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 JULY 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 July 1, 1995
Common Stock, $0.01 Par Value 1,273,909
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ---------------------------
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales...................................... $3,754,201 $3,564,413 $10,951,387 $7,994,715
Cost of product sold........................... 2,442,050 2,044,405 6,582,035 4,999,375
---------- ---------- ----------- ----------
Gross profit................................... 1,312,151 1,520,008 4,369,352 2,995,340
Operating expenses............................. 1,312,433 1,341,051 4,276,364 3,713,972
Restructuring charge........................... (78,000) 1,109,885
---------- ---------- ----------- ----------
Operating income (loss)........................ 77,718 178,957 (1,016,897) (718,632)
Other income (expense)......................... (39,631) 31,201 (121,554) 16,742
---------- ---------- ----------- ----------
Income (loss) before income taxes............. 38,087 210,158 (1,138,451) (701,890)
Provisions (credit) for income taxes........... 12,948 - (1,187,605) -
---------- ---------- ----------- ----------
Net income (loss).............................. $ 25,139 $ 210,158 $ 49,154 ($ 701,890)
========== ========== =========== ==========
Net Income (Loss) Per Share.................... $ 0.02 $ 0.17 $ 0.04 ($ 0.58)
========== ========== =========== ==========
Average Shares Outstanding..................... 1,273,909 1,216,829 1,273,909 1,216,829
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 1, October 1, July 2,
ASSETS 1995 1994 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current assets:
Cash......................................... $ 198,838 $ 180,926 $ 211,604
Accounts receivable.......................... 2,422,381 2,318,365 1,628,124
Inventories.................................. 3,481,495 3,149,871 3,207,720
Prepaid expenses and other current assets.... 595,045 654,672 535,592
Deferred and refundable income taxes......... 1,187,604 - -
---------- ---------- ----------
Total current assets..................... 7,885,363 6,303,834 5,583,040
Property, plant and equipment.................. 5,411,675 5,339,758 5,002,222
Less accumulated depreciation................ 4,205,402 3,800,822 3,692,269
---------- ---------- ----------
Property, plant and equipment, net........... 1,206,273 1,538,936 1,309,953
Other assets................................... 23,342 19,841 21,169
---------- ---------- ----------
$9,114,978 $7,862,611 $6,914,162
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks...................... $1,492,019 $ 795,353 $ 470,000
Notes payable, other........................ - - 135,000
Accounts payable............................ 893,978 1,174,830 1,146,188
Accrued expenses............................ 1,621,588 1,121,316 878,088
Current maturities of long-term debt........ 154,125 150,878 101,059
---------- ---------- ----------
Total current liabilities............... 4,161,710 3,242,377 2,730,335
Long-term debt, less current maturities....... 263,985 288,941 182,805
Stockholders' equity:
Common stock - $.01 par value -
Authorized 3,000,000 shares;
1,273,909 shares issued and outstanding.. 12,739 12,199 12,168
Capital in excess of par value............ 2,829,387 2,550,615 2,537,624
Unearned compensation..................... (25,740) (55,264) (66,571)
Retained earnings......................... 1,872,897 1,823,743 1,517,801
---------- ---------- ----------
Total stockholders' equity.............. 4,689,283 4,331,293 4,001,022
---------- ---------- ----------
$9,114,978 $7,862,611 $6,914,162
========== ========== ==========
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
July 1, July 2,
1995 1994
---------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................................... $ 49,154 ($701,890)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization....................... 653,267 384,365
Provision for losses on accounts receivable......... 1,299 17,126
Amortization of unearned compensation............... 29,524 33,921
Gain on sale of assets.............................. 0 (45,167)
Changes in operating assets and liabilities:
Accounts receivable............................... (105,315) (824,255)
Inventories and prepaid expenses.................. (271,997) (225,553)
Accounts payable and accrued expenses............. 219,420 962,793
Federal and state income taxes.................... (1,187,604) -
---------- --------
Net cash (used in) operating activities............... (612,252) (398,660)
INVESTING ACTIVITIES
Purchases of property, plant and equipment.......... (320,604) (123,057)
Proceeds from sales of fixed assets................. 0 90,500
(Increase) decrease in other assets................. (3,501) 337
---------- --------
Net cash (used in) investing activities............... (324,105) (32,220)
FINANCING ACTIVITIES
Proceeds from sale of common stock.................. 279,312 44,985
Proceeds from bank borrowings....................... 885,000 100,000
Proceeds from other borrowings...................... 0 180,000
Principal payments on revolving line of credit
and long-term debt................................. (210,043) (65,473)
---------- --------
Net cash provided by financing activities............. 954,269 259,512
Increase (decrease) in cash and equivalents
during period........................................ 17,912 (171,368)
Cash and equivalents at beginning of year............. 180,926 382,972
---------- --------
Cash and equivalents at end of period................. $ 198,838 $211,604
========== ========
</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>
July 1, 1995 October 1, 1994 July 2, 1994
<S> <C> <C> <C>
Finished Goods $1,407,833 $ 777,371 $ 655,768
Raw Material 2,073,662 2,372,500 2,551,952
---------- ---------- ----------
$3,481,495 $3,149,871 $3,207,720
========== ========== ==========
</TABLE>
Note C - Restructuring Charge During the Quarter Ended April 1, 1995, the
Company established a special charge in connection with a restructuring
program designed to improve productivity and permanently reduce costs. The
Company decided to move the production of its Datamarine Marine Instrument
product line to its facility in Mountlake Terrace, Washington to reduce
overhead. 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 and estimated costs to settle the lease of the
Massachusetts facility. 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>
Second Quarter Third Quarter Year-to-Date Balance at
Provision Provision Provision 1995 Activity July 1, 1995
<S> <C> <C> <C> <C> <C>
Severance and relocation costs $ 197,748 $ -0- $ 197,748 $ 33,185 $164,563
Curtailment of product line
and facility lease 990,137 (78,000) 912,137 809,597 102,540
---------- -------- ---------- -------- --------
$1,187,885 $(78,000) $1,109,885 $842,782 $267,103
========== ======== ========== ======== ========
</TABLE>
Note D - 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 $ (387,605) $(239,000)
Change in valuation allowance (800,000) 239,000
----------- ---------
$(1,187,605) $ -0-
=========== =========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED JULY 1, 1995
The following table sets forth the components of sales and gross profit by
product line for the Quarter Ended July 1, 1995 and the comparable quarter in
the prior fiscal year.
<TABLE>
<CAPTION>
Sales Gross Profit
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
<C> <C> <S> <C> <C>
$1,527,344 $1,050,000 Narrowband $ 600,513 $ 568,700
1,251,966 1,400,212 Marine Communications 330,327 514,196
974,891 1,114,201 Marine Instruments 381,311 437,112
---------- ---------- ---------- ----------
$3,754,201 $3,564,413 Total $1,312,151 $1,520,008
========== ========== ========== ==========
</TABLE>
Sales order backlogs were as follows: Narrowband $11,021,000; Marine
Communications $98,000 and Marine Instruments $209,000. Narrowband backlogs
are volatile, based upon the customers' ability to obtain F.C.C. approval for
site locations.
<TABLE>
<CAPTION>
Income and expense items Percentage
as a percentage of net sales increase (decrease)
July 1, 1995 July 2, 1994 1994 to 1995 1993 to 1994
<C> <C> <S> <C> <C>
100 100 Net sales 5 51
65 57 Cost of products sold 19 32
35 43 Gross profit (14) 88
35 38 Operating expenses (2) (1)
(2) - Restructuring charge (credit) - -
2 5 Operating income (57) n.m.
(1) 1 Other income (expense) n.m. n.m.
1 6 Income before taxes (82) n.m.
- - Provision (credit) for income taxes n.m. -
1 6 Net income (88) n.m.
</TABLE>
Net sales increased by $189,788 or 5% compared to the same quarter in the
prior fiscal year. Net sales of the Company's narrowband products increased
by $477,344 or 45% compared to the same quarter in the prior fiscal year. Net
sales of the Company's marine radio/telephone systems decreased by $148,246 or
11%. Net sales of the Company's recreational marine instrumentation systems
decreased by $139,310 or 13%.
QUARTER ENDED JULY 1, 1995
Gross profit was $1,312,151 (35% of net sales), as compared to $1,520,008 (43%
of net sales) last year's third quarter, a decrease of $207,857 or 14%. The
gross profit on narrowband products was $600,513 (39% of such sales), as
compared to $568,700 (54% of such sales) in the prior year, an increase of
$31,813 or 6%. The gross profit on marine radio/telephone systems was
$330,327 (26% of such sales), as compared to $514,196 (37% of such sales) in
the prior year, a decrease of $183,869 or 36%. The gross profit on
recreational marine instrumentation systems was $381,311 (39% of such sales),
as compared to $437,112 (39% of such sales) in the prior year, a decrease of
$55,801 or 13%. The overall decrease in gross profit margin was primarily due
to a greater portion of narrowband sales coming from lower margin mobile
radios. Narrowband margins are expected to improve when licensees receive
F.C.C. approval to resume building-out their site locations. Margins on
marine communications products declined due to pricing incentives and lower
margins on third party private label products.
Operating expenses were $1,312,433 (35% of net sales), as compared to
$1,341,051 (38% of net sales) last year, a decrease of $28,618 or 2%.
In December 1994, the Company announced that it was combining its Marine
Communications and its Marine Instruments product lines into a single business
unit. 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 (a wholly owned subsidiary of
Datamarine) renegotiated its line of credit to $2,000,000 with the same
interest rate and collateral requirements. The maturity date of July 5, 1995
has been extended to August 18, 1995.
On July 1, 1995, the Company's principal source of liquidity consisted of
$199,000 in cash and equivalents and $625,000 in the unused portion of bank
working capital credit lines.
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTER ENDED JULY 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 July 1, 1995.
Item 6
(b) There were no reports on FORM 8-K filed during the quarter ended
July 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: August 14, 1995 By: DAVID C. THOMPSON
David C. Thompson
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 198,838
<SECURITIES> 0
<RECEIVABLES> 2,422,381
<ALLOWANCES> 0
<INVENTORY> 3,481,495
<CURRENT-ASSETS> 7,885,363
<PP&E> 5,411,675
<DEPRECIATION> 4,205,402
<TOTAL-ASSETS> 9,114,978
<CURRENT-LIABILITIES> 4,161,710
<BONDS> 0
<COMMON> 12,739
0
0
<OTHER-SE> 2,829,387
<TOTAL-LIABILITY-AND-EQUITY> 9,114,978
<SALES> 10,951,387
<TOTAL-REVENUES> 10,951,387
<CGS> 6,582,035
<TOTAL-COSTS> 6,582,035
<OTHER-EXPENSES> 4,276,364
<LOSS-PROVISION> 1,109,885
<INTEREST-EXPENSE> 121,554
<INCOME-PRETAX> (1,138,451)
<INCOME-TAX> (1,187,605)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,154
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
