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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
.......................................
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
EXCEL TECHNOLOGY, INC.
(Exact name of Registrant as specified in its Charter)
.......................................
For the quarter ended March 25, 2005 Commission File Number 0-19306
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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes [X] No [ ]
The number of shares of the Registrant's common stock outstanding as of
April 22, 2005 was: 12,053,529.
CONTENTS
PART I. FINANCIAL INFORMATION
Page
....
Item 1. Consolidated Financial Statements:
..................................
Consolidated Balance Sheets as of March 25, 2005
(unaudited) and December 31, 2004 3
Consolidated Statements of Income (unaudited) for
the Three Months Ended March 25, 2005 and
March 26, 2004 4
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 25, 2005 and
March 26, 2004 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
.................................................
Condition and Results of Operations 9
...................................
Item 3. Quantitative and Qualitative Disclosures
........................................
about Market Risk 13
.................
Item 4. Controls and Procedures 13
.......................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
.................
Item 2. Changes in Securities, Use of Proceeds
......................................
and Issuer Purchases Of Equity Securities 14
.........................................
Item 3. Defaults upon Senior Securities 14
...............................
Item 4. Submission of Matters to a Vote of Security-Holders 14
...................................................
Item 5. Other Information 14
.................
Item 6. Exhibits and Reports on Form 8-K 14
................................
(a) Exhibits - (11) Computation of net income
per share 18
(31) Certifications Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002 19
(32) Certifications Pursuant to
Section 906 of the Sarbanes-
Oxley Act of 2002, 18 U.S.C.
Section 1350 21
(b) Reports on Form 8-K
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
..................................
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
March 25, 2005 Dec. 31, 2004
.............. .............
(Unaudited)
Assets
.......
Current assets:
Cash and equivalents $ 10,628 $ 11,329
Investments 34,600 30,425
Accounts receivable, less allowance
for doubtful accounts of $790 and
$796 in 2005 and 2004, respectively 21,004 19,782
Inventories 28,790 28,839
Deferred income taxes 1,596 1,598
Other current assets 1,463 1,703
.......... .........
Total current assets 98,081 93,676
.......... .........
Property, plant and equipment 26,323 26,492
Other assets 255 289
Goodwill 31,825 32,021
.......... .........
Total assets $ 156,484 $ 152,478
.......... .........
.......... .........
Liabilities and Stockholders' Equity
.....................................
Current liabilities:
Accounts payable $ 7,071 $ 5,265
Accrued expenses and other
current liabilities 9,207 8,405
.......... .........
Total current liabilities 16,278 13,670
.......... .........
Deferred income taxes 2,807 2,807
Stockholders' equity:
Preferred stock, par value $.001 per
share: 2,000 shares authorized,
none issued 0 0
Common stock, par value $.001 per
share: 20,000 shares authorized,
12,053 shares issued and outstanding 12 12
Additional paid-in capital 49,586 49,573
Retained earnings 84,888 82,375
Accumulated other comprehensive income 2,913 4,041
.......... .........
Total stockholders' equity 137,399 136,001
.......... .........
Total liabilities and
stockholders' equity $ 156,484 $ 152,478
.......... .........
.......... .........
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and in thousands, except income per share amounts)
Three Months Ended
....................
March 25, March 26,
2005 2004
......... .........
Net sales and services $ 30,215 $ 36,291
Cost of sales and services 16,192 19,802
......... .........
Gross profit 14,023 16,489
Operating expenses:
Selling and marketing 4,349 4,781
General and administrative 3,233 2,804
Research and development 3,336 3,364
......... .........
Total operating expenses 10,918 10,949
......... .........
Income from operations 3,105 5,540
Non-operating income:
Interest income 183 56
Minority interest in net loss of subsidiary 0 6
Foreign currency gains and
other income, net 155 170
......... .........
Income before provision for income taxes 3,443 5,772
Provision for income taxes 930 1,725
Net income $ 2,513 $ 4,047
......... .........
......... .........
Basic income per common share $0.21 $0.34
..... .....
..... .....
Weighted average common shares outstanding 12,053 11,972
......... .........
......... .........
Diluted income per common share $0.21 $0.33
..... .....
..... .....
Weighted average common and
common equivalent shares outstanding 12,235 12,444
......... .........
......... .........
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Three Months Ended
....................
March 25, March 26,
2005 2004
......... .........
Operating activities:
Net income $ 2,513 $ 4,047
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in net loss of
subsidiary 0 (6)
Depreciation and amortization 617 611
Tax benefit from employee stock
option exercises 2 234
Provision for bad debts 34 38
Changes in operating assets
and liabilities:
Accounts receivable (1,602) (4,948)
Inventories (249) 734
Other current assets 203 (85)
Other assets (129) (228)
Accounts payable 1,861 1,622
Accrued expenses and other
current liabilities 907 659
......... .........
Net cash provided by
operating activities 4,157 2,678
......... .........
Investing activities:
Purchases of investments,
net of redemptions (4,175) (2,500)
Purchases of property, plant and equipment (528) (178)
......... .........
Net cash used in investing
activities (4,703) (2,678)
......... .........
Financing activities:
Proceeds from exercise of common
stock options 11 595
......... .........
Net cash provided by
financing activities 11 595
......... .........
Effect of exchange rate changes on cash
and equivalents (166) 98
......... .........
Net (decrease) increase in cash
and equivalents (701) 693
Cash and equivalents, beginning of period 11,329 9,740
......... .........
Cash and equivalents, end of period $ 10,628 $ 10,433
......... .........
......... .........
Supplemental cash flow information:
Cash paid for:
Interest $ 0 $ 0
Income taxes $ 44 $ 751
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. CONSOLIDATED FINANCIAL STATEMENTS
.................................
Excel Technology, Inc. and Subsidiaries (the "Company") manufactures
and markets laser systems and electro-optical components primarily for
industrial and scientific applications.
The consolidated balance sheet as of March 25, 2005, and the
consolidated statements of income and cash flows for the three months
ended March 25, 2005 and March 26, 2004 have been prepared by the Company
and are unaudited. In the opinion of management, all adjustments (which
included only normal recurring adjustments) have been made which are
necessary to present fairly the financial position, results of operations
and cash flows of the Company at March 25, 2005 and for all periods
presented.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses reported
in those financial statements. These judgments can be subjective and
complex, and consequently actual results could differ from those
estimates and assumptions.
For information concerning the Company's significant accounting
policies, reference is made to the Company's Annual Report on Form 10-K
for the year ended December 31, 2004. While the Company believes that the
disclosures presented are adequate to make the information contained
herein not misleading, it is suggested that these statements be read in
conjunction with the consolidated financial statements and notes included
in the Form 10-K. Results of operations for the period ended March 25,
2005 are not necessarily indicative of the operating results to be
expected for the full year.
The Company's quarterly closing dates end on the Friday prior and
closest to the last day of each calendar quarter. The Company's fiscal
year always ends on December 31st.
B. ACCOUNTING FOR STOCK-BASED COMPENSATION
.......................................
At March 25, 2005, the Company has two stock-based employee
compensation plans. The Company accounts for those plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting
for Stock Issued to Employees", and related Interpretations. No stock-
based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the
market values of the underlying common stock on the date of grant. For
purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options vesting periods. The fair value of
the options was estimated at the date of grant using the Black Scholes
option pricing model. The following table illustrates the effect on net
income and income per share if the Company had applied the fair value
recognition provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" to stock-
based employee compensation (In thousands, except per share data).
Three months ended
March 25, March 26,
2005 2004
......... .........
Net income, as reported $ 2,513 $ 4,047
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects (2,838) (313)
......... .........
Proforma net (loss) income $ (325) $ 3,734
......... .........
......... .........
Income (loss) per share:
Basic - as reported $ 0.21 $ 0.34
......... .........
Basic - proforma $ (0.03) $ 0.31
......... .........
Diluted - as reported $ 0.21 $ 0.33
......... .........
Diluted - proforma $ (0.03) $ 0.30
......... .........
In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based
Payment" ("SFAS No. 123 (R)"). This statement replaces SFAS No. 123,
"Accounting for Stock-Based Compensation" and supercedes APB No. 25,
"Accounting for Stock Issued to Employees." SFAS 123 (R) requires all
stock-based compensation to be recognized as an expense in the financial
statements and that such cost be measured according to the grant-date
fair value of the stock options or other equity instruments. SFAS 123
(R) will be effective for the first annual period beginning after June
15, 2005. While the Company currently provides the above pro forma
disclosures required by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," on a quarterly basis it is
currently evaluating the impact this statement will have on its
consolidated financial statements.
C. INVENTORIES
...........
Inventories are recorded at the lower of cost on a first-in, first
out basis or market value. Inventories consist of the following (in
thousands):
March 25, 2005 December 31, 2004
.............. .................
Raw Materials $ 15,282 $ 15,384
Work-in-Process 7,735 7,074
Finished Goods 4,340 4,858
Consigned Inventory 1,433 1,523
.............. ..............
$ 28,790 $ 28,839
.............. ..............
.............. ..............
D. COMPREHENSIVE INCOME
....................
Comprehensive income is comprised of net income and foreign currency
translation adjustments, amounting in the aggregate to $1.4 million and
$3.7 million for the three months ended March 25, 2005 and March 26,
2004, respectively.
E. ACCRUED WARRANTY COSTS
......................
Quarterly, the Company analyzes its warranty reserve for
reasonableness based upon a three-year history of warranty expense
incurred, the nature of the products shipped subject to warranty and
anticipated warranty trends.
Changes in the product warranty accrual during the three-month
period ended March 25, 2005 were as follows (In thousands):
Balance at December 31, 2004 $ 765
Provisions for warranties during
the three-month period ended
March 25, 2005 140
Costs of warranty obligations
During the three-month period
ended March 25, 2005 (156)
......
Balance at March 25, 2005 $ 749
......
......
F. STOCK OPTIONS
.............
In 2004, the Company adopted a stock option plan (the "2004 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 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 market value on the date of the grant, and for non-
incentive stock options such price may be less than 100% of the market
value of the stock on the date of grant. Options granted under the 2004
Plan, which terminates on February 23, 2014, may be exercisable for a
period up to ten years. Through March 25, 2005, all options granted to
employees under the 2004 Plan, including 440 thousand granted in the
quarter ended March 25, 2005 have exercise prices equal to the market
value of the stock on the date of grant, vest immediately, and expire ten
years from the date of grant.
G. INCOME TAXES
............
Income tax expense for the quarter ended March 25, 2005 was reduced
by $170 thousand for the settlement of a tax exposure item for an amount
less than previously accrued.
H. LEGAL PROCEEDINGS
.................
Dr. Phillips, Inc. ("Phillips"), the landlord of a facility leased
through 2001 by Baublys-Control Laser ("Baublys"), a wholly owned
subsidiary of the Company, filed a lawsuit in the Circuit Court of the
Ninth Judicial Circuit in and for Orange County, Florida against Baublys
and the Company, for not repairing or replacing certain personal property
related to the use of the property while Baublys leased the facility.
The Company guaranteed the lease. Baublys filed a counterclaim
contending that it was entitled to receive damages from Phillips for
damage to specific property due to Phillips failure to maintain the
leased premises. The Company believes there is no merit to the claims
made by Phillips and that the ultimate outcome of this matter will not
have a significant impact on the financial position and liquidity of the
Company. However, if Phillips is successful in its claims, Baublys could
be subject to approximately $300 thousand in damages plus interest and/or
attorney fees.
The Company and its subsidiaries are subject to various claims,
which have arisen in the normal course of business. The impact of the
final resolution of these matters on the Company's results of operations
or liquidity in a particular reporting period is not known. Management
is of the opinion, however, that the ultimate outcome of such matters
will not have a material adverse effect upon the Company's financial
condition or liquidity.
I. GOODWILL
........
The change in the goodwill balance during the three months ended
March 25, 2005 is attributable to changes in foreign currency exchange
rates used to translate the goodwill contained in the financial
statements of foreign subsidiaries.
J. RECLASSIFICATIONS
.................
Certain reclassifications have been made to the 2004 balances to
conform to the 2005 presentation.
Item 2. Management's Discussion and Analysis of Financial
.................................................
Condition and Results of Operations
...................................
Overview
.........
The Company designs, manufactures and markets a variety of
photonics-based solutions primarily consisting of laser systems and
electro-optical components for industrial and scientific applications.
The Company's current range of products include laser marking and
engraving systems, laser micro-machining systems, CO2 lasers, optical
scanners, high power solid state CW and Q-switched lasers, ultrafast
lasers, high energy solid state pulsed lasers, precision optical
components and light and color measurement instruments. The laser and
electro-optical industry is subject to intense competition and rapid
technological developments. Our strength and success is dependent upon
us developing and delivering successful, timely and cost effective
solutions to our customers. The Company believes, for it to maintain its
performance, it must continue to increase its operational efficiencies,
improve and refine its existing products, expand its product offerings
and develop new applications for its technology. The Company's strategy
is to grow internally and through acquisitions of complementary
businesses. Historically, the Company has successfully integrated
acquired companies.
Results of Operations
......................
Net sales and services for the quarter ended March 25, 2005
decreased $6.1 million or 16.7% to $30.2 million from $36.3 million for
the quarter ended March 26, 2004. The decrease is primarily attributable
to decreased scanner, marking systems and high energy solid state pulsed
laser sales. In addition, we experienced slight decreases in sales in
our other laser product lines.
Gross margins increased to 46.4% for the three months ended March
25, 2005 from 45.4% for the three months ended March 26, 2004. The
increase is primarily due to the product mix. Gross margins vary from
direct sales to distributor sales and also among the more than 250
Company product configurations.
Selling and marketing expenses decreased to $4.3 million in the
quarter ended March 25, 2005 from $4.8 million in the quarter ended March
26, 2004. The decrease of $432 thousand or 9.0% is primarily
attributable to decreased variable costs such as commissions associated
with the decreased sales volume. Selling and marketing expenses as a
percentage of sales increased to 14.4% for the quarter ended March 25,
2005 from 13.2% for the quarter ended March 26, 2004. The increase as a
percentage of sales is essentially attributable to fixed costs being
absorbed by lower sales volume.
General and administrative expenses increased $429 thousand or 15.3%
from $2.8 million in the quarter ended March 26, 2004 to $3.2 million in
the quarter ended March 25, 2005. The increase is primarily attributable
to increased professional fees associated with the continuing compliance
with Sarbanes-Oxley legislation related to internal controls, increased
audit fees and increased legal fees, primarily for the Dr. Phillips
litigation, offset partially by lower bonus expense as a result of lower
operating income.
Research and development costs were $3.3 and $3.4 million for the
quarters ended March 25, 2005 and March 26, 2004, respectively. The cost
of research activities for most of our products was consistent for the
two periods in comparison. Research and development costs increased as a
percentage of sales due to fixed costs being absorbed by lower sales
volume.
The increase in interest income of $127 thousand to $183 thousand in
the quarter ended March 25, 2005 from $56 thousand in the quarter ended
March 26, 2004 is primarily due to higher average investable cash
balances during the quarter ended March 25, 2005.
Foreign currency gains and other income was $155 thousand for the
quarter ended March 25, 2005 as compared to $170 thousand for the quarter
ended March 26, 2004. This is primarily attributable to the recording of
$146 thousand and $220 thousand foreign currency transaction gains in
2005 and 2004, respectively, principally at Excel Europe for the
settlement of payables due in U.S. dollars for the purchase of
inventories from the Company's U.S. subsidiaries as a result of the
decline in the value of the U.S. dollar against the Euro.
The provision for income taxes decreased $795 thousand or 46.1% from
$1.7 million in the quarter ended March 26, 2004 to $930 thousand for the
current quarter ended March 25, 2005. The decrease is primarily
attributable to lower pre-tax income in 2005 combined with a lower
effective tax rate. The effective tax rate was 27% for the quarter ended
March 25, 2005 compared to 30% for the year ended December 31, 2004. The
lower rate in 2005 was primarily due to an increase in tax-exempt income
and the settlement of an income tax contingency for less than the amount
previously accrued.
Liquidity and Capital Resources
................................
Cash Flow Overview
Cash, cash equivalents and investments increased $3.5 million during
the first quarter of 2005 to $45.2 million. The increase was primarily
due to the net cash provided by operating activities of $4.2 million
partially offset by net cash used for capital expenditures of $528
thousand. The Company also experienced an unfavorable foreign exchange
effect on cash and cash equivalents of $166 thousand during the first
quarter of 2005. As of March 25, 2005 the Company had no bank debt.
At March 25, 2005, the Company had working capital of $81.8 million,
including cash, cash equivalents and auction rate notes of $45.2 million,
compared to working capital of $80.0 million, including cash, cash
equivalents and auction rate notes of $41.8 million, at December 31,
2004. The working capital increased by $1.8 million and cash, cash
equivalents and investments increased by $3.5 million during the first
quarter of 2005.
Net cash provided by operating activities was $4.2 million for the
quarter ended March 25, 2005 and $2.7 million for the quarter ended March
26, 2004, which were primarily attributable to net income plus the
depreciation and amortization expenses, increased by net changes in
working capital items in 2005, and offset partially by net changes in
working capital items in 2004. Depreciation and amortization for the
quarter ended March 25, 2005 was $617 thousand. Accounts receivable at
March 25, 2005 of $21.0 million increased $1.2 million from December 31,
2004 primarily due to the timing of the shipments in the first quarter of
2005. Inventory at March 25, 2005 of $28.8 million decreased $49
thousand from December 31, 2004.
Net cash used in investing activities of $4.7 million was primarily
attributable to the purchase of short-term auction rate notes for $4.2
million and equipment for $528 thousand for the quarter ended March 25,
2005. Net cash used in investing activities of $2.7 million for the
quarter ended March 26, 2004 was due primarily to the purchase of short-
term auction rate notes for $2.5 million and equipment for $178 thousand.
Net cash provided by financing activities was $11 thousand and $595
thousand for the quarters ended March 25, 2005 and March 26, 2004,
respectively resulting from the proceeds received upon the exercise of
employee stock options.
As of March 25, 2005, the Company has no lines of credit.
The Company intends to continue to invest in product development,
plant and equipment and marketing in support of its growth strategy.
These investments aid in retaining and acquiring new customers, expanding
the Company's current product offerings and further developing its
operating infrastructure. The Company believes that current cash, cash
equivalents and investments will be sufficient to meet these anticipated
cash needs for at least the next twelve months. However, any projections
of future cash needs and cash flows are subject to substantial
uncertainty. If current cash, cash equivalents and investments and those
that may be generated from operations are insufficient to satisfy the
Company's liquidity requirements, the Company may seek to sell additional
equity or debt securities or secure lines of credit. The sale of
additional equity or convertible debt securities could result in
additional dilution to the Company's stockholders. 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 or
cause the Company to issue additional equity or debt securities. There
can be no assurance that financing will be available, on terms that are
acceptable to the Company or at all.
Inflation
..........
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
New Accounting Pronouncements
..............................
On December 21, 2004, the Financial Accounting Standards Board
("FASB") issued FASB Staff Position No. FAS 109-1, "Application of FASB
Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation
Act of 2004" (FSP No. 109-1"), and FASB Staff Position No. FAS 109-2,
"Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004" ("FSP No. 109-
2"). These staff positions provide accounting guidance on how companies
should account for the effects of the American Jobs Creation Act of 2004
that was signed into law on October 22, 2004. FSP No. 109-1 states that
the tax relief (special tax deduction for domestic manufacturing) from
this legislation should be accounted for as a "special deduction" and
reduce tax expense in the period(s) the amounts are deductible on the tax
returns, instead of a tax rate reduction. FSP No. 109-2 gives a company
additional time to evaluate the effects of the legislation on any plan
for reinvestment or repatriation of foreign earnings for purposes of
applying FASB Statement No. 109. The Company is evaluating whether it
might repatriate any of its $2 million of undistributed foreign earnings,
which is expected to be completed within a reasonable amount of time
after additional guidance is published. The evaluation is affected by
many factors, including the Company's projected cash requirements and the
impact of the new tax law's one-time deduction for qualifying
repatriations. If the Company decides to repatriate foreign earnings, it
estimates the potential income tax effect would be to record a tax
liability at a rate of 5% or less.
In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based
Payment" ("SFAS No. 123 (R)"). This statement replaces SFAS No. 123,
"Accounting for Stock-Based Compensation" and supercedes APB No. 25,
"Accounting for Stock Issued to Employees." SFAS 123 (R) requires all
stock-based compensation to be recognized as an expense in the financial
statements and that such cost be measured according to the grant-date
fair value of the stock options or other equity instruments. SFAS 123
(R) will be effective for the first annual period beginning after June
15, 2005. While the Company currently provides the pro forma disclosures
required by SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," on a quarterly basis (see "Note B -
Accounting for Stock-Based Compensation"), it is currently evaluating the
impact this statement will have on its consolidated financial statements.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs -
an amendment of ARB No. 43, Chapter 4" ("SFAS No. 151"). SFAS No. 151
requires all companies to recognize a current-period charge for abnormal
amounts of idle facility expense, freight, handling costs and wasted
materials. This statement also requires that the allocation of fixed
production overhead to the costs of conversion be based on the normal
capacity of the production facilities. SFAS No. 151 will be effective
for fiscal years beginning after June 15, 2005. The Company is currently
evaluating the effect that this statement will have on its consolidated
financial statements.
Forward-Looking Statements
...........................
The information set forth in this Report (and other reports issued
by the Company and its officers from time to time) contain certain
statements concerning the Company's future results, future performance,
intentions, objectives, plans and expectations that are or may be 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. These forward-looking statements are based on current
expectations that involve numerous risks and uncertainties, including
those risks and uncertainties discussed in the Company's Annual Report on
Form 10K for the year ended December 31, 2004. Assumptions relating to
the foregoing involve judgments with respect to, among other things,
future economic, competitive, and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately
and many of which are beyond the Company's control. Although the Company
believes that its assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and,
therefore, the Company cannot assure you that the results discussed or
implied in such forward-looking statements will prove to be accurate. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
..........................................................
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 foreign currency 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, cash equivalents and investments, with carrying
amounts approximating market value. Assuming March 25, 2005 cash and
investment levels, a one-point change in interest rates would have an
approximate $450 thousand impact on the annual interest income of the
Company.
Foreign Currency Exchange Rates
................................
Operating in international markets involves exposure to movements in
currency exchange rates that 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 represent
a large percentage of total net sales and services. 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
generally has not engaged in foreign currency hedging transactions. The
aggregate foreign exchange gains included in determining consolidated
results of operations were $146 thousand and $220 thousand in the
quarters ended March 25, 2005 and March 26, 2004, respectively.
Changes in the Euro and Yen have 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 4. Controls and Procedures
.......................
Conclusion Regarding the Effectiveness of
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form
10-Q, the Company carried out an evaluation, under the supervision and
with the participation of the Company's management, including the CEO and
CFO, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.
Based upon that evaluation, the Company's CEO and CFO concluded that the
Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's
periodic SEC filings.
There were no significant changes in the Company's internal control
over financial reporting during the quarterly period ended March 25, 2005
that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
.................
Dr. Phillips, Inc. ("Phillips"), the landlord of a facility
leased through 2001 by Baublys-Control Laser ("Baublys"), a
wholly owned subsidiary of the Company, filed a lawsuit in the
Circuit Court of the Ninth Judicial Circuit in and for Orange
County, Florida against Baublys and the Company, for not
repairing or replacing certain personal property related to the
use of the property while Baublys leased the facility. The
Company guaranteed the lease. Baublys filed a counterclaim
contending that it was entitled to receive damages from
Phillips for damage to specific property due to Phillips
failure to maintain the leased premises. The Company believes
there is no merit to the claims made by Phillips and that the
ultimate outcome of this matter will not have a significant
impact on the financial position and liquidity of the Company.
However, if Phillips is successful in its claims, Baublys could
be subject to approximately $300 thousand in damages plus
interest and/or attorney fees.
The Company and its subsidiaries are subject to various claims,
which have arisen in the normal course of business. The impact
of the final resolution of these matters on the Company's
results of operations or liquidity in a particular reporting
period is not known. Management is of the opinion, however,
that the ultimate outcome of such matters will not have a
material adverse effect upon the Company's financial condition
or liquidity.
Item 2. Changes in Securities, Use of Proceeds and
..........................................
Issuer Purchases of Equity Securities
.....................................
None.
Item 3. Defaults upon Senior Securities
...............................
None.
Item 4. Submission of Matters to a Vote of Security-Holders
...................................................
None.
Item 5. Other Information
.................
None.
Item 6. Exhibits and Reports on Form 8-K
................................
a) Exhibits - 11. Computation of net income per share
31.1 Certification Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350
32.2 Certification Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350
b) Reports on Form 8-K - Filed in the first quarter of 2005:
Form 8-K filed on January 7, 2005 relating to the
employment agreement with Alice Varisano, the Company's
Chief Financial Officer.
Form 8-K filed on January 27, 2005 relating to the
press release announcing the earnings for the year
ended December 31, 2004.
Form 8-K filed on March 15, 2005 amending the
employment agreement with Antoine Dominic, the
Company's Chief Executive Officer.
Form 8-K filed on March 15, 2005 amending the
employment agreement with J. Donald Hill, the Company's
Chairman.
Form 8-K/A filed on March 21, 2005 amending the 8-K
filed on March 15, 2005 relating to the amendment to
the employment agreement with J. Donald Hill, the
Company's Chairman.
SIGNATURES
..........
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
DATED: April 26, 2005
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
.....................................
J. Donald Hill, Chairman of the Board
By: /s/ Antoine Dominic
.....................................
Antoine Dominic, President,
Chief Executive Officer and
Chief Operating Officer
By: /s/ Alice Varisano
.....................................
Alice Varisano,
Chief Financial Officer
INDEX TO EXHIBITS
.................
Exhibit No. Description
11 Computation of Net Income Per Share
31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
32.2 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share data)(Unaudited)
BASIC DILUTED
Three Months Ended Three Months Ended
March 25, March 26, March 25, March 26,
.................. ..................
2005 2004 2005 2004
......... ......... ......... ........
Net income $ 2,513 $ 4,047 $ 2,513 $ 4,047
......... ......... ......... ........
......... ......... ......... ........
Weighted average common
shares outstanding 12,053 11,972 12,053 11,972
Weighted average common share
equivalents outstanding:
Stock options 0 0 182 472
......... ......... ......... ........
Weighted average common shares
and common share equivalents
outstanding 12,053 11,972 12,235 12,444
......... ......... ......... ........
......... ......... ......... ........
Net income per share $ 0.21 $ 0.34 $ 0.21 $ 0.33
......... ......... ......... ........
......... ......... ......... ........
As of March 25, 2005, there were 381 thousand stock options outstanding
that are antidilutive and not included in the above income per share
calculations.
EXHIBIT 31.1
CERTIFICATION
..............
I, Antoine Dominic, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Excel
Technology, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
By: /s/ Antoine Dominic
............................
Antoine Dominic, President,
Chief Executive Officer, and
Chief Operating Officer
Dated: April 26, 2005
EXHIBIT 31.2
CERTIFICATION
..............
I, Alice Varisano, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Excel
Technology, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
By: /s/ Alice Varisano
.......................
Alice Varisano,
Chief Financial Officer
Dated: April 26, 2005
EXHIBIT 32.1
CERTIFICATION OF PERIODIC REPORT
.................................
I, Antoine Dominic, Chief Executive Officer of Excel Technology,
Inc. (the "Company"), certify, pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge,:
(1) the Quarterly Report on Form 10-Q of the Company for the period
ended March 25, 2005 (the "Report") fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15.
U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Dated: April 26, 2005
/s/ Antoine Dominic
............................
Antoine Dominic, President,
Chief Executive Officer, and
Chief Operating Officer
A signed original of this written statement required by Section 906
of the Sarbanes-Oxley Act of 2002 has been provided to the Company and
will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION OF PERIODIC REPORT
.................................
I, Alice Varisano, Chief Financial Officer of Excel Technology, Inc.
(the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge,:
(1) the Quarterly Report on Form 10-Q of the Company for the period
ended March 25, 2005 (the "Report") fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15.
U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Dated: April 26, 2005
/s/ Alice Varisano
.......................
Alice Varisano,
Chief Financial Officer
A signed original of this written statement required by Section 906
of the Sarbanes-Oxley Act of 2002 has been provided to the Company and
will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
23