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, 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
August 3, 2000 was: 11,752,316.
CONTENTS
PART I. FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements:
..................................
Balance Sheets as of June 30, 2000 (unaudited) and
December 31, 1999 3
Statements of Earnings (unaudited) for the Three Months
Ended June 30, 2000 and 1999 4
Statements of Earnings (unaudited) for the Six Months
Ended June 30, 2000 and 1999 5
Statements of Cash Flows (unaudited) for the Six Months
Ended June 30, 2000 and 1999 6
Notes to Financial Statements 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 10
..........................................................
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
................................
(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
June 30, 2000 Dec. 31, 1999
............. .............
(Unaudited)
Assets
......
Current assets:
Cash and cash equivalents $ 18,755,950 $ 13,481,251
Accounts receivable, less allowance
for doubtful accounts of $517,000
and $464,000 in 2000 and 1999,
respectively 19,453,712 16,107,179
Inventories 16,491,211 14,383,943
Deferred income taxes, net 1,363,300 1,363,300
Other current assets 648,856 512,389
............. .............
Total current assets 56,713,029 45,848,062
............. .............
Property, plant and equipment, net 10,884,727 10,986,243
Other assets 312,673 341,416
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 $4,404,983
and $3,791,559 in 2000 and 1999,
respectively 20,698,606 21,312,030
............. .............
Total assets $ 89,771,835 $ 79,650,551
............. .............
............. .............
Liabilities and Stockholders' Equity
....................................
Current liabilities:
Notes payable $ 24,149 $ 35,937
Accounts payable 3,811,632 2,974,832
Accrued expenses and other
current liabilities 7,602,008 7,638,569
............. .............
Total current liabilities 11,437,789 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, 11,689,528
and 11,300,941 shares issued in 2000
and 1999, respectively 11,690 11,301
Additional paid-in capital 44,783,803 43,438,702
Retained earnings 34,078,120 26,193,600
Accumulated other comprehensive loss (539,567) (642,390)
............. .............
Total stockholders' equity 78,334,046 69,001,213
............. .............
Total liabilities and
stockholders' equity $ 89,771,835 $ 79,650,551
............. .............
............. .............
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
June 30,
.............................
2000 1999
............. .............
Net sales and services $ 26,358,440 $ 21,478,131
Cost of sales and services 12,621,536 11,044,136
............. .............
Gross profit 13,736,904 10,433,995
Operating expenses:
Selling and marketing 3,049,164 2,998,632
General and administrative 2,030,598 1,412,064
Research and development 2,340,692 1,983,846
Amortization of excess cost over
fair value of net assets of businesses
acquired 306,712 304,070
............. .............
Earnings from operations 6,009,738 3,735,383
Non-operating expenses (income):
Interest expense 1,694 3,687
Interest income (262,193) (50,156)
Other expense, net 20,386 55,643
............. .............
Earnings before provision for income taxes 6,249,851 3,726,209
Provision for income taxes 2,124,949 1,229,649
............. .............
Net earnings $ 4,124,902 $ 2,496,560
............. .............
............. .............
Earnings per share:
Basic earnings per common share $0.36 $0.23
..... .....
..... .....
Weighted average common shares outstanding 11,552,298 11,089,359
............. .............
............. .............
Diluted earnings per common share $0.34 $0.22
..... .....
..... .....
Weighted average common shares and
common share equivalents 12,101,721 11,554,353
............. .............
............. .............
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Six Months Ended
June 30
.............................
2000 1999
............. .............
Net sales and services $ 52,859,095 $ 41,496,305
Cost of sales and services 25,694,211 20,936,330
............. .............
Gross profit 27,164,884 20,559,975
Operating expenses:
Selling and marketing 6,318,430 5,792,851
General and administrative 3,998,240 3,064,825
Research and development 4,697,071 3,662,195
Amortization of excess cost over
fair value of net assets of businesses
acquired 613,424 608,140
............. .............
Earnings from operations 11,537,719 7,431,964
Non-operating expenses (income):
Interest expense 2,946 33,728
Interest income (445,834) (107,206)
Other expense, net 34,365 82,829
............. .............
Earnings before provision for income taxes 11,946,242 7,422,613
Provision for income taxes 4,061,722 2,449,462
............. .............
Net earnings $ 7,884,520 $ 4,973,151
............. .............
............. .............
Earnings per share:
Basic earnings per common share $0.69 $0.45
..... .....
..... .....
Weighted average common
shares outstanding 11,442,482 11,078,347
............. .............
............. .............
Diluted earnings per common share $0.66 $0.43
..... .....
..... .....
Weighted average common shares and
common share equivalents 12,023,021 11,515,568
............. .............
............. .............
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
.............................
2000 1999
............. .............
Cash flows from operating activities:
Net earnings $ 7,884,520 $ 4,973,151
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 1,615,022 1,573,445
Provision for bad debts 89,749 18,922
Changes in operating assets and
liabilities:
Increase in accounts receivable (3,436,282) (2,351,853)
(Increase) decrease in inventories (2,107,268) 80,050
Increase in other current assets (136,467) (224,202)
Decrease in other assets 28,743 130,045
Increase in accounts payable 836,800 38,011
Decrease in accrued expenses and
other current liabilities (36,561) (487,122)
............. .............
Net cash provided by operating
activities 4,738,256 3,750,447
............. .............
Cash flows from investing activities:
Purchases of property,
plant and equipment (900,082) (1,205,398)
............. .............
Net cash used in investing
activities (900,082) (1,205,398)
............. .............
Cash flows from financing activities:
Proceeds from exercise of common stock
options and warrants 1,345,490 261,266
Payments of notes payable (11,788) (52,077)
Payments of long-term debt (revolving
credit line) 0 (3,500,000)
............. .............
Net cash provided by (used in)
financing activities 1,333,702 (3,290,811)
............. .............
Effect of exchange rate changes on assets
and liabilities including cash and
cash equivalents 102,823 (423,888)
............. .............
Net increase (decrease) in cash and
cash equivalents 5,274,699 (1,169,650)
Cash and cash equivalents,
beginning of period 13,481,251 5,839,339
............. .............
Cash and cash equivalents, end of period $ 18,755,950 $ 4,669,689
............. .............
............. .............
Supplemental disclosure of cash flow information:
.................................................
Cash paid for:
Interest $ 2,946 $ 33,728
Income taxes $ 5,026,193 $ 2,579,472
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS:
..................................
The consolidated balance sheet as of June 30, 2000, and the
consolidated statements of earnings for the three months and six months
ended June 30, 2000 and June 30, 1999 and the consolidated statement of
cash flows for the six months ended June 30, 2000 and June 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 June 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 June 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:
June 30, 2000 December 31, 1999
............... .................
Raw Materials $ 9,129,974 $ 6,547,811
Work in Process 4,623,275 5,509,431
Finished Goods 2,382,535 1,862,941
Consigned Inventory 355,427 463,760
............... ..............
$ 16,491,211 $ 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 June 30, 2000, the Company had no borrowings and had all of
its $15 million available on its line of credit.
D. COMPREHENSIVE INCOME
....................
Comprehensive income is comprised of net income and foreign currency
translation adjustments, amounting in the aggregate to $7,987,343 and
$4,549,263 for the six months ended June 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 June 30, 2000 increased
$4.9 million or 22.8% to $26.4 million from $21.5 million for the
comparable period in the prior year. For the six months ended June 30,
2000, net sales and services were $52.9 million, an increase of $11.4
million or 27.5% from $41.5 million in the six months ended June 30,
1999. The increase is attributable to increases in sales and services
across most of the Company's product lines.
Gross margins as a percentage of sales increased to 52.1% for the
quarter ended June 30, 2000 as compared to 48.6% in the same period in
the prior year. For the six months ended June 30, 2000, gross margins as
a percentage of sales increased to 51.4% from 49.5% in the same six
months ended June 30, 1999. The decreases in cost as a percentage of
sales are primarily due to the product mix and the increased sales
volume.
Selling and marketing expenses increased to $3.05 million in the
quarter ended June 30, 2000 from $3.0 million in the quarter ended June
30, 1999. Selling and marketing expense as a percentage of sales
decreased to 11.6% for the quarter ended June 30, 2000 from 14.0% for the
comparable period in the prior year. For the six months ended June 30,
2000, selling and marketing expenses increased to $6.3 million from $5.8
million in the same period in 1999. The increase of $526 thousand is
primarily attributable to the increased variable costs associated with
the increased sales volume. Selling and marketing expenses as a
percentage of sales decreased to 12.0% for the six months ended June 30,
2000 from 14.0% 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 $619 thousand or 43.8%
from $1.41 million in the quarter ended June 30, 1999 to $2.03 million in
the current period. For the six months ended June 30, 2000, general and
administrative expenses increased $933 thousand to $4.0 million from $3.1
million in 1999. The increases are primarily attributable to higher
bonus expenses due to increased profitability.
Research and development costs for the quarter ended June 30, 2000
increased $357 thousand or 18.0% to $2.34 million from $1.98 million in
the quarter ended June 30, 1999. For the six months ended June 30, 2000,
research and development expenses increased $1.0 million or 28.3% to $4.7
million from $3.7 million in 1999. The increases are primarily
attributable to increased research and development activities for all
product groups.
Interest expense was $2 thousand versus $4 thousand for the quarters
ended June 30, 2000 and 1999, respectively. For the six months ended
June 30, 2000, interest expense was $3 thousand versus $34 thousand for
the six months ended June 30, 1999. The decrease of $31 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 $262 thousand for the quarter ended
June 30, 2000 from $50 thousand in the same period of 1999, an increase
of $212 thousand. For the six months ended June 30, 2000 and June 30,
1999, interest income was $446 thousand and $107 thousand, respectively.
The increases are primarily due to increased average investable cash
balances.
Other expense resulted in a net expense of $20 thousand for the
quarter ended June 30, 2000 as compared to a net expense of $56 thousand
for the quarter ended June 30, 1999. Other expense resulted in a net
expense of $34 thousand for the six months ended June 30, 2000 as
compared to $83 thousand for the six months ended June 30, 1999. These
decreases are primarily due to lower foreign exchange losses realized by
the Company's German subsidiary.
Liquidity and Capital Resources
...............................
Working capital at June 30, 2000 was $45.3 million compared to $35.2
million at December 31, 1999. The increase is primarily derived from the
net income of $7.9 million and the proceeds from the exercise of stock
options and warrants of $1.3 million, offset partially by capital
expenditures.
The Company anticipates spending approximately $6.0 million for
capital expenditures in 2000, which includes the construction of a
building for Synrad and the expansion of Quantronix' facilities.
Approximately $900 thousand was spent during the six months ended June
30, 2000. 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 June 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 the 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
..........................................................
Not applicable.
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
...................................................
The Company's Annual Meeting of Stockholders was held on May
31, 2000. At the Meeting:
(i) The following persons were elected as directors of the
Company, to serve until the next Annual Meeting and until their
successors are duly elected and qualified, each receiving the
number of votes set forth opposite their names:
FOR WITHHELD AGAINST
........... ........ .......
J. Donald Hill 10,693,279 24,499 0
Antoine Dominic 10,693,294 24,484 0
Steven Georgiev 10,693,294 24,484 0
Howard S. Breslow 10,693,294 24,484 0
Joseph J. Ortego 10,693,294 24,484 0
(ii) The appointment of KPMG LLP as the Company's independent
auditors for the year ending December 31, 2000 was ratified,
with 10,682,271 shares voting in favor of the appointment,
18,407 shares voting against, and 17,100 shares abstaining from
voting.
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 - Filed in the second quarter of 2000:
Form 8-K dated June 21, 2000
Item 4. Changes in Registrant's Certifying Accountants
Item 7. Financial Statements, Proforma Financial
Information and Exhibits
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: August 9, 2000
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
June 30, June 30,
..................... .....................
2000 1999 2000 1999
.......... .......... .......... ..........
Net earnings $4,124,902 2,496,560 4,124,902 2,496,560
.......... .......... .......... ..........
.......... .......... .......... ..........
Weighted average common
shares outstanding 11,552,298 11,089,359 11,552,298 11,089,359
Weighted average common
share equivalents:
Options and warrants 0 0 549,423 464,994
.......... .......... .......... ..........
Weighted average common
shares and common shares
equivalent outstanding 11,552,298 11,089,359 12,101,721 11,554,353
.......... .......... .......... ..........
.......... .......... .......... ..........
Net earnings per share $0.36 $0.23 $0.34 $0.22
.......... .......... .......... ..........
.......... .......... .......... ..........
BASIC DILUTED
Six Months Ended Six Months Ended
June 30, June 30,
..................... .....................
2000 1999 2000 1999
.......... .......... .......... ..........
Net earnings $7,884,520 4,973,151 7,884,520 4,973,151
.......... .......... .......... ..........
.......... .......... .......... ..........
Weighted average common
shares outstanding 11,442,482 11,078,347 11,442,482 11,078,347
Weighted average common
share equivalents:
Options and warrants 0 0 580,539 437,221
.......... .......... .......... ..........
Weighted average common
shares and common shares
equivalent outstanding 11,442,482 11,078,347 12,023,021 11,515,568
.......... .......... .......... ..........
.......... .......... .......... ..........
Net earnings per share $0.69 $0.45 $0.66 $0.43
.......... .......... .......... ..........
.......... .......... .......... ..........
