<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 1997
( ) 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 04-2726873)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Forbes Road, Newmarket, NH 03857
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 659-6550
NONE
(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
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Number of shares outstanding of each of the registrant's classes of common
stock as of March 30, 1997:
Common Stock, $.01 par value: 9,856,572 shares
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VITRONICS CORPORATION
INDEX
PAGE
PART I--FINANCIAL INFORMATION:
Item 1--Financial Statements:
Condensed Consolidated Balance Sheets--March 30, 1997 (unaudited)
and December 31, 1996............................................ 3
Condensed Consolidated Statements of Operations (unaudited)--Three
Months Ended March 30, 1997 and March 30, 1996................... 4
Condensed Consolidated Statements of Cash Flows (unaudited)--Three
Months Ended March 30, 1997 and March 30, 1996................... 5
Notes to Condensed Consolidated Financial Statements (unaudited). 6
Calculation of Net Income Per Share--Three Months Ended March 30, 1997
and March 30, 1996............................................... 7
Item 2--Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 8
PART II--OTHER INFORMATION
Item 6........................................................... 10
Signatures....................................................... 11
2
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PART I
Item 1. Financial Information
VITRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
MARCH 30, DECEMBER 31,
1997 1996
(UNAUDITED) (*)
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ASSETS
Current assets:
Cash and cash equivalents................. $ 1,923 $2,125
Accounts receivable, net.................. 3,839 3,177
Inventories............................... 3,244 2,989
Deferred taxes............................ 584 553
Other current assets...................... 114 225
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Total current assets.................... 9,704 9,069
Property and equipment, net................. 417 437
Deferred taxes.............................. 183 183
Other assets................................ 88 74
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$10,392 $9,763
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 2,128 $1,341
Income taxes payable...................... 139 176
Other current liabilities................. 1,641 1,753
Current maturities of long-term
liabilities............................. 204 214
--------------- -------------
Total current liabilities............... 4,112 3,484
Long-term liabilities, net of current
maturities................................ 85 104
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity:
Common Stock, $.01 par value.............. 99 99
Additional paid-in capital................ 6,145 6,145
Foreign currency translation.............. (140) (81)
Retained earnings (deficit)............... 91 12
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6,195 6,175
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$10,392 $ 9,763
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* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
3
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VITRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's omitted except per share amounts)
THREE MONTHS ENDED
------------------------
MARCH 30, MARCH 30,
1997 1996
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Net sales....................................... $ 5,457 $ 5,859
Cost of goods sold.............................. 3,423 3,518
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Gross profit.................................. 2,034 2,341
Selling, general and administrative expenses.... 1,523 1,442
Research and development costs.................. 331 369
Patent litigation............................... 39 20
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1,893 1,831
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Income from operations.......................... 141 510
Non-operating expense--net...................... (9) (5)
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Income before taxes............................. 132 505
Income taxes.................................... 53 202
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Net income...................................... $ 79 $ 303
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--------- ---------
Net earnings per common share:
Primary....................................... $ 0.01 $ 0.03
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--------- ---------
Fully diluted................................. $ 0.01 $ 0.03
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--------- ---------
Weighted average number of common and common
equivalent shares used in calculation of
earnings per common share:
Primary....................................... 10,049 10,861
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--------- ---------
Fully diluted................................. 10,075 10,874
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The accompanying notes are an integral part of these condensed financial
statements.
4
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VITRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
THREE MONTHS ENDED
--------------------
MARCH 30, MARCH 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 79 $ 303
Adjustments to reconcile net income to net cash flows
provided by (used for) operating activities:
Depreciation and amortization...................... 57 46
Provision for excess and obsolescence.............. 149 58
Provision for bad debts............................ 6 --
Changes in current assets and liabilities:
Accounts receivable.............................. (668) 232
Inventories...................................... (404) (583)
Other current assets............................. 111 (16)
Accounts payable................................. 787 127
Income taxes..................................... (37) 42
Deferred Taxes................................... (31) 109
Other current liabilities........................ (112) (709)
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Total adjustments.............................. (142) (694)
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Net cash provided by operating activities.............. (63) (391)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.................... (28) (49)
Additions to other assets.............................. (23) (24)
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Net cash used for investing activities................. (51) (73)
CASH FLOWS FROM FINANCING ACTIVITIES:`
Payments of long-term debt............................. (29) (15)
Issuance of common stock............................... -- 1
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Net cash used for financing activities................. (29) (14)
Foreign currency translation adjustment................ (59) (28)
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CASH:
Net increase (decrease)................................ (202) (506)
Balance, beginning period.............................. 2,125 2,825
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Balance, end of period................................. $1,923 $2,319
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest............................................. 8 7
Income taxes......................................... 133 50
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Capital lease obligations.............................. -- 55
The accompanying notes are an integral part of these condensed financial
statements
5
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VITRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS 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 period ended March 30, 1997 are
not necessarily indicative of the results expected for the year ended December
31, 1997. 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, 1996, filed with the Securities and Exchange Commission (File
#0-13715) on March 28, 1997.
B. INVENTORIES
Inventories valued at the lower of cost (determined using the first-in,
first-out method) or market, were as follows (in thousands):
MARCH 30, DECEMBER 31,
1997 1996
--------- ------------
Finished Goods.......................... $ 765 $ 833
Work in process......................... 617 663
Raw materials........................... 1,862 1,493
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$3,244 $2,989
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6
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VITRONICS CORPORATION AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND MARCH 30, 1996
MARCH 30, 1997
--------------------------
FULLY
PRIMARY DILUTED
------------ ------------
Net income................................. $ 79,000 $ 79,000
Weighted average shares outstanding:
Common stock............................. 9,856,572 9,856,572
Stock options............................ 192,601 218,410
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Weighted average shares outstanding...... 10,049,173 10,074,984
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----------- ------------
Earnings per share......................... $ 0.01 $ 0.01
MARCH 30, 1996
--------------------------
FULLY
PRIMARY DILUTED
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Net income................................. $ 303,000 $ 303,000
Weighted average shares outstanding:
Common stock............................. 10,313,819 10,313,819
Stock options............................ 546,914 559,830
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Weighted average shares outstanding...... 10,860,733 10,873,649
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----------- ------------
Earnings per share......................... $ 0.03 $ 0.03
7
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VITRONICS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the quarter ended March 30, 1997 were $5,457,000 compared with
$5,859,000 for the same period in 1996, a decrease of 7%. Bookings for the three
months ended March 30, 1997 were $5,888,000 versus $6,606,000 for the same
period in 1996, a decrease of 11%. The decline in revenues is attributable to
the decline in bookings, primarily in the U.S. and Asia. This was a result of a
slowdown in the overall economy and the market for the Company's products. The
Company does not anticipate that the percentage change in net revenues and
bookings for the three months ended March 30, 1997 is necessarily indicative of
the trend for the entire fiscal year. Backlog at March 30, 1997 was $2,415,000
versus $1,984,000 at December 31, 1996, and $3,594,000 at March 30, 1996.
Gross margin for the three months ended March 30, 1997 decreased to 37% from
40% for the same period in 1996. The decrease is a result of initial costs
associated with the SELECTSeries -TM- systems. The labor and material on the
early shipments were greater than the UNITHERM-Registered Trademark- systems. It
is not expected that these costs will remain at that level on a going forward
basis.
Operating expenses for the three months ended March 30, 1997 were $1,893,000
versus $1,831,000 for the same period in 1996, an increase of 3%. Operating
expenses as a percentage of sales for such periods were 35% and 31%. The
increase in actual spending is the result of the increased staffing levels and
marketing expenses. The first quarter of 1997 includes approximately $135,000 of
severance pay for a former executive of the Company.
For the first quarter of 1997, selling, general and administrative expenses
as a percentage of sales were 28% versus 25% in 1996. The increase in actual
spending is a result of the increased sales volume which resulted in higher
commission and marketing expenses. Research and development expenses as a
percentage of sales for such periods were 6% in 1997 versus 6% in 1996.
Costs relating to the Company's patent infringement lawsuit were $39,000 for
the three months ended March 30, 1997, as compared to $20,000 for the comparable
1996 period.
The Company recorded tax expense of $53,000 for the quarter ended March 30,
1997, as compared to $202,000 for the comparable quarter of 1996. This was a
result of the lower pre-tax income. The effective tax rate for both periods was
40%
Net income for the first quarter of 1997 was $79,000, compared to $303,000
for the comparable period of 1996. For the first quarter of 1997, net income was
$0.01 per primary share, and $0.01 per fully diluted share. For the comparable
1996 period, net income was $0.03 per primary share, and $0.03 per fully diluted
share.
8
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LIQUIDITY AND CAPITAL RESOURCES
The Company continues to monitor its operations spending levels very closely
with the goal of cash conservation. During the quarter ended March 30, 1997,
cash decreased $202,000 to $1,923,000. This decrease was caused by an increase
in the Company's inventory and accounts receivable levels.
The Company has reviewed its capital spending budget for the remainder of
1997 and expects to finance its capital equipment acquisition through lease
financing. The Company believes that its current cash balances and cash from
operations will be adequate to meet the Company's working capital requirements
for the balance of the year.
9
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VITRONICS CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 6:
(a). Exhibits
27 Financial Data Schedule (EDGAR filing only)
(b). No reports on Form 8-K were filed during the quarter for which
this report is filed.
10
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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: MAY 12, 1997 BY: /S/JAMES J. MANFIELD, JR.
--------------------------
JAMES J. MANFIELD, JR.
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER,
AND TREASURER
DATE: MAY 12, 1997 BY: /S/DANIEL J. SULLIVAN
--------------------------
DANIEL J. SULLIVAN,
VICE PRESIDENT, CONTROLLER,
PRINCIPAL ACCOUNTING OFFICER
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-30-1997 MAR-30-1996
<CASH> 1,923 2,319
<SECURITIES> 0 0
<RECEIVABLES> 3,984 3,280
<ALLOWANCES> 145 128
<INVENTORY> 3,244 3,175
<CURRENT-ASSETS> 9,704 9,295
<PP&E> 2,160 2,096
<DEPRECIATION> 1,743 1,627
<TOTAL-ASSETS> 10,392 10,022
<CURRENT-LIABILITIES> 4,112 3,572
<BONDS> 0 0
99 103
0 0
<COMMON> 0 0
<OTHER-SE> 6,096 6,077
<TOTAL-LIABILITY-AND-EQUITY> 10,392 10,022
<SALES> 5,457 5,859
<TOTAL-REVENUES> 5,457 5,859
<CGS> 3,423 3,518
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,893 1,831
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9 5
<INCOME-PRETAX> 132 505
<INCOME-TAX> 53 202
<INCOME-CONTINUING> 79 303
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 79 303
<EPS-PRIMARY> .01 .03
<EPS-DILUTED> .01 .03
</TABLE>
