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 period ended
September 30, 1995, 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 No. 0-12719
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GIGA-TRONICS INCORPORATED
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2656341
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4650 Norris Canyon Road, San Ramon, CA 94583
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (510) 328-4650
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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
--- ---
Common stock outstanding as of September 30, 1995: 2,569,920
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PAGE 2
GIGA-TRONICS INCORPORATED
INDEX
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
ITEM 1 Financial Statements:
Balance Sheets as of September 30, 1995
(unaudited) and March 25, 1995 . . . . . . . . 3
Statements of Operations, three months
and six months ended September 30, 1995 and
September 24, 1994 (unaudited) . . . . . . . . 4
Statements of Cash Flows, six months ended
September 30, 1995 and September 24, 1994
(unaudited) . . . . . . . . . . . . . . . . . . 5
Notes to Unaudited Financial Statements . . . . 6
ITEM 2 Management's Discussion and Analysis of
Operations and Financial Condition . . . . . . 7
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1
TO 3 Not Applicable
ITEM 4 Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . 8
ITEM 5 Not Applicable
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Net Earnings and
Common Share Equivalents . . . . . . 9
(27) Financial Data Schedule . . . . . . 11
(b) Reports on Form 8-K
Not Applicable
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 10
PAGE 3
GIGA-TRONICS INCORPORATED
BALANCE SHEETS
(In thousands, except share data)
ASSETS
------
September 30, 1995 March 25, 1995
------------------ --------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 4,314 $ 2,137
Investments 3,661 3,631
Trade accounts receivable 3,467 3,524
Inventories, net 5,195 6,701
Prepaid expenses 332 588
Deferred income taxes 858 868
------ ------
Total current assets 17,827 17,449
Property and Equipment:
Machinery and equipment 6,252 6,095
Office furniture and fixtures 411 411
Leasehold improvements 88 93
------ ------
Gross cost property and equipment 6,751 6,599
Less accumulated depreciation and amortization (4,638) (4,212)
------- -------
Net property and equipment 2,113 2,387
Patents and licenses 1,870 2,150
Other assets 180 239
------ ------
Total assets $21,990 $22,225
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 1,145 $ 1,477
Accrued commissions 344 318
Accrued expenses 667 745
Accrued payroll and benefits 580 778
Accrued warranty 444 417
Accrued earnout payable 393 472
Income taxes payable 71 --
----- -----
Total liabilities 3,644 4,207
Shareholders' Equity:
Convertible preferred stock of no par value.
Authorized 1,000,000 shares; no shares
outstanding at September 30, 1995 and March 25, 1995 -- --
Common stock of no par value. Authorized
40,000,000 shares; issued and outstanding
2,569,920 shares at September 30, 1995
and March 25, 1995 7,748 7,773
Unrealized loss on investments (57) (77)
Retained earnings 10,655 10,322
------ ------
Total shareholders' equity 18,346 18,018
------ ------
Total liabilities and shareholders' equity $21,990 $22,225
======= =======
See accompanying notes to financial statements.
PAGE 4
GIGA-TRONICS INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
Sept. 30, Sept. 24, Sept. 30, Sept. 24,
1995 1994 1995 1994
-------- -------- -------- --------
Net sales $ 6,212 $ 5,606 $12,473 $11,153
Cost of sales $ 3,898 $ 3,503 $ 7,874 6,845
-------- -------- ------- -------
Gross profit 2,314 2,103 4,599 4,308
Product development 625 625 1,285 1,196
Selling, general and administrative 1,411 1,233 2,863 2,616
-------- ------- ------- -------
Operating expenses 2,036 1,858 4,148 3,812
Net operating income 278 245 451 496
Other income 73 -- 145 --
Amortization of intangibles (140) (140) (280) (279)
Interest income, net 76 52 128 87
-------- ------- ------- -------
Earnings before income taxes 287 157 444 304
Provision for income taxes 72 55 111 109
-------- ------- -------- --------
Net earnings $ 215 $ 102 $ 333 $ 195
======== ======= ======== ========
Earnings per share of common stock $ 0.08 $ 0.04 $ 0.13 $ 0.08
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding 2,648 2,570 2,648 2,570
======= ======= ======= =======
See accompanying notes to financial statements.
PAGE 5
GIGA-TRONICS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
----------------
Sept. 30, Sept. 24,
1995 1994
--------- ---------
Cash flows provided from (used by) operations:
Net earnings as reported $ 333 $ 195
Adjustments to reconcile net earnings to
net cash provided from (used by) operating activities 2,043 (905)
-------- ---------
2,376 (710)
Cash flows used by investing activities:
Re-purchase of common stock (25) --
Investment purchases, net (10) 31
Additions to property and equipment (164) (390)
-------- --------
Net cash used by investing activities (199) (359)
Increase (decrease) in cash and cash equivalents 2,177 (1,069)
Beginning cash and cash equivalents 2,137 2,680
-------- --------
Ending cash and cash equivalents $ 4,314 $ 1,611
======== ========
Supplementary disclosure of cash flow information:
(1) No cash was paid for interest in the periods indicated.
(2) Cash paid for income taxes in the six month period
ending September 30, 1995 was $40,000.
(3) Non-cash investing activities:
The Company incurred an unrealized gain of $20,000 on
investments held available for sale during the six
month period ending September 30, 1995.
See accompanying notes to financial statements
PAGE 6
GIGA-TRONICS INCORPORATED
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) Basis of Presentation
The financial statements included herein have been
prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. The
results of operations for the interim periods shown in this
report are not necessarily indicative of results to be
expected for the fiscal year. In the opinion of management,
the information contained herein reflects all adjustments
necessary to make the results of operations for the interim
periods a fair statement of such operations. For further
information, refer to the financial statements and footnotes
thereto, included in the Annual Report on Form 10-K, filed
with the Securities and Exchange Commission for the year
ended March 25, 1995.
(2) Inventories (unaudited)
Inventories consist of the following (in thousands):
September 30, 1995 March 25, 1995
------------------ --------------
Raw materials $ 2,272 $ 2,489
Work-in-process 2,217 3,347
Finished goods 706 865
-------- --------
$ 5,195 $ 6,701
======== ========
PAGE 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
THREE MONTHS AND SIX MONTHS ENDED SEPT. 30, 1995 AND
- ----------------------------------------------------
SEPT. 24, 1994
- --------------
Net sales for the three month and six month periods ended
September 30, 1995 increased 11% ($606,000) and 12%
($1,320,000), respectively, compared to the same periods
last year. The change resulted mostly from an increase in
shipments of microwave signal generator products.
Gross profit for the current three month and six month
periods increased 10% ($211,000) and 7% ($291,000),
respectively, compared to the same periods last year. The
increase was primarily due to higher sales volume, offset
somewhat by unfavorable product mix.
Operating expenses for the three and six month periods
increased 10% ($178,000) and 9% ($336,000), respectively,
compared to prior year periods. The increases are due to
higher advertising costs, sales commissions, and
administrative expenses for both periods. Higher product
development costs contributed only to the increase for the
six month period.
Other income for the quarter was primarily due to the sale
of certain fixed assets. For the six month period, income
was also derived from an insurance claim recovery.
Significant other income is not expected to continue in the
last two quarters.
Operating income for the current three month and six month
periods were $278,000 and $451,000, respectively, compared to
$245,000 and $496,000 for the same periods last year. The
negligible favorable change for three months, and unfavorable
change for six months, was due to higher operating expenses
and unfavorable product mix offsetting increased sales
volume.
Earnings before income taxes for the current three month and
six month periods were $215,000 and $333,000, respectively,
compared to $102,000 and $195,000 for the same periods last
year. The change was favorably affected by sales volume,
other income and interest income, offset somewhat by
unfavorable product mix and higher operating expenses.
Orders for the three month and six month periods ending
September 30, 1995 were lower than the same periods last
year. The backlog of unfilled orders as of September 30,
1995 are somewhat higher than the same period last year.
FINANCIAL CONDITION
- -------------------
The Company maintains a strong financial position, with
working capital of $14,183,000 and a ratio of current assets
to current liabilities of 4.9 at September 30, 1995. The
Company continues to fund all of its working capital needs
from cash flow provided from operations. Cash provided from
operations for the six month period ended September 30, 1995
was $2,376,000. Management believes that cash reserves and
investments remain adequate to meet anticipated operating
needs.
During the six month period, the Company spent $164,000 on
new manufacturing and test equipment and other capital items.
The Company will continue to invest in capital items that
support growth and new product development, raise
productivity and improve quality. Historically, the Company
has satisfied its cash needs internally for both operating
and capital expenses, and management expects to continue
to do so.
PAGE 8
PART II, Item 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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(A) Annual Meeting of Stockholders was held on August 8,
1995.
(B) The vote for the nominated Directors was as follows:
Nominee In Favor Withheld
------- -------- --------
George H. Bruns, Jr. 2,347,001 5,435
James A. Cole 2,347,001 5,435
Edward D. Sherman 2,346,901 5,535
Robert C. Wilson 2,347,001 5,435
(C) Other matters voted upon at the meeting were as follows:
(1) Ratification of the selection of Peat Marwick LLP
as independent public accountants for fiscal year
1996 was approved as follows:
No. of Votes % of Votes
on Proposal Cast
------------ -----------
For 2,348,266 99.8%
Against 4,100 0.2%
Abstain 70 --
--------- -----
Total 2,352,436 100.0%
Non-voted Shares = 217,484
PAGE 9
EXHIBIT II
PART II, Item 6
COMPUTATION OF NET EARNINGS PER SHARE AND
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COMMON SHARE EQUIVALENTS
------------------------
(Unaudited)
(In thousands, except per share data)
Earnings per share were computed using the weighted average number of shares outstanding plus, when dilutive, incremental
shares issuable upon exercise of outstanding options under the treasury stock method.
Three Months Ended Six Months Ended
------------------ ----------------
Sept. 30, Sept. 24, Sept. 30, Sept. 24,
1995 1994 1995 1994
-------- -------- -------- --------
Weighed average number of
common shares outstanding:
Common stock outstanding 2,570 2,570 2,570 2,570
Common stock equivalents 78 0 78 0
-------- -------- -------- --------
2,648 2,570 2,648 2,570
======== ======== ======== ========
Net earnings $ 215 $ 102 $ 333 $ 195
======== ======== ======== ========
Net earnings per share of common stock $ 0.08 $ 0.04 $ 0.13 $ 0.08
======== ======== ======== ========
PAGE 10
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.
GIGA-TRONICS INCORPORATED
(Registrant)
Date: 10/16/95 /s/ GEORGE H. BURNS, JR.
____________________________
George H. Bruns, Jr.
Chairman and Chief Executive
Officer
(Principal Executive Officer)
Date: 10/16/95 /s/ GREGORY L. OVERHOLTZER
___________________________
Gregory L. Overholtzer
Vice President, Finance and
Chief Financial Officer
(Principal Accounting
Officer)