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, 1997 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)
(425) 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, 1997
Common Stock, .01 Par Value 1,317,473
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ -------------------------
June 28, June 28, June 28, June 28,
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $2,981,853 $4,393,041 $9,191,009 $12,353,616
Cost of products sold 1,831,435 2,630,688 5,814,982 7,106,594
-----------------------------------------------------
Gross profit 1,150,418 1,762,353 3,376,027 5,247,022
Operating expenses 1,271,760 1,347,056 3,909,935 4,089,633
-----------------------------------------------------
Operating income (loss) (121,342) 415,297 (533,908) 1,157,389
Other income and expense, net 119,131 112,961 382,368 224,570
-----------------------------------------------------
Income (loss) before income taxes (240,473) 302,336 (916,276) 932,819
Provision (benefit) for income taxes (81,769) 118,039 (309,015) 342,446
-----------------------------------------------------
Net income (loss) $ (158,704) $ 184,297 $ (607,261) $ 590,373
=====================================================
Net income (loss) per share:
Primary $ (0.12) $ 0.12 $ (0.46) $ 0.40
Fully diluted $ (0.12) $ 0.12 $ (0.46) $ 0.39
Weighted average common and equivalent shares outstanding:
Primary 1,314,790 1,565,925 1,311,427 1,475,932
Fully diluted 1,314,790 1,576,509 1,311,427 1,527,094
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 28, September 28, June 28,
ASSETS 1997 1996 1996
-------- ------------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 18,559 $ 330,076 $ 87,591
Accounts receivable 2,581,984 3,335,052 3,304,281
Inventories 5,329,140 5,230,705 5,511,275
Prepaid expenses and other current assets 196,137 202,067 221,613
Deferred income taxes, current 332,825 332,825 200,000
-----------------------------------------
Total current assets 8,458,645 9,430,725 9,324,760
Property, plant and equipment 5,283,141 5,169,121 4,886,543
Less accumulated depreciation 3,138,193 2,889,267 2,780,637
-----------------------------------------
Property, plant and equipment, net 2,144,948 2,279,854 2,105,906
Deferred income taxes, noncurrent 714,099 405,084 583,069
Other assets, net 514,141 534,183 521,135
-----------------------------------------
Total assets $11,831,833 $12,649,846 $12,534,870
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 1,750,000 $ 1,750,000 $ 1,406,392
Accounts payable 652,652 718,240 1,254,378
Accrued expenses 1,454,235 1,621,694 1,566,556
Current maturities of long-term debt 105,077 173,293 129,894
-----------------------------------------
Total current liabilities 3,961,964 4,263,227 4,357,220
Long-term debt, less current maturities 1,873,492 1,849,685 1,835,319
-----------------------------------------
Total liabilities 5,835,456 6,112,912 6,192,539
-----------------------------------------
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;
1,317,473 shares issued and outstanding 13,175 13,094 13,026
Capital in excess of par value 3,759,295 3,644,662 3,611,954
Unearned compensation (60,431) (12,421) (13,640)
Retained earnings 2,284,338 2,891,599 2,730,991
-----------------------------------------
Total stockholders' equity 5,996,377 6,536,934 6,342,331
-----------------------------------------
Total liabilities and stockholders' equity $11,831,833 $12,649,846 $12,534,870
=========================================
</TABLE>
DATAMARINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
June 28, June 28,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(607,261) $ 590,373
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 324,845 307,766
Amortization of debenture discount and issue costs 88,127 59,749
Provision for losses on accounts receivable 48,111 59,104
Employee investment plan expense 36,287 19,537
Amortization of unearned compensation 11,990 19,736
Provision for (benefit of) deferred income taxes (309,015) 342,923
Changes in operating assets and liabilities:
Accounts receivable 704,957 (1,025,778)
Inventories, prepaid expenses and other current assets (92,505) (2,118,764)
Accounts payable and accrued expenses (233,047) 693,897
-------------------------
Net cash used in operating activities (27,511) (1,051,457)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, including self-
constructed equipment (161,795) (676,458)
Other (31,463) (285,083)
-------------------------
Net cash used in investing activities (193,258) (961,541)
FINANCING ACTIVITIES
Proceeds from sale of common stock 18,427 34,294
Proceeds from bank borrowings 1,300,000
Proceeds from other borrowings 26,271 2,000,000
Principal payments on other borrowings - (30,000)
Principal payments on revolving line
of credit and long-term debt (135,446) (1,456,548)
-------------------------
Net cash provided by (used in) financing activities (90,748) 1,847,746
Increase (decrease) in cash and equivalents during period (311,517) (165,252)
Cash and equivalents at beginning of period 330,076 252,843
-------------------------
Cash and equivalents at end of period $ 18,559 $ 87,591
=========================
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
- ------------------------------
The accompanying consolidated condensed financial statements have been
prepared in accordance with SEC requirements for interim financial
statements. They, therefore, do not include all of the disclosures which
are presented in the Datamarine International, Inc. ("the Company") Annual
Report on Form 10-K. It is suggested that the financial statements be read
in conjunction with the Consolidated Financial Statements and notes thereto
included in the Company's Annual Report on Form 10-K.
The information furnished reflects all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management,
necessary for the fair statement of financial position, results of
operations and cash flows for the interim period. The year-end condensed
balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year.
Net income per share is computed using the weighted average number of common
shares outstanding during the period, adjusted to reflect the assumed
exercise of outstanding stock options to the extent these had a dilutive
effect on the computation.
Note B - Inventory Components
- -----------------------------
Inventories consisted of the following at:
<TABLE>
<CAPTION>
June 28, 1997 September 28, 1996 June 28, 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Finished Goods $1,752,277 $1,603,671 $1,901,201
Work-in-Process 801,694 96,887 38,628
Raw Material 2,775,169 3,530,147 3,571,446
-------------------------------------------------
$5,329,140 $5,230,705 $5,511,275
- -----------------------------------------------------------------------
</TABLE>
Note C - Income Taxes
- ---------------------
Management believes that it is more likely than not that all of the deferred
tax asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTER ENDED JUNE 28, 1997
The following table sets forth the components of sales and gross profit by
product line for the Quarter Ended June 28, 1997 and the comparable quarter
in the prior fiscal year.
<TABLE>
<CAPTION>
Sales Gross Profit
- ----------------------- -----------------------
June 28, June 28, June 28, June 28,
1997 1996 1997 1996
- --------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
$ 863,072 $2,500,745 Land Mobile Communications $ 200,377 $ 924,361
1,402,041 1,290,363 Marine Communications 693,074 548,977
716,740 601,933 Marine Instrumentation 256,967 289,015
- --------------------------------------------------------------------------------
$2,981,853 $4,393,041 Total $1,150,418 $1,762,353
- --------------------------------------------------------------------------------
</TABLE>
Sales order backlogs were as follows: Land Mobile Communications $168,000,
Marine Communications $130,000 and Marine Instrumentation $104,000.
<TABLE>
<CAPTION>
Income and expense items as a Percentage
percentage of net sales increase (decrease)
- ----------------------------- -------------------
1996 1995
June 28, June 28, to to
1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
100% 100% Net sales (32) 17
61 60 Cost of products sold (30) 8
39 40 Gross profit (35) 34
43 31 Operating expenses (6) 3
(4) 9 Operating income (loss) (129) 434
4 2 Other income and expense, net 5 185
(8) 7 Income (loss) before taxes (180) 694
(3) 3 Provision (benefit) for taxes (169) 812
(5%) 4% Net income (loss) (186) 633
</TABLE>
Net sales decreased by $1,411,188 or 32% compared to the same quarter in the
prior fiscal year. Net sales of the Company's land mobile products
decreased by $1,637,673 or 65% compared to the same quarter in the prior
fiscal year. Net sales of the Company's marine communications systems
increased by $111,678 or 9%. Net sales of the Company's marine
instrumentation systems increased by $114,807 or 19%.
The overall sales decrease was due to the decline in the sale of land mobile
base station equipment compared to the same quarter of FY96. Management
attributes the decline in land mobile sales to the Federal Communication
Commission (FCC)'s failure to act with respect to the auction of 220 MHz
radio service licenses. Until such auction licenses are issued, the
Company's sales of base station equipment are almost non-existent. Sales
of marine communications and marine instrumentation products continued to
contribute to the Company's overall performance for the quarter and were
consistent with management's expectations.
Gross profit was $1,150,418 (39% of net sales), as compared to $1,762,353
(40% of net sales) in the prior year, a decrease of $611,935 or 35%. The
gross profit on land mobile products was $200,377 (23% of such sales), as
compared to $924,361 (37% of such sales) in the prior year, a decrease of
$723,984 or 78%. The gross profit on marine communications systems was
$693,074 (49% of such sales), as compared to $548,977 (43% of such sales) in
the prior year, an increase of $144,097 or 26%. The gross profit on marine
instrumentation systems was $256,967 (36% of such sales), as compared to
$289,015 (48% of such sales) in the prior year, a decrease of $32,048 or
11%. The decrease in overall gross profit margin was due to a greater
portion of the Company's land mobile sales coming from mobile radio
products. Land mobile margins vary depending upon the sales mix across the
product line, and mobile radio products typically have substantially lower
gross margins than base station equipment. Increases and decreases in
profit margins on marine communication and marine instrumentation products
were due to a change in product sales mix.
Operating expenses were $1,271,760 (43% of net sales), as compared to
$1,347,056 (31% of net sales) last year, a decrease of $75,296 or 6%.
Operating costs declined as a result of lower selling expenses and a refund
of state excise taxes, but comprised a greater percentage of sales due to
the larger decline in total revenues.
Other expenses increased to $119,131 as compared to $112,961 last year. The
increase is due to additional interest expense on bank borrowings and
debentures, and increased site management expenses related to Narrowband
Network Systems.
On June 28, 1997, the Company's principal sources of liquidity consisted of
$18,559 in cash and equivalents and $250,000 in the unused portion of a bank
revolving line of credit. The bank line is secured by the Company's assets
and availability is subject to a borrowing base requirement. During the
quarter the bank renewed the Company's credit line for $2,000,000 through
June 1998 at an interest rate of prime plus 1.5%, and the Company was in
full compliance with the terms of the agreement. The Company believes that
its existing cash balances, line of credit and other sources of financing
will provide adequate flexibility to fund the Company's operating needs and
capital expenditures during the next twelve months.
Statements included in this report which are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q contain certain detailed
factors that could cause the Company's actual results to materially differ
from forward-looking statements made by the Company.
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, 1997.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) There were no reports on FORM 8-K filed during the quarter ended June
28, 1997.
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 8, 1997 /s/ David C. Thompson
-------------- ---------------------
David C. Thompson
Principal Financial and
Accounting Officer
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------- ---------------------
June 28, June 28, June 28, June 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary
Weighted Average Shares Outstanding 1,314,790 1,298,238 1,311,427 1,297,369
Dilutive Effect of Stock Options - 267,687 - 178,563
---------------------------------------------
Weighted Average Common and
Equivalent Shares Outstanding 1,314,790 1,565,925 1,311,427 1,475,932
=============================================
Fully Diluted
Weighted Average Shares Outstanding 1,314,790 1,298,238 1,311,427 1,297,369
Dilutive Effect of Stock Options - 278,271 - 229,725
---------------------------------------------
Weighted Average Common and
Equivalent Shares Outstanding 1,314,790 1,576,509 1,311,427 1,527,094
=============================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 18,559
<SECURITIES> 0
<RECEIVABLES> 2,787,602
<ALLOWANCES> 205,618
<INVENTORY> 5,329,140
<CURRENT-ASSETS> 8,458,645
<PP&E> 5,283,141
<DEPRECIATION> 3,138,193
<TOTAL-ASSETS> 11,831,833
<CURRENT-LIABILITIES> 3,961,964
<BONDS> 1,873,492
0
0
<COMMON> 13,175
<OTHER-SE> 5,983,202
<TOTAL-LIABILITY-AND-EQUITY> 11,831,833
<SALES> 9,191,009
<TOTAL-REVENUES> 9,191,009
<CGS> 5,814,982
<TOTAL-COSTS> 5,814,982
<OTHER-EXPENSES> 54,046
<LOSS-PROVISION> 48,111
<INTEREST-EXPENSE> 328,322
<INCOME-PRETAX> (916,276)
<INCOME-TAX> (309,015)
<INCOME-CONTINUING> (607,261)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (607,261)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.46)
</TABLE>
