<PAGE>
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 September 29, 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 333-38518
WJ COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1402710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 RIVER OAKS PARKWAY, SAN JOSE, CALIFORNIA 95134
(Address of principal executive offices) (Zip Code)
(408) 577-6200
(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 / / No /X/
Common stock, par value $0.01 per share, outstanding as of November 8, 2000
55,243,000 shares
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TABLE OF CONTENTS
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Page
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Part I - Financial Information
Item 1 - Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statements of Comprehensive Income (Loss) 5
Condensed Consolidated Balance Sheets 6
Condensed Consolidated Statements of Cash Flows 7
Notes to Condensed Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3 - Quantitative and Qualitative Disclosure About Market Risks 19
Part II - Other Information 20
Item 1 - Legal Proceedings
Item 2 - Changes in Securities and Use of Proceeds
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
</TABLE>
Page 2
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PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(In thousands) September 29, September 24, September 29, September 24,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales
Fiber optics $ 15,587 $ 3,784 $ 34,043 $ 10,755
Wireless 13,452 8,419 29,600 41,503
Semiconductor 5,911 4,321 15,985 11,482
------------ ------------- ------------ -------------
Total sales 34,950 16,524 79,628 63,740
Cost of goods sold 21,917 9,684 49,458 39,509
------------ ------------- ------------ -------------
Gross profit 13,033 6,840 30,170 24,231
------------ ------------- ------------ -------------
Operating expenses:
Research and development 4,821 4,367 13,585 13,018
Selling and administrative 4,773 1,168 10,739 3,720
Amortization of deferred stock compensation* 330 - 847 -
Corporate administrative - 1,181 322 3,033
Recapitalization merger and other - 1,639 35,453 1,639
------------ ------------- ------------ -------------
Total operating expenses 9,924 8,355 60,946 21,410
------------ ------------- ------------ -------------
Income (loss) from operations 3,109 (1,515) (30,776) 2,821
Interest income 734 1,084 2,051 2,708
Interest expense (794) (134) (3,069) (379)
Other income (expense) - net (176) 165 (867) 321
Gain on disposition of real property - 9,686 808 9,686
------------ ------------- ------------ -------------
Income (loss) from continuing operations
before income taxes 2,873 9,286 (31,853) 15,157
Income tax provision (benefit) 950 2,964 (8,424) 4,867
------------ ------------- ------------- -------------
Income (loss) from continuing operations 1,923 6,322 (23,429) 10,290
Discontinued operations:
Income from discontinued operations, net of
taxes of $352, $91 and $1,805 - 536 212 5,642
Gain on disposition, net of taxes of $20,471
and $1,606 - - 30,706 7,318
------------ ------------- ------------ -------------
Income before extraordinary item 1,923 6,858 7,489 23,250
Extraordinary item, net of taxes of $1,250 (2,050) - (2,050) -
------------- ------------- ------------- -------------
Net income (loss) (127) 6,858 5,439 23,250
Assumed preferred stock dividend - beneficial
conversion (9,982) - (9,982) -
------------- ------------- ------------- -------------
Net income (loss) available for common
shareholders $ (10,109) $ 6,858 $ (4,543) $ 23,250
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
Page 3
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(In thousands, except per share amounts) September 29, September 24, September 29, September 24,
2000 1999 2000 1999
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Basic per share amounts:
Income (loss) from continuing operations $ (0.16) $ 0.03 $ (0.51) $ 0.05
Discontinued operations:
Income, net of taxes - - - 0.03
Gain on disposition, net of taxes - - 0.46 0.04
Extraordinary item, net of taxes (0.04) - (0.03) -
------------- ------------- ------------- -------------
Net income (loss) $ (0.20) $ 0.03 $ (0.07) $ 0.12
============= ============= ============= =============
Basic average common shares 51,176 198,090 66,093 197,280
Diluted per share amounts:
Income (loss) from continuing operations $ (0.16) $ 0.03 $ (0.51) $ 0.05
Discontinued operations:
Income, net of taxes - - - 0.03
Gain on disposition, net of taxes - - 0.46 0.04
Extraordinary item, net of taxes (0.04) - (0.03) -
------------- ------------- ------------- -------------
Net income (loss) $ (0.20) $ 0.03 $ (0.07) $ 0.12
============= ============= ============= =============
Diluted average common shares 51,176 205,230 66,093 201,720
*Amortization of deferred stock compensation
excluded from the following expenses:
Cost of goods sold $ 22 $ 62
Research and development 35 191
Selling and administrative 273 594
------------ -------------
$ 330 $ 847
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(In thousands) September 29, September 24, September 29, September 24,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income (loss) $ (127) $ 6,858 $ 5,439 $ 23,250
Other comprehensive income (expense),
net of tax:
Net unrealized holding losses on
securities, arising during period - (2) (6) (278)
Less reclassification adjustment for gains
(losses) on securities included in net income - (1) (209) 26
------------ ------------- ------------ --------------
Other comprehensive income (expense) - (1) 203 (304)
------------ ------------- ------------ --------------
Comprehensive income (loss) $ (127) $ 6,857 $ 5,642 $ 22,946
============= ============= ============ =============
</TABLE>
See notes to condensed consolidated financial statements.
Page 5
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) September 29,
2000 December 31,
(unaudited) 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 73,098 $ 131,065
Short-term investments - 42,747
Receivables, net 19,810 11,362
Inventories 14,110 5,146
Deferred income taxes 2,303 2,642
Deposits - 11,101
Net current assets from discontinued operations - 20,237
Other 3,221 2,412
---------------- ------------------
Total current assets 112,542 226,712
---------------- ------------------
Property, plant, and equipment 34,813 34,514
Accumulated depreciation and amortization (16,805) (20,851)
----------------- -------------------
Property, plant, and equipment--net 18,008 13,663
---------------- ------------------
Other assets 3,460 3,245
---------------- ------------------
$ 134,010 $ 243,620
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payables $ 12,763 $ 11,493
Accrued liabilities 13,368 15,905
---------------- ------------------
Total current liabilities 26,131 27,398
---------------- ------------------
Long-term obligations 9,178 14,085
---------------- ------------------
Stockholders' equity:
Common stock 553 37,798
Additional paid in capital 178,715 -
Retained earnings (deficit) (77,177) 164,542
Deferred compensation (3,390) -
Accumulated comprehensive income (loss) - (203)
---------------- -------------------
Total stockholders' equity 98,701 202,137
---------------- ------------------
$ 134,010 $ 243,620
================ ==================
</TABLE>
See notes to condensed consolidated financial statements.
Page 6
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
(In thousands) September 29, September 24,
2000 1999
--------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,439 $ 23,250
Reconciliation of net income to net cash provided
by (used in) operating activities:
Recapitalization merger and other costs 35,453 1,639
Depreciation and amortization 2,169 1,856
Extraordinary item, net of taxes 2,050 -
Provision for bad debt 941 -
Gain on disposal of property, plant & equipment (67) (9,657)
Deferred income taxes 1,594 (1,152)
Amortization of deferred stock compensation 847 -
Income of discontinued operations and gain on
disposal, net of taxes (30,918) (12,960)
Net changes in:
Receivables (9,389) 1,902
Inventories (8,964) (27)
Other assets 6,855 15,274
Accruals and payables (2,400) (11,870)
---------------- --------------
Net cash provided by continuing operating activities 3,610 8,255
Net cash provided by (used in) discontinued operations (12,569) 8,110
---------------- -------------
Net cash provided by (used in) operating activities (8,959) 16,365
---------------- -------------
INVESTING ACTIVITIES:
Additions of property, plant, and equipment (9,035) (4,050)
Proceeds from sale of short-term investments 43,080 24,936
Purchases of short-term investments - (24,869)
Proceeds from sale of discontinued operations 62,288 19,878
Proceeds from sale of real property - 16,875
Proceeds on asset retirements and other 162 52
--------------- -------------
Net cash provided by investing activities 96,495 32,822
--------------- -------------
FINANCING ACTIVITIES:
Long-term borrowings 40,000 -
Payments on long-term borrowings (40,125) (113)
Net proceeds from issuance of common & preferred stock 160,297 1,877
Repurchase of common stock (270,222) -
Recapitalization merger and other costs (35,453) (1,639)
Cash dividends - (2,371)
--------------- --------------
Net cash used in financing activities (145,503) (2,246)
---------------- --------------
Net increase (decrease) in cash and equivalents (57,967) 46,941
Cash and equivalents at beginning of period 131,065 19,271
--------------- -------------
Cash and equivalents at end of period $ 73,098 $ 66,212
=============== =============
Noncash activities:
Assumed preferred stock dividend - beneficial conversion $ 9,982 $ -
</TABLE>
See notes to condensed consolidated financial statements.
Page 7
<PAGE>
WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 29, 2000 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000.
The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of WJ
Communications, Inc. (the "Company") for the fiscal year ended December 31,
1999, which are included in the Company's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on August 16, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principals for complete
financial statements.
The condensed consolidated financial statements include those of the Company and
its subsidiaries after elimination of intercompany balances and transactions.
The Company disposed of its Government Electronics segment in October 1997,
Semiconductor Equipment segment in July 1999, and Telecommunications segment in
January 2000. The consolidated financial statements reflect such dispositions
and results of operations of these businesses as discontinued operations.
On August 18, 2000, the Company sold 6.21 million shares of common stock in an
initial public offering ("IPO") for $16 per share. The initial public offering
resulted in net proceeds to the Company of approximately $88.4 million after the
payment of the underwriters' commission and deduction of offering expenses.
Simultaneous with the closing of the initial public offering, the Company's
outstanding shares of preferred stock were automatically converted into
1,498,800 shares of common stock. The Company recorded a $10 million preferred
stock dividend related to the assumed beneficial conversion of the Company's
preferred shares and their conversion into common shares. See also note 6.
In August 2000, the Company used a portion of the net proceeds from the IPO
to repay the outstanding balances of notes payable of approximately $40.0
million. In conjunction with this debt repayment, the Company recorded an
extraordinary item of $3.3 million (or $2.1 million after tax) related to the
write-off of the remaining unamortized debt financing costs. The remainder of
the proceeds have been invested in securities with maturities of 3 months or
less and are included in cash and equivalents as of September 29, 2000.
Page 8
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
2. ORGANIZATION AND OPERATIONS OF THE COMPANY
WJ Communications, Inc. (formerly Watkins-Johnson Company) was founded in 1957
in Palo Alto, California. For more than 30 years, the Company developed and
manufactured microwave devices for government electronics and space
communications systems used for intelligence gathering and communication. In
1996, the Company began to develop commercial applications for its military
technologies. The Company's continuing operations design, develop and
manufacture innovative, high quality broadband communications products that
enable voice, data and image transport over fiber optic, broadband cable and
wireless communications networks around the world. The Company's products are
used in the network infrastructure supporting and facilitating mobile
communications, broadband high speed data transmission and enhanced voice
services.
Effective January 31, 2000, a recapitalization merger of the Company was
completed that included the following transactions, in accordance with the terms
of the recapitalization merger agreement among the Company and FP-WJ Acquisition
Corp. dated October 25, 1999 (the "Agreement"):
- The Company entered into a credit facility ("Facility") with CIBC World
Markets Corp., among others. This Facility is comprised of a $15.0 million
five-year revolver, a $25.0 million five-year term A loan, and a $15.0 million
six-year term B loan. The Company borrowed $25.0 million under the term A loan
and $15.0 million under the term B loan as part of the recapitalization merger.
The outstanding debt under the Facility was repaid by the Company with a portion
of the proceeds from the IPO.
- The Company incurred approximately $3.6 million in financing costs in
conjunction with the Facility that were capitalized and $35.5 million of
transaction, retention and severance compensation that was charged to operating
expenses. A breakdown of the $35.5 million is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Legal $ 1,200
Consulting and accounting fees 3,500
Bonus and retention payments 3,400
Severance costs 6,400
Compensation charge for payment of stock options 16,800
Financial services 2,600
Other 1,600
--------
$ 35,500
========
</TABLE>
- The severance costs relate to 22 hourly and salaried personnel whose
positions were eliminated at the date of the recapitalization merger
transaction. This entire amount was paid during the three months ended March 31,
2000.
- The Watkins Trust retained an approximate 8.5% voting and economic interest
in the Company as part of the recapitalization merger.
- The Company redeemed the remainder of the outstanding common stock for a
cash payment of approximately $270 million.
- Fox Paine Capital Fund and affiliates (collectively "Fox Paine") invested
$50.8 million in the Company.
Page 9
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Investments--Cash and equivalents consist of municipal bond
funds and commercial paper acquired with remaining maturity periods of 90 days
or less and are stated at cost plus accrued interest which approximates market
value. Investments at December 31, 1999 consisted of high-grade debt securities
(AA rating or better) with maturity greater than 90 days from the date of
acquisition and are classified as "available-for-sale." Investments classified
as available-for-sale are reported at fair market value with unrealized gains or
losses excluded from earnings and reported as a separate component of
stockholders' equity, net of tax, until realized.
Inventories--Inventories are stated at the lower of cost, using first-in,
first-out and average-cost basis, or market. Cost of inventory items is based on
purchase and production cost. Inventories at September 29, 2000 and December 31,
1999 consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 29, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Finished Goods $ 1,552 $ 536
Work in progress 2,622 452
Raw materials and parts 9,936 4,158
---------- ----------
$ 14,110 $ 5,146
========== ==========
</TABLE>
Revenue Recognition--Revenues from product sales are recognized when all of the
following conditions are met: the product has been shipped, the Company has the
right to invoice the customer at a fixed price, the collection of the receivable
is probable and there are no significant obligations remaining. Generally, title
passes upon shipment of the Company's products. Beginning in March 2000, our
contract with a significant customer converted to a consignment arrangement
under which title does not pass until this significant customer utilizes our
products in its production processes. As a consequence, we recognize revenue on
this contract only when this customer notifies us of product consumption. Any
anticipated losses on contracts are charged to earnings when identified. The
Company provides a warranty on standard products and components and products
developed for specific customers or program applications. The Company estimates
the cost of warranty based on its historical field return rates. To date, the
Company has had no significant warranty returns.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements. SAB 101 provides
guidance on applying generally accepted accounting principles to revenue
recognition in financial statements. The Company has adopted SAB 101 and the
adoption had no material effect on the accompanying financial statements.
Fiscal Year - The Company's fiscal year ends on December 31st of each year.
The three months ended September 24, 1999 and September 29, 2000 included 13
weeks. The nine months ended September 24, 1999 and September 29, 2000
included 39 weeks.
Recent Accounting Pronouncements--In June 1998, the FASB issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." In June 1999,
the FASB issued SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS 133." These Statements
require companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains and losses resulting from changes in
the fair market values of those derivative instruments would be accounted for
depending on the use of the instrument and whether it qualifies for hedge
accounting. SFAS 133 will be effective for the company's year ending December
31, 2001. Management is in the process of evaluating any impact on the company's
financial condition or results of operations resulting from these Statements. As
of September 29, 2000 we have no foreign exchange contracts outstanding.
Page 10
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 2000, the FASB issued Financial Accounting Standards Board
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation--an interpretation of APB No. 25. Interpretation No. 44 was
effective July 1, 2000. The Interpretation clarifies the application of Opinion
25 for various issues, specifically the definition of an employee; the criteria
for determining whether a plan qualifies as a non-compensatory plan; the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award; and the accounting for an exchange of stock
compensation awards in a business combination. The adoption of Interpretation
No. 44 did not have a material impact on our financial position or the results
of our operations.
4. LEASES AND REAL ESTATE TRANSACTIONS
In October, 2000 the Company moved its operations from Palo Alto, California to
San Jose, California. The net capital lease obligation associated with the Palo
Alto facility of $2.7 million is included in accrued expenses as of September
29, 2000 due to the intent to sell the facility within the next twelve months.
The new facility will consist of two buildings: a current structure of
approximately 82,000 feet and a smaller (approximately 42,000 square foot)
building which is being constructed at the landlord's expense. Occupancy of the
smaller building is expected to begin no later than the end of the second
quarter of 2001. Both buildings are leased for ten years from the beginning of
occupancy. The larger building has a beginning base monthly rent of $158,340 for
the first twelve months, which increases by 4% over each succeeding twelve month
period. The smaller building will have a beginning base monthly rent of $94,500
for the first twelve months which will also increase by 4% over each succeeding
twelve month period. Rental payments on the second building are expected to
begin during the Company's first quarter of 2001.
5. ASSUMED BENEFICAL CONVERSION OF PREFERRED STOCK
In July, 2000, the Company sold 1,498,800 shares of its Series A Preferred
Stock to one strategic investor and one financial investor. Net proceeds from
the sales totaled approximately $11.2 million. Under the terms of the Series
A Preferred Stock, the shares converted into common stock of the Company
simultaneous with the Company's IPO in August, 2000. In connection with this
conversion, the Company recorded a $10 million noncash preferred stock
dividend based on an assumed beneficial conversion during the three month
period ended September 29, 2000.
Page 11
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
6. EARNINGS PER SHARE CALCULATION
Per share amounts are computed based on the weighted average number of basic and
diluted (dilutive stock options) common and common equivalent shares outstanding
during the respective periods.
Earnings per share calculation for continuing operations are as follows:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- -------------------------------
SEPTEMBER 29, SEPTEMBER 24, SEPTEMBER 29, SEPTEMBER 24,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ 1,923 $ 6,322 $ (23,429) $ 10,290
Preferred stock dividend (9,982) - (9,982) -
------------ ------------ ------------ ------------
Income (loss) available to common
shareholders from continuing operations
(numerator) $ (8,059) $ 6,322 $ (33,411) $ 10,290
============ ============ ============ ============
Denominator for basic per share:
Weighted average shares outstanding 51,176 198,090 66,093 197,280
============ ============ ============ ============
Denominator for diluted per share:
Weighted average shares outstanding 51,176 198,090 66,093 197,280
Effect of dilutive stock options - 7,140 - 4,440
------------ ------------ ------------ ------------
Diluted average common shares 51,176 205,230 66,093 201,720
============ ============ ============ ============
Basic net income (loss) per share from
continuing operations $ (0.16) $ 0.03 $ (0.51) $ 0.05
Diluted net income (loss) per share from
continuing operations $ (0.16) $ 0.03 $ (0.51) $ 0.05
</TABLE>
For the three months and nine months ended September 29, 2000, the incremental
shares from the assumed exercise of 10,698,000 and 9,674,000 stock options,
respectively, are not included in computing the dilutive per share amounts
because continuing operations resulted in a loss and such assumed conversion
would be antidilutive.
Page 12
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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
7. DEFERRED STOCK COMPENSATION
In conjunction with the issuance of certain stock options in 2000, 14,522,544
options were granted at an average exercise price of $1.37 per share which
was equal to the weighted average fair value of $1.37 per share at the date
of grant. This fair value was determined by using the same fair value used in
the recapitalization merger transaction which was completed in January, 2000.
Additionally, the Company granted 791,000 options where the weighted average
exercise price of $5.31 per share was less than the deemed weighted average
fair value of $10.08 per share subsequent to the Company's initial public
offering. In addition, the Company sold 81,000 shares of common stock where
the weighted average sales price of $3.82 per common share was less than the
deemed weighted average fair value of $9.51 per share. The Company has
recorded deferred stock compensation in the aggregate amount of $4,236,000
representing the differential between the deemed fair value of the Company's
common stock and the exercise price at the date of grant for options or date
of sale for stock purchases. The Company is amortizing this amount over the
vesting period of the stock purchased and the options granted. The Company
recorded $0.8 million of deferred stock compensation expense for the nine
months ended September 29, 2000 in the accompanying financial statements.
8. DISCONTINUED OPERATIONS
On January 14, 2000, the Company completed the sale of substantially all of the
Telecommunications segment's assets to a unit of Marconi North America, Inc., a
subsidiary of the General Electric Company p.l.c. of the United Kingdom. Net
proceeds from the sale of about $57.0 million and an estimated pre-tax gain of
more than $40.0 million are included in the Company's financial results in the
first quarter of 2000.
The net assets of discontinued operations, current, was $20.2 million as of
December 31, 1999. All significant amounts related to discontinued operations
have been settled as of September 29, 2000.
Page 13
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
CAUTION REGARDING FORWARD-LOOKING STATEMENTS. THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS INCLUDING FINANCIAL PROJECTIONS, STATEMENTS AS TO
THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, AND STATEMENTS
AS TO THE COMPANY'S FUTURE ECONOMIC PERFORMANCE, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS ARE NOT HISTORICAL
FACTS BUT RATHER ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES, PROJECTIONS
ABOUT OUR INDUSTRY, OUR BELIEFS AND OUR ASSUMPTIONS. WORDS SUCH AS "MAY,"
"WILL," "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS" AND
"ESTIMATES" AND VARIATIONS OF THESE WORDS AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO,
TECHNOLOGICAL INNOVATION IN THE WIRELESS AND FIBER OPTIC COMMUNICATIONS
MARKETS, THE AVAILABILITY AND THE PRICE OF RAW MATERIALS AND COMPONENTS USED
IN THE COMPANY'S PRODUCTS, THE DEMAND FOR WIRELESS AND FIBER OPTIC SYSTEMS
AND PRODUCTS GENERALLY AS WELL AS THOSE OF OUR CUSTOMERS AND CHANGES IN OUR
CUSTOMER'S PRODUCT DESIGNS SUCH THAT OUR PRODUCTS ARE NO LONGER REQUIRED IN
THEIR PRODUCTS. READERS OF THIS REPORT ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONDENSED FINANCIAL STATEMENTS AND RELATED DISCLOSURES INCLUDED ELSEWHERE IN
THIS QUARTERLY REPORT. EXCEPT FOR HISTORIC ACTUAL RESULTS REPORTED, THE
FOLLOWING DISCUSSION MAY CONTAIN PREDICTIONS, ESTIMATES AND OTHER
FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. SEE
"CAUTION REGARDING FORWARD-LOOKING STATEMENTS" INCLUDED ABOVE FOR A DISCUSSION
OF CERTAIN FACTORS THAT COULD CAUSE FUTURE ACTUAL RESULTS TO DIFFER FROM THOSE
DESCRIBED IN THE FOLLOWING DISCUSSION.
Current Operations and Business Outlook
Third Quarter 2000 Compared to Third Quarter 1999
Sales - Sales increased 112% to $35.0 million in the third quarter of 2000 from
$16.5 million in the third quarter of 1999. This increase is attributable to
increased shipments of products related to all three of our broadband
infrastructure product categories, particularly fiber optic products which
increased by 311% to $15.6 million in the third quarter of 2000. The increase in
our fiber optics sales was related to strong demand for OC-192 oscillators,
which we sell to a significant customer. Fiber optic sales represented 45% of
total sales for the quarter. Wireless product sales during the third quarter of
2000 totaled $13.5 million, representing 38% of total sales for the quarter and
an increase of 60% over the third quarter of 1999. Semiconductor sales during
the third quarter totaled $5.9 million, representing 17% of total sales for the
quarter and an increase of 37% over the third quarter of 1999.
Gross profit - Our gross profit increased 91% to $13.0 million in the third
quarter of 2000 from $6.8 million in the third quarter of 1999. This increase
was related to the increase in sales described above. As a percentage of sales,
our gross profit margin declined to 37.3% in the third quarter of 2000 from
41.4% in the third quarter of 1999. This decline in our gross profit margin was
a result of several new products being transitioned from development to
manufacturing as well as higher facility costs associated with our new facility
in San Jose. In general, we achieve lower gross profit margins on products that
have recently been transitioned into manufacturing and which are in low rate
production as compared to products in higher rate production, that we have more
manufacturing experience producing and which absorbs greater amounts of
overhead.
Page 14
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
Research and development - Research and development expenses
increased $0.4 million to $4.8 million in the third quarter of 2000
from $4.4 million in the third quarter of 1999. The increase in
research and development expenses relates to an increase in the
Company's engineering staff. As a percentage of sales, research and
development expenses declined to 13.8% of sales in the third quarter
of 2000 from 26.4% of sales in the third quarter of 1999. The
decrease in research and development expenses as a percentage of
sales primarily relates to the increase in sales described above.
Selling and administrative - Selling and administrative expenses in
the third quarter of 2000 increased $3.6 million to $4.8 million
from $1.2 million in 1999. The increase in selling and
administrative expense is primarily related to higher levels of
selling related expenses, corporate support expenses, bad debt
provisions and recruiting expenses in the third quarter of 2000. As
a percentage of sales, selling and administrative expenses increased
to 13.7% of sales in the third quarter of 2000 from 7.1% in the
third quarter of 1999.
Amortization of deferred stock compensation - Prior to the Company's
initial public offering, certain common stock options were granted to
employees at prices which were deemed to be below fair market value. As
a result, the Company recorded deferred stock compensation which is
being amortized over the vesting period of the related stock options.
During the third quarter of 2000, the Company recorded amortization of
deferred stock compensation of $0.3 million.
Corporate administrative expenses - During the third quarter of 2000,
corporate administrative expenses totaled $0 versus $1.2 million in
the third quarter of 1999. After January 31, 2000, the date of our
recapitalization merger, corporate administrative expenses were
included with selling and administration expenses.
Recapitalization merger and other - Recapitalization merger and other
totaled $0 during the third quarter of 2000 as compared to $1.6 million
in the third quarter of 1999. Recapitalization merger and other
expenses during the third quarter of 1999 related to expenses incurred
in connection with the sale of our telecommunications group.
Interest Income - Interest income decreased $0.4 million to $0.7
million in the third quarter of 2000 compared to $1.1 million in the
third quarter of 1999. The decrease was primarily due to less funds
available for investment in the third quarter of 2000 due to the
recapitalization merger which closed on January 31,2000.
Interest expense - Interest expense increased $0.7 million to $0.8
million in the third quarter of 2000 from $0.1 million in the third
quarter of 1999. The increase in interest expense primarily relates to
the debt the Company incurred in connection with the recapitalization
merger, which closed on January 31, 2000. The Company repaid this debt
with a portion of the net proceeds from its initial public offering.
Other income (expense)- net - Other income (expense)- net decreased
$0.4 million to other expense of $0.2 million in the third quarter of
2000 from other income of $0.2 million in the third quarter of 1999.
During the third quarter of 2000, other (expense) primarily relates to
expenses in excess of sublease payments on certain real estate the
Company subleased to an independent company. In the third quarter of
1999, other income primarily related to net rental income from the
aforementioned property.
Gain on disposition of real property - In the third quarter of 1999, we
completed the sale of a San Jose, California facility for net proceeds
of approximately $16.9 million which resulted in a pretax gain of $9.7
million.
Income tax provision - Our effective tax rate for continuing operations
was 33.1% in the third quarter of 2000 as compared to 31.9% in the
third quarter of 1999.
Extraordinary item, net of taxes - During the third quarter of 2000, we
repaid all of the outstanding borrowings under our credit facility and
wrote-off, as an extraordinary item, the remaining unamortized deferred
financing cost of $3.3 million before income taxes of $1.25 million.
Page 15
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
Assumed preferred stock dividend - beneficial conversion - Under the
terms of our preferred stock, it converted into 1,498,800 shares of
common stock at the time of our initial public offering. In connection
with this conversion, we recorded an assumed preferred stock dividend
of $10.0 million based on an assumed beneficial conversion.
YEAR-TO-DATE 2000 COMPARED TO YEAR-TO-DATE 1999
Sales - Sales increased 25% to $79.6 million during the first nine
months of 2000 from $63.7 million in the first nine months of 1999. The
increase is primarily related to a 217% increase in the sales of fiber
optic products, particularly OC-192 oscillators shipped to one of our
largest customers. For the first nine months of 2000, fiber optic sales
totaled $34.0 million and comprised 43% of total sales. Also during the
first nine months of 2000, sales of semiconductor products rose 39% to
$16.0 million from $11.5 million in the first nine months of 1999,
primarily due to higher shipments of our highly linear amplifier
products. In comparison with the first nine months of 1999, wireless
product sales declined by 29% to $29.6 million during the first nine
months of 2000. In the first nine months of 1999, the Company completed
a fixed wireless project for a major customer in an emerging country.
Sales for this project totaled $22.3 million or 35% of total sales for
the first nine months of 1999.
Gross Profit - Our gross profit increased 24.5% to $30.2 million in the
first nine months of 2000 from $24.2 million in the first nine months
of 1999. The increase in gross profit dollars generated was related to
the increase in sales. As a percentage of sales, our gross profit
margin stayed relatively constant at 37.9% of sales in the first nine
months of 2000 as compared to 38.0% during the first nine months of
1999. Throughout the first nine months of 2000, economies of scale
achieved by higher volumes of manufacturing have been offset by higher
costs primarily associated with new products being transitioned from
development to production. The Company has also experienced higher
facilities costs during the first nine months of 2000 associated with
the relocation of the Palo Alto manufacturing facility to San Jose.
Research and development - Research and development expenses
increased 4% to $13.6 million in the first nine months of 2000 from
$13.0 million in the first nine months of 1999. The increase in
research and development expenses relates to an increase in the
Company's research and development staff, which resulted in higher
levels of salaries and benefit cost. As a percentage of sales,
research and development expenses declined to 17.1% of sales in the
first nine months of 2000 from 20.4% of sales in the first nine
months of 1999. The decline as a percentage of sales relate to the
Company's increased sales.
Selling and administrative - Selling and administrative expenses
increased to $10.7 million in the first nine months of 2000 from
$3.7 million in the first nine months of 1999. The increase in
selling and administrative primarily related to higher levels of
selling related expenses, corporate support expenses, bad debt
provisions and recruiting expenses in the first nine months of 2000.
As a percentage of sales, selling and administrative expenses
increased to 13.5% of sales in the first nine months of 2000 from
5.8% in the first nine months of 1999.
Amortization of deferred stock compensation - Prior to the Company's
initial public offering, certain common stock options were granted to
employees at prices which were deemed to be below fair market value. As
a result, the Company recorded deferred stock compensation which is
being amortized over the vesting period of the related stock options.
During the first nine months of 2000, the Company recorded amortization
of deferred stock compensation of $0.8 million.
Page 16
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
Corporate administrative expenses - After January 31, 2000, the Company
began including corporate administrative expenses in selling and
administrative expenses. For the first nine months of 2000, corporate
administrative expenses totaled $0.3 million versus $3.0 million in the
first nine months of 1999.
Recapitalization merger and other - Recapitalization merger and other
totaled $35.5 million during the first nine months of 2000 as compared
to $1.6 million during the first nine months of 1999. The
recapitalization merger and other expenses we incurred in the first
nine months of 1999 related to the sale of our telecommunications
group. The recapitalization merger expenses we incurred in the first
nine months of 2000 related to our recapitalization merger and
included: $16.8 million of compensation expenses related to payments to
former option holders; $9.8 million of compensation expenses related to
bonus, retention, and severance amounts for certain employees; $4.7
million of legal, consulting and accounting fees; and $4.2 million of
financial services and other expenses related to the recapitalization
merger transaction.
Interest income - Interest income decreased $0.6 million to $2.1
million in the first nine months of 2000 from $2.7 million in the first
nine months of 1999. The decrease primarily related to less average
funds being available for investment in the first nine months of 2000
as compared to the first nine months of 1999.
Interest expense - Interest expense increased $2.7 million to $3.1
million in the first nine months of 2000 from $0.4 million in the first
nine months of 1999. The increase primarily related to interest
incurred on debt we incurred as part of our recapitalization merger.
Other income (expense)- net - Other income (expense) -net decreased
$1.2 million to other expense of $0.9 million in the first nine months
of 2000 from other income of $0.3 million in the first nine months of
1999. During the third quarter of 2000, other (expense) primarily
relates to expenses in excess of sublease payments on certain real
estate the Company subleased to an independent company. In the first
nine months of 1999, other income primarily related to net rental
income from the aforementioned property.
Gain on disposition of real property - During the first nine months of
2000 we realized a gain of $0.8 million related to reimbursement of
property development costs associated with a San Jose facility which
was sold in 1999. In the first nine months of 1999, we completed the
sale of a San Jose, California facility for net proceeds of
approximately $16.9 million, which resulted in a pretax gain of $9.7
million.
Income tax provision (benefit) - Our effective tax rate for continuing
operations for the first nine months of 1999 was a provision of 32.1%.
In the first nine months of 2000 we had an effective tax benefit rate
for continuing operations of (26.4%) due to certain nondeductible
items.
Extraordinary item, net of taxes - During the first nine months of
2000, we repaid all the outstanding borrowing under our credit facility
and wrote-off, as an extraordinary item, the remaining unamortized
deferred financing cost of $3.3 million before income taxes of $1.25
million.
Assumed preferred stock dividend - beneficial conversion - Under the
terms of our preferred stock, it converted into 1,498,800 shares of
common stock at the time of our initial public offering. In connection
with this conversion, we recorded an assumed preferred stock dividend
of $10.0 million based on an assumed beneficial conversion.
Page 17
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources
On September 29, 2000, cash and equivalents and short-term
investments totaled $73.1 million, a decrease of $100.7 million from
the year-end balance of $173.8 million. The net decrease was
primarily attributable to cash used in connection with our
recapitalization merger on January 31, 2000. During the third
quarter, the Company realized approximately $11.2 million of net
proceeds from the sales of our Series A Preferred Stock and
approximately $88.4 million of net proceeds from the sale of our
common stock in the Company's IPO on August 18, 2000. In addition,
during the first nine months of 2000, the Company realized
approximately $62.3 million of net proceeds from the disposition of
discontinued operations, and approximately $60.7 million of net
proceeds from the sale of common stock during the recapitalization
merger.
Net Cash Provided (Used) by Continuing Operating Activities - Net
cash provided (used) by continuing operations was $3.6 million and
$8.3 million in the first nine months of 2000 and 1999 respectively.
Net income (loss) for the first nine months of 2000 and 1999 was
comprised of a loss of ($23.4) million and income of $10.3 million
from continuing operations and income of $30.9 million and $13.0
million from discontinued operations, respectively. Significant
items impacting the difference between income (loss) from continuing
operations and cash flows from continuing operations in the first
nine months of 2000 were $13.9 million used in working capital,
$35.5 million of recapitalization and merger cost and a $2.1 million
extraordinary item related to the write-off of unamortized deferred
financing cost. The $13.9 million used in working capital relates to
a $9.4 million increase in receivables, a $9.0 million increase in
inventories and a $2.4 million decrease in accruals and payables
partially offset by a $6.9 million decrease in other assets.
Significant items impacting the difference between net income from
continuing operations and cash flows from continuing operations for
the first nine months of 1999 were $5.3 million provided by working
capital and $9.7 million related to a gain on the disposition of
property plant and equipment. The $5.3 million provided by working
capital primarily relates to a $15.3 million decrease in other
assets and a $1.9 million decrease in receivables partially offset
by a $11.8 million decrease in accruals and payables. The $9.7
million gain on disposal of property plant and equipment relates to
the Company's sale of an unused facility located in San Jose.
Net Cash Provided (Used) by Investing Activities - Net cash provided by
investing activities was $96.5 million and $32.8 million in the first
nine months of 2000 and 1999, respectively. The primary items providing
cash from investing activities in the first nine months of 2000 were
the sale of short-term investments totaling $43.1 million and the sale
of discontinued operations totaling $62.3 million partially offset by
$9.0 million in capital expenditures. The primary items providing cash
from investing activities during the first nine months of 1999 were the
sales of real property totaling $16.9 million, the sale of discontinued
operations totaling $19.9 million and the sale of short-term
investments totaling $24.9 million partially offset by purchases of
short-term investments totaling $24.9 million and capital expenditures
totaling $4.1 million.
Net Cash Used in Financing Activities - Net cash used in financing
activities increased $143.3 million in the first nine months of 2000
to $145.5 million from $2.2 million in the first nine months of
1999. During the first nine months of 2000, the Company used cash in
financing activities to repurchase $270.2 million of its common
stock in connection with our recapitalization merger, pay
recapitalization merger expenses of $35.5 million and to pay
long-term debt of $40.1 million. These items were partially offset
by the proceeds from the sale of common and preferred stock totaling
$160.3 million and borrowings under our credit facility totaling
$40.0 million. The proceeds from the issuance of common and
preferred stock included a $60.7 million investment in common stock
which occurred in connection with our recapitalization merger, the
sale of preferred stock, which subsequently converted into common
stock, for net proceeds of $11.2 million and the sale of common
stock in our initial public offering for net proceeds of
approximately $88.4 million.
The Company believes its cash and equivalents on hand will be
sufficient to fund current operations for the next twelve months.
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<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements. The
Company is exposed to market risk related to changes in interest rates.
The Company does not use derivative financial instruments for
speculative or trading purposes.
Cash Equivalents and Investments--Cash equivalents consist of municipal
bond funds and commercial paper acquired with remaining maturity
periods of 90 days or less and are stated at cost plus accrued interest
which approximates market value. Investments at December 31, 1999
consisted of high-grade debt securities (AA rating or better) with
maturity greater than 90 days from the date of acquisition and are
classified as "available-for-sale." Investments classified as
available-for-sale are reported at fair market value with unrealized
gains or losses excluded from earnings and reported as a separate
component of stockholders' equity, net of tax, until realized.
The following table provides information about the company's investment
portfolio and constitutes a "forward-looking statement." For investment
securities, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates.
<TABLE>
<CAPTION>
EXPECTED MATURITY WEIGHTED
AMOUNTS AVERAGE INTEREST
EXPECTED MATURITY DATES (IN THOUSANDS) RATE
-------------------------------------------------------------------------
<S> <C> <C>
Cash and equivalents:
September 29, 2000 $ 73,098 6.55%
Short-term investments -
--------
Fair value at
September 29, 2000 $ 73,098
========
</TABLE>
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<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company completed its initial public offering ("IPO") on August
18, 2000, pursuant to a Registration Statement Form S-1 (File No.
333-38518), which was declared effective by the Securities and
Exchange Commission on August 17, 2000. In the IPO we sold an
aggregate of 6,210,000 shares of common stock, par value of $0.01
per share. The sale of the shares of common stock generated
aggregate proceeds of $99.4 million. The aggregate net proceeds were
approximately $88.4 million after deducting underwriters discounts
and commissions of approximately $7.0 million and directly paid
expenses of the offering of $4.0 million. Chase H&Q, CIBC World
Markets and Thomas Weisel Partners LLC were the lead underwriters
for the IPO.
The Company used approximately $40.0 million of the net proceeds to
repay outstanding debt amounts. The remainder of the net proceeds
will be used for several corporate purposes including working
capital and capital expenditures, pending such uses, the net
proceeds are invested in short-term liquid investments.
In July, 2000, the Company sold 1,498,800 shares of its Series A
preferred stock to one strategic and one financial investor for gross
proceeds of $12.5 million. The net proceeds of $11.2 million were
remaining after $1.3 million of expenses relating to the sale,
primarily commissions related to the sale. These shares of preferred
stock were converted to an equivalent number of shares of common
stock concurrently with the completion of the IPO on August 18, 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 16, 2000, our stockholders approved by written consent the
Company's 2000 Non-Employee Director Stock Compensation Plan.
38,297,870 shares of common stock approved the adoption of the plan.
10,047,125 shares of common stock were unvoted.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Financial data schedule.
b) The Company did not file any reports on Form 8-K during the three
months ended September 29, 2000.
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<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.
WJ COMMUNICATIONS, INC.
(Registrant)
Date November 13, 2000 By: /s/ MALCOLM J. CARABALLO
--------------------------------
Malcolm J. Caraballo
President and Chief
Executive Officer
Date November 13, 2000 By: /s/ WILLIAM T. FREEMAN
--------------------------------
William T. Freeman
Chief Financial Officer
Page 21
<PAGE>
EXHIBIT INDEX
The Exhibits below are numbered according to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<S> <C>
27.1 Financial Data Schedule for the three and nine months ended
September 29, 2000.
</TABLE>
-------------------------
b) The Company did not file any reports on Form 8-K during the three months
ended September 29, 2000.
Page 22
