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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
JUNE 29, 1996 0-13230
ALTRON INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2464301
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE JEWEL DRIVE, WILMINGTON, MASSACHUSETTS 01887
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(508) 658-5800
FORMER NAME, FORMER ADDRESS AND FORMER
FISCAL YEAR, IF CHANGED SINCE LAST REPORT:
NONE
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 [_]
The number of shares of Common Stock of the Registrant outstanding as of
June 29, 1996 was 15,208,013 shares.
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ALTRON INCORPORATED AND SUBSIDIARIES
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets--June 29, 1996 and December 30,
1995....................................................... 3
Consolidated Income Statements--Three and Six Months Ended
June 29, 1996 and July 1, 1995............................. 4
Consolidated Statements of Cash Flows--Six Months Ended June
29, 1996 and July 1, 1995.................................. 5
Notes to Consolidated Financial Statements.................. 6-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 8
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders......... 9
ITEM 6. Exhibits and Reports on Form 8-K............................ 9
Signatures.................................................. 10
2
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 29, DECEMBER 30,
1996 1995
----------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 13,367 $ 13,622
Short-term investments................................. 20,424 16,821
Accounts receivable, net............................... 24,939 22,687
Inventories............................................ 20,835 18,588
Other current assets................................... 3,395 3,009
-------- --------
Total Current Assets................................. 82,960 74,727
Property, Plant and Equipment, net....................... 34,137 29,613
Costs in Excess of Net Assets of Acquired Company........ 3,600 3,738
Long-term Investments.................................... 4,855 4,981
-------- --------
$125,552 $113,059
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt...................... $ 3,174 $ 3,169
Accounts payable....................................... 12,752 11,711
Accrued payroll and other employee benefits............ 4,130 3,937
Other accrued expenses................................. 3,367 3,633
-------- --------
Total Current Liabilities............................ 23,423 22,450
-------- --------
Long-term Debt........................................... 4,489 4,577
-------- --------
Deferred Income Taxes.................................... 6,868 5,378
-------- --------
Stockholders' Investment:
Preferred stock, $1.00 par value--
Authorized--1,000,000 shares
Issued and outstanding--none.......................... -- --
Common stock, $.05 par value--
Authorized--40,000,000 shares
Issued--15,443,594 and 15,223,036 shares.............. 772 761
Paid-in capital........................................ 36,729 36,047
Retained earnings...................................... 53,548 44,123
-------- --------
91,049 80,931
Less treasury stock, at cost (235,581 shares).......... 277 277
-------- --------
Total Stockholders' Investment....................... 90,772 80,654
-------- --------
$125,552 $113,059
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ----------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
--------- --------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA,
UNAUDITED)
Net Sales............................... $ 44,302 $ 34,724 $88,393 $67,386
Cost of Sales........................... 33,552 26,634 66,979 51,891
--------- --------- ------- -------
Gross Profit............................ 10,750 8,090 21,414 15,495
Selling, General and Administrative Ex-
penses................................. 3,085 2,608 6,215 5,200
--------- --------- ------- -------
Income from Operations.................. 7,665 5,482 15,199 10,295
Other Income............................ 465 254 923 422
Interest Expense........................ 70 96 156 212
--------- --------- ------- -------
Income Before Provision for Income Tax-
es..................................... 8,060 5,640 15,966 10,505
Provision for Income Taxes.............. 3,300 2,256 6,541 4,201
--------- --------- ------- -------
Net Income.............................. $ 4,760 $ 3,384 $ 9,425 $ 6,304
========= ========= ======= =======
Net Income Per Common and Common Equiva-
lent Share............................. $ .30 $ .24 $ .59 $ .46
========= ========= ======= =======
Weighted Average Common and Common
Equivalent Shares Outstanding.......... 16,068 14,103 15,969 13,773
========= ========= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
-------------------
JUNE 29, JULY 1,
1996 1995
-------- ---------
(IN THOUSANDS, UNAUDITED)
Cash Flows from Operating Activities:
Net income................................................ $ 9,425 $ 6,304
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 2,604 2,514
Deferred income taxes................................... 1,490 43
Changes in current assets and liabilities:
Accounts receivable..................................... (2,252) (3,083)
Inventories............................................. (2,247) (4,845)
Other current assets.................................... (386) (71)
Accounts payable........................................ 1,041 1,049
Accrued expenses........................................ (73) 1,264
-------- --------
Net cash provided by operating activities................... 9,602 3,175
-------- --------
Cash Flows from Investing Activities:
Purchases of investments, net............................. (3,477) 2,028
Capital expenditures...................................... (6,990) (5,048)
-------- --------
Net cash used in investing activities....................... (10,467) (3,020)
-------- --------
Cash Flows from Financing Activities:
Principal payments of long-term debt...................... (83) (1,617)
Proceeds from issuance of common stock.................... 693 24,853
-------- --------
Net cash provided by financing activities................... 610 23,236
-------- --------
Net Change in Cash and Cash Equivalents..................... (255) 23,391
Cash and Cash Equivalents, Beginning of Period.............. 13,622 8,306
-------- --------
Cash and Cash Equivalents, End of Period.................... $ 13,367 $ 31,697
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest................................................ $ 229 $ 289
Income taxes............................................ 4,500 3,885
The accompanying notes are an integral part of these consolidated financial
statements.
5
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BUSINESS
Altron Incorporated (the "Company") is a leading contract manufacturer of
interconnect products used in advanced electronic equipment. The Company
manufactures complex products in the mid-volume sector of the electronic
interconnect industry including custom-designed backplanes, surface mount
assemblies and total systems, as well as multilayer, high density printed
circuit boards. Altron's customers include a diversified base of manufacturers
in the telecommunication, data communication, computer, industrial and medical
industries located in the United States and Europe.
(2) INTERIM FINANCIAL STATEMENTS
In the opinion of the Company's management, these interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the results for such
periods. The unaudited results of operations for the quarter and six months
ended June 29, 1996 are not necessarily an indication of the results of
operations for the full year.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Altron Systems Corporation and
Altron Securities Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
Printed circuit boards manufactured by the Company and used in its assembly
operations are included in value added contract manufacturing sales. Printed
circuit board sales represent sales to third parties.
For information as to the significant accounting policies followed by the
Company and other financial and operating information, see the Company's Form
10-K for the year ended December 30, 1995 as filed with the Securities and
Exchange Commission (Commission File No. 0-13230). These interim financial
statements should be read in conjunction with the financial statements
included in the Form 10-K.
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes materials, labor and manufacturing overhead. Inventories
are summarized as follows (in thousands, June 29, 1996, unaudited):
JUNE 29, DECEMBER 30,
1996 1995
-------- ------------
Raw Materials........................................ $10,843 $ 9,371
Work-in-process...................................... 9,992 9,217
------- -------
$20,835 $18,588
======= =======
(4) SHORT-TERM DEBT
The Company has a $5,000,000 unsecured line of credit available with its
bank at the bank's prime rate. There were no borrowings outstanding under the
line of credit and the entire line was available at June 29, 1996 and December
30, 1995.
(5) STOCKHOLDERS' INVESTMENT
On April 2, 1996, the Board of Directors declared a 3 for 2 split of its
Common Stock effected as a 50% stock dividend to stockholders of record on
April 18, 1996 and distributed on May 10, 1996. Share quantities and related
per share amounts in this Form 10-Q have been retroactively restated to
reflect the stock split.
6
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On May 16, 1996, the Company's stockholders approved an amendment to the
1991 Stock Option Plan, increasing the number of shares of common stock
reserved for issuance from 3,000,000 to 3,750,000. Approval was also given to
the 1996 Stock Option Plan for Non-Employee Directors, under which 37,500
shares of common stock have been reserved for issuance.
The Company's stockholders also voted in favor of an amendment to increase
the total number of authorized shares of common stock from 30,000,000 to
40,000,000 shares, with a par value of $.05 per share.
(6) SIGNIFICANT CUSTOMERS
One customer, Motorola Inc., accounted for 15% and 17% of net sales for the
six month periods ended June 29, 1996 and July 1, 1995, respectively.
7
ALTRON INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the second quarter of 1996 increased 28% to $44.3 million from
net sales of $34.7 million for the same quarter of 1995. Net sales for the
first six months of 1996 increased 31% to $88.4 million compared to $67.4
million for the same period last year. The higher sales for the quarter and
six months resulted primarily from increased shipments of value added assembly
products to the Company's largest customers in the communication, computer and
industrial segments of the electronics industry.
Value added contract manufacturing sales for the second quarter of 1996
increased 38% to $34.8 million or approximately 79% of net sales, compared to
$25.2 million or 73% of net sales in the second quarter of 1995. For the first
six months of 1996, value added contract manufacturing sales increased 39% to
$67.9 million or 77% of net sales compared to $49.0 million or 73% of net
sales for the first six months of 1995. Printed circuit board sales for the
second quarter and first six months of 1996 were approximately 21% and 23% of
net sales, respectively, compared to 27% of net sales for both the second
quarter and first six months of 1995.
Gross margin as a percentage of net sales for the second quarter of 1996
increased to 24.3% as compared to 23.3% for the same period in 1995. Gross
margin as a percentage of net sales for the first six months of 1996 increased
to 24.2% as compared to 23.0% for the same period in 1995. Gross profit for
the second quarter of 1996 increased 33% to $10.8 million from $8.1 million in
1995. Gross profit for the first six months of 1996 increased 38% to $21.4
million compared to $15.5 million in 1995. The improvement in the Company's
gross margin for both the second quarter and the first six months of 1996 as
compared to the same periods in 1995 was primarily the result of better
absorption of fixed costs due to higher shipment levels and manufacturing
efficiencies.
Selling, general and administrative expenses as a percentage of net sales
decreased to 7.0% for both the second quarter and first six months of 1996, as
compared to 7.5% and 7.7% for the respective periods of 1995. The decline in
selling, general and administrative expenses as a percentage of net sales was
principally the result of higher net sales combined with management's ability
to control expenses.
Other income increased $211,000 in the second quarter and $501,000 in the
first six months of 1996, as compared to the respective periods of 1995. The
increases are principally a result of higher cash balances available for
investment mainly due to net proceeds of approximately $24.3 million received
from the public offering of the Company's common stock during the second
quarter of 1995. Interest expense was $26,000 lower in the second quarter and
$56,000 lower in the first six months of 1996 as compared to the same periods
in 1995 as a result of reduced outstanding borrowings and higher interest
capitalized.
LIQUIDITY AND CAPITAL RESOURCES
At June 29, 1996, the Company had working capital of $59.5 million compared
to $52.3 million at December 30, 1995. Cash and cash equivalents and short-
term investments were $33.8 million at June 29, 1996 and $30.4 million at
December 30, 1995. Long-term investments at June 29, 1996 were $4.9 million
compared to $5.0 million at December 30, 1995.
At June 29, 1996, the Company had a $5.0 million unsecured line of credit
with its bank, all of which was available.
The Company believes that its existing bank credit and working capital,
together with funds generated from operations, will be sufficient to satisfy
anticipated sales growth and investment in manufacturing facilities and
equipment. The Company had commitments for approximately $2.7 million of
capital expenditures as of June 29, 1996.
8
ALTRON INCORPORATED AND SUBSIDIARIES
PART II--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Stockholders held on May 16, 1996 in lieu of the
1996 Annual Meeting of Stockholders, the Company's stockholders elected the
Board of Directors to serve until the next Annual Meeting of Stockholders and
approved: (1) by a vote of 4,412,544 for, 1,245,850 against and 22,548
abstaining, an amendment to the Altron Incorporated 1991 Stock Option Plan
increasing the number of shares of common stock of the Company available for
issuance under the Plan from 3,000,000 to 3,750,000; (2) by a vote of
6,799,395 for, 236,800 against and 11,448 abstaining, an amendment to increase
the total number of authorized shares of common stock from 30,000,000 to
40,000,000 shares, with a par value of $.05 per share; and (3) by a vote of
4,682,811 for, 973,024 against and 25,507 abstaining, the Company's 1996 Stock
Option Plan for Non-Employee Directors. The Company solicited proxies for the
Special Meeting pursuant to Regulation 14 under the Securities Exchange Act.
There was no solicitation in opposition to the Company's nominees for
Directors and all nominees were elected.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27--Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
June 29, 1996.
9
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Altron Incorporated
NAME TITLE DATE
/s/ Samuel Altschuler Chairman of the Board of August 9, 1996
- ------------------------- Directors and President
SAMUEL ALTSCHULER (principal executive officer)
/s/ Burton Doo Executive Vice President and August 9, 1996
- ------------------------- Director, President, Altron
BURTON DOO Systems Corporation
/s/ Peter D. Brennan Vice President, Chief Financial August 9, 1996
- ------------------------- Officer and Treasurer (principal
PETER D. BRENNAN financial and accounting
officer)
10