-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jqsrhe6Xs9mGORZDeR1BK6gNKTHxNibwiRJ6vyFX57XJbRhIa0r4KYJ4mMaiLBHd zmktOiPccF32qR9sdUD6Rw== 0000950005-95-000264.txt : 19951107 0000950005-95-000264.hdr.sgml : 19951107 ACCESSION NUMBER: 0000950005-95-000264 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950929 FILED AS OF DATE: 19951106 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATKINS JOHNSON CO CENTRAL INDEX KEY: 0000105006 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [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: 95587579 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 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 29, 1995 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 29, 1995 8,092,000 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 29, 1995, are not necessarily indicative of the results for the full year 1995. Supplementary information to the financial statements: A dividend of twelve cents per share was declared and paid during the third quarter of 1995 and 1994. 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, 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 29, 1995 and September 30, 1994
Three Months Ended Nine Months Ended - ----------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share amounts) 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------------------------- Sales .......................................... $ 95,550 $ 83,174 $ 290,537 $ 251,065 - ----------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of goods sold ........................ 54,978 48,398 168,439 149,228 Selling and administrative ................ 17,565 18,034 56,386 52,988 Research and development .................. 11,217 8,533 35,379 25,957 - ----------------------------------------------------------------------------------------------------------- 83,760 74,965 260,204 228,173 - ----------------------------------------------------------------------------------------------------------- Income from operations ......................... 11,790 8,209 30,333 22,892 Interest and other income (expense)--net ....... 455 295 1,346 874 Interest expense ............................... (232) (291) (638) (894) - ----------------------------------------------------------------------------------------------------------- Income from continuing operations before Federal and foreign income taxes .............. 12,013 8,213 31,041 22,872 Federal and foreign income taxes ............... (3,103) (2,624) (9,002) (7,304) - ----------------------------------------------------------------------------------------------------------- Income from continuing operations .............. 8,910 5,589 22,039 15,568 Loss from discontinued operations--net of taxes ....................................... (208) (624) - ----------------------------------------------------------------------------------------------------------- Net income ..................................... $ 8,910 $ 5,386 $ 22,039 $ 14,944 =========================================================================================================== Fully diluted net income per share (difference between fully diluted and primary earnings per share is not material) ........ $ .98 $ .61 $ 2.48 $ 1.79 Average common and equivalent shares outstanding ................................. 9,083,000 8,344,000 8,881,000 8,344,000 *Unaudited
Page 3 WATKINS-JOHNSON COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of September 29, 1995 and December 31, 1994 - -------------------------------------------------------------------------------- (Dollars in thousands) 1995* 1994 - -------------------------------------------------------------------------------- ASSETS Current assets: Cash and equivalents ......................... $ 37,235 $ 34,469 Receivables .................................. 90,268 80,427 Inventories: Raw materials and parts .................. 17,395 12,293 Work in process .......................... 42,925 37,682 Finished goods ........................... 1,690 1,680 Other ........................................ 15,971 12,921 - -------------------------------------------------------------------------------- Total current assets ......................... 205,484 179,472 - -------------------------------------------------------------------------------- Property, plant, and equipment ................... 170,480 160,683 Accumulated depreciation and amortization .... (114,153) (115,537) - -------------------------------------------------------------------------------- Property, plant, and equipment--net .......... 56,327 45,146 - -------------------------------------------------------------------------------- Other assets ..................................... 10,643 10,412 - -------------------------------------------------------------------------------- $ 272,454 $ 235,030 ================================================================================ LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Payables ................................. $ 16,046 $ 15,045 Accrued liabilities ...................... 51,567 47,776 - -------------------------------------------------------------------------------- Total current liabilities ................ 67,613 62,821 - -------------------------------------------------------------------------------- Long-term obligations ........................ 23,564 22,583 Shareowners' equity: Common stock ............................. 32,746 20,279 Retained earnings ........................ 148,531 129,347 - -------------------------------------------------------------------------------- Total shareowners' equity ................ 181,277 149,626 - -------------------------------------------------------------------------------- $ 272,454 $ 235,030 ================================================================================ *Unaudited Page 4 WATKINS-JOHNSON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS* For the periods ended September 29,1995 and September 30, 1994 Nine Months Ended - -------------------------------------------------------------------------------- (Dollars in thousands) 1995 1994 - -------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net Income ........................................ $ 22,039 $ 14,944 Reconciliation of net income to cash flows Depreciation and amortization ................. 7,325 6,824 Net changes in: Receivables ................................ (9,841) (5,452) Inventories ................................ (10,355) (11,321) Other assets ............................... (3,280) 695 Accruals and payables ...................... 5,227 530 - -------------------------------------------------------------------------------- Net cash provided by operating activities ......... 11,114 6,220 - -------------------------------------------------------------------------------- INVESTING ACTIVITIES: Additions of property, plant, and equipment ....... (19,186) (9,238) Other ............................................. 680 62 - -------------------------------------------------------------------------------- Net cash (used) in investing activities ........... (18,506) (9,176) - -------------------------------------------------------------------------------- FINANCING ACTIVITIES: Proceeds from issuance of stock ................... 12,467 9,202 Repurchase of common stock ........................ (13,805) Dividends paid .................................... (2,855) (2,654) Other ............................................. 546 (391) - -------------------------------------------------------------------------------- Net cash provided (used) by financing activities .. 10,158 (7,648) - -------------------------------------------------------------------------------- Net increase (decrease) in cash and equivalents ....... 2,766 (10,604) Cash and equivalents at beginning of period ........... 34,469 45,040 - -------------------------------------------------------------------------------- Cash and equivalents at end of period ................. $ 37,235 $ 34,436 ================================================================================ *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's financial condition remains healthy. During the first nine months of 1995, cash and equivalents increased $2.7 million from $34.5 to $37.2 million as cash provided by operations and stock issuances more than offset capital expenditures and dividends paid. For the balance of 1995, the company expects cash to decline slightly due to increased working capital needs and capital expenditures. Growth expectations beyond 1995 are anticipated to require use of external financing. The company is negotiating an increase in its lines of credit to approximately $100 million. Current Operations: Semiconductor Equipment Group orders for the third quarter were more than 40% above the last year's quarterly average, reaching a year-to-date total of $170 million. The Far East continues to be a strong geographic area for new semiconductor equipment orders, with 57% of new system orders coming from that region in the third quarter. During the quarter, Semiconductor Equipment Group sales accounted for nearly 60% of total company revenue. Prospects into 1996 appear positive with industry annual growth projections at about 30%. It must be recognized that the semiconductor equipment business is cyclical and can change rapidly. Uncertainty increases significantly when projecting demand for semiconductor equipment products more than six months into the future. The business picture for the Electronics Group is improving as the group advances in wireless telecommunication opportunities. Additional orders for PCS to Cellular downconverters demonstrate acceptance of the group's products in the growing wireless market. Within The Electronics Group's core defense business, customer demand has relatively stabilized for its missile guidance and intelligence receiver products. Backlog: The firm order backlog on September 29, 1995 was $211,283,000 compared to the $227,312,000 recorded on September 30, 1994. Included in the 1994 figure was approximately $23 million of backlog related to product lines divested during the second quarter of 1995 as previously announced. The portion of the current backlog shippable within twelve months is 94%, compared to 87% one year ago. Third Quarter 1995 Compared to Third Quarter 1994: Semiconductor Equipment Group sales increased 53% while Electronics Group sales were down 16%, resulting in an overall company increase of 15%. The decrease in Electronics Group sales was primarily due to the divestiture of certain product lines in the second quarter of 1995 which accounted for approximately $7 million of sales in each quarter of 1994. Gross margins remained at 42%. Selling and administrative expenses decreased slightly due primarily to realization of some benefits of selling direct overseas. Research and development spending increased compared to the same period last year but has slowed from the intense pace of the first half of 1995. During the third quarter, the effective tax rate for federal and foreign income taxes decreased from 31% to 29% compared to the 32% effective rate for the same period last year. The tax rate decrease resulted mostly from tax benefits related to higher export sales and the research tax credit. The cumulative effect of the tax rate reduction in the third quarter was $620 thousand, or about 7 cents per share. Due to the combined effect of the above factors, net income for the third quarter of 1995 increased 65% over the same period in 1994. Page 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Third Quarter Year-to-Date 1995 Compared to Third Quarter Year-to-Date 1994: Semiconductor Equipment Group sales increased 55% while Electronics Group sales were down 13%, resulting in an overall company increase of 16%. The decrease in Electronics Group sales was partially due to the divestiture of certain product lines in the second quarter of 1995, as previously discussed. Gross margins increased from 41% to 42% due mostly to the revenue mix shifting towards more profitable semiconductor equipment products and improved margins in the Electronics Group. Although selling and administrative expenses as a percentage of sales decreased slightly, expenses were up as expected due to the increased volume. Research and development expenses increased from 10.3% to 12.2% of sales due to the company's substantial efforts in developing the next generation of products for both business segments, but has slowed since the first half of 1995. The effective tax rate for federal and foreign income taxes decreased from 32% to 29% compared to the same period last year, as discussed above. Due to the combined effect of the above factors, net income for the first 9 months of 1995 increased 47% over the same period in 1994. Page 7 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 number according to Item 601 of Regulation S-K. b. No reports on Form 8-K were required to be filed during the quarter. Page 8 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 3, 1995 By: /s/ W. Keith Kennedy, Jr. ---------------------- ------------------------------------------- W. Keith Kennedy, Jr. President and Chief Executive Officer Date: November 3, 1995 By: /s/ Scott G.Buchanan ---------------------- ------------------------------------------- Scott G. Buchanan Vice President and Chief Financial Officer Page 9 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. Page 10 EX-11 2 COMPUTATION OF NET INCOME PER COMMON SHARE WATKINS-JOHNSON COMPANY AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON SHARE (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table illustrates the potential dilution of outstanding stock options on net income per share computations: Three Months Ended Nine Months Ended - ------------------------------------------------------------------------------------------------------------------------ Sept. 29, 1995 Sept. 30, 1994 Sept. 29, 1995 Sept. 30, 1994 - ------------------------------------------------------------------------------------------------------------------------ FOR PRIMARY NET INCOME PER SHARE: Weighted average shares outstanding ........... 8,079,000 7,450,000 7,877,000 7,450,000 Equivalent shares--dilutive stock options--based on treasury stock method using average market price 939,000 710,000 939,000 710,000 - ---------------------------------------------------------------------------------------------------------------------- Total ......................................... 9,018,000 8,160,000 8,816,000 8,160,000 FOR FULLY DILUTED NET INCOME PER SHARE: Weighted average shares outstanding ........... 8,079,000 7,450,000 7,877,000 7,450,000 Equivalent shares--dilutive stock options--based on treasury stock method using greater of closing market price or average price ............. 1,004,000 894,000 1,004,000 894,000 - ---------------------------------------------------------------------------------------------------------------------- Total ......................................... 9,083,000 8,344,000 8,881,000 8,344,000 ====================================================================================================================== Net income ........................................ $ 8,910 $ 5,386 $ 22,039 $ 14,944 ====================================================================================================================== Primary net income per share ...................... $ .99 $ .66 $ 2.50 $ 1.83 ====================================================================================================================== Fully diluted net income per share ................ $ .98 $ *.61 $ 2.48 $ 1.79 ====================================================================================================================== *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 11 EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 3-MOS DEC-31-1995 JUL-01-1995 SEP-29-1995 37,235 0 90,268 0 62,010 205,484 170,480 114,153 272,454 67,613 23,564 32,746 0 0 148,531 272,454 95,550 95,550 54,978 83,760 (455) 0 232 12,013 3,103 8,910 0 0 0 8,910 .99 .98
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