<PAGE>
UNITED STATES
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 September 28, 1997
[ ] 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: 0-21154
CREE RESEARCH, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1572719
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2810 Meridian Parkway, Suite 144, Durham, NC 27713
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 361-5709
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. [ X] Yes [ ] No
The number of shares outstanding of the registrant's common stock, par value
$0.005 per share, as of October 14, 1997 was 12,714,841.
<PAGE>
CREE RESEARCH, INC.
FORM 10-Q
For the Quarter Ended September 28, 1997
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 28, 1997 (unaudited) and
June 30, 1997 3
Consolidated Statements of Income for the three months ended
September 28, 1997 and September 30, 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the three months ended
September 28, 1997 and September 30, 1996 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
PART 1- FINANCIAL INFORMATION
Item 1- Financial Statements
CREE RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
(in 000's except per share amounts)
<TABLE>
<CAPTION>
September 28, June 30,
1997 1997
----------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $12,919 $10,448
Accounts receivable, net 8,564 7,694
Inventories 3,215 3,949
Deferred income tax 1,830 1,830
Prepaid expenses and other current assets 417 466
----------------- --------------
Total current assets 26,945 24,387
Long-term accounts receivable 54 54
Property and equipment, net 24,409 24,333
Patent and license rights, net 1,322 1,267
Other assets 85 96
----------------- --------------
Total assets $52,815 $50,137
================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $2,044 $2,248
Accrued salaries and wages 762 292
Other accrued expenses 1,251 834
----------------- --------------
Total current liabilities 4,057 3,374
----------------- --------------
Non-current deferred income tax 1,638 1,638
----------------- --------------
Shareholders' equity:
Common stock, $0.005 par value; 14,500 shares
authorized; shares issued and outstanding
12,705, and 12,523, at September 28, and
June 30, 1997, respectively 63 62
Additional paid-in-capital 47,039 46,214
Retained earnings (accumulated deficit) 18 (1,151)
----------------- --------------
Total shareholders' equity 47,120 45,125
----------------- --------------
Total liabilities and shareholders' equity $52,815 $50,137
================= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
CREE RESEARCH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in 000's except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
September 28, September 30,
1997 1996
-------------- ----------------
<S> <C> <C>
Revenue:
Product revenue, net $8,206 $2,751
Contract revenue, net 2,001 1,623
License fee income - 2,615
-------------- ----------------
Total revenue 10,207 6,989
-------------- ----------------
Product revenue 5,419 1,983
Contract revenue 1,653 1,527
-------------- ----------------
Total cost of revenue 7,072 3,510
-------------- ----------------
Gross margin 3,135 3,479
Operating expenses:
Research and development, net 394 516
Sales, general and administrative 1,140 906
Other (income) expense (6) 87
-------------- ----------------
Income from operations 1,607 1,970
Interest income, net 164 148
-------------- ----------------
Income before income taxes 1,771 2,118
Income tax expense 602 212
-------------- ----------------
Net income $1,169 $1,906
============== ================
Net income per share $0.09 $0.15
============== ================
Weighted average shares outstanding 13,408 13,035
============== ================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
CREE RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in 000's except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------
September 28, September 30,
1997 1996
----------------- --------------------
<S> <C> <C>
Operating activities:
Net income $1,169 $1,906
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,017 737
Reserve for disposal of assets 300 -
Loss (gain) on disposal of property and equipment (6) 87
Amortization of patent rights 25 42
Amortization of goodwill 10 10
Changes in assets and liabilities:
Accounts receivable (871) (3,278)
Inventories 735 (1,178)
Prepaid expenses and other assets 48 (87)
Accounts payable, trade (850) (987)
Accrued expenses 890 5
----------------- --------------------
Net cash provided by (used in) operating activities 2,467 (2,743)
Investing activities:
Purchases of property and equipment (775) (1,020)
Proceeds from sale of property and equipment 35 -
Purchase of patent rights (82) (63)
----------------- --------------------
Net cash used in investing activities (822) (1,083)
Financing activities:
Net proceeds from issuance of common stock 826 47
Repurchase of common stock - (112)
----------------- --------------------
Net cash provided by financing activities 826 (65)
Net increase (decrease) in cash and cash equivalents 2,471 (3,891)
================= ====================
Cash and cash equivalents:
Beginning of year 10,448 10,162
================= ====================
End of year $12,919 $6,271
================= ====================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
CREE RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The balance sheet as of September 28, 1997, the statements of
operations for the three month periods ended September 28, 1997 and September
30, 1996, and the statements of cash flows for the three months ended September
28, 1997 and September 30, 1996 have been prepared by the Company and have not
been audited. In the opinion of management, all adjustments necessary to present
fairly the financial position, results of operations and cash flows at September
28, 1997, and all periods presented, have been made. The balance sheet at June
30, 1997 has been derived from the audited financial statements as of that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's fiscal 1997 Form 10-K. The results of
operations for the period ended September 28, 1997 are not necessarily
indicative of the operating results that may be attained for the entire fiscal
year.
Accounting Policies
On September 24, 1997, the Board of Directors of Cree Research, Inc.
changed the Company's fiscal year from the twelve months ending June 30 to a 52
or 53-week year ending on the last Sunday in the month of June. Accordingly, all
quarterly reporting will reflect a 13 week period in fiscal 1998, except that
the period ended September 28, 1997, which commenced July 1, 1997, reflects the
results of twelve weeks and five days. The Company's current fiscal year will
extend from July 1, 1997 to June 28, 1998.
Inventories
Inventories are stated at the lower of cost or market, with cost
determined under the first-in, first-out (FIFO) method. Inventories consist of
the following:
September 28, 1997 June 30, 1997
(000's) (000's)
Raw materials $1,200 $1,559
Work-in-progress 1,362 1,374
Finished goods 653 1,016
------ ------
$3,215 $3,949
6
<PAGE>
Research and Development Accounting Policy
The U.S. Government provides funding for several of the Company's
current research and development efforts. The contract funding may be based on a
cost-plus or a cost-share arrangement. The amount of funding under each contract
is determined based on cost estimates that include direct costs, plus an
allocation for research and development, general and administrative and the cost
of capital expenses. Cost-plus funding is determined based on actual costs plus
a set percentage margin. For cost-share contracts, the actual costs are divided
between the U.S. Government and the Company based on the terms of the contract.
The government's cost share is then paid to the Company. Activities performed
under these arrangements include research regarding silicon carbide and gallium
nitride materials. The contracts typically require submission of a written
report to document the results of such research.
The revenue and expense classification for contract activity is
determined based on the nature of the contract. For contracts where the Company
anticipates that funding will exceed direct costs over the life of the contract,
funding is reported as contract revenue and all direct costs are reported as
costs of contract revenue. For contracts under which the Company anticipates
that direct costs will exceed amounts to be funded over the life of the
contract, costs are reported as research and development expenses and related
funding as an offset of those expenses. The following table details information
about contracts for which direct expenses exceed funding by period as included
in research and development expenses:
Three months ended (in 000's)
September 28, September 30,
1997 1996
- -------------------------------------------------------------------------------
Net R&D costs $ 120 $ 145
Government funding 287 444
------- --------
Total direct costs incurred $ 407 $ 589
------- --------
During the life of these contracts, total direct expenditures and
funding are estimated to be $8,985,000 and $6,857,000, respectively. As of
September 28, 1997, direct expenses and funding of $8,260,000 and $6,543,000,
respectively, have been recognized in connection with these contracts.
Income Taxes
The Company has established an estimated tax provision based upon an
effective rate of 34%. The estimated effective rate was based upon projections
of income for the fiscal year and the Company's ability to utilize remaining net
operating loss carryforwards and other tax credits. However, the actual
effective rate may vary depending upon actual pre-tax book income for the year
or other factors.
7
<PAGE>
Earnings Per Share
The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share", on December 28, 1997. SFAS No. 128
requires the Company to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS No. 128.
If the Company had adopted SFAS No. 128 for the period ended
September 28, 1997, the following computation would have been used to arrive at
basic income per share and diluted income per common share that would have been
presented on the consolidated statements of operations:
<TABLE>
<CAPTION>
Three Months Ended
September 28, September 30,
1997 1996
(in 000's, (in 000's,
except per share except per share
amounts) amounts)
------------------ -----------------
<S> <C> <C>
Net income $ 1,169 $ 1,906
Weighted average common shares 12,609 12,282
------------------ -----------------
Basic income per common share $ 0.09 $ 0.16
================== =================
Net income $ 1,169 $ 1,906
Weighted average shares:
Common shares outstanding 12,609 12,282
Dilutive effect of stock options & warrants 799 753
------------------ -----------------
Total shares 13,408 13,035
Diluted income per share $ 0.09 $ 0.15
================== =================
</TABLE>
Reclassifications
Reclassifications of certain amounts have been made to the statement of
operations for the three months ended September 30, 1996, and related footnotes
disclosure, to conform to the fiscal 1998 presentation. These reclassifications
had no effect on shareholders' equity, the results of operations or per share
data.
8
<PAGE>
Subsequent Event
The Company is defending securities class action lawsuits brought in
the U.S. District for the Middle District of North Carolina against the Company
and certain of its directors and officers. The suits, filed in October and
December 1996, were subsequently consolidated and plaintiffs filed a
consolidated amended complaint in March 1997. The amended complaint alleged that
the defendants made material misrepresentations and omissions during the period
from February 1, 1996 to July 2, 1996 and sought damages on behalf of all
persons who purchased the Company's stock within that period. The court on
October 17, 1997 issued a ruling granting defendants' motions to dismiss the
complaint and ordering the case dismissed without prejudice. As of October 22,
1997, the Company has received no notice of appeal. The Company believes the
plaintiffs' allegations are without merit and will continue defending the case
vigorously should plaintiffs seek to file a further amended complaint or to
appeal the dismissal.
The Company has entered into a contract to purchase real property
consisting of approximately thirty acres of land on which exists a 145,000
square foot production facility and a total of 35,000 square feet of service and
warehouse buildings. This property is located in Durham County, North Carolina,
in the vicinity of the Research Triangle Park. The Company is currently
evaluating the property and has the right to terminate the contract without
liability during a specified feasibility study period. The purchase price under
the contract is $3,000,000. The Company has obtained a commitment from a
commercial bank for a term loan of up to $10,000,000, to be secured by the
purchased property, to finance the purchase and upfit of the facility.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the first quarter ended September 28, 1997, the Company posted
record revenue of $10,207,000 and net income of $1,169,000 or $.09 per share.
These results reflect a 46% increase in revenue over the first quarter of fiscal
1997. Revenue and net income in the year-ago period also reflects a $2,615,000
one time license fee. Excluding this license fee, revenue and net income for the
first quarter of 1998, respectively, were $5,833,000 and $1,666,000 higher than
the same period in the prior year. Product revenue, which includes sales of
light emitting diodes ("LEDs"), wafers, module display products and moving
message signs, has increased 198% over the first quarter of fiscal 1997. Results
for the first quarter of fiscal year 1998 reflect the recent change to a 13 week
quarter. Please see Notes to Consolidated Financial Statements.
LED sales grew 288% for the quarter ended September 28, 1997 as
compared to the corresponding period in the prior year. These results mirror the
record LED unit volume shipped during the quarter. Most of this increase was
prompted by the purchase agreement signed in September 1996 and amended in April
1997 with Siemens A.G. ("Siemens"). That agreement calls for an escalating
volume of shipments, with an increase of 55% in the second quarter over the
prior quarter. The effect on revenue of this greater volume will be offset in
part by a 25% reduction in the average sales price to be received in the same
period. While shipments under the present agreement with Siemens are scheduled
to conclude in December 1997, the Company maintains an excellent relationship
with this customer and is currently negotiating to continue the purchase
commitment into calendar 1998. However, there can be no assurance that this
purchase agreement will be extended or for what period of time. The failure to
continue this relationship, or find another strategic customer, could have a
material adverse effect on the business and prospects of the Company.
The Company continues to focus efforts on obtaining additional LED
customers. If the Company is unable to expand its customer base, its revenue and
earnings growth may be adversely impacted. The Company believes that market
growth for this product remains dependent on its ability to substantially lower
pricing. As a result, the Company anticipates that its overall average sales
price will decline significantly in fiscal 1998. Lower pricing will be viable
when a significant reduction in production costs can be achieved. Cree
anticipates that a new smaller sized die product that will be introduced in
October 1997, will reduce costs by approximately 35%. In addition, the Company
expects to increase the wafer size to two inches near the end of the second
quarter. The combination of the smaller die and the two inch wafer is expected
to double the number of potential good die on the wafer, which should result in
lowering costs even further on a per unit basis. This move is expected to
increase available volume without plant expansion. Cree plans to seek further
customer diversification in the third and fourth quarters as this volume becomes
available. There can be no assurance that Cree will
10
<PAGE>
achieve these production benchmarks, lower costs or find an increased customer
base. In addition, any change in the manufacturing process could result in
unexpected problems that could lower production during the transition period.
Wafer sales increased 85% for the three months ending September 28,
1997, over the same period in the prior year. This rise in revenue is
attributable to a 73% growth in volume and a 7% increase in the average sales
price. Both of these results reflect the Company's success in achieving a
premium product with a lower defect density and an increased interest in SiC
materials in the semiconductor industry. During the first quarter, the Company
also dedicated resources to the development agreement with C3, Inc. relating to
the development of colorless material for use in gemstones (as discussed in the
Company's most recent 10K filing). That work comprised approximately 6% of
product revenue and contributed a 31% product margin.
The module business unit recorded sales that were more than three times
the level achieved in the first quarter of 1997. The increase was primarily
attributable to the shipment of a large order to a customer in Korea which
installed the module technology in a large live action display board for a new
sports arena. The Company anticipates that this sale will prove to be key to the
module business, as it will provide an example of this application of the
technology for other potential customers. Moving message sign sales by the
Company's subsidiary, Real Color Displays, Inc. ("RCD"), fell by 44% during the
quarter as compared to the first quarter of fiscal 1997, as the Company
continues to refocus its resources to the module business. During fiscal 1997,
the Company made a strategic shift to the module product line. While Cree will
continue to use its best efforts to market and sell moving message signs, the
modules product line is considered to be a better fit for long term initiatives,
as it requires fewer resources and aligns with the distribution network of other
customers.
Research contract revenues and cost of revenues increased 23% and 8%,
respectively, for the three month period ended September 28, 1997, as compared
to the quarter ended September 30, 1996. This increase is attributable to a
change in mix of work being performed on cost share type arrangements. Under
cost share contracts, where direct costs incurred are expected to exceed
government funding, funding is recorded as an offset to research and development
expenses and related direct expenses are recorded as research and development
expenses. Conversely, for cost plus contracts, where government funding is
anticipated to be higher than direct costs incurred, funding is recorded as
contract revenue and direct expenses are reflected as a cost of contract
revenue. During the first quarter of fiscal 1998, resources were moved from the
two cost share arrangements to other cost plus contracts, as the majority of
funding under the cost share transactions had been exhausted. As a result,
contract revenue and costs of revenue were higher.
The Company's product gross margin was 34% for the three months ending
September 28, 1997 compared to 28% experienced in the first quarter of fiscal
1997. The overall growth in margin stems from higher throughput and
manufacturing yield on LED
11
<PAGE>
and materials products, thereby lowering the cost per unit. While the Company
has demonstrated a lower per unit cost during the past year, much of this
success was due to higher volumes processed as a result of the Siemens contract.
In addition, as a result of the anticipated decline in the overall average sales
price to be received in 1998, the Company must continue to reduce per unit costs
in order to sustain similar profit margins. A smaller die sized chip to be
introduced in October 1997, is expected to comprise the majority of production
for the second quarter. In addition, a two inch wafer is expected to be
introduced near the end of the second quarter. The smaller sized chip and the
larger wafer are expected to reduce per unit costs significantly. A major
challenge for the Company for the remainder of the year is to ensure that costs
decline at a faster rate than the average sales price. If the Company is unable
to reduce unit costs or gain orders for the additional volume produced, gross
margin could be negatively impacted.
For the three months ended September 28, 1997, research and
development costs have declined by 24% due to a one time write off of $93,000
for the closure of the Company's Eastern European Division in the first quarter
of fiscal 1997. The Eastern European Division was a basic research division for
some of the Company's material and device development work.
Sales, general and administrative expenses increased by 26% over the
prior year for the three month period ending September 28, 1997, despite the
inclusion of a brokerage fee ($172,000) associated with the license fee revenue
recorded in the first quarter of fiscal 1997. Higher 1998 expenses include the
sponsorship of a worldwide silicon carbide conference held in Sweden, costs to
support a larger sales and legal staff and other cost increases to support the
growth of the business.
The Company's income tax provision has increased to 34% from a 5%
effective rate experienced during 1997. This higher rate results from the
utilization of net operating loss carryforwards during fiscal 1997.
Liquidity and Capital Resources
Net cash provided by operations was $2,467,000 for the three months
ended September 28, 1997 compared with cash used in operations of $2,743,000
during the first quarter of fiscal 1997. This increase was primarily
attributable to a lower growth in accounts receivable balances and a decline in
the investment in inventory, compared to the increase experienced in 1997.
The Company invested $775,000 in capital equipment during the first
three months of fiscal 1998 compared to $1,020,000 during the same period in the
prior year. As discussed in the notes to the financial statements, the Company
is currently evaluating the purchase of a new production facility. The total
capital outlay for this facility and necessary upfit is estimated to be
approximately $9,000,000 to $10,000,000. A $3,000,000 initial investment would
be required for the purchase, with the remaining upfit expected to take place
over a two year period. The Company has acquired a loan
12
<PAGE>
commitment from a commercial bank to finance these expenditures. All other
capital investments made during 1998 are expected to be financed through cash
provided by operations and cash on hand.
Other Factors Affecting Forward Looking Statements
Cree does not provide a forecast for future financial performance.
While management is optimistic about the Company's short and long term
prospects, the issues and uncertainties described in the Company's Form 10K for
fiscal 1997 and the cautionary statement below should be considered in
evaluating its growth outlook.
Cautionary Statement Identifying Important Factors That Could Cause the
Company's Actual Results to Differ From Those Projected in Forward
Looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, readers of this document are advised
that the document contains both statements of historical facts and forward
looking statements. Forward looking statements are subject to various risks and
uncertainty which could cause actual results to differ materially from those
indicated by the statements. Examples of forward looking statements include but
are not limited to (i) projections of revenues, income or loss, earnings per
share, capital expenditures, capital structure and other financial items, (ii)
statements of the plans and objectives of the Company or its management or Board
of Directors, including the introduction of new products or methodology or
predictions of actions by customers, suppliers, or competitors, (iii) statements
of future economic performance, and (iv) statements of assumptions underlying
other statements and statements about the Company and its business.
This document also identifies important factors which could cause
actual results to differ materially from those indicated by the forward looking
statements. These risks and uncertainties include the Company's ability to lower
LED costs, gain a larger customer base, price products competitively, increase
product yields, reduce chip size, increase wafer size, as well as possible
infringement of intellectual property rights of the Company or others, actions
of competitors, the effects of government regulation, both foreign and domestic,
availability of U.S. government funding for research contracts, possible delays
in the introduction of new products, customer acceptance of products or services
and other factors.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is defending securities class action lawsuits brought in
the U.S. District for the Middle District of North Carolina against the Company
and certain of its directors and officers. The suits, filed in October and
December 1996, were subsequently
13
<PAGE>
consolidated and plaintiffs filed a consolidated amended complaint in March
1997. The amended complaint alleged that the defendants made material
misrepresentations and omissions during the period from February 1, 1996 to July
2, 1996 and sought damages on behalf of all persons who purchased the Company's
stock within that period. The court on October 17, 1997 issued a ruling granting
defendants' motions to dismiss the complaint and ordering the case dismissed
without prejudice. As of October 20, 1997, the Company has received no notice of
appeal. The Company believes the plaintiffs' allegations are without merit and
will continue defending the case vigorously should plaintiffs seek to file a
further amended complaint or to appeal the dismissal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11: Computation of Earnings per Share
(b) Reports on Form 8-K:
A Form 8-K dated September 24, 1997 was filed with respect to
the Board of Directors determination to change the Company's fiscal year end
from June 30 to the last Sunday in the month of June.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CREE RESEARCH, INC.
Date: October 24, 1997 /s/Alan J. Robertson
---------------- ----------------------------
Alan J. Robertson, Chief
Financial Officer and
Secretary
Date: October 24, 1997 /s/F. Neal Hunter
---------------- ----------------------------
F. Neal Hunter, President and
Chief Executive Officer
15
<PAGE>
Exhibit 11
CREE RESEARCH, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
September 28, 1997 September 30, 1996
-------------------------------------- --------------------------------------
Primary Fully Diluted Primary Fully Diluted
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding:
Common Stock 12,609 12,609 12,282 12,282
Shares Available Under Options
and Warrants 799 849 753 786
----------------- ------------------ ----------------- -----------------
Weighted Average Common and Common
Equivalent Shares Outstanding 13,408 13,458 13,035 13,068
================= ================== ================= =================
Net Income 1,169 1,169 1,906 1,906
================= ================== ================= =================
Earnings per Share $ 0.09 $ 0.09 $ 0.15 $ 0.15
================= ================== ================= =================
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-END> SEP-28-1997
<CASH> 12,919
<SECURITIES> 0
<RECEIVABLES> 8,760
<ALLOWANCES> 196
<INVENTORY> 3,215
<CURRENT-ASSETS> 26,945
<PP&E> 32,359
<DEPRECIATION> 7,950
<TOTAL-ASSETS> 26,945
<CURRENT-LIABILITIES> 4,057
<BONDS> 0
0
0
<COMMON> 47,102
<OTHER-SE> 18
<TOTAL-LIABILITY-AND-EQUITY> 52,815
<SALES> 10,207
<TOTAL-REVENUES> 10,207
<CGS> 7,072
<TOTAL-COSTS> 8,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (164)
<INCOME-PRETAX> 1,771
<INCOME-TAX> 602
<INCOME-CONTINUING> 1,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,169
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
