FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1994
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 1-5631
WATKINS-JOHNSON COMPANY
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-1402710
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3333 Hillview Avenue, Palo Alto, California 94304-1223
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(Address of principal executive offices) (Zip Code)
(415) 493-4141
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(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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
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Common stock, no par value, outstanding as of April 1, 1994 7,192,384 shares
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The interim financial statements are unaudited; however, the company
believes that all adjustments necessary to a fair statement of results for such
interim periods have been included. The results for the three months ended
April 1, 1994, are not necessarily indicative of the results for the full year
1994.
Supplementary information to the financial statements:
A dividend of twelve cents per share was declared and paid during the
first quarter of 1994 and 1993.
Net income per share is computed based on the weighted average
number of common and common equivalent shares (dilutive stock options)
outstanding during the period. The difference between fully diluted
earnings per share and primary earnings per share is not significant,
see Exhibit 11.
The consolidated financial statements required by Rule 10-01 of Regulation S-X
are included in this report beginning on the next page.
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WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS*
For the Periods Ended April 1, 1994
and April 2, 1993
Three Months Ended
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(Dollars in thousands, except per share amounts) 1994 1993
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Sales $81,058 $67,083
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Costs and expenses:
Cost of goods sold 51,448 44,936
Selling and administrative 15,553 14,001
Research and development 8,824 6,041
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75,825 64,978
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Income from operations 5,233 2,105
Interest and other income (expenses) -- net: 393 187
Interest expense (297) (306)
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Income before Federal and foreign income taxes 5,329 1,986
Federal and foreign income taxes (1,705) (616)
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Net income $3,624 $1,370
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Net income per share $.45 $ . 18
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(Average common and equivalent shares: 1994-7,980,000 shares, 1993-7,555,000)
*Unaudited
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WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
As of April 1, 1994 and December 31, 1993
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
1994* 1993
ASSETS ------------ ---------
Current assets:
Cash and equivalents $ 35,252 $ 49,081
Receivables 71,302 55,562
Inventories:
Raw materials and parts 9,859 6,029
Work in process 31,661 29,290
Finished goods 1,580 2,172
Other 12,516 11,109
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Total current assets 162,170 153,243
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Property, plant and equipment 167,185 163,019
Accumulated depreciation and amortization(120,935) (115,908)
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Property, plant and equipment - net 46,250 47,111
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Other assets 5,005 5,736
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$213,425 $206,090
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LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Payables $ 15,938 $ 10,950
Accrued liabilities 46,484 41,441
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Total current liabilities 62,422 52,391
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Long-term obligations 25,305 28,644
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Shareowners' equity:
Common stock, no par value 10,989 7,839
Retained earnings 114,709 117,216
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Total shareowners' equity 125,698 125,055
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$213,425 $206,090
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*Unaudited
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WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS*
For the Periods Ended April 1, 1994
and April 2, 1993
Three Months Ended
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(Dollars in thousands) 1994 1993
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OPERATING ACTIVITIES:
Net income $3,624 $1,370
Reconciliation of net income to cash flows:
Depreciation and amortization 2,334 2,586
Net changes in:
Receivables 2,668 (10,795)
Inventories (5,954) (2,147)
Other assets 100 385
Accruals and payables 1,396 3,857
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Net cash provided (used) by operating activities 4,168 (4,744)
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INVESTING ACTIVITIES:
Additions of property, plant and equipment (1,789) (1,506)
Other 56
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Net cash used in investing activities (1,733) (1,506)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,855
Repurchase of common stock (13,805)
Dividends paid (864) (907)
Other (409) (172)
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Net cash used by financing activities (12,223) (1,079)
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Net decrease in cash and equivalents (9,788) (7,329)
Cash and equivalents at beginning of period 45,040 49,081
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Cash and equivalents at end of period $35,252 $41,752
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*Unaudited
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition: The company's financial condition continued to be healthy.
Cash and equivalents decreased $9.8 million from $45,040 million to $35,252
million mostly due to stock repurchases and increased working capital needs.
For the balance of 1994, the company expects its operations to generate
sufficient cash to fund its anticipated growth, product development, and stock
repurchase program. In addition, the company has the ability to augment its
cash needs with readily available external financing.
Stock Repurchase: During the first quarter, the company repurchased more than
500,000 shares of stock and completed the 1.5-million-share repurchase program
approved by the board of directors in 1987 and amended in 1990. On April 4,
1994, the board authorized the repurchase of up to one million additional shares
of the company's common stock.
Current Operations: Orders, especially for semiconductor-production equipment,
are exceeding expectations. The Semiconductor Equipment Group is increasing
manufacturing capacity to keep pace with demand for new 8-inch wafer processing
systems. The group also initiated R&D in advanced high-density plasma for
late-1990s deposition requirements. The company anticipates that revenue from
chemical-vapor-deposition systems will grow by 50% again in 1994. The
Electronics Group is achieving planned performance. Watkins-Johnson and two
partners were awarded an $11 million Advanced Research Projects Agency contract
under the federal Technology Reinvestment Project.
First Quarter 1994 Compared to First Quarter 1993: Electronics sales were up 5%
while semiconductor-equipment sales jumped more than 80% from the 1993 levels
resulting in the overall company sales increase of approximately 21%. Gross
margin increased to 36.5% from prior year's quarter mostly due to improved
profitability in Electronics Group and higher volume in the Semiconductor
Equipment Group. Selling and administrative expenses increased 11% and within
planned levels. Research and development expenses increased as expected and
included certain nonrecurring charges associated with the company's initiative
in advancing high-density plasma technology. Estimated effective tax rate
increased slightly to 32% as a result of the 1993 Omnibus Budget Reconciliation
Act. Due to the above factors, first quarter 1994 net income jumped more than
160% compared to the same period in 1993.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held April 9, 1994, shareowners
voted on the following:
Item 1: Election of Directors:
Nominee For Withheld
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Dean A. Watkins 6,696,047 105,397
H. Richard Johnson 6,696,347 105,097
W. Keith Kennedy 6,784,850 16,594
John J. Hartmann 6,785,087 16,357
Rita Ricardo-Campbell 6,784,927 16,517
Jack L. Shepard 6,785,572 15,872
Von R. Eshleman 6,785,947 15,497
Raymond F. O'Brien 6,694,787 106,657
William R. Graham 6,786,347 15,097
Item 2: Proposal to ratify the appointment of Deloitte & Touche as the
independent auditors of the company for accounting year ending December
31, 1994.
For 6,779,940 Against 7,492 Withheld 14,012
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Item 6. Exhibits and Reports on Form 8-K
a) A list of the exhibits required to be filed as part of
this report is set forth in the Exhibit Index, which immediately
precedes such exhibits. The exhibits are numbered according to
Item 601 of Regulation S-K.
b) No reports on Form 8-K were required to be filed during
the quarter.
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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.
WATKINS-JOHNSON COMPANY
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(Registrant)
Date April 28, 1994 By /s/ W. Keith Kennedy, Jr.
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W. Keith Kennedy, Jr.
President and Chief Executive Officer
Date April 28, 1994 By /s/ Scott G. Buchanan
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Scott G. Buchanan
Vice President, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
The Exhibits below are numbered according to Item 601 of Regulation S-K.
Exhibit
Number Exhibit
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11 Statement re Computation of Per Share Earnings.
<PAGE>
WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
For Three Months Ended
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April 1, 1994 April 2, 1993
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For primary net income per share:
Weighted average shares
outstanding 7,355,647 7,554,865
Equivalent shares -- dilutive
stock options -- based on
treasury stock method using
average market price 571,466 167,225
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Total 7,927,113 7,722,090
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For fully diluted net income per share:
Weighted average shares
outstanding 7,355,647 7,554,865
Equivalent shares -- dilutive
stock options -- based on
treasury stock method using
greater of closing market
price or average price 624,629 167,225
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Total 7,980,276 7,722,090
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Net Income $3,624,000 $1,370,000
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Primary net income per share $.45 $.18
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Fully diluted net income per share $.45 $.18
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This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11).
