<PAGE>
- -------------------------------------------------------------------------------
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 SEPTEMBER 27, COMMISSION FILE NUMBER 0-13230
1997
ALTRON INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2464301
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE JEWEL DRIVE, WILMINGTON, 01887
MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(978) 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 27, 1997 was 15,436,677 shares.
- -------------------------------------------------------------------------------
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets -- September 27, 1997 and
December 28, 1996.......................................... 3
Consolidated Income Statements -- Three and Nine Months
Ended September 27, 1997 and September 28, 1996............ 4
Consolidated Statements of Cash Flows -- Nine Months Ended
September 27, 1997 and September 28, 1996.................. 5
Notes to Consolidated Financial Statements.................. 6-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 8
PART II. OTHER INFORMATION...........................................
ITEM 6. Exhibits and Reports on Form 8-K............................ 9
Signatures.................................................. 10
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1997 1996
------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 10,594 $ 14,949
Short-term investments................................ 13,844 19,481
Accounts receivable, net.............................. 26,411 24,840
Inventories........................................... 28,059 18,554
Other current assets.................................. 3,531 2,935
-------- --------
Total current assets................................ 82,439 80,759
Property, plant and equipment, net...................... 59,626 45,727
Costs in excess of net assets of acquired company....... 3,254 3,461
Long-term investments................................... 4,249 4,614
-------- --------
$149,568 $134,561
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable...................................... $ 15,420 $ 12,965
Accrued payroll and other employee benefits........... 3,414 3,910
Other accrued expenses................................ 1,747 2,895
-------- --------
Total current liabilities........................... 20,581 19,770
-------- --------
Long-term debt.......................................... 7,600 7,600
-------- --------
Deferred income taxes................................... 8,390 6,567
-------- --------
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 -- 15,672,258 and 15,477,776 shares........... 784 774
Paid-in capital....................................... 39,152 38,289
Retained earnings..................................... 73,338 61,838
-------- --------
113,274 100,901
Less treasury stock, at cost (235,581 shares)......... 277 277
-------- --------
Total stockholders' investment...................... 112,997 100,624
-------- --------
$149,568 $134,561
======== ========
</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 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA,
UNAUDITED)
<S> <C> <C> <C> <C>
Net sales............... $41,541 $38,229 $125,269 $126,622
Cost of sales........... 32,321 28,894 96,627 95,873
------- ------- -------- --------
Gross profit............ 9,220 9,335 28,642 30,749
Selling, general and
administrative
expenses............... 3,655 2,850 10,475 9,065
------- ------- -------- --------
Income from operations.. 5,565 6,485 18,167 21,684
Other income............ 350 460 1,188 1,383
Interest expense........ 3 40 29 196
------- ------- -------- --------
Income before provision
for income taxes....... 5,912 6,905 19,326 22,871
Provision for income
taxes.................. 2,387 2,795 7,826 9,336
------- ------- -------- --------
Net income.............. $ 3,525 $ 4,110 $ 11,500 $ 13,535
======= ======= ======== ========
Net income per common
and common equivalent
share.................. $ .22 $ .26 $ .72 $ .85
======= ======= ======== ========
Weighted average common
and common equivalent
shares outstanding..... 16,133 16,007 16,069 15,973
======= ======= ======== ========
</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 27, SEPTEMBER 28,
1997 1996
------------- -------------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 11,500 $ 13,535
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 5,005 3,973
Deferred income taxes........................... 1,823 1,782
Changes in current assets and liabilities:
Accounts receivable........................... (1,571) (1,383)
Inventories................................... (9,505) (536)
Other current assets.......................... (596) (256)
Accounts payable.............................. 2,455 (596)
Accrued payroll and other employee benefits... (496) 509
Accrued expenses.............................. (1,148) (765)
-------- --------
Net cash provided by operating activities........... 7,467 16,263
-------- --------
Cash flows from investing activities:
Purchases of investments, net..................... 6,002 (3,989)
Capital expenditures.............................. (18,697) (13,065)
-------- --------
Net cash used in investing activities............... (12,695) (17,054)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt...................... -- 7,600
Principal payments of long-term debt, including
current portion.................................. -- (7,746)
Proceeds from issuance of common stock............ 873 873
-------- --------
Net cash provided by financing activities........... 873 727
-------- --------
Net change in cash and cash equivalents............. (4,355) (64)
Cash and cash equivalents, beginning of period...... 14,949 13,622
-------- --------
Cash and cash equivalents, end of period............ $ 10,594 $ 13,558
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest........................................ $ 395 $ 363
Income taxes.................................... 6,117 8,719
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 27, 1997 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 contract manufacturing sales to customers. 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 28, 1996 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) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share was computed based on the
weighted average number of common and common equivalent shares outstanding
during each period. Common equivalent shares include outstanding stock
options. Fully diluted net income per share has not been separately presented
as it would not be materially different from net income per share as
presented.
In March 1997, SFAS No. 128, Earnings Per Share, was issued which
established new standards for calculating and reporting earnings per share.
The Company will adopt this new standard in its fiscal year end 1997 financial
statements, which will require the reporting of diluted earnings per share and
basic earnings per share. For the quarters ended September 27, 1997 and
September 28, 1996 diluted earnings per share were $0.22 and $0.26,
respectively and basic earnings per share were $0.23 and $0.27, respectively.
For the nine months ended September 27, 1997 and September 28, 1996, diluted
earnings per share were $0.72 and $0.85, respectively and basic earnings per
share were $0.75 and $0.90, respectively.
6
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) 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 27, 1997, unaudited):
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials................................... $15,935 $10,040
Work-in-process................................. 12,124 8,514
------- -------
$28,059 $18,554
======= =======
</TABLE>
(5) SHORT-TERM DEBT
The Company has a $5.0 million 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 27, 1997 and
December 28, 1996.
(6) SIGNIFICANT CUSTOMERS
One single customer accounted for 11% and 15% of net sales for the nine
month periods ended September 27, 1997 and September 28, 1996, 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 1997 were $41.5 million, as compared to
net sales of $38.2 million for the same quarter of 1996. Net sales for the
first nine months of 1997 were $125.3 million, as compared to $126.6 million
for the same period last year. The higher sales for the third quarter resulted
primarily from increased shipments to the Company's larger customers in the
data communication, computer and industrial segments of the electronics
industry.
Contract manufacturing sales for the third quarter of 1997 were $30.7
million or 74% of net sales compared to the third quarter of 1996 of $28.4
million or 74% of net sales. For the first nine months of 1997, contract
manufacturing sales were $90.0 million, 72% of net sales compared to the third
quarter of 1996 of $96.3 million or 76%. Printed circuit board sales for the
third quarter of 1997 were $10.8 million or 26% of net sales compared to the
third quarter 1996 of $9.8 million or 26%. For the first nine months of 1997,
printed circuit board sales were $35.3 million or 28% of net sales compared to
the third quarter of 1996 of $30.3 million or 24%.
Gross margin as a percentage of net sales for the third quarter of 1997 was
22.2% as compared to 24.4% for the third quarter of 1996. Gross margin as a
percentage of net sales for the first nine months of 1997 was 22.9% as
compared to 24.3% for the same period in 1996. The Company's lower gross
margin was primarily the result of a less favorable shipment mix and higher
costs related to the Company's recent capability and capacity expansion.
Selling, general and administrative expenses as a percentage of net sales
was 8.8% for the third quarter of 1997, as compared to 7.5% for the same
quarter of 1996. Selling, general and administrative expenses were 8.4% and
7.2% for the first nine months of 1997 and 1996, respectively. The increase in
selling, general and administrative expenses as a percentage of net sales was
primarily the result of higher expenses associated with investment in program
management and sales to increase customer focus and further expand the
customer base.
Other income was $350,000 and $1,188,000 for the third quarter and first
nine months of 1997, respectively, down $110,000 and $195,000 from the
comparable prior year periods as a result of lower cash balances available for
investment. The lower interest expense for the third quarter and first nine
months of 1997 was principally the result of higher interest capitalized.
LIQUIDITY AND CAPITAL RESOURCES
At September 27, 1997, the Company had working capital of $61.9 million and
a current ratio of 4.0. Working capital included cash and cash equivalents and
short-term investments of $24.4 million. Long-term investments were $4.2
million at September 27, 1997. Long-term debt was $7.6 million at the end of
the third quarter.
At September 27, 1997, 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 $4.0 million of
capital expenditures as of September 27, 1997.
8
<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 27, 1997.
9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Altron Incorporated
SIGNATURE TITLE DATE
/s/ Samuel Altschuler Chairman of the Board of November 4,
- ----------------------------- Directors and President 1997
SAMUEL ALTSCHULER (principal executive officer)
/s/ Burton Doo Executive Vice President and November 4,
- ----------------------------- Director, President, Altron 1997
BURTON DOO Systems Corporation
/s/ Peter D. Brennan Vice President, Chief November 4,
- ----------------------------- Financial Officer and 1997
PETER D. BRENNAN Treasurer (principal
financial and accounting
officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 10,594
<SECURITIES> 13,844
<RECEIVABLES> 27,211
<ALLOWANCES> 800
<INVENTORY> 28,059
<CURRENT-ASSETS> 82,439
<PP&E> 94,093
<DEPRECIATION> 34,467
<TOTAL-ASSETS> 149,568
<CURRENT-LIABILITIES> 20,581
<BONDS> 7,600
0
0
<COMMON> 784
<OTHER-SE> 112,213
<TOTAL-LIABILITY-AND-EQUITY> 149,568
<SALES> 125,269
<TOTAL-REVENUES> 125,269
<CGS> 96,627
<TOTAL-COSTS> 107,102
<OTHER-EXPENSES> (1,188)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 19,326
<INCOME-TAX> 7,826
<INCOME-CONTINUING> 11,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,500
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
