FORM 10-Q
UNITED STATES
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: March 31, 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: 0-14617
RHEOMETRIC SCIENTIFIC, INC.
(Exact name of registrant as specified in its charter)
New Jersey 61-0708419
________________________________ _____________________
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication Number)
One Possumtown Road, Piscataway, NJ 08854
_________________________________________ _____________
(Address of principal executive offices) (Zip Code)
(908) 560-8550
____________________________________________________________
(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
_____ ____
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at May 1, 1997
__________________________ ______________________________
Common Stock, no par value 13,161,739
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RHEOMETRIC SCIENTIFIC, INC.
FORM 10-Q
INDEX
Page
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations 7-8
Liquidity and Capital Resources 8-9
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signature 9
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RHEOMETRIC SCIENTIFIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
(Unaudited)
March December
31, 1997 31, 1996
___________ ________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 304 $ 486
Accounts receivable, net 14,786 15,823
Inventories, net
Finished goods 2,833 2,372
Work in process 1,949 2,006
Assembled components, materials, and parts 5,863 5,040
______ ______
10,645 9,418
Prepaid expenses and other assets 600 764
______ ______
Total current assets 26,335 26,491
______ ______
Property, plant, and equipment 15,846 15,947
less accumulated depreciation and
amortization 8,962 8,844
______ ______
Property, plant, and equipment, net 6,884 7,103
Goodwill, net 71 100
Other assets 1,376 2,351
_______ _______
Total Assets $34,666 $36,045
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank borrowings $ 6,839 $ 7,896
Current maturities of long-term debt 187 110
Accounts payable 3,874 3,750
Borrowings against accounts receivable 1,414 --
Payable to affiliate 837 794
Accrued liabilities 4,776 5,239
______ ______
Total current liabilities 17,927 17,789
______ ______
Long-term note payable 148 246
Long-term debt lease obligation 4,842 4,857
Long-term debt - affiliate 6,258 6,258
Other long-term liabilities 1,384 1,519
______ ______
Total liabilities 30,559 30,669
_______ _______
Commitments and Contingencies
Shareholders' Equity
Common stock, stated value of $.001,
authorized 20,000 shares; issued and
outstanding 13,162 shares 13 13
Additional paid-in capital 25,492 25,492
Accumulated deficit (21,260) (20,218)
Cumulative translation adjustment (138) 89
______ ______
Total shareholders' equity 4,107 5,376
______ ______
Total Liabilities & Shareholders' Equity $34,666 $36,045
======= =======
See Notes to Condensed Consolidated Financial Statements.
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<TABLE>
RHEOMETRIC SCIENTIFIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
_______ _______
<S> <C> <C>
Sales $ 8,317 $ 7,996
Cost of sales 4,759 4,517
______ ______
Gross profit 3,558 3,479
General and administrative expenses 705 588
Marketing and selling expenses 2,179 2,664
Research and development expenses 747 756
Goodwill and intangible amortization 80 165
Loss on sale/leaseback -- 2,368
______ ______
Total Operating Expenses 3,711 6,541
______ ______
Operating loss (153) (3,062)
Interest expense (411) (204)
Interest expense - Affiliate (203) (187)
Interest income 17 --
Foreign currency loss (289) (92)
______ ______
Loss before income taxes (1,039) (3,545)
Income tax expense (3) (3)
_______ ______
Net loss $(1,042) $(3,548)
======= =======
Net loss per share $ (0.08) $ (0.27)
======= =======
Average number of shares
Outstanding 13,162 13,162
======= =======
See Notes to Consolidated Financial Statements.
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RHEOMETRIC SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1996
_______ _______
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (1,042) $ (3,548)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization of plant and
equipment 198 248
Amortization of goodwill and intangibles 80 165
Provision for slow moving inventory 170 67
Loss on sale/leaseback financing -- 2,301
Unrealized currency loss 139 104
Changes in assets and liabilities:
Accounts receivable 406 3,146
Inventories (1,642) (1,151)
Prepaid expenses and other current assets 99 702
Accounts payable and accrued liabilities (95) 629
Other assets 39 (260)
Other non-current liabilities 2 (25)
______ ______
Net cash (used in) provided by operating
activities (1,646) 2,378
______ ______
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment (11) (47)
Net cash used in investing activities (11) (47)
______ ______
Cash Flows from Financing Activities:
Net (repayments) borrowings under line of credit
agreements (839) 227
Borrowings against accounts receivable 1,414 --
Repayment of long-term debt/lease obligation (37) (5,730)
Repayment of short-term debt to affiliate -- (375)
Net proceeds from sale/leaseback arrangement -- 5,734
Mortgage participation 861 (861)
______ ______
Net cash provided by (used in) financing
activities 1,399 (1,005)
______ ______
Effect of exchange rate changes on cash 76 (27)
______ ______
Net (decrease) increase in cash (182) 1,299
Cash at beginning of period 486 1,364
______ ______
Cash at end of period $ 304 $2,663
====== ======
Cash payments for interest $ 672 $ 336
====== ======
Cash payments for income taxes $ 32 $ 3
====== ======
See Notes to Condensed Consolidated Financial Statements.
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RHEOMETRIC SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies
The information included in the foregoing interim financial
statements is unaudited. In the opinion of management, all
adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of financial position and
results of operations for the interim periods presented have
been reflected herein. The results of operations for the
interim periods are not necessarily indicative of the results
to be expected for the entire year.
2. Loss Per Share
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), designed to improve the
earnings per share ("EPS") information provided in the
financial statement by simplifying the existing computational
guidelines, revising disclosure requirements, and increasing
comparability of EPS data on an international basis. The
statement requires dual presentation of basic and diluted EPS
on the face of the income statement and a reconciliation of
the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation.
The adoption of this standard is required for the fiscal year
ending December 31, 1997. The Company has not yet assessed
the impact of SFAS No. 128 on the Company's results of
operation.
3. Long-term Debt and Short-term Borrowings
Long-term debt consists of the following:
March 31, 1997 December 31, 1996
Obligation under sale/leaseback
payable through February 2011,
with interest imputed at a weighted-
average rate of 13.9% and 22.8%
for 1997 and 1996, respectively $4,949,000 $4,967,000
Note payable through November
1999 with interest at 9.54% 228,000 246,000
__________ __________
5,177,000 5,213,000
Less current maturities 187,000 110,000
__________ __________
$4,990,000 $5,103,000
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The Company purchased a participating interest in the
Landlord's mortgage loan (the "Mortgage Loan") in the
amount of $861,000 in connection with the 1996
sale/leaseback arrangement. On February 20, 1997 the
Landlord refinanced the Mortgage Loan and the Company's
participation in the Mortgage Loan of $861,000 plus
interest of $71,000 was repaid.
On February 20, 1997, as a result of the Landlord refinancing the
mortgage on the property, the Company's annual lease payment was
significantly reduced for the remaining life of the lease. This
resulted in the reduction of the imputed interest rate to 13.9%
from 22.8% in the original lease.
The Company has working capital lines of credit with certain
domestic and foreign banks. The foreign working capital lines of
credit are supported by letters of credit issued under the Loan
Agreement. Total borrowings were $6,839,000 with remaining
availability of approximately $2,294,000 at March 31, 1997.
The Company's lines and letters of credit are subject to
acceleration in the event that there is a material and
adverse change in the condition or affairs, financial or
otherwise, of the Company which in the reasonable opinion
of the lender impairs the lender's collateral or
increases its risk so as to jeopardize the repayment of
the obligations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales for the three months ended March 31, 1997 increased
$321,000 (or 4.0%) compared to the corresponding period in
1996. This includes a negative impact of $434,000 on sales
due to unfavorable currency rates in effect for the first
quarter of 1997 compared to the first quarter of 1996.
Japanese and French sales increased by 22% and over 100%,
respectively, while domestic, German, and U.K. sales
decreased 7%, 41%, and 18%, respectively. International and
export sales increased to 66% of consolidated sales from 64%
for the same period in 1996. Gross profit for the quarter
ended March 31, 1997 was 42.8% compared to 43.5% in 1996.
Operating expenses of $3,711,000 decreased by $2,830,000 from
the same period in 1996. Of this amount, $2,368,000 relates
to the one-time 1996 loss from the sale/leaseback
transaction. The remaining decrease of $462,000 resulted
from a decrease in both advertising expense and outside
commissions expense. Favorable currency rates also
contributed to this decrease. The Company has taken measures
to maintain operating expenses at its current level. The
preceding sentence involves forward looking information.
Actual results could differ from those projected in
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the forward looking information if the Company experiences an
increase in sales revenues or other internal growth.
Net interest expense increased $206,000 as compared to the
corresponding period in the prior year. Approximately
$85,000 of this increase is due to the increased interest
rate on the facility obligation in 1997. The remainder of
this increase is due to carrying higher loan balances
throughout the period with slightly higher interest rates.
The foreign currency loss for the three months ended March
31, 1997 was $289,000 compared to $92,000 for the same
period in 1996. Transaction losses of $442,000 resulting
from the Japanese Yen, German Mark, French Franc and British
Pound against the dollar were offset by an unrealized gain
of $153,000 related to the Mettler payable which is due in
Swiss Francs.
Inherent in the Company's business is the potential for
inventory obsolescence for older products as the Company
develops new products. Obsolescence has historically
related to parts inventory. The Company continuously
monitors its exposure relating to excess and obsolete
inventory and establishes appropriate valuation reserves.
Liquidity and Capital Resources
Management believes that cash generated from operations and
funds available under lines of credit should be sufficient
to meet the Company's working capital needs through 1997.
Adequacy of cash flows beyond 1997 will depend upon the
Company's ability to achieve expected sales volumes to
support profitable operations.
Cash Flows from Operations. Net cash used in operating
activities for the three months ended March 31, 1997 was
$1,646,000. The Company incurred a net loss of $1,042,000.
During the quarter, accounts receivables declined by
$406,000 reflecting lower sales in the first quarter of 1997
as compared to the last quarter of 1996. Throughout the
quarter inventory levels were replenished in anticipation of
second quarter sales demand causing an increase in
inventories of $1,642,000. Management continuously monitors
inventory levels on a world-wide basis in order to ensure
that excess inventory is kept to a minimum.
Cash Flows From Investing. Net cash used in investing
activities, during the three months ended March 31, 1997,
was $11,000 as compared to $47,000 during the same period in
1996.
Cash Flows From Financing. The net cash provided by
financing activities was $1,399,000 during the three-month
period ended March 31, 1997. On February 20, 1997 the
Landlord refinanced the Mortgage Loan and the Company's
participation in the Mortgage
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Loan of $861,000 was repaid. The proceeds from the
Company's interest in the Mortgage Loan were applied to its
revolving credit line. In addition, the Company's accounts
receivables discounted increased by $1,414,000.
The Company has working capital lines of credit with
certain domestic and foreign banks. The foreign working
capital lines of credit are supported by letters of credit
issued under the Loan Agreement. Total borrowings were
$6,839,000 with remaining availability of approximately
$2,294,000 at March 31, 1997.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) 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.
RHEOMETRIC SCIENTIFIC, INC.
(Registrant)
June 17, 1997 By /s/ Joseph Musanti
Joseph Musanti, Vice President,
Finance & Materials and
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 304
<SECURITIES> 0
<RECEIVABLES> 14,786
<ALLOWANCES> 0
<INVENTORY> 10,645
<CURRENT-ASSETS> 26,335
<PP&E> 15,846
<DEPRECIATION> 8,962
<TOTAL-ASSETS> 34,666
<CURRENT-LIABILITIES> 17,927
<BONDS> 4,990
0
0
<COMMON> 13
<OTHER-SE> 4,094
<TOTAL-LIABILITY-AND-EQUITY> 34,666
<SALES> 8,317
<TOTAL-REVENUES> 8,317
<CGS> 4,759
<TOTAL-COSTS> 4,759
<OTHER-EXPENSES> 3,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 597
<INCOME-PRETAX> (1,039)
<INCOME-TAX> 3
<INCOME-CONTINUING> (1,042)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,042)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
