SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No. 0-13829
June 30, 1995
PRECISION STANDARD, INC.
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0985295
(State of Incorporation) (I.R.S. Employer Identification No.)
One Pemco Plaza
1943 50th Street North
Birmingham, Alabama 35212
(Address of Principal Executive Offices)
(205) 591-3009
(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 [ ]
The number of shares outstanding of each of the issuer's classes
of common shares, as of the close of the period covered by this
report:
Class of Securities Outstanding Securities
$.0001 Par Value 12,451,239 shares
Common Shares Outstanding at August 1, 1995
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Current assets:
Accounts receivable, net of
allowance for doubtful accounts $18,100,860 $15,266,539
Inventories 26,576,695 27,713,937
Prepaid expenses and other 1,334,486 814,548
Deferred tax 6,245,783 8,147,544
Total current assets 52,257,824 51,942,568
Property, plant and equipment, at cost:
Leasehold improvements 10,444,421 9,784,364
Machinery and equipment 16,510,040 14,992,089
26,954,461 24,776,453
Less accumulated depreciation (12,002,608) (10,837,428)
Net property and equipment 14,951,853 13,939,025
Other assets:
Intangible assets, net of
accumulated amortization 4,993,931 5,053,837
Related party receivable 269,824 269,824
Deposits and other 982,216 1,004,501
Insurance proceeds receivable 371,930 129,930
U.S. Government request for
equitable adjustment, net 5,612,000 3,510,271
Deferred tax 4,926,250 4,926,250
17,156,151 14,894,613
Total assets $84,365,828 $80,776,206
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term
debt $26,538,757 $13,889,790
Accounts payable and accrued
expenses 24,582,158 20,912,352
Accrued warranty expense 1,323,279 1,518,679
Estimated losses on contracts
in progress 2,046,239 1,345,176
Total current liabilities 54,490,433 37,665,997
Long-term debt, net of current
maturities 1,489,378 14,924,602
Long-term portion of self-insured
workers' compensation reserve 3,341,554 3,642,384
Unfunded accumulated benefit
obligation 7,828,431 7,828,431
Total liabilities 67,149,796 64,061,414
Common stock purchase warrant 4,200,000
Stockholders' equity:
Common stock, $.0001 par value,
300,000,000 shares authorized,
12,787,208 and 12,787,208
shares issued, 12,451,239 and
12,344,291 outstanding at
June 30, 1995 and December 31,
1994, respectively 1,280 1,279
Additional paid-in capital 5,138,620 937,784
Deferred compensation on
restricted shares (131,250) (175,000)
Retained earnings 19,980,415 20,058,166
Translation adjustments 19,908
Minimum pension liability
adjustment (7,234,354) (7,748,850)
17,774,619 13,073,379
Less cost of treasury shares
(337,260 shares) (558,587) (558,587)
Total stockholder's equity 17,216,032 12,514,792
Total liabilities and stock-
holders' equity $84,365,828 $80,776,206
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Three
Months Ended Months Ended
June 30, June 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $42,205,228 $36,255,375
Cost of sales 36,002,124 30,249,106
Gross profit 6,203,104 6,006,269
Selling, general and
administrative expenses (4,828,879) (3,813,669)
Bad debts recovery (expense) (49,311) 15,845
Research and development expense (118,562) (272,714)
Income from operations 1,206,352 1,935,731
Other expense:
Interest expense (849,610) (888,057)
Other, net (164,739) (15,004)
Income before income taxes 192,003 1,032,670
Income tax expense (1,867,610) (77,725)
Net income (loss) $(1,675,607) $ 954,945
Earnings (loss) per common share*:
Primary:
Before extraordinary item $ (.13) $ .06
Extraordinary item
Total $ (.13) $ .06
Fully diluted:
Before extraordinary item $ (.13) $ .06
Extraordinary item
Total $ (.13) $ .06
Weighted average number of common
shares outstanding 12,442,850 16,606,895
<FN>
*See basis of computation in Note 4 to the Consolidated Financial
Statements.
The accompanying notes are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Six Six
Months Ended Months Ended
June 30, June 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $83,351,408 $71,113,579
Cost of sales 69,817,560 61,025,401
Gross profit 13,533,848 10,088,178
Selling, general and
administrative expenses (9,235,996) (7,063,870)
Bad debts recovery (expense) (238,366) 82,892
Research and development expense (335,347) (514,774)
Income from operations 3,724,139 2,592,426
Other expense:
Interest expense (1,629,443) (1,669,904)
Other, net (150,837) (82,357)
Income before income taxes 1,943,859 840,165
Income tax expense (2,021,610) (116,765)
Net income (loss) $ (77,751) $ 723,400
Earnings (loss) per common share*:
Primary:
Before extraordinary item $ (.01) $ .05
Extraordinary item
Total $ (.01) $ .05
Fully diluted:
Before extraordinary item $ (.01) $ .05
Extraordinary item
Total $ (.01) $ .05
Weighted average number of common
shares outstanding 12,393,571 16,630,978
<FN>
*See basis of computation in Note 4 to the Consolidated
Financial Statements.
The accompanying notes are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Six
Months Ended Months Ended
June 30, June 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ (77,751) $ 723,400
Adjustments to reconcile
net income (loss) to net cash
provided from operating
activities:
Depreciation and amortization 1,301,002 1,413,086
Pension cost in excess of
funding 514,496 48,884
Provision for warranty expense 77,000 3,000
Provision for losses on
contracts in progress 1,561,918 978,052
Provision for losses on
receivables 238,366
Recognition of deferred compensation
on restricted shares 43,750
Gain on disposition of equipment (5,500)
Changes in assets and
liabilities:
Accounts receivable (2,933,215) (1,626,649)
Inventories 1,239,910 4,763,459
Prepaid expenses (472,133) (623,587)
Intangible assets (64,645) (266,913)
U.S. Government request for
equitable adjustment, net (2,101,729) (2,143,271)
Deferred taxes 1,901,761
Deposits and other 22,279 (25,780)
Accounts payable and
accrued expenses 3,611,499 2,793,441
Accrued warranty expense (272,400)
Estimated losses on contracts
in progress (882,850) (352,507)
Self-insured workers'
compensation reserve (300,830) (532,792)
Total adjustments 3,478,679 4,428,423
Net cash provided by
operating activities 3,400,928 5,151,823
Cash flows from investing
activities:
Capital expenditures (1,432,144) (1,066,301)
Insurance proceeds receivable (242,000) (204,930)
Proceeds from sale of equipment 5,500
Net cash used in
investing activities $(1,668,644) $(1,271,231)
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
Six Six
Months Ended Months Ended
June 30, June 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from financing
activities:
Proceeds from issuance of
common stock $ 837 $ 3,072
Net repayments
under short-term obligations (23,150) (5,178)
Borrowings under revolving
credit facility 22,100,000 29,200,000
Repayments under revolving
credit facility (20,300,000) (28,000,000)
Principal payments under
long-term obligations (3,306,567) (4,164,539)
Change in cash overdraft (176,120) (798,185)
Net cash used in
financing activities (1,705,000) (3,764,830)
Effect of exchange rate changes
on cash and cash equivalents (27,284)
Net increase in cash
and cash equivalents -0- 115,762
Cash and cash equivalents
beginning of period -0- -0-
Cash and cash equivalents
end of period $ -0- $ 115,762
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 1,497,115 $ 1,218,439
Income taxes 123,950 230,800
Supplemental disclosure of
non-cash investing activities:
Capital lease obligations incurred
for new equipment $ 743,460 $ 127,327
Reclassification of common stock 4,200,000
purchase warrant to additional
paid in capital
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
PRECISION STANDARD, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated interim financial statements included in
this report have been prepared by the Company without audit.
In the opinion of management, all adjustments necessary for
a fair presentation are reflected in the interim financial
statements. Such adjustments are of a normal and recurring
nature. The results of operations for the period ended June
30, 1995 are not necessarily indicative of the operating
results for the full year. The interim financial statements
should be read in conjunction with the audited financial
statements and notes thereto included in the Company's 1994
10-K. Certain reclassifications have been made to the 1994
financial statements included herein to conform with the
presentation used in 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash - Under the Company's cash management system, certain
divisions' and subsidiaries' cash accounts reflect credit
balances to the extent checks written have not been
presented for payment. The Company had a net cumulative
credit balance in the amount of $167,963 at June 30, 1995
and $176,120 at December 31, 1994 which is included in
accounts payable. Such credit balances were classified as
Bank Overdrafts in the Company's 1994 10-K. In subsequent
financial presentations, amounts will be classified as Bank
Overdrafts only to the extent that funds are actually
borrowed from the Company's financial institutions which
equates to the Company having insufficient funds.
Translation of Non-U.S. Currency Amounts - Assets and
liabilities of non-U.S. subsidiaries that operate in a local
currency environment are translated to U.S. dollars at the
exchange rate for the end of the accounting period. Income
and expenses are translated at average rates of exchange.
Translation adjustments are accumulated in a separate
component of stockholders' equity.
3. INVENTORIES
<TABLE>
Inventories consist of the following:
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Work in-process $26,085,456 $26,018,727
Finished goods 3,465,302 3,012,119
Raw materials and supplies 5,545,252 5,038,428
Total $35,096,010 $34,069,274
Less progress payments (8,514,990) (6,194,184)
Less allowance for estimated
losses on contracts in
progress (4,325) (161,153)
$26,576,695 $27,713,937
</TABLE>
4. EARNINGS PER COMMON SHARE
The computation of the loss per common share in 1995 is
based on the weighted average number of outstanding common
shares. The inclusion of stock options and stock warrants
would be antidilutive. The computation of the earnings per
common share in 1994 is based on the weighted average number
of outstanding common shares assuming the exercise of stock
options and stock warrants. The stock warrants were granted
to the Company's primary lender in connection with the
Senior Subordinated Loan and allow for the purchase of
4,215,753 shares of the Company's common stock at an
exercise price of approximately $.24 per share.
5. NOTES PAYABLE
<TABLE>
June 30, December 31,
1995 1994
<S> <C> <C>
Short term debt consists of
the following:
Term Credit facility $ 8,000,000 $ 8,000,000
Senior Subordinated Loan 10,000,000 5,000,000
Revolving Credit facility 8,000,000
Note due to individual, bears 447,173
interest at 10% collateralized
by a security interest in
certain equipment
Other obligations,
collateralized 538,757 442,617
by security interests
in certain equipment
$26,538,757 $13,889,790
Long term debt consists of
the following:
Term Credit facility $ 3,000,000
Senior Subordinated Loan 5,000,000
Revolving Credit facility 6,200,000
Note due to individual, bears 447,173
interest at 10% collateralized
by a security interest in
certain equipment
Other obligations, 1,042,205 724,602
collateralized by security
interests in certain
equipment
$ 1,489,378 $14,924,602
</TABLE>
On June 30, 1995, the Company paid $1.0 million of the $2.0
million installment scheduled under the Company's Term
Credit facility. The remaining $1.0 million was paid on
July 11, 1995. This delay can be attributed in part to
payment processing problems of the Company's largest
customer, which resulted in the Company being paid outside
of its contractual terms. In addition, the Company's cash
resources continue to be strained by the cost effect of late
delivery of government furnished materials. See also, Note
6 - Contingencies.
Under the restated credit agreement, the Company's
nonpayment of the entire quarterly installment on June 30,
1995 constituted an event of default which may not have been
cured by the subsequent payment of the balance of that
installment. As a result, the Company's primary lender may
claim the right to demand repayment of all obligations owed
to it by the Company. While the Company does not believe
that any such claim is likely and believes that it would
have meritorious defenses to such a claim if made, the
Company has elected to classify as current that $5.0 million
of the Company's Senior Subordinated Loan due under the
restated credit agreement on September 30, 1996.
At June 30, 1995, the Company was in violation of both its
leverage ratio and fixed charge coverage ratio requirements
related to its Term Credit facility and Senior Subordinated
Credit facility for the second quarter of 1995. The Company
intends to seek appropriate financial covenant waivers from
its primary lender, although no assurance can be given that
such waivers will be obtained.
The Term Credit facility provides for a final payment of
$7.0 million on September 30, 1995 but the Company may, if
not in default, extend the maturity date of both the Term
Credit facility and the Revolving Credit facility by the
payment of the extension fee specified in the restated
credit agreement. This extension of the Term Credit
facility would allow the Company to repay the balance in two
installments of $2.0 million each on September 30, 1995 and
December 31, 1995 and a final payment of $3.0 million on
March 31, 1996. The Company will seek to exercise its right
to extend the maturity date of the Term Credit facility in
conjunction with its covenant waiver discussions referred to
above.
Likewise, the Revolving Credit facility has a maturity date
of September 30, 1995 but can be extended to March 31, 1996,
pursuant to the payment of the extension fee specified in
the agreement. The Company will seek to exercise its right
to extend the maturity date of the Revolving Credit facility
in conjunction with its covenant waiver discussions referred
to above.
The Senior Subordinated Loan is repayable in two principal
installments of $5.0 million each, due in September 1995 and
1996. While the Company is actively seeking to restructure
its entire indebtedness, there can be no assurance that it
will have the resources available to meet the $5.0 million
obligation due at September 30, 1995.
At December 31, 1994, the Company was in violation of both
its leverage ratio and fixed charge coverage ratio
requirements related to its Term Credit facility for the
third and fourth quarters of 1994. On April 14, 1995, the
Company's primary lender issued waivers regarding these
covenants and modified certain financial covenants for the
first six months of 1995. As one of the conditions to
granting the waivers and modifying the covenants, the
Company's primary lender required that the Company rescind
its call of a warrant that was granted to the primary lender
in connection with the Company's Senior Subordinated Loan.
The warrant gives the Company's primary lender the right to
purchase 4,215,753 shares of the Company's common stock at
an exercise price of approximately $.24 per share. During
the second quarter, the Company decided to defer
indefinitely any further negotiations for the purchase of
the warrant and, accordingly, has reclassified the warrant
from liabilities to paid in capital.
In addition, the primary lender issued a Sixth Amendment to
the Amended and Restated Credit Agreement (the Amendment).
The Amendment states that eighty percent of any proceeds
received from the Request for Equitable Adjustment (Note 6)
must first be applied to the noncurrent portion of the
Senior Subordinated Loan and Term Credit facility and, upon
liquidation of those loans, be applied to the Revolving
Credit facility.
6. CONTINGENCIES
The Company recorded revenue and a long-term unbilled
receivable of $3.5 million in 1994 and $1.9 million in the
second quarter of 1995, in anticipation of settlement of a
contract request for equitable adjustment (REA) involving
the 1990 KC-135 Programmed Depot Maintenance (PDM) contract.
Of the $1.9 million booked in the second quarter of 1995,
$0.8 million relates to ships redelivered prior to 1995,
$0.8 million relates to ships redelivered in the first
quarter of 1995 and $0.3 million relates to ships
redelivered in the second quarter of 1995. The Company
increased its receivable in the second quarter of 1995 for
ships redelivered in prior periods because of increased
confidence in the likelihood that its claim would be
realized.
The REA, which has been certified by the Company and
submitted to the U.S. Government, is for equitable
adjustment of the cost effect of late delivery of
government-furnished materials (GFM) under the 1990 KC-135
contract. The disruption in scheduled work flow which
occurred as a result of the late delivery of GFM began in
the second quarter of 1993 and continues to impact ships in
work at June 30, 1995. The Company has obtained an opinion
from outside legal counsel specializing in government
procurement law and from independent management consultants
that there is a reasonable basis to support the REA. The
Company feels strongly that the evidence in support of the
REA is objective and verifiable, and the costs associated
with the REA are reasonable in view of the work performed
and are not the result of any deficiencies in the Company's
performance. In the REA, the Company has considered the
cost impact on ships redelivered to the government through
December 31, 1994, and a projection of the cost impact on
all ships under the 1990 KC-135 contract which are to be
redelivered subsequent to December 31, 1994. The total REA
that has been submitted to the U.S. Government reflects
approximately $9.8 million for ships redelivered to the
government through June 30, 1995 and the Company has
recorded a receivable of $5.4 million. The Company has
recorded reserves equal to $4.4 million due to uncertainties
in the process of receiving equitable adjustment related to
such claims. Should the Company not ultimately receive an
equitable adjustment from the claim, which event the Company
deems unlikely, the Company would realize a pre-tax
reduction of revenue of approximately $5.4 million. The
Company anticipates holding further negotiations with the
U.S. Government for settlement of the REA during the third
quarter of 1995 but at this time, cannot reasonably estimate
the length of time before realization of the REA.
Additionally, the Company recorded $0.2 million of revenue
and a long-term unbilled receivable in the second quarter of
1995, in anticipation of the submittal and settlement of a
contract request for equitable adjustment involving the late
delivery of GFM on the 1994 KC-135 PDM contract. The
Company anticipates submitting an REA for the 1994 contract
during the fourth quarter of 1995. Should the Company not
ultimately receive an equitable adjustment from the REA,
which event the Company deems unlikely, the Company would
realize a pre-tax reduction of revenue of $0.2 million.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto
included herein.
RESULTS OF OPERATIONS
Three months ended June 30, 1995
Versus three months ended June 30, 1994
Revenues for the second quarter of 1995 increased 16%, from $36.3
million for 1994 to $42.2 million for 1995. Government sales
decreased 5% in the second quarter, from $25.6 million in 1994 to
$24.2 million in 1995. Commercial sales increased 68% in the
second quarter, from $10.7 million in 1994 to $18.0 million in
1995. The Company's mix of business between government and
commercial customers shifted from 30% commercial and 70%
government in the second quarter of 1994 to 43% commercial and
57% government in the second quarter of 1995.
The decrease in government sales is due primarily to a reduction
in revenue on the KC-135 aircraft program. Revenue declined on
the KC-135 program due to a decrease in the amount of
reimbursable material billed in the second quarter of 1995 as
compared to 1994 and due to a significant amount of over and
above work orders negotiated, approved and recorded in the second
quarter of 1994 which related to aircraft redelivered in the
first quarter of 1994.
The Company recorded slightly less revenue in the second quarter
of 1995 as compared to the second quarter of 1994 for the
redelivery of KC-135 Programmed Depot Maintenance (PDM) aircraft.
The Company redelivered thirteen complete KC-135 PDM aircraft in
the second quarter of 1994 versus twelve complete aircraft and
three partially completed aircraft in 1995. The Company recorded
partial redeliveries for the three aircraft in 1995 due to work
stoppage which occurred as a result of the lack of government
furnished material. Eight of the twelve complete redeliveries in
1995 were under the new, seven year KC-135 contract which was
awarded in August of 1994. Due to a restructuring of the work
package on the 1994 KC-135 contract, the Company has thus far
seen a decline in revenue for each aircraft redelivered under the
new KC-135 contract.
The Company recorded revenue in both the second quarter of 1995
and 1994 in anticipation of settlement of a Request for Equitable
Adjustment (REA) for the cost effect of late delivery of
government furnished material (GFM) associated with the 1990 KC-
135 contract. The Company recorded $2.1 million in the second
quarter of 1994 versus $1.9 million in 1995. Of the $1.9 million
booked in the second quarter of 1995, $0.8 million relates to
ships redelivered prior to 1995, $0.8 million relates to ships
redelivered in the first quarter of 1995 and $0.3 million relates
to ships redelivered with the second quarter of 1995. The
Company increased its receivable in the second quarter of 1995
for ships redelivered in prior periods because of increased
confidence in the likelihood that its claim would be realized.
The REA, which has been certified by the Company and submitted to
the U.S. Government, considers the cost impact on ships
redelivered to the government through December 31, 1994 and
includes a projection of the cost impact on all ships under the
1990 KC-135 contract to be redelivered subsequent to December 31,
1994. The Company has obtained an opinion from outside legal
counsel specializing in government procurement law and from
independent management consultants that there is a reasonable
basis to support the REA. The Company feels strongly that the
evidence in support of the REA is objective and verifiable, and
the costs associated with the REA are reasonable in view of the
work performed and are not the result of any deficiencies in the
Company's performance. The total REA that has been submitted to
the U.S. Government reflects approximately $9.8 million for ships
redelivered to the Government through June 30, 1995 and the
Company has recorded a receivable of $5.4 million. The Company
has recorded reserves, due to the uncertainties inherent in the
process of receiving the full amount of the REA, equal to $4.4
million. Should the Company not ultimately receive an equitable
adjustment from the U.S. Government, which event the Company
deems unlikely, the Company would realize a pre-tax reduction of
revenue of $5.4 million. The Company anticipates holding further
negotiations with the U.S. Government for settlement of the REA
during the third quarter of 1995 but at this time, cannot
reasonably estimate the length of time before realization of the
REA.
Additionally, the Company recorded $0.2 million of revenue and a
long-term unbilled receivable in the second quarter of 1995, in
anticipation of the submittal and settlement of a contract
request for equitable adjustment involving late delivery of GFM
on the 1994 KC-135 PDM contract. The Company anticipates
submitting a REA for the 1994 contract during the fourth quarter
of 1995. Should the Company not ultimately receive an equitable
adjustment from the REA, which event the Company deems unlikely,
the Company would realize a pre-tax reduction of revenue of $0.2
million.
The increase in the Company's commercial sales is due to (a) an
increase in the number of 727 cargo conversion redeliveries (four
redeliveries in 1995 versus no redeliveries in 1994), (b) an
increase in aircraft maintenance and modification services, other
than cargo conversion aircraft, which includes revenue recognized
under a contract with a major airline, (c) an increase in revenue
generated at the Company's aircraft maintenance facility in
Copenhagen, Denmark, which began operations in May 1994 and (d)
the recognition of revenue, on a percentage of completion basis,
for the first ship converted under the Company's B-727 "Combi"
conversion program. The Company redelivered one 737 cargo
conversion aircraft in the second quarter of both 1995 and 1994.
The ratio of cost of sales ($36.0 million in 1995; $30.2 million
in 1994) to net sales ($42.2 million in 1995; $36.3 million in
1994) increased from 83% in 1994 to 85% in 1995. The resultant
decrease in gross profit is attributable primarily to the
reduction of revenue and the increase of cost on the KC-135
program. Eight of the twelve complete PDM redeliveries in the
second quarter were under the new 1994 KC-135 contract. Due to a
restructuring of the work package on the 1994 KC-135, the Company
has thus far seen a decline in revenue for each of the eight
aircraft redelivered. Additionally, the Company was impacted by
the learning curve inherent with the start up of a new contract.
Further, the Company incurred additional losses associated with
the continuing start-up of the aircraft maintenance facility in
Copenhagen, Denmark which bore the initial ship learning expense
on its first-ever 727 cargo conversion. The Company also
incurred initial ship learning expense on the launch of its B-727
"Combi" conversion project at its Dothan facility. Additionally,
the Company recorded significantly higher pension expense in the
first quarter of 1995 compared to 1994. Pension expense
increased due to higher interest cost on the projected benefit
obligation and due to lower than anticipated returns on plan
assets in 1994. Partially offsetting these unfavorable impacts
on gross profit was an increase in efficiency on the Company's
737 cargo conversion program.
Selling, general and administrative expense increased from $3.8
million in the second quarter of 1994 to $4.8 million in the
second quarter of 1995 and increased as a percentage of sales
from 10.5% in 1994 to 11.4% in 1995. Selling, general and
administrative expenses increased due to the operation of the
aircraft maintenance facility in Copenhagen, Denmark which began
in May of 1994, the establishment of a sales and marketing office
in Denver, Colorado and increased royalty fees due to increased
sales, associated with the aircraft cargo handling systems
product line.
Interest expense decreased slightly from $0.9 million in the
second quarter of 1994 to $0.8 million in the second quarter of
1995. Total consolidated indebtedness was $28.0 million at June
30, 1995 versus $34.5 million at June 30, 1994. However, the
effective average interest rate in the second quarter of 1995 on
the Term Credit facility and the Revolving Credit facility was
9.33% versus 7.12% in the second quarter of 1994. Additionally,
the average outstanding balance on the Revolving Credit facility
was approximately 7.5% greater in the second quarter of 1995 as
compared to 1994.
The Company booked $1.9 million of state and federal income tax
expense in the second quarter of 1995 and reduced its current
deferred tax asset by $1.9 million. The change in the deferred
tax asset resulted primarily from a reduction of percentage of
completion based profits in work in process and the usage of net
operating loss carryforwards.
Six months ended June 30, 1995
Versus six months ended June 30, 1994
Revenues for the first six months of 1995 increased 17%, from
$71.1 million for 1994 to $83.4 million for 1995. Government
sales increased 2% in the first six months, from $49.2 million in
1994 to $50.5 million in 1995. Commercial sales increased 50% in
the first six months, from $21.9 million in 1994 to $32.9 million
in 1995. The Company's mix of business between government and
commercial customers shifted from 31% commercial and 69%
government in the first six months of 1994 to 39% commercial and
61% government in the first six months of 1995.
The increase in government sales in 1995 was due primarily to an
increase in revenue on the space vehicle and support system
product line due to the disruption of business in 1994, caused by
the January, 1994 earthquake in California. Additionally, the
Company recorded more revenue in the first six months of 1995 as
compared to 1994 for the redelivery of KC-135 Programmed Depot
Maintenance (PDM) aircraft. The Company redelivered twenty-six
complete KC-135 PDM aircraft and four partially completed
aircraft in 1995 versus twenty-one complete aircraft and seven
partially completed aircraft in 1994. The Company recorded
partial redeliveries due to work stoppage which occurred as a
result of the lack of government furnished material. Eight of
the twenty-six complete redeliveries in 1995 were under the new,
seven year KC-135 contract which was awarded in August of 1994.
Due to a restructuring of the work package on the 1994 KC-135
contract, the Company has thus far seen a decline in revenue for
each aircraft redelivered under the new KC-135 contract.
Partially offsetting the above increase in government sales was a
reduction of revenue due to the completion of the Company's
contract at the government-owned, company operated facility at
Bergstrom U.S. Air Force Base and a reduction in revenue recorded
under the Company's C-130 contract.
The Company recorded revenue in both the first six months of 1995
and 1994 in anticipation of settlement of a Request for Equitable
Adjustment (REA) for the cost effect of late delivery of
government furnished material (GFM) associated with the 1990 KC-
135 contract. The Company recorded $2.1 million in the first six
months of 1994 versus $1.9 million in 1995. Of the $1.9 million
booked in 1995, $0.8 million relates to ships redelivered in
prior to 1995. The Company increased its receivable in 1995 for
ships redelivered in prior periods because of increased
confidence in the likelihood that its claim would be realized.
The REA, which has been certified by the Company and submitted to
the U.S. Government, considers the cost impact on ships
redelivered to the government through December 31, 1994 and
includes a projection of the cost impact on all ships under the
1990 KC-135 contract to be redelivered subsequent to December 31,
1994. The Company has obtained an opinion from outside legal
counsel specializing in government procurement law and from
independent management consultants that there is a reasonable
basis to support the REA. The Company feels strongly that the
evidence in support of the REA is objective and verifiable, and
the costs associated with the REA are reasonable in view of the
work performed and are not the result of any deficiencies in the
Company's performance. The total REA that has been submitted to
the U.S. Government reflects approximately $9.8 million for ships
redelivered to the government through June 30, 1995 and the
Company has recorded a receivable of $5.4 million. The Company
has recorded reserves, due to the uncertainties inherent in the
process of receiving the full amount of the REA, equal to $4.4
million. Should the Company not ultimately receive an equitable
adjustment from the U.S. Government, which event the Company
deems unlikely, the Company would realize a pre-tax reduction of
revenue of $5.4 million. The Company anticipates holding further
negotiations with the U.S. Government for settlement of the REA
during the third quarter of 1995 but at this time, cannot
reasonably estimate the length of time before realization of the
REA.
Additionally, the Company recorded $0.2 million of revenue and a
long-term unbilled receivable in 1995, in anticipation of the
submittal and settlement of a contract request for equitable
adjustment involving late delivery of GFM on the 1994 KC-135 PDM
contract. The Company anticipates submitting an REA for the 1994
contract during the fourth quarter of 1995. Should the Company
not ultimately receive an equitable adjustment from the REA,
which event the Company deems unlikely, the Company would realize
a pre-tax reduction of revenue of $0.2 million.
The increase in the Company's commercial sales is due to (a) an
increase in the number of 727 cargo conversion redeliveries (six
redeliveries in 1995 versus no redeliveries in 1994), (b) an
increase in aircraft maintenance and modification services, other
than cargo conversion aircraft, which includes revenue recognized
under a contract with a major airline, (c) an increase in sales
from the Company's aircraft cargo handling systems product line,
(d) revenue generated at the Company's aircraft maintenance
facility in Copenhagen, Denmark, which began operations in May of
1994 and (e) the recognition of revenue, on a percentage of
completion basis, for the first ship converted under the
Company's B-727 "Combi" conversion program. The above increases
in commercial sales are partially offset by a reduction in the
number of 737 cargo conversion redeliveries (four redeliveries in
1994 versus three redeliveries in 1995).
The ratio of cost of sales ($69.8 million in 1995; $61.0 million
in 1994) to net sales ($83.4 million in 1995; $71.1 million in
1994) decreased from 86% in 1994 to 84% in 1995. The resultant
increase in gross profits was due primarily to an increase in
efficiency on the Company's 737 cargo conversion program.
Partially offsetting this favorable impact on gross profits are
losses associated with the continuing start-up of the aircraft
maintenance facility in Copenhagen, Denmark which bore the
initial ship learning expense on its first-ever 727 cargo
conversion. The Company also incurred initial ship learning
expense on the launch of its B-727 "Combi" conversion project at
its Dothan facility. Additionally, the Company recorded
significantly higher pension expense in the first six months of
1995 compared to 1994. Pension expense increased due to higher
interest cost on the projected benefit obligation and due to
lower than anticipated returns on plan assets in 1994.
Selling, general and administrative expense increased from $7.1
million in the first six months of 1994 to $9.2 million in the
first six months of 1995 and increased as a percentage of sales
from 9.9% in 1994 to 11.1% in 1995. Selling, general and
administrative expense increased due to the operation of the
aircraft maintenance facility in Copenhagen, Denmark which began
in May of 1994, the establishment of a sales and marketing office
in Denver, Colorado and increased royalty fees due to increased
sales, associated with the aircraft cargo handling systems
product line.
The Company recorded net bad debt expense of $0.2 million in 1995
versus a net bad debt recovery of $0.1 million in 1994. Research
and development expense decreased from $0.5 million in 1994 to
$0.3 million in 1995.
Interest expense decreased slightly from $1.7 million in the
first six months of 1994 to $1.6 million in the first six months
of 1995. Total consolidation indebtedness was $34.5 million at
June 30, 1994 versus $28.0 million at June 30, 1995. However,
the effective average interest rate in the first six months of
1995 on the Term Credit facility and the Revolving Credit
facility was 8.99% versus 6.64% in the first six months of 1994.
Additionally, the average outstanding balance on the Revolving
Credit facility was approximately 4.0% greater in the first six
months of 1995 compared to 1994.
The Company booked $2.0 million of state and federal income tax
expense in 1995 and reduced its current deferred tax asset by
$1.9 million. The change in the deferred tax asset resulted
primarily from a reduction of percentage of completion based
profits in work in process and the usage of net operating loss
carryforwards. The Company's effective tax rate in 1995,
considering book income adjusted for losses incurred at the
Copenhagen, Denmark facility and permanent tax item adjustments,
was approximately 39.8%. The Company recorded $0.1 million of
tax expense in 1994. The Company's effective tax rate in 1994,
considering book income adjusted for losses incurred at the
Copenhagen, Denmark facility and permanent tax item adjustments,
was approximately 9%. The effective tax rate increased
significantly in 1995 due to the $10.5 million reduction of the
Company's deferred tax asset valuation allowance at December 31,
1994. The Company reduced its valuation allowance in 1994 due to
the increase in its firm but unfunded backlog associated with the
follow-on years of its government contracts ($206.5 million at
December 31, 1994; $25.0 million at December 31, 1993), whereby
the realization of certain deferred tax assets became more likely
than not.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 1995, the Company paid $1.0 million of the $2.0
million installment scheduled under the Company's Term Credit
facility. The remaining $1.0 million was paid on July 11, 1995.
This delay can be attributed in part to payment processing
problems of the Company's largest customer, which resulted in the
Company being paid outside of its contractual terms. In
addition, the Company's cash resources continue to be strained by
the cost effect of late delivery of government furnished
materials. See also, Note 6 - Contingencies.
Under the restated credit agreement, the Company's nonpayment of
the entire quarterly installment on June 30, 1995 constituted an
event of default which may not have been cured by the subsequent
payment of the balance of that installment. As a result, the
Company's primary lender may claim the right to demand repayment
of all obligations owed to it by the Company. While the Company
does not believe that any such claim is likely and believes that
it would have meritorious defenses to such a claim if made, the
Company has elected to classify as current that $5.0 million of
the Company's Senior Subordinated Loan due under the restricted
credit agreement on September 30, 1996.
At June 30, 1995, the Company was in violation of both its
leverage ratio and fixed charge coverage ratio requirements
related to its Term Credit facility and Senior Subordinated
Credit facility for the second quarter of 1995. The Company
intends to seek appropriate financial covenant waivers from its
primary lender, although no assurance can be given that such
waivers will be obtained.
The Term Credit facility provides for a final payment of $7.0
million on September 30, 1995 but the Company may, if not in
default, extend the maturity date of both the Term Credit
facility and the Revolving Credit facility by the payment of the
extension fee specified in the restated credit agreement. This
extension of the Term Credit facility would allow the Company to
repay the balance in two installments of $2.0 million each on
September 30, 1995 and December 31, 1995 and a final payment of
$3.0 million on March 31, 1996. The Company will seek to
exercise its right to extend the maturity date of the Term Credit
facility in conjunction with its covenant waiver discussions
referred to above.
Likewise, the Revolving Credit facility has a maturity date of
September 30, 1995 but can be extended to March 31, 1996,
pursuant to the payment of the extension fee specified in the
agreement. The Company will seek to exercise its right to extend
the maturity date of the Revolving Credit facility in conjunction
with its covenant waiver discussions referred to above.
The Senior Subordinated Loan is repayable in two principal
installments of $5.0 million each, due in September 1995 and
1996. While the Company is actively seeking to restructure its
entire indebtedness, there can be no assurance that it will have
the resources available to meet the $5.0 million obligation due
at September 30, 1995.
At December 31, 1994, the Company was in violation of both its
leverage ratio and fixed charge coverage ratio requirements
related to its Term Credit facility for the third and fourth
quarters of 1994. On April 14, 1995, the Company's primary
lender issued waivers regarding these covenants and modified
certain financial covenants for the first six months of 1995. As
one of the conditions to granting the waivers and modifying the
covenants, the Company's primary lender required that the Company
rescind its call of a warrant that was granted to the primary
lender in connection with the Company's Senior Subordinated Loan.
The warrant gives the Company's primary lender the right to
purchase 4,215,753 shares of the Company's common stock at an
exercise price of approximately $.24 per share. During the
second quarter, the Company decided to defer indefinitely any
further negotiations for the purchase of the warrant and,
accordingly, has reclassified the warrant from liabilities to
paid in capital.
In addition, the primary lender issued a Sixth Amendment to the
Amended and Restated Credit Agreement (the Amendment). The
Amendment states that eighty percent of any proceeds received
from the Request for Equitable Adjustment (Note 6) must first be
applied to the noncurrent portion of the Senior Subordinated loan
and Term Credit facility and, upon liquidation of those loans, be
applied to the Revolving Credit facility.
Consolidated indebtedness at June 30, 1995 is $28.0 million
versus $28.8 million at December 31, 1994. The Company paid $3.0
million in the first six months against its Term Credit facility
and utilized $8.0 million of its Revolving Credit facility at
June 30, 1995 versus $6.2 million at December 31, 1994. The
Company also financed various purchases of equipment under
capital lease agreements in the first six months of 1995,
increasing its indebtedness by approximately $0.7 million.
Net working capital decreased $16.5 million in the first six
months of 1995, from $14.3 million at December 31, 1994 to ($2.2)
at June 30, 1995, principally due to the reclassification of the
$8.0 million Revolving Credit facility balance and $5.0 million
of the Senior Subordinated Loan to short term.
Under the Company's cash management system, certain divisions'
and subsidiaries' cash accounts reflect credit balances to the
extent checks written have not been presented for payment. The
Company had a cumulative net credit balance in the amount of
$167,963 at June 30, 1995 and $176,120 at December 31, 1994 which
is included in accounts payable. Such credit balances were
classified as Bank Overdrafts in the Company's 1994 10-K. In
subsequent financial presentations, amounts will be classified as
Bank Overdrafts on the financial statement only to the extent
that funds are actually borrowed from the Company's financial
institutions, which equates to the Company having insufficient
funds.
The following is a discussion of the significant items in the
Company's Consolidated Statement of Cash Flows for the period
ended June 30, 1995 and June 30, 1994.
Pension cost in excess of funding increased in 1995 as compared
to 1994. The Company recorded significantly higher pension
expense in the first six months of 1995 compared to 1994 but
funded its pension obligation for the same amount in both years.
Pension expense increased due to higher interest cost on the
projected benefit obligation and due to lower than anticipated
returns on plan assets in 1994.
A provision of $1.6 million for losses on contracts in process
was recorded for the first 727 conversion contract to be worked
at the Company's Copenhagen aircraft maintenance facility. The
provision was required due to an anticipated higher cost
associated with facility's first aircraft conversions and
unfavorable movements in the kroner/dollar exchange rate. One of
the three aircraft to be worked under this contract was
redelivered to the customer in June of 1995.
Inventory decreased in the first six months of both 1995 and 1994
primarily due to an increase in customer financed progress
payment balances. Accounts receivable and the U.S. Government
REA receivable (see Note 6 - Contingencies) increased in the
first six months of both 1995 and 1994.
The Company booked $2.0 million of state and federal income tax
expense in 1995 and reduced its current deferred tax asset by
$1.9 million. The change in the deferred tax asset resulted
primarily from a reduction of percentage of completion based
profits in work in process and the usage of net operating loss
carryforwards. The Company's effective tax rate in 1995,
considering book income adjusted for losses incurred at the
Copenhagen, Denmark facility and permanent tax item adjustments,
was approximately 39.8%. The Company recorded $0.1 million of
tax expense in 1994. The Company's effective tax rate in 1994,
considering book income adjusted for losses incurred at the
Copenhagen, Denmark facility and permanent tax item adjustments,
was approximately 9%. The effective tax rate increased
significantly in 1995 due to the $10.5 million reduction of the
Company's deferred tax asset valuation allowance at December 31,
1994. The Company reduced its valuation allowance in 1994 due to
the increase in its firm but unfunded backlog associated with the
follow-on years of its government contracts ($206.5 million at
December 31, 1994; $25.0 million at December 31, 1993), whereby
the realization of certain deferred tax assets became more likely
than not.
Accounts payable and accrued expenses increased $3.6 million in
the first six months of 1995 primarily due to an increase in
vendor payables. Accounts payable and accrued expenses increased
$2.8 million in the first six months of 1994 primarily due to an
increase in accrued wages and vendor payables. The fluctuation
in accrued wages is a function of the relationship of the
calendar and the Company's payroll schedule.
The Company increased its insurance proceeds receivable and
recorded income of $0.2 million in the first quarter of 1995 due
to an additional anticipated insurance recovery for damages
incurred during the January, 1994 California earthquake.
The Company utilized $8.0 million of its Revolving Credit
facility at June 30, 1995 and June 30, 1994 versus $6.2 million
at December 31, 1994 and $6.8 million at December 31, 1993. In
the first six months of 1995, the Company used funds of $3.4
million provided from operating activities and $1.8 million
borrowed through the Revolving Credit facility to provide for
$3.0 million in principal payments on the Term Credit facility,
$1.4 million for capital items and $0.3 million for payments on
various capital leases. In the first six months of 1994, the
Company used funds of $5.2 million provided from operating
activities and $1.2 million borrowed through the Revolving Credit
facility to provide for $4.0 million in principal payments on the
Term Credit facility, $1.1 million for capital items and $0.2
million for payments on various capital leases.
BACKLOG
<TABLE>
The following table presents the Company's backlog (in thousands
of dollars) at June 30, 1995 and 1994:
1995 1994
<S> <C> <C>
U.S. Government $ 69,484 $ 84,225
Commercial 38,446 53,213
$107,930 $137,438
</TABLE>
For the period ending June 30, 1995, 64% of the Company's backlog
was for the U.S. Government versus 61% for the period ending June
30, 1994. The backlog for the U.S. Government decreased $14.7
million primarily due to performance of work over the past twelve
months under the Company's HERA contract. The HERA contract is
the Company's largest contract for its space vehicles and support
systems. Commercial backlog decreased $14.8 million due to the
elimination of some assumed option ships related to the Company's
737 cargo conversion program. Approximately $17.0 million of the
commercial backlog at June 30, 1995 (compared to $23.4 million at
June 30, 1994) included above may not be considered as firm as it
includes maintenance and modification work to be performed on
optional aircraft. Approximately $9.2 million of the backlog at
June 30, 1995 (compared to $21.6 million at June 30, 1994)
included above are firm orders that have not yet been funded by
the U.S. Government. Additionally, the Company has approximately
$200 million of firm but unfunded backlog associated with the six
follow-on years of the KC-135 contract and $6.5 million
associated with the final year of the C-130 contract, neither of
which is included in the figures cited above.
While the Company considers its backlog position to be strong,
the Company continues to maintain its fight for market share.
Management believes that recent trends of declining air passenger
and cargo traffic volume have bottomed out and that the industry
is poised for positive growth in both passenger and cargo volume.
As cargo volume rises, and excess capacity is utilized, cargo
carriers will look for additional capacity which should have
positive implications for the Company's primary commercial
businesses. Recent negative financial results by commercial
carriers in the air passenger market are causing many carriers to
re-evaluate their in-house maintenance philosophy. Accordingly,
management believes that an opportunity exists to increase the
Company's share of this business.
The anticipated general decline in defense spending by the U.S.
Government is expected to have mixed implications for the
Company. Reduced fleet size and fewer new aircraft development
projects will be offset by the need to keep older aircraft in
operation. Nevertheless, the competitive nature of the Company's
industry requires constant evaluation of production efficiency
and pricing in both the government and commercial markets. The
Company knows of no current or foreseeable trend which will
diminish its market share for any of its principal products or
services.
FACILITIES
In August of 1995, the Company's Pemco Aeroplex subsidiary
extended its lease with the Birmingham Airport Authority for
twenty years. The lease will now expire September 30, 2019. The
lease covers the Company's 208 acre, 1.9 million square foot
facility located at the Birmingham International Airport. The
lease extension provided for the release of certain, limited
parcels to the lessor but otherwise contained the same terms and
conditions as the Company's current lease.
In May of 1995, the Company entered into a memorandum of
understanding for the lease of approximately 1.0 million square
feet of hangar, manufacturing and warehouse space on
approximately 70 acres of the former Norton Air Force Base at San
Bernardino, California. The memorandum provides for a master
lease under which approximately 650,000 square feet will be used
by the Company as an aircraft maintenance and modification center
with the balance available for sublease. The facility will allow
the Company to add substantially to its wide-body aircraft
maintenance capabilities and broaden the range of military and
commercial aircraft that it can service.
In the second quarter of 1995, the Company relocated Pemco
Nacelle Services from Leeds, Alabama to the Company's facility at
the St. Petersburg/Clearwater International Airport in
Clearwater, Florida. The relocation was made in order to better
accommodate the current and anticipated needs of Pemco Nacelle
Services. Operations at Pemco Nacelle consists of approximately
100,000 square feet of space to include a machine shop, weld
shop, sheet-metal shop, component shop and clean room.
CONTINGENCIES
As previously discussed, a denial of the Company's request for
equitable adjustment from the U.S. Government for the cost impact
of late delivery of government furnished material on its KC-135
PDM contract, which event the Company deems unlikely, would cause
a pre-tax reduction of revenue of $5.6 million.
The Company, as a U.S. Government contractor, is routinely
subject to audits, reviews and investigations by the government
related to its negotiation and performance of government
contracts and its accounting for such contracts. Under certain
circumstances, a contractor can be suspended or debarred from
eligibility for government contract awards. The government may,
in certain cases, also terminate existing contracts, recover
damages and impose other sanctions and penalties. The Company
believes, based on all available information, that the outcome of
the U.S. Government's audits, reviews and investigations will not
have a materially adverse effect on the Company's consolidated
results of operation, financial position or cash flows.
PRECISION STANDARD, INC.
OTHER INFORMATION
PART II.
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
On June 30, 1995, the Company paid $1.0 million of the
$2.0 million installment scheduled under the Company's
Term Credit facility. The remaining $1.0 million was
paid on July 11, 1995. This delay can be attributed in
part to payment processing problems of the Company's
largest customer, which resulted in the Company being
paid outside of its contractual terms. In addition,
the Company's cash resources continue to be strained by
the cost effect of late delivery of government
furnished materials. See also, Note 6 - Contingencies.
Under the restated credit agreement, the Company's
nonpayment of the entire quarterly installment on June
30, 1995 constituted an event of default which may not
have been cured by the subsequent payment of the
balance of that installment. As a result, the
Company's primary lender may claim the right to demand
repayment of all obligations owed to it by the Company.
While the Company does not believe that any such claim
is likely and believes that it would have meritorious
defenses to such a claim if made, the Company has
elected to classify as current that $5.0 million of the
Company's Senior Subordinated Loan due under the
restated credit agreement on September 30, 1996.
At June 30, 1995, the Company was in violation of both
its leverage ratio and fixed charge coverage ratio
requirements related to its Term Credit facility and
Senior Subordinated Credit facility for the second
quarter of 1995. The Company intends to seek
appropriate financial covenant waivers from its primary
lender, although no assurance can be given that such
waivers will be obtained.
Item 4 Submission of Matters to a Vote of Security Holders
The Registrant's annual meeting of shareholders was
held on May 16, 1995. At the Meeting, Matthew L. Gold,
Donald C. Hannah, Admiral George E.R. Kinnear II,
Walter M. Moede and J. Ben Shapiro, Jr. were elected as
directors. Also approved at the meeting was the
ratification of the appointment of Coopers & Lybrand as
the independent public accountants for the Registrant
for the calendar year ending December 31, 1995.
<TABLE>
The number of votes cast for or withheld for each
director nominee was as follows:
<S> <C> <C>
Nominee For Withheld
Matthew L. Gold 8,483,772 3,800
Donald C. Hannah 8,483,772 3,800
Adm. George E.R. Kinnear II 8,483,772 3,800
Walter M. Moede 8,483,772 3,800
J. Ben Shapiro, Jr. 8,483,772 3,800
</TABLE>
<TABLE>
The number of votes cast for, against and abstentions
for ratification of the selection of Coopers & Lybrand
as the Company's independent auditors for the calendar
year ending December 31, 1995 was as follows:
<S> <C> <C>
For Against Abstain
8,485,072 0 2,500
</TABLE>
Because the election of directors and retention of
auditors were considered routine under applicable stock
exchange rules, all proxy shares held in the names of
brokers as nominees which were not voted at the meeting
by the beneficial holders thereof were voted by the
brokers in favor of the nominees for the Board of
Directors and the retention of the auditors.
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
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.
PRECISION STANDARD, INC.
Date: 8/15/95 By: /s/ Matthew L. Gold
Matthew L. Gold
Chairman, President and
Chief Executive Officer
Date: 8/17/95 By: /s/ Walter M. Moede
Walter M. Moede
Executive Vice President
& Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 19,262,038
<ALLOWANCES> 1,161,178
<INVENTORY> 26,576,695
<CURRENT-ASSETS> 52,257,824
<PP&E> 26,954,461
<DEPRECIATION> 12,002,608
<TOTAL-ASSETS> 84,365,828
<CURRENT-LIABILITIES> 54,490,433
<BONDS> 0
<COMMON> 1,280
0
0
<OTHER-SE> 17,214,752
<TOTAL-LIABILITY-AND-EQUITY> 84,365,828
<SALES> 83,351,408
<TOTAL-REVENUES> 83,351,408
<CGS> 69,817,560
<TOTAL-COSTS> 79,388,903
<OTHER-EXPENSES> 150,837
<LOSS-PROVISION> 238,366
<INTEREST-EXPENSE> 1,629,443
<INCOME-PRETAX> 1,943,859
<INCOME-TAX> 2,021,610
<INCOME-CONTINUING> (77,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77,751)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
