<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 JUNE 30, 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 each of the Issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, PAR VALUE $.01: 6,540,279 SHARES OUTSTANDING AT
JUNE 30, 1996.
PAGE 1 OF 14
Index to Exhibits appears on Page 13
<PAGE> 2
GALILEO ELECTRO-OPTICS CORPORATION
INDEX
PART I. Financial Information: Page No.
-------
Consolidated Condensed Balance Sheets -
June 30, 1996 and September 30, 1995 ........................... 3
Consolidated Condensed Statements of Income - Three months
ended and nine months ended June 30, 1996 and June 30, 1995..... 5
Consolidated Condensed Statements of Cash Flows -
Nine months ended June 30, 1996 and June 30, 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 11.0 - Calculation of Earnings Per Share................. 14
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
<CAPTION>
Unaudited Audited
June 30, 1996 Sept. 30, 1995
-------------------------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 15,929 $ 8,274
Accounts receivable, net 5,514 6,961
Inventories:
Finished goods 202 97
Work-in-process 70 367
Raw materials 4,204 4,418
-------------------------------
4,476 4,882
Deferred income taxes 308 308
Other current assets 314 97
Assets held for sale, net -- 2,345
-------------------------------
Total current assets 26,541 22,867
Property, plant and equipment:
Land, buildings and improvements 16,147 16,147
Machinery, equipment and furniture 23,432 23,726
Capital projects in process 3,464 1,110
-------------------------------
43,043 40,983
Less accumulated depreciation (23,601) (21,348)
-------------------------------
Net property, plant and equipment 19,442 19,635
Other assets, net 2,700 2,661
-------------------------------
Total assets $ 48,683 $ 45,163
===============================
</TABLE>
See accompanying notes.
- Continued -
3
<PAGE> 4
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
<CAPTION>
Unaudited Audited
June 30, 1996 Sept. 30, 1995
-------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 1,051 $ 2,412
Accrued liabilities 2,388 1,711
-------------------------------
Total current liabilities 3,439 4,123
Deferred income taxes 469 469
Long-term obligation -- Capital lease 174 174
Accrued postretirement benefits other than
pensions 671 623
Shareholders' equity:
Common stock 65 65
Additional paid-in capital 42,552 42,241
Retained earnings (Accumulated deficit) 1,313 (2,532)
-------------------------------
Total shareholders' equity 43,930 39,774
-------------------------------
Total liabilities and shareholders' equity $48,683 $45,163
===============================
</TABLE>
See accompanying notes.
4
<PAGE> 5
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except share and per share data)
UNAUDITED
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $9,551 $8,817 $27,187 $24,276
Cost of sales 5,236 6,557 16,389 18,083
-------------------- ---------------------
Gross profit 4,315 2,260 10,798 6,193
Selling, engineering and
administrative expenses 2,974 1,958 7,673 6,305
-------------------- ---------------------
Operating profit (loss) 1,341 302 3,125 (112)
Other income 188 95 513 242
-------------------- ---------------------
Income before income taxes
and extraordinary gain 1,529 397 3,638 130
Provision (benefit) for income taxes 33 24 (49) 64
-------------------- ---------------------
Income before extraordinary gain 1,496 373 3,687 66
Extraordinary gain on receipt and sale of
stock (net of income tax expense of $161) --- --- 158 ---
-------------------- ---------------------
Net income $1,496 $ 373 $ 3,845 $ 66
==============================================
Net income per common and
common equivalent share outstanding
Before extraordinary gain $ .22 $ .06 $ .56 $ .01
Effect of extraordinary gain --- --- .02 ---
-------------------- ---------------------
Net income $ .22 $ .06 $ .58 $ .01
==================== =====================
Weighted average common and common
equivalent shares outstanding 6,732,857 6,520,394 6,663,964 6,494,093
</TABLE>
See accompanying notes.
5
<PAGE> 6
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
UNAUDITED
<CAPTION>
Nine Months Ended
-----------------
June 30, 1996 June 30, 1995
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Cash received from customers $28,491 $ 24,079
Cash paid to suppliers and employees (22,037) (23,149)
Other income received 61 77
Interest paid (14) (9)
Investment income received 466 219
Income taxes paid (56) (23)
-------------------------------
Net cash provided by operating
activities 6,911 1,194
Cash flows from investing activities:
- -------------------------------------
Proceeds from sales of assets 2,412 100
Proceeds from receipt and sale of stock 403 ---
Capital expenditures (2,354) (619)
-------------------------------
Net cash provided (used) by investing activities 461 (519)
Cash flows from financing activities:
- -------------------------------------
Principal payments under capital lease obligations (28) (49)
Proceeds from issuance of common stock 311 45
-------------------------------
Net cash provided (used) by financing activities 283 (4)
Net increase in cash and cash equivalents 7,655 671
Cash and cash equivalents at beginning of period 8,274 6,185
-------------------------------
Cash and cash equivalents at end of period $ 15,929 $ 6,856
===============================
</TABLE>
See accompanying notes.
- Continued -
6
<PAGE> 7
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
UNAUDITED
<CAPTION>
Nine Months Ended
-----------------
June 30, 1996 June 30, 1995
--------------------------------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating
- --------------------------------------------------------------
activities:
- -----------
Net income $ 3,845 $ 66
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Extraordinary gain on receipt and sale of stock (319) ---
Depreciation and amortization 2,505 2,434
Provision for losses on accounts receivable, net (142) ---
Postretirement benefits 48 29
Gain on sale of fixed assets (32) (49)
Loss on cancellation of lease --- 37
Increase (decrease) in cash from changes in operating
assets and liabilities:
Accounts receivable 1,589 (197)
Inventories 406 (474)
Other current assets (217) (47)
Other assets, net (90) 14
Accounts payable (1,361) (544)
Accrued liabilities 679 (75)
--------------------------------
Total adjustments 3,066 1,128
--------------------------------
Net cash provided by operating activities $ 6,911 $1,194
================================
</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 June 30, 1996 and the results of operations and
cash flows for the three and nine month periods ended June 30, 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 June 30, 1996 were $9,551,000, an increase of
$734,000 or 8% from the same quarter last year. Operating profit amounted to
$1,341,000 for the quarter versus $302,000 for the prior year's third quarter
while net income rose to $1,496,000, or $.22 per share, from $373,000, or $.06
per share, for the same period last year. Net income for the quarter was the
highest in the Company's history.
For the first nine months, sales amounted to $27,187,000, up $2,911,000 or 12%
from a year ago while operating profit came to $3,125,000. Last year, the
Company incurred an operating loss of $112,000 for the same period. Net income
was $3,845,000, or $.58 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 nine months of last year, the Company reported net
income of $66,000, or $.01 per share.
The improvement in profitability versus last year reflects the continuing
success of the Company's strategy to focus on commercial markets with good
growth potential, as well as selective price increases which were implemented at
the beginning of the fiscal year. The Office Products business continued to be
strong with sales up 13% from a year ago, driven by the demand for dicorotrons,
the glass-coated wire assembly which generates ions to charge a copier's
photoreceptor. The Company is currently the sole-source supplier of dicorotrons
to Xerox Corporation. However, there is no long-term commitment by Xerox to
purchase these components from the Company and no assurance that Xerox will not
develop alternate sources of supply in the future.
In the Medical Products business, sales were up significantly versus a year ago,
although they still account for a small percentage of the Company's total sales.
During the quarter, the Company signed an agreement with Fujikura America, Inc.
to distribute Fujikura's high pixel count optical fiber for endoscopic medical
devices, and signed a letter of intent with UROHEALTH Systems, Inc. under which
both Galileo and UROHEALTH would distribute a video endoscope system in their
respective markets.
As part of the Company's program to complement its core capabilities, improve
its market penetration and achieve more direct market access through
acquisitions, the Company signed a definitive agreement, subsequent to the end
of the third quarter, to acquire Leisegang Medical, Inc. for 269,923 shares of
Galileo stock. The transaction, which will be accounted for as a pooling of
interests, is expected to be consummated in Galileo's fourth fiscal quarter.
9
<PAGE> 10
Leisegang Medical, headquartered in Boca Raton, FL, is a privately-held
distributor and manufacturer of OB/GYN diagnostic and surgical equipment with
annual sales of $6.5 million. Included in its product line are colposcopes
produced by Leisegang GmbH, a related company based in Berlin, Germany, that is
the world's largest and oldest manufacturer of colposcopes and accessories. The
products are sold to OB/GYN doctors' offices and hospitals through an internal
sales force and by manufacturers' representatives.
Leisegang is well known and highly respected in the gynecological equipment
market, estimated to be $200 million annually, and is a leader in sales to
doctors' offices. In addition to colposcopes, its products include biopsy
instruments, ultrasound, video equipment, laser and electro-surgical systems and
accessories, cryosurgery equipment, surgical instruments, rigid and flexible
hysteroscopes, bone densitometers and fetal heart monitors. This acquisition
will enable Galileo to participate immediately in a market that is growing at 15
to 20 percent per year, and is expected to benefit significantly from the trend
toward minimally invasive surgery and office-based procedures. It will also
provide Galileo with new distribution channels that can enhance the brand name
recognition and market penetration of the Company's medical imaging and sensing
products.
FINANCIAL CONDITION
- -------------------
The Company's working capital at June 30, 1996 of $23,102,000 increased
$4,358,000 from the balance at September 30, 1995 of $18,744,000. The cash and
short-term investments balance at June 30, 1996 was $15,929,000 versus
$8,274,000 at September 30, 1995. The change in working capital was primarily
due to the increase in cash. 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 $919,000. This compares with
$169,000 of capital expenditures in the third quarter of fiscal year 1995.
Capital spending year-to-date has been $2,354,000 versus $619,000 for the first
nine months last year. The higher capital spending this year has resulted from
investments related to a variety of cost reduction and business expansion
projects.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
11 Calculation of Earnings per Share
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 June 30, 1996.
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: July 30, 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.
----------- --------
11 Calculation of Earnings Per Share 14
27 Financial Data Schedule EDGAR
Filing
Only
13
<PAGE> 1
EXHIBIT 11
<TABLE>
GALILEO ELECTRO-OPTICS CORPORATION
CALCULATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary
Average shares outstanding 6,536,246 6,480,208 6,517,674 6,475,839
Net effect of dilutive stock options - based
on the treasury stock method using
average market price 196,611 40,186 146,290 18,254
Total 6,732,857 6,520,394 6,663,964 6,494,093
Net Income $1,496,000 $ 373,000 $3,845,000 $ 66,000
Per share amount $ .22 $ .06 $ .58 $ .01
Fully Diluted
Average shares outstanding 6,536,246 6,480,208 6,517,674 6,475,839
Net effect of dilutive stock options - based
on the treasury stock method using the
quarter end market price, if higher than
average market price 199,622 53,496 147,290 22,691
Total 6,735,868 6,533,704 6,664,964 6,498,530
Net Income $1,496,000 $ 373,000 $3,845,000 $ 66,000
Per share amount $ .22 $ .06 $ .58 $ .01
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 15,929
<SECURITIES> 0
<RECEIVABLES> 5,514
<ALLOWANCES> 142
<INVENTORY> 4,476
<CURRENT-ASSETS> 26,541
<PP&E> 43,043
<DEPRECIATION> 23,601
<TOTAL-ASSETS> 48,683
<CURRENT-LIABILITIES> 3,439
<BONDS> 0
<COMMON> 65
0
0
<OTHER-SE> 43,865
<TOTAL-LIABILITY-AND-EQUITY> 48,683
<SALES> 27,187
<TOTAL-REVENUES> 27,187
<CGS> 16,389
<TOTAL-COSTS> 16,389
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,638
<INCOME-TAX> (49)
<INCOME-CONTINUING> 3,687
<DISCONTINUED> 0
<EXTRAORDINARY> 158
<CHANGES> 0
<NET-INCOME> 3,845
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
