0000950123-95-002365.txt : 19950817 0000950123-95-002365.hdr.sgml : 19950817 ACCESSION NUMBER: 0000950123-95-002365 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950816 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRAN CORP CENTRAL INDEX KEY: 0000718487 STANDARD INDUSTRIAL CLASSIFICATION: GLASS PRODUCTS, MADE OF PURCHASED GLASS [3231] 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: 95564591 BUSINESS ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083472261 10-Q 1 SPECTRAN CORPORATION 1 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, 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 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, 1995 was 5,351,853. 2 PART I - FINANCIAL INFORMATION SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED BALANCE SHEETS - ASSETS
June 30, 1995 December 31, 1994 ------------- ----------------- (unaudited) Current Assets: Cash and Cash Equivalents $ 497,970 $ 477,022 Current Portion of Marketable Securities 3,553,933 641,256 Accounts Receivable, Trade, net 7,266,645 6,183,461 Inventories 5,672,488 4,100,179 Current Deferred Income Taxes, net 303,000 303,000 Income Taxes Receivable 392,940 501,629 Prepaid Expenses and Other Current Assets 396,160 267,871 ----------- ----------- Total Current Assets 18,083,136 12,474,418 Property, Plant and Equipment: Land and Land Improvements 395,113 395,113 Buildings and Improvements 3,591,965 3,266,189 Machinery and Equipment 16,176,421 14,612,501 Construction in Progress 1,221,169 1,625,056 ----------- ----------- 21,384,668 19,898,859 Less Accumulated Depreciation and Amortization 11,620,925 10,482,710 ----------- ----------- 9,763,743 9,416,149 Other Assets: Long-term Marketable Securities 1,374,563 5,196,903 License Agreements, net 1,104,858 1,205,300 Deferred Income Taxes, net 1,737,446 1,702,000 Goodwill, net 4,285,947 1,106,806 Other 108,465 260,361 ----------- ----------- 8,611,279 9,471,370 ----------- ----------- Total Assets $36,458,158 $31,361,937 =========== ===========
See accompanying notes to these consolidated condensed financial statements. -2- 3 SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED BALANCE SHEETS - LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 1995 December 31, 1994 ------------- ----------------- (unaudited) Current Liabilities: Accounts Payable $ 1,172,761 $ 751,455 Income Taxes Payable 15,477 -- Accrued Defined Benefit Pension Liability 24,840 65,571 Accrued Liabilities 2,351,390 2,200,825 ----------- ----------- Total Current Liabilities 3,564,468 3,017,851 Long-term Debt 9,091,942 5,240,000 Stockholders' Equity: Common Stock, voting, $.10 par value; authorized 20,000,000 shares; issued and outstanding 5,351,853 shares (5,207,409 in 1994) 535,185 520,741 Common Stock, non-voting, $.10 par value; authorized 250,000 shares; no shares outstanding -- -- Paid-in Capital 26,436,333 26,028,279 Net Unrealized Loss on Marketable Securities (58,407) (242,438) Retained Earnings (Deficit) (3,111,363) (3,202,496) ----------- ----------- Total Stockholders' Equity 23,801,748 23,104,086 ----------- ----------- Total Liabilities & Stockholders' Equity $36,458,158 $31,361,937 =========== ===========
See accompanying notes to these consolidated condensed financial statements. -3- 4 SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended Three Months Ended June 30, June 30, ----------------------------- ------------------------------ 1995 1994 1995 1994 ----------- ----------- ---------- ---------- Net Sales $17,064,463 $12,425,263 $9,099,384 $6,639,044 Cost of Sales 11,329,407 8,260,429 6,257,904 4,535,612 ----------- ----------- --------- ---------- Gross Profit 5,735,056 4,164,834 2,841,480 2,103,432 Selling & Administrative Expenses 4,165,695 2,939,460 2,128,046 1,626,934 Research & Development Costs 1,412,545 601,814 659,100 310,075 ----------- ----------- ---------- ---------- Income from Operations 156,816 623,560 54,334 166,423 Other Income (Expense): Interest Income 168,184 158,214 83,561 81,643 Interest Expense (253,731) (88,900) (151,918) (76,521) Other 84,099 83,475 27,953 63,786 ----------- ----------- ---------- ---------- (1,448) 152,789 (40,404) 68,908 ----------- ----------- ---------- ---------- Income before Taxes 155,368 776,349 13,930 235,331 Income Tax Provision 64,235 321,000 5,711 99,000 ----------- ----------- ---------- ---------- Net Income $ 91,133 $ 455,349 $ 8,219 $ 136,331 =========== =========== ========== ========== Weighted Average Number of Shares of Common Stock Outstanding: Primary 5,296,622 5,389,361 5,335,421 5,293,975 =========== =========== ========== ========== Fully Diluted 5,319,034 5,389,361 5,409,358 5,293,975 =========== =========== ========== ========== Net Income per Share of Common Stock: Primary $.02 $.08 $ -- $.03 ==== ==== ==== ==== Fully Diluted $.02 $.08 $ -- $.03 ==== ==== ==== ====
See accompanying notes to these condensed financial statements. -4- 5 SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ------------------------------------- 1995 1994 ----------- ----------- Cash Flows from Operating Activities: Net Income $ 91,133 $ 455,349 Add (Deduct) Items Not Affecting Cash: Depreciation and Amortization 1,035,307 872,822 Other Non-Cash Charges (156,379) 82,060 Changes in Other Components of Working Capital (1,172,696) (808,033) ----------- ----------- Net Cash Provided by (Used for) Operating Activities (202,635) 602,198 Cash Flows from Investing Activities: Acquisition of Business (4,182,051) (6,636,284) Acquisition of Property & Equipment (959,765) (1,043,359) Net Proceeds from Sales (Purchases) of Marketable Securities 1,090,959 (31,669) ----------- ----------- Cash Used in Investing Activities (4,050,857) (7,711,312) Cash Flows from Financing Activities: Borrowings of Long-term Debt 3,851,942 5,000,000 Reduction of Debt -- (366,673) Proceeds from Exercise of Stock Options and Warrants -- 100,802 Proceeds from Issuance of Stock 422,498 -- ----------- ----------- Cash Provided by Financing Activities 4,274,440 4,734,129 Increase (Decrease) in Cash and Cash Equivalents 20,948 (2,374,985) Cash and Cash Equivalents at Beginning of Period 477,022 3,538,190 ----------- ----------- Cash and Cash Equivalents at End of Period $ 497,970 $ 1,163,205 =========== ===========
See accompanying notes to these condensed financial statements. -5- 6 SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The financial information for the six months and three months ended June 30, 1995 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 periods. The results of operations for the six months ended June 30, 1995 are not necessarily indicative of the results for the entire year. The consolidated results for the six months and three months ended June 30, 1994 include the results of operations of two subsidiaries, SpecTran Specialty Optics Company and EBOT Acquisition Corp., from the date of acquisition, February 18, 1994, to the end of 1994 June quarter. The consolidated results for the six months and three months ended June 30, 1995 also include results of operations of SpecTran Specialty Optics Company and EBOT Acquisition Corp. as well as the results of operations of Applied Photonic Devices, Inc., a wholly-owned subsidiary, from the date of acquisition on May 23, 1995. 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, 1994, as contained in the Company's Form 10-K as filed with the United States Securities and Exchange Commission. 2. INVENTORIES Inventories consisted of:
June 30, 1995 December 31, 1994 ------------- ----------------- Raw Materials $2,211,129 $1,751,859 Work in Process 1,464,882 779,067 Finished Goods 1,996,477 1,569,253 ---------- ---------- $5,672,488 $4,100,179 ========== ==========
-6- 7 3. 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. 4. ACQUISITION On May 23, 1995 the Company purchased the outstanding capital stock of Applied Photonic Devices, Inc. ("APD") for cash and stock with a total cost of $4.4 million, including the retirement of approximately $614,000 of APD bank debt. The results of APD are included in the consolidated financial statements from May 23, 1995. Goodwill of $3,237,000 resulted from the purchase and is being amortized over 15 years. -7- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 VERSUS 1994 Net Sales Consolidated net sales for the three and six month periods ended June 30, 1995 were $9,099,384 and $17,064,463, an increase of 37% for both periods from each of the comparable periods in the prior year when net sales were $6,639,044 and $12,425,263, respectively. Included in 1995 are revenues from Applied Photonic Devices from the May 23, 1995 acquisition date. Sales increased in both periods of 1995 with significant increased shipments of the Company's single-mode optical fiber to international telecommunications markets, offsetting a decline in single-mode fiber prices. Standard datacommunication multimode fiber sales volume increased in both periods with a slight decline in average sale prices. Sales remained strong in the specialty product area for SpecTran Specialty Optics Company. Continued increased sales of single-mode optical fiber to both domestic data communications and international telecommunications markets, increased specialty revenues from new product introductions and an expanded customer base for the Company's standard multimode fiber will contribute to revenue growth, and the Company is making progress in each of these areas. Gross Profit SpecTran earned a consolidated gross profit of $2,841,480 and $5,735,056 for the three and six months ended June 30, 1995, respectively, which was $738,048 (35.1%) and $1,570,222 (37.7%) higher than in the comparable periods of the prior year, respectively. The gross margin, as a percentage of sales, decreased slightly to 31.2% in the second quarter of 1995 from 31.7% in the second quarter of 1994. The gross profit margin of 33.6% for the six month period ended June 30, 1995 remained relatively the same as the gross profit margin of 33.5% in the comparable period of 1994. Royalty expense was 5.5% and 5.6% of SpecTran's sales for the three and six month periods, respectively, compared to 5.2% and 5.6% in the comparable periods of 1994. Selling and Administrative Consolidated selling and administrative expenses increased by $501,112 (30.8%) and $1,226,235 (41.7%) during the three and six month periods ended June 30, 1995. As a percentage of sales these expenses stayed constant during 1995 at 23.4% and 24.4% compared to 24.5% and 23.7% for the comparable three and six month periods. The increase reflects a full six months of expenses incurred by SpecTran Specialty Optics Company compared with four and a half months during 1994 and a month of expenses incurred by Applied Photonic Devices, acquired in May, 1995. Parent -8- 9 company spending increased by $241,000 and $508,000 in the three and six month periods, respectively, due primarily to business development activities. Research and Development Consolidated spending for internal research and development increased by $349,025 (112.6%) and $810,731 (134.7%) for the three and six month periods ended June 30, 1995. As a percentage of sales, consolidated research and development costs increased to 7.2% and 8.3% in 1995 versus 4.7% and 4.8% for the three and six months ended June 30, 1995 and 1994, respectively. The Company's increased research and development spending is primarily related to the Company's new single-mode fiber product line and programs designed to improve manufacturing cost and product performance in our multimode product line, both of which have continued at increased levels since 1994. Other Income (Expense), net Consolidated other income (expense) net decreased by $109,312 (158.6%) and $154,237 (100.9%) during the three and six months ended June 30, 1995. The change is made up of increased interest income of $1,918 and $9,970 for the three and six month periods of 1995, less increased interest expense of $75,397 (98.5%) and $164,831 (185.4%) for these same periods. Interest expense increased during the three and six month periods of 1995 as a result of increased debt levels associated with the acquisition of Applied Photonic Devices. Net Income Net income for the three and six months of 1995 was $8,219 and $91,133. Net income for the same periods in 1994 was $136,331, or 2.1% of net sales, and $455,349, or 3.7% of net sales, respectively. This was a decline of $128,112 (94.0%) and $364,216 (80.0%) for the three and six month periods. Liquidity and Capital Resources At June 30, 1995, the Company had net working capital of $14,518,667, a current ratio of 5.1 to 1, and an aggregate of $497,970 in cash and cash equivalents. In addition, the Company had total marketable securities of $4,928,496, including $1,374,563 classified as long-term which could be converted into cash if needed. On May 23, 1995 the Company borrowed an additional $2,200,000 under its existing bank loan agreement for the purchase of Applied Photonic Devices. The amount outstanding under this agreement at June 30, 1995 was $9.1 million. The Company expects but cannot assure that existing working capital should be sufficient to meet the Company's cash needs in 1995. -9- 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - not applicable (b) Reports on Form 8-K A report on Form 8-K was filed by the Registrant on June 6, 1995 to report the acquisition of stock of Applied Photonic Devices, Inc. A report on Form 8-K/A was filed on August 9, 1995 to provide the audited financials and proforma information of the acquired entities. 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 14, 1995 BY: /s/ R. E. Jaeger ----------------------------- Raymond E. Jaeger President and Chief Executive Officer Date: August 14, 1995 BY: /s/ Bruce A. Cannon ----------------------------- Bruce A. Cannon Senior Vice President and Chief Financial Officer -10- 11 Exhibit Index ------------- Exhibit No. Description ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 497,970 3,553,933 7,413,904 147,259 5,672,488 18,083,136 21,384,668 11,620,925 36,458,158 3,564,468 0 26,971,518 0 0 0 36,458,158 17,064,463 17,064,463 11,329,407 11,329,407 0 0 253,731 155,368 64,235 91,133 0 0 0 91,133 .02 .02