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 April 30, 1999 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 33765
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(Address of principal executive offices) (Zip Code)
(727) 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 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 April
30, 1999.
<PAGE>
INDEX
AEROSONIC CORPORATION
Page No.
PART 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
April 30, 1999 and January 31, 1999
Condensed Consolidated Statements of Income - 4
Three months ended April 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows - 5
Three months ended April 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements - 6
April 30, 1999
Item 2. Management's Discussion and Analysis of 7 - 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
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PART 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Aerosonic Corporation and Subsidiary
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 30,
1999 January 31,
(unaudited) 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 1,045,000 $ 1,718,000
Accounts receivable 4,537,000 4,394,000
Income tax receivable 0 13,000
Inventory 9,593,000 8,888,000
Prepaid expenses 462,000 161,000
Deferred income tax benefit 450,000 391,000
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Total current assets 16,087,000 15,565,000
Property, plant and equipment, net 4,417,000 4,434,000
Other assets 543,000 418,000
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$ 21,047,000 $ 20,417,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 329,000 $ 328,000
Revolving credit facilities 2,782,000 2,140,000
Accounts payable, trade 900,000 987,000
Compensation and benefits 763,000 685,000
Income taxes payable 0 0
Other accrued expenses 329,000 228,000
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Total current liabilities 5,103,000 4,368,000
Long-term debt, less current installments 2,965,000 3,068,000
Deferred income taxes 231,000 231,000
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Total liabilities 8,299,000 7,667,000
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Shareholders' equity:
Common stock, $.40 par; 8,000,000 shares
authorized; 3,986,262 shares issued 1,595,000 1,595,000
Additional paid-in capital 4,335,000 4,335,000
Retained earnings 7,033,000 6,984,000
Less treasury stock, 39,659 shares at 1/31/99
and 42,659 shares at 04/30/99 (215,000) (164,000)
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Total shareholders' equity 12,748,000 12,750,000
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$ 21,047,000 $ 20,417,000
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</TABLE>
Note: The balance sheet at January 31, 1999 has been derived from the
audited financial statements at this date.
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
Aerosonic Corporation and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30
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1999 1998
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<S> <C> <C>
Net sales $ 4,894,000 $ 5,328,000
Cost of goods sold 2,929,000 3,295,000
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Gross Profit 1,965,000 2,033,000
Selling, general and administrative
expenses 1,828,000 1,562,000
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Operating Income 137,000 471,000
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Other (income) deductions:
Interest expense, net 86,000 53,000
Other, net (28,000) (24,000)
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58,000 29,000
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Income before income taxes 79,000 442,000
Income tax expense 30,000 159,000
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Net Income $ 49,000 $ 283,000
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Earnings per share: $ 0.01 $ 0.07
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Basic weighted average shares outstanding 3,948,000 3,938,000
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Diluted weighted average shares outstanding 3,948,000 3,939,000
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
Aerosonic Corporation and Subsidiary
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30
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1999 1998
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Cash flows from operating activities:
<S> <C> <C>
Net income $ 49,000 $ 283,000
Adjustment to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 167,000 151,000
Stock compensation 0 157,000
Change in deferred income taxes (59,000) 176,000
Change in current assets & liabilities (1,054,000) (1,397,000)
Net cash (used in) operating activities (897,000) (630,000)
Cash flows from investing activities:
Purchase of property, plant and equipment (140,000) (100,000)
Changes in other assets (125,000) (193,000)
Exercise of stock options 0 3,000
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Net cash (used in) investing activities (265,000) (290,000)
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Cash flows from financing activities:
Proceeds from long-term debt and notes payable 540,000 662,000
Purchase of treasury stock (51,000)
Repayment of related party notes payable 0 (75,000)
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Net cash provided by financing activities 489,000 587,000
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Net (decrease) in cash and cash investments (673,000) (333,000)
Cash and cash investments, beginning of period 1,718,000 2,075,000
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Cash and cash investments, end of period $ 1,045,000 $ 1,742,000
=========== ===========
Cash paid for:
Interest $ 124,000 $ 73,000
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Income taxes $ 70,000 $ 935,000
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</TABLE>
See notes to Condensed Consolidated Financial Statements
5
<PAGE>
AEROSONIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1999
NOTE A - BASIS OF PRESENTATION
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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 April 30, 1999 are not necessarily
indicative of the results that may be expected for the year ended January 31,
2000. 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, 1999.
NOTE B - ENVIRONMENTAL MATTERS
- ------------------------------
As reported in the annual report on form 10-K for the fiscal year ended January
31, 1999, 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
April 30, 1999 the company has a remaining liability of approximately $44,000
recorded in Other accrued expenses to cover future environmental expenditures
related to the remediation of this site. Management believes that any additional
liability in excess of the amounts accrued at April 30, 1999 will not have a
material affect on the financial position of the company.
NOTE C - WEIGHTED AVERAGE COMMON SHARES AND COMMON EQUIVALENTS
- ---------------------------------------------------------------
OUTSTANDING COMPUTATION OF EARNINGS PER SHARE
- ---------------------------------------------
For the three months ended
April 30, April 30,
1999 1998
Basic weighted average common
shares outstanding 3,948,000 3,938,000
Weighted average common equivalents 0 1,000
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Shares used in diluted EPS calculation 3,948,000 3,939,000
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 April 30, 1999 decreased by 8%
to $4,894,000 as compared to $5,328,000 for the same period in the preceding
year.
Gross profit as a percentage of net sales increased to 40% in the first quarter
of FY2000 versus 38% during the same period in the prior year. The increase is
the result of sales of higher margin product lines.
Selling, General and Administrative expenses increased during the first quarter
ended April 30, 1999 to $1,827,000 as compared to $1,562,000 during the same
period in the prior fiscal year. This increase is due primarily to increased
research and development and marketing expenditures.
Interest expense totaled $86,000 for the three months ended April 30, 1999
versus $53,000 during the same period in the preceding year. The increase is due
primarily to increased short and long-term borrowings related to the startup of
the Precision Components Division. For the first quarter ended April 30, 1999
the Company recorded a net profit of $49,000, or $0.01 per share, compared to a
net profit of $283,000, or $0.07 per share during the same period in the
preceding year.
Working capital decreased to $10,984,000 during the three months ended April 30,
1999 and the Company's current ratio approximated 3.15:1. Significant sources of
cash during the first three months included funds generated from borrowings
under the Company's credit facilities. Significant uses of cash included changes
in current assets and liabilities. The purchase of property and equipment
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.
YEAR 2000
General
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Aerosonic Corporation's company-wide Year 2000 Project (Project) is proceeding
on schedule. The Project is addressing the issue of computer programs being able
to distinguish between the year 1900 and the year 2000. Since 1995, the Company
has purchased and utilized generic software programs supplied by vendors for its
accounting, manufacturing and payroll functions. Embedded in the cost of these
computer programs from the various vendors, were free software upgrades to
include Year 2000 capabilities.
7
<PAGE>
Project
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Aerosonic's Project is divided into three major sections; software embedded in
products sold to customers, infrastructure (applications software and associated
hardware) and key vendor certifications.
Software developed for use in various product lines has been upgraded to
accommodate the Year 2000 issue. Production deliveries have commenced on
products with the upgraded software. Therefore, Company management believes that
the Year 2000 issue will not have a material impact on product sales.
Software programs utilized by the Company in its Manufacturing, Accounting and
Payroll functions were all purchased by third-party vendors and included
upgrades for, among other things, the Year 2000 issue. As of April 30, 1999, all
upgrades provided by software vendors, which include compliance with the Year
2000 issue, have been installed and are undergoing testing to ensure compliance
with the Year 2000 issue. Management expects to complete the testing of all
upgraded software by October 31, 1999.
In May 1998, questionnaires requiring vendor certifications were sent to all key
vendors. These certifications address issues primarily related to the vendors'
ability to provide uninterrupted service or product flow to the Company into the
new millennium. As of April 30, 1999, approximately 90% of all vendors
questioned completed the questionnaire and certified that they are either in
compliance or will be in compliance prior to the year 2000.
Costs
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The total costs associated with required modifications to become Year 2000
compliant have not been material to the Company's financial position to date.
Additionally, anticipated costs to complete the Year 2000 project are not
anticipated to be material to the Company's financial position. Arrangements
with all software vendors include free upgrades on an ongoing basis, which
include upgrades for the Year 2000 issue. Incidental costs such as clerical
labor to perform testing of upgraded software, postage and clerical labor to
administer the vendor questionnaires as well as management level review of the
results are not expected to materially impact the financial position of the
Company.
Risks
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The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party vendors and customers, the
Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Project is expected
to significantly reduce the Company's level of uncertainty about the Year 2000
8
<PAGE>
problem and, in particular, about the Year 2000 compliance and readiness of its
material external agents. The Company believes that, with the completion of the
Project as scheduled, the possibility of significant interruptions of normal
operations should be reduced. Aerosonic Corporation believes that the most
reasonably likely worst case scenario would be business interruptions with
trading partners due to problems inherent in their own systems. This problem is
not anticipated to have a significant impact given that the Company trades with
a high number of vendors and customers, thereby minimizing its exposure to any
one trading partner.
Contingency plan
- ----------------
Aerosonic Corporation's contingency plan is scheduled to be completed by the
middle of 1999. The contingency plan will include a team to be established to
monitor all critical systems through significant date transitions and to
promptly respond to any problems.
FORWARD LOOKING STATEMENTS
This document contains statements that constitute "forward-looking " statements
within the meaning of the Securities Act of 1933 and the Securities Act of 1934,
as amended by the Private Securities Litigation Reform Act of 1995.
"Forward-looking" statements contained in this document include the intent,
belief or current expectations of the Company and its senior management team
with respect to the future prospects of the Company's operations, and belief
concerning profits from future operations and the Company's overall future
business prospects, as well as the assumptions upon which such statements are
based. Investors are cautioned that any such forward-looking statements are not
guarantees of future performance, and involve risks, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those contemplated by the forward-looking statements
in this document include, but are not limited to, adverse developments with
respect to the operations of the Company's business units, failure to meet
operating objectives or to execute the business plan, and the failure to reach
revenue or profit projections. The Company undertakes no obligation to update or
revise the forward-looking statements contained in this document to reflect
changed assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
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 April 30, 1999.
10
<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: June 14, 1999 /s/ Eric J. McCracken
----------------------------- -----------------------
Eric J. McCracken
Executive Vice President
and Chief Financial Officer
11
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jan-31-2000
<PERIOD-START> Feb-01-1999
<PERIOD-END> Apr-30-1999
<CASH> 1045000
<SECURITIES> 0
<RECEIVABLES> 4633000
<ALLOWANCES> 96000
<INVENTORY> 9593000
<CURRENT-ASSETS> 16087000
<PP&E> 8983000
<DEPRECIATION> 4567000
<TOTAL-ASSETS> 21047000
<CURRENT-LIABILITIES> 5103000
<BONDS> 0
0
0
<COMMON> 1595000
<OTHER-SE> 11153000
<TOTAL-LIABILITY-AND-EQUITY> 21047000
<SALES> 4894000
<TOTAL-REVENUES> 4894000
<CGS> 2949000
<TOTAL-COSTS> 2949000
<OTHER-EXPENSES> 1800000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86000
<INCOME-PRETAX> 79000
<INCOME-TAX> 30000
<INCOME-CONTINUING> 49000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49000
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
