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 quarterly period ended March 31, 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 Number 0-12944
Zygo Corporation
(Exact name of registrant as specified in its charter)
Delaware 06-0864500
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Laurel Brook Road, Middlefield, Connecticut 06455
(Address of principal executive offices) (Zip Code)
(860) 347-8506
Registrant's telephone number, including area code
N/A
(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_____
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
4,815,186 shares, Common Stock, $.10 Par Value, at April 23, 1996
<PAGE>
PART I
Item 1. Financial Statements
Company or group of companies for which report is filed: Zygo Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share amounts)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $14,349 $ 8,718 $ 38,343 $ 21,673
Cost of goods sold 7,672 4,615 20,867 11,921
------- ------- -------- --------
Gross profit 6,677 4,103 17,476 9,752
Selling, general and administrative
expenses 2,010 1,567 5,995 4,708
Research, development and
engineering expense 1,414 1,043 4,160 2,505
------- ------- -------- --------
Operating profit 3,253 1,493 7,321 2,539
------- ------- -------- --------
Other income (expense):
Interest income 370 95 614 271
Interest expense - (11) - (34)
Miscellaneous, net (73) (52) (203) (159)
------- ------- -------- --------
Other income, net 297 32 411 78
------- ------- -------- --------
Earnings before income taxes 3,550 1,525 7,732 2,617
Income tax expense 1,030 605 2,493 1,008
------- ------- -------- --------
Net earnings $ 2,520 $ 920 $ 5,239 $ 1,609
======= ======= ======= ========
Net earnings per share $ .45 $ .21 $ 1.04 $ .39
======= ======= ======= ========
Weighted average common shares
and common dilutive equivalents
outstanding 5,553 4,371 5,034 4,137
===== ===== ===== =====
</TABLE>
<PAGE>
-2-
CONSOLIDATED BALANCE SHEETS
As of March 31, 1996, and June 30, 1995
(Thousands of dollars)
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $14,533 $2,428
Marketable securities 19,184 7,746
Receivables 9,701 6,296
Inventories:
Raw materials and manufactured parts 2,977 2,863
Work in process 3,560 2,281
Finished goods 410 499
-------- --------
Total inventories 6,947 5,643
Prepaid expenses and taxes 1,431 581
Deferred income taxes 1,099 1,043
-------- --------
Total current assets 52,895 23,737
-------- --------
Property, plant and equipment, at cost 17,241 16,644
Less accumulated depreciation (11,143) (11,381)
-------- --------
Net property, plant and equipment 6,098 5,263
Other assets, net 788 666
-------- --------
Total assets $59,781 $29,666
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $2,507 $2,515
Accrued expenses and customer progress payments 5,537 3,497
Federal and state income taxes 654 653
-------- --------
Total current liabilities 8,698 6,665
-------- --------
Deferred income taxes 665 668
Stockholders' Equity:
Common stock, $.10 par value per share:
15,000,000 shares authorized; 4,918,986
shares issued (4,030,786 at June 30, 1995) 492 403
Additional paid-in capital 33,479 10,726
Retained earnings 16,747 11,508
Net unrealized gain (loss) on marketable securities 1 (3)
-------- --------
50,719 22,634
Less treasury stock, at cost; 103,800 shares 301 301
-------- --------
Total stockholders' equity 50,418 22,333
-------- --------
Total liabilities and stockholders' equity $59,781 $29,666
======== ========
</TABLE>
<PAGE>
-3-
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended March 31, 1996, and 1995
(Thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash provided by (used for) operating activities:
Net earnings $ 5,239 $ 1,609
Adjustments to reconcile net earnings
to cash provided by (used for) operating activities:
Depreciation and amortization 1,020 937
Deferred income taxes (62) --
Loss on disposal of assets 183 241
Gain on sale of marketable securities (1) --
Intangible and other assets -- (155)
Changes in operating accounts:
Receivables (3,368) (2,964)
Inventories (1,304) (1,932)
Prepaid expenses and taxes (850) 155
Accounts payable and accrued expenses 2,033 2,676
-------- --------
Net cash provided by operating activities 2,890 567
-------- --------
Cash provided by (used for) investing activities: (2,019) (1,036)
Additions to property, plant and equipment
Investment in marketable securities (12,590) (1,229)
Investment in other assets (131) --
Acquisition of business (52) (100)
Proceeds from maturity of marketable securities 1,160 1,465
Proceeds from sale of assets 4 3
-------- --------
Net cash (used for) investing activities (13,627) (897)
-------- --------
Cash provided by (used for) financing activities:
Repayment of long-term debt -- (656)
Net proceeds from issuance of common stock 22,692 --
Exercise of stock options 150 46
-------- --------
Net cash provided by (used for) financing activities 22,842 (610)
-------- --------
Net increase (decrease) in cash and cash 12,105 (940)
equivalents
Cash and cash equivalents,
beginning of year 2,428 2,530
-------- --------
Cash and cash equivalents,
end of period $ 14,533 $ 1,590
======== ========
</TABLE>
The interim financial statements furnished above reflect all adjustments,
consisting only of normal closing entries, which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods
presented. These interim financial statements should be read in conjunction with
the financial statements and notes included in the Company's June 30, 1995
Annual Report on Form 10-K.
The foregoing interim results are not necessarily indicative of the results of
operations for the full fiscal year ending June 30, 1996.
<PAGE>
-4-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
At March 31, 1996, working capital was $44,197,000, an increase of $27,125,000
from $17,072,000 at June 30, 1995. At March 31, 1996, the Company had cash and
cash equivalents of $14,533,000 and marketable securities of $19,184,000 for a
total of $33,717,000. The $23,543,000 increase in cash and cash equivalents and
marketable securities from the amount at June 30, 1995, was due primarily to an
offering of 1,300,000 shares of the Company's common stock which was completed
in December 1995, of which 845,000 shares were sold by the Company generating
approximately $23 million in net proceeds to the Company. As of March 31, 1996,
there were no borrowings outstanding under the Company's $3,000,000 bank line of
credit. Unused amounts under the line of credit are available for short-term
working capital needs.
Results of Operations
Net sales of $14,349,000 for the three months and $38,343,000 for the nine
months ended March 31, 1996, increased by $5,631,000 (64.6%) and $16,670,000
(76.9%), respectively, from the net sales in the comparable prior year periods.
The increases in both the three-month and nine-month periods were principally a
result of increased demand for the Company's electro-optical instruments and
accessories from manufacturers of data storage and semiconductor products. Net
sales of electro-optical instruments and accessories in the three months and
nine months ended March 31, 1996 amounted to $12,426,000 (86.6% of total net
sales) and $33,258,000 (86.7% of total net sales), respectively, and increased
in the three- and nine-month periods by $5,097,000 (69.5%) and $15,422,000
(86.5%), respectively, from the comparable prior year periods. Net sales of
precision optical components in the three months and nine months ended March 31,
1996 increased by $534,000 (38.4%) and $1,248,000 (32.5%), respectively, from
the same periods the year earlier.
Gross profit for the three months and nine months ended March 31, 1996, amounted
to $6,677,000 and $17,476,000, respectively, an increase of $2,574,000 (62.7%)
and $7,724,000 (79.2%), respectively, from the comparable prior year periods.
Gross profit, as a percentage of sales, for the quarter and nine months ended
March 31, 1996, amounted to 46.5% and 45.6%, respectively, compared to 47.1% and
45% for the three months and nine months ended March 31, 1995. Gross profit
dollars increased in both the third quarter and the nine months ended March 31,
1996, from the comparable prior year periods primarily as a result of the
increases in the volume of net sales and certain volume-related manufacturing
efficiencies.
Selling, general and administrative expenses in the three months and nine months
ended March 31, 1996 amounted to $2,010,000 and $5,995,000, respectively. As a
percentage of sales, selling, general and administrative expenses amounted to
14.0% and 15.6%, respectively, as compared to 18.0% and 21.7%, respectively, in
the comparable prior year periods. Selling, general and administrative expenses
increased by $443,000 (28.3%) and $1,287,000 (27.3%), respectively, in the
three- and nine-month periods from the three months and nine months ended March
31, 1995. The increases were principally a result of volume-related expenses and
necessary infrastructure changes made to support the growth of the business.
Research and development expenses in the three months and nine months ended
March 31, 1996, amounted to $1,414,000 and $4,160,000, respectively, an increase
of $371,000 (35.6%) and $1,655,000 (66.1%) from the comparable three- and
nine-month periods in the prior fiscal year. Research and development expenses
as a percentage of sales in the three-and nine-month periods were 9.9% and
10.8%, respectively, as compared to 12.0% and 11.6%, respectively, in the
comparable prior year periods. The significant increase in R&D expenses
primarily resulted from spending on personnel and materials at both the
Company's principal R&D center in Middlefield, Connecticut, and its R&D facility
in Simi Valley, California, which was formed in the quarter ended March 31,
1995.
<PAGE>
-5-
Other income, net, amounted to $297,000 and $411,000, respectively, in the three
months and nine months ended March 31, 1996, compared to $32,000 and $78,000,
respectively, in the same prior year periods. The increase in other income was
primarily due to an increase in interest income resulting from higher cash
balances principally as a result of the Company's secondary offering.
The Company's backlog at March 31, 1996 was $18,174,000, an increase of
$5,640,000 or 45.0% over the $12,534,000 backlog at March 31, 1995, and an
increase of $1,408,000 or 8.4% from the backlog at December 31, 1995. Stronger
demand for the Company's electro-optical instruments and accessories of 44.1%
accounted for the increase in backlog from the year earlier period.
PART II
Item 5. Other Information
On April 9, 1996, the Company announced that it had signed a letter of intent
providing for the acquisition of NexStar Automation, Incorporated for 250,000
shares of Zygo's common stock. NexStar Automation is engaged in the business of
designing, developing, and manufacturing automation parts handling equipment to
improve production efficiency and manufacturing yields within the data storage,
semiconductor, and medical disposables markets. The proposed acquisition of
NexStar is expected to be completed in August 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule.
(b) The Company did not file any reports on Form 8-K during the period covered
by this Form 10-Q.
<PAGE>
-6-
SIGNATURE
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.
Zygo Corporation
-------------------------------------
(Registrant)
/s/ GARY K. WILLIS
-------------------------------------
Gary K. Willis
President and Chief Executive Officer
/s/ MARK J. BONNEY
-------------------------------------
Mark J. Bonney
Vice President, Finance and Administration,
Treasurer, and Chief Financial Officer
Date: April 26, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
27 Financial Data Schedule for the quarterly report
on Form 10-Q for the period ended March 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of earnings and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 14,533
<SECURITIES> 19,184
<RECEIVABLES> 9,667
<ALLOWANCES> 200
<INVENTORY> 6,947
<CURRENT-ASSETS> 52,895
<PP&E> 17,241
<DEPRECIATION> (11,143)
<TOTAL-ASSETS> 59,781
<CURRENT-LIABILITIES> 8,698
<BONDS> 0
0
0
<COMMON> 492
<OTHER-SE> 49,926
<TOTAL-LIABILITY-AND-EQUITY> 59,781
<SALES> 38,343
<TOTAL-REVENUES> 38,343
<CGS> 20,867
<TOTAL-COSTS> 31,022
<OTHER-EXPENSES> 228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,732
<INCOME-TAX> 2,493
<INCOME-CONTINUING> 5,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,239
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
