FORM 10-Q
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 November 26, 2000
Commission file number 0-12611
AULT INCORPORATED
MINNESOTA 41-0842932
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7105 Northland Terrace
Minneapolis, Minnesota 55428-1028
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(Address of principal executive offices)
Registrant's telephone number: (763) 592-1900
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Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES __X__ NO _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock December 27, 2000
--------------------- -----------------
No par value 4,482,532 shares
Total pages 14
Exhibits Index on Page 13
PART 1. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
AULT INCORPORATED & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Amounts Per Share)
(Unaudited)
-------------------------------------------------------
Second Quarter Ended Six Months Ended
------------------------- -------------------------
Nov. 26 Nov. 28 Nov. 26 Nov. 28
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Sales $ 26,273 $ 14,386 $ 47,915 $ 27,921
Cost of Goods Sold 20,437 10,683 37,355 20,642
---------- ---------- ---------- ----------
Gross Profits 5,836 3,703 10,560 7,279
Operating Expenses
Marketing 1,927 1,309 3,457 2,509
Design Engineering 758 783 1,530 1,603
General and Administrative 1,767 1,126 3,279 2,368
---------- ---------- ---------- ----------
4,452 3,218 8,266 6,480
---------- ---------- ---------- ----------
Operating Income 1,384 485 2,294 799
Other Income (Expense)
Interest Expense (132) (59) (284) (109)
Interest Income 23 14 50 17
Other 28 (23) 228 4
---------- ---------- ---------- ----------
(81) (68) (6) (88)
---------- ---------- ---------- ----------
Income Before Income Taxes 1,303 417 2,288 711
Income Taxes 480 106 814 188
---------- ---------- ---------- ----------
Net Income $ 823 $ 311 $ 1,474 $ 523
========== ========== ========== ==========
Earnings Per Share
Basic $ 0.18 $ 0.07 $ 0.33 $ 0.12
Diluted $ 0.17 $ 0.07 $ 0.31 $ 0.11
Common and Equivalent Shares Outstanding
Basic 4,479,825 4,432,371 4,468,129 4,430,338
Diluted 4,751,542 4,676,819 4,703,082 4,677,442
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 2
AULT INCORPORATED & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
November 26, May 28,
2000 2000
------------ ------------
Assets:
Current Assets
Cash and Cash Equivalents $ 2,200 $ 2,419
Available-for-sale Investments 531 497
Trade Receivables, Less Allowance for Doubtful Accounts of
$338,000 at November 26, 2000; $94,000 at May 28, 2000 19,632 15,899
Inventories(Note 2) 14,694 14,260
Prepaid Expenses and Other 1,277 983
Deferred Taxes 211 211
------------ ------------
Total Current Assets 38,545 34,269
Other Assets:
Intangibles, less accumulated amortization of $200,000 at
November 26, 2000; $150,000 at May 28, 2000 1,304 1,354
Deferred Taxes 72 72
Other 16 24
------------ ------------
1,392 1,450
Property Equipment and Leasehold
Improvements:
Land 1,632 1,583
Building 5,361 5,261
Machinery and Equipment 7,868 7,123
Office Furniture 1,409 1,265
E.D.P. Equipment 1,708 1,675
------------ ------------
17,978 16,907
Less Accumulated Depreciation 6,838 6,370
------------ ------------
11,140 10,537
------------ ------------
$ 51,077 $ 46,256
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 3
AULT INCORPORATED & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Unaudited
November 26, May 28,
2000 2000
------------ ------------
Liabilities and Stockholders' Equity:
Current Liabilities
Note Payable to Bank $ 3,469 $ 2,158
Current Maturities of Long-Term Debt (Note 3) 603 802
Accounts Payable 13,513 11,763
Accrued Compensation 638 538
Accrued Commissions 1,135 746
Other 188 135
Income Tax Payable 479 419
------------ ------------
Total Current Liabilities 20,025 16,561
Long-Term Debt, Less Current Maturities (Note 3) 3,471 3,657
Retirement and Severance Benefits 328 233
Stockholders' Equity:
Preferred Stock, No Par Value, Authorized,
1,000,000 Shares; None Issued
Common Shares, No Par Value, Authorized
10,000,000 Shares; Issued and Outstanding 4,481,532 on
November 26, 2000; and 4,445,432 on May 28, 2000; 20,427 20,275
Notes Receivable arising from the sale of common stock (145) (145)
Accumulated Other Comprehensive Loss (787) (548)
Retained Earnings 7,758 6,223
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27,253 25,805
------------ ------------
$ 51,077 $ 46,256
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page 4
AULT INCORPORATED & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended
November 26, November 28,
2000 1999
------------ ------------
Cash Flows From Operating Activities
Net Income: $ 1,474 $ 523
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities:
Depreciation 468 383
Amortization 50 50
Adjustment Related to Change in subsidiary Year End 61
Stock Compensation 44
Changes in Assets and Liabilities:
(Increase) Decrease In:
Trade Receivables (3,733) (819)
Inventories (434) (2,578)
Prepaid and Other Expenses (294) (18)
Increase (Decrease) in:
Accounts Payable 1,750 1,855
Accrued Expenses 637 494
Income Tax Payable 60 50
------------ ------------
Net Cash Provided (Used) in Operating Activities 83 (60)
------------ ------------
Cash Flows From Investing Activities:
Purchase of Equipment and Leasehold Improvements (1,071) (4,348)
Decrease in Other Assets 8
Proceeds from the sale of securities 3
------------ ------------
Net Cash Used in Investment Activities (1,063) (4,345)
------------ ------------
Cash Flows From Financing Activities:
Net Borrowings on Revolving Credit Agreements 1,311 3,632
Proceeds from Issuance of Common Stock 74 19
Principal Payments on Long-Term Borrowings (385) 32
------------ ------------
Net Cash Provided by Financing Activities 1,000 3,683
------------ ------------
Effect of Foreign Currency Exchange Rate Changes
on Cash (239) (67)
------------ ------------
Decrease in Cash and Cash Equivalents (219) (789)
Cash and Cash Equivalents at Beginning of Period 2,419 3,303
------------ ------------
Cash and Cash Equivalents at End of Period $ 2,200 $ 2,514
============ ============
Supplemental Disclosures of Cash Flow Information-
Cash payments for:
Interest $ 284 $ 109
Taxes 757 138
Page 5
AULT INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOND QUARTER ENDED NOVEMBER 26, 2000
1 Summary of Consolidation Principles
The accompanying consolidated financial statements include the accounts of Ault
Incorporated, its wholly owned subsidiary, Ault Korea Corporation, and its
wholly owned subsidiary, Ault Xianghe Co. Ltd. All significant intercompany
transactions have been eliminated. The foreign currency translation adjustment
represents the translation into United States dollars of the Company's
investment in the net assets of its foreign subsidiary in accordance with the
provisions of FASB Statement No. 52.
The balance sheet of the Company as of November 26, 2000 and the related
statements of income and cash flows for the six months ended November 26, 2000
have been prepared without being audited. In the opinion of the management,
these statements reflect all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the position of Ault Incorporated and
subsidiary as of November 26, 2000, and the results of operations and cash flows
for all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Therefore, these statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's May 28, 2000 Form 10-K.
The results of operations for the interim periods are not necessarily indicative
of results that will be realized for the full fiscal year.
Effective May 29, 2000 the company changed its fiscal year end for its
subsidiary from May 31 to April 30 and will consolidate the subsidiary for
financial reporting purposes on a one-month lag basis. This change was done to
facilitate timely and accurate consolidation and in order to meet financial
reporting deadlines of the Company. The results of operations for the subsidiary
for May 2000 ($61,000 net loss) was included in the consolidated results of
operations for the first quarter of fiscal 2001. Retained earnings was adjusted
during the first quarter of fiscal 2001 to eliminate the subsidiary net loss for
May 2000 which was included in operations for the year ended May 28, 2000. The
effect of the change in year-end for future periods is expected to be
insignificant.
2 Inventories
The components of inventory (in thousands) at November 26, 2000 and May 28, 2000
are as follows:
November 26, May 28,
2000 2000
------------ ------------
Raw Materials $ 8,424 $ 7,275
Work-in-process 561 406
Finished Goods 5,709 6,579
------------ ------------
$ 14,694 $ 14,260
============ ============
Page 6
AULT INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOND QUARTER ENDED NOVEMBER 26, 2000
3 Long-term Debt
Long-term debt (in thousands) including current maturities contain the
following:
NOVEMBER 26, MAY 28,
2000 2000
------------ ------------
Various Term Loans, 7.2% - 8.0% interest due in monthly
installments through December 2003, secured by
equipment $ 376 $ 494
Various note payables, 7.5% interest due in quarterly
installments through April 2002, secured by Korean
government funded agency 548 735
Term loan, 7.94% interest rate due in monthly installments
through September 2005, secured by furniture 239 265
Term loan, 8.05% interest rate due in monthly installments
to February 2015 2,911 2,965
------------ ------------
Total $ 4,074 $ 4,459
Less Current Maturities 603 802
------------ ------------
$ 3,471 $ 3,657
============ ============
4 Stockholders' Equity
Six Months Ended
November 26,
2000
----------------
($000)
Total Stockholders' Equity - May 28, 2000 $ 25,805
Net Income $ 1,474
Unrealized gain in Securities Available for
Sale 34
Net change in Foreign currency translation
adjustment (239)
----------
Comprehensive Income 1,269
Stock Compensation 44
Issue 36,100 shares of common stock in
accordance with stock option plan 74
Adjust retained earnings for the change in
subsidiary fiscal year end 61
------------
Total Stockholders' Equity $ 27,253
============
5 Net Income Per Common Share
Basic and diluted earnings per share are presented in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE. The
difference between average common and common equivalent shares is the result of
outstanding stock options.
Six Months Ended
----------------
November 26, 2000 November 28, 1999
----------------- -----------------
Income Applicable to Common Shareholders $ 1,474 $ 523
Basic - Weighted Average Shares Outstanding 4,468,129 4,430,338
Diluted Effect of Stock Options 234,953 247,104
Diluted - Weighted Average Shares Outstanding 4,703,082 4,677,442
Basic Earnings per Share $ 0.33 $ 0.12
========== ==========
Diluted Earnings per Share $ 0.31 $ 0.11
========== ==========
Page 7
AULT INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOND QUARTER ENDED NOVEMBER 26, 2000
6 Accounting Pronouncements
In June 1998, FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. SFAS No. 133 as amended by SFAS No. 138, ACCOUNTING FOR
CERTAIN HEDGING ACTIVITIES, AN AMENDMENT OF FASB NO. 133, requires companies to
record derivatives on the balance sheet as assets and liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. In July 1999, FASB issued SFAS No.
137 delaying the effective date of SFAS No. 133 for one year to fiscal years
beginning after June 15, 2000, with earlier adoption encouraged. Management has
not yet determined the effects SFAS No. 133 will have on its financial position
or the result of its operations. The Company will be required to adopt SFAS No.
133 in fiscal 2002.
In December 1999, The Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101 REVENUE RECOGNITION IN FINANCIAL STATEMENTS.
SAB No. 101 summarizes certain of the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB No.
101 is to be implemented by the Company no later than the fourth quarter of
fiscal 2001. The Company believes SAB No. 101 will not have a material effect on
the financial statements, however management is still reviewing SAB No. 101
relative to its overseas shipping contracts.
Page 8
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Second Quarter Ended November 26, 2000
Increase / (Decrease)
($000) Fiscal Fiscal ---------------------
2001 2000 Amount Percent
-------------------------------------------------
Net Sales $26,273 $14,386 $11,887 83%
Operating Income 1,384 485 899 185%
Net sales were $26,273,000 for the second quarter of fiscal 2001 up 83% from
$14,386,000 for the second quarter of fiscal 2000. The growth was primarily due
to significantly higher power supply volume to major OEMs of high-speed ADSL
modems. The quarter also includes growing business volumes with OEMs of PDAs and
internet appliances. In addition, the Company has continued growth in both
European and Asian markets.
Gross margin for the second quarter improved to 22.2 percent as a percent of
sales, compared with 21.8 percent for the first quarter this year. Second
quarter gross margin last year was 25.7 percent. Margins continue to be affected
by a growth in lower-margin linear power supplies used by our ADSL customers.
Significantly higher air and maritime freight costs have also contributed to the
reduction in gross margin year-over-year.
As a percentage of sales, operating expenses declined to 16.9 percent in the
second quarter of fiscal 2001, down from 22.4 percent in the second quarter of
fiscal 2000. Operating expenses were $4,452,000 for the second quarter of fiscal
2001 up 27.7% from $3,218,000 for the second quarter of fiscal 2000. The
increase is due to commission cost, and other variable costs associated with the
increase in sales.
Operating income totaled $1,384,000 for the second quarter of fiscal 2001 and
$485,000 for the same period in fiscal 2000 equaling, respectively, 5.3% and
3.4% of net sales.
Six Months Ended November 26, 2000
Increase / (Decrease)
($000) Fiscal Fiscal ---------------------
2001 2000 Amount Percent
-------------------------------------------------
Net Sales $47,915 $27,921 $19,994 72%
Operating Income 2,294 799 1,495 187%
Net sales were $47,915,000 for the first six months of fiscal 2001 up 72% from
$27,921,000 for the first six months of fiscal 2000. The growth was primarily
due to significantly higher power supply volume to major OEMs of high-speed ADSL
modems, PDAs and internet appliances. The Company is also benefiting from
growing business volumes with OEMs serving the medical equipment market and
distributors. In addition, the Company has experienced growth in both European
and Asian markets.
Operating income totaled $2,294,000 for the first six months of fiscal 2001 and
$799,000 for the same period in fiscal 2000 equaling, respectively, 4.8% and
2.9% of net sales. Several factors partially offset the positive impact of
Ault's strong sales growth. Gross margins decreased due to a shift in the sales
mix toward lower-margin linear power supplies. In response, the Company is
re-engineering the entire line of power supplies to reduce manufacturing costs.
The significant growth of Asian sales also had a near-term negative impact on
gross margins. As an aggressive new undertaking, the Asian sales effort entails
the normal array of start-up costs and pricing initiatives. The Company is
forecasting strong Asian sales for the remainder of fiscal 2001, and believes
that margins on this business should improve as the year progresses. Finally,
significantly higher air and maritime freight costs as well as high capacity
utilization in shipping from Asia, resulting from the dramatic increase in fuel
prices, also affected margins. The Company is passing through increased fuel
costs. The move has not affected business levels. To further strengthen margins,
the Company is also implementing a global procurement system that will leverage
purchasing power for key electronic components.
Page 9
ORDER BACKLOG: The Company's order backlog at November 26, 2000 totaled
$16,724,000 compared to $17,877,000 at May 28, 2000. The order backlog
represents sales for approximately nine weeks and reflected the posture of many
OEMs to limit their contractual commitments to the best lead-times of their
suppliers. This requires the Company to place greater reliability on its ability
to forecast customer needs and requirements for on-time shipment of products.
NON-OPERATING INCOME: Other income of $278,000 for the six months of fiscal 2001
and $21,000 for the same period in fiscal 2000 represented interest income,
currency exchange rate gains on foreign contracts by the Korean subsidiary and
income derived from rented portions of the Korean manufacturing facility. The
Company incurred interest expenses of $284,000 in the first six months of fiscal
2001 and $109,000 in the same period of fiscal 2000, paid on bank credit
facilities and long-term borrowings. The interest increase is primarily related
to the new facility in Minneapolis.
INCOME TAX: The Company had pre-tax income of $2,288,000 for the first six
months in fiscal 2001 on which it accrued US and Korean income taxes totaling
$814,000. During the same period in fiscal 2000 the Company had pre-tax income
of $711,000 on which US and Korean income taxes totaling $188,000 were accrued.
NET INCOME: The Company reported basic per share earnings of $0.33 for the first
six months of fiscal 2001 based on 4,468,000 outstanding weighted average
shares, compared to basic per share earnings of $0.12 for the same period of
fiscal 2000, based on 4,430,000 outstanding weighted average shares. For the
first six months of fiscal 2001 the Company reported diluted per share earnings
of $0.31 based on 4,703,000 outstanding weighted average shares, compared to
diluted per share earnings of $0.11 for the same period in fiscal 2000, which
were based on 4,677,000 outstanding weighted average shares.
LIQUIDITY AND CAPITAL RESOURCES
The following table describes the Company's liquidity and financial position on
November 26, 2000, and on May 28, 2000:
November 26, May 28,
2000 2000
------------ ------------
($000) ($000)
Working capital $18,520 $17,708
Cash 2,200 $ 2,419
Securities Available for Sale 531 497
Unutilized bank credit facilities 4,000 $ 4,041
Cash Provided by(used in) operations 83 (2,426)
CURRENT WORKING CAPITAL POSITION
As of November 26, 2000, the Company had current assets of $38,545,000 and
current liabilities of $20,025,000, which amounted to working capital of
$18,520,000 and current ratio of 1.9 to 1.0. This represents a change from its
working capital of $17,708,000 as of May 28, 2000. The Company relies on its
credit facilities and cash flows from operations as sources of working capital
to support normal growth in revenue, capital expenditures and attainment of
profit goals.
CASH AND INVESTMENTS: As of November 26, 2000, the Company had cash and
securities totaling $2,731,000, compared to $2,916,000 as of May 28, 2000. The
decrease is primarily due to timing of payables and receivables.
CREDIT FACILITIES: The Company maintains two credit facilities. Its primary
credit facility is with US Bank and a smaller facility with Korea Exchange Bank
supports the South Korean subsidiary.
Page 10
CASH FLOWS FOR FISCAL 2001
OPERATIONS: Operations provided $83,000 of cash during the first six months of
fiscal 2001 due principally to the following activities in trade receivables,
inventories and accounts payables:
(a) Increases in trade receivables mainly due to the increased net sales
in fiscal 2001 used $3,733,000 of cash. Further use of cash from
increased net sales is anticipated for the rest of fiscal 2001.
(b) Increases in inventories used $434,000 of cash. The increases are due
primarily to customer requirements that the Company carry additional
raw material and finished products to support short-term needs. This
is a normal business practice in the power supply market.
(c) Increases in accounts payable provided $1,750,000 of cash from
liabilities associated with purchases of material to support customer
orders and emergency stockings of finished product. Increased
liabilities for these purposes are anticipated for the remainder of
fiscal year 2001.
INVESTING ACTIVITIES: Investing activities used net cash of $1,063,000 relating
to the purchase of manufacturing and IS equipment.
FINANCING ACTIVITIES: Financing activities provided net cash of $1,000,000,
primarily comprised of borrowings for raw material purchases in Korea.
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE FLUCTUATIONS: The effect of translating
the Korean financial statements, which were prepared in Won to US dollars,
resulted in a net asset value decrease of $239,000 during the first six months
of the year. This relates to long-term inter-company receivables.
SUMMARY: The Company's cash and working capital positions are sound and,
together with its credit facilities, adequate to support the Company's
strategies for the remainder of fiscal 2001.
INFORMATION ABOUT PRODUCTS AND SERVICES: The Company's business operations are
comprised of one activity--the design, manufacture and sale of equipment for
converting electric power to a level used by OEMs in data
communications/telecommunications and medical markets to charge batteries,
and/or power equipment. The Company supports these power requirements by making
available to the OEMs products that have various technical features. These
products are managed as one product segment under the Company's internal
organizational structure and the Company does not consider any financial
distinctive measures, including net profitability and segmentation of assets to
be meaningful to performance assessment.
INFORMATION ABOUT REVENUE BY GEOGRAPHY
Distribution of revenue from the US, from each foreign country that is the
source of significant revenue and from all other foreign countries as a group
are as follows:
SIX MONTHS ENDED
November 26, November 28,
2000 1999
----------------------------
($000) ($000)
US $ 29,728 $ 22,837
Korea 4,871 1,342
Belgium 2,704 380
UK 3,121 843
China 1,631 323
Canada 1,621 879
Other Foreign 4,239 1,317
----------------------------
Total $ 47,915 $ 27,921
============================
The Company considers a country to be the geographic source of revenue if it has
contractual obligations, including obligation to pay for trade receivable
invoices.
Page 11
ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. SFAS No. 133 as amended by SFAS No. 138, ACCOUNTING FOR
CERTAIN HEDGING ACTIVITIES, AN AMENDMENT OF FASB NO. 133, requires companies to
record derivatives on the balance sheet as assets and liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. In July 1999, FASB issued SFAS No.
137 delaying the effective date of SFAS No. 133 for one year to fiscal years
beginning after June 15, 2000, with earlier adoption encouraged. Management has
not yet determined the effects SFAS No. 133 will have on its financial position
or the results of its operations. The Company will be required to adopt SFAS No.
133 in fiscal 2002.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101 REVENUE RECOGNITION IN FINANCIAL STATEMENTS.
SAB No. 101 summarizes certain of the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB No.
101 is to be implemented by the Company no later than the fourth quarter of
fiscal 2001. The Company believes SAB No. 101 will not have a material effect on
the financial statements, however management is still reviewing SAB No. 101
relative to its overseas shipping contracts.
IMPACT OF FOREIGN OPERATIONS AND CURRENCY CHANGES:
Products manufactured by the Korean subsidiary contributed a large portion of
total sales. The value of the Won had no significant impact on the Company's
consolidated sales for the quarter. The Company's operations have no significant
exposure to currency risks because the predominant portions of its contracts are
made in US dollars.
From time to time, in reports filed with the Securities and Exchange Commission,
in press releases, and in other communications to shareholders or the investing
public, the Company may make forward-looking statements concerning possible or
anticipated future results of operations or business developments which are
typically preceded by the words "believes", "expects", "anticipates", "intends"
or similar expressions. For such forward-looking statements, the Company claims
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. Shareholders and the
investing public should understand that such forward-looking statements are
subject to risks and uncertainties that could cause results or developments to
differ significantly from those indicated in the forward-looking statements.
Such risks and uncertainties include, but are not limited to, the overall level
of sales by original equipment manufacturers (OEMs) in the telecommunications,
data communications, computer peripherals and the medical markets; buying
patterns of the Company's existing and prospective customers; the impact of new
products introduced by competitors; delays in new product introductions; higher
than expected expense related to sales and new marketing initiatives;
availability of adequate supplies of raw materials and components; fuel prices;
and other risks affecting the Company's target markets.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company experiences foreign currency gains and losses, which are reflected
in the financial statements, due to the strengthening and weakening of the U.S.
dollar against currencies of the Company's foreign subsidiaries. The net
exchange gain or foreign loss arising from this was not material in fiscal year
2000, or in the first six months of fiscal year 2001. The Company anticipates
that it will continue to have exchange gains or losses in the future.
At November 26, 2000, the Company had an investment portfolio of fixed income
securities of $531,000. These securities, like all fixed income instruments, are
subject to interest rate risk and will decline in value if market interest rates
increase.
Page 12
PART II
ITEMS 1-3 OTHER INFORMATION: Not Applicable
ITEMS 4 Submission of Matters to a Vote of Security Holders
The following matters were voted upon at the Annual Meeting of Stockholders held
on September 26, 2000, and received the votes set forth below:
All of the following persons nominated were elected to serve as directors and
received the number of votes set opposite their respective names:
For Withheld
----------------------------
F. Green 3,879,719 457,480
M. Sutton 3,878,322 458,876
D. Johnson 4,303,818 33,380
J. Kassakian 3,878,018 459,180
F. Sims 3,878,078 459,120
J. Duddleston 3,878,418 458,780
D. Larkin 3,878,082 459,116
The proposal to ratify and approve amending the company's 1996 stock plan was
approved by a vote of 1,526,395 shares in favor, with 587,905 shares voting
against, 23,945 shares abstaining.
ITEM 5 OTHER INFORMATION: Not Applicable
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
Page 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AULT INCORPORATED
(REGISTRANT)
DATED: January 3, 2001 /s/ Frederick M. Green
-------------------- -----------------------------------
Frederick M. Green, President
Chief Executive Officer and
Chairman
DATED: January 3, 2001 /s/ Donald L. Henry
-------------------- -----------------------------------
Donald L. Henry
Chief Financial Officer
Page 14