0000950124-95-002560.txt : 19950816 0000950124-95-002560.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950124-95-002560 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCE ROSS CORP CENTRAL INDEX KEY: 0000002457 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564] IRS NUMBER: 360861450 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00770 FILM NUMBER: 95564206 BUSINESS ADDRESS: STREET 1: 6200 ELMRIDGE ROAD CITY: STERLING STATE: MI ZIP: 48310 BUSINESS PHONE: 3123469126 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1995 Commission File No. 0-21822 ADVANCE ROSS CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-3878407 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 233 South Wacker Drive, Suite 9700, Chicago, IL 60606-6502 (Address of principal executive office) (Zip Code) Registrant's telephone number including area code: (312) 382-1100 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 ____ The registrant has 3,532,337 shares of common stock outstanding at June 30. 1995. Page 1 of 16 2 ADVANCE ROSS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
June 30, December 31, 1995 1994 (Unaudited) (Note 4) ---------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $17,295 $13,539 Accounts receivable, less allowances: 1995 - $1,889; 1994 - $1,813 22,073 22,871 Inventory 1,239 1,117 Prepaid expenses 924 975 Other current assets 4,564 4,398 ------- ------- Total current assets 46,095 42,900 COST IN EXCESS OF NET ASSET VALUE OF ACQUIRED BUSINESSES - Net of amortization: 1995 - $2,729; 1994 - $2,169 15,925 15,793 LICENSE AND TRADEMARKS - Net of amortization: 1995 - $326; 1994 - $263 307 364 ------- ------- Total intangibles 16,232 16,157 OTHER ASSETS 3,653 3,067 PROPERTY, PLANT AND EQUIPMENT: Land 84 84 Building and improvements 457 351 Machinery and equipment 6,303 5,057 ------- ------- Total property, plant and equipment 6,844 5,492 Less allowance for depreciation and amortization 4,113 3,496 ------- ------- Property, plant and equipment - net 2,731 1,996 ------- ------- TOTAL ASSETS $68,711 $64,120 ======= =======
See notes to condensed consolidated financial statements. Page 2 3 ADVANCE ROSS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (In Thousands, Except Share Data)
June 30, December 31, 1995 1994 (Unaudited) (Note 4) ----------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $1,813 $1,677 Accounts payable 3,248 2,715 Accrued compensation 1,688 4,649 Income taxes payable 4,493 3,949 Other current liabilities 10,700 9,512 ------ ------ Total current liabilities 21,942 22,502 LONG-TERM DEBT 7,253 6,707 OTHER LIABILITIES 2,250 1,380 SHAREHOLDERS' EQUITY: Capital stock: Preferred stock, $1 par value per share; authorized 1,000,000 shares; issued, none 5% cumulative preferred stock, $25 par value per share; callable at $27.50 per share plus accumulated dividends; authorized, 200,000 shares; issued, 20,247 shares, including 1,472 shares and 1,273 shares held in treasury in 1995 and 1994, respectively 506 506 Common stock, $.01 par value per share; authorized, 12,000,000 shares; issued, 3,784,254 shares, including 251,917 shares and 336,734 shares held in treasury in 1995 and 1994, respectively 38 38 Capital in excess of par value 3,998 3,547 Retained earnings 36,581 34,310 Treasury stock, at cost (1,719) (1,654) Foreign currency translation adjustment (2,138) (3,216) ------ ------ Total shareholders' equity 37,266 33,531 ------ ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $68,711 $64,120 ======= =======
See notes to condensed consolidated financial statements. Page 3 4 ADVANCE ROSS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts)
For the Three Months For the Six Months Ended June 30 Ended June 30 --------------------------- ----------------------- (Unaudited) (Unaudited) 1995 1994 1995 1994 ---- ---- ---- ---- NET SALES AND SERVICES $18,330 $15,838 $32,281 $27,406 COSTS OF PRODUCTS AND SERVICES 13,018 10,886 23,747 19,381 ------- ------- ------- ------- Gross profit 5,312 4,952 8,534 8,025 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,823 1,746 3,365 3,200 ------- ------- ------- ------- Operating income 3,489 3,206 5,169 4,825 AMORTIZATION OF COST IN EXCESS OF NET ASSET VALUE OF ACQUIRED BUSINESS (245) (231) (482) (464) INTEREST INCOME 231 122 555 302 INTEREST EXPENSE (225) (277) (619) (705) OTHER INCOME (EXPENSE) - Net (370) 25 (320) (221) ------- ------- ------- ------- INCOME BEFORE INCOME TAXES AND EQUITY IN PROFIT (LOSS) OF UNCONSOLIDATED AFFILIATES 2,880 2,845 4,303 3,737 PROVISION FOR INCOME TAXES 1,289 1,283 2,516 2,070 ------- ------- ------- ------- INCOME BEFORE EQUITY IN PROFIT (LOSS) OF UNCONSOLIDATED AFFILIATES 1,591 1,562 1,787 1,667 EQUITY IN PROFIT (LOSS) OF UNCONSOLIDATED AFFILIATES 248 (44) 496 70 ------- ------- ------- ------- NET INCOME $1,839 $1,518 $2,283 $1,737 ======= ======= ======= ======= EARNINGS PER COMMON SHARE: Primary $0.42 $0.35 $0.53 $0.40 ======= ======= ======= ======= Fully diluted $0.42 $0.34 $0.52 $0.39 ======= ======= ======= ======= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Primary 4,370 4,345 4,308 4,280 ======= ======= ======= ======= Fully diluted 4,406 4,428 4,374 4,396 ======= ======= ======= =======
See notes to condensed consolidated financial statements. Page 4 5 ADVANCE ROSS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
For the Six Months Ended June 30 ---------------------------- (Unaudited) 1995 1994 ---- ---- OPERATING ACTIVITIES: Net income $2,283 $1,737 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 1,115 932 Provision for deferred income taxes 215 Equity in profit of unconsolidated affiliates (496) (70) Loss on sale of equipment 27 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 1,284 (467) (Increase) in inventory (95) (63) Decrease in prepaid expenses 68 123 (Increase) decrease in other current assets 226 (1,042) Increase (decrease) in accounts payable 473 (341) Increase (decrease) in accrued compensation (3,019) 58 Increase in income taxes payable 458 476 Increase in other current liabilities 1,187 3,157 ------- ------ Net cash flows from operating activities 3,699 4,527 ------- ------ INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,273) (641) Investment in unconsolidated affiliates (135) (4) ------- ------ Net cash flows from investing activities (1,408) (645) ------- ------ FINANCING ACTIVITIES: Decrease in short-term borrowings - net (4,390) Decrease in long-term debt (1,405) Purchase of treasury stock (229) (16) Proceeds from exercise of stock options 285 701 Dividends paid (12) (12) ------- ------ Net cash flows from financing activities 44 (5,122) ------- ------ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 1,421 60 ------- ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,756 (1,180) CASH AND CASH EQUIVALENTS - Beginning of year 13,539 10,142 ------- ------ CASH AND CASH EQUIVALENTS - End of period $17,295 $8,962 ======= ======
See notes to condensed consolidated financial statements Page 5 6 ADVANCE ROSS CORPORATION Notes to condensed consolidated financial statements: (In thousands, except per share amounts) 1. The accompanying condensed consolidated financial statements, which are for an interim period, do not include all disclosures provided in annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Company's Form 10-K for the year ended December 31, 1994. 2. The accompanying condensed consolidated financial statements are subject to year-end adjustments. The financial statements reflect all adjustments consisting of normal, recurring accruals which are, in the opinion of management, necessary for a fair statement of the results for the interim period. 3. The Company's pollution control equipment business records revenue under the percentage of completion method based on the relationship of costs incurred to total estimated costs at completion. The cumulative gross profit recognized on contracts is adjusted for differences between actual and estimated costs at completion. 4. The balance sheet at December 31, 1994, has been derived from the audited consolidated financial statements at that date. 5. Certain 1994 amounts have been reclassified to conform with the 1995 presentation. Page 6 7 6. Supplementary Information - Net Sales and Services and Segment Operating Profit of Principal Business Segments.
Three Months Ended Three Months Ended June 30, 1995 June 30, 1994 ------------- ------------- Net Sales Segment Net Sales Segment and Operating and Operating Services Profit Services Profit -------- ------ -------- ------ Tax-free activities $15,831 $3,260 $13,483 $3,331 Pollution control equipment 2,499 931 2,355 863 ------- ------ ------- ------ TOTAL $18,330 $4,191 $15,838 $4,194 ======= ====== ======= ======
Six Months Ended Six Months Ended June 30, 1995 June 30, 1994 ------------- ------------- Net Sales Segment Net Sales Segment and Operating and Operating Services Profit Services Profit -------- ------ -------- ------ Tax-free activities $27,809 $5,390 $23,891 $5,426 Pollution control equipment 4,472 1,148 3,515 959 ------- ------ ------- ------ TOTAL $32,281 $6,538 $27,406 $6,385 ======= ====== ======= ======
7. The investments in Fexco Tax-free Shopping Ltd., European Data Processing Ltd., Europe Tax-free Shopping France S.A. and Uintah Basin Limited Partnership are accounted for under the equity method. Summary financial information for the unconsolidated affiliates accounted for under the equity method is as follows:
Unconsolidated Affiliates June 30 ------- 1995 1994 ---- ----- Current assets $18,107 $10,212 Noncurrent assets 3,016 3,674 Current liabilities 15,367 7,923 Noncurrent liabilities 13 2,662 Stockholders' equity 5,743 3,301 Revenues (six months) 6,498 4,930 Net income (six months) 1,062 261
Page 7 8 8. Washington State Department of Transportation v. Washington Natural Gas Company et al. (United States District Court Eastern District of Washington). The Company was one of three defendants in a lawsuit filed by the Washington State Department of Transportation ("WDOT") claiming approximately $6 million (allegedly incurred in cleaning up coal tar which WDOT encountered while building a highway in Tacoma, Washington, in the mid-1980s) of joint and several liability against each of the defendants for violations of the Comprehensive Environmental Response Compensation and Liability Act 42 U.S.C. 9601. The claims against the Company were based upon the allegations that the Company owned or operated a coal gasification facility, directly or through corporate subsidiaries, in the relevant location during the period from 1910 through 1924. The lawsuit was tried in November 1992 and, in December 1992, judgment was entered in favor of the defendants and against the plaintiff, finding no liability on the part of the Company. WDOT appealed the judgment and in April 1995 the Court of Appeals for the Ninth Circuit unanimously affirmed the lower court's judgment in favor of the Company. WDOT filed a motion to have the Court of Appeals reconsider its opinion; which motion was denied in July 1995. A subsequent amended motion for reconsideration was also denied, in August 1995. On May 10, 1994, WDOT filed a state court action against the same three defendants who were named in the United States District Court lawsuit referenced above, and a fourth defendant. This lawsuit is in the Superior Court of the County of Pierce, State of Washington. It is in most respects virtually identical to the federal lawsuit, but is based on state environmental statutes rather than federal law. As in the previous lawsuit, the claimed damages are for approximately $6 million incurred in cleaning up coal tar from WDOT's highway right-of-way. On June 10, 1994, this lawsuit was stayed pending resolution of the federal lawsuit by the United States Court of Appeals for the Ninth Circuit. The Company and others have been informed by the Eugene Water and Electric Board ("EWEB") that EWEB is planning to voluntarily clean up a site in Eugene, Oregon, which was once a coal gasification facility allegedly owned or operated at various times by the Company (directly or through corporate subsidiaries) and others. No formal legal claim has been made on the Company, but EWEB has asked the Company and others to participate financially in the preliminary site investigation, the total cost of which is estimated at less than $150,000. The Company has advised EWEB that it requires more information pertaining to historical ownership of the site before it can evaluate its responsibility, if any, for a clean-up of the site. Page 8 9 9. The Board of Directors of the Company declared a two-for-one common stock split on August 9, 1995. The split will be done as a 100 percent stock dividend for shareholders of record as of August 25, 1995. At June 30, 1995, Advance Ross had outstanding 3,532,337 shares of common stock. Giving effect to the announced split, shares of common stock outstanding would have been 7,064,674. The pro forma effect of the stock split with respect to the three month and six month periods ended June 30, 1994 and 1995, is as follows:
Three Months Ended Six Months Ended June 30 June 30 ------- ------- 1995 1994 1995 1994 ---- ---- ---- ---- Fully diluted common shares 8,811,584 8,855,400 8,747,712 8,792,232 Fully diluted earnings per share $.21 $.17 $.26 $.20
Page 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED RESULTS Comparison of Three Months Ended June 30, 1995, with Three Months Ended June 30, 1994. (In thousands, except per share amounts) Net sales and services for the three months ended June 30, 1995, increased by $2,492, or 15.7%, to $18,330 compared to $15,838 for the three months ended June 30, 1994, due to increases in both tax-free activities and pollution control products sales. The increase in net sales and services in the tax-free activities resulted despite the negative impact of changes in the European Union ("EU") which took place effective January 1, 1995. Management has estimated that such changes would have reduced 1994 net sales and services of the tax-free activities by 9%. Approximately 86% and 85% of the net sales for the respective periods were the result of the operations of the Company's wholly-owned subsidiary, Europe Tax-free Shopping, Ltd. ("ETS"). Gross profit for the three months ended June 30, 1995, increased by $360, or 7.3%, to $5,312 from $4,952 for the three months ended June 30, 1994, due to the higher level of sales offset partly by a decline in gross margin. Gross margin for the 1995 period decreased to 29.0% from 31.3% in the comparable 1994 period. Gross margin declined primarily as the result of a shift in business mix away from higher margin countries due to Austria, Finland and Sweden joining the EU effective January 1, 1995, and a strong Norwegian currency; continued business development activities in new tax-free markets, including start-up operations in Switzerland; and increased marketing and promotion activities throughout Europe. The gross profit and gross margin were also negatively affected by the poor performance of ETS's foreign exchange operation in Sweden. The Company has sold this operation for an amount not less than its net asset value. Operating income for the three months ended June 30, 1995, increased by $283, or 8.8%, to $3,489 from $3,206 in the comparable 1994 period due to higher sales offset partly by the lower gross margin combined with modest growth in selling, general and administrative expenses ("SG&A"). SG&A increased by only $77, or 4.4%, compared to the 15.7% increase in sales. Operating margin decreased to 19.0% from 20.2%. The 2.3% decline in gross margin discussed above was partly offset by the reduction in SG&A to 9.9% of sales in 1995 compared to 11.0% for the 1994 period. Page 10 11 Interest expense in the second quarter of 1995 declined by $52 due primarily to the lower level of debt outstanding. Interest income increased by $109 due to the increased level of cash and cash equivalents. Other income (expense) - net decreased by $395 due primarily to higher bank fees resulting from an increase in the number of transactions and the negative effect of foreign currencies in ETS. The Company's effective tax rate for the three months ended June 30, 1995, decreased slightly to 44.8% from 45.1% in the comparable 1994 period. The provision for income taxes exceeds the Federal income tax rate of 35.0% primarily because income taxes are currently payable in certain higher tax-rate European countries, such as Germany and Italy, which have a significant portion of the Company's taxable income, and because that taxable income cannot be offset by losses incurred in other European countries or the United States. The equity in profit of unconsolidated affiliates of $248 compared to a loss of $44 in the 1994 period. The increase resulted primarily from continued stronger performance in the Company's 50%-owned joint ventures in England and France. Consolidated net income was $1,839 for the three months ended June 30, 1995, compared to $1,518 for the 1994 period. Both primary and fully diluted earnings per common share were $.42 in the three months ended June 30, 1995, compared to $.35 and $.34, respectively, for the 1994 period. Comparison of Six Months Ended June 30, 1995, with Six Months Ended June 30, 1994. (In thousands, except per share amounts) Net sales and services for the six months ended June 30, 1995, increased by $4,875, or 17.8%, to $32,281 compared to $27,406 for the six months ended June 30, 1994, due to increases in both tax-free activities and pollution control products sales. The increase in net sales and services in the tax-free activities resulted despite the negative impact of changes in the EU which took place effective January 1, 1995. Management has estimated that such changes would have reduced 1994 net sales and services of the tax-free activities by 9%. Approximately 86% and 87% of the net sales for the respective periods were the result of the operations of ETS. Gross profit for the six months ended June 30, 1995, increased by $509, or 6.3%, to $8,534 from $8,025 for the six months ended June 30, 1994, due to the higher level of sales offset partly by a decline in gross margin. Gross margin for the 1995 period decreased to 26.4% from 29.3% in the comparable 1994 Page 11 12 period. Gross margin declined primarily as the result of a shift in business mix away from higher margin countries due to Austria, Finland and Sweden joining the EU effective January 1, 1995, and a strong Norwegian currency; continued business development activities in new tax-free markets, including start-up operations in Switzerland; increased marketing and promotion activities throughout Europe; costs incurred for printing additional promotional materials; and expenses associated with developing the Company's biofiltration equipment operation. The gross profit and gross margin were also negatively affected by the poor performance of ETS's foreign exchange operation in Sweden. The Company has sold this operation for an amount not less than its net asset value. Operating income for the six months ended June 30, 1995, increased by $344, or 7.1%, to $5,169 from $4,825 in the comparable 1994 period due to higher sales offset partly by the lower gross margin combined with modest growth in SG&A, which increased by only $165, or 5.2%, compared to the 17.8% increase in sales. Operating margin decreased to 16.0% from 17.6%. The 2.9% decline in gross margin discussed above was partly offset by the reduction in SG&A to 10.4% of sales in 1995 compared to 11.7% for the 1994 period. Interest expense in the first six months of 1995 declined by $86 due primarily to the lower level of debt outstanding. Interest income increased by $253 due to the increased level of cash and cash equivalents. Other income (expense) - net decreased by $99 due primarily to higher bank fees resulting from an increase in the number of transactions and the negative impact of foreign currencies in ETS. The Company's effective tax rate for the six months ended June 30, 1995, increased to 58.5% from 55.4% in the comparable 1994 period. The provision for income taxes exceeds the Federal income tax rate of 35.0% primarily because income taxes are currently payable in certain higher tax-rate European countries, such as Germany and Italy, which have a significant portion of the Company's taxable income, and because that taxable income cannot be offset by losses incurred in other European countries or the United States. The equity in profit of unconsolidated affiliates of $496 compared to $70 in the 1994 period. This increase resulted primarily from continued stronger performance in the Company's 50%-owned joint ventures in England and France. Consolidated net income was $2,283 for the six months ended June 30, 1995, compared to $1,737 for the 1994 period. Primary and fully diluted earnings per common share were $.53 and $.52, respectively, in the six months ended June 30, 1995, compared to $.40 and $.39, respectively, for the 1994 period. Page 12 13 FINANCIAL POSITION At June 30, 1995, the Company had cash and cash equivalents totaling $17,295 and total debt, resulting from the acquisition of ETS, of $9,066 compared to $13,539 and $8,384, respectively, at December 31, 1994. Total debt increased as a result of currency fluctuations relative to the dollar. The Company's working capital at June 30, 1995, was $24,153. Capital expenditures for 1995 and 1996 will be financed primarily by funds from operations. If any acquisitions are completed, additional financing may be required. ETS's business is closely tied to the "tourist season" in Europe and is, accordingly, highly seasonal. The months of January, February, March, April and December are the least active for ETS. From May, the start of the traditional tourist season in Europe, ETS has historically operated at a generally accelerating rate of profit, peaking in about August and September and then declining in October and November. ETS has historically borrowed funds on a short-term basis to finance working capital requirements during these peak months of tourist travel. As of June 30, 1995, and December 31, 1994, the Company had no amounts outstanding under any such short-term facilities. Inflation affects the Company's revenues, costs of operation and interest received from short-term investments. Revenues are affected as the amount of value-added tax ("VAT") varies with sales prices and as prices on products sold are increased to maintain gross margins. TAX-FREE ACTIVITIES The Company's tax-free activities include the operation of ETS's VAT refund business and two duty-free perfume, cosmetics and gift/souvenir stores at Landvetter Airport, outside Gothenburg, Sweden. For the three months ended June 30, 1995, ETS had sales of $15,831, an increase of 17.4% over sales of $13,483 for the comparable 1994 period, and segment operating profit of $3,260, a decline of 2.1% from $3,331 in the 1994 period. The segment operating profit excludes ETS's equity in the profit (loss) of unconsolidated affiliates. Net sales of ETS increased in 1995 over the comparable period in 1994 as a result of generally strong traveler and spending growth, offsetting the negative revenue effects of the EU expansion (as discussed above and below), and the strength of certain European currencies relative to the U.S. dollar, partly offset by the effect of the weaker U.S. dollar on dollar-oriented Page 13 14 travelers, including Americans and Russians. The decrease in segment operating profit in the three-month period ended June 30, 1995, over the comparable period in 1994 is primarily the result of a reduced margin resulting from the shift in business mix away from the higher margin operations in Austria, Finland, Norway and Sweden, start-up expenses in new countries such as Switzerland, higher expenses for development activities in new countries and increased marketing expenses, all as discussed above. For the six months ended June 30, 1995, ETS had sales of $27,809, an increase of 16.4% over sales of $23,891 for the comparable 1994 period, and segment operating profit of $5,390, a decrease of 0.7% from $5,426 in the 1994 period. The segment operating profit excludes ETS's equity in the profit (loss) of unconsolidated affiliates. Net sales and segment operating profit were affected by the same factors as discussed above with respect to the three month results. Fluctuations in the dollar versus the Swedish krona, German deutsche mark and other European currencies can affect the financial results of ETS. For example, a strong (weak) dollar versus the Swedish krona and German deutsche mark will reduce (increase) the dollar value of reported operating results of ETS. Counter to this impact, (i) a strong (weak) dollar will generally lead to more (less) purchases by dollar-oriented travelers in Europe, and (ii) the debt used to acquire ETS is denominated in Swedish kronor and German deutsche marks. Austria, Finland and Sweden joined the EU effective January 1, 1995. The decision by these three countries has adversely affected sales in 1995 since EU resident travelers to these countries, and travelers from these three countries who shop in EU countries, will no longer be entitled to VAT refunds. Management estimates that such sales represented approximately 9% of ETS's sales in the year ended December 31, 1994. It is expected, however, that the Company's expansion efforts, both to countries served by ETS and by greater activity with non-affected tourists will, at least in part, offset this effect. POLLUTION CONTROL PRODUCTS For the three months ended June 30, 1995, the Company's PPC Industries unit had sales of $2,499, an increase of 6.1% over sales of $2,355 for the 1994 period, and segment operating profit of $931, an increase of 7.9% from $863 in the 1994 period. Net sales of PPC Industries increased in 1995 over the comparable period in the prior year as the result of sales of biofiltration equipment. The increase in segment operating profit in the three-month period ended June 30, 1995, over the comparable period in 1994 is primarily the result of increased gross profit from the sale of pollution control equipment and improved results from the biofiltration equipment business. Page 14 15 For the six months ended June 30, 1995, the Company's PPC Industries unit had sales of $4,472, an increase of 27.2% over sales of $3,515 for the 1994 period, and segment operating profit of $1,148, an increase of 19.7% from $959 in the 1994 period. Net sales of PPC Industries increased in 1995 over the comparable period in the prior year as the result of an increase in demand for precipitators, primarily from the wood products industry, and sales of biofiltration equipment. The increase in segment operating profit in the six-month period ended June 30, 1995, over the comparable period in 1994 is primarily the result of increased sales and gross profit from the sale of pollution control equipment offset partly by start-up costs associated with development of the Company's biofiltration equipment business. At June 30, 1995, PPC's backlog was $4.3 million. Management anticipates that almost all of the backlog will be delivered in 1995. This segment has historically experienced fluctuations in its quarterly results arising from the timing of the completion of contracts. Page 15 16 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - (a) Exhibits - 11. Computation of per share earnings (b) Reports on Form 8-K - None * * * * Unless otherwise indicated as used in this report, the "Company" and "Advance Ross" refer to Advance Ross Corporation, its predecessors and subsidiaries. * * * * SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADVANCE ROSS CORPORATION (Registrant) __________________________________________ R. M. Joseph Vice President, Chief Financial Officer and Treasurer Chief Financial & Accounting Officer Authorized Agent August 14, 1995 Page 16 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 Item 6(a)(1) - Computation of per share earnings (in thousands, except per share data)
Three Months Ended Six Months Ended June 30 June 30 --------------------- --------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Primary Average shares outstanding 3,515 3,433 3,483 3,402 Net effect of dilutive stock options - based on the treasury stock method using average market price 855 912 825 878 ------ ------ ------ ------ Total 4,370 4,345 4,308 4,280 ====== ====== ====== ====== Net income $1,839 $1,518 $2,283 $1,737 Preferred stock dividends (6) (6) (12) (12) ------ ------ ------ ------ Net income applicable to common stock $1,833 $1,512 $2,271 $1,725 ====== ====== ====== ====== Per share amount $0.42 $0.35 $0.53 $0.40 ====== ====== ====== ====== Fully Diluted Average shares outstanding 3,515 3,433 3,483 3,402 Net effect of dilutive stock options - based on the treasury stock method using the period end price, if higher than average marke 891 995 891 994 ------ ------ ------ ------ Total 4,406 4,428 4,374 4,396 ====== ====== ====== ====== Net income $1,839 $1,518 $2,283 $1,737 Preferred stock dividends (6) (6) (12) (12) ------ ------ ------ ------ Net income applicable to common stock $1,833 $1,512 $2,271 $1,725 ====== ====== ====== ====== Per share amount $0.42 $0.34 $0.52 $0.39 ====== ====== ====== ======
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 17,295 0 23,962 1,889 1,239 46,095 6,844 4,113 68,711 21,942 7,253 38 0 506 36,722 68,711 4,472 32,281 3,209 23,747 247 219 619 4,303 2,516 2,283 0 0 0 2,283 0.53 0.52