NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Description of Business
. We are a fabless semiconductor company that designs, develops and markets
specialized semiconductor memory and integrated semiconductor solutions, which are used in many markets for a wide range of applications. We pioneered the integration of ferroelectric materials into semiconductor products, which enabled the
development of a new class of nonvolatile memory, called ferroelectric random access memory (F-RAM). F-RAM products merge the advantages of multiple memory technologies into a single device that retains information without a power source, can be
read from and written to at very fast speeds, written to many times, consumes low amounts of power, and can simplify the design of electronic systems. In many cases, we are the sole provider of F-RAM enabled semiconductor products, which facilitates
close customer relationships, long application lifecycles and the potential for high-margin sales.
We also integrate with our memory products
wireless communication capabilities as well as analog and mixed-signal functions such as microprocessor supervision, tamper detection, timekeeping, and power failure detection functions. This has enabled new classes of products that address the
growing market need for more functional, efficient and cost effective semiconductor products.
Our revenue is derived from the sale of our
products and from license, development and royalty arrangements entered into with a limited number of established semiconductor manufacturers involving the development and sale of specific applications and products based on our technologies. Product
sales have been made to various customers for use in a variety of applications including utility meters, office equipment, automobiles, electronics, telecommunications, disk array controllers, and industrial control devices, among others.
The accompanying unaudited, interim consolidated financial statements at September 30, 2012, and for the three and nine months ended
September 30, 2012 and 2011, and the audited balance sheet at December 31, 2011, have been prepared from the books and records of Ramtron International Corporation (the Company, we, our, or
us). The preparation of our consolidated financial statements and related disclosures are in conformity with generally accepted accounting principles in the United States. Certain amounts reported in prior periods have been reclassified
to conform to the current presentation.
The accompanying financial statements should be read in conjunction with the Companys annual
report on Form 10-K for the year ended December 31, 2011, which includes all disclosures required by GAAP. The results of operations for the period ended September 30, 2012, are not necessarily indicative of expected operating results for
the full year.
Use of Estimates
. The preparation of our consolidated financial statements and related disclosures in
conformity with generally accepted accounting principles in the United States requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying notes. Examples include the estimate of useful
lives of our property, plant and equipment, and intellectual property costs, valuation allowances associated with our deferred tax assets, valuation allowance for sales returns associated primarily with our sales to distributors, fair value
estimates used in our intangible asset impairment tests, and the valuation of stock-based compensation. The statements reflect all normal recurring adjustments, which, in the opinion of the Companys management, are necessary for the fair
presentation of financial position, results of operations and cash flows for the periods presented.
New Accounting Standards
. In June 2011, the FASB issued an accounting
pronouncement that provides new guidance on the presentation of comprehensive income (FASB ASC Topic 220) in financial statements. Entities are required to present total comprehensive income either in a single, continuous statement of comprehensive
income or in two separate, but consecutive, statements. Under the single-statement approach, entities must include the components of net income, a total for net income, the components of other comprehensive income and a total for comprehensive
income. The Company has elected the single statement approach. The provisions for this pronouncement are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.
7
NOTE 2. INVENTORIES
Inventories consist of the following as of September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Finished goods
|
|
$
|
4,703
|
|
|
$
|
4,018
|
|
Work in process - current portion
|
|
|
12,419
|
|
|
|
16,930
|
|
Provision for scrap and obsolescence
|
|
|
(452
|
)
|
|
|
(698
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,670
|
|
|
$
|
20,250
|
|
|
|
|
|
|
|
|
|
|
Work in process - long-term
(1)
|
|
$
|
4,368
|
|
|
$
|
2,581
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Long-term inventory relates to items that the Company does not forecast to sell within one year, based upon expected sales as a result of our analysis of current
orders, backlog and forecast of future demand. Management believes this inventory will be sold in the future and is fully recoverable.
|
NOTE 3. OTHER CONSOLIDATED FINANCIAL STATEMENT DETAIL
Other Current Assets consist of:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Prepaid expenses
|
|
$
|
511
|
|
|
$
|
783
|
|
Prepaid insurance
|
|
|
57
|
|
|
|
170
|
|
Supplies inventory
|
|
|
244
|
|
|
|
231
|
|
Other
|
|
|
21
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
833
|
|
|
$
|
1,187
|
|
|
|
|
|
|
|
|
|
|
Accrued Liabilities consist of:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Compensation-related liabilities
|
|
$
|
631
|
|
|
$
|
1,827
|
|
Accrued property taxes
|
|
|
128
|
|
|
|
188
|
|
Accrued external commissions
|
|
|
221
|
|
|
|
230
|
|
Merger related liabilities
|
|
|
921
|
|
|
|
|
|
Other
|
|
|
432
|
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,333
|
|
|
$
|
2,601
|
|
|
|
|
|
|
|
|
|
|
8
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Estimated
Useful Lives
(In
Years)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Land
|
|
|
|
$
|
668
|
|
|
$
|
668
|
|
Buildings and improvements
|
|
7, 10 and 18
|
|
|
7,343
|
|
|
|
7,343
|
|
Equipment
|
|
3 and 5
|
|
|
23,691
|
|
|
|
23,998
|
|
Office furniture and equipment
|
|
5 and 7
|
|
|
385
|
|
|
|
764
|
|
Leasehold Improvements
|
|
3 and 10
|
|
|
7,101
|
|
|
|
6,719
|
|
Construction in progress
|
|
|
|
|
946
|
|
|
|
1,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,134
|
|
|
|
40,538
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
(19,079
|
)
|
|
|
(17,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,055
|
|
|
$
|
23,072
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for property, plant and equipment was $1.0 million and $.5 million for the three months ended September 30,
2012 and 2011, respectively, and $3.0 million and $1.6 million for the nine months ended September 30, 2012 and 2011, respectively.
NOTE 5. INTANGIBLE ASSETS
Intangible assets consist of:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Patents and core technology
|
|
$
|
4,925
|
|
|
$
|
4,672
|
|
Accumulated amortization
|
|
|
(2,160
|
)
|
|
|
(1,969
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
2,765
|
|
|
$
|
2,703
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangible assets was $64,000 for each of the three month periods ended September 30, 2012 and 2011, and
$190,000 for each of the nine month periods ended September 30, 2012 and 2011. Estimated amortization expense for intangible assets is $250,000 annually for the years ending 2012 through 2016, and a total of $1,600,000 thereafter.
NOTE 6. LONG-TERM DEBT
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
Capital leases
|
|
$
|
2,994
|
|
|
$
|
4,246
|
|
National Semiconductor promissory note
|
|
|
493
|
|
|
|
478
|
|
Mortgage note
|
|
|
3,321
|
|
|
|
3,439
|
|
Term loan
|
|
|
1,944
|
|
|
|
3,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,752
|
|
|
|
11,913
|
|
Current maturities of long-term debt
|
|
|
(3,139
|
)
|
|
|
(4,202
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,613
|
|
|
$
|
7,711
|
|
|
|
|
|
|
|
|
|
|
9
On February 29, 2012, we executed an Amended and Restated Loan and Security Agreement (Loan
Agreement) with Silicon Valley Bank (SVB). The Loan Agreement provides for a maximum of $7.5 million working capital line of credit and a $6.0 million term loan with a fixed interest rate of 6.5% per annum. The borrowing base
under the line of credit includes eligible accounts receivable and eligible raw materials, work in process and finished goods inventory, capped at $1.0 million for domestic inventory and $3.0 million for export inventory, further reduced by 50% of
the outstanding balance under our term loan. The Loan Agreement provides for interest on the line of credit at a floating rate equal to the SVB prime lending rate plus 1.75% to 2.25% per annum depending upon cash balances maintained at SVB and
borrowing base availability, with an expiration date of February 28, 2013. The Loan Agreement also required an additional principal payment against the term loan of $875,000 before March 31, 2012, which reduced our remaining 27 monthly
principal payments to approximately $93,000 each, plus accrued interest. Security for the Loan Agreement includes all of the Companys assets except for real estate and leased equipment. The Company draws upon the line of credit for working
capital purposes and to fund capital requirements as needed.
As of September 30, 2012, we did not have an outstanding balance on the
secured line of credit facility and had net availability of $3.2 million.
We are required to comply with certain covenants under the Loan
Agreement, calculated on a monthly basis. These covenants include requirements to maintain a minimum EBITDA level, a minimum liquidity ratio and restrictions on certain business actions, such as payment of cash dividends, without the consent of SVB.
As of September 30, 2012, we were in compliance with all such covenants except for our minimum EBITDA covenant requirement for the month ended September 30, 2012. We have obtained a waiver from SVB on this covenant for the months ending
September 30, 2012 and October 31, 2012. We have also received consent for our change in control and merger with Cypress Semiconductor Corporation. See Note 12 Subsequent Events.
The Company currently has six capital leases outstanding totaling $3.0 million, with terms between two and three years and effective interest rates
between 9% and 10%. Under these leases, we have standby letters of credit in favor of three of the lessors for approximately $800,000. As a result of the merger with Cypress and the change of control provisions in the capital lease agreements, on
October 10, 2012 we became in default on five of these leases. One lessor has agreed to waive the default if we pay our accelerated buy out and rent totaling approximately $300,000. We are currently negotiating with one other lessor who holds four
capital leases.
In April 2004, we entered into a patent interference settlement agreement with National Semiconductor Corporation. The
Company is required to pay National Semiconductor Corporation $250,000 annually through 2013. As of September 30, 2012, the present value of this promissory note was $489,000. We discounted the note at 5.75%. The face value of this note as of
September 30, 2012 was $500,000.
On December 15, 2005, the Company, through its subsidiary, Ramtron LLC, for which Ramtron
International Corporation serves as sole member and sole manager, closed on its mortgage loan facility with American National Insurance Company. Ramtron LLC entered into a promissory note evidencing the loan with the principal amount of $4,200,000,
with a maturity date of January 1, 2016, bearing interest at 6.17%. We are obligated to make monthly principal and interest payments of $30,500 until January 2016, and a balloon payment of $2,757,000 in January 2016. Ramtron LLC also entered
into an agreement for the benefit of American National Insurance Company securing our real estate as collateral for the mortgage loan facility.
Payments of our outstanding promissory notes and leases are as follows as of September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Total
|
|
Term loan
|
|
$
|
278
|
|
|
$
|
1,110
|
|
|
$
|
556
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,944
|
|
National Semiconductor promissory note
|
|
|
250
|
|
|
|
250
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
500
|
|
Mortgage note
|
|
|
41
|
|
|
|
168
|
|
|
|
179
|
|
|
|
190
|
|
|
|
2,743
|
|
|
|
3,321
|
|
Capital leases
|
|
|
473
|
|
|
|
1,467
|
|
|
|
1,388
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,328
|
|
Less amount representing interest on the capital leases and promissory note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The carrying amounts and estimated fair values of our long-term debt, which are our only material financial
instruments, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
(in thousands)
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
Term loan
|
|
$
|
1,944
|
|
|
$
|
1,942
|
|
|
$
|
3,750
|
|
|
$
|
3,758
|
|
National Semiconductor promissory note
|
|
|
493
|
|
|
|
489
|
|
|
|
478
|
|
|
|
473
|
|
Capital leases
|
|
|
2,994
|
|
|
|
3,094
|
|
|
|
4,246
|
|
|
|
4,271
|
|
Mortgage note
|
|
|
3,321
|
|
|
|
3,238
|
|
|
|
3,439
|
|
|
|
3,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,752
|
|
|
$
|
8,763
|
|
|
$
|
11,913
|
|
|
$
|
11,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above fair values were estimated based on discounted future cash flows. Differences from carrying amounts are attributable to
changes in the weighted average interest rate used, subsequent to when the transactions occurred.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The
Company has commitments under non-cancelable operating leases expiring through 2014 for various equipment, software, and facilities. Minimum future annual lease payments for leases that have initial or remaining non-cancelable terms in excess of one
year as of September 30, 2012, were as follows:
|
|
|
|
|
Years Ending December 31
:
|
|
Operating
Leases
(in
thousands)
|
|
2012 (October to December)
|
|
$
|
63
|
|
2013
|
|
|
189
|
|
2014
|
|
|
39
|
|
|
|
|
|
|
Total
|
|
$
|
291
|
|
|
|
|
|
|
Total expense on all operating leases was $611,000 and $528,000 for the three months ending September 30, 2012 and 2011,
respectively, and $1.7 and $1.6 million for the nine months ending September 30, 2012 and 2011, respectively.
Manufacturing Alliances
In 2007, the Company and Texas Instruments (TI) entered into a commercial manufacturing agreement for F-RAM memory products,
which was amended in 2011 and 2012. Under that agreement, the Company provides certain design, testing and other activities associated with product development, and TI provides certain foundry and related services. As amended,
the agreement provides for automatic renewals unless it is terminated for cause or notice of termination without cause is given prior to the end of any renewal period. If notice of termination without cause is given, the agreement terminates
three years thereafter and the Company may place last orders and take delivery of product during the following year. The agreement contains various obligations of the parties, including obligations for us regarding minimum orders and negotiated
pricing of products we purchase.
On July 20, 2012, we executed a manufacturing and license partnering agreement with ROHM Co., Ltd.
(ROHM), which provides for ROHM to manufacture F-RAM semiconductor product wafers for us on ROHMs established manufacturing line, as well as for our distribution of certain products manufactured by ROHM. Under the terms of the
agreement, the Company and ROHM also cross-licensed our F-RAM and certain related intellectual property and technology. There are currently no material purchase commitments or contingencies in connection with this agreement.
11
Purchase Commitments
At September 30, 2012, the Company had certain commitments which were not included on the consolidated balance sheet at that date. These include outstanding capital purchase commitments of
approximately $75,000 and wafer purchase commitments of approximately $2.2 million under current purchase orders, and $4.9 million related to minimum monthly purchase commitments under an existing supplier contract, through September 30, 2015.
The Company also has approximately $1.8 million of additional investment banking and legal fees associated with the Cypress Semiconductor Corporation merger (the Merger) that are due at the time of the closing of the merger, which is
expected to take place during the fourth quarter of 2012. See Note 12 Subsequent Events.
Contingencies
Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other
intellectual property rights. We cannot be certain that third parties will not make a claim of infringement against us or against our semiconductor company licensees in connection with their use of our technology. Any claims, even those without
merit, could be time consuming to defend, result in costly litigation and diversion of technical and management personnel, or require us to enter into royalty or licensing agreements. These royalty or licensing agreements, if required, may not be
available to us on acceptable terms or at all. A successful claim of infringement against us or one of our semiconductor manufacturing licensees in connection with use of our technology could materially and adversely impact the Companys
results of operations.
In June 2009, the Company received a summons by the trustee in the bankruptcy of Finmek S.p.A. and its affiliates
(Finmek) to appear before the Padua, Italy court overseeing the bankruptcy. The claims of the trustee in bankruptcy are that payments totaling approximately $2.8 million made to the Company for products shipped to Finmek prior to its bankruptcy
filing in May 2004 are recoverable based on an alleged awareness of the Finmek affiliates insolvency at the time the payments were made. After the first hearing held in 2010 and the second hearing in 2011, in 2013 all parties will submit their
final motions. We intend to vigorously contest the trustees claims. We are unable to estimate a range of possible liability, if any, that we may incur as result of the trustees claims and have not recorded any expense or liability in the
consolidated financial statements as of September 30, 2012.
On October 15, 2012, Paul Dent (Plaintiff Dent) filed a
complaint in the Court of Chancery in the State of Delaware, captioned
Dent v. Ramtron International Corporation, et al
., Docket No. 7950-VCP (the Delaware Action). Plaintiff purports to bring this action as a class
action on behalf of himself and other similarly situated Ramtron stockholders. Plaintiff Dent alleges that the Individual Defendants breached their fiduciary duties in connection with the Merger Agreement reached with Cypress in which
Cypress would acquire all of the outstanding shares of the Company for $3.10 in cash, and the Board of Directors recommendation that Ramtron shareholders tender their shares in Cypress tender offer. Specifically, the complaint
alleges that the Individual Defendants violated their fiduciary duties by failing to engage in a competitive process and failing to disclose fully all material information relating to the recommendation to stockholders to tender shares to
Cypress. The complaint seeks, among other things, injunctive relief as follows: an order declaring the action to be properly maintainable as a class action, an order enjoining Defendants from consummating the Merger, an order
rescinding, to the extent already implemented, the Merger or any of the terms thereof, or granting Plaintiffs and the Class rescissory damages, an order directing Defendants to account to Plaintiff and the class for all damages suffered as a result
of the alleged wrongdoing, and an award of attorneys fees and costs. On October 22, 2012, Plaintiff Dent moved for Expedited Proceedings in the Delaware Action. Also on November 5, 2012, Plaintiff Dent moved for a Preliminary
Injunction in the Delaware Action. A hearing on plaintiff Dents motion for Preliminary Injunction has been set for November 19, 2012. The Company believes the lawsuit is without merit and intends to defend it vigorously.
In October 2012, Allan P. Weber (Plaintiff Weber), a purported Ramtron stockholder, filed a putative class action complaint against
the Company, certain of its officers and directors (the Individual Defendants or, collectively with the Company, the Defendants), and Cypress and its wholly-owned subsidiary Rain Acquisition Corporation, in the
District Court for El Paso County, Colorado, captioned
Weber v. Balzer, et al.
, Docket No. 2012cv4782. Plaintiff Weber alleges that the Individual Defendants breached their fiduciary duties in connection with the Merger
12
Agreement reached with Cypress in which Cypress would acquire all of the outstanding shares of the Company for $3.10 in cash, and the Boards recommendation that Ramtron shareholders tender
their shares in Cypress tender offer. Specifically, the complaint alleges that the Individual Defendants violated their fiduciary duties by failing to take steps to maximize the value of Ramtron to its public stockholders and took
steps to avoid competitive bidding, failed to properly value Ramtron, and ignored or did not protect against conflicts of interest. The complaint seeks, among other things, relief as follows: an order declaring the action to be a
class action and certifying Plaintiff Weber as the class representative and his counsel as class counsel, an order enjoining preliminarily and permanently the Merger, an order rescinding the Merger or awarding Plaintiff and the class rescissory
damages in the event the Merger is consummated prior to entry of the courts final judgment, an order directing Defendants to account to Plaintiff and the class for all damages suffered and profits and any special benefits obtained by
Defendants as a result of the alleged wrongdoing, and an award of attorneys fees and costs. The Company believes the lawsuit is without merit and intends to defend it vigorously.
The Company is involved in other legal matters in the ordinary course of business. Although the outcomes of any such legal actions cannot be predicted,
management believes that there are no pending legal proceedings against or involving the Company for which the outcome would likely to have a material adverse effect upon the Companys financial position or results of operations.
NOTE 8. STOCK-BASED COMPENSATION
Stock-based Compensation Plans
On June 5, 2012, our stockholders approved the 2012 Incentive Award Plan (the 2012 Plan), which reserves a total of 3,879,864 shares of our common stock for issuance under stock option or
restricted stock grants. Of these reserved shares, 379,864 remained available for issuance under our previous 2005 Incentive Award Plan (the 2005 Plan) at June 5, 2012. In accordance with the terms of the 2012 Plan, these shares
were carried forward to and included in the reserve of shares available for issuance pursuant to the 2012 Plan. From January 1, 2012 through June 5, 2012, stock option and restricted stock grants were made under the 2005 Plan. As of
June 5, 2012, the 2005 Plan and the previous and expired 1995 Stock Option Plan, as amended, are only relevant to grants outstanding under these plans or forfeitures that increase the available shares under the 2012 Plan.
The exercise price of all non-qualified stock options must be no less than 100% of the Fair Market Value on the effective date of the grant under the
2012 Plan, and the maximum term of each grant is seven years. The 2012 Plan permits the issuance of incentive stock options, the issuance of restricted stock, and other types of awards. The exercise of stock options and issuance of restricted stock
and restricted stock units is satisfied by issuing authorized unissued common stock or treasury stock. As of September 30, 2012, we had not granted any incentive stock options under either the 2012 Plan or the 2005 Plan.
At September 30, 2012, the number of shares available for future grant under the 2012 Plan was 3,877,864.
Total stock-based compensation recognized in our consolidated statement of income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
Income Statement Classifications:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
$
|
66
|
|
|
$
|
76
|
|
|
$
|
218
|
|
|
$
|
150
|
|
Research and development
|
|
|
96
|
|
|
|
161
|
|
|
|
320
|
|
|
|
368
|
|
Sales and marketing
|
|
|
76
|
|
|
|
53
|
|
|
|
208
|
|
|
|
217
|
|
General and administrative
|
|
|
107
|
|
|
|
268
|
|
|
|
400
|
|
|
|
611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
345
|
|
|
$
|
558
|
|
|
$
|
1,146
|
|
|
$
|
1,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Stock Options
Stock options granted become exercisable in full or in installments pursuant to the terms of each agreement evidencing options granted. As of September 30, 2012, there was approximately $920,000 of
unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested options granted to our employees and directors, which will be recognized over a weighted-average period of three years. Total unrecognized compensation cost
will be adjusted for future changes in estimated forfeitures.
For grants issued during 2012, the fair value for stock options was estimated
at the date of grant using the Black-Scholes option pricing model, which requires management to make certain assumptions. Expected volatility was estimated based on the historical volatility of our stock over the past 6 years, which approximates the
calculated expected term of our options over the past 10 years, a period we considered a fair indicator of future exercises. We based the risk-free interest rate that we use in the option valuation model on U.S. Treasury Notes with remaining terms
similar to the expected terms on the options. Forfeitures are estimated at the time of grant based upon historical experience. We do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of
zero in the option pricing model.
The assumptions used to value option grants for the quarter ended September 30, 2012 are as follows:
|
|
|
|
|
Risk free interest rate
|
|
|
1.0
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Expected term (in years)
|
|
|
6.0 years
|
|
Expected volatility
|
|
|
68
|
%
|
The weighted average fair value per share of options granted during the nine months ended September 30, 2012 and 2011 were $1.28
and $1.60, respectively.
The following table summarizes stock option activity related to our plans for the nine months ended
September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
Number of
Stock Options
|
|
|
Weighted Average
Exercise Price Per Share
|
|
|
|
(in thousands)
|
|
|
|
|
Outstanding at December 31, 2011
|
|
|
3,962
|
|
|
$
|
2.88
|
|
Granted
|
|
|
163
|
|
|
$
|
2.17
|
|
Forfeited
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(106
|
)
|
|
$
|
2.31
|
|
Cancellations
|
|
|
(88
|
)
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
3,931
|
|
|
$
|
2.85
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value of $1,943,000 for outstanding options is the difference between the market value as of September 28, 2012, and
the exercise price of the options that are below the market value. The closing market value of the Companys common stock as of September 28, 2012, was $3.08 as reported by the Nasdaq Global Market composite index.
Restricted Stock
Restricted stock
grants generally vest one to four years from the date of grant. No exercise price or cash payment is required for the release of the restricted stock. The fair value of the Companys common stock at the time of grant is amortized to expense on
a straight-line basis over the vesting period. As of September 30, 2012, there was approximately $1.9 million of unrecognized compensation cost related to non-vested restricted shares, which will be recognized over a weighted-average period of
2.9 years.
14
A summary of non-vested restricted shares during the nine months ended September 30, 2012, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Shares
|
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
|
|
|
(in thousands)
|
|
|
|
|
Outstanding at December 31, 2011
|
|
|
985
|
|
|
$
|
2.53
|
|
Granted
|
|
|
628
|
|
|
$
|
2.09
|
|
Forfeited
|
|
|
(381
|
)
|
|
$
|
2.52
|
|
Vested/Released
|
|
|
(40
|
)
|
|
$
|
2.56
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
1,192
|
|
|
$
|
2.30
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
Restricted stock units represent rights to receive shares of common stock at a future date. No exercise price or cash payment is required for receipt of
restricted stock units or the shares issued in settlement of the award. The fair value of the Companys common stock at the time of the grant is amortized to expense on a straight-line basis over the vesting period.
A summary of the Companys restricted stock units, as of September 30, 2012, is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Units
|
|
|
Weighted Average
Remaining
Contractual Term
|
|
|
|
(in thousands)
|
|
|
(in years)
|
|
Outstanding at December 31, 2011
|
|
|
252
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(21
|
)
|
|
|
|
|
Vested/Released
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
163
|
|
|
|
.66
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012, approximately $280,000 remained in unrecognized compensation costs related to unvested outstanding
restricted stock units, with a weighted-average recognition period of 1 year.
NOTE 9. INCOME TAXES
The Company estimates its annual effective tax rate at the end of each quarter. In making these estimates, the Company considers, among
other things, annual pre-tax income, the application and interpretation of tax laws, treaties and judicial developments, in collaboration with its tax advisors.
The following table presents the provision for income taxes and the effective tax rates:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
Loss before income taxes
|
|
$
|
(4,456
|
)
|
|
$
|
(2,987
|
)
|
(Provision for) benefit from income taxes
|
|
|
(6,177
|
)
|
|
|
1,097
|
|
Effective tax rate
|
|
|
(138.6
|
%)
|
|
|
36.7
|
%
|
15
The Company accounts for income taxes using the asset and liability method of accounting for deferred income
taxes. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating
losses and tax credit carryforwards.
A valuation allowance is required to the extent it is more likely than not that a deferred tax asset
will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the Companys net deferred tax asset is
dependent upon the Companys ability to generate future taxable income in appropriate tax jurisdictions to obtain the benefit of net operating loss carry forwards. Management considers the projected future taxable income and tax planning
strategies in making this assessment.
Due to the recent softness in the semiconductor industry, uncertainty surrounding the tender offer
which caused certain of our distributors to take a cautious stance in regards to placing orders, and uncertainty surrounding future tax strategies, we have determined that it is more likely than not that our deferred tax asset will not be realized
based upon available evidence. Therefore, we have established a full valuation allowance against this deferred tax asset, resulting in an increase to the tax provision of $5.6 million for the quarter ended September 30, 2012.
Any significant increase or reduction in estimated future taxable income may require the Company to record additional adjustments to the valuation
allowance. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in such period and could have a significant impact on the periods earnings.
At September 30, 2012 and December 31, 2011, our deferred tax asset and related valuation allowance were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Gross deferred tax assets
|
|
$
|
28,565
|
|
|
$
|
30,384
|
|
Less valuation allowance
|
|
|
(28,565
|
)
|
|
|
(24,359
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
6,025
|
|
|
|
|
|
|
|
|
|
|
NOTE 10. EARNINGS PER SHARE
Basic net income (loss) per share is computed by dividing reported net income (loss) available to common stockholders by weighted
average shares outstanding. Diluted net income per share reflects the potential dilution assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.
The following table sets forth the calculation of net income (loss) per common share for the three and nine months ended September 30, 2012 and
2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
(in thousands, except per share amounts)
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
Net income (loss)
|
|
$
|
(11,147
|
)
|
|
$
|
1,172
|
|
|
$
|
(10,633
|
)
|
|
$
|
(1,890
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical common shares outstanding at beginning of period
|
|
|
35,448
|
|
|
|
28,442
|
|
|
|
34,838
|
|
|
|
27,540
|
|
Less: Non-vested restricted stock at beginning of period
|
|
|
(1,293
|
)
|
|
|
(391
|
)
|
|
|
(985
|
)
|
|
|
(191
|
)
|
Weighted average common shares issued during period
|
|
|
45
|
|
|
|
3,697
|
|
|
|
242
|
|
|
|
1,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares at end of period - basic
|
|
|
34,200
|
|
|
|
31,748
|
|
|
|
34,095
|
|
|
|
29,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of other dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
Restricted stock
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares at end of period - diluted
|
|
|
34,200
|
|
|
|
32,102
|
|
|
|
34,095
|
|
|
|
29,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic and diluted
|
|
$
|
(0.33
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.31
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
As of September 30, 2012 and September 30, 2011, we had equity instruments or obligations that
could create future dilution to the Companys common stockholders and are not currently classified as outstanding common shares of the Company. The following table details the shares of common stock that are excluded from the calculation of
earnings per share (prior to the application of the treasury stock method) due to their impact being anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
Stock Options
|
|
|
3,931
|
|
|
|
2,603
|
|
|
|
3,931
|
|
|
|
4,173
|
|
Restricted stock/units
|
|
|
1,355
|
|
|
|
581
|
|
|
|
1,355
|
|
|
|
1,256
|
|
NOTE 11. SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS
Our operations are conducted through one business segment. Our business develops, manufactures and sells ferroelectric nonvolatile
random access memory products, integrated products, and licenses the technology related to such products.
We sell our products to direct
customers and to electronic components distributors. Net sales by customer type, by geographic area based on product shipping destination, and to significant customers were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
|
September 30,
2012
|
|
|
September 30,
2011
|
|
Percentage of net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to distributors
|
|
|
70
|
%
|
|
|
85
|
%
|
|
|
75
|
%
|
|
|
78
|
%
|
Sales to direct customers
|
|
|
30
|
%
|
|
|
15
|
%
|
|
|
25
|
%
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic area net sales
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
14
|
%
|
|
|
9
|
%
|
|
|
14
|
%
|
|
|
9
|
%
|
International
|
|
|
86
|
%
|
|
|
91
|
%
|
|
|
86
|
%
|
|
|
91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant distributors/customers
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tokyo Electron Device
|
|
|
13
|
%
|
|
|
10
|
%
|
|
|
14
|
%
|
|
|
10
|
%
|
MSC Vertriebs GMBH
|
|
|
5
|
%
|
|
|
8
|
%
|
|
|
5
|
%
|
|
|
11
|
%
|
17
Except as presented above, no other direct customer or distributor accounted for greater than 10% of our net
sales for the three or nine months ended September 30, 2012, or September 30, 2011.
Balances due from our significant distributors
or direct customers at September 30, 2012 and December 31, 2011, as a percentage of total gross accounts receivable, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Percentage of Gross Accounts Receivable
|
|
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Tokyo Electron Device
|
|
|
13
|
%
|
|
|
11
|
%
|
Action Technology
|
|
|
7
|
%
|
|
|
23
|
%
|
No other direct customer or distributor accounted for more than 10% of our accounts receivable as of September 30, 2012 or
December 31, 2011.
NOTE 12. SUBSEQUENT EVENTS
On September 19, 2012, we announced that the Company had entered into an Agreement and Plan of Merger (the Merger
Agreement) with Cypress Semiconductor Corporation, a Delaware corporation (Cypress), and Rain Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Cypress (Purchaser), pursuant to which, among
other things, Cypress caused Purchaser to amend its June 21, 2012 offer to purchase all of the outstanding shares of common stock, par value $0.01 per share, of the Company (the Company Common Stock), including associated preferred
stock purchase rights (the Rights and, together with the Company Common Stock, the Shares), for $3.10 per Share (the Offer Price), net to the seller in cash (as amended, the Offer).
On October 10, 2012, at the closing of the Offer, Purchaser accepted for payment 23,290,666 shares of common stock that had been validly tendered
and not withdrawn pursuant to the offer and commenced a subsequent offering period for all remaining untendered shares of common stock. An additional 559,785 shares of common stock were tendered subject to guarantee delivery procedures. Also on
October 10, 2012, immediately following the closing of the offer, all of the directors of Ramtron resigned from our board of directors, other than Theodore J. Coburn, William G. Howard, Jr. and William L. George. Immediately following the
resignation of such directors, the remaining directors of Ramtron appointed T.J. Rodgers, Brad W. Buss, Dana C. Nazarian, Neil Weiss, Cathal Phelan and Thomas Surrette, each of whom was designated by Purchaser, to our board of directors.
On October 17, 2012, the subsequent offering period expired, and Purchaser acquired an additional 2,622,273 shares of common stock that were validly
tendered during the subsequent offering period. Included in this amount were 478,150 shares of common stock originally tendered in the Offer pursuant to guaranteed delivery procedures. The subsequent merger of Purchaser into the Company pursuant to
the Merger Agreement is expected to occur in the fourth quarter of 2012, and, if the merger is consummated, we will thereafter become a wholly-owned subsidiary of Cypress.
As a result of the purchase of Shares in the Offer, Cypress controls approximately 78% of our outstanding common stock as of the date of this report. Due to the change in control that has occurred as a
result of the purchase of the Shares by Purchaser in the Offer, the Companys management is currently assessing additional cash requirements and other issues relating to assignment of leases, our mortgage, change of control contracts with
officers and management of the company, severance payments, and outstanding equity awards.
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