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CEVA INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge) You should read the following discussion together with the unaudited financial
statements and related notes appearing elsewhere in this quarterly report. This
discussion contains forward-looking statements that involve risks and
uncertainties. Any or all of our forward-looking statements in this quarterly
report may turn out to be wrong. These forward-looking statements can be
affected by inaccurate assumptions we might make or by known or unknown risks
and uncertainties. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise. Factors which could cause actual results to differ
materially include those set forth under in Part II - Item 1A - "Risk Factors,"
as well as those discussed elsewhere in this quarterly report. See
"Forward-Looking Statements."
BUSINESS OVERVIEW
The financial information presented in this quarterly report includes the
results of CEVA, Inc. and its subsidiaries. CEVA is the world's leading licensor
of DSP cores and platform solutions. Our technologies are widely licensed and
power some of the world's leading semiconductor and original equipment
manufacturer (OEM) companies. In 2011, our licensees shipped more than one
billion CEVA-powered chipsets targeted for a wide range of diverse end markets.
Shipments of CEVA-powered chipsets in 2011 increased 68% over 2010, illustrating
continued, strong market deployment of our technology.
During the past six years, our business has shown profitability growth and
market share expansion as a result of the widespread deployment of our DSP cores
with all major handset OEMs - HTC, Huawei, LG Electronics, Motorola, Nokia,
Samsung, Sony, ZTE and a major U.S.-based smartphone manufacturer. This positive
trend is evident from our royalty revenues which increased by 59% in 2011 over
2010. Based on internal data and Strategy Analytics' worldwide shipment data,
CEVA's worldwide market share of cellular baseband chips that incorporate our
technologies reached approximately 46% of the worldwide shipment volume based on
fourth quarter 2011 worldwide shipments. Revenues derived from the handsets and
mobile broadband markets accounted for approximately 77% of our total revenues
in 2011 and 78% for the first quarter of 2012. The mobile broadband space is a
category of wireless-enabled products, among which are tablets, notebooks,
electronic books, machine-to-machine devices, automotive applications and smart
grids.
We believe the full scale migration to our DSP cores and technologies in the
handsets and mobile broadband markets has not been fully realized and continues
to progress. Specifically, we believe the emergence of merchant 3G cellular
chips from companies such as Broadcom, Intel and Spreadtrum, all of whom are our
customers, are strong positive drivers for our future market share expansion.
Moreover, Strategy Analytics forecasts that worldwide cellular baseband
shipments will grow by 8.6% in 2012 to reach 2.5 billion units. We believe that
the majority of this growth will come from 3G enabled phones in developing
countries and the broader adoption of LTE-based advanced smartphones in mature
markets. We are well positioned to capitalize on the growth in the above
segments, as well as growth from other mobile connected devices such as tablets,
electronic books and other machine-to-machine devices, as key chip suppliers
serving these markets use our technologies broadly.
Beyond products enabled by our technologies for baseband in handsets and mobile
broadband markets, we continue to strategically target growth in non-baseband
applications, such as audio, imaging, vision and connectivity. In this regard,
during the first quarter of 2012, there was strong licensing traction for our
CEVA-TeakLite-III DSP targeting advanced audio and voice processing in
smartphones. Advanced audio and wideband voice processing requires significantly
more DSP performance than existing solutions used in smartphones, automotive and
digital home applications. Our audio/voice product lines, including the
CEVA-TeakLite-III and new CEVA-TeakLite-4 DSPs, are ideally positioned to
address these requirements, and can enable us to continue to expand our
licensing base in these markets.
We believe the following four market trends represent significant growth drivers
for the company:
• The evolution of cellular networks, specifically the growth of 3G networks
in emerging countries and the migration from 3G to LTE in developed
countries. CEVA is well positioned to leverage these opportunities with a
broad range of technologies and broad customer base.
• The emergence of 3G and 4G connectivity in devices beyond handsets such as
tablets, laptops, automotive and surveillance. Our range of baseband DSPs
are ideal for these promising new segments.
• The mass adoption and feature set enhancements of smartphones. We offer a
range of new DSPs and software technologies to address the needs for
advanced imaging audio and wideband voice. It is an incremental business
to our already strong foothold in the baseband market.
• The proliferation of smart devices in the home, including the emergence of
smart-TVs smart set-top boxes and smart grid. We aim to leverage our
mobile experience and technology base to expand into these markets.
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Notwithstanding the various growth opportunities we have outlined above, our
business operates in a highly competitive environment. Competition has
historically increased pricing pressures for our products and decreased our
average selling prices. Royalty payments under our existing license agreements
also could be lower than currently anticipated for a variety of reasons,
including decreased royalty rates triggered by larger volume shipments or lower
royalty rates negotiated with customers due to competitive pressure. Moreover,
some of our competitors have reduced their licensing and royalty fees to attract
customers and expand their market share. In order to penetrate new markets and
maintain our market share with our existing products, we may need to offer our
products in the future at lower prices which may result in lower profits. In
addition, our future growth is dependent not only on the continued success of
our existing products but also the successful introduction of new products,
which requires the dedication of resources into research and development which
in turn may increase our operating expenses. We anticipate that our operating
expenses will be flat for 2012 in comparison to 2011. Furthermore, since our
products are incorporated into end products of our OEM customers, our business
is very dependent on our OEM customers' ability to achieve market acceptance of
their end products in the handsets and consumer electronic markets, which are
similarly very competitive.
Moreover, the growth of our business is significantly dependent on our customers
and market acceptance of their end-products that incorporate our technologies.
In addition, macroeconomic trends may significantly affect our operating
results. We currently anticipate that revenues for the second quarter of 2012
will be lower than the first quarter of 2012 and that these trends may
negatively affect our annual 2012 financial results. These trends are due to a
variety of factors, most significantly, market challenges Nokia, a major OEM of
our customers', is experiencing with its 2G phones, which incorporate our
technologies, and the potential for slower than anticipated adoption of our
technologies in its 3G phones, a greater impact of the historical seasonality
trend that handsets OEMs experience annually which reduces the shipments of
CEVA-powered chipsets in the second quarter of any given year and an anticipated
decrease in royalties associated with a decline in the average selling prices of
low-cost 2G phones due to intense competition in the low-cost 2G phone market in
China.
The ever-changing nature of the market also affects our continued business
growth potential. For example, the success of our imaging and audio products is
highly dependent on the market adoption of new services and products, such as
smartphones, tablets, smart TVs and set-top boxes. The low cost 2G feature phone
market continues to witness fierce competition, putting pressure on the royalty
ASP that we receive from these high volume products. In addition, our business
is affected by market conditions in emerging markets, such as India, Latin
America and Africa, where the penetration of handsets, especially low-cost
phones, could generate future growth potential for our business. The maintenance
of our competitive position and our future growth also are dependent on our
ability to adapt to ever-changing technologies, short product life cycles,
evolving industry standards, changing customer needs and the trend towards
cellular connectivity, and voice, audio and video convergence in the markets
that we operate.
Furthermore, due to the uncertainty about the sustainability of the market
recovery, it is extremely difficult for our customers, our vendors and us to
accurately forecast and plan future business activities. Therefore, current
economic conditions, and specifically the volatility in the semiconductor and
consumer electronics industries, and consolidation in the semiconductor
industry, could seriously impact our revenue and harm our business, financial
condition and operating results. As a result, our past operating results should
not be relied upon as an indication of future performance.
RESULTS OF OPERATIONS
Total Revenues
Total revenues were $15.1 million for the first quarter of 2012, flat compared
to $15.1 million for the first quarter of 2011. Total revenues for the first
quarter of 2012 reflected higher other revenues in comparison to the first
quarter of 2011, offset by lower royalty revenues in comparison to the first
quarter of 2011. Five largest customers accounted for 67% of our total revenues
for the first quarter of 2012, as compared to 71% for the comparable period in
2011. Two customers accounted for 30% and 12% of our total revenues for the
first quarter of 2012, as compared to four customers that accounted for 23%,
16%, 14% and 11% of our total revenues for the first quarter of 2011. Because of
the nature of our license agreements and the associated large initial payments
due, the identity of major customers generally varies from quarter to quarter,
and we do not believe that we are materially dependent on any one specific
customer or any specific small number of licensees. Our total revenues derived
from the handsets and mobile broadband markets represented 78% of our total
revenues for the first quarter of 2012, as compared to 85% for the comparable
period in 2011.
We generate our revenues from licensing our technology, which in certain
circumstances is modified to customer-specific requirements. We account for our
IP license revenues and related services in accordance with Financial Accounting
Standards Board ("FASB") Accounting Standards Codifications ("ASC") No. 985-605,
"Software Revenue Recognition." Revenues from license fees that involve
significant customization of our IP to customer-specific specifications are
recognized in accordance with the principles set forth in FASB ASC No. 605-35-25
"Construction-Type and Production-Type Contracts Recognition."
We generate royalty revenue from our customers during the period in which they
ship units of chipsets incorporating our technology. These royalties are
non-refundable payments and are recognized when payment becomes due, provided no
future obligation exists. These royalties are invoiced and recognized on a
quarterly basis in arrears as we receive quarterly shipment reports from our
licensees.
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Licensing Revenues
Licensing revenues were $5.1 million for the first quarter of 2012, flat
compared to $5.1 million for the first quarter of 2011. Licensing revenues for
the first quarter of 2012 reflected higher revenues from our CEVA-TeakLite DSP
core family of products and our SATA IP in comparison to the first quarter of
2011, partially offset by lower revenues from our CEVA-X DSP core family of
products in comparison to the first quarter of 2011.
Licensing revenues accounted for 34% of our total revenues for both the first
quarter of 2012 and 2011. During the first quarter of 2012, we concluded eight
new license agreements. Six agreements were for CEVA DSP cores, platforms and
software, and two agreements were for CEVA SATA/SAS product lines. Target
applications for customer deployment are 3G and 4G basebands, audio and voice
processing for mass market smartphones and SSD drives. Geographically, three of
the agreements signed were in the U.S., four were in Asia Pacific, including
Japan, and one was in Europe.
Royalty Revenues
Royalty revenues were $9.1 million for the first quarter of 2012, a slight
decrease of 1% from $9.2 million for the first quarter of 2011. Royalty revenues
accounted for 60% of our total revenues for the first quarter of 2012, as
compared to 61% for the comparable period of 2011. The slight decrease in
royalty revenues for the first quarter of 2012 reflected a decrease in the
average per unit royalty rate, partially offset by higher quantities of products
using our technology. Our customers reported sales of 278 million chipsets
incorporating our technologies for the first quarter of 2012, compared to
236 million for the comparable period of 2011. The five largest royalty-paying
customers accounted for 83% of our total royalty revenues for both the first
quarter of 2012 and 2011.
As of March 31, 2012, 27 licensees were shipping products incorporating our
technologies pursuant to 36 licensing arrangements. As of March 31, 2011, 29
licensees were shipping products incorporating our technologies pursuant to 38
licensing arrangements.
Other Revenues
Other revenues were $0.9 million for the first quarter of 2012, an increase of
21% from $0.7 million for the first quarter of 2011. The increase in other
revenues reflected principally higher sales of development systems. Other
revenues accounted for 6% of our total revenues for the first quarter of 2012,
compared to 5% for the comparable period of 2011. Other revenues include support
and training for licensees and sales of development systems.
Geographic Revenue Analysis
First Quarter First Quarter
2012 2011
(in millions, except percentages)
United States $ 3.0 20% $ 3.2 21%
Europe and Middle East (1) (2) $ 3.7 24% $ 7.5 50%
Asia Pacific (3) (4) $ 8.4 56% $ 4.4 29%
(1) Switzerland $ *) *) $ 1.7 11%
(2) Germany $ 1.8 12% $ 5.6 37%
(3) China $ 5.2 35% $ 2.8 18%
(4) Japan $ 2.4 16% $ *) *)
*) Less than 10%
Due to the nature of our license agreements and the associated potential large
individual contract amounts, the geographic split of revenues both in absolute
and percentage terms generally varies from quarter to quarter.
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Cost of Revenues
Cost of revenues was $0.9 million for both the first quarter of 2012 and 2011.
Cost of revenues accounted for 6% of our total revenues for both the first
quarter of 2012 and 2011. Included in cost of revenues for the first quarter of
2012 was a non-cash equity-based compensation expense of $51,000, compared to
$49,000 for the comparable period of 2011.
Gross Margin
Gross margin for the first quarter of 2012 and 2011 was both 94%.
Operating Expenses
Total operating expenses were $9.6 million for the first quarter of 2012,
compared to $9.2 million for the comparable period of 2011. The increase in
total operating expenses for the first quarter of 2012 principally reflected
higher salary and related costs, marketing and trade show expenses, travel
expenses and non-cash equity-based compensation expenses, partially offset by
lower commission expenses.
We currently anticipate that our operating expenses will be flat in 2012 in
comparison to 2011.
Research and Development Expenses, Net
Our research and development expenses were $5.5 million for the first quarter of
2012, compared to $5.3 million for the comparable period of 2011. The net
increase for the first quarter of 2012 principally reflected higher salary and
related costs. Included in research and development expenses for the first
quarter of 2012 were non-cash equity-based compensation expenses of $465,000,
compared to $378,000 for the comparable period of 2011. Research and development
expenses as a percentage of our total revenues were 36% for the first quarter of
2012, compared to 35% for the comparable period of 2011.
The number of research and development personnel was 130 at March 31, 2012,
compared to 128 at March 31, 2011.
Sales and Marketing Expenses
Our sales and marketing expenses were $2.3 million for the first quarter of
2012, compared to $2.2 million for the comparable period of 2011. The increase
for the first quarter of 2012 principally reflected higher marketing and trade
show expenses and travel expenses, partially offset by lower commission
expenses. Included in sales and marketing expenses for the first quarter of 2012
were non-cash equity-based compensation expenses of $239,000, compared to
$201,000 for the comparable period of 2011. Sales and marketing expenses as a
percentage of our total revenues were 15% for both the first quarter of 2012 and
2011.
The total number of sales and marketing personnel was 23 at March 31, 2012,
compared to 22 at March 31, 2011.
General and Administrative Expenses
Our general and administrative expenses were $1.9 million for the first quarter
of 2012, compared to $1.8 million for the comparable period of 2011. The
increase for the first quarter of 2012 principally reflected higher non-cash
equity-based compensation expenses. Included in general and administrative
expenses for the first quarter of 2012 were non-cash equity-based compensation
expenses of $490,000, compared to $326,000 for the comparable period of 2011.
General and administrative expenses as a percentage of total revenues were 12%
for both the first quarter of 2012 and 2011.
The number of general and administrative personnel was 24 at both March 31, 2012
and 2011.
Financial and Other Income, Net (in millions)
First Quarter First Quarter
2012 2011
Financial income, net $ 0.95 $ 0.55
of which:
Interest income and gains and losses from
marketable securities, net $ 0.97 $ 0.63
Foreign exchange loss $ (0.02 ) $ (0.08 )
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Financial income, net, consists of interest earned on investments, gains and
losses from marketable securities, amortization of discounts and premiums on
marketable securities and foreign exchange movements.
The increase in interest income and gains and losses from marketable securities,
net, during the first quarter of 2012 principally reflected higher combined
cash, bank deposits and marketable securities balances held and higher yields.
We review our monthly expected non-U.S. dollar denominated expenditures and look
to hold equivalent non-U.S. dollar cash balances to mitigate currency
fluctuations. This has resulted in a foreign exchange loss of $18,000 and
$84,000 for the first quarter of 2012 and 2011, respectively.
Provision for Income Taxes
Our income tax expenses were $689,000 for the first quarter of 2012, compared to
$770,000 for the comparable period of 2011. The decrease for the first quarter
of 2012 primarily reflected a decrease in withholding tax expenses for which we
were unable to obtain a refund from a certain tax authority, partially offset by
a higher tax rate for our Israeli subsidiary as a result of an increase in the
tax rate of one of its investment programs from a tax exempt status for the
first quarter of 2011 to a tax rate of 10% for this investment program beginning
in the first quarter of 2012. We have significant operations in Israel and the
Republic of Ireland, and a substantial portion of our taxable income is
generated there. Currently, our Israeli and Irish subsidiaries are taxed at
rates substantially lower than U.S. tax rates.
Our Irish subsidiary qualified for a 12.5% tax rate on its trade. Interest
income generated by our Irish subsidiary is taxed at a rate of 25%.
Our Israeli subsidiary is entitled to various tax benefits by virtue of the
"Approved Enterprise" and/or "Benefited Enterprise" status granted to its eight
investment programs, as defined by the Israeli Investment Law, which has
resulted in a decrease in the effective tax rate otherwise applicable to our
Israeli subsidiary. In accordance with the Investment Law, our Israeli
subsidiary's investment programs are tax-exempt for a period of two to four
years commencing from the year the program first earns taxable income, and is
subject to corporate taxes at the rate of 10% to 25%, depending upon the level
of foreign ownership, for an additional period of up to a total of six to eight
years from when the tax exemption ends. The period of tax rate for Approved
Enterprises is limited to the earlier of 12 years from the commencement of
production, or 14 years from the approval date, and for Benefited Enterprises,
12 years starting from the year of election.
The tax benefits under our Israeli subsidiary's first five investment programs
have expired and are subject to corporate tax of 25% in 2012. However, our
Israeli operating subsidiary received an approval for the erosion of tax basis
in respect to its second, third, fourth and fifth investment programs, and as a
result no taxable income was attributed to the second, third and fourth
investment programs, and a reduced taxable income was attributed to the fifth
investment program. The approval did result in an increase in the taxable income
attributable to our Israeli subsidiary's eighth investment program, which has a
reduced taxable income for the first quarter of 2012. Our Israeli subsidiary's
sixth, seventh and eighth investment programs are subject to corporate tax rate
of 10% for the first quarter of 2012. The tax benefits under our Israeli
subsidiary's active investment programs are scheduled to gradually expire
starting in 2014.
On December 29, 2010, new legislation amending the Investment Law was adopted
(the "New Amendment"). Under the New Amendment, a uniform corporate tax rate
will apply to all qualifying income of certain "Industrial Companies," as
opposed to the current law's incentives, which are limited to income from
Approved Enterprises and Benefited Enterprises during their benefit period. The
New Amendment became effective as of January 1, 2011. Among other things, the
New Amendment sets forth the following amended tax rates for income generated
from qualified investment programs: during 2011 and 2012 - 15%; during 2013 and
2014 - 12.5%; and during 2015 and thereafter - 12%.
We do not currently intend to implement the New Amendment; rather we intend to
continue to comply with the Investment Law as in effect prior to enactment of
the New Amendment until the earlier of such time that compliance with the
Investment Law prior to enactment of the New Amendment is no longer in our best
interests or until the expiration of our current investment programs. We are
required to comply with the New Amendment subsequent to the expiration of our
current investment programs and for any new qualified investment program after a
transitional period. As a result, the New Amendment may increase our average tax
rate in future years.
To maintain our Israeli subsidiary's eligibility for the above tax benefits, it
must continue to meet certain conditions under the Investment Law. Should our
Israeli subsidiary fail to meet such conditions in the future, these benefits
would be cancelled and it would be subject to corporate tax in Israel at the
standard corporate rate and could be required to refund tax benefits already
received, with interest and adjustments for inflation based on the Israeli
consumer price index.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States. The preparation of these
consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues, expenses and
related disclosures. We evaluate our estimates and assumptions on an ongoing
basis. Our estimates are based on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Our actual
results could differ from these estimates.
We believe that the assumptions and estimates associated with allowance for
doubtful accounts, fair value of financial instruments, share-based compensation
and income taxes have the greatest potential impact on our consolidated
financial statements. Therefore, we consider these to be our critical accounting
policies and estimates.
See our Annual Report on Form 10-K for the year ended December 31, 2011, filed
with the SEC on March 15, 2012, for a discussion of additional critical
accounting policies and estimates. There have been no changes in our critical
accounting policies as compared to what was previously disclosed in the Form
10-K for the year ended December 31, 2011.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2012, we had approximately $6.3 million in cash and cash
equivalents, $62.1 million in short term bank deposits, $69.2 million in
marketable securities, and $25.3 million in long term bank deposits, totaling
$162.9 million, compared to $164.5 million at December 31, 2011. During the
first quarter of 2012, we invested $30.9 million of cash in bank deposits and
available-for-sale marketable securities with maturities up to 36 months. In
addition, during the same period, bank deposits and available-for-sale
marketable securities were sold or redeemed for cash amounting to $25.1 million.
All of our marketable securities are classified as available-for-sale. The
purchase and sale or redemption of available-for-sale marketable securities are
considered part of investing cash flow. Available-for-sale marketable securities
are stated at fair value, with unrealized gains and losses reported in
accumulated other comprehensive income (loss), a separate component of
stockholders' equity, net of taxes. Realized gains and losses on sales of
investments, as determined on a specific identification basis, are included in
the interim condensed consolidated statements of comprehensive income. We did
not recognize any other-than-temporarily-impaired charges on marketable
securities during the first quarter of 2012. For more information about our
marketable securities, see Notes 3 to the attached Notes to the Interim
Condensed Consolidated Financial Statements for the three months ended March 31,
2012.
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Bank deposits are classified as short-term bank deposits and long-term bank
deposits. Short-term bank deposits are non-tradable deposits with maturities of
more than three months but less than one year, whereas long-term bank deposits
are non-tradable deposits with maturities of more than one year. Non-tradable
deposits are presented at their cost, including accrued interest, and purchases
and sales are considered part of cash flows from investing activities.
Operating Activities
Cash provided by operating activities for the first quarter of 2012 was $5.6
million and consisted of net income of $4.9 million, adjustments for non-cash
items of $1.2 million, and changes in operating assets and liabilities of $0.5
million. Adjustments for non-cash items primarily consisted of $1.4 million of
depreciation and equity-based compensation expenses, $0.4 million of
amortization of premiums on available-for-sale marketable securities, and $0.5
million of accrued interest on bank deposits. The decrease in cash from changes
in operating assets and liabilities primarily consisted of an increase in trade
receivable of $0.4 million, an increase in prepaid expenses and other accounts
receivable of $0.1 million, an increase in deferred tax assets, net, of $0.3
million, a decrease in deferred revenues of $0.5 million, and a classification
of excess tax benefit from equity-based compensation expenses of $0.3 million as
financing cash flows, partially offset by an increase in trade payable of $0.2
million and an increase in taxes payable of $0.8 million.
Cash provided by operating activities for the first quarter of 2011 was $10.0
million and consisted of net income of $4.6 million, adjustments for non-cash
items of $1.4 million, and changes in operating assets and liabilities of $4.0
million. Adjustments for non-cash items primarily consisted of $1.1 million of
depreciation and equity-based compensation expenses, $0.5 million of
amortization of premiums on available-for-sale marketable securities, and $0.2
million of accrued interest on bank deposits. The increase in cash from changes
in operating assets and liabilities primarily consisted of a decrease in trade
receivable of $4.7 million, an increase in accrued expenses and other payables
of $0.2 million, and an increase in taxes payable of $0.3 million, partially
offset by an increase in prepaid expenses and other accounts receivable of $0.2
million, an increase in deferred tax assets, net, of $0.3 million, a decrease in
trade payable of $0.2 million, a decrease in deferred revenues of $0.2 million,
and a classification of excess tax benefit from equity-based compensation
expenses of $0.3 million as financing cash flows.
Cash flows from operating activities may vary significantly from quarter to
quarter depending on the timing of our receipts and payments. Our ongoing cash
outflows from operating activities principally relate to payroll-related costs
and obligations under our property leases and design tool licenses. Our primary
sources of cash inflows are receipts from our accounts receivable and interest
earned from our cash, deposits and marketable securities. The timing of receipts
of accounts receivable from customers is based upon the completion of agreed
milestones or agreed dates as set out in the contracts.
Investing Activities
Net cash used in investing activities for the first quarter of 2012 was
$5.8 million, compared to $14.4 million of net cash used in investing activities
for the comparable period of 2011. We had a cash outflow of $12.9 million and a
cash inflow of $13.4 million in respect of investments in marketable securities
during the first quarter of 2012, as compared to cash outflow of $17.0 million
and a cash inflow of $14.1 million in respect of investments in marketable
securities during the first quarter of 2011. For the first quarter of 2012, we
had a net investment of $6.3 million in bank deposits, as compared to an
investment of $11.5 million in bank deposits for the comparable period of 2011.
Financing Activities
Net cash used in financing activities for the first quarter of 2012 was
$8.4 million, compared to $2.5 million of net cash provided by financing
activities for the comparable period of 2011.
In January 2012, our Board of Directors reaffirmed its authorization for the
repurchase by the company of 1,966,700 shares of common stock pursuant to
Rule 10b-18 of the Securities Exchange Act of 1934, as amended. During the first
quarter of 2012, we repurchased 400,063 shares of common stock pursuant to our
share repurchase program, at an average purchase price of $23.83 per share, for
an aggregate purchase price of $9.5 million. No repurchases were done during the
first quarter of 2011.
During the first quarter of 2012, we received $0.8 million from the issuance of
common stock and treasury stock upon exercises of stock options and purchases
under our employee stock purchase plan, as compared to $2.2 million received
during the first quarter of 2011 from the issuance of common stock upon
exercises of stock options and purchases under our employee stock purchase plan.
During both the first quarter of 2012 and 2011, we classified $0.3 million of
excess tax benefit from equity-based compensation expenses as financing cash
flows.
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We believe that our current cash on hand, short-term deposits and marketable
securities, along with cash from operations, will provide sufficient capital to
fund our operations for at least the next 12 months. We cannot provide
assurances, however, that the underlying assumed levels of revenues and expenses
will prove to be accurate.
In addition, as part of our business strategy, we occasionally evaluate
potential acquisitions of businesses, products and technologies and minority
equity investments. Accordingly, a portion of our available cash may be used at
any time for the acquisition of complementary products or businesses or minority
equity investments. Such potential transactions may require substantial capital
resources, which may require us to seek additional debt or equity financing. We
cannot assure you that we will be able to successfully identify suitable
acquisition or investment candidates, complete acquisitions or investments,
integrate acquired businesses into our current operations, or expand into new
markets. Furthermore, we cannot provide assurances that additional financing
will be available to us in any required time frame and on commercially
reasonable terms, if at all. See "Risk Factors-We may seek to expand our
business in ways that could result in diversion of resources and extra
expenses." for more detailed information.
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