UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended October 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-11360
ILC TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
California 94 -1655721
(State or other jurisdiction of incorporation)(IRS Employer Identification No.)
399 Java Drive, Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 745-7900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on December 12,
1994, was approximately $35,408,734. Shares of Common Stock held by each officer
and director and by each person who owns 5% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes. The number of outstanding shares of the
registrant's Common Stock on December 12, 1994 was 4,532,711.
Parts of the following documents are incorporated by reference into Part III
of this Annual Report and Form 10-K: (1) Proxy Statement for registrant's 1994
Annual Meeting of Shareholders.
<PAGE>
Consolidated Balance Sheets - October 1,
1994 and October 2, 1993. 1-2
Consolidated Statements of Operations for the Three
Fiscal Years Ended October 1, 1994. 3
Consolidated Statements of Stockholders' Equity for
the Three Fiscal Year Ended October 1, 1994. 4
Consolidated Statements of Cash Flows for the Three
Fiscal Years Ended October 1, 1994. 5-6
Notes to Consolidated Financial Statement 7-14
Form 10-K Schedules 15-17
Report of Independent Public Accountants 18
<PAGE>
ILC TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1994 AND OCTOBER 2, 1993
ASSETS
1994 1993
Current assets:
Cash and cash equivalents $ 2,461,549 $ 2,993,998
Marketable securities 998,129 1,436,207
Accounts receivable, less allowance
for doubtful accounts of $332,803
and $219,128, respectively 6,956,981 8,020,263
Receivable from long-term contracts 824,007 370,836
Inventories 7,192,197 7,324,889
Deferred tax asset 2,405,000 691,000
Prepaid expenses 542,801 321,879
Total current assets 21,380,664 21,159,072
----------- -----------
Property and equipment, net 17,688,277 13,008,041
Deposit on land and building purchase 1,300,000 -
Goodwill, net of accumulated amortization
of 331,605, in fiscal 1993 - 2,321,248
Covenants-not-to-compete, net of
accumulated amortization and writedown
of $2,145,473 and $702,042,
respectively 1,406,692 2,849,001
Other assets 221,789 404,483
------------ ------------
$41,997,422 $39,741,845
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
ILC TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1994 AND OCTOBER 2, 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
1994 1993
---- ----
Current liabilities:
Accounts payable $3,921,112 $4,007,623
Accrued payroll and related items 1,765,605 1,577,555
Other accrued liabilities 1,144,184 1,201,710
Current portion of non-compete 520,000 520,000
obligation
Current portion of long-term debt 2,196,494 1,374,696
Accrued income taxes payable 2,405,000 691,000
----------- ------------
Total current liabilities 11,952,395 9,372,584
---------- -----------
Long-term liabilities:
Long-term debt 5,096,494 4,374,695
Non-compete obligation 910,000 1,430,000
Other accruals 414,844 -
----------- ---------------
Total long-term liabilities 6,421,338 5,804,695
----------- -----------
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, no par value; 10,000,000
shares authorized; 4,522,951 shares
and 4,619,476 shares outstanding
in 1994 and 1993, respectively 5,492,338 6,623,828
Retained earnings 18,131,351 17,940,738
------------ -----------
Total stockholders' equity 23,623,689 24,564,566
----------- -----------
$41,997,422 $39,741,845
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
ILC TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
----- ----- ----
Net sales $52,022,328 $51,996,509 $40,884,919
Costs and expenses:
Cost of sales 35,287,928 34,818,944 26,374,444
Research and 3,998,136 2,767,448 1,296,879
development
Sales and marketing 2,271,099 2,641,810 2,079,958
General and administrative 5,218,701 3,936,940 3,557,453
Amortization and writedown
of intangibles 3,764,678 756,712 278,058
---------- ----------- ----------
50,540,542 44,921,854 33,586,792
---------- ----------- ----------
Income from operations 1,481,786 7,074,655 7,298,127
---------- ----------- ----------
Other (income) expense:
Interest, net 139,173 (113,598) (99,947)
Rental operations, net - 77,582 (99,172)
----------- ---------- ---------
139,173 (36,016) (199,119)
----------- ---------- ---------
Income before provision
for income taxes 1,342,613 7,110,671 7,497,246
Provision for income taxes 1,152,000 2,352,000 2,547,000
---------- ---------- ----------
Net income $ 190,613 $4,758,671 $4,950,246
=========== =========== ==========
Net income per share $ 0.04 $ 0.96 $ 1.00
========== ============ ======
Weighted average shares
outstanding used to compute
net income per share 4,825,009 4,979,529 4,956,418
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
ILC TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
<CAPTION>
<S> <C> <C> <C> <C>
Common
Common Stock Retained
Shares Amount Earnings Total
Balance at September 28, 1991 $4,536,186 $6,221,407 $8,231,821 $14,453,228
Net income - - 4,950,246 4,950,246
Issuance of common stock under
stock purchase plan 7,859 80,167 - 80,167
Excercise of stock options 30,650 94,658 - 94,658
-------- ------ --------- -------
Balance at October 3, 1992 4,574,695 6,396,232 13,182,067 19,578,299
Net income - - 4,758,671 4,758,671
Issuance of common stock
under stock purchase plan 14,281 134,283 - 134,283
Exercise of stock options 30,500 93,313 - 93,313
---------- -------- ---------- --------
Balance at October 2, 1993 4,619,476 6,623,828 17,940,738 24,564,566
Net income - - 190,613 190,613
Issuance of common stock
under stock purchase plan 25,475 196,590 - 196,590
Exercise of stock options 82,000 227,420 - 227,420
Repurchase of common stock (204,000)(1,555,500) - (1,555,500)
--------- ----------- --------- -----------
Balance at October 1, 1994 4,522,951 $5,492,338 $18,131,351 $23,623,689
========= ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
ILC TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
Cash flows from operating activities:
Net Income $190,613 $4,758,671 4,950,246
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,115,236 1,033,104 982,885
Provision for doubtful
accounts and note 383,902 (98,769) 128,896
Provision for inventory obsolescence
____________________________________
1,772,346 (22,125) (65,039)
_________ ________ ________
Net loss on property and
equipment sold or retired 3,839 68,687 56,734
Amortization of deferred gain
on sale and leaseback - - (454,087)
Amortization and write down
of non-compete agreements 1,442,309 491,428 211,737
Amortization and write down
of goodwill 2,321,248 265,284 66,321
Changes in assets and
liabilities, net of acquisitions:
(Increase) decrease in accounts
receivable 226,209 (1,150,930) 54,461
Increase in inventories (1,639,654) (148,901) (1,161,066)
_______________________ ___________ _________ ___________
(Increase) decrease in prepaid
expenses (220,922) (198,491) 28,423
Decrease in other assets 182,694 133,572 105,421
Increase (decrease) in accounts
payable (86,511) 263,444 (400,884)
Increase (decrease) in accrued
liabilities 545,369 (49,438) 520,387
---------- ---------- ---------
Total adjustments 6,046,065 586,865 74,189
--------- --------- ---------
Net cash provided by operating
activities 6,236,678 5,345,536 5,024,435
--------- --------- ---------
Cash flows from investing activities:
Purchase of stock of Precision Lamp,
Inc. plus expenses of acquisition,
net of cash acquired - - (4,447,092)
Purchase of land and real estate (3,012,844) (7,600,000) -
Deposit on land and building
purchase (1,300,000) - -
(Increase) decrease in marketable
securities 438,078 475,704 (1,911,911)
Capital expenditures (2,634,348) (1,466,924) (808,315)
----------- ----------- -----------
Net cash used in investing
activities (6,509,114) (8,591,220) (7,167,318)
----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
ILC TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE FISCAL YEARS ENDED OCTOBER 1, 1994
(continued)
<CAPTION>
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
Cash flows from financing activities:
New borrowings under equipment line $1,090,702 717,336 $291,322
Principal repayments under equipment line (499,225) (453,940) (353,916)
Principal borrowings under term loan 1,333,333 5,000,000 -
Principal repayments under term loan (533,333) - -
Principal payments under long-term
severance agreement - - (57,292)
Payments under non-compete agreement (520,000) (520,000) (130,000)
Proceeds from issuance of common stock 424,010 227,596 174,825
Repurchase of common stock (1,555,500) - -
----------- --------- ----------
Net cash provided by (used in)
financing activities (260,013) 4,970,992 (75,061)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (532,449) 1,725,308 (2,217,944)
Cash and cash equivalents at beginning
of year 2,993,998 1,268,690 3,486,634
---------- ---------- ----------
Cash and cash equivalents at end of year $2,461,549 $2,993,998 $1,268,690
========== ========== ==========
Supplemental disclosures of cash flow information:
1994 1993 1992
---- ---- ----
Cash paid during the year for:
Interest expense $338,751 $77,925 $60,640
Income taxes 2,500,539 2,213,100 1,669,744
Supplemental disclosures of noncash investing and financing activities:
A capital lease obligation of $174,268 was incurred in fiscal 1994 when the
Company entered into a capital lease for new computer equipment.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ILC TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 1994
1. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements include the accounts of ILC Technology, Inc.
(the "Company") and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
The Company's fiscal year end is the Saturday closest to September 30.
Certain items in the fiscal 1993 financial statements have been
reclassified to be consistent with the fiscal 1994 financial statements.
Cash and Cash Equivalents
- -------------------------
For the purpose of the statement of cash flows, the Company considers
all highly liquid investments with an original maturity of less than three
months at the time of issue to be cash equivalents.
Marketable Securities
- ---------------------
Effective October 3, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting For Certain
Investments in Debt and Equity Securities". The adoption of this statement did
not materially impact the Company's results from operations or financial
position. Marketable securities at October 1, 1994 are being accounted for as
trading securities and are therefore valued at fair market value in the
accompanying balance sheet. The change in the net unrealized holding loss, which
has been included in fiscal 1994 income, was approximately $80,000 during fiscal
1994.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or
market, and include material, labor and manufacturing overhead. Inventories at
October 1, 1994 and October 2, 1993, net of inventory reserves of $2,533,233 and
___________________________________________
$1,523,972, respectively, consisted of:
________________________
1994 1993
---- ----
Raw materials $ 3,393,249 $ 4,037,207
Work-in-process 2,556,006 2,370,654
Finished goods 1,242,942 917,028
----------- -----------
Total inventories $ 7,182,197 $ 7,324,889
=========== ===========
Developmental and Manufacturing Contracts
- -----------------------------------------
The Company contracts with the U.S. Government and other customers for
the development and manufacturing of various products under both
cost-plus-fixed-fee and fixed-price contracts. Revenues are recognized under
these contracts using the percentage of completion method, whereby revenues are
reported in the proportion that costs incurred bear to the total estimated costs
for each contract. Periodic reviews of estimated total costs during the
performance of such contracts may result in revisions of contract estimates in
subsequent periods. Any loss contracts are reserved at the time such losses are
determined. Revenues from these contracts were less than 10% of net revenues
during 1994, 1993 and 1992.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization on property and equipment are provided on
a straight-line basis over estimated useful lives of 3 to 31.5 years, except for
leasehold improvements which are amortized over the terms of the leases.
<PAGE>
1. Summary of Significant Accounting Policies (continued)
------------------------------------------------------
Net Income Per Share
- --------------------
Net income per share is computed based on the weighted average number
of common shares and common equivalent shares (when such equivalents have a
dilutive effect) outstanding during the period. Fully diluted net income per
share is not significantly different from net income per share as reported.
Intangible Assets
- -----------------
The Company has certain intangible assets as a result of its
acquisition of two subsidiaries (see Note 10). Subsequent to these acquisitions,
the Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful lies of these intangibles
may warrant revision or that the remaining balances of intangibles may not be
recoverable. When factors indicate that intangibles should be evaluated for
possible impairment, the Company uses an estimate of the related subsidiary's
undiscounted cash flow over the remaining life of the intangibles in measuring
whether the intangibles are recoverable.
Goodwill is being amortized over a ten year period. Covenants-not-to-compete
are amortized over the period of the covenant.
Foreign Exchange Contracts
- --------------------------
The Company enters into forward exchange contracts to reduce its
exposure to currency exchange risk for purchases from one Japanese vendor. The
effect of this practice is to minimize the impact of foreign exchange rate
movements on the Company's operating results. The Company's hedging activities
do not subject the Company to exchange rate risk, as gains and losses on these
contracts offset losses and gains on the liabilities being hedged.
At October 1, 1994, the Company had forward exchange contracts maturing
from October 1994 to December 1994 to purchase 74,480,000 Japanese yen
($760,000).
2. Revenues
--------
The Company operates in a single industry segment, the designing,
developing, manufacturing and marketing of high performance light source
products. Revenues are geographically summarized as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
United States $31,627 $ 29,994 $ 27,538
Europe 4,435 5,188 4,653
Asia 15,794 16,447 8,472
Other international 166 368 222
--------- -------- --------
Total revenues $ 52,022 $ 51,997 $ 40,885
========= ======== ========
Customers comprising more than 10% of net sales are as follows:
1994 1993 1992
---- ---- ----
Customer A 17.6% 19% 11%
Customer B 12.8% 17% *
*less than 10% of net sales
</TABLE>
The Company provides credit in the form of trade accounts receivable to
its customers. The Company does not generally require collateral to support
customer receivables. The Company performs ongoing credit evaluations of its
customers and maintains allowances which management believes are adequate for
potential credit losses.
<PAGE>
3. Property and Equipment
----------------------
Property and equipment at October 1, 1994 and October 2, 1993 consisted of:
Property and equipment, at cost:
Machinery and equipment $ 11,856,023 $ 10,497,434
Land and buildings 11,229,341 8,144,406
Furniture and fixtures 463,910 389,318
Equipment under capital lease 174,268 211,823
Leasehold improvements 209,830 157,358
Construction-in-progress 1,939,963 1,074,690
----------- -----------
25,873,335 20,475,029
Less accumulated depreciation and
amortization (8,185,058) (7,466,988)
----------- ------------
Property and equipment, net $ 17,688,277 $ 13,008,041
============ ==============
In August 1993, the Company purchased two adjacent buildings in
Sunnyvale, California, which house the manufacturing activities and the
Corporate offices of the Company. The purchase price was $7,600,000, of which
$2,600,000 was paid in cash and $5,000,000 was borrowed from a bank for a five
year term. In June 1994, the Company purchased a 36,000 square foot facility in
Cambridge, England to expand the manufacturing activities of Q-Arc. The purchase
price was approximately $2,700,000 of which the majority was paid in cash. In
September 1994, the Company purchased a 20,000 square foot facility in Santa
Clara, California to be used primarily for the manufacture of short-arc lamps
used in the processing of semiconductor materials and for the manufacture of
capillary lamps used in microlithography. The purchase also included
manufacturing equipment and a short arc product line and associated backlog. The
total purchase price for the land, building, equipment and product line was
$3,200,000, of which $1,300,000 was paid as a deposit in September 1994 and the
balance of $1,900,000 was paid on October 4, 1994 when escrow closed.
4. Bank Borrowings
---------------
The Company has a $2 million line of credit available with a bank which
expires in January 1996. Borrowings under this line are at 2% above the LIBOR
rate (London Interbank Offer Rate) (7% at October 1, 1994) and are limited to
75% of eligible accounts receivable. Under the covenants of the loan agreement,
unless written approval from the bank is obtained, the Company is restricted
from entering into certain transactions and is required to maintain certain
specified financial covenants, profitability and compensating balances which do
not restrict the use of cash. At October 1, 1994, the Company was not in
compliance with the current ratio requirement but a waiver has been obtained
through fiscal 1995.
The average balance outstanding (based on month-end balances) under the
line of credit in 1993 was $50,000. The maximum borrowings were $600,000 at an
average interest rate of 6.0% for 1993. There were no borrowings under the line
of credit in fiscal 1994, nor were there any amounts outstanding as of October
1, 1994 or October 2, 1993.
In addition, in connection with the purchase of its manufacturing
facilities (Note 3) the Company entered into a term note with a bank for
$5,000,000, which was subsequently increased to $6,333,333, in 1994. The note
matures in August, 1998. The term loan requires monthly principal payments equal
to one- forty-eighth of the principal amount plus interest at 2% above the LIBOR
rate (London Interbank Offer Rate) (7% at October 1, 1994). The term loan is a
reducing revolving credit facility which allows for principal pre- payments and
the flexibility for re-borrowing up to the maximum amount that would be
outstanding under the term loan given normal amortization to the date of
re-borrowing.
The Company also has available a $1.5 million equipment line of credit
for 100% of the purchase cost of new equipment, which expires in January 1995.
Borrowings under this line bear interest at 2% above the LIBOR rate (7% at
October 1, 1994), with principal balances amortized over a 2 year period. At
October 1, 1994, the Company had approximately $943,000 available for future
borrowings under this line of credit.
<PAGE>
4. Bank Borrowings (continued)
--------------------------
As of October 1, 1994 and October 2, 1993, borrowings outstanding under
the term loan and equipment line of credit consisted of:
1994 1993
---- ----
Term note $ 5,800,000 $ 5,000,000
Equipment line-of-credit 1,340,869 749,391
Other capital lease 152,119 -
------------- -------------
7,292,988 5,749,391
Less: current portion 2,196,494 1,374,696
------------- -------------
Long-term debt $ 5,096,494 $ 4,374,695
============ ============
Aggregate maturities for long-term debt during the next four years are
approximately: 1995 - $2,196,000, 1996 - $2,197,000, 1997 - $1,450,000 and 1998
- - $1,450,000.
All of the above credit facilities are secured by all of the property
of the Company.
5. Income Taxes
------------
Through October 2, 1993, the Company accounted for income taxes pursuant to
SFAS No. 96. Effective January 1, 1993, the Company adopted the provisions of
SFAS No. 109, "Accounting for Income Taxes", on a prospective basis. SFAS No.
109 requires an asset and liability approach to accounting for income taxes.
The adoption of SFAS No. 109 did not have a material effect on the Company's
consolidated financial statements.
Income before provision for incme taxes consists of the following for
fiscal 1994, 1993 and 1992:
1994 1993 1992
---- ---- ----
U.S. $ 971,283 $6,906,493 $ 7,260,827
Foreign 371,330 204,178 236,419
----------- ----------- ------------
$1,342,613 $7,110,671 $7,497,246
========== ========== ==========
The components of the provision for income taxes are as follows:
1994 1993 1992
---- ---- ----
Federal -
Current $2,373,000 $1,575,000 $2,093,000
Deferred (1,361,000) - -
----------- ------------ -----------
1,012,000 1,575,000 2,093,000
----------- ----------- -----------
State -
Current 493,000 777,000 454,000
Deferred (353,000) - -
----------- ----------- -----------
140,000 777,000 454,000
----------- ----------- -----------
Total provision
for income taxes $1,152,000 $2,352,000 $2,547,000
========== ========== ==========
<PAGE>
5. Income Taxes (continued)
The major components of the deferred tax accounts as computed under SFAS No.
109, are as follows:
1994
Inventory reserve $754,000
Bad debt reserve 258,000
Warranty reserve 228,000
Accruals not currently deductible
for tax purposes 1,078,000
Amortization of convenant-not-to-compete 538,000
Excess of tax over bank depreciation (710,000)
Other 259,000
----------
$2,405,000
The provisions for income taxes differ from the amounts which would result by
applying the applicable statutory Federal income tax rate to income before taxes
as follows:
<TABLE>
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
Computed expected provision $470,000 $2,418,000 $2,549,000
State tax 81,000 436,000 454,000
Amortization and writedown of
goodwill 812,000 90,000 45,000
FSC commission (259,000) (254,000) (254,000)
General business credits (72,000) (33,000) (42,000)
Other 120,000 (305,000) (205,000)
---------- ----------- ----------
$1,152,000 $2,352,000 $2,547,000
========== =========== ==========
</TABLE>
6. Employee Retirement Plan
------------------------
On January 1, 1984, the Company adopted a thrift incentive savings plan
(the "Plan"). The Plan is qualified under section 401(k) of the Internal Revenue
Code and is available to all full-time employees with one or more years of
employment with the Company. Under the terms of the Plan, participating
employees must contribute at least 2% of their salary to the Plan, and the
Company contributes (as a matching contribution) 100% of this amount. Employees
may also contribute an additional amount up to 13% of their salary to the Plan,
with no further contributions by the Company. The Company's contribution vest at
a rate of 20% per year, commencing on the first anniversary of employment. Total
employer matching contributions under the Plan were $163,000, $145,000, and
$113,000 for the fiscal years 1994, 1993 and 1992, respectively.
7. Commitments
------------
In August 1993, the Company purchased two buildings, which were its two
principal operating facilities in Sunnyvale, California, from the landlord for
$7,600,000 (see Note 3). The Company has a sublease on a portion of the space
which expires in 1995.
Prior to August 1993, the Company had leased these facilities under an
operating lease agreement with the landlord under a sale and leaseback
agreement. In addition, the Company has entered into operating leases in its
other facilities.
For fiscal years 1994, 1993 and 1992, rental expense, was approximately
$318,000, $934,000 and $620,000, respectively.
At October 1, 1994, the future minimum rental payments under all
building leases for fiscal 1995 through 1999 are approximately $265,000,
$260,000, $227,000, $216,000 and $226,000, respectively, and $886,000
thereafter. The amounts total $2,080,000.
<PAGE>
8. Stock Option and Purchase Plans
-------------------------------
In 1993, the Company adopted the 1992 Stock Option Plan and reserved
200,000 shares for issuance. The 1992 Option Plan replaced the 1983 Option Plan
which expired in June 1993. Although options granted under the 1983 Stock Option
Plan before such expiration will remain outstanding in accordance with their
terms, no further options will be granted under the 1983 Stock Option Plan after
June 1993. Options granted are for a ten-year term and generally vest ratably
over a period of four years commencing one year after the date of grant. A
summary of the option transactions is as follows:
<TABLE>
Options Outstanding
<CAPTION>
<S> <C> <C> <C> <C>
Options Number
Available of Price per Aggregate
for Grant Shares Share Value
Balance at September 28, 1991 3,624 537,150 $2.13-11.50 $2,066,580
Additional Shares approved 200,000 - - -
Granted (194,000) 194,000 8.75-9.00 1,704,250
Canceled 2,000 (2,000) 8.75-11.50 (20,250)
Exercised - (30,650) 2.13-3.75 (104,219)
---------- --------- --------- ---------
Balance at October 3, 1992 11,624 698,500 2.13-11.50 3,646,361
1992 Option Plan new shares
approved 200,000 - - -
Options assumed in Converter
Power Acquisition - 26,027 1.09 28,369
Granted (57,500) 57,500 9.00-11.50 642,500
Canceled 5,500 (5,500) 8.75-11.50 (56,375)
Exercised - (30,500) 2.13-3.75 (93,370)
-------- -------- ----------- --------
Balance at October 2, 1993 159,624 746,027 1.09-11.50 4,167,485
Granted (74,000) 74,000 7.38-11.00 723,500
Canceled 18,000 (18,000) 3.75-11.50 (160,126)
Exercised - (82,000) 1.09-8.75 (227,420)
--------- -------- --------- ---------
Balance at October 1, 1994 103,624 720,027 $ 1.09-11.50 $4,503,439
======= ======= ============ ==========
Options exercisable at
October 1, 1994 503,402 $ 1.09-11.50
======= ============
</TABLE>
In February 1985, the Company adopted an employee stock purchase plan.
Under the plan, the Company has reserved 200,000 shares of common stock for
issuance to participating employees who have met certain eligibility
requirements. In 1994, the Board of Directors approved an amendment to the
employee stock purchase plan, subject to shareholder approval, to increase the
number of shares reserved for issuance from 200,000 to 300,000 shares. The
number of shares available for purchase by each participant is based upon annual
base earnings and at a purchase price equal to 85% of the fair market value at
the beginning or the end of the quarter of purchase, whichever is lower. During
fiscal 1994, 1993 and 1992, a total of 25,475, 14,281 and 7,859 shares of common
stock, respectively, were purchased by Company employees under the plan. As of
October 1, 1994, 133,770 shares were available for future purchase.
<PAGE>
8. Stock Option and Purchase Plans (continued)
-------------------------------------------
In November 1993, the Company's 1992 Stock Option Plan was amended to
provide for the automatic grant of a nonstatutory stock option to purchase
shares of Common Stock to each outside Director. Subsequent grants will occur
annually during the Company's third fiscal quarter. During fiscal 1994, each
outside Director was granted an automatic option to purchase a total of 5,000
shares of the Company's Common Stock.
9. Other Income/Expense
--------------------
Other (income) expense consists of the following:
<TABLE>
<S> <C> <C> <C>
1994 1993 1992
---- ---- ----
Interest income $(199,578) $(191,941) $(168,580)
Interest expense 338,751 78,343 68,633
Rental and sublease income - (60,995) (115,596)
Net rental expense on sublet
property - 138,577 16,424
---------- ---------- --------
$139,173 $(36,016) $(199,119)
======== =========== ==========
</TABLE>
10. Acquisitions
------------
In August 1991, the Company acquired all the outstanding stock of Q-Arc
Ltd. of Cambridge, England for $1,400,000 in cash and the assumption of certain
liabilities. Q-Arc is a manufacturer of specialty lamps for laser and non-laser
applications. This transaction was accounted for as a purchase and accordingly,
all assets were revalued to their respective fair values. The acquisition price
was equal to the fair value of net assets acquired. Net assets included a
covenant-not-to-compete of approximately $951,000. The covenant is being
amortized over an eight year period.
On June 30, 1992, the Company acquired all of the outstanding stock of
Precision Lamp, Inc. located in Cotati, California. Precision Lamp designs,
manufactures and distributes miniature incandescent lamps for various
applications. The Company paid approximately $2,000,000 in cash for all of the
outstanding shares, agreed to pay off approximately $1,100,000 of bank debt and
assumed all liabilities ($1,321,000) of Precision Lamp. The Company also agreed
to pay at least $2,600,000 to the primary selling shareholder as consideration
for a covenant-not-to-compete among the primary selling shareholder, Precision
Lamp and ILC. These payments will be made in equal installments through 1997.
This transaction was accounted for as a purchase and accordingly, all assets
were revalued to their respective fair values. This purchase price allocation
resulted in goodwill of approximately $2,650,000 which is being amortized over a
ten year period. The $2,600,000 covenant-not-to-compete is being amortized over
a seven year period.
In the second quarter of fiscal 1994, management determined that an
impairment occurred in the recoverability of the unamortized goodwill and
covenant-not-to-compete due to a significant shortfall in orders from a major
Precision Lamp customer. Accordingly, a $3.4 million charge was recorded to
write off the intangibles to net realizable value. The writedown was determined
based on the currently projected undiscounted cash flows of Precision Lamp from
March 1994 to March 2004, which projected aggregate cash flows of approximately
$900,000 (unaudited) over that period and was based on projected net income
which averaged 9% higher than the net income projection for fiscal 1994 (with no
loss years included in the projection), compared with the carrying value of the
Company's investment in Precision Lamp, including goodwill, at the date of the
writedown. These projections represent management's best estimate for future
results for that subsidiary. At October 1, 1994, the unamortized balance of the
Precision Lamp covenant-not- to-compete is approximately $812,000.
In January 1993, the Company completed a combination with Converter
Power, Inc., located in Ipswich, Massachusetts. Converter Power is a
manufacturer of custom power supplies for medical, scientific and industrial
applications. The Company exchanged 273, 973 shares of common stock for all of
the outstanding common stock of Converter Power in a transaction that was
accounted for as a pooling of interests.
<PAGE>
10. Acquisitions (continued)
------------------------
The financial statements for fiscal year 1992, contained herein, have
been restated to reflect the operations of Converter Power for the full year.
The financial statements for fiscal years 1993 and 1994 also reflect a full year
of operations for Converter Power. A reconciliation of the current financial
statements to previously reported separate Company information is presented
below for the Company and Converter Power (in thousands):
<TABLE>
<S> <C>
1992
Net sales
ILC Technology, Inc. consolidated $ 37,578
Converter Power, Inc. 3,307
---------
Combined $ 40,885
========
Net income
ILC Technology, Inc. consolidated $ 4,694
Converter Power, Inc. 256
---------
Combined $ 4,950
========
</TABLE>
The results of operations of Q-Arc and Precision Lamp since the date of
acquisition have been included in the Company's consolidated results of
operations.
11. Rights Agreement
----------------
On September 19, 1989, the Company's Board of Directors declared a
dividend of one common share purchase right for each outstanding share of common
stock, no par value, of the Company. The dividend was payable on October 2, 1989
to the shareholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one share of common stock of the Company at
a price of $30.00 per common share, after adjustment for the March 8, 1991
2-for-1 stock split, and subsequent amendment. The rights will not be
exercisable until a party either acquires beneficial ownership of 20% of the
Company's common stock or makes a tender offer for at least 30% of its common
stock. In the event the rights become exercisable and thereafter a person or
group acquires 30% or more of the Company's stock, a 20% shareholder ("Acquiring
Person") engages in any specified self-dealing transaction, or, as a result of a
recapitalization or reorganization, an Acquiring Person's shareholdings are
increased by more than 3%, each right will entitle the holder to purchase from
the Company, for the exercise price, common stock having a market value of twice
the exercise price of the right. In the event the rights become exercisable and
thereafter the Company is acquired in a merger or other business combination,
each right will enable the holder to purchase from the surviving corporation,
for the exercise price, common stock having a market value of twice the exercise
price of the right. At the Company's option, the rights are redeemable in their
entirety, prior to becoming exercisable, at $.01 per right. The rights are
subject to adjustment to prevent dilution and expire September 29, 1999.
12. Repurchase of Common Stock
--------------------------
In March 1994, the Board of Directors authorized the purchase of up to
1,000,000 shares of the Company's common shares outstanding through March 1995.
During 1994, the Company repurchased 204,000 shares of common stock for an
aggregate amount of $1,555,500. Purchases were made on the open market.
<PAGE>
<TABLE>
SCHEDULE V
ILC TECHNOLOGY, INC.
PROPERTY AND EQUIPMENT
FOR FISCAL YEARS 1994, 1993 AND 1992
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Balance at Additions Retirement Balance at
Beginning From Additions and End of
of Period Acquisition(1) at Cost Sales Transfers Period
--------- -------------- -------- --------- --------- ---------
Year ended
October 3,1992:
Machinery and
equipment $8,754,674 $ 543,863 $481,640 $(144,579) $48,875 $9,684,473
Furniture and
fixtures 246,234 48,273 14,197 - - 308,704
Leasehold
improvements 2,131,824 62,067 10,652 (1,575) 184,383 2,387,351
Equipment
under capital
lease 211,823 - - - - 211,823
Construction
in progress 212,516 427,363 301,826 - (233,258) 708,447
--------- --------- -------- --------- -------- ----------
$11,557,071 $1,081,566 $ 808,315 $(146,154) $ - 13,300,798
=========== ========== ========= ========== ======= ===========
Year ended
October 2, 1993:
Machinery and
equipment $9,684,473 $ - $764,496 $(175,404) $223,869 $10,497,434
Land and
buildings - - 7,600,000 - 544,406 8,144,406
Furniture and
fixtures 308,704 - 80,614 - - 389,318
Leasehold
improvements 2,387,351 - 31,702 (1,717,289)(544,406) 157,358
Equipment under
capital lease 211,823 - - - - 211,823
Construction
in progress 708,447 - 590,112 - (223,869) 1,074,690
--------- ------- -------- --------- --------- ---------
$13,300,798 $ - $9,066,924 $(1,892,693)$ - $20,475,029
=========== ======= ========== =========== ======= ===========
Year ended
October 1, 1994:
Machinery and
equipment $10,497,434 $ - $ 635,991 $(172,658) $895,256 $11,856,023
Land and
buildings 8,144,406 - 3,012,844 - 72,091 11,229,341
Furniture and
fixtures 389,318 - 91,116 (16,524) - 463,910
Leasehold
improvements 157,358 - 52,472 - - 209,830
Equipment under
capital lease 211,823 - 174,268 (211,823) - 174,268
Construction
in progress 1,074,690 - 1,832,620 - (967,347) 1,939,963
--------- -------- ---------- ------- --------- ---------
$20,475,029 $ - $5,799,311 $(401,005) $ - $25,873,335
============ ======== ========== ========== ======== ===========
(1) Acquisition of Precision Lamp, Inc. See Note 10 to Consolidated
Financial Statements.
</TABLE>
<PAGE>
SCHEDULE VI
ILC TECHNOLOGY, INC.
ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR FISCAL YEARS 1994, 1993 AND 1992
Additions
Balance at Charged to Retirement Balance at
Beginning Costs and and End of
of Period Expenses Sales Period
Year ended October 3, 1992:
Machinery and equipment $5,679,223 $ 705,820 $(88,945) $6,296,098
Furniture and fixtures 169,675 18,138 - 187,813
Leasehold improvements 1,333,464 228,044 (475) 1,561,033
Equipment under capital
lease 180,940 30,883 - 211,823
---------- --------- --------- ----------
$7,363,302 $ 982,885 $ (89,420) $8,256,767
=========== ========= ========== ===========
Year ended October 2, 1993:
Machinery and equipment $6,296,098 $831,227 $(120,016) $7,007,309
Land and buildings - 10,350 - 10,350
Furniture and fixtures 187,813 34,296 - 222,109
Leasehold improvements 1,561,033 157,231 (1,702, 867) 15,397
Equipment under capital
lease 211,823 - - 211,823
---------- -------- ----------- ----------
$8,256,767 $1,033,104 $(1,822,883) $7,466,988
========== ========== =========== ==========
Year ended October 1, 1994:
Machinery and equipment $7,007,309 $ 879,744 $ (168,819) $7,718,234
Land and buildings 10,350 124,194 - 134,544
Furniture and fixtures 222,109 46,224 (16,524) 251,809
Leasehold improvements 15,397 33,125 - 48,522
Equipment under capital lease 211,823 31,949 (211,823) 31,949
--------- ---------- ------------ ----------
$7,466,988 $1,115,236 $ (397,166) $8,185,058
========== ========== ============ ==========
<PAGE>
<TABLE>
SCHEDULE II
ILC TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR FISCAL YEARS 1994, 1993 AND 1992
<CAPTION>
Charged
Balance (Credited) Addition Deductions Balance
at to Cost and from and at end of
Beginning Expenses Acquisition Write Off Period
<S> <C> <C> <C> <C> <C>
Allowance for
Doubtful Accounts:
Year ended
October 3, 1992 $356,171 $128,896 $10,341 $154,053 $341,355
Year ended
October 2, 1993 $341,355 $(98,769) $7,258 $30,716 $219,128
Year ended
October 1, 1994 $219,128 $383,902 $ - $270,227 $332,803
Reserve for Inventory
obsolescence:
Year ended
October 3, 1992 $1,870,395 $(65,039) $330,614 $201,224 $1,934,746
Year ended
October 2, 1993 $1,990,256 $ 3,898 $ - $414,672 $1,523,972
Year ended
October 1, 1994 $1,523,972 $1,772,346 $ - $763,085 $2,533,233
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ILC Technology, Inc.
We have audited the accompanying consolidated balance sheets of ILC
Technology, Inc. (a California Corporation) and subsidiaries as of October 1,
1994 and October 2, 1993, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended October 1, 1994. These financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ILC
Technology, Inc. and subsidiaries as of October 1, 1994 and October 2, 1993 and
the results of their operations and their cash flows for each of the three years
in the period ended October 1, 1994 in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules presented on pages 20 to 22
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Jose, California
November 3, 1994
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
The Consolidated Financial Statements, notes thereto, and
Report of Independent Public Accountants thereon are included in Part
II, Item 8 of this Report.
Page in
2. Financial statement Schedules Form 10-K/A
Schedule V Property and Equipment 15
Schedule VI Accumulated Depreciation and
Amortization of Property and Equipment 16
Schedule II Valuation and Qualifying
Accounts and Reserves 17
All other schedules have been omitted since the required information is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the Consolidated Financial
Statements or notes thereto.
3. Exhibits
The exhibits listed in the Index to Exhibits following the signature
page of the Form 10-K are filed as part of this Report.
The following exhibits are filed as part of this Amendment:
Page
Exhibit 23.1 Consent of Independent Public Accountants 21
______________________________________________________ __
Exhibit 27.1 Financial Data Schedule 22
(b) Reports 8-K
No reports on Form 8-K were filed during the last quarter of fiscal
1994.
No reports on Form 8-K were filed during the last quarter of fiscal
1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 28, 1995 ILC TECHNOLOGY, INC.
s/s Ronald E. Fredianelli
Ronald E. Fredianelli
Chief Financial Officer
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated November 3, 1994, included in this Form 10-K, into the Company's
previously filed Form S-8 Registration Statements, File Numbers 2-90841,
2-95899, 33-6917, 33- 27001, 33-50404 and 33-89470.
ARTHUR ANDERSEN LLP
San Jose, California
July 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-1-1994
<PERIOD-END> OCT-1-1994
<CASH> 2,462
<SECURITIES> 998
<RECEIVABLES> 8,114
<ALLOWANCES> 333
<INVENTORY> 7,192
<CURRENT-ASSETS> 2,948
<PP&E> 25,873
<DEPRECIATION> 8,185
<TOTAL-ASSETS> 41,997
<CURRENT-LIABILITIES> 11,952
<BONDS> 0
<COMMON> 5,492
0
0
<OTHER-SE> 18,131
<TOTAL-LIABILITY-AND-EQUITY> 41,997
<SALES> 52,022
<TOTAL-REVENUES> 52,022
<CGS> 35,288
<TOTAL-COSTS> 35,288
<OTHER-EXPENSES> 15,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> 1,343
<INCOME-TAX> 1,152
<INCOME-CONTINUING> 191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
