-----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, T0FTwFrNN+NJahboPkLWzg1pVNct2iShHjU52GwpbI+lfse22S6YnEjekSRY9eqP 4EyvyjGFRVfELOVNWLmy+A== 0000950149-96-000226.txt : 19960314 0000950149-96-000226.hdr.sgml : 19960314 ACCESSION NUMBER: 0000950149-96-000226 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960128 FILED AS OF DATE: 19960313 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANDROS INC CENTRAL INDEX KEY: 0000352425 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 941674541 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11062 FILM NUMBER: 96534325 BUSINESS ADDRESS: STREET 1: 2332 FOURTH ST CITY: BERKELEY STATE: CA ZIP: 94710 BUSINESS PHONE: 5108495700 MAIL ADDRESS: STREET 1: 2332 FOURTH STREET CITY: BERKELEY STATE: CA ZIP: 94710 FORMER COMPANY: FORMER CONFORMED NAME: ANDROS ANALYZERS INC DATE OF NAME CHANGE: 19901210 10-Q 1 FORM 10-Q FOR PERIOD ENDING JANUARY 28, 1996 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 28, 1996 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 NUMBER 0-11062 ANDROS INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 94-1674541 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2332 FOURTH STREET BERKELEY, CALIFORNIA 94710-2402 (Address of principal executive offices) (Zip code) TELEPHONE: (510) 849-5700 (Registrant's telephone number, including area code) 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 XX No ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares of Common Stock, $.01 par value outstanding as of January 28, 1996 was 4,628,100. 2 INDEX
PART I FINANCIAL INFORMATION PAGE Item 1: Financial Statements Condensed Consolidated Balance Sheet January 28, 1996 3 July 30, 1995 3 Condensed Consolidated Income Statement Quarter and Six Months Ended January 28, 1996 4 Quarter and Six Months Ended January 29, 1995 4 Condensed Consolidated Statement of Cash Flows Six Months Ended January 28, 1996 5 Six Months Ended January 29, 1995 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 PART II OTHER INFORMATION Item 1: Legal Proceedings 12 Item 6: Exhibits and Reports on Form 8-K 13 Signatures 14
2 3 PART I Item 1 ANDROS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEET
January 28, 1996 July 30,1995 ---------------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,532,600 $ 9,612,000 Short-term investments, available-for-sale 23,680,800 16,400,300 Accounts receivable, net 11,959,500 8,231,800 Inventories 15,194,900 16,772,500 Prepaid expenses 343,100 839,400 ----------- ----------- Total current assets 54,710,900 51,856,000 Plant and equipment, net 4,992,100 5,298,800 Goodwill, other intangibles and other assets, net 6,386,300 6,715,700 ----------- ----------- $66,089,300 $63,870,500 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,952,300 $ 3,725,200 Accrued liabilities 1,037,000 1,397,200 Income taxes payable 693,900 0 ----------- ----------- Total current liabilities 5,683,200 5,122,400 Deferred income taxes 221,800 379,900 ----------- ----------- Total liabilities 5,905,000 5,502,300 ----------- ----------- Shareholders' equity: Common shares - $.01 par value, 10,000,000 shares authorized; outstanding 4,628,100 and 4,568,400 34,678,400 33,946,700 Retained earnings 25,505,900 24,421,500 ----------- ----------- Total shareholders' equity 60,184,300 58,368,200 ----------- ----------- $66,089,300 $63,870,500 =========== ===========
See accompanying notes to the condensed consolidated financial statements. 3 4 ANDROS INCORPORATED CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited)
Quarter ended Six months ended ------------- ---------------- 1/28/96 1/29/95 1/28/96 1/29/95 ------- ------- ------- ------- Sales $ 11,630,000 $ 12,465,000 $ 20,850,700 $ 24,312,200 Cost of sales 7,399,500 7,337,700 13,382,900 14,049,400 ------------ ------------ ------------ ------------ Gross profit 4,230,500 5,127,300 7,467,800 10,262,800 ------------ ------------ ------------ ------------ Expenses and other income: Research and development 1,260,500 1,199,800 2,572,400 2,485,100 Marketing, general and administrative 1,959,800 2,387,600 3,938,400 4,835,400 Interest and other income, net (347,300) (368,100) (637,800) (709,800) ------------ ------------ ------------ ------------ 2,837,000 3,219,300 5,873,000 6,610,700 ------------ ------------ ------------ ------------ Income before income taxes 1,357,500 1,908,000 1,594,800 3,652,100 Income tax provision 434,500 571,100 510,400 1,129,300 ------------ ------------ ------------ ------------ Net income $ 923,000 $ 1,336,900 $ 1,084,400 $ 2,522,800 ============ ============ ============ ============ Earnings per share of common stock $ .19 $ .28 $ .22 $ .52 ============ ============ ============ ============ Weighted average common and common equivalent shares 4,824,000 4,800,700 4,849,800 4,814,200 ============ ============ ============ ============
See accompanying notes to the condensed consolidated financial statements. 4 5 ANDROS INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six months ended ---------------- January 28, 1996 January 29, 1995 ---------------- ---------------- Cash flows from operating activities: Net income $ 1,084,400 $ 2,522,800 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 1,111,300 1,186,100 Deferred income taxes (158,100) (400,000) Changes in assets and liabilities: Accounts receivable, net (3,727,700) (1,010,100) Inventories 1,577,600 (1,750,300) Prepaid expenses 496,300 (284,800) Accounts payable and accrued liabilities (133,100) 826,600 Income taxes payable 693,900 (195,000) ----------- ----------- Net cash flows from operating activities 944,600 895,300 ----------- ----------- Cash flows from investing activities: Change in short-term investments (7,280,500) (1,866,500) Capital expenditures (487,400) (630,900) Change in goodwill, other intangibles and other assets 12,200 0 ----------- ----------- Net cash flows from investing activities (7,755,700) (2,497,400) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock, net 731,700 147,000 Repayment of shareholder note receivable 0 22,500 ----------- ----------- Net cash flows from financing activities 731,700 169,500 ----------- ----------- Net change in cash and cash equivalents (6,079,400) (1,432,600) Cash and cash equivalents at beginning of period 9,612,000 3,431,700 ----------- ----------- Cash and cash equivalents at end of period $ 3,532,600 $ 1,999,100 =========== ===========
See accompanying notes to the condensed consolidated financial statements. 5 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Registrant's Annual Report on Form 10-K for the year ended July 30, 1995. In the opinion of the Registrant, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring entries, necessary to present fairly its financial position as of January 28, 1996 and its income and cash flows for the periods presented. Registrant operates on a 52-53 week fiscal year ending the last Sunday in July. The results of operations for the three and six month periods ended January 28, 1996 and January 29, 1995 are not necessarily indicative of the results to be expected for the entire year. NOTE 2
January 28, 1996 July 30, 1995 ---------------- ------------- (unaudited) Inventories: Raw material $11,757,200 $14,243,000 Work in process 2,957,900 1,977,800 Finished goods 479,800 551,700 ----------- ----------- $15,194,900 $16,772,500 =========== ===========
NOTE 3 STOCK-BASED COMPENSATION In October 1995, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based Compensation". Under the new standard, companies will be encouraged, but not required, to adopt a new method of accounting for stock-based compensation awards based on estimated fair value at the date the awards are granted. Companies that continue to follow existing standards, which measure compensation cost as the excess, if any, of the quoted market price of the stock at grant date or other measurement date over the amount an employee must pay to acquire the stock, will be required to disclose in a note to the financial statements the effect on net income had the company recognized expense for stock options based on SFAS 123. The requirements of this Statement are effective for financial statements for fiscal years beginning after December 15, 1995. The Company plans to implement the provisions of SFAS 123 during its fiscal year ending July 27, 1997, and has not yet determined the method of adoption or its financial statement effect. 6 7 NOTE 4 SUBSEQUENT EVENT On February 14, 1996, Genstar Capital Partners II, L.P. and Andros entered into a definitive merger agreement pursuant to which Andros' stockholders will receive $18.00 per share in cash for each share of Andros' common stock. The total value of the transaction, which includes the cash-out of substantially all existing stock options, is approximately $87.5 million. Pursuant to the merger agreement, which was approved by Andros' Board of Directors, Genstar Capital commenced a tender offer for all outstanding shares of common stock of Andros on February 21, 1996. Upon completion of the tender offer, the merger agreement provides that shares of Andros not tendered will be acquired in a merger at the same price per share in cash. The merger agreement also provides that Andros will pay Genstar a fee of $3.1 million in certain circumstances. 7 8 PART I Item 2 Management's Discussion And Analysis Of Financial Condition And Results Of Operations GENERAL The industry in which the Company competes, as well as the markets that it serves, may be characterized by cyclical market patterns as a consequence of, among other things, business cycles, regulatory changes or general economic conditions affecting the timing of orders from major customers. Substantial variations in the operations of the Company's customers or in the demand for their products has in the past and may in the future cause substantial variations in sales and profitability from quarter to quarter. The Company's sales may also be adversely affected by competition from third parties, including customers that may elect to develop internally products comparable to those of the Company. In addition, demand for the Company's automotive and spectrum analysis instrumentation may be substantially affected by the enactment, timing, extent and severity of state, federal and foreign laws governing inspection of automotive emissions and levels of lead contaminants. The Company has experienced fluctuations in sales of such products as well as in demand for particular product enhancements as a result of actual or perceived changes in regulatory requirements. Legislation or regulations resulting in stricter enforcement of, or more stringent specifications for, testing of automotive emissions has resulted in periodic increases in sales and the development of enhanced new products. Conversely, decreases in sales have resulted, and may result in the future, from actual or perceived delays in or weakening of enforcement standards. The Company expects such fluctuations to continue in the future. In particular, state programs related to inspection of automotive emissions have recently been subject to reconsideration in a number of states where legislators are seeking to reduce regulation and otherwise weaken these programs. If these efforts are successful, the Company's sales would be adversely affected. In addition, because Andros' products are sold primarily to OEM customers for incorporation into their end user products, the volume and timing of the Company's sales are largely dependent on the volume and timing of sales by the Company's customers. Delays in release of orders or failure to place new orders could have a substantial impact on the Company's results of operations from quarter to quarter. On February 14, 1996, Genstar Capital Partners II, L.P. and Andros entered into a definitive merger agreement pursuant to which Andros' stockholders will receive $18.00 per share in cash for each share of Andros' common stock. The total value of the transaction, which includes the cash-out of substantially all existing stock options, is approximately $87.5 million. Pursuant to the merger agreement, which was approved by Andros' Board of Directors, Genstar Capital commenced a tender offer for all outstanding shares of common stock of Andros on February 21, 1996. Upon completion of the tender offer, the merger agreement provides that shares of Andros not tendered will be acquired in a merger at the same price per share in cash. The merger agreement also provides that Andros will pay Genstar a fee of $3.1 million in certain circumstances. 8 9 RESULTS OF OPERATIONS The Company's sales for the second quarter and first six months of fiscal 1996 decreased 7% to $11,630,000 and 14% to $20,850,700, respectively, over the comparable periods in fiscal 1995. This decrease in sales resulted primarily from lower sales of automotive gas analyzers in the U.S., offset in part by increased worldwide medical sales, and higher sales of automotive exhaust analyzers in Europe. U.S. automotive sales decreased 88% and 87% to $554,300 and $964,000, respectively, for the second quarter and first six months of fiscal 1996 over the same periods last year due to delays in implementation of the IM 240 program. Management believes that the sales decrease was also attributable to customer uncertainty with respect to implementation or potential weakening of government-mandated automotive emission inspection programs in different states. Worldwide medical sales increased 87% to $5,080,600 for the second quarter of fiscal 1996 over the comparable quarter last year. The increase is primarily due to an increase in sales of the Model 4700 Anesthesia Monitoring System. Sales decreased 19% to $6,398,200 for the first six months of fiscal 1996 compared to the same period last year due to changes in order patterns of customers in the U.S., Europe and the Far East as they continue to bring their inventories in line with expected revenues, offset in part by increased sales of the Model 4700 Anesthesia Monitoring System. International automotive sales increased 28% and 83% to $4,234,300 and $9,955,400, respectively, for the second quarter and first six months of fiscal 1996 over the same periods last year. The increase in sales is mainly related to the now ongoing United Kingdom MOT program. Scitec sales decreased 8% and 18% to $844,400 and $1,613,800, respectively, for the second quarter and first six months of fiscal 1996 over the same period last year. The second quarter sales decrease is mainly due to a 53% decrease in MAP 3 rental and training revenue partially offset by 16% increase in sales of the MAP product. The decrease in sales for the first six months of fiscal 1996 is primarily due to the delay of volume shipments of the MAP 4 product. The volume shipments of the MAP 4 product began in December 1995. Automotive service sales decreased 8% to $916,400 for the second quarter due to lower sales of spare parts and services, and increased 16% to $1,919,300 for the first six months of fiscal 1996 over the same periods last year due primarily to increased sales of spare parts in the first quarter of fiscal 1996. Gross margins for the second quarter and first six months of fiscal 1996 were 36.4% and 35.8%, respectively, compared to 41.1% and 42.2%, respectively, for the same periods a year ago mainly due to increased material costs and variations in the sales mix. Research and development expenses increased 5% and 4%, respectively, in the second quarter and first six months of fiscal 1996 over the same periods a year ago, due primarily to significant efforts to developing gas related products. Marketing, general and administrative expenses were down 18% and 19%, respectively, for the second quarter and first six months of fiscal 1996 compared to the same periods a year ago mainly due to tighter control over operating expenses. 9 10 Interest and other income was down 6% and 10%, respectively, in the second quarter and first six months of fiscal 1996 compared to the same periods last year due mostly due to the lower average investment balance and lower interest rates. Net income decreased 31% and 57%, respectively, for the second quarter and first six months of fiscal 1996 over the same periods last year, mainly due to the decreases in sales and interest and other income, as well as the increases in research and development expenses, offset in part by decreases in marketing and general administrative expenses. As a result, earnings per share decreased 32% and 58%, respectively, for these same periods last year. FINANCIAL CONDITION The Company's January 28, 1996 balance sheet reflected a current ratio of 9.6:1, working capital of $49 million and shareholders' equity of $60.2 million. Cash and cash equivalents and short-term investments increased 5% to $27,213,400 at January 28, 1996 as compared to $26,012,300 on July 30, 1995. This increase resulted primarily from cash flows from operations. Management believes that the cash and cash equivalents and short-term investments on hand at January 28, 1996, together with the cash flows anticipated from operations and the availability of a bank line of credit, will be sufficient to meet the Company's working capital and capital expenditure needs for the next twelve months. Accounts receivable increased 45% mainly due to sales related to the MOT U.K. program. The customers in Europe generally enjoy longer payment terms.
January 28, 1996 July 30, 1995 ---------------- ------------- (unaudited) Current ratio (:1) 9.6 10.1 Working capital $49,027,700 $46,733,600 Shareholders' equity $60,184,300 $58,368,200 Cash and cash equivalents and short-term investments $27,213,400 $26,012,300
NEW ACCOUNTING PRONOUNCEMENTS In October 1995, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based Compensation". Under the new standard, companies will be encouraged, but not required, to adopt a new method of accounting for stock-based compensation awards based on estimated fair value at the date the awards are granted. Companies that continue to follow existing standards, which measure compensation cost as the excess, if any, of the quoted market price of the stock at grant date or other measurement date over the amount an employee must pay to acquire the stock, will be required to disclose in a note to the financial statements the effect on net income had the company recognized expense for stock options based on SFAS 123. The requirements of this Statement are effective for financial statements for fiscal years beginning after December 15, 1995. 10 11 The Company plans to implement the provisions of SFAS 123 during its fiscal year ending July 27, 1997, and has not yet determined the method of adoption or its financial statement effect. 11 12 PART II Item 1 Legal Proceedings On March 4, 1996 the Company was served with a Class Action Complaint in an action entitled IRA FBO Daniel W. Krasner, DLISC as custodian v. Andros Incorporated, et al., Civil Action No. 14872, filed in the Delaware Chancery Court for New Castle County. Named as defendants are the Company and directors Dane Nelson, John M. Huneke, Eugene Kleiner, Dr. Karl H. Schimmer and Robert C. Wilson. Plaintiff, who purports to represent a class consisting of shareholders of the Company, alleges that the defendants have breached fiduciary duties to the Company's shareholders by, inter alia, failing to maximize shareholder value in the sale of the Company and failing to make full disclosure in connection with the announced tender offer. Plaintiff purports to seek a preliminary and permanent injunction preventing the consummation of the transaction and requiring supplemental disclosure, and also seeks unspecified money damages, costs and attorney's fees. No discovery has yet taken place, and no motion for injunctive relief has been filed. 12 13 PART II Item 6 Other information Exhibits and Reports on Form 8-K None. 13 14 SIGNATURE PAGE 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: March 12, 1996 ANDROS INCORPORATED (Registrant) /s/ WILLIAM W. WEISS --------------------- William W. Weiss Acting Chief Financial Officer and Controller 14 15 EXHIBIT INDEX Exhibit No. Description - ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1 3-MOS JUL-28-1996 JUL-31-1995 JAN-28-1996 3532600 23680800 12522900 563400 15194900 54710900 19601700 14609600 66089300 5683900 0 0 0 34678400 0 66089300 20850700 20850700 13382900 13382900 5873000 0 0 1594800 510400 1084400 0 0 0 1084400 0 0
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