UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
.......................
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
.................
OR
[ ] 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 0-19306
EXCEL TECHNOLOGY, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 11-2780242
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
41 Research Way (631) 784-6175
E. Setauket, NY 11733 (Registrant's Telephone Number)
(Address of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
.......................................
Indicate by check mark whether the registrant (1) has filed all reports
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $254,503,132 based on the average bid and ask price
as reported by NASDAQ on March 21, 2002. Shares held by each officer
and director and by each person who owns 10% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. The determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of shares of the Registrant's common stock outstanding as of
March 21, 2002 was: 11,773,869.
DOCUMENTS INCORPORATED BY REFERENCE:
Definitive Proxy Statement to be filed in connection with the
Registrant's 2002 Annual Meeting of Stockholders
(incorporated by reference under Part III.)
PART I
......
ITEM 1. BUSINESS
General
.......
Excel Technology, Inc. (the "Company") was organized under the laws
of Delaware in 1985. The Company designs, develops, manufactures and
markets laser systems and electro-optical components for industry,
science, and medicine. The word laser is an acronym for "Light
Amplification by Stimulated Emission of Radiation." The essence of the
laser is the ability of a photon (light energy) to stimulate the
emission of other photons, each having the same wavelength (color) and
direction of travel. The laser beam is so concentrated and powerful
that it can produce power densities millions of times more intense than
that found on the surface of the sun and is capable of cutting, welding
and marking industrial products, yet it can be precisely controlled and
directed and is capable of performing delicate surgery on humans.
In October 1992, the Company acquired Quantronix Corporation
("Quantronix"). The acquisition of Quantronix and its then wholly-owned
subsidiaries, Control Laser Corporation ("Control Laser"), located in
Orlando, Florida, Excel Technology Europe GmbH (previously named
Quantronix GmbH) ("Excel Europe"), located in Germany, and The Optical
Corporation ("TOC"), located in Oxnard, California, provided the Company
with its industrial, scientific and semiconductor product lines and
provided the Company with a significant revenue base as well as
established manufacturing, engineering, marketing and customer service
capabilities.
In February 1995, the Company acquired Cambridge Technology, Inc.
("Cambridge"), located in Cambridge, Massachusetts. Cambridge is
engaged primarily in the manufacture of laser scanners, essential
components to moving a laser beam with precision at a specified speed.
These products have both industrial and consumer applications, such as
laser marking and etching, high-density laser printing and writing,
digitized x-ray imaging and entertainment laser light shows and
displays. The acquisition allowed the Company to expand into new
markets and enhanced its market position in the industrial business.
In October 1995, the Company acquired the Photo Research Division
("Photo Research") of Kollmorgen Instruments Corporation. Photo
Research is engaged primarily in the business of developing,
manufacturing and marketing photometric and spectroradiometer
instruments and systems.
In August 1998, the Company acquired substantially all of the
assets and properties of Synrad, Inc. ("Synrad"), a company engaged in
the business of developing, manufacturing and marketing sealed CO2
lasers and related accessories.
In April 1999, the Company formed Excel Technology Asia Sdn. Bhd.
("Excel Asia"). Excel Asia primarily engages in the business of
marketing, selling, distributing, integrating and servicing Control
Laser and Quantronix products throughout Southeast Asia.
In July 2000, Excel Europe, a subsidiary of the Company, acquired
substantially all of the assets and assumed certain liabilities of
Baublys GmbH ("Baublys"), a company located in Ludwigsburg, Germany and
engaged in the manufacturing and sale of customized laser systems and
engraving machines.
In January 2001, the Company formed Control Systemation, Inc.
("CSI") which focuses on turn-key laser based micro-machining systems
and part handling workstations for factory automation. CSI operates as
an independent, wholly-owned subsidiary of the Company and is
headquartered in new facilities in Orlando, Florida.
In January 2002, the Company consolidated the product lines and
development efforts of Baublys and Control Laser to eliminate
duplicative products and efforts, to increase efficiencies, and to
create a unified market presence for the Company's marking operations.
While the subsidiaries remain legally separate entities, with separate
profit and loss responsibility, assembly, operations and selling and
marketing efforts, they will operate under one name, "Baublys-Control
Laser," as though they were one entity with fully staffed operations in
Florida and Germany.
Current Products and Applications
.................................
Marking and Engraving Systems - Baublys-Control Laser
.............................
Baublys-Control Laser designs, manufactures and markets a wide
range of industrial computer controlled laser marking systems,
mechanical marking, 3D engraving and integrated marking systems with
automation.
Baublys-Control Laser is a leading source of mechanical marking and
engraving systems and industrial beam-steered laser marking systems used
for coding, marking, engraving and deep engraving. Baublys-Control
Laser's marking systems produce a high quality, permanent, high speed
mark on most materials. These systems are used for marking part
numbers, serial numbers, lot numbers, date codes, graphics, logos, OCR
codes, barcodes, 2D Matrix codes, schematics and other identification
marks. Baublys-Control Laser serves the aerospace; automotive; coining;
jewelry; consumer/commercial; electronic/semiconductor; medical; mold
and die; packaging; tools and tooling; and trophy and award industries.
Baublys-Control Laser is one of the only suppliers that manufacture its
own electronics, mechanical parts, subassemblies, lasers, laser markers,
software and integrated automation solutions. Integrated automation
solutions include a wide variety of fully automatic, semi-automatic and
manual parts handling systems for most part configurations or materials.
The fully integrated and stand-alone marking systems offer a
comprehensive variety of user-friendly software allowing for seamless
integration into nearly any production process.
The coding, marking, engraving and deep engraving product lines
include multiple versions of the mechanical engraving systems with the
U3232, the U5032 and the BE Marking and Inscriptor Unit. The laser
marking systems include a full product range of CO2 and infrared,
frequency doubled, tripled and quadrupled Nd:YAG and Nd:YLF laser
systems including the Concorde, Icon, Insignia, Aurora, Q-Mark, BL65 and
BL150 deep engraving systems. In 2001, Baublys-Control Laser introduced
new higher speed versions of its marking systems, new multiple galvo
head configurations for simultaneous marking, new versions of the
"InstaMark Graphics Plus" marking software and a wide variety of
industry specific automation and parts handling solutions.
Carbon Dioxide Lasers - Synrad
.....................
Synrad, the Company's subsidiary based in Mukilteo, Washington,
manufactures a range of sealed CO2 lasers for cutting, marking, drilling
and other machining applications for a variety of materials. The CO2
lasers range in power from 10W to 240W. Shipments of Synrad's new
"Firestar" series of sealed CO2 lasers started in September 2001. This
series offers users the choice of higher performance and smaller size,
with output powers from 20W to 100W. In 2002, further developments of
the "Firestar" technology should produce higher power lasers with output
from 200W to 400W+.
Synrad sells primarily to OEMs and system integrators who
incorporate the lasers with suitable motion systems and optical
assemblies and then sell the complete system. Applications include
desktop engraving systems found in many trophy and award shops
throughout the world; large area flatbed systems for cutting dieboard or
airbag material; and 3D prototyping using paper, sintered metals and
other materials to create 3D models and molds directly from CAD
packages. Synrad's lower power lasers are the lasers of choice for the
majority of the CO2 marking and coding systems in use throughout the
world. Higher power lasers also are finding uses in manufacturing
plants for trimming of flashing from injection-molded parts in the
automobile industry, cutting textiles and woven fabrics on continuous
production lines and slitting and sealing of plastic packaging.
Synrad also manufactures FH-series and Tracker-series marking-heads
which when configured with a Synrad laser, provide a fast and effective
method of permanently marking parts with lot codes, serial number/date
information and bar codes. The FH-series "Index" is ideal for
stationary marking applications while "Tracker" features the capability
to mark both moving and stationary parts. Synrad's WinMark software
has been developed specifically for the FH-series marking heads, and is
available in multiple language versions, to run on Windows 95, 98, 2000
and Windows NT. Launched in December 2001, Synrad's FH-series Smart
marking head allows users to build marking systems that can be operated
without a PC.
Scanners - Cambridge
........
Cambridge, the Company's subsidiary based in Cambridge,
Massachusetts, is a market leader in galvanometer based optical
scanners. This technology is critical to a broad and growing community
of laser based system applications. The breadth of laser applications
served by Cambridge's systems include: industrial through consumer
product laser marking; laser machining; heat treating; welding and
cutting; high density via hole PCB drilling for the cell phone industry;
scanning microscopy for genomic DNA research and drug discovery; high
resolution printing and diagnostics for the growing base of laser based
biomedical systems, which include digital radiography and ophthalmology;
semiconductor wafer inspection and processing; laser entertainment; and
corporate advertising.
Cambridge is a recognized technology leader in laser scanning
systems that require the highest accuracy and highest speed beam
steering and positioning for industrial, medical, scientific, military
and academic applications and environments. Its product line of
galvanometer based optical scanners includes Moving Magnetic Optical
Scanners with patented optical and capacitive position detectors, which
are primarily designed for scanning speed and offer superior peak
acceleration. Another principal product line is the patented Moving
Coil Optical Scanner with capacitive position detectors, whose design
was pioneered by Cambridge for the highest scanning accuracy and
repeatability. In addition Cambridge provides complete scanning
subassemblies with servo electronics, optics and mounts.
Photomask Repair Systems - Quantronix
........................
Quantronix, the Company's subsidiary located in East Setauket, New
York, manufactures and markets Defect Repair Systems (DRS), which are
laser-based systems for use in semiconductor photomask production. The
DRS provides a means to repair defects on the complex photomasks used to
produce integrated circuits.
A pioneer in this field, Quantronix has provided laser mask repair
systems to the industry since 1975. The DRS II Model 840e system has
been the industry standard with over 100 installed Quantronix repair
systems in operation.
In recognition of the demand for smaller, denser features on next
generation integrated circuits, Quantronix offers the newest generation
of machines (DRS II Model 855) that support circuit production through
the 0.35 microns, 0.25 microns and 0.18 microns design generations,
promoting product viability in the future.
Scientific and Industrial Solid-State Lasers - Quantronix
............................................
Quantronix also manufactures and markets solid-state lasers for
science, industry and OEM uses. On a worldwide basis, scientific lasers
represent one of the most stable and long-established laser markets.
Chemists, biologists, physicists and engineers use scientific lasers.
In this market, end-users are generally familiar with the various
product specifications, features and reliability, which are the major
factors in choosing between competing products.
Quantronix's current line of scientific products includes the
"Integra RGA", "Integra MPPA", "Titan" and "Odin" Series of Ultrafast
Amplifiers and the Series 527 High Power Green lasers. Quantronix's
Ultrafast Amplifiers incorporate a material called Titanium Sapphire
("Ti:Sapphire"), which has created opportunities for a greater volume of
research than previous materials. Ultrafast Amplifiers deliver high-
energy short pulses on the femtosecond or picosecond time scale. (A
femtosecond is one quadrillionth of a second; a picosecond is one
trillionth of a second.) These short pulses enable the investigation of
a wide range of physical, chemical and biological phenomena.
The scientific systems utilize Nd:YLF lasers to produce high-energy
pulses at a rate of 1kHz (1000 pulses per second). These pulses drive
the Ti:Sapphire Amplifier that can then pump other optical systems such
as optical parametric amplifiers, (also marketed by Quantronix), which
deliver tunable light from ultraviolet to infrared regions of the
spectrum. The material properties to be studied vary over this range.
Quantronix's industrial and OEM solid state lasers offer a variety
of high power lamp and diode pumped Nd:YAG and Nd:YLF lasers, available
in infrared, Green, UV and Deep UV wavelengths, ideal for marking and
micro-machining applications. Quantronix's series of scientific
Ultrafast amplifiers are being utilized for ultra-fine micro-machining
applications. In addition, Quantronix launched a series of high-powered
multi-wavelength diode and lamp-pumped marking systems.
Optical Products - TOC
................
TOC, a subsidiary of the Company based in Oxnard, California,
specializes in the manufacturing of custom precision optical components.
TOC is an industry leader in the manufacturing of flying height test
disks used in the disk drive industry. For more than 20 years, TOC has
provided precision fabrication and coating services to meet demanding
applications.
TOC offers custom optics services which incorporate polishing
optics to extreme flatness (better than 1/20 wave) with low surface
roughness and difficult aspect ratios. TOC provides a complete range of
thin film coatings in the UV-Visible-Near IR. This includes Edge
Filters, Bandpass Filters, Hot Mirrors, Cold Mirrors, Beamsplitters,
Neutral Density Filters, Enhanced Metallics, Polarizers, Broadband
AntiReflection Coatings, V Coats, High Reflectors, Dielectric and
Metallic Mirrors and Scanning Mirrors. The substrates and coated
components are used in various systems such as optical scanners, laser
systems, professional motion picture cameras and a myriad of other
industrial and scientific applications, as well as interferometry and
research and development.
Light and Color Measurement - Photo Research
...........................
Photo Research, the Company's Chatsworth, California subsidiary, is
a world leader and innovator in high precision, state of the art
electro-optical instrumentation and systems. Photo Research has
delivered world-class light and color measurement solutions, serving the
cathode ray tube ("CRT")/flat panel display ("FPD"), automotive,
aerospace, lighting, motion picture, research and development and
related industries for over 60 years.
Photo Research has three main product lines. The "Spectra" product
line offers systems to a wide variety of industries for research,
quality control and on-line testing. This line includes the only truly
portable battery operated Spectroradiometer; the PR-650 fast scanning
SpectraColorimeter. The PR-705/715 SpectraScan complements this line
with an industry first automated aperture wheel with up to six
apertures.
The "Pritchard" line originated with the industry workhorse the PR-
1980 series. The Pritchard is the most widely used photometer in the
world. The newer addition to this series is the PR-880. This is the only
fully automated filter photometer available today. The PR-880 is ideal
for today's automated factory and ATE/OEM environments.
Photo Research developed the first commercially available video
photometer over 15 years ago. In 2001, the newest and most advanced
video photometer, the PR-920 digital video photometer, was introduced to
this product line. Video instrumentation provides high-resolution
inspection of CRT and flat panel displays and instrument panels.
The Photo Research Optical Metrology Laboratory (PROML) is a
supplier of and service provider to optical radiation standards,
calibration and measurement for major manufacturers of instruments,
displays, devices and materials. All Photo Research instruments are
calibrated to NIST-traceable standards.
Photo Research developed many industry standards, such as "Spectra"
Pritchard Optics, utilized in astronomical and star-simulation
measurements. Photo Research is also instrumental in supporting
standards for organizations including VESA, ISO and SAE.
Marketing and Sales
...................
The Company markets its products and services through several media
sources in addition to the presentation of its product lines at domestic
and international trade shows. The marketing and sales staff's efforts
are enhanced by means of presentations and training at conferences,
professional meetings, and through in-person and telephone sales and
support calls. The Company also engages independent manufacturers'
representatives for the sale of its products. Foreign sales of its
products are made primarily through foreign equipment distribution
organizations, by representatives at Excel Europe, its German
subsidiary, and Excel Asia, its Malaysian subsidiary. Excel Europe has
operations near Munich, Germany; Frankfurt, Germany; Ludwigsburg,
Germany and Milan, Italy. Excel Asia has operations in Penang,
Malaysia. These subsidiaries engage in the business of marketing,
distributing, integrating and servicing laser systems (for industrial,
semiconductor, scientific, electronic and medical products) manufactured
at the Company's facilities in East Setauket, New York; Orlando,
Florida; and Mukilteo, Washington. The sales territory covered by Excel
Europe is primarily Europe and the sales territory for Excel Asia is
primarily Southeast Asia. At Excel Europe, the staff of 112 includes 36
engineers who install and service all products including complex
semiconductor, scientific, and other industrial systems. In addition,
Excel Europe provides spare parts for its installed base. Excel Asia
currently has a staff of 9, which includes 4 engineers. Excel Asia
offers sales and support services to semiconductor and electronics
manufacturers, automation houses, universities, research and development
facilities and local consumer manufacturers.
The following table represents a breakdown between the Company's
domestic and foreign revenues for the years ended December 31, 2001,
2000 and 1999 (in thousands of dollars):
2001 2000 1999
................ ................ ................
Dollars Percent Dollars Percent Dollars Percent
....... ....... ........ ....... ....... ........
DOMESTIC $37,225 42% $ 51,611 48% $47,987 54%
FOREIGN 51,267 58% 56,109 52% 40,956 46%
....... ....... ........ ....... ....... ........
TOTAL $88,492 100% $107,720 100% $88,943 100%
....... ....... ........ ....... ....... ........
....... ....... ........ ....... ....... ........
Manufacturing
.............
The Company assembles its products at its facilities in East
Setauket, New York; Orlando, Florida; Oxnard, California; Cambridge,
Massachusetts; Chatsworth, California; Mukilteo, Washington and
Ludwigsburg, Germany. The Company relies upon unaffiliated suppliers
for the material components and parts used to assemble its products.
Most parts and components purchased from suppliers are available from
multiple sources. To date, the Company has not experienced any
significant delays in obtaining parts and components for its products.
The Company believes that it will be able to continue to obtain most
required components and parts from a number of different suppliers,
although there can be no assurance thereof. Lack of availability of
certain components could require major redesign of the products and
could result in production delays.
Warranty and Customer Services
..............................
The Company's warranty for all of its new products varies between
three months and twelve months. The Company also provides field support
services on an individual call basis and through service maintenance
contracts, and provides customer support services by telephone to
customers with operational and service problems.
Research and Development
........................
Due to the intense competition and rapid technological change in
the laser and optical industries, the Company believes that it must
continue to improve and refine its existing products and systems and
develop new applications for its technology. Research and development
expenses for the years ended December 31, 2001, 2000, and 1999 were $9.3
million, $9.5 million, and $7.3 million, respectively.
Competition
...........
The laser industry is subject to intense competition and rapid
technological change. Several of the Company's competitors are
substantially larger and have greater financial and other resources than
the Company. Competition among laser manufacturers extends to
attracting and retaining qualified technical personnel. The overall
competitive position of the Company will depend primarily upon a number
of factors, including the price and performance of its products, the
compatibility of its products with existing laser systems and the
Company's overall reputation in the laser industry.
The Company's scientific and industrial solid state lasers face a
number of competitors including Spectra Physics and Coherent Inc., which
are two of the largest solid-state laser companies.
The Company's marking/engraving systems compete primarily with
those manufactured by Rofin-Baasel, Electrox, Alltec, Foba and Trumpf.
These products have generally been subject to intense price competition
in recent years.
In the semiconductor photomask repair market, the Company primarily
competes with NEC, Seiko and Micrion. The market for semiconductor
products recently has been over-saturated and has experienced rapid
advances in miniaturization of integrated circuits and computers. These
factors are behind the Company's commitment to continue developing its
next generation mask repair products.
Competition for sealed carbon dioxide lasers comes from Coherent,
Inc., DEOS, Inc., Spectron and Universal Laser Systems. In 2001,
Coherent purchased the assets of DEOS, and created Coherent-DEOS.
Rofin-Sinar, a large European manufacturer of industrial lasers, also
has competitive products in the 100 - 300W range.
In light and color measurement, the major competitor to the
Company's Spectra product is Minolta. Topcon is the prime competitor to
the Pritchard line. In video-based products, the company's video
photometer is utilized to characterize new display technologies, with
Microvision as its key competitor.
In the optical scanner market, GSI-Lumonics, is a significant
competitor of the Company.
Backlog
.......
As of December 31, 2001, the Company had a backlog of firm orders
of approximately $23.6 million as compared to a backlog of $28.5 million
as of December 31, 2000. The Company believes that the current backlog
will be filled during the present fiscal year. Historically, backlog is
shipped within 90 days from the order date.
Patents and Licenses
....................
The Company has several United States patents covering a wide
variety of its products and has applications pending in the United
States patent office. There can be no assurance that any other patents
will be issued to the Company or that such patents, if and when issued,
will provide any protection or benefit to the Company. Although the
Company believes that its patents and its pending patent applications
are valuable, the Company does not consider the ownership of patents
essential to its business. The Company believes that, in general, the
best protection of proprietary technology in the laser industry will
come from market position, technical innovation and product performance.
There is no assurance that the Company will realize any of these
advantages.
Government Regulation
.....................
The Company is subject to the laser radiation safety regulations of
the Radiation Control for Health and Safety Act administered by the
National Center for Devices and Radiological Health of the FDA. Among
other things, these regulations require a laser manufacturer to file new
product and annual reports, to maintain quality control and sales
records, to perform product testing, to distribute appropriate operating
manuals, to incorporate certain design and operating features in lasers
sold to end-users and to certify and label each laser sold to end-users
as one of four classes (based on the level of radiation from the laser
that is accessible to users). Various warning labels must be affixed
and certain protective devices installed depending on the class of
product. The National Center for Devices and Radiological Health is
empowered to seek fines and other remedies for violations of the
regulatory requirements. The Company believes that it is currently in
compliance with these regulations.
The FDA also imposes various requirements on manufacturers and
sellers of products under its jurisdiction, such as labeling,
manufacturing practices, record keeping and reporting requirements. The
FDA also may require post-market testing and surveillance programs to
monitor a product's effects. There can be no assurance that the
appropriate approvals from the FDA will be granted, that the process to
obtain such approvals will not be excessively expensive or lengthy or
that the Company will have sufficient funds to pursue such approvals at
the time they are sought. The failure to receive requisite approvals
for the Company's products or processes, when and if developed, or
significant delays in obtaining such approvals, would prevent the
Company from commercializing its products as anticipated and would have
a materially adverse effect on the business of the Company.
Employees
.........
As of December 31, 2001, the Company had 510 full-time employees
consisting of: 2 executive officers; 15 subsidiary executive officers;
177 scientists, engineering and technical personnel; and 314
manufacturing, administrative and sales support personnel. The Company
believes that its relations with its employees are satisfactory. A
union represents none of the Company's employees.
Financial Information About Foreign and
.......................................
Domestic Operations and Export Sales
....................................
Net sales and services to customers in the domestic U.S. amounted
to approximately $37.2 million, $51.6 million and $48.0 million for the
years ended December 31, 2001, 2000, and 1999, respectively.
For the years ended December 31, 2001, 2000, and 1999, the Company
had net sales and services to customers in foreign countries amounting
to approximately $51.3 million, $56.1 million, and $41.0 million,
respectively (approximately 58%, 52%, and 46% of total net sales and
services, respectively). These sales included sales by Excel Europe and
Excel Asia, the Company's foreign subsidiaries. Excel Europe buys laser
systems, spare parts and related consumable materials from Quantronix,
Baublys-Control Laser and Synrad for resale to European and other
foreign customers, and also furnishes field repair services. Excel Asia
primarily engages in the business of marketing, selling, distributing,
integrating and servicing Quantronix and Baublys-Control Laser products
in Southeast Asia. See Note 14 of the "Notes to Consolidated Financial
Statements."
Long-lived assets held by Excel Europe at December 31, 2001, 2000
and 1999 include property, plant and equipment whose carrying amounts
were approximately $596 thousand, $580 thousand and $322 thousand,
respectively. Long-lived assets held by Excel Asia at December 31, 2001
and 2000 include property, plant and equipment whose carrying amounts
were approximately $241 thousand and $202 thousand, respectively.
Safe Harbor For Forward-Looking Statements Under the
....................................................
Securities Litigation Reform Act of 1995; Risk Factors
......................................................
This Annual Report on Form 10-K and the other reports, releases, and
statements (both written and oral) issued by the Company and its officers
from time to time may contain statements concerning the Company's future
results, future performance, intentions, objectives, plans, and
expectations that are deemed to be "forward-looking statements." Such
statements are made in reliance upon safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results,
performance, and achievements may differ significantly from those
discussed or implied in the forward-looking statements as a result of a
number of known and unknown risks and uncertainties including, without
limitation, those discussed below and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In light of
the significant uncertainties inherent in such forward-looking statements,
the inclusion of such statements should not be regarded as a
representation by the Company or any other person that the Company's
objectives and plans will be achieved. Words such as "believes,"
"anticipates," "expects," "intends," "may," and similar expressions are
intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. The Company undertakes no
obligation to revise any of these forward-looking statements.
Sometimes the Company communicates with securities analysts. It is
against the Company's policy to disclose to analysts any material non-
public information or other confidential commercial information. You
should not assume that the Company agrees with any statement or report
issued by any analyst regardless of the content of the statement or
report. The Company has a policy against issuing financial forecasts or
projections or confirming the accuracy of forecasts or projections
issued by others. If reports issued by securities analysts contain
projections, forecasts or opinions, those reports are not the
responsibility of the Company.
The risks presented below may not be all of the risks the Company
may face. These are the factors that the Company believes could cause
actual results to be different from expected and historical results.
Other sections of this report include additional factors that could have
an effect on the Company's business and financial performance. The
industry that the Company competes in is very competitive and changes
rapidly. Sometimes new risks emerge and management may not be able to
predict all of them, or be able to predict how they may cause actual
results to be different from those contained in any forward-looking
statements. You should not rely upon forward-looking statements as a
prediction of future results.
Uncertain Market Acceptance. The Company's overall marketing
objective is to strengthen its presence in existing markets, and
establish its market presence in other industrial markets. With any
technology, there is the substantial risk that the market may not
appreciate the benefits or recognize the potential applications of the
technology. Market acceptance of the Company's products will depend, in
large part, upon the ability of the Company to demonstrate the potential
advantages of its products over products manufactured by other
companies. There can be no assurance that the Company will be able to
achieve all or any of its marketing objectives, or that the Company's
products will be accepted in their intended marketplaces on any
significant basis.
Intense Competition. The laser and electro-optical component
industry generally is subject to intense competition. The Company's
current and proposed products compete with existing and proposed
products marketed by other manufacturers. Some of the Company's
competitors are substantially larger in size and have substantially
greater financial, managerial, technical and other resources than the
Company. There can be no assurance that the Company will successfully
differentiate its current and proposed products from the products of its
competitors or that the marketplace will consider the Company's products
to be superior to competing products.
Technological Obsolescence. The laser and electro-optical
component industry is characterized by extensive research and rapid
technological change. The development by others of new or improved
products, processes or technologies may make the Company's current or
proposed products obsolete or less competitive.
Compliance with Government Regulations. The Company currently is
subject to the laser radiation safety regulations of the Radiation
Control for Health and Safety Act administered by the National Center
for Devices and Radiological Health of the United States Food and Drug
Administration (the "FDA"). The National Center for Devices and
Radiological Health is empowered to seek fines and other remedies for
violations of these regulatory requirements.
Patent Protection. The Company's ability to effectively compete
may depend upon the proprietary nature of its technologies. The Company
owns several patents and has other applications pending. The Company
expects to file additional patent applications in the future. There can
be no assurance, however, that other companies are not investigating or
developing other technologies that are similar to the Company's
technologies, or that any additional patents will be issued to the
Company or that such patents will afford the Company sufficiently broad
patent coverage to provide any significant deterrent to competitive
products. Even if a competitor's products were to infringe products
owned by the Company, it could be very costly for the Company to enforce
its rights in an infringement action. The validity and enforceability
of such patents may be significant to the Company and may be important
to the success of the Company. The Company, however, believes that the
best protection of proprietary technology in the laser industry comes
from market position, technical innovation and product performance.
There can be no assurance that any of these will be realized or
maintained by the Company.
The Company has obtained licenses under certain patents covering
lasers and related technology incorporated into the Company's products.
However, there may be other patents covering the Company's current or
proposed products. If valid patents are infringed, the patent owner
will be able to prevent the future use, sale and manufacture of the
subject products by the Company and also will be entitled to damages for
past infringement. Alternatively, the Company may be required to pay
damages for past infringement and license fees or royalties on future
sales of the infringing components of its systems. Infringement of any
patents also may render the Company liable to purchasers and end-users
of the infringing products. If a patent infringement claim is asserted
against the Company, then, whether or not the Company is successful in
defending such claim, the defense of such claim may be very costly.
While the Company is unable to predict what such costs, if any, will be
incurred if the Company is obligated to devote substantial financial or
management resources to patent litigation, its ability to fund its
operations and to pursue its business goals may be substantially
impaired.
Dependence on Suppliers. The Company relies on outside suppliers
for all of its manufacturing supplies, parts and components. Most parts
and components used by the Company currently are available from multiple
sources. There can be no assurance that, in the future, its current or
alternative sources will be able to meet all of the Company's demands on
a timely basis. Unavailability of necessary parts or components could
require the Company to re-engineer its products to accommodate available
substitutions which would increase costs to the Company and/or have a
material adverse effect on manufacturing schedules, product performance
and market acceptance.
Dependence on Resellers, Distributors and OEMs. The Company sells
some of its products through resellers, distributors and original
equipment manufacturers. Reliance upon third party distribution sources
subjects the Company to risks of business failure by these individual
resellers, distributors and OEMs, and credit, inventory and business
concentration risks.
Dependence on Foreign Sales. A significant amount of the Company's
product sales are made to customers outside the United States. These
sales are subject to the normal risks of foreign operations, such as:
Currency fluctuations
Protective tariffs
Trade barriers and export/import controls
Transportation delays and interruptions
Reduced protection for intellectual property rights in some
countries
The impact of recessionary foreign economies
Long receivable collection periods
The Company cannot predict whether the United States or any other
country will impose new quotas, tariffs, taxes or other trade barriers
upon the importation of the Company's products or supplies or to gauge
the effect that new barriers would have on its financial position or
results of operations.
Manufacturing. The Company assembles its products at its various
facilities in the United States and Germany. If use of any of the
Company's manufacturing facilities were interrupted by natural disaster
or otherwise, the Company's operations could be negatively affected
until the Company could establish alternative production and service
operations. In addition, the Company may experience production
difficulties and product delivery delays in the future as a result of:
Changing process technologies
Ramping production
Installing new equipment at its manufacturing facilities
Shortage of key components
Financial Performance. The Company's operating results may vary in
the future as a result of a number of factors, including:
Changes in technology
New competition
Economic conditions
Customer demand
A shift in the mix of the Company's products
A shift in sales channels
The market acceptance of new or enhanced versions of the
Company's products
The timing of introduction of other products and technologies
Any associated charges to earnings
Any cancellation or postponement of orders
Research and Development. The Company is active in research and
development of new products and technologies. The Company's research
and development efforts may not lead to the successful introduction of
new or improved products. The Company may encounter delays or problems
in connection with its research and development efforts. New products
often take longer to develop, have fewer features than originally
considered desirable and achieve higher cost targets than initially
estimated. There may be delays in starting volume production of new
products and new products may not be commercially successful. Products
under development are often announced before introduction and these
announcements may cause customers to delay purchases of existing
products until the new or improved versions of those products are
available. Delays or deficiencies in development manufacturing,
delivery of or demand for new products or of higher cost targets could
have a negative affect on the Company's business, operating results or
financial condition.
Acquisitions. The Company has in the past and may in the future
acquire businesses or product lines as a way of expanding its product
offerings and acquiring new technology. If the Company does not
identify future acquisition opportunities and/or integrate businesses
that it may acquire effectively, the Company's growth may be negatively
affected.
ITEM 2. PROPERTIES
United States
.............
East Setauket, New York
.......................
In August 2001, a 32,000 square foot expansion was completed. The
building is now approximately 65,000 square feet. The facility is for
manufacturing operations, administrative offices, research and
development, engineering and laser applications. CSI will partially
operate from this expanded facility. In February 2001, the Company
terminated its lease in New York City and relocated its corporate
offices to this facility, where it occupies approximately 7,000 square
feet.
Orlando, Florida
................
Baubyls-Control Laser completed the building of its own 78,000
square foot facility and relocated to the new building in December 2001.
The new facility will be utilized for administrative offices and laser
manufacturing operations. CSI is headquartered at and operates from
this facility. Prior to the completion of the new building, Baubyls-
Control Laser leased a 50,000 square foot building in Orlando, Florida
from an unaffiliated landlord. Annual rent was approximately $263
thousand. The lease expired in December 2001.
Oxnard, California
..................
Optical leases a 14,000 square foot building in Oxnard, California
from an unaffiliated landlord for manufacturing purposes, at an annual
rent of approximately $88 thousand. The lease term expires in August
2009.
Cambridge, Massachusetts
........................
Cambridge leases a 17,000 square foot building in Cambridge,
Massachusetts from an unaffiliated landlord for manufacturing operations
and administrative offices. The lease is for a ten-year period ending
in October 2006, at an annual rent of approximately $155 thousand
through October 2003 and $175 thousand from November 2003 through
October 2006.
Chatsworth, California
......................
Photo Research purchased its own building in July 1998. The
building is approximately 22,000 square feet and is located in
Chatsworth, California. The building is used for manufacturing
operations and administrative offices.
Mukilteo, Washington
....................
Synrad occupied a 50,000 square foot facility, in Mukilteo,
Washington, under a five-year lease agreement with an unaffiliated
landlord, which terminated in May 2001. The lease was extended until
December 2001 in order to allow time for the completion of its own
63,000 square foot facility, also located in Mukilteo, Washington. Rent
paid in 2001 was approximately $1.2 million, which included a large
premium increase due to the extension of the lease. In December 2001,
the building was completed and Synrad relocated its administrative
offices and manufacturing operations to the new facility.
Europe
......
Darmstadt, Germany
..................
The main office of Excel Europe and its division Quantronix Europe
is located in Darmstadt, Germany and is approximately 6,300 square feet
of office space, used for sales, marketing and services. The facility
is leased from an unaffiliated landlord at an average annual rent of
approximately $103 thousand. The lease expires in May 2005.
Munich, Germany
...............
This Excel Europe satellite office located near Munich in
Fuerstenfeldbruck, Germany serves as Synrad Europe's sales, marketing
and service operation. The office occupies approximately 3,150 square
feet of space. The facility is leased from an unaffiliated landlord, at
an average annual rent of approximately $33 thousand. The lease expires
in February 2005.
Ludwigsburg, Germany
....................
Baublys-Control Laser operates out of a 22,500 square foot facility
located in Ludwigsburg, Germany, which houses its sales and marketing,
research and development, manufacturing and services facility and
executive offices. The facility is leased from an unaffiliated landlord
at an average annual rent of approximately $131 thousand. The lease
expires in June 2007.
Milan, Italy
............
Excel Europe also maintains a sales and service office in Monza,
Italy, located outside of Milan. The lease provides approximately 1,000
square feet of office space from an unaffiliated landlord at an
approximate annual rent of $10 thousand.
Asia
....
Penang, Malaysia
................
Excel Asia leases a 7,500 square foot facility in Penang Free
Industrial Zone, Penang, Malaysia, from an unaffiliated landlord. The
building is utilized as a regional operations hub which houses the
administrative offices, the light repair and integration services,
technical and support offices, as well as applications laboratories for
regional support. The annual rent is approximately $34 thousand. The
lease expires in December 2002.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company has disputes that arise in the
ordinary course of its business. Currently, there are no material legal
proceedings to which the Company or its subsidiaries are party to or to
which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
.......
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock trades on the NASDAQ National Market
System under the symbol "XLTC." The following table sets forth the high
and low closing sales prices reported on the NASDAQ for the Common Stock
for the periods indicated.
Year ended: High Low
.......... ...... .....
December 31, 2001
First Quarter $27.50 $16.25
Second Quarter $25.54 $17.31
Third Quarter $22.89 $14.05
Fourth Quarter $19.00 $15.18
December 31, 2000
First Quarter $36.38 $16.13
Second Quarter $50.31 $25.25
Third Quarter $49.38 $30.56
Fourth Quarter $31.13 $18.13
As of March 20, 2002, there were approximately 784 holders of
record of the Common Stock.
The Company has never paid cash dividends on its Common Stock.
Payment of dividends to holders of the Common Stock is within the
discretion of the Company's Board of Directors and will depend, among
other factors, on earnings, capital requirements and the operating and
financial condition of the Company. At the present time, the Company's
anticipated capital requirements are such that it intends to follow a
policy of retaining its earnings, if any, in order to finance the
development of its business.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated statement of operations data for the
years ended December 31, 2001, 2000 and 1999, and the consolidated
balance sheet data as of December 31, 2001 and 2000, have been derived
from the Company's audited consolidated financial statements included
elsewhere in this Annual Report on Form 10-K. The selected consolidated
statement of operations data for the years ended December 31, 1998 and
1997, and the selected consolidated balance sheet data as of December
31, 1999, 1998 and 1997, are derived from the Company's audited
consolidated financial statements which are not included in this Annual
Report on Form 10-K.
The following tables summarize (in thousands, except per share
data) the Company's consolidated statement of operations and balance
sheet data. You should read this information together with the
discussion in "Management's Discussion and Analysis of Financial
Condition and Result of Operations" and the Company's consolidated
financial statements and notes to those statements included elsewhere in
this Annual Report on Form 10-K.
Statement of Operations Data
Year Ended December 31,
......................................................
2001 2000 1999 1998 1997
.......... .......... .......... .......... ..........
Net sales and
services $88,492 $107,720 $ 88,943 $ 67,092 $ 65,948
Net earnings $ 5,938 $ 15,651 $ 11,552 $ 8,881 $ 8,235
Net earnings
per share
Basic $0.50 $1.35 $1.04 $0.79 $0.77
Diluted $0.50 $1.30 $1.00 $0.78 $0.73
Weighted average
common and common
equivalent shares
outstanding
Basic 11,761,911 11,597,102 11,118,782 11,190,197 10,686,763
Diluted 11,977,848 12,054,176 11,608,266 11,395,186 11,327,086
Balance Sheet Data
As of December 31,
......................................................
2001 2000 1999 1998 1997
.......... .......... .......... .......... ..........
Total assets $ 102,505 $ 98,986 $ 79,651 $ 71,293 $ 59,220
Total liabilities $ 10,907 $ 12,544 $ 10,649 $ 14,141 $ 8,317
Working capital $ 42,695 $ 48,584 $ 35,199 $ 25,577 $ 37,167
Stockholders'
equity $ 91,598 $ 86,442 $ 69,001 $ 57,152 $ 50,903
Long-term
liabilities $ 0 $ 0 $ 0 $ 3,500 $ 0
Refer to Item 1 "Business" and Item 8 "Financial Statements and
Supplementary Data" for additional information affecting the
comparability of amounts above.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
.......
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and notes thereto set
forth in Item 8.
Critical Accounting Policies and Estimates
..........................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations discusses the Company's consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of
these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management
evaluates its estimates and judgments, including those related to bad
debts, inventories and income taxes. Management bases its estimates and
judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
Management believes the following critical accounting policies,
among others, affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements.
The Company is required to estimate the collectibility of its trade
receivables. A considerable amount of judgment is required in assessing
the ultimate realization of these receivables including the current
credit-worthiness of each customer. The Company maintains allowances
for doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments. If the financial condition
of the Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may
be required. The collectibility of accounts receivable is evaluated
based on a combination of factors. In circumstances where the Company
is aware of a specific customer's inability to meet its financial
obligations (e.g., bankruptcy filings), a specific reserve for bad debts
is recorded against amounts due, to reduce the net recognized receivable
to the amount the Company reasonably believes will be collected. For
all other customers, we have created approximately a 4.4% general
reserve for bad debt based upon the total accounts receivable balance.
We believe that is a reasonably conservative reserve, as write offs were
less than 3% for each of the proceeding three years. In addition, we
deem the 4.4% general reserve may be necessary due to the change in
economic conditions. If circumstances change (i.e., higher than
expected defaults or an unexpected material adverse change in a major
customer's ability to meet its financial obligations to us), our
estimates of the recoverability of amounts due us could be reduced by a
material amount.
On a quarterly basis, the Company compares the amount of the
inventory on hand and under commitment with its latest forecasted
requirements to determine whether write-downs for excess or obsolete
inventory are required. Although the writedowns for excess or obsolete
inventory reflected in the Company's consolidated balance sheet at
December 31, 2001 and 2000 are considered adequate by the Company's
management, there can be no assurance that these writedowns will prove
to be adequate over time to cover ultimate losses in connection with the
Company's inventory. At December 31, 2001, the Company had only one
product, the photomask repair system, with a carrying value making up
more than 5.0% of the total inventory. In December 2001, the Company
had an inventory write down of approximately $1 million, which was
largely related to a specific vendor part where reliability was an
issue. In addition the marking operations of Baublys GmbH and Control
Laser Corporation were merged, which also resulted in inventory write
offs of approximately $350 thousand.
The Company records a valuation allowance to reduce its deferred
tax assets to the amount that it believes is more likely than not to be
realized. While the Company has considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the
need for the valuation allowance, in the event the Company were to
determine that it would not be able to realize all or part of its net
deferred tax assets in the future, an adjustment to the deferred tax
assets would be charged to income in the period such determination was
made. Likewise, should the Company determine that it would be able to
realize its deferred tax assets in the future in excess of its net
recorded amount, an adjustment to the deferred tax assets would increase
income in the period such determination was made. As of December 31,
2001, the Company has approximately $1.7 million of net deferred tax
assets related principally to domestic and foreign loss carryforwards
and inventory reserves. Should the pretax book income and taxable
income be considerably lower than projected, an increase to the
valuation allowance may be required.
The following table presents consolidated financial data for the
years ended December 31, 2001, 2000 and 1999 (in thousands of dollars
and as a percentage of total net sales and services).
Results of Operations
.....................
2001 2000 1999
............... ................ ...............
Dollars Percent Dollars Percent Dollars Percent
....... ....... ........ ....... ....... .......
Net Sales and
Services $88,492 100.0% $107,720 100.0% $88,943 100.0%
Cost of Sales 50,518 57.1% 53,065 49.3% 44,682 50.2%
....... ....... ........ ....... ....... .......
Gross Profit/
Margin 37,974 42.9% 54,655 50.7% 44,261 49.8%
Operating Expenses:
Selling and
Marketing 11,553 13.1% 12,689 11.8% 11,936 13.4%
General and
Administrative 7,066 8.0% 7,930 7.3% 6,645 7.5%
Research and
Development 9,293 10.5% 9,547 8.9% 7,294 8.2%
Amortization of
Goodwill 1,459 1.6% 1,337 1.2% 1,219 1.4%
....... ....... ........ ....... ....... .......
Earnings from
Operations 8,603 9.7% 23,152 21.5% 17,167 19.3%
Non-Operating
Expense (Income) (573) (0.7%) (803) (0.7%) (73) (0.1%)
....... ....... ........ ....... ....... .......
Earnings before
Provision for
Income Taxes 9,176 10.4% 23,955 22.2% 17,240 19.4%
Provision for
Income Taxes 3,238 3.7% 8,304 7.7% 5,688 6.4%
....... ....... ........ ....... ....... .......
Net Earnings $ 5,938 6.7% $ 15,651 14.5% $11,552 13.0%
....... ....... ........ ....... ....... .......
....... ....... ........ ....... ....... .......
Net Sales and Services
.......................
Net sales and services for the year ended December 31, 2001
decreased to $88.5 million from $107.7 million in 2000 and $88.9 million
in 1999. The decrease from 2000 to 2001 of $19.2 or 17.9% was primarily
attributable to decreases in sales of marking systems, scanners, DRS
systems and CO2 lasers. A large percentage of the reduction in sales
was due to a global economic recession, which has reduced demand for
most technological and capital equipment products. The increase from
1999 to 2000 of $18.8 million or 21.1% was primarily attributable to
Excel Europe's acquisition of Baublys and increases in sales and
services across most of the Company's product lines.
Gross Margins and Cost of Sales
...............................
Gross margins as a percentage of sales were 42.9% compared to 50.7%
in 2000 and 49.8% in 1999. Cost of sales and services decreased to
$50.5 million from $53.1 million in 2000, which was an increase from
$44.7 million in 1999. The decrease in gross margins as a percentage of
sales from 2000 to 2001 was due to an inventory write down of
approximately $1 million, which was largely related to a specific vendor
part where reliability was an issue. In addition, the marking
operations of Baublys-Control Laser were merged, which also resulted in
inventory write offs of approximately $350 thousand. The increase in
gross margins as a percentage of sales from 1999 to 2000 was
attributable to the product mix and the increased sales volume during
the periods in comparison. Product margins vary from direct sales to
distributor sales and also vary from product to product. The Company
offers more than 250 product configurations.
Operating Expenses
..................
Selling and Marketing
Selling and marketing expenses were $11.6 million in 2001 compared
to $12.7 million in 2000 and $11.9 million in 1999. The decrease of
$1.1 million or 9.0% from 2000 to 2001 was primarily attributable to
lower variable costs such as commissions associated with the lower sales
volume. The increase of $753 thousand or 6.3% from 1999 to 2000 was
primarily attributable to the increased sales due to the acquisition of
Baublys. Selling and marketing expenses as a percentage of sales were
13.1% in 2001, 11.8% in 2000 and 13.4% in 1999. The changes in selling
and marketing expenses as a percentage of sales are primarily
attributable to fixed costs being absorbed by varying sales volumes.
General and Administrative
General and administrative expenses were $7.1 million in 2001 as
compared to $7.9 million in 2000 and $6.6 million in 1999. The decrease
of $863 thousand or 10.9% from 2000 to 2001 was primarily due to
decreased bonus expense associated with lower operating income in 2001.
The increase of $1.3 million or 19.3% from 1999 to 2000 was primarily
due to additional administrative costs associated with the acquisition
of Baublys and higher bonus expenses, which are tied to increased
profitability. General and administrative expenses as a percentage of
sales increased to 8.0% as compared to 7.3% in 2000 and 7.5% in 1999.
Research and Development
Research and development costs for the year ended December 31, 2001
were $9.3 million as compared to $9.5 million and $7.3 million for the
years ended December 31, 2000 and 1999, respectively. The decrease of
$255 thousand or 2.7% from 2000 to 2001 was primarily attributable to
reduced research and development material costs during 2001. The
increase of $2.3 million or 30.9% from 1999 to 2000 was primarily due to
research and development expenses incurred on product development at
Baublys and increased investments in research and development for all
product groups.
Amortization of Goodwill
The amortization of goodwill of $1.5 million, $1.3 million, and
$1.2 million for the years ended December 31, 2001, 2000, and 1999,
respectively, was a result of the acquisitions of Quantronix in October
1992, Cambridge in February 1995, Photo Research in October 1995, Synrad
in August 1999 and Baublys in July 2000. The increase of $122 thousand
or 9.1% from 2000 to 2001 was primarily due to a full year of
amortization of goodwill recorded in connection with the acquisition of
Baublys. The increase of $118 thousand or 9.7% from 1999 to 2000 was
primarily due to amortization of goodwill recorded in connection with
the acquisition of Baublys.
Other Income/Expense
Interest expense was $30 thousand, $18 thousand and $47 thousand
for the years ended December 31, 2001, 2000 and 1999, respectively.
Interest expense increased by $12 thousand in 2001 due to short-term
borrowing by the European subsidiary during the year, all of which was
paid by December 31, 2001. Interest expense decreased $29 thousand in
2000 as a result of the prepayment of the loan associated with the
acquisition of Synrad.
The decrease in interest income from $998 thousand in 2000 to $679
thousand in 2001 was due to reduced effective interest rates during the
year and decreased average investable cash balances. Balances were
lower due to the funding for new buildings of approximately $12.4
million during the year ended December 31, 2001. The increase in
interest income from $335 thousand in 1999 to $998 thousand in 2000 was
due to increased average cash balances.
Other income/expense for the year ended December 31, 2001 was $75
thousand of expense compared to $178 thousand of expense in 2000 and
$214 thousand of expense in 1999. The expense in 2001 was primarily for
miscellaneous non-operating expenses. The expenses in 2000 and 1999
were due primarily to foreign exchange losses.
Provision for Income Taxes
The provision for income taxes decreased $5.1 million or 61.0% from
$8.3 million in the year ended December 31, 2000 to $3.2 million for the
year ended December 31, 2001. The decrease is primarily attributable to
lower taxable earnings in the year ended December 31, 2001. Higher
taxable earnings are the primary reason for the increase in the
provision for income taxes of $2.6 million or 46.0% to $8.3 million for
the year ended December 31, 2000 from $5.7 million for the year ended
December 31, 1999.
Liquidity and Capital Resources
...............................
At December 31, 2001, the Company had working capital of $42.7
million, including cash and equivalents of $16.2 million, compared to
working capital of $48.6 million, including cash and equivalents of
$19.0 million, at December 31, 2000. The decrease in working capital
resulted primarily from the funding of operations and capital
expenditures.
Net cash provided by operating activities of $12.7 million for the
year ended December 31, 2001 was primarily attributable to net income,
non-cash charges of depreciation and amortization and working capital
changes comprised primarily of decreases in accounts receivable, accrued
expenses and other current liabilities.
Net cash used in investing activities of $15.5 million for the year
ended December 31, 2001 was due to capital expenditures, which included
payment for the construction of the building for Synrad, Baublys-Control
Laser and expansion of the Quantronix facilities. The Company had
capital expenditures of approximately $3.9 million for the year ended
December 31, 2000, which included the purchase of land for Synrad's new
building. The Company anticipates spending approximately $5.0 million
for capital expenditures in 2002, which includes payment of the
remaining balances for construction and expansion of facilities.
Net cash provided by financing activities was $14,345 for the year
ended December 31, 2001, resulting primarily from the net proceeds
received upon the exercise of employee stock options.
The Company has a credit facility with The Bank of New York (the
"Bank") that provides the Company with a $15 million revolving line of
credit for acquisitions or working capital requirements. The term of
this agreement is for five years, maturing on July 22, 2003. This
credit facility allows for interest to be calculated utilizing an
Alternative Base Rate ("ABR") or a LIBOR rate plus a premium ranging
from 0.50% to 2.25%. The ABR is the higher rate of the prime rate or
the Federal Funds Rate plus 0.50%. As of December 31, 2001, the Company
had no borrowings.
The Company intends to continue to invest in support of its growth
strategy. These investments include retain and acquire new customers,
expand its current product offerings and further develop operating
infrastructure. The Company believes that current cash and equivalents
will be sufficient to meet these anticipated cash needs for at least the
next twelve months. However, any projection of future cash needs and
cash flows are subject to substantial uncertainty. In addition, the
Company will, from time to time, consider the acquisition of, or
investment in, complementary businesses, products, services and
technologies, which might impact the Company's liquidity requirements.
Selected Quarterly Financial Data
.................................
Unaudited quarterly financial data (in thousands, except per share
amounts) for 2001 and 2000 is summarized as follows:
FISCAL 2001 FISCAL 2000
................................................. ....................................................
Q1 Q2 Q3 Q4 YEAR Q1 Q2 Q3 Q4 YEAR
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Net sales and services $ 24,795 $ 23,949 $ 21,564 $ 18,184 $88,492 $ 26,501 $ 26,358 $ 29,344 $ 25,517 $107,720
Cost of sales and services 12,880 12,656 12,489 12,493 50,518 13,073 12,621 14,614 12,757 53,065
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Gross profit 11,915 11,293 9,075 5,691 37,974 13,428 13,737 14,730 12,760 54,655
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Operating expenses:
Selling and marketing 2,985 3,353 2,836 2,379 11,553 3,269 3,049 3,436 2,935 12,689
General and
administrative 1,875 1,833 1,563 1,795 7,066 1,968 2,030 2,040 1,892 7,930
Research and development 2,360 2,228 2,329 2,376 9,293 2,356 2,341 2,543 2,307 9,547
Amortization of goodwill 365 363 362 369 1,459 307 307 362 361 1,337
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
7,585 7,777 7,090 6,919 29,371 7,900 7,727 8,381 7,495 31,503
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Earnings (loss) from
operations 4,330 3,516 1,985 (1,228) 8,603 5,528 6,010 6,349 5,265 23,152
Non-operating expenses
(income):
Interest expense 12 0 2 16 30 1 2 7 8 18
Interest income (266) (184) (139) (90) (679) (184) (262) (273) (280) (999)
Other expense
(income),net (13) 31 21 37 76 14 20 99 45 178
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Earnings (loss) before
provision for
income taxes 4,597 3,669 2,101 (1,191) 9,176 5,697 6,250 6,516 5,492 23,955
Provision (benefit)
for income taxes 1,632 1,295 718 (407) 3,238 1,937 2,125 2,302 1,940 8,304
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Net earnings (loss) $ 2,965 $ 2,374 $ 1,383 $ (784) $ 5,938 $ 3,760 $ 4,125 $ 4,214 $ 3,552 $ 15,651
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Basic earnings (loss) per
common share $ 0.25 $ 0.20 $ 0.12 $ (0.07) $ 0.50 $ 0.33 $ 0.36 $ 0.36 $ 0.30 $ 1.35
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Weighted average common
shares outstanding 11,760 11,761 11,763 11,764 11,762 11,333 11,552 11,744 11,756 11,597
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Diluted earnings (loss)
per common share $ 0.25 $ 0.20 $ 0.12 $ (0.07) $ 0.50 $ 0.32 $ 0.34 $ 0.35 $ 0.30 $ 1.30
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Weighted average common
and common equivalent
shares outstanding 11,991 11,993 11,978 11,764 11,978 11,914 12,102 12,180 11,997 12,054
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
........ ........ ........ ........ ....... ........ ........ ........ ........ ........
Euro Conversion
...............
The January 1, 1999 adoption of the Euro created a single-currency
market as of January 1, 2002 in much of Europe. The Company does not
anticipate that its operations will be materially adversely affected by
the conversion to the Euro. The Company has analyzed the impact of
conversion to the Euro on its existing systems and operations and
implemented modifications to its systems to enable the Company to handle
Euro or DEM invoicing for transactions commencing in 1999 and Euro
invoicing for transactions commencing in 2002. The Company anticipates
that the cost of such modifications should not have a material adverse
effect on its results of operations or liquidity.
Inflation
.........
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The principal market risks (i.e. the risk of loss arising from
adverse changes in market rates and prices) to which the Company is
exposed are interest rates on demand deposits with banks and money
market funds and exchange rates, generating translation and transaction
gains and losses.
Interest Rates
..............
The Company manages its cash and investment portfolios considering
investment opportunities and risks, tax consequences and overall
financing strategies. The Company's investment portfolios consist
primarily of cash and equivalents, with carrying amounts approximating
market value. Assuming year-end 2001 variable cash and investment
levels, a one-point change in interest rates would not have a material
impact on interest income.
Foreign Exchange Rates
......................
Operating in international markets involves exposure to movements
in currency exchange rates which are volatile at times. The economic
impact of currency exchange rate movements on the Company is complex
because such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other factors.
These changes, if material, could cause the Company to adjust its
financing and operating strategies. Consequently, isolating the effect
of changes in currency does not incorporate these other important
economic factors.
The Company's net sales and services to foreign customers
represented approximately 58% of total net sales and services in 2001,
52% in 2000 and 46% in 1999. The Company expects net sales and services
to foreign customers will continue to represent a large percentage of
its total net sales and services. The Company's net sales and services
denominated in foreign currencies represented approximately 24% of its
total net sales and services in 2001, 15% in 2000 and 8% in 1999. The
Company generally has not engaged in foreign currency hedging
transactions. The aggregate foreign exchange gains and (losses)
included in determining consolidated results of operations were $(7)
thousand, $(177) thousand and $(227) thousand in 2001, 2000 and 1999,
respectively.
The change in the Euro has the largest impact on the Company's
operating profits. The Company estimates that a 10% change in foreign
exchange rates would not materially impact reported operating profits.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements and supplementary data follow on
pages 21 to 39.
EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and
Financial Statement Schedule filed with the Annual
Report of the Company on Form 10-K
For the Year ended December 31, 2001.
Page
....
Report of Independent Auditors 22
Independent Auditors' Report 23
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2001 and 2000 24
Consolidated Statements of Income for the years
ended December 31, 2001, 2000 and 1999 25
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2001, 2000 and 1999 26
Consolidated Statements of Cash Flows for the years
ended December 31, 2001, 2000 and 1999 27
Notes to Consolidated Financial Statements 28
Consolidated Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts 39
...........................
Schedules not listed above have been omitted because they are either not
applicable or the required information has been given elsewhere in the
consolidated financial statements or notes thereto.
Report of Independent Auditors
..............................
To the Board of Directors and Stockholders
Excel Technology, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Excel Technology, Inc. and Subsidiaries (the "Company") as of December
31, 2001 and 2000, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. Our
audits also included the activity for the years ended December 31, 2001
and 2000 in the financial statement schedule listed at Item 14(a).
These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Excel Technology, Inc. and Subsidiaries at December 31, 2001 and 2000,
and the consolidated results of their operations and their cash flows
for the years then ended in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the
related financial statement schedule for the years ended December 31,
2001 and 2000, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all materials respects
the information set forth therein.
/s/ Ernst & Young LLP
Melville, New York
January 18, 2002
Independent Auditors' Report
............................
Board of Directors and Stockholders
Excel Technology, Inc. and Subsidiaries:
We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Excel Technology, Inc. and
subsidiaries for the year ended December 31, 1999. In connection with
our audit of the consolidated financial statements, we have also audited
the financial statement schedule for the year ended December 31, 1999.
These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the results of
operations and the cash flows of Excel Technology, Inc. and subsidiaries
for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America. Also, in
our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein for the year ended December 31, 1999.
/s/ KPMG LLP
Melville, New York
January 21, 2000
EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2001 and 2000
Assets 2001 2000
............ .............
Current assets:
Cash and equivalents $ 16,211,865 $ 19,006,192
Accounts receivable, less allowance
for doubtful accounts of $717,000 and
$559,000 in 2001 and 2000, respectively 15,688,733 19,689,837
Inventories 19,219,695 19,855,508
Deferred income taxes 1,112,000 1,483,000
Other current assets 1,369,903 1,093,025
........... .............
Total current assets 53,602,196 61,127,562
........... .............
Property, plant and equipment - at cost, net 26,125,347 12,990,033
Other assets 64,362 241,319
Deferred income taxes 593,000 1,048,000
Goodwill, net of accumulated amortization
of $6,586,773 and $5,128,134 in 2001
and 2000, respectively 22,120,116 23,578,755
............ .............
Total Assets $102,505,021 $ 98,985,669
............ .............
............ .............
Liabilities and Stockholders' Equity
....................................
Current liabilities:
Notes payable $ 0 $ 15,364
Accounts payable 3,786,154 4,251,577
Accrued expenses and other
current liabilities 7,121,293 8,276,967
............ .............
Total current liabilities 10,907,447 12,543,908
............ .............
Stockholders' equity:
Preferred stock, par value $.001 per share:
2,000,000 shares authorized, none issued 0 0
Common stock, par value $.001 per share:
20,000,000 shares authorized, 11,763,569
and 11,759,325 shares issued and
outstanding in 2001 and 2000,
respectively 11,764 11,759
Additional paid-in capital 44,856,504 44,826,800
Retained earnings 47,783,066 41,844,578
Accumulated other comprehensive loss (1,053,760) (241,376)
............ .............
Total stockholders' equity 91,597,574 86,441,761
............ .............
Total Liabilities and Stockholders' Equity $102,505,021 $ 98,985,669
............ .............
............ .............
See Notes to Consolidated Financial Statements.
EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
............ ............ ............
Net sales and services $ 88,492,288 $107,720,400 $ 88,943,148
Cost of sales and services 50,517,834 53,065,356 44,682,521
............ ............ ............
Gross profit 37,974,454 54,655,044 44,260,627
Operating expenses:
Selling and marketing 11,553,303 12,689,260 11,936,078
General and administrative 7,066,440 7,929,652 6,644,820
Research and development 9,292,777 9,547,342 7,294,314
Amortization of goodwill 1,458,639 1,336,575 1,218,922
............ ............ ............
29,371,159 31,502,829 27,094,134
............ ............ ............
Income from operations 8,603,295 23,152,215 17,166,493
Non-operating expenses (income):
Interest expense 29,905 18,130 47,330
Interest income (678,515) (998,445) (335,104)
Other expense, net 75,381 177,849 213,907
............ ............ ............
Income before provision for
income taxes 9,176,524 23,954,681 17,240,360
Provision for income taxes 3,238,036 8,303,703 5,688,594
............ ............ ............
Net income $ 5,938,488 $ 15,650,978 $ 11,551,766
............ ............ ............
............ ............ ............
Basic earnings per common share $0.50 $1.35 $1.04
............ ............ ............
............ ............ ............
Weighted average common
shares outstanding 11,761,911 11,597,102 11,118,782
............ ............ ............
............ ............ ............
Diluted earnings per common share $0.50 $1.30 $1.00
............ ............ ............
............ ............ ............
Weighted average common and
common equivalent
shares outstanding 11,977,848 12,054,176 11,608,266
............ ............ ............
............ ............ ............
See Notes to Consolidated Financial Statements.
Excel Technology, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
Accumulated
Additional Other Com- Compre-
Preferred Stock Common Stock Treasury Paid-In Retained prehensive hensive
Shares Amounts Shares Amounts Stock Capital Earnings Loss Total Income
....... ....... .......... ....... ............ ........... ........... .......... ........... ...........
Balances at
December 31, 1998 0 $ 0 11,810,349 $11,810 $(6,565,794) $49,116,700 $14,641,834 $ (52,595) $57,151,955
Exercise of common
stock options and
warrants 0 0 280,055 280 0 1,235,016 0 0 1,235,296
Acquisition of
treasury stock 0 0 0 0 (348,009) 0 0 0 (348,009)
Retirement of
treasury stock 0 0 (789,463) (789) 6,913,803 (6,913,014) 0 0 0
Net earnings
for the year 0 0 0 0 0 0 11,551,766 0 11,551,766 $11,551,766
Foreign currency
translation adjustment 0 0 0 0 0 0 0 (589,795) (589,795) (589,795)
...........
Comprehensive income 0 0 0 0 0 0 0 0 0 $10,961,971
... ...... .......... ....... ............ ........... ............ ............ ........... ...........
...........
Balances at
December 31, 1999 0 0 11,300,941 11,301 0 43,438,702 26,193,600 (642,390) 69,001,213
Exercise of common
stock options
and warrants 0 0 458,384 458 0 1,388,098 0 0 1,388,556
Net earnings
for the year 0 0 0 0 0 0 15,650,978 0 15,650,978 $15,650,978
Foreign currency
translation adjustment 0 0 0 0 0 0 0 401,014 401,014 401,014
...........
Comprehensive income 0 0 0 0 0 0 0 0 0 $16,051,992
... ...... .......... ....... ............ ........... ............ ............ ........... ...........
...........
Balances at
December 31, 2000 0 0 11,759,325 11,759 0 44,826,800 41,844,578 (241,376) 86,441,761
Exercise of common
stock options 0 0 4,244 5 0 29,704 0 0 29,709
Net earnings
for the year 0 0 0 0 0 0 5,938,488 0 5,938,488 $ 5,938,488
Foreign currency
translation adjustment 0 0 0 0 0 0 0 (812,384) (812,384) (812,384)
...........
Comprehensive income 0 0 0 0 0 0 0 0 0 $ 5,126,104
... ...... .......... ....... ............ ........... ............ ............ ........... ...........
...........
Balances at
December 31, 2001 0 $ 0 11,763,569 $11,764 $ 0 $44,856,504 $47,783,066 $(1,053,760) $91,597,574
... ...... .......... ....... ............ ........... ............ ............ ...........
... ...... .......... ....... ............ ........... ............ ............ ...........
See Notes to Consolidated Financial Statements.
EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
............ ............ ............
Operating activities:
Net earnings $ 5,938,488 $ 15,650,978 $ 11,551,766
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and
amortization 3,836,241 3,504,416 3,010,231
Provision for bad debts 336,365 191,410 70,697
Deferred income taxes 826,000 (4,900) (282,000)
Changes in operating assets
and liabilities, net of
effects from acquisitions:
Accounts receivable 3,337,401 (3,240,231) (2,794,011)
Inventories 89,934 (4,463,317) 1,288,633
Other current assets (297,835) (490,766) (62,602)
Other assets 173,413 100,097 156,248
Accounts payable (427,961) 1,074,109 (638,102)
Accrued expenses and
other current
liabilities (1,075,736) (281,791) 715,598
............ ............ ............
Net cash provided by
operating activities 12,736,310 12,040,005 13,016,458
............ ............ ............
Investing activities:
Cash paid for acquisitions,
net of cash acquired 0 (4,409,916) 0
Purchases of property,
plant and equipment (15,512,916) (3,874,144) (2,102,671)
............ ............ ............
Net cash used in
investing activities (15,512,916) (8,284,060) (2,102,671)
............ ............ ............
Financing activities:
Proceeds from exercise of
common stock options
and warrants 29,709 1,388,556 1,235,296
Purchase of treasury stock 0 0 (348,009)
Payments of notes payable (15,364) (20,573) (69,367)
Payments of borrowings on
long-term debt and revolving
credit line, net 0 0 (3,500,000)
............ ............ ............
Net cash provided by
(used in) financing
activities 14,345 1,367,983 (2,682,080)
............ ............ ............
Effect of exchange rate changes
on cash and cash equivalents (32,066) 401,013 (589,795)
............ ............ ............
Net (decrease) increase in cash
and equivalents (2,794,327) 5,524,941 7,641,912
Cash and equivalents -
beginning of year 19,006,192 13,481,251 5,839,339
............ ............ ............
Cash and equivalents -
end of year $ 16,211,865 $ 19,006,192 $ 13,481,251
............ ............ ............
............ ............ ............
Supplemental Cash Flow Information
..................................
Cash paid for:
Interest $ 33,066 $ 18,130 $ 48,220
............ ............ ............
............ ............ ............
Income taxes $ 3,239,876 $ 8,901,062 $ 5,477,543
............ ............ ............
............ ............ ............
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(1) Summary of Significant Accounting Policies
..........................................
Excel Technology, Inc. and Subsidiaries (the "Company") designs,
develops, manufactures and markets laser systems and electro-optical
components, primarily for the electronic, semiconductor, scientific and
other industrial markets. The significant accounting policies used in
the preparation of the consolidated financial statements of the Company
are as follows:
Basis of Presentation
.....................
The consolidated financial statements include the accounts of Excel
Technology, Inc. (Excel) and its wholly-owned subsidiaries:
Synrad, Inc. (Synrad); Photo Research, Inc. (Photo Research);
Excel Europe (previously named Quantronix GmbH); Cambridge
Technology, Inc. (Cambridge); Quantronix Corporation
(Quantronix); Control Laser Corporation (Control Laser); The
Optical Corporation; Quantronix International Corporation (a
Foreign Sales Corporation); and Excel Asia. All material
intercompany transactions and balances have been eliminated in
consolidation.
Revenue Recognition
...................
Net sales and services are recognized when the earnings process is
complete, generally upon shipment of products or performance of
services. Related shipping and handling costs are included in
cost of sales and services. Net sales and services relating to
the Company's DRS laser-based systems sold by its Quantronix
subsidiary are recognized upon final acceptance from the
customer.
Effective January 1, 2000, the Company adopted Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements.
Adoption of the provisions of SAB No. 101 did not have an impact
on the Company's revenue recognition policies or its results of
operations.
Cash and Equivalents
....................
Cash and equivalents of $16.2 million and $19.0 million at December
31, 2001 and 2000, respectively, consist of demand deposits with
banks and highly liquid money market funds. The Company
considers investments with maturities of three months or less
when purchased to be cash equivalents.
Inventories
...........
Inventories consist of material, labor and overhead and are stated
at the lower of weighted average cost or market. Weighted
average cost approximates actual cost on a first-in, first-out
basis. On a quarterly basis, the Company compares the amount of
the inventory on hand and under commitment with its latest
forecasted requirements to determine whether write-downs for
excess or obsolete inventory are required. Although the
writedowns for excess or obsolete inventory reflected in the
Company's consolidated balance sheet at December 31, 2001 and
2000 are considered adequate by the Company's management, there
can be no assurance that these writedowns will prove to be
adequate over time to cover ultimate losses in connection with
the Company's inventory.
Accounts Receivables
....................
The Company is required to estimate the collectibility of its trade
receivables. A considerable amount of judgment is required in
assessing the ultimate realization of these receivables
including the current credit-worthiness of each customer. The
Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make
required payments. If the financial condition of the Company's
customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be
required.
Depreciation and Amortization
.............................
The Company's property, plant and equipment, recorded at cost, are
depreciated or amortized over their estimated useful lives under
the straight-line method. Leasehold improvements are amortized
over the life of the lease or over the estimated life of the
asset, whichever is less.
Goodwill represents the excess of cost over fair value of net
assets of businesses acquired and is amortized on a straight-line
basis over periods ranging from 15 to 20 years.
Research and Development Costs
..............................
Research and development costs include material and labor
associated with company-sponsored projects. Such costs are
expensed as incurred.
Long-Lived Assets
.................
The Company reviews long-lived assets for impairment when
circumstances indicate the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
Income Taxes
............
The Company recognizes deferred tax assets and liabilities for the
future tax consequences attributable to temporary differences
between the financial reporting bases and the tax bases of the
Company's assets and liabilities at enacted rates expected to be
in effect when such amounts are realized or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date.
Foreign Currency Translation
............................
The financial statements of foreign subsidiaries have been
translated into U.S. dollars in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 52, "Foreign
Currency Translation." All balance sheet accounts have been
translated using the exchange rates in effect at the balance
sheet date. Income statement amounts have been translated using
the average exchange rate for the year. The resulting cumulative
translation adjustment of approximately $1.1 million and $241
thousand at December 31, 2001 and 2000, respectively, is
reflected as accumulated other comprehensive loss, a component of
stockholders' equity. In addition, there were transaction gains
and losses and inter-company balances not deemed long-term in
nature at the balance sheet date that resulted in net
transaction losses of $7 thousand, $177 thousand and $227
thousand for the years ended December 31, 2001, 2000 and 1999,
respectively, which is reflected in other expense in the
consolidated statements of earnings.
Earnings Per Share
..................
The Company presents two earnings per share ("EPS") amounts, basic
and diluted. Basic EPS is calculated based on net earnings and
the weighted-average number of common shares outstanding during
the reported period. Diluted EPS includes the effect of
potentially dilutive securities, using the treasury stock method,
on weighted-average shares outstanding.
Fair Value of Financial Instruments
...................................
The recorded amounts of the Company's cash and equivalents,
accounts receivable, notes payable, accounts payable and accrued
expenses approximate their fair values because of the short-term
nature of these items.
Use of Estimates
................
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Concentration of Credit Risk
............................
Financial instruments that potentially subject the Company to a
concentration of credit risk consist primarily of its holdings of
cash and equivalents and accounts receivable. Cash and
equivalents are deposited with high credit quality financial
institutions. Concentration of credit risk with respect to
accounts receivable is limited due to the Company's large number
of customers and their dispersion throughout the United States,
Europe and Asia. The Company performs periodic credit
evaluations of its customers' financial condition and generally
does not require collateral.
Accounting for Stock-Based Compensation
.......................................
The Company records compensation expense for employee and
directors' stock options only if the market price of the
underlying stock exceeds the exercise price on the date of the
grant. The Company has elected not to implement the fair value
based accounting method for employee and directors' stock options
and warrants of Statement of Financial Accounting Standards No.
123, (SFAS123), "Accounting for Stock-Based Compensation," but
has elected to disclose the pro-forma net earnings and pro-forma
earnings per share to account for employee and directors' stock
option grants beginning in 1995 as if such method had been used
to account for such stock-based compensation cost.
Accumulated Other Comprehensive Loss
....................................
Accumulated other comprehensive loss ("comprehensive loss")
refers to revenues, expenses, gains and losses that under
accounting principles generally accepted in the United States are
included in comprehensive loss but are excluded from net income
as these amounts are recorded directly as an adjustment to
stockholders' equity, net of tax. The Company's comprehensive
loss is composed of unrealized losses on foreign currency
translation adjustments.
New Accounting Pronouncements
.............................
In June 2001, the FASB issued SFAS No. 141 "Business Combinations"
and SFAS 142, "Goodwill and Other Intangible Assets." SFAS No.
141 requires all business combinations initiated after June 30,
2001 to be accounted for using the purchase method. Under SFAS
142, goodwill and intangible assets with indefinite lives are no
longer amortized but are reviewed at least annually for
impairment. The amortization provisions of SFAS 142 apply to
goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Company is required to adopt SFAS 142 effective
January 1, 2002. Application of the non-amortization provisions
of SFAS 142 for goodwill is expected to result in an increase in
earnings from operations of approximately $1.5 million in 2002.
Changes in the estimated useful lives of intangible assets are
not expected to result in a material effect on net income in
2002. At December 31, 2001, the Company had goodwill of
approximately $22 million. Pursuant to SFAS 142, the Company will
test its goodwill for impairment upon adoption and, if impairment
is indicated, record such impairment as a cumulative effect of an
accounting change. The Company is currently evaluating the effect
that the adoption may have on its consolidated results of
operations and financial position.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"),
which supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of."
The primary objectives of SFAS No. 144 is to develop one
accounting model based on the framework established in SFAS No.
121 for long-lived assets to be disposed of by sale, and to
address significant implementation issues. The provisions of this
statement are effective for fiscal years beginning after December
15, 2001, and interim periods within those fiscal years, with
early application encouraged. The adoption of this statement is
not expected to have a material impact on the Company's results
of operations or financial position.
Reclassification
................
Certain amounts in the 1999 and 2000 financial statements have been
reclassified to conform with the 2001 presentation.
(2) Acquisitions
............
On July 1, 2000, Excel Europe, a subsidiary of the Company,
acquired substantially all of the assets and certain liabilities
of Baublys GmbH ("Baublys"), a company engaged in the
manufacturing and sale of customized laser systems and engraving
machines. The purchase price, including additional costs
directly related to the acquisition amounted to $4.5 million and
was internally funded using the Company's own cash. The
acquisition has been accounted for as a purchase and,
accordingly, the operating results of Baublys have been included
in the Company's consolidated results of operations since the
date of acquisition. The goodwill, approximating $3.5 million,
is being amortized on a straight-line basis over 15 years.
Pro forma results are not presented for the Baublys acquisition
due to immateriality.
(3) Inventories
...........
Inventories consist of the following:
December 31,
............
2001 2000
........... ...........
Raw materials $10,028,445 $12,027,510
Work-in-process 5,590,729 5,326,625
Finished goods 3,001,963 2,157,951
Consigned inventory 598,558 343,422
........... ...........
$19,219,695 $19,855,508
........... ...........
........... ...........
(4) Property, Plant and Equipment
.............................
Property, plant and equipment at cost consists of the following:
December 31,
......................
Useful life 2001 2000
........... ........... ...........
Land -- $ 4,236,056 2,279,363
Buildings 30 years 17,363,772 5,005,477
Leasehold improvements Lease term 1,368,053 1,366,867
Fixtures and computer
equipment 3-8 years 4,381,915 3,813,555
Machinery and equipment 4-8 years 7,492,334 7,262,329
Laboratory equipment 4-8 years 3,222,932 2,824,555
........... ...........
38,065,062 22,552,146
Less accumulated
depreciation and amortization 11,939,715 9,562,113
........... ...........
$26,125,347 $12,990,033
............ ..........
............ ..........
Synrad acquired land during 2000 for the construction of its new
building. The new Synrad facilities, new Control Laser
facilities and the expansion of Quantronix's facilities were
constructed and occupied during 2001.
Depreciation and amortization expense aggregated approximately $2.4
million, $2.2 million and $2.0 million for the years ended
December 31, 2001, 2000 and 1999, respectively.
(5) Income Taxes
............
Pre-tax income for the years ended December 31, 2001, 2000 and 1999
was comprised of domestic income of $10,414,121, $24,006,442 and
$17,888,074, respectively, and foreign losses of $1,237,597,
$51,761 and $647,714, respectively.
The provision for income taxes consists of:
Year ended December 31,
.....................................
2001 2000 1999
........... ........... ...........
Current:
Federal $ 1,763,497 $ 7,467,742 $ 5,022,224
State and local 648,539 840,861 948,370
........... ........... ...........
2,412,036 8,308,603 5,970,594
........... ........... ...........
Deferred:
Federal 826,000 (4,900) (282,000)
........... ........... ...........
$ 3,238,036 $ 8,303,703 $ 5,688,594
........... ........... ...........
........... ........... ...........
The current provision for income taxes includes a tax benefit of
$394 thousand for 2001, $196 thousand for 2000 and $281 thousand
for 1999 for utilizing Federal net operating loss carry forwards.
The effective income tax rate differed from the statutory Federal
income tax rate due to the following items:
Year ended December 31,
.....................................
2001 2000 1999
........... ........... ...........
Taxes at statutory Federal
income tax rate $ 3,120,018 $ 8,402,255 $ 5,861,700
Non deductable amortization
of goodwill 96,400 96,400 96,400
Foreign Sales Corporation
benefit (582,024) (893,485) (688,400)
Change in valuation allowance 357,000 53,100 201,000
State income taxes, net
of Federal benefit 428,036 546,560 632,300
Other (181,394) 98,873 (414,406)
........... ........... ...........
$ 3,238,036 $ 8,303,703 $ 5,688,594
........... ........... ...........
........... ........... ...........
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
at December 31, 2001 and 2000 are as follows:
December 31,
........................
2001 2000
........... ...........
Deferred tax assets:
Excess of tax over financial statement
basis of inventory $ 610,000 $ 733,000
Allowance for doubtful accounts 155,000 63,000
Accrued warranty costs 103,000 22,000
Other accrued expenses 244,000 665,000
Benefits of U.S. net operating
loss carryforwards 974,000 1,612,000
Benefits of foreign net operating
loss carryforwards 1,046,000 455,000
Plant and equipment depreciation 186,000 226,000
........... ...........
Total deferred tax assets 3,318,000 3,776,000
Less valuation allowance (1,346,000) (989,000)
........... ...........
1,972,000 2,787,000
........... ...........
Deferred tax liabilities:
Capitalized software development costs 0 (95,000)
Goodwill amortization (267,000) (161,000)
........... ...........
Total deferred tax liabilities (267,000) (256,000)
........... ...........
Net deferred tax assets $ 1,705,000 $ 2,531,000
........... ...........
........... ...........
At December 31, 2001, Excel has available net operating loss
carryforwards ("NOL's"), expiring in 2005 through 2007, of
approximately $1.3 million for income tax purposes. The
utilization of NOL's by Excel for income tax purposes is subject
to annual limitations imposed by Internal Revenue Code
Section 382 due to various equity transactions from 1991 to 1993
and alternative minimum tax limitations. If the full amount of
that limitation is not used in any year, the amount not used
increases the allowable limit in the following year.
At December 31, 2001, Quantronix and its subsidiaries have
available for tax purposes utilizable NOL's of approximately $1.6
million expiring in 2005 through 2007. Such NOL's can only be
utilized to offset Quantronix's future taxable income and are
limited, in a similar fashion to Excel's NOL's, in each year to
approximately $1.1 million as a result of the change in ownership
from the merger with Excel.
While management believes that the Company's deferred tax assets
will be realized based on its generation of taxable income in
recent years and its future projected taxable income, the
substantial restrictions on and time periods required to realize
certain of the Company's NOL's make it appropriate to record a
valuation allowance against a portion of those NOL's. In
addition, a valuation allowance has been provided against all of
the Company's foreign net operating loss carryforwards.
Accordingly, Excel has provided a total valuation allowance of
$1.3 million, as of December 31, 2001. There can be no assurance
that the Company will generate sufficient taxable earnings in
future years to fully realize recorded tax benefits.
(6) Accrued Expenses and Other Current Liabilities
..............................................
Accrued expenses and other current liabilities consist of the
following:
December 31,
........................
2001 2000
........... ...........
Salaries, wages, commissions
and bonuses $ 1,395,650 $ 2,701,286
Accrued vacation/holiday/sick pay 672,354 645,168
Accrued accounts payable 756,363 417,205
Customer deposits 612,781 647,006
Accrued royalties payable 101,530 200,183
Warranty reserve 400,619 339,812
Unearned service contract revenue 146,845 159,844
Professional fees payable 276,412 210,171
Income taxes payable 760,615 1,588,453
Other 1,998,124 1,367,839
........... ...........
$ 7,121,293 $ 8,276,967
........... ...........
........... ...........
(7) Line of Credit
...............
On July 23, 1998, the Company entered into a credit facility with
The Bank of New York (the "Bank") that provides the Company with
a $15 million revolving line of credit for acquisitions or
working capital requirements. The term of this agreement is for
five years, maturing on July 22, 2003. This credit facility
allows for interest to be calculated, at the Company's election,
utilizing an Alternative Base Rate ("ABR") or a LIBOR rate plus a
premium ranging from 0.50% to 2.25%. The ABR is the higher rate
of the prime rate or the Federal Funds Rate plus 0.50%. This
credit facility contains certain financial covenants, including a
minimum tangible net worth requirement of at least $15 million,
prohibits the payment of dividends, and requires payment of
interest on a quarterly basis. As of December 31, 2001, the
Company had no borrowings outstanding.
(8) Stockholders' Equity
....................
Stock Option Plans
..................
In 1990, Excel adopted a stock option plan (the "Plan") which
provided for the granting of incentive stock options and non-
incentive stock options to certain key employees, including
officers and directors of Excel, to purchase an aggregate of
2,000,000 shares of common stock, as amended, at prices and terms
determined by the Board of Directors. Options granted under the
Plan, which terminated on July 30, 2000, may be exercisable for a
period of up to ten years. Through December 31, 2001, all
options granted to employees under the Plan have exercise prices
equal to the market value of the stock on the date of grant, vest
ratably over three or five years and expire either five or ten
years from date of grant.
The Plan was amended in August 1993 to provide for the automatic
grant to each member of the Board of Directors, on the date of
each annual meeting of stockholders, non-incentive options to
purchase 10,000 shares of common stock at an exercise price equal
to the fair market value of the common stock on such date.
In 1998, the Company adopted a stock option plan (the "1998 Plan")
which provides for the granting of incentive stock options and
non-incentive stock options to certain key employees, including
officers and directors of the Company and consultants to purchase
an aggregate of 1,000,000 shares of common stock at prices and
terms determined by the Board of Directors. The option price per
share of incentive stock options must be at least 100% of the
fair market value of the stock on the date of the grant, except
in the case of shareholders owning more than 10% of the
outstanding shares of common stock, the option price must be at
least 110% of the fair market value on the date of the grant, and
for non-incentive stock options such price may be less than 100%
of the fair market value of the stock on the date of grant.
Options granted under the 1998 Plan, which terminates on April 8,
2008, may be exercisable for a period up to ten years. Through
December 31, 2001, all options granted to employees under the
1998 Plan have exercise prices equal to the market value of the
stock on the date of grant, vest ratably over three or five
years, and expire either five or ten years from the date of
grant.
A summary of activity related to the Company's stock option plans
is as follows:
Number Weighted average
of shares exercise price
......... ................
Outstanding at December 31, 1998 1,119,520 $ 6.88
Granted 115,000 13.06
Exercised (261,509) 6.70
Canceled (78,319) 7.00
.........
Outstanding at December 31, 1999 894,692 7.70
Granted 407,000 25.16
Exercised (433,764) 7.48
Canceled (87,752) 7.12
.........
Outstanding at December 31, 2000 780,176 17.00
Granted 55,000 19.71
Exercised (4,244) 7.00
Canceled (10,620) 10.63
.........
Outstanding at December 31, 2001 820,312 $ 17.31
.........
.........
At December 31, 2001, 2000 and 1999 a total of 410,342, 200,809 and
571,582 options were exercisable at a weighted average exercise
price of $14.81, $13.26 and $7.52 and options for the purchase of
452,050, 543,452, and 862,700, respectively, common shares were
available for future grants under the 1998 plan.
The options outstanding as of December 31, 2001 are summarized in
ranges as follows:
Weighted
Number of average
options contractual Options
Exercise price outstanding remaining life Excercisable
.............. ........... .............. ............
$ 3.26 18 .08 years 18
$ 6.50 9,334 6.8 years 9,334
$ 7.00 284,260 5.8 years 193,450
$13.06 66,200 7.5 years 36,440
$19.71 55,000 9.3 years 50,000
$24.63 355,500 8.2 years 71,100
$29.00 50,000 8.4 years 50,000
........ .......
820,312 410,342
........ .......
........ .......
Other
.....
No warrants were available for exercise during 2001. In 2000 and
1999, respectively, 23,000 and 14,000 warrants were exercised.
Shares Reserved for Issuance
............................
At December 31, 2001, the Company had reserved, authorized and
unissued common shares for the following purposes:
Shares
.........
1987 Stock option plan 18
1990 Stock option plan 272,344
1998 Stock option plan 1,000,000
.........
1,272,362
.........
.........
Stock-Based Compensation
........................
The per share weighted-average fair value of stock options and
warrants granted during 2001, 2000 and 1999 was $9.33, $11.99 and
$5.03, respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average
assumptions: 2001- expected dividend yield of 0%, risk free
interest rate of 4.9%, expected stock volatility of 55% and an
expected option life of approximately 4.0 years; 2000- expected
dividend yield of 0%, risk free interest rate of 6.3%, expected
stock volatility of 53% and an expected option life of
approximately 4.0 years; 1999- expected dividend yield of 0%,
risk free interest rate of 5.0%, expected stock volatility of 40%
and an expected option life of 4.0 years.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations in accounting for its stock option and warrant
grants and has adopted the disclosure requirements of SFAS No.
123, "Accounting for Stock Based Compensation." Accordingly, no
compensation cost has been recognized in the consolidated
financial statements for its stock options and warrants which
have an exercise price equal to or greater than the fair value of
the stock on the date of the grant. Had the Company determined
compensation cost based on the fair value at the grant date for
its stock options under SFAS 123, the Company's net earnings
would have been reduced to the pro-forma amounts indicated below:
2001 2000 1999
.......... .......... ............
Net earnings:
As reported $5,938,488 $15,650,978 $11,551,766
Pro-forma $4,440,943 $14,202,464 $10,991,766
Basic earnings per
common share:
As reported $0.50 $1.35 $1.04
Pro-forma $0.38 $1.22 $0.99
Diluted earnings per
common share:
As reported $0.50 $1.30 $1.00
Pro-forma $0.37 $1.18 $0.95
(9) Earnings Per Share
..................
The following is a reconciliation of the numerators and
denominators of the basic and diluted EPS computations:
2001
.....................................
Earnings Shares Per-Share
(Numerator) (Denominator) Amount
........... ............ ..........
Basic EPS $ 5,938,488 11,761,911 $0.50
Effect of Dilutive Securities:
Options and Warrants 215,937
...........
Diluted EPS $ 5,938,488 11,977,848 $0.50
........... ............ ..........
........... ............ ..........
2000
.....................................
Earnings Shares Per-Share
(Numerator) (Denominator) Amount
........... ............ ..........
Basic EPS $15,650,978 11,597,102 $1.35
Effect of Dilutive Securities:
Options and Warrants 457,074
..........
Diluted EPS $15,650,978 12,054,176 $1.30
........... ............ ..........
........... ............ ..........
1999
.....................................
Earnings Shares Per-Share
(Numerator) (Denominator) Amount
........... ............ ..........
Basic EPS $11,551,766 11,118,782 $1.04
Effect of Dilutive Securities:
Options and Warrants 489,484
............
Diluted EPS $11,551,766 11,608,266 $1.00
........... ............ ..........
........... ............ ..........
(10) Treasury Stock
..............
The Board of Directors of the Company has authorized the purchase
of up to 2 million shares of common stock in the open market at
prevailing market prices. As part of this program, the Company
acquired 32 thousand shares as treasury stock in 1999 for $348
thousand. In December 1999, the Company retired all of its
treasury stock.
(11) Employee Benefit Plan
.....................
The Company has a voluntary contribution pension plan, which
complies with Section 401(k) of the Internal Revenue Code, as
amended. The plan permits employees to make a voluntary
contribution of pretax dollars to a pension trust, with a
matching contribution by the Company equal to 50% of an
employee's basic contribution to the plan up to a maximum of 3%
of their salaries. Company contributions to the plan were
approximately $404 thousand, $423 thousand and $390 thousand in
2001, 2000 and 1999, respectively.
(12) Commitments and Contingencies
.............................
Operating Leases
.................
The Company and its subsidiaries lease certain buildings, vehicles
and equipment under non-cancelable operating leases. At December
31, 2001, the future minimum lease payments under non-cancelable
operating leases are as follows:
2002 $ 744,417
2003 663,698
2004 594,583
2005 475,917
2006 416,294
Thereafter 407,465
..........
$3,302,374
..........
..........
Rent expense approximated $2.09 million, $1.60 million, and $1.57
million for the years ended December 31, 2001, 2000 and 1999,
respectively.
Employment and Consulting Agreements
....................................
Excel has entered into employment agreements with certain key
executives that provide for severance upon termination without
cause, aggregating approximately $1.5 million.
(13) Foreign and Domestic Operations and Export Sales
................................................
The Company operates in one business segment which designs,
develops, manufactures and markets laser systems and electro-
optical components. Information concerning foreign and domestic
operations and export sales is as follows:
As of or the year ended
December 31,
2001 2000 1999
............ ............ ............
Net sales and services to
unaffiliated customers:
United States operations $ 67,260,948 $ 91,018,082 $ 81,837,044
European operations 20,073,323 15,809,484 7,106,104
Asian operations 1,158,017 892,834 0
............ ............ ............
$ 88,492,288 $107,720,400 $ 88,943,148
............ ............ ............
............ ............ ............
Operating earnings (loss):
United States operations $ 9,774,458 $ 23,120,998 $ 17,454,571
European operations (1,242,962) (98,690) (288,078)
Asian operations 71,799 129,907 0
............ ............ ............
$ 8,603,295 $ 23,152,215 $ 17,166,493
............ ............ ............
............ ............ ............
Identifiable assets:
United States operations $ 85,552,201 $ 83,448,272 $ 77,775,495
European operations 16,175,597 14,853,942 1,875,056
Asian operations 777,223 683,455 0
............ ............ ............
$102,505,021 $ 98,985,669 $ 79,650,551
............ ............ ............
............ ............ ............
In determining operating earnings (loss) for each geographic area,
sales and purchases between areas have been accounted for on the
basis of internal transfer prices set by the Company.
Identifiable assets are those tangible and intangible assets used
in operations in each geographic area.
During the years ended December 31, 2001, 2000 and 1999, the
Company had foreign and export sales of approximately $51.3
million, $56.1 million and $41.0 million, representing 58%, 52%
and 46%, respectively, of total net sales and services.
No single customer accounted for more than ten percent of the
Company's net sales and services in 2001, 2000 and 1999. One
customer accounted for 5.8% of the Company's total accounts
receivable at December 31, 2001. No accounts receivable from a
customer exceeded five percent of the Company's total accounts
receivable at December 31, 2000.
(14) Related Party Transactions
..........................
Two directors of the Company also provide services to the Company
as legal counsel. During 2001, 2000 and 1999, the Company paid
approximately $55 thousand, $174 thousand and $81 thousand,
respectively, for legal services rendered by the respective law
firms that the directors represent.
Schedule II
...........
EXCEL TECHNOLOGY, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 2001, 2000 and 1999
Column A Column B Column C Column D Column E
........ ........ ........ ........ ........
Balance at Additions (Deductions) Balance at
beginning charged to cost additions - end of
Description of period and expenses describe period
........... ......... .............. ........... ..........
Allowance for
doubtful accounts:
Year ended
December 31,:
2001 $ 559,000 $336,000 $(178,000) (1) $717,000
2000 $ 464,000 $191,000 $(173,000) (1) $559,000
$77,000 (2)
1999 $ 426,000 $70,697 $ (32,697) (1) $464,000
(1) Uncollectible accounts written off, net of recoveries.
(2) Allowance of acquired subsidiary at date of acquisition.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On June 28, 2000, the Company filed a Current Report on Form 8-K
reporting a change in its certifying accountants.
PART III
........
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item 10 with respect to the directors
and executive officers of registrant is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation
14A promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, which proxy statement is anticipated to
be filed within 120 days after the end of the Company's year ended
December 31, 2001.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 is incorporated by reference
to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, which proxy statement is
anticipated to be filed within 120 days after the end of the Company's
year ended December 31, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by this Item 12 is incorporated by reference
to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, which proxy statement is
anticipated to be filed within 120 days after the end of the Company's
year ended December 31, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item 13 is incorporated by reference
to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, which proxy statement is
anticipated to be filed within 120 days after the end of the Company's
year ended December 31, 2001.
PART IV
.......
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements (included in Part II, Item 8):
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Earnings for the years ended
December 31, 2001, 2000 and 1999.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2000 and 1999.
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedule
(included in Part II Item 8)*
Schedule
........
II Valuation and Qualifying Accounts
3. Exhibits included herein:
See Exhibit Index below for exhibits filed as part of this Annual
Report on Form 10-K.
(b) Reports on Form 8-K. No reports on Form 8-K were filed in the last
quarter of the period covered by this report.
(c) Exhibits. The exhibits required by Item 601 of Regulation S-K are
filed herewith.
(d) Financial Statement Schedule. The Financial Statement Schedule
required by Regulation S-X is filed herewith.
...........................
* Financial statement schedules other than those listed are omitted
because they are either not applicable or not required, or because
the information sought is included in the Consolidated Financial
Statements or the Notes thereto.
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.
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
......................
J. Donald Hill,
Chairman of the Board
By: /s/ Antoine Dominic
......................
Antoine Dominic,
Chief Executive Officer
Date: March 22, 2002
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES
INDICATED.
Signature Title Date
......... ..... ....
/s/ J. Donald Hill Chairman of the Board and Director March 22, 2002
.....................
J. Donald Hill
/s/ Antoine Dominic Chief Executive Officer, March 22, 2002
..................... President, Chief Operating
Antoine Dominic Officer, and Director (Principal
Executive Officer and Principal
Financial and Accounting Officer)
/s/ Steven Georgiev Director March 22, 2002
.....................
Steven Georgiev
/s/ Howard S. Breslow Director March 22, 2002
.....................
Howard S. Breslow
/s/ Joseph J. Ortego Director March 22, 2002
.....................
Joseph J. Ortego
INDEX TO EXHIBITS
Exhibit
Number Document
......... .........
3.1 Restated Certificate of Incorporation dated November 13,
1990, as amended. Incorporated by reference to the
Company's Registration Statement on Form S-1,
File No. 33-39375.
3.2 By-Laws, as amended. Incorporated by reference to the
Company's Registration Statement on Form S-4,
File No. 33-47440.
4 Specimen Certificate for Company's Common Stock.
Incorporated by reference to the Company's Registration
Statement on Form S-1, File No. 33-39375.
10.1 1990 Stock Option Plan, as amended. Incorporated by
reference to the Company's Registration Statement on
Form S-1, File No. 33-52612.
10.2 Employment Agreement, dated as of October 10, 2000,
between the Company and J. Donald Hill. Incorporated by
reference to Exhibit 10(b) to the Company's Annual Report
on Form 10-K for the year ended December 31, 2000.
10.3 Employment Agreement, dated as of October 10, 2000,
between the Company and Antoine Dominic. Incorporated by
reference to Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the year ended December 31, 2000.
10.4 1998 Stock Option Plan. Incorporated by reference to as
Exhibit A to the Company's Definitive Proxy Statement,
dated April 27, 1998 for the Annual Meeting of
Stockholders held on June 24, 1998.
10.5 Loan Agreement, dated as of July 20, 1998, by and among
the Company and The Bank of New York. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
21 List of subsidiaries. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Excel Technology, Inc.:
We consent to incorporation by reference in the registration statements
on Form S-8 (Nos. 33-71122 and 33-35934) and Form S-3 (No. 33-34523) of
Excel Technology, Inc. of our report dated January 21, 2000, relating to
the consolidated statements of income, stockholders' equity, and cash
flows of Excel Technology, Inc. and subsidiaries and the related
financial statement schedule for the year ended December 31, 1999, which
report appears in the December 31, 2001 annual report on Form 10-K of
Excel Technology, Inc.
KPMG LLP
Melville, New York
March 19, 2002
Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-71122) pertaining to the Excel Technology,
Inc. 1990 Stock Option Plan, the Registration Statement (Form S-3 No.
33-34523) of Excel Technology, Inc. and in the related Prospectus, and
the Registration Statement (Form S-8 No. 33-35934) pertaining to the
Excel Technology 1998 Stock Option Plan of our report dated January 18,
2002, with respect to the consolidated financial statements and schedule
of Excel Technology, Inc. and Subsidiaries included in this Annual
Report (Form 10-K) for the year ended December 31, 2001.
/s/ Ernst & Young LLP
Melville, New York
March 22, 2002