<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31 ,1995
--------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission File Number 1-8342
_________
PICO PRODUCTS, INC.
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 15-0624701
- ------------------------------------ ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12500 Foothill Blvd.
Lakeview Terrace, California 91342
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 897-0028
--------------
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
requirement for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of December 8, 1995.
Common Stock, $0.01 par value 3,682,246
- ----------------------------- --------------------
Class Number of Shares
This report consists of 18 pages.
1
<PAGE>
PICO PRODUCTS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
October 31, 1995 and July 31, 1995 3-4
Condensed Consolidated Statements
of Income - Three Months
Ended October 31, 1995 and 1994 5
Condensed Consolidated Statements
of Cash Flows - Three Months
Ended October 31, 1995 and 1994 6
Notes to Condensed Consolidated Financial
Statements 7-10
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 11-13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31,
1995 1995
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 251,126 $ 501,525
Accounts receivable (less allowance
for doubtful accounts: October 31,
1995, $290,000; July 31, 1995,
$290,000) 5,338,471 5,892,338
Inventories (Note 2) 11,257,354 9,760,164
Prepaid expenses and other current
assets 222,283 183,870
----------- -----------
TOTAL CURRENT ASSETS 17,069,234 16,337,897
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Buildings 217,255 217,255
Leasehold improvements 337,540 259,277
Machinery and equipment 2,513,747 2,428,605
----------- -----------
3,068,542 2,905,137
Less accumulated depreciation
and amortization 2,186,384 2,121,382
----------- -----------
882,158 783,755
----------- -----------
OTHER ASSETS:
Patents and licenses (less accumulated
amortization: October 31, 1995,
$57,712; July 31, 1995, $56,204) 166,281 165,006
Excess of cost over net assets of
businesses acquired (less accumulated
amortization: October 31, 1995,
$345,150; July 31, 1995, $337,890) 232,285 239,545
Deposits and other noncurrent assets 102,474 107,147
----------- -----------
501,040 511,698
----------- -----------
$18,452,432 $17,633,350
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31,
1995 1995
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 7,822,348 $ 7,778,655
Current portion of long-term debt 370,173 362,239
Accounts payable 3,972,132 3,326,366
Accrued expenses:
Legal and accounting 122,298 90,443
Payroll and payroll taxes 578,707 484,854
Other accrued expenses 352,387 336,450
Other current liabilities (Note 5) 462,066 462,066
------------ ------------
TOTAL CURRENT LIABILITIES 13,680,111 12,841,073
------------ ------------
LONG-TERM DEBT 271,249 278,820
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5) - -
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value;
authorized 500,000 shares;
no shares issued - -
Common shares, $.01 par value;
authorized 15,000,000 shares;
issued and outstanding 3,682,246
shares at October 31, 1995 and
3,637,046 shares at July 31, 1995 36,822 36,370
Additional paid-in capital 21,578,928 21,565,255
Accumulated deficit (17,008,212) (17,010,269)
Cumulative translation adjustment (106,466) (77,899)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 4,501,072 4,513,457
------------ ------------
$18,452,432 $17,633,350
------------ ------------
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-----------------------
1995 1994
------------ ------------
<S> <C> <C>
SALES $ 8,373,962 $ 8,091,902
COSTS AND EXPENSES:
Cost of sales 6,245,265 6,176,272
Selling and administrative expenses 1,900,762 1,709,705
------------ ------------
TOTAL COSTS AND EXPENSES 8,146,027 7,885,977
------------ ------------
INCOME FROM OPERATIONS 227,935 205,925
------------ ------------
OTHER INCOME (Note 3) 1,809 129,822
INTEREST EXPENSE (227,687) (152,843)
INCOME BEFORE INCOME TAXES 2,057 182,904
------------ ------------
INCOME TAX PROVISION (Note 4) - -
------------ ------------
NET INCOME $ 2,057 $ 182,904
------------ ------------
------------ ------------
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $ 0.00 $ 0.04
------------ ------------
------------ ------------
Fully diluted $ 0.00 $ 0.04
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON AND
EQUIVALENT SHARES OUTSTANDING:
Primary 4,136,917 4,313,172
------------ ------------
------------ ------------
Fully diluted 4,136,917 4,313,172
------------ ------------
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,057 $ 182,904
Adjustments to reconcile net income
to net cash provided (used) in
operating activities:
Depreciation and amortization 82,675 108,293
Changes in operating assets
and liabilities (229,907) 633,147
------------ ------------
NET CASH PROVIDED (USED) IN
OPERATING ACTIVITIES (145,175) 924,344
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (163,405) (36,830)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under a
line of credit agreement 43,693 (801,323)
Principal payments on long-term debt (30,729) (24,099)
Additional long-term debt financing 31,092 -
Proceeds from exercise of stock options 14,125 -
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 58,181 (825,422)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (250,399) 62,092
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 501,525 441,609
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 251,126 $ 503,701
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest $ 229,428 $ 155,189
Income taxes 22,050 -
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
PICO PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
(1) GENERAL
The Company's primary industry is the manufacturing and distribution of
equipment and parts for the cable television (CATV) and satellite master antenna
television (SMATV) markets. The accompanying unaudited condensed consolidated
financial statements include all adjustments which are, in the opinion of the
Company's management, necessary to present fairly the Company's financial
position as of October 31, 1995, and the results of its operations and its cash
flows for the three month periods ended October 31, 1995 and 1994. All such
adjustments are of a normal recurring nature. All significant intercompany
accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
related notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1995.
The results of operations for the interim periods shown in this Report are not
necessarily indicative of the results to be expected for the fiscal year.
(2) INVENTORIES
The composition of inventories was as follows:
<TABLE>
<CAPTION>
October 31, July 31,
1995 1995
------------ ------------
<S> <C> <C>
Raw materials $ 3,609,374 $ 3,350,435
Work in process 1,093,217 319,386
Finished goods 6,554,763 6,090,343
------------ ------------
$11,257,354 $ 9,760,164
------------ ------------
------------ ------------
</TABLE>
7
<PAGE>
(3) OTHER INCOME
Other income consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
October 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Royalty income $ - $124,287
Interest income 1,809 5,535
-------- --------
$ 1,809 $129,822
-------- --------
-------- --------
</TABLE>
(4) INCOME TAXES
No provision for U.S. Federal and State income taxes nor foreign income taxes
has been recorded for the three month periods ended October 31, 1995 and 1994
due to the Company's U.S. Federal and State net operating loss carryforward
positions and tax holidays granted the Company's foreign subsidiaries.
(5) LITIGATION AND CONTINGENCIES
In November 1991, Arrow Communication Laboratories, Inc. (Arcom) of Syracuse,
New York initiated a lawsuit in the Supreme Court in the County of Onondaga, New
York. The suit, which was amended in June 1992, alleges that Arcom had a paid-
up license with respect to the Company's patent for positive trapping systems,
that Arcom is entitled to unspecified damages based on overpayment of royalty
amounts, and that Arcom has incurred damages in excess of $250,000 as a result
of a Company press release announcing termination of the license agreement. The
suit also asserts that Arcom is entitled to punitive damages of $3,000,000. The
Company responded by denying all liability and asserting certain common law and
statutory defenses.
In December 1993, in response to a summary judgment motion filed by the Company,
the New York State Court rejected Arcom's claim that it had a paid-up license.
Instead, the Court held that when Arcom "defaulted in making royalty payments on
or about November 15, 1991, the license terminated by its own terms 30 days
later as asserted by the Company in its termination letter dated January 13,
1992." Following the New York State Court's summary judgment decision, the
Company initiated a patent infringement lawsuit against Arcom in the United
States District Court for the Northern District of New York. In its suit, the
Company asked the Federal Court to award it treble damages for willful
infringement plus attorney's fees. The Company also filed a motion for a
preliminary injunction against further infringement by Arcom. At a court
hearing on February 15, 1994, the
8
<PAGE>
parties agreed, and it was ordered by the Court, that Arcom would post as
security amounts equal to the royalties due to the Company for the manufacture
and sale of product covered by the license agreement from December 15, 1991, the
date that the license would have terminated, until the expiration of the patent
in February 1995. Through November 30, 1995 Arcom has made cash payments of
$462,066 covering royalties through February 14, 1995. The Company has not
included these amounts in income in any fiscal period but has recorded a current
liability for $462,066 at October 31, 1995. In addition, Arcom posted an
irrevocable letter of credit in an amount deemed sufficient to permit recovery
of a significant portion of the Company's damages if it were to prevail on its
willful infringement claim. In exchange, the Company withdrew its request for a
preliminary injunction. In the event that the Company does not prevail on its
infringement claims, the Company has agreed to refund all security payments made
by Arcom.
In July 1994, the Appellate Division, Fourth Department of the New York Supreme
Court ruled that the interpretation of parts of the license agreement relating
to Arcom's paid-up license claims involves questions of fact that must be
resolved at trial. A trial has been scheduled to begin in early January 1996.
Management believes that the outcome of this matter will not have a material
adverse effect on the Company's consolidated financial statements.
On March 6, 1995, a subsidiary of the Company received a Joint Request for
Information (the "Information Request") from the United States Environmental
Protection Agency, Region II (the "EPA"), under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), with
respect to the release and/or threatened release of hazardous substances,
hazardous wastes, pollutants or contaminants into the environment at the
Onondaga Lake Site, Syracuse, Onondaga County, New York. The Company has
learned that the EPA added the Onondaga Lake Site to the Superfund National
Priorities List on December 6, 1994, and has completed an onsite assessment of
the degree of hazard. The EPA has indicated that the Company is only one of 26
companies located in the vicinity of Onondaga Lake or its tributaries that have
received a similar Information Request.
The Information Request related to the activities of the Company's Printed
Circuit Board Division, which has sold to a third party in 1992, and which
conducted operations within the specified area. Under the Agreement of Sale
with the buyer, the Company retained liability for environmental obligations
which occurred prior to the sale.
9
<PAGE>
The Company has provided all information requested by the EPA. The Information
Request does not designate the Company as a potentially responsible party, nor
has the EPA indicated the basis upon which it would designate the Company as a
potentially responsible party. The Company is therefore unable to state whether
there is any material likelihood for liability on its part, and, if there were
to be any such liability, the basis of any sharing of such liability with
others.
The Company is involved, from time to time, in certain other legal actions
arising in the normal course of business. Management believes that the outcome
of other litigation will not have a material adverse affect on the Company's
consolidated financial statements.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following discussion compares the operations of the Company for the three
month period ended October 31, 1995 with the operations for the three month
period ended October 31, 1994, as shown by the unaudited condensed consolidated
statements of operations included in this quarterly report.
RESULTS OF OPERATIONS
Sales increased by approximately $282,000, or 3%, for the fiscal quarter ended
October 31, 1995 compared to the fiscal quarter ended October 31, 1994. The
Company's Pico Macom subsidiary recorded a sales decrease of approximately 5%
primarily due to a slowdown in demand for Satellite Master Antenna Television
(SMATV) equipment and products in South America. The Company's CATV division
recorded a sales increase of approximately 44% primarily due to increasing
demand for television signal security products both internationally and
domestically. Management anticipates that overall sales will continue to grow
during the remainder of fiscal year 1996 due to increased availability of
existing products, to the introduction of new products and to increased sales to
customers in Asia and in South America.
Cost of sales increased by approximately $69,000, or 1%, for the fiscal quarter
ended October 31, 1995 compared with the fiscal quarter ended October 31, 1994.
Cost of sales as a percentage of sales decreased by 1% (from 76% to 75%) for the
fiscal quarter ended October 31, 1995 versus the same fiscal quarter in the
previous year. The dollar increase in cost of sales was primarily attributable
to the increase in sales volume. The 1% decrease in cost of sales as a
percentage of sales was primarily due to the improved purchasing power of the
U.S. dollar in the Far East which resulted in slight product cost reductions,
and due to manufacturing cost improvements for the Company's CATV division
security products.
Selling and administrative expenses increased by approximately $191,000, or 11%,
for the fiscal quarter ended October 31, 1995 compared to the fiscal quarter
ended October 31, 1994. The primary reasons for the increase in selling and
administrative expenses were continuing increased investment in product
development and expenditures related to development of new markets in Asia and
to the Company's new regional office in Hong Kong. Management anticipates that
this current level of selling and administrative expenses will continue
throughout fiscal year 1996.
11
<PAGE>
Other income decreased by approximately $128,000, or 99%, for the fiscal quarter
ended October 31, 1995 compared to the fiscal quarter ended October 31, 1994.
The decrease in other income was primarily due to the elimination of royalty
income from license holders following the expiration of the Company's patent for
positive encoding and decoding systems in February 1995.
Interest expense increased by approximately $75,000, or 49%, for the fiscal
quarter ended October 31, 1995 compared with the fiscal quarter ended October
31, 1994. The increase was primarily due to higher borrowing levels on the
Company's bank line of credit to support the Company's working capital
requirements, and due to a higher prime rate during the fiscal quarter ended
October 31 ,1995.
No provision for U.S. Federal and State income taxes nor foreign income taxes
has been recorded for the three month periods ended October 31, 1995 and 1994
due to the Company's U.S. Federal and State net operating loss carryforward
positions and tax holidays granted the Company's foreign subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1995, the Company had working capital of approximately
$3,389,000 and a ratio of current assets to current liabilities of approximately
1.25:1, compared with working capital of approximately $3,497,000 and a ratio of
1.27:1 as of July 31, 1995. During the fiscal quarter ended October 31, 1995,
the Company recorded negative cash flow from operating activities primarily as a
result of increased inventory purchases to support the current and anticipated
future sales levels.
The Company's growth depends on its ability to supply a diverse line of products
compatible with cable systems in the United States, Asia and South America.
Further, as discussed earlier, the Company is investing resources in new product
development. Inventory has increased due to sourcing of material for new
products and stocking of completed units of new product coupled with a temporary
slow down in new orders from South America.
During the fiscal quarters ended October 31, 1995 and 1994, cash used for
capital expenditures was approximately $163,000 and $37,000 respectively.
Capital expenditures for the remainder of fiscal year 1996 are expected to be
under $100,000.
At October 31, 1995 Pico Macom had a $10,000,000 revolving bank line of credit
which provides for interest at the prime rate (8.75% at October 31, 1995) plus
1.25%. The bank line of credit is used to fund operating expenses, product
purchases, and letters of credit for import purchases. The line is structured
as a $10,000,000 line
12
<PAGE>
of credit with a sublimit of $1,500,000 for outstanding letters of credit. The
amount available is based on various percentages of eligible accounts receivable
and inventories as defined in the agreement, which is subject to review and
renewal on May 25, 1996. The credit facility is subject to certain financial
tests and covenants. Management anticipates that the bank line of credit will
be renewed. In the event that it were not renewed, the Company would seek
alternative asset-based financing. Failure to obtain such financing would have
a materially adverse affect on the Company's working capital requirements. At
October 31, 1995, Pico Macom had approximately $7,822,000 in revolving loans and
approximately $46,000 in letters of credit outstanding, and the unused portion
of the borrowing base was approximately $399,000.
In November 1995, the Company requested an amendment to its revolving bank line
of credit to increase the borrowing limit against eligible inventories. The
Company is in negotiations with its bank regarding this request.
Management believes that continued profitable operations along with the current
credit arrangements, as amended by the above request, will provide sufficient
cash to fund the Company's operational needs for the rest of fiscal year 1996.
Should the Company identify opportunities that require cash beyond that
generated internally or available from its credit line, the Company would seek
to increase its current credit line. Alternatively, the Company would consider
seeking other sources of cash, including, but not limited to, a public offering
or a private placement. However, there can be no assurance that additional
financing with favorable terms will be available if needed.
Profitability of operations is subject to various uncertainties including
general economic conditions, favorable settlement of ongoing litigation and the
actions of actual or potential competitors and customers. The Company's future
depends on the growth of the cable TV market in the United States and
internationally. In the United States, a number of factors could affect the
future profitability of the Company, including changes in the regulatory climate
for cable TV, changes in the competitive structure of the cable and
telecommunications industries or changes in the technology base of the industry.
Internationally, the Company's profitability depends on its ability to penetrate
new markets in the face of competition from other United States and foreign
companies.
13
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Incorporated by reference from financial statement footnote number 5 of Part I.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10(p) Amendment to Pico Macom, Inc. lease of building at 12500 Foothill
Boulevard, Lakeview Terrace, California - amendment dated
November 9, 1995.
11.1 Computation of Per Share Earnings.
27 Financial Data Schedule (included only in the EDGAR filing).
(b) Reports on Form 8-K:
None.
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.
PICO PRODUCTS, INC.
REGISTRANT
DATE: December 8, 1995 Joseph T. Kingsley
-----------------------------------
Senior Vice President of Finance
Chief Financial Officer
14
<PAGE>
FORM 10-Q
QUARTER ENDED OCTOBER 31, 1995
EXHIBITS
10(p) Amendment to Pico Macom, Inc. lease of building at 12500 Foothill
Boulevard, Lakeview Terrace, California 91342 - amendment dated
November 9, 1995.
11.1 Computation of Per Share Earnings
27 Financial Data Schedule (included only in the EDGAR filing).
15
<PAGE>
THIRD AMENDMENT OF LEASE
THIS THIRD AMENDMENT OF LEASE ("Third Amendment") is made this 9th day of
November, 1995, by and between Valley Properties, a California general
partnership ("Lessor") and Pico Products, Inc. and Pico Macom, Inc.
(collectively "Lessee").
WHEREAS, the parties have heretofore entered into an Agreement of Lease
("Lease") dated July 30, 1985, and an amendment of lease executed August 16,
1985, covering the Premises commonly know as 12500 Foothill Boulevard, Lakeview
Terrace, California (the "Premises"); and
WHEREAS, the parties have heretofore entered into a further Amendment of
Lease dated January 5, 1991 covering the same Premises; and
WHEREAS, the parties hereto now desire to enter into this Third Amendment
of Lease in order to further reflect the desires of the parties and keep the
Lease and prior amendments thereto in full force and effect except as modified
by this Third Amendment;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties agree as follows:
SECTION 1.05 LEASE TERM.
The term of this Lease is extended by this Third Amendment from April 1,
1996, up to and including March 31, 1998 ("Second Extended Term").
SECTION 1.13 RENT.
Lessee shall pay Base Rent to Lessor during the entire Second Extended Term
for the Premises in the amount of Thirty Thousand and No/100 Dollars
($30,000.00) per month.
SECTION 15.04 OPTION TO EXTEND.
The option to extend contained in the Amendment of Lease dated January 5,
1991 is cancelled in its entirety prior to any exercise of said option by
Lessee.
ADDITIONAL IMPROVEMENTS.
Any additional improvements to the Premises to be made by Lessee shall be
at Lessee's sole expense without any reduction or abatement of rent or
contribution of any kind by Lessor. Any additional improvements or repairs to
be made by Lessee must be approved in advance by the Lessor, consent to which
will not be unreasonably withheld. The improvements or repairs must comply with
all applicable laws and regulations, and Lessee will not allow them to result in
any liens or encumbrances on the Premises.
16
<PAGE>
FUTURE COOPERATION.
During the Second Extended Term, Lessee will, if reasonable and practicable
without interference in the operations of its business, cooperate with Lessor's
potential desires to divide the Premises into two smaller rentable spaces.
Lessee will cooperate in Lessor's potential efforts to commence construction to
accomplish this purpose before the expiration of the Second Extended Term. In
such event, to the extent that Lessor requests this cooperation from Lessee, and
if Lessee is required to vacate certain portions of the Premises in order to
facilitate such construction, then Lessor will reduce Lessee's monthly rent
under this Second Amendment at the rate of 50CENTS per square foot per month for
the amount of space so vacated. Further, Lessor will reduce the allocation to
the Lessee of property taxes, insurance and common maintenance pro rata with the
amount of space so vacated. No other financial compensation, consideration or
abatements shall be granted to Lessee as part of such cooperation. Lessor will
be responsible for paying any increase to utility or related types of expenses
caused by such construction by Lessor.
NO OTHER CHANGES.
Except as modified by this Second Amendment, the Lease and all amendments
thereto including this Second Amendment remain in full force and effect between
the parties until the expiration of the Second Extended Term.
<TABLE>
<CAPTION>
LESSOR: LESSEE:
<S> <C>
VALLEY PROPERTIES, a PICO PRODUCTS, INC.
California general partnership
By: Joseph T. Kingsley
------------------------------------------
By: Stewart Foreman Title: Senior V.P. Finance & Operations
-------------------------------- ----------------------------------------
Stewart Foreman, Partner
PICO MACOM, INC.
By: Joseph T. Kingsley
------------------------------------------
By: Martin F. Witkin Title: Senior V.P. Finance
-------------------------------- ---------------------------------------
Martin F. Witkin, Partner
By: Roberta Ainciart Date: November 9 , 1995
-------------------------------- ------------------------------
Roberta Ainciart, Partner
Date: November 15 , 1995
------------------------------
</TABLE>
<PAGE>
EXHIBIT 11.1
PICO PRODUCTS, INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
October 31,
---------------------
1995 1994
-------- --------
<TABLE>
<CAPTION>
<S> <C> <C>
Net income attributable
to common stock $ 2 183
Net income used to compute
fully diluted earnings
per share $ 2 $ 183
-------- --------
Primary earnings per share:
Weighted average number
of common shares outstanding 3,652 3,632
Dilutive effect of stock options
and warrants after application
of treasury stock method 485 681
-------- --------
Number of shares used to compute
primary earnings per share 4,137 4,313
Primary earnings per share $ 0.00 $ 0.04
-------- --------
-------- --------
Fully diluted earnings per share:
Weighted average number
of common shares outstanding 3,652 3,632
Dilutive effect of stock options
and warrants after application
of treasury stock method 485 681
-------- --------
Number of shares used to compute
fully diluted earnings per share 4,137 4,313
Fully diluted earnings per share $ 0.00 $ 0.04
-------- --------
-------- --------
</TABLE>
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 251
<SECURITIES> 0
<RECEIVABLES> 5,628
<ALLOWANCES> 290
<INVENTORY> 11,257
<CURRENT-ASSETS> 17,069
<PP&E> 3,068
<DEPRECIATION> 2,186
<TOTAL-ASSETS> 18,452
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0
0
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</TABLE>
