FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-17286
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LIFSCHULTZ INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE No. 87-0448118
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 West 59th Street, New York, NY 10019
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(Address of principal executive offices)
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(212) 397-7788
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report.)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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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The number of shares of the issuer's common stock outstanding as of
December 11, 1998 is 1,117,519 shares.
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PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, 1998 and July 31, 1998
ASSETS
31-Oct-98 31-Jul-98
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 918,000 $ 989,000
Marketable securities 1,017,000 805,000
Trade accounts receivable, net 2,118,000 2,468,000
Related party receivable 68,000 79,000
Deferred income taxes 234,000 234,000
Inventories 2,642,000 2,386,000
Other current assets 313,000 136,000
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Total current assets 7,310,000 7,097,000
PROPERTY HELD FOR LEASE, NET 1,937,000 2,066,000
PROPERTY AND EQUIPMENT, NET 1,153,000 972,000
LAND 100,000 100,000
DEFERRED INCOME TAXES 550,000 550,000
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$11,050,000 $10,785,000
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The accompanying notes are an integral part of these statements.
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LIABILITIES AND SHAREHOLDERS' EQUITY
31-Oct-98 31-Jul-98
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CURRENT LIABILITIES
Notes payable to banks $ 250,000 $ 154,000
Trade accounts payable 802,000 519,000
Income taxes payable 93,000 34,000
Accrued liabilities 862,000 1,318,000
Note payable to shareholder 3,000 3,000
Current maturities of capital lease
obligations 31,000 32,000
Current maturities of long-term obligation 2,000 2,000
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Total current liabilities $ 2,043,000 $ 2,062,000
LONG-TERM OBLIGATION, less current maturities 7,000 7,000
CAPITAL LEASE OBLIGATIONS, less current
maturities 107,000 110,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Convertible preferred stock, par value $0.01;
authorized 100,000 shares
Series A; issued and outstanding 5,200
shares at October 31 and July 31, 1998 - -
Series E; issued and outstanding 21,231
shares at October 31 and July 31, 1998 - -
Common stock, par value $0.001; authorized
1,650,000 shares; issued and outstanding,
1,117,519 shares issued at October 31 and
July 31 1,000 1,000
Additional paid-in capital 11,060,000 11,060,000
Treasury stock, at cost (22,560 common
shares) (157,000) (157,000)
Accumulated deficit (2,011,000) (2,298,000)
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Total shareholders' equity 8,893,000 8,606,000
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$11,050,000 $10,785,000
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the three months ended October 31,
1998 1997
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Net Revenues $ 3,626,000 $ 3,659,000
Cost and expenses:
Cost of products sold 1,716,000 1,787,000
Selling, general and administrative 1,172,000 1,330,000
Research and development 412,000 230,000
Interest expense 7,000 13,000
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$ 3,307,000 $ 3,360,000
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Earnings before income taxes 319,000 299,000
Income tax expense 32,000 41,000
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NET EARNINGS $ 287,000 $ 258,000
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Net earnings per common - basic 0.26 0.22
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Net earnings per common share -
assuming dilution 0.24 0.20
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The accompanying notes are an integral part of these statements.
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended October 31,
1998 1997
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Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net Earnings $ 287,000 $ 258,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 42,000 32,000
Amortization of leasehold interest 129,000 124,000
Changes in assets and liabilities:
Accounts receivable 350,000 (19,000)
Related party receivable 11,000 -
Inventories (256,000) (134,000)
Deferred Tax - -
Other current assets (177,000) (38,000)
Accounts payable 283,000 403,000
Accrued liabilities (456,000) (347,000)
Income taxes payable 59,000 32,000
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Total Adjustments (15,000) 53,000
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Net cash provided (used) by
operating activities 272,000 311,000
Cash flows from investing activities
Purchase of property and equipment (223,000) (39,000)
Purchase of marketable securities (375,000) (169,000)
Proceeds from maturities of marketable
securities 163,000 164,000
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Net cash used in
investing activities (435,000) (44,000)
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Cash flows from financing activities
Principal payments on long-term obligations (1,000) (1,000)
Principal payments on capital lease
obligations (3,000) -
Principal payments on note payable
to shareholder - (10,000)
Cash received from issuance of long-term debt - -
Net change in line of credit 96,000 47,000
Cash received from issuance of common stock - -
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Net cash provided by
financing activities 92,000 36,000
Net decrease in cash and cash
equivalents (71,000) 303,000
Cash and cash equivalents at beginning
of quarter 989,000 901,000
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Cash and cash equivalents at end of quarter $ 918,000 $1,204,000
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Supplemental disclosures of cash flow information
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Cash paid during the quarter for
Interest $ 7,000 $ 7,000
Income Taxes $ 3,000 $ 8,000
The accompanying notes are an integral part of these statements.
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Notes to Financial Statements
(unaudited)
Note 1
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The consolidated financial statements have been prepared by
Company without audit, in accordance with generally accepted
accounting principles. Pursuant to the rules and regulations of the
Securities and Exchange Commission, certain disclosures normally
included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been omitted or
condensed. It is management's belief that the disclosures made are
adequate to make the information presented not misleading and reflect
all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of financial position and results
of operations for the periods presented. The results of operations
for the periods presented should not be considered as necessarily
indicative of operations for the full year. It is recommended that
these consolidated financial statements be read in conjunction with
the consolidated financial statements for the year ended July 31, 1998
and the notes thereto included in the Company's Form 10-KSB.
Note 2
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Certain reclassifications have been made to the October 31, 1997 three
month period financial statements to conform with the October 31, 1998
presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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General
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The Company designs, manufactures, and markets scientific and
industrial instrumentation and instrument calibration equipment.
Historically, the Company's growth has come from an expanding base of
new customers and from increasing sales to existing customers. The
Company's current and future growth is largely dependent upon its
ability to continue increasing instrument sales to new and existing
customers and its ability to successfully introduce and market new or
enhanced products. The Company anticipates that over the next 12
months, its primary business strategy and emphasis will be on
expanding domestic and international instrument sales.
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Results of Operations:
- ----------------------
Total revenues for Lifschultz Industries' and its subsidiaries in its
first quarter, ended October 31, 1998, decreased 0.9% to $3,626,000
versus $3,659,000 for the same period last year. Revenues for
Lifschultz Industries' subsidiary, Hart Scientific (including Hart
Scientific's subsidiary, Calorimetry Sciences), were $3,495,000 for
the first quarter versus $3,482,000 for the same period last year.
Hart Scientific's gross margins were 51% for the current period versus
44% for the same period last year. Management believes that differ-
ences in product mix is the main reason for the higher margins in
1998.
General and Administrative costs for the first quarter were $626,000
for Hart Scientific versus $737,000 for the same period last year and
$178,000 for Lifschultz Industries' subsidiary Lifschultz Fast Freight
versus $164,000 for the same period last year.
Research and Development costs increased to $412,000 in the first
quarter versus $230,000 for the same period last fiscal year (see Note
1 to Financial Statements). Hart Scientific has increased its efforts
to develop and introduce new products.
Hart Scientific had $335,000 in marketing costs in the first quarter
versus $326,000 for the same period last year. Hart plans to continue
aggressive efforts to market new products and expand distribution of
existing products.
Net consolidated earnings increased 11.2% to $287,000 in the first
quarter versus $258,000 in the same period last year. Higher margins
from product mix accounted for the increased earnings on almost equal
revenue versus the prior year's period. Hart Scientific's net profit
for the first quarter was $366,000 versus $354,000 for the same period
last year.
Financial Condition and Liquidity
- ---------------------------------
The Company's current ratio at October 31, 1998 is 3.57 to 1 versus
3.44 to 1 at July 31, 1998. The current ratio improved to 3.57 to 1
at the end of the current first quarter versus 2.93 on October 31,
1997.
Management expects that internal operating cash flow from Hart
Scientific and from certain subleases held by Lifschultz Fast Freight
will be sufficient to meet the cash needs of the Company during the
1998 fiscal year. Hart Scientific currently has approximately
$500,000 remaining on its bank line of credit if these funds are
required.
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Cautionary Statement for Purposes of "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995.
When used in this report, the words "believe," "plan" "expects" and
similar expressions are intended to identify forward-looking state-
ments within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such statements are subject to certain risks and uncertainties,
including those discussed below, that could cause actual results
to differ materially from those projected. These forward-looking
statements speak only as of the date hereof. All of these forward-
looking statements are based on estimates and assumptions made by
management of the Company, which although believed to be reasonable,
are inherently uncertain and difficult to predict. There can be no
assurance that the benefits anticipated in these forward-looking
statements will be achieved. The following important factors, among
others, could cause the Company not to achieve the benefits contem-
plated herein, or otherwise cause the Company's results of opera-
tions to be adversely affected in future periods: (i) continued or
increased competitive pressures from existing competitors and new
entrants; (ii) unanticipated costs related to the Company's growth
and operating strategies; (iii) loss or retirement of key members of
management; (iv) prolonged labor disruption; (v) deterioration in
general of international economic conditions; (vi) loss of customers.
Many such factors are beyond the control of the Company. Please
refer to the Company's SEC Form 10-K for its fiscal year ended
July 31, 1998, for additional cautionary statements.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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27.1 Financial Data Schedule
(b) Reports on Form 8-K
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No reports on Form 8-K were filed by the Company during the
quarter ended October 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIFSCHULTZ INDUSTRIES, INC.
Date December 11, 1998 By: DENNIS R. HUNTER
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Dennis R. Hunter
President and Chief
Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> OCT-31-1998
<CASH> $918,000
<SECURITIES> $1,017,000
<RECEIVABLES> $2,186,000
<ALLOWANCES> 0
<INVENTORY> $2,642,000
<CURRENT-ASSETS> $7,310,000
<PP&E> $3,190,000
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<TOTAL-ASSETS> $11,050,000
<CURRENT-LIABILITIES> $2,043,000
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<COMMON> $1,000
<OTHER-SE> $8,892,000
<TOTAL-LIABILITY-AND-EQUITY> $11,050,000
<SALES> $3,659,000
<TOTAL-REVENUES> $3,626,000
<CGS> $1,716,000
<TOTAL-COSTS> $3,307,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $7,000
<INCOME-PRETAX> $319,000
<INCOME-TAX> $32,000
<INCOME-CONTINUING> $287,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> $287,000
<EPS-PRIMARY> .26
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