-----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, Jzq6kK4GBu9SEHo/v7co37TAGCEkAs6W0Iidg7SccnG/SPMRBOSC08A8iwKPToxj 8oH7SM5cofPpeXwc1XyZRA== 0000820318-99-000022.txt : 19991115 0000820318-99-000022.hdr.sgml : 19991115 ACCESSION NUMBER: 0000820318-99-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: II-VI INC CENTRAL INDEX KEY: 0000820318 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 251214948 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16195 FILM NUMBER: 99749239 BUSINESS ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 BUSINESS PHONE: 4123524455 MAIL ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1999 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ------ to -------. Commission File Number: 0-16195 II-VI INCORPORATED (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-1214948 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 375 Saxonburg Boulevard Saxonburg, PA 16056 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 724-352-4455 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 each of the issuer's classes of common stock as of the latest practicable date: At November 5, 1999, 6,351,586 shares of Common Stock, no par value, of the registrant were outstanding. 1 II-VI INCORPORATED AND SUBSIDIARIES INDEX Page No. PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets -- September 30, 1999 and June 30, 1999 . . . . . . . . . . . . 3 Condensed Consolidated Statements of Earnings - -- Three months ended September 30, 1999 and 1998. . . . . . 4 Condensed Consolidated Statements of Cash Flows -- Three months ended September 30, 1999 and 1998. . . 5 Notes to Condensed Consolidated Financial Statements . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . .10 Item 3. Quantitative and Qualitative Disclosures about Market Risk (no significant changes since June 30, 1999) PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . .12 2 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements: II-VI Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) ($000)
September 30, June 30, Assets 1999 1999 ------------- -------- Current Assets Cash and cash equivalents $ 6,895 $ 5,558 Accounts receivable - net 11,873 13,070 Inventories 10,256 9,096 Other current assets 1,489 1,289 --------- --------- Total Current Assets 30,513 29,013 Property, Plant and Equipment, net 36,908 36,955 Other Assets 7,890 4,875 --------- --------- $ 75,311 $ 70,843 ========= ========= Liabilities and Shareholders' Equity Current Liabilities Notes payable $ 6,523 $ 4,082 Accounts payable 1,768 1,934 Accrued salaries, wages and bonuses 2,180 2,836 Income taxes payable 867 367 Accrued profit sharing contribution 181 580 Other current liabilities 1,264 1,581 Current portion of long-term debt 43 43 --------- --------- Total Current Liabilities 12,826 11,423 Long-Term Debt--less current portion 2,783 2,549 Other Liabilities, primarily deferred income taxes 2,750 2,378 Commitments & Contingencies - - Shareholders' Equity Preferred stock, no par value; authorized - 5,000,000 shares; unissued - - Common stock, no par value; authorized - 30,000,000 shares; issued - 6,885,226 shares at September 30, 1999; 6,875,766 shares at June 30, 1999 18,808 18,746 Accumulated other comprehensive income 930 272 Retained earnings 39,124 37,385 --------- --------- 58,862 56,403 Less treasury stock, at cost - 534,440 shares at September 30, 1999 and June 30, 1999 1,910 1,910 --------- --------- 56,952 54,493 --------- --------- $ 75,311 $ 70,843 ========= =========
- -See notes to condensed consolidated financial statements. 3 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Earnings (Unaudited) ($000 except per share data)
Three Months Ended September 30, 1999 1998 -------- -------- Revenues Net sales: Domestic $ 8,536 $ 7,665 International 7,586 5,829 -------- -------- 16,122 13,494 Contract research and development 76 299 -------- -------- 16,198 13,793 Costs, Expenses & Other Expense (Income) Cost of goods sold 9,228 8,969 Contract research and development 58 235 Internal research and development 623 578 Selling, general and administrative 3,806 3,007 Interest expense 85 126 Other expense (income) - net (72) (19) -------- -------- 13,728 12,896 -------- -------- Earnings Before Income Taxes 2,470 897 Income Taxes 731 268 -------- -------- Net Earnings $ 1,739 $ 629 ======== ======== Basic Earnings Per Share $ 0.27 $ 0.10 ======== ======== Diluted Earnings Per Share $ 0.27 $ 0.10 ======== ========
- -See notes to condensed consolidated financial statements. 4 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) ($000)
Three Months Ended September 30, 1999 1998 -------- -------- Cash Flows from Operating Activities Net earnings $ 1,739 $ 629 Adjustments to reconcile net earnings to net cash Provided by (used in) operating activities: Depreciation and amortization 1,402 1,200 Loss on foreign currency transactions (10) (90) Deferred income taxes (8) - Increase (decrease) in cash from changes in: Accounts receivable 1,381 434 Inventories (1,022) (131) Accounts payable (308) (1,506) Other operating net assets (1,163) (2,369) -------- -------- Net cash provided by (used in) operating activities 2,011 (1,833) -------- -------- Cash Flows from Investing Activities Additions to property, plant and equipment (1,280) (1,719) Investments in unconsolidated businesses (2,788) - Disposals of other assets 750 - -------- -------- Net cash used in investing activities (3,318) (1,719) -------- -------- Cash Flows from Financing Activities Proceeds on short-term borrowings, net 2,432 1,397 Payments on long-term borrowings (25) (13) Proceeds from sale of common stock 35 84 Purchases of treasury stock - (452) -------- -------- Net cash provided by financing activities 2,442 1,016 Effect of exchange rate changes on cash and cash equivalents 202 139 -------- -------- Net increase (decrease) in cash and cash equivalents 1,337 (2,397) Cash and Cash Equivalents at Beginning of Period 5,558 4,160 -------- -------- Cash and Cash Equivalents at End of Period $ 6,895 $1,763 ======== ========
- -See notes to condensed consolidated financial statements. 5 II-VI Incorporated and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The consolidated financial statements for the three month periods ended September 30, 1999 and 1998 are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation for the periods presented have been included. These interim statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto contained in the Company's 1999 Annual Report to shareholders. The consolidated results of operations for the three month periods ended September 30, 1999 and 1998 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications were made to the prior period financial statements in order for them to be in conformity with current period presentation. Note B - Inventories ($000) The components of inventories are as follows: September 30, June 30, 1999 1999 ------------- -------- Raw materials $ 2,576 $ 3,014 Work in progress 4,497 3,731 Finished goods 3,183 2,351 ------------- -------- $10,256 $ 9,096 ============= ======== Note C - Property, Plant and Equipment ($000) Property, plant and equipment (at cost) consist of the following: September 30, June 30, 1999 1999 ------------- -------- Land and land improvements $ 1,501 $ 1,501 Buildings and improvements 19,709 19,559 Machinery and equipment 41,888 40,758 ------------- -------- 63,098 61,818 Less accumulated depreciation 26,190 24,863 ------------- -------- $36,908 $36,955 ============= ======== 6 II-VI Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited), Continued Note D - Debt On March 26, 1999, the Company entered into a $15.0 million unsecured line of credit agreement with PNC Bank that expires on March 25, 2000. This line of credit may be extended upon the mutual agreement of the Company and PNC Bank for an additional two years. The average interest rate in effect as of September 30, 1999 was 6.25%. As of September 30, 1999, the total borrowings under this line of credit were $6.5 million. The Company is subject to certain restrictive covenants under this agreement. Note E - Earnings Per Share The following table sets forth the computation of earnings per share for the periods indicated: Three Months Ended September 30, (000 except per share data) 1999 1998 - ------------------------------------------------------------------- Net earnings $1,739 $ 629 Divided by: Weighted average shares 6,347 6,444 - ------------------------------------------------------------------- Basic earnings per share $0.27 $0.10 Net earnings $1,739 $ 629 Divided by: Weighted average shares 6,347 6,444 Dilutive effect of common stock equivalents 159 159 - ------------------------------------------------------------------- Diluted weighted average common shares 6,506 6,603 - ------------------------------------------------------------------- Diluted earnings per share $0.27 $0.10 - ------------------------------------------------------------------- Note F - Other Comprehensive Income During the quarter ended September 30, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" which requires the Company to report and disclose a measure ("comprehensive income") of all changes in shareholders' equity that result from transactions and other economic events of the period other than transactions with owners. The changes to accumulated other comprehensive income were as follows for the periods indicated ($000): Three Months Ended September 30, 1999 ------------------------------------------ Foreign Unrealized Accumulated Other Currency Gains on Comprehensive Items Securities Income -------- ---------- ----------------- Beginning balance, July 1, 1999 272 - 272 Changes during the period (27) 685 658 -------- ---------- ----------------- Ending balance, September 30, 1999 245 685 930 7 II-VI Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited), Continued Note F - Other Comprehensive Income Cont'd. Three Months Ended September 30, 1998 ------------------------------------------ Foreign Unrealized Accumulated Other Currency Gains on Comprehensive Items Securities Income -------- ---------- ----------------- Beginning balance, July 1, 1998 435 - 435 Changes during the period (123) - (123) -------- ---------- ----------------- Ending balance, September 30, 1998 312 - 312 Note G - Segment Reporting Effective in fiscal 1999, the Company adopted Statement of Financial Accounting standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" (SFAS No. 131), which requires the use of the 'management approach' model for segment reporting. The Company has two reportable segments: Optical Components, which is an aggregation of the Company's infrared optics and material products business and the Company's VLOC subsidiary under the guidelines of SFAS No. 131, and Radiation Detectors. The accounting policies of the segments are the same as those of the Company. Substantially all of the Company's corporate expenses are allocated to the segments. The Company evaluates segment performance based upon reported segment profit or loss from operations. Inter- segment sales and transfers are insignificant. The following table summarizes selected financial information of the Company's operations by segment ($000's): Three Months Ended September 30, 1999 ------------------------------------------ Optical Radiation Components Detectors Totals ------------------------------------------ Net revenues $14,841 $1,357 $16,198 Income (loss) from operations 2,855 (372) 2,483 Interest expense - - 85 Other income, net - - (72) Earnings before income taxes - - 2,470 Segment assets 66,946 8,365 75,311 8 II-VI Incorporated and Subsidiaries Notes to Consolidated Financial Statements (Unaudited), Continued Note G - Segment Reporting Cont'd. Three Months Ended September 30, 1998 ------------------------------------------ Optical Radiation Components Detectors Totals ------------------------------------------ Net revenues $12,499 $1,294 $13,793 Income (loss) from operations 1,290 (286) 1,004 Interest expense - - 126 Other income, net - - (19) Earnings before income taxes - - 897 Segment assets 56,279 9,295 65,574 Note H - Investment in Laser Power Corporation On September 21, 1999, the Company purchased 1,250,000 shares of Laser Power Corporation common stock for a total purchase price of approximately $2.8 million. Based on information available to the Company, this purchase represents approximately 14.7% of the outstanding common stock of Laser Power Corporation. Laser Power Corporation is a competitor of the Company which produces infrared and CO2 laser optics. This investment is being accounted for under the cost method of accounting. This investment is included in "Other Assets" in the accompanying condensed consolidated balance sheet as of September 30, 1999. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net earnings for the first quarter of fiscal 2000 were $1,739,000 ($0.27 per share-diluted) on revenues of $16,198,000. This compares to net earnings of $629,000 ($0.10 per share-diluted) on revenues of $13,793,000 in the first quarter of fiscal 1999. Order bookings for the first quarter of fiscal 1999 were $16,832,000 compared to $12,812,000 for the same period last fiscal year, an increase of 31%. There were no bookings for contract research and development for the first quarter of fiscal year 2000 or 1999. Bookings for laser optics and component products increased approximately 40% while bookings of the eV PRODUCTS division decreased by nearly 30%. Revenues for the first quarter of fiscal 2000 increased 17% to $16,198,000 compared to $13,793,000 for the same period last fiscal year. Revenues from laser optics and products increased by approximately 20% while revenues from the eV PRODUCTS division increased by approximately 5%. Manufacturing gross margin for the first quarter of fiscal 2000 was $6,894,000 or 43% of revenues compared to $4,525,000 or 34% of revenues for the same period last fiscal year. The higher gross margin percentage for the quarter reflects the productivity gains and cost control programs of all operating entities, lower per unit cost associated with higher production volume for laser optics and component products and a strengthened Japanese Yen. Company-funded internal research and development expenses for the first quarter of fiscal 2000 were $623,000 or 4% of revenues compared to $578,000 or 4% of revenues for the same period last year. The increased expenses for the quarter reflect projects associated with nuclear radiation detector development and infrared optics and materials development. Selling, general and administrative expenses for the first quarter of fiscal 2000 were $3,806,000 or 23% of revenues compared to $3,007,000 or 22% of revenues for the same period last year. The dollar and percentage increases are attributable to increased compensation expense associated with the Company's worldwide profit-driven bonus programs and increased professional service expenses. Interest expense for the first quarter of fiscal 2000 was $85,000 compared to $126,000 for the same period last year. This fluctuation is the direct result of decreased average borrowings. The Company's first quarter fiscal 2000 and first quarter fiscal 1999 effective income tax rate was 30%, respectively. Liquidity and Capital Resources Cash increased during the first three months of fiscal 2000 by $1,337,000 primarily due to net earnings before depreciation and amortization of $3,141,000, a reduction in accounts receivable and borrowings on the Company's line of credit. These items were offset by an increase in inventory, payment of compensation costs relating to the Company's fiscal 1999 worldwide profit-driven bonus programs, capital expenditures and the purchase of 1,250,000 shares of Laser Power Corporation common stock. The Company generated $2,011,000 in cash from operations during the first three months of fiscal 2000. The Company believes internally generated funds, existing cash reserves and available borrowing capacity will be sufficient to fund its working capital needs, capital expenditures and scheduled debt payments for fiscal 2000. 10 This Management's Discussion and Analysis contains forward looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including the statements regarding the Company's ability to fund future working capital needs, capital expenditures and scheduled debt payments and the Company's plan to address the Year 2000 issue. Forward-looking statements are also identified by words such as "expects," "anticipates," "intends," "plans," "projects" or similar expressions. Actual results could materially differ from such statements if worldwide economic conditions change, competitive conditions intensify, and/or technology problems emerge. There are additional risk factors that could affect the Company's business, results of operations or financial condition. Investors are encouraged to review the risk factors set forth in the Company's 1999 Form 10-K as filed with the Securities and Exchange Commission on September 28, 1999. Other Matters The "Year 2000" issue concerns the potential exposures related to the automated generation of business and financial misinformation resulting from the use of computer programs which have been written using two digits, rather than four, to define the applicable year of business transactions. The Company has developed a formal plan to address the Year 2000 implications of its information technology and noninformation technology systems, which consisted of three phases. The first phase of this plan is complete and consisted of an evaluation of the systems impacted by the Year 2000 issue. The second phase is complete and consisted of an evaluation of the third parties with whom the Company has significant relationships and their Year 2000 compliance. The last phase of this plan is substantially complete and consisted of the implementation of corrective measures deemed necessary, as identified during the first two stages of the plan. Based upon information obtained during the execution of the plan, the Company does not believe its information technology and noninformation technology systems will experience significant Year 2000 problems. However, there can be no assurances that the third parties with whom the Company has significant relationships will not experience disruptions in their business that could have a material adverse effect on the Company. An example of a worst case scenario caused by the Year 2000 issue would be the failure in the accounting systems of a significant number of the Company's key customers which resulted in a delay in the payment of invoices issued by the Company. To date, the Company has spent approximately $160,000 on the Year 2000 issue and believes that the remaining potential cost related to the Year 2000 issue will be insignificant. Although the Company has developed and executed the plan described above, due to the inherent uncertainty and complexity involved with the Year 2000 issue, there can be no assurance that the Company will address all aspects of the Year 2000 issue. The Company assessed needs and developed a contingency plan as part of its Year 2000 plan The contingency plan incorporates necessary actions that may be needed to contend with such occurrences as disruptions of electrical and water service, temporary loss of critical business information systems, and similar potential business interruptions. 11 PART II - OTHER INFORMATION --------------------------- Item 6. EXHIBITS AND REPORTS ON FORM 8-K. -------------------------------- (a) Exhibits. -------- 27.01 Financial Data Schedule . . . Filed herewith. (b) Reports on Form 8-K. On July 7, 1999, the registrant filed a report on Form 8-K for the events dated July 7, 1999, covering Items 5 and 7 thereof. On October 21, 1999, the registrant filed a report on Form 8-K for the events dated October 19, 1999, covering Items 5 and 7 thereof. 12 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. II-VI INCORPORATED (Registrant) Date: November 12, 1999 By: /s/ Carl J. Johnson Carl J. Johnson Chairman and Chief Executive Officer Date: November 12, 1999 By: /s/ James Martinelli James Martinelli Treasurer & Chief Financial Officer 13 EXHIBIT INDEX Exhibit No. 27.01 Financial Data Schedule. . . . . . . . . .Filed herewith. 14 EX-27 2
5 1,000 3-MOS 3-MOS JUN-30-2000 JUN-30-1999 JUL-01-1999 JUL-01-1998 SEP-30-1999 SEP-30-1998 6,895 1,763 0 0 12,345 10,907 472 308 10,256 10,234 30,513 24,519 63,098 58,151 26,190 21,670 75,311 65,574 12,826 11,371 2,783 2,391 0 0 0 0 18,808 18,572 38,144 31,649 75,311 65,574 16,198 13,793 16,198 13,793 9,286 9,204 9,286 9,204 4,357 3,566 0 0 85 126 2,470 897 731 268 1,739 629 0 0 0 0 0 0 1,739 629 0.27 0.10 0.27 0.10
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