-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, J3twNAYMnu19s6tibMHdZv4B/bu8BuSa3nUhlmHdOtuGn9MUZjcIHGEATroZFT+k GaJTjEdTklWuWwjnpn9PbQ== 0000004911-94-000021.txt : 19941017 0000004911-94-000021.hdr.sgml : 19941017 ACCESSION NUMBER: 0000004911-94-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940826 FILED AS OF DATE: 19941007 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEL INDUSTRIES INC CENTRAL INDEX KEY: 0000004911 STANDARD INDUSTRIAL CLASSIFICATION: 3812 IRS NUMBER: 231353403 STATE OF INCORPORATION: PA FISCAL YEAR END: 0226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00230 FILM NUMBER: 94552070 BUSINESS ADDRESS: STREET 1: 305 RICHARDSON RD CITY: LANSDALE STATE: PA ZIP: 19446 BUSINESS PHONE: 2158222929 MAIL ADDRESS: STREET 1: 305 RICHARDSON ROAD CITY: LANSDALE STATE: PA ZIP: 19446 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN ELECTRONIC LABORATORIES INC DATE OF NAME CHANGE: 19761019 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-230 _____ For the thirteen weeks ended August 26, 1994 _______________ AEL INDUSTRIES, INC. ____________________________________________________________________ (Exact name of registrant as specified in its charter) Pennsylvania 23-1353403 ____________________________________________________________________ (State or other jurisdiction of (IRS Employer incorporation of organization) Identification No.) 305 Richardson Road, Lansdale, Pennsylvania 19446 ____________________________________________________________________ (Address of principal executive offices and Zip Code) (215) 822-2929 ____________________________________________________________________ (Registrant's telephone number, including area code) N/A ____________________________________________________________________ (Former name, if changed since last report) Indicate by check mark whether the registrant (1) has filed all re- ports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ _______ The number of shares outstanding of each class of common stock is as follows: Class Outstanding at September 30, 1994 __________________________________ _________________________________ Class A common stock, $1 par value 3,347,052 Class B common stock, $1 par value 434,717 Page 1 of 11 AEL INDUSTRIES, INC. FORM 10-Q TWENTY-SIX WEEKS ENDED AUGUST 26, 1994 INDEX
PAGE NO. PART I. FINANCIAL INFORMATION Condensed Consolidated Balance 3 Sheets - August 26, 1994 and February 25, 1994 Consolidated Statements of Oper- 4 ations Thirteen and Twenty-Six Weeks Ended August 26, 1994 and August 27, 1993 Consolidated Statements of Cash 5 Flows - Twenty-Six Weeks Ended August 26, 1994 and August 27, 1993 Notes to Condensed Consolidated 6 Financial Statements Management's Discussion and 7 Analysis of Results of Oper- ations and Financial Condition PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 10 Signature 11
Page 2 of 11 PART I. FINANCIAL INFORMATION FORM 10-Q AEL INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
August 26, February 25, 1994 1994 _____________ _____________ ASSETS Current assets: Cash and equivalents $7,023 $10,414 Marketable securities 534 1,428 Receivables, including unbilled amounts of $24,608 at August 26, 1994 and $26,985 at February 25, 1994: U. S. Government 32,537 35,717 Other 4,724 4,202 _____________ _____________ 37,261 39,919 Inventories 2,215 4,375 Deferred income taxes 2,694 2,646 Other current assets 470 238 _____________ _____________ Total current assets 50,197 59,020 Property, plant and equipment (net of accumulated depreciation and amorti- zation of $55,166 at August 26, 1994 and $52,375 at February 25, 1994) 43,442 44,323 Other assets 5,673 5,813 _____________ _____________ $99,312 $109,156 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $2,111 $4,795 Accrued salaries, wages and employee benefits 5,667 5,811 Other current liabilities 11,018 13,631 Current portion of long-term debt 3,842 5,542 _____________ Total current liabilities 22,638 29,779 Long-term debt, net of current portion 16,131 19,599 Other liabilities 1,744 1,713 Commitments and contingent liabilities Note 3 Shareholders' equity 58,799 58,065 _____________ _____________ $99,312 $109,156 ============ ============ See accompanying notes
Page 3 of 11 AEL INDUSTRIES, INC. FORM 10-Q CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts)
Thirteen Thirteen Twenty-Six Twenty-Six Weeks Ended Weeks Ended Weeks Ended Weeks Ended August 26, 1994 August 27, 1993 August 26, 1994 August 27, 199 ________________ ________________ ________________ ______________ Sales and service revenue $30,911 $27,754 $61,485 $58,485 Operating costs and expenses: Cost of products and services 23,712 20,917 46,800 44,194 Administrative and selling expenses 4,177 4,054 8,686 8,689 Bid and proposal costs 1,600 1,031 3,215 2,396 Research and development costs 406 559 983 964 ________________ ________________ ________________ ______________ 29,895 26,561 59,684 56,243 ________________ ________________ ________________ ______________ Operating income 1,016 1,193 1,801 2,242 Interest expense (307) (376) (676) (865) Investment income 58 119 142 270 Other expense, net of other income (261) (205) (281) (118) ________________ ________________ ________________ ______________ Income before income taxes 506 731 986 1,529 Income tax provision 152 326 296 686 ________________ ________________ ________________ ______________ Net Income $354 $405 $690 $843 ================ ================ ================ ============== Net income per share $0.09 $0.10 $0.18 $0.22 ================ ================ ================ ============== Weighted average shares outstanding 3,820,000 3,751,000 3,818,000 3,755,000 ================ ================ ================ ============== See accompanying notes Page 4 of 11
AEL INDUSTRIES, INC. FORM 10-Q CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Twenty-Six Twenty-Six Weeks Weeks Ended Ended August 26, 1994 August 27, 1993 ________________ ________________ Cash flows from operating activities: Net income $690 $843 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,188 3,281 Amortization of other assets 206 204 Deferred income taxes 67 606 Accrued retirement benefits 31 (334) Other (181) Decrease in receivables 2,658 8,177 (Increase) decrease in inventories and other current assets 1,928 (2,278) Decrease in accounts payable, accrued liabilities and other current liabilities (5,441) (6,211) ________________ ________________ Net cash provided by operating activities 3,146 4,288 ________________ ________________ Cash flows from investing activities: Additions to property, plant and equipment (2,352) (3,761) Liquidations of marketable securities 894 7,978 Other 45 9 ________________ ________________ Net cash provided (absorbed) by investing activities (1,413) 4,226 ________________ ________________ Cash flows from financing activities: Reductions in long-term debt (5,168) (6,810) Other 44 8 ________________ ________________ Net cash absorbed by financing activities (5,124) (6,802) Increase (decrease) in cash and equivalents (3,391) 1,712 Cash and equivalents at beginning of period 10,414 4,168 ________________ ________________ Cash and equivalents at end of period $7,023 $5,880 ================= ================ See accompanying notes Page 5 of 11
FORM 10-Q AEL INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments necessary for a fair presentation of the results of the interim periods have been made and are of a normal, recurring nature. The condensed consolidated financial statements should be read in conjunction with the Registrant's Annual Report on Form 10-K for the fiscal year ended February 25, 1994. 2. Under fixed price contracts, the Company may encounter, and on certain programs from time to time has encountered, cost overruns caused by increased material, labor, or overhead costs, design or production difficulties and various other factors such as technical and manufacturing complexity, which must be, and in such cases have been, borne by the Company. Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is provided for currently in its entirety. In addition, the Company from time to time commits to invest its own funds, particularly in the case of high-technology seed programs. The estimated costs of such investments in excess of the related contract values are provided for currently in their entirety upon receipt of such contracts by the Company. During the quarter and six months ended August 26, 1994, contract cost estimates and profitability adjustments resulted in net charges to income of $1,200,000 and $3,300,000, respectively, compared with net charges of $1,600,000 and $3,000,000 for adjustments of the same nature during the comparable periods ended August 27, 1993. Other current liabilities at August 26, 1994 and February 25, 1994 include allowances for contract losses and other contract allowances aggregating $4,600,000 and $3,900,000, respectively. 3. From time to time, the Company may be involved in lawsuits, investigations and other legal proceedings arising from the ordinary conduct of its business with the U.S. Government and others. One such action relates to the U.S. Environmental Protection Agency (EPA) which, in 1989, placed a site that includes the Company's Richardson Road property on the National Priorities List for detailed study and cleanup of alleged environmental contamination. The Company continues to cooperate with the EPA in the study of this site. In the opinion of management, except for the matter described below, these legal proceedings will not have a material adverse effect on consolidated financial position. The Company has provided documents, relating to its AN/MLQ-T4 Ground Jammer program, to the Department of Defense pursuant to a subpoena issued by its Inspector General in September 1992. At this time, management is unable to determine when the Government will complete its investigation or whether it will seek any remedies as a result of its investigation. Page 6 of 11 FORM 10-Q AEL INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's consolidated results of operations for the thirteen weeks (quarter) and twenty-six weeks (six months) ended August 26, 1994, as compared with the thirteen weeks (quarter) and twenty-six weeks (six months) ended August 27, 1993, and its consolidated financial condition at August 26, 1994. The discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto which appear elsewhere in this Form 10-Q. Results of Operations Sales and service revenues for the quarter and six months ended August 26, 1994 were $30,911,000 and $61,485,000, increases of 11% and 5% over revenues reported for the comparable periods ended August 27, 1993. The current year was favorably impacted by higher revenues from TACJAM-A, an electronic countermeasures program which provided 16% and 15% of total revenues in the current year's quarter and six month periods, up from 5% and 7% for the comparable periods of the prior year. In addition, an avionics installation/integration program with a foreign customer generated 9% of the current year's revenues, up from only 1% in the prior year. For avionics programs on the whole, revenues were fairly stable, providing 35% of total revenues in the current year's quarter and six month periods, compared with 38% and 32% in the corresponding periods of the prior year. Programs such as the QF-106 avionics program, the Type 18 ADF electronic surveillance measures program and several radar environmental simulator programs all contributed less to total revenues in the current year due to the maturity of those programs. Finally, revenues from the Band 9/10 electronic countermeasures program fell to 6% of total revenues in the current year from 10% in the prior year. Operating income for the quarter and six months ended August 26, 1994 was $1,016,000 and $1,801,000, respectively, down from $1,193,000 and $2,242,000 reported for the comparable periods ended August 27, 1993. In comparing the quarters ended August 26, 1994 and August 27, 1993, the decrease in operating income was primarily due to an increase of $569,000 in bid and proposal spending, offset by a reduction of $400,000 in adverse contract cost estimates and profitability adjustments. In comparing the six month periods ended August 26, 1994 and August 27, 1993, the decrease in operating income was primarily due to an increase of $819,000 in bid and proposal spending combined with an increase of $300,000 in adverse contract cost estimates and profitability adjustments, offset by the favorable impact of increased revenues in the current year. The higher bid and proposal spending in the current year reflects the Company's continued bidding activity for development programs and other long- term business opportunities. Page 7 of 11 FORM 10-Q AEL INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Interest expense for the quarter and six months ended August 26, 1994 decreased $69,000 and $189,000, respectively, from the comparable periods of the prior year due to lower average borrowing levels. In April 1993 and April 1994, the Company repaid $6,600,000 and $5,000,000, respectively, of its $20,000,000, 10.03% unsecured note payable. Investment income for the quarter and six months ended August 26, 1994 decreased $61,000 and $128,000, respectively, from the comparable periods of the prior year primarily due to the liquidation of marketable securities to meet the aforementioned debt repayments and to fund capital expenditures. Other income for the six months ended August 26, 1994 and August 27, 1993 included $202,000 and $299,000, respectively, for royalties received under a license agreement with a foreign vendor. The income tax provision for the six months ended August 26, 1994 is based on an annual effective tax rate of 30% which is consistent with the annual effective tax rate in fiscal year 1994. The income tax provision for the first six months of fiscal year 1994 was based upon an original estimated annual effective tax rate of 45% which was subsequently adjusted due to the retroactive re-enactment of federal income tax research credits recorded in the Company's third quarter of fiscal year 1994. The Company had a firm orders backlog of approximately $99,800,000 (9% unfunded) at August 26, 1994 compared to $121,500,000 (12% unfunded) at February 25, 1994. The firm orders backlog is not expected to change substantially throughout the balance of the current fiscal year. Operating results for the remainder of fiscal year 1995 will be influenced by various internal and external factors. The Company is presently engaged in several programs involving complicated engineering development efforts and, as is the case with most development efforts, technical and other complexities are often encountered. These complexities have resulted in increased contract cost estimates in the past and could have the same result in the future. The Company could also encounter similar risks on other long-term contracts and such factors could impact future operating results. In addition, the Company continues to seek high-technology seed programs which are intended to provide a base for the Company's future operations. Such programs may require contract investment provisions or significant Company-sponsored research and development expenditures, both reflecting the Company's commitment of its own funds. Ongoing changes in many countries around the world have resulted in the U.S. Government reassessing its approach to national defense spending. Although it is clear that defense spending will continue to decline, it is unclear how that spending will be redirected. Management is continuing its strategic planning efforts in order to enhance the Company's ability to be responsive to the Government's requirements and to select products and business areas which will enable the Company to effectively compete and perform in a Page 8 of 11 FORM 10-Q AEL INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION very demanding marketplace. Although the uncertainties of future world events and the corresponding changes in national defense spending hang over the defense industry, the Company's products, heavily concentrated in the field of defense electronics, and man- agement's constant thrust to improve its design, manufacturing and quality systems, provide the Company with the prerequisites to be competitive. The U.S. Government and its suppliers continue to be the most significant customers to the Company, and a significant reduction in one or more of the Company's major defense programs, existing or anticipated, could adversely effect the Company's future operating results. In addition to its business with the U.S. Government, the Company continues to seek commercial applications for its products and services, including the development of a line of wide dynamic range fiber optic links for use in CATV and cellular communications systems, and expansion of its aircraft modification business into commercial aviation. The Company from time to time is subject to claims and investigations arising from the conduct of its business with the U.S. Government. Under one such investigation, the Company has supplied the Inspector General of the Department of Defense with certain documents related to the AN/MLQ-T4 Ground Jammer program. At this time, management is unable to determine when the Government will complete its investigation or whether the Government will seek remedies as a result if its investigation. This matter and other ongoing legal matters which may impact future operating results are described in Note 3 to the consolidated financial statements. Liquidity and Capital Resources The Company's primary source of short-term financing is cost reimbursements under contracts with the U.S. Government and its suppliers. That financing is supplemented, when necessary, through the liquidation of short-term investments and borrowings under a line of credit agreement. Cash flows for the six months ended August 26, 1994 were provided through operations and the liquidation of marketable securities, and were absorbed to repay long-term debt and fund capital expenditures. At August 26, 1994, the Company had available cash and equivalents and highly liquid marketable securi- ties totalling $7,600,000, and a line of credit agreement, which expires June 30, 1995, providing for borrowings up to $5,000,000, in- cluding $500,000 set aside for foreign currency transactions. The ratio of current assets to current liabilities was 2.2 to 1 at August 26, 1994 compared with 2.0 to 1 at February 25, 1994. The long-term debt to equity ratio of .3 to 1 at August 26, 1994 was essentially unchanged from the ratio at February 25, 1994. The Company's next installment repayment of $3,300,000 on its 10.03% unsecured note obligation is due April 1995. With a substantial amount of highly liquid assets and a strong working capital position at August 26, 1994, capital resources should be sufficient to meet the Company's operating needs for the fore- seeable future, as well as long-term debt maturities and other anticipated cash outlays. Page 9 of 11 FORM 10-Q PART II. OTHER INFORMATION AEL INDUSTRIES, INC. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - None (b) Reports on Form 8-K - There were no reports on Form 8-K filed for the twenty-six week period ended August 26, 1994. Page 10 of 11 FORM 10-Q AEL INDUSTRIES, INC. SIGNATURE 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. AEL INDUSTRIES, INC. ____________________________________________________________________ (Registrant) Date: October 7, 1994 /S/ John F. Sharkey _______________ _______________________ John F. Sharkey Vice President, Finance Page 11 of 11 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AEL INDUSTRIES, INC. FORM 10-Q FOR PERIOD ENDED AUGUST 26, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS FEB-24-1995 AUG-26-1994 7,023 534 37,261 0 2,215 3,164 98,608 55,166 99,312 22,638 16,131 3,780 0 0 55,019 99,312 61,485 61,485 46,800 46,800 983 0 676 986 296 690 0 0 0 690 .18 .18
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