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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JULY 23, 1998
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GALILEO 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.)
0-11309
(Commission File Number)
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
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(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS
The Registrant reported financial results for the third quarter of
fiscal 1998 and announced a reorganization plan in response to the
higher than expected losses realized in two of its businesses, as
reported in its press release dated July 23, 1998, which is included in
this filing as Exhibit 99.1.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Exhibits
99.1 Press Release dated July 23, 1998.
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SIGNATURE
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 hereunto duly authorized.
GALILEO CORPORATION
Date: August 4, 1998 By: /s/ Josef W. Rokus
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Josef W. Rokus
Vice President, Corporate Development
and Secretary
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EXHIBIT INDEX
Exhibit No.
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99.1 Press Release dated July 23, 1998.
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EXHIBIT 99.1
Investor Relations - Gregory Riedel (508) 347-4222
GALILEO REPORTS THIRD QUARTER FISCAL 1998 RESULTS
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STURBRIDGE, MA, JULY 23, 1998 - Galileo Corporation (NASDAQ National Market:
GAEO) today reported financial results for the third quarter of fiscal 1998.
Revenues for the third quarter were $12,106,000 versus $7,516,000 in the third
quarter of last year. For the third quarter, the Company realized a loss of
$3,330,000, or a loss of $0.41 per share. The loss includes a provision for
$984,000, or $0.12 per share, principally related to the potential
uncollectibility of receivables from a significant medical endoscope customer
that has recently experienced severe liquidity issues. Although some or all of
this receivable may be collectible in the future, management believes that the
provision is appropriate given current circumstances.
Higher than expected losses were realized in principally two business areas.
In the Medical Endoscope Products business, the Company invested significant
resources in unsuccessfully securing a marketing relationship for a recently
developed application-specific endoscope. In addition, orders for existing
products have significantly decreased during the third quarter as a result of
lower than expected product requirements by the Company's marketing partners.
In Scientific Detector and Remote Spectroscopy Products, revenues were adversely
impacted by foreign shipment restrictions placed on the Company's microchannel
plate products by the US Department of Defense. For the past four years these
products were shipped to foreign customers
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under licenses granted by the US Department of Commerce. During the third
quarter, the Department of Defense restricted foreign shipments pending a
jurisdictional ruling of licenses between these two departments. This
jurisdictional ruling will decide whether any future licenses will be granted.
The Company is aggressively working with these departments and its elected
federal officials to keep jurisdiction with the Department of Commerce. As of
the date of this announcement, no decision has been reached, and there can be no
assurance that the outcome will be favorable to the Company. In addition, third
quarter revenues were negatively impacted by reduced shipments of the Company's
detector products to semiconductor equipment manufacturers who have
significantly reduced orders in response to the Asian economic downturn. These
events negatively impacted third quarter revenues by approximately $800,000.
Responding to these adverse events, the Company has adopted a reorganization
plan to significantly reduce costs. The Company has instituted a reduction in
force of approximately 85 employees, which will result in annualized savings of
approximately $3,600,000. This reduction will be based principally at the
Company's corporate headquarters in Sturbridge, MA, and involves employees that
support Scientific Detector and Remote Spectroscopy Products, Medical Endoscope
Products and various corporate administrative functions. The reduction in force
will be completed in compliance with federal law, which requires that a 60-day
notice be given to affected employees. The Company's fourth quarter results will
include a charge for as much as $900,000, or $0.11 per share, in salary and
related benefit expenses for employees who have received termination notices.
In addition, as a result of the aforementioned slowdown in the Company's
Scientific Detector and Remote Spectroscopy Products and Medical Endoscope
Products, the Company can no longer continue to invest in its Medical Endoscope
Products, and it has, therefore, suspended all investments for this business and
will eliminate certain significant related activities. In connection with this
action, during the fourth quarter the Company will record a charge of up to
$3,700,000, or $0.46 per share, to reduce the carrying values of related
equipment and inventories to fair market value.
Due to the losses for the quarter, the Company is in violation of the covenants
of its bank loan which gives the bank the right to accelerate the loan. The
Company is discussing with the bank a waiver of
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the violation and an increase in the loan amount to fund ongoing cash
requirements. There can be no assurance that the waiver or an increase in the
loan amount will be obtained.
William T. Hanley, President and Chief Executive Officer, commented, "We are
very disappointed in our third quarter performance and have taken quick,
remedial action to dramatically reduce expenses and focus the Company's
development efforts on its emerging telecommunication products. We will also
continue to work aggressively with our elected officials to regain foreign
shipment licenses for our microchannel plate products." Mr. Hanley continued,
"On the positive side, we are currently providing Beta test optical amplifiers
for the 1310nm region of the spectrum to a telecommunications service provider
and a CATV equipment manufacturer, and we are in the process of testing our
first WDM filters developed at OFC to Bellcore standards. We are pleased with
the progress we've achieved increasing our women's health products revenues from
our supply and distribution agreement with PSS World Medical, Inc. In addition,
our recently acquired OFC subsidiary performed well for the quarter. We believe
that focusing our efforts in telecommunication and women's health medical
products provides the foundation for future growth."
Galileo, along with its recently acquired wholly-owned subsidiary, OFC
Corporation, develops, manufactures and markets products based on its core
optical and photonic technologies for applications in medical products and
instruments, telecommunications products, analytical instruments and office
equipment. Leisegang Medical, a wholly-owned subsidiary, develops,
manufactures, and markets women's health-related medical products. Please visit
our web sites at www.galileocorp.com, www.ofccorp.com and www.leisegang.com for
additional information.
NOTE TO INVESTORS
Forward-looking statements in this release, including statements regarding the
continuing operations of recently acquired companies, the expected growth from
the PSS World Medical, Inc supply and distribution agreement and the
above-referenced reorganization plan are based on information available to the
Company on the date hereof. The Company's actual results could differ materially
from those stated or implied by such forward-looking statements, due to risks
and uncertainties associated with the continued integration of newly acquired
operations, the Company's dependence
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on a major distributor and the successful completion of the Company's
reorganization plan. The forward-looking statements should be considered in the
context of these and other risk factors disclosed in the Company's fiscal 1997
SEC Form 10-K.
(Financial information follows)
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GALILEO CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1998 Sept. 30, 1997
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<S> <C> <C>
ASSETS
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Current assets:
Cash and cash equivalents $ 1,146 $ 9,546
Accounts receivable, net 7,968 5,639
Inventories, net 11,473 6,614
Other current assets 302 187
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Total current assets 20,889 21,986
Property, plant and equipment, net 17,950 15,372
Excess of cost over the fair value of assets acquired, net 20,051 3,873
Other assets, net 1,758 1,496
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Total assets $ 60,648 $42,727
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Accounts payable and accrued liabilities $ 7,810 $ 5,669
Note payable 1,298 --
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Total current liabilities 9,108 5,669
Other liabilities 1,148 956
Long-term debt 10,300 --
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Total liabilities 20,556 6,625
Shareholders' equity:
Common stock 80 69
Additional paid-in capital 52,075 42,951
Accumulated deficit (12,063) (6,918)
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Total shareholders' equity 40,092 36,102
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Total liabilities and shareholders' equity $ 60,648 $42,727
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GALILEO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net Sales $12,106 $ 7,516 $32,540 $ 25,948
Cost of sales 8,384 5,499 21,859 16,733
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Gross profit 3,722 2,017 10,681 9,215
Engineering expenses 1,644 1,361 4,614 3,844
Selling and administrative expenses 4,289 2,355 10,051 6,868
Provision for potential uncollectible
receivables 984 -- 984 --
Reduction in carrying value of certain -- -- -- 2,226
long-lived assets
Reorganization costs -- -- -- 6,872
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6,917 3,716 15,649 19,810
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Operating loss before other income
(expense) and income taxes (3,195) (1,699) (4,968) (10,595)
Other income (expense) (179) 198 (241) 691
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Loss before income taxes (3,374) (1,501) (5,209) (9,904)
Provision (benefit) for income taxes (44) 12 (64) 153
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Net loss $(3,330) $(1,513) $(5,145) $(10,057)
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Basic and diluted loss per share $ (0.41) $ (0.22) $ (0.69) $ (.47)
Weighted average shares outstanding 8,042 6,854 7,509 6,846
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