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 February 28, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-10095
AUTOCLAVE ENGINEERS, INC.
State of Address and IRS Employer
Incorporation Telephone Number Identification
Pennsylvania 2930 West 22nd Street Number
Erie, Pennsylvania 16506 25-0941759
814-838-5700
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
The number of shares of common stock, $.15 par value,
outstanding as of March 31, 1995 was 4,222,519.
Exhibit Index 13
Total Pages 15
-1-
<PAGE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Consolidated Balance Sheet -- 3-4
February 28, 1995 and May 31, 1994
Consolidated Statement of Income -- 5
Three months and nine months ended
February 28, 1995 and February 28, 1994
Consolidated Statement of Cash Flows -- 6
Nine months ended February 28, 1995
and February 28, 1994
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis
of Financial Condition and Results of Operations 9-12
Part II. Other Information 13
-2-
<PAGE>
<TABLE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
February 28, 1995 and May 31, 1994
(amounts in thousands)
(unaudited)
<CAPTION>
ASSETS:
<S> <C> <C>
02/28/95 05/31/94
Current Assets:
Cash and cash equivalents $ 2,153 $ 5,719
Short-term investments, at cost 7,785 17
Accounts and notes receivable 12,767 18,320
Inventories 10,366 14,318
Prepaid expenses and other 2,628 3,195
Net assets of discontinued operations,
held for disposal 942 --
_______ _______
Total current assets 36,641 41,569
_______ _______
Property, plant and equipment, at cost:
Land and land improvements 291 266
Buildings and improvements 5,345 6,167
Machinery and equipment 18,504 19,648
______ _______
24,140 26,081
Accumulated depreciation and amortization (15,902) (16,815)
_______ _______
8,238 9,266
Property held for sale, net of accumulated
depreciation of $1,033 and $1,166, respectively 697 996
Investment in equity interests 807 739
Goodwill, net of amortization of $1,532 and
$1,417, respectively 4,528 4,643
Other assets 573 1,037
_______ _______
$51,484 $58,250
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
<PAGE>
<TABLE>
AUTOCLAVE ENGINEERS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
February 28, 1995 and May 31, 1994
(amounts in thousands, except share data)
(unaudited)
<CAPTION>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
02/28/95 05/31/94
Current liabilities:
Short-term borrowings - banks $ 2,222 $ 1,500
Accounts payable, trade 4,058 6,627
Accrued compensation and benefits 1,673 3,504
Income taxes 874 888
Current installments on term debt 483 703
Other current liabilities 3,104 3,219
_______ _______
Total current liabilities 12,414 16,441
Term debt 583 952
Deferred income taxes 156 216
Other long-term liabilities and deferred credits 682 1,278
_______ _______
Total liabilities and deferred credits 13,835 18,887
_______ _______
Excess of net assets acquired over cost -- 1,642
_______ _______
Shareholders' equity:
Common stock, $.15 par value; authorized shares:
12,000,000; issued shares: 4,416,193 662 662
Additional paid-in capital 20,103 20,083
Retained earnings 17,946 16,183
Foreign currency translation adjustment (473) 1,369
_______ _______
38,238 38,297
Less treasury stock, at cost: 198,029 shares
and 201,573 shares, respectively (589) (576)
________ ________
Total shareholders' equity 37,649 37,721
_______ _______
$51,484 $58,250
See accompanying notes to consolidated financial statements.
</TABLE>
-4-
<PAGE>
<TABLE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the three months and nine months ended
February 28, 1995 and February 28, 1994
(amounts in thousands, except share data)
(unaudited)
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
02/28/95 02/28/94 02/28/95 02/28/94
Net sales $ 19,659 $ 13,510 $ 52,620 $ 41,798
Operating costs & expenses:
Cost of goods sold 12,675 9,514 34,120 28,641
Selling and administration 5,176 4,321 14,284 12,735
Research and development 478 321 1,306 800
__________ __________ __________ _________
Operating income(loss) 1,330 (646) 2,910 (378)
Interest income 67 19 114 68
Interest expense (88) (95) (296) (343)
Other income, net 20 17 119 39
__________ __________ __________ _________
Income(loss) from
continuing operations
before income taxes
and equity interests 1,329 (705) 2,847 (614)
Provision for(benefit from)
income taxes 670 (198) 1,233 (102)
__________ __________ _________ _________
Income(loss) from continu-
ing operations before
equity interests 659 (507) 1,614 (512)
Equity interests (7) 95 68 12
__________ __________ _________ _________
Income(loss) from
continuing operations 652 (412) 1,682 (500)
Discontinued operations:
Income from operations 718 428 581 705
Gain on disposal 259 -- 259 --
__________ __________ __________ _________
Net income $ 1,629 $ 16 $ 2,522 $ 205
Per common share:
Income (loss) from
continuing operations $ .15 $ (.10) $ .39 $ (.12)
Discontinued operations:
Income .17 .10 .13 .17
Gain on disposal .06 -- .06 --
__________ __________ __________ _________
Net income $ .38 $ .00 $ .58 $ .05
Average shares used in
computing earnings per
share 4,329,703 4,302,902 4,321,863 4,265,747
See accompanying notes to consolidated financial statements.
</TABLE>
-5-
<PAGE>
<TABLE>
AUTOCLAVE ENGINEERS,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the nine months ended
February 28, 1995 and February 28, 1994
(amounts in thousands, unaudited)
<CAPTION>
<S> <C> <C>
Nine Months Ended
2/28/95 2/28/94
Cash Flows from Operating Activities:
Net Income $ 2,522 $ 205
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 2,245 2,195
Deferred income taxes (430) (191)
Equity interests (68) (12)
Loss on disposal of fixed assets 28 --
(Gain) on sale of discontinued operations (259) --
Changes in assets & liabilities:
Accounts receivable (1,092) (176)
Inventories (2,741) 509
Prepaids and other assets (697) (116)
Accounts payable and accrued liabilities 1,119 459
Income taxes 347 (984)
Other current liabilities 245 (85)
Change in other long-term liabilites 373 8
Other (72) 22
_______ ________
Net cash provided from operating activities 1,520 1,834
_______ ________
Cash Flows from Investing Activities:
Capital expenditures (2,585) (2,101)
Proceeds from sale of property, plant & equip. 242 89
Proceeds from sale of discontinued operations,
net of cash sold 5,208 --
Change in short-term investments (7,864) 6,633
Other (51) (183)
________ ________
Net cash provided from (used in) investing
activities (5,050) 4,438
_______ ________
Cash Flows from Financing Activities
Payments on long-term debt (343) (570)
Proceeds from issuance of common stock 7 6
Change in short-term borrowings, net 423 (3,795)
Cash dividends paid (759) (758)
________ _______
Net cash (used in) financing activities (672) (5,117)
________ _______
Effect of exchange rate changes 636 (501)
________ _______
Net increase(decrease) in cash
and cash equivalents (3,566) 654
Cash and cash equivalents at beginning of year 5,719 3,907
_______ _____
Cash and cash equivalents at end of period $ 2,153 $4,561
See accompanying notes to consolidated financial statements.
</TABLE>
-6-
<PAGE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
1. Significant Accounting Policies
The financial information furnished herein is unaudited but
includes all adjustments which management of the Corporation
considers normal, recurring and necessary to fairly present
the Corporation's financial position, results of operations,
and cash flows for the periods indicated. This report
should be read in conjunction with the Corporation's
financial statements as reported in its Form 10-K for the
fiscal year ended May 31, 1994.
2. Inventories
Inventories at February 28, 1995 and May 31, 1994 consisted
of the following:
Feb. 28, 1995 May 31, 1994
Raw materials $ 5,285 $ 4,303
Work in process 3,104 6,350
Finished goods 2,111 5,379
_______ _______
10,500 16,032
Less advance payments (134) (1,714)
________ ________
Total inventories $10,366 $14,318
3. Discontinued Operations
On January 19, 1995, the Corporation sold its compressor
operations in the United States and France to James Howden &
Godfrey Overseas Limited (Howden) for a cash sales price of
$9,064 and the forgiveness of $2,584 in debt owed by
Autoclave Engineers, Inc. to Burton Corblin, S.A. (BCSA).
Howden did not acquire control of Autoclave Engineers Europe
(AEE) which was owned by BCSA and operated out of the BCSA
facility in France; however, interdivisional debt of $3,122,
owed by AEE to BCSA was forgiven. As the administrative and
management support of AEE was previously provided by BCSA,
the Corporation has determined that the continued operation
of AEE without this support is not feasible. Therefore, the
net assets of AEE are shown as a separate line item
entitled, "Net Assets of Discontinued Operations Held for
Disposal" on the Consolidated Balance Sheet. After
providing for costs of the transaction, adjustments and
certain obligations in connection with the sale, and an
estimated $752,000 of costs to dispose of the AEE
operations, the Corporation recognized a pre-tax gain of
$157.
-7-
<PAGE>
3. Discontinued Operations (continued)
The following is a summary of the operating results of Burton
Corblin for the periods presented:
Three Months Ended Nine Months Ended
2/28/95 2/28/94 2/28/95 2/28/94
Net sales $9,171 $5,670 $19,792 $14,132
Income before provision
for income tax $1,163 $ 636 $ 931 $ 1,054
Provision for income tax 445 208 350 349
______ ______ _______ _______
Net income $ 718 $ 428 $ 581 $ 705
-8-
<PAGE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
(amounts in thousands, except share data)
Discussion included herein relates to the results of continuing operations
of the Corporation and the performance of its two operating groups -- the
Autoclave Engineers Group of companies ("AEG") and Unit Instruments, Inc.
and its subsidiaries ("Unit"); and the discontinued operations of Burton
Corblin S.A. ("BCSA") and Burton Corblin North America, Inc. ("BCNA")
(combined "Burton Corblin").
RESULTS OF CONTINUING OPERATIONS
Included in net sales for the three months and nine months ended February
28, 1995 and 1994 are the following sales by operating group:
Three Months Ended Nine Months Ended
02/28/95 02/28/94 02/28/95 02/28/94
AEG $ 6,800 $ 5,848 $19,884 $18,737
Unit 12,859 7,662 32,736 23,061
________ _______ _______ _______
Consolidated Net Sales $19,659 $13,510 $52,620 $41,798
Net sales at AEG increased $952, or $16%, in the third quarter and $1,147,
or 6%, for the first nine months of fiscal 1995 from the corresponding
periods in the prior year. Research product and system sales increased
worldwide by $818, or 32%, in the third quarter, while remaining
relatively unchanged for the first nine months of 1995 compared to 1994.
Two large cold isostatic presses that had been delayed in the previous
quarter were shipped in the third quarter, along with two large reaction
systems. Fluid component sales increased slightly in the third quarter
and first nine months of 1995 due to strengthening general economic
conditions both in the United States and worldwide. The shipment of
supercritical cleaning systems earlier in 1995 increased AEG's net sales
by $682 for the first nine months of 1995.
At Unit, net sales increased 68% in the third quarter and 42% for the
first nine months of 1995, compared to 1994. These record levels were
primarily attributable to the continuing strong activity in the semi-
conductor equipment market and the excellent reception of Unit's new
1660 Metal Seal Mass Flow Controller in the market.
AEG's cost of goods sold as a percentage of net sales decreased from
approximately 75% to 65% in the third quarter of 1995 compared to 1994
and decreased from 73% to 64% in the corresponding nine-month periods.
These decreases were primarily due to a reduction in personnel from the
prior year, continuous quality improvement resulting in lower warranty
costs, and lower operating costs resulting from a consolidation of
facilities.
-9-
<PAGE>
Unit's cost of goods sold percentage was 64% for the third
quarter of 1995 compared to 67% for the third quarter of 1994.
For the nine months ended February 28, 1995 and 1994, this
percentage was approximately 65% in both periods. Increased
shipments of the new flow controller and other models caused the
improvement in this percentage in the third quarter as fixed
production overheads were absorbed over a higher volume of net
sales. For the year-to-date percentage, higher manufacturing
costs, primarily for direct labor and materials, the cost of
quality improvements, and the cost of additional service
requirements by Unit's customers offset the incremental margin on
the higher sales volume during the first six months of 1995
because of contracted selling prices on the increased volume.
On a consolidated basis, selling and administration expenses
increased approximately $855 or 20% and $1,549 or 12% for the
third quarter and first nine months, respectively, from 1994
levels.
AEG's selling and administration expenses remained level for both
the quarter and nine-month period. Unit's expenses increased 36%
for the quarter and 23% for the first nine months, due to higher
commissions and selling costs associated with the higher sales
volume.
Research and development expenses increased $157 or 49% and $506
or 63% for the third quarter and first nine months, respectively,
from 1994. Most of these increases occurred at Unit, where an
increased level of new product development activity has been
planned for 1995.
Interest income increased from the prior year due to the
significant increase in short-term investments caused by the
proceeds from the sale of discontinued operations.
The decrease in interest expense is due to a lower level of
short-term borrowings partially offset by increases in short-term
interest rates.
Other income and expense increased significantly from a gain of
$39 in the first nine months of fiscal 1994 to $119 in the
current year. This was due to currency fluctuations in France
and Japan.
The effective tax rate was 50.4% and 43.3% for the third quarter
and year-to-date periods of 1995 compared to 28.1% and 16.6% for
the same periods in the prior year. The higher-than normal
effective tax rates in 1995 are due to losses at overseas
subsidiaries which could not be offset against taxable income
from operations in the United States.
Equity interests represents the Corporation's share of the income
or loss incurred by its joint venture, ABB Pressure Systems AB.
-10-
<PAGE>
DISCONTINUED OPERATIONS
On January 19, 1995, the Corporation sold its compressor
operations at Burton Corblin, S.A. (BCSA) in France and Burton
Corblin North America, Inc. (BCNA) in Horsham, Pennsylvania
(combined Burton Corblin) to James Howden & Godfrey Overseas
Limited. See Note 3 of Notes to Consolidated Financial
Statements included elsewhere in this Report on Form 10Q.
The fiscal quarters of Burton Corblin historically ended two
months earlier than the rest of the Corporation's operations.
The Consolidated Balance Sheet at May 31, 1994 includes the
accounts of Burton Corblin at March 31, 1994. The Consolidated
Statements of Income and Cash Flows for the three-month and nine-
month periods ended February 28, 1995 and 1994 include the
results of its operations for the three-month and nine-month
periods ended December 31, 1994 and 1993. Also included in the
Consolidated Statements of Income and Cash Flows for the three-
month and nine-month periods ended February 28, 1995 are the
results of its operations for the period January 1, 1995 through
the date of sale, January 19, 1995. The results of operations of
Burton Corblin have been segregated from the results of the
continuing operations of the Corporation and reported as a single
line item "Discontinued Operations - Income from Operations" on
the Consolidated Statement of Income for all periods presented.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation generated $1,520 in cash from operations in the
first nine months of fiscal 1995. Although the increase in
volume resulted in more investment in working capital, improved
earnings and depreciation on fixed assets more than offset this
investment. In the corresponding period of fiscal 1994, $1,834
was provided from operations, primarily from the depreciation of
fixed assets. These are normal operational fluctuations in these
accounts.
Cash of $5,050 was consumed in investing activities, while $4,438
was generated in the prior year. This difference is almost
entirely due to the maturity of short-term investments in the
prior year which were used principally to pay off short-term
borrowings and the acquisition of short-term investments in the
current year from the proceeds received from the sale of
discontinued operations.
Financing activities utilized cash of $672 in the current year
and $5,117 in the prior year due to normal payments of term debt
and quarterly cash dividends in both years and the change in
short-term borrowings in 1994.
The financial condition of the Corporation at February 28, 1995
reflected a continuing strong working capital position of $24,227
or a ratio of 2.95 to 1 compared to $25,128, or a ratio of 2.53
to 1 at May 31, 1994.
-11-
<PAGE>
The Corporation believes it has sufficient resources to meet all
anticipated short-term capital requirements. The ratio of total
liabilities to tangible net worth (i.e. shareholders' equity less
goodwill, plus the excess of assets acquired over cost) was .42
to 1 at February 28, 1995 compared to .54 to 1 at May 31, 1994.
The Corporation was not committed to any significant plant or
equipment contracts at February 28, 1995.
-12-
<PAGE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11.1 - Computation of Earnings Per Share -
Page 15
(b) Reports on Form 8-K - A report on Form 8-K dated
January 19,1995 concerning the sale of 100% of the
Corporation's stock holdings in Burton Corblin
S.A. and Burton Corblin North America, Inc.
effective January 19, 1995 was filed during the
fiscal quarter ended February 28, 1995. An
unaudited pro forma balance sheet as of November
30, 1994 and unaudited pro forma statements of
income for the six months ended November 30, 1994
and for the year ended May 31, 1994 were included
in the filing.
-13-
<PAGE>
AUTOCLAVE ENGINEERS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirement 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.
AUTOCLAVE ENGINEERS, INC.
Registrant
Date: April 13, 1995 /S/William F. Schilling
William F. Schilling, President
and Chief Executive Officer
Date: April 13, 1995 /S/Thomas C. Guelcher
Thomas C. Guelcher
Chief Financial Officer
-14-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
02/28/95 02/28/94 02/28/95 02/28/94
Income(Loss) from con-
tinuing operations $ 652,000 $ (412,000) $1,682,000 $(500,000)
Net Income 1,629,000 16,000 2,522,000 205,000
Earnings Per Share - Primary
Weighted average number of
shares outstanding 4,218,164 4,214,581 4,216,187 4,213,972
Common share equivalents
assuming exercise of stock
options 111,539 88,321 105,676 5l,775
__________ __________ __________ _________
Average shares used in
computing earnings
per share 4,329,703 4,302,902 4,321,863 4,265,747
Income(Loss) from
continuing operations
per share $ .15 $ (.10) $ .39 $ (.12)
Net income per share $ .38 $ .00 $ .58 $ .05
Earnings Per Share - Fully Diluted
Weighted average number of
shares outstanding 4,218,164 4,214,581 4,216,187 4,213,972
Common share equivalents
assuming exercise of stock
options 100,520 88,322 105,658 56,331
__________ __________ __________ __________
Average shares used in
computing earnings per
share 4,318,684 4,302,903 4,321,845 4,270,303
Income(Loss) from continu-
ing operations per share $(1) .15 $ (.10) $(1) .39 $ (.12)
Net income per share $(1) .38 $ .00 $(1) .58 $ .05
</TABLE>
(1)This calculation is submitted in accordance with Regulation
S-K, item 601(b)(11), although it is contrary to paragraph
40 of APB opinion 15 because it produces an anti-dilutive
result.
-15-
<PAGE>
