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 March 31, 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
(Address of Principal Number)
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
May 7, 1996 as: 8,529,897.
The number of shares of the Registrant's Series 1 convertible preferred
stock outstanding as of May 7, 1996 was: 345,292.
The number of the Registrant's Class B warrants outstanding as of
May 7, 1996 was: 1,254,058.
CONTENTS
PART I. FINANCIAL INFORMATION
...............................
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS: Page
Balance Sheets as of March 31, 1996 and
December 31, 1995 3
Statements of Earnings and Accumulated Deficit
for the Three Months Ended March 31, 1996 and 1995 4
Statements of Cash Flows for the Three Months Ended
March 31, 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 10
None.
ITEM 2. CHANGES IN SECURITIES 10
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS 10
None.
ITEM 5. OTHER INFORMATION 10
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
(a) Exhibits - (11) Computation of net
earnings per share
(b) Reports on Form 8-K - None
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
March 31, 1996 Dec. 31, 1995
.............. .............
(unaudited) (audited)
Assets
......
Current assets:
Cash and cash equivalents $ 1,591,809 $ 2,326,932
Investments 5,041,045 5,887,693
Prepaid and refundable income taxes 78,717 503,741
Accounts receivable, less allowance
for doubtful accounts $202,000 and
$264,000 in 1996 and 1995,
respectively 10,588,564 7,353,479
Inventories 12,554,780 13,290,729
Other current assets 1,765,967 1,626,732
Total current assets 31,620,882 30,989,306
Property, plant and equipment, net 1,668,816 1,777,917
Other assets 675,412 794,518
Excess of cost over fair value of
net assets of businesses acquired, net
of accumulated amortization of $1,103,916
in 1996 and $971,504 in 1995. 9,313,732 9,445,873
Total assets $ 43,278,842 $ 43,007,614
Liabilities and Stockholders' Equity
....................................
Current liabilities:
Note payable, current $ 733,899 $ 2,019,257
Current portion of long-term debt 1,500,012 1,550,704
Accounts payable 3,054,132 3,052,543
Accrued expenses and other
current liabilities 6,945,915 6,757,312
Total current liabilities 12,233,958 13,379,816
Long-term debt, less current installments 7,419,621 6,699,457
Long term notes payable - 868,763
Stockholders' equity:
Series 1 redeemable convertible preferred
stock par value $.001 per share:
(liquidation preference $5.00 per share)
2,000,000 shares authorized, 363,000
issued and outstanding in 1996, and
405,000 in 1995. 363 405
Common stock, par value $.001 per share:
20,000,000 shares authorized, 8,947,976
and 8,347,000 issued and outstanding in
1996 and 1995, respectively. 8,498 8,347
Additional paid-in capital 29,964,853 29,360,278
Accumulated deficit (6,311,515) (7,367,153)
Foreign currency translation adjustment (36,936) 57,701
23,625,263 22,059,578
Total liabilities and
shareholders' equity $ 43,278,842 $ 43,007,614
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
March 31, 1996 March 31, 1995
.............. ..............
Net sales and services $ 13,895,613 $ 9,621,348
Cost of sales and services 7,465,248 5,695,686
Gross profit 6,430,365 3,925,662
Operating expenses:
Selling 2,328,308 1,659,738
General and administrative 1,100,851 1,041,522
Research and development 1,065,940 631,719
Amortization of excess of cost over
fair value of net assets of
businesses acquired 132,141 87,223
Earnings from operations 1,803,125 505,460
Non operating expenses (income):
Interest expense 197,696 91,748
Interest income (6,845) (147,185)
Other expense (income), net 11,930 (45,790)
Earnings before provision for income taxes 1,600,344 606,687
Provision for income taxes 544,706 187,000
Net earnings 1,055,638 419,687
Accumulated deficit, beginning of period (7,367,153) (5,609,181)
Preferred stock dividends - -
Accumulated deficit, end of period $ (6,311,515) $ (5,189,494)
Earnings per share:
Primary $0.11 $0.05
Fully diluted $0.11 $0.05
Weighted average common and common
equivalent shares outstanding:
Primary 9,029,371 8,250,947
Fully diluted 9,706,784 8,718,770
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 1996 March 31, 1995
.............. ..............
Cash flows from operating activities:
Net income $ 1,055,638 $ 419,687
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 385,887 202,325
Provision for bad debts 5,901 41,900
Changes in operating assets and
liabilities, net of effects from
acquisition:
Increase in accounts receivable (3,240,986) (135,839)
Decrease (increase) in inventories 735,949 (1,238,419)
Decrease in prepaid and refundable
taxes and other current assets 285,789 274,072
Decrease (increase) in other assets 119,105 (112,698)
Increase in accounts payable 1,589 733,598
(Decrease) increase in accrued expenses
and other current liabilities (680,159) 96,269
Net cash (used in)
provided by operating
activities: (1,331,287) 281,345
Cash flows from investing activities:
Cash paid for acquisitions,
net of cash acquired (1,331,237) (3,072,363)
Cash paid for capital expenditures (144,644) (148,996)
Redemption of investments 846,648 3,193,343
Net cash used in investing
activities: (629,233) (28,016)
Cash flows from financing activities:
Proceeds from exercise of common stock
options and warrants 604,684 989
Proceeds from borrowings on notes payable 45,879 197,504
Proceeds on long-term borrowings and
revolving credit line 669,472 3,726,904
Net cash provided by
financing activities: 1,320,035 3,925,397
Effect of exchange rate changes on assets
and liabilities including cash (94,367) 116,649
Net (decrease) increase in cash and cash
equivalents (735,123) 4,295,375
Cash and cash equivalents, beginning of
period 2,326,932 1,545,148
Cash and cash equivalents, end of period $ 1,591,809 $ 5,840,523
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 213,329 $ 85,058
Income taxes $ 434,500 $ 16,282
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated balance sheet as of March 31, 1996 and the consolidated
statements of earnings and accumulated deficit and cash flows for the
three month periods ended March 31, 1996 and March 31, 1995 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 March 31, 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 period ended March 31,
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 government securities, corporate
bonds and mortgage-backed securities, 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
March 31, 1996 and, thus, unrealized gains and losses are reported on a
realized basis. 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:
March 31, 1996 Dec. 31, 1995
.............. .............
Raw Materials $ 5,163,768 $ 4,893,171
Work in Process 5,662,046 6,269,983
Finished Goods 1,339,202 1,759,118
Consigned Inventory 389,764 368,457
$ 12,554,780 $ 13,290,729
E. NOTES AND LOAN PAYABLES
As of March 31, 1996, the Company had approximately $2.5 million
available on its $5 million revolving line of credit with U.S. Trust.
The Company's term loans with U.S. Trust at March 31, 1996 was $6.2
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.
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.
Proforma
March 31, 1995
Net sales and services $ 11,800,000
Net income 458,000
Earnings per share - Primary $0.05
Earnings per share - Fully Diluted $0.05
The proforma 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 of the results which may
occur in the future.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPTERATIONS
Results of Operations
.....................
Net sales and services for the quarter ended March 31, 1996 increased
$4.3 million to $13.9 million from $9.6 million for the comparable period
in the prior year. The increase is primarily attributable to the
acquisition of Cambridge and Photo Research which accounted for $2.6
million of this increase. In addition all product lines, with the
exception of medical, realized increased sales over the same period last
year.
Gross margins as a percentage of sales increased to 46.3% for the period
ended March 31, 1996 from 40.8% in the same period ended March 31,1995.
The decrease in cost as a percentage of sales in the quarter ended March
1996 is primarily due to the acquisitions of Cambridge and Photo Research
which experience higher gross margins, and improved margins from the
Company's New York operations.
Selling expenses increased to $2.3 million in the quarter ended March 31,
1996 from $1.66 million in the quarter ended March 31, 1995. The
increase of $670 thousand or 40.3% in the current period is attributable
to the increase in the sales volume. Selling expenses as a percentage of
sales decreased from 17.3% to 16.8%.
General and administrative expenses increased $60 thousand from $1.04
million in the quarter ended March 31, 1995 to $1.1 million in the
current period or 5.7%. The increase is primarily due to the acquisition
of Photo Research which was offset by a decrease in the New York
operations.
Research and development costs for the quarter ended March 31, 1996
increased $440 thousand or 68.7% to $1.07 million from $630 thousand in
the quarter ended March 31,1995. The increase is primarily attributable
to the acquisition of Photo Research and increased research and
development costs related to all product lines excluding medical.
Interest expense was $198 thousand versus $92 thousand for the quarters
ended March 31, 1996 and 1995, respectively. The increase of $106
thousand is due to an increase in long term debt due to acquisitions
which was partially offset by a decrease in borrowing on the Company's
revolving line of credit.
The decrease in interest income to $7 thousand in the quarter ending
March 31, 1996 from $147 thousand in the same period of 1995, a decrease
of $140 thousand, is primarily due to a decrease in average investments
and change in accounting procedure for investments.
Other income/expense was an expense of $12 thousand for the quarter
ended March 31, 1996 as compared to income of $46 thousand for the
quarter ended March 31, 1995. This decrease from income to expense is a
result of foreign currency translation losses incurred by the Company's
German subsidiary in the current quarter.
Liquidity and Capital Resources
...............................
Working capital at March 31, 1996 was $19.4 million as compared to $17.6
million at December 31, 1995. The increase is primarily attributable to
the profitable operating results for the quarter ended March 31, 1996, an
increase in long term debt of $700 thousand and proceeds of approximately
$600 thousand from exercises in options and warrants offset by a
reclassification of long term notes payable to current liabilities.
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
totalling approximately $144 thousand.
As of March 31, 1996, the Company had approximately $2.5 million
available on its $5 million revolving line of credit with U.S. Trust.
The Company's term loans with U.S. Trust at March 31, 1996 were $6.2
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 has no major capital expenditures planned in 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 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: May 10, 1996
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
..............................
J. Donald Hill President and
Chief Executive Officer
By: /s/ Antoine Dominic
..............................
Antoine Dominic
Chief Financial Officer
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
PRIMARY FULLY DILUTED
Three Months Ended Three Months Ended
March 31, March 31,
1996 1995 1996 1995
.................... ....................
Net earnings $1,055,638 $419,687 $1,055,638 $419,687
Less: Preferred stock
dividend (36,344) (46,735) - -
Net earnings available
to common shareholders $1,019,294 $372,952 $1,055,638 $419,687
Weighted average
common shares outstanding 8,429,920 8,222,967 8,429,920 8,222,967
Weighted average
common share equivalents:
Options and warrants 599,451 27,980 900,168 27,980
Preferred stock - - 376,696 467,823
Weighted average
common and common
equivalent shares 9,029,371 8,250,947 9,706,784 8,718,770
Net earnings per share $.11 $.05 $.11 $.05
