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 March 30, 1996 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 March 30, 1996
Common Stock, .01 Par Value 1,297,095
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $3,963,374 $3,553,266 $7,960,575 $7,197,186
Cost of product sold 2,335,990 2,027,565 4,475,906 4,139,985
----------------------------------------------------
Gross profit 1,627,384 1,525,701 3,484,669 3,057,201
Operating expenses 1,375,663 1,476,006 2,742,577 2,963,931
Restructuring charge -- 1,187,885 -- 1,187,885
----------------------------------------------------
Operating income (loss) 251,721 (1,138,190) 742,092 (1,094,615)
Other expense 99,331 50,813 111,609 81,923
----------------------------------------------------
Income (loss) before income taxes 152,390 (1,189,003) 630,483 (1,176,538)
Provision (benefit) for income taxes 58,524 (1,200,553) 224,407 (1,200,553)
----------------------------------------------------
Net income $ 93,866 $ 11,550 $ 406,076 $ 24,015
====================================================
Income Per Share $ 0.06 $ 0.01 $ 0.28 $ 0.02
====================================================
Average shares outstanding 1,557,151 1,251,592 1,476,819 1,251,592
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 30, September 30, April 1,
ASSETS 1996 1995 1995
----------- ------------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 508,425 $ 252,843 $ 122,543
Accounts receivable 2,485,589 2,337,607 2,433,900
Inventories 4,067,506 3,371,976 3,519,271
Prepaid expenses and other current assets 186,112 242,148 582,632
Deferred income taxes, current 200,000 340,000 1,200,553
------------------------------------------
Total current assets 7,447,632 6,544,574 7,858,899
Property, plant and equipment 4,772,591 4,210,085 5,340,470
Less accumulated depreciation 2,661,759 2,472,871 4,104,936
------------------------------------------
Property, plant and equipment, net 2,110,832 1,737,214 1,235,534
Deferred income taxes, noncurrent 701,110 785,992 --
Other assets 504,030 255,801 26,487
------------------------------------------
$10,763,604 $9,323,581 $9,120,920
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 124,895 $1,468,750 $1,379,519
Notes payable, other -- 30,000 --
Accounts payable 1,035,187 814,437 1,108,616
Accrued expenses 1,526,491 1,312,600 1,709,032
Current maturities of long-term debt 203,532 209,881 126,936
------------------------------------------
Total current liabilities 2,890,105 3,835,668 4,324,103
Long-term debt, less current maturities 1,767,647 289,522 292,041
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 12,516
Capital in excess of par value 3,561,046 3,078,182 2,679,902
Unearned compensation (14,859) (33,376) (35,400)
Retained earnings 2,546,694 2,140,618 1,847,758
------------------------------------------
Total stockholders' equity 6,105,852 5,198,391 4,504,776
------------------------------------------
$10,763,604 $9,323,581 $9,120,920
==========================================
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
------------------------
March 30, April 1,
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 406,076 $ 24,015
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 188,888 206,276
Non-cash portion of loss from restructuring charge -- 809,597
Provision for losses on accounts receivable 36,286 39,642
Employee investment plan expense -- 24,520
Amortization of unearned compensation 18,517 19,864
Amortization of bond discount and issue costs 25,875 --
Deferred tax provision 224,882 (1,200,553)
Changes in operating assets and liabilities:
Accounts receivable (184,268) (155,177)
Inventories and prepaid expenses (639,494) (760,432)
Accounts payable and accrued expenses 434,641 521,502
------------------------
Net cash provided by (used in) operating activities 511,403 (470,746)
INVESTING ACTIVITIES
Purchases of property, plant and equipment,
including self-constructed equipment (562,506) (249,399)
(Increase) in other assets (258,104) (6,646)
------------------------
Net cash (used in) investing activities (820,610) (256,045)
FINANCING ACTIVITIES
Proceeds from sale of common stock 2,868 105,084
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 (1,408,079) (66,676)
------------------------
Net cash provided by financing activities 564,789 668,408
Increase (decrease) in cash and equivalents
during period 255,582 (58,383)
Cash and equivalents at beginning of period 252,843 180,926
------------------------
Cash and equivalents at end of period $ 508,425 $ 122,543
========================
</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>
March 30, 1996 September 30, 1995 April 1, 1995
-------------- ------------------ -------------
<S> <C> <C> <C>
Finished Goods $1,162,766 $1,319,509 $1,336,244
Raw Material 2,904,740 2,052,467 2,183,027
------------------------------------------------
$4,067,506 $3,371,976 $3,519,271
------------------------------------------------
</TABLE>
Note C - Restructuring Charge During the quarter ended April 1, 1995, the
Company established a special charge of $1,187,885 in connection with a
restructuring program designed to improve productivity and permanently
reduce costs. Restructuring costs included the write down of products and
related tooling, certain leasehold improvements, employee severance and
lease termination expenses. The restructuring was substantially completed
during FY95 and the ultimate costs were approximately $686,000.
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 MARCH 30, 1996
The following table sets forth the components of sales and gross profit by
product line for the Quarter Ended March 30, 1996 and the comparable
quarter in the prior fiscal year.
<TABLE>
<CAPTION>
Sales Gross Profit
----------------------- ------------------------
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<C> <C> <S> <C> <C>
$2,075,813 $1,289,042 Land Mobile Communications $ 698,547 $ 555,996
1,285,293 1,480,506 Marine Communications 654,735 757,600
602,268 783,718 Marine Instrumentation 274,102 212,105
---------------------------------------------------------------------------------
$3,963,374 $3,553,266 Total $1,627,384 $1,525,701
---------------------------------------------------------------------------------
</TABLE>
Sales order backlogs were as follows: Land Mobile Communications
$7,284,000, Marine Communications $84,000 and Marine Instrumentation
$24,000. 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 Percentage
a percentage of net sales increase (decrease)
--------------------------- -------------------
1995 1994
March 30, April 1, to to
1996 1995 1996 1995
--------- -------- ------ ------
<C> <C> <S> <C> <C>
100% 100% Net sales 12 40
59 57 Cost of products sold 15 24
41 43 Gross profit 7 67
35 42 Operating expenses (7) 15
0 33 Restructuring charge n.m. n.m.
6 (32) Operating income (loss) n.m. n.m.
2 2 Other expense 95 n.m.
4 (34) Income (loss) before taxes n.m. n.m.
2 (34) Provision (benefit) for taxes n.m. n.m.
2% 0% Net income 713 n.m.
</TABLE>
Net sales increased by $410,108 or 12% compared to the same quarter in the
prior fiscal year. Net sales of the Company's land mobile products
increased by $786,771 or 61% compared to the same quarter in the prior
fiscal year. Net sales of the Company's marine radio/telephone systems
decreased by $195,213 or 13%. Net sales of the Company's recreational
marine instrumentation systems decreased by $181,450 or 23%.
Gross profit was $1,627,384 (41% of net sales), as compared to $1,525,701
(43% of net sales) in the prior year, an increase of $101,683 or 7%. The
gross profit on land mobile products was $698,547 (34% of such sales), as
compared to $555,996 (43% of such sales) in the prior year, an increase of
$142,551 or 26%. The gross profit on marine radio/telephone systems was
$654,735 (51% of such sales), as compared to $757,600 (51% of such sales)
in the prior year, a decrease of $102,865 or 14%. The gross profit on
recreational marine instrumentation systems was $274,102 (46% of such
sales), as compared to $212,105 (27% of such sales) in the prior year, an
increase of $61,997 or 29%. The overall gross profit margin was similar
to that of last year's second quarter. Lower gross profit margins in land
mobile products were offset by higher gross profit margins in marine
instrumentation 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. During the quarter, a
greater portion of land mobile sales came from mobile products. Profit
margins on marine instrumentation products continued to improve due to
lower manufacturing costs as a result of consolidating production at the
Mountlake Terrace, Washington location.
Operating expenses were $1,375,663 (35% of net sales), as compared to
$1,476,006 (42% of net sales) last year, a decrease of $100,343 or 7%.
Operating costs declined as a result of savings realized from the
restructuring which commenced in the second quarter of FY95.
Other expenses increased to $99,331 as compared to $48,518 last year. The
increase is due primarily to additional interest expense, and the
amortization of discount and direct costs related to the convertible
debenture issued December 19, 1995.
On March 30, 1996, the Company's principal sources of liquidity consisted
of $508,425 in cash and equivalents and $3,375,000 in the unused portion
of bank working capital credit lines.
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 30, 1996
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 March 30, 1996.
Item 6
(b) There were no reports on FORM 8-K filed during the quarter ended
March 30, 1996.
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: May 14, 1996 /s/ DAVID C. THOMPSON
------------------------- ------------------------------
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1996
<PERIOD-END> MAR-30-1996
<CASH> 508,425
<SECURITIES> 0
<RECEIVABLES> 2,671,036
<ALLOWANCES> 185,447
<INVENTORY> 4,067,506
<CURRENT-ASSETS> 7,447,632
<PP&E> 4,772,591
<DEPRECIATION> 2,661,759
<TOTAL-ASSETS> 10,763,604
<CURRENT-LIABILITIES> 2,890,105
<BONDS> 1,767,647
0
0
<COMMON> 12,971
<OTHER-SE> 6,092,881
<TOTAL-LIABILITY-AND-EQUITY> 10,763,604
<SALES> 3,963,374
<TOTAL-REVENUES> 3,963,374
<CGS> 2,335,990
<TOTAL-COSTS> 2,335,990
<OTHER-EXPENSES> 1,474,994
<LOSS-PROVISION> 12,901
<INTEREST-EXPENSE> 63,960
<INCOME-PRETAX> 152,390
<INCOME-TAX> 58,524
<INCOME-CONTINUING> 93,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,866
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
