<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
SEPTEMBER 28, 1996 0-13230
ALTRON INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2464301
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE JEWEL DRIVE, WILMINGTON, 01887
MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(508) 658-5800
FORMER NAME, FORMER ADDRESS AND FORMER
FISCAL YEAR, IF CHANGED SINCE LAST REPORT:
NONE
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 [_]
The number of shares of Common Stock of the Registrant outstanding as of
September 28, 1996 was 15,221,140 shares.
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ALTRON INCORPORATED AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets--September 28, 1996 and December
30, 1995................................................... 3
Consolidated Income Statements--Three and Nine Months Ended
September 28, 1996 and September 30, 1995.................. 4
Consolidated Statements of Cash Flows--Nine Months Ended
September 28, 1996 and September 30, 1995.................. 5
Notes to Consolidated Financial Statements.................. 6-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 8-9
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K............................ 10
Signatures.................................................. 11
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 30,
1996 1995
------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................. $ 13,558 $ 13,622
Short-term investments................................ 21,117 16,821
Accounts receivable, net.............................. 24,070 22,687
Inventories........................................... 19,124 18,588
Other current assets.................................. 3,265 3,009
-------- --------
Total Current Assets................................ 81,134 74,727
Property, Plant and Equipment, net...................... 38,912 29,613
Costs in Excess of Net Assets of Acquired Company....... 3,531 3,738
Long-term Investments................................... 4,674 4,981
-------- --------
$128,251 $113,059
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt..................... $ -- $ 3,169
Accounts payable...................................... 11,115 11,711
Accrued payroll and other employee benefits........... 4,445 3,937
Other accrued expenses................................ 2,869 3,633
-------- --------
Total Current Liabilities........................... 18,429 22,450
-------- --------
Long-term Debt.......................................... 7,600 4,577
-------- --------
Deferred Income Taxes................................... 7,160 5,378
-------- --------
Stockholders' Investment:
Preferred stock, $1.00 par value--
Authorized--1,000,000 shares
Issued and outstanding--none......................... -- --
Common stock, $.05 par value--
Authorized--40,000,000 shares
Issued--15,456,721 and 15,223,036 shares............. 773 761
Paid-in capital....................................... 36,908 36,047
Retained earnings..................................... 57,658 44,123
-------- --------
95,339 80,931
Less treasury stock, at cost (235,581 shares)......... 277 277
-------- --------
Total Stockholders' Investment...................... 95,062 80,654
-------- --------
$128,251 $113,059
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA,
UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales............... $38,229 $34,753 $126,622 $102,139
Cost of Sales........... 28,894 26,280 95,873 78,171
------- ------- -------- --------
Gross Profit............ 9,335 8,473 30,749 23,968
Selling, General and Ad-
ministrative Expenses.. 2,850 2,535 9,065 7,735
------- ------- -------- --------
Income from Operations.. 6,485 5,938 21,684 16,233
Other Income............ 460 475 1,383 897
Interest Expense........ 40 88 196 300
------- ------- -------- --------
Income Before Provision
for Income Taxes....... 6,905 6,325 22,871 16,830
Provision for Income
Taxes.................. 2,795 2,530 9,336 6,731
------- ------- -------- --------
Net Income.............. $ 4,110 $ 3,795 $ 13,535 $ 10,099
======= ======= ======== ========
Net Income Per Common
and Common Equivalent
Share.................. $ .26 $ .24 $ .85 $ .70
======= ======= ======== ========
Weighted Average Common
and Common Equivalent
Shares Outstanding..... 16,007 15,962 15,973 14,451
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
------------- -------------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income........................................ $13,535 $10,099
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 3,973 3,654
Deferred income taxes........................... 1,782 1,235
Changes in current assets and liabilities:
Accounts receivable............................. (1,383) (4,078)
Inventories..................................... (536) (8,125)
Other current assets............................ (256) (643)
Accounts payable................................ (596) 3,682
Accrued expenses................................ (256) 2,044
------- -------
Net cash provided by operating activities........... 16,263 7,868
------- -------
Cash Flows from Investing Activities:
Purchases of investments, net..................... (3,989) (22,686)
Capital expenditures.............................. (13,065) (7,163)
------- -------
Net cash used in investing activities............... (17,054) (29,849)
------- -------
Cash Flows from Financing Activities:
Proceeds from long-term debt...................... 7,600 --
Principal payments of long-term debt, including
current portion.................................. (7,746) (1,658)
Proceeds from issuance of common stock............ 873 24,872
------- -------
Net cash provided by financing activities........... 727 23,214
------- -------
Net Change in Cash and Cash Equivalents............. (64) 1,233
Cash and Cash Equivalents, Beginning of Period...... 13,622 8,306
------- -------
Cash and Cash Equivalents, End of Period............ $13,558 $ 9,539
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest........................................ $ 363 $ 385
Income taxes.................................... 8,719 5,485
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BUSINESS
Altron Incorporated (the "Company") is a leading contract manufacturer of
interconnect products used in advanced electronic equipment. The Company
manufactures complex products in the mid-volume sector of the electronic
interconnect industry including custom-designed backplanes, surface mount
assemblies and total systems, as well as multilayer, high density printed
circuit boards. Altron's customers include a diversified base of manufacturers
in the telecommunication, data communication, computer, industrial and medical
industries located in the United States and Europe.
2) INTERIM FINANCIAL STATEMENTS
In the opinion of the Company's management, these interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the results for such periods. The unaudited
results of operations for the quarter and nine months ended September 28, 1996
are not necessarily an indication of the results of operations for the full
year.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Altron Systems Corporation and
Altron Securities Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
Printed circuit boards manufactured by the Company and used in its assembly
operations are included in value added contract manufacturing sales. Printed
circuit board sales represent sales to third parties.
For information as to the significant accounting policies followed by the
Company and other financial and operating information, see the Company's Form
10-K for the year ended December 30, 1995 as filed with the Securities and
Exchange Commission (Commission File No. 0-13230). These interim financial
statements should be read in conjunction with the financial statements
included in the Form 10-K.
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes materials, labor and manufacturing overhead. Inventories
are summarized as follows (in thousands, September 28, 1996, unaudited):
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 30,
1996 1995
------------- ------------
<S> <C> <C>
Raw Materials................................... $10,920 $ 9,371
Work-in-process................................. 8,204 9,217
------- -------
$19,124 $18,588
======= =======
</TABLE>
(4) SHORT-TERM DEBT
The Company has a $5,000,000 unsecured line of credit available with its
bank at the bank's prime rate. There were no borrowings outstanding under the
line of credit and the entire line was available at September 28, 1996 and
December 30, 1995.
(5) LONG-TERM DEBT
On August 16, 1996, the Company borrowed $7,600,000 under an amendment to
its unsecured term loan agreement with its bank. The borrowing consisted of a
$3,000,000 unsecured term loan with interest at 6.77%,
6
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
payable monthly, and principal payable on August 16, 1999, and a $4,600,000
unsecured term loan with interest at 7.18%, payable monthly, and principal
payable on August 16, 2001. Also on August 16, 1996, the Company paid off the
balance of $3,000,000 on its three-year unsecured term loan. The term loan
agreement contains provisions that the Company maintain certain financial
ratios and covenants which the Company met as of September 28, 1996.
On September 3, 1996, the Company paid off the balance of $4,635,000 on its
ten-year, real estate mortgage note which was secured by the Company's
Wilmington facility.
(6) SIGNIFICANT CUSTOMERS
One customer, Motorola Inc., accounted for 15% and 18% of net sales for the
nine month periods ended September 28, 1996 and September 30, 1995,
respectively.
7
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the third quarter of 1996 increased 10% to $38.2 million from
net sales of $34.8 million for the same quarter of 1995. Net sales for the
first nine months of 1996 increased 24% to $126.6 million compared to $102.1
million for the same period last year. The higher sales for the quarter and
nine months resulted primarily from increased contract manufacturing shipments
to the Company's larger customers in the communication and computer segments
of the electronics industry. Several of the Company's customers have been
experiencing reduced demand for their products, and contract manufacturing
sales in the third quarter were affected by such reduced demand.
Contract manufacturing sales for the third quarter of 1996 increased 12% to
$28.4 million or approximately 74% of net sales, compared to $25.3 million or
73% of net sales in the third quarter of 1995. For the first nine months of
1996, contract manufacturing sales increased 30% to $96.3 million or 76% of
net sales compared to $74.3 million or 73% of net sales for the comparable
1995 period. Printed circuit board sales for the third quarter and first nine
months of 1996 were approximately 26% and 24% of net sales, respectively,
compared to 27% of net sales for the comparable periods a year ago.
Gross margin as a percentage of net sales for the third quarters of 1996 and
1995 were 24.4%. Gross margin as a percentage of net sales for the first nine
months of 1996 increased to 24.3% as compared to 23.5% for the same period in
1995. Gross profit for the third quarter and year to date increased 10% and
28% compared to the same 1995 periods. The improvement was primarily the
result of better absorption of fixed costs due to higher shipment levels and
manufacturing efficiencies.
Selling, general and administrative expenses as a percentage of net sales
was 7.5% for the third quarter of 1996 compared to 7.3% for the same quarter
of 1995. In the first nine months of 1996, selling, general and administrative
expenses decreased to 7.2% of net sales compared to 7.6% for the same period
of 1995. The decline in selling, general and administrative expenses as a
percentage of net sales for the nine month period was primarily the result of
higher net sales combined with management's ability to control expenses.
Other income increased $486,000 in the first nine months of 1996, as
compared to the same period of 1995 principally due to receiving net proceeds
of approximately $24.3 million from the public offering of the Company's
common stock during the second quarter of 1995. Interest expense was $48,000
lower in the third quarter and $104,000 lower in the first nine months of 1996
as compared to the same periods in 1995 as a result of lower outstanding
borrowings and higher interest capitalized.
LIQUIDITY AND CAPITAL RESOURCES
At September 28, 1996, the Company had working capital of $62.7 million
compared to $52.3 million at December 30, 1995. Cash and cash equivalents and
short-term investments were $34.7 million at September 28, 1996 and $30.4
million at December 30, 1995. Long-term investments at September 28, 1996 were
$4.7 million compared to $5.0 million at December 30, 1995.
On August 16, 1996, the Company borrowed $7.6 million under an amendment to
its unsecured loan agreement with its bank. The loans consisted of a $3.0
million, three-year note and a $4.6 million, five-year note. Also on August
16, 1996, the Company paid off the balance of $3.0 million on its existing
three-year unsecured term loan. On September 3, 1996, the Company paid off the
balance of $4.6 million on its ten-year, first mortgage loan.
8
<PAGE>
At September 28, 1996, the Company had a $5.0 million unsecured line of
credit with its bank, all of which was available.
The Company believes that its existing bank credit and working capital,
together with funds generated from operations, will be sufficient to satisfy
anticipated sales growth and investment in manufacturing facilities and
equipment. The Company had commitments for approximately $7.0 million of
capital expenditures as of September 28, 1996, which include the 104,000
square foot contract manufacturing facility under construction near the
Company's headquarters.
9
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27--Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended September 28, 1996.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 13,558
<SECURITIES> 21,117
<RECEIVABLES> 24,845
<ALLOWANCES> 775
<INVENTORY> 19,124
<CURRENT-ASSETS> 81,134
<PP&E> 69,005
<DEPRECIATION> 30,093
<TOTAL-ASSETS> 128,251
<CURRENT-LIABILITIES> 18,429
<BONDS> 7,600
0
0
<COMMON> 773
<OTHER-SE> 94,289
<TOTAL-LIABILITY-AND-EQUITY> 128,251
<SALES> 126,622
<TOTAL-REVENUES> 126,622
<CGS> 95,873
<TOTAL-COSTS> 104,938
<OTHER-EXPENSES> (1,383)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 196
<INCOME-PRETAX> 22,871
<INCOME-TAX> 9,336
<INCOME-CONTINUING> 13,535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,535
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>
