-----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, PKsT8HFVxOKMkG3JEi3T4D2vY/8nQcBrZJ7Ctchb0mACQ5SWXX5JtkGH9yXHp5zT m0DUvmdMoVz9ZsCXpTSgxw== 0000802851-96-000012.txt : 19960928 0000802851-96-000012.hdr.sgml : 19960928 ACCESSION NUMBER: 0000802851-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 DATE AS OF CHANGE: 19960820 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGIC DEVICES INC CENTRAL INDEX KEY: 0000802851 STANDARD INDUSTRIAL CLASSIFICATION: 3674 IRS NUMBER: 942893789 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17187 FILM NUMBER: 96616486 BUSINESS ADDRESS: STREET 1: 628 E EVELYN AVE CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4087373300 MAIL ADDRESS: STREET 1: 628 EAST EVELYN AVE CITY: SUNNYVALE STATE: CA ZIP: 94086 10-Q 1 *---------------------------------------------------------------* UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended JUNE 30, 1996 Commission File Number 0-17187 *---------------------------------------------------------------* LOGIC DEVICES INCORPORATED (Exact name of registrant as specified in its charter) *---------------------------------------------------------------* CALIFORNIA 94-2893789 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 628 EAST EVELYN AVENUE, SUNNYVALE, CALIFORNIA 94086 (Address of principal executive offices) (Zip Code) (408) 737-3300 (Registrant's telephone number,including area code) ______________________ 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 the number of shares outstanding of the issuer's classes of common stock, as of the latest practicable date. On August 7, 1996, 6,001,750 shares of Common Stock, without par value, were outstanding. *---------------------------------------------------------------* 1 OF 18 PAGES LOGIC DEVICES INCORPORATED INDEX PAGE NUMBER Part I. Financial Information ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 1996 3 and December 31, 1995 Consolidated Statements of Income for the three 4 months ended June 30, 1996 and 1995 Consolidated Statements of Income for the six 5 months ended June 30, 1996 and 1995 Consolidated Statements of Cash Flows for the 6 six months ended June 30, 1996 and 1995 Notes to Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9 FINANCIAL CONDITION AND RESULTS OF OPERATIONS Part II. Other Information ITEM 5. OTHER INFORMATION 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14 Signatures 15 Exhibit 11 16 Exhibit 27 18 Part I - FINANCIAL INFORMATION Item 1. Financial Statements. LOGIC DEVICES INCORPORATED CONSOLIDATED BALANCE SHEETS June 30, December 31, 1996 1995 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 2,444,900 $ 4,378,500 Accounts receivable, net of allowance 5,856,000 5,844,000 Inventories 9,703,100 8,296,000 Prepaid expenses 938,400 980,300 Deferred income taxes 704,700 704,700 Total current assets 19,647,100 20,203,500 Equipment and leasehold improvements, net 2,780,500 2,409,800 Other assets 646,800 752,700 $23,074,400 $23,366,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations 175,200 175,200 Accounts payable 883,700 991,000 Accrued expenses 285,400 278,800 Income taxes payable 61,200 819,000 Total current liabilities 1,405,500 2,264,000 Long-term obligations 111,700 166,200 Deferred income taxes 225,000 225,000 Total liabilities 1,742,200 2,655,200 Shareholders' equity: Common stock 17,008,900 16,741,900 Retained earnings 4,323,300 3,968,900 Total shareholders' equity 21,332,200 20,710,800 $23,074,400 $23,366,000 LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Three months ended June 30, 1996 and 1995 (unaudited) 1996 1995 Net revenues $ 3,495,800 $ 4,408,300 Cost of sales 1,799,300 2,581,200 Gross margin 1,696,500 1,827,100 Operating expenses: Research and development 400,700 365,400 Selling, general and administrative 1,109,900 765,300 Operating expenses 1,510,600 1,130,700 Income from operations 185,900 696,400 Other income (expense), net 27,900 (94,600) Income before taxes 213,800 601,800 Income taxes 80,000 195,200 Net income $ 133,800 $ 406,600 Net income per common share $ 0.02 $ 0.08 Weighted average common share equivalents 6,221,750 5,293,788 outstanding LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Six Months ended June 30, 1996 and 1995 (unaudited) 1996 1995 Net revenues $ 7,105,000 $ 7,958,000 Cost of sales 3,774,700 4,464,700 Gross margin 3,330,300 3,493,300 Operating expenses: Research and development 794,800 715,500 Selling, general and administrative 2,021,100 1,582,800 Operating expenses 2,815,900 2,298,300 Income from operations 514,400 1,195,000 Other income (expense), net 68,600 (193,500) Income before taxes 583,000 1,001,500 Income taxes 228,500 322,700 Net income $ 354,500 $ 678,800 Net income per common share $ 0.06 $ 0.13 Weighted average common share equivalents 6,221,750 5,149,780 outstanding LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1996 and 1995 (unaudited) 1996 1995 Cash flows from operating activities: Net income $ 354,400 $ 678,800 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 506,900 612,700 Change in operating assets and liabilities: Accounts receivable, net (12,000) (418,600) Inventories (1,407,100) (55,900) Prepaid expenses 41,900 (27,200) Accounts payable (107,300) (446,000) Accrued expenses 6,600 (80,600) Income taxes payable (757,800) 21,400 Net cash (used in) provided by operating(1,374,400) 284,600 activities Cash flows from investing activities: Capital expenditures (725,200) (419,300) Net increase in other assets (46,500) (136,700) Net cash (used in) investing activities (771,700) (556,000) Cash flows from financing activities: Bank borrowing, net - 45,000 Proceeds from long-term debt - 800,000 Repayment of notes payable and long-term debt (54,500) (68,000) Repayment of obligations to shareholders - (863,900) Proceeds from exercise of warrants 258,900 258,600 Proceeds from exercise of employee stock options 8,100 161,900 Net cash provided by 212,500 333,600 financing activities Net (decrease) increase in cash and cash (1,933,600) 62,200 equivalents Cash and cash equivalents at beginning of period $ 4,378,500 $ 222,300 Cash and cash equivalents at end of period $ 2,444,900 $ 284,500 LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements June 30, 1996 and December 31, 1995 (unaudited) (A) BASIS OF PRESENTATION The accompanying unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited interim financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with generally accepted accounting principles. The Company has filed audited financial statements which include all information and footnotes necessary for such a presentation of the financial position, results of operations, and cash flows for the years ended December 31, 1995 and 1994, with the Securities and Exchange Commission. It is suggested that the accompanying unaudited interim financial statements be read in conjunction with the aforementioned audited financial statements. The unaudited interim financial statements contain all normal and recurring entries. The results of operations for the interim period ended June 30, 1996 are not necessarily indicative of the results to be expected for the full year. (B) INVENTORIES A summary of inventories follows: June 30, December 31, 1996 1995 Raw materials $ 2,520,000 $ 938,000 Work-in-process 3,265,600 3,912,600 Finished goods 3,917,500 3,445,400 $ 9,703,100 $ 8,296,000 Based on forecasted 1996 sales levels, the Company has on hand inventories aggregating approximately twelve months of sales. LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements June 30, 1996 and December 31, 1995 (unaudited) (C) DEBT FINANCING On June 28, 1996, the Company renewed its $8,000,000 revolving line of credit with Sanwa Bank extending the maturity to May 31, 1997. The line of credit bears interest at the bank's reference rate (8.25% at June 30, 1996). The line of credit is secured by the assets of the Company and requires the Company to maintain a minimum tangible net worth, a maximum ratio of debt to tangible net worth, a minimum current ratio, a minimum quick ratio, and profitability over a specified interval of time. As of June 30, 1995, the Company had $8,000,000 available under the revolving line of credit. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. LOGIC DEVICES INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Net revenues decreased by 21%, from $4,408,300 for the three months ended June 30, 1995 to $3,495,800 for the three months ended June 30, 1996. This decrease was due to a substantial decrease in revenues derived from the Company's SRAM ("Static Random Access Memory") products which accounted for 52% of revenues in the June 30, 1995 period, but decreased to 18% of revenues in the June 30, 1996 period. Net revenues from the Company's DSP ("Digital Signal Processing") products accounted for 45% of revenues in 1995, and increased to 78% in 1996. The semiconductor memory market is in the midst of a dramatic drop-off in demand which began in the fourth quarter of 1995. SRAM memory suppliers have been caught in a period of weak demand and have been reducing prices to move their SRAM inventories. As a result of the adverse market conditions, the Company has experienced order cancellations, delivery push-outs, and sharply falling prices which affected SRAM product revenues during the 1996 period. The Company's DSP product line, which sells into a much more stable market environment than the SRAM products, grew 38% in revenues over the 1995 period. Net revenues decreased by 11%, from $7,958,000 for the six month period ended June 30, 1995 to $7,105,000 for the six months ended June 30, 1996. This decrease was due to decreased net revenues derived from the Company's SRAM products which accounted for 44% of revenues for the 1995 period, but decreased to 10% of revenues for the 1996 period. Net revenues from DSP products accounted for 50% of revenues in 1995, whereas DSP product sales comprised 85% of net revenues in 1996. The sharp drop-off in demand in the memory market which began in the fourth quarter of 1995 continued through the first half of 1996. The Company has experienced order cancellations, delivery push-outs, and sharply falling prices which affected SRAM product revenues during the first half of 1996. The Company's DSP product line, which is more stable, grew 51% in revenues over the first half of 1995. EXPENSES Cost of sales decreased 30% from $2,581,200 or 59% of net revenues for the three months ended June 30, 1995 to $1,799,300 or 52% of net revenues for the same period in 1996. Gross profit decreased 7%, from $1,827,100 in the former period to $1,696,500 in the latter period. The decrease in gross profit is the result of lower revenues for the period. As a percentage of net revenues, gross profit increased from 41% for the three months ended June 30, 1995 to 49% for the three months ended June 30, 1996. The increase in gross profit margin for the period is the result of a larger percentage of the Company's revenues coming from its DSP product line which generally yields higher gross profit margin than the Company's SRAM product line. Cost of sales decreased 16% from $4,464,700 or 56% of net revenues for the six months ended June 30, 1995 to $3,774,700 or 53% of net revenues for the same period in 1996. Gross profit decreased 5% from $3,493,300 in the former period to $3,330,300 in the latter period. This decrease in gross profit is the result of lower revenues for the period. As a percentage of net revenues, gross profit increased from 44% in the six months ended June 30, 1995 to 47% in the six months ended June 30, 1996. This increase in gross profit margin is the result of a higher revenue contribution from DSP products which yields a higher gross margin than the Company's SRAM products. Research and development ("R & D") expenses for the three months ended June 30, 1995, were $365,400 and increased to $400,700 for the same period in 1996. For the six month period, research and development expenses were $715,500 for 1995, increasing to $794,800 for 1996. As a percentage of net revenues, R & D expenses were 8% for the three months ended June 30, 1995, compared to 12% for 1996. For the six months ended June 30, 1995, R & D expenses as a percentage of net sales were 9% compared to 11% for 1996. In the 1996 periods the Company has dramatically increased its product development efforts. The Company invested in additional personnel, product development tools and new product tooling at its foundry sources to increase the Company's product offerings and to diversify its foundry sources. The Company intends to continue to make substantial investments in product R & D. Selling, general and administrative ("S,G & A") expenses were $765,300 for the three months ended June 30, 1995 and increased to $1,109,900 for the same period in 1996. For the six months ended June 30, 1995, S, G & A expenses were $1,582,800, increasing to $2,021,100 for the same period in 1996. As a percentage of net sales, selling, general and administrative expenses were 17% for the three months ended June 30, 1995 compared to 32% in 1996. As a percentage of net sales, selling, general and administrative expenses were 20% for the first six months of 1995 compared to 28% in 1996. The Company increased its sales and marketing efforts substantially for the 1996 period. Over the prior year, the Company has added a sales office in Southern California to service the south and midwest sales regions and a sales office in Great Britain to service the European market, added an additional sales engineer to staff its east-coast regional sales offices, and increased the marketing and technical sales staff at the headquarters office. The Company has also increased its marketing promotional effort with ad placements and applications articles in industry trade publications as well as additional promotional materials and a newsletter for the Company's distributor and sales representatives. The Company intends to continue to expand these efforts in the future. Net operating income decreased 73% to $185,900 for the three months ended June 30, 1996 versus $696,400 for the same period in 1995. For the six month period ended June 30, 1996 net operating income decreased 57% to $514,400 from $1,195,000 for the same period in 1995. For the three month period in 1996, the Company earned $27,900 in Other Income from interest on cash invested versus Other Expense of $94,600 in 1995 which consisted of interest expense on outstanding debt. For the six month period in 1996, the Company earned $68,600 in Other Income from interest on cash invested versus Other Expense of $193,500 in 1995 which consisted largely of interest expense on outstanding debt. The Company's effective tax rate for the three and six months period for 1996 increased to 39% versus 32% for the 1995 period. This increase is the result of utilization of the tax credits available to the Company in the past. Net income decreased 67% for the three months ended June 30, 1996 to $133,800 compared to $406,600 for the same period in 1995. For the six months ended June 30, 1996, net income decreased 48% to $354,500 compared to $678,800 for the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS For the six months ended June 30, 1996, the Company's after-tax cash earnings ($861,300 for the 1996 period and $1,291,500 for the 1995 period) have provided much of the Company's source for working capital needs and for capital expenditures. During the 1996 period, after-tax earnings of $861,300 partially funded increases in inventory of $1,407,100 and payment of income taxes due of $757,800 which therefore resulted in net cash used in operations of $1,374,400 for the first six months of 1996. The Company also invested $771,700 in capital expenditures and other assets for 1996. The Company received proceeds of $267,000 from the exercise of certain warrants and employee stock options. The result was a net use of cash for the first six months of 1996 of $1,933,600. During the 1995 period, after-tax earnings of $1,291,500 funded the increase in accounts receivables of $418,600, reduction in accounts payable of $446,000 and resulted in net cash provided by operations of $284,600. The Company invested in capital expenditures of $556,000. In June 1995 the Company repaid its shareholder obligation with proceeds from bank debt. In the 1995 period the Company received proceeds for the exercise of warrants and employee stock options in the amount of $420,500 which along with debt restructuring provided $333,600 in cash from financing activities. WORKING CAPITAL The Company's investment in inventories and accounts receivable has been significant and will continue to be significant in the future. Over prior periods, the Company, as a nature of its business, has maintained these levels of inventories and accounts receivable. The Company relies on third party suppliers for raw materials and as a result maintains substantial inventory levels to protect against disruption in supplies. The Company has historically maintained inventory levels from approximately 225 days to 360 days, since 1990. The low point in inventory levels came in 1992 and 1993 when the Company had supply disruptions from one of its major suppliers. The Company looks at its inventories in relationship to its sales which have ranged from 155 days to 185 days within the periods between 1995 and 1990. This inventory to sales ratio is a more stable measure of inventory levels, versus the traditional inventory turnover measure because, at the times when the Company is experiencing supply disruptions, and therefore lower inventory levels, the Company is also experiencing increased costs of goods due to inefficiencies in its operations stemming from sporadic deliveries which skews the numerator and denominator in different directions for inventory turns calculations. The Company provides reserves for product material that is over one year old with no back-log or sales activity, and reserves for future obsolescence. The Company also takes physical inventory write-downs for obsolescence. Because of the Company's customer scheduled backlog demands up to 80% of the quarterly revenues are shipped in the last month of the quarter. This places a large portion of the quarterly shipments into accounts receivable not yet due per the Company's net 30 day terms. This factor, combined with the fact that the Company's distributor customers (which currently make up 65% of the Company revenues) generally pay 60 days and beyond, results in the accounts receivable balance at the end of the quarterly period being at its highest point for the period. Although current levels of inventory and accounts receivable impact the Company's liquidity, the Company believes that it is a necessary cost of doing business given that the Company is a fabless manufacturer. The Company is in the process of diversifying its supplier base to reduce the risk of supply disruption. However, this will require a significant investment in product development related to product tooling with new suppliers. The Company believes that as it expands its customer base it will be able to even out the flow of its shipments within its quarterly reporting periods. DEBT The Company renewed its $8,000,000 revolving line of credit with Sanwa Bank on June 27, 1996. The new agreement expires on May 31, 1997, bears interest at the bank's reference rate (8.25% at June 30, 1996) and is secured by the assets of the Company. The line of credit requires the Company to maintain a minimum tangible net worth, a maximum ratio of debt to tangible net worth, a minimum current ratio, a minimum quick ratio, and profitability over a specified interval of time. As of June 30, 1996 and the date of this quarterly report, the Company had no outstanding balance under the line of credit and is in compliance with all covenant restrictions. PART II - OTHER INFORMATION LOGIC DEVICES INCORPORATED Item 5. Other Information. The Annual Shareholders' meeting was held on August 1, 1996. The election of the Board of Directors was the only matter to be voted on at this year's meeting. There were 3,067,271 shares present or represented by proxy at the meeting. Shareholders are permitted to vote cumulatively in the election of directors which allows each shareholder to cast a number of votes equal to the number of directors to be elected by the number of shares owned and to distribute such votes among the candidates in such proportion as such shareholder may determine. In order to vote cumulatively, a shareholder must give notice of this intention by proxy or at the meeting. Thereafter, all shareholders will be entitled to cumulate votes. The votes for each nominee are as set forth in the following table: Votes Votes NOMINEE IN FAVOR AGAINST ABSTENTION Howard L. Farkas 2,944,308 0 23,220 Burton W. Kanter 2,944,308 0 23,220 Albert Morrison,Jr. 2,944,308 0 23,220 William J. Volz 3,440,633 0 23,220 Bruce B. Lusignan 2,945,698 0 23,220 Item 6. Exhibits and Reports on Form 8-K. (a) (1) Exhibit 11 - Computation of Earnings Per Common Share. (2) Exhibit 27 - Financial Data Schedule (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. 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. Logic Devices Incorporated (Registrant) Date: AUGUST 9, 1996 By /S/ WILLIAM J. VOLZ William J. Volz President and Principal Executive Officer Date: AUGUST 9, 1996 By /S/ TODD J. ASHFORD Todd J. Ashford Chief Financial Officer and Principal Financial and Accounting Officer EXHIBIT 11 LOGIC DEVICES INCORPORATED Computation of Earnings per Common Share (unaudited) Three months ended June 30, 1996 and 1995 1996 1995 Weighted average shares of common stock 6,001,750 4,857,559 outstanding Common stock equivalent convertible - 12,833 preferred stock Dilutive effect of common stock options and stock warrants 220,000 423,396 Weighted average common and 6,221,750 5,293,788 common share equivalents Net income $ 133,800 $ 406,600 Net income per common $ .02 $ .08 share equivalent EXHIBIT 11 LOGIC DEVICES INCORPORATED Computation of Earnings per Common Share (unaudited) Six months ended June 30, 1996 and 1995 1996 1995 Weighted average shares of common stock 6,001,750 4,817,240 outstanding Common stock equivalent convertible - 12,833 preferred stock Dilutive effect of common stock options and stock warrants 220,000 319,707 Weighted average common and 6,221,750 5,149,780 common share equivalents Net income $ 354,500 $ 678,800 Net income per common $ .06 $ .13 share equivalent EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1 6-MOS DEC-31-1995 JUN-30-1996 2,444,900 0 5,856,000 [ALLOWANCE] 0 9,703,100 19,647,100 10,799,700 8,019,200 23,074,400 1,405,500 0 17,008,900 0 0 0 23,074,400 7,105,000 7,105,000 3,774,700 6,590,600 0 0 0 583,000 228,500 354,500 0 0 0 354,500 .06 .06
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