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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, 1997
Commission file number 0-16182
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AXSYS TECHNOLOGIES, INC.
(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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2,986,381 shares of Common Stock, $.01 par value, were outstanding as of May 9,
1997.
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<PAGE>
AXSYS TECHNOLOGIES, INC.
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996............................... 3
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996..................................... 4
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1997 and 1996............................... 5
Notes to Condensed Consolidated Financial Statements...................... 6
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
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM I. Financial Statements
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1997 1996
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Net Sales .................................. $ 27,602 $ 17,031
Cost of sales .............................. 20,402 12,603
Selling, general and administrative expenses 4,899 3,265
Amortization of intangible assets .......... 52 52
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Operating income ........................... 2,249 1,111
Interest expense ........................... 655 444
Other expense (income) ..................... 11 (7)
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Income before taxes ........................ 1,583 674
Provision for income taxes ................. 638 284
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Net income ................................. 945 390
Preferred stock dividends .................. 60 184
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Net income applicable to common shareholders $ 885 $ 206
========== ===========
Net income per common share ................ $ 0.27 $ 0.08
========== ===========
Weighted average common shares outstanding . 3,230,130 2,529,045
========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash .......................................................... $ 546 $ 2,691
Accounts receivable - net ..................................... 15,852 13,801
Inventories - net ............................................. 25,502 24,454
Other current assets .......................................... 897 850
------- -------
TOTAL CURRENT ASSETS ........................................ 42,797 41,796
PROPERTY, PLANT AND EQUIPMENT - net ............................. 13,817 13,456
EXCESS OF COST OVER NET ASSETS ACQUIRED - net ................... 6,363 6,415
OTHER ASSETS .................................................... 473 504
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TOTAL ASSETS ................................................ $63,450 $62,171
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .............................................. $ 8,045 $ 6,881
Accrued expenses and other liabilities ........................ 7,745 7,290
Current portion of long-term debt and capital lease obligations 2,939 2,831
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TOTAL CURRENT LIABILITIES ................................... 18,729 17,002
LONG-TERM DEBT & CAPITAL LEASES, less current portion ........... 21,380 23,324
OTHER LONG-TERM LIABILITIES ..................................... 2,244 2,293
DEFERRED INCOME ................................................. 354 387
SHAREHOLDERS' EQUITY:
Preferred Stock, issued and outstanding
200,873 shares in 1997 and 738,881 shares in 1996 ............. 2 7
Common Stock, issued and outstanding
2,986,381 shares in 1997 and 2,568,940 shares in 1996 ......... 30 26
Capital in Excess of Par ...................................... 17,991 17,297
Retained Earnings ............................................. 2,720 1,835
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TOTAL SHAREHOLDERS' EQUITY .................................. 20,743 19,165
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................. $63,450 $62,171
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
---------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 945 $ 390
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Realization of net operating loss carryforward .. 542 261
Depreciation and amortization ................... 751 411
Increase in current assets, other than cash ..... (3,146) (2,262)
Increase in current liabilities ................. 1,619 694
Other - net ..................................... 53 113
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NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES ........................................ 764 (393)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................ (462) (263)
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NET CASH USED IN INVESTING ACTIVITIES ............. (462) (263)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings ........................ 6,150 16,957
Repayment of borrowings ......................... (8,597) (15,884)
Redemption of preferred stock odd lot shares .... -- (420)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,447) 653
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NET DECREASE IN CASH .............................. (2,145) (3)
CASH AT BEGINNING OF PERIOD ....................... 2,691 91
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CASH AT END OF PERIOD ............................. $ 546 $ 88
======= ========
Supplemental Cash Flow Information:
Cash paid (refunded) for:
Interest ...................................... $ 484 $ 336
======= ========
Income Taxes .................................. $ (16) $ 19
======= ========
Non-cash investing and financing activities:
Equipment acquired under capital leases ...... $ 598 $ --
======= ========
See notes to condensed consolidated financial statements.
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated 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 three months ended March 31,1997 are
not indicative of the results that may be expected for the year ending December
31, 1997. 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, 1996.
Certain reclassifications have been made to previously reported financial
statements to conform to current classifications.
Note 2 - Earnings per Share
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share" was issued in February 1997 and replaces Accounting Principles Board
("APB") Opinion No. 15. The new statement simplifies the computations of
earnings per share ("EPS") by replacing the presentation of primary EPS with
basic EPS, which is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS under the new statement is computed similarly to fully diluted EPS
pursuant to APB Opinion 15. SFAS No. 128 is effective for financial statements
for both interim and annual periods ending after December 15, 1997. Early
application is prohibited. For the three months ended March 31, 1997, the effect
of adopting SFAS No. 128 on the Company's reported EPS would be immaterial.
Note 3 - Acquisitions and Divestiture
On April 25, 1996, the Company acquired all of the outstanding shares of
Precision Aerotech, Inc., ("PAI") for $4,728, net of cash acquired. In addition,
the Company repaid $12 million of borrowings under PAI term loans. Precision
Aerotech designs, manufactures and markets laser scanners, precision metal
optics, high performance air bearings and precision machined parts sold
predominantly in commercial markets.
The acquisition of PAI was accounted for under the purchase method of accounting
and, accordingly, the results of operations of PAI have been included in the
accompanying consolidated financial statements since the date of acquisition.
The cost of the acquisition was allocated on the basis of the estimated fair
market value of the assets acquired and liabilities assumed. The purchase price
allocation has been completed on a preliminary basis. Management does not
believe that changes in the purchase price allocation will be material. During
the acquisition process, the Company determined that L&S Machine Company, Inc.
("L&S"), a wholly-owned subsidiary of PAI which manufactures structural
components for the aerospace industry, did not fit its long-term strategy and
would be subsequently sold. As a result, L&S was accounted for as a net asset
held for disposal as of the PAI acquisition date. The portion of the PAI
acquisition cost allocated to this asset represents the net proceeds expected to
be realized upon sale, which includes an amount for estimated results of
operations of the L&S business during the holding period. On December 12, 1996,
the Company completed the sale of L&S to Tru-Circle Manufacturing, Inc. for an
aggregate purchase price of approximately $13,100, subject to a post-closing
adjustment. The price included the assumption of approximately $1,800 in
long-term capitalized leases.
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Summarized below are the unaudited pro forma results of operations of the
Company as if PAI had been acquired on January 1, 1996:
Pro Forma
Three Months Ended
March 31,
1996
------------------
Net sales .......... $25,145
Net income ......... 382
Net income per share 0.08
The pro forma financial information presented above is not necessarily
indicative of either the results of operations that would have occurred had the
acquisition of PAI taken place at the beginning of 1996 or the future operating
results of the combined companies. Pro forma net income for the three months
ended March 31, 1996 included certain special charges totaling approximately
$400.
On October 2, 1996, the Company acquired substantially all of the assets of
Lockheed Martin Beryllium Corporation ("LMBC") for $2,883, subject to
post-closing adjustments. LMBC's operations consist primarily of precision
machining of beryllium and other exotic material components. This acquisition
has also been accounted for under the purchase method of accounting and,
accordingly, the results of operations of LMBC have been included in the
accompanying consolidated financial statements since the date of acquisition.
The cost of the acquisition has been allocated on the basis of the estimated
fair market value of the assets acquired and liabilities assumed. The purchase
price allocation has been completed on a preliminary basis. Management does not
believe that changes in the purchase price allocation will be material.
Note 4 - Inventories
Inventories have been determined generally by lower of cost (first-in, first-out
or average) or market. Inventories consist of:
March 31, December 31,
1997 1996
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Raw materials ................. $ 8,494 $ 8,033
Work-in-process ............... 11,998 12,942
Finished goods ................ 10,824 10,118
------- -------
31,316 31,093
Less reserves ................. 5,814 6,639
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$25,502 $24,454
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<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Note 5 - Shareholders' Equity
On February 14, 1997, the Company commenced an offer to exchange 0.75 shares of
its common stock for each outstanding share of its preferred stock. On March 17,
1997, the Exchange Offer terminated and the Company accepted for exchange all
shares of preferred stock validly tendered as of that time. Approximately
538,000 shares of preferred stock were exchanged for 403,500 shares of common
stock. Holders of shares of preferred stock accepted for exchange did not
receive any separate payment in respect of dividends not paid subsequent to
February 22, 1996, the last date on which dividends were paid on the preferred
stock.
On April 30, 1997, the Company announced that it has called for redemption all
remaining outstanding shares of its preferred stock. The redemption date has
been fixed at June 4, 1997. The redemption price is $7.70 per share, including
accrued and unpaid dividends of $1.54 per share through the redemption date.
Approximately 200,900 shares of preferred stock have been called for redemption.
Note 6 - Other Information
March 31, December 31,
1997 1996
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Allowance for doubtful accounts .......... $ 433 $ 385
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Accumulated depreciation and amortization
of property, plant and equipment ........ $8,256 $7,458
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Accumulated amortization of excess of cost
over net assets acquired ................ $1,098 $1,046
====== ======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales by product for the first quarter are presented in the table below.
On April 25, 1996, the Company acquired the stock of PAI and, on October 2,
1996, the Company acquired substantially all of the assets of LMBC. These
acquisitions have been accounted for under the purchase method of accounting
and, accordingly, the results of the continuing operations of PAI and LMBC (see
Note 3 to the Condensed Consolidated Financial Statements) have been included in
the Company's Condensed Consolidated Statement of Operations since their
respective dates of acquisition.
($ in thousands)
1997 1996
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Precision Systems ... $16,618 $ 5,775
Industrial Components 10,984 11,256
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Net Sales ........... $27,602 $17,031
======= =======
Three Months Ended March 31,1997 Compared to the Three Months Ended March 31,
1996
Net sales in 1997 increased by $10.6 million or 62%, compared to 1996, primarily
as a result of the acquisitions of PAI and LMBC.
The Precision Systems group's sales (precision optical and positioning
components and subsystems) increased in 1997 by $10.8 million, or 188%, as
compared to 1996. Bookings for the group were $18.0 million in 1997, an increase
of $12.0 million, or 200%, compared to 1996. Both the increase in sales and
bookings were primarily due to the acquisitions of PAI and LMBC. Backlog at
March 31, 1997 was $45.2 million, compared to $43.9 million at December 31,
1996. The increase in backlog of $1.3 million is primarily attributable to the
scanner product line due to increased bookings from the digital imaging market.
The Industrial Components group's sales (precision ball bearings and
interconnect devices) decreased in 1997 by $.3 million, or 2%, compared to 1996.
Bookings for the group were $11.1 million, an increase of $.2 million, or 2%,
compared to 1996. Backlog at both March 31, 1997 and December 31, 1996 was $12.5
million.
Operating income was $2.2 million in 1997, as compared to $1.1 million in 1996,
representing a $1.1 million increase. This increase was primarily due to the
higher sales volume. Gross margin on sales was 26.1% in 1997 as compared to
26.0% in 1996.
Selling, general and administrative expenses, as a percentage of sales declined
to 18% in 1997 from 19% in 1996. Selling, general and administrative expenses
increased by $1.6 million in 1997 primarily due to the acquisition of PAI and
LMBC.
<PAGE>
Liquidity and Capital Resources
Cash provided by (used in) operations for 1997 and 1996 was $.8 million and
$(.4) million, respectively. This increase was primarily due to higher cash
earnings.
Cash used in investing activities was $.5 million in 1997, as compared to $.3
million in 1996, due to higher capital expenditures.
Borrowings under the Company's revolving credit facility have been reduced by
$2.3 million primarily from a reduction of cash on deposit.
The Company had no material commitments for capital expenditures as of March 31,
1997.
The Company believes that its $25.2 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.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 27: Financial Data Schedule (For SEC use only).
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: May 14, 1997 AXSYS TECHNOLOGIES, INC.
By: /s/ Stephen W. Bershad
---------------------------
Stephen W. Bershad
Chief Executive Officer
By: /s/ Raymond F. Kunzmann
---------------------------
Raymond F. Kunzmann
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of AXSYS TECHNOLOGIES, INC as of March 31, 1997 and
the related consolidated statement of operations for the three months ended
March 31, 1997 and is qualified in it's entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> $ 546
<SECURITIES> 0
<RECEIVABLES> 16,285
<ALLOWANCES> 433
<INVENTORY> 25,502
<CURRENT-ASSETS> 42,797
<PP&E> 22,073
<DEPRECIATION> 8,256
<TOTAL-ASSETS> 63,450
<CURRENT-LIABILITIES> 18,729
<BONDS> 21,380
0
2
<COMMON> 30
<OTHER-SE> 20,711
<TOTAL-LIABILITY-AND-EQUITY> 63,450
<SALES> 27,602
<TOTAL-REVENUES> 27,602
<CGS> 20,402
<TOTAL-COSTS> 20,402
<OTHER-EXPENSES> 4,951
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 655
<INCOME-PRETAX> 1,583
<INCOME-TAX> 638
<INCOME-CONTINUING> 945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 945
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
