UNITED STATES 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 December 31, 1995
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 0-12944
Zygo Corporation
(Exact name of registrant as specified in its charter)
Delaware 06-0864500
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Laurel Brook Road, Middlefield, Connecticut 06455
(Address of principal executive offices) (Zip Code)
(860) 347-8506
Registrant's telephone number, including area code
N/A
(Former name, former address, and former fiscal year, if changed
from 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.
YES X NO ____
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
4,782,636 shares, Common Stock, $.10 Par Value, at January 25, 1996
PART I
Item 1. Financial Statements
Company or group of companies for which report is filed: Zygo Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share amounts)
For the Three Months For the Six Months
Ended December 31, Ended December 31,
--------------------------- ---------------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net sales $ 12,654 $ 7,097 $ 23,994 $ 12,955
Cost of goods sold 6,859 3,852 13,195 7,306
-------- -------- -------- --------
Gross profit 5,795 3,245 10,799 5,649
Selling, general and administrative
expenses 2,024 1,641 3,985 3,141
Research, development and
engineering expenses 1,320 793 2,746 1,462
-------- -------- -------- --------
Operating profit 2,451 811 4,068 1,046
-------- -------- -------- --------
Other income (expense):
Interest income 142 88 244 176
Interest expense 0 (11) 0 (23)
Miscellaneous, net (89) (44) (130) (107)
-------- -------- -------- --------
53 33 114 46
-------- -------- -------- --------
Earnings before income taxes 2,504 844 4,182 1,092
Income tax expense 876 311 1,464 403
-------- -------- -------- --------
Net earnings $ 1,628 $ 533 $ 2,718 $ 689
======== ======== ======== ========
Net earnings per share $ .33 $ .13 $ .57 $ .17
======== ======== ======== ========
Weighted average common shares
and common dilutive equivalents
outstanding 4,879 4,068 4,786 4,019
======== ======== ======== ========
-2-
CONSOLIDATED BALANCE SHEETS
As of December 31, 1995, and June 30, 1995
(Thousands of dollars)
December 31, June 30,
ASSETS 1995 1995
------ -------- --------
Current Assets:
Cash and cash equivalents $ 27,373 $ 2,428
Marketable securities 7,008 7,746
Receivables 6,080 6,296
Inventories:
Raw materials and manufactured parts 3,020 2,863
Work in process 3,027 2,281
Finished goods 305 499
-------- --------
Total inventories 6,352 5,643
-------- --------
Prepaid expenses and taxes 683 581
Deferred income taxes 1,093 1,043
-------- --------
Total current assets 48,589 23,737
-------- --------
Property, plant and equipment, at cost 16,714 16,644
Less accumulated depreciation (11,055) (11,381)
-------- --------
Net property, plant and equipment 5,659 5,263
Other assets, net 724 666
-------- --------
Total assets $ 54,972 $ 29,666
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,300 $ 2,515
Accrued expenses and customer progress
payments 4,095 3,497
Federal and state income taxes -- 653
-------- --------
Total current liabilities 6,395 6,665
-------- --------
Deferred income taxes 665 668
Stockholders' Equity:
Common stock, $.10 par value per share:
15,000,000 shares authorized; 4,882,686
shares issued (4,030,786 at June 30, 1995) 488 403
Additional paid-in capital 33,490 10,726
Retained earnings 14,226 11,508
Net unrealized gain (loss) on marketable securities 9 (3)
-------- --------
48,213 22,634
Less treasury stock, at cost; 103,800 shares 301 301
-------- --------
Total stockholders' equity 47,912 22,333
-------- --------
Total liabilities and stockholders' equity $ 54,972 $ 29,666
======== ========
-3-
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended December 31, 1995, and 1994
(Thousands of dollars)
1995 1994
-------- --------
Cash provided by (used for) operating activities:
Net earnings $ 2,718 $ 689
Adjustments to reconcile net earnings
to cash provided by (used for) operating activities:
Depreciation and amortization 684 582
Deferred income taxes (63) --
Loss on disposal of assets 98 209
Intangible and other assets -- (162)
Changes in operating accounts:
Receivables 236 (923)
Inventories (709) (617)
Prepaid expenses and taxes (102) 184
Accounts payable and accrued expenses (270) 487
-------- --------
Net cash provided by operating activities 2,592 449
-------- --------
Cash provided by (used for) investing activities:
Additions to property, plant and equipment (1,165) (772)
Investment in marketable securities (400) (1,229)
Investment in other assets (95) --
Proceeds from maturity of marketable securities 1,160 1,465
Proceeds from sale of assets 4 3
-------- --------
Net cash (used for) investing activities (496) (533)
-------- --------
Cash provided by (used for) financing activities:
Repayment of long-term debt -- (131)
Net proceeds from issuance of common stock 22,826 --
Exercise of stock options 23 16
-------- --------
Net cash provided by (used for) financing activities 22,849 (115)
-------- --------
Net increase (decrease) in cash and cash equivalents 24,945 (199)
Cash and cash equivalents,
beginning of year 2,428 2,530
-------- --------
Cash and cash equivalents,
end of period $ 27,373 $ 2,331
======== ========
The interim financial statements furnished herein reflect all adjustments,
consisting only of normal closing entries, which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods
presented. These interim financial statements should be read in conjunction with
the consolidated financial statements and notes included in the Company's June
30, 1995 Annual Report on Form 10-K.
The foregoing interim results are not necessarily indicative of the results of
operations for the full fiscal year ending June 30, 1996.
-4-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
At December 31, 1995, working capital was $42,194,000, an increase of
$25,122,000 from $17,072,000 at June 30, 1995. At December 31, 1995, the Company
had cash and cash equivalents of $27,373,000 and marketable securities of
$7,008,000 for a total of $34,381,000. The $24,207,000 increase in cash and cash
equivalents and marketable securities from the amount at June 30, 1995, was due
primarily to the secondary offering of 1,300,000 shares of the Company's common
stock, of which 845,000 shares were sold by the Company generating approximately
$23 million in net proceeds to the Company. As of December 31, 1995, there were
no borrowings outstanding under the Company's $3,000,000 bank line of credit.
Unused amounts under the line of credit are available for short-term working
capital needs.
Results of Operations
Net sales of $12,654,000 for the three months and $23,994,000 for the six months
ended December 31, 1995, increased by $5,557,000 or 78.3% and $11,039,000 or
85.2%, respectively, from the net sales in the comparable prior year periods.
The percentages of net sales attributed to electro-optical instruments and
accessories amounted to 84.7% and 86.8%, respectively, in the three months and
six months ended December 31, 1995. The increases in net sales in both the
three-month and six-month periods were principally due to increased demand from
manufacturers of data storage and semiconductor products for the Company's
instruments and systems. Net sales of the Company's electro-optical instruments
and accessories in the three- and six-month periods ended December 31, 1995
increased by 78.5% and 98.3%, respectively, from the same periods the year
earlier. Net sales of precision optical components also increased by 77.2% and
29.2%, respectively, for the three months and six months ended December 31,
1995.
Gross profit for the three months and six months ended December 31, 1995,
amounted to $5,795,000 and $10,799,000, respectively, an increase of $2,550,000
and $5,150,000 from the comparable prior year periods. Gross profit as a
percentage of sales for the quarter and six months ended December 31, 1995,
amounted to 45.8% and 45.0%, respectively, an increase of 0.1 and 1.4 percentage
points, respectively, from gross profit as a percentage of sales of 45.7% and
43.6%, respectively, for the three months and six months ended December 31,
1994. Gross profit dollars and gross profit as a percentage of sales increased
principally due to the increased volume of sales and certain volume-related
manufacturing efficiencies.
Selling, general and administrative expenses of $2,024,000 and $3,985,000,
respectively, in the three months and six months ended December 31, 1995,
increased by $383,000 or 23.3%, and $844,000, or 26.9%, respectively, from the
same periods the year earlier. In the three-month and six-month periods ended
December 31, 1995, volume-related expenses accounted for 59.0% and 53.1%,
respectively, of the total dollar increases from the comparable prior year
periods. As a percentage of sales, selling, general and administrative expenses
declined in the three months and six months ended December 31, 1995, to 16.0%
and 16.6%, respectively, as compared to 23.1% and 24.2%, respectively, in the
comparable prior year period.
Research and development expenses amounted to $1,320,000 or 10.4% of sales and
$2,746,000 or 11.4% of sales, respectively, for the three months and six months
ended December 31, 1995. In the comparable three- and six-month periods in the
prior year, R&D expenses totaled $793,000 or 11.2% of sales and $1,462,000 or
11.3% of sales, respectively. The significant increase in R&D expenses primarily
resulted from spending on personnel and materials at both the Company's
principal R&D center in Middlefield, Connecticut, and its R&D facility in Simi
Valley, California, which was formed in the quarter ended March 31, 1995.
-5-
Other income in the quarter and six months ended December 31, 1995, amounted to
$53,000 and $114,000, respectively, as compared to $33,000 and $46,000,
respectively, in the same periods last year. Other income increased primarily
due to an increase in interest income relating to the Company's secondary stock
offering and the elimination of interest expense, partially offset by
miscellaneous expense of a nonrecurring nature.
The Company's backlog at December 31, 1995 was a record level of $16,766,000, an
increase of $6,884,000 or 69.7% over the $9,882,000 backlog at December 31,
1994, and an increase of $2,772,000 or 19.8% from the backlog at September 30,
1995. Stronger demand for the Company's electro-optical instrument systems and
accessories and precision optical components accounted for the increase in
backlog from the year earlier period.
PART II
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on November 16, 1995. The following
matters were submitted to a vote of the Company's stockholders:
Proposal No. 1 - Election of Board of Directors
To elect eight directors for the ensuing year. The following
individuals, all of whom were Company directors, immediately
prior to the vote, were elected as a result of the following
vote:
For Against
--- -------
Michael R. Corboy 3,556,048 12,780
Paul F. Forman 3,555,876 12,952
Seymour E. Liebman 3,555,876 12,952
Robert G. McKelvey 3,555,876 12,952
Paul W. Murrill 3,556,048 12,780
Robert B. Taylor 3,556,048 12,780
Gary K. Willis 3,556,048 12,780
Carl A. Zanoni 3,556,048 12,780
Proposal No. 2 - Adoption of an amendment to the Company's Restated
Certificate of Incorporation
To adopt an amendment to the Company's Articles of Incorporation
to increase the number of authorized shares of Common Stock from
10,000,000 to 15,000,000 shares. The amendment to the Company's
Articles of Incorporation was adopted, as written in the proxy
statement dated October 10, 1995, as a result of the following
vote:
Votes For 3,540,679
Votes Against 18,681
Abstentions 9,468
Proposal No. 3 - Adoption of an amendment to the Company's Amended and
Restated Non- Qualified Stock Option Plan
To adopt an amendment to the Company's Amended and Restated
Non-Qualified Stock Option Plan to increase the number of shares
of Common Stock authorized for issuance under the Plan from
975,000 to 1,425,000 shares. The amendment to the Company's
Amended and Restated Non-Qualified Stock Option Plan was adopted,
as written in the proxy statement dated October 10, 1995, as a
result of the following vote:
Votes For 2,329,816
Votes Against 211,118
Broker Non-Votes 1,012,395
Abstentions 15,499
-6-
Proposal No. 4 - Approval of the Company's entering into indemnity
agreements with its directors and officers
To approve the Company's entering into indemnity agreements with
its directors and officers. The action of the Company's entering
into indemnity agreements with its officers and directors was
approved, as written in the proxy statement dated October 10,
1995, as a result of the following vote:
Votes For 3,522,006
Votes Against 29,625
Abstentions 17,197
There were no other matters submitted to a vote of the Company's
stockholders.
Item 5. Other Information
On December 13, 1995, the Company commenced a public offering of
1,300,000 shares of Common Stock, of which 845,000 shares were
sold by the Company, and 455,000 shares were sold by certain of
the Company's stockholders. The Company generated approximately
$23 million in net proceeds, which is expected to be used for
working capital associated with expanded sales, research and
development and other general corporate purposes, and for
potential acquisitions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule.
(b) The Company did not file any reports on Form 8-K during the period
covered by this Form 10-Q.
-7-
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.
/S/ Zygo Corporation
--------------------------------------------
(Registrant)
/S/ GARY K. WILLIS
--------------------------------------------
Gary K. Willis
President and Chief Executive Officer
/S/ MARK J. BONNEY
--------------------------------------------
Mark J. Bonney
Vice President, Finance and Administration,
Treasurer, and Chief Financial Officer
Date: February 5, 1996