FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED July 31, 1996 COMMISSION FILE NO. 0-04988
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AEROSONIC CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 74-1668471
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1212 No. Hercules Avenue, Clearwater, Florida 34625
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(Address of principal executive offices) (Zip Code)
(813) 461-3000
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(Registrant's telephone number, including Area Code)
Non applicable
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(Former name, former address and former fiscal year,
if changed since lastreport)
Indicate by check mark whether 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
----- -----
Securities registered pursuant to Section 12 (g) of the Act.
Common Stock ($.40 par value)
-----------------------------
(Title of Class)
<PAGE>
INDEX
AEROSONIC CORPORATION
Page No.
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PART 1. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)
Condensed Balance Sheets -
July 31, 1996 and January 31, 1996 2
Condensed Statements of Operations -
Three and six months ended July 31, 1996 and 1995 3
Condensed Statements of Cash Flows -
Six months ended July 31, 1996 and 1995 4
Notes to Condensed Financial Statements -
July 31, 1996 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 7 - 8
SIGNATURES 9
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PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
Exhibit I. - Computations of Earnings Per Share 10
<PAGE>
AEROSONIC CORPORATION
Condensed Balance Sheets
<TABLE>
<CAPTION>
July 31 January 31
1996 1996
------------ ------------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 1,315,000 $ 10,000
Receivables:
Trade, less allowance of $69 at 7/96 and 1/96 3,475,000 3,320,000
Officers and employees 15,000 6,000
Other 30,000 44,000
Income tax 425,000 436,000
Inventories 6,475,000 6,312,000
Prepaid expenses 48,000 37,000
Deferred income tax benefit 999,000 999,000
------------ ------------
Total current assets 12,782,000 11,164,000
Property, plant and equipment
Less allowance for depreciation 4,108,000 6,415,000
Other assets 159,000 272,000
------------ ------------
$ 17,049,000 $ 17,851,000
============ ============
Liabilities and shareholders' equity
Current liabilities:
Current installments of long-term debt $ 637,000 $ 712,000
Notes payable to bank 2,250,000 295,000
Accounts payable, trade 962,000 969,000
Other accrued expenses 1,604,000 1,606,000
Accrued litigation costs 0 1,775,000
------------ ------------
Total current liabilities 5,453,000 5,357,000
Long-term debt, less current installments 1,869,000 2,814,000
Deferred income taxes 491,000 491,000
Shareholders' equity:
Common stock, $.40 par; 8,000,000 shares
authorized; 3,986,262 shares issued 1,595,000 1,595,000
Additional paid-in capital 3,410,000 3,410,000
Retained earnings 4,539,000 4,506,000
Less treasury stock, 194,571 shares at 1/31/96
178,753 shares at 7/31/96 (308,000) (322,000)
------------ ------------
Total shareholders equity 9,236,000 9,189,000
------------ ------------
$ 17,049,000 $ 17,851,000
============ ============
Note: The balance sheet at January 31, 1996 has been derived from the
audited financial statements at this date.
See Notes to Condensed Financial Statements.
</TABLE>
2
<PAGE>
AEROSONIC CORPORATION
Condensed Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31 July 31
------------------------ -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 5,710,000 $ 4,767,000 $10,699,000 $ 9,800,000
Cost of goods sold 4,039,000 3,751,000 7,822,000 7,456,000
----------- ----------- ----------- -----------
Gross Profit 1,671,000 1,016,000 2,877,000 2,344,000
Selling, general and administrative
expenses 1,245,000 1,274,000 2,469,000 2,489,000
----------- ----------- ----------- -----------
Operating Income (loss) 426,000 (258,000) 408,000 (145,000)
----------- ----------- ----------- -----------
Other income (deductions):
Provision for settlement of litigation 0 0 235,000 0
Interest expense, net 90,000 71,000 164,000 141,000
Other, net (39,000) (41,000) (54,000) (44,000)
----------- ----------- ----------- -----------
51,000 30,000 335,000 97,000
----------- ----------- ----------- -----------
Income (loss) before income taxes 375,000 (288,000) 73,000 (242,000)
Income taxes 143,000 (109,000) 40,000 (92,000)
----------- ----------- ----------- -----------
Net Income (loss) $ 232,000 $ (179,000) $ 33,000 $ (150,000)
=========== =========== =========== ===========
Earnings per share: $ 0.06 $ -0.05 $ 0.01 $ -0.04
=========== =========== =========== ===========
Weighted average number
of shares outstanding 3,801,000 3,799,000 3,801,000 3,799,000
=========== =========== =========== ===========
</TABLE>
See Notes to Condemsed Financial Statements
3
<PAGE>
AEROSONIC CORPORATION
Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31
---------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 33,000 $ (150,000)
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 401,000 379,000
Change in deferred income taxes (1,000) (107,000)
Net increase in cash due to changes
in current assets and liabilities (2,080,000) 293,000
----------- -----------
Net cash provided by operating
activities (1,647,000) 415,000
Cash flows from investing activities:
Purchase of fixed assets 0 (1,014,000)
Proceeds from sale of equipment 1,904,000 37,000
Net decrease in other assets 113,000 109,000
----------- -----------
Net cash used in investing activities 2,017,000 (868,000)
Cash flows from financing activities:
Repayment on long-term debt (945,000) (418,000)
Proceeds from borrowing 1,880,000 400,000
----------- -----------
Net cash used by financing activities 935,000 (18,000)
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Net increase (decrease) in cash 1,305,000 (471,000)
Cash, beginning of period 10,000 573,000
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Cash, ending $ 1,315,000 $ 102,000
=========== ===========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 164,000 $ 148,000
----------- -----------
Income taxes $ -- $ 2,000
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Supplemental disclosure of noncash financing activity:
During the quarter ended April 30, 1996, the Company
reissued 8,019 shares of treasury stock to fund a portion
of the Company's tax deferred savings plan.
See Notes to Condensed Financial Statements
</TABLE>
4
<PAGE>
AEROSONIC CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1996
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended July 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended January 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on form 10-K for the year ended January 31, 1996.
NOTE B - SALE OF ORDNANCE ASSETS
- --------------------------------
On July 10, 1996, the Company finalized the sale of the assets of the ordnance
division for $1,700,000 in cash; the proceeds of which were partially used to
pay down long term debt, with the balance being invested in marketable
securities. For the second quarter, the company recorded a $41,000 gain on the
sale of the Ordnance Division assets.
NOTE C - INCREASED AVAILABILITY UNDER SHORT TERM BORROWINGS
- -----------------------------------------------------------
On July 15, 1996, the Company was granted a $500,000 increase on its line of
credit, taking the total to $2,000,000. The terms of the line of credit
arrangement are comparable to the terms that had governed the Company's credit
facility prior to the increase. As of July 31, 1996, the outstanding balance on
the line of credit was $1,250,000.
NOTE D - FINALIZATION OF THE SENSONICS SETTLEMENT
- -------------------------------------------------
During the first quarter ended April 30, 1996, the Company finalized the
settlement of the lawsuit with Sensonics, Inc., the details of which are
reflected in the 10-Q report, dated April 30, 1996. Reflected in the
year-to-date earnings figure is a $225,000 charge against first quarter earnings
to finalize the settlement.
5
<PAGE>
AEROSONIC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
Net sales for the three months ended July 31, 1996 ("fiscal 1997") were
$5,710,000 as compared to $4,767,000 for the same period last year. Net sales
for the six months ended July 31, 1996 increased by 9% to $10,699,000 as
compared to $9,800,000 for the same period last year. Included in prior year's
sales was a $292,000 settlement for "Termination for convenience of the
Government".
The Avionics Specialties Division sales for the quarter ended July 31, 1996 were
$2,761,000, an 11% increase over the same period in the prior fiscal year. The
Clearwater Instrument Division sales for the quarter ended July 31, 1996
increased by 16% to $2,319,000. Net sales for the six months ended July 31, 1996
for the Avionics and Clearwater Instrument Division combined showed an
improvement of 8%, or $744,000, over the same period in the prior fiscal year.
Ordnance sales represented $958,000 of the net sales figure for the six months
ended July 31, 1996 as compared to $833,000 during the same period in the prior
fiscal year. However, the Ordnance Division had an overall negative impact on
the profitability of the company as the market slowed in that product line. .
Gross profit as a percentage of net sales improved in both the second quarter
and the six months ended July 31, 1996 as compared to their respective periods
in the prior fiscal year. The improvement is largely attributed to Company
management's shift of focus away from Ordnance manufacturing and towards the
instrument product line, its core business line. As a result of that shift of
focus, Company management has reengineered and streamlined the instrument
manufacturing process, including addressing permanent price increases on certain
instrument lines, which were implemented in the second quarter.
Reflective of the Company's continued philosophy towards controlling indirect
costs, selling, general and administrative expenses continued to show a decline
in both whole dollars and as a percentage of net sales in both the second
quarter and the six months ended July 31, 1996 as compared to their respective
periods in the prior fiscal year. Nonrecurring indirect costs for the six months
ended July 31, 1996 consist of the provision for the settlement of the patent
infringement lawsuit with Sensonics, Inc. The total cost for the Sensonics
settlement in FY `97 equals $225,000, which was expensed in the first quarter;
the terms of the settlement were outlined in the 10-Q dated April 30, 1996. The
second quarter earnings include a $41,000 gain on the sale of the Ordnance
Division assets, which occurred in July 1996.
The Company recorded a net profit for the quarter of $232,000, or $.06 per
share. Through the six months ended July 31, 1996, the company recorded a net
profit of $47,000, or $.01 per share, inclusive of the $41,000 gain on the sale
of the Ordnance Division and despite the $225,000 charge against first quarter
earnings for the settlement of the Sensonics suit.
6
<PAGE>
Working capital increased by $1,522,000 to $7,329,000 during the six months
ended July 31, 1996. The improvement was largely due to the cash provided by the
sale of the Ordnance Division, reduction in the litigation accrual and debt
repayment.
Interest expense increased by $23,000 to $164,000 during the six months ended
July 31, 1994 as compared to the same period in the prior fiscal year largely
due to heavier borrowings under the company's line of credit arrangement to fund
the settlement with Sensonics, Inc.
Backlog as of July 31, 1996 was $14,709,000, as compared to a backlog of
$17,356,000 during the same period in the prior fiscal year. However, $3,021,000
of the prior year's backlog figure was attributed to the Ordnance Division.
As of July 31, 1996, the Company was back in compliance with its bank loan
covenants and was granted a $500,000 increase on its revolving line of credit,
taking it to $2,000,000. The outstanding balance on the Company's line of credit
as of July 31, 1996 was $1,250,000.
7
<PAGE>
AEROSONIC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
A summary of the period-to-period changes in the principal items included in the
Statements of Operations is shown below:
Three Months Ended Three Months Ended
7/31/96 - 7/31/95 7/31/96 - 4/30/96
$ (000) % $ (000) %
------- ----- ------- -----
Net sales 943,000 20 721,000 14
Cost of sales 288,000 8 256,000 7
Operating expenses (26,000) (2) (16,000) (1)
Interest and other expenses 19,000 27 16,000 22
Income taxes 251,000 (230) 244,000 (239)
------- ---- ------- -----
Net income 411,000 (230) 221,000 2,009
======= ==== ======= =====
Six Months Ended
7/31/96 - 7/31/95
$ (000) %
------- -----
Net sales 899,000 9
Cost of sales 366,000 5
Operating expenses 195,000 8
Interest and other expenses 23,000 16
Income taxes 132,000 (143)
------- ----
Net income 183,000 (122)
======= ====
8
<PAGE>
PART II. OTHER INFORMATION
AEROSONIC CORPORATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11: Computation of Earnings Per Share
Exhibit 27: Financial Data Schedule (Electronic filing
only)
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on June 7, 1996,
regarding Item 1: Changes in Control of Registrant. The
company reported that J. Mervyn Nabors purchased 1,087,000
shares of common stock from the Herbert J. Frank Revocable
Trust.
The Company filed a report on form 8-K on June 14, 1996,
regarding Item 2: Acquisition and Disposition of Assets.
The company reported that it had entered into an agreement
with National Metalworking Corporation, an affiliated
company of Bulova Technologies LLC, to sell the Ordnance
Division assets.
SIGNATURES
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.
AEROSONIC CORPORATION
---------------------
(Registrant)
Date: September 19, 1996 /s/ J. Mervyn Nabors
---------------------- ----------------------------
J. Mervyn Nabors, President
and Chief Executive Officer
9
Exhibit 11
Weighted Average Common Shares and Common Equivalents Outstanding
Computations of Earnings Per Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- --------------------------
July 31 July 31 July 31 July 31
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary earnings per share:
Net income $ 232,000 (179,000) $ 33,000 (150,000)
--------- --------- --------- ---------
Weighted average number of common
and common share equivalents 3,801,000 3,793,000 3,801,000 3,796,000
========= ========= ========= =========
Primary earnings per share $ 0.06 -0.05 $ 0.01 -0.04
========= ========== ========= ==========
There are no other common stock equivalents so that primary and fully
diluted earnings per share are equal.
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AEROSONIC CORPORATION FOR THE THREE MONTHS ENDED JULY
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 1,315
<SECURITIES> 0
<RECEIVABLES> 3,589
<ALLOWANCES> 69
<INVENTORY> 6,475
<CURRENT-ASSETS> 12,782
<PP&E> 7,103
<DEPRECIATION> 2,995
<TOTAL-ASSETS> 17,049
<CURRENT-LIABILITIES> 5,453
<BONDS> 0
0
0
<COMMON> 1,595
<OTHER-SE> 7,641
<TOTAL-LIABILITY-AND-EQUITY> 17,049
<SALES> 10,699
<TOTAL-REVENUES> 10,699
<CGS> 7,822
<TOTAL-COSTS> 7,822
<OTHER-EXPENSES> 2,469
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164
<INCOME-PRETAX> 73
<INCOME-TAX> 40
<INCOME-CONTINUING> 33
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
