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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 1-9125
AMERICAN TECHNICAL CERAMICS CORP.
(Exact Name of Company as Specified in Its Charter)
DELAWARE 11-2113382
---------------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1 NORDEN LANE, HUNTINGTON STATION, NY 11746
-------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
(631) 622-4700
(Telephone Number, Including Area Code)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ( X ) No ( )
Indicate by check mark whether the Company is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). Yes ( ) No ( X )
As of May 2, 2005, the Company had outstanding 8,475,473 shares of Common Stock,
par value $0.01 per share.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
MARCH 31, 2005 JUNE 30, 2004
------------------ ------------------
ASSETS (unaudited)
Current assets
Cash (including cash equivalents of $17 and
$502, respectively) $ 6,027 $ 4,534
Investments 1,998 2,508
Accounts receivable, net 10,238 10,563
Inventories 26,257 22,268
Deferred income taxes, net 2,868 2,777
Other current assets 1,036 865
------------------ ------------------
TOTAL CURRENT ASSETS 48,424 43,515
------------------ ------------------
Property, plant and equipment, net of accumulated depreciation
and amortization of $45,966 and $42,092, respectively 29,168 26,141
Other assets 198 197
------------------ ------------------
TOTAL ASSETS $ 77,790 $ 69,853
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (including related party debt of
$426 and $394, respectively) $ 2,911 $ 394
Accounts payable 2,198 2,065
Accrued expenses 4,580 5,107
Income taxes payable 1,772 1,049
------------------ ------------------
TOTAL CURRENT LIABILITIES 11,461 8,615
Long-term debt, net of current portion (including related party debt of
$2,573 and $2,896, respectively) 4,689 2,896
Deferred income taxes 2,964 3,515
------------------ ------------------
TOTAL LIABILITIES 19,114 15,026
------------------ ------------------
Commitments and contingencies
Stockholders' equity
Common Stock -- $0.01 par value; authorized 20,000 shares; issued 8,888
and 8,644 shares, outstanding 8,474 and 8,230 shares, respectively 89 86
Capital in excess of par value 13,144 12,051
Retained earnings 46,592 43,846
Accumulated other comprehensive income:
Unrealized loss on investments available-for-sale, net --- (5)
Cumulative foreign currency translation adjustment 384 282
------------------ ------------------
384 277
------------------ ------------------
Less: Treasury stock, at cost (414 and 414 shares, respectively) 1,396 1,396
Deferred compensation 137 37
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 58,676 54,827
------------------ ------------------
$ 77,790 $ 69,853
================== ==================
See accompanying notes to unaudited consolidated financial statements.
2
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2005 2004 2005 2004
---- ---- ---- ----
Net sales $ 18,991 $ 16,109 $ 52,148 $ 42,174
Cost of sales 12,324 10,796 34,519 30,342
-------------- ----------------- ----------------- ---------------
Gross profit 6,667 5,313 17,629 11,832
-------------- ----------------- ----------------- ---------------
Selling, general and administrative expenses 4,044 3,935 11,840 10,589
Research and development expenses 536 796 1,575 2,248
Other 4 89 25 22
-------------- ----------------- ----------------- ---------------
Operating expenses 4,584 4,820 13,440 12,859
-------------- ----------------- ----------------- ---------------
-------------- ----------------- ----------------- ---------------
Income/(loss) from operations 2,083 493 4,189 (1,027)
-------------- ----------------- ----------------- ---------------
Other (income) expense:
Interest expense 118 90 309 277
Interest income (13) (12) (43) (57)
Other (1) --- 7 2
-------------- ----------------- ----------------- ---------------
104 78 273 222
-------------- ----------------- ----------------- ---------------
Income/(loss) before provision for income taxes 1,979 415 3,916 (1,249)
Provision for/(benefit from) income taxes 599 100 1,170 (335)
-------------- ----------------- ----------------- ---------------
Net income/(loss) $ 1,380 $ 315 $ 2,746 $ (914)
============== ================= ================= ===============
Basic net income/(loss) per common share $ 0.16 $ 0.04 $ 0.33 $ (0.11)
============== ================= ================= ===============
Diluted net income/(loss) per common share $ 0.16 $ 0.04 $ 0.32 $ (0.11)
============== ================= ================= ===============
Basic weighted average common
shares outstanding 8,470 8,136 8,374 8,116
============== ================= ================= ===============
Diluted weighted average common
shares outstanding 8,775 8,673 8,717 8,116
============== ================= ================= ===============
See accompanying notes to unaudited consolidated financial statements.
3
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Nine Months Ended March 31,
2005 2004
--------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 2,746 $ (914)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,141 3,846
Loss/(gain) on disposal of fixed assets (18) 353
Deferred income taxes (643) (194)
Stock-based compensation expense 56 109
Investment interest accretion, net (10) ---
Realized loss on investments 8 2
Changes in operating assets and liabilities:
Accounts receivable 477 (2,555)
Inventories (3,889) (3,482)
Other assets (149) (116)
Accounts payable and accrued expenses (420) 2,028
Income taxes payable 906 (489)
--------------------- --------------------
Net cash provided by/(used in) operating activities 3,205 (1,412)
--------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,195) (3,199)
Purchase of investments (2,490) (2,982)
Proceeds from sale of investments 3,010 3,000
Proceeds from sale of fixed assets 50 22
--------------------- --------------------
Net cash used in investing activities (6,625) (3,159)
--------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (441) (263)
Proceeds from the exercise of stock options 756 136
Proceeds from the issuance of long term debt 4,751 ---
--------------------- --------------------
Net cash provided by/(used in)financing activities 5,066 (127)
--------------------- --------------------
--------------------- --------------------
Effect of exchange rate changes on cash (153) 86
--------------------- --------------------
Net increase/(decrease) in cash and cash equivalents 1,493 (4,612)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,534 8,685
--------------------- --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,027 $ 4,073
===================== ====================
Supplemental cash flow information:
Interest paid $ 309 $ 277
Taxes paid $ 953 $ 39
See accompanying notes to unaudited consolidated financial statements.
4
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(1) BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements of
American Technical Ceramics Corp. and subsidiaries (the "Company") reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of its consolidated financial
position as of March 31, 2005, and the results of its operations for the three
and nine month periods ended March 31, 2005 and 2004. These consolidated
financial statements should be read in conjunction with the summary of
significant accounting policies and notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2004. Results for the three and nine month periods ended
March 31, 2005 are not necessarily indicative of results which could be expected
for the entire year.
(2) IMPACT OF NEW ACCOUNTING STANDARDS:
In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment" ("SFAS No. 123 (R)"). This Statement is a revision of FASB
Statement No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 (R)
supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"), and its related implementation guidance.
SFAS No. 123 (R) establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services. It also
addresses transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of the entity's equity
instruments, or that may be settled by the issuance of those equity instruments.
The provisions of SFAS No. 123 (R) shall be effective as of the beginning of the
first annual reporting period that begins after June 15, 2005. The Company will
adopt SFAS No. 123 (R) effective July 1, 2005. The adoption of this standard
will increase compensation expense to the extent the requisite service has not
yet been rendered for options granted prior to July 1, 2003, that are accounted
for under the intrinsic value method. Management has not yet determined the
effect SFAS No. 123 (R) will have on the Company's consolidated results of
operations or financial position.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151 "Inventory Costs - an amendment of ARB No. 43, Chapter 4"
("SFAS No. 151"). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). SFAS
No. 151 requires that those items be recognized as current period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
SFAS No. 151 requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. The
provisions of SFAS No. 151 shall be effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The Company will adopt SFAS
No. 151 effective July 1, 2005. The adoption of this standard is not expected to
have a material impact on the Company's consolidated results of operations or
financial position.
5
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
On December 31, 2004, the FASB issued Staff Position No. FAS 109-1,
"Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" ("FSP No. 109-1"), and Staff Position No. FAS 109-2,
"Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004" ("FSP No. 109-2").
These staff positions provide accounting guidance on how companies should
account for the effects of the American Jobs Creation Act of 2004 ("AJCA") that
was signed into law on October 22, 2004. FSP No. 109-1 states that the tax
relief (special tax deduction for domestic manufacturing) from this legislation
should be accounted for as a "special deduction" instead of a tax rate
reduction. FSP No. 109-2 gives a company additional time to evaluate the effects
of the legislation on any plan for reinvestment or repatriation of foreign
earnings for purposes of applying FASB Statement No. 109. The Company is
currently assessing the repatriation provision to determine whether it might
repatriate extraordinary dividends, as defined in the AJCA. The Company expects
to complete this evaluation within a reasonable amount of time after additional
guidance from the United States Treasury is published.
On March 3, 2005, the FASB issued FASB Staff Position FIN 46(R)5,
"Implicit Variable Interests under FASB Interpretation No. 46" ("FSP
FIN46(R)5"). This FSP provides that a reporting enterprise should consider
whether it holds an implicit variable interest in a variable interest entity or
potential variable interest entity. A reporting enterprise that holds an
implicit variable interest in a variable interest entity and is a related party
to another variable interest holder should evaluate whether it is appropriate to
consolidate the entity under FASB Interpretation No. 46. This FASB Staff
Position becomes effective for the Company on April 1, 2005. The Company is
presently evaluating the applicability and potential impact of FSP FIN46(R)5.
(3) STOCK-BASED COMPENSATION:
On April 1, 1997, the Board of Directors approved the American
Technical Ceramics Corp. 1997 Stock Option Plan (the "1997 Option Plan")
pursuant to which the Company may grant options to purchase up to 800,000 shares
of the Company's common stock. On April 11, 2000, the Board of Directors
approved the American Technical Ceramics Corp. 2000 Incentive Stock Plan (the
"2000 Plan", and collectively with the 1997 Option Plan, the "Plans") pursuant
to which the Company may grant options or stock awards covering up to 1,200,000
shares of the Company's common stock. Each Plan is administered by the Board of
Directors or by a Committee appointed by the Board. Options granted under the
Plans may be either incentive or non-qualified stock options. The term of each
incentive stock option shall not exceed ten years from the date of grant (five
years for grants to employees who own 10% or more of the voting power of the
Company's common stock). Options vest in accordance with a vesting schedule
established by the plan administrator (traditionally 25% per year during the
first four years of their term). Unless terminated earlier by the Board, the
1997 Option Plan will terminate on March 31, 2007, and the 2000 Plan will
terminate on April 10, 2010.
Disposition of shares acquired pursuant to the exercise of incentive
stock options under both Plans may not be made by the optionees within two years
following the date that the option is granted, nor within one year after the
exercise of the option, without the written consent of the Company.
6
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Stock option activity for the three months ended March 31, 2005 and 2004 is as follows:
March 31, 2005 March 31, 2004
-----------------------------------------------------------------------
Weighted Weighted
Average Average
Shares Subject Exercise Shares Subject Exercise
to Options Price to Options Price
----------------- ---------------- ------------------ --------------
Outstanding, beginning of period 1,021,845 $ 7.77 1,352,950 $ 6.68
Granted --- --- --- ---
Canceled (6,000) 9.84 (250) 11.40
Expired (12,050) 9.10 --- ---
Exercised (9,000) 3.15 (14,500) 3.65
------------------ -------------
Outstanding, end of period 994,795 $ 7.79 1,338,200 $ 6.71
================== ==============
Stock option activity for the nine months ended March 31, 2005 and 2004 is as follows:
March 31, 2005 March 31, 2004
-----------------------------------------------------------------------
Weighted Weighted
Average Average
Shares Subject Exercise Shares Subject Exercise
to Options Price to Options Price
----------------- ---------------- ------------------ --------------
Outstanding, beginning of period 1,257,400 $ 6.97 1,381,200 $ 6.64
Granted 25,000 8.79 13,000 5.85
Canceled (32,250) 8.08 (6,750) 9.93
Expired (18,800) 11.40 (9,350) 8.08
Exercised (236,555) 3.20 (39,900) 3.41
------------------ ----------------
Outstanding, end of period 994,795 $ 7.79 1,338,200 $ 6.71
================== ================
Prior to fiscal year 2004, the Company did not recognize compensation
cost for these options upon grant, as the exercise price was equal to or greater
than the fair market value of the underlying stock at the date of grant. In July
2003, the Company adopted Statement of Financial Accounting Standard No. 123
("SFAS No. 123"), using the prospective method as prescribed in Statement of
Financial Accounting Standard No. 148 ("SFAS No. 148"). The Company applies SFAS
No. 123 in accounting for employee stock-based compensation awarded or granted
after June 30, 2003, and applies APB No. 25 in accounting for employee
stock-based compensation awarded or granted prior to July 1, 2003, and makes pro
forma disclosures of net income and net income per share as if the fair value
method under SFAS No. 123, as amended by SFAS No. 148, had been applied.
Had compensation expense with respect to all options and awards granted
under the Plans been determined based on the fair value method on the date of
grant consistent with the methodology prescribed under SFAS No. 123 prior to
July 1, 2003, the Company's net income/(loss) and earnings/(loss) per share
would have been equal to the pro forma amounts indicated below:
7
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(3) STOCK-BASED COMPENSATION (CONTINUED):
Three Months Ended March 31,
-----------------------------------------------
2005 2004
----------------------- --------------------
Net income, as reported $ 1,380 $ 315
Add: Stock-based employee compensation expense
included in reported net income, net of related tax effects 13 30
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects (30) (722)
--------------------- --------------------
Pro forma income/(loss) $ 1,363 $ (377)
Earnings/(loss) per share:
Basic - as reported $ 0.16 $ 0.04
Basic - pro forma $ 0.16 $ (0.05)
Diluted - as reported $ 0.16 $ 0.04
Diluted - pro forma $ 0.16 $ (0.04)
Nine Months Ended March 31,
-----------------------------------------------
2005 2004
----------------------- --------------------
Net income/(loss), as reported $ 2,746 $ (914)
Add: Stock-based employee compensation expense
included in reported net income, net of related tax effects 39 105
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects (312) (1,642)
--------------------- --------------------
Pro forma income/(loss) $ 2,473 $ (2,451)
Earnings/(loss) per share:
Basic - as reported $ 0.33 $ (0.11)
Basic - pro forma $ 0.30 $ (0.30)
Diluted - as reported $ 0.32 $ (0.11)
Diluted - pro forma $ 0.28 $ (0.30)
The weighted-average fair value of each stock option included in the
preceding pro forma amounts was estimated using the Black-Scholes option pricing
model and is amortized over an expected grant life of five years.
(4) SUPPLEMENTAL CASH FLOW INFORMATION:
During the nine months ended March 31, 2005, the Company (i) granted
deferred compensation stock awards with an aggregate value of $40 with respect
to which expense shall be recognized ratably throughout fiscal year 2005, (ii)
granted stock options with respect to which compensation expense of $116 will be
recognized evenly over the service period, and (iii) recognized a $183 reduction
of income taxes payable related to disqualifying dispositions from incentive
stock options exercised.
8
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(5) INVENTORIES:
Inventories included in the accompanying consolidated financial statements
consist of the following:
March 31, 2005 June 30, 2004
------------------- -------------------
(unaudited)
Raw materials $ 12,452 $ 11,772
Work-in-process 7,053 6,722
Finished goods 6,752 3,774
------------------- -------------------
$ 26,257 $ 22,268
=================== ===================
(6) EARNINGS PER SHARE:
The following represents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share ("EPS") computation:
For the Three Months Ended March 31,
------------------------------------------------------------------------------------------------
2005 2004
---- ----
Net Income Shares Per-Share Net Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------ ------------ ------------ ------------ -----------
Basic EPS $ 1,380 8,470 $ 0.16 $ 315 8,136 $ 0.04
============ ===========
Effect of dilutive securities:
Stock options --- 6 --- 530
Deferred compensation
stock awards --- 299 --- 7
------------ -------------- ------------ ----------- -------------- -----------
Diluted EPS $ 1,380 8,775 $ 0.16 $ 315 8,673 $ 0.04
============ ============== ============ =========== ============== ===========
Options covering 353 and 345 shares have been omitted from the
calculation of dilutive EPS for the three months ended March 31, 2005 and 2004,
respectively, because their inclusion would have been antidilutive.
For the Nine Months Ended March 31,
-------------------------------------------------- ---------------------------------------------
2005 2004
---- ----
Net Income Shares Per-Share Net Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
Basic EPS $ 2,746 8,374 $ 0.33 $ (914) 8,116 $ (0.11)
============ ===========
Effect of dilutive securities:
Stock options --- 6 --- ---
Deferred compensation
stock awards --- 337 --- ---
------------ -------------- ------------ ----------- -------------- -----------
Diluted EPS $ 2,746 8,717 $ 0.32 $ (914) 8,116 $ (0.11)
============ ============== ============ =========== ============== ===========
9
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Options covering 415 and 1,346 shares have been omitted from the
calculation of dilutive EPS for the nine months ended March 31, 2005 and 2004,
respectively, because their inclusion would have been antidilutive.
(7) COMPREHENSIVE INCOME/ (LOSS):
The Company's comprehensive income/(loss) is as follows:
For the Three Months
Ended March 31,
2005 2004
------------------- -------------------
Net income $ 1,380 $ 315
------------------- -------------------
Other comprehensive income/(loss):
Foreign currency translation
adjustments (143) (61)
Unrealized gains on investments, net of tax --- 3
------------------- -------------------
Other comprehensive loss
(143) (58)
------------------- -------------------
Comprehensive income $ 1,237 $ 257
=================== ===================
For the Nine Months
Ended March 31,
2005 2004
------------------- -------------------
Net income/(loss) $ 2,746 $ (914)
------------------- -------------------
Other comprehensive income:
Foreign currency translation
adjustments 102 93
Unrealized gains on investments, net of tax 5 1
------------------- -------------------
Other comprehensive income 107 94
------------------- -------------------
Comprehensive income/(loss) $ 2,853 $ (820)
=================== ===================
(8) INDEBTEDNESS:
Long-term debt consists of the following:
March 31, 2005 June 30, 2004
------------------- ------------------
Notes payable to banks $ 4,602 $ ---
Obligations under capital leases 2,998 3,290
------------------- ------------------
7,600 3,290
Less: current portion 2,911 394
------------------- ------------------
Long-term debt $ 4,689 $ 2,896
=================== ==================
10
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
In April 2004, the Company entered into a $4,000 credit facility with
General Electric Capital Corporation ("GECC") for the purchase of equipment. The
line bears interest, at the Company's option, at either a fixed rate of 3.47%
above the five year Treasury Bond yield or a floating rate of 3.65% above the
London Interbank Market ("LIBOR"). Borrowings under the line are secured by the
equipment purchased thereunder. Each separate borrowing under the line will be a
fully amortizing term loan with a maturity of five years from the date the funds
are drawn down. The line of credit was to expire on March 31, 2005. On March 14,
2005, GECC increased the line of credit to $6,000, and extended the expiration
date to September 11, 2005. The line is renewable, at the option of GECC, for an
additional six months. As of March 31, 2005, the Company had $2,602 outstanding
under this line.
In December 2004, the Company entered into a one-year credit facility
with Commerce Bank, N. A. ("Commerce Bank"). During the term, the Company may
request advances under the facility from time to time up to an aggregate of
$5,000. Interest on advances are at floating rates based on the Prime Rate as
reported in the Wall Street Journal. Borrowings under the facility are secured
by a lien on the Company's accounts receivable and inventory. Each borrowing
under the line will expire on November 30, 2005. During the term of the loan,
the Company will make interest only payments with the balance of the loan
payable on the expiration date. All outstanding borrowings under the facility
are subject to certain financial covenants, including minimum tangible net worth
and liability percentage ratios. As of March 31, 2005, the Company had $2,000
outstanding under this credit facility currently bearing interest at 5.75%.
The Company leases an administrative office, manufacturing and research
and development complex located in Jacksonville, Florida (the "Jacksonville
Facility") from a partnership controlled by the Company's President, Chief
Executive Officer and principal stockholder under a capital lease. At March 31,
2005, the Jacksonville Facility has an aggregate cost of $5,104 and a net book
value of $2,052. The lease is for a period of 30 years, was capitalized using an
interest rate of 10.5% and expires on September 30, 2010. The lease provides for
annual increases in base rent for years beginning after May 1, 1999, based on
the increase in the Consumer Price Index ("CPI") since May 1, 1998, applied to
base rent. The lease also provides for increases to the base rent in connection
with any new construction at the Jacksonville Facility. Under the lease, upon
any new construction being placed into use, the base rental is subject to
increase to the fair market rental of the Jacksonville Facility, including the
new construction. Effective October 1, 2004, the Company is obligated to pay
approximately $756 per annum under this lease. The payments due over the
remaining term of this capital lease, including the portion related to interest,
total approximately $4,159.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements, related notes and other information
included in this Quarterly Report on Form 10-Q.
Statements in this Quarterly Report on Form 10-Q that are not
historical fact may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. All such
forward-looking statements are subject to risks and uncertainties, including,
but not limited to, market and economic conditions, the impact of competitive
products, product demand and market acceptance risks, changes in product mix,
costs and availability of raw materials, fluctuations in operating results,
delays in development of highly complex products, risks associated with
international sales and sales to the U.S. military, risk of customer contract or
sales order cancellations and other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission, including,
without limitation, those contained under the caption "Item 1 BUSINESS -
CAUTIONARY STATEMENTS REGARDING FORWARD - LOOKING STATEMENTS" in the Company's
Annual Report on Form 10-K. These risks could cause the Company's actual results
for future periods to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. Any
forward-looking statement represents the Company's expectations or forecasts
only as of the date it was made and should not be relied upon as representing
its expectations or forecasts as of any subsequent date. The Company undertakes
no obligation to correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, even if its expectations
or forecasts change.
Overview
Bookings, sales and net income in each of the quarters in the current
fiscal year have exceeded the levels attained in the comparable quarter in the
prior fiscal year. Bookings improvements compared to the prior fiscal year were
primarily due to increases from the wireless infrastructure, medical equipment
and military markets. Growth has come from improved economic conditions,
improved market share and expanding acceptance of newer products in the market.
The Company expects this positive trend in bookings will continue in the near
term.
Improvements in net income have essentially tracked improvements in
sales. The Company has benefited from certain manufacturing efficiencies that
result from operating at higher volumes. Gross margins have improved partly due
to these efficiencies and partly due to favorable product mix as certain lower
margin, high volume business was replaced with higher margin business.
The Company borrowed $2,000 under its line of credit with Commerce Bank
primarily to settle its remaining precious metal commitments which came due on
April 1, 2005. During the quarter ended March 31, 2005, the Company increased
its line of credit with GECC from $4,000 to $6,000, extended the term an
additional six months to September 11, 2005 and incurred approximately $863 in
additional borrowings to fund equipment purchases. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND
CAPITAL RESOURCES".
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
RESULTS OF OPERATIONS
KEY COMPARATIVE PERFORMANCE INDICATORS
Three Months Ended Nine Months Ended
------------------------------------------ ------------------------------------------
March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------- ------------------- ------------------- -------------------
Sales $ 18,991 $ 16,109 $ 52,148 $ 42,174
Bookings $ 19,304 $ 18,721 $ 52,291 $ 45,181
Gross Margin $ 6,667 $ 5,313 $ 17,629 $ 11,832
Gross Margin (% of sales) 35.1% 33.0% 33.8% 28.1%
Operating Expenses $ 4,584 $ 4,820 $ 13,440 $ 12,859
Operating Expenses (% of sales) 24.1% 29.9% 25.8% 30.5%
SIGNIFICANT HIGHLIGHTS
Sales for the three and nine months ended March 31, 2005 increased 18%
and 24%, respectively, over the comparable period in the prior fiscal year.
Growth in sales for the year-to-date period ended March 31, 2005 (24%) was
greater than that for the three month period ended March 31, 2005 (18%),
primarily due to sales growth that accelerated in the three month period ended
March 31, 2004.
Bookings for the three and nine months ended March 31, 2005, increased
3% and 16%, respectively, over the comparable period in the prior fiscal year.
Three Months Ended March 31, 2005, Compared with Three Months Ended March 31,
2004
Bookings for the three months ended March 31, 2005 were $19,304,
compared to $18,721 for the three months ended March 31, 2004. The improvement
in bookings was due primarily to improved bookings from the wireless
infrastructure and medical markets.
The backlog of unfilled orders at March 31, 2005 was $13,621, compared
to $12,142 at March 31, 2004 and $13,472 at June 30, 2004.
Net sales for the three months ended March 31, 2005 increased 18% from
the comparable period in the prior fiscal year. The increase was due to higher
volume of product shipped as a result of improved economic conditions in the
electronic components industry, increased market share and expanding acceptance
of the Company's newer products in the market. The volume improvement was mainly
from sales to customers in the wireless infrastructure, medical equipment and
military markets.
Gross margin for the three months ended March 31, 2005 was 35% of net
sales, compared to 33% of net sales for the comparable period in the prior
fiscal year. Gross margins increased due to higher sales volume, favorable
product mix, efficiencies associated with operating at higher production levels
and increased precious metal recovery, partially offset by increased labor and
overhead costs. Labor and overhead cost increases primarily relate to increased
headcount and the redesignation of certain personnel from research and
development to production support. Over the past year, the Company has added
personnel and incurred other expenses in connection with its efforts to increase
production, reduce lead times and improve market share.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
Selling, general and administrative expenses for the three months ended
March 31, 2005 increased 3% from the comparable period in the prior fiscal year.
The increase was primarily the result of increased administrative and sales
personnel, salary increases, bonuses, commission expense, professional fees and
expenses associated with the expansion of the Company's foreign sales offices in
China and Sweden, partially offset by lower bad debt expense.
Research and development expenses for the three months ended March 31,
2005 decreased 33% from the comparable period in the prior fiscal year,
primarily as a result of the redesignation of certain personnel to production
support.
As a result of the foregoing, net income for the three months ended
March 31, 2005 was $1,380, or $0.16 per common share and common share assuming
dilution, compared to net income of $315, or $0.04 per common share and common
share assuming dilution, for the comparable period in the prior fiscal year.
Nine Months Ended March 31, 2005, Compared with Nine Months Ended March 31, 2004
Bookings for the nine months ended March 31, 2005 were $52,291,
compared to $45,181 for the nine months ended March 31, 2004. The improvement in
bookings was due primarily to improved bookings from the wireless
infrastructure, military and medical markets.
Net sales for the nine months ended March 31, 2005 increased 24% from
the comparable period in the prior fiscal year. The increase was due to higher
volume of product shipped as a result of improved economic conditions in the
electronic components industry, increased market share and expanding acceptance
of the Company's newer products in the market. The volume improvement was mainly
from sales to customers in the wireless infrastructure, medical equipment and
military markets.
Gross margin for the nine months ended March 31, 2005 was 34% of net
sales, compared to 28% of net sales for the comparable period in the prior
fiscal year. Gross margins increased due to higher sales volume, increased
precious metal recovery and efficiencies associated with operating at higher
production levels, partially offset by an unfavorable sales mix of lower margin,
high volume product, increased labor and overhead costs and inventory writedowns
to net realizable value. Labor and overhead cost increases primarily relate to
increased headcount and the redesignation of certain personnel from research and
development to production support. Over the past year, the Company has added
personnel and incurred other expenses in connection with its efforts to increase
production, reduce lead times and improve market share. Precious metal recovery
increased primarily due to a higher amount of metal reclaimed.
Selling, general and administrative expenses for the nine months ended
March 31, 2005 increased 12% from the comparable period in the prior fiscal
year. The increase was primarily the result of salary increases, severance
costs, commission expense and expenses associated with the expansion of the
Company's foreign sales offices in China and Sweden, partially offset by lower
bad debt expense.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
Research and development expenses for the nine months ended March 31,
2005 decreased 30% from the comparable period in the prior fiscal year,
primarily as a result of the redesignation of certain personnel to production
support.
As a result of the foregoing, net income for the nine months ended
March 31, 2005 was $2,746, or $0.33 per common share and $0.32 per common share
assuming dilution, compared to net loss of $914, or ($0.11) per common share and
common share assuming dilution, for the comparable period in the prior fiscal
year.
LIQUIDITY AND CAPITAL RESOURCES
March 31, 2005 June 30, 2004 March 31, 2004
----------------------- -------------------- --------------------
Cash and Investments $ 8,025 $ 7,042 $ 7,082
Working Capital $ 36,963 $ 34,900 $ 31,565
Quarter Ended:
Operating Cash Flow $ 473 $ 1,142 $ (1,736)
Capital Expenditures $ 1,322 $ 1,130 $ 1,755
Depreciation and Amortization $ 1,531 $ 1,306 $ 1,317
Current Ratio 4.2:1 5.1:0 5.8:1
Quick Ratio 1.6:1 2.0:0 2.5:1
The Company's financial position at March 31, 2005 remains strong as
evidenced by working capital of $36,963. The Company's current and quick ratios
at March 31, 2005 also remain strong.
Cash, cash equivalents and investments increased by $983 from June 30,
2004, as a result of positive operating cash flows and loan proceeds, partially
offset by capital expenditures. Inventories increased by $3,989 from June 30,
2004, primarily as a result of higher production levels to support current and
future demand.
The current portion of long-term debt increased by $2,517 from June 30,
2004, due to borrowings incurred under the Commerce Bank line of credit and the
GECC equipment line of credit. Borrowings under the Commerce Bank line are all
due within one year. Accrued expenses decreased by $527 from June 30, 2004, due
to the timing of payments of various accrued expenses. Taxes payable increased
$723 from June 30, 2004, primarily due to taxable income generated during the
nine months ended March 31, 2005, partially offset by federal estimated tax
payments.
On April 1, 2005, the Company purchased an additional $2,500 of
precious metals (primarily palladium and silver) completing its outstanding
precious metal purchase commitments.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
In April 2004, the Company entered into a $4,000 credit facility with
GECC for the purchase of equipment. The line bears interest, at the Company's
option, at either a fixed rate of 3.47% above the five year Treasury Bond yield
or a floating rate of 3.65% above LIBOR. Borrowings under the line are secured
by the equipment purchased thereunder. Each separate borrowing under the line
will be a fully amortizing term loan with a maturity of five years from the date
the funds are drawn down. The line of credit was to expire on March 31, 2005. On
March 14, 2005, GECC increased the line of credit to $6,000, and extended the
expiration date to September 11, 2005. The line is renewable, at the option of
GECC, for an additional six months. As of March 31, 2005, the Company had
borrowed an aggregate of $2,751 under this credit facility bearing interest at
7.15%.
In December 2004, the Company entered into a one-year credit facility
with Commerce Bank. During the term, the Company may request advances under the
facility from time to time up to an aggregate of $5,000. Interest on advances
are at floating rates based on the Prime Rate as reported in the Wall Street
Journal. Borrowings under the facility are secured by a lien on the Company's
accounts receivable and inventory. Each borrowing under the line will expire on
November 30, 2005. During the term of the loan, the Company will make interest
only payments with the balance of the loan payable on the expiration date. All
outstanding borrowings under the facility are subject to certain financial
covenants, including minimum tangible net worth and liability percentage ratios.
As of March 31, 2005, the Company had borrowed an aggregate of $2,000 under this
credit facility currently bearing interest at 5.75%.
The Company leases a facility in Jacksonville, Florida from a
partnership controlled by the Company's President, Chief Executive Officer and
principal stockholder under a capital lease. The rental payments under this
lease have been adjusted several times, most recently as of October 2004,
primarily to reflect fair market rental adjustments as a result of certain
additions or improvements to the facility or annual increases based on the
consumer price index as required by the terms of the lease. Each fair market
rental adjustment has been based upon an independent appraisal of the fair
market rental of the facility giving effect to the addition or improvement at
issue. Effective October 1, 2004, the Company is obligated to pay approximately
$756 per annum under this lease. The payments due over the remaining term of
this capital lease, including the portion related to interest, total
approximately $4,159.
Capital expenditures for the nine months ended March 31, 2005 totaled
$7,195, including expenditures for machinery and equipment and leasehold
improvements. The Company intends to use cash on hand, cash generated through
operations and the line of credit with GECC to finance budgeted capital
expenditures of approximately $2,000 for the remainder of fiscal year 2005,
primarily for equipment acquisitions and building renovations.
Aggregate contractual obligations as of March 31, 2005, mature as
follows:
Payments Due by Period
--------------------------------------------------------------------------------------------
Total Less than 1 1- 3 3- 5 After 5
Contractual Obligations year years years years
- ---------------------------------- -------------- --------------- -------------- ---------------- ---------------
Bank Debt $ 5,148 $ 2,734 $ 1,312 $ 1,102 $ ---
Capital Lease Obligations 4,159 756 1,512 1,512 379
Operating Leases 1,264 503 735 26 ---
Purchase Obligations 4,836 4,836 --- --- ---
-------------- --------------- -------------- ---------------- ---------------
Total Contractual Obligations $ 15,407 $ 8,829 $ 3,559 $ 2,640 $ 379
============== =============== ============== ================ ===============
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
The Company routinely enters into binding and non-binding purchase
obligations in the ordinary course of business, primarily covering anticipated
purchases of inventory and equipment. The terms of these commitments generally
do not extend beyond one year. At March 31, 2005, the Company had commitments to
purchase an aggregate of $2,500 of precious metals all of which were settled
April 1, 2005.
CRITICAL ACCOUNTING POLICIES
The Securities and Exchange Commission (the "SEC") issued disclosure
guidance for "critical accounting policies." The SEC defines "critical
accounting policies" as those that require the application of management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. The Company's significant accounting policies are
described in Note 1 to its consolidated financial statements contained in its
Annual Report on Form 10-K for the fiscal year ended June 30, 2004. The Company
believes that the following accounting policies require the application of
management's most difficult, subjective or complex judgments:
Allowances for Doubtful Accounts Receivable
The Company performs ongoing credit evaluations of its customers and
adjusts credit limits based upon payment history and a customer's current
creditworthiness, as determined by its review of the customer's current credit
information. The Company continuously monitors collections and payments from its
customers and maintains an allowance for estimated credit losses based upon its
historical experience and any specific customer collection issues that the
Company has identified. While such credit losses have historically been within
the Company's expectations and the allowances established, the Company cannot
guarantee that it will continue to experience the same credit loss rates that it
has in the past. Should the financial position of its customers deteriorate
resulting in an impairment of their ability to pay amounts due, the Company's
revised estimate of such losses and any actual losses in excess of previous
estimates may negatively impact its operating results.
Sales Returns and Allowances
In the ordinary course of business, the Company accepts returns of
products sold for various reasons and grants sales allowances to customers.
While the Company engages in extensive product quality control programs and
processes, its level of sales returns is affected by, among other things, the
quality of its manufacturing processes. The Company maintains an allowance for
sales returns and allowances based upon historical returns and allowances
granted. While such returns and allowances have historically been within the
Company's expectations, actual return and allowance rates in the future may
differ from current estimates, which could negatively impact its operating
results.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
Inventory Valuation
The Company values inventory at the lower of aggregate cost (first-in,
first-out) or market. When the cost of inventory is determined by management to
be in excess of its market value, such inventory is written down to its
estimated net realizable value. This requires the Company to make estimates and
assumptions about several factors (e.g., future sales quantities and selling
prices, and percentage complete and failure rates for work in process) based
upon historical experience and its projections for future periods. Changes in
factors such as the level of order bookings, the product mix of order bookings
and the Company's manufacturing processes could have a material impact on the
Company's assessment of the net realizable value of inventory in the future.
Valuation of Deferred Tax Assets
The Company regularly evaluates its ability to recover the reported
amount of its deferred income taxes considering several factors, including its
estimate of the likelihood of the Company generating sufficient taxable income
in future years during the period over which temporary differences reverse.
Presently, the Company believes that it is more likely than not that it will
realize the benefits of its deferred tax assets based primarily on its history
of and projections for taxable income in the future. In the event that actual
results differ from its estimates or the Company adjusts these estimates in
future periods, the Company may need to establish a valuation allowance against
a portion or all of its deferred tax assets, which could materially impact its
financial position or results of operations in future periods.
Valuation of Long-lived Assets
The Company assesses the recoverability of long-lived assets whenever
the Company determines that events or changes in circumstances indicate that the
carrying amount may not be recoverable. Its assessment is primarily based upon
its estimate of future cash flows associated with these assets. The Company
believes that the carrying amount of its long-lived assets is recoverable.
However, should its operating results deteriorate, or anticipated new product
launches not occur or not attain the commercial acceptance that the Company
anticipates, the Company may determine that some portion of its long-lived
assets are impaired. Such determination could result in non-cash charges to
income that could materially affect its financial position or results of
operations for that period.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
IMPACT OF NEW ACCOUNTING STANDARDS
In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment" ("SFAS No. 123 (R)"). This Statement is a revision of FASB
Statement No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 (R)
supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"), and its related implementation guidance.
SFAS No. 123 (R) establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services. It also
addresses transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of the entity's equity
instruments, or that may be settled by the issuance of those equity instruments.
The provisions of SFAS No. 123 (R) shall be effective as of the beginning of the
first annual reporting period that begins after June 15, 2005. The Company will
adopt SFAS No. 123 (R) effective July 1, 2005. The adoption of this standard
will increase compensation expense to the extent the requisite service has not
yet been rendered for options granted prior to July 1, 2003, that are accounted
for under the intrinsic value method. Management has not yet determined the
effect SFAS No. 123 (R) will have on the Company's consolidated results of
operations or financial position.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151 "Inventory Costs - an amendment of ARB No. 43, Chapter 4"
("SFAS No. 151"). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). SFAS
No. 151 requires that those items be recognized as current period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
SFAS No. 151 requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. The
provisions of SFAS No. 151 shall be effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The Company will adopt SFAS
No. 151 effective July 1, 2005. The adoption of this standard is not expected to
have a material impact on the Company's consolidated results of operations or
financial position.
On December 31, 2004, the FASB issued Staff Position No. FAS 109-1,
"Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" ("FSP No. 109-1"), and Staff Position No. FAS 109-2,
"Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004" ("FSP No. 109-2").
These staff positions provide accounting guidance on how companies should
account for the effects of the American Jobs Creation Act of 2004 ("AJCA") that
was signed into law on October 22, 2004. FSP No. 109-1 states that the tax
relief (special tax deduction for domestic manufacturing) from this legislation
should be accounted for as a "special deduction" instead of a tax rate
reduction. FSP No. 109-2 gives a company additional time to evaluate the effects
of the legislation on any plan for reinvestment or repatriation of foreign
earnings for purposes of applying FASB Statement No. 109. The Company is
currently assessing the repatriation provision to determine whether it might
repatriate extraordinary dividends, as defined in the AJCA. The Company expects
to complete this evaluation within a reasonable amount of time after additional
guidance from the United States Treasury is published.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
On March 3, 2005, the FASB issued FASB Staff Position FIN 46(R)5, "Implicit
Variable Interests under FASB Interpretation No. 46" ("FSP FIN46(R)5"). This FSP
provides that a reporting enterprise should consider whether it holds an
implicit variable interest in a variable interest entity or potential variable
interest entity. A reporting enterprise that holds an implicit variable interest
in a variable interest entity and is a related party to another variable
interest holder should evaluate whether it is appropriate to consolidate the
entity under FASB Interpretation No. 46. This FASB Staff Position becomes
effective for the Company on April 1, 2005. The Company is presently evaluating
the applicability and potential impact of FSP FIN46(R)5.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposure at March 31, 2005 is consistent with
the types of market risk and amount of exposures, including foreign currency
exchange rate, commodity price, security price and interest rate risks,
presented in its Annual Report on Form 10-K for the fiscal year ended June 30,
2004.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In response to the requirements of the Sarbanes-Oxley Act of 2002, as
of the end of the period covered by this Quarterly Report on Form 10-Q (the
"Evaluation Date"), the Company's President and Chief Executive Officer and Vice
President - Controller carried out an evaluation of the effectiveness of the
Company's "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). Based on that evaluation,
these officers concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and effective to ensure that
material information relating to the Company and the Company's consolidated
subsidiaries was made known to them by others within those entities,
particularly during the period in which this report was being prepared.
Changes in Internal Controls
There were no changes in the Company's internal controls over financial
reporting identified in connection with the evaluation of such internal controls
that occurred during the Company's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company's internal
controls over financial reporting.
20
PART II - OTHER INFORMATION
ITEMS 1. THROUGH 5. Not Applicable
ITEM 6. Exhibits
EXHIBIT NO. DESCRIPTION
10(x) - Letter from General Electric Capital Corporation, dated as of
March 14, 2005
10(y)(i) - Victor Insetta Compensation Arrangement
10(y)(ii) - Stuart Litt Consulting Arrangement
10(y)(iii) - Executive Compensation Arrangements
10(y)(iv) - Director Compensation Arrangements
31.1 - Section 302 Certification of Principal Executive Officer.
31.2 - Section 302 Certification of Principal Accounting Officer.
32.1 - Section 906 Certification of Principal Executive Officer.
32.2 - Section 906 Certification of Principal Accounting Officer.
21
SIGNATURES
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 Company in the
capacities and on the dates indicated.
AMERICAN TECHNICAL CERAMICS CORP.
(Company)
DATE: May 16, 2005 BY: /S/ VICTOR INSETTA
-------------------------------
Victor Insetta
President and Director
(Principal Executive Officer)
DATE: May 16, 2005 BY: /S/ ANDREW R. PERZ
------------------ -----------
Andrew R. Perz
Vice President, Controller
(Principal Accounting Officer)