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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 29, 1995
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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
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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)
(508) 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
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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 September 29, 1995
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$.66 2/3 par value 4,411,048
Page 1 of 11 Pages
The Exhibit Index is Located at Page 10
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AMERICAN SCIENCE AND ENGINEERING, INC.
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three Months Ended For The Six Months Ended
--------------------------- --------------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
--------- ---------- --------- ----------
1995 1994 1995 1994
---- ---- ---- ----
NET SALES AND CONTRACT $3,882,000 $3,397.000 $7,399,000 $5,922.000
REVENUE ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales and contracts 2,577,000 2,572,000 5,030,000 4,138,000
Selling, general and
administrative expenses 962,000 733,000 1,921,000 1,783,000
Research and development 128,000 104,000 183,000 456,000
---------- ---------- ---------- ----------
Total costs and expenses 3,667,000 3,409,000 7,134,000 6,377,000
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 215,000 (12,000) 265,000 (455,000)
---------- ---------- ---------- ----------
OTHER (EXPENSE) INCOME:
Interest, net (12,000) 11,000 (9,000) (4,000)
Other, net (48,000) - (49,000) (5,000)
---------- ---------- ---------- ----------
Total other (expense) income (60,000) 11,000 (58,000) (9,000)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 155,000 (1,000) 207,000 (464,000)
PROVISION FOR INCOME TAXES - - - -
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 155,000 $ (1,000) $ 207,000 $ (464,000)
========== ========== ========== ===========
INCOME (LOSS) PER COMMON SHARE $ .04 $ (.00) $ .05 $ (.11)
DIVIDENDS PAID PER SHARE NONE NONE NONE NONE
========== ========== ========== ===========
SHARES USED IN INCOME (LOSS)
PER SHARE CALCULATIONS 4,408,881 4,129,000 4,292,195 4,129,000
========== ========== ========== ===========
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
Dollars in thousands
Sept. 29, 1995 March 31, 1995
-------------- --------------
(Unaudited)
ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 726 $ 869
Accounts receivable, net 4,476 2,831
Unbilled costs and fees, net 866 1,983
Inventories 3,566 3,709
Prepaid expenses and other
current assets 203 53
Deferred income taxes 28 28
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Total current assets 9,865 9,473
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NON CURRENT ASSETS:
Deposits 257 207
Property and equipment, net
of accumulated depreciation
of $8,466 at September 29,1995
and $8,336 at March 31,1995 875 1,054
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$ 10,997 $ 10,734
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
Dollars in thousands Sept. 29, 1995 March 31, 1995
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(Unaudited)
LIABILITIES & CURRENT LIABILITIES:
STOCKHOLDERS' Current maturities of obligations
INVESTMENT under capital leases $ 12 $ 160
Accounts payable 1,659 2,169
Bank line of credit 163 --
Accrued legal 190 350
Accrued salaries and benefits 679 557
Accrued warranty costs 159 152
Accrued commissions 49 184
Accrued rent 210 570
Customer deposits 50 48
Other current liabilities 825 667
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TOTAL CURRENT LIABILITIES 3,996 4,857
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NONCURRENT LIABILITIES
Obligations under capital leases,
net of current maturities 73 73
Deferred compensation 188 184
Deferred income taxes 28 28
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TOTAL NONCURRENT LIABILITIES 289 285
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STOCKHOLDERS' INVESTMENT
Preferred stock, no par value
Authorized - 100,000 shares
Issued - None
Common stock, $.66-2/3 par value
Authorized - 8,000,000 shares
Issued 4,467,926 shares at
Sept. 29, 1995 and 4,216,475
shares at March 31, 1995 2,978 2,838
Capital in excess of par value 14,385 13,612
Accumulated deficit (9,885) (10,092)
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7,478 6,358
Note receivable-Officer (640) (640)
Less: treasury stock -
67,377 shares at Sept. 29, 1995
and March 31, 1995 at cost (126) (126)
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TOTAL STOCKHOLDERS' INVESTMENT 6,712 5,592
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$10,997 $ 10,734
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The accompanying notes are an integral part of these 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
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CASH FLOW FROM OPERATING ACTIVITIES: Sept. 29, 1995 Sept. 30, 1994
-------------- --------------
Net income/(loss) $ 207 $ (464)
Adjustments to reconcile net income (loss) to net cash used for
operating activities:
Depreciation and amortization 98 132
Amortization of deferred gain -- (36)
Provisions for contract, restructuring, inventory and warranty reserves (46) (13)
Changes in assets and liabilities
Accounts receivable (1,645) (748)
Unbilled costs and fees 1,117 272
Inventories 169 (95)
Prepaid expenses and other current assets (150) (87)
Accounts payable (510) 427
Customer deposits 2 (84)
Accrued expenses and other current liabilities (398) (553)
Accrued restructuring costs -- (275)
Noncurrent liabilities 4 12
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Total adjustments (1,359) (1,048)
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Net cash used for operating activities (1,152) (1,512)
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase)/decrease of property and equipment 81 (76)
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Cash (used for) provided by investing activities 81 (76)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 813 --
Repayment of officer note (650) --
Proceeds from exercise of stock options 11 2
Proceeds from issuance of stock 902 --
Principal payments of capital lease obligations (148) (77)
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Cash (used for) provided by financing activities 928 (75)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (143) (1,663)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 869 2,496
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 726 $ 833
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 47 $ 9
Income taxes paid $ -- $ --
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 consolidated financial statements are subject to year end audit by
independent public accountants. Certain information and footnote disclosure
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. Certain accounts have been
reclassified to conform with the current year's presentation. See Management's
Discussion and Analysis of Financial Condition and Results of Operations on
page 8. These results are not necessarily to be considered indicative of the
results for the entire year.
The condensed consolidated financial statements contained herein have been
reviewed by Arthur Andersen LLP, the Company's independent public accountants
(see attached letter on page 11).
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Market and Operating Environment
--------------------------------
As described in its latest Form 10-K, the Company has sustained
significant losses in the past two years. While current management has
succeeded in reducing these losses, the Company's liquidity and cash
reserves have been depleted to a point where outside financing was
required to fund the growth of operations back to the point of cash
sufficiency.
Accordingly, several outside financing initiatives were accomplished
during the first and second quarter of fiscal 1996, the sum of which
produced a cash infusion of $1.5 million and an additional $1 million of
bank borrowing potential based upon the level of export business
attained. Management continues to pursue additional financing options.
With these initiatives, management believes that sufficient liquidity has
been attained to sustain operations in the short term. However, revenues
could continue to be volatile, new cash pressures may arise, and
additional outside financing may not be immediately available.
2. Significant Accounting Policies
-------------------------------
The significant accounting policies followed by the Company and its
subsidiary in preparing its consolidated financial statements are set
forth in Note 2 to the consolidated financial
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statements included in Form 10-K for the year ended March 31, 1995. The
Company has made no change in these policies during this quarter.
3. Inventories
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Inventories consisted of:
Sept. 29, 1995 March 31, 1995
-------------- --------------
Raw materials and completed
sub-assemblies $2,036,000 $2,485,000
Work in process 1,530,000 1,224,000
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Total $3,566,000 $3,709,000
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4. Income (Loss) Per Common and Common Equivalent Share
----------------------------------------------------
Income (loss) per common share for the three and six month periods ended
September 29, 1995 and September 30, 1994 was computed by dividing income
(loss) for the period by the weighted average number of shares of common
stock outstanding during the period. Under the Treasury Stock Method
of computing earnings per share, common stock equivalents (stock options
and stock warrants) did not impact earnings per share.
5. Income Taxes
------------
The Company provides for income taxes on an interim basis based on the
estimated effective tax rate for the fiscal year. No income tax
provision has been recorded in connection with the first six month's
income, as the Company has significant net operating loss carryforwards.
Such carryforwards, which are subject to review by the Internal Revenue
Service, approximate $9,792,000 and expire beginning in 1998. The
Company also has unused investment tax and other credits of approximately
$318,000 expiring from 1996 through 2001.
At September 29, 1995, the Company had $4,272,000 of short and long-term
deferred tax assets and $163,000 of long-term deferred tax liabilities.
The Company has recorded a valuation allowance of $4,109,000 against
these amounts.
6. Loans from Officers
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In April 1995, the Company received $650,000 in cash from Officers and a
Director as a temporary loan. This loan was repaid on August 15, 1995.
Interest was paid monthly at the rate of prime plus 2% per annum. In
addition, the Company issued a total of 6,500 shares of its common stock
and warrants to purchase 65,000 shares of its common stock,
proportionately to the lenders. The accompanying condensed consolidated
statements of operations include $45,000 of interest expense recognized
as a result of the issuance of the common stock; no interest expense was
recognized related to the issued warrants as the exercise price of the
warrants approximated fair value at the date of grant.
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AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OPERATIONS
Overview
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For roughly the past eight quarters, management has pursued an aggressive
turnaround program to rebuild sales, control costs, and return the Company to
sustainable profitability. In the second fiscal quarter ended September 29,
1995, measurable progress was made in all such areas.
Net sales and contract revenues grew to $3,882,000 during the quarter, a 10%
increase over the previous first quarter of fiscal 1996 and a 14% increase from
the comparable year ago period. A net profit of $155,000 was reported in the
current quarter compared to a profit of $52,000 in the previous quarter and a
loss of $1,000 in the corresponding year ago period.
Several large new contracts were won that dramatically improve the Company's
sales backlog and provide further evidence that the market is responding
favorably to management's programs.
Finally, the Company's debt and liquidity positions improved during the
quarter, and the cash shortages discussed in previous quarters, for the time
being, have abated.
Backlog
- -------
Total backlog at the end of the second quarter increased dramatically to over
$6.8 million, compared to $2.8 million reported at June 30, 1995. All of the
increase came through new bookings for X-ray inspection systems, including
large orders from the U.S. Capitol Police, the Federal Emergency Management
Agency, the U.S. Post Office, and several international agencies. New bookings
were particularly strong for the new Model 66Z(R) for MailSearch(TM) and
LobbySearch(TM).
Results of Operations
- ---------------------
Net sales and contract revenues in the second quarter increased by $485,000
(14%) compared to the corresponding period a year ago and increased by $365,000
(10%) compared to the previous first quarter of fiscal year 1996. Compared to
the previous quarter, security systems and related field service revenues were
up by $511,000 (18%), research and engineering revenues were down by $141,000
(21%), and control systems revenues were largely unchanged.
Another positive development during the quarter was the shipment of the
Company's first EXR(TM) (Enhanced X-ray) system to the Federal Aviation
Administration. With over $400,000 of development assistance from the FAA, the
EXR System represents the next generation of explosives detection capability.
The EXR system employs highly advanced digital signal processing, uses
state-of-the-art imaging technology, and provides for both automatic and
operator-assisted bomb detection in airport luggage. These new features will
have immediate benefits to the existing product line, and the program positions
AS&E to participate in the potential market for 100% airport baggage screening.
For the second quarter, costs of sales and contracts of $2,577,000 were nearly
unchanged compared to the corresponding period a year ago, despite the
increased sales volume of X-ray inspection systems and field
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services revenues in the current period. Costs of sales and contracts
represented 66% of revenues versus 76% for the corresponding period last year
and 70% for the previous first quarter of fiscal year 1996.
The costs of sales percentage of revenues in the current quarter has improved
over the previous quarters primarily due to the higher overhead absorption
resulting from increased product shipments and the reduced occupancy costs from
the new facility.
Selling, general, and administrative expenses of $962,000 for the second
quarter were higher by 31% compared to the corresponding year-ago period and
approximately the same as in the first quarter of fiscal 1996. As a percent of
sales, selling, general, and administrative expenses were 25% of revenues in
the current quarter compared to 22% of revenues for the corresponding year-ago
period and 27% for the first quarter of fiscal year 1996. This generally
stable ratio of SG&A expenses to sales is in line with budgetary expectations
and reflects the cessation of nonrecurring legal and relocation expenses that
occurred in previous quarters.
Company-funded research and development expenses of $128,000 for the second
quarter were higher by $24,000 (23%) compared to the year-ago quarter and
higher by $73,000 (133%) compared to the first quarter of fiscal year 1996. In
addition, the company incurred significant development cost related to an
engineering contract during the period. Those costs are reported in the cost
of sales and contracts associated with research and engineering contract
revenue.
The Company produced a net profit of $155,000 during the second quarter. This
is an improvement of $156,000 over the net loss in the year-ago quarter and an
improvement of $103,000 over the net profit reported in the previous first
quarter of fiscal 1996. The improved profitability results from higher
revenue, a more profitable revenue mix, and the reduced overhead levels
associated with the new facility.
Liquidity and Capital Resources
- -------------------------------
The Company continued to improve its liquidity and capital resources during the
current period. Net cash used for operating activities during the first six
months of fiscal year 1996 was $1,152,000, compared to $1,512,000 net cash used
during the corresponding year-ago period. Cash and cash equivalents were
largely unchanged from March 31, 1995. Working capital (current assets minus
current liabilities) increased by $1,253,000 (27%) since March 31, 1995,
growing from $4,616,000 to $5,869,000 at the end of the second quarter.
During the quarter the Company successfully raised $856,250 of outside capital
through a private placement of common stock to overseas investors. Also during
the quarter, approximately $250,000 of bank borrowings were approved under the
new $1 million export line of credit agreement signed in late June, 1995.
These new sources of outside capital, together with the improvements in
operating cash flow, have temporarily relieved the acute cash shortages of
previous quarters and provide management some added flexibility for future
operations.
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AMERICAN SCIENCE AND ENGINEERING, INC.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibit Index
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Exhibit Page
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(11) Statement re: Computation of 7
Income (Loss) per Common
and Common Equivalent Share
(28) Letter Concerning Review by 11
Independent Public Accountant
(b) Reports on Form 8-K
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The following reports on Form 8-K were filed during the quarter
NONE
SIGNATURES
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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: 3 November 1995 _____________________________________
Lee C. Steele
Vice President and Chief Financial Officer
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