UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 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)
7030 220th NW, Mountlake Terrace, Washington 98043
(Address of principal executive offices)
(206) 771-2182
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports 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.
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.
Class Outstanding at December 30, 1995
Common Stock, .01 Par Value 1,297,095
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
December 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Net sales $3,997,201 $3,643,920
Cost of product sold 2,139,916 2,112,420
----------------------------
Gross profit 1,857,285 1,531,500
Operating expenses 1,366,914 1,487,925
----------------------------
Operating income 490,371 43,575
Other (expense) (12,278) (31,110)
----------------------------
Income before income taxes 478,093 12,465
Provision for income taxes 165,883 --
----------------------------
Net income $312,210 $12,465
============================
Income Per Share $0.22 $0.01
============================
Average shares outstanding 1,396,488 1,223,965
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 30, September 30, December 31,
ASSETS 1995 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,252,160 $ 252,843 $ 157,367
Accounts receivable 2,200,882 2,337,607 2,544,836
Inventories 3,179,918 3,371,976 3,738,128
Prepaid expenses and other current assets 238,496 242,148 926,167
Deferred income taxes, current 174,117 340,000 --
-------------------------------------------
Total current assets 7,045,573 6,544,574 7,366,498
Property, plant and equipment 4,688,239 4,210,085 5,444,648
Less accumulated depreciation 2,548,632 2,472,871 3,916,633
-------------------------------------------
Property, plant and equipment, net 2,139,607 1,737,214 1,528,015
Deferred income taxes, noncurrent 785,992 785,992
Other assets 382,783 255,801 27,816
-------------------------------------------
$10,353,955 $9,323,581 $8,922,329
===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 134,146 $1,468,750 $1,417,019
Notes payable, other -- 30,000 --
Accounts payable 895,336 814,437 1,434,345
Accrued expenses 1,333,341 1,312,600 1,263,120
Current maturities of long-term debt 210,920 209,881 140,130
-------------------------------------------
Total current liabilities 2,573,743 3,835,668 4,254,614
Long-term debt, less current maturities 1,535,864 289,522 294,997
Redeemable preferred stock, $1 par value,
issued, none -- -- --
-------------------------------------------
Stockholders' equity:
Convertible preferred stock, $1 par value,
Authorized 1,000,000 shares; including
redeemable preferred shares, issued, none -- -- --
Common stock, $.01 par value, Authorized
3,000,000 shares; 1,297,095 shares issued
and outstanding 12,971 12,967 12,240
Capital in excess of par value 3,801,046 3,078,182 2,569,330
Unearned compensation (22,497) (33,376) (45,060)
Retained earnings 2,452,828 2,140,618 1,836,208
-------------------------------------------
Total stockholders' equity 6,244,348 5,198,391 4,372,718
-------------------------------------------
$10,353,955 $9,323,581 $8,922,329
===========================================
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
December 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 312,210 $ 12,465
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 77,088 115,809
Provision for losses on accounts receivable 23,385 22,519
Amortization of unearned compensation 10,879 10,204
Provision for income taxes 165,883 --
Changes in operating assets and liabilities:
Accounts receivable 113,340 (248,990)
Inventories and prepaid expenses 195,710 (859,752)
Accounts payable and accrued expenses 101,640 401,319
-------------------------
Net cash provided by (used in) operating activities 1,000,135 (546,426)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, including
self-constructed equipment (478,154) (104,888)
(Increase) in other assets (128,309) (7,975)
-------------------------
Net cash (used in) investing activities (606,463) (112,863)
FINANCING ACTIVITIES
Proceeds from sale of common stock 2,868 18,756
Proceeds from bank borrowings -- 630,000
Proceeds from other borrowings 2,000,000 --
Principal payments on other borrowings (30,000) --
Principal payments on revolving line of credit and
long-term debt (1,367,223) (13,026)
-------------------------
Net cash provided by financing activities 605,645 635,730
Increase (decrease) in cash and equivalents during period 999,317 (23,559)
Cash and equivalents at beginning of period 252,843 180,926
-------------------------
Cash and equivalents at end of period $1,252,160 $ 157,367
=========================
</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 FY96 are consistent with those used in FY95. 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 September 30, 1995. 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>
December 30, 1995 September 30, 1995 December 31, 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Finished Goods $ 991,205 $1,319,509 $1,107,717
Raw Material 2,188,713 2,052,467 2,630,411
- ----------------------------------------------------------------------------------
$3,179,918 $3,371,976 $3,738,128
- ----------------------------------------------------------------------------------
</TABLE>
Note C - Convertible Debt and Preferred Stock On December 19, 1995 the
Company completed a private placement issuance of $2,000,000 in
subordinated Convertible Debentures due in the year 2000. The Debentures
bear interest at increasing rates from 10-15% per annum, and may be
prepaid at anytime, subject to the lender's rights of conversion. The
lender may convert the Debentures at anytime into 2000 shares of
Redeemable Preferred Stock and 2000 shares of Convertible Preferred Stock.
The $2,000,000 proceeds from the Debenture were allocated to the
Debenture's carrying value and additional paid in capital based on the
relative fair values of the Debenture and the 163,967 shares of common
stock obtainable on conversion. The discount on the Debenture is accreted
by periodic charges to earnings over the life of the issue, as are the
direct costs related to the issue.
Redeemable Preferred Stock
- --------------------------
Each $1,000 principal value of the Debentures is convertible into one
share of Redeemable Preferred Stock. The Redeemable Preferred Stock (2000
shares designated, $1 par value) is entitled to cumulative dividends in an
amount equal to the interest that would otherwise be payable on the
Debentures, and is subject to mandatory redemption in the year 2000. The
Redeemable Preferred Stock has no voting rights. The Company may, in its
sole discretion, at anytime after December 19, 1997, redeem all of the
shares of the Redeemable Preferred Stock then outstanding at a price of
$1000 per share.
Convertible Preferred Stock
- ---------------------------
Each share of the Convertible Preferred Stock (2000 shares designated, $1
par value) is convertible at anytime by the holder into approximately 82
shares of the Company's common stock (.01 par value). Convertible
Preferred shares have voting rights equal to common shares, and are
entitled to such number of votes per share as equals the number of shares
of common stock into which each share of Convertible Preferred Stock is
then convertible. The Company may, in its sole discretion, at anytime
after December 19, 2000, either convert the shares to common stock, or
redeem the shares for the fair value.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED DECEMBER 30, 1995
The following table sets forth the components of sales and gross profit by
product line for the Quarter Ended December 30, 1995 and the comparable
quarter in the prior fiscal year.
<TABLE>
<CAPTION>
Sales Gross Profit
- -------------------------- --------------------------
December 30, December 31, December 30, December 31,
1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
$2,506,836 $1,994,262 Land Mobile Communications $1,221,374 $ 937,649
1,162,170 1,103,887 Marine Communications 505,922 454,898
328,195 545,771 Marine Instrumentation 129,989 138,953
- ------------------------------------------------------------------------------------
$3,997,201 $3,643,920 Total $1,857,285 $1,531,500
- ------------------------------------------------------------------------------------
</TABLE>
Sales order backlogs were as follows: Land Mobile Communications
$7,553,000, Marine Communications $50,000 and Marine Instrumentation
$100,000. Land Mobile Communications backlogs are volatile, based upon
the customers' ability to obtain F.C.C. approval for site locations.
<TABLE>
<CAPTION>
Income and expense items as a Percentage
percentage of net sales increase (decrease)
- ---------------------------------------------------------------------
1995 1994
December 30, December 31, to to
1995 1994 1996 1995
- ---------------------------------------------------------------------
<C> <C> <S> <C> <C>
100% 100% Net sales 10 93
54 58 Cost of products sold 1 60
46 42 Gross profit 21 173
34 41 Operating expenses (8) 36
12 1 Operating income 1025 n.m.
0 (1) Other income(expense) (61) n.m.
12 0 Income before taxes 3681 n.m.
4 0 Provision for taxes n.m. n.m.
8 0% Net income 2405 n.m.
</TABLE>
Net sales increased by $353,281 or 10% compared to the same quarter in the
prior fiscal year. Net sales of the Company's land mobile products
increased by $512,574 or 26% compared to the same quarter in the prior
fiscal year. Net sales of the Company's marine radio/telephone systems
increased by $58,283 or 5%. Net sales of the Company's recreational
marine instrumentation systems decreased by $217,576 or 40%.
Gross profit was $1,857,285 (46% of net sales), as compared to $1,531,500
(42% of net sales) in last year's first quarter, an increase of $325,785
or 21%. The gross profit on land mobile products was $1,221,374 (49% of
such sales), as compared to $937,649 (47% of such sales) in the prior
year, an increase of $283,725 or 30%. The gross profit on marine
radio/telephone systems was $505,922 (44% of such sales), as compared to
$454,898 (41% of such sales) in the prior year, an increase of $51,024 or
11%. The gross profit on recreational marine instrumentation systems was
$129,989 (40% of such sales), as compared to $138,953 (25% of such sales)
in the prior year, a decrease of $8,964 or 6%. The overall increase in
gross profit margin was primarily due to a greater portion of the
Company's sales coming from higher margin land mobile products. Land
mobile margins vary depending upon the sales mix across the product line,
and base station equipment typically has a higher gross margin than mobile
products. Profit margins on marine instrumentation products improved due
to lower manufacturing costs as a result of consolidating production at
the Mountlake Terrace, Washington location.
Operating expenses were $1,366,914 (34% of net sales), as compared to
$1,487,925 (41% of net sales) last year, a decrease of $121,011 or 8%.
Operating costs declined as a result of savings realized from the
restructuring which commenced in the second quarter of FY95.
As a result of the private placement issuance of $2,000,000 in Convertible
Debentures, one of the Company's credit lines was increased from
$2,000,000 to $2,500,000. On December 30, 1995, the Company's principal
sources of liquidity consisted of $1,252,160 in cash and equivalents and
$3,365,000 in the unused portion of bank working capital credit lines.
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTER ENDED DECEMBER 30, 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 December 30, 1995.
Item 6
(b) There were no reports on FORM 8-K filed during the quarter ended
December 30, 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 thereunto duly authorized.
Datamarine International, Inc.
(Registrant)
Date: February 13, 1996 /s/ DAVID C. THOMPSON
- ------------------------ -------------------------------
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1996
<PERIOD-END> DEC-30-1995
<CASH> 1,252,160
<SECURITIES> 0
<RECEIVABLES> 2,376,201
<ALLOWANCES> 175,319
<INVENTORY> 3,179,918
<CURRENT-ASSETS> 7,831,566
<PP&E> 4,688,239
<DEPRECIATION> 2,548,632
<TOTAL-ASSETS> 10,353,955
<CURRENT-LIABILITIES> 2,573,743
<BONDS> 1,535,864
0
0
<COMMON> 12,971
<OTHER-SE> 6,231,377
<TOTAL-LIABILITY-AND-EQUITY> 10,353,955
<SALES> 3,997,201
<TOTAL-REVENUES> 3,997,201
<CGS> 2,139,916
<TOTAL-COSTS> 2,139,916
<OTHER-EXPENSES> 1,379,192
<LOSS-PROVISION> 23,385
<INTEREST-EXPENSE> 33,647
<INCOME-PRETAX> 478,093
<INCOME-TAX> 165,883
<INCOME-CONTINUING> 312,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 312,210
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
