<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For quarterly period ended December 29, 1996
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[_] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ______________
Commission file number 0-28932
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BENTHOS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2381876
State or Other Jurisdiction of (I. R. S. Employer
Corporation or Organization) Identification No.)
49 Edgerton Drive, North Falmouth, Massachusetts 02556
(Addresses of Principal Executive Offices) (Zip Code)
(508)563-1000
Issuer's Telephone Number Including Area Code
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes No X
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State the number of shares outstanding of each of the issuer's classes of Common
equity as of the latest practicable date:
Common Stock par value $.0667 811,560
(class) (outstanding stock at February 7, 1997)
Traditional Small Business Disclosure Format (check one):
Yes X No
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1
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BENTHOS, INC. AND SUBSIDIARY
INDEX
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Page No.
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Face Sheet 1
Index 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
December 29, 1996 (unaudited) and
September 30, 1996
Consolidated Statements of Earnings (unaudited) 4
December 29, 1996 and December 31, 1995
Consolidated Statements of Cash Flow (unaudited) 5
December 29, 1996 and December 31, 1995
Other Financial Information 6
Item 2. Management's Discussion and Analysis 7-8
of Financial Condition and Results
of Operations
PART II
OTHER INFORMATION 9
Item 6. Exhibits and Reports on Form 8-K 9
Signature 9
Exhibit 27 10
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2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Benthos, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets Dec. 29, 1996 Sept. 30, 1996
<S> <C> <C>
(unaudited)
Cash and Cash Equivalents $ 165,498 $ 751,357
Accounts Receivable 2,557,741 1,519,142
Inventories 3,343,238 3,551,258
Prepaid Expenses 47,937 70,039
Deferred Tax Asset 516,000 516,000
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Total Current Assets 6,630,414 6,407,796
Land 127,339 127,339
Building and Improvement 1,845,303 1,845,303
Equipment and Fixtures 2,371,889 2,220,045
Demonstration Equipment 1,392,755 1,348,204
Construction in Progress 18,042 18,042
- -
5,755,328 5,558,933
Less Accumulated Depreciation 3,698,320 3,567,862
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2,057,008 1,991,071
Other Assets 236,697 215,077
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$ 8,924,119 $ 8,613,944
=========== ===========
Liabilities and Stockholders' Investment
Demand Note Payable to Bank $ 0 $ 0
Current Maturities of Long-term Debt 31,800 29,646
Accounts Payable 627,921 490,909
Accrued Expenses 1,452,457 1,680,893
Customer Deposits 131,084 275,911
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Total Current Liabilities 2,243,262 2,477,359
Long-term Debt, Net of Current Maturities 814,465 824,242
Common Stock 67,150 67,150
Capital in Excess of Par Value 807,555 807,555
Retained Earnings 5,889,782 5,335,733
Treasury Stock, at Cost (898,095) (898,095)
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Total Stockholders' Investment 5,866,392 5,312,343
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$ 8,924,119 $ 8,613,944
=========== ===========
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3
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Benthos, Inc. and Subsidiary
Consolidated Statements of Earnings
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
Dec. 29, 1996 Dec. 31, 1995
<S> <C> <C>
Net Sales $4,844,256 $2,396,117
Cost of Sales 2,155,740 1,077,429
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Selling, General & Administrative Expenses 1,504,918 736,772
Research and Development Expenses 242,467 134,306
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Income from Operations 941,131 447,610
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Interest Income 6,093 40
Interest Expense (19,634) (27,030)
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Income Before Provision for Income Taxes 927,590 420,620
Provision for Income Taxes 373,540 144,000
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Net Income $ 554,050 $ 276,620
========= =========
Net Income Per Common and Common
Equivalent Share Outstanding $ 0.60 $ 0.32
Weighted Average Common and Common ========= =========
Equivalent Share Outstanding 922,000 861,000
</TABLE>
4
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Benthos, Inc. and Subsidiary
Consolidated Statements of Cash Flow
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
Dec. 29, 1996 Dec. 31, 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 554,050 $ 276,620
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 195,390 120,686
Changes in Assets and Liabilities:
Accounts Receivable (1,038,599) (262,387)
Inventories 208,020 (449,039)
Prepaid Expenses 22,102 13,738
Accounts Payable & Accrued Expenses (91,424) 397,887
Customer Deposits (144,827) (195,657)
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Net Cash Used in Operating Activities (295,288) (98,152)
Cash Flows from Financing Activities:
Purchase of Property, Plant & Equipment (261,328) (122,470)
Increase in Other Assets (21,620) (5,835)
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Net Cash Used in Investing Activities (282,948) (128,305)
Cash Flows from Financing Activities:
Increase in Demand Note Payable 0 250,000
Payments on long-term debt, net (7,623) (12,434)
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Net Cash Provided by (Used in) Financing Activities (7,623) 237,566
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Net Increase (Decrease) in Cash and Cash Equivalents (585,859) 11,109
Cash and Cash Equivalents, Beginning of Period 751,357 17,461
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Cash and Cash Equivalents, End of Period $ 165,498 $ 28,570
========= ========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 19,634 $ 27,030
Income Taxes Paid $ 759,000 $ 88,103
</TABLE>
5
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Other Financial Information
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by Benthos, Inc. pursuant to the rules and regulations of the Securities and
Exchange Commission regarding interim financial reporting. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the consolidated financial statements and notes thereto for the
fiscal year ended September 30, 1996. The accompanying consolidated financial
statements reflect all adjustments (consisting solely of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods presented. The results of
operations for the three month periods ended December 29, 1996 and December 31,
1995, are not necessarily indicative of the results to be expected for the full
fiscal year.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following:
<TABLE>
<CAPTION>
Dec. 29,1996 Sept. 30, 1996
<S> <C> <C>
Raw Material $ 164,900 $ 203,314
Work-in-Process 3,143,035 3,226,405
Finished Goods 35,303 121,539
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$ 3,343,238 $ 3,551,258
</TABLE>
6
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Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations -- First quarter of fiscal year 1997 compared with first
quarter of fiscal year 1996.
The following table presents, for the periods indicated, the percentage
relationship of Consolidated Statements of Earnings items to total sales:
Benthos, Inc. and Subsidiary
Consolidated Statements of Earnings
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
Dec. 29, 1996 Dec. 31, 1995
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Sales 44.5% 45.0%
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Gross Profit 55.5% 55.0%
Selling, General & Administrative Expenses 31.1% 30.7%
Research and Development Expenses 5.0% 5.6%
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Income from Operations 19.4% 18.7%
Interest Expense, Net (0.3%) (1.1%)
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Income Before Provision for Income Taxes 19.1% 17.6%
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Provisions for Income Taxes 7.7% 6.0%
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Net Income 11.4% 11.6%
</TABLE>
Sales. Total sales increased by 102.2% in the first quarter of fiscal year 1997
to $4,844,000 as compared to $2,396,000 in the first quarter of fiscal year
1996. Sales of the Container Inspection Systems Division increased by 47.8% to
$2,038,000 for the first quarter of fiscal year 1997 compared to $1,379,000 for
the first quarter of fiscal year 1995. This results from the company's
continued penetration of the food and beverage market and the domestic and
international brewery industries. Sales of the Undersea Systems Division
increased by 175.9% to $2,806,000 in the first quarter of fiscal year 1997 as
compared to $1,017,000 in the first quarter of fiscal year 1996. The increase
in Undersea Systems Division sales was largely the result of increased shipments
of hydrophones used for off shore oil exploration as well as an increase in
sales of the Company's newly released Digital Still Camera (DSC).
Gross Profit. Gross Profit increased by 103.9 % to $2,689,000 for the first
quarter of fiscal year 1997 as compared to $1,319,000 for the first quarter of
fiscal year 1996. As a percentage of sales, gross profit was 55.5% in the first
quarter of fiscal year 1997 as compared to 55.0% for the first quarter of fiscal
year 1996. The increase in gross profit was attributed to sales mix and overhead
efficiencies related to the increased sales volume.
7
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Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 104.3% to $1,505,000 for the first quarter
of fiscal year 1997 as compared to $737,000 in the first quarter of fiscal year
1996. The increase in total expenses was a result of selling expenses
coinciding with the increased volume and expenses relating to the registration
of the Company's securities in the first quarter of fiscal year 1997. As a
percentage of sales, selling, general and administrative expenses increased
slightly to 31.1% in the first quarter of fiscal year 1997 as compared to 30.7%
for the first quarter of fiscal year 1996.
Research and Development Expenses. Research and development expenses increased
80.5% to $242,000 in the first quarter of fiscal year 1997 as compared to
$134,000 in the first quarter of fiscal year 1996. As a percentage of sales,
research and development expenses decreased to 5.0% in the first quarter of
fiscal year 1997 from 5.6% in the first quarter of fiscal year 1996. The
decrease in percentage of sales was related to the increase in sales levels,
while the overall level of expenditures is consistent with the Company's current
operational plans.
Interest Expense. Interest expense, net, decreased by 49.8% to $14,000 in the
first quarter of fiscal year 1997 as compared to $27,000 in the first quarter of
fiscal year 1996. The decreased level of interest expense, net, was a result of
decreased borrowing under the credit line and improved interest income.
Liquidity and Capital Resources. The Company's cash and cash equivalents
decreased $586,000 from September 30, 1996 to December 29, 1996. This reduction
results primarily from cash usage from operations of $295,000. Accounts
receivable increased $1,039,000 to support the increased sales volume while
asset management programs were able to decrease inventories by $208,000.
Customer deposits decreased by $145,000 as the orders related to these deposits
were shipped in the quarter. Cash flow from financing activities was a use of
$283,000 and resulted primarily from purchases of property, plant and equipment
of $261,000. The Company believes it is well positioned to finance future
working capital requirements and capital expenditures through current earnings
and available credit facilities.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995.
The statements in this Quarterly Report on Form 10-QSB and in oral statements
which may be made by representatives of the Company relating to plans,
strategies, economic performance and trends and other statements that are not
descriptions of historical facts may be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking information is inherently subject to risks and
uncertainties, and actual results could differ materially from those currently
anticipated due to a number of factors which include: competitive factors,
shifts in customer demand, government spending, economic cycles, availability of
financing as well as the factors described in this report. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results or outcomes may vary materially from those
described herein as anticipated, believed, estimated, expected or intended.
8
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PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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.
BENTHOS, INC
By /s/ Francis E. Dunne, Jr.
Francis E. Dunne, Jr
Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
DATE: February 12, 1997
9
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BENTHOS, INC. CONTAINED ELSEWHERE IN THIS
QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-29-1996
<CASH> 165,498
<SECURITIES> 0
<RECEIVABLES> 2,557,741
<ALLOWANCES> 191,764
<INVENTORY> 3,343,238
<CURRENT-ASSETS> 6,630,414
<PP&E> 5,755,328
<DEPRECIATION> 3,698,320
<TOTAL-ASSETS> 8,924,119
<CURRENT-LIABILITIES> 2,243,262
<BONDS> 814,465
0
0
<COMMON> 67,150
<OTHER-SE> 5,799,242
<TOTAL-LIABILITY-AND-EQUITY> 8,924,119
<SALES> 4,844,256
<TOTAL-REVENUES> 4,844,256
<CGS> 2,155,740
<TOTAL-COSTS> 1,504,918
<OTHER-EXPENSES> 242,467
<LOSS-PROVISION> 64,764
<INTEREST-EXPENSE> 19,634
<INCOME-PRETAX> 927,590
<INCOME-TAX> 373,540
<INCOME-CONTINUING> 554,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 554,050
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
