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: January 30, 1998
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 principal 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.
X
Yes No
Number of common shares outstanding as of January 30, 1998:
4,272,727 with par value $.01 per share
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Optek Technology, Inc. Consolidated Balance Sheets as of
January 30, 1998 and October 31, 1997.
Optek Technology, Inc. Consolidated Statements of Income
for the Three Months Ended January 30, 1998
and January 31, 1997.
Optek Technology, Inc. Consolidated Statements of Cash
Flows for the Three Months Ended January 30,
1998 and January 31, 1997.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
PART II - OTHER INFORMATION
None
PAGE
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FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands except share and per share data)
<TABLE>
January 30,
1998 October 31,
1997
<S> <C> <C>
ASSETS
Current assets:
Cash $11,644 $ 9,815
Accounts receivable, net of allowance
for doubtful accounts and
customer returns of $1,773 in 1998
and $1,653 in 1997 8,049 9,196
Inventories (note 2) 6,908 6,491
Deferred income taxes 2,113 2,113
Prepaid expenses 112 109
Total current assets 28,826 27,724
Property, plant and equipment, net 12,732 11,135
Other assets 64 77
$41,622 $38,936
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,162 3,109
Accrued expenses 9,112 9,547
Total current liabilities 12,274 12,656
Other liabilities 155 117
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 4,272,727
shares in 1998 and 4,259,534
shares in 1997 43 43
Additional paid-in-capital 14,053 13,963
Retained earnings 15,097 12,157
Total stockholders' equity 29,193 26,163
$41,622 $38,936
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
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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
January 30,
1998 January 31,
1997
<S> <C> <C>
Net sales $20,419 $16,689
Costs and expenses:
Cost of sales 12,105 10,099
Product development expenses 254 318
Engineering expenses 1,204 1,009
Selling expenses 1,457 1,295
General and administrative expenses 971 866
Total costs and expenses 15,991 13,587
Operating income 4,428 3,102
Other (income) expense, net
Interest (income) expense, net (111) 83
Other expense 15 76
Total other (income) expense,
net (96) 159
Income before income taxes 4,524 2,943
Income tax expense 1,584 1,031
Net income $2,940 $ 1,912
Basic earnings per share (Note 4) $ 0.69 $ 0.46
Shares used in computing basic
earnings per share 4,272,727 4,150,007
Diluted earnings per share (Note 4) $ 0.37 $ 0.25
Shares used in computing diluted
earnings per share 7,881,398 7,533,237
</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>
THREE MONTHS ENDED
January 30,
1998 January 31,
1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,940$ 1,912
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 410 570
Gain on sale of property,
plant and equipment (6) -
Changes in assets and liabilities:
Accounts receivable 1,147 1,197
Inventories (417) (541)
Prepaid expenses and other assets 10 20
Accounts payable, accrued expenses
and other liabilities (344) (121)
Net cash provided by
operating activities 3,740 3,037
Cash flows from investing activities:
Purchase of property, plant and equipment (2,007) (165)
Proceeds from sale of property,
plant and equipment 6 -
Net cash used in investing
activities (2,001) (165)
Cash flows from financing activities:
Net repayment of long-term bank debt - (3,157)
Net proceeds from exercise of stock
options and warrants 90 292
Net cash provided (used) in
financing activities 90 (2,865)
Net increase in cash 1,829 7
Cash at beginning of period 9,815 121
Cash at end of period $11,644 $128
Interest payments $ - $ 98
Income tax payments $1,020 $ 93
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE
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FORM 10-Q
PART I
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 30, 1998
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 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 year ended October
31, 1997. The results of operations for the
three months ended January 30, 1998 are not necessarily
indicative of the results for the entire year ending October
30, 1998.
NOTE 2 The components of inventories, in thousands of dollars,
are as follows:
January 30,
1998 October 31,
1997
Finished goods $ 1,114 $ 1,503
Work-in-process 4,343 4,003
Raw materials 3,757 3,140
Reserves for excess
and obsolete
inventory (2,306) (2,155)
$ 6,908 $ 6,491
NOTE 3 The registrant has no material pending legal proceedings.
NOTE 4 At January 30, 1998, the Company adopted Financial
Accounting Standards Statement No. 128,
Earnings per Share. All share and per share amounts, including
those of the prior year, have been restated to
comply with the new provisions.
Shares used in calculating basic and diluted earnings per
share are as follows:
January 30,
1998 January 31,
1997
Weighted average common shares
outstanding usedin computing
basic earnings per share 4,272,727 4,150,007
Warrants to purchase common
shares held by First
Source Financial, LLP 3,150,000 3,150,000
Other warrants to purchase
common shares 178,801 196,468
Stock options 607,662 359,565
Assumed repurchase of
common shares (327,792) (322,803)
Shares used in computing
diluted earnings per share 7,881,398 7,533,237
NOTE 5 Other notes have been omitted pursuant to Rule 10-01 (a)
(5) of Regulation S-X.
PAGE
<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Three Months Ended January 30, 1998 Compared to Three Months
Ended January 31, 1997
Net sales for the three months of fiscal 1998 were $20.4 million,
up $3.7 million, or 22%, compared to net sales
of $16.7 million for the first three months of fiscal 1997. The
increase was the result of higher net sales volume
in automotive products primarily attributable to sales of sensor
assemblies for use in a passlock theft deterrent
system on model year 1998 trucks and sport utility vehicles.
Gross profit in the first three months of fiscal 1998 was $8.3
million, or 40.7% of net sales, compared to $6.6
million, or 39.5% of net sales, in the comparable period of
fiscal 1997. The increase in absolute dollars resulted
primarily from the higher net sales volume in automotive
products.
Product development and engineering expenses during the first
three months of fiscal 1998 were $1.5 million, or
7.1% of net sales, compared to $1.3 million, or 8.0% of net
sales, during the comparable period of the prior fiscal
year. Although expenses in absolute dollars were up slightly
from the prior year, they are down as a percentage
of net sales due to the increase in net sales for the period.
These expenses were primarily related to the
development of new products and processes as well as ongoing
engineering support. The Company anticipates
expenditures to increase in absolute dollars during fiscal 1998
in order to support new product development and
expand ongoing engineering support.
Selling, general and administrative expenses during the first
three months of fiscal 1998 were $2.4 million, or
11.9% of net sales, compared to $2.2 million, or 12.9% of net
sales, in the first three months of fiscal 1998.
Although expenses in absolute dollars were up slightly from the
prior year, they are down as a percentage of net
sales due to the increase in net sales for the period.
Operating income for the first three months of fiscal 1998 was
$4.4 million, or 21.7% of net sales, versus $3.1
million, or 18.6% of net sales, during the comparable period of
fiscal 1997. The increase in operating income was
attributable primarily to higher net sales volume.
Other (income) expense consisted primarily of interest income of
$111,000 in the first three months of fiscal 1998
and interest expense of $83,000 in the comparable period of
fiscal 1997. The Company repaid the remaining
balance of long-term debt during the second quarter of fiscal
1997 and earned interest income on accumulated cash
balances since that time.
Income tax expense for the first three months of fiscal 1998 was
$1.6 million, or 7.8% of net sales, compared to
$1.0 million, or 6.1% of net sales, in the same period of fiscal
1997. The increase in tax expense for the period
was attributable to higher income. The effective tax rate for
both periods was 35%.
As a result of the factors discussed above, net income for the
first three months of fiscal 1998 was $2.9 million,
or 14.4% of net sales, compared to $1.9 million, or 11.5% of net
sales, in the first three months of fiscal 1997.
Liquidity and Capital Resources
The Company generated approximately $3.7 million in cash from
operations during the first three months of fiscal
1998. The largest use of operating cash flow was the purchase of
manufacturing equipment in the amount of $2.0
million. At the end of the first three months of fiscal 1998,
the Company s working capital was $16.6 million
including $11.6 million of cash and cash equivalents.
<PAGE>
The Company anticipates that additional manufacturing capacity,
primarily in Mexico, will be required to support
growth over the next several years. Therefore, capital
expenditures are planned to increase to a total of
approximately $10 to $15 million to be expended over the next two
to three fiscal years to support anticipated future
growth in demand for the company s products. The timing and
amount of such expenditures is subject to adjustment
based upon continued evaluation by management.
In January 1998, the Company obtained a three-year $10.0 million
unsecured line of credit from NationsBank N.A.
Borrowings under this facility bear interest, at the option of
the Company, either at (i) a LIBOR-based rate plus a
margin ranging from 1.00% per annum to 1.50% per annum, depending
upon the Company s ratio of indebtedness
to operating income, or (ii) a base rate equal to a reference
rate plus a margin ranging from 1.00% to 0%,
depending upon the Company s ratio of indebtedness to operating
income. These facilities contain customary
covenants that, among other things: require the maintenance of
certain financial ratios relating to fixed charge and
interest coverage and debt and equity amounts; require the
maintenance of certain net worth levels; restrict liens on
Company and subsidiary assets; and limit the payment of cash
dividends.
The Company anticipates that it will generate sufficient cash
flow from operations to meet its obligations, including
capital requirements, for the next 12 months. However, an
unanticipated expansion or contraction of its business
or future acquisitions may require the Company to draw upon its
existing credit line or obtain other financing.
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: February 17, 1998 By:/s/ Thomas R. Filesi
Thomas R. Filesi
President and CEO
(Principal Executive Officer)
Date: February 17, 1998 By: /s/ William J. Collinsworth
William J. Collinsworth
Vice President Finance and CFO
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
registrant's Form 10-Q for the quarter ended January 30, 1998 and is
qualified in its entirety by reference to such financial statement. All
numbers are in thousands, except per share amounts.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-30-1998
<CASH> 11644
<SECURITIES> 0
<RECEIVABLES> 9822
<ALLOWANCES> 1773
<INVENTORY> 6908
<CURRENT-ASSETS> 28826
<PP&E> 34107
<DEPRECIATION> 21375
<TOTAL-ASSETS> 41622
<CURRENT-LIABILITIES> 12274
<BONDS> 0
0
0
<COMMON> 43
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 41622
<SALES> 20419
<TOTAL-REVENUES> 20419
<CGS> 12105
<TOTAL-COSTS> 15991
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (111)
<INCOME-PRETAX> 4524
<INCOME-TAX> 1584
<INCOME-CONTINUING> 2940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2940
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.37
</TABLE>
