CONFORMED COPY
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: August 1, 1997
Commission File Number: 0-16304
OPTEK TECHNOLOGY, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of Delaware
------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
75-1962405
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(I.R.S. Employer Identification No.)
1215 West Crosby Road Carrollton, Texas 75006
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(Address of principal executive offices) (Zip Code)
(972) 323-2200
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(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.
x
------ ------
Yes No
Number of common shares outstanding as of August 1, 1997:
4,088,387 par value $.01 per share
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of August 1, 1997
and October 25, 1996.
Consolidated Statements of Income for the Three
Months and Nine Months Ended August 1, 1997 and
July 26, 1996.
Consolidated Statements of Cash Flows for the Nine
Months Ended August 1, 1997 and July 26, 1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
August 1, 1997 October 25, 1996
ASSETS
<S> <C> <C>
Current assets:
Cash $ 5,907 $ 121
Accounts receivable, net of
allowance for doubtful
accounts and customer returns of
$1,560 in 1997 and $1,095 in 1996 6,935 7,288
Inventories (note 3) 6,410 6,007
Deferred income taxes 1,142 1,142
Prepaid expenses 42 82
-------- --------
Total current assets 20,436 14,640
Property, plant and equipment, net 10,242 11,150
Other assets 80 96
------- --------
$30,758 $25,886
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,889 $ 2,637
Accrued expenses 6,383 5,345
------- -------
Total current liabilities 8,272 7,982
Long-term debt 1 3,428
Other liabilities 98 100
Deferred income taxes 309 309
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 1,000,000 shares; none
issued - -
Common stock, $.01 par value; authorized
12,000,000 shares; issued and outstand-
ing 4,088,387 shares in 1997 and
3,912,915 shares in 1996 41 39
Additional paid-in-capital 13,707 13,373
Retained earnings 8,330 655
------- -------
Total stockholders' equity 22,078 14,067
------- -------
$30,758 $25,886
======== =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
August 1, 1997 July 26, 1996
<S> <C> <C>
Net sales $ 18,763 $16,834
Costs and expenses:
Cost of sales 10,522 9,464
Product development expenses 215 464
Engineering expenses 990 822
Selling expenses 1,310 1,184
General and administrative expenses 958 685
------- -------
Total costs and expenses 13,995 12,619
------- -------
Operating income 4,768 4,215
Other (income) expense, net:
Interest (income) expense, net (54) 267
Other (income) expense, net (14) 29
------- -------
Total other (income) expense, net (68) 296
------- -------
Earnings before income taxes 4,836 3,919
Income tax expense 1,692 352
------- -------
Net earnings $ 3,144 $ 3,567
======= =======
Earnings per common and common equiv-
alent share (note 5) $ 0.41 $ 0.46
======= =======
Weighted average common and common
equivalent shares 7,694,874 7,753,359
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
August 1, 1997 July 26, 1996
<S> <C> <C>
Net sales $53,703 $49,925
Costs and expenses:
Cost of sales 31,371 29,108
Product development expenses 875 1,006
Engineering expenses 2,977 2,730
Selling expenses 3,900 3,821
General and administrative expenses 2,680 2,342
------- -------
Total costs and expenses 41,803 39,007
------- -------
Operating income 11,900 10,918
Other (income) expense, net:
Interest expense, net 27 1,124
Other (income) expense, net 67 (118)
------- -------
Total other (income) expense, net 94 1,006
------- -------
Earnings before income taxes 11,806 9,912
Income tax expense 4,131 681
------- -------
Net earnings $ 7,675 $ 9,231
======= =======
Earnings per common and common
equivalent share (note 5) $ 1.01 $ 1.21
======= =======
Weighted average common and common
equivalent shares 7,624,011 7,625,909
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION> NINE MONTHS ENDED
August 1, 1997 July 26, 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,675 $ 9,231
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 1,614 2,251
Gain on sale of property, plant
and equipment (214) -
Changes in assets and liabilities:
Accounts receivable 353 332
Inventories (403) (323)
Prepaid expenses and other assets 56 29
Accounts payable, accrued expenses
and other liabilities 288 (1,070)
------- -------
Net cash provided by operating
activities 9,369 10,450
Cash flows from investing activities:
Purchase of property,plant and equipment (706) (1,111)
Proceeds from sale of property, plant
and equipment 214 -
------- -------
Net cash used in investing
activities (492) (1,111)
Cash flows from financing activities:
Net repayment under long-term bank debt (3,427) (9,643)
Net proceeds from exercise of stock
options and warrants 336 334
Net cash used in financing ------- -------
activities (3,091) (9,309)
Net increase in cash 5,786 30
Cash at beginning of period 121 61
------- -------
Cash at end of period $ 5,907 $ 91
======= =======
Interest payments $ 154 $ 1,562
======= =======
Income tax payments $ 3,308 $ 605
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 1, 1997
NOTE 1
The consolidated financial statements of Optek Technology, Inc.
(the "Company") are unaudited and reflect all adjustments, consisting
only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results for the
interim periods. These consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended October 25, 1996. The results of operations for
the nine months ended August 1, 1997 are not necessarily indicative of
the results for the entire fiscal year ending October 31, 1997.
NOTE 2
The Company adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation," which requires pro forma disclosure of net
earnings and earnings per share as if the SFAS No. 123 fair value method
had been applied. The Company continues to apply the provisions of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," for the preparation of its basic consolidated
financial statements.
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amounts of an asset
may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs
to sell. Adoption of SFAS No. 121 has not had a material impact
on the Company's financial position or results of operations.
NOTE 3
The components of inventories in thousands of dollars are as follows:
<TABLE>
<CAPTION> August 1, 1997 October 26, 1996
<S> <C> <C>
Finished goods $1,524 $1,109
Work-in-process 3,592 3,323
Raw materials 3,335 3,381
Reserves for excess and
obsolete inventory (2,041) (1,806)
------- -------
$6,410 $6,007
======= =======
</TABLE>
NOTE 4
The registrant has no material pending legal proceedings.
NOTE 5
Earnings per common and common equivalent share is based on the
weighted average number of shares and, when dilutive, equivalent shares
outstanding during each of the periods presented. Primary earnings per
share and fully diluted earnings per share were substantially the same
for the third quarter of fiscal 1997 and fiscal 1996. The calculation
of net earnings per share in fiscal 1997 and fiscal 1996 uses the
modified treasury stock method.
NOTE 6
Certain amounts in the fiscal 1996 consolidated financial statements have
been reclassified to conform with the current year's presentation.
NOTE 7
Other notes have been omitted pursuant to Rule 10-01 (a)(5) of
Regulation S-X.
<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
Results of Operations
Third Quarter Ended August 1, 1997 Compared to Third Quarter July 26, 1996
Net sales for the third quarter of fiscal 1997 were $18.8 million, up
11.5% compared to net sales of $16.8 million for the comparable period
of fiscal 1996. The increase was the result of higher sales volume in
all product lines with automotive net sales up $1.4 million
or 43.1%, high reliability (aerospace/defense) up $304,000 or 22.2%,
and commercial (office equipment, industrial, medical and communications)
up $213,000 or 1.8%.
Cost of sales was $10.5 million, or 56.1% of net sales, in the third
quarter of fiscal 1997 compared to $9.5 million, or 56.2% of net sales,
during the comparable period of fiscal 1996. Higher gross margins
resulting from the increase in net sales was partially off-
set by an increase in certain manufacturing costs related to preparation
for the automotive ramp-up planned for the second half of the year. This
resulted in cost of sales as a percentage of net sales remaining constant
between the comparable periods of fiscal 1997 and fiscal 1996.
Product development and engineering expenses during the third quarter
of fiscal 1997 were $1.2 million, or 6.4% of net sales, compared to
$1.3 million, or 7.6% of net sales, during the third quarter of 1996.
Although expenses were essentially the same, the percentage to net sales
was lower due to the increase in net sales.
Selling, general and administrative expenses for the third quarter of
fiscal 1997 were $2.3 million, or 12.1% of net sales. This compares
to $1.9 million, or 11.1% of net sales, during the third quarter of
fiscal 1996. The increase in expenses is attributable to increased
volume and certain charges related to prepration for anticipated growth
in net sales.
Operating income for the third quarter of fiscal 1997 was $4.8 million,
or 25.4% of net sales, compared to $4.2 million, or 25.0% of net sales,
for the third quarter of fiscal 1996. The improvement from fiscal 1996
was a result of the factors discussed above. The Company is experiencing
increasing pressure from OEMs to reduce costs. The Company believes
that its ability to remain competitive and maintain its profit margins
at current levels will depend on its ability to develop new products,
to work with its customers to reduce costs on existing products and to
continue controlling its own operating expenses.
Other income was $68,000 in the third quarter of fiscal 1997 compared
to other expense of $296,000 in the third quarter of fiscal 1996. This
change was primarily due to lower interest expense resulting from repaying
the balance of long term debt during the second quarter of
fiscal 1997 and the investment of excess cash in overnight deposits
beginning late in the second quarter of fiscal 1997.
Income tax expense during the third quarter of fiscal 1997 was $1.7
million compared to $352,000 during the same period of fiscal 1996.
Tax expense increased due to the Company having fully utilized its
remaining net operating loss carryforwards during the fourth quarter
of fiscal 1996. The Company expects to be on a fully taxed basis
during all of fiscal 1997.
As a result of the factors discussed above, net earnings for the third
quarter of fiscal 1997 were $3.1 million compared to $3.6 million in
the third quarter of fiscal 1996.
Nine Months Ended August 1, 1997 Compared to Nine Months Ended July 26, 1996
Net sales for the first nine months of fiscal 1997 were $53.7 million, up
7.6% compared to net sales of $49.9 million for the first nine months of
fiscal 1996. This increase was the result of higher sales volume in
automotive products, in which net sales increased $3.2 million or 35.0%
over the prior year period, and commercial products (office equipment,
industrial, medical and communications), in which net sales increased
$673,000 or 1.9% over the prior year period. High reliability
(aerospace/defense) was essentially flat compared to the prior year period.
<PAGE>
Cost of sales was $31.4 million, or 58.4% of net sales, in the first
nine months of fiscal 1997 compared to $29.1 million, or 58.3% of
net sales, during the comparable period of fiscal 1996. Higher gross
margins resulting from the increase in net sales was offset by an
increase in certain manufacturing costs related to preparation for the
automotive ramp-up planned for the second half of the year. This
resulted in cost of sales as a percentage of net sales remaining
constant between the comparable periods of fiscal 1997 and fiscal 1996.
Product development and engineering expenses during the first nine
months of fiscal 1997 were $3.9 million, or 7.2% of net sales, compared
to $3.7 million, or 7.5% of net sales, during the comparable period of the
previous fiscal year. Although expenses were up slightly, the percentage
of net sales was lower due to the increase in net sales.
Selling, general and administrative expenses in the first nine months
of fiscal 1997 totaled $6.6 million, or 12.3% of net sales, compared
to $6.2 million, or 12.3% of net sales, during the comparable period
of fiscal 1996.
Operating income for the nine month period was $11.9 million, or 22.2%
of net sales, compared to $10.9 million, or 21.9% of net sales, in the
first nine months of fiscal 1996. The improvement from fiscal 1996
was the result of the factors discussed above. The Company is exper-
iencing increasing pressure from OEMs to reduce costs. The Company
believes that its ability to remain competitive and maintain its
profit margins at current levels will depend on its ability to develop
new products, to work with its customers to reduce costs on existing
products and to continue controlling its own operating expense.
Other expenses, consisting primarily of interest expense, were $94,000
in the first nine months of fiscal 1997 compared to $1.0 million in
the first nine months of fiscal 1996. This change was primarily
due to lower interest expense resulting from repaying the balance of
long-term debt during the second quarter of fiscal 1997 and the
investment of excess cash in overnight deposits beginning late in the
second quarter of fiscal 1997.
Income tax expense during the first nine months of fiscal 1997 was
$4.1 million compared to $681,000 during the comparable period of
fiscal 1996. Tax expense increased as a result of the Company having
fully utilized its remaining net operating loss carryforwards during
the fourth quarter of fiscal 1996. The Company expects to be on a
fully taxed basis during all of fiscal 1997.
As a result of the factors discussed above, net earnings for the first
nine months of fiscal 1997 were $7.7 million versus $9.2 million in
the first nine months of fiscal 1996.
Liquidity and Capital Resources
- -------------------------------
As reflected in the Company's consolidated statements of cash flows,
the Company generated approximately $9.4 million in cash from
operations during the first nine months of fiscal 1997. The largest
uses of cash during this period were to retire the Company's outstand-
ing debt during the second quarter of fiscal 1997 (approximately $3.4
million) and the payment of estimated federal income taxes (approximately
$3.3 million).
In the second quarter of fiscal 1997, the Company completely repaid
amounts outstanding under its credit agreement with First Source.
The credit facility continues to provide a $10.5 million working capital
line. Amounts drawn on the working capital line bear interest at one-
half percentage point over the reference rate announced from time to
time by the First National Bank of Chicago, Chicago, Illinois and matures
on October 31, 1997. The credit facility can be renewed for an additional
one year period at the option of the Company. The credit facility and
warrants to purchase common stock issued to First Source include
covenants which restrict investments, capital expenditures, additional
debt and prohibit payment of dividends. The credit facility also contains
certain positive and negative covenants which require the Company, among
other things, to maintain minimum net worth, as defined, and to satisfy
certain financial ratios. The Company has been in compliance with all
covenants during fiscal 1997.
For the next three years, the Company estimates capital expenditures will be
approximately $3.0 to $4.0 million annually to support anticipated increases
in demand for the Company's products.
The Company presently anticipates that it will generate sufficient cash
from operations to meet its obligations, including its capital require-
ments, for the foreseeable future. Any unanticipated expansion or
contraction of its business or future acquisitions may require the
Company to draw upon its working capital line or obtain other
financing.
<PAGE>
New Accounting Standards
- ------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
Earnings per Share, which establishes new standards for computing
and presenting earnings per share. SFAS 128 is effective for
financial statements issued for periods ending after December 15,
1997 and requires restatement of all prior-period earnings per
share data. Early application of SFAS 128 is not permitted. The
Company's adoption of the provisions of SFAS 128 will result in
the dual presentation of basic and diluted earnings per share on
the Company's income statement. Diluted earnings per share as
calculated under SFAS 128 is not expected to materially differ
from primary earnings per share amounts previously presented.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income," and Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures About
Segments of an Enterprise and Related Information." SFAS 130
and SFAS 131 are effective for financial statements issued for
periods beginning after December 15, 1997. The Company does not
expect these standards to have a significant impact on the
consolidated financial statements.
PART II. - OTHER INFORMATION
None
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf of
the undersigned thereunto duly authorized.
Optek Technology, Inc.
Date: September 3, 1997 By: /s/ Thomas R. Filesi
-------------------------- -----------------------------
Thomas R. Filesi
President and CEO
(Principal Executive Officer)
Date: September 3, 1997 By: /s/ William J. Collinsworth
-------------------------- -----------------------------
William J. Collinsworth
Vice President - Finance and CFO
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> AUG-01-1997
<CASH> 5907
<SECURITIES> 0
<RECEIVABLES> 8495
<ALLOWANCES> 1560
<INVENTORY> 6410
<CURRENT-ASSETS> 20436
<PP&E> 30758
<DEPRECIATION> 20516
<TOTAL-ASSETS> 30758
<CURRENT-LIABILITIES> 8272
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30758
<SALES> 18763
<TOTAL-REVENUES> 18763
<CGS> 10522
<TOTAL-COSTS> 13995
<OTHER-EXPENSES> (14)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (54)
<INCOME-PRETAX> 4836
<INCOME-TAX> 1692
<INCOME-CONTINUING> 3144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3144
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
