<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
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[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________TO__________
Commission File Number: 0-12254
SCIENTIFIC TECHNOLOGIES INCORPORATED
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(Issuer)
Oregon 77-0170363
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(State of incorporation) (I.R.S. Employer Identification Number)
31069 Genstar Road, Hayward, California 94544
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(Address of principal executive offices) (Zip Code)
(510) 471-9717
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(Issuers telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 OR 15(d) of the Securities Exchange Act during the past 12 months (or 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
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Common stock outstanding as of August 1, 1995 was 9,607,758 shares.
1
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SCIENTIFIC TECHNOLOGIES INCORPORATED
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CONSOLIDATED BALANCE SHEET
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(Unaudited)
<TABLE>
<CAPTION>
Jun. 30, 1995
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<S> <C>
Assets
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Current assets:
Cash and cash equivalents $ 3,921,000
Short-term investments 1,077,000
Accounts and notes receivable, net 5,324,000
Inventories 3,473,000
Receivable from Parent 137,000
Other assets 341,000
-----------
Total current assets 14,273,000
Property and equipment, net 1,746,000
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Total assets $16,019,000
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Liabilities and Shareholders' Equity
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Current liabilities:
Short-term debt $ 21,000
Trade accounts payable 2,242,000
Accrued expenses 1,523,000
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Total current liabilities 3,786,000
Long-term debt 50,000
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Total liabilities 3,836,000
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Shareholders' equity
Common stock: shares authorized 20,000,000
issued and outstanding; 9,608,000
($.001 par value) 10,000
Capital in excess of par value 5,415,000
Retained earnings 6,758,000
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Total shareholders' equity 12,183,000
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Total liabilities and shareholders' equity $16,019,000
===========
</TABLE>
2
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SCIENTIFIC TECHNOLOGIES INCORPORATED
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CONSOLIDATED STATEMENT OF OPERATIONS
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(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
Jun. 30, 1995 Jun. 30, 1994
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<S> <C> <C>
Sales $8,767,000 $6,738,000
Cost of goods sold 3,819,000 3,055,000
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Gross profit 4,948,000 3,683,000
Operating Expenses:
Selling, general and administrative 1,926,000 1,765,000
Research and development 327,000 323,000
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Total operating expenses 2,253,000 2,088,000
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Income from operations 2,695,000 1,595,000
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Interest income, net 46,000 25,000
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Income before income taxes 2,741,000 1,620,000
Provision for taxes on income 1,096,000 648,000
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Net income $1,645,000 $ 972,000
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Net income per share $.17 $.10
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Weighted average common and common
equivalent shares 9,608,000 9,608,000
========== ==========
</TABLE>
3
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SCIENTIFIC TECHNOLOGIES INCORPORATED
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CONSOLIDATED STATEMENT OF OPERATIONS
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(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
Jun. 30, 1995 Jun. 30, 1994
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<S> <C> <C>
Sales $17,420,000 $12,210,000
Cost of goods sold 7,468,000 5,635,000
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Gross profit 9,952,000 6,575,000
Operating Expenses:
Selling, general and administrative 3,997,000 3,141,000
Research and development 691,000 630,000
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Total operating expenses 4,688,000 3,771,000
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Income from operations 5,264,000 2,804,000
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Interest income, net 106,000 58,000
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Income before income taxes 5,370,000 2,862,000
Provision for taxes on income 2,148,000 1,145,000
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Net income $ 3,222,000 $ 1,717,000
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Net income per share $.34 $.18
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Weighted average common and common
equivalent shares 9,608,000 9,608,000
=========== ===========
</TABLE>
4
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SCIENTIFIC TECHNOLOGIES INCORPORATED
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CONSOLIDATED STATEMENT OF CASH FLOWS
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(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
Jun. 30, 1995 Jun. 30, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,222,000 $ 1,717,000
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 209,000 154,000
Changes in assets and liabilities:
Accounts receivable, net (538,000) (1,054,000)
Inventories (1,106,000) (559,000)
Receivable from Parent (137,000) 396,000
Payable to Parent (19,000)
Trade accounts payable 694,000 469,000
Accrued expenses 141,000 447,000
Other (90,000) 15,000
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Cash flows provided by
operating activities 2,376,000 1,585,000
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Cash flows from investing activities
Investment in intangibles and fixed
assets (455,000) (634,000)
Sale (Purchase) of short-term
investments 56,000 (694,000)
Cash flows used in investing ----------- -----------
activities (399,000) (1,328,000)
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Cash flows from financing activities
Increase (decrease) in debt (15,000) (27,000)
Dividends (288,000) (238,000)
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Cash flows used in financing
activities (303,000) (265,000)
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Change in cash and cash equivalents 1,674,000 (8,000)
Cash and cash equivalents at beginning
of period 2,247,000 103,000
Cash and cash equivalents at end of ----------- -----------
period $ 3,921,000 $ 95,000
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest $ 4,000 $ 8,000
Cash paid to the Parent for income
taxes $ 2,148,000 $ 1,145,000
</TABLE>
5
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SCIENTIFIC TECHNOLOGIES INCORPORATED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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The consolidated financial statements as of June 30, 1995 and the three and
six months ended June 30, 1995 and 1994 are unaudited. In the opinion of
management, they reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results of these periods but
may not necessarily be indicative of the results to be expected for the full
fiscal year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been consolidated or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in Scientific Technologies
Incorporated's Annual Report to Shareholders on Form 10-KSB for the year ended
December 31, 1994.
1. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Jun. 30, 1995
-------------
<S> <C>
Raw Materials $1,920,000
Work in Process 519,000
Finished Goods 1,034,000
----------
$3,473,000
==========
</TABLE>
2. NET INCOME PER SHARE
Net income per common share is computed based on the weighted average
number of shares outstanding during the period. There were no options or
warrants outstanding during the periods presented.
3. DIVIDEND PAID
On March 1, 1995, the Company declared a cash dividend of $.06 per share on
all its pre-split common shares. This dividend was paid on April 3, 1995 to
shareholders of record on March 24, 1995. Approximately 87% of the outstanding
common stock of the Company is beneficially owned by Scientific Technology
Incorporated (the Parent), a California corporation under common control with
the Company. Dividends paid to Scientific Technology Incorporated were applied
to the Receivable from Parent account.
4. STOCK SPLIT
On June 16, 1995, the Board of Directors approved a stock split whereby
each one share of Common Stock of the Company issued and outstanding on the
record date would be split up and converted into two shares of common stock. The
record date for this stock split was July 6, 1995 and the shareholders of record
at the close of business on that date were entitled to receive one additional
share of Common Stock of the Company for each one share of Common Stock held on
that date. The payable date for the stock split was July 27, 1995. All share and
per share numbers have been restated to reflect this split.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
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Results of Operations
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Sales for the three and six months ended June 30, 1995 increased 30% and
43% respectively to records of $8,767,000 and $17,420,000 from $6,738,000 and
$12,210,0000 recorded in the same periods in 1994. This was primarily the result
of continued acceptance of the Company' products and a slightly lower overall
distributor discount rate.
In the fourth quarter of 1995, the Company will relocate to a new facility
being constructed for its use. While, the Company will take all necessary steps
to minimize disruption of its business, there can be no guarantee that some
temporary interruption will not occur.
Gross margin as a percent of sales increased to 56% during the second
quarter of 1995, and to 57% during the first six months of 1995, compared to 55%
and 54% in the respective 1994 periods. This was primarily the result of
improved economies of scale associated the increased volume and lower overall
discount rates. Competitive pressures could have a negative effect on this lower
discount rate trend, which may reduce gross margins in the future.
Selling, general and administrative costs increased 9% to $1,926,000 in the
second quarter and 27% to $3,997,000 in the first half of 1995 from $1,765,000
and $3,141,000 in the comparable 1994 periods. This was primarily the result of
increased selling expenses associated with the higher levels of revenue.
Selling, general and administrative expenses as a percent of sales declined to
22% in the second quarter of 1995 from the 26% reported in 1994 and to 23%
during the six months ended June 30, 1995 from 26% during the six months ended
June 30, 1994.
Research and development expenses rose to $327,000 in the second quarter of
1995 from $323,000 in 1994. Year to date research and development expenses rose
to $691,000 during the first six months of 1995 compared to $630,000 in 1994.
Research and development expenses were 4% of sales for the three and six months
ended June 30, 1995 compared to 5% for the comparable 1994 periods.
Interest income, net increased to $46,000 and $106,000 for the three and
six months ended June 30, 1995 compared to $25,000 and $58,000 for the same
periods in the prior year. This was primarily the result of increased income
from short-term investments offsetting reduced interest income from the Parent.
The Company's provision for income taxes was $1,096,000 and $2,148,000 for
the three and six months ended June 30, 1995 compared to $648,000 and $1,145,000
for the comparable periods in 1994.
The growth in revenues, gross margins and income experienced by the Company
in recent quarters is not necessarily indicative of future results. In view of
the significant growth of the Company's operations in recent years, the Company
believes that period to period comparisons of its financial results should not
be relied upon as an indication of future performance.
7
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Liquidity and Capital Resources
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At June 30, 1995 the Company's working capital was $10,487,000, a 34%
increase from the $7,807,000 reported at December 31, 1994. This was due to
increases in cash equivalents, short-term investments, accounts receivable and
inventory and lower short-term debt, which offset increased trade accounts
payable and accrued expenses.
The Company reduced its bank borrowings by $15,000 during the first six
months of 1995 to $71,000. Available bank borrowings were $2,500,000 at March
31, 1995. The Company believes that cash from operations, together with its cash
resources and available bank borrowings, should be adequate to fund its working
capital requirements through at least the remainder of 1995.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
At the Annual Meeting of shareholders held on May 25, 1995, the
shareholders reelected Anthony R. Lazzara, Joseph J. Lazzara, James A. Lazzara,
James A. Ashford, Carl H. Frei and Bernard L. Ploshay to the Board of Directors
and approved the selection of Price Waterhouse as the Company's independent
accountants.
8
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SIGNATURES
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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.
SCIENTIFIC TECHNOLOGIES INCORPORATED
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Registrant
Date: August 11, 1995 /s/ Joseph J. Lazzara
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Joseph J. Lazzara
President and Chief Executive Officer
(Principal Executive and Financial officer)
Date: August 11, 1995 /s/ Richard O. Faria
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Richard O. Faria
Vice-President and Controller
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,921,000
<SECURITIES> 1,077,000
<RECEIVABLES> 5,438,000
<ALLOWANCES> 114,000
<INVENTORY> 3,473,000
<CURRENT-ASSETS> 14,273,000
<PP&E> 3,744,000
<DEPRECIATION> 1,746,000
<TOTAL-ASSETS> 16,019,000
<CURRENT-LIABILITIES> 3,786,000
<BONDS> 0
<COMMON> 10,000
0
0
<OTHER-SE> 12,173,000
<TOTAL-LIABILITY-AND-EQUITY> 12,183,000
<SALES> 17,420,000
<TOTAL-REVENUES> 17,420,000
<CGS> 9,952,000
<TOTAL-COSTS> 12,156,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,370,000
<INCOME-TAX> 2,148,000
<INCOME-CONTINUING> 3,222,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,222,000
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
