UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter End April 1, 1995 Commission File Number 0-8936
DATAMARINE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2454559
(State of incorporation) (I.R.S. Employer Identification Number)
53 Portside Drive, Pocasset, Massachusetts 02559
(Address of principal executive offices)
(508) 563-7151
(Registrant's telephone number)
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, and (2) has been subject to filing
requirements for the past 90 days.
X Yes No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 1, 1995
Common Stock, $0.01 Par Value 1,251,592
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 1, April 2, April 1, April, 2
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $3,553,266 $2,546,236 $7,197,186 $4,430,302
Cost of product sold 2,027,565 1,631,964 4,139,985 2,954,970
Gross profit 1,525,701 914,272 3,057,201 1,475,332
Operating expenses 1,476,006 1,281,204 2,963,931 2,372,921
Restructuring charge 1,187,885 1,187,885
Operating loss (1,138,190) (366,932) (1,094,615) (897,589)
Other income (expense) (50,813) (12,637) (81,923) (14,459)
Income (loss) before income taxes (1,189,003) (379,569) (1,176,538) (912,048)
Provisions (credit) for income taxes (1,200,553) - (1,200,553) -
Net income (loss) $11,550 ($379,569) $24,015 ($912,048)
Net Income (Loss) Per Share $0.01 ($0.31) $0.02 ($0.75)
Average Shares Outstanding 1,251,592 1,213,135 1,251,592 1,213,135
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 1, October 1, April 2,
ASSETS 1995 1994 1994
<S> <C> <C> <C>
Current assets:
Cash $ 122,543 $ 180,926 $ 32,298
Accounts receivable 2,433,900 2,318,365 1,516,615
Inventories 3,519,271 3,149,871 2,859,512
Prepaid expenses and other current assets 582,632 654,672 495,407
Deferred and refundable income taxes 1,200,553 - -
Total current assets 7,858,899 6,303,834 4,903,832
Property, plant and equipment 5,340,470 5,339,758 4,924,333
Less accumulated depreciation 4,104,936 3,800,822 3,583,150
Property, plant and equipment, net 1,235,534 1,538,936 1,341,183
Other assets 26,487 19,841 26,281
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $1,379,519 $ 795,353 $ 500,000
Notes payable, other - - 85,000
Accounts payable 1,108,616 1,174,830 876,570
Accrued expenses 1,709,032 1,121,316 778,438
Current maturities of long-term debt 126,936 150,878 101,252
Total current liabilities 4,324,103 3,242,377 2,341,260
Long-term debt, less current maturities 292,041 288,941 168,196
Stockholders' equity:
Common stock - $.01 par value -
Authorized 3,000,000 shares;
1,251,592 shares issued and outstanding 12,516 12,199 12,131
Capital in excess of par value 2,679,902 2,550,615 2,519,944
Unearned compensation (35,400) (55,264) (77,878)
Retained earnings 1,847,758 1,823,743 1,307,643
Total stockholders' equity 4,504,776 4,331,293 3,761,840
$9,120,920 $7,862,611 $6,271,296
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
April 1, April 2,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 24,015 ($912,048)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 552,801 231,310
Provision for losses on accounts receivable 39,642 14,994
Amortization of unearned compensation 19,864 22,614
Changes in operating assets and liabilities:
Accounts receivable (155,177) (710,614)
Inventories and prepaid expenses (297,360) 162,840
Accounts payable and accrued expenses 521,502 593,525
Federal and state income taxes (1,200,553) -
Net cash (used in) operating activities (495,266) (597,379)
INVESTING ACTIVITIES
Purchases of property , plant and equipment (249,399) (48,879)
Proceeds from sales of fixed assets 89,000
(Increase) Decrease in other assets (6,646) (795)
Net cash provided by (used in) investing activities (256,045) 39,326
FINANCING ACTIVITIES
Proceeds from sale of common stock 129,604 27,268
Proceeds from bank borrowings 630,000 100,000
Proceeds from other borrowings 130,000
Principle payments on revolving line
of credit and long-term debt (66,676) (49,889)
Net cash provided by financing activities 692,928 207,379
Increase (decrease) in cash and equivalents during period (58,383) (350,674)
Cash and equivalents at beginning of year 180,926 382,972
Cash and equivalents at end of period $122,543 $ 32,298
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation The accompanying unaudited , consolidated,
condensed financial statements have been prepared in accordance with
instructions to FORM 10-Q and , therefore, do not include all information and
footnotes normally included in financial statements prepared in conformity
with Generally Accepted Accounting Principles. In the opinion of management,
they fairly represent the operating results of the Company for the periods
presented. All accruals necessary for a fair presentation of the operating
results of the period have been included. Accounting policies used in FY95 are
consistent with those used in FY94. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on FORM 10-K for the year ended October 1, 1994. The
results shown are not necessarily indicative of the results that may be
expected in succeeding quarters.
Note B - Inventory Components Inventories consisted of the following at:
<TABLE>
<CAPTION>
April 1, October 1, April 2,
1995 1994 1994
<S> <C> <C> <C>
Finished goods $1,336,244 $ 777,371 $ 724,603
Raw material 2,183,027 2,372,500 2,134,909
$3,519,271 $3,149,871 $2,859,512
</TABLE>
Note C - Restructuring Charge During the Quarter Ended April 1, 1995, the
Company established a special charge of $1,187,885, or $.63 per share, in
connection with a restructuring program designed to improve productivity and
permanently reduce its costs. The Company decided to move the production of
its Datamarine Marine Instrument Product Line to its facility in Mountlake
Terrace, Washington to reduce redundant overhead costs. Costs associated with
the restructuring of this product line included the write down of leasehold
improvements, product tooling and equipment to net realizable values, the
phase-out of certain products, employee severance, estimated cost of the move
and estimated costs to settle the lease of the Massachusetts facility. Of the
total amount, approximately $378,288 represents cash spending. The program is
expected to result in the permanent reduction of 10 salaried employees. The
components of the special charge are as follows:
<TABLE>
<CAPTION>
1995 1995 Balance at
Provision Activity April 1, 1995
<S> <C> <C> <C>
Severance and relocation costs from consolidation of facilities $ 197,748 $ 11,434 $186,314
Curtailment of a product line and a facility lease 990,137 809,597 180,540
$1,187,885 $821,031 $366,854
</TABLE>
Note C - Income Taxes Management has determined, based on the restructuring of
its unprofitable operation and its expectations for the future, that operating
income of the Company will more likely than not be sufficient to recognize
fully its deferred tax assets. The reconciliation of taxes on income at the
federal statutory rate to the actual benefit for income taxes is presented
below:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Tax at statutory rate $ (400,553) $(310,000)
Change in valuation allowance (800,000) 310,000
$(1,200,553) $ -
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED APRIL 1, 1995
The following table sets forth the components of sales and gross profit by
product line for the Quarter Ended April 1, 1995 and the comparable quarter in
the prior fiscal year.
<TABLE>
<CAPTION>
Sales Gross Profit
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<C> <C> <S> <C> <C>
$1,289,042 $ 694,882 Narrowband $ 555,996 $370,227
1,480,506 982,349 Marine Communications 757,600 284,225
783,718 869,005 Marine Instruments 212,105 259,820
$3,553,266 $2,546,236 Total $1,525,701 $914,272
</TABLE>
Sales order backlogs were as follows: Narrowband $12,450,000; Marine
Communications $ 66,000 and; Marine Instruments $315,000. Narrowband backlogs
are volatile, based upon the customers ability to obtain F.C.C. approval for
site locations.
<TABLE>
<CAPTION>
Income and Expenses Items Percentage
As a percentage of Net Sales Increase (Decrease)
1994 1993
April 1, April 2, to to
1995 1994 1995 1994
<C> <C> <S> <C> <C>
100% 100% Net sales 40% 25%
57 64 Cost of products sold 24 24
43 36 Gross profit 67 26
42 50 Operating expenses 15 3
33 - Restructuring charge n.m. -
(32) (14) Operating income (loss) n.m. n.m.
(2) (1) Other income (expenses) n.m. n.m.
(34) (15) Income (loss) before income taxes n.m. n.m.
(34) Provisions (credit) for income taxes n.m. n.m.
0% (15)% Net income (loss) n.m. n.m.
</TABLE>
Net sales increased by $1,007,030, or 40% compared to the same quarter in the
prior fiscal year. In July 1993 the Company introduced a line of narrowband
radios for use in the new land mobile service in the new 220-222 MHz. land
mobile radio service. Net sales of the Company's new narrowband products
increased by $594,160, or 86% compared to the same quarter in the prior fiscal
year. Net sales of the Company's marine radio\telephone systems increased by
$498,157, or 73%. Net sales of the Company's recreational marine
instrumentation systems decreased by $85,287, or -10%.
Gross profit was $1,525,701 (43% of net sales), as compared to $914,272 (36%
of net sales) last year' second quarter, an increase of $611,429 or 67%. The
gross profit on narrowband products was $555,996 (43% of such sales), as
compared to $370,227(53% of such sales) in the prior year, an increase of
$185,769 or 50%. The gross profit on marine radiotelephone systems was
$757,600 (51% of such sales), as compared to $284,225 (29% of such sales) in
the prior year, an increase of $473,375 or 166%. The gross profit on
recreational marine instrumentation systems was $212,105 (27% of such sales),
as compared to $259,820 (30% of such sales) in the prior year, a decrease of
$47,715 or -18%. The overall increase in gross profit at a rate in excess of
the rate of increase in sales was primarily due to sales growth in the new
narrowband products and in marine communication products. In the future,
narrowband sales will likely be comprised of a greater proportion of mobile
radios and thus will likely achieve a lower overall margin than was achieved
this quarter.
Operating expenses were $1,476,006 (42% of net sales), as compared to
$1,281,204 (50% of net sales) last year, an increase of $194,802 or 15%, which
trailed the sales increase of 40%.
In December 1994, the Company announced that it was combining its Marine
Communications and its Marine Instruments product lines into a single business
unit. In the future they will be offered to the marketplace with a unified
sales and marketing effort. While strategically motivated, this change should
also result in future operating efficiencies. In January 1995 as many new
product development projects in the Marine Instrument product line were being
successfully concluded, the engineering staff was reduced. During the Quarter
ended April 1, 1995, an appropriate restructuring charge was made based upon a
review of the realizable values of the assets associated with the planned move
of the Marine Instrument product line and for the costs associated with
employee severance and lease settlement.
During the Quarter ended April 1, 1995, SEA renegotiated its line of credit to
$2,000,000 with the same interest rate and collateral requirements and
maturity date of July 5, 1995. Additionally, SEA has entered into a separate
line of credit for up to $1,000,000 to finance the equipment required to build
the narrowband licenses that it manages.
On April 1, 1995, the Company's principal source of liquidity consisted of
$122,000 in cash and equivalents and $620,000 in the unused portion of bank
working capital credit lines.
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTER ENDED APRIL 1, 1995
PART II - OTHER INFORMATION
Items 1,2,3,4 and 5
There were no reportable events or matters under these captions during the
quarter ended April 1, 1995.
Item 6
(b) There were no reports on FORM 8-K filed during the quarter ended
April 1, 1995.
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 thereto duly authorized.
Datamarine International, Inc.
(Registrant)
Date: May 12, 1995 By: /s/GEOFFREY W. KREIGER
Geoffrey W. Kreiger
Vice President of Finance & Treasurer
(As Duly Authorized Officer and as
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> APR-01-1995
<CASH> 122,543
<SECURITIES> 0
<RECEIVABLES> 2,433,900
<ALLOWANCES> 0
<INVENTORY> 3,519,271
<CURRENT-ASSETS> 7,858,899
<PP&E> 5,340,470
<DEPRECIATION> 4,104,936
<TOTAL-ASSETS> 9,120,920
<CURRENT-LIABILITIES> 4,324,103
<BONDS> 0
<COMMON> 12,516
0
0
<OTHER-SE> 2,679,902
<TOTAL-LIABILITY-AND-EQUITY> 9,120,920
<SALES> 7,197,186
<TOTAL-REVENUES> 7,179,186
<CGS> 4,139,985
<TOTAL-COSTS> 4,139,985
<OTHER-EXPENSES> 2,963,931
<LOSS-PROVISION> 1,187,885
<INTEREST-EXPENSE> 81,923
<INCOME-PRETAX> (1,176,538)
<INCOME-TAX> (1,200,553)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,105
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
