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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JULY 1, 1995
COMMISSION FILE NUMBER 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.)
01887
ONE JEWEL DRIVE, WILMINGTON, MA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(508) 658-5800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 [_].
The number of shares of Common Stock of the Registrant outstanding as of
July 1, 1995 was 9,924,159 shares.
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ALTRON INCORPORATED AND SUBSIDIARIES
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets--July 1, 1995 and December 31,
1994......................................................... 3
Consolidated Income Statements-- Three and Six Months Ended
July 1, 1995 and
July 2, 1994................................................. 4
Consolidated Statements of Cash Flows--Six Months Ended July
1, 1995 and
July 2, 1994................................................. 5
Notes to Consolidated Financial Statements.................... 6
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
(IN THOUSANDS)
JULY 1, DECEMBER 31,
1995 1994
----------- ------------
ASSETS (UNAUDITED)
Current Assets:
Cash and cash equivalents........................... $ 31,697 $ 8,306
Short-term investments.............................. -- 2,028
Accounts receivable, less allowances of $675 and
$625............................................... 18,899 15,816
Inventories......................................... 16,364 11,519
Other current assets................................ 2,795 2,324
-------- -------
Total Current Assets.............................. 69,755 39,993
-------- -------
Property, Plant and Equipment, net.................... 27,186 24,510
-------- -------
Costs in Excess of Net Assets of Acquired Company..... 3,877 4,019
-------- -------
$100,818 $68,522
======== =======
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt................... $ 171 $ 805
Accounts payable.................................... 10,324 9,275
Accrued payroll and other employee benefits......... 3,447 2,882
Other accrued expenses.............................. 3,188 2,489
-------- -------
Total Current Liabilities......................... 17,130 15,451
-------- -------
Long-term Debt........................................ 7,663 8,646
-------- -------
Deferred Income Taxes................................. 4,487 4,044
-------- -------
Stockholders' Investment:
Preferred stock, $1.00 par value--
Authorized--1,000,000 shares
Issued and outstanding--none....................... -- --
Common stock, $.05 par value--
Authorized--30,000,000 shares
Issued--10,081,213 and 8,577,552 shares............ 504 429
Paid-in capital..................................... 35,442 10,664
Retained earnings................................... 35,869 29,565
-------- -------
71,815 40,658
Less treasury stock, at cost, 157,054 shares........ 277 277
-------- -------
Total Stockholders' Investment.................... 71,538 40,381
-------- -------
$100,818 $68,522
======== =======
The accompanying notes are an integral part
of these consolidated financial statements.
3
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -----------------
JULY 1, JULY 2, JULY 1, JULY 2,
1995 1994 1995 1994
--------- --------- -------- --------
Net Sales................................ $ 34,724 $ 25,372 $ 67,386 $ 48,379
Cost of Sales............................ 26,634 19,702 51,891 37,609
--------- --------- -------- --------
Gross Profit............................. 8,090 5,670 15,495 10,770
Selling, General and Administrative Ex-
penses.................................. 2,608 2,130 5,200 4,085
--------- --------- -------- --------
Income from Operations................... 5,482 3,540 10,295 6,685
Other Income............................. 254 39 422 95
Interest Expense......................... 96 130 212 291
--------- --------- -------- --------
Income Before Provision for Income Taxes. 5,640 3,449 10,505 6,489
Provision for Income Taxes............... 2,256 1,379 4,201 2,594
--------- --------- -------- --------
Net Income............................... $ 3,384 $ 2,070 $ 6,304 $ 3,895
========= ========= ======== ========
Net Income Per Common and Common Equiva-
lent Share.............................. $ .36 $ .24 $ .69 $ .45
========= ========= ======== ========
Weighted Average Common and Common Equiv-
alent Shares Outstanding................ 9,402 8,631 9,182 8,601
========= ========= ======== ========
The accompanying notes are an integral part
of these consolidated financial statements.
4
ALTRON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
SIX MONTHS ENDED
------------------
JULY 1, JULY 2,
1995 1994
-------- --------
Cash Flows from Operating Activities:
Net income................................................ $ 6,304 $ 3,895
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 2,514 2,075
Deferred income taxes................................... 43 1,055
Changes in current assets and liabilities, net of assets
acquired:
Accounts receivable................................... (3,083) (2,073)
Inventories........................................... (4,845) (2,291)
Other current assets.................................. (71) (683)
Accounts payable...................................... 1,049 3,565
Accrued expenses...................................... 1,264 1,168
-------- --------
Net cash provided by operating activities................. 3,175 6,711
-------- --------
Cash Flows from Investing Activities:
Decrease in short-term investments...................... 2,028 --
Capital expenditures.................................... (5,048) (3,154)
Purchase of a company, net of cash acquired............. -- (2,994)
-------- --------
Net cash used in investing activities..................... (3,020) (6,148)
-------- --------
Cash Flows from Financing Activities:
Net decrease in short-term debt......................... -- (175)
Principal payments of long-term debt.................... (1,617) (528)
Proceeds from issuance of common stock.................. 24,853 118
-------- --------
Net cash provided by (used in) financing activities....... 23,236 (585)
-------- --------
Net Change in Cash and Cash Equivalents................... 23,391 (22)
Cash and Cash Equivalents, Beginning of Period............ 8,306 8,877
-------- --------
Cash and Cash Equivalents, End of Period.................. $ 31,697 $ 8,855
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest.............................................. $ 289 $ 342
Income taxes.......................................... 3,885 2,285
Supplemental Disclosure of Noncash Investing Activities:
(See Note 1).
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 telecommunications, data communications, computer, industrial and
medical systems segments of the electronics industry.
On June 9, 1994, Altron Systems Corporation, a wholly-owned subsidiary,
completed the acquisition of Astrio Corporation, a manufacturer of complex
surface mount assemblies. The purchase price was $4,685,000 consisting of
$3,000,000 cash and $1,685,000 in Altron's common stock (167,108 shares). In
addition, $1,565,000 in liabilities were assumed and related acquisition costs
of $64,000 were incurred. The acquisition has been accounted for as a
purchase, and the results of operations have been included in the accompanying
consolidated income statements from the date of acquisition.
On May 26, 1995, the Company completed a public offering of 1,395,000 shares
of its common stock, resulting in net proceeds of approximately $24.4 million.
On June 9, 1995, the Company formed Altron Securities Corporation, a wholly-
owned Massachusetts investment subsidiary.
(2) INTERIM FINANCIAL STATEMENTS
In the opinion of management, these interim financial statements contain all
adjustments (consisting of normal recurring adjustments) which management
considers necessary for a fair presentation of the results for such periods.
The unaudited results of operations for the quarter and six months ended July
1, 1995 are not necessarily indicative of the results of operations for the
full year.
The accompanying consolidated financial statements include the accounts of
the Company, Altron Systems Corporation and Altron Securities Corporation, its
wholly-owned subsidiaries. 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 31, 1994 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):
JULY 1, DECEMBER 31,
1995 1994
------- ------------
Raw materials......................................... $ 8,168 $ 5,120
Work-in-process....................................... 8,196 6,399
------- -------
$16,364 $11,519
======= =======
(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 July 1, 1995 and December
31, 1994. On June 13, 1995, the Company paid off the balance of $1,200,000 on
the five-year unsecured term loan which originated in May 1992.
6
ALTRON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) STOCKHOLDERS' INVESTMENT
On May 25, 1995, the Company's stockholders approved the 1995 Employee Stock
Purchase Plan, the 1995 Stock Option Plan for Non-Employee Directors and an
amendment to the Company's 1991 Stock Option Plan which increased the number
of shares of common stock reserved for issuance under the Plan from 1,200,000
to 2,000,000. Shares of common stock reserved for issuance under the 1995
Employee Stock Purchase Plan and the 1995 Stock Option Plan for Non-Employee
Directors were 300,000 and 50,000, respectively.
(6) SIGNIFICANT CUSTOMERS
One customer, Motorola Inc., accounted for approximately 17% and 16% of net
sales for the six month periods ended July 1, 1995 and July 2, 1994,
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 1995 increased 37% to $34.7 million from
net sales of $25.4 million for the same quarter of 1994. Net sales for the
first six months of 1995 increased 39% to $67.4 million compared to $48.4
million for the same period last year. The increase was primarily the result
of increased shipments to the Company's major customers in the communications
and computer segments of the electronics industry. The Company's largest
customer in each of the second quarters of 1995 and 1994 was Motorola, Inc.,
which accounted for 17% and 16% of net sales for each quarter, respectively.
Value added contract manufacturing sales for the second quarter of 1995
increased 66% to $25.2 million or 73% of the Company's net sales, compared to
$15.2 million or 60% of net sales in the second quarter of 1994. For the first
six months of 1995, value added contract manufacturing sales increased 71% to
$49.0 million or 73% of net sales compared to $28.7 million or 59% of net
sales for the first six months of 1994. Altron Systems Corporation accounted
for $5.2 million and $10.4 million of value added manufacturing sales in the
second quarter and first six months of 1995, respectively. Printed circuit
board sales for the second quarter of 1995 were 27% of the Company's net
sales, compared to 40% of net sales in the second quarter of 1994. Printed
circuit board sales for the first six months of 1995 were 27% of net sales,
compared to 41% of net sales for the same period in 1994.
Gross profit for the second quarter of 1995 increased 43% to $8.1 million
from $5.7 million in 1994. Gross profit for the first six months of 1995
increased 44% to $15.5 million compared to $10.8 million in 1994. Gross margin
as a percentage of net sales for the second quarter of 1995 increased to 23.3%
as compared to 22.3% in 1994. Gross margin as a percentage of net sales for
the first six months of 1995 increased to 23.0% compared to 22.3% in 1994. The
improvement in the Company's gross margin was primarily a result of better
absorption of fixed costs due to the higher shipment levels and was also due
to manufacturing efficiencies gained through productivity and product yield
improvements.
Selling, general and administrative expenses as a percentage of net sales
decreased to 7.5% in the second quarter of 1995 from 8.4% for the same quarter
of 1994. In the first six months of 1995, selling, general and administrative
expenses decreased to 7.7% of net sales compared to 8.4% for the same period
in 1994. The decline in selling, general and administrative expenses as a
percentage of net sales was principally the result of higher net sales.
Other income increased $215,000 in the second quarter and $327,000 for the
first six months of 1995 as compared to the respective periods of 1994. The
increases resulted primarily from higher rates of return earned on investments
and higher cash balances available for investment mainly due to net proceeds
of approximately $24.4 million received through the sale of the Company's
common stock during the second quarter. Interest expense was $34,000 lower in
the second quarter and $79,000 lower for the first six months of 1995 compared
to the same periods in 1994 as a result of reduced outstanding borrowings.
LIQUIDITY AND CAPITAL RESOURCES
At July 1, 1995, the Company had working capital of $52.6 million compared
to $24.5 million at December 31, 1994. Cash and cash equivalents and short-
term investments were $31.7 million at July 1, 1995 and $10.3 million at
December 31, 1994.
At July 1, 1995, the Company had a $5 million line of credit arrangement
with its bank, all of which was available.
On May 26, 1995, the Company completed a public offering of 1,395,000 shares
of its common stock resulting in net proceeds of approximately $24.4 million.
On June 13, 1995, the Company paid the balance of $1.2 million on its five-
year unsecured term loan which originated in May 1992.
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 $700,000 of capital
expenditures as of July 1, 1995.
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 in lieu of the 1995 Annual Meeting of
Stockholders held on May 25, 1995, 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 4,118,847 for, 70,751 against and 17,612
abstaining, the Company's 1995 Employee Stock Purchase Plan; and (2) by a vote
of 3,973,434 for, 207,336 against and 26,440 abstaining, the Company's 1995
Stock Option Plan for Non-Employee Directors; and (3) by a vote of 3,294,457
for, 706,732 against and 26,472 abstaining, an amendment to the Company's 1991
Stock Option Plan increasing the number of shares of common stock of the
Company available for issuance under the Plan from 1,200,000 to 2,000,000. 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 July 1, 1995.
9
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THE REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Altron Incorporated and Subsidiaries
NAME TITLE DATE
---- ----- ----
/s/ Samuel Altschuler Chairman of the Board of August 14, 1995
-------------------------------- Directors and President
SAMUEL ALTSCHULER (principal executive officer)
/s/ Burton Doo Executive Vice President August 14, 1995
-------------------------------- and Director, President,
BURTON DOO Altron Systems Corporation
/s/ Peter D. Brennan Vice President, Chief August 14, 1995
-------------------------------- Financial Officer and
PETER D. BRENNAN Treasurer (principal
financial and accounting
officer)
10