<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
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 (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
17 STEPAR PLACE, HUNTINGTON STATION, NY 11746
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:(516) 622-4700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $.01 AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
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. [ X ]
ON SEPTEMBER 7, 1999, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S
COMMON STOCK (BASED UPON THE CLOSING SALES PRICE OF THE REGISTRANT'S COMMON
STOCK ON THE AMERICAN STOCK EXCHANGE ON SUCH DATE) HELD BY NONAFFILIATES OF THE
REGISTRANT WAS APPROXIMATELY $ 24,455,000. (FOR PURPOSES OF THIS REPORT, ALL
OFFICERS AND DIRECTORS HAVE BEEN CLASSIFIED AS AFFILIATES, WHICH CLASSIFICATION
SHALL NOT BE CONSTRUED AS AN ADMISSION OF THE AFFILIATE STATUS OF ANY SUCH
PERSON.)
ON SEPTEMBER 7, 1999, THE REGISTRANT HAD OUTSTANDING 3,826,034 SHARES
OF COMMON STOCK.
DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF THE REGISTRANT'S PROXY
STATEMENT RELATING TO ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER
19, 1999 ARE INCORPORATED INTO PART III OF THIS REPORT BY REFERENCE.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number
Independent Auditors' Report .................................... F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998 ......... F-2
Consolidated Statements of Earnings
Years Ended June 30, 1999, 1998 and 1997 ...................... F-3
Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1999, 1998 and 1997 ...................... F-4
Consolidated Statements of Cash Flows
Years Ended June 30, 1999, 1998 and 1997 ...................... F-5
Notes to Consolidated Financial Statements ...................... F-6
F
<PAGE>
KPMG, LLP
Certified Public Accountants
Independent Auditors' Report
The Board of Directors and Stockholders
American Technical Ceramics Corp.:
We have audited the accompanying consolidated balance sheets of American
Technical Ceramics Corp. and subsidiaries (the Company) as of June 30, 1999 and
1998, and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the years in the three-year period ended June 30,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Technical
Ceramics Corp. and subsidiaries as of June 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1999, in conformity with generally accepted accounting
principles.
KPMG, LLP
Melville, New York
August 24, 1999
F-1
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash (including cash equivalents of approximately $786,000
and $681,000, respectively) $ 2,898,000 $ 2,069,000
Investments 3,129,000 6,307,000
Accounts receivable, net 5,274,000 4,420,000
Inventories 12,436,000 10,884,000
Deferred income taxes 539,000 373,000
Other 344,000 281,000
-------------- -------------
TOTAL CURRENT ASSETS 24,620,000 24,334,000
-------------- -------------
PROPERTY, PLANT AND EQUIPMENT
Land 738,000 738,000
Buildings 7,506,000 7,422,000
Leasehold improvements 3,124,000 2,744,000
Machinery and equipment 26,361,000 23,813,000
Furniture, fixtures and other 2,341,000 1,839,000
-------------- -------------
40,070,000 36,556,000
Less: Accumulated depreciation 21,279,000 18,853,000
-------------- -------------
18,791,000 17,703,000
-------------- -------------
OTHER ASSETS 211,000 292,000
-------------- -------------
TOTAL ASSETS $ 43,622,000 42,329,000
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 542,000 $ 917,000
Accounts payable 1,315,000 1,357,000
Accrued expenses 2,877,000 3,284,000
Income taxes payable 726,000 657,000
-------------- -------------
TOTAL CURRENT LIABILITIES 5,460,000 6,215,000
-------------- -------------
Long-term debt 3,691,000 3,338,000
Deferred income taxes 2,086,000 1,703,000
-------------- -------------
TOTAL LIABILITIES 11,237,000 11,256,000
-------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock -- $.01 par value; authorized 20,000,000
shares; issued 4,067,979 shares 41,000 41,000
Capital in excess of par value 6,944,000 6,601,000
Retained earnings 27,011,000 24,882,000
Accumulated comprehensive income:
Unrealized gain on investments available-for-sale, net 2,000 183,000
Cumulative foreign currency translation adjustment (98,000) (9,000)
-------------- -------------
(96,000) 174,000
-------------- -------------
Less: Treasury stock, at cost (242,445 and
165,301 shares, respectively) 1,515,000 611,000
Deferred compensation -- 14,000
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY 32,385,000 31,073,000
-------------- -------------
-------------- -------------
$ 43,622,000 $ 42,329,000
============== =============
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 1999, 1998, 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $ 37,565,000 $ 40,399,000 $ 36,529,000
Cost of sales 23,642,000 23,367,000 22,269,000
------------ ------------ ------------
Gross profit 13,923,000 17,032,000 14,260,000
------------ ------------ ------------
Selling, general and administrative expenses 8,806,000 8,720,000 7,249,000
Research and development expenses 1,981,000 1,813,000 1,433,000
------------ ------------ ------------
Operating expenses 10,787,000 10,533,000 8,682,000
------------ ------------ ------------
------------ ------------ ------------
Income from operations 3,136,000 6,499,000 5,578,000
------------ ------------ ------------
Other expense (income):
Interest expense 420,000 428,000 493,000
Interest income (309,000) (483,000) (259,000)
Other (251,000) (12,000) 6,000
------------ ------------ ------------
(140,000) (67,000) 240,000
------------ ------------ ------------
Income before provision for income taxes 3,276,000 6,566,000 5,338,000
Provision for income taxes 1,147,000 2,364,000 1,909,000
------------ ------------ ------------
Net income $ 2,129,000 $ 4,202,000 $ 3,429,000
============ ============ ============
Basic net income per common share $ 0.56 $ 1.08 $ 0.88
Diluted net income per common share $ 0.56 $ 1.05 $ 0.87
------------ ------------ ------------
Basic weighted average common shares outstanding 3,829,000 3,897,000 3,887,000
============ ============ ============
------------ ------------ ------------
Diluted weighted average common shares outstanding 3,829,000 4,009,000 3,920,000
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Capital in
Comprehensive Common Stock Excess of Par Retained
Income/(Loss) Shares Amount Value Earnings
------------- ------ ------ ------------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1996 4,067,501 $41,000 $6,439,000 $17,251,000
Net income $3,429,000 --- --- --- 3,429,000
Purchase of treasury stock --- --- --- --- ---
Deferred compensation --- --- --- 92,000 ---
Stock award compensation expense --- --- --- --- ---
Exercise of stock options --- 478 --- 2,000 ---
Other comprehensive income, net of
tax:
Unrealized gains on investments
available-for-sale, net of
reclassification adjustment 53,000 --- --- --- ---
Foreign currency translation
adjustment 68,000 --- --- --- ---
---------
Other comprehensive income, net of
tax 121,000 --- --- --- ---
---------
Comprehensive income $3,550,000
=========------------------------------------------------------
BALANCE AT JUNE 30, 1997 4,067,97 9 $41,000 $6,533,000 $20,680,000
Net income $4,202,000 --- --- --- 4,202,000
Purchase of treasury stock --- --- --- --- ---
Issuance of shares for deferred
compensation --- --- --- 65,000 ---
Stock award compensation expense --- --- --- --- ---
Exercise of stock options --- --- --- 3,000 ---
Other comprehensive income, net of
tax:
Unrealized gains on investments
available-for-sale, net of
reclassification adjustment 118,000 --- --- --- ---
Foreign currency translation
adjustment 2,000 --- --- --- ---
-----------
Other comprehensive income, net of
tax 120,000 --- --- --- ---
-----------
Comprehensive income $4,322,000
===========----------------------------------------------------
BALANCE AT JUNE 30, 1998 4,067,979$41,000 $6,601,000 $24,882,000
Net income $ 2,129,000 --- --- --- 2,129,000
Purchase of treasury stock --- --- --- --- ---
Issuance of shares for compensation --- --- --- 130,000 ---
Stock award compensation expense --- --- --- 162,000 ---
Issuance of shares for inventory
purchase --- --- --- 51,000 ---
Other comprehensive income, net of
tax:
Unrealized losses on investments
available-for-sale, net of
reclassification adjustment (181,000) --- --- --- ---
Foreign currency translation
adjustment (89,000) --- --- --- ---
---------
Other comprehensive income, net of
tax (270,000) --- --- --- ---
---------
Comprehensive income 1,859,000
===========----------------------------------------------------
BALANCE AT JUNE 30, 1999 4,067,979 41,000 $6,944,000 $27,011,000
-------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Comprehensive Treasury Deferred
Income Stock Compensation Total
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1996 ($67,000) ($572,000) --- $ 23,092,000
Net income --- --- --- 3,429,000
Purchase of treasury stock --- (63,000) --- (63,000)
Deferred compensation --- 36,000 (241,000) (113,000)
Stock award compensation expense --- --- 135,000 135,000
Exercise of stock options --- --- --- 2,000
Other comprehensive income, net of
tax:
Unrealized gains on investments
available-for-sale, net of
reclassification adjustment --- --- --- ---
Foreign currency translation
adjustment --- --- --- ---
Other comprehensive income, net of
tax 121,000 --- --- 121,000
Comprehensive income
-------------------------------------------------------
BALANCE AT JUNE 30, 1997 $ 54,000 ($599,000) ($106,000) $26,603,000
Net income --- --- --- 4,202,000
Purchase of treasury stock --- (41,000) --- (41,000)
Issuance of shares for deferred
compensation --- 28,000 --- 93,000
Stock award compensation expense --- --- 92,000 92,000
Exercise of stock options --- 1,000 --- 4,000
Other comprehensive income, net of
tax:
Unrealized gains on investments
available-for-sale, net of
reclassification adjustment --- --- --- ---
Foreign currency translation
adjustment --- --- --- ---
Other comprehensive income, net of
tax 120,000 --- --- 120,000
Comprehensive income
-------------------------------------------------------
BALANCE AT JUNE 30, 1998 $174,000 ($611,000) ($14,000) $31,073,000
Net income --- --- --- 2,129,000
Purchase of treasury stock --- (1,198,000) --- (1,198,000)
Issuance of shares for compensation --- 84,000 --- 214,000
Stock award compensation expense --- 161,000 14,000 337,000
Issuance of shares for inventory
purchase --- 49,000 --- 100,000
Other comprehensive income, net of
tax:
Unrealized losses on investments
available-for-sale, net of
reclassification adjustment --- --- --- ---
Foreign currency translation
adjustment --- --- --- ---
Other comprehensive income, net of
tax (270,000) --- --- (270,000)
Comprehensive income
-------------------------------------------------------
BALANCE AT JUNE 30, 1999 ($96,000) ($1,515,000) --- $32,385,000
-------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,129,000 $ 4,202,000 $ 3,429,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,542,000 2,064,000 1,918,000
(Gain) loss on disposal of fixed assets (10,000) (16,000) 3,000
Stock award compensation expense 337,000 92,000 135,000
Provision for deferred income taxes 318,000 205,000 522,000
Provision for doubtful accounts receivable --- 50,000 35,000
Realized gain on sale of investments (257,000) --- ---
Changes in operating assets and liabilities:
Accounts receivable, net (854,000) 50,000 395,000
Inventories (1,452,000) (1,857,000) 59,000
Other assets, net 18,000 181,000 (135,000)
Accounts payable, accrued expenses
and income taxes payable (166,000) 1,087,000 (78,000)
----------------- ----------------- -----------------
Net cash provided by operating activities 2,605,000 6,058,000 6,283,000
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,570,000) (4,085,000) (2,029,000)
Purchase of investments (203,000) (2,659,000) (2,494,000)
Proceeds from sale of investments 3,356,000 --- ---
Proceeds from sale of fixed assets 55,000 50,000 3,000
----------------- ----------------- -----------------
Net cash provided by (used in) investing activities (362,000) (6,694,000) (4,520,000)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (923,000) (760,000) (876,000)
Payments to acquire treasury stock (1,198,000) (41,000) (63,000)
Proceeds from exercise of stock options --- 4,000 2,000
Proceeds from issuance of long-term debt 796,000 --- ---
----------------- ----------------- -----------------
Net cash used in financing activities (1,325,000) (797,000) (937,000)
----------------- ----------------- -----------------
Effect of exchange rate changes on cash (89,000) 2,000 13,000
----------------- ----------------- -----------------
Net increase (decrease) in cash and cash equivalents 829,000 (1,431,000) 839,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,069,000 3,500,000 2,661,000
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,898,000 $ 2,069,000 $ 3,500,000
================= ================= =================
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
American Technical Ceramics Corp. and its wholly-owned subsidiaries (the
"Company") are engaged in the design, development, manufacture and sale of
ceramic multilayer capacitors for commercial and military purposes in the United
States and for export, primarily to Western Europe, Canada and the Far East.
During fiscal years 1999, 1998 and 1997, there were no customers which accounted
for 10% or more of consolidated revenues. In the fiscal years ended June 30,
1999, 1998 and 1997, approximately 7%, 10%, and 13% respectively, of the
Company's net sales were to United States military and aerospace contractors.
The Company operates in one industry segment - the electronic components
industry.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
American Technical Ceramics Corp. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Certain reclassifications have been made to prior year amounts to conform
to the current year presentation.
REVENUE RECOGNITION
Revenue is recognized as products are shipped.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents, including money
market accounts and certificates of deposit.
INVESTMENTS
The Company classifies its investments in debt and equity securities as
available-for-sale. Accordingly, these investments are reported at fair value
with unrealized holding gains and losses excluded from earnings and reported as
a separate component of stockholders' equity, net of tax. Classification of
investments is determined at acquisition and reassessed at each reporting date.
Realized gains and losses are included in the determination of net earnings at
the time of sale and are derived using the specific identification method for
determining cost of securities sold.
INVENTORIES
Inventories are stated at the lower of aggregate cost (first-in, first-out)
or market.
F-6
<PAGE>
COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 Reporting Comprehensive Income ("SFAS No. 130").
SFAS No. 130 presents standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
The components of the change in the net unrealized (losses)/gains on investments
available-for-sale, net of tax for the fiscal years ended June 30, 1999, 1998
and 1997 are as follows:
Year Ended June 30,
1999 1998 1997
---------------------------------
Unrealized holding (losses)/gains
arising during the period, net $ (14,000) $ 118,000 $ 53,000
Less: reclassification adjustment for
gains included in net income, net (167,000) -- --
---------------------------------
Change in net unrealized (losses)/gains
on investments available-for-sale $(181,000) $ 118,000 $ 53,000
=================================
LONG-LIVED ASSETS
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided primarily using the straight-line method over the
estimated useful lives of the related assets as follows:
Buildings 30 years
Leasehold improvements Lesser of the remaining lease term or 5 years
Machinery and equipment 3 to 10 years
Furniture, fixtures and other 3 to 8 years
The Company reviews its long-lived assets (property, plant and
equipment, and related intangible assets that arose from business combinations
accounted for under the purchase method) for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an impairment loss is
recognized as the amount by which the carrying amount of the asset exceeds its
fair value.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-7
<PAGE>
FOREIGN CURRENCY TRANSLATION
The Company translates the financial statements of its foreign subsidiary
(located in England) by applying the current exchange rate as of the balance
sheet date to the assets and liabilities of the subsidiary and a weighted
average rate to such subsidiary's results of operations. The resulting
translation adjustment is recorded as a component of stockholders' equity.
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25 Accounting
for Stock Issued to Employees in accounting for employee stock-based
compensation and makes pro-forma disclosures of net income and net income per
share as if the fair value method under Statement of Financial Accounting
Standards No. 123 Accounting for Stock Based Compensation had been applied.
EARNINGS PER SHARE:
The Company applies Statement of Financial Accounting Standards No. 128
Earnings Per Share in computing and presenting basic and diluted earnings per
share ("EPS"). Basic EPS is computed by dividing income available to common
shareholders (which for the Company equals its net income) by the weighted
average number of common shares outstanding and dilutive EPS adds the dilutive
effect of stock options and other common stock equivalents. A reconciliation
between numerators and denominators of the basic and diluted earnings per share
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999 YEAR ENDED JUNE 30, 1998 YEAR ENDED JUNE 30, 1997
------------------------ ------------------------ ------------------------
PER- PER- PER-
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS $2,129,000 3,829,000 $.56 $4,202,000 3,897,000 $1.08 $3,429,000 3,897,000 $.88
==== ===== ====
Effect of
Dilutive
Securities:
Stock Options -- -- -- -- 109,000 -- -- 7,000 --
Stock Awards -- -- -- -- 3,000 -- -- 16,000 --
------------ ------------ --------- ------------- ------------ --------- ------------ ------------ --------
Diluted EPS $2,129,000 3,829,000 $.56 $4,202,000 4,009,000 $1.05 $3,429,000 3,920,000 $.87
============ ============ ========= ============= ============ ========= ============ ============ ========
</TABLE>
IMPACT OF NEW ACCOUNTING STANDARDS
In fiscal year 2001, the Company will be required to adopt SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Company has
not yet completed its evaluation of the impact of this statement on its
financial statements.
ACCOUNTING ESTIMATES
The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION
During fiscal year 1999, significant non-cash activities included (i) the
purchase of approximately $100,000 of inventory from an officer of the Company
in exchange for 12,700 shares of common stock issued from treasury, (ii) the
issuance of 20,454 shares of treasury stock to pay approximately $214,000 in
accrued compensation, (iii) the purchase of property, plant and equipment
through an increase in capital lease obligations of approximately $105,000 and
(iv) the issuance of 47,750 shares of treasury stock to pay $337,000 in stock
awards.
NOTE 2. INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
June 30, 1999 Cost Gains Losses Fair Value
------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
U.S. Government obligations $ 3,125,000 $ 28,000 $ 24,000 $ 3,129,000
================ ================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
June 30, 1998 Cost Gains Losses Fair Value
------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Mutual funds $ 269,000 $ 25,000 $ -- $ 294,000
Equity securities 310,000 177,000 2,000 485,000
U.S. Government obligations 5,442,000 92,000 6,000 5,528,000
---------------- ----------------- ----------------- -----------------
$6,021,000 $ 294,000 $ 8,000 $ 6,307,000
================ ================= ================= =================
</TABLE>
Gross realized gains of approximately $257,000 are included in other income
for fiscal year 1999. There were no gross realized gains or losses in fiscal
years 1998 and 1997.
The Company's investments in U. S. Government obligations at June 30, 1999
contractually mature as follows:
COST FAIR VALUE
---- ----------
Within one year $ 701,000 $ 703,000
Between one and five years 1,402,000 1,414,000
Between five and ten years 1,022,000 1,012,000
------------------ ------------------
$ 3,125,000 $ 3,129,000
================== ==================
NOTE 3. INVENTORIES
Inventories consist of the following:
June 30, 1999 June 30, 1998
------------- -------------
Raw materials $ 5,874,000 $ 4,142,000
Work in process 3,551,000 2,216,000
Finished goods 3,011,000 4,526,000
------------------ -----------------
$12,436,000 $ 10,884,000
================== =================
F-9
<PAGE>
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following:
June 30, 1999 June 30, 1998
------------- -------------
Notes payable to banks $ 1,183,000 $ 1,155,000
Obligations under capital leases 3,050,000 3,100,000
--------------- ---------------
4,233,000 4,255,000
Less: Current portion 542,000 917,000
--------------- ---------------
Long-term debt $ 3,691,000 $ 3,338,000
=============== ===============
Interest payments during fiscal years 1999, 1998 and 1997 approximated
interest expense for those years.
NOTES PAYABLE TO BANKS
Notes payable to banks at June 30, 1999 consists of:
(i) an unsecured term loan with a remaining balance of $95,000 payable
in equal monthly installments of principal of approximately $32,000
through September 1999, plus accrued interest at the bank's prime rate
(7.75% at June 30, 1999). The loan is subject to certain financial
covenants which require, among other things, a minimum level of
tangible net worth;
(ii) two term loans, with a remaining principal balance aggregating
$292,000, secured by capital equipment with an approximate net book
value of $1,100,000 at June 30, 1999. The remaining balance of the
loans are payable in equal monthly principal installments of
approximately $37,000 through February 2000, and bear interest at
8.85%. Both loans are subject to certain financial covenants which
require, among other things, the maintenance of certain financial
ratios; and
(iii) a $3,500,000 equipment line of credit secured by capital
equipment with NationsBank, NA. As of June 30, 1999, $796,000 has been
borrowed against the line of credit. The line bears interest at 2%
above the three month rate for U.S. Dollar deposits on the London
Interbank Market. The outstanding principal under the equipment
line-of-credit will be rolled over every six months into a self
amortizing term note of not less than four nor more than seven years.
Borrowing under the line will be subject to compliance with certain
financial covenants, including maintenance of asset and liability
percentage ratios.
The Company also has $2,000,000 available under a revolving
line-of-credit with a bank. The line contains certain financial covenants
and a facility fee of 1/4% of the average unused amount. As of June 30,
1999, the Company had no borrowings outstanding under this line.
As of June 30, 1999, the Company was in compliance with all financial
covenants of its notes payable to banks.
F-10
<PAGE>
The following table presents aggregate annual maturities of notes payable
to banks after fiscal year 1999:
2000 $ 387,000
2001 796,000
------------
$ 1,183,000
============
OBLIGATIONS UNDER CAPITAL LEASES
The Company leases a manufacturing facility located in Jacksonville,
Florida from a partnership controlled by the Company's President and Chief
Executive Officer and principal stockholder under a capital lease. The leased
facility has an aggregate cost of $3,666,000 and a net book value of $2,233,000
at June 30, 1999. The lease is for a period of 30 years and was capitalized
using an interest rate of 10.5%. The lease provides for base rent of
approximately $461,000 payable in twelve monthly installments of approximately
$38,000 for the fiscal year ending June 30, 1999. The lease further provides for
annual increases in total annual rent for years beginning after May 1, 1999,
based on the increase in the CPI since May 1, 1998, applied to base rent. The
annual increase for fiscal year 2000 results in monthly payments of
approximately $39,000 per month.
The Company leases computer equipment from an unrelated party. At June 30,
1999, the equipment had an original cost of $83,000 and a net book value of
$3,000. The lease is for a period of five years beginning October 1994 and was
capitalized using an interest rate of 10%. The remaining balance will be paid in
equal monthly installments through September 1999.
The following sets forth the future minimum lease payments (excluding
rental adjustments) under these capital leases by fiscal year and the present
value of the minimum lease payments as of June 30, 1999:
2000 $ 466,000
2001 461,000
2002 461,000
2003 461,000
2004 461,000
2005 and thereafter 2,883,000
-------------
Total minimum lease payments 5,193,000
Less: Amount representing interest 2,143,000
-------------
Present value at June 30, 1999 3,050,000
Less: Current portion 155,000
-------------
$ 2,895,000
=============
F-11
<PAGE>
NOTE 5. INCOME TAXES
The provision for income taxes consists of the following:
Years Ended June 30,
--------------------
1999 1998 1997
---- ---- ----
CURRENT:
Federal $ 645,000 $ 1,875,000 $ 1,110,000
State 103,000 116,000 85,000
Foreign 81,000 168,000 192,000
------------- -------------- -------------
Total Current 829,000 2,159,000 1,387,000
------------- -------------- -------------
DEFERRED:
Federal 272,000 178,000 462,000
State 46,000 27,000 60,000
------------- -------------- -------------
Total Deferred 318,000 205,000 522,000
------------- -------------- -------------
$ 1,147,000 $ 2,364,000 $ 1,909,000
============= ============== =============
The following table reconciles the Federal statutory rate to the Company's
effective tax rate:
Years Ended June 30,
--------------------
1999 1998 1997
---- ---- ----
Tax provision computed at statutory rate 34.0% 34.0% 34.0%
State tax, net of Federal tax effect 3.0 1.4 1.8
FSC benefit (1.3) (1.0) (1.0)
Tax credits and other, net (0.7) 1.6 1.0
---------- --------- --------
35.0% 36.0% 35.8%
========== ========= ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1999 and 1998, are presented below.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts receivable and sales returns $ 137,000 $ 140,000
Inventories, principally due to additional costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 178,000 142,000
Accrued expenses 257,000 225,000
-------------- ---------------
Total deferred tax assets 572,000 507,000
-------------- ---------------
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation and capital leases (2,086,000) (1,703,000)
Unrealized appreciation on investments available-for-sale (1,000) (102,000)
Other (32,000) (32,000)
-------------- ---------------
Total deferred tax liabilities (2,119,000) (1,837,000)
-------------- ---------------
Net deferred tax liability $ (1,547,000) $ (1,330,000)
============== ===============
</TABLE>
F-12
<PAGE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, expected future taxable income
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income, expected future taxable income over the periods which
the deferred tax assets are deductible, and reversals of deferred tax
liabilities, management believes (although there can be no assurance) that it is
more likely than not the Company will realize the benefits of these deductible
differences. Income taxes paid were approximately $648,000, $1,982,000, and
$1,735,000 for fiscal years 1999, 1998 and 1997, respectively.
NOTE 6. COMMON STOCK AND STOCK-BASED COMPENSATION
On April 1, 1997, the Board of Directors approved the American Technical
Ceramics Corp. 1997 Stock Option Plan (the "1997 Option Plan") pursuant to which
the Company may grant options to purchase up to 400,000 shares of the Company's
common stock. Options granted under the 1997 Option Plan may be either incentive
or non-qualified stock options. The term of each incentive stock option shall
not exceed ten years from the date of grant (five years for grants to employees
who own 10% or more of the voting power of the Company's common stock), and
options may vest in accordance with a vesting schedule established by the plan
administrator. The 1997 Option Plan will terminate on March 31, 2007.
On April 1, 1997, the Board of Directors granted incentive stock options
under the 1997 Option Plan to purchase 266,000 shares of common stock at an
exercise price of $8.25 per share. On July 29, 1998, the Board of Directors
granted incentive stock options under the 1997 Option Plan to purchase 61,000
shares of Common Stock at an exercise price of $8.125 per share and 4,000 shares
of Common Stock at an exercise price of $8.988 per share. On November 20, 1998,
the Board of Directors granted incentive stock options under the 1997 Option
Plan to purchase 18,000 shares of Common Stock at an exercise price of $8.00 per
share and 2,000 shares of Common Stock at an exercise price of $8.80 per share.
These options may be exercised for a period of ten years from the date of grant
and vest 25% per year during the first four years of their term. No disposition
of shares acquired pursuant to the exercise of these options may be made by the
optionees within two years following the date that the option is granted, nor
within one year after the exercise of the option, without the written consent of
the Company. Since the Company measures compensation cost under Opinion No. 25,
the Company has not recognized compensation cost for these options as the
exercise price was equal to the fair market value of the stock at the date of
grant. No options were granted during fiscal year 1998.
The average per-share value of stock options granted during fiscal years
1999 and 1997 was $3.75 and $3.61, respectively, as determined by the
Black-Scholes option pricing model (assuming a risk-free interest rate of 5.15%,
and 7.09%, respectively, expected life of five years, expected volatility of 45%
and 37%, respectively, and no dividends).
F-13
<PAGE>
The Company's stock option activity for fiscal years 1999, 1998, and
1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ----------------------------- ----------------------------
Weighted Weighted Weighted
Average Average Average
Amount Price Amount Price Amount Price
----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 248,500 $ 8.25 266,000 $ 8.25 478 $ 5.50
Granted 85,000 8.15 - - 266,000 8.25
Canceled (19,000) 8.21 (17,000) 8.25 - -
Exercised - - (500) 8.25 (478) 5.50
-------------- ---------- -----------
Outstanding, end of year 314,500 $ 8.24 248,500 $ 8.25 266,000 $ 8.25
============== ========== ===========
</TABLE>
At June 30, 1999, 118,000 options are exercisable.
In fiscal year 1997, the Company agreed to award 34,000 shares of its
common stock to an employee as part of his employment agreement. The shares were
earned over a 24 month period. The market value of the shares awarded was
recorded as deferred compensation, and was amortized to compensation expense
over the 24 month period that the shares were earned. During fiscal years 1999,
1998 and 1997, 2,852, 10,417 and 18,000 shares were released from treasury stock
to the employee under the agreement, respectively. In fiscal years 1999 and
1998, such amount is net of 148 and 2,583 common shares, respectively, for tax
withholdings. The fair value of the withheld shares, amounting to $1,000, and
$41,000, respectively, was recorded as an addition to treasury stock for fiscal
years 1999 and 1998, respectively. Compensation expense related to these stock
awards was $14,000, $92,000, and $135,000 for fiscal years 1999, 1998 and 1997,
respectively.
In fiscal year 1999, the Company awarded 47,750 shares of its common stock
to employees for services rendered. This award resulted in compensation expense
of $323,000, measured by the market value of the shares on the date of grant.
Treasury shares have been utilized for all stock awards and, accordingly,
treasury stock has been reduced for the cost of the shares on a specific
identification basis, first-in first-out.
On a pro-forma basis, net income and basic net income per share would have
been $1,855,000, $3,976,000 and $3,390,000 and $.48, $1.02 and $.87,
respectively, for fiscal years 1999, 1998 and 1997, respectively, had the
Company measured compensation cost using the fair value method of SFAS No. 123.
The full impact of calculating compensation cost for stock options under SFAS
No. 123 is not reflected in the pro-forma amounts because compensation cost is
calculated over the option vesting periods and compensation costs for options
granted prior to July 1995 are not considered.
In June 1990, the Registrant announced its first stock purchase program
pursuant to which it was authorized to purchase up to $1,000,000 of its common
stock. In September 1998, the Board of Directors authorized the purchase of up
to an additional $1,000,000 of the Registrant's common stock under a second
stock purchase program. As of March 31, 1999, the Registrant had expended the
entire amount available under both programs and had purchased an aggregate of
475,000 shares. No shares were purchased under this program in fiscal year 1998.
In fiscal years 1999 and 1997 160,900 and 10,700 shares, respectively, were
acquired for $1,197,000 and $63,000, respectively.
F-14
<PAGE>
NOTE 7. COMMITMENTS
OPERATING LEASES
The Company has a related party operating lease for a rented facility
which, as amended, expires December 31, 2001. Rent expense under this related
party operating lease was approximately $484,000, $462,000 and $452,000 for the
fiscal years ended June 30, 1999, 1998, and 1997, respectively. Under this lease
future minimum rent payments will be approximately $489,000 per year.
Rent expense to unrelated parties was approximately $10,000, $13,000 and
$12,000 for the fiscal years ended June 30, 1999, 1998 and 1997, respectively.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with its President, which provides
for annual base compensation of $297,000 as well as additional annual
compensation equal to 5% of net income before such bonus and income taxes. The
agreement expires March 1 of each year but is renewed automatically for an
additional one year in the absence of written notice to the contrary by either
party at least 120 days prior to the March 1st renewal date. In addition, if
there is a change in control of the Company or the President's employment is
terminated by the Company before the expiration of the agreement other than for
cause (as defined in the agreement), the President is entitled to the greater of
(a) all compensation due under the remaining term of the agreement, or (b) a
payment equal to three times his average annual compensation (including any
incentives) over the last five years. In September 1998, the Company amended the
employment agreement effective for the fiscal year ending June 30, 1998 to allow
the Company, at its option, to pay the additional annual compensation in stock,
cash or a combination thereof. Such compensation for fiscal 1998 was paid by the
issuance of 20,454 treasury shares in fiscal 1999.
In September 1996, the Company entered into a three year employment
agreement with another executive officer. The agreement provides for annual base
compensation of $165,000, additional annual compensation equal to .5% of pretax
profits, and an award of 34,000 shares of the Company's common stock, (see Note
6). If after three years of employment, the officer is terminated by the
Company, he is entitled to a severance payment of $100,000.
In January 1998, the Company entered into a four year employment agreement
with an officer. The agreement provides for annual base compensation of $90,000,
plus additional compensation based upon specific performance measures. The
agreement includes termination provisions providing for payout arrangements
depending on the nature of the termination.
NOTE 8. OTHER DATA
ACCRUED EXPENSES
Accrued expenses consist of the following:
June 30, 1999 June 30, 1998
------------- -------------
Accrued commissions $ 1,102,000 $ 1,588,000
Accrued payroll and related expenses 1,671,000 1,530,000
Other 104,000 166,000
------------ ------------
$ 2,877,000 $ 3,284,000
============ ============
F-15
<PAGE>
VALUATION AND QUALIFYING ACCOUNTS
Valuation and qualifying accounts included in the accompanying consolidated
financial statements consist of the following:
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Allowance for doubtful accounts receivable and sales returns $ 390,000 $ 390,000
============ ============
</TABLE>
EMPLOYEE BENEFIT DEFINED CONTRIBUTION PLAN
Effective November 1, 1985, the Company established a voluntary savings and
defined contribution plan under Section 401(k) of the Internal Revenue Code.
This Plan covers all employees meeting certain eligibility requirements and
allows participants to contribute an amount not to exceed 15% of annual
compensation. For the fiscal years ended June 30, 1999, 1998 and 1997, the
Company provided a matching contribution of $371,000, $350,000 and $303,000,
respectively, which was equal to 50% of each participant's contribution up to a
maximum of 6% of annual compensation. Employees are 100% vested in their own
contributions and become fully vested in the employer contributions over five
years.
PROFIT BONUS PLAN
Effective commencing in fiscal year 1995, the Company adopted a profit
bonus plan for the benefit of eligible employees, as defined. The plan provides
that for each fiscal year the Board of Directors, in its discretion, may
establish a bonus pool not to exceed 10% of pretax income of the Company for the
subject fiscal year. The bonus pool is then allocated among eligible employees
in accordance with the terms of the plan. For fiscal years 1999, 1998 and 1997,
the Company recognized related compensation expense of $338,000, $657,000 and
$538,000, respectively.
NOTE 9. FOREIGN OPERATIONS
The Company markets and distributes a portion of its foreign sales through
Phase Components Ltd., a wholly-owned subsidiary in the United Kingdom. The
following table summarizes certain financial information covering the Company's
operations in the U.S. and U.K. for fiscal years 1999, 1998 and 1997. Net sales
information is based upon country of origin.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales
U.S. $35,680,000 $37,893,000 $33,730,000
U.K. 1,885,000 2,506,000 2,799,000
---------------- ---------------- ---------------
Total $37,565,000 $40,399,000 $36,529,000
================ ================ ===============
Pretax income
U.S. $ 3,013,000 $ 6,024,000 $ 4,869,000
U.K. 263,000 542,000 469,000
---------------- ---------------- ---------------
Total $3,276,000 $ 6,566,000 $ 5,338,000
================ ================ ===============
Identifiable Assets
U.S. $42,009,000 $40,814,000 $35,176,000
U.K. 1,613,000 1,695,000 1,948,000
---------------- ---------------- ---------------
Total $43,622,000 $42,509,000 $37,124,000
================ ================ ===============
</TABLE>
U.S. sales include $9,235,000, $9,645,000 and $8,753,000 for export in
fiscal years 1999, 1998 and 1997, respectively. Export sales were primarily to
customers in Western Europe, Canada and the Far East.
F-16
<PAGE>
NOTE 10. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, NET, ACCOUNTS
PAYABLE, AND ACCRUED EXPENSES
The carrying amount approximates fair value due to the short maturity of
these instruments.
INVESTMENTS
Cost and fair value of the Company's investments is presented in Note 2.
Fair value is based upon quoted market prices.
LONG-TERM DEBT
The carrying amounts of each of the Company's long-term debt instruments
approximate fair value as the underlying interest rates approximate rates which
would be offered to the Company for the same or similar instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgement and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
F-17
