- ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- 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 28, 1997 0-13230 ALTRON INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 04-2464301 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE JEWEL DRIVE, WILMINGTON, 01887 MASSACHUSETTS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 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 28, 1997 was 15,302,818 shares. - ------------------------------------------------------------------------------- ALTRON INCORPORATED AND SUBSIDIARIES INDEX PAGE NUMBER ------ PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets -- June 28, 1997 and December 28, 1996.................................................... 3 Consolidated Income Statements -- Three and Six Months Ended June 28, 1997 and June 29, 1996............................ 4 Consolidated Statements of Cash Flows -- Six Months Ended June 28, 1997 and June 29, 1996............................ 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 28, DECEMBER 28, 1997 1996 ----------- ------------ (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents........................... $ 11,347 $ 14,949 Short-term investments.............................. 17,008 19,481 Accounts receivable, net............................ 27,514 24,840 Inventories......................................... 24,130 18,554 Other current assets................................ 3,607 2,935 -------- -------- Total current assets.............................. 83,606 80,759 Property, plant and equipment, net.................... 55,660 45,727 Costs in excess of net assets of acquired company..... 3,323 3,461 Long-term investments................................. 4,696 4,614 -------- -------- $147,285 $134,561 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable.................................... $ 18,532 $ 12,965 Accrued payroll and other employee benefits......... 3,593 3,910 Other accrued expenses.............................. 1,942 2,895 -------- -------- Total current liabilities......................... 24,067 19,770 -------- -------- Long-term debt........................................ 7,600 7,600 -------- -------- Deferred income taxes................................. 6,631 6,567 -------- -------- 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 -- 15,538,399 and 15,477,776 shares......... 777 774 Paid-in capital..................................... 38,674 38,289 Retained earnings................................... 69,813 61,838 -------- -------- 109,264 100,901 Less treasury stock, at cost (235,581 shares)....... 277 277 -------- -------- Total stockholders' investment.................... 108,987 100,624 -------- -------- $147,285 $134,561 ======== ======== 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 28, JUNE 29, JUNE 28, JUNE 29, 1997 1996 1997 1996 --------- --------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) Net sales............................. $ 40,560 $ 44,302 $83,728 $88,393 Cost of sales......................... 31,368 33,552 64,306 66,979 --------- --------- ------- ------- Gross profit.......................... 9,192 10,750 19,422 21,414 Selling, general and administrative expenses............................. 3,457 3,085 6,820 6,215 --------- --------- ------- ------- Income from operations................ 5,735 7,665 12,602 15,199 Other income.......................... 403 465 838 923 Interest expense...................... 18 70 26 156 --------- --------- ------- ------- Income before provision for income taxes................................ 6,120 8,060 13,414 15,966 Provision for income taxes............ 2,485 3,300 5,439 6,541 --------- --------- ------- ------- Net income............................ $ 3,635 $ 4,760 $ 7,975 $ 9,425 ========= ========= ======= ======= Net income per common and common equivalent share..................... $ .22 $ .30 $ .49 $ .59 ========= ========= ======= ======= Weighted average common and common equivalent shares outstanding........ 16,194 16,068 16,204 15,969 ========= ========= ======= ======= 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 28, JUNE 29, 1997 1996 -------- -------- (IN THOUSANDS, UNAUDITED) Cash flows from operating activities: Net income............................................... $ 7,975 $ 9,425 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 3,330 2,604 Deferred income taxes.................................. 64 1,490 Changes in current assets and liabilities: Accounts receivable.................................. (2,674) (2,252) Inventories.......................................... (5,576) (2,247) Other current assets................................. (672) (386) Accounts payable..................................... 5,567 1,041 Accrued payroll and other employee benefits.......... (317) 193 Other accrued expenses............................... (953) (266) -------- -------- Net cash provided by operating activities.................. 6,744 9,602 -------- -------- Cash flows from investing activities: Sales (purchases) of investments, net.................... 2,391 (3,477) Capital expenditures..................................... (13,125) (6,990) -------- -------- Net cash used in investing activities...................... (10,734) (10,467) -------- -------- Cash flows from financing activities: Principal payments of long-term debt..................... -- (83) Proceeds from issuance of common stock................... 388 693 -------- -------- Net cash provided by financing activities.................. 388 610 -------- -------- Net change in cash and cash equivalents.................... (3,602) (255) Cash and cash equivalents, beginning of period............. 14,949 13,622 -------- -------- Cash and cash equivalents, end of period................... $ 11,347 $ 13,367 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest............................................... $ 267 $ 229 Income taxes........................................... 5,483 4,500 The accompanying notes are an integral part of these consolidated financial statements. 5 ALTRON INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 systems segments of the electronics industry 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 28, 1997 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 contract manufacturing sales to customers. 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 28, 1996 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) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Net income per common and common equivalent share was computed based on the weighted average number of common and common equivalent shares outstanding during each period. Common equivalent shares include outstanding stock options. Fully diluted net income per share has not been separately presented as it would not be materially different from net income per share as presented. In March 1997, SFAS No. 128, Earnings Per Share, was issued which established new standards for calculating and presenting earnings per share. The Company will adopt this new standard in its fiscal year end 1997 financial statements, which will require the reporting of diluted earnings per share and basic earnings per share. For the quarters ended June 28, 1997 and June 29, 1996, diluted earnings per share were $0.22 and $0.30, respectively, and basic earnings per share were $0.24 and $0.31, respectively. For the six months ended June 28, 1997 and June 29, 1996, diluted earnings per share were $0.49 and $0.59 respectively, and basic earnings per share were $0.52 and $0.63, respectively. 6 ALTRON INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (4) 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 28, 1997, unaudited): JUNE 28, DECEMBER 28, 1997 1996 -------- ------------ Raw materials........................................ $13,205 $10,040 Work-in-process...................................... 10,925 8,514 ------- ------- $24,130 $18,554 ======= ======= (5) 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 28, 1997 and December 28, 1996. (6) SIGNIFICANT CUSTOMERS Two customers accounted for 11% and 10% of net sales for the six month period ended June 28, 1997. One customer accounted for 15% of net sales for the six month period ended June 29, 1996. 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 1997 were $40.6 million, as compared to net sales of $44.3 million for the same quarter of 1996. Net sales for the first six months of 1997 were $83.7 million compared to $88.4 million for the same period last year. The second quarter and six months of 1997 net sales were below last year's comparable periods as a result of lower than anticipated demand from several major customers. Late deliveries of critical materials also impacted the second quarter. Contract manufacturing sales for the second quarter of 1997 were $28.3 million and printed circuit board sales were $12.3 million compared with $34.8 million and $9.5 million, respectively, for the same 1996 period. For the first six months of 1997, contract manufacturing sales were $59.3 million and printed circuit board sales were $24.4 million, as compared to $67.9 million and $20.5 million, respectively, for 1996. Gross margin as a percentage of net sales for the second quarter of 1997 was 22.7% as compared to 24.3% for the same period in 1996. Gross margin as a percentage of net sales for the first six months of 1997 was 23.2% as compared to 24.2% for the same period in 1996. The Company's lower gross margin was primarily the result of lower shipment levels and higher costs related to the Company's recent expansion. Selling, general and administrative expenses as a percentage of net sales were 8.5% for the second quarter of 1997, as compared to 7.0% for the same period of 1996. Selling, general and administrative expenses were 8.1% and 7.0% for the first six months of 1997 and 1996, respectively. The increase in selling, general and administrative expenses as a percentage of net sales was primarily due to the lower sales volume and higher expenses associated with building a regional sales organization to focus on further expanding the customer base. Other income was lower for the second quarter and six months of 1997 mainly due to lower cash balances available for investment. The lower interest expense for the second quarter and first six months of 1997 was principally a result of higher capitalized interest. LIQUIDITY AND CAPITAL RESOURCES At June 28, 1997, the Company had working capital of $59.5 million and a current ratio of 3.5. Working capital included cash and cash equivalents and short-term investments of $28.4 million. Long-term investments were $4.7 million at June 28, 1997. At June 28, 1997, the Company had a $5,000,000 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 $4.2 million of capital expenditures as of June 28, 1997. 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 22, 1997, the Company's stockholders elected the Board of Directors to serve until the next Annual Meeting of Stockholders. 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 28, 1997. 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 5, - --------------------------------- Directors and President 1997 SAMUEL ALTSCHULER (principal executive officer) /s/ Burton Doo Executive Vice President August 5, - --------------------------------- and Director, President, 1997 BURTON DOO Altron Systems Corporation /s/ Peter D. Brennan Vice President, Chief August 5, - --------------------------------- Financial Officer and 1997 PETER D. BRENNAN Treasurer (principal financial and accounting officer) 10