U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Commission file number 0-5460
_____________________________________________
Stocker & Yale, Inc.
(Name of small business issuer in its charter)
Massachusetts 04-2114473
(State or other jurisdiction of incorporation (I.R.S. employer
or organization) identification no.)
32 Hampshire Road
Salem, New Hampshire 03079
(Address of principal executive offices (Zip Code)
(603) 893-8778
(Issuer's telephone number)
___________________________
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. ___X__Yes _____No
As of November 14, 1997 there were 2,567,894.60 shares of the issuer's common
stock outstanding.
Transitional Small Business Disclosure Format: _______Yes ____X__No
<PAGE>
PART 1 FINANCIAL STATEMENTS
Item 1.1 CONSOLIDATED BALANCE SHEETS
STOCKER & YALE, INC.
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
<S> (unaudited) (unaudited)
Current Assets: <C> <C>
Cash $ 175,130 $ 1,244,418
Accounts Receivable 1,822,130 1,410,774
Prepaid Taxes 587,221 353,668
Inventory 4,810,209 3,701,019
Prepaid Expenses 193,297 131,478
_________ _________
Total current assets 7,587,987 6,841,357
Property, Plant and Equipment, Net 3,728,418 3,134,717
--------- ---------
Note Receivable 1,000,000 1,000,000
--------- ---------
Goodwill, Net of Accumulated Amortization 8,520,200 8,721,800
--------- ---------
Other Assets 52,166 0
--------- ---------
Debt Issuance Costs, Net of Accumulated
Amortization 107,835 138,490
--------- ---------
$ 20,996,606 $ 19,836,364
LIABILITIES AND STOCKHOLDER'S INVESTMENT
<S>
Current Liabilities: <C> <C>
Current Portion of long-term debt $ 211,141 $ 211,142
Hong Kong Line of Credit 178,482 124,799
Accounts Payable 1,349,892 1,373,121
Accrued Expenses 548,073 547,654
Short Term Lease Obligations 114,504 21,628
_________ _________
Total current liabilities 2,402,092 2,278,344
--------- ---------
Long Term Debt 5,573,625 4,021,570
--------- ---------
Other Long Term Liabilities 564,688 564,688
--------- ---------
Deferred Income Taxes 972,685 1,012,685
Stockholder's Investment: Common stock, par value $0.001
Authorized -- 10,000,000
Issued and outstanding -- 2,567,894 2,568 2,568
Paid-in capital 10,822,705 10,822,705
Retained earnings 658,243 1,133,804
---------- ----------
Total stockholder's investment 11,483,516 11,959,077
---------- ----------
$ 20,996,606 $ 19,836,364
</TABLE>
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1.2 CONSOLIDATED STATEMENT OF OPERATIONS
STOCKER & YALE, INC.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net Sales $ 2,689,583 $ 2,495,168 $ 8,227,525 $ 8,071,392
Cost of Sales 1,882,681 1,501,799 5,139,564 5,081,251
__________ _________ _________ _________
Gross Profit 806,902 993,369 3,087,961 2,990,141
Selling Expenses 594,870 362,370 1,434,227 1,193,497
General and 635,895 561,778 1,488,138 1,517,345
Administrative Expenses
Research and 222,415 117,043 553,940 261,805
Development _________ ________ _________ _________
Operating Income (646,278) (47,822) (388,344) 17,494
Interest Expense (107,913) (149,867) (272,217) (450,007)
________ _________ _________ _________
Income/(Loss) before (754,191) (197,689) (660,561) (432,513)
income taxes
Income Tax Expense/ (277,000) (51,700) (185,000) (87,800)
(Benefit)
Net Income/(Loss) $(477,191) (145,989) $(475,561) (344,713)
________ __________ ________ ________
________ __________ -------- --------
Income/(Loss) $ (0.19) (0.09) $ (0.19) (0.20)
Per Share -------- ---------- -------- --------
Weighted-Average
Common Shares and 2,567,894 1,712,914 2,567,894 1,712,914
Equivalents
</TABLE>
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1.3 CONSOLIDATED STATEMENTS OF CASH FLOWS
STOCKER & YALE, INC.
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1997 1996
(unaudited) (unaudited)
<S>
Cash Flows from Operating Activities: <C> <C>
Net loss $ (475,561) $ (344,713)
Adjustments to reconcile net loss to
net cash used in/provided by operating
activities
Depreciation and Amortization 429,750 635,324
Deferred income taxes (40,000) (105,000)
Other changes in assets and liabilities
Accounts receivable, net (411,356) 191,151
Inventories (1,109,190) (93,781)
Prepaid expenses (295,372) 64,583
Accounts payable (23,236) 287,363
Accrued expenses 419 22,724
Other assets (52,166) 0
Accrued and refundable taxes 0 (252,403)
--------- ---------
Net cash (used in)/provided by operating (1,976,712) 405,248
activities --------- ---------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (791,196) (138,778)
--------- --------
Net cash used in investing activities (791,196) (138,778)
Cash Flows from Financing Activities:
Lease Financing 387,027 (57,709)
Repayment of Subordinated Note 0 (2,500,000)
Repayments/Advances of Bank Debt 1,257,910 (553,727)
Proceeds from Notes Payable 0 1,500,000
Proceeds from Subordinated Notes Payable 0 1,350,000
Deferred financing costs 0 (39,000)
Hong Kong Line of Credit Advances 53,683 41,109
-------- --------
Net cash (used in)/ provided by 1,698,620 (259,327)
financing activities -------- --------
Net Increase/(Decrease) in Cash and (1,069,288) 7,143
Cash Equivalents
Cash and Cash Equivalents, Beginning of Period 1,244,418 22,033
--------- --------
Cash and Cash Equivalents, End of Period $ 175,130 $ 29,176
---------- ---------
---------- ---------
</TABLE>
<PAGE>
PART 1. FINANCIAL STATEMENTS
Notes to Financial Statements
The interim consolidated financial statements presented have been prepared by
Stocker & Yale, Inc. (the "Company") without audit and, in the opinion of the
management, reflect all adjustments of a normal recurring nature necessary for
a fair statement of (a) the results of operations for the three month and nine
month periods ended September 30, 1997 and September 30, 1996 (b) the
financial position at September 30, 1997 and (c) the cash flows for the nine
month periods ended September 30, 1997 and September 30, 1996. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1996 has been
derived from the consolidated financial statements that have been audited by
the Company's independent public accountants. Certain balances have been
reclassified for financial statement purposes. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes
included herein should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-KSB.
In March 1997, the Financial Accounting Standards Board issued SFAS No. 128
Earnings Per Share. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock. This statement is effective for fiscal years ending after
December 15, 1997 and early adoption is not permitted. When adopted, the
statement will require restatement of prior years' earnings per share. The
Company will adopt this statement for its fiscal year ending
December 31, 1997 and does not believe that the effect of the adoption of
this standard would be materially different from the amounts presented in
the accompanying statements of income.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND OPERATING RESULTS
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company's actual results could differ
materially from those set forth in the forward-looking statements.
Results of Operations
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1996.
Three-month periods ending September 30, 1997 and 1996
Revenues increased 8% from $2,495,167 for the three months ended September
30,1996, to $2,689,583 for the three months ended September 30, 1997, due
primarily to increases in sales of lighting products and sales to the
U.S. Government. Sales of lighting products increased 84% from $542,149
in the third quarter of 1996 to $998,754 in the third quarter of 1997.
Sales of military products (military-style watches and compasses) to civilian
markets decreased 40%, from $407,123 in the three months ended September
30, 1996 to $243,984 in the equivalent period in 1997, primarily due to
diminished sales through the Company's Hong Kong subsidiary. Sales of the
Company's MFE products decreased 20% from $482,491 for the third quarter of
1996 to $383,717 for the third quarter of 1997, in large part because of a
decrease in OEM contracts. Third quarter sales of machine tool components
through the Company's Stilson division remained flat at $948,223
for the quarter ended September 30, 1997 as compared to sales of $957,391
for the quarter ended September 30, 1996.
Gross profit margin decreased, by $186,467 to $806,902 for the quarter ended
September 30, 1997 as compared to $993,369 for the quarter ended September
30, 1996, which is attributable to a write down of inventory at the Company's
Stilson division. Selling expenses increased $232,500 as a result of
increased payroll costs and marketing efforts associated with the Company's
fiber optic product launch and the addition of a sales manager at the Stilson
division. Research and development expenditures increased by $105,372 as a
result of the Company's increased development efforts relating to its new
fiber optic product line.
The Company recorded a pretax loss of $(754,191) in the quarter ended
September 30, 1997 as compared with the reported pretax loss of $(197,689)
for the quarter ended September 30, 1996. This decrease is primarily
attributable to the reduction in gross margin and the increase in selling
and research and development expenses.
Nine month periods ending September 30, 1997 and 1996
Revenues increased 2% from $8,071,392 for the nine months ended September
30, 1996, to $8,227,525 for the nine months ended September 30, 1997.
Increased sales of lighting products represent the most significant product
line growth in revenue. Lighting sales increased 55% from $1,904,406 in the
nine month period ended September 30, 1996 to $2,948,616 in the equivalent
period of 1997. Included in these lighting segment revenues are sales of the
Company's fiber optic lighting products which were $202,485 as of September
30, 1997 compared to $0 in the comparable period of 1996. For the nine months
ended September 30, 1997 sales of military products to civilian markets
increased 8% to $920,050 from $852,776 for the first nine months of 1996.
Sales to the U.S. Government decreased by 41% from $438,561 for the nine month
period ended September 30, 1996 to $260,648 for the nine month period ended
September 30, 1997. Sales of electronic ballast, which were discontinued
as a product offering in 1996, decreased from $282,367 for the
nine months ended September 30, 1996 to $26,963 for the comparable 1997
period. MFE product sales declined from $1,487,777 for the nine month period
ended September 30, 1996 to $1,126,308 for the nine month period ended
September 30, 1997. Sales of machine tool components through the Company's
Stilson division decreased 5% from $3,105,504 for the nine months ended
September 30, 1996 to $2,944,940 for the nine months ended September 30, 1997.
In the nine month period ended September 30, 1997, the Company recorded a
pretax loss of $(660,561) as compared to the reported pretax loss of
$(432,513) for the comparable period ended September 30, 1996. Gross profit
margin remained flat at 37% for the nine month periods ended September
30, 1996 and September 30, 1997, despite a negative $180,000 inventory
adjustment at the Stilson division. Interest expense decreased by $177,790
as a result of reductions in the Company's outstanding debt. General and
Administrative expenses decreased by $29,207 primarily due to a reduction in
professional fees. The Company's pretax loss position was primarily a result
of expenses incurred for selling and research and development associated
with the Company's development and launch of its new fiber optic product
line. Selling expenses increased by $240,730 as a result of increased payroll
costs and marketing efforts. Research and development costs increased by
$292,135 as a result of the Company's research efforts relating to its new
fiber optic product line.
<PAGE>
Liquidity and Capital Resources
The Company finances its operations primarily through third party credit
facilities and cash from operations. Net cash (used in)/provided by
operations was $(1,069,288) for the nine months ended September 30, 1997
and $7,143 for the nine months ended September 30, 1996.
The Company's primary third party financing relationship is with Fleet National
Bank of Massachusetts, N.A. (the "Bank"). The initial Credit Agreement between
the Company and the Bank, dated March 6, 1995 (the "Credit Agreement"),
provided for a Revolving Line of Credit Loan (the "Revolving Loan") due
March 31, 1998 and a a Long Term Loan due March 1, 2001. The
Revolving Loan and the Long Term Loan bear interest at the Bank's base rate
plus 1/2%. At September 30, 1997 there was a total of $2,631,900 borrowed
under the Credit Agreement and availability to borrow of $1,667,286 under
the Revolving Loan.
Under the terms of the Credit Agreement, the Company is required to comply with
a number of financial covenants including minimum equity, debt service coverage
ratios, debt to equity ratios and minimum net income tests. For the period
ending September 30, 1997, the Company was out of compliance with the
minimum net income and debt service coverage covenants. On November 12, 1997
the Bank granted waivers of these covenants as of September 30, 1997 for
the period then ended. In addition, the Credit Agreement was amended to
increase the maximum annual limit on capital expenditures from $500,000 to
$1,500,000 for the year ending December 31, 1997.
The Company has issued and outstanding Subordinated Notes
in an original principal amount of $1,350,000. These notes mature
on May 1, 2001. The Subordinated Notes bear interest at 7.25% and are
convertible into shares of the Company's common stock at a price of $7.375
per share.
Company expenditures for capital equipment were $791,196 in the first nine
months of 1997 as compared to $138,778 in the same period of 1996. The
majority of the 1997 expenditures related to the Company's new fiber optic
product line.
On May 20, 1997 the Company entered into an equipment line of credit agreement
with Primary Bank to finance capital equipment related to new product
development. The facility provides that equipment purchases will be converted
quarterly into a series of five year notes, not to exceed $500,000 in the
aggregate, bearing interest at the prime rate plus .75%. As of September
30, 1997, the Company had borrowed $215,450 against the line of credit.
The Company believes that its available financial resources are adequate to
meet its foreseeable working capital, debt service and capital expenditure
requirements.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Stocker & Yale, Inc.
- --------------------
November 14, 1997 /s/ Mark W. Blodgett
- -------------- ----------------------
Mark W. Blodgett, Chairman and Chief Executive Officer
November 14, 1997 /s/ Susan A. H. Sundell
- -------------- -------------------------
Susan A.H. Sundell, Senior Vice-President-Finance and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 175,130
<SECURITIES> 0
<RECEIVABLES> 1,822,130
<ALLOWANCES> 0
<INVENTORY> 4,810,209
<CURRENT-ASSETS> 7,587,987
<PP&E> 3,728,418
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,996,606
<CURRENT-LIABILITIES> 2,402,092
<BONDS> 0
0
0
<COMMON> 2,568
<OTHER-SE> 11,480,948
<TOTAL-LIABILITY-AND-EQUITY> 20,996,606
<SALES> 8,227,525
<TOTAL-REVENUES> 8,227,525
<CGS> 5,139,564
<TOTAL-COSTS> 3,476,305
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 272,217
<INCOME-PRETAX> (660,561)
<INCOME-TAX> (185,000)
<INCOME-CONTINUING> (475,561)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (475,561)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
FLEET
12 NOVEMBER, 1997
MS. SUSAN SUNDELL
SENIOR VICE PRESIDENT
STOCKER & YALE, INC.
32 HAMPSHIRE ROAD
SALEM, NH 03079
DEAR MS. SUNDELL:
Reference is made to the CREDIT AGREEMENT dated as of March 6, 1995 (as
amended, the "Agreement") between Stocker & Yale, Inc., a Massachusetts
corporation (the "Company"), and Fleet National Bank, successor by
merger to Fleet National Bank of Massachusetts, formerly known as Shawmut
Bank, N.A. (the "Bank"). All capitalized terms used and not defined
herein shall have the meanings ascribed to such terms in the Agreement.
Section 1. Waiver - The Bank confirms waiver of the Event of Default that
has resulted from non-compliance with Subsections 6.01(m) and 6.01(n) of the
Agreement. This waiver is effective as of September 30, 1997; provided
however, that such waiver is effective only for the period ended September
30, 1997.
Section 2. Amendment of Subsection 6.01 (p) of the Agreement - Subsection
6.01 (p) of the Agreement is hereby amended to read as follows:
(p) The Company and its Subsidiaries will not make Consolidated Capital
Expenditures aggregating in excess of $500,000 during any fiscal
year; provided, however, that Consolidated Capital Expenditures
may not aggregate in excess of $1,500,000 for the fiscal year
ended December 31, 1997.
Section 3. Payment for Waiver and Amendment - The Company agrees to pay to
the Bank a fee of $5,000 plus expenses; including but not limited to
reasonable attorney's fees, for this Waiver and Amendment.
Except as amended by this Waiver and Amendment, all other provisions, terms
and conditions of the Agreement shall continue to be effective. This
Waiver and Amendment shall not be deemed a waiver of any defaults that
exist under the Agreement other than those described in Section 1 hereof.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ H. Ellery Perkinson
-----------------------
Its: Assistant Vice President
Agreed:
STOCKER & YALE, INC.
By: /s/ Susan A. H. Sundell
-----------------------
Its: Senior Vice President-Finance, Treasurer
