<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: SEPTEMBER 30, 1995
Commission File Number: 0-11309
GALILEO ELECTRO-OPTICS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 04-2526583
(State of Incorporation) (I.R.S. Employer Identification No.)
GALILEO PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: (508) 347-9191
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
- --------------------------------------
(Title of class)
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
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of December 15, 1995, 6,506,932 shares of the Registrant's Common
Stock were outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant on such date was $65,069,320.
Documents incorporated by reference:
Portions of Registrant's proxy statement dated December 11, 1995 are
incorporated by reference into Part III of this report.
The Index to Exhibits is located on Page 39.
PAGE 1 OF 42
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GALILEO ELECTRO-OPTICS CORPORATION
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PART I
Item 1. BUSINESS
--------
General
-------
Galileo Electro-Optics Corporation (the "Company") was
incorporated in Delaware in 1973 as the successor to a business
which was founded in 1959.
Since its formation in 1973, the Company has been engaged in
developing, manufacturing and marketing fiberoptic and
electro-optic components which transmit, sense or intensify light
or images and a variety of components for office copiers. In
fiscal year 1995, the Company's products were sold primarily to
original equipment manufacturers (OEMs) for use in electronic
imaging, scientific, analytical, office products and medical
applications (approximately 95% of sales) and in military night
vision devices (approximately 5% of sales). The Company's
capabilities in the formulation of specialty glass and experience
in fiberoptic and electro-optic technology are fundamental to the
development and manufacture of its products. Although the Company
purchases a large quantity of its glass requirements, it also owns
and operates a specialty glass manufacturing plant which enables it
to develop experimental glass formulations and respond quickly to
unique customer requirements.
The Company operates in a single industry segment. Prior to
fiscal year 1995, the Company had segregated its operations into
five product lines for marketing and manufacturing purposes. As a
result of the sale of a substantial portion of the Fused Fiberoptic
Products business in fiscal year 1994 as described further in the
Management's Discussion and Analysis of Financial Condition and
Results of Operations under Item 7 of this report, the
Electro-Optic Components business was eliminated and the Company's
businesses were classified into the following four product lines in
fiscal year 1995.
Office Products
---------------
Sales of Office Products accounted for 54%, 49% and 40% of the
Company's net sales for fiscal years 1995, 1994 and 1993,
respectively. These products are used in a variety of applications
to improve the reliability and performance of high-volume,
high-speed copiers and laser printers as well as high-performance
desk-top copiers and ion deposition printers. Xerox Corporation is
the principal customer for these products.
The Company's highest volume product is the dicorotron, for
which it is currently the sole source of supply to Xerox. The
dicorotron, which utilizes the Company's proprietary glass-coated
wire technology, generates ions which charge a copier's
photoreceptor during the image transfer process. The quality,
cost-effectiveness, reliability and extended product life of the
dicorotron have been key to the success of the product. The
Company also supplies other electromechanical assemblies to Xerox
which are used in a variety of copiers. The majority of the Office
Products sold by the Company to Xerox are used as replacement units
in existing copiers.
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GALILEO ELECTRO-OPTICS CORPORATION
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Scientific Detector Products
----------------------------
Sales of Scientific Detector Products accounted for 34%, 35%
and 34% of the Company's net sales for fiscal years 1995, 1994 and
1993, respectively. The principal products within Scientific Detector
Products are the following:
SINGLE CHANNEL DETECTORS are small glass tubes with
semiconducting inner surfaces which emit electrons when struck
by sub-atomic particles, photons or other electrons. This
electron emission process is repeated many times along the
length of the tube in a multiplying sequence, whereby one
electron, ion or photon entering at one end of the tube
generates a pulse containing millions of electrons at the other
end of the tube, which pulse can easily be measured as it
emerges. The major application of this product is as the
detecting element in a mass spectrometer. Mass spectrometers
identify the atoms of unknown elements by determining atomic
mass through the measurement of velocity or path of movement
and are used in such industries as biotechnology and
pharmaceutical as well as in drug screening applications. A
detector recognizes the time or the place at which an atom
exits from the vacuum chamber of the spectrometer and thereby
permits the identification of the unknown atom.
The Company's Channeltron[REGISTERED TRADEMARK] and
Spiraltron[TRADEMARK] Single Channel Detectors have replaced
the complex multi-electrode structure of older detectors and
require only a single two-terminal power supply. The
simplicity of the Company's Detectors, their mechanical
ruggedness and their resistance to contamination in service
have led to their adoption as the preferred detector in mass
spectrometers, ultraviolet spectrometers and in a growing range
of surface-scanning instruments. The Company's Detectors are
used by all major mass spectrometer manufacturers, and, in many
cases, the Company is the single source.
DETECTOR ASSEMBLIES AND SYSTEMS consist of multichannel
electron multipliers, which multiply electrons that enter the
channels of the device, mated with fiberoptic, mechanical and
electronic components. These value-added devices are used as
ion, X-ray or particle detectors in scientific instrumentation.
The Company provides these detector assemblies primarily to the
major manufacturers of analytical instrumentation and to the
research community.
MICROCHANNEL PLATES (MCPs) are multichannel electron
multipliers. The initial manufacturing process of MCPs is
similar to that of a Fused Fiberoptic Product in that a small
wafer-thin fused fiberoptic disc is produced. However, MCPs
are further processed by etching out the core of each fiber to
produce hollow channels, approximately 10 microns in diameter,
the surfaces of which are semiconducting. Each channel serves
as a microscopic single channel electron multiplier,
multiplying the electrons that enter the channel in order to
intensify faint electron images.
The Company manufactures an improved, long-life MCP
with enhanced gain stability, resulting in improved brightness
and a significantly longer life expectancy than other MCPs
available in the marketplace. The Company's MCPs are used
primarily in military night vision devices as an integral part
of the image intensification process. MCPs are also employed
in electron and field-ion microscopes and in high-speed
oscilloscopes.
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GALILEO ELECTRO-OPTICS CORPORATION
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Remote Sensor Products
----------------------
Sales of Remote Sensor Products accounted for 3%, 2% and 3% of
the Company's net sales for fiscal years 1995, 1994 and 1993,
respectively. Remote Sensor Products provide technically advanced,
cost-effective solutions for industrial process monitoring with
on-line, remote, infrared spectroscopy systems. Applications are found
in markets where cost controls and manufacturing yields are critical to
profitability, including the chemical, food, beverage, petrochemical,
semiconductor, environmental, textile and pharmaceutical industries.
The Company's infrared transmitting fiberoptic cables are
integrated with on-line sensors which identify a material's chemical
signature and transmit that data to a spectrometer for analysis.
Applications for this technology include raw materials screening,
moisture content and octane measurements, and the monitoring of a
variety of manufacturing processes. The Company's IR Link[TRADEMARK]
Systems, a family of integrated sensors and accessories, are valuable
for monitoring quality and also reduce costs by moving process analysis
from the laboratory directly to the manufacturing line. IR Link
Multi-Channel Systems allow up to seven sensing points to be monitored
using just one analytical instrument, resulting in process analysis
systems which provide the lowest cost-per-measurement.
The Company also manufactures several different probes, sensors
or cells, depending upon the specific application. High-pressure liquid
and gas cells are designed to monitor heated and pressurized liquid and
gas side-streams. Web sensors monitor materials, such as films,
plastics and polymers, while immersible transmission probes can be
installed on-line or dipped into liquid samples or liquid streams, and
diffuse reflectance systems analyze samples such as powders, slurries
and textiles. These accessories help provide immediate, analytical
feedback which enables customers to make instantaneous adjustments to
their processes and allows them to reduce costs, improve quality and
raise productivity.
Medical Products
----------------
Sales of Medical Products accounted for 9%, 14% and 23% of the
Company's net sales for fiscal years 1995, 1994 and 1993, respectively.
The principal products within Medical Products are the following:
ENDOSCOPES are used for minimally invasive surgery and
use a combination of glass rods and plastic lenses resulting in
a high-quality, low-cost device in single-use or limited reuse
applications for arthroscopic surgery. Other endoscopes in
prototype development use the Company's patented Fractal
Fiberoptics[TRADEMARK] architecture and Integral Contrast
Enhancement, ICE[TRADEMARK], technology to create fiberoptics
that are defect-free, producing clear, sharp images for
the surgeon.
As a result of improvements in the manufacturing
process, the Company has developed the Galaxy endoscope which
incorporates improvements to the Company's original disposable
endoscope. These improvements facilitate the use of this
product in the limited reuse and reusable endoscope markets.
The Company currently has permission from the FDA to market
several of its endoscopes -- creating the opportunity to offer
products directly to end-users and speed time-to-market for its
OEM partners.
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GALILEO ELECTRO-OPTICS CORPORATION
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FUSED FIBEROPTIC PRODUCTS are formed by fusing
large numbers of optical fibers together to form a rigid
structure containing several million fibers per square inch.
These products have the unique characteristic of transferring
an image on one surface to the opposite surface with minimal
loss of resolution. The most common form of these products is
known as a fiberoptic faceplate, a circular or rectangular
optical plate made in varying sizes and thicknesses and
finished to optical specifications. Fiberoptic faceplates are
frequently used in electron tubes, particularly in military
night vision image intensifier tubes, to preserve the detail of
optical images transmitted through them. In specialty camera
applications, fiberoptic faceplates are used to extend the
focal plane of a camera to accommodate different films and
Polaroid film attachments.
Since the sale of a substantial portion of the
Fused Fiberoptic Products business in fiscal year 1994, the
Company has been phasing down this product line and expects to
stop manufacturing Fused Fiberoptic Products early in fiscal
year 1996.
FLEXIBLE FIBEROPTIC PRODUCTS are used to transmit light
("lightguides") or images ("imagescopes") in a flexible format
and employ much longer fibers than do Fused Fiberoptic
Products. Lightguides are used to supply remote illumination
in flexible probes in a variety of lengths and formats
depending upon customer requirements. Lightguides can also be
used as sensors to detect signals, position, dimensions, images
and many other physical phenomena. The applications for
lightguides and sensors range from counting, positioning and
dimensional measurements to laser delivery systems and remote
spectroscopy. A remote spectroscopy system makes it possible
to take a measurement of chemical constituents of a sample
on-line and on a real-time basis using fiberoptic cables to
transfer the information to the spectrometer. Outside the
visible light spectrum, lightguides fabricated from ultraviolet
transmitting glasses are used for the curing of resins.
Imagescopes are image transfer devices capable of monitoring
remote events and inspecting otherwise inaccessible or
hazardous areas. Imagescopes are used in a variety of
applications such as tank sights, periscopes and industrial
endoscopes.
Research and New Product Development
------------------------------------
The Company's scientists and engineers conduct research and
development in glass, fiberoptic and electro-optic technologies to
develop new products and to enhance and expand applications for
existing products. The Company's expenditures for research and
development were approximately $3,054,000, $3,685,000 and $4,764,000 in
fiscal years 1995, 1994 and 1993, respectively.
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GALILEO ELECTRO-OPTICS CORPORATION
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Current projects include the following: fibers usable as
lasers and optical amplifiers, fiberoptic devices for medical imaging
and laser power delivery, systems and devices for infrared fiber-based
process remote spectroscopy, improved Channeltrons[REGISTERED
TRADEMARK], MCP-based devices for medical imaging and astrophysics
research and advanced detectors for scientific instruments. In
addition, programs are continuing to improve the manufacturing
efficiency as well as the quality of all of the Company's products.
Marketing
---------
The Company's strategy is to supply technologically advanced
fiberoptic and electro-optic components and electromechanical
assemblies. Customers include large OEMs and end-users of products
produced by such OEMs. The Company is continuing to broaden and
solidify its technical relationship with its customers. Marketing and
sales activities are focused on technical support of existing products,
development of future products and technologies, and on providing
cost-effective solutions to complex problems.
Customers
---------
Sales to Xerox Corporation were 51.9% of net sales in fiscal
year 1995. In total, the Company's top twenty customers accounted for
80.5% of sales.
Export Sales
------------
Export sales to foreign customers amounted to approximately
$6,284,000, $5,060,000 and $5,857,000 in fiscal years 1995, 1994 and
1993, respectively, principally in Europe and Japan. In addition,
sales to domestic affiliates of foreign customers and to domestic
customers, both for export by the purchaser, amounted to approximately
$325,000, $837,000 and $710,000 in fiscal years 1995, 1994 and 1993,
respectively.
Raw Materials and Supplies
--------------------------
The principal raw materials and supplies used by the Company in
the manufacture of its products are glass tubing and glass core bars,
chemicals for glass manufacture, and purchased parts for commercial
assemblies. The Company has not experienced any shortages in the past
and does not anticipate any future shortages or unavailability of these
items. Most of these items are available from alternative sources. In
order to maintain a competitive advantage in quality and price, the
Company has determined that it is economically attractive to purchase
high quality optical glass from a major domestic source and is
purchasing the majority of its glass from this supplier. The Company
has maintained its own in-house capability to produce these glasses and
other lower volume compositions and to facilitate research and
development of new glasses.
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GALILEO ELECTRO-OPTICS CORPORATION
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Patents
-------
While the Company possesses many patents which relate to its
technology, it does not believe that the protection offered by these
patents is of material importance to the success of its business. The
Company believes that its success depends primarily on its development,
manufacturing and marketing skills.
Backlog
-------
At September 30, 1995, the sales backlog was $8,552,000, all of
which is scheduled for shipment during fiscal year 1996.
Competition
-----------
The Company's competitive position depends primarily upon the
technological development of its products, as well as service, quality
and price. Some of the Company's competitors are divisions of major
corporations, including Schott Glaswerke and Litton Industries, Inc.,
which have greater financial resources than the Company.
Employees
---------
As of September 30, 1995, the Company had 204 full-time
employees, none of whom is a party to a collective bargaining agreement
with the Company. Of these employees, 166 were engaged in direct
manufacturing, maintenance, engineering, quality assurance and related
manufacturing support functions, 14 in sales and marketing and 24 in
administration and finance. The Company believes that it has good
relations with its employees.
Item 2. PROPERTIES
----------
The Company's corporate headquarters are located in Sturbridge,
Massachusetts, where the Company owns three buildings, with a total of
197,000 square feet on a 56 acre tract. Two of these buildings house a
glass plant, draw towers, clean rooms, furnaces and ovens, extruding,
etching, grinding and polishing equipment, and assembly, research, test
and inspection equipment principally for manufacturing Office Products,
Medical Products and Remote Sensor Products. The third building is used
primarily for manufacturing Scientific Detector Products.
In Forest, Virginia, the Company owns a 61,000 square foot
manufacturing facility on 51 acres of land which it purchased in fiscal
year 1988. During the fourth quarter of fiscal year 1993, the Company
decided to consolidate its manufacturing operations in Sturbridge,
Massachusetts. This consolidation was completed in the first half of
fiscal year 1994, and the Forest, Virginia, facility has been for sale
since that time. The Company is in the process of finalizing
negotiations for the sale of the facility, and it expects the sale to
be completed early in fiscal year 1996.
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GALILEO ELECTRO-OPTICS CORPORATION
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Item 3. LEGAL PROCEEDINGS
-----------------
There are no material pending legal proceedings outside the
ordinary course of business to which the Company is a party or to which
any of its property is subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted during the fourth quarter of
fiscal year 1995 to a vote of the Company's security holders, through
the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following table indicates the names and ages of all executive
officers of the Company and the offices held by each:
<TABLE>
<CAPTION>
Name Age Officer
---- --- -------
<S> <C> <C>
William T. Hanley 48 President and Chief Executive Officer
and Director
Josef W. Rokus 53 Vice President, Finance and
Chief Financial Officer and Corporate
Secretary
David W. Skiles 49 Vice President, Sales and Marketing
</TABLE>
Each officer serves for a term extending until the meeting of directors
following the next annual meeting of shareholders and until a successor is
elected and qualified or until earlier resignation or removal.
Mr. Hanley holds a B.S. degree in Glass Science from Alfred
University and an A.S. degree from Corning Community College. He
joined Galileo in 1982 as Vice President of Manufacturing, was
subsequently appointed Executive Vice President and Chief Operating
Officer prior to being appointed President, Chief Executive Officer and
Director in 1984. Prior experience includes positions as Manufacturing
Manager, Fiber Optics for Times Fiber Communications, Inc., a
manufacturer of fiberoptic products, and key managerial positions with
Corning Incorporated, a specialty glass manufacturer.
Mr. Rokus holds an M.B.A. in Finance from The Tuck School,
Dartmouth College and an M.S. and B.S. in Electrical Engineering from
the University of Illinois. Mr. Rokus joined Galileo as Vice
President, Manufacturing in 1984, was appointed Vice President,
Corporate Development in 1986 and Vice President, Finance in 1988. He
was named Chief Financial Officer in 1990 and Corporate Secretary in
1993. Prior experience includes management and controller positions
with Corning Incorporated, a specialty glass manufacturer.
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GALILEO ELECTRO-OPTICS CORPORATION
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Mr. Skiles holds a B.S. in Chemistry from Frostburg State
College. Prior to joining Galileo in 1992, Mr. Skiles was Director of
Sales for the MilliGen Division of Millipore Corp., a manufacturer of
biotechnology products from 1988 to 1991, and prior to that he was
Vice President, Marketing, ESA, Inc., a manufacturer of analytical and
clinical instruments and supplies, and National Sales Manager for
Waters Associates, Inc., a manufacturer of chromotography instruments
and supplies.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
-----------------------------------------------------------------
Matters
-------
The Company's Common Stock is traded in the over the counter
market, and prices are quoted on the Nasdaq National Market System
under the symbol GAEO. The following table sets forth, for the periods
indicated, the high and low sale prices for the Common Stock as
reported by Nasdaq.
<TABLE>
<CAPTION>
Fiscal 1994 Low High
----------- --- ----
<S> <C> <C>
1st Quarter $3-1/2 $5
2nd Quarter 3-5/8 4-1/2
3rd Quarter 3-1/8 4-1/8
4th Quarter 2-3/4 3-7/8
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1995 Low High
----------- --- ----
<S> <C> <C>
1st Quarter $3-1/8 $4-7/8
2nd Quarter 3-3/4 5-3/4
3rd Quarter 4-1/4 8
4th Quarter 6-7/8 8-1/2
</TABLE>
The Company had 508 shareholders of record as of December 15, 1995.
Dividend Policy
---------------
The Company has not paid any dividends since 1979. The
Company's policy is to retain earnings to provide funds for the
operation and expansion of its business, and it does not anticipate
paying cash dividends in the foreseeable future.
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GALILEO ELECTRO-OPTICS CORPORATION
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Item 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
Years ended September 30,
(Dollars in thousands, except per share data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $34,043 $30,241 $ 34,307 $32,886 $35,968
Operating profit (loss) 836 (1,296) (10,512) (1,911) (4,332)
Other income, net 356 244 211 327 395
----------------------------------------------------------------------
Income (loss) before income taxes and
cumulative effect of a change in accounting
for postretirement benefits other than pensions 1,192 (1,052) (10,301) (1,584) (3,937)
Provision (benefit) for income taxes 82 69 (469) (542) (1,358)
----------------------------------------------------------------------
Income (loss) before cumulative effect of a
change in accounting for postretirement
benefits other than pensions 1,110 (1,121) (9,832) (1,042) (2,579)
Cumulative effect of a change in accounting for
postretirement benefits other than pensions -- -- (430) -- --
----------------------------------------------------------------------
Net income (loss) $ 1,110 $(1,121) $(10,262) $(1,042) $(2,579)
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common and common
equivalent share outstanding:
Before cumulative effect of a change in
accounting for postretirement benefits
other than pensions $ .17 $ (.17) $ (1.53) $ (.16) $ (.41)
----------------------------------------------------------------------
Cumulative effect of a change in accounting
for postretirement benefits other than
pensions -- -- (.07) -- --
----------------------------------------------------------------------
Net income (loss) $ .17 $ (.17) $ (1.60) $ (.16) $ (.41)
- ------------------------------------------------------------------------------------------------------------------------
Weighted average common and common
equivalent shares outstanding 6,507,603 6,473,654 6,434,361 6,360,434 6,336,746
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
As of September 30,
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $18,744 $12,969 $11,271 $16,263 $15,120
Property, plant and equipment, net 19,635 21,693 24,900 31,529 33,664
Total assets 45,163 43,621 47,915 54,127 54,262
Shareholders' equity 39,774 38,615 39,736 49,523 50,429
</TABLE>
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GALILEO ELECTRO-OPTICS CORPORATION
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
---------------------
As an aid to understanding the Company's operating results, the following table
summarizes the percentage relationships to net sales of income and expense
items included in the Consolidated Statements of Operations for 1995, 1994 and
1993 and the changes in those items from the respective prior years.
<TABLE>
<CAPTION>
Percentage
Income and Increase (Decrease)
Expense Items as a Years Ended
Percentage of Sales September 30,
1994 1993 1992
to to to
1995 1994 1993 Income and Expense Items 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
100.0% 100.0% 100.0% Net sales 12.6% (11.9)% 4.3%
72.4 75.0 79.2 Cost of sales 8.8 (16.5) 17.7
- ------------------------------------------------------------------------------------------------------------------------------
27.6 25.0 20.8 Gross profit 24.5 5.7 (27.2)
10.2 12.7 15.6 Engingeering expense (8.9) (28.7) (8.7)
14.9 16.6 17.9 Selling and administrative expenses 1.2 (18.3) 5.3
-- -- 17.9 Restructuring cost -- * *
- ------------------------------------------------------------------------------------------------------------------------------
2.5 (4.3) (30.6) Operating profit (loss) * * *
1.0 .8 .6 Other income, net 45.9 15.6 (35.5)
- ------------------------------------------------------------------------------------------------------------------------------
3.5 (3.5) (30.0) Income (loss) before income taxes * * *
.2 .2 (1.4) Provision (benefit) for income taxes 18.8 * *
- ------------------------------------------------------------------------------------------------------------------------------
3.3 (3.7) (28.6) Net income (loss) before effect of * * *
accounting change for postretirement
benefits other than pensions
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
*Not meaningful
</TABLE>
RESULTS OF OPERATIONS
Fiscal Year 1995 Compared to Fiscal Year 1994
- ---------------------------------------------
Net sales in fiscal year 1995 of $34,043,000 increased 13% from sales of
$30,241,000 in fiscal year 1994 with sales volume increasing in three of the
Company's four businesses. Commercial sales increased 18% from fiscal year 1994
and set a new record of $32,337,000, while military sales declined 37%.
Military sales represented 5% of total sales in 1995 versus 9% of total sales in
1994. Operating profit for 1995 amounted to $836,000 versus an operating loss
of $1,296,000 in 1994 with a net profit of $1,110,000, or $.17 per share, as
compared to a net loss of $1,121,000, or $.17 per share, in 1994.
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GALILEO ELECTRO-OPTICS CORPORATION
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The improvement in profitability was the result of higher sales volume in most
of the Company's businesses, a favorable sales mix, selective price increases,
the elimination of certain unprofitable product lines and the reduction of
fixed costs, primarily due to the consolidation of the Company's manufacturing
operations in fiscal year 1994.
In the Office Products business, sales increased 24% from the previous year
and reached a new high of $18,226,000. These products include dicorotron
glass-coated wire assemblies, which utilize the Company's proprietary
technology to generate ions which charge the photoreceptor in office copiers,
as well as a variety of other components for copiers and laser and ion
deposition printers. Most Office Products sales are for the replacement
market. Xerox Corporation is the largest customer for these products as well
as the Company's largest customer accounting for 52% of the Company's total
revenues in 1995. Although the Company is currently the sole-source supplier
of dicorotrons to Xerox Corporation, there is no long-term commitment by Xerox
to purchase these components from the Company and no assurance that Xerox will
not develop alternative sources of supply in the future. Demand for these
products continued to be strong in fiscal year 1995 as they were designed into
new products and the installed base of office machines continued to grow. In
addition, moderate price increases were implemented for selective products, and
several products were phased out because they did not meet the Company's
profitability criteria. In fiscal year 1995, the Company established three new
customers for its Office Products and started to explore new applications for
its glass-coated wire technology.
Sales of Scientific Detector Products also increased from fiscal year 1994,
being up $1,155,000 or 11%. This business includes Channeltron single-channel
detectors, used primarily in mass spectrometers, microchannel plates and
microchannel plate-based detectors and assemblies. Shipments of Channeltrons
and microchannel plates were up 15% and 14%, respectively, from the previous
year while sales of microchannel plate assemblies were essentially flat.
Channeltron shipments increased due in part to strong demand for detectors by
the semiconductor industry and the success of a new mass spectrometer detector.
Also, billings for engineering services were up 10% as the Company completed
its two-year, $1.9 million contract it was awarded in 1993 by the National
Institute of Standards and Technology to develop new fabrication methods for
microchannel plates. The product mix for this business was favorable due to
higher sales of Channeltrons and microchannel plates and the above average
incremental profitability associated with these products.
Sales of Remote Sensor Products were up $410,000 or 65% in fiscal year 1995
versus 1994. This business includes fiberoptic cables, sensors and systems for
a variety of industrial process and telecommunications applications. Several
new products were introduced to the market place this year which contributed to
the higher sales, with the Hand-Held Diffuse Reflectance Probe, which is
designed to perform incoming inspection of raw materials, being particularly
well received. Good progress was also made in fiscal year 1995 in the
development of the Fluorolase technology for use as fiber amplifiers in
telecommunications applications. This business, which is currently the
smallest of the Company's four businesses, is a developing business and was
unprofitable at the operating profit level.
The Medical business includes fused products, flexible fiberoptic
products and medical endoscopes. In fiscal year 1994, fused products and
flexible products were part of the Electro-Optic Components business which was
merged into the Company's present four businesses. In fiscal year 1995, sales
of fused products declined 53% from the previous year due to the sale of a
substantial portion of that business in fiscal year 1994 while shipments of
flexible fiberoptics increased 40% from 1994.
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GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
Sales of medical endoscopes for minimally invasive surgery applications were
essentially unchanged from the 1994 level. The Company continued to improve
its existing products and has been developing several low-cost, high-quality,
single-use and limited re-use medical endoscopes which have successfully
undergone clinical trials and are now being actively marketed through medical
instrument distributors in the United States as well as abroad. Significant
progress was made in the development of the Company's Fractal Fiberoptics
imaging conduit which is being designed into small diameter, low-cost
endoscopes. Sales of medical endoscopes constituted a small percentage of the
Company's sales in fiscal year 1995, but the Company expects these sales to
grow in fiscal year 1996 and beyond. The Company's medical endoscopes business
is a developing business and is not yet profitable at the operating profit
level.
The consolidation of manufacturing operations, which involved the
relocation of the Medical, Office and Flexible Fiberoptic products from Forest,
Virginia to Sturbridge, Massachusetts and which was completed in fiscal year
1994, impacted fiscal year 1995 favorably due to the reduction of fixed costs
and better utilization of capacity. The consolidation was also largely
responsible for achieving a record level of productivity, as measured by sales
per employee, which averaged $162,000 for the entire year and reached $191,000
for the fourth quarter. The reserves related to the consolidation, which were
established at the end of 1993, have been adequate since the expenditures have
been consistent with management's expectations. In fiscal year 1995, these
expenditures consisted primarily of maintenance costs for the Forest, Virginia
facility which has been actively marketed and is expected to be sold in the
early part of fiscal year 1996. At the end of fiscal year 1995, the reserve
balance was $290,000 which is expected to be adequate for the anticipated
ongoing expenses of that facility for a portion of fiscal year 1996. The
Company believes that the facility is properly valued on the Company's books at
an estimate of its net realizable value.
Fiscal Year 1994 Compared to Fiscal Year 1993
- ---------------------------------------------
Net sales in fiscal year 1994 of $30,241,000 declined 12% from sales of
$34,307,000 in fiscal year 1993. This drop in revenue occurred primarily in
Medical Products which accounted for $3,120,000 of the decline. The Company
incurred an operating loss of $1,296,000 in fiscal year 1994 versus an
operating loss of $10,512,000 the previous year. The net loss in fiscal year
1994 amounted to $1,121,000, or $.17 per share, as compared to a net loss of
$10,262,000, or $1.60 per share, in fiscal year 1993.
The Company's results for fiscal year 1993 were significantly affected by a
restructuring charge of $6,144,000 resulting from a decision to shut down its
Forest, Virginia facility and consolidate all manufacturing operations in
Sturbridge, Massachusetts. This restructuring charge also included a write-off
of unused equipment specific to the Fused Fiberoptics business. Without the
restructuring charge, the operating loss in fiscal year 1993 would have been
$4,368,000. In addition, the 1993 results were affected by the adoption of
Financial Accounting Standards Board Statement No. 106, Employers Accounting
for Postretirement Benefits Other Than Pensions, which resulted in a one-time
after tax charge of $430,000, or $.07 per share.
PAGE 13
<PAGE> 14
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
The consolidation of manufacturing operations, which involved the
relocation of production lines for Medical, Office and Flexible Fiberoptic
Products from Forest, Virginia to Sturbridge, Massachusetts was completed by
the end of the second quarter of fiscal year 1994, slightly ahead of schedule
with no negative impact on deliveries or quality. The Company added some
warehousing space and reconfigured some of its manufacturing space in
Sturbridge to accommodate the transferred operations. Because very few of the
Forest, Virginia employees were relocated, the Company realized a reduction in
fixed costs related to staffing as well as in other areas. The reserves
related to the consolidation which were established at the end of 1993 were
adequate since the expenditures related to this project were consistent with
management's expectations. These reserves were reduced during fiscal year 1994
primarily as a result of cash expenditures for the purposes intended when the
reserves were established. At the end of fiscal year 1994, the reserve balance
was $528,000. The Company had previously estimated that the annualized cost
reduction effect of the restructuring would be approximately $3,000,000 with
some of the savings benefiting selling, engineering and administrative expenses
and the balance reducing fixed costs included in the cost of sales.
The reduction in fixed costs which resulted from the consolidation of
manufacturing operations was primarily responsible for the improvement of
profitability in the second half of fiscal year 1994. Gross profit for fiscal
year 1994 of $7,548,000 increased $407,000 despite a decrease in sales from the
previous year. Selling, engineering and administrative expenses declined in
fiscal year 1994 by $2,665,000, primarily as a result of cost reductions
resulting from the consolidation. At the operating profit level, the Office
Products and Scientific Detector Products businesses were profitable.
At the end of the second quarter of fiscal year 1994, the Company
completed the sale of a substantial portion of its Fused Fiberoptics business.
The purchaser acquired exclusive license rights to certain technologies of the
Company related to that business. However, the Company retained rights to its
patented Fractal Fiberoptics technology, which it continues to use in support
of the Medical Products and Scientific Detector Products businesses. The
purchase price of the assets involved in the sale was $1,400,000. Of this
amount, $1,271,000 was paid to the Company by the end of fiscal year 1994.
There was no gain or loss to the Company on the transaction.
Sales of components for military applications declined $664,000 in fiscal
year 1994 to $2,725,000 or 9% of total sales, a decrease of 20% from 1993.
Commercial sales, which amounted to $27,516,000, or 91% of total sales, were
down 11% from the previous year.
Sales of Office Products, consisting of dicorotron glass-coated wire
assemblies and other components for a variety of copiers, increased to
$14,690,000 and set a new record. During fiscal year 1994, the Company started
to manufacture several new products at rates higher than originally anticipated
in support of a new series of office machines launched by Xerox Corporation,
the Company's largest customer. Approximately 60% of the Company's sales to
Xerox were for the replacement market.
PAGE 14
<PAGE> 15
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
Shipments of Medical Products were down $3,120,000 versus the previous year as
sales of endoscopes for minimally invasive surgery declined. This decline
started in the fourth quarter of 1993 when the sole customer for this product
notified the Company that its requirements would be significantly less than
anticipated. Under a renegotiated supply agreement with this customer, the
Company has a nonexclusive license to use the endoscope technologies to develop
medical imaging devices for other customers. The Company improved its existing
products and developed a broad line of low-cost, high-quality single-use and
limited re-use endoscopes for medical applications as well as its Microvision
borescope for non-medical uses. Approvals were received from the FDA for two
products in fiscal year 1994, and two additional approvals were received
shortly after the end of fiscal year 1994.
In the Electro-Optic Components business, sales of fused fiberoptics,
flexible fiberoptics and microchannel plates each declined approximately 10%
with the drop of military sales being the principal reason of this change.
Sales of Fused Fiberoptics Products, which include some components for military
applications, were down also as a result of the sale of that business. Sales
of engineering services, however, were up slightly due to billings related to
the two-year, $1.9 million contract the Company was awarded in 1993 by the
National Institute of Standards and Technology to develop new fabrication
methods for microchannel plates. This program made good progress.
Sales of Scientific Detector Products were down 10% versus the previous year,
as shipments of Channeltron single-channel detectors and microchannel
plate-based detectors and assemblies declined. Shipments of Channeltrons were
lower primarily because of a decline in sales to Hewlett-Packard. However, the
Company introduced a new detector in mid-1994 in an effort to regain this lost
revenue. Finally, Remote Sensor Products sales declined 18% compared to fiscal
year 1993. Several more new products were scheduled for introduction in the
near future in both Scientific Detector and Remote Sensor Products.
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL POSITION
Working capital at September 30, 1995 was $18,744,000, an increase of
$5,775,000 from the working capital balance of $12,969,000 at September 30,
1994. Cash and short-term investments were $8,274,000 at the end of fiscal
year 1995 as compared to $6,185,000 at the end of the previous fiscal year, for
an increase of $2,089,000. The increase in working capital was primarily due
to the increase in cash, an increase in accounts receivable of $1,771,000 which
was principally attributable to strong sales at the end of the fiscal year and
the reclassification of the book value of the Company's Forest, Virginia
facility as a current asset. The major factors which affected the increase in
cash were an increase in working capital provided by operations partially
offset by an increase in accounts receivable.
Capital expenditures amounted to $988,000 versus expenditures of
$1,352,000 in fiscal year 1994. The Company expects that its need for capital
in 1996 will be comparable to that in fiscal year 1995. The Company has no
long-term debt other than capitalized lease obligations. The nature of the
Company's business is such that its sales are not subject to extended payment
terms or return privileges, except for defective goods. The Company does not
anticipate a need for external financing to support its currently planned
operations.
PAGE 15
<PAGE> 16
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Consolidated Financial Statements and Consolidated
Financial Statement Schedules at pages 18 through 36 of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
See "Executive Officers of the Registrant" at the end of Part I
of this report and the information contained in the Company's Proxy
Statement dated December 11, 1995 relating to the 1996 Annual Meeting
of Shareholders (the "Proxy Statement") under the captions "Election
of Directors" and "Share Ownership," which information is
incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
----------------------
See the information contained in the Proxy Statement under the
captions "Election of Directors - Director Compensation," "Executive
Compensation" and "Compensation Committee Interlocks and Insider
Participation," which information is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
See the information contained in the Proxy Statement under the
heading "Share Ownership," which information is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Not applicable.
PAGE 16
<PAGE> 17
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) Documents filed as a part of this Form 10-K
-------------------------------------------
1. Financial Statements.
The Financial Statements filed as a part of this Form 10-K are
listed on the Index to Consolidated Financial Statements and
Consolidated Financial Statement Schedules on page 18.
2. Financial Statement Schedules.
The Financial Statement Schedule filed as a part of this Form 10-K
is listed on the Index to Consolidated Financial Statements and
Consolidated Financial Statement Schedules on page 18.
3. Exhibits.
The Exhibits filed as a part of this Form 10-K are listed on the
Exhibit Index on page 39.
(b) No reports on Form 8-K were filed by the Registrant during the
last quarter of the period covered by this Form 10-K.
PAGE 17
<PAGE> 18
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
ITEM 14(a)
Financial Statements:
- --------------------
Report of Independent Auditors 19
Consolidated Balance Sheets at September 30, 1995 and 1994 20
Consolidated Statements of Operations for the fiscal years ended
September 30, 1995, 1994 and 1993 22
Consolidated Statements of Changes in Shareholders' Equity for the
fiscal years ended September 30, 1995, 1994 and 1993 23
Consolidated Statements of Cash Flows for the fiscal years ended
September 30, 1995, 1994 and 1993 24
Notes to Consolidated Financial Statements 25
Supplementary Information:
- -------------------------
Unaudited Quarterly Financial Information 35
Schedules:
- ---------
II. Valuation and qualifying accounts for the fiscal years ended
September 30, 1995, 1994 and 1993 36
Schedules Omitted:
- -----------------
All other schedules are omitted as they are not applicable or the information
is shown in the financial statements or notes thereto.
PAGE 18
<PAGE> 19
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
ERNST & YOUNG LLP
The Board of Directors
Galileo Electro-Optics Corporation
We have audited the accompanying consolidated balance sheets of Galileo
Electro-Optics Corporation as of September 30, 1995 and 1994, and the related
consolidated statements of operations, changes in shareholders' equity and
cash flows for each of the three years in the period ended September 30, 1995.
Our audits also included the financial statement schedules listed in the Index
at Item 14(a). These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Galileo Electro-Optics Corporation at September 30, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended September 30, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note 3 to the financial statements, in 1993 the Company changed
its method of accounting for postretirement benefits other than pensions.
Providence, Rhode Island
October 20, 1995 ERNST & YOUNG LLP
PAGE 19
<PAGE> 20
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
September 30,
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,274 $ 6,185
Accounts receivable, less allowance of $32 in
1995 and $25 in 1994 6,961 5,190
Refundable income taxes -- 17
Inventories:
Finished goods 97 31
Work-in-process 367 352
Raw materials 4,418 4,324
--------------------------------------------------------------
4,882 4,707
Deferred income taxes 308 460
Other current assets 97 149
Assets held for sale, net 2,345 --
--------------------------------------------------------------
Total current assets 22,867 16,708
Assets held for sale, net -- 2,345
Property, plant and equipment:
Land, buildings and improvements 16,147 16,066
Machinery, equipment and furniture 23,726 24,186
Capital projects in process 1,110 643
--------------------------------------------------------------
40,983 40,895
Less accumulated depreciation (21,348) (19,202)
--------------------------------------------------------------
Net property, plant and equipment 19,635 21,693
Other assets, net 2,661 2,875
--------------------------------------------------------------
Total assets $ 45,163 $ 43,621
==============================================================
See accompanying notes.
</TABLE>
PAGE 20
<PAGE> 21
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
September 30,
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,412 $ 2,200
Accrued liabilities 1,711 1,539
---------------------------------------------------------------
Total current liabilities 4,123 3,739
Deferred income taxes 469 620
Long-term obligation - Capital leases 174 42
Accrued postretirement benefits other than pensions 623 605
Shareholders' equity:
Common stock, $.01 par value, 18,000,000 shares
authorized; 6,484,432 shares issued and
outstanding in 1995 and 6,473,654 shares in 1994 65 65
Additional paid-in capital 42,241 42,192
Accumulated deficit (2,532) (3,642)
--------------------------------------------------------------
Total shareholders' equity 39,774 38,615
--------------------------------------------------------------
Total liabilities and shareholders' equity $45,163 $43,621
==============================================================
See accompanying notes.
</TABLE>
PAGE 21
<PAGE> 22
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
Years ended September 30,
(Dollars in thousands, except per share data) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $34,043 $30,241 $ 34,307
Cost of sales 24,646 22,693 27,166
----------------------------------------------------
Gross profit 9,397 7,548 7,141
Operating expenses:
Engineering 3,486 3,828 5,368
Selling and administrative 5,075 5,016 6,141
----------------------------------------------------
8,561 8,844 11,509
Restructuring cost -- -- 6,144
----------------------------------------------------
Operating profit (loss) 836 (1,296) (10,512)
Other income, net 356 244 211
----------------------------------------------------
Income (loss) before income taxes and
cumulative effect of a change in
accounting for postretirement benefits
other than pensions 1,192 (1,052) (10,301)
Provision (benefit) for income taxes 82 69 (469)
----------------------------------------------------
Income (loss) before cumulative effect
of a change in accounting for post-
retirement benefits other than pensions 1,110 (1,121) (9,832)
Cumulative effect of a change in accounting
for postretirement benefits other than
pensions -- -- (430)
----------------------------------------------------
Net income (loss) $ 1,110 $(1,121) $(10,262)
====================================================
Net income (loss) per common and common
equivalent share outstanding:
Before cumulative effect of a change
in accounting for postretirement
benefits other than pensions $ .17 $ (.17) $ (1.53)
Cumulative effect of a change in
accounting for postretirement
benefits other than pensions -- -- (.07)
-----------------------------------------------------
Net income (loss) $ .17 $ (.17) $ (1.60)
=====================================================
Weighted average common and common
equivalent shares outstanding 6,507,603 6,473,654 6,434,361
=====================================================
See accompanying notes.
</TABLE>
PAGE 22
<PAGE> 23
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Additional Earnings Total
Common Paid-In (Accumulated Shareholders'
(Dollars in thousands) Stock Capital Deficit) Equity
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 30, 1992 $64 $41,718 $ 7,741 $ 49,523
Net loss -- -- (10,262) (10,262)
Exercise of stock options
(105,884 shares) 1 474 -- 475
-----------------------------------------------------------------------------
Balance, September 30, 1993 65 42,192 (2,521) 39,736
Net income (loss) -- -- (1,121) (1,121)
-----------------------------------------------------------------------------
Balance, September 30, 1994 65 42,192 (3,642) 38,615
Net income (loss) -- -- 1,110 1,110
Exercise of stock options
(10,778 shares) -- 49 -- 49
-----------------------------------------------------------------------------
Balance, September 30, 1995 $65 $42,241 $(2,532) $ 39,774
=============================================================================
See accompanying notes.
</TABLE>
PAGE 23
<PAGE> 24
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
- ------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<CAPTION>
Years ended September 30,
(Dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 32,230 $ 30,213 $ 33,137
Cash paid to suppliers and employees (29,644) (30,616) (33,383)
Other income received 101 96 68
Interest paid (15) (17) (22)
Investment income received 315 165 165
Income tax paid (28) (51) (65)
--------------------------------
Net cash provided (used) by operating activities 2,959 (210) (100)
Cash flows from investing activities:
Proceeds from sales of assets 127 1,279 48
Capital expenditures (988) (1,352) (2,610)
--------------------------------
Net cash used in investing activities (861) (73) (2,562)
Cash flows from financing activities:
Principal payments under capital lease obligations (58) (62) (50)
Proceeds from issuance of common stock 49 - 475
--------------------------------
Net cash provided (used) by financing activities (9) (62) 425
Net increase (decrease) in cash and cash equivalents 2,089 (345) (2,237)
Cash and cash equivalents at beginning of year 6,185 6,530 8,767
--------------------------------
Cash and cash equivalents at end of year $ 8,274 $ 6,185 $ 6,530
================================
Reconciliation of net income (loss) to net cash
provided (used) by operating activities:
Net income (loss) $ 1,110 $ (1,121) $(10,262)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Cumulative effect of accounting change - - 578
Restructuring charge - - 6,144
Depreciation and amortization 3,186 3,353 3,781
Provision for losses on accounts receivable, net 42 16 122
Gain on sale of fixed assets (61) - (32)
Loss on cancellation of lease 37 - -
Loss on retirement of fixed assets - - 433
Deferred taxes - - (682)
Postretirement benefits 18 27 -
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable (1,813) (27) (1,117)
Refundable income taxes 17 17 15
Inventories (175) 38 1,304
Other current assets 53 117 (63)
Other assets, net 129 25 (127)
Accounts payable 212 205 (144)
Accrued liabilities 204 (2,860) (50)
--------------------------------
Total adjustments 1,849 911 10,162
--------------------------------
Net cash provided (used) by operating activities $ 2,959 $ (210) $ (100)
================================
See accompanying notes.
</TABLE>
PAGE 24
<PAGE> 25
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICIES
-------------------
ORGANIZATION - The Company develops, manufactures and markets fiberoptic and
electro-optic components, assemblies and systems which transmit, sense or
intensify light or images. The Company's products are sold primarily to
original equipment manufacturers for applications in electronic imaging,
analytical instrumentation, office equipment, medical instrumentation and
process analysis. The majority of the Company's customers are located in
North America with most international customers in Europe and the Far East.
CONSOLIDATION - The consolidated balance sheets at September 30, 1995 and
1994 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the
period ended September 30, 1995, include the accounts of Galileo
Electro-Optics Corporation and its wholly-owned subsidiary. Intercompany
transactions have been eliminated in consolidation.
CASH FLOWS - For purposes of the statements of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less at the time of purchase to be cash equivalents.
In 1995, the capital leases pertaining to computer equipment then in effect
were replaced with a new capital lease obligation of $180,000 for new
computer equipment.
INVENTORIES - Inventories are valued at the lower of cost (first in, first
out) or market.
<TABLE>
PROPERTY, PLANT AND EQUIPMENT - Depreciation is computed using either the
straight-line or accelerated methods. The estimated useful lives used in
computing depreciation and amortization are:
<S> <C>
Buildings and improvements 10-30 years
Machinery, equipment and furniture 3-10 years
</TABLE>
ENGINEERING EXPENSE - Engineering expense includes research and development,
engineering support of manufacturing operations relating to problem solving
and process improvement, the preparation of bids and proposals and sales
support of customers. The amounts charged to income for research and
development were approximately $3,054,000, $3,685,000 and $4,764,000 for
fiscal years 1995, 1994 and 1993, respectively.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE - Net income per common
and common equivalent share is computed using the weighted average number
of common and common equivalent shares outstanding. The exercise of stock
options has not been assumed for fiscal years 1993 and 1994 because the
effect was antidilutive.
PAGE 25
<PAGE> 26
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL - Goodwill, which is included in other assets, is being amortized
on a straight-line basis over a period of forty years.
REVENUE RECOGNITION - The Company records a sale and recognizes revenue when
title passes to the customer or when services are performed in accordance
with contracts.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CURRENT ACCOUNTING DEVELOPMENTS - In March and October of 1995, the
Financial Accounting Standards Board issued two new statements: Statement
121, Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of and Statement 123, Accounting for Stock Based
Compensation. Statement 121 principally requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement 123 encourages the expensing of the fair value of employee stock
options but allows the continuance of current practice with disclosure of
the pro forma effect on net income had the fair value of the options been
expensed. The Company will adopt Statement 121 in the first quarter of
fiscal year 1997 and is expecting to adopt Statement 123 in fiscal year
1996. Based on current circumstances, the Company does not believe the
effects of adopting either of these statements will be material.
2. RESTRUCTURING
-------------
In 1993, the Company's operating loss included a charge of approximately
$6,144,000 related to a decision to consolidate its manufacturing
operations in its Sturbridge, Massachusetts, facility. As part of this
consolidation, all manufacturing operations in Forest, Virginia, were
relocated, and the Forest facility was shut down in fiscal year 1994 and is
currently for sale. The Company expects that this facility will be sold in
the early part of fiscal year 1996. The charge also included a write-off
specific to the Company's Fused Fiberoptics product line, which related
principally to production equipment no longer used in manufacturing.
PAGE 26
<PAGE> 27
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. RETIREMENT PLANS
----------------
PENSION PLAN - The Company has a noncontributory pension plan covering
substantially all employees who joined the Company prior to
January 1, 1995. The Plan provides pension benefits based upon years
of service and average compensation during the five years preceding
retirement. The Company's policy is to fund the maximum amount that
can be deducted for federal income tax purposes.
<TABLE>
Net pension cost consists of:
<CAPTION>
Years ended September 30,
1995 1994 1993
-------------------------------
(In thousands)
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 245 $ 256 $ 337
Interest cost on projected benefit obligations 469 447 430
Actual return on assets (1,447) 495 (853)
Net amortization and deferral 854 (1,169) 234
-------------------------------
$ 121 $ 29 $ 148
===============================
</TABLE>
In 1993, the Company reduced its work force and as a result, recognized
a curtailment gain of approximately $556,000.
The assumptions used in calculating pension expense included discount
rates of 8% and expected long-term rates of return on Plan assets of
9%. In addition, the rate of increase in compensation levels was
assumed to be 5% for 1995 and 5.5% for 1994 and 1993.
PAGE 27
<PAGE> 28
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
The following table sets forth the Plan's funded status and amount recognized
in the Company's Consolidated Balance Sheets at September 30, 1995 and 1994
for the Plan:
<CAPTION>
Years ended September 30,
1995 1994
-------------------------
(In thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $(4,661) $(4,445)
=========================
Accumulated benefit obligations $(4,986) $(4,646)
=========================
Projected benefit obligations for services
rendered to date $(6,215) $(5,935)
Plan assets at fair value 7,564 6,357
-------------------------
Plan assets in excess of projected benefit
obligations 1,349 422
Unrecognized prior service cost (77) (22)
Unrecognized net loss 50 1,090
Unrecognized net asset (481) (528)
-------------------------
Prepaid pension costs included in other assets $ 841 $ 962
=========================
</TABLE>
TAX DEFERRED SAVINGS PLAN - The Company has a tax deferred savings plan under
Section 401(k) of the Internal Revenue Code under which, subject to certain
limitations, each eligible employee may contribute up to 15% of gross wages
per year. The Company matches 50% of the first 6% of employee contributions.
Company contributions to the Plan were approximately $139,000, $126,000 and
$147,000 in fiscal years 1995, 1994 and 1993, respectively.
OTHER RETIREMENT PLANS - In addition to the Company's defined benefit pension
plan, the Company sponsors a defined benefit postretirement medical and life
insurance plan that covers substantially all of its full-time employees.
Employees who retire from the Company and who have attained age 65 with 15
years of service (10 years of service for employees hired before October 1,
1989) and who were hired prior to October 1, 1993 are eligible. Employees who
retired prior to October 1, 1989 are not required to contribute; employees who
retired after October 1, 1989 contribute a portion of the cost beyond a Company
subsidy. The plan is not funded.
PAGE 28
<PAGE> 29
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1993, the Company adopted Financial Accounting Standards Board Statement
No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions.
The Company elected to immediately recognize the accumulated liability,
measured as of October 1, 1992. This resulted in a one-time, after tax charge
of $430,000 or $.07 per share. The tax benefit of adoption was approximately
$138,000. Aside from the one-time effect of this adjustment, adoption of
Statement 106 was not material to 1993 financial results. Previously reported
first quarter 1993 results have been restated to reflect the accumulated
postretirement benefit obligation recognition. Postretirement benefit costs
for years prior to 1993, which were recorded on a cash basis, have not been
restated.
<TABLE>
The actuarial and recorded liabilities for this plan were as follows:
<CAPTION>
Years ended September 30,
1995 1994
-------------------------
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $391 $429
Fully eligible active plan participants 21 37
Other active plan participants 160 169
-------------------------
Accumulated postretirement benefit obligation 572 635
Plan assets at fair value -- --
-------------------------
Unfunded accumulated benefit obligation in excess of plan assets 572 635
Unrecognized net gain (loss) 51 (30)
-------------------------
Accrued postretirement benefit cost $623 $605
=========================
Net periodic postretirement benefit cost in 1995 and 1994
includes the following components:
(In thousands)
Service cost $ 12 $ 17
Interest cost 43 49
-------------------------
Net periodic postretirement benefit cost $ 55 $ 66
=========================
</TABLE>
For measurement purposes, a 10% annual rate of increase in the per capita cost
of covered health care benefits was assumed for fiscal year 1995. The rate was
assumed to decrease gradually down to 6% for fiscal year 2003 and remain at
that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rate one percentage point in each year would
increase the accumulated postretirement benefit obligation as of September 30,
1995 by $35,000 (or by 6%) and the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for fiscal year 1995
by $3,600 (or by 6.5%).
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8%. As the plan is unfunded, no
assumption was needed as to the long-term rate of return on assets.
PAGE 29
<PAGE> 30
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. LEASE COMMITMENTS
-----------------
<TABLE>
The cost of computer equipment capitalized under capital lease
agreements approximated $180,000 and $284,000 as of September 30, 1995
and 1994, respectively. Associated accumulated amortization as of
September 30, 1995 and 1994 approximated $18,000 and $186,000,
respectively. Future minimum lease payments relating to the computer
equipment under capital leases as of September 30, 1995 are as follows:
<S> <C>
1996 $ 56,750
1997 56,750
1998 56,750
1999 56,750
2000 36,500
--------
Total minimum lease payments 263,500
Less amount representing imputed interest 51,000
--------
Net present value, minimum lease payments 212,500
Less current portion 38,300
--------
Long-term portion of lease obligation $174,200
========
</TABLE>
Minimum rental commitments under all noncancelable operating leases,
primarily machinery and equipment, in effect at September 30, 1995 are
$78,000, $45,000, $43,000, $33,000 and $14,000 in fiscal years 1996,
1997, 1998, 1999 and 2000, respectively.
Total rental expense for all operating leases was approximately
$145,000, $149,000 and $184,000 in fiscal years 1995, 1994 and 1993,
respectively.
5. COMMON STOCK
Employee Stock Option Plan - Under the Company's 1991 Stock Option
Plan, which succeeded the 1981 Stock Option Plan, the Plan
Administrative Committee of the Board of Directors may grant options to
purchase common stock to officers and key employees of the Company and
its subsidiary. The stock options are exercisable at a price not less
than the fair market value of the common stock on the date of grant.
The Plan also provides that the Committee may issue stock appreciation
rights. The exercise price of the stock appreciation rights may not
be less than the fair market value of the common stock on the date of
grant or if issued with a stock option, the exercise price of the
related option. Stock appreciation rights provide for the issuance of
common stock, or the payment of cash, or a combination of both equal
to the difference between the exercise price of the stock appreciation
right and the fair market value of the common stock on the date of
exercise.
PAGE 30
<PAGE> 31
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
Transactions during the last three years under the 1981 Stock Option Plan and
the 1991 Stock Option Plan are summarized as follows:
<CAPTION>
Shares Price Range Aggregate
--------------------------------------------
<S> <C> <C> <C>
Balance, September 30, 1992 359,902 $4.375 - 7.500 $1,757,000
Granted 25,000 5.250 - 6.750 146,000
Exercised (105,884) 4.375 - 4.625 (475,000)
Cancelled (35,348) 4.375 - 7.500 (174,000)
-------- ----------
Balance, September 30, 1993 243,670 4.375 - 7.500 1,254,000
Granted 15,000 3.000 - 3.625 51,250
Exercised -- -- --
Cancelled (46,267) 3.625 - 7.500 (271,239)
-------- ----------
Balance, September 30, 1994 212,403 3.000 - 7.500 1,034,011
Granted 92,000 4.625 - 8.250 722,125
Exercised (10,778) 4.438 - 4.625 (49,287)
Cancelled (41,778) 3.625 - 7.500 (189,443)
-------- ----------
Balance, September 30, 1995 251,847 $3.000 - 8.250 $1,517,406
</TABLE>
As of September 30, 1995, 214,000 option shares were available for grant under
the 1991 Plan, and 137,597 options were exercisable at prices ranging from
$3.00 to $7.50, aggregating approximately $672,239 under the 1981 and 1991
Plans. The remainder of the outstanding options become exercisable on various
dates through 1999.
DIRECTOR STOCK OPTION PLAN - Under the Company's 1989 Director Stock Option
Plan, each non-employee director as of March 15, 1989 was granted nonstatutory
options to purchase 10,000 shares of the Company's common stock, 5,000 of which
became exercisable immediately and 1,250 of which became exercisable on each of
the next four anniversaries of the date of grant. Options to purchase 5,000
shares of common stock are granted automatically to each new non-employee
director on the date of the director's first election, with 25 percent of the
shares becoming exercisable on each of the next four anniversaries of the date
of grant. A director may be granted options only once. The option exercise
price is the fair market value of the common stock on the date of grant.
Under the Director Stock Option Plan as of September 30, 1995, 20,000 shares
were exercisable at prices ranging from $4.875 to $9.00 per share, aggregating
$157,813. Options covering 70,000 shares remain available for grant under the
Director Stock Option Plan. No options under the Plan have been exercised.
PAGE 31
<PAGE> 32
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
No accounting recognition is given to stock options until they are
exercised, at which time the proceeds are credited to the capital
accounts. The Company recognizes a tax benefit upon exercise of
nonstatutory options in an amount equal to the difference between the
option price and the fair market value of the common stock. With
respect to incentive stock options, tax benefits arising from
disqualifying dispositions are recognized at the time of disposition.
Tax benefits related to stock options are credited to additional
paid-in capital.
EMPLOYEE STOCK PURCHASE PLAN - The Company has an Employee Stock
Purchase Plan under which it contributes up to 37.5% of amounts
contributed by participating employees to a combined maximum of $1,375
per calendar year. All contributions are made to a trust for
investment in the Company's common stock. Shares are purchased in the
open market. The Plan held 26,357 and 26,091 shares at September 30,
1995 and 1994, respectively.
6. MAJOR CUSTOMERS AND EXPORT SALES
--------------------------------
Sales were made to certain customers in amounts exceeding 10% of
consolidated revenues in fiscal years 1995, 1994 and 1993,
respectively. Sales to these customers were as follows:
<TABLE>
<CAPTION>
Years ended September 30,
1995 1994 1993
-------------------------------
(in thousands)
<S> <C> <C> <C>
Customer A $17,674 $14,330 $13,348
Customer B * * 3,549
<FN>
*Less than 10% of consolidated revenues.
</TABLE>
Export sales to various foreign customers amounted to approximately
$6,284,000, $5,060,000 and $5,857,000 in fiscal years 1995, 1994 and
1993, respectively. In addition, sales to domestic affiliates of
foreign customers and to domestic customers, both for export by the
purchaser, amounted to approximately $325,000, $837,000 and $710,000
in fiscal years 1995, 1994 and 1993, respectively.
At September 30, 1995 and 1994, accounts receivable from Customer A, a
Fortune 100 office products manufacturer, represented approximately
51% and 38%, respectively, of total accounts receivable. The Company
extends credit based on evaluating individual customers' financial
condition, and collateral is generally not required. Credit losses
are provided for in the financial statements and have historically
been within management's expectations.
PAGE 32
<PAGE> 33
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
7. Income Taxes
------------
<TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of
September 30, 1995 and 1994, respectively, are as follows:
<CAPTION>
Years ended September 30,
1995 1994
-------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 2,502 $ 2,671
Pension cost 329 368
-------------------------
Total deferred tax liabilities 2,831 3,039
Deferred tax assets:
Inventory adjustments 543 806
Restructuring accruals 124 214
Other accruals 478 448
Net operating loss carryforwards 5,424 5,257
General business credits 1,188 1,043
-------------------------
Total deferred tax assets 7,757 7,768
Valuation allowance for deferred tax assets (5,086) (4,889)
-------------------------
Net deferred tax assets 2,671 2,879
-------------------------
Net deferred tax liabilities $ 160 $ 160
=========================
</TABLE>
The net change in the total valuation allowance for the fiscal years
ended September 30, 1995 and 1994 amounted to increases of $197,000 and
$398,000, respectively.
Page 33
<PAGE> 34
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
Significant components of the provision for income taxes are as follows:
<CAPTION>
Years ended September 30
1995 1994 1993
-----------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ --
State 82 69 75
-----------------------------------------------
82 69 75
Deferred:
Federal -- -- (510)
State -- -- (34)
-----------------------------------------------
-- -- (544)
-----------------------------------------------
Total $ 82 $ 69 $(469)
===============================================
</TABLE>
<TABLE>
The reconciliation of the statutory federal income tax rate and the
effective tax rate is as follows:
<CAPTION>
Years ended September 30
1995 1994 1993
-----------------------------------------------
(In thousands)
<S> <C> <C> <C>
Income tax benefit per
statutory rate 34.0% 34.0% 34.0%
Utilization of net operating
loss carryforwards (32.9) -- --
Loss on which no income
tax benefits realized -- (34.8) (30.3)
State income taxes, net of
federal income tax benefit 4.5 (3.8) (.2)
Other 1.3 (2.0) 1.1
-----------------------------------------------
6.9% (6.6)% 4.6%
===============================================
</TABLE>
At September 30, 1995, the Company had net operating loss carryforwards
of $12,487,000 for income tax purposes that expire in years 2006 through 2010.
Page 34
<PAGE> 35
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
UNAUDITED QUARTERLY FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<CAPTION>
Fiscal Year 1995 Dec. 31 March 31 June 30 Sept. 30
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $7,198 $8,261 $8,817 $9,767
Cost of sales 5,553 5,973 6,557 6,563
--------------------------------------------
Gross profit 1,645 2,288 2,260 3,204
Operating expenses 2,164 2,183 1,958 2,256
--------------------------------------------
Operating profit (loss) (519) 105 302 948
Other income, net 67 80 95 114
--------------------------------------------
Income (loss) before income taxes (452) 185 397 1,062
Provision for income taxes 24 16 24 18
--------------------------------------------
Net income (loss) $ (476) $ 169 $ 373 $1,044
============================================
Net income (loss) per common
and common equivalent share $ (.07) $ .03 $ .06 $ .16
============================================
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1994 Dec. 31 March 31 June 30 Sept. 30
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $7,212 $6,789 $7,859 $8,381
Cost of sales 5,581 5,274 5,789 6,049
--------------------------------------------
Gross profit 1,631 1,515 2,070 2,332
Operating expenses 2,337 2,280 2,042 2,185
--------------------------------------------
Operating profit (loss) (706) (765) 28 147
Other income, net 57 34 99 54
--------------------------------------------
Income (loss) before income taxes (649) (731) 127 201
Provision for income taxes 18 18 21 12
--------------------------------------------
Net income (loss) $ (667) $ (749) $ 106 $ 189
============================================
Net income (loss) per common
and common equivalent share $ (.10) $ (.12) $ .02 $ .03
============================================
</TABLE>
Page 35
<PAGE> 36
GALILEO ELECTRO-OPTICS CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<CAPTION>
- --------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- --------------------------------------------------------------------------------
ADDITIONS ADDITIONS DEDUCTIONS
BALANCE AT CHARGED TO CHARGED TO WRITTEN OFF BALANCE AT
BEGINNING COST AND OTHER AGAINST END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVE PERIOD
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1993:
- -------------------
Allowance for
doubtful accounts 194 177 -- 55 316
SEPTEMBER 30, 1994:
- -------------------
Allowance for
doubtful accounts 316 16 -- 307 25
SEPTEMBER 30, 1995:
- -------------------
Allowance for
doubtful accounts 25 42 -- 34 33
</TABLE>
Page 36
<PAGE> 37
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
Galileo Electro-Optics Corporation
Dated: December 15, 1995
/s/ William T. Hanley
--------------------------------
William T. Hanley, President and
Chief Executive Officer
Page 37
<PAGE> 38
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on December 15, 1995.
/s/ William T. Hanley
-------------------------------------------------
William T. Hanley, President and Chief Executive
Officer and Director (Principal Executive Officer)
/s/ Josef W. Rokus
-------------------------------------------------
Josef W. Rokus, Vice President, Finance
(Principal Financial and Accounting Officer)
/s/ William T. Burgin
-------------------------------------------------
William T. Burgin
Director
/s/ Allen E. Busching
-------------------------------------------------
Allen E. Busching
Director
/s/ Kenneth W. Draeger
-------------------------------------------------
Kenneth W. Draeger
Director
/s/ Robert D. Happ
-------------------------------------------------
Robert D. Happ
Director
Page 38
<PAGE> 39
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<S> <C>
2.1 Asset Purchase Agreement between the Company and Incom, Inc.
dated April 28, 1994 (filed as exhibit 2.1 to the Registrant's
Form 10-Q for the quarter ended June 30, 1994, file no. 0-11309,
and herein incorporated by reference).
2.2 License Agreement between the Company and Incom, Inc. dated
April 28, 1994 (filed as exhibit 2.2 to the Registrant's Form
10-Q for the quarter ended June 30, 1994, file no. 0-11309, and
herein incorporated by reference).
2.3 Amendment No. 1 to the License Agreement between the Company
and Incom, Inc. dated September 29, 1994 (filed as exhibit 2.3
to the Registrant's Form 10-K for the year ended September 30,
1994, file no. 0-11309, and hereby incorporated by reference).
2.4 Promissory Note from Incom, Inc. to the Company dated
September 29, 1994 (filed as exhibit 2.4 to the Registrant's
Form 10-K for the year ended September 30, 1994, file
no. 0-11309, and hereby incorporated by reference).
3.1 Registrant's Restated Certificate of Incorporation and
amendment thereto (filed as exhibit 4.1 to the
Registrant's registration statement on Form S-2, file
no. 33-13752, and hereby incorporated herein by reference).
3.2 Registrant's amended and restated By-Laws (filed as
exhibit 4.2 to the Registrant's registration statement
on Form S-2, file no. 33-13752, and hereby incorporated
herein by reference).
4.1 Specimen Certificate of the Registrant's Common Stock
(filed as exhibit 4.1 to the Registrant's registration
statement on Form S-2, file no. 33-13752, and hereby
incorporated herein by reference).
4.2 Shareholder's Agreement dated September 12, 1979, together
with First Amendment dated September 5, 1980, Second
Amendment dated February 5, 1981, and Third Amendment
dated November 30, 1982 (filed as exhibit 4.2 to the
Registrant's registration statement on Form S-1, file
no. 2-81090, and hereby incorporated herein by reference).
4.3 Form of Employee Shareholder Agreement together with list
of individuals who are parties thereto and form of
Amendment to Employee Shareholder Agreement together
with list of individuals who are parties thereto (filed
as exhibit 4.3 to the Registrant's registration statement
on Form S-1, file no. 2-81090, and hereby incorporated
herein by reference).
</TABLE>
Page 39
<PAGE> 40
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
INDEX TO EXHIBITS
(Continued)
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<S> <C>
10.1 Lease dated May 31, 1978 between Venture II and Galite,
Inc. together with Guaranty of said lease by Registrant
and Modification of lease dated December 15, 1978 (filed
as exhibit 10.3 to the Registrant's registration statement
on Form S-1, file no. 2-81090, and hereby incorporated
herein by reference).
10.2 Indemnification agreement dated September 15, 1981,
regarding Wallingford Lease between Registrant, Galite,
Inc. and Pirelli Cable Corporation (filed as exhibit 10.5
to the Registrant's registration statement on Form S-1,
file no. 2-81090, and hereby incorporated herein by reference).
10.3 Stock option plan adopted November 20, 1981, as amended
(filed as exhibit 10.4 to the Registrant's Form 10-K for
the year ended September 30, 1988, file no. 0-11309, and
hereby incorporated herein by reference).
10.4 Director stock option plan adopted March 15, 1989 (filed
as an exhibit to the Registrant's proxy statement dated
December 18, 1989, and hereby incorporated herein by
reference).
10.5 Stock option plan adopted October 23, 1991 (filed as
an exhibit to the Registrant's proxy statement dated
December 17, 1991, and hereby incorporated herein by
reference).
11 Computation of net income (loss) per common and common
equivalent share. 41
23 Consent of Independent Auditors for incorporation by
reference in previously filed Registration Statements. 42
27 Financial Data Schedule (for electronic filing only).
</TABLE>
Executive Compensation Plans and Arrangements
- ---------------------------------------------
Exhibits 10.3, 10.4 and 10.5 are management contracts or compensatory
plans or arrangements in which the executive officers or directors of the
Company participate.
Page 40
<PAGE> 1
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
EXHIBIT 11
<TABLE>
COMPUTATION OF NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE
(Dollars in thousands, except per share data)
- -------------------------------------------------------------------------------
<CAPTION>
Fiscal years ended September 30,
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 1,110 $ (1,121) $ (10,262)
----------------------------------------
Average common shares outstanding 6,477,802 6,473,654 6,434,361
Average common equivalent shares
arising from outstanding options 29,801 -- --
----------------------------------------
Average common and common
equivalent shares outstanding
- primary and fully diluted 6,507,603 6,473,654 6,434,361
----------------------------------------
Primary and fully diluted:
Net income (loss) per common
and common equivalent share $ .17 $ (.17) $ (1.60)
----------------------------------------
</TABLE>
Page 41
<PAGE> 1
GALILEO ELECTRO-OPTICS CORPORATION
- -------------------------------------------------------------------------------
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8, Nos. 2-92671, 33-5142, 33-47589 and 33-47588) pertaining
to the Stock Option and Purchase Plans of Galileo Electro-Optics Corporation
of our report dated October 20, 1995, with respect to the consolidated
financial statements and schedules of Galileo Electro-Optics Corporation
included in the Annual Report (Form 10-K) for the year ended September 30,
1995.
Providence, Rhode Island ERNST & YOUNG LLP
December 27, 1995
Page 42
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 8,274
<SECURITIES> 0
<RECEIVABLES> 6,961
<ALLOWANCES> 32
<INVENTORY> 4,882
<CURRENT-ASSETS> 22,867
<PP&E> 40,983
<DEPRECIATION> 21,348
<TOTAL-ASSETS> 45,163
<CURRENT-LIABILITIES> 4,123
<BONDS> 0
<COMMON> 65
0
0
<OTHER-SE> 39,709
<TOTAL-LIABILITY-AND-EQUITY> 45,163
<SALES> 34,043
<TOTAL-REVENUES> 34,043
<CGS> 24,646
<TOTAL-COSTS> 24,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,192
<INCOME-TAX> 82
<INCOME-CONTINUING> 1,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,110
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
