SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 30, 1995 Commission File Number 0-10964
MAXWELL LABORATORIES, INC.
Delaware IRS ID# 95-2390133
8888 Balboa Avenue,
San Diego, California 92123
Telephone (619) 279-5100
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of May 31, 1995 Registrant had only one class of common
stock of which there were 2,676,060 shares outstanding.
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PART I - FINANCIAL STATEMENTS
Maxwell Laboratories, Inc.
Consolidated Condensed Balance Sheet
(in thousands)
Assets
______
<CAPTION>
April 30, July 31,
1995 1994
_________ _________
(Unaudited) (Note)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,442 $ 4,579
Accounts receivable - net 12,701 16,023
Inventories:
Finished products 1,244 1,052
Work in process 3,670 2,438
Parts and raw materials 4,584 4,118
_________ _________
9,498 7,608
Recoverable income taxes 401 64
Prepaid expenses 739 512
Deferred income taxes 3,135 3,135
_________ _________
Total current assets 28,916 31,921
Property, plant and equipment - net 20,489 20,981
Deposits and other assets 1,139 1,420
_________ _________
$ 50,544 $ 54,322
========= =========
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<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
____________________________________
<S> <C> <C> <C> <C>
Current Liabilities:
Accounts payable $ 7,331 $ 9,925
Accrued employee compensation 2,715 2,936
Current portion of long-term debt 908 969
_________ _________
Total current liabilities 10,954 13,830
Long-term debt 2,114 2,797
Deferred income taxes 1,030 1,030
Minority interest and additional amounts contributed 1,390 1,705
Shareholders' equity:
Common stock 267 267
Additional paid-in capital 18,802 18,802
Retained earnings 15,987 15,891
_________ _________
35,056 34,960
_________ _________
$ 50,544 $ 54,322
========= =========
<FN>
Note: The Balance Sheet at July 31, 1994 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
PART I - FINANCIAL STATEMENTS, continued
Maxwell Laboratories, Inc.
Consolidated Condensed Statement of Income - (Unaudited)
(in thousands except per share data)
<CAPTION>
Three Months
Ended April 30,
______________________
1995 1994
_________ _________
<S> <C> <C>
Sales $ 17,468 $ 22,480
Costs and expenses:
Cost of sales 13,683 17,289
Research and development expenses 1,375 1,085
Selling, administrative and general expenses 3,531 3,482
Other - net (324) 142
_________ _________
18,265 21,998
_________ _________
Income (loss) before income taxes
and minority interest (797) 482
Income taxes (credit) (354) 155
_________ _________
(443) 327
Minority interest in net income of subsidiary 21 7
_________ _________
Net income (loss) $ (464) $ 320
========= =========
Primary earnings (loss) per share of common stock $ (.17) $ .12
========= =========
Weighted average number of shares 2,675,000 2,681,000
========= =========
<FN>
Note: Primary earnings per share is based upon weighted average number of
shares of common stock outstanding and all dilutive stock options. Per
share amounts are unchanged on a fully dilutive basis.
See notes to consolidated condensed financial statements.
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<TABLE>
PART I - FINANCIAL STATEMENTS, continued
Maxwell Laboratories, Inc.
Consolidated Condensed Statement of Income - (Unaudited)
(in thousands except per share data)
<CAPTION>
Nine Months
Ended April 30,
______________________
1995 1994
_________ _________
<S> <C> <C>
Sales $ 53,016 $ 63,215
Costs and expenses:
Cost of sales 39,675 49,378
Research and development expenses 3,665 3,475
Selling, administrative and general expenses 10,091 10,264
Loss on closing of Brobeck division -- 1,018
Other - net (507) (254)
_________ _________
52,924 63,881
_________ _________
Income (loss) before income taxes
and minority interest 92 (666)
Income tax credit (70) (359)
_________ _________
162 (307)
Minority interest in net income of subsidiary 66 56
_________ _________
Net income (loss) $ 96 $ (363)
========= =========
Primary earnings (loss) per share of common stock $ .04 $ (.14)
========= =========
Weighted average number of shares 2,677,000 2,685,000
========= =========
<FN>
Note: Primary earnings per share is based upon weighted average number of
shares of common stock outstanding and all dilutive stock options. Per
share amounts are unchanged on a fully dilutive basis.
See notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
PART I - FINANCIAL STATEMENTS, continued
Maxwell Laboratories, Inc.
Consolidated Condensed Statement of Cash Flows - (Unaudited)
(in thousands)
<CAPTION>
Nine Months
Ended April 30,
______________________
1995 1994
_________ _________
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 96 $ (363)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,149 2,591
Minority interest in net income of subsidiary 66 56
Changes in operating assets and
liabilities - net (1,666) (2,022)
_________ _________
NET CASH PROVIDED BY
OPERATING ACTIVITIES 645 262
_________ _________
INVESTING ACTIVITIES
Purchases of property and equipment (2,038) (3,555)
_________ _________
NET CASH USED IN
INVESTING ACTIVITIES (2,038) (3,555)
_________ _________
FINANCING ACTIVITIES
Principal payments on long-term debt (744) (1,013)
Proceeds from long-term borrowing -- 2,500
Proceeds from issuance of Company stock -- 2
_________ _________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (744) 1,489
_________ _________
DECREASE IN CASH AND
CASH EQUIVALENTS (2,137) (1,804)
Cash and cash equivalents at beginning of period 4,579 4,651
_________ _________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,442 $ 2,847
========= =========
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PART I - continued
NOTES TO FINANCIAL STATEMENTS
The preceding interim consolidated condensed financial statements contain
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair and accurate presentation of
financial position at April 30, 1995 and the results of operations for the
three and nine month periods then ended. These interim financial statements
should be read in conjunction with the Company's July 31, 1994 audited
financial statements included in its Proxy Statement for the 1994 Annual
Meeting of Shareholders. Interim results are not necessarily indicative of
those to be expected for the full year.
The consolidated financial statements include the accounts of Maxwell
Laboratories, Inc., and its majority-owned subsidiary, PurePulse Technologies,
Inc. (formerly Foodco Corporation). All significant intercompany transactions
and account balances are eliminated in consolidation.
In January 1991, the California Department of Toxic Substances Control, or
DTSC, notified the Company that it had been identified as one of a number of
"potentially responsible parties" with respect to alleged hazardous substances
released into the environment at a recycling facility in San Diego County.
Although the Company was not involved in the transport or disposal of the
substances, Maxwell remains a potentially responsible party under California
and Federal "Superfund" laws. In 1992, the Company and approximately 40 other
potentially responsible parties signed a consent order which had been
negotiated with the DTSC, agreeing to pay $4 million of the $7.9 million
response costs previously incurred, and to pay for certain future site
investigations and interim response actions outlined in the consent order. The
currently estimated cost of such activities is $9.1 million, and the Company's
share of the cost, as allocated by the parties to the consent order, is
currently estimated at approximately 7.0%. The eventual cost of all removal
and remediation activities, for which the Company and the other potentially
responsible parties will share in additional reimbursements to the State, is
currently estimated to be in the range of $15 - $20 million. On the basis of
amounts accrued by the Company, it is management's opinion that any additional
liability resulting from this situation will not have a material effect on the
Company's financial statements. There have been no material developments on
this matter since the date of issuance of the Company's audited financial
statements for the year ended July 31, 1994.
Backlog of unfilled orders at April 30, 1995 was $77.8 million, of which
$41.1 million is fully funded.
<PAGE>
PART I - continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
Results of Operations
- ---------------------
Sales for the quarter ended April 30, 1995 were $17,468,000, a 22% decrease
compared to the $22,480,000 for the same period one year ago. Nine-month sales
were $53,016,000, a 16% decrease compared to the $63,215,000 for last year's
first nine months. These decreases occurred primarily in the Company's
technology programs and services (TPS) business segment. Sales of commercial,
industrial and scientific products (CIS) also decreased, to a lesser extent,
in this year's third quarter, as described in the paragraphs below.
CIS sales for the third quarter were $10,367,000, a decrease of
approximately $1,200,000, or 11%, compared to last year's third quarter.
Nine-month CIS sales were $29,581,000, a decrease of approximately $500,000, or
2%, compared to the same period last year. A major factor for both the quarter
and year-to-date decrease is the completion early this year of a large, turnkey
capacitor bank system, which substantially boosted CIS sales during most of
fiscal 1994, including last year's first nine months. The Company does not
have a similar large project in the first nine months of this fiscal year,
resulting in a revenue difference of over $4,000,000 for the nine months, and
$1,300,000 for the third quarter. For the nine month period, the reduction
described above has nearly been offset by increased sales at the I-Bus
division, along with higher sales volumes at the PurePulse Technologies
subsidiary and the new networked information solutions group at the S-Cubed
division. This new S-Cubed group, called MINDS, for Maxwell Integrators of
Networked Distributed Solutions, currently has two long-term fixed-price
contracts, one of which should be completed in the first quarter of next fiscal
year, and the other one scheduled for completion in fiscal 1997. It should be
noted when making such comparisons that fluctuations upward or downward occur
from time to time in several of the Company's product groups.
TPS sales for the third quarter were $7,101,000, a decrease of
approximately $3,800,000, or 35%, compared to the prior year. Nine-month TPS
sales were $23,435,000, a decrease of approximately $9,700,000, or 29%,
compared to last year's first nine months. These decreases reflect continuing
declines in the Company's Defense business base, and the declines are
negatively impacting operations at both the Balboa and S-Cubed divisions. In
addition, at Balboa, several large technology system programs substantially
completed in the prior year have not been replaced with similarly sized
additional projects. Also, at S-Cubed, the third quarter was impacted by a
reduced flow of samples into the chemical analytical services laboratory. The
sample flow has picked-up again as of the beginning of the fourth quarter.
Cost of sales for the third quarter was $13,683,000, or 78.3% of sales, as
compared to $17,289,000, or 76.9% of sales, for the same period last year.
For the nine-months, cost of sales was $39,675,000, or 74.8% of sales, as
compared to the prior year's $49,378,000, or 78.1% of sales. In March of
1994, the Company took cost reduction measures which reduced overhead costs.
This is the primary factor contributing to the decrease in cost of sales as a
percent of sales for the year-to-date as compared to last year's first nine
months. Since the reduction occurred last March, there is not as significant
an impact on this year's third quarter as compared to the same three months
last year. In addition, there was a shift in the sales mix in this year's
third quarter compared to the first two quarters of the year. That is, certain
product and chemical analytical services sales, with their typically higher
gross profit margins, declined, as described above. Combined with the reduced
overall sales level in the quarter, this resulted in an increase in the cost of
sales percentage for the three months as compared to both the first two
quarters of this year and the same period in the prior year.
Research and development expenses were $1,375,000 for the third quarter,
compared to $1,085,000 for last year's third quarter. For the nine months
these expenses were $3,665,000 as compared to $3,475,000 for the same period
last year. These increases are primarily attributable to the increased
expenditures at the S-Cubed division for commercialization efforts with respect
to technologies and software know-how originally developed for Defense
applications.
Selling, administrative and general expenses in the third quarter were
$3,531,000, or 20.2% of sales, compared to $3,482,000, or 15.5% of sales, in
the prior year's third quarter. For the nine months, these expenses were
$10,091,000, or 19.0% of sales, compared to $10,264,000, or 16.2% of sales, one
year ago. Aggressive marketing efforts for commercial products at the
PurePulse subsidiary and I-Bus division maintained the expenditures for these
efforts at similar dollar levels as in 1994. The increase in selling,
administrative and general expenses as a percentage of sales is primarily
attributable to the sales decline discussed in the TPS paragraph above.
Other-net for the three and nine months ended April 30, 1995 was income of
$324,000 and $507,000, respectively, compared to expense of $142,000 and income
of $254,000 for the comparable periods last year. The greater amount of income
is primarily attributable to the completion of accruals last year for payments
under a covenant-not-to-compete with the former owners of I-Bus, and due to
interest earned this year on various tax recoveries.
As a result of the above factors, the net loss for the three months ended
April 30, 1995 was $464,000, as compared to net income of $320,000 for the same
period one year ago. For the nine months, the current year income of $96,000
compares to a net loss of $363,000 in the prior year. In January of 1994, the
Company recorded a pre-tax write-off of $1,018,000 to recognize the costs of
terminating the Brobeck division and its operations, which contributed
substantially to year-to-date losses last year.
Liquidity and Capital Resources
- -------------------------------
The ratio of current assets to current liabilities was 2.6 to 1 at April
30, 1995, compared to 2.3 to 1 at the end of fiscal year 1994. Management
believes that funds on hand and those generated by future operations and
available through its bank line of credit of $7.5 million will be sufficient to
finance working capital and currently projected capital expenditure
requirements.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
________
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
___________________
No reports on Form 8-K were filed during the quarter ended April
30, 1995.
SIGNATURE
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.
MAXWELL LABORATORIES, INC.
June 13, 1995 Gary J. Davidson
Date Gary Davidson, Chief Financial Officer
and Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> APR-30-1995
<CASH> 2,442
<SECURITIES> 0
<RECEIVABLES> 12,701
<ALLOWANCES> 0
<INVENTORY> 9,498
<CURRENT-ASSETS> 28,916
<PP&E> 55,285
<DEPRECIATION> 34,796
<TOTAL-ASSETS> 50,544
<CURRENT-LIABILITIES> 10,954
<BONDS> 2,114
<COMMON> 267
0
0
<OTHER-SE> 34,789
<TOTAL-LIABILITY-AND-EQUITY> 50,544
<SALES> 53,016
<TOTAL-REVENUES> 53,016
<CGS> 39,675
<TOTAL-COSTS> 39,675
<OTHER-EXPENSES> 3,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 92
<INCOME-TAX> (70)
<INCOME-CONTINUING> 96
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
