<PAGE> 1
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 July 1, 1995
Commission File No. 1-4817
BOWMAR INSTRUMENT CORPORATION
(Exact name of Registrant as specified in its charter)
INDIANA 35-0905052
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5080 NORTH 40TH STREET, SUITE 475
PHOENIX, ARIZONA 85018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 602/957-0271
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
At August 8, 1995, 6,446,624 shares of the Registrant's Common Stock, and
119,990 shares of the Registrant's Preferred Stock were outstanding.
<PAGE> 2
BOWMAR INSTRUMENT CORPORATION
AND
SUBSIDIARIES
INDEX
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
July 1, 1995 and October 1, 1994 . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations (Unaudited)
Third Quarter and Nine Months Ended
July 1, 1995 and July 2, 1994 . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended July 1, 1995 and
July 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial
Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 7
</TABLE>
1
<PAGE> 3
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
JULY 1, 1995 OCTOBER 1, 1994
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 367 $ 147
Accounts receivable, net 3,601 4,834
Inventories 5,187 4,866
Prepaid expenses 528 478
Deferred income taxes 1,410 0
------------------------------------------------------------------------------------------------
Total Current Assets 11,093 10,325
Property, Plant and Equipment, net 1,442 1,446
Deferred Income Taxes 1,890 0
Other Assets, net 1,666 2,012
------------------------------------------------------------------------------------------------
Total Assets $16,091 $13,783
================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 0 $ 1,135
Current portion of long-term debt 4,331 639
Accounts payable 1,203 1,036
Accrued expenses 2,918 2,306
------------------------------------------------------------------------------------------------
Total Current Liabilities 8,452 5,116
Long-Term Debt 463 4,617
------------------------------------------------------------------------------------------------
Total Liabilities 8,915 9,733
------------------------------------------------------------------------------------------------
Shareholders' Equity 7,176 4,050
------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $16,091 $13,783
================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 4
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
THIRD QUARTER FIRST NINE MONTHS
JULY 1, JULY 2,
1995 1994 1995 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 7,004 $ 6,799 $19,634 $20,519
Cost of sales 4,692 4,328 12,047 12,730
------------------------------------------------------------------------------------------------------
Gross margin 2,312 2,471 7,587 7,789
------------------------------------------------------------------------------------------------------
Expenses:
Selling, general and
administrative 2,727 1,638 6,308 5,085
Product development 209 175 578 471
Interest 208 178 579 555
Other expense (income), net 235 (80) (48) (213)
------------------------------------------------------------------------------------------------------
Total expenses 3,379 1,911 7,417 5,898
------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (1,067) 560 170 1,891
Provision (benefit) for income taxes (3,270) 41 (3,182) 184
------------------------------------------------------------------------------------------------------
NET INCOME $ 2,203 $ 519 $ 3,352 $ 1,707
======================================================================================================
NET INCOME PER COMMON SHARE:
PRIMARY $ 0.32 $ 0.07 $ 0.47 $ 0.22
Fully diluted $ 0.27 $ 0.06 $ 0.41 $ 0.21
======================================================================================================
Weighted average number of
common shares and equivalents:
Primary 6,554,727 6,579,520 6,557,810 6,550,655
Fully diluted 8,173,166 8,181,786 8,169,609 8,152,921
------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 5
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
FIRST NINE MONTHS
JULY 1, JULY 2,
1995 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,352 $ 1,707
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 425 554
Deferred income taxes (3,300) 0
Write-off of intangible assets 319 0
Net changes in balance sheet accounts:
Accounts receivable 1,233 (546)
Inventories (321) (1,973)
Prepaid expenses (50) (187)
Accounts payable 167 673
Accrued expenses 612 777
Other 34 222
-----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,471 1,227
-----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (419) (498)
-----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings under notes payable 551 1,521
Retirement of debt (2,148) (1,852)
Payment of dividends on preferred stock (270) (270)
Exercise of stock options 35 188
-----------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,832) (413)
-----------------------------------------------------------------------------------------------------
Net increase in cash 220 316
Cash at beginning of period 147 136
-----------------------------------------------------------------------------------------------------
Cash at end of period $ 367 $ 452
-----------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid during the period for:
Interest $ 518 $ 593
Income taxes $ 165 $ 91
-----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 6
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of July 1, 1995 and October 1, 1994,
the consolidated statements of operations for the third quarter and nine
months ended July 1, 1995 and July 2, 1994, and the consolidated
statements of cash flows for the first nine months ended July 1, 1995 and
July 2, 1994, have been prepared by the Registrant without audit. In the
opinion of management all adjustments which are of a normal recurring
nature necessary to present fairly such financial statements have been
made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Registrant's Annual
Report on Form 10-K for the fiscal year ended October 1, 1994. The
results of operations for the above noted periods ended July 1, 1995, are
not necessarily indicative of the operating results for the full year.
2. INVENTORIES
Inventories consist of the following ($ in thousands):
<TABLE>
<CAPTION>
JULY 1, OCTOBER 1,
1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $2,041 $1,807
Work-in-process 2,725 2,718
Finished goods 421 341
-------------------------------------------------------------------------------------------------
$5,187 $4,866
=================================================================================================
</TABLE>
3. INCOME TAXES
The differences between the U.S. effective and statutory tax rates for 1995 are
consistent with fiscal year 1994, except for the impact of the change in the
valuation allowance, which resulted in a benefit of $3,300,000.
5
<PAGE> 7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
SALES
Sales for the third quarter ended July 1, 1995, were $7,004,000 compared to
prior year sales for the third quarter of $6,799,000. For the first nine
months of fiscal 1995, sales were $19,634,000 compared to sales of $20,519,000
for the same period in fiscal 1994.
Sales in the electronic/microelectronic segment for the third quarter of fiscal
1995 were up by approximately $300,000 versus the same period in the prior
year. Sales in this segment for the first nine months of fiscal 1995 were down
by approximately $400,000 due primarily to decreased sales of custom military
multi-chip modules. The current backlog in this segment for high density
memories indicates that fiscal 1995 segment sales will approximate last year's
sales.
Sales in the electromechanical segment for the third quarter of fiscal 1995
increased by approximately $100,000 versus the same period in the prior year
and sales for the first nine months of fiscal 1995 were down by approximately
$500,000 versus the same period in fiscal 1994. For the third quarter of
fiscal 1995 the decrease in sales resulted from decreases in all product lines
offset partially by sales of rapid heat sterilizers which were acquired in the
fourth quarter of fiscal 1994. For the first nine months of fiscal 1995 the
decrease in sales revenues resulted primarily from decreased activity in the
mechanical product line and absence of prototype sales of a high-definition,
low-intensity dental x-ray machine which occurred in fiscal 1994. These
decreases were partially offset by the $435,000 ordnance claim settlement
recognized as a sale in the second quarter of fiscal 1995 and sales in fiscal
1995 of rapid heat sterilizers. The reduction in sales in this segment is
related to the overall decline in Defense spending. The backlog for
electromechanical sales is lower than last year and is expected to result in
lower sales than last year in this segment throughout the remainder of fiscal
1995.
The Company continues to believe that changes in Defense spending will not have
a material adverse affect on the Company's overall results. However, its
appears that although the electronic/microelectronic segment of the Company's
business could continue to experience growth as a result of changes in Defense
spending, the Company's electromechanical segment is being materially and
adversely affected. Accordingly, the Company continues to pursue its goal of
reduced dependency on the Defense industry. During the fiscal years 1994 and
1995, among other things, the electromechanical segment delivered three
prototypes of a high-definition, low-intensity dental x-ray machine for
Panoramic Corporation, and acquired the net assets and business of Cox Sterile
Products which manufactured a dry heat sterilizer for sale to the medical and
dental markets. In addition, the Company is continuing development of an
instrument sterilizing autoclave for sale to medical and dental markets and
continues to seek acquisitions.
GROSS MARGIN
Gross margin dollars for the third quarter of fiscal 1995 were down by
approximately $160,000 versus the same period in fiscal 1994 and for the first
nine months of fiscal 1995 were down by approximately $200,000 versus the same
period in fiscal 1994. The gross margin percentage for the third quarter of
fiscal 1995 decreased to 33.0% from 36.3% in fiscal 1994, and the gross margin
percentage for the first nine months of fiscal 1995 increased slightly to 38.6%
from 38.0% in fiscal 1994.
6
<PAGE> 8
Gross margin percentages in the electronic/microelectronic segment for the
third quarter and first nine months of fiscal 1995 were 46.1% and 44.1%,
respectively versus 39.8% and 40.8%, respectively in the same periods of the
prior year, due to a shift in the product mix to higher margin products.
The gross margin percentage in the electromechanical segment for the third
quarter and first nine months of fiscal 1995 were 6.6% and 26.4%, respectively
versus 30.1% and 32.4%, respectively in the same periods of the prior year.
Third quarter gross margin in this segment was negatively impacted by
adjustments of approximately $240,000 related to additional warranty reserves
and the write- off of excess inventories related to the rapid heat sterilizer
product line.
The year-to-date fiscal 1995 gross margin has been negatively impacted by the
lower sales volume in this segment as well as by the adjustments noted above,
both of which have been partially offset by the positive impact on gross margin
of $435,000 in ordnance claim income recognized in the second quarter of 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses for the third quarter and first
nine months ended July 1, 1995, increased by $1,089,000 and $1,223,000,
respectively, compared to the same periods in fiscal 1994. These increases
were due primarily to charges in the third quarter of $338,000 for the post
employment benefits for a former executive, the write-off of $236,000 in
prepaid royalty payments related to the Co Sterile Products acquisition and
reserve of $153,000 for employee medical insurance expenses. Additionally,
there has been increased selling and marketing expenses in the
electromechanical segment related to the new rapid heat sterilizer product
line.
PRODUCT DEVELOPMENT EXPENSE
Product development expenses for the third quarter and first nine months of
fiscal 1995, increased by approximately $34,000 and $109,000, respectively
compared to the same periods in fiscal 1994. The increase in the quarter was
due primarily to development costs related to the autoclave and other products
in the electromechanical segment, while the year-to-date increase also reflects
increased spending in the electronic/microelectronic segment for engineering
labor related to new product development.
INTEREST EXPENSE
Interest expense in the third quarter and first nine months of fiscal 1995 were
approximately the same as for these same periods in fiscal 1994. The effect of
higher interest rates was offset by decreased borrowing requirements during
fiscal 1995.
OTHER EXPENSE (INCOME)
Other expense (income) for the third quarter and first nine months of fiscal
1995, includes a charge of $319,000 related to the write-off of intangible
assets from in the Co Sterile Products acquisition.
PROVISION (BENEFIT) FOR INCOME TAXES
During the third quarter of fiscal 1995, the Company recorded a $3,300,000 tax
credit resulting from the adjustment of the valuation allowance related to the
Company's deferred tax assets. The adjustment is in accordance with the
provisions of Statement of Financial Accounting Standards No. 109. As a result
the effective tax rate in future years will approximate the statutory rate.
7
<PAGE> 9
NET INCOME
Net income for the quarter and nine months ended July 1, 1995, was $2,203,000
and $3,352,000, respectively, or $0.32 and $0.47 per primary share,
respectively, compared to net income for the quarter and nine months ended July
2, 1994 of approximately $519,000 and $1,707,000, respectively, or $0.07 and
$0.22 per primary share, respectively. The results for 1995 were significantly
affected by the income tax benefits and various charges against income during
the third quarter.
FINANCIAL CONDITION AND LIQUIDITY
In the first nine months of fiscal 1995 working capital decreased to $2,641,000
from $5,209,000, due principally to the reclassification to short term debt,
during the first quarter of fiscal 1995, of $2,477,000 of term debt and
$1,826,000 in convertible debentures which were classified as long-term on
October 2, 1994. The remaining balance of the Company's term loan is due in
November, 1995, and the remaining balance of the 13.5% convertible debentures
matures on December 15, 1995. Although the Company expects to refinance the
term debt, credit facility and debentures in the fourth quarter of fiscal 1995,
they have been classified as current since the refinancing is not yet complete.
Changes in the components of working capital are detailed in the Consolidated
Statements of Cash Flows.
The Company's operations generated cash in the first nine months of fiscal
1995, of $2,471,000. The Company projects positive cash flow for the remainder
of the year, which, when combined with the Company's revolving credit facility,
should be sufficient in Management's opinion to fund the Company's cash needs
for the foreseeable future.
ITEM 5
OTHER INFORMATION
None
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
Exhibit 11 - Computation of Net Income Per Common Share
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K.
Form 8-K dated June 9, 1995 regarding announcement of management changes
and amendment to employment agreement.
8
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
BOWMAR INSTRUMENT CORPORATION
/S/ Joseph G. Warren, Jr.
_______________________________
Joseph G. Warren, Jr.
Vice President Finance
Dated: August 11, 1995
9
<PAGE> 1
Exhibit 11
BOWMAR INSTRUMENT CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
THIRD QUARTER FIRST NINE MONTHS
FISCAL FISCAL FISCAL FISCAL
1995 1994 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER
COMMON SHARE:
NET INCOME:
Net Income $2,203,000 $ 519,000 $3,352,000 $1,707,000
Less: Dividends on Preferred Stock 90,000 90,000 270,000 270,000
---------- ---------- ---------- ----------
Net Income Applicable to Common Stock $2,113,000 $ 429,000 $3,082,000 $1,437,000
========== ========== ========== ==========
SHARES:
Weighted Average Number of Common
Shares Outstanding 6,419,124 6,420,671 6,415,567 6,382,634
Number of Common Stock Equivalents
Assuming Exercise of Options Reduced
by the Number of Shares Which Could
Have Been Purchased With the Proceeds
From Exercise of Such Options 135,603 158,849 142,243 168,021
---------- ---------- ---------- ----------
Weighted Average Number of Shares
and Common Stock Equivalents 6,554,727 6,579,520 6,557,810 6,550,655
========== ========== ========== ==========
PRIMARY NET INCOME PER
COMMON SHARE $ 0.32 $ 0.07 $ 0.47 $ 0.22
========== ========== ========== ==========
---------------------------------------------------------------------------
FULLY DILUTED NET INCOME PER
COMMON SHARE:
NET INCOME:
Net Income $2,203,000 $ 519,000 $3,352,000 $1,707,000
========== ========== ========== ==========
SHARES:
Weighted Average Number of Shares
and Common Stock Equivalents 6,573,699 6,579,520 6,570,142 6,550,655
Number of Shares of Common Stock
Issued Upon Conversion of
Preferred Stock 1,599,467 1,602,266 1,599,467 1,602,266
---------- ---------- ---------- ----------
Weighted Average Number of Shares
and Common Stock Equivalents
Assuming Conversion of Preferred Stock 8,173,166 8,181,786 8,169,609 8,152,921
========== ========== ========== ==========
FULLY DILUTED NET INCOME PER
COMMON SHARE $ 0.27 $ 0.06 $ 0.41 $ 0.21
========== ========== ========== ==========
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from statement
and balance sheets and is qualified in its entirety by reference to such 10-Q
for the quarter ended July 1, 1995.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> JUL-1-1995
<CASH> 367
<SECURITIES> 0
<RECEIVABLES> 3,601
<ALLOWANCES> 0
<INVENTORY> 5,187
<CURRENT-ASSETS> 11,093
<PP&E> 1,442
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,091
<CURRENT-LIABILITIES> 8,452
<BONDS> 0
<COMMON> 642
0
120
<OTHER-SE> 6,414
<TOTAL-LIABILITY-AND-EQUITY> 16,091
<SALES> 19,634
<TOTAL-REVENUES> 19,634
<CGS> 12,047
<TOTAL-COSTS> 12,047
<OTHER-EXPENSES> 6,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 579
<INCOME-PRETAX> 170
<INCOME-TAX> (3,182)
<INCOME-CONTINUING> 3,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,352
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.41
</TABLE>
