<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number 0-25560 .
CELERITEK, INC.
(Exact name of registrant as specified in its charter)
California 77-0057484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3236 Scott Blvd., Santa Clara, CA 95054
(Address of principal executive offices) (Zip code)
(408) 986-5060
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: [X] Yes [ ] No
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
Common Stock, No Par Value: 6,991,270 shares of July 28, 1996
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CELERITEK, INC.
PART I: FINANCIAL INFORMATION PAGE
Item 1: Financial Statements (Unaudited) 1
Condensed Consolidated Balance
Sheets: June 30, 1996 and March 31, 1996.
Condensed Consolidated Statements of Income: 2
Three months ended June 30, 1996 and
June 30, 1995.
Condensed Consolidated Statements of Cash Flows: 3
Three months ended June 30, 1996 and June 30, 1995.
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations. 5 - 8
SIGNATURES 9
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
Exhibit 11 - Computation of Earnings per share 11
<PAGE> 3
CELERITEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
----------- ---------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,314 $ 3,311
Short-term investments 7,525 7,500
Accounts receivable, net 9,450 9,675
Inventories 5,837 6,398
Prepaid expenses and other current assets 157 126
Deferred tax assets 1,703 1,703
------- -------
Total current assets 29,986 28,713
Property and equipment, net 5,357 5,121
Other assets 43 43
------- -------
Total assets $35,386 $33,877
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,227 $ 2,145
Accrued payroll 1,344 1,156
Accrued liabilities 2,893 2,657
------- -------
Total current liabilities 6,464 5,958
Shareholders' equity 28,922 27,919
------- -------
Total liabilities and shareholders' equity $35,386 $33,877
======= =======
</TABLE>
Note: The balance sheet at March 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
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CELERITEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------
1996 1995
------- -------
<S> <C> <C>
Total Net Sales $11,518 $ 8,003
Cost of Goods Sold 7,252 5,169
------- -------
Gross Profit 4,266 2,834
Operating expenses:
Research and development 1,081 949
Selling, general and administrative 1,869 1,475
------- -------
Total operating expenses 2,950 2,424
Income from operations 1,316 410
Interest income (expense) and other 144 (111)
------- -------
Income before income tax 1,460 299
Provision for income taxes 555 120
------- -------
Net income $ 905 $ 179
------- -------
Net income per share $ 0.12 $ 0.03
------- -------
Shares used in per share calculations 7,322 5,489
------- -------
</TABLE>
See accompanying notes.
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CELERITEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITES
Net income 905 179
Adjustment to reconcile net income to net cash
provided by operating activites:
Depreciation and amortization 479 445
Changes in operating assets and liabilities 1,261 (592)
------ ------
Net cash provided by operating activities 2,645 32
INVESTING ACTIVITIES
Purchase of property and equipment (715) (299)
Purchase of short-term investments (2,025) --
Proceeds from maturities and sales of
short-term investments 2,000 --
------ ------
Net cash used in investing activities (740) (299)
FINANCING ACTIVITIES
Payments on lines of credit -- (250)
Borrowings under lines of credit -- 250
Payments on long-term debt -- (323)
Borrowings on long-term debt -- 286
Payments on obligations under capital leases -- 125
Proceeds from issuance of common stock 98 13
------ ------
Net cash provided by financing activities 98 101
Increase (decrease) in cash and cash equivalents 2,003 (166)
Cash and cash equivalents at beginning of period 3,311 2,194
------ ------
Cash and cash equivalents at end of period 5,314 2,028
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest -- 125
Income taxes 609 390
Capital lease obligations incurred to
finance equipment -- 110
</TABLE>
See accompanying notes.
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CELERITEK, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
This financial information should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended
March 31, 1996, included in the Company's annual report. Operating results
for the three month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended March
31, 1997.
2. INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
------ ------
(In Thousands)
<S> <C> <C>
Raw materials............. $1,750 $2,107
Work-in-process........... 4,087 4,291
------ ------
$5,837 $6,398
====== ======
</TABLE>
3. NET INCOME PER SHARE
Net income per share is based upon the weighted average number of
outstanding shares of common stock, dilutive common equivalent shares from
convertible preferred stock (using the if-converted method), and dilutive
common equivalent shares from stock options (using the treasury stock
method). Pursuant to Securities and Exchange Commission's Staff Accounting
Bulletins, common and common equivalent shares issued during the
twelve-month period prior to the initial public offering are included in
the calculations as if they were outstanding for all periods through
September 30, 1995 (using the treasury stock method at the initial public
offering price). The difference between primary and fully diluted net
income per share is not material for any periods presented.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the risk
factors set forth below under "Risks, Trends, and Uncertainties."
RESULT OF OPERATIONS - FIRST QUARTER OF FISCAL 1996 COMPARED TO FIRST QUARTER OF
FISCAL 1997:
Total net sales were $8.0 million for the first quarter of fiscal 1996 as
compared to $11.5 million for the first quarter of fiscal 1997. Total net sales
to commercial customers increased 44% from $5.7 million for the first quarter of
fiscal 1996 to $8.2 million for the first quarter of fiscal 1997, primarily as a
result of increased sales to the satellite-based communications market. Total
net sales to defense customers increased by 43% from $2.3 million in the
first quarter of fiscal 1996 to $3.3 million for the first quarter of fiscal
1997. The increase in defense sales was due to an increase of unit sales to the
defense market, partially offset by a decline in average selling prices of
defense electronics products. The Company intends to continue to selectively
pursue sales to certain defense customers.
As a percentage of net sales, gross margin increased from 35% of sales in
the first quarter of fiscal 1996 to 37% of sales in the first quarter of fiscal
1997. The increase in gross margin was primarily the result of increased
production volumes and increased efficiency in the production of certain
commercial parts. This improvement was partially offset by a shift in product
mix to a substantially higher percentage of commercial products into which a
greater percentage of third-party purchased components were incorporated.
Research and development expenses increased from $0.9 million or 12% of
sales in the first quarter of fiscal 1996 to $1.1 million or 9% of sales in the
first quarter of fiscal 1997 reflecting the Company's continuing investment in
commercial product development. The Company is currently recruiting design
engineers for commercial products and expects the dollar amounts of research and
development expenses to increase in future periods. See "Risks, Trends, and
Uncertainties - Dependence on Key Personnel."
Selling, general and administrative expenses increased slightly from $1.5
million or 18% of sales in the first quarter of fiscal 1996 to $1.9 million or
16% of sales in the first quarter of fiscal 1997. The increase in dollar amount
was a reflection of higher selling costs to support the higher sales volume and
increased personnel cost.
Interest expense and other, net was $111,000 of expense in the first
quarter of fiscal 1996 as compared to $144,000 of income in the first quarter of
fiscal 1997. The change is due to increased interest income on increased cash
and investment balances as a result of proceeds from the initial public offering
and the elimination of interest expense as a result of no outstanding borrowings
in the first quarter of fiscal 1997.
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The provision for income taxes as a percentage of income before income
taxes has been relatively consistent for both the first quarter of fiscal 1996
and 1997.
FINANCIAL CONDITION
The Company has funded its operations to date primarily through cash flows
from operations and sales of equity securities including the initial public
offering of common stock completed in December 1995 and January 1996, which
generated net proceeds of approximately $12.1 million.
As of June 30, 1996, the Company had $5.3 million of cash and cash
equivalents, $7.5 million of short-term investments and $23.5 million of working
capital. The Company believes that the current capital resources combined with
cash generated from operations will be sufficient to meet its liquidity and
capital expenditure requirements at least through fiscal 1997.
RISKS, TRENDS, AND UNCERTAINTIES
The following risk factors should be carefully reviewed in addition to the other
information contained in this Quarterly Report in Form 10-Q.
Potential Fluctuations in Quarterly Results. The Company's quarterly
results have fluctuated in the past, and may continue to fluctuate in the
future, due to a number of factors, including: the timing, cancellation or delay
of customer orders; the mix of products sold; the timing of new product
introductions by the Company or its competitors; the long sales cycles
associated with the Company or its competitors; the long sales cycles associated
with the Company's application-specific products; market acceptance of the
Company's and its customers' products; variations in average selling prices of
semiconductors; variations in manufacturing yields; changes in inventory levels,
and changes in manufacturing capacity and variations in the utilization of this
capacity and other competitive factors. Any unfavorable changes in the factors
listed above or others could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to maintain quarterly profitability in the future.
Continued Penetration of Commercial Markets; New Product Introductions.
The Company's ability to grow will depend substantially on its ability to
continue to apply its radio frequency ("RF") and microwave signal processing
expertise and GaAs semiconductor technologies to existing and emerging
commercial wireless communications markets. If the Company is unable to design,
manufacture and market new products for existing or emerging commercial markets
successfully, its business, operating results and financial condition will be
adversely affected. Furthermore, if the markets for the Company's products in
the commercial wireless communications area fail to grow, or grow more slowly
than anticipated, the Company's business, operating results and financial
condition could be materially adversely affected.
Dependence on a Limited Number of OEM Customers. A relatively limited
number of OEM customers historically have accounted for a substantial portion of
the Company's sales. In fiscal 1996 and the three months ended June 30, sales to
the Company's top ten customers accounted for approximately 74% and 83%,
respectively, of
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total net sales. In the three months ended June 30, 1996, two of the Company's
customers accounted for 36% and 14% of total net sales. The Company expects that
sales of its products to a limited number of OEM customers will continue to
account for a high percentage of its sales for the foreseeable future, although
sales to any single customer are subject to significant variability from quarter
to quarter. Such fluctuations could have a material adverse effect on the
Company's business, operating results and financial condition.
No Assurance of Product Performance and Reliability. The Company's
customers establish demanding specifications for performance and reliability.
There can be no assurance that problems will not occur in the future with
respect to performance and reliability of the Company's products. If such
problems occur, the Company could experience increased costs, delays in or
reductions, cancellations or rescheduling of orders and shipments, product
returns and discounts, and product redesigns, any of which would have a material
adverse effect on the Company's business, operating results and financial
condition.
Rapid Technological Change. The markets in which the Company competes are
characterized by rapidly changing technologies, evolving industry standards and
continuous improvements in products and services. There can be no assurance that
the Company will be able to respond to technological advances, changes in
customer requirements or changes in regulatory requirements or industry
standards, and any significant delays in the development, introduction or
shipment of products could have a material adverse effect on the Company's
business, operating results and financial condition.
The High Degree of Fixed Costs in the Manufacturing Operation. These fixed
costs consist primarily of investments in manufacturing equipment, repair,
maintenance and depreciation costs related to such equipment and fixed labor
costs related to manufacturing and process engineering. The Company has in the
past and may in the future experience significant delays in product shipments
due to lower than expected production yields, and there can be no assurance that
the Company will not experience problems in maintaining acceptable yields in the
future. The Company's manufacturing yields vary significantly among products,
depending on a given product's complexity and the Company's experience in
manufacturing the product. To the extent that the Company does not maintain
acceptable yields, its operating results could be adversely affected. In
addition, during periods of decreased demand, high fixed wafer fabrication costs
could have a material adverse effect on the Company's operating results.
Competition. The markets in which the Company competes are intensely
competitive and the Company expects competition to increase. Most of the
Company's current and potential competitors have significantly greater
financial, technical, manufacturing and marketing resources than the Company and
have achieved market acceptance of their existing technologies. The ability of
the Company to compete successfully depends upon a number of factors, including
the rate at which customers incorporate the Company's products into their
systems, product quality and performance, price, experienced sales and marketing
personnel, rapid development of new products and features, evolving industry
standards and the number and nature of the Company's competitors. There can be
no assurance that the Company will be able to compete
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successfully in the future, which could have a material adverse effect on the
Company's business, operating results and financial condition.
Dependence on Key Suppliers. Certain components used by the Company in its
existing products are only available from single sources, and certain other
components are presently available or acquired only from a limited number of
suppliers. In the event that its single source suppliers are unable to fulfill
the Company's requirements in a timely manner, the Company may experience an
interruption in production until alternative sources of supply can be obtained,
which could damage customer relationships or have a material adverse effect on
the Company's business, operating results and financial condition.
Dependence on Key Personnel. The Company's future success depends in
significant part upon the continued service of its key technical and senior
management personnel and its continuing ability to attract and retain highly
qualified technical and managerial personnel. Competition for such personnel is
intense, and there can be no assurance that the Company can retain its key
technical and managerial employees or that it can attract, assimilate or retain
other highly qualified technical and managerial personnel in the future which
could have a material adverse effect on the Company's business, operating
results and financial condition.
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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.
Celeritek, Inc.
(Registrant)
Date: August 14, 1996 /s/ MARGARET E. SMITH
-------------------------------------
Margaret E. Smith, Vice President,
Chief Financial Officer and Assistant
Secretary
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Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(11) Statement re: Computation of earnings per share
The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- ---------------
<S> <C>
11.1 Calculation of Earnings Per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 11
CELERITEK, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------
PRIMARY 1996 1995
- ------- ------ ------
<S> <C> <C>
Net income ....................................... $ 905 $ 179
====== ======
Common and common equivalent shares outstanding:
Common Stock ................................. 6,952 1,773
Convertible Preferred Stock ................. -- 3,201
Options ...................................... 370 257
Common and common stock equivalent shares related
to stock and option issuances in accordance with
SAB No. 55, 64, and 83 ......................... -- 258
------ ------
Common and common equivalent shares used in
computing per share amounts .................... 7,322 5,489
====== ======
Net income per share ............................. $ 0.12 $ 0.03
====== ======
</TABLE>
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------
FULLY DILUTED 1996 1995
- ------------- ------ ------
<S> <C> <C>
Net income ....................................... $ 905 $ 179
====== ======
Common and common equivalent shares outstanding:
Common Stock ................................. 6,952 1,773
Convertible Preferred Stock ................. -- 3,201
Options ...................................... 370 257
Common and common stock equivalent shares related
to stock and option issuances in accordance with
SAB No. 55, 64, and 83 ......................... -- 258
------ ------
Common and common equivalent shares used in
computing per share amounts .................... 7,322 5,489
====== ======
Net income per share ............................. $ 0.12 $ 0.03
====== ======
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 5314
<SECURITIES> 7525
<RECEIVABLES> 9450
<ALLOWANCES> 549
<INVENTORY> 5837
<CURRENT-ASSETS> 29986
<PP&E> 19107
<DEPRECIATION> 13750
<TOTAL-ASSETS> 35386
<CURRENT-LIABILITIES> 6464
<BONDS> 0
0
0
<COMMON> 22865
<OTHER-SE> 6057
<TOTAL-LIABILITY-AND-EQUITY> 35386
<SALES> 11518
<TOTAL-REVENUES> 11518
<CGS> 7252
<TOTAL-COSTS> 7252
<OTHER-EXPENSES> 2950
<LOSS-PROVISION> 549
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1460
<INCOME-TAX> 555
<INCOME-CONTINUING> 905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 905
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
