<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 April 30, 2000
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 0-14365
ALPHA TECHNOLOGIES GROUP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 76-0079338
------------------------------------------------------ ------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
306 Pasadena Ave. South Pasadena, CA 91030
------------------------------------------
(Address of principal executive offices)
(626) 799-9171
--------------
(Registrant's telephone number, including area code)
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 __
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.03 par value 6,670,812
---------------------------- ---------
Class Outstanding at May 30, 2000
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC.
FORM 10-Q
APRIL 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION.......................................................... 3
ITEM 1. FINANCIAL STATEMENTS........................................................... 3
CONSOLIDATED BALANCE SHEETS - OCTOBER 31, 1999 AND APRIL 30, 2000.......................... 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS AND SIX MONTHS
ENDED MAY 2, 1999 AND APRIL 30, 2000........................................................... 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE QUARTERS AND
SIX MONTHS ENDED MAY 2, 1999 AND APRIL 30, 2000................................................ 5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MAY 2, 1999
AND APRIL 30, 2000............................................................................. 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................... 10
PART II - OTHER INFORMATION.................................................................... 14
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - OCTOBER 31, 1999 AND APRIL 30, 2000
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
October 31, April 30,
1999 2000
----------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 354 $ 274
Accounts receivable, net 9,482 10,368
Inventories, net 7,790 8,243
Prepaid expenses 863 1,080
----------- -------------
Total current assets 18,489 19,965
PROPERTY AND EQUIPMENT, at cost 22,300 22,983
Less -- Accumulated depreciation and amortization 10,838 12,363
----------- -------------
Property and equipment, net 11,462 10,620
GOODWILL, net 2,559 2,427
OTHER ASSETS, net 2,339 2,315
----------- -------------
TOTAL ASSETS $ 34,849 $ 35,327
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable, trade $ 4,518 $ 4,511
Accrued compensation and related benefits 1,670 1,480
Other accrued liabilities 1,983 1,176
Current portion of long-term debt 1,220 1,229
----------- -------------
Total current liabilities 9,391 8,396
REVOLVING CREDIT FACILITY 2,799 967
LONG-TERM DEBT 3,960 3,340
OTHER LONG-TERM LIABILITIES 197 173
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value; shares authorized 180,000 - -
Common stock, $.03 par value; shares authorized 17,000,000; issued
7,959,007 at October 31, 1999 and 8,059,697 at April 30, 2000 239 242
Additional paid in -- capital 43,828 43,984
Retained deficit (19,739) (15,963)
Accumulated other comprehensive loss (22) (8)
Treasury stock, at cost (1,394,353 common shares at October 31, 1999 and
April 30, 2000) (5,804) (5,804)
----------- -------------
TOTAL STOCKHOLDERS' EQUITY 18,502 22,451
----------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,849 $ 35,327
=========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS AND SIX MONTHS ENDED
MAY 2, 1999 AND APRIL 30, 2000
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
---------------------------- ---------------------------
May 2, April 30, May 2, April 30,
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $ 16,164 $ 18,001 $ 32,475 $ 34,863
COST OF SALES 12,016 12,777 24,418 24,830
--------- --------- --------- ---------
Gross profit 4,148 5,224 8,057 10,033
OPERATING EXPENSES
Research and development 176 202 374 425
Selling, general and administrative 2,870 2,831 5,788 5,569
--------- --------- --------- ---------
Total operating expenses 3,046 3,033 6,162 5,994
--------- --------- --------- ---------
OPERATING INCOME 1,102 2,191 1,895 4,039
INTEREST INCOME (EXPENSE), net (226) (199) (484) (414)
OTHER INCOME (EXPENSE), net (15) 169 (46) 151
--------- --------- --------- ---------
INCOME BEFORE TAXES 861 2,161 1,365 3,776
PROVISION (BENEFIT) FOR INCOME TAXES - - - -
--------- --------- --------- ---------
NET INCOME $ 861 $ 2,161 $ 1,365 $ 3,776
========= ========= ========= =========
BASIC AND DILUTED NET INCOME PER SHARE
Basic $ 0.12 $ 0.33 $ 0.20 $ 0.57
========= ========= ========= =========
Diluted $ 0.12 $ 0.30 $ 0.20 $ 0.53
========= ========= ========= =========
SHARES USED IN COMPUTING NET INCOME
PER SHARE
Basic 6,933 6,615 6,933 6,615
========= ========= ========= =========
Diluted 7,013 7,167 6,960 7,147
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE
QUARTERS AND SIX MONTHS ENDED MAY 2, 1999 AND APRIL 30, 2000
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------ ------------------------
May 2, April 30, May 2, April 30,
1999 2000 1999 2000
-------- ---------- ------- ---------
<S> <C> <C> <C> <C>
NET INCOME $ 861 $2,161 $1,365 $3,776
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment 8 -- 81 14
-------- ---------- ------- ---------
COMPREHENSIVE INCOME $ 869 $2,161 $1,446 $3,790
======== ========== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 2, 1999 AND APRIL 30, 2000
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
May 2, April 30,
1999 2000
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,365 $ 3,776
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,613 1,676
Stock option compensation expense 47 --
Cumulative translation adjustment 6 14
Changes in assets and liabilities:
Increase in accounts receivable (13) (886)
Decrease (Increase) in inventory 1,602 (453)
Increase in prepaid expenses (416) (217)
Decrease in accounts payable (2,032) (7)
Decrease in accrued compensation and related benefits (258) (190)
Decrease in other liabilities (766) (831)
---------- -----------
Net cash provided by operating activities 1,148 2,882
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 97 --
Purchase of property and equipment, net (253) (683)
Decrease in other assets, net -- 5
---------- -----------
Net cash used in investing activities (156) (678)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3 159
Proceeds from revolving credit lines 29,164 32,127
Payments on revolving credit lines (33,141) (33,959)
Proceeds from term debt 5,836 --
Payments on term debt (3,843) (611)
---------- -----------
Net cash used in financing activities (1,981) (2,284)
NET DECREASE IN CASH (989) (80)
---------- -----------
CASH, beginning of period 1,387 354
---------- -----------
CASH, end of period $ 398 $ 274
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
Alpha Technologies Group, Inc. ("Alpha" or the "Company"), through its
wholly owned subsidiaries, manufactures thermal management products, electronic
connectors, and custom designed subsystems.
Thermal management products, principally heat sinks, are primarily
fabricated aluminum extrusions that have high surface area to volume ratios and
are engineered to dissipate unwanted heat generated by electronic components. As
systems become increasingly more powerful and packaging becomes smaller, the
need to dissipate heat becomes more important to the reliability and
functionality of electronic systems. The Company's thermal management products
serve the microprocessor, computer, automotive, telecommunication, industrial
controls, transportation, power supply, factory automation, consumer
electronics, aerospace and defense industries.
Connectors are electro-mechanical devices that permit electronic
subassemblies such as printed circuit boards, power supplies and input-output
wire harnesses/cable assemblies to be coupled and separated. The Company's
connector products include sub-miniature, micro-miniature and ultra-miniature
connectors and cable and/or wire harness connector assemblies, the majority of
which are custom manufactured to meet rigid specifications. The Company's
connector products serve the aerospace, communications, defense, factory
automation, industrial controls, medical electronics, scientific/process
instrumentation and test/measurement industries.
Custom designed subsystems are operational sub-units integrated into major
networks for data transmission, retrieval and transfer. The Company designs,
fabricates and tests custom designed subsystems for the defense industry, the
telecommunications industry and certain commercial markets.
7
<PAGE>
(2) Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of the Company, the accompanying interim unaudited
consolidated financial statements contain all material adjustments, consisting
only of normal recurring adjustments necessary to present fairly the financial
condition, the results of operations and the changes in cash flows of Alpha
Technologies Group, Inc. and Subsidiaries for interim periods. The results for
such interim periods are not necessarily indicative of results for a full year.
All material intercompany transactions and balances have been eliminated.
Certain prior year amounts have been reclassified to conform to fiscal 2000
presentation.
Users of financial information produced for interim periods are encouraged
to refer to the footnotes contained in the Annual Report to Stockholders when
reviewing interim financial results.
(3) Inventories
Inventories consisted of the following on October 31, April 30,
(in thousands): 1999 2000
----------- ----------
Raw materials and components $ 5,439 $ 5,162
Work in process 2,548 2,817
Finished goods 2,194 1,937
----------- ----------
10,181 9,916
Valuation reserve (2,391) (1,673)
----------- ----------
$ 7,790 $ 8,243
=========== ==========
Inventory reserves decreased due to the write off of inventory which was
reserved for in prior years.
8
<PAGE>
(4) Business Segment Information
The Company's management evaluated performance based on operating income.
Summarized financial information by business segment (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------- -----------------
May 2, April 30, May 2, April 30,
1999 2000 1999 2000
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales:
----------
Thermal management products $11,897 $14,057 $23,596 $27,242
Connector products 2,770 2,384 5,768 4,579
Subsystems 1,497 1,560 3,111 3,042
------- ------- ------- -------
Total 16,164 18,001 32,475 34,863
======= ======= ======= =======
Operating income (loss) before interest,
----------------------------------------
other income(expense) and corporate
-----------------------------------
allocation:
-----------
Thermal management products $ 1,339 $ 2,387 $ 2,306 $ 4,325
Connector products 222 231 597 455
Subsystems 92 119 194 302
Corporate (551) (546) (1,202) (1,043)
------- ------- ------- -------
Total 1,102 2,191 1,895 4,039
======= ======= ======= =======
Total assets:
-------------
Thermal management products $24,078 $24,958 $24,078 $24,958
Connector products 6,555 4,881 6,555 4,881
Subsystems 3,265 2,710 3,265 2,710
Corporate 2,417 2,778 2,417 2,778
Intercompany Elimination (1,184) -- (1,184) --
------- ------- ------- -------
Total 35,131 35,327 35,131 35,327
======= ======= ======= =======
Depreciation and amortization:
------------------------------
Thermal management products $ 623 $ 656 $ 1,259 $ 1,336
Connector products 130 125 253 244
Subsystems 45 41 90 85
Corporate 5 6 11 11
------- ------- ------- -------
Total 803 828 1,613 1,676
======= ======= ======= =======
Capital Expenditures:
---------------------
Thermal management products $ 26 $ 263 $ 169 $ 492
Connector products 13 72 49 108
Subsystems 23 -- 35 41
Corporate -- 34 -- 42
------- ------- ------- -------
Total 62 369 253 683
======= ======= ======= =======
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
---------------------
Quarter to Quarter Comparison
-----------------------------
Net Income. Net income for the second quarter of fiscal 2000 increased to
$2,161,000 from $861,000 for the 1999 quarter. The increase in net income is
primarily due to the increase in sales and gross margin from the Company's
thermal management business. Net income does not include a tax provision due to
the Company's utilization of its net operating loss carryforwards.
Income from thermal management operations for the second quarter of fiscal
2000, before the allocation of Alpha corporate expenses ("corporate
allocation"), was $2,387,000 compared to $1,339,000 for the fiscal 1999 quarter.
Results from operations increased primarily due to an increase in sales and
gross margin. Income from operations for the connector products segment, before
corporate allocation, for the second quarter of fiscal 2000 was $231,000
compared to $222,000 for the 1999 quarter. Income from the Company's subsystems
operation for the second quarter of fiscal 2000, before corporate allocation,
was $119,000 compared to $92,000 for the second quarter of fiscal 1999.
Sales. Sales for the second quarter of fiscal 2000 increased 11.4% to
$18,001,000 from $16,164,000 for the same period of fiscal 1999, due to the
18.2% increase in thermal management sales to $14,057,000 from $11,897,000.
Management believes that the increase in sales is due to the Company's ability
to serve its thermal management customers including improvements in customer
service, shorter lead times, and better on-time delivery.
Connector sales were $2,384,000 during the second quarter of fiscal 2000
compared to $2,770,000 during the prior fiscal year second quarter. Management
believes that the 13.9% decrease during fiscal 2000 was due to the weakness in
the military-aerospace and commercial aircraft markets. Subsystems sales were
$1,560,000 during the second quarter of fiscal 2000 compared to $1,497,000
during the prior fiscal year's second quarter.
Gross Profit. The Company's overall gross profit as a percentage of total
revenues ("gross profit percentage") for the second quarter of fiscal 2000 was
29.0% compared to 25.7% for the 1999 fiscal quarter. The thermal management
segment's gross profit percentage increased to 29.0% in the second quarter of
fiscal 2000 from 25.1% for the fiscal 1999 quarter as a result of the increase
in sales and the effects of programs to forgo lower margin sales, enhance
productivity and lower costs. In addition, the Company continues to focus on
manufacturing efficiencies. In the second quarter of fiscal 1999, the thermal
10
<PAGE>
management segment's cost of sales included $169,000 in severance and moving
costs which had the effect of reducing the gross profit percentage.
The connector segment's gross profit percentage increased to 32.0% for the
second quarter of fiscal 2000 from 28.5% for the 1999 quarter. This increase
was due to the effects of programs to enhance productivity and lower costs. The
gross profit percentage at the Company's subsystems operation was 24.3% for the
second quarter of fiscal 2000 compared to 25.1% for the 1999 quarter.
Interest and Other Income (Net). Interest expense was $199,000 and
$231,000 for the second quarter of fiscal 2000 and 1999, respectively. This
decrease was due to a decrease in the average outstanding borrowing base
partially offset by an increase in the effective interest rate paid on
outstanding debt. The effective interest rate increased due to the market
increase in the base rate used to calculate the interest charged on the
Company's debt (See "Liquidity and Capital Resources" below). The Company
recorded other income (net) for the second quarter of fiscal 2000 of $169,000
which was primarily a result of the reversal of a $160,000 accrual expensed in
prior periods for the environmental litigation at the Company's Lockhart
facility. In April 2000, the parties reached a settlement under which the suit
was dismissed.
Six Months to Six Months Comparison
-----------------------------------
Net Income. Net income for the first six months of fiscal 2000 was
$3,776,000 compared to net income of $1,365,000 for the first six months of
fiscal 1999. The increase in net income is primarily due to the increase in
sales and gross margin from the Company's thermal management business. Net
income does not include a tax provision due to the Company's net operating loss
carryforwards.
Income from thermal management operations for the first six months of
fiscal 2000, before the allocation of Alpha corporate expenses ("corporate
allocation"), was $4,325,000 compared to $2,306,000 for the 1999 period. This
increase was primarily due to an increase in sales and gross margin. Income
from operations for the connector products segment for the first six months of
fiscal 2000, before corporate allocation, was $455,000 compared to $597,000 for
the first six months of fiscal 1999. The decrease in income was primarily due to
lower sales, which is discussed further below. Income from operations from the
Company's subsystems business for the first six months of fiscal 2000, before
corporate allocation, was $302,000 compared to $194,000 for the first six months
of fiscal 1999. The increase was primarily due to an increase in gross profit
margin in the first quarter of fiscal 2000.
11
<PAGE>
Sales. The Company's sales for the first six months of fiscal 2000
increased to $34,863,000 from $32,475,000 for the same period of fiscal 1999.
Thermal management sales increased 15.5% to $27,242,000 for the first half of
fiscal 2000 from $23,596,000 for the first six months of fiscal 1999.
Management believes that the increase in sales is due to the Company's ability
to serve its thermal management customers including improvements in customer
service, shorter lead times, and better on-time delivery.
Connector sales were $4,579,000 during the first six months of fiscal 2000
compared to $5,768,000 during the prior fiscal year period. Management believes
that the 20.6% decrease during fiscal 2000 was due to the weakness in the
military-aerospace and commercial aircraft markets. Subsystems sales were
$3,042,000 during the first six months of fiscal 2000 compared to $3,111,000
during the prior fiscal year's period.
Gross Profit. The Company's overall gross profit as a percentage of total
revenues ("gross profit percentage") for the first six months of fiscal 2000 was
28.8% compared to 24.8% for the 1999 period. The thermal management segment's
gross profit percentage was 28.4% and 23.5% for the first six months of fiscal
2000 and 1999, respectively. This increase was due to the effects of programs to
forgo lower margin sales, enhance productivity and lower costs. In addition, the
Company has continued to focus on manufacturing efficiencies. In the second
quarter of fiscal 1999, the thermal management segment's cost of sales included
$169,000 in severance and moving costs, which had the effect of reducing the
gross profit percentage.
The connector products segment's gross profit percentage increased to 32.2%
for the first six months of fiscal 2000 from 30.4% for the 1999 period. This
increase was due to the effects of programs to enhance productivity and lower
costs. The gross profit percentage at the Company's subsystems operation
increased to 27.4% for the first six months of fiscal 2000 from 24.4% for the
1999 period. This increase was due to a lower material percentage for the mix of
product shipped in the first quarter of fiscal 2000 verses the mix of product
shipped in the first quarter of 1999.
Selling, General and Administrative Expense. Selling, general and
administrative expenses for the six months of fiscal 2000 were $5,569,000, or
16.0% of sales, compared to $5,788,000, or 17.8% of sales, for the 1999 period
which included $180,000 accrued in the first quarter of 1999 for the
cancellation of a contractual obligation. SG&A expenses (excluding the $180,000
accrual in fiscal 1999) were essentially flat. SG&A expenses (excluding the
additional accrual in 1999), as a percentage of sales, decreased due to higher
sales volume (without additional SG&A expenses) in the first half of 2000 as
compared to the prior year.
Interest and Other Income (Net). Interest expense was $414,000 and
$500,000 for the first six months of fiscal 2000 and 1999, respectively. This
decrease was due to a decrease in the average outstanding borrowing base
partially offset by an increase in the effective interest rate paid on
outstanding
12
<PAGE>
debt. The effective interest rate increased due to the market increase in the
base rate used to calculate the interest charged on the Company's debt (See
"Liquidity and Capital Resources" below). The Company recorded other income
(net) for the first six months of fiscal 2000 of $151,000 which was primarily a
result of a $160,000 reversal of the accrual expensed in prior periods for
environmental litigation related to the Company's Lockhart facility. In April
2000, the parties reached a settlement under which the suit was dismissed.
Liquidity and Capital Resources
On April 30, 2000, the Company had cash of approximately $274,000 compared
to $354,000 on October 31, 1999. The Company is able to operate with a low level
of cash because of its ability to draw on its revolving credit line daily. For
the six months ended April 30, 2000, $2,882,000 in cash was provided by
operating activities. During the first half of fiscal 2000, $683,000 was used in
investing activities for capital equipment purchases which were made to improve
manufacturing capabilities and to refurbish and upgrade existing machinery. The
Company used $2,443,000 to reduce debt for first six months of fiscal 2000.
Effective April 16, 1999, the Company and its subsidiaries (hereinafter
referred to as "Borrowers") became parties to a loan and security agreement (the
"Agreement") with a commercial lender. The Agreement provides for revolving
loans of up to $10,500,000, a $5,400,000 term note payable monthly over five
years, and an equipment acquisition facility of up to $3,000,000. The advances
on the revolving loans are based on the eligible accounts receivable and
inventories and the advances on the equipment acquisition facility may be used
only for the purpose of funding capital equipment purchases by the Borrowers.
The maturity date of the Agreement is April 15, 2004.
On April 30, 2000, $967,000 was outstanding on the revolving credit
facility with interest accruing at the prime rate announced by First Union
National Bank plus .25% (9.25% per annum on April 30, 2000). There is an unused
line fee equal to .5% per annum on the difference between $10,500,000 and the
average daily outstanding principal balance of Revolving Loans during each month
payable monthly in arrears on the first day of each month. The $5,400,000 term
note accrues interest at the prime rate announced by First Union National Bank
plus .25% (9.25% per annum on April 30, 2000) and is payable in fifty-nine (59)
equal monthly installments of $90,000 beginning April 30, 1999 and a final
installment equal to all unpaid principal on March 31, 2004, together, in each
instance, with interest thereon to the date of payment. On April 30, 2000,
$4,320,000 was outstanding on the term loan and there were no borrowings on the
equipment acquisition facility. The obligations under the Agreement are secured
by a first lien on and assignment of all of the assets of the Borrowers which in
aggregate total $35,327,000 on April 30, 2000.
Working capital (which excludes amounts due under the revolving credit
facility) on April 30, 2000 was $11,569,000 compared to $9,098,000 on October
31, 1999. The increase in working capital during the first six months of fiscal
2000, primarily due to an increase in accounts receivable and a decrease in
short
13
<PAGE>
term liabilities, was financed by the Company's revolving credit line. The
Company believes its currently available cash, anticipated cash flow from
operations and availability under its credit facility is sufficient to fund its
operations in the near-term.
Forward Leading Statements
In conjunction with the provisions of the "Safe Harbor" section of the Private
Securities Litigation Reform Act of 1995, this quarterly report Form 10-Q may
contain forward-looking statements pertaining to future anticipated projected
plans, performance and developments, as well as other statements relating to
future operations. All such forward-looking statements are necessarily only
estimates of future results and there can be no assurance that actual results
will not materially differ from expectations. Further information on potential
factors which could affect the Company, including, but not limited to, the
impact of competitive products and pricing, product demand and market
acceptance, new product development, reliance on key strategic alliances,
availability of raw materials, fluctuations in operating results, ability to
retain and attract personnel including management and other risks detailed
herein and in the Company's other filings with the Securities and Exchange
Commission.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Litigation Dismissed April 2000. During 1997, Aerospace Aluminum Heat
-------------------------------
Treating, Inc. ("AAHT") instituted an action in the United States District Court
for the Central District of California against Soco-Lynch Corporation and the
Company's Lockhart subsidiary. AAHT operates a facility neighboring Lockhart's
facility in Paramount, California. The complaint alleged that Lockhart released
certain hazardous chemicals into the ground, and that some of these chemicals
have contaminated the ground and/or groundwater below the AAHT facility and an
adjoining property. The complaint also alleged that Soco-Lynch is a supplier of
industrial chemicals, and that Soco-Lynch spilled certain chemicals at the AAHT
facility.
Testing was conducted and led to results that, in the opinion of Lockhart's
expert consultants, suggest that contamination flowed from the AAHT property to
the Lockhart property, rather than the other way around. In April 2000, the
parties reached a settlement under which the suit was dismissed without any
payment by the Company.
There are no material pending legal proceedings against the Company and, to
the Company's knowledge, no such proceedings are threatened.
14
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of stockholders held on April 18, 2000 in
New York, New York the stockholders elected the following management nominees:
Nominee Votes For Votes Withheld
------- --------- --------------
Marshall D. Butler 6,331,766 2,600
Lawrence Butler 6,331,766 2,600
Donald K. Grierson 6,331,766 2,600
Frederic A. Heim 6,330,566 3,800
Dr. Kenneth W. Rind 6,331,766 2,600
Robert C. Streiter 6,331,766 2,600
15
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
10.19 Amendment to Lease between Cummings Properties Management,
Inc. and Wakefield Engineering, Inc.
11.1 Statement re Computation of Per Share Earnings for the quarters
and six months ended May 2, 1999 and April 30, 2000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
There were no reports for Form 8-K filed by the Company during the quarter
ended April 30, 2000.
16
<PAGE>
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.
Alpha Technologies Group, Inc.
--------------------------------------
(Registrant)
Date: June 6, 2000 By: /s/ Lawrence Butler
----------------------------- ------------------------------------
Lawrence Butler
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: June 6, 2000 By: /s/ Johnny J. Blanchard
------------------------------ ------------------------------------
Johnny J. Blanchard
Chief Financial Officer
(Principal Financial and Accounting
Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
------- --------
10.19 Amendment to Lease between Cummings Properties Management,
Inc. and Wakefield Engineering, Inc.
11.1 Statement re Computation of Per Share Earnings for the quarters
and six months ended May 2, 1999 and April 30, 2000.
27.1 Financial Data Schedule
18
