FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 March 31, 1995 7,743,000 shares
Page 1
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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 and all such adjustments are
of a normal recurring nature. The results for the three months ended
March 31, 1995, are not necessarily indicative of the results for the
full year 1995.
Supplementary information to the financial statements:
A dividend of twelve cents per share was declared and paid during the
first quarter of 1995 and 1994.
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, 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.
Page 2
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WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS*
For the periods ended March 31, 1995 and April 1, 1994
Three Months Ended
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(Dollars in thousands, except per share amounts) 1995 1994
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Sales $ 92,983 $ 80,526
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Costs and expenses:
Cost of goods sold 53,106 51,050
Selling and administrative 19,923 15,246
Research and development 12,551 8,824
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85,580 75,120
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Income from operations 7,403 5,406
Other income (expense) 355 92
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Income from continuing operations before Federal and
foreign income taxes 7,758 5,498
Federal and foreign income taxes (2,405) (1,756)
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Income from continuing operations 5,353 3,742
Loss from discontinued operations--net of taxes (118)
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Net income $ 5,353 $ 3,624
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Fully diluted net income per share
(difference between fully diluted and
primary earnings per share is not material) $ .63 $ .45
Average common and equivalent shares outstanding 8,541,000 7,980,000
*Unaudited
Page 3
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WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 1995 and December 31, 1994
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(Dollars in thousands) 1995* 1994
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ASSETS
Current assets:
Cash and equivalents $ 35,640 $ 34,469
Receivables 77,185 80,427
Inventories:
Raw materials and parts 13,379 1,680
Work in process 42,914 37,682
Finished goods 1,289 12,293
Other 12,412 12,921
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Total current assets 182,819 179,472
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Property, plant, and equipment 164,939 160,683
Accumulated depreciation and amortization (117,950) (115,537)
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Property, plant, and equipment--net 46,989 45,146
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Other assets 10,420 10,412
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$ 240,228 $ 235,030
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LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Payables $ 13,526 $ 15,045
Accrued liabilities 48,856 47,776
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Total current liabilities 62,382 62,821
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Long-term obligations 21,769 22,583
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Shareowners equity:
Common stock 22,301 20,279
Retained earning 133,776 129,347
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Total shareowners equity 156,077 149,626
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$ 240,228 $ 235,030
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*Unaudited
Page 4
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WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS*
For the periods ended March 31, 1995 and April 1, 1994
Three Months Ended
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(Dollars in thousands) 1995 1994
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OPERATING ACTIVITIES:
Net income $ 5,353 $ 3,624
Reconciliation of net income to cash flows:
Depreciation and amortization 2,448 2,334
Net changes in:
Receivables 3,243 2,668
Inventories (5,927) (5,954)
Other assets 501 100
Accruals and payables (1,323) 1,396
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Net cash provided by operating activities 4,295 4,168
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INVESTING ACTIVITIES:
Additions of property, plant, and equipment (4,292) (1,789)
Other 1 56
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Net cash used in investing activities (4,291) (1,733)
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FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,021 2,855
Repurchase of common stock (13,805)
Dividends paid (924) (864)
Other 70 (409)
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Net cash provided (used) by financing activities 1,167 (12,223)
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Net increase (decrease) in cash and equivalents 1,171 (9,788)
Cash and equivalents at beginning of period 34,469 45,040
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Cash and equivalents at end of period $ 35,640 $ 35,252
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*Unaudited
Page 5
<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. During the first quarter 1995, cash and equivalents increased
slightly from $34 to $36 million as cash provided by operations and
stock issuances more than offset capital expenditures. For the balance
of 1995, the company expects its operations to generate sufficient cash
to fund its anticipated growth and product development. In addition, the
company has the ability to augment any unplanned cash needs with readily
available external financing.
Current Operations: New orders for semiconductor-equipment slightly
exceeded shipments for the period. Semiconductor equipment sales
accounted for more than 50% of total revenue. The Far East continues to
be the strongest geographic area for new semiconductor equipment orders,
with 61% of new system bookings coming from that region in the first
quarter. The Group has sufficient backlog to support planned sales
volume for the first half of 1995. It is recognized that the
semiconductor equipment business is cyclical and can change rapidly.
Uncertainty increases significantly when projecting demand for
semiconductor equipment products more than 6 months into the future.
Although the defense market remains weak, the Electronics Group improved
its profitability and continues to streamline its operations in 1995.
Its East Coast operations were consolidated into the Gaithersburg,
Maryland Plant in the first quarter. The company continues to advance in
commercial opportunities for its electronics products and is focusing on
its wireless telecommunications business. It has formed certain
alliances with established commercial electronics firms to accelerate
its penetration of the wireless market.
First Quarter 1995 Compared to First Quarter 1994: Semiconductor
Equipment Group sales jumped 67% while Electronics Group sales were down
12%, resulting in the overall company sales increase of approximately
15%. Gross margin increased to 43% from prior year's quarter mostly due
to the favorable revenue shift towards more profitable
semiconductor-equipment products and improved profitability in the
Electronics Group. Selling and administrative expenses were expectedly
higher due to the higher cost associated with the increased
international sales volume in the Semiconductor Equipment Group.
Research and development expenses increased 2% to 13% of sales due to
the company's intense efforts in developing the next generation of
products for both business segments. The company does not expect this
intense level of research and development spending to continue for the
full year. Due to the above factors, first quarter 1995 net income
jumped 48% compared to the same period in 1994.
Page 6
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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 8, 1995, shareowners
voted on the following:
Item 1: Election of Directors:
Nominee For Withheld
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Dean A. Watkins 6,066,606 31,709
H. Richard Johnson 6,066,607 31,708
W. Keith Kennedy 6,063,565 34,750
John J. Hartmann 6,067,707 30,608
Raymond F. O'Brien 6,068,207 30,108
William R. Graham 6,068,082 30,233
Gary M. Cusumano 6,065,441 32,874
Robert L. Prestel 6,067,982 30,333
Item 2: Proposal to ratify the appointment of Deloitte & Touche as the
independent auditors of the company for accounting year ending
December 31, 1995.
For 6,042,414 Against 13,782 Withheld 42,119
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.
Page 7
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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 25, 1995 By: /s/ W. Keith Kennedy, Jr.
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W. Keith Kennedy, Jr.
President and Chief Executive Officer
Date April 25, 1995 By: /s/ Scott G. Buchanan
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Scott G. Buchanan
Vice President and Chief Financial Officer
Page 8
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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.
27 Financial Data Schedule
Page 9
WATKINS-JOHNSON COMPANY AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Dollars in thousands, except per share amounts)
For Three Months Ended
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March 31, 1995 April 1, 1994
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For primary net income per share:
Weighted average shares outstanding 7,639,000 7,356,000
Equivalent shares--dilutive
stock options--based on
treasury stock method using
average market price 807,000 571,000
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Total 8,446,000 7,927,000
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For fully diluted net income per share:
Weighted average shares outstanding 7,639,000 7,356,000
Equivalent shares--dilutive
stock options--based on
treasury stock method using
greater of closing market
price or average price 902,000 624,000
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Total 8,541,000 7,980,000
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Net Income $5,353 $3,624
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Primary net income per share $.63 $.46
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Fully diluted net income per share $.63 $.45
==== ====
This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11).
Page 10
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 35640
<SECURITIES> 0
<RECEIVABLES> 77185
<ALLOWANCES> 0
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<CURRENT-ASSETS> 182819
<PP&E> 164939
<DEPRECIATION> 117950
<TOTAL-ASSETS> 240228
<CURRENT-LIABILITIES> 62382
<BONDS> 21769
<COMMON> 22301
0
0
<OTHER-SE> 133776
<TOTAL-LIABILITY-AND-EQUITY> 240228
<SALES> 92983
<TOTAL-REVENUES> 92983
<CGS> 53106
<TOTAL-COSTS> 85580
<OTHER-EXPENSES> (355)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7758
<INCOME-TAX> 2405
<INCOME-CONTINUING> 5353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5353
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
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