<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
Commission file number 0-16182
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AXSYS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 11-1962029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
645 Madison Avenue 10022
New York, New York (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (212) 593-7900
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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
---- ----
4,113,190 shares of Common Stock, $.01 par value, were outstanding as of
November 7, 1997.
<PAGE>
AXSYS TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations--
Three Months Ended September 30, 1997 and 1996............... 3
Condensed Consolidated Statements of Operations--
Nine Months Ended September 30, 1997 and 1996................ 4
Condensed Consolidated Balance Sheets--
September 30, 1997 and December 31, 1996..................... 5
Condensed Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1997 and 1996................ 6
Notes to Condensed Consolidated Financial Statements........... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K............................... 13
SIGNATURES.............................................................. 13
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</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited, dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
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<S> <C> <C>
Net Sales $ 31,674 $ 24,233
Cost of sales 22,774 18,121
Selling, general and administrative expenses 5,512 4,430
Amortization of intangible assets 117 55
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Operating income 3,271 1,627
Interest expense 823 615
Other (income) expense (2) 9
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Income from continuing operations before taxes 2,450 1,003
Provision for income taxes 1,000 396
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Income from continuing operations 1,450 607
Loss on discontinued operations, net of tax (244) --
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Net income 1,206 607
Preferred stock dividends -- 221
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Net income applicable to common shareholders $ 1,206 $ 386
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Earnings (loss) per share:
Continuing operations $ 0.42 $ 0.14
Discontinued operations (0.07) --
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$ 0.35 $ 0.14
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Weighted average common shares outstanding 3,467,494 2,757,746
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</TABLE>
See notes to condensed consolidated financial statements.
3
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AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited, dollars in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
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<S> <C> <C>
Net Sales $ 90,523 $ 64,778
Cost of sales 65,885 48,011
Selling, general and administrative expenses 15,796 11,932
Amortization of intangible assets 242 157
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Operating income 8,600 4,678
Interest expense 2,166 1,657
Other (income) expense 24 (4)
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Income from continuing operations before taxes and
extraordinary item 6,410 3,025
Provision for income taxes 2,594 1,216
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Income from continuing operations before extraordinary item 3,816 1,809
Loss on discontinued operations, net of tax (244) --
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Income before extraordinary item 3,572 1,809
Extraordinary loss on early extinguishment
of debt, net of tax benefit -- (173)
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Net income 3,572 1,636
Preferred stock dividends 102 626
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Net income applicable to common shareholders $ 3,470 $ 1,010
---------- ----------
---------- ----------
Earnings (loss) per share:
Continuing operations $ 1.11 $ 0.44
Discontinued operations (0.07) --
Extraordinary charge -- (0.06)
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$ 1.04 $ 0.38
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Weighted average common shares outstanding 3,340,222 2,662,650
---------- ----------
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</TABLE>
See notes to condensed consolidated financial statements.
4
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AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 531 $ 2,691
Accounts receivable--net 17,207 13,801
Inventories--net 27,905 24,454
Other current assets 1,457 850
------------- ------------
TOTAL CURRENT ASSETS 47,100 41,796
PROPERTY, PLANT AND EQUIPMENT--net 15,181 13,456
EXCESS OF COST OVER NET ASSETS ACQUIRED--net 14,025 6,415
OTHER ASSETS 619 504
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TOTAL ASSETS $ 76,925 $ 62,171
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,317 $ 6,881
Accrued expenses and other liabilities 10,915 7,290
Current portion of long-term debt and capital lease obligations 3,210 2,831
------------- ------------
TOTAL CURRENT LIABILITIES 22,442 17,002
LONG-TERM DEBT & CAPITAL LEASES, less current portion 26,353 23,324
OTHER LONG-TERM LIABILITIES 2,426 2,293
DEFERRED INCOME 288 387
SHAREHOLDERS' EQUITY:
Preferred Stock, none issued and outstanding at September 30, 1997
and 738,881 shares at December 31, 1996 -- 7
Common Stock, issued and outstanding 3,048,381 shares at
September 30, 1997 and $2,568,940 shares at December 31, 1996 30 26
Capital in Excess of Par 20,081 17,297
Retained Earnings 5,305 1,835
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TOTAL SHAREHOLDERS' EQUITY 25,416 19,165
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 76,925 $ 62,171
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</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
<S> <C> <C>
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,572 $ 1,636
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Extraordinary loss, net -- 173
Loss on discontinued operations, net 244 --
Realization of net operating loss carryforward 2,205 877
Depreciation and amortization 2,466 1,961
Increase in current assets, other than cash (4,464) (1,857)
Increase (decrease) in current liabilities 3,104 (928)
Increase (decrease) in long-term liabilities 34 (508)
Other-net 106 (641)
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,267 713
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,202) (1,141)
Acquisition of business, net of cash acquired (7,335) (4,728)
Proceeds from sale of assets -- 206
----------- ----------
(9,537) (5,663)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 32,600 62,786
Repayment of borrowings (30,844) (51,830)
Other (1,646) (420)
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 110 10,536
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NET (DECREASE) INCREASE IN CASH (2,160) 5,586
CASH AT BEGINNING OF PERIOD 2,691 91
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CASH AT END OF PERIOD $ 531 $ 5,677
----------- ----------
----------- ----------
Supplemental Cash Flow Information:
Cash paid for:
Interest $ 1,631 $ 1,395
Income Tax 190 441
Non-Cash Investing and Financing Activities:
Equipment acquired under capital lease $ 1,612 $ 590
Capital stock issued for acquisition 2,166 --
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
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 considered necessary for a fair presentation (consisting of
normal recurring accruals) have been included. Operating results for the
three month and nine month periods ended September 30, 1997 are not
indicative of the results that may be expected for the year ending December
31, 1997. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
Certain reclassifications have been made to previously reported financial
statements to conform to current classifications.
Note 2--Earnings Per Share
- --------------------------
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share" was issued in February 1997 and replaces Accounting Principles Board
("APB") Opinion No. 15. The new statement simplifies the computations of
earnings per share ("EPS") by replacing the presentation of primary EPS with
basic EPS, which is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS under the new statement is computed similarly to
fully diluted EPS pursuant to APB Opinion 15. SFAS No. 128 is effective for
financial statements for both interim and annual periods ending after
December 15, 1997. Early application is prohibited. For the three month and
the nine month periods ended September 30, 1997, the effect of adopting SFAS
No. 128 on the Company's reported EPS would be immaterial.
Note 3--Acquisitions and Divestiture
- ------------------------------------
On May 30, 1997, the Company acquired Teletrac, Inc. for $9,926, including
the issuance of 153,000 shares of Axsys common stock. Teletrac designs and
manufactures laser-based precision measurement systems and state-of-the-art
precision linear and rotary positioning servo systems for use in the
electronics capital equipment market.
On April 25, 1996, the Company acquired all of the outstanding shares of
Precision Aerotech, Inc., ("PAI") for $4,728, net of cash acquired. In
addition, the Company repaid $12 million of borrowings under PAI term loans.
Precision Aerotech designs, manufactures and markets laser scanners,
precision metal optics, high performance air bearings and precision machined
parts sold predominantly in commercial markets.
The acquisitions of Teletrac and PAI were accounted for under the purchase
method of accounting and, accordingly, the results of operations of Teletrac
and PAI have been included in the accompanying consolidated financial
statements since the date of their respective acquisition. The cost of the
acquisitions was allocated on the basis of the estimated fair market value of
the assets acquired and liabilities assumed. The purchase price allocations
for Teletrac have been completed on a preliminary basis, however, management
does not believe that changes in the allocations will be material. During the
PAI acquisition process, the Company determined that L&S Machine Company,
Inc. (L&S), a wholly-owned subsidiary of PAI which manufactures structural
components for the aerospace industry, did not fit its long-term strategy and
would be subsequently sold. The portion of the PAI acquisition cost allocated
to this asset represented the net proceeds realized upon sale. In December
1996, the Company completed the sale of L&S for an aggregate purchase price
of approximately $13,000. The price included the assumption of approximately
$1,800 in long-term capitalized leases.
7
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Summarized below are the unaudited pro forma results of operations of the
Company as if Teletrac and PAI had been acquired on January 1, 1996:
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Net Sales $ 94,834 $ 80,628
Income from continuinig operations before extraordinary item 3,905 2,093
Net income 3,661 1,920
Earnings per share:
Income from continuing operations before extraordinary item 1.11 0.52
Net Income 1.04 0.46
</TABLE>
The pro forma financial information presented above is not necessarily
indicative of either the results of operations that would have occurred had
the acquisitions of Teletrac and PAI taken place at the beginning of 1996 or
the future operating results of the combined companies. Pro forma net income
for the nine months ended September 30, 1996 included certain special charges
totaling approximately $400.
On October 2, 1996, the Company acquired substantially all of the assets of
Lockheed Martin Beryllium Corporation ("LMBC") for $2,883, subject to
post-closing adjustments. LMBC's operations consist primarily of precision
machining of beryllium and other exotic material components. This acquisition
has also been accounted for under the purchase method of accounting and,
accordingly, the results of operations of LMBC have been included in the
accompanying consolidated financial statements since the date of acquisition.
market value of the assets acquired and liabilities assumed. The purchase
price allocation has been completed on a preliminary basis. Management does
not believe that changes in the purchase price allocation will be material.
Note 4--Inventories
- -------------------
Inventories have been determined generally by lower of cost (first-in,
first-out or average) or market. Inventories consist of:
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- --------------
Raw materials $ 9,904 $ 8,033
Work-in-process 12,978 12,942
Finished goods 10,588 10,118
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33,470 31,093
Less reserves 5,565 6,639
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$ 27,905 $ 24,454
--------------- --------------
--------------- --------------
Note 5--Shareholders' Equity
- ----------------------------
On February 14, 1997, the Company commenced an offer to exchange 0.75
shares of its common stock for each outstanding share of its preferred stock.
On March 17, 1997, the Exchange Offer terminated and the Company accepted for
exchange all
8
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AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
shares of preferred stock validly tendered as of that time. Approximately
538,000 shares of preferred stock were exchanged for 403,500 shares of common
stock. Holders of shares of preferred stock accepted for exchange did not
receive any separate payment in respect of dividends not paid subsequent to
February 22, 1996, the last date on which dividends were paid on the
preferred stock.
On June 4, 1997, the Company redeemed all the remaining approximately
200,900 outstanding shares of its preferred stock. The redemption price was
$7.70 per share, including accrued and unpaid dividends of $1.54 per share
through the redemption date.
Note 6--Loss on Discontinued Operations
- ---------------------------------------
In September 1997, the Company was advised by its environmental
consultants that the costs associated with the remediation of a previously
discontinued operation site are now estimated to be higher than originally
anticipated. The current estimates to remediate this site now range from
approximately $600 to $1,500. Actual costs may be different than the current
estimates. Based on this information, the Company increased its reserve
relating to this site to approximately $600 by recording an after-tax
discontinued operation charge of $244.
Note 7--Other Information
- -------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
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<S> <C> <C>
Allowance for doubtful accounts $ 392 $ 385
--------- ---------
--------- ---------
Accumulated depreciation and amortization of property, plant and equipment $ 9,726 $ 7,458
--------- ---------
--------- ---------
Accumulated amortization of excess of cost over net assets acquired $ 1,288 $ 1,046
--------- ---------
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</TABLE>
Note 8--Subsequent Events
- -------------------------
On October 21, 1997, the Company completed an underwritten public offering of
1,064,809 shares of its Common Stock, at a public offering price of $27.00
per share (the "Offering"). Of the approximately $26.5 million of net
proceeds from the offering, approximately $6.9 million was used to repurchase
outstanding warrants to purchase the Company's Common Stock and the remaining
net proceeds to prepay a portion of the Company's outstanding bank debt. As a
result of this prepayment, the Company will incur an extraordinary, non-cash
charge of approximately $109, net of tax, to be recognized in the fourth
quarter of 1997.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company designs, manufactures and sells custom precision optical and
positioning components, subsystems and systems for high-performance markets,
such as defense, space, high-end digital imaging and electronics capital
equipment through its Precision Systems Group ("PSG"). The Company also
designs, manufactures and markets interconnect devices and distributes
precision ball bearings for use in a variety of industrial, commercial and
consumer applications through its Industrial Components Group ("ICG").
Results of Operations
The table below sets forth certain financial data by product group in dollars
and as a percentage of net sales for the three months and nine months ended
September 30, 1997 and 1996.
The Company acquired the stock of Teletrac and PAI on May 30, 1997 and April
25, 1996, respectively. On October 2, 1996, the Company acquired
substantially all of the assets of LMBC. These acquisitions have been
accounted for under the purchase method of accounting and, accordingly, the
results of the continuing operations of Teletrac, PAI and LMBC (see Note 3 to
the Condensed Consolidated Financial Statements) have been included in the
Company's Condensed Consolidated Statement of Operations since their
respective dates of acquisition.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1997 1996
-------------------- -------------------- -------------------- --------------------
Net sales:
PSG $ 20,678 65.3% $ 13,998 57.8% $ 57,096 63.1% $ 32,098 49.6%
ICG 10,996 34.7 10,235 42.2 33,427 36.9 32,680 50.4
--------- --------- --------- --------- --------- --------- --------- ---------
31,674 100.0 24,233 100.0 90,523 100.0 64,778 100.0
--------- --------- --------- --------- --------- --------- --------- ---------
Gross Profit:
PSG 5,621 27.2% 3,098 22.1% 14,418 25.3% 6,818 21.2%
ICG 3,279 29.8% 3,014 29.4% 10,220 30.6% 9,949 30.4%
--------- --------- --------- ---------
$ 8,900 28.1% $ 6,112 25.2% $ 24,638 27.2% $ 16,767 25.9%
--------- --------- --------- ---------
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
NET SALES. Net sales increased by 30.7%, or $7.5 million, from $24.2 million
in the three months ended September 30, 1996 to $31.7 million in the same
period of 1997. PSG's sales increased by 47.7%, or $6.7 million, from $14.0
million in 1996 to $20.7 million in 1997. This increase was primarily due to
the acquisitions of Teletrac and LMBC and increased business in the space,
defense, electronics capital equipment and digital imaging markets. ICG's
sales increased by 7.4%, or $.8 million, from $10.2 million in 1996 to $11.0
million in 1997. This increase was a result of higher shipments of both
interconnect devices and precision ball bearings.
GROSS PROFIT. The Company's cost of sales includes materials, labor and
overhead. Overhead includes engineering and research and development
expenses. The Company's gross profit increased by 45.6%, or $2.8 million,
from $6.1 million in 1996 to $8.9 million in 1997. Gross profit margin
increased from 25.2% of net sales in 1996 to 28.1% in 1997. Gross profit
margin attributable to PSG increased from 22.1% of net sales in 1996 to 27.2%
in 1997. The increase in PSG's gross profit margin was primarily due to the
increase in sales resulting from the acquisition of Teletrac and operating
efficiencies related
10
<PAGE>
to higher sales volume. Gross profit margin attributable to ICG increased
from 29.4% in 1996 to 29.8% in 1997 primarily due to a favorable sales mix in
the precision ball bearing business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's selling, general
and administrative ("SG&A") expenses consist primarily of personnel costs,
including salaries and bonuses earned by Company employees, as well as
occupancy costs for its sales, finance, administrative and executive
personnel. In addition, it includes sales commissions earned by manufacturing
representatives. SG&A expenses increased by 24.4%, or $1.1 million, from $4.4
million in 1996 to $5.5 million in 1997, but decreased from 18.3% to 17.4% of
net sales, respectively. The increase in SG&A expenses in absolute dollars
was primarily due to the acquisition of Teletrac as well as increased
employment and other selling expenses.
INTEREST EXPENSE. Interest expense increased by 33.8%, or $208,000, from $.6
million in 1996 to $.8 million in 1997. The increase in interest expense was
primarily the result of higher average borrowings due to the acquisitions of
Teletrac and LMBC.
PREFERRED STOCK DIVIDENDS. Preferred Stock dividends decreased by $221,000,
from $221,000 in 1996 to none in 1997. The decrease in Preferred Stock
dividends was due to the Company's exchange of Preferred Stock for common
Stock and subsequent redemption of remaining Preferred Stock. See Note 5 to
the Condensed Consolidated Financial Statements. As a result of such
redemption, there is no Preferred Stock outstanding and there are no accrued
and unpaid dividends.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
NET SALES. Net sales increased by 39.7%, or $25.7 million, from $64.8
million in the first nine months of 1996 to $90.5 million in the first nine
months of 1997. PSG's sales increased by 77.9% , or $25.0 million, from $32.1
million in the first nine months of 1996 to $57.1 million in the first nine
months of 1997. This increase was primarily due to the acquisition of
Teletrac, PAI and LMBC and increased business in the space, defense,
electronics capital equipment and digital imaging markets. ICG's sales
increased by 2.3%, or .7 million, from $32.7 million in the first nine months
1996 to $33.4 million in the first nine months of 1997 primarily due to
increased sales of interconnect devices generated from new product
introductions.
GROSS PROFIT. The Company's gross profit increased by $46.9%, or $7.8
million, from $16.8 million in the first nine months of 1996 to $24.6 million
in the first nine months of 1997. Gross profit margin increased from 25.9% of
net sales in the first nine months of 1996 to 27.2% in the first nine months
of 1997. Gross profit margin attributable to PSG increased from 21.2% of net
sales in the first nine months of 1996 to 25.3% in the first nine months of
1997. The increase in PSG's gross profit margin was primarily due to the
increase in sales resulting from the acquisitions of PAI and Teletrac and
operating efficiencies related to higher sales volume. Gross profit margin
attributable to ICG increased from 30.4% of net sales in the first nine
months of 1996 to 30.6% in the first nine months of 1997 primarily due to a
slightly favorable sales mix in the precision ball bearing business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased by
32.4%, or $3.9 million, from $11.9 million in the first nine months of 1996
to $15.8 million in the first nine months of 1997, but decreased from 18.4%
to 17.4% of net sales, respectively. The increase in SG&A expenses in
absolute dollars was primarily due to the acquisitions of Teletrac, PAI and
LMBC, as well as increased employment and other selling expenses.
INTEREST EXPENSE. Interest expense increased by 30.7%, or $509,000, from
$1.7 million in the first nine months of 1996 to $2.2 million in the first
nine months of 1997. The increase in interest expense was primarily the
result of higher average borrowings due to the acquisitions of Teletrac, PAI
and LMBC.
Preferred stock dividends. Preferred Stock dividends decreased by $524,000,
from $626,000 in 1996 to $102,000 in the first nine months of 1997. The
decrease in Preferred Stock dividends was due to the Company's exchange of
Preferred Stock for common Stock and subsequent redemption of remaining
Preferred Stock.
11
<PAGE>
Backlog
- -------
A substantial portion of the Company's business is of a build-to-order nature
requiring various engineering, manufacturing, testing and other processes to
be performed prior to shipment. In addition, many of the Company's orders
require multiple deliveries over a period of time. As a result, the Company
generally has a significant backlog of orders to be shipped.
As of September 30, 1997 and December 31, 1996, the Company had a backlog of
orders of $59.1 million and $56.4 million, respectively, an increase of 4.8%,
or $2.7 million. The increase in backlog is primarily attributable to the
acquisition of Teletrac partially offset by a reduction of past due orders at
the Company's precision machining business.
The Company believes that a substantial portion of the backlog of orders at
September 30, 1997 will be shipped over the next twelve months.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operations for the nine months ended September 30, 1997
and 1996 was $7.3 million and $713,000, respectively. This improvement was
primarily due to higher cash earnings. At December 31, 1996, the Company had
approximately $10.0 million of net operating loss carry forwards available to
reduce future taxable income.
Net cash used in investing activities for the nine months ended September 30,
1997 and 1996 was $9.5 million and $5.7 million, respectively, due to an
increase in the use of cash for business acquisitions. During the second
quarter of 1997, the Company acquired Teletrac. The cash portion of the total
purchase price for Teletrac was $7.3 million. During the second quarter of
1996, the Company acquired all the outstanding shares of PAI for
approximately $4.7 million. See Note 3 to the Condensed Consolidated
Financial Statements.
The Company had no material commitments for capital expenditures as of
September 30, 1997.
On October 27, 1997, the Company generated net proceeds of $26.5 million from
a public offering of its stock (see Note 8 to the Condensed Consolidated
Financial Statements). These net proceeds were used to repurchase outstanding
warrants to purchase the Company's common stock ($6.9 million) and to prepay
a portion ($19.6 million) of the outstanding bank debt under its current
$31.1 million Credit Facility. After giving effect to this prepayment, the
Company expects that the only credit available under the Credit Facility will
amount to approximately $11.0 million of revolving loans. After the
consummation of this Offering, the Company intends to renegotiate the Credit
Facility or enter into alternate borrowing arrangements with other lenders.
There can be no assurance that the Company will be able to renegotiate the
Credit Facility or enter into alternate borrowing arrangements on terms
acceptable to the Company, if at all. The Company believes that cash expected
to be generated from operations and credit facilities expected to be
available to the Company following the consummation of this Offering will be
sufficient to meet the Company's capital expenditure and working capital
requirements for at least the next 12 months.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 27: Financial Data Schedule (For SEC use only).
b) Reports on Form 8-K
During the quarter ended September 30, 1997, the Company provided the
information required by items 7(b) on Form 8-K relating to its acquisition of
Teletrac.
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.
Date: November 12, 1997 AXSYS TECHNOLOGIES, INC.
By: /s/ STEPHEN W. BERSHAD
-----------------------------------------
Stephen W. Bershad
CHIEF EXECUTIVE OFFICER
BY: /s/ RAYMOND F. KUNZMANN
-----------------------------------------
Raymond F. Kunzmann
CHIEF FINANCIAL OFFICER
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF AXSYS TECHNOLOGIES, INC. AS OF SEPTEMBER 30, 1997
AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 531
<SECURITIES> 0
<RECEIVABLES> 17,599
<ALLOWANCES> 392
<INVENTORY> 27,905
<CURRENT-ASSETS> 47,100
<PP&E> 24,907
<DEPRECIATION> 9,726
<TOTAL-ASSETS> 76,925
<CURRENT-LIABILITIES> 22,442
<BONDS> 26,353
0
0
<COMMON> 30
<OTHER-SE> 25,386
<TOTAL-LIABILITY-AND-EQUITY> 76,925
<SALES> 90,523
<TOTAL-REVENUES> 90,523
<CGS> 65,885
<TOTAL-COSTS> 65,885
<OTHER-EXPENSES> 16,038
<LOSS-PROVISION> 87
<INTEREST-EXPENSE> 2,166
<INCOME-PRETAX> 6,410
<INCOME-TAX> 2,594
<INCOME-CONTINUING> 3,816
<DISCONTINUED> 244
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,572
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
