<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 March 30, 1996
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 May 10, 1996, 6,456,404 shares of the Registrant's Common Stock, and 119,900
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)
March 30, 1996 and September 30, 1995................... 2
Consolidated Statements of Income (Unaudited)
Second Quarter and Six Months Ended
March 30, 1996 and April 1, 1995........................ 3
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 30, 1996 and
April 1, 1995 .......................................... 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 5. Submission of Matters to a Vote of Security Holders...... 7
Item 6. Exhibits and Reports on Form 8-K......................... 8
</TABLE>
1
<PAGE> 3
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
MARCH 30, 1996 SEPTEMBER 30, 1995
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 0 $ 739
Accounts receivable, net 3,791 3,882
Inventories 6,234 5,420
Prepaid expenses 411 457
Deferred income taxes 1,698 1,698
- -------------------------------------------------------------------------
Total Current Assets 12,134 12,196
Property, Plant and Equipment, net 1,221 1,335
Deferred Income Taxes 1,891 2,167
Other Assets, net 1,691 1,734
- -------------------------------------------------------------------------
Total Assets $ 16,937 $ 17,432
- -------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term 632 661
Accounts payable 1,121 1,453
Accrued salaries & benefits 1,227 2,092
Accrued expenses 1,170 1,101
- -------------------------------------------------------------------------
Total Current Liabilities 4,150 5,307
Long-Term Debt 4,328 3,992
Other Long-Term Liabilities 339 338
- -------------------------------------------------------------------------
Total Liabilities 8,817 9,637
- -------------------------------------------------------------------------
Shareholders' Equity 8,120 7,795
- -------------------------------------------------------------------------
Total Liabilities and
Shareholder Equity $ 16,937 $ 17,432
- -------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 4
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SECOND QUARTER FIRST SIX MONTHS
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 6,951 $ 6,609 $ 12,930 $ 12,630
Cost of sales 4,462 3,872 8,335 7,598
- ----------------------------------------------------------------------------------------------
Gross margin 2,489 2,737 4,595 5,032
- ----------------------------------------------------------------------------------------------
Expenses:
Selling, general and 1,783 1,760 3,384 3,319
administrative
Product development 165 221 318 388
Interest expense 123 198 261 371
Other (income), net (99) (165) (225) (283
- ----------------------------------------------------------------------------------------------
Total expenses 1,972 2,014 3,738 3,795
- ----------------------------------------------------------------------------------------------
Income before income taxes 517 723 857 1,237
Provision for income taxes 209 36 345 88
- ----------------------------------------------------------------------------------------------
NET INCOME $ 308 $ 687 $ 512 $ 1,149
- ----------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE:
Primary $ 0.03 $ 0.09 $ 0.05 $ 0.15
Fully diluted (Note) $ 0.08 $ 0.14
- ----------------------------------------------------------------------------------------------
Weighted average number of
common shares and equivalents
Primary 6,624,184 6,563,753 6,628,506 6,563,817
Fully diluted 8,223,651 8,163,220 8,227,973 8,163,284
- ----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
Note: For the second quarter and first six months of 1996, fully diluted net
income per share is considered to be the same as primary net income per share
since the effect of the potentially dilutive preferred stock is currently
antidilutive.
3
<PAGE> 5
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
FIRST SIX MONTHS
MARCH 30, APRIL 1,
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 512 $ 1,149
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 262 256
Deferred income taxes 276 0
Net changes in balance sheet accounts:
Accounts receivable 91 592
Inventories (814) (1,109)
Prepaid expenses 46 (185)
Accounts payable (332) 262
Accrued salaries & expenses (796) (319)
Other 17 (19)
- -----------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (738) 627
- -----------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (121) (252)
- -----------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings under notes payable 4,610 507
Retirement of debt (4,303) (254)
Payment of dividends on preferred stock (180) (180)
Other (7) 0
- -----------------------------------------------------------------------------------------
Net cash provided by financing activities 120 73
- -----------------------------------------------------------------------------------------
Net change in cash (739) 448
Cash at beginning of period 739 147
- -----------------------------------------------------------------------------------------
Cash at end of period $ 0 $ 595
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid during the period for:
Interest $ 277 $ 371
Income taxes $ 132 $ 77
- -----------------------------------------------------------------------------------------
</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 March 30, 1996 and September 30,
1995, the consolidated statements of income for the second quarter and six
months ended March 30, 1996 and April 1, 1995, and the consolidated
statements of cash flows for the first six months ended March 30, 1996 and
April 1, 1995, 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 September 30, 1995. The results of operations for
the above noted periods ended March 30, 1996, are not necessarily
indicative of the operating results for the full year.
2. INVENTORIES
Inventories consist of the following ($ in thousands):
<TABLE>
<CAPTION>
MARCH 30, SEPTEMBER 30,
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 3,123 $ 2,164
Work-in-process 2,946 2,891
Finished goods 165 365
- ---------------------------------------------------------------------------------
$ 6,234 $ 5,420
- ---------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
SALES
Sales for the second quarter ended March 30, 1996, were $6,951,000 compared to
prior year sales for the same period of $6,609,000. For the first six months of
fiscal 1996, sales were $12,930,000 compared to sales of $12,630,000 for the
same period in fiscal 1995.
Sales in the microelectronic segment for the second quarter of fiscal 1996
increased by approximately $400,000 versus the same period in the prior year and
sales for the first six months of fiscal 1996 were up by approximately $900,000
versus the same period in fiscal 1995. Microelectronic segment sales increases
for both the second quarter and first six months were due to an increase in
sales of SRAM and Flash memories.
Sales in the electromechanical segment for the second quarter of fiscal 1996
were $60,000 lower, versus the same period in the prior year and sales for the
first six months of fiscal 1996 were down by approximately $600,000 versus the
same period in fiscal 1995. Electromechanical segment sales were down due to
fewer shipments in the interface product line as compared to the prior year.
The Company believes that changes in defense spending will not have a material
adverse affect on the Company's overall results. It appears that the
microelectronic segment could continue to experience growth because of the
increase demand resulting from upgrading existing systems. However, the
electromechanical segment has been negatively impacted.
GROSS MARGIN
Gross margin dollars for the second quarter of 1996 were approximately $250,000
less than the same period in 1995. The gross margin dollars for the six months
ended March 30, 1996 were $437,000 below the same period for the prior year. The
second quarter gross margin percentage in fiscal 1996 decreased to 35.8% from
41.4% in fiscal 1995, and the gross margin percentages for the first six months
decreased to 35.5% from 39.8%. Gross margin in the microelectronic segments for
the second quarter and six months of fiscal 1996 were 42.0% and 41.0%
respectively versus 40.6% and 40.2%, respectively, in the same periods due
principally to new products and custom products with higher margins. The gross
margin percentage in the electromechanical segment for the second quarter and
first six months of fiscal 1996 were 20.6% and 19.3% respectively, versus 42.8%
and 37.6% respectively, in the same periods of the prior year, due principally
to the settlement of the Picatinny Arsenal claim in the second quarter of 1995.
The settlement increased 1995's second quarter gross margin by $375,000.
Additionally, start up costs associated with a new product were incurred during
the quarter. The 1996 six month margin was also affected by losses in the
ordnance product line and inefficiencies associated with lower volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were approximately the same for the
second quarter of both fiscal years, 1996 and 1995, and increased by $65,000 for
the first six months of fiscal 1996 as compared with 1995. The increase was
primarily due to the increased sales efforts in the microelectronics division.
6
<PAGE> 8
PRODUCT DEVELOPMENT EXPENSES
Product development expenses for the second quarter of fiscal 1996 were
approximately $56,000 lower than the same period for fiscal 1995 and such
expenses were $70,000 lower for the first six months of 1996 as compared to the
same period for the prior year. This was a result of decreased spending in the
electromechanical segment primarily on the products related to the sterilizer
product line. This decrease was partially offset by the microelectronics
segments increased spending on new memory products.
INTEREST EXPENSE
Interest expense for the second quarter and first six months ended March 30,
1996, decreased by $75,000 and $110,000 respectively as compared to the same
periods in fiscal 1995. This was a result of a combination of lower interest
rates and lower borrowings in 1996.
PROVISION FOR INCOME TAXES
The provision for income taxes increased by approximately $173,000 for the
second quarter of fiscal 1996 as compared to 1995 and by $257,000 for the six
months ended March 31, 1996 as compared to the first six months of fiscal 1995.
These increases were a result of a change in accounting which began with the
Company's adjustment of the valuation allowance related to the Company's
deferred tax assets in the third quarter of fiscal 1995. The change was in
accordance with the provisions of Statement of Financial Accounting Standards
No. 109. The affect of this change is that the Company's effective tax rate now
approximates the statutory rate, resulting in higher income tax expense in
fiscal 1996 as compared to the same period in 1995.
FINANCIAL CONDITION AND LIQUIDITY
In the first six months of fiscal 1996 working capital increased to $7,984,000
from $6,889,000, principally as a result of the profitability of the company and
the Bank One refinancing which increased long term debt. Changes in the
components of working capital are detailed in the Consolidated Statements of
Cash Flows.
The Company's operations consumed $738,000 of cash in the first six months of
fiscal 1996. 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.
PART II OTHER INFORMATION
ITEM 5
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders was held on February 2, 1996.
7
<PAGE> 9
(b) At that meeting all of the current directors were re-elected. The
vote was as follows:
<TABLE>
<CAPTION>
Name For Against
---- --- -------
<S> <C> <C>
Fred N. Gerard 5,738,545 142,935
Thomas K. Lanin 5,738,545 142,935
Steven P. Matteucci 5,738,645 142,835
Dan L. McGurk 5,738,545 142,935
Thomas M. Reahard 5,738,645 142,835
Edward A. White 5,723,615 157,865
</TABLE>
(c) At that meeting the shareholders approved ratification of Coopers &
Lybrand L.L.P. as independent auditors for fiscal 1996. The vote was as
follows:
<TABLE>
<S> <C>
For 5,277,498
Against 84,728
Abstain 69,254
</TABLE>
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
Exhibit 11 - Computation of Net Income Per Common Share
b. Reports on Form 8-K.
None
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: May , 1996
8
<PAGE> 1
EXHIBIT 11
BOWMAR INSTRUMENT CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
SECOND QUARTER FIRST SIX MONTHS
FISCAL FISCAL FISCAL FISCAL
1996 1995 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER
COMMON SHARE:
NET INCOME:
Net Income $308,000 $687,000 $511,000 $1,149,000
Less: Dividends on Preferred Stock 90,000 90,000 180,000 180,000
--------- --------- --------- ----------
Net Income Applicable to Common Stock $218,000 $597,000 $331,000 $ 969,000
========= ========= ========= ==========
SHARES:
Weighted Average Number of Common
Shares Outstanding 6,454,355 6,414,561 6,453,561 6,413,788
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 169,289 149,192 174,877 150,029
--------- --------- --------- ----------
Weighted Average Number of Shares
and Common Stock Equivalents 6,624,184 6,563,753 6,628,506 6,563,817
========= ========= ========= ==========
PRIMARY NET INCOME PER
COMMON SHARE $0.03 $0.09 $0.05 $0.15
========= ========= ========= ==========
--------------------------------------------------------------------------
FULLY DILUTED NET INCOME PER
COMMON SHARE:
NET INCOME:
Net Income $308,000 $687,000 $511,000 $1,149,000
========= ========= ========= ==========
SHARES:
Weighted Average Number of Shares
and Common Stock Equivalents 6,624,184 6,563,753 6,628,506 6,563,817
Number of Shares of Common Stock
Issued Upon Conversion of
Preferred Stock 1,599,467 1,599,467 1,599,467 1,599,467
--------- --------- --------- ----------
Weighted Average Number of Shares
and Common Stock Equivalents
Assuming Conversion of Preferred Stock 8,223,651 8,163,220 8,227,973 8,163,284
========= ========= ========= ==========
FULLY DILUTED NET INCOME PER
COMMON SHARE (SEE NOTE) $0.08 $0.14
========= ========= ========= ==========
</TABLE>
Note: For the second quarter and first six months of 1996, fully diluted Net
Income per share is considered to be the same as primary Net Income per share
since the effect of the potentially dilutive preferred stock is currently
antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,791
<ALLOWANCES> 0
<INVENTORY> 6,234
<CURRENT-ASSETS> 12,134
<PP&E> 7,179
<DEPRECIATION> (5,958)
<TOTAL-ASSETS> 16,937
<CURRENT-LIABILITIES> 4,150
<BONDS> 4,328
<COMMON> 650
0
120
<OTHER-SE> 7,350
<TOTAL-LIABILITY-AND-EQUITY> 16,937
<SALES> 12,930
<TOTAL-REVENUES> 12,930
<CGS> 8,335
<TOTAL-COSTS> 8,335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 261
<INCOME-PRETAX> 857
<INCOME-TAX> 345
<INCOME-CONTINUING> 512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 512
<EPS-PRIMARY> .05
<EPS-DILUTED> .05<F1>
<FN>
<F1>Fully diluted EPS is considered to be the same as primary EPS since the effect
of the potentially dilutive preferred stock is antidilutive.
</FN>
</TABLE>
