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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 MARCH 30, 1996
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)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2057203
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
100 ROYALL STREET 02021
CANTON, MASSACHUSETTS (Zip Code)
(Address of Principal executive offices)
</TABLE>
(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 May 3, 1996:
COMMON STOCK, $1 PAR VALUE -- 6,410,985 SHARES
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INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Income PART I
(Unaudited) ITEM 1
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 30, 1996 April 1, 1995
---------------------------------
<S> <C> <C>
Revenue:
Sales $ 29,751 $ 28,704
Service 5,473 5,461
----------- ----------
Total revenue 35,224 34,165
----------- ----------
Cost of revenue:
Sales 16,626 15,841
Service 3,942 3,916
----------- ----------
Total cost of revenue 20,568 19,757
----------- ----------
Gross Profit 14,656 14,408
----------- ----------
Operating expenses:
Selling and administrative 10,992 10,791
Research and development 2,137 2,138
Special items charge (Note 4) 1,812 0
----------- ----------
Total operating expenses 14,941 12,929
----------- ----------
Income (loss) from operations (285) 1,479
----------- ----------
Other expenses:
Interest, net 255 394
Foreign exchange (gains) losses (183) 94
----------- ----------
Total other expenses 72 488
----------- ----------
Income (loss) before income taxes (357) 991
Provision (benefit) for income taxes (136) 377
----------- ----------
Net income (loss) $ (221) $ 614
=========== ==========
Net income (loss) per common share (Note 2) $ (0.03) $ 0.10
=========== ==========
Average common and equivalent shares
outstanding (Note 2) 6,349,602 6,401,976
=========== ==========
Dividends declared per share of
common stock $ 0.04 $ 0.04
=========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
1
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INSTRON CORPORATION FORM 10-Q
Consolidated Balance Sheet PART I
(In thousands, except share data) ITEM 1
<TABLE>
<CAPTION>
March 30, December 31,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,750 $ 1,644
Accounts receivable (net of
allowance for doubtful accounts of
$1,014 in 1996 and $1,040 in 1995) 43,317 47,504
Inventories 26,554 24,337
Deferred income taxes 3,555 3,544
Prepaid expenses and other current assets 2,642 2,835
--------- ---------
Total current assets 79,818 79,864
Property, plant and equipment, net 21,493 21,809
Deferred Income Taxes 1,441 1,476
Other Assets 9,818 10,185
--------- ---------
Total assets $ 112,570 $ 113,334
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 9,690 $ 8,650
Accounts payable 8,806 9,746
Accrued liabilities 14,194 12,704
Accrued employee compensation and benefits 5,244 6,135
Accrued income taxes 586 2,496
Advance payments received on contracts 2,761 1,874
--------- ---------
Total current liabilities 41,281 41,605
Long-term debt 11,022 11,225
Other long-term liabilities 4,691 4,402
--------- ---------
Total liabilities 56,994 57,232
--------- ---------
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; 6,470,718 and 6,415,321 shares
issued, respectively 6,471 6,415
Additional paid in capital 3,043 2,538
Retained earnings 51,963 52,439
Cumulative translation adjustment (5,187) (4,576)
--------- ---------
56,290 56,816
Less: Treasury stock of 74,952 shares at cost 714 714
--------- ---------
Total stockholders' equity 55,576 56,102
--------- ---------
Total liabilities and stockholders' equity $ 112,570 $ 113,334
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
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INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Cash Flows PART I
(Unaudited) ITEM 1
<TABLE>
<CAPTION>
(In thousands) For the three months ended
-----------------------------
March 30, 1996 April 1, 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (221) $ 614
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,678 1,642
Provision for losses on accounts receivable 29 28
Increase in deferred taxes 18 10
Changes in assets and liabilities, excluding
the effects from purchase of business
Decrease in accounts receivable 3,649 1,874
Increase in inventories (2,458) (4,548)
Increase in prepaid expenses
and other current assets (380) (391)
Decrease in accounts
payable and accrued expenses (499) (317)
Increase in other long-term liabilities 371 81
Other 275 274
------- -------
Net cash provided (used) by operating activities 2,462 (733)
------- -------
Cash flows from investing activities:
Capital expenditures (916) (1,542)
Purchase of business, net of cash acquired 0 (2,460)
Capitalized software costs (405) (233)
Other 10 (17)
------- -------
Net cash used by investing activities (1,311) (4,252)
------- -------
Cash flows from financing activities:
Net borrowings under revolving credit and
term loan facility (182) 5,041
Net short-term borrowings 1,170 761
Cash dividends paid (255) (189)
Other 223 196
------- -------
Net cash provided by financing activities 956 5,809
------- -------
Effect of exchange rate changes on cash (1) 38
------- -------
Net increase in cash and cash equivalents 2,106 862
------- -------
Cash and cash equivalents at beginning of year 1,644 1,877
------- -------
Cash and cash equivalents at end of period $ 3,750 $ 2,739
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 437 $ 396
Income taxes 301 215
Supplemental disclosures of non-cash investing
and financing activities:
Liabilities incurred or assumed in business
acquisition $ 0 $ 345
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
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INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
March 30, 1996
(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, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that effect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported periods.
Actual results could differ from those estimates.
In the opinion of management, all adjustments (which include only
normal recurring adjustments) considered necessary for a fair
presentation have been included. Certain reclassifications were made to
prior year's amounts to conform with the 1996 presentation. Operating
results for the three month period ended March 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1996.
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
(In thousands)
<TABLE>
<CAPTION>
March 30, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw Materials $12,040 $11,269
Work-in-process 7,058 5,257
Finished goods 7,456 7,811
------- -------
$26,554 $24,337
======= =======
</TABLE>
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3. Inventories (continued)
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
$11,064,000 and $9,721,000 at March 30, 1996 and December 31, 1995,
respectively. The excess of current cost over stated LIFO value was
$4,612,000 at March 30, 1996 and $4,535,000 at December 31, 1995.
4. During the first quarter of 1996, the Company recorded a special items
charge to operations of $1,812,000 representing the costs to implement
a work force reduction and consolidation of certain manufacturing
operations. These actions were taken to improve the overall cost
structure and efficiency of the Company's operations, particularly
those relating to previous acquisitions.
5
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INSTRON CORPORATION FORM 10-Q
MARCH 30, 1996 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Quarter ended March 30, 1996 vs. quarter ended April 1, 1995
Revenues for the first quarter of 1996 were $35,224,000, an increase of
3.1% over the same period last year, resulting from increased revenues in
Instron's European Operation and Asia/Latin America. Foreign sales accounted for
approximately 66% of consolidated first quarter revenues compared with 59% for
the first quarter of 1995.
Gross margin as a percentage of revenue decreased to 41.6% for the
first quarter of 1996 compared to 42.2% for the first quarter of 1995. The lower
gross margin is principally the result of competitive pricing pressures,
particularly in overseas operations.
Total selling and administrative expenses increased by 1.9% compared to
the first quarter of 1995. As a percentage of revenue, selling and
administrative expenses were 31.2% in the first quarter of 1996 compared to
31.6% for the comparable period last year.
Research and development expenses were unchanged for the first quarter
of 1996 compared with the first quarter of 1995. Software development costs of
$405,000 were capitalized during the first quarter of 1996 compared with
$233,000 in the first quarter of the prior year. Research and development
expenditures, including amounts capitalized, increased by 7.2% in 1996.
Operating expenses included a special items charge of $1,812,000 in the
first quarter of 1996 representing the cost of implementing a work force
reduction and consolidation of certain manufacturing operations (see Note 4).
Net interest expense decreased by $139,000 compared to the first
quarter of 1995 due to lower average borrowings and lower interest rates.
Foreign exchange gains of $183,000 in the first quarter of 1996 resulted
primarily from the strengthening of certain European currencies against the
British pound. This compares to foreign exchange losses of $94,000 in the first
quarter of 1995, which resulted primarily from a weaker British pound versus the
German Deutschmark, partially offset by foreign exchange gains in Japan.
6
<PAGE> 8
INSTRON CORPORATION FORM 10-Q
MARCH 30, 1996 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
For the first quarter of 1996, the Company reported a net loss of
$221,000 or 3 cents per share compared to net income of $614,000 or 10 cents per
share for the first quarter of 1995. The net loss in 1996 includes the special
items charge of $1,812,000 ($1,123,000 net of taxes), which reduced first
quarter earnings by 17 cents per share. Excluding the effects of the special
items charge, net income for the first quarter of 1996 would have increased over
the first quarter of 1995 by 47% to $902,000 or 14 cents per share.
The consolidated effective tax rate was 38% for the first quarter of
1996 and 1995.
Financial Condition
In the first quarter of 1996, the Company generated net operating cash
flows of $2.5 million which were used to fund capital expenditures of $0.9
million and software development costs of $0.4 million. Cash and cash
equivalents increased by $2.1 million in the first quarter of 1996.
At March 30, 1996, the Company had $14.0 million of available credit
under its $25.0 million multicurrency revolving credit and term loan facility.
The Company's subsidiaries have other overdraft and borrowing facilities for
allowing advances of approximately $27.0 million of which $9.7 million were
outstanding at March 30, 1996. The ratio of total debt to debt plus equity at
March 30, 1996, increased to 27.1% from 26.2% at year-end 1995.
Accounts receivable decreased by $4.2 million from year-end 1995, which
is reflective of the seasonally high fourth quarter shipment levels. Inventories
rose by $2.2 million from the end of 1995 mainly due to inventory on hand to
fulfill customer orders for the second quarter of 1996. As a result, the
inventory turnover ratio decreased to 2.81 from 2.90 at year-end 1995.
The Company believes its present capital resources and anticipated
operating cash flows are sufficient to meet its current and future cash
requirements to finance operations, capital expenditures and acquisitions.
7
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INSTRON CORPORATION FORM 10-Q
MARCH 30, 1996 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition (continued)
The Company's order backlog was $36.4 million at the end of the first
quarter of 1996, an increase of 6.6% over the first quarter of 1995 and a slight
improvement from year-end 1995. Bookings for the first quarter of 1996 increased
by 4.0% over the same period last year as orders increased in the United States
and the Company's European operations.
On February 28, 1996, the Board of Directors declared a regular
quarterly dividend of 4 cents per share on the Company's Common Stock, payable
March 29, 1996, to shareholders of record on March 15, 1996.
8
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INSTRON CORPORATION FORM 10-Q
March 30, 1996 PART II
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
None.
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.
9
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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 10, 1996 By /s/ James M. McConnell
-------------------------------------
James M. McConnell
President and Chief Executive Officer
Date: May 10, 1996 By /s/ Linton A. Moulding
-------------------------------------
Linton A. Moulding
Chief Financial Officer
10
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INSTRON CORPORATION EXHIBIT 11
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 30, April 1,
1996 1995
----------- ----------
<S> <C> <C>
Net income (loss) $ (221,000) $ 614,000
=========== ==========
Primary earnings per share:
Weighted average number of common shares outstanding 6,349,602 6,295,537
Add: Shares arising from the assumed
exercise of stock options
(as determined under the
Treasury Stock Method) 0 106,439
----------- ----------
Weighted average of common and equivalent shares 6,349,602 6,401,976
=========== ==========
Primary earnings per share $ (.03) $ .10
=========== ==========
Fully diluted earnings per share (1):
Weighted average of common and equivalent shares outstanding
(as determined for the Primary earnings per share calculation above) 6,349,602 6,401,976
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 6,349,602 6,401,976
=========== ==========
Fully diluted earnings $ (.03) $ .10
=========== ==========
</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%.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET AND CONSOLIDATED
STATEMENT OF CASH FLOWS. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FORM 10-Q FOR THE PERIOD ENDED MARCH 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> 3,750
<SECURITIES> 0
<RECEIVABLES> 43,317
<ALLOWANCES> 1,014
<INVENTORY> 26,554
<CURRENT-ASSETS> 79,818
<PP&E> 56,845
<DEPRECIATION> 35,352
<TOTAL-ASSETS> 112,570
<CURRENT-LIABILITIES> 41,281
<BONDS> 0
0
0
<COMMON> 6,471
<OTHER-SE> 49,105
<TOTAL-LIABILITY-AND-EQUITY> 112,570
<SALES> 29,751
<TOTAL-REVENUES> 35,224
<CGS> 16,626
<TOTAL-COSTS> 20,568
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> 255
<INCOME-PRETAX> (357)
<INCOME-TAX> (136)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (221)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
