<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended MARCH 31, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________________
to _____________________
COMMISSION FILE NUMBER 0-11309
GALILEO ELECTRO-OPTICS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2526583
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
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 the number of shares outstanding of the Issuer's classes of common
stock, as of the latest practicable date.
COMMON STOCK, PAR VALUE $.01: 6,532,779 SHARES OUTSTANDING AT
APRIL 30, 1996.
<PAGE> 2
GALILEO ELECTRO-OPTICS CORPORATION
INDEX
Page No.
--------
PART I. Financial Information:
Consolidated Condensed Balance Sheets -
March 31, 1996 and September 30, 1995.............................. 3
Consolidated Condensed Statements of Income - Three months
ended and six months ended March 31, 1996 and March 31, 1995....... 5
Consolidated Condensed Statements of Cash Flows -
Six months ended March 31, 1996 and March 31, 1995................. 6
Notes to Consolidated Condensed Financial Statements................ 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 9
PART II. Other Information:
Other Information................................................... 11
Index to Exhibits................................................... 13
Exhibit 11 - Calculation of Earnings Per Share...................... 14
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALILEO ELECTRO-OPTICS CORPORATION
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
<CAPTION>
Unaudited Audited
Mar. 31, 1996 Sept. 30, 1995
------------- --------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 13,467 $ 8,274
Accounts receivable, net 5,696 6,961
Inventories:
Finished goods 152 97
Work-in-process 456 367
Raw materials 4,215 4,418
-------- --------
4,823 4,882
Deferred income taxes 308 308
Other current assets 275 97
Assets held for sale, net -- 2,345
-------- --------
Total current assets 24,569 22,867
Property, plant and equipment:
Land, buildings and improvements 16,147 16,147
Machinery, equipment and furniture 23,449 23,726
Capital projects in process 2,545 1,110
-------- --------
42,141 40,983
Less accumulated depreciation (22,776) (21,348)
-------- --------
Net property, plant and equipment 19,365 19,635
Other assets, net 2,632 2,661
-------- --------
Total assets $ 46,566 $ 45,163
======== ========
</TABLE>
See accompanying notes.
- Continued -
3
<PAGE> 4
GALILEO ELECTRO-OPTICS CORPORATION
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
<CAPTION>
Unaudited Audited
Mar. 31, 1996 Sept. 30, 1995
------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,229 $ 2,412
Accrued liabilities 1,664 1,711
------- -------
Total current liabilities 2,893 4,123
Deferred income taxes 469 469
Long-term obligation -- Capital leases 174 174
Accrued postretirement benefits other than
pensions 663 623
Shareholders' equity:
Common stock 65 65
Additional paid-in capital 42,485 42,241
Accumulated deficit (183) (2,532)
------- -------
Total shareholders' equity 42,367 39,774
------- -------
Total liabilities and shareholders' equity $46,566 $45,163
======= =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
GALILEO ELECTRO-OPTICS CORPORATION
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except share and per share data)
UNAUDITED
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ------------------------
3/31/96 3/31/95 3/31/96 3/31/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 9,283 $ 8,261 $ 17,636 $ 15,459
Cost of sales 5,667 5,973 11,153 11,526
--------- --------- --------- ---------
Gross profit 3,616 2,288 6,483 3,933
Selling, engineering and
administrative expenses 2,537 2,183 4,699 4,347
--------- --------- --------- ---------
Operating profit (loss) 1,079 105 1,784 (414)
Other income 207 80 325 147
--------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary gain 1,286 185 2,109 (267)
Provision (benefit) for income taxes 25 16 (82) 40
--------- --------- --------- ---------
Income (loss) before extraordinary gain 1,261 169 2,191 (307)
Extraordinary gain on receipt and sale of
stock (net of income tax expense of $161) -- -- 158 --
--------- --------- --------- ---------
Net income (loss) $ 1,261 $ 169 $ 2,349 $ (307)
========= ========= ========= =========
Net income (loss) per common and common
equivalent share outstanding
Before extraordinary gain $ .19 $ .03 $ .33 $ (.05)
Effect of extraordinary gain -- -- .02 --
--------- --------- --------- ---------
Net income (loss) $ .19 $ .03 $ .35 $ (.05)
========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding 6,664,407 6,486,962 6,629,706 6,473,654
</TABLE>
See accompanying notes.
5
<PAGE> 6
GALILEO ELECTRO-OPTICS CORPORATION
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
UNAUDITED
<CAPTION>
Six Months Ended
----------------
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Cash received from customers $ 18,866 $ 15,684
Cash paid to suppliers and employees (15,555) (15,554)
Other income received 53 13
Interest paid (10) (7)
Investment income received 282 141
Income taxes paid (46) (14)
-------- --------
Net cash provided by operating activities 3,590 263
Cash flows from investing activities:
- -------------------------------------
Proceeds from sales of assets 2,409 --
Proceeds from receipt and sale of stock 403 --
Capital expenditures (1,435) (450)
-------- --------
Net cash provided (used) by investing activities 1,377 (450)
Cash flows from financing activities:
- -------------------------------------
Principal payments under capital lease obligations (18) (34)
Proceeds from issuance of common stock 244 --
-------- --------
Net cash provided (used) by financing activities 226 (34)
Net increase (decrease) in cash and cash equivalents 5,193 (221)
Cash and cash equivalents at beginning of period 8,274 6,185
-------- --------
Cash and cash equivalents at end of period $ 13,467 $ 5,964
======== ========
</TABLE>
See accompanying notes.
-Continued-
6
<PAGE> 7
GALILEO ELECTRO-OPTICS CORPORATION
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
UNAUDITED
<CAPTION>
Six Months Ended
----------------
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
<S> <C> <C>
Reconciliation of net income (loss) to net cash provided
- --------------------------------------------------------
by operating activities:
- ------------------------
Net income (loss) $ 2,349 $ (307)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary gain on receipt and sale of stock (319) --
Depreciation and amortization 1,651 1,625
Provision for losses on accounts receivable, net (35) --
Postretirement benefits 40 15
Gain on sale of fixed assets (34) --
Increase (decrease) in cash from changes in operating
assets and liabilities:
Accounts receivable 1,300 225
Inventories 59 (1,012)
Other current assets (178) (61)
Other assets, net (5) 36
Accounts payable (1,183) (80)
Accrued liabilities (55) (178)
------- -------
Total adjustments 1,241 570
------- -------
Net cash provided by operating activities $ 3,590 $ 263
======= =======
</TABLE>
See accompanying notes.
7
<PAGE> 8
GALILEO ELECTRO-OPTICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the Company's
financial position as of March 31, 1996 and the results of operations and
cash flows for the three and six month periods ended March 31, 1996 and
1995.
2. The accounting policies followed by the Company are set forth in Note 1 to
the Company's consolidated financial statements in the Company's Annual
Report for fiscal year 1995.
8
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Sales for the quarter ended March 31, 1996 were $9,283,000, an increase of
$1,022,000 or 12% from the same quarter last year. Operating profit amounted to
$1,079,000 for the quarter versus $105,000 for the prior year's second quarter
while net income rose to $1,261,000, or $.19 per share, from $169,000, or $.03
per share, for the same period last year. The second quarter generated the
highest level of operating profit, net income and earnings per share in
approximately nine years.
For the first six months, sales amounted to $17,636,000, up $2,177,000 or 14%
from a year ago while operating profit came to $1,784,000. Last year, the
Company incurred an operating loss of $414,000 for the same period. Net income
was $2,349,000, or $.35 per share, which included an extraordinary gain, net of
taxes, of $158,000, or $.02 per share, from the receipt and sale of stock
following the demutualization of the Company's health insurance carrier in the
first quarter. For the first half of last year, the Company reported a net loss
of $307,000 or $.05 per share.
The improvement in profitability versus last year reflects the success of the
Company's strategy to focus on commercial markets with strong growth potential,
selective price increases, fine tuning of the product mix and maintaining
stringent cost controls. Commercial sales increased 14% from the second quarter
of 1995 and accounted for 96% of total sales.
In the Office Products business, sales for the quarter were up 20% from a year
ago and set a new record, driven by the continuing strong demand for
dicorotrons, the glass-coated wire assembly which generates ions to charge a
copier's photoreceptor. Likewise, for the first six months, sales increased 25%
from the first six months of last year. Xerox Corporation is the Company's
largest customer for this product, and sales to Xerox represented 58% of the
Company's total sales in the quarter. The phase-out of a number of products for
this business due to their lower than desired profitability was completed this
quarter.
Sales of Scientific Detector Products were virtually unchanged from the same
quarter of last year. However, last year's sales included billings for a
contract with the National Institute of Standards and Technology which was
completed in fiscal year 1995. On a year-to-date basis, shipments declined 3%
also because of the National Institute of Standards and Technology billings
last year. Shipments of microchannel plate-based detectors and assemblies as
well as of Channeltron[Registered Trademark] single-channel detectors were
particularly strong in the quarter while on a year-to-date basis, sales of
microchannel plate-based detectors and assemblies and microchannel plates
increased significantly.
9
<PAGE> 10
In the Medical Products business, sales were also up versus a year ago, although
they still account for a small percentage of the Company's total sales. Good
progress was made in several programs to develop medical endoscopes to broaden
the Company's product line and achieve a volume level to make this business
profitable.
Revenues in the Remote Sensor Products business also increased versus the same
quarter a year ago as well as compared to the first six months last year.
Although this business is not yet profitable at the operating profit level,
shipments of these products, primarily consisting of systems and accessories
for on-line monitoring of industrial processes and Fluorolase[Trademark]
doped fluoride fiber and fiber amplifiers for telecommunications applications,
met expectations.
The Company's strategy is to make acquisitions to complement its core
capabilities, improve its market penetration and achieve direct market access in
its businesses. The Company is currently investigating and evaluating several
situations which it believes would accomplish these objectives and strengthen
its competitive position if they are successfully completed. It is the Company's
hope to complete some of these acquisitions over the next several quarters.
However, there are no binding agreements or undertakings in place, and there can
be no assurance that any of these opportunities will result in a completed
transaction and, if completed, will prove advantageous to the Company.
The Company's Forest, Virginia facility, which had been for sale since it was
closed in fiscal year 1994, was sold this quarter. The sale did not have a
material impact on the financial results for the quarter.
FINANCIAL CONDITION
- -------------------
The Company's working capital at March 31, 1996, of $21,676,000 increased
$2,932,000 from the balance at September 30, 1995, of $18,744,000. The cash and
short-term investments balance at March 31, 1996 was $13,467,000 versus
$8,274,000 at September 30, 1995. The change in working capital was primarily
due to an increase in cash and to a lesser degree, a decrease in accounts
receivable and a decrease in accounts payable. The higher level of cash resulted
from cash generated from operations and $2,350,000 received from the sale of the
Company's Forest, Virginia facility. The Company considers its working capital
position to be adequate to support its currently planned operations and does not
anticipate a need for external financing.
Capital spending for the quarter amounted to $921,000. This compares with
$351,000 of capital expenditures in the second quarter of fiscal year 1995. For
the year-to-date, capital spending this year was $1,435,000 versus $450,000 for
the first six months last year. The higher capital spending this year was the
result of investments in a variety of equipment to improve manufacturing
efficiencies and reduce costs.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<TABLE>
At the Annual Meeting of Shareholders held on January 19, 1996, the shareholders
of the Company elected five directors. The votes were as follows:
<CAPTION>
Abstentions
Votes Cast Votes and Broker
For Withheld Non-Votes
---------- -------- -----------
<S> <C> <C> <C>
William T. Burgin 5,859,714 19,276 --
Allen E. Busching 5,855,015 23,975 --
Kenneth W. Draeger 5,855,215 23,775 --
William T. Hanley 5,856,714 22,276 --
Robert D. Happ 5,854,415 24,575 --
</TABLE>
Also at the Annual Meeting of Shareholders held January 19, 1996, the Company's
proposed 1996 Director Stock Option Plan covering 200,000 shares of the
Company's common stock was approved with 4,939,949 votes in favor, 202,324 votes
opposed, 53,212 votes abstaining and 683,505 broker non-votes.
<TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<S> <C>
a. Exhibits: Exhibit 10 - 1996 Director Stock Option Plan (filed as Exhibit 99.1
to the Registrant's registration statement on Form S-8, registration
number 333-02435, and incorporated herein by reference).
Exhibit 11 - Calculation of Earnings Per Share.
Exhibit 27 - Financial Data Schedule (EDGAR filing only).
b. Reports on Form 8-K: There were no reports on Form 8-K filed for the three
months ended March 31, 1996.
</TABLE>
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GALILEO ELECTRO-OPTICS CORPORATION
Dated: May 2, 1996 /s/ William T. Hanley
-------------------------------------
William T. Hanley, President and
Chief Executive Officer (Principal
Executive Officer)
/s/ Josef W. Rokus
-------------------------------------
Josef W. Rokus, Vice President,
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer)
12
<PAGE> 13
GALILEO ELECTRO-OPTICS CORPORATION
INDEX TO EXHIBITS
Exhibit No. Page No.
- ----------- --------
10 1996 Director Stock Option Plan (filed as Exhibit --
99.1 to the Registrant's registration statement
on Form S-8, registration number 333-02435, and
incorporated herein by reference).
11 Calculation of Earnings Per Share 14
27 Financial Data Schedule EDGAR
Filing
Only
13
<PAGE> 1
EXHIBIT 11
GALILEO ELECTRO-OPTICS CORPORATION
<TABLE>
CALCULATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Mar. 31, 1996 Mar. 31, 1995 Mar. 31, 1996 Mar. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary
Average shares outstanding 6,523,381 6,473,654 6,508,439 6,473,654
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 141,026 13,308 121,267 --
Total 6,664,407 6,486,962 6,629,706 6,473,654
Net income (loss) $1,261,000 $ 169,000 $2,349,000 $ (307,000)
Per share amount $ .19 $ .03 $ .35 $ (.05)
Fully Diluted
Average shares outstanding 6,523,381 6,473,654 6,508,439 6,473,654
Net effect of dilutive stock options-
based on the treasury stock method
using the quarter end market price,
if higher than average market price, 158,497 13,308 129,955 --
Total 6,681,878 6,486,962 6,638,394 6,473,654
Net income (loss) $1,261,000 $ 169,000 $2,349,000 $ (307,000)
Per share amount $ .19 $ .03 $ .35 $ (.05)
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF GALILEO ELECTRO-OPTICS CORP. FOR THE SIX
MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 13,467
<SECURITIES> 0
<RECEIVABLES> 5,742
<ALLOWANCES> 46
<INVENTORY> 4,823
<CURRENT-ASSETS> 24,569
<PP&E> 42,141
<DEPRECIATION> 22,776
<TOTAL-ASSETS> 46,566
<CURRENT-LIABILITIES> 2,893
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 42,302
<TOTAL-LIABILITY-AND-EQUITY> 46,566
<SALES> 17,636
<TOTAL-REVENUES> 17,636
<CGS> 11,153
<TOTAL-COSTS> 11,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,109
<INCOME-TAX> (82)
<INCOME-CONTINUING> 2,191
<DISCONTINUED> 0
<EXTRAORDINARY> 158
<CHANGES> 0
<NET-INCOME> 2,349
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
