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 September 30, 2000 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 (631) 784-6100
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
November 8, 2000 was: 11,755,331.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements: Page
.................................
Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999 3
Statements of Earnings (unaudited) for the
Three Months Ended September 30, 2000 and 1999 4
Statements of Earnings (unaudited) for the Nine Months
Ended September 30, 2000 and 1999 5
Statements of Cash Flows (unaudited) for the Nine Months
Ended September 30, 2000 and 1999 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
.................................................
Condition and Results of Operations 8
...................................
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
..........................................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
.................
Item 2. Changes in Securities and Use of Proceeds 12
.........................................
Item 3. Defaults upon Senior Securities 12
...............................
Item 4. Submission of Matters to a Vote of Security-Holders 12
...................................................
Item 5. Other Information 12
.................
Item 6. Exhibits and Reports on Form 8-K 12
................................
Index to Exhibits 14
(a) Exhibits - (11) Computation of net earnings per share 14
(27) Financial Data Schedule
(b) Reports on Form 8-K
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
CONSOLIDATED BALANCE SHEETS
Sept. 30, 2000 Dec. 31, 1999
.............. .............
(Unaudited)
Assets
.......
Current assets:
Cash and cash equivalents $ 15,665,788 $ 13,481,251
Accounts receivable, less allowance
for doubtful accounts of $599,000
and $464,000 in 2000 and 1999,
respectively 20,863,564 16,107,179
Inventories 17,779,597 14,383,943
Deferred income taxes, net 1,363,300 1,363,300
Other current assets 892,458 512,389
............. .............
Total current assets 56,564,707 45,848,062
............. .............
Property, plant and equipment, net 12,918,782 10,986,243
Other assets 280,746 341,416
Deferred income taxes, net 1,162,800 1,162,800
Excess of cost over fair value of net
assets of businesses acquired, net of
accumulated amortization of $4,767,256
and $3,791,559 in 2000 and 1999,
respectively 23,797,633 21,312,030
............. .............
Total assets $ 94,724,668 $ 79,650,551
............. .............
............. .............
Liabilities and Stockholders' Equity
....................................
Current liabilities:
Notes payable $ 19,734 $ 35,937
Accounts payable 3,973,809 2,974,832
Accrued expenses and other current
liabilities 8,557,005 7,638,569
............. .............
Total current liabilities 12,550,548 10,649,338
............. .............
Stockholders' equity:
Preferred stock, par value $.001 per
share; 2,000,000 shares authorized,
none issued 0 0
Common stock, par value $.001 per
share; 20,000,000 shares authorized,
11,757,529 and 11,300,941 shares
issued in 2000 and 1999, respectively 11,758 11,301
Additional paid-in capital 44,825,404 43,438,702
Retained earnings 38,292,265 26,193,600
Accumulated other comprehensive loss (955,307) (642,390)
............. .............
Total stockholders' equity 82,174,120 69,001,213
............. .............
Total liabilities and
stockholders' equity $ 94,724,668 $ 79,650,551
............. .............
............. .............
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
September 30,
.............................
2000 1999
............. .............
Net sales and services $ 29,343,749 $ 23,546,481
Cost of sales and services 14,613,647 11,795,346
............. .............
Gross profit 14,730,102 11,751,135
Operating expenses:
Selling and marketing 3,436,050 2,894,980
General and administrative 2,039,587 1,863,880
Research and development 2,542,734 1,807,940
Amortization of excess cost over
fair value of net assets of
businesses acquired 362,273 304,070
............. .............
Earnings from operations 6,349,458 4,880,265
Non-operating expenses (income):
Interest expense 6,848 9,010
Interest income (272,580) (92,627)
Other expense, net 99,311 16,695
............. .............
Earnings before provision for income taxes 6,515,879 4,947,187
Provision for income taxes 2,301,734 1,632,572
............. .............
Net earnings $ 4,214,145 $ 3,314,615
............. .............
............. .............
Earnings per share:
Basic earnings per common share $0.36 $0.30
..... .....
..... .....
Weighted average common shares outstanding 11,744,224 11,103,210
............. .............
............. .............
Diluted earnings per common share $0.35 $0.29
..... .....
..... .....
Weighted average common shares and
common share equivalents 12,179,542 11,616,334
............. .............
............. .............
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Nine Months Ended
September 30,
.............................
2000 1999
............. .............
Net sales and services $ 82,202,844 $ 65,042,786
Cost of sales and services 40,307,858 32,731,676
............. .............
Gross profit 41,894,986 32,311,110
Operating expenses:
Selling and marketing 9,754,480 8,687,831
General and administrative 6,037,827 4,928,705
Research and development 7,239,805 5,470,135
Amortization of excess cost over
fair value of net assets of
businesses acquired 975,697 912,210
............. .............
Earnings from operations 17,887,177 12,312,229
Non-operating expenses (income):
Interest expense 9,794 42,738
Interest income (718,414) (199,833)
Other expense, net 133,676 99,524
............. .............
Earnings before provision for income taxes 18,462,121 12,369,800
Provision for income taxes 6,363,456 4,082,034
............. .............
Net earnings $ 12,098,665 $ 8,287,766
............. .............
............. .............
Earnings per share:
Basic earnings per common share $1.05 $0.75
..... .....
..... .....
Weighted average common shares outstanding 11,543,797 11,086,726
............. .............
............. .............
Diluted earnings per common share $1.00 $0.72
..... .....
..... .....
Weighted average common shares and
common share equivalents 12,072,707 11,551,335
............. .............
............. .............
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
.............................
2000 1999
............. .............
Cash flows from operating activities:
Net earnings $ 12,098,665 $ 8,287,766
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 2,548,241 2,190,462
Provision for bad debts 112,702 32,999
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Increase in accounts receivable (4,335,250) (5,135,478)
(Increase) decrease in inventories (2,387,406) 1,308,862
Increase in other current assets (290,199) (132,507)
Decrease in other assets 60,670 139,878
Increase (decrease) in accounts
payable 796,341 (457,498)
(Decrease) increase in accrued
expenses and other current
liabilities (1,753) 1,020,611
............. .............
Net cash provided by operating
activities 8,602,011 7,255,095
............. .............
Cash flows from investing activities:
Purchases of property, plant and equipment (3,207,597) (1,535,876)
Cash paid for acquisition, net of
cash acquired (4,267,916) 0
............. .............
Net cash used in investing
activities (7,475,513) (1,535,876)
............. .............
Cash flows from financing activities:
Purchase of treasury stock 0 (348,009)
Proceeds from exercise of common stock
options and warrants 1,387,159 490,808
Payments of notes payable (16,203) (65,416)
Payments of long-term debt
(revolving credit line) 0 (3,500,000)
............. .............
Net cash provided by (used in)
financing activities 1,370,956 (3,422,617)
............. .............
Effect of exchange rate changes on assets
and liabilities including cash and cash
equivalents (312,917) (283,491)
............. .............
Net increase in cash and cash equivalents 2,184,537 2,013,111
Cash and cash equivalents,
beginning of period 13,481,251 5,839,339
............. .............
Cash and cash equivalents, end of period $ 15,665,788 $ 7,852,450
............. .............
............. .............
Supplemental disclosure of cash flow information:
.................................................
Cash paid for:
Interest $ 9,795 $ 75,919
Income taxes $ 6,832,714 $ 3,954,309
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
.................................
The consolidated balance sheet as of September 30, 2000, and the
consolidated statements of earnings for the three months and nine months
ended September 30, 2000 and September 30, 1999 and the consolidated
statement of cash flows for the nine months ended September 30, 2000 and
September 30, 1999 have been prepared by the Company and are unaudited.
In the opinion of management, all adjustments (which included only normal
recurring adjustments) have been made which are necessary to present
fairly the financial position, results of operations and cash flows at
September 30, 2000 and for all periods presented.
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, 1999. 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 September
30, 2000 are not necessarily indicative of the operating results to be
expected for the full year.
B. 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:
September 30, 2000 December 31, 1999
.................. .................
Raw Materials $ 9,904,621 $ 6,547,811
Work in Process 5,315,267 5,509,431
Finished Goods 2,213,113 1,862,941
Consigned Inventory 346,596 463,760
........... ...........
$17,779,597 $14,383,943
........... ...........
........... ...........
C. LONG-TERM DEBT
..............
On July 23, 1998, the Company entered into a credit facility with The
Bank of New York (the "Bank") that provides the Company with a $15 million
revolving line of credit for acquisitions or working capital requirements.
The term of this agreement is for five years, maturing on July 22, 2003.
This credit facility allows for interest to be calculated utilizing an
Alternative Base Rate ("ABR") or a LIBOR rate plus a premium ranging from
0.50% to 2.25%. The ABR is the higher rate of either the prime rate or the
Federal Funds Rate plus 0.50%. This credit facility contains certain
financial covenants, including the prohibition of the payment of
dividends, and requires payment of interest on a quarterly basis. As of
September 30, 2000 the Company had no borrowings and had all of its $15
million available on its line of credit.
D. ACQUISITIONS
............
On July 1, 2000, Excel Technology Europe GmbH ("Excel Europe"), a
subsidiary of the Company, acquired substantially all of the assets and
certain liabilities of Baublys GmbH ("Baublys"), a company engaged in the
manufacturing and sale of customized laser systems and engraving
machines. The purchase price, including additional costs directly
related to the acquisition, amounted to $4.5 million and was internally
funded using the Company's own cash. The acquisition has been accounted
for as a purchase and accordingly, the operating results of Baublys have
been included in the Company's consolidated results of operations since
the date of acquisition. The excess of the purchase price over the fair
value of the net assets acquired, approximating $3.5 million, is being
amortized on a straight-line basis over 15 years.
E. COMPREHENSIVE INCOME
....................
Comprehensive income is comprised of net income and foreign currency
translation adjustments, amounting in the aggregate to $11,785,748 and
$8,004,275 for the nine months ended September 30, 2000 and 1999,
respectively.
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 September 30, 2000
increased $5.8 million or 24.7% to $29.3 million from $23.5 million for
the comparable period in the prior year. For the nine months ended
September 30, 2000, net sales and services were $82.2 million, an
increase of $17.2 million or 26.5% from $65.0 million in the nine months
ended September 30, 1999. The increases are attributable to Excel
Europe's acquisition of Baublys and increases in sales and services
across most of the Company's product lines.
Gross margins increased to 50.2% for the quarter ended September 30,
2000 as compared to 49.9% in the same period in the prior year. For the
nine months ended September 30, 2000, gross margins increased to 51.0%
from 49.7% in the same nine months ended September 30, 1999. The
increases in gross margins for the periods are primarily due to the
product mix and the increased sales volume during the periods in
comparison.
Selling and marketing expenses increased to $3.4 million in the
quarter ended September 30, 2000 from $2.9 million in the quarter ended
September 30, 1999. Selling and marketing expense as a percentage of
sales decreased to 11.7% for the quarter ended September 30, 2000 from
12.3% for the comparable period in the prior year. For the nine months
ended September 30, 2000, selling and marketing expenses increased to
$9.8 million from $8.7 million in the same period in 1999. The increase
of $1.1 million is primarily attributable to the acquisition of Baublys
and the increased variable costs associated with the overall increase in
sales volume. Selling and marketing expenses as a percentage of sales
decreased to 11.9% for the nine months ended September 30, 2000 from
13.4% for the comparable period in the prior year. The decrease in
selling expenses as a percentage of sales is essentially attributable to
fixed costs being absorbed by the higher sales volume.
General and administrative expenses increased $176 thousand or 9.3%
from $1.9 million in the quarter ended September 30, 1999 to $2.0 million
in the current period. For the nine months September 30, 2000, general
and administrative expenses increased $1.1 million to $6.0 million from
$4.9 million in 1999. The increases are primarily attributable to
general and administrative costs incurred in the operations of Baublys
and higher bonus expenses, which are tied to increased profitability.
Research and development costs for the quarter ended September 30,
2000 increased $735 thousand or 40.8% to $2.5 million from $1.8 million
in the quarter ended September 30, 1999. For the nine months ended
September 30, 2000, research and development expenses increased $1.7
million or 32.4% to $7.2 million from $5.5 million in 1999. The
increases are primarily attributable to research and development expenses
incurred at Baublys and increased investments in research and development
for all product groups.
Interest expense was $7 thousand versus $9 thousand for the quarters
ended September 30, 2000 and 1999, respectively. For the nine months
ended September 30, 2000, interest expense was $10 thousand versus $43
thousand for the nine months ended September 30, 1999. The decrease of
$33 thousand is due to the paydown of the loan associated with the
acquisition of Synrad in the quarter ended March 31, 1999.
Interest income increased to $273 thousand for the quarter ended
September 30, 2000 from $93 thousand in the same period of 1999, an
increase of $180 thousand. For the nine months ended September 30, 2000
and September 30, 1999, interest income was $718 thousand and $200
thousand, respectively. The increases are primarily due to increased
average investable cash balances.
Other expense resulted in a net expense of $99 thousand for the
quarter ended September 30, 2000 as compared to a net expense of $17
thousand for the quarter ended September 30, 1999. Other expense
resulted in a net expense of $134 thousand for the nine months ended
September 30, 2000 as compared to $100 thousand for the nine months ended
September 30, 1999. These increases are primarily due to higher foreign
exchange losses realized by the Company's German subsidiary.
The provision for income taxes increased $669 thousand or 41.0% from
$1.6 million in the quarter ended September 30, 1999 to $2.3 million for
the current quarter ended. For the nine months ended September 30, 2000,
the provision for income taxes increased $2.3 million or 55.9% from $4.1
million in the nine months ended September 30, 1999 to $6.4 million in
the comparable period in 2000. The increases are primarily attributable
to higher taxable earnings in both 2000 periods as compared to the
periods in the prior year.
Liquidity and Capital Resources
...............................
Working capital at September 30, 2000 was $44.0 million compared to
$35.2 million at December 31, 1999. The increase is primarily derived
from the net income of $12.1 million and the proceeds from the exercise
of common stock options and warrants of $1.4 million, offset by the cash
used for the acquisition of Baublys, capital expenditures and other
operating activities.
The Company anticipates spending approximately $8.0 million for
capital expenditures in 2000, which includes close to $5.0 million for
both the construction of a building for Synrad and the expansion of
Quantronix' facilities. Approximately $3.2 million was spent during the
nine months ended September 30, 2000, of which roughly $1.5 million was
for the Synrad and Quantronix facilities. The Company had capital
expenditures of approximately $2.1 million for the year ended December
31, 1999.
The Company had no outstanding long-term debt and $15 million
available on its line of credit as of September 30, 2000, as described in
note C to the consolidated financial statements.
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.
Inflation
.........
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Forward-Looking Statements
..........................
The information set forth in this Report (and other reports issued by
the Company and its officers from time to time) contain certain statements
concerning the Company's future results, future performance, intentions,
objectives, plans and expectations that are or may be deemed to be
"forward-looking statements." Such statements are made in reliance upon
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on current expectations
that involve numerous risks and uncertainties, including those risks and
uncertainties discussed in this Form 10-Q and in the Company's Annual
Report on Form 10K for the year ended December 31, 1999. Assumptions
relating to the foregoing involve judgments with respect to, among other
things, future economic, competitive, and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the Company's control. Although
the Company believes that its assumptions underlying the forward-looking
statements are reasonable, any of these assumptions could prove inaccurate
and, therefore, the Company cannot assure you that the results discussed
or implied in such forward-looking statements will prove to be accurate.
In light of the significant uncertainties inherent in such forward-looking
statements, the inclusion of such statements should not be regarded as a
representation by the Company or any other person that the Company's
objectives and plans will be achieved. Words such as "believes,"
"anticipates," "expects," "intends," "may," and similar expressions are
intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. The Company undertakes no
obligation to revise any of these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
..........................................................
Market Risk
...........
The principal market risks (i.e. the risk of loss arising from
adverse changes in market rates and prices) to which the Company is
exposed are interest rates on short-term investments and foreign exchange
rates, which generate translation and transaction gains and losses.
Interest Rates
..............
The Company's short-term investments, which approximated $15.7
million at September 30, 2000, are made up entirely of cash and cash
equivalents. Assuming investment levels remained the same, a one-point
change in interest rates would not have a material impact on the
Company's interest income.
Foreign Operations
..................
Operating in international markets involves exposure to movements in
currency exchange rates, which are volatile at times. The economic
impact of currency exchange rate movements on the Company is complex
because such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other factors. These
changes, if material, could cause the Company to adjust its operating
strategies. Consequently, isolating the effect of changes in currency
does not incorporate these other important economic factors.
The Company's net sales to foreign customers represent a large
percentage of total net sales. The Company generally has not engaged in
foreign currency hedging transactions.
Changes in the foreign currency rate for the German mark would have
the largest impact on translating the Company's international operating
profit.
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, 1999.
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
(27) Financial Data Schedule
(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: November 9, 2000
EXCEL TECHNOLOGY, INC.
By: /s/ Antoine Dominic
....................................
Antoine Dominic, President,
Chief Executive Officer
Chief Operating Officer
and Principal Accounting Officer
INDEX TO EXHIBITS
Exhibit Number:
11 Computation of Net Earnings per Share
27 Financial Data Schedule
EXHIBIT 11 (Unaudited)
COMPUTATION OF NET EARNINGS PER SHARE
BASIC DILUTED
Three Months Ended Three Months Ended
September 30, September 30,
....................... ......................
2000 1999 2000 1999
........... .......... .......... ..........
Net earnings $ 4,214,145 3,314,615 4,214,145 3,314,615
........... .......... .......... ..........
........... .......... .......... ..........
Weighted average common
shares outstanding 11,744,224 11,103,210 11,744,224 11,103,210
Weighted average common
share equivalents:
Options and warrants 0 0 435,318 513,124
........... .......... .......... ..........
Weighted average common
shares and common shares
equivalent outstanding 11,744,224 11,103,210 12,179,542 11,616,334
........... .......... .......... ..........
........... .......... .......... ..........
Net earnings per share $0.36 $0.30 $0.35 $0.29
..... ..... ..... .....
..... ..... ..... .....
BASIC DILUTED
Nine Months Ended Nine Months Ended
September 30, September 30,
....................... ......................
2000 1999 2000 1999
........... .......... .......... ..........
Net earnings $12,098,665 8,287,766 12,098,665 8,287,766
........... .......... .......... ..........
........... .......... .......... ..........
Weighted average common
shares outstanding 11,543,797 11,086,726 11,543,797 11,086,726
Weighted average common
share equivalents:
Options and warrants 0 0 528,910 464,609
........... .......... .......... ..........
Weighted average common
shares and common shares
equivalent outstanding 11,543,797 11,086,726 12,072,707 11,551,335
........... .......... .......... ..........
........... .......... .......... ..........
Net earnings per share $1.05 $0.75 $1.00 $0.72
..... ..... ..... .....
..... ..... ..... .....
