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, 1997 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
August 4, 1997 was: 10,878,954
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
..................................
Balance Sheets as of June 30, 1997 and
December 31, 199 3
Statements of Earnings and Accumulated Deficit
for the Three Months Ended June 30, 1997 and 1996 4
Statements of Earnings and Accumulated Deficit
for the Six Months Ended June 30, 1997 and 1996 5
Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
.................................................
Condition and Results of Operations 9
...................................
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, 1997 Dec. 31, 1996
............. .............
(unaudited) (audited)
Assets
......
Current assets:
Cash and cash equivalents $ 5,197,097 $ 2,910,982
Investments 11,051,776 4,076,045
Prepaid and refundable income taxes 124,492 124,492
Accounts receivable, less allowance for
doubtful accounts of $254,000 and
$278,000 in 1997 and 1996,
respectively 11,303,474 9,145,460
Inventories 11,119,056 10,977,407
Deferred income taxes 645,100 650,200
Other current assets 534,741 532,295
.......... ..........
Total current assets 39,975,736 28,416,881
........... ..........
Property, plant and equipment, net 2,695,604 2,475,586
Other assets 604,191 701,896
Deferred income taxes 1,854,000 1,854,000
Excess of cost over fair value of net
assets of businesses acquired,net of
accumulated amortization of $1,664,480
in 1997 and $1,479,628 in 1996. 6,307,719 6,492,571
........... .........
Total assets $51,437,250 $39,940,934
........... ..........
........... ..........
Liabilities and Stockholders' Equity
.....................................
Current liabilities:
Current portion of long-term debt $ -- $ 1,923,024
Notes payable, current 573,696 1,288,282
Accounts payable 2,197,307 2,161,740
Accrued expenses and other current
liabilities 5,830,686 5,551,548
.......... ..........
Total current liabilities 8,601,689 10,924,594
.......... ..........
Stockholders' equity:
Common stock, par value $.001 per share:
20,000,000 shares authorized,
10,522,267 and 9,189,265 issued and
outstanding in 1997 and 1996,
respectively. 10,522 9,189
Additional paid-in capital 41,680,776 31,559,063
Retained earnings (accumulated deficit) 1,341,975 (2,474,37)
Foreign currency translation adjustment (197,712) (77,585)
.......... ..........
42,835,561 29,016,340
.......... ..........
Total liabilities and
shareholders' equity $51,437,250 $39,940,934
.......... ..........
.......... ..........
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
June 30
...............................
1997 1996
............ ...........
Net sales and services $16,847,026 $14,616,936
Cost of sales and services 8,546,386 8,103,364
.......... ...........
Gross Profit 8,300,640 6,513,572
Operating expenses:
Selling 2,639,787 2,221,428
General and administrative 1,123,357 1,085,476
Research and development 1,196,414 1,037,365
Amortization of excess of cost over
fair value of net assets of
businesses acquired 92,426 128,954
.......... ...........
Earnings from operations 3,248,656 2,040,349
Non operating expenses (income):
Interest expense 13,106 185,359
Interest income (191,787) (58,141)
Other expense, net 48,713 79,931
.......... ...........
Earnings before provision for
income taxes 3,378,624 1,833,200
Provision for income taxes 1,185,896 629,967
.......... ...........
Net earnings 2,192,728 1,203,233
.......... ...........
Accumulated deficit, beginning of period (850,753) (6,311,513)
.......... ...........
.......... ...........
Retained earnings (accumulated deficit),
end of period $1,341,975 $(5,108,280)
.......... ...........
.......... ...........
Earnings per share:
Primary and fully diluted $.20 $.12
.... ....
.... ....
Weighted average common and common
equivalent shares outstanding:
Primary and fully diluted 11,066,000 10,123,000
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Six Months Ended
June 30
.............................
1997 1996
........... ...........
Net sales and services $33,174,918 $28,512,549
Cost of sales and services 17,021,430 15,568,612
........... ...........
Gross profit 16,153,488 12,943,937
Operating expenses:
Selling & Marketing 5,392,379 4,549,736
General and administrative 2,245,441 2,186,326
Research and development 2,433,552 2,103,305
Amortization of excess of cost
over fair value of net assets
of businesses acquired 184,852 261,096
........... ...........
Earnings from operations 5,897,264 3,843,474
Non operating expenses (income):
Interest expense 148,598 398,755
Interest income (315,507) (64,986)
Other expense, net 108,447 76,159
........... ...........
Earnings before provision for income taxes 5,955,726 3,433,546
Provision for income taxes 2,139,424 1,174,673
........... ...........
Net earnings 3,816,302 2,258,873
........... ...........
Accumulated deficit, beginning of period (2,474,327) (7,367,153)
........... ...........
Retained earnings (accumulated deficit),
end of period $ 1,341,975 $(5,108,280)
........... ...........
........... ...........
Earnings per share:
Primary and fully diluted $.36 $.23
.... ....
.... ....
Weighted average common and common
equivalent shares outstanding:
Primary and fully diluted 10,731,000 9,879,000
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
.............................
1997 1996
........... ...........
Cash flows from operating activities:
Net income $ 3,816,302 $ 2,258,873
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 641,865 704,314
Provision for bad debts 12,564 29,479
Changes in operating assets and
liabilities, net of effects from
acquisition:
Increase in accounts receivable (2,170,578) (2,488,304)
(Increase) decrease in inventories (141,649) 1,752,952
Decrease in prepaid and refundable
taxes and other current assets 2,654 193,079
Decrease in other assets 97,705 84,540
Increase (decrease) in accounts payable 35,567 (797,620)
Increase in accrued expenses and other
current liabilities 279,138 467,432
........... ...........
Net cash provided by
operating activities: 2,573,568 2,204,745
........... ...........
Cash flows from investing activities:
Cash paid for acquisition of Cambridge,
net of cash acquired (723,150) (1,331,237)
Purchases of equipment (677,032) (362,268)
Purchase of investments, net (6,975,731) (238,352)
Proceeds from sale of assets -- 522,178
........... ...........
Net cash used in
investing activities: (8,375,913) (1,409,679)
........... ...........
Cash flows from financing activities:
Proceeds from exercise of common
stock options and warrants 10,123,046 1,984,536
Proceeds from (repayment of) borrowings
on notes payable 8,564 (79,790)
Repayment on long-term debt/revolving
credit line (1,923,024) (2,879,502)
Payment of dividend, preferred stock -- (162,137)
........... ...........
Net cash provided by
(used in) financing
activities: 8,208,586 (1,136,893)
........... ...........
Effect of exchange rate changes on cash 120,126) (114,018)
........... ...........
Net decrease in cash and cash equivalents (2,286,115) (455,845)
........... ...........
Cash and cash equivalents,
beginning of period 2,910,982 2,326,932
........... ...........
Cash and cash equivalents, end of period $ 5,197,097 $ 1,871,087
........... ...........
........... ...........
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 148,598 $ 185,359
Income taxes $ 1,820,140 $ 546,500
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
..........................................
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
..................................
The consolidated balance sheet as of June 30, 1997, the consolidated
statements of earnings and accumulated deficit for the three month and
six month periods ended June 30, 1997 and the statement of cash flows for
the six months ended June 30, 1997 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, 1997 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, 1996. 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, 1997 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. Fully diluted earnings per
share amounts for the periods presented were the same as primary earnings
per share.
C. INVESTMENTS AND CASH EQUIVALENTS
................................
Investments, which consist primarily of commercial paper, are
recorded at fair value. The Company has classified its investments as
trading securities as of June 30, 1997 and, thus, unrealized gains and
losses are reported in net 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, 1997 December 31, 1996
............. .................
Raw Materials $ 4,395,271 $ 4,473,246
Work in Process 4,802,853 5,098,370
Finished Goods 1,755,428 1,124,538
Consigned Inventory 165,504 281,253
............ ............
$ 11,119,056 $ 10,977,407
............ ............
............ ............
E. NOTES AND LOAN PAYABLES
.......................
As of June 30, 1997, the Company had no borrowings on its $5 million
revolving line of credit with U.S. Trust. The Company prepaid the
remaining balances of all its term loans during the quarter ended March
31, 1997 and has no outstanding debt with U. S. Trust.
F. ACQUISITION
...........
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 February 17, 1997, the Company paid $400 thousand to Cambridge in
accordance with the acquisition agreement. In addition, the Company paid
an additional $323 thousand based on Cambridge's attainment of
performance goals, as defined in the acquisition agreement.
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, 1997 increased
$2.2 million to $16.8 million or 15% from $14.6 million for the
comparable period in the prior year. The increase is attributable to
increases in sales in all operations.
Gross margins as a percentage of sales increased to 49.3% for the
period ended June 30, 1997 as compared to 44.6% in the comparable period
in the prior year. For the six months ended June 30, 1997, the gross
margins increased to 48.7% from 45.4% of sales for the same period in
1996. The increase is due to increased manufacturing efficiencies coupled
with a higher margin product mix sold during the quarter.
Selling expenses for the three months ended June 30, 1997 increased
$418 thousand to $2.64 million from $2.2 million for the same period in
1996. The increase is due to the increased sales volume. Selling expenses
for the quarter as a percentage of sales increased to 15.6% in 1997 from
15.2% in 1996. For the six months ended June 30, 1997 selling expenses
increased $843 thousand to $5.39 million from $4.55 million in 1996 due
to the increased sales volume.
General and administrative expenses for the quarter ended June 30,
1997 increased $38 thousand to $1.12 million from $1.08 million in 1996.
The increase is due to higher corporate cost associated with the
Company's office in Manhattan. For the six months ended June 30, 1997,
general and administrative expenses increased $59 thousand to $2.24
million from $2.18 million, in 1996.
Research and development costs for the quarter ended June 30, 1997
increased $160 thousand to $1.2 million from $1.04 million in 1996. The
increase is primarily attributable to increased research and development
costs related to all product lines with the exception of medical. For the
six months ended June 30, 1997, research and development expenses
increased $330 thousand to $2.43 million compared with $2.1 million in
1996.
Interest expense was $13 thousand and $185 thousand for the three
months ended June 30, 1997 and 1996, respectively, and $149 thousand and
$399 thousand for the six months ended June 30, 1997 and 1996,
respectively. The decrease in interest expense is due to a reduction in
long term debt. For the quarters ended June 30, 1997 and 1996, interest
income was $191 thousand and $58 thousand, respectively. Interest income
was $315 thousand and $65 thousand for the six months ended June 30, 1997
and 1996, respectively. The increase in interest income is due to higher
average investments resulting from the proceeds from the exercise of
options/warrants and increased cash flow from operations.
Other expense for the quarter ended June 30, 1997 totaled $48
thousand as compared to expense of $79 thousand for the quarter ended
June 30, 1996. For the six months ended June 30, 1997 and 1996, other
expense was $108 thousand and $76 thousand, respectively.. 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, 1997 was $31.4 million as compared to
$17.5 million at December 31, 1996. The increase is primarily
attributable to the profitable operating results, $3.8 million for the
six months ended June 30, 1997, and proceeds of approximately $10.1
million from exercises in options and warrants. In February 1997, Class B
warrants to purchase 1,191,956 shares of common stock of the Company at
$8.00 per share were exercised, and resulted in net proceeds of $9.5
million to the Company.
As of June 30, 1997, the Company had no borrowings on its $5 million
revolving line of credit with U.S. Trust. The Company prepaid the
remaining balances of all its term loans during the quarter ended March
31, 1997 and has no outstanding debt with U. S. Trust.
On February 17, 1997, the Company paid $400 thousand to Cambridge in
accordance with the acquisition agreement. In addition, the Company paid
an additional $323 thousand based on Cambridge's attainment of
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.
Due to the Company's continuing growth, the Company's subsidiary,
Quantronix, plans to spend approximately $3.7 million over the next eight
months on the purchase of land and construction of a new building in
Setauket, New York to replace its existing manufacturing facilities.
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, 1996.
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: August 11, 1997
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
...................
J. Donald Hill
President
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
...................... .....................
1997 1996 1997 1996
........... .......... .......... ..........
Net earnings $ 2,192,728 $1,203,233 $2,192,728 $1,203,233
Less: Preferred stock
dividend -- (17,290) -- --
........... .......... .......... ..........
Net earnings available
to common shareholders $ 2,192,728 $1,185,943 $2,192,728 $1,203,233
........... .......... .......... ..........
........... .......... .......... ..........
Weighted average
common shares outstanding 10,479,009 8,688,715 10,479,009 8,688,715
Weighted average
common share equivalents:
Options and warrants 586,491 1,099,811 586,491 1,166,731
Preferred stock -- -- -- 267,139
........... .......... .......... ..........
Weighted average common and
common equivalent shares 11,065,500 9,788,526 11,065,500 10,122,585
........... .......... .......... ..........
........... .......... .......... ..........
Net earnings per share $0.20 $0.12 $0.20 $0.12
..... ..... ..... .....
..... ..... ..... .....
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
PRIMARY FULLY DILUTED
..................... .....................
Six Months Ended Six Months Ended
June 30 June 30
..................... .....................
1997 1996 1997 1996
.......... .......... .......... ..........
Net earnings $3,816,302 $2,258,873 $3,816,302 $2,258,873
Less: Preferred stock
dividend -- 54,273) -- --
.......... .......... .......... ..........
Net earnings available
to common shareholders $3,816,302 $2,204,600 $3,816,302 $2,258,873
Weighted average
common shares outstanding 10,109,381 8,556,949 10,109,381 8,556,949
Weighted average
common share equivalents:
Options and warrants 621,127 865,157 621,127 1,050,733
Preferred stock -- -- -- 271,366
.......... .......... .......... ..........
Weighted average common and
common equivalent shares 10,730,508 9,422,106 10,730,508 9,879,048
.......... .......... .......... ..........
.......... .......... .......... ..........
Net earnings per share $0.36 $0.23 $0.36 $0.23
..... ..... ..... .....
..... ..... ..... .....
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 5,197,097 5,197,097
<SECURITIES> 11,051,776 11,051,776
<RECEIVABLES> 11,303,474 11,303,474
<ALLOWANCES> 254,000 254,000
<INVENTORY> 11,119,056 11,119,056
<CURRENT-ASSETS> 39,975,736 39,975,736
<PP&E> 2,695,604 2,695,604
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 51,437,250 51,437,250
<CURRENT-LIABILITIES> 8,601,689 8,601,689
<BONDS> 0 0
0 0
0 0
<COMMON> 10,522 10,522
<OTHER-SE> 42,825,039 42,825,039
<TOTAL-LIABILITY-AND-EQUITY> 51,437,250 51,437,250
<SALES> 16,847,026 33,174,918
<TOTAL-REVENUES> 16,847,026 33,174,918
<CGS> 8,546,386 17,021,430
<TOTAL-COSTS> 8,546,386 17,021,430
<OTHER-EXPENSES> 5,051,984 10,256,224
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,106 148,598
<INCOME-PRETAX> 3,378,624 5,955,726
<INCOME-TAX> 1,185,896 2,139,424
<INCOME-CONTINUING> 2,192,728 3,816,302
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,192,728 3,816,302
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