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 July 1, 2000 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, 7,186,579 shares as of July 27, 2000
Page 1 of 12
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BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--July 1,
2000 and October 2, 1999 3
Condensed Consolidated Statements of
Operations--Quarter and Nine Months ended July
1, 2000 and July 3, 1999 4
Condensed Consolidated Statements of Cash
Flows-- Quarter and Nine Months ended July 1,
2000 and July 3, 1999 5
Notes to Condensed Consolidated Financial
Statements--July 1, 2000 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
(a) Exhibits
27.1 Financial Data Schedule 11
(b) Reports on Form 8-K 11
SIGNATURES 12
Page 2 of 12
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, October 2,
2000 1999
(Unaudited) (See note below)
(in thousands)
--------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 9,663 $ 3,181
Investments 7,080 6,467
Trade receivables, net 31,439 29,555
Inventories, net -- Note 2 31,534 31,036
Other current assets 8,087 7,193
-------- --------
Total current assets 87,803 77,432
Property, plant and equipment, net 34,881 35,122
Acquired technology 3,333 4,054
Goodwill 2,292 2,436
Other assets, net 3,928 4,316
-------- --------
$ 132,237 $ 123,360
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 16,575 $ 15,484
Accrued expenses and other liabilities 23,246 17,424
Deferred compensation liability 7,080 6,467
Current portion of long-term debt 120 120
-------- --------
Total current liabilities 47,021 39,495
Long-term debt, less current portion 36,643 36,705
Other liabilities 3,368 1,317
Stockholders' equity 45,205 45,843
-------- --------
$ 132,237 $ 123,360
======== ========
See notes to condensed consolidated financial statements.
Note: The balance sheet at October 2, 1999 has been derived from the audited
consolidated balance sheet at that date.
Page 3 of 12
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<TABLE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited) Quarter Ended Nine Months Ended
------------------------- --------------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------------------------- --------------------------
(in thousands except per share amounts)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 60,246 $ 41,175 $ 158,191 $ 116,965
Cost of sales 42,704 28,981 113,931 80,992
-------- -------- --------- ---------
17,542 12,194 44,260 35,973
Selling, general and administrative expenses 9,977 7,891 26,147 23,143
Research, development and related expenses 2,178 1,855 6,130 5,188
-------- -------- --------- ---------
Income from operations 5,387 2,448 11,983 7,642
Interest expense 655 730 2,006 2,266
Other income 178 234 797 327
-------- -------- --------- ---------
Income from operations before
income taxes 4,910 1,952 10,774 5,703
Provision for income taxes 1,917 782 4,234 2,320
-------- -------- --------- ---------
Income before extraordinary item 2,993 1,170 6,540 3,383
Extraordinary item, net of income taxes -- -- -- (326)
-------- -------- --------- ---------
Net income $ 2,993 $ 1,170 $ 6,540 $ 3,057
======== ======== ========= =========
Earnings per Common Share -- Note 3
Basic Earnings per Share
Income before extraordinary item $ 0.42 $ 0.16 $ 0.91 $ 0.48
Extraordinary item, net of income tax effect -- -- -- (0.05)
-------- -------- --------- ---------
Net income per common and common
equivalent share $ 0.42 $ 0.16 $ 0.91 $ 0.43
======== ======== ========= =========
Diluted Earnings per Share
Income before extraordinary item $ 0.41 $ 0.16 $ 0.89 $ 0.47
Extraordinary item, net of income tax effect -- -- -- (0.05)
-------- -------- --------- ---------
Net income per common and common
equivalent share $ 0.41 $ 0.16 $ 0.89 $ 0.42
======== ======== ======== =========
Dividends per common share $ 0.02 $ 0.02 $ 0.06 $ 0.06
======== ======== ======== =========
Page 4 of 12
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Quarter Ended Nine Months Ended
----------------------- -----------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
----------------------- -----------------------
(in thousands)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,993 $ 1,170 $ 6,540 $ 3,057
Adjustments to reconcile net income to net cash
provided by (used by) operating activities:
Depreciation and amortization 2,193 2,019 6,181 5,918
Other 2,693 855 5,053 (3,870)
-------- -------- ------- -------
Net cash provided by operating activities: 7,879 4,044 17,774 5,105
Cash flows from investing activities:
Purchase of property, plant and equipment (1,935) (3,149) (5,635) (6,868)
Disposal of property, plant and equipment -- -- 1,868 --
Increase (decrease) in other assets (531) (193) 109 (28)
-------- -------- ------ -------
Net cash used by investing activities (2,466) (3,342) (3,658) (6,896)
Cash flows from financing activities:
Proceeds from debt borrowings 72 253 1,142 39,099
Principal payments on debt and other liabilities (9) (675) (1,030) (36,539)
Proceeds from issuance of common stock 153 55 347 55
Repurchase of common stock (6,242) -- (7,648) --
Payment of cash dividends (147) (148) (445) (445)
-------- -------- ------- -------
Net cash provided (used) by financing activities (6,173) (515) (7,634) 2,170
-------- -------- ------- -------
Net increase (decrease) in cash and cash equivalents (760) 187 6,482 379
Cash and cash equivalents at beginning of period 10,423 3,749 3,181 3,557
-------- -------- ------- -------
Cash and cash equivalents at end of period $ 9,663 $ 3,936 $ 9,663 $ 3,936
======== ======== ======= =======
<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)
July 1, 2000
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
September 30, 2000. 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 October 2, 1999. BEI Technologies, Inc. ("Technologies" or the
"Company") was incorporated on June 30, 1997 in the State of Delaware as a
wholly owned subsidiary of BEI Electronics, Inc., subsequently renamed BEI
Medical Systems Company, 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
operations of Defense Systems were discontinued during the third quarter of
fiscal year 1998.
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.
NOTE 2--INVENTORIES
Inventories are carried principally at the lower of cost (first-in, first-out
method) or fair value and do not exceed net realizable value.
July 1, October 2,
2000 1999
(dollars in thousands)
----------------------------
Finished products $ 3,927 $ 1,521
Work in process 5,604 10,165
Materials 22,000 17,848
Costs incurred under long-term contracts,
including U.S Government contracts 3 1,746
Unliquidated progress payments -- (244)
-------- --------
Net inventories $ 31,534 $ 31,036
======== ========
Page 6 of 12
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NOTE 3--EARNINGS PER SHARE
<TABLE>
The following table sets forth the computation of basic and diluted earnings per
common share from continuing operations:
<CAPTION>
Quarter Ended Nine Months Ended
------------------------ ------------------------
Ju1y 1, July 3, July, 1 July 3,
2000 1999 2000 1999
------------------------ ------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C>
Numerator
---------
Income before extraordinary item $2,993 $1,170 $6,540 $3,383
====== ====== ====== ======
Denominator
Denominator for basic earnings per share --
Weighted average shares, net of nonvested
shares (FY 2000 - 273 shares;
FY 1999 - 305 shares) 7,165 7,169 7,216 7,120
Effect of dilutive securities:
Nonvested shares 20 50 73 44
Employee stock options 104 67 92 85
Denominator for diluted earnings per share 7,289 7,286 7,381 7,249
====== ====== ====== ======
Basic earnings per share before extraordinary item $ 0.42 $ 0.16 $ 0.91 $ 0.48
====== ====== ====== ======
Diluted earnings per share before extraordinary item $ 0.41 $ 0.16 $ 0.89 $ 0.47
====== ====== ====== ======
</TABLE>
NOTE 4--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 consolidated financial condition, operating results or cash flow.
NOTE 5--SUBSEQUENT EVENTS
On July 25, the Company made a cash contribution of $1 million to OpticNet,
Inc., a newly incorporated majority-owned subsidiary of the Company. OpticNet's
primary focus will be to develop optical components for the telecommunications
industry. The Company also intends to transfer ownership of certain optical
components related intellectual property to OpticNet in the near future. The
Company believes the subsidiary has the potential to develop into an independent
company and intends to distribute shares of OpticNet common stock to its
stockholders in the form of a special stock dividend.
Page 7 of 12
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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 October 2, 1999.
<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 Nine Months Ended
----------------------- ------------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
----------------------- ------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 70.9 70.4 72.0 69.2
-------- -------- -------- --------
Gross margin 29.1 29.6 28.0 30.8
Operating expenses
Selling, general and administrative expenses 16.6 19.2 16.5 19.8
Research, development and related expenses 3.6 4.5 3.9 4.5
-------- -------- -------- --------
Income from operations 8.9 5.9 7.6 6.5
Interest expense 1.1 1.7 1.3 1.9
Other income 0.3 0.6 0.5 0.3
-------- -------- -------- --------
Income from operations before
income taxes 8.1 4.8 6.8 4.9
Provision for income taxes 3.1 2.0 2.7 2.0
-------- -------- -------- --------
Income before extraordinary item 5.0 2.8 4.1 2.9
Extraordinary item, net of income taxes -- -- -- (0.3)
-------- -------- -------- --------
Net income 5.0% 2.8% 4.1% 2.6%
======== ======== ======== ========
</TABLE>
Quarters ended July 1, 2000 and July 3, 1999
Net sales for the third quarter of fiscal 2000, ended July 1, 2000, were $60.2
million representing a $19.0 million increase or 46.3% from $41.2 million during
the same period in fiscal 1999. The principal increase in sales volume was
attributable to purchases by domestic and foreign automotive customers. Sales of
non-automotive commercial products increased by $2.5 million or 11.2% from the
same period of fiscal 1999, while sales under government contracts decreased by
$0.5 million or 11.0% from the same period of the prior fiscal year.
Page 8 of 12
<PAGE>
Cost of sales as a percentage of net sales in the third quarter of fiscal 2000
increased half a percentage point to 70.9% from 70.4% in the comparable period
of fiscal 1999, due mainly to the impact of increased automotive GyroChip(R)
sensor sales. Cost of sales as a percentage of net sales for automotive sensors
decreased from the same quarter of the prior year, but the automotive sensor
cost of sales percentage remains higher than the average cost of sales
percentage for the Company. Sales of automotive sensor products increased to
50.0% of net sales in the third quarter of fiscal 2000 from 34.2% of net sales
in the comparable period of fiscal 1999. Accordingly, the total cost of sales
percentage was slightly higher. The Company expects continued downward pressure
on gross profit as a percentage of net sales if automotive sensor sales continue
to become a larger portion of the Company's product mix as now seems likely.
Selling, general and administrative expenses as a percentage of net sales
decreased in the third quarter of fiscal 2000 versus the comparable period of
fiscal 1999 due to higher sales volume. Actual selling, general and
administrative expenses increased primarily as a result of support for the
increased manufacturing activity in the quarter and due to increased incentive
accruals related to above plan profitability.
Research, development and related expenses as a percentage of net sales for the
third quarter of fiscal 2000 decreased from the comparable period of fiscal 1999
due to higher sales volume. Actual research, development and related expenses
increased by $0.3 million.
Costs related to interest decreased 10.3% during the third quarter of fiscal
2000 as compared to the same period of fiscal 1999. The decrease is a result of
decreased debt borrowings during the third quarter of fiscal 2000 as compared to
the debt borrowings during the third quarter of fiscal 1999.
Nine Months ended July 1, 2000 and July 3, 1999
Net sales for the first nine months of fiscal 2000 were $158.2 million, an
increase of $41.2 million or 35.2% as compared to $117.0 million during the same
period in fiscal 1999. The principal increase was attributable to expanded sales
of GyroChip sensors to foreign and domestic automotive customers for use in
automotive stability control systems.
Cost of sales as a percentage of net sales in the first nine months of fiscal
2000 increased 2.8 percentage points to 72.0% from 69.2% in the comparable
period of fiscal 1999 due to several factors. Cost of sales as a percentage of
net sales for automotive sensors decreased slightly from the same period of the
prior fiscal year, but is higher than the average percentage cost of sales for
the Company. Sales of automotive products increased to 46.5% of total sales in
the first nine months of fiscal 2000 from 33.2% of total sales in the first nine
months of fiscal 1999. Accordingly, the average cost of sales percentage was
increased, even though cost of sales as a percentage of net sales improved
slightly in most product areas. The Company expects continued downward pressure
on gross profit as a percentage of net sales if automotive sensors continue to
become a larger portion of the Company's product mix.
During the first nine months of fiscal 2000, actual selling, general and
administrative expenses increased $3.0 million to $26.1 million from the same
period of fiscal 1999 as a result of increased sales volume during the first
nine months of fiscal 2000. Selling, general and administrative expenses as a
percentage of net sales decreased to 16.5% from 19.8% of the comparable period
in the prior year. The 3.3 percentage point decrease is attributable to
increased sales during the first nine months of fiscal 2000.
Research, development and related expenses as a percentage of net sales for the
first nine months of fiscal 2000 decreased 0.6 percentage points from the
comparable period of fiscal 1999 due to higher sales volume. An increase of $0.9
million from the same period of fiscal 1999 in actual research, development and
related expenses resulted primarily in support of MEMS production.
Page 9 of 12
<PAGE>
Interest expense has decreased 0.6 percentage points to 1.3% of net sales from
the comparable period of fiscal 1999. The Company's increased cash flow in the
first nine months of fiscal 2000 resulted in repayment of all short-term
borrowings. Accordingly, reduced interest related costs were realized during the
first nine months of fiscal 2000.
During the first nine months of fiscal 2000, other income increased $0.5 million
to $0.8 million from the comparable period of fiscal 1999. The increase was
primarily attributable to the sale of an asset held for investment during the
third quarter that resulted in a non-recurring item in other income of $0.5
million.
Liquidity and Capital Resources
During the first nine months of fiscal 2000, total cash provided by operations
was $17.7 million. Cash provided by operations included net income of $6.5
million, adjusted for the positive impact of non-cash charges to income from
depreciation and amortization of $4.4 million and $1.7 million, respectively. A
positive impact also resulted from increases to other liabilities, accrued
expenses, and accounts payable in the amounts of $2.1 million, $7.6 million and
$1.2 million, respectively. Offsetting these items were increases to accounts
receivable of $2.4 million and an increase to other assets of $0.3 million.
Other uses of cash for operations also included decreases in progress payments
and customer advances of $0.4 million. Increases in income tax payable and
inventories of $2.1 million and $0.4 million, respectively as well as payment of
a prepaid foreign taxes of $0.4 million offset the increases in cash.
Cash used in investing activities of $3.7 million consisted of equipment
purchases of $5.6 million, the disposal of equipment in the amount of $1.9
million and a decrease of $0.1 million to other assets.
Cash used by financing activities of $7.6 million consisted primarily of the
repurchase of common stock that amounted to $7.5 million for the first nine
months of fiscal 2000. Proceeds from debt borrowings and stock issuances are
partially offset by the repayments of debt and cash dividends.
While the Company believes that its existing cash balances, together with cash
derived from operating revenues, will be sufficient to meet the Company's
capital requirements for the next twelve months, the Company could possibly need
to raise additional funds through public or private financing or other
arrangements. There can be no assurance that the Company will not require
additional funding, or that such additional funding, if needed, will be
available on terms attractive to the Company, or at all. Any additional equity
financing may be dilutive to the stockholders, and debt financing, if available,
may involve restrictive covenants.
The Company had no material capital commitments at July 1, 2000.
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 July 1, 2000.
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 August 4, 2000.
BEI Technologies, Inc.
By: /s/ Robert R. Corr
-------------------------------------
Robert R. Corr
Secretary, Treasurer and Controller
(Chief Accounting Officer)
Page of 12 of 12
