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, 1998 Commission File Number 0-10964
MAXWELL TECHNOLOGIES, INC.
Delaware IRS ID #95-2390133
9275 Sky Park Court
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, 1998, Registrant had only one class of common stock of which
there were 8,466,446 shares outstanding.
<PAGE>
PART I - FINANCIAL STATEMENTS
<TABLE>
Maxwell Technologies, Inc.
Consolidated Condensed Balance Sheet
(in thousands)
<CAPTION>
Assets
------
October 31, July 31,
1998 1998
---------- ----------
(Unaudited) (Note)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 15,511 $ 21,224
Accounts receivable - net 37,618 36,062
Inventories:
Finished products 1,189 1,019
Work in process 2,545 2,254
Parts and raw materials 13,169 12,550
---------- ----------
16,903 15,823
Prepaid expenses 3,003 2,016
Deferred income taxes 161 161
---------- ----------
Total current assets 73,196 75,286
Property, plant and equipment - net 24,082 23,276
Goodwill and other non-current assets 10,587 6,503
---------- ----------
$ 107,865 $ 105,065
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 20,373 $ 20,680
Accrued employee compensation 6,880 6,353
Current portion of long-term debt 103 121
---------- ----------
Total current liabilities 27,356 27,154
Long-term debt 348 361
Minority interest 1,916 1,712
Stockholders' equity:
Common stock 840 838
Additional paid-in capital 70,570 70,926
Deferred compensation (353) (413)
Accumulated other comprehensive income 4 --
Retained earnings 7,184 4,487
---------- ----------
78,245 75,838
---------- ----------
$ 107,865 $ 105,065
========== ==========
Note: The Balance Sheet at July 31, 1998 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PART I - FINANCIAL STATEMENTS, continued
<TABLE>
Maxwell Technologies, Inc.
Consolidated Condensed Statement of Operations - (Unaudited)
(in thousands except per share data)
<CAPTION>
Three Months
Ended October 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C> <C> <C>
Sales $ 38,172 $ 27,756
Cost of sales 25,466 18,481
---------- ----------
Gross profit 12,706 9,275
Operating expenses:
Selling, general and administrative expenses 8,211 6,132
Research and development expenses 1,709 1,689
---------- ----------
Total operating expenses 9,920 7,821
---------- ----------
Operating income 2,786 1,454
Interest expense 73 105
Interest income and other - net (285) (19)
---------- ----------
Income before income taxes and minority
interest 2,998 1,397
Income tax expense 100 --
Minority interest in net income (loss)
of subsidiaries 195 (48)
---------- ----------
Net income $ 2,703 $ 1,416
========== ==========
Basic income per share $ 0.32 $ 0.23
========== ==========
Diluted income per share $ 0.30 $ 0.20
========== ==========
Weighted average number of shares used to calculate:
Basic income per share 8,402 6,171
========== ==========
Diluted income per share 8,794 6,912
========== ==========
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,
----------------------------
1998 1997
---------- ----------
<S> <C> <C> <C> <C>
Operating Activities:
Net income $ 2,703 $ 1,416
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 1,124 694
Deferred compensation 60 52
Minority interest in net income (loss)
of subsidiary 195 (19)
Changes in operating assets and
liabilities - net (7,582) (4,328)
---------- ----------
Net cash used in
operating activities (3,500) (2,185)
---------- ----------
Investing Activities:
Purchases of property and equipment (1,841) (1,145)
---------- ----------
Net cash used in
investing activities (1,841) (1,145)
---------- ----------
Financing Activities:
Principal payments on long-term debt (31) (128)
Proceeds from short-term borrowings -- 2,100
Proceeds from issuance of Company and
subsidiary stock 193 1,554
Repurchase of Company stock (538) --
---------- ----------
Net cash provided by (used in)
financing activities (376) 3,526
---------- ----------
Effect of exchange rates on cash and
cash equivalents 4 --
---------- ----------
Increase (decrease) in cash and
cash equivalents (5,713) 196
Cash and cash equivalents at beginning
of period 21,224 826
---------- ----------
Cash and cash equivalents
at end of period $ 15,511 $ 1,022
========== ==========
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PART I - continued
NOTES TO FINANCIAL STATEMENTS
1. General
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, 1998 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, 1998 audited consolidated
financial statements and notes thereto included in its Annual Report on Form
10-K for fiscal 1998. Interim results are not necessarily indicative of
those to be expected for the full year.
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, 1998 was $75.1 million, of which
$38.6 million is fully funded.
2. Foreign Currency Translation
The assets and liabilities of the Company's foreign operations are
translated to U.S. dollars at quarter-end exchange rates, and revenues and
expenses are translated at average rates prevailing during the period. There
was no material effect from foreign currency translation adjustments during the
quarter ended October 31, 1998.
3. Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", as of the quarter ended October 31,
1998. Statement No. 130 establishes new rules for the reporting and display
of comprehensive income and its components; however it has no impact on the
Company's net income or total stockholders' equity. The components of
comprehensive income for the three months ended October 31, 1998 and 1997 were
as follows (in thousands):
<TABLE>
<CAPTION>
Three Months
Ended October 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C> <C> <C>
Net income $ 2,703 $ 1,416
Foreign currency translation adjustments 4 --
---------- ----------
Comprehensive income $ 2,707 $ 1,416
========== ==========
</TABLE>
4. New Accounting Standards
In June 1997, the FASB issued Statement No. 131, Disclosures About
Segments of an Enterprise and Related Information, which is effective for the
fourth quarter of the Company's fiscal year 1999. The Company believes that
adoption of Statement No. 131 will not have a material effect on its financial
statements.
<PAGE>
PART I - continued
5. Income per share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share. Statement No. 128 replaced the previously
reported primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic earnings per
share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. Earnings per share amounts for
for the quarter ended October 31, 1997 have been restated to conform to
Statement No. 128 requirements.
The following table has set forth the computation of basic and diluted
income per share:
<TABLE>
<CAPTION>
Three Months
Ended October 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C> <C> <C>
Basic:
Net income $ 2,703 $ 1,416
---------- ----------
Weighted average shares 8,402 6,171
---------- ----------
Basic income per share $ 0.32 $ 0.23
========== ==========
Diluted:
Net income $ 2,703 $ 1,416
Effect of majority-owned
subsidiaries dilutive securities (66) --
---------- ----------
Income available to Common Shareholders,
as adjusted $ 2,637 $ 1,416
========== ==========
Weighted average shares 8,402 6,171
Effective of dilutive securities:
Stock options 370 722
Convertible preferred stock
of subsidiary 22 19
---------- ----------
Dilutive potential common shares 392 741
---------- ----------
Weighted average shares, as adjusted 8,794 6,912
---------- ----------
Diluted income per share $ 0.30 $ 0.20
========== ==========
</TABLE>
<PAGE>
PART I - continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
POSITION
Business Segments
The Company operates in three business segments, as follows:
* Power Conversion Products: Includes design, development and manufacture
of electrical components, systems and subsystems, including products
that capitalize on pulsed power such as ultracapacitors, microbial
purification systems, high voltage capacitors and other electrical
components, power distribution and conditioning systems and
electromagnetic interference filter capacitors.
* Industrial Computers and Subsystems: Includes design and manufacture of
standard, custom and semi-custom industrial computer modules, platforms
and fully integrated systems primarily for OEMs.
* Technology Programs and Systems: Includes research and development
programs in pulsed power, pulsed power systems design and construction,
weapons effects simulation and computer-based analytic services and
software, primarily for the US Government Department of Defense ("DOD").
In the first quarter of fiscal 1998, the Company had a fourth business
segment, Information Products and Services, which was primarily focused on
commercial software and internet related services. During the third quarter of
last fiscal year, the Company reorganized the operations within the Information
Products and Services segment, including a refocusing of certain operations
along the lines of other of the Company's existing business segments and the
discontinuation of certain businesses. The Company no longer operates or
reports in the Information Products and Services segment, and therefore prior
year results include sales and cost of sales for such segment, while current
year results do not.
<PAGE>
PART I - continued
Results of Operations
The following table has set forth selected operating data for the Company,
expressed as a percentage of sales, for the three month periods ended October
31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months
Ended October 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0%
Cost of sales 66.7 66.6
---------- ----------
Gross profit 33.3 33.4
Operating expenses:
Selling, general and administrative
expenses 21.5 22.1
Research and development expenses 4.5 6.1
---------- ----------
Total operating expenses 26.0 28.2
---------- ----------
Operating income 7.3 5.2
Interest expense 0.2 0.4
Interest income and other - net (0.8) (0.2)
---------- ----------
Income before income taxes and minority
interest 7.9 5.0
Income tax expense 0.3 --
Minority interest in net income (loss)
of subsidiary 0.5 (0.1)
---------- ----------
Net income 7.1% 5.1%
========== ==========
</TABLE>
The following table has set forth the Company's business segment sales,
gross profit and gross profit as a percentage of business segment sales for
the three-month periods ended October 31, 1998 and 1997. As mentioned above,
the Company no longer maintains an Information Products and Services business
segment. Therefore, reporting for such segment is for prior periods only.
<TABLE>
<CAPTION>
Three Months
Ended October 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C> <C> <C>
Power Conversion Products:
Sales $ 13,231 $ 8,391
Gross profit 5,732 3,575
Gross profit as a percentage of sales 43.3% 42.6%
Industrial Computers and Subsystems
Sales $ 10,267 $ 8,903
Gross profit 3,193 3,600
Gross profit as a percentage of sales 31.1% 40.4%
Technology Programs and Systems
Sales $ 14,674 $ 8,509
Gross profit 3,781 1,422
Gross profit as a percentage of sales 25.8% 16.7%
Information Products and Services
Sales $ -- $ 1,953
Gross profit -- 678
Gross profit as a percentage of sales --% 34.7%
Consolidated
Sales $ 38,172 $ 27,756
Gross profit 12,706 9,275
Gross profit as a percentage of sales 33.3% 33.4%
</TABLE>
Sales
Sales for the three months ended October 31, 1998 were $38,172,000, a
record quarterly high for the Company and a 38% increase over the $27,756,000
for the same period one year ago. The sales gains occurred primarily in the
Power Conversion Products and Technology Programs and Systems business
segments, as more fully described in the discussion below.
Power Conversion Products. In the quarter ended October 31, 1998, Power
Conversion Products sales increased $4.8 million, or 57.7%, to $13.2 million
from $8.4 million in the first quarter of last fiscal year. This increase was
primarily attributable to sales of power protection systems, a business area
acquired by the Company in the prior year, sales in the PowerCache(TM)
ultracapacitor business area, the majority of which was a portion of a non-
recurring fee under a technology and product rights license with Siemens
Matsushita Components GmbH, and greater revenue from the PurePulse purification
business. During the quarter, PurePulse concluded a one-time grant of certain
non-exclusive rights for manufacturing and distribution of its products. In
addition, although to a lesser extent, sales in the Company's glass-to-metal
seal and electromagnetic interference filter capacitor businesses also
contributed to the overall sales increase in this business segment.
Industrial Computers and Subsystems. In the quarter ended October 31,
1998, Industrial Computers and Subsystems sales increased $1.4 million, or
15.3%, to $10.3 million from $8.9 million in the first quarter of last fiscal
year. Sales in this business segment are made principally to OEM customers
and are primarily derived from the shipment of industrial computers and
subsystems that are "designed-in" to the OEM's products. In the third quarter
of fiscal 1998, Maxwell acquired a company in the United Kingdom that focuses
on lower priced standard products, and the Company has since issued product
catalogs featuring both the standard and custom product lines with the dual aim
of generating direct sales as well as leads for additional OEM design-in
opportunities. The increase in sales for the quarter is attributable both to
sales of the new standard products, as well as new design wins for customized
OEM products. Offsetting these increases was the absence of sales this year
to a single, long-standing OEM customer, which were significant to this segment
in last year's first quarter, under a multi-year program which was completed in
the second quarter of the prior year. While standard product sales have
accelerated, and the Company continues to expand its presence in Europe with
the opening of offices in both France and Germany this year, sales under large
OEM programs remain a critical element of this business. If sales of OEM
products do not achieve the levels projected by the OEM, or if OEM projects
are curtailed due to consolidations or other market conditions, such as the
impact of conditions in Asia that have substantially slowed shipments under
I-Bus' program with Fujitsu I-Network Systems, Ltd., the Company may be unable
to offset such loss of sales.
Technology Programs and Systems. In the quarter ended October 31, 1998,
sales in the Technology Programs and Systems segment increased $6.2 million,
or 72.5%, to $14.7 million from $8.5 million in the first quarter of last
fiscal year. The Company substantially enhanced its funded pulsed power
research and simulation business with its April 1998 purchase of the Physics
International operation of Primex Technologies. Physics International was the
Company's primary competitor in this area, and the combined businesses
consolidate much of the scientific and technical research capabilities for the
benefit of both the Government and the Company's technology base. The increase
in revenue in the first quarter compared to last year is attributable to both
the additional pulsed power simulation work with the inclusion of Physics
International, as well as an increase in software sales, including the on-going
Government contractor focused accounting and MIS software that, prior to a
reorganization last year, was included in a separate business segment.
Offsetting these increases was lower revenue from work on two large multi-year
contracts for the DOD. These two contracts are still on-going, but at a lower
level of effort than in the prior year; these and other contracts with the DOD
are subject to such increases and decreases as well as to periodic Government
funding provisions. The level of future DOD expenditures in the Company's
research and development areas and the related impact on funding for the
Company's contracts are therefore not predictable, and previously reported
results are not necessarily indicative of those to be expected in the future.
Gross Profit
In the quarter ended October 31, 1998, the Company's gross profit was $12.7
million, or 33.3% of sales, compared to $9.3 million, or 33.4% of sales, in the
first quarter of last fiscal year. This gross profit is described by business
segment in the discussion that follows.
Power Conversion Products. In the quarter ended October 31, 1998, Power
Conversion Products gross profit increased $2.1 million to $5.7 million from
$3.6 million in the first quarter of last fiscal year. As a percentage of
sales, gross profit of 43.3% in this year's first quarter is comparable to the
42.6% in the first quarter of the prior year, as both periods benefited from
licensing and rights fees received from strategic partners in the
ultracapacitor area, and in the current year the PurePulse operation's gross
profit was also primarily comprised of such fees. As the Company introduces
PowerCache ultracapacitor products, however, it may offer aggressive pricing to
gain market penetration. As product sales ramp up, such pricing would have an
adverse impact on gross profit margins until the Company reaches full
production volumes. In addition, the Company is working on material cost
reduction and manufacturing automation to reduce its PowerCache product costs,
and the outcome of these efforts will not be known until later in this fiscal
year.
Industrial Computers and Subsystems. In the quarter ended October 31, 1998,
Industrial Computers and Subsystems gross profit decreased $0.4 million to $3.2
million from $3.6 million in the first quarter of last fiscal year. As a
percentage of sales, gross profit decreased to 31.1% in this year's first
quarter from 40.4% in the first quarter of the prior year primarily due to the
sales mix which, in last year's first quarter, included certain higher margin
products for an OEM that were near the end of their product and sales life
cycle. The Company's new line of lower priced standard products, the
increasing competition, for OEM design-in programs and new developments in the
marketplace, such as the CompactPCI form factor and increasing foreign
competition are factors which could impact gross profit margins as a percent of
sales. These factors lead the Company to believe future gross profit margins
will be closer to that experienced in this year's first quarter than that of
the first quarter one year ago.
Technology Programs and Systems. In the quarter ended October 31, 1998,
Technology Programs and Systems gross profit increased $2.4 million to $3.8
million from $1.4 million in the first quarter of last fiscal year. As a
percentage of sales, gross profit increased to 25.8% in this year's first
quarter from 16.7% in the first quarter of the prior year. The increase in
gross profit, both as a dollar amount and as a percentage of sales, in the
first quarter of this fiscal year as compared to the same period last year
includes the addition of Physics International and higher margin software sales
due to the inclusion in this segment of certain software businesses, as
previously described. In addition, the prior year's first quarter included a
larger impact from under-absorbed overhead costs on cost plus Government
contracts. While there was a recovery of most of such costs under provisional
billing rates in the second half of fiscal 1998, the result was lower margins
for the interim first quarter period than would be expected for the Government
business area for a full year.
Selling, General and Administrative Expenses
In the quarter ended October 31, 1998, the Company's selling, general and
administrative expenses increased $2.1 million, or 33.9 %, to $8.2 million from
$6.1 million in the first quarter of last fiscal year. As a percentage of
total sales, selling, general and administrative expenses decreased to 21.5%
in this year's first quarter from 22.1% in the first quarter of the prior year.
The increase in the dollar amount of these expenses is primarily in support of
the Company's growth, including businesses acquired in fiscal 1998, as well as
increased support and sales effort as compared to last year's first quarter in
the ultracapacitor business area. The decrease in selling, general and
administrative expenses as a percentage of sales is due to the absorption of
such costs over the expanded level of sales for the Company.
Research and Development Expenses
The Company's research and development expenses reflect only internally
funded research and development programs. Costs associated with United States
Government and other customer funded research and development contracts are
included in cost of sales. The level of research and development expenses
reflects the Company's ability to obtain customer funding to support a
significant portion of its research and product development activities.
Internally funded research and development expenses were $1.7 million each for
the three month periods ended October 31, 1998 and 1997. As a percentage of
sales, these expenses decreased to 4.5% in this year's first quarter from 6.1%
in the first quarter of the prior year. Several large research and development
efforts on-going in the first quarter of fiscal 1998, including an
ultracapacitor power electronics system and I-Bus' CompactPCI development, have
wound down substantially as major phases of such programs have been completed.
However, the Company maintained the same dollar level of these expenses as in
last year's first quarter as it continues to pursue research and development
with an emphasis in the Power Conversion Products business segment, focused on
its ultracapacitor, power systems and implantable medical device technologies.
Interest Income and Other-net, and Income Tax Expense
In this year's first quarter, interest income and other-net was $285,000,
compared to $48,000 in the same period last year. This increase is primarily
attributable to interest earned on the investment of cash on hand in the
current year. In the prior year, the Company had not yet completed its
follow-on offering of common stock, and had only a small amount of cash
available for investment. The Company had net operating loss carryforwards
which offset the Company's provision for US income taxes for the quarters ended
October 31, 1998 and 1997. Income tax expense in the first quarter of this
fiscal year is primarily due to foreign taxes on the profits of the Company's
United Kingdom subsidiary.
Liquidity and Capital Resources
Net cash used in operations in the current year's first quarter was $3.5
million. This is primarily attributable to increases in receivables and
inventory, reflecting the higher quarterly sales volume. The Company's
capital expenditures during the first quarter amounted to $1.8 million, and
related primarily to production and other capital assets in the Power
Conversion Products business segment. The Company has ordered and continues to
receive additional equipment for volume manufacturing of ultracapacitors in an
existing facility, and for manufacture of electromagnetic interference filter
capacitors at the newly expanded Carson City, Nevada manufacturing site. These
commitments are part of the Company's budgeted capital expenditures for fiscal
1999 totaling $8.7 million. The Company may address higher volume or other
manufacturing requirements as the year progresses. Alternatively, the Company
may consider leasing facilities or manufacturing equipment or both or may
satisfy additional manufacturing requirements through outsourcing or under
licensing arrangements with third parties. If the Company decides to
internally finance construction of such facilities, a significant amount of
capital would be required.
The Company has an unsecured bank line of credit of $20.0 million, under
which there were no outstanding borrowings as of October 31, 1998.
The Company believes that funds on-hand, together with cash generated from
operations and funds available under its bank line of credit, will be
sufficient to finance its operations and budgeted capital expenditures through
fiscal 1999. In addition to addressing manufacturing requirements, the Company
may also from time to time consider acquisitions of complementary businesses,
products or technologies, which may require additional funding. Sources of
additional funding for these purposes could include one or more of the
following: cash, cash equivalents and short-term investments on hand; cash flow
from operations; borrowings under the existing bank line of credit; investments
by strategic partners and additional debt or equity financing. There can be no
assurance that the Company will be able to obtain additional sources of
financing on favorable terms, if at all, at such time or times as the Company
may require such capital.
Software Compatibility with Year 2000 Date Processing
The Year 2000 issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Computer systems
utilizing such programs may be unable to interpret dates beyond the year 1999,
which could cause a system failure or other computer errors, leading to
disruptions in operations. This issue is often referred to as "Y2K" or a "Y2K"
issue or problem. In fiscal 1998, the Company developed a three-phase program
for Y2K information systems compliance. Phase 1 is to identify and solve Y2K
issues in the Company's significant information systems infrastructure and
enterprise business applications, including telecommunications and networking
systems as well as accounting and manufacturing software. Phase 2 is to
identify and plan for Y2K issues that are specific to the Company's business
units, including local software, product matters, facilities related systems
and vendor and key partner concerns. Phase 3 is the final testing of each
major area of exposure to ensure compliance, and the development of
contingency plans for unsolved Y2K deficiencies, such as key vendors failing
to adequately address their Y2K problems. The Company has identified four
major areas determined to be critical for successful Y2K compliance: (1)
networking and telecommunications, (2) financial and manufacturing
informational systems applications, (3) products and (4) third-party
relationships.
In Phase 1 of the program, the Company has completed its review of company-
wide and large systems, several of which have been identified as being Y2K
compliant due to their recent implementation or upgrade. Such installations
were unrelated to the Y2K concern, but rather were needed as part of the
ordinary course of business. For certain accounting and manufacturing systems,
upgrades are needed. These upgrades are available from the third party
suppliers, and are in the process of being evaluated. Implementation of the
updated systems is expected by the end of the Company's fiscal second quarter.
Remaining upgrades of system infrastructure have been identified and planned.
Final testing and documentation under Phase 1 is currently anticipated in the
January-February 1999 time frame. Under Phase 2, the Company is currently
identifying and evaluating business unit exposures. In the third-party area,
the Company is in the process of contacting its significant third parties,
primarily key vendors and customers, regarding their Y2K readiness. As to
products, current findings indicate that most Company products appear to be Y2K
compliant. For several of those that are not, the Company has made upgrades
available via the Company's Internet web site. For other products, the Company
is still completing its evaluation process. The testing and contingency plan
development under Phase 3 will begin in early 1999, and is expected to be
completed in mid-1999.
The Company believes it will cost approximately $100,000 to complete the
replacement of network and telecommunication infrastructure requiring Y2K
upgrades. The Company has yet to determine what costs, if any, will be
incurred in connection with local software, facilities, products and the third
party area.
The anticipated costs relating to resolving Y2K issues are based on
estimates which were derived utilizing assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and, as
additional Y2K remediation activities are developed and planned, that actual
results will not differ materially from those in the current estimate.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the completion of the Company's Y2K investigations, the ability to locate and
correct all relevant computer codes, and similar uncertainties. In addition,
there can be no assurance that Y2K compliance problems will not be revealed in
the future which could have a material adverse affect on the Company's
business, financial condition and results of operations. Many of the Company's
customers and suppliers may be affected by Y2K issues that may require them to
expend significant resources to modify or replace their existing systems, which
may result in those customers having reduced funds to purchase the Company's
products or those suppliers experiencing difficulties in producing or shipping
key components to the Company on a timely basis or at all. Such third party
issues could have a material adverse affect on the Company's business,
financial condition and results of operations. This discussion of the
Company's Y2K status constitutes a "Year 2000 Readiness Disclosure" as that
item is defined in the Year 2000 Information and Readiness Disclosure Act, and
also contains forward-looking statements (see "Forward-Looking Statements "
below).
Accounting Principles
In June 1997, the FASB issued Statement No. 131, Disclosures About
Segments of an Enterprise and Related Information, which is effective for the
fourth quarter of the Company's fiscal year 1999. The Company believes that
adoption of Statement No. 131 will not have a material effect on its financial
statements.
Forward-Looking Statements
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 1998 for a discussion of certain of those factors. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
27 - Financial Data Schedule
(b) Reports on Form 8-K
-------------------
On October 15, 1998, the Company filed a report on Form 8-K
containing notice to shareholders of an October 31, 1998 deadline
to notify the company of any proposals which any shareholder
intends to present at the 1998 Annual Meeting to be held on
January 27, 1999.
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 15, 1998 /s/ Gary Davidson
- ---------------------- ---------------------------
Date Gary Davidson, Chief Financial Officer
and Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAXWELL
TECHNOLOGIES, INC.'S CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS,
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS AND CONSOLIDATED CONDENSED
BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 15,511
<SECURITIES> 0
<RECEIVABLES> 37,618
<ALLOWANCES> 0
<INVENTORY> 16,903
<CURRENT-ASSETS> 73,196
<PP&E> 61,115
<DEPRECIATION> 37,033
<TOTAL-ASSETS> 107,865
<CURRENT-LIABILITIES> 27,356
<BONDS> 348
<COMMON> 840
0
0
<OTHER-SE> 77,405
<TOTAL-LIABILITY-AND-EQUITY> 107,865
<SALES> 38,172
<TOTAL-REVENUES> 38,172
<CGS> 25,466
<TOTAL-COSTS> 25,466
<OTHER-EXPENSES> 9,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 2,998
<INCOME-TAX> 100
<INCOME-CONTINUING> 2,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,703
<EPS-PRIMARY> .32<F1>
<EPS-DILUTED> .30
<FN>
<F1> Consists of Basic Income per Share.
</FN>
</TABLE>
