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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the Quarter ended December 31, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-14824
PLEXUS CORP.
(Exact name of registrant as specified in charter)
Wisconsin 39-1344447
(State of Incorporation) (IRS Employer Identification No.)
55 Jewelers Park Drive
Neenah, Wisconsin 54957-0156
(Address of principal executive offices)(Zip Code)
Telephone Number (920) 722-3451
(Registrant's 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 reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes |X| No
----- ------
As of February 10, 1998 there were 14,745,123 shares of Common Stock of
the Company outstanding.
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PLEXUS CORP.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 1997 and 1996.............3
Condensed Consolidated Balance Sheets
December 31, 1997 and September 30, 1997..................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 1997 and 1996.............5
Notes to Condensed Consolidated Financial Statements....6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
General................................................7-10
Results of Operations.................................10-12
Liquidity and Capital Resources..........................12
Item 3. Qualitative and Quantitative Disclosures about Market Risk...........13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...............13-14
Item 6. Exhibits and Reports on Form 8-K.....................................14
Signatures...........................................................14
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PLEXUS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net sales $ 95,905 $ 87,366
Cost of sales 85,611 78,713
---------- ----------
Gross profit 10,294 8,653
Selling and administrative
expenses 4,276 3,879
---------- ----------
Operating income 6,018 4,774
Other income (expense):
Interest expense (4) (262)
Other 190 184
---------- ----------
Income before income taxes 6,204 4,696
Provision for income taxes 2,459 1,832
---------- ----------
Net income $ 3,745 $ 2,864
========== ==========
Net income per common and common equivalent share:
Basic $ 0.25 $ 0.21
========== ==========
Diluted $ 0.23 $ 0.19
========== ==========
Average number of common and common equivalent shares outstanding:
Basic 14,792,344 13,045,090
========== ==========
Diluted 16,134,538 14,689,103
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
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PLEXUS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
----------- ------------
(Unaudited) (Audited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 3,757 $ 3,655
Accounts receivable, net of allowance of $360
and $285, respectively 41,889 47,648
Inventories 46,894 47,931
Deferred income taxes 2,733 2,571
Prepaid expenses and other 2,499 981
--------- --------
Total current assets 97,772 102,786
Property, plant and equipment, net 20,986 18,687
Other 1,062 344
--------- --------
Total assets $ 119,820 $121,817
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 216 $ 214
Accounts payable 34,592 35,099
Customer deposits 2,322 3,414
Accrued liabilities:
Salaries and wages 3,300 5,908
Other 3,820 4,893
--------- --------
Total current liabilities 44,250 49,528
Long-term debt 211 3,516
Deferred income taxes 1,013 998
Other liabilities 274 192
Stockholders' equity:
Preferred stock $.01 par value,
4,993,000 shares authorized,
none issued or outstanding - -
Common stock, $.01 par value,
20,000,000 shares authorized,
14,820,521 and 14,739,914 issued
and outstanding, respectively 148 147
Additional paid-in capital 20,979 17,675
Retained earnings 53,314 49,761
Treasury stock, at cost, 26,065
and 0 shares, respectively (369) -
--------- --------
74,072 67,583
--------- --------
Total liabilities and stockholders' equity $ 119,820 $121,817
========= ========
</TABLE>
See notes to condensed consolidated financial statements
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PLEXUS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 3,745 $ 2,864
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 1,427 894
Deferred income taxes (147) (145)
Change in assets and liabilities:
Accounts receivable 6,034 (5,394)
Inventories 1,170 (5,382)
Prepaid expenses and other (1,072) (1,385)
Accounts payable (619) 5,719
Customer deposits (1,092) (453)
Accrued liabilities (1,233) 2,131
Other (15) 18
------- --------
Cash flows provided by (used in)
operating activities 8,198 (1,133)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment (4,023) (1,319)
Other (634) -
------- --------
Cash flows used in investing activities (4,657) (1,319)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt - 31,983
Payments on debt (3,303) (27,801)
Issuance of common stock 425 485
Net treasury stock transactions (561) -
Payments of preferred stock dividends - (254)
------- --------
Cash flows provided by (used in)
financing activities (3,439) 4,413
------- --------
Net increase in cash and cash equivalents 102 1,961
------- --------
Cash and cash equivalents:
Beginning of period 3,655 1,847
------- --------
End of period $ 3,757 $ 3,808
======= ========
</TABLE>
See notes to condensed consolidated financial statements
5
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PLEXUS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have
been prepared by the Company without audit and pursuant to the rules and
regulations of the United States Securities and Exchange Commission. In the
opinion of the Company, the financial statements reflect all adjustments, which
consist only of normal recurring adjustments, necessary to present fairly the
financial position of Plexus Corp. at December 31, 1997 and the results of
operations for the three months ended December 31, 1997 and 1996 and the cash
flows for the same three-month periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the SEC rules and
regulations dealing with interim financial statements. However, the Company
believes that the disclosures made in the condensed consolidated financial
statements included herein are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's 1997 Annual Report.
The condensed consolidated balance sheet data at September 30, 1997 was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
NOTE 2 - INVENTORIES
The major classes of inventories are as follows (in thousands):
December 31, September 30,
1997 1997
----------- ------------
Assembly Parts $ 25,119 $ 28,828
Work-in-Process 21,094 18,557
Finished Goods 681 546
----------- ------------
$ 46,894 $ 47,931
=========== ============
NOTE 3 - STOCKHOLDERS' EQUITY
On December 19, 1997, the Company's Board of Directors authorized the
repurchase of up to 2,000,000 shares, or a maximum of $25,000,000, of the
Company's Common Stock on the open market. The Company expects that repurchases
will occur from time to time. The Company anticipates the shares held in
treasury to be used for various purposes in the future, including satisfaction
of requirements for shares under the Company's Employee Stock Savings Plan and
its stock option incentive program. When the treasury shares are reissued, any
excess of the acquisition cost of the shares over the proceeds from reissuance
is charged to retained earnings. Through December 31, 1997, 50,000 shares have
been repurchased, of which 23,935 have been reissued.
NOTE 4 - ACQUISITIONS
On November 13, 1997, the Company acquired the majority of assets of
NEI Electronics, Inc., a contract electronics manufacturer located in
Minneapolis, and Tertronics, Inc., a Silicon Valley electronic design and
quick-turn company. This transaction was accounted for as a purchase but is not
material to the Company's consolidated financial position, results of operations
and cash flows. Accordingly, additional information regarding this transaction
has not been disclosed.
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NOTE 5 - NET INCOME PER SHARE
During the quarter, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128 "Earnings Per Share", which establishes new
standards for reporting earnings per share. The earnings per share computations
for prior periods have been restated to conform with the provisions of SFAS No.
128.
The following is a reconciliation of the numerators and denominators
for the computation of basic and diluted income per share (in thousands except
per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------
1997 1996
------- -------
Basic income per share:
<S> <C> <C>
Net income $ 3,745 $ 2,864
Less: Preferred stock dividends - 127
------- -------
Income available to common stockholders (numerator) 3,745 2,737
======= =======
Weighted average number of common shares (denominator) 14,792 13,045
======= =======
Basic income per share $ 0.25 $ 0.21
======= =======
Diluted income per share:
Net income (numerator) $ 3,745 2,864
======= =======
Weighted average number of common shares 14,792 13,045
Effect of dilutive securities:
Stock options 1,343 535
Convertible preferred stock - 1,109
------- -------
Diluted weighted average number of common shares
(denominator) 16,135 14,689
======= =======
Diluted income per share $ 0.23 $ 0.19
======= =======
</TABLE>
NOTE 6 - NON-CASH TRANSACTIONS
During the quarter ended December 31, 1997, the Company recorded income
tax benefits of approximately $2.9 million related to stock option exercises.
The income tax benefits are reflected as an increase in additional paid-in
capital.
NOTE 7 - RECLASSIFICATIONS AND RESTATEMENTS
Certain amounts in prior years' condensed consolidated financial
statements have been reclassified to conform to the 1998 presentation. In
addition, prior year share and per share data has been restated for the
Company's two-for-one stock split effective August 25, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Management's Discussion and Analysis of Financial Condition and Results
of Operations, with the exception of historical matters, contains
forward-looking statements (such as statements in the future tense and those
including the terms "believe," "expect," "anticipate," "intend" and similar
terms) which involve risks and uncertainties. Actual results may differ
materially from these statements as a result of various factors, including those
discussed in further detail below (in particular "General").
GENERAL
Plexus Corp. is a contract provider of design, manufacturing and
testing services to the electronics industry. Headquartered in Neenah,
Wisconsin, the Company provides product realization services and is one of the
largest electronic assembly organizations in the United States. Through its
wholly owned subsidiaries, Plexus Technology Group, Inc., and Plexus Electronic
Assembly Corporation, the Company offers a full range of services including
product development and design, material procurement and management,
prototyping, assembly, testing, manufacturing, final system box build and
distribution. Services are provided to original equipment manufacturers in the
computer (primarily mainframe, server and peripheral products), medical,
industrial, telecommunications and
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transportation electronics industries. The Company has operations in Wisconsin,
Kentucky, North Carolina, Minnesota and California.
In November 1997, the Company acquired the assets of two related
companies located in Minneapolis, Minn., and Milpitas, Calif., in a cash
transaction made through the Company's newly-formed PAC Acquisition Corp.
subsidiary. The assets acquired, individually and combined, were less than 3
percent of the Company's total assets. Total combined sales of the acquired
companies were approximately $3 million in the 12-month period ended September
30, 1997. The Minneapolis location strengthens the Company's presence in the
medical industry. The California location puts the Company in the heart of
Silicon Valley. The acquisitions are intended to support the Company's growth as
the product realization company. Because the acquisitions were accounted for
using the purchase method of accounting, the effects of the acquisitions will
only be included in the Company's financial statements from the acquisition
date. The acquisitions are not expected to have a material impact on the
Company's financial condition and results of operations. The Company continues
to look for opportunities for geographical expansion that will improve the
Company's ability to provide services to its customers.
The Company's contract manufacturing services are provided on either a
turnkey basis, where the Company procures certain or all of the materials
required for product assembly, or on a consignment basis, where the customer
supplies some or, occasionally, all materials necessary for product assembly.
Turnkey services include material procurement and warehousing, in addition to
manufacturing, and involve greater resource investment and inventory risk
management than consignment services. Turnkey manufacturing currently represents
almost all of the Company's sales. Turnkey sales typically generate higher net
sales and higher gross profit dollars with lower gross margin percentages than
consignment sales due to the inclusion of component costs, and related markup,
in the Company's net sales. Variations in the Company's turnkey sales have
caused, and could continue to cause, the Company's gross margin and
profitability to fluctuate year to year and quarter to quarter.
Since a substantial portion of the Company's sales are derived from
turnkey manufacturing, net sales can be negatively impacted by component
shortages. Shortages of key electronic components which are provided directly
from customers or suppliers can cause manufacturing interruptions, customer
rescheduling issues, production downtime and production set-up and restart
inefficiencies. From time to time, allocations of components can be an integral
part of the electronics industry. While in general the marketplace for such
components has eased, allowing greater availability, key component shortage
issues can still occur with respect to specific industries or particular
components. In response to this dynamic environment, the Company has a corporate
procurement organization whose primary purpose is to create strong supplier
alliances to assure a steady flow of components at competitive prices and
mitigate shortages. Strategic relationships have been established with
international purchasing offices to improve shortage and pricing issues.
However, because of the limited number of suppliers for certain electronic
components and other supply and demand concerns, the Company can neither
eliminate component shortages nor determine the timing or impact of such
shortages on the Company's results. As a result, the Company's sales and
profitability can be affected from period to period.
Many of the industries for which the Company currently provides
electronic products are subject to rapid technological changes, product
obsolescence, increased competition, and pricing pressures. In the quarter
ending December 31, 1997 and in fiscal 1997, approximately 5 percent and 6
percent, respectively, of the Company's total sales were foreign, with less than
2 percent in each period going into the Southeast Asian market, which is
currently experiencing unfavorable currency and economic
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conditions. These and other factors which affect the industries or the markets
that the Company serves, and which affect any of the Company's major customers
in particular, could have a material adverse effect on the Company's results of
operations.
The Company has no long-term volume commitments from its customers, and
lead-times for customer orders and product-life cycles continue to contract.
Customer programs can be canceled and volume levels can be changed or delayed at
any time. The timely replacement of delayed, canceled or reduced programs with
new business cannot be assured. Because of these and other factors, there can be
no assurance that the Company's recent historical sales growth rate will
continue. See "Results of Operations -- Net Sales" below for certain factors
affecting net sales to the Company's largest customers.
The Company believes that its growth has been achieved in significant
part by its approach to partnering with customers mainly through its product
design and development services. Approximately 20 percent of the Company's
contract manufacturing sales are a direct result of these services. The Company
intends to continue to leverage this aspect of its product design and
development services for continued growth in contract manufacturing revenues.
Currently, the design and development services are less than 10 percent of total
sales. In order to achieve expanded sales growth, the Company must continue to
generate additional sales from existing customers from both current and future
programs, and must successfully market to new customers. The Company must also
successfully integrate and leverage its new regional product design centers into
this strategy. In addition, the Company must continue to attract and retain top
quality product development engineers in order to continue to expand its design
and development services. Because of these and other factors, there can be no
assurance that the Company's historic growth rates will continue.
Start-up costs and the management of labor and equipment efficiencies
for new programs and new customers can have an effect on the Company's gross
margins. Due to these and other factors, gross margins can be negatively
impacted early on in the life cycle of new programs. In addition, labor
efficiency and equipment utilization rates ultimately achieved and maintained by
the Company for new and current programs impact the Company's gross margins.
Geographical expansion and growth by acquisition can have an effect on
the Company's operations. The successful operation of an acquired business will
require communication and cooperation among key managers, along with the
transition of customer relationships. There can be no assurance that the Company
will successfully manage the integration of new locations or acquired operations
and may experience certain inefficiencies which could negatively impact the
results of operations. Additionally, no assurance can be given that any past or
future acquisition by the Company will enhance the Company's business.
The Company has a corporate information technology organization whose
primary purpose is to ensure vision and direction of information systems to meet
internal and external needs. The Company must keep pace with rapid technological
developments in its management information systems and its production facilities
and equipment, and can experience costs and conversion difficulties in
connection with the implementation of new systems and processes. In addition,
like all other companies, the Company must assure that its computer and software
systems, and other machinery and systems that depend upon computer-driven
operations or which have embedded chips or micro-processors, are capable of
accurately functioning and accurately recognizing and processing data in the
year 2000 and
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beyond ("Year 2000 Compliant"). The Company expects to be Year 2000 Compliant in
calendar 1998, although certain functions are subject to the efforts of
third-party suppliers. The costs associated with implementing year 2000
applications currently are not expected to be material, although there can be no
assurances. Material costs or consequences of incomplete or untimely resolution
of year 2000 issues currently are not expected, although no assurances can be
given that it would not negatively impact the results of operations.
The Company operates in a highly competitive industry. The Company
faces competition from a number of domestic and foreign electronic manufacturing
services companies, some with financial and manufacturing resources greater than
the Company's. The Company also faces competition in the form of current and
prospective customers that have the capabilities to develop and manufacture
products internally. In order to remain a viable alternative, the Company must
continue to enhance its total engineering and manufacturing technologies.
Other factors that could adversely affect forward-looking statements
include the Company's ability to maintain and expand its customer base, gross
margin pressures, the effect of start-up costs related to new facilities, the
overall economic conditions affecting the electronics industry, and other
factors and risks detailed herein and in the Company's other Securities and
Exchange Commission filings.
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended December 31, 1997, increased 10
percent to $95.9 million from $87.4 million for the same period in the prior
fiscal year. The increase in net sales was due to increased orders from existing
customers, including on-going and new programs. However, the increases were not
as extensive as originally anticipated by Company management in part due to
Motorola, Inc.'s (Motorola) decision to move a program back in house because of
available internal capacity. In addition, some customers have adjusted near term
production schedules, certain new customers and new programs have ramped up
slower than anticipated caused by design changes or other customer-specific
factors, and the negative effects of the strong U.S. dollar have impacted a few
customers resulting in somewhat lower sales. The factors that affected first
quarter sales have continued into the second quarter. Although there can be no
assurances, the Company presently anticipates sales growth to be more pronounced
in the second half of fiscal 1998, subject to the development and timing of new
customers and new programs.
By industry segment, net sales increased, from the same period in the
prior fiscal year, across all industries served, except computer, with growth
more pronounced in the industrial and transportation markets. Sales for the
quarter by industry were as follows: Computer 29 percent, Industrial 21 percent,
Medical 20 percent, Transportation 15 percent, Telecommunications 12 percent,
and Other 3 percent. Currently, the Company does not expect there will be any
material changes in the breakdown of its sales by industry in fiscal 1998.
The Company's largest customers continue to be International Business
Machines Corporation (IBM) and General Electric Company (GE) who each accounted
for approximately 12 percent of net sales in the three months ended December 31,
1997 and 1996. Sales in dollar terms to IBM and GE
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were up from the comparable period prior year, but the percentage of net sales
remained relatively constant due to the Company's increasing sales to other
customers. The Company believes that sales to IBM may decrease due to the
potential transfer of business from one of IBM's divisions, which may not be
fully offset by increases in other IBM programs. Other customers with sales over
10 percent for the three months ended December 31, 1996 included Motorola at 11
percent and Unisys Corporation (Unisys) at just over 10 percent. Sales in the
quarter ended December 31, 1997 to both of these customers were less than 10
percent of total sales. As indicated above, sales to Motorola declined due to
their decision to move a program back in house. Motorola remains a significant
customer. Sales to Unisys were just slightly less than 10 percent of total
sales.
Sales to the Company's ten largest customers accounted for 72 percent
for the three months ended December 31, 1997 compared to 69 percent for the same
period in fiscal 1997 and 68 percent for all of fiscal 1997. The Company remains
dependent upon continued sales to IBM, GE, Motorola, Unisys and its other
significant customers. Any material change in orders from these or other
customers could have a material effect on the Company's results of operations.
GROSS PROFIT
Gross profit increased to $10.3 million, or 19 percent, for the three
months ended December 31, 1997 from $8.7 million for the same period in the
prior fiscal year. The gross margin increased to 10.7 percent for the three
months ended December 31, 1997 from 9.9 percent for the same period in fiscal
1997. The increase in gross margin in the three months ended compared to the
same period in fiscal 1997 reflects the leverage generated by higher sales
volumes, continued cost controls, better component pricing, and improved product
mix. These were partially offset by increased start-up costs associated with new
programs and increased hiring in the Company's engineering and technical
manufacturing areas in order to continue to expand its capabilities and meet
customer demands. However, the gross margin for the first quarter of fiscal 1998
was below the 12.6 percent level in the fourth quarter of fiscal 1997 primarily
due to lower sales volume.
Most of the research and development conducted by the Company is paid
for by customers and is, therefore, included in cost of sales. Other research
and development is conducted by the Company, but is not specifically identified,
as the Company believes such expenses are less than 1 percent of its total
sales.
The Company's gross margin also reflects a number of other factors,
including product mix, the level of start-up costs and efficiencies of new
programs, sales volumes, capacity utilization of surface mount and other
equipment, labor costs and efficiencies, the management of inventories,
component pricing and shortages, fluctuations and timing of customer orders,
changing demand for customer's products and competition within the electronics
business. These and other factors can cause variations in the Company's
operating results. While the Company's focus is on maintaining and expanding
gross margins, there can be no assurance that gross margins will not decrease in
future periods.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative (S&A) expenses increased to $4.3 million for
the three months ended December 31, 1997, compared to $3.9 million for the
comparable prior fiscal year period. As a percentage of sales, S&A expenses were
4.5 percent and 4.4 percent, respectively. These increases
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reflect the Company's planned expansion of its sales and marketing efforts,
enhancement of its information systems to support the Company's continued
growth, and increase in its customer support function. The Company anticipates
that future S&A expenses will increase in absolute dollars but remain between
4.5 percent and 4.7 percent of sales, as the Company continues to expand these
support areas.
OTHER INCOME (EXPENSE)
Interest expense was $4,000 for the three months ended December 31,
1997 compared to $262,000 in the comparable period in fiscal 1997. The continual
decrease in interest expense is primarily due to reduced borrowings required to
support working capital, coupled with lower interest rates. See "Liquidity and
Capital Resources."
INCOME TAXES
Income taxes increased to $2.5 million for the three months ended
December 31, 1997 compared to $1.8 million in the comparable period in fiscal
1997, as a result of increased earnings. The Company's effective income tax rate
has remained constant at rates between 38 percent to 40 percent. These rates
approximate the blended Federal and state statutory rate as a result of the
Company's operations being located within the United States.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $8.2 million for the three
months ended December 31, 1997 compared to cash flows used in operating
activities of $1.1 million in the comparable period in fiscal 1997. Cash from
operations was provided primarily by improved net profits and accounts
receivable collections. In addition, inventory turnover improved to 7.2 turns as
of December 31, 1997, from 5.5 turns as of December 31, 1996 and from 6.7 turns
for all of fiscal 1997. The cash generated from operating activities was
utilized primarily to purchase additional manufacturing equipment and facilities
and to reduce outstanding debt.
Cash flows used in investing activities totaled $4.7 million and were
utilized primarily for capital additions, including the acquisition of the
majority of assets of NEI Electronics, Inc., a contract electronics manufacturer
located in Minneapolis, and Tertronics, Inc., a Silicon Valley electronic design
and quick-turn company.
The Company has historically utilized operating leases to fund the
majority of its manufacturing equipment needs. The Company now anticipates
utilizing operating leases primarily in situations where technical obsolescence
concerns are determined to outweigh the benefits of financing the equipment
purchase. The Company estimates that capital expenditures for fiscal 1998 to be
similar to fiscal 1997, at approximately $10 to $12 million, which the Company
expects to fund through cash flows from operations and the revolving credit
agreement.
Cash flows used in financing activities totaled $3.4 million for the
three months ended December 31, 1997, primarily representing the paydown of the
Company's long-term revolving credit facility. Borrowings under the Company's
$40 million long-term revolving credit agreement have been reduced to zero as of
December 31, 1997, from $3.3 million as of September 30, 1997. The ratio of
total debt-to-equity as of December 31, 1997, was 0.6 to 1, compared to 0.8 to 1
as of September 30, 1997.
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The Company anticipates increases in working capital in order to
facilitate growth. However, because of the dynamics of the Company's industry,
the exact timing and amount of these increases cannot be determined. The Company
believes that its credit facilities, leasing capabilities and projected cash
flows from operations will be sufficient to meet its anticipated working capital
needs and its anticipated short-term and long-term capital requirements. The
Company's recent acquisitions did not have a material affect to the Company's
cash flows.
On December 19, 1997, the Company's Board of Directors authorized the
repurchase of up to 2,000,000 shares, or a maximum of $25,000,000, of the
Company's Common Stock on the open market. The Company expects that repurchases
will occur from time to time. The Company anticipates the shares held in
treasury to be used for various purposes in the future, including satisfaction
of requirements for shares under the Company's Employee Stock Savings Plan and
its stock option incentive program. Through January 31, 1998, the Company
repurchased 130,000 shares for approximately $1.8 million.
The Company has not paid dividends on its common stock, but has
reinvested its earnings to support its working capital and expansion
requirements. The Company intends to continue to utilize its earnings in the
development and expansion of the business and does not expect to pay cash
dividends in the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Requirements not yet applicable to the Company.
* * * * *
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of shareholders on February 11, 1998,
the six continuing directors who were management's nominees for re-election were
re-elected. The nominees/directors were re-elected with the following votes:
Authority for
Director's Name Votes "For" Voting Withheld
- --------------- ----------- ---------------
Rudolph T. Hoppe 13,660,680 230,643
Harold R. Miller 13,660,980 230,343
John L. Nussbaum 13,608,230 283,093
Gerald A. Pitner 13,609,728 281,595
Thomas J. Prosser 13,658,566 232,757
Peter Strandwitz 13,609,924 281,399
The shareholders of the Company voted on February 11, 1998 to amend the
Articles of Incorporation of the Company to increase the total number of shares
of Common Stock authorized from 20,000,000 to 60,000,000. The vote on the
amendment was as follows:
13
<PAGE> 14
For 10,754,400
Against 2,938,022
Abstain 112,806
Broker Non-Votes 86,095
The shareholders of the Company voted on February 11, 1998 to approve
the Company's 1998 Stock Option Plan. The vote on the new option plan was as
follows:
For 7,431,841
Against 3,233,295
Abstain 143,531
Broker Non-Votes 3,082,656
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
2/13/98 /s/ Peter Strandwitz
------- ---------------------
Date Peter Strandwitz
Chairman and CEO
2/13/98 /s/ Thomas B. Sabol
------- ---------------------
Date Thomas B. Sabol
Vice President-Finance &
Chief Financial Officer
14
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,757
<SECURITIES> 0
<RECEIVABLES> 41,889
<ALLOWANCES> 360
<INVENTORY> 46,894
<CURRENT-ASSETS> 97,772
<PP&E> 47,677
<DEPRECIATION> 26,691
<TOTAL-ASSETS> 119,820
<CURRENT-LIABILITIES> 44,250
<BONDS> 0
0
0
<COMMON> 148
<OTHER-SE> 73,924
<TOTAL-LIABILITY-AND-EQUITY> 119,820
<SALES> 95,905
<TOTAL-REVENUES> 95,905
<CGS> 85,611
<TOTAL-COSTS> 85,611
<OTHER-EXPENSES> 4,276
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 6,204
<INCOME-TAX> 2,459
<INCOME-CONTINUING> 3,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,745
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.23
</TABLE>
