<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 June 30, 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
July 31, 1995 was 5,351,853.
<PAGE> 2
PART I - FINANCIAL INFORMATION
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS - ASSETS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 497,970 $ 477,022
Current Portion of Marketable Securities 3,553,933 641,256
Accounts Receivable, Trade, net 7,266,645 6,183,461
Inventories 5,672,488 4,100,179
Current Deferred Income Taxes, net 303,000 303,000
Income Taxes Receivable 392,940 501,629
Prepaid Expenses and Other Current Assets 396,160 267,871
----------- -----------
Total Current Assets 18,083,136 12,474,418
Property, Plant and Equipment:
Land and Land Improvements 395,113 395,113
Buildings and Improvements 3,591,965 3,266,189
Machinery and Equipment 16,176,421 14,612,501
Construction in Progress 1,221,169 1,625,056
----------- -----------
21,384,668 19,898,859
Less Accumulated Depreciation and Amortization 11,620,925 10,482,710
----------- -----------
9,763,743 9,416,149
Other Assets:
Long-term Marketable Securities 1,374,563 5,196,903
License Agreements, net 1,104,858 1,205,300
Deferred Income Taxes, net 1,737,446 1,702,000
Goodwill, net 4,285,947 1,106,806
Other 108,465 260,361
----------- -----------
8,611,279 9,471,370
----------- -----------
Total Assets $36,458,158 $31,361,937
=========== ===========
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
-2-
<PAGE> 3
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS -
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 1,172,761 $ 751,455
Income Taxes Payable 15,477 --
Accrued Defined Benefit Pension Liability 24,840 65,571
Accrued Liabilities 2,351,390 2,200,825
----------- -----------
Total Current Liabilities 3,564,468 3,017,851
Long-term Debt 9,091,942 5,240,000
Stockholders' Equity:
Common Stock, voting, $.10 par value; authorized
20,000,000 shares; issued and outstanding
5,351,853 shares (5,207,409 in 1994) 535,185 520,741
Common Stock, non-voting, $.10 par value;
authorized 250,000 shares; no shares outstanding -- --
Paid-in Capital 26,436,333 26,028,279
Net Unrealized Loss on Marketable Securities (58,407) (242,438)
Retained Earnings (Deficit) (3,111,363) (3,202,496)
----------- -----------
Total Stockholders' Equity 23,801,748 23,104,086
----------- -----------
Total Liabilities & Stockholders' Equity $36,458,158 $31,361,937
=========== ===========
</TABLE>
See accompanying notes to these consolidated condensed financial statements.
-3-
<PAGE> 4
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------------- ------------------------------
1995 1994 1995 1994
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $17,064,463 $12,425,263 $9,099,384 $6,639,044
Cost of Sales 11,329,407 8,260,429 6,257,904 4,535,612
----------- ----------- --------- ----------
Gross Profit 5,735,056 4,164,834 2,841,480 2,103,432
Selling & Administrative Expenses 4,165,695 2,939,460 2,128,046 1,626,934
Research & Development Costs 1,412,545 601,814 659,100 310,075
----------- ----------- ---------- ----------
Income from Operations 156,816 623,560 54,334 166,423
Other Income (Expense):
Interest Income 168,184 158,214 83,561 81,643
Interest Expense (253,731) (88,900) (151,918) (76,521)
Other 84,099 83,475 27,953 63,786
----------- ----------- ---------- ----------
(1,448) 152,789 (40,404) 68,908
----------- ----------- ---------- ----------
Income before Taxes 155,368 776,349 13,930 235,331
Income Tax Provision 64,235 321,000 5,711 99,000
----------- ----------- ---------- ----------
Net Income $ 91,133 $ 455,349 $ 8,219 $ 136,331
=========== =========== ========== ==========
Weighted Average Number of Shares of
Common Stock Outstanding:
Primary 5,296,622 5,389,361 5,335,421 5,293,975
=========== =========== ========== ==========
Fully Diluted 5,319,034 5,389,361 5,409,358 5,293,975
=========== =========== ========== ==========
Net Income per Share of Common Stock:
Primary $.02 $.08 $ -- $.03
==== ==== ==== ====
Fully Diluted $.02 $.08 $ -- $.03
==== ==== ==== ====
</TABLE>
See accompanying notes to these condensed financial statements.
-4-
<PAGE> 5
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 91,133 $ 455,349
Add (Deduct) Items Not Affecting Cash:
Depreciation and Amortization 1,035,307 872,822
Other Non-Cash Charges (156,379) 82,060
Changes in Other Components of Working Capital (1,172,696) (808,033)
----------- -----------
Net Cash Provided by (Used for) Operating Activities (202,635) 602,198
Cash Flows from Investing Activities:
Acquisition of Business (4,182,051) (6,636,284)
Acquisition of Property & Equipment (959,765) (1,043,359)
Net Proceeds from Sales (Purchases)
of Marketable Securities 1,090,959 (31,669)
----------- -----------
Cash Used in Investing Activities (4,050,857) (7,711,312)
Cash Flows from Financing Activities:
Borrowings of Long-term Debt 3,851,942 5,000,000
Reduction of Debt -- (366,673)
Proceeds from Exercise of Stock Options and Warrants -- 100,802
Proceeds from Issuance of Stock 422,498 --
----------- -----------
Cash Provided by Financing Activities 4,274,440 4,734,129
Increase (Decrease) in Cash and Cash Equivalents 20,948 (2,374,985)
Cash and Cash Equivalents at Beginning of Period 477,022 3,538,190
----------- -----------
Cash and Cash Equivalents at End of Period $ 497,970 $ 1,163,205
=========== ===========
</TABLE>
See accompanying notes to these condensed financial statements.
-5-
<PAGE> 6
SPECTRAN CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial information for the six months and three months ended
June 30, 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 periods. The results of operations for the
six months ended June 30, 1995 are not necessarily indicative of the results for
the entire year.
The consolidated results for the six months and three months ended June
30, 1994 include the results of operations of two subsidiaries, SpecTran
Specialty Optics Company and EBOT Acquisition Corp., from the date of
acquisition, February 18, 1994, to the end of 1994 June quarter. The
consolidated results for the six months and three months ended June 30, 1995
also include results of operations of SpecTran Specialty Optics Company and EBOT
Acquisition Corp. as well as the results of operations of Applied Photonic
Devices, Inc., a wholly-owned subsidiary, from the date of acquisition on May
23, 1995. 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>
June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Raw Materials $2,211,129 $1,751,859
Work in Process 1,464,882 779,067
Finished Goods 1,996,477 1,569,253
---------- ----------
$5,672,488 $4,100,179
========== ==========
</TABLE>
-6-
<PAGE> 7
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.
4. ACQUISITION
On May 23, 1995 the Company purchased the outstanding capital stock of
Applied Photonic Devices, Inc. ("APD") for cash and stock with a total cost of
$4.4 million, including the retirement of approximately $614,000 of APD bank
debt. The results of APD are included in the consolidated financial statements
from May 23, 1995.
Goodwill of $3,237,000 resulted from the purchase and is being
amortized over 15 years.
-7-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995
VERSUS 1994
Net Sales
Consolidated net sales for the three and six month periods ended June
30, 1995 were $9,099,384 and $17,064,463, an increase of 37% for both periods
from each of the comparable periods in the prior year when net sales were
$6,639,044 and $12,425,263, respectively. Included in 1995 are revenues from
Applied Photonic Devices from the May 23, 1995 acquisition date.
Sales increased in both periods of 1995 with significant increased
shipments of the Company's single-mode optical fiber to international
telecommunications markets, offsetting a decline in single-mode fiber prices.
Standard datacommunication multimode fiber sales volume increased in both
periods with a slight decline in average sale prices. Sales remained strong in
the specialty product area for SpecTran Specialty Optics Company.
Continued increased sales of single-mode optical fiber to both domestic
data communications and international telecommunications markets, increased
specialty revenues from new product introductions and an expanded customer base
for the Company's standard multimode fiber will contribute to revenue growth,
and the Company is making progress in each of these areas.
Gross Profit
SpecTran earned a consolidated gross profit of $2,841,480 and
$5,735,056 for the three and six months ended June 30, 1995, respectively, which
was $738,048 (35.1%) and $1,570,222 (37.7%) higher than in the comparable
periods of the prior year, respectively. The gross margin, as a percentage of
sales, decreased slightly to 31.2% in the second quarter of 1995 from 31.7% in
the second quarter of 1994. The gross profit margin of 33.6% for the six month
period ended June 30, 1995 remained relatively the same as the gross profit
margin of 33.5% in the comparable period of 1994.
Royalty expense was 5.5% and 5.6% of SpecTran's sales for the three and
six month periods, respectively, compared to 5.2% and 5.6% in the comparable
periods of 1994.
Selling and Administrative
Consolidated selling and administrative expenses increased by $501,112
(30.8%) and $1,226,235 (41.7%) during the three and six month periods ended June
30, 1995. As a percentage of sales these expenses stayed constant during 1995 at
23.4% and 24.4% compared to 24.5% and 23.7% for the comparable three and six
month periods. The increase reflects a full six months of expenses incurred by
SpecTran Specialty Optics Company compared with four and a half months during
1994 and a month of expenses incurred by Applied Photonic Devices, acquired in
May, 1995. Parent
-8-
<PAGE> 9
company spending increased by $241,000 and $508,000 in the three and six month
periods, respectively, due primarily to business development activities.
Research and Development
Consolidated spending for internal research and development increased
by $349,025 (112.6%) and $810,731 (134.7%) for the three and six month periods
ended June 30, 1995. As a percentage of sales, consolidated research and
development costs increased to 7.2% and 8.3% in 1995 versus 4.7% and 4.8% for
the three and six months ended June 30, 1995 and 1994, respectively. The
Company's increased research and development spending is primarily related to
the Company's new single-mode fiber product line and programs designed to
improve manufacturing cost and product performance in our multimode product
line, both of which have continued at increased levels since 1994.
Other Income (Expense), net
Consolidated other income (expense) net decreased by $109,312 (158.6%)
and $154,237 (100.9%) during the three and six months ended June 30, 1995. The
change is made up of increased interest income of $1,918 and $9,970 for the
three and six month periods of 1995, less increased interest expense of $75,397
(98.5%) and $164,831 (185.4%) for these same periods. Interest expense increased
during the three and six month periods of 1995 as a result of increased debt
levels associated with the acquisition of Applied Photonic Devices.
Net Income
Net income for the three and six months of 1995 was $8,219 and $91,133.
Net income for the same periods in 1994 was $136,331, or 2.1% of net sales, and
$455,349, or 3.7% of net sales, respectively. This was a decline of $128,112
(94.0%) and $364,216 (80.0%) for the three and six month periods.
Liquidity and Capital Resources
At June 30, 1995, the Company had net working capital of $14,518,667, a
current ratio of 5.1 to 1, and an aggregate of $497,970 in cash and cash
equivalents. In addition, the Company had total marketable securities of
$4,928,496, including $1,374,563 classified as long-term which could be
converted into cash if needed.
On May 23, 1995 the Company borrowed an additional $2,200,000 under its
existing bank loan agreement for the purchase of Applied Photonic Devices. The
amount outstanding under this agreement at June 30, 1995 was $9.1 million.
The Company expects but cannot assure that existing working capital
should be sufficient to meet the Company's cash needs in 1995.
-9-
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - not applicable
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Registrant on June 6, 1995 to
report the acquisition of stock of Applied Photonic Devices, Inc. A
report on Form 8-K/A was filed on August 9, 1995 to provide the audited
financials and proforma information of the acquired entities.
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: August 14, 1995 BY:
/s/ R. E. Jaeger
-----------------------------
Raymond E. Jaeger
President and
Chief Executive Officer
Date: August 14, 1995 BY:
/s/ Bruce A. Cannon
-----------------------------
Bruce A. Cannon
Senior Vice President and
Chief Financial Officer
-10-
<PAGE> 11
Exhibit Index
-------------
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 497,970
<SECURITIES> 3,553,933
<RECEIVABLES> 7,413,904
<ALLOWANCES> 147,259
<INVENTORY> 5,672,488
<CURRENT-ASSETS> 18,083,136
<PP&E> 21,384,668
<DEPRECIATION> 11,620,925
<TOTAL-ASSETS> 36,458,158
<CURRENT-LIABILITIES> 3,564,468
<BONDS> 0
<COMMON> 26,971,518
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,458,158
<SALES> 17,064,463
<TOTAL-REVENUES> 17,064,463
<CGS> 11,329,407
<TOTAL-COSTS> 11,329,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253,731
<INCOME-PRETAX> 155,368
<INCOME-TAX> 64,235
<INCOME-CONTINUING> 91,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,133
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
