-----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, UaUJiRqD0ll58Y8YRrM+Zb2mn3NRZhUQQgA/jr7G6IS2zxTvp5IFVl3Ew4ng8RKa 2xI0G0qYL/dyqEoD1HrsLg== 0000718487-97-000004.txt : 19971117 0000718487-97-000004.hdr.sgml : 19971117 ACCESSION NUMBER: 0000718487-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-12489 FILM NUMBER: 97718926 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 September 30, 1997 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 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 October 31, 1997, was 6,970,683. 1 PART I - FINANCIAL INFORMATION SPECTRAN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share) (unaudited) Nine Months Ended Three Months Ended September 30, September 30, ------------- ------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales .................................................... $ 47,747 $ 44,915 $ 15,638 $ 16,161 Cost of Sales ................................................ 29,266 28,621 9,861 9,941 ----------- ----------- ----------- -------- Gross Profit ................................................. 18,481 16,294 5,777 6,220 Selling and Administrative Expenses .......................... 11,021 9,909 3,133 3,641 Research and Development Costs ............................... 2,396 2,321 798 740 ----------- ----------- ----------- -------- Income from Operations ....................................... 5,064 4,064 1,846 1,839 Other Income (Expense): Interest Income ......................................... 1,100 166 335 45 Interest Expense ........................................ (701) (528) (237) (208) Other, net .............................................. (20) 122 (9) 58 ----------- ----------- ----------- -------- Other Income (Expense), net ............................. 379 (240) 89 (105) ----------- ----------- ----------- -------- Income before Income Taxes ................................... 5,443 3,824 1,935 1,734 Income Tax Expense ........................................... 1,850 1,300 657 727 ----------- ----------- ----------- -------- Income before Equity in Joint Venture ........................ 3,593 2,524 1,278 1,007 Income (Loss) from Joint Venture, Net of Income Taxes ............................................. 10 -- (127) -- ----------- ----------- ----------- -------- Net Income ................................................... $ 3,603 $ 2,524 $ 1,151 $ 1,007 =========== =========== =========== ======== Weighted Average Number of Common Shares Outstanding 7,100,804 5,929,796 7,371,866 6,003,798 =========== =========== =========== ======== Net Income per Share of Common Stock ......................... $ .51 $ .43 $ .16 $ .17 =========== =========== =========== ========
See accompanying notes to these condensed consolidated financial statements. 2 SPECTRAN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 1997 1996 ------- -------- (unaudited) ASSETS Current Assets: Cash and Cash Equivalents ........................................................... $ 3,152 $ 3,565 Current Portion of Marketable Securities ............................................ 9,030 13,822 Trade Accounts Receivable, net ...................................................... 10,364 7,621 Inventories ......................................................................... 8,458 7,254 Deferred Income Taxes, net .......................................................... 791 791 Prepaid Expenses and Other Current Assets ........................................... 1,949 1,316 ------- -------- Total Current Assets ......................................................... 33,744 34,369 Property, Plant and Equipment, net ....................................................... 43,778 17,890 Other Assets: Long-term Marketable Securities ..................................................... 5,350 1,595 License Agreements, net ............................................................. 653 804 Deferred Income Taxes, net .......................................................... 1,114 814 Goodwill, net ....................................................................... 891 950 Investment in Joint Venture ......................................................... 4,152 4,135 Other Long-term Assets .............................................................. 2,228 1,899 ------- -------- Total Other Assets .............................................................. 14,388 10,197 ------- -------- Total Assets ................................................................... $91,910 $ 62,456 ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable .................................................................... $ 5,444 $ 3,763 Income Taxes Payable ................................................................ 849 301 Accrued Liabilities ................................................................. 6,171 5,989 ------- -------- Total Current Liabilities ..................................................... 12,464 10,053 Long-term Debt ........................................................................... 24,000 24,000 Stockholders' Equity: Common Stock, voting, $.10 par value; authorized 20,000,000 shares; outstanding 6,958,667 shares and 5,400,071 shares in 1997 and 1996, respectively ................................. 696 540 Common Stock, non-voting, $.10 par value; authorized 250,000 shares; no shares outstanding ................................ -- -- Paid-in Capital ..................................................................... 50,114 26,884 Net Unrealized Gain/(Loss) on Marketable Securities ................................. 38 (16) Retained Earnings ................................................................... 4,598 995 ------- -------- Total Stockholders' Equity ..................................................... 55,446 28,403 ------- -------- Total Liabilities and Stockholders' Equity .................................... $91,910 $ 62,456 ======= ========
See accompanying notes to these condensed consolidated financial statements. 3 SPECTRAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited) Nine Months Ended September 30, ------------- 1997 1996 ---- ---- Cash Flows from Operating Activities: Net Income ........................................... $ 3,603 $ 2,524 Reconciliation of Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization ...................... 3,070 2,189 Other Non-Cash Charges ............................. (38) (242) Loss on Sale of Marketable Securities .............. -- 19 Change in Long-term Deferred Income Taxes .......... (300) 832 Change in Other Long-term Assets ................... (409) (1,019) Equity in Net Income of Unconsolidated Joint Venture (17) -- Changes in Other Components of Working Capital ..... (2,139) (2,689) Loss on Disposition of Equipment ................... 62 -- --------- -------- Net Cash Provided by Operating Activities .......... 3,832 1,614 Cash Flows from Investing Activities: Acquisition of Property, Plant and Equipment ......... (28,723) (6,209) Purchase of Marketable Securities .................... (240,110) (7,380) Proceeds from Sale/Maturity of Marketable Securities . 241,202 10,218 --------- -------- Net Cash Used in Investing Activities ................ (27,631) (3,371) Cash Flows from Financing Activities: Borrowings of Long-term Debt ......................... -- 2,000 Proceeds from Exercise of Stock Options and Warrants . 309 306 Issuance of Common Stock, net ........................ 23,077 -- --------- -------- Cash Provided by Financing Activities ................ 23,386 2,306 --------- -------- Increase (Decrease) in Cash and Cash Equivalents ........ (413) 549 Cash and Cash Equivalents at Beginning of Period ........ 3,565 1,625 --------- -------- Cash and Cash Equivalents at End of Period .............. $ 3,152 $ 2,174 ========= ========
See accompanying notes to consolidated financial statements. 4 SPECTRAN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The financial information for the three months and nine months ended September 30, 1997 and 1996, 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 nine months ended September 30, 1997 and 1996, are not necessarily indicative of the results for the entire year. The consolidated results for the three and nine months ended September 30, 1997 and 1996, include the accounts of SpecTran Corporation (the Company) and all 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, 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): September 30, 1997 December 31, 1996 ------------------ ----------------- Raw Materials $ 3,866 $ 3,677 Work in Process 1,088 1,209 Finished Goods 3,504 2,368 ---------- --------- $ 8,458 $ 7,254 ======== =========
5 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of (in thousands): September 30, 1997 December 31, 1996 ------------------ ----------------- Land and Land Improvements $ 978 $ 937 Buildings and Improvements 10,406 3,840 Machinery and Equipment 27,873 19,213 Construction in Progress 21,002 8,611 ---------- ---------- 60,259 32,601 Less Accumulated Depreciation and Amortization 16,481 14,711 ---------- ---------- $ 43,778 $ 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. 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 Results of Operations Three and Nine Months Ended September 30, 1997 Compared With Three and Nine Months Ended September 30, 1996 Nine Months Ended September 30, Three Months Ended September 30, ---------------------------------- ---------------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales 100.0% 100.0% 100.0% 100.0% Cost of Sales 61.3% 63.7% 63.1% 61.5% ------- ------- -------- -------- Gross Profit 38.7% 36.3% 36.9% 38.5% Selling and Administrative Expenses 23.1% 22.1% 20.0% 22.5% Research and Development Costs 5.0% 5.2% 5.1% 4.6% ------- ------- -------- -------- Income from Operations 10.6% 9.0% 11.8% 11.4% Other Income (Expense), net .8% (.5)% .6% (.7)% ------- ------- -------- -------- Income before Income Taxes 11.4% 8.5% 12.4% 10.7% Income Tax Expense 3.9% 2.9% 4.2% 4.5% ------- ------- -------- -------- Income before Equity in Joint Venture 7.5% 5.6% 8.2% 6.2% Income from Joint Venture, net -- -- (.8)% -- -------- -------- --------- -------- Net Income 7.5% 5.6% 7.4% 6.2% ======= ======= ======== ========
Net Sales - --------- Net sales of $15.6 million for the three months ended September 30, 1997, were $523,000, or 3.2% lower than for the comparable period of 1996. Net sales of $47.7 million for the nine months ended September 30, 1997, were $2.8 million, or 6.3% higher than for the comparable period 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 nine months ended September 30, 1997, compared to the three months and nine months ended September 30, 1996, increased 13.2% and 23.1%, respectively. Net sales for the nine months increased in all business units reflecting continued market demand. Selling prices for single-mode have increased in the first nine months of 1997 compared to the comparable period of 1996, largely due to strong market demand but experienced a slight decrease for the three months ended September 30, 1997, due to industry pricing pressures. Selling prices for multimode have remained relatively stable in 1997 compared to 1996. 7 Gross Profit - ------------ Gross profit of $5.8 million for the three months ended September 30, 1997, was $443,000 or 7.1% lower than for the comparable period of 1996. Gross profit of $18.5 million for the nine months ended September 30, 1997, was $2.2 million, or 13.4%, higher than the comparative period of 1996. As a percentage of net sales, the gross profit decreased from 38.5%, for the three months ended September 30, 1996, to 36.9% for the three months ended September 30, 1997, and increased from 36.3% for the nine months ended September 30, 1996, to 38.3%, for the nine months ended September 30, 1997. The decrease in gross profit for the three months ended was primarily due to the greater than planned costs incurred in the consolidation and expansion of the Company's Specialty Optics subsidiary. The increase in gross profit for the nine months period was primarily due to 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 3.4% and 3.8% in the three months and nine months ended September 30, 1996, to 3.0% and 2.9% for the three months and nine months ended September 30, 1997, primarily due to an increase in the percentage of net sales not subject to royalty. Selling and Administration - -------------------------- Selling and administrative expenses decreased $508,000, or 13.9%, for the three months ended September 30, 1997, primarily due to lower than anticipated training costs. Selling and administrative expenses increased $1.1 million, or 11.2%, for the nine months ended September 30, 1997. Included in the nine months ended September 30, 1997, is $1.1 million 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 decreased to 20.0% for the three months ended September 30, 1997, from 22.5% for the comparable period in 1996, and increased to 23.1% for the nine months ended September 30, 1997, from 22.1% for the comparable period in 1996. Research and Development - ------------------------ Research and development costs increased $58,000, or 7.7%, and $75,000, or 3.2%, for the three months and nine months ended September 30, 1997, compared with the same periods in 1996. As a percentage of net sales, research and development costs increased from 4.6% for the three months ended September 30, 1996, to 5.1% for the three months ended September 30, 1997, and decreased from 5.2% for the nine months ended September 30, 1996, to 5.0% for the nine months ended September 30, 1997. The Company continues to invest in programs to improve manufacturing costs 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 $194,000 and $620,000 for the three months and nine months ended September 30, 1997, compared with the same periods for 1996. Interest income increased for the three months and nine months ended September 30, 1997, by $289,000 and $934,000, respectively, due to a higher level of cash available for investment as a result of the Company's secondary public offering in February, 1997. Interest expense, net of capitalized interest, increased for the three months and nine months ended September 30, 1997, by $28,000 and $172,000, respectively, compared to the same periods in 1996 due to the increase in debt related to the Company's capacity expansion. 8 Income Taxes - ------------ A tax provision of 34.0% of pre-tax income was provided for the three months and nine months ended September 30, 1997, compared to a tax provision of 42.0% and 34.0% of pre-tax income for the comparable periods in 1996. The effective tax rates for the nine months ended September 30, 1996, and three months and nine months ended September 30, 1997, were lower than the statutory combined federal and state tax rates due primarily to reductions in the valuation allowance for deferred tax assets. The higher rate for the three months ended September 30, 1996, was to adjust the 1996 year-to-date estimated tax rate up to 34.0% from the 27.0% that had been used in the first six months of 1996. Income From Equity in Joint Venture - ----------------------------------- The Company realized a loss of $127,000 for the three months ended September 30, 1997, net of tax, and income of $10,000 for the nine months ended September 30, 1997, net of tax, from its equity in General Photonics, the joint venture formed in December, 1996 with General Cable. The loss for the three months period in 1997 was due to lower than anticipated revenues. In 1996, the results of Applied Photonic Devices, Inc., the predecessor to General Photonics, were included in the consolidated results. Net Income - ---------- Net income for the three and nine months ended September 30, 1997, increased by $144,000, or 14.3%, and $1.1 million, or 42.8%, compared with the same periods of 1996. The improvement was largely attributed to improved manufacturing yields and efficiencies which resulted in higher production available for sale at higher margins. 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. This has been used to fund the Company's continuing capacity expansion. As of September 30, 1997, the Company had approximately $17.5 million in 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 September 30, 1997, had working capital of approximately $21.3 million and a current ratio of 2.7 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, the latter expenditure being substantially all of which was completed in the third quarter. When fully operational, these expansions are expected to increase SpecTran Communication's capacity by 100% and SpecTran Specialty's by 50%. The Company has and intends to continue 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: November 14, 1997 BY: /s/ Raymond E. Jaeger ---------------------- Raymond E. Jaeger President, Chief Executive Officer and Chairman of the Board of Directors Date: November 14, 1997 BY: /s/ Bruce A. Cannon -------------------- Bruce A. Cannon Senior Vice President and Chief Financial Officer 10 EX-27 2 FDS --
5 (Replace this text with the legend) 0000718487 SpecTran Corporation 1,000 U.S. DOLLARS 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 3,152 9,030 10,587 223 8,458 33,744 60,259 16,481 91,910 12,464 0 0 0 696 0 91,910 47,747 47,747 29,266 13,417 20 0 701 5,453 1,850 0 0 0 0 3,603 .51 .51
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