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, 1998 Commission File Number 0-19306
Delaware 11-2780242
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
41 Research Way (516) 273-6900
E. Setauket NY 11733 (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
July 23, 1998 was: 11,167,498
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
..................................
Balance Sheets as of June 30, 1998 and
December 31, 1997 3
Statements of Earnings and Retained Earnings
(Accumulated Deficit) for the Three Months
Ended June 30, 1998 and 1997 4
Statements of Earnings and Retained Earnings
(Accumulated Deficit) for the Six Months
Ended June 30, 1998 and 1997 5
Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 6
Notes to Consolidated 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 and Use of Proceeds 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, 1998 Dec. 31, 1997
.............. .............
(unaudited) (audited)
Assets
......
Current assets:
Cash and cash equivalents $ 7,429,290 $ 6,331,159
Investments 11,672,801 14,209,854
Accounts receivable, less allowance for
doubtful accounts of $262,000 and
$254,000 in 1998 and 1997, respectively 11,968,652 11,522,041
Inventories 11,711,323 12,143,140
Deferred income taxes 645,100 692,500
Other current assets 391,732 584,840
........... ...........
Total current assets 43,818,898 45,483,534
........... ...........
Property, plant and equipment, net 9,625,931 5,392,955
Other assets 439,086 45,725
Deferred income taxes 1,722,000 1,674,600
Excess of cost over fair value of net
assets of businesses acquired, net of
accumulated amortization of $ 2,034,184
in 1998 and $1,849,332 in 1997,
respectively 5,938,015 6,122,867
........... ...........
Total assets $61,543,930 $59,219,681
........... ...........
........... ...........
Liabilities and Stockholders' Equity
....................................
Current liabilities:
Note payable $ 144,943 $ 182,888
Accounts payable 2,470,834 2,235,109
Accrued expenses and other current
liabilities 6,685,916 5,898,577
........... ...........
Total current liabilities 9,301,693 8,316,574
........... ...........
Stockholders' equity:
Common stock, par value $.001 per share:
20,000,000 shares authorized, 11,764,348
and 11,714,471 issued in 1998 and 1997,
respectively. 11,764 11,714
Additional paid-in capital 48,966,184 48,726,078
Retained earnings 9,048,184 5,760,370
Treasury stock, 599,025 shares in 1998
and 375,000 shares in 1997 (5,531,495) (3,339,375)
Foreign currency translation adjustment (252,400) (255,680)
........... ...........
52,242,237 50,903,107
........... ...........
Total liabilities and
shareholders' equity $61,543,930 $59,219,681
........... ...........
........... ...........
CONSOLIDATED STATEMENTS OF EARNINGS AND
.......................................
RETAINED EARNINGS (ACCUMULATED DEFICIT)
.......................................
(Unaudited)
Three Months Ended
June 30
..........................
1998 1997
........... ...........
Net sales and services $14,375,482 $16,847,026
Cost of sales and services 7,414,009 8,546,386
........... ...........
Gross Profit 6,961,473 8,300,640
Operating expenses:
Selling and marketing 2,269,372 2,639,787
General and administrative 1,142,718 1,123,357
Research and development 1,143,194 1,196,414
Amortization of excess of cost over fair
value of net assets of businesses acquired 92,426 92,426
........... ...........
Earnings from operations 2,313,763 3,248,656
Non operating expenses (income):
Interest expense 3,755 13,106
Interest income (238,713) (191,787)
Other (income) expense, net (29,226) 48,713
........... ...........
Earnings before provision for income taxes 2,577,947 3,378,624
Provision for income taxes 900,992 1,185,896
........... ...........
Net earnings 1,676,955 2,192,728
........... ...........
Retained earnings (accumulated deficit),
beginning of period 7,371,229 (850,753)
........... ...........
Retained earnings, end of period $ 9,048,184 $ 1,341,975
........... ...........
........... ...........
Earnings per share:
Basic earnings per common share $0.15 $0.21
..... .....
..... .....
Weighted average common shares outstanding 11,221,000 10,479,000
........... ...........
........... ...........
Diluted earnings per common share $0.15 $0.20
..... .....
..... .....
Weighted average common shares and common
share equivalents 11,437,000 11,066,000
........... ...........
........... ...........
CONSOLIDATED STATEMENTS OF EARNINGS AND
.......................................
RETAINED EARNINGS (ACCUMULATED DEFICIT)
.......................................
(Unaudited)
Six Months Ended
June 30
.........................
1998 1997
........... ...........
Net sales and services $28,674,645 $33,174,918
Cost of sales and services 14,639,379 17,021,430
........... ...........
Gross profit 14,035,266 16,153,488
Operating expenses:
Selling and marketing 4,571,817 5,392,379
General and administrative 2,427,479 2,245,441
Research and development 2,266,417 2,433,552
Amortization of excess of cost over fair
value of net assets of businesses acquired 184,852 184,852
........... ...........
Earnings from operations 4,584,701 5,897,264
Non operating expenses (income):
Interest expense 7,903 148,598
Interest income 485,594) (315,507)
Other (income) expense, net (15,233) 108,447
........... ...........
Earnings before provision for income taxes 5,077,625 5,955,726
Provision for income taxes 1,789,811 2,139,424
........... ...........
Net earnings 3,287,814 3,816,302
........... ...........
Retained earnings (accumulated deficit),
beginning of period 5,760,370 (2,474,327)
........... ...........
Retained earnings, end of period $ 9,048,184 $ 1,341,975
........... ...........
Earnings per share:
Basic earnings per common share $0.29 $0.38
........... ...........
........... ...........
Weighted average common shares outstanding 11,281,000 10,109,000
........... ...........
........... ...........
Diluted earnings per common share $0.29 $0.36
........... ...........
........... ...........
Weighted average common shares and
common share equivalents 11,529,000 10,731,000
........... ...........
........... ...........
CONSOLIDATED STATEMENTS OF CASH FLOWS
.....................................
(Unaudited)
Six Months Ended
June 30
.........................
1998 1997
........... ...........
Cash flows from operating activities:
Net earnings $ 3,287,814 $ 3,816,302
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation and amortization 773,249 641,865
Provision for bad debts 8,286 12,564
Changes in operating assets and liabilities,
net of effects from acquisition:
(Increase) in accounts receivable (454,897) (2,170,578)
Decrease (increase) in inventories 431,817 (141,649)
Decrease in other current assets 193,108 2,654
Decrease in other assets 106,639 97,705
Increase in accounts payable 235,725 35,567
Increase in accrued expenses and other
current liabilities 787,339 279,138
........... ...........
Net cash provided by operating activities: 5,369,080 2,573,568
........... ...........
Cash flows from investing activities:
Cash paid for acquisitions,
net of cash acquired -- (723,150)
Purchases of property, plant and equipment (4,821,373) (677,032)
Redemption (purchase) of investments, net 2,537,053 (6,975,731)
........... ...........
Net cash used in investing activities: (2,284,320) (8,375,913)
........... ...........
Cash flows from financing activities:
Purchase of treasury stock (2,192,120) --
Proceeds from exercise of common
stock options and warrants 240,156 10,123,046
(Payments of) proceeds from
borrowings on notes payable (37,945) 8,564
Payments of long-term debt and
revolving credit line -- (1,923,024)
........... ...........
Net cash (used in) provided by
financing activities: (1,989,909) 8,208,586
........... ...........
Effect of exchange rate changes on assets
and liabilities including cash 3,280 (120,126)
........... ...........
Net increase (decrease) in cash and
cash equivalents 1,098,131 (2,286,115)
........... ...........
Cash and cash equivalents, beginning of period 6,331,159 2,910,982
........... ...........
Cash and cash equivalents, end of period $ 7,429,290 $ 5,197,097
........... ...........
........... ...........
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 7,903 $ 148,598
Income taxes $ 1,173,606 $ 1,820,140
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
..........................................
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
..................................
The consolidated balance sheet as of June 30, 1998, the consolidated
statements of earnings and retained earnings (accumulated deficit) for
the three month and six month periods ended June 30, 1998 and the
consolidated statement of cash flows for the six months ended June 30,
1998 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, 1998 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, 1997. 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, 1998 are not necessarily indicative of the
operating results to be expected for the full year.
B. EARNINGS PER SHARE
..................
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings
per Share," which the Company adopted during 1997. Under SFAS 128, the
Company presents two earnings per share (EPS) amounts. Basic EPS is
calculated based on income available to common shareholders and the
weighted-average number of shares outstanding during the reported period.
Diluted EPS includes additional dilution from potential common stock
including stock issuable pursuant to the exercise of dilutive stock
options and warrants outstanding. Prior year earnings per share data
have been restated to apply the provisions of SFAS 128.
C. 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, 1998 December 31, 1997
............. .................
Raw Materials $ 5,401,897 $ 5,792,455
Work in Process 4,966,327 5,013,691
Finished Goods 767,157 619,316
Consigned Inventory 575,942 717,678
........... ...........
$11,711,323 $12,143,140
........... ...........
........... ...........
D. COMPREHENSIVE INCOME
....................
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income", which the Company implemented during
the first quarter of 1998. For the quarters ended June 30, 1998 and
1997, comprehensive income was $1,780,020 and $2,140,882, respectively.
For the six months ended June 30, 1998 and 1997 comprehensive income was
$3,291,094 and $3,696,175, respectively. The components of comprehensive
income are net earnings and foreign currency translation adjustments.
E. SEGMENT INFORMATION
...................
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosure about Segments of an Enterprise and Related Information".
Historically, the Company has operated in one business segment; however,
SFAS 131 redefines segments and in the future, the Company may also be
required to disclose certain financial information about operating
segments, products and services. The Company has not determined how
operating segments will be defined for disclosure purposes or which
segments will meet the quantitative requirements for disclosure. The
adoption of the standard will have no impact on the Company's future
results of operations or financial position.
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, 1998 decreased
$2.4 million or 14.3% to $14.4 million from $16.8 million for the
comparable period in the prior year. The decrease in sales is primarily
attributable to a decrease in sales in laser marking systems and reduced
sales to Asia for all products.
Gross margins as a percentage of sales decreased to 48.4% for the
quarter ended June 30, 1998 as compared to 49.3% in the comparable period
in the prior year. For the six months ended June 30, 1998, gross margins
increased to 48.9% from 48.7% of sales for the six months in 1997. The
decrease is due to the product mix sold during the quarter.
Selling and marketing expenses for the three months ended June 30,
1998 decreased $370 thousand or 14.2% to $2.27 million from $2.64 million
for the same period in 1997. Selling and marketing expenses for the
quarter as a percentage of sales increased to 15.8% in 1998 from 15.7% in
1997. For the six months ended June 30, 1998 selling and marketing
expenses decreased $821 thousand to $4.57 million from $5.39 million in
1997. Selling and marketing expenses for the six months ended as a
percentage of sales decreased to 15.9% in 1998 from 16.3% in 1997. The
decrease in selling and marketing expenses is due to the decrease in
sales volume.
General and administrative expenses for the periods ended June 30,
1998 were relatively comparable to prior periods. General and
administrative expenses for the quarter ended June 30, 1998 increased $19
thousand or 2% to $1.14 million from $1.12 million in 1997. For the six
months ended June 30, 1998, general and administrative expenses increased
$180 thousand or 8% to $2.43 million from $2.25 million, in 1997.
Research and development costs for the quarter ended June 30, 1998
decreased $53 thousand or 4% to $1.14 million from $1.20 million in 1997.
For the six months ended June 30, 1998, research and development expenses
decreased $167 thousand or 6.9% to $2.27 million compared with $2.43
million in 1997. The decrease is primarily attributable to reduced
research and development costs on Control Laser's new marking system.
Interest expense was $4 thousand and $13 thousand for the three
months ended June 30, 1998 and 1997, respectively, and $8 thousand and
$149 thousand for the six months ended June 30, 1998 and 1997,
respectively. The decrease in interest expense is due to a decrease in
the average note payable balance.
For the quarters ended June 30, 1998 and 1997, interest income was
$239 thousand and $191 thousand, respectively. Interest income was $486
thousand and $316 thousand for the six months ended June 30, 1998 and
1997, respectively. The increase in interest income is due to an
increase in average investments.
Other income/expense for the quarter ended June 30, 1998 was income
of $29 thousand as compared to expense of $49 thousand for the quarter
ended June 30, 1997. For the six months ended June 30, 1998 and 1997,
other income was $15 thousand and expense of $108 thousand, respectively.
This increase in income for the current quarter and six months is due to
foreign exchange gains incurred by the Company's German subsidiary.
Liquidity and Capital Resources
...............................
Working capital at June 30, 1998 was $34.5 million as compared to
$37.2 million at December 31, 1997. The decrease of $2.7 million is
primarily attributable to costs associated with the purchase of new
buildings and the purchase of treasury stock.
As of June 30, 1998, the Company had no debt. The revolving line of
credit with U.S. Trust expired in March 1998 and the Company did not
renew it due to the carrying cost.
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.
During the quarter ended June 30, 1998, the Company purchased a
building for its subsidiary, Photo Research, for approximately $1.8
million and spent approximately $350 thousand in tooling for a new
machine shop.
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, 1997.
Item 2. Changes in Securities and Use of Proceeds
.........................................
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: July 24, 1998
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
BASIC DILUTED
Three Months Ended Three Months Ended
June 30 June 30
........................ ........................
1998 1997 1998 1997
........... ........... ........... ...........
Net earnings $ 1,676,955 $ 2,192,728 $ 1,676,955 $ 2,192,728
........... ........... ........... ...........
........... ........... ........... ...........
Weighted average common
shares outstanding 11,221,172 10,479,009 11,221,172 10,479,009
Weighted average common
share equivalents:
Options and warrants -- -- 215,961 586,491
........... ........... ........... ...........
Weighted average common
and common equivalent
shares 11,221,172 10,479,009 11,437,133 11,065,500
........... ........... ........... ...........
........... ........... ........... ...........
Net earnings per share $0.15 $0.21 $0.15 $0.20
..... ..... ..... .....
..... ..... ..... .....
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
BASIC DILUTED
Six Months Ended Six Months Ended
June 30 June 30
........................ ........................
1998 1997 1998 1997
........... ........... ........... ...........
Net earnings $ 3,287,814 $ 3,816,302 $ 3,287,814 $ 3,816,302
........... ........... ........... ...........
........... ........... ........... ...........
Weighted average common
shares outstanding 11,281,820 10,109,381 11,281,820 10,109,381
Weighted average common
share equivalents:
Options and warrants -- -- 246,750 621,127
........... ........... ........... ...........
Weighted average common
and common equivalent
shares 11,281,820 10,109,381 11,528,570 10,730,508
........... ........... ........... ...........
........... ........... ........... ...........
Net earnings per share $0.29 $0.38 $0.29 $0.36
..... ..... ..... .....
..... ..... ..... .....
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 7,429,290 7,429,290
<SECURITIES> 11,672,801 11,672,801
<RECEIVABLES> 11,968,652 11,968,652
<ALLOWANCES> 0 0
<INVENTORY> 11,711,323 11,711,323
<CURRENT-ASSETS> 43,818,898 43,818,898
<PP&E> 9,625,931 9,625,931
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 61,543,930 61,543,930
<CURRENT-LIABILITIES> 9,301,693 9,301,693
<BONDS> 0 0
0 0
0 0
<COMMON> 11,764 11,764
<OTHER-SE> 52,230,473 52,230,473
<TOTAL-LIABILITY-AND-EQUITY> 61,543,930 61,543,930
<SALES> 14,375,482 28,674,645
<TOTAL-REVENUES> 14,375,482 28,674,645
<CGS> 7,414,009 14,639,379
<TOTAL-COSTS> 4,647,710 9,450,565
<OTHER-EXPENSES> (29,226) (15,233)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,755 7,903
<INCOME-PRETAX> 2,577,947 5,077,625
<INCOME-TAX> 900,992 1,789,811
<INCOME-CONTINUING> 1,676,955 3,287,814
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,676,955 3,287,814
<EPS-PRIMARY> .15 .29
<EPS-DILUTED> .15 .29
</TABLE>
