SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of
1934 For the transition period from _____ to
_____.
Commission File No. 0-22428
ZYTEC CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1465891
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7575 MARKET PLACE DRIVE, EDEN PRAIRIE, MINNESOTA 55344
(Address of principal executive offices) (Zip Code)
(612) 941-1100
Registrant's telephone number, including area code
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 [ ]
As of August 2, 1996, there were outstanding 9,083,644 shares of the
registrant's common stock, no par value.
ZYTEC CORPORATION
INDEX
PAGE
NO.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheets as of June 30, 1996 and
December 31, 1995 3
Statements of Operations for the three
months and six months ended June 30, 1996
and July 2, 1995 4
Statements of Cash Flows for the six months
ended June 30, 1996 and July 2, 1995 5
Notes to Consolidated Financial Statements 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9-12
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY 13
HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ZYTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2 $ 2
Accounts receivable 29,381 26,648
Inventories 30,043 24,201
Other current assets 2,973 3,014
---------- ----------
Total current assets 62,399 53,865
Property, plant and equipment, net 18,826 11,823
Deferred income taxes 3,264 --
Other assets 932 679
---------- ----------
Total assets $ 85,421 $ 66,367
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt and capital lease obligations,
current portion $ 14,773 $ 13,942
Accounts payable 15,088 18,487
Accrued expenses 7,820 6,979
---------- ----------
Total current liabilities 37,681 39,408
Debt and capital lease obligations,
less current portion 17,461 4,050
Other liabilities 1,642 1,542
---------- ----------
Total liabilities 56,784 45,000
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value:
25,000,000 shares authorized,
9,071,864 and 8,687,306 shares
outstanding at June 30, 1996 and
December 31, 1995, respectively 12,233 11,799
Retained earnings 16,682 9,685
Foreign currency translation adjustments (278) (117)
---------- ----------
Total stockholders' equity 28,637 21,367
---------- ----------
Total liabilities and stockholders' equity $ 85,421 $ 66,367
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
<CAPTION>
ZYTEC CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) FOR THE THREE
MONTHS AND THE SIX MONTHS ENDED JUNE 30,
1996 AND JULY 2, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Six Months
Ended Ended
----- -----
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 60,709 $ 40,544 $ 121,796 $ 73,425
Cost of goods sold 51,837 36,171 104,978 65,404
------------ ------------ ------------ ------------
Gross profit 8,872 4,373 16,818 8,021
------------ ------------ ------------ ------------
Other revenue 403 411 756 795
------------ ------------ ------------ ------------
Operating expenses:
Selling 890 784 1,734 1,539
General and administrative 1,792 1,070 3,408 1,920
Research and development 2,495 2,157 4,885 4,318
------------ ------------ ------------ ------------
Total operating expenses 5,177 4,011 10,027 7,777
------------ ------------ ------------ ------------
Operating income 4,098 773 7,547 1,039
Other income (expense):
Interest expense (571) (223) (952) (447)
Other, net (281) 16 (410) 165
------------ ------------ ------------ ------------
Income before income taxes 3,246 566 6,185 757
Income tax expense (benefit) (1,643) 211 (812) 282
------------ ------------ ------------ ------------
Net income $ 4,889 $ 355 $ 6,997 $ 475
============ ============ ============ ============
Net income per share:
Primary $ 0.48 $ 0.04 $ 0.70 $ 0.05
============ ============ ============ ============
Fully diluted $ 0.48 $ 0.04 $ 0.69 $ 0.05
============ ============ ============ ============
Common and common equivalent shares outstanding:
Primary 10,243,785 9,258,528 9,998,888 9,254,364
============ ============ ============ ============
Fully diluted 10,280,725 9,258,528 10,204,246 9,254,364
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
<CAPTION>
ZYTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995
(IN THOUSANDS)
June 30, July 2,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,997 $ 475
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 1,794 1,304
Changes in operating assets and liabilities (11,370) 517
Deferred income taxes (3,347) (130)
Other 111 79
--------- ---------
Net cash (used in) provided by operating
activities (5,815) 2,245
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (2,173) (1,330)
Cash paid for Zytec Hungary Elektronikai Kft (834) --
Increase in other assets (106) (300)
--------- ---------
Net cash used in investing activities (3,113) (1,630)
--------- ---------
Cash flows from financing activities:
Payments of debt and capital lease obligations (4,339) (4,675)
Proceeds from debt and capital lease obligations 4,122 3,718
Payments on revolving credit agreement (96,323) (54,446)
Proceeds from revolving credit agreement 104,864 54,206
Sale of common stock for cash 433 58
Change in bank overdrafts (192) 794
Other 204 --
--------- ---------
Net cash provided by (used in)
financing activities 8,769 (345)
--------- ---------
Effect of exchange rate changes on cash 159 (270)
--------- ---------
Change in cash and cash equivalents -- --
Cash and cash equivalents, beginning of period 2 2
--------- ---------
Cash and cash equivalents, end of period $ 2 $ 2
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
ZYTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation of Interim Consolidated Financial Statements:
The consolidated financial statements as of June 30, 1996 and for the
periods ended June 30, 1996 and July 2, 1995, have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements
reflect all adjustments, consisting of normal recurring adjustments, which
the Company considers necessary for a fair presentation of the results for
the indicated periods. The results of operations for any interim period are
not necessarily indicative of results for the full year. Certain
information and 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. These consolidated financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's latest annual report on Form 10-K.
2. Selected Balance Sheet Data:
<TABLE>
<CAPTION>
(In thousands)
June 30, December 31,
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Inventories
Work in process and finished goods $ 6,559 $ 7,392
Parts and subassemblies 23,484 16,809
-------- --------
$ 30,043 $ 24,201
======== ========
Property, plant and equipment:
Land and land improvements $ 76 $ 76
Building and building improvements 1,703 637
Equipment, furniture and leasehold improvements 19,861 18,493
Equipment, furniture and leasehold improvements
under capital leases 10,828 5,228
-------- --------
32,468 24,434
Less accumulated depreciation (13,463) (12,176)
Less accumulated amortization of equipment and
leasehold improvements under capital leases (2,248) (1,970)
-------- --------
16,757 10,288
Construction in progress and deposits on equipment 2,069 1,535
-------- --------
$ 18,826 $ 11,823
======== ========
</TABLE>
Accounts payable included bank overdrafts of $711,000 at June 30, 1996 and
$1,148,000 at December 31, 1995.
3. Supplemental Cash Flow Data:
The following provides supplemental disclosures of cash flow activities for
the six months ended June 30, 1996 and July 2, 1995, respectively:
<TABLE>
<CAPTION>
(In thousands)
Increase (Decrease)
-------------------
In Cash and Cash Equivalents
----------------------------
June 30, July 2,
1996 1995
-------- --------
<S> <C> <C>
Changes in operating assets and liabilities:
Accounts receivable $ (3,158) $ (4,921)
Inventories (6,153) (1,785)
Other current assets (17) 832
Accounts payable (2,999) 6,007
Accrued expenses 957 384
-------- --------
$(11,370) $ 517
======== ========
Significant noncash investing and financing transactions:
Property and equipment acquired
through capital lease obligations $ 4,911 1,168
Equipment acquired through issuance of debt $ 1,425
</TABLE>
4. Income Taxes:
In May 1996, the Austrian government changed the treatment of net operating
loss (NOL) carryforwards by (a) suspending the use of NOLs during the years
1996 and 1997 retroactively to January 1, 1996 and (b) removing the time
limitations on the use of the NOLs. In light of this new statute, and based
on its current assessment of the financial results of its Austrian
operations, the Company concluded that it should recognize the deferred
income tax benefit related to the Austrian NOL carryforwards in the second
quarter of 1996. This resulted in a $2,626,000 net reduction of income
taxes in the second quarter, comprised of a tax benefit of $3,175,000
relating to recognition of the deferred tax benefit offset by $549,000 in
income tax expense resulting from the retroactive application of this tax
law change to first and second quarter Austrian operations.
If tax expense (benefit) in the second quarter of 1996 is adjusted by
removing the benefit from recognition of NOLs and by removing tax expense
on first quarter earnings, the consolidated effective tax rate was 37.9
percent. This rate differs from the federal statutory tax rate primarily
due to state taxes. The Company expects that its effective income tax rate,
after consideration of the issue discussed above, will be approximately 38
percent for the foreseeable future.
5. Employee Benefit Plans:
In April 1996, the Company's Board of Directors established a
noncontributory profit-sharing plan covering substantially all employees.
The Company may make semiannual contributions to the plan based on profit
performance in relation to goals to be established by the Board of
Directors. The plan was effective July 1, 1996.
In April 1996, the Company's Board of Directors also established a stock
purchase plan that will allow substantially all employees to purchase,
through payroll deductions, newly issued shares of the Company's common
stock. The plan was effective July 1, 1996.
6. Stockholders' Equity:
In April 1996, the Company's Board of Directors authorized a two-for-one
stock split in the form of a 100 percent stock dividend distributed on June
3, 1996 to shareholders of record on May 20, 1996. All per share and number
of share data have been retroactively restated to reflect the stock split.
In April 1996, the Company's shareholders approved the 1996 Employee
Incentive Stock Option Plan (the 1996 Plan). Under the 1996 Plan, an
aggregate of 2,000,000 shares of common stock was reserved for the granting
of options to employees. Options can be granted under the 1996 Plan until
February 2006.
7. Debt Arrangements:
In May 1996, the Company entered into a revolving credit facility with a
new bank. The agreement provides up to $23 million in borrowings through
May 1999. Credit availability under this facility is subject to a defined
borrowing base that is based on certain percentages of accounts receivable,
inventories and plant and equipment. At the Company's option, advances from
the revolving credit agreement may be made at either a floating rate which
is approximately equal to the bank's prime rate or at a LIBOR rate which is
based on the British Bankers' Association LIBOR setting rate. The Company
must pay a fee of .25% on the unused portion of the revolving credit
balance. The agreement requires the Company to maintain certain leverage,
interest coverage, current and funded debt ratios.
PART I -- FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This report contains certain forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "estimate" or
"continue" or the negative or other variations thereof or comparable terminology
are intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, and actual results may
differ materially depending on a variety of factors.
The second quarter of 1996 was a continuation of a period of sustained growth
for Zytec. As a result of this period of growth, the Company began expansion of
its main production facility in Redwood Falls, Minnesota in the third quarter of
1995 and leased a production facility in Broomfield, Colorado in January 1996.
In the second quarter of 1996, the new construction at the Redwood Falls plant
was completed and operations that had been carried out in peripheral buildings
began to move into the main factory. At the beginning of April 1996, the
Broomfield facility produced its first power supply units; by the end of the
quarter, the facility was operating at its planned capacity rate for 1996.
RESULTS OF OPERATIONS
The following table sets forth certain information derived from the Company's
Consolidated Statements of Operations for the three month and six month periods
ended June 30, 1996 and July 2, 1995, expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold (85.4) (89.2) (86.2) (89.1)
----- ----- ----- -----
Gross profit 14.6 10.8 13.8 10.9
Other revenue 0.7 1.0 0.6 1.1
Selling, general and administrative (4.4) (4.6) (4.2) (4.7)
Research and development (4.1) (5.3) (4.0) (5.9)
----- ----- ----- -----
Operating income 6.8 1.9 6.2 1.4
Other income (expense):
Interest expense (0.9) (0.5) (0.8) (0.6)
Other, net (0.5) 0.0 (0.3) 0.2
----- ----- ----- -----
Income before income taxes 5.4 1.4 5.1 1.0
Income tax (expense) benefit 2.7 (0.5) 0.6 (0.4)
----- ----- ----- -----
Net income 8.1 % 0.9 % 5.7 % 0.6 %
===== ===== ===== =====
</TABLE>
NET SALES
Net sales increased 49.7 percent to $60,709,000 in the second quarter of 1996
from $40,544,000 in the second quarter of 1995. In the first half, sales
increased 65.9 percent to $121,796,000 from $73,425,000 in 1995. The increase in
net sales in the second quarter was due to generally increased demands for
existing products, introduction of new products, and the return of an adequate
supply of power semiconductors which began to occur in the first quarter of
1996. During the second quarter of 1995, the Company's suppliers of power
semiconductors reduced deliveries. This action reduced sales substantially
within that quarter by delaying the Company's ability to ship existing orders.
In addition to the factors above, the Company believes that the first quarter
has become less seasonal. Historically, the first quarter has represented
seasonally low net sales due to the purchasing patterns of one large customer.
As sales of new products to a broader customer base have increased, sales to
that customer have declined to 10 percent of net sales in the first quarter of
1996 from 23 percent in the first quarter of 1995. Net sales for the California
service and logistics business increased 100.2 percent during the first half of
1996.
GROSS MARGIN
Gross margin was 14.6 percent in the second quarter of 1996, up 3.8 percentage
points from 10.8 percent in the second quarter of 1995. In the first half of
1996, gross margin was 13.8 percent, up 2.9 percentage points from 10.9 percent
in the first half of 1995. Gross margin on USA power supply manufacturing
operations improved due to efficiencies being realized from balancing
manufacturing capacity usage which led to lower labor and overhead costs, a
reduction in material content due to change in product mix and cost reduction in
certain products. In the first half, USA power supply operations absorbed the
costs of startup of the Colorado facility, which offset some of the mentioned
improvements. Austria's gross margin also improved, despite slightly higher
material cost rates due to product mix. The increase was accomplished primarily
because the Austria operation was able to increase manufacturing costs much more
slowly than sales and thus was able to leverage its fixed costs.
OTHER REVENUE
Other revenue, which consists of customer payments to fund development of custom
power supplies, decreased slightly to $403,000 in the second quarter of 1996
from $411,000 in the second quarter of 1995. In the first half, funding
decreased to $756,000 in 1996 from $795,000 in 1995. Other revenue has been, and
will continue to be, affected by the number and timing of development programs,
as well as by variations in levels of funding among programs.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative (SG&A) expenses increased 44.7 percent to
$2,682,000 in the second quarter of 1996 from $1,854,000 in the second quarter
of 1995. In the first half, SG&A increased 48.7 percent to $5,142,000 from
$3,459,000 in the first half of 1995. The increases came in the USA with Austria
holding fairly constant in these categories. In the USA, the Company established
a separate administrative function in its California operation at the beginning
of 1996, including new accounting and computer support functions, as well as
additions to human resources and material management. Costs associated with
these changes, which were necessary to maintain the California operation's rapid
growth rate, explain most of the increase in SG&A. Consolidated SG&A expenses
were 4.4 percent and 4.6 percent of sales, respectively, in the second quarter
of 1996 and 1995, and 4.2 percent and 4.7 percent of sales, respectively, in the
first half of 1996 and 1995.
RESEARCH AND DEVELOPMENT
Research and development (R&D) expenses increased 15.7 percent to $2,495,000 in
the second quarter of 1996 from $2,157,000 in the second quarter of 1995. In the
first half, expenses increased 13.1 percent to $4,885,000 in 1996 from
$4,318,000 in 1995. This increase represented a similar number of programs
active in both years, but the spending level of R&D typically varies based on
the stage of completion of programs. Since 1995, the Company has increased
spending on two research programs, but has reduced the average time to
completion (and thus, cost) of custom designs, which has allowed R&D expenses to
grow more slowly than revenue.
INTEREST EXPENSE
Interest expense increased to $571,000 in the second quarter of 1996 from
$223,000 in the second quarter of 1995, as the Company increased borrowing to
support sales and working capital growth, the Austrian facility purchased
capital equipment and the Company's former supplier in Tatabanya, Hungary, and
USA manufacturing facilities were expanded. Interest rates improved slightly in
the first half of 1996 as a result of lower prime rates in 1996 as compared to
1995 and also due to the Company utilizing the lower LIBOR-based rate in the
first quarter for its USA revolving credit facility.
INCOME TAXES
Second quarter income taxes reflected the recognition of the income tax benefit
related to the net operating loss (NOL) carryforwards in the Austrian
operations. In May 1996, the Austrian government changed the treatment of NOL
carryforwards by (1) suspending the use of NOL carryforwards during the years
1996 and 1997 (retroactive to January 1, 1996) and (2) removing the time
limitations on the use of the NOLs. In light of this new statute, and based on
its current assessment of the strong financial results of its Austrian
operations, the Company concluded that it should recognize the deferred income
tax benefit related to the Austrian NOL carryforwards. This change reduced taxes
in the second quarter. The Company recognized a tax reduction of $2,626,000 in
the second quarter, which was comprised of a tax benefit of $3,175,000 relating
to the recognition of the deferred tax benefit offset by $549,000 in income tax
expense resulting from the retroactive application of this tax law change to the
first and second quarter Austrian operations. Because the Austrian NOL
carryforwards has been recorded, the Company expects that its consolidated
effective tax rate will increase to and stabilize at statutory levels of
approximately 38 percent based on Austria's 34 percent tax rate and USA's 40
percent tax.
LIQUIDITY AND CAPITAL RESOURCES
In the first half of 1996, the Company's operating activities used cash of
$5,815,000. Net income and depreciation and amortization provided cash of
$8,791,000; however, changes in operating assets and liabilities used cash of
$11,370,000, and the benefit for deferred income taxes, which includes the
Company's recognition of the Austrian net operating loss carryforwards, resulted
in a non-cash adjustment of $3,347,000. For the comparable period in 1995,
operating activities provided $2,245,000, which was comprised of $475,000 of net
income, a $1,304,000 non-cash adjustment for depreciation and amortization and a
reduction in operating assets and liabilities which provided cash of $517,000.
Cash and cash equivalents were $2,000 as of June 30, 1996. When the Company is
borrowing against its revolving credit facilities, as it was during these
periods, cash balances are minimal.
Working capital was $24,718,000 at June 30, 1996 and $14,457,000 at December 31,
1995, an increase of 71 percent. This was caused primarily by the
reclassification of $10,000,000 debt from short term at December 31, 1995 to
long term at June 30, 1996 as a result of a new credit facility.
Accounts receivable increased $3,158,000 during the first half of 1996, which
was in line with sales overall, and resulted in average days sales outstanding
of 50.9 days in the first quarter of 1996 and 44.2 days in the second quarter of
1996. The overall improvement in the second quarter was caused primarily by
process improvements with a major customer that have accelerated collections.
Inventory turnover averaged 6.8 times in the first quarter of 1996 and 6.9 times
in the second quarter of 1996. Although high by industry standards, these
turnovers are relatively low compared with the Company's history. This is due in
part to the Company's decision to increase inventories of certain semiconductors
due to limited industry capacity in 1995 and due in part to the transition from
one factory to two factories. The Company expects that inventory turnover will
continue to improve as the Company works out of its semiconductor inventories
and the Colorado facility approaches its planned operating rate.
Investing activities required cash of $3,113,000 in the first half of 1996,
compared with $1,630,000 in the first half of 1995. Capital expenditures,
including new capital lease obligations and additional debt, were $8,509,000 in
the first half of 1996 compared with $2,498,000 in first half of 1995. These
expenditures were used in 1996 to provide the new facility in Colorado with
surface mount technology, automated insertion equipment, test equipment,
soldering equipment and other assembly equipment, as well as to provide normal
replacement and improvement to equipment in Redwood Falls, Minnesota and
Austria. In addition, a new facility was opened in Lincoln, California to expand
capacity of the California operation, and this facility required material
handling and other support equipment.
Cash provided by financing activities was $8,769,000 for the first half of 1996.
During the second quarter, a credit facility was entered into in the USA which
provides up to $23,000,000 in borrowings through August, 1996 and $13,000,000
thereafter until it expires in May 1999. This credit facility is unsecured. This
new financing agreement resulted in a reclassification of debt on the balance
sheet with $10,000,000 moving from short-term to long-term.
During the quarter, the Company began a process to sell 2,000,000 shares of the
Company's common stock in order to raise new equity funding. Subsequent to the
end of the quarter, the Company delayed this offering because of unfavorable
market conditions. At the same time, the Company requested its bank to continue
the new credit facility at its $23,000,000 limit and the bank agreed to do so.
Based on the availability of the credit line, the Company believes this
financing is adequate to meet the Company's needs in 1996 and 1997.
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on April 29, 1996. The
following members were elected to the Company's Board of Directors to hold
office for the ensuing year:
Nominee In Favor Withheld
------- -------- --------
Ronald D. Schmidt 4,089,745 13,650
John M. Steel 4,086,745 16,650
Josef J. Matz 4,070,705 32,690
Sherman Winthrop 4,086,745 16,650
Lawrence J. Matthews 4,089,745 13,650
Gary C. Flack 4,086,474 16,921
Dr. Fred C. Lee 4,089,745 13,650
John V. Titsworth 4,073,705 29,690
James S. Womack 4,089,745 13,650
Ratification of the selection of Coopers & Lybrand L.L.P. as independent
accountants to audit the consolidated financial statements of Zytec Corporation
for the year ending December 31, 1996. The votes of the stockholders on this
proposal were as follows:
In Favor Opposed Abstained Broker Non-Vote
4,055,412 32,950 15,033 -0-
Approval of the Zytec Corporation 1996 Employee Incentive Stock Option Plan:
In Favor Opposed Abstained Broker Non-Vote
3,025,397 252,280 30,391 795,327
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
10.1 First Amendment to Credit Agreement
between Zytec Corporation, the
Lenders named therein, and Harris
Trust and Savings Bank, Individually
and as Agent dated July 18, 1996.
(Original agreement dated May 30,
1996.)
10.2 Second Amendment to Credit Agreement
between Zytec Corporation, the
Lenders named therein, and Harris
Trust and Savings Bank, Individually
and as Agent dated August 8, 1996.
(Original agreement dated May 30,
1996.)
11.1 Computation of Net Income Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any current reports on
Form 8-K during the quarter ended June 30, 1996.
SIGNATURE
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.
ZYTEC CORPORATION
(Registrant)
Date: August 8, 1996 By: /s/ John B Rogers
----------------------------------------
John B. Rogers
Vice President Finance & Treasurer
(Principal financial and principal
accounting officer)
EXHIBIT 10.1
ZYTEC CORPORATION
FIRST AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
Firstar Bank of Minnesota,
National Association
Bloomington, Minnesota
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
May 30, 1996 (the "Credit Agreement") among the undersigned, Zytec Corporation,
a Minnesota corporation (the "Company"), you (the "Lenders") and Harris Trust
and Savings Bank, as agent for the Lenders (the "Agent"). All defined terms used
herein shall have the same meaning as in the Credit Agreement unless otherwise
defined herein.
The Company and the Lenders are hereby amending the Credit Agreement to
reflect that the Commitments shall reduce by $10,000,000 as of August 31, 1996,
and not by $13,000,000 as is currently reflected in the Credit Agreement.
1. AMENDMENT.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, Section 3.4(b) of the Credit Agreement shall be amended by
deleting the amount "$13,000,000" appearing therein and substituting therefor
the amount "$10,000,000."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Company and each of the Lenders shall have executed this
Amendment.
(b) The Agent shall have received the favorable written opinion of
counsel for the Company in form and substance satisfactory to the Lenders.
3. MISCELLANEOUS
(a) Reference to this specific Amendment need not be made in any note,
document, letter, certificate, the Credit Agreement itself, the Credit Agreement
itself, the Notes or any communication issued or made pursuant to or with
respect to the Credit Agreement or the Notes, any reference to the Credit
Agreement being sufficient to refer to the Credit Agreement as amended hereby.
(b) This Amendment may be executed in any number of counterparts, and
by the different parties on different counterparts, all of which taken together
shall constitute one and the same agreement. Any of the parties hereto may
execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
Upon acceptance hereof by the Agent and the Lenders in the manner
hereinafter set forth, this Amendment shall be a contract between us for the
purposes hereinabove set forth.
Dated as of this 18th day of July, 1996.
ZYTEC CORPORATION
By: /s/ John B. Rogers
Its: Vice President Finance & Treasurer
Accepted and agreed to as of the date and year last above written.
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By: /s/ Catherine C. Ciolek
Its: Vice President
FIRSTAR BANK OF MINNESOTA, NATIONAL
ASSOCIATION
By: /s/ Karen S. Paris
Its: Vice President
EXHIBIT 10.2
ZYTEC CORPORATION
SECOND AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
Firstar Bank of Minnesota,
National Association
Bloomington, Minnesota
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
May 30, 1996, as previously amended (as so amended, the "Credit Agreement")
among the undersigned, Zytec Corporation, a Minnesota corporation (the
"Company"), you (the "Lenders") and Harris Trust and Savings Bank, as agent for
the Lenders (the "Agent"). All defined terms used herein shall have the same
meaning as in the Credit Agreement unless otherwise defined herein.
The Company has requested that the Lenders permit the Commitments to
remain at $23,000,000 after August 31, 1996 and amend Section 7.13 and 7.17 of
the Credit Agreement, and the Lenders are willing to do so under the terms and
conditions set forth in this Amendment.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1.Section 3.4(b) of the Credit Agreement shall be deleted in
its entirety.
1.2.Section 7.13 of the Credit Agreement shall be amended by
deleting the amount "$3,000,000" appearing in the fifth line thereof
and substituting therefor the amount "$4,000,000".
1.3.Section 7.15(a) of the Credit Agreement shall be amended
by deleting the amount "$6,000,000" appearing in line three thereof and
substituting therefore the amount "$8,000,000". Upon satisfaction of
all of the conditions precedent set forth in Section 2 hereof, the
foregoing amendment shall be retroactively effective as of May 30,
1996.
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Company and each of the Lenders shall have executed this
Amendment.
(b) The Agent shall have received the favorable written opinion of
counsel for the Company in form and substance satisfactory to the Lenders.
3. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment,
the Company hereby represents to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.5 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Lenders) and the Company is in full
compliance with all of the terms and conditions of the Credit Agreement and no
Default or Event of Default has occurred and is continuing under the Credit
Agreement or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
(a) Reference to this specific Amendment need not be made in any note,
document, letter, certificate, the Credit Agreement itself, the Notes or any
communication issued or made pursuant to or with respect to the Credit Agreement
or the Notes, any reference to the Credit Agreement being sufficient to refer to
the Credit Agreement as amended hereby.
(b) This Amendment may be executed in any number of counterparts, and
by the different parties on different counterparts, all of which taken together
shall constitute one and the same agreement. Any of the parties hereto may
execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
Upon acceptance hereof by the Agent and the Lenders in the manner
hereinafter set forth, this Amendment shall be a contract between us for the
purposes hereinabove set forth.
Dated as of this 8th day of August, 1996.
ZYTEC CORPORATION
By /s/ Ronald D. Schmidt
Its Chairman, President & CEO
Accepted and agreed to as of the day and year last above written.
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By /s/ Catherine C. Ciolek
Its Vice President
FIRSTAR BANK OF MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Karen S. Paris
Its Vice President
EXHIBIT 11.1
<TABLE>
<CAPTION>
ZYTEC CORPORATION
COMPUTATION OF NET INCOME PER SHARE
Three Months Ended Six Months Ended
------------------ ----------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net income $ 4,889,000 $ 355,000 $ 6,997,000 $ 475,000
Net income per common and common
equivalent share, primary $ 0.48 $ 0.04 $ 0.70 $ 0.05
Net income per common and common
equivalent share, fully diluted $ 0.48 $ 0.04 $ 0.69 $ 0.05
Primary:
Weighted average number of common
shares outstanding 8,950,141 8,530,182 8,852,022 8,507,088
Common equivalent shares:
Dilutive stock options and warrants,
using Modified Treasury Stock
Method 1,293,644 728,346 1,146,866 747,276
----------- ----------- ----------- ----------
10,243,785 9,258,528 9,998,888 9,254,364
=========== =========== =========== ==========
Fully Diluted:
Weighted average number of common
shares outstanding 8,950,141 8,530,182 8,852,022 8,507,088
Common equivalent shares:
Dilutive stock options and warrants,
using Modified Treasury Stock
Method 1,330,584 728,346 1,352,224 747,276
----------- ----------- ----------- ----------
10,280,725 9,258,528 10,204,246 9,254,364
=========== =========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 29,381
<ALLOWANCES> 0
<INVENTORY> 30,043
<CURRENT-ASSETS> 62,399
<PP&E> 34,537
<DEPRECIATION> 15,711
<TOTAL-ASSETS> 85,421
<CURRENT-LIABILITIES> 37,681
<BONDS> 17,461
0
0
<COMMON> 12,233
<OTHER-SE> 16,404
<TOTAL-LIABILITY-AND-EQUITY> 85,421
<SALES> 121,796
<TOTAL-REVENUES> 122,552
<CGS> 104,978
<TOTAL-COSTS> 104,978
<OTHER-EXPENSES> 4,885
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 952
<INCOME-PRETAX> 6,185
<INCOME-TAX> (812)
<INCOME-CONTINUING> 6,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,997
<EPS-PRIMARY> .70
<EPS-DILUTED> .69
</TABLE>
