SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended January 31, 1995 Commission file Number 0-10964
MAXWELL LABORATORIES, INC.
Delaware IRS ID# 95-2390133
8888 Balboa Avenue,
San Diego, California 92123
Telephone (619) 279-5100
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of February 28, 1995 Registrant had only one class of common
stock of which there were 2,674,973 shares outstanding.
PART I - FINANCIAL STATEMENTS
Maxwell Laboratories, Inc.
Consolidated Condensed Balance Sheet
(in thousands)
Assets
______
January 31, July 31,
1995 1994
_________ _________
(Unaudited) (Note)
Current Assets:
Cash and cash equivalents $ 1,724 $ 4,579
Accounts receivable - net 15,375 16,023
Inventories:
Finished products 1,111 1,052
Work in process 3,063 2,438
Parts and raw materials 4,695 4,118
_________ _________
8,869 7,608
Recoverable income taxes -- 64
Prepaid expenses 755 512
Deferred income taxes 3,135 3,135
_________ _________
Total current assets 29,858 31,921
Property, plant and equipment - net 20,696 20,981
Deposits and other assets 1,370 1,420
_________ _________
$ 51,924 $ 54,322
========= =========
Liabilities and Shareholders' Equity
____________________________________
Current Liabilities:
Accounts payable $ 8,039 $ 9,925
Accrued employee compensation 2,565 2,936
Income taxes payable 25 --
Current portion of long-term debt 908 969
_________ _________
Total current liabilities 11,537 13,830
Long-term debt 2,341 2,797
Deferred income taxes 1,030 1,030
Minority interest and additional amounts contributed 1,496 1,705
Shareholders' equity:
Common stock 267 267
Additional paid-in capital 18,802 18,802
Retained earnings 16,451 15,891
_________ _________
35,520 34,960
_________ _________
$ 51,924 $ 54,322
========= =========
<FN>
Note: The Balance Sheet at July 31, 1994 has been derived from the audited
financial statements at that date.
See notes to consolidated condensed financial statements.
PART I - FINANCIAL STATEMENTS, continued
Maxwell Laboratories, Inc.
Consolidated Condensed Statement of Income - (Unaudited)
(in thousands except per share data)
Three Months
Ended January 31,
______________________
1995 1994
_________ _________
Sales $ 17,630 $ 20,142
Costs and expenses:
Cost of sales 13,046 15,817
Research and development expenses 936 1,318
Selling, administrative and general expenses 3,371 3,331
Loss on closing of Brobeck division -- 1,018
Other - net (98) (233)
_________ _________
17,255 21,251
_________ _________
Income (loss) before income taxes
and minority interest 375 (1,109)
Income taxes (credit) 121 (444)
_________ _________
254 (665)
Minority interest in net income of subsidiary 17 29
_________ _________
Net income (loss) $ 237 $ (694)
========= =========
Primary earnings (loss) per share of common stock $ .09 $ (.26)
========= =========
Weighted average number of shares 2,677,000 2,675,000
========= =========
<FN>
Note: Primary earnings per share is based upon weighted average number of
shares of common stock outstanding and all dilutive stock options. Per
share amounts are unchanged on a fully dilutive basis.
See notes to consolidated condensed financial statements.
PART I - FINANCIAL STATEMENTS, continued
Maxwell Laboratories, Inc.
Consolidated Condensed Statement of Income - (Unaudited)
(in thousands except per share data)
Six Months
Ended January 31,
______________________
1995 1994
_________ _________
Sales $ 35,548 $ 40,735
Costs and expenses:
Cost of sales 25,992 32,089
Research and development expenses 2,290 2,390
Selling, administrative and general expenses 6,560 6,782
Loss on closing of Brobeck division -- 1,018
Other - net (183) (396)
_________ _________
34,659 41,883
_________ _________
Income (loss) before income taxes
and minority interest 889 (1,148)
Income taxes (credit) 284 (514)
_________ _________
605 (634)
Minority interest in net income of subsidiary 45 49
_________ _________
Net income (loss) $ 560 $ (683)
========= =========
Primary earnings (loss) per share of common stock $ .21 $ (.26)
========= =========
Weighted average number of shares 2,678,000 2,675,000
========= =========
<FN>
Note: Primary earnings per share is based upon weighted average number of
shares of common stock outstanding and all dilutive stock options. Per
share amounts are unchanged on a fully dilutive basis.
See notes to consolidated condensed financial statements.
PART I - FINANCIAL STATEMENTS, continued
Maxwell Laboratories, Inc.
Consolidated Condensed Statement of Cash Flows - (Unaudited)
(in thousands)
Six Months
Ended January 31,
______________________
1995 1994
_________ _________
OPERATING ACTIVITIES
Net income (loss) $ 560 $ (683)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 1,433 1,866
Minority interest in net income of subsidiary 45 49
Changes in operating assets and
liabilities - net (2,974) (3,222)
_________ _________
NET CASH USED IN
OPERATING ACTIVITIES (936) (1,990)
_________ _________
INVESTING ACTIVITIES
Purchases of property and equipment (1,402) (1,920)
_________ _________
NET CASH USED IN
INVESTING ACTIVITIES (1,402) (1,920)
_________ _________
FINANCING ACTIVITIES
Principal payments on long-term debt (517) (686)
Proceeds from issuance of Company stock -- 2
_________ _________
NET CASH USED IN
FINANCING ACTIVITIES (517) (684)
_________ _________
DECREASE IN CASH AND
CASH EQUIVALENTS (2,855) (4,594)
_________ _________
Cash and cash equivalents at beginning of period 4,579 4,651
_________ _________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,724 $ 57
========= =========
<FN>
See notes to consolidated condensed financial statements.
PART I - continued
NOTES TO FINANCIAL STATEMENTS
The preceding interim consolidated condensed financial statements contain
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair and accurate presentation of
financial position at January 31, 1995 and the results of operations for the
three and six month periods then ended. These interim financial statements
should be read in conjunction with the Company's July 31, 1994 audited
financial statements included in its Proxy Statement for the 1994 Annual
Meeting of Shareholders. Interim results are not necessarily indicative of
those to be expected for the full year.
The consolidated financial statements include the accounts of Maxwell
Laboratories, Inc., and its majority-owned subsidiary, PurePulse
Technologies, Inc. (formerly Foodco Corporation). All significant
intercompany transactions and account balances are eliminated in
consolidation.
In January 1991, the California Department of Toxic Substances Control, or
DTSC, notified the Company that it had been identified as one of a number
of "potentially responsible parties" with respect to alleged hazardous
substances released into the environment at a recycling facility in San
Diego County. Although the Company was not involved in the transport or
disposal of the substances, Maxwell remains a potentially responsible party
under California and Federal "Superfund" laws. In 1992, the Company and
approximately 40 other potentially responsible parties signed a consent
order which had been negotiated with the DTSC, agreeing to pay $4 million
of the $7.9 million response costs previously incurred, and to pay for
certain future site investigations and interim response actions outlined in
the consent order. The currently estimated cost of such activities is $9.1
million, and the Company's share of the cost, as allocated by the parties to
the consent order, is currently estimated at approximately 7.0%. The
eventual cost of all removal and remediation activities, for which the
Company and the other potentially responsible parties will share in
additional reimbursements to the State, is currently estimated to be in the
range of $15 - $20 million. On the basis of amounts accrued by the
Company, it is management's opinion that any additional liability resulting
from this situation will not have a material effect on the Company's
financial statements. There have been no material developments on this
matter since the date of issuance of the Company's audited financial
statements for the year ended July 31, 1994.
Backlog of unfilled orders at January 31, 1995 was $82.1 million, of which
$36.5 million is fully funded.
PART I - continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
Results of Operations
- ---------------------
Sales for the quarter ended January 31, 1995 were $17,630,000, a 12%
decrease compared to the $20,142,000 for the same period one year ago.
Six-month sales were $35,548,000, a 13% decrease compared to the
$40,735,000 for last year's first six months. These decreases occurred in
the Company's technology programs and services (TPS) business segment.
Sales of commercial, industrial and scientific products (CIS) increased
slightly, as described in the paragraphs below.
CIS sales for the second quarter were $10,356,000, an increase of
approximately $300,000, or 3%, compared to last year's second quarter.
Six-month CIS sales were $19,214,000, an increase of approximately $700,000, or
4%, compared to the same period last year. Masking larger increases at several
of the operations is the wind-down of work and delivery to the customer of a
large, turnkey capacitor bank system which substantially boosted CIS sales
during most of fiscal 1994, including last year's first six months. The
Company does not have a similar large project in the first six months of this
fiscal year. For both the second quarter and the six-month period, the
increase in CIS revenues is primarily the result of increased sales of I-Bus
division PC-based computers and components. The PurePulse Technologies
subsidiary and the new networked information solutions group at S-Cubed also
made contributions to the increase for both periods. While these are positive
results compared to the prior year, it should be noted when making such
comparisons that fluctuations upward or downward occur from time to time in
several of the Company's product groups.
TPS sales for the second quarter were $7,274,000, a decrease of
approximately $2,900,000, or 28%, compared to the prior year. Six-month TPS
sales were $16,334,000, a decrease of approximately $5,900,000, or 27%,
compared to last year's six-month period. Continuing declines in the Company's
Defense business base are still negatively impacting the Balboa and S-Cubed
divisions. In addition, at Balboa, several large technology system programs
substantially completed in the prior year have not been replaced with similarly
sized additional projects. Also, at S-Cubed, a large multi-year defense R & D
contract began to wind down in the last half of the prior year. While a
follow-on contract was awarded to S-Cubed, funding for follow-on work is just
now being received at levels comparable to the first half of last year.
Cost of sales for the second quarter was $13,046,000 or 74.0% of sales, as
compared to $15,817,000 or 78.5% of sales for the same period last year.
For the six-months, cost of sales was $25,992,000, or 73.1% of sales, as
compared to the prior year's $32,089,000, or 78.8% of sales. Overall, a
reduction in overhead costs, primarily attributable to cost reduction measures
taken in the last half of fiscal 1994, contributed to the decrease in the cost
of sales percentage. CIS cost of sales as a percent of sales for both the
quarter and year-to-date were lower due to improved margins on systems and
changes in the product mix, primarily from greater sales volume at the I-Bus
operation. The TPS cost of sales percentage for both the quarter and
year-to-date was greater last year primarily as a result of the greater
activity in fiscal 1994 on the previously mentioned S-Cubed defense R & D
contract, which has lower than typical profit margins.
Research and development expenses were $936,000 for the second quarter,
compared to $1,318,000 for last year's second quarter. For the six months
these expenses were $2,290,000 as compared to $2,390,000 for the same
period last year. These decreases are primarily attributable to the overall
decrease in Defense-related proposal requests in the Balboa and S-Cubed
divisions. Partially offsetting such decreases are the increased expenditures
at the S-Cubed division for commercialization efforts with respect to
technologies and software know-how originally developed for Defense
applications.
PART I - continued
Selling, administrative and general expenses in the second quarter were
$3,371,000, or 19.1% of sales, compared to $3,331,000, or 16.5% of sales,
in the prior year's second quarter. For the six months, these expenses were
$6,560,000, or 18.5% of sales, compared to $6,782,000, or 16.6% of sales,
one year ago. Aggressive marketing efforts for commercial products at the
PurePulse subsidiary, and I-Bus and Business Systems divisions, maintained the
expenditures for these costs at the same dollar levels as 1994. The increase
in selling, administrative and general expenses as a percentage of sales is
primarily attributable to the sales decline discussed in the TPS paragraph,
above.
Other-net for the three and six months ended January 31, 1995 was income of
$98,000 and $183,000, respectively, compared to $233,000 and $396,000 for the
comparable periods last year. These decreases reflect the additional interest
expense on the $2.5 million term bank loan obtained in the third quarter of
last year to finance construction of building improvements for a new chemical
analytical services laboratory in a Company-owned facility and to make general
improvements to other owned facilities.
As a result of the above factors, net income for the three months ended
January 31, 1995 was $237,000, as compared to a net loss of $694,000 for the
same period one year ago. For the six months, the current year income of
$560,000 compares to a net loss of $683,000 in the prior year. In January of
1994, the Company recorded a pre-tax write-off of $1,018,000 to recognize the
costs of terminating the Brobeck division and its operations, which contributed
substantially to the second quarter and year-to-date losses last year.
Liquidity and Capital Resources
- -------------------------------
The ratio of current assets to current liabilities was 2.6 to 1 at January
31, 1995, compared to 2.3 to 1 at the end of fiscal year 1994. Management
believes that funds on hand and those generated by future operations and
available through its bank line of credit of $7.5 million will be sufficient
to finance working capital and currently projected capital expenditure
requirements.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Registrant's Annual Meeting of Shareholders was held on December
13, 1994. At the meeting, Lewis J. Colby, Jr., Donn A. Starry, and Henry
F. Owsley were reelected as Class II directors for terms expiring at the 1997
Annual Meeting of Shareholders. In addition, directors Adolphe G.
Gueymard, Thomas B. Hayward, John W. Weil, Alan C. Kolb, Karl M.
Samuelian, Kedar D. Pyatt, Jr., and Sean M. Maloy continue to serve as
directors with terms expiring at the 1995 and 1996 Annual Meetings of
Shareholders.
In addition, the Registrant's shareholders approved the adoption of the
Company's 1994 Employee Stock Purchase Plan and the Company's 1994
Director Stock Purchase Plan. A maximum of 200,000 shares and 50,000
shares have been authorized for purchase by employees and directors,
respectively, under the approved plans.
PART II - continued
The following number of votes were cast "for" and to "withhold authority to
vote for" on the election of the three directors elected as Class II directors
at the meeting:
Lewis J. Colby, Jr. For: 2,424,995 Withhold Authority: 71,696
_________ _______
Donn A. Starry For: 2,424,725 Withhold Authority: 71,966
_________ _______
Henry F. Owsley For: 2,424,383 Withhold Authority: 72,308
_________ _______
The vote on the approval of the Company's 1994 Employee Stock Purchase Plan
and 1994 Director Stock Purchase Plan was as follows:
1994 Employee Stock Purchase Plan
_________________________________
For: 1,504,728
Against: 98,162
Abstain: 163,479
1994 Director Stock Purchase Plan
_________________________________
For: 1,663,809
Against: 123,244
Abstain: 152,968
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
________
No exhibits are included with the Form 10-Q for the period ended
January 31, 1995.
(b) Reports on Form 8-K
___________________
No reports on Form 8-K were filed during the quarter ended January
31, 1995.
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.
MAXWELL LABORATORIES, INC.
March 16, 1995 Gary J. Davidson
Date Gary Davidson, Chief Financial Officer
and Authorized Officer