<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 1-9125
AMERICAN TECHNICAL CERAMICS CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2113382
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
17 STEPAR PLACE, HUNTINGTON STATION, NY 11746
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
516-547-5700
---------------------------------------
(Telephone number, including area code)
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
----- -----
As of November 5, 1997, the Registrant had outstanding 3,895,622 shares of
Common Stock, par value $.01 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1997
------------------ -------------
ASSETS (unaudited)
(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash (including cash equivalents of approximately
$1,251 and $1,749, respectively) $3,423 $3,500
Investments 4,315 3,457
Accounts receivable, net 4,963 4,520
Inventories 8,667 9,027
Deferred income taxes 438 438
Other current assets 448 519
------------- -------------
Total current assets 22,254 21,461
------------- -------------
Property, plant and equipment, net of
depreciation and amortization of $17,447
and $16,942, respectively 15,585 15,404
Other assets, net 287 259
------------- -------------
$38,126 $37,124
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $917 $902
Accounts payable 956 834
Accrued expenses 2,540 2,861
Income taxes payable 899 571
------------- -------------
Total current liabilities 5,312 5,168
------------- -------------
LONG-TERM DEBT 3,586 3,825
DEFERRED INCOME TAXES 1,544 1,528
------------- -------------
Total liabilities 10,442 10,521
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock- par value $.01;authorized 20,000,000 shares;
issued 4,067,979 shares 41 41
Capital in excess of par value 6,553 6,533
Retained earnings 21,724 20,680
------------- -------------
28,318 27,254
Unrealized gain on investments available-for-sale, net 101 65
Less: Treasury stock, at cost; 173,146 and 176,218 shares,
respectively 607 599
Deferred compensation 78 106
Cumulative foreign currency translation adjustment 50 11
------------- -------------
Total stockholders' equity 27,684 26,603
------------- -------------
$38,126 $37,124
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-1-
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
1997 1996
---- ----
(In thousands except per share data)
<S> <C> <C>
Net sales $9,958 $8,289
Cost of goods sold 5,907 5,852
----------- ----------
Gross profit 4,051 2,437
----------- ----------
Selling, general and administrative expenses 1,998 1,488
Research and development expenses 388 374
----------- ----------
Operating expenses 2,386 1,862
----------- ----------
Income from operations 1,665 575
----------- ----------
Other expense (income):
Interest expense 113 104
Interest income (90) (44)
Other 13 (6)
----------- ----------
36 54
----------- ----------
Income before provision for income taxes 1,629 521
Provision for income taxes 585 186
----------- ----------
Net income $1,044 $335
=========== ==========
Net income per common and common equivalent share $0.27 $0.09
=========== ==========
Weighted average common and common
equivalent shares outstanding 3,893 3,884
=========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-2-
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
1997 1996
---- ----
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,044 $335
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 505 466
Loss on disposal of fixed assets 6 -
Stock award compensation expense 28 -
Changes in operating assets and liabilities:
Accounts receivable, net (444) 702
Inventories 360 362
Other assets, net 43 38
Accounts payable, and accrued expenses (200) (691)
Income taxes payable 328 (468)
--------- ---------
Net cash provided by operating activities 1,670 744
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (684) (354)
Purchase of investments (806) -
Proceeds from sale of fixed assets - 3
--------- ---------
Net cash used in investing activities (1,490) (351)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (224) (209)
Payments to acquire treasury stock (16) 2
--------- ---------
Net cash used in financing activities (240) (207)
--------- ---------
Effect of exchange rate changes on cash (17) 7
--------- ---------
Net (decrease) increase in cash and cash equiv (77) 193
CASH AND CASH EQUIVALENTS, beginning of period 3,500 2,661
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $3,423 $2,854
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) PRINCIPLES OF CONSOLIDATION:
The accompanying unaudited interim consolidated financial statements
of American Technical Ceramics Corp. and Subsidiaries (the "Registrant")
reflect all adjustments (consisting of normal recurring accruals) which are, in
the opinion of management, necessary for a fair presentation of its
consolidated financial position as of September 30, 1997 and the results of its
operations for the months ended September 30, 1997 and 1996. These financial
statements should be read in conjunction with the summary of significant
accounting policies and notes to consolidated financial statements included in
the Registrant's Annual Report to Stockholders for the year ended June 30,
1997. Results for the three months ended September 30, 1997 are not necessarily
indicative of results which could be expected for the entire year.
(2) INVENTORIES:
Inventories included in the accompanying consolidated financial
statements consist of the following:
Sept. 30, June 30,
1997 1997
(in thousands)
------------ -----------
Raw materials $1,927 $2,635
Work-in-process 3,549 3,498
Finished goods 3,191 2,894
-------- --------
$8,667 $9,027
======== ========
(3) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
Net income per common and common equivalent share has been computed
based upon the weighted average number of shares outstanding for the period.
Recognition has been given to the assumed exercise, as of the beginning of each
period or date of issuance if later, of outstanding options except when their
effect would be antidilutive or immaterial.
- 4 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements, related notes and other information
included in this Quarterly Report on Form 10-Q.
Statements in this Quarterly Report on Form 10-Q that are not
historical fact may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. All such
forward-looking statements are subject to risks and uncertainties, including,
but not limited to, the impact of competitive products, product demand and
market acceptance risks, fluctuations in operating results and delays in
development of highly complex products and the other matters listed in the
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1997
under caption "Cautionary Statements Regarding Forward-Looking Statements" and
in the Registrant's other filings with the Securities and Exchange Commission.
These risks could cause the Registrant's actual results for future periods to
differ materially from those expressed in any forward-looking statements made
by the Registrant.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended September 30, 1997
Compared with Three Months Ended September 30, 1996
- ---------------------------------------------------
Net sales for the three months ended September 30, 1997 increased 20%
to $9,958,000 as compared to net sales of $8,289,000 for the comparable quarter
in the prior fiscal year. This increase was primarily the result of a
significant increase in demand for commercial products in both domestic and
foreign markets. The backlog of unfilled orders was $7,560,000 at September 30,
1997, compared to $6,239,000 at September 30, 1996 and $7,721,000 at June 30,
1997.
Gross margin for the three months ended September 30, 1997 was 40.7%
of net sales as compared to 29.4% for the comparable quarter in the prior
fiscal year. The higher gross margin in the current quarter was primarily
attributable to improved economies of scale resulting from the increase in
sales and the return to more historical manufacturing margins compared to the
comparable quarter in the prior fiscal year when the Registrant was
experiencing process difficulties, negatively affecting profit margins. The
Registrant corrected most of these process difficulties in the second quarter
of the prior fiscal year.
- 5 -
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS, continued
- --------------------------------
Total operating expenses for the three months ended September 30, 1997
increased 28% to $2,386,000 as compared to $1,862,000 in the comparable period
in the prior fiscal year. The increase in operating expenses was attributable
to higher selling, general and administrative expenses which resulted primarily
from the increases in sales and profits. Executive salaries were higher as a
result of the addition of a Senior Vice President of Operations in October,
1996 and the effect of higher bonus accruals due to higher pretax profits.
Increased selling expenses included higher salaries, commissions to
representatives and expenses relating to advertising and promotion activities.
As a result of the foregoing, net income for the three months ended
September 30, 1997 was $1,044,000, or $.27 per common and common equivalent
share, compared to net income of $335,000, or $.09 per common and common
equivalent share, for the comparable period in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Registrant's financial position at September 30, 1997 remains
strong as evidenced by working capital of $16,942,000 and stockholders' equity
of $27,684,000. The Registrant's current ratio at September 30, 1997 remained
at 4.2:1 as compared to June 30, 1997. The Registrant's quick ratio at
September 30, 1997 was 2.6:1 as compared to a quick ratio of 2.4:1 at June 30,
1997.
Cash and investments increased by $781,000 to $7,738,000 at September
30, 1997 from $6,957,000 at June 30, 1997. Accounts receivable increased by
$443,000 to $4,963,000 at September 30, 1997 from $4,520,000 at June 30, 1997.
Inventories decreased by $360,000 to $8,667,000 at September 30, 1997 from
$9,027,000 at June 30, 1997. Accounts payable and accrued expenses decreased by
$199,000 to $3,496,000 at September 30, 1997 from $3,695,000 at June 30, 1997.
Income taxes paid in the three month period ended September 30, 1997 were
$257,000.
- 6 -
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES, continued
- ------------------------------------------
In September 1996, the Registrant secured a $2,000,000 revolving
line-of-credit from Barnett Bank of Jacksonville, N.A. ("Barnett"). The
line-of-credit is subject to certain fees on the unused portion while the
outstanding balance bears interest at a rate equal to Barnett's prime rate
minus one-half percent (1/2%). Borrowings under the line-of-credit are subject
to, among other things, continued compliance with certain financial covenants,
including maintenance of asset and liability percentage ratios. There is
currently no balance outstanding under this line-of-credit.
Capital expenditures for the three months ended September 30, 1997
totaled $700,000 of which $509,000 was for machinery and equipment. The
Registrant intends to use cash on hand and funds generated from operations to
finance budgeted capital expenditures of approximately $3.0 million in fiscal
year 1998, primarily for additions to and replacement of machinery and
equipment.
In June 1990, the Registrant announced a stock purchase program
pursuant to which it is authorized to purchase up to $1,000,000 of its Common
Stock. As of September 30, 1997, the Registrant has expended approximately
$805,000 to purchase an aggregate of 308,400 shares under this program.
- 7 -
<PAGE>
PART II - OTHER INFORMATION
ITEMS 1. THROUGH 5. Not Applicable
--------------
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3(a)(i) - Certificate of Incorporation of the Registrant.
3(a)(ii) - Amendment to Certificate of Incorporation. (1)
3(b)(i) - By-laws of the Registrant.
9(a)(i) - Restated Shareholders' Agreement, dated April 15, 1985, among
Victor Insetta, Joseph Mezey, Joseph Colandrea and the
Registrant.
10(b)(i) - Lease Agreement between Victor Insetta and the Registrant for
premises at 15 Stepar Place, Huntington Station, N.Y.
10(b)(ii) - Amendment to Lease Agreement, dated May 8, 1984, but
effective as of July 14, 1981, between Victor Insetta, d/b/a
Stepar Leasing Company, and the Registrant.
10(b)(iii) - Amendment to Lease Agreement, dated June 15, 1987, but
effective as of May 1, 1987, between Victor Insetta, d/b/a
Stepar Leasing Company, and the Registrant. (2)
10(b)(iv) - Amendment to Lease Agreement, dated February 9, 1989, between
Victor Insetta, d/b/a Stepar Leasing Company, and the
Registrant. (3)
10(b)(v) - Amendment to Lease Agreement, as of January 1, 1997, between
Victor Insetta, d/b/a Stepar Leasing Company, and the
Registrant. (4)
10(c)(i) - 1985 Employee Stock Sale Agreement between the Registrant and
various employees.
10(c)(ii) - Form of Employee Stock Bonus Agreement, dated as of July 1,
1993, between the Registrant and various employees. (5)
10(c)(iii) - Form of Employee Stock Bonus Agreement, dated as of April 19,
1994, between the Registrant and various employees. (5)
10(c)(iv) - Form of Employee Stock Bonus Agreement, dated as of April 20,
1995, between the Registrant and various employees. (1)
10(e) - Amended and Restated Lease, effective as of July 1, 1996,
between V.P.I. Properties Associates, d/b/a V.P.I. Properties
Associates, Ltd., and American Technical Ceramics (Florida),
Inc. (4)
10(f) - Purchase Agreement, dated May 31, 1989, by and among Diane
LaFond Insetta and/or Victor D. Insetta, as custodians for
Danielle and Jonathan Insetta, and American Technical
Ceramics Corp., and amendment thereto, dated July 31, 1989.
(3)
10(g)(iii) - Profit Bonus Plan, dated April 19, 1995, and effective for
the fiscal years beginning July 1, 1994. (1)
- 8 -
<PAGE>
10(g)(iv) - Employment Agreement, dated April 3, 1985, between Victor
Insetta and the Registrant, as amended. (6)
10(h) - Loan Agreement, dated September 27, 1994, between the
Registrant and Barnett Bank of Jacksonville, N.A. (5)
10(i) - Secured Commercial Note, dated as of February 17, 1995,
between the Registrant and European American Bank. (1)
10(j) - Secured Commercial Note, dated as of February 17, 1995,
between the Registrant and European American Bank. (1)
10(k)(i) - Letters of Agreement, dated June 26, 1996 and August 22,
1996, between the Registrant and Stuart P. Litt. (7)
10(k)(ii) - Letter Agreement, dated September 11, 1997, between the
Registrant and Stuart P. Litt. (8)
10(l) - Loan Agreement, dated September 25, 1996, between the
Registrant and Barnett Bank, N.A. (9)
10(m) - American Technical Ceramics Corp. 1997 Stock Option Plan. (8)
21 - Subsidiaries of the Registrant. (6)
27 - Financial Data Schedule. (10)
- --------------------
1. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1995.
2. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1987.
3. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1989.
4. Incorporated by reference to the Registrant's Form 10-Q for the quarterly
period ended March 31, 1997.
5. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1994.
6. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993.
7. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1996.
8. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997.
9. Incorporated by reference to the Registrant's Form 10-Q for the quarterly
period ended September 30, 1996.
10. Filed herewith.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during
the quarter ended September 30, 1997.
- 9 -
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TECHNICAL CERAMICS CORP.
(Registrant)
DATE: November 10, 1997 BY: /s/ VICTOR INSETTA
------------------
Victor Insetta
President and Director
(Chief Executive Officer)
DATE: November 10, 1997 BY: /s/ STUART P. LITT
------------------
Stuart P. Litt
Senior Vice President - Operations and Director
(Acting Principal Financial Officer)
- 10 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,423
<SECURITIES> 4,315
<RECEIVABLES> 4,963<F1>
<ALLOWANCES> 0
<INVENTORY> 8,667
<CURRENT-ASSETS> 22,254
<PP&E> 33,032
<DEPRECIATION> 17,447
<TOTAL-ASSETS> 38,126
<CURRENT-LIABILITIES> 5,312
<BONDS> 3,586
0
0
<COMMON> 41
<OTHER-SE> 27,643
<TOTAL-LIABILITY-AND-EQUITY> 38,126
<SALES> 9,958
<TOTAL-REVENUES> 9,958
<CGS> 5,907
<TOTAL-COSTS> 8,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> 1,629
<INCOME-TAX> 585
<INCOME-CONTINUING> 1,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,044
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
<FN>
<F1>note: receivables shown net of allowance of 340
</FN>
</TABLE>
