EXHIBIT 13.0
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS FOR FISCAL 2000 AS COMPARED TO 1999
New orders received in 2000 were $64,013,000, an increase of 74% from
$36,786,000 in 1999. At year end 2000, the Company's backlog of unfilled orders
was $34,128,000, compared to $17,792,000 at the end of 1999. As of year end
2000, there were approximately $10,201,000 unfilled orders that were scheduled
for shipment beyond a year and as of year end 1999 there were no unfilled orders
scheduled for shipment beyond a year. Primarily, the increase in backlog is
attributable to strong order levels at Microsource and at the Giga-tronics
Instruments division.
Net sales for 2000 were $47,577,000, a 26% increase from $37,636,000 in
1999. Every segment of the business improved revenue during the fiscal year. In
fiscal 2000, Microsource increased revenues 68% or $6,085,000, DYMATIX (formerly
the Semiconductor Equipment Group) improved 43% or $2,180,000, in revenue, while
Giga-tronics Instruments increased 8% or $1,455,000, in sales and ASCOR improved
3% or $221,000, in sales.
Cost of sales increased 22% in 2000 to $31,767,000 from $26,102,000 in
1999. The increase in fiscal 2000 is attributable to increased shipments of
products during the fiscal year coupled with higher costs for labor and material
for the products shipped.
Operating expenses declined 6% in 2000 over 1999. Product development
costs declined $1,133,000 in fiscal 2000 to $4,180,000 as the development of new
products returned to previous levels. Selling, general and administrative
expenses increased $237,000 to $9,655,000 in 2000 due to higher commissions on
higher revenues. Amortization of intangibles decreased $82,000 to $480,000 as a
result of reduced amortization of patents and licenses.
Other income decreased in fiscal 2000 primarily due to the fiscal 1999
gain from the sale of a surplus building following facilities consolidation at
DYMATIX for which there was no corresponding sale in fiscal 2000. Net interest
income in 2000 decreased 51% from 1999 due to lower average cash available for
investment. The average cash decline resulted principally from low cash level at
the beginning of the year. The provision for income taxes in 2000 was $494,000,
or 30%, of the pre-tax earnings.
Giga-tronics recorded net earnings of $1,139,000, or $0.24 per share, in
2000 versus a loss of $1,858,000, or $0.43 per share, in 1999. The improvement
in 2000 earnings was due to the Company's higher sales levels in 2000 as
compared to 1999.
RESULTS OF OPERATIONS FOR FISCAL 1999 AS COMPARED TO 1998
Giga-tronics acquired Microsource, Inc., a manufacturer of YIG
oscillators and communications related synthesizers, on May 18, 1998 in a
purchase transaction. Performance from that date through March 27, 1999 is
included in the Company's operating results. Management believes this
acquisition positioned Giga-tronics to expand its market for microwave
instruments and devices.
New orders received in 1999 were $36,786,000, an increase of 11% from
$33,092,000 in 1998. These orders included $7,900,000 for Microsource for which
there were no comparable orders in 1998. At year end 1999, the Company's backlog
of unfilled orders was $17,792,000, compared to $6,492,000 at the end of 1998.
The increase in backlog is primarily attributable to addition of the Microsource
backlog which was $11,066,000 at year end.
Net sales for 1999 were $37,636,000, a 2% increase from 1998. The
increase is due to the addition of Microsource sales of $ 9,000,000 offset by
reduced sales volume for DYMATIX (formerly the Semiconductor Equipment Group) as
well as Giga-tronics Instrument products. In 1999, DYMATIX sales declined $6.2
million. Revenues for Giga-tronics' semiconductor product lines were impacted by
the substantial downturn of the semiconductor industry together with the severe
economic problems in Asia. The Giga-tronics Instrument sales reductions of $3.4
million were due to the aging of the product lines, delay in new product
releases, and weakness in the wireless industry. ASCOR sales improved $1.4
million in 1999 over 1998.
Cost of sales increased 24% in 1999 to $26,102,000 from $21,024,000 in
1998. The increase in 1999 is attributable to the addition of Microsource as
well as inventory write offs associated with the Company's decision to
discontinue a particular semiconductor equipment line. The cost of sales for
Microsource during fiscal 1999 was $6,978,000.
Operating expenses increased 1% in 1999 over 1998, which includes
Microsource operating expenses of $2,152,000. Product development costs declined
$.9 million in 1999 to $5.3 million as the development of new products began to
return to previous levels. Selling, general and administrative expenses
increased in 1999 due to the addition of Microsource which had expenses of
$1,602,000. Amortization of intangibles increased as a result of the addition of
the amortization of goodwill for Microsource offset by reduced amortization of
patents and licenses.
15
Other income increased primarily due to the gain from the sale of a
surplus building following facilities consolidation of the Company's
semiconductor equipment operations. Net interest income in 1999 declined 75%
from 1998 due to lower cash available for investment. The cash decline resulted
principally from the extinguishment of debt, reduction of accounts payable and
acquisition costs associated with the acquisition of the Microsource subsidiary.
The benefit for income taxes in 1999 was $1,148,000 or 38% of the pre-tax loss.
The Company recorded a net loss of $1,858,000, or $0.43 per share, in
1999 versus earnings of $767,000, or $0.18 per share in 1998. The decline in
1999 earnings was due to the Company's lower gross profits in 1999 of
$11,534,000 as compared to $15,789,000 in 1998.
FINANCIAL CONDITION AND LIQUIDITY
As of March 25, 2000, Giga-tronics had $3,455,000 in cash, cash
equivalents, and investments, compared to $2,686,000 as of March 27, 1999 and
$10,335,000 as of March 28, 1998. Cash provided by operations amounted to
$2,065,000 in 2000, compared to cash used by operations of $2,365,000 in 1999,
and $1,099,000 in 1998. Cash provided by operations in 2000 is attributed to
operating income in the year. In 1999, losses by operations were the significant
reason for the increase in use of cash by operations. In 1998, the increase in
product development costs of $1,619,000 and the merger transaction costs of
$643,000 were the significant reasons for the use of cash by operations.
Giga-tronics continues to maintain a strong financial position, with
working capital at year end of $21,645,000 compared to $18,021,000 in 1999 and
$23,484,000 in 1998. The Company's current ratio of 3.2 decreased from the 1999
and 1998 current ratio of 3.3 and 5.1, respectively. The increase in working
capital is primarily a result of the increased operations of the Company.
Additions to property and equipment were $1,361,000 in 2000, compared to
$953,000 in 1999 and $779,000 in 1998. Fiscal 2000 spending reflects continuing
investments to support new product development, increased productivity, and
improved product quality. Other cash inflows in 2000 consists of $174,000 of
common stock in connection with the exercise of stock options. Other cash
inflows in 1999 were $89,000 of common stock in connection with the exercise of
stock options, $1,291,000 from the sale of the Company's building and $5,742,000
from maturities of investments, net of purchases, which were principally
marketable securities classified as available for sale.
Management believes that the Company has adequate resources to meet its
operating and capital expenditure needs for the foreseeable future. The Company
has a seven million dollar unsecured line of credit, none of which has been
used. The Company may continue to increase product development expenditures in
the near term for the purpose of broadening its product base. It is the
Company's intention to broaden its product lines and expand its market, both by
internal development of new products and through the acquisition of other
business entities.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
BUSINESS CLIMATE MAY BECOME VOLATILE
Giga-tronics' has a significant number of defense-related orders. If the
defense market should decline, shipments in the current year could be less than
anticipated and cause a decrease in earnings. The Company's commercial product
backlog has a number of risks and uncertainties such as the cancellation or
deferral of orders. If this occurs, then shipments in the current year could
fall short of plan resulting in a decline in earnings.
GIGA-TRONICS ACQUISITIONS MAY NOT BE EFFECTIVELY INTEGRATED AND THEIR
INTEGRATION MAY BE COSTLY
As part of its business strategy, Giga-tronics intends to broaden its
product lines and expand its markets, in part through the acquisition of other
business entities. In fiscal 1999 the Company acquired Microsource, Inc. in a
transaction accounted for as a purchase. Giga-tonics is subject to various risks
in connection with this and any future acquisitions. Such risks include, among
other things, the difficulty of assimilating the operations and personnel of the
acquired companies, the potential disruption of the Company's business, the
inability of management to maximize the financial and strategic position of the
Company by the successful incorporation of acquired technology and rights into
its product offerings, the maintenance of uniform standards, controls,
procedures and policies, and the potential loss of key employees of acquired
companies. No assurance can be given that any acquisition by Giga-tronics will
or will not occur, that if an acquisition does occur, that it will not
materially harm the Company or that any such acquisition will be successful in
enhancing the Company's business. The Company currently contemplates that future
acquisitions may involve the issuance of additional shares of common stock. Any
such issuance may result in dilution to all Giga-tronics shareholders, and sales
of such shares in significant volume by the shareholders of acquired companies
may depress the price of its common stock.
Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Annual Report to Stockholders contain
forward-looking statements that involve risks and uncertainties. The actual
results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed herein and in the Company's 2000 Report
10-K under "Item 1. Business" and "Certain Factors Which May Affect Future
Operation Or An Investment In Giga-tronics" as filed with the Securities and
Exchange Commission.
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------
(In thousands except share data) March 25, 2000 March 27, 1999
-------------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 3,455 $ 2,686
Trade accounts receivable, net of allowance 9,194 6,434
of $253 and $435 respectively
Inventories, net 14,692 13,249
Income tax receivable -- 725
Prepaid expenses 444 383
Deferred income taxes 3,570 2,309
-------------- --------------
TOTAL CURRENT ASSETS 31,355 25,786
Property and equipment
Leasehold improvements 382 311
Machinery and equipment 14,673 13,460
Office furniture and fixtures 1,023 1,060
-------------- --------------
Property and equipment, gross cost 16,078 14,831
Less accumulated depreciation and amortization 10,678 9,179
-------------- --------------
PROPERTY AND EQUIPMENT, NET 5,400 5,652
PATENTS AND LICENSES 112 349
GOODWILL, NET 564 1,194
DEFERRED INCOME TAXES -- 169
OTHER ASSETS 95 109
-------------- --------------
TOTAL ASSETS $ 37,526 $ 33,259
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,065 $ 3,022
Accrued commissions 625 369
Accrued payroll and benefits 1,638 1,346
Accrued warranty 553 467
Customer advances 1,536 1,648
Obligation under capital lease 118 112
Other current liabilities 1,175 801
-------------- --------------
TOTAL CURRENT LIABILITIES 9,710 7,765
OBLIGATIONS UNDER CAPITAL LEASE, NET OF CURRENT PORTION 127 210
DEFERRED INCOME TAXES 1,011 --
DEFERRED RENT 529 574
-------------- --------------
TOTAL LIABILITIES 11,377 8,549
SHAREHOLDERS' EQUITY
Preferred stock of no par value
Authorized 1,000,000 shares; no shares outstanding
at March 25, 2000 and March 27, 1999 -- --
Common stock of no par value;
Authorized 40,000,000 shares; 4,431,008 shares at
March 25, 2000 and 4,361,902 shares at
March 27, 1999 issued and outstanding 11,921 11,621
Retained earnings 14,228 13,089
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 26,149 24,710
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 37,526 $ 33,259
============== ==============
See Accompanying Notes to Consolidated Financial Statements
17
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Years ended March 25, March 27, March 28,
(In thousands except share data) 2000 1999 1998
--------- --------- ---------
NET SALES $47,577 $37,636 $36,813
Cost of sales 31,767 26,102 21,024
------- ------- -------
GROSS PROFIT 15,810 11,534 15,789
Product development 4,180 5,313 6,200
Selling, general and administrative 9,655 9,418 8,537
Amortization of intangibles 480 562 435
------- ------- -------
Operating expenses 14,315 15,293 15,172
------- ------- -------
OPERATING INCOME (LOSS) 1,495 (3,759) 617
Other income (expense) 79 632 22
Interest income, net 59 121 457
------- ------- -------
EARNINGS (LOSS) BEFORE INCOME TAXES 1,633 (3,006) 1,096
Provision (benefit) for income taxes 494 (1,148) 329
------- ------- -------
NET EARNINGS (LOSS) $ 1,139 $(1,858) $ 767
======= ======= =======
EARNINGS (LOSS) PER COMMON SHARE -- BASIC $ 0.26 $ (0.43) $ 0.18
======= ======= =======
EARNINGS (LOSS) PER COMMON SHARE -- DILUTED $ 0.24 $ (0.43) $ 0.18
======= ======= =======
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING 4,379 4,338 4,319
------- ------- -------
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING 4,693 4,338 4,377
------- ------- -------
See Accompanying Notes to Consolidated Financial Statements
18
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands except share data)
Other
Common Stock Comprehensive Comprehensive Retained
Shares Amount Income (Loss) Income (loss) Earnings Total
----------------------------------------------------------- ----------------------
BALANCE AT MARCH 29, 1997 4,316,188 $ 11,463 $ -- $ 11 $ 14,180 $ 25,654
Comprehensive Income
Net earnings -- -- 767 -- 767 767
Unrealized gain on investments, net
of income tax benefit of $16 -- -- (29) (29) -- (29)
------------
Comprehensive Income -- -- 738 -- -- --
============
Stock issuance under stock
Option plans 10,111 69 -- -- -- 69
----------------------------------------------------------- ----------------------
BALANCE AT MARCH 28, 1998 4,326,299 $ 11,532 $ -- $ (18) $ 14,947 $ 26,461
Comprehensive Income
Net loss -- -- (1,858) -- (1,858) (1,858)
Unrealized gain on investments, net
of income tax benefit of $10 -- -- 18 18 -- 18
------------
Comprehensive Loss -- -- (1,840) -- -- --
============
Stock issuance under stock
Option plans 35,603 89 89
----------------------------------------------------------- ----------------------
BALANCE AT MARCH 27, 1999 4,361,902 $ 11,621 $ --- $ -- $ 13,089 $ 24,710
Comprehensive Income
Net Earnings -- -- 1,139 -- 1,139 1,139
============
Stock issuance under stock
Option plans 69,106 174 -- -- -- 174
Tax benefit associated with exercise
of stock options -- 126 -- -- -- 126
----------------------------------------------------------- ----------------------
BALANCE AT MARCH 25, 2000 4,431,008 $ 11,921 $ -- $ -- $ 14,228 $ 26,149
=========================================================== ======================
See Accompanying Notes to Consolidated Financial Statements
19
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------
Years ended
(In thousands) March 25, 2000 March 27, 1999 March 28, 1998
-------------- -------------- --------------
CASH FLOWS PROVIDED FROM OPERATIONS:
Net earnings (loss) $ 1,139 $ (1,858) $ 767
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operations:
Provision for bad debt (182) 142 (31)
Depreciation and amortization 2,111 2,208 1,407
Tax benefit from employee stock options 126 -- --
Tax benefit of pre acquisition NOL utilization 394 -- --
Gain on sales of fixed assets (20) (521) (3)
Deferred income taxes (81) (443) (120)
Changes in operating assets and liabilities:
Trade accounts receivable (2,578) 1,738 (2,337)
Inventories (1,443) (1,710) 196
Prepaid expenses (61) 74 (522)
Accounts payable 1,043 (622) 204
Accrued commissions 256 (180) 206
Accrued payroll and benefits 292 67 (118)
Accrued warranty 86 (269) (67)
Accrued other expenses 535 (209) (212)
Customer advances (112) (968) (469)
Income taxes receivable/payable 560 186 --
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) OPERATIONS 2,065 (2,365) (1,099)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments -- (2,268) (36,294)
Maturities of investments -- 8,010 37,751
Proceeds from sale of property and equipment 7 1,291 --
Additions to property and equipment (1,361) (953) (779)
Payment for purchase of Microsource, including (8) (605) --
transaction costs
Advances to Microsource -- (940) --
Issuance of notes receivable -- -- (860)
Other assets 14 (17) 57
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,348) 4,518 (125)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 174 89 69
Dividends paid -- -- (27)
Payment on line of credit -- (1,500) (189)
Payment on notes payable and other long term liabilities (45) (2,497) (985)
Payments on capital lease and other long term obligations (77) (170) (32)
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 52 (4,078) (1,164)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 769 (1,925) (2,388)
-------------- -------------- --------------
BEGINNING CASH AND CASH EQUIVALENTS 2,686 4,611 6,999
ENDING CASH AND CASH EQUIVALENTS 3,455 2,686 4,611
============== ============== ==============
Supplementary disclosure of cash flow information:
Cash paid for income taxes $ 86 $ 7 $ 951
Cash paid for interest -- -- 58
Non-cash investing and financing activities:
Purchases under capital lease obligations 50 -- --
- ------------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements
20
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1 BUSINESS COMBINATIONS
On May 18, 1998, Giga-tronics Incorporated acquired Microsource, Inc.
(Microsource) of Santa Rosa, California. Microsource develops and
manufactures a broad line of YIG (Yttrium, Iron, Garnet) tuned
oscillators, filters, and microwave synthesizers. The acquisition was
accounted for using the purchase method of accounting, and
accordingly, the results of operations of Microsource have been
included in the Company's consolidated financial statements from May
18, 1998. The purchase price consisted of $1,500,000 plus contingent
payments based upon future net income of Microsource during the two
fiscal years after the effective time of the merger. The excess of
the purchase price over the fair value of the net identifiable assets
of $1,509,000 was recorded as goodwill and other intangibles
(primarily patents).
The total purchase price of $1,500,000 has been allocated to the net
assets acquired based on the estimated fair value as follows (in
thousands):
Current assets $ 5,119
Property and equipment 4,370
Goodwill and other intangibles 1,509
Current liabilities (7,018)
Capital lease and other long term obligations, net (517)
-------
3,463
-------
Less advances to Microsource, net, and transaction costs (1,963)
-------
$ 1,500
=======
The purchase price was subsequently adjusted to give effect to the
contingent payment of $8,000, net paid to Microsource shareholders
based on the subsidiary's fiscal year 2000 operating results. In
addition, the purchase price allocation was adjusted to give effect
in fiscal year 2000 to the recognition of deferred tax assets of
$394,000 for which no value was assigned at the date of the
acquisition.
Results of operations previously reported by the separate entities
prior to the mergers and the pro-forma combined amounts are
summarized below.
--------------------------------------------------------------------------------------------------------
Year ended March 28, 1998 (unaudited) Pro-forma Pro-forma
Giga-tronics Microsource Adjustments Combined
Net sales $ 36,813 $ 6,262 $ -- $ 43,075
Net earnings (loss) 767 (4,531) (390) (4,154)
Net earnings (loss) per share $ 0.18 $ -- $ -- $ (0.96)
--------------------------------------------------------------------------------------------------------
Pro-forma adjustment represents increased depreciation on the step-up
basis (to fair market value) of property, plant and equipment, the
amortization of goodwill created as a result of the acquisition of
Microsource, and interest accrued by Microsource on the notes due to
Giga-tronics for which no income had previously been recorded by
Giga-tronics.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company The accompanying consolidated financial statements
include the accounts of Giga-tronics and its wholly owned
subsidiaries. Giga-tronics and its subsidiary companies design,
manufacture and market a broad line of test and measurement equipment
used in the development, test, and maintenance of wireless
communications products and systems, flight navigational equipment,
electronic defense systems, and automatic testing systems. The
Company also manufactures and markets a line of test, measurement,
and handling equipment used in the manufacturing of semiconductor
devices. The Company's products are sold worldwide to customers in
the test and measurement and semiconductor industries. The Company
has no foreign operations, and all non-U.S. sales are made in U.S.
dollars.
Principles of Consolidation The consolidated financial statements
include the accounts of Giga-tronics and its wholly-owned
subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the
21
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Fiscal Year The Company's financial reporting year consists of either
a 52 week or 53 week period ending on the last Saturday of the month
of March. Fiscal years 2000, 1999 and 1998 each contained 52 weeks.
Revenue Recognition Revenues are recognized when the earnings process
has been completed and products are shipped or when services are
performed. Upon shipment, the Company also provides for the estimated
cost that may be incurred for product warranties.
Cash Equivalents The Company considers all highly liquid debt
instruments with remaining maturity dates of 90 days or less from
date of purchase to be cash equivalents.
Inventories Inventories are stated at the lower of cost or market.
Cost is determined on a first-in, first-out basis.
Property and Equipment Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the respective assets, which range from
three to ten years for machinery and equipment and office fixtures.
Leasehold improvements and assets acquired under capital leases are
amortized using the straight-line method over the shorter of the
estimated useful lives of the respective assets or the lease term.
Recoverability of property and equipment is measured by comparison of
its carrying amount, including the unamortized portion of goodwill
allocated to property and equipment, to future cash flows the
property and equipment are expected to generate. The Company assesses
the recoverability of enterprise level goodwill by determining
whether the unamortized goodwill balance can be recovered through
undiscounted future cash flows of the acquired operation. To date,
the Company has made no adjustments to the carrying value of its
property and equipment or goodwill due to asset impairment.
Deferred Rent Rent expense is recognized in an amount equal to the
minimum guaranteed base rent plus future rental increases amortized
on the straight-line basis over the terms of the leases, including
free rent periods. Included in other long-term liabilities is the
excess of rent expense over required rental payments.
Income Taxes Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Patents and Licenses Patents and licenses are being amortized using
the straight-line method over periods of five to seven years. As of
March 25, 2000 and March 27, 1999 accumulated amortization on patents
and licenses was $2,084,000 and $1,848,000, respectively.
Goodwill Goodwill is being amortized using the straight-line method
over a period of five years. As of March 25, 2000 and March 27, 1999
accumulated amortization on goodwill was $1,725,000 and $1,481,000
respectively.
Product Development Costs Product development costs are charged to
operations in the year incurred.
Software Development Costs Development costs included in the research
and development of new products and enhancements to existing products
are expensed as incurred until technological feasibility in the form
of a working model has been established. To date, software
development has been concurrent with the establishment of
technological feasibility, and accordingly, no costs have been
capitalized.
Stock-based Compensation The Company uses the intrinsic value method
to account for stock-based compensation.
Earnings (Loss) Per Share Basic earnings (loss) per share are
computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share incorporate
the incremental shares issuable upon the assumed exercise of stock
options. Antidilutive options are not included in the computation of
diluted earnings per share.
Financial Instruments and Concentration of Credit Risk Financial
instruments, which potentially subject the Company to credit risk as
of March 25, 2000, consist principally of cash, cash equivalents and
trade accounts receivable. The Company's cash equivalents consist
principally of money market funds and certificates of deposits which
are held in recognized depository institutions. Concentration of
credit risk in trade accounts receivable results primarily from sales
to major customers. The Company individually evaluates the
creditworthiness of its customers and generally does not require
collateral or other security. Historically, the Company has not
incurred any significant credit related losses.
Fair Market Value of Financial Instruments The carrying amount for
the Company's cash equivalents, trade accounts receivable and
accounts payable approximates fair market value because of the short
maturity of these financial instruments.
Recent Accounting Pronouncements The Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value. For a derivative not designated as a
hedging instrument, changes in the fair value of the derivative are
recognized in earnings in the period of change. The Company must
adopt SFAS No. 133 in the first quarter of fiscal 2002. Management
does not believe the adoption of SFAS No. 133 will have a material
effect on the financial position or operations of the Company.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101. SAB 101 presents certain of the SEC's staff views on applying
generally accepted accounting principles for revenue recognition in
financial statements. The Company has not determined the impact
implementation of SAB No. 101 will have on its consolidated results
of operations.
The FASB issued Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB
No. 25" (FIN No. 44) in March 2000. The interpretation clarifies the
application of Opinion 25 for only certain issues such as the
following: (a) the definition of employee for the purposes of
applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence
of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. The Company must adopt
FIN No. 44 by July 1, 2000. The Company does not believe that the
interpretation will have a material effect on its consolidated
results of operations, financial position, or liquidity.
3 CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following at March 25,
2000 and March 27, 1999:
- -----------------------------------------------------------------------------------------------
March 25, 2000 Cash and Cash Equivalents
(In thousands) -------------------------
Amortized Fair
Cost Value
Cash $ 1,067 $ 1,067
Money market funds 1,933 1,933
Other marketable securities 455 455
-------------- --------------
Total debt securities $ 3,455 $ 3,455
============== ==============
- -----------------------------------------------------------------------------------------------
March 27, 1999 Cash and Cash Equivalents
(In thousands) -------------------------
Amortized Fair
Cost Value
Cash $ 1,093 $ 1,093
Money market funds 1,593 1,593
-------------- --------------
Total debt securities $ 2,686 $ 2,686
============== ==============
4 INVENTORIES
- -----------------------------------------------------------------------------------------------
Years ended
(In thousands) March 25, 2000 March 27, 1999
- -----------------------------------------------------------------------------------------------
Raw materials $ 8,095 $ 6,386
Work-in-progress 5,746 6,124
Finished goods 294 305
Loaned Inventory 557 434
-------------- --------------
$ 14,692 $ 13,249
============== ==============
5 SELLING EXPENSES
Selling expenses consist primarily of commissions paid to various
marketing agencies. Commission expense totaled $2,360,000,
$2,051,000, and $2,155,000 in fiscal 2000, 1999, and 1998,
respectively. Advertising costs which are expensed as incurred
totaled $511,000, $558,000, and $431,000 for fiscal 2000, 1999, and
1998, respectively.
6 SIGNIFICANT CUSTOMERS AND INDUSTRY SEGMENT INFORMATION
The Company has five reportable segments: Giga-tronics Instruments
Division, ASCOR, Microsource, DYMATIX, and Corporate. Giga-tronics
Instrument division produces a broad line of test and measurement
equipment used in the development, test and maintenance of wireless
communications products and systems, flight navigational equipment,
electronic defense systems and automatic testing systems. ASCOR
designs, manufactures, and markets a line of switching devices that
link together many specific purpose instruments that comprise
automatic test systems. Microsource develops and manufactures a broad
line of YIG (Yttrium, Iron, Garnet) tuned oscillators, filters and
microwave synthesizers, which are used in a wide variety of microwave
instruments or devices. DYMATIX, which includes Viking Semiconductor
Equipment, Inc. and Ultracision, Inc., manufactures and markets
optical inspection equipment used to test semiconductor devices and
automation equipment for the test and inspection of silicon wafers.
Corporate handles the financing needs of each segment and lends funds
to each segment as required.
The accounting policies for the segments are the same as those
described in the "Summary of Significant Accounting Policies." The
Company evaluates the performance of its segments and allocates
resources to them based on earnings before income taxes (pre-tax
income (loss)). Segment net sales includes sales to external
customers. Segment pre-tax loss includes an allocation for corporate
expenses, amortization of goodwill, and interest expense from
borrowings from Corporate. Corporate expenses are allocated to the
reportable segments based principally on full time equivalent
headcount. The interest expense is charged at prime which is
currently 9 % for cash required by each segment. Goodwill associated
with acquisitions are recorded as assets of the individual segments.
Assets include accounts receivable, inventories, equipment, cash,
deferred income taxes, prepaid expenses, goodwill and other long-term
assets. The Company accounts for inter-segment sales and transfers at
terms that allow a reasonable profit to the seller. During the
periods reported there were no significant inter-segment sales or
transfers.
The Company's reportable operating segments are strategic business
units that offer different products and services. They are managed
separately because each business utilizes different technology and
requires different marketing strategies. All of the businesses except
for Giga-tronics Instruments were acquired. The Company's chief
operating decision maker is considered to be the Company's Chief
Executive Officer ("CEO"). The CEO reviews financial information
presented on a consolidated basis accompanied by disaggregated
information about revenues and pre-tax income by operating segment.
The tables below present information for the fiscal years ended in
2000, 1999 and 1998:
March 25, 2000 (In thousands):
Giga-tronics
Instruments ASCOR Microsource DYMATIX Corporate Total
----------- ----- ----------- ------- --------- -----
Revenue $ 18,516 $ 6,705 $ 15,069 $ 7,287 $ -- $ 47,577
Interest income -- 34 1 -- 70 105
Interest expense (25) (15) (634) (329) 957 (46)
Amortization & depreciation 699 153 1,164 95 -- 2,111
Pre-tax income 361 53 132 168 919 1,633
Assets 13,546 5,299 11,874 5,396 1,411 37,526
March 27, 1999 (In thousands):
Giga-tronics
Instruments ASCOR Microsource DYMATIX Corporate Total
----------- ----- ----------- ------- --------- -----
Revenue $ 17,061 $ 6,484 $ 8,984 $ 5,107 $ -- $ 37,636
Interest income 35 10 -- 2 120 167
Interest expense -- 31 455 287 (727) (46)
Amortization & depreciation 924 152 1,004 128 -- 2,208
Pre-tax income (loss) (805) 546 (777) (2,791) 821 (3,006)
Assets 10,130 4,426 11,495 5,763 1,445 33,259
March 28, 1998 (In thousands):
Giga-tronics
Instruments ASCOR Microsource DYMATIX Corporate Total
----------- ----- ----------- ------- --------- -----
Revenue $ 20,441 $ 5,070 $ -- $ 11,302 $ -- $ 36,813
Interest income -- 40 -- 5 470 515
Interest expense 5 -- -- 183 (130) 58
Amortization & depreciation 1,110 163 -- 134 -- 1,407
Pre-tax income (loss) 1,626 62 -- (1,192) 600 1,096
Assets 12,778 3,425 -- 7,326 9,143 32,672
The Company's Giga-tronics Instruments, ASCOR, and Microsource
segments sell to agencies of the U.S. Government and U.S.
defense-related customers. In fiscal 2000, 1999, and 1998 U.S.
Government and U.S. defense-related customers accounted for 16%, 24%,
and 12% of sales, respectively.
Export sales accounted for 30%, 20%, and 28% of the Company's sales
in fiscal 2000, 1999, and 1998, respectively. Export sales by
geographical area are shown below:
Years ended
(In thousands) March 25, 2000 March 27, 1999 March 28, 1998
- -------------------------------------------------------------------------------------------------------------------
Americas $ 1,989 $ 445 $ 345
Europe 6,448 3,446 3,990
Asia 4,981 3,371 5,747
Rest of world 1,050 403 328
-------------- -------------- --------------
$ 14,468 $ 7,665 $ 10,410
============== ============== ==============
7 EARNINGS (LOSS) PER SHARE
Shares used in per share computations for the years ended March 25,
2000, March 27, 1999, and March 28, 1998 are as follows:
- -------------------------------------------------------------------------------------------------------------------
Years ended
(In thousands except per share data) March 25, 2000 March 27, 1999 March 28, 1998
- -------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,139 $ (1,858) $ 767
============== ============== ==============
Weighted average:
Common shares outstanding 4,379 4,338 4,319
Common share equivalents 314 -- 58
-------------- -------------- --------------
Common shares assuming dilution 4,693 4,338 4,377
============== ============== ==============
Net earnings per share of common stock $ 0.26 $ (0.43) $ 0.18
============== ============== ==============
Net earnings per share of common stock assuming
dilution $ 0.24 $ (0.43) $ 0.18
============== ============== ==============
Stock options not included in computation 24 537 177
============== ============== ==============
The number of stock options not included in the computation of
diluted EPS for the period ended March 27, 1999 is a result of the
Company's loss from continuing operations and therefore the options
are antidilutive. The number of stock options not included in the
computation of diluted EPS for the periods ending March 25, 2000 and
March 28, 1998 reflects stock options where the exercise prices were
greater than the average market price of the common shares and are
therefore antidilutive.
8 INCOME TAXES
Following are the components of the provision (benefit) for income
taxes:
- -------------------------------------------------------------------------------------------------------------------
Years ended
(In thousands) March 25, 2000 March 27, 1999 March 28, 1998
Current:
Federal $ 46 $ (720) $ 413
State 7 4 20
-------------- -------------- --------------
53 (716) 433
Deferred:
Federal (180) (205) 50
State 100 (227) (154)
-------------- -------------- --------------
(80) (432) (104)
Charge in lieu of taxes attributable to employer stock
option plans 127 -- --
Goodwill, for initial recognition of acquired tax
benefits that previously were included in the valuation
reserve 394 -- --
-------------- -------------- --------------
Provision (benefit) for income taxes $ 494 $ (1,148) $ 329
============== ============== ==============
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities are
as follows:
- -----------------------------------------------------------------------------------------------
Years ended
(In thousands) March 25, 2000 March 27, 1999
- -----------------------------------------------------------------------------------------------
Current tax assets, net $ 3,570 $ 2,309
Noncurrent tax asset (liabilities), net (1,011) 169
-------------- --------------
Net deferred taxes $ 2,559 $ 2,478
============== ==============
Future state tax effect (188) (238)
Allowance for doubtful accounts 196 187
Fixed asset depreciation (1,116) 188
Inventory reserves and additional costs capitalized 2,747 2,797
Deferred revenue 19 52
Accrued vacation 268 251
Accrued warranty 237 162
Other accrued liabilities 330 269
Net operating loss carryforward 6,452 6,576
Unrealized loss (gain) on equity securities -- (18)
Income tax credits 501 --
Valuation allowances (6,887) (7,748)
-------------- --------------
$ 2,559 $ 2,478
============== ==============
Income tax expense (benefit) differs from the amounts computed by
applying the U.S. federal income tax rate to pre-tax income as a
result of the following:
- ------------------------------------------------------------------------------------------------------------------------------
Years ended
(In thousands except percentages) March 25, 2000 March 27, 1999 March 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------
Statutory federal income tax (benefit) $ 555 34.0% $(1,022) 34.0% $ 372 34.0%
Beginning of year change in deferred
Tax asset valuation allowance (55) (3.4) -- -- (85) (7.8)
State income tax, net of federal benefit 57 3.5 (146) 4.9 (87) (8.0)
Nontax deductible expenses 6 0.4 14 (0.4) 210 19.2
Interest income exempt from federal tax (51) (3.1) (19) 0.6 (83) (7.5)
Tax credits (98) (6.0) (58) 1.9 (24) (2.2)
Goodwill and patent amortization 88 5.4 84 (2.8) -- --
Other (8) (0.5) (1) -- 26 2.3
------- ------- ------- ------- ------- -------
Effective income tax (benefit) $ 494 30.3% $(1,148) 38.2% $ 329 30.0%
======= ======= ======= ======= ======= =======
The change in valuation allowance from March 27, 1999 to March 25,
2000 was $860,000. The change in valuation allowance from March 28,
1998 to March 27, 1999 was $7,648,000. The change in valuation
allowance from March 29, 1997 to March 28, 1998 was $272,000.
The Company has recorded a valuation allowance to reflect the
estimated amount of deferred tax assets, which may not be realized.
The ultimate realization of deferred tax assets is dependent upon
generation of future taxable income during the period in which those
temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making
this assessment. Based on the historical taxable income and
projections for future taxable income over the periods in which the
deferred tax assets become deductible, management believes it more
likely than not
that the Company will realize benefits of these deductible
differences, net of valuation allowances as of March 25, 2000.
During the year ended March 27, 1999, the Company acquired
approximately $7,600,000 of deferred tax assets in the acquisition of
Microsource, which was fully offset by a valuation allowance.
Subsequent recognition of tax benefits relating to the valuation
allowance for deferred tax assets of Microsource will be allocated to
goodwill and the remainder to income tax benefit. At March 25, 2000,
goodwill was reduced by the $394,000 for the tax benefits realized
from the Microsource deferred tax assets.
During the year ended March 25, 2000, disqualifying employee stock
option dispositions resulted in an income tax deduction to the
Company of approximately $269,000 and a tax benefit of approximately
$127,000. The tax benefit has been reflected as an increase to the
Company's paid-in-capital in the accompanying financial statements.
9 STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS
Stock Option Plan The Company has established a stock option plan
which provides for the granting of options for up to 700,000 shares
of common stock at 100% of fair market value at the date of grant,
with each grant requiring approval by the Board of Directors of the
Company. Options granted vest in one or more installments as set
forth in the relevant option agreement and must be exercised while
the grantee is employed by the Company or within a certain period
after termination of employment. Options granted to employees shall
not have terms in excess of 10 years from the grant date. During
December 1998, the Company offered options holders the opportunity to
have outstanding options repriced to current fair value, with the
related vesting period starting over. The Company cancelled and
reissued (repriced) 405,250 options pursuant to the repricing.
Holders of options may be granted stock appreciation rights (SAR's),
which entitle them to surrender outstanding options for a cash
distribution under certain changes in ownership of the Company, as
defined in the stock option plan. As of March 25, 2000, no SAR's have
been granted under the option plan. As of March 25, 2000, the total
number of shares of common stock available for issuance is 608,312
under the Giga-tronics stock option plan and 17,048 under the prior
Ultracision stock option plan. All outstanding options have a term of
five years. With the merger of one of the Company's subsidiaries, the
Company also assumed 56,370 options granted under its existing option
plan. These options vest 100% after two years and have a term of five
years.
Following is a summary of stock option activity:
- ------------------------------------------------------------------------------------------------------------------
Per Share Weighted
Average Fair Value Options Weighted Average
of Options Granted Exercisable Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------------
Outstanding as of March 29, 1997 12,150 318,870 $ 7.058
- -------------------------------- -------------- -------------- -------------- --------------
Exercised (950) 4.000
Forfeited (16,250) 4.115
Granted $ 3.822 89,000 7.410
- -------------------------------- -------------- -------------- -------------- --------------
Outstanding as of March 28, 1998 106,682 390,670 7.268
- -------------------------------- -------------- -------------- -------------- --------------
Exercised (1,400) 2.660
Forfeited (561,456) 6.399
Granted $ 2.914 807,750 2.818
- -------------------------------- -------------- -------------- -------------- --------------
Outstanding as of March 27, 1999 48,814 635,564 2.391
- -------------------------------- -------------- -------------- -------------- --------------
Exercised (28,204) 2.515
Forfeited (168,875) 2.118
Granted $ 2.613 115,500 2.613
- -------------------------------- -------------- -------------- -------------- --------------
Outstanding as of March 25, 2000 131,424 553,985 $ 2.514
- -------------------------------- -------------- -------------- -------------- --------------
In accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company is required to disclose the effects on net
earnings and earnings per share as if it had elected to use the fair
value method to account for employee stock-based compensation plans.
Had the Company recorded a charge for the fair value of options
granted consistent with SFAS No. 123, net earnings (loss) and net
earnings (loss) per share would have been changed to the pro-forma
(unaudited) amounts shown below:
- -------------------------------------------------------------------------------------------------------------------
Years ended
(In thousands except per share data) March 25, 2000 March 27, 1999 March 28, 1998
- -------------------------------------------------------------------------------------------------------------------
Net earnings (loss)
As reported $ 1,139 $ (1,858) $ 767
Pro-forma 872 (2,234) 404
Net earnings (loss) per share - basic
As reported 0.26 (0.43) 0.18
Pro-forma 0.20 (0.52) 0.09
Net earnings (loss) per share - diluted
As reported 0.24 (0.43) 0.18
Pro-forma $ 0.19 $ (0.52) $ 0.09
For purposes of computing pro-forma (unaudited) consolidated net
earnings (loss), the fair value of each option grant and Employee
Stock Purchase Plan purchase right is estimated on the date of grant
using the Black Scholes option pricing model. The assumptions used to
value the option grants and purchase rights are stated below:
Years ended March 25, 2000 March 27, 1999 March 28, 1998
- -------------------------------------------------------------------------------------------------------------------
Expected life of options 4 years 4 years 4 years
Expected life of purchase rights 6 mos 6 mos 6 mos
Volatility 60% 60% 60%
Risk-free interest rate 5.08 to 5.97 4.53 to 5.66 5.50 to 6.25
Dividend yield Zero Zero Zero
Options Outstanding and Exercisable as of March 25, 2000, by Price Range
- -----------------------------------------------------------------------------------------------------------------------
Number Weighted Average Weighted Number Weighted
Range of of Options Remaining Average of Options Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- -----------------------------------------------------------------------------------------------------------------------
$2.09 374,187 3.71 $ 2.094 84,876 $ 2.094
From $2.12 to $4.00 155,798 3.81 2.717 22,548 2.827
$7.75 24,000 0.79 7.750 24,000 7.750
-------------- -------------- -------------- -------------- --------------
From $2.09 to $7.75 553,985 3.61 $ 2.514 131,424 $ 3.252
============== ============== ============== ============== ==============
Employee Stock Purchase Plan Under the Company's Employee Stock
Purchase Plan (the Purchase Plan), employees meeting specific
employment qualifications are eligible to participate and can
purchase shares semi-annually through payroll deductions at the lower
of 85% of the fair market value of the stock at the commencement or
end of the offering period. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions for up
to 10% of qualified compensation. As of March 25, 2000, 45,734 shares
remain available for issuance under the Purchase Plan. The weighted
average fair value of the purchase rights granted in fiscal 2000 was
$2.522.
401(k) Plan The Company has established 401(k) plans which cover
substantially all employees. Participants may make voluntary
contributions to the plan up to 20% of their defined compensation.
The Company is required to match a percentage of the participants'
contributions in accordance with the plan. Participants vest ratably
in Company contributions over a four-year period. Company
contributions to the plans for fiscal 2000, 1999, and 1998 were
approximately $151,000, $153,000, and $151,000, respectively.
10 COMMITMENTS
The Company leases a 47,300 square foot facility located in San
Ramon, California, under a twelve-year lease (as amended) that
commenced in April 1994. The Company leases a 18,756 square foot
facility located in Fremont, California, under a seven-year lease
that commenced in July 1999. The Company leases a 20,400 square foot
facility located in Santa Clara, California, under a seven-year lease
that commenced in July 1995. The Company leases a 49,090 square foot
facility located in Santa Rosa, California, under a twenty-year lease
that commenced in July 1993. These facilities accommodate all of the
Company's present operations. The Company also has acquired equipment
under capital and operating leases. The future minimum lease payments
for equipment leases and facilities are shown below:
-----------------------------------------
Fiscal years
(In thousands)
-----------------------------------------
2001 $1,679
2002 1,692
2003 1,575
2004 1,535
2005 874
Thereafter 7,127
-------
$14,482
=======
The aggregate rental expense was $1,812,000, $1,462,000, and
$959,000, in fiscal 2000, 1999, and 1998, respectively.
As of March 25, 2000, Property and Equipment includes equipment under
capital lease of $313,000 and related accumulated depreciation of
$99,000. As of March 27, 1999, Property and Equipment includes
equipment under capital lease of $502,000 and related accumulated
depreciation of $111,000. As of March 28, 1998, equipment under
capital lease was not significant. The future minimum lease payments
for capital equipment leases are shown below.
- --------------------------------------------------------
Fiscal years
(In thousands)
- --------------------------------------------------------
2001 $140
2002 123
2003 12
----
Total 275
Less interest costs 30
----
Present value of minimum lease payments 245
Less current portion 118
----
Long term portion of capital lease obligations $127
====
11 LINE OF CREDIT
The Company has an agreement with a bank for an unsecured revolving
line of credit loan for $7,000,000 with interest payable at prime
rate or at LIBOR plus 1 1/2 percent. This credit line has not been
utilized by the Company and expires July 31, 2000.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Giga-tronics Incorporated:
We have audited the accompanying consolidated balance sheets of
Giga-tronics Incorporated and subsidiaries as of March 25, 2000 and March 27,
1999, and the related consolidated statements of operations, shareholders'
equity and cash flows for years ended March 25, 2000, March 27, 1999, and March
28, 1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements 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 financial position of Giga-tronics
Incorporated and subsidiaries as of March 25, 2000, and March 27, 1999, and the
results of their operations and their cash flows for the years ended March 25,
2000, March 27, 1999, and March 28, 1998, in conformity with generally accepted
accounting principles.
/s/
KPMG LLP
Mountain View, California
May 2, 2000
29
SELECTED FINANCIAL DATA
SUMMARY OF OPERATIONS:
--------------------------------------------------------------------------------------------------------------------
(In thousands except per share data) March 25, March 27, March 28, March 29, March 30,
2000 1999 1998 1997 1996
Net sales $ 47,577 $ 37,636 $ 36,813 $ 38,031 $ 40,804
Gross profit 15,810 11,534 15,789 14,627 15,916
Operating expenses 14,315 15,293 15,172 13,096 13,714
Interest income, net 59 121 457 533 221
Earnings (loss) before income taxes 1,633 (3,006) 1,096 2,048 2,623
Net earnings (loss) 1,139 (1,858) 767 1,509 2,193
Net earnings (loss) per share - basic $ 0.26 $ (0.43) $ 0.18 $ 0.35 $ 0.52
Net earnings (loss) per share - diluted $ 0.24 $ (0.43) $ 0.18 $ 0.34 $ 0.51
FINANCIAL POSITION:
--------------------------------------------------------------------------------------------------------------------
(In thousands except ratio) March 25, March 27, March 28, March 29, March 30,
2000 1999 1998 1997 1996
Current ratio 3.23 3.32 5.06 4.32 3.15
Working capital $ 21,645 $ 18,021 $ 23,484 $ 22,692 $ 19,638
Total assets 37,526 33,259 32,672 33,618 33,448
Shareholders' equity $ 26,149 $ 24,710 $ 26,461 $ 25,654 $ 23,475
Shares of common stock - basic 4,379 4,338 4,319 4,300 4,232
Shares of common stock - diluted 4,693 4,338 4,377 4,376 4,297
PERCENTAGE DATA:
--------------------------------------------------------------------------------------------------------------------
March 25, March 27, March 28, March 29, March 30,
2000 1999 1998 1997 1996
Percent of net sales
Gross profit 33.2 30.6 42.9 38.5 39.0
Operating expenses 30.1 40.6 41.2 34.4 33.6
Interest income, net 0.1 0.3 1.2 1.4 0.5
Earnings (loss) before income taxes 3.4 (8.0) 3.0 5.4 6.4
Net earnings (loss) 2.4 (4.9) 2.1 4.0 5.4
30
SELECTED FINANCIAL DATA
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------
(In thousands except per share data) 2000
-----------------------------------------------------------------------
First Second Third Fourth Year
-----------------------------------------------------------------------
Net sales $ 11,505 $ 11,834 $ 11,314 $ 12,924 $ 47,577
Gross profit 3,451 3,948 3,990 4,421 15,810
Operating expenses 3,315 3,638 3,568 3,794 14,315
Interest income, net (1) 3 22 35 59
Earnings (loss) before income taxes 162 324 460 687 1,633
Net earnings (loss) 112 227 322 478 1,139
Net earnings (loss) per share - basic $ 0.03 $ 0.05 $ 0.07 $ 0.11 $ 0.26
Net earnings (loss) per share - diluted $ 0.03 $ 0.05 $ 0.07 $ 0.10 $ 0.24
Equivalent shares of common stock - basic 4,362 4,368 4,383 4,402 4,379
Equivalent shares of common stock - diluted 4,372 4,483 4,611 4,846 4,693
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------
(In thousands except per share data) 1999
-----------------------------------------------------------------------
First Second Third Fourth Year
-----------------------------------------------------------------------
Net sales $ 8,677 $ 9,030 $ 11,343 $ 8,586 $ 37,636
Gross profit 3,313 2,834 3,690 1,697 11,534
Operating expenses 3,806 3,950 3,672 3,865 15,293
Interest income, net 112 6 2 1 121
Earnings (loss) before income taxes (377) (1,076) 47 (1,600) (3,006)
Net earnings (loss) (264) (753) 34 (875) (1,858)
Net earnings (loss) per share - basic $ (0.06) $ (0.17) $ 0.01 $ (0.20) $ (0.43)
Net earnings (loss) per share - diluted $ (0.06) $ (0.17) $ 0.01 $ (0.20) $ (0.43)
Equivalent shares of common stock - basic 4,326 4,331 4,344 4,350 4,338
Equivalent shares of common stock - diluted 4,326 4,331 4,362 4,350 4,338
COMMON STOCK MARKET PRICES
Giga-tronics' common stock is traded over the counter on NASDAQ/NMS National
Market System using the symbol "GIGA". The number of record holders of the
Company's common stock as of March 25, 2000 was close to 1,400. The table
below shows the high and low closing bid quotations for the common stock
during the indicated fiscal periods.
---------------------------------------------------------------------------
2000 High Low 1999 High Low
---------------------------------------------------------------------------
First quarter (3/28-6/26) 3 1 3/4 (3/29-6/27) 7 4 3/4
Second quarter (6/27-9/25) 3 5/16 1 13/16 (6/28-9/26) 5 2 13/32
Third quarter (9/26-12/25) 7 1/2 2 1/2 (9/27-12/28) 3 1/4 2
Fourth quarter (12/26-3/25) 22 6 1/2 (12/29-3/27) 3 7/16 2 1/8
-----------------------------------------------------------------------------------------------
31