SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 December 31, 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
BKC SEMICONDUCTORS INCORPORATED
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2883532
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6 LAKE STREET, LAWRENCE, MASSACHUSETTS 01841
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(Address of principal executive offices) (Zip Code)
(978) 681-0392
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(Registrant's telephone number, including area code)
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(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 February 9, 1998.
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
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QUARTERLY REPORT FORM 10-Q
December 31, 1997
PAGE
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PART I. FINANCIAL INFORMATION
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ITEM 1. Financial Statements (Unaudited)
Balance Sheet - December 31, 1997 and September 30, 1997 3
Statement of Income (Loss) - for the three months ended
December 31, 1997, and December 31, 1996 4
Statement of Cash Flows - for the three months ended
December 31, 1997 and December 31, 1996 5
Notes to Financial Statements - December 31, 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 8
ITEM 2. Changes in Securities 8
ITEM 3. Defaults Upon Senior Securities 8
ITEM 4. Submission of Matters to a Vote of Security Holders 8
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports on Form 8-K 8
Signature Page 9
2
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
BALANCE SHEET
December 31, September 30,
1997 1997
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 28,276 $ 3,593
Accounts Receivable, Net 1,830,307 1,811,349
Inventories 3,371,738 3,249,197
Deferred Income Taxes 149,469 274,900
Other Current Assets 96,934 78,098
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Total current assets 5,476,724 5,417,137
PROPERTY AND EQUIPMENT - NET 1,474,790 1,455,668
OTHER ASSETS 28,752 31,410
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TOTAL 6,980,266 $6,904,215
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $1,550,106 $1,683,272
Accounts payable 652,800 566,061
Accrued liabilities 340,198 301,626
Current maturities of long-term debt 385,064 383,986
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Total current liabilities 2,928,168 2,934,945
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LONG-TERM DEBT - Net of current maturities 462,873 588,184
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DEFERRED INCOME TAXES 54,300 54,300
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STOCKHOLDERS' EQUITY:
Convertible preferred stock series A - 6% cumulative,
authorized, 5,000 shares of no par value;
issued 2,940 shares 242,078 242,078
Common Stock-authorized, 2,000,000 shares of no
par value; issued 1,295,311 shares 3,916,721 3,916,721
Retained earnings (Deficit) (268,255) (456,394)
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Total 3,890,544 3,702,405
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
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Stockholders' equity-net 3,534,925 3,346,786
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TOTAL 6,980,266 $6,904,215
========== ==========
See notes to financial statements.
3
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
UNAUDITED STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
Dec. 31, Dec. 31,
1997 1996
---- ----
REVENUE $3,098,185 $ 2,367,542
COST OF REVENUE 2,169,291 1,935,538
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GROSS PROFIT 928,894 432,004
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OPERATING EXPENSES:
Selling 294,116 261,639
General and administrative 247,917 189,635
Research and development 7,024 43,947
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Total Operating Expenses 549,057 495,221
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INCOME (LOSS) FROM OPERATIONS 379,837 (63,217)
INTEREST EXPENSE 66,267 58,016
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INCOME (LOSS) BEFORE PROVISION (CREDIT) 313,570 (121,233)
FOR INCOME TAXES
PROVISION (CREDIT) FOR INCOME TAXES 125,431 (48,149)
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NET INCOME (LOSS) $ 188,139 $ (73,084)
========== ===========
NET INCOME (LOSS) PER SHARE $ 0.15 $ (0.06)
========== ===========
See notes to financial statements.
4
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
Dec. 31, Dec. 31,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 188,139 $ (73,084)
Depreciation 121,760 127,420
Deferred income taxes 125,431 (48,149)
Changes in current assets/liabilities:
Accounts receivable (18,958) (180,372)
Inventories (122,541) 37,007
Other assets (16,178) (35,160)
Accounts payable 86,739 (226,041)
Accrued liabilities 38,572 249,020
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Net cash provided by/(used in)
investing activities 402,964 (149,359)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (140,882) (72,288)
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Net cash provided by/(used in)
investing activities (140,882) (72,288)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under line-of-credit (133,166) 49,153
Proceeds from issuance of long-term debt -- 235,442
Principal payments on long-term debt (104,233) (60,225)
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Net cash provided by/(used in)
investing activities (237,399) 224,370
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Net increase in cash and cash equivalents 24,683 2,723
Cash and cash equivalents at beginning of period 3,593 5,921
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Cash and cash equivalents at end of period $ 28,276 $ 8,644
========= =========
See notes to financial statements.
5
<PAGE>
BKC SEMICONDUCTORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1997
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited 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:
Dec. 31, Sept. 30,
1997 1997
---- ----
Raw Material $ 711,454 $ 681,157
Work in Process 1,679,424 1,756,847
Finished Goods 980,860 811,193
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$ 3,371,738 $3,249,197
=================== =================
NOTE C - FORWARD-LOOKING STATEMENT
- ----------------------------------
Except for historical information contained herein the matters
set forth are forward- looking statements as defined under the Federal
Securities Laws. Actual results could differ materially from the information set
forth herein and there is no assurance than any anticipated future results will
be achieved. Risks include uncertainties with regard to product demand,
manufacturing, and the effectiveness of the Company's plans to realize and
expand revenues. The Company undertakes no obligation to publicly release the
result of any revisions to forward-looking statements.
NOTE D - SUBSEQUENT EVENT
- -------------------------
On January 21, 1998, the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") by and among the Company, Microsemi
Corporation ("Microsemi"), and Micro BKC Acquisition Corporation ("Merger
Subsidiary"), a wholly-owned subsidiary of Microsemi. Pursuant to the Merger
Agreement, Merger Subsidiary will be merged with and into the Company, with the
Company the surviving corporation and a wholly-owned subsidiary of Microsemi.
Shareholders of the Company will receive $9.17 in cash per share of Company
Stock. The merger is subject to certain conditions precedent and the approval of
the Company's stockholders. A stockholder meeting to consider and vote upon the
Merger will be held at the end of March or the beginning of April, 1998.
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
QUARTER ENDED DECEMBER 31, 1997 COMPARED TO QUARTER ENDED DECEMBER 31, 1996
Revenues for the first fiscal quarter of fiscal year 1998 were
$3,098,185, compared to $2,367,542 for the same quarter of fiscal 1997, an
increase of 31%. The changes in the quarterly revenue levels were the result of
increased sales of products used in the satellites, space and telecommunications
industries.
Gross Profit for fiscal year 1998 first quarter was $928,894, or 30%
of revenue versus $432,004, or 18% of revenue for the same fiscal quarter of
1997. The higher gross profit was a direct result of the increased high
reliability products shipments and a decrease of the lower profit commercial
products shipments.
Operating Expenses for fiscal year 1998 first quarter were $549,057,
or 18% of revenue, compared to prior fiscal year quarter expenses of $495,221,
or 21% of revenue.
Net Income for first quarter of fiscal 1998 was $188,139, or $.15
per share, versus a net loss of ($73,084), or ($.06) per share, for the same
quarter last year. The first quarter FY98 results reflect the overall
improvement in product mix and customer base relating to the higher profit
satellites, space and telecommunication markets. The first quarter of fiscal
year 1997 included pre-tax costs of approximately $100,000 for the start-up and
introduction of a new product line for the high-reliability, space and satellite
communications markets.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of December 31, 1997, the Company had working capital of
$2,549,000 as compared to $2,484,000 at September 30, 1997. The increase was
primarily due to a $170,000 increase in Finished Goods Inventory.
During the quarter just ended, the Company purchased $140,882 in
property and equipment as compared to $72,288 for the same quarter of last year.
As of December 31, 1997, the Company had a revolving credit line
with Eastern Bank for $2,500,000 collateralized by accounts receivable and
inventories. The amount borrowed against the line of credit was $1,550,106. The
line of credit agreement contained certain restrictive covenants which the
Company has complied with.
On February 1, 1998 the Company entered into a new banking
relationship with Citizens Bank of Massachusetts, thereby replacing the Eastern
Bank program. The new arrangement includes a revolving line of credit of
$2,500,000, and a sixty month term loan in the amount of $750,000. As part of
the new agreement, the Company also secured a $500,000 line of credit to be used
for the purchase of equipment.
7
<PAGE>
PART II. OTHER INFORMATION
BKC SEMICONDUCTORS INCORPORATED
DECEMBER 31, 1997
ITEM 1. LEGAL PROCEEDINGS
None
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
NOTE D - SUBSEQUENT EVENT
- -------------------------
On January 21, 1998, the Company entered into an Agreement and Plan
of Merger (the "Merger Agreement") by and among the Company, Microsemi
Corporation ("Microsemi"), and Micro BKC Acquisition Corporation ("Merger
Subsidiary"), a wholly-owned subsidiary of Microsemi. Pursuant to the Merger
Agreement, Merger Subsidiary will be merged with and into the Company, with the
Company the surviving corporation and a wholly-owned subsidiary of Microsemi.
Shareholders of the Company will receive $9.17 in cash per share of Company
Stock. The merger is subject to certain conditions precedent and the approval of
the Company's stockholders. A stockholder meeting to consider and vote upon the
Merger will be held at the end of March or the beginning of April, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
8
<PAGE>
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.
BKC Semiconductors Incorporated
Date: February 6, 1998 /s/ James R. Shiring
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By: James R. Shiring, President
and Chief Executive Officer, Director
Date: February 6, 1998 /s/ Bryan A. Schmidt
--------------------------------------------
Bryan A. Schmidt, Controller, Treasurer
and Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted for
the 3 months ending December 31, 1997 and is qualified in its
entirety by reference to such 10Q and is qualified in its entirety
by reference to such 10-K.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 28,276
<SECURITIES> 0
<RECEIVABLES> 1,830,307
<ALLOWANCES> 0
<INVENTORY> 3,371,738
<CURRENT-ASSETS> 5,602,155
<PP&E> 6,347,895
<DEPRECIATION> 4,873,105
<TOTAL-ASSETS> 7,105,697
<CURRENT-LIABILITIES> 3,053,599
<BONDS> 0
<COMMON> 3,796,302
0
6,878
<OTHER-SE> (268,255)
<TOTAL-LIABILITY-AND-EQUITY> 7,105,697
<SALES> 3,098,185
<TOTAL-REVENUES> 3,098,185
<CGS> 2,169,291
<TOTAL-COSTS> 2,169,291
<OTHER-EXPENSES> 549,057
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,267
<INCOME-PRETAX> 313,570
<INCOME-TAX> 125,431
<INCOME-CONTINUING> 188,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,139
<EPS-PRIMARY> $0.15
<EPS-DILUTED> $0.12
</TABLE>
