SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 1997
/ / 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 04-2726873
(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 September 28, 1997:
Common Stock, $.01 par value: 9,856,572 shares
VITRONICS CORPORATION
INDEX
PAGE
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Part I--Financial Information:
Item 1--Financial Statements:
Condensed Consolidated Balance Sheets-- September 28,
1997 (unaudited) and December 31, 1996................... 3
Condensed Consolidated Statements of Operations
(unaudited)--Three Months and Nine Months Ended
September 28, 1997 and September 28, 1996................ 4
Condensed Consolidated Statements of Cash Flows
(unaudited)--Nine Months Ended September 28, 1997 and
September 28, 1996....................................... 5
Notes to Condensed Consolidated Financial Statements
(unaudited).............................................. 6
Calculation of Net Income Per Share--Three Months Ended
September 28, 1997 and September 28, 1996................ 7
Calculation of Net Income Per Share--Nine Months Ended
September 28, 1997 and September 30, 1996................ 8
Item 2--Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 9
Part II--Other Information
Items 1 through 6........................................ 11
Signatures............................................... 13
2
VITRONICS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
SEPTEMBER 28, DECEMBER 31,
1997 1996
(UNAUDITED) (*)
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 2,005 $ 2,125
Accounts receivable, net.......................................................... 4,814 3,177
Inventories....................................................................... 2,966 2,989
Deferred taxes.................................................................... 525 553
Other current assets.............................................................. 146 225
------ ------
Total current assets........................................................... 10,456 9,069
Property and equipment, net......................................................... 353 437
Deferred taxes..................................................................... 183 183
Other assets....................................................................... 98 74
------ ------
$ 11,090 $ 9,763
------ ------
------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 1,848 $ 1,341
Income taxes payable............................................................ 516 176
Other current liabilities....................................................... 1,765 1,753
Current maturities of long-term liabilities..................................... 71 214
------ ------
Total current liabilities....................................................... 4,200 3,484
Long-term liabilities, net of current maturities.................................... 57 104
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity:
Common Stock, $.01 par value...................................................... 99 99
Additional paid-in capital........................................................ 6,145 6,145
Foreign currency translation...................................................... (162) (81)
Retained earnings (deficit)....................................................... 751 12
------ ------
6,833 6,175
------ ------
$ 11,090 $ 9,763
------ ------
------ ------
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
3
VITRONICS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's omitted except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 28, SEPTEMBER 28, SEPTEMBER 28, SEPTEMBER 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
Net sales............................................ $ 6,380 $ 5,814 $ 17,083 $ 17,880
Cost of goods sold................................... 3,719 3,393 10,298 10,829
------ ------ ------------- -------------
Gross profit....................................... 2,661 2,421 6,785 7,051
Selling, general and administrative expenses......... 1,626 1,566 4,428 4,509
Research and development costs....................... 348 472 1,016 1,276
Patent Litigation.................................... -- 9 65 36
------ ------ ------------- -------------
1,974 2,047 5,509 5,821
------ ------ ------------- -------------
Income from operations............................... 687 374 1,276 1,230
Non-operating expense--net........................... 13 23 44 16
------ ------ ------------- -------------
Income before taxes.................................. 674 351 1,232 1,214
Income taxes......................................... 300 141 493 486
------ ------ ------------- -------------
Net income........................................... $ 374 $ 210 $ 739 $ 728
------ ------ ------------- -------------
Net earnings per common share:
Primary............................................ $ .03 $ .02 $ .07 $ .07
------ ------ ------------- -------------
Fully diluted...................................... $ .03 $ .02 $ .07 $ .07
------ ------ ------------- -------------
Weighted average number of common and common
equivalent shares used in calculation of earnings
per common share:
Primary............................................ 9,975 10,643 9,992 10,754
------ ------ ------------- -------------
Fully diluted...................................... 9,997 10,654 10,016 10,762
------ ------ ------------- -------------
The accompanying notes are an integral part of these condensed financial
statements.
4
VITRONICS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
NINE MONTHS ENDED
----------------------------
SEPTEMBER 28, SEPTEMBER 28,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................................... $ 739 $ 728
Adjustments to reconcile net income to net cash flows provided by (used for)
operating activities:
Depreciation and amortization................................................... 159 172
Provision for excess and obsolescence........................................... 187 246
Provision for bad debts......................................................... -- 13
Changes in current assets and liabilities:
Accounts receivable........................................................... (1,637) (677)
Inventories................................................................... (164) (522)
Other current assets.......................................................... (79) 85
Accounts payable.............................................................. 507 (195)
Income taxes.................................................................. 368 194
Other current liabilities..................................................... 12 127
------ ------
Total adjustments.......................................................... (489) (557)
------ ------
Net cash provided by/used for operating activities................................. 250 171
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.............................................. (48) (80)
Additions to other assets........................................................ (51) (31)
------ ------
Net cash used for investing activities............................................ (99) (111)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt........................................................ (190) (124)
Issuance of common stock.......................................................... -- 13
Purchase of Treasury Stock........................................................ -- (665)
------ ------
Net cash used for financing activities............................................ (190) (776)
Foreign currency translation adjustment........................................... (81) 4
------ ------
CASH:
Net increase (decrease)........................................................... (120) (712)
Balance, beginning period......................................................... 2,125 2,825
------ ------
Balance, end of period........................................................... $ 2,005 $ 2,113
------ ------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest........................................................................ 28 30
Income taxes.................................................................... 133 281
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations........................................................ -- 78
The accompanying notes are an integral part of these condensed financial
statements
5
VITRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Basis 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 nine month period ended September 28, 1997
are not necessarily indicative of the results expected for the year ended
December 31, 1997. 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, 1996, filed with the Securities and Exchange
Commission (File #0-13715) on March 28, 1997.
B. Inventories
Inventories valued at the lower of cost (determined using the first-in,
first-out method) or market, were as follows (in thousands):
SEPTEMBER 28, DECEMBER 31,
1997 1996
------------- -------------
Finished Goods...................................................................... $ 792 $ 833
Work in process..................................................................... 801 663
Raw materials....................................................................... 1,373 1,493
------ ------
$ 2,966 $ 2,989
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VITRONICS CORPORATION AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 28, 1996
SEPTEMBER 28, 1997
----------------------
FULLY
PRIMARY DILUTED
---------- ----------
Net income.............................................................................. $ 374,000 $ 374,000
Weighted average shares outstanding:
Common stock.......................................................................... 9,856,572 9,856,572
Stock options......................................................................... 118,198 140,208
---------- ----------
Weighted average shares outstanding................................................... 9,974,770 9,996,780
---------- ----------
---------- ----------
Earnings per share...................................................................... $0.03 $0.03
SEPTEMBER 28, 1996
--------------------------
FULLY
PRIMARY DILUTED
------------ ------------
Net income............................................................................ $ 210,000 $ 210,000
Weighted average shares outstanding:
Common stock........................................................................ 10,316,597 10,316,597
Stock options....................................................................... 326,483 336,975
------------ ------------
Weighted average shares outstanding................................................. 10,643,440 10,653,572
------------ ------------
------------ ------------
Earnings per share.................................................................... $ 0.02 $ 0.02
7
VITRONICS CORPORATION AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER COMMON SHARE
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 28, 1996
SEPTEMBER 28, 1997
------------------------
FULLY
PRIMARY DILUTED
---------- ------------
Net income............................................................................. $ 739,000 $ 739,000
Weighted average shares outstanding:
Common stock......................................................................... 9,856,572 9,856,752
Stock options........................................................................ 135,109 159,191
---------- ------------
Weighted average shares outstanding.................................................. 9,991,681 10,015,763
---------- ------------
---------- ------------
Earnings per share..................................................................... $ 0.07 $ 0.07
SEPTEMBER 28, 1996
--------------------------
FULLY
PRIMARY DILUTED
------------ ------------
Net income............................................................................ $ 728,000 $ 728,000
Weighted average shares outstanding:
Common stock........................................................................ 10,316,689 10,316,689
Stock options....................................................................... 437,154 444,815
------------ ------------
Weighted average shares outstanding................................................. 10,753,842 10,761,504
------------ ------------
------------ ------------
Earnings per share.................................................................... $ 0.07 $ 0.07
8
VITRONICS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the third quarter ended September 28, 1997 increased 10% to
$6,380,000 from $5,814,000 for the same period in 1996. Sales for the nine
months ended September 28, 1997 were $17,594,000 compared with $17,880,000 for
the same period in 1996, a decrease of 4%. Bookings for the three months ended
September 28, 1997 increased 3% to $5,096,000 from $4,929,000 for the same
period in 1996. Bookings for the nine months ended September 28, 1997 were
$17,386,000 versus $17,594,000 for the same period in 1996, a decrease of 1%.
The Company does not anticipate that the change in net revenue and bookings for
the three and nine month periods ended September 28, 1997 are necessarily
indicative of the percentage change in net revenues and bookings to be expected
for the balance of the fiscal year. Backlog as of September 28, 1997 was
$2,287,000 compared with $1,984,000 at December 31, 1996 and $2,561,000 as of
September 30, 1996.
Gross margin for the three months ended September 28, 1997 remained at 42%
from 42% for the same period in 1996. For the nine month period ended September
28, 1997, the gross margin percentage was 40% compared with 39% for the same
period in 1996.
Operating expenses for the three months ended September 28, 1997 were
$1,827,000 compared with $2,047,000 for the same period in 1996, a decrease of
11%. Operating expenses as a percentage of sales were 31% and 35%, respectively.
Operating expenses for the nine months ended September 28, 1997 were $5,509,000
compared with $5,821,000 for the same period in 1996, an decrease of 5%.
Operating expenses as a percentage of sales were 32% and 33%, for the respective
nine month period. The 1997 spending includes $147,000 of expenses relating to
the tender offer from Dover Technologies which was substantially completed on
October 6, 1997. The Company incurred approximately $102,000 of due diligence
expenses during the 1996 quarter relating to a potential strategic relationship
which was not pursued. The decrease in expenses is a result of management's
efforts to improve efficiencies and reduce headcount during the second and third
quarter of 1997.
The Company had non-operating expense of $13,000 for the three months ended
September 28, 1997, compared with non-operating expense of $23,000 for the same
period of 1996. During the first nine months of 1997, the Company incurred
non-operating expenses of $44,000 compared with $16,000 for the same period of
1996.
The Company recorded tax expense of $300,000 for the quarter ended September
28, 1997, as compared to $141,000 for the comparable quarter of 1996. For the
nine month period ended September 28, 1997, the Company had income tax expense
of $493,000 as compared to $486,000 for the same period in 1996.
Net income for the third quarter of 1997 was $374,000 compared to $210,000
for the comparable period of 1996. For the third quarter of 1997, net income was
$0.03 per primary share, and $0.03 per fully diluted share. For the comparable
1996 period, net income was $0.02 per primary share, and $0.02 per fully diluted
share. Net income for the nine month period ended September 28, 1997 was
$739,000 compared to
9
$728,000 for the same period in 1996. For the first nine months of 1997, net
income was $0.07 per primary share, and $0.07 per fully diluted share. For
the comparable 1996 period, net income was $0.07 per primary share, and $0.07
per fully diluted share
Liquidity and Capital Resources
The Company continues to monitor its operations spending levels very closely
with the goal of cash conservation. During the nine months ended September 28,
1997, cash decreased $120,000 to $2,005,000.
10
VITRONICS CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
Items 1 through 5: Not applicable
Item 6:
(a). Exhibits
27 Financial Data Schedule
(b). Subsequent Events
I. On September 3, 1997, Dover Technologies International Inc., a
subsidiary of Dover Corporation (NYSE:DOV) and Vitronics Corporation
(AMEX:VTC) announced that they entered into an Agreement and Plan
of Merger pursuant to which Dover Technologies would acquire
Vitronics. Dover Technologies' subsidiary DTI Intermediate, Inc.
did within five business days commence a tender offer for all of
the approximately 9,856,572 outstanding shares of common stock of
Vitronics Corporation at $1.90 per share in cash. The tender offer
expired at midnight EST time on October 6, 1997. The Information
Agent for the tender offer was Morrow & Co., Inc. of New York City.
Under the Agreement Plan of Merger following consummation of
the tender offer, DTI Intermediate Inc. and Vitronics would merge
and the surviving company would become a wholly-owned subsidiary
of Dover Technologies. Vitronics shareholders who did not tender
their shares have the right to receive $1.90 per share in cash
for their shares in the merger or exercise their Dissenters Rights
under applicable law.
The Board of Directors of Vitronics had unanimously approved
the tender offer and merger transaction and recommended that
Vitronics shareholders tender their shares pursuant to the tender
offer. Vitronics' financial advisor, Scott-Macon Securities Inc.,
had delivered its opinion to Vitronics' Board of Directors on
September 3, 1997, that the $1.90 per share consideration in the
tender offer and the merger was fair to Vitronics shareholders
from a financial point of view as of such date.
The tender offer was subject to certain conditions, including
that a minimum of 66 2/3% of the Vitronics shares were tendered and
not withdrawn as of the expiration of the tender offer period and
clearance under the applicable waiting period under Hart-Scott-
Rodino Anti-trust Improvement Act of 1976.
11
Mr. James J. Manfield, Jr., former Chairman, President and CEO,
said, "We are excited by the opportunity to be supported by
Dover's resources and being associated with such leaders in
printed circuit assembly as Dover's Universal, DEK and Soltec
subsidiaries."
Mr. John Pomeroy, President and CEO of Dover Technologies,
said "We are delighted with the prospect of acquiring Vitronics
and excited with the opportunity to add Vitronics' technology and
products to our current leadership positions in printed circuit
assembly equipment."
II. On October 7, 1997, DTI Intermediate, Inc., a subsidiary of
Dover Technologies International, Inc., a subsidiary of Dover
Corporation (NYSE:DOV), announced it had accepted for payment and
would purchase, as soon as practicable, all shares of common stock
of Vitronics Corporation tendered pursuant to DTI Intermediate,
Inc.'s tender offer for all outstanding shares of Vitronics
common stock. The tender offer expired as scheduled at 12:00
midnight, New York City time, October 6, 1997. During the week
following the expiration of the tender offer, DTI Intermediate
consummated the purchase of the Vitronics Common Stock tendered in
the tender offer.
Dover Technologies International, Inc. reported that
approximately 7,935,940 shares of common stock of Vitronics
Corporation were tendered in the tender offer, which constituted
80.5% of the outstanding common stock of Vitronics. Dover
Technologies International, Inc. further stated that the planned
merger of Vitronics Corporation and DTI Intermediate, Inc. would
be consummated as soon as practicable. A special Meeting of
Shareholders of Vitronics has been called for December 2, 1997
to approve the merger of Vitronics into DTI Intermediate, Inc.
12
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: November 12, 1997 By: /s/Daniel J. Sullivan
----------------------
Daniel J. Sullivan, Vice
President, Clerk, Controller and
Principal Accounting Officer
13