SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 26, 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: (410) 381-0400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the 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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
The aggregate market value of the registrant's voting stock held by
non-affiliate persons and entities as of December 31, 1996, computed by
reference to the closing price for such stock on the composite reporting system
on such date, was $3,581,205 based on 2,438,267 shares.
The number of shares of the registrant's common stock outstanding as of December
31, 1996, was 12,610,011.
<PAGE>
PART I
Item 1. BUSINESS
Bowles Fluidics Corporation was incorporated under Maryland law in
1961 (originally as Bowles Engineering Corporation) for the purpose of
advancing and exploiting the technology of fluidics. For about ten years
the principal business of the Company was research and development
primarily under contracts with agencies of the U.S. Government. From
1972 to 1979 its principal income was derived from the sale of
proprietary consumer products it had developed based upon fluid
oscillators, including massaging showers and oral irrigation devices.
These consumer products have since been discontinued. Since 1979 its
principal product has been proprietary windshield and rear window washer
nozzles for the automotive industry. Late in FY 1989, the Company
extended the automotive product line to include shipments of fluidic
defroster nozzles. The Company also provides its automotive customers
with tooling and application engineering services related to its
products.
The Company continues to pursue its purpose of advancing the
technology of fluidics (see Research and Development below). Such
efforts are directed toward the development of products for which, in
the opinion of management, substantial markets exist.
Principal Products and Markets
The Company is the leading designer, manufacturer and supplier of
windshield and rear window washer nozzles for passenger cars and light
trucks in North America. Defroster nozzles for a limited number of these
same light vehicles are also being manufactured and sold.
The Company's market for its fluidic nozzles, both windshield
washer and defroster, consists of North America, i.e., the "Big Three"
U.S. automotive manufacturers and foreign transplants. The Company is
also open to opportunities presented to it in other parts of the world.
The Company believes that it supplies about 75% of the total windshield
washer nozzle requirements for light vehicles (cars and light trucks)
manufactured in the United States, Canada and Mexico. The defroster
nozzle is currently being supplied to four vehicle models in this
market.
Over 90% of the Company's production of nozzles is incorporated in
vehicles produced by General Motors, Ford and Chrysler, each of whom
typically represents over 10% of the Company's sales volume. The Company
is, therefore, dependent upon the requirements of the U.S. automotive
industry producing cars and light trucks. Although the Company enters
into agreements with its customers to meet 100% of their production
requirements, notice of firm shipping requirements for the coming week
generally takes place weekly from the assembly plants and at somewhat
longer intervals from the first-tier suppliers.
The Company's fiscal year, beginning in November and ending in the
following October, follows closely the length and timing of the typical
model year for an automobile or light truck. The Company's annual sales
follow the seasonal pattern dictated by the production levels of its
customers.
2
<PAGE>
Sales also include technical services, i.e., design, tooling, and
prototyping services for the Company's customers. The requirements of
the automotive customers are for designs and tools to meet the needs of
forthcoming vehicle models or changes in existing models, as well as for
prototypes of new products desired for testing. These sales are, for the
most part, undertaken as a service to the customers, and the Company
contracts these services and tools so as to recover projected direct
costs.
Patents and Competitive Products
The Company has engaged, since its inception, in research and
development in the fields of fluidics and fluid effect devices,
encompassing both gases and liquids. Over the past 18 years, 45 U.S.
patents have been granted to the Company's employees and assigned to the
Company. Five applications are presently in process for U.S. patents.
Foreign patents have also been granted, in countries in which the
Company has an interest, for most of the art covered by the U.S.
patents. Although these patents embody new and novel technology or
product, there is available competitive technology and alternative
product. The extent to which the expiration of an individual patent may
affect the Company's competitive position is difficult to determine.
In the past, U.S. patents were granted for a period of 17 years
from the date of issue. However, beginning in June 1995, those granted
in the past can be for a period of either 17 years from date of issue or
20 years from date of filing the application, whichever expiration date
is later. Those granted on applications filed after June 1995 are for a
period of 20 years from date of filing.
The Company's fluidic windshield washer and defroster nozzles,
which are covered by issued U.S. and foreign patents, are in direct
competition with conventional nozzles of traditional design. The Company
believes that its products have advantages both in performance and in
economy of assembly to the vehicle by the car manufacturers.
The Company is of the opinion that, in the long run, a history of
service, delivery, quality and economic supply is the most important
factor in binding its customers to it. Customers of the Company place a
great deal of emphasis on quality. The Company has maintained Ford's
preferred supplier rating (Q1 award) since 1985, has been rated an
excellent status in a supplier assessment by General Motors, has been a
self-certified supplier for Chrysler since 1991, and achieved a Quality
Excellence Award from Chrysler with a 98% rating in 1995. The Company's
material testing laboratory has been accredited by General Motors since
1992. In addition, the Company's customers mandated that the Company put
into place a QS-9000 compliant quality system, the automotive version of
ISO 9000, to be assessed and, if qualified, registered by an independent
organization. Chrysler required registration by July 1997 and General
Motors by December 1997. The Company went through initial assessment in
September 1996 and received certification in December as a QS-9000
supplier with ISO 9001 addendum.
The Company does not grant North American licenses for its own
patents in which it has an interest in marketing a product. The Company
does pursue interests expressed by others in the Company's technology in
an attempt to broaden its use. To the extent that there may be
additional uses in markets not related to those of primary interest to
the Company, efforts are made to license the patents for such use.
3
<PAGE>
Foreign Affiliates and Licensing
The Company has no foreign affiliates. The Company has licensing
agreements with foreign companies with respect to certain of its foreign
patents. Income from such agreements was $16,215 in FY 1996, down from
$21,770 in FY 1995.
Raw Material Sources and Availability
Raw materials, primarily plastic resin, are sourced within the
United States. The market was stable during the current year with no
significant price changes, and adequate supply is expected to be
available in the coming year. The resins purchased are restricted to
those approved by our customers.
Working Capital Requirements
The Company's standard credit terms for receivables is net 30
days. Adequate levels of inventories are normally maintained in order to
ensure compliance with the stringent delivery requirements of our
customers.
The design and acquisition of production tools, which represent
the major portion of technical services sales, normally take several
months to complete, during which period the Company has to make progress
payments which are included in work-in-process inventories. Sales for
these tools and services are rendered only after completion and
customers' acceptance of qualified products produced by the tools.
Research and Development
The Company's research and development costs, all Company-funded,
were:
FY 1996 $1,175,890
FY 1995 $ 636,970
FY 1994 $ 842,332
In FY 1996, the Company's research and development efforts were
expanded and directed primarily toward the advancement of its knowledge
of the workings of its fluidic washer nozzles, including wind tunnel
testing, and in addition the development of fluidic air conditioning
outlets for cars and light trucks. With regard to the latter products,
to date the Company has received one contract for the design and
development for one vehicle with a major customer.
In FY 1993, 1994, and 1995, its research and development efforts
were primarily directed toward the improvement of the characteristics of
natural gas and propane burners utilizing fluidic devices. The
applications, however, did not prove out due to marketing and technical
problems. During these years, efforts were also directed toward various
product development, product improvement, and process improvement
projects related to the automotive industry.
Potential sales of products still in the development stage cannot
be predicted since product capability and customer acceptance of the new
technology are difficult to determine.
4
<PAGE>
Employees
The Company averaged approximately 246 employees during FY 1996
and employed 242 people on a full-time basis on October 26, 1996. The
increase from the 223 employed on October 28, 1995, was primarily in the
engineering and support departments in response to the increase in
research and development and application engineering activities.
Compliance with Environmental Regulations
The Company believes it is in compliance with all known
environmental regulations and has no plans for significant expenditures
to meet these requirements in the future.
Item 2. PROPERTIES
In September 1993, the Company entered into an amendment to its
original lease agreement for 62,600 sq. ft. of space in a building
located in Columbia, Maryland, its sole location. The amended lease
provided for the Company's occupancy of the premises until April 16,
2004, and the addition in September 1993 of 14,226 sq. ft. and in
February 1994 of 12,000 sq. ft. The Company is now the sole occupant of
the premises. In an addendum to the lease, the landlord agreed to make
certain improvements to the premises financed by a supplement to the
rent. The lease amendment further provides an option to continue the
lease for an additional ten years or to purchase the premises at 94% of
fair market value at the first termination of the lease.
The facility, which now totals 88,826 sq. ft., provides for the
Company's needs for manufacturing windshield washer and defroster
nozzles at levels adequate to meet near-term projected customer needs.
In addition to the capacity for supporting more manufacturing equipment,
the enlarged premises allow for larger engineering capabilities.
The facilities are currently utilized as follows:
Manufacturing, Materials, Quality Control 60,560 sq. ft.
Administration and Sales 8,538 sq. ft.
Laboratories and Engineering 19,728 sq. ft.
Total Area 88,826 sq. ft.
In its production operations, the Company generally utilizes tools
purchased for the account of its customers and used for their unique
requirements. The Company has also designed and built for its own
account specialized assembly and test equipment to meet quality
assurance and economic performance requirements.
Item 3. LEGAL PROCEEDINGS
During FY 1994 and 1996, the Company discovered in the market two
instances of windshield washer nozzles which infringed upon its
windshield washer patents. As a result, the Company filed suits for
patent infringement in the United States District Court for the District
of Maryland. One suit was settled favorably to the Company in June 1995
and the other is still proceeding.
5
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5.
5a. STOCK PRICE AND MARKETS
The Common Stock of the Company is traded in the
"over-the-counter" market and is quoted on the NASD OTC Bulletin Board;
symbol BOWE. The Preferred Stock is unregistered and is not publicly
traded.
The high and low bid and asked prices of the Common Stock over the
last two fiscal years are listed below:
Bid Asked
------------------ -------------------
FY High Low High Low
---- --- ---- ---
1996 1st Quarter 5/8 3/8 1 3/4
2nd Quarter 3/8 3/8 3/4 3/4
3rd Quarter 3/8 3/8 3/4 5/8
4th Quarter 7/8 1/8 1-1/4 7/16
1995 1st Quarter 3/8 1/4 7/8 3/4
2nd Quarter 7/8 1/4 1-3/8 3/4
3rd Quarter 3/4 1/2 1-3/8 1
4th Quarter 3/4 1/2 1-3/8 1
Note: The above quotes represent prices between dealers and do
not include retail mark-up, mark-down or commissions. They do not
represent actual transactions.
5b. APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
Approximate Number of
Record Holders
Title of Class (as of October 26, 1996)
------------------ ------------------------
Common Stock
$.10 Par Value 428
Preferred Stock
8% Cumulative 33
Included in the number of stockholders of record are shares held
in "Nominee" or "Street" name.
6
<PAGE>
5c. DIVIDENDS
The Company has never paid cash dividends on its Common Stock.
Payment of dividends on Common Stock is within the discretion of the
Company's Board of Directors and will depend, among other factors, on
earnings, capital requirements and the operating financial condition of
the Company.
For information concerning dividends on Preferred Stock, see Note
6 of Notes to Consolidated Financial Statements.
7
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
October 26, 1996 October 28, 1995 October 29, 1994 October 30, 1993 October 31, 1992
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C>
Net sales $18,128,274 $16,972,876 $15,111,829 $12,299,037 $9,996,970
Net income 884,306 1,783,875 1,727,020 1,076,040 1,040,637
Primary earnings
per share .06 .13 .13 .08 .08
Fully diluted earnings
per share .05 .11 .11 .07 .08
Working capital 4,649,328 4,296,368 3,126,959 1,791,192 1,315,788
Total assets 10,719,852 9,292,446 8,478,227 6,231,132 4,880,510
Long-term debt -- 202,811 512,831 584,612 1,028,293
Stockholders' equity $ 7,439,552 $ 6,629,891 $ 4,907,664 $ 3,246,590 $2,242,198
</TABLE>
8
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
FY 1996 vs FY 1995
Total sales in FY 1996 rose 7% over FY 1995, reaching another
record for the Company of $18,128,274 compared with $16,972,876 in FY
1995. Income before taxes, however, decreased 53% from FY 1995 to FY
1996. Net income also declined to $884,306 from $1,783,875 in FY 1995, a
50% reduction. Profitability was significantly affected by increased
spending for application engineering and research and development
expenses and for an accrual for the costs of terminating a sales
agreement.
Product sales of light vehicle windshield washer and defroster
nozzles increased 8% to $17,292,030 in FY 1996 from $15,960,301 in FY
1995. Higher volume of shipments of new products to the Company's major
customers was the major reason for the increase, which more than
compensated for a 3% decline in total North American light vehicle
production for the fiscal year 1996 versus 1995.
In contrast, technical services sales in FY 1996 decreased 17% to
$836,244 from FY 1995's $1,012,575. Sales of tooling for new windshield
washer and defroster nozzles were down significantly as there was a
lower rate of culmination of programs for these products. However, sales
were recorded for the first time for prototype tooling for new air
conditioning outlets for one automotive customer.
Gross profit on total sales declined to 34% in FY 1996 from 36% in
FY 1995. The gross profit on product sales declined due to higher
manufacturing expenses mainly related to the modification and repair of
injection molding tooling. Additionally, application engineering costs
directed to the customization of new air conditioning outlets increased
significantly. In contrast, the gross loss on technical services sales
declined for FY 1996 compared to FY 1995 because of cost containment
efforts applied to the tooling programs for new windshield washer
nozzles.
Selling, general and administrative expenses increased $1,033,217
or 40% in FY 1996 from FY 1995 principally because of increases in sales
commissions. These commissions in FY 1996 include accruals of $760,000
related to the planned termination in May 1997 of the Company's sales
agreement with its manufacturer's representatives. The Company is
reorganizing its sales force using its own employees rather than
independent representatives. Aside from this special accrual, expenses
increased 10% due to higher patent, personnel, and computer expenses,
partially caused by the efforts to obtain QS-9000 certification and the
implementation of a new information system.
Research and development costs increased to $1,175,890 in FY 1996,
a $538,920 or 85% increase over the prior year. The Company discontinued
its efforts to develop fluidic nozzles for natural gas burner
appliances. It redirected those same resources plus additional personnel
and outside contractors to the development of automotive air conditioner
outlets, improvements in the design of windshield washer nozzles, and
fluidic technology research.
9
<PAGE>
In FY 1996, the provision for income taxes was $506,629,
reflecting the lower income before taxes and somewhat lower effective
tax rate of 36.4% versus 39% for FY 1995.
FY 1995 vs FY 1994
Total sales in FY 1995 improved 12% over FY 1994, reaching another
new record for the Company of $16,972,876 compared with $15,111,829 in
FY 1994. Income before taxes increased 22% from FY 1994 to FY 1995. Net
income in FY 1995 improved 3% to $1,783,875 from $1,727,020 for FY 1994.
Net income increased at a lower rate than income before taxes as the
result of the higher effective income tax rate at 39% in FY 1995 as
compared with 28% in FY 1994.
Sales of component products rose 19% to $15,960,301 in FY 1995
from $13,365,761 in FY 1994. As a result of the addition and enhancement
of windshield washer products and new defroster nozzle products, the
Company's increase in shipments of component products was greater than
the zero growth in total North American vehicle production experienced
by our customers during the fiscal year 1995. The gross profit on sales
of component products declined to 43% in FY 1995 from 47% in FY 1994 as
engineering activities related to customizing new washer nozzle products
expanded and various manufacturing expenses increased.
Technical services sales in FY 1995 decreased 42% to $1,012,575
from FY 1994's $1,746,068. The shipments of tools for future automotive
products declined in FY 1995, reflecting the culmination of fewer
tooling programs for new windshield washer and defroster nozzles. In
addition, the FY 1994 sales included $250,000 of revenue from a specific
application engineering customer contract. The loss in this segment of
the business at the gross profit level increased to $704,656 from the
prior year's loss of $372,000. This deterioration occurred primarily as
a result of the lack of last year's $250,000 of revenue referred to
above, costs of which were incurred in prior years. Also, higher costs
were incurred in FY 1995 from extra tool work necessary to achieve
operational capability as well as additional time required for customer
approval of the tools for use in parts production.
Selling, general and administrative expenses remained the same as
the prior year and as a percentage of sales were 15.4% in FY 1995 versus
17.2% in FY 1994. Sales and marketing expenses rose due to higher
commissions as a result of the increase in component sales. However,
general and administrative expenses were lower than last year as a
result of decreases in U.S. and foreign patent costs.
The Company in FY 1995 continued to invest in research and
development projects, although the dollar amount was 24% less than FY
1994. Emphasis was placed on applying fluidic technology to natural gas
burner nozzles as well as various other improvements to the Company's
present products and manufacturing systems.
Interest expense was lower in FY 1995 as a result of lower debt
levels. Other income was higher due to an increase in interest income
from larger investments of available cash and higher interest rates.
10
<PAGE>
In FY 1995, the provision for income taxes was $1,148,902,
resulting in an effective tax rate of 39%, approximately the statutory
rate. In FY 1994, after the remaining available research and development
and investment tax credit carryovers from prior years were utilized, the
Company's effective tax rate was 28%. (See Note 6 of the Notes to the
Consolidated Financial Statements.)
Liquidity and Capital Resources
Current assets at 1996 fiscal year end were $7,183,195 compared
with $6,324,208 at the 1995 fiscal year end. Liquidity of these assets
improved as cash and cash equivalents, short-term investments, and
receivables rose to $4,640,605 from $4,117,888 from the positive cash
flow during FY 1996.
Inventories rose 5% to meet projected requirements for sales of
nozzle products. The tooling work in process decreased compared to the
prior year, as there were fewer tools being built for future products.
Current liabilities increased 25%, reflecting the current portion
of the special sales commission accrual plus normal increases in
operational accounts payables and other accruals.
The current ratio of 2.8:1 at the 1996 fiscal year end declined in
comparison to the 3.1:1 ratio at the 1995 fiscal year end due to the
addition of the current portion of the special sales commission accrual
at the end of the 1996 fiscal year end.
Cash provided by operating activities in the amount of $2,144,438
in FY 1996 resulted principally from net income of $884,306, plus
non-cash charges for depreciation and amortization of $750,449 and
accrual of the special sales commissions of $760,000 ($465,400 net of
income taxes).
Funds were used for capital expenditures in the amount of
$1,321,331 principally for additional computer equipment, building
improvements for enlarged office space, and assembly and laboratory
equipment. The Company purchased $566,664 of U.S. Treasury bills and
sold $700,000 of such bills.
The principal payment of term loan debt during FY 1996 was
$271,668, the prepayment of all outstanding bank debt in February 1996.
The Company's $1,000,000 short-term line of credit was not utilized
during the fiscal year 1996 and had no balance outstanding at October
26, 1996. The preferred stock dividend was declared and paid in December
1995.
The Company's credit facilities and financial position should
provide an adequate base for sales and production resulting from
forecasted production rates by the U.S. car manufacturers, additional
market penetration, and near-term requirements for potential new
products resulting from R & D efforts.
11
<PAGE>
Fiscal Year 1997
The Company's operating plans assume that industry production
levels for the 1997 fiscal year as a whole will be somewhat less than
the FY 1996 levels, in line with external market forecasts, but that
there will be additional production requirements for new nozzles
expected to be added in the course of the fiscal year, resulting in the
Company's anticipating windshield washer nozzle sales slightly below the
1996 fiscal year. However, defroster nozzle sales are expected to
decline significantly in FY 1997 as certain products were discontinued.
Present knowledge of customer plans indicates that the Company's
billings for technical services related to the introduction of new
products and new or revised windshield washer nozzles will increase from
the FY 1996 level.
The automotive parts industry has become more competitive in
general due to consolidation of suppliers, customers' expectations of
higher quality and more service, and price pressures.
The Company's customers mandated that a QS-9000 compliant quality
system be developed and registered by an independent organization.
Chrysler required registration by July 1997 and General Motors by
December 1997. The Company received certification as a QS-9000 supplier
with ISO 9001 addendum in December 1996. QS-9000 is a quality system
standard developed by the three major U.S. automotive manufacturers
based on the ISO 9000 International Standard but incorporating general
automotive and specific customer requirements. Management believes that
the Company's technology coupled with a QS-9000 compliant quality system
should provide a solid platform for future competitiveness and growth.
Research and development expenditures are planned to remain at the
same level or decrease in FY 1997. Efforts will continue to be made in
the development of new product lines, principally air conditioning
outlets for light vehicles, and for the improvement of windshield washer
nozzles, which would result in a significant increase in application
engineering expenses.
12
<PAGE>
Item 7 (continued) SCHEDULE A: RELATIONSHIP TO NET SALES
<TABLE>
<CAPTION>
Percent Change of Dollars
------------------------------------
Period to Period
Percentage of Net Sales Increase or (Decrease)
----------------------------------------------- -----------------------------------
FY 1996 FY 1995 FY 1994 1995-1996 1994-1995
<S> <C>
Net sales 100.0 100.0 100.0 6.8 12.3
Direct labor, material and other
product-related costs 66.2 63.9 60.9 10.5 18.0
Selling, general and administrative
expenses 20.1 15.4 17.2 39.6 0.2
Research and development costs 6.5 3.8 5.6 84.6 (24.4)
----- ------ ------
Operating income 7.2 16.9 16.3 (54.3) 16.6
Interest expense -- (0.2) (0.6) (84.5) (56.3)
Other revenue and (expense) net 0.5 0.6 .2 (14.8) 223.4
----- ------ ------
Net income before taxes 7.7 17.3 15.9 (52.6) 21.9
===== ===== =====
</TABLE>
13
<PAGE>
Item 8
FINANCIAL STATEMENTS
BOWLES FLUIDICS CORPORATION
FOR THE YEAR ENDED OCTOBER 26, 1996
14
<PAGE>
BOWLES FLUIDICS CORPORATION
INDEX
FOR THE YEAR ENDED OCTOBER 26, 1996
Page
Report of Independent Accountants 16
Financial Statements:
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Changes in Stockholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
----------
To the Board of Directors
and Stockholders,
Bowles Fluidics Corporation
We have audited the accompanying consolidated balance sheets
of Bowles Fluidics Corporation as of October 26, 1996, and October 28, 1995, and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the three fiscal years in the period ended October
26, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Bowles Fluidics Corporation as of October 26, 1996, and October 28, 1995, and
the results of its operations and its cash flows for each of the three fiscal
years in the period ended October 26, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Baltimore, Maryland
December 20, 1996
16
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For The Years Ended
-------------------------------------------------------------
October 26, October 28, October 29,
1996 1995 1994
---------------- --------------- ---------------
<S> <C>
Net sales $18,128,274 $16,972,876 $15,111,829
Cost of sales 11,996,305 10,852,940 9,200,976
---------------- --------------- ---------------
Gross profit 6,131,969 6,119,936 5,910,853
Selling, general and
administrative expenses 3,643,128 2,609,911 2,603,491
Research and development costs 1,175,890 636,970 842,332
---------------- --------------- ---------------
Operating income 1,312,951 2,873,055 2,465,030
Interest expense (6,018) (38,871) (88,991)
Other income, net 84,002 98,593 30,487
---------------- --------------- ---------------
Income before taxes 1,390,935 2,932,777 2,406,526
Provision for income taxes 506,629 1,148,902 679,506
---------------- --------------- ---------------
Net income 884,306 1,783,875 1,727,020
Preferred stock dividends accrued (74,646) (74,648) (74,646)
----------------- --------------- ---------------
Income applicable to
common shareholders $ 809,660 $ 1,709,227 $ 1,652,374
================ ================= ===============
Primary earnings per share $ .06 $ .13 $ .13
================ ================ ===============
Fully diluted earnings per share $ .05 $ .11 $ .11
================ ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 26, October 28,
1996 1995
--------------- --------------
<S> <C>
ASSETS
Current
Cash and cash equivalents $ 1,287,110 $ 676,981
Investments available for sale 577,837 679,513
Accounts receivable 2,775,658 2,761,394
Inventories 1,986,065 1,899,346
Other current assets 556,525 306,974
--------------- --------------
Total current assets 7,183,195 6,324,208
--------------- --------------
Property and equipment, net 3,428,765 2,821,804
Other assets 107,892 146,434
--------------- --------------
Total assets $ 10,719,852 $ 9,292,446
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable - trade $ 1,104,511 $ 995,421
Accrued expenses and other liabilities 1,389,356 852,121
Income taxes payable 40,000 111,441
Current portion of long-term debt - 68,857
--------------- --------------
Total current liabilities 2,533,867 2,027,840
Long-term debt - 202,811
Other liabilities 746,433 431,904
--------------- --------------
Total liabilities 3,280,300 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
($2,407,467 deficit eliminated
at 10/29/94) Note 6 2,518,888 1,709,227
--------------- --------------
Total stockholders' equity 7,439,552 6,629,891
--------------- --------------
Total liabilities and stockholders' equity $ 10,719,852 $ 9,292,446
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------------- ----------------------- Additional Retained
Shares Shares Paid-in Earnings
Total (000's) Amount (000's) Amount Capital (Deficit)
----- ------- ------ ------- ------ ------------- ------------
<S> <C>
Balance October 30, 1993 $3,246,590 933 $933,080 12,549 $1,254,881 $5,193,116 $(4,134,487)
Stock options exercised 8,700 41 4,120 4,580
Preferred stock dividends (74,646) (74,646)
Net income 1,727,020 1,727,020
Quasi-reorganization effective
October 29, 1994 (Note 6) - (2,407,467) 2,407,467
----------- ------ --------- ------ ------------- -------------- ----------
Balance October 29, 1994 $4,907,664 933 $933,080 12,590 $1,259,001 $2,715,583 $ --
Stock options exercised 13,000 20 2,000 11,000
Preferred stock dividends (74,648) (74,648)
Net income 1,783,875 1,783,875
----------- ------ --------- ----- ------------- -------------- ----------
Balance October 28, 1995 $6,629,891 933 $933,080 12,610 $1,261,001 $2,726,583 $1,709,227
----------- ------ --------- ------ ------------- -------------- ----------
Preferred stock dividends (74,646) (74,646)
Net income 884,307 884,307
----------- ----- --------- ------- ------------- -------------- ----------
Balance October 26, 1996 $7,439,552 933 $933,080 12,610 $ 1,261,001 $ 2,726,583 $2,518,888
=========== ===== ========= ======= ============= ============== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
19
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Years Ended
------------------------------------------
October 26, October 28, October 29,
1996 1995 1994
------------ ----------- ------------
<S> <C>
Cash flows from operating activities:
Net income $ 884,306 $ 1,783,875 $ 1,727,020
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 750,449 661,024 624,099
Deferred income taxes (241,315) (36,500) -
(Gain)/Loss on disposal of assets 3,088 (2,267) 8,496
Accretion of interest on investments (31,659) (14,125) -
--------- ---------- ----------
1,364,869 2,392,007 2,359,615
--------- ---------- ----------
Change in operating accounts:
Accounts receivable (14,264) (844,509) (204,165)
Inventories (86,719) (202,846) (365,409)
Other assets (122,381) (111,535) 42,927
Accounts payable 109,090 (70,656) 152,015
Accrued expenses 537,235 57,314 152,382
Income taxes payable (71,441) (431,715) 468,156
Other liabilities 428,049 63,150 27,124
--------- ---------- ----------
Change in operating accounts 779,569 (1,540,797) 273,030
--------- ---------- ----------
Net cash provided by operating activities 2,144,438 851,210 2,632,645
--------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (1,321,331) (962,597) (938,246)
Purchase of investments (566,664) (1,143,566) (484,807)
Patents and trademarks - (32,556) -
Proceeds from sale of equipment - 31,025 -
Proceeds from sale of investments 700,000 962,985 -
--------- ---------- ----------
Net cash used in investing activities (1,187,995) (1,144,709) (1,423,053)
--------- ---------- ----------
Cash flows from financing activities:
Principal payment of debt (271,668) (525,102) (603,657)
Proceeds from issuance of debt - - 365,000
Preferred stock dividends (74,646) (74,648) (74,646)
Proceeds from issuance of common stock - 13,000 8,700
-------- ---------- ----------
Net cash used by financing activities (346,314) (586,750) (304,603)
-------- ---------- ----------
Net increase(decrease) in cash and cash equivalents 610,129 (880,249) 904,989
Cash and cash equivalents
- Beginning of period 676,981 1,557,230 652,241
-------- --------- ----------
- End of period 1,287,110 $ 676,981 $ 1,557,230
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
General. The Company and its wholly owned subsidiary, Fluid Effects
Corporation, operate on a 52/53-week fiscal year which ends on the last
Saturday of October. All years presented are 52 weeks. Assets and
liabilities, and revenues and expenses, are recognized on the accrual basis
of accounting.
Cash equivalents. Cash equivalents are highly liquid investments with
original maturities of 90 days or less.
Investments. Investments, which are available for sale, consist of U.S.
Treasury Bills with original maturities over 90 days, but not greater than
365 days, and are carried at cost plus accrued interest, which approximates
market.
Inventory Pricing. Inventories are carried at the lower of cost (first-in,
first-out) or market.
Property, Equipment and Depreciation. The cost of property and equipment is
depreciated over the estimated useful life of the related assets.
Depreciation is computed on the straight-line method for all assets based
on the following estimated lives:
Years
Production machinery and equipment 3 - 10
Office furniture and equipment 5 - 7
Laboratory and machine shop equipment 3 - 10
Leasehold improvements lease term
Depreciation expense for the fiscal years ended 1996, 1995, and 1994,
was $711,282, $612,294 and $577,811, respectively.
Patents. Costs associated with obtaining United States patents are
capitalized and amortized using the straight-line method over the life of
the patent beginning with the date of issue or date of filing the
application. The Company initially charges all costs associated with the
acquisition of U.S. and foreign patents to expense, then capitalizes those
costs related to U.S. patents upon issuance of those patents.
Management reviews all of the patent costs and writes off any patents
which are considered to be of no foreseeable economic benefit to the
Company. The Company recognizes income from patent licenses in accordance
with the respective payment terms of each license agreement.
Income Taxes. The Company uses the asset and liability method for
accounting for income taxes. Under this method, deferred income taxes are
recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences
between the financial statements carrying amounts and the tax bases of
existing assets and liabilities.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
21
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Inventories
Inventories are comprised of:
1996 1995
---------- ----------
Raw Material $ 678,494 $ 703,864
Work and tooling in process 242,369 416,090
Finished Goods 1,065,202 779,392
---------- ----------
Total $1,986,065 $1,899,346
========== ==========
3. Property and Equipment, net
Property and Equipment, net, is comprised of:
October 26, October 28,
1996 1995
----------- -----------
Production machinery and equipment $ 4,397,018 $ 4,047,602
Office furniture and equipment 1,992,152 1,580,026
Laboratory and machine shop equipment 1,395,837 1,159,087
Leasehold improvements 796,928 539,274
----------- -----------
Total property and equipment 8,581,935 7,325,989
Less accumulated depreciation (5,153,170) (4,504,185)
----------- -----------
Property and equipment, net $ 3,428,765 $ 2,821,804
=========== ===========
4. Line of Credit
In May 1996, the Company entered into a fourth amended and restated
agreement with Mercantile-Safe Deposit & Trust Company to reaffirm and
extend its $1,000,000 line of credit until May 8, 1997, and to set forth
the Company's and the Bank's decision to continue the line of credit on an
unsecured basis. At the Company's request and the Bank's discretion the
line of credit may be affirmed as of May 8, 1997, and each year thereafter.
The interest rate is Mercantile's prime rate, floating, which was 8 1/4% as
of October 26, 1996. In addition, a 3/8% annual fee is assessed on the
unused portion of this credit facility. Advances on the line of credit are
limited to 85% of eligible accounts receivable and 40% of finished goods
inventory. No amount was outstanding on this credit line at October 26,
1996, or on October 28, 1995.
In addition to the maintenance of certain financial ratios, the
covenants of the fourth amended loan agreement require the Company's
tangible net worth to be not less than $2,000,000 as of the close of each
fiscal year.
22
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Debt
Balances as of October 26, 1996, and October 28, 1995, are as follows:
1996 1995
------------ ------------
$ -- $ 271,668
============ ============
In June 1993, the Company entered into a third amended and restated
loan agreement with Mercantile-Safe Deposit & Trust Company for a term
loan facility for a period up to seven years in the maximum
amount of $1,100,000. Advances under this agreement were made for the
purchase of specified capital equipment and leasehold improvements. This
loan facility was cross-collateralized and cross-defaulted with all
other loans with Mercantile and was subject to certain loan covenants. In
December 1993, the Company borrowed $365,000 under this facility. During
fiscal 1994, a fixed interest rate of 8 3/4% was elected for borrowing
under this agreement through April 1997. The unpaid balance of the
outstanding loan was paid in total in February 1996.
Cash paid for interest during 1996, 1995, and 1994 was $6,018,
$37,586, and $91,079 respectively.
6. Stockholders' Equity
The 8% convertible preferred stock of the Company at October 26,
1996, and October 28, 1995, consists of 3,000,000 authorized shares, par
value $1.00 per share, with 933,080 shares issued and outstanding on both
dates.
The common stock of the Company at October 26, 1996, and October 28,
1995, consists of 17,000,000 authorized shares, par value $.10 per share,
with 12,610,011 shares issued and outstanding on both dates.
The Company's preferred stock provides for an annual dividend of $.08
per share from the net earnings of the Company and is cumulative only for
those years in which the Company has earnings, and $1.00 per share in
liquidation before any distribution can be made to holders of common stock.
If any dividends payable on the preferred stock with respect to any fiscal
year of the Company are not paid for any reason, the rights of the holders
of the preferred stock to receive payment of such dividends shall not lapse
or terminate; but unpaid dividends shall accumulate and shall be paid
without interest to the holders of the preferred stock when and as
authorized by the Board of Directors before any dividends shall be paid on
any other class of stock.
The Company's preferred stock may at the option of the holder, at any
time dividends are current, be converted into common stock of the Company
at the conversion rate of four shares of common for each share of
preferred. Additionally, the preferred stock is redeemable at par in whole
or in part at the option of the Board of Directors at any time the
dividends are current after a period of 10 years subsequent to issue. At
October 26, 1996, 683,080 shares have been outstanding for more than 10
years and dividends are current, and thus can be converted. The common
stock has one (1) vote per share and the preferred stock has four (4) votes
per share.
23
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. (continued)
Reserved Shares. As of and for the three fiscal years in the period
ended October 26, 1996, there were 300,000 shares of common stock reserved
for issuance in connection with the Company's stock option plans. None of
the authorized shares of common stock are reserved for conversion of
preferred stock. Under the laws of the State of Maryland, the
authorization of the preferred stock in itself provides the authorization
of common stock necessary for conversion.
Stock Options. In May 1992, the Company adopted its key employee
incentive stock option plan. Activity in the Company's incentive stock
option plan was as follows:
1996 1995 1994
------- ------- -------
Options outstanding,
beginning of year 180,000 200,000 314,400
Options granted - - -
Options exercised - (20,000) (41,200)
Options expired - - (73,200)
------- ------- -------
Options outstanding,
end of year 180,000 180,000 200,000
======= ======= =======
Options activities are at exercise prices ranging from $.15 to $.65 per
share.
In 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation." The Company has
determined that it will retain its current accounting for stock options
granted; therefore, the adoption of this new standard in fiscal 1996 will
not impact the Company's financial position or results of operations.
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 additional
paid-in capital.
24
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Income Taxes
The Company and its subsidiary file a consolidated federal income tax
return and separate state income tax returns. The provision for income
taxes consisted of the following:
1996 1995 1994
-------- -------- --------
Federal:
Current $ 678,938 $1,019,525 $540,000
Deferred (222,600) (30,100) -
--------- ---------- --------
456,338 989,425 540,000
--------- ---------- --------
State:
Current 68,791 164,377 139,506
Deferred (18,500) (4,900) -
--------- ---------- --------
50,291 159,477 139,506
--------- ---------- --------
$ 506,629 $1,148,902 $679,506
========= ========== ========
The components of the deferred tax asset and liability for 1996 and 1995
were as follows:
1996 1995
-------- --------
Deferred tax asset:
Accrued vacation and retirement programs $ 190,300 $ 167,800
Non-deductible reserves 387,100 121,700
--------- --------
Total deferred tax asset 577,400 289,500
--------- --------
Deferred liability:
Property and equipment (312,800) (266,000)
--------- --------
Total deferred tax liability (312,800) (266,000)
--------- --------
Net deferred tax asset $ 264,600 $ 23,500
========= =========
Reconciliations of the provisions for income taxes at the U.S. federal
statutory rate to the effective tax rates were as follows:
1996 1995 1994
-------- ---------- ---------
U.S. statutory income tax $472,918 $ 997,145 $ 818,219
State tax, net of federal income tax
benefit 33,711 151,757 92,074
Utilization of investment and research
and development credit carryforwards - - (226,000)
Other - - (4,787)
-------- ---------- ---------
$506,629 $1,148,902 $ 679,506
Cash paid for income taxes was $877,000, $1,617,000, and $118,000 for
1996, 1995, and 1994, respectively.
25
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Earnings per Share
Primary earnings per share are based on the weighted average number
of common shares and the effects of shares issuable under stock options
based on the treasury stock method. Fully diluted earnings per share
assumes that the preferred stock is converted to common stock at the
beginning of the year.
The number of shares used for computing primary earnings per share
was 12,701,898, 12,706,408, and 12,672,647, in 1996, 1995, and 1994,
respectively. The number of shares used in computing fully diluted
earnings per share was 16,473,390, 16,445,005 and 16,404,967 in 1996,
1995, and 1994, respectively.
9. Commitments and Contingencies
The Company leases its facility under a non-cancelable operating
lease which expires in 2004. As of October 26, 1996, minimum annual
aggregate rentals are as follows:
Year Ended Amount
---------- -----------
1997 $ 561,648
1998 561,648
1999 561,648
2000 561,648
2001 561,648
thereafter 1,404,120
----------
Total minimum future rental payments $4,212,360
==========
Rent expense under all leases for 1996,1995, and 1994 was $626,565,
$622,671, and $598,427, respectively.
Management is unaware of any pending legal proceedings which would
have a material adverse effect on the financial statements of the Company.
26
<PAGE>
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Employee Benefit Plans
On November 1, 1990, the Company adopted a defined contribution
(401k) plan covering substantially all of its employees. Contributions and
costs were determined by matching 50% of employee contributions up to 4%
of each covered employee's earnings. As of April 1, 1994, the Company
increased its matching contribution to 50% of the employee contributions
up to 6% of each covered employee's earnings. The Company's contributions
to the plan were $119,640, $101,286 and $76,892, in 1996, 1995, and 1994,
respectively.
The Company has agreed to retirement programs for certain former
officers providing for the payment of certain retirement benefits. The
unfunded present value, at a discount rate of 7.5%, of these benefits
accumulated as of October 26, 1996, amounts to approximately $360,000, of
which $301,000 is included in other liabilities. Expenses related to these
programs were $44,000 in 1996, $102,000 in 1995, and $62,000 in 1994.
11. Termination of Sales Agreement
During the fiscal year 1996, the Company accrued $760,000 ($465,400 net
of income taxes) for the termination in May 1997 of the sales agreement
with its manufacturer's representatives. The payments will commence in May
1997.
12. Major Customers
Over 90% of the Company's production of nozzles is incorporated in
vehicles produced by General Motors, Ford and Chrysler, each of whom
typically represents over 10% of the Company's sales volume. The Company
is, therefore, substantially dependent upon the North American production
requirements of these three automotive companies. In addition, the
Company's customers mandated a QS-9000 compliant quality system be
developed and registered by an independent organization. Chrysler required
registration by July 1997 and General Motors by December 1997. In
September 1996, the Company was assessed by Underwriters Laboratories Inc.
and received QS-9000 certification with ISO 9001 addendum as of December
20, 1996.
27
<PAGE>
BOWLES FLUIDICS CORPORATION
Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None
28
<PAGE>
PART III
Item 10a. - 10c. DIRECTORS OF THE REGISTRANT INCLUDED IN PROXY MATERIALS
Item 10b., d., e., & f. EXECUTIVE OFFICERS OF THE REGISTRANT:
<TABLE>
<CAPTION>
b. Name, Age and Position e. Business Experience During Past Five Years
---------------------- ------------------------------------------
<S> <C>
William Ewing III Chairman since July 1996. Responsible for the formation of
Chairman overall corporate policy and planning. Member of Board of
Age 50 Directors since 1985. Currently Vice President and Treasurer of
Reeves Industries, Inc., 1995-present. Previously Managing
Director of Chemical Bank, 1992-1994, and, prior to that,
Managing Director of Manufacturers Hanover Trust Company.
Ronald D. Stouffer President since March 1994. Responsible for execution of the
President Company's policies and for the Company's operations. Executive
Chief Executive Officer Vice President responsible for engineering and manufacturing from
Age 65 1982 to 1994. Joined the Company in 1967.
Melvyn J. L. Clough Vice President, Operations, since joining the Company in November
Vice President, 1995. Responsible for all manufacturing operations including
Operations industrial engineering and tooling. Previously Engineering
Age 49 Manager for A. Raymond, Inc., 1992-1995, and various
positions with TRW Fasteners Division to Engineering
Manager, 1982-1992.
Richard W. Hess Vice President, Engineering, since joining the Company in
Vice President 1992. Vice President, Responsible for the Company's total
Engineering engineering department, including research and development and
Age 53 applications engineering. Previously Director of Engineering
with Automated Packaging Systems, Inc., 1990-1992.
Eric W. Koehler Vice President, Marketing, since March 1994. Responsible for
Vice President, marketing and sales functions. Director of Marketing,
Marketing 1990-1994. Joined the Company in 1989.
Age 34
Eleanor M. Kupris Vice President, Administration, since 1982. Corporate Secretary
Secretary and Vice President, since March 1992. Responsible for purchasing and personnel.
Administration Joined the Company in 1966.
Age 55
</TABLE>
29
<PAGE>
Item 10b., d., e., & f. (continued)
<TABLE>
<CAPTION>
b. Name, Age and Position e. Business Experience During Past Five Years
---------------------- ------------------------------------------
<S> <C>
David A. Quinn Vice President, Finance, since joining the Company in October
Vice President, 1993. Responsible for treasury, accounting and financial
Finance planning functions. Previously CFO for Bruning Paint Company,
Age 60 1991-1993, and Group Vice President-Finance for The Black &
Decker Corporation, 1989-1991.
Dharapuram N. Srinath Vice President, Quality Assurance, since March 1995. Responsible
Vice President, for quality assurance and reliability functions. Director of
Quality Assurance Quality Assurance and Product Reliability, 1992-1995; Director of
Age 45 Technology, 1990-1992. Joined the Company in 1978.
Arlene M. Hardy Corporate Controller since 1990. Responsible for accounting
Corporate Controller functions. Joined the Company in 1986.
Age 49
</TABLE>
d. The names, ages and positions of all of the executive officers of the
Company are listed above, along with their business experience during the
past five years. Officers are appointed annually by the Board of Directors
at the annual meeting of directors, immediately following the annual
meeting of shareholders. There are no family relationships among any of the
officers of the Company, nor any arrangements or understanding between any
such officers and another person pursuant to which they were elected as
officers.
Item 11 EXECUTIVE COMPENSATION INCLUDED IN PROXY MATERIALS.
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT INCLUDED
IN PROXY MATERIALS.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INCLUDED IN PROXY
MATERIALS.
30
<PAGE>
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 Financial Statements
Included in Part II of this report:
Report of Independent Accountants
Consolidated Statements of Income for the three years
ended October 26, 1996, October 28, 1995, and October 29,
1994
Consolidated Balance Sheets at October 26, 1996, and
October 28, 1995
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended October 26, 1996, October 28,
1995, and October 29, 1994
Consolidated Statements of Cash Flows for the three years
ended October 26, 1996, October 28, 1995, and October 29,
1994
Notes to Consolidated Financial Statements
(a) 2 Financial Statements Schedules
Schedules are omitted because of the absence of conditions
under which they are required or because the required
information is given in the financial statements or notes
thereto.
(a) 3 Exhibits
Exhibit 11 -
Schedule showing computations of earnings per share for
each of three years ended October 26, 1996, October 28,
1995, and October 29, 1994.
(b) Reports on Form 8-K
None
31
BOWLES FLUIDICS CORPORATION - EXHIBIT 11
CALCULATION OF EARNINGS PER SHARE
A. PRIMARY EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARES
For the Fiscal Year Ended
-----------------------------------------
October 26, October 28, October 29,
1996 1995 1994
----------- ----------- -----------
Calculation of net income:
Net income per books $ 884,306 $ 1,783,875 $ 1,727,020
Less:Dividends on
convertible
preferred stock 74,646 74,648 74,646
----------- ----------- -----------
Net income
as adjusted $ 809,660 $ 1,709,227 $ 1,652,374
=========== =========== ===========
Calculation of outstanding shares:
Weighted average of common
shares outstanding 12,610,011 12,593,353 12,581,647
Add: Assumed exercise of
stock options 91,887 113,055 91,000
----------- ----------- -----------
Number of common shares
outstanding adjusted 12,701,898 12,706,408 12,672,647
=========== =========== ===========
Primary earnings
per common share $ .06 $ .13 $ .13
=========== =========== ===========
32
<PAGE>
BOWLES FLUIDICS CORPORATION - EXHIBIT 11
CALCULATION OF EARNINGS PER SHARE (continued)
B. FULLY DILUTED EARNINGS PER SHARE:
For the Fiscal Year Ended
-----------------------------------------
October 26, October 28, October 29,
1996 1995 1994
----------- ----------- -----------
Net income per books $ 884,306 $ 1,783,875 $ 1,727,020
=========== =========== ===========
Weighted average of
common shares
outstanding 12,610,011 12,593,353 12,581,647
Add:Assumed conversion of
of preferred stock 3,732,320 3,732,320 3,732,320
Assumed exercise of
stock options 131,059 119,332 91,000
----------- ----------- -----------
Number of common shares
outstanding adjusted 16,473,390 16,445,005 16,404,967
=========== ========== ==========
Fully diluted earnings
per common share and
common stock equivalents $ .05 $ .11 $ .11
=========== ========== ==========
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
BY:
Chairman of
the Board and
- -------------------------- Director ---------------
William Ewing III Date
President and
- -------------------------- Director ---------------
Ronald D. Stouffer Date
Vice President
- -------------------------- Finance ---------------
David A. Quinn Date
Corporate Controller
- -------------------------- ---------------
Arlene M. Hardy Date
Director
- -------------------------- ---------------
David C. Dressler Date
Director
- -------------------------- ---------------
John E. Searle, Jr. Date
34
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-26-1996
<PERIOD-END> OCT-26-1996
<CASH> 1,287,110
<SECURITIES> 577,837
<RECEIVABLES> 2,775,658
<ALLOWANCES> 0
<INVENTORY> 1,986,065
<CURRENT-ASSETS> 7,183,195
<PP&E> 8,581,935
<DEPRECIATION> 5,153,170
<TOTAL-ASSETS> 10,719,852
<CURRENT-LIABILITIES> 2,533,867
<BONDS> 0
0
933,080
<COMMON> 1,261,001
<OTHER-SE> 5,245,471
<TOTAL-LIABILITY-AND-EQUITY> 10,719,852
<SALES> 18,128,274
<TOTAL-REVENUES> 18,128,274
<CGS> 11,996,305
<TOTAL-COSTS> 6,131,969
<OTHER-EXPENSES> (84,002)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,018
<INCOME-PRETAX> 1,390,935
<INCOME-TAX> 506,629
<INCOME-CONTINUING> 884,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 884,306
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.05
</TABLE>
