UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
--------------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended March 30, 1997
OR
- ----- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-28276
SAWTEK INC.
(Exact name of registrant as specified in its charter)
Florida 59-1864440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 South Highway 441
Apopka, Florida 32703
(Address of principal executive offices)
Telephone Number (407) 886-8860
(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 ______
As of April 15, 1997, there were 20,362,566 shares of the Registrant's
Common Stock outstanding, par value $.0005.
<PAGE>
Sawtek Inc.
TABLE OF CONTENTS
Part I. Financial Information Page Number
- ------- --------------------- -----------
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of March 31, 1997
and September 30, 1996 ..................................... 3
Consolidated Statements of Income (Loss) for the three
months and six months ended March 31, 1997 and 1996......... 4
Consolidated Statements of Cash Flows for the six months
ended March 31, 1997 and 1996............................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............. 8
Part II. Other Information
- -------- -----------------
Item 1. Legal Proceedings ..........................................13
Item 2. Changes in Securities ......................................13
Item 3. Defaults Upon Senior Securities ............................13
Item 4. Submission of Matters to a Vote of Security Holders ........13
Item 5. Other Information ...........................................13
Item 6. Exhibits and Reports on Form 8-K ...........................13
Signatures...............................................................14
Exhibit Index ...........................................................14
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
<TABLE>
SAWTEK INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, September 30,
1997 1996
---- ----
(unaudited)
(dollars in thousands, except per share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $35,714 $ 27,743
Accounts receivable net of allowance for doubtful accounts and returns of
$875 at March 31, 1997 and $654 at September 30, 1996 7,653 7,938
Inventories 7,094 6,509
Deferred income taxes 1,237 1,266
Other current assets 716 528
------ ------
Total current assets 52,414 43,984
Other assets 142 186
Property, plant and equipment, net 36,780 30,424
------ ------
Total assets $89,336 $ 74,594
====== ======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 1,874 $ 1,801
Accrued wages and benefits 2,286 3,109
Other accrued liabilities 1,670 1,068
Current maturities of long-term debt 1,251 1,363
Income taxes payable 2,631 844
------- ------
Total current liabilities 9,712 8,185
Long-term debt, less current maturities 3,262 3,786
Deferred income taxes 4,089 998
Shareholders' equity:
Common stock; $.0005 par value; 120,000,000 authorized shares; issued and
outstanding shares 20,362,566 at March 31, 1997 and 19,854,102 at September
30, 1996 10 10
Capital surplus 54,207 53,000
Unearned ESOP compensation (1,171) (1,367)
Retained earnings 19,227 9,982
------ ------
Total shareholders' equity 72,273 61,625
------ ------
Total liabilities and shareholders' equity $89,336 $74,594
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
SAWTEK INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) - unaudited
<CAPTION>
Three Months Six Months
Ended Ended
March 31, March 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $20,009 $13,929 $38,511 $24,738
Cost of sales 8,313 6,512 16,991 11,604
------ ------ ------ ------
Gross profit 11,696 7,417 21,520 13,134
Operating expenses:
Selling expenses 1,150 797 2,396 1,571
General & administrative expenses 1,786 1,581 2,920 2,649
ESOP compensation expense 196 5,539 392 11,079
Research & development expenses 912 486 1,593 904
------ ------ ------ ------
Total operating expenses 4,044 8,403 7,301 16,203
------ ------ ------ ------
Operating income (loss) 7,652 (986) 14,219 (3,069)
Interest expense 70 87 111 225
Other income (453) (26) (808) (20)
------ ------ ------ ------
Income (loss) before taxes 8,035 (1,047) 14,916 (3,274)
Income taxes 3,053 1,401 5,671 2,355
------ ------ ------ ------
Net income (loss) $ 4,982 $ (2,448) $ 9,245 $ (5,629)
====== ====== ====== ======
Net income (loss) per share $ 0.23 $ (0.14) $ 0.43 $ (0.31)
====== ====== ====== ======
Shares used in computing net income (loss) per
share 21,368 18,140 21,363 18,140
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
SAWTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
(in thousands)
<S> <C> <C>
Operating activities:
Net income (loss) $ 9,245 $ (5,629)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,800 732
Deferred income taxes 3,120 34
Compensatory stock options 553 0
ESOP allocation 196 11,079
Loss on sale of fixed assets 269 0
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 285 518
Inventories (585) (2,025)
Other current assets (187) (390)
Increase (decrease) in liabilities:
Accounts payable 73 1,422
Accrued liabilities (221) (635)
Income taxes payable 1,787 16
------ -------
Net cash provided by operating activities 16,335 5,122
Investing activities:
Purchase of property, plant and equipment, net (8,436) (15,254)
Reduction in industrial revenue bond assets 0 2,606
Proceeds from sale of fixed assets 54 0
------ ------
Net cash used in investing activities (8,382) (12,648)
Financing activities:
Proceeds from long-term debt 0 8,200
Principal payments on long-term debt (636) (3,128)
Net proceeds from sale of common stock 654 358
Purchase of common stock 0 (191)
Redemption of preferred stock 0 (100)
Preferred stock dividends paid 0 (27)
------ ------
Net cash provided by financing activities 18 5,112
------ ------
Increase (decrease) in cash and cash equivalents 7,971 (2,414)
Cash and cash equivalents at beginning of period 27,743 2,819
------ ------
Cash and cash equivalents at end of period $ 35,714 $ 405
====== ======
Interest paid $ 169 $ 289
Income taxes paid 765 2,660
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SAWTEK INC.
Notes to Consolidated Financial Statements - March 31, 1997 (unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information in response to the requirements of Article 10 of
Regulation S-X. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial condition as of March 31, 1997, and the results of its
operations, and its cash flows for the three and six month periods ended March
31, 1997 and 1996. These financial statements should be read in conjunction with
the Company's audited financial statements as of September 30, 1996, including
the notes thereto, and the other information set forth therein included in the
Company's most recent annual report on Form 10-K for the year ended September
30, 1996 (File No. 000-28276), which was filed with the Securities and Exchange
Commission (the "SEC") on November 8, 1996. The following discussion may contain
forward looking statements which are subject to the risk factors set forth in
"Risks and Uncertainties" in Item 2 of this Form 10-Q.
The Company maintains its records on a fiscal year ending on September 30 of
each year and all references to a year refer to the year ending on that date.
The Company's first, second and third quarters end on the Sunday closest to the
last day of the last month of such quarter, which was March 30, 1997, for the
second quarter of 1997. However, for convenience, the financial statements are
dated as of March 31, 1997.
Operating results for the three and six month periods ended March 31, 1997 are
not necessarily indicative of the operating results that may be expected for the
year ending September 30, 1997.
2. Earnings (loss) Per Share
Earnings (loss) per share ("EPS") is computed based on the weighted average
number of common shares, common stock options (using the treasury stock method)
and all ESOP shares outstanding. In accordance with Securities and Exchange
Commission staff accounting bulletins, common and common equivalent shares
issued by the Company at prices below the public offering price during the
period beginning one year prior to the filing date of the initial public
offering on April 29, 1996, have been included in the calculation as if they
were outstanding for all periods prior to the offering (using the treasury stock
method and the initial public offering price).
3. Inventories - Inventories are composed of the following:
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
-------------- ------------------
(in thousands)
<S> <C> <C>
Raw Material........................................ $2,401 $1,976
Work in Process..................................... 2,058 2,341
Finished Goods...................................... 2,635 2,192
----- -----
Total...................................... $7,094 $6,509
===== =====
</TABLE>
6
<PAGE>
4. Property, Plant and Equipment - Property, plant and equipment are
composed of the following:
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
-------------- ------------------
(in thousands)
<S> <C> <C>
Land and Improvements............................... $ 671 $ 671
Buildings........................................... 9,566 9,829
Production and Test Equipment....................... 26,478 21,459
Computer Equipment.................................. 2,803 2,734
Furniture and Fixtures.............................. 1,569 1,533
Construction in Progress............................ 7,505 4,774
------ ------
48,592 41,000
Less Accumulated Depreciation....................... 11,812 10,576
------ ------
Total...................................... $36,780 $30,424
====== ======
</TABLE>
5. Shareholders' Equity
The consolidated changes in shareholders' equity for the six months ended
March 31, 1997 are as follows:
<TABLE>
(in thousands)
<CAPTION>
Unearned
Common Stock Capital ESOP Retained
Shares Amount Surplus Compensation Earnings
------ ------ ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1996 19,854 $ 10 $53,000 $(1,367) $ 9,982
Net income 9,245
ESOP allocation 196
Compensatory stock options granted 553
Sale of common stock 509 654
------ --- ------ ------ ------
Balance at March 31, 1997 20,363 $ 10 $54,207 $(1,171) $19,227
====== === ====== ====== ======
</TABLE>
6. Increase in Authorized Shares
On March 17, 1997, the shareholders of the Company voted to amend the Articles
of Incorporation to increase the number of authorized shares of Common Stock,
par value $.0005 per share, from 40,000,000 shares to 120,000,000 shares. This
amendment was adopted pursuant to a recommendation by the Board of Directors to
the shareholders of the Corporation and approved by the required majority of the
shareholders on March 17, 1997, at a special meeting of the shareholders.
7. Recently Issued Accounting Standards
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which is
effective for financial statements issued for periods ending after December 15,
1997. This pronouncement establishes standards for computing and presenting
earnings per share (EPS) for entities with publicly-held common stock or
potential common stock. SFAS 128 simplifies the standards for computing EPS and
makes them comparable to international EPS standards. Early application of this
statement is not permitted. The Company intends to adopt the provisions of SFAS
128 in 1998 and does not expect its application to have a material impact on the
financial statements of the Company.
7
<PAGE>
Item 2. Management's discussion and analysis of financial condition and result
of operations
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-Q. Except for the historical information contained herein, the
discussion in this Form 10-Q contains certain forward-looking statements that
involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The cautionary statements made herein
should be read as being applicable to all related forward-looking statements
wherever they appear. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such differences
include those discussed in "Risks and Uncertainties," as well as those discussed
elsewhere herein.
Overview
- --------
The Company was incorporated in 1979 to design, develop, manufacture and market
a broad range of electronic components based on surface acoustic wave ("SAW")
technology used in telecommunications, data communications, video transmission,
military and space systems and other markets. The Company's focus has been on
the high-end performance spectrum of the market, and its primary products are
SAW bandpass filters, resonators, delay lines, oscillators and SAW-based
sub-systems. Initially, the Company's products were concentrated in the military
and space systems market. The Company has since shifted its attention to
commercial markets which accounted for 87% of net sales in the first six months
of 1997. The Company has also experienced significant growth in its
international markets over the last five years, with international sales having
more than doubled to approximately 42% of net sales for the first six months of
1997.
The Company derives revenue from high-volume commercial production components,
military/industrial production components and engineering services and products.
Non-recurring engineering ("NRE") revenue is included in net sales and relates
to the design and development of custom devices and delivery of prototype parts.
In all cases, revenue is recognized when the parts or services have been
completed and units, including prototypes, have been shipped.
Net sales increased 56% from the first six months of 1996 to the first six
months of 1997. The growth in net sales is mainly attributable to growth in the
wireless communications market to which the Company supplies SAW bandpass
filters for cellular telephone basestations and, to a lesser extent, for
handheld subscriber telephones. The Company has a broad product line of SAW
filters and other components with average selling prices generally in the range
of $3 to $300 for many high performance wireless applications.
For the six months ended March 31, 1997, net sales to the Company's top ten
customers accounted for approximately 75% of net sales with the top four
customers accounting for 51%. The Company expects that sales of its products to
a limited number of customers will account for a high percentage of its net
sales in the foreseeable future.
8
<PAGE>
In 1991, the Company established an Employee Stock Ownership Plan ("ESOP"). At
that time, the Company borrowed $4.0 million from its commercial bank and loaned
it to the ESOP to finance the purchase of 8,888,880 shares of the Company's
common stock. The unpaid balance of this loan, $1.171 million as of March 31,
1997, matures in 1998 and is payable in quarterly installments of approximately
$195,000. These ESOP shares are accounted for in accordance with the American
Institute of Certified Public Accountants (AICPA) Statement of Position ("SOP")
76-3, which uses cost as the basis for valuing shares as they are released and
allocated to participants' accounts. In 1994, the Company borrowed an additional
$1.7 million and loaned it to the ESOP to finance the purchase of an additional
1,610,600 shares of common stock. In 1996, the Company repaid the 1994 loan and
allocated all of the related shares to participants' accounts. These shares were
accounted for in accordance with the AICPA's SOP 93-6, which uses fair market
value as the basis of valuing shares. The impact of this was a charge to ESOP
compensation expense of $12.9 million reflected in the financial results for
1996. Of the $12.9 million, $11.3 million was a one-time, non-cash charge
amounting to $0.59 per share for the full year of 1996. This charge equaled $4.8
million or $0.27 per share for the three months ending March 31, 1996, and $9.6
million or $0.54 per share for the six months ending March 31, 1996.
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company.
Results of Operations
- ---------------------
The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to
total net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 41.6 46.8 44.1 46.9
----- ----- ----- -----
Gross profit 58.4 53.2 55.9 53.1
Operating expenses:
Selling expenses 5.7 5.7 6.2 6.3
General & administrative expenses 8.9 11.4 7.6 10.7
ESOP compensation expense 1.0 39.7 1.0 44.8
Research & development expenses 4.6 3.5 4.1 3.7
----- ----- ----- -----
Total operating expenses 20.2 60.3 18.9 65.5
----- ----- ----- -----
Operating income (loss) 38.2 (7.1) 37.0 (12.4)
Interest expense .3 .6 .3 .9
Other income (2.3) (0.2) (2.1) (0.1)
----- ----- ----- -----
Income (loss) before income taxes 40.2 (7.5) 38.8 (13.2)
Income taxes 15.3 10.1 14.8 9.6
----- ----- ----- -----
Net income (loss) 24.9% (17.6)% 24.0% (22.8)%
===== ===== ===== =====
</TABLE>
9
<PAGE>
Net Sales. Net sales increased 44% from $13.9 million in the quarter ended March
31, 1996 to $20.0 million in the quarter ended March 31, 1997 and increased 56%
from $24.7 million in the six months ended March 31, 1996 to $38.5 million in
the six months ended March 31, 1997. The increase for both the three and six
month periods was a result of increased product shipments to the wireless
communication market, specifically sales of high volume filters for basestation
applications and telephone handsets based on CDMA technology for the
telecommunications industry. International sales decreased from approximately
56.4% and 53.0% of net sales in the three and six-month periods ended March 31,
1996 to 40.5% and 42.5% of net sales for the three and six-month periods ended
March 31, 1997, respectively. Sales for military and space systems of
approximately 15.8% and 13.8% of net sales in the three and six-month periods
ended March 31, 1996 compare to approximately 12.1% and 13.0% of net sales for
the three and six-month periods ended March 31, 1997, respectively. The
percentage decrease was due to the increase in overall net sales, however, the
dollar volume of international and military sales actually increased in both the
three and six month periods ended March 31, 1997 compared to the same periods
ended March 31, 1996.
Gross Margin. Gross margin increased from 53.2% and 53.1% in the three and
six-month periods ended March 31, 1996 to 58.4% and 55.9% in the three and
six-month periods ended March 31, 1997 primarily due to improved yields, lower
manufacturing costs associated with the Costa Rican operation and economies of
scale with the increased volume. As the Company shifts its product mix to high
volume production, it is anticipated that gross margins will decline as these
components are more susceptible to downward pricing pressure.
Selling Expenses. Selling expenses increased 44% and 53% in the second quarter
and the first six months of 1997 compared to the same periods in 1996, but
remained essentially constant as a percentage of net sales for the corresponding
periods. Most of the selling expenses remained relatively constant with
commission expenses paid to outside sales representatives as the only component
that increased significantly with the higher sales level. The Company
anticipates that selling expenses will increase as new employees are added to
support its sales and marketing effort in 1997 and as commissions are incurred.
General and Administrative Expenses. General and administrative expenses
increased from $1.6 million for the quarter ended March 31, 1996 to $1.8 million
for the quarter ended March 31, 1997. These expenses also increased from $2.7
million for the six months ended March 31, 1996 to $2.9 million for the six
months ended March 31, 1997. The increase in cost is primarily due to additional
expenses incurred as a public company, higher salaries and wages, and
compensatory stock option expense.
ESOP Compensation Expense. ESOP compensation expense decreased from $11.1
million in the first six months of 1996 to $392,000 in the first six months of
1997. This decrease of $10.7 million is a result of the Company committing to
release and to allocate all of the ESOP shares acquired in 1994 to employees'
accounts for services rendered during the first seven months of 1996. For the
quarter ended March 31, 1997, the Company recorded a charge of $196,000 for ESOP
compensation compared to $5.5 million for the same period in 1996. The 1996
share allocation was accounted for in accordance with SOP 93-6 which uses market
value as the basis of valuing shares as they are allocated. The shares were
acquired at a cost of $1.03 per share compared to an average market value of
$8.03 for the first seven months of 1996. The charge for ESOP shares allocated
in 1997 is based on SOP 76-3 which uses the cost of the shares. All remaining
ESOP shares are accounted for in accordance with SOP 76-3.
10
<PAGE>
Research and Development Expenses. Research and development expenses increased
$426,000 in the quarter ended March 31, 1997 compared to the quarter ended March
31, 1996. R&D increased 76% from $904,000 in the six months ended March 31, 1996
to $1.6 million in the first six months of 1997, and increased as a percentage
of net sales from 3.7% to 4.1% for the same period. These expenses increased due
to additional personnel and expanded research and development efforts. The
Company anticipates that research and development expenses will continue to
increase in total dollars as personnel and programs are added. A significant
portion of the Company's development activities is conducted in connection with
the design and development of custom devices, which is paid for by customers and
classified as NRE items. The revenue generated from these items is included in
net sales and the cost is reflected in cost of sales rather than in research and
development expenses.
Interest Expense. Interest expense decreased from $225,000 in the first six
months of 1996 to $111,000 in the first six months of 1997, due to repayment of
debt with a portion of the funds from the Company's IPO.
Other Income. Other income primarily represents interest income and
non-operating expenses. Other income increased for the three and six-month
periods as the Company recorded increased interest income on its cash balances.
Income Tax Expense. The provision for income taxes as a percentage of income
(loss) before income taxes was 38.0% for the three and six-month periods ended
1997. In the three and six-month periods ended March 31, 1996, the Company
incurred a non-deductible charge for ESOP compensation expense of approximately
$4.8 million and $9.6 million, respectively. Had it not been for this charge,
the tax provision would have been approximately 37% for both periods. The
Company expects that its effective tax rate will remain at approximately 36% to
39% during 1997.
Risks and Uncertainties
- -----------------------
General Risks and Uncertainties. Except for historical information contained
herein, this Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that are subject to
risks and uncertainties, including fluctuations in quarterly results, backlog,
capacity limitations, order rescheduling or cancellation, limited sources of
supply, dependence on continuing demand for wireless communication services,
dependence on a limited number of customers, technological change, competition,
risks associated with international operations, variation in production yield,
change in economic conditions of the various markets the Company serves, as well
as the other risks detailed in the Company's Form 10-K filed with the Securities
and Exchange Commission on November 8, 1996.
Liquidity and Capital Resources
- -------------------------------
The Company has financed its operations to date through cash generated from
operations, bank borrowings, lease financing, the private sale of securities,
and its May 1, 1996 initial public offering. The Company requires capital
principally for equipment, expansion of its primary facility, financing of
accounts receivable and inventory, investment in product development activities
and new technologies and for its operations in Costa Rica. For the six months
ended
11
<PAGE>
March 31, 1997, the Company generated net cash from operating activities of
$16.3 million,consisting primarily of net income of $9.2 million, $1.8 million
of depreciation and amortization, $3.1 million in deferred taxes and $1.6
million of increases in other current liabilities. The Company has a revolving
credit agreement totaling $15.0 million from SunTrust Bank, Central Florida,
N.A. available through January 1998. There were no balances outstanding on this
credit line at March 31, 1997.
The Company made capital expenditures of approximately $3.7 million during the
quarter ended March 31, 1997 and $8.4 million for the six months ended March 31,
1997. The Company intends to spend approximately $20 million in 1997 on capital
equipment and facilities.
The Company believes that its present cash position, together with its credit
facility and funds expected to be generated from operations, will be sufficient
to meet its projected working capital and other cash requirements through the
next 12 months. However, the Company is considering a follow-on public offering
in fiscal 1997 to fund future capital expenditures and working capital needs in
the future if, among other factors, the market conditions are favorable. There
can be no assurance that events in the future will not require the Company to
seek additional capital sooner or, if so required, that it will be available on
terms acceptable to the Company, if at all.
12
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings. The Company is not subject to any legal proceedings
that, if adversely determined, would cause a material adverse effect on
the Company's financial condition, business or results of operations.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders.
1. Shareholders of record December 9, 1996. Vote to elect Board of Directors
to an annual term. Vote cast as of January 20, 1997.
Nominee to Board Votes For Votes Withheld Abstained
---------------- --------- -------------- ---------
Steven P. Miller 17,520,590 73,931 510
Neal J. Tolar 17,520,590 300 510
Robert C. Strandberg 17,520,590 101,183 510
Bruce S. White 17,520,590 73,881 510
Willis C. Young 17,520,590 74,531 510
2. Shareholders of record February 14, 1997. Vote to amend the Articles of
Incorporation to increase the authorized shares from 40,000,000 to 120,000,000.
Vote cast as of March 17, 1997.
Votes for Votes Withheld
Vote to amend Articles of Incorporation
to increase authorized shares 13,578,783 3,242,587
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.1 - First Amendment to Fourth Supplemental Trust
Indenture dated November 19, 1996 by and among the Company,
SunTrust Bank, Central Florida, N.A., and the Orange County
Industrial Development Authority.
(b) Exhibit 11.1 - Statement regarding computations of earnings
per share.
(c) Exhibit 27 - Financial Data Schedule.
(d) Reports on Form 8-K.
On March 25, 1997, the Company filed a Current Report on Form
8-K concerning an amendment to the Company's Articles of
Incorporation increasing the authorized shares of its Common
Stock.
13
<PAGE>
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.
Dated: April 21, 1997
SAWTEK INC.
(Registrant)
/S/ Raymond A. Link
Raymond A. Link
Vice President Finance, Chief Financial Officer
(Principal Financial Officer)
EXHIBIT INDEX
10.1 Exhibit 10.1 - First Amendment to Fourth Supplemental Trust Indenture
dated November 19, 1996 by and among the Company, SunTrust Bank,
Central Florida, N.A., and the Orange County Industrial Development
Authority.
11.1 Statement regarding computations of earnings per share
2.7 Financial Data Schedule
14
<PAGE>
EXHIBIT 11.1
<TABLE>
SAWTEK INC.
STATEMENT REGARDING COMPUTATIONS OF EARNINGS PER SHARE -
as reported on Form 10Q
Three months Six months
ended ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average number of shares of Common
Stock outstanding 20,328 15,837 20,183 15,837
Net effect of dilutive stock options based
on the Treasury stock method using
the average fair market
value in effect for the period 1,040 2,257 1,163 2,257
------ ------ ------ ------
Total shares outstanding for Primary EPS 21,368 18,094 21,346 18,094
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares of Common
Stock outstanding 20,328 15,837 20,183 15,837
Net effect of dilutive stock options based on
the Treasury stock method using
the fair market value at the end of the period 1,040 2,303 1,180 2,303
------ ------ ------ ------
Total shares outstanding for fully
Diluted EPS 21,368 18,140 21,363 18,140
====== ====== ====== ======
Net income (loss) applicable to common
shareholders $ 4,982 ($2,448) $ 9,245 ($5,629)
Earnings (loss) per share: Primary $ 0.23 ($ 0.14) $ 0.43 ($ 0.31)
Fully Diluted $ 0.23 ($ 0.14) $ 0.43 ($ 0.31)
</TABLE>
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO
FOURTH SUPPLEMENTAL TRUST INDENTURE
THIS FIRST AMENDMENT TO FOURTH SUPPLEMENTAL TRUST INDENTURE (the "First
Amendment") entered into as of the 19th day of November, 1996 by and among
ORANGE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY, a public body politic and
corporate and a public instrumentality duly created and existing under and by
virtue of the laws of the State of Florida (the "Issuer"), SUNTRUST BANK,
CENTRAL FLORIDA, NATIONAL ASSOCIATION f/k/a/ Sun Bank, National Association, a
national banking association, as Trustee (the "Trustee") and SAWTEK INC., a
Florida corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Issuer and Sawtek Inc., a Florida corporation (the
"Company") heretofore entered into an Installment Sale and Security Agreement,
dated as of December 1, 1981, and recorded on December 23, 1981 in Official
Records Book 3247, Page 2051, as amended by an Amendment to Installment Sale and
Security Agreement dated August 3, 1983, as further amended by a Second
Amendment to Installment Sale and Security Agreement dated as of June 1, 1984,
and recorded June 7, 1984 in Official Records Book 3515, Page 1454, as further
amended by a Third Amendment to Installment Sale and Security Agreement, dated
as of January 1, 1987 and recorded April 1, 1987 in Official Records Book 3874,
Page 0760, as further amended by a Fourth Amendment to Installment Sale and
Security Agreement, dated as of December 20, 1990 and recorded January 14, 1991
in Official Records Book 4253, Page 3406 and as further amended by a Fifth
Amendment to Installment Sale and Security Agreement dated as of March 1, 1995
and recorded March 15, 1995 in Official Records Book 4867, page 1818, all of the
Public Records of Orange County, Florida (collectively, the "Sale Agreement")
whereby the Issuer agreed to finance the cost of acquiring, constructing and
equipping a capital project for the expansion of an industrial or manufacturing
plant (the "1995 Project", as more fully defined in the Sale Agreement) within
the boundaries of Orange County, Florida, through the issuance of a series of
its revenue bonds designated, "Orange County Industrial Development Authority,
Industrial Development Revenue Bonds (Sawtek Inc. Project), Series 1995" in the
aggregate principal amount of $3,500,000.00 (the "Series 1995 Bonds") and to
sell the 1995 Project to the Company for a purchase price to be paid in
installments and at times and in amounts sufficient to pay the principal of,
premium, if any, and interest on the Series 1995 Bonds and to pay Administration
Expenses (as defined in the Sale Agreement); and
WHEREAS, the Issuer and SunTrust Bank, Central Florida National
Association, f/k/a/ Sun Bank, National Association, as Trustee (the "Trustee")
heretofore entered into a Trust Indenture, dated as of December 1, 1981, and
recorded on December 23, 1981 in Official Records Book 3247, at Page 2158, as
amended by a Supplemental Trust Indenture, dated August 3, 1983, as further
amended by a Second Supplemental Trust Indenture dated as of June 1, 1984, and
recorded June 7, 1984 in Official Records Book 3515, Page 1482, as further
amended by a Third Supplemental Trust Indenture dated January 1, 1987 and
recorded April 1, 1987 in Official Records Book 3874, Page 0760 and as further
amended by a Fourth Supplemental Trust Indenture (the "Fourth Supplemental
Indenture") dated as of March 1, 1995 and recorded March 15, 1995 in Official
Records Book 4867, Page 1852, all of the Public Records of Orange County,
Florida, (Collectively, the "Indenture") under which the Series 1995 Bonds are
issued and outstanding; and
<PAGE>
WHEREAS, pursuant to a Bond Purchase Agreement by and between the
Issuer and SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION f/k/a/ Sun Bank,
National Association, a national banking association (the "Bondholder") dated as
of March 1, 1995 (the "Bond Purchase Agreement") the Bondholder purchased one
hundred percent (100%) of the 1995 Bonds; and
WHEREAS, due to unforeseen circumstances which were not reasonably
ascertainable by the Company at the time of issuance of the 1995 Bonds, there
has occurred a Determination of Taxability, as defined in the Series 1995 Bonds,
the form of which is attached as Exhibit B to the Fourth Supplemental Indenture
and, as a result thereof, the Company has requested the Issuer and the Trustee
to modify the Adjusted Rate (as defined in the Series 1995 Bonds) applicable to
the Series 1995 Bonds after the occurrence of a Determination of Taxability; and
WHEREAS, pursuant to Section 10.02 of the Indenture, the Issuer and the
Trustee, with the approval of the Company and the written consent of the Holders
of not less than sixty-six and two-thirds percent (66 2/3%) in principal amount
of the Outstanding Bonds, may amend the Indenture or any Supplemental Indenture
to modify and amend the Adjusted Rate applicable to the Series 1995 Bonds after
a Determination of Taxability; and
WHEREAS, the Issuer, the Company and the Trustee, by execution of this
First Amendment, and the Bondholder, as the holder of one hundred percent (100%)
of the Outstanding Bonds, by execution of the Consent and Approval attached to
this First Amendment, have consented to the modification and amendment of the
Adjusted Rate with respect to the Series 1995 Bonds and the amendment and
modification of the form of the Series 1995 Bond attached as Exhibit B to the
Fourth Supplemental Indenture, to provide for and/or allow the same.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is hereby mutually covenanted, agreed and confirmed that the Fourth
Supplemental Indenture is hereby supplemented, amended and modified as follows:
1. Amendment to Fourth Supplemental Indenture. The form of the Series
1995 Bond which is attached to the Fourth Supplemental Indenture as Exhibit B is
hereby amended by deleting in its entirety the first sentence of the fifth
paragraph of page 2 of said Bond and substituting in lieu thereof the following:
"In the event that there shall occur a 'Determination of
Taxability' (the 'Determination'), as hereinafter defined, the
interest rate on this Series 1995 Bond (the 'Adjusted Rate')
from the 'Date of Taxability' (as hereinafter defined) to and
through the date of payment in full of this Series 1995 Bond
(the 'Inclusion Period'), as hereinafter defined, shall be
equal to LIBOR, as hereinafter defined, plus one hundred fifty
basis points (1.50%), as calculated on each Interest Rate
Determination Date, as hereinafter defined. 'LIBOR' as used
herein means the interest rate per annum (in accordance with
the length of the designated Interest Period, as hereinafter
defined) in effect on the Interest Rate Determination Date (as
hereinafter defined) designated as the LIBOR rate and
-2-
<PAGE>
published from time to time in the Wall Street Journal or such
substitute publication or interest rate reporting service as
may be designated in writing from time to time by the Holder
to the Company; in any such case rounded, if necessary, to the
next higher 1/16 of 1.0%, if the rate is not such a multiple.
'Interest Period' as used herein means 30, 60 or 90 days, or
any other period approved by the Holder in its sole and
absolute discretion, as selected by the Company from time to
time in accordance with the terms hereinafter set forth.
'Interest Rate Determination Date' as used herein means each
date for calculating LIBOR for purposes of determining the
Adjusted Rate in respect of an Interest Period, and which
shall be the second business day prior to the first day of the
applicable Interest Period, and which shall be the second
business day prior to the first day of the applicable Interest
Period. The initial Interest Period shall be thirty (30) days
and thereafter the Company shall choose the Interest Period
from time to time by giving the Holder notice (a 'Notice of
Selection of Interest Period') in such form as may be
acceptable to the Holder, which notice shall specify the
requested Interest Period and that on the date of the Notice
of Selection of Interest Period, there has been no material
adverse change in the financial condition of the Company from
that set forth on the most recent financial statements
furnished to the Holder and must be provided to the Holder no
later than the Interest Rate Determination Date for the
applicable Interest Period for which the Adjusted Rate is
being calculated. If this Series 1995 Bond is unpaid upon the
expiration of any Interest Period applicable thereto and the
Company has not provided a Notice of Selection of Interest
Period and received by the Holder within the time provided
above prior to the expiration of such Interest Period of the
Interest Period to be applicable to this Series 1995 Bond
after the current Interest Period expires, this Series 1995
Bond shall, effective as of the first day after the expiration
of such Interest Period, be continued for an Interest Period
of identical length to that just expired. Thereafter, subject
to the limitations set forth above, the Company may, by giving
the Holder an appropriate Notice of Selection of Interest
Period, together with the requested Interest Period, elect to
change the Interest Period applicable to this Series 1995 Bond
at a date designated by the Company, which date shall be (i)
no earlier than a date two (2) Banking Days after the receipt
by the Holder of such Notice of Selection of Interest Period
and (ii) immediately following the expiration of an existing
Interest Period."
2. Execution of Additional Amendment Documents. The Issuer and the
Trustee have, simultaneously with the execution of this First Amendment, entered
into, executed and delivered an Allonge to Bond (which, collectively with this
First Amendment is hereinafter referred to as the "Amendment Document") of even
date herewith to evidence the amendment and modification of the Adjusted Rate
applicable to the Series 1995 Bond after the occurrence of a Determination of
Taxability to accomplish the purposes of this First Amendment.
-3-
<PAGE>
3. Ratification of Bond Documents. Except as otherwise specifically set
forth in this First Amendment, no other term, condition or provision of the
Fourth Supplemental Indenture shall be deemed to be altered, amended or modified
hereby and this First Amendment shall not be considered a novation. The Issuer,
the Company and the Trustee hereby ratify, approve and confirm the Fourth
Supplemental Indenture, as amended and modified hereby. The Company agrees that
the amounts advanced to it under the Sale Agreement (as defined in the Fourth
Supplemental Indenture) are absolutely and unconditionally due and owing and are
not subject to any claims, counterclaims, defenses or other rights of offset
whatsoever.
4. Representations and Warranties. The parties hereby reaffirm all the
representations and warranties contained in the Fourth Supplemental Indenture as
though made and given in connection with the execution and delivery of this
First Amendment and further certify that such representations and warranties are
true and correct as of the date hereof.
5. Complete Agreement. This First Amendment constitutes the complete
agreement between the parties hereto and incorporates all prior discussions,
agreements and representations made in regard to the matters set forth herein.
6. Counterparts. This First Amendment and the Consent and Approval of
Bondholder attached hereto may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this First Amendment and the Consent and Approval of
Bondholder by signing any such counterpart.
IN WITNESS WHEREOF, the Issuer, the Company and the Trustee have caused
this First Amendment to be executive, sealed and delivered by their duly
authorized officers on the day and year first above written.
ISSUER:
ORANGE COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
(OFFICIAL SEAL)
By: /s/ J. Schirmm
Vice-Chairman of the Orange
County Industrial Development
Authority
ATTEST:
/s/ Daniel A. Lynch
Secretary of the Orange
County Industrial Development
Authority
-4-
TRUSTEE:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION f/k/a Sun
Bank, National Association, as Trustee
(CORPORATE SEAL)
By: /s/ David A. Rimpo
Name: David A. Rimpo
Title: Vice President
ATTEST:
/s/ Deborah Moreyra
Name: Deborah Moreyra
Title: First Vice President
<PAGE>
COMPANY:
SAWTEK INC.
(CORPORATE SEAL)
By: /s/ Steven P. Miller
Steven P. Miller,
President/Chief Executive Officer
ATTEST:
/s/ Raymond A. Link
Raymond A. Link,
Vice President-Finance, Chief
Financial Officer
-5-
<PAGE>
CONSENT AND APPROVAL OF BONDHOLDER
The undersigned, as the Holder of one hundred percent (100%) of the
Outstanding Bonds, hereby approves and consents to the foregoing First Amendment
and to the amendment and modification of the Fourth Supplemental Indenture as
set forth therein and in the other Amendment Documents.
Dated as of the 16th day of December, 1996.
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION f/k/a/ Sun
Bank, National Association
(CORPORATE SEAL)
By: /s/ Douglas A. Woodman
Name: Douglas A. Woodman
Title: Vice President
ATTEST:
/s/ W. John Wendler
Name: W. John Wendler
Title: First Vice President
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001009675
<NAME> Sawtek Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-30-1997
<CASH> 35,714
<SECURITIES> 0
<RECEIVABLES> 8,528
<ALLOWANCES> 875
<INVENTORY> 7,094
<CURRENT-ASSETS> 52,414
<PP&E> 48,592
<DEPRECIATION> 11,812
<TOTAL-ASSETS> 89,336
<CURRENT-LIABILITIES> 9,712
<BONDS> 3,262
0
0
<COMMON> 10
<OTHER-SE> 72,273
<TOTAL-LIABILITY-AND-EQUITY> 89,336
<SALES> 38,511
<TOTAL-REVENUES> 38,511
<CGS> 16,991
<TOTAL-COSTS> 16,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> 14,916
<INCOME-TAX> 5,671
<INCOME-CONTINUING> 9,245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,245
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
