1
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: May 2, 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
________________________________________________________________________
(I.R.S. Employer Identification No.)
1215 West Crosby Road Carrollton, Texas
75006
________________________________________________________________________
(Address of principle executive offices) (Zip Code)
(972) 323-2200
________________________________________________________________________
(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 No
Number of common shares outstanding as of May 2, 1997:
4,072,187 par value $.01 per share
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of May 2, 1997 and October 25, 1996.
Consolidated Statements of Income for the Three Months and Six Months
Ended May 2, 1997 and April 26, 1996.
Consolidated Statements of Cash Flows for the Six Months Ended May 2,
1997 and April 26, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of
Operations.
PART II - OTHER INFORMATION
Item 5. 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> May 2, October
1997 25, 1996
ASSETS
<S> <C> <C> <C>
Current assets:
Cash $ $
2,706 121
Accounts receivable, net of
allowance for doubtful
accounts and customer returns of 6,259 7,288
$1,554 in 1997 and
$1,095 in 1996
Inventories (note 3) 6,116 6,007
Deferred income taxes 1,142 1,142
Prepaid expenses 76 82
Total current assets 16,299
14,640
Property, plant and equipment, net 10,627 11,150
Other assets 87
96
$27,01 $25,88
3 6
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ $
1,844 2,637
Accrued expenses 5,851
5,345
Total current liabilities 7,695 7,982
Long-term debt 1 3,428
Other liabilities 91 100
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 outstanding 41 39
4,072,187 shares in 1997
and 3,912,915 shares in 1996
Additional paid-in-capital 13,690 13,373
Retained earnings 5,186
655
Total stockholders' equity 18,917 14,067
$27,01 $25,88
3 6
</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>
THREE MONTHS ENDED
May 2, April 26,
1997 1996
<S> <C> < <C>
C
>
Net sales $18,251 $18,051
Costs and expenses:
Cost of sales 10,750 10,369
Product development expenses 342 347
Engineering expenses 978 960
Selling expenses 1,295 1,340
General and administrative expenses 856 831
Total costs and expenses 14,221 13,847
Operating income 4,030 4,204
Other expenses:
Interest (income) expense, net (2) 408
Other expense (income), net 5 (97)
Total other expenses 3 311
Earnings before income taxes 4,027 3,893
Income tax expense 1,408 274
Net earnings $ $ 3,619
2,619
Earnings per common and common $ $
equivalent shares (note 5) 0.34 0.47
Weighted average common and common 7,649,1 7,568,84
equivalent shares 15 7
</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>
SIX MONTHS ENDED
May 2, April 26,
1997 1996
<S> <C> < <C>
C
>
Net sales $34,940 $33,091
Costs and expenses:
Cost of sales 20,849 19,644
Product development expenses 660 542
Engineering expenses 1,987 1,908
Selling expenses 2,590 2,637
General and administrative expenses 1,722 1,657
Total costs and expenses 27,808 23,388
Operating income 7,132 6,703
Other expenses:
Interest expense, net 81 857
Other expense (income), net 81 (147)
Total other expenses 162 710
Earnings before income taxes 6,970 5,993
Income tax expense 2,439 329
Net earnings $ $ 5,664
4,531
Earnings per common and common $ $
equivalent shares (note 5) 0.59 0.75
Weighted average common and common 7,588,8 7,494,76
equivalent shares 27 5
</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>
SIX MONTHS ENDED
May 2, April
1997 26, 1996
<S> < <C> < <C>
C C
> >
Cash flows from operating activities:
Net earnings $ $
4,531 5,664
Adjustments to reconcile net earnings
to net cash provided
by operating activities:
Depreciation and amortization 1,090 1,322
Changes in assets and liabilities:
Accounts receivable 1,029 (295)
Inventories (109) 100
Prepaid expenses and other 15 14
assets
Accounts payable, accrued (296) (556)
expenses and other liabilities
Net cash provided by 6,260 6,249
operating activities
Cash flows from investing activities:
Purchase of property, plant and (567) (773)
equipment
Net cash used in investing (567) (773)
activities
Cash flows from financing activities:
Net repayment under long-term bank (3,427 (5,717)
debt )
Net proceeds from exercise of stock 319 283
options and warrants
Net cash used in financing (3,108 (5,434)
activities )
Net increase in cash 2,585 42
Cash at beginning of period 121 61
Cash at end of period $ $
2,706 103
Interest payments $ $
132 909
Income tax payments $ $
1,675 255
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 2, 1997
NOTE 1 The condensed 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 condensed 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 six months ended May 2, 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. Initial adoption of SFAS No. 121 did not have 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:
May 2, 1997October 25, 1996
Finished goods $ 1,191 $ 1,109
Work-in-process 3,451 3,323
Raw materials 3,405 3,381
Reserves for excess and obsolete inventory (1,931)(1,806)
$ 6,116 $ 6,007
NOTE 4 The registrant has no material pending legal proceedings.
NOTE 5 Earnings per common and common equivalent shares 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 second quarters 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.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Results in Operations
Second Quarter Fiscal 1997 Compared to Second Quarter Fiscal 1996
Net sales for the second quarter of fiscal 1997 were $18.3 million, up 1.1%
compared to net sales of $18.1 million for the comparable period of fiscal 1996.
The increase was the result of higher automotive net sales of $1.1 million,
partially offset by lower net sales of high reliability (aerospace/defense)
products of approximately $600,000 due to certain one-time sales in the second
quarter of fiscal 1996 and lower commercial (office equipment, industrial,
medical and communications) net sales of $342,000 in the second quarter of
fiscal 1997.
Cost of sales was $10.8 million, or 58.9% of net sales, in the second quarter of
fiscal 1997 compared to $10.4 million, or 57.4% of net sales, during the
comparable period of fiscal 1996. The increase in cost of sales as a percentage
of net sales was primarily the result of (i) the reduction in higher margin
aerospace/defense sales from the second quarter of fiscal 1996 as discussed
above, (ii) a change in product mix within the commercial product group favoring
lower margin component products, and (iii) an increase in certain manufacturing
costs related to the preparation for a ramp-up of automotive component
production anticipated in the second half of fiscal 1997.
Product development and engineering expenses during the second quarter of fiscal
1997 were $1.3 million, or 7.2% of net sales. These expenses were approximately
the same as the comparable period of fiscal 1996.
Selling, general and administrative expenses for the second quarter of fiscal
1997 were $2.2 million, or 11.8% of net sales. This compares to $2.2 million,
or 12.0% of net sales, during the second quarter of fiscal 1996.
Operating income for the second quarter of fiscal 1997 was $4.0 million, or
22.1% of net sales, compared to $4.2 million, or 23.3% of net sales, for the
second quarter of fiscal 1996. The decline was the result of the aforementioned
lower aerospace/defense net sales, the change in product mix within the
commercial product group, and higher costs related to the anticipated ramp-up of
automotive component production. 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 expenses were $3,000 in the second quarter of fiscal 1997 compared to
$311,000 in the second quarter of fiscal 1996. This decrease was primarily due
to lower interest expense resulting from repaying the balance of long term debt
at the beginning of the second quarter of fiscal 1997.
Income tax expense during the second quarter of fiscal 1997 was $1.4 million
compared to $274,000 during the same period of fiscal 1996. Tax expense
increased due to the Company having fully utilized its remaining net operating
loss carryforwards during 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 second quarter
of fiscal 1997 were $2.6 million compared to $3.6 million in the second quarter
of fiscal 1996.
Six Months Ended May 2, 1997 Compared to Six Months Ended April 26, 1996
Net sales for the first six months of fiscal 1997 were $34.9 million, up 5.6%
compared to net sales of $33.1 million for the first six months of fiscal 1996.
This increase was the result of higher automotive net sales of $1.7 million and
higher commercial (office equipment, industrial, medical and communications) net
sales of $460,000. Partially offsetting the increase were lower sales of high
reliability (aerospace/defense) products due to approximately $600,000 of one-
time sales in the second quarter of fiscal 1996.
Cost of sales was $20.8 million, or 59.7% of net sales, in the first six months
of fiscal 1997 compared to $19.6 million, or 59.4% of net sales, during the
comparable period of fiscal 1996. This increase in cost of sales as a
percentage of net sales was primarily the result of (i) the reduction in higher
margin aerospace/defense sales from the second quarter of fiscal 1996 as
discussed above, (ii) a change in product mix within the commercial product
group favoring lower margin component products and (iii) costs related to the
preparation for a ramp-up of automotive component production expected to occur
in the second half of fiscal 1997.
Product development and engineering expenses during the first six months of
fiscal 1997 were $2.6 million, or 7.6% of net sales, compared to $2.5 million,
or 7.4% of net sales, during the comparable period of the previous fiscal year.
Selling, general and administrative expenses in the first six months of fiscal
1997 totaled $4.3 million, or 12.3% of net sales, compared to $4.3 million, or
13.0% of net sales, during the comparable period of fiscal 1996. The decrease
in selling, general and administrative expenses as a percentage of net sales is
due to net sales increasing while expenses remained essentially the same from
period to period.
Operating income for the period was $7.1 million, or 20.4% of net sales,
compared to $6.7 million, or 20.3% of net sales, in the first six months of
fiscal 1996. The improvement from fiscal 1996 was the result of the factors
discussed above.
Other expenses, consisting primarily of interest expense, were $162,000 in the
first six months of fiscal 1997 compared to $710,000 in the first six months of
fiscal 1996. This decrease was the result of the continued reduction of long
term debt.
Income tax expense during the first six months of fiscal 1997 was $2.4 million
compared to $329,000 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 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 six
months of fiscal 1997 were $4.5 million versus $5.7 million in the first six
months of fiscal 1996.
Liquidity and Capital Resources
As reflected in the Company's consolidated statements of cash flows, the Company
generated approximately $6.3 million in cash from operations during the first
six months of fiscal 1997. The largest single use of cash (approximately $3.4
million) was to retire the Company's outstanding debt.
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 expires October 31, 1997, but can be renewed for an additional one year
period at the option of the Company. The credit facility contains certain
affirmative and negative covenants which require the Company, among other
things, to maintain minimum net worth, as defined, and to satisfy certain
financial ratios. The covenants also restrict investments, capital expenditures
and additional debt and prohibit payment of dividends. The Company has been in
compliance with all debt covenants during fiscal 1997.
In fiscal 1997 the Company estimates capital expenditures will be approximately
$3.0 million in the aggregate to support anticipated increases in demand for the
Company's automotive products during fiscal 1998 and 1999. The Company also
anticipates higher expenditures for federal income taxes in fiscal 1997 due to
the Company's full utilization of its net operating loss carryforwards during
fiscal 1996.
The Company presently anticipates that it will generate sufficient cash from
operations to meet its obligations, including its capital requirements, 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.
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.
PART II. - OTHER INFORMATION
ITEM 5. Other Information.
ITEM 6. Exhibits and Reports on Form 8-K.
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.
<TABLE>
Optek Technology, Inc.
<S> <C> <C> <C>
Date May 23, 1997 By: /s/ Thomas R.
: Filesi
Thomas R. Filesi
President and
CEO
(Principal
Executive
Officer)
Date May 23, 1997 By: /s/ William J.
: Collinsworth
William J.
Collinsworth
Vice President -
Finance
(Principal
Financial
Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> MAY-02-1997
<CASH> 2706
<SECURITIES> 0
<RECEIVABLES> 7813
<ALLOWANCES> 1554
<INVENTORY> 6116
<CURRENT-ASSETS> 16299
<PP&E> 30620
<DEPRECIATION> 19993
<TOTAL-ASSETS> 27013
<CURRENT-LIABILITIES> 7695
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 27013
<SALES> 18251
<TOTAL-REVENUES> 18251
<CGS> 10750
<TOTAL-COSTS> 14221
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 4027
<INCOME-TAX> 1408
<INCOME-CONTINUING> 2619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2619
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
