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 June 28, 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 SW, 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 June 28, 1996
Common Stock, .01 Par Value 1,302,627
<PAGE> 1
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ --------------------------
June 28, July 1, June 28, July 1,
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $4,393,041 $3,754,201 $12,353,616 $10,951,387
Cost of product sold 2,630,688 2,442,050 7,106,594 6,582,035
-------------------------------------------------------
Gross profit 1,762,353 1,312,151 5,247,022 4,369,352
Operating expenses 1,347,056 1,312,433 4,089,633 4,276,364
Restructuring charge (credit) -- (78,000) -- 1,109,885
-------------------------------------------------------
Operating income (loss) 415,297 77,718 1,157,389 (1,016,897)
Other expense 112,961 39,631 224,570 121,554
-------------------------------------------------------
Income (loss) before income taxes 302,336 38,087 932,819 (1,138,451)
Provision (benefit) for income taxes 118,039 12,948 342,446 (1,187,605)
-------------------------------------------------------
Net income $ 184,297 $ 25,139 $ 590,373 $ 49,154
=======================================================
Income Per Share $ 0.12 $ 0.02 $ 0.40 $ 0.04
=======================================================
Average shares outstanding 1,565,925 1,273,909 1,475,932 1,273,909
</TABLE>
<PAGE> 2
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 28, September 30, July 1,
1996 1995 1995
----------- ------------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 87,591 $ 252,843 $ 198,838
Accounts receivable 3,304,281 2,337,607 2,422,381
Inventories 5,511,275 3,371,976 3,481,495
Prepaid expenses and other current assets 221,613 242,148 595,045
Deferred income taxes, current 200,000 340,000 1,187,604
------------------------------------------
Total current assets 9,324,760 6,544,574 7,885,363
Property, plant and equipment 4,886,543 4,210,085 5,411,675
Less accumulated depreciation 2,780,637 2,472,871 4,205,402
------------------------------------------
Property, plant and equipment, net 2,105,906 1,737,214 1,206,273
Deferred income taxes, noncurrent 583,069 785,992 --
Other assets 521,135 255,801 23,342
------------------------------------------
$12,534,870 $9,323,581 $9,114,978
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 1,406,392 $1,468,750 $1,492,019
Notes payable, other -- 30,000 --
Accounts payable 1,254,378 814,437 893,978
Accrued expenses 1,566,556 1,312,600 1,621,588
Current maturities of long-term debt 129,894 209,881 154,125
------------------------------------------
Total current liabilities 4,357,220 3,835,668 4,161,710
Long-term debt, less current maturities 1,835,319 289,522 263,985
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; 1,302,627 shares issued and outstanding 13,026 12,967 12,739
Capital in excess of par value 3,611,954 3,078,182 2,829,387
Unearned compensation (13,640) (33,376) (25,740)
Retained earnings 2,730,991 2,140,618 1,872,897
------------------------------------------
Total stockholders' equity 6,342,331 5,198,391 4,689,283
------------------------------------------
$12,534,870 $9,323,581 $9,114,978
==========================================
</TABLE>
<PAGE> 3
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
June 28, July 1,
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 590,373 $ 49,154
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 307,766 306,742
Non-cash portion of loss from restructuring charge -- 809,597
Provision for losses on accounts receivable 59,104 1,299
Employee investment plan expense 19,537 35,045
Amortization of unearned compensation 19,736 29,524
Amortization of bond discount and issue costs 59,749 --
Deferred tax provision 342,923 (1,187,605)
Changes in operating assets and liabilities:
Accounts receivable (1,025,778) (105,315)
Inventories and prepaid expenses (2,118,764) (537,496)
Accounts payable and accrued expenses 693,897 219,420
------------------------
Net cash (used in) operating activities (1,051,457) (379,635)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, including
self-constructed equipment (676,458) (455,176)
(Increase) in other assets (285,083) (66,501)
------------------------
Net cash (used in) investing activities (961,541) (521,677)
FINANCING ACTIVITIES
Proceeds from sale of common stock 34,294 244,267
Proceeds from bank borrowings 1,300,000 885,000
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 (1,456,548) (210,043)
------------------------
Net cash provided by financing activities 1,847,746 919,224
Increase (decrease) in cash and equivalents during
period (165,252) 17,912
Cash and equivalents at beginning of period 252,843 180,926
------------------------
Cash and equivalents at end of period $ 87,591 $ 198,838
========================
</TABLE>
<PAGE> 4
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>
June 28, 1996 September 30, 1995 July 1, 1995
------------- ------------------ ------------
<S> <C> <C> <C>
Finished Goods $1,939,829 $1,319,509 $1,407,833
Raw Material 3,571,446 2,052,467 2,073,662
-----------------------------------------------
$5,511,275 $3,371,976 $3,481,495
===============================================
</TABLE>
Note C - Reclassifications Certain reclassifications have been made to
the July 1, 1995 financial statements in order to conform to the September
30, 1995 and June 28, 1996 presentations.
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.
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED JUNE 28, 1996
The following table sets forth the components of sales and gross profit by
product line for the Quarter Ended June 28, 1996 and the comparable
quarter in the prior fiscal year.
<TABLE>
<CAPTION>
Sales Gross Profit
- ------------------------ ------------------------
June 28, July 1, June 28, July 1,
1996 1995 1996 1995
- ---------- ---------- -------------------------- ---------- ----------
<C> <C> <S> <C> <C>
$2,500,745 $1,527,344 Land Mobile Communications $ 924,361 $ 600,513
1,290,363 1,251,966 Marine Communications 548,977 330,327
601,933 974,891 Marine Instrumentation 289,015 381,311
$4,393,041 $3,754,201 Total $1,762,353 $1,312,151
</TABLE>
Sales order backlogs were as follows: Land Mobile Communications
$5,216,000, Marine Communications $158,000 and Marine Instrumentation
$15,000. Land Mobile Communications backlogs are volatile, based upon the
customers' ability to obtain F.C.C. approval for site locations. The
Company has reduced the land mobile backlog because it does not believe
all customers will be able to take delivery prior to the building
deadline.
<TABLE>
<CAPTION>
Income and expense items as Percentage
a percentage of net sales increase (decrease)
- --------------------------- -------------------
1995 1994
June 28, July 1, to to
1996 1995 1996 1995
-------- ------- ---------------------- ---- ----
<C> <C> <S> <C> <C>
100% 100% Net sales 17 5
60 65 Cost of products sold 8 19
40 35 Gross profit 34 (14)
31 35 Operating expenses 3 (2)
0 (2) Restructuring (credit) n.m. --
9 2 Operating income 434 (57)
2 (1) Other expense 185 n.m.
7 1 Income before taxes 694 (82)
3 -- Provision for taxes 812 n.m.
4% 1% Net income 633 (88)
</TABLE>
Net sales increased by $638,840 or 17% compared to the same quarter in the
prior fiscal year. Net sales of the Company's land mobile products
increased by $973,401 or 64% compared to the same quarter in the prior
fiscal year. Net sales of the Company's marine communications systems
increased by $38,397 or 3%. Net sales of the Company's marine
instrumentation systems decreased by $372,958 or 38%.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued
QUARTER ENDED JUNE 28, 1996
Gross profit was $1,762,353 (40% of net sales), as compared to $1,312,151
(35% of net sales) in the prior year, an increase of $450,202 or 34%. The
gross profit on land mobile products was $924,361 (37% of such sales), as
compared to $600,513 (39% of such sales) in the prior year, an increase of
$323,848 or 54%. The gross profit on marine communications systems was
$548,977 (43% of such sales), as compared to $330,327 (26% of such sales)
in the prior year, an increase of $218,650 or 66%. The gross profit on
marine instrumentation systems was $289,015 (48% of such sales), as
compared to $381,311 (39% of such sales) in the prior year, a decrease of
$92,296 or 24%. The overall gross profit margin was greater than last
year's third quarter. Slightly lower gross profit margins in land mobile
products were offset by higher gross profit margins in marine
communication and 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, the sales mix in land mobile products was
similar to that of the prior year. Profit margins on marine communication
products were higher than last year's third quarter which included pricing
incentives and lower margins on third party private label 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 $1,347,056 (31% of net sales), as compared to
$1,312,433 (35% of net sales) last year, an increase of $34,623 or 3%.
Operating cost reductions realized from the restructuring in FY95 were
offset by increased selling costs related to higher sales.
Other expenses increased to $112,961 as compared to $39,631 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 June 28, 1996, the Company's principal sources of liquidity consisted
of $87,591 in cash and equivalents and $1,200,000 in the unused portion of
bank working capital credit lines.
<PAGE> 7
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 28, 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 June 28, 1996.
Item 6
(b) There was one report on FORM 8-K filed April 12, 1996 related to the
resignation of a director.
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: August 9, 1996 /s/ DAVID C. THOMPSON
------------------- ----------------------------------
Principal Financial and
Accounting Officer
<PAGE> 8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> JUN-28-1996
<CASH> 87,591
<SECURITIES> 0
<RECEIVABLES> 3,513,106
<ALLOWANCES> 208,825
<INVENTORY> 5,511,275
<CURRENT-ASSETS> 9,324,760
<PP&E> 4,886,543
<DEPRECIATION> 2,780,637
<TOTAL-ASSETS> 12,534,870
<CURRENT-LIABILITIES> 4,357,220
<BONDS> 1,835,319
0
0
<COMMON> 13,026
<OTHER-SE> 6,329,305
<TOTAL-LIABILITY-AND-EQUITY> 12,534,870
<SALES> 4,393,041
<TOTAL-REVENUES> 4,393,041
<CGS> 2,630,688
<TOTAL-COSTS> 2,630,688
<OTHER-EXPENSES> 1,460,017
<LOSS-PROVISION> 22,818
<INTEREST-EXPENSE> 79,398
<INCOME-PRETAX> 302,336
<INCOME-TAX> 118,039
<INCOME-CONTINUING> 184,297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,297
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
