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
EXCEL TECHNOLOGY, INC.
(Exact name of Registrant as specified in its Charter)
For the quarter ended September 30, 1996 Commission File Number 0-19306
Delaware 11-2780242
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
45 Adams Ave. (516) 273-6900
Hauppauge, NY 11788 (Registrant's Telephone Number)
(Address of Principal Executive Offices)
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 [ ]
The number of shares of the Registrant's common stock outstanding as of
October 24, 1996 was: 9,166,288.
The number of the Registrant's Class B warrants outstanding as of October
24, 1996 was: 1,586,225.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
Balance Sheets as of September 30, 1996 and
December 31, 1995 2
Statements of Earnings and Accumulated Deficit for
the Three Months Ended September 30, 1996 and 1995 3
Statements of Earnings and Accumulated Deficit for
the Nine months Ended September 30, 1996 and 1995 4
Statements of Cash Flows for the Nine months Ended
September 30, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security-Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 11 Computation of net earnings per share 13
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
CONSOLIDATED BALANCE SHEETS
September 30, 1996 Dec. 31, 1995
(unaudited) (audited)
.................. .............
Assets
Current assets:
Cash and cash equivalents $ 1,967,470 $ 2,326,932
Investments 6,186,045 5,887,693
Prepaid and refundable income taxes 150,121 503,741
Accounts receivable, less allowance
for doubtful accounts of $243,000 and
$377,000 in 1996 and 1995, respectively 10,588,097 7,353,479
Inventories 11,225,711 13,290,729
Other current assets 1,787,092 1,626,732
............ ............
Total current assets 31,904,536 30,989,306
............ ............
Property, plant and equipment, net 2,075,776 1,777,917
Other assets 708,453 794,518
Excess of cost over fair value of net assets
of businesses acquired, net of accumulated
amortization of $1,357,202 in 1996 and
$971,504 in 1995. 8,537,997 9,445,873
............ ............
Total assets $ 43,226,762 $ 43,007,614
............ ............
............ ............
Liabilities and Stockholders' Equity
Current liabilities:
Note payable, current $ 712,066 $ 2,019,257
Current portion of long-term debt 1,500,012 1,550,704
Accounts payable 2,228,010 3,052,543
Accrued expenses and other current
liabilities 8,234,686 6,757,312
............ ............
Total current liabilities 12,674,774 13,379,816
............ ............
Long-term debt, less current installments 2,809,465 6,699,457
Long term notes payable -- 868,763
Stockholders' equity:
Series 1 redeemable convertible preferred
stock par value $.001 per share:
(liquidation preference $5 per share)
2,000,000 shares authorized, none
outstanding in 1996, and 405,342 issued
and outstanding in 1995. -- 405
Common stock, par value $.001 per share:
20,000,000 shares authorized, and
9,161,297 and 8,347,453 issued and
outstanding in 1996 and 1995,
respectively. 9,161 8,347
Additional paid-in capital 31,440,498 29,360,278
Accumulated deficit (3,655,505) (7,367,153)
Foreign currency translation adjustment (51,631) 57,701
............ ............
27,742,523 22,059,578
............ ............
Total liabilities and
shareholders' equity $ 43,226,762 $43,007,614
............ ............
............ ............
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
September 30
...........................
1996 1995
............. ............
Net sales and services $ 14,678,089 $ 10,913,619
Cost of sales and services 8,262,587 6,400,516
............ ............
Gross profit 6,415,502 4,513,103
Operating expenses:
Selling and marketing 2,230,671 1,629,494
General and administrative 881,726 1,085,965
Research and development 1,025,256 762,885
Amortization of excess of cost
over fair value of net assets of
business acquired 124,602 102,228
............ ............
Earnings from operations 2,153,247 932,531
Non operating expenses (income):
Interest expense 126,794 180,006
Interest income (110,618) (138,289)
Other income, net (19,128) (267,025)
............ ............
Earnings before provision for income taxes 2,156,199 1,157,839
Provision for income taxes 703,424 371,000
............ ...........
Net earnings 1,452,775 786,839
............ ............
Accumulated deficit, beginning of period (5,108,280) (4,395,809)
Preferred stock dividends -- --
............ ............
Accumulated deficit, end of period $(3,655,505) $(3,608,970)
............ ............
............ ............
Earnings per share:
Primary $0.15 $0.09
..... .....
..... .....
Fully diluted $0.15 $0.09
..... .....
..... .....
Weighted average common and common
equivalent shares outstanding:
Primary 9,897,396 8,437,381
Fully diluted 9,934,046 9,044,686
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Nine Months Ended
September 30
...........................
1996 1995
............. ............
Net sales and services $ 43,190,638 $ 31,072,769
Cost of sales and services 23,831,199 17,803,877
............ ............
Gross profit 19,359,439 13,268,892
Operating expenses:
Selling and marketing 6,780,407 5,029,708
General and administrative 3,068,050 3,299,611
Research and development 3,128,561 2,085,880
Amortization of excess of cost over
fair value of net assets of business
acquired 385,698 291,684
............ ............
Earnings from operations 5,996,723 2,562,009
Non operating expenses (income):
Interest expense 525,549 461,990
Interest income (175,604) (428,478)
Other expense (income), net 57,033 (407,715)
............ ............
Earnings before provision for income taxes 5,589,745 2,936,212
Provision for income taxes 1,878,097 936,000
............ ............
Net earnings 3,711,648 2,000,212
Accumulated deficit, beginning of period (7,367,153) (5,609,182)
Preferred stock dividends -- --
............ ............
Accumulated deficit, end of period $(3,655,505) $(3,608,970)
............ ............
............ ............
Earnings per share:
Primary $0.38 $0.23
..... .....
..... .....
Fully diluted $0.38 $0.23
..... .....
..... .....
Weighted average common and common
equivalent shares outstanding:
Primary 9,575,017 8,328,245
Fully diluted 9,896,126 8,842,229
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
...........................
1996 1995
............. ............
Cash flows from operating activities:
Net income $ 3,711,648 $ 2,000,212
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,041,356 684,965
Provision for bad debts 69,752 78,073
Changes in operating assets and
liabilities, net of effects from
acquisition:
Increase in accounts receivable (3,304,370) (580,575)
Decrease (increase) in inventories 2,065,018 (2,665,863)
Decrease in prepaid and refundable
taxes and other current assets 193,260 389,031
Decrease (increase) in other assets 86,065 (191,159)
(Decrease) increase in accounts
payable (824,533) 306,036
Increase in accrued expenses and
other liabilities 770,748 698,354
............. ............
Net cash provided by operating
activities: 3,808,944 719,074
............. ............
Cash flows from investing activities:
Cash paid for acquisition of Cambridge,
net of cash acquired (1,331,237) (3,069,784)
Purchases of equipment (953,517) (429,547)
Purchase of investments, net (298,352) (942,355)
Proceeds from sale of assets 522,178 --
............. ............
Net cash used in investing
activities: (2,060,928) (4,441,686)
............ ............
Cash flows from financing activities:
Proceeds from exercise of common stock
options and warrants 2,080,629 19,146
Proceeds from notes payable 24,046 892,439
(Repayment) proceeds from borrowings on
long-term debt and revolving credit line (3,940,684) 2,704,244
Payment of dividend on preferred stock (162,137) (186,941)
............ ............
Net cash (used in) provided by
financing activities: (1,998,146) 3,428,888
............ ............
Effect of exchange rate changes on assets
and liabilities, including cash (109,332) 2,611
............ ............
Net decrease in cash and cash equivalents (359,462) (291,113)
............ ............
Cash and cash equivalents, beginning of period 2,326,932 1,545,148
............ ............
Cash and cash equivalents, end of period $ 1,967,470 $ 1,254,035
............ ............
............ ............
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 525,549 $ 455,346
Income taxes $ 622,756 $ 111,282
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
.......................................
The consolidated balance sheet as of September 30, 1996, the
consolidated statements of earnings and accumulated deficit for the three
month and nine month periods ended September 30, 1996 and the statement
of cash flows for the nine months ended September 30, 1996 have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which included only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows (unaudited) at September 30, 1996 and for all periods presented
have been made.
For information concerning the Company's significant accounting
policies, reference is made to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995. While the Company believes that
the disclosures presented are adequate to make the information contained
herein not misleading, it is suggested that these statements be read in
conjunction with the consolidated financial statements and notes included
in the Form 10-K. Results of operations for the three and nine month
periods ended September 30, 1996 are not necessarily indicative of the
operating results to be expected for the full year.
B. EARNINGS PER SHARE
.......................
Primary earnings per share is calculated by dividing net earnings
less preferred stock dividends by the weighted average number of common
and common equivalent shares (if dilutive) outstanding during the periods
presented. Common equivalent shares consist of additional shares that
would be outstanding assuming the exercise of outstanding stock options
and stock warrants (if dilutive). Fully diluted earnings per share
additionally includes the dilutive effects of assuming the conversion of
convertible preferred stock and accordingly, the preferred stock
dividends are not deducted from net earnings.
C. INVESTMENTS AND CASH EQUIVALENTS
.....................................
Investments, which consist primarily of commercial paper, are
recorded at fair value. In 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company has classified
its investments as trading securities as of September 30, 1996 and, thus,
unrealized gains and losses are reported on a realized basis in the
Statement of Earnings. Investments with original maturities of three
months or less at the time of purchase are considered cash equivalents.
D. INVENTORIES
................
Inventories are recorded at the lower of average cost or market.
Average cost approximates actual cost on a first-in first-out basis.
Inventories consist of the following:
September 30, 1996 December 31, 1995
.................. .................
Raw Materials $ 3,811,783 $ 4,893,171
Work in Process 5,941,498 6,269,983
Finished Goods 1,053,595 1,759,118
Consigned Inventory 418,835 368,457
........... ...........
$11,225,711 $13,290,729
........... ...........
........... ...........
E. NOTES AND LOAN PAYABLES
............................
As of September 30, 1996 the Company had no borrowings on its $5
million revolving line of credit with U.S. Trust. The Company's
outstanding balance under the term loans with U.S. Trust at September 30,
1996 were $4.3 million. The interest rate on the revolving line of
credit and the term loans is prime plus 0.75 %. The Company pays $375
thousand per quarter in principal payments on its outstanding term loans.
During the quarter, ended September 30, 1996, the Company prepaid an
additional $600 thousand on its term loans.
F. ACQUISITIONS
.................
On February 14, 1995, the Company acquired Cambridge Technology,
Inc. ("Cambridge"), located in Watertown, Massachusetts. Cambridge is
engaged primarily in the manufacture of laser scanners, essential
components to moving a laser beam with precision at a specified speed.
On March 5, 1996, in accordance with the acquisition agreement, the
Company paid $600 thousand due on the first anniversary date. Also on
March 5, 1996, pursuant to the acquisition agreement, the Company paid an
additional $731 thousand based on Cambridge's attainment of certain
performance goals, as defined in the acquisition agreement.
On October 2, 1995, the Company acquired substantially all the net
assets and property utilized in connection with the business of Photo
Research, Inc. ("Photo Research") which develops and manufactures light
measuring instruments.
EXCEL TECHNOLOGY, INC.
Pro Forma Income Statement
Reflecting Acquisition of Cambridge Technology, Inc.
and Photo Research, Inc.
The following unaudited pro forma consolidated results of operations
assume the acquisition of Cambridge and Photo Research occurred at the
beginning of the period and reflect the historical results of operations
of the purchased business adjusted for the increased interest expense as
a result of the borrowings and increased amortization.
Nine Months Ended
September 30, 1995
..................
Net sales and services $36,000,000
Net income $ 1,856,000
Earnings per share - Primary $0.21
Earnings per share - Fully Diluted $0.21
The pro-forma results of operations are not necessarily indicative
of the actual results of operations that would have occurred had the
purchase been made at the beginning of the period, or the results which
may occur in the future.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
.....................
Net sales and services for the quarter ended September 30, 1996
increased $3.8 million or 34.9% to $14.7 million from $10.9 million for
the comparable period in the prior year. Net sales and services for the
nine months ended September 30, 1996 were $43.2 million versus
$31.1 million for the comparable period in the prior year, an increase of
$12.1 million or 38.9%. The increase for the three month period is
primarily attributable to higher sales in laser marking, industrial sales
and the acquisition of Photo Research.
Gross margins as a percentage of sales increased to 43.7% from 41.4%
for the quarter ended September 30, 1996 as compared to the comparable
period in the prior year. The increase in gross margin during the
quarter is due to the mix of products shipped during the quarter. For
the nine months ended September 30, 1996 the gross margins increased to
44.9% from 42.7% of sales in the same period in 1995.
Selling expense for the quarter ended September 30, 1996 increased
$600 thousand to $2.23 million from $1.63 million during the same period
in 1995. The increase is attributable to the increased sales. Selling
expense as a percentage of sales during the quarter remained stable at
approximately 15% in 1996 and in 1995. For the nine months ended
September 30, 1996 selling expenses increased to $6.8 million from $5
million in 1995. Selling expenses as a percentage of sales for the nine
months were 15.7% in 1996 and 16.2% in 1995.
General and administrative expenses for the quarter decreased $200
thousand to $900 thousand in 1996 from $1.1 million in 1995. The
decrease is due to increased efficiencies in most of the Company's
general and administrative functions. For the nine months ended
September 30, 1996 general and administrative expense decreased $230
thousand to $3.07 million from $3.3 million in 1995.
Research and development expenses for the quarter increased $260
thousand to $1.03 million in 1996 from $763 thousand in 1995. The
increase is due to the acquisition of Photo Research and increased R & D
in all operations. For the nine months ended September 30, research and
development expenses increased $1.0 million to $3.1 million from $2.1
million in 1995.
Interest expense was $526 thousand and $462 thousand for the nine
months ended September 30, 1996 and 1995, respectively, and $127
thousand and $180 thousand for the three months ended September 30, 1996
and 1995, respectively. The decrease in interest expense during the
quarter is due to a reduction in long term debt as a result of strong
cash flow from operations. Interest expense for the nine months ended
September 30, was higher compared to the same period in 1995 due to the
increased borrowings upon the acquisition of Photo Research. Interest
income was $176 thousand and $428 thousand for the nine months ended
September 30, 1996 and 1995, respectively. For the quarter ended
September 30, 1996 and 1995, interest income was $111 thousand and $138
thousand, respectively. The decrease in income is due to lower
investments in 1996.
Other income/expense for the nine months ended September 30, 1996
and 1995 was expense of $57 thousand and income of $408 thousand,
respectively. For the quarter ended September 30, 1996 other
income/expense was income of $19 thousand as compared to income of $267
thousand for the quarter ended September 30, 1995. This decrease in
other income for the current quarter and nine months is primarily due to
foreign exchange losses incurred by the Company's German subsidiary.
Liquidity and Capital Resources
...............................
Working capital at September 30, 1996 was $19.2 million as compared
to $17.6 million at December 31, 1995. The increase is primarily
attributable to the profitable operating results for the nine months
ended September 30, 1996, and proceeds of approximately 2.1 million from
the exercise of options and warrants offset by reductions in long term
debt and notes payable.
During the second quarter ended June 30, 1996 goodwill was further
reduced by $522 thousand as a result of the sale of Cambridge
Technology's medical product line.
In April 1996, the Company paid a cash dividend of $.40 per share to
holders of record of the Company's preferred stock as of April 19, 1996
totaling approximately $144 thousand.
As of September 30, 1996, the Company had all of its $5 million
available on its revolving line of credit with U.S. Trust. The
Company's term loans with U.S. Trust at September 30, 1996 were $4.3
million. The interest rate on the revolving line of credit and the term
loans is prime plus 0.75%. The Company pays $375 thousand per quarter in
principal payments on its outstanding term loans.
On March 5, 1996, in accordance with the Cambridge acquisition
agreement, the Company paid $600 thousand due on the first anniversary
date. Also on March 5, 1996, pursuant to the acquisition agreement, the
Company paid an additional $731 thousand based on Cambridge's attainment
of certain performance goals, as defined in the acquisition agreement.
The Company estimates that its current resources and anticipated
cash flow from operations will be sufficient to meet the Company's cash
requirements for at least the next 12 months.
The Company anticipates capital expenditures to remain at its
current level for the next 6 months.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning Legal Proceedings, reference is made
to Item 3. Legal Proceedings in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - (11) Computation of net earnings per share
(b) Reports on Form 8-K - None
SIGNATURES
..........
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.
DATED: October 24, 1996
EXCEL TECHNOLOGY, INC.
By: ......................
J. Donald Hill
Chief Executive Officer
By: .......................
Antoine Dominic
Chief Financial Officer
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
PRIMARY FULLY DILUTED
Three Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
..................... ......................
Net earnings $1,452,775 $ 786,839 $1,452,775 $ 786,839
Less: Preferred stock
dividend -- (40,944) -- --
.......... .......... .......... ..........
Net earnings available
to common shareholders $1,452,775 $ 745,895 $1,452,775 $ 786,839
.......... .......... .......... ..........
.......... .......... .......... ..........
Weighted average common
shares outstanding 9,152,843 8,300,687 9,152,843 8,300,687
Weighted average common
share equivalents:
Options and warrants 744,553 136,694 781,203 315,729
Preferred stock -- -- -- 428,270
.......... .......... .......... ..........
Weighted average common
and common equivalent
shares 9,897,396 8,437,381 9,934,046 9,044,686
.......... .......... .......... ..........
.......... .......... .......... ..........
Net earnings per share $0.15 $0.09 $0.15 $0.09
..... ..... ..... .....
..... ..... ..... .....
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
PRIMARY FULLY DILUTED
Nine Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
..................... ......................
Net earnings $3,711,648 $2,000,212 $3,711,648 $2,000,212
Less: Preferred stock
dividend 54,273 (122,983) -- --
.......... .......... .......... ..........
Net earnings available
to common shareholders $3,657,375 $1,877,229 $3,711,648 $2,000,212
Weighted average common
shares outstanding 8,757,031 8,266,726 8,757,031 8,266,726
Weighted average common
share equivalents:
Options and warrants 817,986 61,529 953,466 127,520
Preferred stock -- -- 185,629 447,983
.......... .......... .......... ..........
Weighted average common
and common equivalent
shares 9,575,017 8,328,245 9,896,126 8,842,229
.......... .......... .......... ..........
.......... .......... .......... ..........
Net earnings per share $0.38 $0.23 $0.38 $0.23
..... ..... ..... .....
..... ..... ..... .....
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<CASH> 1,967,470 1,967,470
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