<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
--------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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-------------------
Commission File Number: O-13715
VITRONICS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF
MASSACHUSETTS O4-2726873
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Forbes Road, Newmarket, NH 03857
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 659-6550
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NONE
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(Former name, former address and former fiscal year,
if changed since last report)
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
-------- --------
Number of shares outstanding of each of the registrant's classes
of common stock as of July 1, 1995:
Common Stock, $.01 par value: 7,553,638 shares
<PAGE>
VITRONICS CORPORATION
INDEX
Page
----
Part I - Financial Information:
-------------------------------
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
July 1, 1995 (unaudited)
and December 31, 1994 ................................... 3
Condensed Consolidated Statements of Operations (unaudited) -
Three Months and Six Months Ended July 1, 1995
and July 2, 1994 ........................................ 4
Condensed Consolidated Statements of
Cash Flows (unaudited) - Six Months
Ended July 1, 1995 and July 2, 1994 ..................... 5
Notes to Condensed Consolidated Financial Statements
(unaudited).............................................. 6
Calculation of Net Income Per Share for
Three Months Ended July 1, 1995 and July 2, 1994......... 7
Calculation of Net Income Per Share for
Six Months Ended July 1, 1995 and July 2, 1994........... 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 9
Part II - Other Information
---------------------------
Items 1 through 6............................................. 11
Signatures.................................................... 13
<PAGE>
VITRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
(Unaudited) (*)
----------- ------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 852 $ 671
Accounts receivable, net 3,214 2,723
Inventories 2,777 2,094
Other current assets 146 189
------- -------
Total current assets 6,989 5,677
Property and equipment, net 165 223
Other assets 59 152
------- -------
$ 7,213 $ 6,052
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable 2,101 $ 1,751
Other current liabilities 1,218 945
Current maturities of long-term liabilities 253 305
------- -------
Total current liabilities 3,572 3,001
Long-term liabilities, net of current maturities 1,243 1,323
Stockholders' Equity:
Common Stock, $.01 par value 76 76
Additional paid-in capital 5,405 5,401
Foreign currency translation adjustment (168) (184)
Retained earnings (deficit) (2,915) (3,565)
------- -------
2,398 1,728
------- -------
$ 7,213 $ 6,052
======= =======
</TABLE>
*Condensed from audited financial statements
The accompanying notes are an integral part
of these condensed financial statements.
3
<PAGE>
VITRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ------------------
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $5,767 $3,704 $10,620 $7,288
Cost of goods sold 3,345 2,344 6,327 4,702
------ ------ ------- ------
Gross profit 2,422 1,360 4,293 2,586
Selling, general and
administrative expenses 1,523 942 2,738 1,799
Research & development costs 333 244 636 504
Patent Litigation 75 60 150 91
------ ------ ------- ------
1,931 1,246 3,524 2,394
------ ------ ------- ------
Income from operations 491 114 769 192
Non-operating expense - net (52) (55) (103) (121)
------ ------ ------- ------
Income before income taxes 439 59 666 71
Income tax 13 - 16 -
------ ------ ------- ------
Net income $ 426 $ 59 $ 650 $ 71
====== ====== ======= ======
Net earnings per
common share
Primary $.05 $.01 $.08 $.01
==== ==== ==== ====
Fully Diluted $.04 $.01 $.07 $.01
==== ==== ==== ====
Weighted average number of
common and common equivalent
shares used in calculation
of earnings per common share
Primary 8,095 7,592 8,132 7,566
====== ====== ====== ======
Fully Diluted 10,537 9,992 10,155 9,966
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
4
<PAGE>
VITRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
Six Months Ended
-------------------
July 1, July 2,
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 650 $ 71
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 111 89
Provision for excess and obsolescence 155 106
Changes in current assets and liabilities:
Accounts receivable (491) (449)
Inventories (838) (80)
Other current assets 43 18
Accounts payable 350 298
Income taxes - 20
Other current liabilities 273 (68)
----- -----
Total adjustments (397) (66)
----- -----
Net cash provided by operating activities 253 5
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (17) (9)
Disposals of property and equipment - 3
Additions\disposals of other assets 57 (9)
----- -----
Net cash provided by (used for)
investing activities 40 (15)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (132) (134)
Issuance of common stock 4
----- -----
Net cash provided by (used for)
financing activities (128) (134)
Foreign currency translation adjustment 16 15
----- -----
CASH:
Net increase (decrease) 181 (129)
Balance, beginning of period 671 172
----- -----
Balance, end of period $ 852 $ 43
===== =====
Supplemental disclosure of non-cash
financing activities:
Conversion of debt to equity - $ 71
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
5
<PAGE>
VITRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Basis for Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three month and six month period
ended July 1, 1995 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1995. For further information,
refer to the Company's consolidated financial statements and notes thereto
contained in the Company's Form 10-K for the year ended December 31, 1994
filed with the Securities and Exchange Commission (File #0-13715) on March
22, 1995 and amended on August 4, 1995.
B. Inventories
Inventories valued at the lower of cost (determined using the first-in,
first-out method) or market, net of valuation reserves of $522,000 and
$367,000, respectively, were as follows (in thousands):
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
------- ------------
<S> <C> <C>
Finished goods $ 551 $ 224
Work in process 961 369
Raw Materials 1,265 1,501
------ ------
2,777 2,094
====== ======
</TABLE>
6
<PAGE>
VITRONICS CORPORATION
CALCULATION OF NET INCOME PER COMMON SHARE
FOR THE THREE MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994
<TABLE>
<CAPTION>
July 1, 1995
------------
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net Income $426 $456
Weighted Average Shares Outstanding:
Common Stock 7,553,638 7,553,638
Convertible Debentures 2,400,000
Warrants 203,945 212,830
Stock Options 337,628 371,016
--------- ----------
Weighted Averaged Shares 8,095,211 10,537,484
Outstanding
Income Per Share $.05 $.04
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 2, 1994
------------
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net Income $ 59 $ 89
Weighted Average Shares Outstanding:
Common Stock 7,520,538 7,520,538
Convertible Debentures 2,400,000
Warrants 71,806 71,806
Stock Options 0 0
--------- ---------
Weighted Averaged Shares
Outstanding 7,592,344 9,992,344
Income Per Share $.01 $.01
</TABLE>
7
<PAGE>
VITRONICS CORPORATION
CALCULATION OF NET INCOME PER COMMON SHARE
FOR THE SIX MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994
<TABLE>
<CAPTION>
July 1, 1995
------------
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net Income $650 $710
Weighted Average Shares Outstanding:
Common Stock 7,552,611 7,552,611
Convertible Debentures 2,400,000
Warrants 212,107 216,895
Stock Options 367,383 385,369
--------- ----------
Weighted Averaged Shares 8,132,101 10,554,875
Outstanding
Income Per Share $.08 $.07
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 2, 1994
------------
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net Income $ 71 $131
Weighted Average Shares Outstanding:
Common Stock 7,453,806 7,453,806
Convertible Debentures 2,400,000
Warrants 99,079 99,079
Stock Options 13,528 13,528
--------- ----------
Weighted Averaged Shares
Outstanding 7,566,413 9,966,413
Income Per Share $.01 $.01
</TABLE>
8
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation
--------------------
Sales for the second quarter ended July 1, 1995 increased 56% to $5,767,000
from $3,704,000 for the same period of 1994. Sales for the six months ended
July 1, 1995 were $10,620,000 versus $7,288,000 for the same period in 1994, an
increase of 46%. Bookings for the three months ended July 1, 1995 increased 47%
to $6,736,000 from $4,584,000 for the same period in 1994. Bookings for the six
months ended July 1, 1995 were $12,069,000 versus $8,212,000 for the same period
in 1994, an increase of 47%. The increase in bookings and revenue were a result
of increased demand for the Company's UNITHERM(R), UNITHERM(R) II and
ISOTHERM/TM/ products. The Company does not anticipate that the percentage
increase in net revenue and bookings for the three and six month periods ending
July 1, 1995 are necessarily indicative of the percentage increase in net
revenues to be expected for the entire fiscal year. Backlog as of July 1, 1995
was $4,038,000 versus $2,589,000 at December 31, 1994 and $3,057,000 as of July
2, 1994.
Gross margin for the three months ended July 1, 1995 increased to 42%
from 37% for the same period in 1994. For the six month period ended July 1,
1995, the gross margin percentage was 40% versus 35% for the same period in
1993. The increase in margins is due to a significantly higher volume of sales,
reduced overhead spending and reduced material costs. The Company increased its
deductions/write-offs for excess and obsolete inventory to $101,000 in the
second quarter of 1995, as compared to $76,000 in the first quarter of 1994, and
increased its provision for inventory reserves from $367,000 at the end of 1994
to $522,000 at the end of the second quarter of 1995. Deductions and write-offs
for the first six months of 1995 were $155,000 as compared to $106,000 in 1994.
Such increases are principally related to the Company's production process and
product line evolution. As the Company made changes in designs and processes,
certain existing inventories were affected. The Company also changed its
production process as the UNITHERM/TM/ product evolved. This change
necessitated the rework of certain inventory items and the obsolescence of other
items. The Company increased its reserves for obsolescence in recognition of
these events.
Operating expenses for the three months ended July 1, 1995 were
$1,931,000 versus $1,246,000 for the same period of 1994, an increase of 55%.
Operating expenses as a percentage of sales were 33% and 34%, respectively.
Operating expenses for the six months ended July 1, 1995 were $3,524,000 versus
$2,394,000 for the same period in 1994, an increase of 47%. Operating expenses
as a percentage of sales were 33% and 33%, for the resepctive six month periods.
The increase in actual spending is a result of the higher sales volume which
resulted in higher commission and marketing expenses and increased staffing
levels. The Company also incurred approximately $100,000 of costs relating to
the Registration Statement filed on Form S-3 and an additional $100,000 of costs
associated with the anticipated conversion of the $1.2 million subordinated
convertible debenture.
For the second quarter of 1995, selling, general and administrative
9
<PAGE>
expenses as a percentage of sales were 26% versus 25% in 1994. The costs
relating to the Registration Statement and debenture conversion which were
included in selling, general & administrative expenses represented 3% of sales
in the second quarter and 2% of sales for the six month period. Research and
development expenses as a percentage of sales for such periods were 6% in 1995,
and 7% in 1994. For the six months ended July 1, 1995 selling, general and
administrative expenses as a percentage of sales were 26% as compared to 25% in
1994. Research and development expenses as a percentage of sales were 6% in 1995
and 7% in 1994.
Patent litigation costs were $75,000 for the second quarter of 1995 as
compared to $60,000 for the second quarter of 1994. For the six month period
ended July 1, 1995, patent litigation costs were $150,000 as compared to $91,000
for the same period in 1994.
The Company had non-operating expenses, primarily interest expense net, of
$52,000 for the three months ended July 1, 1995 compared with $55,000 for the
same period of 1994. During the first six months of 1995, the Company incurred
non-operating expenses, primarily interestexpense net, of $103,000 compared with
$121,000 for the same period of 1994.
Net income for the second quarter of 1995 was $426,000 compared to $59,000
for the comparable period of 1994. Net income was $.05 per primary share, and
$.04 per fully diluted share. For the comparable 1994 period, net income per
share was $.01. Net income for the first six months of 1995 was $650,000
compared to $71,000 for the same period in 1994. Net income for the six month
period of 1995 was $.08 per primary share, and $.07 per fully diluted share.
For the comparable period of 1994, net income per share was $.01.
Liquidity and Capital Resources
-------------------------------
The Company continues to monitor its operational spending levels very
closely with the goal of cash conservation. During the first six months of
1995, cash increased $181,000 to $852,000.
During March 1995, the Company obtained a $500,000 revolving line of credit
with First National Bank of Portsmouth. The Company believes this funding
source, combined with its existing cash balances and anticipated cash flow from
operations, will be adequate to meet its working capital requirements for the
remainder of the year. To date, the Company has not utilized this line of
credit.
10
<PAGE>
VITRONICS CORPORATION
PART II
OTHER INFORMATION
Items 1 through 3: Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
On May 4, 1995, the Company held its Annual Meeting of Stockholders.
David R. A. Steadman was elected as Class B Director of the Company. Set forth
below are the results of each matter voted upon at the Annual Meeting:
1. Election of Directors
For Withheld
--- --------
David R. A. Steadman 6,127,466 14,572
2. Ratification of the appointment of Coopers & Lybrand as the Company's
independent public accountants:
For Against Abstentions
--- ------- -----------
6,130,879 7,399 3,760
3. Adoption of Key Employees' Stock Option Plan
For Against Abstentions
--- ------- -----------
5,938,018 112,799 91,221
Item 5: Other Information
On April 25, 1995, the Company filed a Registration Statement on Form S-3,
and an amended Form S-3 on July 18, 1995, August 3, 1995 and August 9, 1995 with
the Securities and Exchange Commission covering 2,888,225 shares of its common
stock which includes 2,400,000 shares reserved for issuance upon conversion of
the Company's outstanding $1.2 million subordinated convertible debenture dated
October 1, 1993, 346,225 shares issuable upon exercise of outstanding warrants
held by the underwriter for the Company's 1992 Right's Offering and 142,000
shares sold to a vendor of the Company in 1992. The Company filed the
Registration Statement due to the exercise of registration rights previously
granted to the holders of the Company's underwriter warrants and subordinated
convertible debenture. The Company will incur the cost of the registration.
However, the Company will not receive any proceeds from the sale of the stock by
the selling stockholders. The holders of the Company's subordinated convertible
debenture will convert the entire debenture and are selling 1,920,000 of the
2,400,000 shares pursuant to a firm commitment underwriting by Schneider
Securities, Inc.
11
<PAGE>
Item 6:
(a). Exhibits
27 Financial Data Schedule
(b). Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VITRONICS CORPORATION
Date: August 9, 1995 By: /s/ James J. Manfield, Jr.
--------------------------
James J. Manfield, Jr.
Chairman of the Board,
Chief Executive Officer,
Chief Financial Officer,
and Treasurer
Date: August 9, 1995 By: /s/ Ronald W. Lawler
--------------------------
Ronald W. Lawler,
President and
Chief Operating Officer
Date: August 9, 1995 By: /s/ Daniel J. Sullivan
--------------------------
Daniel J. Sullivan,
Vice President, Controller and
Principal Accounting Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JULY 1, 1995
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993 DEC-31-1994 DEC-31-1993
<PERIOD-START> APR-02-1995 APR-03-1994 JAN-01-1995 JAN-01-1994
<PERIOD-END> JUL-01-1995 JUL-02-1994 JUL-01-1995 JUL-02-1994
<CASH> 852 43 852 43
<SECURITIES> 0 0 0 0
<RECEIVABLES> 3,324 2,245 3,324 2,245
<ALLOWANCES> 110 100 110 100
<INVENTORY> 2,777 2,133 2,777 2,133
<CURRENT-ASSETS> 6,989 4,544 6,989 4,544
<PP&E> 1,815 1,750 1,815 1,750
<DEPRECIATION> 1,650 1,482 1,650 1,482
<TOTAL-ASSETS> 7,213 4,978 7,213 4,978
<CURRENT-LIABILITIES> 3,572 2,253 3,572 2,253
<BONDS> 0 0 0 0
<COMMON> 76 75 76 75
0 0 0 0
0 0 0 0
<OTHER-SE> 2,322 1,081 2,322 1,081
<TOTAL-LIABILITY-AND-EQUITY> 7,213 4,978 7,213 4,978
<SALES> 5,767 3,704 10,620 7,288
<TOTAL-REVENUES> 5,765 3,704 10,620 7,288
<CGS> 3,345 2,344 6,327 4,702
<TOTAL-COSTS> 1,931 1,246 3,524 2,394
<OTHER-EXPENSES> 9 20 18 25
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 43 35 85 96
<INCOME-PRETAX> 439 59 666 71
<INCOME-TAX> 13 0 16 0
<INCOME-CONTINUING> 426 59 650 71
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 426 59 650 71
<EPS-PRIMARY> .05 .01 .08 .01
<EPS-DILUTED> .04 .01 .07 .01
</TABLE>
