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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
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Commission File Number: 0-15240
LOWRANCE ELECTRONICS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 44-0624411
- ---------------------- -------------------------
State of Incorporation IRS Identification Number
12000 East Skelly Drive
Tulsa, Oklahoma 74128
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (918) 437-6881
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
--- ---
At October 31, 2002, there were 3,761,196 shares of Registrant's $0.10 par value
Common Stock outstanding.
LOWRANCE ELECTRONICS, INC.
FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Balance Sheets -
October 31, 2002 and 2001, and July 31, 2002............................... 3
Condensed Consolidated Statements of Operations and Comprehensive Income -
Three Months Ended October 31, 2002 and 2001............................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended October 31, 2002 and 2001............................... 5
Notes to Condensed Consolidated Financial Statements........................... 6-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 9-11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk .................... 11
ITEM 4. Controls and Procedures ....................................................... 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................................. 12
ITEM 2. Changes in Securities.......................................................... 12
ITEM 3. Defaults Upon Senior Securities................................................ 12
ITEM 4. Submission of Matters to a Vote of Security Holders............................ 12
ITEM 5. Other Information.............................................................. 12
ITEM 6. Exhibits and Reports on Form 8-K............................................... 12-17
SIGNATURES ................................................................................. 17
CERTIFICATIONS ............................................................................. 18-19
-2-
LOWRANCE ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Oct. 31, Oct. 31, July 31,
2002 2001 2002
---------- ---------- ----------
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 634 $ 679 $ 903
Trade accounts receivable, less allowances 4,966 5,376 7,695
Inventories 14,859 17,430 12,130
Current deferred income taxes 1,006 1,025 1,161
Prepaid expenses 1,115 690 1,012
---------- ---------- ----------
Total current assets 22,580 25,200 22,901
PROPERTY, PLANT, AND EQUIPMENT, net 7,133 7,546 7,104
OTHER ASSETS 49 51 49
DEFERRED INCOME TAXES 1,757 3,163 708
---------- ---------- ----------
$ 31,519 $ 35,960 $ 30,762
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,780 $ 1,929 $ 1,817
Accounts payable 4,049 5,949 4,420
Accrued liabilities 4,009 3,716 3,983
---------- ---------- ----------
Total current liabilities 9,838 11,594 10,220
---------- ---------- ----------
LONG-TERM DEBT, less current
maturities 8,720 14,462 6,183
---------- ---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, 230,000 shares authorized, none issued -- -- --
Common stock, $.10 par value, 10,000,000 shares
authorized; 3,761,196 shares issued and outstanding at October 31,
2002; 3,768,796 shares issued and outstanding at October 31, 2001;
3,768,796 shares
issued and 3,761,196 outstanding at July 31, 2002 377 377 377
Paid-in capital 7,073 7,073 7,073
Treasury stock, at cost -- -- (26)
Retained earnings 5,769 2,951 7,227
Accumulated other comprehensive loss (258) (497) (292)
---------- ---------- ----------
Total stockholders' equity 12,961 9,904 14,359
---------- ---------- ----------
$ 31,519 $ 35,960 $ 30,762
========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-3-
LOWRANCE ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
-------------------------------
Oct. 31, Oct. 31,
2002 2001
---------- ----------
(in thousands, except per share information)
NET SALES $ 11,155 $ 11,023
COST OF SALES 7,032 8,019
---------- ----------
Gross profit 4,123 3,004
OPERATING EXPENSES:
Selling and administrative 5,160 4,798
Research and development 1,050 826
---------- ----------
Total operating expenses 6,210 5,624
---------- ----------
Operating loss (2,087) (2,620)
---------- ----------
OTHER EXPENSES:
Interest expense 201 388
Other, net 36 (13)
---------- ----------
Total other expenses 237 375
---------- ----------
LOSS BEFORE INCOME TAXES (2,324) (2,995)
BENEFIT FOR INCOME TAXES (892) (1,108)
---------- ----------
NET LOSS $ (1,432) $ (1,887)
========== ==========
NET LOSS PER COMMON SHARE:
Basic $ (.38) $ (.50)
========== ==========
Diluted $ (.38) $ (.50)
========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 3,761 3,769
========== ==========
Diluted 3,761 3,769
========== ==========
DIVIDENDS NONE NONE
========== ==========
OTHER COMPREHENSIVE LOSS NET OF TAX:
NET LOSS $ (1,432) $ (1,887)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 34 (86)
---------- ----------
COMPREHENSIVE LOSS $ (1,398) $ (1,973)
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-4-
LOWRANCE ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
-------------------------------
Oct. 31 Oct. 31
2002 2001
---------- ----------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,432) $ (1,887)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 595 499
Deferred income taxes (894) (1,155)
Changes in operating assets and liabilities:
(Increase)decrease in trade accounts receivable 2,729 1,368
(Increase)decrease in inventories (2,729) 1,422
(Increase)decrease in prepaids and other assets (103) (141)
Increase (decrease) in accounts payable and
accrued liabilities (345) 201
---------- ----------
Net cash provided by (used in) operating activities (2,179) 307
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (498) (114)
---------- ----------
Net cash used in investing activities (498) (114)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit line 16,252 11,975
Repayments of borrowings under revolving credit line (13,414) (11,620)
Principal payments on term loans and capital
lease obligations (464) (477)
---------- ----------
Net cash provided by (used in) financing activities 2,374 (122)
Effect of exchange rate changes on cash 34 (86)
---------- ----------
Net decrease in cash and cash equivalents (269) (15)
CASH AND CASH EQUIVALENTS - beginning of period 903 694
---------- ----------
CASH AND CASH EQUIVALENTS - end of period $ 634 $ 679
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-5-
LOWRANCE ELECTRONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED OCTOBER 31, 2002 AND 2001
(Unaudited)
(1) PRINCIPLES OF PREPARATION
The financial statements subsequent to July 31, 2002 and with respect to
the interim three month periods ended October 31, 2002 and 2001 have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures contained herein are adequate to make the information
presented not misleading. Accounting policies for the three months ended
October 31, 2002, are the same as those outlined in the Annual Report on
Form 10-K filed relative to the year ended July 31, 2002. In the opinion
of management, all adjustments necessary for a fair presentation of
interim results of operations have been made to the interim statements.
All such adjustments were of a normal, recurring nature. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report for the year ended July 31, 2002 filed with the
Securities and Exchange Commission on Form 10-K.
Certain reclassifications have been made to the October 31, 2001
financial statements to conform to the classifications used for the
period ended October 31, 2002.
(2) INVENTORIES
Inventories are priced at the lower of cost (first-in, first-out) or
market and consist of the following:
Oct. 31, Oct. 31, July 31,
2002 2001 2002
-------- -------- --------
(in thousands)
Raw materials $ 4,105 $ 6,149 $ 3,350
Work-in-process 2,838 1,644 2,135
Finished goods 8,602 11,411 7,186
Reserves (687) (1,774) (541)
-------- -------- --------
Total inventories $ 14,859 $ 17,430 $ 12,130
======== ======== ========
Inventories as of October 31, 2002 were 14.8% lower than October 31,
2001. Inventory on hand at November 30, 2002 for products the Company
expects to discontinue during fiscal 2003 was $1.9 million as compared to
$3.4 million at July 31, 2002. All discontinued inventories are carried
at cost, which management believes to be lower than expected realizable
value. The Company expects the remaining inventory of discontinued
products to be sold during fiscal 2003.
-6-
(3) LONG-TERM DEBT AND REVOLVING CREDIT LINE
Long-term debt and the revolving credit line are summarized below:
Oct. 31, Oct. 31, July 31,
2002 2001 2002
-------- -------- --------
(in thousands)
Revolving credit line $ 6,770 $ 11,135 $ 3,932
Term loan 2,228 3,467 2,538
Capitalized equipment lease obligations (net),
payable in monthly installments of approximately
$54,000 including interest at rates from 3.9% to
13.5%, with final payments ranging from March
2003 through June 2007 1,502 1,789 1,530
-------- -------- --------
10,500 16,391 8,000
Less - current maturities 1,780 1,929 1,817
-------- -------- --------
Total long-term debt $ 8,720 $ 14,462 $ 6,183
======== ======== ========
At October 31, 2002, the Company's financing facility consisted of $7.4
million in term loans and a $26.5 million revolving credit line. The
revolving credit line provides for borrowings up to $26.5 million based
on varying percentages of qualifying receivables and inventories.
Borrowing against inventories is limited to $13 million in total. The
interest rate on the financing facility is prime plus 1.0%, which was
5.75% as of October 31, 2002. The Company had $1.6 million available
under the revolving credit line at October 31, 2002.
The Company was in compliance with all debt covenants at October 31,
2002.
During November 2002, the Company amended its financing facility. This
amendment extended the term of the agreement for the revolving credit
line and term loans from December 31, 2003 to December 31, 2005.
Significant provisions of the amendment include changes in certain
financial covenants, the lowering of the interest rate from prime plus
1.0% to prime plus .5% on all loans under the facility and the addition
of LIBOR based interest rate options. In addition, the amendment allows
for a permanent $1.5 million seasonal overadvance facility.
The terms of the foregoing agreement include a commitment fee of .25%
based on the unused portion of the revolving credit line in lieu of
compensating balances.
The Company's indebtedness is collateralized by substantially all of the
Company's assets.
(4) CONSOLIDATED STATEMENTS OF CASH FLOWS
During the three months ended October 31, 2002, and October 31, 2001, the
Company paid interest of approximately $.2 million and $.4 million,
respectively.
Incremental capital lease borrowings of $126,000 are included in
property, plant and equipment balances for the three months ended October
31, 2002 as compared to $198,000 for the same period last year. Total
capital expenditures for the period, including capital leases borrowings,
were $624,000 as compared to $312,000 for the previous period.
-7-
(5) OPERATING SEGMENT INFORMATION
The Company does not reflect segment disclosures as the CEO and
President, the Company's Chief Decision Maker, provides oversight and
review based upon financial statements and financial information
presented at the consolidated level.
The Company markets its products internationally through foreign
distributors, except in Canada and Australia where it has established its
own distribution operations. The majority of foreign sales are
concentrated in Canada, Australia and Europe.
Long-lived assets in foreign countries are disclosed in Note 2 to the
Consolidated Financial Statements, Property, Plant and Equipment, in the
Company's 2002 Annual Report on Form 10-K. There are no long-lived assets
in any foreign country other than Mexico.
(6) EARNINGS PER SHARE
Basic and diluted earnings per share is calculated as follows:
INCOME SHARES PER-SHARE
(NUMERATOR) DENOMINATOR AMOUNT
----------- ----------- -----------
FOR THE THREE MONTHS ENDED OCTOBER 31, 2002
BASIC EPS
Net Income (loss) available to common
stockholders $(1,432,000) 3,761,196 $ (0.38)
===========
EFFECT OF DILUTIVE SECURITIES
2001 Stock Option Plan Options(a) -- --
----------- -----------
DILUTED EPS
Net Income(loss) available to common
stockholders + assumed conversions $(1,432,000) 3,761,196 $ (0.38)
=========== =========== ===========
FOR THE THREE MONTHS ENDED OCTOBER 31, 2001
BASIC EPS
Net Income(loss) available to common
stockholders $(1,887,000) 3,768,796 $ (0.50)
===========
EFFECT OF DILUTIVE SECURITIES
2001 Stock Option Plan Options(a) -- --
----------- -----------
DILUTED EPS
Net Income(loss) available to common
stockholders + assumed conversions $(1,887,000) 3,768,796 $ (0.50)
=========== =========== ===========
(a) The effect of the 2001 Stock Option Plan options are not included as
they are anti-dilutive.
-8-
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2002 - SALES AND MARGIN
Total net sales increased by 1.2% for the three months ended October 31, 2002 as
compared to the same period last year while total unit sales increased by 6.4%.
The gross profit margin increased to 37.0% as compared to 27.3% for the same
period last year.
Sales of non-original equipment SONAR and combination SONAR/GPS navigation units
decreased by 6.0% for the three months ended October 31, 2002 as compared to the
same period last year while unit sales increased by 3.0%. Gross profit on
non-original equipment SONAR and combination SONAR/GPS navigation units
decreased by 2.1% for the three months ended October 31, 2002 as compared to the
same period last year. The overall decrease in sales dollars on a unit sales
increase is due to product mix fluctuations. The decrease in gross profit
dollars was less than the decrease in sales dollars as the gross profit margin
increased to 37.5% for the three months ended October 31, 2002 compared to 36.1%
in the same period last year.
Stand-alone GPS navigation sales increased by 17.1% for the three months ended
October 31, 2002 while unit sales increased by 10.8%. Gross profit on GPS
navigation units increased by 585% for the three months ended October 31, 2002
compared to the same period last year. Gross profit in the three month period
ended October 31, 2001 was impacted by a promotion involving a hand-held GPS
unit. There were no similar promotions involving GPS units during the three
month period ended October 31, 2002.
Accessory sales increased by 11.8% for the three months ended October 31, 2002
as compared to the same period last year while gross profit on these sales
increased by 14.1%.
Original equipment (OEM) SONAR sales to boat manufacturers increased by 20.2% on
a 16.2% unit increase as compared to the same period last year. The original
equipment market is continuing to improve from the major decrease in boat sales
that occurred as a result of the general economic downturn last year. Original
equipment SONAR sales were 8.4% of total net sales as compared to 7.1% last
year. Gross profit on OEM units increased by 16.5% year over year. Gross profit
on OEM units was 4.2% of total gross profit as compared to 5.0% last year.
THREE MONTHS ENDED OCTOBER 31, 2002 - OPERATING EXPENSES AND INCOME
Operating expenses increased by $586,000 for the three months ended October 31,
2002 as compared to the same period last year, an increase of 10.4%.
The increase in selling and administrative expenses (an increase of 7.5%) and
the increase in research and development costs (an increase of 27.1%) directly
relate to the 25 new products announced for fiscal 2003, more than double the
number of new products in the previous year. The increase in selling and
administrative expenses is due primarily to increased advertising and marketing
efforts focused on the new products. The increase in research and development
expense relates to the design of the new products.
The operating loss decreased by $533,000, or 20.3% for the three months ended
October 31, 2002 as compared to the same period last year.
-9-
THREE MONTHS ENDED OCTOBER 31, 2002 - INTEREST EXPENSE
Interest expense was $201,000 for the three months ended October 31, 2002 as
compared to $388,000 for the same period last year, a decrease of 48.2%. This
decrease is primarily related to a 35.9% reduction in debt primarily as a result
of a decrease in inventories. In addition, the interest rate on the Company's
primary financing facility was lower in the three months ended October 31, 2002
compared to the three months ended October 31, 2001 as a result of a decrease in
the prime rate which ranged from 6.75% down to 5.50% in the three month period
ended October 31, 2001 and was 4.75% throughout the three month period ended
October 31, 2002.
THREE MONTHS ENDED OCTOBER 31, 2002 - INCOME TAXES
The effective tax rates for the three month periods ended October 31, 2002 and
2001 were 38.4% and 37.0%, respectively.
THREE MONTHS ENDED OCTOBER 31, 2002 - NET LOSS
The net loss for the three month periods ended October 31, 2002 and 2001 was
$1,432,000 and $1,887,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from operations, a
$26.5 million line of credit and lease financing. The line of credit includes a
borrowing base of 85% of qualifying accounts receivable, 30% of qualifying raw
material inventory and 60% of qualifying finished goods inventory with
borrowings from inventories limited to $13 million. At October 31, 2002, the
Company had $1.6 million available under the revolving credit line.
The Company has an overall $33.9 million financing facility consisting of the
revolving credit line discussed above and $7.4 million in term loans. The term
loans had a remaining balance of $2.3 million at October 31, 2002.
The Company was in compliance with all loan covenants at October 31, 2002.
During November 2002, the Company amended its financing facility. This amendment
extended the term of the agreement for the revolving credit line and term loans
from December 31, 2003 to December 31, 2005. Significant provisions of the
amendment include changes in certain financial covenants, the lowering of the
interest rate from prime plus 1.0% to prime plus .5% on all loans under the
facility and the addition of LIBOR based interest rate options. In addition, the
amendment allows for a permanent $1.5 million seasonal overadvance facility.
Cash flows used in operations were ($2.2 million) for the three months ended
October 31, 2002 as compared to $.3 million provided by operations for the same
period last year. Inventories at July 31, 2002, the beginning of the fiscal 2003
first quarter, were 35.6% lower than inventories at July 31, 2001, the beginning
of the fiscal 2002 first quarter. Inventories increased by $2,729,000 during the
three month period ended October 31, 2002 which was the primary factor in the
change in operating cash flow compared to the three month period ended October
31, 2001. The increase in inventories in the first quarter of the fiscal year is
historically more representative of the seasonal nature of the Company's
operations. Operating cash flows were utilized to fund capital expenditures of
$.5 million and an additional $.1 million of capital expenditures was funded by
capital lease borrowings.
Inventories as of October 31, 2002 were 14.8% lower than October 31, 2001.
Discontinued inventory attributable to fiscal 2003 product decisions was
approximately $1.9 million at November 30, 2002 as compared to $3.4 million at
July 31, 2002. All discontinued inventories are carried at cost, which
management believes to be lower than expected realizable value. The Company
expects the remaining inventory of
-10-
discontinued products to be sold by the end of fiscal 2003. Management monitors
all inventories via various inventory control and review processes which
include, but are not limited to, forecast review and inventory reduction
meetings, graphical presentations and forecast versus inventory status reports.
Management believes these processes are adequate.
Demand for the Company's products is seasonal. The Company utilizes the
revolving line of credit to address its seasonal liquidity needs. Management
believes the sources of liquidity discussed above are adequate to satisfy the
Company's current working capital and capital equipment needs.
OUTLOOK AND UNCERTAINTIES
Certain matters discussed in this report, excluding historical information,
include certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended, that involve risks and uncertainties. The
Company and its representatives may from time to time make written or verbal
forward-looking statements, including statements contained in filings with the
Securities and Exchange Commission and in the report to stockholders. Statements
that address the Company's operating performance, events or developments that
the Company expects or anticipates will occur in the future, including
statements relating to sales and earnings growth, statements expressing general
optimism about future operating results and statements relating to liquidity and
future financing plans are forward-looking statements. Although the Company
believes that such forward-looking statements are based on management's
then-current views and reasonable assumptions, no assurance can be given that
every objective will be reached. Such statements are made in reliance on the
"safe harbor" protections provided under the Private Securities litigation
Reform Act of 1995.
As required by the Private Securities Litigation Reform Act of 1995, the Company
hereby identifies the following factors that could cause actual results to
differ materially from any results projected, forecasted, estimated or budgeted
by the company in forward-looking statements:
o Financial performance and cash flow from operations in fiscal 2003
are based on attaining current projections.
o Production delays due to raw material shortages or unforeseen
competitive pressures could have a materially adverse effect on
current projections.
o Because of the dynamic environment in which the Company operates,
one or more key factors discussed in "Part I, Item 1. Business" of
the Company's most recent Form 10-K could have an adverse effect
on expected results for fiscal 2003.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to cash flow and interest rate risk due to changes in
interest rates with respect to its long-term debt. See Note 3 to the condensed
consolidated financial statements for details on the Company's long-term debt. A
..5% increase in the prime rate for the three months ended October 31, 2002 would
have had a negative after-tax impact of approximately $6,000.
The Company is subject to foreign currency risk due to the location of its
manufacturing facility in Mexico and sales from each of its distribution
facilities in Canada and Australia, which are denominated in the local currency.
Sales to other countries are denominated in U.S. dollars. Although fluctuations
have occurred in the Mexican peso, the Canadian dollar and the Australian
dollar, such fluctuations have not historically had a significant impact on the
Company's financial statements taken as a whole. Future volatility in these
exchange rates could have a significant impact on the Company's financial
statements.
-11-
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Controls and Procedures - Within 90 days prior to the
filing of this report, under the supervision and with the participation
of the Company's management, including the Company's Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), an evaluation of the
effectiveness of the Company's disclosure controls and procedures was
performed. Based on this evaluation, the CEO and CFO have concluded that
the Company's disclosure controls and procedures are effective to ensure
that material information is recorded, processed, summarized and reported
by management of the Company on a timely basis in order to comply with
the Company's disclosure obligations under the Securities Exchange Act of
1934 and the SEC rules thereunder.
(b) Changes in Internal Controls - There were no significant changes in the
Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluation.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) The exhibits listed on the following Exhibit Index are
filed as part of this Report. Exhibits required by Item 601
of Regulation S-K, but which are not listed below, are
inapplicable.
Exhibit Index:
3.1 Restated Certificate of Incorporation of
Lowrance Electronics, Inc., filed herewith.
3.2 By-Laws of Lowrance Electronics, Inc., filed
herewith.
4.1 Shareholders' Agreement dated December 22,
1978, by and between Darrell J. Lowrance, James
L. Knight, and Ben V. Schneider previously
filed as Exhibit 4.3 to the Company's
Registration Statement on Form S-1 (SEC File
No. 33-9464), which is incorporated herein by
reference thereto.
4.2 First Amendment to Shareholders' Agreement
dated October 7, 1986 by and between Darrell J.
Lowrance, James L. Knight, and Ben V. Schneider
previously filed as Exhibit 4.4 to the
Company's Registration Statement on Form S-1
(SEC File No. 33-9464), which is incorporated
by reference thereto.
-12-
4.3 Agreement between Stockholders dated October 7,
1986, by and between the Company and Darrell J.
Lowrance, James L. Knight, and Ben V. Schneider
previously filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-1
(SEC File No. 33-9464), which is incorporated
herein by reference thereto.
10.2 Lowrance Retirement Plan and Trust previously
filed as Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (SEC File
No. 33-9464), which is incorporated herein by
reference thereto.
10.3 Form of Distributor Agreements previously filed
as Exhibit 10.4 to the Company's Registration
Statement on Form S-1 (SEC File No. 33-9464),
which is incorporated herein by reference
thereto.
10.5 Credit Agreement dated April 27, 1989, by and
between the Company and Norwest Business
Credit, Inc., previously filed as Exhibit 10.8
to the Company's 1989 Annual Report on Form
10-K, which is incorporated herein by reference
thereto.
10.6 Promissory note dated April 27, 1989, by the
Company in favor of Norwest Leasing, Inc.,
previously filed as Exhibit 10.7 to the
Company's 1989 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.8 First, Second, and Third Amendments to Credit
Agreement dated April 27, 1989, by and between
the Company and Norwest Business Credit, Inc.,
previously filed as Exhibit 10.8 to the
Company's 1990 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.9 Fourth and Fifth Amendments to Credit Agreement
dated April 27, 1989, by and between the
Company and Norwest Business Credit, Inc.,
previously filed as Exhibit 10.9 to the
Company's 1992 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.10 Sixth Amendment to Credit Agreement dated March
17, 1993, by and between the Company and
Norwest Business Credit, Inc., previously filed
as Exhibit 10.10 to the Company's 1992 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.11 Seventh Amendment to Credit Agreement dated
October 21, 1993, by and between the Company
and Norwest Business Credit, Inc., previously
filed as Exhibit 10.11 to the Company's 1993
Annual Report on Form 10-K, which is
incorporated herein by reference thereto.
10.12 Eighth Amendment to Credit Agreement dated
September 29, 1993, by and between the Company
and Norwest Business Credit, Inc., previously
filed as Exhibit 10.12 to the Company's 1993
Annual Report on Form 10-K, which is
incorporated herein by reference thereto.
10.13 Loan and Security Agreement dated December 15,
1993, by the Company in favor of Barclays
Business Credit, Inc., previously filed as
Exhibit 10.13 to the Company's 1994 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.14 Amended and Restated Secured Promissory Note
dated October 16, 1995, by and between the
Company and Shawmut Capital Corporation
(formerly Barclays Business Credit, Inc.),
previously filed as Exhibit 10.14 to the
Company's 1995 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.15 Amended and Restated Revolving Credit Notes
dated October 16, 1995, by and between the
Company and Shawmut Capital Corporation
(formerly Barclays
-13-
Business Credit, Inc.), previously filed as
Exhibit 10.15 to the Company's 1995 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.16 First Amendment to Loan and Security Agreement
dated October 16, 1995, by and between the
Company and Shawmut Capital Corporation
(formerly Barclays Business Credit, Inc.),
previously filed as Exhibit 10.16 to the
Company's 1995 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.17 Amended and Restated Stock Pledge Agreement
dated October 16, 1995, by and between the
Company and Shawmut Capital Corporation
(formerly Barclays Business Credit, Inc.),
previously filed as Exhibit 10.17 to the
Company's 1995 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.18 Unconditional Guaranty dated October 16, 1995,
by and between Sea Electronics, Inc. and
Shawmut Capital Corporation, previously filed
as Exhibit 10.18 to the Company's 1995 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.19 First Amendment to Mortgage, Security
Agreement, Financing Statement and Assignment
of Rents dated October 16, 1995, by and between
the Company and Shawmut Capital Corporation
(formerly Barclays Business Credit, Inc.)
previously filed as Exhibit 10.19 to the
Company's 1996 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.20 Lease Agreement entered into by and between
Eric Juan De Dios Flourie Geffroy and
Electronica Lowrance De Mexico, S. A. de C. V.
dated August 30, 1996, previously filed as
Exhibit 10.20 to the Company's 1996 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.21 Lease Agreement entered into by and between
Refugio Geffroy De Flourie, Eric Juan De Dios
Flourie Geffroy, Elizabeth Flourie Geffroy,
Edith Flourie Geffroy and Electronica Lowrance
De Mexico, S. A. de C. V. dated August 30,
1996, previously filed as Exhibit 10.21 to the
Company's 1996 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.22 Second Amendment to Loan and Security Agreement
dated November 1, 1996, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.22 to the Company's 1997 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.23 Third Amendment to Loan and Security Agreement
dated December 31, 1996, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.23 to the Company's 1997 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.24 Fourth Amendment to Loan and Security Agreement
dated August 14, 1997, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.24 to the Company's 1997 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.25 Fifth Amendment to Loan and Security Agreement
dated August 25, 1997, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.25 to the Company's 1997 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.26 Sixth Amendment to Loan and Security Agreement
dated August 28, 1997, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut
-14-
Capital Corporation), previously filed as
Exhibit 10.26 to the Company's 1998 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.27 Seventh Amendment to Loan and Security
Agreement dated November 6, 1997, by and
between the Company and Fleet Capital
Corporation (formerly Shawmut Capital
Corporation), previously filed as Exhibit 10.27
to the Company's 1998 Annual Report on Form
10-K, which is incorporated herein by reference
thereto.
10.28 Eighth Amendment to Loan and Security Agreement
dated December 9, 1997, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.28 to the Company's 1998 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.29 Ninth Amendment to Loan and Security Agreement
dated September 14, 1998, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.29 to the Company's 1998 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.30 Tenth Amendment to Loan and Security Agreement
dated November 12, 1998, by and between the
Company and Fleet Capital Corporation (formerly
Shawmut Capital Corporation), previously filed
as Exhibit 10.30 to the Company's 1998 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.31 Eleventh Amendment to Loan and Security
Agreement dated March 14, 2000, by and between
the Company and Fleet Capital, previously filed
as Exhibit 10.31 to the Company's 2000 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.32 Twelfth Amendment to Loan and Security
Agreement dated October 18, 2000, by and
between the Company and Fleet Capital,
previously filed as Exhibit 10.32 to the
Company's October 31, 2000 Quarterly Report on
Form 10-Q, which is incorporated herein by
reference thereto.
10.33 Employment Agreement for Douglas J. Townsdin,
dated as of April 7, 2000, previously filed as
Exhibit 10.33 to the Company's 2001 Annual
Report on Form 10-K, previously filed as
Exhibit 10.33 to the Company's 2001 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.34 Employment Agreement for Bob G. Callaway, dated
as of March 27, 2000, previously filed as
Exhibit 10.34 to the Company's 2001 Annual
Report on Form 10-K, previously filed as
Exhibit 10.34 to the Company's 2001 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.35 Employment Agreement for Mark C. McQuown, dated
as of April 7, 2000, previously filed as
Exhibit 10.35 to the Company's 2001 Annual
Report on Form 10-K, previously filed as
Exhibit 10.35 to the Company's 2001 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.36 Employment Agreement for Jane M. Kaiser, dated
as of April 7, 2000, previously filed as
Exhibit 10.36 to the Company's 2001 Annual
Report on Form 10-K, previously filed as
Exhibit 10.36 to the Company's 2001 Annual
Report on Form 10-K, which is incorporated
herein by reference thereto.
10.37 Lease Agreement entered into by and between
Eric Juan de Dios Flourie Geffroy, Refugio
Geffroy de Flourie, Elizabeth Pierret Pepita
Flourie Geffroy, Edith Elizabeth Cuquita Flouri
Geffroy and Lowrance Electronica de Mexico,
-15-
S.A. de C.V. dated May 11, 2001, previously
filed as Exhibit 10.37 to the Company's 2001
Annual Report on Form 10-K, which is
incorporated herein by reference thereto.
10.38 2001 Stock Option Plan of the Company,
previously filed as Exhibit 10.38 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.39 NonQualified Stock Option Agreement between the
Company and Ron G. Weber dated July 25, 2001,
previously filed as Exhibit 10.39 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.40 Incentive Stock Option Agreement between the
Company and Ron G. Weber dated July 25, 2001,
previously filed as Exhibit 10.40 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.41 Incentive Stock Option Agreement between the
Company and Douglas Townsdin dated October 4,
2001, previously filed as Exhibit 10.41 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.42 Incentive Stock Option Agreement between the
Company and Bob G. Callaway dated July 25,
2001, previously filed as Exhibit 10.42 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.43 Incentive Stock Option Agreement between the
Company and Mark McQuown dated July 25, 2001,
previously filed as Exhibit 10.43 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
10.44 Incentive Stock Option Agreement between the
Company and Jane M. Kaiser dated July 25, 2001,
previously filed as Exhibit 10.44 to the
Company' 2001 Annual Report on Form 10-K, which
is incorporated herein by reference thereto.
10.45 Thirteenth Amendment to Loan and Security
Agreement dated October 19, 2001, by and
between the Company and Fleet Capital,
previously filed as Exhibit 10.45 to the
Company's Quarterly Report on Form 10-Q dated
October 31, 2001, which is incorporated herein
by reference thereto.
10.46 Fourteenth Amendment to Loan and Security
Agreement dated March 11, 2002 by and between
the Company and Fleet Capital, previously filed
as Exhibit 10.46 to the Company's 2002
Quarterly Report on Form 10-Q dated January 31,
2002, which is incorporated herein by reference
thereto.
10.47 Fifteenth Amendment to Loan and Security
Agreement dated November 26, 2002 by and
between the Company and Fleet Capital, filed
herewith.
22.13 Subsidiaries of the Company as of July 31,
2001, previously filed as Exhibit 22.13 to the
Company's 2001 Annual Report on Form 10-K,
which is incorporated herein by reference
thereto.
99.1 Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350, executed by
Darrell J. Lowrance, President and Chief
Executive Officer of Lowrance Electronics, Inc.
and Douglas J. Townsdin, Vice President of
Finance and Chief Financial Officer of Lowrance
Electronics, Inc., filed herewith.
-16-
(b.) Reports on Form 8-K:
None
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 thereunto duly authorized.
LOWRANCE ELECTRONICS, INC.
DATE: December 12, 2002 BY: /s/ Darrell J. Lowrance
----------------- ---------------------------
Darrell J. Lowrance,
President and Chief Executive Officer
(Principal Executive Officer)
DATE: December 12, 2002 BY: /s/ Douglas J. Townsdin
----------------- ---------------------------
Douglas J. Townsdin
Vice President of Finance and
Chief Financial Officer
(Principal Financial Officer)
-17-
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
I, Darrell J. Lowrance, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lowrance
Electronics, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Dated: December 12, 2002
/s/ Darrell J. Lowrance
-----------------------
Darrell J. Lowrance
President and Chief Executive Officer
-18-
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
I, Douglas J. Townsdin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lowrance
Electronics, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Dated: December 12, 2002
/s/ Douglas J. Townsdin
-----------------------
Douglas J. Townsdin
Vice President of Finance
and Chief Financial Officer
-19-
EXHIBIT INDEX
EXHIBIT NO.
3.1 Restated Certificate of Incorporation of
Lowrance Electronics, Inc., filed herewith.
3.2 By-Laws of Lowrance Electronics, Inc., filed
herewith.
10.47 Fifteenth Amendment to Loan and Security
Agreement dated November 26, 2002 by and
between the Company and Fleet Capital, filed
herewith.
99.1 Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350, executed by
Darrell J. Lowrance, President and Chief
Executive Officer of Lowrance Electronics, Inc.
and Douglas J. Townsdin, Vice President of
Finance and Chief Financial Officer of Lowrance
Electronics, Inc., filed herewith.