SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ -------------
Commission File Number 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 4, 1997, 6,674,492 shares of the Registrant's Common Stock, and
119,906 shares of the Registrant's Preferred Stock were outstanding.
<PAGE>
BOWMAR INSTRUMENT CORPORATION
AND
SUBSIDIARIES
Index
PART I FINANCIAL INFORMATION......................................... 2-8
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)........................ 2
June 28,1997 and September 28, 1996
Consolidated Statements of Income (Unaudited).................. 3
Third Quarter and Nine Months Ended
June 28, 1997 and June 29, 1996
Consolidated Statements of Cash Flows (Unaudited).............. 4
Nine Months Ended June 28, 1997 and
June 29, 1996
Notes to Consolidated Financial................................ 5
Statements (Unaudited)
Item 2. Management's Discussion and Analysis.................. 6
of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures.............. 8
about Market Risk
PART II OTHER INFORMATION............................................. 8
Item 6. Exhibits and Reports on Form 8-K...................... 8
1
<PAGE>
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands of dollars, except share data)
================================================================================
June 28, 1997 September 28, 1996
================================================================================
ASSETS
Current Assets
Cash $ 489 $ 108
Accounts receivable, net 4,280 3,992
Inventories 7,081 6,059
Prepaid expenses 398 402
Deferred income taxes 1,630 1,652
- --------------------------------------------------------------------------------
Total Current Assets 13,878 12,213
Property, Plant and Equipment, net 1,365 1,122
Deferred Income Taxes 905 1,524
Other Assets, net 1,656 1,679
- --------------------------------------------------------------------------------
Total Assets $17,804 $16,538
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 607 $ 556
Accounts payable 1,600 933
Accrued salaries and benefits 1,733 1,503
Accrued expenses 211 719
- --------------------------------------------------------------------------------
Total Current Liabilities 4,151 3,711
Long-Term Debt 3,327 3,675
Other Long-Term Liabilities 339 339
- --------------------------------------------------------------------------------
Total Liabilities 7,817 7,725
- --------------------------------------------------------------------------------
Shareholders' Equity 9,987 8,813
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $17,804 $16,538
================================================================================
See Notes To Consolidated Financial Statements
2
<PAGE>
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands of dollars, except share data)
<TABLE>
<CAPTION>
====================================================================================
Third Quarter First Nine Months
------------------------- ------------------------
1997 1996 1997 1996
====================================================================================
<S> <C> <C> <C> <C>
Sales $ 6,989 $ 5,484 $ 20,175 $ 18,415
Cost of sales 4,319 3,222 12,311 11,558
- ------------------------------------------------------------------------------------
Gross margin 2,670 2,262 7,864 6,857
- ------------------------------------------------------------------------------------
Expenses:
Selling, general and
administrative 1,836 1,663 5,452 5,048
Product development 175 453
127 445
Interest expense 102 305
110 371
Other income, net (283)
(4) (181) (411)
- ------------------------------------------------------------------------------------
Total expenses 2,109 1,719 5,927 5,453
- ------------------------------------------------------------------------------------
Income before income taxes 561 543 1,937 1,404
Provision for income taxes 209 215 760 563
- ------------------------------------------------------------------------------------
NET INCOME $ 352 $ 328 $ 1,177 $ 841
====================================================================================
NET INCOME PER COMMON SHARE:
Primary $ 0.04 $ 0.04 $ 0.14 $ 0.09
- ------------------------------------------------------------------------------------
Weighted average number of
common shares and equivalents:
Primary 6,712,681 6,537,354 6,638,921 6,575,239
Fully diluted 8,426,446 8,136,821 8,389,068 8,174,706
====================================================================================
</TABLE>
Note:For the third quarter and first nine months of 1997 and 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.
See Notes To Consolidated Financial Statements
3
<PAGE>
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars, except share data)
================================================================================
First Nine Months
--------------------
June 28, June 29,
1997 1996
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 1,177 $ 841
Adjustments to reconcile net income
to net cash provided by (used in) operations:
Depreciation and amortization 394 396
Deferred income taxes 651 459
Net changes in balance sheet accounts:
Accounts receivable (288) (62)
Inventories (1,022) (1,946)
Prepaid expenses 4 24
Accounts payable 667 34
Accrued salaries & expenses (278) (1,050)
(278)
Other 7 28
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 1,302 (1,276)
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (616) (170)
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings under notes payable 117 5,444
Retirement of debt (414) (4,461)
Payment of dividends on preferred stock (270) (270)
Issuance of common stock 268 (6)
Other (6) 0
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (305) 707
- --------------------------------------------------------------------------------
Net change in cash 381 (739)
Cash at beginning of period 108 739
- -------------------------------------------------------------------------------
Cash at end of period $ 489 $ 0
================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid during the period for:
Interest $ 302 $ 403
Income taxes $ 180 $ 142
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital lease $ 190 $ 0
================================================================================
See Notes To Consolidated Financial Statement
4
<PAGE>
BOWMAR INSTRUMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of June 28, 1997 and September 28, 1996, the
consolidated statements of income for the third quarter and nine months ended
June 28, 1997 and June 29, 1996, and the consolidated statements of cash flows
for the first nine months ended June 28, 1997 and June 29, 1996, 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 consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for the fiscal
year ended September 28, 1996. The results of operations for the above noted
periods ended are not necessarily indicative of the operating results for the
full year.
2. NEWLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 Earnings Per Share (FAS 128) which
specifies the computation, presentation, and disclosure requirements for
earnings per share. FAS 128 replaces the presentation of primary and fully
diluted EPS pursuant to Accounting Principles Board Opinion No. 15 Earnings Per
Share (APB 15) with the presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income available to common
stockholders by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. The Company is required to adopt FAS 128 with its December
28, 1997 financial statements and restate all prior period EPS information. The
Company will continue to account for EPS under APB 15 until that time. The
adoption of FAS 128 is not expected to have a significant impact on the
Company's reported earnings per share.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income (SFAS 130), which establishes standards for
reporting and display of comprehensive income and its components. This statement
requires a separate statement to report the components of comprehensive income
for each period reported. The provisions of this statements are effective for
fiscal years beginning after December 15, 1997. Management believes that they
currently do not have items that would require presentation in a separate
statement of comprehensive income.
In June 1997, the FASB also issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131), which establishes standards for the way the public business
enterprises report information about operating segments in annual financial
statements and require that those enterprises report selected information about
5
<PAGE>
operating segments in interim financial reports issued to shareholders. This
statement is effective for financial statements for periods beginning after
December 15, 1997. Management believes this statement may require expanded
disclosure in the Company's financial statements.
3. INVENTORIES
Inventories consist of the following (in thousands):
--------------------------------------------------------------------
June 28, 1997 September 28, 1996
--------------------------------------------------------------------
Raw Materials $2,742 $3,330
Work-in-process 3,838 2,531
Finished Goods 501 198
------ ------
$7,081 $6,059
====== ======
--------------------------------------------------------------------
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Sales
Sales for the third quarter ended June 28, 1997, were $6,989,000 compared to
sales for the same fiscal 1996 period of $5,484,000. For the first nine months
of fiscal 1997 sales were $20,175,000 compared to sales of $18,415,000 for the
same period in fiscal 1996.
Sales in the microelectronic segment for the third quarter of fiscal 1997
increased by approximately $1,710,000 versus the same period in fiscal 1996.
Sales for the first nine months of fiscal 1997 were up by approximately
$2,675,000 versus the same period in fiscal 1996. Sales for the third quarter of
1996 were adversely affected as a result of disruptions in the production
schedules caused by the Federal investigation previously disclosed. The
additional increase for the quarter was a result of new products being
introduced in the prior year. Sales for the first nine months of 1997 increased
because of the items mentioned above and the initial stocking orders shipped to
distributors in the second quarter.
Sales in the electromechanical segment for the third quarter of fiscal 1997 were
$205,000 lower versus the same period in fiscal 1996. Sales for the first nine
months of fiscal 1997 were down by approximately $915,000 versus the same period
in fiscal 1996. The decline in sales for the electromechanical segment resulted
principally from the disposition of the ordnance and rapid heat transfer ("RHT")
sterilizer product lines in late fiscal 1996.
The Company continues to believe that changes in defense spending by the U. S.
government will not have a material adverse effect on the Company's overall
results. However, it appears that although the Company's microelectronic segment
could experience growth as a result of such changes in defense spending, the
changes have had a negative impact on the Company's electromechanical segment.
6
<PAGE>
Accordingly, the Company continues to pursue its goal of reduced dependency on
the defense industry by pursuing commercial business while emphasizing niche
military markets where the Company has a competitive advantage.
Gross Margin
Gross margin dollars for the third quarter of fiscal 1997 were $408,000 more
than the same period in fiscal 1996. The gross margin dollars for the first nine
months of fiscal 1997 were $1,007,000 above the same period for fiscal 1996. The
fiscal 1997 third quarter gross margin percentage decreased to 38.2% from 41.2%
for the same fiscal 1996 period, and the gross margin percentages for the first
nine months of fiscal 1997 increased to 39.0% from 37.2% for the same period of
fiscal 1996. The increased margin dollars resulted from the sales increases
discussed above. Gross margins in the microelectronic segment for the third
quarter and nine months of fiscal 1997 were 40.1% and 40.7%, respectively,
versus 46.7% and 44.8%, respectively, for the same periods of fiscal 1996. The
decline in the gross margin percentages primarily resulted from a decline in the
selling price due to increased competition and the decreased prices for memory
components.
The gross margin percentage in the electromechanical segment for the third
quarter and first nine months of fiscal 1997 were 29.2% and 31.8% respectively,
versus 33.4% and 23.6% respectively, in the same periods of the fiscal 1996. The
electromechanical gross margin percentage was lower for the third quarter
because of higher costs associated with the shipment of new products. However,
the gross margin percentage was higher for the first nine months as a result of
improved efficiencies and product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $173,000 for the third
quarter of fiscal 1997 as compared with the same period of fiscal 1996, and
increased by $404,000 for the first nine months of fiscal 1997 as compared with
the same period of fiscal 1996. The increases were primarily in the
microelectronics segment selling expenses and resulted from increased
commissions related to higher sales, increased sales efforts and advertising.
Product Development Expenses
Product development expenses for the third quarter of fiscal 1997 were
approximately $48,000 higher than the same period of fiscal 1996 and were $8,000
higher for the first nine months of fiscal 1997 as compared to the same period
of fiscal 1996. The increase was a result of new package development costs in
the microelectronics segment.
Interest Expense
Interest expense for the third quarter and the first nine months in fiscal 1997
decreased by $8,000 and $66,000, respectively, as compared to the same periods
of fiscal 1996. This was a result of lower borrowings in the third quarter of
fiscal 1997 as compared to the same period in fiscal 1996 which was partially
offset by higher interest rates for the third quarter of fiscal 1997. The lower
interest expense for the first nine months of fiscal 1997 as compared to the
same period in fiscal 1996 was a result of lower interest rates and borrowings
in 1997.
7
<PAGE>
Other Income
Other income was lower in the third quarter and the first nine months of fiscal
1997 by $177,000 and $128,000, respectively, as compared to the same periods of
fiscal 1996. The decrease is mainly due to the loss of rental income upon the
expiration in February 1997 of the lease on a building in Acton, Massachusetts.
The building is currently listed for sale, and the Company anticipates no loss
as a result of the sale. However, the loss of rental income will lower other
income by approximately $120,000 per quarter, and until the building is sold, it
is anticipated that the cost of maintaining the building and the related taxes
will be $36,000 per quarter. The remaining difference for the quarter is a
result of the gain on the sale of the ordnance and RHT product lines which the
electromechanical division recognized in the third quarter of 1996.
Provision for Income Taxes
The provision for income taxes decreased by approximately $6,000 for the third
quarter of fiscal 1997 and increased by $197,000 for the nine months ended June
28, 1997 as compared to the same fiscal 1996 periods. The increase was a result
of higher income before income taxes in the first nine months of fiscal 1997.
FINANCIAL CONDITION AND LIQUIDITY
In the first nine months of fiscal 1997 working capital increased to $9,727,000
from $9,221,000, in the same period of fiscal 1996 principally as a result of
the profitability of the Company.
Changes in the components of working capital are detailed in the Consolidated
Statements of Cash Flows.
During the second quarter of fiscal 1997 the Company executed a modification to
its credit facility with its principal bank, which among other things, extended
to the Company an additional credit line of up to $1,200,000 to finance
leasehold improvements for the new microelectronic segment facility.
The Company operations provided $1,302,000 of cash in the first nine months of
fiscal 1997. The Company expects that revenues from operations, when combined
with the Company's available credit facilities, should be sufficient in
management's opinion to fund the Company's cash needs for the foreseeable
future.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
8
<PAGE>
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
3.1 Amended and Restated Articles of Incorporation. (Previously filed as
Exhibit A to the Registrant's definitive Proxy Statement prepared in
connection with the 1993 Annual Meeting of Shareholders, which is
incorporated herein by this reference.)
3.2 Amended and Restated Code of By-laws, as further amended on July 28, 1995.
(The former having been previously filed as Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, and the
latter having been previously filed as Exhibit 5(a) to the Current Report
on Form 8-K dated October 16, 1995, both of which are incorporated here by
this reference.)
4.1 Indenture, Bowmar Instrument Corporation 13-1/2% Convertible Subordinated
Debentures due December 15, 1995. (Previously filed as Exhibit 4.4 to the
Registration Statement of Form S-7, File No. 2-70025, on November 25, 1980,
which is incorporated herein by this reference.)
4.2 Amended and Restated Articles of Incorporation (See Exhibit 3.1, above.)
4.3 Rights Agreement, dated as of December 6, 1996 between Bowmar Instrument
Corporation and American Stock Transfer and Trust Corporation. (Previously
filed as Exhibit 5C to the Form 8-K filed by the Registrant on December 19,
1996.)
11 Computation of Net Income Per Common Share.*
27 Financial Data Schedule.*
*Filed herewith.
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: August 8, 1997
9
EXHIBIT 11
BOWMAR INSTRUMENT CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
===========================================================================================
Third Quarter First Nine Months
Fiscal Fiscal Fiscal Fiscal
1997 1996 1997 1996
===========================================================================================
PRIMARY NET INCOME PER
COMMON SHARE:
NET INCOME:
<S> <C> <C> <C> <C>
Net Income $ 352,000 $ 328,000 $1,177,000 $ 841,000
Less: Dividends on Preferred Stock 90,000 90,000 270,000 270,000
----------------------------------------------
Net Income Applicable to Common Stock $ 262,000 $ 238,000 $ 907,000 $ 571,000
==============================================
SHARES:
Weighted Average Number of Common
Shares Outstanding 6,666,910 6,456,291 6,629,532 6,454,516
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 45,771 81,063 9,389 120,723
----------------------------------------------
Weighted Average Number of Shares
and Common Stock Equivalents 6,712,681 6,537,354 6,638,921 6,575,239
==============================================
PRIMARY NET INCOME PER
COMMON SHARE $ 0.04 $ 0.04 $ 0.14 $ 0.09
==============================================
==============================================================================
FULLY DILUTED NET INCOME
PER COMMON SHARE:
NET INCOME:
Net Income $ 352,000 $ 328,000 $1,177,000 $ 841,000
==============================================
SHARES:
Weighted Average Number of Shares
and Common Stock Equivalents 6,828,099 6,537,354 6,790,721 6,575,239
Number of Shares of Common Stock
Issued Upon Conversion of
Preferred Stock 1,598,347 1,599,467 1,598,347 1,599,467
----------------------------------------------
Weighted Average Number of Shares
and Common Stock Equivalents
Assuming Conversion of Preferred Stock 8,426,446 8,136,821 8,389,068 8,174,706
==============================================
FULLY DILUTED NET INCOME PER
COMMON SHARE (SEE NOTE)
==============================================
</TABLE>
Note: For the third quarter and first nine months of 1997 and 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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-28-1997
<CASH> 489
<SECURITIES> 0
<RECEIVABLES> 4,280
<ALLOWANCES> 0
<INVENTORY> 7,081
<CURRENT-ASSETS> 13,878
<PP&E> 7,497
<DEPRECIATION> (6,132)
<TOTAL-ASSETS> 17,804
<CURRENT-LIABILITIES> 4,151
<BONDS> 3,327
0
120
<COMMON> 667
<OTHER-SE> 9,200
<TOTAL-LIABILITY-AND-EQUITY> 17,804
<SALES> 20,175
<TOTAL-REVENUES> 20,175
<CGS> 12,311
<TOTAL-COSTS> 12,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 305
<INCOME-PRETAX> 1,937
<INCOME-TAX> 760
<INCOME-CONTINUING> 1,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,177
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
