SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________________to _____________________
Commission file number 0-20506
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BKC SEMICONDUCTORS INCORPORATED
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2883532
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 LAKE STREET, LAWRENCE, MASSACHUSETTS 01841
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(Address of principal executive offices) (Zip Code)
(508) 681-0392
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(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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_____
There were 1,276,411 shares of common stock outstanding at June 30, 1997.
1
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
QUARTERLY REPORT FORM 10-Q
June 30, 1997
PAGE
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PART I. FINANCIAL INFORMATION
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ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - June 30, 1997 and
September 30, 1996 3
Statement of Consolidated Income - for the three
and nine months ended June 30, 1997 and
June 30, 1996 4
Statement of Consolidated Cash Flows - for the nine
months ended June 30, 1997 and June 30, 1996 5
Notes to Consolidated Financial Statements - June 30, 1997 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
Signature Page 10
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
BKC SEMICONDUCTORS INCORPORATED
CONSOLIDATED BALANCE SHEET
June 30, Sept. 30,
1997 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,878 $ 5,921
Accounts Receivable, Net 1,831,047 1,274,927
Inventories 3,149,480 3,119,741
Deferred Income Taxes 339,008 460,000
Other Current Assets 84,398 33,577
------------------ ------------------
Total Current Assets 5,405,811 4,894,166
------------------ ------------------
PROPERTY AND EQUIPMENT - NET 1,519,295 1,426,439
OTHER ASSETS 66,364 107,908
TOTAL $6,991,470 $6,428,513
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $1,778,130 $1,430,839
Accounts Payable 639,428 1,019,836
Accrued Liabilities 356,114 54,481
Current Maturities of Long-term Debt 421,689 374,070
------------------ ------------------
Total current liabilities 3,195,361 2,879,226
------------------ ------------------
LONG-TERM DEBT - Net of Current Maturities 629,911 580,610
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DEFERRED INCOME TAXES
STOCKHOLDERS' EQUITY:
Convertible preferred stock series A-6%, authorized,
5000 shares of no par value; issued 2940 shares 242,076 242,078
Common Stock-authorized 2,000,000 shares of no par
value; issued 1,295,311 shares on 12/31/96 3,916,721 3,916,721
Retained earnings (deficit) (636,980) (834,503)
------------------ ------------------
Total 3,521,817 3,324,296
------------------ ------------------
Less cost of shares held in treasury:
Convertible preferred stock, 2,940 shares 235,200 235,200
Common stock, 18,900 shares 120,419 120,419
------------------
Stockholders' equity - net 3,166,198 2,968,677
------------------ ------------------
TOTAL $6,991,470 $6,428,513
================== ==================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
BKC SEMICONDUCTORS INCORPORATED
UNAUDITED STATEMENT OF CONSOLIDATED INCOME
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE $2,973,173 $2,406,746 $8,170,573 $7,914,722
COST OF REVENUE 1,981,467 1,910,487 5,929,672 6,171,334
-------------- -------------- --------------- ---------------
GROSS PROFIT 991,706 496,259 2,240,901 1,743,388
-------------- -------------- --------------- ---------------
OPERATING EXPENSES:
Selling 333,961 191,528 899,896 657,471
General and administrative 293,387 158,643 738,321 554,163
Research and development 15,187 56,231 86,059 155,436
Total operating expenses 642,535 406,402 1,724,276 1,367,070
-------------- -------------- -------------- ---------------
INCOME FROM OPERATIONS 349,171 89,857 516,625 376,318
INTEREST INCOME (EXPENSE) (63,848) (64,296) (187,425) (235,773)
GAIN ON SALE OF REAL ESTATE 0 0 0 217,075
-------------- -------------- -------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES
285,323 25,561 329,200 357,620
PROVISION FOR INCOME TAXES 108,767 10,224 131,681 107,675
-------------- -------------- -------------- ---------------
NET INCOME $176,557 $15,337 $197,519 $249,945
============== ============== ============== ===============
NET INCOME PER SHARE $0.14 $0.01 $0.15 $0.20
============== ============== ============== ===============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,276,411 1,276,411 1,276,411 1,271,593
============== ============== ============== ===============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
BKC SEMICONDUCTORS INCORPORATED
UNAUDITED STATEMENT OF CONSOLIDATED CASH FLOWS
For Nine Months Ended
June 30, June 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $197,519 $249,945
Depreciation 374,884 372,610
Gain on sale of real estate 0 (217,075)
Deferred income taxes 120,992 107,676
Changes in assets/liabilities:
Accounts receivable (556,120) 347,602
Refundable income taxes 0 204,003
Inventories (29,739) 19,839
Other assets (9,277) (87,116)
Accounts payable 380,408) 6,702
Accrued liabilities 301,633 63,840
----------------- ------------------
Net cash provided/(used) in operating activities 19,484 1,068,026
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (467,738) (85,870)
Proceeds from sale of property and equipment 0 420,953
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Net cash provided/(used) in investing activities (467,738) 335,083
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under line-of-credit 347,291 (948,457)
Proceeds from issuance of long-term debt 235,442 0
Principal payments on long-term debt (138,522) (471,245)
Purchase of common stock for the treasury 0 0
------------------ ------------------
Net cash provided/(used) by financing activities 444,211 (1,419,702)
----------------- ------------------
Net inc./(dec.) in cash and cash equivalents (4,043) (16,593)
Cash and cash equivalents at beg. of period 5,921 28,340
----------------- ------------------
Cash and cash equivalents at end of period $1,878 $11,747
================= ==================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position and results of operations have been included. Operating
results for interim periods are not necessarily indicative of the results that
may be expected for the full year. For further information, refer to the
consolidated financial statement and footnotes thereto included in the Company's
annual report on Form 10-K
NOTE B - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 SEPT. 30, 1996
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<S> <C> <C>
Raw Material $ 681,692 $ 558,008
Work in Process 1,529,982 1,519,481
Finished Goods 937,806 1,042,252
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$3,149,480 $3,119,741
========== ==========
</TABLE>
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------
RESULTS OF OPERATIONS
Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996
Revenues for the third quarter of fiscal 1997 were $2,973,173, compared
to $2,406,746 for the same quarter last year. The revenue increase was the
result of increased sales of BKC manufactured high reliability products.
Gross Profit for the third quarter of fiscal 1997 was $991,706, or 33%
of revenues, compared to $496,259, or 21% of revenues, for the third quarter of
fiscal 1996. The improvement in gross profit was due to the heavy mix of BKC
manufactured high reliability products with a corresponding reduction of
revenues from buy-resale products which had lower gross profit margins.
Operating Expenses for the current quarter were $642,535, or 22% of
revenue, compared to $406,402, 17% of revenue, for the third quarter of fiscal
1996. Operating expenses reflect an increase in costs associated with increasing
and improving staffing in areas of sales, marketing, customer service, and
engineering to support increased growth and the technical demands of the high
reliability product lines.
Net income for the current quarter was $176,556, or $0.14 per share,
compared to $15,337, or $0.01 per share for the same quarter last year. The net
income improvement is the resultant sum of the above noted actions.
Nine Months Ended June 30, 1997 compared to nine months ended June 30, 1996
Revenues for the first nine months of fiscal 1997 were $8,170,573,
compared to $7,914,722 same period in 1996, an increase of $255,851, or 3%.
Sales of BKC manufactured products were up 14% during the first nine months of
FY97 while the volume of buy-resell products declined by 71%.
Gross Profit for nine months of fiscal 1997 was $2,240,901, or 27% of
revenue, compared to $1,743,338, or 22% of revenue, the same period of fiscal
1996. The improvement was a direct result of a favorable mix of sales of high
reliability products, process improvements, and increased volume of BKC
manufactured products.
Operating Expenses for nine months of fiscal 1997 were $1,724,276, or
21% of revenue, compared to $1,367,070, or 17% of revenue, for nine months of
fiscal 1996. The increase in operating expenses reflects the associated costs
with the growth of the business, especially the high reliability product line,
which has a high degree of added technical resource requirements.
Net Income for the nine month period was $197,519, or $0.15 per share.
The same period last year had net income of $249,945, or $.20 per share, which
included $130,000 of net income, or $0.10 a share, from the gain on the sale of
real estate.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had working capital of $2,210,000 as
compared to $2,015,000 for the period ended September 30, 1996. The slight
increase during the nine month time frame was a result of higher receivables
offset by increased spending for plant and equipment and lower deferred income
taxes.
For the first nine months of fiscal 1997, the Company purchased
$467,838 in property and equipment as compared to $85,870 for the same nine
months in fiscal 1996.
During June 1997, the Company renewed its revolving credit line
facility for $2,500,000 with Eastern Bank, the loan is collateralized by
substantially all the assets of the Company. The outstanding balance on the line
on June 30, 1997 was $1,778,130. The line of credit agreement contains certain
restrictive covenants which the Company has complied with or the bank has
waived. In addition, the Company negotiated a separate $250,000 credit line for
additional plan and equipment purchases through the remainder of calendar 1997.
On January 1, 1998, net purchases applied to this line of credit will be rolled
into a 42 month term loan secured by said purchases.
8
<PAGE>
PART II. OTHER INFORMATION
BKC SEMICONDUCTORS INCORPORATED
QUARTER ENDED JUNE 30, 1997
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
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
None
9
<PAGE>
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BKC SEMICONDUCTORS INCORPORATED
Date: August 12, 1997 \s\ James R. Shiring
--------------------
James R. Shiring
President and Chief Executive Officer
Date: August 12, 1997 \s\ Bryan A. Schmidt
--------------------
Bryan A. Schmidt
Treasurer and Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 9-MOS
<CASH> 1,878
<SECURITIES> 0
<RECEIVABLES> 1,831,047
<ALLOWANCES> 0
<INVENTORY> 3,149,480
<CURRENT-ASSETS> 5,405,811
<PP&E> 6,133,115
<DEPRECIATION> 4,613,820
<TOTAL-ASSETS> 6,991,470
<CURRENT-LIABILITIES> 3,195,361
<BONDS> 0
<COMMON> 3,796,302
0
6,876
<OTHER-SE> (636,980)
<TOTAL-LIABILITY-AND-EQUITY> 6,991,470
<SALES> 8,170,573
<TOTAL-REVENUES> 8,170,573
<CGS> 5,929,672
<TOTAL-COSTS> 5,929,672
<OTHER-EXPENSES> 1,724,276
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (187,425)
<INCOME-PRETAX> 329,200
<INCOME-TAX> 131,681
<INCOME-CONTINUING> 197,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197,519
<EPS-PRIMARY> $0.15
<EPS-DILUTED> $0.15
</TABLE>
