FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-17286
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LIFSCHULTZ INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE No. 87-0448118
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Page 1
641 West 59th Street, New York, NY 10019
(Address of principal executive offices)
(212) 397-7788
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report.)
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.
YES X NO
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 1,117,519 shares of
Common Stock outstanding as of June 11, 1999.
Page 2
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, 1999 and July 31, 1998
ASSETS
30-Apr-99 31-Jul-98
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CURRENT ASSETS
Cash and cash equivalents $ 849,000 $ 989,000
Marketable securities 686,000 805,000
Trade accounts receivable, net 2,764,000 2,468,000
Related party receivable 38,000 79,000
Deferred income taxes 234,000 234,000
Inventories 2,987,000 2,386,000
Other current assets 113,000 136,000
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Total current assets 7,671,000 7,097,000
PROPERTY HELD FOR LEASE, NET 1,684,000 2,066,000
PROPERTY AND EQUIPMENT, NET 1,334,000 972,000
LAND 100,000 100,000
DEFERRED INCOME TAXES 550,000 550,000
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$11,339,000 $10,785,000
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The accompanying notes are an integral part of these statements.
Page 3
Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, 1999 and July 31, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
30-Apr-99 31-Jul-98
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CURRENT LIABILITIES
Notes payable to banks $ 150,000 $ 154,000
Trade accounts payable 672,000 519,000
Income taxes payable 104,000 34,000
Accrued liabilities 732,000 1,318,000
Note payable to shareholder - 3,000
Current maturities of capital lease obligations 38,000 32,000
Current maturities of long-term obligation 2,000 2,000
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Total current liabilities $1,698,000 $2,062,000
LONG-TERM OBLIGATION, less current maturities 5,000 7,000
CAPITAL LEASE OBLIGATIONS, less current maturities 105,000 110,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Convertible preferred stock, par value $0.01;
authorized 100,000 shares
Series A; issued and outstanding 5,200 shares - -
at April 30, 1999 and July 31, 1998
Series E; issued and outstanding 21,231 shares - -
at April 30, 1999 and July 31, 1998
Common stock, par value $0.001; authorized
1,650,000 shares; issued 1,117,519 shares at
April 30, 1999 and July 31, 1998 1,000 1,000
Additional paid-in capital 11,060,000 11,060,000
Treasury stock, at cost (22,560 common shares) (157,000) (157,000)
Accumulated deficit (1,373,000) (2,298,000)
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Total shareholders' equity 9,531,000 8,606,000
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$11,339,000 $10,785,000
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The accompanying notes are an integral part of these statements.
Page 4
Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the three months and nine months ended April 30,
(Three months ended) (Nine months ended)
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1999 1998 1999 1998
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Net Revenues $ 4,068,000 $ 3,852,000 $11,487,000 $11,377,000
Cost and expenses:
Cost of products
sold 1,966,000 1,974,000 5,587,000 5,650,000
Selling, general
and administrative 1,315,000 1,441,000 3,688,000 3,992,000
Research and
development 451,000 309,000 1,176,000 770,000
Interest expense 21,000 9,000 37,000 37,000
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$ 3,753,000 $ 3,733,000 $10,488,000 $10,449,000
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Earnings before
income taxes and
extraordinary item 315,000 119,000 999,000 928,000
Income tax expense 12,000 ( 2,000) 74,000 104,000
Earnings before
extraordinary item 303,000 121,000 925,000 824,000
Extraordinary Item
Forgiveness of Debt,
net of tax effect - - - 33,000
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NET EARNINGS $ 303,000 $ 121,000 $ 925,000 $ 857,000
=========== =========== =========== ===========
Net earnings per
common share-basic 0.32 0.11 0.83 0.77
=========== =========== =========== ===========
Net earnings per
common share-
assuming dilution 0.27 0.09 0.72 0.67
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
Page 5
Lifschultz Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended April 30,
1999 1998
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Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net Earnings $925,000 $736,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 179,000 71,000
Amortization of leasehold interest 382,000 250,000
Changes in assets and liabilities:
Accounts receivable (296,000) (687,000)
Related party receivable 41,000
Inventories (601,000 (328,000)
Deferred Tax - 145,000
Other current assets 23,000 (171,000)
Accounts payable 153,000 263,000
Accrued liabilities (586,000) (349,000)
Income taxes payable 70,000 2,000
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Total Adjustments (635,000) (804,000)
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Net cash provided (used) by
operating activities 290,000 (68,000)
Cash flows from investing activities
Purchase of property and equipment (541,000) (116,000)
Purchase of marketable securities (9,000) (320,000)
Proceeds from maturities of marketable
securities 128,000 101,000
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Net cash used in investing
activities (422,000) (335,000)
Page 6
Cash flows from financing activities
Principal payments on long-term obligations (2,000) (2,000)
Principal payments on capital lease obligations (5,000)
Principal payments on note payable to shareholder (3,000) (25,000)
Cash received from issuance of long-term debt 6,000 -
Net change in line of credit (4,000) 197,000
Cash received from issuance of common stock - -
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Net cash provided by financing
activities (8,000) 170,000
Net decrease in cash and cash
equivalents (140,000) (233,000)
Cash and cash equivalents at beginning of quarter 989,000 901,000
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Cash and cash equivalents at end of quarter $ 849,000 $ 668,000
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Supplemental disclosures of cash flow information
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Cash paid during the quarter for
Interest $ 21,000 $ 10,000
Income Taxes 31,000 -
The accompanying notes are an integral part of these statements.
Page 7
Notes to Financial Statements
(unaudited)
Note 1
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The consolidated financial statements have been prepared by
Company without audit, in accordance with generally accepted accounting
principles. Pursuant to the rules and regulations of the Securities and
Exchange Commission, certain disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been omitted or condensed. It is
management's belief that the disclosures made are adequate to make the
information presented not misleading and reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of financial position and results of operations for the
periods presented. The results of operations for the periods presented
should not be considered as necessarily indicative of operations for the
full year. It is recommended that these consolidated financial
statements be read in conjunction with the consolidated financial
statements for the year ended July 31, 1998 and the notes thereto
included in the Company's Form 10-KSB.
Note 2
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Certain items from fiscal year 1998 were reclassified to be consistent
with the 1999 statement of earnings presentation with no effect on net
income.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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General
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The Company designs, manufactures, and markets scientific and
industrial instrumentation and instrument calibration equipment.
Historically, the Company's growth has come from an expanding base of
new customers and from increasing sales to existing customers. The
Company's current and future growth is largely dependent upon its
ability to continue increasing instrument sales to new and existing
customers and its ability to successfully introduce and market new or
enhanced products. The Company anticipates that over the next 12
months, its primary business strategy and emphasis will be on
expanding domestic and international instrument sales.
Page 8
Results of Operations:
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Total revenues for the nine months ended April 30, 1999 were
$11,487,000 versus $11,377,000 for the same period last year, a 1%
increase. Total revenues for the three months ended April 30, 1999 were
$4,068,000 versus $3,852,000 for the same period last year, a 6%
increase.
Revenues for the Company's subsidiary, Hart Scientific, Inc., for
the current nine month period were $11,482,000 versus $11,298,000 for the
same period last year, a 2% increase. (Figures given for Hart
Scientific include Hart Scientific's subsidiary, Calorimetry Sciences
Corporation). Hart Scientific revenues for the current three month
period were $4,068,000 versus $3,843,000 for the same period last year, a
6% increase.
General and Administrative costs for the current nine month period
were $2,707,000 versus $2,867,000 for the same period last year. The
expenses for the current period included depreciation by the Company's
subsidiary, Lifschultz Fast Freight, of its New York leasehold ($381,000
in the current nine month period).
Marketing and sales expenses for the current three month period
were $328,000 and $974,000 for the current nine month period. For the
current nine months ended April 30, 1999, marketing and sales expenses
were 8.5% of Hart revenues, versus 10% for the same period last year.
Consolidated net income before extraordinary items for the nine
months ended April 30, 1999 was $925,000 versus $824,000 for the same
period last year, a 12% increase. Net income for the current nine month
period at Hart Scientific was $1,253,000 versus $1,115,000 for the same
period last fiscal year, a 12% increase.
Consolidated net income for the current three month period was
$303,000 compared to $121,000 during the same three month period last
year, a 150% increase. Net income for the current three month period at
Hart Scientific was $425,000 versus $263,000 for the same period last
fiscal year, a 62% increase.
Administrative costs at Lifschultz Fast Freight and Lifschultz
Industries reduced operating profits during the current quarter.
Financial Condition and Liquidity
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The company's current ratio at April 30, 1999 is 4.52 versus 3.44 at
July 31, 1998. The current ratio has improved from .49 on July 31, 1993
to 4.52 on April 30, 1999.
Page 9
The Company will need capital to support the growth of Hart
Scientific. Management expects that internal operating cash flow from
Hart Scientific and from certain subleases held by Lifschultz Fast
Freight will be sufficient to meet the cash needs of the Company. Hart
Scientific has approximately $625,000 in unused lines of credit
available.
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995.
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When used in this report, the words "believe," "plan" "expects" and
similar expressions are intended to identify forward-looking state-
ments within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such statements are subject to certain risks and uncertainties,
including those discussed below, that could cause actual results
to differ materially from those projected. These forward-looking
statements speak only as of the date hereof. All of these forward-
looking statements are based on estimates and assumptions made by
management of the Company, which although believed to be reasonable,
are inherently uncertain and difficult to predict. There can be no
assurance that the benefits anticipated in these forward-looking
statements will be achieved. The following important factors, among
others, could cause the Company not to achieve the benefits contem-
plated herein, or otherwise cause the Company's results of opera-
tions to be adversely affected in future periods: (i) continued or
increased competitive pressures from existing competitors and new
entrants; (ii) unanticipated costs related to the Company's growth
and operating strategies; (iii) loss or retirement of key members of
management; (iv) deterioration in general of international economic
conditions; and (v) loss of customers. Many such factors are
beyond the control of the Company. Please refer to the Company's
SEC Form 10-KSB for its fiscal year ended July 31, 1998, for
additional cautionary statements.
Page 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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27.1 Financial Data Schedule
(b) Reports on Form 8-K
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No reports on From 8-K were filed by the Company during the quarter
ended April 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIFSCHULTZ INDUSTRIES, INC.
Date June 11, 1999 By: DENNIS R. HUNTER
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Dennis R. Hunter
President and Chief
Financial Officer