.0% 27.0%
Restructuring charges 3.9% 13.9%
Asset impairment charges - 16.6%
----- -----
Operating loss (76.4%) (93.7%)
Interest income 6.3% 8.6%
Interest expense (5.9%) (7.4%)
Other income (expense) (0.1%) -
----- -----
Loss before cumulative effect of accounting change (76.1%) (92.5%)
Cumulative effect of accounting change - (41.0%)
----- -----
Net loss (76.1%) (133.5%)
===== =====
FIRST QUARTER 2003 (ENDED MARCH 29, 2003) COMPARED TO FIRST QUARTER 2002 (ENDED
MARCH 30, 2002)
Net Sales. Net sales decreased 17.6% during the first quarter of 2003 to
$16.1 million from $19.5 million in the first quarter of 2002.
Sales of integrated circuits for Wireless applications decreased 4.9%
during the first quarter of 2003 to $8.6 million from $9.0 million in the first
quarter of 2002. The decrease in sales of integrated circuits for Wireless
applications was primarily due to the continued decrease in sales of our TDMA
power amplifiers. Offsetting the TDMA decline was a 30.6% increase in our CDMA
module revenue that was driven by volume increases.
Sales of integrated circuits for Broadband applications decreased 28.5%
during the first quarter of 2003 to $7.5 million from $10.5 million in the first
quarter of 2002. The decrease in sales of integrated circuits for Broadband
applications was primarily due to decreased demand for our reverse amplifiers
and converters used in digital set-top boxes and cable modems and to a lesser
degree, a reduction in sales of integrated circuits for fiber optic
applications.
The decline in sales to the Asia region is due to a decline in Broadband and
TDMA sales, which were partially offset by an increase in CDMA sales.
Generally, selling prices for same product sales were lower during the
first quarter of 2003 compared to the first quarter of 2002.
GROSS MARGIN. Gross margin during the first quarter of 2003 declined to
breakeven from 2.6% in the first quarter of 2002. The decrease in gross margin
in 2003 was primarily due to the decrease in revenues, lower production and
consequent lower absorption of fixed costs, which was partially offset by
reductions in our manufacturing cost base.
RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense decreased 5.6% during the first quarter of 2003 to $7.2 million from
$7.6 million during the first quarter of 2002. The decrease was primarily
attributable to $0.3 million of cost reduction initiative expenses recorded in
the first quarter of 2002. As a percentage of sales, research and development
expense increased to 44.5% in the first quarter of 2003 from 38.8% in the first
quarter of 2002.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses decreased
14.4% during the first quarter of 2003 to $4.5 million from $5.3 million in the
first quarter of 2002. The decrease in selling and administrative expenses was
primarily due to lower compensation and professional fees following our
restructuring initiatives of 2002 and the elimination of intangibles
amortization in 2003. As a percentage of sales, selling and administrative
expenses increased to 28.0% in the first quarter of 2003 from 27.0% in the first
quarter of 2002.
9
ASSET IMPAIRMENT AND RESTRUCTURING AND OTHER CHARGES. During the first
quarter of 2003, we recorded restructuring charges of $0.6 million pertaining to
severance and related benefits of workforce reductions undertaken in the
quarter. The workforce reductions eliminate approximately 19 positions in
operations and administration to whom approximately $0.1 million of severance
benefits were paid through March 29, 2003. The anticipated annual savings from
these charges is expected to approximate $1.9 million.
During the first quarter of 2002, we recorded restructuring charges of $6.0
million. As part of our cost reduction initiatives, we curtailed certain
fiber-optic research activities and consolidated facilities at our Warren
headquarters. The restructuring charges included $2.2 million for facilities
consolidation costs and $3.2 million for an impairment of certain leasehold
improvements and research fixed assets, which are no longer used in our ongoing
business. A charge of $0.5 million was recorded for severance and related
benefits of workforce reductions undertaken in the first quarter. The workforce
reductions eliminated approximately 22 fiber research and marketing positions.
INTEREST INCOME. Interest income decreased 39.7% to $1.0 million during the
first quarter of 2003 from $1.7 million during the first quarter of 2002. The
decrease of $0.7 million was primarily due to lower invested funds and was
compounded by lower interest rates.
INTEREST EXPENSE. Interest expense decreased 34.7% to $0.9 million during
the first quarter of 2003 from $1.4 million during the first quarter of 2002.
The decrease of $0.5 million is due to the lower outstanding balance of $66.7
million of our 5% Convertible notes, following their original $100.0 million
issuance on November 27, 2001 and our partial repurchase and retirement in the
third quarter of 2002.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Effective January 1, 2002, we
completed the first of the required impairment tests of goodwill required under
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, which was adopted as of that date. As a result of completing
the required test, we recorded a charge retroactive to the adoption date for the
cumulative effect of the accounting change in the amount of $8.0 million
representing the excess of the carrying value of a reporting unit (Telcom) as
compared to its estimated fair value.
LIQUIDITY AND CAPITAL RESOURCES
As of March 29, 2003, we had $25.5 million in cash and cash equivalents and
$119.1 million in marketable securities. We had $66.7 million of
interest-bearing debt outstanding as of March 29, 2003.
Operating activities used $9.0 million in cash during the three-month
period ended March 29, 2003. Investing activities, which consisted of purchases
of equipment of $1.3 million and net sales of marketable securities of $11.4
million, provided $10.1 million of cash during the three month period ended
March 29, 2003.
As of March 29, 2003, we had purchase commitments of approximately $0.6
million for equipment, furniture and leasehold improvements.
We believe that our existing sources of capital, including internally
generated funds, will be adequate to satisfy operational needs and anticipated
capital needs for the next twelve months and beyond. Our anticipated capital
needs may include acquisitions of complimentary businesses or technologies, or
investments in other companies or repurchasing our outstanding debt or equity.
However, we may elect to finance all or part of our future capital requirements
through additional equity or debt financing. There can be no assurance that such
additional financing would be available on satisfactory terms.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). FAS
143 requires that asset retirement obligations that are identifiable upon
acquisition and construction, and during the operating life of a long-lived
asset be recorded as a liability using the present value of the estimated cash
flows. A corresponding amount would be capitalized as part of the asset's
carrying amount and amortized to expense over the asset's useful life. We
adopted the provisions of FAS 143 effective January 1, 2003 and there was no
impact on the financial statements.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146) which nullifies EITF Issue
No. 94-3. FAS 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred, whereas EITF
No. 94-3 had recognized the liability at the commitment date to an exit plan. We
adopted the provisions of FAS 146 for exit or disposal activities initiated
during the period ended March 29, 2003.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the recognition
of certain guarantees as liabilities at fair market value and is effective for
guarantees issued or modified after December 31, 2002. We adopted the disclosure
requirement of FIN 45 and there was no impact on the financial statements from
the fair market value provisions. We provide for warranty obligations, by a
current charge to income, an amount it estimates, by examining historical
returns and other information it deems critical, will be needed to cover future
warranty costs for products sold during the period.
10
In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends
Statement No. 123, Stock-Based Compensation, (FAS 123) to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, FAS 148 amends
the requirements of FAS 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
disclosure provisions of FAS 148 are effective for periods ending after December
15, 2002.
RISKS AND UNCERTAINTIES
Except for historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties,
including, but not limited to, order rescheduling or cancellation, changes in
customers' forecasts of product demand, timely product and process development
and protection of the associated intellectual property rights, individual
product pricing pressure, variation in production yield, changes in estimated
product lives, difficulties in obtaining components and assembly and test
services needed for production of integrated circuits, change in economic
conditions of the various markets we serve, as well as the other risks detailed
from time to time in our reports filed with the Securities and Exchange
Commission, including the report on Form 10-K for the year ended December 31,
2002 and the Registration Statement on Form S-3 (Registration No. 333-75040).
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as "believe", "anticipate",
"expect", or words of similar import. Similarly, statements that describe our
future plans, objectives, estimates or goals are forward-looking statements. The
cautionary statements made in this Form 10-Q should be read as being applicable
to all related forward-looking statements wherever they appear in this Form
10-Q. Important factors that could cause actual results and developments to be
materially different from those expressed or implied by such statements include
those factors discussed herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in interest rates primarily from our investments
in certain available-for-sale securities. Our available-for-sale securities
consist primarily of fixed income investments (U.S. Treasury and Agency
securities, commercial paper and corporate bonds). We continually monitor our
exposure to changes in interest rates and credit ratings of issuers from our
available-for-sale securities. Accordingly, we believe that the effects of
changes in interest rates and credit ratings of issuers are limited and would
not have a material impact on our financial condition or results of operations.
However, it is possible that we would be at risk if interest rates or credit
ratings of issuers change in an unfavorable direction. The magnitude of any gain
or loss would be a function of the difference between the fixed rate of the
financial instrument and the market rate and our financial condition and results
of operations could be materially affected.
Our Convertible notes bear a fixed rate of interest of 5%. A change in
interest rates on long-term debt is assumed to impact fair value but not
earnings or cash flow because the interest rate is fixed.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
The management of the Company, including the President and Chief Executive
Officer and the Chief Financial Officer, have conducted an evaluation of the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act) as of a date
(the "Evaluation Date") within 90 days prior to the filing date of this report.
Based on that evaluation, the President and Chief Executive Officer and the
Chief Financial Officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were effective in ensuring that all material
information relating to the Company, including its consolidated subsidiaries,
required to be filed in this quarterly report has been made known to them in a
timely manner.
Changes in internal controls.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the most recently completed evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
11
ANADIGICS, Inc.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ANADIGICS is a party to litigation arising out of the operation of its
business. We believe that the ultimate resolution of such litigation should not
have a material adverse effect on the Company's financial condition, results of
operations or liquidity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Bami Bastani, President and Chief
Executive Officer of ANADIGICS, Inc., pursuant to 18
U.S.C. 1350.
99.2 Certification of Thomas C. Shields, Senior Vice President
and Chief Financial Officer of ANADIGICS, Inc., pursuant
to 18 U.S.C. Section 1350.
(b) Reports on Form 8-K during the quarter ended March 29, 2003.
None.
12
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.
ANADIGICS, INC.
By: /s/ Thomas C. Shields
-----------------------------
Thomas C. Shields
Senior Vice President
and Chief Financial Officer
Dated: April 30, 2003
13
CERTIFICATION
I, Bami Bastani, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ANADIGICS, Inc.;
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 functions):
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: April 30, 2003
By: /s/ Bami Bastani
--------------------------------
Bami Bastani
President and
Chief Executive Officer
14
CERTIFICATION
I, Thomas Shields, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ANADIGICS, Inc.;
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 functions):
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: April 30, 2003
By: /s/ Thomas C. Shields
--------------------------------
Thomas C. Shields
Senior Vice President
and Chief Financial Officer
15