UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 2003
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
For the Transition Period from to
Commission File Number 0-17795
CIRRUS LOGIC, INC.
(Exact name of registrant as specified in its charter)
2901 Via Fortuna Austin, Texas 78746
(Address of principal executive offices) (Zip Code)
(512) 851-4000
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 þ NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES þ NO ¨
The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of July 26, 2003 was 83,935,993.
FORM 10-Q QUARTERLY REPORT
QUARTERLY PERIOD ENDED JUNE 28, 2003
TABLE OF CONTENTS
Item 1.
Consolidated Condensed Balance Sheet—June 28, 2003 (unaudited) and March 29, 2003
Consolidated Condensed Statement of Operations (unaudited)—Three Months Ended June 28, 2003 and June 29, 2002
Consolidated Condensed Statement of Cash Flows (unaudited)—Three Months Ended June 28, 2003 and June 29, 2002
Notes to the Consolidated Condensed Financial Statements (unaudited)
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
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CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands)
Current assets:
Cash and cash equivalents
Restricted cash
Marketable equity securities
Accounts receivable, net
Inventories
Other current assets
Total current assets
Property and equipment, net
Goodwill and intangibles, net
Other assets
Current liabilities:
Accounts payable and accrued liabilities
Income taxes payable
Total current liabilities
Long-term obligations
Stockholders’ equity:
Capital stock
Accumulated deficit
Accumulated other comprehensive income (loss)
Total stockholders’ equity
The accompanying notes are an integral part of these consolidated condensed financial statements.
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CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except per share amounts; unaudited)
Net sales
Costs and expenses:
Cost of sales
Research and development
Selling, general and administrative
Restructuring and other costs
Amortization of acquired intangibles
Total costs and expenses
Loss from operations
Realized gain on marketable equity securities
Interest expense
Interest income
Other income (expense), net
Loss before income taxes and loss from discontinued operations
Provision for income taxes
Loss from continuing operations
Loss from discontinued operations
Net loss
Basic and diluted loss per share:
From continuing operations
Discontinued operations
Basic and diluted weighted average common shares outstanding
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CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands; unaudited)
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Gain on marketable equity securities
Other non-cash charges
Net change in operating assets and liabilities
Net cash used in operating activities
Cash flows from investing activities:
Proceeds from sale of equity investments
Additions to property and equipment
Investments in technology
Decrease in deposits and other assets
Net cash used in investing activities
Cash flows from financing activities:
Payments on long-term debt and capital lease obligations
Issuance of common stock, net of issuance costs
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The consolidated condensed financial statements have been prepared by Cirrus Logic, Inc. (“we,” “us,” “our,” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated condensed financial statements do not include complete footnotes and financial presentations. As a result, these financial statements should be read along with the audited consolidated financial statements and notes thereto for the year ended March 29, 2003, included in our 2003 Annual Report on Form 10-K. We maintain a Web site at www.cirrus.com, which makes available free of charge our recent annual report and other filings with the SEC. In our opinion, the financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, operating results and cash flows for those periods presented. The results of operations for the interim period presented are not necessarily indicative of the results that may be expected for the entire year.
Certain reclassifications have been made to the fiscal year 2003 financial statements to conform to the fiscal year 2004 presentation. These reclassifications had no effect on the results of operations or stockholders’ equity.
2. Recently Issued Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created before February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. We are currently evaluating the effect of this financial interpretation on our company. At this time, we do not believe that the adoption of FIN 46 will have a material impact on our results of operations.
3. Inventories
Inventories are comprised of the following (in thousands):
Work-in process
Finished goods
4. Assets Held for Sale
On June 26, 2003, we agreed to sell our test operations assets, consisting of analog and mixed-signal testers, handlers and wafer probes, to ChipPAC, Inc. (“ChipPAC”), a provider of semiconductor packaging design, assembly, test, and distribution services, for $3.5 million. The transaction closed and the cash was received on June 30, 2003. The transfer of assets will occur over a six-month period ending in December 2003. As a result of the planned transfer of these assets to ChipPAC, we recorded an impairment charge of $0.7 million in cost of sales during the first quarter and reclassified the related assets to assets held for sale, a component of other current assets. In addition to the transfer of assets, we have entered into a long-term outsourcing agreement, under which ChipPAC will provide package development, wafer probe, assembly, final test and distribution services to us.
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5. Goodwill and Acquired Intangibles
The following information details the gross carrying amount and accumulated amortization of our acquired intangible assets (in thousands):
Core Technology
License Agreements
Existing Technology
Trademarks
Amortization expense for all acquired intangibles in the first quarter of fiscal years 2004 and 2003 was $3.8 million and $4.7 million, respectively. The following table details the estimated aggregate amortization expense for all acquired intangibles for fiscal year 2004 and for each of the 5 succeeding fiscal years (in thousands):
For the year ended March 27, 2004
For the year ended March 26, 2005
For the year ended March 25, 2006
For the year ended March 31, 2007
For the year ended March 29, 2008
For the year ended March 28, 2009
6. Income Taxes
We incurred income tax expense of $21 thousand for the first quarter of fiscal year 2004, compared with $29 thousand incurred for the comparable period of fiscal year 2003. The income tax expense for both periods consisted primarily of foreign withholding and foreign income taxes.
Our taxes payable balance is comprised primarily of tax contingencies that are recorded to address potential exposures involving tax positions we have taken that could be challenged by taxing authorities. These potential exposures result from the varying application of statutes, rules, regulations, and interpretations. Our tax contingencies are established based on past experiences and judgments about potential actions by taxing jurisdictions. It is reasonably likely that the ultimate resolution of these matters may be materially greater or less than the amount that we have accrued.
Statement of Financial Accounting Standard No. 109 (“SFAS 109”), “Accounting for Income Taxes,” provides for the recognition of deferred tax assets if realization of these assets is more likely than not. We have provided a valuation allowance equal to our net deferred tax assets due to uncertainties regarding their realization. We evaluate the realizability of our deferred tax assets on a quarterly basis.
7. Restructuring and Other Costs
During the first quarter of fiscal year 2004, we recorded a charge of $5.8 million in operating expenses for facility consolidations in California and Texas. We also recorded a restructuring charge of $0.3 million related to workforce reductions during the first quarter. Additionally, we recorded an impairment charge of $1.5 million for property and equipment associated with our Austin, Texas facility consolidation.
During the first quarter of fiscal year 2003, we announced our intentions to reduce costs and operating expenses. We eliminated approximately 150 employee positions worldwide, or 13% of the total workforce, from various business functions and job classes over the first half of fiscal
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year 2003. During the first quarter of fiscal year 2003, we recorded a restructuring charge of $1.7 million in operating expenses to cover costs associated with a portion of these workforce reductions and $0.4 million related to facility consolidations.
As of June 28, 2003, we had a remaining accrual for all of our past restructurings of $10.8 million, primarily related to net lease expenses that will be paid over their respective lease terms through fiscal year 2013, along with other anticipated lease termination costs. We have classified $8.0 million of this restructuring accrual as long term.
The following table details the changes in all of our restructuring accruals during the quarter ended June 28, 2003:
Description
Severance—fiscal year 2004
Facilities Abandonment—fiscal year 2004
Severance—fiscal year 2003
Facilities Abandonment—fiscal year 2003
Facilities Abandonment—fiscal year 2002
Facilities Abandonment—fiscal year 1999
8. Contingencies
Fujitsu
On October 19, 2001, we filed a lawsuit against Fujitsu, Ltd. in the United States District Court for the Northern District of California. We are alleging claims for breach of contract and anticipatory breach of contract, and seek damages in excess of $46 million. The basis for our complaint is Fujitsu’s refusal to pay for chips delivered to and accepted by it. On December 17, 2001, Fujitsu filed an answer and a counterclaim. Fujitsu alleges claims for breach of contract, breach of warranty, quantum meruit/equitable indemnity, and declaratory relief. The basis for the claims is our sale of allegedly defective chips to Fujitsu, which chips allegedly caused Fujitsu’s hard disk drives to fail. The counterclaim does not specify the damages Fujitsu seeks, other than to allege it has sustained “tens of millions” of dollars in damages. Our claim is based on chips that are not included in Fujitsu’s counterclaim but for which Fujitsu has not paid. To facilitate the resolution of all claims in one lawsuit, including our claims against potentially responsible third parties, we and Fujitsu agreed to realign our claims with Fujitsu as the plaintiff and us as the defendant and counterclaimant. This realignment allowed us to file in the same lawsuit a third-party claim alleging breach of contract and warranty against Amkor Technology, Inc., the company that recommended and sold us the goods that allegedly caused Fujitsu’s hard disk drives to fail. Amkor filed an answer to our third-party claim and a third-party complaint for implied contractual indemnity against Sumitomo Bakelite Co., Ltd., the company that sold the allegedly defective goods to Amkor. The trial is scheduled for July 2004. At this time, we are unable to assess the potential outcome of this litigation. We intend to defend and prosecute our lawsuit vigorously. Further, we believe that any potential liability in connection with Fujitsu’s counterclaim is covered by insurance coverage and claims we have against third parties.
Western Digital
On July 5, 2001, Western Digital Corporation and its Malaysian subsidiary, Western Digital (M) SDN.BHD, filed a lawsuit against us in the Superior Court of the State of California, Orange County, in connection with the purchase of “read channel” chips from us, as explained in more detail below. On August 20, 2001, we filed a cross complaint against the plaintiffs, and on October 9, 2001, the Court granted our motion for judgment on the pleadings that resulted in the dismissal of the plaintiffs’ entire original complaint.
The plaintiffs filed an amended complaint, in which they alleged that they entered into an oral supply contract for “read channel” chips with us, and that we breached the contract and our duty of good faith and fair dealing. This amended complaint seeks, among other things, unspecified damages, which appear to be in excess of $60 million, and declaratory relief. We filed a cross-complaint against the plaintiffs, alleging causes of action for breach of
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contract, fraud and negligent misrepresentation. We are seeking damages in excess of $53 million, as well as punitive damages. The plaintiffs currently owe us amounts exceeding $53 million for products we have shipped and for non-cancelable orders placed with us.
On December 24, 2001, the trial court granted our application for writs of attachment against the plaintiffs in the amount of approximately $25 million. The plaintiffs appealed the order, and the court of appeals affirmed the decision of the trial court on May 6, 2003. Pursuant to an agreement we entered into, the plaintiffs have delivered to us a letter of credit in the amount of approximately $25 million in substitution for an attachment of their property. We will have the right to draw under the letter of credit in the event we prevail in the litigation.
On December 31, 2002, the court granted our motion for summary adjudication of five of the seven causes of action in the plaintiffs’ first amended complaint. On April 25, 2003, the court granted the plaintiffs’ leave to file a second amended complaint. The trial is scheduled for December 2003. We intend to collect all amounts owed to us. We have not accrued for any amount we may be ordered to pay the plaintiffs because we do not believe this outcome is probable. If an adverse judgment were to occur, the amount cannot be quantified at this time.
LuxSonor Semiconductors, Inc.
On April 9, 2003, we filed a claim for approximately $760,000 against the escrow account set up in connection with our acquisition of LuxSonor Semiconductors, Inc. (“LuxSonor”). This escrow account was set up to compensate us in the event of certain breaches of warranties and covenants by LuxSonor made in the Agreement of Merger. Our claim comprised of (i) certain penalties and fees we assumed in connection with the acquisition, (ii) an uncollectible accounts receivable, (iii) unreported accounts payable, and (iv) issues related to the infringement of certain third-party intellectual property rights. The shareholder representative has stated that he is investigating the issues related to the infringement issue. Neither party has initiated arbitration of this claim, pending this investigation.
ATI and NVIDIA
On May 16, 2003, we initiated a lawsuit in the Western District of Texas, Austin Division, against ATI Technologies Inc. (“ATI”) and NVIDIA Corporation (“NVIDIA”) for infringement of our United States Patent No. 5,841,418. As part of our complaint, we are seeking damages and a permanent injunction against further infringement by certain graphics processors made, used, sold, offered for sale, or imported into the United States by ATI and NVIDIA. NVIDIA filed counterclaims against us on July 11, 2003, for infringement of U.S. Patent Nos. 5,768,628; 5,968,148; and 6,292,854. NVIDIA is seeking damages and a permanent injunction against further infringement by certain products made, used, sold, offered for sale, or imported into the United States by us. We intend to prosecute and defend our lawsuit vigorously. At this time, we are unable to assess the outcome of this lawsuit.
Other Claims
On June 3, 2003, the Inland Revenue Authority of Singapore notified us that it disagreed with our classification of sales to certain disk drive customers from May 1997 to March 1998, resulting in additional goods and services taxes owed by us. In the event we do not prevail, we could owe approximately $5 million, plus interest and penalties. We plan to contest this claim and, if necessary, to pursue reimbursement from these customers. We are unable at this time to make a determination regarding the outcome of this matter.
From time to time, various claims, charges, and litigation are asserted or commenced against us arising from, or related to, contractual matters, intellectual property, employment disputes, as well as other issues. Frequent claims and litigation involving these types of issues are not uncommon in the semiconductor industry. As to any of these claims or litigation, we cannot predict the ultimate outcome with certainty. In the event a third party makes a valid intellectual property claim and a license is not available on commercially reasonable terms, we would be forced either to redesign or to stop production of products incorporating that intellectual property, and our operating results could be materially and adversely affected. Litigation may also be necessary to enforce our intellectual property rights or to defend us against claims of infringement, and this litigation may be costly and divert the attention of key personnel.
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9. Comprehensive Income
The components of comprehensive income, net of tax, are as follows (in thousands):
Change in unrealized gain (loss) on marketable equity securities
Change in unrealized loss on foreign currency translation adjustments
10. Stock Option Exchange Program
On December 20, 2002, we completed a stock option exchange program offered to all eligible option holders. Under the exchange offer, eligible employees had the opportunity to tender for cancellation certain stock options in exchange for new options to be granted at least six months and one day after the cancellation of the tendered options. Members of the Board of Directors and executive officers were not eligible to participate in the exchange program. Each eligible participant received a new option to purchase 0.75 share of common stock for each option to purchase one share of common stock canceled. We accepted approximately 3.4 million options for exchange in December 2002 and granted approximately 2.3 million new options on June 23, 2003. The exercise price per share of the new options was $3.40, equal to the fair market value of our common stock on the date of the grant. We did not record any compensation expense as a result of the exchange program.
11. Stock-Based Compensation
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (in thousands, except per share data):
Net loss as reported
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of tax related effects
Proforma net loss
Basic and diluted net loss per share as reported
Proforma basic and diluted net loss per share
12. Segment Information
We determine our operating segments in accordance with SFAS 131, “Disclosures about Segments of an Enterprise and Related Information.” Our chief executive officer has been identified as the chief operating decision maker as defined by SFAS 131. We have one operating segment, which is Consumer Entertainment Electronics.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read along with the unaudited consolidated condensed financial statements and notes thereto included in Item 1 of this Quarterly Report, as well as the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 29, 2003, contained in our 2003 Annual Report on Form 10-K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management including, without limitation, our expectations regarding second quarter sales, margins, combined research and development and selling, general and administrative expenses, income taxes payable, and total cash. Words such as “we expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “estimates,” and “intend,” variations of these types of words, and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.
Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed below under the subheading “Factors That May Affect Future Operating Results” and elsewhere in this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason. Readers should carefully review the risk factors described in “Factors That May Affect Future Operating Results” below, as well as in the documents filed by us with the Securities and Exchange Commission, specifically the most recent reports on Form 10-K, 10-Q and 8-K, each as it may be amended from time to time. Certain reclassifications have been made to conform to the fiscal year 2004 presentation. These reclassifications had no effect on the results of operations or stockholders’ equity.
Cirrus Logic, Inc. (“we,” “us,” “our,” or the “Company”) is a leader in digital audio, video and high-performance mixed-signal integrated circuits (“ICs”) for consumer entertainment, automotive entertainment and industrial applications. We develop and market integrated ICs and embedded software used by original design manufacturers and original equipment manufacturers. We also provide complete system reference designs based on our technology that enable our customers to bring products to market in a timely and cost-effective manner.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon the consolidated condensed financial statements included in this report, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts. We evaluate the estimates on an on-going basis. We base these 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 from these estimates. We also have policies that we consider key accounting policies, such as our policy for revenue recognition, including the deferral of revenues and gross profit on sales to our distributors. However, our revenue recognition policy does not meet the definition of a critical accounting policy because it does not generally require us to make estimates or judgments that are difficult or subjective.
We believe the following critical accounting policies involve significant judgments and estimates used in the preparation of the consolidated financial statements:
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Results of Operations
The following table summarizes the results of our operations for the first quarter of fiscal years 2004 and 2003 as a percentage of net sales. All percentage amounts were calculated using the underlying data in thousands:
Gross margin
Net Sales
During the first quarter of fiscal year 2004, our net sales were $40.7 million, down from $76.0 million for the first quarter of fiscal year 2003. The $35.3 million decrease was primarily due to a decline in sales of our audio and game console products. Net sales from our audio products were down $23.5 million in the first quarter of fiscal year 2004 due to a decline in demand for certain older digital signal processors and converters, along with lower personal computer audio sales, a product line we have de-emphasized. Further, net sales from our game console products declined $9.3 million in the first quarter of fiscal year 2004 from the comparable period of the prior year. The majority of these game console sales were made under a volume purchase agreement, which terms were fulfilled in the fourth quarter of fiscal year 2003. We also experienced a $2.8 million decrease in net sales from our video products in the first quarter of fiscal year 2004 from the comparable period of the prior year as a result of a decline in demand for some of our DVD player components. We expect our net sales in the second fiscal quarter to be $45 million to $50 million.
Export sales, principally to Asia, including sales to U.S.-based customers with manufacturing plants overseas, were 69% and 80% of net sales during the first quarter of fiscal years 2004 and 2003, respectively.
Our sales are denominated primarily in U.S. dollars. As a result, we have not entered into foreign currency forward exchange and option contracts.
During the first quarter of fiscal year 2004, sales to certain distributors, Memec Group Holdings Limited and Ryoyo Electro Corporation, represented 21% and 10% of net sales, respectively. Net sales in the first quarter of fiscal year 2003 to Thomson Multimedia S.A., Memec Group Holdings Limited, and Reigncom Limited accounted for 15%, 15%, and 11% of net sales, respectively.
Gross Margin
Gross margin as a percentage of net sales was 48.5% in the first quarter of fiscal year 2004, down from 50.8% in the first quarter of fiscal year 2003. The decrease in gross margin percentage between these periods was
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primarily attributable to a charge to cost of sales in the first quarter of fiscal year 2004 for the impairment of assets to be sold under an agreement with ChipPAC, Inc. (“ChipPAC”). We expect our margins to remain in the 48% to 50% range for the second fiscal quarter of fiscal year 2004.
Research and Development Expense
Research and development expense for the first quarter of fiscal year 2004 of $20.6 million decreased $7.3 million from $27.9 million in the first quarter of fiscal year 2003. This decrease was primarily attributable to our cost cutting measures and reduced outside product development expenses.
Selling, General and Administrative Expense
Selling, general and administrative expense in the first quarter of fiscal year 2004 decreased $8.0 million to $12.5 million from $20.5 million in the first quarter of fiscal year 2003, primarily due to our cost reduction and expense control measures.
We expect our combined research and development and selling, general and administrative expenses to total $33 million to $35 million for our second fiscal quarter.
Restructuring and Other Costs
During the first quarter of fiscal year 2004, we recorded a charge of $5.8 million in operating expenses for facility consolidations in California and Texas. We also recorded a restructuring charge of $0.3 million related to workforce reductions during the first quarter. Additionally, we recorded an impairment charge of $1.5 million for property and equipment associated with our Austin, Texas facility consolidation. We will record additional restructuring charges in the second and third quarters of fiscal year 2004 as we transition our test operations to ChipPAC and eliminate approximately 120 employee positions in Austin, Texas over the next two quarters.
During the first quarter of fiscal year 2003, we announced our intentions to reduce costs and operating expenses. We eliminated approximately 150 employee positions worldwide, or 13% of the total workforce, from various business functions and job classes over the first half of fiscal year 2003. During the first quarter of fiscal year 2003, we recorded a restructuring charge of $1.7 million in operating expenses to cover costs associated with a portion of these workforce reductions and $0.4 million related to facility consolidations.
Amortization of Acquired Intangibles
During the first quarter of fiscal year 2004 we recorded $3.8 million in amortization of acquired intangibles related to acquisitions in fiscal years 2002 and 2000. During the first quarter of fiscal year 2003, we recorded $4.7 million in amortization of acquired intangibles. The decrease of $0.9 million was primarily attributable to the write-off of ShareWave, Inc. (“ShareWave”) and AudioLogic, Inc. acquired intangibles during the fourth quarter of fiscal year 2003.
Realized Gain on Marketable Equity Securities
During the first quarter of fiscal year 2003, we realized a gain of $1.4 million related to receipt of proceeds previously held back by Intel Corporation on the fiscal year 2001 sale of our interest in Basis Communications.
Interest Income
Interest income was $0.6 million for the first quarter of fiscal year 2004 and $0.8 million for the first quarter of fiscal year 2003. The decrease of $0.2 million was primarily due to lower cash and cash equivalent balances on which interest was earned coupled with lower interest rates during the first quarter of fiscal year 2004.
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Income Taxes
We incurred income tax expense of $21 thousand for the first quarter of fiscal year 2004, compared to $29 thousand incurred for the comparable period of fiscal year 2003. The income tax expense for both periods consisted primarily of foreign withholding and foreign income taxes.
SFAS 109, “Accounting for Income Taxes,” provides for the recognition of deferred tax assets if realization of such assets is more likely than not. We have provided a valuation allowance equal to our net deferred tax assets due to uncertainties regarding their realization. We evaluate the realizability of our deferred tax assets on a quarterly basis.
We expect to benefit from a $7.2 million reduction in income taxes payable due to the release of a reserve in the second quarter of fiscal year 2004. This release will not have a cash impact.
Loss from Discontinued Operations
In June 2002, the stockholders of eMicro Corporation (“eMicro”), a joint venture between the Company and Creative Technology Ltd., voted to dissolve the entity, and it ceased operations during the first quarter of fiscal year 2003. In connection with the cessation of operations of eMicro during the first quarter of fiscal year 2003, we recorded its results of operations as discontinued at that time. During the first quarter of fiscal year 2004, eMicro made the final cash distribution to its shareholders.
Employee Stock Option Exchanges
Liquidity and Capital Resources
We used approximately $7.1 million of cash and cash equivalents in our operating activities during the first quarter of fiscal year 2004, primarily due to the cash components of our net loss partially offset by the change in our working capital, primarily an increase in accounts payable and accrued liabilities. In the comparable period of fiscal year 2003, we used approximately $6.8 million primarily due to the cash components of our net loss and a decline in accounts payable, accrued liabilities, and an increase in gross inventory. These uses were partially offset by a decrease in accounts receivable.
We used $0.6 million of cash in investing activities during the first quarter of fiscal year 2004, primarily for the purchase of property and equipment and technology licenses. In the first quarter of fiscal year 2003, we used $3.1 million for investing activities, primarily related to purchases of property and equipment and technology licenses, partially offset by the receipt of proceeds previously held back by Intel Corporation on the fiscal year 2001 sale of our interest in Basis Communications.
We generated $0.4 million in cash from financing activities during the first quarter of fiscal year 2004 related to the issuance of common stock in connection with option exercises and our employee stock purchase plan. For the comparable period in fiscal year 2003, we generated $1.3 million in cash from financing activities primarily related by the issuance of common stock of $1.6 million from the exercise of employee stock options and the purchase of stock under the employee stock purchase plan, partially offset by capital lease payments.
We have a $9.0 million letter of credit secured by $9.0 million in restricted cash. The letter of credit was issued to secure certain obligations under a lease agreement for our new headquarters and engineering facility in Austin,
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Texas. Due to the acquisition of Stream Machine Company (“Stream Machine”) in fiscal year 2002, we also have $2.3 million in restricted cash securing a letter of credit related to Stream Machine’s office lease. This $2.3 million in restricted cash will be released in the second quarter of fiscal year 2004 due to our exit from this property in the fourth quarter of fiscal year 2003. We also have $0.5 million in restricted cash securing a writ of attachment related to ongoing litigation involving Western Digital Corporation.
We have not paid cash dividends on our common stock and currently intend to continue our policy of retaining any earnings for reinvestment in our business. Although we cannot assure that we will be able to generate cash in the future, we anticipate that our existing capital resources and cash flow generated from future operations will enable us to maintain our current level of operations for the next 12 months. For the second quarter of fiscal year 2004, we expect to use $5 million to $10 million in cash. As a result, we expect total cash at the end of the second quarter of fiscal year 2004 to range between $106 million and $111 million.
Factors That May Affect Future Operating Results
Our business faces significant risks. The risk factors set forth below may not be the only ones that we face. Additional risks that we are not aware of yet or that currently are not material may adversely affect our business operations.
Further weakening or delayed recovery in the highly cyclical semiconductor equipment industry may adversely affect our business.
We are subject to business cycles, and it is difficult to predict the timing, length, or volatility of these cycles. After growth in calendar years 1999 and 2000, the condition of the semiconductor industry declined significantly in calendar year 2001, and it has not recovered. Further weakening or delayed recovery could continue to adversely affect our business. During downturns, customers usually reduce purchases, delay delivery of products, shorten lead times on orders, and/or cancel orders. These downturns create pressure on our net sales, gross margins, and operating income. In addition, these downturns may result in retention issues with our employees, who are vital to our success.
We cannot assure you that this continued weakness, or any future downturn, will not have a material adverse effect on our business and results of operations. We cannot assure you that we will not experience substantial period-to-period fluctuations in revenue due to general semiconductor industry conditions or other factors.
Our business is highly dependent on the expansion of the consumer digital entertainment electronics market.
We changed the focus of our business to the consumer digital entertainment electronics market in fiscal year 2002. We are focusing on audio/video receivers, personal compressed audio players, automotive audio applications, DVD recorders, and personal video recorders. We expect the consumer digital market to expand; however, our strategy may not be successful. Given current economic conditions in the United States and internationally, as well as the large installed base of consumer electronics products, consumer spending on home electronic products may not increase as expected. In addition, the potential decline in consumer confidence and consumer spending relating to future terrorist attacks could have a material adverse effect on our business.
We have historically experienced fluctuations in our operating results and expect these fluctuations to continue in future periods.
Our quarterly and annual operating results are affected by a wide variety of factors that could materially and adversely affect our net sales, gross margins and operating income. These factors include:
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Our success depends on our ability to introduce new products on a timely basis.
Our success depends upon our ability to develop new products for new and existing markets, to introduce these products in a timely manner, and to have these products gain market acceptance. The development of new products is highly complex and from time to time, we have experienced delays in developing and introducing them. Successful product development and introduction depend on a number of factors, including:
Although we seek to design products that have the potential to become industry standard products, we cannot assure you that the market leaders will adopt any products introduced by us, or that any products initially accepted by our customers will become industry standard products. Both revenues and margins may be materially affected if new product introductions are delayed, or if our products are not designed into successive generations of our customers’ products. We cannot assure you that we will be able to meet these challenges, or adjust to changing market conditions as quickly and cost-effectively as necessary to compete successfully. Our failure to develop and introduce new products successfully could harm our business and operating results.
Successful product design and development is dependent on our ability to attract, retain, and motivate qualified design engineers, of which there is a limited number. Due to the complexity and variety of precision linear and mixed-signal circuits, the limited number of qualified circuit designers and software engineers, and the limited effectiveness of computer-aided design systems in the design of such circuits, we cannot assure you that we will be able to successfully develop and introduce new products on a timely basis.
Strong competition in the high-performance integrated circuit market may harm our business.
The integrated circuit industry is intensely competitive and is characterized by rapid technological change, price erosion, and design and other technological obsolescence. Because of shortened product life cycles and even shorter design-in cycles in a number of the markets that we serve, particularly consumer entertainment, our competitors have increasingly frequent opportunities to achieve design wins in next-generation systems. In the event that competitors succeed in supplanting our products, our market share may not be sustainable and net sales, gross margins, and results of operations would be adversely affected.
Our principal competitors include AKM Semiconductors, ALi Semiconductor, Advanced Micro Devices, Analog Devices, ATMEL, Broadcom, Conexant, ESS Technologies, Fujitsu Semiconductor, Intel, Linear Technology, LSI Logic, Maxim, Mediatek, Motorola, Philips, Samsung Semiconductor, Sharp Semiconductor, SigmaTel, ST Microelectronics, Sunplus, Texas Instruments, Tripath, Wolfson, Yamaha, and Zoran, many of whom have substantially greater financial, engineering, manufacturing, marketing, technical, distribution and other
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resources, broader product lines, greater intellectual property rights, and longer relationships with customers than we have. We also expect intensified competition from emerging companies and from customers who develop their own integrated circuit products. In addition, some of our current and future competitors maintain their own fabrication facilities, which could benefit them in connection with cost, capacity and technical issues.
Increased competition could adversely affect our business. We cannot assure you that we will be able to compete successfully in the future or that competitive pressures will not adversely affect our financial condition and results of operations. Competitive pressures could reduce market acceptance of our products and result in price reductions and increases in expenses that could adversely affect our business and our financial condition.
Our products are characterized by average selling prices that decline over short time periods; if we are unable to introduce new products with higher selling prices or reduce our costs, our business and operating results could be harmed.
Historically in the integrated circuit industry, average selling prices of products have decreased over time, while many of our manufacturing costs are fixed. If we are unable to introduce new products with higher margins or to reduce manufacturing costs to offset anticipated decreases in the prices of our existing products, our operating results may be adversely affected. In addition, because of high fixed costs in our industry, we are limited in our ability to reduce total costs quickly in response to any revenue shortfalls. Because of these factors, we may experience material adverse fluctuations in our future operating results on a quarterly or annual basis.
We have significant international sales and risks associated with these sales that could harm our operating results.
Export sales, principally to Asia, include sales to U.S-based customers with manufacturing plants overseas, and accounted for 69 percent, 77 percent and 85 percent of net sales in the first quarter of fiscal year 2004, and in fiscal years 2003 and 2002, respectively. We expect export sales to continue to represent a significant portion of product sales. This reliance on sales internationally subjects us to the risks of conducting business internationally, including political and economic conditions, on our customers, employees and contract manufacturers in Asia. For example, the financial instability in a given region, such as Asia, may have an adverse impact on the financial position of end users in the region, which could impact future orders and harm our results of operations. Our international sales operations involve a number of other risks, including:
In addition, while we may buy hedging instruments to reduce our exposure to currency exchange rate fluctuations, our competitive position can be affected by the exchange rate of the U.S. dollar against other currencies. Consequently, increases in the value of the dollar would increase the price in local currencies of our products in foreign markets and make our products relatively more expensive. We cannot assure you that regulatory, political, and other factors will not adversely affect our operations in the future or require us to modify our current business practices.
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The expansion of our international operations subjects our business to additional economic risks that could have an adverse impact on our business.
In addition to export sales constituting a majority of our net sales, we are expanding our international operations. Specifically, we have recently focused our efforts on expanding in the People’s Republic of China by employing local design, sales and technical support personnel. In addition, we are also using contract manufacturers in the region for foundry, assembly and/or test operations. Expansion into this region has required and will continue to require significant management attention and resources. We have limited experience in the Chinese market and may not succeed in expanding our presence into this market or other international markets. Failure to do so could harm our business. In addition, there are risks inherent in expanding our presence into foreign regions, including, but not limited to:
Our products are complex and could contain defects, which could reduce sales of those products or result in claims against us.
Product development in the markets we serve is becoming more focused on the integration of multiple functions on individual devices. There is a general trend towards increasingly complex products. The greater integration of functions and complexity of operations of our products increase the risk that our customers or end users could discover latent defects or subtle faults after volumes of product have been shipped. This could result in:
The occurrence of any of these problems could result in the delay or loss of market acceptance of our products and would likely harm our business. In addition, any defects or other problems with our products could result in financial or other damages to our customers who could seek damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend.
We need to manage the transition of the sale of our test operations assets to ChipPAC.
On June 26, 2003, we agreed to sell our test operations assets, consisting of analog and mixed-signal testers, handlers and wafer probes, to ChipPAC, a provider of semiconductor packaging design, assembly, test, and distribution services. ChipPAC will transfer these test assets to its China facility over a six-month period. This asset transfer may involve a number or risks, including but not limited to:
If we are unable to successfully address any of these risks, our business could be harmed.
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Our sales may fluctuate due to seasonality of customer demand.
As our sales to the consumer entertainment market increase, we are more likely to be affected by seasonality in the sales of our products. Approximately half of consumer electronics products are sold worldwide during the holiday season. As a result, we expect a disproportionate amount of our sales to occur in our second and third fiscal quarters in anticipation of the holiday season.
If we fail to attract, hire, and retain qualified personnel, we may not be able to develop, market, or sell our products or successfully manage our business.
Competition for personnel in our industry is intense. The number of technology companies in the geographic areas in which we operate is greater than it has been historically, and we expect competition for qualified personnel to intensify. There are only a limited number of people in the job market with the requisite skills. Our human resources organization focuses significant efforts on attracting and retaining individuals in key technology positions. Declining stock market prices, however, make retention more difficult, as prior equity grants contain less value and key employees pursue equity opportunities elsewhere. In addition, start-up companies generally offer larger equity grants to attract individuals from more established companies. The loss of the services of any key personnel or our inability to hire new personnel with the requisite skills could restrict our ability to develop new products or enhance existing products in a timely manner, sell products to our customers, or manage our business effectively.
We may incur inventory charges or write-downs as a result of shifts in industry-wide capacity and our practice of purchasing our products based on sales forecasts.
Shifts in industry-wide capacity from shortages to oversupply, or from oversupply to shortages, may result in significant fluctuations in our quarterly and annual operating results. We must order wafers and build inventory well in advance of product shipments. Because our industry is highly cyclical and is subject to significant downturns resulting from excess capacity, overproduction, reduced demand, order cancellations, or technological obsolescence, there is a risk that we and/or our customers will forecast inaccurately and that we produce excess inventories of particular products.
In addition, we rely on contract manufacturers to produce our semiconductor components. We generally order our products through non-cancelable orders from third-party foundries based on our sales forecasts, and our customers can generally cancel or reschedule orders they place with us without significant penalties. If we do not receive orders as anticipated by our forecasts, or customers cancel orders that are placed, we may experience increased inventory levels and incur future inventory write-downs or charges due to the lower of cost or market accounting, excess inventory, or inventory obsolescence.
We rely on independent foundries to manufacture our products, which subjects us to increased risks.
We rely on independent foundries to manufacture all of our wafers. Our reliance on these foundries involves several risks and uncertainties, including:
Market conditions could result in wafers being in short supply and prevent us from having adequate supply to meet our customer requirements. In addition, any prolonged inability to utilize third-party foundries because of fire, natural disaster, or otherwise would have a material adverse effect on our financial condition and results of operations. If we are not able to obtain additional foundry capacity as required, our relationships with our customers would be harmed and, consequently, our sales would likely be reduced, and we may be forced to purchase wafers from higher-cost suppliers or to pay expediting charges to obtain additional supply, if we are able to acquire wafers at all.
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In order to secure additional foundry capacity, we may enter into contracts that commit us to purchase specified quantities of silicon wafers over extended periods. In the future, we may not be able to secure sufficient capacity with foundries in a timely fashion or at all, and such arrangements, if any, may not be on terms favorable to us. Moreover, if we are able to secure foundry capacity, we may be obligated to utilize all of that capacity or incur penalties. These penalties may be expensive and could harm our financial results.
We are dependent on our subcontractors in Asia to perform key manufacturing functions for us.
We depend on third-party subcontractors in Asia for the assembly, packaging, and testing of our products. International operations and sales may be subject to political and economic risks, including political instability, currency controls, exchange rate fluctuations, and changes in import/export regulations, tariff, and freight rates, as well as the risks of natural disaster. Although we seek to reduce our dependence on our limited number of subcontractors, this concentration of subcontractors and manufacturing operations in Asia subjects us to the risks of conducting business internationally, including political and economic conditions in Asia. Disruption or termination of the assembly, packaging or testing of our products could occur, and such disruptions could harm our business and operating results.
Failure to manage our distribution channel relationships could adversely affect our business.
In the first quarter of fiscal year 2004 and in fiscal years 2003 and 2002, sales to our distributors accounted for 63 percent, 57 percent, and 38 percent, respectively, of our net sales. The future of our business, as well as the future growth of our business, will depend in part on our ability to manage our relationships with current and future distributors and sales representatives, develop additional channels for the distribution and sale of our products, and manage these relationships. The inability to successfully do so could adversely affect our business.
We may need to acquire other companies or technologies and successfully integrate them into our business to compete in our industry.
We acquired LuxSonor Semiconductors, Inc. (“LuxSonor”), ShareWave, and Stream Machine, as well as the assets of Peak Audio, Inc., in fiscal year 2002. We will continue to consider future acquisitions of other companies, or their technologies or products, to improve our market position, broaden our technological capabilities, and expand our product offerings. However, we may not be able to acquire, or successfully identify, the companies, products or technologies that would enhance our business.
In addition, if we are able to acquire companies, products or technologies, we could experience difficulties in integrating them. Integrating acquired businesses involves a number of other risks, including, but not limited to:
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We may be unable to protect our intellectual property rights from third-party claims and litigation.
Our success depends on our ability to obtain patents and licenses and to preserve our other intellectual property rights covering our manufacturing processes, products, and development and testing tools. We seek patent protection for those inventions and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage to us. We also rely substantially on trade secrets, proprietary technology, non-disclosure and other contractual agreements, and technical measures to protect our technology and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect our competitive position. We cannot assure you that steps taken by us to protect our intellectual property will be adequate, that our competitors will not independently develop or patent substantially equivalent or superior technologies or be able to design around our patents, or that our intellectual property will not be misappropriated. Also, the laws of some foreign countries may not protect our intellectual property as much as the laws of the United States.
Potential intellectual property claims and litigation could subject us to significant liability for damages and could invalidate our proprietary rights.
The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. We cannot assure you that any patent owned by us will not be invalidated, circumvented, or challenged, that rights granted under the patent will provide competitive advantages to us, or that any of our pending or future patent applications will be issued with the scope of the claims sought by us, if at all.
As is typical in the semiconductor industry, we and our customers have from time to time received, and may in the future receive, communications from third parties asserting patents, mask work rights, or copyrights on certain of our products and technologies. In the event third parties were to make a valid intellectual property claim and a license was not available on commercially reasonable terms, our operating results could be harmed. Litigation, which could result in substantial cost to us and diversion of our resources, may also be necessary to defend us against claimed infringement of the rights of others. An unfavorable outcome in any such suit could have an adverse effect on our future operations and/or liquidity.
If we are unable to make continued substantial investments in research and development, we may not be able to sell our products.
We make significant investments in research and development activities to develop new and enhanced products and solutions. If we fail to make sufficient investments in research and development programs, new technologies could render our current and planned products obsolete, and our business could be harmed.
Our stock price may be volatile.
The market price of our common stock fluctuates significantly. This fluctuation is the result of numerous factors, including:
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We have provisions in our charter, and are subject to certain provisions of Delaware law, that could prevent, delay or impede a change of control of our company.
Certain provisions of our Certificate of Incorporation, By-Laws, and Delaware law could make it more difficult for a third party to acquire us, even if our stockholders support the acquisition. These provisions include:
We are also subject to the anti-takeover laws of Delaware that may prevent, delay or impede a third party from acquiring or merging with us, which may adversely affect the market price of our common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Part II, Item 7a, Quantitative and Qualitative Disclosures About Market Risk, in the Registrant’s Annual Report on Form 10-K for the fiscal year ended March 29, 2003.
ITEM 4. CONTROLS AND PROCEDURES
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PART II
ITEM 1. LEGAL PROCEEDINGS
On October 19, 2001, we filed a lawsuit against Fujitsu, Ltd. in the United States District Court for the Northern District of California. We are alleging claims for breach of contract and anticipatory breach of contract, and seek damages in excess of $46 million. The basis for our complaint is Fujitsu’s refusal to pay for chips delivered to and accepted by it. On December 17, 2001, Fujitsu filed an answer and a counterclaim. Fujitsu alleges claims for breach of contract, breach of warranty, quantum meruit/equitable indemnity, and declaratory relief. The basis for the claims is our sale of allegedly defective chips to Fujitsu, which chips allegedly caused Fujitsu’s hard disk drives to fail. The counterclaim does not specify the damages Fujitsu seeks, other than to allege it has sustained “tens of millions” of dollars in damages. Our claim is based on chips that are not included in Fujitsu’s counterclaim but for which Fujitsu has not paid. To facilitate the resolution of all claims in one lawsuit, including our claims against potentially responsible third parties, we and Fujitsu agreed to realign our claims with Fujitsu as the plaintiff and us as the defendant and counterclaimant. This realignment allowed us to file in the same lawsuit a third-party claim alleging breach of contract and warranty against Amkor Technology, Inc., the company that recommended and sold us the goods that allegedly caused Fujitsu’s hard disk drives to fail. Amkor filed an answer to our third-party claim and a third-party complaint for implied contractual indemnity against Sumitomo Bakelite Co., Ltd., the company that sold the allegedly defective goods to Amkor. The trial is scheduled for July 2004.
On July 5, 2001, Western Digital Corporation and its Malaysian subsidiary, Western Digital (M) SDN.BHD, filed a lawsuit against us in the Superior Court of the State of California, Orange County, in connection with the purchase of “read channel” chips from us, as explained in more detail below. On August 20, 2001, we filed a cross-complaint against the plaintiffs, and on October 9, 2001, the Court granted our motion for judgment on the pleadings that resulted in the dismissal of the plaintiffs’ entire original complaint.
The plaintiffs filed an amended complaint, in which they alleged that they entered into an oral supply contract for “read channel” chips with us, and that we breached the contract and our duty of good faith and fair dealing. This amended complaint seeks, among other things, unspecified damages, which appear to be in excess of $60 million, and declaratory relief. We filed a cross-complaint against the plaintiffs, alleging causes of action for breach of contract, fraud and negligent misrepresentation. We are seeking damages in excess of $53 million, as well as punitive damages. The plaintiffs currently owe us amounts exceeding $53 million for products we have shipped and for non-cancelable orders placed with us.
On December 31, 2002, the court granted our motion for summary adjudication of five of the seven causes of action in the plaintiffs’ first amended complaint. On April 25, 2003, the court granted the plaintiffs’ leave to file a second amended complaint. The trial is scheduled for December 2003.
On May 16, 2003, we initiated a lawsuit in the Western District of Texas, Austin Division, against ATI Technologies Inc. (“ATI”) and NVIDIA Corporation (“NVIDIA”) for infringement of our United States Patent No. 5,841,418. As part of our complaint, we are seeking damages and a permanent injunction against further infringement by certain graphics processors made, used, sold, offered for sale, or imported into the United States by ATI and NVIDIA. NVIDIA filed counterclaims against us on July 11, 2003, for infringement of U.S. Patent Nos. 5,768,628; 5,968,148; and 6,292,854. NVIDIA is seeking damages and a permanent injunction against further
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infringement by certain products made, used, sold, offered for sale, or imported into the United States by us. We intend to prosecute and defend our lawsuit vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders of Cirrus Logic, Inc. on July 31, 2003, the stockholders voted on three proposals as reflected below:
David D. French
D. James Guzy
Michael L. Hackworth
Suhas S. Patil
Walden C. Rhines
William D. Sherman
Robert H. Smith
There were no broker non-votes.
For: 67,533,834 Against: 8,735,350 Abstain: 169,847
There were 300,100 broker non-votes.
For: 75,749,637 Against: 883,898 Abstain: 105,596
ITEM 5. OTHER INFORMATION
Consistent with Section 10A(i)(2) of the Securities Exchange Act of 1934, we are responsible for listing the non-audit services to be performed by our external auditor, Ernst & Young LLP, as approved by our Audit Committee or the Chairman of the Audit Committee pursuant to authority delegated to him by the Audit Committee. During the first quarter of fiscal year 2004, our Chairman of the Audit Committee approved the engagement of Ernst & Young LLP in connection with the notice we received from the Inland Revenue Authority of Singapore regarding additional goods and services taxes owed by us, as disclosed in Note 8 in the Notes to our Consolidated Condensed Financial Statements contained in “Item 1—Financial Statements.”
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Amended and Restated Bylaws of Registrant.
Certificate of the Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002).
Certificate of the acting Chief Financial Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002).
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Certificate of the Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
Certificate of the acting Chief Financial Officer pursuant to 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
On April 30, 2003, we filed a Form 8-K regarding our fourth quarter earnings release.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
By:
/s/ W. KIRKPATTERSON
W. Kirk Patterson
Acting Chief Financial Officer
Date: August 6, 2003
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