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, 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 October
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 -
October 31, 1997 and January 31, 1997 2
Consolidated Statements of Income -
Three and nine months ended October 31, 1997 and 1996 3
Consolidated Statements of Cash Flows -
Nine months ended October 31, 1997 and 1996 4
Notes to Consolidated Financial Statements -
October 31, 1997 5 & 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 & 8
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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Exhibit 11. - Computations of Earnings Per Share 11
<PAGE>
PART 1. FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Aerosonic Corporation and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
October 31,
1997 January 31
(unaudited) 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 1,116,000 $ 1,250,000
Receivables 3,409,000 3,456,000
Income tax receivable 92,000 149,000
Inventories 7,938,000 7,286,000
Prepaid expenses 90,000 66,000
Deferred income tax benefit 482,000 344,000
------------ ------------
Total current assets 13,127,000 12,551,000
Property, plant and equipment, net 4,446,000 4,491,000
Other assets 73,000 173,000
------------ ------------
$ 17,646,000 $ 17,215,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 147,000 $ 1,805,000
Accounts payable, trade 643,000 964,000
Other accrued expenses 1,219,000 1,293,000
------------ ------------
Total current liabilities 2,009,000 4,062,000
Long-term debt, less current installments 3,461,000 1,944,000
Note payable, related party 300,000 500,000
Deferred income taxes 582,000 582,000
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Total liabilities 6,352,000 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 3,696,000 3,410,000
Retained earnings 6,142,000 5,430,000
Less treasury stock, 178,753 shares at 1/31/97
and 80,818 shares at 10/31/97 (139,000) (308,000)
------------ ------------
Total shareholders' equity 11,294,000 10,127,000
------------ ------------
$ 17,646,000 $ 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 Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 4,240,000 $ 5,066,000 $ 14,460,000 $ 14,820,000
Cost of goods sold 2,617,000 3,439,000 9,260,000 10,205,000
------------ ------------ ------------ ------------
Gross Profit 1,623,000 1,627,000 5,200,000 4,615,000
Selling, general and administrative
expenses 1,359,000 1,288,000 4,044,000 3,568,000
------------ ------------ ------------ ------------
Operating Income 264,000 339,000 1,156,000 1,047,000
------------ ------------ ------------ ------------
Other (income) deductions:
Provision for settlement of litigation 0 0 0 225,000
Interest expense, net 47,000 74,000 195,000 209,000
Other, net (151,000) (68,000) (148,000) (87,000)
------------ ------------ ------------ ------------
(104,000) 6,000 47,000 347,000
------------ ------------ ------------ ------------
Income from continuing operations
before income taxes 368,000 333,000 1,109,000 700,000
Income tax expense 140,000 122,000 397,000 258,000
------------ ------------ ------------ ------------
Income from continuing operations 228,000 211,000 712,000 442,000
------------ ------------ ------------ ------------
Discontinued ordnance operations:
Loss from discontinued operations net
of income tax benefit of $108,000 0 0 0 (226,000)
Gain on sale of discontinued operations 0 0 0 41,000
------------ ------------ ------------ ------------
Net Income $ 228,000 $ 211,000 $ 712,000 $ 257,000
============ ============ ============ ============
Earnings per share: $ 0.06 $ 0.06 $ 0.18 $ 0.07
============ ============ ============ ============
Weighted average number
of shares outstanding 3,909,000 3,801,000 3,909,000 3,801,000
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31
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1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 712,000 $ 257,000
Adjustment to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 413,000 498,000
Gain on sale of segment 0 (41,000)
Change in deferred income taxes (138,000) 19,000
Net increase (decrease) in current assets & liab's
Income tax receivable 57,000 436,000
Employee Stock Bonus/401(K) Company Match 282,000 0
Accrued litigation costs 0 (1,525,000)
Other current assets and liabilities (1,024,000) (649,000)
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Net cash provided by (used in) operating activities 302,000 (1,005,000)
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Cash flows from investing activities:
Purchase of property, plant and equipment (369,000) (147,000)
Proceeds from sale of equipment 0 0
Proceeds from sale of discontinued operations 0 1,700,000
Net decrease in other assets 100,000 148,000
Exercise of stock options 173,000 0
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Net cash provided by (used in) investing activities (96,000) 1,701,000
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Cash flows from financing activities:
Proceeds from/(repayment) on long-term debt 1,110,000 (848,274)
Proceeds from/(repayment) on borrowings (1,250,000) 0
Proceeds from notes payable 0 2,205,000
Repayment of notes payable (200,000) (753,726)
----------- -----------
Net cash used in financing activities (340,000) 603,000
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Net increase (decrease) in cash and cash investments (134,000) 1,299,000
Cash and cash investments, beginning of period 1,250,000 10,000
----------- -----------
Cash and cash investments, end of period $ 1,116,000 $ 1,309,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 230,000 $ 274,000
=========== ===========
Income taxes $ 1,000 $ 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 CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
October 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 October 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
- --------------------------------
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 nine months ended October 31, 1996 were $0 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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As reported in the 10-Q for quarter ended July 31, 1997, 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 has been submitted to the Florida Department of Environmental Protection
(FDEP) and is currently under review and discussion. Before approval of the
plan, the FDEP may require further assessment and testing. Company management
still believes that any additional liability in excess of amounts accrued at
October 31, 1997 will not have a material affect on the financial condition of
the company.
5
<PAGE>
NOTE D - FINALIZATION OF THE SENSONICS SETTLEMENT
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During the nine months ended October 31, 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.
NOTE E - LONG TERM DEBT
- -----------------------
During the third quarter ended October 31, 1997, the Company converted the
funded balance on the line of credit to long term debt. Along with the
restructuring, the company negotiated a reduced interest rate. Collateral for
the new term loan remains the same as it was under the prior arrangement.
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 October 31, 1997 were
$4,240,000 as compared to $5,066,000 for the same period in the preceding year.
This represents a $826,000 or 16% decrease in the third quarter compared to the
same period last year. The decline in sales is due to Company Management's
decision to reduce sales of unprofitable product lines combined with a temporary
delay in certain new contracts as well as a restructuring of the Company's
distribution network. Also, the affect of the acquisition of McDonnell Douglas
by Boeing and the associated consolidation had a small impact on revenues. Net
sales for the nine months ended October 31, 1997 decreased by 2% to $14,460,000
as compared to $14,820,000 for the same period last year.
Net sales for the Clearwater and Kansas Instrument Divisions for the quarter
ended October 31, 1997 totaled $2,325,000, which represents a $252,000 or 10%
decrease from the same period in the prior year. The Avionics Specialties
Division sales for the quarter ended October 31, 1997 were $1,915,000, a
$574,000 or 23% decrease over the same period in the prior fiscal year.
Discontinued Ordnance Division sales totaled $945,000 for the nine months ended
October 31, 1996.
Gross profit as a percentage of net sales improved in both the third quarter and
the nine months ended October 31, 1997 as compared to their respective periods
in the prior fiscal year. The improvement is largely attributed to Company
Management's continued focus of its sales efforts toward its most highly
profitable product lines. 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 and profitability, while de-emphasizing,
and in some areas, discontinuing sales of lower margin products.
Interest expense totaled $47,000 for the three months ended October 31, 1997
versus $74,000 during the same period in the preceding year. The decrease is due
primarily to the reduction in borrowings, and a renegotiation of interest rates
on its existing credit facilities.
Other income for the quarter ended October 31, 1997 includes a $138,000 gain on
the sale of the stock of a publicly-traded health insurance company. The stock
was received as remuneration for premiums paid related to a specific health care
plan.
For the third quarter ended October 31, 1997 the Company recorded net after tax
profit of $228,000, or $.06 per share. Through the nine months ended October 31,
1997, the company recorded a net after tax profit of $712,000, or $.18 per
share.
Working capital increased by $2,629,000 during the nine months ended October 31,
1997 and the Company's current ratio approximated 6.53:1, an increase from the
last reporting period.
7
<PAGE>
The largest component of the increase is related to the restructuring of the
balance on the Company's line of credit to long-term debt. Significant sources
of cash during the first nine months consisted of funds generated from
operations and borrowings under the Company's line of credit arrangement. Net
cash provided by operations approximated $302,000 as compared to cash used of
$1,005,000 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 nine months of Fiscal 1998 generating cash of approximately $173,000.
Significant uses of cash included a net decrease in other current assets and
liabilities, the purchase of property and equipment and repayment of long term
debt and notes payable, related.
In October 1997, the company negotiated a reduced interest rate and restructured
debt funded under the revolving line of credit arrangement, converting the
balance of $1,450,000 on the line of credit to long-term debt and establishing a
new line of credit with availability of $1,500,000, all of which was available
as of the third quarter ended October 31, 1997. Company management anticipates
that the availability under the line of credit combined with cash flow from
operations will be sufficient to fund future growth.
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
None
9
<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: December 11, 1997 /s/ J. Mervyn Nabors
--------------------- ------------------------------
J. Mervyn Nabors, President
and Chief Executive Officer
10
Exhibit 11: Computation of Earnings per Share
Exhibit 11
Weighted Average Common Shares and Common Equivalents Outstanding
Computation of Earnings Per Share
For the nine months ended
October 31, October 31,
1997 1996
------------ -----------
Primary earnings per share:
Net income $ 712,000 $ 257,000
============ ===========
Weighted average common shares
outstanding 3,909,000 3,801,000
============ ===========
Primary earnings (loss) per share $ 0.18 $ 0.07
============ ===========
There are no other common stock equivalents; therefore, primary and fully
diluted earnings per share are equal.
11
<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, 1997, 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-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 1,116
<SECURITIES> 0
<RECEIVABLES> 3,477
<ALLOWANCES> 68
<INVENTORY> 7,938
<CURRENT-ASSETS> 12,983
<PP&E> 8,134
<DEPRECIATION> 3,688
<TOTAL-ASSETS> 17,646
<CURRENT-LIABILITIES> 147
<BONDS> 0
0
0
<COMMON> 1,595
<OTHER-SE> 9,499
<TOTAL-LIABILITY-AND-EQUITY> 17,646
<SALES> 14,460
<TOTAL-REVENUES> 14,460
<CGS> 9,260
<TOTAL-COSTS> 9,260
<OTHER-EXPENSES> 3,896
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195
<INCOME-PRETAX> 1,109
<INCOME-TAX> 397
<INCOME-CONTINUING> 712
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 712
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
