<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 period ended September 28,
1996, 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 No. 0-12719
GIGA-TRONICS INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2656341
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4650 Norris Canyon Road, San Ramon, CA 94583
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (510) 328-4650
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 / /
--- ---
Common stock outstanding as of September 28, 1996: 3,369,199
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GIGA-TRONICS INCORPORATED
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
ITEM 1 Financial Statements:
Balance Sheets as of September 28, 1996 (unaudited)
and March 30, 1996...............................................3
Statements of Operations, three months and six months ended
September 28, 1996 and September 30, 1995 (unaudited)............4
Statements of Cash Flows, six months ended
September 28, 1996 and September 30, 1995 (unaudited)............5
Notes to Unaudited Financial Statements..........................6
ITEM 2 Management's Discussion and Analysis of
Operations and Financial Condition...............................7
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1
TO 3 Not Applicable
ITEM 4 Submission of Matters to a Vote of Security Holders..............9
ITEM 5 Not Applicable
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Net Earnings and
Common Share Equivalents......................10
(b) Reports on Form 8-K
A report on Form 8-K was filed on July 31,
1996. It consisted of a press release
announcing the completion of the merger with
ASCOR, Inc. Shareholders of Giga-tronics
approved the merger at the July 23, 1996
Special Meeting.
SIGNATURES...................................................................11
</TABLE>
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GIGA-TRONICS INCORPORATED PAGE 3
BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
ASSETS
------
<TABLE>
<CAPTION>
September 28, 1996 March 30, 1996
------------------ --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,248 $ 5,923
Investments 9,560 5,313
Trade accounts receivable, net 2,993 3,658
Inventories, net 5,890 6,293
Prepaid expenses 286 228
Deferred income taxes 1,273 1,305
-------- --------
Total current assets $ 23,250 $ 22,720
Property and Equipment:
Machinery and equipment $ 7,300 $ 7,277
Office furniture and fixtures 530 518
Leasehold improvements 121 106
-------- --------
Gross cost property and equipment 7,951 7,901
Less accumulated depreciation and amortization (6,072) (5,779)
Net property and equipment 1,879 2,122
Patents and licenses 1,310 1,590
Other assets 101 152
-------- --------
Total assets $ 26,540 $ 26,584
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,713 $ 2,070
Accrued commissions 264 277
Other current liabilities 717 751
Accrued payroll and benefits 655 666
Accrued warranty 566 580
Accrued earnout payable -- 393
Income taxes payable 196 47
Notes payable -- 730
-------- --------
Total current liabilities 4,111 5,514
Non-current liabilities 248 253
-------- --------
Total liabilities $ 4,359 $ 5,767
======== ========
Shareholders' Equity:
Preferred stock of no par value; -- --
Authorized 1,000,000 shares; no shares outstanding
at September 28, 1996, and March 30, 1996
Common stock of no par value; -- --
Authorized 40,000,000 shares; 3,369,199 shares at
September 28, 1996 and 3,323,649 shares at March 30, 1996
issued and outstanding 10,872 10,543
Unrealized gain (loss) on investments 11 (47)
Retained earnings 11,298 10,321
-------- --------
Total shareholders' equity $ 22,181 $ 20,817
-------- --------
Total liabilities and shareholders' equity $ 26,540 $ 26,584
======== ========
</TABLE>
See accompanying notes to financial statements
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PAGE 4
GIGA-TRONICS INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
--------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 7,138 $ 7,692 $ 14,931 $ 15,341
Cost of sales 4,473 4,776 9,201 9,578
-------- -------- -------- --------
Gross profit 2,665 2,916 5,730 5,763
Product development 666 664 1,383 1,337
Selling, general and administrative 1,386 1,749 3,054 3,431
-------- -------- -------- -------
Operating expenses 2,052 2,413 4,437 4,768
-------- -------- -------- --------
Net operating income 613 503 1,293 995
Other income/(expense) (3) 86 18 170
Amortization of intangibles (139) (140) (279) (280)
Interest income, net 159 66 270 106
-------- -------- -------- --------
Earnings before income taxes 630 515 1,302 991
Provision for income taxes 158 62 325 85
-------- -------- -------- --------
Net earnings $ 472 $ 453 $ 977 $ 906
======== ======== ======== ========
Earnings per share of common stock $ 0.14 $ 0.13 $ 0.29 $ 0.27
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding 3,420 3,369 3,418 3,369
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
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GIGA-TRONICS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------
September 28, September 30,
1996 1995
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<S> <C> <C>
Cash flows provided from operations:
Net earnings as reported $ 977 $ 906
Adjustments to reconcile net earnings to
net cash provided from operations
Depreciation and amortization 761 784
Gain on sale of fixed assets (9) --
Deferred income taxes, net 32 (43)
Changes in operating assets and liabilities 412 620
------- -------
Net cash provided by operations 2,173 2,267
Cash flows used by investing activities:
Investment purchases, net (4,189) (410)
Additions to property and equipment, net (198) (344)
------- -------
Net cash used in investing activities (4,387) (754)
Cash flows from financing activities:
Issuance/(re-purchase) of common stock 329 (16)
Payments on notes payable (730) --
Issuance/(payments) of other obligations (60) 76
------- -------
Net cash provided by financing activities (461) 60
Increase in cash and cash equivalents (2,675) 1,573
5,923 3,202
Beginning cash and cash equivalents -------- --------
Ending cash and cash equivalents $ 3,248 $ 4,775
</TABLE>
Supplementary disclosure of cash flow information:
(1) Cash paid for interest in the six month period ending September 28,
1996 was $42,000.
(2) Cash paid for income taxes in the six month period ending September
28, 1996 was $81,000.
(3) Non-cash investing activities:
The Company incurred an unrealized gain of $11,000
on investments held available for sale.
See accompanying notes to financial statements.
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GIGA-TRONICS INCORPORATED
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) Basis of Presentation
The financial statements included herein have been prepared by the
Company, pursuant to the rules and regulations of the Securities and
Exchange Commission. The results of operations for the interim periods
shown in this report are not necessarily indicative of results to be
expected for the fiscal year. In the opinion of management, the
information contained herein reflects all adjustments necessary to make
the results of operations for the interim periods a fair statement of
such operations. For further information, refer to the financial
statements and footnotes thereto, included in the Annual Report on Form
10-K, filed with the Securities and Exchange Commission for the year
ended March 30, 1996.
Effective July 24, 1996, Giga-tronics merged with ASCOR in a transaction
accounted for as a "pooling of interests." Accordingly, results for
prior periods have been re-stated to reflect the acquisition and include
the results of ASCOR operations.
(2) Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 28, 1996 March 30, 1996
------------------ --------------
<S> <C> <C>
Raw materials $ 2,509 $ 2,388
Work-in-process 2,476 2,972
Finished goods 905 933
-------- --------
$ 5,890 $ 6,293
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</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30 , 1995
Net sales for the three month and six month periods ended September 28, 1996
decreased 7% ($554,000) and 3% ($410,000), respectively, compared to the same
periods last year. The change for the six months was due to a decline in
shipment of RF signal generators and power measurement devices. The three month
change was due to a decline in all three product lines shipping from San Ramon
(i.e., excluding the recent ASCOR acquisition).
Gross profit for the current three month and six month periods decreased 9%
($251,000) and 1% ($33,000), respectively, compared to the same periods last
year. The decrease for the six month and three month periods was primarily due
to sales volume.
Operating expenses for the three month and six month periods decreased 15%
($361,000) and 7% ($331,000), respectively, compared to prior year periods. The
decreases are due to lower advertising, sales commissions and administrative
expenses.
Other income is lower relative to the comparable quarter and six month period
for the prior year because of non-recurring prior year fixed asset sales and an
insurance recovery.
Operating income for the current three month and six month periods were $110,000
and $298,000 higher, respectively, than the comparable periods last year. The
improved results were due to lower operating expenses, and reduced manufacturing
variances (for the six month period), offset somewhat by lower sales volume and
a reduction in other income.
Earnings before income taxes for the current three month and six month periods
were $105,000 and $311,000 higher, respectively, than the comparable periods
last year. The change was favorably impacted by the lower operating expenses,
reduced manufacturing variances (for the six month period), and higher interest
income (due to higher balances of cash, cash equivalents and investments
relative to prior year). These effects were partially offset by lower sales
volume and reduced other income.
Orders for the current quarter were slightly lower than the comparable period
last year. Orders for the six month period were slightly higher than the prior
year six month period. The backlog of unfilled orders as of September 28 is down
significantly from the comparable period last year. The decrease in backlog
results mostly from the decline in microwave signal generator orders. Due to the
softness in order intake, fiscal 1997 revenues will likely be less than fiscal
1996. However, it is projected at
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this time that cost reduction activities may offset the unfavorable impact
caused by the decline in revenues.
FINANCIAL CONDITION
The Company maintains a strong financial position, with working capital of
$19,139,000 and a ratio of current assets to current liabilities of 5.7 at
September 28, 1996. The Company continues to fund all of its working capital
needs from cash flow provided from operations. Cash provided from operations for
the six month period ended September 28, 1996, was $2,173,000. Management
believes that cash reserves and investments remain adequate to meet anticipated
operating needs.
During the six month period, the Company spent $198,000 on new manufacturing and
test equipment and other capital items. The Company will continue to invest in
capital items that support growth and new product development, raise
productivity and improve quality. Historically, the Company has satisfied its
cash needs internally for both operating and capital expenses, and management
expects to continue to do so.
The issuance of common stock was related to exercise of stock options. The
outflow for notes payable was the retirement of debt by ASCOR in September.
Note: These statements contain forward looking information that involves a
number of risks and limitations discussed in more detail in other documents
submitted to the SEC.
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PART II, Item 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(A) Special Meeting of the Stockholders was held on July 23, 1996.
(1) The vote for the acquisition of ASCOR, Incorporated was as follows:
<TABLE>
<CAPTION>
No. of Votes % of Votes
on Proposal Cast
------------ ----------
<S> <C> <C>
For 1,509,344 91.2%
Against 5,500 .3%
Abstain 141,130 8.5%
----------------------------------------
Quorum 1,655,974 100.0%
</TABLE>
Non-voted Shares = 986,996
Outstanding shares on Record Date = 2,642,970
(B) Annual Meeting of Stockholders was held on August 12, 1996.
(1) The vote for the nominated Directors was as follows:
<TABLE>
<CAPTION>
Nominee In Favor Withheld
------- -------- --------
<S> <C> <C>
George H. Bruns, Jr. 2,261,674 15,934
James A. Cole 2,261,674 15,934
Edward D. Sherman 2,261,574 16,034
Robert C. Wilson 2,261,674 15,934
</TABLE>
(2) Other matters voted upon at the meeting were as follows:
Ratification of the selection of Peat Marwick LLP as independent
public accountants for fiscal year 1997 was approved as follows:
<TABLE>
<CAPTION>
No. of Votes % of Votes
on Proposal Cast
------------ ----------
<S> <C> <C>
For 2,269,443 99.64%
Against 6,520 0.29%
Abstain 1,645 0.07%
-------------------------------------
Quorum 2,277,608 100.0%
</TABLE>
Non-voted Shares = 365,362
Outstanding shares on Record Date = 2,642,970
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PAGE 10
EXHIBIT II
PART II, Item 6
COMPUTATION OF NET EARNINGS PER SHARE AND
-----------------------------------------
COMMON SHARE EQUIVALENTS
------------------------
(Unaudited)
(In thousands, except per share data)
Earnings per share were computed using the weighted average number of shares
outstanding plus, when dilutive, incremental shares issuable upon exercise of
outstanding options under the treasury stock method.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -------------------------------
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average:
Common shares outstanding 3,367 3,291 3,358 3,291
Common share equivalents 53 78 60 78
------ ------ ------ ------
3,420 3,369 3,418 3,369
------ ------ ------ ------
Net earnings $ 472 $ 453 $ 977 $ 906
====== ====== ====== ======
Net earnings per share of common stock $ 0.14 $ 0.13 $ 0.29 $ 0.27
====== ====== ====== ======
</TABLE>
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PAGE 11
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.
GIGA-TRONICS INCORPORATED
(Registrant)
Date: 10/18/96 /s/
-------------- --------------------------------------------------
George H. Bruns, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: 10/18/96 /s/
-------------- ---------------------------------------------------
Gregory L. Overholtzer
Vice President, Finance and Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> SEP-28-1996
<EXCHANGE-RATE> 1
<CASH> 3,248
<SECURITIES> 9,560
<RECEIVABLES> 3,193
<ALLOWANCES> (200)
<INVENTORY> 5,890
<CURRENT-ASSETS> 23,250
<PP&E> 7,951
<DEPRECIATION> (6,072)
<TOTAL-ASSETS> 26,540
<CURRENT-LIABILITIES> 4,111
<BONDS> 0
0
0
<COMMON> 10,872
<OTHER-SE> 11,309
<TOTAL-LIABILITY-AND-EQUITY> 26,540
<SALES> 14,931
<TOTAL-REVENUES> 14,931
<CGS> 9,201
<TOTAL-COSTS> 13,638
<OTHER-EXPENSES> 261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (270)
<INCOME-PRETAX> 1,302
<INCOME-TAX> 325
<INCOME-CONTINUING> 977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 977
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
