UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
Commission file Number 0-1388
Waters Instruments, Inc.
(Exact name of registrant as specified in its charter.)
Minnesota 41-0832194
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2411-7th Street, NW., Rochester, MN 55901
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(507)288-7777
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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $.10 Par Value - 1,462,271 shares outstanding as of
March 31, 1995.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
WATERS INSTRUMENTS, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS
ENDED MARCH 31, 1995 AND 1994
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
1995 1994
__________________ _________________
3 months 9 months 3 months 9 months
________ ________ _________ _________
<S> <C> <C> <C> <C>
Net Sales $3,177 $9,051 $3,081 $9,097
Cost of goods sold 2,223 6,418 2,333 6,703
________ ________ _________ _________
Gross Profit(Loss) 954 2,633 748 2,394
Administrative 345 1,039 351 989
Selling 399 1,164 369 1,139
Research and Development 107 266 72 188
________ ________ _________ _________
Total Operating Expenses 851 2,469 792 2,316
Operating Income (Loss) 103 164 (44) 78
Net Interest Income (Expense) 9 20 1 (3)
Net Other Income (Expense) 0 39 (3) 39
________ ________ _________ _________
Income (Loss) Before Income
Tax 112 223 (46) 114
Income Tax Provision 41 82 0 40
Net Income (Loss) 71 141 (46) 74
Earnings (Loss) per
common share $ .05 $ .10 $ (.03) $ .05
Weighted Average Number of
Shares Outstanding 1,462,271 1,462,271 1,462,271 1,460,493
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
WATERS INSTRUMENTS, INC.
BALANCE SHEETS (unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
March 31, 1995 June 30, 1994
______________ ______________
<S> <C> <C>
ASSETS
Current Assets
Cash & Cash Equivalents $ 1,028 $ 965
Net Trade Receivables 1,703 1,609
Inventories 1,557 1,794
Prepaid expenses & Deferred Items 227 226
________ ________
Total Current Assets 4,515 4,594
Fixed Assets
Property, Plant and Equipment 4,156 3,968
Less accumulated depreciation (2,593) (2,396)
________ ________
Net Fixed Assets 1,563 1,572
Other Assets 123 137
_______ _______
TOTAL ASSETS $ 6,201 $ 6,303
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<S> <C> <C>
Current Liabilities
Current Maturities of Long-Term
Debt $ 90 $ 88
Accounts Payable 688 724
Accrued Salaries, Wages
& Other Compensation 545 558
Product Warranties 290 275
Accrued Other Expenses 132 217
_______ _______
Total Current Liabilities 1,745 1,862
Long Term Debt, Less Current
Maturities 44 112
Deferred Income Taxes 63 63
_______ _______
Total Liabilities 1,852 2,037
Stockholder's Equity
Common Stock 146 146
Additional Paid-in Capital 1,246 1,246
Retained Earnings 2,957 2,874 _______ _______
Total Stockholders' Equity 4,349 4,266
_______ _______
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 6,201 $ 6,303
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
WATERS INSTRUMENTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
(Amounts in thousands)
<CAPTION>
1995 1994
<S> <C> <C>
Cash Flow From Operations
Cash Received from Customers $ 8,957 $ 9,037
Interest Received 35 14
_______ _______
Cash Provided From Operations 8,992 9,051
Cash paid to suppliers and employees 8,410 8,624
Taxes paid (refunded) 206 (46)
Interest paid 15 17
_______ _______
Cash disbursed from operations 8,631 8,595
Net cash provided (used) for
operations 361 456
CASH FLOWS FROM INVESTING
Net acquisition of fixed assets (188) (159)
Decrease in other assets 14 31
_______ _______
Net cash used for investing (174) (128)
CASH FLOWS FROM FINANCING
Reduction of Long-Term Debt (66) (61)
Cash Dividend Payment (58) 0
_______ ______
Net cash used for financing (124) (61)
_______ ______
NET INCREASE (DECREASE) IN CASH &
EQUIVALENTS 63 267
CASH AND CASH EQUIVALENTS - BEGINNING
OF PERIOD 965 399
_______ ______
CASH AND CASH EQUIVALENTS - END OF
PERIOD $ 1,028 $ 666
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH FROM (USED FOR) OPERATIONS:
Net Income (Loss) $ 141 $ 74
Depreciation and Amortization 197 206
Provision for Losses on Accounts
Receivable 9 9
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (103) (69)
Inventories 237 (27)
Refundable Income Taxes 0 51
Prepaid Expenses (1) 59
Accounts Payable and Accrued Expenses (119) 153
_______ ______
NET CASH FROM (USED FOR) OPERATIONS $ 361 $ 456
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1. Financial Statements (continued)
WATERS INSTRUMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
The financial statements have been prepared by Waters Instruments, Inc.
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the financial statements
includes normal recurring adjustments and reflects all adjustments which
are, in the opinion of management, necessary for a fair presentation of
such financial statements. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the accompanying
notes included in the Company's latest Annual Report.
The marketable securities included as cash equivalents on the balance sheet
and cash flow statements meet the definition of cash equivalents set forth
in paragraphs 8 and 9 of SFAS95.
Inventories at March 31, 1995 and June 30, 1994 consisted of the following:
March 31, 1995 June 30, 1994
Raw Materials $1,036,000 $ 927,000
Work-in-Process 348,000 235,000
Finished Goods 173,000 632,000
__________ __________
Total Inventories $1,557,000 $1,794,000
ITEM 2. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Requirements
The Company's working capital position at March 31, 1995 was $2,770,000, a 1%
increase from the $2,732,000 amount at June 30, 1994. The cash balance for
the Company was $1,028,000 at March 31, 1995 compared to the cash balance
of $965,000 at June 30, 1994.
The Company believes that its existing funds, cash generated from operations
and short-term borrowing under the Company's line of credit will be
adequate to meet the Company's foreseeable operating activities and outlays for
capital expenditures.
The Company has a $750,000 line of credit with its bank which bears
interest at .75 percentage points over the bank's reference rate. The
line of credit is collateralized by the Company's accounts receivable,
inventories, and general intangibles. The Company had no outstanding
balances on March 31, 1995 under its line of credit.
Capital expenditures of $92,000 and $188,000 for the quarter and nine-month
period ended March 31, 1995, respectively, were used to purchase
manufacturing equipment. The Company anticipates continued improvements
in the manufacturing process, lower unit manufacturing cost and improved
gross margins as a result of these capital expenditures.
Results of Operations
Net sales for the quarter and nine-month period ended March 31, 1995 were
$3,177,000 and $9,051,000 respectively. This represents an increase of 3.1%
for the quarter and decrease of .5% for the nine months ended March 31,
1995 when comparing to the comparable periods for the prior year.
Waters Medical Systems' net sales for the quarter and nine-month period
ended March 31, 1995 were $578,000 and $1,885,000 respectively. This
represents an increase of 4.9% for the quarter and 9.9% for the nine
months ended March 31, 1995 when comparing to the comparable period of
the prior year.
Sales declines were experienced in the American FarmWorks Division of the
Company for the quarter and nine months ended March 31, 1995. Net sales
for American FarmWorks for the quarter and nine months ended March 31, 1995
were $2,188,000 and $6,189,000 respectively. This represents a 6.7%
decrease for the quarter and a 5.2% decrease for the nine months ended
March 31, 1995 when comparing to the comparable periods of the prior
years. This reduction represents the planned discontinuance of certain
accessory products.
Midwest WireTech had net sales of $411,000 for the quarter and $977,000
for the nine months ended March 31, 1995. This represents an increase
of 94.8% for the quarter and 14.0% for the nine months ended March 31, 1995
when comparing to the comparable periods of the prior year. The Company
will continue to identify and establish new product technologies and growth
opportunities in contract manufacturing.
Net income for the Company for the quarter and nine-month period ended
March 31, 1995 was a profit of $71,000 and a profit of $141,000
respectively. This compares comparably to the loss of $46,000 for
the quarter of the prior year and profit of $74,000 for the comparable
nine months of the prior year. The nine month results represent an
increase of 90% from the comparable period of the prior year. This
increase was achieved despite a one-time reorganization charge of
$139,000 relating primarily to employee termination expense during the
first half of fiscal year 1995. This reorganization charge was incurred
in connection with productivity improvements within the entire
organization, but principally in its American FarmWorks business unit.
The Company settled a claim involving a breach of contract with a supplier
during October 1994. The settlement required a payment by the Company in
October 1994 in the amount of $75,000. The Company had accrued an
estimated amount of $50,000 with respect to this claim in Fiscal Year
1994 and recorded an additional $25,000 in the quarter ended December 31,
1994.
The Company's previously announced order from Argon Medical for Thermal
Dilution Cardiac Output computers has been canceled by Argon Medical.
Argon made no complaint about the price or quality of the Company's
product. The order, originally expected to generate sales of $300,000
in each of Fiscal Year 1995 and 1996, has resulted in sales of
$254,000 to date. The Company's management feels the Argon order
cancellation will not significantly impact Fiscal Year 1996 earnings.
<PAGE>
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits
27 Financial Data Schedule (submitted only in electronic
format).
B. Reports on Form 8-KSB
No reports have been filed on Form 8-K during the last quarter
of the period covered by this report.
<PAGE>
WATERS INSTRUMENTS, INC.
SIGNATURES
Pursuant to the requirement of the Securities Exchange
Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
WATERS INSTRUMENTS, INC.
Company
May 12, 1995 Jerry W. Grabowski
Date Jerry W. Grabowski
President
Chief Executive Officer
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,028
<SECURITIES> 0
<RECEIVABLES> 1,719
<ALLOWANCES> 31
<INVENTORY> 1,557
<CURRENT-ASSETS> 4,515
<PP&E> 4,156
<DEPRECIATION> 2,593
<TOTAL-ASSETS> 6,201
<CURRENT-LIABILITIES> 1,745
<BONDS> 44
<COMMON> 146
0
0
<OTHER-SE> 4,203
<TOTAL-LIABILITY-AND-EQUITY> 6,201
<SALES> 9,051
<TOTAL-REVENUES> 9,051
<CGS> 6,418
<TOTAL-COSTS> 6,418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 223
<INCOME-TAX> 82
<INCOME-CONTINUING> 141
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
