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, 1997 COMMISSION FILE NO. 0-4988
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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 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 July
31, 1997.
<PAGE>
INDEX
AEROSONIC CORPORATION
Page No.
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PART 1. FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
July 31, 1997 and January 31, 1997 2
Consolidated Statements of Operations -
Three and six months ended July 31, 1997 and 1996 3
Consolidated Statements of Cash Flows -
Six months ended July 31, 1997 and 1996 4
Notes to Consolidated Financial Statements -
July 31, 1997 5 & 6
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
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Exhibit 11. - Computations of Earnings Per Share 10
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<PAGE>
PART 1. FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Aerosonic Corporation and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31,
1997 January 31
(unaudited) 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 1,257,000 $ 1,250,000
Receivables 3,365,000 3,456,000
Income tax receivable 92,000 149,000
Inventories 7,822,000 7,286,000
Prepaid expenses 93,000 66,000
Deferred income tax benefit 482,000 344,000
------------ ------------
Total current assets 13,111,000 12,551,000
Property, plant and equipment, net 4,441,000 4,491,000
Other assets 109,000 173,000
------------ ------------
$ 17,661,000 $ 17,215,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 1,797,000 $ 1,805,000
Accounts payable, trade 717,000 964,000
Other accrued expenses 1,315,000 1,293,000
------------ ------------
Total current liabilities 3,829,000 4,062,000
Long-term debt, less current installments 1,870,000 1,944,000
Note payable, related party 350,000 500,000
Deferred income taxes 582,000 582,000
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Total liabilities 6,631,000 7,088,000
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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 3,681,000 3,410,000
Retained earnings 5,914,000 5,430,000
Less treasury stock, 178,753 shares at 1/31/97
and 92,593 shares at 7/31/97 (160,000) (308,000)
------------ ------------
Total shareholders' equity 11,030,000 10,127,000
------------ ------------
$ 17,661,000 $ 17,215,000
============ ============
</TABLE>
Note: The balance sheet at January 31, 1997 has been derived from the
audited financial statements at this date.
See Notes to Consolidated Financial Statements.
2
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31 July 31
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 4,893,000 $ 5,080,000 $10,220,000 $ 9,741,000
Cost of goods sold 3,178,000 3,569,000 6,643,000 6,863,000
----------- ----------- ----------- -----------
Gross Profit 1,715,000 1,511,000 3,577,000 2,878,000
Selling, general and administrative
expenses 1,325,000 1,116,000 2,685,000 2,281,000
----------- ----------- ----------- -----------
Operating Income 390,000 395,000 892,000 597,000
----------- ----------- ----------- -----------
Other (income) deductions:
Provision for settlement of litigation 0 0 0 225,000
Interest expense, net 67,000 90,000 148,000 157,000
Other, net 7,000 2,000 3,000 (14,000)
----------- ----------- ----------- -----------
74,000 92,000 151,000 368,000
----------- ----------- ----------- -----------
Income from continuing operations
before income taxes 316,000 303,000 741,000 229,000
Income tax expense 110,000 115,000 257,000 90,000
----------- ----------- ----------- -----------
Income from continuing operations 206,000 188,000 484,000 139,000
----------- ----------- ----------- -----------
Discontinued ordnance operations:
Income (loss) from discontinued
operations net of income tax expense
(benefit) of $28,000 and ($50,000) 0 44,000 (106,000)
----------- ----------- ----------- -----------
Net Income $ 206,000 $ 232,000 $ 484,000 $ 33,000
=========== =========== =========== ===========
Earnings per share: $ 0.05 $ 0.06 $ 0.12 $ 0.01
=========== =========== =========== ===========
Weighted average number
of shares outstanding 3,891,000 3,801,000 3,891,000 3,801,000
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31
--------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 484,000 $ 33,000
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 270,000 401,000
Change in deferred income taxes (138,000) (1,000)
Net increase (decrease) in current assets & liab's
Income tax receivable 57,000 11,000
Other current assets and liabilities (415,000) (2,091,000)
----------- -----------
Net cash provided by (used in) operating activities 258,000 (1,647,000)
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Cash flows from investing activities:
Purchase of property, plant and equipment (221,000) 0
Proceeds from sale of equipment 0 1,904,000
Net decrease in other assets 64,000 113,000
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Net cash provided by (used in) investing activities (157,000) 2,017,000
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Cash flows from financing activities:
Repayment on long-term debt (281,000) (945,000)
Proceeds from borrowings 200,000 1,880,000
Repayment of notes payable (150,000) 0
Exercise of stock options 137,000 0
----------- -----------
Net cash provided by (used in) financing activities (94,000) 935,000
----------- -----------
Net increase in cash and cash investments 7,000 1,305,000
Cash and cash investments, beginning of period 1,250,000 10,000
----------- -----------
Cash and cash investments, end of period $ 1,257,000 $ 1,315,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 157,000 $ 164,000
=========== ===========
Income taxes $ 0 $ 0
=========== ===========
Supplemental disclosure of noncash activity:
During the first quarter ended April 30, 1996, and second quarter ended July 31, 1997
the Company reissued 8,019 and 14,960 shares, respectively, of treasury stock to fund
a portion of the Company's tax deferred savings plan.
During the second quarter ended July 31, 1997, the Company reissued 26,700 shares of
treasury stock to fund the company-wide employee bonus program.
</TABLE>
4
<PAGE>
AEROSONIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1997
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, 1997 are
not necessarily indicative of the results that may be expected for the year
ended January 31, 1998. 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, 1997.
NOTE B - DISCONTINUED OPERATIONS
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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.
Net sales for the three and six months ended July 31, 1996 were $630,000 and
$958,000 respectively.
Certain prior year amounts have been reclassified to conform with current year
presentation of discontinued operations.
NOTE C - ENVIRONMENTAL MATTERS
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In accordance with a consent agreement signed by the Company in 1993, the
Company's environmental consultant has developed an interim remedial action plan
to contain and remediate certain contamination on and underlying the Company's
property. This plan must be submitted to the Florida Department of Environmental
Protection (FDEP) for review and approval. Before approval of the plan, the FDEP
may require further assessment and testing. The Company believes that any
additional liability in excess of amounts accrued at July 31, 1997 will not have
a material affect on the financial condition of the company.
5
<PAGE>
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. and recorded a $225,000 charge
against related earnings. The details of the lawsuit and related settlement are
reflected in the 10-K report, dated January 31, 1997.
6
<PAGE>
PART 1. FINANCIAL INFORMATION
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
Company wide net sales for the three months ended July 31, 1997 ("fiscal 1998")
were $4,893,000 as compared to $5,080,000 for the same period in the preceding
year. This represents a $187,000 or 4% decrease in the second quarter compared
to the same period last year. The small decline in sales is due to a temporary
delay in certain new contracts. Also, the affect of the acquisition of McDonnell
Douglas by Boeing and the associated consolidation contributed to the sales
decline. Deliveries were also minimally affected by the UPS work stoppage. Net
sales for the six months ended July 31, 1997 increased by 5% to $10,220,000 as
compared to $9,741,000 for the same period last year. Net sales for the
Clearwater and Kansas Instrument Divisions for the quarter ended July 31, 1997
totaled $2,697,000, which represents a $372,000 or 16% increase from the same
period in the prior year. The Avionics Specialties Division sales for the
quarter ended July 31, 1997 were $2,196,000, a 19% decrease over the same period
in the prior fiscal year. Discontinued Ordnance Division sales totaled $630,000
Gross profit as a percentage of net sales improved in both the second quarter
and the six months ended July 31, 1997 as compared to their respective periods
in the prior fiscal year. The improvement is largely attributed to Company
management's continued focus on its core business line. Company management
continues its strategy of pursuing long term agreements with its major customers
and continues to focus on the worldwide market to enhance revenues.
Interest expense totaled $67,000 for the three months ended July 31, 1997 versus
$90,000 during the same period in the preceding year. The decrease is due
primarily to the reduction in long-term borrowings.
For the second quarter ended July 31, 1997 the Company recorded a net profit of
$206,000, or $.05 per share. Through the six months ended July 31, 1997, the
company recorded a net profit of $484,000, or $.12 per share.
Working capital increased by $793,000 during the six months ended July 31, 1997
and the Company's current ratio approximated 3.42:1, an increase from the last
reporting period. Significant sources of cash during the first six months
consisted of funds generated from operations and borrowings under the Company's
line of credit arrangement. Net cash provided by operations approximated
$258,000 as compared to cash used by operations of $1,647,000 for the same
period in the preceding year. In addition, stock options granted under the
Company's Incentive Stock Option Plan were exercised during the first six months
of Fiscal 1998 generating cash of approximately $134,000. Significant uses of
cash included a net decrease in other current assets and liabilities, the
purchase of fixed assets and repayment of long term debt and notes payable,
related party. As of July 31, 1997, the Company had $550,000 available under its
$2,000,000 line of credit arrangement. Company management anticipates that the
availability under the line of credit combined with cash flow from operations
will be sufficient to fund future growth.
7
<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 September 9, 1997,
regarding Item 5: Other Events. The company reported that
William C. Parker retired as President, but will remain as a
member of the board of directors and consultant to the
Company. P. Mark Perkins was elected as a member of the board
of directors.
8
<PAGE>
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 12, 1997 /s/ J. Mervyn Nabors
--------------------- ------------------------------
J. Mervyn Nabors, President
and Chief Executive Officer
9
Exhibit 11: Computation of Earnings per Share
Exhibit 11
Weighted Average Common Shares and Common Equivalents Outstanding
Computation of Earnings Per Share
For the six months ended
July 31, July 31,
1997 1996
---- ----
Primary earnings per share:
Net income $ 484,000 $ 33,000
=============== ==========
Weighted average common shares
outstanding 3,891,000 3,801,000
=============== ==========
Primary earnings (loss) per share $ 0.12 $ 0.01
=============== ==========
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 THREE MONTHS ENDED APRIL
30, 1997, 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-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 1,257
<SECURITIES> 0
<RECEIVABLES> 3,433
<ALLOWANCES> 68
<INVENTORY> 7,822
<CURRENT-ASSETS> 13,111
<PP&E> 7,988
<DEPRECIATION> 3,947
<TOTAL-ASSETS> 17,661
<CURRENT-LIABILITIES> 3,829
<BONDS> 0
0
0
<COMMON> 1,595
<OTHER-SE> 9,435
<TOTAL-LIABILITY-AND-EQUITY> 17,661
<SALES> 10,220
<TOTAL-REVENUES> 10,220
<CGS> 6,643
<TOTAL-COSTS> 6,643
<OTHER-EXPENSES> 2,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 741
<INCOME-TAX> 257
<INCOME-CONTINUING> 484
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 484
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
