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, 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____
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, 2000.
<PAGE>
INDEX
AEROSONIC CORPORATION
PAGE NO.
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PART 1. FINANCIAL INFORMATION
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
July 31, 2000 and January 31, 2000 3
Condensed Consolidated Statements of Income -
Three months and Six months ended July 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
Six months ended July 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements -
July 31, 2000 6 - 8
Item 2. Management's Discussion and Analysis of 9 - 10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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2
<PAGE>
PART 1. FINANCIAL INFORMATION
------------------------------
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
AEROSONIC CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
2000 2000
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments $ 1,420,000 $ 964,000
Accounts receivable 4,906,000 5,349,000
Inventory 10,388,000 10,606,000
Prepaid expenses 170,000 128,000
Deferred income tax benefit 388,000 388,000
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Total current assets 17,272,000 17,435,000
Property, plant and equipment, net 4,259,000 4,462,000
Capitalized software cost and other assets 958,000 877,000
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Total assets $ 22,489,000 $ 22,774,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 994,000 $ 542,000
Revolving credit facilities 487,000 2,314,000
Accounts payable, trade 1,978,000 1,968,000
Compensation and benefits 594,000 659,000
Income taxes payable 71,000 144,000
Other accrued expenses 400,000 597,000
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Total current liabilities 4,524,000 6,224,000
Long-term debt, less current installments 4,879,000 3,751,000
Deferred income taxes 155,000 155,000
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Total liabilities 9,558,000 10,130,000
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Shareholders' equity:
Common stock, $.40 par; 8,000,000 shares
authorized; 3,986,262 shares issued 1,595,000 1,595,000
Additional paid-in capital 4,457,000 4,440,000
Retained earnings 7,455,000 7,244,000
Less treasury stock, 68,963 shares at 1/31/00
and 61,717 shares at 7/31/99, at cost (576,000) (635,000)
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Total shareholders' equity 12,931,000 12,644,000
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$ 22,489,000 $ 22,774,000
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</TABLE>
See Notes to Consolidated Financial Statements.
3
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Aerosonic Corporation and Subsidiary
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31 JULY 31
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net sales $ 5,632,000 $ 5,861,000 $ 12,116,000 $ 10,755,000
Cost of goods sold 3,678,000 3,773,000 8,072,000 6,702,000
------------ ------------ ------------ ------------
Gross Profit 1,954,000 2,088,000 4,044,000 4,053,000
Selling, general and administrative
expenses 1,620,000 1,770,000 3,462,000 3,598,000
------------ ------------ ------------ ------------
Operating Income 334,000 318,000 582,000 455,000
------------ ------------ ------------ ------------
Other (income) deductions:
Interest expense, net 113,000 85,000 231,000 171,000
Other, net 20,000 2,000 (1,000) (26,000)
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133,000 87,000 230,000 145,000
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Income before income taxes 201,000 231,000 352,000 310,000
Income tax expense 81,000 87,000 141,000 117,000
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Net Income $ 120,000 $ 144,000 $ 211,000 $ 193,000
============ ============ ============ ============
Earnings per share: $ 0.03 $ 0.04 $ 0.05 $ 0.05
============ ============ ============ ============
Basic weighted average shares outstanding 3,911,000 3,945,000 3,914,000 3,942,000
============ ============ ============ ============
Diluted weighted average shares outstanding 3,911,000 3,945,000 3,914,000 3,943,000
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
4
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Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
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2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 211,000 $ 193,000
Adjustment to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 353,000 343,000
Stock compensation 188,000 176,000
Change in deferred income taxes 0 (39,000)
Change in current assets & liabilities 294,000 (1,027,000)
Net cash provided by (used in) operating activities 1,046,000 (354,000)
Cash flows from investing activities:
Purchase of property, plant and equipment (126,000) (526,000)
Changes in other assets (105,000) (188,000)
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Net cash provided by (used in) investing activities (231,000) (714,000)
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Cash flows from financing activities:
Proceeds from/(repayment on) long-term debt
and notes payable (247,000) 802,000
Purchase of treasury stock (112,000) (130,000)
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Net cash provided by (used in) financing activities (359,000) 672,000
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Net increase (decrease) in cash and cash investments 456,000 (396,000)
Cash and cash investments, beginning of period 964,000 1,718,000
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Cash and cash investments, end of period $ 1,420,000 $ 1,322,000
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Cash paid for:
Interest $ 224,000 $ 187,000
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Income taxes $ 70,000 $ 70,000
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</TABLE>
See notes to consolidated financial statements
5
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AEROSONIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 2000
NOTE A - BASIS OF PRESENTATION
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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 July 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
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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. Management believes that any additional liability for any further
remediation will not have a material affect on the financial position of the
company.
6
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NOTE C - LONG-TERM DEBT AND NOTES PAYABLE
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Long-term debt and notes payable at July 31, 2000 and January 31 2000
consisted of the following:
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
2000 2000
<S> <C> <C>
Note Payable $1,210,000 $1,268,000
Industrial development revenue bonds 930,000 965,000
Mortgage note payable 813,000 831,000
Note payable, equipment 1,120,000 1,229,000
Note payable, II 1,800,000 --
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5,873,000 4,293,000
Less current maturity 994,000 542,000
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Long-term debt and notes payable, less current maturity $4,879,000 $3,751,000
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</TABLE>
The amount of long-term debt and notes payable maturing in each of the
fiscal years 2002, 2003, 2004 and 2005 approximates $994,000, $994,000,
$1,212,000, $329,000 and $2,338,000, respectively.
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 July 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. 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
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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 $513,000 of additional
credit was available under this facility at July 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.
8
<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 second quarter ended July 31, 2000 decreased by
4% to $5,632,000 as compared to $5,861,000 for the same period in the preceding
year. Gross profit as a percentage of net sales equaled 35% in the second
quarter of fiscal year 2001 versus 36% during the same period in the prior year.
Sales and gross margin was consistent with the same period in the preceding
year. Scheduled deliveries were lower in the second quarter compared with the
first quarter of fiscal year 2001, however the product mix of deliveries had a
stronger concentration of higher margin items.
Selling, General and Administrative (SG&A) expenses decreased during the second
quarter ended July 31, 2000 to $1,620,000 as compared to $1,770,000 during the
same period in the prior fiscal year. The decrease in SG&A cost is primarily
related to the decrease in the amount of sales commissions expense during the
quarter and short term turnover of personnel. As a percentage of sales, SG&A
declined to 29% from 30% in the prior year period. Management continues efforts
to grow the Company and continue research and development while controlling SG&A
cost.
Interest expense totaled $113,000 for the three months ended July 31, 2000
versus $85,000 during the same period in the preceding year. The increase is due
primarily to increased interest rates.
For the second quarter ended July 31, 2000 the Company recorded a net profit of
$120,000 or $0.03 per share, compared to a net profit of $144,000, or $0.04 per
share during the same period in the preceding year.
Working capital equaled $12,748,000 at July 31, 2000 and the Company's current
ratio approximated 3.82:1. Significant sources of cash during the second quarter
of fiscal year 2001 were from operations, which included decreases in accounts
receivable and inventory. 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
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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 second quarter by approximately $14,000 based on the
balance of variable rate debt outstanding at July 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
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 July 31, 2000.
11
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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: September 14, 2000 /s/ ERIC J. MCCRACKEN
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Eric J. McCracken
Executive Vice President
and Chief Financial Officer
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