-----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, MvXlE7y9ui92NpmvCe1LsPDuMtTMyam/cNuu+7iJMoAJkktcQpvQ+dsMIBQqJpvR KNWczMsdTfg9w6hHO18aVw== 0000073568-97-000002.txt : 19970221 0000073568-97-000002.hdr.sgml : 19970221 ACCESSION NUMBER: 0000073568-97-000002 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19970210 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OAK INDUSTRIES INC CENTRAL INDEX KEY: 0000073568 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 361569000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04474 FILM NUMBER: 97522916 BUSINESS ADDRESS: STREET 1: 1000 WINTER STREET STREET 2: BAY COLONY CORP CENTER CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6178900400 MAIL ADDRESS: STREET 1: BAY COLONY CORPORATE CENTER STREET 2: 1000 WINTER STREET CITY: WALTHAM STATE: MA ZIP: 02154 FORMER COMPANY: FORMER CONFORMED NAME: OAK ELECTRONETICS CORP DATE OF NAME CHANGE: 19720827 10-Q/A 1 AMENDED 10Q FIRST QUARTER MAIN DOCUMENT =========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q/A ------------------ Amendment No. 1 to Form 10-Q For Quarter Ended March 31, 1996 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NO. 1-4474 -------------------------- OAK INDUSTRIES INC. (Exact name of Registrant as specified in its charter) DELAWARE 36-1569000 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification Number) 1000 WINTER STREET WALTHAM, MASSACHUSETTS 02154 (Address of principal executive offices) (617) 890-0400 (Registrant's telephone number) 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 number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. As of March 31, 1996 the Company had outstanding 17,825,988 shares of Common Stock, $0.01 par value per share. The undersigned registrant hereby amends the following items, financial statements, and other portions of its quarterly report on Form 10-Q for quarter ended March 31, 1996 as set forth on the pages attached hereto. PART I. FINANCIAL INFORMATION ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET (Dollars in thousands) (As restated)
March 31, 1996 December 31, 1995 (Unaudited) --------------------- --------------------- ASSETS Current Assets: Cash and cash equivalents....................... $ 14,185 $ 16,842 Receivables, less reserve...................... 48,706 38,314 Inventories: Raw materials............................... $ 12,399 $ 12,308 Work in process............................. 27,390 29,679 Finished goods.............................. 8,930 48,719 6,527 48,514 --------- --------- Deferred income taxes.......................... 21,150 19,900 Other current assets........................... 3,459 3,088 --------- -------- Total current assets..................... 136,219 126,658 Plant and Equipment, at cost...................... 128,422 123,083 Less - Accumulated depreciation................... (72,196) 56,226 (70,009) 53,074 --------- --------- Deferred Income Taxes............................. 7,350 17,242 Goodwill and Other Intangible Assets, less accumulated amortization of $8,653 and $9,518 ............................ 77,994 79,094 Investments in Affiliates......................... 9,075 20,940 Net assets of discontinued operations............. 9,549 8,438 Other Assets...................................... 7,281 7,098 --------- -------- Total Assets............................. $ 303,694 $312,544 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt............... $ 9,034 $ 14,691 Accounts payable................................ 16,438 15,103 Accrued liabilities............................. 26,253 23,696 --------- --------- Total current liabilities................. 51,725 53,490 Other Liabilities.................................. 10,122 11,628 Long-term Debt..................................... 63,486 91,570 Minority Interest.................................. 38,793 36,643 Stockholders' Equity: Common stock............................... 178 177 Additional paid-in capital................. 285,128 282,179 Accumulated deficit........................ (144,269) (161,528) Other...................................... (1,469) 139,568 (1,615) 119,213 --------- --------- --------- --------- Total Liabilities and Stockholders' Equity.............. $ 303,694 $ 312,544 ========= =========
See accompanying notes to condensed consolidated financial statements. CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) (As restated)
For the Three Months Ended March 31, ---------------------- 1996 1995 -------- -------- Net sales........................................ $ 78,737 $ 65,592 Cost of sales.................................... (48,586) (39,154) -------- -------- Gross profit..................................... 30,151 26,438 Selling, general and administrative expenses..... (17,428) (11,652) -------- -------- Operating income................................. 12,723 14,786 Interest expense................................. (1,829) (1,510) Interest income.................................. 142 461 Gain on sale of equity investment................ 20,550 # Equity in net income (loss) of affiliated companies................................. (975) 498 -------- -------- Income from operations before income taxes and minority interest..................... 30,611 14,235 Income taxes..................................... (11,632) (1,387) Minority interest in net income of subsidiaries.. (2,150) (2,826) -------- -------- Income from continuing operations................ 16,829 10,022 Income from discontinued operations, net of income taxes........................... 430 793 -------- -------- Net income....................................... $ 17,259 $ 10,815 ======== ======== Income per common share: Continuing operation.......................... $ .92 $ .54 Discontinued operations....................... .02 .04 -------- -------- Net Income.................................... $ .94 $ .58 ======== ======== Weighted average shares ......................... 18,409 18,512 ======== ========
See accompanying notes to condensed consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) (Unaudited) (As restated)
For the Three Months Ended March 31, ---------------------- 1996 1995 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM: Operating Activities: Income from continuing operations.................... $ 16,829 $ 10,022 Adjustments to reconcile income from continuing operations to net cash provided by operations: Depreciation and amortization.................. 3,107 2,881 Change in minority interest.................... 2,150 2,826 Gain on sale of equity investment.............. (20,550) # Change in assets and liabilities............... 1,577 (7,971) Other.......................................... 1,552 (485) -------- -------- Net cash provided by operations......................... 4,665 7,273 -------- -------- Investing Activities: Capital expenditures................................. (5,633) (2,718) Proceeds from the sale of equity investment.......... 29,400 # Other................................................ 160 (22) -------- -------- Net cash provided by (used in) investing activities..... 23,927 (2,740) -------- -------- Financing Activities: Repayment of borrowings.............................. (33,741) (6,693) Other................................................ 3,005 226 -------- -------- Net cash used in financing activities................... (30,736) (6,467) -------- -------- Effect of exchange rates................................ 88 656 -------- -------- Net cash used by discontinued operations................ (601) (1,233) -------- -------- Cash and Cash Equivalents: Net change during the period......................... (2,657) (2,511) Balance, beginning of period......................... 16,842 37,548 -------- -------- Balance, end of period............................... $ 14,185 $ 35,037 ======== ========
See accompanying notes to condensed consolidated financial statements. OAK INDUSTRIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED) 1. The condensed consolidated financial statements have been prepared by Oak Industries Inc. (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. The Company believes that the disclosures made in this report are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Oak Industries Inc. and subsidiaries as of March 31, 1996 and December 31, 1995, and the results of their operations and cash flows for the three month periods ending March 31, 1996 and 1995 have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. 2. In early 1997, the Company discovered that the controller of one of its divisions, in collusion with two of his assistants, capitalized certain amounts which should have been expensed in the periods incurred. The amounts involved, which totaled $3,518,000 ($2,181,000 after taxes), or $.12 per share, relate to portions of fiscal years 1995 and 1996. Because the irregularities which relate to 1995 were not material, the 1995 financial statements were not restated; the first, second, and third quarters of 1996 have been restated, and the cumulative effect of the 1995 misstatements is reflected in the restated financial statements for the three months ended March 31, 1996. All amounts in this Form 10-Q/A have been adjusted, as appropriate, to reflect the foregoing. In response to this employee misconduct, the Company conducted an investigation of this matter involving outside legal counsel and the Company's independent accountants, terminated the employment of the individuals involved, and executed a review of the internal control system at the applicable division. The impact of these adjustments on the Company's financial results for the three months ended March 31, 1996 as originally reported is summarized below (dollars in thousands, except per share data):
As Previously Reported * As Restated ------------- ----------- Sales........................................... $ 78,737 $ 78,737 Operating income................................ 14,598 12,723 Income from continuing operations before income taxes and minority interest.......... 32,486 30,611 Income from continuing operations............... 17,991 16,829 Net income...................................... 18,421 17,259 Net income per common share............... $ 1.00 $ .94 * As a result of the sale of the Company's Nordco Inc. ("Nordco") subsidiary, the Company has also restated 1996 and 1995 consolidated financial statement to reflect Nordco as a discontinued operation. See Note 7.
3. Interest paid on debt for the three months ending March 31, 1996 and 1995 was $2,026,000 and $1,343,000, respectively. Income taxes paid during the three months ended March 31, 1996 and 1995 were $595,000 and $330,000, respectively. 4. During the first quarter of 1996, the Company sold its 49% interest in Video 44 (WSNS-TV Channel 44), a Hispanic television station located in Chicago, and received net proceeds of $29,400,000. The Company recorded a pre-tax gain of $20,550,000 from the sale. Proceeds of $29,000,000 were used to reduce debt. 5. During the first quarter of 1996, the Company recorded a pre-tax charge of $1,900,000 associated with the write down of certain assets and a reserve for potential legal and environmental costs. 6. The Company previously reported that it entered into a definitive agreement to sell its 45% interest in O/E/N India Ltd. During the first quarter of 1996, the potential buyer notified the Company that it was unable to obtain financing for this transaction. As a result, the Company wrote down the book value of its investment in O/E/N India Ltd. from $1,218,000 to $468,000. This pre-tax $750,000 charge is included in the $1,900,000 discussed in Note 5 above. 7. In October 1996, the Company sold its Nordco Inc. ("Nordco") subsidiary to an affiliate of Banc One Venture Corporation and members of Nordco management for net cash proceeds of approximately $19,381,000. As a result of the sale of Nordco, the Company has restated its prior year consolidated financial statements to reflect Nordco as a discontinued operation. The results of the discontinued operations reflected in the consolidated statements of operations are as follows ($000s):
For The Three Months Ended March 31, -------------------- 1996 1995 ------ ------ Net sales............................ $ 5,890 $ 6,008 ======= ======= Gross profit......................... $ 1,881 $ 2,077 ======= ======= Earnings before income taxes......... $ 693 $ 879 Income taxes......................... (263) (86) ------- ------- Net earnings from discontinued operations......................... $ 430 $ 793 ======== ========
The components of net assets of discontinued operations included in the Consolidated Balance Sheet at March 31, 1996 and December 31, 1995 were as follows ($000s):
March 31, 1996 December 31, 1995 -------------- ----------------- Inventories.......................... $ 4,359 $ 3,814 Receivables, less reserve............ 3,590 2,317 Other current assets................. 856 827 PP and E, net........................ 598 494 Intangibles, net..................... 704 699 Other................................ 979 1,742 Current liabilities.................. (1,537) (1,455) ------- ------- Net assets of discontinued operations....................... $ 9,549 $ 8,438 ======= =======
8. Certain items in the 1995 Consolidated Statement of Operations have been reclassified to conform with 1996 presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations First Quarter Results The Company has restated its interim financial statements for the first quarter of 1996 as described in Note 2 of Notes to Condensed Consolidated Financial Statements. This restatement relates to the reversal of certain capitalized amounts that should have been expensed in the periods incurred. In October 1996, the Company sold its Nordco Inc. ("Nordco") subsidiary which was the only business included in the Other Segment. As a result of the sale, the Company has restated prior year consolidated financial statements to reflect Nordco as a discontinued operation. The Company now operates entirely in one segment, the Components Segment. First Quarter Results Sales for the first quarter of 1996 reached $78.7 million, an increase of 20.0% over the $65.6 million in 1995 primarily due to incremental sales of Lasertron, purchased in September of 1995, and due to continued growth in Communications Components businesses. The Company reported net income of $17.3 million in 1996 compared to $10.8 million in 1995. Net income for the first quarter of 1996 includes a net gain of $12.7 million ($20.5 million less $7.8 million income tax expense) from the sale of the Company's 49% interest in Video 44, a joint venture owning (WSNS-TV Channel 44) and the write down of certain assets and a reserve to cover certain legal and environmental contingencies of $1.9 million. Of this $1.9 million pre-tax charge, $0.2 million is included in cost of sales, $0.8 million is included in selling, general and administrative expenses and $0.9 million is included in equity in net income (loss) of affiliated companies. The first quarter of 1996 also includes certain amounts which should have been expensed in the periods incurred. Since the irregularities which occurred in 1995 were not material ($1.1 million) to the 1995 results, the 1995 financials were not restated. The irregularities which occurred in 1995 are reflected as an unusual item in the first quarter of 1996. The Company's results of operations for the first quarters of 1996 and 1995 can be summarized as follows (in millions):
Q1 Q1 1996 1995 ---- ---- Pre-tax income excluding unusual items................ $ 13.1 $ 14.2 Income taxes.......................................... (5.0) (1.4) Minority interest..................................... (2.1) (2.8) ------ ------ Net income excluding unusual items.................... 6.0 10.0 Unusual items: Gain on the sale of equity investment............. 20.5 # Asset write down and other reserves............... (1.9) # Improperly capitalized expenses................... (1.1) - Tax impact of unusual items....................... (6.6) # Income from discontinued operations............... .4 .8 ------ ------ Net income as reported................................ $ 17.3 $ 10.8 ====== ======
The first quarter 1996 provision for income taxes excluding the impact of unusual items increased $3.6 million over the same quarter of 1995 principally due to an increase in the effective tax rate for financial reporting purposes. The annual effective income tax rate for financial reporting purposes increased to 38.0% in the first quarter of 1996 from 9.7% in the corresponding period of the prior year reflecting the provision of a full statutory rate beginning in the third quarter of 1995. The Company had approximately $45.0 million of unused net operating loss carryforwards for tax return purposes at March 31, 1996 and will, therefore, pay minimal federal income taxes until these carryforwards are utilized. Minority interest decreased $0.7 million due to lower earnings at Gilbert Engineering resulting from a higher income tax provision as Gilbert fully utilized its net operating loss carryforward for financial reporting purposes. Pre-tax income before minority interest and unusual items decreased $1.1 million to $13.1 million in the first quarter of 1996 from $14.2 million recorded in the first quarter of 1995. An increase in operating income before unusual items of $0.1 million was offset by increased interest expense ($0.3 million), decreased interest income ($0.3 million) and decreased equity income ($0.6 million). Communications Components Communications Components revenues increased 32.3% for the first three months of 1996 compared to the same three months of 1995. Excluding the impact of the Lasertron, Inc. acquisition in September 1995, net sales increased 12.5% over the 1995 period. Communications Components includes the sales of Gilbert Engineering, a manufacturer of CATV cable connectors, Lasertron, Inc., a manufacturer of fiber optic components, and Oak Frequency Control Group, a manufacturer of quartz-based crystals and oscillators. The Company's sales growth in 1996, excluding the impact of Lasertron, is attributable to increased construction of cable television networks in international markets, upgrades of domestic cable systems, and expanding applications for products in cellular, paging and personal communications systems. Controls Components The sales of Controls Components in the first quarter of 1996 approximated those of the first quarter of 1995, which was a record quarter. However, compared to the fourth quarter of 1995, sales of Controls Components increased 21%, due primarily to improved appliance controls sales. Controls Components consist primarily of flow and temperature control devices for gas appliances and switches and encoders for equipment used in consumer, commercial, medical and military applications. Gross Profit The gross profit margin excluding unusual items was 39.8% for the first quarter of 1996 and 40.3% for the first quarter of 1995. Selling, General and Administrative Expenses Selling, general and administrative expenses excluding unusual items as a percentage of sales increased to 20.9% in the first quarter of 1996 from 17.8% in the first quarter of 1995. Research and development spending increased $1.7 million in the first quarter of 1996, accounting for a portion of the increase. Most of this increase was attributable to Lasertron which was acquired in September 1995. Interest Interest expense increased from $1.5 million in 1995 to $1.8 million in the first quarter of 1996. The increase reflects interest associated with increased borrowings in connection with the September 1995 acquisition of Lasertron. Interest income decreased from $0.4 million in the first quarter of 1995 to $0.1 million in the 1996 period as average cash balances decreased. In September 1995, the Company used approximately $20.0 million of cash in conjunction with the Lasertron acquisition. Equity Income During the first quarter of 1996, the Company sold its 49% interest in Video 44 (WSNS-TV Channel 44), a Hispanic television station located in Chicago, and received net proceeds of $29.4 million. The Company recorded a pre-tax gain of $20,550,000 from the sale. As a result of its acquisition of Lasertron, the Company has included in equity income its proportionate share of the earnings (losses) of its 50% owned Wuhan Telecommunications Devices Company ("WTD"), located in the Peoples' Republic of China. Liquidity and Capital Resources Cash flow from operations of $4.7 million in 1996 decreased $2.6 million from the $7.3 million generated in the first quarter of 1995 reflecting an increased investment in working capital to support new product introductions and higher sales volumes. The Company also accelerated its rate of capital spending to $5.6 million in the first quarter of 1996 from the $2.7 million invested in 1995. The increase in capital expenditures is attributable to automation of production processes to reduce both cost and manufacturing cycle times, expanded use of CAD/CAM capability and new prototyping equipment to reduce development cycle times, expansion of existing production capacity to meet increased volume requirements and addition of new capabilities generally related to new products. Debt net of cash decreased to $58.3 million at March 31, 1996 from $89.4 million at December 31, 1995 primarily as a result of repayment of borrowings of $33.7 million in the first quarter of 1996. As a result of its sale of its 49% interest in Video 44 (WSNS-TV Channel 44), a Hispanic television station located in Chicago, the Company received net proceeds of $29.4 million. The proceeds were used to reduce $29.0 million of debt. The Company's credit agreement provides for a $40.0 million revolving credit facility, a $60.0 million term loan used in conjunction with the Lasertron, Inc. acquisition and a $60.0 million term loan restricted to the funding of the Company's purchase of a minority partner's interest in Connector Holding Company. In conjunction with the Company's credit agreement, the Company completed a financing on behalf of Gilbert Engineering for an $18.0 million revolving credit facility and a $22.0 million term loan. In addition to the $60.0 million term loan which is only available for purchase of the Connector minority interest, cash, cash equivalents and unused lines of credit at March 31, 1996 totaled $46.8 million of which $24.4 million was available only to Gilbert and $22.4 million was available to the Company for general corporate purposes, including acquisitions. The Company believes that funds generated by operations, existing cash balances and its available credit facility will be sufficient to fund the Company's ongoing operations over the next year. Risks and Uncertainties Revenues from telecommunications components will account for a majority of the Company's future revenues. Although demand for these products has grown in recent years with the build out of telecommunications networks in domestic and international markets, a decrease in the rate of infrastructure construction or upgrade programs could have an adverse impact on the Company's results of operations. The telecommunications industry is very competitive and is characterized by rapid technological change, new product development, product obsolescence and evolving product specifications. Additionally, price competition in this market is intense with significant price erosion over the life cycle of a product. The ability of the Company to compete successfully depends on the continued introduction of new products and ongoing manufacturing cost reduction. Sales of the Company's Controls Components are in large part dependent on the production level of a few North American appliance manufacturers, which in turn is sensitive to the strength of the economy, including housing starts, consumer disposable income and interest rates. Adverse changes in the economy would have a negative impact on the Company's financial results. The Company currently buys a number of raw materials from single sources. In most cases there are readily available and qualified alternative sources of supply. Although the Company does not at this time have a qualified second source for one critical component used in the production of fiber optic modules, management believes there are other suppliers that could provide a like quality product on comparable terms. A change in suppliers for this product could cause a delay in manufacturing and adversely impact operating results. The Company must comply with governmental regulations relating to the environment. The cost of compliance with environmental regulations in 1995 was immaterial and is not expected to have a material effect on capital expenditures or operating results in 1996. Various pending or threatened legal proceedings by or against the Company or one or more of its subsidiaries involve alleged breaches of contract, torts and miscellaneous other causes of action arising in the course of business. The Company's management, based upon advice of legal counsel representing the Company with respect to each of these proceedings, does not believe any of these proceedings will have a significant impact on the Company's consolidated financial position. The Company's international operations and its results could be affected by changes in policies of foreign governments and in social and economic conditions outside the U.S. including civil unrest, changing inflation and foreign exchange rates, and trade restrictions or prohibitions. Any of the foregoing could have an adverse effect on future results. OAK INDUSTRIES INC. SIGNATURES Pursuant to the requirement 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. OAK INDUSTRIES INC. Date: February 10, 1997 /s/ Francis J. Lunger Francis J. Lunger Senior Vice President and Chief Financial Officer EX-27 2 AMENDED FDS
5 1,000 3-MOS Dec-31-1996 Mar-31-1996 14,185 0 48,706 0 48,719 136,219 128,422 72,196 303,694 51,725 0 178 0 0 139,390 303,694 78,737 78,737 48,586 48,586 0 0 1,829 30,611 11,632 16,829 430 0 0 17,259 .94 .94
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