-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qdh7IKErm4QZYRoYSXbOi3K/z775rULUL7ppxKtBeXHN2O8bOkkyzHs/hErYt2KQ 9vh4DvcN70GjfWpj4F7f4Q== 0000950169-98-001020.txt : 19980909 0000950169-98-001020.hdr.sgml : 19980909 ACCESSION NUMBER: 0000950169-98-001020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980725 FILED AS OF DATE: 19980908 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOWLES FLUIDICS CORP CENTRAL INDEX KEY: 0000013585 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 520741762 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-37706 FILM NUMBER: 98705558 BUSINESS ADDRESS: STREET 1: 6625 DOBBIN RD CITY: COLUMBIA STATE: MD ZIP: 21045-4707 BUSINESS PHONE: 4103810400 MAIL ADDRESS: STREET 1: 6625 DOBBIN ROAD CITY: COLUMBIA STATE: MD ZIP: 21045-4707 FORMER COMPANY: FORMER CONFORMED NAME: BOWLES ENGINEERING CORP DATE OF NAME CHANGE: 19700629 10-Q 1 BOWLES FLUIDICS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended July 25, 1998 Commission File Number 2-37706 ------------- ------- Bowles Fluidics Corporation ---------------------------------------------------- (exact name of registrant as specified in its charter) MARYLAND 52-0741762 ----------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6625 Dobbin Road, Columbia, Maryland 21045 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (410) 381-0400 Indicate by check mark whether the registrant has filed all annual, quarterly and other reports required to be filed with the Commission within the past 90 days and in addition has filed the most recent annual report required to be filed. Yes X No --- --- Indicate the number of shares outstanding of each issuer's classes of common stock, as of July 25, 1998. Class Outstanding at July 25, 1998 ------------------ ---------------------------- Common Stock, $.10 12,685,011 shares INDEX BOWLES FLUIDICS CORPORATION FOR THE NINE MONTHS ENDED JULY 25, 1998 Page PART I. Financial Information Number ------ Item 1. Financial Statements Consolidated Statements of Income For the three and nine months ended July 25, 1998, and July 26, 1997 ..................... 3 Consolidated Balance Sheets July 25, 1998, and October 25, 1997 .................. 4 Consolidated Statements of Cash Flows For the nine months ended July 25, 1998, and July 26, 1997 ..................... 5 Notes to Consolidated Financial Statements .............. 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ............................................ 8 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K ........................ 11 Exhibit 20 ........................................... 12 2 BOWLES FLUIDICS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended For the Nine Months Ended -------------------------- --------------------------- July 25, July 26, July 25, July 26, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Net sales $4,632,502 $4,387,924 $15,105,362 $13,615,319 Cost of sales 3,889,714 3,130,132 11,196,107 9,325,310 ---------- ---------- ---------- ---------- Gross profit 742,788 1,257,792 3,909,255 4,290,009 Selling, general and administrative expenses 664,588 672,013 1,993,702 2,409,483 Research and development costs 205,180 225,055 582,743 756,563 ---------- ---------- ---------- ---------- Operating income (loss) (126,980) 360,724 1,332,810 1,123,963 Interest income 11,134 30,363 52,022 81,551 Other income (expense), net 9,423 (3,990) 23,749 (5,839) ---------- ---------- ---------- ---------- Income (loss) before taxes (106,423) 387,097 1,408,581 1,199,675 Provision (credit) for income taxes (38,759) 140,345 521,631 432,687 ---------- ---------- ---------- ---------- Net income (loss) (67,664) 246,752 886,950 766,988 Preferred stock dividends accrued 18,662 18,662 55,985 55,985 ---------- ---------- ---------- ---------- Income (loss) applicable to common shareholders $ (86,326) $ 228,090 $ 830,965 $ 711,003 ========== ========== ========== ========== Basic earnings per share $ (.01) $ .02 $ .07 $ .06 ========== ========== ========== ========== Diluted earnings per share $ .00 $ .02 $ .05 $ .05 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 3 BOWLES FLUIDICS CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited) July 25, October 25, 1998 1997 ----------- ----------- ASSETS Current Cash and cash equivalents $ 970,359 $ 755,525 Investments available for sale -- 1,563,121 Accounts receivable 2,821,583 3,112,063 Inventories 2,992,946 2,130,615 Other current assets 425,689 634,037 ----------- ----------- Total current assets 7,210,577 8,195,361 ----------- ----------- Property and equipment, net 4,312,460 3,494,335 Other assets 91,230 95,005 ----------- ----------- Total assets $11,614,267 $11,784,701 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Accounts payable - trade $ 701,337 $ 1,122,437 Accrued expenses and other liabilities 1,088,139 1,609,807 Income taxes payable -- 48,162 ----------- ----------- Total current liabilities 1,789,476 2,780,406 Other liabilities 474,488 492,866 ----------- ----------- Total liabilities $ 2,263,964 $ 3,273,272 ----------- ----------- Commitments and contingencies Stockholders' Equity 8% Convertible preferred stock 933,080 933,080 Common stock 1,268,501 1,264,001 Additional paid-in capital 2,732,832 2,728,083 Retained earnings 4,415,890 3,586,265 ----------- ----------- Total stockholders' equity 9,350,303 8,511,429 ----------- ----------- Total liabilities and stockholders' equity $11,614,267 $11,784,701 =========== =========== The accompanying notes are an integral part of these financial statements. 4 BOWLES FLUIDICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended ----------------------------- July 25, July 26, 1998 1997 ----------- ----------- Cash flows from operating activities: Net income $ 886,950 $ 766,988 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 792,295 699,690 Net loss on disposal of assets 2,221 2,891 Accretion of interest on investments (25,139) (1,580) ----------- ----------- 1,656,327 1,467,989 ----------- ----------- Change in operating accounts: Accounts receivable 290,480 580,103 Inventories (862,331) (162,089) Other assets (13,475) 145,444 Accounts payable (421,100) (408,207) Accrued expenses and other liabilities (423,125) 44,609 Income taxes payable 93,103 (40,000) ----------- ----------- Change in operating accounts (1,336,448) 159,680 ----------- ----------- Net cash provided by operating activities 319,879 1,627,849 ----------- ----------- Cash flows from investing activities: Capital expenditures (1,627,583) (791,063) Patent and trademark expenditures -- (4,433) Proceeds from sale of equipment 1,200 425 Purchase of investments -- (1,540,014) Proceeds from sale of investments 1,586,734 577,837 ----------- ----------- Net cash used in investing activities (39,649) (1,757,248) ----------- ----------- Cash flows from financing activities: Preferred stock dividend (74,646) (74,646) Proceeds from issuance of common stock 9,250 4,500 ----------- ----------- Net cash used in financing activities (65,396) (70,146) ----------- ----------- Net increase (decrease) in cash and cash equivalents 214,834 (199,545) Cash and cash equivalents - Beginning of period 755,525 1,287,110 ----------- ----------- - End of period $ 970,359 $ 1,087,565 =========== ===========
The accompanying notes are an integral part of these financial statements. 5 BOWLES FLUIDICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - General In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of July 25, 1998, and the results of operations and cash flows for three and nine months ended July 25, 1998, and July 26, 1997. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company's latest annual report on Form 10-K. The Company considers itself as one operating segment due to the similarity of its products, services, production processes, customers and distribution. NOTE 2 - Inventories Inventories are comprised of: July 25, October 25, 1998 1997 ---------- ----------- Raw Material $ 843,762 $ 620,567 Work and tooling in process 1,021,015 1,016,845 Finished Goods 1,128,169 493,203 ---------- ---------- Total $2,992,946 $2,130,615 ========== ========== NOTE 3 - Property and Equipment, and Accumulated Depreciation Property and Equipment, and Accumulated Depreciation are comprised of: July 25, October 25, 1998 1997 ----------- ----------- Production machinery and equipment $ 6,086,011 $ 4,946,390 Office furniture and equipment 2,469,721 2,321,844 Laboratory and machine shop equipment 1,576,988 1,428,516 Leasehold improvements 840,845 812,120 ----------- ----------- Total property and equipment 10,973,565 9,508,870 Less accumulated depreciation (6,661,105) (6,014,535) ----------- ----------- Net property and equipment $ 4,312,460 $ 3,494,335 =========== =========== NOTE 4 - Common Stock In May 1998, two officers of the Company exercised stock options and purchased 40,000 and 5,000 shares of common stock at the exercise prices of $.15 and $.65 per share respectively. NOTE 5 - Quasi-reorganization Effective October 29, 1994, the Board of Directors approved a quasi-reorganization which had the impact of eliminating the retained earnings deficit of $2,407,467 as an adjustment to the additional paid-in capital. 6 BOWLES FLUIDICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - Earnings Per Share Effective October 26, 1997, the Company adopted Statement of Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 replaced the presentation of primary earnings per share (EPS) and fully diluted EPS with a presentation of basic EPS and diluted EPS. Basic earnings per share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per share are based on the weighted average number of common shares outstanding and potential dilution of securities that could share in earnings. The following table sets forth the computation of basic and diluted earnings per share:
For the Three Months Ended For the Nine Months Ended ------------------------------- ----------------------------- July 25, July 26, July 25, July 26, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Numerator: Numerator for basic earnings per share: Income available to common shareholders $ (86,326) $ 228,090 $ 830,965 $ 711,003 Effect of dilutive securities: Preferred Stock Dividends 18,662 18,662 55,985 55,985 ----------- ----------- ----------- ----------- Numerator for diluted earnings per share Income available to common shareholders after assumed conversion $ (67,664) $ 246,752 $ 886,950 $ 766,988 ----------- ----------- ----------- ----------- Denominator: Denominator for basic earnings per share: Weighted average shares outstanding during the period 12,685,011 12,640,011 12,655,011 12,633,111 Effect of dilutive securities: Employee Stock Options 14,879 38,615 14,847 45,284 Assumed Conversion of Preferred Stock 3,732,320 3,732,320 3,732,320 3,732,320 ----------- ----------- ----------- ----------- Denominator for diluted earnings per share 16,432,210 16,410,946 16,402,178 16,410,715 ----------- ----------- ----------- ----------- Earnings per Share: Basic $ (.01) $ .02 $ .07 $ .06 === === === === Diluted $ .00 $ .02 $ .05 $ .05 === === === ===
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the attached financial statements and notes thereto, and with the Company's audited financial statements and notes thereto for the fiscal year ended October 25, 1997. RESULTS OF OPERATIONS Third Quarter FY 1998 Compared with Third Quarter FY 1997 The General Motors strike as well as the normal annual vacation shutdown significantly affected operations in the third quarter of fiscal year 1998. Shipments of automotive products declined but sales of production tooling more than doubled. As a result, a net loss was recorded for the third quarter of fiscal year 1998 in contrast to a profit in the prior year's third quarter. Net sales in the third quarter of FY 1998 increased to $4,632,502, 5.6% above last year's third quarter sales of $4,387,924. The net loss was $67,664 compared with net income of $246,752 earned in the third quarter of FY 1997. Sales of light vehicle windshield washer and defroster nozzles of $3,584,894 declined 10% from the prior year's third quarter sales of $3,983,944. The General Motors strike was the primary cause of the sales decline. Sales of production and prototype tooling of $1,047,608 principally for future manufacturing of the new air conditioning outlets increased significantly over last year's third quarter sales of $403,979. Gross profit in this year's third quarter was $742,788, 41% below last year's third quarter profit of $1,257,792. The decrease was due to the lower product sales and higher unabsorbed manufacturing expenses resulting from lower production levels. The related personnel were not laid off during the strike, but rather their efforts were redirected to expedite manufacturing process improvements. Selling, general and administrative expenses of $664,588 for the fiscal year 1998 third quarter were approximately equal to those for the prior year's third quarter. Research and development costs were $205,180, 9% below last year's third quarter since in 1997 significant effort was directed toward the development of the new air conditioning outlets. An operating loss of $126,980 was realized in this year's third quarter compared to operating income of $360,724 in the prior year's third quarter. 8 Provision for income taxes, both federal and state, was determined based upon an estimate of the total year's pretax income using the same tax rates for both this year and last year. Nine Months Ended July 25, 1998, Compared with Nine Months Ended July 26, 1997 For the first nine months of the 1998 fiscal year ended July 25, 1998, total sales increased compared to last year's first nine months due to higher technical services sales and net income gained because of the reduction of several expenses and higher production levels. The negative impact of the GM strike on the FY 1998 third quarter's product sales more than offset the favorable effect of the increase in product sales in the first six months of the year. Net sales for the first nine months of fiscal year 1998 were $15,105,362, 11% above last year's first nine months of $13,615,319. Net income of $886,950 was 16% higher than the prior year's first nine months results of $766,988. Sales of light vehicle windshield washer and defroster nozzles of $12,920,701 in the first nine months of FY 1998 were approximately equal to sales of the similar period in the last fiscal year. Higher shipments of windshield washer nozzles were offset by lower sales of defroster nozzles. Technical services sales amounting to $2,184,662 of production and prototype tooling and product design related to the future manufacturing of both the new air conditioning outlets and the current washer nozzle business increased more than three times over the prior year's first nine months sales of $691,191. The Company has been selected as the supplier of automotive air conditioning outlets for two future vehicles scheduled for production by one customer starting in 1999 and by another in 2000. Gross profit in the first nine months of the 1998 fiscal year declined 9% to $3,909,255 from $4,290,009 in the similar fiscal year 1997 period because of the unfavorable impact of the GM strike in the third quarter of FY 1998. Selling, general and administrative expenses were $1,993,702 in the first nine months of fiscal year 1998, 17% less than last year's expenses for a similar period of $2,409,483. The decrease was the result of the elimination of the sales commissions to independent manufacturer's representatives and their replacement with the cost of the Company's own sales force in the Detroit area. Research and development costs decreased 23% to $582,743 for the first nine months of fiscal year 1998. Less spending was incurred for washer nozzle and air conditioning outlet product development. Operating income of $1,332,810 in this year's first nine months compared with $1,123,963 in the similar period last year, a 19% increase. Provision for income taxes, both federal and state, was determined based upon an estimate of the total year's pretax income. The effective tax rates for both years' nine months were essentially the same. 9 FINANCIAL CONDITION The Company's position in cash, cash equivalents, and current investments available for sale on July 25, 1998, decreased $1,348,287 to $970,359 from $2,318,646 at the previous fiscal year end of October 25, 1997. The working capital of $5,421,101 at July 25, 1998, was approximately the same as the last fiscal year end. The current ratio rose to 4.03 from 2.95 since October 25, 1997, the previous year end. Cash provided by operating activities was $319,879 in the first nine months of fiscal year 1998 compared with $1,627,849 in the prior fiscal year's similar period. Cash flow from net income and depreciation was higher, but finished goods and raw material inventories were increased in order to provide safety stock to ensure on-time delivery, and accounts payable declined as a result of the slow-down in production during the months of June and July. In addition, accrued expenses also declined due to the final payments of the accrued sales commissions related to the termination of the Company's sales agreement with its manufacturer's representatives. Capital expenditures were $1,627,583 in the fiscal year's first nine months, $836,520 greater than those for last year's similar period principally to increase production capacity and provide additional tooling. North American light vehicle production decreased 4% in the second calendar quarter of 1998 versus the same period in 1997. Production for the third quarter of 1998 is forecasted by Ward's Automotive Reports to decrease in the same range. It is expected that shipments in the Company's fiscal fourth quarter, which does not include the GM strike period of July 1998, will reflect more normal activity levels. The Company's management believes that the present and planned production capacity should be satisfactory to meet the anticipated demands of the Company's share of the North American vehicle production forecast, as well as near-term new product shipments. Cash flow from operations and available cash are expected to provide the funds needed for planned working capital requirements and capital expenditures. In order to perform the required electronic communication with its customers, control production and other business functions, and receive product and services from its suppliers, the Company needs to ensure that its own computer systems and those of its suppliers will function properly for the year 2000 and beyond. The Company has taken the necessary steps for its own computer systems to be compliant with these requirements. It continues to be in the process of assessing the status of its production equipment and its suppliers. The costs of compliance have not been and are not expected to be significant to its results of operations. Forward-Looking Statements This report contains certain forward-looking statements subject to risk and uncertainties which could cause actual results to differ materially from those anticipated. Readers are cautioned not to place undue reliance on those forward-looking statements which speak only as of the date of this report. 10 BOWLES FLUIDICS CORPORATION PART II. OTHER INFORMATION FOR THE NINE MONTHS ENDED JULY 25, 1998 Item 6. Exhibits and Reports on Form 8-K Exhibit Description ------- ----------- (a) Exhibit 20 Report furnished to Security Holders (b) Reports on Form 8-K None 11 EX-20 2 EXHIBIT 20 Exhibit 20 BOWLES FLUIDICS CORPORATION 6625 Dobbin Road, Columbia, Maryland 21045-4707 USA Phone: 410-381-0400 Fax: 410-381-2718 September 8, 1998 TO THE STOCKHOLDERS OF BOWLES FLUIDICS CORPORATION: Automotive nozzle sales declined 10% in the third quarter primarily because of the General Motors strike. We elected not to lay off related personnel in this period, as normal shutdowns for retooling and the strike would dictate, but rather to redirect efforts toward accelerating manufacturing process improvements. This, of course, contributed to a further decrease in the quarter's gross profit. Two automotive customers have selected BFC as the supplier of AC outlets for production in 1999 and 2000. Two nonautomotive programs have been awarded to BFC commencing production in 1998 and 1999. In spite of the third quarter's negatives, the nine-month results exceed those of last year and we hope the last quarter will permit a significant sales recovery. Sincerely, _____________________ Ronald Stouffer President RS:lto Attachment 12 BOWLES FLUIDICS CORPORATION - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended July 25, 1998 July 26, 1997 July 25, 1998 July 26, 1997 ------------- ------------- ------------- ------------- Net Sales $ 4,632,502 $ 4,387,924 $ 15,105,362 $ 13,615,319 Cost of Sales 3,889,714 3,130,132 11,196,107 9,325,310 Selling, General and Administrative Expenses 664,588 672,013 1,993,702 2,409,483 Research and Development Costs 205,180 225,055 582,743 756,563 Interest Income and Other Income and (Expense), Net 20,557 26,373 75,771 75,712 ------------- --------------------------------- ------------- Income before Taxes $ (106,423) $ 387,097 $ 1,408,581 $ 1,199,675 Provision for Income Taxes (38,759) 140,345 521,631 432,687 ------------- -------------------------------- ------------- Net Income $ (67,664) $ 246,752 $ 886,950 $ 766,988 ------------- -------------------------------- ------------- Income applicable to Common Shareholders $ (86,326) $ 228,090 $ 830,965 $ 711,003 ============= ================================ ============= Net Income per Share Basic $ (0.01) $ 0.02 $ 0.07 $ 0.06 Diluted $ 0.00 $ 0.02 $ 0.05 $ 0.05
- ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS
Unaudited Audited July 25, 1998 October 25,1997 ------------- --------------- Assets Cash and Cash Equivalents $ 970,359 $ 755,525 Investments - 1,563,121 Accounts Receivable 2,821,583 3,112,063 Inventories 2,992,946 2,130,615 Other Current Assets 425,689 634,037 ------------- ------------- Total Current Assets 7,210,577 8,195,361 ------------- ------------- Property, Plant and Equipment, Net 4,312,460 3,494,335 Other Assets 91,230 95,005 ------------- ------------- Total Assets $ 11,614,267 $ 11,784,701 ============= ============= Liabilities and Stockholders' Equity Accounts Payable--Trade $ 701,337 $ 1,122,437 Accrued Expenses and Other Liabilities 1,088,139 1,609,807 Income Taxes Payable - 48,162 ------------- ------------- Total Current Liabilities 1,789,476 2,780,406 Other Liabilities 474,488 492,866 ------------- ------------- Total Liabilities 2,263,964 3,273,272 ------------- ------------- 8% Convertible Preferred Stock 933,080 933,080 Common Stock 1,268,501 1,264,001 Additional Paid-in Capital 2,732,832 2,728,083 Retained Earnings 4,415,890 3,586,265 ------------- ------------- Stockholders' Equity 9,350,303 8,511,429 ------------- ------------- Total Liabilities and Stockholders' Equity $ 11,614,267 $ 11,784,701 ============= =============
13 FORM 10-Q BOWLES FLUIDICS CORPORATION 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. BOWLES FLUIDICS CORPORATION Date __________________ By ____________________________ Ronald D. Stouffer President Date __________________ By ___________________________ David A. Quinn Vice President - Finance 14 EX-27 3 FDS FOR BOWLES FLUIDICS
5 1 3-MOS OCT-31-1998 JUL-25-1998 970,359 0 2,821,583 0 2,992,946 7,210,577 10,973,565 6,661,105 11,614,267 1,789,476 0 0 933,080 1,268,501 7,148,722 11,614,267 4,632,502 4,632,502 3,889,714 4,759,482 (20,557) 0 0 (106,423) (38,759) (67,664) 0 0 0 (67,664) (0.01) 0.00
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