UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 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 0-11360
ILC TECHNOLOGY, INC
(Exact name of registrant as specified in its charter)
California 94-1655721
(State of other jurisdiction (I.R.S. Employer Incorporation or
or organization) Identification No.)
399 Java Drive, Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
408-745-7900
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares: 4,695,916 Date: January 31, 1996
<PAGE>
ILC TECHNOLOGY, INC.
FORM 10-Q
For the Quarter Ended December 30, 1995
INDEX Page No.
Part I Financial Information 2
Item 1 Condensed Consolidated Statements of
Operations - Quarters ended December 30, 1995
and December 31, 1994 3
Condensed Consolidated Balance Sheets -
December 30, 1995 and September 30, 1995 4
Condensed Consolidated Statements of Cash
Flows - Quarters ended December 30, 1995
and December 31, 1994 5-6
Notes to Condensed Consolidated Financial
Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
Part II Other Information 11
Signatures 12
1
<PAGE>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures which are made are adequate to make the information presented not
misleading. It is suggested that the condensed consolidated financial statements
be read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report/Form 10-K for the year ended
September 30, 1995.
These financial statements have been prepared in all material respects in
conformity with the standards of accounting measurements set forth in Accounting
Principles Board Opinion No. 28 and reflect, in the opinion of management, all
adjustments (that consisted only of normal recurring adjustments) necessary to
present fairly the financial information set forth therein. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year.
2
<PAGE>
ITEM 1. Financial Statements
ILC TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Quarter Ended
-------------
December 30, December 31,
1995 1994
---- ----
Net Sales ........................................ $ 14,498 $ 12,684
Costs and expenses:
Cost of sales .................................. 9,834 8,687
Research and development ....................... 1,287 1,014
Marketing ...................................... 806 657
General and administrative ..................... 1,193 1,099
Amortization of intangibles .................... 73 73
-- --
13,193 11,530
------ ------
Income from operations ........................... 1,305 1,154
----- -----
Other income (expense):
Interest, net .................................. (135) (129)
---- ----
Income before provision for income taxes ......... 1,170 1,025
Provision for income taxes ....................... 292 287
--- ---
Net Income ....................................... $ 878 $ 738
======== ========
Earnings per share ............................... $ 0.18 $ 0.16
======== ========
Weighted average shares outstanding .............. 4,884 4,752
===== =====
See accompanying notes
3
<PAGE>
ILC TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 30, September 30,
1995 1995
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents ...................... $ 936 $ 1,509
Accounts receivable, net ....................... 9,693 10,445
Inventories:
Raw materials ................................. 4,974 4,846
Work-in-process ............................... 3,193 2,609
Finished goods ................................ 1,662 1,834
----- -----
Total inventories ........................... 9,829 9,289
----- -----
Deferred tax asset ............................. 1,454 1,454
Prepaid expenses ............................... 292 159
--- ---
Total current assets ........................ 22,204 22,856
------ ------
Property and equipment, net .................... 22,734 22,442
Covenants-not-to-compete, net .................. 1,044 1,117
Other assets ................................... 754 770
$46,736 $47,185
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ............................... $ 3,969 $ 4,080
Accrued liabilities ............................ 5,286 5,841
Accrued income taxes payable ................... 2,079 1,869
----- -----
Total current liabilities ................... 11,334 11,790
------ ------
Long-term debt ................................. 3,876 4,772
Non-compete obligation ......................... 260 390
Obligations under equipment line ............... 1,079 1,006
Other accruals ................................. 298 304
Capital lease obligation ....................... 112 121
Stockholders' equity:
Common stock ................................... 6,230 6,133
Retained earnings .............................. 23,547 22,669
------ ------
Total stockholders' equity .................. 29,777 28,802
------ ------
$46,736 $47,185
======= =======
See accompanying notes
4
<PAGE>
ILC TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Quarter Ended
-------------
December 30, December 31,
1995 1994
---- ----
Cash flows from operating activities -
Net income ........................................... $ 878 $ 738
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ..................... 511 355
Amortization of non-compete agreements ............ 73 73
Changes in assets and liabilities from
operations:
Decrease in marketable securities ............... -- 739
Decrease in accounts receivable ................. 751 350
Increase in inventories ......................... (540) (1,101)
(Increase) decrease in prepaid expenses ......... (133) 252
(Increase) decrease in other assets ............. 16 (147)
Increase (decrease) in accounts payable ......... (111) 404
Decrease in accrued liabilities ................. (433) (38)
---- ---
Total adjustments .............................. 134 887
--- ---
Net cash provided by operating
activities ..................................... 1,012 1,625
----- -----
Cash flows from investing activities -
Capital expenditures ............................... (803) (4,570)
Decrease in deposit on land and building
purchase .......................................... -- 1,300
-----
Net cash used in investing activities .......... (803) (3,270)
---- ------
Cash flows from financing activities -
Principal borrowings under line of credit .......... 1,500 --
Principal repayments under line of credit .......... (2,000) --
Principal borrowings under equipment line .......... 443 910
Principal payments under equipment ................. (296) (181)
linePrincipal payments under term loan for
buildings ..................................... (396) (390)
Proceeds from issuance of common stock ............. 97 67
Payments under non-compete agreement ............... (130) (130)
---- ----
Net cash provided by (used in) ................. (782) 276
---- ---
financing activities
Net decrease in cash and cash equivalents .......... (573) (1,369)
Cash and cash equivalents at beginning of
period ............................................ 1,509 2,462
----- -----
Cash and cash equivalents at end of period ......... $ 936 $ 1,093
======= =======
See accompanying notes
5
<PAGE>
ILC TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Continued)
(In thousands)
Supplemental disclosures of cash flow information:
Quarter Ended
December 30, December 30,
1995 1994
---- ----
Cash paid during the period for:
Interest expense ............................. $151 $154
Income taxes ................................. -- 80
See accompanying notes
6
<PAGE>
ILC TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
December 30, 1995
1. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The condensed consolidated financial statements include the accounts of ILC
Technology, Inc., and its subsidiaries, after elimination of intercompany
accounts and transactions. The company's quarter ends on the last Saturday of
the fiscal month.
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 three months or less at
the time of issue to be cash equivalents.
Inventories
-----------
Inventories are stated at the lower of cost (first in, first out) or
market, and include material, labor and manufacturing overhead.
2. Earnings Per Share
------------------
Earnings per share is computed using the weighted average number of common
shares and common equivalent shares (when such equivalents have a dilutive
effect) outstanding during the periods using the treasury stock method. Fully
diluted earnings per share is not significantly different from earnings per
share as reported.
3. Intangible Assets
-----------------
The Company has certain intangible assets as a result of its acquisition of
two subsidiaries. Subsequent to these acquisitions, the Company quarterly
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful lives 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.
Covenants-not-to-compete are amortized over the period of the covenant.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
Quarter Ended December 30, 1995 Compared to Quarter Ended December 31, 1994
- ---------------------------------------------------------------------------
Net sales increased 14.3% in the quarter ended December 30, 1995 to
$14,498,000 compared to $12,684,000 in the quarter ended December 31, 1994. The
increase was the result of a higher volume of Quartz and Equipment products sold
and higher unit volume at the Converter Power, Precision Lamp and Q-Arc
subsidiaries. Unit volume in the Flash, Cermax and Advanced Lighting products
remained constant between the two quarters.
Cost of sales as a percentage of net sales was 67.8% in the first quarter
of fiscal 1996 compared to 68.5% in the same quarter last year. The percentage
decrease was due primarily to improved manufacturing yields coupled with an
increase in sales volume.
Spending in the area of research and development, 8.9% of net sales in the
first quarter of fiscal 1996, compared to 8.0% of net sales in the first quarter
of fiscal 1995, increased $273,000 between the two quarters. The majority of the
increase occurred in the Quartz Lamp product group for the development of
mercury xenon short arc lamps ("stepper lamps") used in the processing of
semiconductor materials and for the development of metal halide technologies for
the display and projection markets.
Marketing expenses for the quarter ended December 30, 1995 were $806,000,
or 5.6% of net sales, compared to $657,000, or 5.2% of net sales, in the same
quarter of the prior fiscal year. The $149,000 increase between the two quarters
was the result of personnel additions, more travel and trade show attendance and
additional commission expense on an increased sales volume.
General and administrative expenses, as a percentage of net sales, were
8.2% in the quarter ended December 30, 1995, compared to 8.7% in the quarter
ended December 31, 1994. The $94,000 increase in spending between the two
quarters includes increases to general and administrative expenses at Converter
Power, primarily for additions to staff, and at ILC for personnel additions and
for expenses associated with ISO 9001 certification.
In the second quarter of fiscal 1995, Precision Lamp experienced a
significant shortfall in orders from a major customer due to the qualification
of a second source by that customer. The customer represents approximately 85%
of Precision Lamp's revenue. In assessing the recoverability of the unamortized
goodwill and covenant-not-to-compete generated from the acquisition, management
determined that an impairment occurred in that quarter and recorded at $3.4
million charge. The amortization of intangibles of $73,000 in the first quarter
of fiscal 1996 and 1995 represents the revised amortization of the remaining
balance of the Precision Lamp covenant-not-to-compete plus the amortization of
the Q-Arc Ltd. covenant-not-to- compete.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations (continued)
---------------------------------
Quarter Ended December 30, 1995 Compared to Quarter Ended December 31, 1994
- ---------------------------------------------------------------------------
(continued)
- -----------
Other income (expense), net, primarily interest expense and interest
income, remained relatively constant between the first quarter of fiscal 1996
and the first quarter of fiscal 1995. Interest expense for the quarter ended
December 30, 1995 amounted to $151,000 compared to $154,000 for the quarter
ended December 31, 1994. Interest expense is associated with the term loan
obtained to purchase the Company's two operating facilities in Sunnyvale, the
line of credit for working capital needs and the equipment line of credit for
capital equipment acquisitions.
Income before provision for income taxes was $1,170,000 for the quarter
ended December 30, 1995 compared to $1,025,000 for the quarter ended December
31, 1994. The provision for income taxes was 25% of income before provision for
income taxes for the first quarter of fiscal 1996 compared to 28% of income
before provision for income taxes in the same quarter last year.
The Company believes that inflation and changing prices had no significant
impact on sales or costs during the first quarter of fiscal 1996 or 1995.
Liquidity and Financial Condition
- ---------------------------------
Net cash provided by operating activities decreased to $1,012,000 for the
quarter ended December 30, 1995, a decrease of $613,000 from $1,625,000 for the
quarter ended December 31, 1994. This decrease was primarily due to the
liquidation of marketable securities of $739,000 in the quarter ended December
31, 1994. During the first quarter of fiscal 1996, the Company made capital
equipment acquisitions of $803,000, decreased its net borrowings under its line
of credit by $500,000, paid down a term loan by $396,000 and increased its net
borrowings under an equipment line by $147,000. In the quarter ended December
31, 1994, the Company purchased land and a manufacturing facility in Santa
Clara, California for approximately $3,200,000 (cash of approximately $1,900,000
plus a deposit made in the fourth quarter of fiscal 1994). Also in the quarter
ended December 31, 1994, the Company made capital equipment acquisitions of
$1,370,000, increased net borrowings under an equipment line by $729,000 and
paid down a term loan by $390,000.
Raw material and work in process inventories have increased from the
immediately preceding quarter by approximately $128,000 and $584,000,
respectively. This increase is in anticipation of product shipments in the
second quarter of fiscal 1996 and to reduce cycle time for customer needs.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------
Results of Operations (continued)
---------------------------------
Liquidity and Financial Condition (continued)
- ---------------------------------------------
The Company has working capital of $10,870,000 and a current ratio of 1.96
to 1.0 at December 30, 1995. This compares with working capital of $11,066,000
and a current ratio of 1.94 to 1.0 at September 30, 1995. As of December 30,
1995, the Company has $2,500,000 unused on a $4,000,000 bank line-of-credit for
working capital requirements with interest at 2% above the LIBOR rate (London
Interbank Offer Rate) (7.6% at December 30, 1995). The Company also has
available approximately $300,000 under a facility for equipment acquisitions,
which facility was increased to $2,000,000 in January 1996. This facility is at
the same interest rate as the bank line-of-credit. At December 30, 1995, the
Company was in compliance with all bank covenants. These financial resources,
together with anticipated additional resources to be provided from operations,
are expected to be adequate to meet the Company's anticipated financial needs at
least through fiscal 1996.
10
<PAGE>
PART II OTHER INFORMATION
-----------------
None.
11
<PAGE>
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.
ILC TECHNOLOGY, INC.
DATE: February 12,1996 /S/Ronald E. Fredianelli
Ronald E. Fredianelli
Chief Financial Officer
DATE: February 12, 1996 /S/Henry C. Baumgartner
Henry C. Baumgartner
President
12
<PAGE>
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ILC Technology Inc., Financial Data Sheet
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<NAME> ILC Technology, Inc.
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