FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED October 31, 2001 COMMISSION FILE NO. 0-4988
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AEROSONIC CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 74-1668471
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1212 No. Hercules Avenue, Clearwater, Florida 33765
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(Address of principal executive offices) (Zip Code)
(727) 461-3000
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(Registrant's telephone number, including Area Code)
Non applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether 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____
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.40 per share, 3,986,262 number of shares as of October
31, 2001.
INDEX
AEROSONIC CORPORATION
Page No.
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PART 1. FINANCIAL INFORMATION
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
October 31, 2001 and January 31, 2001
Condensed Consolidated Statements of Income - 4
Three and nine months ended October 31, 2001 and 2000
Condensed Consolidated Statements of Cash Flows - 5
Nine months ended October 31, 2001 and 2000
Notes to Condensed Consolidated Financial Statements - 6
October 31, 2001
Item 2. Management's Discussion and Analysis of 7 - 8
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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PART 1. FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Aerosonic Corporation and Subsidiary
Consolidated Balance Sheets
October 31,
2001 January 31,
(unaudited) 2001
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ASSETS
Current assets:
Cash and cash investments $ 919,000 $ 1,077,000
Accounts receivable 5,953,000 5,055,000
Inventory 10,021,000 9,949,000
Prepaid expenses 175,000 122,000
Deferred income tax benefit 295,000 295,000
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Total current assets 17,363,000 16,498,000
Property, plant and equipment, net 4,315,000 4,157,000
Other assets 621,000 818,000
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$ 22,299,000 $ 21,473,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and notes payable $ 1,029,000 $ 1,019,000
Revolving credit facilities 500,000 0
Accounts payable, trade 1,172,000 1,252,000
Compensation and benefits 712,000 849,000
Income taxes payable 220,000 153,000
Other accrued expenses 1,055,000 621,000
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Total current liabilities 4,688,000 3,894,000
Long-term debt, less current installments 3,605,000 4,335,000
Deferred income taxes 113,000 113,000
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Total liabilities 8,406,000 8,342,000
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Shareholders' equity:
Common stock, $.40 par; 8,000,000 shares
authorized; 3,986,262 shares issued 1,595,000 1,595,000
Additional paid-in capital 4,458,000 4,457,000
Retained earnings 8,461,000 7,700,000
Less treasury stock, 66,417 shares and 66,417 shares
at 1/31/01 and 10/31/01, respectively, at cost (621,000) (621,000)
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Total shareholders' equity 13,893,000 13,131,000
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$ 22,299,000 $ 21,473,000
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Note: The balance sheet at January 31, 2001 has been derived from
the audited financial statements at this date.
See Notes to Consolidated Financial Statements.
3
Aerosonic Corporation and Subsidiary
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
October 31, October 31,
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2001 2000 2001 2000
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Net sales $ 6,994,000 $ 5,706,000 $ 20,947,000 $ 17,822,000
Cost of goods sold 4,656,000 3,626,000 13,428,000 11,698,000
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Gross profit 2,338,000 2,080,000 7,519,000 6,124,000
Selling, general and administrative
expenses 1,895,000 2,258,000 5,931,000 5,720,000
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Operating income 443,000 (178,000) 1,588,000 404,000
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Other (income) deductions:
Interest expense, net 99,000 148,000 327,000 379,000
Other, net 10,000 (4,000) 14,000 (5,000)
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109,000 144,000 341,000 374,000
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Income before income taxes 334,000 (322,000) 1,247,000 30,000
Income tax expense 130,000 (129,000) 486,000 12,000
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Net income $ 204,000 $ (193,000) $ 761,000 $ 18,000
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Earnings per share: $ 0.05 $ (0.05) 0.19 $ 0.00
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Basic and Diluted weighted
average shares outstanding 3,920,000 3,922,000 3,920,000 3,917,000
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See Notes to Consolidated Financial Statements
4
Aerosonic Corporation and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
Nine months ended
October 31
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2001 2000
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Cash flows from operating activities:
Net income $ 761,000 $ 18,000
Adjustment to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 597,000 534,000
Stock compensation 188,000
Change in current assets and liabilities (739,000) 218,000
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Net cash provided by (used in) operating activities 619,000 958,000
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Cash flows from investing activities:
Purchase of property, plant and equipment (681,000) (195,000)
Changes in other assets 134,000 (114,000)
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Net cash used in investing activities (547,000) (309,000)
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Cash flows from financing activities:
Proceeds from/(repayment on) long-term debt
and notes payable (230,000) (453,000)
Purchase of treasury stock 0 (151,000)
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Net cash provided by (used in) financing activities (230,000) (604,000)
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Net increase (decrease) in cash and cash investments (158,000) 45,000
Cash and cash investments, beginning of period 1,077,000 964,000
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Cash and cash investments, end of period $ 919,000 $ 1,009,000
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Cash paid for:
Interest $ 320,000 $ 352,000
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Income taxes $ 418,000 $ 70,000
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See notes to consolidated financial statements
5
AEROSONIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 31, 2001
NOTE A - BASIS OF PRESENTATION
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The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to form 10-Q 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 a fair presentation have been included.
Operating results for the three- and nine-month periods ended October 31, 2001
are not necessarily indicative of the results that may be expected for the year
ended January 31, 2002. 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 January 31, 2001.
NOTE B - ENVIRONMENTAL MATTERS
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As reported in the annual report on form 10-K for the fiscal year ended January
31, 2001, in accordance with a consent agreement signed by the Company in 1993,
the Company's environmental consultant has developed an interim remedial action
plan to contain and remediate certain contamination on and underlying the
Company's property. During 1997 the Company recorded a provision of
approximately $175,000 related to the estimated costs to be incurred under this
plan. As of January 31, 2000 the company had utilized all amounts originally
recorded in Other accrued expenses, and phase-one remediation had been
completed.
During the third quarter of 2001, management assessed the post-remediation
monitoring expense related to the environmental cleanup of 1993 would cost
approximately $125,000. This amount was accrued and expensed during the third
quarter of Fiscal Year 2001. Approximately $5,000 remains accrued in Other
accrued expenses at October 31, 2001. Management believes that any additional
liability for any further remediation will not have a material affect on the
financial position of the company.
6
PART 1. FINANCIAL INFORMATION
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF OPERATIONS
Company wide net sales for the third quarter ended October 31, 2001 were
$6,994,000 as compared to $5,706,000 for the same period in the preceding year.
Year-to-date net sales for the nine months ended October 31, 2001 were
$20,947,000 as compared to $17,822,000 in the prior year period. Sales increases
were due largely to the increased sales of altimeters, airspeed indicators, non-
warranty instrument repairs, spare parts and riflescope components. Gross profit
as a percentage of net sales equaled 33% in the third quarter of FY2002 versus
36% during the same period in the prior year. Gross profit margin, year-to-date,
through the period ended October 31, 2001 equaled 36% versus 34% during the
prior year period. The decline in gross profit margin in the third quarter was
due to a higher concentration of multi-function probe sales to one certain
customer through Avionics Specialties, Inc., Aerosonic Corporation's wholly -
owned subsidiary.
Selling, General and Administrative (SG & A) expenses decreased during the third
quarter ended October 31, 2001 to $1,895,000 as compared to $2,133,000 during
the same period in the prior fiscal year. As a percentage of net sales SG& A
decreased to 27% as compared to 37% during the prior year period. SG & A
year-to-date through the period ended October 31, 2001 increased to $5,931,000
from $5,595,000 in the prior year period. However, as a percentage of net sales,
SG & A decreased to 28% of net sales compared to 31% during the prior year
period. The decreased SG & A expense during the third quarter ended October 31,
2001 as compared to same period in the prior fiscal year represents a reduction
in legal expenses and the effort by management in controlling other SG & A
costs. Year-to-date SG & A for the nine months ended October 31, 2001 increased
during the year compared to Year to Date prior year due to an increase in legal
expense during the first and second quarters of FY2002.
Interest expense dropped to $99,000 for the three months ended October 31, 2001
from $148,000 during the same period in the preceding year. Interest expense
year-to-date through the period ended October 31, 2001 dropped to $327,000
versus $379,000 during the prior year period. This reduction is due primarily to
reduced outstanding debt and lower interest rates.
For the third quarter ended October 31, 2001 the Company recorded a net profit
of $204,000 or $0.05 per share, compared to a net loss of $193,000, or ($0.05)
per share during the same period in the preceding year. Earnings year-to-date
through the period ended October 31, 2001 increased to $761,000, or $0.19 per
share from $18,000 or $0.00 per share.
Working capital equaled $12,675,000 at October 31, 2001 and the Company's
current ratio approximated 3.70:1. Cash flow provided by operations was $619,000
through the third quarter ended October 31, 2001. Company management anticipates
that cash flow from operations, existing cash balances and the availability
under the Company's line of credit arrangement will be sufficient to fund future
growth.
7
The primary market risks exposure for the Company is interest rate risk. The
Company does not currently utilize any financial instruments to manage interest
rate risk. The Company is exposed to changes in interest rates primarily as a
result of its variable rate short- and long-term borrowings. A hypothetical 10%
increase in the Company's weighted average interest rate would have increased
the Company's interest expense for the third quarter by approximately $9,000
based on the balance of variable rate debt outstanding at October 31, 2001.
FORWARD LOOKING STATEMENTS
This document contains statements that constitute "forward-looking" statements
within the meaning of the Securities Act of 1933 and the Securities Act of 1934,
as amended by the Private Securities Litigation Reform Act of 1995. "Forward-
looking" statements contained in this document include the intent, belief or
current expectations of the Company and its senior management team with respect
to the future prospects of the Company's operations, and belief concerning
profits from future operations and the Company's overall future business
prospects, as well as the assumptions upon which such statements are based.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance, and that actual results may differ materially
from those contemplated by such forward-looking statements. Important factors
currently known to management that could cause actual results to differ
materially from those contemplated by the forward-looking statements in this
document include, but are not limited to, adverse developments with respect to
the operations of the Company's business units, failure to meet operating
objectives or to execute the business plan, and the failure to reach revenue or
profit projections. The Company undertakes no obligation to update or revise the
forward-looking statements contained in this document to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
8
PART II. OTHER INFORMATION
AEROSONIC CORPORATION
Item 1. LEGAL PROCEEDINGS
David S. Goldman, former President and Chief Executive Officer of Aerosonic
Corporation sued the Company in September 1996, for an alleged breach of a
consulting agreement between Mr. Goldman and the Company. The suit seeks
damages in excess of $15,000. During fiscal year 1997, the Company sued Mr.
Goldman and Mil-Spec Finishers, Inc., a former subcontractor to Aerosonic
Corporation controlled by Mr. Goldman, seeking damages in excess of $15,000,
for alleged fraud and misappropriation of funds, appropriation of corporate
opportunity, breach of fiduciary duty and conversion. The Company filed an
amended complaint, adding claims for civil theft against both defendants, in
October of 1997. Management believes that the ultimate resolution of this
matter will not have a material, negative effect on the financial position of
the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on form 8-K
The company did not file any report on form 8-K during the
three months ended October 31, 2001.
9
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 thereunto duly authorized.
AEROSONIC CORPORATION
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(Registrant)
Date: December 14, 2001 /s/ Eric J. McCracken
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Eric J. McCracken
Executive Vice President
and Chief Financial Officer