FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______ to______
Commission File Number 1-6549
American Science and Engineering, Inc.
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(Exact name of Registrant as specified in its charter)
Massachusetts 04-2240991
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
829 Middlesex Turnpike
Billerica, Massachusetts 01821
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(Address of principal executive offices) (Zip Code)
(978) 262-8700
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
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___X___ No______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date
Outstanding at
Class of Common Stock Sept. 30, 2000
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$.66 2/3 par value 4,969,532
Page 1 of 11 Pages
The Exhibit Index is Located at Page 11
AMERICAN SCIENCE AND ENGINEERING, INC.
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
For The Three Months For The Six Months
Ended Ended
---------------------- --------------------
Sept.30, Sept.30, Sept.30, Sept.30,
2000 1999 2000 1999
---- ---- ---- ----
NET SALES AND CONTRACT REVENUE $16,466 $15,459 $ 31,529 $ 29,775
------- ------- -------- --------
COSTS AND EXPENSES:
Cost of sales and contracts 12,413 10,925 23,748 20,796
Selling, general and
administrative expenses 2,438 2,673 4,662 5,373
Research and development 1,155 1,204 2,461 2,603
----- ----- ----- -----
Total costs and expenses 16,006 14,802 30,871 28,772
------ ------ ------ ------
OPERATING INCOME 460 657 658 1,003
--- --- --- -----
OTHER INCOME (EXPENSE):
Interest, net (138) (24) (264) (26)
Other, net (79) (4) (104) (39)
--- -- ---- ---
Total other income (expense) (217) (28) (368) (65)
---- --- ---- ---
INCOME BEFORE PROVISION
FOR INCOME TAXES 243 629 290 938
PROVISION FOR INCOME TAXES 90 239 108 356
-- --- --- ---
NET INCOME $ 153 $ 390 $ 182 $ 582
======= ======= ======== ========
INCOME PER SHARE - BASIC $ .03 $ .08 $ .04 $ .12
======= ======= ======== ========
- DILUTED $ .03 $ .08 $ .04 $ .12
======= ======= ======== ========
DIVIDENDS PAID PER SHARE NONE NONE NONE NONE
WEIGHTED AVERAGE SHARES - BASIC 4,970 4,915 4,969 4,903
===== ===== ===== =====
- DILUTED 5,037 4,998 5,018 5,008
===== ===== ===== =====
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands
ASSETS Sept. 30, Mar. 31,
2000 2000
--------- --------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,343 $ 1,246
Accounts receivable, net of
allowances of $250 at September 30,
and March 31, 2000 6,067 6,276
Unbilled costs and fees, net of
allowances of $447 at September
30, and March 31, 2000 8,665 9,117
Inventories 11,510 10,446
Deferred income taxes 1,911 1,911
Prepaid expenses and other current
assets 891 1,118
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TOTAL CURRENT ASSETS 30,387 30,114
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NONCURRENT ASSETS:
Non-current deferred income taxes 1,038 1,038
Deposits 60 44
Other assets 132 132
Patents and other intangibles, net
of accumulated amortization of
$220 at Sept. 30, 2000 and $165 at
March 31, 2000 246 300
Property, equipment and leasehold
Improvements, net of Accumulated
depreciation of
$11,981 at Sept. 30, 2000 and
$11,000 at March 31, 2000 6,614 6,577
-------- ----------
$ 38,477 $ 38,205
======== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
DOLLARS IN THOUSANDS
Sept. 30, Mar. 31,
2000 2000
--------- --------
(Unaudited)
LIABILITIES & CURRENT LIABILITIES:
STOCKHOLDERS'
INVESTMENT Line of Credit $ 2,000 $ 4,000
Current maturities of obligations
Under capital leases 15 16
Accounts payable 4,737 5,714
Accrued salaries and benefits 1,434 1,136
Accrued warranty costs 400 698
Deferred revenue 497 756
Customer deposits 5,374 2,209
Other current liabilities 859 679
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TOTAL CURRENT LIABILITIES 15,316 15,208
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NON-CURRENT LIABILITIES:
Deferred revenue 1,106 1,113
Deferred compensation 114 146
Deferred rent 325 363
--------- --------
TOTAL NON-CURRENT LIABILITIES 1,545 1,622
--------- --------
Commitments and contingencies
STOCKHOLDERS' INVESTMENT:
Preferred stock, no par value
Authorized - 100,000 shares
Issued - None
Common stock, $.66-2/3 par value
Authorized - 20,000,000 shares
Issued 4,969,532 shares in Sept.
30, 2000
and 4,961,874 shares in Mar. 31,
2000 3,312 3,308
Capital in excess of par value 17,962 17,907
Retained Earnings 982 800
--------- --------
22,256 22,015
Note receivable-Officer (640) (640)
--------- --------
TOTAL STOCKHOLDERS' INVESTMENT 21,616 21,375
--------- --------
$38,477 $38,205
========= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Dollars in thousands For the Six Months Ended
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Sept. 30, Sept. 30,
2000 1999
----------- ----------
Net income $ 182 $ 582
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 1,035 748
Provisions for contract, inventory, accounts
receivable and warranty reserves 174 377
Changes in assets and liabilities:
Accounts receivable 209 (3,223)
Unbilled costs and fees 452 (3,796)
Inventories (1,064) 582
Prepaid expenses, other assets, and deposits 211 (570)
Accounts payable (977) 526
Accrued income taxes -- 31
Customer deposits 3,165 (596)
Deferred revenue (259) (270)
Accrued expenses and other current liabilities 6 (467)
Noncurrent liabilities (77) 224
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Total adjustments 2,875 (6,434)
--------- --------
Net cash provided by (used in) operating activities 3,057 (5,852)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,018) (610)
Purchase of patents and intangibles -- (9)
--------- --------
Cash used for investing activities (1,018) (619)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit (2,000) 7,000
Proceeds from exercise of stock options 59 252
Principal payments of capital lease obligations (1) (14)
--------- --------
Cash (used) provided by financing activities (1,942) 7,238
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 97 767
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,246 366
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,343 $ 1,133
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 302 $ 86
Income taxes paid $ 65 $ 800
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by American Science and Engineering, Inc. (the Company) pursuant to the
rules and regulations of the Securities and Exchange Commission, and the annual
condensed consolidated financial statements are subject to year end audit by
independent public accountants. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes, however, that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
The condensed consolidated financial statements, in the opinion of management,
include all adjustments necessary to present fairly the Company's financial
position and the results of operations. These results are not necessarily to be
considered indicative of the results for the entire year.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
American Science and Engineering, Inc., is engaged in the development and
manufacture of sophisticated X-ray inspection systems for critical
detection and security screening solutions for sale primarily to U.S. and
foreign government agencies. The Company has only one operating segment,
the x-ray product.
The significant accounting policies followed by the Company and its
subsidiary in preparing its consolidated financial statements are set
forth in Note 1 to the consolidated financial statements included in Form
10-K for the year ended March 31, 2000. The Company has made no change in
these policies during this quarter.
2. INVENTORIES
Inventories consisted of: (Dollars in thousands)
Sept. 30, 2000 Mar. 31, 2000
-------------- -------------
Raw materials and
completed
sub-assemblies $ 5,163 $ 6,416
Work in process 6,347 4,030
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Total $ 11,510 $ 10,446
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3. INCOME PER COMMON AND COMMON EQUIVALENT SHARE
In March 1997, the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", which establishes standards for computing and presenting earnings
per share for entities with publicly held common stock or potential common
stock. The Company adopted SFAS 128 in fiscal 1998 and as required,
restated per share amounts for all prior periods presented to conform to
the new requirements. Basic earnings per common share is computed by
dividing net income by the weighted average number of shares of common
stock outstanding during the year. No dilution for any potentially dilutive
securities is included. Diluted earnings per share includes the dilutive
impact of options and warrants using the average share price of the
Company's common stock for the period.
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Earnings Per Share Three Months Ended Six Months Ended
------------------ ------------------ ----------------
(in thousands except Sept. 30, Sept. 30, Sept. 30, Sept. 30,
per share amounts) 2000 1999 2000 1999
---------- --------- --------- ---------
BASIC
Net income $ 153 $ 390 $ 182 $ 582
------- ------- ------- -------
Weighted average shares 4,970 4,915 4,969 4,903
------- ------- ------- -------
Basic earnings per share $ .03 $ .08 $ .04 $ .12
------- ------- ------- -------
DILUTED
Net income $ 153 $ 390 $ 182 $ 582
------- ------- ------- -------
Weighted average shares 4,970 4,915 4,969 4,903
------- ------- ------- -------
Effect of stock options 67 83 49 105
------- ------- ------- -------
Weighted average shares, as
adjusted 5,037 4,998 5,018 5,008
------- ------- ------- -------
Diluted earnings per share $ .03 $ .08 $ .04 $ .12
======= ======= ======= =======
4. INCOME TAXES
At March 31, 2000, the Company had approximately $855,000 of unused
investment tax and other credits which expire through 2018.
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AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In the second quarter of fiscal 2001 net sales and contract revenues grew
to $16,466,000, a 7% increase from the comparable period a year ago and an
9% increase from the previous quarter. The company earned net profits of
$153,000 in the current quarter, compared to a net profit of $390,000 in
the corresponding period a year ago and a net profit of $29,000 in the
previous quarter.
RESULTS OF OPERATIONS
Net sales and contract revenues in the second quarter increased by
$1,007,000 (7%) in comparison to the corresponding year ago period and
$1,404,000 (9%) compared to the first quarter of fiscal 2001. The increase
in revenues from the previous quarter is due to increased sales of x-ray
cargosearch systems.
For the second quarter, costs of sales and contracts increased to
$12,413,000 from $10,925,000 in the corresponding period a year ago due
primarily to increased sales volume. Costs of sales and contracts
represented 75% of revenues versus 71% for the corresponding period last
year and 76% for the first quarter of fiscal 2000. The costs of sales
percentage of revenues in the current quarter increased from the previous
quarter primarily due to sales mix. As compared to the year ago quarter,
the cost of sales percentage of revenues in the current quarter increased
due to investments made in operations infrastructure, and introduction of
new or enhanced products in response to growing domestic and international
demand.
Selling, general and administrative expenses of $2,438,000 for the second
quarter were lower by 9% compared to the corresponding year-ago period and
higher by 15% compared to the first quarter of fiscal 2001. As a percent of
sales, selling, general and administrative expenses were 15% of revenues in
the current quarter and 17% for the corresponding year-ago period and 15%
for the first quarter of fiscal 2001.
Company-funded research and development expenses of $1,155,000 for the
second quarter were lower by $49,000 (4%) compared to the year-ago quarter
and lower by $44,000 (4%) compared to the first quarter of fiscal 2001.
This is essentially on budget.
The Company produced a net profit of $153,000 during the second quarter.
This is a decline of $237,000 (61%) over net profit in the year-ago quarter
and an increase of $124,000 (428%) from the first quarter of fiscal 2001.
The decline in after-tax profits from the year-ago quarter is due the above
mentioned investments in operational infrastructure and global technical
support capability, as well as the sales mix.
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AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $97,000 to $1,343,000 at Sept. 30, 2000
compared to $1,246,000 on March 31, 2000. This increase was primarily due to an
increase in customer deposits, partially offset by an increase in inventory, as
well as a decrease in accounts payable and the line of credit. Working capital
increased by $165,000(1%) since March 31, 2000, increasing from $14,906,000 to
$15,071,000 at the end of the second quarter.
On August 24, 2000, the Company entered into an agreement with its banks to
extend the current credit facilities by 90 days, to November 30, 2000. The
purpose of the extension, was to allow the Company to negotiate revisions to
its' bank credit and financing requirements that will support operations in the
future. On October 20, 2000, the Company entered into a preliminary financing
commitment with an international banking institution, that is the subject of
current negotiations. The Company plans to close this financing during the
third quarter of fiscal year 2001. As of September 30, 2000, the Company had
external borrowings, with a local bank, in the amount of $2,000,000
representing a decrease of $3,000,000 during the quarter. Interest is payable
monthly at the bank's prime rate of interest.
Part II - Other Information
ITEM 1 - LEGAL PROCEEDINGS
The United States Court of Appeals for the Federal Circuit in Washington, D.C.,
in a decision issued December 29, 1999, ruled that American Science &
Engineering may pursue a patent infringement claim against Vivid Technologies
which produces x-ray detection devices used in baggage scanning equipment.
The Appeals Court overturned a 1998 decision in Vivid's favor by the
Massachusetts Federal District Court. The lawsuit, filed by Vivid Technologies
in May 1996, concerns whether Vivid's x-ray detection devices infringed on
AS&E's patent. The District Court had ruled that AS&E could not assert a claim
that Vivid's devices infringed on AS&E's patent. The Appeals Court also reversed
the district court's finding on summary judgment that Vivid did not infringe on
AS&E's patent, as well as the district court's denial of AS&E's request for
discovery to oppose Vivid's summary judgment motion.
In September 1998, the Company filed suit against EG&G Astrophysics Research
Corp. (EG&G) in U.S. District Court in Boston, Massachusetts alleging that EG&G
is infringing on at least two patents owned by the Company and that EG&G has
misappropriated certain trade secrets of the Company. In February 1999, the
Company filed a related action in the same court against the U.S. Customs
Service ("Customs") alleging that Customs had either misappropriated the
Company's trade secrets or facilitated their misappropriation by EG&G and that
Customs had improperly entered into a contract with EG&G for the acquisition of
a product functionally equivalent to the Company's MobileSearch (TM) X-ray
inspection system. In May 1999, the Court held a hearing on the Company's motion
for a preliminary injunction against both Customs and EG&G prohibiting further
performance of the contested contract and preventing EG&G from utilizing the
Company's trade secrets. In August 1999, the Court issued a ruling denying the
request for the preliminary injunction. In December 1999, EG&G filed a Motion
for Summary Judgment
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that EG&G did not misappropriate the Company's trade secrets and in March 2000
EG&G filed a Motion for Summary Judgment that EG&G did not infringe the
Company's patents. The Company has filed opposition to EG&G's motions and the
Court has not yet ruled on these motions. The Company is continuing to pursue
its claims against EG&G, but has filed a motion to dismiss the suit against the
U.S. Customs Service.
In a related matter, EG&G had filed a request with the U.S. Patent and Trademark
Office for re-examination of the two patents that currently are at issue in the
patent infringement action described above. The Company filed oppositions to the
reexamination requests and has now been advised by the U.S. Patent and Trademark
Office that the Company's MobileSearch x-ray inspection patent will be upheld in
all material respects. The Company has not received the results of the
re-examination of its other patent, but believes that the significant claims of
this patent, covering activities by EG&G, will be upheld.
In February 2000, Heimann Systems GmBH filed a civil action in U.S. District
Court in Boston, Massachusetts against the Company alleging that the Company
infringed a Heimann patent relating to a mobile vehicle and x-ray examining
device. The Company denies Heimann's assertions and believes that Heimann's
claims are without merit. The Company does not expect the outcome of this
litigation to have a material impact to its financial position or results of
operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Special Meeting in Lieu of Annual Meeting of the Company was held on
September 21, 2000. At the meeting, all seven of management's nominees to
the Board of Directors were elected to a one-year term according to the
following votes:
Votes
NOMINEE VOTES FOR WITHHELD
------- --------- --------
Herman Feshbach 4,402,729 61,478
Roger P. Heinisch 4,407,292 57,365
Hamilton W. Helmer 4,407,292 56,915
Donald S. McCarren 4,407,292 56,915
William E. Odom 4,405,292 58,915
Ralph S. Sheridan 4,313,042 151,165
Carl W. Vogt 4,407,238 56,969
In addition, the stockholders approved the adoption of the Company's 2000
combination Stock Option Plan, by vote of 2,131,858 shares in favor to
247,641 shares against.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter.
The information required by Exhibit Item 11 (Statement re: Computation of
Income per Common and Common Equivalent Share) may be found in Footnote No.
3 on Page 7.
SIGNATURES
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 hereunto duly authorized.
AMERICAN SCIENCE AND ENGINEERING, INC.
(Registrant)
Date: 10th November 2000 /s/ Lee C. Steele
------------------------------------------
Lee C. Steele
Vice President and Chief Financial Officer
SAFE HARBOR STATEMENT
THE FOREGOING 10-Q CONTAINS STATEMENTS CONCERNING THE COMPANY'S FINANCIAL
PERFORMANCE AND BUSINESS OPERATIONS WHICH MAY BE CONSIDERED "FORWARD-LOOKING"
UNDER APPLICABLE SECURITIES LAWS.
THE COMPANY WISHES TO CAUTION READERS OF THIS FORM 10-Q THAT ACTUAL RESULTS
MIGHT DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS.
FACTORS WHICH MIGHT CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN INCLUDE THE
FOLLOWING: SIGNIFICANT REDUCTIONS OR DELAYS IN PROCUREMENTS OF THE COMPANY'S
SYSTEMS BY THE UNITED STATES GOVERNMENT; DISRUPTION IN THE SUPPLY OF ANY
SOLE-SOURCE COMPONENT INCORPORATED INTO THE COMPANY'S PRODUCTS (OF WHICH THERE
ARE SEVERAL); LITIGATION SEEKING TO RESTRICT THE USE OF INTELLECTUAL PROPERTY
USED BY THE COMPANY; POTENTIAL PRODUCT LIABILITY CLAIMS AGAINST THE COMPANY;
GLOBAL POLITICAL TRENDS AND EVENTS WHICH AFFECT PUBLIC PERCEPTION OF THE THREAT
PRESENTED BY DRUGS, EXPLOSIVES AND OTHER CONTRABAND; THE ABILITY OF GOVERNMENTS
AND PRIVATE ORGANIZATIONS TO FUND PURCHASES OF THE COMPANY'S PRODUCTS TO ADDRESS
SUCH THREATS; AND THE POTENTIAL INSUFFICIENCY OF COMPANY RESOURCES, INCLUDING
HUMAN RESOURCES, CAPITAL, PLANT AND EQUIPMENT AND MANAGEMENT SYSTEMS, TO
ACCOMMODATE ANY FUTURE GROWTH. THESE AND CERTAIN OTHER FACTORS WHICH MIGHT CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED ARE MORE FULLY SET
FORTH UNDER THE CAPTION "RISK FACTORS" IN THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-3 (SEC FILE NO. 333-9151).
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