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 April 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, 7,464,992 shares as of May 1, 2000
Page 1 of 12
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<CAPTION>
BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<S> <C> <C>
PART 1. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--April 1, 2000 and
October 2, 1999 3
Condensed Consolidated Statements of Operations--Quarter and
Six Months ended April 1, 2000 and April 3, 1999 4
Condensed Consolidated Statements of Cash Flows-- Quarter
and Six Months ended April 1, 2000 and April 3, 1999 5
Notes to Condensed Consolidated Financial Statements--April 1, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
SIGNATURES 12
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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
April 1, October 2,
2000 1999
(Unaudited) (See note below)
(in thousands)
- ------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 10,423 $ 3,181
Investments 6,866 6,467
Trade receivables, net 30,583 29,555
Inventories, net -- Note 2 30,460 31,036
Other current assets 8,414 7,193
-------- --------
Total current assets 86,746 77,432
Property, plant and equipment, net 34,557 35,122
Accquired technology 3,573 4,054
Goodwill 2,341 2,436
Other assets, net 3,453 4,316
-------- --------
$130,670 $123,360
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 14,060 $ 15,484
Accrued expenses and other liabilities 21,766 17,424
Deferred compensation liability 6,866 6,467
Current portion of long-term debt 120 120
-------- --------
Total current liabilities 42,812 39,495
Long-term debt, less current portion 36,653 36,705
Other liabilities 3,027 1,317
Stockholders' equity 48,178 45,843
-------- --------
$130,670 $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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BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited) Quarter Ended Six Months Ended
------------------ --------------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
------------------- -------------------
(in thousands except per share amounts)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 54,217 $ 39,047 $ 97,945 $ 75,790
Cost of sales 39,058 26,731 71,227 52,011
-------- -------- -------- --------
15,159 12,316 26,718 23,779
Selling, general and administrative expenses 9,124 7,789 16,170 15,252
Research, development and related expenses 2,197 1,837 3,952 3,333
-------- -------- -------- --------
Income from operations 3,838 2,690 6,596 5,194
Interest expense 664 758 1,351 1,536
Other income 593 34 619 93
-------- -------- -------- --------
Income from operations before
income taxes 3,767 1,966 5,864 3,751
Provision for income taxes 1,476 807 2,317 1,538
-------- -------- -------- --------
Income before extraordinary item 2,291 1,159 3,547 2,213
Extraordinary item, net of income taxes -- -- -- (326)
-------- -------- -------- --------
Net income $ 2,291 $ 1,159 $ 3,547 $ 1,887
======== ======== ======== ========
Earnings per Share -- Note 4
Basic Earnings per Share
Income before extraordinary item $ 0.32 $ 0.16 $ 0.49 $ 0.31
Loss from extraordinary item, net of income tax effect -- -- -- (0.05)
-------- -------- -------- --------
Net income per common share $ 0.32 $ 0.16 $ 0.49 $ 0.26
======== ======== ======== ========
Diluted Earnings per Share
Income before extraordinary item $ 0.31 $ 0.16 $ 0.48 $ 0.30
Loss from extraordinary item, net of income tax effect -- -- -- (0.04)
-------- -------- -------- --------
Net income per common and common
equivalent share $ 0.31 $ 0.16 $ 0.48 $ 0.26
======== ======== ======== ========
Dividends per common share $ 0.02 $ 0.02 $ 0.04 $ 0.04
======== ======== ======== ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
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Page 4 of 12
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BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Quarter Ended Six Months Ended
-----------------------------------------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
-----------------------------------------------
(in thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,291 $ 1,159 $ 3,547 $ 1,887
Adjustments to reconcile net income to net cash
provided by (used by) operating activities:
Depreciation and amortization 1,998 2,139 3,988 3,899
Other 6,701 (78) 2,364 (4,717)
-------- -------- -------- --------
Net cash provided by operating activities: 10,990 3,220 9,899 1,069
Cash flows from investing activities:
Purchase of property, plant and equipment (1,469) (3,175) (3,700) (3,276)
Disposal of property, plant and equipement 292 -- 1,868 --
Increase (decrease) in other assets 697 404 640 (12)
-------- -------- -------- --------
Net cash used by investing activities (480) (2,771) (1,192) (3,288)
Cash flows from financing activities:
Proceeds from debt borrowings 992 288 1,267 39,032
Principal payments on debt and other liabilities (1,017) (1,133) (1,218) (36,516)
Proceeds from issuance of common stock 161 -- 191 --
Repurchase of common stock (638) -- (1,407) --
Payment of cash dividends (149) (148) (298) (297)
Other -- -- -- 192
-------- -------- -------- --------
Net cash provided (used) by financing activities (651) (993) (1,465) 2,411
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 9,859 (544) 7,242 192
Cash and cash equivalents at beginning of period 564 4,293 3,181 3,557
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 10,423 $ 3,749 $ 10,423 $ 3,749
======== ======== ======== ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 5 of 12
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BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 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
April 1, October 2,
2000 1999
(dollars in thousands)
--------------------------
Finished products $ 2,570 $ 1,521
Work in process 5,903 10,165
Materials 21,981 17,848
Costs incurred under long-term contracts,
including U.S Government contracts 6 1,746
Unliquidated progress payments -- (244)
-------- --------
Net inventories $ 30,460 $ 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 Six Months Ended
------------------------ ---------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
----------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C>
Numerator
Income before
extraordinary item $2,291 $1,159 $3,547 $2,213
====== ====== ====== ======
Denominator
Denominator for basic earnings per share --
Weighted average shares, net of nonvested
shares (FY 2000 - 228 shares;
FY 1999 - 266 shares) 7,190 7,154 7,253 7,116
Effect of dilutive securities:
Nonvested shares 98 87 47 108
Employee stock options 112 108 85 95
------ ------ ------ ------
Denominator for diluted earning per share 7,400 7,349 7,385 7,319
====== ====== ====== ======
Basic earnings per share
before extraordinary item $ 0.32 $ 0.16 $ 0.49 $ 0.31
====== ====== ====== ======
Diluted earnings per share
before extraordinary item $ 0.31 $ 0.16 $ 0.48 $ 0.30
====== ====== ====== ======
</TABLE>
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 consolidated financial condition, operating results or cash flow.
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 Six Months Ended
----------------------- ------------------------
April 1, April 3, April 1, April 3,
2000 1999 2000 1999
----------------------- ------------------------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 72.0 68.5 72.7 68.6
-------- -------- -------- -------
Gross margin 28.0 31.5 27.3 31.4
Operating expenses
Selling, general and administrative expenses 16.8 19.9 16.5 20.1
Research, development and related expenses 4.1 4.7 4.0 4.4
-------- -------- -------- -------
Income from operations 7.1 6.9 6.8 6.9
Interest expense 1.2 1.9 1.4 2.0
Other income 1.1 0.1 0.6 --
-------- -------- -------- -------
Income from operations before
income taxes 7.0 5.1 6.0 4.9
Provision for income taxes 2.7 2.1 2.4 2.0
-------- -------- -------- -------
Income before extraordinary item 4.3 3.0 3.6 2.9
Extraordinary item, net of income taxes -- -- -- (0.4)
-------- -------- -------- -------
Net income 4.3 % 3.0 % 3.6 % 2.5 %
======== ======== ======== =======
</TABLE>
Quarters ended April 1, 2000 and April 3, 1999
Net sales for the second quarter of fiscal 2000, ended April 1, 2000, increased
$15.2 million to $54.2 million or 38.9% from $39.0 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 18.3% from the same period of
fiscal 1999, while sales under government contracts decreased $0.6 million or
11.9% from the same period of the prior fiscal year.
Cost of sales as a percentage of net sales in the second quarter of fiscal 2000
increased 3.5 percentage points to 72.0% from 68.5% 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
Page 8 of 12
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increased to 45.7% of net sales in the second quarter of fiscal 2000 from 33.2%
of net sales in the comparable period of fiscal 1999. Accordingly, the total
cost of sales percentage was negatively impacted. 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 second 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 increased
manufacturing activity in the quarter.
Research, development and related expenses as a percentage of net sales for the
second quarter of fiscal 2000 decreased from the comparable period of fiscal
1999 due to higher sales volume combined with only a slight increase in actual
research, development and related expenses.
Due to increased cash flow, the Company decreased its debt borrowings during the
second quarter of fiscal 2000. The decreased debt borrowings resulted in a 0.7
percentage point decrease of costs related to interest from the comparable
period of fiscal 1999.
During the second quarter of fiscal 2000, the Company had non-recurring other
income of $0.5 million and interest income of $0.1 million, up significantly
from the comparable period of fiscal 1999. The non-recurring item was primarily
from the sale of an asset held for investment.
Six Months ended April 1, 2000 and April 3, 1999
Net sales for the first six months of fiscal 2000 increased $22.2 million or
29.2% to $97.9 million from $75.8 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 stability control systems.
Cost of sales as a percentage of net sales in the first six months of fiscal
2000 increased 4.1 percentage points to 72.7% from 68.6% 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 48.1% of total sales in
the first six months of fiscal 2000 from 32.6% of total sales in the first six
months of fiscal 1999. Accordingly, the average cost of sales percentage was
negatively impacted, even though cost of sales as a percentage of sales improved
slightly in most product areas. The Company expects continued downward pressure
on gross profit as a percentage of net sales as automotive sensors become a
larger portion of the Company's product mix.
During the first six months of fiscal 2000, actual selling, general and
administrative expenses increased $0.9 million to $16.2 million from the same
period of fiscal 1999 as a result of increased sales volume during the first six
months of fiscal 2000. Selling, general and administrative expenses as a
percentage of net sales decreased to 16.5% from 20.1% of the comparable period
in the prior year. The 3.6 percentage point decrease is attributable to
increased sales during the first six months of fiscal 2000.
Research, development and related expenses as a percentage of net sales for the
first six months of fiscal 1999 decreased 0.4 percentage points from the
comparable period of fiscal 1999 due to higher sales volume combined with an
increase of $0.6 million in actual research, development and related expenses.
Interest expense has decreased 0.6 percentage points to 1.4% of net sales from
the comparable period of fiscal 1999. The Company's increased cash flow resulted
in a reduction of short-term borrowings. Accordingly, reduced interest related
costs were realized during the first six months of fiscal 2000.
Page 9 of 12
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During the first six months of fiscal 2000, other income increased $0.5 million
to $0.6 million from the comparable period of fiscal 1999. The increase was
primarily attributable to the sale of an asset held for investment that resulted
in a non-recurring item in other income of $0.5 million.
Liquidity and Capital Resources
During the first six months of fiscal 2000, total cash provided by operations
was $9.9 million. Cash provided by operations included net income of $3.5
million, adjusted for the positive impact of non-cash charges to income from
depreciation and amortization of $2.8 million and $1.2 million, respectively,
and a decreases in inventory of $0.8 million and an increase to other
liabilities and accrued expenses of $4.7 million. Offsetting these items were
increases to accounts receivable and other assets of $1.2 and $0.9 million,
respectively. Other uses of cash for operations also included decreases in
progress payments and customer advances of $0.2 million and $0.1 million,
respectively as well as payments of deferred income taxes of $0.4 million.
Cash used in investing activities of $1.2 million consisted of equipment
purchases of $3.7 million, the disposal of equipment in the amount of $1.9
million and a decrease of $0.6 million to other assets.
Cash used by financing activities of $1.5 million consisted primarily of the
repurchase of stock that amounted to $1.4 million for the first six months of
fiscal 2000. The $1.3 million in debt borrowings and $0.2 million of proceeds
from the issuance of stock were offset by repayments of $1.2 million and cash
dividends of $0.3 million.
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 April 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
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BEI TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
(a) The Annual Meeting of Stockholders of the
Company (the "Meeting") was held on March 1,
2000. At the Meeting, Richard M. Brooks,
William G. Howard Jr. and Robert Mehrabian were
re-elected to the Company's Board of Directors
for a three-year term expiring at the Company's
2002 Annual Meeting.
Shares voted:
For Withheld
----------------------------
Brooks 5,571,363 1,139,673
Howard 5,576,806 1,134,230
Mehrabian 5,977,592 733,444
Effective March 31, 2000, Robert Mehrabian
resigned as director of BEI Technologies, Inc.
due to increased responsibilities at his
current employer.
(b)
In addition, the following directors continued
in office as directors of the Company following
the Meeting: Charles Crocker and George S.
Brown (until the Company's 2001 Annual
Meeting); Joseph Girior, Jr., Asad M. Madni and
Gary D. Wrench (until the Company's 2002 Annual
Meeting).
The other matters presented at the Meeting and
the voting of stockholders with respect thereto
are as follows:
The stockholders ratified the Board of
Directors' selection of Ernst & Young LLP as
the Company's independent public accountants
for the fiscal year ending September 30, 2000.
Shares voted:
For Against Abstain
-----------------------------------
6,703,579 1,677 5,780
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 April 1, 2000.
Page 11 of 12
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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 May 3, 2000.
BEI Technologies, Inc.
By: /s/ Robert R. Corr
-----------------------------------
Robert R. Corr
Secretary, Treasurer and Controller
(Chief Accounting Officer)
Page 12 of 12
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
PERIOD ENDED APRIL 1, 2000 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<PERIOD-TYPE> 3-MOS
<CASH> 10,423
<SECURITIES> 0
<RECEIVABLES> 31,292
<ALLOWANCES> 709
<INVENTORY> 30,460
<CURRENT-ASSETS> 86,746
<PP&E> 75,796
<DEPRECIATION> 34,557
<TOTAL-ASSETS> 130,670
<CURRENT-LIABILITIES> 42,812
<BONDS> 0
0
0
<COMMON> 3,329
<OTHER-SE> 44,849
<TOTAL-LIABILITY-AND-EQUITY> 130,670
<SALES> 54,217
<TOTAL-REVENUES> 54,217
<CGS> 39,058
<TOTAL-COSTS> 39,058
<OTHER-EXPENSES> 11,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 664
<INCOME-PRETAX> 3,767
<INCOME-TAX> 1,476
<INCOME-CONTINUING> 2,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,291
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.31
</TABLE>
