<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 July 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
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Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date. 789,250
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Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Condensed Balance Sheets
(in thousands)
ASSETS
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<TABLE>
<CAPTION>
July 31, April 30,
1995 1995
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(Unaudited) (Note)
<S> <C> <C>
Current assets
Cash $ 337 $ 240
Accounts receivable, net 4,877 4,664
Inventories 7,990 7,700
Deferred tax assets 758 961
Prepaid expenses and other current assets 8 103
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Total current assets 13,970 13,668
Property, plant & equipment, net 9,715 9,535
Other non-current assets 75 75
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$23,760 $23,278
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LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable $ 2,803 $ 3,130
Income taxes payable 491 235
Current portion of long-term debt and capital
lease obligation 1,318 1,227
Accrued expenses 3,190 3,370
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Total current liabilities 7,802 7,962
Long-term debt and capital lease obligations,
less current portion 13,402 13,690
Deferred tax liabilities 770 820
Shareholders' equity
Common stock 8 8
Additional paid-in capital 735 735
Retained earnings since May 1, 1994 ($15,927
accumulated deficit eliminated in
quasi-reorganization) 1,043 63
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Total shareholders' equity 1,786 806
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$23,760 $23,278
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</TABLE>
Note: The Balance Sheet at April 30, 1995 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
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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
July 31,
1995 1994
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<S> <C> <C>
Net sales $12,365 $ 7,696
Cost of sales 8,294 6,179
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Gross profit 4,071 1,517
Selling, general and administrative expenses 2,111 1,551
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Operating income 1,960 (34)
Other income (expense):
Interest expense (403) (427)
Other income (expense), net 5 (3)
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Total other expense (398) (430)
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Income (loss) before income taxes 1,562 (464)
Income tax expense 582 1
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Net income (loss) $ 980 $ (465)
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Income (loss) per share: $ 1.24 $ (.59)
======= =======
Number of shares used in calculation 789,250 789,250
</TABLE>
See notes to consolidated condensed financial statements.
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Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Statements of Cash Flow - (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 980 $ (465)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization of property,
plant and equipment 586 587
Deferred income taxes 154 -
Provision for losses on inventory 19 (18)
(Gain) loss on disposal of assets - 2
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (213) (682)
Inventories (309) (417)
Prepaid expenses and other current assets 95 56
Non-current assets - (18)
Increase (decrease) in:
Accounts payable (327) 543
Accrued expenses (180) (226)
Income taxes payable 256 -
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NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES $1,061 $ (638)
====== ======
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $ (249) $ (184)
Proceeds from disposal of assets - 1
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NET CASH (USED IN) INVESTING ACTIVITIES $ (249) $ (183)
====== ======
</TABLE>
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<PAGE>
Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Statements of Cash Flow -- Continued - (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt $ 2,544 $ 746
Principal payments on long-term debt and
capital lease obligations (3,259) (926)
Outstanding checks in excess of available cash balances - 290
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NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES $ (715) $ 110
======= =====
NET INCREASE (DECREASE) IN CASH $ 97 $(711)
Cash at beginning of period 240 711
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CASH AT END OF PERIOD 337 $ -
======= =====
Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 396 $ 427
Income taxes 257 -
Supplemental schedule of non-cash investing
and financing activities
Capital equipment acquired under capital leases 517 389
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
Part I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS(UNAUDITED)
July 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, 1995.
The preceding statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of financial position at July 31,
1995, and the results of operations for the three month period then ended. All
adjustments are of a normal recurring nature. The results are not necessarily
indicative of results expected for the full year.
NOTE B - BACKLOG
Backlog of unfilled orders for which contractual commitments have been received
as of July 31, 1995 was $26.9 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 FROM CONTINUING OPERATIONS
------------------------------------------------
Sales for the three-month period ended July 31, 1995, of $12.4 million were 61%
higher than the $7.7 million reported for the same period one year earlier.
Sales increases were achieved at all subsidiaries with the largest increase
occurring at L&S Aerotech, Inc. ("L&S"). While sales improved in a number of
areas at L&S, the largest increase was in military aircraft repair parts and
assemblies.
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Gross profit of $4.1 million was $2.6 million higher than the $1.5 million
reported for the same period one year earlier. The large increase in sales for
the current quarter and a favorable product mix were responsible for the
majority of the gross profit improvement. The uneven nature of orders from
certain customers can create significant period-to-period sales and
profitability fluctuations. The current quarter increase in sales and
profitability is not expected to continue for the balance of the current fiscal
year.
Selling, general and administrative expense of $2.1 million for the three-month
reporting period was $0.5 million higher than the $1.6 million reported for the
same period one year earlier. The majority of the increase is due to increased
sales commissions based on increased sales at L&S and incentive plan accruals
based on achievement of improved operating results.
Pre-tax income of $1.6 million was $2.1 million better than the pre-tax loss of
$0.5 million reported for the three-month period ended July 31, 1994. The
increase is due to the factors discussed above with interest for the two periods
being essentially the same.
Income tax expense of $0.6 million for the three-month period ended July 31,
1995 was $0.6 million higher than the same period one year earlier. The
increase is due to improved profitability in the current quarter. Additionally,
because of the change in ownership under the debt restructuring in 1994, no net
operating loss carryovers are available to offset taxable income in the current
or future periods.
Net income of $1.0 million or $1.24 per share is significantly improved over the
net loss of $0.5 million or $.59 per share for the same period one year earlier.
LIQUIDITY AND FINANCIAL CONDITION
---------------------------------
Cash provided by operations increased by $1.7 million in the three-months ended
July 31, 1995 compared to the same period one year earlier. $1.5 million of the
increase was due to improvement in net income for the period.
Net cash used in financing activities increased by $0.8 million in the current
quarter compared to the same quarter one year earlier. This increase is
primarily due to net repayment of debt, including the revolving credit
agreement, based on the increased cash provided by operations.
Capital expenditures, including capital leases, during the three-month periods
ended July 31, 1995 and 1994 were $0.8 million and $0.6 million respectively.
As of July 31, 1995, there were firm purchase commitments for capital equipment
of $0.5 million of which $0.3 million is expected to be financed by leasing.
The Registrant has available, a maximum revolving credit agreement of $4.0
million. Availability of this line of credit is based on a calculation
utilizing a percentage of accounts receivable and a percentage of certain
components of inventory. As of July 31, 1995, $4.0 million was available, with
no amounts having been drawn against the calculated borrowing base.
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Management plans to fund working capital requirements from a combination of cash
generated from operations, short-term vendor financing and borrowings from its
revolving credit agreement. Management believes this will provide adequate
working capital to meet its needs in the foreseeable future.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
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.
September 12, 1995 /s/ Richard W. Detweiler
------------------ ----------------------------------
Date Richard W. Detweiler
Chairman, President, Chief Executive
Officer, and duly authorized to sign
on behalf of the Registrant
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<PAGE>
EXHIBIT 11
PRECISION AEROTECH, INC.
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
THREE MONTHS ENDED JULY 31, 1995 AND 1994
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
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1995 1994
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<S> <C> <C>
Net income (loss) $ 980 $ (465)
EARNINGS (LOSS) PER SHARE: $1.24 $ (.59)
WEIGHTED AVERAGE OF SHARES OUTSTANDING 789,250 789,250
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
CONDENSED BALANCE SHEET AND CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-1-1995
<PERIOD-END> JUL-31-1995
<CASH> 337
<SECURITIES> 0
<RECEIVABLES> 4,961
<ALLOWANCES> 84
<INVENTORY> 7,990
<CURRENT-ASSETS> 13,970
<PP&E> 12,655
<DEPRECIATION> 2,940
<TOTAL-ASSETS> 23,760
<CURRENT-LIABILITIES> 7,802
<BONDS> 13,402
<COMMON> 8
0
0
<OTHER-SE> 735
<TOTAL-LIABILITY-AND-EQUITY> 23,760
<SALES> 12,365
<TOTAL-REVENUES> 12,365
<CGS> 8,294
<TOTAL-COSTS> 8,294
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403
<INCOME-PRETAX> 1,562
<INCOME-TAX> 582
<INCOME-CONTINUING> 980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 980
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
