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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number:0-22175
EMCORE CORPORATION
(Exact name of Registrant as specified in its charter)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2746503
(IRS Employer Identification No.)
394 ELIZABETH AVENUE
SOMERSET, NJ 08873
(Address of principal executive offices) (zip code)
(908) 271-9090
(Registrant's telephone number, including area code)
NO CHANGE
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: No: X
As of May 15, 1997, there were 5,919,368 shares of the registrant's common
stock outstanding.
This quarterly report of Form 10- Q contains 14 pages, of which this is page
1.PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMCORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
March 31, March 31,
1997 1996 1997 1996
Revenue . . . . . . . . . . . . . . . . . . . $12,929 $6,014 $21,520 $10,269
Cost of sales . . . . . . . . . . . . . . . . 8,855 4,041 15,579 6,823
Gross profit . . . . . . . . . . . . . . . . $4,074 $1,973 $5,941 $3,446
Operating expenses:
Selling, general and administrative . . . . 1,940 1,545 4,142 3,056
Research and development . . . . . . . . . 1,987 1,196 4,237 1,989
Total operating expenses . . . . . . . . . . $3,927 $2,741 $8,379 $5,045
Operating income . . . . . . . . . . . . . . $147 ($768) ($2,438) ($1,599)
Other expense (income):
Stated interest expense (income) . . . . . 249 55 445 94
Imputed warrant interest expense,
non-cash . . . . . . . . . . . . . . . . 2,792 3,809
Provision for income taxes . . . . . . . . 15
Total other expense . . . . . . . . . . . . . $3,041 $55 $4,254 $109
Loss before extraordinary item . . . . . . . (2,894) (823) (6,692) (1,708)
Extraordinary loss . . . . . . . . . . . . . (256) (256)
Net loss . . . . . . . . . . . . . . . . . . ($3,150) ($823) ($6,948) ($1,708)
Per share data:
Loss before extraordinary item . . . . . . . (0.76) (0.19) ($1.62) ($0.38)
Extraordinary loss . . . . . . . . . . . . . (0.07) (0.06)
Net loss per share . . . . . . . . . . . . . ($0.82) ($0.19) ($1.68) ($0.38)
Shares used in per share
calculations . . . . . . . . . . . . . . . 3,825 4,438 4,127 4,438
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
EMCORE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
AT MARCH 31, AT SEPTEMBER 30,
1997 1996
(UNAUDITED)
ASSETS
CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . $13,896 $1,367
Accounts receivable, net of allowance for
doubtful accounts of $380 and $310 at March 31,
1997 and September 30, 1996, respectively . . . . . . . . . . . . . . . 6,495 3,025
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,905 6,745
169 79
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $30,465 $12,116
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 12,761 7,797
355 521
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$43,581 $20,434
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES
CURRENT LIABILITIES:
Account payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,730 $5,661
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,855 1,987
Advanced billings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,393 3,306
43 12
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . $16,021 $10,966
7,588 8,947
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,609 $19,913
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
STOCKHOLDERS' EQUITY:
Common stock, no par value, 23,529,411 shares
authorized, 5,869,461 shares issued and outstanding in 1997, 2,994,461
shares issued and outstanding in 1996 . . . . . . . . . . . . . . . . $45,344 $18,977
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,106) (18,158)
(266) (298)
Notes receivable from stock sales . . . . . . . . . . . . . . . . . . . .
$19,972 $521
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and
$43,581 $20,434
stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . .
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EMCORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(Unaudited)
SIX MONTHS ENDED
MARCH 31,
1997 1996
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($6,948) ($1,708)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 1,996 777
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . 70 36
Detachable warrant accretion and valuation . . . . . . . . . . . . . 3,809
Extraordinary loss on early debt extinguishment . . . . . . . . . . . 256
Provision for inventory valuation . . . . . . . . . . . . . . . . . . 60 18
Increase (decrease) in liabilities & (increase)
decrease in assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . (3,540) 228
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,320) (3,397)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . (90) (136)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 (5)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 3,069 1,560
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 868 390
Advanced billings . . . . . . . . . . . . . . . . . . . . . . . . . . 1,087 4,031
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 31 107
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,437 $3,609
Net cash (used) provided by operating activities . . . . . . . . . . ($1,511) $1,901
INVESTING ACTIVITIES:
Purchase of property, plant, and equipment . . . . . . . . . . . . . . (6,935) (4,164)
Net cash used by investing activities . . . . . . . . . . . . . . . . ($6,935) ($4,164)
FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . 2,000
Proceeds from borrowings under demand note facility . . . . . . . . . . 8,000
Payments on subordinated notes and demand
note facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,000)
Net proceeds from initial public offering . . . . . . . . . . . . . . . 22,765
Reduction in notes receivable on subordinated debt
and from shareholders . . . . . . . . . . . . . . . . . . . . . . . . 210
Net cash provided by financing activities . . . . . . . . . . . . . . $20,975 $2,000
Net increase (decrease) in current cash . . . . . . . . . . . . . . . . 12,529 (263)
Current cash, beginning . . . . . . . . . . . . . . . . . . . . . . . . 1,367 2,323
Current cash, end of year . . . . . . . . . . . . . . . . . . . . . . . $13,896 $2,060
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EMCORE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
As of September 30, 1996, December 31, 1996, and March 31, 1997
(Amounts in Thousands)
(Unaudited)
Shareholders' Total
Common Stock Accumulated Notes Shareholders'
Shares Amount Deficit Receivable Equity
Balance at September 30, 1996 . 2,994 $18,978 ($18,158) ($298) $522
Issuance of common stock
purchase warrants . . . . . . . 3,600 3,600
Net loss . . . . . . . . . . . (3,798) (3,798)
Balance at December 31, 1996 . 2,994 $22,578 ($21,956) ($298) $324
Issuance of common stock from
initial public offering, net of
issuance costs of $3,109 . . . 2,875 22,766 22,766
Cancellation of notes receivable
due from shareholders . . . . . 32 32
Net loss . . . . . . . . . . . (3,150) (3,150)
Balance at March 31, 1997 . . . 5,869 $45,344 ($25,106) ($266) $19,972
EMCORE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information. The condensed consolidated financial
statements of EMCORE Corporation (the "Company") are unaudited (except for the
balance sheet information as of September 30, 1996 which is derived from the
Company's audited financial statements) but reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position at
March 31, 1997, and the operating results and cash flows for the quarters
ended March 31, 1997, and March 31, 1996. The results of operations for the
six months ended March 31, 1997, are not necessarily indicative of the results
for the entire fiscal year ending September 30, 1997, or any future interim
period.
Cash and Cash Equivalents. The Company considers all highly liquid short-
term investments purchased with an original maturity of three months or less
to be cash equivalents. The Company had approximately $13,441,000 and
$106,000 in cash equivalents at March 31, 1997, and September 30, 1996,
respectively. As of March 31, 1997, the Company had restricted cash in the
amount of $437,500 due to contractual obligations.
Inventories. Inventories are stated at the lower of FIFO (first-in, first-
out) cost or market. Reserves are established for slow moving or obsolete
inventory based upon historical and anticipated usage.
Property and Equipment. Property and equipment are stated at cost.
Significant renewals and betterments are capitalized. Maintenance and repairs
that do not extend the useful lives of the respective assets are expensed.
Depreciation is recorded using the straight-line method over the estimated
useful lives of the applicable assets, which range from three to five years.
Leasehold improvements are amortized using the straight-line method over the
term of the related leases or the estimated useful lives of the improvements,
whichever is less. When assets are retired or otherwise disposed of, the
assets and related accumulated depreciation accounts are adjusted accordingly,
and any resulting gain or loss is recorded in current operations. In the
event that facts and circumstance indicate that the value of assets may be
impaired, an evaluation of recoverability is performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with the
asset would be compared to the assets carrying amount to determine if an
adjustment to the carrying amount is required.
Deferred Costs. Included in other assets are deferred costs related to
obtaining product patents. Such costs are being amortized over a five year
period.
Income Taxes. The Company uses Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." SFAS No. 109 required a
change from the deferred method to the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. Under SFAS No. 109, the effect
on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. Under the deferred method, deferred
taxes are recognized at the tax rate applicable to the year in which the
difference between financial statement carrying amounts and the corresponding
tax bases arose.
Revenue and Cost Recognition-Systems, Components and Service Revenues.
Revenue from systems sales is recorded upon shipment to the customer.
Subsequent to product shipment, the Company incurs certain installation costs
at the customer's facility and warranty costs that are estimated and accrued
at the time a sale is recorded. Component sales and service revenues are
recognized when goods are shipped or services are rendered to the customer.
Service revenue under contracts with specified service terms is recognized as
earned over the service period in accordance with the terms of the applicable
contract. Costs in connection with the procurement of the contracts are
charged to expense as incurred.
Revenue and Cost Recognition-Contract Revenue. The Company's research con-
tracts require the development or evaluation of new materials' applications
and have a duration of six to 36 months. For research contracts with the U.S.
Government and commercial enterprises with durations greater than six months,
the Company recognizes revenue to the extent of costs incurred plus the
estimated gross profit as stipulated in such contracts, based upon contract
performance. Contracts with a duration of six months or less are accounted
for on the completed contract method. A contract is considered complete when
all costs, except insignificant items, have been incurred, and the research
reporting requirements to the customer have been met. Contract costs include
all direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools, repairs and
depreciation costs, as well as coverage of certain general and administrative
costs. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.
Research and Development. Research and development costs related to the
development of both present and future products and Company sponsored
materials application research are charged to expense as incurred.
Fair Value of Financial Instruments. The Company estimates fair value based
upon discounted cash flow analyses using the Company's incremental borrowing
rate on similar instruments as the discount rate. As of March 31, 1997, the
carrying values of the Company's cash and cash equivalents, receivables and
accounts payable recorded on the accompanying balance sheets approximate fair
value.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from those estimates. The Company's most significant estimates relate to
accounts receivable and inventory valuation reserves, warranty and
installation reserves, estimates of cost and related gross profits on certain
research contracts and the valuation of long-lived assets.
New Accounting Standards. In March 1995, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). This
pronouncement establishes accounting standards for when impairment losses
relating to long-lived assets, identifiable intangibles and goodwill related
to those assets should be recognized and how the losses should be measured.
The Company plans to implement SFAS No. 121 in fiscal 1997. The adoption of
SFAS No. 121 is not expected to have an impact on the Company's financial
position or results of operations since EMCORE's current policy is to monitor
assets for impairment and record any necessary write-downs.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based
Compensation" ("SFAS No. 123"). SFAS No. 123 sets forth the method of
accounting for stock based compensation based on the fair value of stock
options and similar instruments, but does not require the adoption of this
preferred method. SFAS No. 123 also requires the disclosure of additional
information about stock compensation plans, even if the preferred method of
accounting is not adopted. The Company plans to implement SFAS No. 123 in
fiscal 1997. The Company does not intend to change its method of accounting
for stock based compensation to the preferred method under SFAS No. 123, but
instead will continue to apply the provisions of No. 25 "Accounting for Stock
Issued to Employees." However, the Company will disclose the pro forma effect
of SFAS No. 123 on net income and earnings per share.
In February 1997, the FASB issued SFAS No. "Earnings per Share" ("SFAS
No.128"). SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") for periods ending after December 15, 1997. SFAS
No. 128 is designed to improve EPS information provided in financial
statements by simplifying the existing computational guidelines, revising
disclosure requirements, and increasing the comparability of EPS on an
international basis. Basic and diluted earnings per share, calculated
pursuant to SFAS No.128, are not expected to be materially different from net
income per common share as reflected in the accompanying Condensed
Consolidated Statements of Income.
NOTE 2. DEBT.
The Company repaid $10.0 million of its outstanding debt with proceeds from
its initial public offering (the "IPO"). The entire $8.0 million outstanding
of its demand note facility with First Union National Bank was repaid and $2.0
million was used to repay a portion of the Company's outstanding subordinated
notes due May 1, 2001. In connection with the discharge of the Company's
subordinated notes, an extraordinary loss of $256,000 was recognized.
On March 31, 1997, the Company entered into a new $10.0 million revolving
loan and security agreement (the "Agreement") with First Union National Bank.
The Agreement bears interest at the rate of First Union's prime rate plus 50
basis points and has a revolving loan maturity date of and expires on
September 30, 1998. There are presently no borrowings under the Agreement.
NOTE 3. INVENTORIES
Inventories comprise (in thousands):
AT MARCH 31, 1997
AT SEPTEMBER 30, 1996
Raw Materials $5,882 $4,965
Work-in-progress 4,023 2,680
Finished goods 0 0
Total $9,905 $7,645
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company was founded in 1986 and is a designer and developer of compound
semiconductor materials and process technology and a manufacturer of
production systems used to fabricate compound semiconductor wafers. Compound
semiconductors are used in a broad range of applications in wireless
communications, telecommunications, computers, and consumer and automotive
electronics. The Company has recently capitalized on its technology base by
expanding into the design and production of compound semiconductor wafers and
package-ready devices. The Company offers its customers a complete,
vertically-integrated solution for the design, development and production of
compound semiconductor wafers and devices.
RESULTS OF OPERATIONS:
REVENUES
The Company's second quarter revenues increased 115% from $6.0 million for
the quarter ended March 31, 1996, to $12.9 million for the quarter ended March
31, 1997. Revenues for the first six months of fiscal 1997 increased 110%
from $10.3 million for the six months ended March 31, 1996, to $21.5 million
for the six months ended March 31, 1997. The revenue increase in each of the
three and six month periods was primarily attributable to increased demand of
MOCVD (metal-organic chemical vapor deposition) systems and the start of
package-ready device deliveries. International sales accounted for
approximately 47% and 41% of revenues for the six months ended March 31, 1997
and 1996, respectively.
The Company believes that in the future its revenues and consequential
results of operations in a quarterly period could be impacted by the timing of
customer development projects and related purchase orders for the Company's
varied products, new merchandise announcements and releases by the Company,
and economic conditions generally and the compound semiconductor industry
specifically.
COST OF SALES/GROSS PROFIT
Cost of sales includes direct material and labor costs, manufacturing and
service overhead, and installation and warranty costs. Gross profit decreased
from 33% of revenue for the quarter ended March 31, 1996, to 32% of revenue
for the quarter ended March 31, 1997. For the six months ended March 31,
gross profit decreased from 34% to 28% in 1996 and 1997, respectively. The
decrease was primarily attributable to incurred costs associated with the
package-ready device product line without the benefit of revenues during the
three month period ended December 31, 1996. Revenues for this product line
commenced during the quarter ended March 31, 1997.
SELLING, GENERAL, AND ADMINISTRATIVE
Selling, general, and administrative expenses increased by 26% from $1.5
million for the quarter ended March 31, 1996, to $1.9 million in the quarter
ended March 31, 1997. For the first six months of fiscal year 1997, selling,
general, and administrative expenses increased by 36% from $3.1 million for
the six months ended March 31, 1996, to $4.1 million for the six months ended
March 31, 1997. The increase in each of the three and six month periods was
largely due to sales personnel headcount increases to support both domestic
and foreign markets and general headcount additions to sustain the internal
administrative support necessary for increased business as well as higher
expenses attributable to increased revenues. However, as a percentage of
revenue, selling, general, and administrative expenses decreased from 26% for
the first quarter of the prior year to 15% for the first quarter of the
current year. For the first six months ended March 31, selling, general, and
administrative expenses decreased from 30% of revenue for the prior year to
19% of revenue for the current year. The Company expects that selling,
general, and administrative expenses will continue to increase in absolute
dollar amounts as the Company expands both its sales and marketing efforts and
overall business capacity.
RESEARCH AND DEVELOPMENT
Research and development expenses increased by 66% from $1.2 million in the
quarter ended March 31, 1996, to $2.0 million in the quarter ended March 31,
1997. For the six months of fiscal year 1997, research and development
expenses increased by 113% from $2.0 million for the six months ended March
31, 1996, to $4.2 million for the six months ended March 31, 1997. The
increase was primarily attributable to increased staffing and equipment costs
necessary to enhance current products and research and development activities
for the emulation of the Company's two new product lines (epitaxial wafers and
package-ready devices). However, as a percentage of revenue, research and
development expenses decreased from 20% for the first quarter of 1996 to 15%
for the first quarter of 1997. For the six months ended March 31, research
and development expenses increased from 19% of revenue for the prior year to
20% of revenue for the current year. To maintain growth and market leadership
in epitaxial technology, the Company expects to continue to invest a
significant amount of its resources in research and development.
OPERATING INCOME (LOSS)
Operating profit increased $915,000 from a loss of $768,000 in the quarter
ended March 31, 1996, to a profit of $147,000 in the quarter ended March 31,
1997, primarily due to higher revenues generating a greater overall gross
profit. Operating income (loss) per share increased $.21 per share from a
loss of ($0.17) per share in the quarter ended March 31, 1996, to a profit of
$0.04 per share in the quarter ended March 31, 1997.
OTHER EXPENSE
During fiscal 1996, the Company issued detachable warrants along with
subordinated notes to certain of its existing shareholders. In the first
quarter of fiscal year 1997, the Company also issued detachable warrants in
return for a 10.0 million demand note facility (the "Facility") guarantee by a
director of the Company, affiliated with the Company's majority shareholder,
who provided collateral for the Facility. The Company subsequently assigned a
value to these detachable warrants' issues using a commonly recognized option
pricing model, the Black-Scholes Option Pricing Model. The Company recorded
the subordinated notes at a carrying value that is subject to periodic
accretions, using the interest method, and reflected the Facility detachable
option value as a debt issuance cost. The consequent expense of these warrant
accretion amounts and the now terminated Facility debt issuance cost is
entitled "Imputed warrant interest, non-cash" and totaled $2.8 million for the
quarter ended March 31, 1997.
Borrowings under the $10.0 million demand note facility with First Union
National Bank totaling $8.0 million were drawn down to fund capital
expenditures in connection with the build-out of the Company's manufacturing
facility during the six months ended March 31, 1997. The resultant interest
expense was the primary reason for the large increase in the caption entitled
"Stated interest expense" during the three months and six months ended March
31, 1997.
EXTRAORDINARY ITEM
The Company repaid $10.0 million of its outstanding debt with proceeds from
its IPO. The entire $8.0 million outstanding of its demand note facility with
First Union National Bank was repaid and $2.0 million was used to repay a
portion of the Company's outstanding subordinated notes due May 1, 2001. In
connection with the discharge of the Company's subordinated notes, an
extraordinary loss of $256,000 was recognized.
NET LOSS
Net loss increased from a loss of $823,000 to a loss of $3.2 million for the
quarters ended March 31, 1996 and 1997, respectively. This increase was
primarily attributable to the aforementioned $2.8 million of debt issuance
cost amortization related to warrants and the $256,000 extraordinary loss on
early extinguishment of debt.
BACKLOG
The Company's order backlog increased 35% from $16.1 million as of March 31,
1996, to $21.8 million as of March 31, 1997. This increase in backlog was
primarily a result of the introduction of the Company's wafer and package-
ready device product lines. The Company includes in backlog only customer
purchase orders which have been accepted by the Company and for which shipment
dates have been assigned within the twelve months to follow and research
contracts that are in process or awarded. The Company receives partial
advance payments or irrevocable letters of credit on most production system
orders and has never experienced an order cancellation. The Company is
seeking to increase capacity to meet anticipated continuing increased
production needs; however, there can be no assurance that the Company will
increase its capacity to meet its scheduled needs.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $12.5 million from $1.4 million at
September 30, 1996, to $13.9 million at March 31, 1997. At March 31, 1997,
net cash used by operations was $1.5 million, primarily due to the Company's
net losses, increase in accounts receivable and inventory, offset by increases
in accounts payable and advanced billings and the Company's non-cash, yet net
income impacting, detachable warrant accretion in valuation. At March 31,
1997, net cash used in investments was $6.9 million due to purchase of new
equipment for the facilitation of the Company's wafer and package-ready device
product lines and to new facility clean room modifications and enhancements.
At March 31, 1997, net cash from financing activities, primarily the IPO
proceeds, accounted for the majority of the resulting net cash increase.
On March 31, 1997, the Company entered into a $10.0 million revolving loan
and security agreement (the "Agreement") with First Union National Bank. The
Agreement bears interest at the rate of First Union's prime rate plus 50 basis
points and has a revolving loan maturity date of and expires on September 30,
1998. There are presently no borrowings under the Agreement.
The Company believes that its current liquidity, together with the
Agreement, will be sufficient to meet its cash needs for working capital and
capital expenditures, through fiscal 1997. Thereafter, if cash generated from
operations is insufficient to satisfy the Company's liquidity requirements,
the Company may be required to raise funds through equity or debt offerings or
obtain additional credit facilities if possible. Additional funding may not
be available when needed or on terms acceptable to the Company, which could
have a material adverse effect on the Company's business financial conditions
or operations.
Certain statements which are not historical facts in this report may be
forward-looking statements and are made by the Company on a good faith basis.
Such forward-looking statements may include business forecasts, financial
projections, or statements concerning the Company's expectations for demand
and sales of new or existing products, industry and market segment growth,
market and technology opportunities, development of process, the commencement
of production, or the future financial performance of the Company. Such
forward-looking statements involve risks and uncertainties. Actual operating
results may differ materially from projections or forecasts contained in
forward-looking statements and are subject to certain risks including, without
limitation, risks developing and commercializing new products, and other
factors described in the Company's filings with the Securities and Exchange
Commission.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
11. Statement re: computation of per share earnings.
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended March 31,
1997.Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMCORE CORPORATION
Date: May 13, 1997 By: /s/ Reuben F. Richards, Jr.
Reuben F. Richards, Jr.
President and Chief Executive Officer
Date: May 13, 1997 By: /s/ Thomas G. Werthan
Thomas G. Werthan
Vice President, Finance and
Administration
EXHIBIT INDEX
Exhibit Description
11 Statement re computation of per share earnings
27 Financial Data Schedule
EXHIBIT 11
EMCORE CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Amounts In Thousands, Except Per Share Amounts)
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1997 1996 1997 1996
Weighted average shares outstanding:
Common stock 3,825 2,994 3,405 2,944
Common stock equivalents 1,444 722 1,444
Weighted average common shares and equivalents 3,825 4,438 4,127 4,438
Loss before extraordinary item ($2,894) ($823) ($6,692) ($1,708)
Extraordinary loss ( 256) ( 256)
Net loss ($3,150) ($823) ($6,948) ($1,708)
Loss before extraordinary item ($0.76) ($0.19) ($1.62) ($0.38)
Extraordinary loss ( 0.07) ( 0.07) ( 0.06)
Net loss per share ($0.82) ($0.19) ($1.68) ($0.38)
Under the provisions of Securities and Exchange Commission Staff
Bulletin No. 64 ("SAB" No. 64), common stock and common stock equivalents
issued by the company within one year or in contemplation of the Company's
offering are treated as if they were outstanding for all periods presented
prior to the IPO. After the IPO is effective, the determination of common
stock and equivalents must be determined on a basis consistent with APB
Opinion No. 15, which states "outstanding options and warrants should be
included in the EPS compuation only if they have a dilutive effect."
There is no difference between primary and fully diluted net loss
per share.
5
1,000
6-MOS
SEP-30-1997
MAR-31-1997
13,896
0
6,875
(380)
9,905
30,465
22,482
(9,721)
43,581
16,021
0
0
0
45,344
(25,372)
43,581
21,520
21,520
15,579
15,579
8,379
0
4,254
(6,692)
0
(6,692)
0
(256)
0
(6,948)
(1.68)
(1.68)
