<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 0-12489
SPECTRAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2729372
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Hall Road, Sturbridge, Massachusetts 01566
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 347-2261
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 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.
The number of shares of the registrant's Common Stock outstanding as of
April 30, 1995 was 5,207,409.
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PART I - FINANCIAL INFORMATION
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS - ASSETS
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 176,960 $ 477,022
Current Portion of Marketable Securities 2,483,814 641,256
Accounts Receivable, Trade, net 6,218,532 6,183,461
Inventories 5,049,499 4,100,179
Current Deferred Income Taxes, net 303,000 303,000
Income Taxes Receivable 501,629 501,629
Prepaid Expenses and Other Current Assets 382,555 267,871
--------------- ---------------
Total Current Assets 15,115,989 12,474,418
Property, Plant and Equipment:
Land and Land Improvements 395,113 395,113
Buildings and Improvements 3,271,598 3,266,189
Machinery and Equipment 15,157,496 14,612,501
Construction in Progress 1,455,446 1,625,056
--------------- ---------------
20,279,653 19,898,859
Less Accumulated Depreciation and Amortization 10,848,966 10,482,710
--------------- ---------------
9,430,687 9,416,149
Other Assets:
Long-term Marketable Securities 3,794,108 5,196,903
License Agreements, net 1,155,079 1,205,300
Deferred Income Taxes, net 1,702,000 1,702,000
Deposit on Acquisition 1,759,646 --
Goodwill, net 1,086,397 1,106,806
Other 110,894 260,361
--------------- ---------------
9,608,124 9,471,370
--------------- ---------------
Total Assets $ 34,154,800 $ 31,361,937
=============== ===============
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS -
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 1,402,138 $ 751,455
Income Taxes Payable 57,774 --
Accrued Defined Benefit Pension Liability 65,571 65,571
Accrued Liabilities 2,462,128 2,200,825
--------------- ---------------
Total Current Liabilities 3,987,611 3,017,851
Long-term Debt 6,891,942 5,240,000
Stockholders' Equity:
Common Stock, voting, $.10 par value; authorized
20,000,000 shares; outstanding 5,207,409 shares 520,741 520,741
Common Stock, non-voting, $.10 par value;
authorized 250,000 shares; no shares
outstanding -- --
Paid-in Capital 26,028,279 26,028,279
Net Unrealized Loss on Marketable Securities (154,191) (242,438)
Retained Earnings (Deficit) (3,119,582) (3,202,496)
--------------- ---------------
Total Stockholders' Equity 23,275,248 23,104,086
--------------- ---------------
Total Liabilities & Stockholders' Equity $ 34,154,800 $ 31,361,937
=============== ===============
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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<PAGE> 4
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Net Sales $ 7,965,079 $ 5,786,219
Cost of Sales 5,071,503 3,724,817
-------------- -------------
Gross Profit 2,893,576 2,061,402
Selling & Administrative Expenses 2,037,649 1,312,526
Research & Development Costs 753,445 291,739
-------------- -------------
Income from Operations 102,482 457,137
Other Income (Expense):
Interest Income 84,623 76,571
Interest Expense (101,813) (12,379)
Other 56,146 19,689
-------------- -------------
38,956 83,881
-------------- -------------
Income before Income Taxes 141,438 541,018
Income Tax Expense 58,524 222,000
-------------- -------------
Net Income $ 82,914 $ 319,018
============== =============
Weighted Average Number of Shares of
Common Stock Outstanding:
Primary 5,228,710 5,484,748
============== =============
Fully Diluted 5,228,710 5,484,748
============== =============
Net Income per Share of Common Stock:
Primary $.02 $.06
==== ====
Fully Diluted $.02 $.06
==== ====
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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<PAGE> 5
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 82,914 $ 319,018
Add (Deduct) Items Not Affecting Cash:
Depreciation and Amortization 484,795 398,803
Other Non-Cash Charges (17,517) 114,500
Changes in Other Components of Working Capital (115,548) (445,328)
--------------- ---------------
Net Cash Provided by Operating Activities 434,644 386,993
Cash Flows from Investing Activities:
Deposit on Acquisition of Business (1,613,062) (6,567,768)
Acquisition of Property & Equipment (420,643) (262,897)
Other -- 443
--------------- ---------------
Cash Used in Investing Activities (2,033,705) (6,830,222)
--------------- ---------------
Cash Flows from Financing Activities:
Borrowings of Long-term Debt 1,651,942 5,000,000
Reduction of Debt -- (33,333)
Proceeds from Exercise of Stock Options and Warrants -- 99,115
Purchase of Marketable Securities (352,943) --
--------------- ---------------
Cash Provided by Financing Activities 1,298,999 5,065,782
Decrease in Cash and Cash Equivalents (300,062) (1,377,447)
Cash and Cash Equivalents at Beginning of Period 477,022 3,538,190
--------------- ---------------
Cash and Cash Equivalents at End of Period $ 176,960 $ 2,160,743
=============== ===============
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
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<PAGE> 6
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial information for the three months ended March 31, 1995 is
unaudited but reflects all adjustments (consisting solely of normal recurring
adjustments) which the Company considers necessary for a fair statement of
results for the interim period. The results of operations for the three months
ended March 31, 1995 are not necessarily indicative of the results for the
entire year.
The consolidated results for the three months ended March 31, 1995
include the accounts of SpecTran Corporation (the Company) and all wholly-owned
subsidiaries; SpecTran Specialty Optics Company and EBOT Acquisition Corp. All
significant intercompany balances and transactions have been eliminated.
These financial statements supplement, and should be read in
conjunction with, the Company's audited financial statements for the year ended
December 31, 1994, as contained in the Company's Form 10-K as filed with the
United States Securities and Exchange Commission.
2. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Raw Materials $ 1,870,508 $ 1,751,859
Work in Process 852,938 779,067
Finished Goods 2,326,053 1,569,253
-------------- --------------
$ 5,049,499 $ 4,100,179
============== ==============
</TABLE>
3. INCOME PER SHARE OF COMMON STOCK
Income per share of common stock is based on the weighted average of
the number of shares outstanding during the periods, including common stock
equivalents of stock purchase warrants and stock options for both primary and
fully diluted earnings per share.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995 Versus Three Months Ended March 31,
1994
Net Sales
Consolidated net sales of $7,965,079 for the three months ended March
31, 1995 were $2,178,860 (37.7%) higher than for the same period in 1994. This
increase reflects increased specialty product sales by SpecTran Specialty
Optics Company and additional revenues resulting from sales of the Company's
single-mode fiber. The Company's standard multimode fiber sales increased
slightly from the first quarter of 1994 as a result of increased sales volume
reflecting strong market conditions, with a slight decline in average sales
price.
Gross Profit
SpecTran earned a consolidated gross profit of $2,893,576 during the
1995 first quarter which was $832,174 (40.4%) higher than 1994. The gross
margin, as a percent of sales, increased to 36.3% in 1995 from 35.6% in 1994.
Single-mode product costs have improved from the first quarter of 1994, but
still reflect manufacturing development costs that were experienced during
1994. This was offset by improved margins on multimode product sales due to
lower average unit production costs. Royalties expense was 5.7% and 7.3% of
SpecTran's sales during the first quarter of 1995 and 1994, respectively.
Selling and Administrative Expenses
Consolidated selling and administrative expenses increased by $725,123
(55.2%) during the 1995 first quarter. As a percent of sales these expenses
increased during 1995 to 25.6% from 22.7% in 1994. The increase is made up of
a full quarter of expenses incurred by SpecTran Specialty Optics Company in the
1995 March quarter versus approximately half a quarter of expenses incurred in
last year's first quarter. Parent company spending increased by $266,532
(24.1%) due to business development activities.
Research and Development Expenses
Consolidated spending for internal research and development increased
by $461,706 (158.3%). As a percent of sales, consolidated research and
development costs increased to 9.5% in the first quarter of 1995 versus 5.0% in
the same period in 1994. The Company's increased research and development
spending is primarily in programs designed to improve manufacturing cost and
product performance in both the multimode and single-mode product lines and
develop alternative process technologies.
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<PAGE> 8
Other Income (Expense)
Consolidated other income (expense) decreased by $44,925 (53.6%)
during the 1995 first quarter. Interest income increased by $8,052 (10.5%)
during the 1995 first quarter primarily as a result of improved investment
yields. Interest expense increased during the first quarter of 1995 by $89,434
(722.5%) as a result of increased debt levels. The increase in other income of
$36,457 during 1995 is related to royalty income.
Income Taxes
A tax provision of 41% of pre-tax income was provided in the first
quarters of both 1995 and 1994.
Net Income
Net income for the 1995 first quarter was $82,914 which was a 1.0%
return on sales. Net income for the same period in 1994 was $319,018, or 5.5%
of sales, a decline of $236,104 (74.0%) primarily due to increased research and
development and selling and administrative expenses.
Liquidity and Capital Resources
At March 31, 1995, the Company had net working capital of $11,128,378,
a current ratio of 3.8 to 1, and an aggregate of $176,960 in cash and cash
equivalents. In addition, the Company had total marketable securities of
$6,277,922, including $3,794,108 classified at long-term which could be
converted into cash if needed.
The Company restructured the existing bank revolving term loan of $10
million on March 30, 1995. Under the amended agreement, the Company may borrow
the lesser of $10 million or an amount based upon certain percentages of the
value of cash on deposit, eligible accounts receivable and eligible inventory.
The amount outstanding under this agreement at March 31, 1994 was $6.9 million,
including a draw down under the agreement of $1.6 million used as a deposit on
an agreement to acquire Applied Photonic Devices.
The Company expects but can not assure that existing working capital
should be sufficient to meet the Company's cash needs in 1995.
Anticipated Acquisition
It is anticipated, but cannot be assured, that a wholly-owned
subsidiary of the Company will acquire all the issued and outstanding stock of
Applied Photonic Devices ("APD") for cash and stock worth approximately $3.9
million. The Company will also retire approximately $600,000 of APD bank debt.
APD manufactures and sells fiber optic cable and related components.
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<PAGE> 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - not applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
which this report was filed.
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.
SPECTRAN CORPORATION
(Registrant)
Date: May 15, 1995 BY:
/s/ R. E. Jaeger
-------------------------
Raymond E. Jaeger
President and
Chief Executive Officer
Date: May 15, 1995 BY:
/s/ Bruce A. Cannon
-------------------------
Bruce A. Cannon
Senior Vice President and
Chief Financial Officer
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<PAGE> 10
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 176,960
<SECURITIES> 2,483,814
<RECEIVABLES> 6,465,990
<ALLOWANCES> 247,458
<INVENTORY> 5,049,499
<CURRENT-ASSETS> 15,115,989
<PP&E> 20,279,653
<DEPRECIATION> 10,848,966
<TOTAL-ASSETS> 34,154,800
<CURRENT-LIABILITIES> 3,987,611
<BONDS> 0
<COMMON> 26,549,020
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,154,800
<SALES> 7,965,079
<TOTAL-REVENUES> 7,965,079
<CGS> 5,071,503
<TOTAL-COSTS> 5,071,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,813
<INCOME-PRETAX> 141,438
<INCOME-TAX> 58,524
<INCOME-CONTINUING> 82,914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,914
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
