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 November 29, 1996
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
incorporation or organization) number)
Northfield, Minnesota 55057
(Address of principal executive offices) (zip code)
Registrant's telephone number: (507) 663-8000
As of December 12, 1996, 8,912,695 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
November 29, December 1,
(in thousands, 1996 1995
except for per share data)
Cost of sales 21,846 20,410
______ ______
Gross profit 2,455 5,687
______ ______
Expenses:
Sales and marketing 2,299 2,221
General and administrative 1,580 1,170
Research and development 1,140 690
Interest 69 383
______ ______
Total expenses 5,088 4,464
______ ______
Income (loss) before provision
for income taxes (2,633) 1,223
Benefit (provision) for income
taxes 900 (365)
______ ______
Net income (loss) $(1,733) $ 858
====== ======
Net income (loss) per share $(0.19) $0.12
====== ======
Weighted average common shares
and common share equivalents
outstanding 8,913 7,257
====== ======
<PAGE>
SHELDAHL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
unaudited
(In thousands) November 29, August 30,
1996 1996
Current assets:
Cash and cash equivalents 1,248 904
Accounts receivable, net 17,114 21,091
Inventories 12,825 11,525
Prepaid expenses and other
current assets 646 390
Deferred tax assets 2,200 1,660
______ ______
Total current assets 34,033 35,570
______ ______
Construction in process 45,605 37,650
Land and buildings 24,912 24,718
Machinery and equipment 65,839 64,754
Less: accumulated
depreciation (49,685) (47,630)
______ ______
Net plant and
equipment 86,671 79,492
______ ______
Other assets 780 825
______ ______
$121,484 $115,887
====== ======
LIABILITIES AND SHAREHOLDERS INVESTMENT
Current liabilities:
Current maturities of long-term
debt 439 466
Accounts payable 11,112 9,824
Accrued compensation 1,557 1,390
Other accruals 2,449 1,839
______ ______
Total current liabilities 15,557 13,519
______ ______
Long-term debt 27,451 21,858
______ ______
Other non-current liabilities 2,328 2,269
______ ______
Deferred taxes 2,544 2,904
______ ______
Shareholders investment:
Common stock 2,228 2,228
Additional paid-in capital 51,404 51,404
Retained earnings 19,972 21,705
______ ______
Total shareholders
investment 73,604 75,337
______ ______
$121,484 $115,887
======== ========
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Three Months Ended
(in thousands) November 29, December 1,
1996 1995
Operating activities:
Net income (1,733) 858
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 2,072 1,456
Deferred income tax provision (900) 324
Net change in other operating
activities:
Accounts receivable 3,977 (283)
Inventories (1,300) 666
Prepaid expenses and other
current assets (256) (570)
Other assets 45 60
Accounts payable and accrued
liabilities 2,065 1,586
Other non-current
liabilities 59 77
______ ______
Net cash provided by operating
activities 4,029 4,174
______ ______
Investing activities:
Capital expenditures, net (9,251) (6,367)
______ ______
Net cash used in investing
activities (9,251) (6,367)
______ ______
Financing activities:
Borrowings (repayments) under
revolving credit facilities,
net 5,682 (10,534)
Repayments of long-term debt (116) (108)
Issuance of common stock - 29,089
______ ______
Net cash provided by financing
activities 5,566 18,447
______ ______
Increase (decrease) in cash 344 16,254
______ ______
Cash at beginning of period 904 1,045
______ ______
Cash at end of period $ 1,248 $17,299
====== ======
Supplemental cash flow information:
Income taxes paid 195 31
====== ======
Interest paid 458 735
====== ======
<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 strongly 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 first-in first-
out cost or market, consists of (in thousands):
November 29, 1996 August 30, 1996
Raw materials $ 3,486 $ 2,599
Work-in-process 5,791 5,572
Finished goods 3,548 3,354
______ ______
$12,825 $11,525
====== ======
2) 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 $12.2 million in funding through September of
1997 to further test, design and develop the manufacturing
processes for the Company's NOVACLAD7 based products which
are to be used in constructing multi-chip modules. During
the three months ended November 29, 1996, the Company
incurred $231,000 in manufacturing, and research and
development costs that are reimbursable through ARPA. To
date, the Company has received a total of $9,335,000 of
funding through the Consortium. As of November 29, 1996, the
Company has recorded a $2,240,000 receivable from ARPA.
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED OPERATING RESULTS AND FINANCIAL CONDITION
Three Months Ended November 29, 1996 and December 1, 1995
The following table gives information about the Company's revenue
for the three months ended November 29, 1996 as compared with the
three months ended December 1, 1995:
Three Months Ended
November 29, December 1, Gross %
1996 1995 Change Change
Automotive $16,524 $17,684 $ (1,160) (7%)
Datacommunications 2,380 3,408 (1,028) (30%)
Aerospace/Defense 2,357 1,738 619 36%
Industrial 1,987 2,463 (476) (19%)
Consumer 1,053 804 249 31%
______ ______ ______ ______
Total $24,301 $26,097 $(1,796) $ (7%)
====== ====== ====== ======
As shown above, the automotive market declined 7%. The sales
decline was primarily due to year-end inventory adjustments
following an industry-wide inventory build-up in anticipation of
prolonged labor disputes. As the automotive market accounts for
67% of total sales, the Company's revenue will react to the
automotive market business cycles.
The datacommunications market sales declined as the Company
continues to narrow its core business offering to this market.
Growth in datacommunications sales is expected to come from the
Company's Micro Products operation in Longmont, Colorado.
The aerospace/defense market sales increase was due to increased
demand in the Company's thin film and fabricated device products
used in the satellite and space industry.
The industrial and consumer markets, combined, declined $227,000
or 7.5%. Normal demand fluctuations account for the change in
these non-primary markets.
Gross margin for the period declined $3,231,000 or 56% from
$5,687,000 for the three months ended December 1, 1995 to
$2,455,000 for the three months ended November 29, 1996. Lower
sales, unfavorable product mix, and increased expenses due to the
Micro Products operation accounted for the decline.
Sales and marketing expense increased $78,000 or 4% from
$2,221,000 for the three months ended December 1, 1995 to
$2,299,000 for the three months ended November 29, 1996.
Increases in sales staffing costs and advertising expenses were
offset by declines in consulting and travel costs.
General and administrative expense increased $410,000 or 35% from
$1,170,000 for the three months ended December 1, 1995 to
$1,580,000 for the three months ended November 29, 1996.
Accounting for the increase was $122,000 in less ARPA funding and
increased staffing for accounting and other support staff.
Research and development expense increased $450,000 or 65% from
$690,000 for the three months ended December 1, 1995 to $1,140,000
for the three months ended November 29, 1996. Although ARPA
funding applied to research and development expenses increased
$65,000, increases in staff supporting the Micro Products
operation and the ARPA consortium, as well as outside testing
services relating to the Micro Products operation, accounted for
this rather large increase in research and development expense.
Interest expense, net of capitalized interest, is reflected in the
following table:
Three Months Ended
November 29, 1996 December 1, 1995
Gross interest expense $ 479 $ 908
Less capitalized interest (410) (525)
______ ______
Interest expense $ 69 $ 383
====== ======
Lower interest rates (about 250 basis points on average) as well
as lower average borrowings account for the decline in both the
gross interest expense and capitalized interest.
Operating profit, due to $1,800,000 in less sales, $814,000 in
less ARPA funding, unfavorable product mix, and increases in
administration and research expenses, decline $3,871,000 from a
profit of $1,223,000 for the three months ended December 1, 1995
to a loss of $2,633,000 for the three months ended November 29,
1996.
Tax benefits for the current period were provided at 34%. Net
income, therefore, declined $2,591,000 from income of $858,000 in
1995 to a loss of $1,733,000 in 1996.
Financial Condition:
The Company has a $35 million revolving credit facility secured by
the Company's assets. As of November 29, 1996, borrowings under
this facility were $20.1 million with $14.9 million available.
The Company is currently examining additional financing options to
support the Company's growth. During the first three months, the
Company invested $9,251,000 in capital expenditures. The current
ratio declined from 2.63 at August 30, 1996 to 2.19 at November
29, 1996.
Prospective Information:
Significant operating events will take place during the next
several months of operations. First, the ARPA funded consortium
will be completing its purpose and funding will slow dramatically
throughout fiscal 1997. The Company has no obligation to any
member after the consortium objectives and related ARPA fundings
are completed. Only normal business relationships will remain
among the members of the MCM-L consortium.
Secondly, the Company's Longmont, Colorado, production facility is
complete. The facility is undergoing an intensive production
qualification process with several key customers. Once
qualifications have been satisfactorily completed, the facility
will begin operations. Initially, sales are not expected to be of
sufficient volume to offset operational expenses. Therefore, the
start-up of this operation is likely to have a negative impact on
the Company's operating results through fiscal 1997 or until such
time as sales increase enough to cover fixed and other operating
expenses.
Other Factors:
The Company has limited foreign currency risks from its
international sales. Major contracts have "risk sharing"
arrangements with the customer, allowing repricing in the event of
long-term and/or significant foreign currency fluctuations.
To deal with short-term fluctuations, the Company, from time-to-
time, will use a variety of natural and contractual hedging
techniques to prudently reduce, but not eliminate, its exposure to
foreign currency fluctuations. Historical transactions have not
been material in nature. The Company expects its foreign currency
contracts to increase during fiscal 1997 and will increase its
hedging activities accordingly.
Cautionary Statement:
Statements contained herein, other than historical data, may be
forward-looking and subject to risks and uncertainties including,
but not limited to, those set forth in the annual report and 10K
for fiscal 1996.
<PAGE>
PART II - OTHER INFORMATION
SHELDAHL, INC. AND SUBSIDIARY
FORM 10-Q
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 November 29, 1996.
<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 6, 1997 By /s/ John V. McManus
Vice President, Finance
<PAGE>
Exhibit 11
SHELDAHL, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
For The Three Months Ended
November 29, December 1,
1996 1995
Primary earnings per share
Weighted average number of issued
shares outstanding 8,913 6,994
Effect of exercise of stock options
under the treasury stock method - 263
______ ______
Weighted average shares outstanding
used to compute primary earnings
per share 8,913 7,257
====== ======
Net income $(1,733) $ 858
====== ======
Net income per share $(0.19) $ 0.12
====== ======
Fully diluted earnings per share
Weighted average number of issued
shares outstanding 8,913 6,994
Effect of exercise of stock options
under the treasury stock method - 285
______ ______
Weighted average shares outstanding
used to compute fully diluted
earnings per share 8,913 7,279
====== ======
Net income $(1,733) $ 858
====== ======
Net income per share $ (0.19) $ 0.12
====== ======
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financcial information extracted from the
November 29, 1996 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-29-1997
<PERIOD-END> NOV-29-1996
<CASH> 1248
<SECURITIES> 0
<RECEIVABLES> 17114
<ALLOWANCES> 0
<INVENTORY> 12825
<CURRENT-ASSETS> 34033
<PP&E> 136356
<DEPRECIATION> 49685
<TOTAL-ASSETS> 121484
<CURRENT-LIABILITIES> 15557
<BONDS> 0
0
0
<COMMON> 2228
<OTHER-SE> 71376
<TOTAL-LIABILITY-AND-EQUITY> 121484
<SALES> 24301
<TOTAL-REVENUES> 24301
<CGS> 21846
<TOTAL-COSTS> 5019
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 2633
<INCOME-TAX> 900
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1733
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
