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, 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
April 28, 1997 was: 10,449,147.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
..................................
Balance Sheets as of March 31, 1997 and
December 31, 1996 3
Statements of Earnings and Accumulated Deficit for
for the Three Months Ended March 31, 1997 and 1996 4
Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
.................................................
Condition and Results of Operations 7
...................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
None.
Item 3. Defaults upon Senior Securities 9
None.
Item 4. Submission of Matters to a Vote of Security-Holders 9
None.
Item 5. Other Information 9
None.
Item 6. Exhibits and Reports on Form 8-K 9
(a) Exhibits - (11) Computation of net earnings
per share 11
(b) Reports on Form 8-K - None
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
CONSOLIDATED BALANCE SHEETS
March 31, 1997 Dec. 31, 1996
(unaudited) (audited)
.............. .............
Assets
Current assets:
Cash and cash equivalents $ 3,645,948 $ 2,910,982
Investments 10,900,995 4,076,045
Prepaid and refundable income taxes 124,492 124,492
Accounts receivable, less allowance
for doubtful accounts of $230,000
and $276,000 in 1997 and 1996,
respectively 12,003,459 9,145,460
Inventories 10,185,122 10,977,407
Deferred income taxes 645,100 650,200
Other current assets 590,052 532,295
.............. .............
Total current assets 38,095,168 28,416,881
.............. .............
Property, plant and equipment, net 2,450,495 2,475,586
Other assets 619,174 701,896
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 $1,572,054
in 1997 and $1,479,628 in 1996. 6,400,145 6,492,571
Total assets $ 49,418,982 $ 39,940,934
.............. .............
.............. .............
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ -- $ 1,923,024
Note payable, current 864,842 1,288,282
Accounts payable 2,475,643 2,161,740
Accrued expenses and other
current liabilities 5,745,922 5,551,548
.............. .............
Total current liabilities 9,086,407 10,924,594
.............. .............
Stockholders' equity:
Common stock, par value $.001 per share:
20,000,000 shares authorized,
10,446,453 and 9,189,265 issued
and outstanding in 1997 and 1996,
respectively. 10,446 9,189
Additional paid-in capital 41,318,748 31,559,063
Accumulated deficit (850,753) (2,474,327)
Foreign currency translation adjustment (145,866) (77,585)
.............. .............
40,332,575 29,016,340
.............. .............
Total liabilities and
shareholders' equity $ 49,418,982 $ 39,940,934
.............. .............
.............. .............
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
March 31
................................
1997 1996
.............. .............
Net sales and services $ 16,327,892 $ 13,895,613
Cost of sales and services 8,475,045 7,465,248
.............. .............
Gross profit 7,852,847 6,430,365
Operating expenses:
Selling 2,752,592 2,328,308
General and administrative 1,122,084 1,100,851
Research and development 1,237,138 1,065,940
Amortization of excess of cost
over fair value of net assets of
businesses acquired 92,426 132,141
.............. .............
Earnings from operations 2,648,607 1,803,125
Non operating expenses (income):
Interest expense 135,492 197,696
Interest income (123,721) (6,845)
Other expense, net 59,734 11,930
.............. .............
Earnings before provision for
income taxes 2,577,102 1,600,344
Provision for income taxes 953,528 544,706
.............. .............
Net earnings 1,623,574 1,055,638
Accumulated deficit,
beginning of period (2,474,327) (7,367,153)
Accumulated deficit,
end of period $(850,753) $ (6,311,515)
.............. .............
.............. .............
Earnings per share:
Fully diluted $0.16 $0.11
..... .....
..... .....
Weighted average common and common
equivalent shares outstanding:
Fully diluted 10,379,419 9,706,784
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
................................
1997 1996
.............. .............
Cash flows from operating activities:
Net income $ 1,623,574 $ 1,055,638
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 344,432 385,887
Provision for bad debts 9,398 5,901
Changes in operating assets and
liabilities, net of effects
from acquisition:
Increase in accounts receivable (2,867,397) (3,240,986)
Decrease in inventories 792,285 735,949
(Increase) decrease in prepaid and
refundable taxes and other current
assets (52,657) 285,789
Decrease in other assets 82,722 119,105
Increase in accounts payable 313,903 1,589
Increase (decrease) in accrued
expenses and other current
liabilities 194,374 (680,159)
.............. .............
Net cash provided by (used in)
operating activities: 440,634 (1,331,287)
.............. .............
Cash flows from investing activities:
Cash paid for acquisitions, net of
cash acquired (723,150) (1,331,237)
Purchase of equipment (226,915) (144,644)
(Purchase) redemption of investments (6,824,950) 846,648
.............. .............
Net cash used in investing
activities: (7,775,015) (629,233)
.............. .............
Cash flows from financing activities:
Proceeds from exercise of common stock
options and warrants 9,760,942 604,684
Proceeds from borrowings on
notes payable 237,984 45,879
(Payments) proceeds on long-term
borrowings and revolving credit line (1,861,298) 669,472
.............. .............
Net cash provided by
financing activities: 8,137,628 1,320,035
.............. .............
Effect of exchange rate changes on assets
and liabilities including cash (68,281) (94,638)
.............. .............
Net increase (decrease) in cash and cash
equivalents 734,966 (735,123)
Cash and cash equivalents, beginning
of period 2,910,982 2,326,932
.............. .............
Cash and cash equivalents, end of period $ 3,645,948 $ 1,591,809
.............. .............
.............. .............
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 135,492 $ 213,329
Income taxes $ 426,000 $ 434,500
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
..................................
The consolidated balance sheet as of March 31, 1997 and the
consolidated statements of earnings and accumulated deficit and cash
flows for the three month periods ended March 31, 1997 and March 31, 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 March 31, 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 period ended March 31,
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 March 31, 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:
March 31, 1997 December 31, 1996
.............. .................
Raw Materials $ 3,697,873 $ 4,473,246
Work in Process 4,500,389 5,098,370
Finished Goods 1,762,878 1,124,538
Consigned Inventory 223,982 281,253
.............. ..............
$10,185,122 $ 10,977,407
.............. ..............
.............. ..............
E. NOTES AND LOAN PAYABLES
.......................
As of March 31, 1997, the Company had no borrowings on its $5
million revolving line of credit with U.S. Trust. The Company prepaid
all its term loans during the quarter ended March 31, 1997 and has no
outstanding debt with U. S. Trust.
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 February 17, 1997, in accordance with the acquisition agreement, the
Company paid $400 thousand due on the second anniversary date. In
addition, pursuant to the acquisition agreement, the Company paid an
additional $323 thousand based on Cambridge's attainment of certain
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 March 31, 1997
increased $2.4 million or 17.3% to $16.3 million from $13.9 million for
the comparable period in the prior year. The increase is primarily
attributable to increased sales in Control Laser (Industrial), Quantronix
(Semiconductor/Scientific/Industrial) and Cambridge (Scanners). This
increase was offset by our German subsidiary (primarily medical and
scientific product lines), which experienced reduced sales.
Gross margins as a percentage of sales increased to 48.1% for the
period ended March 31, 1997 from 46.3% in the same period ended March
31,1996. The decrease in cost as a percentage of sales in the quarter
ended March 1997 is primarily due to the increased sales volume.
Selling expenses increased to $2.8 million in the quarter ended
March 31, 1997 from $2.3 million in the quarter ended March 31, 1996.
The increase of $500 thousand or 21.7% in the current period is
attributable to the increase in the sales volume. Selling expense as a
percentage of sales remained the same at approximately 16.8%.
General and administrative expenses increased $20 thousand or 2%
from $1.1 million in the quarter ended March 31, 1996 to $1.12 million
in the current period. The increase is primarily due to higher corporate
expenses associated with the Company's new Manhattan office.
Research and development costs for the quarter ended March 31, 1997
increased $170 thousand or 16% to $1.24 million from $1.07 million in the
quarter ended March 31,1996. The increase is primarily attributable to
increased research and development costs related to all product lines
with the exception of medical.
Interest expense was $135 thousand versus $198 thousand for the
quarters ended March 31, 1997 and 1996, respectively. The decrease of
$63 thousand is due to the prepayment of all debt owed to U.S. Trust,
partially offset by interest paid to Gould on previously past due
royalties.
The increase in interest income to $124 thousand in the quarter
ending March 31, 1997 from $7 thousand in the same period of 1996, an
increase of $117 thousand, is primarily due to the increase in average
investments due to the proceeds from the exercise of warrants and
increased cash from operations.
Other income/expense was an expense of $60 thousand for the quarter
ended March 31, 1997 as compared to an expense of $12 thousand for the
quarter ended March 31, 1996. This increase 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, 1997 was $29.1 million as compared to
$17.5 million at December 31, 1996. The increase is primarily
attributable to the profitable operating results for the quarter ended
March 31, 1997, and proceeds of approximately $9.8 million from exercises
of options and warrants. In February 1997, Class B warrants to purchase
1,191,856 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 March 31, 1997, the Company had no borrowings on its $5
million revolving line of credit with U.S. Trust. The Company prepaid
all its term loans during the quarter ended March 31, 1997 and has no
outstanding debt with U. S. Trust
On February 17, 1997, in accordance with the Cambridge acquisition
agreement, the Company paid $400 thousand due on the second anniversary
date. 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.
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, 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 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: April 29, 1997
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
........................................
J. Donald Hill, Chairman of the Board,
President and Chief Executive Officer
By: /s/ Antoine Dominic
........................................
Antoine Dominic, Chief Financial Officer
and Principal Accounting Officer
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
PRIMARY FULLY DILUTED
Three Months Ended Three Months Ended
March 31, March 31,
...................... .......................
1997 1996 1997 1996
.......... ........... ........... ...........
Net earnings $ 1,623,574 $ 1,055,638 $ 1,623,574 $ 1,055,638
Less: Preferred stock
dividend -- (36,344) -- --
........... ........... ........... ...........
Net earnings
available to common
shareholders $ 1,623,574 $ 1,019,294 $ 1,623,574 $ 1,055,638
........... ........... ........... ...........
........... ........... ........... ...........
Weighted average common
shares outstanding 9,735,646 8,429,920 9,735,646 8,429,920
Weighted average common
share equivalents:
Options and warrants 643,773 599,451 643,773 900,168
Preferred stock -- -- -- 376,696
........... ........... ........... ...........
Weighted average common
and common equivalent
shares 10,379,419 9,029,371 10,379,419 9,706,784
........... ........... ........... ...........
........... ........... ........... ...........
Net earnings per share $0.16 $0.11 $0.16 $0.11
..... ..... ..... .....
..... ..... ..... .....
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