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 quarter ended June 30, 1995 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-2387
RESEARCH, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-0908058
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 24064, Minneapolis, Minnesota 55424
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (612) 941-3300
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of August 3, 1995, 1,134,118 common shares were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RESEARCH, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30 1995
Three Months Ended June 30 1994
Nine Months Ended June 30 1995
Nine Months Ended June 30 1994
Net Sales
$5,379,813
$4,602,529
$14,956,015
$12,390,521
Cost of Sales
2,976,264
2,603,629
8,256,353
6,864,122
Gross profit
2,403,549
1,998,900
6,699,662
5,526,399
Expenses:
Selling
1,434,181
1,339,792
4,306,570
3,750,691
Research and development
443,862
308,294
1,261,578
989,372
General and administrative
177,829
155,458
531,783
423,052
Total expenses
2,055,872
1,803,544
6,099,931
5,163,115
Income before Taxes
347,677
195,356
599,731
363,284
Provision for Income Taxes
114,557
62,755
210,539
128,445
Net Income
$233,120
$132,601
$389,192
$234,839
Earnings Per Share (Note 1)
$0.21
$0.12
$0.35
$0.21
Weighted Average Shares Outstanding
1,128,674
1,125,118
1,126,675
1,125,118
Dividends Paid Per Share
$0.055
$0.055
$0.165
$0.165
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
RESEARCH, INCORPORATED
Consolidated Balance Sheets
(Unaudited)
June 30 1995
September 30 1994
Assets
Current Assets:
Cash and cash equivalents
$805,859
$614,351
Marketable securities
0
701,679
Accounts receivable
3,703,629
3,997,416
Inventories
2,914,039
2,597,232
Other current assets
368,099
311,010
Total current assets
7,791,626
8,221,688
Property and Equipment, at cost:
Land and land improvements
212,852
212,852
Building
1,948,772
1,698,970
Machinery and equipment
3,826,915
4,074,488
Less-accumulated depreciation
(4,051,804)
(4,291,629)
Net property and equipment
1,936,735
1,694,681
Other Assets
134,111
163,507
Total Assets
$9,862,472
$10,079,876
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable
$1,281,482
$1,450,188
Accrued liabilities -
Salaries and benefits
285,581
586,466
Profit sharing contribution
204,185
188,000
Warranty reserve
150,000
150,000
Real estate taxes
179,144
215,000
Other
289,354
268,782
Federal and state income taxes
486,833
459,608
Total current liabilities
2,876,579
3,318,044
Stockholders' Investment (Note 3)
Common stock, $.50 par value, 5,000,000 shares authorized, 1,129,618
and 1,125,118 shares issued and outstanding at June 30, 1995 and
September 30, 1994
564,809
562,559
Additional paid-in capital
159,690
145,440
Foreign currency translation
17,782
13,656
Retained earnings
6,243,612
6,040,177
Total stockholders' investment
6,985,893
6,761,832
Total Liabilities and Stockholders' Investment
$9,862,472
$10,079,876
The accompanying notes to the consolidated financial statements are an
integral part of these balance sheets.
RESEARCH, INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended June 30, 1995
For the nine months ended June 30, 1994
Operating Activities:
Net income
$389,192
$234,839
Adjustments to reconcile net income to net cash
provided from (used for) operating activities:
Depreciation and amortization
325,838
272,999
Changes in current operating items:
Accounts receivable
293,787
(233,530)
Inventories
(316,807)
(649,438)
Other current assets
(57,089)
(52,801)
Accounts payable
(168,706)
193,890
Accrued liabilities
(299,984)
(416,911)
Federal and state income taxes
27,225
(534)
Net cash provided from (used for)
operating activities
193,456
(651,486)
Investment Activities:
Purchases of marketable securities
0
(700,000)
Maturities of marketable securities
701,679
1,669,765
Property and equipment additions, net
(531,437)
(303,966)
Acquisition of business
0
(162,208)
Other
(2,933)
10,474
Net cash provided from investing activities
167,309
514,065
Financing Activities:
Cash dividends paid
(185,757)
(185,647)
Issuance of common stock
16,500
0
Net cash used for financing activities
(169,257)
(185,647)
Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents
191,508
(323,068)
Cash and cash equivalents at beginning
of period
614,351
1,275,490
Cash and cash equivalents at end
of period
$805,859
$952,422
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
RESEARCH, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
The Company's significant accounting policies not elsewhere set forth in
the accompanying consolidated financial statements are as follows:
Consolidated Financial Statements -
The consolidated balance sheet as of June 30, 1995, the consolidated
statements of operations for the three and nine month periods ended June
30, 1995 and 1994 and the consolidated statements of cash flows for the
nine months ended June 30, 1995 and 1994, have been prepared by the
Company, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and changes in cash
flows at June 30, 1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes
included in the Company's September 30, 1994 annual report to
shareholders. The results of operations for the periods ended
June 30, 1995 are not necessarily indicative of the operating results for
the full fiscal year or for any interim period.
Inventories -
Inventories are stated at the lower of first-in, first-out cost or market and
include direct labor, material and overhead costs. Inventories consist of
the following components at:
June 30 September 30
1995 1994
Raw materials and
purchased parts $ 2,025,377 $ 1,881,080
Work in process and
finished goods 888,662 716,152
Total $ 2,914,039 $ 2,597,232
Earnings per Share -
Earnings per share are based on the weighted average number of
common shares outstanding. Shares reserved for employee stock options
are not considered as they are insignificant or anti-dilutive. The number
of outstanding shares increased by 2,500 shares during the third quarter
of fiscal 1995 due to the exercise of employee stock options. There was
no change in the number of outstanding shares during the third quarter
of fiscal 1994.
2. Line of Credit:
The Company has a $3,000,000 unsecured bank line of credit which
carries an interest rate equal to the bank's base (prime) rate with no
compensating balance requirements. There are also financial and
affirmative covenants that are applicable to the line of credit. As of
June 30, 1995, these covenants have been met.
3. Stockholders' Investment:
Employee Stock Options -
During fiscal 1982, the Company adopted the 1981 Employee Incentive
Stock Option Plan (1981 Plan) and a total of 200,000 shares of the
Company's common stock were reserved for issuance pursuant to the
exercise of options under the plan. Options for 16,000 shares were
outstanding at June 30, 1995 at prices ranging from $4.00 to $4.50. The
Board of Directors has taken action to preclude the granting of further
options under the 1981 Plan.
During fiscal 1992 the Company adopted the 1991 Stock Plan (1991
Plan). This plan has 210,000 shares of the Company's common stock
reserved for issuance pursuant to the exercise of options under the plan.
Options for 106,500 shares under the 1991 Plan were outstanding at
June 30, 1995 at prices ranging from $3.50 to $6.25 per share.
4. Income Taxes:
During the third quarter of fiscal 1995, the Company
terminated efforts to recover tax refund claims filed in 1989 for
research and development tax credits.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Sources of Capital
The Company's working capital increased from $4,903,644 at September
30, 1994 to $4,915,047 at June 30, 1995. The current ratio at June 30,
1995 was 2.7 to 1 compared to 2.5 to 1 nine months earlier.
The Company has no long-term debt.
The Company has an unsecured bank line of credit for $3,000,000.
There was no borrowing against the line of credit during the nine
months ended June 30, 1995.
Operations
Sales for the third quarter of fiscal 1995 (the quarter ended June 30,
1995) amounted to $5,379,813. This was 16.9% higher than sales of
$4,602,529 reported for the same period of the preceding year. Sales for
the first nine months of fiscal 1995 were $14,956,015 compared to
$12,390,521 for the first nine months of last year. This is 20.7% higher
than last year and is primarily caused by increased sales of products in
the Surface Mount Technology market.
Gross profit on sales for the quarter ended June 30, 1995 was 44.7%
compared to 43.4% for the same quarter last year and 44.8% compared
to 44.6% for the nine month period ended June 30, 1995 and 1994,
respectively. The increase in gross profit is due to product mix and
increased volume.
Selling expenses were 26.7% and 29.1% of sales in the quarters
ended June 30, 1995 and 1994 and 28.8% and 30.3% of sales for the
nine months ended June 30, 1995 and 1994. This percent decrease is
due to our reduced operating expenses in the Controls Division.
Expenditures for research and development increased to 8.3% from
6.7% of sales for the quarters ended June 30, 1995 and 1994 and
were 8.4% and 8.0% of sales for the nine month periods ended
June 30, 1995 and 1994. These expenditures increased due to the
development expenses incurred for our new products and
adaptations of our existing products. General and administrative
expenses were 3.3% and 3.4% of sales in the quarters ended June 30,
1995 and 1994 and 3.6% and 3.4% of sales for the nine months ended
June 30, 1995 and 1994.
As a result of the above, there was a consolidated net profit before
income taxes of $347,677 for the third quarter of fiscal 1995 as
compared to $195,356 for the same quarter last year. The profit for
the first nine months of fiscal 1995 was $599,731 as compared to
$363,284 for the same period last year.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
[27] Financial Data Schedule
(b) Reports on Form 8-K
None filed during the quarter
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
RESEARCH, INCORPORATED
(Registrant)
Date 8/7/95 S: Claude C. Johnson
President,
Chief Executive Officer,
Chief Financial Officer
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