SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended October 31, 1996 Commission File Number 0-10964
MAXWELL TECHNOLOGIES, INC.
Delaware IRS ID #95-2390133
8888 Balboa Avenue
San Diego, California 92123
Telephone (619) 279-5100
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
----- -----
As of November 30, 1996 Registrant had only one class of common stock of which
there were 2,960,455 shares outstanding.
<PAGE>
<TABLE>
PART I - FINANCIAL STATEMENTS
Maxwell Technologies, Inc.
Consolidated Condensed Balance Sheet
(in thousands)
<CAPTION>
Assets
------
October 31, July 31,
1996 1996
--------- ---------
(Unaudited) (Note)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,976 $ 1,465
Accounts receivable - net 19,887 15,573
Inventories:
Finished products 844 714
Work in process 2,110 1,836
Parts and raw materials 4,012 4,258
--------- ---------
6,966 6,808
Recoverable income taxes -- 740
Prepaid expenses 1,168 548
Deferred income taxes 161 161
--------- ---------
Total current assets 30,158 25,295
Property, plant and equipment - net 14,703 14,809
Deposits and other assets 489 620
--------- ---------
$ 45,350 $ 40,724
========= =========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 17,069 $ 14,231
Accrued employee compensation 3,466 2,866
Current portion of long-term debt 910 910
--------- ---------
Total current liabilities 21,445 18,007
Long-term debt 749 1,018
Minority interest 581 954
Shareholders' equity:
Common stock 295 284
Additional paid-in capital 20,998 20,036
Deferred compensation (564) (605)
Retained earnings 1,846 1,030
--------- ---------
22,575 20,745
--------- ---------
$ 45,350 $ 40,724
========= =========
<FN>
Note: The Balance Sheet at July 31, 1996 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PART I - FINANCIAL STATEMENTS, continued
Maxwell Technologies, Inc.
Consolidated Condensed Statement of Income - (Unaudited)
(in thousands except per share data)
<CAPTION>
Three Months
Ended October 31,
-------------------------
1996 1995
--------- ---------
<S> <C> <C> <C> <C>
Sales $ 24,017 $ 19,172
Costs and expenses:
Cost of sales 16,958 14,864
Research and development expenses 1,058 983
Selling, administrative and general expenses 5,179 3,133
Other - net (12) (90)
--------- ---------
23,183 18,890
Income before income taxes, minority
interest and loss from cumulative
effect of change in accounting
principle 834 282
Provision for income taxes -- 28
Minority interest in net income of subsidiary 18 12
Loss from cumulative effect of change in
accounting principle -- 2,569
--------- ---------
Net income (loss) $ 816 $ (2,327)
========= =========
Earnings per share before cumulative effect
of change in accounting principle $ .25 $ .09
========= =========
Earnings (loss) per share $ .25 $ (.86)
========= =========
Weighted average number of shares 3,225,000 2,691,000
========= =========
<FN>
Note: Earnings (loss) per share is based upon weighted average number of shares
of common stock outstanding and all dilutive stock options. Per share amounts
are unchanged on a fully dilutive basis.
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PART I - FINANCIAL STATEMENTS, continued
Maxwell Technologies, Inc.
Consolidated Condensed Statement of Cash Flows - (Unaudited)
(in thousands)
<CAPTION>
Three Months
Ended October 31,
-------------------------
1996 1995
--------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 816 $ (2,327)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 725 552
Deferred compensation 41 --
Cumulative effect of change in
accounting principle -- 2,569
Minority interest in net income of
subsidiary 18 12
Changes in operating assets and
liabilities - net (1,196) (3,334)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 404 (2,528)
--------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment (616) (474)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (616) (474)
--------- ---------
FINANCING ACTIVITIES
Principal payments on long-term debt (269) (270)
Proceeds from issuance of Company and
subsidiary stock 995 103
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 726 (167)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 511 (3,169)
--------- ---------
Cash and cash equivalents at beginning
of period 1,465 4,053
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,976 $ 884
========= =========
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PART I - continued
NOTES TO FINANCIAL STATEMENTS
The preceding interim consolidated condensed financial statements
contain all adjustments (consisting of normal recurring accruals) which are,
in the opinion of management, necessary for a fair and accurate presentation
of financial position at October 31, 1996 and the results of operations for
the three month period then ended. These interim financial statements should
be read in conjunction with the Company's July 31, 1996 audited financial
statements included in its Proxy Statement for the 1996 Annual Meeting of
Shareholders. Interim results are not necessarily indicative of those to be
expected for the full year.
Effective August 1, 1996, the Company reorganized its operations and
took the necessary steps to incorporate its business units as subsidiaries of
Maxwell Technologies, Inc. These new subsidiaries are all wholly-owned except
for Maxwell Business Systems, Inc., which is majority-owned. These
subsidiaries are as follows:
I-Bus, Inc.
Maxwell Federal Division, Inc.
Maxwell Information Systems, Inc.
Maxwell Business Systems, Inc.
Maxwell Energy Products, Inc.
In addition, on August 1, 1996, Maxwell purchased 10% of the outstanding shares
of its PurePulse Technologies, Inc. subsidiary that had been held by one of the
minority shareholders of PurePulse. This action increased Maxwell's ownership
of the currently outstanding shares of PurePulse from approximately 75% to 85%.
The consolidated financial statements include the accounts of Maxwell
Technologies, Inc., and its subsidiaries. All significant intercompany
transactions and account balances are eliminated in consolidation.
Backlog of unfilled orders at October 31, 1996 was $72.1 million, of
which $39.7 million is fully funded.
<PAGE>
PART I - continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL POSITION
Results of Operations
- ---------------------
Sales for the three months ended October 31, 1996 were $24,017,000, a
25% increase over the $19,172,000 for the same period one year ago. All of the
Company's commercial business segments contributed to the sales increase, and
on a dollar basis, the Commercial and Industrial PC Products and the Power
Conversion Products segments contributed $4.7 million of the revenue gain.
Sales and cost of sales by business segment for the first quarter of the
current and prior years are shown in the table below. For purposes of this
table, the Chemical Analytical Services business, which was sold in the fourth
quarter of fiscal 1996, is included with the Technology Programs and Systems
business segment.
<TABLE>
<CAPTION>
Sales
Three Months Ended October 31,
-------------------------------
(In 000's) 1996 1995
--------- ----------
<S> <C> <C> <C> <C>
Commercial and Industrial
PC Products $ 8,375 $ 5,984
Technology Programs & Systems 6,889 7,796
Information Products & Services 2,451 1,390
Power Conversion Products 6,302 4,002
--------- ---------
$ 24,017 $ 19,172
========= =========
Cost of Sales
-------------
Three Months Ended October 31,
-------------------------------------
% of % of
1996 Sales 1995 Sales
-------- ----- -------- -----
<S> <C><C> <C> <C><C> <C>
Commercial and Industrial
PC Products $ 5,573 66.5% $ 4,015 67.1%
Technology Programs & Systems 5,634 81.8% 6,279 80.5%
Information Products & Services 1,743 71.1% 1,367 98.3%
Power Conversion Products 4,008 63.6% 3,203 80.0%
-------- --------
$ 16,958 $ 14,864
======== ========
</TABLE>
<PAGE>
PART I - continued
The Commercial and Industrial PC Products segment is operated through
the I-Bus business unit. I-Bus' sales to OEM customers, primarily in the
telecommunications market for use in end products such as switching test
equipment, voice mail, fax servers and video conferences, account for the
majority of the increase in sales as compared to last year's first quarter.
The largest increase in these OEM shipments was with Lucent Technologies.
Lucent signed an agreement early in the quarter that is worth up to $4.5
million for PCs to be used in customized test equipment, with deliveries
expected over a period of approximately one-and-one-half-years. Cost of sales
as a percent of sales decreased primarily due to the impact of higher sales on
the fixed portion of the costs of operations, and the shipment during the
quarter of certain products with higher than typical margins on the material
content of the product. Partially offsetting these decreases in the cost of
sales percentage was an increase compared to the first quarter of last year in
the amount charged to the reserve for obsolete inventory.
The Technology Programs and Systems business segment is operated through
Maxwell's Federal Division, and a significant portion of this business is with
the U.S. Government Department of Defense. The $900,000 decrease in first
quarter Federal Division sales as compared to the first quarter of fiscal 1996
is primarily due to the impact of the sale in last year's fourth quarter of the
Chemical Analytical Services business, a winding-down of the Division's
environmental consulting programs, and the shipment in fiscal 1996 of a large
hardware system with no such large hardware shipment in this year's first
quarter. Partially offsetting these decreases is work on a $4 million,
15-month program for the production of advanced, high-voltage power supplies
for a Department of Energy accelerator project. This program has ramped-up
since its start date in April of 1996. While the level of Federal government
work has remained relatively stable over the last two years, periods prior to
that were significantly impacted by substantial reductions in Defense related
projects. The level of future Defense cutbacks and their impact on the Company
is not predictable and, therefore, previously reported results are not
necessarily indicative of those to be expected in the future. While cost of
sales as a percent of sales is generally consistent from year to year, there
are several offsetting factors creating this result. The fiscal 1996 first
quarter was adversely impacted by losses from the Chemical Analytical Services
group, but benefited from the margin recognized on the shipment of the large
hardware system. The current year has no Chemistry losses since that group was
sold in June, but was negatively impacted by a lesser overhead recovery on the
lower sales volume.
The Information Products and Services segment is operated through the
Information Systems business unit. Sales in this business unit consist
primarily of the Business Systems group's JAMIS accounting and MIS software
package, and three large multi-year contracts, two for integrated justice
information systems (IJIS) in the State of Florida, and one for the network
component of a Child Support Enforcement System in South Carolina. All three
of these multi-year contracts are scheduled for completion in the current
fiscal year. The increase in sales in this year's first quarter as compared to
the first quarter of fiscal 1996 is primarily attributable to greater JAMIS-
related sales in the Business Systems group and, to a lesser extent, increased
revenues on the two IJIS contracts. With an annual sales level of
approximately $2 million for the past several years, the Business Systems group
has been prone to spikes in its quarterly sales results when multiple large
software orders are booked in one quarter. The current year improvement in
cost of sales as a percent of sales from the prior year's first quarter is
primarily attributable to the profit margins associated with the increased
Business Systems sales. Charges of $1 million were taken in fiscal 1996 on the
IJIS contracts due to the impact of anticipated financial performance, and
therefore, these jobs are not currently contributing meaningfully to segment
gross profit. The Information Systems unit is pursuing funding for add-ons and
enhancements to these software projects, and has bid on additional large
justice information systems, but the ultimate realization of such new business
and its impact on the Company is not currently predictable.
<PAGE>
PART I - continued
The Power Conversion Products business segment is operated through the
Energy Products and PurePulse Technologies business units. The increase in
revenue in this segment was nearly evenly spread among three groups:
PurePulse, Energy Products - San Diego operations, and Energy Products - Sierra
Capacitor/Filter operations. At PurePulse, the revenue increase is primarily
attributable to prototype systems and related funded development underway for
the evaluation of the subsidiary's CoolPure/TM/ system in the processing of
food products such as tomato-based sauces. This work is part of an
approximately one-year, $2 million program PurePulse began in January of 1996.
At Energy Products - San Diego, the majority of the sales increase is in the
Company's Ultracapacitor product line, principally to an international
automotive company for evaluation of the energy storage devices for use in
electric or hybrid electric vehicles. At Energy Products - Sierra, sales have
grown as a result of the restructuring carried-out in the third quarter of
fiscal year 1996 to focus on Sierra's new medical product. The improvement in
cost of sales as a percent of sales in this year's first quarter from the same
period last year is primarily due to the impact on this percentage of the
increase in sales, as well as the results of the restructuring at Sierra.
Selling, administrative and general expenses were $5,179,000, or 21.6%
of sales, compared to $3,133,000, or 16.3% of sales, in the first three months
of the prior year. The major factors contributing to this increase include:
(1) increased sales and marketing costs in the three commercial business
segments in order to support the significant revenue growth; (2) accruals under
new Company incentive and profit sharing plans that were implemented in fiscal
year 1997; and (3) additions to staff to support the Company's new strategic
plans, including new executive management with skills in technology
commercialization and high-volume manufacturing.
Other-net for the current year's first quarter was income of $12,000,
compared to $90,000 for the same period last year. This decrease primarily
reflects completing the amortization into income of amounts contributed by
minority shareholders upon the organization of PurePulse Technologies over such
shareholders' proportionate share of PurePulse's equity. This amortization
began in 1993 and was completed in April 1996. Thus, last year's first quarter
other-net included $127,000 of such income, while none is included in the
current year.
The Company has net operating loss carryforwards to offset pre-tax
income, and therefore no income tax expense is provided on current year
profits. The prior year's first quarter included a $2.6 million charge due to
the adoption of FASB Statement No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of. As a result of the
factors described above, net income for the three months ended October 31, 1996
was $816,000, as compared to a net loss of $2,327,000 for the same period one
year ago.
Liquidity and Capital Resources
- -------------------------------
The ratio of current assets to current liabilities was 1.4 to 1 at
October 31, 1996, compared to 1.4 to 1 at the end of fiscal year 1996. The
balance sheet is still strong, with very little long-term debt and working
capital of $8.7 million. In addition, the Company has available a $5 million
bank line of credit, which is secured by the personal property of the Company.
<PAGE>
PART I - continued
The Company does not currently have plans to fund any significant
capital addition projects in this fiscal year, and management believes that
funds on hand and those generated by future operations and available through
its bank line of credit will be sufficient to finance current working capital
requirements. The Company is considering a plan whereby one of its
subsidiaries would pursue the issuance of shares of stock to the public.
Should such an initial public offering of subsidiary shares occur, the proceeds
would be available for long-term financing needs associated with anticipated
future growth.
Note on Forward-Looking Information
- -----------------------------------
To the extent that the above discussion goes beyond historical
information and indicates results or developments which the Company plans or
expects to achieve, these forward-looking statements are identified by the use
of terms such as "expected," "anticipates," "believes," "plans" and the like.
Readers are cautioned that such future results are uncertain and could be
affected by a variety of factors that could cause actual results to differ from
those expected. Readers are referred to item 1 of the Company's Annual Report
on Form 10-K for fiscal 1996 for a discussion of certain of those factors.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
----------------------------------------------------
On October 17, 1996, the Registrant's Board of Directors solicited the
written consent of the shareholders of Registrant to a proposed amendment to
Registrant's Restated Certificate of Incorporation increasing the authorized
number of shares of Common Stock, $.10 par value, from 5 million to 20 million
shares. Shareholders of record on October 4, 1996, were entitled to submit
consents. The Registrant received consent forms from holders of a total of
2,664,952 shares, of which holders of 2,321,133 shares consented to the action,
holders of 340,108 shares withheld consent, and holders of 3,711 shares
abstained.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
No exhibits are included with the Form 10-Q for the period ended
October 31, 1996.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended October
31, 1996.
<PAGE>
SIGNATURE
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.
MAXWELL TECHNOLOGIES, INC.
December 16, 1996 /s/ Gary Davidson
- ----------------- --------------------------------------
Date Gary Davidson, Chief Financial Officer
and Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 1,976
<SECURITIES> 0
<RECEIVABLES> 19,887
<ALLOWANCES> 0
<INVENTORY> 6,966
<CURRENT-ASSETS> 30,158
<PP&E> 45,483
<DEPRECIATION> 30,780
<TOTAL-ASSETS> 45,350
<CURRENT-LIABILITIES> 21,445
<BONDS> 749
<COMMON> 295
0
0
<OTHER-SE> 22,280
<TOTAL-LIABILITY-AND-EQUITY> 45,350
<SALES> 24,017
<TOTAL-REVENUES> 24,017
<CGS> 16,958
<TOTAL-COSTS> 16,958
<OTHER-EXPENSES> 1,058
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 834
<INCOME-TAX> 0
<INCOME-CONTINUING> 816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
