RESEARCH ALERT- Evaluation Completed! *****
CATALYST SEMICONDUCTOR, INC. designs, develops and markets a broad range of semiconductor memory products. Nonvolatile memory (NVM) retains stored data when system power is turned off and is therefore well suited for a wide variety of applications in the computer, consumer electronics, telecommunications, automotive, industrial control and instrumentation markets. The company maintains a website which includes a lot of historical data and press releases regarding the company-
catsemi.com.
The Company markets its products through a direct sales force and a
worldwide network of independent distributors and sales representatives. For the year ended April 30, 1997, international sales represented 65% of product sales. End user customers of the Company's products include Compaq, Fujitsu, Hewlett Packard, IBM, JVC, Matsushita Communications, Maxtor, Mitsubishi, Motorola, Nokia, Panasonic, Philips, Sharp, Siemens, Sony and Toshiba. (from 10K filed 7/11/97).
The different NVM semiconductor devices which have been introduced over time include read-only memory ("ROM") and programmable ROM ("PROM"); reprogrammable NVM memory such as erasable programmable ROM ("EPROM") and electrically erasable programmable ROM ("EEPROM"); nonvolatile random access memory ("NVRAM"); and, most recently, Flash memory. Each uccessive generation of NVM memory offers increasing functionality, flexibility and performance.
As of April 30, 1997, the Company owned sixteen (16) U.S. patents, one (1) international patent and had an additional three (3) U.S. patent applications pending. The Company intends to continue to seek patents on its inventions used in its products and manufacturing processes.
Principal competitors with respect to the Company's EEPROM products as of 10-K filed July 11, 1997 included SGS-Thomson, National Semiconductor, Atmel and Xicor, as well as the Company's strategic manufacturing partner Oki. The market for Flash memory products is relatively new and has been characterized by long production cycles, irregular yields, competing technologies and, particularly in fiscal 1997, intense price competition.
In the company press release announcing the end of the 4th Q of the
company's 1997 fiscal year dated June 12, 1997- see biz.yahoo.com - the company stated:
"We have received significant orders from two major disk drive manufacturers for our new 28F102 Flash memory device and have now qualified our new 1 Meg Bootblock Flash memory device at a major U.S. personal computer manufacturer", and "The Company closed this quarter with its highest end-of-quarter backlog since April 30, 1996."
A historical price chart for the last two years shows that this stock was at $7 at the end of April, 1996.
quote.yahoo.com
Recent price action has been in the range of $2 per share.
quote.yahoo.com
The 52 Week Low for the stock was 1ÿ15/32 on 05/16/97. The 52 Week High was 6ÿ15/16 on 08/16/96. There are 7,989,000 shares outstanding giving the company a current Market Cap of $15,978,000 at $2 per share.
Recent quarterly results include the following: On 06/12/97 CATS reported 4th qtr 1997 results (ending April 30, 1997): Revs (mils) were $9.01 down from $15.86 in 4th Q 1996 (-43.2%). Cost of revenues was $7.0M (78% of sales) vs. $11.2M (71% of sales). Gross Profit was $2.0M (22% of sales) vs. $4.7M (29% of sales). Operating expenses were $3.1M vs. $3.6M. Net Income (mils) was -$1.13 down from $1.11 in 4th Q 1996 (-202.2%). EPS were -$0.14 down from $0.13 in 4th Q 1996 (-207.7%).
On 02/26/97 CATS reported 3rd qtr 1997 ending January 31, 1997) results: Revs (mils) were $10.18 down from $15.51 in 3rd Q 1996 (-34.4%). Cost of revenues was $8.4M (83% of sales) vs. $10.9M (70% of sales). Gross profit was $1.74M (17% of sales) vs. $4.65M (30% of sales). Operating expenses were $3.2M vs. $3.6M. Net Income (mils) was -$1.58 down from $0.98 in 3rd Q 1996 (-261.4%). EPS were -$0.20 down from $0.12 in 3rd Q 1996 (-266.7%). In the 2nd Q 1997 ending 10/31/96, Revs (mils) were $12.08 down from $14.70 in 2nd Q 1996 (-17.8%). Net Income (mils) were -$2.49 down from $0.81 in 2nd Q 1996 (-406.0). Earnings per share were -$0.31 down from $0.10 in 2nd Q 1996 (- 410.0%).
The 1st Q of 1997 fiscal year is the comparison quarter for the upcoming earnings results. This was a strong quarter and will make earnings comparisons somewhat difficult. In 1st Q 1997 (ended July 31, 1996), the company had revenues of $15.8M. Cost of revenues was $11.1M, leaving a Gross Profit of $4.7M. Operating expenses were $3.5M leaving Net Income of $1.2M (a net profit margin of 7.3%). The shares outstanding were 8.9 and the earnings per share came to $.13.
The industry in general is in a rebound. One recently released article indicates that the North American Semiconductor Equipment Industry posted a July 1997 Book-to-Bill Ratio of 1.13
(released 09:19 p.m Aug 15, 1997 Eastern time). See: guide-p.infoseek.com
The recent book to bill ratios are as follows:
Month............Shipments...Bookings...Book-to-Bill
February 97....1,029.0 .....1,100.9 .......1.07
March 97 ......1,101.6 .....1,264.7 .......1.15
April 97 ......1,260.5 .....1,385.7 .......1.10
May 97 ........1,299.4 .....1,421.0 .......1.09
June 97 .......1,372.0 .....1,471.2 .......1.07
(revised)
July 97 .......1,457.9 .....1,647.3 .......1.13
(preliminary)
Note: these 10% gains are compounded monthly!
(See link above for source of these figures.)
So now- the earnings estimates. First of all- the expected announcement date is Wednesday, August 27, 1997. This was confirmed with the company.
The anticipated earnings for 1st Q 1998 are a little more difficult to project than the release date. The industry is experiencing an increase of approx. 11% (see book to bill). We will assume that CATS has turned the corner and that it will make a revenue level equal to the average between the 1996 and the 1997 sales. It appears from the new products and the company's backlog that it is much closer to the 1996 situation than in previous quarters. This indicates revenues of (9.01+15.86)/2 = 12.4M. This is a substantial improvement over prior quarters.
Cost of goods has varied from 70%-83%. We will assume that they hit in the middle of the range this quarter- 75%. This is an mprovement of 3% from 78% in the 4th Q 1997. The additional sales and the company's recent focus on profitability should help this number continue to improve. With CoG at 75%, gross profit margin will be 25%.
Operating expenses have been trimmed and will remain in the range of $3.1M. This assumes no further improvement in the positive trend of the past several quarters. Interest expense will add another $.1M to expenses. It is probable that the tax rate is effectively 0%.
Crunching the numbers we see that the 1st Q of 1998 fiscal year is a
turnaround quarter. In 1st Q 1998 (ended July 31, 1997), we estimate that the company had revenues of $12.4M. Cost of revenues would be $9.3M, leaving a Gross Profit of $3.1M. Operating expenses and interest expense will be $3.2M leaving Net Income of $-.1M The shares outstanding are 7.97M and the earnings per share are estimated to be -$.01.
A result of -$.01 would be very beneficial to the stock price of this company. I would anticipate a very quick recovery to a price in the neighborhood of $5.00 per share. Happy investing and we'll see what next Wednesday afternoon brings! |
