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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1996
Commission File Number 0-26634
LeCROY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2507777
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
700 CHESTNUT RIDGE ROAD, CHESTNUT RIDGE , NEW YORK 10977
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914) 425-2000
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 $.01 Per Share
(Title of Class)
Indicate by check mark ("X") 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 twelve 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 the 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 number of shares outstanding of the registrant's Common Stock, as of August
15, 1996, was 5,453,062 shares. The aggregate market value on August 15, 1996
of the Common Stock held by non-affiliates of the registrant was $134,963,284.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1996 Annual Meeting of Stockholders are
incorporated by reference in Part III hereof.
Portions of the Prospectus to Form S-1 Registration Statement No. 33-95620 are
incorporated by reference.
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TABLE OF CONTENTS
Page
Part I............................................................ 3
Item 1. Business........................................... 3
Item 2. Properties......................................... 16
Item 3. Legal Proceedings.................................. 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 4A. Executive Officers of the Registrant............... 16
Part II........................................................... 18
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 18
Item 6. Selected Financial Data............................ 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 20
Item 8. Financial Statements and Supplementary Data........ 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 46
Part III.......................................................... 46
Item 10. Directors and Executive Officers of the Registrant. 46
Item 11. Executive Compensation............................. 46
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 46
Item 13. Certain Relationships and Related Transactions..... 46
Part IV........................................................... 46
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................ 46
This report contains certain forward-looking statements that are subject to
risks and uncertainties, including without limitation those discussed herein in
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and those discussed in the section
entitled "Risk Factors" in the Prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) on or about October 9, 1996 (which
section is hereby incorporated by reference herein). These risks and
uncertainties could cause the Registrant's actual results in future periods to
differ materially from its historical results and from any opinions or
statements expressed in such forward-looking statements. Such forward-looking
statements speak only as of the date of this report, and the Registrant
cautions readers not to place undue reliance on such statements.
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PART I
ITEM 1. BUSINESS
LeCroy Corporation (the "Registrant") was founded and incorporated in the
State of New York in 1964. The Company reincorporated in the State of Delaware
in July, 1995. The New York corporation executed an Agreement and Plan of
Merger with the Registrant, then its wholly owned subsidiary, pursuant to which
the New York Corporation merged with and into the Registrant. The merger did
not result in any change of the Company's Board of Directors, management,
operations or financial condition. The term "Company" used in this report means
the Registrant and its consolidated subsidiaries unless the context indicates
otherwise.
The Company develops, manufactures and sells signal analyzers, principally
high-performance digital oscilloscopes, and related products. Digital
oscilloscopes capture electronic signals, convert them to digital form and
perform sophisticated measurements and analyses. The Company's digital
oscilloscope products are used by design engineers and researchers in a broad
range of industries, including electronics, computers and communications.
The Company's digital oscilloscope technology is derived from its
historical efforts in developing products for scientists engaged in high energy
physics ("HEP") research. Since its founding in 1964, the Company has designed
and manufactured signal analyzers for a number of leading HEP research
laboratories. The Company's signal analyzers were used in Nobel Prize-winning
experiments at CERN (Centre Europeen pour la Recherche Nucleaire) near Geneva,
Switzerland and the Brookhaven National Laboratory in Upton, New York. The
Company believes that it is the leading supplier of signal analyzers to the HEP
market, as measured by both annual shipments and installed base.
In 1985, the Company introduced its first digital oscilloscope product.
Subsequently, the Company expanded its digital oscilloscope product offerings
to include a variety of models with a broad range of capabilities to address
most segments of the digital oscilloscope market. Commencing in fiscal 1994,
the Company began to concentrate its digital oscilloscope product offerings on
a single high-performance product family, its 9300 series. The Company believes
that certain models of its 9300 series offer the highest sampling rate, and
others the longest record length, available to date in the digital oscilloscope
market. The Company's shift toward a single family of high-performance digital
oscilloscopes has resulted in a significant increase in revenues. The Company's
total revenues were $63.8 million, $82.3 million and $101.5 million for the
fiscal years ended June 30, 1994, 1995 and 1996, respectively, and sales of
digital oscilloscopes and related products accounted for approximately 75%, 80%
and 85% of the Company's total revenues for those fiscal years.
Industry Background
Researchers, engineers and field technicians rely on test and measurement
instrumentation such as signal analzers in designing, developing and servicing
electronic equipment. When designing and developing electronic circuits,
researchers and engineers use signal analyzers to ensure that the circuits are
performing as designed. Field technicians use such instruments to diagnose
electronic equipment to determine whether it is performing as intended.
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The most general-purpose test and measurement instrument used for signal
analysis is the digital oscilloscope. Digital oscilloscopes are signal
analyzers that, like their earlier analog counterparts, can display a
representation of an electronic signal's "shape," which is essentially a
measure of a signal's voltage as a function of time. Digital oscilloscopes,
however, go beyond the capabilities of analog oscilloscopes in that they
capture a signal in digital form by sampling it over time and storing the data
or measurements in memory. The stored signal can then be viewed later and, more
importantly, the instrument can perform various analyses on the stored data.
During the past few decades, there has been an increasing proliferation of
electronics in general and digital electronics in particular. The growth in
digital electronics has been driven primarily by the growth in stand-alone
computers and related systems, the increase in embedded digital controls within
other electronic and electrical devices and the rapid increase in digital
communications. Combined with the general growth in the quantity of digital
electronics, there has been a substantial increase in processing speed. For
example, processing speeds of personal computers have increased dramatically in
recent years from about 33 MHz to more than 200 MHz and sophisticated
communications equipment transmits data at rates that exceed 1 gigabit per
second.
Signal shape analysis is becoming increasingly important as data rates in
applications such as computers, local area networks (LANs) and
telecommunications systems increase. Within a given digital circuit, it takes a
finite amount of time for a digital signal to change from a "zero" or "off"
state to a "one" or "on" state. As digital data rates increase, signals within
a circuit may not have sufficient time to cleanly change from a "zero" to a
"one" or vice-versa. This distorts, or changes the shape of the digital signal,
which can lead to computation or information errors. To identify such problems,
engineers use digital oscilloscopes to analyze the signal's shape, which is not
generally possible using other measurement and analysis instruments (such as
protocol analyzers or logic analyzers).
Market
The Company believes that the digital oscilloscope market is generally
segmented according to bandwidth, and that with advances in technology, the
bandwidth requirements of each market segment will increase. The low-end or
commodity segment of the market currently requires low bandwidth (less than 200
MHz), low sample rates (of 100 MS/s or less) and short record lengths (less
than 10,000 points). These instruments typically sell for under $5,000. The
high-performance market segment (bandwidth of greater than 200 MHz) is
characterized by instruments with high sample rates (from 100 MS/s to 4 GS/s)
and long record lengths (from 10,000 to 8 million sample points) and greater
processing power to perform more sophisticated analyses. These high-performance
digital oscilloscopes typically range in price from $5,000 to $30,000, although
certain very high bandwidth oscilloscopes for specialized applications are
priced above $30,000.
According to Prime Data, Inc. ("Prime Data"), an independent industry
survey organization, total digital oscilloscope sales, excluding handhelds,
grew from $586.5 million in 1992 to $719.0 million in 1995. Prime Data
estimates that the four largest suppliers of digital oscilloscopes, exclusive
of handheld models, and their approximate respective market shares for
calendar 1995 were Tektronix, Inc. with 44.5%, Hewlett-Packard Company with
17.8%, LeCroy with 10.0% and Fluke Corporation with 5.8%.
5
The Company's 9300 digital oscilloscope product family is targeted at
customers in the high-performance market segment.
LeCroy Product Advantages
The Company believes that its expertise in signal shape analysis has
enabled it to develop digital oscilloscopes that provide key advantages over
competitive offerings:
- High Sample Rates. The Company's advanced technology, which includes
many sophisticated custom components, enables its digital oscilloscopes
to make measurements at high sample rates. The Company's Model 9362
offers sample rates of up to 10 GS/s, which the Company believes is the
highest sample rate available to date.
- Long Record Lengths. The Company's advanced memory architecture, which
includes many sophisticated custom components, enables its digital
oscilloscope products to have long record capability. The Company's
Models 9350 and 9370 offer record lengths of up to 8 million sample
points at 2 GS/s, which the Company believes is the longest record
length available to date.
- Powerful Processing Capability. The Company's multiprocessor
architecture in each of its 9300 models combines a Motorola 68020 or
68030 main processor with custom processors designed by the Company.
The combination of this advanced multiprocessing technology with the
Company's patented data-compaction techniques enables the rapid and
accurate display of long signals and the performance of complex
analyses.
- Sophisticated Analysis Software. The Company's analysis software
options, available either at the time of purchase or as aftermarket
upgrades, provide a wide range of capabilities customized for specific
end-user applications. By customizing its analysis software, the
Company believes that it can provide a total solution to a particular
customer's measurement and analysis requirements.
The Company believes that the high sample rates, long record lengths and
powerful hardware and software processing capabilities offered by its various
digital oscilloscope products position it to serve industries, such as the
computer disk drive and communications industries, that require the ability to
measure long, high-speed complex data streams. The Company believes that its
ability to offer digital oscilloscope customers products with these advantages
at what it believes are competitive prices permits it to compete favorably in
its target market segment.
Business Strategy
The Company's primary business objective is to become a leading supplier
of high-performance digital oscilloscopes. In addition, the Company intends to
use its core technology to develop dedicated signal analyzers for broader
markets. The Company is pursuing the following strategies to achieve these
objectives:
6
- Extend High-Performance Technology. The high-performance technology
that the Company originally developed in the technically demanding HEP
market and its continuing investment in research and development have
enabled it to develop a family of high-performance digital oscilloscope
products in the 9300 series, certain models of which feature what the
Company believes is the highest sample rate, and others the longest
record length, available to date. The Company intends to continue to
allocate significant resources to extending these performance
advantages.
- Target High-Growth Industries with Special-Purpose Oscilloscopes. The
Company's experience with users in certain industries has shown that
adding special features and processing capabilities to its digital
oscilloscopes permits it to offer total solutions for special data
measurement and analysis problems. For example, the Company has
developed digital oscilloscopes targeted at the particular data
measurement and analysis problems of the computer disk drive industry.
The Company believes that this strategy was a significant factor in the
growth of its sales to this industry, which accounted for approximately
18% of the Company's sales in its fiscal year ended June 30, 1996. The
Company recently introduced a special purpose oscilloscope for the
optical recording industries. The Company intends to target other high
growth industries that require special purpose oscilloscopes.
- Leverage Core Technology into New Product Markets. The Company believes
that it is well positioned to leverage its core technology to develop
dedicated signal analyzers for broader markets. The Company believes
that market opportunities for such products include the networking and
telecommunications industries. The Company is currently in the
development stage with respect to a product that would analyze
electronic signals in communications networks in order to provide
better monitoring and failure-diagnosis capabilities than can be
achieved using existing products.
There can be no assurance that the Company will be successful in
implementing its strategies, including whether it will be able to leverage its
core technologies into new product markets.
Products and Services
The Company's primary products are its 9300 family of digital
oscilloscopes, which are targeted at users who require high performance at
competitive prices. The Company also offers a complementary line of signal
source products that can be combined with its digital oscilloscopes to create a
complete test and measurement system for certain applications. In addition, the
Company continues to serve the HEP market with a broad line of modular signal
analysis products. The Company offers a full range of aftermarket service and
support for all its products.
Digital Oscilloscopes and Related Products. The Company's 9300 digital
oscilloscope products, which range in list price from approximately $5,000 to
approximately $30,000, offer precise measurement and analysis capability for
applications such as the design, development and testing of electrical and
electronic products. Such applications call for high bandwidths (up to 1,500
MHz), high sample rates (up to 10,000 MS/s), long record lengths (up to 8
million sample points) and require greater processing capability to perform
sophisticated analysis of the input signals.
7
The Company's 9300 series consists of the following digital oscilloscope
products:
Maximum Record
Maximum Maximum Length Calendar
Bandwidth Sample Rate (number of Year of
Model Number (MHz)^ (MS/s)^ sample points) Introduction
930x 200 100 200,000 1992
9361 300 2,500 500*/25,000 1993
931x 400 100 1,000,000 1991
935x 500 2,000 8,000,000 1994
937x 1,000 2,000 8,000,000 1995
938x 1,000 4,000 4,000,000 1996
9362 750*/1,500 10,000 1,000*/25,000 1995
^ 1,000 MHz = 1 GHz
^ 1,000 MS/s = 1 GS/s
* At maximum sample rate.
Most of the models in the table above are available in several
configurations offering varying record lengths. The "x" suffix used in the
table above denotes a particular product number that is based on the product's
configuration. Taking into account all available configurations, the Company
offers a total of 30 different products in the 9300 family.
The Company believes that the following features give its 9300 series
products one of the best user interfaces in the digital oscilloscope market:
- Large, high-resolution amber monochrome display, organized in a manner
that facilitates easy readout and analysis of displayed data.
- User-friendly control panel.
- Main processor with up to 64 MB of random access memory.
- Flexible options for data storage (floppy disk, PCMCIA memory card,
PCMCIA removable hard disk).
- Optional built-in printer that allows users to produce a print-out of
the display at the touch of a button.
- A standard general-purpose interface bus ("GPIB") that enables the
digital oscilloscope to be part of a measurement and analysis system
that uses other GPIB-compatible instruments.
As part of its strategy to focus on its 9300 series product family, the
Company is phasing out its other digital oscilloscope product offerings. The
Company is continuing to sell its current inventory of these products, sales
of which accounted for less than 10% of the Company's total revenues for the
fiscal year ended June 30, 1996.
The Company offers its customers a wide array of post-sale upgrades of
important components, such as memory, processor and analysis software, as well
as optional features such as mass storage capability and built-in printers.
These product upgrades and options allow the Company's customers to add
performance and features to adapt their digital oscilloscopes to new
measurement and analysis requirements as they arise, which the Company believes
reduces the risk of product obsolescence to a certain degree.
8
To provide its digital oscilloscope customers with what it believes are
total solutions to their data measurement and analysis problems, the Company
develops, manufactures and sells a complementary line of signal source products
that can create input signals so that an electronic circuit can be evaluated
under controlled conditions. Using a digital oscilloscope, an engineer can
analyze the shape of the signal within the circuit, compare it to the shape of
the "ideal" input signal generated by the signal source and thereby identify
problems in the circuit. The Company's signal source products consist of
programmable pulse generators and arbitrary waveform generators. Programmable
pulse generators produce standard analog or digital signals. Arbitrary waveform
generators are more versatile instruments that allow the user to fully program
the shape of the signals generated. For example, an arbitrary waveform
generator can be programmed to produce signals that simulate those produced by
a hard disk drive head. The Company's principal pulse generator product is its
Model 9200, the list price of which is approximately $11,000. Its principal
arbitrary waveform generator is its Model LW4xx, the list price of which is
approximately $19,000.
Sales of digital oscilloscopes and related products accounted for
approximately 85%, 80% and 75% of the Company's total revenues in its fiscal
years ended June 30, 1996, 1995 and 1994, respectively. Sales of products in
the Company's 9300 series (including sales of products in the 9400 series, the
predecessor to the 9300 series) accounted for approximately 79%, 65% and 58% of
the Company's total revenues in those fiscal years.
The following are examples of specific applications involving the
Company's 9300 series digital oscilloscope product family:
Data Storage - The computer disk drive industry is continually seeking
to apply advanced magnetic storage technology to increase data density
and reduce access time. Design engineers in this field require digital
oscilloscopes with high sample rates and long record lengths. The
Company believes that its Model 9354L digital oscilloscope, which
features a maximum sample rate of 2 GS/s and a maximum record length of
8,000,000 sample points, is well suited to such applications. In
addition to providing digital oscilloscopes that meet the disk drive
industry's requirements for high sample rates and long record lengths,
the Company has worked closely with customers in this industry to
develop specialized processing software that incorporates advanced
algorithms designed specifically for their particular measurement and
analysis requirements. The Company believes that the combination of its
high-performance data-acquisition technology with this specialized
processing capability has been a significant factor in the growth of
its sales to this industry, which accounted for approximately 18% of
the Company's revenues in the fiscal year ended June 30, 1996.
Cellular Telephones/Pagers - In contrast to many other applications,
the design of cellular telephones and pagers does not require digital
oscilloscopes with high bandwidths or sample rates. This is due to the
relatively longer and slower electronic signals associated with these
products. It is therefore important that digital oscilloscopes for
these applications have long record lengths and the ability to display
the captured data in a meaningful and usable format. The Company
believes that its Model 9314L digital oscilloscope is particularly well
suited to such applications. The Model 9314L has a medium bandwidth and
sample rate, but features a maximum record length of 1,000,000 sample
points. In addition, the Model 9314L has the ability to simultaneously
9
display the entire signal as well as an enlarged or "zoomed" view of a
portion of the signal.
Lasers - A typical laser pulse has a duration on the order of two
billionths of a second. To capture and analyze the shape of a laser
pulse, a digital oscilloscope must make measurements of its amplitude
many times during this period. The Company believes that its Model 9362
is well suited to this application as it has the capability to make
precise measurements at the rate of ten billion per second, therefore
permitting this oscilloscope to capture accurately the shape of the
laser pulse so that it can be analyzed.
HEP Products. A typical HEP experiment consists of a large assembly of
electronics that measures particle energy and speed from up to many hundreds of
thousands of particle detectors. These measurements are used to identify
individual particles and to study their interactions.
The Company's HEP product offerings consist of an extensive range of
modular products. These products include analog-to-digital converters, which
measure particle energy, time-to-digital converters, which measure particle
speed, logic triggers and high-voltage power sources. The modular nature of
these products enables experimenters to select products from the Company's HEP
product catalog and combine them in a configuration that provides an overall
solution to their particular data measurement and analysis problems.
Sales of HEP products (including digitizers) accounted for approximately
11%, 15% and 21% of the Company's total revenues in its fiscal years ended
June 30, 1996, 1995 and 1994, respectively.
Service and Aftermarket Products. The Company provides aftermarket
support, repair, maintenance and recalibration of installed Company products,
as well as installation of a variety of post-sale upgrades and optional
features. The Company maintains three major field service centers in Chestnut
Ridge, New York (located at the Company's corporate headquarters), Heidelberg,
Germany and Osaka, Japan. Sophisticated service on certain key components of
the Company's digital oscilloscope products, including on its printed circuit
boards, is performed only at the Company's manufacturing facilities in Geneva,
Switzerland and Chestnut Ridge, New York.
The Company warrants its digital oscilloscopes for three years (two years
for digital oscilloscopes sold prior to December 1, 1994), signal source
products from one to five years, and HEP products for one year.
Service and aftermarket products (including product upgrades) generated
approximately 4%, 5% and 4% of the Company's total revenues in its fiscal years
ended June 30, 1996, 1995 and 1994, respectively.
Customers
During the three fiscal years ended June 30, 1996, the Company shipped a
total of approximately 13,500 digital oscilloscopes worldwide. The largest
group of users of the Company's digital oscilloscopes are electronic product
designers and test engineers. Researchers in many scientific disciplines
including high-energy physics, medicine, geology, ultrasound and mechanics also
use the Company's digital oscilloscopes.
10
No single customer accounted for more than 4% of the Company's sales in
the fiscal year ended June 30, 1996. No single customer accounted for more than
10% of the Company's consolidated sales in any of the last three fiscal years.
The Company's top 25 customers in 1996, each of which purchased more than
$375,000 of products, and all of which together purchased an aggregate of
approximately $21.1 million of products in such year, consist of the following:
Computers/Disk Drives/Peripherals Government/Military/Aerospace
- - - Hitachi - Centre Europeen pour la
- - - International Business Machines Recherche Nucleaire (CERN)
Corporation - Defense Procurement Agency
- - - Iomega - Sandia National Labs
- - - Maxtor Corporation
- - - Quantum Corporation Consumer Electronics
- - - Seagate/Conner - Mitsubishi
- - - Western Digital - Sony
- Toshiba
Telecommunications Industrial
- - - 3COM - Matsushita
- - - Motorola, Inc. - Philips
- - - Thomson - Siemens AG
Other Automotive/Transportation
- - - AT&T Capital Corporation - Bosch
- - - Bruker Instruments - Hyundai Electronics Industries
- - - Fujitsu Limited Co., Ltd
- - - Telogy Incorporated
Sales, Marketing and Distribution
The Company maintains a direct sales force of highly trained, technically
sophisticated sales engineers who are knowledgeable in the use of signal
analyzers in general and the features and advantages of the Company's products
in particular. In addition, particularly because of the Company's focus on a
single high-performance product family of digital oscilloscopes, the Company
believes that its sales engineers are skilled in performing product
demonstrations for current and prospective customers. The Company believes it
has a competitive advantage in sales situations in which its sales engineers
have the opportunity to demonstrate the advantages of the Company's digital
oscilloscopes; accordingly, such demonstrations are an integral part of the
Company's sales strategy. In connection with its HEP products, the Company's
sales engineers typically consult with customers during the design and
implementation of an experiment to develop customized solutions to particular
data measurement and analysis problems.
In fiscal 1994, the Company began to reorganize its worldwide sales
organization in order to improve management of the sales function. This
reorganization included the centralization of certain support and
administrative functions for the Company's sales engineers and the closure of
certain sales offices in the United States and the centralization of certain
administrative functions for the Company's sales engineers in Europe. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
11
The Company sells its digital oscilloscope products through its own direct
sales force in the United States, Europe and Japan with regional sales
headquarters located in Chestnut Ridge, New York, Heidelberg, Germany and
Osaka, Japan. As of June 30, 1996, the Company's direct digital oscilloscope
sales force consisted of 67 sales engineers directed by eight regional managers
worldwide. The Company also uses manufacturer's representatives in support of
its direct selling efforts and in territories where the sales potential does
not currently justify the maintenance of a direct sales force. In addition, in
Japan the Company maintains a strategic alliance with Iwatsu Electric Co. Ltd.,
a Japanese communications and test-and-measurement company that sells and
distributes some of the Company's products under the "Iwatsu/LeCroy" label.
Eleven HEP sales engineers operate worldwide and report to the Company's
sales headquarters in Chestnut Ridge. The activities of the HEP sales engineers
are supplemented by manufacturer's representatives.
The Company believes that the successful implementation of its
technologies and services requires substantial marketing activities to key
target markets. The Company has reorganized and expanded its marketing
department to pursue the high end of the test and measurement market.
In order to raise market awareness of its products, the Company advertises
in trade publications, distributes promotional materials, conducts marketing
programs and seminars, issues press releases regarding new products, publishes
technical articles and participates in industry trade shows and conferences.
Seasonality
The Company historically has experienced somewhat lower activity during
its first fiscal quarter than in other fiscal quarters due, it believes,
principally to the lower level of orders and market activity during the summer
months, particularly in Europe. The Company believes this seasonable aspect of
its business is likely to continue in the future.
Research and Development
The Company believes that as a result of what it views as a continuing
shift in technology towards higher speed digital signals, users of signal
analyzer products will continue to demand higher bandwidths, higher sample
rates, longer record lengths and more powerful processing capabilities. The
primary objective of the Company's research and development program is to
extend its high performance technology in order to satisfy this demand, while
maintaining ease-of-use qualities and favorable price-to-performance ratios.
There can be no assurance that the Company will achieve this objective.
The Company is continuing to develop its sampling, data storage and
processing technologies using advanced integrated circuit techniques, and is
also working to improve its existing digital oscilloscope platform to provide
display enhancements, higher speed data processing and a broader range of
application-specific hardware and software options. The Company also is engaged
in the development of several new instruments and integrated circuits to
address the needs for precise amplitude and time measurement, and high-voltage
power supplies for a wide variety of particle detectors.
12
The Company intends to use its core technology to develop dedicated signal
analyzers for broader markets. The Company believes that possible market
opportunities for such products include the networking and communications
industries. The Company is currently in the research and development stage with
respect to a product that would analyze electronic signals in communications
networks in order to provide better monitoring and failure-diagnosis
capabilities than can be achieved using existing products. There can be no
assurance that the Company will be successful in developing such a signal
analyzer.
The Company conducts research and development activities in both its
Geneva, Switzerland and Chestnut Ridge, New York facilities. The Company's
research and development expenses, which are expensed as incurred, were
approximately $12.6 million, $10.3 million and $8.8 million in its fiscal years
ended June 30, 1996, 1995 and 1994, respectively, which expenses represented
12.5%, 12.5% and 13.7% of total revenues, respectively, for such fiscal years.
The Company intends to continue to invest approximately 12% to 13% of revenues
in its research and development efforts.
Manufacturing and Supplies
Prior to the Company's decision to concentrate on a single high-
performance product family of digital oscilloscopes, the Company's digital
oscilloscopes and related products were manufactured at the Company's
facilities in Geneva, Switzerland and Chestnut Ridge, New York, with HEP
products also manufactured at the Chestnut Ridge facility. Following that
decision, and until the first quarter of fiscal 1996, all 9300 series digital
oscilloscopes were manufactured at the Company's Geneva facility, with the
Chestnut Ridge facility principally manufacturing HEP products, signal source
products and hybrid and chip-on-board microcircuit assemblies for Geneva's
digital oscilloscope production. In June 1995, the Company commenced limited
manufacturing of its Model 935x digital oscilloscope in its New York facility,
with the ultimate objectives of satisfying United States demand for this and
other models in the 9300 series product family with units manufactured in New
York and better balancing the manufacturing output of the Geneva and New York
facilities.
This shift in manufacturing was undertaken for a variety of reasons,
including greater utilization of the New York facility in light of the reduced
volume in HEP sales, an expected reduction in certain customs duties resulting
from shipping parts rather than completed units to the United States from
Geneva, closer alignment of manufacturing and development facilities and, to
the extent that the Company is able to source components in the United States
for models assembled and sold in the United States, better currency matching of
revenues and related costs. The Company has established United States vendors
as sources for certain components, including printed circuit board assemblies,
that had previously been shipped from its Geneva facility to its New York
facility. As a result of this shift, the New York facility shipped in excess of
$28.8 million of product in fiscal 1996, including $10.9 million of its Model
935x. In addition, in June 1996 the New York facility commenced initial
manufacturing of the Company's newest oscilloscope, Model 938x, and shipped
$753,000 for worldwide distribution.
13
The Company obtains certain parts, components and sub-assemblies from
single sources. This has particularly been the case with several key integrated
circuits made by certain single source suppliers (Motorola, Philips, TRW and
LSI Logic). The Company believes that, for the printed circuit board assemblies
and integrated circuits in particular, alternative sources of supply would be
difficult to develop over a short period of time. An interruption in supply or
an increase in price for its parts, components and sub-assemblies would have a
material adverse affect on the Company's business, results of operations and
financial condition.
As of June 30, 1996, the Company's Geneva facility employed 41
manufacturing employees in an area devoted to such tasks of approximately
14,000 square feet and its New York facility employed 90 manufacturing
employees in an area devoted to such tasks of approximately 26,000 square feet.
Backlog
The Company's backlog of unshipped customer orders was approximately $8.0
million and $8.5 million as of June 30, 1996 and 1995, respectively. Customers
may cancel orders at any time. The Company believes that its level of backlog
at any particular time is not necessarily indicative of future operating
performance of the Company.
Foreign Currency Exchange
The Company has manufacturing facilities in both the United States and
Switzerland, purchases parts, components and sub-assemblies from suppliers
around the world in a variety of currencies and sells its products around the
world in a variety of currencies. As a consequence, the Company is exposed to
risks from fluctuations in foreign currency exchange rates with respect to a
number of currencies, changes in government policies and legal and regulatory
requirements, political instability, transportation delays and the imposition
of tariffs and export controls. Among the more significant potential risks to
the Company of relative fluctuations in foreign currency exchange rates is the
relationship among and between the United States dollar, Swiss franc and
Japanese yen, and, to a lesser extent, the German deutschemark, British pound,
French franc and Italian lira. During the fiscal year ended June 30, 1996,
approximately half of the Company's revenues and half of its costs and expenses
were denominated in currencies other than the United States dollars. Local
currency expenses resulting from manufacturing and the worldwide sourcing of
parts, components and sub-assemblies are not generally offset by related local
currency revenues, if any. The Company seeks to mitigate to some degree its
exposure to foreign currency exchange rate fluctuations by borrowing under its
multicurrency revolving credit facility in circumstances in which it is exposed
to significant local currency receivables. The Company does not attempt to
reduce its foreign currency exchange risks by entering into other foreign
currency management programs or hedging transactions and has no plans to do so
in the near term. As a consequence, there can be no assurance that the
Company's results of operations will not be adversely effected by fluctuations
in foreign currency exchange rates in the future, as a result of mismatches
between local currency revenues and expenses, the translation of foreign
currencies into the United States dollar, the Company's financial reporting
currency, or otherwise. Moreover, fluctuations in exchange rates could affect
demand for the Company's products. During the fiscal years ended June 30, 1994
and 1995, foreign currency exchange losses amounted to $512,000 and $684,000,
respectively. During the fiscal year ended June 30, 1996, the Company reported
a foreign currency exchange gain of $539,000.
14
Competition
The market for signal analyzers is highly competitive and characterized by
rapid and continual advances in technology. Some of the Company's principal
competitors have substantially greater sales and marketing, development and
financial resources than the Company. The Company believes that each of these
companies offers a wide range of products that attempt to address most segments
of the digital oscilloscope market.
The Company believes that the principal bases of competition in the signal
analyzer market are a product's performance (bandwidth, sample rate, record
length and processing power), its price and quality, the vendor's name
recognition, reputation, product availability and the availability and quality
of post-sale support. The Company also believes that its success will depend in
part on its ability to maintain and develop the advanced technology used in its
signal analyzer products and its ability to offer high-performance products at
a favorable price-to-performance ratio. The Company believes that it currently
competes effectively with respect to each of the principal bases of competition
in the signal analyzer market in the general price range ($5,000 to $30,000) in
which its digital oscilloscopes are focused and that it will be able to
continue to do so, but there can be no assurance that this is or will be the
case.
The Company believes that its principal competition in the HEP market
comes from its customers themselves, who are technically sophisticated and
frequently choose to construct their own measurement and analysis systems. The
Company also believes that the rest of this market is highly fragmented and
consists of a number of small firms, no one of which commands a significant
market share.
Patents, Trademarks and Licenses
The Company currently relies on a combination of patents, trade secrets,
technical expertise and continuing technological research and development to
establish and protect proprietary rights in its products. The Company believes,
however, that because of the rapid pace of change and advancement in digital
oscilloscope technology, legal intellectual property protection is and will
continue to be a less significant factor in the Company's success than the
Company's core competency in converting electronic signals to digital form and
the experience and expertise of its personnel.
The Company protects significant technologies, products and processes that
it considers important to its business by, among other things, filing
applications for patent protection. As of June 30, 1996, the Company held a
total of eleven United States patents expiring in the years from 2000 to 2012.
The Company holds one foreign patent. The Company also has pending an
application for one additional United States patent and for six additional
foreign patents. The patent positions of high-technology companies such as the
Company are uncertain, however, and involve complex legal issues and factual
questions. There can be no assurance that any of the Company's pending or
future applications will result in issued patents or that any issued patents
will provide the Company with adequate protection of the covered technologies,
products or processes. Moreover, the laws of foreign countries in which the
Company's products are or may be developed, manufactured or sold may not
protect the Company's intellectual property and other proprietary rights to the
same extent as the laws of the United States.
15
Although the Company believes that its products and technologies do not
infringe the proprietary rights of third parties, there can be no assurance
that third parties will not assert claims against the Company based on the
infringement or alleged infringement of any such rights. Such claims are
typically costly to defend, regardless of the legal outcome. There can be no
assurance that the Company would prevail with respect to any such claim, or
that a license to third-party rights, if needed, would be available on
acceptable terms. In any event, patent and proprietary rights litigation can
be extremely protracted and expensive.
In February 1994, the Company settled litigation with Tektronix, Inc.
involving allegations that the Company's digital oscilloscope products
infringed patents held by Tektronix. As part of the settlement, the Company
entered into a license agreement with respect to such patents. Pursuant to the
license agreement the Company made an initial payment of approximately $1.5
million. In addition, the Company is required to make future royalty payments
in a minimum aggregate amount of $3.5 million over ten years ending June 30,
2004 and may be required to make up to an additional $3.5 million in contingent
royalty payments depending on its sales of certain products in certain
territories over the life of the patents. Royalty expense approximated $781,000
and $963,000 in fiscal 1995 and 1996, respectively. The settlement agreement
provides that Tektronix may terminate the license in the event that the Company
acquires 20% or more of the stock of, or a controlling interest in, any of a
number of specified companies participating in the oscilloscope market or any
of their respective affiliates (each, a "Restricted Company") or a Restricted
Company acquires 20% or more of the stock of, or a controlling interest in, the
Company or an affiliate of the Company, or any attempt to transfer the
Tektronix license to a Restricted Company is made. This provision of the
settlement could preclude the Company from making an investment in or
acquisition of such companies, and it also could discourage such companies or
another third party from attempting to acquire control of the Company or limit
the price that such a third party might be willing to pay for the Common Stock.
In addition, this provision could limit the price that investors might be
willing to pay in the future for the Common Stock.
Employees
As of June 30, 1996, LeCroy had 476 employees, of whom 270 work in the
Company's New York facility, 119 work in the Company's Geneva facility, and the
remainder work in various other Company offices around the world. None of the
Company's employees is represented by a labor union and the Company has not
experienced any work stoppages. The Company believes that its employee
relations are generally satisfactory. A majority of the Company's senior
managers has over five years of service with the Company.
Regulation
As the Company manufactures its products in the United States and
Switzerland, and sells its products and purchases parts, components and
sub-assemblies in a number of countries, the Company is subject to legal and
regulatory requirements, particularly the imposition of tariffs, customs and
export controls, in a variety of countries. In addition, the export of digital
oscilloscopes from both the United States and Switzerland is subject to
regulation under the Treaty for Nuclear Non-Proliferation by such countries.
16
ITEM 2. PROPERTIES
The Company's executive offices and one of its manufacturing facilities
are located in a two-story, approximately 88,000 square foot building in
Chestnut Ridge, New York that is owned by the Company. The Company also leases
a three story office and manufacturing building in Geneva, Switzerland pursuant
to a lease expiring December 31, 2004. In addition, the Company leases other
offices around the world on a short-term basis to support its local sales and
service operations.
The Company believes that its facilities are in good working condition and
are suitable for its current operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
Name Age Position
Walter O. LeCroy, Jr 61 Chairman of the Board of Directors
Lutz P. Henckels 55 President, Chief Executive Officer
and Director
Werner H. Brokatzky 51 Vice President-Operations (Geneva)
Brian V. Cake 53 Vice President-Advanced Development
Raymond Chevalley 57 Vice President-Worldwide T&M Products
Clement R. Confessore 59 Vice President-Operations (United States)
John C. Maag 46 Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
Joseph J. Migliozzi 46 Vice President-High Energy Physics
James J. Mueller 43 Vice President-Worldwide T&M Engineering
Ronald S. Nersesian 36 Vice President-Marketing
Thomas H. Reslewic 37 Vice President-Worldwide Sales
Walter O. LeCroy, Jr., founder of the Company, has served as the Chairman
of the Board since the Company's inception. Mr. LeCroy was instrumental in the
initial development of the Company's core technology and remains active in the
design of the Company's products. Mr. LeCroy has a Bachelor of Arts degree in
physics from Columbia University.
Lutz P. Henckels has served as the President and the Chief Executive
Officer since July 1993. He served as a consultant for the Company from January
1993 until July 1993. Before joining the Company, Mr. Henckels served as the
President of U.S. Operations of Racal-Redac, Inc., an electronic design
automation company, from May 1989 until January 1993. Prior to 1989,
Mr. Henckels was the founder and Chief Executive Officer of HHB Systems, Inc.,
a public computer-aided design and test company. Mr. Henckels has Bachelor of
17
Science and Master of Science degrees in electrical engineering, and a Doctor
of Science degree in computer science, from the Massachusetts Institute of
Technology. Mr. Henckels serves as a director of IKOS Corporation.
Werner H. Brokatzky joined the Company in August 1978 as the Manager of
Finance and Administration, served as Vice President-Finance (Geneva) from
March 1990 to December 1995, and has served as Vice President-Operations
(Geneva) since January 1996. Before joining the Company, Mr. Brokatzky served
as an apprentice at Volksbank Schopfheim.
Brian V. Cake has served as Vice President-Advanced Development since
1986. He joined the Company as an engineer in November 1980. Mr. Cake has a
Bachelor of Science degree in electrical and electronic engineering from City
University in London.
Raymond Chevalley has served as Vice President-Worldwide T&M Products
since January 1996. Mr. Chevalley joined the Company as an engineer in
September 1969 and served as Vice President-Operations (Geneva) from January
1973 to December 1995. He established the Company's first European office in
1972. Mr. Chevalley has a degree in engineering from the Geneva Engineering
School.
Clement R. Confessore has served as the Vice President-Operations (United
States) since joining the Company in January 1994. Before joining the Company,
Mr. Confessore was the Senior Vice President of Operations at RasterOps
Corporation, a computer monitor manufacturing company. Mr. Confessore has a
Bachelor of Science degree in mechanical engineering from Norwich University
and a Master of Business Administration degree from Southwest University.
John C. Maag has served as the Vice President-Finance/Chief Financial
Officer, Secretary and Treasurer since December 1995. Before joining the
Company, Mr. Maag was the Corporate Controller of Dynatech Corporation, a
voice, data and video communications company from May 1987 to December 1995.
Mr. Maag has a Bachelor of Science degree in accounting from St. Joseph's
College and is a Certified Public Accountant.
Joseph J. Migliozzi has served as the Vice President-High Energy Physics
since May 1995. Mr. Migliozzi served as Vice President-Finance/Chief Financial
Officer and Treasurer from May 1985 to December 1995. Mr. Migliozzi has a
Bachelor of Business Administration degree in accounting and a Master of
Business Administration degree from Pace University and is a Certified Public
Accountant.
James J. Mueller has served as the Vice President-Worldwide T&M
Engineering since June 1996. Mr. Mueller served as R&D Manager-T&M from April
1992 to May 1996. Mr. Mueller has a Bachelor of Arts degree in physics from
Rutgers University and a Master of Science and Doctor of Science degrees in
physics from Princeton University.
Ronald S. Nersesian has served as the Vice President-Marketing since March
1996. Before joining the Company, Mr. Nersesian was the Division Marketing
Manager for a test & measurement division of Hewlett-Packard Company. Mr.
Nersesian has a Bachelor of Science degree in electrical engineering from
Lehigh University and a Master of Business Administration degree from New York
University.
18
Thomas H. Reslewic has served as Vice President-Worldwide Sales since
March 1996. He served as Vice President-Sales and Marketing from July 1994
until March 1996, as the General Manager for North American Sales, from 1993
until July 1994 and the Director of Marketing for the Company's Signal
Sources Division from 1990 until 1993. Previously, he spent eight years in
sales and marketing management with Tektronix, Inc., a manufacturer of digital
oscilloscopes and one of the Company's principal competitors. Mr. Reslewic has
a Bachelor of Science degree in physics from The College of the Holy Cross and
a Master of Business Administration degree from the University of Oregon.
Executive officers of the Company are appointed by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive
officers or directors of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
LeCroy's common stock has been traded on the Nasdaq National Market under
the symbol LCRY since the Company's initial public offering on October 5, 1995.
The following table sets forth, for the periods indicated, the range of high
and low sales prices for the Common Stock as reported by Nasdaq.
High Low
1996 (1)
Second Quarter (2) $19.25 $10.50
Third Quarter 19.25 13.50
Fourth Quarter 22.25 14.00
(1) The Company's stock did not trade publicly in the first quarter of
fiscal year 1996.
(2) From October 5, 1995, the effective date of the Company's initial
public offering.
The Company has never declared or paid cash dividends on its Common Stock
and intends to retain all available funds for use in the operation and
expansion of its business. The Company therefore does not anticipate that any
cash dividends will be declared or paid in the foreseeable future. As of June
30, 1996, there were approximately 230 holders of record of the Common Stock.
19
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated Statements of Operations data for the five
years ended June 30, 1996 and the Balance Sheet data at June 30, 1992, 1993,
1994, 1995 and 1996 are derived from the Consolidated Financial Statements of
the Company. The data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Consolidated Financial Statements and related Notes included herein.
Years Ended June 30,
1996 1995 1994 1993 1992
(in thousands, except per share data)
Statements of Operations Data:
Revenues
Digital oscilloscopes and related products...... $ 86,061 $65,785 $47,627 $42,812 $42,486
High energy physics products.................... 10,952 12,277 13,519 15,640 15,428
Service and other (1)........................... 4,478 4,210 2,696 2,835 2,003
------- ------ ------ ------ ------
Total..................................... 101,491 82,272 63,842 61,287 59,917
Cost of sales (2)................................. 45,545 37,777 28,252 26,930 26,568
------- ------ ------ ------ ------
Gross profit.............................. 55,946 44,495 35,590 34,357 33,349
Selling, general and administrative expenses...... 34,623 27,950 22,831 23,029 22,626
Research and development expenses................. 12,639 10,315 8,770 9,736 9,299
Restructuring costs (3)........................... 930
------- ------ ------ ------ ------
Operating income.......................... 8,684 6,230 3,059 1,592 1,424
Technology dispute settlement costs (4)........... 2,073 278
Other expenses.................................... 134 2,212 1,694 1,434 1,100
------- ------ ------ ------ ------
Income (loss) before income taxes and
extraordinary charge.............. 8,550 4,018 (708) (120) 324
Provision for income taxes........................ 2,992 1,408 331 30 124
------- ------ ------ ------ ------
Income (loss) before extraordinary charge. 5,558 2,610 (1,039) (150) 200
Extraordinary charge for early retirement of debt. (1,300)
------- ------ ------ ------ ------
Net income (loss)......................... $ 4,258 $ 2,610 $(1,039) $ (150) $ 200
======= ====== ====== ====== ======
Income (loss) per share before extraordinary charge $ .93 $ .56 $ (.24) $ (.03) $ .04
Extraordinary charge.............................. (.22)
------- ------ ------ ------ ------
Net income (loss) per share....................... $ .71 $ .56 $ (.24) $ (.03) $ .04
======= ====== ====== ====== ======
Weighted average common shares outstanding (5).... 5,953 4,683 4,407 4,418 4,628
June 30,
1996 1995 1994 1993 1992
(in thousands)
Balance Sheet Data:
Working capital................................... $32,041 $21,791 $13,120 $16,818 $16,056
Total assets...................................... 62,400 49,836 39,477 35,252 36,398
Total debt and capitalized leases................. 5,673 18,042 15,235 12,530 12,607
Total stockholders' equity........................ 37,472 17,440 12,820 12,518 13,477
20
__________
(1) Service and other includes sales and product upgrades.
(2) Included in cost of sales in fiscal 1995 and 1996 are recurring technology license royalties
pursuant to an agreement settling certain litigation.
(3) Restructuring costs were incurred in fiscal 1994 due to a restructuring of the Company's
worldwide sales organization and the closure of its research facility in the United Kingdom.
(4) Included in technology dispute settlement costs in fiscal 1993 and fiscal 1994 are certain
legal fees and related expenses and also in fiscal 1994 a $1.5 million payment related to
the settlement referred to in Note 2 above.
(5) See "Per Share Information" in Note 1 to Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Consolidated Financial Statements
and Notes thereto included elsewhere in this Annual Report on Form 10-K.
This section contains certain forward-looking statements that are subject
to risks and uncertainties, including without limitation those discussed in the
section entitled "Risk Factors" in the Prospectus filed by the Registrant with
the Securities and Exchange Commission pursuant to Rule 424(b) on August 9,
1995 (which section is hereby incorporated by reference herein). These risks
and uncertainties could cause the Registrant's actual results in future periods
to differ materially from its historical results and from any opinions or
statements expressed in such forward-looking statements. Such forward-looking
statements speak only as of the date of this report, and the Registrant
cautions readers not to place undue reliance on such statements.
Overview
Since the Company's founding in 1964, the Company has been designing,
manufacturing and selling high performance signal analyzers to scientists
engaged in HEP research. Since calendar year 1983, the Company has applied its
HEP technology to the design and development of digital oscilloscopes, its
principal product. Digital oscilloscopes are signal analyzers that capture
electronic signals, convert them to digital form and perform sophisticated
measurements and analyses. The Company's digital oscilloscope products are used
by design engineers and researchers in a broad range of industries, including
electronics, computers and communications.
In 1985, the Company introduced its first digital oscilloscope product.
Commencing in fiscal 1994, the Company began to focus its digital oscilloscope
product offerings on a single high-performance product family, the 9300 series,
which has resulted in a significant increase in revenues. The Company's total
revenues were $63.8 million, $82.3 million and $101.0 million for the fiscal
years ended June 30, 1994, 1995 and 1996, respectively, and sales of digital
oscilloscopes and related products accounted for approximately 75%, 80% and 85%
of the Company's total revenues for those fiscal years.
In 1993, the Company adopted a performance improvement strategy pursuant
to which the Company hired new managers, including a new Chief Executive
Officer, to supplement the existing management team. As part of the performance
improvement strategy, the Company's worldwide sales organization was
restructured, the Company's United Kingdom research and development facility
was closed and the Company's product offerings were streamlined to focus on a
single family of high-performance digital oscilloscopes, the 9300 series which
21
is currently composed of 30 models. The focus on a single high-performance
product family, together with management's continued emphasis on operational
improvements, have resulted in efficiency gains in product development,
manufacturing, marketing, sales and service. These factors, together with an
increase in revenues, have contributed to an increase in operating margin from
4.8% for the fiscal year ended June 30, 1994 to 8.5% for the fiscal year ended
June 30, 1996.
The Company has manufacturing facilities in both the United States and
Switzerland and purchases parts, components and sub-assemblies from a variety
of vendors around the world in a variety of currencies and sells its products
around the world in a variety of currencies. This subjects the Company to
certain risks including fluctuations in foreign currency exchange rates,
changes in government policies and legal and regulatory requirements, political
instability, transportation delays and the imposition of tariffs and export
controls. For information with respect to the risks arising from fluctuations
in foreign currency exchange rates and certain measures adopted by the Company
in an effort to mitigate to a degree such risks, see "Business-Foreign Currency
Exchange."
Results of Operations
The following table sets forth for the periods indicated the percentage
of total revenues represented by each line item in the Company's statement of
operations:
Years Ended June 30,
1996 1995 1994
Revenues
Digital oscilloscopes and related products.... 84.8% 80.0% 74.6%
High energy physics products.................. 10.8 14.9 21.2
Service and other............................. 4.4 5.1 4.2
----- ----- -----
Total.................................... 100.0 100.0 100.0
Cost of sales.................................... 44.9 45.9 44.3
----- ----- -----
Gross profit.................................. 55.1 54.1 55.7
Selling, general and administrative expenses..... 34.1 34.0 35.8
Research and development expenses................ 12.5 12.5 13.7
Restructuring costs.............................. - - 1.4
----- ----- -----
Operating income.............................. 8.5 7.6 4.8
Technology dispute settlement costs.............. - - 3.2
Other expenses, net.............................. 0.1 2.7 2.7
----- ----- -----
Income (loss) before income taxes and
extraordinary charge....................... 8.4 4.9 (1.1)
Provision for income taxes....................... 2.9 1.7 0.5
----- ----- -----
Income (loss) before extraordinary charge..... 5.5 3.2 (1.6)
Extraordinary charge for early retirement of debt (1.3) - -
----- ----- -----
Net income (loss)............................. 4.2% 3.2% (1.6)%
===== ===== =====
22
Comparison of Fiscal Years 1996 and 1995
Total revenues increased to $101.5 million in 1996 from $82.3 million in
1995, or 23%, and represented record revenues for the Company. Revenues
increased primarily as a result of an increase in sales of higher margin
digital oscilloscopes and related products. On a geographic basis, total
revenues increased to $42.2 million in 1996 from $35.8 million in 1995, or 18%,
in the United States, to $42.3 million in 1996 from $33.3 million in 1995, or
27%, in Europe and to $17.0 million in 1996 from $13.2 million in 1995, or 29%,
in the rest of the world, principally Japan and the rest of Asia.
Revenues from sales of digital oscilloscopes and related products
increased to $86.1 million in 1996 from $65.8 million in 1995, or 31%. Sales of
digital oscilloscopes and related products, in terms of units, increased to
approximately 6,000 in 1996 from approximately 5,100 in 1995, or 18%. This
increase in revenues and units was primarily attributable to an increase in
sales of the higher-end products in the Company's 9300 family of digital
oscilloscopes which, in terms of units, increased to approximately 5,300 in
1996 from approximately 4,000 in 1995, or 33%. Average selling prices of
digital oscilloscopes and related products increased by 11% as compared to 1995
principally as a result of a continuing change in the Company's product mix
towards higher-end products.
Revenues from sales of HEP products decreased to $11.0 million in 1996
from $12.3 million in 1995, or 11%. The Company in recent years has experienced
a continuing decrease in HEP revenues due to a variety of factors, including a
decline in United States government funding for defense and the phase-out of
the Company's digitizer products. The Company believes that revenues from sales
of HEP products, which represented approximately 11% of total revenues in 1996
as compared to approximately 15% of total revenues in 1995, are likely to
continue to represent a declining portion of its total revenues in the future,
attributable in part to lower anticipated order volumes.
Service and other revenues increased to $4.5 million in 1996 from $4.2
million in 1995, or 6%, due primarily to the continued increase in marketing of
service and support programs for digital oscilloscopes and related products and
increased sales of upgrades for such products.
Gross profit for fiscal 1996 was 55.1% of revenues compared to 54.1% for
the prior year. This growth was due primarily to increased revenues from higher
sales volume of certain higher margin 9300 Series of digital oscilloscopes,
coupled with increased operating efficiencies at the Company's manufacturing
facility in Chestnut Ridge, New York. Approximately $933,000 of the increase in
cost of sales for 1996 was attributable to the weakening of the United States
dollar versus the Swiss franc as compared to the exchange rates prevailing in
1995.
Selling, general and administrative expenses increased to $34.6 million in
1996 from $28.0 million in 1995, or 24%. As a percentage of total revenues,
selling, general and administrative expenses was 34.1% in 1996 compared to
34.0% in 1995. These expenses increased as the Company expanded sales
management and support staff at its European, Asian and United States regional
sales headquarters and incurred additional sales commissions due to higher
sales volume and the hiring of additional administrative support staff.
Approximately $781,000 of the increase in selling, general and administrative
expenses in 1996 was attributable to the weakening of the United States dollar
versus the Swiss franc as compared to the exchange rates prevailing in 1995.
23
Research and development expenses increased to $12.6 million in 1996 from
$10.3 million in 1995, or 22%. This higher level of research and development
expenses reflects an increase in expenditures for prototype and development
costs of custom integrated circuits for use in digital oscilloscopes and
related products and initial development of an analog LAN network monitor. As
a percentage of total revenues, research and development expenses were 12.5% in
both 1996 and 1995. The Company's objective is to maintain annual research and
development expenses at approximately 12% to 13% of total revenues.
Operating income increased to $8.7 million in 1996 from $6.2 million in
1995, or 39%. As a percentage of total revenues, operating income was 8.6% in
1996 as compared to 7.6% in 1995. The increase in operating income was due
primarily to increased revenues in 1996 as compared to 1995 coupled with
improved operating efficiencies and other factors listed above.
Net interest and financing charges decreased to $672,000 in 1996 from
$1.5 million in 1995, or 56%. The decrease in the current year is due
primarily to reduced levels of debt, paid down from funds received in the
second quarter of fiscal 1996 from the Company's initial public offering.
Average borrowing levels were $7.6 million in 1996 as compared to $16.6 million
in 1995. Operating results in fiscal 1996 and 1995 included currency exchange
gains (losses) of approximately $539,000 and ($684,000), respectively.
The Company's effective income tax rate for 1996 was 35%. Currently, the
Company's Swiss subsidiary operates under a tax agreement with the Canton of
Geneva pursuant to which the effective tax rate on income with respect to such
subsidiary was approximately 15% in 1996. This agreement is in effect through
the fiscal year ended June 30, 2000.
During fiscal 1996, an extraordinary charge of $1.3 million was incurred
relating to the write-off of deferred financing costs associated with the early
retirement of debt paid from the proceeds received from the Company's initial
public offering.
Income before extraordinary charge increased 113% to $5.6 million in 1996,
representing record earnings for the Company, compared to net income of $2.6
million for 1995. Income before extraordinary charge in 1996, as a percentage
of total revenues, was 5.5% compared to 3.2% in 1995. The improvement in 1996
was due primarily to increased revenues, improved operating efficiencies and
operating margins and the gain on currency exchange.
Comparison of Fiscal Years 1995 and 1994
Total revenues increased to $82.3 million in 1995 from $63.8 million in
1994, or 29%, primarily as a result of an increase in sales of digital
oscilloscopes and related products. On a geographic basis, total revenues
increased to $35.8 million in 1995 from $29.4 million in 1994, or 22%, in the
United States, to $33.3 million in 1995 from $26.1 million in 1994, or 28%, in
Europe and to $13.2 million in 1995 from $8.4 million in 1994, or 58%, in the
rest of the world, principally Japan and the rest of Asia.
Revenues from sales of digital oscilloscopes and related products
increased to $65.8 million in 1995 from $47.6 million in 1994, or 38%. Sales of
digital oscilloscopes and related products, in terms of units, increased to
approximately 5,100 in 1995 from approximately 3,900 in 1994, or 30%. This
increase in revenues and units was primarily attributable to an increase in
sales of the Company's 9300 family of digital oscilloscopes which, in terms of
24
units, increased to approximately 4,000 in 1995 from approximately 2,900 in
1994, or 37%. Average selling prices of digital oscilloscopes and related
products increased by 7% as compared to 1994 principally as a result of a
change in the Company's product mix towards higher-end products.
Revenues from sales of HEP products decreased to $12.3 million in 1995
from $13.5 million in 1994, or 9%. The Company in recent years has experienced
a continuing decrease in HEP revenues due to a variety of factors, including a
decline in United States government funding for defense and the phase-out of
the Company's digitizer products. Revenues from sales of HEP products
represented approximately 15% of total revenues in 1995 as compared to
approximately 21% of total revenues in 1994.
Service and other revenues increased to $4.2 million in 1995 from $2.7
million in 1994, or 56%, due primarily to increased marketing of service and
support programs for digital oscilloscopes and related products and increased
sales of upgrades for such products.
Approximately $3.3 million of the increase in total revenues for 1995 was
attributable to the net impact of the weakening of the United States dollar
versus the Japanese yen, Swiss franc and German deutschemark, offset in part by
the strengthening of the United States dollar versus the Italian lira, in each
case as compared to the exchange rates prevailing in 1994.
Gross profit increased to $44.5 million in 1995 from $35.6 million in
1994, or 25%. This growth was due primarily to increased revenues from sales
of the Company's 9300 family of digital oscilloscopes, manufactured at the
Company's facility in Geneva, Switzerland. The gross profit margin decreased to
54.1% in 1995 from 55.7% in 1994 due principally to the inclusion in 1995 of
technology license royalties of approximately $700,000, or 1% of total revenue,
the under-utilization of the Company's Chestnut Ridge, New York manufacturing
facility resulting from the phase-out of older generation oscilloscopes, the
reduction in sales of digitizer products produced in Chestnut Ridge and a
change in product mix (including service revenues). In an effort to increase
absorption of the fixed costs of the Chestnut Ridge facility, in June 1995 the
Company commenced limited manufacturing at such facility of its Model 935x
digital oscilloscope to supplement its manufacturing operations in Geneva.
Approximately $1.6 million of the increase in cost of sales for 1995 was
attributable to the weakening of the United States dollar versus the Swiss
franc and the Japanese yen as compared to the exchange rates prevailing in
1994.
Selling, general and administrative expenses increased to $28.0 million
in 1995 from $22.8 million in 1994, or 22%. However, as a percentage of total
revenues, selling, general and administrative expenses decreased to 34.0% in
1995 from 35.8% in 1994. Selling expenses increased approximately $2.4 million
as the Company expanded management and support staff at its European, Asian and
United States regional sales headquarters and hired additional sales engineers
in Japan. General and administrative expenses also increased by approximately
$800,000 due principally to the hiring of additional administrative support
staff and improvements made to the Company's information systems. In addition,
selling, general and administrative expenses increased by approximately
$700,000 principally due to higher advertising and promotional expenses
related to the 9300 family of digital oscilloscopes. Approximately $1.3 million
of the increase in selling, general and administrative expenses in 1995 was
attributable principally to the weakening of the United States dollar versus
the Swiss franc and Japanese yen as compared to the exchange rates prevailing
in 1994.
25
Research and development expenses increased to $10.3 million in 1995 from
$8.8 million in 1994, or 17.0%. This higher level of research and development
expenses reflects an increase in expenditures for the development of custom
integrated circuits for use in digital oscilloscopes and related products to
$1.5 million in 1995 from $700,000 in 1994. As a percentage of total revenues,
research and development expenses decreased to 12.5% in 1995 from 13.7% in
1994. This percentage decrease was due primarily to a significant growth in
revenues and slower growth in overall research and development expenses.
Operating income increased to $6.2 million in 1995 from $3.1 million in
1994, or 104%. As a percentage of total revenues, operating income was 7.6% in
1995 as compared to 4.8% in 1994. The increase in operating income was due
primarily to the factors noted above as well as the absence in 1995 of the
restructuring costs incurred in 1994.
Net interest and financing charges increased to $1.5 million in 1995 from
$1.2 million in 1994, or 29%, due primarily to higher average levels of debt
outstanding. Average borrowing levels were $16.6 million in 1995 as compared
to $13.8 million in 1994. Operating results in fiscal 1995 and 1994 included
currency losses of approximately $684,000 and $512,000, respectively.
The Company's effective income tax rate for 1995 was 35%. The Company's
Swiss subsidiary operates under a tax agreement with the Canton of Geneva
pursuant to which the effective tax rate on income with respect to such
subsidiary was approximately 12% in 1995. This agreement is in effect through
the fiscal year ended June 30, 2000.
Net income increased to $2.6 million in 1995 from a net loss of $1.0
million for 1994. Net income in 1995 as a percentage of total revenues was
3.2%; in 1994, the net loss represented (1.6)% of total revenues. The
improvement in 1995 was due primarily to the factors noted above as well as
the incurrence in 1994 of the $1.5 million initial settlement payment included
under technology dispute settlement costs.
Liquidity and Capital Resources
In October 1995 LeCroy completed an initial public offering of 1,500,000
shares of Common Stock at $12.00 per share, generating net proceeds to the
Company of approximately $15.3 million. These net proceeds, combined with net
cash generated from operating activities of $8.3 million, allowed the Company
to reduce funded debt to 13% of total capital at June 30, 1996. This compares
to a level of funded debt to total capital ranging from 48% to 54% at the end
of fiscal years 1992 through 1995. Working capital, including $10.3 million in
cash, increased to $32.0 million at June 30, 1996, which represented a working
capital ratio of 2.6 to 1, compared to $21.8 million, or 2.2 to 1, at June 30,
1995. Cash balances primarily reflect short-term deposits in Europe.
Cash flows from operating activities were $8.3 million in fiscal 1996, a
significant improvement in comparison to the prior two fiscal years as a result
of increased operating earnings in the current year coupled with improved asset
management. Combined accounts receivable and inventories at year-end were 40%
of fiscal 1996 sales compared to 46% in fiscal 1995 and 49% in fiscal 1994.
Capital expenditures were $3.7 million in fiscal 1996 compared to $2.9
million and $1.5 million in fiscal 1995 and 1994, respectively. These capital
expenditures were primarily for assembly, research, design and test equipment,
26
facilities improvements and information systems. Average net fixed assets
employed were $8.2 million, or 8.1% of fiscal 1996 sales, compared to $6.9
million or 8.3% of sales in fiscal 1995. LeCroy anticipates that its capital
spending for property and equipment in fiscal 1997 will approximate $7 million,
primarily for design and test equipment, information systems and facilities
improvements. Funding for capital expenditures generally will be provided from
internal sources.
In December 1995 the Company finalized its $15 million unsecured
multicurrency credit agreement with several commercial banks, maturing in
January 1999. At June 30, 1996, $4.6 million was borrowed on this facility. The
Company has met its financial covenants that include maintaining specified
financial ratios and positive levels of net income and limitations on capital
expenditures and lease obligations.
In addition, the Company maintains certain foreign borrowing and overdraft
facilities, principally a three million Swiss franc ($2.4 million using the
U.S. dollar/French franc exchange rate as of June 30, 1996) multicurrency
revolving credit agreement cancelable upon notice by the bank or the Company.
The Company's cash on hand, together with amounts available under its
multicurrency revolving credit agreement, and internally generated cash flow
will be sufficient to fund working capital and capital expenditure requirements
for at least the next twelve months.
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
LeCROY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors........................... 28
Consolidated Balance Sheets as of June 30, 1996 and 1995. 29
Consolidated Statements of Operations for the Years Ended
June 30, 1996, 1995 and 1994 ............................ 31
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1996, 1995 and 1994................. 32
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1996, 1995 and 1994............................. 33
Notes to Consolidated Financial Statements............... 35
28
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
LeCroy Corporation
We have audited the accompanying consolidated balance sheets of LeCroy
Corporation as of June 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1996. Our audits also included the
financial statement schedule listed in the Index 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 generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of LeCroy Corporation at June 30, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Hackensack, New Jersey
July 22, 1996
29
LeCROY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
1996 1995
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 10,315 $ 1,408
Accounts receivable, less allowance of $38 in
1996 and $44 in 1995, respectively................ 20,625 17,316
Inventories....................................... 20,104 20,014
Other current assets.............................. 1,278 1,476
------ ------
Total current assets.............................. 52,322 40,214
Property and equipment, at cost:
Land.............................................. 5,202 5,178
Furniture, machinery and equipment................ 25,948 24,583
------ ------
31,150 29,761
Less: Accumulated depreciation and amortization... (22,234) (22,338)
------ ------
8,916 7,423
Other assets......................................... 1,162 2,199
------ ------
$ 62,400 $ 49,836
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt...................................... $ 1,026 $ 4,069
Accounts payable.................................. 6,882 7,053
Accrued liabilities............................... 4,803 3,154
Accrued employee compensation and benefits........ 4,066 2,749
Income taxes payable.............................. 3,504 1,398
------ ------
Total current liabilities...................... 20,281 18,423
Long-term debt and capitalized leases................ 4,647 13,973
Contingencies and commitments
Stockholders' Equity:
Preferred stock, $.01 par value (Authorized
2,913,043 shares, none issued and outstanding
Series B Preferred stock, $.01 par value
(Authorized 782,609 shares, 559,131 issued and
outstanding in 1995)............................ - 6
Series C Preferred stock, $.01 par value
(Authorized 1,304,348 shares, 655,774 issued
and outstanding in 1995)........................ - 7
Common stock, $.01 par value (Authorized 45,000,000
shares; 5,877,732 and 2,938,939 issued and
5,426,606 and 2,317,000 outstanding in 1996 and
1995, respectively).............................. 59 29
Additional paid-in capital......................... 22,112 5,419
Less: Treasury stock at cost; (451,126 and 621,939
shares in 1996 and 1995, respectively)........... (2,334) (3,133)
Foreign currency translation adjustment............ 1,662 3,397
Retained earnings.................................. 15,973 11,715
30
------ ------
Total stockholders' equity...................... 37,472 17,440
------ ------
$ 62,400 $ 49,836
====== ======
The accompanying notes are an integral part of these financial statements.
31
LeCROY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years Ended June 30,
1996 1995 1994
Revenues:
Digital oscilloscopes and related products $ 86,061 $65,785 $47,627
High energy physics products.............. 10,952 12,277 13,519
Service and other......................... 4,478 4,210 2,696
------- ------ ------
Total.................................. 101,491 82,272 63,842
Cost of sales................................ 45,545 37,777 28,252
------- ------ ------
Gross profit.............................. 55,946 44,495 35,590
Operating expenses:
Selling, general and administrative....... 34,623 27,950 22,831
Research and development.................. 12,639 10,315 8,770
Restructuring costs....................... - - 930
------- ------ ------
Operating income............................. 8,684 6,230 3,059
Technology dispute settlement costs.......... - - 2,073
Other expenses, net.......................... 134 2,212 1,694
------- ------ ------
Income (loss) before income taxes and
extraordinary charge...................... 8,550 4,018 (708)
Provision for income taxes................... 2,992 1,408 331
------- ------ ------
Income (loss) before extraordinary charge.... 5,558 2,610 (1,039)
Extraordinary charge for early retirement
of debt................................... (1,300) - -
------- ------ ------
Net income (loss)............................ $ 4,258 $ 2,610 $(1,039)
======= ====== ======
Income (loss) per common share:
Income (loss) before extraordinary charge. $ 0.93 $ 0.56 $ (0.24)
Extraordinary charge...................... (0.22) - -
----- ---- -----
Net income (loss)......................... $ 0.71 $ 0.56 $ (0.24)
===== ==== =====
Weighted average number of common shares..... 5,953 4,683 4,407
===== ===== =====
The accompanying notes are an integral part of these financial statements.
32
LeCROY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
Foreign
Series B Series C Additional Currency
Preferred Stock Preferred Stock Common Stock Paid-in Treasury Stock Translation Retained
Shares Amount Shares Amount Shares Amount Capital Shares Amount Adjustment Earnings Total
Balance at July 1,
1993............... 3,525 $35 $2,102 (20) $ (203) $ 440 $10,144 $12,518
Common shares
repurchased....... (17) (170) (170)
Sale of shares...... 70 1 399 400
Foreign currency
translation....... 1,111 1,111
Net loss............ (1,039) (1,039)
----- -- ----- ---- ----- ----- ------- -------
Balance at June 30,
1994............... 3,595 36 2,501 (37) (373) 1,551 9,105 12,820
Common shares
repurchased....... (585) (2,760) (2,760)
Conversion of shares 656 $ 7 (656) (7) -
Sale of shares...... 559 $ 6 2,502 2,508
Sale of common
stock warrants.... 416 416
Foreign currency
translation....... 1,846 1,846
Net income.......... 2,610 2,610
--- -- --- -- ----- -- ----- --- ----- ----- ------ ------
Balance at June 30,
1995.............. 559 6 656 7 2,939 29 5,419 (622) (3,133) 3,397 11,715 17,440
Public sale of
common stock...... 1,500 15 15,297 15,312
Exercise of stock
rights............ 223 2 912 914
Conversion of
preferred stock... (782) (8) (656) (7) 1,439 15
Stock option and
stock purchase
plans............. 484 171 799 1,283
Foreign currency
translation....... (1,735) (1,735)
Net income.......... 4,258 4,258
----- --- ------- --- ------ ----- ------ ------
Balance at June 30,
1996.............. 5,878 $59 $22,112 (451) $(2,334) $ 1,662 $15,973 $37,472
===== === ======= === ======= ===== ====== ======
The accompanying notes are an integral part of these financial statements.
33
LeCROY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended June 30,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $ 4,258 $ 2,610 $(1,039)
Adjustments for noncash items included in
operating activities:
Depreciation and amortization............. 2,221 1,922 2,013
Deferred income taxes..................... 165 799 -
Extraordinary charge and other............ 1,300 (1,192) 128
Change in operating asset and liability
components:
Accounts receivable....................... (3,751) (1,271) (3,460)
Inventories............................... (510) (3,430) 291
Prepaid expenses and other assets......... (409) (273) 377
Accounts payable and accrued liabilities.. 1,536 1,799 796
Accrued employee compensation and benefits 1,415 (281) 532
Income taxes.............................. 2,050 267 197
----- ----- -----
Net cash provided by (used in) operating
activities................................ 8,275 950 (165)
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........ (3,720) (2,854) (1,537)
Proceeds from disposal of property and
equipment.............................. - 57 46
Due from officers......................... 147 608 (247)
----- ----- -----
Net cash used in investing activities........ (3,573) (2,189) (1,738)
----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt
and capitalized leases................. 4,600 23,676 8,010
Repayment of debt and capitalized leases.. (16,878) (19,534) (7,775)
Technology license payments............... - (1,549) 1,549
Sale of common stock...................... - 2,508 400
Repurchase of common stock................ - (2,760) (170)
Public sale of common stock............... 15,312 - -
Proceeds from sale of warrants............ - 16 -
Proceeds from exercise of stock rights.... 914 - -
Proceeds from exercise of stock options
and issuances.......................... 1,283 - -
----- ----- -----
Net cash provided by financing activities.... 5,231 2,357 2,014
----- ----- -----
Effect of exchange rates on cash............. (1,026) 79 92
----- ----- -----
Increase in cash and cash equivalents..... 8,907 1,197 203
Cash and cash equivalents at beginning of
the year............................... 1,408 211 8
----- ----- -----
Cash and cash equivalents at end of
the year............................... $ 10,315 $ 1,408 $ 211
====== ===== =====
34
Supplemental Cash Flow Disclosure
Cash paid during the year for:
Interest............................... $ 649 $ 1,336 $ 1,296
Income taxes........................... 731 418 211
The accompanying notes are an integral part of these financial statements.
35
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of LeCroy
Corporation (the "Company") and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. Certain prior year
amounts have been reclassified to conform with the current year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts in the financial statements
and the accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Substantially all revenue is recognized when products are shipped or
services are rendered to customers. Revenues from service contracts are
recognized ratably over the contract period.
Fiscal Year Ending Dates
The operations of the U.S. company, LeCroy Corporation, have a fiscal year
end of the Saturday closest to June 30 (July 2, 1994, July 1, 1995, and June
29, 1996). For each of the fiscal years, the fiscal year represented a 52 week
period. The majority of foreign subsidiaries have a June 30 fiscal year end.
The consolidated financial statements' year end references are stated as of
June 30.
Cash Equivalents
Cash equivalents represent highly liquid debt instruments with a maturity
of three months or less at the time of purchase. Financial instruments, which
potentially subject the Corporation to concentrations of credit risk, consist
primarily of short-term deposits in Europe with major banks located in various
cities with investment levels and debt ratings set to limit exposure with any
one institution.
Concentration of Credit Risks
The Company manufactures and sells electronic equipment to research
facilities, governmental agencies and the test and measurement industry. Sales
are to all regions of the United States as well as to a multitude of foreign
countries. The Company performs periodic credit evaluations of its customers'
financial condition. Credit losses have been minimal and within management's
expectations. There is no significant concentration of the Company's accounts
receivable portfolio in any customer or geographical region that presents a
risk to the Company based on that concentration.
36
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization
are provided on the straight-line basis. The estimated useful lives are as
follows:
Building 32 years
Furniture, machinery and equipment 3-12 years
Income Taxes
Income taxes are accounted for under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The statement requires that
deferred taxes be established for all temporary differences between book and
tax bases of assets and liabilities, measured using enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
United States income taxes have not been provided on the undistributed net
earnings of foreign subsidiaries which amount approximated $17,700 at June 30,
1996. Determining the tax liability that would arise if these earnings were
remitted is not practicable. The Company plans to reinvest substantially all
of these net earnings in assets located outside of the United States, thus
indefinitely postponing the remittance of such earnings.
Foreign Exchange
The Company's foreign subsidiaries use their local currency as the
functional currency and translate all assets and liabilities at current
exchange rates and all income and expenses at average exchange rates. The
adjustment resulting from this translation is included in a separate component
of stockholders' equity. Gains (losses) in fiscal 1996, 1995 and 1994 resulting
from foreign currency transactions approximated $539, $(684) and $(512),
respectively, and are included in other expenses.
Warranty
Estimated future warranty obligations related to products are provided by
charges to operations in the period that the related revenue is recognized.
Research and Development
Research and development costs are expensed as incurred.
Per Share Information
Net income (loss) per share is computed based upon the weighted average
number of shares of Common Stock and common share equivalents outstanding
during the periods presented. Common share equivalents result from outstanding
rights, options and warrants to purchase Common Stock and the conversion of
Preferred Stock are included to the extent dilutive. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83, shares
issuable upon exercise of stock rights, options and warrants granted during
the twelve months immediately preceding October 6, 1995, the date of the
Company's initial public offering, have been included in the calculation of the
37
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
shares used in computing net income (loss) per share as if they were
outstanding for all periods presented prior to the initial public offering
(using the treasury stock method), including loss years where the impact
of the incremental shares is anti-dilutive.
Treasury Stock
The Company delivers treasury shares upon the exercise of stock options
and the issuance of shares from the 1995 Employee Stock Purchase Plan. The
difference between the cost of the treasury shares, on a last-in, first-out
basis, and the exercise price of the option or the cost of shares from the
Employee Stock Purchase Plan is reflected in additional paid-in capital.
Hedging and Related Financial Instruments
The Company utilizes foreign currency based borrowings to hedge foreign
exchange risks.
2. Inventories
Inventories, including demonstration units in finished goods, are stated
at the lower of cost (first-in, first-out method) or market.
June 30,
1996 1995
Raw materials......................... $ 7,398 $ 7,932
Work in process....................... 6,539 3,616
Finished goods........................ 6,167 8,466
------ ------
$20,104 $20,014
====== ======
The allowance for excess and obsolete inventory, included above, amounted
to $2,459 in 1996 and $2,291 in 1995.
3. Other Assets
Other assets consist of the following:
June 30,
1996 1995
Deferred financing costs, net........ $ 282 $1,696
Patents and trademarks, net.......... 191 175
Other................................ 689 328
----- -----
$1,162 $2,199
===== =====
38
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Deferred financing costs are being amortized over the term of the related
debt; patents and trademarks are being amortized on the straight-line basis
over 20 years.
4. Income Taxes
Provision for income taxes is comprised of the following charges:
1996 1995 1994
Current - Foreign............................. $2,827 $ 609 $331
Deferred - Foreign............................ 165 799 -
----- ----- ---
Total $2,992 $1,408 $331
===== ===== ===
At June 30, 1996 and 1995, the components of the Company's deferred tax
assets are as follows:
June 30,
1996 1995
Deferred tax assets:
Revenue recognition.............................. $ 224 $ -
U.S. net operating loss carryforwards............ 1,166 540
Foreign net operating loss carryforwards......... 302 125
Research and development tax credit carryforwards 60 60
State investment tax credit carryforwards........ 300 300
Inventory reserves............................... 587 330
Vacation pay reserves............................ 91 122
Other, net....................................... 185 40
----- -----
Total deferred tax assets........................... 2,915 1,517
Valuation allowance for deferred tax assets......... (2,915) (1,517)
----- -----
Net deferred tax assets............................. $ - $ -
===== =====
Included in current income taxes payable in 1996 and 1995 is $521 and
$799, respectively, of current deferred income taxes payable associated with
foreign inventory provisions and other foreign tax reserves.
39
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
A reconciliation of the tax provision computed at the Federal statutory
tax rate to the Company's recorded tax provision is as follows:
1996 1995 1994
Tax computed at federal statutory tax rate $2,465 $1,367 $(244)
Officers' life insurance and other permanent
differences 72 102 83
Effect of foreign income (943) (225) (98)
Change in valuation allowance 1,398 157 589
Other, net - 7 1
----- ----- ---
$2,992 $1,408 $ 331
===== ===== ===
Federal tax net operating losses available for carryforward to future
years total approximately $2.9 million at June 30, 1996 and expire in the years
2009 thru 2011. Foreign tax net operating losses available for carryforward to
future years total approximately $703 at June 30, 1996, expiring at various
dates based on the country of origin.
The components of income (loss) before income taxes are as follows:
1996 1995 1994
Domestic $(1,810) $ (837) $(2,056)
Foreign 10,360 4,855 1,348
------ ----- -----
$ 8,550 $4,018 $ (708)
====== ===== =====
5. Term Debt
Term debt consists of the following:
June 30,
1996 1995
Revolving credit agreement............... $4,600 $ 6,250
Term loans............................... - 3,825
Subordinated debentures.................. - 4,500
Other.................................... 957 2,666
----- ------
5,557 17,241
Less: Current debt....................... 930 3,516
----- ------
$4,627 $13,725
===== ======
40
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
In December 1995, the Company finalized an unsecured $15 million
multicurrency revolving line of credit agreement with several commercial banks
which allows for borrowings in various currencies and provides for interest to
be payable quarterly at the highest of the prime rate, the federal funds rate
(as defined) plus 1/2 % or the Eurocurrency Interest Rate (as defined). This
facility replaced a previous secured agreement. As of June 30, 1996, United
States dollar advances were $4,600 at 8.25% interest, the carrying amount
approximates fair value based upon market rates. A commitment fee is assessed
on the unused line of credit, payable at the end of each calendar quarter, at
a rate of 1/4 of 1% per annum. The credit agreement expires on January 31,
1999. The agreement contains covenants that include maintaining specified
financial ratios and positive levels of net income and limitations on capital
expenditures and lease obligations.
In October 1995 proceeds received from the Company's initial public
offering were used to repay previously outstanding term loans and subordinated
debt. An extraordinary non-cash charge of $1.3 million of deferred financing
costs was taken resulting from the early extinguishment of this debt.
Interest expense, net, included in other expense was $672 in fiscal 1996,
$1,528 in fiscal 1995 and $1,182 in fiscal 1994.
At fiscal year end the Company had short-term unused lines of credit
aggregating $5,447 for foreign operations.
Aggregate maturities of the above term debt for each of the years in the
three year period ending June 30, 1999 are $ 930, $ 0 and $4,627, respectively.
6. Capital Stock and Option Plans
On October 5, 1995, the Company completed an initial public offering of
1,500,000 shares of Common Stock for the net proceeds of $15.3 million, at
which time 782,609 shares of Series B Preferred Stock and 655,774 shares of
Series C Preferred Stock were converted to Common Stock at the rate of one
share for one share.
On March 28, 1995, in conjunction with the issuance of $4.5 million of
subordinated debentures, the Company sold warrants, at $.023 per warrant to
purchase 695,652 shares of Common Stock, which are reserved for future
issuance, at an exercise price of $4.49 per share. The warrants are 100%
exercisable and expire on December 31, 2002. For accounting purposes, the
deemed value of the warrants was treated as additional financing costs and was
being amortized to interest expense over the outstanding period of the
subordinated debentures. As a result of repayments of the subordinated
debentures from the proceeds of the initial public offering, these costs were
written off as part of the extraordinary charge to earnings in the second
quarter of fiscal 1996.
In July 1995, the Board of Directors amended and restated the Incentive
Stock Option Plan of 1993. Under the Amended and Restated 1993 Stock Incentive
Plan, 1,521,739 shares of Common Stock can be issued through the exercise of
Incentive Stock Options, increasing 5% annually each July 1 during the term of
the Plan. At July 1, 1996, a maximum of 1,793,069 shares were reserved for
41
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
issuance. These options allow full-time employees, including officers, to
purchase shares of Common Stock at prices equal to fair market value at the
date of grant. For individuals who own more than 10% of the Common Stock of the
Company, the option price of the shares may not be less than 110% of the fair
market value on the date of grant. The vesting period and expiration of each
grant will be determined by the Compensation Committee of the Board of
Directors. This limitation does not apply to nonqualified stock options or
restricted stock awards that may be granted under the amended 1993 Plan.
Under the Amended and Restated 1993 Stock Incentive Plan adopted July,
1995, "non-qualified" stock options can be issued to full-time employees,
including officers and non-employee consultants. Options must be granted at an
exercise price of at least 85% of the fair market value on the date of grant.
The vesting period and expiration of each grant will be determined by the
Compensation Committee of the Board of Directors.
Transactions for incentive and "non-qualified" stock options for the Amended
and Restated 1993 Stock Incentive Plan for fiscal year 1996, 1995 and 1994 are
as follows:
1996 1995 1994
Option Price Option Price Option Price
Shares Per Share Shares Per Share Shares Per Share
Outstanding at July 1 1,051,278 $6.33-$10.47 479,659 $6.33-$10.47 44,959 $8.51-$10.47
Granted 327,706 9.20- 19.63 576,956 6.33- 8.05 434,700 6.33
Exercised (128,570) 6.33- 10.47 - - - -
Cancelled (2,202) 6.33- 9.20 (5,337) 6.33 - -
--------- ------------ --------- ------------ ------- ------------
Outstanding at June 30 1,248,282 $6.33-$19.63 1,051,278 $6.33-$10.47 479,659 $6.33-$10.47
========= ============ ========= ============ ======= ============
Options exercisable at
June 30 359,332 $6.33-$10.47 216,647 $6.33-$10.47 106,553 $6.33-$10.47
Stock Options available
for grant at June 30 144,887 382,203 873,387
======= ======= =======
In July 1995, the Board of Directors and stockholders approved the 1995
Non-Employee Director Stock Option Plan. Under the Non-Employee Director Option
Plan, 217,391 shares of Common Stock can be issued during the term of the Plan.
These options allow non-employee directors to purchase shares of Common Stock
at prices equal to fair market value at the date of grant. As of June 30, 1996,
no shares had been issued upon exercise of options granted under the Director
Option Plan, options for 25,364 shares were outstanding and options to purchase
192,027 shares were available for future grant under the Plan.
At June 30, 1996, the Company has reserved 2,034,734 shares of Common
Stock for the exercise of options.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). As allowable by SFAS 123, the Company will not
42
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
recognize compensation cost for stock-based employee compensation arrangements,
but rather, commencing in fiscal 1997, will disclose in the notes to the
consolidated financial statements the impact on net income and earnings per
share as if the fair value based compensation cost had been recognized.
7. Employee Benefit Plans
The Company maintains a qualified Employee Stock Ownership Plan ("ESOP"
or the "Plan") which has been established in accordance with the requirements
and provisions of the Employee Retirement Income Security Act of 1974 ("ERISA")
and has been approved by the Internal Revenue Service ("IRS").
Annually, the Board of Directors determines the contribution, if any, to
the Employee Stock Ownership Trust ("ESOT") which trust has been established
under the Plan for the purpose of administering and investing the funds
contributed by the Company. Annual contributions to the ESOP are not to exceed
15% of the aggregate gross payroll of all participants. Payment of benefits
may be satisfied by the Company's stock, cash or a combination thereof. For
each of the years ended June 30, 1994 and 1995, the Company contributed $450
to the ESOP. For the year ended June 30, 1996, the Company did not contribute
to the ESOP. Under the terms of the plan, the Company is required under certain
conditions to fund the repurchase of shares by the ESOP.
The Company has a trusteed employee 401(k) savings plan for eligible U.S.
employees. The Company does not match employee contributions currently.
For the year ended June 30, 1996, the Company intends to contribute $450
to domestic eligible employees who (i) may deposit the funds in the Company's
401(k) plan or (ii) may receive such funds as a direct payment.
The Company's subsidiary in Switzerland maintains a defined contribution
plan which requires employee contributions based upon a percentage of the
employee's earnings currently ranging from 2.0% to 6.5%. The employer makes a
matching contribution based also upon a percentage of the employee's earnings
currently ranging from 3.5% to 11.0%. Company contributions ($737 in 1996,
$549 in 1995 and $430 in 1994) were charged to expense.
In July 1995, the Company adopted the 1995 Employee Stock Purchase Plan
and reserved for issuance an aggregate of 434,783 shares of Common Stock. The
Plan allows eligible employees to purchase Common Stock, through payroll
deductions, at prices equal to 85% of fair market value on the first or last
business day of the offering period, whichever is lower. The option to purchase
Stock will terminate on July 7, 2005. To date, 42,624 shares have been issued
under the Employee Stock Purchase Plan and 392,159 shares were available for
future grant.
43
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
8. Business Segment
The Company operates in a single industry segment and is engaged in the
design, development, manufacture and sale of high-performance signal analyzers.
The Company's operations by geographic area for the years ended June 30, 1996,
1995 and 1994 are presented below:
Revenue
from Area
Total Interarea Unaffiliated Operating Identifiable
Revenue Revenue Customers Income Assets
1996
United States........... $ 48,035 $ (5,834) $ 42,201 $ (22) $28,631
Europe.................. 74,216 (31,937) 42,279 10,198 30,357
Other foreign........... 17,011 - 17,011 (65) 3,412
Interarea Eliminations.. (37,771) 37,771 - - -
------- ------ ------- ------ ------
$101,491 $ - $101,491 $10,111 $62,400
======= ====== ======= ====== ======
1995
United States........... $ 44,226 $ (8,466) $ 35,760 $ 290 $26,529
Europe.................. 61,449 (28,109) 33,340 6,707 19,003
Other foreign........... 13,172 - 13,172 226 4,304
Interarea Eliminations.. (36,575) 36,575 - - -
------ ------ ------ ----- ------
$ 82,272 $ - $ 82,272 $ 7,223 $49,836
====== ====== ====== ===== ======
1994
United States........... $ 37,003 $ (7,568) $ 29,435 $(1,436) $21,644
Europe.................. 45,303 (19,247) 26,056 4,798 14,944
Other foreign........... 8,351 - 8,351 383 2,889
Interarea Eliminations.. (26,815) 26,815 - - -
------ ------ ------ ----- ------
$ 63,842 $ - $ 63,842 $ 3,745 $39,477
====== ====== ====== ===== ======
Unallocated corporate expenses amounting to $1,427, $993 and $686 in 1996, 1995
and 1994, respectively, are excluded from area operating income.
Other foreign revenues consist principally of sales to Japan and Asia.
9. Commitments and Contingencies
Leases
The Company has capitalized leases for certain equipment. The original
cost of equipment under capitalized leases was $794 and $1,798 at June 30, 1996
and 1995, respectively. Accumulated amortization of these assets was $679 and
$985 at June 30, 1996 and 1995, respectively. The capitalized lease obligations
are payable through July, 1998 and bear interest at rates ranging from 7.40% to
7.64%. In addition, the Company leases certain offices, manufacturing
44
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
facilities and equipment under long-term non-cancelable operating leases. The
leases for facilities provide for all real estate taxes and operating expenses
to be paid by the Company. The following is a schedule by year of future
minimum lease payments, for capital and non-cancelable operating leases,
together with the present value of the net minimum lease payments as of June
30, 1996.
Capitalized Operating
Leases Leases
Years Ended June 30,
1997............................. $100 $ 1,938
1998............................. 7 1,831
1999............................. 13 1,604
2000............................. - 1,530
2001............................. - 1,214
2002 and beyond.................. - 4,206
--- ------
Net minimum lease payments....... 120 $12,323
======
Less amount representing interest 4
---
Present value of net minimum lease payments 116
Amounts due within one year 96
---
Long-term portion $ 20
===
Aggregate rental expense on noncancelable operating leases for the years
ended June 30, 1996, 1995 and 1994 approximated $2,844, $2,559 and $2,364,
respectively.
The Company has a 2,000 Swiss franc credit agreement which serves as
security for the lease on the Geneva facility.
Technology Dispute Settlement
In the normal course of business, the Company and its subsidiaries are
parties to various legal claims, actions and complaints. Included among these
claims in fiscal 1994 was an intellectual property claim in the form of a
lawsuit which alleged patent infringement with respect to some of the Company's
oscilloscope products. In February, 1994, the Company concluded negotiations
to resolve this dispute and avoid extensive litigation. The result was a
settlement and a license agreement requiring an initial payment by the Company
of $1,549 on July 5, 1994, in addition to $524 of related legal costs; legal
costs amounted to $278 in 1993. Minimum annual future royalty payments are $350
for ten years with potential for higher additional amounts annually. These
additional amounts are contingent on future product sales as described in the
settlement agreement and cannot exceed an aggregate of $3,500. Royalty expense,
which approximated $963 in 1996 and $781 in 1995, are included in cost of
sales.
45
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Restructuring Costs
During 1994, the Company restructured its sales and marketing organization
and also closed its research facility in the United Kingdom; total charges
incurred were $930. The restructuring was accomplished by a combination of
relocation of certain employees, early retirement and severance payments.
10. Quarterly Results of Operations (Unaudited)
Summarized unaudited quarterly operating results for fiscal year 1996 and
1995 is as follows:
Quarters Ended
Fiscal Year 1996 Fiscal Year 1995
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30,
1995 1995 1996 1996 1994 1994 1995 1995
(in thousands, except for per share data)
Revenues
Digital oscilloscopes and
related products........... $18,392 $21,553 $22,436 $23,680 $13,699 $15,441 $17,639 $19,006
High energy physics products 2,819 2,237 2,972 2,924 2,492 3,267 2,758 3,760
Service and other........... 1,189 1,023 1,132 1,134 839 1,005 1,169 1,197
------ ------ ------ ------ ------ ------ ------ ------
Total..................... 22,400 24,813 26,540 27,738 17,030 19,713 21,566 23,963
Cost of sales................. 10,283 11,156 11,797 12,309 7,634 9,044 9,969 11,130
------ ------ ------ ------ ----- ------ ------ ------
Gross profit................ 12,117 13,657 14,743 15,429 9,396 10,669 11,597 12,833
Selling, general and
administrative expenses...... 7,685 8,321 9,211 9,406 6,066 6,827 7,135 7,922
Research and development
expenses..................... 3,129 3,187 3,155 3,168 2,296 2,487 2,450 3,082
----- ----- ----- ----- ----- ----- ----- -----
Operating income............ 1,303 2,149 2,377 2,855 1,034 1,355 2,012 1,829
Other (income) expense, net... 307 132 47 (352) 601 353 700 558
----- ----- ----- ----- ----- ----- ----- -----
Income before taxes and
extraordinary charge......... 996 2,017 2,330 3,207 433 1,002 1,312 1,271
Provision for income taxes... 349 706 815 1,122 152 351 460 445
----- ----- ----- ----- ----- ----- ----- -----
Income before extraordinary
charge....................... 647 1,311 1,515 2,085 281 651 852 826
Extraordinary charge for early
retirement of debt........... 1,300
----- ----- ----- ----- ----- ----- ----- -----
Net income.................... $ 647 $ 11 $ 1,515 $ 2,085 $ 281 $ 651 $ 852 $ 826
===== ===== ===== ===== ===== ===== ===== =====
Income per share before
extraordinary charge......... $ .14 $ .21 $ .24 $ .32 $ .06 $ .14 $ .18 $ .18
Extraordinary charge.......... (.21)
---- ---- ---- ---- ---- ---- ---- ----
Net income per share.......... $ .14 $ .00 $ .24 $ .32 $ .06 $ .14 $ .18 $ .18
==== ==== ==== ==== ==== ==== ==== ====
46
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Weighted average common shares
outstanding.................. 4,632 6,212 6,439 6,544 4,693 4,688 4,679 4,672
47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the directors of the Company and with respect
to Item 405 disclosure of delinquent Form 3, 4 or 5 filers will be contained
in the Company's definitive Proxy Statement relating to its 1996 Annual Meeting
of Stockholders, which is scheduled to be held October 28, 1996; said
information is incorporated herein by reference. The discussion of executive
officers of the Company is included in Item 4A in Part I of this report under
"Executive Officers of the Company".
ITEM 11. EXECUTIVE COMPENSATION.
A description of the compensation of the Company's executive officers will
be contained in the section captioned "Executive Compensation" of the Proxy
Statement for the Company's 1996 Annual Meeting of Stockholders which is
scheduled to be held on October 28, 1996; said information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
A description of the security ownership of certain beneficial owners and
management will be contained in the Proxy Statement for the Company's 1996
Annual Meeting of Stockholders which is scheduled to be held on October 28,
1996; said information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Certain relationships and related transactions with management will be
contained in the Proxy Statement for the Company's 1996 Annual Meeting of
Stockholders which is scheduled to be held on October 28, 1996; said
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
(a) (1) Financial Statements - See Index to Financial Statements at Item 8
of this report.
(a) (2) Financial Statement Schedules
Schedule II: Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is included elsewhere
in the financial statements or notes thereto.
(a) (3) Exhibits
The following exhibits are filed with this report:
48
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of August 3, 1995, between the
Registrant and LeCroy Merger Corporation, filed as Exhibit 2.1 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
3.1 Certificate of Incorporation of the Registrant as of July 24, 1995,
filed as Exhibit 3.1 to Form S-1 Registration Statement No. 33-95620,
and is incorporated herein by reference.
3.2 Current By-Laws of the Registrant, filed as Exhibit 3.3 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.1 Letter of Employment, dated as of August 23, 1993, between the
Registrant and Lutz. P. Henckels, filed as Exhibit 10.15 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.2 Letter of Employment, dated as of August 24, 1995, between the
Registrant and Lutz. P. Henckels, filed as Exhibit 10.30 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.3 Letter of Employment, dated as of May 3, 1995, between the Registrant
and Joseph J. Migliozzi, filed as Exhibit 10.16 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.4 Employee Agreement Regarding Inventions, Confidentiality and Non-
Competition, dated as of March 28, 1995, between the Registrant and
Lutz. P. Henckels, filed as Exhibit 10.12 to Form S-1 Registration
Statement No. 33-95620, and is incorporated herein by reference.
10.5 Employee Agreement Regarding Inventions, Confidentiality and Non-
Competition, dated as of March 28, 1995, between the Registrant and
Walter O. LeCroy, Jr., filed as Exhibit 10.13 to Form S-1 Registration
Statement No. 33-95620, and is incorporated herein by reference.
10.6 Employee Agreement Regarding Inventions, Confidentiality and Non-
Competition, dated as of March 28, 1995, between the Registrant and
Brian V. Cake, filed as Exhibit 10.14 to Form S-1 Registration
Statement No. 33-95620, and is incorporated herein by reference.
10.7 LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan filed
as Exhibit 10.1 to Form S-1 Registration Statement No. 33-95620, and
is incorporated herein by reference.
10.8 LeCroy Corporation 1995 Non-Employee Director Stock Option Plan filed
as Exhibit 10.2 to Form S-1 Registration Statement No. 33-95620 dated
August 9, 1995, and is incorporated herein by reference.
10.9 LeCroy Corporation 1995 Employee Stock Purchase Plan filed as Exhibit
10.3 to Form S-1 Registration Statement No. 33-95620, and is
incorporated herein by reference.
49
10.10 Settlement and License Agreement, dated as of December 9, 1993, between
the Registrant and Tektronix, Inc. filed as Exhibit 10.11 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.11 Multicurrency Credit Agreement, dated as of December 12, 1995, between
the Registrant and The Chase Manhattan Bank, N.A. (as agent for the
lenders named therein).
10.12 Securities Purchase Agreement, dated as of March 28, 1995, between the
Registrant and the purchasers named therein filed as Exhibit 10.7 to
Form S-1 Registration Statement No. 33-95620, and is incorporated
herein by reference.
10.13 Shareholders Agreement, dated as of March 28, 1995, among the
Registrant, Walter O. LeCroy, Jr. and the investors named therein filed
as Exhibit 10.8 to Form S-1 Registration Statement No. 33-95620, and
is incorporated herein by reference.
10.14 Form of Common Stock Purchase Warrant filed as Exhibit 10.10 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.15 Form of Indemnification Agreement, between the Registrant and each of
its executive officers and directors filed as Exhibit 10.29 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.16 Agreement dated as of August 2, 1995, amending the Securities Purchase
Agreement filed as Exhibit 10.12 hereto filed as Exhibit 10.34 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.17 Agreement dated as of September 29, 1995, amending the Securities
Purchase Agreement filed as Exhibit 10.12 hereto filed as Exhibit 10.35
to Form S-1 Registration Statement No. 33-95620, and is incorporated
herein by reference.
10.18 LeCroy Corporation Employee Stock Ownership Trust Agreement, between
the Registrant and Cole Taylor Bank, dated September 13, 1995 filed as
Exhibit 10.36 to Form S-1 Registration Statement No. 33-95620, and is
incorporated herein by reference.
10.19 Amended and Restated LeCroy Corporation Employee Stock Ownership Plan
filed as Exhibit 10.37 to Form S-1 Registration Statement No. 33-95620,
and is incorporated herein by reference.
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP , Independent Auditors
27 Financial Data Schedule for the fiscal year ended June 30, 1996.
(b) Reports on Form 8-K
None.
50
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.
LECROY CORPORATION
August 7, 1996 By JOHN C. MAAG
John C. Maag
Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
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
WALTER O. LECROY Chairman of the Board and Director August 7, 1996
Walter O. LeCroy
LUTZ P. HENCKELS President, Chief Executive Officer August 7, 1996
Lutz P. Henckels and Director
JOHN C. MAAG Vice President-Finance, Chief August 7, 1996
John C. Maag Financial Officer, Secretary
and Treasurer
ROBERT E. ANDERSON Director August 7, 1996
Robert E. Anderson
DOUGLAS A. KINGSLEY Director August 7, 1996
Douglas A. Kingsley
WILLIAM G. SCHEERER Director August 7, 1996
William G. Scheerer
51
Schedule II
LeCROY CORPORATION
Valuation and Qualifying Accounts
Years Ended June 30, 1994, 1995 and 1996
(in thousands)
Balance at Additions (A)(B) Balance at
beginning charged to Deductions/ end
Description of period operations Other of period
Against trade receivables-
Year ended June 30, 1994
Allowance for doubtful
accounts................ $ 25 $ 7 $ (2) $ 30
Year ended June 30, 1995
Allowance for doubtful
accounts................ 30 32 (18) 44
Year ended June 30, 1996
Allowance for doubtful
accounts................ 44 2 (8) 38
Against inventories-
Year ended June 30, 1994
Allowance for excess and
obsolete................ 1,011 733 (120) 1,624
Year ended June 30, 1995
Allowance for excess and
obsolete................ 1,624 595 72 2,291
Year ended June 30, 1996
Allowance for excess and
obsolete................ 2,291 375 (207) 2,459
____________
(A) Accounts written-off.
(B) Merchandise disposals and/or impact of foreign currency.