<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 June 28, 1997
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.)
740 Belleville Avenue, New Bedford, MA 02745
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(Address of principal executive offices) (Zip Code)
(508) 994-9661
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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 June 28, l997, 5,379,003 shares of registrant's common stock (par value,
$1.00) were outstanding.
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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
financial statements and notes.
(2) During 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 "Earnings Per Share." This
statement specifies the computation, presentation and disclosure for
basic and dilutive earnings per share. The Company will implement the
standard in its fiscal year ended December 27, l997. Using the new
method for computing earnings per share, basic earning per share and
dilutive earnings per share would not be materially affected.
(3) The 1996 results have been restated for the change in accounting for
inventories from LIFO to FIFO.
<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 June 28, 1997 compared to Three Months Ended June 29, l996.
Net sales for the second quarter of 1997 totaled $34,185,000 compared
to $32,439,000 for the second quarter of 1996, an increase of $1,746,000 (5.4%).
In North America the increase included a 50% improvement in sales of aluminum
electrolytic products compared to the same period in 1996. Shipments of AC
capacitors, however, dropped sharply in June as the unusually cool spring and
early summer in the Northeast caused customers who manufacture air conditioners
to push back and cancel orders.
Gross margin for the second quarter of 1997 totaled $4,867 (14.2% of
net sales) compared to $5,668,000 (17.5% of net sales) before reserves recorded
in the second quarter of 1996 and $1,419,000 (4.4% of net sales) after reserve
and LIFO adjustments. Despite the increase in second quarter 1997 revenues
compared to the same period in 1996, gross margin was impacted by several
factors: Product mix (the decline in AC capacitor sales to both unitary and room
air conditioning customers versus an increase in lower margin electrolytic
capacitor sales) adversely affected margins. Pricing pressures, particularly in
Europe where further strengthening of the pound sterling has forced the company
to cut into margins as it attempts to stay competitive at key European accounts,
had a negative impact. Expenses related to ongoing operational improvements in
the company's North American operations also impacted second quarter margins.
Selling, general and administrative (SG&A) expenses for the quarter
totaled $3,916,000 (11.5% of net sales) versus $4,649,000 (14.3% of net sales),
after special charges to reserves and LIFO adjustments, in the second quarter of
1996. Before these adjustments, SG&A expense for the second quarter of 1996 was
$3,851,000 (11.9% of net sales).
Interest expense for the second quarter was $491,000 compared to
$576,000 in the same period of 1996. Other income of $93,000 compared to expense
of $356,000 for the corresponding quarter of 1996.
Income before income taxes was $553,000 (1.6% of net sales) compared to
a loss of $4,162,000 (a negative 12.8% of net sales) for the second quarter of
1996, including adjustments, and $1,174,000 (3.6 % net sales) before
adjustments. The provision for income taxes for the second quarter of 1997 was
$213,000 versus a benefit of $1,484,000 in the second quarter of 1996. Net
income of $340,000 ( $0.06 per common share) compared to a net loss in the
second quarter of 1996, including adjustments, of $2,678,000 ($0.50 per common
share).
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Liquidity and Capital Resources
Cash at the end of second quarter of 1997 totaled $762,000 compared to
$292,000 at the end of the second quarter of 1996. Working capital totaled
$23,873,000 on June 28, 1997, and was $24,576,000 at the end of the second
quarter of 1996. Current ratio of 2.2:1 compared to a ratio of 2.4:1 at June 29,
1996. Expenditures for equipment during the first half of 1997 were $1,723,000,
compared to $1,914,000 during the first half of 1996.
At the end of the second quarter of 1997, the Company had borrowings of
$22,755,000 versus $30,124,000 at the end of the second quarter of 1996, a
reduction of $7,369,000.
The Company maintains a Revolving Credit Agreement with the Bank of
Boston, which as amended, provides a credit line of approximately $22 million to
the Company, including a 4,400,000 British pounds sterling ($7,323,800 at
quarter-end exchange rates) line to BHC Aerovox Ltd., the Company's wholly-owned
subsidiary in England. At June 28, l997, the Company was in compliance with all
financial and other covenants specified by this Agreement, as modified by the
Fifth Amendment to this Agreement of February 14, l997. On June 28, l997, total
borrowings outstanding under the Agreement were approximately $14,982,000
compared to approximately $19,721,000 on June 29, l996.
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 June 28, 1997, borrowings outstanding
under this agreement were $5,393,000 compared to $7,637,000 outstanding at the
end of the second quarter of 1996.
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. On
June 28, 1997, the bond balance outstanding under this agreement was $2,380,000
compared to $2,765,000 on June 29, l996.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
6 (a). The Company's Annual Meeting of Stockholders was held on Tuesday, May 13,
l997, in Boston, MA. Proxies for the meeting were solicited pursuant to
Regulation 14A.
6 (b). There was no solicitation in opposition to the nominees listed in the
proxy statement and all such nominees were elected.
6 (c). At the Annual Meeting of Stockholders, the following three Class II
Directors were elected to serve until the Annual Meeting in the year 2000. The
total vote for each nominee follows:
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<TABLE>
<CAPTION>
Total Vote
Total Vote Withheld
for Each from Each
Director Director
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<S> <C> <C>
John F. Brennan 4,997,318 22,800
Sherel D. Horsley 4,997,342 22,776
Benedict P. Rosen 4,997,291 22,827
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
6 (a). Exhibits: None
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 July 31, l997 BY /S/ JEFFREY A. TEMPLER
------------------- Jeffrey A. Templer
Senior Vice President/Finance
<PAGE>
AEROVOX INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 34,185 $ 32,439 $ 66,801 $ 66,004
Cost of sales 29,318 31,020 56,749 58,769
-------- -------- -------- --------
Gross margin 4,867 1,419 10,052 7,235
Selling, general and administrative expenses 3,916 4,649 7,683 8,328
-------- -------- -------- --------
Income(loss) from operations 951 (3,230) 2,369 (1,093)
Other income(expense):
Interest expense (491) (576) (975) (1,293)
Other income(expense) 93 (356) 57 (356)
-------- -------- -------- --------
Income(loss) before income taxes 553 (4,162) 1,451 (2,742)
Provision for income taxes 213 (1,484) 598 (919)
-------- -------- -------- --------
Net income(loss) $ 340 $ (2,678) $ 853 $ (1,823)
======== ======== ======== ========
Net income(loss) per share 0.06 (0.50) 0.16 (0.34)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
AEROVOX INCORPORATED
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
June 28, Dec 28,
1997 1996
-------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 762 $ 864
Accounts receivable, net 19,579 16,096
Inventories 19,305 20,910
Prepaid expenses and other current assets 1,013 1,044
Deferred income taxes 3,608 3,608
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Total current assets 44,267 42,522
Property, plant and equipment,
net of accumulated depreciation 39,595 40,530
Deferred income taxes 1,651 1,651
Other assets 169 273
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Total assets $ 85,682 $ 84,976
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,427 $ 8,298
Accrued expenses 6,459 5,886
Current maturities of long-term debt 2,787 3,552
Income taxes 721 210
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Total current liabilities 20,394 17,946
Deferred income taxes 8,102 8,151
Industrial revenue bond 1,970 2,175
Long-term debt less current maturities 17,998 20,335
Other liabilities 1,167 1,296
Stockholders' equity:
Common stock 5,379 5,315
Additional paid-in capital 1,017 842
Retained earnings 29,634 28,781
Foreign currency translation adjustment 21 135
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Total stockholders' equity 36,051 35,073
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Total liabilities and stockholders' equity $ 85,682 $ 84,976
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
AEROVOX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 28, June 29,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income(loss) $ 853 $ (1,817)
Adjustments to reconcile net income to cash
provided by(used in) operating activities:
Depreciation 2,507 2,395
Deferred income taxes (11) (1,300)
Changes in operating assets and liabilities:
Accounts receivable (3,542) 907
Inventories 1,535 521
Prepaid expenses and other current assets 36 (230)
Accounts payable 2,136 (1,037)
Accrued expenses 571 1,980
Income taxes payable 493 354
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Net cash provided by operating activities 4,578 1,773
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Cash flows from investing activities:
Acquisition of property, plant and equipment (1,723) (1,914)
Other (18) 588
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Net cash used in investing activities (1,741) (1,326)
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Cash flows from financing activities:
Proceeds from employee stock purchase
plan and exercise of stock options 239 62
Net borrowings/(repayments) under line of credit (2,321) (1,716)
Long-term debt borrowings 946 1,500
Long-term debt repayment (1,813) (568)
------------ ------------
Net cash provided by (used in) financing activities (2,949) (722)
Effects of exchange rate on cash 10 (6)
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Increase (decrease) in cash (102) (281)
Cash beginning of period 864 573
------------ ------------
Cash at end of period $ 762 $ 292
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 970 $ 1,173
============ ============
Cash paid during the period for income taxes $ 220 $ 220
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 762
<SECURITIES> 0
<RECEIVABLES> 20,283
<ALLOWANCES> 704
<INVENTORY> 19,305
<CURRENT-ASSETS> 44,267
<PP&E> 74,767
<DEPRECIATION> 35,172
<TOTAL-ASSETS> 85,682
<CURRENT-LIABILITIES> 20,394
<BONDS> 0
0
0
<COMMON> 5,379
<OTHER-SE> 30,672
<TOTAL-LIABILITY-AND-EQUITY> 85,682
<SALES> 34,185
<TOTAL-REVENUES> 34,185
<CGS> 29,318
<TOTAL-COSTS> 33,175
<OTHER-EXPENSES> (93)
<LOSS-PROVISION> 59
<INTEREST-EXPENSE> 491
<INCOME-PRETAX> 553
<INCOME-TAX> 213
<INCOME-CONTINUING> 340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
