<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 March 28, l998
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
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(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 March 28, 1998, 5,385,409 shares of registrant's common stock (par value,
$1.00) were outstanding.
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AEROVOX INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
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March 28, March 29,
1998 l997
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<S> <C> <C>
Net sales $29,528 $32,616
Cost of sales 24,301 26,768
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Gross margin 5,227 5,848
Selling, general and administrative expenses 4,452 4,430
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Income from operations 775 1,418
Other income (expense):
Interest expense (405) (484)
Other income (expense) 92 (36)
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Income before income taxes 462 898
Provision for income taxes 137 385
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Net income $ 325 $ 513
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Basic earnings per share $ 0.06 $ 0.10
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Diluted earnings per share $ 0.06 $ 0.10
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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AEROVOX INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 28, December 27,
1998 l997
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 308 $ 693
Accounts receivable, net 17,383 14,249
Inventories 18,861 18,176
Prepaid expenses and other current assets 847 637
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Total current assets 37,399 33,755
Property, plant and equipment, net of accumulated
depreciation 31,309 32,263
Deferred income taxes 5,412 5,385
Other assets 156 156
Total assets $74,276 $71,559
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,141 $10,351
Accrued compensation and related expenses 2,766 2,887
Other accrued expenses 3,029 3,030
Current maturities of long-term debt 1,622 1,909
Income taxes 468 362
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Total current liabilities 19,026 18,539
Deferred income taxes 5,468 5,446
Industrial revenue bond 1,640 1,750
Long-term debt less current maturities 17,236 14,973
Reserve for evironmental costs and plant remediation 6,033 6,033
Other liabilities 768 1,052
Stockholders' equity:
Common stock 5,385 5,384
Additional paid-in capital 1,041 1,037
Retained earnings 17,607 17,282
Foreign currency translation adjustment 72 63
Total stockholders' equity 24,105 23,766
Total liabilities and stockholders' equity $74,276 $71,559
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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AEROVOX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 28, MARCH 29,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 325 $ 513
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation 1,173 1,219
Deferred income taxes (8) (11)
Changes in operating assets and liabilities:
Accounts receivable (3,107) (2,856)
Inventories (698) 461
Prepaid expenses and other current assets (193) (4)
Accounts payable 797 1,797
Accrued expenses (59) 284
Reserve for Environmental/Plan Remediation (54) 0
Income taxes payable 102 332
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Net cash provided by (used in) operating
activities (1,722) 1,735
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Cash flows from investing activities:
Acquisition of property, plant and equipment (232) (883)
Other (242) (104)
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Net cash used in investing activities (474) (987)
Cash flows from financing activities:
Proceeds from employee stock purchase
plan and exercise of stock options 5 40
Net borrowings (repayment) under line
of credit 2,544 (186)
Repayment of long-term debt (695) (931)
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Net cash provided by (used in) financing
activities 1,854 (1,077)
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Effects of exchange rate on cash (43) 25
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Increase (decrease) in cash (385) (304)
Cash beginning of period 693 864
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Cash at end of period $ 308 $ 560
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Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $ 400 $ 461
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Cash paid during the period for income
taxes $ 69 $ 84
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</TABLE>
The accompanying notes are integral part of the financial statements.
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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) Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130 ("SFAS 130"), "Reporting Comprehensive Income."
This Statement establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or stockholders'
equity. The Company's comprehensive earnings were as follows:
<TABLE>
<CAPTION>
(In Thousands) For the Three Months
Ended March 28
1998 1997
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<S> <C> <C>
Net Income $325 $514
Foreign currency translation adjustment 9 (246)
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Total comprehensive income $334 $268
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</TABLE>
(3) In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, accounting for the costs of
computer software developed or obtained for internal use. The Company does
not believe that this pronouncement will have a material impact on its
business or results of operations.
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(4) Earnings Per Share (Basic and Diluted)
Basic EPS is computed by dividing income available to common
stockholders (the numerator) by the weighted-average number of common
shares outstanding (the denominator). Diluted EPS is computed by dividing
income available to common stockholders (the numerator) by the weighted-
average number of common shares outstanding plus potential dilutive common
shares under treasury stock method.
<TABLE>
<CAPTION>
MARCH 28, 1998 MARCH 29, 1997
- ------------------------------------------------------------------------------------------------------
Net Shares Per share Net Shares Per share
income amount income amount
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER
SHARE:
$325 5,384,894 $0.06 $514 5,319,898 $0.10
- ------------------------------------------------------------------------------------------------------
EFFECT OF DILUTIVE
SECURITIES:
- ------------------------------------------------------------------------------------------------------
Options 32,017 69,655
- ------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER
----------------------------------------------------------------------------------
SHARE: $325 5,416911 $0.06 $514 5,389,553 $0.10
- ------------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 409,875 shares of common stock at prices ranging from
$4.500 to $9.625 per share were outstanding at March 28, l998 but were not
included in the computation of diluted earnings per share because the
exercise price of the options was greater than the average market price of
common shares. Options to purchase 155,000 shares of common stock at prices
ranging from $3.00 to $4.00 per share were outstanding at March 28, 1998
and were included in the calculation of dilutive options under the treasury
stock method, because the options were dilutive.
Options to purchase 366,750 shares of common stock at prices
ranging from $5.000 to $9.625 per share were outstanding at March 29, 1997
but were not included in the computation of diluted earnings per share
because the exercise price of the options was greater than the average
market price of common shares. Options to purchase 210,125 shares of
common stock at prices ranging from $3.00 to $5.00 per share were
outstanding at March 29, 1997 and were included, in the calculation of
dilutive options under the treasury stock method, because they were
dilutive.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 131 Segment Reporting ("SFAS
131") which establishes standards for segment reporting in a full set of
general purpose financial statements. Management has not yet evaluated the
effects of this change on its reporting of income. The Company will adopt
SFAS 131 for its fiscal year ending December 26, 1998.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three Months Ended March 28, l998 compared to Three Months Ended March 29, l997.
Net sales for the first quarter of 1998 totaled $29,528,000 compared to
$32,616,000 for the first quarter of 1997, a decrease of $3,090,000 or 9.5%.
That decrease included an 18% decline in revenues from North American film
capacitor product lines except the Company's automated AeroMet II motor run
product line. Lower volumes and prices caused by intense competition, and a
general reduction in demand and the loss of certain accounts to competition
accounted for the decline in the film capacitor business. First quarter 1998
shipments of aluminum electrolytic capacitors from the Company's subsidiary in
England increased approximately 11.8% over the same period in 1997. First
quarter 1998 shipments from the Company's plant in Juarez, Mexico, were
comparable to the same period in 1997.
Gross margin for the first quarter of 1998 totaled $5,227,000 or 17.7% of
net sales compared to $5,848,000 or 17.9% of net sales, for the same period in
1997. Despite lower volumes and prices, gross margin was comparable to the first
quarter of 1997, reflecting a reduction of $1,700,000 in manufacturing labor and
overhead expenses compared to the same period in 1997.
Selling, general and administrative expenses for the first quarter of 1998
totaled $4,452,000 or 15.1% of net sales versus $4,431,000 or 13.6% of net
sales, for the same period in 1997. The increase is attributable to severance,
recruiting costs and charges related to the Millennium project, a company-wide
project to convert all management information systems to an integrated system
that meets year 2000 requirements.
Interest expense for the first quarter of 1998 was $405,000, compared to
$484,000 in the same period of 1997. The decrease was due to lower borrowings.
Other income of $92,000 includes royalty income of $78,000.
Income before taxes was $462,000 or 1.6% of net sales compared to $898,000
or 2.8% of net sales for the first quarter of 1997. The provision for income
taxes for the first quarter of 1998 was $137,000, reflecting the expected use of
deferred tax assets to reduce 1998 income taxes, compared to $385,000 in the
first quarter of 1997. Net income for the quarter of $325,000 or $0.06 per
common share diluted, compared to net income in the first quarter of 1997 of
$513,000 or $0.10 per common share - diluted.
LIQUIDITY AND CAPITAL RESOURCES
Cash at the end of the first quarter of 1998 totaled $308,000 compared to
$560,000 at the end of the first quarter of 1997. Working capital totaled
$18,373,000 on March 28, l998, and was $24,276,000 at the end of the first
quarter of 1997. Current ratio of 1.97:1, compared to a
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ratio of 2.2:1 at March 29, l997. Expenditures for equipment during the first
three months of 1998 were $232,000 compared to $883,000 during the first three
months of 1997.
At the end of the first quarter of 1998, the Company had borrowings of
$20,498,000 compared to $24,715,000 at the end of the first quarter of 1997.
The Company maintains a Revolving Credit Agreement, which as amended
provides a credit line of approximately $22 million to the Company, including
4,400,000 British pounds sterling ($7,405,000 at quarter-end exchange rates)
line to BHC Aerovox Ltd., the Company's wholly owned subsidiary in England. On
March 28, l998, total borrowings outstanding under that Agreement were
approximately $15,254,000 compared to approximately $17,008,000 on March 29,
l997.
The Company also has a term line of credit. This line of $10,000,000,
collateralized by certain equipment, has annual interest rates ranging from
7.36% to 8.18% and maturing at various dates through the year 2002. At March
28, l998, borrowings outstanding under this agreement were $3,171,000 compared
to $5,231,000 outstanding at the end of the first quarter of 1997.
An Industrial Revenue Bond was issued in July 1982 to finance the
acquisition of equipment. Principal and interest, at an annual rate of 7.42%,
are payable monthly to July 1, 2002. On March 28, 1998 the bond balance
outstanding under this agreement was $2,072,000 compared to $2,476,000 on March
29, 1997.
PART II. OTHER INFORMATION
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 April 28, l998 BY /S/ JEFFREY A. TEMPLER
--------------------------
Jeffrey A. Templer
Senior Vice President/Finance
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-26-1998 DEC-27-1997
<PERIOD-START> DEC-28-1997 DEC-29-1996
<PERIOD-END> MAR-28-1998 MAR-29-1997
<CASH> 308 560
<SECURITIES> 0 0
<RECEIVABLES> 18,005 19,442
<ALLOWANCES> 622 660
<INVENTORY> 18,861 20,308
<CURRENT-ASSETS> 37,399 44,309
<PP&E> 64,543 73,743
<DEPRECIATION> 33,234 33,835
<TOTAL-ASSETS> 74,276 86,139
<CURRENT-LIABILITIES> 19,026 20,033
<BONDS> 0 0
0 0
0 0
<COMMON> 5,385 5,325
<OTHER-SE> 18,720 30,054
<TOTAL-LIABILITY-AND-EQUITY> 74,276 86,139
<SALES> 29,528 32,616
<TOTAL-REVENUES> 29,528 32,616
<CGS> 24,301 27,431
<TOTAL-COSTS> 28,753 31,205
<OTHER-EXPENSES> (92) 36
<LOSS-PROVISION> 0 (7)
<INTEREST-EXPENSE> 405 484
<INCOME-PRETAX> 462 898
<INCOME-TAX> 137 385
<INCOME-CONTINUING> 325 513
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 325 513
<EPS-PRIMARY> 0.06 0.10
<EPS-DILUTED> 0.06 0.10
</TABLE>
