-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, onistYiNzJ2+DQ3ZUDmXbvY58VV+VekTHlNGcqkDV7/4hpmlJCnLEceDzU+PvDhJ jebCp40dTZMZv08aEvZWRQ== 0000950005-94-000054.txt : 19941122 0000950005-94-000054.hdr.sgml : 19941122 ACCESSION NUMBER: 0000950005-94-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATKINS JOHNSON CO CENTRAL INDEX KEY: 0000105006 STANDARD INDUSTRIAL CLASSIFICATION: 3812 IRS NUMBER: 941402710 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05631 FILM NUMBER: 94558430 BUSINESS ADDRESS: STREET 1: 3333 HILLVIEW AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154934141 MAIL ADDRESS: STREET 1: 3333 HILLVIEW AVENUE CITY: PALO ALTO STATE: CA ZIP: 94304-1223 10-Q 1 FORM 10-Q FOR QUARTER ENDED 9-30-94 FORM 10-Q ----------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission file number 1-5631 WATKINS-JOHNSON COMPANY ----------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 94-1402710 - - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3333 Hillview Avenue, Palo Alto, California 94304-1223 - - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (415) 493-4141 ---------------------------------------------------- (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, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ----- ----- Common stock, no par value, outstanding as of September 30, 1994 7,491,278 shares Page 1 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The interim financial statements are unaudited; however, Watkins-Johnson Company believes that all adjustments necessary to a fair statement of results for such interim periods have been included and all such adjustments are of a normal recurring nature. The results for the nine months ended September 30, 1994, are not necessarily indicative of the results for the full year 1994. Supplementary information to the financial statements: A dividend of twelve cents per share was declared and paid during the third quarter of 1994 and 1993. Net income per share is computed based on the weighted average number of common and common equivalent shares (dilutive stock options) outstanding during the period. The difference between fully diluted earnings per share and primary earnings per share is not significant, see Exhibit 11. The consolidated financial statements required by Rule 10-01 of Regulation S-X are included in this report beginning on the next page. Page 2 WATKINS-JOHNSON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS* For the periods ended September 30, 1994 and October 1, 1993
Three Months Ended Nine Months Ended - - - ------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share amounts) 1994 1993 1994 1993 - - - ------------------------------------------------------------------------------------------------- Sales $ 84,287 $ 72,708 $ 253,185 $ 208,007 - - - ------------------------------------------------------------------------------------------------- Costs and expenses: Cost of goods sold 49,519 47,246 151,311 137,148 Selling and administrative 18,302 14,278 53,909 42,325 Research and development 8,533 6,124 25,957 17,681 - - - ------------------------------------------------------------------------------------------------- 76,354 67,648 231,177 197,154 - - - ------------------------------------------------------------------------------------------------- Income from operations 7,933 5,060 22,008 10,853 Interest and other income (expense) -net 280 343 863 997 Interest expense (291) (313) (894) (931) - - - ------------------------------------------------------------------------------------------------- Income before Federal and foreign income taxes 7,922 5,090 21,977 10,919 Federal and foreign income taxes (2,536) (1,578) (7,033) (3,385) - - - ------------------------------------------------------------------------------------------------- Net income $ 5,386 $ 3,512 $ 14,944 $ 7,534 ================================================================================================= Net income per share $ .61 $ .42 $ 1.79 $ .93 (Average number of common and common equivalent shares outstanding: 1994 - 8,344,000 shares, 1993 - 8,129,000 shares. Differences between fully diluted and primary earnings per share are considered immaterial, see Exhibit 11.) *Unaudited
Page 3 WATKINS-JOHNSON COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of September 30, 1994 and December 31, 1993 - - - -------------------------------------------------------------------------------- (Dollars in thousands) 1994* 1993 - - - -------------------------------------------------------------------------------- ASSETS Current assets: Cash and equivalents $ 34,436 $ 45,040 Receivables 79,423 73,971 Inventories: Raw materials and parts 10,818 7,327 Work in process 35,897 28,014 Finished goods 1,752 1,805 Other 12,102 12,617 - - - -------------------------------------------------------------------------------- Total current assets 174,428 168,774 - - - -------------------------------------------------------------------------------- Property, plant and equipment 173,977 167,857 Accumulated depreciation and amortization (124,732) (121,028) - - - -------------------------------------------------------------------------------- Property, plant and equipment - net 49,245 46,829 - - - -------------------------------------------------------------------------------- Other assets 4,781 5,025 - - - -------------------------------------------------------------------------------- $ 228,454 $ 220,628 ================================================================================ LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Payables $ 13,724 $ 13,243 Accrued liabilities 49,158 47,034 - - - -------------------------------------------------------------------------------- Total current liabilities 62,882 60,277 - - - -------------------------------------------------------------------------------- Long-term obligations 23,996 26,463 - - - -------------------------------------------------------------------------------- Shareowners' equity: Common stock 17,336 9,106 Retained earning 124,240 124,782 - - - -------------------------------------------------------------------------------- Total shareowners' equity 141,576 133,888 - - - -------------------------------------------------------------------------------- $ 228,454 $ 220,628 ================================================================================ * Unaudited Page 4 WATKINS-JOHNSON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS* For the Periods Ended September 30,1994 and October 1, 1993 Nine Months Ended - - - -------------------------------------------------------------------------------- (Dollars in thousands) 1994 1993 - - - -------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net Income $ 14,944 $ 7,534 Reconciliation of net income to cash flows Depreciation and amortization 6,824 7,756 Net changes in: Receivables (5,452) (3,027) Inventories (11,321) (1,692) Other assets 695 (739) Accruals and payables 530 6,293 - - - -------------------------------------------------------------------------------- Net cash provided by operating activities 6,220 16,125 - - - -------------------------------------------------------------------------------- INVESTING ACTIVITIES: Additions of property, plant and equipment (9,238) (6,331) Other 62 779 - - - -------------------------------------------------------------------------------- Net cash used in investing activities (9,176) (5,552) - - - -------------------------------------------------------------------------------- FINANCING ACTIVITIES: Proceeds from issuance of stock 9,202 1,008 Repurchase of common stock (13,805) (426) Dividends paid (2,654) (2,719) Other (391) (1,377) - - - -------------------------------------------------------------------------------- Net cash used in financing activities (7,648) (3,514) - - - -------------------------------------------------------------------------------- Net increase (decrease) in cash and equivalents (10,604) (7,059) Cash and equivalents at beginning of period 45,040 49,081 - - - -------------------------------------------------------------------------------- Cash and equivalents at end of period $ 34,436 $ 56,140 ================================================================================ *Unaudited Page 5 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION: The company continues to be in excellent financial condition. Cash and equivalents decreased $10.6 million from $45.0 to $34.4 million mostly due to cash used for stock repurchases exceeding cash generated by stock issuances from stock option exercises and increased working capital requirements. For the fourth quarter of 1994, the company expects sufficient cash will be generated internally to fund its operations. In addition the company has the ability to augment its cash needs with readily available external financing. At the end of the third quarter the company had no material commitments or planned investments which would require external financing. Pending divestitures described below are not expected to have any material adverse impact on the company's financial condition and are anticipated to generate net positive cash flow. CURRENT OPERATIONS: The excellent performance of the Semiconductor Equipment Group strengthened further in the third quarter. The group's total business in 1994 is expected to exceed 1993's level by more than 60 percent. In contrast, the Electronics Group is facing strong competition in a weak defense market. To offset that weakness, the group is consolidating its Northern California operations at the company's Palo Alto plant. In the commercial arena, the Electronics Group won contracts for cellular base-station transceivers and is pursuing a number of related equipment opportunities. W-J is offering the San Jose plant for sale and plans to divest its hydrogeology subsidiary--W-J Environmental, Inc.--to focus its resources on business areas which hold the greatest promise for the total company. BACKLOG: The firm order backlog on September 30, 1994 was $230,290,000, compared to the $228,917,000 recorded on October 1, 1993. The portion of the current backlog shippable within twelve months is 87 percent, compared to 81 percent one year ago. THIRD QUARTER 1994 COMPARED TO THIRD QUARTER 1993: Sales in the semiconductor equipment segment increased 80% and more than offset the decline in the electronics segment resulting in an overall company increase of 16%. The favorable shift towards more profitable semiconductor-equipment products helped to improve the company's margin to above 40% despite consolidation charges incurred in the Electronics Group. Selling and administrative expenses increased in line with volume except for higher international sales commissions. Research and development expenditures were expectedly higher than last year due to efforts in the advancing high-density plasma technology. The combination of the above factors resulted in the increase in net income of more than 50%. THIRD QUARTER YEAR-TO-DATE 1994 COMPARED TO THIRD QUARTER YEAR-TO-DATE 1993: Sales recorded by the Semiconductor Equipment Group more than doubled last year's amount and was the primary reason the company's overall sales grew 22%. Margins pushed above 40% mostly due to the product mix favorably shifted towards higher margin semiconductor-equipment sales. Selling and administration expenses continued to grow faster than revenues because of high commissions and high volume for the international sales of semiconductor equipment. To improve customer service and control international commission expenses in the future the company has established foreign subsidiaries in Japan, Taiwan and Singapore in addition to Korea, which was established last year. The offices will operate in parallel with the current distributors for a transitional period. The company allowed a higher rate for research and development expenditures because of higher revenues from semiconductor equipment group and the opportunity to meet certain milestones for the high-density plasma initiative. The combined effect of the above factors resulted in the company's net income to increase 100% over the prior year's amount. Page 6 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) A list of the exhibits required to be filed as part of this report is set forth in the Exhibit Index, which immediately precedes such exhibits. The exhibits are numbered according to Item 601 of Regulation S-K. b) No reports on Form 8-K were required to be filed during the quarter. Page 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WATKINS-JOHNSON COMPANY ----------------------- (Registrant) Date: November 4, 1994 By: /s/ W. Keith Kennedy, Jr. -------------------- ------------------------------------------ W. Keith Kennedy, Jr. President and Chief Executive Officer Date: November 4, 1994 By: /s/ Scott G. Buchanan -------------------- ------------------------------------------ Scott G. Buchanan Vice President and Chief Financial Officer Page 8 EXHIBIT INDEX The Exhibits below are numbered according to Item 601 of Regulation S-K. Exhibit Number Exhibit ------- ------- 11 Statement re Computation of Per Share Earnings. 27 Financial Data Schedule for the period ended September 30, 1994. Page 9 EX-11 2 COMPUTATION OF NET INCOME PER SHARE WATKINS-JOHNSON COMPANY AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON SHARE The following table illustrates the potential dilution of outstanding stock options on net income per share computations:
Three Months Ended Nine Months Ended - - - ------------------------------------------------------------------------------------------------------------- Sept. 30, 1994 Oct. 1, 1993 Sept. 30, 1994 Oct. 1, 1993 - - - ------------------------------------------------------------------------------------------------------------- FOR PRIMARY NET INCOME PER SHARE: Weighted average shares outstanding 7,450,000 7,553,000 7,450,000 7,546,000 Equivalent shares -- dilutive stock options -- based on treasury stock metho using average market price 710,000 527,000 710,000 310,000 - - - ------------------------------------------------------------------------------------------------------------- Total 8,160,000 8,080,000 8,160,000 7,856,000 ============================================================================================================= FOR FULLY DILUTED NET INCOME PER SHARE: Weighted average shares outstanding 7,450,000 7,553,000 7,450,000 7,546,000 Equivalent shares -- dilutive stock options -- based on treasury stock method using greater of closing market price or average price 894,000 623,000 894,000 583,000 - - - ------------------------------------------------------------------------------------------------------------- Total 8,344,000 8,176,000 8,344,000 8,129,000 ============================================================================================================= Net Income $ 5,386,000 $ 3,512,000 $14,944,000 $ 7,534,000 ============================================================================================================= Primary net income per share $ .66 $ .43 $ 1.83 $ .96 ============================================================================================================= Fully diluted net income per share $ .61* $ .42 $ 1.79 $ .93 ============================================================================================================= * Reported $.61 instead of $.65 so cumulative earnings for all quarters total year-to-date earnings of $1.79 per share. This calculation is submitted in accordance with Regulation S-K, Item 601(b)(11).
Page 10 EX-27 3 FDS FOR QUARTER ENDED 9-30-94
5 1000 QTR-3 DEC-31-1994 SEP-30-1994 34436 0 79423 0 48467 174428 173977 124732 228454 62882 23996 17336 0 0 124240 141576 84287 84287 49519 49519 26555 0 291 7922 2536 5386 0 0 0 5386 0 0.61
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