<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 June 27, 1998
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)
(781) 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 5, 1998.
Common Stock, $1 par value -- 6,928,269 shares
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<PAGE> 2
INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Income PART I
(Unaudited) ITEM 1
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended
-------------------------------------
June 27, 1998 June 28, 1997
-------------------------------------
<S> <C> <C>
Revenue:
Sales $30,933 $30,977
Service 6,828 6,147
------- -------
Total revenue 37,761 37,124
------- -------
Cost of revenue:
Sales 17,573 17,890
Service 4,454 4,107
------- -------
Total cost of revenue 22,027 21,997
------- -------
Gross Profit 15,734 15,127
------- -------
Operating expenses:
Selling and administrative 11,014 10,794
Research and development 1,718 1,760
------- -------
Total operating expenses 12,732 12,554
------- -------
Income from operations 3,002 2,573
------- -------
Other (income) expense:
Interest (income) expense (89) 231
Foreign exchange (gains) losses 177 (34)
------- -------
Total other expense 88 197
------- -------
Income before income taxes 2,914 2,376
Provision for income taxes 1,107 906
------- -------
Net income $ 1,807 $ 1,470
======= =======
Weighted average number of basic common shares 6,623 6,236
======= =======
Earnings per share - basic $ 0.27 $ 0.24
======= =======
Weighted average number of diluted common shares 7,151 6,584
======= =======
Earnings per share - diluted $ 0.25 $ 0.22
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 3
<TABLE>
<CAPTION>
INSTRON CORPORATION FORM 10-Q
Consolidated Statement of Income PART I
(Unaudited) ITEM 1
(In thousands, except per share data)
For the six months ended
------------------------------
June 27, 1998 June 28, 1997
------------------------------
<S> <C> <C>
Revenue:
Sales $ 58,437 $ 60,800
Service 13,193 12,347
-------- --------
Total revenue 71,630 73,147
-------- --------
Cost of revenue:
Sales 33,176 34,949
Service 8,978 8,365
-------- --------
Total cost of revenue 42,154 43,314
-------- --------
Gross Profit 29,476 29,833
-------- --------
Operating expenses:
Selling and administrative 21,075 21,653
Research and development 3,167 3,668
Special items charge 4,975 0
-------- --------
Total operating expenses 29,217 25,321
-------- --------
Income from operations 259 4,512
-------- --------
Other (income) expense:
Interest (income) expense (15) 560
Foreign exchange losses 277 94
Gain on sale of land (11,076) 0
-------- --------
Total other (income) expense (10,814) 654
-------- --------
Income before income taxes 11,073 3,858
Provision for income taxes 5,355 1,469
-------- --------
Net income $ 5,718 $ 2,389
======== ========
Weighted average number of basic common shares 6,553 6,216
======== ========
Earnings per share - basic $ 0.87 $ 0.38
======== ========
Weighted average number of diluted common shares 7,106 6,563
======== ========
Earnings per share - diluted $ 0.80 $ .36
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
<TABLE>
<CAPTION>
INSTRON CORPORATION FORM 10-Q
Consolidated Balance Sheet PART I
(In thousands, except per share data) ITEM 1
June 27, December 31,
1998 1997
---------- ------------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 7,194 $ 2,566
Accounts receivable (net of
allowance for doubtful accounts of
$1,007 in 1998 and $1,071 in 1997) 41,292 46,404
Inventories 30,771 24,024
Deferred income taxes 3,412 3,314
Prepaid expenses and other current assets 2,602 3,767
-------- --------
Total current assets 85,271 80,075
Property, plant and equipment, net 21,935 21,207
Deferred income taxes 845 806
Other assets 17,463 16,897
-------- --------
Total assets $125,514 $118,985
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 10,191 $ 6,059
Accounts payable 8,288 11,095
Accrued liabilities 17,523 14,083
Accrued employee compensation and benefits 3,977 6,220
Accrued income taxes 1,584 957
Advance payments received on contracts 2,630 1,541
-------- --------
Total current liabilities 44,193 39,955
Long-term debt 2,550 7,600
Other long-term liabilities 5,677 5,176
-------- --------
Total liabilities 52,420 52,731
-------- --------
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, 7,036,531 and 6,823,698 shares
issued, respectively 7,037 6,824
Additional paid in capital 8,572 6,972
Deferred compensation (2,944) (3,235)
Retained earnings 67,288 62,097
Cumulative translation adjustment (5,529) (5,690)
-------- --------
74,424 66,968
Less: Treasury stock of 108,262 and 74,952
shares, respectively, at cost 1,330 714
-------- --------
Total stockholders' equity 73,094 66,254
-------- --------
Total liabilities and stockholders' equity $125,514 $118,985
======== ========
</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
------------------------------------
June 27, 1998 June 28, 1997
------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,718 $ 2,389
Adjustments to reconcile net income to
net cash provided by operating activities:
(Gain) loss on the sale of property, plant
and equipment (6,895) 10
Depreciation and amortization 3,250 3,244
Provision for losses on accounts receivable 23 145
Deferred taxes (235) (14)
Changes in assets and liabilities, excluding
the effects from purchase of business:
Decrease in accounts receivable 4,754 6,598
(Increase) decrease in inventories (6,729) 539
(Increase) decrease in prepaid expenses
and other current assets 1,165 (145)
Decrease in accounts
payable and accrued expenses (5,426) (2,437)
Increase in other long-term liabilities 764 157
Other (697) (1,918)
------- -------
Net cash provided (used) by operating activities (4,308) 8,568
------- -------
Cash flows from investing activities:
Proceeds from the sale of property, plant
and equipment 13,471 118
Capital expenditures (3,695) (1,302)
Purchase of business 0 (2,010)
Capitalized software costs (635) (133)
Other 7 95
------- -------
Net cash provided (used) by investing activities 9,148 (3,232)
------- -------
Cash flows from financing activities:
Net payments under revolving credit and
term loan facility (5,050) (2,901)
Net short-term borrowings (payments) 4,174 (2,250)
Cash dividends paid (527) (526)
Proceeds from exercise of stock options 1,814 0
Treasury stock purchases (616) 0
------- -------
Net cash used in financing activities (205) (5,677)
------- -------
Effect of exchange rate changes on cash (7) (59)
------- -------
Net increase (decrease) in cash and cash equivalents 4,628 (400)
------- -------
Cash and cash equivalents at beginning of year 2,566 2,541
------- -------
Cash and cash equivalents at end of period $ 7,194 $ 2,141
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 873 $ 744
Income taxes 4,214 1,996
Supplemental disclosures of non-cash investing
and financing activities:
Liabilities incurred or assumed
in business acquisition $ 0 $ 639
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE> 6
INSTRON CORPORATION FORM
10-Q
Statements of Comprehensive Income PART I
(Unaudited) ITEM 1
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
June 27, 1998 June 28, 1997
--------------------------------
<S> <C> <C>
Net income $1,807 $1,470
Other comprehensive income, net of tax:
Foreign currency translation adjustments (339) 188
------ ------
Comprehensive income $1,468 $1,658
====== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 27, 1998 June 28, 1997
--------------------------------
<S> <C> <C>
Net income $5,718 $2,389
Other comprehensive income, net of tax:
Foreign currency translation adjustments 103 (879)
------ ------
Comprehensive income $5,821 $1,510
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE> 7
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
June 27, 1998
(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. Certain
reclassifications were made to the prior year amounts to conform with the
1998 presentation. 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, 1997.
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. Operating results for the six month period ended June 27,
1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998.
2. EARNINGS PER SHARE
Under the new requirements of FAS No. 128, primary and fully diluted
earnings per share are replaced by basic and diluted earnings per share.
Basic earnings per share is computed based only on the weighted average
number of common shares outstanding during the period and the diluted
effect of stock options is excluded. Diluted earnings per share is based on
the weighted average number of common shares and common share equivalents
outstanding.
7
<PAGE> 8
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
June 27, 1998
(Unaudited)
The following is a reconciliation of the basic and diluted EPS calculations:
<TABLE>
<CAPTION>
For the three months ended
(In thousands, except per share data) ------------------------------
- - ------------------------------------- June 27, 1998 June 28, 1997
------------- -------------
<S> <C> <C>
Net income $1,807 $1,470
====== ======
Weighted average number of basic common
shares outstanding 6,623 6,445
Dilutive effect of common stock
equivalents outstanding 528 139
------ ------
Weighted average of common and
dilutive shares 7,151 6,584
====== ======
Basic earnings per share $ 0.27 $ 0.23
====== ======
Diluted earnings per share $ 0.25 $ 0.22
====== ======
</TABLE>
<TABLE>
<CAPTION>
For the six months ended
(In thousands, except per share data) -------------------------------
- - ------------------------------------- June 27, 1998 June 28, 1997
------------- -------------
<S> <C> <C>
Net income $5,718 $2,389
====== ======
Weighted average number of basic common
shares outstanding 6,553 6,445
Dilutive effect of common stock
equivalents outstanding 553 118
------ ------
Weighted average of common and
dilutive shares 7,106 6,563
====== ======
Basic earnings per share $ 0.87 $ 0.37
====== ======
Diluted earnings per share $ 0.80 $ 0.36
====== ======
</TABLE>
8
<PAGE> 9
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
June 27, 1998
(unaudited)
<TABLE>
<CAPTION>
3. INVENTORIES
(In thousands) June 27, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Raw Materials $16,468 $12,742
Work-in-process 8,047 5,156
Finished goods 6,256 6,126
------- -------
$30,771 $24,024
======= =======
</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
$16,106,000 and $9,395,000 at June 27, 1998 and December 31, 1997,
respectively. The excess of current cost over stated LIFO value was
$5,442,000 at June 27, 1998 and $5,247,000 at December 31, 1997.
4. SPECIAL ITEMS CHARGE
During the first quarter of 1998, the Company recorded a special items
Pre-tax charge of $5.0 million to operations to undertake a
consolidation of its European operations and write-down the value of
certain non-performing assets. The special items charge includes
termination benefits, the costs to exit a manufacturing facility, other
asset impairments and other related costs. The Company is currently in
the process of consolidating its German operations and moving the
manufacturing operation to the United Kingdom. These actions are
expected to be completed and paid for by the end of the first quarter
of 1999. The Company does not anticipate any significant benefits in
1998 from these actions, however, operating margins are expected to
improve in 1999.
5. SALE OF LAND
On March 27, 1998, the Company completed the sale of 42 acres of its 66
acre site off Route 128 in Canton, Massachusetts for $13.5 million. As
a result of this transaction, a non-operating pre-tax gain of $11.1
million was recorded in the first quarter of 1998.
9
<PAGE> 10
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
March 28, 1998
(unaudited)
6. SALE OF LMS
On April 14, 1997, the Company sold its Laboratory MicroSystems
division, known as LMS, to Axiom Systems. The net assets associated
with LMS at the time of the sale were approximately $2.9 million,and
there was no significant gain or loss recorded as a result of this
disposition. The proforma results of this transaction is not disclosed
as the results were immaterial.
7. NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, ("SFAS 131") "Disclosure
about Segments of an Enterprise and Related Information." SFAS 131
specifies new guidelines for determining a company's operating segments
and related requirements for disclosure. SFAS 131 will become effective
for fiscal years beginning after December 15, 1997. The Company will
adopt the new standard for the fiscal year ending December 31, 1998,
and is in the process of evaluating the impact of the new standard on
the presentation of its financial statements and the disclosures
therein.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132 ("SFAS 132"),
"Employees' Disclosures about Pensions and Other Postretirement
Benefits." The new requirements require increased disclosures for
public entities. SFAS No. 132 only affects disclosure issues and does
not change any existing measurement or recognition provisions
previously required. The statement is effective for fiscal years
beginning after December 15, 1997. Reclassification for earlier periods
is required for comparative purposes. The Company will adopt SFAS No.
132 for its fiscal year ended December 31, 1998.
10
<PAGE> 11
INSTRON CORPORATION FORM 10-Q
PART I
Notes to Consolidated Financial Statements ITEM 1
March 28, 1998
(unaudited)
8. SUBSEQUENT EVENT
As of August 1, 1998, the Company acquired substantially all the assets
of Satec Systems, Inc. of Grove City, Pennsylvania, for approximately
$12.8 million in cash. Satec is a manufacturer of a range of materials
testing equipment sold primarily in the United States with annual sales
of approximately $18 million. This acquisition will be accounted for
under the purchase method of accounting and, accordingly, the acquired
assets and liabilities will be recorded at their estimated fair values
at the date of acquisition. The Company expects to take a non-recurring
charge in connection with the related purchased incomplete technology.
The operating results of Satec will be included in the Company's
consolidated results of operations from the date of acquisition.
11
<PAGE> 12
INSTRON CORPORATION FORM 10-Q
June 27, 1998 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 27, 1998 VS. QUARTER ENDED JUNE 28, 1997
Revenues for the second quarter of 1998 were $37,761,000, an increase
of 1.7% from the same period last year. This increase occurred
primarily in North America, partially offset by lower revenues in
Europe and Asia. Foreign sales accounted for approximately 54% of
consolidated second quarter revenues, compared with 61% for the second
quarter of 1997.
The Company's consolidated gross margin as a percentage of revenue
increased to 41.7% for the second quarter of 1998 compared to 40.7% for
the second quarter of 1997. This increase is due to higher product
margins, particularly in the electromechanical line, and an improvement
in the Company's service business, partially offset by the impact of
supplying the IST joint venture with structures systems at lower than
normal margins. The Company has a 51% interest in IST and has certain
rights to acquire the co-joint venturer's interest in IST.
Total selling and administrative expenses increased by 2.0% compared to
the second quarter of 1997. As a percentage of revenue, selling and
administrative expenses were nearly unchanged at 29.2% in the second
quarter of 1998 compared to 29.1% for the comparable period last year.
Research and development expenses decreased by 2.4% for the second
quarter of 1998 compared with the second quarter of 1997. Certain
software development costs of $360,000 were capitalized during the
second quarter of 1998, compared with $27,000 in the second quarter of
last year. If research and development expenses for comparison purposes
included software development costs as period expenses, research and
development expenses would have increased by 13.4% in 1998.
12
<PAGE> 13
INSTRON CORPORATION FORM 10-Q
June 27, 1998 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS (CONTINUED)
QUARTER ENDED JUNE 27, 1998 VS. QUARTER ENDED JUNE 28, 1997 (CONTINUED)
Income from operations for the second quarter of 1998 was $3,002,000,
an increase of 16.7% compared to the second quarter last year on an
increase in total revenue of 1.7%. Total income from operations
expressed as a percentage of total revenue increased to 8.0% from 6.9%
for the same period in 1997.
During the second quarter of 1998, the Company recorded net interest
income of $89,000 compared with net interest expense of $231,000 in the
second quarter of 1997. This improvement was due to reduced interest
expense resulting from lower average borrowings and by interest income
received on notes receivable and temporary bank deposits. Foreign
exchange losses of $177,000 in the second quarter of 1998 resulted
primarily from the strengthening of the British pound against the U.S.
dollar and certain European currencies. This compares to foreign
exchange gains of $34,000 in the second quarter of 1997.
Net income increased by 23% to $1,807,000 or 25 cents per diluted share
for the second quarter of 1998, compared to net income of $1,470,000,
or 22 cents per diluted share, for the same period in 1997.
SIX MONTHS ENDED JUNE 27, 1998 VS SIX MONTHS ENDED JUNE 28, 1997
Revenues for the six months ended June 27, 1998, decreased by 2.1% from
the same period in 1997. This decrease is due primarily to lower
shipments in the Company's Asian markets. Foreign sales accounted for
approximately 57% of the consolidated first six months' revenue
compared to 60% in 1997.
Gross margin as a percentage of revenue increased slightly to 41.1%
compared with 40.8% in the first half of 1997. This increase is
primarily due to improved product margins, partially offset by the
impact of supplying IST with structures systems at lower than normal
profit margins.
13
<PAGE> 14
INSTRON CORPORATION FORM 10-Q
June 27, 1998 PART I
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
SIX MONTHS ENDED JUNE 27, 1998 VS SIX MONTHS ENDED JUNE 28, 1997
(CONTINUED)
Total selling and administrative expenses decreased by 2.7% in the
first half of 1998 compared to the same period in 1997 and as a
percentage of revenue, selling and administrative expenses were 29.4%
compared to 29.6% for the same period last year. This decrease in
selling and administration expenses is due primarily to the exclusion
of LMS expenses in 1998 (as the business was sold in April of 1997) and
to certain selling and administrative expenses being recovered from
IST.
Research and development expenses decreased by 13.7% for the first six
months of 1998 compared with the same period in 1997. This decrease is
the result of certain Instron engineering resources being further
utilized to develop new products for IST in accordance with the joint
venture agreement which are reimbursed by IST and the disposition of
LMS. In addition, software development costs of $635,000 were
capitalized during the first half of 1998 compared with $133,000 in the
first half of last year. If research and development costs for
comparison purposes included software development costs as period
expenses and engineering expenses were adjusted for the effect of IST
and the disposition of LMS, research and development expenses would
have increased by 7.4% in 1998.
Operating expenses in the first half of 1998 included a special items
charge of $4,975,000, for the cost of consolidating European operations
and to write-down the value of certain non-performing assets. The
special items charge includes termination benefits, the costs to exit a
manufacturing facility, other asset impairments and other related
costs. The Company is currently in the process of consolidating its
German operations and moving the manufacturing operation to the United
Kingdom. These actions are expected to be completed and paid for by the
end of the first quarter of 1999. The Company does not anticipate any
significant benefits in 1998 from these actions, however, operating
margins are expected to improve in 1999.
14
<PAGE> 15
INSTRON CORPORATION FORM 10-Q
June 27, 1998 PART I
Management's Discussion and Analysis of ITEM 2
Financial Condition and Results of Operations
SIX MONTHS ENDED JUNE 27, 1998 VS SIX MONTHS ENDED JUNE 28, 1997
(CONTINUED)
During the first six months of 1998, the Company recorded net interest
income of $15,000 compared with interest expense of $560,000 for the
same period in 1997. This improvement was due to reduced interest
expense resulting from lower average borrowings and by interest income
received on notes receivable and temporary bank deposits. Foreign
exchange losses of $277,000 for the first six months of 1998 resulted
from the strengthening of the British pound against the U.S. dollar and
certain European currencies. This compares to foreign exchange losses
of $94,000 for the first half of 1997.
A non-operating gain of $11,076,000 was recorded in the first quarter
of 1998 on the sale of excess land in Canton, Massachusetts.
Net income for the first six months of 1998 was $5,718,000, or 80 cents
per diluted share, compared to net income of $2,389,000, or 36 cents
per diluted share, for the same period last year. For comparison
purposes, when the after-tax effect of the gain on sale of land and the
special items charge are excluded, net income of the ongoing business
was $3,083,000 or 43 cents per diluted share in the first half of 1998,
an increase of 29% when compared to the same period in 1997.
The consolidated effective tax rate was 48% for the first half of 1998
compared to 38% in 1997. The higher tax rate is due to certain
non-deductable expenses relating to the special items charge. Excluding
the effect of the special items charge, the ongoing effective tax rate
was 38% for the first half of 1998.
FINANCIAL CONDITION
In the first six months of 1998, the Company had negative cash flows
from operating activities of $4.3 million. The negative cash flows
resulted primarily from an increase in inventories for the production
of several structural testing systems due to be shipped to the IST
joint venture in the second half of 1998 and the timing of certain cash
payments.
15
<PAGE> 16
INSTRON CORPORATION FORM 10-Q
June 27, 1998 PART I
Management's Discussion and Analysis of ITEM 2
Financial Condition and Results of Operations
FINANCIAL CONDITION (CONTINUED)
The Company generated cash flows of $13.5 million from the sale of
excess land in Canton, Massachusetts in March of 1998. The $13.5
million was substantially used to pay down debt.
At June 27, 1998, the Company had $32.5 million of available credit
under its $35.0 million multicurrency revolving credit and term loan
facility. The Company's subsidiaries have other overdraft and borrowing
facilities totaling approximately $26.0 million of which $10.2 million
were outstanding at June 27, 1998. The ratio of total debt to debt plus
equity at June 27, 1998, decreased to 14.8% from 17.1% at year-end
1997.
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.
Bookings for the second quarter of 1998 decreased by 6.7% and by 2.1%
in the first half of 1998 from the corresponding periods in 1997,
respectively. The decrease in both periods is due primarily to weaker
order bookings in the Company's Asian territories. In 1997, the Asian
and Japanese markets accounted for approximately 22% of Instron's
worldwide bookings. The Company is currently forecasting a decline in
1998 of 25%-33% for new customer orders in this part of the world,
compared to 1997. The order intake for North America and European
markets has improved over last year's levels, but will not offset the
lower bookings from the Far East. This forecast excludes the increase
in orders that will result from the Company's recent acquisition of
Satec Systems, Inc.
The Company expects that Satec will make a positive contribution to
earnings in 1999, but will have no material impact on earnings in 1998,
excluding non-recurring acquisition charges which will include the
write-down of incomplete technology.
The Company's order backlog was $31.4 million at the end of the second
quarter of 1998, an increase of 3.0% from the second quarter of 1997
and a decrease of 1.9% from the first quarter of 1998.
16
<PAGE> 17
INSTRON CORPORATION FORM 10-Q
June 27, 1998 PART I
Management's Discussion and Analysis of ITEM 2
Financial Condition and Results of Operations
FINANCIAL CONDITION
This Form 10-Q Report contains certain "forward-looking" statements
within the meaning of the federal securities laws and are made in
reliance upon the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such
statements are only predictions and speak only as of the date of this
report. No assurances can be given that actual results will not differ
materially from those projected in the forward-looking statements
contained in this Form 10-Q report.
Certain factors that might cause such a difference include: the level
of bookings worldwide for Instron and its joint venture IST,
particularly in Asia; the operating results of the IST joint venture;
the impact of fluctuations in the exchange rates; the uncertainties of
operating in a global economy, including fluctuations in the economic
conditions of the foreign and domestic markets served by the Company;
the Company's ability to successfully integrate the products and
operations of Satec; Satec's ability to meet its earnings expectations;
and the Company's ability to identify and successfully consummate
strategic acquisitions. For further discussion of the factors,
investors are encouraged to review the Company's Form 10-K for the
fiscal year ended December 31, 1997 and its other recent SEC filings.
17
<PAGE> 18
INSTRON CORPORATION FORM 10-Q
June 27, 1998 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
At the 1998 Annual Meeting of Stockholders of the Registrant held on
May 13, 1998, 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:
5,749,763, For, 141,878 Withheld; Dennis J. Moore: 5,744,935 For,
146,706 Withheld; John F. Smith, 5,681,513, For, 210,128 Withheld.
There were no abstentions or broker nonvotes with respect to the
election of directors at the Annual Meeting.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
None.
b. REPORTS ON FORM 8-K
None.
18
<PAGE> 19
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, 1998 By /s/ James M. McConnell
----------------------
James M. McConnell
President and
Chief Executive Officer
Date: August 11, 1998 By /s/ Linton A. Moulding
-------------------------
Linton A. Moulding
Chief Financial Officer
19
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