<PAGE> 1
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 March 31, 1995 Commission File No. 1-7744
PACIFIC SCIENTIFIC COMPANY
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-0744970
- ------------------------------ -----------------------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
620 Newport Center Drive, Suite 700, Newport Beach, California 92660
- -------------------------------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 720-1714
Former address:
- -------------------------------------------------------------------
(Former name, address and 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 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 .
---- ---------
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
10,983,356 shares
1
<PAGE> 2
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1995 AND DECEMBER 30, 1994
(In $000's)
March 31 December 30
1995 1994
-------- -----------
ASSETS
- ------
CURRENT ASSETS:
Cash................................................. $ 7,146 $ 1,655
Short-term investments............................... 1,436 1,758
Trade receivables (less allowance for doubtful
accounts of $1,519 and $929, respectively)........ 50,404 43,435
Inventories, lower of cost (principally average)
or market:
Finished goods................................... 4,283 4,263
Work-in-process.................................. 10,843 11,866
Raw materials and purchased parts................ 24,334 21,151
Deferred income taxes................................ 4,085 4,205
Other current assets................................. 2,623 2,100
-------- --------
Total Current Assets......................... 105,154 90,433
-------- --------
PROPERTY AT COST:
Land and buildings................................... 13,086 13,187
Machinery and equipment.............................. 73,867 70,630
-------- --------
Total........................................ 86,953 83,817
Less accumulated depreciation........................ 54,922 52,649
-------- --------
Net Property................................ 32,031 31,168
-------- --------
RESTRICTED CASH........................................ 6,135 6,071
NOTE RECEIVABLE........................................ 711 711
PROEPRTY HELD FOR SALE................................. 3,300 3,300
NOTES, PATENTS AND OTHER............................... 8,466 8,272
EXCESS OF COST OVER NET ASSETS ACQUIRED................ 40,753 32,714
-------- --------
TOTAL........................................ $196,550 $172,669
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term borrowings................................ $ 4,000 $ 3,700
Accounts payable..................................... 16,977 15,826
Accrued employee compensation and benefits........... 5,542 5,717
Note payable for business acquisition................ 2,610 0
Other current liabilities............................ 13,294 9,904
-------- --------
Total Current Liabilities.................... 42,423 35,147
-------- --------
BANK BORROWING......................................... 30,399 19,400
CONVERTIBLE SUBORDINATED DEBENTURES.................... 17,281 17,286
INDUSTRIAL DEVELOPMENT BONDS........................... 5,625 5,625
OTHER LONG TERM LIABILITIES............................ 5,915 4,073
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value........................... 10,983 10,939
Additional paid-in-capital........................... 1,029 727
Currency Translation Adjustment...................... 1,209 0
Retained earnings.................................... 81,686 79,472
-------- --------
Total Stockholders' Equity................... 94,907 91,138
-------- --------
TOTAL........................................ $196,550 $172,669
======== ========
The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
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PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND APRIL 1, 1994
(In $000's)
<TABLE>
<CAPTION>
Quarter Ended
-------------------
March 31 April 1
1995 1994
-------- --------
<S> <C> <C>
SALES:
Electrical Equipment.................................. $48,955 $37,230
Safety Equipment...................................... 15,889 14,355
------- -------
64,844 51,585
COST OF SALES.......................................... 45,009 35,640
------- -------
Gross Profit.......................................... 19,835 15,945
------- -------
EXPENSES:
Selling and marketing................................. 6,611 5,374
General and administrative............................ 5,910 5,156
Research and development.............................. 2,908 2,124
------- -------
Total Expenses....................................... 15,429 12,654
------- -------
OPERATING INCOME....................................... 4,406 3,291
INTEREST & OTHER (Net)................................. (336) (546)
------- -------
INCOME BEFORE INCOME TAX PROVISION..................... 4,070 2,745
INCOME TAX PROVISION................................... (1,526) (1,071)
------- -------
NET INCOME............................................. $ 2,544 $ 1,674
======= =======
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Primary............................................... $ 0.22 $ 0.15
======= =======
Fully Diluted......................................... $ 0.22 $ 0.15
======= =======
Cash dividends per common share....................... $ 0.03 $ 0.015
======= =======
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of this statement.
3
<PAGE> 4
PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND APRIL 1, 1994
(IN $000's)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
March 31 April 1
1995 1994
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 2,544 $ 1,674
Depreciation and amortization..................... 2,782 2,817
Deferred income taxes............................. 120 0
Decreased in accrued employee benefit plan
liabilities...................................... (159) (124)
Loss on disposal of property...................... (7) 25
Effect on cash of changes in assets and
liabilities, net of the effects of business
acquisitions:
Trade receivables............................... (4,454) 3,377
Inventories..................................... 1,094 (2,753)
Other current assets............................ (476) 84
Accounts payable................................ 204 (1,746)
Accrued employee compensation and benefits...... (175) 7
Other current liabilities....................... 6,178 887
-------- -------
Net cash flows from operating activities........ 7,651 4,248
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for business acquisitions, net of cash
acquired......................................... (11,625) 0
Purchases of property.............................. (2,779) (2,337)
Decrease in short-term investments................. 322 1
Decrease (increase) in restricted cash and
other assets..................................... (597) 1
-------- -------
Net cash flows from investing activities......... (14,679) (2,335)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of convertible subordinated debentures... (5) 0
Repayments of short-term debt..................... 300 (500)
Issuance of long-term debt........................ 10,999 2,000
Cash dividends on common stock.................... (330) (163)
Issuances of common stock......................... 346 315
-------- -------
Net cash flows from financing activities......... 11,310 1,652
-------- -------
EFECT OF EXCHANGE RATE CHANGES..................... 1,209 0
-------- -------
NET INCREASE IN CASH............................... 5,491 3,565
CASH, Beginning of Period.......................... 1,655 2,081
-------- -------
CASH, End of Period................................ $ 7,146 $ 5,646
======== =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
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PACIFIC SCIENTIFIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) INTERIM ACCOUNTING POLICY
Interim periods are viewed as an integral part of the annual period.
Accordingly, the results for each of the interim periods presented are based on
the accounting principles and practices followed by the Company in the
preparation of its annual financial statements. Certain costs and expenses are
assigned to the periods presented so that the interim periods bear a reasonable
portion of the anticipated annual amount. Included among these are estimated
amounts for inventory adjustments, performance bonuses, employee fringe
benefits and income taxes. The financial statements presented, in the opinion
of management, include all adjustments necessary to present fairly the
Company's interim financial statements.
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2) EARNINGS PER SHARE
Earnings per common and common equivalent share were computed by dividing
net income by the weighted average number of common and common equivalent
shares outstanding during each period. Common equivalent shares consist of
the estimated number of shares issuable upon exercise of dilutive stock
options reduced by the number of common shares assumed to have been
reacquired with the proceeds from exercise of the options.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------
March 31, April 1,
1995 1994
------------ -----------
<S> <C> <C>
PRIMARY
-------
AVERAGE NUMBER OF
SHARES OUTSTANDING 10,983,356 10,815,494
AVERAGE NUMBER OF
SHARES ASSUMING EXERCISE
OF DILUTIVE EMPLOYEE
STOCK OPTIONS 503,644 315,404
---------- ----------
COMMON AND COMMON
EQUIVALENT SHARES 11,487,000 11,130,898
========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------
March 31, April 1,
1995 1994
------------ -----------
<S> <C> <C>
FULLY DILUTED
-------------
AVERAGE NUMBER OF
SHARES OUTSTANDING 10,983,356 10,815,494
AVERAGE NUMBER OF
SHARES ASSUMING EXERCISE
OF DILUTIVE EMPLOYEE
STOCK OPTIONS 508,644 282,506
----------- ----------
COMMON AND COMMON
EQUIVALENT SHARES 11,492,000 11,098,000*
========== ==========
</TABLE>
* The computation of fully diluted shares for the three month period
ended April 1, 1994 is anti dilutive and accordingly was not
included in the computation of earnings per share.
NOTE: The Company has outstanding convertible subordinated
debentures. Inclusion of these debentures would be
antidilutive and, accordingly, they have been
excluded from the above totals.
3) RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 amounts to
conform to the 1995 financial statement presentation.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
QUARTERLY COMPARISON (FIRST QUARTER 1995 VS. FIRST QUARTER 1994)
Net sales were $68,844,000 in the first quarter of 1995, a 26% or $13,259,000
increase in sales over the same period in the prior year. First quarter sales
in the Electrical Equipment segment were up 31% or $11,725,000. The
acquisitions of Royce Thompson Ltd. in the second quarter of 1994 and Eduard
Bautz GmbH in the first quarter of 1995 accounted for $4,836,000 of the
increase in sales of Electrical Equipment. The sales from the Safety Equipment
segment increased by 11% or $1,534,000.
Gross margin on sales decreased 0.3% in the current quarter from the prior year
reflecting increases in reserves for obsolescence and startup expenses in the
Solium subsidiary. Selling, general and administrative expenses declined
nearly 1% in 1995 reflecting the economics of scale associated with the higher
sales base. Research and development expenses increased 0.4% reflecting
continued emphasis on new product development.
Income before taxes increased 48% primarily due to a 26% increase in sales and
control of operating expenses. Acquisitions made in 1994 and 1995 accounted
for $1,179,000 of the increase in pre-tax income.
The estimated annual effective tax rate for 1995 is 37.5% as compared to the
prior year's effective rate of 39% for the first quarter.
Net income of $0.22 per share in 1995 compares to $0.15 per share in the first
quarter of 1994. The 1994 earnings reflect the 2 for 1 stock split effective
December 16, 1994. In addition to the stock split, the remaining increase in
the number of shares is accounted for by the exercise of employee stock options
and the dilutive effect of options outstanding at stock prices below the
current market price.
Orders for Electrical Equipment during the first quarter totaled $52,140,000,
up 34% as compared to the same period in the prior year. Orders for Safety
Equipment during the first quarter totaled $14,863,000, down 6% as compared to
the same quarter of the prior year. The decline in Safety Equipment orders is
due to both delays and reductions in procurement by the military and the
aerospace industry. Orders for spare parts from the worldwide airline industry
increased compared to the prior year.
The backlog of orders at March 31, 1995 and April 1, 1994 was $92,754,000 and
94,872,000, respectively.
The Company's inertia reels, used as personnel restraints on military aircraft,
which were temporarily suspended in 1991, have not yet been requalified by the
U.S. Air Force and relisted on the "Qualified Product List" (QPL). However,
certain military agencies are again purchasing the Company's inertia reels by
waiving the QPL requirement. Although the Company continues to believe, after
more than thirty years experience, that its inertia reels are designed and
manufactured to meet all known requirements, it is not possible to project when
the U.S. Air Force will approve our products for the QPL.
7
<PAGE> 8
FINANCIAL POSITION AND LIQUIDITY
Debt less cash, restricted cash, and short-term investments was $42,588,000 at
the end of the first three months in 1995 as compared to the $37,158,000 in the
same period of the prior year. This increase of $5,430,000 resulted
principally from the acquisition of Eduard Bautz, GmbH at the beginning of 1995
net of operational cash flow.
Operations provided cash of $7,651,000 in the first three months of 1995 as
compared to $4,248,000 in the same period of the prior year.
The increase in cash flow from operations is primarily due to:
<TABLE>
<S> <C>
Increase in trade receivables $(7,831,000)
Increase in other current liabilities 5,291,000
Decrease in inventories 3,847,000
Increase in accounts payable 1,950,000
Other 146,000
-----------
Increase in Cash Flow from Operating Activities $ 3,403,000
===========
</TABLE>
The Company's working capital was $62,731,000 on March 31, 1995 for a current
ratio of 2.5:1. On April 1, 1994 working capital was $52,825,000.
At the end of the first quarter of 1995, the Company had unused lines of credit
of $23,100,000.
The Company believes that internally generated funds will provide sufficient
capital resources to finance operations, fund planned capital expenditures, pay
interest and dividends on outstanding debt and common stock, and reduce
outstanding debt.
PART II - OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
None
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PACIFIC SCIENTIFIC COMPANY, Registrant
By: /s/ Richard V. Plat
-----------------------------
Richard V. Plat
Executive Vice President
Date: May 12, 1995
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
FINANCIAL STATEMENTS/FORM 10-Q FOR QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR QUARTER ENDED MARCH 31,
1995.
</LEGEND>
<CIK> 0000075608
<NAME> PACIFIC SCIENTIFIC COMPANY
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1994
<PERIOD-START> DEC-31-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 7,146,000
<SECURITIES> 1,436,000
<RECEIVABLES> 51,923,000
<ALLOWANCES> 1,519,000
<INVENTORY> 39,460,000
<CURRENT-ASSETS> 105,154,000
<PP&E> 86,953,000
<DEPRECIATION> 54,922,000
<TOTAL-ASSETS> 196,550,000
<CURRENT-LIABILITIES> 42,423,000
<BONDS> 53,305,000
<COMMON> 10,983,000
0
0
<OTHER-SE> 94,907,000
<TOTAL-LIABILITY-AND-EQUITY> 196,550,000
<SALES> 64,844,000
<TOTAL-REVENUES> 64,844,000
<CGS> 45,009,000
<TOTAL-COSTS> 15,429,000
<OTHER-EXPENSES> 336,000
<LOSS-PROVISION> 608,000
<INTEREST-EXPENSE> 974,000
<INCOME-PRETAX> 4,070,000
<INCOME-TAX> 1,526,000
<INCOME-CONTINUING> 2,544,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,544,000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
