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 24, 1998 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 24, 1998.
Class Outstanding at January 24, 1998
------------- -------------------------------
Common Stock, $.10 12,640,011 shares
<PAGE>
INDEX
BOWLES FLUIDICS CORPORATION
FOR THE THREE MONTHS ENDED JANUARY 24, 1998
Page
PART I. Financial Information Number
------
Item 1. Financial Statements
Consolidated Statements of Income
For the three months ended January 24, 1998
and January 25, 1997......................................... 3
Consolidated Balance Sheets
January 24, 1998 and October 25, 1997 ....................... 4
Consolidated Statements of Cash Flows
For the three months ended January 24, 1998
and January 25, 1997......................................... 5
Notes to Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations .............................................. 8
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K ............................. 10
Exhibit 20........................................... 11
2
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended
--------------------------
January 24, January 25,
1998 1997
---------- ----------
Net sales $4,803,671 $4,244,123
Cost of sales 3,295,386 3,158,081
---------- ----------
Gross profit 1,508,285 1,086,042
Selling, general and
administrative expenses 620,748 840,982
Research and development costs 180,966 274,761
---------- ----------
Operating income (loss) 706,571 (29,701)
Interest income 28,101 25,985
Other income (expense), net 4,398 (8,951)
---------- ----------
Income (loss) before taxes 739,070 (12,667)
Provision (benefit) for income taxes 271,218 (14,832)
---------- ----------
Net income 467,852 2,165
Preferred stock dividends accrued (18,662) (18,662)
---------- ----------
Income (loss) applicable to
common shareholders $ 449,190 $ (16,497)
========== ==========
Basic earnings per share $.04 $.00
==== ====
Diluted earnings per share $.03 $.00
==== ====
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BOWLES FLUIDICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
January 24, October 25,
1998 1997
----------- -----------
ASSETS
Current
Cash and cash equivalents $ 1,069,503 $ 755,525
Investments 474,916 1,563,121
Accounts receivable 3,024,251 3,112,063
Inventories 2,751,070 2,130,615
Other current assets 551,458 634,037
----------- -----------
Total current assets 7,871,198 8,195,361
----------- -----------
Property and equipment, net 3,831,601 3,494,335
Other assets 93,987 95,005
----------- -----------
Total assets $11,796,786 $11,784,701
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable - trade $ 906,127 $ 1,122,437
Accrued expenses 1,168,460 1,609,807
Income taxes payable 274,839 48,162
----------- -----------
Total current liabilities 2,349,426 2,780,406
Other liabilities 486,739 492,866
----------- -----------
Total liabilities 2,836,165 3,273,272
----------- -----------
Commitments and contingencies
Stockholders' Equity
8% Convertible preferred stock 933,080 933,080
Common stock 1,264,001 1,264,001
Additional paid-in capital 2,728,083 2,728,083
Retained earnings 4,035,457 3,586,265
----------- -----------
Total stockholders' equity 8,960,621 8,511,429
----------- -----------
Total liabilities and stockholders' equity $11,796,786 $11,784,701
=========== ===========
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 24, January 25,
1998 1997
----------- -----------
Cash flows from operating activities:
Net income $ 467,852 $ 2,165
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 255,599 213,354
Loss on disposition of assets 976 2,751
Accretion of interest on investments (3,291) (8,334)
----------- -----------
721,136 209,936
----------- -----------
Change in operating accounts:
Accounts receivable 87,812 (62,899)
Inventories (620,455) 514,005
Other assets 82,579 (36,477)
Accounts payable (216,309) (245,933)
Accrued expenses (385,363) (108,071)
Income taxes payable 226,677 --
Other liabilities (6,127) (193,148)
----------- -----------
Change in operating accounts (831,186) (132,523)
----------- -----------
Net cash used by or provided by operating activities (110,050) 77,413
----------- -----------
Cash flows from investing activities:
Capital expenditures (592,147) (198,475)
----------- -----------
Net cash used by investing activities (592,147) (198,475)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of investments 1,090,821 --
Preferred stock dividend (74,646) (74,646)
Proceeds from issuance of common stock -- 4,500
----------- -----------
Net cash used by financing activities 1,016,175 (70,146)
----------- -----------
Net increase(decrease) in cash and cash
equivalents 313,978 (191,208)
Cash and cash equivalents
- Beginning of period 755,525 1,287,110
----------- -----------
- End of period $ 1,069,503 $ 1,095,902
=========== ===========
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
24, 1998, and the results of operations and cash flows for three months ended
January 24, 1998 and January 26, 1997.
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 24, October 25,
1998 1997
----------- -----------
Raw Material $ 682,148 $ 620,567
Work and tooling in process 1,144,177 1,016,845
Finished Goods 924,745 493,203
----------- -----------
Total $ 2,751,070 $ 2,130,615
=========== ===========
NOTE 3 - Property And Equipment, net
Property and Equipment, and Accumulated Depreciation are comprised of:
January 24, October 25,
1998 1997
----------- -----------
Production machinery and equipment $ 5,302,871 $ 4,946,390
Office furniture and equipment 2,422,659 2,321,844
Laboratory and machine shop equipment 1,509,208 1,428,516
Leasehold improvements 810,943 812,120
----------- -----------
Total property and equipment 10,045,681 9,508,870
Less accumulated depreciation (6,214,080) (6,014,535)
----------- -----------
Net property and equipment $ 3,831,601 $ 3,494,335
=========== ===========
NOTE 4 - Quasi reorganization
Effective October 29, 1994, the Board of Directors approved a
quasi-reorganization which had the impact of eliminating the retained earnings
deficit of $2,407,467 as an adjustment to the additional paid-in capital.
6
<PAGE>
NOTE 5 - Earnings Per Share
Effective October 26, 1997, the Company adopted Statement of Financial
Accounting Standard No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128
replaced the presentation of primary earnings per share (EPS) and fully diluted
EPS with a presentation of basic EPS and diluted EPS. Basic earnings per share
are based on the weighted average number of common shares outstanding during the
periods. Diluted earnings per share are based on the weighted average number of
common shares outstanding and potential dilution of securities that could share
in earnings.
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------
January 24, January 25,
Numerator: 1998 1997
------------ ------------
<S><C>
Net income (loss) numerator for basic
earnings per share - income (loss)
available to common shareholders $ 449,190 $ (16,497)
Effect of dilutive securities:
Preferred Stock Dividends 18,662 18,662
------------ ------------
Numerator for diluted earnings per share
Income available to common shareholders
after assumed conversion $ 467,852 $ 2,165
Denominator:
Denominator for basic earnings per share:
Weighted average shares outstanding
during the period 12,640,011 12,615,011
Effect of Dilutive Securities:
Employee Stock Options 53,482 52,639
Assumed Conversion of Preferred Stock 3,732,320 3,732,320
------------ ------------
Denominator for diluted earnings per share 16,425,813 16,399,970
------------ ------------
Earnings per Share:
Basic $ .04 $ .00
=== ===
Diluted $ .03 $ .00
=== ===
</TABLE>
7
<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 25, 1997.
RESULTS OF OPERATIONS
First Quarter FY 1998 Compared with First Quarter FY 1997
The Company's sales of $4,803,671 in the first quarter of fiscal year 1998
surpassed last year's first quarter by 13% due principally to higher technical
services sales as well as product sales. Net income reached $467,852, reflecting
a major improvement over the previous year's first quarter breakeven results
because of the gains in product sales as well as significantly higher production
levels.
Shipments of light vehicle windshield washer nozzles and defroster outlets of
$4,334,677 were 7% above the FY 1997 first quarter sales of $4,061,350. The gain
was attributable to larger washer nozzle shipments to the Japanese automotive
manufacturing plants in the United States, as well as to one major U.S.
manufacturer. Defroster outlet sales, on the other hand, decreased sharply as
the demand for certain models declined. Technical services sales, principally of
customer tooling, increased 157% to $468,994 from last year's first quarter
sales of $182,773 as more new tools were approved for the manufacture of new
washer nozzles.
Gross profit in the FY 1998 first quarter was $1,508,285, 39% greater than the
previous year's first quarter of $1,086,042. In addition to the increase in
sales, the major difference was the lower cost per part due to higher production
levels this year as inventories were built to more appropriate levels to meet
customer service requirements in contrast to last year when plant layoffs were
carried out to bring inventories down in line with shipment levels.
Selling, general and administrative expenses at $620,748 were 26% lower than
last year's first quarter principally due to the elimination of sales
commissions to manufacturer's representatives as the Company operated with its
own sales force and office this year.
Research and development costs declined 34% to $180,966 in FY 1998's first
quarter from the previous year's first quarter as supporting engineering efforts
were redirected to customer product and tooling programs.
Operating income rose to $706,571 in this year's first quarter in contrast to
last year's first quarter operating loss of $29,701.
The provision and benefit for income taxes, both federal and state, have been
determined based upon an estimate of the total year's pretax income.
8
<PAGE>
FINANCIAL CONDITION
The Company's working capital of $5,521,772 at January 24, 1998, increased
$106,817 from the previous year end at October 25, 1997. The current ratio
increased from 2.95 to 3.35 during the first quarter. Inventories increased
$620,455 as a result of the high production levels during the first quarter to
provide the company with the capability to meet customer service requirements.
Accrued expenses declined $441,347 as certain year-end accruals and the
preferred stock dividend were paid in the first quarter.
Cash flow during the FY 1998 first quarter was positive $313,978 derived from
the sales of temporary investments. Aside from these sales, cash flow was
negative $776,843 principally due to purchases of property and equipment for
$592,147 and to the investments in inventories for $620,455. Three new electric
injection molding machines were added during the first quarter as well as
various other equipment. The cash flow from adjusted net income, which includes
depreciation, was $721,136.
North American light vehicle production, which generates most of the Company's
sales, increased 10.6% in the fourth calendar quarter of 1997 versus the same
period in 1996. Production for the first calendar quarter of 1998 is forecasted
by Ward's Automotive Reports to increase 1% 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,
available cash, and the Company's credit line are expected to provide the funds
needed for near-term working capital requirements and capital expenditures.
9
<PAGE>
BOWLES FLUIDICS CORPORATION
PART II. OTHER INFORMATION
FOR THE THREE MONTHS ENDED JANUARY 24, 1998
Item 6. Exhibits and Reports on Form 8-K
Exhibit Description
------- -----------
(a) Exhibit 20 Report furnished to Security Holders
(b) Reports on Form 8-K none
10
Exhibit 20
BOWLES FLUIDICS CORPORATION
6625 Dobbin Road, Columbia, Maryland 21045-4707 USA
Phone: 410-381-0400 Fax: 410-381-2718
March 10, 1998
TO THE STOCKHOLDERS OF BOWLES FLUIDICS CORPORATION:
The first quarter's sales were higher than last year and also better than the
budget. In addition to increased delivery of washer nozzles to both domestic and
transplant customers, completion of tooling in this period contributed to the
sales volume.
Progress continues on the AC outlet programs as we have released scheduled
production and prototype orders for tooling. Likewise, tooling orders have been
placed for each of the two household products programs.
The addition of three new molding machines and increased production levels
allowed us to meet increased requirements as well as bring our inventory to
normal levels so that overtime participation is at a minimum.
We continue to develop cell manufacturing processes as part of the cost
reduction efforts and maintain the focus of our sales efforts on the AC and
household product areas.
Sincerely,
Ronald Stouffer
President
RS:lto
11
<PAGE>
BOWLES FLUIDICS CORPORATION EXHIBIT 20
- ------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 24, 1998 January 25, 1997
---------------- ----------------
<S><C>
Net Sales $ 4,803,671 $ 4,244,123
Cost of Sales 3,295,386 3,158,081
Selling, General and Administrative Expenses 620,748 840,982
Research and Development Costs 180,966 274,761
Interest Income and Other (Expense), Net 32,499 17,034
--------------- ---------------
Income (loss) before Taxes $ 739,070 $ (12,667)
Provision (benefit) for Income Taxes 271,218 (14,832)
--------------- ---------------
Net Income $ 467,852 $ 2,165
--------------- ---------------
Income (loss) applicable to Common Shareholders $ 449,190 $ (16,497)
=============== ================
Net Income per Share
Basic $ 0.04 $ 0.00
--------------- ----------------
Diluted $ 0.03 $ 0.00
--------------- ----------------
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
January 24,1998 October 25,1997
--------------- ---------------
Assets
Cash and Cash Equivalents $ 1,069,503 $ 755,525
Investments 474,916 1,563,121
Accounts Receivable 3,024,251 3,112,063
Inventories 2,751,070 2,130,615
Other Current Assets 551,458 634,037
--------------- ---------------
Total Current Assets 7,871,198 8,195,361
Property, Plant and Equipment, Net 3,831,601 3,494,335
Other Assets 93,987 95,005
--------------- ---------------
Total Assets $ 11,796,786 $ 11,784,701
=============== ===============
Liabilities and Stockholders' Equity
Accounts Payable--Trade $ 906,127 $ 1,122,437
Accrued Expenses and Other Liabilities 1,168,460 1,609,807
Income Taxes Payable 274,839 48,162
Total Current Liabilities 2,349,426 2,780,406
Other Liabilities and Deferred Income Taxes 486,739 492,866
--------------- ---------------
Total Liabilities 2,836,165 3,273,272
--------------- ---------------
8% Convertible Preferred Stock 933,080 933,080
Common Stock 1,264,001 1,264,001
Additional Paid-in Capital 2,728,083 2,728,083
Retained Earnings 4,035,457 3,586,265
--------------- ---------------
Stockholders' Equity 8,960,621 8,511,429
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 11,796,786 $ 11,784,701
=============== ===============
</TABLE>
12
<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
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-24-1998
<CASH> 1,069,503
<SECURITIES> 474,916
<RECEIVABLES> 3,024,251
<ALLOWANCES> 0
<INVENTORY> 2,751,070
<CURRENT-ASSETS> 7,871,198
<PP&E> 10,045,681
<DEPRECIATION> 6,214,080
<TOTAL-ASSETS> 11,796,786
<CURRENT-LIABILITIES> 2,349,426
<BONDS> 0
0
933,080
<COMMON> 1,264,001
<OTHER-SE> 6,763,540
<TOTAL-LIABILITY-AND-EQUITY> 11,796,786
<SALES> 4,803,671
<TOTAL-REVENUES> 4,803,671
<CGS> 3,295,386
<TOTAL-COSTS> 4,097,100
<OTHER-EXPENSES> (32,499)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 739,070
<INCOME-TAX> 271,218
<INCOME-CONTINUING> 467,852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 467,852
<EPS-PRIMARY> .04
<EPS-DILUTED> .03
</TABLE>
