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 June 30, 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: 333-18565
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: X No:
As of July 21, 1997, there were 5,921,190 shares of the registrant's common
stock outstanding.
This quarterly report of Form 10-Q contains 17 pages, of which this is page 1.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMCORE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
Revenue . . . . . . . . . . . . . . . . . $14,106 $7,726 $35,626 $17,995
Cost of sales . . . . . . . . . . . . . . 8,208 5,495 23,787 12,317
Gross profit . . . . . . . . . . . . . . $5,898 $2,231 $11,839 $5,678
Operating expenses:
Selling, general and
administrative . . . . . . . . . . . . 2,573 1,901 6,715 4,956
Research and development. . . . . . . . 2,418 1,708 6,655 3,697
Total operating expenses . . . . . . . . $4,991 $3,609 $13,370 $8,653
Operating income (loss) . . . . . . . . . $907 ($1,378) ($1,531) ($2,975)
Other expense (income):
Stated interest
expense (income) . . . . . . . . . . . (8) 60 437 170
Imputed warrant interest
expense, non-cash . . . . . . . . . . . 85 44 3,894 44
Total other expense . . . . . . . . . . . $77 $104 $4,331 $214
Income (loss) before extraordinary item . $830 ($1,482) ($5,862) ($3,189)
Extraordinary loss . . . . . . . . . . . (256)
Net income (loss) . . . . . . . . . . . . $830 ($1,482) ($6,118) ($3,189)
PER SHARE DATA:
Income (loss) before extraordinary item . $0.10 ($0.33) ($1.24) ($0.72)
Extraordinary loss . . . . . . . . . . . (0.06)
Net income (loss) per share . . . . . . . $0.10 ($0.33) ($1.30) ($0.72)
Shares used in per share calculations . . 8,308 4,438 4,723 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 JUNE 30, AT SEP. 30,
1997 1996
ASSETS (UNAUDITED)
Cash and cash equivalents . . . . . . . . . . . . . $7,709 $1,367
Accounts receivable, net of allowance
for doubtful accounts of $315 and
$310 at June 30, 1997 and September
30, 1996, respectively . . . . . . . . . . . . . 7,657 3,025
Inventories . . . . . . . . . . . . . . . . . . . . 6,980 7,645
Other current assets . . . . . . . . . . . . . . . 145 79
Total current assets . . . . . . . . . . . . . . $22,491 $12,116
Property and equipment, net . . . . . . . . . . . . 15,690 7,797
Other assets . . . . . . . . . . . . . . . . . . . 463 521
Total assets . . . . . . . . . . . . . . . . . . $38,644 $20,434
LIABILITIES
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . $4,905 $5,661
Accrued expenses . . . . . . . . . . . . . . . . . 2,670 1,987
Advanced billings . . . . . . . . . . . . . . . . . 2,373 3,306
Other current liabilities . . . . . . . . . . . . . 217 12
Total current liabilities . . . . . . . . . . . $10,165 $10,966
Subordinated debt . . . . . . . . . . . . . . . . . . 7,547 8,947
Total liabilities . . . . . . . . . . . . . . . $17,712 $19,913
STOCKHOLDERS' EQUITY:
Common stock, no par value, 23,529,411
shares authorized, 5,921,190 shares
issued and outstanding in 1997,
2,994,461 shares issued and outstanding
in 1996 . . . . . . . . . . . . . . . . . . . . . $45,474 $18,977
Accumulated deficit . . . . . . . . . . . . . . . . (24,276) (18,158)
Notes receivable from stock sales . . . . . . . . . (266) (298)
Total stockholders' equity . . . . . . . . . . . $20,932 $521
Total liabilities and stockholders' equity . . . $38,644 $20,434
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)
NINE MONTHS ENDED JUNE 30,
1997 1996
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . ($6,118) ($3,189)
Net loss . . . . . . . . . . . . . .
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization . . 2,594 1,395
Provision for doubtful accounts . 130 63
Detachable warrant accretion and
valuation . . . . . . . . . . . . 3,892 35
Extraordinary loss on early debt
extinguishment . . . . . . . . . 256
Provision for inventory valuation 30 69
Increase (decrease) in liabilities
& (increase) decrease in
assets:
Accounts receivable . . . . . (4,762) (978)
Inventories . . . . . . . . . 635 (3,263)
Costs in excess of billings on
uncompleted contracts . . (7) (16)
Billings in excess of costs on
uncompleted contracts . . 222
Other current assets . . . . . (59) 16
Other assets . . . . . . . . . 8 (198)
Accounts payable . . . . . . . (756) 1,870
Accrued expenses . . . . . . . 683 241
Advanced billings . . . . . . (933) 2,471
Other current liabilities . . 205 54
Total adjustments . . . . . . . . . . $1,916 $1,981
Net cash used in operating
activities . . . . . . . . . . . ($4,202) ($1,208)
INVESTING ACTIVITIES:
Purchase of property, plant, and
equipment . . . . . . . . . . . . (10,437) (6,262)
Net cash used in investing
activities . . . . . . . . . . . ($10,437) ($6,262)
FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . 2,000
Payments on notes payable and long-
term debt . . . . . . . . . . . . . . (5,000)
Proceeds from borrowings under demand
note facility . . . . . . . . . . 8,000
Proceeds from borrowings under
subordinated notes . . . . . . . 8,510
Payments on subordinated notes and
demand note facility . . . . . . (10,000)
Net proceeds from initial public
offering . . . . . . . . . . . . . 22,765
Net proceeds from stock options
exercise . . . . . . . . . . . . . 6
Reduction in notes receivable from
shareholders . . . . . . . . . . . 210
Net cash provided by financing
activities . . . . . . . . . . . . $20,981 $5,510
Net increase (decrease) in current
cash . . . . . . . . . . . . . . . . $6,342 ($1,960)
Current cash, beginning . . . . . . . 1,367 2,323
Current cash, end of year . . . . . . $7,709 $363
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EMCORE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
BY QUARTER FROM SEPTEMBER 30, 1996, THROUGH JUNE 30, 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 . . .
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
Conversion of subordinated
debt . . . . . . . . . . . 31 124 124
Stock option exercise . . . 21 6 6
Net income . . . . . . . . 830 830
BALANCE AT JUNE 30, 1997 . 5,921 $45,474 ($24,276) ($266) $20,932
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
June 30, 1997, and the operating results and cash flows for the quarters ended
June 30, 1997, and June 30, 1996. The results of operations for the nine
months ended June 30, 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 $4,891,000 and
$106,000 in cash equivalents at June 30, 1997, and September 30, 1996,
respectively. As of June 30, 1997, the Company had restricted cash in the
amount of $375,000 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
contracts 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 a duration of 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 June 30,
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"). The provision of 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. 128, "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
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 outstanding under the
Agreement.
NOTE 3. INVENTORIES
Inventories comprise (in AT AT
thousands): JUNE 30, 1997 SEPTEMBER 30, 1997
Raw Materials $5,619 $4,965
Work-in-progress 1,361 2,680
Finished goods
Total $6,980 $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 third quarter revenues increased 83% from $7.7 million for
the quarter ended June 30, 1996, to $14.1 million for the quarter ended June
30, 1997. Revenues for the first nine months of fiscal 1997 increased 98%
from $18.0 million for the nine months ended June 30, 1996, to $35.6 million
for the nine months ended June 30, 1997. The revenue increase in each of the
three and nine month periods was primarily attributable to increased demand
for MOCVD (metal-organic chemical vapor deposition) systems and package-ready
devices, as well as the introduction of compound semiconductor wafer products
and contract and licensing activities. International sales accounted for
approximately 46% and 58% of revenues for the nine months ended June 30, 1997
and 1996, respectively.
The Company believes that in the future its revenues and 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
environment specifically.
COST OF SALES/GROSS PROFIT
Cost of sales includes direct material and labor costs, allocated
manufacturing and service overhead, and installation and warranty costs.
Gross profit increased from 29% of revenue for the quarter ended June 30,
1996, to 42% of revenue for the quarter ended June 30, 1997. For the nine
months ended June 30, gross profit increased from 32% to 33% for 1996 and
1997, respectively. The gross profit percentage increase was attributable to
margins on wafer and device revenue and contract and licensing activities.
SELLING, GENERAL, AND ADMINISTRATIVE
Selling, general, and administrative expenses increased by 35% from $1.9
million for the quarter ended June 30, 1996, to $2.6 million in the quarter
ended June 30, 1997. For the first nine months of fiscal year 1997, selling,
general, and administrative expenses increased by 35% from $5.0 million for
the nine months ended June 30, 1996, to $6.7 million for the nine months ended
June 30, 1997. The increase in each of the three and nine 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 the Company's increased business as well
as higher expenses attributable to increased revenues. However, as a
percentage of revenue, selling, general, and administrative expenses decreased
from 25% for the third quarter of the prior year to 18% for the third quarter
of the current year. For the nine months ended June 30, selling, general, and
administrative expenses decreased from 28% of revenue for the prior year to
19% of revenue for the current year.
RESEARCH AND DEVELOPMENT
Research and development expenses increased by 42% from $1.7 million in
the quarter ended June 30, 1996, to $2.4 million in the quarter ended June 30,
1997. For the first nine months of fiscal year 1997, research and development
expenses increased by 80% from $3.7 million for the nine months ended June 30,
1996, to $6.7 million for the nine months ended June 30, 1997. The increase
was primarily attributable to increased staffing and equipment costs necessary
to enhance current products and research and development activities for the
initiation 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 22% for the third quarter of 1996 to 17%
for the third quarter of 1997. For the nine months ended June 30, research and
development expenses decreased from 21% of revenue for the prior year to 19%
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 $2.3 million from a loss of $1.4 million in
the quarter ended June 30, 1996, to a profit of $0.9 million in the quarter
ended June 30, 1997. For the first nine months of fiscal year 1997, operating
loss decreased $1.4 million from a loss of $2.9 million for the nine months
ended June 30, 1997. These changes in operating income (loss) are primarily
due to higher revenues generating a greater overall gross profit.
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
warrant value as a debt issuance cost. The consequent expense of these
warrant accretion amounts and the now terminated Facility debt issuance cost
is charged to "Imputed warrant interest, non-cash," and amounted to $44,000
and $3.9 million for the quarter and nine months ended June 30, 1997,
respectively.
Borrowings under the Company's $10.0 million demand note facility with
First Union National Bank totaling $8.0 million were utilized 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 increase in "Stated interest expense"
for the nine months ended June 30, 1997. The outstanding $8.0 million under
this demand note facility was repaid in March 1997, resulting in much lower
interest expense for the quarter ended June 30, 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 INCOME/LOSS
Net income increased $2.3 million from a loss of $1.5 million to income
of $0.8 million for the quarters ended June 30, 1996, and 1997, respectively.
For the nine months ended, the Company's net loss increased $2.9 million from
$3.2 million for the nine months ended June 30, 1996, to $6.1 million for the
nine months ended June 30, 1997. This year-to-date increase was primarily
attributable to the aforementioned $3.9 million of debt issuance cost
amortization related to warrants.
BACKLOG
The Company's order backlog decreased 1% from $23.0 million as of June
30, 1996, to $22.7 million as of June 30, 1997. 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. Wafer and device
contract agreements extending longer than one year in duration are included in
backlog only for the ensuing 12 months and 3 months, respectively. Some of
these agreements currently extend over five years. The Company receives
partial advance payments or irrevocable letters of credit on most production
system orders and has never experienced an order cancellation. Although the
Company has increased its capacity to meet continued increased production
needs, there can be no assurance that the Company will be consistently able to
increase its capacity to meet its scheduled needs.
Liquidity And Capital Resources
Cash and cash equivalents increased by $6.3 million from $1.4 million at
September 30, 1996, to $7.7 million at June 30, 1997. For the nine months
ended June 30, 1997, net cash used by operations amounted to $4.2 million,
primarily due to the Company's net losses, increase in accounts receivable,
decrease in accounts payable and advanced billings, offset by the Company's
non-cash items, including depreciation, amortization, and detachable warrant
accretion and valuation. For the nine months ended June 30, 1997, net cash
used in investment activities amounted to $10.4 million due to purchase and
manufacture of new equipment for the Company's wafer and package ready device
product lines and to new facility clean room modifications and enhancements.
For the nine months ended June 30, 1997, net cash from financing activities,
primarily including the $22.8 million 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 or financial condition or
operations.
Certain statements which are not historical facts in this report may be
forward-looking statements and are based on assumptions the Company believes
are reasonable. 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
processes, 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 in 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 for the nine
months ended June 30, 1997.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended June 30, 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: August 14, 1997 By:/s/ Reuben F. Richards, Jr.
Reuben F. Richards, Jr.
President and Chief Executive
Officer
DATE: August 14, 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 for the nine months
ended June 30, 1997.
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 NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
Income (loss) before extraordinary item . . . . . $830 ($1,482) ($5,862) ($3,189)
Extraordinary loss . . . . . . . . . . . . . . . (256)
Net income (loss) . . . . . . . . . . . . . . . . $830 ($1,482) ($6,118) ($3,189)
Primary earnings per share calculation:
Weighted average shares outstanding:
Common stock . . . . . . . . . . . . . . . . 5,915 2,994 4,242 2,994
Common stock equivalents(1) . . . . . . . . 2,393 1,444 481 1,444
Primary weighted average common shares and
equivalents . . . . . . . . . . . . . . . . . 8,308 4,438 4,723 4,438
Income (loss) before extraordinary item . . . . . $0.10 ($0.33) ($1.24) ($0.72)
Extraordinary loss . . . . . . . . . . . . . . . (0.06)
Net income (loss) per share . . . . . . . . . . . $0.10 ($0.33) ($1.30) ($.72)
Fully diluted earnings per share
calculation:(2)
Weighted average shares outstanding:
Common stock . . . . . . . . . . . . . . . . 5,915 2,994 4,242 2,994
Common stock equivalents(1) . . . . . . . . 2,587 1,444 481 1,444
Fully-diluted weighted average common shares and
equivalents . . . . . . . . . . . . . . . . . 8,502 4,438 4,723 4,438
Income (loss) before extraordinary item . . . . . $0.10 ($0.33) ($1.24) ($0.72)
Extraordinary loss . . . . . . . . . . . . . . . (0.06)
Net income (loss) per share . . . . . . . . . . . $0.10 ($0.33) ($1.30) ($.72)
(1) 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 Company's IPO. After the IPO is effective, the
determination of common stock and equivalents has been determined on a
basis consistent with APB Opinion No. 15, which states "outstanding
options and warrants should be included in the EPS computation only if
they have a dilutive effect."
(2) This calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083 although not required by footnote 2 of paragraph
14 of APB Opinion No. 15 because it results in dilution of less than 3%.
5
9-MOS
SEP-30-1997
JUN-30-1997
7,709
0
7,972
315
6,980
22,491
25,915
10,225
38,644
10,165
0
0
0
45,474
24,542
38,644
35,626
35,626
23,787
23,787
13,370
0
4,331
(5,862)
0
(5,862)
0
(256)
0
(6,118)
(1.30)
(1.30)
