<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1995
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-9276
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PRECISION AEROTECH, INC.
a Delaware Corporation IRS ID# 33-0171440
7777 Fay Avenue, Suite 200, La Jolla, CA 92037
Telephone (619) 456-2992
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 _________
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES ________ NO _________
There were 789,250 shares of the Registrant's common stock outstanding
as of March 8, 1995.
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Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Condensed Balance Sheets
(in thousands)
ASSETS
------
<TABLE>
<CAPTION>
January 31, April 30,
1995 1994
------------ ----------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash $ 217 $ 711
Accounts receivable, net 4,021 3,967
Inventories 7,259 6,852
Prepaid expenses and other current assets 159 84
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Total current assets $11,656 $11,614
Property, plant & equipment, net 9,731 9,709
Other non-current assets 74 29
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$21,461 $21,352
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 2,443 $ 1,208
Current portion of long-term debt and capital
lease obligations 1,335 1,276
Accrued expenses 2,917 2,698
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Total current liabilities 6,695 5,182
Long-term debt and capital lease obligations,
less current portion 14,624 15,427
Shareholders' equity:
Common stock 8 8
Additional paid-in capital 735 735
Retained deficit since May 1, 1994 ($15,927,000
accumulated deficit eliminated in
quasi reorganization) (601) -
------- -------
Total shareholders' equity 142 743
$21,461 $21,352
======= =======
</TABLE>
Note: The Balance Sheet at April 30, 1994 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
2
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Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Condensed Statements of Operations - (Unaudited)
(in thousands, except shares and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
1995 1994 1995 1994
------ -------- ------- --------
<S> <C> <C> <C> <C>
Net sales $8,541 $ 7,853 $25,134 $28,148
Cost of sales 6,913 6,389 19,582 21,464
------ ------- ------- -------
Gross profit 1,628 1,464 5,552 6,684
Selling, general and administrative
expenses 1,827 1,396 4,970 5,172
(Gain) on disposal of subsidiary - (234) (97) (234)
------ ------- ------- -------
Operating income (loss) (199) 302 679 1,746
Other income (expense):
Interest expense (414) (1,326) (1,288) (3,927)
Other income (expense), net 16 - 27 (6)
------ ------- ------- -------
Total other expense (398) (1,326) (1,261) (3,933)
Loss from continuing operations
before income taxes (597) (1,024) (582) (2,187)
Income tax expense 9 23 19 9
------ ------- ------- -------
Net (loss) from continuing operations $ (606) $(1,047) $ (601) $(2,196)
Discontinued operations
Gain on disposal of Aero - 175 - 175
------ ------- ------- -------
Net loss $ (606) $ (872) $ (601) $(2,021)
====== ======= ======= =======
Per share amounts:
Loss from continuing operations $(.77) $(32.13) $(.76) $(68.96)
Gain from discontinued operations - 5.07 - 5.07
------ ------- ------- -------
Net loss $(.77) $(27.06) $(.76) $(63.89)
====== ======= ======= =======
Number of shares used in calculation 789,250 34,483 789,250 34,483
</TABLE>
See notes to consolidated condensed financial statements.
Note: Per share data for the three months and nine months ended January 31,
1994, has been restated for the 1-for-100 reverse stock split completed
during the year.
3
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Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Statements of Cash Flow - (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1995 1994
-------- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (601) $(2,021)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of property,
plant and equipment 1,780 1,788
Other amortization 1 395
Provision for losses on inventory 27 -
Loss on disposal of assets 2 1
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (54) 1,271
(Increase) decrease in inventories (434) 2,598
Increase in prepaid expenses
and other current assets (75) (153)
(Increase) decrease in other non-current assets (45) 25
Increase (decrease) in accounts payable 1,235 (780)
Increase (decrease) in accrued expenses 219 (1,156)
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$2,055 $ 1,968
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (584) (362)
Proceeds from disposal of assets 1 3
------ -------
NET CASH USED BY INVESTING ACTIVITIES $ (583) $ (359)
------ -------
</TABLE>
See notes to consolidated condensed financial statements.
4
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Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Statements of Cash Flow -- Continued - (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1995 1994
-------- -------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt $ 3,828 $ -
Principal payments on long-term debt and
capital lease obligations (5,794) (632)
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NET CASH USED BY FINANCING ACTIVITIES (1,966) (632)
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NET INCREASE (DECREASE) IN CASH (494) 977
Cash at beginning of period 711 2,200
------- ------
CASH AT END OF PERIOD $ 217 $3,177
======= ======
Supplemental information:
Cash paid during the period for:
Interest $ 1,288 $1,452
Income taxes - 80
Non-cash investing and financing activities:
Capital equipment acquired under capital leases 1,222 145
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
Part I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 1995
NOTE A - INTERIM FINANCIAL STATEMENTS
The preceding unaudited interim consolidated condensed financial statements
("statements") should be read in conjunction with the Registrant's audited
financial statements for the year ended April 30, 1994.
The preceding statements reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of financial position at January 31,
1995, and the results of operations for the period then ended. All adjustments
are of a normal recurring nature.
NOTE B - BACKLOG
Backlog of unfilled orders for which contractual commitments have been received
as of January 31, 1995 was $28.2 million.
NOTE C - QUASI REORGANIZATION
After the debt restructuring accomplished on April 28, 1994, the Registrant
implemented, for accounting purposes, a "quasi-reorganization", an elective
accounting procedure that permits a company which has emerged from previous
financial difficulty to restate its accounts and establish a fresh start in an
accounting sense. After implementation of the accounting quasi-reorganization,
the Registrant's assets and liabilities were adjusted to fair value, however,
these adjustments were limited so as to not increase net assets. The deficit
balance in retained earnings was changed to additional paid-in capital. The
Registrant effected the accounting quasi-reorganization as of April 30, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Sales of $8.5 million for the quarter ended January 31, 1995 was $0.7 million
higher than the $7.8 million for the same quarter one year earlier. The net
loss of $0.6 million or $.77 per common share was $0.3 million better than the
net loss of $0.9 million or $27.06 per share (after taking into account a
subsequent 1-for-100 reverse stock split) for the three-months period ended
twelve months earlier.
Sales for the nine months ended January 31, 1995 of $25.1 million were $3.0
million lower than the $28.1 million for the same period one year ago. The net
loss for the nine months year-to-date was $0.6 million or $.76 per share
compared with a net loss of $2.0 million or $63.89 per share (after taking into
account a subsequent 1-for-100 reverse stock split) last year.
6
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Increased sales in the current quarter resulted from stronger sales at all
subsidiaries during the month of January, compared with results one year
earlier. However, sales for the first nine months of this year were lower than
the comparable period last year due to incremental sales in the prior year
period associated with two major customer program cancellations.
Income from the most recent quarter benefitted from a substantial reduction in
interest expense compared to the same quarter one year earlier. However, the
absence in the most recent quarter of certain favorable adjustments which were
taken in the prior year quarter related to reserves for disposal of certain
subsidiary operations and restructuring expenses, included in selling, general
and administrative expense, reduced the total favorable variance reported.
The nine months year-to-date gross margin is lower than the comparable period
last year as the result of the current year not being favorably impacted by the
two major program cancellations and associated above average margins mentioned
earlier. All other current-year expenses were favorable compared to the same
period a year earlier, supporting an improvement in results during the nine
months ended January 31, 1995.
Numerous investments in new customer programs and subsidiary capabilities have
been made throughout the Corporation during the first nine months of the current
fiscal year.
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
A net decrease in cash for the third quarter of $8,000 resulted in net cash used
for the nine months ended January 31, 1995 of $494,000. The net loss and
increased inventory levels were partially offset by improvements in accounts
receivable collections and increases in accounts payable and accrued expenses
during the quarter.
Cash provided by operations was $873,000 and $2,055,000 for the quarter and nine
months ended January 31, 1995 respectively and compares to $1,968,000 and
($655,000) for comparable periods of the prior year.
Net working capital declined by $1,030,000 for the quarter and $1,471,000 year
to date. The decline is attributable to the net loss for the periods as well as
payments against the Registrant's long-term line of credit made from working
capital in the amounts of $341,000 and $922,000 for the quarter and year to date
respectively.
The Registrant has available, a maximum revolving credit agreement to
$4,000,000. Availability of the line of credit is based on a calculation
utilizing a percentage of accounts receivable and a percentage of certain
components of inventory. As of January 31, 1995, an additional $2,879,000 was
available, with $1,078,000 having been drawn against the calculated borrowing
base.
Capital expenditures, including capital leases, during the third quarter of
current and prior years were $835,000 and $6,000. As of January 31, 1995, the
Registrant had firm purchase commitments for capital equipment of $83,000.
Management plans to fund working capital requirements from cash provided by
operations and from borrowing against its revolving credit agreement.
7
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11: Schedule of Computation of Net Earnings Per
Share
(b) There were no reports on Form 8-K.
SIGNATURE
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 there unto duly authorized.
PRECISION AEROTECH, INC.
____________ _____________________________________
Date Richard W. Detweiler
Chairman, President, Chief Executive
Officer, Chief Financial Officer,
and duly authorized to sign on
behalf of the Registrant
8
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EXHIBIT 11
PRECISION AEROTECH, INC.
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
THREE MONTHS ENDED JANUARY 31, 1995 AND 1994
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31 January 31
------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Loss from operations $ (606) $(1,047) $ (601) $(2,196)
------- ------- ------- -------
Undeclared cumulative preferred dividends - 61 - 182
------- ------- ------- -------
Loss from continuing operations (606) (1,108) (601) (2,378)
Gain from discontinued operations - 175 - 175
------- ------- ------- -------
Loss attributable to common shareholders $ (606) $ (933) $ (601) $(2,203)
======= ======= ======= =======
Per share amounts:
Loss from continuing operations $ (.77) $(32.13) $ (.76) $(68.96)
Gain from discontinued operations - 5.07 - 5.07
Net loss $ (.77) $(27.06) $ (.76) $(63.89)
======= ======= ======= =======
Weighted average number of
shares outstanding 789,250 34,483 789,250 34,483
======= ======= ======= =======
</TABLE>
Note: Per share data for the three months and nine months ended January 31,
1994, has been restated for the 1-for-100 reverse stock split completed
the prior year.
