-----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, LQR1A4FbGNQ+QauXiKCmrx7OvQmZ9eUOo1VGdRz5BGPQzyR1QZJBD63nP1VJX95v gRrCoNwbm6wHcpZ/ZuQUiQ== 0000719625-96-000015.txt : 19960517 0000719625-96-000015.hdr.sgml : 19960517 ACCESSION NUMBER: 0000719625-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960515 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11360 FILM NUMBER: 96564840 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 MARCH 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from TO FROM 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. Employer 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: 4,714,850 Date: APRIL 30, 1996 ------------------------------------------------------------------------ ILC TECHNOLOGY, INC. FORM 10-Q For the Quarter Ended March 30, 1996 INDEX PAGE NO. Part I. FINANCIAL INFORMATION 2 Item 1 Condensed Consolidated Statements of Operations - Quarters ended March 30, 1996 and April 1, 1995 and six months ended March 30, 1996 and April 1, 1995 3 Condensed Consolidated Balance Sheets - March 30, 1996 and September 30, 1995 4 Condensed Consolidated Statements of Cash Flows - Six months ended March 30, 1996 and April 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 Item 4 Submission of Matters to a Vote of Security Holders 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 SIX MONTHS ENDED ------------- --------------- March 30, April 1, March 30, April 1, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales ...................... $ 16,049 $ 13,989 $ 30,547 $ 26,673 Costs and expenses: Cost of sales ................ 10,780 9,210 20,614 17,897 Research and development ..... 1,312 1,205 2,599 2,219 Marketing .................... 881 712 1,687 1,370 General and administrative ... 1,395 1,254 2,588 2,352 Amortization of intangibles .. 73 73 146 146 -------- -------- -------- -------- 14,441 12,454 27,634 23,984 -------- -------- -------- -------- Income from operations ......... 1,608 1,535 2,913 2,689 -------- -------- -------- -------- Other income (expense): Interest, net ................ (128) (164) (263) (293) -------- -------- -------- -------- Income before provision for income taxes ................. 1,480 1,371 2,650 2,396 Provision for income taxes ..... 370 384 662 671 -------- -------- -------- -------- Net income ..................... $ 1,110 $ 987 $ 1,988 $ 1,725 ======== ======== ======== ======== Earnings per share ............. $ 0.23 $ 0.21 $ 0.41 $ 0.37 ======== ======== ======== ======== Weighted average shares used in computation .......... 4,895 4,769 4,886 4,726 ======== ======== ======== ======== See accompanying notes 3 ILC TECHNOLOGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) MAR 30, SEPT 30, 1996 1995 -------- ------ (unudited) ASSETS Current assets: Cash and cash equivalents .................... $ 1,029 $ 1,509 Accounts receivable, net ..................... 10,824 10,445 Inventories: Raw materials .............................. 5,605 4,846 Work-in-process ............................ 2,867 2,609 Finished goods ............................. 1,956 1,834 ------- ------- Total inventories ........................ 10,428 9,289 ------- ------- Deferred tax asset ............................. 1,454 1,454 Prepaid expenses ............................... 275 159 ------- ------- Total current assets ..................... 24,010 22,856 ------- ------- Property and equipment, net .................... 22,943 22,442 Covenants-not-to-compete, net .................. 971 1,117 Other assets ................................... 773 770 ------- ------- $48,697 $47,185 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ............................. $ 4,352 $ 4,080 Accrued liabilities .......................... 5,463 5,841 Accrued income taxes payable ................. 2,095 1,869 ------- ------- Total current liabilities ................ 11,910 11,790 ------- ------- Long-term debt ................................. 4,280 4,772 Non-compete obligation ......................... 130 390 Obligations under equipment line ............... 1,056 1,006 Other accruals ................................. 246 304 Capital lease obligation ....................... 104 121 Stockholders' equity: Common stock ................................. 6,314 6,133 Retained earnings ............................ 24,657 22,669 ------- ------- Total stockholders' equity ............... 30,971 28,802 ------- ------- $48,697 $47,185 ======= ======= See accompanying notes 4 ILC TECHNOLOGY, INC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) SIX MONTHS ENDED ---------------- MAR 30, APR 1, 1996 1995 ---- ---- Cash flows from operating activities - Net income ............................................ $ 1,988 $ 1,725 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ........................ 1,002 772 Amortization of non-compete agreements ............... 146 146 Changes in assets and liabilities from operations: Decrease in marketable securities .................. -- 998 Increase in accounts receivable .................... (380) (504) Increase in inventories ............................ (1,139) (2,032) Increase (decrease) in prepaid expenses ............ (115) 282 Increase in other assets ........................... (3) (473) (Increase) decrease in accounts payable ............ 272 (170) Decrease in accrued liabilities .................... (278) (937) ------- ------- Total adjustments ................................. (495) (1,918) ------- ------- Net cash provided by (used in) operating activities 1,493 (193) ------- ------- Cash flows from investing activities - Capital expenditures ................................... (1,503) (5,222) Decrease in deposit on land and building purchase ...... -- 1,300 ------- ------- Net cash used in investing activities ............. (1,503) (3,922) ------- ------- Cash flows from financing activities - Borrowings under line of credit ........................ 4,500 5,850 Repayments under line of credit ........................ (4,200) (3,850) Principal borrowings under equipment line .............. 751 1,165 Principal payments under equipment line ................ (650) (520) Principal payments under term loan for buildings ....... (792) (787) Proceeds from issuance of common stock ................. 181 335 Payments under non-compete agreement ................... (260) (260) Repurchase of common stock ............................. -- (77) ------- ------- Net cash provided by (used in) financing activities (470) 1,856 ------- ------- Net decrease in cash ..................................... (480) (2,259) Cash at beginning of period .............................. 1,509 2,462 ------- ------- Cash at end of period ....................................$ 1,029 $ 203 ======= ======= See accompanying notes 5 ILC TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued) (In thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: SIX MONTHS ENDED ---------------- MARCH 30, 1996 APRIL 1, 1995 -------------- ------------- Cash paid during the period for: Interest expense ............. $296 $332 Income taxes ................. 355 834 See accompanying notes 6 ILC TECHNOLOGY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 30, 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 MARCH 30, 1996 COMPARED TO QUARTER ENDED APRIL 1, 1995 Net sales increased 14.7% in the quarter ended March 30, 1996 to $16,049,000 compared to $13,989,000 in the quarter ended April 1, 1995. The increase was the result of a higher volume of units sold across all products except Aerospace products. Cost of sales as a percentage of net sales was 67.2% in the second quarter of fiscal 1996 compared to 65.8% in the same quarter last year. The percentage increase was due to increased manufacturing costs in Cermax products due to yield inefficiencies partially offset by revisions of cost estimates for a fixed price contract in Aerospace products. Spending in the area of research and development, 8.2% of net sales in the second quarter of fiscal 1996, compared to 8.6% of net sales in the second quarter of fiscal 1995, increased $107,000 between the two quarters. The increase occurred in Cermax for lamps for video projection and in Quartz for the development of lamps used in the processing of semiconductor materials. Also contributing to the increase was spending at Converter Power for the design of new power supplies. Marketing expenses for the quarter ended March 30, 1996 were $881,000, or 5.5% of net sales, compared to $712,000, or 5.1% of net sales, in the same quarter of the prior fiscal year. The $169,000 increase in spending between the two quarters was primarily the result of more travel and trade show attendance coupled with additional commission expense on an increased sales volume. General and administrative expenses, as a percentage of net sales, were 8.7% in the quarter ended March 30, 1996, compared to 9.0% in the quarter ended April 1, 1995. Even though the percentage comparison between the two quarters has decreased, the spending in absolute dollars has increased $141,000 from the 1996 to the 1995 period primarily for additions to staff at Converter Power and for expenses associated with ISO 9001 certification. In the second quarter of fiscal 1994, Precision Lamp experienced a significant shortfall in orders from a major customer due to the qualification of a second source by that customer. This customer represented approximately 85% of Precision Lamp's revenue. In assessing the recoverability of the unamortized goodwill and covenant-not-to-compete generated from the acquisition, management determined that an impairment occurred in that quarter and recorded a $3.4 million charge. The amortization of intangibles of $73,000 in the second quarter of fiscal 1996 and 1995 represents the revised amortization of the remaining balance of the Precision Lamp covenant-not-to-compete plus the amortization of the Q-Arc Ltd. covenant-not-to-compete. Other income (expense), net, primarily interest expense and interest income, decreased $36,000 in the second quarter of fiscal 1996 from the second quarter of fiscal 1995 due primarily to a declining balance outstanding on the term loan obtained to purchase the Company's two operating facilities in Sunnyvale. Interest expense associated with the line of credit for working capital needs and the line of credit for capital equipment acquisitions remained relatively constant between the second quarter of fiscal 1996 and the second quarter of fiscal 1995. Income before provision for income taxes was $1,480,000 for the quarter ended March 30, 1996 compared to $1,371,000 for the quarter ended April 1, 1995. The provision for income taxes was 25% of income before provision for income taxes for the second quarter of fiscal 1996 compared to 28% of income before provision for income taxes in the same quarter last year. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) QUARTER ENDED MARCH 30, 1996 COMPARED TO QUARTER ENDED APRIL 1, 1995 (CONTINUED) The Company believes that inflation and changing prices had no significant impact on sales or costs during the second quarter of fiscal 1996 or 1995. SIX MONTHS ENDED MARCH 30, 1996 COMPARED TO SIX MONTHS ENDED APRIL 1, 1995 Net sales for the six months ended March 30, 1996 increased 14.5% ($3,874,000) from the comparable period a year ago. The increase was the result of a higher volume of units sold across all products except Aerospace products. Cost of sales as a percentage of net sales was 67.5% and 67.1% for the six months ended March 30, 1996 and April 1, 1995, respectively. The percentage increase was due to higher manufacturing costs at Converter Power partially offset by revisions of cost estimates for a fixed price contract in Aerospace in the second quarter of fiscal 1996. Research and development expenses, $2,599,000 or 8.5% of net sales for the six months ended March 30, 1996, increased $380,000 from $2,219,000, or 8.3% of net sales for the six months ended April 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 six months ended March 30, 1996 were $1,687,000, or 5.5% of net sales compared to $1,370,000, or 5.1% of net sales, in the same six month period a year ago. The $317,000 increase is primarily due to personnel additions, more travel and trade show attendance and an increased advertising program. General and administrative expenses, 8.5% of net sales in the six months ended March 30, 1996 compared to 8.8% of net sales in the six months ended April 1, 1995, increased $236,000. The increase between the two six month periods was the result of additions to staff at Converter Power and expenses associated with ISO 9001 certification. In the quarter ended April 2, 1994, Precision Lamp experienced a slowdown in the release of shippable product from a major customer. In assessing the recoverability of the unamortized goodwill and covenant-not-to-compete generated from the acquisition, management determined that an impairment occurred in the second quarter of fiscal 1994 and recorded a $3.4 million charge. The amortization of intangibles of $146,000 in the six months ended March 30, 1996 and April 1, 1995 represents the revised amortization of the remaining balance of the Precision Lamp covenant-not-to-compete plus the amortization of the Q-Arc Ltd. covenant-not-to-compete. Other income (expense), net, primarily interest expense and interest income, decreased $30,000 in the first six months of fiscal 1996 from the first six months of fiscal 1995 due primarily to a declining balance outstanding on the term loan obtained to purchase the Company's two operating facilities in Sunnyvale. Interest expense associated with the line of credit for working capital needs and the line of credit for capital equipment acquisitions remained relatively constant between the six months ended March 30, 1996 and the six month ended April 1, 1995. Income before provision for income taxes was $2,650,000 for the six months ended March 30, 1996 compared to $2,396,000 for the six months ended April 1, 1995. The provision for income taxes was 25% of income before provision for income taxes for the first six months of fiscal 1996 compared to 28% of income before provision for income taxes in the first six months of fiscal 1995. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SIX MONTHS ENDED MARCH 30, 1996 COMPARED TO SIX MONTHS ENDED APRIL 1, 1995 (CONTINUED) The Company believes that inflation and changing prices had no significant impact on sales or costs during the six months ended March 30, 1996 or April 1, 1995. LIQUIDITY AND FINANCIAL CONDITION Net cash provided by operating activities totaled $1,493,000 in the six months ended March 30, 1996 compared to net cash used in operating activities of $193,000 in the six months ended April 1, 1995. During the first six months of fiscal 1996, the Company made capital equipment acquisitions of $1,503,000, paid down a term loan by $792,000, increased its net borrowings under a working capital line of credit by $300,000 and increased its net borrowings under a capital equipment line of credit by $101,000. During the first six 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). Also in the first six months of fiscal 1995, the Company liquidated the balance of marketable securities of $998,000, increased net borrowings under a capital equipment line of credit by $645,000, made principal payments of $787,000 under a term loan and increased net borrowings under a working capital line of credit by $2,000,000. Raw material, work in process and finished goods inventories have increased from September 30, 1995 by approximately $758,000, $258,000 and $122,000, respectively. These increases 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 $12,100,000 and a current ratio of 2.02 to 1.0 at March 30, 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 March 30, 1996, the Company has $1,700,000 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) (7.6% at March 30, 1996). The Company also has available, at March 30, 1996, approximately $1,900,000 remaining on a $2,200,000 facility for capital equipment acquisitions at the same interest rate. At March 30, 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 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company held its Annual Meeting of Shareholders on February 14, 1996. (b) The following directors, comprising the entire Board of Directors, were elected at the meeting: Harrison H. Augur Henry C. Baumgartner Richard D. Capra Arthur L. Schawlow Wirt D. Walker (c) The matters voted upon at the meeting and the number of votes cast for, against or withheld, as well as abstentions and broker nonvotes with respect to each are as follows: (i) Election of Directors: VOTES VOTES WITHHELD AND VOTES FOR AGAINST BROKER NONVOTES Harrison H. Augur ........ 3,837,565 -- 21,409 Henry C. Baumgartner...... 3,835,789 1,776 21,409 Richard D. Capra ......... 3,832,265 5,300 21,409 Arthur L. Schawlow ....... 3,833,424 4,141 21,409 Wirt D. Walker ........... 3,837,380 185 21,409 (ii) Approval of an amendment to the 1992 Employee Stock Option Plan: Votes for: 3,282,377 shares Votes against: 311,787 shares Votes withheld and broker nonvotes 264,810 shares (iii Ratification of the appointment of Arthur Andersen LLP as independent public accountants of the Company for fiscal 1996: Votes for: 3,843,340 shares Votes against: 5,234 shares Votes withheld and broker nonvotes 10,400 shares (d) Not applicable 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: May 14, 1996 S/S Ronald E. Fredianelli ------------------------- Ronald E.Fredianelli Chief Financial Officer DATE: May 14, 1996 S/S Henry C. Baumgartner ------------------------ Henry C. Baumgartner President 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS SEP-30-1996 MAR-30-1996 1,029 0 11,158 334 10,428 1,729 34,327 11,384 48,697 11,910 0 0 0 6,314 24,657 48,697 16,049 16,049 10,780 10,780 3,661 0 128 1,480 370 1,110 0 0 0 1,110 .23 .23 -----END PRIVACY-ENHANCED MESSAGE-----