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 December 31, 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
Former name, former address, and former fiscal year, if changed since last
report.
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
As of February 5, 1996, 1,155,368 common shares were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RESEARCH, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31
1995 1994
---------- ----------
Net Sales $4,380,549 $4,992,587
Cost of Sales 2,576,432 2,703,844
---------- ----------
Gross profit 1,804,117 2,288,743
---------- ----------
Expenses:
Selling 1,178,905 1,483,047
Research and development 391,073 401,053
General and administrative 186,922 190,733
---------- ----------
Total expenses 1,756,900 2,074,833
---------- ----------
Income before Taxes 47,217 213,910
Provision for Income Taxes 19,918 82,269
---------- ----------
Net Income $ 27,299 $ 131,641
========== ==========
Earnings Per Share (Note 1) $ 0.02 $ 0.12
---------- ----------
Weighted Average Shares Outstanding (Note 1) 1,199,491 1,125,718
Dividends Paid per Share $ 0.055 $ 0.055
---------- ----------
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated statements.
<TABLE>
<CAPTION>
RESEARCH, INCORPORATED
Consolidated Balance Sheets
(Unaudited)
December 31 September 30
Assets 1995 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,126,466 $ 1,307,564
Accounts receivable, net of reserves of $150,000 2,557,589 4,147,907
Inventories 3,322,643 2,722,446
Other current assets 522,570 415,109
------------ ------------
Total current assets 7,529,268 8,593,026
------------ ------------
Property and Equipment
Land and land improvements 212,852 212,852
Building 1,972,234 1,972,234
Machinery and equipment 4,078,553 3,841,923
Less-accumulated depreciation (4,248,985) (4,151,031)
------------ ------------
Net property and equipment 2,014,654 1,875,978
------------ ------------
Other Assets 111,963 124,068
------------ ------------
Total assets $ 9,655,885 $ 10,593,072
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,273,374 $ 1,417,719
Accrued liabilities -
Salaries and benefits 175,654 505,436
Profit sharing contribution 37,303 268,000
Warranty reserve 150,000 150,000
Real estate taxes 177,287 215,000
Other 190,312 215,073
Federal and state income taxes 449,310 627,055
------------ ------------
Total current liabilities 2,453,240 3,398,283
------------ ------------
Stockholders' Equity
Common stock, $.50 par value, 5,000,000 shares
authorized, 1,152,368 and
1,139,618 shares issued and outstanding at
December 31 and September 30, 1995 576,184 569,809
Additional paid-in capital 243,439 197,315
Foreign currency translation 365 8,953
Retained earnings 6,382,657 6,418,712
------------ ------------
Total stockholders' equity 7,202,645 7,194,789
------------ ------------
Total liabilities and stockholders' equity $ 9,655,885 $ 10,593,072
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated balance sheets.
RESEARCH, INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended December 31, 1995 1994
----------- -----------
Operating Activities:
Net income $ 27,299 $ 131,641
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 105,822 111,826
Changes in current operating items:
Accounts receivable 1,590,318 1,015,032
Inventories (600,197) (323,224)
Other current assets (107,461) (75,541)
Accounts payable and accrued liabilities (767,298) (713,808)
Federal and state income taxes (177,745) 10,769
----------- -----------
Net cash provided by operating activities 70,738 156,695
----------- -----------
Investment Activities:
Maturity of marketable securities -- 500,000
Property and equipment additions, net (236,630) (183,999)
Other (4,351) (319)
----------- -----------
Net cash provided by (used in)
investing activities (240,981) 315,682
----------- -----------
Financing Activities:
Cash dividends paid (63,354) (61,937)
Issuance of common stock 52,499 3,500
----------- -----------
Net cash used in financing activities (10,855) (58,437)
----------- -----------
Cash and Cash Equivalents:
Net increase (decrease) in cash and
cash equivalents (181,098) 413,940
Cash and cash equivalents at beginning
of year 1,307,564 614,351
----------- -----------
Cash and cash equivalents at end
of period $ 1,126,466 $ 1,028,291
=========== ===========
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated 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 December 31, 1995, the consolidated
statements of operations and cash flows for the three months ended December 31,
1995 and December 31, 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 December 31, 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 thereto included in the Company's September 30,
1995 Form 10-K. The results of operations for the period ended December 31, 1995
are not necessarily indicative of the operating results for the full fiscal
year.
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:
December 31 September 30
1995 1995
---------- -----------
Raw materials and
purchased parts $2,394,416 $2,104,382
Work in process and
finished goods 928,227 618,064
---------- ----------
Total $3,322,643 $2,722,446
========== ==========
Earnings per Share -
Earnings per share are based on the weighted average number of common and common
equivalent shares (where dilutive) outstanding. The number of common shares
outstanding increased by 12,750 shares during the first quarter of fiscal 1996
due to the exercise of employee stock options.
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. The Company had no borrowing against the line of credit during the
current quarter ended December 31, 1995.
3. Stockholders' Equity:
Employee Stock Options -
During fiscal 1992, the Company adopted the 1991 Stock Plan (1991 Plan). The
1991 Plan has 210,000 shares of the Company's common stock reserved for issuance
pursuant to the exercise of options. Options for 124,250 shares under the 1991
Plan were outstanding at December 31, 1995 at prices ranging from $3.50 to $7.75
per share.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Sources of Capital
The Company's working capital was $5,076,028 at December 31, 1995, relatively
unchanged from $5,194,743 at September 30, 1995. The current ratio at December
31, 1995 was 3.1 to 1 compared to 2.5 to 1 at September 30, 1995.
At a meeting of the Board of Directors of Research, Incorporated on January 18,
1996, the directors declared a regular quarterly dividend of 7 cents per share,
payable April 1, 1996 to shareholders of record March 1, 1996. This represents a
1 1/2 cents per share increase.
The Company has an unsecured bank line of credit for $3,000,000. There were no
borrowings against the line of credit during the three months ended December 31,
1995. The Company has no long-term debt.
Operations
Sales for the first three months of fiscal 1996 (the quarter ended December 31,
1995) amounted to $4,380,549. This was 12.3% lower than sales of $4,992,587
reported for the same period of the preceding year. The lower sales volume for
the first quarter of fiscal 1996 was primarily due to customer delays.
Gross profit on sales for the quarter ended December 31, 1995 was 41.2% compared
to 45.8% for the first quarter last year. The decrease in gross profit
percentage for the first quarter of fiscal 1996 was primarily due to reduced
volume, product mix and the impact of new product introductions. Selling
expenses decreased to $1,178,905 (26.9% of sales) in the current quarter
compared to $1,483,047 (29.7% of sales) in the first quarter of fiscal 1995 due
to expense control and the impact of the action taken in March 1995 to reduce
operating expenses in the Controls Division.
Expenditures for research and development decreased slightly to $391,073 (8.9%
of sales) in the current quarter compared to $401,053 (8.0% of sales) for the
same quarter a year ago.
General and administrative expenses remained relatively unchanged at $186,922
(4.3% of sales) in the first quarter of fiscal 1996 compared to $190,733 (3.8%
of sales) for the same quarter a year ago. The percentage increase in research
and development and general and administrative expenses is a result of the
reduced volume of sales.
As a result of the above, there was a net profit before income taxes of $47,217
for the first quarter of fiscal 1996 as compared to $213,910 for the same
quarter 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 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 By /s/ Claude C. Johnson
Claude C. Johnson
President,
Chief Executive Officer,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THE 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 1,126
<SECURITIES> 0
<RECEIVABLES> 2,708
<ALLOWANCES> 150
<INVENTORY> 3,323
<CURRENT-ASSETS> 7,529
<PP&E> 6,264
<DEPRECIATION> 4,249
<TOTAL-ASSETS> 9,656
<CURRENT-LIABILITIES> 2,453
<BONDS> 0
0
0
<COMMON> 576
<OTHER-SE> 6,626
<TOTAL-LIABILITY-AND-EQUITY> 9,656
<SALES> 4,381
<TOTAL-REVENUES> 4,381
<CGS> 2,576
<TOTAL-COSTS> 2,576
<OTHER-EXPENSES> 1,757
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 47
<INCOME-TAX> 20
<INCOME-CONTINUING> 27
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
