<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Mark One
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Quarterly Period Ended March 31, 1996
or
[ ] 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 1-10011
ASTROTECH INTERNATIONAL CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1570579
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
960 Penn Avenue, Suite 800, Pittsburgh, PA 15222
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (412) 391-1896
--------------
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of April 30, 1996, there were 9,840,206 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
<PAGE> 2
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Condensed Consolidated Balance Sheet at
March 31, 1996 and September 30, 1995.................... 1 - 2
Condensed Consolidated Income Statement for the
Three Months Ended March 31, 1996 and March 31, 1995..... 3
Condensed Consolidated Income Statement for the
Six Months Ended March 31, 1996 and March 31, 1995....... 4
Condensed Consolidated Statement of Cash Flows for the
Six Months Ended March 31, 1996 and March 31, 1995....... 5
Condensed Consolidated Statement of Stockholders' Equity for the
Six Months Ended March 31, 1996.......................... 6
Notes to Condensed Consolidated Financial Statements............. 7 - 10
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition....................... 11 - 13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings........................................ 14
ITEM 6. Exhibits and Reports on Form 8-K......................... 14
Signatures....................................................... 15
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Share Data)
March 31, September 30,
1996 1995
--------- -------------
ASSETS (Unaudited) *
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 658 $ 0
Trade accounts receivable 22,029 19,821
Inventories (Note 3) 5,174 4,225
Costs and estimated earnings in excess
of billings on uncompleted contracts 4,665 4,348
Deferred income taxes 2,028 2,143
Prepaid expenses and other current assets 1,409 887
------- -------
TOTAL CURRENT ASSETS 35,963 31,424
PROPERTY, PLANT AND EQUIPMENT
Land 2,904 2,134
Buildings 6,055 4,066
Furniture and office equipment 2,174 1,546
Machinery and equipment 15,522 13,034
Tanks and trucks held for lease 6,148 4,980
------- -------
32,803 25,760
Less accumulated depreciation and amortization 8,781 7,658
------- -------
24,022 18,102
OTHER ASSETS
Costs in excess of net assets acquired, net of accumulated
amortization of $4,037 at March 31, 1996 and $3,740 at
September 30, 1995 16,220 15,689
Other assets 1,554 1,336
------- -------
TOTAL ASSETS $77,759 $66,551
======= =======
</TABLE>
* Summarized from audited balance sheet included in the Company's 1995 Annual
Report on Form 10-K.
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEET, CONTINUED
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) *
<S> <C> <C>
CURRENT LIABILITIES
Checks not yet presented for payment, net $ 0 $ 443
Accounts payable 5,291 6,630
Note payable 0 19
Accrued compensation and benefits 2,784 2,811
Accrued expenses and other current liabilities 7,361 6,099
Billings in excess of costs and estimated
earnings on uncompleted contracts 6,663 2,743
Current portion of long-term debt to related parties 166 160
Current portion of long-term debt (Note 4) 3,236 2,236
-------- --------
TOTAL CURRENT LIABILITIES 25,501 21,141
LONG-TERM DEBT TO RELATED PARTIES 180 265
LONG-TERM DEBT (Note 4) 14,549 9,821
DEFERRED INCOME TAXES 2,942 2,006
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, authorized
20,000,000 shares; issued and outstanding
9,839,206 at March 31, 1996 and
9,929,315 shares at September 30, 1995 (Note 5) 98 99
Additional capital 59,717 60,009
Retained earnings (deficit) (25,228) (26,790)
-------- --------
34,587 33,318
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 77,759 $ 66,551
======== ========
</TABLE>
* Summarized from audited balance sheet included in the Company's 1995 Annual
Report on Form 10-K.
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Share Data)
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales and revenues $24,019 $22,832
Cost of services and products sold 17,351 16,378
Depreciation and amortization expense 866 785
Selling, general and administrative expenses 4,431 4,487
------- -------
OPERATING PROFIT 1,371 1,182
Interest and other income 34 24
Interest expense (271) (363)
------- -------
INCOME BEFORE INCOME TAXES 1,134 843
Income tax expense:
Current (89) (67)
Deferred (349) (301)
------- -------
(438) (368)
------- -------
NET INCOME $ 696 $ 475
======= =======
Earnings per common and dilutive common equivalent share (Note 7):
Net income $ 0.07 $ 0.05
Weighted average shares outstanding 10,014,059 9,821,472
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 6
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Share Data)
Six Months Six Months
Ended Ended
March 31, March 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales and revenues $49,929 $47,703
Cost of services and products sold 36,446 34,660
Depreciation and amortization expense 1,738 1,598
Selling, general and administrative expenses 8,700 9,008
------- -------
OPERATING PROFIT 3,045 2,437
Interest and other income (Note 6) 61 356
Interest expense (538) (784)
------- -------
INCOME BEFORE INCOME TAXES 2,568 2,009
Income tax expense:
Current (222) (183)
Deferred (784) (692)
------- -------
(1,006) (875)
------- -------
NET INCOME $ 1,562 $ 1,134
======= =======
Earnings per common and dilutive common equivalent share (Note 7):
Net income $ 0.16 $ 0.12
Weighted average shares outstanding 10,027,689 9,814,907
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 7
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in Thousands)
Six Months Six Months
Ended Ended
March 31, March 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,221 $ 5,574
-------- --------
Cash flows from investing activites:
Capital expenditures (3,342) (1,597)
Contingent purchase consideration paid (544) 0
Cash paid for acquisition of subsidiary, net of cash acquired (2,836) 0
Proceeds from notes receivable from employee 613 0
Cash paid for license agreement 0 (265)
Cash received from sale of land, buildings and equipment 72 157
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (6,037) (1,705)
-------- --------
Cash flows from financing activities:
Proceeds under revolving lines of credit and other notes payable 24,560 9,629
Proceeds from long-term debt 5,000 400
Repayments under revolving lines of credit and other notes payable (23,733) (12,274)
Repayments of long-term debt (2,617) (1,384)
Checks not yet presented for payment, net (443) 0
Cash paid for stock repurchase (Note 5) (293) 0
Other 0 7
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,474 (3,622)
-------- --------
Increase in cash and cash equivalents $ 658 $ 247
======== ========
Supplemental cash flow disclosures of
noncash investing and financing activities:
Note receivable received for sales of land and buildings $ 0 $ 497
Long-term debt and notes payable refinanced $ 0 $ 13,111
Details of the Graver Tank & Mfg. Co., Inc. acquisition follow:
Fair value of assets acquired $ 12,773 $ 0
Fair value of liabilities assumed $ 9,873 $ 0
-------- --------
Net Assets Acquired $ 2,900 $ 0
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 8
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Retained
Common Additional Earnings
Stock Capital (Deficit)
------ ---------- ---------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 $99 $60,009 $(26,790)
Net income 1,562
Repurchase of 90,109 shares (Note 5) (1) (292)
--- ------- --------
BALANCE AT MARCH 31, 1996 $98 $59,717 $(25,228)
=== ======= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE> 9
ASTROTECH INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information for commercial and industrial companies and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the three- and six-month periods ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the fiscal
year ending September 30, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1995.
The condensed consolidated financial statements include the accounts of
Astrotech International Corporation and its subsidiaries (the "Company").
Intercompany accounts and transactions have been eliminated in consolidation.
Certain amounts in the 1995 financial statements have been reclassified to
conform to the current year presentation.
2. ACQUISITION OF GRAVER TANK & MFG. CO., INC.
On March 28, 1996, the Company acquired Graver Holding Company and its
wholly-owned subsidiary, Graver Tank & Mfg. Co., Inc. (collectively "Graver").
Graver designs, manufactures and erects storage tanks and pressure vessels for
the petroleum and process industries. Graver also provides nickel-clad
installations for the air pollution industry, providing fabrication and
erection of scrubbers, chimneys, and stack liners. The base purchase price
recorded by the Company of $2,900,000 consisted of $2,750,000 in cash and
$150,000 of acquisition-related expenses. The seller is entitled to receive
additional cash proceeds of up to $1,250,000 pursuant to the terms of an
earn-out arrangement based on future profits (as defined) of Graver during each
of the three fiscal years ending September 30, 1998. In addition, the Company
repaid Graver's existing bank obligations totaling $2,420,000. A portion of
the cash consideration paid for Graver was provided through a credit facility
with Bank One, Texas, N.A. See Note 4.
The acquisition has been accounted for using the purchase method of accounting.
The results of operations of Graver commencing March 29, 1996 are included in
the condensed consolidated financial statements. Costs of the acquisition in
excess of net assets of the business acquired of approximately $870,000 are
being amortized over forty years using the straight-line method.
- 7 -
<PAGE> 10
The following unaudited pro forma information shows the results of operations
of the Company and Graver for the six months ended March 31, 1996 and 1995,
assuming the companies had combined as of October 1, 1994.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues $60,509,000 $68,586,000
Net income $ 1,018,000 $ 990,000
Net income per share $ .10 $ .10
</TABLE>
This pro forma information does not purport to be indicative of the results
that actually would have been obtained if the companies had been combined
during the periods presented and is not intended to be a projection of future
results.
3. INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method and consisted of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
---- ----
<S> <C> <C>
Raw materials and components parts $3,886,000 $3,283,000
Work in process 590,000 306,000
Finished goods 698,000 636,000
---------- ----------
$5,174,000 $4,225,000
========== ==========
</TABLE>
4. LONG-TERM DEBT
On February 28, 1995, the Company executed the Credit Facility with Bank One,
which consolidated then existing term indebtedness previously incurred at the
Company subsidiary levels and provided financing to be used for working capital
support, capital expenditures, possible acquisitions and other general
corporate purposes. On March 28, 1996, the Company executed the First
Amendment to the Credit Facility.
The First Amendment to the Credit Facility amended the Credit Facility to:
(i) Provide for a $3,000,000 acquisition loan used to purchase all
of the stock and assets of Graver Holding Company and its wholly-owned
subsidiary, Graver Tank & Mfg. Co., Inc.;
(ii) Provide for a $2,000,000 advance/term facility to finance
capital expenditures for fiscal 1996 ("1996 Advancing term loan");
(iii) Provide for an increase in the Revolving Credit Facility to
$14,000,000 to be used for working capital support and other general corporate
purposes; and
(iv) Amend certain other terms and provisions of the Credit
Facility.
In addition, during the first six months of fiscal 1996, the Company borrowed
$2,000,000 which was previously available under its 1995 capital expenditures
advancing term loan.
- 8 -
<PAGE> 11
All obligations of the Company under the Credit Facility are collateralized by
substantially all of the assets of the Company and the pledge by the Company of
the Common Stock of each of its direct subsidiaries. The obligations of the
Company are guaranteed by each direct and indirect subsidiary. The Credit
Facility contains certain covenants which provide for, among other things,
maintenance of various financial ratios. At March 31, 1996, the Company was in
compliance with all such covenants.
Long-term debt at March 31, 1996 and September 30, 1995 consisted of the
following:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Term Loan $ 9,800,000 $10,900,000
Revolving line of credit 2,895,000 1,050,000
1995 Advancing term loan 2,000,000 -
Acquisition loan 3,000,000 -
Other 90,000 107,000
----------- -----------
17,785,000 12,057,000
Less current portion 3,236,000 2,236,000
----------- -----------
$14,549,000 $ 9,821,000
=========== ===========
</TABLE>
Required principal payments on long-term debt to related parties and long-term
debt outstanding at March 31, 1996 for the remainder of fiscal 1996 and the
next five fiscal years are as follows:
<TABLE>
<S> <C>
1996 $1,700,000
1997 $3,409,000
1998 $6,222,000
1999 $3,200,000
2000 $2,850,000
2001 $ 750,000
</TABLE>
5. COMMON STOCK
During November 1995, the Company completed a program to repurchase small
shareholders' common stock at no cost to the shareholder. Through this program
the Company repurchased and retired 90,109 shares of stock at an aggregate
purchase price of $293,000.
6. OTHER INCOME
During the quarter ended December 31, 1994, the Company sold land and buildings
which resulted in a gain of $312,000.
7. EARNINGS PER COMMON SHARE
Earnings per share are computed by dividing the respective income statement
caption by the weighted average number of common and dilutive common equivalent
shares outstanding during the period.
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<PAGE> 12
8. CONTINGENCIES
A. Litigation
- - --------------
On March 19, 1996, the Company's HMT Inc. subsidiary was served with a Complaint
filed in Superior Court of California, County of Contra Costa. This matter
arises out of a tank fire which occurred in June of 1995, at a refinery in
northern California, where Company employees were replacing seals on an
aboveground storage tank. The Complaint, filed by Valerie Vega-Wright, seeks to
certify a class of persons affected by the fire under theories of negligence,
nuisance, battery, trespass and strict liability. The Complaint seeks damages
for, among other things, personal injuries and loss of property value, and is
requesting unspecified compensatory and punitive damages. The Company has
removed this litigation to the U.S. District Court for the Northern District of
California. Although this matter is in its initial stages and investigative
activities are continuing, the cause of the fire has not been determined. The
Company has insurance coverages and both the Company and its insurance carrier
are assessing the claims and related policy coverages. While the ultimate
outcome cannot now be determined because of the uncertainties which exist, the
Company intends to vigorously defend this litigation. The Company is a party to
certain other legal proceedings occurring in the ordinary course of business.
Based upon information presently available to it, the Company does not believe
that the final outcome of any of these matters will have a materially adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
B. Insurance
- - -------------
The Company's insurance program for workers' compensation, general liability
and group medical is partially self-insured. Estimated costs of claims
outstanding of $4,688,000 at March 31, 1996 under these self-insurance
agreements are included in accrued liabilities in the accompanying consolidated
balance sheet. The ultimate cost of claims outstanding could differ from
management's current estimates. In connection with the Company's insurance
programs, standby letters of credit have been issued by the Company in the
aggregate amount of $4,873,000 to cover reimbursement obligations for
self-insurance claims to be paid by the Company's insurers.
- 10 -
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
condensed consolidated financial statements and accompanying notes.
On March 28, 1996, the Company acquired Graver Holding Company and its
wholly-owned subsidiary, Graver Tank & Mfg. Co., Inc. The results of
operations of Graver commencing March 29, 1996 are included in the
condensed consolidated financial statements.
RESULTS OF OPERATIONS
Historically, the Company's second fiscal quarter results have tended to
fluctuate, principally due to climate conditions affecting some of the
Company's operations and the timing of maintenance budgets of some of the
Company's customers. Consequently, the Company's second quarter ending
March 31 typically includes lower revenues than the other three quarters.
The Company's revenues, resulting primarily from contracts related to repair
and modification to aboveground storage tanks ("ASTs") and fabrication and
erection of steel structures, are recognized on the percentage-of-completion
method. The following table presents, as a percentage of net sales and
revenues, certain selected financial data for the Company for the periods
indicated:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales and revenues 100.0% 100.0% 100.0% 100.0%
Cost of services and products sold 72.2 71.7 73.0 72.7
----- ----- ----- -----
Gross profit 27.8 28.3 27.0 27.3
Depreciation and amortization expense 3.6 3.4 3.5 3.3
Selling, general and administrative expense 18.5 19.7 17.4 18.9
----- ----- ----- -----
Operating profit 5.7 5.2 6.1 5.1
Other income .1 .1 .1 .7
Interest expense 1.1 1.6 1.1 1.6
Income tax expense 1.8 1.6 2.0 1.8
----- ----- ----- -----
Net income 2.9% 2.1% 3.1% 2.4%
===== ===== ===== =====
</TABLE>
The Company's net sales and revenues increased by $2,226,000 or 5% in the first
six months of fiscal 1996 and increased by $1,187,000 or 5% in the second
quarter of fiscal 1996 as compared to the same periods a year ago. The
increase is primarily a result of an increase in demand for the Company's tank
construction services.
The total amounts of contracts in backlog, as of March 31, 1996 and 1995, were
approximately $50,094,000 and $28,777,000, respectively, including both the
uncompleted portion of contracts in progress and contracts awarded but not yet
started. The increase was principally attributable to the addition of Graver's
backlog and
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<PAGE> 14
an increase in orders for tank construction services. The majority of the
backlog at March 31, 1996 is expected to be completed within a year.
Gross profit margin on net sales and revenues decreased from 27.3% in the first
six months of fiscal 1995 to 27.0% in the first six months of fiscal 1996 and
from 28.3% in the second quarter of fiscal 1995 to 27.8% in 1996. This was a
net result of a change in the revenue mix of the business.
Selling, general and administrative expenses decreased $308,000 or 3% from the
first six months of fiscal 1995 to fiscal 1996 due principally to the
consolidation of certain operations and a reduction in certain employee
compensation costs. Selling, general and administrative expenses, as a
percentage of net sales and revenues, decreased from 18.9% in fiscal 1995 to
17.4% for the six-month period.
The Company had operating profit of $3,045,000 for the first six months of
fiscal 1996 compared to $2,437,000 for the same period of 1995 and had operating
profit of $1,371,000 for the second quarter of fiscal 1996 compared to
$1,182,000 for the same period of 1995 as a result of the items discussed above.
Other income in the first six months of fiscal 1995 included a gain on the sale
of land and buildings of $312,000. Interest expense decreased from $784,000
during the first six months of 1995 to $538,000 in the first six months of
fiscal 1996 and from $363,000 during the second quarter of 1995 to $271,000 in
the second quarter of 1996 primarily due to decreased interest rates and the
flexibility in cash management allowed by the consolidation of the Company's
debt in March 1995.
Current income tax expense consists of state and foreign income taxes. Deferred
income taxes consist principally of federal income taxes. The Company's
effective income tax rate decreased from 44% of income before income taxes in
the first six months of fiscal 1995 to 39% in the same period of fiscal 1996.
This decrease was due to higher expected earnings in fiscal 1996, relatively
constant goodwill amortization, which is not deductible for tax purposes and an
adjustment to prior year taxes. The benefit for existing federal net operating
loss carryforwards was recorded at the beginning of fiscal 1995 when the Company
changed its method of accounting for income taxes. Therefore, although
utilization of these carryforwards reduces the Company's liability for payment
of federal income taxes, it does not benefit net income in current periods.
The Company had net income of $1,562,000 for the first six months of fiscal 1996
compared to $1,134,000 during the same period of fiscal 1995 and had net income
of $696,000 for the second quarter of fiscal 1996 compared to $475,000 for the
second quarter of fiscal 1995. The majority of the increase resulted from
higher volumes of net sales and revenues, lower selling, general and
administrative expenses and a reduction in the Company's effective tax rate.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards #123, "Accounting for Stock-Based Compensation"
("SFAS #123"). SFAS #123 establishes compensation recognition options and
disclosure requirements for stock based compensation plans. The Company is
currently evaluating the alternative accounting provisions of SFAS #123 and its
potential impact on its stock based compensation plans. As a result, at this
time, the potential impact on the Company's financial position or future
operations, if any, has not been determined.
LIQUIDITY AND SOURCES OF CAPITAL
On February 28, 1995, the Company executed the Credit Facility with Bank One,
which consolidated then existing term indebtedness previously incurred at the
subsidiary levels and provided financing to be used for working capital
support, capital expenditures, possible acquisitions and other general
corporate purposes. On March 28, 1996, the Company executed the First
Amendment to the Credit Facility.
- 12 -
<PAGE> 15
The First Amendment to the Credit Facility amended the Credit Facility to:
(i) Provide for a $3,000,000 acquisition loan used to purchase all
of the stock and assets of Graver Holding Company and its
wholly-owned subsidiary, Graver Tank & Mfg. Co., Inc.;
(ii) Provide for a $2,000,000 advance/term facility to finance
capital expenditures for fiscal 1996 ("1996 advancing term
loan");
(iii) Provide for an increase in the Revolving Credit Facility to
$14,000,000 to be used for working capital support and other
general corporate purposes; and
(iv) Amend certain other terms and provisions of the Credit Facility.
In addition, during the first six months of fiscal 1996, the Company borrowed
$2,000,000 which was previously available under its 1995 capital expenditures
advancing term loan. All obligations of the Company under the Credit Facility
are collateralized by substantially all of the assets of the Company and the
pledge by the Company of the Common Stock of each of its direct subsidiaries.
The obligations of the Company are guaranteed by each direct and indirect
subsidiary. The Credit Facility contains certain covenants which provide for,
among other things, maintenance of various financial ratios. At March 31,
1996, the Company was in compliance with all such covenants.
Cash provided by operating activities was $4,221,000 for the first six months
of fiscal 1996, as compared to $5,574,000 for the first six months of fiscal
1995. The net cash provided in the current year resulted from net cash inflows
from net income plus non-cash items of $4,088,000 and net cash inflows due to
changes in working capital items, principally the timing of payments for
contract costs.
Cash used in investing activities of $6,037,000 for the first six months of
fiscal 1996 was primarily used for capital expenditures and the acquisition of
Graver. Capital expenditures during the first six months of fiscal year 1996
totaled $3,342,000, compared to last year's expenditures of $1,597,000. The
Company has currently budgeted an additional $2.5 million for capital
expenditures during the remainder of fiscal 1996 including $1.1 million
principally for machinery and equipment, $1.0 million for tanks held for lease,
$200,000 for a new computer system, including hardware and software and
$200,000 for facility improvements. The Company expects to be able to finance
these expenditures with available working capital and credit facilities.
Net cash provided by financing activities of $2,474,000 in the first six months
of fiscal 1996 was primarily a result of borrowing for the acquisition of
Graver and net borrowings under the Company's revolving line of credit and 1995
capital expenditure advancing term loan offset by the payment of Graver's
existing bank obligations totaling $2,420,000 and regularly scheduled payments
on long-term debt. During November 1995, the Company completed a program to
repurchase small shareholders' common stock at no cost to the shareholder.
Through this program the Company repurchased and retired 90,109 shares of stock
at an aggregate purchase price of $293,000
The Company believes that its existing funds, amounts generated by operations,
and amounts available for borrowing under its credit facility with Bank One
will be sufficient to meet its working capital needs through fiscal 1996.
Management continues to review acquisition opportunities. It is anticipated
that any significant acquisition will require acquisition financing and will
require the consent of Bank One. No assurances can be made that any such
acquisition will be made, or that any such financing will be obtained on terms
and conditions satisfactory to the Company.
- 13 -
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 19, 1996, the Company's HMT Inc. subsidiary was served with a Complaint
filed in Superior Court of California, County of Contra Costa. This matter
arises out of a tank fire which occurred in June of 1995, at a refinery in
northern California, where Company employees were replacing seals on an
aboveground storage tank. The Complaint, filed by Valerie Vega-Wright, seeks to
certify a class of persons affected by the fire under theories of negligence,
nuisance, battery, trespass and strict liability. The Complaint seeks damages
for, among other things, personal injuries and loss of property value, and is
requesting unspecified compensatory and punitive damages. The Company has
removed this litigation to the U.S. District Court for the Northern District of
California. Although this matter is in its initial stages and investigative
activities are continuing, the cause of the fire has not been determined. The
Company has insurance coverages and both the Company and its insurance carrier
are assessing the claims and related policy coverages. While the ultimate
outcome cannot now be determined because of the uncertainties which exist, the
Company intends to vigorously defend this litigation. The Company is a party to
certain other legal proceedings occurring in the ordinary course of business.
Based upon information presently available to it, the Company does not believe
that the final outcome of any of these matters will have a materially adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended March 31, 1996. Report on Form 8-K was filed on April 11,
1996 reporting (i) the acquisition of Graver Tank & Mfg. Co., Inc. and
(ii) the First amendment to the Credit Facility with Bank One, Texas,
N.A.
- 14 -
<PAGE> 17
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 officers thereunto duly authorized.
ASTROTECH INTERNATIONAL CORPORATION
May 10, 1996 By: /s/ RAYMOND T. ROYKO
-----------------------
Raymond T. Royko
Vice President and Secretary
By: /s/ HELEN VARDY GRICKS
-----------------------
Helen Vardy Gricks
Treasurer and
Principal Accounting Officer
- 15 -
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<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
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