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 October 31, 1996 COMMISSION FILE NO. 0-4988
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AEROSONIC CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 74-1668471
- ------------------------------------- ---------------------------------------
(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 last report)
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
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Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
Common Stock, par value $.40 per share, 3,986,262 number of shares as of October
31, 1996.
<PAGE>
INDEX
AEROSONIC CORPORATION
Page No.
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PART I. FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - 2
October 31, 1996 and January 31, 1996
Consolidated Statements of Operations - 3
Three months ended October 31, 1996 and 1995
Consolidated Statements of Operations - 4
Nine months ended October 31, 1996 and 1995
Consolidated Statements of Cash Flows - 5
Nine months ended October 31, 1996 and 1995
Notes to Consolidated Financial Statements - 6
October 31, 1996
Item 2. Management's Discussion and Analysis of 7 - 8
Financial Condition and Results of Operations
SIGNATURES 9
PART II. OTHER INFORMATION
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ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 11 - Computations of Earnings Per Share 10
Exhibit 27 - Financial Data Schedule (Electronic
filing only) 11
<PAGE>
AEROSONIC CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
October 31
1996 January 31
(unaudited) 1996
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash investments $ 1,309,000 $ 10,000
Receivables:
Trade, net 3,511,000 3,320,000
Officers and employees 7,000 6,000
Other 141,000 44,000
Income tax 0 436,000
Inventories 6,677,000 6,312,000
Prepaid expenses 73,000 37,000
Deferred income tax benefit 980,000 999,000
------------ ------------
Total current assets 12,698,000 11,164,000
Property, plant and equipment, net 4,423,000 6,415,000
Other assets 124,000 272,000
------------ ------------
$ 17,245,000 $ 17,851,000
============ ============
Liabilities and shareholders' equity
Current liabilities:
Current installments of long-term debt $ 604,000 $ 712,000
Notes payable 1,746,000 295,000
Accounts payable, trade 1,052,000 969,000
Other accrued expenses 1,568,000 1,606,000
Accrued litigation costs 250,000 1,775,000
------------ ------------
Total current liabilities 5,220,000 5,357,000
Long-term debt, less current installments 2,074,000 2,814,000
Deferred income taxes 491,000 491,000
------------ ------------
Total liabilities 7,785,000 8,662,000
------------ ------------
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 4,763,000 4,506,000
Less treasury stock, 178,753 shares at 10/31/96
and 186,772 shares at 1/31/96 (308,000) (322,000)
------------ ------------
Total shareholders' equity 9,460,000 9,189,000
------------ ------------
$ 17,245,000 $ 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 Consolidated Financial Statements.
</TABLE>
2
<PAGE>
AEROSONIC CORPORATION
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31
--------------------------
1996 1995
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<S> <C> <C>
Net sales $ 5,066,000 $ 4,335,000
Cost of goods sold 3,439,000 3,174,000
----------- -----------
Gross profit 1,627,000 1,161,000
Selling, general and administrative
expenses 1,288,000 1,175,000
----------- -----------
Operating income (loss) 339,000 (14,000)
----------- -----------
Other (income) deductions:
Interest expense, net 74,000 75,000
Other, net (68,000) 8,000
----------- -----------
6,000 83,000
----------- -----------
Income (loss) from continuing operations
before income taxes 333,000 (97,000)
Income tax expense (benefit) 122,000 (37,000)
----------- -----------
Income (loss) from continuing operations 211,000 (60,000)
Discontinued Ordnance operations:
Losses from discontinued operations,
net of income tax benefit of $67,000 0 (109,000)
----------- -----------
Net income (loss) $ 211,000 $ (169,000)
=========== ===========
Earnings (loss) per share:
Continuing operations $ 0.06 $ (0.01)
Discontinued operations 0.00 (0.03)
----------- -----------
Net Earnings (loss) per share: $ 0.06 $ (0.04)
=========== ===========
Weighted average number
of shares outstanding 3,801,000 3,799,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
AEROSONIC CORPORATION
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 14,820,000 $ 13,184,000
Cost of goods sold 10,205,000 9,415,000
------------ ------------
Gross profit 4,615,000 3,769,000
Selling, general and administrative
expenses 3,568,000 3,415,000
------------ ------------
Operating income 1,047,000 354,000
------------ ------------
Other (income) deductions:
Provision for settlement of litigation 225,000 0
Interest expense, net 209,000 209,000
Other, net (87,000) 11,000
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347,000 220,000
------------ ------------
Income from continuing operations before
income taxes 700,000 134,000
Income tax expense 258,000 51,000
------------ ------------
Income from continuing operations 442,000 83,000
Discontinued Ordnance operations:
Losses from discontinued operations, net of income
tax benefit of $108,000 and $247,000, respectively (226,000) (402,000)
Gain on sale of discontinued operations 41,000 0
------------ ------------
Net income (loss) $ 257,000 $ (319,000)
============ ============
Earnings (loss) per share:
Continuing operations $ 0.12 $ 0.02
Discontinued operations (0.05) (0.10)
------------ ------------
Net Earnings (loss) per share: $ 0.07 $ (0.08)
============ ============
Weighted average number
of shares outstanding 3,801,000 3,797,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
AEROSONIC CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 257,000 $ (319,000)
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 498,000 562,000
Gain on sale of segment (41,000) 0
Change in deferred income taxes 19,000 (203,000)
Net increase (decrease) in current assets and
liabilities:
Income tax receivable 436,000 0
Accrued litigation costs (1,525,000) 0
Other current assets and liabilities (649,000) 463,000
----------- -----------
Net cash provided by (used in) operating activities (1,005,000) 503,000
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (147,000) (1,107,000)
Proceeds from sale of equipment 0 59,000
Proceeds from sale of discontinued operations 1,700,000 0
Investment in unconsolidated subsidiary 0 148,000
Net decrease in other assets 148,000 50,000
----------- -----------
Net cash provided by (used in) investing activities 1,701,000 (850,000)
----------- -----------
Cash flows from financing activities:
Repayment on long-term debt (848,274) (641,000)
Proceeds from borrowings 0 450,000
Proceeds from notes payable 2,205,000 0
Repayment of notes payable (753,726) 0
----------- -----------
Net cash provided by (used in) financing activities 603,000 (191,000)
----------- -----------
Net increase (decrease) in cash and cash investments 1,299,000 (538,000)
Cash and cash investments, beginning of period 10,000 573,000
----------- -----------
Cash and cash investments, end of period $ 1,309,000 $ 35,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 274,000 $ 227,000
=========== ===========
Income taxes $ 0 $ 7,000
=========== ===========
</TABLE>
Supplemental disclosure of noncash financing activity:
During the first quarter ended April 30, 1996 and 1995, the Company
reissued 8,019 and 7,799 shares, respectively, of treasury stock to fund a
portion of the Company's tax deferred savings plan.
See Notes to Consolicated Financial Statements.
5
<PAGE>
AEROSONIC CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 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
information 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 nine-month period ended October 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 - DISCONTINUED OPERATIONS
- --------------------------------
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.
Net sales of the Ordnance Division for the nine months ended October 31, 1996
and 1995 were $945,000 and $1,179,000, respectively. Net sales of the Ordnance
Division for the quarter ended October 31, 1995 were $228,000.
Certain prior year amounts have been reclassified to conform with current year
presentation of discontinued operations.
NOTE C - 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.
NOTE D - SETTLEMENT WITH LEGAL COUNSEL
- --------------------------------------
During the quarter ended October 31, 1996, the Company recognized $118,000 of
other income, which represents a settlement between the Company and prior legal
counsel. The related disputes have been amicably resolved without litigation and
no party admitting any liability or wrongdoing.
6
<PAGE>
AEROSONIC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF
OPERATIONS
Net sales of the Instrument Divisions for the three months ended October 31,
1996 ("fiscal 1997") were $5,066,000 as compared to $4,335,000 for the same
period in the prior year. Net sales of the Instrument Divisions for the nine
months ended October 31, 1996 increased 12%, to $14,820,000, as compared to
$13,184,000 for the same period in the prior year.
The Avionics Specialties Division sales for the quarter ended October 31, 1996
were $2,489,000, a 12% increase over the same period in the prior year. The
Clearwater Instrument Division sales for the quarter ended October 31, 1996
increased by 85%, to $2,577,000, over the same period in the prior year.
Ordnance sales were $945,000 for the nine months ended October 31, 1996, as
compared to $1,179,000 during the same period in the prior 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 third quarter and
the nine months ended October 31, 1996 as compared to the 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, Company management
has reengineered and streamlined the instrument manufacturing, cost accounting
and sales management processes. In addition, management is addressing
significant price increases on certain instrument lines which began in the
second quarter, as well as entering into long-term sales agreements with certain
customers.
The Company recorded a net profit for the third quarter of $211,000, or $.06 per
share. For the nine months ended October 31, 1996, the Company recorded a net
profit of $257,000, or $.07 per share, inclusive of the $41,000 gain on the sale
of the Ordnance Division, other income of $118,000 relating to the settlement
with legal counsel and the $225,000 charge against first quarter earnings for
the settlement of the Sensonics suit.
Working capital increased by $1,671,000 during the nine months ended October 31,
1996. Significant sources of cash during the year included proceeds from the
sale of the Ordnance Division, a refund relating to income taxes and proceeds
from utilization of the Company's line of credit. Significant uses of cash
included payment of Sensonics litigation costs and repayment of the Company's
debt facilities. At October 31, 1996, the Company had $750,000 available under
its line of credit.
7
<PAGE>
AEROSONIC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF
OPERATIONS (CONTINUED)
Interest expense totaled $238,000 ($209,000 allocated to the Instrument Division
and $29,000 allocated to the Ordnance Division) for the nine months ended
October 31, 1996. The $29,000 increase from the same period in the prior fiscal
year is largely due to heavier borrowings under the Company's line of credit
arrangement used to fund the settlement with Sensonics, Inc.
Backlog as of October 31, 1996 was $14,461,000, as compared to $14,774,000 in
the prior year. The prior year amount does not include backlog of $2,637,000
relating to the Ordnance division.
8
<PAGE>
AEROSONIC CORPORATION
PART II. OTHER INFORMATION
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) The Company did not file any report on Form 8-K during the
three months ended October 31, 1996.
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: December 4, 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
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
October 31 October 31 October 31 October 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary earnings per share:
Net income $ 211,000 $ (169,000) $ 257,000 $ (319,000)
============== ============= ============== =============
Weighted average common shares
outstanding 3,801,000 3,799,000 3,801,000 3,797,000
============== ============= ============== =============
Primary earnings (loss) per share $ 0.06 $ (0.04) $ 0.07 $ (0.08)
============== ============= ============== =============
</TABLE>
There are no other common stock equivalents; therefore, primary and fully
diluted earnings per share are equal.
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AEROSONIC CORPORATION FOR THE NINE MONTHS ENDED OCTOBER
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,309
<SECURITIES> 0
<RECEIVABLES> 3,511
<ALLOWANCES> 69
<INVENTORY> 6,677
<CURRENT-ASSETS> 12,698
<PP&E> 7,548
<DEPRECIATION> 3,126
<TOTAL-ASSETS> 17,245
<CURRENT-LIABILITIES> 5,220
<BONDS> 0
0
0
<COMMON> 1,595
<OTHER-SE> 7,865
<TOTAL-LIABILITY-AND-EQUITY> 17,245
<SALES> 14,820
<TOTAL-REVENUES> 14,820
<CGS> 10,205
<TOTAL-COSTS> 10,205
<OTHER-EXPENSES> 3,709
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209
<INCOME-PRETAX> 407
<INCOME-TAX> 150
<INCOME-CONTINUING> 442
<DISCONTINUED> (226)
<EXTRAORDINARY> 41
<CHANGES> 0
<NET-INCOME> 257
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
