Aerosonic Corp. of Clearwater filed revised financial statements Thursday as it struggled to bring itself into compliance so trading in its stock, halted Sept. 25, could resume.
The aircraft instrumentation maker also disclosed a number of insider boardroom deals that occurred under J. Mervyn Nabors, who resigned as president a year ago.
The company revealed that it had overstated revenue and inventory by several million dollars in March, two months after a new chief financial officer joined the company. Nabors stepped down as chairman of Aerosonic's board in May shortly after the Securities and Exchange Commission said it was investigating the company.
Nabors, who joined Aerosonic in 1962 and became president in 1996, headed a seven-member board that, in addition to himself, included three company executives, one retired executive, a company consultant and one of the company's lenders. Nabors is also the company's largest individual shareholder, with 31.7 percent of the stock.
While the boardroom shenanigans at Aerosonic can't match the alleged excesses of someone like Tyco International's former chief executive, Dennis Kozlowski, who reportedly put everything from shower curtains to his wife's birthday party on the company tab, they illustrate the dangers of having a board with no independent directors.
Though Aerosonic's compensation committee never met during the fiscal year ended Jan. 31, 2003, Nabors received more than a $100,000 raise that year, for total compensation of nearly $370,000. The company now says about $15,000 of that raise was unauthorized and later denied by the board, but a refund has not been requested.
Nabors also arranged consulting jobs with one board member, Daniel J. Garwacki at his own discretion. According to Aerosonic's recent SEC filing, the two men had "oral consulting arrangements" at a mutually agreed upon rate. During fiscal 2003, Garwacki and a related company received nearly $200,000 for work on projects "specifically assigned by Mr. Nabors," the company said. No information is given about the nature of the consulting assignments.
Garwacki left the board in October 2002 and the company has not used his services since, the filing said.
After Nabors was forced to step down from Aerosonic's board and its day-to-day management in mid May, he received a one-year consulting contract with the company, paying $120,000. "The company forecasts very limited use of Mr. Nabors' services for the balance of the agreement," said Aerosonic's filing, which noted that Nabors had not been nominated for re-election to the board. The number of board seats has been reduced to six and nominees will be elected at the company's upcoming annual meeting Dec. 18 at the Belleview Biltmore Hotel in Clearwater.
On Thursday, Aerosonic revised its financials for two quarters in fiscal 2002 and submitted data for comparable quarters in 2003 as it worked its way through accounting errors. Among the problems: Inventory had been overstated by nearly $7-million for the year through the end of July 2002.
For the quarter ended April 30, 2003, the company said it had net sales of $8.7-million with earnings of $503,000 or 13 cents a share. Revised figures for the same quarter in 2002 put sales at $6-million with a profit of $51,000 or 1 cent a share.
For the quarter ended July 31, 2003, the company reported a loss of $342,000 or 9 cents a share on revenues of $7.7-million. For the same period a year ago, revised earnings were $65,000 or 2 cents a share on revenues of $5.97-million.
Aerosonic, which said it is cooperating with the SEC investigation, hopes Thursday's filings will make it possible for trading of its stock to resume on the American Stock Exchange.
"Once the updated information is out there, the shareholders will have it and trading should resume," said Mark Perkins, Aerosonic's executive vice president. "We're really pushing to get everything out today."
