SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 27, 1996 Commission File Number 2-37706
Bowles Fluidics Corporation
(exact name of registrant as specified in its charter)
MARYLAND 52-0741762
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6625 Dobbin Road, Columbia, Maryland 21045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 381-0400
Indicate by check mark whether the registrant has filed all annual,
quarterly and other reports required to be filed with the Commission
within the past 90 days and in addition has filed the most recent
annual report required to be filed.
Yes X No
Indicate the number of shares outstanding of each issuer's classes of
common stock, as of January 27, 1996.
Class Outstanding at January 27, 1996
Common Stock, $.10 12,610,011 shares
<PAGE>
INDEX
BOWLES FLUIDICS CORPORATION
FOR THE THREE MONTHS ENDED JANUARY 27, 1996
Page
PART I. Financial Information Number
Item 1. Financial Statements
Consolidated Statements of Income
For the three months ended January 27, 1996
and January 28, 1995............................ 3
Consolidated Balance Sheets
January 27, 1996 and October 28, 1995 .......... 4
Consolidated Statements of Cash Flows
For the three months ended January 27, 1996
and January 28, 1995............................ 5
Notes to Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ............................. 7
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K ............... 9
Exhibit 11......................... 10
Exhibit 20......................... 12
(2)
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the three months ended
January 27, January 28
1996 1995
----------- -------
Net Sales $ 4,550,061 $ 4,193,318
Cost of Sales 3,062,121 2,726,033
----------- -----------
Gross profit 1,487,940 1,467,285
Selling, general and
administrative expenses 663,375 588,744
Research and development costs 215,474 153,536
----------- -----------
Operating Income 609,091 725,005
Interest expense (5,954) (18,091)
Other income, net 16,448 16,898
----------- -----------
Income before taxes 619,585 723,812
Provision for income taxes 226,616 270,880
----------- -----------
Net Income 392,969 452,932
Preferred stock
dividends accrued (18,662) (18,662)
----------- -----------
Income applicable to
common shareholders $ 374,307 $ 434,270
=========== ===========
Primary earnings per share $.03 $.03
==== ====
Fully diluted earnings per share $.02 $.03
==== ====
The accompanying notes are an integral part of these financial statements.
(3)
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
January 27, October 28,
1996 1995
---------- ----------
Assets
Current
Cash and cash equivalents $ 771,590 $ 676,981
Investments 689,513 679,513
Accounts receivable 2,939,089 2,761,394
Inventories 1,789,872 1,899,346
Other current assets 366,977 306,974
---------- ----------
Total current assets 6,557,041 6,324,208
---------- ----------
Property and equipment, net 2,835,845 2,821,804
Other assets 134,510 146,434
---------- ----------
Total assets $9,527,396 $9,292,446
========== ==========
Liabilities and Stockholders' Equity
Current
Accounts payable - trade $ 909,061 $ 995,421
Accrued expenses and other liabilities 617,735 852,121
Income taxes payable 278,335 111,441
Current portion of long-term debt 260,524 68,857
---------- ----------
Total current liabilities 2,065,655 2,027,840
Long-term debt - 202,811
Other liabilities 308,542 282,904
Deferred income taxes 149,000 149,000
---------- ----------
Total liabilities 2,523,197 2,662,555
---------- ----------
Commitments and Contingencies
Stockholders' Equity
8% Convertible preferred stock 933,080 933,080
Common stock 1,261,001 1,261,001
Additional paid-in capital 2,726,583 2,726,583
Retained earnings 2,083,535 1,709,227
---------- ----------
Total stockholders' equity 7,004,199 6,629,891
---------- ----------
Total liabilities and stockholders'equity $9,527,396 $9,292,446
========== ==========
The accompanying notes are an integral part of these financial statements.
(4)
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the three months ended
January 27, January 28,
1996 1995
----------- ----------
Net Income $ 392,969 452,933
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 167,179 164,730
(Gain)/Loss on sale of assets 2,073 (4,052)
Accretion of interest on investments 10,000 -
----------- ---------
552,221 613,611
----------- -----------
Change in operating accounts:
Accounts receivable (177,695) (396,803)
Inventories 109,474 181,950
Other assets (60,003) (26,700)
Accounts payable (86,360) (229,444)
Accrued expenses (178,400) (230,878)
Income taxes payable 166,894 (266,037)
Other liabilities 25,638 (10,247)
----------- -----------
Change in operating accounts (200,452) (978,159)
----------- -----------
Cash provided by(used in) operating
activities 351,769 (364,548)
----------- -----------
Investing activities:
Capital expenditures (172,368) (73,446)
Proceeds from sale of equipment 1,000 31,025
Proceeds from sale of investments - 97,619
----------- -----------
Net cash provided by(used in)
investing activities (171,368) 55,198
----------- -----------
Financing activities:
Principal payment of debt (11,144) (476,911)
Preferred stock dividend (74,648) (74,646)
----------- -----------
Net cash used in financing
activities (85,792) (551,557)
----------- -----------
Increase(decrease) in cash and cash
equivalents 94,609 (860,907)
Cash and cash equivalents - beginning
of period 676,981 1,557,230
----------- -----------
Cash and cash equivalents - end of
period $ 771,590 $ 696,323
=========== ===========
The accompanying notes are an integral part of these financial statements.
(5)
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - General
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of January
27, 1996, the results of operations and cash flows for three months ended
January 27, 1996 and January 28, 1995.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and the notes
included in the Company's latest annual report on Form 10-K.
NOTE 2 - Inventories
Inventories are comprised of:
January 27, October 28,
1996 1995
Raw Material $ 735,915 $ 703,864
Work and tooling in process 191,425 416,090
Finished Goods 862,532 779,392
---------- ----------
Total $1,789,872 $1,899,346
========== ==========
NOTE 3 - Property and Equipment, and Accumulated Depreciation Property and
Equipment, and Accumulated Depreciation are comprised of:
January 27, October 28,
1996 1995
Production machinery and equipment $ 4,095,437 $ 4,047,602
Office furniture and equipment 1,652,348 1,580,026
Laboratory and machine shop equipment 1,180,094 1,159,087
Leasehold improvements 546,698 539,274
----------- -----------
Total property and equipment 7,474,577 7,325,989
Less accumulated depreciation (4,638,732) (4,504,185)
----------- -----------
Net property and equipment $ 2,835,845 $ 2,821,804
=========== ===========
NOTE 4 - Debt
The Board of Directors have authorized management to pay all of the
outstanding debt with Mercantile-Safe Deposit & Trust Company as of February 1,
1996.
NOTE 5 - Quasi reorganization
Effective October 29, 1994, the Board of Directors approved a quasi-
reorganization which had the impact of eliminating the retained earnings deficit
as an adjustment to the additional paid-in capital.
(6)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the attached
financial statements and notes thereto, and with the Company's audited financial
statements and notes thereto for the fiscal year ended October 28, 1995.
RESULTS OF OPERATIONS
First Quarter FY 1996 Compared with First Quarter FY 1995
The Company achieved record sales levels for a first quarter but lower net
income than last year's first quarter. The gain in sales was provided from
larger volume shipments and products with higher pricing. Net income was
negatively affected by increases in applications engineering, research and
development, and general and administrative expenses.
Net sales in the first quarter of FY 1996 rose 8.5% to $4,550,061. Net income
was $392,969, 13% less than the prior year's first quarter results.
Shipments of light vehicle windshield washer nozzles and defroster outlets of
$4,171,177 increased 9% in this year's first quarter above the FY 1995 first
quarter sales of $3,828,393. Sales rose principally because of higher prices of
washer nozzles with multiple parts and larger volumes of new windshield washer
nozzles and defroster outlets. Sales of prototype and production tooling of
$378,884 for future product manufacturing increased 4% over last year's first
quarter.
Gross profit in the FY 1996 first quarter was $1,487,940, 1.4% above last year's
first quarter of $1,467,285. The decline in gross profit margin, despite higher
sales, occurred due to lower profit realized on these products in this year's
first quarter resulting from customer pressure on prices. This trend is expected
to continue in the future. While not impacting gross profit, engineering
resources were redirected in the FY 1996 first quarter more toward applications
engineering, i.e., the customization of new auto products, with less emphasis on
tooling and product qualification activities.
Selling, general and administrative expenses were higher due to increases in
personnel costs and sales commissions. Research and development costs rose 41%
as greater efforts were applied to the development of new products both for the
auto industry and for nonautomotive applications.
Operating income decreased 16% or $115,914 to $609,091 in this year's first
quarter versus $725,005 in last year's comparable period.
Provision for income taxes, both federal and state, has been determined based
upon an estimate of the total fiscal year's pretax income. The effective tax
rates for both years' first quarters were essentially the same.
(7)
<PAGE>
FINANCIAL CONDITION
The Company's working capital at January 27, 1996, increased $195,018 from the
previous year end at October 28, 1995. The current ratio increased from 3.12 to
3.17 during the first quarter. Accounts receivable increased and inventories
decreased as a result of the sale of tooling from work in process inventory.
Current liabilities would have been lower with the payment of year-end accruals
but were somewhat higher due to the reclassification of long-term bank debt to
current since the Board of Directors approved early payment of all of the
outstanding bank debt.
Cash provided by operations was $351,769 in the first quarter of FY 1996
compared with cash used by operations in last year's comparable quarter of
$364,548. This year's higher cash flow from net income was used to a lower
extent than last year due to the lower investment in accounts receivable and
lower paydowns of accrued income taxes and accounts payable.
Capital expenditures were $172,368 during the first quarter of FY 1996, $98,922
greater than last year as more funds were spent on computer facilities and
production equipment.
Cash used by financing activities was significantly lower during this year's
first quarter since last year's payments included the early payment of certain
notes.
North American light vehicle production (excluding Mexican output) by the three
major U.S. automotive companies, which generates most of the Company's sales,
decreased 6% in the fourth calendar quarter of 1995 versus the same period in
1994. Production for the first calendar quarter of 1996 is forecasted by Ward's
Automotive Reports to decrease 7% below last year's first quarter, and for the
second quarter is forecasted to be the same as the prior year's comparable
period.
The Company's management believes that the present production capacity should be
satisfactory to meet the anticipated demands referred to above as well as new
product deliveries. Cash flow from operations is expected to provide the cash
needed for future working capital requirements and capital expenditures.
(8)
<PAGE>
BOWLES FLUIDICS CORPORATION
PART II. OTHER INFORMATION
FOR THE THREE MONTHS ENDED JANUARY 27, 1996
Item 6. Exhibits and Reports on Form 8-K
Exhibit Description
(a) Exhibit 11 Computation of Earnings
Per Common Share
Exhibit 20 Report furnished to Security Holders
(b) Reports on Form 8-K none
(9)
<PAGE>
BOWLES FLUIDICS CORPORATION
PART II. OTHER INFORMATION
Item 6. (a) EXHIBIT 11 - CALCULATION OF EARNINGS PER SHARE
A. PRIMARY EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARES
For the three months ended
January 27, January 28,
1996 1995
----------- -----------
Calculation of Net Income
Net income per books $ 392,969 $ 452,932
Less: Dividends on convertible
preferred stock 18,662 18,662
----------- -----------
Net income as adjusted $ 374,307 $ 434,270
============ ===========
Calculation of Outstanding Shares
Weighted average of common
shares outstanding 12,610,011 12,590,011
Add: Assumed exercise of stock
options 104,364 *
Number of common shares
outstanding adjusted 12,714,375 12,590,011
============ ============
Primary earnings per common share $ .03 $ .03
============ ============
* Under the treasury stock method, the assumed exercise of stock options would
be anti-dilutive; accordingly, such amounts are excluded from the
computation.
(10)
<PAGE>
BOWLES FLUIDICS CORPORATION
PART II. OTHER INFORMATION
Item 6. (a) EXHIBIT 11 - CALCULATION OF EARNINGS PER SHARE (continued)
B. FULLY DILUTED EARNINGS PER SHARE
For the three months ended
January 27, January 28,
1996 1995
----------- --------
Net Income per books $ 392,969 $ 452,932
=========== ============
Weighted average of common
shares outstanding 12,610,011 12,590,011
Add: Assumed conversion of
preferred stock 3,732,320 3,732,320
Assumed exercise of stock
options 104,364 *
Number of shares 16,446,695 16,322,331
=========== ===========
Fully diluted earnings
per share $ .02 .03
=========== ===========
* Same as footnote (1) on prior page.
(11)
<PAGE>
Exhibit 20
BOWLES FLUIDICS CORPORATION
6625 Dobbin Road, Columbia, Maryland 21045-4707 USA
Phone: 410-381-0400 Fax: 410-381-2718
March 12, 1996
TO THE STOCKHOLDERS:
As the first quarter figures show, BFC's sales increased in spite of a decline
in auto production. Net income, however, was adversely affected by increased
customer pressures on pricing as well as the change in mix of products when
compared to last year.
The larger commitments in R & D expenses reflect our renewed emphasis on basic
research to address our longer-term needs for new fluidic devices.
Increased engineering application efforts were aimed at improving manufacturing
processes and developing new products.
The most significant event during the first quarter is the receipt of a letter
of intent in response to our recent proposal for air conditioning outlets for an
automotive customer. A dedicated core team has been formed to achieve a
production-ready stage as quickly and economically as possible. We hope that
this new entry product will pave the way to other opportunities.
Although North American auto production is predicted to be less than last year,
we believe we can continue to support these efforts to assure our future based
on our sales remaining above the industry trend.
Sincerely,
Ronald Stouffer
President
RS:lto
Enclosure
(12)
<PAGE>
Exhibit 20
BOWLES FLUIDICS CORPORATION
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended
January 27,1996 January 28,1995
Net Sales $ 4,550,061 $ 4,193,318
Cost of Sales 3,062,121 2,726,033
Selling, General and Administrative Expenses 663,375 588,744
Research and Development Costs 215,474 153,536
Interest Expense and Other (Income)
and Expense, Net (10,494) 1,193
---------------- ------------
Income before Taxes $ 619,585 $ 723,812
Provision for Taxes 226,616 270,880
---------------- ------------
Net Income $ 392,969 $ 452,932
================ ============
Net Income per Share
Primary $ 0.03 $ 0.03
Fully Diluted $ 0.02 $ 0.03
- -----------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
January 27,1996 October 28,1995
Assets
Cash and Cash Equivalents $ 771,590 $ 676,981
Investments 689,513 679,513
Accounts Receivable 2,939,089 2,761,394
Inventories 1,789,872 1,899,346
Other Current Assets 366,977 306,974
------------ ------------
Total Current Assets 6,557,041 6,324,208
Property, Plant and Equipment, Net 2,835,845 2,821,804
Other Assets 134,510 146,434
------------ ------------
Total Assets $ 9,527,396 $ 9,292,446
============ ============
Liabilities and Stockholders' Equity
Accounts Payable--Trade $ 909,061 $ 995,421
Accrued Expenses and Other Liabilities 617,735 852,121
Income Taxes Payable 278,335 111,441
Current Portion of Long-Term Debt 260,524 68,857
------------ ------------
Total Current Liabilities 2,065,655 2,027,840
Long-Term Debt - 202,811
Other Liabilities and Deferred
Income Taxes 457,542 431,904
------------ ------------
Total Liabilities 2,523,197 2,662,555
------------ ------------
8% Convertible Preferred Stock 933,080 933,080
Common Stock 1,261,001 1,261,001
Additional Paid-in Capital 2,726,583 2,726,583
Retained Earnings 2,083,535 1,709,227
------------- ------------
Stockholders' Equity 7,004,199 6,629,891
------------- ------------
Total Liabilities
and Stockholders' Equity $ 9,527,396 $ 9,292,446
============== ===========
(13)
<PAGE>
FORM 10-Q
BOWLES FLUIDICS CORPORATION
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.
BOWLES FLUIDICS CORPORATION
Date By
Ronald D. Stouffer
President
Date By
David A. Quinn
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Oct-26-1996
<PERIOD-END> Jan-27-1996
<CASH> 771,590
<SECURITIES> 689,513
<RECEIVABLES> 2,939,089
<ALLOWANCES> 0
<INVENTORY> 1,789,872
<CURRENT-ASSETS> 6,557,041
<PP&E> 7,474,577
<DEPRECIATION> 4,638,732
<TOTAL-ASSETS> 9,527,396
<CURRENT-LIABILITIES> 2,065,655
<BONDS> 0
<COMMON> 1,261,001
0
933,080
<OTHER-SE> 4,810,118
<TOTAL-LIABILITY-AND-EQUITY> 9,527,396
<SALES> 4,550,061
<TOTAL-REVENUES> 4,550,061
<CGS> 3,062,121
<TOTAL-COSTS> 3,940,970
<OTHER-EXPENSES> (16,448)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,954
<INCOME-PRETAX> 619,585
<INCOME-TAX> 226,616
<INCOME-CONTINUING> 392,969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 392,969
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.02
</TABLE>
