<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, 1996
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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 120, 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)
<TABLE>
<CAPTION>
ASSETS
January 31, April 30,
1996 1995
---------- --------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash $ - $ 240
Accounts receivable, net 5,500 4,664
Inventories 9,057 7,700
Deferred tax assets 1,003 961
Prepaid expenses and other current assets 127 103
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Total current assets 15,687 13,668
Property, plant & equipment, net 9,576 9,535
Other non-current assets 39 75
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$25,302 $23,278
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------- -------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 4,272 $ 3,130
Income taxes payable 654 235
Current portion of long-term debt and capital
lease obligation 1,455 1,227
Accrued expenses 3,013 3,370
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Total current liabilities 9,394 7,962
Long-term debt and capital lease obligations,
less current portion 13,506 13,690
Deferred tax liabilities 659 820
Shareholders' equity
Common stock 8 8
Additional paid-in capital 735 735
Retained deficit since May 1, 1994 ($15,927
accumulated deficit eliminated in
quasi reorganization) 1,000 63
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Total shareholders' equity 1,743 806
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$25,302 $23,278
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------- -------
</TABLE>
Note: The Balance Sheet at April 30, 1996 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
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<PAGE>
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,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $10,365 $ 8,541 $32,819 $25,134
Cost of sales 8,297 6,913 24,484 19,582
------- ------- -------- --------
Gross profit 2,068 1,628 8,335 5,552
Selling, general and administrative
expenses 1,782 1,827 5,587 4,970
(Income) on disposal of subsidiary - - - (97)
------- ------- ------- -------
Operating income (loss) 286 (199) 2,748 679
Other income (expense):
Interest expense (401) (414) (1,201) (1,288)
Other income (expense), net 5 16 16 27
------- ------- ------- -------
Total other expense (396) (398) (1,185) (1,261)
------- ------- ------- -------
Income (loss) before income taxes (110) (597) 1,563 (582)
Income tax expense (4) 9 626 19
------- ------- ------- -------
Net income $ (106) $ (606) 937 $ (601)
------- ------- ------- -------
------- ------- ------- -------
Earnings per share: $ (.13) $ (.77) $ 1.19 $ (.76)
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of
common shares outstanding 789,250 789,250 789,250 789,250
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Statements of Cash Flow - (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 937 $ (601)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization of property,
plant and equipment 1,802 1,781
Deferred income taxes (203) -
Provision for losses on inventory (104) 27
(Gain) loss on disposal of assets - 2
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (836) (54)
Inventories (1,253) (434)
Prepaid expenses and other current assets (24) (75)
Non-current assets 36 (45)
Increase (decrease) in:
Accounts payable 796 1,235
Accrued expenses (357) 219
Income taxes payable 419 -
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NET CASH PROVIDED BY OPERATING ACTIVITIES $1,213 $2,055
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures 554 584
Proceeds from disposal of assets - 1
------- -------
NET CASH (USED) BY INVESTING ACTIVITIES $ (554) $ (583)
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</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
Part I - FINANCIAL INFORMATION
PRECISION AEROTECH, INC.
Consolidated Statements of Cash Flow -- Continued - (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1996 1995
------ -----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt $ 6,300 $ 3,828
Principal payments on long-term debt and
capital lease obligations (7,545) (5,794)
Outstanding checks in excess of
available cash balances 346 -
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NET CASH (USED IN) FINANCING ACTIVITIES $ (899) $(1,966)
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NET (DECREASE) IN CASH (240) (494)
Cash at beginning of period $ 240 $ 711
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CASH AT END OF PERIOD $ - $ 217
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Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 1,201 $ 1,288
Income taxes 423 -
Supplemental schedule of non-cash investing
and financing activities
Capital equipment acquired under capital leases 1,289 1,222
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
Part I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 1996
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 for a fair statement of financial position at January 31,
1996 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, 1996 was $32.6 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales of $10.4 million for the three months ended January 31, 1996 were 22%
higher than the $8.5 million reported for the comparable period one year
earlier. Year-to-date sales of $32.8 million were 31% higher than the $25.1
million for the nine months ended January 31, 1995. Sales were up at all
businesses due to broad based demand increases in many existing served markets
and selective penetration of new markets and customers.
Operating income for the most recent quarter was $0.3 million compared with a
$0.2 million operating loss for the quarter one year earlier. Year-to-date
operating income was $2.7 million compared with $0.7 million last year. The
majority of the year-to-year improvement is related to increased volume, a more
profitable mix of business, and improved margins on new programs, partially
offset by increased selling, general and administrative expense associated with
the substantially higher activity levels.
The $0.1 million net loss for the most recent quarter compares to a net loss of
$0.6 million for the three-month period one year earlier. Year-to-date net
income of $0.9 million was $1.6 million better than the $0.6 million net loss
for the nine-month period one year earlier. The improvement is directly related
to the volume and mix changes discussed earlier, partially offset by an increase
in the tax provision for the current year of approximately $0.6 million.
On February 16, 1996, the Registrant executed a definitive merger agreement with
Vernitron Corporation. The transaction is subject to the successful completion
of the normal pre-closing activities. Closing is expected during the second
calendar quarter of 1996.
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LIQUIDITY AND FINANCIAL CONDITION
Cash provided by operations of $1.2 million for the nine months ended January
31, 1996 was lower than the amount generated for the same period of the prior
year of $2.0 million. Net income for the current period was significantly
higher than the same period one year earlier but was offset by increases in net
current assets during the period. Inventory levels continued to increase this
period due to continued high activity levels to support sales increases and
short-term delays in customer shipments at two of the subsidiaries.
Net cash used in financing activities of $.9 million for the nine months ended
January 31, 1996 was lower than the amount used in the same period of the prior
year of $1.9 million. The reduction was due to a lower reduction of the
revolving credit agreement and increases in the outstanding checks in excess of
available cash balances at January 31, 1996 compared to the same period one year
earlier.
Capital expenditures, including capital leases, during the nine month periods
ended January 31, 1996 and 1995 were $1.8 million for each period. As of
January 31, 1996, there were purchase order commitments for capital equipment of
$0.7 million of which $0.5 million is expected to be financed by leasing.
The Registrant has available, a maximum revolving credit agreement of $4.0
million. 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, 1996, $4.0 million was available, with $0.2
million drawn against the calculated borrowing base.
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 was one report on Form 8-K filed during the quarter, on
December 18, 1995. The Form 8-K included a press release
announcing that The Registrant had signed a Letter of Intent on
December 15, 1995, to be acquired by Vernitron Corporation.
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.
/s/ Richard W. Detweiler
March 13, 1996 ------------------------------------
Date Richard W. Detweiler
Chairman, President, Chief Executive
Officer, Chief Financial Officer,
and duly authorized to sign on
behalf of the Registrant
-7-
<PAGE>
EXHIBIT 11
PRECISION AEROTECH, INC.
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31 January 31
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss) $ (106) $ (606) $ 937 $ (601)
Earnings (loss per share) $ (.13) $ (.77) $ 1.19 $ (.76)
Weighted average number of
shares outstanding 789,250 789,250 789,250 789,250
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
Note: Per share data for the three months and nine months ended January 31,
1996, has been restated for the 1-for-100 reverse stock split completed
the prior year.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 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> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5,500
<ALLOWANCES> 0
<INVENTORY> 9,057
<CURRENT-ASSETS> 15,687
<PP&E> 9,576
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,302
<CURRENT-LIABILITIES> 9,394
<BONDS> 13,506
0
0
<COMMON> 8
<OTHER-SE> 735
<TOTAL-LIABILITY-AND-EQUITY> 1,743
<SALES> 32,819
<TOTAL-REVENUES> 32,819
<CGS> 24,484
<TOTAL-COSTS> 24,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,201
<INCOME-PRETAX> 1,563
<INCOME-TAX> 626
<INCOME-CONTINUING> 937
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 937
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
