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, 2000 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 October 31, 2000.
<PAGE>
INDEX
AEROSONIC CORPORATION
Page No.
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PART 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
October 31, 2000 and January 31, 2000
Condensed Consolidated Statements of Operations - 4
Three months and nine months ended October 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows - 5
Nine months ended October 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements - 6 - 8
October 31, 2000
Item 2. Management's Discussion and Analysis of 9 - 10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Aerosonic Corporation and Subsidiary
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
October 31, January 31,
2000 2000
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ASSETS
Current assets:
<S> <C> <C>
Cash and cash investments $ 1,009,000 $ 964,000
Accounts receivable 4,620,000 5,349,000
Inventory 10,241,000 10,606,000
Prepaid expenses 159,000 128,000
Income tax receivable 78,000 0
Deferred income tax benefit 388,000 388,000
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Total current assets 16,495,000 17,435,000
Property, plant and equipment, net 4,198,000 4,462,000
Capitalized software cost and other assets 916,000 877,000
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Total assets $ 21,609,000 $ 22,774,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 997,000 $ 542,000
Revolving credit facilities 497,000 2,314,000
Accounts payable, trade 1,353,000 1,968,000
Compensation and benefits 667,000 659,000
Income taxes payable 0 144,000
Other accrued expenses 581,000 597,000
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Total current liabilities 4,095,000 6,224,000
Long-term debt, less current installments 4,660,000 3,751,000
Deferred income taxes 155,000 155,000
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Total liabilities 8,910,000 10,130,000
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Shareholders' equity:
Common stock, $.40 par; 8,000,000 shares
authorized; 3,986,262 shares issued 1,595,000 1,595,000
Additional paid-in capital 4,457,000 4,440,000
Retained earnings 7,262,000 7,244,000
Less treasury stock, 68,963 shares at 1/31/00
and 65,917 shares at 10/31/00, at cost (615,000) (635,000)
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Total shareholders' equity 12,699,000 12,644,000
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$ 21,609,000 $ 22,774,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
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2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 5,706,000 $ 6,237,000 $17,822,000 $16,992,000
Cost of goods sold 3,626,000 3,987,000 11,698,000 10,689,000
----------- ----------- ----------- -----------
Gross Profit 2,080,000 2,250,000 6,124,000 6,303,000
Selling, general and administrative
expenses 2,258,000 2,020,000 5,720,000 5,618,000
----------- ----------- ----------- -----------
Operating Income (Loss) (178,000) 230,000 404,000 685,000
----------- ----------- ----------- -----------
Other (income) deductions:
Interest expense, net 148,000 109,000 379,000 280,000
Other, net (4,000) 12,000 (5,000) (14,000)
----------- ----------- ----------- -----------
144,000 121,000 374,000 266,000
----------- ----------- ----------- -----------
Income (Loss) before income taxes (322,000) 109,000 30,000 419,000
Income tax expense (benefit) (129,000) 41,000 12,000 158,000
----------- ----------- ----------- -----------
Net Income (Loss) $ (193,000) $ 68,000 $ 18,000 $ 261,000
=========== =========== =========== ===========
Earnings (loss) per share: $ (0.05) $ 0.02 $ 0.00 $ 0.07
=========== =========== =========== ===========
Basic weighted average shares outstanding 3,922,000 3,934,000 3,917,000 3,941,000
=========== =========== =========== ===========
Diluted weighted average shares outstanding 3,922,000 3,934,000 3,917,000 3,941,000
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
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2000 1999
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Cash flows from operating activities:
<S> <C> <C>
Net income $ 18,000 $ 261,000
Adjustment to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 534,000 518,000
Stock compensation 188,000 176,000
Change in deferred income taxes 0 (133,000)
Change in current assets and liabilities 218,000 (1,220,000)
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Net cash provided by (used in) operating activities 958,000 (398,000)
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Cash flows from investing activities:
Purchase of property, plant and equipment (195,000) (702,000)
Changes in other assets (114,000) (237,000)
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Net cash used in investing activities (309,000) (939,000)
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Cash flows from financing activities:
Proceeds from/(repayment on) long-term debt
and notes payable (453,000) 1,213,000
Purchase of treasury stock (151,000) (340,000)
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Net cash provided by (used in) financing activities (604,000) 873,000
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Net increase (decrease) in cash and cash investments 45,000 (464,000)
Cash and cash investments, beginning of period 964,000 1,718,000
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Cash and cash investments, end of period $ 1,009,000 $ 1,254,000
=========== ===========
Cash paid for:
Interest $ 352,000 $ 351,000
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Income taxes $ 70,000 $ 139,000
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</TABLE>
See notes to consolidated financial statements
5
<PAGE>
AEROSONIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 October 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
January 31, 2001. 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, 2000.
NOTE B - ENVIRONMENTAL MATTERS
As reported in the annual report on form 10-K for the fiscal year ended January
31, 2000, 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. During 1997 the Company recorded a provision of
approximately $175,000 related to the estimated costs to be incurred under this
plan. As of January 31, 2000 the company had utilized all amounts originally
recorded in other accrued expenses, and phase-one remediation had been
completed.
During the third quarter management assessed the post-remediation monitoring
expense related to the environmental clean up of 1993 would cost approximately
$125,000. This amount was accrued and expensed during the third quarter.
Approximately $76,000 remains accrued in Other accrued expenses.
6
<PAGE>
Note C - LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt and notes payable at October 31, 2000 and January 31, 2000
consisted of the following:
<TABLE>
<CAPTION>
October 31, January 31,
2000 2000
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<S> <C> <C>
Note Payable $1,155,000 $1,268,000
Industrial development revenue bonds 909,000 965,000
Mortgage note payable 793,000 831,000
Note payable, equipment 1,075,000 1,229,000
Note payable, II 1,725,000 --
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5,657,000 4,293,000
Less current maturity 997,000 542,000
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Long-term debt and notes payable, less current maturity $4,660,000 $3,751,000
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</TABLE>
The Company's long-term debt agreements include certain restrictive covenants,
including restrictions on dividends (dividends during any single calendar year
cannot exceed 25 percent of net income for that year), limitations on business
acquisitions and sales of assets, and the requirement to maintain: a debt to
tangible net worth ratio of 1.0:1, a current ratio of 2.0:1 and a long-term debt
service coverage of 1.25:1. The Company is in compliance with all of the above
debt covenants at October 31, 2000.
Note Payable, II
During July 2000, the Company converted $1,800,000 of its Revolving Credit
Facility into a long term note payable. This note bears interest at the rate of
8.71% per annum until October 31, 2000; on October 31, 2000 the interest rate
shall be adjusted to 275 basis points over the "trailing 90 day average of the
90 day Treasury bill rate" on the last day of each of the Company's fiscal
calendar quarters. (Approximately 8.95% at October 31, 2000) This note is
payable in thirty-seven monthly principal installments of $37,103, plus accrued
interest, with the outstanding principal balance due on or before September 30,
2003. This note is collateralized by receivables, inventory and general
intangibles.
7
<PAGE>
NOTE D - REVOLVING CREDIT FACILITY
During July 2000, the company acquired a revolving credit facility in the amount
of $1,000,000 to replace the prior facility that matured in June 2000. The
interest is payable monthly and bears interest at the rate of 8.71% per annum
until October 31, 2000; on October 31, 2000 the interest rate shall be adjusted
to 275 basis points over the "trailing 90 day average of the 90 day Treasury
bill rate" on the last day of each of the Company's fiscal calendar quarters.
(Approximately 8.95% at October 31, 2000) Approximately $503,000 of additional
credit was available under this facility at October 31, 2000. This note is due
and payable on demand, and if no demand is made, is due and payable May 30,
2001. The revolving credit facility agreement is collateralized by receivables,
inventory and general intangibles, and is subject to the same covenants that are
included in the Company's long-term debt agreements.
NOTE E - LEGAL PROCEEDINGS
David S. Goldman, former President and Chief Executive Officer of Aerosonic
Corporation sued the Company in September 1996, for an alleged breach of a
consulting agreement between Mr. Goldman and the Company. The suit seeks damages
in excess of $15,000. During fiscal year 1997, the Company sued Mr. Goldman and
Mil-Spec Finishers, Inc., a former subcontractor to Aerosonic Corporation
controlled by Mr. Goldman, seeking damages in excess of $15,000, for alleged
fraud and misappropriation of funds, appropriation of corporate opportunity,
breach of fiduciary duty and conversion. The Company filed an amended
complaint, adding claims for civil theft against both defendants, in October of
1997. Discovery has not yet been completed, however a trial date has been set
for February of 2001. Management believes that the ultimate resolution of this
matter will not have a material, negative effect on the financial position of
the Company.
8
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
Year to date sales for fiscal year 2001 continues to outpace the previous period
with a 5% increase to 17,822,000 as compared to 16,992,000. Net sales for the
third quarter, ended October 31, 2000 decreased by 9% to $5,706,000 as compared
to $6,237,000 for the same period in the preceding year. Gross profit as a
percentage of net sales equaled 36% in the third quarter of both fiscal year
2001 and fiscal year 2000. The decrease in sales is primarily due to delays in
shipments of the multi-function probe, the impact of the delays were partially
offset by increased sales of altimeters and air speeds. The strong sales in the
mechanical instruments along with increased efficiencies in the manufacturing
process of these instruments have helped maintained the gross margin.
Selling, General and Administrative (SG&A) expenses increased during the third
quarter ended October 31, 2000 to $2,258,000 as compared to $2,020,000 during
the same period in the prior fiscal year. Legal expense in the third quarter
increased to approximately $214,000 as compared to $68,000 in the previous
period. This large increase is primarily due to the increased activity in the
legal proceedings described in Part II, item 1. In addition, there was $125,000
worth of post-remediation monitoring expenses incurred and accrued for during
the third quarter. Management continues efforts to grow the Company and continue
research and development while controlling SG&A cost.
Interest expense totaled $148,000 for the three months ended October 31, 2000
versus $109,000 during the same period in the preceding year. The increase is
due primarily to increases in the interest rates and a higher average balance
during the quarter.
For the third quarter ended October 31, 2000 the Company recorded a net loss of
$193,000 or $0.05 per share, compared to a net profit of $68,000, or $0.02 per
share during the same period in the preceding year. The third quarter loss is
primarily attributed to non-recurring SG&A and Other deductions during the third
quarter.
Working capital equaled $12,400,000 at October 31, 2000 and the Company's
current ratio approximated 4:1. The increase in the Company's current ratio is
primarily the result of negotiating a new loan agreement. The Company's
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.
9
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risks exposure for the Company is interest rate risk. The
Company does not currently utilize any financial instruments to manage interest
rate risk.
The Company is exposed to changes in interest rates primarily as a result of its
variable rate short and long term borrowings. A hypothetical 10% increase in the
Company's weighted average interest rate would have increased the Company's
interest expense for the third quarter by approximately $14,000 based on the
balance of variable rate debt outstanding at October 31, 2000
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 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.
10
<PAGE>
PART II. OTHER INFORMATION
AEROSONIC CORPORATION
Item 1. LEGAL PROCEEDINGS
David S. Goldman, former President and Chief Executive Officer of Aerosonic
Corporation sued the Company in September 1996, for an alleged breach of a
consulting agreement between Mr. Goldman and the Company. The suit seeks damages
in excess of $15,000. During fiscal year 1997, the Company sued Mr. Goldman and
Mil-Spec Finishers, Inc., a former subcontractor to Aerosonic Corporation
controlled by Mr. Goldman, seeking damages in excess of $15,000, for alleged
fraud and misappropriation of funds, appropriation of corporate opportunity,
breach of fiduciary duty and conversion. The Company filed an amended complaint,
adding claims for civil theft against both defendants, in October of 1997.
Discovery has not yet been completed, however a trial date has been set for
February of 2001. Management believes that the ultimate resolution of this
matter will not have a material, negative effect on the financial position of
the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
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27 Financial Data Schedule
(b) Reports on form 8-K
The company did not file any report on form 8-K during the three
months ended October 31, 2000.
11
<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
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(Registrant)
Date: December 14, 2000 /s/ Eric J. McCracken
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Eric J. McCracken
Executive Vice President
and Chief Financial Officer
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