SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ending Commission File
September 30, 1997 Number 0-3063
TINSLEY LABORATORIES, INC.
____________________________________________________________
(Exact name of registrant as specified in its charter)
California 94-1049146
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
3900 Lakeside Drive, Richmond, California 94806
_______________________________________________________________
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (510)222-8110
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 past 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 __
1,654,248 shares of Common Stock outstanding as of September 30, 1997.
<PAGE>
Part 1. Financial Information
Item 1.
<TABLE>
TINSLEY LABORATORIES, INC.
Condensed Consolidated Balance
Sheets
(Unaudited)
<CAPTION>
Sept. 30, Dec. 29,
1997 1996
--------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $181,394 $946,222
Accounts receivable 3,840,667 2,925,786
Inventories 1,640,029 1,785,721
Prepaid expenses & other 692,788 666,436
--------- ---------
Total current assets 6,354,878 6,324,165
Net property, plant & equipment 7,431,838 6,288,088
Other assets 827,627 872,627
Net goodwill 1,303,162 1,394,791
--------- ---------
$15,917,505 $14,879,671
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade account payable $732,019 $640,397
Other accrued liabilities 3,100,130 2,702,169
--------- ---------
Total current liabilities 3,832,149 3,342,566
Long-term debt 618,034 1,491,110
Long-term notes payable
to related parties 105,000 10,000
Deferred income taxes 227,101 324,686
Deferred compensation 629,855 613,777
Stockholders' Equity:
Common stock at stated value 274,880 258,633
Capital in excess of stated value 1,568,979 1,261,776
Retained earnings 8,935,725 7,704,963
Minimum pension liability (274,218) (127,840)
--------- ---------
Total stockholders' equity 10,505,366 9,097,532
---------- ---------
$15,917,505 $14,879,671
========== ==========
</TABLE>
<PAGE>
<TABLE>
TINSLEY LABORATORIES, INC.
Condensed Consolidated Statements
of Income
(Unaudited)
<CAPTION>
Three months ended Nine Months ended
------------------ -----------------
Sept. 30, Sept. 29, Sept. 30, Sept. 29,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $5,463,887 $4,918,550 $16,003,865 $13,070,647
Cost of goods sold 3,620,472 3,468,239 10,316,736 9,010,443
Selling, administrative and
research and development
expenses 1,093,398 785,159 3,282,563 2,669,445
Amortization of intangible
assets 55,543 55,543 166,629 166,629
--------- --------- --------- ----------
Income from operations 694,474 609,609 2,237,937 1,224,130
Other (income) expense (17,352) 27,534 (25,330) (37,622)
Interest expense 63,686 68,847 146,363 158,052
--------- --------- --------- ----------
Income before taxes 648,140 513,228 2,116,904 1,103,700
Provision for taxes on income 272,642 217,700 886,142 477,904
--------- --------- --------- ----------
Net income $375,498 $295,528 $1,230,762 $625,796
========= ========= ========= ==========
Per share of common stock:
Net income $0.21 $0.19 $0.70 $0.41
========= ========= ========= ==========
Number of shares used in per
share calculation 1,797,797 1,543,948 1,766,077 1,543,948
========= ========= ========= =========
</TABLE>
<PAGE>
TINSLEY LABORATORIES, INC.
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
-------------------------
Sept. 30, Sept. 29,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,230,762 $625,796
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation & amortization 788,606 743,140
Change in operating assets and
liabilities (1,111,871) (583,100)
Net cash provided by operating
activities 907,497 785,836
Cash flows from investing activities:
Purchase of fixed assets (1,645,727) (1,592,552)
Other (30,000) (45,000)
---------- ----------
Net cash used in investing
activities (1,675,727) (1,637,552)
Cash flows from financing activities:
Proceeds from borrowing arrangements 450,000 1,250,000
Principal payments on long-term debt (770,048) (509,879)
Proceeds from exercise of stock options 323,450 26,675
--------- ---------
Net cash provided by (used in)
financing activities 3,402 766,796
--------- ---------
Net change in cash and cash
equivalents (764,828) (84,920)
Cash and cash equivalents at
beginning of period 946,222 560,692
--------- ---------
Cash and cash equivalents at
end of period $181,394 $475,772
========= =========
- -----------------------------------------------------------------------------
Supplemental disclosure of cash
flow information:
Cash paid for:
Interest $153,698 $172,006
Income taxes $1,325,175 $354,000
=============================================================================
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
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-QSB 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. Operating results for the nine month period ended,
September 30, 1997, are not necessarily indicative of the results that may
be expected for any future periods. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB/A for the year ended December
29, 1996.
In June 1995, the Company entered into employment
agreements with its President and Chief Executive Officer and Vice
President of Marketing. The Company had not accrued the annual bonus
or deferred compensation under the employment agreements for 1996. To
correctly accrue compensation related to the employment agreements, the
Company originally restated its condensed consolidated financial
statements for the quarter ended June 30, 1996. The effect of the
restatement on the results of operations was a reduction of net income of
$54,804 or $.03 per share for the nine months ended September 30, 1996.
In the opinion of management, all material adjustments necessary to
restate the September 30, 1996 condensed consolidated financial
statements have been recorded.
The consolidated financial statements include the accounts of
Tinsley Laboratories, Inc., and its wholly owned subsidiaries, Century
Precision Industries, Inc. d/b/a Century Precision Optics ("Century") and
Tinsley International, Inc., after elimination of intercompany transactions
and balances.
Note: 2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September 30, December 29,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials $266,617 $229,640
Contracts in progress (net of
cost of progress billings of
$1,576,998 at September 30, 1997,
and $576,416 at December 29, 1996) 624,221 637,390
Finished goods 749,191 918,691
-------- -------
$1,640,029 $1,785,721
========== ==========
</TABLE>
Note 3. Recent Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. At that time, the Company will be required
to change the method currently used to compute earnings per share and to
restate all prior periods which are presented in its financial statements.
Under the new requirements for calculating basic earnings per share, the
dilutive effect of stock options will be excluded. Under the new
requirements, the Company's basic earnings per share for the nine months
ending September 30, 1997 and September 30, 1996 would be 74 cents a
share and 44 cents a share, respectively.
Note 4. Pending Merger
On September 9, 1997, Silicon Valley Group, Inc. of San Jose,
California signed a definitive agreement to acquire the Company. The
merger, intended to qualify as a pooling of interests, is scheduled to be
voted upon by Tinsley shareholders on November 26, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF QUARTERLY FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2.
Tinsley's operating results, which have shown continuing strength over the
last several quarters, improved again during the third quarter of 1997 and
for the first nine months of the year ended September 30.
Net sales for the first three quarters rose to $16,003,865 or 22 percent
above last year's sales for the same period of $13,070,647. Net income
reflected our higher volume, moving up to $1,230,762 or 70 cents a share.
Net income therefore substantially exceeded the $625,796 or 41 cents a
share earned during the first nine months of 1996.
Third quarter sales came to $5,463,887 or 11 percent higher than last year's
sales for the September quarter of $4,918,550. Net income for the
September quarter was $375,498, or 21 cents a share, as compared to
$295,528 or 19 cents a share for the same quarter last year.
Moreover, our higher sales and profits accompanied a significant
strengthening of the company's backlog by the close of the September
quarter. Thus backlog by September 30 had reached $17,089,000, which
was well up from our $10,380,000 backlog at the same time a year ago, and
appreciably ahead of our backlog of $10,300,000 at the start of the current
year.
Our business with the Lawrence Livermore National Laboratory has grown
over the past several months with our increasing involvement in the
National Ignition Facility, a $1.2 billion laser fusion technology program.
Tinsley has completed the successful transition from a company that has
primarily served the military to a much better balanced organization
essentially dedicated to commercial markets.
One aspect of this shift is our new concentration on precision optics used
in lithography equipment for making semiconductor chips. Through our
acquisition of Century, an important contributor to the company's
improved operations in recent years, we have also entered the film and
video products markets. While historically we have been the major factor
in the production of optical tooling for the manufacture of color television
tubes, these optics remain a robust line of business for the company.
With regard to precision optics for the lithography industry, on which we
have previously reported, our strategy is to work with consortiums of other
high technology companies and customers that share this common
objective.
One example is our involvement in a Joint Sponsored Research Agreement
with a consortium of three other United States government and private
industrial organizations. The consortium was organized to develop ultra-
precision optics manufacturing and system technologies needed by the
United States Semiconductor Industry to produce future generations of
semiconductor chips and by United States government for the future
exploration of space. The other consortium participants are Sematech,
Inc., NASA's Goddard Space Flight Center and SVG Lithography Systems,
Inc.. The work of the consortium members is being coordinated and
largely funded by Sematech, Inc.
Another significant recent development in this area has been Tinsley's
support of the new Advanced Lithography Technology Consortium headed
by Intel, the world's largest chipmaker. This consortium, in addition to
Intel, includes Motorola, Advanced Micro Devices and the Virtual National
Laboratory consisting of the combined resources of Lawrence Livermore
National Laboratory, Sandia National Laboratories and E.O. Lawrence
Berkeley National Laboratory. The Intel led consortium plans to invest over
$250 million in private funding over the next three years to develop extreme
ultraviolet lithography for commercial manufacturing of computer chips.
It is projected that this technology would increase computer chip
capabilities for the 21st Century, allowing microprocessors to become 100
times more powerful and memory chips to store 1,000 times more
information than is now possible.
Tinsley brings to these new consortiums of high technology companies
many years of specialized experience in the development and production
of high precision optics, many of which have provided important long term
scientific and industrial benefits.
The repair of the Hubble Space Telescope is a case in point. In early
October, 1997, the orbiting space laboratory generated spectacular
photographs of what NASA described as the most powerful star ever
detected, what NASA called "The Pistol Star", which releases more energy
than the sun.
It was the latest of many unprecedented pictures taken by Hubble since the
installation of a number of Tinsley mirrors by astronauts that corrected the
telescope's flawed vision. "NASA", says Ed Weiler, program scientist for
the Hubble, "has delivered a telescope that meets all of the promises we
made before the launch."
This will be our last Shareholders Report as an independent company.
On September 9, Silicon Valley Group, Inc. of San Jose, California signed a
definitive agreement to acquire Tinsley Laboratories. We have previously
mailed to all Tinsley shareholders information on the merger, which is
intended to qualify as a pooling of interests. The merger is scheduled to
be voted upon by Tinsley shareholders on November 26, 1997.
The Merger will provide Tinsley with greater resources with which to
develop and expand its manufacturing capabilities and technology.
As we enter into this new and exciting period of development and
expansion, I would like to take this opportunity to express my thanks and
deep appreciation to individuals who have played important roles in
supporting Tinsley through the Company's long history. I am thinking of
the late David L. Feathers, who provided inspiration, prudent advice, and
timely financial support during several critical years while serving ably on
our Board of Directors.
Harvey L. Morton, our Chairman and President for a considerable period,
gave the Company invaluable technical expertise for many years. Harvey
Morton played a vital part in developing the Company's proprietary
technology.
May I also express my thanks and appreciation to our current Board of
Directors: Stephen L. Davenport, Stephen E. Globus and Steven E. Manios,
and our recently retired Director, Daniel J. Duckhorn, as well as to
company officers: Daniel J. Bajuk, Robert J. Johnson and James A.
Kennon.
I would also like to express my gratitude to Donald P. Clark, Corporate
Counsel and Lowell M. Clucas, Consultant for their sound advice and
excellent work over the last 30 years.
I value my long association with these gentlemen and their personal
friendship.
Finally, I want to express my thanks and appreciation to all the employees
of Tinsley for their dedication, competence, and hard work in establishing
Tinsley as the internationally recognized leader in ultra-precision optical
manufacturing. What we have achieved together has been truly the Work of
Many Hands.
In the beginning of the new era for Tinsley, our goal is to remain solidly in
the forefront of precision optical manufacturing while continuing to make
significant contributions to our customers' products and advanced
technology programs.
Robert J. Aronno
Chairman of the Board
President and Chief Executive Officer
November 7, 1997
Liquidity and Capital Resources:
As of September 30, 1997, cash and cash equivalents were $181,394, a
decrease of $764,828 from cash and cash equivalents of $946,222 at
December 29, 1996. The decrease in cash and cash equivalents was
primarily due to purchases of fixed assets and payments of long-term debt,
offset in part by cash provided by operating activities and additional bank
borrowings.
The Company has a $1.2 million bank revolving line of credit (the "Bank
Line") which was amended on October 14, 1997. The Bank Line bears
interest at the bank's prime rate plus 1% and expires on April 30, 1998. At
September 30, 1997 the Company had $250,000 outstanding under the
Bank Line. During 1997, the Company renewed its bank line of credit,
which expired on April 30, 1997, and increased available borrowings from
$1,000,000 to $1,200,000. The line of credit is secured by the Company's
current and future assets. The line of credit requires the Company to meet
various financial covenants. The Company was in compliance with these
covenants as of September 30, 1997.
The Company is currently negotiating with a manufacturer of
cinematographic equipment located in the United Kingdom to purchase
assets intended to complement Century's optical lens business. The cost
to the Company to purchase and finance the ongoing operation could
require the Company to obtain third party financing.
On April 1, 1998, the Company is obligated to repay in full a $750,000 note
payable related to the 1996 purchase of land and a building.
The Company estimates that it will require an additional $700,000 in capital
expenditures for use in the ordinary course of its business over the twelve
months ended September 30, 1998.
The Company believes that it has adequate working capital and available
bank credit to sustain operations, provide for the expansion of its business
and fulfill its obligations for at least the next twelve months.
<PAGE>
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Reference is made to materials appearing with respect to
election of the Board of Directors, set forth in the Company's
definitive Proxy Statement filed in connection with the
Company's 1996 Annual Meeting of Shareholders, held on
April 23, 1997 which material is incorporated herein.
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the current
period.
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.
TINSLEY LABORATORIES, INC.
____________________________
Robert J. Aronno
President and
Chief Executive Officer
November 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 181394
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<RECEIVABLES> 3840667
<ALLOWANCES> 0
<INVENTORY> 1640029
<CURRENT-ASSETS> 6354878
<PP&E> 13093391
<DEPRECIATION> 5661553
<TOTAL-ASSETS> 15917505
<CURRENT-LIABILITIES> 3832149
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0
0
<COMMON> 274880
<OTHER-SE> 10230486
<TOTAL-LIABILITY-AND-EQUITY> 15917505
<SALES> 16003865
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<CGS> 10316736
<TOTAL-COSTS> 3449192
<OTHER-EXPENSES> (25330)
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</TABLE>
