-----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, IhvDTr4M3D1G8+eIh0vG1NIr7qFHgxoGWLOJyxbpBK55VM3gJiox3OC/XFEDZ3ZI REbOVEykCx9zEUlkDOTczQ== 0000802851-96-000016.txt : 19961202 0000802851-96-000016.hdr.sgml : 19961202 ACCESSION NUMBER: 0000802851-96-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19961127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGIC DEVICES INC CENTRAL INDEX KEY: 0000802851 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [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: 96673615 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 EndedMarch 31, 1996 Commission File Number0-17187 --------------------------------------------------------------- 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 May 7, 1996, 5,995,750 shares of Common Stock, without par value, were outstanding. --------------------------------------------------------------- Logic Devices Incorporated INDEX Page Number Part I. Financial Information Item 1. Financial Statements Balance Sheets as of March 31, 1996 and 3 December 31, 1995 Statements of Income for the three months ended 4 March 31, 1996 and 1995 Statements of Cash Flows for the three months 5 ended March 31, 1996 and 1995 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of 8 Financial Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Exhibit 11 13 Part I - FINANCIAL INFORMATION Item 1. Financial Statements. Logic Devices Incorporated Balance Sheets March 31, December 31, 1996 1995 Assets (unaudited) Current assets: Cash and cash equivalents $4,002,300 $4,378,500 Accounts receivable, net of allowance 5,383,700 5,844,000 Inventories 8,843,400 8,296,000 Prepaid expenses 941,200 980,300 Deferred income taxes 704,700 704,700 Total current assets 19,875,300 20,203,500 Equipment and leasehold improvements, net 2,597,400 2,409,800 Other Assets 745,900 752,700 $23,218,600 $23,366,000 Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term obligations 175,200 175,200 Accounts payable 997,300 991,000 Accrued expenses 352,300 278,800 Income taxes payable 139,200 819,000 Total current liabilities 1,664,000 2,264,000 Long-term debt obligations, less current portion 139,300 166,200 Deferred income taxes 225,000 225,000 Total liabilities 2,028,300 2,655,200 Shareholders' equity: Common stock 17,000,800 16,741,900 Retained earnings 4,189,500 3,968,900 Total shareholders' equity 21,190,300 20,710,800 $23,218,600 $23,366,000 Logic Devices Incorporated Statements of Income Three months ended March 31, 1996 and 1995 (unaudited) 1996 1995 Net sales $ 3,609,200 $3,549,700 Cost of sales 1,975,400 1,883,500 Gross margin 1,633,800 1,666,200 Operating expenses: Research and development 394,100 350,100 Selling, general and administrative 911,200 817,500 Operating expenses 1,305,300 1,167,600 Income from operations 328,500 498,600 Other (income) expense, net (40,700) 98,900 Income before taxes 369,200 399,700 Income taxes 148,500 127,500 Net income $ 220,700 $ 272,200 Net income per common share $ 0.04 $ 0.06 Weighted average common share equivalents 6,218,750 4,913,306 outstanding Logic Devices Incorporated Statements of Cash Flows Three months ended March 31, 1996 and 1995 (unaudited) 1996 1995 Cash flows from operating activities: Net income $ 220,700 $ 272,200 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 246,600 312,500 Change in operating assets and liabilities: Accounts receivable, net 460,300 (136,600) Inventories (547,400) 96,600 Prepaid expenses and other assets 39,000 9,300 Accounts payable 6,300 (242,000) Accrued expenses 73,500 (44,600) Income taxes payable (679,800) (20,300) Net cash provided by (used in) (180,800) 247,100 operating activities Cash flows from investing activities: Capital expenditures (358,000) (179,900) Increase in other assets (69,400) (49,500) Net cash (used in) investing activities (427,400) (229,400) Cash flows from financing activities: Bank borrowing, net - 45,000 Repayment of long-term obligations (26,900) (42,600) Repayment of obligations to shareholders - (50,000) Proceeds from exercise of warrants/stock options 258,900 8,100 Net cash provided by (used in) 232,000 (39,500) financing activities Net increase (decrease) in cash (376,200) (21,800) Cash and cash equivalents at beginning of period $ 4,378,500 $ 222,300 Cash and cash equivalents at end of period $ 4,002,300 $ 200,500 Logic Devices Incorporated Notes to Financial Statements March 31, 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 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 March 31, 1996 are not necessarily indicative of the results to be expected for the full year. (B) Inventories A summary of inventories follows: March 31, December 31, 1996 1995 Raw Materials $ 497,400 $ 938,000 Work-in-process 4,268,300 3,912,600 Finished goods 4,077,700 3,445,400 $ 8,843,400 $ 8,296,000 Based on forecasted 1996 sales levels, the Company has on hand inventories aggregating approximately ten months of sales. Logic Devices Incorporated Notes to Financial Statements March 31, 1996 and December 31, 1995 (unaudited) (C) Exercise of Warrants Warrants to purchase an aggregate of 150,000 shares of Common Stock were issued in connection with an extension of the Shareholder Loan under a Loan Extension and Warrant Purchase Agreement entered into in March 1991. The warrants to purchase 74,955 shares were exercised in 1995 and the remaining warrants to purchase 75,045 were exercised in February 1996. The exercise price was $3.45 per share, and the warrants were to expire March 1, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Revenues Net revenues increased by 2%, from $3,549,700 in the three months ended March 31, 1995 to $3,609,200 in the three months ended March 31, 1996. The increase was due to strong demand of the Company's DSP products during the period. The Company is and has been in the process of tooling more of its DSP products to additional foundry sources to enable the Company to meet the increased demand for these products. Although foundry constraints for the industry as a whole have eased over the past year, the Company is still limited on capacity for its DSP products until additional tooling work is completed. The strong increases in revenues for the DSP products were offset by decreased revenues from the Company's SRAM products between the comparative periods. Deteriorating conditions in the semiconductor memory market saw falling demand and pricing for the industry in the first quarter 1996. As a result, the Company experienced push-outs in delivery times and falling prices which adversely affected SRAM product revenues during the 1996 period. Expenses Cost of revenues increased from $1,883,500 in the three months ended March 31, 1995 to $1,975,400 in the three months ended March 31, 1996. Gross profit decreased by 2%, from $1,666,200 in 1995 to $1,633,800 in 1996 as a result of substantially lower prices on the Company's SRAM products versus the prior year which offset the gain in gross profit attributed to the increase in sales from the Company's DSP products. As a percentage of net revenues, gross profit margin decreased from 47% in the three months ended March 31, 1995 to 45% in the three months ended March 31, 1996. Research and development expense increased from $350,100 (10% of net revenues) in the 1995 period to $394,100 (11% of net revenues) in the 1996 period, as the Company increased its new product development efforts and tooling to new foundry sources. The Company plans to continue to make substantial investments in its product research and development. Selling, general and administrative expense increased from $817,500 (23% of net revenues) in the 1995 period to $911,200 (25% of net revenues) in the 1996 period due to increased marketing and promotional expenses, sales commissions and increased insurance costs. Net operating income for 1996 decreased to $328,500 from $498,600 in 1995, due to the above mentioned factors. As a percentage of net revenues operating income decreased to 9% for the 1996 period versus 14% in 1995. For the 1996 period, the Company earned $40,700 in Other Income from interest on cash invested versus Other Expense of $98,900 in 1995 which consisted largely of interest expense on outstanding debt. Income taxes increased from $127,500 in 1995 to $148,500 in 1996 as a result of a higher effective tax rate despite slightly lower pretax income for 1996. The Company has utilized most of its long term tax credits. As a result of the foregoing, net income decreased from $272,200 in the 1995 period to $220,700 in the 1996 period. Liquidity and Capital Resources Cash Flows For the three months ended March 31, 1996, the Company's after-tax cash earnings ($467,300 for the 1996 period and $584,700 for the 1995 period) have served as the Company's primary source of financing for working capital needs and for capital expenditures. During the 1996 period, after-tax earnings of $467,300 supplemented by reductions in income taxes payable of $679,800 and accounts receivables of $460,300 which funded an increase in inventory of $547,400 resulted in net cash used by operations of $180,800. The Company invested $427,400 in capital expenditures and other assets and reduce net indebtedness by $26,900. The Company received proceeds of $258,900 from the exercise of employee stock options and the exercise of certain warrants. During the 1995 period, after-tax earnings of $584,700 supplemented by a reduction in inventory of $96,600 funded the increase in accounts receivables of $136,600 and reduction in accounts payable of $242,000 and other current liabilities of $64,900 and resulted in net cash provided by operations of $247,100. Such amount financed capital expenditures of $229,400 and allowed the Company to reduce net indebtedness by $39,500. 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 any 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. The Company's accounts receivable level has been consistently correlated to the Company's previous quarter revenue level. Because of the Company's customer scheduled backlog requirements, up to 80% of the quarterly revenues are shipped in the last month of the quarter. This has the effect of placing a large portion of the quarterly shipments reflected in accounts receivable still not yet due per the Company's net 30 day terms. This, combined with the fact that the Company's distributor customers (which make up 55% 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 cost of doing business given the Company's fabless operation. 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 to 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 has a $8,000,000 revolving line of credit with a bank which expires on June 30, 1996, bears interest at the bank's prime rate plus 1.500% (10.500% at March 31, 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 March 31, 1996, the Company had no outstanding balance under the revolving line of credit. Part II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 11 - Computation of Earnings Per Common Share. (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: May 9, 1996 By /s/ William J. Volz William J. Volz President and Principal Executive Officer Date: May 9, 1996 By /s/ Todd J. Ashford Todd J. Ashford Chief Financial Officer Principal Financial and Accounting Officer EXHIBIT 11 Logic Devices Incorporated Computation of Earnings per Common Share (unaudited) Three months ended March 31, 1996 and 1995 1996 1995 Weighted average shares of common stock 5,996,750 4,776,473 outstanding Common stock equivalent convertible - 12,833 preferred stock Dilutive effect of common stock options 2,000 14,000 Dilutive effect of common stock warrants 220,000 110,000 Weighted average common and 6,218,750 4,913,306 common share equivalents Net income $ 220,700 $ 272,200 Net income per common $ .04 $ .06 share equivalent EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1 3-MOS DEC-31-1995 MAR-31-1996 4,002,300 0 5,383,700 0 8,843,400 19,875,300 10,432,500 7,835,100 23,218,600 1,664,000 0 17,000,800 0 0 0 23,218,600 3,609,200 3,609,200 1,975,400 3,280,700 0 0 0 369,200 148,500 220,700 0 0 0 220,700 .04 .04
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