<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 APRIL 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
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COMMISSION FILE NUMBER 1-5641
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INSTRON CORPORATION
(Exact name of registrant as specified in its Charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2057203
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 ROYALL STREET
CANTON, MASSACHUSETTS 02021
(Address of Principal executive offices) (Zip Code)
(617) 828-2500
(Registrant's telephone number, including area code)
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(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 May 5 1995:
COMMON STOCK, $1 PAR VALUE -- 6,331,555 SHARES
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</TABLE>
<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
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April 1, 1995 April 2, 1994
-----------------------------------------
<S> <C> <C>
Revenue:
Sales $ 28,704 $ 26,878
Service 5,461 4,715
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Total revenue 34,165 31,593
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Cost of revenue:
Sales 15,841 13,851
Service 3,916 3,646
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Total cost of revenue 19,757 17,497
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Gross Profit 14,408 14,096
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Operating expenses:
Selling and administrative 10,791 10,514
Research and development 2,138 2,022
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Total operating expenses 12,929 12,536
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Income from operations 1,479 1,560
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Other expenses:
Interest 394 286
Foreign exchange (gains) losses 94 (168)
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Total other expenses 488 118
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Income before income taxes 991 1,442
Provision for income taxes 377 534
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Net income $ 614 $ 908
========== ==========
Net income per common share (Note 2) $ 0.10 $ 0.14
========== ==========
Average common and equivalent shares
outstanding (Note 2) 6,401,976 6,341,544
========== ==========
Dividends declared per share of
common stock $ 0.04 $ 0.03
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
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INSTRON CORPORATION FORM 10-Q
Consolidated Balance Sheet PART I
(In thousands, except share data) ITEM 1
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
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<S> <C> <C>
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 2,739 $ 1,877
Accounts receivable (net of
allowance for doubtful accounts of
$1,027 in 1995 and $943 in 1994 41,013 41,401
Inventories 27,488 21,859
Deferred income taxes 2,985 2,949
Prepaid expenses and other current assets 1,756 1,625
-------- --------
Total current assets 75,981 69,711
Property, plant and equipment, net 23,465 22,266
Other assets 11,838 10,317
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Total assets $111,284 $102,294
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 7,780 $ 6,800
Accounts payable 8,954 8,271
Accrued liabilities 13,538 12,553
Accrued employee compensation and benefits 5,025 6,051
Accrued income taxes 68 -
Advance payments received on contracts 2,180 2,187
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Total current liabilities 37,545 35,862
Long-term debt 16,112 11,018
Other long-term liabilities 3,998 3,488
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Total liabilities 57,655 50,368
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Stockholders' equity:
Preferred stock, $1 par value; 1,000,000
shares authorized, none issued - -
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 48,818 48,393
Cumulative translation adjustment (3,348) (4,229)
-------- --------
54,343 52,640
Less: Treasury stock of 74,952 shares,
at cost 714 714
-------- --------
Total stockholders' equity 53,629 51,926
-------- --------
Total liabilities and stockholders' equity $111,284 $102,294
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Cash Flows PART I
(Unaudited) ITEM 1
<TABLE>
<CAPTION>
(In thousands) For the three months ended
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April 1, 1995 April 2, 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 614 $ 908
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,642 1,406
Provision for losses on accounts receivable 28 20
Increase in deferred taxes 10 27
Changes in assets and liabilities, excluding
the effects from purchase of business:
Decrease in accounts receivable 1,874 154
Increase in inventories (4,548) (716)
Increase in prepaid expenses
and other current assets (391) (164)
Decrease in accounts
payable and accrued expenses (317) (903)
Increase in other long-term
liabilities 81 79
Other 274 423
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Net cash provided (used) by operating activities (733) 1,234
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Cash flows from investing activities:
Capital expenditures (1,542) (979)
Purchase of business, net of cash acquired (2,460) -
Capitalized Software Costs (233) (288)
Other (17) (17)
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Net cash used by investing activities (4,252) (1,284)
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Cash flows from financing activities:
Net borrowings under revolving credit and
term loan facility 5,041 (1,807)
Net short-term borrowings 771 1,211
Principal payments on notes payable (10) (10)
Cash dividends paid (189) (189)
Other 196 -
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Net cash provided (used) by financing activities 5,809 (795)
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Effect of exchange rate changes on cash 38 32
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Net increase (decrease) in cash and cash equivalents 862 (813)
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Cash and cash equivalents at beginning of year 1,877 2,898
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Cash and cash equivalents at end of period $ 2,739 $ 2,085
======= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 396 $ 294
Income taxes 215 354
Supplemental disclosures of non-cash investing
and financing activities:
Liabilities incurred or assumed in business acquisition $ 345 $ -
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
April 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 Commission. 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 three month period ended April 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
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<TABLE>
<CAPTION>
(In thousands) April 1, 1995 December 31, 1994
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<S> <C> <C>
Raw Materials $ 10,498 $ 9,913
Work-in-process 8,023 4,279
Finished goods 8,967 7,667
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$ 27,488 $ 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 $10,709,000 and
$8,913,000 at April 1, 1995 and December 31, 1994, respectively. The excess
of current cost over stated LIFO value was $4,374,000 at April 1, 1995 and
$4,339,000 at December 31, 1994.
5
<PAGE> 6
INSTRON CORPORATION FORM 10-Q
April 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
- ---------------------
Quarter ended April 1, 1995 vs. Quarter ended April 2, 1994
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Revenues for the first quarter of 1995 were $34,165,000, an increase of 8.1%
over the same period last year, resulting principally from increased revenues
in North America and increased service revenues throughout the world. Foreign
sales accounted for approximately 59% of consolidated first quarter revenues
compared with 62% for the first quarter of 1994.
Gross margin as a percentage of revenue decreased to 42.2% for the first
quarter of 1995 compared to 44.6% for the first quarter of 1994. The lower
gross margin is due to an unfavorable mix of lower margin products partially
offset by improved service profitability. Gross margins on several key
customer orders that were obtained in the fourth quarter of 1994 were lower
than our traditional system business and had the effect of reducing margins in
the first quarter of 1995.
Total selling and administrative expenses increased by 2.6% compared to the
same period in 1994. As a percentage of revenue, selling and administrative
expenses were 31.6% in the first quarter of 1995 compared to 33.3% for the
comparable period last year.
Research and development expenses increased by 5.7% for the first quarter of
1995 compared with the prior year's first quarter. Software development costs
capitalized during the first quarter of 1995 were less than those costs
capitalized in the first quarter of 1994. Including amounts capitalized,
research and development expenditures increased by 2.6% in 1995.
Other expenses increased by $370,000 over last year's first quarter. The
increase is principally due to foreign exchange losses resulting from a weaker
British pound versus the German Deutschmark, partially offset by foreign
exchange gains in Japan. This compares to a foreign exchange gain of $168,000
for the same period in 1994 which was primarily due to the stronger Japanese
yen versus the U.S. dollar and British pound. In addition, other expenses
increased due to higher interest expense resulting from an increase in interest
rates.
6
<PAGE> 7
INSTRON CORPORATION FORM 10-Q
April 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Net income of $614,000 for the first quarter of 1995 decreased by 32.4%
compared to the first quarter of 1994. Earnings per share for the three months
ended April 1, 1995 was 10 cents per share compared to 14 cents per share for
the comparable prior year period. The lower earnings were attributable to the
decrease in gross margin and the foreign exchange loss in the first quarter of
1995 versus the gain in the first quarter of 1994.
The consolidated effective tax rate for the first quarter of 1995 was 38.0%
compared to 37.0% in the first quarter of 1994.
Financial Condition
- -------------------
The Company experienced negative cash flows from operating activities of
$0.7 million in the first quarter of 1995. Operating cash flows were effected
by a build-up in work-in-process inventories to support major systems which are
expected to be shipped in the second quarter of 1995. The Company anticipates
it will generate positive cash flow from operating activities by the end of
1995. Net bank borrowings increased by $5.8 million in the first quarter of
1995, principally to finance the acquisition of certain assets of Shore
Instrument, capital equipment expenditures and the inventory build-up. The
ratio of debt to debt plus equity was 30.8% at April 1, 1995 compared to 25.5%
at year end 1994. At April 1, 1995, the Company had $8.9 million of available
credit under its $25 million multicurrency revolving credit and term loan
facility. The Company's subsidiaries have additional overdraft and borrowing
facilities for allowing advances of approximately $24 million of which $7.8
million were outstanding at April 1, 1995.
Accounts receivable decreased by $1.9 million and inventories increased by
$4.5 million from year end 1994. The inventory turnover ratio decreased to
2.71 from 2.77 at year end 1994 resulting from the build-up in work-in-process
inventories during the first quarter of 1995.
The Company's order backlog was $34.1 million at the end of the first
quarter of 1995, an increase of 25.5% over the first quarter of 1994 and an
increase of 4.5% from year end 1994.
7
<PAGE> 8
INSTRON CORPORATION FORM 10-Q
April 1, 1995 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Bookings for the first quarter of 1995 increased by 16.3% over the first
quarter last year. This increase was due to higher bookings in the Company's
European operation as well as in China and Southeast Asia. In addition, the
major product lines of electromechanical, servohydraulic (including structural
testing systems) and service experienced increased bookings in the first
quarter of 1995 compared to the same period last year.
The Company believes its present capital resources, anticipated operating
cash flows, borrowing capacity under its revolving credit and term loan
facility and other bank lines of credit are sufficient to meet its current and
future cash requirements to finance operations, capital expenditures and
acquisitions.
As we announced at year end 1994, margins on several key customer orders
that were obtained in the fourth quarter were lower than our traditional system
business and had the effect of reducing margins in the first quarter of 1995.
The remaining orders will be shipped by the end of the second quarter of 1995.
Despite the effect these orders will have on gross margin, we anticipate that
our second quarter net income will improve over the second quarter of 1994 and
that the total year earnings for 1995 will be higher than last year given the
current strength of order bookings and the high backlog level.
8
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INSTRON CORPORATION FORM 10-Q
April 1, 1995 PART I
ITEM 2
Part II - Other Information
Item 1. Legal Proceedings
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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
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None.
Item 3. Defaults Upon Senior Securities.
- ------- --------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
At the 1995 Annual Meeting of Stockholders of the Registrant held on May 3,
1995, the three directors nominated by management, as listed in the
Registrant's proxy statement, were elected. At the Annual Meeting, these
three nominees received the following votes: James M. McConnell, 5,896,520
For, 206,764 Withheld; Dennis J. Moore: 5,904,938 For, 198,346 Withheld;
John F. Smith: 5,899,662 For, 203,622 Withheld. There were no abstentions or
broker nonvotes with respect to the election of directors at the Annual Meeting.
Also at the Annual Meeting, the Stockholder Proposal concerning the
appointment of a committee to sell the Corporation received the following
votes: 459,904 For; 5,048,447 Against. There were 31,988 abstentions and
562,945 broker nonvotes with respect to the Stockholder Proposal.
9
<PAGE> 10
INSTRON CORPORATION FORM 10-Q
April 1, 1995
Part II - Other Information
Item 5. Other Information
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None.
Item 6. Exhibits and Reports on Form 8-K
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a. Exhibits
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Exhibit 11 - Computation of Primary and Fully Diluted
Earnings per Share.
b. Reports on Form 8-K
-------------------
None.
<PAGE> 11
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: May 12, 1995 By/s/ James M. McConnell
------------------------------------
James M. McConnell
President and
Chief Executive Officer
Date: May 12, 1995 By/s/ Linton A. Moulding
------------------------------------
Linton A. Moulding
Chief Financial Officer
<PAGE> 1
EXHIBIT 11
INSTRON CORPORATION
-------------------
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
-----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
April 1, April 2,
1995 1994
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<S> <C> <C>
Net income $ 614,000 $ 908,000
========== ==========
Primary earnings per share:
Weighted average number of common shares outstanding 6,295,537 6,288,107
Add: Shares arising from the assumed exercise
of stock options (as determined under the
Treasury Stock Method) 106,439 53,437
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Weighted average of common and equivalent shares 6,401,976 6,341,544
========== ==========
Primary earnings per share $ .10 $ .14
========== ==========
Fully diluted earnings per share (1):
Weighted average of common and equivalent shares
outstanding (as determined for the Primary
earnings per share calculation above) 6,401,976 6,341,544
Add: Additional shares arising from the assumed
exercise of stock options (as determined
under the Treasury Stock Method) 0 0
---------- ----------
Weighted average of common and equivalent shares 6,401,976 6,341,544
========== ==========
Fully diluted earnings per share $ .10 $ .14
========== ==========
</TABLE>
Note (1): This calculation is submitted in accordance with the Securities Act
of 1993 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> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANACIAL INFORMATION EXTRACTED FROM
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 1, 1995
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<EXCHANGE-RATE> 1
<CASH> 2,739
<SECURITIES> 0
<RECEIVABLES> 42,040
<ALLOWANCES> 1,027
<INVENTORY> 27,488
<CURRENT-ASSETS> 75,981
<PP&E> 58,825
<DEPRECIATION> 35,360
<TOTAL-ASSETS> 111,284
<CURRENT-LIABILITIES> 37,545
<BONDS> 0
<COMMON> 6,407
0
0
<OTHER-SE> 47,222
<TOTAL-LIABILITY-AND-EQUITY> 111,284
<SALES> 28,704
<TOTAL-REVENUES> 34,165
<CGS> 15,841
<TOTAL-COSTS> 19,757
<OTHER-EXPENSES> 12,995
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 394
<INCOME-PRETAX> 991
<INCOME-TAX> 377
<INCOME-CONTINUING> 614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
