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, 1998 COMMISSION FILE NO. 0-4988
------------- ------
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 33765
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(727) 461-3000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including Area Code)
Non applicable
- --------------------------------------------------------------------------------
(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
--- ---
Indicate the number of shares outstanding of each of the issuer's 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, 1998.
<PAGE>
INDEX
AEROSONIC CORPORATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART 1. FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - 3
July 31, 1998 and January 31, 1998
Consolidated Statements of Income - 4
Three and six months ended July 31, 1998 and 1997
Consolidated Statements of Cash Flows - 5
Six months ended July 31, 1998 and 1997
Notes to Consolidated Financial Statements - 6
July 31, 1998
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
- ----------
</TABLE>
Page 2 of 9
<PAGE>
PART 1. FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements
Aerosonic Corporation and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, January 31,
--------------------- -------------------
1998
---------------------
(unaudited) 1998
--------------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 1,831,000 $ 2,075,000
Receivables 4,321,000 3,348,000
Inventories 8,075,000 8,057,000
Costs and estimated earnings in excess of billings on uncompleted
contract 48,000 48,000
Prepaid expenses 517,000 36,000
Deferred income tax benefit 639,000 314,000
--------------------- -------------------
Total current assets 15,431,000 13,878,000
Property, plant and equipment, net 4,247,000 4,369,000
Other assets 137,000 68,000
--------------------- -------------------
$ 19,815,000 $ 18,315,000
===================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 1,350,000 $ 196,000
Accounts payable, trade 608,000 409,000
Compensation and benefits 547,000 619,000
Income taxes payable 72,000 836,000
Other accrued expenses 688,000 662,000
--------------------- -------------------
Total current liabilities 3,265,000 2,722,000
Long-term debt, less current installments 3,199,000 3,376,000
Note payable, related party 75,000 225,000
Deferred income taxes 491,000 214,000
--------------------- -------------------
Total liabilities 7,030,000 6,537,000
--------------------- -------------------
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 4,283,000 3,684,000
Retained earnings 6,969,000 6,631,000
Less treasury stock, 76,393 shares at 1/31/98
and 35,159 shares at 7/31/98 (62,000) (132,000)
--------------------- -------------------
Total shareholders' equity 12,785,000 11,778,000
--------------------- -------------------
$ 19,815,000 $ 18,315,000
===================== ===================
</TABLE>
Note: The balance sheet at January 31, 1998 has been derived from the
audited financial statements at this date.
See Notes to Consolidated Financial Statements.
Page 3 of 9
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
----------------------------- -------------------------------
1998 1997 1998 1997
------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 4,888,000 $ 4,893,000 $ 10,216,000 $ 10,220,000
Cost of goods sold 3,065,000 3,178,000 6,360,000 6,643,000
------------ -------------- ------------ ------------
Gross Profit 1,823,000 1,715,000 3,856,000 3,577,000
Selling, general and administrative
expenses 1,698,591 1,325,000 3,260,000 2,685,000
------------ -------------- ------------ ------------
Operating Income 124,409 390,000 596,000 892,000
------------ -------------- ------------ ------------
Other (income) deductions:
Interest expense, net 51,000 67,000 104,000 148,000
Other, net (13,000) 7,000 (37,000) 3,000
------------ -------------- ------------ ------------
38,000 74,000 67,000 151,000
------------ -------------- ------------ ------------
Income from continuing operations
before income taxes 87,000 316,000 529,000 741,000
Income tax expense 32,000 110,000 191,000 257,000
------------ -------------- ------------ ------------
Net Income $ 55,000 $ 206,000 $ 338,000 $ 484,000
============ ============== ============ ============
$ 0.01 $ 0.05 $ 0.09 $ 0.12
============ ============== ============ ============
Earnings per share:
Basic weighted average shares outstanding 3,946,000 3,891,000 3,942,000 3,891,000
============ ============== ============ ============
Diluted weighted average shares outstanding $ 3,946,000 3,891,000 3,943,000 3,891,000
============ ============== ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
Page 4 of 9
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31
-------------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 338,000 $ 484,000
Adjustment to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 306,000 270,000
Stock compensation 289,000
Change in deferred income taxes 44,000 (138,000)
Change in current assets & liabilities (1,815,000) (358,000)
----------------- ----------------
Net cash provided by (used in) operating activities (838,000) 258,000
----------------- ----------------
Cash flows from investing activities:
Purchase of property, plant and equipment (167,000) (221,000)
Proceeds from sale of equipment 0 0
Changes in other assets (69,000) 64,000
Exercise of stock options 3,000 137,000
----------------- ----------------
Net cash provided by (used in) investing activities (233,000) (20,000)
----------------- ----------------
Cash flows from financing activities:
Proceeds from/(repayment on ) long-term debt
and notes payable 977,000 (81,000)
Repayment of related party notes payable (150,000) (150,000)
----------------- ----------------
Net cash provided by (used in) financing activities 827,000 (231,000)
----------------- ----------------
Net increase (decrease) in cash and cash investments (244,000) 7,000
Cash and cash investments, beginning of period 2,075,000 1,250,000
----------------- ----------------
Cash and cash investments, end of period $ 1,831,000 $ 1,257,000
================= ================
Supplemental disclosure of cash flow information: Cash paid for:
Interest $ 124,000 $ 157,000
================= ================
Income taxes $ 1,099,000 $ 0
================= ================
</TABLE>
See notes to consolidated financial statements
Page 5 of 9
<PAGE>
AEROSONIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
July 31, 1998
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 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, 1998 are not necessarily
indicative of the results that may be expected for the year ended January 31,
1999. 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, 1998.
NOTE B - ENVIRONMENTAL MATTERS
- ------------------------------
As reported in the annual report on form 10-K for the fiscal year ended January
31, 1998, 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 was submitted to the Florida Department of
Environmental Protection (FDEP) in 1997 and is currently under review and
discussion. During 1997, the company recorded a provision of approximately
$175,000 related to the estimated costs to be incurred under this plan. As of
July 31, 1998, the company has a remaining liability of approximately $99,200
recorded in Other accrued expenses to cover future environmental expenditures
related to the remediation of this site. Before approval of the plan, the FDEP
may require further assessment and testing. Company management believes that any
additional liability in excess of amounts accrued at July 31, 1998 will not have
a material affect on the financial condition of the company.
NOTE C - WEIGHTED AVERAGE COMMON SHARES AND COMMON EQUIVALENTS OUTSTANDING
- --------------------------------------------------------------------------
COMPUTATION OF EARNINGS PER SHARE
- ---------------------------------
<TABLE>
<CAPTION>
For the three months ended For the six months ended
July 31, July 31, July 31, July 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic weighted average common
shares outstanding 3,946,000 3,891,000 3,942,000 3,891,000
Weighted average common equivalents 0 0 1,000 0
-------------- ------------ ----------- -----------
Shares used in diluted EPS calculation 3,946,000 3,891,000 3,943,000 3,891,000
</TABLE>
Page 6 of 9
<PAGE>
PART 1. FINANCIAL INFORMATION
- ------------------------------
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, 1998 remained
relatively stable at $4,888,000 as compared to $4,893,000 for the same period in
the preceding year. Net sales for the nine months ended July 31, 1998 also
remained relatively stable at $10,216,000 as compared to $10,220,000 for the
same period last year.
Net sales for the Clearwater and Kansas Instrument Divisions for the quarter
ended July 31, 1998 totaled $2,615,000 which represents a $82,000 or 3% decrease
from the same period in the prior year. Sales for Avionics Specialties for the
quarter ended July 31, 1998 were $2,273,000, a $77,000 or 4% decrease over the
same period in the prior fiscal year.
Gross profit as a percentage of net sales improved to 37% in the second quarter
of FY1999 versus 35% during the same period in the prior year. During the six
months ended July 31, 1998 gross profit as a percentage of net sales improved to
38% versus 35% during the same period in the prior year. The improvement is the
result of management's continued focus on improving its manufacturing processes
and focus of its sales efforts toward its most highly profitable product lines.
Selling, General and Administrative expenses increased during both the second
quarter and six months ended July 31, 1998 due primarily to increased research
and development expenditures. These increased R&D expenditures were part of the
Company's business plan and related to the development of new programs including
the new Precision Components Division as well as three new military programs and
the new line of two-inch instrumentation.
Interest expense totaled $51,000 for the three months ended July 31, 1998 versus
$67,000 during the same period in the preceding year. The decrease is due
primarily to a renegotiation of interest rates on its existing credit
facilities.
For the second quarter ended July 31, 1998 the Company recorded a net profit of
$55,000, or $0.01 per share. Through the six months ended July 31, 1998, the
company recorded a net profit of $338,000, or $0.09 per share.
Working capital increased to $12,166,000 during the six months ended July 31,
1998 and the Company's current ratio approximated 4.73:1. Significant sources of
cash during the first six months included funds generated from operating
activities and borrowings under the Company's line of credit arrangement.
Significant uses of cash included a $1,099,000 payment of federal and state
income tax liabilities, which included all of FY'98 and the first six months of
FY'99. Net changes in current assets and liabilities, the purchase of property
and equipment and repayment of long-term debt and notes payable, related
comprised the majority of other uses of cash. Company management anticipates
that cash flow from operations, existing cash balances and the availability
under the Company's line of credit arrangement will be sufficient to fund future
growth.
Page 7 of 9
<PAGE>
PART II. OTHER INFORMATION
AEROSONIC CORPORATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on form 8-K
The company did not file any report on form 8-K
during the three months ended July 31, 1998.
Page 8 of 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: September 21, 1998 /s/ Eric J. McCracken
---------------------- -------------------------
Eric J. McCracken
Executive Vice President
and Chief Financial Officer
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Jan-31-1999
<PERIOD-START> Feb-01-1998
<PERIOD-END> Jul-31-1998
<CASH> 1831000
<SECURITIES> 0
<RECEIVABLES> 4454000
<ALLOWANCES> 41000
<INVENTORY> 8075000
<CURRENT-ASSETS> 15431000
<PP&E> 8360000
<DEPRECIATION> 4113000
<TOTAL-ASSETS> 19815000
<CURRENT-LIABILITIES> 3265000
<BONDS> 0
1595000
0
<COMMON> 0
<OTHER-SE> 11190000
<TOTAL-LIABILITY-AND-EQUITY> 19815000
<SALES> 10216000
<TOTAL-REVENUES> 10216000
<CGS> 6360000
<TOTAL-COSTS> 6360000
<OTHER-EXPENSES> 3223000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104000
<INCOME-PRETAX> 529000
<INCOME-TAX> 191000
<INCOME-CONTINUING> 338000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
