<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 April 4, 1997
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 May 8, 1997 7,363,700
<PAGE> 2
AMERICAN PRECISION INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
---------------------------------------
1997 1996
March March
------------- -------------
<S> <C> <C>
NET SALES $ 35,843,000 $ 21,948,000
INVESTMENT INCOME 28,000 74,000
------------- -------------
REVENUES 35,871,000 22,022,000
------------- -------------
COSTS AND EXPENSES
Cost of products sold 24,518,000 14,568,000
Selling and administrative 7,347,000 4,859,000
Research and product development 703,000 314,000
Interest and debt expense 458,000 140,000
------------- -------------
33,026,000 19,881,000
------------- -------------
EARNINGS BEFORE INCOME TAXES 2,845,000 2,141,000
FEDERAL AND STATE INCOME TAXES 960,000 742,000
------------- -------------
NET EARNINGS $ 1,885,000 $ 1,399,000
============= =============
NET EARNINGS PER SHARE $0.26 $0.20
============= =============
AVERAGE SHARES OUTSTANDING 7,316,000 7,142,000
============= =============
</TABLE>
<PAGE> 3
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
March December
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,329,000 $ 2,412,000
Accounts receivable less allowance for doubtful
accounts of $752,000 and $487,000 22,302,000 17,912,000
Inventories 22,685,000 17,431,000
Prepaid expenses 1,476,000 1,137,000
Deferred income tax benefit 2,094,000 2,094,000
------------ ------------
TOTAL CURRENT ASSETS 49,886,000 40,986,000
INVESTMENTS 3,021,000 3,279,000
OTHER ASSETS
Cost in excess of net assets acquired 6,072,000 4,472,000
Prepaid pension cost 2,099,000 2,104,000
Net cash value of life insurance 2,659,000 2,655,000
Other 1,161,000 1,310,000
------------ ------------
11,991,000 10,541,000
PROPERTY, PLANT AND EQUIPMENT
Land 665,000 665,000
Buildings and improvements 14,157,000 13,549,000
Machinery, equipment and furniture 40,108,000 32,589,000
Construction In process 3,191,000 1,502,000
------------ ------------
58,121,000 48,305,000
Less accumulated depreciation 22,034,000 21,099,000
------------ ------------
NET PROPERTY, PLANT AND EQUIPMENT 36,087,000 27,206,000
$ 100,985,000 $ 82,012,000
============== =============
</TABLE>
<PAGE> 4
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
March December
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 2,960,000 $ -
Accounts payable 11,273,000 8,511,000
Accrued compensation and payroll taxes 6,043,000 5,167,000
Other accrued expenses 4,978,000 1,341,000
Dividends payable - 471,000
Current portion of long-term obligations 1,296,000 1,292,000
Federal and state income taxes 746,000 12,000
------------ -----------
TOTAL CURRENT LIABILITIES 27,296,000 16,794,000
------------ -----------
DEFERRED INCOME TAXES 1,417,000 1,417,000
OTHER NONCURRENT LIABILITIES 679,000 1,046,000
LONG-TERM OBLIGATIONS, LESS CURRENT PORTION 28,908,000 22,211,000
SHAREHOLDERS' EQUITY
Common stock, par value $.66 2/3 a share:
Authorized - 10,000,000 shares
Issued- 7,697,454 and 7,666,011 shares 5,131,000 5,110,000
Additional paid-in capital 11,270,000 11,065,000
Retained earnings 29,210,000 27,281,000
Equity adjustment from foreign currency translation (14,000) -
Minimum pension liability, net of tax (74,000) (74,000)
------------ -----------
45,523,000 43,382,000
Less cost of 374,262 treasury shares 2,838,000 2,838,000
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 42,685,000 40,544,000
------------ -----------
$ 100,985,000 $ 82,012,000
=============== ============
</TABLE>
<PAGE> 5
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
1997 1996
March March
-------------- -------------
Cash Flows from Operating Activities
<S> <C> <C>
Net Income $ 1,885,000 $ 1,399,000
Adjustments to reconcile net income to cash and
cash equivalents provided by operating activities:
Depreciation and amortization 1,333,000 781,000
Write-off of fixed assets 42,000 --
(Loss) Gain on sale of investments/fixed assets (80,000) 10,000
Increase in supplemental benefit program 24,000 32,000
Recognition of pension expense under SFAS 87 4,000 --
Stock compensation programs (105,000) 298,000
Change in various allowance accounts (2,077,000) 2,000
(Increase) Decrease in:
Accounts receivable (2,606,000) (1,486,000)
Inventories 2,402,000 (1,459,000)
Prepaid expenses (290,000) 60,000
Deferred income taxes (33,000) (25,000)
Net cash value of life insurance (4,000) --
Other assets, net 143,000 (130,000)
Increase (Decrease) in:
Accounts payable 788,000 1,669,000
Accrued expenses (2,626,000) (751,000)
Federal and state income taxes 766,000 662,000
Other noncurrent liabilities (262,000) (333,000)
----------- -----------
Net cash (used) provided by Operating Activities (696,000) 729,000
----------- -----------
Cash Flows from Investing Activities
Investment in API Schmidt-Bretten, net of cash &
cash equivalents acquired (5,927,000) --
Purchases of investments and marketable securities -- (20,000)
Additions to property, plant and equipment (2,421,000) (1,228,000)
Proceeds from investments and marketable securities 257,000 1,641,000
Proceeds from sale of fixed assets 97,000 --
----------- -----------
Net cash (used) provided by Investing Activities (7,994,000) 393,000
----------- -----------
Cash Flows from Financing Activities
Exercise of stock options 226,000 205,000
Payments of long-term obligations, including current maturities (327,000) (155,000)
Dividends paid (471,000) (463,000)
Increase in long-term debt 7,005,000 --
Increase (decrease) in short-term Borrowings 1,191,000 (1,832,000)
----------- -----------
Net cash provided (used) by Financing Activities 7,624,000 (2,245,000)
----------- -----------
Effect of Exchange Rate Changes (17,000) --
----------- -----------
Net (Decrease) in Cash and Cash Equivalents (1,083,000) (1,123,000)
Cash and Cash Equivalents at Beginning of Year 2,412,000 2,486,000
----------- -----------
Cash and Cash Equivalents at End of Period $ 1,329,000 $ 1,363,000
=========== ===========
</TABLE>
<PAGE> 6
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
First Quarter Ended April 4, 1997
Note A Consolidated Financial Statements
- ------ ---------------------------------
The Consolidated Balance Sheet as of April 4, 1997, and the
Consolidated Statement of Earnings and the Consolidated Statement
of Cash Flows for the periods ended April 4, 1997 and March 29,
1996 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
April 4, 1997 and for all periods presented have been made. The
Consolidated Balance Sheet as of April 4, 1997 includes the
assets, liabilities and resulting goodwill of API Schmidt-Bretten
acquired as of January 31, 1997. The Consolidated Statements of
Earnings and Cash Flows for the period ended April 4, 1997 also
include the results of API Schmidt-Bretten 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 1996 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
- ------ ---------------------
Long Term Obligations
<TABLE>
<CAPTION>
April 4,1997
-------------------------------------------
Outstanding Current Long-Term
----------- ----------- -----------
<S> <C> <C> <C>
Industrial Revenue Bonds $13,126,000 $ 1,115,000 $12,011,000
Supplemental Benefit Program 1,078,000 181,000 897,000
Revolving Credit Debt 16,000,000 -- 16,000,000
----------- ----------- -----------
$30,204,000 $ 1,296,000 $28,908,000
=========== =========== ===========
</TABLE>
Note D Earnings Per Share
- ------ ------------------
Net earnings per common share are based on the weighted average
number of common shares outstanding during the respective
periods. The effect of common stock equivalents, consisting of
stock options, on net earnings per common share is not material.
During the first quarter of 1997, Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," was
issued. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. SFAS No.
128 replaces the presentation of primary earnings per share
required by Accounting Principles Board Opinion No. 15, "Earnings
Per Share," with a presentation of basic earnings per share. It
also requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the
numerator and denominator in the basic earnings per share
computation to the numerator and denominator in the diluted
earnings per share computation.
Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in
earnings.
<PAGE> 8
SFAS No. 128 is effective for financial statements for periods
ending after December 15, 1997, including interim periods.
Earlier application is not permitted, however, after the
effective date all prior period earnings per share data presented
shall be restated to conform with the provisions of SFAS No. 128.
The Company has considered the potential impact of SFAS No. 128
and has concluded that the effect of adoption will not have a
material effect on earnings per share.
Note E Foreign Currency Translation
- ------ ----------------------------
The financial statements of subsidiaries outside the United
States are measured using the local currency as the functional
currency. Assets, including goodwill, and liabilities are
translated at the rates of exchange at the balance sheet date.
The resultant translation adjustments are included in equity
adjustment from foreign currency translation, a separate
component of stockholder's equity. Income and expense items are
translated at average monthly rates of exchange. Gains and losses
from foreign currency transactions are included in net earnings.
From time to time, the Company becomes exposed to exchange rate
risk when its U.S. and non-U.S. subsidiaries enter into
transactions in currencies other than their functional currency.
The Company enters into foreign exchange contracts, where
possible, to hedge this risk.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
REVENUES
Consolidated revenues in the first quarter of 1997 increased 62.9% as compared
with the previous year. Sales within the Heat Transfer segment increased 96.6%
as compared to the prior year. The favorable impact of the acquisitions of API
Ketema and API Schmidt-Bretten GmbH, which occurred on April 1, 1996 and January
31, 1997, respectively, represents the greatest contributing factor to the sales
performance of this business segment. The increase in sales for API Heat
Transfer was also favorably impacted by the volume of orders booked for aluminum
air-to-air heat exchangers. The water cooled shell and tube business, while
providing sales growth in the first quarter, has begun to feel the effects of a
softening in market demand as evidenced by lower levels of orders booked. The
Electronic Components segment sales increased 12.5%, due principally to
increased volume of standard axial leaded products, offset by higher volume but
lower sales prices in surface mounted products due to competitive pricing
pressures. The increase in sales of the Motion Technologies segment of 39.1% is
related to the positive effects achieved as a result of the acquisition of API
Gettys, which occurred on April 19, 1996. Increased sales of stepper drives and
resolvers also contributed to the increase in this segment's sales.
Bookings of customer orders in the first quarter of 1997 were $40.3 million, up
59.0% as compared to the same period of the prior year. The Company's
consolidated backlog of firm orders at April 4, 1997 was $47.3 million, up 42.6%
from $33.2 million in 1996. The backlog at April 4, 1997 includes $12.2 million
for API Ketema, API Gettys, and API Schmidt-Bretten GmbH.
COST OF PRODUCTS SOLD
The cost of products sold represents 68.2% in the first quarter of 1997 as
compared to 66.2% for the same period of 1996. This increase is due to higher
manufacturing overhead spending and subcontracting and direct labor costs within
the Heat Transfer segment of the business.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses, expressed as a percentage of net sales,
declined to 20.5% in the first quarter of 1997 from 22.1% in the first quarter
of 1996. This trend reflects management's continued efforts to grow the business
while maintaining general overhead costs at a minimum. The dollar increase is
due to a combination of the following: (1) the acquisitions of API Ketema, API
Gettys, and API Schmidt-Bretten GmbH; (2) higher commission expense due to the
increased sales; (3) slightly higher provisions recorded under the Company's
incentive compensation program; and (4) other administrative expenses associated
with directly growing certain business units.
<PAGE> 10
RESEARCH AND PRODUCT DEVELOPMENT
The increase in research and product development reflects the acquisitions of
API Ketema, API Gettys, and API Schmidt-Bretten GmbH combined with increased
research and development activities in the Motion Technologies segment.
INTEREST AND DEBT EXPENSE
The increase in interest and debt expense is due to the following transactions:
(1) industrial revenue bond financing in connection with the purchase of API
Ketema in April 1996; and (2) increased usage of the revolving line of credit
primarily associated with the acquisitions of API Ketema, API Gettys, and API
Schmidt-Bretten GmbH.
NET EARNINGS
Net earnings increased 34.7% as compared to the prior year. This increase is the
direct result of the positive impact achieved from the successful integration of
the acquistions of API Ketema, API Gettys Inc., and API Schmidt-Bretten GmbH,
offset by higher interest costs related to these acquistions.
FINANCIAL POSITION
On January 31, 1997, the Company borrowed $6,111,000 under its Revolving Credit
facility and a subsidiary issued a note payable for $1,791,000, which is due and
payable on December 31, 1997, to fund the acquisition of API Schmidt-Bretten
GmbH. Payment of this note, which is subject to interest at a per annum rate of
5.5% commencing as of January 31, 1997, is guaranteed by the Company.
The Company has available short-term lines of credit which it utilizes from time
to time to fund current operations. Future acquisitions may require the Company
to arrange additional credit facilities with lenders or procure financing
through issuance of debt or equity securities.
<PAGE> 11
Comparative information on the Company's liquidity position follows ($000
omitted):
<TABLE>
<CAPTION>
1997 1996
March March
-------------- -------------
<S> <C> <C>
Net working capital $22,590 $19,089
Current ratio 1.8 2.5
Cash and cash equivalents $1,329 $1,209
<CAPTION>
For the three months ended
------------------------------
1997 1996
March March
-------------- -------------
Cash flow from operations $(696) $729
Capital expenditures $2,421 $1,228
</TABLE>
The decrease in cash flow from operations is primarily due to increased accounts
receivable combined with the payment of bonuses under the Company's incentive
compensation program.
The increase in capital expenditures reflects the Company's continued investment
in new machinery and equipment in both the Heat Transfer and Motion Technology
segments.
<PAGE> 12
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Components of Consolidated Statement of Earnings
Expressed as a Percentage of Revenues
Components of Consolidated Statement of Earnings
Expressed as a Percentage of Revenues
------------------------------------------------
First Quarter Ended
-------------------
1997 1996
March March
--------- ---------
Revenues 100.0 100.0
----- -----
Costs and Expenses
Cost of products sold 68.4 66.2
Selling and administrative 20.5 22.1
Research and product development 2.0 1.4
Interest and debt expense 1.3 0.6
----- -----
92.2 90.3
----- -----
Earnings before Income Taxes 7.8 9.7
Federal and State Income Taxes 2.7 3.4
----- -----
Net Earnings 5.1 6.3
===== =====
Federal and State Income Taxes
as a percentage of Earnings
Before Income Taxes 33.7 34.7
===== =====
<PAGE> 13
PART II
-------
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
- ------- -----------------
None
Item 2. Changes in Securities
- ------- ---------------------
None
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
None
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
See the index to exhibits immediately preceding the
exhibits filed with this report.
(b) Reports on Form 8-K
The Company filed a Form 8-K on February 14, 1997
reporting the acquisition of Schmidt-Bretten GmbH on
January 31, 1997.
<PAGE> 14
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
* * * * * *
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
--------------------------------------------------
LITIGATION REFORM ACT OF 1995
-----------------------------
Certain matters discussed in this Report, with exception of historical
information, include forward-looking statements, which are made in
reliance on the "safe harbor" protections provided under the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve certain assumptions, risks and uncertainties that
could cause actual results to differ materially from those included in
or contemplated by the statements. Some important factors that could
cause results to differ from forward-looking statements are the risks
and uncertainties associated with general economic cycles in either
North America or Europe, significant changes in competitive factors,
the timing of various corporate acquisitions and programs, and the
other risks and uncertainties discussed in all documents filed by the
Company with the Securities and Exchange Commission. The Company
expressly disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date hereof.
* * * * * *
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/ Bruce McH. Kirchner
- ------------------------------
Bruce McH. Kirchner
Chief Financial Officer
/s/ Thomas M. Huebsch
- ------------------------------
Thomas M. Huebsch
Chief Accounting Officer
May 16, 1997
<PAGE> 15
EXHIBIT INDEX
-------------
11 Computation of net income per share.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
AMERICAN PRECISION INDUSTRIES
COMPUTATION OF NET INCOME PER SHARE
(Shares and dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
For the three months ended
---------------------------
March March
1997 1996
------------ -----------
<C> <C> <C>
1. Net income $ 1,885 $ 1,399
========= =========
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
2. Weighted-average number of
common shares outstanding 7,316 7,142
========= =========
3. Incremental shares:
Dilutive common stock options 376 234
--------- ---------
4. Total 7,692 7,376
========= =========
5. Primary net income per common share
(1 divided by 2) $ 0.26* $ 0.20*
========= =========
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
6. Weighted-average number of
common shares outstanding 7,316 7,142
========= =========
7. Incremental shares:
Dilutive common stock options 376 250
--------- ---------
8. Total 7,692 7,392
========= =========
9. Fully diluted net income per common
share (1 divided by 6) $ 0.26* $ 0.20*
========= =========
<FN>
* Net income per common share outstanding was used in the designated
calculations since the dilutive effect of common stock options was not
material.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000005657
<NAME> AMERICAN PRECISION INDUSTRIES INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-START> JAN-02-1997
<PERIOD-END> APR-04-1997
<CASH> 1,329,000
<SECURITIES> 0
<RECEIVABLES> 22,302,000
<ALLOWANCES> 752,000
<INVENTORY> 22,685,000
<CURRENT-ASSETS> 49,886,000
<PP&E> 58,121,000
<DEPRECIATION> 22,034,000
<TOTAL-ASSETS> 100,985,000
<CURRENT-LIABILITIES> 27,296,000
<BONDS> 0
<COMMON> 5,131,000
0
0
<OTHER-SE> 37,554,000
<TOTAL-LIABILITY-AND-EQUITY> 100,985,000
<SALES> 35,843,000
<TOTAL-REVENUES> 35,871,000
<CGS> 24,518,000
<TOTAL-COSTS> 33,026,000
<OTHER-EXPENSES> 8,050,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 458,000
<INCOME-PRETAX> 2,845,000
<INCOME-TAX> 960,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,885,000
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
</TABLE>
