-----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, KV88Hzg+uczvZGSShaDEXMe1gC3tEgQWu7+cWsJrUgaokg002w/BX6njRmT0rxOQ fN6nfHlZ94wsxTNb2Fe+OQ== 0000950135-97-003214.txt : 19970805 0000950135-97-003214.hdr.sgml : 19970805 ACCESSION NUMBER: 0000950135-97-003214 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GALILEO ELECTRO OPTICS CORP CENTRAL INDEX KEY: 0000711425 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 042526583 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11309 FILM NUMBER: 97650720 BUSINESS ADDRESS: STREET 1: GALILEO PARK STREET 2: PO BOX 550 CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083479191 MAIL ADDRESS: STREET 1: GALILEO PARK STREET 2: PO BOX 550 CITY: STURBRIDGE STATE: MA ZIP: 01566 10-Q 1 GALILEO CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act 1934 For the quarterly period ended JUNE 30, 1997 COMMISSION FILE NUMBER 0-11309 . GALILEO CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 04-2526583 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) GALILEO PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (508) 347-9191 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the Issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT JUNE 30, 1997 - -------------------------------------------------------------------------------- COMMON STOCK, PAR VALUE $.01 6,856,250 SHARES PAGE 1 OF 15 2 GALILEO CORPORATION INDEX PART I. Financial Information: Page No. --------- Item 1. Financial Statements (unaudited) Consolidated Condensed Balance Sheets at June 30, 1997, and September 30, 1996................... 3 Consolidated Condensed Statements of Income for the three and nine months ended June 30, 1997, and June 30, 1996................................................ 4 Consolidated Condensed Statements of Cash Flows for the nine months ended June 30, 1997, and June 30, 1996.................................................... 5 Notes to Consolidated Condensed Financial Statements.............................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 8 PART II. Other Information: Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2 3 GALILEO CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
Jun. 30, 1997 Sept. 30, 1996 ------------------------------- ASSETS - ------ Current assets: Cash and cash equivalents $ 11,408 $ 18,652 Accounts receivable, net 4,578 5,710 Inventories, net (Note 5) 6,412 6,218 Other current assets 393 598 -------- -------- Total current assets 22,791 31,178 Property, plant and equipment, net 14,729 19,228 Excess of cost over the fair value of 3,906 -- assets acquired, net Other assets, net 1,544 2,658 -------- -------- Total assets $ 42,970 $ 53,064 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable and accrued liabilities $ 4,656 $ 4,174 Other current liabilities -- 542 -------- -------- Total current liabilities 4,656 4,716 Other liabilities 1,199 1,320 Shareholders' equity: Common stock 69 68 Additional paid-in capital 42,839 42,694 (Accumulated deficit) / retained earnings (5,793) 4,266 -------- -------- Total shareholders' equity 37,115 47,028 -------- -------- Total liabilities and shareholders' equity $ 42,970 $ 53,064 ======== ========
See Notes to Consolidated Condensed Financial Statements 3 4 GALILEO CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Amounts in thousands except per share data)
For the Three For the Nine Months Ended Months Ended June 30, June 30, 1997 1996 1997 1996 ----------------------------------------------------- Net sales $ 7,516 $ 11,152 $ 25,948 $ 31,756 Cost of sales 5,499 6,013 16,733 18,619 -------- -------- -------- -------- Gross profit 2,017 5,139 9,215 13,137 Engineering expenses 1,361 1,058 3,844 2,885 Selling and administrative expenses 2,355 2,500 6,868 6,883 Reduction in carrying value of certain long-lived assets (Note 2) -- -- 2,226 -- Reorganization costs (Note 2) -- -- 6,872 -- -------- -------- -------- -------- 3,716 3,558 19,810 9,768 -------- -------- -------- -------- Operating profit (loss) (1,699) 1,581 (10,595) 3,369 Other income 198 211 691 534 -------- -------- -------- -------- Income (loss) before income taxes and extraordinary gain (1,501) 1,792 (9,904) 3,903 Provision (benefit) for income taxes 12 33 153 (49) -------- -------- -------- -------- Income (loss) before extraordinary gain (1,513) 1,759 (10,057) 3,952 Extraordinary gain on receipt and sale of stock, net of taxes -- -- -- 158 ======== ======= ======== ======== Net income (loss) (1,513) 1,759 (10,057) 4,110 ======== ======== ======== ======== Net income (loss) per common and common equivalent share outstanding Before extraordinary gain ($ 0.22) $ 0.25 ($ 1.47) $ 0.57 Effect of extraordinary gain -- -- -- $ 0.02 -------- -------- -------- -------- Net income (loss) ($ 0.22) $ 0.25 ($ 1.47) $ 0.59 ======== ======== ======== ======== Weighted average common and common equivalent shares outstanding 6,854 7,006 6,846 6,935
See Notes to Consolidated Condensed Financial Statements 4 5 GALILEO CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
For the nine months ended June 30, 1997 1996 ----------------------- Net income (loss) $(10,057) $ 4,110 Adjustments to reconcile net income to net cash provided (used) by operating activities: Extraordinary gain on receipt and sale of stock -- (319) Depreciation and amortization 2,363 2,557 Reduction in carrying value of certain long-lived assets 2,226 -- Reorganization provisions 6,451 -- Increase in cash from changes in operating assets and liabilities: Accounts receivable 1,284 1,496 Inventories (1,012) 589 Accounts payable and accrued liabilities 495 (994) Other changes, net (211) (511) -------- -------- Total adjustments 11,596 2,818 -------- -------- Net cash provided by operating activities 1,539 6,928 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from receipt and sale of stock -- 403 Proceeds from sale of assets -- 2,412 Capital expenditures (2,854) (2,395) Acquisitions (5,500) -- -------- -------- Net cash provided (used) in investing activities (8,354) 420 CASH FLOWS FROM FINANCING ACTIVITIES: - ------------------------------------- Payments on notes payable (542) (51) Proceeds from issuance of common stock 145 311 Other financing activities (32) (28) -------- -------- Net cash provided (used) by financing activities (429) 232 Net increase (decrease) in cash and cash equivalents (7,244) 7,580 Cash and cash equivalents at beginning of period 18,652 8,580 ======== ======== Cash and cash equivalents at end of period $ 11,408 $ 16,160 ======== ========
See Notes to Consolidated Condensed Financial Statements 5 6 GALILEO CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in thousands except per share data) 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments, except for the items discussed in Note 2 below) necessary to present fairly Galileo Corporation's (the Company) financial position as of June 30, 1997, the results of operations for the three and nine month periods ended June 30, 1997, and cash flows for the nine months ended June 30, 1997, in conformity with generally accepted accounting principles for interim financial information applied on a consistent basis. The results of operations for the three and nine months ended June 30, 1997, are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's 1996 Annual Report to Shareholders and Form 10-K for the fiscal year ended September 30, 1996. 2. As a result of the loss of its then largest customer in its second fiscal quarter, the Company announced a reorganization plan. In connection with this plan, the Company recorded a nonrecurring charge of $6,872, $1.00 per share, in the three months ended March 31, 1997. In the first quarter of fiscal 1997, the Company recorded a $2,226, or $0.32 per share, nonrecurring, noncash charge to reduce certain robotic assembly equipment to its estimated fair market value. Excluding the impact of these charges, the net loss for the nine months ended June 30, 1997, was $959, or $0.14 per share. 3. On February 28, 1997, the Company acquired the Sani-Spec(TM) business from C.R. Bard, Inc., for $5,500. The acquisition was accounted for using the purchase method of accounting and accordingly, results of Sani-Spec's operations are included in the accompanying statement of operations from the date of acquisition. Assuming that the acquisition had been made as of the beginning of fiscal 1996, results for the Company on a pro forma basis, would have been as follows:
For the Three For the Nine Months Ended Months Ended June 30, June 30, 1996 1997 1996 ------------- ---------- ---------- Net sales $ 12,077 $ 27,490 $ 34,531 Net income (loss) 1,887 (9,844) 4,494 Net income (loss) per share $ 0.27 $ (1.44) $ 0.65
6 7 4. Results for the three and nine months ended June 30, 1996, have been restated to reflect the acquisition of Leisegang Medical, Inc., in fiscal year 1996, which was accounted for on a pooling of interests basis. For the three and nine months ended June 30, 1996, Leisegang Medical, Inc.'s, net income was $263 and $265, respectively. 5. Classification of inventories is:
June 30, September 30, 1997 1996 ---------- ------------- Finished goods $2,060 $1,402 Work-in-progress 549 635 Raw materials 3,803 4,181 ------ ------ $6,412 $6,218 ====== ======
6. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted by December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact on the calculation of primary and fully diluted earnings per share is not expected to be material. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW - -------- Galileo Corporation (the "Company") develops, manufactures and markets fiberoptic and electro-optic components which transmit, sense or intensify light or images. The Company's products are currently sold primarily to original equipment manufacturers (OEMs) for use in scientific, analytical, medical, electronic imaging and office product applications. The Company's experience in fiberoptic and electro-optic technology are fundamental to developing and manufacturing its products. On February 11, 1997, the Company received written notification from its then largest customer, Xerox Corporation, that Xerox had developed internal production capabilities for dicorotron assemblies and will no longer purchase these assemblies from the Company. These assemblies accounted for approximately $20.4 million, or 48% of the Company's fiscal 1996 revenues and approximately $3.8 million, or 39%, and $2.7 million, or 31%, of revenues for the Company's first and second fiscal quarters of 1997, respectively. Reduced revenues from this product will materially adversely affect the Company's financial performance for at least the remainder of fiscal 1997 and likely will result in a loss for the fiscal year. In connection with this loss of business, the Company adopted a reorganization plan and recorded a charge of $6.9 million in the three months ended March 31, 1997. The charge includes a noncash $6.5 million provision for related long-lived assets, other assets and inventory, and a $0.4 million provision for related severance and other obligations. The Company's Scientific Detector Products include detectors and sensors which are used in various instruments in a wide range of markets including semiconductor processing, life sciences, food processing, bulk and specialty chemicals, petroleum refining, biotechnology, failure analysis and quality and process control. The Company's Medical Products consist of a variety of scopes in support of minimally invasive medical procedures. Scopes are valuable in any medical procedure where video imaging can provide accurate diagnosis, improve surgical performance and reduce patient discomfort. In addition, the acquisitions of Leisegang Medical, Inc. and the Sani-Spec(TM) business from C.R. Bard, Inc., more fully discussed below, position the Company as a supplier of certain medical instrument equipment, principally to the obstetric and gynecological markets. The Company believes that these products offer significant future growth opportunities. Leisegang Medical, headquartered in Boca Raton, FL, was a privately-held distributor and manufacturer of OB/GYN diagnostic and surgical equipment. Included in its product line are colposcopes produced by Leisegang GmbH, a related company based in Berlin, Germany, 8 9 that is the world's largest and oldest manufacturer of colposcopes and accessories. The products are sold to OB/GYN doctors' offices and hospitals through an internal sales force and by manufacturers' representatives. Leisegang Medical is well known and highly respected in the gynecological equipment market, estimated to be $200 million annually, and is a leader in sales to doctors' offices. In addition to colposcopes, its products include biopsy instruments, ultrasound, video equipment, laser and electro-surgical systems and accessories, cryosurgery equipment, surgical instruments, rigid and flexible hysteroscopes, bone densitometers and fetal heart monitors. This acquisition enables Galileo to participate in a market that is growing at 15 to 20 percent per year, and is expected to benefit significantly from the trend toward minimally invasive surgery and office-based procedures. It also provides Galileo with new distribution channels that enhance the brand name recognition and market penetration of the Company's medical imaging and sensing products. On February 28, 1997, the Company acquired the Sani-Spec(TM) business from C.R. Bard, Inc. The Sani-Spec product line includes a comprehensive suite of women's health-related products used by OB/GYN physicians, clinics and hospitals including Sani-Spec single-use vaginal speculums, Sani-Scope(TM) anoscopes, Spec Light(TM) speculum lights and Pap Smear kits. The product line is marketed through a nationwide network of approximately 80 dealers and has been a market leader for over 20 years. Last year's revenues were in excess of $4.0 million, representing approximately 40% of the domestic market. The Company's Fluorolase(R) fiberoptic-based optical amplifier product is used in applications for telecommunications as well as high speed data and video transmission. Currently, this product is being tested in these markets and the Company believes that the Fluorolase product offers significant future growth opportunities. In addition to investing in research and development activities for all of its products, the Company is exploring other acquisition opportunities to enhance its product offerings to all its customers. This Report on Form 10-Q contains certain forward-looking statements concerning, among other things, the Company's plans and objectives for future operations, planned products and services, expansion into new markets and anticipated customer demand for its existing and future products and services. Certain factors that could cause the Company's actual results to differ from those projected in these forward-looking statements are set forth in Exhibit 99.1 to the Company's December 31, 1996, SEC Form 10-Q and incorporated herein. 9 10 RESULTS OF OPERATIONS - --------------------- Sales for the three and nine months ended June 30, 1997, of $7.5 million and $25.9 million decreased 33% and 18%, respectively, from the comparable prior-year periods. Reduced revenues resulted primarily from the loss of the Company's largest customer more fully discussed in the "Overview" section above. The Company completed final shipments to this customer during its second quarter. Excluding sales activity for this customer, revenues for the three months ended June 30, 1997, increased 28% and 23% over revenues from the comparable prior year period and the Company's second fiscal quarter of 1997, respectively. Gross profit (as a percentage of revenues) of 26.8% and 35.5% for the three and nine months ended June 30, 1997, decreased from 46.1% and 41.4% from the comparable prior year periods, respectively, primarily due to the impact of reduced revenues on fixed manufacturing expenses. Engineering expenses increased to $1.4 million and $3.8 million from $1.1 million and $2.9 million for the three and nine months ended June 30, 1997, respectively, primarily due to increased spending to support the development of the medical and Fluorolase products. Selling and administrative expenses remained relatively stable for the three and nine months ended June 30, 1997, from comparable prior-year periods. As a result of the loss of its then largest customer more fully described in the "Overview" section above, the Company announced a reorganization plan. In connection with this plan, the Company recorded a nonrecurring charge of $6.9 million, or $1.00 per share, in the three months ended March 31, 1997. In the first quarter of fiscal 1997, the Company recorded a $2,226, or $0.32 per share, nonrecurring charge to reduce the value of certain robotic assembly equipment to its estimated fair market value. Excluding the impact of these charges, net income for the nine months ended June 30, 1997, was a loss of $1.0 million or $0.14 per share. Other income principally relates to interest earned on investments. For both the current and comparable prior year periods, the Company's effective tax rate differs from the statutory rate primarily due to available tax loss carryforwards. The current year provision relates principally to state and franchise taxes. FINANCIAL CONDITION - ------------------- The Company's working capital at June 30, 1997, of $18.1 million, decreased $8.4 million from the balance at September 30, 1996, of $26.5 million. The change in working capital was primarily the result of the $5.5 million acquisition of the Sani-Spec(TM) business 10 11 described in more detail in the "Overview" section above and operating losses for the year to date. The Company considers its working capital position to be adequate to support its currently planned operations. Capital spending for the nine months ended June 30, 1997, amounted to $2.9 million. This compares with $2.4 million of capital expenditures for the comparable prior-year period. Capital spending for fiscal 1997 primarily relates to building improvements and machinery and equipment to support the development of new medical scopes and the Company's Fluorolase products. The Company currently has commitments for capital expenditures of approximately $1.0 million. 11 12 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 11 Calculation of Earnings per Share 27 Financial Data Schedule (EDGAR filing only) b. Reports on Form 8-K: There were no reports on Form 8-K filed for the three months ended June 30, 1997. 12 13 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. GALILEO CORPORATION Dated: July 30, 1997 /s/ William T. Hanley ----------------------------------------- William T. Hanley, President and Chief Executive Officer (Principal Executive Officer) /s/ Gregory Riedel ----------------------------------------- Gregory Riedel, Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 13 14 GALILEO CORPORATION INDEX TO EXHIBITS EXHIBIT NO. PAGE NO. ----------- -------- 11 Calculation of Earnings Per Share 15 27 Financial Data Schedule EDGAR Filing Only 14 EX-11 2 CALCULATION OF EARNINGS PER SHARE 1 EXHIBIT 11 GALILEO CORPORATION CALCULATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended June 30, June 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Primary Average shares outstanding 6,854,668 6,806,159 6,846,147 6,787,587 Net effect of dilutive stock options - based on the treasury stock method using average market price -- 196,611 -- 146,290 ----------- ----------- ----------- ----------- Total 6,854,668 7,002,770 6,846,147 6,933,877 =========== =========== =========== =========== Net income (loss) (1,513,000) 1,759,000 (10,057,000) 4,110,000 Per share amount (0.22) 0.25 (1.47) 0.59 Fully Diluted Average shares outstanding 6,854,668 6,806,159 6,846,147 6,787,587 Net effect of dilutive stock options - based on the treasury stock method using the quarter-end market price, if higher than average market price -- 199,622 -- 147,290 ----------- ----------- ----------- ----------- Total 6,854,668 7,005,781 6,846,147 6,934,877 =========== =========== =========== =========== Net income (loss) (1,513,000) 1,759,000 (10,057,000) 4,110,000 Per share amount (0.22) 0.25 (1.47) 0.59
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-30-1997 OCT-1-1996 JUN-30-1997 11,408 0 4,710 (132) 6,805 22,791 47,750 (27,571) 42,970 5,855 0 0 0 69 37,046 42,970 25,948 25,948 16,733 16,733 0 0 0 (9,904) 153 (10,057) 0 0 0 (10,057) ($1.47) ($1.47)
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