-----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, Jf4l0vGt2QWLACJ8kUuCp022LSuEei2dGFhMTXYlDCv9J81yJVlce4D+fduNSQ00 GBBDGn8rXAys3md5I20SRQ== /in/edgar/work/0001104659-00-000734/0001104659-00-000734.txt : 20001115 0001104659-00-000734.hdr.sgml : 20001115 ACCESSION NUMBER: 0001104659-00-000734 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROVOX INC CENTRAL INDEX KEY: 0000856164 STANDARD INDUSTRIAL CLASSIFICATION: [3620 ] IRS NUMBER: 760254329 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18018 FILM NUMBER: 764667 BUSINESS ADDRESS: STREET 1: 740 BELLEVILLE AVE CITY: NEW BEDFORD STATE: MA ZIP: 02745-6194 BUSINESS PHONE: 5089949661 MAIL ADDRESS: STREET 1: 740 BELLEVILLE AVE CITY: NEW BEDFORD STATE: MA ZIP: 02745-6194 10-Q 1 0001.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2000 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 #0-18018 AEROVOX INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 76-0254329 -------- ---------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 167 John Vertente Boulevard ----------------------------------------------- (Address of principal executive offices) (Zip Code) (508) 994-9661 Registrant's telephone number 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 ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: At November 14, 2000, 6,141,924 shares of registrant's common stock (par value, $1.00) were outstanding, 700,000 of which are restricted and redeemable under Stockholder Agreements as described in the footnotes to the financial statements included in the registrant's most recent Annual Report on Form 10-K. 1 AEROVOX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED Sept. 30, Oct. 2, Sept. 30, Oct. 2, 2000 1999 2000 1999 -------- -------- -------- -------- Net sales $ 25,770 $ 26,718 $ 86,070 $ 85,728 Cost of sales 22,887 21,941 72,702 69,868 -------- -------- -------- -------- Gross profit 2,883 4,777 13,368 15,860 Selling, general and administrative expenses 4,312 4,254 13,166 12,574 -------- -------- -------- -------- Income (loss) from operations (1,429) 523 202 3,286 Other income (expense): Interest expense (706) (468) (1,822) (1,330) Other income 446 107 352 100 -------- -------- -------- -------- Income (loss) before income taxes (1,689) 162 (1,268) 2,056 Provision for income taxes 164 58 270 822 -------- -------- -------- -------- Net income (loss) $ (1,853) $ 104 $ (1,538) $ 1,234 ======== ======== ======== ======== Basic and diluted earnings (loss) per share $ (0.34) $ 0.02 $ (0.28) $ 0.23 ======== ======== ======== ======== Weighted average number of shares outstanding 5,435 5,399 5,425 5,396 ======== ======== ======== ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 2 AEROVOX INCORPORATED Condensed Consolidated Balance Sheets (Amounts in thousands) (Unaudited)
Sept. 30, Jan. 1, 2000 2000 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 2,182 $ 742 Accounts receivable, net 17,306 14,881 Inventories 22,854 17,511 Prepaid expenses and other current assets 3,132 2,214 -------- -------- Total current assets 45,474 35,348 Property, plant and equipment, net 35,859 27,521 Goodwill, net 3,665 3,989 Deferred income taxes 3,592 3,592 Restricted cash 758 - Other assets 220 70 -------- -------- Total assets $ 89,568 $ 70,520 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,569 $ 8,285 Accrued compensation and related expenses 2,628 2,540 Other accrued expenses 2,452 2,090 Current maturities of long-term debt 6,921 7,362 Income taxes 362 47 -------- -------- Total current liabilities 23,932 20,324 Deferred income taxes 4,060 4,100 Industrial revenue bond 409 800 Long-term debt less current maturities 31,581 13,571 Reserve for environmental costs and plant remediation 6,482 6,470 Deferred compensation 403 503 Redeemable common stock 2,324 2,546 Stockholders' equity: Common stock 5,435 5,404 Additional paid-in capital 1,145 1,078 Retained earnings 14,653 15,969 Accumulated other comprehensive loss (856) (245) -------- -------- Total stockholders' equity 20,377 22,206 -------- -------- Total liabilities and stockholders' equity $ 89,568 $ 70,520 ======== ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 3 AEROVOX INCORPORATED Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited)
Nine Months Ended ---------------------------- September 30, October 2, 2000 1999 ------------- ---------- Cash flows from operating activities: Net income (loss) $ (1,538) $ 1,234 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 3,563 3,670 Loss on disposal of assets - (3) Changes in operating assets and liabilities: Accounts receivable (2,856) (1,693) Inventories (5,653) 1,591 Prepaid expenses and other current assets (1,154) (297) Accounts payable 3,422 (1,758) Accrued expenses and other liabilities 871 (1,117) Income taxes payable 407 301 -------- -------- Net cash provided by (used in) operating activities (2,938) 1,928 -------- -------- Cash flows from investing activities: Cash paid to acquire Capacitores, net of cash acquired - (1,721) Acquisition of property and equipment (11,912) (2,056) Deposit into EPA trust fund and cash interest received (774) - Other (373) 87 -------- -------- Net cash used in investing activities (13,059) (3,690) -------- -------- Cash flows from financing activities: Net borrowings (repayments) under lines of credit 11,252 (1,665) Long-term borrowings 10,748 12,671 Repayment of long-term debt (4,385) (9,156) Cash paid for debt issuance costs (195) - Proceeds from employee stock purchase plan and exercise of stock options 98 16 -------- -------- Net cash provided by financing activities 17,518 1,866 -------- -------- Effects of exchange rates on cash (81) (26) -------- -------- Increase in cash 1,440 78 Cash at beginning of year 742 1,149 -------- -------- Cash at end of period $ 2,182 $ 1,227 ======== ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 4 AEROVOX INCORPORATED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION These unaudited condensed consolidated financial statements should be read in conjunction with Aerovox Incorporated's ("the Company") Annual Report on Form 10-K for the fiscal year ended January 1, 2000, and the consolidated financial statements and footnotes included therein. In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations. The condensed consolidated balance sheet data as of January 1, 2000, included herein, is derived from the Company's audited financial statements as of January 1, 2000. Fiscal year 2000 consists of 52 weeks, and will end on December 30, 2000. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current presentation. (2) INVENTORIES Inventories consist of the following (in thousands):
September 30, 2000 January 1, 2000 -------------------------------------------------------------------------------- Domestic Foreign Total Domestic Foreign Total ---------------------------------------------------------------------------------------------------------------------- Raw materials $ 6,365 $ 3,752 $10,117 $ 5,948 $ 3,429 $ 9,377 Work in process 2,549 647 3,196 1,949 359 2,308 Finished goods 8,168 1,373 9,541 4,838 988 5,826 ---------------------------------------------------------------------------------------------------------------------- $17,082 $ 5,772 $22,854 $12,735 $ 4,776 $17,511 ----------------------------------------------------------------------------------------------------------------------
5 (3) NET INCOME (LOSS) PER SHARE (BASIC AND DILUTED) Net income (loss) per share is computed based on the weighted average number of common and common equivalent shares outstanding during the period, calculated under the treasury stock method.
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA) - ----------------------------------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 OCTOBER 2, 1999 SEPTEMBER 30, 2000 - ----------------------------------------------------------------------------------------------------------------------------- Net Shares Per Net Shares Per Net Shares Per loss share income share loss share amount amount amount - ----------------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS (LOSS) PER SHARE $(1,853) 5,434,565 $(0.34) $104 5,398,537 $0.02 $(1,538) 5,424,982 $(0.28) - ----------------------------------------------------------------------------------------------------------------------------- DILUTIVE SECURITIES: - ----------------------------------------------------------------------------------------------------------------------------- Options 0 505 0 - ----------------------------------------------------------------------------------------------------------------------------- Redeemable Common Stock 0 0 0 - ----------------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS (LOSS) $(1,853) 5,434,565 $(0.34) $104 5,399,042 $0.02 $(1,538) 5,424,982 $(0.28) PER SHARE - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------- FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 - ----------------------------------------------------- Net Shares Per income share amount - ----------------------------------------------------- BASIC EARNINGS (LOSS) PER SHARE $1,234 5,396,354 $0.23 - ----------------------------------------------------- DILUTIVE SECURITIES: - ----------------------------------------------------- Options 505 - ----------------------------------------------------- Redeemable Common Stock 0 - ----------------------------------------------------- DILUTED EARNINGS (LOSS) $1,234 5,396,859 $0.23 PER SHARE - -----------------------------------------------------
6 Options to purchase 396,750 shares of common stock at prices ranging from $3.95 to $9.63 per share were outstanding at September 30, 2000, but were not included in the computation of diluted earnings per share for the three and nine months ended September 30, 2000 because the effect would be anti-dilutive. Redeemable common stock aggregating 700,000 shares were not included in the calculation of diluted earnings per share for the three and nine month periods ended September 30, 2000 because the effect would be anti-dilutive. The redeemable common stock was not included in the calculation of diluted earnings per share for the three-month and nine-month periods ended October 2, 1999 because the book value per common share exceeded the average fair market value of the Company's outstanding common stock. Under these conditions, it is presumed that the redeemable common stock would be redeemed at the book value per common share and become treasury stock. Options to purchase 740,875 shares of common stock at prices ranging from $2.813 to $9.625 per share were outstanding at October 2, 1999, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of common shares during the three months ended October 2, 1999. Options to purchase 6,000 shares of common stock at the price of $2.50 were outstanding at October 2, 1999, and were included in the calculation of dilutive shares under the treasury stock method because they had a dilutive effect on earnings per share for the three and nine months ended October 2, 1999. 7 (4) COMPREHENSIVE INCOME The Company's comprehensive income (loss) was as follows (in thousands):
For the Three Months For the Nine Months Ended Ended SEPT. 30, OCT. 2, SEPT. 30, OCT. 2, --------- -------- ---------- ------- 2000 1999 2000 1999 ----- ---- ---- ---- Net income (loss) $(1,853) $104 $(1,538) $ 1,234 Foreign currency translation adjustment (200) 389 (611) 103 ------- ------- ------- ------- Total comprehensive income (loss) $(2,053) $493 $(2,149) $ 1,337 ======= ======= ======= =======
(5) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). In June 1999, SFAS 137 "Deferral of the Effective Date of SFAS 133" was issued to amend the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Under SFAS 133, the accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. The Company will adopt SFAS 133 for its fiscal year beginning December 31, 2000. Management estimates that the effect of adopting SFAS 133 would not have a material impact on the Company's historical financial position or results of operations. In March 2000, the Financial Accounting Standard Board issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - An interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's historical financial position or results of operations. 8 (6) DEBT On March 21, 2000, the Company entered into a fifteen-year financing agreement with a bank and an investment company affiliated with the bank. Under the terms of the agreement, the Company received $10.2 million of adjustable rate financing collateralized by the Company's new facility in New Bedford, Massachusetts, which includes real property and manufacturing equipment. The Company entered into a staged interest rate swap in order to fix the interest rate at 7.66% over fifteen years. As of September 30, 2000, $10.2 million was covered by the interest rate swap. Including all amortizable fees, the effective interest rate is 9.26%. The agreement contains a financial covenant requiring the Company to maintain a minimum debt service coverage ratio. The Company was in violation of the minimum debt service coverage ratio covenants at September 30, 2000, on two of its loan agreements. The lenders waived their rights to accelerate payment of these loans for these violations. (7) RESTRUCTURING COSTS In December 1999, the Company recorded charges of $5,676,000 related to the exit costs from certain activities and asset impairments arising from the consolidation and relocation of certain facilities. Of this amount, charges of $4,723,000 related to the impairment of property, plant and equipment and $344,000 related to the write-off of certain inventory were recorded in the Company's Consolidated Statements of Operations and against the respective assets. A charge of $609,000 related to involuntary employee terminations was recorded in the Company's Consolidated Statement of Operations and accrued for as of January 1, 2000. The involuntary terminations were a result of the closure and consolidation of plants in Mexico and the closure of foil processing operations in the United Kingdom. As a result of these actions, 54 employees were identified for termination, primarily from production, supervisory and manufacturing support functions. In the nine months ended September 30, 2000, the Company terminated 25 employees and paid $291,000 of involuntary termination costs which were accrued as of January 1, 2000. The severance accrual was reduced by $100,000 to reflect voluntary terminations of employees who were included in the original restructuring reserve calculation. Management believes the severance accrual ($207,000 at September 30, 2000) to be sufficient to meet the requirements for the remaining employee termination costs. 9 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED OCTOBER 2, 1999. Net sales for the third quarter of 2000 totaled $25.8 million compared with $26.7 million for the third quarter of 1999, a decrease of $0.9 million or 3.5%. The decrease in net sales for the quarter resulted principally from the impact of pricing concessions and lower demand for capacitors sold into the motors market. Gross profits for the third quarter of 2000 decreased to $2.9 million or 11.2% of net sales compared with $4.8 million or 17.9% of net sales for the same period in 1999. Gross margin declined due in part to pricing pressures, but more significantly as a result of $1.2 million of expenses related to facility and product line relocations, and approximately $0.5 million of expenses incurred to troubleshoot and correct problems related to new production equipment and processes. Selling, general and administrative expenses for the third quarter of 2000 totaled $4.3 million or 16.7% of net sales, the same spending level as in the third quarter last year. Additional borrowings in 2000 for the new building and equipment in New Bedford along with funding for relocation activities and higher interest rates have resulted in increased interest expense, $0.7 million in the third quarter compared with $0.5 million for the same quarter last year. Other income reflects patent royalties and exchange rate gains. The loss before income taxes of $1.7 million compares to income of $0.2 million in the same quarter last year. No benefit from U.S. income taxes was recorded because there are no prior earnings with which to offset the net operating loss. The provision for income taxes reflects foreign income taxes in Mexico and England. The resulting net loss of $1.9 million, or $0.34 per share, compares to net income of $0.1 million, or $0.02 per share, in the third quarter of 1999. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED OCTOBER 2, 1999. For the first nine months of 2000, net sales were $86.1 million, an increase of $0.4 million compared with $85.7 million for the first nine months of 1999. This increase resulted principally from the contribution to sales from CGE Aerovox, acquired in April 1999, offset by pricing concessions and lower demand for capacitors sold into the motors market. Gross profits for the first nine months of 2000 decreased to $13.4 million or 15.5% of net sales compared with $15.9 million or 18.5% of net sales for the same period in 1999. Gross margin declined due in part to pricing pressures, but more significantly as a result of $1.9 million of expenses related to facility and product line relocations, and approximately $0.5 million of expenses incurred to troubleshoot and correct problems related to new production equipment and processes. Selling, general and administrative expenses for the three quarters of 2000 totaled $13.2 million or 15.3% of net sales compared with $12.6 million or 14.7% of net sales for the same period in 1999. The 10 increase resulted from higher personnel and recruiting costs as well as the effect of the April 1999 acquisition of CGE Aerovox. Additional borrowings in 2000 for the new building and equipment in New Bedford along with funding for relocation activities and higher interest rates have resulted in increased interest expense, $1.8 million in the nine-month period compared with $1.3 million for the same period last year. Other income reflects patent royalties and exchange rate gains. Loss before income taxes was $1.3 million or 1.5% compared with income of $2.1 million or 2.4% of net sales in the first three quarters of 1999. No benefit from U.S. income taxes was recorded because there are no prior earnings with which to offset the net operating loss. The provision for income taxes reflects foreign income taxes in Mexico and England. For the respective nine-month periods, the net loss is $1.5 million, or $0.28 per share, compared with net income of $1.2 million, or $0.23 per share LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at the end of the third quarter of 2000 totaled $2.2 million compared with $0.7 million as of January 1, 2000. The Company's working capital, as a result of the increase in cash equivalents, accounts receivable and inventories offset by an increase in accounts payable, totaled $21.5 million at September 30, 2000, compared to $15.0 million at January 1, 2000. Inventories have risen to accommodate customer delivery schedules during the relocation of production lines in North America. Management expects that inventories will begin to decline in the fourth quarter as the Company completes its relocation projects. The Company's current ratio at September 30, 2000 was 1.90:1, compared with a ratio of 1.74:1 at January 1, 2000. At the end of the third quarter of 2000, the Company had borrowings of $38.9 million compared with $21.7 million at January 1, 2000. Of the increase, $10.2 million resulted from debt incurred to finance the Company's new facility in New Bedford and approximately $7.0 million represents funding of operations and relocation expenses through the Company's revolving lines of credit. On March 21, 2000, the Company entered into a fifteen-year financing agreement with a bank and an investment company affiliated with the bank. Under the terms of the agreement, the Company received $10.2 million of adjustable rate financing collateralized by the Company's new facility in New Bedford, Massachusetts, which includes real property and manufacturing equipment. The Company entered into a staged interest rate swap in order to fix the interest rate at 7.66% over fifteen years. As of September 30, 2000, $10.2 million was covered by the interest rate swap. Including all amortizable fees, the effective interest rate is 9.26%. The agreement contains financial covenants requiring the Company to maintain a minimum debt service coverage ratio and a maximum debt leverage ratio. The Company was in violation of the minimum debt service coverage ratio covenants at September 30, 2000, on two of its loan agreements. The lenders waived their rights to accelerate payment of these loans for these violations. The Company's revolving credit agreement with a U.S. bank provides for a credit line of $14.4 million and is collateralized by certain accounts receivable and inventory. The agreement, which matures on May 31, 2002, includes several borrowing options which, for the quarter ending September 30, 2000, had interest rates ranging from 8.56% to 9.50%. The outstanding balance of the credit line at September 30, 2000 was $14.0 million. The Company was in compliance with all financial covenants specified by the agreement at September 30, 2000. BHC has an agreement with a bank which provides for (i) a ten-year mortgage on real property in the 11 amount of 0.5 million British pounds with an outstanding balance at September 30, 2000 of 0.5 million British pounds ($0.7 million), (ii) a five-year loan collateralized by machinery and equipment in the amount of 0.5 million British pounds with an outstanding balance at September 30, 2000 of 0.4 million British pounds ($0.5 million) and (iii) an "Overdraft" credit line allowing borrowings in British pounds, euros or U.S. dollars up to the equivalent of 2.5 million British pounds with an outstanding balance at September 30, 2000 of 2.1 million British pounds ($3.1 million). With the exception of the five-year loan collateralized by plant and machinery, which has a fixed rate of interest of 7.15%, interest is charged at variable rates based upon the bank base rate. The ten-year mortgage agreement includes certain financial covenants. At January 1, 2000 BHC was in violation of two covenants regarding interest coverage and net worth. On February 24, 2000 the lender waived its right to accelerate payments on this loan with respect to the violation through January 1, 2001. BHC has an agreement with another bank which provides for a five-year loan at 8.00% per annum collateralized by machinery and equipment in the amount of 0.8 million British pounds with an outstanding balance at September 30, 2000 of 0.8 million British pounds ($1.2 million). The Company also has a term loan with an equipment financing company with an outstanding balance at September 30, 2000 of $6.6 million. This loan, collateralized by equipment at the Company's New Bedford and Huntsville, Alabama facilities, matures in 2005, and bears an annual interest rate of 7.8%. The Company was in compliance with all financial covenants of the agreement at September 30, 2000. Other long-term debt of the Company consists of an Industrial Revenue Bond maturing on July 1, 2002, with an annual interest rate of 7.42% and quarterly payments on the principal. The outstanding balance at September 30, 2000 was $0.9 million. The Company also has two notes payable to the original shareholders of Capacitores Unidos, S.A. de C.V. in the amounts of $1.1 million and $0.4 million, accruing interest at rates of 5.22% and 5.32% per annum, respectively, and due April 4, 2001 and April 5, 2002, respectively. Aerovox de Mexico, S.A. de C.V., the Company's Mexico subsidiary, has a note payable to Compania General de Electronica, S.A. de C.V., in the amount $0.2 million which bears interest at 5.22% per annum and matures at April 1, 2001. Management believes existing cash and short-term investments together with funds generated from operations will be sufficient to meet operating requirements for the next 12 months. OTHER MATTERS ENVIRONMENTAL STATUS On December 2, 1999, the Company reached a final agreement with the U.S. Environmental Protection Agency regarding the remediation of polychlorinated biphenyls ("PCBs") present in its New Bedford facility. Under the agreement, the Company has agreed to relocate its Belleville Avenue operations to another site within 16 months, demolish the existing building and cap the site by November 2011. In fiscal 1997, the Company recorded a provision of $13.0 million for environmental costs, plant remediation and impairment of assets. The provision included a $7.2 million reserve for environmental remediation and associated consulting, legal and engineering costs posted as a result of the identification 12 of PCBs in the plant. From that date through September 30, 2000, $0.6 million was charged to the reserve, primarily for legal and engineering expenses. Management believes the reserve is adequate for the cost of activities described above. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). In June 1999 SFAS 137 "Deferral of the Effective Date of SFAS 133" was issued to amend the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. The Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Under the new Statement, the accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. The Company will adopt SFAS 133 for its fiscal year beginning December 31, 2000. Management estimates that the effect of adopting SFAS 133 would not be material to the historical consolidated financial statements. In March 2000, the Financial Accounting Standard Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's historical financial position or results of operations. SAFE HARBOR STATEMENT This form 10-Q contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 6 (a). Exhibits: None 6 (b). Reports on Form 8-K: On September 7, 2000, the Company filed Form 8-K relating to a change in its certifying accountants. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AEROVOX INCORPORATED DATE November 14, 2000 BY /s/ F. RANDAL HUNT --------------------- F. Randal Hunt Senior Vice President and Chief Financial Officer EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 3-MOS DEC-30-2000 JUL-02-2000 SEP-30-2000 2,182 0 17,708 402 22,854 45,474 61,307 25,448 89,568 23,932 0 0 0 5,435 0 89,568 25,770 25,770 22,887 27,199 (446) 0 706 (1,689) 164 0 0 0 0 (1,853) (0.34) (0.34)
EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
5 9-MOS DEC-30-2000 JAN-02-2000 SEP-30-2000 2,182 0 17,708 402 22,854 45,474 61,307 25,448 89,568 23,932 0 0 0 5,435 0 89,568 86,070 86,070 72,702 85,868 (352) 0 1,822 (1,268) 270 0 0 0 0 (1,538) (0.28) (0.28)
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