SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 26, 199631, 1998
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Commission File Number 2-37706
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Bowles Fluidics Corporation
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(exact name of registrant as specified in its charter)
Maryland 52-0741762
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6625 Dobbin Road, Columbia, Maryland 21045
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (410) 381-0400
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Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
None
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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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes Xx No
--- ---
The aggregate market value of the registrant's voting stock held by
non-affiliate persons and entities as of December 31, 1996,24, 1998, computed by
reference to the closing price for such stock on the composite reporting system
on such date, was $3,581,205$908,274 based on 2,438,2671,038,027 shares.
The number of shares of the registrant's common stock outstanding as of December
31, 1996,24, 1998, was 12,610,011.
12,685,011.
PART I
Item 1. BUSINESS
Bowles Fluidics Corporation was incorporated under Maryland law in
1961 (originally as Bowles Engineering Corporation) for the purpose of
advancing and exploiting the technology of fluidics. For about ten years
the principal business of the Company was research and development
primarily under contracts with agencies of the U.S. Government.government. From
1972 to 1979 its principal income was derived from the sale of
proprietary consumer products it had developed based upon fluid
oscillators, including massaging showers and oral irrigation devices.
These consumer products have since been discontinued. Since 1979 its
principal product has been proprietary windshield and rear window washer
nozzles for the automotive industry. Late in FY 1989, the Company
extended the automotive product line to include shipments of fluidic
defroster nozzles. The Company also provides its automotive customers
with tooling and application engineering services related to its
products.
The Company continueshas continued to pursue its purpose of advancingexpend efforts on the technology of fluidics (see Researchresearch and Development below). Such
efforts are directed toward the
development of new fluidic products for which,the automotive and other
industries. The air conditioning outlet in the opinioninstrument panel of
management, substantial markets exist.automotive vehicles has been a particular focus. Prototypes have been
developed and presented to a number of potential customers. At present,
two customers have selected the Company as the supplier of these
outlets, one for a vehicle scheduled to start production in August 1999
and the other for production in February 2000.
Principal Products and Markets
The Company is the leading designer, manufacturer and supplier of
windshield and rear window washer nozzles for passenger cars and light
trucks in North America. Defroster nozzles for a limited number of these
same light vehicles are also being manufactured and sold.
The Company's principal market for its fluidic nozzles, both
windshield washer and defroster, consists of North America, i.e., the
"Big Three" U.S. automotive manufacturers and foreign transplants. The
Company is
also open to opportunities presented to it in other parts of the world.
The Company believes that it supplies about 75%80% of the total windshield
washer nozzle requirements for light vehicles (cars and light trucks)
manufactured in the United States, Canada and Mexico. The defroster
nozzle is currently being supplied to foura number of vehicle models in this
market.
OverThe Company has a licensing agreement covering Europe with a major
German automotive parts supplier for its windshield washer systems. The
Company itself has no international operations.
In North America, over 90% of the Company's production of nozzles
is incorporated in vehicles produced by General Motors, Ford and
Chrysler, each of whom typically represents over 10% of the Company's
sales volume. The Company is, therefore, dependent upon the requirements
of the U.S. automotive
2
industry producing cars and light trucks. Although the Company enters
into agreements with its customers to meet 100% of their production
requirements, notice of firm shipping requirements for the coming week
generally takes place weekly from the assembly plants and at somewhat
longer intervals from the first-tier suppliers. The Company's fiscal year, beginning in November and ending in the
following October, follows closely the length and timing of the typical
model year for an automobile or light truck. The Company's annualmonthly
sales follow the seasonal pattern dictated by the production levels of
its customers. 2
Consequently, sales for the second and fourth quarters of
the Company's fiscal year are typically higher than for the first and
third.
Sales also include technical services, i.e., design, tooling, and
prototyping services for the Company's customers. The requirements of
the automotive customers are for designs and tools to meet the needs of
forthcoming vehicle models or changes in existing models, as well as for
prototypes of new products desired for testing. These sales are, for the
most part, undertaken as a service to the customers, and the Company
contracts these services and tools so as to recover projected direct
costs.
Patents and Competitive Products
The Company has engaged, since its inception, in research and
development in the fields of fluidics and fluid effect devices,
encompassing both gases and liquids. Over the past 1819 years, 4552 U.S.
patents have been granted to the Company's employees and assigned to the
Company. FiveTen applications are presently in process for additional U.S.
patents. Foreign patentsPatents in selected other countries have also been granted in countries in which the
Company has an interest, for
most of the art covered by the U.S. patents. Although these patents
embody new and novel technology or product, there is available
competitive technology and alternative product. The extent to which the
expiration of an individual patent may affect the Company's competitive
position is difficult to determine.
In the past, U.S. patents were granted for a period of 17 years
from the date of issue. However, beginning in June 1995, those granted
in the past can be for a period of either 17 years from date of issue or
20 years from date of filing the application, whichever expiration date
is later. Those granted on applications filed after June 1995 are for a
period of 20 years from date of filing.
The Company's fluidic windshield washer and defroster nozzles,
which are covered by issued U.S. and foreigninternational patents, are in
direct competition with conventional nozzles of traditional design. The
Company believes that its products have advantages both in performance
and in economy of assembly to the vehicle by the car manufacturers.
The Company is of the opinion that, in the long run, a history of
service, delivery, quality and economic supply is the most important
factor in binding its customers to it. Customers of the Company place a
great deal of emphasis on quality. The Company has maintained Ford's
preferred supplier rating (Q1 award) since 1985, has been rated an
excellent status in a supplier assessment by
3
General Motors, and has been a self-certified supplier for Chrysler
since 1991, and achieved a Quality
Excellence Award from Chrysler with a 98% rating in 1995.1991. The Company's material testing laboratory has been
accredited by General Motors since 1992.
In addition, the Company's customers mandatedrequired that the Company put
into place a QS-9000 compliantQS-9000-compliant quality system, the automotive version of
ISO 9000, to be assessed and, if qualified, registered by an independent
organization. Chrysler required registration by July 1997 and General
Motors by December 1997.9000. The Company went through the initial independent assessment in
September 1996, and received certification in December 1996 as a QS-9000
supplier with ISO 9001 addendum.addendum, and has maintained that certification
since then.
The Company does not grant North American licenses for its own
patents in which it has an interest in marketing a product. The Company
does pursue interests expressed by others in the Company's technology in
an attempt to broaden its use. To the extent that there may be
additional uses in markets not related to those of primary interest to
the Company, efforts are made to license the patents for such use.
3
Foreign Affiliates and Licensing
The Company has no foreign affiliates. The Company has licensing
agreements with foreign companies with respect to certain of its foreign
patents. Income from such agreements was $16,215 in FY 1996, down from
$21,770 in FY 1995.
Raw Material Sources and Availability
Raw materials, primarily plastic resin, are sourced within the
United States. TheTheir market wasprices were generally stable during the
current year with no
significant price changes, and adequate supply is expected to be available in the
coming year. The resins purchased are restricted to those approved by
ourthe Company's customers.
Working Capital Requirements
The Company's standard credit terms for receivables isare net 30
days. Adequate levels of inventories are normally maintained in order to
ensure compliance with the stringent delivery requirements of our
customers.
The design and acquisition of production tools, which represent
the major portion of technical services sales, normally take several
months to complete, during which period the Company has to make progress
paymentsaccumulates such
costs which are included in work-in-process inventories. Sales invoices
for these tools and services are rendered only after completion and
customers' acceptance of qualified products produced by the tools.
Research and Development
The Company's research and development costs, all Company-funded,
were:
% of Sales
FY 1998 $ 866,390 4.1
FY 1997 $ 1,005,183 5.3
FY 1996 $1,175,890$ 1,175,890 6.5
4
In FY 1995 $ 636,9701998, the Company's research and development efforts were
directed primarily toward basic research and the design of new fluidic
nozzles intended for a variety of purposes resulting in the filing of a
number of patent applications.
In FY 1994 $ 842,332
In1997 and FY 1996, the Company's research and development
efforts were expanded and directed primarily toward the advancement of its knowledge
of the workings of its fluidic washer nozzles, including wind tunnel
testing, and in addition thefurther development of
fluidic air conditioning outlets for cars and light trucks. With regard totrucks, and the
latter products,
to date the Company has received one contract for the design and
development for one vehicle with a major customer.
In FY 1993, 1994, and 1995,advancement of its research and development efforts
were primarily directed toward the improvementknowledge of the characteristicsworkings of natural gas and propane burners utilizing fluidic devices. The
applications, however, did not prove out due to marketing and technical
problems. During these years,washer nozzles,
including wind tunnel testing. These efforts were also directed toward various
product development, product improvement, and process improvement
projects related to the automotive industry.resulted in a number of
patent filings.
Potential sales of products still in the development stage cannot
be predicted since product capability and customer acceptance of the new
technology are difficult to determine.
4
Employees
The Company averaged approximately 246275 employees during FY 19961998
and employed 242278 people on a full-time basis on October 26, 1996.31, 1998. The
increase from the 223252 employed on October 28, 1995,25, 1997, was primarily in the
engineering and support departments in response to the increase in
research and development and application engineering activities.manufacturing departments.
Compliance with Environmental Regulations
The Company believes it is in compliance with all known
environmental regulations and has no plans for significant expenditures
to meet these requirements in the future.
Item 2. PROPERTIES
In September 1993, theThe Company entered into an amendment toamended lease in September 1993 for,
in effect, all of the space at its original lease agreement for 62,600 sq. ft. of space in a building
locatedfacility in Columbia, Maryland, its
sole location. The amended lease
provided for the Company's occupancy of the premisesprincipal location until April 16, 2004, and the addition in September 1993 of 14,226 sq. ft. and in
February 1994 of 12,000 sq. ft. The Company is now the sole occupant of
the premises. In an addendum to the lease, the landlord agreed to make
certain improvements to the premises financed by a supplement to the
rent.2004. The lease amendment further
provides an option to continue the lease for an additional ten years or
to purchase the premises at 94% of fair market value at the first terminationend of the
initial term of the lease.
The facility which now totals 88,826 sq. ft., provides for the Company's current needs for
manufacturing windshield washer and defroster nozzles at levels adequate
to meet near-term projected customer needs.
In addition toneeds and for manufacturing committed air
conditioning outlets. Additional space for warehousing, however, will be
required in the capacity for supporting more manufacturing equipment,
the enlarged premises allow for larger engineering capabilities.near future.
The Columbia facilities are currently utilized as follows:
Manufacturing, Materials, Quality Control 60,56066,264 sq. ft.
Administration and Sales 8,5388,883 sq. ft.
Laboratories and Engineering 19,72813,679 sq. ft.
Total Area 88,826 sq. ft.
In its production operations,5
Beginning April 15, 1997, the Company generally utilizes tools
purchasedleased for the accountthree years 1,617
sq. ft. of office space in Southfield, Michigan, to be used by its customers and used for their unique
requirements. The Company has also designed and built for its own
account specialized assembly and test equipment to meet quality
assurance and economic performance requirements.sales
staff.
Item 3. LEGAL PROCEEDINGS
During FY 1994 and 1996, the Company discovered in the market two
instances of windshield washer nozzles which infringed upon its
windshield washer patents. As a result, the Company filed suits for
patent infringement in the United States District Court for the District
of Maryland. One suit was settled favorably to the Company in June 1995
and the other is still proceeding.
5
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.None were submitted during the fourth quarter of the Company's
fiscal year.
6
PART II
Item 5. 5a.MARKET FOR REGISTRANT'S STOCK PRICE AND MARKETSRELATED STOCKHOLDER
MATTERS
Stock Price and Markets
The Common Stockcommon stock of the Company is traded in the
"over-the-counter" market and is quoted on the NASD OTC Bulletin Board;
symbol BOWE. The Preferred Stockpreferred stock is unregistered and is not publicly
traded.
The high and low bid and asked prices of the Common Stockcommon stock over the
last two fiscal years are listed below:
Bid Asked
------------------ ---------------------- -----
FY High Low High Low
-- ---- --- ---- ---
19961997 1st Quarter 5/1 3/8 3/13/16 1 5/8 1 3/1/4
2nd Quarter 1 3/8 3/5/8 3/41 9/16 3/4
3rd Quarter 3/13/16 7/16 7/8 3/9/16
4th Quarter 3 1/8 3/4 5/3 1/2 7/8
1998 1st Quarter 1 3/4 1 1/4 2 1/16 1 3/8
2nd Quarter 1 3/4 1 1/16 2 1/2 1 3/8
3rd Quarter 1 3/4 1 2 1 3/8
4th Quarter 7/81 1/32 23/32 1 1/2 1 1/8 1-1/4 7/16
1995 1st Quarter 3/8 1/4 7/8 3/4
2nd Quarter 7/8 1/4 1-3/8 3/4
3rd Quarter 3/4 1/2 1-3/8 1
4th Quarter 3/4 1/2 1-3/8 1
Note: The above quotes represent prices between dealers and do not
include retail mark-up, mark-down, or commissions. They do not represent
actual transactions.
5b. APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERSOn December 8, 1998, the Board of Directors of the Company adopted
a resolution authorizing the submission to the vote of the stockholders
of the Company of a proposed amendment to the Articles of Incorporation
of the Company under which all outstanding shares of common stock will
be subject to a reverse stock split at the ratio of 1,000 shares of
common stock before the reverse split to 1 share of common stock after
the reverse split. The Board of Directors also adopted a resolution
authorizing the redemption of all fractional shares of common stock
resulting from the reverse stock split at the rate of $1,250 per post
reverse split share. This proposed amendment to the Articles of
Incorporation is pending subject to stockholder approval.
Following the reverse stock split and purchase of resulting
fractional shares of common stock, it is expected that the number of
record shareholders of the Company's common stock will be reduced from
approximately 430 (as of October 15, 1998) to less than 200. The number
of holders of the Company's preferred
7
stock will remain unchanged at approximately 18. As a result of the
reduction in number of record shareholders below 300, the Company
intends to suspend its obligation to file periodic reports with the
Securities and Exchange Commission pursuant to section 15(d) of the
Exchange Act of 1934.
Approximate Number of Equity Security Holders
Approximate Number of
Record Holders
Title of Class (as of October 26, 1996)
------------------31, 1998)
-------------- ------------------------
Common Stock
$.10 Par Value 428430
Preferred Stock
8% Cumulative 3318
Included in the number of stockholders of record are shares held
in "Nominee""nominee" or "Street""street" name.
6
5c. DIVIDENDSDividends
The Company has never paid cash dividends on its Common Stock.common stock.
Payment of dividends on Common Stockcommon stock is within the discretion of the
Company's Board of Directors and will depend, among other factors, on
current and forecasted earnings, capitalinvestment requirements, and the operating
financial condition of the Company.
For information concerning dividends on Preferred Stock,preferred stock, see Note
6 of Notes to Consolidated Financial Statements.
78
Item 6. SELECTED FINANCIAL DATA
October 31, 1998 October 25, 1997 October 26, 1996 October 28, 1995 October 29, 1994
October 30, 1993 October 31, 1992
---------------- ---------------- ---------------- ---------------- ----------------
Net sales $21,084,804 $18,842,673 $18,128,274 $16,972,876 $15,111,829
$12,299,037 $9,996,970
Net income 932,186 1,142,023 884,306 1,783,875 1,727,020
1,076,040 1,040,637
PrimaryBasic earnings
per share .07 .08 .06 .14 .14
Diluted earnings
per share .06 .13 .13 .08 .08
Fully diluted earnings
per share.07 .05 .11 .11
.07 .08
Working capital 5,389,165 5,414,955 4,649,328 4,296,368 3,126,959
1,791,192 1,315,788
Total assets 12,355,321 11,784,701 10,719,852 9,292,446 8,478,227
6,231,132 4,880,510
Long-term debt -- -- -- 202,811 512,831 584,612 1,028,293
Stockholders' equity $ 7,439,5529,378,219 $ 6,629,8918,511,429 $ 4,907,6647,439,552 $ 3,246,590 $2,242,1986,629,891 $ 4,907,664
89
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
FY 1996 vs1998 vs. FY 19951997
Total FY 1998 sales in FY 1996 rose 7%of $21,084,804 increased 12% over FY 1995, reaching another
record1997
sales of $18,842,673, almost all due to higher technical services sales.
Net income for FY 1998 was $932,186, an 18% decrease from the FY 1997
net income of $1,142,023. The principal reasons for the Company of $18,128,274 compared with $16,972,876 in FY
1995. Income before taxes, however, decreased 53% from FY 1995 to FY
1996. Net income also declined to $884,306 from $1,783,875 in FY 1995, a
50% reduction. Profitability was significantly affected by increased
spending for application engineering and research and development
expenses and for an accrual for thedecrease were
higher manufacturing costs of terminating a sales
agreement.the windshield washer nozzles and the
unfavorable effect of the General Motors strike during the Company's
third quarter.
Product sales of light vehicle windshield washer and defroster
nozzles increased 8%1.5% or $275,410 to $18,385,924 in FY 1998 from
$18,110,514 in FY 1997. Sales of washer nozzles provided an increase of
$595,206, while those of defroster nozzles decreased $319,797 due to
declining sales of the related older vehicle models. Sales of washer
nozzles to the Big Three U.S. car manufacturers were approximately equal
to the prior year. The Company's third quarter sales of both washer and
defroster nozzles in FY 1998 were significantly affected by the strike
at the General Motors auto plants in June and July.
The Company's operating plans for the 1999 fiscal year assume that
production requirements for light vehicle production in North America
will be approximately equal to FY 1998.
Technical services sales increased 269% to $2,698,880 in FY 1998
from $732,159 in FY 1997. In FY 1998 tooling and design services
included those related to the new air conditioning outlets scheduled to
start production for two vehicles during the next two fiscal years and
those for newly designed washer nozzles for future car production, both
of which were an increase over the prior year.
For the 1999 fiscal year, technical services are forecasted to be
somewhat higher than FY 1998 due to continuing tooling sales related to
the new air conditioning outlets and washer nozzles.
Gross profit on total sales declined 15% to $4,938,956 in FY 1998
from $5,777,299 in FY 1997. As a percentage of total sales, gross profit
was 23.4% in FY 1998 versus 30.7% in FY 1997. Manufacturing costs were
higher as a number of newly designed washer nozzles began production and
a number of initiatives were taken including the introduction of cell
manufacturing to improve the manufacturing processes. The decline in
sales due to the General Motors strike also caused the gross profit to
decline. In addition, the significantly larger technical sales in FY
1998 described above versus FY 1997 which have essentially no profit
margin negatively impacted the gross profit percentage on
10
total sales. These sales are undertaken as a service to the Company's
customers and are contracted so as to recover only projected costs.
Selling, general and administrative expenses declined 13% in FY
1998 from FY 1997 due to the savings from the elimination of the higher
sales commissions paid to the manufacturer's representatives and their
replacement with the Company's own sales force in the Detroit area.
Research and development costs decreased 14% to $866,390 in FY
1998 from $1,005,183 in the prior year due to a decline in the spending
on the design and development of the automotive air conditioning
outlets. The Company's plans call for the maintenance of this level of
R&D spending in FY 1999.
Interest income declined in FY 1998 due principally to lower cash
and cash equivalents and investments available for sale. Other income
increased because of higher royalties and license income generated by
the sales of the Company's licensee outside North America.
The provision for income taxes of $575,953 in FY 1998 reflects the
lower income before taxes as compared to FY 1997. The effective income
tax rate for FY 1998 was higher than FY 1997 due to increases in state
taxes.
FY 1997 vs. FY 1996
Total FY 1997 sales of $18,842,673 increased 4% above FY 1996
sales of $18,128,274. Net income for FY 1997 rose to $1,142,023,
representing a 29% gain over FY 1996 net income of $884,306. Adjusting
for the FY 1996 nonrecurring accrual of $760,000, (which reduced the
Company's after-tax net income by $465,400) for the expenses related to
the termination of the sales agreement with its manufacturer's
representatives, net income for FY 1997 declined 15% principally due to
higher application engineering and tooling costs.
Product sales of light vehicle windshield washer and defroster
nozzles increased 5% to $18,110,514 in FY 1997 from $17,292,030 in FY
1996 from $15,960,301 in FY
1995.1996. Higher volume of shipments of new productsnewly and previously designed washer
nozzles to the Company's major
customersBig Three U.S. car manufacturers as well as the
transplant manufacturers in the U.S. was the major reason for the gain, even
though defroster outlet sales declined due to discontinuation of certain
models. This 5% increase which more than
compensated for a 3% declinecompares favorably with the 2% gain in total North
American light vehicle production forduring the fiscal year 1996 versus 1995.same period.
In contrast to the increase in product sales for FY 1997,
technical services sales in FY 1996 decreased 17%12% to $836,244$732,159 from FY 1995's $1,012,575.1996's
$836,244. Sales of tooling for new windshield washer and defroster nozzles were down
significantly as there was a
lower ratedue to deferrals in the completion and approvals of culmination of programs for these products. However, sales
were recorded for the first time for prototype tooling
for new air
conditioning outlets for one automotive customer.programs.
Gross profit on total sales declined 6% to 34%$5,777,299 in FY 1996 from 36%1997.
The margin on sales diminished to 30.7% in FY 1995.1997 from 33.8% in the
previous fiscal year. The gross profit on product sales declineddeclines occurred principally due to higher
manufacturing expenses mainly related to the modification and repair of
injection molding tooling. Additionally,increased
application engineering
costs
directed to11
expenses associated with the customization of new windshield and rear
window washer nozzles. In addition, higher tooling costs over and above
amounts billed to customers were incurred for the development and
support of both washer nozzle and air conditioning outlets increased
significantly. In contrast, the gross loss on technical services sales
declined for FY 1996 compared to FY 1995 because of cost containment
efforts applied to theoutlet tooling
programs for new windshield washer
nozzles.projects.
Selling, general and administrative expenses increased $1,033,217declined $548,359 or
40%15% in FY 19961997 from FY 1995 principally1996 because of increasesthe accrual in sales
commissions. These commissions in FYfiscal year 1996
include accruals of $760,000 for expenses related to the planned termination of the Company's
sales agreement with its manufacturer's representatives. Excluding this
nonrecurring accrual, selling, general and administrative expenses
increased 7% in Mayfiscal year 1997 principally due to professional fees
for services related to strategic and financial planning for the
Company.
Research and development costs decreased 15% to $1,005,183 from
$1,175,890 the previous fiscal year. Spending on various new product
programs was cut back and larger amounts were spent on the design and
development of the automotive air conditioning outlets.
In FY 1997, the provision for income taxes was $657,420,
reflecting the higher income before taxes and approximately the same
effective tax rate as in the previous fiscal year.
Liquidity and Capital Resources
Current assets at the 1998 fiscal year end were $7,825,174
compared with $8,195,361 at the end of the prior fiscal year. The
decline of $370,187 was principally related to the decline of $584,385
in cash and cash equivalents and investments available for sale
partially offset by the addition of the income taxes receivable of
$194,213.
Inventories rose by 6% during the fiscal year. Finished goods were
built up to reach more comfortable levels to meet the stringent customer
service requirements, and the tooling work-in-process declined since the
tools were completed and approved for sale.
Current liabilities declined 12% or $344,397 as the remaining
payments were made during FY 1998 for the liability associated with the
termination of the Company's sales agreement with its manufacturer's
representatives.
The Company is
reorganizing its sales force using its own employees rather than
independent representatives. Aside from this special accrual, expenses
increased 10% due to higher patent, personnel, and computer expenses,
partially caused by the efforts to obtain QS-9000 certification and the
implementationcurrent ratio of a new information system.
Research and development costs increased to $1,175,890 in FY 1996,
a $538,920 or 85% increase over the prior year. The Company discontinued
its efforts to develop fluidic nozzles for natural gas burner
appliances. It redirected those same resources plus additional personnel
and outside contractors to the development of automotive air conditioner
outlets, improvements in the design of windshield washer nozzles, and
fluidic technology research.
9
In FY 1996, the provision for income taxes was $506,629,
reflecting the lower income before taxes and somewhat lower effective
tax rate of 36.4% versus 39% for FY 1995.
FY 1995 vs FY 1994
Total sales in FY 1995 improved 12% over FY 1994, reaching another
new record for the Company of $16,972,876 compared with $15,111,829 in
FY 1994. Income before taxes increased 22% from FY 1994 to FY 1995. Net
income in FY 1995 improved 3% to $1,783,875 from $1,727,020 for FY 1994.
Net income increased at a lower rate than income before taxes as the
result of the higher effective income tax rate at 39% in FY 1995 as
compared with 28% in FY 1994.
Sales of component products rose 19% to $15,960,301 in FY 1995
from $13,365,761 in FY 1994. As a result of the addition and enhancement
of windshield washer products and new defroster nozzle products, the
Company's increase in shipments of component products was greater than
the zero growth in total North American vehicle production experienced
by our customers during the fiscal year 1995. The gross profit on sales
of component products declined to 43% in FY 1995 from 47% in FY 1994 as
engineering activities related to customizing new washer nozzle products
expanded and various manufacturing expenses increased.
Technical services sales in FY 1995 decreased 42% to $1,012,575
from FY 1994's $1,746,068. The shipments of tools for future automotive
products declined in FY 1995, reflecting the culmination of fewer
tooling programs for new windshield washer and defroster nozzles. In
addition, the FY 1994 sales included $250,000 of revenue from a specific
application engineering customer contract. The loss in this segment of
the business3.2:1 at the gross profit level increased to $704,656 from the
prior year's loss of $372,000. This deterioration occurred primarily as
a result of the lack of last year's $250,000 of revenue referred to
above, costs of which were incurred in prior years. Also, higher costs
were incurred in FY 1995 from extra tool work necessary to achieve
operational capability as well as additional time required for customer
approval of the tools for use in parts production.
Selling, general and administrative expenses remained the same as
the prior year and as a percentage of sales were 15.4% in FY 1995 versus
17.2% in FY 1994. Sales and marketing expenses rose due to higher
commissions as a result of the increase in component sales. However,
general and administrative expenses were lower than last year as a
result of decreases in U.S. and foreign patent costs.
The Company in FY 1995 continued to invest in research and
development projects, although the dollar amount was 24% less than FY
1994. Emphasis was placed on applying fluidic technology to natural gas
burner nozzles as well as various other improvements to the Company's
present products and manufacturing systems.
Interest expense was lower in FY 1995 as a result of lower debt
levels. Other income was higher due to an increase in interest income
from larger investments of available cash and higher interest rates.
10
In FY 1995, the provision for income taxes was $1,148,902,
resulting in an effective tax rate of 39%, approximately the statutory
rate. In FY 1994, after the remaining available research and development
and investment tax credit carryovers from prior years were utilized, the
Company's effective tax rate was 28%. (See Note 6 of the Notes to the
Consolidated Financial Statements.)
Liquidity and Capital Resources
Current assets at 19961998 fiscal year end were $7,183,195 compared
with $6,324,208 at the 1995 fiscal year end. Liquidity of these assets
improved as cash and cash equivalents, short-term investments, and
receivables rose to $4,640,605 from $4,117,888 from the positive cash
flow during FY 1996.
Inventories rose 5% to meet projected requirements for sales of
nozzle products. The tooling work in process decreased compared to the
prior year, as there were fewer tools being built for future products.
Current liabilities increased 25%, reflecting the current portion
of the special sales commission accrual plus normal increases in
operational accounts payables and other accruals.
The current ratio of 2.8:1 at the 1996 fiscal year end declined
in comparison to the 3.1:2.9:1 ratio at the 19951997 fiscal year end principally
due to the addition of thedecline in current portion of the special sales commission accrual
at the end of the 1996 fiscal year end.liabilities.
Cash provided by operating activities in the amount of $2,144,438$1,493,822
in FY 1996fiscal year 1998 resulted principally from net income of $884,306,$932,186
plus the non-cash charges for depreciation and amortization of
$750,449 and
accrual$1,091,634 offset by an increase in working capital of the special sales commissions of $760,000 ($465,400 net of
income taxes).$843,803.
12
Funds were used for capital expenditures in the amount of
$1,321,331$2,014,132 principally for additionalproduction and computer equipment, building
improvements for enlarged office space, and assembly and laboratory equipment. The
Company purchased $566,664expects to spend approximately the same amount for capital
expenditures in FY 1999. During the year, the Company sold $1,586,735 of
U.S. Treasury billsBills to meet working capital and sold $700,000 of such bills.
The principal payment of term loan debt during FY 1996 was
$271,668, the prepayment of all outstanding bank debt in February 1996.capital expenditure
requirements.
.
The Company's $1,000,000 short-term line of credit was not
utilized during the fiscal year 19961998 and had no balance outstanding at
October 26, 1996.31, 1998. The preferred stock dividend was declared and paid in
December
1995.January 1998.
The Company's cash flow, financial position, and credit facilities and financial position
should provide an adequate base for salesworking capital and production
investment requirements resulting from forecastedprojected production rates by
the U.S. carNorth American automotive manufacturers, additional market penetration,
and near-term requirements for potential new products resulting from R & D efforts.
11
Fiscalnear term, including air conditioning
outlets.
Impact of Year 19972000
The management of the Company has considered the impact of the
changeover before, during and after midnight, December 31, 1999, to
January 1, 2000, on the handling of data and information, any related
software, and functions of operations. Inadequate handling of the
changeover could have a significant impact on the Company as follows:
a) business systems - internal computer information system,
CAD/CAM engineering design systems, payroll and personnel systems, and
electronic data interchange (EDI) systems;
b) manufacturing, warehouse and support equipment;
c) technical infrastructure, e.g. network, computer server,
personal computers, and telephone systems;
d) production, service, and other suppliers;
e) environmental support systems, e.g. security and maintenance
systems;
f) dedicated research and development systems.
The changeover will have no direct impact on the Company's
products themselves.
The Company's operating plans assume that industry production
levels for the 1997 fiscal year as a whole will be somewhat less than
the FY 1996 levels, in line with external market forecasts, but that
there will be additional production requirements for new nozzles
expected to be added in the coursemanagement has addressed each one of the fiscal year, resultingabove
issues where the impact applies and has in general either updated the
system, acquired a new system, tested the system and found compliance,
or been assured by the equipment or software manufacturer that the
related items were in compliance. A timetable was established in 1997,
and all the necessary steps have been taken and completed with respect
to the Company's anticipating windshield washer nozzle sales slightly belowinternal systems. The Company's suppliers have been
surveyed to assess the 1996 fiscal year. However, defroster nozzle sales are expectedstatus of their systems, focusing on
13
those with the largest potential impact on the Company. Questionable
areas with respect to
decline significantly in FY 1997 as certain products were discontinued.
Present knowledge of customer plans indicates that the Company's billings for technical services related to the introduction of new
productscustomers and new or revised windshield washer nozzles will increase from
the FY 1996 level.
The automotive parts industry has become more competitive in
general due to consolidation of suppliers customers' expectations of
higher quality and more service, and price pressures.
The Company's customers mandated that a QS-9000 compliant quality
system be developed and registered by an independent organization.
Chrysler required registration by July 1997 and General Motors by
December 1997. The Company received certification as a QS-9000 supplier
with ISO 9001 addendum in December 1996. QS-9000 is a quality system
standard developed by the three major U.S. automotive manufacturers
based on the ISO 9000 International Standard but incorporating general
automotive and specific customer requirements. Management believes that
the Company's technology coupled with a QS-9000 compliant quality system
should provide a solid platform for future competitiveness and growth.
Research and development expenditures are planned to remain at the
same level or decrease in FY 1997. Efforts will continue to
be made inaddressed.
Aside from the developmentacquisition of new product lines, principally air conditioning
outlets for light vehicles,systems which were considered to
be necessary and timely for the improvementfuture successful functioning of windshield washer
nozzles,the
business, the costs of the steps taken were not material to the
Company's profitability or financial condition.
The most reasonable likely worst cases if the changeover were not
handled properly by the Company's systems or its suppliers would be loss
of power and/or communications for a temporary period which would result inimpact
production. Since the Company provides its products to and communicates
daily with the auto companies' assembly plants or their other suppliers,
this loss could be a serious problem. The Company plans to build
inventory to meet this short-term contingency and consider alternative
means of communications. Any significant increase in application
engineering expenses.
12loss of revenue would be
directly related to lost production by the North American auto
companies, which is not considered probable and cannot be estimated at
this time.
Forward-Looking Statements
This report contains certain forward-looking statements subject to
risks and uncertainties which could cause actual results to differ
materially from those anticipated. Readers are cautioned not to place
undue reliance on those forward-looking statements which speak only as
of the date of this report.
14
Item 7 (continued) SCHEDULESchedule A: RELATIONSHIP TO NET SALESRelationship to Net Sales
Percent Change of Dollars
------------------------------------
Period to PeriodPeriod-to-Period
Percentage of Net Sales Increase or (Decrease)
----------------------------------------------- -----------------------------------FY 1998 FY 1997 FY 1996 FY 1995 FY 1994 1995-1996 1994-19951997-1998 1996-1997
------- ------- ------- --------- ---------
Net sales 100.0 100.0 100.0 6.8 12.311.9 3.9
Direct labor, material and other product-related costs 76.5 69.3 66.2 63.9 60.9 10.5 18.023.6 8.7
Selling, general and administrative expenses 12.8 16.4 20.1 15.4 17.2 39.6 0.2(13.0) (15.1)
Research and development costs 4.1 5.3 6.5 3.8 5.6 84.6 (24.4)(13.8) (14.5)
----- ------ ---------- ----
Operating income 6.6 8.9 7.2 16.9 16.3 (54.3) 16.6(17.6) 27.8
Interest expense -- (0.2) (0.6) (84.5) (56.3)income 0.3 0.6 0.5 (39.1) 31.5
Other revenue andincome (expense) net 0.5 0.6 .2 (14.8) 223.40.3 -- -- -- --
----- ------ ---------- ----
Net income before taxes 7.2 9.5 7.7 17.3 15.9 (52.6) 21.9(16.2) 29.4
===== ===== ========= ====
1315
Item 88. FINANCIAL STATEMENTS BOWLES FLUIDICS CORPORATION
FOR THE YEAR ENDED OCTOBER 26, 1996
14
BOWLES FLUIDICS CORPORATION
INDEX
FOR THE YEAR ENDED OCTOBER 26, 1996
Page
Report of Independent AccountantsAND SUPPLEMENTARY DATA
Page
Report of Independent Accountants...............................................................17
Financial Statements:
Consolidated Statements of Income.........................................................18
Consolidated Balance Sheets...............................................................19
Consolidated Statements of Changes in Stockholders' Equity................................20
Consolidated Statements of Cash Flows.....................................................21
Notes to Consolidated Financial Statements................................................22
16
Financial Statements:
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Changes in Stockholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21
15
REPORT OF INDEPENDENT ACCOUNTANTS
----------December 16, 1998
To the Board of Directors and Stockholders
Bowles Fluidics Corporation
We have auditedIn our opinion, the accompanying consolidated balance sheets
of Bowles Fluidics Corporation as of October 26, 1996, and October 28, 1995, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows present fairly, in all material respects, the financial position of
Bowles Fluidics Corporation as of October 31, 1998, and October 25, 1997, and
the results of its operations and its cash flows for each of the three fiscal
years in the period ended October 26, 1996.31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management. Ourmanagement; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards. Those standards, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includesstatements, assessing the
accounting principles used and significant estimates made by management, as well asand
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In ourthe opinion the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Bowles Fluidics Corporation as of October 26, 1996, and October 28, 1995, and
the results of its operations and its cash flows for each of the three fiscal
years in the period ended October 26, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 20, 1996
1617
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For Thethe Years Ended
-------------------------------------------------------------October 31, October 25, October 26,
October 28, October 29,1998 1997 1996 1995 1994
---------------- --------------- ---------------
Product sales $ 18,385,924 $ 18,110,514 $ 17,292,030
Technical services sales 2,698,880 732,159 836,244
----------- ------------ ------------
Net sales $18,128,274 $16,972,876 $15,111,82921,084,804 18,842,673 18,128,274
Cost of sales 16,145,848 13,065,374 11,996,305
10,852,940 9,200,976
---------------- --------------- ------------------------- ---------- ----------
Gross profit 4,938,956 5,777,299 6,131,969 6,119,936 5,910,853
Selling, general and
administrative expenses 2,691,141 3,094,769 3,643,128 2,609,911 2,603,491
Research and development
costs 866,390 1,005,183 1,175,890
636,970 842,332
---------------- --------------- -------------------------- ---------- ----------
Operating income 1,381,425 1,677,347 1,312,951
2,873,055 2,465,030
Interest expense (6,018) (38,871) (88,991)income 71,530 117,541 89,401
Other income (expense), net 84,002 98,593 30,487
---------------- --------------- ---------------55,184 4,555 (11,417)
---------- ------------ ------------
Income before taxes 1,508,139 1,799,443 1,390,935 2,932,777 2,406,526
Provision for income taxes 575,953 657,420 506,629
1,148,902 679,506
---------------- --------------- -------------------------- ----------- -----------
Net income 932,186 1,142,023 884,306 1,783,875 1,727,020
Preferred stock dividends
accrued (74,646) (74,648) (74,646) ----------------- --------------- ---------------(74,645)
---------- ------------ -----------
Income applicable to common
shareholders $ 809,660857,540 $ 1,709,2271,067,377 $ 1,652,374
================ =================809,661
=========== ========= ===========
Basic earnings per share $ .07 $ .08 $ .06
============= ============= ===============
PrimaryDiluted earnings per share $ .06 $ .13 $ .13
================ ================ ===============
Fully diluted earnings per share.07 $ .05
$ .11 $ .11
================ ============================= ============== ===============
The accompanying notes are an integral part of these financial statements.
17
BOWLES FLUIDICS CORPORATION
CONSOLIDATED BALANCE SHEETS
October 26, October 28,
1996 1995
--------------- --------------
ASSETS
Current
Cash and cash equivalents $ 1,287,110 $ 676,981
Investments available for sale 577,837 679,513
Accounts receivable 2,775,658 2,761,394
Inventories 1,986,065 1,899,346
Other current assets 556,525 306,974
--------------- --------------
Total current assets 7,183,195 6,324,208
--------------- --------------
Property and equipment, net 3,428,765 2,821,804
Other assets 107,892 146,434
--------------- --------------
Total assets $ 10,719,852 $ 9,292,446
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable - trade $ 1,104,511 $ 995,421
Accrued expenses and other liabilities 1,389,356 852,121
Income taxes payable 40,000 111,441
Current portion of long-term debt - 68,857
--------------- --------------
Total current liabilities 2,533,867 2,027,840
Long-term debt - 202,811
Other liabilities 746,433 431,904
--------------- --------------
Total liabilities 3,280,300 2,662,555
--------------- --------------
Commitments and contingencies
Stockholders' Equity
8% Convertible preferred stock 933,080 933,080
Common stock 1,261,001 1,261,001
Additional paid-in capital 2,726,583 2,726,583
Retained earnings
($2,407,467 deficit eliminated
at 10/29/94) Note 6 2,518,888 1,709,227
--------------- --------------
Total stockholders' equity 7,439,552 6,629,891
--------------- --------------
Total liabilities and stockholders' equity $ 10,719,852 $ 9,292,446
=============== ==============
The accompanying notes are an integral part of these financial statements.
18
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
BOWLES FLUIDICS CORPORATION
CONSOLIDATED BALANCE SHEETS
October 31, October 25,
1998 1997
---- ----
ASSETS
Current
Cash and cash equivalents $ 1,734,261 $ 755,525
Investments available for sale -- 1,563,121
Accounts receivable 3,233,775 3,112,063
Income taxes receivable 194,213 --
Inventories 2,263,144 2,130,615
Other current assets 399,781 634,037
----------- -----------
Total current assets 7,825,174 8,195,361
---------- ----------
Property and equipment, net 4,408,404 3,494,335
Other assets 121,743 95,005
----------- ------------
Total assets $ 12,355,321 $ 11,784,701
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Preferred StockCurrent
Accounts payable - trade $ 1,109,902 $ 1,122,437
Accrued expenses 1,326,107 1,609,807
Income taxes payable -- 48,162
------------ -----------
Total current liabilities 2,436,009 2,780,406
Other liabilities 541,093 492,866
----------- -----------
Total liabilities 2,977,102 3,273,272
---------- ----------
Commitments and contingencies
Stockholders' equity
8% Convertible preferred stock 933,080 933,080
Common Stock
----------------------- -----------------------stock 1,268,501 1,264,001
Additional paid-in capital 2,732,833 2,728,083
Retained Shares Shares Paid-in Earningsearnings 4,443,805 3,586,265
---------- ----------
Total (000's) Amount (000's) Amount Capital (Deficit)
----- ------- ------ ------- ------ ------------- ------------
Balance October 30, 1993 $3,246,590 933 $933,080 12,549 $1,254,881 $5,193,116 $(4,134,487)
Stock options exercised 8,700 41 4,120 4,580
Preferred stock dividends (74,646) (74,646)
Net income 1,727,020 1,727,020
Quasi-reorganization effective
October 29, 1994 (Note 6) - (2,407,467) 2,407,467
----------- ------ --------- ------ ------------- --------------stockholders' equity 9,378,219 8,511,429
---------- Balance October 29, 1994 $4,907,664 933 $933,080 12,590 $1,259,001 $2,715,583----------
Total liabilities and stockholders' equity $ --
Stock options exercised 13,000 20 2,000 11,000
Preferred stock dividends (74,648) (74,648)
Net income 1,783,875 1,783,875
----------- ------ --------- ----- ------------- -------------- ----------
Balance October 28, 1995 $6,629,891 933 $933,080 12,610 $1,261,001 $2,726,583 $1,709,227
----------- ------ --------- ------ ------------- -------------- ----------
Preferred stock dividends (74,646) (74,646)
Net income 884,307 884,307
----------- ----- --------- ------- ------------- -------------- ----------
Balance October 26, 1996 $7,439,552 933 $933,080 12,61012,355,321 $ 1,261,001 $ 2,726,583 $2,518,888
=========== ===== ========= ======= ============= ==============11,784,701
========== ==========
The accompanying notes are an integral part of these financial statementsstatements.
19
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended
------------------------------------------BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Additional
Shares Shares Paid-in Retained
Total (000's) Amount (000's) Amount Capital Earnings
----------- ------- ------ ------- ------------ ------------- ----------
Balance October 28, 1995 $ 6,629,891 933 $ 933,080 12,610 $ 1,261,001 $ 2,726,583 $ 1,709,227
Preferred stock dividends (74,645) (74,645)
Net income 884,306 884,306
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance October 26, October 28, October 29,
1996 1995 1994
------------ ----------- ------------
Cash flows from operating activities:
Net income $ 884,306 $ 1,783,875 $ 1,727,020
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 750,449 661,024 624,099
Deferred income taxes (241,315) (36,500) -
(Gain)/Loss on disposal of assets 3,088 (2,267) 8,496
Accretion of interest on investments (31,659) (14,125) -
--------- ---------- ----------
1,364,869 2,392,007 2,359,615
--------- ---------- ----------
Change in operating accounts:
Accounts receivable (14,264) (844,509) (204,165)
Inventories (86,719) (202,846) (365,409)
Other assets (122,381) (111,535) 42,927
Accounts payable 109,090 (70,656) 152,015
Accrued expenses 537,235 57,314 152,382
Income taxes payable (71,441) (431,715) 468,156
Other liabilities 428,049 63,150 27,124
--------- ---------- ----------
Change in operating accounts 779,569 (1,540,797) 273,030
--------- ---------- ----------
Net cash provided by operating activities 2,144,438 851,210 2,632,645
--------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (1,321,331) (962,597) (938,246)
Purchase of investments (566,664) (1,143,566) (484,807)
Patents and trademarks - (32,556) -
Proceeds from sale of equipment - 31,025 -
Proceeds from sale of investments 700,000 962,985 -
--------- ---------- ----------
Net cash used in investing activities (1,187,995) (1,144,709) (1,423,053)
--------- ---------- ----------
Cash flows from financing activities:
Principal payment of debt (271,668) (525,102) (603,657)
Proceeds from issuance of debt - - 365,0007,439,552 933 933,080 12,610 1,261,001 2,726,583 2,518,888
Stock options exercised 4,500 30 3,000 1,500
Preferred stock dividends (74,646) (74,648) (74,646)
Proceeds from issuance of commonNet income 1,142,023 1,142,023
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance October 25, 1997 8,511,429 933 933,080 12,640 1,264,001 2,728,083 3,586,265
Stock options exercised 9,250 45 4,500 4,750
Preferred stock - 13,000 8,700
-------- ---------- ----------dividends (74,646) (74,646)
Net cash used by financing activities (346,314) (586,750) (304,603)
-------- ---------- ----------
Net increase(decrease) in cash and cash equivalents 610,129 (880,249) 904,989
Cash and cash equivalents
- Beginning of period 676,981 1,557,230 652,241
-------- --------- ----------
- End of period 1,287,110income 932,186 932,186
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance October 31, 1998 $ 676,9819,378,219 933 $ 1,557,230
========== ========== ==========933,080 12,685 $ 1,268,501 $ 2,732,833 $ 4,443,805
=========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
20
BOWLES FLUIDICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
October 31, October 25, October 26,
1998 1997 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 932,186 $ 1,142,023 $ 884,306
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 1,091,634 960,346 750,449
Deferred income taxes 332,759 (5,900) (241,315)
(Gain)/Loss on disposal of assets 4,660 21,089 3,088
Accretion of interest on investments (23,614) (45,269) (31,659)
---------- ---------- ----------
2,337,625 2,072,289 1,364,869
--------- --------- ---------
Change in operating accounts:
Accounts receivable (121,712) (336,405) (14,264)
Inventories (132,529) (144,550) (86,719)
Other assets (26,447) (74,958) (122,381)
Accounts payable (12,535) 17,926 109,090
Accrued expenses (283,700) (189,549) 537,235
Income taxes (242,375) 8,162 (71,441)
Other liabilities (24,505) 156,433 428,049
---------- --------- ----------
(843,803) (562,941) 779,569
--------- --------- ----------
Net cash provided by operating activities: 1,493,822 1,509,348 2,144,438
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,014,132) (1,027,780) (1,321,331)
Purchase of investments -- (1,540,015) (566,664)
Patents and trademarks (32,347) (4,433) --
Proceeds from sale of equipment 10,054 1,441 --
Proceeds from sale of investments 1,586,735 600,000 700,000
--------- ---------- ----------
Net cash used in investing activities (449,690) (1,970,787) (1,187,995)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment of debt -- -- (271,669)
Preferred stock dividends (74,646) (74,646) (74,645)
Proceeds from issuance of common stock 9,250 4,500 --
----------- ----------- ----------
Net cash used by financing activities (65,396) (70,146) (346,314)
----------- ---------- ----------
Net increase(decrease) in cash and cash
equivalents 978,736 (531,585) 610,129
CASH AND CASH EQUIVALENTS:
- Beginning of period 755,525 1,287,110 676,981
---------- --------- ----------
- End of period $ 1,734,261 $ 755,525 $ 1,287,110
========= ========== =========
The accompanying notes are an integral part of these financial statements.
21
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
General.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL. The Company and its wholly owned subsidiary, Fluid Effects
Corporation, operate on a 52/53-week fiscal year which ends on the last
Saturday of October. AllThe fiscal year 1998 has 53 weeks and fiscal years
presented are1997 and 1996 have 52 weeks. Assets and liabilities, and revenues and
expenses, are recognized on the accrual basis of accounting. Cash equivalents.Fluid Effects
Corporation was merged into the Company as of April 6, 1998.
CASH EQUIVALENTS. Cash equivalents are highly liquid investments with
original maturities of 90 days or less.
Investments.INVESTMENTS. Investments, which are available for sale, consist of U.S.
Treasury Bills with original maturities over 90 days, but not greater than
365 days, and are carried at cost plus accrued interest, which approximates
market.
Inventory Pricing.INVENTORY PRICING. Inventories are carried at the lower of cost (first-in,
first-out) or market.
Property, Equipment and Depreciation.PROPERTY, EQUIPMENT AND DEPRECIATION. The cost of property and equipment is
depreciated over the estimated useful life of the related assets.
Depreciation is computed on the straight-line method for all assets based
on the following estimated lives:
Years
-----
Production machinery and equipment 3 - 103-10
Office furniture and equipment 5 - 75-7
Laboratory and machine shop equipment 3 - 103-10
Leasehold improvements lease term
Depreciation expense for the fiscal years ended 1998, 1997, and 1996 1995,was
$1,085,349, $939,678, and 1994,
was $711,282 $612,294 and $577,811, respectively.
Patents.PATENTS. Costs associated with obtaining United States patents are
capitalized and amortized using the straight-line method over the life of
the patent beginning with the date of issue or date of filing the
application. The Company initially charges all costs associated with the
acquisition of U.S. and foreign patents to expense, then capitalizes those
costs related to U.S. patents upon issuance of those patents.
Management reviews all of the patent costs and writes off any patents
which are considered to be of no foreseeable economic benefit to the
Company. The Company recognizes income from patent licenses in accordance
with the respective payment terms of each license agreement.
Income Taxes.22
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. (continued)
INCOME TAXES. The Company uses the asset and liability method for
accounting for income taxes. Under this method, deferred income taxes are
recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences
between the financial statements carrying amounts and the tax bases of
existing assets and liabilities.
Use of Estimates.USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
21RECLASSIFICATIONS. Certain 1996 and 1997 amounts have been reclassified to
conform to the 1998 presentation.
CONCENTRATIONS OF CREDIT RISK. Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of
accounts receivable and cash investments. The Company's customer base
includes the significant U.S. automotive manufacturers and a large number
of automotive parts suppliers. The Company does not require collateral for
its trade accounts receivable. However, the Company's credit evaluation
process and reasonably short collection terms help to mitigate any
concentration of credit risk. The Company also has cash investment policies
that limit the amount of credit exposure to any one financial institution
and require placement of investments in financial institutions evaluated as
highly creditworthy.
2. INVENTORIES
Inventories are comprised of:
1998 1997
-------------- -------------
Raw material $ 720,084 $ 620,567
Work and tooling in progress 791,805 1,016,845
Finished goods 751,255 493,203
---------- ----------
Total $2,263,144 $2,130,615
========== ==========
Tooling in progress includes costs accumulated under short-term contracts
to produce tooling for certain of the Company's customers of $598,193 and
$865,700 in 1998 and 1997 respectively.
23
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Inventories
Inventories are comprised of:
1996 1995
---------- ----------
Raw Material $ 678,494 $ 703,864
Work and tooling in process 242,369 416,090
Finished Goods 1,065,202 779,392
---------- ----------
Total $1,986,065 $1,899,346
========== ==========
3. Property and Equipment, net3.PROPERTY AND EQUIPMENT, NET
Property and Equipment, net, is comprised of:
October 26, October 28,
1996 1995
----------- -----------
Production machinery and equipment $ 4,397,018 $ 4,047,602
Office furniture and equipment 1,992,152 1,580,026
Laboratory and machine shop equipment 1,395,837 1,159,087
Leasehold improvements 796,928 539,274
----------- -----------
Total property and equipment 8,581,935 7,325,989
Less accumulated depreciation (5,153,170) (4,504,185)
----------- -----------
Property and equipment, net $ 3,428,765 $ 2,821,804
=========== ===========
1998 1997
-------------- --------
Production machinery and equipment $6,328,351 $4,946,390
Office furniture and equipment 2,502,438 2,321,844
Laboratory and machine shop equipment 1,586,801 1,428,516
Leasehold improvements 894,816 812,120
-------------- ----------
Total property and equipment 11,312,406 9,508,870
Less accumulated depreciation (6,904,002) (6,014,535)
--------- ---------
Property and equipment, net $4,408,404 $3,494,335
========= =========
4. Line of CreditLINE OF CREDIT
In May 1996, the Company entered into a fourth amended and restated
agreement with Mercantile-Safe Deposit & Trust Company to reaffirm and
extend its $1,000,000 line of credit until May 8, 1997, and to set forth
the Company's and the Bank's decision to continue the line of credit on an unsecured
basis. At the Company's request and the Bank's discretion the line of
credit was extended until May 8, 1999, and may be affirmed as of May 8, 1997, andreaffirmed each year
thereafter. The interest rate is Mercantile's prime rate, floating, which
was 8 1/4%8% as of October 26, 1996.31, 1998. In addition, a 3/8% annual fee is assessed
on the unused portion of this credit facility. Advances on the line of
credit are limited to 85% of eligible accounts receivable and 40% of
finished goods inventory. No amount was outstanding on this credit line at
October 26,
1996,31, 1998, or on October 28, 1995.25, 1997.
In addition to the maintenance of certain financial ratios, the
covenants of the fourth amended loan agreement require the Company's
tangible net worth to be not less than $2,000,000 as of the close of each
fiscal year.
225. DEBT
No debt was outstanding as of October 31, 1998, and October 25, 1997. In
February 1996 the unpaid balance of the then outstanding loan from
Mercantile-Safe Deposit & Trust Company was paid in total.
24
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Debt
Balances as of October 26, 1996, and October 28, 1995, are as follows:
1996 1995
------------ ------------
$ -- $ 271,668
============ ============
In June 1993, the Company entered into a third amended and restated
loan agreement with Mercantile-Safe Deposit & Trust Company for a term
loan facility for a period up to seven years in the maximum
amount of $1,100,000. Advances under this agreement were made for the
purchase of specified capital equipment and leasehold improvements. This
loan facility was cross-collateralized and cross-defaulted with all
other loans with Mercantile and was subject to certain loan covenants. In
December 1993, the Company borrowed $365,000 under this facility. During
fiscal 1994, a fixed interest rate of 8 3/4% was elected for borrowing
under this agreement through April 1997. The unpaid balance of the
outstanding loan was paid in total in February 1996.
Cash paid for interest during 1996, 1995, and 1994 was $6,018,
$37,586, and $91,079 respectively.
6. Stockholders' Equity6.STOCKHOLDERS' EQUITY
The 8% convertible preferred stock of the Company at October 26,
1996,31, 1998,
and October 28, 1995,25, 1997, consists of 3,000,000 authorized shares, par value
$1.00 per share, with 933,080 shares issued and outstanding on both dates.
The common stock of the Company at October 26, 1996,31, 1998, and October 28,
1995,25,
1997, consists of 17,000,000 authorized shares, par value $.10 per share,
with 12,610,011share.
On October 31, 1998, the shares issued and outstanding were 12,685,011,
whereas on both dates.October 25, 1997, they were 12,640,011.
The Company's preferred stock provides for an annual dividend of $.08
per share from the net earnings of the Company and is cumulative only for
those years in which the Company has earnings, and $1.00 per share in
liquidation before any distribution can be made to holders of common stock.
If any dividends payable on the preferred stock with respect to any fiscal
year of the Company are not paid for any reason, the rights of the holders
of the preferred stock to receive payment of such dividends shall not lapse
or terminate; but unpaid dividends shall accumulate and shall be paid
without interest to the holders of the preferred stock when and as
authorized by the Board of Directors before any dividends shall be paid on
any other class of stock.
The Company's preferred stock may at the option of the holder, at any
time dividends are current, be converted into common stock of the Company
at the conversion rate of four shares of common for each share of
preferred. Additionally, the preferred stock is redeemable at par in whole
or in part at the option of the Board of Directors at any time the
dividends are current after a period of 10 years subsequent to issue. At
October 26, 1996,31, 1998, 683,080 shares have been outstanding for more than 10
years and dividends are current, and thus can be converted.redeemed. The common stock
has one (1) vote per share and the preferred stock has four (4) votes per
share.
23
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. (continued)
Reserved Shares.RESERVED SHARES. As of and for the three fiscal years in the period ended
October 26, 1996,31, 1998, there were 300,000 shares of common stock reserved for
issuance in connection with the Company's stock option plans. None of the
authorized shares of common stock are reserved for conversion of preferred
stock. Under the laws of the State of Maryland, the authorization of the
preferred stock in itself provides the authorization of common stock
necessary for conversion.
Stock Options. In May 1992, the Company adopted its key employee
incentive stock option plan. Activity in the Company's incentive stock
option plan was as follows:
1996 1995 1994
------- ------- -------
Options outstanding,
beginning of year 180,000 200,000 314,400
Options granted - - -
Options exercised - (20,000) (41,200)
Options expired - - (73,200)
------- ------- -------
Options outstanding,
end of year 180,000 180,000 200,000
======= ======= =======
Options activities are at exercise prices ranging from $.15 to $.65 per
share.
In 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation." The Company has
determined that it will retain its current accounting for stock options
granted; therefore, the adoption of this new standard in fiscal 1996 will
not impact the Company's financial position or results of operations.
Quasi-reorganization.QUASI-REORGANIZATION. Effective October 29, 1994, the Board of Directors
approved a quasi-reorganization which had the impact of eliminating the
retained earnings deficit as an adjustment to additional paid-in capital.
2425
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Income TaxesINCOME TAXES
The Company and its subsidiary file a consolidated federal income tax
return and separate state income tax returns. The provision for income
taxes consisted of the following:
1996 1995 1994
-------- -------- --------
Federal:
Current $ 678,938 $1,019,525 $540,000
Deferred (222,600) (30,100) -
--------- ---------- --------
456,338 989,425 540,000
--------- ---------- --------
State:
Current 68,791 164,377 139,506
Deferred (18,500) (4,900) -
--------- ---------- --------
50,291 159,477 139,506
--------- ---------- --------
$ 506,629 $1,148,902 $679,506
========= ========== ========
The components of the deferred tax asset and liability for 1996 and 1995
were as follows:
1996 1995
-------- --------
Deferred tax asset:
Accrued vacation and retirement programs $ 190,300 $ 167,800
Non-deductible reserves 387,100 121,700
--------- --------
Total deferred tax asset 577,400 289,500
--------- --------
Deferred liability:
Property and equipment (312,800) (266,000)
--------- --------
Total deferred tax liability (312,800) (266,000)
--------- --------
Net deferred tax asset $ 264,600 $ 23,500
========= =========
Reconciliations of the provisions for income taxes at the U.S. federal
statutory rate to the effective tax rates were as follows:
1996 1995 1994
-------- ---------- ---------
U.S. statutory income tax $472,918 $ 997,145 $ 818,219
State tax, net of federal income tax
benefit 33,711 151,757 92,074
Utilization of investment and research
and development credit carryforwards - - (226,000)
Other - - (4,787)
-------- ---------- ---------
$506,629 $1,148,902 $ 679,506
1998 1997 1996
---------------- ------------- --------
Federal:
Current $195,218 $620,131 $678,938
Deferred 292,675 (6,100) (222,600)
-------- --------- -------
487,893 614,031 456,338
------- ------- -------
State:
Current 47,976 43,189 68,791
Deferred 40,084 200 (18,500)
-------- ---------- -------
88,060 43,389 50,291
-------- -------- --------
$575,953 $657,420 $506,629
======= ======= =======
The components of the deferred tax asset and liability for 1998 and 1997 were as follows:
1998 1997
---- ----
Deferred tax assets:
Accrued vacation and retirement programs $ 43,818 $ 83,600
Non-deductible reserves 261,882 490,600
------- -------
Total deferred tax assets 305,700 574,200
------- -------
Deferred tax liabilities:
Property and equipment (368,000) (303,700)
------- -------
Total deferred tax liabilities (368,000) (303,700)
------- -------
Net deferred tax asset (liability) $ (62,300) $ 270,500
======= =======
Reconciliation of the provisions for income taxes at the U.S. federal statutory rate to the effective tax
expense were as follows:
1998 1997 1996
------------ ------------ -------
U.S. statutory income tax $512,767 $611,811 $472,918
State taxes, net of federal
income tax benefit 58,736 28,637 33,711
Other, net 4,450 16,972 --
--------- -------- ------
$575,953 $657,420 $506,629
======= ======= =======
Cash paid for income taxes was $489,000, $584,000, and $877,000 $1,617,000,for
1998, 1997, and $118,000 for
1996 1995, and 1994, respectively.
2526
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EarningsEARNINGS PER SHARE
Effective October 26, 1997, the Company adopted Statement of Financial
Accounting Standard No. 128 "Earnings per Share
PrimaryShare" ("SFAS 128"). SFAS 128
replaced the presentation of primary earnings per share are(EPS) and fully
diluted EPS with a presentation of basic EPS and diluted EPS. All earnings
per share amounts presented in the financial statements here have been
restated in accordance with SFAS 128.
Basic earnings per share is determined based on the weighted average
number of common shares andoutstanding during the effects of shares issuable under stock optionsperiods. Diluted earnings
per share is determined based on the treasury stock method. Fullyweighted average number of common
shares outstanding and potential dilution of securities that could share in
earnings.
The following table sets forth the computation of basic and diluted
earnings per share
assumes that the preferred stock is converted to common stock at the
beginning of the year.
The number of shares used for computing primary earnings per share
was 12,701,898, 12,706,408, and 12,672,647, in 1996, 1995, and 1994,
respectively. The number of shares used in computing fully diluted
earnings per share was 16,473,390, 16,445,005 and 16,404,967 in 1996,
1995, and 1994, respectively.share:
For the Years Ended
-------------------------------------------------------
October 31, October 25, October 26,
1998 1997 1996
---------------- ---------------- ----------------
Numerator:
Numerator for basic earnings per share:
Income applicable to common
shareholders $ 857,540 $ 1,067,377 $ 809,661
Effect of dilutive securities:
Preferred Stock Dividends 74,646 74,646 74,646
------------ ------------ ------------
Numerator for diluted earnings per share
Income applicable to common shareholders after
assumed conversion $ 932,186 $ 1,142,023 $ 884,306
---------- ---------- ----------
Denominator:
Denominator for basic earnings per share:
Weighted average shares outstanding
during the period 12,660,294 12,633,764 12,610,011
Effect of dilutive securities:
Employee Stock Options 32,160 48,607 91,887
Assumed Conversion of Preferred Stock 3,732,320 3,732,320 3,732,320
----------- ----------- -----------
Denominator for diluted earnings per
share 16,424,774 16,414,691 16,434,218
---------- ---------- ----------
Earnings per Share:
Basic $ .07 $ .08 $ .06
=== === ===
Diluted $ .06 $ .07 $ .05
=== === ===
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Commitments and ContingenciesCOMMITMENTS AND CONTINGENCIES
The Company leases its facilityfacilities under a non-cancelable operating
leaseleases which expiresexpire in 2004.2004 for Columbia, Maryland, and in 2000 for
Southfield, Michigan. As of October 26, 1996,31, 1998, minimum annual aggregate
rentals are as follows:
27
Year Ended Amount
---------- -----------
1997------
1999 $ 561,648
1998 561,648
1999 561,648594,929
2000 561,648572,831
2001 561,648561,646
2002 561,646
2003 561,646
thereafter 1,404,120
----------257,421
Total minimum future rental payments $4,212,360
==========$3,110,119
Rent expense under all leases for 1996,1995,1998, 1997, and 19941996 was $626,565,
$622,671,$666,908,
$644,008, and $598,427,$626,565 respectively.
Management is unaware of any pending legal proceedings which would
have a material adverse effect on the financial statements of the
Company.
26
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Employee Benefit PlansEMPLOYEE BENEFIT PLANS
On November 1, 1990, the Company adopted a defined contribution (401k)
plan covering substantially all of its employees. Contributions and costs
were determined by matching 50% of employee contributions up to 4% of
each covered employee's earnings. As of April 1, 1994, the Company
increased its matching contribution to 50% of the employee contributions
up to 6% of each covered employee's earnings. The Company's contributions
to the plan were $169,685, $151,314, and $119,640 $101,286in 1998, 1997, and $76,892, in 1996 1995, and 1994,
respectively.
The Company has agreed to retirement programs for certain former
officers providing for the payment of certain retirement benefits. The
unfunded present value, at a discount rate of 7.5%, of these benefits
accumulated as of October 26, 1996,31, 1998, amounts to approximately $360,000,$323,000, of
which $301,000$264,000 is included in other liabilities. Expenses related to
these programs were $41,090 in 1998, $46,476 in 1997, and $44,000 in
1996, $102,0001996.
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS
In May 1992, the Company adopted its key employee incentive stock
option plan. Activity in the Company's incentive stock option plan was as
follows:
1998 1997 1996
--------- --------- ------
Options outstanding, beginning of year 70,000 180,000 180,000
Options granted - - -
28
Options exercised (45,000) (30,000) -
Options expired (25,000) (80,000) -
----------- ----------- -----------
Options outstanding, end of year - 70,000 180,000
=========== =========== ===========
Options activities are at exercise prices ranging from $.15 to $.65
per share.
Statement of Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (FAS 123) became effective for the Company in 1997. As
allowed by FAS 123, the Company has elected to continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25), in accounting for its stock option plans. FAS 123
requires the Company to present pro forma information as if the Company
had accounted for stock options granted since December 15, 1995, and $62,000 in 1994.
11. Terminationunder
the fair value method of Sales AgreementFAS 123. No pro forma information has been
presented by the Company as no stock options have been issued since
December 15, 1995, the effective date of FAS 123.
12. TERMINATION OF SALES AGREEMENT
During the fiscal year 1996, the Company accrued $760,000 ($465,400
net of income taxes) for the termination in May 1997 of the sales
agreement with its manufacturer's representatives. The payments will commencecommenced
in May 1997.
12. Major Customers1997 and were completed at May 14, 1998.
13. MAJOR CUSTOMERS
Over 90% of the Company's production of nozzles is incorporated in
vehicles produced by General Motors, Ford, and Chrysler, each of whom
typically represents over 10% of the Company's sales volume. The Company
is, therefore, substantially dependent upon the North American production
requirements of these three automotive companies. In addition, the
Company's customers mandatedrequired that a QS-9000 compliantQS-9000-compliant quality system be
developed and registered by an independent organization. Chrysler required
registration by July 1997 and General Motors by December 1997. In September
1996, the Company was assessed by Underwriters Laboratories Inc.
and,
received QS-9000 certification with ISO 9001 addendum as of December 20,
1996.
27
1996, and has maintained that certification since then.
BOWLES FLUIDICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. (Continued)
Three customers each had sales exceeding 10% of the Company revenues:
1998 1997 1996
---- ---- ----
Customer A $3,727,630 $3,819,124 $3,845,926
Customer B 2,977,928 3,506,208 2,378,921
Customer C 2,411,813 2,367,381 2,511,570
14. NEW ACCOUNTING PRONOUNCEMENTS
29
The Financial Accounting Standards Board has issued the following
Statements of Financial Standards ("FAS") which are not yet effective for
the Company:
o FAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATIVE
INFORMATION
This statement becomes effective for fiscal years beginning after
December 15, 1997, and changes the way public companies report
information about segments of their business in their financial
statements and requires them to report selected segment information in
their quarterly reports to stockholders. The Company intends to adopt
the disclosure requirement by this statement for the year ending
October 30, 1999.
o FAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES
This statement becomes effective for fiscal years beginning after June
15, 1999. This standard establishes accounting and reporting standards
for derivative instruments and hedging activities. The Company does
not believe this new standard will have any impact on the Company upon
adoption.
15. PROPOSED REVERSE STOCK SPLIT
On December 8, 1998, the Board of Directors of the Company adopted a
resolution authorizing the submission to the vote of the stockholders of
the Company of a proposed amendment to the Articles of Incorporation of
the Company under which all outstanding shares of common stock will be
subject to a reverse stock split at the ratio of 1000 shares of common
stock before the reverse split to 1 share of common stock after the
reverse split. The Board of Directors also adopted a resolution
authorizing the redemption of all fractional shares of common stock
resulting from the reverse stock split at the rate of $1,250 per post
reverse split share. This proposed amendment to the Articles of
Incorporation is pending subject to stockholder approval.
Item 99. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
28DISCLOSURE
None.
30
PART III
Item 10a. - 10c.10. DIRECTORS OF THE REGISTRANT INCLUDED IN PROXY MATERIALS
Item 10b., d., e., & f.AND EXECUTIVE OFFICERS OF THE REGISTRANT:REGISTRANT
Directors of the Registrant
Information is included in the Proxy Statement for the Annual Meeting of
Stockholders scheduled for April 7, 1999.
Executive Officers of the Registrant
b.
Name, Age and Position e.Position: Business Experience During Past Five Years
---------------------- ------------------------------------------
Years:
William Ewing III Chairman of the Board since July 1996. Responsible for the formation of
Chairman of the Board overall corporate policy and planning. Member of Board of Age 50Directors
of Directors since 1985. CurrentlyPreviously Vice President and Treasurer of Reeves
Age 52 Industries, Inc., 1995-present. Previously1995-1997, and Managing Director of Chemical Bank,
1992-1994, and, prior to that,
Managing Director of Manufacturers Hanover Trust Company.1992-1994.
Ronald D. Stouffer President since March 1994. Responsible for execution of the Company's
President Company's policies and for the Company's operations. Executive Vice President
Chief Executive Officer Vice President responsible for engineering and manufacturing from Age 65 1982 to 1994. Member
Age 67 of Board of Directors since 1978. Joined the Company in 1967.
Eric W. Koehler Appointed Executive Vice President and member of Board of Directors
Executive Vice President December 17, 1997, in charge of marketing, sales, and engineering
Age 36 functions. Previously Vice President, Marketing, since March 1994,
responsible for marketing and sales functions. Director of Marketing,
1990-1994. Joined the Company in 1989.
Melvyn J. L. Clough Vice President, Operations, since joining the Company in November 1995.
Vice President, 1995. Responsible for all manufacturing operations including Operations industrial engineering
Operations and tooling. Previously Engineering
Age 49 Manager for A. Raymond, Inc.,
1992-1995, and various
positions with TRW Fasteners Division to Engineering
Manager, 1982-1992.Age 51 1992-1995.
Richard W. Hess Vice President, Automotive Products Engineering, since April 1998.
Vice President, Responsible for the Company's engineering of automotive products.
Engineering Previously Vice President, Engineering, since joining the Company in Vice President 1992.
Vice President, Responsible forAge 55
31
Executive Officers of the Company's total
Engineering engineering department, including researchRegistrant (continued)
Name, Age and development and
Age 53 applications engineering. Previously Director of Engineering
with Automated Packaging Systems, Inc., 1990-1992.
Eric W. Koehler Vice President, Marketing, since March 1994. Responsible for
Vice President, marketing and sales functions. Director of Marketing,
Marketing 1990-1994. Joined the Company in 1989.
Age 34Position: Business Experience During Past Five Years:
----------------------- -------------------------------------------
Eleanor M. Kupris Vice President, Administration, since 1982. Corporate Secretary since
Secretary and Vice President, sincePresi- March 1992. Responsible for purchasing and personnel. Administration Joined the
dent, Administration Company in 1966.
Age 55
29
Item 10b., d., e., & f. (continued)
b. Name, Age and Position e. Business Experience During Past Five Years
---------------------- ------------------------------------------
57
David A. Quinn Vice President, Finance, and Treasurer since joining the Company in
October
Vice President, October 1993. Responsible for treasury, accounting and financial
Finance, and Treasurer planning functions. Previously CFO for Bruning Paint Company, 1991-1993.
Age 60 1991-1993, and Group Vice President-Finance for The Black &
Decker Corporation, 1989-1991.62
Dharapuram N. Srinath Vice President, Advanced Engineering, since April 1998. Responsible for
Vice President, the development of new products, other than automotive, and research and
Advanced Engineering development. Previously Vice President, Quality Assurance, sincefrom March
1995. Responsible
Vice President, for quality assuranceAge 47 1995, and reliability functions. Director of
Quality Assurance Quality Assurance and Product Reliability,
1992-1995; Director of
Age 45 Technology, 1990-1992.1992-1995. Joined the Company in 1978.
Arlene M. Hardy Corporate Controller since 1990. Responsible for accounting functions.
Corporate Controller functions. Joined the Company in 1986.
Age 4951
The names, ages and positions of all of the executive officers of the
Company are listed above, along with their business experience during the
past five years. Officers are appointed annually by the Board of Directors
at its meeting immediately following the Annual Meeting of Stockholders.
There are no family relationships among any of the officers of the Company,
nor any arrangements or understanding between any such officers and another
person pursuant to which they were elected as officers.
Item 11. EXECUTIVE COMPENSATION
Information is included in the Proxy Statement for the Annual Meeting of
Stockholders scheduled for April 7, 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information is included in the Proxy Statement for the Annual Meeting of
Stockholders scheduled for April 7, 1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information is included in the Proxy Statement for the Annual Meeting of
Stockholders scheduled for April 7, 1999.
32
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 Financial Statements
Included in Part II of this report:
Report of Independent Accountants
Consolidated Statements of Income for the three years
ended October 31, 1998, October 25, 1997, and October
26, 1996
Consolidated Balance Sheets at October 31, 1998, and
October 25, 1997
Consolidated Statements of Changes in Stockholders'
Equity for the three years ended October 31, 1998,
October 25, 1997, and October 26, 1996
Consolidated Statements of Cash Flows for the three
years ended October 31, 1998, October 25, 1997, and
October 26, 1996
Notes to Consolidated Financial Statements
(a) 2 Financial Statements Schedules
Schedules are omitted because of the absence of conditions
under which they are required or because the required
information is given in the financial statements or notes
thereto.
(b) Reports on Form 8-K
A Form 8-K was filed on October 6, 1998, during the fourth
quarter of the Company's fiscal year indicating the unanimous
election at an informal meeting of the Board of Directors on July
14, 1998, and confirmed at a meeting of the Board on September 22,
1998, of Frederic Ewing II, James Parkinson, and Neil T. Ruddock to
the Board of Directors to serve until the next Annual Meeting of
Stockholders.
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BOWLES FLUIDICS CORPORATION
BY:
Chairman of
the Board and
- ------------------------------- Director ----------------------------------
William Ewing III Date
President and
- ------------------------------- Director ----------------------------------
Ronald D. Stouffer Date
Executive
Vice President and
- ------------------------------- Director ----------------------------------
Eric W. Koehler Date
Vice President
- ------------------------------- Finance ----------------------------------
David A. Quinn Date
- ------------------------------- Corporate Controller ----------------------------------
Arlene M. Hardy Date
- ------------------------------- Director ----------------------------------
David C. Dressler Date
- ------------------------------- Director ----------------------------------
Frederic Ewing II Date
- ------------------------------- Director ----------------------------------
Jim Parkinson Date
- ------------------------------- Director ----------------------------------
Neil T. Ruddock Date
d. The names, ages and positions of all of the executive officers of the
Company are listed above, along with their business experience during the
past five years. Officers are appointed annually by the Board of Directors
at the annual meeting of directors, immediately following the annual
meeting of shareholders. There are no family relationships among any of the
officers of the Company, nor any arrangements or understanding between any
such officers and another person pursuant to which they were elected as
officers.
Item 11 EXECUTIVE COMPENSATION INCLUDED IN PROXY MATERIALS.
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT INCLUDED
IN PROXY MATERIALS.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INCLUDED IN PROXY
MATERIALS.
30
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 Financial Statements
Included in Part II of this report:
Report of Independent Accountants
Consolidated Statements of Income for the three years
ended October 26, 1996, October 28, 1995, and October 29,
1994
Consolidated Balance Sheets at October 26, 1996, and
October 28, 1995
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended October 26, 1996, October 28,
1995, and October 29, 1994
Consolidated Statements of Cash Flows for the three years
ended October 26, 1996, October 28, 1995, and October 29,
1994
Notes to Consolidated Financial Statements
(a) 2 Financial Statements Schedules
Schedules are omitted because of the absence of conditions
under which they are required or because the required
information is given in the financial statements or notes
thereto.
(a) 3 Exhibits
Exhibit 11 -
Schedule showing computations of earnings per share for
each of three years ended October 26, 1996, October 28,
1995, and October 29, 1994.
(b) Reports on Form 8-K
None
31
34