<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 28, 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 1-5601
AMERICAN PRECISION INDUSTRIES INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 16-1284388
- ------------------------------- ----------------
(State or other jurisdiction 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 1, 1996 7,205,856
<PAGE> 2
AMERICAN PRECISION INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
------------------------------------ -------------------------------------
1996 1995 1996 1995
JUNE JUNE JUNE JUNE
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
NET SALES $ 31,432,000 $ 20,294,000 $ 53,379,000 $ 39,516,000
INVESTMENT INCOME 110,000 66,000 184,000 133,000
----------------- ----------------- ----------------- ------------------
REVENUES 31,542,000 20,360,000 53,563,000 39,649,000
----------------- ----------------- ----------------- ------------------
COSTS AND EXPENSES
Cost of products sold 21,330,000 13,884,000 35,990,000 26,852,000
Selling and administrative 6,883,000 4,453,000 11,632,000 8,760,000
Research and product development 449,000 269,000 781,000 572,000
Interest and debt expense 382,000 59,000 522,000 117,000
----------------- ----------------- ----------------- ------------------
29,044,000 18,665,000 48,925,000 36,301,000
----------------- ----------------- ----------------- ------------------
EARNINGS BEFORE INCOME TAXES 2,498,000 1,695,000 4,638,000 3,348,000
FEDERAL AND STATE INCOME TAXES 924,000 573,000 1,666,000 1,184,000
----------------- ----------------- ----------------- ------------------
NET EARNINGS $ 1,574,000 $ 1,122,000 $ 2,972,000 $ 2,164,000
================= ================= ================= ==================
NET EARNINGS PER SHARE $0.22 $0.16 $0.42 $0.31
================= ================= ================= ==================
DIVIDENDS DECLARED PER SHARE $0.0650 $0.0650 $0.130 $0.1275
================= ================= ================= ==================
AVERAGE SHARES OUTSTANDING 7,179,000 7,069,000 7,161,000 7,066,000
================= ================= ================= ==================
</TABLE>
<PAGE> 3
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
JUNE DECEMBER
----------------------- -----------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 817,000 $ 2,486,000
Accounts receivable less allowance for 18,821,000 12,691,000
doubtful accounts of $452,000 and $264,000
Marketable securities 250,000 3,493,000
Inventories 17,283,000 10,589,000
Prepaid expenses 1,244,000 967,000
Deferred income tax benefit 1,403,000 1,389,000
Prepaid income taxes 517,000 --
----------------------- -----------------------
TOTAL CURRENT ASSETS 40,335,000 31,615,000
----------------------- -----------------------
INVESTMENTS 5,738,000 6,277,000
OTHER ASSETS
Cost in excess of net assets acquired 4,485,000 2,153,000
Prepaid pension cost 2,140,000 2,140,000
Net cash value of life insurance 2,516,000 2,222,000
Other 725,000 1,115,000
----------------------- -----------------------
9,866,000 7,630,000
----------------------- -----------------------
PROPERTY, PLANT AND EQUIPMENT
Land 665,000 211,000
Buildings and improvements 10,237,000 6,183,000
Machinery, equipment and furniture 29,764,000 22,265,000
Construction in process 2,347,000 1,450,000
----------------------- -----------------------
43,013,000 30,109,000
Less accumulated depreciation 19,317,000 17,840,000
----------------------- -----------------------
NET PROPERTY, PLANT AND EQUIPMENT 23,696,000 12,269,000
----------------------- -----------------------
$ 79,635,000 $ 57,791,000
======================= =======================
</TABLE>
<PAGE> 4
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
JUNE DECEMBER
----------------------- -----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Short-term borrowings $ 675,000 $ 2,602,000
Accounts payable 8,857,000 5,136,000
Accrued compensation and payroll taxes 4,447,000 3,566,000
Other accrued expenses 2,374,000 757,000
Dividends payable 468,000 463,000
Current portion of long-term obligations 679,000 628,000
----------------------- -----------------------
TOTAL CURRENT LIABILITIES 17,500,000 13,152,000
----------------------- -----------------------
DEFERRED INCOME TAXES 1,251,000 1,251,000
OTHER NONCURRENT LIABILITIES 340,000 413,000
LONG-TERM OBLIGATIONS, LESS CURRENT PORTION 23,528,000 8,628,000
SHAREHOLDERS' EQUITY
Common stock, par value $.66 2/3 a share:
Authorized - 10,000,000 shares
Issued - 7,575,664 and 7,502,000 shares 5,050,000 5,001,000
Additional paid-in capital 10,069,000 9,532,000
Retained earnings 24,735,000 22,629,000
Net unrealized gain on marketable securities
and investments -- 23,000
----------------------- -----------------------
39,854,000 37,185,000
Less cost of 374,262 treasury shares 2,838,000 2,838,000
----------------------- -----------------------
TOTAL SHAREHOLDERS' EQUITY 37,016,000 34,347,000
----------------------- -----------------------
$ 79,635,000 $ 57,791,000
======================= =======================
</TABLE>
<PAGE> 5
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------------------------
1996 1995
JUNE JUNE
-------------------- --------------------
Cash Flows from Operating Activities
<S> <C> <C>
Net Income $ 2,972,000 $ 2,164,000
Adjustments to reconcile net income to cash
and cash equivalents provided by operating activities:
Depreciation and amortization 1,779,000 1,362,000
Gain on sale of investments and fixed assets (16,000) (4,000)
Increase in supplemental benefit program 49,000 67,000
Recognition of pension income under FASB #87 -- (155,000)
Stock compensation programs 322,000 --
Change in various allowance accounts 201,000 (59,000)
Treasury stock issued as bonus -- 24,000
(Increase) Decrease in:
Accounts receivable (1,345,000) (1,529,000)
Inventories (2,675,000) (235,000)
Prepaid expenses (127,000) (8,000)
Prepaid income taxes (590,000) --
Net cash value of life insurance (294,000) (351,000)
Other assets, net 202,000 (303,000)
Increase (Decrease) in:
Accounts payable 1,959,000 (94,000)
Accrued expenses 34,000 (192,000)
Federal and state income taxes -- 21,000
Other noncurrent liabilities (396,000) (96,000)
-------------------- --------------------
Net cash provided by Operating Activities 2,075,000 612,000
-------------------- --------------------
Cash Flows from Investing Activities
Purchases of investments and marketable securities (60,000) --
Investment in Ketema and Gettys, net of cash acquired (17,292,000)
Additions to property, plant and equipment (2,872,000) (2,087,000)
Proceeds from investments and sale of fixed assets 3,846,000 1,420,000
-------------------- --------------------
Net cash (used) by Investing Activities (16,378,000) (667,000)
-------------------- --------------------
Cash Flows from Financing Activities
Exercise of stock options 586,000 22,000
Payment of long-term obligations, including current maturities (313,000) (183,000)
Dividends paid (928,000) (883,000)
Increase in long-term borrowings 15,216,000 --
Repayment of short-term borrowings (1,927,000) (815,000)
-------------------- --------------------
Net cash provided (used) by Financing Activities 12,634,000 (1,859,000)
-------------------- --------------------
Net Decrease in Cash and Cash Equivalents (1,669,000) (1,914,000)
Cash and Cash Equivalents at Beginning of Year 2,486,000 2,136,000
==================== ====================
Cash and Cash Equivalents at End of Period $ 817,000 $ 222,000
==================== ====================
</TABLE>
<PAGE> 6
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Second Quarter Ended June 28, 1996
------------------------------------------
Note A Consolidated Financial Statements
- ------ ---------------------------------
The Consolidated Balance Sheet as of June 28, 1996, and the
Consolidated Statement of Earnings, and the Consolidated
Statement of Cash Flows for the periods ended June 28, 1996 and
June 30, 1995 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 28, 1996 and for all periods presented have been
made. The Consolidated Balance Sheet as of June 28, 1996 includes
the assets, liabilities, and resulting goodwill of API Ketema
Inc. ("Ketema") and API Gettys Inc. ("Gettys") acquired as of
April 1, 1996 and April 29, 1996, respectively. The Consolidated
Statement of Earnings and Cash Flows for the period ended June
28, 1996 also includes the results of Ketema and Gettys since the
dates 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 29, 1995 Annual Report
to Shareholders.
NOTE B Inventories
- ------ -----------
It is not practical to determine raw material, work in process,
and finished goods inventories during interim periods.
<PAGE> 7
Note C Long-Term Obligations
- ------ ---------------------
<TABLE>
<CAPTION>
June 28, 1996
---------------------------------------------------------
Outstanding Current Long-Term
------------- ---------------- ----------------
=S> <C> <C> <C>
Industrial Revenue $ 7,886,000 $ 500,000 $ 7,386,000
Bonds
Supplemental Benefit 1,121,000 179,000 942,000
Program
Revolving Credit Debt 15,200,000 -- 15,200,000
------------- ---------------- ----------------
$ 24,207,000 $ 679,000 $ 23,528,000
============= ================ ================
</TABLE>
Note D Earnings Per Share
- ------ ------------------
Earnings per share are based on the weighted average number of
shares outstanding.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
REVENUES
Consolidated revenues for the second quarter and six months of 1996 increased
54.9% and 35.1%, respectively, as compared to the same periods of the preceding
year. Sales within the Heat Transfer segment increased 68.3% and 43.7%,
respectively, over the comparable quarter and six months of 1995. The Company
attributes this increase to higher sales volume of extended surface heat
transfer equipment as well as a general increase in sales of other products to
new and existing customers. The Motion Technologies segment sales increased
61.9% and 40.6%, respectively, over the comparable quarter and six months of
1995. This increase is due to a combination of increased sales of
electromagnetic clutches and brakes to new and existing customers, continued
increase in market share of products offered by Harowe Servo Controls Inc.,
partially offset by a decline in sales in the power supply, drives, and
controller product line. The second quarter's results for both the Heat Transfer
and Motion Technologies segments were also favorably impacted by sales and
earnings from Ketema and Gettys which were acquired by the Company as of April
1, 1996 and April 29, 1996, respectively. Sales within the Electronic Components
segment for the second quarter of 1996 increased 2.4% over the second quarter of
1995, while sales for the six months remained relatively consistent over the
comparable period in 1995. This increase is due to sales of surface mounted
products to new customers offset by a decrease in the selling price of
axial-leaded products.
Bookings of customer orders in the second quarter and first half of 1996 were
$30.5 million and $55.9 million, respectively, up 26.5% and 20.5% over bookings
in the same periods last year. The Company's consolidated backlog of firm orders
at June 28, 1996 was $39.0 million, up 36.5% from $28.6 million on June 30,
1995. The backlog at June 28, 1996 includes $8.9 million for Ketema and Gettys.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses, expressed as a percentage of net sales,
declined slightly for the second quarter and six months of 1996 as compared with
the comparable periods in 1995. The dollar increase is due primarily to
increases in sales commissions and provisions made under the Company's incentive
compensation program.
<PAGE> 9
INTEREST AND DEBT EXPENSE
The increase in interest and debt expense is due to the combination of the
industrial revenue bond financing obtained at the end of 1995 for the
construction of the new Air Technologies facility as well as debt incurred for
the acquisition of Ketema and Gettys.
RESEARCH AND PRODUCT DEVELOPMENT
The increase in research and product development in the second quarter and first
half of 1996 of 66.9% and 36.5%, respectively, reflects the additional activity
of Gettys acquired as of April 29, 1996, as well as the Company's commitment to
the continued improvement of existing products and the design of new products.
NET EARNINGS
Net earnings increased 40.3% in the second quarter of 1996 and 37.3% in the
first half as compared to similar periods in 1995, which is primarily due to the
increased level of sales discussed above, offset by higher interest and debt
expense.
<PAGE> 10
FINANCIAL POSITION
On March 29, 1996, the Company concluded a Credit Agreement with Marine Midland
Bank which provides a Revolving Credit facility of $20,000,000. The Revolving
Credit matures on March 29, 1999, at which time the Company may convert the
amount outstanding under the Revolving Credit to a term loan payable over a four
year term. The interest rate on the Revolving Credit as of June 28, 1996, under
the LIBOR Rate Option in the Credit Agreement, was 6.12%.
On April 1, 1996, the Company borrowed $12,700,000 under the Credit Agreement in
connection with the Ketema acquisition and borrowed an additional $4,000,000 on
April 19, 1996 relating to the Gettys acquisition.
Relative to the Ketema acquisition, the Company concluded a $6,000,000 15-year
bond financing with the Grand Prairie Industrial Development Authority on August
7, 1996. Substantially all the proceeds from this financing will be applied to
reduce the outstanding debt under the Revolving Credit prior to September 1,
1996 at which time the Revolving Credit facility will be reduced from
$20,000,000 to $16,000,000.
Concurrent with the closing of the aforementioned Credit Agreement, the Company
reduced its short-term line of credit with Marine Midland Bank from $10 million
to $5 million. The Company has utilized this 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 28, 1996.
Comparative information on the Company's liquidity position follows ($000
omitted):
<TABLE>
<CAPTION>
1996 1995
June June
-------------------- --------------------
<S> <C> <C>
Net working capital $22,835 $ 14,959
Current ratio 2.3 2.5
Cash, cash equivalents
and marketable securities $ 1,067 $ 2,556*
</TABLE>
<TABLE>
<CAPTION>
For the six months ended
--------------------------------------------
1996 1995
June June
-------------------- --------------------
<S> <C> <C>
Cash flow from operations $ 2,075 $ 612
Capital expenditures $ 2,872 $ 2,087
<FN>
* Including funds held in escrow for the acquisition of certain assets of
Gettys.
</TABLE>
Investments reflected in the Company's balance sheet at June 28, 1996 and
December 29, 1995 represent the proceeds of a bond financing concluded on
December 22, 1995 for the construction of the new Airtech Division facility.
<PAGE> 11
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Components of Consolidated Statement of Earnings
Expressed as a Percentage of Revenues
------------------------------------------------
<TABLE>
<CAPTION>
Second Quarter Ended
--------------------
1996 1995
June June
----- -----
<S> <C> <C>
Revenues 100.0 100.0
----- -----
Costs and Expenses
Cost of products sold 67.6 68.2
Selling and administrative 21.8 21.9
Research and product development 1.4 1.3
Interest and debt expense 1.2 0.3
----- -----
92.0 91.7
----- -----
Earnings before Income Taxes 8.0 8.3
Federal and State Income Taxes 2.9 2.8
----- -----
Net Earnings 5.1 5.5
===== =====
Federal and State Income Taxes
as a percentage of Earnings
Before Income Taxes 37.0 33.8
===== =====
</TABLE>
<PAGE> 12
PART II
OTHER INFORMATION
-----------------
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K reporting the acquisition of certain assets of
Gettys Corporation and Gettys Property Corporation by the
Company was filed on May 3, 1996 and another Form 8-K
reporting the acquisition of certain assets of Ketema, Inc.
by the Company was filed on April 15, 1996.
<PAGE> 13
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 13, 1996
<PAGE> 14
EXHIBIT INDEX
-------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000005657
<NAME> AMERICAN PRECISION INDUSTRIES INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> JUN-28-1996
<CASH> 817,000
<SECURITIES> 250,000
<RECEIVABLES> 18,821,000
<ALLOWANCES> 452,000
<INVENTORY> 17,283,000
<CURRENT-ASSETS> 40,335,000
<PP&E> 43,013,000
<DEPRECIATION> 19,317,000
<TOTAL-ASSETS> 79,635,000
<CURRENT-LIABILITIES> 17,500,000
<BONDS> 0
<COMMON> 5,050,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 31,966,000
<SALES> 53,379,000
<TOTAL-REVENUES> 53,563,000
<CGS> 35,990,000
<TOTAL-COSTS> 48,925,000
<OTHER-EXPENSES> 12,913,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522,000
<INCOME-PRETAX> 4,638,000
<INCOME-TAX> 1,666,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,972,000
<EPS-PRIMARY> .42
<EPS-DILUTED> 0
</TABLE>
