FORM 10-Q/A-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 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: O-13715 VITRONICS CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) COMMONWEALTH OF MASSACHUSETTS O4-2726873 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1 Forbes Road, Newmarket, NH 03857 - ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (603) 659-6550 -------------- NONE --------------------------------------------------- (Former name, former address and former fiscal year, if changed since 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 ------ ------ Number of shares outstanding of each of the registrant's classes of common stock as of May 4, 1995: Common Stock, $.01 par value: 7,553,638 shares VITRONICS CORPORATION AND SUBSIDIARIES INDEX Page ---- Part I - Financial Information: - ------------------------------- Item 1 - Financial Statements: Condensed Consolidated Balance Sheets - April 1, 1995 (unaudited) and December 31, 1994 ................................... 3 Condensed Consolidated Statements of Operations (unaudited) - Three Months Ended April 1, 1995 and April 2, 1994 ...................................... 4 Condensed Consolidated Statements of Cash Flows (unaudited) - Three Months Ended April 1, 1995 and April 2, 1994 .................. 5 Notes to Condensed Consolidated Financial Statements (unaudited).............................................. 6 Calculation of Net Income Per Share........................ 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 8 Part II - Other Information: ---------------------------- Items 1 through 6.......................................... 10 Signatures................................................. 11 -2- VITRONICS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (000's omitted) April 1, December 31, 1995 1994 (Unaudited) (*) ----------- ----------- ASSETS - ------ Current assets: Cash and cash equivalents $ 947 $ 671 Accounts receivable, net 2,006 2,723 Inventories 2,717 2,094 Other current assets 179 189 ------- ------- Total current assets 5,849 5,677 Property and equipment, net 204 223 Other assets 152 152 ------- ------- $ 6,205 $ 6,052 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 1,602 $ 1,751 Other current liabilities 1,016 945 Current maturities of long-term liabilities 315 305 ------- ------- Total current liabilities 2,933 3,001 Long-term liabilities - net of current maturities 1,283 1,323 Stockholders' Equity: Common Stock, $.01 par value 76 76 Additional paid-in capital 5,405 5,401 Foreign currency translation adjustment (151) (184) Accumulated deficit (3,341) (3,565) ------- ------- 1,989 1,728 ------- ------- $ 6,205 $ 6,052 ======= ======= *Condensed from audited financial statements The accompanying notes are an integral part of these condensed financial statements. -3- VITRONICS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (000's omitted except per share amounts) Three Months Ended ----------------------- April 1, April 2, 1995 1994 -------- -------- Net sales $4,853 $3,584 Cost of goods sold 2,982 2,358 -------- -------- Gross profit 1,871 1,226 Selling, general and administrative expenses 1,215 857 Research and development costs 303 260 -------- ------ Patent litigation 75 31 1,593 1,148 -------- ------ Income from operations 278 78 Non-operating expense - net (51) (66) ------- ----- Income before taxes 227 12 Income taxes 3 - ------- ------- Net income $ 224 $ 12 ======= ======= Net earnings per common share: Primary $ .03 $ .00 ======= ======= Fully diluted $ .02 $ .00 ======= ======= Weighted average number of common and common equivalent shares used in calculation of earnings per common share: Primary 8,169 7,522 ====== ===== Fully diluted 10,572 9,922 ====== ===== The accompanying notes are an integral part of these condensed financial statements. -4- VITRONICS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (000's omitted) Three Months Ended --------------------- April 1, April 2, 1995 1994 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 224 $ 12 Adjustments to reconcile net income to net cash flows provided by (used for) operating activities: Depreciation and amortization 54 47 Provision for excess and obsolescence 54 30 Changes in current assets and liabilities: Accounts receivable 717 (178) Inventories (677) 241 Other current assets 10 55 Accounts payable (149) 15 Income taxes - 20 Other current liabilities 71 (163) ------ ------ Total adjustments 80 67 ------ ------ Net cash provided by operating activities 304 79 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (17) (9) Additions to other assets (18) (6) ------ ------ Net cash used for investing activities (35) (15) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt (30) (81) Issuance of common stock 4 - ------ ------ Net cash used for financing activities (26) (81) Foreign currency translation adjustment 33 (4) CASH: Net increase (decrease) 276 (21) Balance, beginning of period 671 172 ------ ------ Balance, end of period $ 947 $ 151 ====== ====== SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: Conversion of debt to equity - $71 The accompanying notes are an integral part of these condensed financial statements -5- VITRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A. 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 pursuant to the rules and regulations of the Securities and Exchange Commission. 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 only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended April 1, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the Company's consolidated financial statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 1994 filed with the Securities and Exchange Commission (File #0-13715) on March 22, 1995. B. Inventories Inventories valued at the lower of cost (determined using the first-in, first-out method) or market, were as follows (in thousands): April 1, December 31, 1995 1994 ------- ------------- Finished goods $ 339 $ 224 Work in process 773 369 Raw materials 1,605 1,501 ------ ------ $2,717 $2,094 ====== ====== -6- EXHIBIT 11.1 VITRONICS CORPORATION AND SUBSIDIARIES CALCULATION OF NET EARNINGS PER COMMON SHARE FOR THE THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994 April 1, 1995 ---------------------- Fully Primary Diluted ------- ------- Net income $ 224 $ 254 Weighted average shares outstanding: Common stock 7,551,583 7,551,583 Convertible debentures 2,400,000 Warrants 220,270 220,960 Stock options 397,139 399,722 ----------- ----------- Weighted averaged shares outstanding 8,168,992 10,572,265 Earnings per share $ 0.03 $ 0.02 - -------------------------------------------------------------------------------- April 2, 1994 ------------------------- Fully Primary Diluted ------- ------- Net income $ 12 $ 42 Weighted average shares outstanding: Common stock 7,387,799 7,387,799 Convertible debentures 2,400,000 Warrants 107,449 107,449 Stock options 27,055 27,055 --------- --------- Weighted averaged shares outstanding 7,522,303 9,922,303 Earnings per share $ 0.00 $ 0.00 -7- VITRONICS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operation - -------------------- Sales for the quarter ended April 1, 1995 increased 35% to $4,853,000 from $3,584,000 for the same period in 1994. Bookings for the three months ended April 1, 1995 were $5,333,000 versus $3,628,000 for the same period in 1994, an increase of 47%. The increase in bookings and revenues were a result of increased demand for IsothermTM, UnithermR and Unitherm II products, along with recapture of market share lost in 1991-1993. The Company does not anticipate that the percentage increase in net revenues and bookings for the three months ended April 1, 1995 is necessarily indicative of the percentage increase in net revenues to be expected for the entire fiscal year. Backlog as of April 1, 1995 was $3,068,000 versus $2,589,000 at December 31, 1994 and $2,177,000 as of April 2, 1994. Gross margin for the three months ended April 1, 1995 increased to 39% from 34% for the same period in 1994. The increased margin is due to a significantly higher volume of sales, reduced overhead spending and reduced material costs. Operating expenses for the three months ended April 1, 1995 were $1,518,000 versus $1,117,000 for the same period of 1994, an increase of 36%. Operating expenses as a percentage of sales for such periods were 31% and 31%, respectively. The increase in actual spending is partially the result of the increased sales which resulted in increased staffing levels, commission and marketing expenses. For the first quarter of 1995, selling, general and administrative expenses as a percentage of sales were 25% versus 24% in 1994. This increase is the result of the increased sales volume which resulted in higher commission and marketing expenses. Research and development expenses as a percentage of sales for such periods were 6% in 1995 versus 7% in 1994. Patent litigation costs were $75,000 for the first quarter of 1995 as compared to $31,000 during the first quarter of 1994. Patent defense costs are continuing to increase as the suit approaches trial which is expected to occur in July 1995. The Company had non-operating expenses of $51,000 for the three months ended April 1, 1995 compared with $66,000 for the comparable period in 1994. The non-operating expenses for the first quarter of 1995 include patent defense costs of $75,000 and interest expense, net $32,000, as compared with interest expenses for the first quarter of 1994, net $42,000. The Company increased its deductions/write-offs for excess and obsolete inventory to $57,000 the first quarter of 1995 as compared to $30,000 in the first quarter of 1994 and increased its provision for inventory reserves from $367,000 at the end of 1994 to $421,000 at the end of the first quarter of 1995. Such increases are principally related to the Company's production process and product line evolution. As the Company made changes in designs and processes, certain existing inventories were affected. The Company also changed its production process as the UNITHERM product evolved. This change necessitated the rework of certain inventory items and the obsolescence of other items. The Company increased its reserves for obsolescence in recognition of these events. -8- Net income for the first quarter of 1995 was $224,000 compared to $12,000 for the comparable period of 1994. For the first quarter of 1995, net income was $.03 per primary share, and $.02 per fully diluted share. For the comparable 1994 period, net income per share was $.00. Liquidity and Capital Resources - ------------------------------- The Company continues to monitor its operational spending levels very closely with the goal of cash conservation. During the quarter ended April 1, 1995, cash increased $276,000 to $847,000. During March 1995, the Company obtained a $500,000 revolving line of credit with First National Bank of Portsmouth. The Company believes this funding source, combined with its existing cash balances and anticipated cash flow from operations, will be adequate to meet its working capital requirements for the remainder of the year. -9- VITRONICS CORPORATION AND SUBSIDIARIES PART II OTHER INFORMATION Items 1 through 4: Not applicable Item 5: Other Information On April 25, 1995, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission covering 2,888,225 shares of its common stock which includes 2,400,000 shares reserved for issuance upon conversion of the Company's outstanding $1.2 million subordinated convertible debenture dated October 1, 1993, 346,225 shares issuable upon exercise of outstanding warrants held by the underwriter for the Company's 1992 Right's Offering and 142,000 shares sold to a vendor of the Company in 1992. The Company filed the Registration Statement due to the exercise of registration rights previously granted to the holders of the Company's underwriter warrants and subordinated convertible debenture. The Company will incur the cost of the registration. However, the Company will not receive any proceeds from the sale of the stock by the selling stockholders. Item 6: (a). Exhibits 10.33 Business Loan Agreement between the Company and First National Bank of Portsmouth dated March 22, 1995 10.34 Promissory Note of the Company to First National Bank of Porstmouth dated March 22, 1995 10.35 Commercial Security Agreement between the Company and First National Bank of Portsmouth dated March 22, 1995 27 Financial Data Schedule. (b). Reports on Form 8-K None -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. VITRONICS CORPORATION Date: August 4, 1995 By:/s/ James J. Manfield, Jr. -------------------------- James J. Manfield, Jr. Chairman of the Board, Chief Executive Officer, Chief Financial Officer, and Treasurer Date: August 4, 1995 /s/ Ronald W. Lawler -------------------------- Ronald W. Lawler, President and Chief Operating Officer Date: August 4, 1995 By:/s/ Daniel J. Sullivan -------------------------- Daniel J. Sullivan, Controller and Principal Accounting Officer -11-