<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
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
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: 33-9464
LOWRANCE ELECTRONICS, INC.
-------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 44-0624411
- - - --------------------------- --------------------------------
State of Incorporation IRS Identification Number
12000 East Skelly Drive
Tulsa, Oklahoma 74128
-----------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (918) 437-6881
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
---- ----
At January 31, 1995, there were 3,352,458 shares of Registrant's $0.10 par value
Common Stock outstanding.
<PAGE>
LOWRANCE ELECTRONICS, INC.
--------------------------
FORM 10-Q
---------
INDEX
-----
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Balance Sheets -
January 31, 1995, 1994, and July 31, 1994........... 3
Consolidated Statements of Operations -
Three Months and Six Months Ended
January 31, 1995 and 1994........................... 4
Consolidated Statements of Cash Flows -
Six Months Ended January 31, 1995 and 1994......... 5
Notes to Condensed Consolidated Financial Statements... 6-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 9-10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...................................... 11
ITEM 2. Changes in Securities.................................. 11
ITEM 3. Defaults Upon Senior Securities........................ 11
ITEM 4. Submission of Matters to a Vote of Security Holders.... 11
ITEM 5. Other Information...................................... 11
ITEM 6. Exhibits and Reports on Form 8-K....................... 11
SIGNATURES..................................................... 12
</TABLE>
-2-
<PAGE>
LOWRANCE ELECTRONICS, INC.
--------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
----------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
Jan. 31, Jan. 31, July 31,
1995 1994 1994
----------- ----------- ---------
(Unaudited) (Unaudited) (Audited)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 928 $ 672 $ 976
Accounts receivable, less allowances 14,564 13,899 9,158
Inventories (Note 2) 18,147 20,174 12,878
Prepaid expenses 391 468 708
Deferred income taxes 1,744 1,993 1,351
Income tax refunds receivable - - 1,066
------- ------- -------
Total current assets $35,774 $37,206 $26,137
PROPERTY, PLANT, AND EQUIPMENT,
net (Note 2) 8,373 8,419 8,744
OTHER ASSETS 228 229 147
------- ------- -------
$44,375 $45,854 $35,028
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term
debt (Note 3) $ 8,438 $10,238 $ 2,857
Short-term debt (Note 7) 850 - -
Accounts payable 9,890 10,457 5,670
Accrued liabilities 4,633 5,458 4,738
------- ------- -------
Total current liabilities $23,811 $26,153 $13,265
DEFERRED INCOME TAXES 411 138 393
LONG-TERM DEBT, less current
maturities (Note 3) 8,844 8,072 9,379
STOCKHOLDERS' EQUITY:
Preferred stock, 300,000 shares
authorized, none issued - - -
Common stock, $.10 par value,
10,000,000 shares authorized,
3,352,458 shares issued $ 335 $ 335 $ 335
Paid-in capital 5,600 5,602 5,600
Retained earnings 5,481 5,747 6,239
Foreign currency translation adjustment (107) (193) (183)
------- ------- -------
Total stockholders' equity $11,309 $11,491 $11,991
------- ------- -------
$44,375 $45,854 $35,028
======= ======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
-3-
<PAGE>
LOWRANCE ELECTRONICS, INC.
-----------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ------------------------
January 31, January 31, January 31, January 31,
1995 1994 1995 1994
----------- ----------- ----------- -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
NET SALES $25,417 $18,583 $39,632 $30,758
COST OF SALES 16,925 12,817 26,875 20,611
------- ------- ------- -------
Gross profit $ 8,492 $ 5,766 $12,757 $10,147
OPERATING EXPENSES:
Selling and administrative $ 5,294 $ 4,736 $10,160 $ 9,698
Research and development 736 641 1,475 1,328
Unusual Item (Note 7) 1,100 - 1,100 -
------- ------- ------- -------
Total operating expenses $ 7,130 $ 5,377 $12,735 $11,026
------- ------- ------- -------
Operating income (loss) $ 1,362 $ 389 $ 22 $ (879)
------- ------- ------- -------
OTHER EXPENSES:
Interest expense $ 344 $ 270 $ 608 $ 463
Other, net 295 252 547 456
------- ------- ------- -------
Total other expenses $ 639 $ 522 $ 1,155 $ 919
------- ------- ------- -------
INCOME (LOSS) BEFORE
INCOME TAXES $ 723 $ (133) $(1,133) $(1,798)
PROVISION (BENEFIT) FOR
INCOME TAXES 278 (45) (375) (634)
------- ------- ------- -------
NET INCOME (LOSS) $ 445 $ ( 88) $ (758) $(1,164)
======= ======= ======= =======
INCOME (LOSS) PER COMMON SHARE:
NET INCOME (LOSS) PER SHARE $ .13 $ (.03) $ (.23) $ (.35)
======= ======= ======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 3,352 3,350 3,352 3,348
====== ====== ======= =====
DIVIDENDS NONE NONE NONE NONE
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-4-
<PAGE>
LOWRANCE ELECTRONICS, INC.
--------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited) (Note 6)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
January 31, January 31,
1995 1994
----------- -----------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (758) $ (1,164)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 1,254 930
Loss on retirement of fixed assets - 2
Changes in operating assets and liabilities:
Increase in accounts receivable (5,406) (5,602)
Increase in inventories (5,269) (9,104)
Decrease (Increase) in prepaids, deferred
income taxes, and other assets 909 (963)
Increase in short-term debt (Note 7) 850 -
Increase in liabilities and other 4,211 6,734
-------- --------
Net cash used in operating activities $ (4,209) $ (9,167)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures $ (745) $ (2,035)
-------- --------
Net cash used in investing activities $ (745) $ (2,035)
CASH FLOWS FROM FINANCING ACTIVITIES
(Notes 3 & 4):
Borrowings under lines of credit $ 39,854 $ 45,451
Repayments of borrowings under lines of credit (34,339) (35,279)
Borrowings under new term loan agreement - 3,500
Principal payments on term loans and capital
lease obligations (609) (2,346)
Additional common stock issued - 13
-------- --------
Net cash provided by financing activities $ 4,906 $ 11,339
-------- --------
Net increase (decrease) in cash and cash
equivalents $ (48) $ 137
CASH AND CASH EQUIVALENTS - beginning of period 976 535
-------- --------
CASH AND CASH EQUIVALENTS - end of period $ 928 $ 672
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-5-
<PAGE>
LOWRANCE ELECTRONICS, INC.
--------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
(1) PRINCIPLES OF PREPARATION
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures contained herein are adequate to make the information presented
not misleading. Accounting policies for the six months ended January 31,
1995, are the same as those outlined in the Annual Report on Form 10-K filed
relative to the year ended July 31, 1994. In the opinion of management, all
adjustments necessary for a fair presentation of interim results of
operations have been made to the interim statements. All such adjustments
were of a normal, recurring nature. Certain reclassifications have been made
to the January 31, 1994, consolidated financial statements to conform to the
January 31, 1995, consolidated financial statements. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report filed with the Securities and Exchange Commission on
Form 10-K.
(2) BALANCE SHEET DETAIL
Inventories -
-------------
Inventories are priced at the lower of cost (first-in, first-out) or
market and consist of the following:
<TABLE>
<CAPTION>
Jan. 31, Jan. 31, July 31,
1995 1994 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Raw materials $ 8,582 $ 8,402 $ 6,236
Work-in-process 4,289 4,078 4,010
Finished goods 5,276 7,694 2,632
------- ------- -------
Total inventories $18,147 $20,174 $12,878
======= ======= =======
Property, Plant, and Equipment, Net -
-----------------------------------
Land $ 557 $ 557 $ 557
Building and improvements 3,330 3,752 3,331
Machinery and equipment 17,411 15,107 16,906
Office furniture and equipment 4,368 4,038 4,217
------- ------- -------
$25,666 $23,454 $25,011
Less - accumulated depreciation 17,293 15,035 16,267
------- ------- -------
Net property, plant, and equipment $ 8,373 $ 8,419 $ 8,744
======= ======= =======
</TABLE>
-6-
<PAGE>
(3) LONG-TERM DEBT AND REVOLVING CREDIT LINE
Long-term debt and revolving credit line are summarized below:
<TABLE>
<CAPTION>
Jan. 31, Jan. 31, July 31,
1995 1994 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Revolving credit line $11,495 $12,352 $ 5,913
Term loans 2,676 3,477 2,815
Capitalized equipment lease obligations,
payable in monthly installments of approx-
imately $124,000 including interest at rates
from 7% to 13%, with final payments ranging
from March 1995 through August 1999 3,111 2,438 3,474
Other - 43 34
------- ------- -------
$17,282 $18,310 $12,236
Less - current maturities 8,438 10,238 2,857
------- ------- -------
Total long-term debt $ 8,844 $ 8,072 $ 9,379
======= ======= =======
</TABLE>
Future maturities of the above debt obligations at January 31, 1995, are
$8,438,000, $7,649,000, $504,000, $422,000, and $269,000 for the years
ending January 31, 1996 through 2000, respectively.
On December 15, 1993, the Company secured a $30 million financing package
which was utilized to pay off and replace its then existing $20 million
facility. The financing consists of a $3.5 million term loan together with a
$26.5 million revolving credit line. The term loan is payable in monthly
installments of $23,167 plus interest at 1.5% over prime (currently 9%) with
the final payment due December 1996. Additionally, a principal payment for
the term loan of $500,000 is due and payable on May 31, 1995. The revolving
credit line provides for borrowings up to $26.5 million based on varying
percentages of qualifying categories of receivables and inventories and
matures on December 15, 1996. Borrowings against inventories are limited to
$10 million in total.
Interest under the revolving credit line is payable monthly at prime plus
1%. Current maturities for the revolving credit line are estimated based on
future results and collateral limitations. The terms of the foregoing
agreement include a commitment fee based on the unused portion of the bank
credit line in lieu of compensating balances.
The Agreement requires, among other things, that the Company maintain a
minimum tangible net worth and limits the ratio of total liabilities to
tangible net worth. Additionally, the Agreement limits capital expenditures
and capital leases. Violation of any of these provisions would constitute an
event of default which, if not cured, would empower the lender to declare
all amounts immediately payable.
The Company's indebtedness is collateralized by substantially all of the
Company's assets.
(4) STOCKHOLDERS' EQUITY
During the six months ended January 31, 1995, stockholders' equity changed
for the following items: Net loss of $758,000 and a $76,000 decrease in the
negative Foreign Currency translation adjustment.
(5) INCOME TAXES
The Company has adopted Statement No. 109 of the Financial Accounting
Standards Board which requires an asset and liability approach to financial
accounting and reporting for income taxes. The difference between the
financial statement and tax bases of assets and liabilities is determined
and deferred tax assets or liabilities are computed for those differences
that have future tax consequences.
-7-
<PAGE>
The Company's deferred tax liability arises solely from the use of
accelerated depreciation methods for tax purposes. The Company has a
deferred tax asset resulting from reserves for product costs, bad debts, and
compensation and benefits, as well as the current year tax benefit
associated with the loss through six months. The Company determined that no
valuation allowance is necessary as of January 31, 1995.
(6) CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company acquired $138,000 and $569,000 in equipment under capital lease
obligations during the six months ended January 31, 1995, and January 31,
1994, respectively. These transactions were accounted for as non-cash
investing and financing activities and, therefore, are not included in the
Consolidated Statements of Cash Flows. During the three months ended January
31, 1994, payments of $11.3 million and $1.8 million were made to the
previous primary lender as payment in full settlement of the then
outstanding obligations for the revolving credit line and the term loan,
respectively. These amounts are included in the totals reflected on the
Consolidated Statement of Cash Flows. During the six months ended January
31, 1995, and January 31, 1994, the Company paid interest of $608,000 and
$463,000, respectively. Additionally, an income tax refund of $1.1 million
was received during the three months ended January 31, 1995, and an income
tax payment of $378,000 was made during the six months ended January 31,
1994.
(7) UNUSUAL ITEM
On January 10, 1995, the Company entered into a Settlement Agreement with
Computrol, Inc., resolving a patent infringement lawsuit filed against the
Company in November 1993. This legal proceeding was previously disclosed by
the Company on its Form 10-Q in Item 1 of Part II filed with the Securities
and Exchange Commission on March 15, 1994, June 15, 1994, December 15, 1994,
and the Company's 8-K, in Item 5, filed on January 11, 1995, as well as in
Item 3 of Part 1 of the Company's Form 10-K filed on October 29, 1994.
The Settlement Agreement calls for four payments beginning January 10, 1995,
and ending June 30, 1995, totaling $1,000,000 in exchange for a mutual
release and settlement of the lawsuit. The unpaid portion of the Settlement
Agreement of $850,000 is reflected in the Condensed Consolidated Balance
Sheets as Short-term debt.
The Company also entered into a License Agreement with Computrol, Inc., and
paid a one-time license fee of $100,000. The License Agreement allows the
Company to use the Computrol patent on any new products or the existing
product which was the subject of the lawsuit.
At this time, the Company has no current products that utilize the
technologies covered by this License Agreement and has no immediate plans to
produce and market such products. Accordingly, the $100,000 license fee
along with the $1 million settlement amount has been expensed in full in the
three-month period ending January 31, 1995.
(8) FOOTNOTES INCORPORATED BY REFERENCE
Certain footnotes are applicable to the consolidated financial statements
but would be substantially unchanged from those presented on Form 10-K filed
with the Securities and Exchange Commission on October 29, 1994.
Accordingly, reference should be made to the Company's Annual Report filed
with the Securities and Exchange Commission on Form 10-K for the following:
Note Description
---- ------------------------------------------------------
1 Business and Summary of Significant Accounting Policies
4 Capital Leases
5 Stockholders' Equity and Related Items
6 Retirement Plans
7 Income Taxes
-8-
<PAGE>
PART I, ITEM 2
- - - --------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
- - - ---------------------
Net sales for the three months ended January 31, 1995, increased 36.8% compared
to the same period in fiscal 1994. Unit sales increased 16%, and the average
price per unit increased 19%. The increase in unit sales was attributable to
(1) increased sales of the Company's mid-priced products (retail selling prices
from $250 to $400) in both the Lowrance and Eagle brands, (2) increased sales of
the Lowrance high-end products (retail selling prices of $400 and up), (3)
increased sales to Original Equipment Manufacturers (OEM's), and (4) sales of
the Company's handheld GPS products which did not begin shipping until the third
quarter of 1994. The increase in the average price per unit resulted from the
increases in volume for the mid/upper-priced and the handheld GPS products noted
above.
Gross profit as a percentage of net sales increased to 33.4% from 31% for the
three months ended January 31, 1995, compared to the same period in fiscal 1994.
The increase is attributable to the shift in mix of products sold to the higher-
priced, higher-margin units as discussed above as well as cost reductions for
the 1995 products and manufacturing efficiencies gained through increased
volumes.
Net Sales for the six months ended January 31, 1995, increased 28.9% over the
same period in fiscal 1994. Unit sales increased 24% while the average price
per unit increased 5%. The increase in unit volume results from an increase in
sales of substantially all of the Company's products with the exception of the
lower-priced Eagle products. Sales of these products, which carry a retail
price of less than $150, were approximately the same during the first six months
of fiscal 1995 when compared with the same period in fiscal 1994.
Gross profit as percentage of net sales for the six months ended January 31,
1995, was 32.2% compared to 33% for the same period in fiscal 1994. This
decrease is primarily attributable to (1) increased sales to OEM's which
historically carry lower margins, (2) sales of handheld GPS products (due to the
present intense competitive environment, margins on these units are currently
lower than on most of the Company's sonar products), and (3) during most of
the first quarter of fiscal 1994, the Company benefited from carry-over sales of
high-margin 1993 products. The Company's 1995 product offering (which
generally carries higher margins than the 1994 product offering) did not begin
shipping in volume until the second quarter of 1995. Gross margins are expected
to improve for the remainder of the year assuming volumes and product mix
continue at forecasted levels.
Operating expenses as a percentage of net sales for the three months ended
January 31, 1995, were 28.1% compared to 28.9% during the same period in fiscal
1994. Total operating expenses increased by $1,753,000. The increased expenses
resulted from (1) the $1,100,000 unusual item related to the Settlement
Agreement and License Agreement with Computrol reached on January 10, 1995, (2)
legal fees which were directly associated with the Computrol litigation of
approximately $330,000 compared to less than $50,000 for the same period in
fiscal 1994 (legal fees are reflected within Selling and administrative in the
Consolidated Statements of Operations), (3) other variable selling expenses such
as freight-out and product returns costs which were up approximately $500,000
over the same period last year as a direct result of increased sales volumes,
(4) research and development expenses which were up $95,000 due to the Company's
continuing efforts to develop new products. Expense reductions in the sales and
marketing and general and administrative areas of approximately $300,000
partially offset the effects of the above increases.
Operating expenses as a percentage of net sales for the six months ended January
31, 1995, were 32.1% compared to 35.9% for the same period in fiscal 1994.
Total operating expenses increased $1,709,000. The increase related to (1) the
$1,100,000 unusual item discussed above, (2) legal fees associated with the
Computrol settlement of approximately $550,000 compared to less than $50,000 for
the same period in fiscal 1994, (3) other variable selling expenses which were
up approximately $350,000 over the same period in fiscal 1994 due to increased
volumes (approximately 77% of the net sales increase for the six months ended
January 31, 1995, occurred in the second quarter), (4) research and development
expenditures which were up $147,000 over the same period in fiscal 1994 for
reasons discussed above. Expense reductions in the
-9-
<PAGE>
sales and marketing and general and administrative areas of $350,000 partially
offset the effects of the above increases.
Interest expense is up for both the three-month and six-month periods ending
January 31, 1995, compared to fiscal 1994 because of higher average borrowing
levels and increases in the Company's interest rate on its term loan and
revolving credit facility. Additionally, increased sales have led to increased
cash discounts for both the three and six-month periods which are reflected in
Other, net.
LIQUIDITY AND CAPITAL RESOURCES
- - - -------------------------------
The Company's working capital needs increase in the fall and winter months as
the Company manufactures and stockpiles its products for the peak sales months
of January thru April.
The Company's primary sources of liquidity are cash flow from operations and an
accounts receivable and inventory line of credit. The line of credit allows the
Company to borrow certain percentages of its qualifying accounts receivable and
inventories. Borrowings from inventories, however, are limited to $10 million
in total and $2.5 million for raw materials. The terms of the line of credit
are described in Notes to Condensed Consolidated Financial Statements contained
elsewhere in this report.
Net cash used in operating activities decreased by $5 million during the first
six months of fiscal 1995 compared to the same period in fiscal 1994 due to a
smaller net loss, increased depreciation expense, a smaller increase in
inventory, and receipt of a $1.1 million income tax refund in fiscal 1995.
Additionally, the Company experienced an increase in short-term debt related to
the Computrol settlement, offset by a reduction in the increase in accounts
payable and other liabilities. The traditional build-up of inventories was $3.8
million lower in the first six months of 1995 than during the same period last
year due to management's plan to reduce inventory levels in fiscal 1995 combined
with higher than expected sales during the first six months of fiscal 1995.
Capital expenditures (including leased assets) were $1.7 million lower during
the first six months of fiscal 1995 than the first six months of fiscal 1994.
The net cash used in operating activities during the first six months of fiscal
1995 was financed primarily through increased borrowings under the Company's
revolving line of credit.
OUTLOOK
- - - -------
Current backlog is approximately $19.9 million compared to approximately $17.4
million at January 31, 1994. The increase in the backlog number relates
primarily to the marketplace acceptance of the Company's 1995 product offerings
which include eight new models. Most of these new models did not begin shipping
in volume until the second quarter. The increase in the backlog contrasts with
the trend seen by the Company in recent years whereby, because of changes in
distribution and customer purchasing patterns, the backlog numbers have been
decreasing. However, it should be noted that backlog numbers are not
necessarily indicative of sales trends for the year. Also, while the backlog
numbers are supported by purchase orders from customers, cancellations and/or
delays of requested delivery times can, and often do, occur.
The Company anticipates a return to profitability in fiscal 1995, primarily as
the result of continuing strong economic and market conditions, as well as the
marketplace acceptance of the 1995 products. The gross margins are expected to
increase during the last six months of 1995 based on (1) steps taken to reduce
costs on the 1995 models (a large percentage of sales for the first six months
of 1995 was of close-out 1994 models), (2) continuing mix changes as sales of
the higher-priced/higher-margin units grow at a higher rate than the lower-
margin products, and (3) manufacturing efficiencies gained through increased
volumes. However, because of the dynamic environment in which the Company
operates, any one of several factors could have a material adverse effect on the
results of operation for the remainder of the year.
-10-
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Incorporated herein by reference are the Company's disclosures on three
Form 10Q's in Item 1, Part II, filed with the Commission on March 15,
1994, June 15, 1994, and December 15, 1994, as well as in Item 3 of Part
I of the Company's Form 10K filed on October 31, 1994, and Item 5 of the
Company's Form 8K filed with the Commission on January 11, 1995,
disclosing the filing of the lawsuit on November 12, 1993, against the
Company in the United States District Court for the District of Idaho in
a case styled as, Computrol, Inc., an Idaho corporation, Plaintiff vs.
----------------------------------------------------
Lowrance Electronics, Inc., a Delaware corporation d/b/a Eagle
--------------------------------------------------------------
Electronics, Inc., Defendant, Case No. 93-0439 S HLR (the "Lawsuit")
----------------------------
and the settlement of the Lawsuit on January 10, 1995. The Company
entered into a Settlement Agreement with Computrol, Inc., ("Computrol")
on January 10, 1995, whereby the Company agreed to pay four settlement
payments to Computrol aggregating $1,000,000. The first settlement
payment was made on January 10, 1995, and three additional settlement
payments are due on March 15, 1995, May 15, 1995, and June 30, 1995. The
Company received a full and complete release from Computrol and total
settlement of the Lawsuit by entry of a Stipulated Judgment that
Computrol's '912 Patent is valid and enforceable, and that the Company's
ScanPac accessory (which the Company voluntarily ceased selling on
October 31, 1994) infringed, with each party to pay its own costs and
attorneys' fees. Additionally, the Company agreed to dismiss its
counterclaim against Computrol with prejudice, and Computrol agreed that
the preliminary injunction order dated January 5, 1995, against the
Company's sale of the ScanPac be dissolved. The Company also entered
into a License Agreement as part of the Settlement Agreement on January
10, 1995, with Computrol whereby for a one-time license fee of $100,000
the Company is free to use Computrol's '912 Patent in connection with
any new side-scanning product the Company might introduce in the future
or the Company's ScanPac, should the Company elect to again manufacture
and sell its ScanPac as an accessory. The License Agreement also allows
the Company to introduce a handheld sonar unit housed in a rigid,
single, integrated unit (including all electronic circuit and displays
and a submersible transducer) to compete with Computrol's Fishin' Buddy
using Computrol's '912 Patent in exchange for the Company paying
Computrol a royalty of ten percent on such new sonar product should the
Company elect to introduce such a sonar product in the future. As a
result of the foregoing settlement, all litigation between the Company
and Computrol is terminated, and the Company is free to reintroduce the
ScanPac as an accessory product should the Company elect to do so in the
future without any ongoing royalty payment.
Item 2. Changes in Securities
---------------------
Not applicable
Item 3. Defaults upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Not applicable
-11-
<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.
LOWRANCE ELECTRONICS, INC.
By: /s/ Mark C. Wilmoth
-------------------------------------
Mark C. Wilmoth
Vice President Finance &
Chief Financial Officer
Dated: March 17, 1995
--------------
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1995
<PERIOD-END> JAN-31-1995
<CASH> 928
<SECURITIES> 0
<RECEIVABLES> 14564
<ALLOWANCES> 0
<INVENTORY> 18147
<CURRENT-ASSETS> 35774
<PP&E> 8373
<DEPRECIATION> 0
<TOTAL-ASSETS> 44375
<CURRENT-LIABILITIES> 23811
<BONDS> 0
<COMMON> 335
0
0
<OTHER-SE> 10974
<TOTAL-LIABILITY-AND-EQUITY> 44375
<SALES> 39632
<TOTAL-REVENUES> 39632
<CGS> 26875
<TOTAL-COSTS> 26875
<OTHER-EXPENSES> 547
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 608
<INCOME-PRETAX> (1133)
<INCOME-TAX> (375)
<INCOME-CONTINUING> (758)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (758)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
