U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________________________________________
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
Commission file number: 0 - 5460
____________________________________________________
STOCKER & YALE, INC.
(Name of small business issuer in its charter)
Massachusetts 04-2114473
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
32 Hampshire Road
Salem, New Hampshire 03079
(Address of principal executive offices) (Zip Code)
(603) 893-8778
(Issuer's telephone number)
_____________________________________________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
_X_ Yes ___ No
As of May 1, 1996 there were 1,712,914.6 shares of the issuer's common
stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes_____No _X_
PART I FINANCIAL STATEMENTS
Item 1.1 CONSOLIDATED BALANCE SHEETS
STOCKER & YALE, INC.
ASSETS March December
31, 1996 31,1995
(unaudited) (audited)
CURRENT ASSETS
Cash 13,269 22,033
Accounts Receivable 2,203,730 1,897,943
Prepaid Taxes 323,963 323,963
Inventory 3,939,452 3,836,653
Prepaid Expenses 130,111 159,013
Total Current 6,610,525 6,239,605
PROPERTY, PLANT & EQUIPMENT, NET 3,282,514 3,365,949
NOTE RECEIVABLE 1,000,000 1,000,000
GOODWILL, NET 8,933,117 9,005,729
DEBT ISSUANCE COSTS, NET 137,475 169,687
19,963,631 19,780,970
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt 296,479 266,358
Mortgage note payable 1,500,000 1,500,000
Subordinated notes payable 1,000,000 1,000,000
Accounts payable 2,009,755 1,527,468
Short-term lease obligation 45,224 58,560
Accrued expenses
Income taxes 72,503 265,918
Other 501,373 475,136
Total Current Liabilities 5,425,334 5,093,440
LONG TERM DEBT 4,098,223 4,163,273
OTHER LONG TERM LIABILITIES 684,479 684,479
DEFERRED INCOME TAXES 1,215,280 1,285,280
11,156,472 11,423,316
STOCKHOLDER'S EQUITY
Common stock, .001 par value
Authorized -2,400,000
Issued and Outstanding -1,712,914 1,713 1,713
Paid in capital 6,845,685 6,845,685
Retained Earnings 1,692,917 1,777,100
Total Stockholder's Equity 8,540,315 8,624,498
19,780,970 19,963,631
PART I FINANCIAL STATEMENTS
Item 1.2 CONSOLIDATED STATEMENTS OF OPERATIONS
STOCKER & YALE, INC.
March 31, March 31,
1996 1995
(unaudited) (unaudited)
NET SALES 3,101,126 3,288,818
COST OF SALES 1,945,159 2,025,899
Gross profit 1,064,967 1,262,919
SELLING EXPENSES 421,371 444,101
GENERAL AND ADMINISTRATIVE EXPENSES 511,005 477,147
RESEARCH & DEVELOPMENT EXPENSES 71,405 74,716
Operating income 61,186 266,955
INTEREST EXPENSE 152,169 154,423
Income (loss) before income tax
provision (90,983) 112,532
INCOME TAX PROVISION (BENEFIT) (6,800) 72,200
Net income (loss) (84,183) 40,332
EARNINGS (LOSS) PER SHARE (0.05) 0.03
WEIGHTED AVERAGE COMMON SHARES 1,712,914 1,567,645
AND EQUIVALENTS
PART I FINANCIAL STATEMENTS
Item 1.3 CONSOLIDATED STATEMENTS OF CASH FLOWS
STOCKER & YALE, INC.
Three months ended
March 31, March 31,
1996 1995
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (84,183) 40,332
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 250,685 276,304
Other changes in assets and liabilities -
Accounts receivable, net (305,787) (11,705)
Inventories (102,799) (281,145)
Prepaid expenses 28,902 (1,876)
Accounts payable 482,287 228,607
Accrued expenses 26,237 (52,269)
Accrued and refundable taxes (193,415) (61,104)
Net cash provided by
operating activities 101,927 137,144
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (62,427) (47,115)
Net cash used for
investing activities (62,427) (47,115)
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock 0 194,000
Proceeds from Short Term Note 0 200,000
Proceeds from Term Loan 0 2,767,000
Proceeds from Line of Credit 0 2,766,357
Proceeds from Subordinated Notes payable 0 1,000,000
Payments of bank debt (29,520) (6,771,061)
Payments on capital lease (18,744) (11,554)
Deferred financing cost 0 (154,244)
Net cash used for
financing activities (48,264) (9,502)
NET INCREASE (DECREASE) IN CASH (8,764) 80,527
CASH, BEGINNING OF PERIOD 22,033 8,344
CASH, END OF PERIOD 13,269 88,871
PART I. FINANCIAL STATEMENTS
Item 1.4 Notes to Financial Statements
The interim consolidated financial statements presented have been prepared by
Stocker & Yale, Inc. (the "Company") without audit and, in the opinion of the
management, reflect all adjustments of a normal recurring nature necessary
for a fair statement of (a) the results of operations for the three months
periods ended March 31, 1996 and March 31, 1995, (b) the financial position
at March 31, 1996, and (c) the cash flows for the three month periods ended
March 31, 1996 and March 31, 1995. Interim results are not necessarily
indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1995, has been
derived from the consolidated financial statements that have been audited by
the Company's independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-QSB and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes
included herein should be read in conjunction with the financial statements
and notes included in the Company's Form 10-SB Registration Statement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND OPERATING RESULTS
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward-looking
statements.
Results of Operations
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1995.
Fiscal Quarters Ended March 31, 1996 and 1995
Revenues declined $278,692 from $3,288,818 in the quarter ended March 31,
1995 to $3,010,126 in the quarter ended March 31, 1996. The decline was due
primarily to reduced sales of the Company's electronic ballasts, which
declined $271,510 from $409,152 in the quarter ended March 31, 1995 to
$137,642 in the equivalent period in the current year. First quarter 1995
ballast sales were extraordinarily high, representing 40% of the Company's
total 1995 annual ballast sales of $1,026,896, and resulted from increased
demand for the Company's ballasts due to a temporary lack of supply from
other ballast manufacturers. During the first quarter of 1996, the Company
also experienced slower than expected sales from its printer and recorder
lines due to inventory overstock positions with major customers and, although
lighting product unit sales volume was higher than projected, a planned price
increase was delayed in implementation until the second quarter, resulting in
lower than planned revenues and gross profit.
Gross Profit declined from $1,262,919 in the first quarter of 1995 to
$1,064,967 in the first quarter of 1996, primarily due to reduced cost
absorption associated with lower revenues. Operating costs increased less
than 1%, from $995,964 to $1,003,786, and interest expense decreased from
$154,423 to $152,169 in the comparable periods.
The Company provided an effective tax benefit of 7% for the three months
ended March 31, 1996 compared with an effective tax provision of 64% for the
three months ended March 31, 1995. The change in the effective tax rates is
primarily due to non-deductible amortization.
Liquidity and Capital Resources
The Company finances its operations primarily through third party credit
facilities and cash from operations. Net cash provided by operations was
$101,927 for the quarter ended March 31, 1996 and $137,144 for the quarter
ended March 31, 1995.
The Company's primary third party financing relationship is with Fleet
National Bank of Massachusetts, N.A. (the "Bank"). The Initial Credit
Agreement between the Company and the Bank, dated March 6, 1995, provided
for a Short Term Loan due August 1, 1995 , a Revolving Line of Credit Loan
(the "Revolving Loan") due March 31, 1998, and a Long Term Loan due March 1,
2001. At March 31, 1995, the total amount borrowed under the Credit
Agreement was $5,641,452. At March 31, 1996, there was a total of $4,181,762
borrowed under the agreement. The Short Term Loan was paid as agreed in
August, 1995. The Revolving Loan and the Long Term Loan bear interest at the
Bank's base rate plus 1/2%. At March 31, 1996 the Company had $254,731
additional available for borrowing under Revolving Loan as compared to
$211,630 additional available at March 31, 1995.
Under the terms of the Credit Agreement, the Company is required to comply
with a number of financial covenants including minimum equity, debt service
coverage ratios, debt to equity ratios and minimum net income tests. The
Company has informed the Bank that as of March 31, 1996, the Company was not
in compliance with the covenants for minimum net income and minimum equity,
due primarily to lower than expected revenues in the quarter, as discussed in
"Results of Operations." The Company and the Bank have engaged in
discussions regarding the waiver of such non-compliance. The Company
believes that it will be able to resolve this matter with the Bank in a
prompt and mutually satisfactory manner and that the ultimate outcome of this
matter will not have a materially adverse effect on the results of operations
or the financial position of the Company.
Company expenditures for capital equipment were $62,427 in the first quarter
of 1996 as compared to $47,115 in the same period of 1995.
The Subordinated Notes Payable of $1,000,000, which matured on May 6, 1996,
were refinanced by a new issue of Subordinated Notes totaling $1,350,000.
The new notes mature on May 1, 2001, bear interest at 7.25% and are
convertible into shares of the Company's common stock at a price of $7.375
per share. Additional proceeds will be used for general corporate purposes.
The Mortgage Note Payable of $1,500,000 will mature on September 1, 1996.
The Company intends to refinance this note with a conventional mortgage prior
to the maturity date. The Company's ability to refinance such Mortgage Note
Payable may be affected by various factors including, without limitation, (i)
the Company's results of operations and (ii) general economic conditions.
There can bee no assurance that the Company will be able to refinance the
Mortgage Note Payable or that any such refinancing will be on terms
substantially similar to, or as favorable as, the terms of the Mortgage Note.
The Company believes that its available financial resources are adequate to
meet its foreseeable working capital, debt service and capital expenditure
requirements.
PART II
ITEM 5. OTHER INFORMATION
On May 7, 1996 the Company announced that it has requested the de-listing of
its Common Stock from the Vancouver Stock Exchange, effective with the close
of business on May 10, 1996. The Company will maintain the listing of its
Common Stock on the Nasdaq SmallCap Stock Market.
ITEM 6. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) The following is a complete list of Exhibits filed as part of this Form
10-QSB :
Exhibit
Number Description
4.1 * Subordinated Note Purchase Agreement and Form of Note
10.1 * 1996 Profit Sharing Plan
27.1 ** Financial Data Schedule
_______
* filed herewith
** filed electronically only
(b) There were no reports filed on Form 8-K
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.
Stocker & Yale, Inc.
___________________________
May 15, 1996 /s/James Bickman
___________________________ __________________________
James Bickman, President
May 15, 1996 /s/ Susan Hojer Sundell
___________________________ __________________________
Susan Hojer Sundell,
Vice President-Finance and Treasurer