-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NO5Dr6oFNoghMiAhKru2UuBHnwvnw8pca9eT8xuYYn3zRPvIvnZQf1EOKKnCxetl Ssh8uUb1Kd4+NAZyXj2YSg== 0000820318-97-000025.txt : 19971113 0000820318-97-000025.hdr.sgml : 19971113 ACCESSION NUMBER: 0000820318-97-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: II-VI INC CENTRAL INDEX KEY: 0000820318 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 251214948 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16195 FILM NUMBER: 97716444 BUSINESS ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 BUSINESS PHONE: 4123524455 MAIL ADDRESS: STREET 1: 375 SAXONBURG BLVD CITY: SAXONBURG STATE: PA ZIP: 16056 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended, September 30, 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: 0-16195 II-VI INCORPORATED (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-1214948 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 375 Saxonburg Boulevard Saxonburg, PA 16056 16056 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 412-352-4455 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: At November 6, 1997, 6,815,786 shares of Common Stock, no par value, of the registrant were outstanding. II-VI INCORPORATED AND SUBSIDIARIES ----------------------------------- INDEX -----
Page No. -------- PART 1 FINANCIAL INFORMATION Item 1. Financial Statements. Independent Accountants' Report. . . . . . . . . . 3 Condensed Consolidated Balance Sheets - September 30, 1997 and June 30, 1997 . . . . . . . 4 Condensed Consolidated Statements of Earnings - Three months ended September 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Shareholders' Equity - Three months ended September 30, 1997 . . . . . . . . . . . . . . . . 6 Condensed Consolidated Statements of Cash Flows - Three months ended September 30, 1997 and 1996. . . . . . . . . . . . 7 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12 2 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Shareholders of II-VI Incorporated and Subsidiaries Saxonburg, Pennsylvania We have reviewed the accompanying condensed consolidated balance sheet of II-VI Incorporated and subsidiaries as of September 30, 1997, and the related condensed consolidated statements of earnings, shareholders' equity and cash flows for the three-month period then ended. These financial statements are the responsibility of the Company's management. The condensed interim financial statements as of September 30, 1996, and the for the three-month period then ended, were reviewed by other accountants whose report dated October 16, 1996 stated thatthey were not aware of any material modifications that should be made to those statements in order for them to be in conformity with generally accepted accounting principles. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of II-VI Incorporated and subsidiaries as of June 30, 1997,and the related consolidated statements of earnings, shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated August 12, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 30, 1997 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania October 16, 1997 3 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements - ------------------------------------------------ II-VI Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) ($000 except share data)
September 30, June 30, Assets 1997 1997 ------------ ----------- Current Assets Cash and cash equivalents $ 7,097 $10,854 Accounts receivable - less allowance for doubtful accounts of $319 at September 1997 and $306 at June 1997 12,272 10,808 Inventories 8,836 8,129 Deferred income taxes 439 428 Prepaid and other current assets 658 563 ------- ------- Total Current Assets 29,302 30,782 Property, Plant & Equipment, net 23,577 19,631 Other Assets 4,016 4,099 ------- ------- $56,895 $54,512 ======= ======= Liabilities and Shareholders' Equity Current Liabilities Notes payable $ 776 $ 590 Accounts payable 2,906 3,207 Accrued salaries, wages and bonuses 2,047 3,740 Income taxes payable 852 80 Accrued profit sharing contribution 220 740 Other current liabilities 1,021 1,264 Current portion of long-term debt 70 72 ------- ------- Total Current Liabilities 7,892 9,693 Long-Term Debt--less current portion 2,651 684 Deferred Income Taxes 1,683 1,613 Commitments & Contingencies - - Shareholders' Equity Preferred stock, no par value; authorized - 5,000,000 shares; unissued - - Common stock, no par value; authorized - 30,000,000 shares; issued - 6,815,286 shares at September 1997; 6,802,946 shares at June 1997 18,117 18,072 Foreign currency translation 60 70 Retained earnings 27,254 25,142 ------- ------- 45,431 43,284 Less treasury stock, at cost - 384,440 shares at September 1997 and June 1997 762 762 ------- ------- 44,669 42,522 ------- ------- $56,895 $54,512 ======= =======
[FN] - -See notes to condensed consolidated financial statements. 4 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Earnings (Unaudited) ($000 except per share data)
Three Months Ended September 30, 1997 1996 -------- -------- Revenues Net sales: Domestic $ 7,793 $ 6,772 International 7,087 4,820 ------- ------- 14,880 11,592 Contract research and development 639 518 ------- ------- 15,519 12,110 ------- ------- Costs, Expenses & Other Income Cost of goods sold 8,305 6,348 Contract research and development 471 395 Internal research and development 300 124 Selling, general and administrative 3,450 3,030 Other income - net (17) (125) ------- ------- 12,509 9,772 ------- ------- Earnings Before Income Taxes 3,010 2,338 Income Taxes 898 678 ------- ------- Net Earnings $ 2,112 $ 1,660 ======= ======= Earnings Per Share $ 0.32 $ 0.25 ======= =======
[FN] - -See notes to condensed consolidated financial statements. 5 II-VI Incorporated and Subsidiaries Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (000)
Common Stock Cumulative Treasury Stock --------------- Translation Retained ---------------- Shares Amount Adjustment Earnings Shares Amount Total ------ ------- ----------- -------- ------- -------- ------- Balance--July 1, 1997 6,803 $18,072 $ 70 $ 25,142 384 $ 762 $42,522 Shares issued under stock option plan 12 45 - - - - 45 Net earnings for the quarter - - - 2,112 - - 2,112 Translation adjustment - - (10) - - - (10) ----- ------- ----------- -------- ------- -------- ------- Balance-- September 30, 1997 6,815 $18,117 $ 60 $ 27,254 384 $ 762 $44,669 ===== ======= =========== ======== ======= ======== =======
[FN] - -See notes to condensed consolidated financial statements. 6 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) ($000)
Three Months Ended September 30, 1997 1996 ------- ------- Cash Flows from Operating Activities Net earnings $ 2,112 $ 1,660 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Depreciation and amortization 1,061 816 Loss on foreign currency transactions 204 67 Deferred income taxes 59 - Increase (decrease) in cash from changes in: Accounts receivable (1,834) (456) Inventories (860) (525) Accounts payable (95) 43 Accrued salaries, wages and bonuses (1,670) (1,336) Accrued profit sharing contribution (519) (349) Income taxes payable 772 343 Other operating net assets (188) (132) ------- ------- Net cash (used in) provided by operating activities (958) 131 ------- ------- Cash Flows from Investing Activities Additions to property, plant & equipment (4,926) (1,407) Additions in other assets 2 (9) ------- ------- Net cash used in investing activities (4,924) (1,416) ------- ------- Cash Flows from Financing Activities Net change in notes payable 205 (202) Proceeds from long-term borrowings 1,980 741 Payments on long-term borrowings (15) (6) Proceeds from sale of common stock 45 66 ------- ------- Net cash provided by financing activities 2,215 599 ------- ------- Effect of exchange rate changes on cash and cash equivalents (90) (125) ------- ------- Net decrease in cash and cash equivalents (3,757) (811) Cash and Cash Equivalents at Beginning of Period 10,854 9,417 ------- ------- Cash and Cash Equivalents at End of Period $ 7,097 $ 8,606 ======= =======
[FN] - -See notes to condensed consolidated financial statements. 7 II-VI Incorporated and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The condensed consolidated financial statements for the three month periods ended September 30, 1997 and 1996 are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation for the periods presented have been included. These interim statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto contained in the Company's 1997 Annual Report to shareholders. The consolidated results of operations for the three month periods ended September 30, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. Note B - Inventories ($000) The components of inventories are as follows: September 30, June 30, 1997 1997 ------------- -------- Raw materials $ 3,540 $ 3,083 Work in progress 2,175 1,992 Finished goods 3,121 3,054 ------------- -------- $ 8,836 $ 8,129 ============= ======== Note C - Property, Plant and Equipment ($000) Property, plant and equipment consist of the following: September 30, June 30, 1997 1997 ------------- -------- Land and land improvements $ 1,033 $ 876 Buildings and improvements 10,936 8,073 Machinery and equipment 29,798 27,893 ------------- -------- 41,767 36,842 Less accumulated depreciation 18,190 17,211 ------------- -------- $ 23,577 $19,631 ============= ======== 8 II-VI Incorporated and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note D - Debt In September 1997, the Company secured a $1,980,000 low interest rate loan from PNC Bank. The terms of the loan call for the entire principal amount to be paid on September 25, 2002. Interest payments are payable semi- annually from the inception of the loan at a rate equal to the lesser of the floating rate or the maximum rate as defined in the loan agreement. The floating rate is equal to the Euro-Rate plus 1.49% and the maximum rate is 3.74%. Note E - New Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. This Statement requires restatement of all prior- period earnings per share data presented. Basic earnings per share as defined by SFAS No. 128 for the three month periods ended September 30, 1997 and 1996 would have been $.33 and $.26, respectively. Dilutive earnings per share as defined by SFAS No. 128 approximates the historically presented earnings per share. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net earnings for the first quarter of fiscal 1998 were $2,112,000 ($0.32 per share) on revenues of $15,519,000. This compares to net earnings of $1,660,000 ($0.25 per share) on revenues of $12,110,000 in the first quarter of fiscal 1997. The increased earnings were driven by increased revenue volume. Order bookings for the first quarter of fiscal 1998 were $16,050,000 compared to $12,927,000 for the same period last fiscal year, an increase of 24%. Included in bookings were contract research and development bookings for the first quarter of fiscal year 1998 of $90,000 compared to $1,104,000 for the same period last fiscal year. Excluding these long-term research and development contract bookings, manufacturing bookings increased 35% to $15,960,000 for the quarter from $11,823,000 for the same period last year. Approximately 60% of the increase was attributable to bookings for infrared optics and materials and the remainder for products manufactured by the Company's VLOC subsidiary. Total revenues for the first quarter of fiscal 1998 increased 28% to $15,519,000 compared to $12,110,000 for the same period last fiscal year. Nearly 80% of the increase in revenues was attributable to shipments of infrared optics and materials, while increased shipments from the Company's VLOC subsidiary accounted for the remainder of the increase. Manufacturing gross margin for the first quarter of fiscal 1998 was $6,575,000 or 44% of net sales compared to $5,244,000 or 45% of net sales for the first quarter of fiscal 1997. The decrease in manufacturing gross margin was due to the strengthening of the U.S. dollar against foreign currencies and increased expenses in the Company's eV PRODUCTS division due to the expansion in operations required to fulfill a major order from Neoprobe Corporation. Selling, general and administrative expenses for the first quarter of fiscal 1998 were $3,450,000 or 22% of revenues compared to $3,030,000 or 25% of revenues for last fiscal year's first quarter. The increase in expense is attributable to higher general and administrative expenses needed to support the Company's growth and higher compensation expense associated with the Company's world-wide profit driven bonus programs. 10 Other income decreased by $108,000 in the first quarter of fiscal 1998 in comparison to last fiscal year's first quarter due to foreign currency translation losses and lower investment earnings on reduced cash balances. The lower cash balance is primarily due to increased capital spending. The Company's first quarter fiscal 1998 effective income tax rate is 30%, which is slightly higher than 29% for last fiscal year's first quarter. This increase is due to a higher percentage of earnings generated from U.S. operations. Liquidity and Capital Resources Cash decreased during the first quarter of fiscal 1998 by $3,757,000 primarily due to $4,926,000 in capital expenditures and payment of compensation costs relating to the Company's fiscal 1997 world-wide profit-driven bonus and retirement programs, partially offset by proceeds from a long-term loan. The capital expenditures focused on increasing capacity and included the construction costs incurred for a new 45,000 square foot manufacturing facility at the Company's VLOC subsidiary in Florida and a 30,000 square foot manufacturing facility for the Company's eV PRODUCTS division in Pennsylvania. The Company used $958,000 in cash from operations for the first quarter of fiscal 1998. The $3,173,000 in cash generated from net earnings before depreciation and amortization for the quarter was offset by the payment of compensation costs relating to the Company's fiscal 1997 world-wide profit-driven bonus and retirement programs, and increases in accounts receivable and inventories needed to support the growth in sales volume. The current cash balance, which includes a $1,980,000 low interest rate loan from PNC, as well as cash provided by operations during the remainder of fiscal year 1998, will be used for working capital needs, further capital expenditures on facilities and equipment, scheduled debt payments, and possible acquisitions of complementary businesses, products, or technologies. This Management's Discussion and Analysis contains forward looking statements as defined by Section 21E of the Securities Exchange Act of 1934, including the statements regarding the Company's ability to fund future working capital needs, capital expenditures and scheduled debt payments from internally generated funds and existing cash reserves. The Company's ability to fund future capital needs from internally generated funds and existing cash reserves could differ from these statements if worldwide economic conditions change, competitive conditions intensify, technology problems emerge, and/or if suitable acquisitions of technologies or businesses cannot be consummated. There are certain risk factors that could affect the Company's business, results of operations or financial condition. Investors are encouraged to review the risk factors set forth in the Company's 1997 Form 10-K filed on September 29, 1997. 11 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. -------- 11.01 Statement of Computation of Earnings Per Share. . . . . . . . . . . . Filed herewith. 15.01 Accountant's awareness letter dated November 13, 1997 . . . . . . . . . . . . Filed herewith. 27.01 Financial Data Schedule . . . . . . . . . Filed herewith. (b) Reports on Form 8-K. None 12 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. II-VI INCORPORATED (Registrant) Date: November 13, 1997 By: /s/ Carl J. Johnson Carl J. Johnson Chairman and Chief Executive Officer Date: November 13, 1997 By: /s/ James Martinelli James Martinelli Treasurer & Chief Financial Officer EXHIBIT INDEX Exhibit No. 11.01 Statement of Computation of Earnings Per Share. . . . . . . . . . . . Filed herewith. 15.01 Accountant's acknowledgment letter dated November 13, 1997 . . . . . . . . . . . . Filed herewith. 27.01 Financial Data Schedule . . . . . . . . . Filed herewith. EX-11 2 II-VI INCORPORATED AND SUBSIDIARIES STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
Quarter Ended September 30, ($000'S except per share data) 1997 1996 1995 - ------------------------------------------------------------------------------------------- Net earnings $ 2,112 $ 1,660 $ 806 ======= ======= ======= Common stock 6,420 6,312 5,102 Outstanding options 264 431 404 ------- ------- ------- Primary weighted average shares outstanding 6,684 6,743 5,506 ======= ======= ======= Common stock 6,420 6,312 5,102 Outstanding options 274 456 416 ------- ------- ------- Fully diluted weighted average shares outstanding 6,694 6,769 5,518 ======= ======= ======= Primary earnings per share $ 0.32 $ 0.25 $ 0.15 ======= ======= ======= Fully diluted earnings per share $ 0.32 $ 0.25 $ 0.15 ======= ======= ======= Notes: The 1995 calculation is adjusted to reflect the two-for-one stock split in fiscal 1996. The common stock equivalents consist of the shares reserved for issuance under II-VI's stock option plan and deferred under II-VI's deferred compensation, earnings growth, deferred compensation plan for directors and directors' common stock plan. The fully diluted earnings per share calculations are submitted in accordance with Regulation S-K item 601(b)(11).
EX-15 3 November 13, 1997 II-VI Incorporated 375 Saxonburg Boulevard Saxonburg, PA 16056 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of II-VI Incorporated and subsidiaries for the period ended September 30, 1997, as indicated in our report dated October 16, 1997; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, is incorporated by reference in Registration Statements No. 33- 19511, No. 33-38019, No. 33-19510, No. 33-63739, and No. 333-12737 on Form S-8 and Registration Statement No. 333-04531 on Form S-3. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania EX-27 4
5 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 7,097 0 12,591 319 8,836 29,302 41,767 18,190 56,895 7,892 2,651 0 0 18,117 27,314 56,895 15,519 15,519 8,776 8,776 3,733 0 0 3,010 898 2,112 0 0 0 2,112 .32 0
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