SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 1, 1995 Commission File Number:0-45
SHELDAHL, INC.
(exact name of registrant as specified in its charter)
Minnesota 41-0758073
(State or other jurisdiction of (IRS Employer Identification
Number)
incorporation or organization)
Northfield, Minnesota 55057
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (507) 663-8000
As of December 21, 1995, 8,846,246 shares of the Registrant's common
stock were outstanding.
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
<PAGE>
PART I: FINANCIAL INFORMATION
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Three Months Ended
December 1, December 2,
(in thousands, except for per share data) 1995 1994
Net sales $26,097 $21,088
Cost of sales 20,410 16,688
______ ______
Gross profit 5,687 4,400
______ ______
Expenses:
Sales and marketing 2,221 2,275
General and administrative 1,170 864
Research and development 690 531
Interest 383 19
______ ______
Total expenses 4,464 3,689
______ ______
Income before provision for income taxes 1,223 711
Provision for income taxes (365) (192)
______ ______
Net income $ 858 $ 519
====== ======
Net income per share $0.12 $0.08
====== ======
Weighted average common shares and
common share equivalents outstanding 7,257 6,838
====== ======
SHELDAHL, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
ASSETS
(In thousands) December 1, September 1,
1995 1995
Current assets:
Cash and cash equivalents $17,299 $ 1,045
Accounts receivable, net 17,920 17,637
Inventories 11,843 12,509
Prepaid expenses and other current assets 1,302 732
Deferred tax assets 650 849
______ ______
Total current assets 49,014 32,772
______ ______
Construction in process 37,867 32,654
Plant and equipment, at cost 69,606 68,672
Less: accumulated depreciation (42,707) (41,471)
______ ______
Net plant and equipment 64,766 59,855
______ ______
Other assets 1,499 1,559
______ ______
$115,279 $94,186
====== ======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt $ 5,429 $ 4,179
Accounts payable 10,331 9,113
Accrued compensation 1,354 1,262
Other accruals 2,162 1,886
______ ______
Total current liabilities 19,276 16,440
Long-term debt 21,972 33,864
Other non-current liabilities 2,760 2,683
Deferred taxes 372 247
______ ______
Shareholders' investment:
Common Stock 2,212 1,708
Additional paid-in capital 50,896 22,311
Retained earnings 17,791 16,933
______ ______
Total shareholders' investment 70,899 40,952
______ ______
$115,279 $94,186
====== ======
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Three Months Ended
(in thousands) December 1, December 2,
1995 1994
Operating activities:
Net income $ 858 $ 519
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,456 1,037
Deferred income tax provision 324 161
Net change in other operating activities:
Accounts receivable (283) 112
Inventories 666 (1,360)
Prepaid expenses and other current assets (570) (120)
Other assets 60 (464)
Accounts payable and accrued liabilities 1,586 568
Income taxes payable - (3)
Other non-current liabilities 77 (21)
______ ______
Net cash provided by operating activities 4,174 429
______ ______
Investing activities:
Capital expenditures, net (6,367) (6,031)
Net cash flows used in discontinued operation - (49)
______ ______
Net cash used in investing activities (6,367) (6,080)
______ ______
Financing activities:
Borrowings (repayments) under revolving credit
facilities, net (10,534) 4,169
Repayments of long-term debt (108) (65)
Issuance of common stock 29,089 198
______ ______
Net cash provided by financing activities 18,447 4,302
______ ______
Increase (decrease) in cash 16,254 (1,349)
______ ______
Cash at beginning of period 1,045 2,008
______ ______
Cash at end of period $17,299 $ 659
====== ======
Supplemental cash flow information:
Income taxes paid $ 31 $ 34
====== ======
Interest paid $ 735 $ 224
====== ======
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
These condensed and unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, these
condensed unaudited consolidated financial statements reflect all
adjustments, of a normal and recurring nature, necessary for a fair
statement of the interim periods, on a basis consistent with the annual
audited financial statements. Certain information, accounting policies
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.
Although these disclosures should be considered adequate, the Company
suggests that these condensed unaudited financial statements be read in
conjunction with the financial statements and summary of significant
accounting policies and notes thereto included in the Company's latest
annual report on Form 10-K.
1) Inventories, which are valued at the lower of last-in first-out cost
or market, consists of (in thousands):
December 1, 1995 September 1, 1995
Raw materials $ 3,170 $ 4,267
Work-in-process 5,847 5,649
Finished goods 3,930 3,663
LIFO reserve (1,104) (1,070)
______ ______
$11,843 $12,509
====== ======
2) Debt and Finance
The Company has a credit agreement with three banks consisting of a
$15 million revolving note based on and secured by the Company's
inventories and accounts receivable, and a $20 million term note
collateralized by equipment. Interest accrued on the revolving note
at prime plus 1.5%; on the term note at prime plus 2.0%. As of
December 1, 1995, the Company had a zero balance on the revolving
note. The term note provides for quarterly payments of $1,250,000
beginning January 1, 1996 with the remaining balance due December 31,
1997. As of December 1, 1995, the outstanding balance on the term
note was $20,000,000 at 10.75% interest. In addition, the Company has
outstanding a $5.5 million note to Northern Life Insurance Company
collateralized by the Company's land and buildings in Longmont,
Colorado. The note bears interest at 8.32% with monthly principal and
interest payments of $52,000 with the remaining unpaid principal
balance due September 1, 2002.
3) Consortium for the Development of Multi-Chip Module Laminates (MCM-L)
On January 10, 1994, the Company entered into a Consortium Agreement
sponsored by the Advanced Projects Research Agency (ARPA), a United
States Government Agency. The purpose of the Consortium is to
accelerate the development and commercialization of the multi-chip
module laminate (MCM-L). As a Consortium member, the Company expects
to receive approximately $11.2 million in funding over two years from
ARPA to further test, design and develop the manufacturing processes
for the Company's NOVACLAD based products which are to be used in
constructing multi-chip modules. During the three months ended
December 1, 1995, the Company incurred $1,043,000 in manufacturing,
selling, research and development and administrative costs refunded
by ARPA. To date, the Company has received a total of $8,073,000 of
funding through the Consortium. As of December 1, 1995, the Company
has recorded a $1,180,000 receivable from ARPA.
4) Common Stock Offering
On November 21, 1995, the Company completed the offering of 2,021,500
shares of common stock, with net proceeds to the Company of
approximately $29.1 million.
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED OPERATING RESULTS AND FINANCIAL CONDITION
Three Months Ended December 1, 1995 and December 2, 1994
Net sales increased $5,009,000 or 23.8% from $21,088,000 for the three
months ended December 2, 1994 to $26,097,000 for the three months ended
December 1, 1995. Sales to the automotive market increased $5,833,000 or
49.2% from $11,851,000 for the three months ended December 2, 1994 to
$17,684,000 for the three months ended December 1, 1995. The increase is
the result of continued demand for interconnect systems for engine
control units, power distribution instrumentation, plus flexible materials
for airbags. This demand resulted from the Company's continued efforts
to position itself as a leading supplier of flexible circuits and
interconnects to the automotive electronics industry. Sales to the
datacommunication market decreased $77,000 or 2.2% from $3,485,000 for
the three months ended December 2, 1994 to $3,408,000 for the three
months ended December 1, 1995. Aerospace/defense market sales decreased
$852,000 or 32.9% from $2,590,000 for the three months ended December 2,
1994 to $1,738,000 for the three months ended December 1, 1995. The
decline in the aerospace/defense market sales is principally due to
the sale of the Company's Hoskins Aviation Lighting Product Line Division early
in the first quarter of fiscal 1996. Industrial market sales increased
$859,000 or 53.6% from $1,604,000 for the three months ended December 2,
1994 to $2,463,000 for the three months ended December 1, 1995. Consumer
market sales decreased $754,000 or 48.4% from $1,558,000 for the three months
ended December 2, 1994 to $804,000 for the three months ended December 1,
1995, as sales of flexible interconnect to original equipment camera
manufacturers declined.
Gross profit increased $1,287,000 or 29.3% from $4,400,000 for the three
months ended December 2, 1994 to $5,687,000 for the three months ended
December 1, 1995. Gross profit, as a percentage of sales, increased to
21.8% for the three months ended December 1, 1995 from 20.9% for the
three months ended December 2, 1994. Increased factory volume and
continued improvements to manufacturing processes contributed to the
increase in gross profit.
Expenses increased $775,000 or 21.0% from $3,689,000 for the three months
ended December 2, 1994 to $4,464,000 for the three months ended December
1, 1995. As a percentage of sales, expenses decreased to 17.1% for the
three months ended December 1, 1995 from 17.5% for the three months ended
December 2, 1994.
Sales and marketing expenses decreased $54,000 or 2.4% from $2,275,000
for the three months ended December 2, 1994 to $2,221,000 for the three
months ended December 1, 1995. Increased consulting and relocation
expenses were offset by reductions in travel and proposal materials
and sample costs.
Net general and administrative expenses increased $306,000 or 35.4% from
$864,000 for the three months ended December 2, 1994 to $1,170,000 for
the three months ended December 1, 1995. Gross general and
administrative costs increased $195,000 or 17.8% from $1,097,000 for the
three months ended December 2, 1994 to $1,292,000 for the three months
ended December 1, 1995. The increase was the result of increased legal
and consulting costs relating to the China and Morton International joint
ventures. During the first quarter of fiscal 1995 and 1996, $233,000
and $122,000, respectively, of ARPA credits were applied to general
and administrative costs, decreasing gross expenses. See Note 3 of
the accompanying financial statements for additional information
regarding ARPA.
Research and development expenses increased $159,000 or 29.9% from
$531,000 for the three months ended December 2, 1994 to $690,000 for the
three months ended December 1, 1995. Costs increased due to the
resources required to complete full scale production of the Longmont,
Colorado, production facility.
Net interest expense increased by $364,000, or 19 times, from $19,000 for
the three months ended December 2, 1994 to $383,000 from the three months
ended December 1, 1995. Gross interest expense increased $682,000 or
301.8% from $226,000 for the three months ended December 2, 1994 to
$908,000 for the three months ended December 1, 1995. The Company's
borrowings to support capital expenditures increased substantially
causing the significant increase in interest cost. Capitalized interest
increased $318,000 or 153.6% from $207,000 for the three months ended
December 2, 1994 to $525,000 for the three months ended December 1, 1995.
The increase in capitalized interest is the result of extensive capital
spending including the new production facility in Longmont, Colorado.
As the result of increased sales and improved gross margin performance,
income before provision for income taxes increased $512,000 or 72.0% from
$711,000 for the three months ended December 2, 1994 to $1,223,000 for
the three months ended December 1, 1995.
For the current quarter, income taxes have been provided at an estimated
effective annual rate of 30%. As a result, net income for the three
months ended December 2, 1994 was $519,000 or $0.08 per share and
$858,000 or $0.12 per share for the three months ended December 1, 1995.
Financial Condition
The Company's cash requirements for the three months ended December 1,
1995 were satisfied through positive operating results and and
borrowings. For the three months ended December 1, 1995, operating cash
flows were $4.2 million and capital expenditures for the three months
ended December 1, 1995 totaled $6.4 million.
On November 21, 1995, the Company completed a $29.1 million common stock
offering; $10.5 million of these funds were used to pay down the
revolving credit note with the remaining $18.6 million invested in high
grade short term interest bearing securities. The Company will use these
funds to finance its continuing capital expansion programs over the next
several quarters.
As a result, working capital as of December 1, 1995 was $29,738,000, an
increase of $13,406,000 since September 1, 1995. The Company's current
ratio increased to 2.5 to 1 compared to 2.0 to 1 at September 1, 1995.
In addition, as a result of the common stock offering, the Company
expects its interest rates to decline 100 to 150 basis points, under the
terms of its revolving credit agreement.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
11 Statement regarding computation of earnings per share
27 Financial data schedule
B) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during
the quarter ended December 1, 1995.
<PAGE>
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.
SHELDAHL, INC.
(Registrant)
Dated: January 12, 1996 By: /s/ John V. McManus
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE DECEMBER 1, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-30-1996
<PERIOD-END> DEC-01-1995
<CASH> 17299
<SECURITIES> 0
<RECEIVABLES> 17920
<ALLOWANCES> 0
<INVENTORY> 11843
<CURRENT-ASSETS> 49014
<PP&E> 107473
<DEPRECIATION> 42707
<TOTAL-ASSETS> 115279
<CURRENT-LIABILITIES> 19276
<BONDS> 0
<COMMON> 2212
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0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 115279
<SALES> 26097
<TOTAL-REVENUES> 26097
<CGS> 20410
<TOTAL-COSTS> 4464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 383
<INCOME-PRETAX> 1223
<INCOME-TAX> 365
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</TABLE>
Exhibit 11
SHELDAHL, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
For The Three Months Ended
December 1, December 2,
1995 1994
Primary Earnings Per Share
Weighted average number of issued
shares outstanding 6,994 6,602
Effect of exercise of stock options
under the treasury stock method 263 236
______ ______
Weighted average shares outstanding used
to compute primary earnings per share 7,257 6,838
====== ======
Net income $ 858 $ 519
====== ======
Net income per share $ 0.12 $ 0.08
====== ======
Fully diluted earnings per share
Weighted average number of issued
shares outstanding 6,994 6,602
Effect of exercise of stock options
under the treasury stock method 285 296
______ ______
Weighted average shares outstanding used
To compute fully diluted earnings per share 7,279 6,898
====== ======
Net income $ 858 $ 519
====== ======
Net income per share $ 0.12 $ 0.08
====== ======
