SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended February 28, 1999 Commission File Number 0-8796
Spectrum Control, Inc.
Exact name of registrant as specified in its charter
Pennsylvania 25-1196447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6000 West Ridge Road; Erie, Pennsylvania 16506
(Address) (Zip Code)
Registrant's telephone number, including area code: (814) 835-4000
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
the filing requirements for at least the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Number of Shares Outstanding
Class as of March 31, 1999
Common, no par value 10,887,008
<PAGE>
SPECTRUM CONTROL, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
February 28, 1999 and November 30, 1998 3-4
Condensed Consolidated Statements of Income --
Three Months Ended February 28, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows --
Three Months Ended February 28, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-18
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
<PAGE>
<TABLE>
SPECTRUM CONTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DOLLAR AMOUNTS IN THOUSANDS
(UNAUDITED)
<CAPTION>
February 28 November 30
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 43 $ 739
Accounts receivable, net of
allowances 11,342 10,162
Inventories
Finished goods 3,156 2,581
Work-in-process 5,056 5,070
Raw materials 5,778 5,234
Total inventories 13,990 12,885
Prepaid expenses and other
current assets 1,024 593
Total current assets 26,399 24,379
PROPERTY, PLANT AND EQUIPMENT,
at cost less accumulated
depreciation of $17,520
in 1999 and $16,631 in 1998 16,246 16,289
OTHER ASSETS
Goodwill 2,576 2,547
Deferred income taxes 383 383
Patents and patent rights 247 255
Debt issuance costs 158 139
Deferred charges 120 147
Total other assets 3,484 3,471
TOTAL ASSETS $46,129 $44,139
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SPECTRUM CONTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DOLLAR AMOUNTS IN THOUSANDS
(UNAUDITED)
<CAPTION>
February 28 November 30
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt $ 400 $ 336
Accounts payable 3,698 2,719
Accrued salaries and wages 1,042 1,438
Accrued interest 43 63
Accrued federal and state
income taxes 525 93
Accrued other expenses 464 281
Current portion of long-term debt 812 830
Total current liabilities 6,984 5,760
LONG-TERM DEBT 2,481 2,500
DEFERRED INCOME TAXES 2,132 2,105
STOCKHOLDERS' EQUITY
Common stock, no par value,
authorized 25,000,000 shares,
issued 10,957,008 shares in 1999
and 1998 14,470 14,470
Retained earnings 20,661 19,798
Treasury stock, 70,000 shares in
1999 and 1998, at cost (294) (294)
34,837 33,974
Accumulated other comprehensive
income
Foreign currency translation
adjustment (305) (200)
Total stockholders' equity 34,532 33,774
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $46,129 $44,139
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SPECTRUM CONTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
(Dollars in Thousands Except Per Share Data)
Three Months Ended
February 28
1999 1998
<S> <C> <C>
Net sales $15,325 $14,641
Cost of products sold 10,913 10 222
Gross margin 4,412 4,419
Selling, general and
administrative expense 2,980 2,905
Income from operations 1,432 1,514
Other income (expense)
Interest expense (53) (53)
Other income and expense,
net 11 10
(42) (43)
Income before provision
for income taxes 1,390 1,471
Provision for
income taxes 527 515
Net income $ 863 $ 956
Earnings per common share:
Basic $ 0.08 $ 0.09
Diluted $ 0.08 $ 0.09
Dividends declared per
common share $ - $ -
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
SPECTRUM CONTROL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLAR AMOUNTS IN THOUSANDS
(UNAUDITED)
<CAPTION>
Three Months Ended
February 28
1999 1998
<S> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 128 $1,818
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property, plant
and equipment (867) (522)
Net cash used in investing
activities (867) (522)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net borrowings (repayment)of
short-term debt 64 (40)
Repayment of long-term debt (37) (35)
Net proceeds from issuance
of common stock - 114
Net cash provided by
financing activities 27 39
Effect of Exchange Rate
Changes on Cash 16 (20)
Net Increase (Decrease)
in Cash and Cash Equivalents (696) 1,315
Cash and Cash Equivalents,
Beginning of Period 739 196
Cash and Cash Equivalents,
End of Period $ 43 $1,511
Cash Paid During the Period For:
Interest $ 73 $ 74
Income taxes 23 137
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
SPECTRUM CONTROL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1999
Note 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 notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying financial statements include all adjustments which are normal,
recurring and necessary to present fairly the results for the interim
periods. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the year.
The balance sheet at November 30, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
notes thereto included in the Spectrum Control, Inc. and Subsidiaries annual
report on Form 10-K for the fiscal year ended November 30, 1998.
Note 2 - Principles of Consolidation
The condensed consolidated financial statements include the accounts of
Spectrum Control, Inc. and its Subsidiaries (the Company). To facilitate
timely reporting, the fiscal quarters of a foreign subsidiary are based upon
a fiscal year which ends October 31. All significant intercompany accounts
are eliminated upon consolidation.
Note 3 - Foreign Currency Translation
The assets and liabilities of the foreign subsidiary are translated into
U.S. dollars at current exchange rates. Revenue and expense accounts of
these operations are translated at average exchange rates prevailing during
the period. These translation adjustments are accumulated in a separate
component of stockholders' equity. Foreign currency transaction gains and
losses are included in determining net income for the period in which the
exchange rate changes.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 4 - Earnings Per Common Share
<TABLE>
The following table sets forth the computation of basic and diluted earnings
per common share for the periods indicated:
<CAPTION>
Three Months Ended
February 28
1999 1998
<S> <C> <C>
Numerator for basic and
diluted earnings per
common share (in thousands):
Net income $ 863 $ 956
Denominator for basic
earnings per common
share (in thousands):
Weighted average
shares outstanding 10,887 10,846
Denominator for diluted
earnings per common
share (in thousands):
Weighted average
shares outstanding 10,887 10,846
Effect of dilutive
stock options 70 141
10,957 10,987
Earnings per common share:
Basic $ 0.08 $ 0.09
Diluted $ 0.08 $ 0.09
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 5 - Comprehensive Income
The following table sets forth the computation of comprehensive income for
the periods indicated:
Three Months Ended
February 28
1999 1998
(in thousands)
Net income $ 863 $ 956
Foreign currency translation adjustment (105) (75)
Comprehensive income $ 758 $ 881
Note 6 - Operating Segments
The following table sets forth reportable segment information for the periods
indicated (in thousands):
Three Months Ended Interconnect Control
February 28, 1999: Products Products Total
Revenue from unaffiliated
customers $ 9,660 $ 5,199 $ 14,859
Segment income 3,778 1,022 4,800
Three Months Ended
February 28, 1998:
Revenue from unaffiliated
customers 11,375 3,068 14,443
Segment income 4,498 410 4,908
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
A reconciliation of total reportable segment income to consolidated income
before provision for income taxes is as follows:
<CAPTION>
Three Months Ended
February 28
1999 1998
(in thousands)
<S> <C> <C>
Total income for reportable segments $4,800 $4,908
Unallocated amounts:
Manufacturing expense related to the
Company's ceramic capacitor operations (853) (866)
Selling, general and administrative expense (2,515) (2,528)
Interest expense (53) (53)
Other income 11 10
Consolidated income before provision for
income taxes $1,390 $1,471
<FN>
For the periods indicated above, there were no material changes to reportable
segment assets or the accounting policies and procedures used to determine
segment income
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 7 - Subsequent Event
On March 26, 1999, the Company acquired substantially all of the assets of
the Signal Conditioning Products Division ("SCPD") of AMP Incorporated
("AMP"). AMP is a world leader in the manufacture of electrical, electronic,
fiber-optic and wireless interconnection devices and systems. Through SCPD,
AMP manufactured and sold a broad line of electromagnetic interference
("EMI") filters, filtered arrays, filtered connectors, and related products.
During the year ended December 31, 1998, SCPD sales of these product
offerings amounted to approximately $30.0 million.
The aggregate purchase price of the acquired assets was approximately
$20.0 million. To finance the acquisition, the Company secured a
$20.0 million term loan from its principal lending institution. The term
loan bears interest at variable rates at or below the prevailing prime rate
and requires quarterly principal payments of $909,000 from December 26, 1999
through March 26, 2005.
The acquisition will be accounted for as a purchase. Accordingly, the
aggregate purchase price will be allocated to the acquired assets based upon
their respective fair market values. The excess of the aggregate purchase
price over the fair value of net assets acquired (goodwill) is expected to
approximate $10.7 million and will be amortized ratably over a period of
20 years. The acquired assets and related operations will be included in the
Company's Interconnect Products business segment.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis may be understood more fully by
reference to the consolidated financial statements, notes to the consolidated
financial statements, and management's discussion and analysis contained in
the Spectrum Control, Inc. and Subsidiaries annual report on Form 10-K for
the fiscal year ended November 30, 1998.
General
Spectrum Control, Inc. and its Subsidiaries (the "Company") design,
manufacture and market a broad line of control products and systems.
The Company was founded as a solutions-oriented company, designing and
manufacturing products to suppress or eliminate electromagnetic interference
("EMI"). The Company has expanded its core EMI filter technology into a
complete line of interconnect filter products (discrete filters, filtered
arrays, and filtered connectors). In recent years, the Company broadened
its focus by developing new lines of power products (commercial custom
assemblies, military/aerospace multisection assemblies, power entry modules,
power distribution units, and power line filters), microwave products
(coaxial ceramic bandpass filters, duplexers, and dielectric resonators),
and specialty ceramic capacitors (single layer, temperature compensating,
high voltage, and switch mode). The Company's products are used in virtually
all industries worldwide, including telecommunications, aerospace, military,
medical, computer, and industrial controls.
Forward-Looking Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes certain forward-looking statements which reflect
management's current views with respect to future operating performance,
ongoing cash requirements, and the Year 2000 Issue. The words "believe",
"expect", "anticipate" and similar expressions identify forward-looking
statements. These forward-looking statements are subject to certain risks
and uncertainties which could cause actual results to differ materially
from historical results or those anticipated. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors That
May Affect Future Results", as well as those discussed elsewhere herein.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
<TABLE>
The following table sets forth certain financial data, as a percentage
of net sales, for the three months ended February 28, 1999 and 1998:
<CAPTION>
1999 1998
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of products sold 71.2 69.8
Gross margin 28.8 30.2
Selling, general and
administrative expense 19.4 19.9
Income from operations 9.4 10.3
Other income (expense)
Interest expense (0.3) (0.4)
Other income and expense, net - 0.1
Income before provision
for income taxes 9.1 10.0
Provision for income taxes 3.5 3.5
Net income 5.6% 6.5%
</TABLE>
First Quarter 1999 Versus First Quarter 1998
Net Sales
Net sales increased 4.7% during the period, with consolidated net sales of
$15.3 million in the first quarter of 1999 and $14.6 million in the
comparable quarter of 1998. The increase in sales primarily reflects
additional shipment volume of the Company's commercial custom assemblies
and power distribution units used in various communication equipment.
Sales of these power products amounted to $5.0 million in the first quarter
of 1999, an increase of $2.4 million or 92.7% from the same period last year.
Sales of the Company's interconnect filter products decreased by $1.7
million during the period, reflecting reduced shipments of the Company's
D-Subminiature connectors and filter plate assemblies used in cellular base
stations and linear power amplifiers. Overall demand for the Company's
products was very strong during the period with total customer orders of
$23.1 million received in the first quarter of 1999, a 53.0% increase from
the first quarter of last year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Gross Margin
Gross margin was constant throughout the period at $4.4 million in the first
quarter of 1999 and 1998. As a percentage of sales, gross margin declined
during the period, amounting to 28.8% in 1999 and 30.2% in 1998. The
decrease in gross margin percentage primarily reflects changes in sales mix
among the Company's interconnect filter products and power product offerings,
as well as yield losses and resultant higher labor costs incurred at the
Company's Ceramic Components Division in New Orleans, Louisiana. Management
expects gross margin percentages for the remainder of 1999 to more closely
approximate historical levels of 30.0% to 31.0% of sales.
Selling, General and Administrative Expense
As a percentage of sales, selling expense remained relatively stable during
the period. Selling expense was $1.8 million or 11.5% of sales in 1999,
compared to $1.6 million or 11.0% of sales in 1998. For the first quarter
of 1999, general and administrative expense amounted to $1.2 million or 7.9%
of sales, compared to $1.3 million or 8.9% of sales for the same period last
year. The decrease in general and administrative expense primarily reflects
lower personnel costs.
Income Taxes
The Company's effective income tax rate was 37.9% in 1999 and 35.0% in 1998,
compared to an applicable statutory income tax rate of approximately 40.0%.
Differences in the effective tax rates and statutory tax rate principally
arise from state tax provisions and foreign income tax rates.
Risk Factors That May Affect Future Results
The Company's results of operations may be affected in the future by a
variety of factors including: competitive pricing pressures, new product
offerings by the Company and it's competitors, new technologies, product
cost changes, changes in the overall economic climate, availability of
raw materials, and changes in product mix. In 1999, management expects
approximately 50.0% of the Company's sales will be to customers in the
telecommunication industry. Accordingly, any significant change in the
telecommunication industry's activity level would have a direct impact on
the Company's performance.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Liquidity, Capital Resources and Financial Condition
The Company has a $6.0 million line of credit with PNC Bank N.A. of Erie,
Pennsylvania (the "Bank"). The revolving credit line is collateralized by
substantially all of the Company's tangible and intangible property, with
interest rates on borrowings at or below the Bank's prevailing prime rate.
At February 28, 1999, the Company had borrowed $400,000 under this financing
arrangement. The current line of credit agreement expires March 26, 2002.
The Company's wholly-owned foreign subsidiary maintains unsecured Deutsche
Mark lines of credit with several German financial institutions aggregating
$1.7 million (3.0 million DM). At February 28, 1999, there were no
outstanding borrowings under these lines of credit. Future borrowings,
if any, under the lines of credit will bear interest at rates below the
prevailing prime rate and will be payable upon demand.
The Company's working capital continued to increase during the period.
At February 28, 1999, the Company had net working capital of $19.4 million,
compared to $18.6 million at November 30, 1998. The Company's current ratio
remained strong during the first three months of fiscal 1999, with current
assets at 3.78 times current liabilities at February 28, 1999, compared to
4.23 at November 30, 1998.
As a result of increased working capital requirements, the Company's
operating cash flow decreased during the period. During the first quarter
of 1999, net cash generated from operations amounted to $128,000 compared to
$1.8 million for the first quarter of 1998. During the first thirteen weeks
of 1999, inventories increased by approximately $1.1 million. The increase
in inventories primarily reflects additional customer consigned inventory
requirements, as well as additional raw material and finished goods
inventories to support anticipated future shipment requirements.
During the first three months of fiscal 1999, the Company's cash
expenditures for property, plant and equipment amounted to $867,000. These
capital expenditures primarily related to metal fabrication machinery and
other manufacturing equipment for capacity expansion at the Company's
Control Products Division.
Current financial resources, including working capital and existing lines of
credit, and anticipated funds from operations are expected to be sufficient
to meet operating cash requirements throughout 1999, including scheduled
long-term debt repayment and planned capital expenditures. There can be no
assurance, however, that unplanned capital replacement or other future
events will not require the Company to seek additional debt or equity
financing and , if so required, that it will be available on terms acceptable
to the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Impact of Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, any
of the Company's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions
of operations, including among other things, a temporary inability to
process transactions, prepare invoices, or engage in similar normal business
activities.
The Company has completed an assessment and determined that it will have to
modify or replace portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter.
The Company presently believes that with modifications and replacement of
existing software, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely,
the Year 2000 Issue could have a material impact on the operations of the
Company.
The Company's plan to resolve the Year 2000 Issue involves four phases:
assessment, remediation, testing, and implementation. To date, the Company
has fully completed its assessment of all material systems that could be
affected by the Year 2000 Issue. The completed assessment indicated that
most of the Company's significant information technology systems could be
affected. The assessment also indicated that software used in certain
manufacturing equipment (hereafter also referred to as operating equipment)
is also at risk. If not resolved on a timely basis, these systems could
hamper the Company's ability to manufacture and ship product from which the
Company derives a significant portion of its revenues.
.
For its information technology exposures, the Company has completed the
remediation phase for all material systems including required software
reprogramming and replacement. After completing the reprogramming and
replacement of software, the Company commenced the testing and
implementation of its information technology systems. To date, the Company
has completed 80% of its testing and has implemented 80% of its remediated
systems. Completion of the testing phase is expected by April, 1999, with
all remediated systems fully implemented by May, 1999.
With respect to operating equipment, the Company has completed the
remediation phase of the resolution process. Testing of this equipment is
currently 80% complete. Once testing is complete, the operating equipment
will be ready for immediate use. Testing and implementation of affected
equipment is expected to be completed by May, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company has queried its important suppliers and vendors to assess their
Year 2000 readiness. To date, the Company is not aware of any problems that
would materially impact results of operations, liquidity, or capital
resources. However, the Company has no means of ensuring that these
suppliers and vendors will be Year 2000 ready. The inability of those
parties to complete their Year 2000 resolution process could materially
impact the Company.
The Company is utilizing both internal and external resources to reprogram,
or replace, test, and implement the software and operating equipment for
Year 2000 modifications. Management anticipates that its total year 2000
project costs will not be material.
The Company's plans to complete Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of
certain resources and other factors. Estimates on the status of completion
and the expected completion dates are based on hours expended to date
compared to total expected hours. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially
from those plans. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel training in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
Other Matters
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and for Hedging Activities" ("SFAS No. 133"). SFAS No. 133
provides a comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. SFAS No 133 is effective
for fiscal years beginning after June 15, 1999, with earlier application
permitted.
Effective January 1, 1999, the European Monetary Union ("EMU") created a
single currency (the "Euro") for its member countries and the exchange rates
of the participating currencies have been fixed against the Euro. The EMU
has established a three year transition period from January 1, 1999 to
December 31, 2001, for the introduction of the Euro.
The Company does not expect the adoption of SFAS No. 133 or the introduction
of the Euro to have a material impact on the Company's financial position
or results of operations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
On March 26, 1999, the Company acquired substantially all of the assets of
the Signal Conditioning Products Division ("SCPD") of AMP Incorporated
("AMP"). AMP is a world leader in the manufacture of electrical,
electronic, fiber-optic and wireless interconnection devices and systems.
Through SCPD, AMP manufactured and sold a broad line of electromagnetic
interference ("EMI") filters, filtered arrays, filtered connectors, and
related products. During the year ended December 31, 1998, SCPD sales of
these product offerings amounted to approximately $30.0 million.
The aggregate purchase price of the acquired assets was approximately
$20.0 million. To finance the acquisition, the Company secured a
$20.0 million term loan from its principal lending institution
(PNC Bank N.A. of Erie, Pennsylvania). The term loan bears interest at
variable rates at or below the prevailing prime rate and requires quarterly
principal payments of $909,000 from December 26, 1999 through March 26, 2005.
The acquisition will be accounted for as a purchase. Accordingly, the
aggregate purchase price will be allocated to the acquired assets based
upon their respective fair market values. The excess of the aggregate
purchase price over the fair value of net assets acquired (goodwill) is
expected to approximate $10.7 million and will be amortized ratably over a
period of 20 years. The acquired assets and related operations will be
included in the Company's Interconnect Products business segment.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter for which
which this report is filed.
<PAGE>
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.
SPECTRUM CONTROL, INC.
(Registrant)
Date: March 31, 1999 By: /s/ John P. Freeman
John P. Freeman, Vice President
and Chief Financial Officer
(Principal Accounting and
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Spectrum
Control, Inc. Condensed Consolidated Balance Sheet (Unaudited) at February 28,
1999 and Condensed Consolidated Statement of Income (Unaudited) for the three
months ended February 28, 1999 and is qualified in its entirety by reference
to its Form 10-Q for the period ended February 28, 1999
</LEGEND>
<CIK> 0000092769
<NAME> SPECTRUM CONTROL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> FEB-28-1999
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 11,745
<ALLOWANCES> 403
<INVENTORY> 13990
<CURRENT-ASSETS> 26399
<PP&E> 33766
<DEPRECIATION> 17520
<TOTAL-ASSETS> 46129
<CURRENT-LIABILITIES> 6984
<BONDS> 2481
0
0
<COMMON> 14470
<OTHER-SE> 20062
<TOTAL-LIABILITY-AND-EQUITY> 46129
<SALES> 15325
<TOTAL-REVENUES> 15325
<CGS> 10913
<TOTAL-COSTS> 10913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> 1390
<INCOME-TAX> 527
<INCOME-CONTINUING> 863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 863
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
