UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ x / Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 31, 1996, or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-16115
AIRSENSORS, INC.
----------------
(Exact name of registrant as specified in its charter)
Delaware 91-1039211
------------------------ --------------------
(State of Incorporation) IRS Employer I.D. No.
16804 Gridley Place, Cerritos, CA 90703
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 860-6666
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, and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
------ ------
Number of shares outstanding of each of the issuer's classes of common
stock, as of February 29, 1996:
5,654,568 shares of Common Stock, $.001 par value per share
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRSENSORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-----------
January 31, April 30,
ASSETS 1996 1995
- ------ ----------- -----------
(unaudited)
Current assets:
Cash $ 345,037 $ 65,489
Accounts receivable 8,680,156 5,549,550
Less allowance for doubtful accounts 163,552 153,802
----------- -----------
Net accounts receivable 8,516,604 5,395,748
Inventories:
Raw materials and parts 5,493,383 4,720,035
Work-in-process 983,096 495,132
Finished goods 5,157,527 2,158,493
----------- -----------
Total inventories 11,634,006 7,373,660
Other current assets 601,420 791,209
----------- -----------
Total current assets 21,097,067 13,626,106
Equipment and leasehold improvements:
Dies, molds and patterns 3,019,359 2,419,448
Machinery and equipment 4,729,640 4,197,209
Office furnishings and equipment 2,757,858 1,939,757
Leasehold improvements 1,657,573 1,620,767
----------- -----------
12,164,430 10,177,181
Less accumulated depreciation and amortization 6,602,277 5,767,565
----------- -----------
Net equipment and leasehold improvements 5,562,153 4,409,616
Intangibles arising from acquisitions 7,956,050 5,701,916
Less accumulated amortization 2,661,051 2,449,757
----------- -----------
Net intangibles arising from acquisitions 5,294,999 3,252,159
Other assets 1,140,720 821,255
----------- -----------
$33,094,939 $22,109,136
=========== ===========
See accompanying notes.
<PAGE>
AIRSENSORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
-----------
January 31, April 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------------ ----------- -----------
(unaudited)
Current liabilities:
Notes payable $ 119,218 $ 406,413
Accounts payable 2,769,366 2,200,335
Accrued payroll obligations 1,368,275 1,248,957
Other accrued expenses 2,765,414 1,255,042
Current portion of long-term notes 722,630 -
----------- -----------
Total current liabilities 7,744,903 5,110,747
Line of credit 2,900,000 1,000,000
Term loan - Bank of America NT&SA 1,537,500 -
Term loan - DEPA Holding B.V. 2,934,132 -
Other long term liabilities 1,072,121 855,446
Commitments and contingencies - -
Minority interest 216,276 -
Stockholders' equity:
1993 Series 1 Preferred Stock, $0.01 par value,
5,950 shares authorized, issued and
outstanding $5,950,000 liquidation value 5,650,000 5,650,000
Common stock, $.001 par value, authorized
25,000,000 shares; 5,652,902 issued and
outstanding at January 31, 1996
(5,641,370 at April 30, 1995) 5,653 5,641
Additional paid-in capital relating to
common stock 28,734,819 28,660,181
Deficit (17,686,932) (19,172,879)
Foreign currency translation adjustment (13,533) -
----------- -----------
Total stockholders' equity 16,690,007 15,142,943
----------- -----------
$33,094,939 $22,109,136
=========== ===========
See accompanying notes.
<PAGE>
AIRSENSORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
---------
Three Months Ended Nine Months Ended
January 31, January 31,
----------------------- -----------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenue:
Product sales $12,115,597 $11,725,694 $34,313,511 $32,497,385
Contract revenue 1,009,982 167,129 2,333,492 688,469
----------- ----------- ----------- -----------
Net revenue 13,125,579 11,892,823 36,647,003 33,185,85
Costs and expenses:
Cost of sales 8,302,155 7,826,849 23,018,444 21,531,651
Research and
development expense 1,726,010 1,757,520 5,521,690 4,532,424
Selling, general and
administrative expense 2,197,681 1,439,723 5,513,336 4,516,894
----------- ----------- ----------- -----------
Total costs and expenses 12,225,846 11,024,092 34,053,470 30,580,969
----------- ----------- ----------- -----------
Operating income 899,733 868,731 2,593,533 2,604,885
Financing charges 176,623 61,631 337,885 212,257
----------- ----------- ----------- -----------
Income before income taxes 723,110 807,100 2,255,648 2,392,628
Provision for income taxes 36,412 - 164,412 239,749
Minority interest 142,924 - 142,924 -
----------- ----------- ----------- -----------
Net income 543,774 807,100 1,948,312 2,512,879
Dividends on preferred stock 151,230 141,312 462,365 396,666
----------- ----------- ----------- -----------
Net income applicable
to common stock $ 392,544 $ 665,788 $ 1,485,947 $ 1,756,213
=========== =========== =========== ===========
Net income per share $0.07 $0.11 $0.26 $0.29
=========== =========== =========== ===========
Number of shares used in
per share calculation 6,635,763 6,565,599 6,637,939 6,556,602
=========== =========== =========== ===========
See accompanying notes.
<PAGE>
AIRSENSORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------
Nine Months Ended
January 31,
------------ ------------
1996 1995
------------ ------------
Net cash provided by operating activities $ 1,058,449 $ 911,559
Cash flows from investing activities:
Purchase of equipment and leasehold
improvements (1,048,972) (1,369,573)
Investment in Media (1,965,678) -
Deferred software production costs (612,361) (32,704)
Other, net (41,673) 75,490
------------ ------------
Net cash used in investing activities (3,668,684) (1,326,787)
Cash flows from financing activities:
Payments on notes payable (458,249) (351,723)
Proceeds from issuance of note payable 171,054 148,750
Net borrowings on line of credit 1,900,000 132,710
Payments on term notes (168,632) (332,800)
Proceeds from issuance of bank term note 2,050,000 -
Payments of other long-term liabilities (216,675) (62,111)
Proceeds from sales of common stock 74,650 348,612
Dividends paid on preferred stock (462,365) (396,666)
------------ ------------
Net cash provided by (used in)
financing activities 2,889,783 (513,228)
------------ ------------
Net increase (decrease) in cash 279,548 (928,456)
Cash beginning of year 65,489 1,104,501
------------ ------------
Cash at end of quarter $ 345,037 $ 176,045
============ ============
See accompanying notes.
<PAGE>
AIRSENSORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1996 and 1995
--------------
(1) The accompanying condensed consolidated financial statements are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for the
fair presentation of the financial position and operating results for the
interim periods. The condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and the results of operations, contained in the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1995. The results
of operations for the three months and nine months ended January 31, 1996
are not necessarily indicative of the results that may be expected for the
entire fiscal year ending April 30, 1996.
(2) Acquisition
On October 31, 1995, the Company, through its wholly owned subsidiary
IMPCO Technologies, Inc. (IMPCO), acquired 51% of the outstanding stock of
Technisch Bureau Media B.V. (Media), a private company in the Netherlands,
from Centradas B.V., a private company in the Netherlands. The acquisition
of Media has been accounted for under the purchase method of accounting and
its operations have been included in the condensed consolidated financial
statements since the date of acquisition.
The following table presents the unaudited pro forma consolidated
results of operations as if the acquisition had occurred at the beginning
of each period (Dollars in thousands, except for net income per share):
Nine Months Ended
January 31,
-----------------------
1996 1995
---------- ----------
Revenue $ 38,931 $ 36,843
Net income applicable
to common stock 1,414 1,813
Net income per share $ .24 $ .30
The proforma consolidated results of operations are not necessarily
indicative of the actual results of operations that would have occurred had
the purchase actually been made at the beginning of the respective periods,
or of results which may occur in the future. Minority interest represents
the minority stockholders' proportionate share of the equity of Media.
<PAGE>
(3) Debt Payable
On January 29, 1996, Media's term-loan from DEPA Holding B.V. (DEPA) was
increased by 1,279,092 Dutch Guilders (U.S. $765,923) to reflect Media's
current year earnings prior to the acquisition. As of January 31, 1996, the
outstanding principal balance on the term-loan was 5,422,092 Dutch Guilders
(U.S. $3,246,762) which is to be repaid quarterly in one installment of
102,092 Dutch Guilders (U.S. $61,146), and thirty-eight (38) additional
installments of 140,000 Dutch Guilders (U.S. $83,832).
(4) Warranty
The Company provides, at the time of sale, an amount it estimates will
be needed to cover future warranty obligations. During the third quarter
of fiscal year 1996, the Company increased the reserve for estimated
product warranties resulting in a one time charge of approximately
$270,000.
(5) Income taxes
The provision for income taxes for the nine months ended January 31,
1996 has been reduced by the utilization of approximately $2,485,000 of
federal net operating loss carryforwards of which $6,296,000 is available
to offset future taxable income. During the third quarter of fiscal year
1996 the Company revised its estimated tax rate resulting in a lower income
tax provision for the nine months ended January 31, 1996. The lower net
effective tax rate during the current year is due to the utilization of
research and development tax credits and a tax refund.
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operation
Acquisition of Technisch Bureau Media B.V.
- ------------------------------------------
Effective October 31, 1995, the Company, through its wholly owned
subsidiary, IMPCO Technologies, Inc. (IMPCO), acquired 51% of the
outstanding stock of Technisch Bureau Media B.V. (Media), a private company
in the Netherlands. Media services the European marketplace from its
headquarters in the Netherlands and through its subsidiaries and facilities
in Germany and France. The acquisition has been accounted for under the
purchase method of accounting.
Results of Operations
- ---------------------
Total revenue for the three months ended January 31, 1996, increased
by approximately 10% as compared to the same period in the prior fiscal
year. This increase was attributable to higher contract revenue and the
inclusion of Media's sales as a result of the acquisition. These increases
were partially offset by lower sales levels recognized by IMPCO as compared
to the same period in the prior fiscal year. For the nine months ended
January 31, 1996 revenue increased by approximately 10% as compared to the
same period in the prior fiscal year. This increase is equally
attributable to product sales recognized as a result of the Media
acquisition and contract revenue. The following table sets forth the
Company's product sales by application (all dollars in thousands):
Three months ended Nine months ended
January 31, January 31,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
Motor vehicle $ 3,780 $ 3,902 $ 11,036 $ 12,453
Forklifts and other material
handling equipment 6,553 5,576 17,567 14,017
Small portable to
large stationary 1,783 2,247 5,711 6,027
-------- -------- -------- --------
Total $ 12,116 $ 11,725 $ 34,314 $ 32,497
======== ======== ======== ========
Motor vehicle product sales for the three months and nine months ended
January 31, 1996, decreased by approximately 3% and 11% respectively as
compared to the same periods in the prior fiscal year. These decreases
were primarily attributable to lower shipments to international markets and
to a domestic original equipment truck manufacturer. Management
anticipates this trend to continue during the fourth quarter of fiscal year
1996.
<PAGE>
During the three months and nine months ended January 31, 1996, sales
of the Company's products for forklifts and other material handling
equipment increased by approximately 18% and 25%, respectively, as compared
to the same period in the prior fiscal year. The increase during the three
months ended January 31, 1996 was attributable to revenue recognized as a
result of the Media acquisition. This increase was partially offset by
lower sales levels recognized by IMPCO as compared to the same period in
the prior fiscal year. The increase during the nine months ended
January 31, 1996 was attributable to revenue recognized as a result of the
Media acquisition and the demand for new forklifts during the first six
months of fiscal year 1996. Management anticipates sales of products from
forklifts and other material handling equipment will be higher during the
fourth quarter of fiscal year 1996 as compared to the same period in the
prior fiscal year primarily as a result of the Media acquisition.
Contract revenue for the three months and nine months ended January
31, 1996 increased by approximately $843,000 and $1,645,000, respectively,
as compared to the same periods in the prior fiscal year. These increases
were primarily attributable to the extension of the development contract
with General Motors Corporation (GM) in August 1995, and the addition of
other OEM development programs. Management anticipates this trend to
continue during the fourth quarter of fiscal year 1996.
The Company's cost of goods sold for the three months and nine months
ended January 31, 1996 was higher as compared to the same period in the
prior fiscal year due to an increase in product sales during the three
months and nine months ended January 31, 1996. The Company's gross profit
margin on product sales for the three months and nine months ended January
31, 1996 decreased due to the lower gross profit margin on motor vehicle
sales of compressed natural gas systems, increased expenditures for current
product support and a product warranty charge. During the third quarter of
fiscal year 1996 the Company increased the reserve for estimated product
warranties resulting in a one time charge of approximately $270,000.
Research and development ("R&D") expense for the three months ended
January 31, 1996, decreased by approximately 2% as compared to the same
period in the prior fiscal year. This decrease was primarily attributable
to deferring efforts for software production costs which are to be
recognized when the product is sold. R&D expense for the nine months ended
January 31, 1996, increased by approximately 22% as compared to the same
period in the prior fiscal year. This increase was primarily attributable
to development and testing of the Company's new products, durability
testing, enhancements to products to maintain mandated emission standards,
efforts expended to obtain California's Title XIII engine certification,
and efforts on the GM contract. Management believes the Company's future
success depends on its ability to design, develop and market new products
to meet mandated emission standards and new emission related customer
product specifications, and will therefore continue to incur significant
R&D costs. Management anticipates this trend to continue during the fourth
quarter of fiscal year 1996 primarily as a result of development efforts
for the GM contract.
<PAGE>
Selling, general and administrative (SG&A) expense for the three
months and nine months ended January 31, 1996, increased by approximately
$758,000 (53%) and $996,000 (22%) as compared to the same periods in the
prior fiscal year. These increases were primarily attributable to the
inclusion of Media's SG&A expenses subsequent to the acquisition and to an
increase in IMPCO's sales force. Management anticipates this trend to
continue during the fourth quarter of fiscal year 1996 primarily as a
result of including Media's SG&A expenses.
During the third quarter of fiscal year 1996 the Company revised it's
estimated tax rate resulting in a lower income tax provision for the nine
months ended January 31, 1996. The lower net effective tax rate during the
current year is due to the utilization of research and development tax
credits and tax refunds.
Financing charges for the three months and nine months ended January
31, 1996, increased by approximately $115,000 (187%) and $125,000 (59%) as
compared to the same periods in the prior fiscal year. These increases are
primarily attributable to loans associated with the acquisition of Media
and the increased use of the line of credit.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended January 31, 1996, cash provided by
operations, excluding working capital, was approximately $3,343,000 or 4%
higher than the same period last year. Of the $3,343,000 generated by
operations approximately $2,284,000 was used for working capital. The most
significant changes in the Company's current assets and liabilities during
the nine months ended January 31, 1996 were increases in inventory,
accounts receivable and current liabilities. The increase in inventory was
primarily attributed to a temporary buildup of inventory in anticipation of
future sales of compressed natural gas systems and core products while the
increase in accounts receivable was due to the increase in sales for the
month ended January 31, 1996 as compared to the month ended April 30, 1995
and slower payments by certain customers. The increase in current
liabilities was attributable to accounts payable, accrued liabilities and
the current portion of the Bank of America term note. The increase in
accounts payable is attributable to the buildup of inventory while the
increase in accrued liabilities is attributable to certain estimated
reserves.
Net cash used in investing activities for the nine months ended
January 31, 1996 was approximately $3,669,000 compared with approximately
$1,327,000 for the same period last fiscal year. Investing activities
principally included the purchase of Media which resulted in a net use of
cash of approximately $1,966,000. It also included the purchase of dies,
molds and patterns, machinery and equipment, and the capitalization of
certain costs related to future programs. Management projects an increase
in capital expenditures during the remaining three months of fiscal year
1996 as compared to the same periods in fiscal year 1995, primarily as a
result of equipment enhancements, and capital expenditures by Media.
<PAGE>
Net cash provided by financing activities for the nine months ended
January 31, 1996, was approximately $2,890,000 of which $2,050,000 was for
a term loan with Bank of America to finance the acquisition of Media.
Although the company has made no material commitments for future capital
expenditures, it expects to incur significant expenditures relating to
equipment and facilities for the development and production of new
products. The Company expects to fund a major portion of these expenses
from cash generated from operations and by use of its Bank of America
Credit facility.
<PAGE>
Part II - OTHER INFORMATION
Items 1,2,3,5 Not applicable.
Item 4. Submission of matters to a vote of security holders
(a) The annual meeting of stockholders was held on November 3, 1995.
(b) The following were elected as directors for the terms expiring
in 1997 as follows:
V. Robert Colton
Robert M. Stemmler
The names of each of the other directors whose terms of office
continued after the meeting are as follows:
Peter B. Bensinger
Norman L. Bryan
Edwin J. Schneebeck
Don J. Simplot
Rawley F. Taplett
Douglas W. Toms
(c) The stockholders voted upon the ratification of the appointment
of Ernst & Young LLP as independent auditors as follows:
Votes Votes Broker
For Against Abstention non-votes
---------- ---------- ---------- ---------
Common Stock 3,441,570 1,682,488 2,148 0
Preferred Stock 507,600 611,000 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11.1 - Computation of net income per share.
(b) Reports on Form 8-K.
On November 15, 1995, the Company filed a Form 8-K to report that
on October 31, 1995, the Company, through its wholly owned subsidiary IMPCO
Technologies, Inc. (IMPCO), acquired 51% of the outstanding stock of
Technisch Bureau Media B.V. (Media), a private company in the Netherlands,
from Centradas B.V., a private company in the Netherlands.
<PAGE>
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.
AirSensors, Inc.
(Registrant)
Date: March 18, 1996 By /s/ Thomas M. Costales
----------------------
Thomas M. Costales
Chief Financial Officer
and Treasurer
[Authorized Signatory]
<TABLE>
<CAPTION>
AIRSENSORS, INC.
COMPUTATION OF NET INCOME PER SHARE
Nine months ended January 31, 1996 and 1995
---------------
Three months ended Nine months ended
January 31, January 31,
------------------------ ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY CALCULATION:
Net income $ 543,774 $ 807,100 $1,948,312 $2,152,879
Dividends on
preferred stock (151,230) (141,312) (462,365) (396,666)
----------- ----------- ----------- -----------
Net income applicable
to common stock 392,544 665,788 1,485,947 1,756,213
Add: Effect of treasury
stock on repayment
of borrowings 83,323 49,190 208,576 133,879
----------- ----------- ----------- -----------
Net income applicable
to common stock for
calculation of net
income per share 475,867 714,978 1,694,523 1,890,092
Weighted average number
of common shares
outstanding 5,651,654 5,638,297 5,646,419 5,613,700
Dilutive effect of
outstanding stock
options and warrants
(As determined by
application of the
modified treasury
stock method) 984,109 927,302 991,520 942,902
----------- ----------- ----------- -----------
Weighted average number
of common shares, as
adjusted for cal-
culation of net
income per share 6,635,763 6,565,599 6,637,939 6,556,602
=========== =========== =========== ===========
Net income per share $0.07 $0.11 $0.26 $0.29
=========== =========== =========== ===========
FULLY DILUTED CALCULATION:
Net income applicable
to common stock for
calculation of net
income per share before
effect of treasury
stock on repayment
of borrowings 392,544 665,788 1,485,947 1,756,213
Add: Effect of treasury
stock on repayment
of borrowings 83,323 43,543 208,576 133,255
----------- ----------- ----------- -----------
Net income applicable
to common stock for
calcuation of net
income per share 475,867 709,331 1,694,523 1,889,468
Weighted average number
of common shares
outstanding 5,651,654 5,638,297 5,646,419 5,613,700
Dilutive effect of
outstanding stock
options and warrants
(As determined by
application of the
modified treasury
stock method) 984,109 927,302 991,520 942,902
----------- ----------- ----------- -----------
Weighted average number
of common shares,
as adjusted for cal-
culation of net
income per share 6,635,763 6,565,599 6,637,939 6,556,602
=========== =========== =========== ===========
Net income per share $0.07 $0.11 $0.26 $0.29
=========== =========== =========== ===========
</TABLE>
(1) The conversion of preferred stock was not assumed since its effect would be
antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 345,037
<SECURITIES> 0
<RECEIVABLES> 8,680,156
<ALLOWANCES> 163,552
<INVENTORY> 11,634,006
<CURRENT-ASSETS> 21,097,067
<PP&E> 12,164,430
<DEPRECIATION> 6,602,277
<TOTAL-ASSETS> 33,094,939
<CURRENT-LIABILITIES> 7,744,903
<BONDS> 0
0
5,650,000
<COMMON> 5,653
<OTHER-SE> 11,034,354
<TOTAL-LIABILITY-AND-EQUITY> 33,094,939
<SALES> 12,115,597
<TOTAL-REVENUES> 13,125,579
<CGS> 8,302,155
<TOTAL-COSTS> 8,302,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176,623
<INCOME-PRETAX> 723,110
<INCOME-TAX> 36,412
<INCOME-CONTINUING> 543,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 392,544
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
