-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T4It/XFua3BnS30/y8guu6nyiKyadBIRC9H0iIDQJRKRDwRqCSouDYlHS1hBv3dn 3Ohu9g6YZEOH0C7Lv1t8Cw== 0001047469-98-019161.txt : 19980512 0001047469-98-019161.hdr.sgml : 19980512 ACCESSION NUMBER: 0001047469-98-019161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980511 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARMON INDUSTRIES INC CENTRAL INDEX KEY: 0000045635 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 440657800 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07916 FILM NUMBER: 98615382 BUSINESS ADDRESS: STREET 1: 1300 JEFFERSON CT CITY: BLUE SPRINGS STATE: MO ZIP: 64015 BUSINESS PHONE: 8162293345 MAIL ADDRESS: STREET 1: 1300 JEFFERSON INC CITY: BLUE SPRINGS STATE: MO ZIP: 64015 FORMER COMPANY: FORMER CONFORMED NAME: HARMON ELECTRONICS INC DATE OF NAME CHANGE: 19780823 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: March 31, 1998 Commission File Number: 0-7916 -------------- ------ HARMON INDUSTRIES, INC. ----------------------- (Exact name of registrant as specified in its charter) MISSOURI 44-0657800 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1300 Jefferson Court, Blue Springs, Missouri 64015 - -------------------------------------------- ----- (Address of principal executive offices) (Zip Code) 816-229-3345 ------------ (Registrant's telephone number, including area code) 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 --- --- Number of shares of Registrant's common stock outstanding as of March 31, 1998: 10,521,152 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The Consolidated Statements of Earnings, Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders' Equity are unaudited, but reflect, in the opinion of management, all adjustments necessary, all of which are considered normal and recurring, to present fairly the financial position of the Company at March 31, 1998 and December 31, 1997 as well as the results of its operations for the interim periods ended March 31, 1998 and March 31, 1997. The Consolidated Balance Sheet as of December 31, 1997 is derived from the audited Consolidated Balance Sheet as of that date. 2 HARMON INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 AMOUNTS IN THOUSANDS (EXCEPT PER SHARE DATA) (UNAUDITED)
Three months ended March 31, ---------------------------- 1998 1997 -------- -------- Net sales $ 60,558 $ 35,988 Cost of sales 46,014 26,196 Research and development expenditures 2,107 1,602 -------- -------- Gross profit 12,437 8,190 Selling, general and administrative expenses 7,540 5,847 Amortization of cost in excess of fair value of net assets acquired 217 160 Miscellaneous (income) expense-net 10 (23) -------- -------- Operating income 4,670 2,206 Interest expense (304) (124) Investment income 36 138 -------- -------- Earnings before income taxes 4,402 2,220 Income tax expense 1,590 772 -------- -------- Net earnings $ 2,812 $ 1,448 -------- -------- -------- -------- Net earnings per common share: Basic $ 0.27 $ 0.14 Diluted $ 0.27 $ 0.14 Shares used for computation: Basic 10,481 10,253 Diluted 10,608 10,304
3 HARMON INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS IN THOUSANDS OF DOLLARS
MARCH 31, 1998 DECEMBER 31, (UNAUDITED) 1997 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 1,531 $ 6,748 Trade receivables, less allowance for doubtful accounts of $314 in 1998 and $318 in 1997 47,117 45,001 Costs and estimated earnings in excess of billings on uncompleted contracts 4,704 2,850 Inventories: Work in process 7,108 6,171 Raw materials and supplies 34,377 32,894 -------- --------- 41,485 39,065 Deferred tax asset 2,215 2,215 Prepaid expenses and other current assets 1,546 473 -------- --------- Total current assets 98,598 96,352 -------- --------- Property, plant and equipment, at cost: Land 465 465 Buildings 11,644 11,363 Machinery and equipment 17,465 16,319 Office furniture and equipment 21,406 20,671 Transportation equipment 1,462 1,393 Leasehold improvements 3,435 3,120 -------- --------- 55,877 53,331 Less accumulated depreciation and amortization 30,890 29,302 -------- --------- Net property, plant and equipment 24,987 24,029 Deferred tax asset 414 414 Cost in excess of fair value of net assets acquired, net of accumulated amortization of $3,397 in 1998 and $3,180 in 1997 9,707 8,766 Deferred compensation asset 6,532 5,807 Other assets 730 401 -------- --------- $140,968 $ 135,769 -------- --------- -------- ---------
MARCH 31, 1998 DECEMBER 31, (UNAUDITED) 1997 ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current debt installments $ 1,260 $ 1,162 Accounts payable 18,427 21,554 Accrued payroll, bonus and employee benefit plan contributions 7,903 11,893 Billings in excess of costs and estimated earnings on uncompleted contracts 6,122 5,677 Federal and state income taxes payable 1,942 566 Other accrued liabilities 4,590 5,177 -------- --------- Total current liabilities 40,244 46,029 -------- --------- Deferred compensation liability 4,933 4,522 Long-term debt 21,873 15,456 -------- --------- Total liabilities 67,050 66,007 Stockholders' equity Common stock of $.25 par value; authorized 20,000,000 shares, issued 10,521,152 in 1998 and 10,437,369 in 1997 2,630 2,609 Additional paid-in capital 25,688 24,514 Foreign currency translation 253 104 Unearned compensation (224) (224) Retained earnings 45,571 42,759 -------- --------- Total stockholders' equity 73,918 69,762 -------- --------- $140,968 $ 135,769 -------- --------- -------- ---------
4 HARMON INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 IN THOUSANDS OF DOLLARS (UNAUDITED)
MARCH 31, MARCH 31, 1998 1997 ------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 2,812 $ 1,448 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,765 1,326 (Gain) loss on sale of property, plant and equipment -- (55) Changes in assets and liabilities: Trade receivables (548) 15,315 Inventories (2,173) (4,729) Estimated costs, earnings and billings on contracts (1,398) (1,582) Income tax receivable -- (713) Prepaid expenses (1,085) 1,064 Accounts payable (2,971) (5,805) Accrued payroll and benefits (4,347) (5,123) Current income taxes 1,166 (492) Other liabilities (1,397) (1,645) Other deferred liabilities 411 65 -------- --------- Total adjustments (10,577) (2,374) -------- --------- Net cash used in operating activities (7,765) (926) -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,437) (1,562) Deferred compensation contributions (725) (241) Other investing activities (290) 14 -------- --------- Net cash used in investing activities (3,452) (1,789) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 37 171 Proceeds from issuance of long-term debt -- 15,000 Borrowings under line of credit agreements 21,683 2,519 Repayments under line of credit agreements (15,595) (5,369) Principal payments of long-term debt (186) (277) -------- --------- Net cash provided by financing activities 5,939 12,044 -------- --------- Foreign currency translation adjustment 61 (107) -------- --------- Net increase (decrease) in cash and cash equivalents (5,217) 9,222 -------- --------- Cash and cash equivalents at beginning of period 6,748 -- -------- --------- Cash and cash equivalents at end of period $ 1,531 $ 9,222 -------- --------- -------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 522 $ 92 Income taxes $ 743 $ 1,973
5 HARMON INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY IN THOUSANDS OF DOLLARS (UNAUDITED)
Additional Foreign Total Common Paid-in Currency Unearned Retained Stockholders' Comprehensive Stock Capital Translation Compensation Earnings Equity Income ------ ---------- ----------- ------------ -------- ------------- ------------- Balance at December 31, 1996 $2,561 $22,340 $203 -- $32,835 $57,939 ------ ---------- ----------- ------------ -------- ------------- Net earnings 1,447 1,447 $1,447 Common stock issued: Stock options and other 12 159 171 Foreign currency translation (107) (107) (107) --------- Comprehensive income $1,340 --------- ------ ---------- ----------- ------------ -------- ------------- --------- Balance at March 31, 1997 2,573 22,499 96 -- 34,282 59,450 ------ ---------- ----------- ------------ -------- ------------- Net earnings 2,987 2,987 $2,987 Cash dividends paid (515) (515) Common stock issued: Stock options and other 5 239 244 Foreign currency translation 58 58 58 --------- Comprehensive income $3,045 --------- ------ ---------- ----------- ------------ -------- ------------- --------- Balance at June 30, 1997 2,578 22,738 154 -- 36,754 62,224 ------ ---------- ----------- ------------ -------- ------------- Net earnings 2,639 2,639 $2,639 Common stock issued: Deferred compensation 5 267 (163) 109 Stock options and other 1 31 32 Foreign currency translation (122) (122) (122) --------- Comprehensive income $2,517 --------- ------ ---------- ----------- ------------ -------- ------------- --------- Balance at September 30, 1997 2,584 23,036 32 (163) 39,393 64,882 ------ ---------- ----------- ------------ -------- ------------- Net earnings 3,888 3,888 $3,888 Cash dividends paid (522) (522) Common stock issued: Acquisition of businesses 23 1,337 1,360 Deferred compensation 1 88 (61) 28 Stock options and other 1 53 54 Foreign currency translation 72 72 72 --------- Comprehensive income $3,960 --------- ------ ---------- ----------- ------------ -------- ------------- --------- Balance at December 31, 1997 2,609 24,514 104 (224) 42,759 69,762 ------ ---------- ----------- ------------ -------- ------------- Net earnings 2,812 2,812 $2,812 Common stock issued: Acquisition of business 20 1,138 1,158 Stock options and other 1 36 37 Foreign currency translation 149 149 149 --------- Comprehensive income $2,961 ------ ---------- ----------- ------------ -------- ------------- --------- Balance at March 31, 1998 $2,630 $25,688 $253 ($224) $45,571 $73,918 ------ ---------- ----------- ------------ -------- ------------- ------ ---------- ----------- ------------ -------- -------------
6 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales for the quarter ended March 31, 1998 were $60.6 million, an increase of $24.6 million, or 68.3%, from the first quarter of 1997. The increase in net sales is the result of continued strong demand for the Company's goods and services and substantial shipments on two large projects; one in the freight market and one in the transit market. Gross profit for the quarter ended March 31 increased by 51.9% to $12.4 million in 1998 from $8.2 million in 1997. This increase in gross profit in the result of the sales increase previously discussed. Gross profit margin for the first quarter of 1998 decreased to 20.5% from 22.8% in the prior year quarter. The decline in gross profit margin is primarily the result of an increase in the sales mix toward services, systems and pass- through sales. Research and development expenditures (R&D) for the quarter ended March 31, 1998 increased to $2.1 million from $1.6 million in the same quarter one year ago. As a result of the increase in net sales, R&D as a percent of net sales decreased from 4.5% in the first quarter of 1997 to 3.5% in the first quarter of 1998. Selling, general and administrative expenses (SG&A) were $7.5 million during the first quarter of 1998 compared with $5.8 million during the prior year quarter. Much of the increase in SG&A was represented by labor and benefit expenses resulting from an increase in full-time employees from the first quarter of 1997 to the first quarter of 1998 of approximately 25%. SG&A as a percent of net sales decreased from 16.2% during the quarter ended March 31, 1997 to 12.5% during the quarter ended March 31, 1998. The decrease in SG&A as a percent of net sales for the first quarter of 1998 compared with the prior year quarter resulted from net sales increasing at a rate which exceeded the rate of increase in SG&A. Amortization expense increased to $217 thousand in the first quarter of 1998 from $160 thousand in the same quarter one year ago. This increase is attributable to the increase in goodwill resulting from acquisitions during the twelve months ended March 31, 1998. Interest expense for the quarter ended March 31, 1998 increased to $304 thousand from $124 thousand for the prior year quarter. This increase is the result of higher borrowings in support of increased working capital in 1998 versus 1997. Additionally, the Company completed a $15 million private debt placement during the first quarter of 1997 on which interest expense was incurred for the entire first quarter of 1998 and only a portion of the first quarter of 1997. Investment income decreased from $138 thousand during the first quarter of 1997 to $36 thousand during the first quarter of 1998. This decrease is the result of lower cash balances available for investment during the 1998 quarter compared to the 1997 quarter. Cash balances available for investment were substantially higher during the 1997 quarter as a result of the private placement discussed above. 7 For the quarter ended March 31, 1998, the effective tax rate increased to 36.1% from 34.8% for the comparable period of 1997. This increase is due to the use of United Kingdom tax loss carryforwards during the 1997 period. Orders for the Company's products and services during the quarter ended March 31, 1998 increased to $77.5 million from $46.6 million during the 1997 quarter. The Company's order backlog increased to $89.4 million at March 31, 1998, up from $74.5 million at December 31, 1997 and $70.2 million one year ago. On January 29, 1998 the Company acquired the stock of a railroad industry maintenance and installation services provider. This acquisition was made with the issuance of 80,820 shares of unregistered common stock valued at $14.33 per share. This acquisition has been accounted for by the purchase method of accounting and accordingly, the operating results have been included in the Company's consolidated results of operations from the date of acquisition. The excess of the consideration given over the fair value of net assets acquired has been recorded as goodwill of $1,158,000. At the end of the first quarter of 1998, the Company had $25.6 million in liquidity. This consisted of $1.5 million in cash and cash equivalents plus $24.1 million available under bank lines of credit. The current ratio at March 31, 1998 was 2.45 to 1 compared to 2.09 to 1 at December 31, 1997 and 2.77 to 1 at March 31, 1997. The increase in the current ratio from December 31, 1997 to March 31, 1998 is the result of increases in inventory and accounts receivable related to the increase in sales and decreases in accounts payable and accrued payroll and benefits from year-end levels. Cash used in operating activities for the quarter ended March 31, 1998 was $7.8 million compared to $0.9 million for the same quarter one year ago. The principal reason for this increase was a decrease in trade accounts payable and accrued payroll and benefits from December 31, 1997. For the quarter ended March 31, 1998 the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. The adjustment to stockholders' equity as a result of the cumulative foreign currency translation adjustment is included in comprehensive income as presented in the Consolidated Statements of Stockholders' Equity. 8 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES The Registrant's common stock was split on a three-for-two basis during the quarter ended March 31, 1998. The split was effective February 27, 1998 for shareholders of record February 13, 1998 and increased the common shares outstanding from approximately 7.0 million to approximately 10.5 million. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit Number Exhibit Page ------- ------------------------ ---- 11 Computation of per share earnings 11 (b) Reports on Form 8-K: There were no reports on Form 8-K for the quarter ended March 31, 1998. 9 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. HARMON INDUSTRIES, INC.
Date: May 11, 1998 /s/Bjorn E. Olsson ------------------ Bjorn E. Olsson, President and Chief Executive Officer Date: May 11, 1998 /s/Charles M. Foudree --------------------- Charles M. Foudree, Executive Vice President-Finance Date: May 11, 1998 /s/Stephen L. Schmitz --------------------- Stephen L. Schmitz, Vice President-Controller
10 EX-11 2 EXHIBIT 11 Exhibit 11 Harmon Industries, Inc. Form 10-Q Computation of Per Share Earnings (in thousands, except earnings per share) Three Months ended March 31, ---------------------------- 1998 1997 --------- -------- Basic: Net earnings $ 2,812 $ 1,448 --------- -------- --------- -------- Weighted average shares outstanding 10,493 10,253 Shares representing unearned compensation (12) 0 --------- -------- Total 10,481 10,253 --------- -------- --------- -------- Basic earnings per share $ 0.27 $ 0.14 --------- -------- --------- -------- Diluted: Net earnings $ 2,812 $ 1,448 --------- -------- --------- -------- Weighted average shares outstanding 10,493 10,253 Shares representing unearned compensation (12) 0 Equivalent shares under option plans 127 51 --------- -------- Total 10,608 10,304 --------- -------- --------- -------- Diluted earnings per share $ 0.27 $ 0.14 --------- -------- --------- -------- 11 EX-27 3 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF HARMON INDUSTRIES, INC. AT MARCH 31, 1998 AND FOR THE THREE MONTHS THEN ENDED. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1,531 0 47,431 (314) 41,485 98,598 55,877 (30,890) 140,968 40,244 23,133 0 0 2,630 71,288 140,968 60,558 60,558 48,121 48,121 0 0 304 4,402 1,590 2,812 0 0 0 2,812 0.27 0.27
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