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, 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
May 12, 1998 was: 11,178,367.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
Balance Sheets as of March 31, 1998 and December 31, 1997 3
Statements of Earnings, Retained Earnings and Accumulated
Deficit for for the Three Months Ended
March 31, 1998 and 1997 4
Statements of Cash Flows for the Three Months Ended
March 31, 1998 and 1997 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
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security-Holders 9
Item 5. Other Information 9
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, 1998 Dec. 31, 1997
............. .............
(unaudited) (audited)
Assets
......
Current assets:
Cash and cash equivalents $ 6,032,209 $ 6,331,159
Investments 14,403,801 14,209,854
Accounts receivable, less allowance
for doubtful accounts of $251,000
and $254,000 in 1998 and 1997,
respectively 11,155,447 11,522,041
Inventories 11,990,134 12,143,140
Deferred income taxes 645,100 692,500
Other current assets 759,295 584,840
............. .............
Total current assets 44,985,986 45,483,534
............. .............
Property, plant and equipment, net 7,105,329 5,392,955
Other assets 503,505 545,725
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 $1,941,758
in 1998 and $1,849,332 in 1997. 6,030,441 6,122,867
............. .............
Total assets $ 60,347,261 $ 59,219,681
............. .............
............. .............
Liabilities and Stockholders' Equity
....................................
Current liabilities:
Note payable $ 164,094 182,888
Accounts payable 1,977,998 2,235,109
Accrued expenses and other
current liabilities 5,850,643 5,898,577
............. .............
Total current liabilities 7,992,735 8,316,574
............. .............
Stockholders' equity:
Common stock, par value $.001 per share:
20,000,000 shares authorized, 11,721,710
and 11,714,471 issued in 1998 and 1997,
respectively. 11,722 11,714
Additional paid-in capital 48,765,570 48,726,078
Retained earnings 7,371,229 5,760,370
Treasury stock, 385,000 in 1998
and 375,000 in 1997 (3,438,530) (3,339,375)
Foreign currency translation adjustment (355,465) (255,680)
............. .............
52,354,526 50,903,107
............. .............
Total liabilities and
stockholders' equity $ 60,347,261 $ 59,219,681
............. .............
............. .............
CONSOLIDATED STATEMENTS OF EARNINGS
AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
(Unaudited)
Three Months Ended
March 31
.........................
1998 1997
............. .............
Net sales and services $ 14,299,163 $ 16,327,892
Cost of sales and services 7,225,370 8,475,045
............. .............
Gross profit 7,073,793 7,852,847
Operating expenses:
Selling 2,302,445 2,752,592
General and administrative 1,284,761 1,122,084
Research and development 1,123,223 1,237,138
Amortization of excess of cost over fair
value of net assets of businesses acquired 92,426 92,426
............. .............
Earnings from operations 2,270,938 2,648,607
Non-operating expenses (income):
Interest expense 4,148 135,492
Interest income (246,881) (123,721)
Other expense, net 13,993 59,734
............. .............
Earnings before provision for income taxes 2,499,678 2,577,102
Provision for income taxes 888,819 953,528
............. .............
Net earnings 1,610,859 1,623,574
Retained earnings (accumulated deficit),
beginning of period 5,760,370 (2,474,327)
............. .............
Retained earnings (accumulated deficit),
end of period $ 7,371,229 $ (850,753)
............. .............
............. .............
Earnings per share:
Basic earnings per common share $0.14 $0.17
............. .............
............. .............
Weighted average common shares outstanding: 11,343,143 9,735,646
............. .............
............. .............
Diluted earnings per common share $0.14 $0.16
............. .............
............. .............
Weighted average common shares and
common share equivalents 11,615,752 10,379,419
............. .............
............. .............
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
.............................
1998 1997
............. .............
Cash flows from operating activities:
Net income $ 1,610,859 $ 1,623,574
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 388,648 344,432
Provision for bad debts 7,786 9,398
Changes in operating assets and
liabilities, net of effects from
acquisition:
Decrease (increase) in accounts
receivable 358,808 (2,867,397)
Decrease in inventories 153,006 792,285
(Increase) in other current assets (174,455) (52,657)
Decrease in other assets 42,220 82,722
(Decrease) increase in accounts
payable (257,111) 313,903
Decrease (increase) in accrued
expenses and other current
liabilities (47,935) 194,374
............. .............
Net cash provided by
operating activities: 2,081,826 440,634
............. .............
Cash flows from investing activities:
Cash paid for acquisitions, net of cash
acquired 0 (723,150)
Purchase of property, plant and equipment (2,008,595) (226,915)
Purchase of investments, net (193,947) (6,824,950)
............. .............
Net cash used in investing
activities: (2,202,542) (7,775,015)
............. .............
Cash flows from financing activities:
Purchase of treasury stock (99,155) 0
Proceeds from exercise of common stock
options and warrants 39,500 9,760,942
Proceeds from (payments of) borrowings
on notes payable (18,794) 237,984
Payments on long-term borrowings and
revolving credit line 0 (1,861,298)
............. .............
Net cash (used in) provided
by financing activities: (78,449) 8,137,628
............. .............
Effect of exchange rate changes on assets
and liabilities including cash (99,785) (68,281)
............. .............
Net (decrease) increase in cash and cash
equivalents (298,950) 734,966
Cash and cash equivalents,
beginning of period 6,331,159 2,910,982
............. .............
Cash and cash equivalents, end of period $ 6,032,209 $ 3,645,948
............. .............
............. .............
Supplemental cash flow disclosure:
..................................
Cash paid for:
Interest $ 4,148 $ 135,492
Income taxes $ 888,000 $ 426,000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
..........................................
(unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
..................................
The consolidated balance sheet as of March 31, 1998 and the
consolidated statements of earnings and accumulated deficit and cash
flows for the three month periods ended March 31, 1998 and March 31, 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 March 31, 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 period ended March 31,
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 and the effect of assuming the
conversion of convertible preferred stock. Prior year earnings per share
data have been restated to apply the provisions of SFAS 128.
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, 1998 and, thus, unrealized gains and
losses are reported in net earnings.
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, 1998 December 31, 1997
.............. .................
Raw Materials $ 6,049,106 $ 5,792,455
Work in Process 4,559,822 5,013,691
Finished Goods 696,208 619,316
Consigned Inventory 684,998 717,678
............ .............
$ 11,990,134 $ 12,143,140
............. .............
............. .............
E. NOTES AND LOAN PAYABLES
.......................
As of March 31, 1998, the Company had no borrowings on its $5
million revolving line of credit with U.S. Trust. The revolving line of
credit expired in March 1998 and the Company did not renew it due to the
carrying cost.
F. 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
this quarter. At March 31, 1998 and 1997 comprehensive income is
$1,511,074 and $1,555,293, respectively. The components of comprehensive
income are net income and foreign currency translation adjustments.
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, 1998
decreased $2.0 million or 12.2% to 14.3 million from $16.3 million for
the comparable period in the prior year. The decrease is primarily
attributable to decreased sales in laser marking systems.
Gross margins as a percentage of sales increased to 49.5% for the
period ended March 31, 1998 from 48.1% in the same period ended March
31,1997. The decrease in cost as a percentage of sales in the quarter
ended March 1998 is primarily due to increased gross margins at
Quantronix and the product mix for the quarter.
Selling expenses decreased to $2.3 million in the quarter ended
March 31, 1998 from $2.8 million in the quarter ended March 31, 1997.
The decrease of $500 thousand or 17.9% in the current period is
attributable to the decrease in sales volume. Selling expense as a
percentage of sales decreased to 16.1% for the quarter ended March
31,1998 from 16.8% for the comparable period in the prior year.
General and administrative expenses increased $160 thousand or 14%
from $1.12 million in the quarter ended March 31, 1997 to $1.28 million
in the current period. The increase is primarily attributable to the
reversal of a corporate expense of $120 thousand for royalties which was
reclassified to interest expense for late payments to Gould.
Research and development costs for the quarter ended March 31, 1998
decreased $115 thousand or 9.3% to $1.12 million from $1.24 million in
the quarter ended March 31, 1997. The decrease is primarily attributable
to reduced research and development costs on Control Laser's new marking
system which is near completion.
Interest expense was $4 thousand versus $135 thousand for the
quarters ended March 31, 1998 and 1997, respectively. The decrease of
$131 thousand is due to interest paid to Gould on previously past due
royalties, in March 1997.
The increase in interest income to $246 thousand in the quarter
ending March 31, 1998 from $124 thousand in the same period of 1997, an
increase of $122 thousand, is primarily due to the increase in average
investments.
Other income/expense was an expense of $14 thousand for the quarter
ended March 31, 1998 as compared to an expense of $60 thousand for the
quarter ended March 31, 1997. This decrease is primarily due to foreign
currency translation losses incurred by the Company's German subsidiary
in the current quarter.
Liquidity and Capital Resources
...............................
Working capital at March 31, 1998 and December 31, 1997 remained the
same, as the profits of $1.6 million were offset by costs associated with
Quantronix new building of $1.7 million.
As of March 31, 1998, the Company had no debt. The revolving line of
credit 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.
The Board of Directors approved the Company's purchase of a building
for its subsidiary, Photo Research, for approximately $2.0 million. In
addition, the Company plans to spend $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
.....................
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 13, 1998
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
......................................
J. Donald Hill, Chairman of the Board,
Chief Executive Officer
By: /s/ Antoine Dominic
......................................
Antoine Dominic, President,
Chief Operating Officer
and Principal Accounting Officer
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
BASIC DILUTED
Three Months Ended Three Months Ended
March 31, March 31,
...................... ....................
1998 1997 1998 1997
........... ......... ......... .........
Net earnings $ 1,610,859 1,623,574 1,610,859 1,623,574
Net earnings available
to common shareholders $ 1,610,859 1,623,574 1,610,859 1,623,574
........... ......... ......... .........
........... ......... ......... .........
Weighted average common
shares outstanding, net
of treasury stock 11,343,143 9,735,646 11,343,143 9,735,646
Weighted average
common share equivalents:
Options and warrants 0 0 272,609 643,773
........... ......... ......... .........
Weighted average common
shares common share
equivalents 11,343,143 9,735,646 11,615,752 10,379,419
........... ......... ......... .........
........... ......... ......... .........
Net earnings per share $0.14 $0.17 $0.14 $0.16
........... ......... ......... .........
........... ......... ......... .........
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 6,032,209 6,331,159
<SECURITIES> 14,403,801 14,209,854
<RECEIVABLES> 11,155,447 11,522,041
<ALLOWANCES> 251,000 254,000
<INVENTORY> 11,990,134 12,143,140
<CURRENT-ASSETS> 44,985,986 45,483,534
<PP&E> 7,105,329 5,392,955
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 60,347,261 59,219,681
<CURRENT-LIABILITIES> 7,992,735 8,316,574
<BONDS> 0 0
0 0
0 0
<COMMON> 11,722 11,714
<OTHER-SE> 52,342,804 50,891,393
<TOTAL-LIABILITY-AND-EQUITY> 60,347,261 59,219,681
<SALES> 14,299,163 16,327,892
<TOTAL-REVENUES> 14,299,163 16,327,892
<CGS> 7,225,370 8,475,045
<TOTAL-COSTS> 7,225,370 8,475,045
<OTHER-EXPENSES> 4,802,855 5,204,240
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,148 135,492
<INCOME-PRETAX> 2,499,678 2,577,102
<INCOME-TAX> 888,819 953,528
<INCOME-CONTINUING> 1,610,859 1,623,574
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,610,859 1,623,574
<EPS-PRIMARY> 0.14 0.17
<EPS-DILUTED> 0.14 0.16
</TABLE>
