-----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, JnTt35XRq1AaEOAqnYoVCahxgPBq+OImJdPmeExe92GyBhpIfTh1cke68fmBKqdG 1g9l9ZIOwj6s4x3GWvAogQ== 0000719625-96-000016.txt : 19960812 0000719625-96-000016.hdr.sgml : 19960812 ACCESSION NUMBER: 0000719625-96-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960809 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILC TECHNOLOGY INC CENTRAL INDEX KEY: 0000719625 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 941655721 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11360 FILM NUMBER: 96607205 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 29, 1996 ----------------------------------------------- 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 0-11360 ILC TECHNOLOGY, INC (Exact name of registrant as specified in its charter) CALIFORNIA 94-1655721 (State of other jurisdiction (I.R.S. Emp4444loyer Incorporation or or organization) Identification No.) 399 JAVA DRIVE, SUNNYVALE, CALIFORNIA 94089 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 408-745-7900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) 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 ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ___ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares: 4,742,260 Date: JULY 30, 1996 - ------------------------------------------------------------------------------- ILC TECHNOLOGY, INC. FORM 10-Q For the Quarter Ended June 29, 1996 INDEX PAGE NO. Part I. FINANCIAL INFORMATION 2 --------------------- Item 1 Condensed Consolidated Statements of Operations - Quarters ended June 29, 1996 and July 1, 1995 and nine months ended June 29, 1996 and July 1, 1995 3 Condensed Consolidated Balance Sheets - June 29, 1996 and September 30, 1995 4 Condensed Consolidated Statements of Cash Flows - Nine months ended June 29, 1996 and July 1, 1995 5-6 Notes to Condensed Consolidated Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II OTHER INFORMATION 11 ----------------- SIGNATURES 12 ---------- 1 PART I. FINANCIAL INFORMATION --------------------- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------- The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures which are made are adequate to make the information presented not misleading. It is suggested that the condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report/Form 10-K for the year ended September 30, 1995. These financial statements have been prepared in all material respects in conformity with the standards of accounting measurements set forth in Accounting Principles Board Opinion No. 28 and reflect, in the opinion of management, all adjustments (that consisted only of normal recurring adjustments) necessary to present fairly the financial information set forth therein. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. 2 ITEM 1. FINANCIAL STATEMENTS ILC TECHNOLOGY, INC. -------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ----------------------------------------------------------- (In thousands, except per share data) QUARTER ENDED NINE MONTHS ENDED ------------- ----------------- June 29, July 1, June 29, July 1, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales ....................... $ 16,535 $ 15,277 $ 47,082 $ 41,950 Costs and expenses: Cost of sales ................ 11,359 10,415 31,972 28,312 Research and development ..... 994 1,163 3,594 3,383 Marketing .................... 702 821 2,390 2,191 General and administrative ... 1,275 1,300 3,864 3,652 Amortization of intangibles .. 73 73 218 218 -------- -------- -------- -------- 14,403 13,772 42,038 37,756 -------- -------- -------- -------- Income from operations .......... 2,132 1,505 5,044 4,194 -------- -------- -------- -------- Other income (expense): Interest, net ................ (126) 65 (388) (228) -------- -------- -------- -------- Income before provision for income taxes ................. 2,006 1,570 4,656 3,966 Provision for income taxes ...... 502 205 1,164 876 -------- -------- -------- -------- Net income ...................... $ 1,504 $ 1,365 $ 3,492 $ 3,090 ======== ======== ======== ======== Earnings per share .............. $ 0.30 $ 0.28 $ 0.71 $ 0.65 ======== ======== ======== ======== Weighted average shares used in computation .......... 4,984 4,825 4,917 4,759 ======== ======== ======== ======== See accompanying notes 3 ILC TECHNOLOGY, INC. -------------------- CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (In thousands) JUNE 29, 1996 SEPTEMBER 30, (unaudited) 1995 ----------- ---- ASSETS Current assets: Cash and cash equivalents ..................... $ 924 $ 1,509 Accounts receivable, net ...................... 12,369 10,445 Inventories: Raw materials ............................... 5,858 4,846 Work-in-process ............................. 3,086 2,609 Finished goods .............................. 2,013 1,834 ------- ------- Total inventories .......................... 10,957 9,289 ------- ------- Deferred tax asset ............................. 1,454 1,454 Prepaid expenses ............................... 135 159 ------- ------- Total current assets ..................... 25,839 22,856 ------- ------- Property and equipment, net .................... 23,762 22,442 Covenants-not-to-compete, net .................. 899 1,117 Other assets ................................... 750 770 ------- ------- $51,250 $47,185 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ............................. $ 4,639 $ 4,080 Accrued liabilities .......................... 5,175 5,841 Accrued income taxes payable ................. 2,308 1,869 ------- ------- Total current liabilities ................ 12,122 11,790 ------- ------- Long-term liabilities: Long-term debt ............................... 5,084 4,772 Non-compete obligation ........................ - 390 Obligations under equipment line ............. 1,043 1,006 Other accruals ............................... 218 304 Capital lease obligation ..................... 95 121 ------- ------- Total liabilities ........................ 18,562 18,383 ------- ------- Stockholders' equity: Common stock .................................. 6,527 6,133 Retained earnings ............................. 26,161 22,669 ------- ------- Total stockholders' equity ............... 32,688 28,802 ------- ------- $51,250 $47,185 ======= ======= See accompanying notes 4 ILC TECHNOLOGY, INC ------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ----------------------------------------------------------- (In thousands) NINE MONTHS ENDED ----------------- JUNE 29, 1996 JULY 1, 1995 ------------- ------------ Cash flows from operating activities - Net income ......................................... $ 3,492 $ 3,090 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................... 1,456 1,205 Amortization of non-compete agreements ........... 218 218 Changes in assets and liabilities from operations: Decrease in marketable securities .............. - 998 Increase in accounts receivable .................. (1,924) (965) Increase in inventories ........................ (1,668) (2,011) Decrease in prepaid expenses ................... 24 407 Decrease (increase) in other assets ............ 20 (518) Increase (decrease) in accounts payable ........ 559 (153) Decrease in accrued liabilities ................ (379) (619) ------- ------- Total adjustments ......................... (1,694) (1,438) ------- ------- Net cash provided by operating activities.. 1,798 1,652 ------- ------- Cash flows from investing activities - Decrease in deposit on land and building purchase.. - 1,300 Capital expenditures .............................. (2,775) (5,947) ------- ------- Net cash used in investing activities ...... (2,775) (4,647) ------- ------- Cash flows from financing activities - Borrowings under line of credit ................... 7,100 6,550 Repayments under line of credit ................... (5,600) (5,200) Principal borrowings under equipment line ......... 1,111 1,530 Principal payments under equipment line ........... (1,035) (815) Principal payments under term loan for buildings .. (1,188) (1,200) Proceeds from issuance of common stock ............ 394 451 Payments under non-compete agreement .............. (390) (390) Repurchase of common stock ........................ - (77) ------- ------- Net cash provided by financing activities .. 392 849 ------- ------- Net decrease in cash .............................. (585) (2,146) Cash at beginning of period ....................... 1,509 2,462 ------- ------- Cash at end of period ............................. $ 924 $ 316 ======= ======== See accompanying notes 5 ILC TECHNOLOGY, INC. -------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ----------------------------------------------------------- (Continued) (In thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: NINE MONTHS ENDED JUNE 29, 1996 JULY 1, 1995 ------------- ------------ Cash paid during the period for: Interest expense $ 451 $ 517 Income taxes 425 874 See accompanying notes 6 ILC TECHNOLOGY, INC. -------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ---------------------------------------------------------------- JUNE 29, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ BASIS OF PRESENTATION --------------------- The condensed consolidated financial statements include the accounts of ILC Technology, Inc., and its subsidiaries, after elimination of intercompany accounts and transactions. The Company's quarter ends on the last Saturday of the fiscal month. CASH AND CASH EQUIVALENTS ------------------------- For the purpose of the statement of cash flows, the Company considers all highly liquid investments with a maturity of less than three months at the time of issue to be cash equivalents. INVENTORIES ----------- Inventories are stated at the lower of cost (first in, first out) or market, and include material, labor and manufacturing overhead. 2. EARNINGS PER SHARE ------------------ Earnings per share is computed using the weighted average number of common shares and common equivalent shares (when such equivalents have a dilutive effect) outstanding during the periods using the treasury stock method. Fully diluted earnings per share is not significantly different from earnings per share as reported. 3. INTANGIBLE ASSETS ----------------- The Company has certain intangible assets as a result of its acquisition of two subsidiaries. Subsequent to these acquisitions, the Company quarterly evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful lives 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. Covenants-not-to-compete are amortized over the period of the covenant. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------------------------- RESULTS OF OPERATIONS - --------------------- QUARTER ENDED JUNE 29, 1996 COMPARED TO QUARTER ENDED JULY 1, 1995 - ------------------------------------------------------------------ Net sales increased 8.2% in the quarter ended June 29, 1996 to $16,535,000 compared to $15,277,000 in the quarter ended July 1, 1995. The increase was the result of a higher volume of units sold in Flash, Cermax, Quartz and Equipment. Unit volume in Advanced Lighting products, in the quarter ended June 29, 1996, was lower than the unit volume in the quarter ended July 1, 1995 due to a decrease in the level of government contracts. Unit volume at Precision Lamp was lower in the current quarter from the same quarter in the prior year due to a further slowdown in the release of shippable product to a major customer, while unit volume at Converter Power and at Q-Arc remained relatively constant between the two quarters. Converter Power has experienced a softening in orders from major customer that provides equipment to the semiconductor industry. Converter Power will continue to reduce reliance on this major customer through additional sales of new products to other customers. This change in customer base and mix may have an unfavorable impact on gross margin in future quarters. The previous two sentences contain forward looking statements. Actual results culd differ materially due to factors such as, customer base and mix, product mix, timely introduction and market acceptance of new products, price and competitive factors. Cost of sales as a percentage of net sales was 68.7% in the third quarter of fiscal 1996 compared to 68.2% in the same quarter last year. The slight percentage increase was due primarily to the lower sales volume at Precision Lamp, due to the slowdown in the release of shippable product to a major customer. Spending in the area of research and development, 6.0% of net sales in the third quarter of fiscal 1996, compared to 7.6% of net sales in the third quarter of fiscal 1995, decreased $169,000 between the two quarters. The majority of the decrease occurred in Cermax for lamps for video projection and at Converter Power for the design of new power supplies to compliment the lamps for video projection since this development effort has been substantially completed during the current quarter. Marketing expenses for the quarter ended June 29, 1996 were $702,000, or 4.2% of net sales, compared to $821,000, or 5.4% of net sales, in the same quarter of the prior fiscal year. The $119,000 decrease between the two quarters was the result of less travel and trade show attendance and less commission expense on a decreased sales volume at Precision Lamp as previously discussed above. General and administrative expenses, as a percentage of net sales, were 7.7% in the quarter ended June 29, 1996, compared to 8.5% in the quarter ended July 1, 1995. In absolute dollars, the general and administrative expense spending level has remained relatively constant, having decreased $25,000 between the two quarters. Other income (expense), net, primarily interest expense and interest income, increased $191,000 in the third quarter of fiscal 1996 from the third quarter of fiscal 1995. In the quarter ended July 1, 1995, interest income increased approximately $221,000 due to interest received from an income tax refund, while interest expense decreased approximately $30,000 due to a slightly lower interest rate. Interest expense is associated with the term loan obtained to purchase the Company's two operating facilities in Sunnyvale, the line of credit for working capital needs and the equipment line of credit for capital equipment acquisitions. Income before provision for income taxes was $2,006,000 for the quarter ended June 29, 1996 compared to $1,570,000 for the quarter ended July 1, 1995. The provision for income taxes was 25% of income before provision for income taxes for the third quarter of fiscal 1996 compared to 13% of income before provision for income taxes in the same quarter last year. The quarter ended July 1, 1995 reflects an income tax refund of approximately $238,000 which reduced the overall income tax rate. The tax refund related to taxes previously paid on tax returns which were under review by the Internal Revenue Service and favorably settled by the Company. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------------------------- QUARTER ENDED JUNE 29, 1996 COMPARED TO QUARTER ENDED JULY 1, 1995 (CONTINUED) - ------------------------------------------------------------------------------ The Company believes that inflation and changing prices had no significant impact on sales or costs during the third quarter of fiscal 1996 or 1995. NINE MONTHS ENDED JUNE 29, 1996 COMPARED TO NINE MONTHS ENDED JULY 1, 1995 - -------------------------------------------------------------------------- Net sales for the nine months ended June 29, 1996 increased 12.2% ($5,132,000) from the comparable period a year ago. The increase was the result of a higher volume of units sold in all products except Advanced Lighting products, due to less government contract work and at Precision Lamp due to a further slowdown in the release of shippable product to a major customer in the third quarter of fiscal 1996. Converter Power, in the third quarter of fiscal 1996, has experienced a softening in orders from a major customer that provides equipment to the semiconductor industry. Converter Power will continue to reduce reliance on this major customer through additional sales of new products to other customers. This change in customer base and mix may have an unfavorable impact on gross margin in future quarters. The previous two sentences contain forward looking statements. Actual results could differ materially due to factors such as, customer base and mix, product mix. timely introduction and market acceptance of new products, price and competitive factors. Cost of sales as a percentage of net sales was 67.9% and 67.5% for the nine months ended June 29, 1996 and July 1, 1995, respectively. The percentage increase was due primarily to the lower sales volume at Precision Lamp due to the slowdown in the release of shippable product by a major customer as previously discussed. Research and development expenses, $3,594,000 or 7.6% of net sales for the nine months ended June 29, 1996, increased $211,000 from $3,383,000, or 8.1% of net sales for the nine months ended July 1, 1995. The majority of the increase occurred in Quartz for the development of lamps used in the processing of semiconductor materials and at Converter Power for the design of new power supplies. Marketing expenses in the nine months ended June 29, 1996 were $2,390,000, or 5.1% of net sales compared to $2,191,000, or 5.2% of net sales in the same nine month period a year ago. The $199,000 increase is primarily due to personnel additions, more travel and trade show attendance and an increased advertising program. General and administrative expenses, 8.2% of net sales in the nine months ended June 29, 1996 compared to 8.7% of net sales in the nine months ended July 1, 1995, increased $212,000. The increase between the two nine month periods was the result of additions to staff at Converter Power and expenses associated with ISO 9001 Certification. Other income (expense), net, primarily interest expense and interest income, increased $160,000 in the first nine months of fiscal 1996 from the first nine months of fiscal 1995. Interest income, for the first nine months of fiscal 1996, increased approximately $226,000 due mainly to $239,000 of interest associated with an income tax refund. Interest expense, for the nine months ended June 29, 1996, decreased approximately $66,000 from the nine months ended July 1, 1995 due to lower outstanding balances on the Company's term loan obtained to purchase the Company's two operating facilities in Sunnyvale coupled with a slightly lower interest rate. Income before provision for income taxes was $4,656,000 for the nine months ended June 29, 1996 compared to $3,966,000 for the nine months ended July 1, 1995. The provision for income taxes was 25% of income before provision for income taxes for the first nine months of fiscal 1996 compared to 22% of income before provision for income taxes for the first nine months of fiscal 1995. The 22% provision for income taxes for the first nine months of fiscal 1995 reflects a $238,000 income tax refund received in the third quarter of fiscal 1995. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------------------------- NINE MONTHS ENDED JUNE 29, 1996 COMPARED TO NINE MONTHS ENDED JULY 1, 1995 (CONTINUED) - -------------------------------------------------------------------------- The Company believes that inflation and changing prices had no significant impact on sales or costs during the nine months ended June 29, 1996 or July 1, 1995. LIQUIDITY AND FINANCIAL CONDITION - --------------------------------- Net cash provided by operating activities totaled $1,798,000 in the nine months ended June 29, 1996 compared to $1,652,000 in the nine months ended July 1, 1995. During the first nine months of fiscal 1996, the Company made capital equipment acquisitions of $2,775,000, increased net borrowings under a working capital line of credit by $1,500,000, increased net borrowings under an equipment line of credit by $76,000 and made principal payments of $1,188,000 under a term loan for real estate acquisitions. During the first nine months of fiscal 1995, the Company purchased land and a manufacturing facility in Santa Clara, California for approximately $3,200,000 (cash of approximately $1,900,000, plus a deposit made in the fourth quarter of fiscal 1994). Capital equipment acquisitions in the nine months ended July 1, 1995 were $2,747,000. Also, during the first nine months of fiscal 1995, the Company liquidated the balance of marketable securities of $998,000, increased net borrowings under an equipment line by $715,000, made principal payments of $1,200,000 under a term loan for real estate acquisitions and increased net borrowings under a working capital line of credit by $1,350,000. Raw materials, work in process and finished goods have increased from September 30, 1995 by approximately $1,011,000, $477,000 and $179,000, respectively. The majority of the raw material increase is located at Precision Lamp and is anticipated to be consumed over the balance of calendar 1996 in the manufacture of product for its major customer. The work in process and finished goods inventory increases are spread over the various Company locations and are in anticipation of product shipments for the balance of fiscal 1996 and to reduce cycle time for customer needs. The Company has working capital of $13,717,000 and a current ratio of 2.13 to 1.0 at June 29, 1996. This compares with working capital of $11,066,000 and a current ratio of 1.94 to 1.0 at September 30, 1995. As of June 29, 1996, the Company has $500,000 available under a $4,000,000 bank line of credit for working capital requirements with interest at 2% above the LIBOR rate (London Interbank Offer Rate) (7.45% at June 29, 1996). This bank line of credit was increased to $6,000,000 subsequent to the quarter end at the same rate of interest. The Company also has available, at June 29, 1996, approximately $1,540,000 remaining on a $2,200,000 facility for capital equipment acquisitions at the same interest rate. At June 29, 1996, the Company was in compliance with all bank covenants. These financial resources, together with anticipated additional resources to be provided from operations, are expected to be adequate to meet the Company's anticipated financial needs at least through fiscal 1996. 10 PART II OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following exhibit is filed as part of this report: Exhibit 27.1 Financial Data Schedule (b) Reports on Form 8-K None 11 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. ILC TECHNOLOGY, INC. DATE: August 9, 1996 /S/ RONALD E. FREDIANELLI ------------------------- Ronald E.Fredianelli Chief Financial Officer DATE: August 9, 1996 /S/ HENRY C. BAUMGARTNER ------------------------ Henry C. Baumgartner Chairman and Chief Executive Officer 12 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-28-1996 JUN-29-1996 924 0 12,724 355 10,957 1,589 35,599 11,837 51,250 12,122 0 0 0 6,527 26,161 51,250 47,082 47,082 31,972 31,972 10,066 0 388 4,656 1,164 3,492 0 0 0 3,492 .71 .71
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