UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended December 27, 1997
or
[ ] 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 0-22799
B E I T E C H N O L O G I E S, I N C.
(Exact name of Registrant as specified in its charter)
Delaware 94-3274498
- ------------------------------- ----------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
One Post Street, Suite 2500
San Francisco, California 94104
----------------------------------------
(Address of principal executive offices)
(415) 956-4477
----------------------------------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: $.001 Par Value, 7,198,850 shares as of January 20, 1998
Page 1 of 12
<PAGE>
<TABLE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<CAPTION>
PART 1. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--December 27, 1997 and
September 27, 1997 3
Condensed Consolidated Statements of Operations--Quarter
ended December 27, 1997 and December 28, 1996 4
Condensed Consolidated Statements of Cash Flows--Quarter
ended December 27, 1997 and December 28, 1996 5
Notes to Condensed Consolidated Financial Statements--
December 27, 1997 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the quarter ended December 27,
1997.
SIGNATURES 12
Page 2 of 12
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 27, September 27,
1997 1997
(Unaudited) (See note below)
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,049 $ 5,034
Trade receivables, net 15,923 17,241
Inventories, net -- Note 2 24,183 22,656
Other current assets 5,651 5,618
Current assets of discontinued operations -- Note 3 388 1,418
------- -------
Total current assets 51,194 51,967
Property, plant and equipment, net 24,219 25,361
Acquired technology 5,736 5,977
Goodwill 641 654
Other assets, net 4,093 3,825
Non-current assets of discontinued operations -- Note 3 1,572 1,625
------- -------
87,455 89,409
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 5,792 $ 6,317
Accrued expenses and other liabilities 9,921 10,497
Current portion of long-term debt 5,626 5,628
Current liabilities of discontinued operations -- Note 3 2,370 2,558
------- -------
Total current liabilities 23,709 25,000
Long-term debt, less current portion 25,903 27,508
Other liabilities 299 284
Stockholders' equity 37,544 36,617
------- -------
$87,455 $89,409
======= =======
<FN>
See notes to condensed consolidated financial statements.
Note: The balance sheet at September 27, 1997 has been derived from the audited consolidated balance sheet at that date.
</FN>
Page 3 of 12
</TABLE>
<PAGE>
<TABLE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Quarter Ended
-------------------------------------------------
December 27, December 28,
1997 1996
(dollars in thousands except per share amounts)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 28,256 $ 22,903
Cost of sales 18,634 15,136
-------- --------
9,622 7,767
Selling, general and administrative expenses 6,118 7,114
Research, development and related expenses 1,396 895
-------- --------
Income (loss) from operations 2,108 (242)
Interest expense 641 476
Other income 82 111
-------- --------
Income (loss) from continuing operations before
income taxes 1,549 (607)
Provision (benefit) for income taxes 671 (248)
-------- --------
Income (loss) from continuing operations 878 (359)
Income from discontinued operations, net of income taxes 81 394
-------- --------
Net income $ 959 $ 35
======== ========
Earnings (loss) per Common Share -- Note 4
Basic Earnings (loss) per Common Share
Income (loss) from continuing operations $ 0.13 ($ 0.05)
Income from discontinued operations, net of income taxes 0.01 0.06
-------- --------
Net income per common share $ 0.14 $ 0.01
======== ========
Diluted Earnings (loss) per Common and Common Equivalent Share
Income (loss) from continuing operations $ 0.12 ($ 0.05)
Income from discontinued operations, net of income taxes 0.01 0.06
-------- --------
Net income per common and common equivalent share $ 0.13 $ 0.01
======== ========
Dividends per common share $ 0.02 $ 0.02
======== ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
Page 4 of 12
</TABLE>
<PAGE>
<TABLE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Quarter Ended
------------------------------------------------
December 27, December 28,
1997 1996
(dollars in thousands)
- ---------------------------------------------------------------------- ------------------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 1,657 $ 1,478
Cash flows from investing activities:
Purchases of property, plant and equipment (995) (1,480)
Decrease in other assets 6 31
------- -------
Net cash used in investing activities (989) (1,449)
Cash flows from financing activities:
Payments on long-term debt (5,605) (6)
Proceeds from issuance of long debt 4,000 --
Proceeds from sale of equipment in sale - lease back
transaction 1,076 --
Proceeds from issuance of common stock 20 --
Decrease in payable to BEI Electronics, Inc. -- (612)
Payment of cash dividends (144) --
------- -------
Net cash used in financing activities (653) (618)
------- -------
Net increase (decrease) in cash and cash equivalents 15 (589)
Cash and cash equivalents at beginning of period 5,034 8,201
------- -------
Cash and cash equivalents at end of period $ 5,049 $ 7,612
======= =======
<FN>
See notes to condensed consolidated financial statements.
</FN>
Page 5 of 12
</TABLE>
<PAGE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 27, 1997
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the year ending
October 3, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto in the Company's annual report on Form 10-K for
the year ended September 27, 1997.
BEI Technologies, Inc. ("Technologies") was incorporated on June 30, 1997 in the
State of Delaware, as a wholly owned subsidiary of BEI Electronics, Inc.
("Electronics"). On September 27, 1997, Electronics distributed to holders of
Electronics common stock one share of common stock of the Company for each share
of Electronics common stock held on September 24, 1997 (the "Distribution"). In
connection with the Distribution, Electronics transferred to Technologies all of
the assets, liabilities and operations of its BEI Sensors & Systems Company,
Inc. ("Sensors & Systems") and Defense Systems Company, Inc. ("Defense Systems")
business segments.
The accompanying condensed consolidated financial statements of Technologies
present the condensed consolidated financial position and results of operations
of Sensors & Systems and Defense Systems, former subsidiaries of Electronics and
predecessor entities to the Company, on a combined basis for all dates and
periods prior to the Distribution. All intercompany accounts and transactions
have been eliminated. The financial position and results of operations of the
Sensors & Systems business segment are presented as continuing operations and
those of the Defense Systems business segment are presented as discontinued
operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Page 6 of 12
<PAGE>
NOTE 2--INVENTORIES
December 27, September 27,
1997 1997
(dollars in thousands)
---------------------
Finished products $ 1,215 $ 557
Work in process 9,587 7,412
Materials 13,365 12,303
Costs incurred under long-term contracts,
including U.S. Government contracts 16 2,384
------- -------
Net inventories $24,183 $22,656
======= =======
NOTE 3 -- DISCONTINUED OPERATIONS
On June 30, 1997, the Board of Directors of Electronics announced a
formal plan to discontinue the operations of the Defense Systems segment.
Accordingly, the results of operations of the segment have been presented as
discontinued operations for all periods presented and the assets and liabilities
of the segment have been segregated in the consolidated balance sheets. The
remaining assets are stated at cost, which management believes approximates net
realizable value, and management does not expect any material loss from the
on-going operations or abandonment of the Defense Systems segment. Previously,
in September 1995, Electronics had reached a decision to exit the HYDRA rocket
manufacturing line of business which made up a substantial portion of the
Defense Systems segment. Additional products for the segment included weapons
management systems and sales under a cost-plus-fee advanced rocket development
contract.
As a result of the decision to exit the rocket line of business, the
Company has incurred costs relating to employee severance and the closure and
withdrawal from the leased facility in Camden, Arkansas and similar costs
related to its owned facility in Euless, Texas. The balance in the reserve at
the end of first quarter of fiscal year 1998 was not significant. At September
27, 1997, substantially all inventory and equipment assets for the rocket
business had been written off or disposed of. The remaining assets of Defense
Systems are classified as assets of discontinued operations on the balance
sheet. Management expects to complete the disposition of these assets during
fiscal 1998.
Page 7 of 12
<PAGE>
<TABLE>
NOTE 4--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
common share:
<CAPTION>
Quarter Ended
--------------------------------------------------
December 27, December 28,
1997 1996
(in thousands except per share amounts)
--------------------------------------------------
<S> <C> <C>
Numerator
Income (loss) from continuing operations $ 878 ($ 359)
Income from discontinued operations, net of income taxes 81 394
------- -------
Net income available to common stockholders $ 959 $ 35
======= =======
Denominator
Denominator for basic earnings per share --
Weighted average shares, net of
unvested contingently issuable shares (FY 1998 -- 268 shares;
FY 1997 -- 225 shares) 6,923 6,760
Weighted average contingently issuable shares granted 29 --
Effect of dilutive securities:
Contingently issuable shares 9 --
Employee stock options 168 --
------- -------
Denominator for diluted earnings per share 7,129 6,760
======= =======
Basic earnings per share $ 0.14 $ 0.01
Diluted earnings per share $ 0.13 $ 0.01
</TABLE>
Due to the loss from continuing operations, earnings per share in the first
quarter of fiscal 1997 is based on the weighted average number of common shares
only, as any assumption of conversion of equivalent shares would be
anti-dilutive.
NOTE 5--CONTINGENCIES AND LITIGATION
The Company has pending various legal actions arising in the normal course of
business. None of these legal actions is expected to have a material effect on
the Company's operating results or financial condition.
Page 8 of 12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, and those discussed in the
Company's Form 10-K for the year ended September 27, 1997.
<TABLE>
The following table sets forth, for the fiscal periods indicated, the percentage
of net sales represented by certain items in the Company's Condensed
Consolidated Statements of Operations.
<CAPTION>
Quarter Ended
-----------------------------------------------
December 27, December 28,
1997 1996
- ---------------------------------------------------------------------- ------------------------ ---------------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 65.9 66.1
----- -----
Gross profit 34.1 33.9
Operating expenses
Selling, general and administrative expenses 21.7 31.1
Research, development and related expenses 4.9 3.9
----- -----
Income (loss) from operations 7.5 (1.1)
Interest expense 2.3 2.1
Other income 0.3 0.5
----- -----
Income (loss) from continuing operations before income taxes 5.5 (2.7)
Provision (benefit) for income taxes (credit) 2.4 (1.1)
----- -----
Income (loss) from continuing operations 3.1 (1.6)
Income from discontinued operations 0.3 1.7
----- -----
Net income 3.4% 0.1%
===== =====
</TABLE>
Quarters ended December 27, 1997 and December 28, 1996
Net sales for the first quarter of fiscal 1998, ended December 27, 1997,
increased $5.4 million to $28.3 million or 23.4% from $22.9 million during the
same period in fiscal 1997.
Sales volume increased primarily in commercial sales to the industrial and
automotive markets. The increase was due to sales of emerging automotive
products and increased sales of traditional products, including pressure
sensors, motors and actuators. The sales increase was offset, in part, by
declines in sales related to government contracts resulting from the delayed
delivery of customer-supplied components for space satellite programs.
Cost of sales as a percentage of net sales in the first quarter of fiscal 1998
decreased slightly to 65.9% from 66.1% in the comparable period of fiscal 1997,
due to several factors. Cost of sales as a percentage of sales improved in all
product areas except for the unfavorable impact of reworking or replacing
materials on some products, primarily automotive steering sensors.
Page 9 of 12
<PAGE>
Selling, general and administrative expenses as a percentage of net sales
decreased in the first quarter of fiscal 1998 versus the comparable period of
fiscal 1997, due primarily to the costs in fiscal 1997 associated with the
resolution of a matter which had been subject to arbitration. This was partially
offset by increased spending in operating units to support higher sales volumes.
Research, development and related expenses as a percentage of net sales for the
first quarter of fiscal 1998 increased 1.0% from the comparable period of fiscal
1997 due to increased spending on new products and processes related primarily
to microelectromechanical structures for pressure and automotive applications.
Liquidity and Capital Resources
During the first quarter of fiscal 1998, total cash provided by operations was
$1.7 million, primarily from the net income of $1.0 million and the positive
impact of non-cash charges to income from depreciation of $1.1 million and
amortization of $0.4 million. Cash generated from operating activities included
receivables collections of $2.2 million resulting from a decrease in receivable
balances during the quarter. Cash used for operating activities included an
increase in inventory on hand of $1.4 million and decreases in accrued expenses
and trade payables of $1.3 million.
Cash used in investing activities consisted primarily of equipment purchases of
$1.0 million.
Cash flows from financing activities consisted primarily of $5.6 million in
scheduled payments made on long-term debt. The debt was retired using $4.0
million from the Company's bank line of credit and $1.6 million from operations.
Proceeds from the sale of equipment in a sale-leaseback transaction provided
$1.1 million. Dividend payments were $0.1 million.
The Company had no material capital commitments at December 27, 1997.
Year 2000 Compliance; Modification of Management Information Systems
The Company is evaluating the potential impact of what is commonly referred to
as the "Year 2000" issue, concerning the inability of certain information
systems to properly recognize and process dates containing the Year 2000 and
beyond. If not corrected, these systems could fail or create erroneous results.
The Company's management information systems primarily use software products
purchased from commercial sources without significant modification or
customization. Updates to these products are routinely installed by the Company
to upgrade the systems and correct known faults in the software. All major
systems have been reviewed for Year 2000 issues and where necessary, upgraded
software has been identified and implemenation schedules are in process. There
have been no significant incremental costs identified with updates that
specifically address Year 2000 compliance. Notwithstanding the Year 2000
compliance of the Company's systems, there can be no assurance that the Company
will not be adversely affected by the failure of others to become Year 2000
compliant.
Based on the financial condition of the Company at December 27, 1997, management
believes that the existing cash balances, cash generated from operations, and
available lines of credit will be sufficient to meet the Company's planned needs
for the foreseeable future. If the Company requires additional capital, it
anticipates that such capital will be provided by bank or other borrowings,
although there can be no assurances that funds will be available on terms as
favorable as those applicable to the Company's currently outstanding debt.
Effects of Inflation
Management believes that, for the periods presented, inflation has not had a
material effect on the Company's operations.
Page 10 of 12
<PAGE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the quarter ended December
27, 1997.
Page 11 of 12
<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 on February 9, 1998.
BEI Technologies, Inc.
By: /s/ Robert R. Corr
-----------------------------------------
Robert R. Corr
Secretary, Treasurer and Controller
(Chief Accounting Officer)
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Condensed Consolidated Financial Statements for the Period Ended
December 27, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-START> SEP-28-1997
<PERIOD-END> DEC-27-1997
<CASH> 5,049
<SECURITIES> 0
<RECEIVABLES> 15,923
<ALLOWANCES> 0
<INVENTORY> 24,183
<CURRENT-ASSETS> 51,194
<PP&E> 24,219
<DEPRECIATION> 0
<TOTAL-ASSETS> 87,455
<CURRENT-LIABILITIES> 23,709
<BONDS> 25,903
0
0
<COMMON> 7
<OTHER-SE> 37,537
<TOTAL-LIABILITY-AND-EQUITY> 87,455
<SALES> 28,256
<TOTAL-REVENUES> 28,338
<CGS> 18,634
<TOTAL-COSTS> 18,634
<OTHER-EXPENSES> 7,514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 641
<INCOME-PRETAX> 1,549
<INCOME-TAX> 671
<INCOME-CONTINUING> 878
<DISCONTINUED> 81
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 959
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
