<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 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 September 28, 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 #0-18018
AEROVOX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 76-0254329
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 Faunce Corner Road, North Dartmouth, Massachusetts 02747
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 995-8000
--------------
Registrant's telephone number
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
At September 28, 1996, 5,312,695 shares of registrant's common stock (par value,
$1.00) were outstanding.
<PAGE>
AEROVOX INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 28, Sept 30, Sept 28, Sept 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C>
Net sales $ 29,285 $ 27,678 $ 94,479 $ 98,556
Cost of sales 24,698 24,604 82,532 83,505
---------- ---------- ---------- ----------
Gross margin 4,587 3,074 11,947 15,051
Selling, general and administrative expenses 3,830 3,355 12,833 11,507
---------- ---------- ---------- ----------
Income (loss) from operations 757 (281) (886) 3,544
Other income (expense):
Interest expense (525) (615) (1,818) (1,697)
Other income (expense) 160 134 54 524
---------- ---------- ---------- ----------
Income (loss) before income taxes 392 (762) (2,650) 2,371
Provision (benefit) for income taxes 169 (356) (855) 852
---------- ---------- ---------- ----------
Net income (loss) $ 223 $ (406) $ (1,795) $ 1,519
========== ========== ========== ==========
Net income (loss) per share $ 0.04 $ (0.08) $ (0.34) $ 0.28
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
AEROVOX INCORPORATED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Sept. 28, Dec. 30,
1996 1995
----------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 517 $ 573
Accounts receivable, net 19,315 19,588
Inventories 22,011 22,630
Prepaid expenses and other current assets 1,149 1,073
Deferred income taxes 1,792 885
-------------- --------------
Total current assets 44,784 44,749
Property, plant and equipment,
net of accumulated depreciation 40,447 41,251
Deferred income taxes 2,683 2,290
Other assets 281 401
-------------- --------------
Total assets $ 88,195 $ 88,691
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,703 $ 11,270
Accrued expenses 7,029 3,339
Current maturities of long-term debt 3,654 3,205
Income taxes 873 508
-------------- --------------
Total current liabilities 21,259 18,322
Deferred income taxes 6,731 6,727
Industrial revenue bond 2,278 2,573
Long-term debt less current maturities 23,083 25,132
Other liabilities 1,337 1,072
Stockholders' equity
Common stock 5,313 5,299
Additional paid-in capital 831 769
Retained earnings 27,693 29,488
Foreign currency translation adjustment (330) (691)
-------------- --------------
Total stockholders' equity 33,507 34,865
-------------- --------------
Total liabilities and stockholders' equity $ 88,195 $ 88,691
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
AEROVOX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------
Sept. 28, Sept. 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,795) $ 1,519
Adjustments to reconcile to cash provided by (used for)
operating activities:
Depreciation and amortization 3,484 3,165
Deferred income taxes (1,296) 3
Changes in operating assets and liabilities:
Accounts receivable 273 (3,451)
Inventories 619 (2,236)
Prepaid expenses and other current assets (76) (465)
Accounts payable (1,567) 178
Accrued expenses 3,690 476
Income taxes payable 365 364
--------- --------
Net cash provided by (used for) operating activities 3,697 (447)
--------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (2,680) (6,323)
Other 746 23
--------- --------
Net cash used in investing activities (1,934) (6,300)
--------- --------
Cash flows from financing activities:
Net borrowings (repayments) under line of credit (810) 5,296
Long-term debt borrowings 1,500 3,500
Long-term debt repayment (2,585) (1,957)
Common stock issued 76 230
--------- --------
Net cash provided by (used for) financing activities (1,819) 7,069
--------- --------
Increase (decrease) in cash and cash equivalents (56) 322
Cash and cash equivalents at beginning of period 573 102
--------- --------
Cash and cash equivalents at end of period $ 517 $ 424
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,729 $ 1,763
========= ========
Cash paid during the period for income taxes $ 310 $ 562
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
AEROVOX INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(1) The consolidated financial statements are unaudited, and in the opinion of
management, reflect all adjustments necessary for a fair presentation of
the financial statements for the interim periods.
The financial statements are presented as permitted by Form 10Q and do not
contain certain information included in the Company's annual statements and
notes.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
Three Months Ended September 28, 1996 as compared to Three Months Ended
September 30, 1995.
Net sales for the third quarter of 1996 totaled $29,285,000 compared to
$27,678,000 for the third quarter of 1995, an increase of $1,607,000 (5.8%). A
rebound in demand for aluminum electrolytic capacitors, strong orders from
manufacturers of lighting products and appliances, particularly microwave ovens,
and shipment of a large order of energy discharge capacitors to Korea for use in
rock crushing equipment contributed to the quarterly sales increase.
Gross margins for the third quarter of 1996 totaled $4,587,000 (15.7% of
net sales) compared to $3,074,000 (11.1% of net sales) for the corresponding
quarter in 1995. Selling, general and administrative (SG&A) expenses for the
quarter totaled $3,830,000 (13.1% of net sales) versus $3,355,000 in the third
quarter of 1995 (12.1% of net sales). Certain expenses in SG&A incurred during
the quarter were attributable to the addition of two new officers to the Company
to replace officers retiring at year end.
Interest expense for the third quarter was $525,000 compared to $615,000 in
the third quarter of 1995. Other income totaled $160,000 compared to $134,000
for the corresponding quarter of 1995.
Income (loss) before income taxes was $392,000 (1.3% of net sales) compared
to a loss of a $762,000 (a negative 2.8% of net sales) for the third quarter of
1995. The provision for income taxes for the third quarter of 1996 was $169,000
versus a tax benefit of $356,000 in the third quarter of 1995. Net income of
$223,000 ($0.04 per common share) compared to a net loss reported in the third
quarter of 1995 of $406,000 ($0.08 per share per common share).
Results of Operations
Nine Months Ended September 28, 1996 as compared to Nine Months Ended September
30, 1995.
Net sales for the first nine months of 1996 totaled $94,479,000 compared to
$98,556,000 for the corresponding nine months of 1995, a $4,077,000 (4.1%)
decrease. General softness in the lighting marketplace earlier in the year,
slowness in the buildup of demand for electrolytic capacitors produced in the
Company's Mexican facility, a non-repeated government program (produced in
1995), and price compression (primarily affecting day-to-day bid business) all
contributed to a shortfall in net sales between the corresponding periods.
Cumulative nine months results were impacted by the special provision
established by the Company during the second quarter of 1996 to cover warranty
claims, unusable inventories primarily
<PAGE>
related to operations in Mexico, severance costs, elimination of certain benefit
programs, and an increase in doubtful accounts receivable. The after-tax impact
to operations of the Company totaled $3,465,000 (or $.65 per common share) and
was accounted for, as follows:
<TABLE>
<CAPTION>
Nine Months, 1996
-----------------
Before Special
(In $000's) Provision Provision As Reported
--------- --------- -----------
<S> <C> <C> <C>
Net Sales $94,479 -- $94,479
Cost of sales 78,283 $ 4,249 82,532
------ ------ ------
Gross margin 16,196 /17.1%/ (4,249) 11,947 /12.6%/
Selling, general and
administrative expenses 12,035 /12.7%/ 798 12,833 /(13.6%)/
------ ------ ------
Income (loss) from operations 4,161 /4.4%/ (5,047) (886) /(.9%)/
Other income (expense):
Interest expense (1,818) -- (1,818)
Other income (expense) 343 (289) (54)
------ ------ ------
Income (loss) before income taxes 2,686 /2.8%/ (5,336) (2,650) /(2.8%)/
Provision (benefit) for income taxes 1,016 (1,871) (855)
------ ------ ------
Net income (loss) $ 1,670 /1.8%/ $(3,465) $(1,795) /(1.9%)/
====== ====== ======
Net income (loss) per share $ 0.31 $ (0.65) $ (0.34)
====== ====== ======
</TABLE>
Year-to-date gross margins before the special provision totaled $16,196,000
(17.1% of net sales) and $11,947,000 (12.6% of net sales) after special
provision adjustments compared to $15,051,000 (15.3% of net sales) for the
corresponding period of 1995. Selling, general and administrative expenses for
the first nine months of 1996 totaled $12,035,000 before the special provision
(12.7% of net sales) and $12,833,000 after provision adjustments (13.6%)
compared to $11,507,000 for the first nine months of 1995 (11.7% of net sales).
Interest expenses totaled $1,818,000 for the first nine months compared to
$1,697,000 for the first nine months of 1995. Other income was $342,000 prior to
special provision adjustments and $54,000 after the provision compared to
$524,000 for the first nine months of 1995.
Income (loss) before taxes and the special provision was $2,685,000 (2.8%
of net sales) and ($2,650,000) after adjustments for the special provision (a
negative 2.8% of net sales) compared to income before taxes of $2,371,000 for
the first nine months of 1995 (2.4% of net sales). Year-to-date income tax
benefits totaled $855,000 in comparison to a tax provision of $852,000 for the
first nine months of 1995. A net loss of $1,795,000 (a negative $0.34 per
common share) compares to a net income of $1,519,000 ($0.28 per common share)
for the corresponding period in 1995.
<PAGE>
Liquidity and Capital Resources
Cash at the end of the third quarter, 1996, totaled $517,000 compared to
$424,000 at the end of the third quarter of 1995. Working capital totaled
$23,525,000 on September 28, 1996, versus $27,061,000 at the end of the third
quarter of 1995; a reduction of $3,536,000, primarily a result of the reserve
adjustments taken by the Company during the second quarter of 1996. Current
ratio of 2.1:1 compares to a ratio of 2.5:1 at end of the third quarter in
1995. Approximately $2,680,000 of expenditures were made during the first nine
months of 1996 for property, plant and equipment compared to $6,323,000
expended during the first nine months of 1995. The ratio of total liabilities to
net worth was 1.63:1 at the end of the first nine months of 1996 compared to
1.50:1 at the end of the corresponding period in 1995.
At the end of the third quarter of 1996, the Company had borrowings of
$29,015,000 versus $30,779,000 for the comparable period in 1995, a reduction of
$1,764,000.
On November 1, 1996, a Forth Amendment to the Revolving Credit Agreement
was entered into between the Bank of Boston and the Company which amended
financial covenants. At the end of the third quarter of 1996, the Bank of Boston
covenant for an interest coverage ratio of no less than 2.50:1 (earnings before
interest and income taxes divided by interest expense) was not met. The bank was
advised and amended the related covenant for the period as reflected in the
amended Agreement. All other covenants required by the Agreement between the
bank and the Company have been met. At September 28,1996, total borrowings
outstanding under this Agreement were approximately $19,480,700 compared to
approximately $19,417,000 on September 30, 1995.
The Company also has a term line of credit with the CIT Group, an
equipment financing company. This line of $10,000,000, collateralized by
certain equipment, has annual interest rates ranging from 7.4% to 8.2% and
maturing at various dates to January 10, 2001. At September 28, 1996,
borrowings outstanding under this agreement were $6,866,000 compared to
$8,361,000 outstanding at the end of the third quarter of 1995.
A ten-year Industrial Revenue Bond was issued by the Massachusetts
Industrial Finance Agency in July 1982 to finance the acquisition of equipment.
The bond was transferred to another purchaser in June, 1992. Principal and
interest, at an annual rate of 7.42%, are payable monthly to July 1, 2002. At
September 28, 1996, the bond balance outstanding under this agreement was
$2,669,000 compared to $3,002,000 at September 30, 1995.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
6(a). Exhibits:
4.4.5 Fourth Amendment, dated November 1, 1996, to Amended and Restated
Revolving Credit Agreement, dated July 8, 1993, between the Company and the
First National Bank of Boston.
<PAGE>
Note: Registrant agrees to furnish to the Securities and Exchange
commission, upon request, a copy of any other instrument with respect to
long-term debt of the registrant and its subsidiaries. Such other instruments
are not filed herewith because no such instrument relates to outstanding debt in
an amount greater than 10% of the total consolidated assets of the registrant
and its subsidiaries.
6(b). Reports on Form 8-K: None filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AEROVOX INCORPORATED
DATE November 8, 1996 BY /s/JEFFREY A. TEMPLER
------------------ Jeffrey A. Templer
Senior Vice President/Finance
<PAGE>
Exhibit 4.4.5
FOURTH AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
--------------------------
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
(this "Fourth Amendment") is made and entered into as of the 1st day of
November, 1996, by and among AEROVOX INCORPORATED, a Delaware corporation having
its principal place of business at 370 Faunce Corner Road, North Dartmouth,
Massachusetts 02747 (the "Borrower"), BHC AEROVOX, LTD., a corporation organized
under the laws of the United Kingdom (the "Guarantor"), and THE FIRST NATIONAL
BANK OF BOSTON (the "Bank"), a national banking association having its principal
place of business at 100 Federal Street, Boston, Massachusetts 02110.
WHEREAS, the Borrower, Aerovox Aero M, Inc., (predecessor in interest to
the Guarantor under the Loan Documents) and the Bank entered into an Amended and
Restated Revolving Credit Agreement dated as of July 8, 1993, and amended as of
August 30, 1994, and December 29, 1995 and May 15, 1996 (as further amended and
in effect from time to time, the "Credit Agreement") pursuant to which the Bank
extended credit to the Borrower on the terms set forth therein;
WHEREAS, the Bank, the Borrower and the Guarantor have agreed to amend the
Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition have the
-----------
meanings ascribed to them in the Credit Agreement.
2. Amendment to (S)8.1 of the Credit Agreement. Section 8.1 of the Credit
---------
Agreement is hereby deleted in its entirety and the following substituted in
place thereof.
"(S)8.1. Debt to Worth Ratio. As at the end of any fiscal quarter
-------------------
commencing with the fiscal quarter ending September 28, 1996, the ratio of
Consolidated Total Liabilities to Consolidated Tangible Net Worth shall be
less than the stated ratio for the respective periods set forth below:
<TABLE>
<CAPTION>
-------------------------------------
Period Ratio
------ -----
-------------------------------------
<S> <C>
fiscal quarters ending 1.75:1
9/28/96 and 12/28/96
-------------------------------------
Thereafter 1.50:1"
-------------------------------------
</TABLE>
<PAGE>
- 2 -
3. Amendment to (S)8.2 of the Credit Agreement. Section 8.2 of the Credit
-------------------------------------------
Agreement is hereby deleted in its entirety and the following substituted in
place thereof:
"8.2. Interest Coverage Ratio. As of the end of any fiscal quarter
-----------------------
commencing with the fiscal quarter ending September 28, 1996, the ratio of
EBIT to Consolidated Total Interest Expense (a) for the fiscal quarter
ending on such date with respect to the fiscal quarters ending September
28, 1996 and December 28, 1996, and (b) for the fiscal year-to-date on a
cumulative basis with respect to any fiscal quarter ending after December
28, 1996 shall not be less than the stated ratio for the fiscal quarters
ending during the respective periods set forth below:
------------------------------------
Period Ratio
------ -----
------------------------------------
fiscal quarter ending 1.20:1
9/28/96
------------------------------------
fiscal quarter ending 2.75:1
12/28/96
------------------------------------
Thereafter 3.75:1"
------------------------------------
4. Ratification, etc.
-----------------
Except as expressly amended hereby, the Credit Agreement, the other Loan
Documents and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. This Fourth Amendment and the Credit Agreement shall hereafter be
read and construed together as a single document, and all references in the
Credit Agreement or any related agreement or instrument to the Credit Agreement
shall refer to the Credit Agreement as amended by this Fourth Amendment. By
executing this Fourth Amendment where indicated below, the Guarantor hereby
ratifies and confirms its guaranty of the Obligations, and acknowledges and
consents to the terms of this Fourth Amendment.
6. GOVERNING LAW.
-------------
THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Fourth Amendment may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. Complete sets of counterparts shall be lodged with the Bank.
<PAGE>
- 3 -
8. Effectiveness. This Fourth Amendment shall become effective upon its
-------------
execution and delivery by the respective parties hereto.
9. Entire Agreement. The Credit Agreement as amended by this Fourth
----------------
amendment represents the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
IN WITNESS WHEREOF, the undersigned have duly executed this Fourth
Amendment under seal as of the date first set forth above.
THE BORROWER:
------------
AEROVOX INCORPORATED
By: /s/ JEFFREY A. TEMPLER
-----------------------------
Title: Sr. V.P. and CFO
--------------------------
THE GUARANTOR:
--------------
BHC AEROVOX, LTD.
By: /s/ RONALD F. MURPHY
-----------------------------
Title: V.P./Director
--------------------------
THE BANK:
--------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ PAULINE J. MOZZONE
-----------------------------
Title: Vice President
--------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 517
<SECURITIES> 0
<RECEIVABLES> 20,594
<ALLOWANCES> 1,279
<INVENTORY> 22,011
<CURRENT-ASSETS> 44,784
<PP&E> 71,718
<DEPRECIATION> 31,271
<TOTAL-ASSETS> 88,195
<CURRENT-LIABILITIES> 21,259
<BONDS> 0
0
0
<COMMON> 5,313
<OTHER-SE> 28,194
<TOTAL-LIABILITY-AND-EQUITY> 88,195
<SALES> 29,285
<TOTAL-REVENUES> 29,285
<CGS> 24,698
<TOTAL-COSTS> 28,424
<OTHER-EXPENSES> (160)
<LOSS-PROVISION> 104
<INTEREST-EXPENSE> 525
<INCOME-PRETAX> 392
<INCOME-TAX> 169
<INCOME-CONTINUING> 223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
