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 25, 1997 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 25, 1997.
Class Outstanding at January 25, 1997
Common Stock, $.10 12,640,011 shares
<PAGE>
INDEX
BOWLES FLUIDICS CORPORATION
FOR THE THREE MONTHS ENDED JANUARY 25, 1997
Page
PART I. Financial Information Number
Item 1. Financial Statements
Consolidated Statements of Income
For the three months ended January 25, 1997
and January 27, 1996...................................... 3
Consolidated Balance Sheets
January 25, 1997 and October 26, 1996 .................... 4
Consolidated Statements of Cash Flows
For the three months ended January 25, 1997
and January 27, 1996...................................... 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 25 January 27
1997 1996
----------- -----------
Net sales $ 4,244,123 $ 4,550,061
Cost of sales 3,158,081 3,062,121
----------- -----------
Gross profit 1,086,042 1,487,940
Selling, general and
administrative expenses 840,982 663,375
Research and development costs 274,761 215,474
----------- -----------
Operating income (loss) (29,701) 609,091
Interest expense - (5,954)
Other income, net 17,034 16,448
----------- -----------
Income (loss) before taxes (12,667) 619,585
Provision (benefit) for income taxes (14,832) 226,616
----------- -----------
Net income 2,165 392,969
Preferred stock dividends accrued (18,662) (18,662)
----------- -----------
Income (loss) applicable to
common shareholders $ (16,497) $ 374,307
=========== ===========
Primary earnings per common share $.00 $.03
==== ====
Fully diluted earnings per common share $.00 $.02
==== ====
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
January 25, October 26,
1997 1996
-------------- -----------
ASSETS
Current
Cash and cash equivalents $ 1,095,902 $ 1,287,110
Investments 586,171 577,837
Accounts receivable 2,838,557 2,775,658
Inventories 1,472,060 1,986,065
Other current assets 593,003 556,525
----------- -----------
Total current assets 6,585,693 7,183,195
----------- -----------
Property and equipment, net 3,416,335 3,428,765
Other assets 102,693 107,892
----------- -----------
Total assets $10,104,721 $10,719,852
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable - trade $ 858,578 $ 1,104,511
Accrued expenses and other liabilities 1,265,301 1,429,356
------------ -----------
Total current liabilities 2,123,879 2,533,867
Other liabilities 553,286 746,433
----------- -----------
Total liabilities 2,677,165 3,280,300
----------- -----------
Commitments and contingencies
Stockholders' Equity
8% Convertible preferred stock 933,080 933,080
Common stock 1,264,001 1,261,001
Additional paid-in capital 2,728,082 2,726,583
Retained earnings
($2,407,467 deficit eliminated
at 10/29/94) Note 5 2,502,393 2,518,888
----------- -----------
Total stockholders' equity 7,427,556 7,439,552
----------- -----------
Total liabilities and stockholders' equity $10,104,721 $10,719,852
=========== ===========
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 25, January 27,
1997 1996
---------- ----------
Cash flows from operating activities:
Net income $ 2,165 $ 392,969
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 213,354 167,179
Loss on sale of assets 2,751 2,073
Accretion of interest on investments (8,334) (10,000)
---------- -----------
209,936 552,221
---------- -----------
Change in operating accounts:
Accounts receivable (62,899) (177,695)
Inventories 514,005 109,474
Other assets (36,477) (60,003)
Accounts payable (245,933) (86,360)
Accrued expenses (108,071) (178,400)
Income taxes payable - 166,894
Other liabilities (193,148) 25,638
---------- -----------
Change in operating accounts (132,523) (200,452)
---------- -----------
Net cash provided by operating activities 77,413 351,769
---------- -----------
Cash flows from investing activities:
Capital expenditures (198,475) (172,368)
Proceeds from sale of equipment - 1,000
---------- -----------
Net cash used by investing activities (198,475) (171,368)
---------- -----------
Cash flows from financing activities:
Principal payment of debt - (11,144)
Preferred stock dividend (74,646) (74,648)
Proceeds from issuance of common stock 4,500 -
---------- -----------
Net cash used by financing activities (70,146) (85,792)
---------- -----------
Net increase (decrease) in cash and cash
equivalents (191,208) 94,609
Cash and cash equivalents
- Beginning of period 1,287,110 676,981
---------- -----------
- End of period $1,095,902 $ 771,590
========== ===========
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
25, 1997, and the results of operations and cash flows for three months ended
January 25, 1997 and January 27, 1996.
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 25, October 26,
1997 1996
---------- ----------
Raw Material $ 545,487 $ 678,494
Work and tooling in process 316,536 242,369
Finished Goods 610,037 1,065,202
---------- ----------
Total $1,472,060 $1,986,065
========== ==========
NOTE 3 - Property and Equipment, net
Property and Equipment, and Accumulated Depreciation are comprised of:
January 25, October 26,
1997 1996
----------- -----------
Production machinery and equipment $ 4,487,873 $ 4,397,018
Office furniture and equipment 2,062,024 1,992,152
Laboratory and machine shop equipment 1,409,678 1,395,837
Leasehold improvements 807,295 796,928
----------- -----------
Total property and equipment 8,766,870 8,581,935
Less accumulated depreciation (5,350,535) (5,153,170)
----------- -----------
Net property and equipment $ 3,416,335 $ 3,428,765
=========== ===========
NOTE 4 - Capital Stock
In January, 1997, an officer of the Company exercised her stock options and
purchased 30,000 shares of common stock at the exercise price of $.15 per share.
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 26, 1996.
RESULTS OF OPERATIONS
First Quarter FY 1997 Compared with First Quarter FY 1996
The Company's sales of $4,244,123 in the first quarter of fiscal year 1997 fell
short of last year's first quarter by 7%, and net income decreased to $2,165
from $392,969. Technical services sales were half of the prior year's first
quarter and product sales decreased 3%. Net income was unfavorably affected
principally by lower profit from product sales as well as by higher engineering
costs and other operating expenses.
Shipments of light vehicle windshield washer nozzles and defroster outlets of
$4,061,350 decreased 3% from the FY 1996 first quarter sales of $4,171,177. The
decline was more than accounted for by the drop in the shipments of defrosters
as certain models were discontinued. Technical services sales of product design
work and prototypes and production tooling related to future product
manufacturing declined 52% to $182,773 from last year's first quarter sales of
$378,884 principally due to timing of the start-up of various car model
programs.
Gross profit in the FY 1997 first quarter was $1,086,042, 27% below last year's
first quarter of $1,487,940. Product sales were lower, and the profitability of
the manufacturing operations declined due to lower production levels as a result
of plant layoffs carried out to bring inventories in line with shipment levels.
In addition, more funds were spent on engineering and other support activities
for the customization of new products, particularly for the new air conditioning
outlets.
Selling, general and administrative expenses were 27% higher due in part to the
addition of sales personnel but principally to increases in professional service
and patent costs related to product and operational improvements. Research and
development costs increased by 28% as more spending was incurred for the
development of the new air conditioning outlets and the improvement of the
current windshield washer nozzles.
An operating loss of $29,701 was realized in the FY 1997 first quarter compared
to operating income of $609,091 in the prior year's first quarter, a change of
$638,792.
The benefit and the provision for income taxes, both federal and state, have
been determined based upon an estimate of the total year's pretax income.
7
<PAGE>
FINANCIAL CONDITION
The Company's working capital of $4,461,814 at January 25, 1997, decreased
$187,514 from the previous year end at October 26, 1996. The current ratio
increased from 2.83 to 3.10 during the first quarter. The decrease in working
capital was caused by the reduction in finished goods inventories brought about
by the plant layoffs during the first quarter of FY 1997. Accounts payable and
accrued expenses were also reduced during the quarter as the result of the lower
inventory levels and payment of certain year-end accruals.
Cash provided by operating activities was $77,413 in the first quarter of FY
1997 compared with $351,769 provided in the FY 1996 first quarter. The principal
difference in cash flow was from the lower net income this year.
Capital expenditures were $198,475 compared with $172,368 during last year's
first quarter.
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 5% in the fourth calendar quarter of 1996 versus the same period in
1995. Production for the first calendar quarter of 1997 is forecasted by Ward's
Automotive Reports to increase 7% above the prior year's first quarter.
The Company's management believes that the present and planned production
capacity should be satisfactory to meet the anticipated demands referred to
above, as well as near-term new product deliveries. Cash flow from operations as
well as available cash is expected to provide the funds needed for near-term
working capital requirements and capital expenditures.
8
<PAGE>
BOWLES FLUIDICS CORPORATION
PART II. OTHER INFORMATION
FOR THE THREE MONTHS ENDED JANUARY 25, 1997
Item 6. Exhibits and Reports on Form 8-K
Exhibit Description
(a) Exhibit 11 Calculation of Earnings
Per Common Share
Exhibit 20 Report furnished to Security Holders
(b) Reports on Form 8-K none
9
<PAGE>
BOWLES FLUIDICS CORPORATION - EXHIBIT 11
CALCULATION OF EARNINGS PER COMMON SHARE
A. PRIMARY EARNINGS PER COMMON SHARE
For the Three Months Ended
-----------------------------
January 25, January 27,
1997 1996
----------- ------------
Calculation of net income:
Net income per books $ 2,165 $ 392,969
Less: Dividends on convertible
preferred stock 18,662 18,662
----------- -----------
Net income (loss) as adjusted $ (16,497) $ 374,307
=========== ===========
Calculation of outstanding shares:
Weighted average of common
shares outstanding 12,615,011 12,610,011
Add: Assumed exercise of
stock options 50,747 140,364
----------- -----------
Number of common shares
outstanding adjusted 12,665,758 12,714,375
=========== ===========
Primary earnings per common share $ .00 $ .03
=========== ===========
10
<PAGE>
BOWLES FLUIDICS CORPORATION - EXHIBIT 11
CALCULATION OF EARNINGS PER COMMON SHARE (continued)
B. FULLY DILUTED EARNINGS PER COMMON SHARE
For the Three Months Ended
----------------------------
January 25, January 27,
1997 1996
----------- -----------
Net income per books $ 2,165 $ 392,969
=========== ===========
Weighted average of common
shares outstanding 12,615,011 12,610,011
Add: Assumed conversion of
preferred stock 3,732,320 3,732,320
Assumed exercise of stock
options 52,639 104,364
----------- -----------
Number of common shares
outstanding adjusted 16,399,970 16,446,695
=========== ===========
Fully diluted earnings
per common share $ .00 .02
=========== ===========
11
Exhibit 20
BOWLES FLUIDICS CORPORATION
6625 Dobbin Road, Columbia, Maryland 21045-4707 USA
Phone: 410-381-0400 Fax: 410-381-2718
March 11, 1997
TO THE STOCKHOLDERS OF BOWLES FLUIDICS CORPORATION:
The sales of washer nozzles and defrosters in the first quarter of FY 1997 were
lower than last year but higher than anticipated in our budget. The decrease in
defroster shipments as certain models were discontinued accounts for this sales
decline.
Our efforts and expenditures in this quarter have resulted in significant
progress in a number of areas.
We were awarded a washer nozzle program by a large transplant automotive
supplier, resulting in our becoming a major player in that market.
We continue to pursue opportunities for application of our AC outlet to
additional car lines as well as perform the design and development of production
tooling for the current contract.
The consumer tests of our nozzles in a household application have been
sufficiently successful to consider an expansion in market scope.
We plan to continue to devote much of our resources to development of the new
automotive and household products while addressing needs to improve our washer
nozzle line.
Sincerely,
Ronald Stouffer
President
RS:lto
Enclosure
12
<PAGE>
BOWLES FLUIDICS CORPORATION EXHIBIT 20
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended
January 25, 1997 January 27, 1996
---------------- ----------------
Net Sales $ 4,244,123 $ 4,550,061
Cost of Sales 3,158,081 3,062,121
Selling, General and Administrative
Expenses 840,982 663,375
Research and Development Costs 274,761 215,474
Interest Expense and Other (Income) and
Expense, Net (17,034) (10,494)
----------- -----------
Income (loss) before Taxes $ (12,667) $ 619,585
Provision (benefit) for Income Taxes (14,832) 226,616
----------- -----------
Net Income $ 2,165 $ 392,969
----------- -----------
Income (loss) applicable to Common
Shareholders $ (16,497) $ 374,307
=========== ===========
Net Income per Common Share
Primary $ -- $ 0.03
Fully Diluted $ -- $ 0.02
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
January 25, 1997 October 26, 1996
---------------- ----------------
Assets
Cash and Cash Equivalents $ 1,095,902 $ 1,287,110
Investments 586,171 577,837
Accounts Receivable 2,838,557 2,775,658
Inventories 1,472,060 1,986,065
Other Current Assets 593,003 556,525
----------- -----------
Total Current Assets 6,585,693 7,183,195
Property, Plant and Equipment, Net 3,416,335 3,428,765
Other Assets 102,693 107,892
----------- -----------
Total Assets $10,104,721 $10,719,852
=========== ===========
Liabilities and Stockholders' Equity
Accounts Payable--Trade $ 858,578 $ 1,104,511
Accrued Expenses and Other Liabilities 1,225,301 1,389,356
Income Taxes Payable 40,000 40,000
Current Portion of Long-Term Debt -- --
----------- -----------
Total Current Liabilities 2,123,879 2,533,867
Long-Term Debt -- --
Other Liabilities and Deferred Income
Taxes 553,286 746,433
----------- -----------
Total Liabilities 2,677,165 3,280,300
----------- -----------
8% Convertible Preferred Stock 933,080 933,080
Common Stock 1,264,001 1,261,001
Additional Paid-in Capital 2,728,082 2,726,583
Retained Earnings 2,502,393 2,518,888
----------- -----------
Stockholders' Equity 7,427,556 7,439,552
----------- -----------
Total Liabilities and Stockholders'
Equity $10,104,721 $10,719,852
=========== ===========
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
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-25-1997
<PERIOD-END> JAN-25-1997
<CASH> 1,095,902
<SECURITIES> 586,171
<RECEIVABLES> 2,838,557
<ALLOWANCES> 0
<INVENTORY> 1,472,060
<CURRENT-ASSETS> 6,585,693
<PP&E> 8,766,870
<DEPRECIATION> 5,350,535
<TOTAL-ASSETS> 10,104,721
<CURRENT-LIABILITIES> 2,123,879
<BONDS> 0
0
933,080
<COMMON> 1,264,001
<OTHER-SE> 5,230,475
<TOTAL-LIABILITY-AND-EQUITY> 10,104,721
<SALES> 4,244,123
<TOTAL-REVENUES> 4,244,123
<CGS> 3,158,081
<TOTAL-COSTS> 1,086,042
<OTHER-EXPENSES> (17,034)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,667)
<INCOME-TAX> (14,832)
<INCOME-CONTINUING> 2,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,165
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
