-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Zs7beukC8Z+2DVJ/C4HKScGR1Um0tuslt6kHYTsUeCi0nGSJFUrHzoBBEcsBvf6J 0t0R+mwLShTXs8VO3eEE4w== 0000719625-95-000016.txt : 19950731 0000719625-95-000016.hdr.sgml : 19950731 ACCESSION NUMBER: 0000719625-95-000016 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941001 FILED AS OF DATE: 19950728 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILC TECHNOLOGY INC CENTRAL INDEX KEY: 0000719625 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 941655721 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11360 FILM NUMBER: 95556970 BUSINESS ADDRESS: STREET 1: 399 JAVA DR CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087457900 MAIL ADDRESS: STREET 1: 399 JAVA DRIVE CITY: SUNNYVALE STATE: CA ZIP: 94089 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment No. 2 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended October 1, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission file number 0-11360 ILC TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) California 94 -1655721 (State or other jurisdiction of incorporation)(IRS Employer Identification No.) 399 Java Drive, Sunnyvale, California 94089 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (408) 745-7900 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Title of Class) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price of the Common Stock on December 12, 1994, was approximately $35,408,734. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of outstanding shares of the registrant's Common Stock on December 12, 1994 was 4,532,711. Parts of the following documents are incorporated by reference into Part III of this Annual Report and Form 10-K: (1) Proxy Statement for registrant's 1994 Annual Meeting of Shareholders. Consolidated Balance Sheets - October 1, 1994 and October 2, 1993. 1-2 Consolidated Statements of Operations for the Three Fiscal Years Ended October 1, 1994. 3 Consolidated Statements of Stockholders' Equity for the Three Fiscal Year Ended October 1, 1994. 4 Consolidated Statements of Cash Flows for the Three Fiscal Years Ended October 1, 1994. 5-6 Notes to Consolidated Financial Statement 7-14 Form 10-K Schedules 15-17 Report of Independent Public Accountants 18 ILC TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS OCTOBER 1, 1994 AND OCTOBER 2, 1993 ASSETS 1994 1993 Current assets: Cash and cash equivalents $ 2,461,549 $ 2,993,998 Marketable securities 998,129 1,436,207 Accounts receivable, less allowance for doubtful accounts of $332,803 and $219,128, respectively 6,956,981 8,020,263 Receivable from long-term contracts 824,007 370,836 Inventories 7,192,197 7,324,889 Deferred tax asset 2,405,000 691,000 Prepaid expenses 542,801 321,879 Total current assets 21,380,664 21,159,072 ----------- ----------- Property and equipment, net 17,688,277 13,008,041 Deposit on land and building purchase 1,300,000 - Goodwill, net of accumulated amortization of 331,605, in fiscal 1993 - 2,321,248 Covenants-not-to-compete, net of accumulated amortization and writedown of $2,145,473 and $702,042, respectively 1,406,692 2,849,001 Other assets 221,789 404,483 ------------ ------------ $41,997,422 $39,741,845 =========== =========== The accompanying notes are an integral part of these financial statements. ILC TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS OCTOBER 1, 1994 AND OCTOBER 2, 1993 LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 ---- ---- Current liabilities: Accounts payable $3,921,112 $4,007,623 Accrued payroll and related items 1,765,605 1,577,555 Other accrued liabilities 1,144,184 1,201,710 Current portion of non-compete 520,000 520,000 obligation Current portion of long-term debt 2,196,494 1,374,696 Accrued income taxes payable 2,405,000 691,000 ----------- ------------ Total current liabilities 11,952,395 9,372,584 ---------- ----------- Long-term liabilities: Long-term debt 5,096,494 4,374,695 Non-compete obligation 910,000 1,430,000 Other accruals 414,844 - ----------- --------------- Total long-term liabilities 6,421,338 5,804,695 ----------- ----------- Commitments and contingencies (Note 6) Stockholders' equity: Common stock, no par value; 10,000,000 shares authorized; 4,522,951 shares and 4,619,476 shares outstanding in 1994 and 1993, respectively 5,492,338 6,623,828 Retained earnings 18,131,351 17,940,738 ------------ ----------- Total stockholders' equity 23,623,689 24,564,566 ----------- ----------- $41,997,422 $39,741,845 =========== =========== The accompanying notes are an integral part of these financial statements. ILC TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
1994 1993 1992 ----- ----- ---- Net sales $52,022,328 $51,996,509 $40,884,919 Costs and expenses: Cost of sales 35,287,928 34,818,944 26,374,444 Research and 3,998,136 2,767,448 1,296,879 development Sales and marketing 2,271,099 2,641,810 2,079,958 General and administrative 5,218,701 3,936,940 3,557,453 Amortization and writedown of intangibles 3,764,678 756,712 278,058 ---------- ----------- ---------- 50,540,542 44,921,854 33,586,792 ---------- ----------- ---------- Income from operations 1,481,786 7,074,655 7,298,127 ---------- ----------- ---------- Other (income) expense: Interest, net 139,173 (113,598) (99,947) Rental operations, net - 77,582 (99,172) ----------- ---------- --------- 139,173 (36,016) (199,119) ----------- ---------- --------- Income before provision for income taxes 1,342,613 7,110,671 7,497,246 Provision for income taxes 1,152,000 2,352,000 2,547,000 ---------- ---------- ---------- Net income $ 190,613 $4,758,671 $4,950,246 =========== =========== ========== Net income per share $ 0.04 $ 0.96 $ 1.00 ========== ============ ====== Weighted average shares outstanding used to compute net income per share 4,825,009 4,979,529 4,956,418 ========== ========== ========== The accompanying notes are an integral part of these financial statements.
ILC TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
Common Common Stock Retained Shares Amount Earnings Total Balance at September 28, 1991 $4,536,186 $6,221,407 $8,231,821 $14,453,228 Net income - - 4,950,246 4,950,246 Issuance of common stock under stock purchase plan 7,859 80,167 - 80,167 Excercise of stock options 30,650 94,658 - 94,658 -------- ------ --------- ------- Balance at October 3, 1992 4,574,695 6,396,232 13,182,067 19,578,299 Net income - - 4,758,671 4,758,671 Issuance of common stock under stock purchase plan 14,281 134,283 - 134,283 Exercise of stock options 30,500 93,313 - 93,313 ---------- -------- ---------- -------- Balance at October 2, 1993 4,619,476 6,623,828 17,940,738 24,564,566 Net income - - 190,613 190,613 Issuance of common stock under stock purchase plan 25,475 196,590 - 196,590 Exercise of stock options 82,000 227,420 - 227,420 Repurchase of common stock (204,000)(1,555,500) - (1,555,500) --------- ----------- --------- ----------- Balance at October 1, 1994 4,522,951 $5,492,338 $18,131,351 $23,623,689 ========= ========== =========== =========== The accompanying notes are an integral part of these financial statements.
ILC TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
1994 1993 1992 ---- ---- ---- Cash flows from operating activities: Net Income $190,613 $4,758,671 4,950,246 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,115,236 1,033,104 982,885 Provision for doubtful accounts and note 383,902 (98,769) 128,896 Provision for inventory obsolescence ____________________________________ 1,772,346 (22,125) (65,039) _________ ________ ________ Net loss on property and equipment sold or retired 3,839 68,687 56,734 Amortization of deferred gain on sale and leaseback - - (454,087) Amortization and write down of non-compete agreements 1,442,309 491,428 211,737 Amortization and write down of goodwill 2,321,248 265,284 66,321 Changes in assets and liabilities, net of acquisitions: (Increase) decrease in accounts receivable 226,209 (1,150,930) 54,461 Increase in inventories (1,639,654) (148,901) (1,161,066) _______________________ ___________ _________ ___________ (Increase) decrease in prepaid expenses (220,922) (198,491) 28,423 Decrease in other assets 182,694 133,572 105,421 Increase (decrease) in accounts payable (86,511) 263,444 (400,884) Increase (decrease) in accrued liabilities 545,369 (49,438) 520,387 ---------- ---------- --------- Total adjustments 6,046,065 586,865 74,189 --------- --------- --------- Net cash provided by operating activities 6,236,678 5,345,536 5,024,435 --------- --------- --------- Cash flows from investing activities: Purchase of stock of Precision Lamp, Inc. plus expenses of acquisition, net of cash acquired - - (4,447,092) Purchase of land and real estate (3,012,844) (7,600,000) - Deposit on land and building purchase (1,300,000) - - (Increase) decrease in marketable securities 438,078 475,704 (1,911,911) Capital expenditures (2,634,348) (1,466,924) (808,315) ----------- ----------- ----------- Net cash used in investing activities (6,509,114) (8,591,220) (7,167,318) ----------- ----------- ----------- The accompanying notes are an integral part of these financial statements.
ILC TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994 (continued)
1994 1993 1992 ---- ---- ---- Cash flows from financing activities: New borrowings under equipment line $1,090,702 717,336 $291,322 Principal repayments under equipment line (499,225) (453,940) (353,916) Principal borrowings under term loan 1,333,333 5,000,000 - Principal repayments under term loan (533,333) - - Principal payments under long-term severance agreement - - (57,292) Payments under non-compete agreement (520,000) (520,000) (130,000) Proceeds from issuance of common stock 424,010 227,596 174,825 Repurchase of common stock (1,555,500) - - ----------- --------- ---------- Net cash provided by (used in) financing activities (260,013) 4,970,992 (75,061) --------- --------- --------- Net increase (decrease) in cash and cash equivalents (532,449) 1,725,308 (2,217,944) Cash and cash equivalents at beginning of year 2,993,998 1,268,690 3,486,634 ---------- ---------- ---------- Cash and cash equivalents at end of year $2,461,549 $2,993,998 $1,268,690 ========== ========== ========== Supplemental disclosures of cash flow information: 1994 1993 1992 ---- ---- ---- Cash paid during the year for: Interest expense $338,751 $77,925 $60,640 Income taxes 2,500,539 2,213,100 1,669,744 Supplemental disclosures of noncash investing and financing activities: A capital lease obligation of $174,268 was incurred in fiscal 1994 when the Company entered into a capital lease for new computer equipment. The accompanying notes are an integral part of these financial statements.
ILC TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 1, 1994 1. Summary of Significant Accounting Policies Basis of Presentation The financial statements include the accounts of ILC Technology, Inc. (the "Company") and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The Company's fiscal year end is the Saturday closest to September 30. Certain items in the fiscal 1993 financial statements have been reclassified to be consistent with the fiscal 1994 financial statements. Cash and Cash Equivalents - ------------------------- For the purpose of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of less than three months at the time of issue to be cash equivalents. Marketable Securities - --------------------- Effective October 3, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting For Certain Investments in Debt and Equity Securities". The adoption of this statement did not materially impact the Company's results from operations or financial position. Marketable securities at October 1, 1994 are being accounted for as trading securities and are therefore valued at fair market value in the accompanying balance sheet. The change in the net unrealized holding loss, which has been included in fiscal 1994 income, was approximately $80,000 during fiscal 1994. Inventories - ----------- Inventories are stated at the lower of cost (first-in, first-out) or market, and include material, labor and manufacturing overhead. Inventories at October 1, 1994 and October 2, 1993, net of inventory reserves of $2,533,233 and ___________________________________________ $1,523,972, respectively, consisted of: ________________________ 1994 1993 ---- ---- Raw materials $ 3,393,249 $ 4,037,207 Work-in-process 2,556,006 2,370,654 Finished goods 1,242,942 917,028 ----------- ----------- Total inventories $ 7,182,197 $ 7,324,889 =========== =========== Developmental and Manufacturing Contracts - ----------------------------------------- The Company contracts with the U.S. Government and other customers for the development and manufacturing of various products under both cost-plus-fixed-fee and fixed-price contracts. Revenues are recognized under these contracts using the percentage of completion method, whereby revenues are reported in the proportion that costs incurred bear to the total estimated costs for each contract. Periodic reviews of estimated total costs during the performance of such contracts may result in revisions of contract estimates in subsequent periods. Any loss contracts are reserved at the time such losses are determined. Revenues from these contracts were less than 10% of net revenues during 1994, 1993 and 1992. Depreciation and Amortization - ----------------------------- Depreciation and amortization on property and equipment are provided on a straight-line basis over estimated useful lives of 3 to 31.5 years, except for leasehold improvements which are amortized over the terms of the leases. 1. Summary of Significant Accounting Policies (continued) ------------------------------------------------------ Net Income Per Share - -------------------- Net income per share is computed based on the weighted average number of common shares and common equivalent shares (when such equivalents have a dilutive effect) outstanding during the period. Fully diluted net income per share is not significantly different from net income per share as reported. Intangible Assets - ----------------- The Company has certain intangible assets as a result of its acquisition of two subsidiaries (see Note 10). Subsequent to these acquisitions, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful lies of these intangibles may warrant revision or that the remaining balances of intangibles may not be recoverable. When factors indicate that intangibles should be evaluated for possible impairment, the Company uses an estimate of the related subsidiary's undiscounted cash flow over the remaining life of the intangibles in measuring whether the intangibles are recoverable. Goodwill is being amortized over a ten year period. Covenants-not-to-compete are amortized over the period of the covenant. Foreign Exchange Contracts - -------------------------- The Company enters into forward exchange contracts to reduce its exposure to currency exchange risk for purchases from one Japanese vendor. The effect of this practice is to minimize the impact of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to exchange rate risk, as gains and losses on these contracts offset losses and gains on the liabilities being hedged. At October 1, 1994, the Company had forward exchange contracts maturing from October 1994 to December 1994 to purchase 74,480,000 Japanese yen ($760,000). 2. Revenues -------- The Company operates in a single industry segment, the designing, developing, manufacturing and marketing of high performance light source products. Revenues are geographically summarized as follows (in thousands): 1994 1993 1992 ---- ---- ---- United States $31,627 $ 29,994 $ 27,538 Europe 4,435 5,188 4,653 Asia 15,794 16,447 8,472 Other international 166 368 222 --------- -------- -------- Total revenues $ 52,022 $ 51,997 $ 40,885 ========= ======== ======== Customers comprising more than 10% of net sales are as follows: 1994 1993 1992 ---- ---- ---- Customer A 17.6% 19% 11% Customer B 12.8% 17% * *less than 10% of net sales
The Company provides credit in the form of trade accounts receivable to its customers. The Company does not generally require collateral to support customer receivables. The Company performs ongoing credit evaluations of its customers and maintains allowances which management believes are adequate for potential credit losses. 3. Property and Equipment ---------------------- Property and equipment at October 1, 1994 and October 2, 1993 consisted of: Property and equipment, at cost: Machinery and equipment $ 11,856,023 $ 10,497,434 Land and buildings 11,229,341 8,144,406 Furniture and fixtures 463,910 389,318 Equipment under capital lease 174,268 211,823 Leasehold improvements 209,830 157,358 Construction-in-progress 1,939,963 1,074,690 ----------- ----------- 25,873,335 20,475,029 Less accumulated depreciation and amortization (8,185,058) (7,466,988) ----------- ------------ Property and equipment, net $ 17,688,277 $ 13,008,041 ============ ============== In August 1993, the Company purchased two adjacent buildings in Sunnyvale, California, which house the manufacturing activities and the Corporate offices of the Company. The purchase price was $7,600,000, of which $2,600,000 was paid in cash and $5,000,000 was borrowed from a bank for a five year term. In June 1994, the Company purchased a 36,000 square foot facility in Cambridge, England to expand the manufacturing activities of Q-Arc. The purchase price was approximately $2,700,000 of which the majority was paid in cash. In September 1994, the Company purchased a 20,000 square foot facility in Santa Clara, California to be used primarily for the manufacture of short-arc lamps used in the processing of semiconductor materials and for the manufacture of capillary lamps used in microlithography. The purchase also included manufacturing equipment and a short arc product line and associated backlog. The total purchase price for the land, building, equipment and product line was $3,200,000, of which $1,300,000 was paid as a deposit in September 1994 and the balance of $1,900,000 was paid on October 4, 1994 when escrow closed. 4. Bank Borrowings --------------- The Company has a $2 million line of credit available with a bank which expires in January 1996. Borrowings under this line are at 2% above the LIBOR rate (London Interbank Offer Rate) (7% at October 1, 1994) and are limited to 75% of eligible accounts receivable. Under the covenants of the loan agreement, unless written approval from the bank is obtained, the Company is restricted from entering into certain transactions and is required to maintain certain specified financial covenants, profitability and compensating balances which do not restrict the use of cash. At October 1, 1994, the Company was not in compliance with the current ratio requirement but a waiver has been obtained through fiscal 1995. The average balance outstanding (based on month-end balances) under the line of credit in 1993 was $50,000. The maximum borrowings were $600,000 at an average interest rate of 6.0% for 1993. There were no borrowings under the line of credit in fiscal 1994, nor were there any amounts outstanding as of October 1, 1994 or October 2, 1993. In addition, in connection with the purchase of its manufacturing facilities (Note 3) the Company entered into a term note with a bank for $5,000,000, which was subsequently increased to $6,333,333, in 1994. The note matures in August, 1998. The term loan requires monthly principal payments equal to one- forty-eighth of the principal amount plus interest at 2% above the LIBOR rate (London Interbank Offer Rate) (7% at October 1, 1994). The term loan is a reducing revolving credit facility which allows for principal pre- payments and the flexibility for re-borrowing up to the maximum amount that would be outstanding under the term loan given normal amortization to the date of re-borrowing. The Company also has available a $1.5 million equipment line of credit for 100% of the purchase cost of new equipment, which expires in January 1995. Borrowings under this line bear interest at 2% above the LIBOR rate (7% at October 1, 1994), with principal balances amortized over a 2 year period. At October 1, 1994, the Company had approximately $943,000 available for future borrowings under this line of credit. 4. Bank Borrowings (continued) -------------------------- As of October 1, 1994 and October 2, 1993, borrowings outstanding under the term loan and equipment line of credit consisted of: 1994 1993 ---- ---- Term note $ 5,800,000 $ 5,000,000 Equipment line-of-credit 1,340,869 749,391 Other capital lease 152,119 - ------------- ------------- 7,292,988 5,749,391 Less: current portion 2,196,494 1,374,696 ------------- ------------- Long-term debt $ 5,096,494 $ 4,374,695 ============ ============ Aggregate maturities for long-term debt during the next four years are approximately: 1995 - $2,196,000, 1996 - $2,197,000, 1997 - $1,450,000 and 1998 - - $1,450,000. All of the above credit facilities are secured by all of the property of the Company. 5. Income Taxes ------------ Through October 2, 1993, the Company accounted for income taxes pursuant to SFAS No. 96. Effective January 1, 1993, the Company adopted the provisions of SFAS No. 109, "Accounting for Income Taxes", on a prospective basis. SFAS No. 109 requires an asset and liability approach to accounting for income taxes. The adoption of SFAS No. 109 did not have a material effect on the Company's consolidated financial statements. Income before provision for incme taxes consists of the following for fiscal 1994, 1993 and 1992: 1994 1993 1992 ---- ---- ---- U.S. $ 971,283 $6,906,493 $ 7,260,827 Foreign 371,330 204,178 236,419 ----------- ----------- ------------ $1,342,613 $7,110,671 $7,497,246 ========== ========== ========== The components of the provision for income taxes are as follows: 1994 1993 1992 ---- ---- ---- Federal - Current $2,373,000 $1,575,000 $2,093,000 Deferred (1,361,000) - - ----------- ------------ ----------- 1,012,000 1,575,000 2,093,000 ----------- ----------- ----------- State - Current 493,000 777,000 454,000 Deferred (353,000) - - ----------- ----------- ----------- 140,000 777,000 454,000 ----------- ----------- ----------- Total provision for income taxes $1,152,000 $2,352,000 $2,547,000 ========== ========== ========== 5. Income Taxes (continued) The major components of the deferred tax accounts as computed under SFAS No. 109, are as follows: 1994 Inventory reserve $754,000 Bad debt reserve 258,000 Warranty reserve 228,000 Accruals not currently deductible for tax purposes 1,078,000 Amortization of convenant-not-to-compete 538,000 Excess of tax over bank depreciation (710,000) Other 259,000 ---------- $2,405,000 The provisions for income taxes differ from the amounts which would result by applying the applicable statutory Federal income tax rate to income before taxes as follows: 1994 1993 1992 ---- ---- ---- Computed expected provision $470,000 $2,418,000 $2,549,000 State tax 81,000 436,000 454,000 Amortization and writedown of goodwill 812,000 90,000 45,000 FSC commission (259,000) (254,000) (254,000) General business credits (72,000) (33,000) (42,000) Other 120,000 (305,000) (205,000) ---------- ----------- ---------- $1,152,000 $2,352,000 $2,547,000 ========== =========== ==========
6. Employee Retirement Plan ------------------------ On January 1, 1984, the Company adopted a thrift incentive savings plan (the "Plan"). The Plan is qualified under section 401(k) of the Internal Revenue Code and is available to all full-time employees with one or more years of employment with the Company. Under the terms of the Plan, participating employees must contribute at least 2% of their salary to the Plan, and the Company contributes (as a matching contribution) 100% of this amount. Employees may also contribute an additional amount up to 13% of their salary to the Plan, with no further contributions by the Company. The Company's contribution vest at a rate of 20% per year, commencing on the first anniversary of employment. Total employer matching contributions under the Plan were $163,000, $145,000, and $113,000 for the fiscal years 1994, 1993 and 1992, respectively. 7. Commitments ------------ In August 1993, the Company purchased two buildings, which were its two principal operating facilities in Sunnyvale, California, from the landlord for $7,600,000 (see Note 3). The Company has a sublease on a portion of the space which expires in 1995. Prior to August 1993, the Company had leased these facilities under an operating lease agreement with the landlord under a sale and leaseback agreement. In addition, the Company has entered into operating leases in its other facilities. For fiscal years 1994, 1993 and 1992, rental expense, was approximately $318,000, $934,000 and $620,000, respectively. At October 1, 1994, the future minimum rental payments under all building leases for fiscal 1995 through 1999 are approximately $265,000, $260,000, $227,000, $216,000 and $226,000, respectively, and $886,000 thereafter. The amounts total $2,080,000. 8. Stock Option and Purchase Plans ------------------------------- In 1993, the Company adopted the 1992 Stock Option Plan and reserved 200,000 shares for issuance. The 1992 Option Plan replaced the 1983 Option Plan which expired in June 1993. Although options granted under the 1983 Stock Option Plan before such expiration will remain outstanding in accordance with their terms, no further options will be granted under the 1983 Stock Option Plan after June 1993. Options granted are for a ten-year term and generally vest ratably over a period of four years commencing one year after the date of grant. A summary of the option transactions is as follows: Options Outstanding
Options Number Available of Price per Aggregate for Grant Shares Share Value Balance at September 28, 1991 3,624 537,150 $2.13-11.50 $2,066,580 Additional Shares approved 200,000 - - - Granted (194,000) 194,000 8.75-9.00 1,704,250 Canceled 2,000 (2,000) 8.75-11.50 (20,250) Exercised - (30,650) 2.13-3.75 (104,219) ---------- --------- --------- --------- Balance at October 3, 1992 11,624 698,500 2.13-11.50 3,646,361 1992 Option Plan new shares approved 200,000 - - - Options assumed in Converter Power Acquisition - 26,027 1.09 28,369 Granted (57,500) 57,500 9.00-11.50 642,500 Canceled 5,500 (5,500) 8.75-11.50 (56,375) Exercised - (30,500) 2.13-3.75 (93,370) -------- -------- ----------- -------- Balance at October 2, 1993 159,624 746,027 1.09-11.50 4,167,485 Granted (74,000) 74,000 7.38-11.00 723,500 Canceled 18,000 (18,000) 3.75-11.50 (160,126) Exercised - (82,000) 1.09-8.75 (227,420) --------- -------- --------- --------- Balance at October 1, 1994 103,624 720,027 $ 1.09-11.50 $4,503,439 ======= ======= ============ ========== Options exercisable at October 1, 1994 503,402 $ 1.09-11.50 ======= ============
In February 1985, the Company adopted an employee stock purchase plan. Under the plan, the Company has reserved 200,000 shares of common stock for issuance to participating employees who have met certain eligibility requirements. In 1994, the Board of Directors approved an amendment to the employee stock purchase plan, subject to shareholder approval, to increase the number of shares reserved for issuance from 200,000 to 300,000 shares. The number of shares available for purchase by each participant is based upon annual base earnings and at a purchase price equal to 85% of the fair market value at the beginning or the end of the quarter of purchase, whichever is lower. During fiscal 1994, 1993 and 1992, a total of 25,475, 14,281 and 7,859 shares of common stock, respectively, were purchased by Company employees under the plan. As of October 1, 1994, 133,770 shares were available for future purchase. 8. Stock Option and Purchase Plans (continued) ------------------------------------------- In November 1993, the Company's 1992 Stock Option Plan was amended to provide for the automatic grant of a nonstatutory stock option to purchase shares of Common Stock to each outside Director. Subsequent grants will occur annually during the Company's third fiscal quarter. During fiscal 1994, each outside Director was granted an automatic option to purchase a total of 5,000 shares of the Company's Common Stock. 9. Other Income/Expense -------------------- Other (income) expense consists of the following: 1994 1993 1992 ---- ---- ---- Interest income $(199,578) $(191,941) $(168,580) Interest expense 338,751 78,343 68,633 Rental and sublease income - (60,995) (115,596) Net rental expense on sublet property - 138,577 16,424 ---------- ---------- -------- $139,173 $(36,016) $(199,119) ======== =========== ==========
10. Acquisitions ------------ In August 1991, the Company acquired all the outstanding stock of Q-Arc Ltd. of Cambridge, England for $1,400,000 in cash and the assumption of certain liabilities. Q-Arc is a manufacturer of specialty lamps for laser and non-laser applications. This transaction was accounted for as a purchase and accordingly, all assets were revalued to their respective fair values. The acquisition price was equal to the fair value of net assets acquired. Net assets included a covenant-not-to-compete of approximately $951,000. The covenant is being amortized over an eight year period. On June 30, 1992, the Company acquired all of the outstanding stock of Precision Lamp, Inc. located in Cotati, California. Precision Lamp designs, manufactures and distributes miniature incandescent lamps for various applications. The Company paid approximately $2,000,000 in cash for all of the outstanding shares, agreed to pay off approximately $1,100,000 of bank debt and assumed all liabilities ($1,321,000) of Precision Lamp. The Company also agreed to pay at least $2,600,000 to the primary selling shareholder as consideration for a covenant-not-to-compete among the primary selling shareholder, Precision Lamp and ILC. These payments will be made in equal installments through 1997. This transaction was accounted for as a purchase and accordingly, all assets were revalued to their respective fair values. This purchase price allocation resulted in goodwill of approximately $2,650,000 which is being amortized over a ten year period. The $2,600,000 covenant-not-to-compete is being amortized over a seven year period. In the second quarter of fiscal 1994, management determined that an impairment occurred in the recoverability of the unamortized goodwill and covenant-not-to-compete due to a significant shortfall in orders from a major Precision Lamp customer. Accordingly, a $3.4 million charge was recorded to write off the intangibles to net realizable value. The writedown was determined based on the currently projected undiscounted cash flows of Precision Lamp from March 1994 to March 2004, which projected aggregate cash flows of approximately $900,000 (unaudited) over that period and was based on projected net income which averaged 9% higher than the net income projection for fiscal 1994 (with no loss years included in the projection), compared with the carrying value of the Company's investment in Precision Lamp, including goodwill, at the date of the writedown. These projections represent management's best estimate for future results for that subsidiary. At October 1, 1994, the unamortized balance of the Precision Lamp covenant-not- to-compete is approximately $812,000. In January 1993, the Company completed a combination with Converter Power, Inc., located in Ipswich, Massachusetts. Converter Power is a manufacturer of custom power supplies for medical, scientific and industrial applications. The Company exchanged 273, 973 shares of common stock for all of the outstanding common stock of Converter Power in a transaction that was accounted for as a pooling of interests. 10. Acquisitions (continued) ------------------------ The financial statements for fiscal year 1992, contained herein, have been restated to reflect the operations of Converter Power for the full year. The financial statements for fiscal years 1993 and 1994 also reflect a full year of operations for Converter Power. A reconciliation of the current financial statements to previously reported separate Company information is presented below for the Company and Converter Power (in thousands): 1992 Net sales ILC Technology, Inc. consolidated $ 37,578 Converter Power, Inc. 3,307 --------- Combined $ 40,885 ======== Net income ILC Technology, Inc. consolidated $ 4,694 Converter Power, Inc. 256 --------- Combined $ 4,950 ========
The results of operations of Q-Arc and Precision Lamp since the date of acquisition have been included in the Company's consolidated results of operations. 11. Rights Agreement ---------------- On September 19, 1989, the Company's Board of Directors declared a dividend of one common share purchase right for each outstanding share of common stock, no par value, of the Company. The dividend was payable on October 2, 1989 to the shareholders of record on that date. Each Right entitles the registered holder to purchase from the Company one share of common stock of the Company at a price of $30.00 per common share, after adjustment for the March 8, 1991 2-for-1 stock split, and subsequent amendment. The rights will not be exercisable until a party either acquires beneficial ownership of 20% of the Company's common stock or makes a tender offer for at least 30% of its common stock. In the event the rights become exercisable and thereafter a person or group acquires 30% or more of the Company's stock, a 20% shareholder ("Acquiring Person") engages in any specified self-dealing transaction, or, as a result of a recapitalization or reorganization, an Acquiring Person's shareholdings are increased by more than 3%, each right will entitle the holder to purchase from the Company, for the exercise price, common stock having a market value of twice the exercise price of the right. In the event the rights become exercisable and thereafter the Company is acquired in a merger or other business combination, each right will enable the holder to purchase from the surviving corporation, for the exercise price, common stock having a market value of twice the exercise price of the right. At the Company's option, the rights are redeemable in their entirety, prior to becoming exercisable, at $.01 per right. The rights are subject to adjustment to prevent dilution and expire September 29, 1999. 12. Repurchase of Common Stock -------------------------- In March 1994, the Board of Directors authorized the purchase of up to 1,000,000 shares of the Company's common shares outstanding through March 1995. During 1994, the Company repurchased 204,000 shares of common stock for an aggregate amount of $1,555,500. Purchases were made on the open market. SCHEDULE V ILC TECHNOLOGY, INC. PROPERTY AND EQUIPMENT FOR FISCAL YEARS 1994, 1993 AND 1992
Balance at Additions Retirement Balance at Beginning From Additions and End of of Period Acquisition(1) at Cost Sales Transfers Period --------- -------------- -------- --------- --------- --------- Year ended October 3,1992: Machinery and equipment $8,754,674 $ 543,863 $481,640 $(144,579) $48,875 $9,684,473 Furniture and fixtures 246,234 48,273 14,197 - - 308,704 Leasehold improvements 2,131,824 62,067 10,652 (1,575) 184,383 2,387,351 Equipment under capital lease 211,823 - - - - 211,823 Construction in progress 212,516 427,363 301,826 - (233,258) 708,447 --------- --------- -------- --------- -------- ---------- $11,557,071 $1,081,566 $ 808,315 $(146,154) $ - 13,300,798 =========== ========== ========= ========== ======= =========== Year ended October 2, 1993: Machinery and equipment $9,684,473 $ - $764,496 $(175,404) $223,869 $10,497,434 Land and buildings - - 7,600,000 - 544,406 8,144,406 Furniture and fixtures 308,704 - 80,614 - - 389,318 Leasehold improvements 2,387,351 - 31,702 (1,717,289)(544,406) 157,358 Equipment under capital lease 211,823 - - - - 211,823 Construction in progress 708,447 - 590,112 - (223,869) 1,074,690 --------- ------- -------- --------- --------- --------- $13,300,798 $ - $9,066,924 $(1,892,693)$ - $20,475,029 =========== ======= ========== =========== ======= =========== Year ended October 1, 1994: Machinery and equipment $10,497,434 $ - $ 635,991 $(172,658) $895,256 $11,856,023 Land and buildings 8,144,406 - 3,012,844 - 72,091 11,229,341 Furniture and fixtures 389,318 - 91,116 (16,524) - 463,910 Leasehold improvements 157,358 - 52,472 - - 209,830 Equipment under capital lease 211,823 - 174,268 (211,823) - 174,268 Construction in progress 1,074,690 - 1,832,620 - (967,347) 1,939,963 --------- -------- ---------- ------- --------- --------- $20,475,029 $ - $5,799,311 $(401,005) $ - $25,873,335 ============ ======== ========== ========== ======== =========== (1) Acquisition of Precision Lamp, Inc. See Note 10 to Consolidated Financial Statements.
SCHEDULE VI ILC TECHNOLOGY, INC. ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT FOR FISCAL YEARS 1994, 1993 AND 1992 Additions Balance at Charged to Retirement Balance at Beginning Costs and and End of of Period Expenses Sales Period Year ended October 3, 1992: Machinery and equipment $5,679,223 $ 705,820 $(88,945) $6,296,098 Furniture and fixtures 169,675 18,138 - 187,813 Leasehold improvements 1,333,464 228,044 (475) 1,561,033 Equipment under capital lease 180,940 30,883 - 211,823 ---------- --------- --------- ---------- $7,363,302 $ 982,885 $ (89,420) $8,256,767 =========== ========= ========== =========== Year ended October 2, 1993: Machinery and equipment $6,296,098 $831,227 $(120,016) $7,007,309 Land and buildings - 10,350 - 10,350 Furniture and fixtures 187,813 34,296 - 222,109 Leasehold improvements 1,561,033 157,231 (1,702, 867) 15,397 Equipment under capital lease 211,823 - - 211,823 ---------- -------- ----------- ---------- $8,256,767 $1,033,104 $(1,822,883) $7,466,988 ========== ========== =========== ========== Year ended October 1, 1994: Machinery and equipment $7,007,309 $ 879,744 $ (168,819) $7,718,234 Land and buildings 10,350 124,194 - 134,544 Furniture and fixtures 222,109 46,224 (16,524) 251,809 Leasehold improvements 15,397 33,125 - 48,522 Equipment under capital lease 211,823 31,949 (211,823) 31,949 --------- ---------- ------------ ---------- $7,466,988 $1,115,236 $ (397,166) $8,185,058 ========== ========== ============ ========== SCHEDULE II ILC TECHNOLOGY, INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR FISCAL YEARS 1994, 1993 AND 1992
Charged Balance (Credited) Addition Deductions Balance at to Cost and from and at end of Beginning Expenses Acquisition Write Off Period Allowance for Doubtful Accounts: Year ended October 3, 1992 $356,171 $128,896 $10,341 $154,053 $341,355 Year ended October 2, 1993 $341,355 $(98,769) $7,258 $30,716 $219,128 Year ended October 1, 1994 $219,128 $383,902 $ - $270,227 $332,803 Reserve for Inventory obsolescence: Year ended October 3, 1992 $1,870,395 $(65,039) $330,614 $201,224 $1,934,746 Year ended October 2, 1993 $1,990,256 $ 3,898 $ - $414,672 $1,523,972 Year ended October 1, 1994 $1,523,972 $1,772,346 $ - $763,085 $2,533,233
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To ILC Technology, Inc. We have audited the accompanying consolidated balance sheets of ILC Technology, Inc. (a California Corporation) and subsidiaries as of October 1, 1994 and October 2, 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended October 1, 1994. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ILC Technology, Inc. and subsidiaries as of October 1, 1994 and October 2, 1993 and the results of their operations and their cash flows for each of the three years in the period ended October 1, 1994 in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules presented on pages 20 to 22 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP San Jose, California November 3, 1994 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements The Consolidated Financial Statements, notes thereto, and Report of Independent Public Accountants thereon are included in Part II, Item 8 of this Report. Page in 2. Financial statement Schedules Form 10-K/A Schedule V Property and Equipment 15 Schedule VI Accumulated Depreciation and Amortization of Property and Equipment 16 Schedule II Valuation and Qualifying Accounts and Reserves 17 All other schedules have been omitted since the required information is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or notes thereto. 3. Exhibits The exhibits listed in the Index to Exhibits following the signature page of the Form 10-K are filed as part of this Report. The following exhibits are filed as part of this Amendment: Page Exhibit 23.1 Consent of Independent Public Accountants 21 ______________________________________________________ __ Exhibit 27.1 Financial Data Schedule 22 (b) Reports 8-K No reports on Form 8-K were filed during the last quarter of fiscal 1994. No reports on Form 8-K were filed during the last quarter of fiscal 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: July 28, 1995 ILC TECHNOLOGY, INC. s/s Ronald E. Fredianelli Ronald E. Fredianelli Chief Financial Officer EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated November 3, 1994, included in this Form 10-K, into the Company's previously filed Form S-8 Registration Statements, File Numbers 2-90841, 2-95899, 33-6917, 33- 27001, 33-50404 and 33-89470. ARTHUR ANDERSEN LLP San Jose, California July 28, 1995 EX-27 2 FDS
5 1,000 12-MOS OCT-1-1994 OCT-1-1994 2,462 998 8,114 333 7,192 2,948 25,873 8,185 41,997 11,952 0 5,492 0 0 18,131 41,997 52,022 52,022 35,288 35,288 15,252 0 139 1,343 1,152 191 0 0 0 191 .04 .04
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