-----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, VDktXKytbl5K0rEXaZbpfE3cWJW+JXkvGTtrdkQ0wDecrVh5cjqu0eCIOPg5azKi BUPD2dDGrZsdey3qZ9NQhA== 0000718487-97-000003.txt : 19970813 0000718487-97-000003.hdr.sgml : 19970813 ACCESSION NUMBER: 0000718487-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRAN CORP CENTRAL INDEX KEY: 0000718487 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 042729372 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12489 FILM NUMBER: 97656464 BUSINESS ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083472261 10-Q 1 QUARTERLY REPORT OF SPECTRAN CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT 1934 For the transition period from __________________ to __________________ Commission file number 0-12489 SPECTRAN CORPORATION (Exact name of registrant as specified in its charter) Delaware 04-2729372 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 Hall Road, Sturbridge, Massachusetts 01566 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 347-2261 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 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. The number of shares of the registrant's Common Stock outstanding as of July 31, 1997, was 6,948,880. 1 PART I - FINANCIAL INFORMATION SPECTRAN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Dollars in thousands except per share amounts (unaudited) Six Months Ended Three Months Ended June 30, June 30, ----------------- ------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales .............................. $ 32,109 $ 28,754 $ 15,881 $ 15,281 Cost of Sales .......................... 19,405 18,680 9,719 9,964 ------ ------ ----- ----- Gross Profit ........................... 12,704 10,074 6,162 5,317 Selling and Administrative Expenses .... 7,888 6,267 3,906 3,448 Research and Development Costs ......... 1,598 1,581 817 671 ----- ----- --- --- Income from Operations ................. 3,218 2,226 1,439 1,198 Other Income (Expense): Interest Income ........................ 765 121 489 53 Interest Expense ....................... (464) (320) (111) (133) Other, Net ............................. (11) 63 42 29 --- -- -- -- Other Income (Expense), net ............ 290 (136) 420 (51) --- ---- --- --- Income before Income Taxes ............. 3,508 2,090 1,859 1,147 Income Tax Expense ..................... 1,193 573 626 314 ----- --- --- --- Income before Equity in Joint Venture .. 2,315 1,517 1,233 833 Income from Joint Venture, Net of Income Taxes ............. 137 -- 97 -- --- -- -- -- Net Income ............................. $ 2,452 $ 1,517 $ 1,330 $ 833 ======== ======== ======== ======== Weighted Average Number of Common Shares Outstanding .............. 6,965 5,893 7,308 6,036 ===== ===== ===== ===== Net Income per Common Share .......... $ .35 $ .26 $ .18 $ .14 ======== ======== ======== ========
See accompanying notes to these consolidated financial statements. 2 SPECTRAN CORPORATION CONSOLIDATED BALANCE SHEETS Dollars in thousands June 30,December 31, 1997 1996 ---- ---- (unaudited) ASSETS Current Assets: Cash and Cash Equivalents ............................. $ 1,930 $ 3,565 Current Portion of Marketable Securities .............. 18,650 13,822 Trade Accounts Receivable, net ........................ 9,367 7,621 Inventories ........................................... 7,970 7,254 Deferred Income Taxes, net ............................ 791 791 Prepaid Expenses and Other Current Assets ............. 3,092 1,316 ------- -------- Total Current Assets .................................. 41,800 34,369 Property, Plant and Equipment, net ......................... 32,706 17,890 Other Assets: Long-term Marketable Securities ....................... 5,391 1,595 License Agreements, net ............................... 703 804 Deferred Income Taxes, net ............................ 1,114 814 Goodwill, net ......................................... 911 950 Investment in Joint Venture ........................... 4,272 4,135 Other Long-term Assets ................................ 1,862 1,899 ------- -------- Total Other Assets .................................... 14,253 10,197 ------- -------- Total Assets ..................................... $88,759 $ 62,456 ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable ...................................... $ 3,635 $ 3,763 Income Taxes Payable .................................. 611 301 Accrued Liabilities ................................... 6,322 5,989 ------- -------- Total Current Liabilities ............................. 10,568 10,053 Long-term Debt ............................................. 24,000 24,000 Stockholders' Equity: Common Stock, voting, $.10 par value; authorized 20,000,000 shares; outstanding 6,946,830 shares and 5,400,071 shares in 1997 and 1996, respectively ... 695 540 Common Stock, non-voting, $.10 par value; authorized 250,000 shares; no shares outstanding .. -- -- Paid-in Capital ....................................... 50,046 26,884 Net Unrealized Gain(Loss) on Marketable Securities .... 3 (16) Retained Earnings ..................................... 3,447 995 ------- -------- Total Stockholders' Equity ............................ 54,191 28,403 ------- -------- Total Liabilities & Stockholders' Equity ......... $88,759 $ 62,456 ======= ========
See accompanying notes to these consolidated financial statements. 3 SPECTRAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in thousands (unaudited) Six Months Ended June 30, -------- 1997 1996 ---- ---- Cash Flows from Operating Activities: Net Income .............................................. $ 2,452 $ 1,517 Reconciliation of Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization ...................... 1,939 1,467 Other Non-Cash Charges ............................. (562) (286) Equity in Net Income of Unconsolidated Joint Venture (137) -- Changes in Other Components of Working Capital ..... (3,482) (1,649) Loss on Disposition of Equipment ................... 2 -- --------- --------- Net Cash Provided by Operating Activities .......... 212 1,049 Cash Flows from Investing Activities: Acquisition of Property,Plant and Equipment ........ (16,559) (4,361) Purchase of Marketable Securities .................. (199,493) (7,193) Proceeds from Sale/Maturity of Marketable Securities 190,888 10,086 --------- --------- Cash Used in Investing Activities .................. (25,164) (1,468) Cash Flows from Financing Activities: Borrowings of Long-term Debt ....................... -- 1,000 Proceeds from Exercise of Stock Options and Warrants 240 159 Issuance of Stock, net ............................. 23,077 -- --------- --------- Cash Provided by Financing Activities .............. 23,317 1,159 Increase(Decrease) in Cash and Cash Equivalents ......... (1,635) 740 Cash and Cash Equivalents at Beginning of Period ........ 3,565 1,625 --------- --------- Cash and Cash Equivalents at End of Period .............. $ 1,930 $ 2,365 ========= =========
See accompanying notes to these consolidated financial statements. 4 SPECTRAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The financial information for the three months and six months ended June 30, 1997, is unaudited but reflects all adjustments (consisting solely of normal recurring adjustments) which the Company considers necessary for a fair statement of results for the interim period. The results of operations for the six months ended June 30, 1997, are not necessarily indicative of the results for the entire year. The consolidated results for the three months and six months ended June 30, 1997, include the accounts of SpecTran Corporation (the Company) and its wholly-owned subsidiaries, SpecTran Communication Fiber Technologies, Inc. ("SpecTran Communication"), SpecTran Specialty Optics Company ("SpecTran Specialty"), and Applied Photonic Devices, Inc. ("APD") which holds the Company's investment in General Photonics. In December 1996 the Company announced the formation of General Photonics, LLC, a 50-50 joint venture between the Company and General Cable Corporation ("General Cable"), a former subsidiary of Wassall plc. The Company sold certain of the assets of APD to General Cable and then contributed the remaining non-cash assets of APD to General Photonics for a 50% equity interest. The investment in General Photonics is accounted for under the equity method of accounting pursuant to which the Company records its 50% interest in General Photonics' net operating results. Prior to the formation of General Photonics, APD's results of operations, including net sales and expenses, were consolidated with those of the Company. All significant intercompany balances and transactions have been eliminated. These financial statements supplement, and should be read in conjunction with, the Company's audited financial statements for the year ended December 31, 1996, as contained in the Company's Form 10-K as filed with the United States Securities and Exchange Commission. 2. INVENTORIES Inventories consisted of (in thousands): June 30, 1997 December 31, 1996 ------------- ----------------- Raw Materials $3,873 $3,677 Work in Process 1,187 1,209 Finished Goods 2,910 2,368 ----- ----- $7,970 $7,254 ====== ======
5 3. PROPERTY, PLANT & EQUIPMENT Property, plant and equipment consisted of (in thousands): June 30, December 31, 1997 1996 ---- ---- Land and Land Improvements $ 978 $ 937 Buildings and Improvements 3,878 3,840 Machinery and Equipment 24,322 19,213 Construction in Progress 19,946 8,611 ------ ----- 49,124 32,601 Less Accumulated Depreciation and Amortization 16,418 14,711 ------ ------ $32,706 $17,890 ======= =======
4. INCOME PER SHARE OF COMMON STOCK Income per share of common stock is based on the weighted average of the number of shares outstanding during the periods, including common stock equivalents of stock purchase warrants and stock options for both primary and fully diluted earnings per share. Fully diluted income per share approximates primary income per share for all periods presented. 5. SECONDARY PUBLIC OFFERING OF COMMON STOCK On February 18, 1997 the Company completed a secondary public offering of 1,500,000 shares of common stock at a price of $19.00 per share. Of the 1,500,000 shares, 1,300,000 were sold by the Company and 200,000 by Allen and Company, Incorporated, a selling stockholder. 6 item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three and Six Months Ended June 30, 1997 Compared to Three and Six Months Ended June 30, 1996 Results of Operations - --------------------- The following table sets forth, for the periods indicated, certain financial data as a percentage of net sales: THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, -------- -------- 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales 100.0% 100.0% 100.0% 100.0% Cost of Sales 61.2% 65.2% 60.4% 65.0% ---- ---- ---- ---- Gross Profit 38.8% 34.8% 39.6% 35.0% Selling and Administrative Expenses 24.6% 22.6% 24.6% 21.8% Research and Development Cost 5.1% 4.4% 5.0% 5.5% --- --- --- --- Income from Operations 9.1% 7.8% 10.0% 7.7% Other Income(Expense), net 2.6% (.3)% .9% (.4)% --- --- -- --- Income before Income Taxes 11.7% 7.5% 10.9% 7.3% Income Tax Expense 3.9% 2.0% 3.7% 2.0% --- --- --- --- Income before Equity in Joint Venture 7.8% 5.5% 7.2% 5.3% Income from Joint Venture, net .6% --% .4% --% -- -- -- -- Net Income 8.4% 5.5% 7.6% 5.3% === === === ===
Net Sales - --------- Net sales of $15.9 million and $32.1 million for the three months and six months ended June 30, 1997, were $600,000, or 3.9%, and $3.4 million, or 11.7%, higher than for the comparable periods of 1996. Sales for the 1996 periods include the sales of Applied Photonic Devices, Inc. ("APD"), certain assets of which were sold in December 1996 to form General Photonics, a joint venture with General Cable. On a comparative basis, excluding APD sales from the 1996 periods, sales for the three months and six months ended June 30, 1997 compared to the three months and six months ended June 30, 1996 increased 24.1% and 32.2%, respectively. Net sales increased in all business units reflecting continued market demand with a substantial increase in single-mode fiber sales. Selling prices for single-mode have increased in the first three months and six months of 1997 compared to the comparable periods of 1996, largely due to market demand. Selling prices for multimode have remained relatively stable in 1997 compared to 1996. Gross Profit - ------------ Gross profit of $6.2 million and $12.7 million for the three months and six months ended June 30, 1997, was $845,000, or 15.9%, and $2.6 million, or 26.1%, higher than for the comparable periods of 1996. As a percentage of net sales, the gross profit increased to 38.8% and 39.6% for the three months and six months ended June 30, 1997, from 34.8% and 35.0% for the three months and six months ended June 30, 1996. This increase in gross profit was primarily due to increased net sales in the 1997 periods, lower production costs for the Company's standard products resulting from manufacturing process and yield improvements, and higher single-mode selling prices. In addition, the 1997 results do not include the lower margin cabling revenues of General Photonics. As a percentage of net sales, royalties decreased from 4.0% and 4.1% in the three months and six months ended June 30, 1996 to 2.5% and 2.8% for the three months and six months ended June 30, 1997 primarily due to an increase in the percentage of net sales not subject to royalty. 7 Selling and Administrative - -------------------------- Selling and administrative expenses increased $458,000, or 13.3%, and $1.6 million, or 25.9%, for the three months and six months ended June 30, 1997. Included in the three months and six months of June 30, 1997 are $400,000 and $1.1 million, respectively, of costs associated with the Company's one-time management reorganization and training costs, with the latter continuing throughout the year. As a percentage of net sales, selling and administrative expenses increased to 24.6% for both the three months and six months ended June 30, 1997 from 22.6% and 21.8% for the three months and six months ended June 30, 1996. Exclusive of the management reorganization and training costs, selling and administrative expenses decreased as a percentage of net sales for the three months and six months ended June 30, 1997 to 22.1% and 21.1%, respectively. Research and Development - ------------------------ Research and development costs increased $146,000, or 21.8%, and $17,000, or 1.1%, for the three months and six months ended June 30, 1997, compared with the same periods in 1996. As a percentage of net sales, research and development costs increased from 4.4% for the three months ended June 30, 1996 to 5.1% for the three months ended June 30, 1997, and decreased from 5.5% for the six months ended June 30, 1996, to 5.1% for the six months ended June 30, 1997. The Company continues to invest in programs to improve manufacturing cost and product performance in both multimode and single-mode product lines, to develop new special performance fiber products and to develop alternative process technologies. Other Income (Expense), net - --------------------------- Other income (expense), net improved by $471,000 and $426,000, for the three months and six months ended June 30, 1997 compared with the same periods in 1996. Interest income increased for the three months and six months ended June 30, 1997 by $436,000 and $644,000, respectively, due to a higher level of cash available for investment as a result of the Company's secondary public offering in February, 1997. Net interest expense decreased by $22,000 for the three months ended June 30, 1997 due to a higher level of capitalized interest associated with the Company's capacity expansion programs. Interest expense, net of capitalized interest, increased for the six months ended June 30, 1997 by $144,000 compared to the same periods in 1996 due to the increase in debt related to the Company's capacity expansion. Income Taxes - ------------ A tax provision of 33.7% and 34.0% of pre-tax income was provided for the three months and six months ended June 30, 1997 compared to a tax provision of 27.4% of pre-tax income for the comparable periods in 1996. The effective tax rates for the 1996 and 1997 periods were lower than the statutory combined federal and state tax rates due primarily to reductions in the valuation allowance for deferred tax assets. Income from Equity in Joint Venture - ----------------------------------- The Company realized income of $97,000 and $137,000 for the three months and six months ended June 30, 1997, net of tax, from its equity in General Photonics, the joint venture formed in December, 1996 with General Cable. In 1996, the results of Applied Photonic Devices, Inc., the predecessor to General Photonics, were included in consolidated results. Net Income - ---------- Net income for the three months and six months ended June 30, 1997 increased by $497,000, or 59.7%, and $935,000, or 61.6%, compared with the same periods of 1996. The improvement was largely attributable to improved manufacturing yields and efficiencies which resulted in higher production available for sale at higher margins. 8 Liquidity and Capital Resources - ------------------------------- The Company's principal sources of cash are cash flow from operations, established bank credit facilities and existing cash balances. In February the Company completed a secondary public offering for a total of 1,500,000 shares of common stock at a price of $19.00 per share. Of the 1,500,000 shares, 1,300,000 were sold by the Company and 200,000 by Allen and Company, Incorporated, a selling stockholder. This offering raised approximately $23.0 million for the Company. Approximately $16.5 million of this was used to fund the Company's continuing capacity expansion. The remaining amount was temporarily invested in short-term marketable securities until needed for capital expansion. As of June 30, 1997, the Company had approximately $26.0 million of cash, cash equivalents and marketable securities, including approximately $5.4 million in marketable securities, classified as long-term assets, which could be converted to cash if necessary. In addition, the Company has an unused $20.0 million revolving credit agreement with its principal bank. The Company at June 30, 1997 had working capital of approximately $31.2 million and a current ratio of 4.0 to 1. The Company currently has underway capacity expansion requiring significant capital expenditures through the remainder of 1997. Total planned expenditures for capacity expansion include approximately $38.0 million for SpecTran Communication and approximately $9.0 million for SpecTran Specialty. When completed, these expansions are expected to increase SpecTran Communication's capacity by 100% and SpecTran Specialty's by 50%. The Company intends to finance these expansions through a combination of cash flow from operations and existing cash and marketable security balances. Forward Looking Statements - -------------------------- This report contains forward looking statements which are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These uncertainties include, but are not limited to, general economic conditions and competitive conditions in markets served by the Company. 9 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter which this report was filed. 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. SPECTRAN CORPORATION (Registrant) Date: August 11, 1997 BY: /s/ Raymond E. Jaeger --------------------- Raymond E. Jaeger President, Chief Executive Officer and Chairman of the Board of Directors Date: August 11, 1997 BY: /s/ Bruce A. Cannon -------------------- Bruce A. Cannon Senior Vice President, Chief Financial Officer and Chief Accounting Officer 10 EX-27 2 FDS --
5 (Replace this text with the legend) 0000718487 Spectran Corporation 1,000 U.S. DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 1,930 18,650 9,584 217 7,970 41,800 49,124 16,418 88,759 10,568 0 0 0 695 0 88,759 32,109 32,109 19,405 9,486 11 0 464 3,645 1,193 2,452 0 0 0 2,452 .35 .35
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