<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 0-16182
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VERNITRON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-1962029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
645 MADISON AVENUE
NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 593-7900
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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
----- ----
12,604,107 SHARES OF COMMON STOCK, $.01 PAR VALUE, WERE OUTSTANDING AS OF
OCTOBER 27, 1995.
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<PAGE>
VERNITRON CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Statements of Operations -
Quarter Ended September 30, 1995 and 1994 3
Condensed Statements of Operations -
Nine Months Ended September 30, 1995 and 1994 4
Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 5
Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
VERNITRON CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED
SEPTEMBER 30,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net Sales $ 15,633 $ 15,705
Cost of sales 11,806 11,298
Selling, general and administrative expenses 2,848 3,349
Amortization of intangible assets 53 53
----------- -----------
Operating income 926 1,005
Interest expense 497 498
Other expense 234 2
----------- -----------
Income from continuing operations before
taxes and extraordinary gain 195 505
Charge in lieu of taxes 76 197
----------- -----------
Income from continuing operations before extraordinary gain 119 308
Discontinued Operations:
Loss from operations, net of tax benefit (25)
Loss on disposal, net of tax benefit of $1,317 in 1994 (2,059)
----------- -----------
Income (loss) before extraordinary gain 119 (1,776)
Extraordinary gain on debt repurchase,
net of charge in lieu of taxes of $3,744 5,856
----------- -----------
Net income 119 4,080
Preferred stock dividends 159 102
----------- -----------
Net income (loss) applicable to common shareholders' equity $ (40) $ 3,978
----------- -----------
----------- -----------
Net income (loss) per common share:
Continuing operations $ - $ 0.02
Discontinued operations - (0.19)
Extraordinary gain - 0.53
----------- -----------
Total $ - $ 0.36
----------- -----------
----------- -----------
Weighted average common shares outstanding 12,540,776 11,019,470
----------- -----------
----------- -----------
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
VERNITRON CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net Sales $ 49,383 $ 46,470
Cost of sales 36,230 33,838
Selling, general and administrative expenses 9,973 9,801
Amortization of intangible assets 157 157
------------ ------------
Operating income 3,023 2,674
Interest expense 1,534 1,752
Other expense 249 5
------------ ------------
Income from continuing operations before
taxes and extraordinary gain 1,240 917
Charge in lieu of taxes 484 358
------------ ------------
Income from continuing operations before extraordinary gain 756 559
Discontinued Operations:
Loss from operations, net of tax benefit (143)
Loss on disposal, net of tax benefit of $1,317 in 1994 (2,059)
------------ ------------
Income (loss) before extraordinary gain 756 (1,643)
Extraordinary gain on debt repurchase,
net of charge in lieu of taxes of $3,744 5,856
------------ ------------
Net income 756 4,213
Preferred stock dividends 417 252
------------ ------------
Net income applicable to common shareholders' equity $ 339 $ 3,961
------------ ------------
------------ ------------
Net income (loss) per common share:
Continuing operations $ 0.03 $ 0.04
Discontinued operations - (0.31)
Extraordinary gain - 0.82
------------ ------------
Total $ 0.03 $ 0.55
------------ ------------
------------ ------------
Weighted average common shares outstanding 12,538,943 7,151,241
------------ ------------
------------ ------------
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
VERNITRON CORPORATION
CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 81 $ 27
Accounts receivable - net 8,788 9,293
Inventories - net 16,097 14,527
Other current assets 488 468
------------- ------------
TOTAL CURRENT ASSETS 25,454 24,315
PROPERTY, PLANT AND EQUIPMENT - net 7,694 7,990
EXCESS OF COST OVER NET ASSETS ACQUIRED - net 6,676 6,832
NET ASSETS HELD FOR DISPOSAL 2,507
OTHER ASSETS 448 553
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TOTAL ASSETS $ 40,272 $ 42,197
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------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,573 $ 6,394
Accrued expenses and other liabilities 5,604 5,941
Current portion of long-term debt 466 442
------------- ------------
TOTAL CURRENT LIABILITIES 11,643 12,777
LONG-TERM DEBT, less current portion 10,579 11,921
OTHER LONG-TERM LIABILITIES 2,964 3,579
DEFERRED INCOME 552 651
SHAREHOLDERS' EQUITY:
Preferred Stock, issued and outstanding 752,779
shares in 1995 and 672,344 shares in 1994 8 7
Common Stock, issued and outstanding 12,604,107
shares in 1995 and 12,538,012 shares in 1994 126 125
Capital in Excess of Par 14,489 13,982
Accumulated Deficit (since December 31, 1991) (89) (845)
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TOTAL SHAREHOLDERS' EQUITY 14,534 13,269
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 40,272 $ 42,197
------------- ------------
------------- ------------
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
VERNITRON CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 756 $ 3,951
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Extraordinary gain on debt repurchase, net (5,856)
Loss on disposal of discontinued operations, net 2,322
Recognition of net operating loss carryforward 436 92
Depreciation and amortization 1,179 1,292
Increase in current assets, other than cash (1,085) (2,015)
Increase (decrease) in current liabilities (1,158) 728
Decrease in long-term liabilities (615) (408)
Other - net (343) (46)
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (830) 60
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (727) (533)
Proceeds from sale of assets (Note 2 and Note 4) 2,929 205
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 2,202 (328)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 51,831 28,652
Repayment of borrowings (53,149) (30,792)
Net proceeds from common stock rights offering 2,335
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (1,318) 195
---------- ----------
NET INCREASE (DECREASE) IN CASH 54 (73)
Cash at beginning of period 27 103
---------- ----------
CASH AT END OF PERIOD $ 81 $ 30
---------- ----------
---------- ----------
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
VERNITRON CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation (consisting
of normal recurring accruals) have been included. Operating results
for the quarter and nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1995. For further information, refer to
the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1994.
Certain reclassifications have been made to previously reported
financial statements to conform to current classifications.
In accordance with quasi-reorganization accounting principles, the
Company elected to adjust its December 31, 1991 balance sheet to
fair value and transferred the accumulated deficit of $14,094 to
capital in excess of par.
Per share data for the periods are based upon the weighted average
number of common shares outstanding during such periods.
Outstanding common stock options have not been included in the
computation of earnings per share as their exercise would not have a
material dilutive effect.
Total interest paid for the nine months ended September 30, 1995 and
1994 was $1,466 and $1,628 respectively. The Company had net income
tax payments of $55 and $7 for the nine months ended September 30,
1995 and 1994, respectively.
NOTE 2 - DISCONTINUED OPERATIONS
Effective September 30, 1994, the Company adopted a plan to dispose
of all of its Electronic Components business. The disposal has been
accounted for as a discontinued operation, and, accordingly, the
related net assets and operating results have been reported
separately from continuing operations. During 1995, the Company
sold the remaining product line of this business for $1,500. The
loss from operations of the discontinued Electronic Components
business in 1995 of $64 was charged to reserves established in the
prior year for anticipated operating losses until disposal.
NOTE 3 - INVENTORIES
Inventories have been determined generally by lower of cost (first-in,
first-out or average) or market. Inventories consist of:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials $ 5,890 $ 7,820
Work-in-process 5,587 5,988
Finished goods 9,567 8,445
------------- ------------
21,044 22,253
Less reserves 4,947 7,726
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$ 16,097 $14,527
------------- ------------
------------- ------------
</TABLE>
7
<PAGE>
VERNITRON CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
NOTE 4 - OTHER EXPENSE
In September 1995, the Company sold its idle Deer Park, New York
facility for net proceeds of $1,434. Included in other expense for
the quarter and nine month periods ended September 30, 1995, is a
$233 loss on the sale of this facility.
NOTE 5 - OTHER INFORMATION
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Allowance for doubtful accounts $ 233 $ 345
------------- ------------
------------- ------------
Accumulated depreciation and
amortization of property, plant
and equipment $ 4,686 $ 3,662
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------------- ------------
Accumulated amortization of excess
of cost over net assets acquired $ 784 $ 627
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</TABLE>
The reduction in the allowance for doubtful accounts is due
primarily to the write-off of an uncollectable account against the
related allowance previously established.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales by product group were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Quarter Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Motion Control $ 5,634 $ 6,704 $ 18,681 $ 19,270
Industrial Components 9,999 9,001 30,702 27,200
-------- -------- -------- --------
Net Sales $ 15,633 $ 15,705 $ 49,383 $ 46,470
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO THE QUARTER ENDED
SEPTEMBER 30, 1994
Net sales for the third quarter of 1995 were substantially the
same as the third quarter in 1994.
The Motion Control group's sales (motors, sensors and controls)
decreased in 1995 by $1.1 million, or 16%, as compared to 1994.
This decrease was primarily due to lower shipments of synchros ($.5
million), resulting from excess inventory at Government supply
depots, and from lower encoder sales ($.5 million), primarily due to
the timing of certain Government programs. Bookings were $4.7
million in the third quarter of 1995, a decrease of $.9 million, or
17%, compared to the comparable quarter in 1994, primarily due to
lower synchros orders. In general, the nature of the Motion Control
group's bookings results in an uneven pattern from quarter to
quarter and does not necessarily reflect overall business trends.
However, the conditions which resulted in lower synchros shipments
are expected to continue to impact bookings for the remainder of
1995. Backlog at September 30, 1995 was $13.3 million, compared to
$12.6 million at December 31, 1994.
The Industrial Components group's sales (bearings and connectors)
increased in 1995 by $1.0 million, or 11%, compared to 1994. Sales
of bearings were up by 16%, primarily due to new and increased
activity with original equipment manufacturers. Industrial
Component's bookings for the quarter were $10.4 million, an increase
of $1.9 million, or 23%, compared to 1994. This increase is
primarily in bearings and is due to increased OEM activity. Backlog
at September 30, 1995 was $11.7 million, compared to $10.4 million
at December 31, 1994.
Operating income was $.9 million in 1995, as compared to $1.0
million in 1994, representing a $.1 million decrease. Overall,
gross margin on sales was 24.5% in 1995, down from 28.1% in 1994.
This decrease was primarily due to lower gross margins resulting
from an unfavorable sales mix in both business groups ($.4 million)
and labor and overhead inefficiencies primarily in the Motion
Control group resulting from the lower sales volume ($.2 million).
These unfavorable variances were substantially offset by lower
selling, general and administrative expenses ($.5 million).
Selling, general and administrative expenses decreased by $.5
million primarily due to the reversal of excess, one-time medical
and other insurance costs accrued in the first half of 1995 and the
reduction of certain profit sharing provisions accrued through the
third quarter of 1995.
9
<PAGE>
Interest expense for the third quarter of 1995 was substantially
the same as the third quarter. The favorable impact of lower
average borrowings due primarily to the repurchase of the Company's
bank indebtedness at a discount in the third quarter of 1994 was
offset by higher interest rates.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1994
RESULTS OF OPERATIONS
Net sales for the first nine months of 1995 increased by $2.9
million or 6%, compared to the same period in 1994.
The Motion Control group's sales (motors, sensors and controls)
decreased in 1995 by $.6 million, or 3%, as compared to 1994. This
decrease was primarily due to lower shipments of synchros ($1.2
million) resulting from excess inventory at Government supply depots
and lower resolver sales ($.7 million) due to shipment of certain
large orders in the first quarter of 1994. These lower shipments
were partially offset by higher electromagnetic sub-system sales
($.7 million) resulting from new product introductions which did not
begin to generate significant sales volume until the second half of
1994, and higher potentiometer sales ($.7 million) resulting from
greater operating efficiency due to changes in product line
management and the relocation of the product line from Deer Park,
New York to St. Petersburg, Florida during the first quarter of
1994. Bookings were $19.3 million in 1995, an increase of $2.1
million, or 12%, compared to 1994, primarily due to higher foreign
orders for industrial resolvers and higher motor orders resulting
from new Government programs awards. The nature of the Motion
Control group's bookings results in an uneven pattern from quarter
to quarter and does not necessarily reflect overall business trends.
The Industrial Components group's sales (bearings and connectors)
increased in 1995 by $3.5 million or 13%, compared to 1994. Sales
of bearings and connectors were up by 14% and 11%, respectively,
primarily due to new and increased activity with original equipment
manufacturers and the introduction of new and/or enhanced products.
Industrial Component's bookings were $32.0 million, an increase of
$4.1 million or 15%, compared to 1994. Both the increase in sales
and bookings reflect favorable economic conditions, new and
increased activity with OEM's and the introduction of new and/or
enhanced products.
Operating income was $3.0 million in 1995, as compared to $2.7
million in 1994, representing a $.3 million increase. This increase
was primarily due to the gross margin earned on the incremental
sales volume ($1.0 million) and cost reductions in the Motion
Control group resulting from restructuring actions completed during
1994 ($.6 million). These favorable variances were partially offset
by an unfavorable sales mix in both business groups ($.7 million),
higher raw material costs in the Industrial Components group ($.2
million) and higher selling, general and administrative expenses
($.2 million) . Overall, gross margin on sales was 26.6% in 1995,
down from 27.2% in 1994.
Interest expense declined by $.2 million in the first nine months
of 1995 as a result of lower average borrowings due primarily to the
repurchase of the Company's bank indebtedness at a discount in the
third quarter of 1994. This was partially offset by higher interest
rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that its $17.5 million credit facility and
cash generated from operations will be sufficient to meet its
future capital expenditure and working capital requirements and
required debt amortization.
The Company had no material commitments for capital expenditures
as of September 30, 1995.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None
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 thereunto duly authorized.
Date: November 10, 1995 VERNITRON CORPORATION
By: /s/ Stephen W. Bershad
----------------------------------
Stephen W. Bershad
Chief Executive Officer
By: /s/ Raymond F. Kunzmann
----------------------------------
Raymond F. Kunzmann
Vice President - Finance,
Controller and Chief Financial
Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF VERNITRON CORPORATION AS OF SEPTEMBER 30, 1995 AND THE RELATED
STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED AND NINE MONTHS ENDED SEPTEMBER
30, 1995 AND 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000206030
<NAME> VERNITRON CORP
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JUL-01-1995 JAN-01-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<CASH> 81 81
<SECURITIES> 0 0
<RECEIVABLES> 9,021 9,021
<ALLOWANCES> 233 233
<INVENTORY> 16,097 16,097
<CURRENT-ASSETS> 25,454 25,454
<PP&E> 12,380 12,380
<DEPRECIATION> 4,686 4,686
<TOTAL-ASSETS> 40,272 40,272
<CURRENT-LIABILITIES> 11,643 11,643
<BONDS> 0 0
<COMMON> 126 126
0 0
8 8
<OTHER-SE> 14,400 14,400
<TOTAL-LIABILITY-AND-EQUITY> 40,272 40,272
<SALES> 15,633 49,383
<TOTAL-REVENUES> 15,633 49,383
<CGS> 11,806 36,230
<TOTAL-COSTS> 11,806 36,230
<OTHER-EXPENSES> 2,901 10,130
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 497 1,534
<INCOME-PRETAX> 195 1,240
<INCOME-TAX> 76 484
<INCOME-CONTINUING> 119 756
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 119 756
<EPS-PRIMARY> .00 .03
<EPS-DILUTED> .00 .03
</TABLE>
