<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 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 1-5641
INSTRON CORPORATION
(Exact name of registrant as specified in its Charter)
Massachusetts 04-2057203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Royall Street 02021
Canton, Massachusetts (Zip Code)
(Address of Principal executive offices)
(617) 828-2500
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock as of August 7, 1995
COMMON STOCK, $1 PAR VALUE -- 6,331,555 SHARES
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<PAGE> 2
INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Income PART I
(Unaudited) ITEM 1
(In thousands, except share data)
<TABLE>
<CAPTION>
For the three months ended
-----------------------------------------
July 1, 1995 July 2, 1994
-----------------------------------------
<S> <C> <C>
Revenue:
Sales $ 32,575 $ 27,442
Service 5,483 5,126
---------- ----------
Total revenue 38,058 32,568
---------- ----------
Cost of revenue:
Sales 18,508 14,280
Service 3,785 3,816
---------- ----------
Total cost of revenue 22,293 18,096
---------- ----------
Gross Profit 15,765 14,472
---------- ----------
Operating expenses:
Selling and administrative 11,235 10,926
Research and development 2,300 1,991
---------- ----------
Total operating expenses 13,535 12,917
---------- ----------
Income from operations 2,230 1,555
---------- ----------
Other expenses:
Interest 304 274
Foreign exchange (gains) losses (150) 12
---------- ----------
Total other expenses 154 286
---------- ----------
Income before income taxes 2,076 1,269
Provision for income taxes 788 415
---------- ----------
Net income $ 1,288 $ 854
========== ==========
Net income per common share (Note 2) $ 0.20 $ 0.14
========== ==========
Average common and equivalent shares
outstanding (Note 2) 6,422,728 6,311,404
========== ==========
Dividends declared per share of
common stock $ 0.00 $ 0.03
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 3
INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Income PART I
(Unaudited) ITEM 1
(In thousands, except share data)
<TABLE>
<CAPTION>
For the six months ended
-----------------------------------------
July 1, 1995 July 2, 1994
-----------------------------------------
<S> <C> <C>
Revenue:
Sales $ 61,279 $ 54,320
Service 10,944 9,841
----------- ------------
Total revenue 72,223 64,161
----------- ------------
Cost of revenue:
Sales 34,349 28,131
Service 7,701 7,462
----------- ------------
Total cost of revenue 42,050 35,593
----------- ------------
Gross Profit 30,173 28,568
----------- ------------
Operating expenses:
Selling and administrative 22,026 21,440
Research and development 4,438 4,013
----------- ------------
Total operating expenses 26,464 25,453
----------- ------------
Income from operations 3,709 3,115
----------- ------------
Other expenses:
Interest 698 560
Foreign exchange gains (56) (156)
----------- ------------
Total other expenses 642 404
----------- ------------
Income before income taxes 3,067 2,711
Provision for income taxes 1,165 949
----------- -------------
Net income $ 1,902 $ 1,762
=========== =============
Net income per common share (Note 2) $ 0.30 $ 0.28
=========== =============
Average common and equivalent shares
outstanding (Note 2) 6,412,360 6,326,609
=========== =============
Dividends declared per share of
common stock $ 0.07 $ 0.06
=========== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
INSTRON CORPORATION FORM 10-Q
Consolidated Balance Sheet PART I
(In thousands, except share data) ITEM 1
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,928 $ 1,877
Accounts receivable (net of
allowance for doubtful accounts of
$975 in 1995 and $943 in 1994) 42,227 41,401
Inventories 26,005 21,859
Deferred income taxes 3,037 2,949
Prepaid expenses and other current assets 1,634 1,625
--------- ---------
Total current assets 76,831 69,711
Property, plant and equipment, net 23,471 22,266
Other assets 11,799 10,317
--------- ---------
Total assets $112,101 $102,294
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 10,437 $ 6,800
Accounts payable 8,027 8,271
Accrued liabilities 12,368 12,553
Accrued employee compensation and benefits 5,402 6,051
Accrued income taxes 501 -
Advance payments received on contracts 1,571 2,187
--------- ---------
Total current liabilities 38,306 35,862
Long-term debt 14,574 11,018
Other long-term liabilities 4,401 3,488
--------- ---------
Total liabilities 57,281 50,368
--------- ---------
Stockholders' equity:
Preferred stock, $1 par value; 1,000,000
shares authorized, none issued 0 0
Common stock, $1 par value; 10,000,000 shares
authorized, 6,406,507 shares issued in 1995
and 6,363,059 in 1994. 6,407 6,363
Additional paid in capital 2,466 2,113
Retained earnings 49,853 48,393
Cumulative translation adjustment (3,192) (4,229)
-------- ---------
55,534 52,640
Less: Treasury stock of 74,952 shares
at cost 714 714
--------- ---------
Total stockholders' equity 54,820 51,926
--------- ---------
Total liabilities and stockholders' equity $112,101 $102,294
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Cash Flows PART I
(Unaudited) ITEM 1
<TABLE>
<CAPTION>
(In thousands) For the six months ended
--------------------------------------
July 1, 1995 July 2, 1994
--------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,902 $ 1,762
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,299 2,805
Provision for losses on accounts receivable 56 51
Increase (decrease) in deferred taxes (44) 64
Changes in assets and liabilities, excluding
the effects from purchase of business:
Decrease in accounts receivable 497 6,035
Increase in inventories (3,316) (1,392)
Increase in prepaid expenses
and other current assets (278) (127)
Increase (decrease) in accounts
payable and accrued expenses (2,021) 112
Increase in other long-term liabilities 418 150
Other 1,084 (789)
-------- ----------
Net cash provided by operating activities 1,597 8,671
-------- ----------
Cash flows from investing activities:
Capital expenditures (3,190) (2,332)
Capitalized software costs (504) (477)
Purchase of business, net of cash acquired (2,660) 0
Other (14) 33
-------- ----------
Net cash used by investing activities (6,368) (2,776)
-------- ----------
Cash flows from financing activities:
Net borrowings under revolving credit and
term loan facility 3,527 (3,360)
Net short-term borrowings 3,542 154
Principal payments on notes payable (10) (2,465)
Cash dividends paid (442) (377)
Other 196 0
-------- ----------
Net cash provided (used) by financing activities 6,813 (6,048)
-------- ----------
Effect of exchange rate changes on cash 9 93
-------- ----------
Net decrease in cash and cash equivalents 2,051 (60)
-------- ----------
Cash and cash equivalents at beginning of year 1,877 2,898
-------- ----------
Cash and cash equivalents at end of period $ 3,928 $ 2,838
======== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 921 $ 661
Income taxes 433 845
Supplemental disclosures of non-cash investing
and financing activities:
Liabilities incurred or assumed
in business acquisition 345 $ 0
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE> 6
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
July 1, 1995
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commisssion. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For
further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the
year ended December 31, 1994.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the six month period ended July 1,
1995 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1995.
2. Net Income per Share
Net income per share is based on the weighted average number of common
shares and common share equivalents outstanding.
3. Inventories
<TABLE>
<CAPTION>
(In thousands) July 1, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Raw Materials $ 11,177 $ 9,913
Work-in-process 6,134 4,279
Finished goods 8,694 7,667
--------- ---------
$ 26,005 $ 21,859
========= =========
</TABLE>
Inventories are valued at the lower of cost or market (net realizable
value). The last-in, first-out (LIFO) method of determining cost is
principally used for inventories in the United States and the Asian
branches. The Company uses the first-in, first-out (FIFO) method for
all other inventories. Inventories valued at LIFO amounted to
$10,022,000 and $8,913,000 at July 1, 1995 and December 31, 1994,
respectively. The excess of current cost over stated LIFO value was
$4,306,000 at July 1, 1995 and $4,339,000 at December 31, 1994.
6
<PAGE> 7
INSTRON CORPORATION FORM 10-Q
July 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Quarter ended July 1, 1995 vs. Quarter ended July 2, 1994
Revenues for the second quarter of 1995 were $38,058,000, an increase of
16.9% over the same period last year, due primarily to increased revenues in
North America and higher worldwide service revenues. Revenues for North
America included several large structural testing systems and custom material
testing systems. Foreign sales accounted for approximately 57% of consolidated
second quarter revenues compared with 59% for the second quarter of 1994.
Gross margin as a percentage of revenue decreased to 41.4% for the second
quarter of 1995 compared to 44.4% for the second quarter of 1994. The lower
gross margin is due to a mix of lower margin products partially offset by
improved service profitability. Gross margins on several key custom orders for
structural and material testing systems were lower than our traditional system
business and had the effect of reducing margins in the second quarter of 1995.
Total selling and administrative expenses increased by 2.8% compared to
the same period in 1994. As a percentage of revenue, selling and
administrative expenses were 29.5% in the second quarter of 1995 compared to
33.5% for the comparable period last year.
Research and development expenses increased by 15.5% (17.9%, if adjusted
for amounts capitalized as software development) for the second quarter of 1995
compared with the prior year's second quarter. The Company capitalized
$271,000 of software development costs during the second quarter of 1995
compared with $189,000 in the second quarter of 1994. As a percentage of
revenue, research and development expenditures were approximately 6% in 1995
and 1994.
Other expenses decreased by 46.2% from the second quarter of 1994. The
decrease is principally due to foreign exchange gains resulting from a stronger
Japanese yen versus the U.S. dollar and British pound, partially offset
7
<PAGE> 8
INSTRON CORPORATION FORM 10-Q
July 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
by higher interest expense resulting from an increase in average borrowings and
higher interest rates.
Net income of $1,288,000 for the second quarter of 1995 increased by
50.8% compared to the second quarter of 1994. Earnings per share for the three
months ended July 1, 1995, was 20 cents per share compared to 14 cents per
share for the comparable prior year period. This increase in earnings was
principally due to the higher revenue.
The consolidated effective tax rates for the second quarter of 1995 was
38.0% compared to 32.7% in the second quarter of 1994. The increase in the
effective tax rate is primarily due to higher foreign taxes.
Six Months ended July 1, 1995 vs Six Months ended July 2, 1994
Revenues for the six months ended July 1, 1995, increased by 12.6% over
the comparable 1994 period, due primarily to higher revenues in North America
and increased service revenues throughout the world. Revenues for North
America included several large structural testing systems and custom material
testing systems. Foreign revenues accounted for approximately 58% of the
consolidated first six months revenues compared to 61% in 1994.
Gross margin as a percentage of revenue decreased to 41.8% compared with
44.5% in the first half of 1994. The lower gross margin is due to a mix of
lower margin products partially offset by improved service profitability.
Gross margins on several key custom orders for structural and material testing
systems were lower than the Company's traditional system business and had the
effect of reducing margins in the first six months of 1995.
Selling and administrative expenses for the first six months of 1995
increased by 2.7% compared to the same period in 1994. As a percentage of
revenue, selling and administrative expenses were 30.5% in the first half of
1995 compared to 33.4% for the comparable period last year.
8
<PAGE> 9
INSTRON CORPORATION FORM 10-Q
July 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Research and development expenses increased by 10.6% (10.1%, if adjusted
for amounts capitalized as software development) for the first six months of
1995 compared with the same period in 1994. During the first half of 1995, the
Company capitalized $504,000 of software development costs compared with
$477,000 for the same period in 1994. As a percentage of revenue, research and
development expenditures were 6.8% for the first half of 1995 compared to 7.0%
for the same period in 1994.
Other expenses increased by 58.9% over the first six months of 1994. The
increase is due to higher interest expense resulting from an increase in
average borrowings and higher interest rates, and lower foreign exchange gains.
The consolidated effective tax rate was 38% for the six months ended July
1, 1995 compared with 35% for the comparable prior year. The increase in the
effective tax rate is primarily due to higher foreign taxes.
Net income was $1,902,000 for the first six months of 1995 compared to
$1,762,000 for the same period in 1994. Earnings per share for the six months
ended July 1, 1995 was 30 cents compared to 28 cents per share for the
comparable period in 1994. This increase in earnings was principally due to
the higher revenue.
Financial Condition
In the first half of 1995, the Company generated net cash flows from
operations of $1.6 million and increased net bank borrowings by $7.1 million.
Operating cash flows and bank borrowings were primarily used to fund capital
expenditures of $3.1 million and acquire certain assets of Shore Instrument
valued at $2.7 million. The ratio of debt to debt plus equity was 31.3% at
July 1, 1995 compared to 25.5% at year end 1994. At July 1, 1995, the Company
had $10.4 million of available credit under its $25 million multicurrency
revolving credit and term loan facility. In addition, the Company's
subsidiaries have other overdraft and borrowing facilities allowing advances up
to approximately $25 million of which $14.6 million were unused at July 1,
1995.
Inventories increased by $3.3 million from year end 1994, due primarily
to work in progress to support higher shipment volumns in the third and fourth
9
<PAGE> 10
INSTRON CORPORATION FORM 10-Q
July 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
quarters of 1995. The inventory turnover ratio was relatively unchanged at
2.79 compared to 2.77 at year end 1994.
The Company's order backlog was $32.3 million at the end of the second
quarter of 1995, an increase of 14.1% from the end of the prior year's second
quarter and a decrease of 1.1% from year end 1994.
Bookings for the first six months of 1995 increased by 13.2% over the
same period last year. Bookings increased in all major markets and were
particularly strong in the Company's European operation and Asian markets.
Bookings for the second quarter increased by 10.4% over the second quarter of
1994, due in large part to increased bookings activity in the Asian markets.
The Company believes its available capital resources, anticipated
operating cash flows and borrowing facilities, as discussed above, are
sufficient to obtain funds necessary to meet its current and future business
requirements.
Based on the current quotation activity and customer interest, the
Company anticipates that order bookings will remain relatively strong for the
second half of the year, particularly in Europe and the Far East. If the
bookings strength continues the Company should post improved bookings,
shipments and earnings for 1995.
10
<PAGE> 11
INSTRON CORPORATION FORM 10-Q
July 1, 1995 PART I
ITEM 2
Part II - Other Information
Item 1. Legal Proceedings
Neither the Registrant nor any of its subsidiaries is a party to, nor
is any of their property the subject of, any material pending legal
proceedings.
Item 2. Changes in the Rights of the Company's Security Holders
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The information contained in Part II, Item 4 of the Registrant's Form
10-Q filed for the period ended April 1, 1995, is incorporated herein
by reference.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11 - Computation of Primary and Fully Diluted
Earnings per Share.
b. Reports on Form 8-K
None.
11
<PAGE> 12
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INSTRON CORPORATION
Date: August 11, 1995 By/s/ James M. McConnell
------------------------------------
James M. McConnell
President and
Chief Executive Officer
Date: August 11, 1995 By/s/ Linton A. Moulding
------------------------------------
Linton A. Moulding
Chief Financial Officer
12
<PAGE> 1
EXHIBIT 11
INSTRON CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six months ended
------------------------- -------------------------
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Net income $1,288,000 $ 854,000 $1,902,000 $1,762,000
=========== =========== =========== ===========
Primary earnings per share:
Weighted average number of common shares outstanding 6,331,555 6,288,107 6,313,545 6,288,107
Add: Shares arising from the assumed exercise
of stock options (as determined under the
Treasury Stock Method) 91,173 23,297 98,815 38,502
----------- ----------- ----------- -----------
Weighted average of common and equivalent shares 6,422,728 6,311,404 6,412,360 6,326,609
=========== =========== =========== ===========
Primary earnings per share $ .20 $ .14 $ .30 $ .28
=========== =========== =========== ===========
Fully diluted earnings per share (1):
Weighted average of common and equivalent shares
outstanding (as determined for the Primary
earnings per share calculation above) 6,422,728 6,311,404 6,412,360 6,326,609
Add: Additional shares arising from the assumed
exercise of stock options (as determined
under the Treasury Stock Method) 0 0 0 0
----------- ----------- ----------- -----------
Weighted average of common and equivalent shares 6,422,728 6,311,404 6,412,360 6,326,609
=========== =========== =========== ===========
Fully diluted earnings per share
$ .20 $ .14 $ .30 $ .28
=========== =========== =========== ===========
<FN>
Note (1): This calculation is submitted in accordance with the Securities Act
of 1933 Release No. 5,133 although it is not required by footnote 2
to paragraph 14 of APB Opinion No. 15 because it results in dilution
of less than 3%.
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET AND CONSOLIDATED
STATEMENT OF CASH FLOWS OF INSTRON CORPORATION FOR THE SIX MONTHS ENDED
JULY 1, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
FOR THE QUARTERLY REPORT ENDED JULY 1, 1995.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<EXCHANGE-RATE> 1
<CASH> 3,928
<SECURITIES> 0
<RECEIVABLES> 42,227
<ALLOWANCES> 975
<INVENTORY> 26,005
<CURRENT-ASSETS> 76,831
<PP&E> 59,744
<DEPRECIATION> 36,273
<TOTAL-ASSETS> 112,101
<CURRENT-LIABILITIES> 38,306
<BONDS> 0
<COMMON> 6,407
0
0
<OTHER-SE> 48,413
<TOTAL-LIABILITY-AND-EQUITY> 112,101
<SALES> 61,279
<TOTAL-REVENUES> 72,223
<CGS> 34,349
<TOTAL-COSTS> 42,050
<OTHER-EXPENSES> 26,352
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 698
<INCOME-PRETAX> 3,067
<INCOME-TAX> 1,165
<INCOME-CONTINUING> 1,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,902
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
