<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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 30, 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 1-5601
AMERICAN PRECISION INDUSTRIES INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 16-1284388
-------------------------------- -------------------
(State or other jurisidiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 WALDEN AVENUE, BUFFALO, NEW YORK 14225
----------------------------------------- ----------
(Address of principal executives offices) (Zip Code)
(716) 684-9700
----------------------------------------------------
(Registrant's telephone number, including area code)
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 period 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 .
------- -------
Number of shares of outstanding stock
on August 11, 1995 7,101,101
<PAGE> 2
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
2ND QUARTER ENDED SIX MONTHS ENDED
1995 1994 1995 1994
-------------------------------------- ---------------------------------
JUNE JUNE JUNE JUNE
<S> <C> <C> <C> <C>
Net Sales $ 20,294,000 $ 15,332,000 $ 39,516,000 $ 29,524,000
Investment Income 66,000 106,000 133,000 208,000
------------------ ------------- ------------ --------------
Revenues 20,360,000 15,438,000 39,649,000 29,732,000
------------------ ------------- ------------ --------------
Costs and Expenses:
Cost of products sold 13,884,000 10,182,000 26,852,000 19,623,000
Selling and administrative 4,453,000 3,694,000 8,760,000 7,247,000
Research and product development 269,000 195,000 572,000 386,000
Interest and debt expense 59,000 53,000 117,000 107,000
------------------ ------------- ------------ --------------
18,665,000 14,124,000 36,301,000 27,363,000
------------------ ------------- ------------ --------------
Earnings before Income Taxes 1,695,000 1,314,000 3,348,000 2,369,000
Federal and State Income Taxes 573,000 473,000 1,184,000 848,000
------------------ ------------- ------------ --------------
Net Earnings $ 1,122,000 $ 841,000 $ 2,164,000 $ 1,521,000
================== ============= ============ ==============
Net Earnings per Share $0.16 $0.12 $0.31 $0.22
================== ============= ============ ==============
Dividends Declared per Share $0.0650 $0.0625 $0.1275 $0.1225
================== ============= ============ ==============
Average Shares Outstanding 7,069,000 7,064,000 7,066,000 7,061,000
================== ============= ============ ==============
</TABLE>
<PAGE> 3
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
JUNE DECEMBER
------------ -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 222,000 $ 2,135,000
Accounts receivable, less allowance for
doubtful accounts of $280,000 and
$373,000 12,176,000 10,555,000
Marketable securities 2,334,000 1,706,000
Inventories 9,041,000 8,827,000
Prepaid expenses 858,000 862,000
Deferred income tax benefit 127,000 153,000
--------------- ---------------
Total Current Assets 24,758,000 24,238,000
--------------- ---------------
Investments 1,596,000 3,562,000
Other Assets
Cost in excess of net assets acquired 2,281,000 2,245,000
Prepaid pension cost 2,160,000 2,005,000
Net cash value of life insurance 2,002,000 1,651,000
Other 750,000 566,000
--------------- ---------------
Total Other Assets 7,193,000 6,467,000
---------------- ---------------
Property, Plant and Equipment
Land 211,000 211,000
Buildings and improvements 5,520,000 5,305,000
Machinery, equipment and furniture 21,225,000 20,730,000
Construction in process 1,093,000 410,000
---------------- ---------------
28,049,000 26,656,000
Less accumulated depreciation 17,069,000 16,454,000
---------------- ---------------
Net Property, Plant and Equipment 10,980,000 10,202,000
---------------- ---------------
$ 44,527,000 $ 44,469,000
================ ===============
</TABLE>
<PAGE> 4
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION> 1995 1994
JUNE DECEMBER
------------------ --------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Short-term borrowings $ 1,185,000 $ 2,000,000
Accounts payable 4,516,000 4,609,000
Accrued compensation and payroll taxes 2,641,000 2,523,000
Other accrued expenses 568,000 898,000
Dividends payable 459,000 441,000
Current portion of long-term obligations 330,000 366,000
Federal and state income taxes 100,000 79,000
------------------ --------------
Total Current Liabilities 9,799,000 10,916,000
------------------ --------------
Other Noncurrent Liabilities 80,000 176,000
Long-Term Obligations, less current portion 2,392,000 2,472,000
Shareholders' Equity
Common stock, par value
$.66-2/3 per share:
Authorized - 10,000,000 shares
Issued - 7,447,579 and 7,442,048 shares 4,965,000 4,961,000
Additional paid-in capital 9,116,000 9,098,000
Retained earnings 20,989,000 19,726,000
Net unrealized gain (loss) on marketable
securities and investments 24,000 (18,000)
------------------ ------------------
35,094,000 33,767,000
Less cost of 374,262 and 378, 262 treasury shares 2,838,000 2,862,000
------------------ ------------------
Total Shareholders' Equity 32,256,000 30,905,000
------------------ ------------------
$ 44,527,000 $ 44,469,000
================== ==================
</TABLE>
<PAGE> 5
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
1995 1994
JUNE JUNE
--------------- ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $2,164,000 $1,521,000
Adjustments to reconcile net income to cash
and cash equivalents provided by operating activities:
Depreciation and amortization 1,362,000 940,000
Gain on sale of investments and fixed assets (4,000) (6,000)
Increase in supplemental benefit program 67,000 49,000
Recognition of pension income under FASB #87 (155,000) (82,000)
Change in various allowance accounts (59,000) 190,000
Treasury stock issued as bonus 24,000 -
(Increase) Decrease in:
Accounts receivable (1,529,000) (1,794,000)
Inventories (235,000) (1,061,000)
Prepaid expenses (8,000) (66,000)
Prepaid income taxes - (120,000)
Net cash value of life insurance (351,000) (321,000)
Other assets, net (303,000) 81,000
Increase (Decrease) in:
Accounts payable (94,000) 655,000
Accrued expenses (192,000) 942,000
Federal and state income taxes 21,000 -
Other noncurrent liabilities (96,000) -
------------- ----------
Net cash provided by Operating Activities 612,000 928,000
------------- -----------
Cash Flows from Investing Activities
Purchases of investments and marketable securities - (754,000)
Additions to property, plant and equipment (2,087,000) (925,000)
Proceeds from investments 1,406,000 2,296,000
Investment in Harowe - (4,925,000)
Proceeds from sale of fixed assets 14,000 -
------------- -----------
Net cash (used) by Investing Activities (667,000) (4,308,000)
------------- -----------
Cash Flows from Financing Activities
Exercise of stock options 22,000 28,000
Payment of long-term obligations, including current maturities (183,000) (348,000)
Dividends paid (883,000) (847,000)
Short-term borrowings, net of repayments (815,000) 4,000,000
------------- -----------
Net cash provided (used) by Financing Activities (1,859,000) 2,833,000
Net Decrease in Cash and Cash Equivalents (1,914,000) (547,000)
Cash and Cash Equivalents at Beginning of Year 2,136,000 1,455,000
Cash and Cash Equivalents at End of Period $ 222,000 $ 908,000
============== =============
</TABLE>
<PAGE> 6
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Second Quarter Ended June 30, 1995
------------------------------------------
Note A Consolidated Financial Statements
------ ---------------------------------
The Consolidated Balance Sheet as of June 30, 1995, and the Consolidated
Statement of Earnings, and the Consolidated Statements of Cash Flows for the
periods ended June 30, 1995 and July 1, 1994 have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and changes in cash flow at June 30, 1995 and
for all periods presented have been made. The Consolidated Balance Sheet as
of June 30, 1995 includes the assets, liabilities, and resulting goodwill of
Harowe Servo Controls, Inc. ("Harowe") acquired June 30, 1994. The
Consolidated Statement of Earnings and Cash Flows for the period ended June 30,
1995 also includes the results of Harowe since the date of acquisition.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with Generally Accepted
Accounting Principles have been condensed or omitted. It is suggested these
condensed consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's December
30, 1994 Annual Report to Shareholders.
NOTE B Marketable Securities and Investments
------ -------------------------------------
In connection with the Management Agreement between the Company
and Gettys Corporation, municipal bonds in the amounts of $728,000 reflected as
marketable securities and $1,320,000 reflected as investments are held in an
escrow account to be applied to the purchase price of the net assets of Gettys
Corporation at the time the Company acquires those net assets pursuant to the
exercise of the put or call option provisions of the Management Agreement.
Note C Inventories
------ -----------
It is not practical to determine raw material, work in process,
and finished goods inventories during interim periods.
<PAGE> 7
Note D Long-Term Obligations
------ ---------------------
<TABLE>
<CAPTION> June 30, 1995
-----------------------------------------------------------------------------
Outstanding Current Long-Term
------------------ ---------------- ------------------
<S> <C> <C> <C>
Industrial Revenue
Bonds $ 1,551,000 $ 157,000 $ 1,394,000
Supplemental Benefit
Program 1,171,000 173,000 998,000
------------------- -------------- ------------------
$ 2,722,000 $ 330,000 $ 2,392,000
=================== =============== ==================
</TABLE>
Note E Earnings Per Share
------ ------------------
Earnings per share are based on the weighted average number of
shares outstanding.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
REVENUES
Consolidated revenues for the second quarter and first half of 1995 increased
31.9% and 33.4%, respectively, as compared to the same periods in 1994. Sales
increased in the second quarter and first half of 1995 by 26.2% and 27.6% in
the Heat Transfer Group and 10.0% and 6.8% in the Electronic Components Group.
Sales of the Motion Technologies Group, which includes Harowe Servo Controls,
Inc. ("HSC" ) in 1995, increased by 62.3% and 68.3%, respectively, as compared
to the second quarter and first six months of the prior year.
Bookings of customer orders in the second quarter and first half were $24.1
million and $46.4 million, respectively, up 47.4% and 43.1% over bookings in
the same periods last year. The Company's consolidated backlog of firm orders
at June 30, 1995 was $28.6 million, up 47.1% from $19.4 million on June 30,
1994. The backlog at June 30, 1995 includes $6.8 million for HSC, which is up
36.0% since HSC was acquired on July 1, 1994.
Investment income declined by 37.8% and 36.1% in the second quarter and first
half of 1995, respectively, reflecting the decline in average investment assets
primarily as a result of the sale of various bonds to fund the purchase of HSC.
COST OF PRODUCTS SOLD
The gross profit percentage declined in the second quarter of 1995 by
2% and in the first half by 1.5%, primarily reflecting higher manufacturing
costs in the Heat Transfer Group and, to a lesser degree, in the Electronic
Components Group.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses, as a percentage of sales, declined from
24.1% in the second quarter last year to 21.9% this year and from 24.5% in the
first half of 1994 to 22.2% this year, reflecting successful efforts to hold
the growth of overhead costs at levels below the growth in sales.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development increased in the second quarter and first half
of 1995 by 37.9% and 48.2%, respectively, which is consistent with the
Company's continued commitment to the design of new products and improvements
of existing products.
<PAGE> 9
NET EARNINGS
Net earnings increased 33.4% in the second quarter of 1995 and 42.3% in the
first half as compared to the comparable periods in 1994, which is primarily
attributable to the increased level of sales discussed above.
FINANCIAL POSITION
The Company's liquidity is primarily generated from operations. In addition,
the Company has utilized its $10 million short-term line of credit from time to
time in amounts not exceeding $2,000,000 at any time during the six months
ended June 30, 1995. Comparative information on the Company's liquidity
position follows ($000 omitted):
<TABLE>
<CAPTION>
1995 1994
June December
------- --------
<S> <C>
Net working capital $ 14,959 $13,322
Current ratio 2.5 2.2
Cash, cash equivalents
and marketable securities $ 2,556 $ 3,841
For the six months ended
-----------------------------
1995 1994
June June
---- ----
Cash flow from operations $ 612 $ 928
Capital expenditures $ 2,087 $ 925
</TABLE>
Over the past twelve months, the Company's portfolio of investments in
municipal bonds has declined as the proceeds realized from payment at maturity
or from sales of such investments have been applied to the final payment for
the acquisition of HSC and to the financing of the Company's receivables,
inventory, property, plant, and equipment, and research and product
development. The use of these funds has been consistent with the Company's
announced growth strategy. Continued success of that strategy will further
reduce the Company's investment portfolio and, in time, may require the Company
to seek long-term debt financing from banks or other lenders and/or additional
equity financing. As the Company's financing requirements become more clearly
defined, the Company will begin evaluating financing alternatives and will
re-assess its present dividend policy in order to determine whether either some
or all of the Company's cash currently used to pay dividends could be better
utilized towards the improvement of shareholder value when applied to fund
the Company's growth strategy.
<PAGE> 10
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Components of Consolidated Statement of Earnings
Expressed as a Percentage of Revenues
-------------------------------------------------
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
--------------------- ---------------------
1995 1994 1995 1994
JUNE JUNE JUNE JUNE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues 100.0 100.0 100.0 100.0
Costs and Expenses
Cost of products sold 68.2 66.0 67.7 66.0
Selling and administrative 21.9 23.9 22.1 24.4
Research and product development 1.3 1.3 1.4 1.3
Interest and debt expense 0.3 0.3 0.3 0.4
---------- ---------- ---------- ----------
91.7 91.5 91.5 92.1
---------- ---------- ---------- ----------
Earnings before Income Taxes 8.3 8.5 8.5 7.9
Federal and State Income Taxes 2.8 3.1 3.0 2.8
Net Earnings 5.5 5.4 5.5 5.1
========== ========== =========== ==========
Federal and State Income Taxes
as a percentage of earnings
before income taxes 33.8 36.0 35.4 35.8
========== ========== =========== ==========
</TABLE>
<PAGE> 11
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
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.
AMERICAN PRECISION INDUSTRIES INC.
/s/ John M. Murray
---------------------------------------
John M. Murray
Vice President Finance and Treasurer
/s/ Thomas M. Huebsch
---------------------------------------
Thomas M. Huebsch
Chief Accounting Officer
August 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000005657
<NAME> AMERICAN PRECISION INDUSTRIES INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 222,000
<SECURITIES> 2,334,000
<RECEIVABLES> 12,176,000
<ALLOWANCES> 280,000
<INVENTORY> 9,041,000
<CURRENT-ASSETS> 24,758,000
<PP&E> 28,049,000
<DEPRECIATION> 17,069,000
<TOTAL-ASSETS> 44,527,000
<CURRENT-LIABILITIES> 9,799,000
<BONDS> 0
<COMMON> 4,965,000
0
0
<OTHER-SE> 27,291,000
<TOTAL-LIABILITY-AND-EQUITY> 44,527,000
<SALES> 20,294,000
<TOTAL-REVENUES> 20,360,000
<CGS> 13,884,000
<TOTAL-COSTS> 18,665,000
<OTHER-EXPENSES> 4,722,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,000
<INCOME-PRETAX> 1,695,000
<INCOME-TAX> 573,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,122,000
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
