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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period EndedMarch 31, 1996
Commission File Number0-17187
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Logic Devices Incorporated
(Exact name of registrant as specified in its charter)
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California 94-2893789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
628 East Evelyn Avenue, Sunnyvale, California 94086(Address of principal
executive offices)(Zip Code)
(408) 737-3300(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 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 the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date. On May 7, 1996,
5,995,750 shares of Common Stock, without par value, were outstanding.
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<PAGE>
Logic Devices Incorporated
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of March 31, 1996 and 3
December 31, 1995
Statements of Income for the three months ended 4
March 31, 1996 and 1995
Statements of Cash Flows for the three months 5
ended March 31, 1996 and 1995
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 11 13
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Logic Devices Incorporated
Balance Sheets
March 31, December 31,
1996 1995
Assets (unaudited)
Current assets:
Cash and cash equivalents $4,002,300 $4,378,500
Accounts receivable, net of allowance 5,383,700 5,844,000
Inventories 8,843,400 8,296,000
Prepaid expenses 941,200 980,300
Deferred income taxes 704,700 704,700
Total current assets 19,875,300 20,203,500
Equipment and leasehold
improvements, net 2,597,400 2,409,800
Other Assets 745,900 752,700
$23,218,600 $23,366,000
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term
obligations 175,200 175,200
Accounts payable 997,300 991,000
Accrued expenses 352,300 278,800
Income taxes payable 139,200 819,000
Total current liabilities 1,664,000 2,264,000
Long-term debt obligations,
less current portion 139,300 166,200
Deferred income taxes 225,000 225,000
Total liabilities 2,028,300 2,655,200
Shareholders' equity:
Common stock 17,000,800 16,741,900
Retained earnings 4,189,500 3,968,900
Total shareholders' equity 21,190,300 20,710,800
$23,218,600 $23,366,000
<PAGE>
Logic Devices Incorporated
Statements of Income
Three months ended March 31, 1996 and 1995
(unaudited)
1996 1995
Net sales $ 3,609,200 $3,549,700
Cost of sales 1,975,400 1,883,500
Gross margin 1,633,800 1,666,200
Operating expenses:
Research and development 394,100 350,100
Selling, general and administrative 911,200 817,500
Operating expenses 1,305,300 1,167,600
Income from operations 328,500 498,600
Other (income) expense, net (40,700) 98,900
Income before taxes 369,200 399,700
Income taxes 148,500 127,500
Net income $ 220,700 $ 272,200
Net income per common share $ 0.04 $ 0.06
Weighted average common share equivalents 6,218,750 4,913,306
outstanding
<PAGE>
Logic Devices Incorporated
Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(unaudited)
1996 1995
Cash flows from operating activities:
Net income $ 220,700 $ 272,200
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 246,600 312,500
Change in operating assets and liabilities:
Accounts receivable, net 460,300 (136,600)
Inventories (547,400) 96,600
Prepaid expenses and other assets 39,000 9,300
Accounts payable 6,300 (242,000)
Accrued expenses 73,500 (44,600)
Income taxes payable (679,800) (20,300)
Net cash provided by (used in) (180,800) 247,100
operating activities
Cash flows from investing activities:
Capital expenditures (358,000) (179,900)
Increase in other assets (69,400) (49,500)
Net cash (used in) investing activities (427,400) (229,400)
Cash flows from financing activities:
Bank borrowing, net - 45,000
Repayment of long-term obligations (26,900) (42,600)
Repayment of obligations to shareholders - (50,000)
Proceeds from exercise of warrants/stock options 258,900 8,100
Net cash provided by (used in) 232,000 (39,500)
financing activities
Net increase (decrease) in cash (376,200) (21,800)
Cash and cash equivalents at beginning of
period $ 4,378,500 $ 222,300
Cash and cash equivalents at end of period $ 4,002,300 $ 200,500
<PAGE>
Logic Devices Incorporated
Notes to Financial Statements
March 31, 1996 and December 31, 1995
(unaudited)
(A) Basis of Presentation
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows for
the periods indicated.
The accompanying unaudited interim financial statements have been prepared
in accordance with the instructions for Form 10-Q and therefore do not
include all information and footnotes necessary for a complete
presentation of the financial position, results of operations, and cash
flows, in conformity with generally accepted accounting principles. The
Company filed audited financial statements which include all information
and footnotes necessary for such a presentation of the financial position,
results of operations and cash flows for the years ended December 31, 1995
and 1994, with the Securities and Exchange Commission. It is suggested
that the accompanying unaudited interim financial statements be read in
conjunction with the aforementioned audited financial statements. The
unaudited interim financial statements contain all normal and recurring
entries. The results of operations for the interim period ended March 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
(B) Inventories
A summary of inventories follows:
March 31, December 31,
1996 1995
Raw Materials $ 497,400 $ 938,000
Work-in-process 4,268,300 3,912,600
Finished goods 4,077,700 3,445,400
$ 8,843,400 $ 8,296,000
Based on forecasted 1996 sales levels, the Company has on hand inventories
aggregating approximately ten months of sales.
<PAGE>
Logic Devices Incorporated
Notes to Financial Statements
March 31, 1996 and December 31, 1995
(unaudited)
(C) Exercise of Warrants
Warrants to purchase an aggregate of 150,000 shares of Common Stock
were issued in connection with an extension of the Shareholder Loan under
a Loan Extension and Warrant Purchase Agreement entered into in March
1991. The warrants to purchase 74,955 shares were exercised in 1995 and
the remaining warrants to purchase 75,045 were exercised in February 1996.
The exercise price was $3.45 per share, and the warrants were to expire
March 1, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Revenues
Net revenues increased by 2%, from $3,549,700 in the three months
ended March 31, 1995 to $3,609,200 in the three months ended March 31,
1996. The increase was due to strong demand of the Company's DSP products
during the period. The Company is and has been in the process of tooling
more of its DSP products to additional foundry sources to enable the
Company to meet the increased demand for these products. Although foundry
constraints for the industry as a whole have eased over the past year, the
Company is still limited on capacity for its DSP products until additional
tooling work is completed. The strong increases in revenues for the DSP
products were offset by decreased revenues from the Company's SRAM
products between the comparative periods. Deteriorating conditions in the
semiconductor memory market saw falling demand and pricing for the
industry in the first quarter 1996. As a result, the Company experienced
push-outs in delivery times and falling prices which adversely affected
SRAM product revenues during the 1996 period.
Expenses
Cost of revenues increased from $1,883,500 in the three months ended
March 31, 1995 to $1,975,400 in the three months ended March 31, 1996.
Gross profit decreased by 2%, from $1,666,200 in 1995 to $1,633,800 in
1996 as a result of substantially lower prices on the Company's SRAM
products versus the prior year which offset the gain in gross profit
attributed to the increase in sales from the Company's DSP products. As a
percentage of net revenues, gross profit margin decreased from 47% in the
three months ended March 31, 1995 to 45% in the three months ended March
31, 1996.
Research and development expense increased from $350,100 (10% of net
revenues) in the 1995 period to $394,100 (11% of net revenues) in the 1996
period, as the Company increased its new product development efforts and
tooling to new foundry sources. The Company plans to continue to make
substantial investments in its product research and development.
Selling, general and administrative expense increased from $817,500
(23% of net revenues) in the 1995 period to $911,200 (25% of net revenues)
in the 1996 period due to increased marketing and promotional expenses,
sales commissions and increased insurance costs.
Net operating income for 1996 decreased to $328,500 from $498,600 in
1995, due to the above mentioned factors. As a percentage of net revenues
operating income decreased to 9% for the 1996 period versus 14% in 1995.
<PAGE>
For the 1996 period, the Company earned $40,700 in Other Income from
interest on cash invested versus Other Expense of $98,900 in 1995 which
consisted largely of interest expense on outstanding debt.
Income taxes increased from $127,500 in 1995 to $148,500 in 1996 as a
result of a higher effective tax rate despite slightly lower pretax income
for 1996. The Company has utilized most of its long term tax credits.
As a result of the foregoing, net income decreased from $272,200 in
the 1995 period to $220,700 in the 1996 period.
Liquidity and Capital Resources
Cash Flows
For the three months ended March 31, 1996, the Company's after-tax
cash earnings ($467,300 for the 1996 period and $584,700 for the 1995
period) have served as the Company's primary source of financing for
working capital needs and for capital expenditures.
During the 1996 period, after-tax earnings of $467,300 supplemented by
reductions in income taxes payable of $679,800 and accounts receivables of
$460,300 which funded an increase in inventory of $547,400 resulted in net
cash used by operations of $180,800. The Company invested $427,400 in
capital expenditures and other assets and reduce net indebtedness by
$26,900. The Company received proceeds of $258,900 from the exercise of
employee stock options and the exercise of certain warrants.
During the 1995 period, after-tax earnings of $584,700 supplemented by
a reduction in inventory of $96,600 funded the increase in accounts
receivables of $136,600 and reduction in accounts payable of $242,000 and
other current liabilities of $64,900 and resulted in net cash provided by
operations of $247,100. Such amount financed capital expenditures of
$229,400 and allowed the Company to reduce net indebtedness by $39,500.
Working Capital
The Company's investment in inventories and accounts receivable has
been significant and will continue to be significant in the future. Over
prior periods, the Company, as a nature of its business, has maintained
these levels of inventories and accounts receivable.
<PAGE>
The Company relies on third party suppliers for raw materials and as a
result maintains substantial inventory levels to protect against
disruption in supplies. The Company has historically maintained inventory
levels from approximately 225 days to 360 days, since 1990. The low point
in inventory levels came in 1992 and 1993 when the Company had supply
disruptions from one of its major suppliers.
The Company looks at its inventories in relationship to its sales
which have ranged from 155 days to 185 days within the periods between
1995 and 1990. This inventory to sales ratio is a more stable measure of
inventory levels, versus the traditional inventory turnover measure
because, at the times when the Company is experiencing supply disruptions,
and therefore lower inventory levels, the Company is also experiencing
increased costs of goods due to inefficiencies in its operations stemming
from sporadic deliveries which skews the numerator and denominator in
different directions for inventory turns calculations.
The Company provides reserves for any product material that is over
one year old with no back-log or sales activity, and reserves for future
obsolescence. The Company also takes physical inventory write-downs for
obsolescence.
The Company's accounts receivable level has been consistently
correlated to the Company's previous quarter revenue level. Because of
the Company's customer scheduled backlog requirements, up to 80% of the
quarterly revenues are shipped in the last month of the quarter. This has
the effect of placing a large portion of the quarterly shipments reflected
in accounts receivable still not yet due per the Company's net 30 day
terms. This, combined with the fact that the Company's distributor
customers (which make up 55% of the Company revenues) generally pay 60
days and beyond, results in the accounts receivable balance at the end of
the quarterly period being at its highest point for the period.
Although current levels of inventory and accounts receivable impact
the Company's liquidity, the Company believes that it is a cost of doing
business given the Company's fabless operation. The Company is in the
process of diversifying its supplier base to reduce the risk of supply
disruption. However, this will require a significant investment in
product development to tooling with new suppliers. The Company believes
that as it expands its customer base it will be able to even out the flow
of its shipments within its quarterly reporting periods.
Debt
The Company has a $8,000,000 revolving line of credit with a bank
which expires on June 30, 1996, bears interest at the bank's prime rate
plus 1.500% (10.500% at March 31, 1996) and is secured by the assets of
the Company. The line of credit requires the Company to maintain a
minimum tangible net worth, a maximum ratio of debt to tangible net worth,
a minimum current ratio, a minimum quick ratio, and profitability over a
specified interval of time. As of March 31, 1996, the Company had no
outstanding balance under the revolving line of credit.
<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Computation of Earnings Per Common Share.
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
<PAGE>
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.
Logic Devices Incorporated
(Registrant)
Date: May 9, 1996 By /s/ William J. Volz
William J. Volz
President and Principal
Executive Officer
Date: May 9, 1996 By /s/ Todd J. Ashford
Todd J. Ashford
Chief Financial Officer
Principal Financial and
Accounting Officer
<PAGE>
EXHIBIT 11
Logic Devices Incorporated
Computation of Earnings per Common Share
(unaudited)
Three months ended March 31, 1996 and 1995
1996 1995
Weighted average shares of common stock 5,996,750 4,776,473
outstanding
Common stock equivalent convertible - 12,833
preferred stock
Dilutive effect of common stock options 2,000 14,000
Dilutive effect of common stock warrants 220,000 110,000
Weighted average common and 6,218,750 4,913,306
common share equivalents
Net income $ 220,700 $ 272,200
Net income per common $ .04 $ .06
share equivalent
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,002,300
<SECURITIES> 0
<RECEIVABLES> 5,383,700
<ALLOWANCES> 0
<INVENTORY> 8,843,400
<CURRENT-ASSETS> 19,875,300
<PP&E> 10,432,500
<DEPRECIATION> 7,835,100
<TOTAL-ASSETS> 23,218,600
<CURRENT-LIABILITIES> 1,664,000
<BONDS> 0
<COMMON> 17,000,800
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,218,600
<SALES> 3,609,200
<TOTAL-REVENUES> 3,609,200
<CGS> 1,975,400
<TOTAL-COSTS> 3,280,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 369,200
<INCOME-TAX> 148,500
<INCOME-CONTINUING> 220,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,700
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
