<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 June 29, 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 August 6, 1996, 6,479,163 shares of the Registrant's Common Stock, and
119,948 shares of the Registrant's Preferred Stock were outstanding.
<PAGE> 2
BOWMAR INSTRUMENT CORPORATION
AND
SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I FINANCIAL INFORMATION............................................ 2-7
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
June 29, 1996 and September 30, 1995................... 2
Consolidated Statements of Income (Unaudited)
Third Quarter and Nine Months Ended
June 29, 1996 and July 1, 1995......................... 3
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 29, 1996 and
July 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 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>
- --------------------------------------------------------------------------------
JUNE 29, 1996 SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 0 $ 739
Accounts receivable, net 3,942 3,882
Inventories 7,366 5,420
Prepaid expenses 433 457
Deferred income taxes 1,698 1,698
- --------------------------------------------------------------------------------
Total Current Assets 13,439 12,196
Property, Plant and Equipment, net 1,149 1,335
Deferred Income Taxes 1,708 2,167
Other Assets, net 1,681 1,734
- --------------------------------------------------------------------------------
Total Assets $ 17,977 $ 17,432
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 594 $ 661
Accounts payable 1,482 1,453
Accrued salaries & benefits 1,259 2,092
Accrued expenses 883 1,101
- --------------------------------------------------------------------------------
Total Current Liabilities 4,218 5,307
Long-Term Debt 5,047 3,992
Other Long-Term Liabilities 339 338
- --------------------------------------------------------------------------------
Total Liabilities 9,604 9,637
- --------------------------------------------------------------------------------
Shareholders' Equity 8,373 7,795
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 17,977 $ 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>
- -------------------------------------------------------------------------------------------
THIRD QUARTER FIRST NINE MONTHS
FISCAL FISCAL FISCAL FISCAL
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 5,484 $ 7,004 $18,415 $19,634
Cost of sales 3,222 4,962 11,558 12,561
- -------------------------------------------------------------------------------------------
Gross margin 2,262 2,042 6,857 7,073
- -------------------------------------------------------------------------------------------
Expenses:
Selling, general and 1,663 2,430 5,048 5,748
administrative
Product development 127 236 445 624
Interest expense 110 208 371 579
Other expense (income), net (181) 235 (411) (48)
- -------------------------------------------------------------------------------------------
Total expenses 1,719 3,109 5,453 6,903
- -------------------------------------------------------------------------------------------
Income (loss) before income taxes 543 (1,067) 1,404 170
Provision (benefit) for income taxes 215 (3,270) 563 (3,182)
- -------------------------------------------------------------------------------------------
NET INCOME $ 328 $ 2,203 $ 841 $ 3,352
===========================================================================================
NET INCOME PER COMMON SHARE:
Primary $ 0.04 $ 0.32 $ 0.09 $ 0.47
Fully diluted (Note 3) $ 0.27 $ 0.41
===========================================================================================
Weighted average number of
common shares and equivalents:
Primary 6,537,354 6,554,727 6,575,239 6,557,810
Fully diluted 8,136,821 8,173,166 8,174,706 8,169,609
===========================================================================================
</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
JUNE 29, JULY 1,
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 841 $ 3,352
Adjustments to reconcile net income
to net cash provided (used) by operations:
Depreciation and amortization 396 425
Deferred income taxes 459 (3,300)
Write-off of intangible assets 0 319
Net changes in balance sheet accounts:
Accounts receivable (62) 1,233
Inventories (1,946) (321)
Prepaid expenses 24 (50)
Accounts payable 34 167
Accrued salaries & expenses (1,050) 612
Other 28 34
- -----------------------------------------------------------------------------
Net cash provided (used) by operating activities (1,276) 2471
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (170) (419)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings under notes payable 5,444 551
Retirement of debt (4,461) (2,148)
Payment of dividends on preferred stock (270) (270)
Other (6) 35
- -----------------------------------------------------------------------------
Net cash provided (used) by financing activities 707 (1,832)
- -----------------------------------------------------------------------------
Net change in cash (739) 220
Cash at beginning of period 739 147
- -----------------------------------------------------------------------------
Cash at end of period $ 0 $ 367
=============================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid during the period for:
Interest $ 403 $ 518
Income taxes $ 142 $ 165
=============================================================================
</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 June 29, 1996 and September 30, 1995,
the consolidated statements of income for the third quarter and nine months
ended June 29, 1996 and July 1, 1995, and the consolidated statements of cash
flows for the first nine months ended June 29, 1996 and July 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 June 29, 1996, are not necessarily indicative of the
operating results for the full year.
2. INVENTORIES
Inventories consist of the following ($ in thousands):
<TABLE>
<CAPTION>
JUNE 29, SEPTEMBER 30,
1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Raw materials $ 4,319 $ 2,164
Work-in-process 2,883 2,891
Finished goods 164 365
- ---------------------------------------------------------
$ 7,366 $ 5,420
=========================================================
</TABLE>
3. EARNINGS PER SHARE
For the third quarter and first nine 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.
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 June 29, 1996, were $5,484,000 compared to
prior year sales for the same period of $7,004,000. For the first nine months of
fiscal 1996, sales were $18,415,000 compared to $19,634,000 for the same period
in fiscal 1995.
Sales in the microelectronic segment for the third quarter of fiscal 1996
decreased by approximately $750,000 versus the same period in the prior year and
sales for the first nine months of fiscal 1996 were up by approximately $100,000
versus the same period in fiscal 1995. The decline in the third quarter was
attributed to disruption in the production schedules as a result of the
previously announced federal investigation.
Sales in the electromechanical segment for the second quarter of fiscal 1996
were approximately $750,000 lower versus the same period in the prior year and
the sales for the nine months of fiscal 1996 were down by approximately
$1,300,000 versus the same period in fiscal 1995. Electromechanical segment
sales were down due to lower shipments as a result of reduced defense spending
primarily in our 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 should resume its 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 third quarter of 1996 were approximately $220,000
more than the same period in 1995. The gross margin dollars for the nine months
ended June 29, 1996 were approximately $216,000 below the same period for the
prior year. The third quarter gross margin percentage in fiscal 1996 increased
to 41.2% from 29.2% in fiscal 1995, and the gross margin percentages for the
first nine months increased to 37.2% from 36.0%. Gross margin in the
microelectronic segments for the third quarter and nine months of fiscal 1996
were 46.7% and 44.8% respectively versus 46.1% and 44.1%, respectively, in the
same periods in the prior year, due principally to sales of new and custom
products with higher margins. The gross margin percentage in the
electromechanical segment for the third quarter and first nine months of fiscal
1996 were 33.4% and 23.6% respectively, versus 6.8% and 26.4% respectively in
the same periods of the prior year. The higher margin for the 1996 third quarter
was a result of improved product mix, cost savings, and because the 1995 third
quarter included a $240,000 write-off on the rapid heat sterilizer product line.
The decline in the margin for the first nine months, was primarily caused by
start up costs associated with a new product that has been abandoned.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were approximately $770,000 below
the third quarter of 1995, and approximately $700,000 below the nine month
period of 1995. The principle reason for the quarterly decline was approximately
$725,000 in write-offs associated with post employment benefits, prepaid royalty
payments and medical insurance termination expenses that were recorded in 1995.
6
<PAGE> 8
PRODUCT DEVELOPMENT EXPENSES
Product development expenses for the third quarter of fiscal 1996 were
approximately $109,000 lower than the same period for fiscal 1995 and $179,000
lower for the first nine months of 1996 as compared to the same period for the
prior year. This was the 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 third quarter and first nine months ended June 29,
1996, decreased by $98,000 and $208,000 respectively as compared to the same
periods in fiscal 1995. This was a result of a combination of reduced interest
rates and lower borrowing in 1996.
OTHER EXPENSE (INCOME)
Other income was approximately $416,000 higher for the quarter as compared to
the same quarter in 1995, and it was $353,000 higher for the first nine months
of 1996 as compared to the same period in the prior year. The principal reason
for the improvement in 1996 was the $319,000 write off in the third quarter of
1995 related to the sterilizer product line. The remaining difference relates to
the gain on the 1996 third quarter sale of the ordnance and sterilizer product
lines.
PROVISION FOR INCOME TAXES
The provision for income taxes increased by approximately $3,485,000 for the
third quarter of fiscal 1996 as compared to 1995 and by $3,745,000 for the nine
months ended June 29, 1996 as compared to the first nine 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. This adjustment
resulted in a $3,300,000 tax credit in the results for the 1995 third quarter.
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 nine months of fiscal 1996 working capital increased to $9,221,000
from $6,889,000. Changes in the components of working capital are detailed in
the Consolidated Statements of Cash Flows.
The Company's operations consumed $1,276,000 of cash in the first nine 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.
7
<PAGE> 9
PART II OTHER INFORMATION
ITEM 5
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 April 25, 1996 filed, pursuant to Item 5, a copy of the
Company's press release relating to the Investigation by the U.S. Attorney's
Office for the District of Arizona of certain aspects of its microelectronics
contracts with the federal government.
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, 1996
8
<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
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER
COMMON SHARE:
NET INCOME:
Net Income $328,000 $2,203,000 $841,000 $3,352,000
Less: Dividend on Preferred Stock 90,000 90,000 270,000 270,000
--------- ---------- --------- ----------
Net Income Applicable to Common Stock $238,000 $2,113,000 $571,000 $3,082,000
========= ========== ========= ==========
SHARES:
Weighted Average Number of Common
Shares Outstanding 6,456,291 6,419,124 6,454,516 6,415,567
Number of Common Stock Equivalents
Assuming Exercise of Options Reduced
by the Number os Shares Which Could
Have Been Purchased With the Proceeds
From Exercise of Such Options 81,063 135,603 120,723 142,243
--------- ---------- --------- ----------
Weighted Average Number of Shares
and Common Stock Equivalents 6,537,354 6,554,727 6,575,239 6,557,810
========= ========== ========= ==========
PRIMARY NET INCOME PER
COMMON SHARE $0.04 $0.32 $0.09 $0.47
========= ========== ========= ==========
- ---------------------------------------------------------------------------------------------------
FULLY DILUTED NET INCOME PER
COMMON SHARE:
NET INCOME:
Net Income $328,000 $2,203,000 $841,000 $3,352,000
========= ========== ========= ==========
SHARES:
Weighted Average Number of Shares
and Common Stock Equivalents 6,537,354 6,573,699 6,575,239 6,570,142
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 8,136,821 8,173,166 8,174,706 8,169,609
========= ========== ========= ==========
FULLY DILUTED NET INCOME PER
COMMON SHARE (SEE NOTE) $0.27 $0.41
========= ========== ========= ==========
</TABLE>
Note: For the third quarter and first nine 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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-29-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,942
<ALLOWANCES> 0
<INVENTORY> 7,366
<CURRENT-ASSETS> 13,439
<PP&E> 6,894
<DEPRECIATION> (5,745)
<TOTAL-ASSETS> 17,977
<CURRENT-LIABILITIES> 4,218
<BONDS> 5,047
0
120
<COMMON> 650
<OTHER-SE> 7,603
<TOTAL-LIABILITY-AND-EQUITY> 17,977
<SALES> 18,415
<TOTAL-REVENUES> 18,415
<CGS> 11,558
<TOTAL-COSTS> 11,558
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 371
<INCOME-PRETAX> 1,404
<INCOME-TAX> 563
<INCOME-CONTINUING> 841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 841
<EPS-PRIMARY> .09
<EPS-DILUTED> .09<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>
