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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 MARCH 31, 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
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12,538,012 SHARES OF COMMON STOCK, $.01 PAR VALUE, WERE OUTSTANDING AS OF
APRIL 28, 1995.
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VERNITRON CORPORATION
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Statements of Operations -
Quarter Ended March 31, 1995 and 1994 3
Condensed Balance Sheets -
March 31, 1995 and December 31, 1994 4
Condensed Statements of Cash Flows -
Quarter Ended March 31, 1995 and 1994 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
VERNITRON CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
------------------------------
1995 1994
------------ -----------
<S> <C> <C>
NET SALES $ 16,896 $ 14,929
Cost of sales 12,214 11,172
Selling, general and administrative expenses 3,628 3,158
Amortization of intangible assets 52 52
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OPERATING INCOME 1,002 547
Interest expense - net 496 601
Other expense 8 -
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INCOME(LOSS) FROM CONTINUING OPERATIONS
BEFORE TAXES 498 (54)
Charge in lieu of taxes 194 -
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INCOME(LOSS) FROM CONTINUING OPERATIONS 304 (54)
Discontinued Operations (Note 2):
Loss from operations - (236)
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NET INCOME(LOSS) 304 (290)
Preferred stock dividends 121 69
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NET INCOME(LOSS) APPLICABLE TO COMMON
SHAREHOLDERS' EQUITY $ 183 $ (359)
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NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ 0.01 $ (0.02)
Discontinued operations - (0.05)
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Total $ 0.01 $ (0.07)
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Weighted average common shares outstanding 12,538,012 5,185,070
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------------ ----------
</TABLE>
See notes to condensed financial statements.
3
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VERNITRON CORPORATION
CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 49 $ 27
Accounts receivable - net 10,410 9,293
Inventories 15,144 14,527
Other current assets 510 468
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TOTAL CURRENT ASSETS 26,113 24,315
PROPERTY, PLANT AND EQUIPMENT - net 7,850 7,990
EXCESS OF COST OVER NET ASSETS ACQUIRED - net 6,780 6,832
NET ASSETS HELD FOR DISPOSAL 1,643 2,507
OTHER ASSETS 525 553
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TOTAL ASSETS $ 42,911 $ 42,197
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<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 5,655 $ 6,394
Accrued expenses and other liabilities 5,809 5,941
Current portion of long-term debt 592 442
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TOTAL CURRENT LIABILITIES 12,056 12,777
LONG-TERM DEBT, less current portion 13,019 11,921
OTHER LONG-TERM LIABILITIES 3,464 3,579
DEFERRED INCOME 618 651
SHAREHOLDERS' EQUITY:
Preferred Stock, issued and outstanding 698,157
shares in 1995 and 672,344 shares in 1994 7 7
Common Stock, issued and outstanding 12,538,012
shares in 1995 and 1994 125 125
Capital in Excess of Par 14,163 13,982
Accumulated Deficit (since December 31, 1991) (541) (845)
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TOTAL SHAREHOLDERS' EQUITY 13,754 13,269
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 42,911 $ 42,197
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</TABLE>
See notes to condensed financial statements.
4
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VERNITRON CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
--------------------
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 304 $ (290)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating
activities:
Recognition of net operating loss carryforward 181
Depreciation and amortization 385 374
Increase in current assets, other than cash (1,776) (772)
Increase (decrease) in current liabilities (871) 612
Other - net (231) 610
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NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (2,008) 534
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (193) (134)
Proceeds from sale of assets (Note 2) 975
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NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 782 (134)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 19,004 336
Repayment of borrowings (17,756) (500)
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NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 1,248 (164)
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NET INCREASE IN CASH 22 236
Cash at beginning of period 27 103
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CASH AT END OF PERIOD $ 49 $ 339
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--------- --------
</TABLE>
See notes to condensed financial statements.
5
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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 interim period presented 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 they were
deemed to have been anti-dilutive.
Total interest paid in the quarters ended March 31, 1995 and 1994 was $489 and
$632, respectively. The Company had net income tax payments of $41 and $20 in
the quarters ended March 31, 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 is being accounted for as a
discontinued operation, and, accordingly, the related net assets and operating
results have been reported separately from continuing operations. During the
quarter ended March 31, 1995, the Company sold the remaining product line for
$1,500, of which $975 has been collected. The remaining $500 is expected to be
collected in the second quarter of 1995. The loss from operations of the
discontinued Electronic Components business for the quarter ended March 31, 1995
of $51 was charged to reserves established in the prior year for anticipated
operating losses until disposal. The operations of the Electronics Components
business are expected to close during the second quarter of 1995.
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VERNITRON CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
NOTE 3 - INVENTORIES
Interim inventories have been determined generally by lower of cost (first-in,
first-out or average) or market. Inventories consist of:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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<S> <C> <C>
Raw materials $ 2,869 $ 2,551
Work-in-process 5,755 5,879
Finished goods 6,520 6,097
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$ 15,144 $14,527
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-------- --------
</TABLE>
NOTE 4 - OTHER INFORMATION
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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<S> <C> <C>
Allowance for doubtful accounts $ 279 $ 345
-------- --------
-------- --------
Accumulated depreciation and amortization
of property, plant and equipment $ 3,996 $ 3,662
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-------- --------
Accumulated amortization of excess of cost
over net assets acquired $ 679 $ 627
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</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Dollars in thousands)
QUARTER ENDED MARCH 31, 1995 COMPARED TO THE QUARTER ENDED MARCH 31, 1994
RESULTS OF OPERATIONS
Net sales by product group for continuing operations for the first quarter were
as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Motion Control $ 6,640 $ 5,970
Industrial Components 10,256 8,959
-------- --------
Net Sales $ 16,896 $ 14,929
-------- --------
-------- --------
</TABLE>
Net sales for the first quarter of 1995 increased by $1,967, or 13%,
compared to the same period in 1994.
The Motion Control group's sales (motors, sensors and controls) increased
in 1995 by $670, or 11%, as compared to 1994. This increase was primarily due
to higher electromagnetic sub-system sales resulting from new product
introductions which did not begin to generate significant sales volume until the
second half of 1994 and higher potentiometer sales resulting from greater
operating efficiency in the current quarter. The potentiometer product line was
in the process of being relocated from Deer Park, New York to St. Petersburg,
Florida during the first quarter of 1994. Bookings were $7,448 in 1995, an
increase of $660, or 10%, compared to 1994, primarily due to the timing of
certain large resolver orders. 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 $1,297, or 14%, compared to 1994. Sales of bearings and connectors
were up by 17% and 12%, respectively. Industrial Component's bookings for the
quarter were $11,482, an increase of $1,772, or 18%, compared to 1994. Both the
increase in sales and bookings reflect an improvement in general economic
conditions and new customer activity.
Operating income was $1,002 in 1995, as compared to $547 in 1994,
representing a $455 increase. This increase was primarily due to the gross
margin earned on the incremental sales volume in both business groups and
improved profit margins in the Motion Control group resulting from restructuring
actions completed during 1994, which were partially offset by higher selling,
general and administrative expenses. Overall, gross margin on sales was 27.7%
in 1995, up from 25.2% in 1994. Productivity, as measured by value-added per
employee, increased 25.2% to approximately $18,900 in 1995 from approximately
$15,100 in 1994.
Selling, general and administrative expenses increased by $470 in 1995
primarily due to higher
8
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medical costs and the reinstatement of certain profit sharing provisions.
Interest expense declined by $105 in 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, cash generated
from operations and proceeds from the sale of assets included in net assets held
for disposal, 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
March 31, 1995.
9
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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: April 28, 1995 VERNITRON CORPORATION
By: /s/ Stephen W. Bershad
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Stephen W. Bershad
Chief Executive Officer
By: /s/ Raymond F. Kunzmann
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Raymond F. Kunzmann
Vice President - Finance, Controller
and Chief Financial Officer
10
