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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
JANUARY 3, 1998 0-13230
ALTRON INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2464301
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF 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:
(978) 658-5800
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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 aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of February 28, 1998 was $199,000,000.
The number of shares of Common Stock of the Registrant outstanding as of
January 3, 1998 was:
15,491,188
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive proxy
statement for the 1998 Annual Meeting to be held May 21, 1998.
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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Explanatory Note: This amendment amends the Form 10-K filed with the
Securities and Exchange Commission on March 27, 1998. Items 1, 7 and 8 have
been changed.
<PAGE>
ITEM 1. BUSINESS
Altron 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. Altron's
products generally require greater engineering and manufacturing expertise
than mass-produced, less complex products. The Company manufactures custom-
designed backplanes, surface mount assemblies and total systems, as well as
multilayer, high density printed circuit boards. Altron works closely with its
customers from the early stages of product design and development. The Company
provides original design, engineering prototype, preproduction and volume
production capabilities.
Altron believes its capabilities both in manufacturing multilayer, high
density printed circuit boards and in providing value added contract
manufacturing services advantageously position the Company to serve high
growth OEMs in the rapidly changing electronics markets. Altron's OEM
customers include a diversified base of manufacturers in the
telecommunication, data communication, computer, industrial and medical
systems segments of the electronics industry, such as 3Com Corporation, Ascend
Communications Corp., Cabletron Systems, Inc., Cisco Systems, Inc., Data
General Corporation, EMC Corporation, General Electric Company, Hewlett-
Packard Company, KLA Tencor Corporation, Lucent Technologies, Motorola, Inc.,
Silicon Graphics, Inc. and Sun Microsystems, Inc.
Altron's strategy is to continue to use its well established high technology
printed circuit board manufacturing and engineering capabilities to further
expand into the rapidly growing contract manufacturing business, providing
products and services including backplanes, surface mount assemblies, power
supplies and total systems. Key elements of this strategy include providing
its customers with the highest levels of quality, superior service and leading
edge technology. In fiscal 1997, approximately 73% of Altron's net sales were
attributable to value added contract manufacturing, with the remaining 27% of
net sales attributable to printed circuit board manufacturing.
ELECTRONIC INTERCONNECT INDUSTRY OVERVIEW
Multilayer, High Density Printed Circuit Boards. According to The Institute
for Interconnecting and Packaging Electronic Circuits ("IPC"), the United
States printed circuit board market was approximately $9.1 billion in 1997.
IPC's data also shows that approximately 80% of this market was multilayer
printed circuit boards.
Value Added Contract Manufacturing. According to IPC, the United States
value added contract manufacturing market was approximately $18.0 billion in
1997 and is growing about 20% per year. Based on industry data, the Company
believes that OEMs are increasingly relying upon independent manufacturers of
complex electronic interconnect products, such as Altron, rather than on in-
house ("captive") production. OEMs which have discontinued or curtailed
domestic captive printed circuit board or backplane production since 1990
include Data General Corporation, Digital Equipment Corporation, General
Electric Company, Hewlett-Packard Company, IBM Corporation, Lucent
Technologies, Northern Telecomm Limited and Xerox Corporation. Altron believes
that the current trend towards increased reliance by OEMs on independent
manufacturers reflects the OEMs' recognition that, for complex electronic
interconnect products, independent manufacturers can provide greater
specialization, expertise, responsiveness and flexibility and can offer
shorter delivery cycles than can be achieved by internal production.
Other factors which lead OEMs to utilize contract manufacturers include:
Reduced Time-to-Market. Due to intense competitive pressures in the
electronics industry, OEMs are faced with increasingly shorter product
life-cycles and therefore have a growing need to reduce the time required
to bring a product to market. OEMs can reduce their time-to-market by using
a contract manufacturer's established manufacturing expertise and
infrastructure.
Reduced Capital Investment Requirements. As electronic products have
become more technologically advanced, the manufacturing process has become
increasingly sophisticated and automated, requiring a
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greater level of investment in capital equipment. By using contract
manufacturers, OEMs can reduce their overall capital equipment requirements
while maintaining access to advanced manufacturing facilities.
Focused Resources. Because the electronics industry is experiencing
greater levels of competition and rapid technological change, many OEMs
increasingly are seeking to focus their resources on activities and
technologies in which they add the greatest value. By offering
comprehensive electronic assembly and turnkey manufacturing services,
contract manufacturers, such as Altron, allow OEMs to focus on core
technologies and activities such as product development, marketing and
distribution.
Access to Leading Manufacturing Technology. Electronic interconnect
products and electronic interconnect product manufacturing technology have
become increasingly sophisticated and complex, making it difficult for OEMs
to maintain the necessary technological expertise in process development
and control. OEMs are motivated to work with a contract manufacturer in
order to gain access to the contract manufacturer's process expertise and
manufacturing know-how.
Improved Inventory Management and Purchasing Power. Electronics industry
OEMs are faced with increasing difficulties in planning, procuring and
managing their inventories efficiently due to frequent design changes,
short product life-cycles, large investments in electronic components,
component price fluctuations and the need to achieve economies of scale in
materials procurement. OEMs can reduce production costs by using a contract
manufacturer's volume procurement capabilities. By utilizing a contract
manufacturer's expertise in inventory management, OEMs can better manage
inventory costs and increase their return on assets.
BUSINESS STRATEGY
In response to the foregoing industry trends, Altron has transitioned its
business from primarily supplying printed circuit boards to producing
sophisticated value added electronic interconnect products.
Altron's business strategy encompasses several elements:
. Focus on quality. The Altron team strives to insure the highest levels of
quality control in all phases of its operations, as quality is a critical
competitive factor in the electronic interconnect market. The Company
strives for continuous improvement of its processes and has adopted a
number of quality improvement and measurement techniques to improve its
performance. Altron's four plants are ISO 9002 registered.
. Provide service-oriented manufacturing. The Company manufactures almost
all of the printed circuit boards used in its total systems, surface mount
assemblies and custom designed backplanes in order to maintain control
over costs, quality and timely delivery of its products. This vertical
integration also allows the Company to provide a broader range of assembly
services, including prototype and high technology products.
. Maintain technology leadership. Altron seeks to deliver advanced
manufacturing and test engineering, responsive materials management, and
technologically advanced, flexible and service-oriented manufacturing for
the complex, leading-edge products of its OEM customers throughout the
full product life-cycle.
. Target high value added electronic interconnect products. Altron focuses
on leading manufacturers of advanced electronic equipment who generally
require custom-designed, more complex interconnect products and short
lead-time manufacturing services such as quick-turn multilayer printed
circuit boards, backplanes and surface mount assemblies and in-house power
supply and total systems design. By focusing on such customer needs,
Altron has been able to achieve higher margins than many other businesses
within the electronic interconnect industry.
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. Maintain a diversified customer base. Altron services a diversified
customer base spread over a variety of growing industry segments,
including more than 125 customers in the telecommunication, data
communication, computer, industrial and medical systems segments of the
electronics industry. During fiscal 1997, in aggregate, Altron's ten
largest customers accounted for approximately 54% of the Company's net
sales.
. Pursue a "partnership" approach with customers. Altron seeks to establish
"partnerships" with its customers by involving Altron engineers and staff
in the early design stages of its customers' product development, and by
providing quick-turnaround manufacturing services and just-in-time, kanban
and dock-to-stock delivery. Through this approach, Altron seeks to forge
lasting customer relationships across a number of products and through
multiple product generations.
PRODUCTS AND SERVICES
Altron produces total systems, surface mount assemblies, custom designed
backplanes and multilayer printed circuit boards that are used in the
manufacture of sophisticated electronic equipment. For fiscal 1997, Altron's
sales of value added contract manufacturing products such as total systems,
surface mount assemblies and custom designed backplanes accounted for
approximately 73% of total sales. Sales of printed circuit boards accounted
for the remaining 27% of total sales. Approximately 97% of Altron's printed
circuit board sales in fiscal 1997 were multilayer, high density printed
circuit boards.
Total systems include printed circuit board assemblies, backplanes, card
racks, and power supplies that are enclosed in housings, which are usually
fabricated from steel or aluminum. Altron has developed a highly sophisticated
mechanical design capability to provide its customers with design services.
This capability allows Altron to establish a close partnership with its
customers and gives Altron visibility for potential future customer
requirements.
Custom designed backplanes are assemblies of stamped and plated pins,
plastic housings and other components on multilayer or two-sided printed
circuit boards. Backplanes are used in electronic systems to distribute power
and ground, and to connect printed circuit boards which plug into the
backplane with other printed circuit boards, power supplies, and other circuit
elements. They also are used to transfer information into and out of the
system. As semiconductor speeds have increased and design requirements have
become more stringent, backplane complexity has increased significantly, often
requiring the use of large multilayer printed circuit boards of six or more
layers. The Company manufactures backplanes with up to 50 layers, .300 inches
thick, and 2 feet by 3 feet in size.
Surface mount assembly is a largely automated advanced interconnect
technology that involves placing semiconductor components directly on the
surface of both sides of a printed circuit board. This surface mount
technology ("SMT") allows the leads on integrated circuits and other
electronic components to be soldered to the surface of the backplane assembly
or printed circuit board rather than being inserted into holes, thereby
accommodating a substantially higher number of leads than can be accommodated
with less sophisticated pin-through-hole technology. More leads permit the
printed circuit board to interconnect a greater density of components, which
permits a reduction in the size of the backplane assembly or printed circuit
board. Additionally, SMT allows components to be placed on both sides of the
printed circuit board, thereby permitting even greater density.
Multilayer printed circuit boards consist of three or more layers of a
printed circuit board laminated together and interconnected by plated-through
holes. Printed circuit boards consist of metallic interconnecting paths on a
non-conductive material, typically laminated epoxy glass. Holes drilled in the
laminate and plated through with conductive material from one surface to
another, called plated-through holes, are used to receive component leads and
to interconnect the circuit layers. Multilayer boards increase packaging
density, improve power and ground distribution, and permit the use of higher
speed circuitry. The development of electronic components with increased
speed, higher performance and smaller size has stimulated a demand for
multilayer printed circuit boards, as they provide increased reliability,
density and complexity. Since even the most sophisticated two-sided
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printed circuit board cannot meet the requirements of today's circuit
designers for packaging density, an increasing number of designs use
multilayer technology.
MANUFACTURING CAPABILITIES AND SERVICES
Altron seeks to establish "partnerships" with its customers by providing
high quality, responsive, flexible manufacturing capabilities and services
which include:
Advanced Manufacturing Equipment. Altron's concentration on more complex
electronic interconnect products has necessitated a substantial capital
investment in advanced equipment and the continued introduction of new
manufacturing processes. Altron has established an engineering capability to
select and implement the latest manufacturing technology. For example, the
fine lead spacing or "pitch" in SMT requires an exacting printed circuit board
manufacturing and assembly process, and Altron has state-of-the-art surface
mount assembly operations in all three of its value added contract
manufacturing plants. The Company also uses numerically controlled pin
installation and high voltage electrical test equipment in its backplane
assembly manufacturing, and has developed a design and manufacturing
capability for controlled impedance multilayer printed circuit boards and
backplane assemblies. Altron's printed circuit board manufacturing operations
also require state-of-the-art equipment and processes, and Altron has a
computerized artwork generation system, numerically controlled drillers and
routers, automatic electroless deposition, dry film photo-imaging, automatic
gold plating, computerized electrical testing and automatic optical
inspection. In addition, Altron has ten SMT machines, as well as Hewlett-
Packard and GenRad Test Equipment, Nitrogen blanket flow soldering equipment,
and two automatic axial lead assembly lines. All three of Altron's value added
contract manufacturing plants are staffed with highly experienced SMT
engineering and manufacturing teams which provide cost effective, high
quality, assembled printed circuit boards, backplanes and total systems.
Value Added Contract Manufacturing. Computer integrated manufacturing
("CIM") services provided by Altron consist of developing manufacturing
processes and tooling and test sequences for new products from product designs
received from customers. In addition, Altron's interconnect products division
provides design and engineering services in the early stages of product
development, thus assuring that both mechanical and electrical considerations
are integrated into a total system approach to achieve a producible, high
quality and cost effective product. Altron also evaluates customer designs for
manufacturability and, when appropriate, recommends design changes to reduce
manufacturing costs or lead times or to increase manufacturing yields and the
quality of finished backplane assemblies and printed circuit boards.
Quick-turnaround. Altron's quick-turnaround manufacturing capabilities allow
it to better serve the needs of its customers for quick response to their
product designs. Shorter customer product life-cycles and the need to bring
new products to market quickly have created a demand for small quantities of
complex multilayer printed circuit boards delivered in relatively short
periods of time, typically from three to ten days. Sales of printed circuit
boards produced in this manner accounted for approximately 17% of the
Company's printed circuit board sales in fiscal 1997. After engineering of an
interconnect product is completed, Altron has the capability to manufacture
prototype or preproduction versions of such product on a quick-turnaround
basis. Altron expects that the demand for engineering and quick-turnaround
prototype and preproduction manufacturing services will increase as OEMs'
products become more complex and as product life-cycles shorten. The Company's
continued success depends upon its ability to respond to the evolving needs of
customers in a timely manner.
Multilayer Printed Circuit Board Manufacturing. Altron's ability to
manufacture printed circuit boards, including large, complex multilayer
printed circuit boards with close tolerance plated-through hole diameters and
other characteristics important to backplane applications, is one of the major
factors that has enabled it to become an important supplier of complex,
technologically advanced backplane assemblies and multilayer printed circuit
boards to the electronics industry. The Company began manufacturing multilayer
boards in 1979 and in fiscal 1997 multilayer sales constituted 97% of the
Company's printed circuit board revenues. Today, Altron is capable of
efficiently producing commercial quantities of printed circuit boards with up
to 50 layers and circuit track widths as narrow as four thousandths of an
inch.
5
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The manufacture of complex multilayer interconnect products often requires
the use of sophisticated circuit interconnections between certain layers
(called "blind or buried vias") and adherence to strict electrical
characteristics to maintain consistent circuit transmission speeds (referred
to as "controlled impedance boards"). These technologies require very tight
lamination and etching tolerances and are especially critical for printed
circuit boards with ten or more layers. The Company specializes in multilayer
boards requiring controlled impedance, and has developed the ability to
manufacture large, thick multilayer backplane boards using Cyanate Ester and
GETEK base materials for ultra-high speed applications. By concentrating on
the multilayer segment of the printed circuit board market, where quality,
technology and customer service are more important than in the market for less
complex boards, the Company faces less direct competition.
The manufacture of printed circuit boards involves several steps including
dry film imaging, photoimageable soldermask processing, computer controlled
drilling and routing, automated plating and process controls and achievement
of controlled impedance. Manufacture of printed circuit boards used in
backplane assemblies requires specialized expertise and equipment because of
the size of the backplane relative to other printed circuit boards and the
closer hole diameter tolerances required for press-fit pin assembly.
Multilayer manufacturing, which involves placing multiple layers of electrical
circuitry within a single printed circuit board or backplane, expands the
number of circuits and components that can be contained on the interconnect
product and increases the operating speed of the system by reducing the
distance that electrical signals must travel. Increasing the density of the
circuitry in each layer is accomplished by reducing the width of the circuit
tracks and placing them closer together on the printed circuit board or
backplane. Interconnect products having narrow, closely spaced circuit tracks
are known as "fine line" products.
Materials Procurement and Handling. Materials procurement and handling
services provided by Altron include planning, purchasing and warehousing of
electronic components and metal housings used in interconnect products. Altron
uses a variety of materials in the manufacture of its products, including
copper clad laminates, dry film photo resists, connectors, terminals and pins.
The Company maintains more than one supply source wherever possible;
however, a component for a major OEM contract is obtained from a single
source. An interruption or loss of this component supply could have a material
adverse effect on the Company's business and results of operations.
ISO 9002 Registration. Altron's Wilmington and Woburn, Massachusetts plants
and its surface mount assembly manufacturing operations in its Fremont,
California plant are ISO 9002 registered which provides for worldwide
acceptance of Altron's quality systems. ISO 9002 registration is based on
successful implementation of quality assurance requirements, and includes
continuous examination of every aspect of the Company's business and periodic
compliance audits conducted by an independent quality assessor. Altron was one
of the first companies in the electronic interconnect industry to achieve ISO
9002 registration. This achievement has been well received by Altron
customers, as certain customers will only do business with ISO 9002 registered
companies.
COMPETITION
The electronic interconnect industry, which includes contract manufacturing,
is highly fragmented and is characterized by intense competition. Altron
competes in the technologically advanced segment of the electronic
interconnect industry, which is also highly competitive but is less fragmented
than the industry as a whole. The Company competes against numerous domestic
electronic interconnect product manufacturers. In addition, current and
prospective customers continually evaluate the merits of manufacturing
products internally and will, from time to time, offer manufacturing services
to third parties in order to utilize excess capacity. Certain of the Company's
competitors have substantially greater manufacturing, financial and marketing
resources than the Company. The Company may be operating at a cost
disadvantage compared to manufacturers who have greater direct buying power
with component suppliers or who have lower cost structures. During downturns
in the electronics industry, OEMs may become more price sensitive.
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The Company believes that the principal competitive factors in the
electronic interconnect industry are quality, service, technology,
manufacturing capability, regional access, price, reliability, timeliness and
flexibility. There can be no assurance that competition from existing or
potential competitors will not have a materially adverse effect on the
Company's results of operations.
The introduction of lower-priced competitive products or significant price
reductions by the Company's competitors could result in price reductions that
would adversely affect the Company's results of operations, as would the
introduction of new technologies which would render existing electronic
interconnect technology less competitive or obsolete.
BACKLOG
The Company's backlog at February 28, 1998 was approximately $60.0 million
compared to approximately $58.0 million at February 22, 1997, the majority of
which was scheduled to be shipped within 120 days. Variations in the size and
delivery schedules of purchase orders received by the Company, as well as
changes in customers' delivery requirements, may result in substantial
fluctuations in backlog from period to period. Accordingly, the Company
believes that backlog cannot be considered a meaningful indicator of long-term
future financial results.
EMPLOYEES
The Company had approximately 1,210 full-time employees as of January 3,
1998. The employees are not represented by a union, and the Company believes
its employee relations to be satisfactory. A majority of Company management,
officers and executives have over five years of service with the Company.
ENVIRONMENTAL QUALITY
Proper waste disposal is a major consideration for printed circuit board
manufacturers because metals and chemicals are used in the manufacturing
process. Water used in the printed circuit board manufacturing process must be
treated to remove metal particles and other contaminants before it can be
discharged into the municipal sanitary sewer system. Altron has an existing
waste treatment system at its Wilmington plant which enables it to comply with
governmental regulations relating to the protection of the environment and
accommodate anticipated future growth. The Company believes that continued
compliance with governmental requirements relating to protection of the
environment will not have a materially adverse effect on the Company.
Altron has been advised that contamination resulting from activities of
prior owners of an adjacent property has migrated under the Company's
manufacturing plant in Wilmington, Massachusetts. The present owner of the
adjacent property has assumed responsibility for any remediation activities
that may be required and has agreed to indemnify and hold the Company harmless
from liabilities and expenses arising from any requirement that the
contamination be remediated. Although the Company believes that the present
owner's assumption of responsibility will result in no remediation costs to
the Company from the contamination, there can be no assurance that the Company
will not be subject to some costs regarding this matter, but the Company does
not anticipate that such costs, if any, will be material to its financial
condition.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------ --- ----------------------------------------------------------------
<S> <C> <C>
Samuel Altschuler....... 70 Chairman of the Board of Directors and President
Burton Doo.............. 67 Executive Vice President and Director of Altron Incorporated and
President of Altron Systems Corporation
Peter D. Brennan........ 55 Vice President, Chief Financial Officer and Treasurer
</TABLE>
MR. ALTSCHULER, a founder of the Company, has been President, Chief
Executive Officer and a Director of the Company since 1970. In December 1983,
Mr. Altschuler was elected Chairman of the Board of Directors. Mr. Altschuler
is also a director of MASSBANK Corp.
MR. DOO, a founder of the Company, has been a Director of the Company since
1970. He was Treasurer from 1973 to 1992 and Senior Vice President from 1978
to December 1983. In December 1983, he was elected Executive Vice President.
Mr. Doo has been President of Altron Systems Corporation since its inception
in June 1994.
MR. BRENNAN has been Vice President, Chief Financial Officer and Treasurer
since June 1992. He has been Vice President of Finance and Corporate
Controller since he began his employment with the Company in 1987.
ITEM 2. PROPERTIES
Altron operates a 204,000 square foot manufacturing plant in Wilmington,
Massachusetts which is approximately 15 miles north of Boston. The plant
produces multilayer printed circuit boards. Altron believes that this plant is
one of the largest independent facilities of its kind in the United States. In
1997, the Company completed a 104,000 square foot plant in Woburn,
Massachusetts for its backplane and systems assembly operations. Altron leases
a 70,000 square foot facility in Fremont, California to manufacture
interconnect systems, surface mount assemblies and backplanes for its West
Coast customers. Altron also leases a 30,000 square foot plant in Woburn,
Massachusetts for its surface mount assembly operations. In total, the Company
has over 400,000 square feet of space. The Company believes that these
facilities are adequate for its current needs. See "Environmental Quality."
ITEM 3. LEGAL PROCEEDINGS
To the Company's knowledge there are no pending legal proceedings which are
material to the Company to which it is a party or to which any of its property
is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following table sets forth, for the periods indicated, the range of high
and low sale prices for the Company's common stock in 1997 and 1996 on The
Nasdaq Stock Market's National Market. Prices of the Company's common stock
have been retroactively restated to reflect the three-for-two split of its
common stock distributed May 10, 1996. The Company's common stock has been
traded under the Nasdaq symbol ALRN since its initial public offering on
August 8, 1984.
<TABLE>
<CAPTION>
1997 1996
------------- -------------
QUARTER HIGH LOW HIGH LOW
- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First............................................... 21 3/4 16 1/8 21 1/2 15 5/6
Second.............................................. 19 3/4 13 7/8 25 1/2 18 5/6
Third............................................... 21 1/8 14 1/2 20 3/4 12 1/4
Fourth.............................................. 17 3/4 12 3/4 21 1/2 13 1/2
</TABLE>
The Company has not paid any cash dividends on its common stock and its
Board of Directors presently intends to continue this policy in order to
retain earnings for the development of the Company's business. As of January
3, 1998, the approximate number of record shareholders was 370 and the Company
believes that there were approximately 6,500 beneficial shareholders of the
Company's common stock based on information supplied by the Company's transfer
agent.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The income statement data for each of the years in the three-year period
ended January 3, 1998, and balance sheet data as of January 3, 1998 and
December 28, 1996 are derived from the audited Consolidated Financial
Statements included elsewhere in this Form 10-K. The income statement data for
each of the years in the two-year period ended December 31, 1994 and the
balance sheet data as of December 30, 1995, December 31, 1994 and January 1,
1994 are derived from audited Consolidated Financial Statements included in
prior Forms 10-K and are not included in this Form 10-K. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements, related Notes and other financial information included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1,
1998 1996 1995 1994 1994
---------- ------------ ------------ ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............. $172,428 $165,248 $143,867 $104,202 $83,406
Cost of sales......... 134,373 125,079 109,858 81,161 67,020
-------- -------- -------- -------- -------
Gross profit.......... 38,055 40,169 34,009 23,041 16,386
Selling, general and
administrative
expenses............. 14,844 11,969 10,704 8,645 7,308
-------- -------- -------- -------- -------
Income from opera-
tions................ 23,211 28,200 23,305 14,396 9,078
Other income.......... 1,503 1,869 1,317 261 109
Interest expense...... 31 232 359 574 582
-------- -------- -------- -------- -------
Income before
provision for
income taxes......... 24,683 29,837 24,263 14,083 8,605
Provision for income
taxes................ 10,016 12,122 9,705 5,633 3,445
-------- -------- -------- -------- -------
Net income............ $ 14,667 $ 17,715 $ 14,558 $ 8,450 $ 5,160
======== ======== ======== ======== =======
Basic earnings per
share(1)............. $ 0.96 $ 1.17 $ 1.05 $ 0.68 $ 0.44
======== ======== ======== ======== =======
Basic weighted average
shares
outstanding(1)....... 15,333 15,143 13,887 12,361 11,746
======== ======== ======== ======== =======
Diluted earnings per
share(1)............. $ 0.91 $ 1.11 $ 0.98 $ 0.65 $ 0.42
======== ======== ======== ======== =======
Diluted weighted aver-
age shares outstand-
ing(1)............... 16,039 16,009 14,795 12,980 12,370
======== ======== ======== ======== =======
<CAPTION>
JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1,
1998 1996 1995 1994 1994
---------- ------------ ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....... $ 63,135 $ 60,989 $ 52,277 $ 24,542 $21,522
Total assets.......... 155,603 134,561 113,059 68,522 52,553
Long-term debt........ 7,600 7,600 4,577 8,646 9,405
Stockholders' invest-
ment................. 117,127 100,624 80,654 40,381 29,452
</TABLE>
- --------
(1) Adjusted to reflect the three-for-two splits of the Company's common stock
effected May 10, 1996, February 10, 1995 and September 3, 1993. See Note 8
of Notes to Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Consolidated Financial Data and the Consolidated Financial Statements and
Notes thereto contained elsewhere herein.
Printed circuit boards manufactured by the Company and used in its assembly
operations are included in value added contract manufacturing sales to
customers. Printed circuit board sales represent sales to third parties.
The following table sets forth for the periods indicated the percentage of
net sales represented by each line item in the Company's statements of income:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0%
Cost of sales......................... 77.9 75.7 76.4
----- ----- -----
Gross profit.......................... 22.1 24.3 23.6
Selling, general and administrative
expenses............................. 8.6 7.2 7.4
----- ----- -----
Income from operations................ 13.5 17.1 16.2
Other income.......................... 0.8 1.1 0.9
Interest expense...................... -- 0.1 0.2
----- ----- -----
Income before provision for income
taxes................................ 14.3 18.1 16.9
Provision for income taxes............ 5.8 7.4 6.8
----- ----- -----
Net income............................ 8.5% 10.7% 10.1%
===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Fiscal 1997 Compared to Fiscal 1996
Net sales for 1997 were $172.4 million, as compared to net sales of $165.2
million for 1996. The increase resulted primarily from increased shipments to
the Company's larger customers in the data communications and computer
segments of the electronics industry as well as shipments to new customers in
these industries. Data communication and telecommunication customers accounted
for approximately 53% of net sales in 1997 and 51% in 1996. Computer customers
were 31% of net sales in 1997 and 1996. Industrial and medical systems
customers combined accounted for 16% of net sales in 1997 and 18% in 1996. The
Company's largest customer in each of 1997 and 1996 was Motorola, Inc., which
accounted for approximately 11% of net sales in 1997 and 15% in 1996.
Contract manufacturing sales for 1997 increased to $126.5 million or
approximately 73% of net sales, as compared to 1996 contract manufacturing
sales of $122.8 million or 74% of net sales. Printed circuit board sales for
1997 were $45.9 million or approximately 27% of net sales, as compared to 1996
printed circuit board sales of $42.4 million or 26% of net sales.
Gross margin as a percentage of net sales for 1997 was 22.1%, as compared to
24.3% in 1996. Approximately half of the decrease in gross margin as a
percentage of net sales was due to higher depreciation expense and related
fixed facility costs associated with the Company's new 104,000 square foot
backplane and systems assembly plant and major building renovations and
equipment purchases to further increase capacity and capabilities in the
printed circuit board operation. The balance of the decrease in the gross
margin percentage resulted primarily from the continuing shift in shipment mix
to a higher level of value added printed circuit assembly and systems build
products which have lower overall gross margins. The Company expects gross
margins to continue to fluctuate based upon product mix and customer mix.
Although there can be no assurance that the Company can maintain its current
gross margin, management expects to focus on market niches and product mix
where there are less competitive pricing pressures and to continue to improve
productivity, yields and utilization.
11
<PAGE>
Selling, general and administrative expenses as a percentage of net sales
increased to 8.6% in 1997 from 7.2% in 1996. The increase in selling, general
and administrative expenses as a percentage of net sales was principally the
result of higher payroll and related expenses associated with the hiring of
additional program management and sales personnel to increase customer focus
and further expand the customer base.
Other income for 1997 was $1.5 million, as compared to $1.9 million in 1996.
The decrease was due to lower cash balances available for investment. Interest
expense for 1997 decreased to $31,000 from $232,000 in 1996 and was
principally the result of higher interest capitalized in 1997.
The Company's effective tax rate in 1997 and 1996 reflects a provision of
40.6% of pretax income.
Fiscal 1996 Compared to Fiscal 1995
Net sales for 1996 increased 15% to $165.2 million from net sales of $143.9
million for 1995. The increase was primarily from increased contract
manufacturing shipments to the Company's larger customers in the
communication, computer, industrial and medical systems segments of the
electronics industry, as well as shipments to new customers in these
industries. Data communication and telecommunication customers accounted for
approximately 51% of net sales in 1996 and 52% in 1995. Computer customers
were 31% of net sales in 1996 as compared to 34% of net sales in 1995.
Industrial and medical systems customers combined accounted for 18% of net
sales in 1996 and 14% in 1995. The Company's largest customer in each of 1996
and 1995 was Motorola, Inc., which accounted for approximately 15% of net
sales in 1996 and 19% in 1995.
Contract manufacturing sales for 1996 increased 17% to $122.8 million or
approximately 74% of net sales, compared to 1995 contract manufacturing sales
of $105.3 million or 73% of net sales. Printed circuit board sales for 1996
were $42.4 million or approximately 26% of net sales, compared to 1995 printed
circuit board sales of $38.6 million or 27% of net sales.
Gross margin as a percentage of net sales for 1996 increased to 24.3% as
compared to 23.6% in 1995. The improvement in the Company's gross margin was
primarily a result of better absorption of fixed costs due to higher shipment
levels and normal changes in product and customer mix. In addition, gross
margin benefited from manufacturing efficiencies gained through productivity
and product yield improvements resulting from additional automated
manufacturing systems and processes. The Company expects gross margins to
continue to fluctuate based upon product mix and customer mix. Although there
can be no assurance that the Company can maintain its current gross margin,
management expects to focus on market niches and product mix where there are
less competitive pricing pressures and to continue to improve productivity,
yields and utilization.
Selling, general and administrative expenses as a percentage of net sales
decreased to 7.2% in 1996 from 7.4% in 1995. The improvement in selling,
general and administrative expenses as a percentage of net sales was
principally the result of higher net sales combined with management's ability
to control expenses. The increase of $1.3 million to $12.0 million in 1996 was
primarily due to the development of a stronger customer program management
organization, establishing regional sales offices and higher sales commission
costs on increased commissionable sales made by independent sales
representatives.
Other income for 1996 increased 42% to $1.9 million from other income of
$1.3 million in 1995. This increase was principally due to higher cash
balances available for investment, mainly due to 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 for 1996 decreased to $232,000
from $359,000 in 1995. This decrease was principally due to higher interest
capitalized in 1996.
The Company's effective tax rate in 1996 and 1995 reflects a provision of
40.6 % and 40.0%, respectively, of pretax income.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At January 3, 1998, the Company had working capital of $63.1 million and a
current ratio of 3.9 compared to working capital of $61.0 million and a
current ratio of 4.1 at December 28, 1996. Cash and cash equivalents and
short-term investments at January 3, 1998 were $27.5 million, as compared to
$34.4 million at December 28, 1996. Long-term investments at January 3, 1998
and December 28, 1996 were $1.9 million and $4.6 million, respectively.
At January 3, 1998, the Company had a $5.0 million unsecured line of credit
with its bank, all of which was available. During the third quarter of the
1998 fiscal year, the Company's $3.0 million three-year unsecured term loan
with a maturity of August 16, 1999 will become a current liability.
The Company believes that its existing bank credit and working capital,
together with cash generated from operations, will be sufficient to satisfy
anticipated sales growth and investment in manufacturing facilities and
equipment. The Company had commitments for approximately $3.5 million of
capital expenditures as of January 3, 1998.
YEAR 2000 COMPLIANCE
In 1997, the Company began a year 2000 date conversion project to address
all necessary code changes, testing and implementation for all of its systems.
Anticipated spending for the year 2000 date conversion project will be
expensed as incurred or new software will be capitalized and amortized over
the software's useful life and is not expected to have a significant impact on
the Company's results of operations. Project completion is planned for the
middle of 1999. However, there can be no assurance that the systems of other
companies on which the Company's systems rely will be converted on a timely
basis or that any such failure by another company to convert would not have an
adverse effect on the Company's systems.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Altron Incorporated:
We have audited the accompanying consolidated balance sheets of Altron
Incorporated (a Massachusetts corporation) and Subsidiaries as of January 3,
1998 and December 28, 1996 and the related consolidated income statements,
statements of stockholders' investment and cash flows for the years ended
January 3, 1998, December 28, 1996 and December 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 financial position of Altron Incorporated and
Subsidiaries as of January 3, 1998 and December 28, 1996, and the results of
their operations and their cash flows for the years ended January 3, 1998,
December 28, 1996 and December 30, 1995 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at
item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly states, 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
Boston, Massachusetts
March 11, 1998
14
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 3, 1998 AND DECEMBER 28, 1996
<TABLE>
<CAPTION>
1997 1996
(IN THOUSANDS, EXCEPT SHARE DATA) -------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 11,926 $ 14,949
Short-term investments....................................... 15,556 19,481
Accounts receivable, less allowance of $800.................. 25,781 24,840
Inventories.................................................. 28,626 18,554
Other current assets......................................... 3,337 2,935
-------- --------
Total current assets....................................... 85,226 80,759
Property, plant and equipment, net............................. 65,311 45,727
Costs in excess of net assets of acquired company.............. 3,184 3,461
Long-term investments.......................................... 1,882 4,614
-------- --------
$155,603 $134,561
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable............................................. $ 16,455 $ 12,965
Accrued payroll and other employee benefits.................. 3,367 3,910
Other accrued expenses....................................... 2,269 2,895
-------- --------
Total current liabilities.................................. 22,091 19,770
-------- --------
Long-term debt................................................. 7,600 7,600
-------- --------
Deferred income taxes.......................................... 8,785 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--15,726,769 and 15,477,776 shares.................... 786 774
Paid-in capital.............................................. 40,113 38,289
Retained earnings............................................ 76,505 61,838
-------- --------
117,404 100,901
Less treasury stock, at cost (235,581 shares)................ 277 277
-------- --------
Total stockholders' investment............................. 117,127 100,624
-------- --------
$155,603 $134,561
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
15
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA) -------- -------- --------
<S> <C> <C> <C>
Net sales............................................ $172,428 $165,248 $143,867
Cost of sales........................................ 134,373 125,079 109,858
-------- -------- --------
Gross profit......................................... 38,055 40,169 34,009
Selling, general and administrative expenses......... 14,844 11,969 10,704
-------- -------- --------
Income from operations............................... 23,211 28,200 23,305
Other income......................................... 1,503 1,869 1,317
Interest expense..................................... 31 232 359
-------- -------- --------
Income before provision for income taxes............. 24,683 29,837 24,263
Provision for income taxes........................... 10,016 12,122 9,705
-------- -------- --------
Net income........................................... $ 14,667 $ 17,715 $ 14,558
======== ======== ========
Basic earnings per share............................. $ 0.96 $ 1.17 $ 1.05
======== ======== ========
Basic weighted average shares outstanding............ 15,333 15,143 13,887
======== ======== ========
Diluted earnings per share........................... $ 0.91 $ 1.11 $ 0.98
======== ======== ========
Diluted weighted average shares outstanding.......... 16,039 16,009 14,795
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
COMMON STOCK
------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------ ------ ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994.... 12,867 $643 $10,450 $29,565 $(277) $ 40,381
Exercise of stock options... 250 12 646 -- -- 658
Income tax benefit from
stock options.............. -- -- 600 -- -- 600
Stock issuance from public
offering................... 2,093 105 24,180 -- -- 24,285
Sale of common stock through
employee stock purchase
plan....................... 13 1 171 -- -- 172
Net income.................. -- -- -- 14,558 -- 14,558
------ ---- ------- ------- ----- --------
Balance, December 30, 1995.... 15,223 761 36,047 44,123 (277) 80,654
Exercise of stock options... 240 12 836 -- -- 848
Income tax benefit from
stock options.............. -- -- 1,150 -- -- 1,150
Sale of common stock through
employee stock purchase
plan....................... 15 1 256 -- -- 257
Net income.................. -- -- -- 17,715 -- 17,715
------ ---- ------- ------- ----- --------
Balance, December 28, 1996.... 15,478 774 38,289 61,838 (277) 100,624
Exercise of stock options... 229 11 810 -- -- 821
Income tax benefit from
stock options.............. -- -- 750 -- -- 750
Sale of common stock through
employee stock purchase
plan....................... 20 1 264 -- -- 265
Net income.................. -- -- -- 14,667 -- 14,667
------ ---- ------- ------- ----- --------
Balance, January 3, 1998...... 15,727 $786 $40,113 $76,505 $(277) $117,127
====== ==== ======= ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 14,667 $ 17,715 $ 14,558
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 6,637 5,338 4,553
Deferred taxes............................... 2,345 1,189 1,034
Changes in current assets and liabilities, net
of assets acquired:
Accounts receivable.......................... (941) (2,153) (6,871)
Inventories.................................. (10,072) 34 (7,069)
Other current assets......................... (529) 74 (385)
Accounts payable............................. 3,490 1,254 2,436
Accrued payroll and other employee benefits.. (543) (27) 1,055
Other accrued expenses....................... (626) (738) 1,144
-------- -------- --------
Net cash provided by operating activities...... 14,428 22,686 10,455
-------- -------- --------
Cash flows from investing activities:
Purchases of investments....................... (14,920) (35,705) (24,367)
Proceeds from sale of investments.............. 21,577 33,412 4,593
Capital expenditures........................... (25,944) (21,175) (9,375)
-------- -------- --------
Net cash used in investing activities.......... (19,287) (23,468) (29,149)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock......... 1,086 1,105 25,115
Income tax benefit from stock options.......... 750 1,150 600
Proceeds from long-term debt................... -- 7,600 --
Principal payments of long-term debt........... -- (7,746) (1,705)
-------- -------- --------
Net cash provided by financing activities...... 1,836 2,109 24,010
-------- -------- --------
Net change in cash and cash equivalents.......... (3,023) 1,327 5,316
Cash and cash equivalents at beginning of year... 14,949 13,622 8,306
-------- -------- --------
Cash and cash equivalents at end of year......... $ 11,926 $ 14,949 $ 13,622
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest..................................... $ 533 $ 498 $ 501
Income taxes................................. 7,256 10,944 7,070
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 3, 1998
(1) BUSINESS SUMMARY
Altron Incorporated ("the Company") is a leading contract manufacturer of
interconnect products used in advanced electronic equipment. The Company
provides total design and manufacturing capability for complete electronic
systems, including multilayer boards, backplanes and surface mount assemblies.
Altron is an ISO 9000 registered company serving the telecommunication, data
communication, computer, industrial and medical industries located in the
United States and Europe. The Company has four plants located in Massachusetts
and Northern California.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31. In
the financial statements, "1997" refers to the year ended January 3, 1998,
"1996" refers to the year ended December 28, 1996 and "1995" refers to the
year ended December 30, 1995. Operations for the year ended January 3, 1998
include 53 weeks. Operations for other years presented include 52 weeks.
Principles of Consolidation
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.
Management Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, investments, accounts receivable, accounts payable and long-term
debt. The carrying amount of these financial instruments approximates their
fair value.
SFAS No. 105, Disclosure of Information About Financial Statements with Off-
Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that potentially subject the Company to
concentrations of credit risk are principally cash equivalents, investments
and accounts receivable. The Company places its investments in highly rated
institutions. The Company had one customer accounting for 11%, 15% and 19% of
total revenues in 1997, 1996 and 1995, respectively.
Cash Equivalents and Investments
The Company considers all highly liquid investment instruments with original
maturities of three months or less to be cash equivalents. Short-term
investments are investments with maturities less than one year and investments
with maturities greater than one year but less than five years have been
classified as long-term. The Company carries its investments in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Investments at January
3, 1998 and December 28, 1996 consist primarily of securities issued by the
U.S. Treasury and other U.S. Government agencies and municipalities. The
Company has deemed these investments as of January 3, 1998 to be held-to-
maturity and they are carried at amortized cost which approximates market
value.
19
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 3, 1998
As of January 3, 1998 and December 28, 1996 the Company had no financial
instruments requiring disclosure under SFAS No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments.
Revenue Recognition
The Company recognizes revenue at the time products are shipped. The Company
provides for estimated returns when material.
Basic and Diluted Earnings per Share
The Company applies SFAS No. 128, Earnings per Share, in computing earnings
per share. Basic earnings per share was computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share was computed by dividing net income by the weighted
average number of common shares and common stock equivalents outstanding
during the period. The weighted average number of common stock equivalents
outstanding during the period has been determined in accordance with the
treasury-stock method. Common stock equivalents consist of common stock
issuable upon the exercise of outstanding options.
Calculations of basic and diluted earnings per share information are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net income....................................... $14,667 $17,715 $14,558
======= ======= =======
Basic weighted average shares outstanding........ 15,333 15,143 13,887
Common stock equivalents......................... 706 866 908
------- ------- -------
Diluted weighted average shares outstanding...... 16,039 16,009 14,795
======= ======= =======
Basic earnings per share......................... $ 0.96 $ 1.17 $ 1.05
======= ======= =======
Diluted earnings per share....................... $ 0.91 $ 1.11 $ 0.98
======= ======= =======
Anti-dilutive securities, that were not included
in the above table are as follows:
Stock options.................................. 216 30 32
======= ======= =======
</TABLE>
New Accounting Standards
In June 1997, SFAS No. 130, Reporting Comprehensive Income, was issued which
requires disclosure of all components of comprehensive income on an annual and
interim basis. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from nonowner sources. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. The standard will be adopted by the
Company during the first quarter of the fiscal year ended January 2, 1999.
In July 1997, SFAS No. 131, Disclosures About Segments of an Enterprise and
Related Information, was issued which requires certain financial and
supplementary information to be disclosed on an annual and interim basis for
each reportable segment of an enterprise. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997. Unless impracticable, companies would
be required to restate prior information upon adoption. The standard will be
adopted by the Company for the fiscal year ended January 2, 1999.
20
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 3, 1998
(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:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................. $15,314 $10,040
Work-in-process........................................... 13,312 8,514
------- -------
$28,626 $18,554
======= =======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................... $ 4,052 $ 3,661
Buildings and improvements.............................. 24,217 16,046
Equipment............................................... 73,009 56,628
-------- -------
101,278 76,335
Less accumulated depreciation........................... 35,967 30,608
-------- -------
$ 65,311 $45,727
======== =======
</TABLE>
The Company provides for depreciation using the straight-line method over
the estimated useful lives of 7 to 40 years for buildings and improvements and
3 to 8 years for equipment.
(5) INCOME TAXES
The provision for income taxes shown in the accompanying statements of
income consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Federal:
Current............................................ $ 6,110 $ 8,715 $6,801
Deferred........................................... 1,688 712 806
------- ------- ------
7,798 9,427 7,607
------- ------- ------
State:
Current............................................ 1,561 2,536 1,870
Deferred........................................... 657 159 228
------- ------- ------
2,218 2,695 2,098
------- ------- ------
Provision for income taxes........................... $10,016 $12,122 $9,705
======= ======= ======
</TABLE>
21
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 3, 1998
A reconciliation of the Company's effective income tax rate and the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit............. 5.8 5.7 5.6
Other, net................................................. (.2) (.1) (.6)
---- ---- ----
Effective tax rate......................................... 40.6% 40.6% 40.0%
==== ==== ====
</TABLE>
The tax effects of temporary differences included in other current assets as
of January 3, 1998 are $404,000 for inventory and receivables, $770,000 for
accruals and $(61,000) for other net differences. The tax effects of temporary
differences included in other current assets as of December 28, 1996 are
$769,000 for inventory and receivables, $834,000 for accruals and $(14,000)
for other net differences.
Deferred income taxes as of January 3, 1998 and December 28, 1996 are
$8,785,000 and $6,567,000, respectively, and resulted principally from the
difference between book and tax depreciation methods.
For 1997, 1996 and 1995, the Company realized tax benefits of $750,000,
$1,150,000 and $600,000, respectively, for disqualifying dispositions of stock
options exercised which are deemed compensation for tax purposes. For
financial reporting purposes, the benefit is accounted for as paid-in capital.
(6) LONG AND SHORT-TERM DEBT
Long-Term Debt
Long-term debt consists of unsecured term loans totaling $7,600,000 with
maturities of $3,000,000 and $4,600,000 in 1999 and 2001, respectively.
On August 16, 1996, the Company borrowed $7,600,000 under an amendment to
its unsecured term loan agreement with its bank. The borrowing consists of a
$3,000,000 three-year unsecured term loan with interest at 6.77%, payable
monthly and principal due at maturity, and a $4,600,000 five-year unsecured
term loan with interest at 7.18%, payable monthly and principal due at
maturity. During the third quarter of the 1998 fiscal year, $3,000,000 will be
transferred to the current portion of long-term debt.
Short-term Debt
The Company has a $5,000,000 unsecured line of credit 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 January 3, 1998 and December 28,
1996.
(7) OPERATING LEASES
The Company rents manufacturing space in Woburn, Massachusetts and Fremont,
California under lease agreements. Aggregate minimum lease payments under the
leases at January 3, 1998 are $566,000, $582,000, $469,000 and $430,000 for
each of the years 1998 through 2001, respectively. Rental expense under the
leases was $546,000 in 1997, $576,000 in 1996 and $486,000 in 1995.
(8) STOCKHOLDERS' INVESTMENT
On April 2, 1996, the Board of Directors declared a three-for-two split of
its common stock effected as a 50% stock dividend to shareholders of record on
April 18, 1996 and distributed on May 10, 1996. On January 5,
22
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 3, 1998
1995, the Board of Directors declared a three-for-two stock split of its
common stock effected as a 50% stock dividend to shareholders of record on
January 20, 1995 and distributed February 10, 1995. Share quantities and
related per share amounts have been retroactively restated to reflect the
stock splits.
On May 16, 1996, the stockholders approved a resolution to increase the
authorized shares of common stock from 30,000,000 to 40,000,000 shares with a
par value of $.05 per share.
On May 25, 1995, the Company completed a public offering of 2,092,500 shares
of its common stock resulting in net proceeds of approximately $24.3 million.
Preferred Stock
The stockholders approved the authorization of 1,000,000 shares of preferred
stock, $1 par value, on February 14, 1984. The preferred stock is divisible
and issuable into one or more series. The rights and preferences of the
different series may be established by the Board of Directors without further
action by the stockholders. The Board of Directors is authorized, with respect
to each series, to fix and determine, among other things: (i) the dividend
rate, (ii) the liquidation preference, (iii) whether or not such shares will
be convertible into, or exchangeable for, any other securities and (iv)
whether or not such shares will have voting rights and, if so, the conditions
under which such shares will vote as a separate class.
Stock Options
The 1981 Stock Option Plan provided for incentive stock options granted at
fair market value at the date of grant and nonqualified stock options granted
at prices determined by the Board of Directors. All options under the plan are
exercisable over a five-year period and expire 10 years from the date of
grant. In December 1991, this plan terminated and at January 3, 1998, options
for 2,025 shares remain outstanding.
The 1991 Stock Option Plan provides for incentive stock options granted at
fair market value at the date of grant and nonqualified stock options granted
at prices determined by a committee of the Board of Directors. All options are
exercisable over a five-year period, commencing 12 months from the date of
grant unless accelerated and expire 10 years from the date of grant. On May 16,
1996, the stockholders approved an increase in the total number of shares of
common stock reserved for issuance under the Plan to 3,750,000. At January 3,
1998, 2,739,553 shares of common stock were reserved for issuance.
The 1989 Nonqualified Stock Option Plan for Non-Employee Directors provides
for options exercisable over five years commencing 12 months from the date of
grant and expiring 10 years from the date of grant. At January 3, 1998, 3,375
shares were reserved for issuance.
The 1992, 1993 and 1995 Stock Option Plans for Non-Employee Directors
provide for options exercisable over a two-year period from the date of grant
and expiring 10 years from the date of grant. At January 3, 1998, 84,375,
90,000 and 75,000 shares were reserved for issuance under the 1992, 1993 and
1995 Plans, respectively.
The 1996 Stock Option Plan for Non-Employee Directors provides for options
exercisable over a three-year period commencing 12 months from the date of
grant and expiring 10 years from the date of grant. At January 3, 1998, 37,500
shares were reserved for issuance under this Plan.
On October 22, 1997, the Board of Directors approved a Stock Option Plan for
Non-Employee Directors. Under the Plan, options are exercisable over a three-
year period commencing 12 months from the date of grant and expiring 10 years
from the date of grant. At January 3, 1998, 45,000 shares were reserved for
issuance under this Plan.
23
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 3, 1998
The Company follows the disclosure-only alternative under SFAS No. 123,
Accounting for Stock-Based Compensation, which requires disclosure of the pro
forma effects on earnings and earnings per share as if SFAS No. 123 had been
adopted, as well as certain other information. The Company has computed the
pro forma disclosures required under SFAS No. 123 for all stock options
granted after January 1, 1995 using the Black-Scholes option pricing model
prescribed by SFAS No. 123.
The assumptions used and the weighted average information for the years
ended January 3, 1998, December 28, 1996 and December 30, 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rates................ 5.83%-6.66% 5.97%-6.73% 5.51%-7.79%
Expected dividend yield................. -- -- --
Expected lives.......................... 4-7 years 4-7.5 years 4-7.5 years
Expected volatility..................... 53% 48% 48%
Weighted average grant-date fair value
of options granted during the period... $9.30 $8.48 $6.43
Weighted-average remaining contractual
life of options outstanding............ 8.61 years 7.65 years 7.74 years
Weighted-average exercise price of
exercisable options.................... $7.79 $4.76 $3.30
Exercisable options..................... 791,421 694,812 494,500
The effect of applying SFAS No. 123 would be as follows:
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Pro forma--
Net income............................. $ 13,153 $ 16,693 $ 14,235
Basic earnings per share............... $ 0.86 $ 1.10 $ 1.03
Diluted earnings per share............. $ 0.82 $ 1.04 $ 0.96
</TABLE>
24
<PAGE>
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JANUARY 3, 1998
The following table summarizes the stock option activity for the three-year
period ended January 3, 1998 (restated for the stock splits):
<TABLE>
<CAPTION>
INCENTIVE NONQUALIFIED
STOCK OPTIONS STOCK OPTIONS WEIGHTED
----------------------- ---------------------- AVERAGE
OPTION PRICE OPTION PRICE EXERCISE
SHARES PER SHARE SHARES PER SHARE PRICE
--------- ------------ ------- ------------- --------
<S> <C> <C> <C> <C> <C>
Outstanding at December
31, 1994............... 1,025,325 $ .81-$ 8.78 195,750 $1.22- $ 4.72 $ 3.67
Granted............... 546,000 9.17- 19.25 55,500 9.17- 10.67 10.18
Exercised............. (229,012) 0.81- 6.72 (20,925) 1.48- 2.45 2.64
Canceled.............. (33,525) 1.19- 9.17 -- -- 5.14
--------- -------
Outstanding at December
30, 1995............... 1,308,788 1.02- 19.25 230,325 1.22- 10.67 6.35
Granted............... 535,000 12.25- 19.63 37,500 12.25- 18.83 13.93
Exercised............. (219,326) 1.11- 9.94 (20,925) 1.48- 10.67 3.57
Canceled.............. (12,900) 9.17- 17.67 -- -- 12.13
--------- -------
Outstanding at December
28, 1996............... 1,611,562 1.02- 19.63 246,900 1.22- 18.83 9.01
Granted............... 627,500 13.38- 19.63 45,000 14.75 15.17
Exercised............. (153,396) 1.11- 17.67 (75,150) 1.22- 4.72 3.60
Canceled.............. (111,018) 6.44- 19.63 -- -- 13.31
--------- -------
Outstanding at January
3, 1998................ 1,974,648 $1.02-$19.63 216,750 $1.44- $18.83 $11.24
========= =======
Exercisable at January
3, 1998................ 680,296 $1.02-$19.63 111,125 $1.44- $18.83 $ 7.79
========= =======
</TABLE>
Options outstanding at January 3, 1998 expire between December 15, 1998 and
December 17, 2007.
The following table summarizes information about incentive and non-qualified
stock options outstanding and exercisable at January 3, 1998:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
------------------------------------ ----------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE NUMBER AVERAGE
EXERCISE PRICE NUMBER REMAINING EXERCISE OF EXERCISE
RANGE OF OPTIONS CONTRACTUAL LIFE PRICE OPTIONS PRICE
- -------------- ---------- ---------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 1.02 - $ 1.48 90,800 4.39 $ 1.34 90,800 $ 1.34
1.56 - 2.15 18,225 4.44 1.73 15,188 1.68
2.44 2,025 5.40 2.44 -- --
4.72 - 6.72 379,413 5.82 5.45 316,863 5.25
8.78 - 12.25 821,085 7.75 10.43 289,703 10.31
$13.38 - $19.63 879,850 9.23 $15.73 78,867 $17.45
--------- -------
2,191,398 791,421
========= =======
</TABLE>
Employee Stock Purchase Plan
On May 25, 1995, the stockholders approved the 1995 Employee Stock Purchase
Plan. The Plan provides for two purchase periods during the Company's fiscal
year. The purchase price of shares under the Plan is 90% of the lower of the
fair market value at the beginning and the end of the period. Substantially
all employees with more than one year of service are eligible to participate
in the Plan. At January 3, 1998, 400,623 of the initial 450,000 shares of
common stock were reserved for issuance.
(9) OTHER INCOME
Other income consisted of interest income of $1,497,000, $1,857,000 and
$1,304,000 for the years ended 1997, 1996 and 1995, respectively, and other
income, net, of $6,000, $12,000 and $13,000 for these respective years.
25
<PAGE>
(10) INTEREST EXPENSE
Interest expense was $535,000, $554,000 and $497,000 for the years ended
1997, 1996 and 1995, respectively, of which $504,000, $322,000 and $138,000
was capitalized to property, plant and equipment.
(11) EMPLOYEE BENEFIT PLAN
The Altron Savings and Investment Plan allows all full-time employees with
at least 90 days of service with the Company to participate. Plan participants
elect to have contributions made to the Plan under Section 401(k) of the
Internal Revenue Code. Company contributions become vested at the rate of 20%
for each year of service with the Company. Annual Company contributions to the
Plan are at the discretion of the Board of Directors and are discretionary in
amount. The Company contributed approximately $836,000, $537,000 and $260,000
for the years ended 1997, 1996 and 1995.
(12) QUARTERLY RESULTS (UNAUDITED)
The following summarized unaudited results of operations for the fiscal
quarters in the years ended January 3, 1998 and December 28, 1996 have been
accounted for using generally accepted accounting principles for interim
reporting purposes and include adjustments (consisting of normal recurring
adjustments) which the Company considers necessary for the fair presentation
of results for these interim periods:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1997
Net sales................................... $43,168 $40,560 $41,541 $47,159
Gross profit................................ 10,230 9,192 9,220 9,413
Net income.................................. 4,340 3,635 3,525 3,167
Net income per basic share.................. 0.28 0.24 0.23 0.20
Net income per diluted share................ 0.27 0.22 0.22 0.20
1996
Net sales................................... $44,091 $44,302 $38,229 $38,626
Gross profit................................ 10,664 10,750 9,335 9,420
Net income.................................. 4,665 4,760 4,110 4,180
Net income per basic share.................. 0.31 0.31 0.27 0.27
Net income per diluted share................ 0.29 0.30 0.26 0.26
</TABLE>
26
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
The information required by Items 10, 11, 12 and 13 is hereby incorporated
by reference from the Registrant's definitive Proxy Statement for the 1998
Annual Meeting to be held on May 21, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
(1) Financial Statements included in Part II of this Report:
Report of Independent Public Accountants
Consolidated Income Statements for the fiscal years ended January 3,
1998, December 28, 1996 and December 30, 1995.
Consolidated Balance Sheets as of January 3, 1998 and December 28,
1996.
Consolidated Statements of Stockholders' Investment for the fiscal
years ended January 3, 1998, December 28, 1996 and December 30,
1995.
Consolidated Statements of Cash Flows for the fiscal years ended
January 3, 1998, December 28, 1996 and December 30, 1995.
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule Included in Part IV of this Report:
Schedule II--Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted since they are
either not required or the information is otherwise included.
(3) Exhibits
The following exhibits are incorporated herein by reference:
<TABLE>
<C> <S>
3.1 Articles of Organization of Registrant, as amended (filed as Exhibit
3.1 to the Registration Statement Form S-1 [Registration No. 2-
89704]).
3.2 By-laws of Altron Incorporated as amended through March 12, 1990
(filed as Exhibit 3.2 to the Annual Report on Form 10-K for fiscal
year ended December 29, 1990).
10.1 Altron Incorporated Non-Qualified Stock Option Plan (filed as Exhibit
4B to the Registration Statement on Form S-8 [Registration No. 2-
94712]).
10.2 Altron Incorporated 1981 Stock Option Plan (filed as Exhibit 4A to
the Registration Statement on Form S-8 [Registration No. 2-94712]).
10.3 First Amendment to Altron Incorporated 1981 Stock Option Plan (filed
as Exhibit 4AA to Post-Effective Amendment No. 1 to Registration
Statement on Form S-8 [Registration No. 2-94712]).
10.4 Altron Incorporated Employee Stock Purchase Plan (filed as Exhibit 4A
to the Registration Statement on Form S-8 [Registration No. 2-
94713]).
</TABLE>
27
<PAGE>
<TABLE>
<C> <S>
10.5 Altron Incorporated Stock Option Plan for Non-Employee Directors,
adopted by the Board of Directors on December 17, 1984 (filed as
Exhibit 10.11 to the Annual Report on Form 10-K for fiscal year
ended December 29, 1984 [Registration No. 2-89704]).
10.6 Second Amendment to the Altron Incorporated 1981 Stock Option Plan
(filed as Exhibit 10.12 to the Annual Report on Form 10-K for fiscal
year ended January 2, 1988 [Registration No. 2-94712]).
10.7 Third Amendment to the Altron Incorporated 1981 Stock Option Plan
(filed as Exhibit 10.13 to the Annual Report on Form 10-K for fiscal
year ended January 3, 1987 [Registration No. 2-94712]).
10.8 Mortgage with Massbank for Savings dated October 1, 1987 (filed as
Exhibit 10.14 to the Annual Report on Form 10-K for fiscal year
ended January 2, 1988 [Registration No. 2-94712]).
10.9 Commercial Real Estate Promissory Note with Massbank for Savings
dated October 1, 1987 (filed as Exhibit 10.15 to the Annual Report
on Form 10-K for fiscal year ended January 2, 1988 [Registration No.
2-94712]).
10.10 Altron Incorporated Stock Option Plan for Non-Employee Directors,
adopted by the Board of Directors on December 14, 1989 (filed as
exhibit 10.18 to the Annual Report on Form 10-K for the fiscal year
ended December 30, 1989).
10.11 Altron Savings and Investment Plan, adopted by the Board of
Directors on December 14, 1989 (filed as exhibit 10.19 to the Annual
Report on Form 10-K for the fiscal year ended December 30, 1989).
10.12 Altron Incorporated 1991 Stock Option Plan, adopted by the Board of
Directors on June 20, 1991 as amended April 19, 1995 (filed as
Exhibit 4A to the Registration Statement on Form S-8 [Registration
No. 33-60759]).
10.13 Altron Incorporated Stock Option Plan for Non-Employee Directors,
adopted by the Board of Directors on September 30, 1992 (filed as
exhibit 10.13 to the Annual Report on Form 10-K for the fiscal year
ended January 2, 1993).
10.14 Altron Incorporated Stock Option Plan for Non-Employee Directors,
adopted by the Board of Directors on December 22, 1993 (filed as
Exhibit 10.14 to the Annual Report on Form 10-K for the fiscal year
ended January 1, 1994.)
10.15 First Amendment to Altron Incorporated Employee Stock Purchase Plan,
adopted by the Board of Directors on December 21, 1994 (filed as
Exhibit 4A to the Registration Statement on Form S-8 [Registration
No. 33-60713]).
10.16 Altron Incorporated 1995 Stock Option Plan for Non-Employee
Directors (filed as Exhibit 4A to Registration Statement on Form S-8
[Registration No. 33-60757]).
10.17 Altron Incorporated 1996 Stock Option Plan for Non-Employee
Directors (filed as Exhibit 4A to the Registration Statement on Form
S-8 [Registration No. 333-10097]).
The following exhibits are filed herewith:
10.18 Stock Option Plan for Non-Employee Directors adopted October 22,
1997.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended January 3, 1998.
28
<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
/s/ Samuel Altschuler
By: _________________________________
Samuel Altschuler President
Date: June 8, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C>
NAME TITLE
DATE
/s/ Samuel Altschuler Chairman of the Board of June 8, 1998
- --------------------------------- Directors and President
SAMUEL ALTSCHULER (principal executive
officer)
/s/ Burton Doo Executive Vice President June 8, 1998
- --------------------------------- and Director
BURTON DOO
/s/ Peter D. Brennan Vice President, Chief June 8, 1998
- --------------------------------- Financial Officer and
PETER D. BRENNAN Treasurer (principal
financial and accounting
officer)
/s/ Anthony J. Medaglia, Jr. Director June 8, 1998
- ---------------------------------
ANTHONY J. MEDAGLIA, JR.
/s/ Daniel A. Cronin, Jr. Director June 8, 1998
- ---------------------------------
DANIEL A. CRONIN, JR.
/s/ Thomas M. Claflin, II Director June 8, 1998
- ---------------------------------
THOMAS M. CLAFLIN, II
</TABLE>
29
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report, included in this Form 10-K/A, into Altron Incorporated's
previously filed Registration Statements (File Nos. 2-94712, 2-94713, 33-
39744, 33-39980, 33-45884, 33-60713, 33-60757, 33-60759, 33-82574, 33-86862,
333-01443, 333-10095 and 333-10097).
Arthur Andersen LLP
Boston, Massachusetts
June 8, 1998
30
<PAGE>
SCHEDULE II
ALTRON INCORPORATED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO DEDUCTION BALANCE AT
BEGINNING OF COSTS AND FROM END OF
PERIOD EXPENSES RESERVES PERIOD
------------ ---------- --------- ----------
<S> <C> <C> <C> <C>
RESERVE FOR DOUBTFUL ACCOUNTS:
January 3, 1998................. $800 $ 55 $55 $800
December 28, 1996............... 775 25 -- 800
December 30, 1995............... 625 150 -- 775
</TABLE>
31
<PAGE>
Exhibit 10.18
ALTRON INCORPORATED
-------------------
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
ADOPTED OCTOBER 22, 1997
RESOLVED: That this resolution be and hereby is deemed a Stock Option Plan
for Non-Employee Directors of the corporation and that pursuant to
this Plan each of the following named outside directors of the
corporation be and each hereby is granted a number of options set
forth opposite their respective names, each option to vest one-
third on the anniversary date of this resolution and an additional
one-third on each subsequent anniversary date such that by the
third year following this resolution all options will be vested.
Further provided that upon a change of control of the Corporation
that all options accelerate and be immediately fully vested and
exercisable and the option exercise price is to be the fair market
value of the corporation's common stock which is deemed to be the
price at the close of business on October 21, 1997 which was
$14.75 per share. Said options to contain such further terms as
the president in his determination deems appropriate with regard
to the following optionees:
Thomas M. Claflin, II 15,000 shares
Daniel A. Cronin, Jr. 15,000 shares
Anthony J. Medaglia, Jr. 15,000 shares
<PAGE>
Exhibit 21
The subsidiaries of Altron Incorporated are as follows:
Names Jurisdiction of Incorporation
- ----- -----------------------------
Altron Systems Corporation Massachusetts
Altron Securities Corporation Massachusetts
Such subsidiaries are wholly owned.
