-----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, CHqF1qcCHLSG+kyTp0bdOgBX0Vw+8m16YDVrQceAuXJc0jVd+36Lgk91LZ+2Ns8Q 0RsmCOmih7sGeeFMn2fDiQ== 0000075049-97-000015.txt : 19970515 0000075049-97-000015.hdr.sgml : 19970515 ACCESSION NUMBER: 0000075049-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSMONICS INC CENTRAL INDEX KEY: 0000075049 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 410955759 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12714 FILM NUMBER: 97603424 BUSINESS ADDRESS: STREET 1: 5951 CLEARWATER DR CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129332277 MAIL ADDRESS: STREET 1: 5951 CLEARWATER DRIVE CITY: MINNETONKA STATE: MN ZIP: 55343 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1997 OR Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to Commission File No. 1-12714 OSMONICS, INC (Exact name of registrant as specified in its charter) Minnesota 41-0955759 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification Number) 5951 Clearwater Drive, Minnetonka, MN 55343 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (612) 933-2277 N/A Former name, former address and former fiscal year, if changed since last report 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 at least the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At April 30, 1997, 13,932,003 shares of the issuer's Common Stock, $0.01 par value, were outstanding. OSMONICS, INC. INDEX PART I. FINANCIAL INFORMATION PAGE ITEM I. FINANCIAL STATEMENTS Consolidated Statements of Income - . . . . . . . . 2 For the Three Months Ended March 31, 1997 and 1996 Consolidated Balance Sheets - . . . . . . . . . . . 3 March 31, 1997 and December 31, 1996 Consolidated Statements of Cash Flows . . . . . . . 4 For the Three Months Ended March 31, 1997 and 1996 Notes to Consolidated Financial Statements . . . . . 5 ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF . . . . . . 6-8 FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . 9 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ITEM I - FINANCIAL STATEMENTS OSMONICS, INC. CONSOLIDATED STATEMENTS OF INCOME (In Thousands Except Per Share Data) Three Months Ended March 31, 1997 1996 Sales $42,313 $39,051 Cost of sales 25,964 23,027 Gross profit 16,349 16,024 Less: Selling, general and administrative 9,717 8,333 Research, development and engineering 2,786 2,504 Income from operations 3,846 5,187 Other income (expense) (101) 156 Income from continuing operations before income taxes 3,745 5,343 Income taxes 1,311 1,708 Income from continuing operations 2,434 3,635 Recovery on discontinued operations 325 - Net income $ 2,759 $ 3,635 Income from continuing operations per common and common equivalent share $ 0.17 $ 0.25 Recovery on discontinued operations per common and common equivalent share $ 0.02 - Net income per common and common equivalent share $ 0.19 $ 0.25 Average common and common equivalent shares outstanding 14,516 14,445 OSMONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except share data) March 31, December 31, 1997 1996 ASSETS Current assets Cash and cash equivalents $ 2,968 $ 5,392 Marketable securities 17,779 19,028 Trade accounts receivable, net of allowance for doubtful accounts of $1,102 in 1997, and $907 in 1996 31,176 28,200 Inventories 34,030 32,322 Deferred tax assets 1,767 1,559 Other current assets 1,880 2,026 Total current assets 89,600 88,527 Property and equipment, at cost Land and land improvements 5,506 5,485 Building 27,475 27,158 Machinery and equipment 52,939 50,045 Construction in progress 4,006 3,438 89,926 86,126 Less accumulated depreciation and amortization (35,228) (34,332) 54,698 51,794 Other assets 19,865 11,855 $164,163 $152,176 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 11,463 $ 12,511 Current debt 16,891 7,493 Reserve for discontinued operations 1,457 1,957 Other accrued liabilities 15,464 12,560 Total current liabilities 45,275 34,521 Long-term debt 15,764 15,900 Other liabilities 194 196 Deferred income taxes 3,950 3,616 Shareholders' equity Common stock, $0.01 par value Authorized -- 50,000,000 Issued -- 1997: 14,215,195 and 1996: 14,193,239 shares 142 142 Capital in excess of par value 23,439 23,128 Retained earnings 74,540 71,781 Treasury Stock (1,184) - Unrealized gain on marketable securities 2,270 2,864 Foreign currency translation adjustments (227) 28 Total shareholders' equity 98,980 97,943 $164,163 $152,176 OSMONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Three Months Ended March 31, Cash flows from: 1997 1996 Operations: Net income $ 2,759 $ 3,635 Non-cash items included in net income: Depreciation and amortization 1,190 1,206 Deferred income taxes 111 (87) Gain on sale of investments - (164) Accounts receivable (1,439) (1,262) Inventories and other current assets 2,371 1,586 Accounts payable and accrued liabilities (4,084) (2,640) Net cash provided by operations 908 2,274 Investing activities: Business acquisition (net of cash acquired) (10,470) - Purchase of investments (317) (283) Sale of investments 400 3,029 Purchase of property and equipment (1,350) (6,610) Other (125) (266) Cash provided by (used in) investing activities (11,862) (4,130) Financing activities: Increases in debt 9,398 514 Reduction of debt (136) (909) Issuance of Common Stock 311 335 Purchase of Treasury Stock (1,184) - Net cash provided by (used in) financing activities 8,389 (60) Effect of exchange rate changes on cash 141 (20) Decrease in cash and cash equivalents (2,424) (1,936) Cash and cash equivalents - beginning of year 5,392 4,729 Cash and cash equivalents - end of quarter $ 2,968 $ 2,793 OSMONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all 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 months ended March 31, 1997, are not necessarily indicative of the results that may be expected for the year 1997. These statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report to shareholders and Form 10-K for the year ended December 31, 1996. ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands except per share amounts) As an aid to understanding the Company's operating results, the following table shows the percentage of sales that each income statement item represents for the three months ended March 31, 1997 and 1996. Percent of Sales Three Months Ended March 31, 1997 1996 Sales 100.0% 100.0% Cost of sales 61.4 59.0 Gross profit 38.6 41.0 Selling, general and administrative 23.0 21.3 Research, development and engineering 6.6 6.4 Operating expenses 29.6 27.7 Income from operations 9.0 13.3 Other income (expense) (0.2) 0.4 Income from continuing operations before income taxes 8.8 13.7 Income taxes 3.1 4.4 Income from continuing operations 5.7 9.3 Recovery on discontinued operations 0.8 - Net income 6.5% 9.3% Sales Sales of $42,313 for the quarter ended March 31, 1997 increased 8.4% from the first quarter of 1996. Sales generated internally increased 5.4% on a year-to-year comparison. The acquisition of AquaMatic, Inc. in late February 1997 contributed an additional 3.0% of the year-to-year sales increase. Gross Margin Gross margin decreased from 41.0% of sales in the first quarter of 1996 to 38.6% of sales in the first quarter of 1997, primarily as a result of changes in the product line sales mix. Previously announced price increases on selected product lines are expected to provide modest favorable impact beginning in the second quarter. Operating Expenses Operating expenses increased from 27.7% of sales in the first quarter of 1996 to 29.6% in the first quarter of 1997. The primary increase was in sales and marketing expenses to fund the expansion of the sales organization and marketing programs. Part of the increased operating expense is due to the implementation of the SAP management information system. The savings from improved systems should begin to be realized in the latter part of 1997. Reductions in operating expense are being implemented, in response to the lower average gross margins, and slower rate of sales growth. Other Income Other income was lower by $257,000 for the first quarter of 1997 compared to the first quarter of 1996, primarily due to less gains on the sale of investments. Income Taxes The effective tax rate for the first quarter 1997 was 35% based on the forecast for the full year. This compares to 32.0% in the corresponding period of 1996, which benefited from remaining tax credits from the Autotrol acquisition. Recovery on Discontinued Operations The Company recognized $325,000 ($0.02 per share) of after-tax income from a reduction in the reserve for discontinued operations from the Autotrol merger after a lawsuit was successfully defended. Net Income Net income for the quarter was $2,759, as compared to $3,635 for the first quarter of 1996. Net income per share was $0.19 per share, a decrease of 25% from the $0.25 per share reported for the same quarter last year. Liquidity and Capital Resources As of March 31, 1997, the Company had cash, cash equivalents and marketable securities of $20,747 versus $24,420 at December 31, 1996. The current ratio was 2.0 at March 31, 1997, as compared to 2.6 at year-end 1996. The Company's current debt increased from $7,493 at December 31, 1996 to $16,891 at March 31, 1997. The increase was due to short-term borrowings for the AquaMatic acquisition. The Company announced on March 17, 1997 that its Board of Directors authorized purchase of up to 1,500,000 shares of the Company's common stock. In March 1997, the Company purchased 68,600 shares and in April 1997, 220,000 shares. The Company believes that its current cash and investments position, its cash flow from operations, and amounts available from bank credit will be adequate to meet its anticipated cash needs for working capital, capital expenditures, and potential acquisitions during the foreseeable future. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed with the Securities and Exchange Commission (as well as information included in oral or other written statements made or to be made by the Company) contains statements that are forward-looking. Such statements may relate to plans for future expansion, business development activities, other capital spending, financing, or the effects of regulation and competition. Such information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to product development activities, dependence on existing management, global economic and market conditions, and changes in federal or state laws. OSMONICS, INC. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) (27) Financial Data Schedule (b) During the quarter ended March 31, 1997 the Registrant did not file a Form 8-K report. 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. Dated: ________________ OSMONICS, INC. (Registrant) /s/ L. Lee Runzheimer L. Lee Runzheimer Chief Financial Officer /s/ Howard W. Dicke Howard W. Dicke Treasurer and Vice President Corporate Development /s/ D. Dean Spatz D. Dean Spatz Chief Executive Officer GSW/dh finance/10QMAR)F EX-27 2
5 This schedule contains summary financial information extracted from FORM 10-Q for the quarter ended March 31, 1997, and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1997 MAR-31-1997 2968 17779 31176 1102 34030 89600 89926 35228 164163 45275 15764 0 0 142 98980 164163 42313 42313 25964 25964 12503 0 431 3745 1311 2434 325 0 0 2759 .19 .19
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