<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended October 31, 1996
Commission File Number 1-4124
JETRONIC INDUSTRIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1364981
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4200 Mitchell Street, Philadelphia, PA 19128
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 482-7660
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Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days. Yes X No .
--- ---
At October 31, 1996, 3,604,499 shares of common stock were outstanding.
<PAGE>
PART I
ITEM 1
------
CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT AND ITS
SUBSIDIARIES
The following Consolidated Balance Sheets, Consolidated Statements of
Operations, Consolidated Statements of Changes in Shareholders' Equity
(Deficit) and Consolidated Statements of Cash Flows are unaudited. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of results for the interim
periods have been included. Results of operations for interim periods are not
necessarily indicative of a full year's operations. The aforementioned
statements should be read in conjunction with the annual report on Form 10-K
for the fiscal year ended January 31, 1996.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain forward looking statements contained herein are based on current
expectations. Actual results may differ materially from the results described
in such forward looking statements due to, but not limited to, the following
factors: the effect of general business conditions, the impact of competitive
products and pricing, product development and technological difficulties.
<PAGE>
Summarized business segment information for fiscal years 1997 and 1996 (in
thousands) is as follows:
Nine Months Ended October 31,
1996 1995*
---- ----
Net revenues:
Electronic communication
equipment $ 680 $ 281
Energy conversion products
group 17,129 16,267
-------- --------
Consolidated $ 17,809 $ 16,548
======== ========
Operating profit (loss):
Electronic communication
equipment $ 125 $( 192)
Energy conversion products
group 2,136 1,521
Net corporate expenses ( 1,731) ( 1,733)
-------- --------
$ 530 $( 404)
======== ========
* Reclassified to conform to 1997 presentation.
<PAGE>
ITEM 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of operations:
----------------------
In the following commentary, "operating profit" is total revenue less
operating expenses and has been reclassified to exclude discontinued
operations. In computing operating profit, none of the following items has
been added or deducted: general corporate expenses, corporate interest
expense, corporate interest income and income taxes.
The electronic communication equipment operations reported revenues of
$680,000 and an operating profit of $125,000 for the nine months ended
October 31, 1996 (1997) compared to revenues of $281,000 and an operating
loss of $192,000 for the nine months ended October 31, 1995 (1996). Revenues
and operating loss for the quarter ended October 31, 1996 were $164,000 and
$18,000, respectively, compared to revenues and operating loss for the
quarter ended October 31, 1995 of $163,000 and $45,000, respectively. The
increase in both revenues and profitability for the nine months is related to
deliveries under a U.S. Government contract for products similar to those
produced in the past. The losses incurred in both third quarters is a result
of reduced shipments under the U.S. Government contract and the necessity to
maintain a level of readiness in anticipation of future awards.
The energy conversion products group reported revenues of $17,129,000 and an
operating profit of $2,136,000 for the nine months ended October 31, 1996
compared to revenues of $16,267,000 and an operating profit of $1,521,000 for
the nine months ended October 31, 1995. Revenues and operating profit for the
quarter ended October 31, 1996 were $6,684,000 and $869,000, respectively,
compared to revenues and operating profit for the quarter ended October 31,
1995 of $5,215,000 and $678,000, respectively. The increase in revenues and
profitability is attributable to increased business and margins in both the
solid state power supply business and custom switchgear equipment.
Net corporate expenses, comprised of interest expense and general corporate
items, were $1,731,000 for the nine months ended October 31, 1996 compared to
$1,733,000 for the nine monhts ended October 31, 1995.
Liquidity and Capital Resources:
--------------------------------
During FY 1997 and FY 1996 the operations of the Company and its subsidiaries
were financed by a lending institution under various formulae which provide
operating funds as required. Such borrowings are primarily in the form of
short-term loans, secured by assignment of accounts receivable and
inventories. Under the various formulae, borrowings are limited to varying
percentages and maximum dollar amounts of accounts receivable and inventories
with a maximum limitation of $5,000,000. As of October 31, 1996, such
borrowings amounted to $3,413,000 with an additional availability based on
the various formulae of $514,000. The Company's line of credit agreement with
its current lender expires on June 30, 1998.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (continued):
At this time, there are no material commitments for capital expenditures.
Cash requirements for the current fiscal year should decrease by
approximately five percent, primarily based upon the Company's discontinuance
of its marine products division. Based upon the availability of funds under
its various existing financing arrangements, the Company deems its liquidity
to be adequate.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(000's Omitted)
October 31, 1996 January 31, 1996
---------------- ----------------
ASSETS
Current assets:
Cash $ 547 $ 652
Accounts receivable 4,226 2,858
Inventories 4,825 4,140
Prepaid and other assets 485 601
-------- --------
Total current assets 10,083 8,251
Property, plant and equipment, net 435 481
Goodwill 303 311
Other assets 557 364
-------- --------
Total assets $ 11,378 $ 9,407
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable to lenders $ 3,413 $ 2,331
Current portion of long-term debt 81 89
Accounts payable 1,940 1,584
Other accrued liabilities 1,066 1,143
Deferred interest 1,246 1,166
-------- --------
Total current liabilities 7,746 6,313
Long-term debt 4,005 3,996
-------- --------
Total liabilities 11,751 10,309
-------- --------
Shareholders' equity (deficit):
Common stock 361 361
Capital in excess of par value 12,569 12,569
Retained earnings (deficit) (13,303) (13,832)
-------- --------
Total shareholders'
equity (deficit) ( 373) ( 902)
-------- --------
$ 11,378 $ 9,407
======== ========
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's Omitted)
Nine Months Ended October 31,
-----------------------------
1996 1995*
---- ----
Net sales $ 17,809 $ 16,548
Cost and expenses:
Cost of goods sold 14,843 14,342
Selling and administrative expenses 1,699 1,807
Interest and debt expenses 737 803
-------- --------
Total costs and expenses 17,279 16,952
-------- --------
Income (loss) from continuing
operations before income taxes 530 ( 404)
Income tax provision 1 10
-------- --------
Income (loss) from continuing
operations 529 ( 414)
Discontinued operations ( 217)
-------- --------
Net income (loss) $ 529 $( 631)
======== ========
Net income (loss) per share (A) $ .15 $( .18)
======== ========
Notes:
(A) Weighted average number of shares for the nine months ended October 31,
1996 and 1995 was 3,604,000.
See notes to consolidated financial statements.
* Reclassified to conform to 1996 presentation.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's Omitted)
Three Months Ended October 31,
------------------------------
1996 1995*
---- ----
Net sales $ 6,848 $ 5,378
Cost and expenses:
Cost of goods sold 5,726 4,486
Selling and administrative expenses 688 639
Interest and debt expenses 231 280
-------- --------
Total costs and expenses 6,645 5,405
-------- --------
Income (loss) from continuing
operations before income taxes 203 ( 27)
Income tax provision (benefit) ( 8) 9
-------- --------
Income (loss) from continuing
operations 211 ( 36)
Discontinued operations ( 181)
-------- --------
Net income (loss) $ 211 $( 217)
======== ========
Net income (loss) per share (A) $ .06 $( .06)
======== ========
Notes:
(A) Weighted average number of shares for the three months ended October 31,
1996 and 1995 was 3,604,000.
See notes to consolidated financial statements.
* Reclassified to conform to 1996 presentation.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
Common Stock Capital in Retained
------------ excess of earnings
Shares Amount par value (deficit) Total
------ ------ --------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1995 3,604,499 $361 $12,569 ($11,609) $1,321
Net loss, year ended
January 31, 1996 ( 2,223) ( 2,223)
--------- ---- ------- -------- -------
Balance, January 31, 1996 3,604,499 361 12,569 ( 13,832) ( 902)
Net income, nine months
ended October 31, 1996 529 529
--------- ---- ------- -------- -------
Balance, October 31, 1996 3,604,499 $361 $12,569 ($13,303) ($ 373)
========= ==== ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's Omitted)
Nine Months Ended October 31,
-----------------------------
1996 1995*
---- ----
Cash flows from operating activities:
Net income (loss) $ 529 $( 631)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 128 174
Reduction of goodwill 8 8
Deferred taxes 15
Changes in assets and liabilities:
Accounts receivable (1,368) ( 306)
Inventories ( 685) ( 202)
Prepaid and other assets 116 ( 108)
Net assets of discontinued
operations 1,006
Other assets ( 245) ( 183)
Accounts payable 356 284
Other liabilities 3 86
------- -------
Total adjustments (1,687) 774
------- -------
Net cash provided (used) by
operating activities (1,158) 143
------- -------
Cash flows from investing activities:
Capital expenditures ( 30) ( 54)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt 65
Net borrowings from lenders 1,082 137
Principal payments on long-term debt ( 64) ( 111)
------- -------
Net cash provided (used) by
financing activities 1,083 26
------- -------
Net increase (decrease) in cash ( 105) 115
Cash beginning of period 652 144
------- -------
Cash end of period $ 547 $ 259
======= =======
Supplemental disclosures of cash flow
information:
Interest paid during the period $ 255 $ 186
======= =======
Income taxes paid during the period $ 1 $ 1
======= =======
See notes to consolidated financial statements.
* Reclassified to conform to 1996 presentation.
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(000's Omitted)
Note 1 - INVENTORIES
Inventories, which are stated at the lower of last-in first-out (LIFO) cost
or market for electronic communication equipment and a portion of energy
conversion products (10% of inventory) and at the lower of first-in
first-out (FIFO) cost or market for the remaining portion of energy
conversion products, are summarized as follows:
October 31, 1996 January 31, 1996
---------------- ----------------
Raw materials $ 2,724 $ 2,626
Work in process 2,101 1,514
-------- --------
Total $ 4,825 $ 4,140
======== ========
Note 2 - STATEMENT OF OPERATIONS
Effective February 1, 1993, the Company changed its method of accounting
for income taxes by adopting Statement of Financial Accounting Standards
No. 109 (SFAS No. 109). Under SFAS No. 109 the deferred tax provision is
determined under the liability method. Deferred tax assets of $3,188,
arising principally from net operating loss carryforwards, were partially
offset by deferred tax liabilities and valuation allowance of $3,016 in
accordance with guidelines established under SFAS No. 109. The Company will
periodically review and adjust the valuation allowance as needed.
Differences between the statutory federal income tax rate and the effective
tax rate are accounted for as follows:
Nine Months Ended October 31,
-----------------------------
1996 1995
---- ----
Federal income tax rate 34.0% (34.0%)
State income taxes, net of
federal tax benefit 0.1 2.8
Tax effect of non-deductible
expenses 1.8 1.7
NOL utilization under SFAS No. 109 (35.8) 31.3
----- -----
Effective income tax rate 0.1% 1.8%
===== =====
<PAGE>
PART II
Items 1 thru 6(a) are not applicable.
Item 6(b) - There were no reports on Form 8-K filed for the quarter ended
October 31, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JETRONIC INDUSTRIES, INC.
-------------------------
Registrant
Leonard W. Pietrzak
----------------------------------------
Vice President - Finance
December 23, 1996
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<NAME> JETRONIC INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
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<RECEIVABLES> 4,244
<ALLOWANCES> 18
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