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 June 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
(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
August 5, 1996 was: 9,155,631.
The number of the Registrant's Class B warrants outstanding as of August 5,
1996 was: 1,589,225.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
Balance Sheets as of June 30, 1996 and December 31, 1995 3
Statements of Earnings and Accumulated Deficit for 4
the Three Months Ended June 30, 1996 and 1995
Statements of Earnings and Accumulated Deficit 5
for the Six Months Ended June 30, 1996 and 1995
Statements of Cash Flows for the Six Months Ended 6
June 30, 1996 and 1995
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
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
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
June 30, 1996 Dec. 31, 1995
(unaudited) (audited)
............ .............
Assets
Current assets:
Cash and cash equivalents $ 1,871,087 $ 2,326,932
Investments 6,126,045 5,887,693
Prepaid and refundable income taxes 127,094 503,741
Accounts receivable, less allowance for
doubtful accounts of $250,000 and
$264,000 in 1996 and 1995, respectively 9,812,304 7,353,479
Inventories 11,537,777 13,290,729
Other current assets 1,810,300 1,626,732
............ .............
Total current assets 31,284,607 30,989,306
............ .............
Property, plant and equipment, net 1,696,968 1,777,917
Other assets 709,978 794,518
Excess of cost over fair value of net
assets of businesses acquired, net of
accumulated amortization of $1,232,600
in 1996 and $971,504 in 1995. 8,662,599 9,445,873
............ .............
Total assets $ 42,354,152 $ 43,007,614
............ .............
............ .............
Liabilities and Stockholders' Equity
Current liabilities:
Note payable, current $ 608,230 $ 2,019,257
Current portion of long-term debt 1,500,012 1,550,704
Accounts payable 2,254,923 3,052,543
Accrued expenses and other current
liabilities 7,931,371 6,757,312
............ .............
Total current liabilities 12,294,536 13,379,816
............ .............
Long-term debt, less current installments 3,870,647 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,253,942
issued and outstanding in 1996, and
405,342 in 1995. 254 405
Common stock, par value $.001 per share:
20,000,000 shares authorized, 8,893,664
and 8,347,976 issued and outstanding in
1996 and 1995, respectively. 8,894 8,347
Additional paid-in capital 31,344,418 29,360,278
Accumulated deficit (5,108,280) (7,367,153)
Foreign currency translation adjustment (56,317) 57,701
............ .............
26,188,969 22,059,578
............ .............
Total liabilities and
shareholders' equity $ 42,354,152 $ 43,007,614
............. ............
............. ............
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
June 30
1996 1995
...........................
Net sales and services $ 14,616,936 $ 10,537,800
Cost of sales and services 8,103,364 5,707,675
............ ............
Gross profit 6,513,572 4,830,125
Operating expenses:
Selling 2,221,428 1,740,479
General and administrative 1,085,476 1,172,185
Research and development 1,037,365 691,276
Amortization of excess of cost over
fair value of net assets of
businesses acquired 128,954 102,228
............ ............
Earnings from operations 2,040,349 1,123,957
Non operating expenses (income):
Interest expense 185,359 198,922
Interest income (58,141) (248,611)
Other expense, net 79,931 1,962
............ ............
Earnings before provision for income taxes 1,833,200 1,171,684
Provision for income taxes 629,967 378,000
............ ............
Net earnings 1,203,233 793,684
............ ............
Accumulated deficit, beginning of period (6,311,513) (5,189,494)
............ ............
Accumulated deficit, end of period $(5,108,280) $(4,395,810)
............ ............
............ ............
Earnings per share:
Primary $ .12 $ .09
Fully diluted $ .12 $ .09
Weighted average common and common
equivalent shares outstanding:
Primary 9,789,000 8,295,000
Fully diluted 10,123,000 8,763,000
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Six Months Ended
June 30
1996 1995
............................
Net sales and services $ 28,512,549 $ 20,159,148
Cost of sales and services 15,568,612 11,403,361
............ ............
Gross profit 12,943,937 8,755,787
Operating expenses:
Selling & Marketing 4,549,736 3,400,214
General and administrative 2,186,326 2,213,706
Research and development 2,103,305 1,322,995
Amortization of excess of cost over
fair value of net assets of businesses
acquired 261,096 189,456
............ .............
Earnings from operations 3,843,474 1,629,416
Non operating expenses (income):
Interest expense 398,755 281,984
Interest income (64,986) (290,189)
Other expense(income), net 76,159 (140,750)
............ .............
Earnings before provision for income taxes 3,433,546 1,778,371
Provision for income taxes 1,174,673 565,000
............ ............
Net earnings 2,258,873 1,213,371
............ ............
Accumulated deficit, beginning of period (7,367,153) (5,609,181)
............ ............
Accumulated deficit, end of period $(5,108,280) $(4,395,810)
............ ............
............ ............
Earnings per share:
Primary $.23 $.14
Fully diluted $.23 $.14
Weighted average common and common
equivalent shares outstanding:
Primary 9,422,000 8,274,000
Fully diluted 9,879,000 8,741,000
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
1996 1995
........................
Cash flows from operating activities:
Net income $ 2,258,873 $ 1,213,371
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 704,314 444,701
Provision for bad debts 29,479 70,915
Changes in operating assets and liabilities,
net of effects from acquisition:
(Increase) decrease in accounts receivable (2,488,304) 526,118
Decrease (increase) in inventories 1,752,952 (2,068,504)
Decrease in prepaid and refundable taxes
and other current assets 193,079 148,538
Decrease (increase) in other assets 84,540 (174,543)
(Decrease) increase in accounts payable (797,620) 463,896
Increase in accrued expenses and other
current liabilities 467,432 711,691
........... ............
Net cash provided by operating
activities: 2,204,745 1,336,183
........... ............
Cash flows from investing activities:
Cash paid for acquisition of Cambridge,
net of cash acquired (1,331,237) (3,069,784)
Purchases of equipment (362,268) (367,075)
Purchase of investments, net (238,352) (827,920)
Proceeds from sale of assets 522,178 --
........... ...........
Net cash used in investing
activities: (1,409,679) (4,264,779)
............ ...........
Cash flows from financing activities:
Proceeds from exercise of common stock
options and warrants 1,984,536 5,769
Repayment of borrowings on notes payable (79,790) (103,916)
(Repayment) proceeds on long-term
debt/revolving credit line (2,879,502) 3,056,245
Payment of dividend, preferred stock (162,137) (186,941)
............ ...........
Net cash (used in)provided by
financing activities: (1,136,893) 2,771,157
............ ...........
Effect of exchange rate changes on cash (114,018) (1,180)
............ ...........
Net decrease in cash and cash equivalents (455,845) (158,619)
............ ...........
Cash and cash equivalents, beginning of period 2,326,932 1,545,148
............ ...........
Cash and cash equivalents, end of period $ 1,871,087 $ 1,386,529
............ ...........
............ ...........
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 185,359 $ 275,340
Income taxes $ 546,500 $ 62,282
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated balance sheet as of June 30, 1996, the consolidated
statements of earnings and accumulated deficit for the three month and six
month periods ended June 30, 1996 and the statement of cash flows for six
months ended June 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 June 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 six month periods ended June
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 government securities,
corporate bonds, mortgage-backed securities, and stocks 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 June 30, 1996 and, thus, 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:
June 30, 1996 Dec. 31, 1995
............. .............
Raw Materials $ 4,942,621 $ 4,893,171
Work in Process 5,097,277 6,269,983
Finished Goods 1,128,862 1,759,118
Consigned Inventory 369,017 368,457
............. .............
$11,537,777 $13,290,729
E. NOTES AND LOAN PAYABLES
As of June 30, 1996, the Company had approximately $4.95 million
available on its $5 million revolving line of credit with U.S. Trust. The
Company's term loans with U.S. Trust at June 30, 1996 were $5.3 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.
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.
Six Months Ended
June 30,1995
................
Net sales and services $ 22,523,000
Net income $ 1,162,000
Earnings per share - Primary $0.13
Earnings per share - Fully Diluted $0.13
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 OPERATIONS
Results of Operations
.....................
Net sales and services for the quarter ended June 30, 1996 increased
$4.1 million or 38% from $10.5 million for the comparable period in the
prior year. The increase is attributable to the acquisition of Photo
Research which accounted for $1.7 million and increases in sales in all
operations, with the exception of Medical which had lower sales.
Gross margins as a percentage of sales reduced to 44.5% from 45.8% for
the period ended June 30, 1996 as compared to the comparable period in the
prior year. The decrease is due to the mix of shipments during the quarter.
For the six months ended June 30, 1996 the gross margins increased to 45.3%
from 43.4% of sales in the same period in 1995 due to the increased sales
volume.
Selling expenses for the three months ended June 30, 1996 increased
$480 thousand to $2.2 million from $1.74 million in the same period in
1995. The increase is due to the increased sales volume. Selling expenses
for the quarter as a percentage of sales decreased to 15.1% in 1996 from
16.5% in 1995. For the six months ended June 30, selling expenses increased
$1.15 million to $4.55 million in 1996 from $3.4 million in 1995.
General and administrative expenses for the quarter decreased $90
thousand to $1.08 million in 1996 from $1.17 million in 1995. The decrease
is due to increased efficiencies in most of the Company's operations which
experienced lower expenses. For the six months ended June 30, general and
administrative expenses decreased $30 thousand to $2.18 million, in 1996,
from $2.21 million in 1995.
Research and development costs for the quarter increased $350 thousand
to $1.05 million in 1996 from $700 thousand in 1995. The increase is due to
the acquisition of Photo Research and increased R & D in all operations.
For the six months ended June 30, research and development expenses
increased $800 thousand to $2.1 million in 1996 from $1.3 million in 1995.
Interest expense was $399 thousand and $282 thousand for the six months
ended June 30, 1996 and 1995, respectively, and $185 thousand and $199
thousand for the three months ended June 30, 1996 and 1995, respectively.
The decrease in interest expense is due to a reduction in long term debt as
a result of operational cash flow. Interest income was $65 thousand and
$290 thousand for the six months ended June 30, 1996 and 1995 respectively.
For the quarter ended June 30, 1996 and 1995 interest income was $58
thousand and $249 thousand, respectively. The decrease in income is due to
lower investments in 1996.
Other income/expense for the six months ended June 30, 1996 and 1995
was an expense of $76 thousand and income of $141 thousand, respectively.
For the quarter ended June 30, 1996 other expense was $80 thousand as
compared to expense of $2 thousand for the quarter ended June 30, 1995.
This increase in expense for the current quarter and six months is due to
foreign exchange losses incurred by the Company's German subsidiary.
Liquidity and Capital Resources
...............................
Working capital at June 30, 1996 was $19.0 million as compared to $17.6
million at December 31, 1995. The increase is primarily attributable to the
profitable operating results for the six months ended June 30, 1996, and
proceeds of approximately $2.0 million from exercises in options and
warrants offset by a reduction of long term debt and notes payable.
During the 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. All inventory related to this product was transferred to the
buyer at cost.
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 June 30, 1996, the Company had approximately $4.95 million
available on its $5 million revolving line of credit with U.S. Trust. The
Company's term loans with U.S. Trust at June 30, 1996 were $5.3 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 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: August 13, 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
June 30 June 30
1996 1995 1996 1995
.......... ......... .......... .........
Net earnings $1,203,233 $ 793,685 $1,203,233 $ 793,685
Less: Preferred stock
dividend (17,290) (44,030) -- --
Net earnings available to
common shareholders $1,185,940 $ 749,655 $1,203,233 $ 793,685
Weighted average
common shares outstanding 8,688,715 8,275,303 8,688,715 8,275,303
Weighted average
common share equivalents:
Options and warrants 1,099,811 19,883 1,166,731 38,850
Preferred stock -- -- 267,139 448,784
Weighted average common and
common equivalent shares 9,788,526 8,295,186 10,122,585 8,762,937
Net earnings per share $0.12 $0.09 $0.12 $0.09
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
PRIMARY FULLY DILUTED
Six Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
.......... ......... .......... ..........
Net earnings $2,258,873 $1,213,371 $2,258,873 $1,213,371
Less: Preferred stock
dividend (54,273) (88,060) -- --
Net earnings available to
common shareholders $2,204,600 $1,125,311 $2,258,873 $1,213,371
Weighted average
common shares
outstanding 8,556,949 8,249,464 8,556,949 8,249,464
Weighted average
common share equivalents:
Options and warrants 865,157 23,932 1,050,733 33,415
Preferred stock -- -- 271,366 458,004
Weighted average common
and common equivalent
shares: 9,422,106 8,273,396 9,879,048 8,740,883
Net earnings per share $0.23 $0.14 $0.23 $0.14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 1,871,087 1,871,087
<SECURITIES> 6,126,045 6,126,045
<RECEIVABLES> 9,812,304 9,812,304
<ALLOWANCES> 0 0
<INVENTORY> 11,537,777 11,537,777
<CURRENT-ASSETS> 31,284,607 31,284,607
<PP&E> 1,696,968 1,696,968
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 42,354,152 42,354,152
<CURRENT-LIABILITIES> 12,294,536 12,294,536
<BONDS> 0 0
0 0
254 254
<COMMON> 8,894 8,894
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 42,354,152 42,354,152
<SALES> 14,616,936 28,512,549
<TOTAL-REVENUES> 14,616,936 28,512,549
<CGS> 8,103,364 15,568,612
<TOTAL-COSTS> 8,103,364 15,568,612
<OTHER-EXPENSES> 4,473,223 9,100,463
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 185,359 398,755
<INCOME-PRETAX> 1,833,200 3,433,546
<INCOME-TAX> 629,967 1,174,673
<INCOME-CONTINUING> 1,203,233 2,258,873
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,203,233 2,258,873
<EPS-PRIMARY> 0.12 0.23
<EPS-DILUTED> 0.12 0.23
</TABLE>
