<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the period ended December 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 December 28, 1996: 3,369,199
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PAGE 2
GIGA-TRONICS INCORPORATED
INDEX
PART I - FINANCIAL INFORMATION Page No.
ITEM 1 Financial Statements:
Balance Sheets as of December 28, 1996 (unaudited)
and March 30, 1996........................................3
Statements of Operations, three months and nine months
ended December 28, 1996 and December 30, 1995
(unaudited)...............................................4
Statements of Cash Flows, nine months ended
December 28, 1996 and December 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 5 Not Applicable
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Net Earnings and
Common Share Equivalents..................9
(b) Reports on Form 8-K
Not Applicable
SIGNATURES...................................................................10
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PAGE 3
GIGA-TRONICS INCORPORATED
BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
December 28, 1996 March 30, 1996
----------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,249 $ 5,923
Investments 9,666 5,313
Trade accounts receivable, net 3,777 3,658
Inventories, net 5,146 6,293
Prepaid expenses 150 228
Deferred income taxes 1,557 1,305
-------- --------
Total current assets $ 23,545 $ 22,720
Property and Equipment:
Machinery and equipment $ 7,384 $ 7,277
Office furniture and fixtures 544 518
Leasehold improvements 121 106
-------- --------
Gross cost property and equipment 8,049 7,901
Less accumulated depreciation and amortization (6,160) (5,779)
-------- --------
Net property and equipment 1,889 2,122
Patents and licenses 1,170 1,590
Other assets 79 152
-------- --------
Total assets $ 26,683 $ 26,584
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,275 $ 2,070
Accrued commissions 294 277
Other current liabilities 771 751
Accrued payroll and benefits 822 666
Accrued warranty 579 580
Accrued earnout payable -- 393
Income taxes payable 28 47
Notes payable -- 730
-------- --------
Total current liabilities 3,769 5,514
Non-current liabilities 245 253
-------- --------
Total liabilities $ 4,014 $ 5,767
======== ========
Shareholders' Equity:
Preferred stock of no par value; -- --
Authorized 1,000,000 shares; no shares outstanding
at December 28, 1996, and March 30, 1996
Common stock of no par value;
Authorized 40,000,000 shares; 3,369,199 shares at
December 28, 1996 and 3,323,649 shares at March 30, 1996
issued and outstanding 10,872 10,543
Unrealized gain (loss) on investments 30 (47)
Retained earnings 11,767 10,321
-------- --------
Total shareholders' equity $ 22,669 $ 20,817
-------- --------
Total liabilities and shareholders' equity $ 26,683 $ 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 Nine Months Ended
------------------------ ------------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $ 7,697 $ 7,718 $ 22,628 $ 23,059
Cost of sales 4,956 4,830 14,157 14,408
-------- -------- -------- --------
Gross profit 2,741 2,888 8,471 8,651
Product development 607 637 1,990 1,974
Selling, general and administrative 1,499 1,582 4,553 5,013
-------- -------- -------- --------
Operating expenses 2,106 2,219 6,543 6,987
-------- -------- -------- --------
Net Operating income 635 669 1,928 1,664
Other income/(expense) (32) 18 (14) 188
Amortization of intangibles (141) (140) (420) (420)
Interest income, net 161 67 431 173
-------- -------- -------- --------
Earnings before income taxes 623 614 1,925 1,605
Provision for income taxes 154 82 479 167
-------- -------- -------- --------
Net earnings $ 469 $ 532 $ 1,446 $ 1,438
======== ======== ======== ========
Earnings per share of common stock $ 0.14 $ 0.16 $ 0.42 $ 0.43
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding 3,411 3,369 3,414 3,369
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
PAGE 5
GIGA-TRONICS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------------
December 28, 1996 December 30, 1995
----------------- -----------------
<S> <C> <C>
Cash flows provided from operations:
Net earnings as reported $ 1,446 $ 1,438
Adjustments to reconcile net earnings to
net cash provided from operations
Depreciation and amortization 1,136 1,186
Gain on sale of fixed assets 23 --
Deferred income taxes, net (252) (68)
Changes in operating assets and liabilities 172 1,110
------- -------
Net cash provided by operations 2,525 3,666
Cash flows used by investing activities:
Investment sales/(purchases), net (4,276) (318)
Additions to property and equipment, net (459) (551)
------- -------
Net cash used in investing activities (4,735) (869)
Cash flows from financing activities:
Issuance/(re-purchase) of common stock 329 (16)
Payments on notes payable (730) (81)
Issuance/(payments) of other obligations (63) 49
------- -------
Net cash provided by financing activities (464) (48)
Increase in cash and cash equivalents (2,674) 2,749
Beginning cash and cash equivalents 5,923 3,202
------- -------
Ending cash and cash equivalents $ 3,249 $ 5,951
======= =======
</TABLE>
Supplementary disclosure of cash flow information:
(1) Cash paid for interest in the nine month period ending December 28,
1996 was $44,000.
(2) Cash paid for income taxes in the nine month period ending December
28, 1996 was $592,000.
(3) Non-cash investing activities:
The Company incurred an unrealized gain of $77,000 (after-tax effect)
on investments held available for sale during the nine month period
ending December 28, 1996.
See accompanying notes to financial statements.
<PAGE> 6
PAGE 6
GIGA-TRONICS INCORPORATED
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,
prior periods have been restated to reflect the acquisition and include
the results of the ASCOR operations.
(2) Inventories
Inventories consist of the following (in thousands):
December 28, 1996 March 30, 1996
----------------- --------------
Raw materials $ 2,230 $ 2,388
Work-in-process 2,284 2,972
Finished goods 632 933
-------- ---------
$ 5,146 $ 6,293
======= ========
<PAGE> 7
PAGE 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS AND NINE MONTHS ENDED DECEMBER 28, 1996 AND DECEMBER 30, 1995
Net sales for the three month and nine month periods ended December 28, 1996
decreased less than 1% ($21,000) and decreased 2% ($431,000), respectively,
compared to the same periods last year. The quarterly shipments of microwave
signal generators was down over $1,000,000 from the prior year third quarter,
though increased shipment of RF signal generators and power measurement devices
offset this decline. For the nine month period, a $1,000,000 decline in
shipments of microwave signal generators from the prior year was offset only
partially by an increase in sales of ASCOR VXI products.
Gross profit for the current three month and nine month periods decreased 5%
($147,000) and 2% ($180,000), respectively, compared to the same periods last
year. The quarterly gross profit decline was due to heavily discounted sales of
microwave and RF signal generators. It is expected that these large discounts
will not continue for the balance of the year in these two product lines.
Operating expenses for the three month and nine month periods decreased 5%
($113,000) and 6% ($444,000), respectively, compared to prior year periods. The
decreases are due to lower sales and marketing expenses.
Operating income for the current three month and nine month periods is $34,000
lower and $264,000 higher, respectively, than the comparable periods last year.
For the quarter, lower operating expenses mostly offset the lower gross profit.
For the nine month period, the higher operating income was a result of lower
operating expenses, only partially offset by lower sales volume.
Other income is lower relative to the comparable three month and nine month
periods for the prior year because of non-recurring prior year fixed asset sales
and an insurance recovery.
Earnings before income taxes for the current three month and nine month periods
are $9,000 and $320,000 higher, respectively, than the comparable periods of the
prior year. The results for the quarter were due to higher interest income and
lower operating expenses, offset mostly by lower gross profit. For the nine
month period, the results were due to higher interest income and lower operating
expenses, only partially offset by the lack of other income and lower sales
volume. The favorable interest income is due to higher balances of cash
equivalents and investments relative to prior year.
Orders for the three month and nine month periods for the current year were
lower than the same periods last year. The backlog of unfilled orders as of
December 28, 1996, is down significantly from the comparable period of the prior
year, mostly due to a decline in microwave signal generator orders. Due to the
continued softness in order intake, fiscal 1997 revenues are expected to be less
than fiscal 1996. It is unclear at this time whether cost reduction activities
will totally offset the unfavorable impact caused by the decline in revenues.
<PAGE> 8
PAGE 8
FINANCIAL CONDITION
The Company maintains a strong financial position, with working capital of
$19,776,000 and a ratio of current asset to current liabilities of 6.2 as of
December 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 nine month period ended December 28, 1996 was $2,525,000. Management
believes that cash reserves and investments remain adequate to meet anticipated
operating needs.
During the nine month period, the Company spent $459,000 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 involve a number
of risks and limitations discussed in more detail in other documents submitted
to the SEC.
<PAGE> 9
PAGE 9
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 Nine Months Ended
---------------------- ----------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average:
Common shares outstanding 3,369 3,291 3,358 3,291
Common share equivalents 42 78 56 78
------ ------ ------ ------
3,411 3,369 3,414 3,369
====== ====== ====== ======
Net earnings $ 469 $ 532 $1,446 $1,438
====== ====== ====== ======
Net earnings per share of common stock $ 0.14 $ 0.16 $ 0.42 $ 0.43
====== ====== ====== ======
</TABLE>
<PAGE> 10
PAGE 10
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: 01/15/96 /s/ George H. Bruns, Jr.
---------------------------------------------------
George H. Bruns, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory L. Overholtzer
---------------------------------------------------
Date: 01/15/96 Gregory L. Overholtzer
Vice President, Finance and Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> DEC-28-1996
<CASH> 3,249
<SECURITIES> 9,666
<RECEIVABLES> 4,002
<ALLOWANCES> (225)
<INVENTORY> 5,146
<CURRENT-ASSETS> 23,545
<PP&E> 8,049
<DEPRECIATION> (6,160)
<TOTAL-ASSETS> 26,683
<CURRENT-LIABILITIES> 3,769
<BONDS> 0
0
0
<COMMON> 10,872
<OTHER-SE> 11,797
<TOTAL-LIABILITY-AND-EQUITY> 26,683
<SALES> 22,628
<TOTAL-REVENUES> 22,628
<CGS> 14,157
<TOTAL-COSTS> 20,700
<OTHER-EXPENSES> 434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (431)
<INCOME-PRETAX> 1,925
<INCOME-TAX> 479
<INCOME-CONTINUING> 1,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,446
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
