-----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, UC+hiDv30jyFyjkeZgqzIY15Qs3lw5noKyFCZ5b/UkeX1/vHovXb1BLBUqXS6t+w mLgLEmxQNAB9B3XWFO/s0Q== 0000047035-96-000020.txt : 19961209 0000047035-96-000020.hdr.sgml : 19961209 ACCESSION NUMBER: 0000047035-96-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961103 FILED AS OF DATE: 19961206 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERLEY INDUSTRIES INC /NEW CENTRAL INDEX KEY: 0000047035 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 232413500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05411 FILM NUMBER: 96676530 BUSINESS ADDRESS: STREET 1: 10 INDUSTRY DR CITY: LANCASTER STATE: PA ZIP: 17603 BUSINESS PHONE: 7173972777 MAIL ADDRESS: STREET 1: 10 INDUSTRY DRIVE CITY: LANCASTER STATE: PA ZIP: 17603 FORMER COMPANY: FORMER CONFORMED NAME: HERLEY MICROWAVE SYSTEMS INC DATE OF NAME CHANGE: 19900510 FORMER COMPANY: FORMER CONFORMED NAME: HERLEY INDUSTRIES INC DATE OF NAME CHANGE: 19831103 10-Q 1 QUARTERLY REPORT FOR 14 WEEKS ENDED NOV 3, 1996 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended: November 3, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .................. to..................... Commission File Number 0-5411 HERLEY INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE #23-2413500 - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 10 Industry Drive, Lancaster, Pennsylvania 17603 - ------------------------------------------ ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (717) 397-2777 -------------- --------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) 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. [X] Yes [ ] No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of December 3, 1996 - 3,115,038 shares of Common Stock HERLEY INDUSTRIES, INC AND SUBSIDIARIES INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION PAGE Item 1 - Financial Statements: Consolidated Balance Sheets - November 3, 1996 and July 28,1996 2 Consolidated Statements of Operations For the fourteen weeks ended November 3, 1996 and the thirteen weeks ended October 29, 1995 3 Consolidated Statements of Cash Flows For the fourteen weeks ended November 3, 1996 and the thirteen weeks ended October 29, 1995 4 Notes to Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION 8 Signatures 10 Computation of per share earnings 11 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS November 3, July 28, 1996 1996 ---------- ---------- Unaudited Audited ASSETS Current Assets: Cash and cash equivalents $ 351,746 $ 1,104,445 Accounts receivable 3,805,517 3,249,225 Notes receivable-officers 2,132,365 2,083,543 Other receivables 250,098 124,992 Inventories 8,455,171 8,010,687 Deferred taxes and other 2,078,175 1,689,988 ---------- ---------- Total Current Assets 17,073,072 16,262,880 Property, Plant and Equipment, net 12,445,901 12,579,044 Intangibles, net of amortization 4,512,211 4,580,236 Available-for-sale Securities - 4,912,387 Other Investments 3,000,000 3,000,000 Other Assets 1,170,077 1,174,395 ========== ========== $ 38,201,261 $ 42,508,942 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 300,000 $ 300,000 Accounts payable and accrued expenses 5,210,298 5,123,868 Income taxes payable 76,388 166,295 Reserve for contract losses 422,610 489,110 Advance payments on contracts 672,124 1,480,033 ---------- ---------- Total Current Liabilities 6,681,420 7,559,306 ---------- ---------- Long-term Debt 6,421,000 11,021,000 Deferred Income Taxes 2,246,886 1,923,058 Excess of fair value of net assets of business acquired over cost, net of amortization 851,958 973,667 ---------- ---------- 16,201,264 21,477,031 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 10,000,000 shares; issued 2,951,247 at November 3, 1996 and 2,936,122 at July 28, 1996 295,125 293,612 Additional paid-in capital 11,543,672 11,448,827 Retained earnings 10,161,200 9,289,472 ---------- ---------- Total Shareholders' Equity 21,999,997 21,031,911 ========== ========== $ 38,201,261 $ 42,508,942 ========== ========== The accompanying notes are an integral part of these financial statements. 2 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 14 weeks ended 13 weeks ended November 3, October 29, 1996 1995 --------------- --------------- Net sales $ 7,507,904 $ 7,062,891 --------------- --------------- Cost and expenses: Cost of products sold 5,171,174 4,888,421 Selling and administrative expenses 1,398,769 1,414,561 --------------- --------------- 6,569,943 6,302,982 --------------- --------------- Operating income 937,961 759,909 --------------- --------------- Other income (expense): Gain on sale of available-for-sale securities 15,440 55,554 Dividend and interest income 47,955 62,786 Interest expense (129,628) (227,018) --------------- --------------- (66,233) (108,678) --------------- --------------- Income before income taxes 871,728 651,231 Provision for income taxes - 135,400 --------------- --------------- Net income $ 871,728 $ 515,831 =============== =============== Earnings per common and common equivalent share $.25 $.17 ==== ==== Weighted average number of common and common equivalent shares outstanding 3,462,550 2,960,242 ========= ========= The accompanying notes are an integral part of these financial statements. 3 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
14 weeks ended 13 weeks ended November 3, October 29, 1996 1995 ---------------- ---------------- Cash flows from operating activities: Net income $ 871,728 $ 515,831 ---------------- ---------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 377,224 384,168 (Gain) on sale of marketable securities (15,440) (55,554) (Increase) in deferred tax assets - (19,291) Increase in deferred tax liabilities 323,828 103,798 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (609,390) 557,145 (Increase) in notes receivable-officers (48,822) - (Increase) in other receivables (72,008) (24,327) Decrease (increase) in inventories (444,484) 702,103 (Increase) in deferred taxes and other (388,187) (54,172) Increase (decrease) in accounts payable and accrued expenses 86,430 (810,392) (Decrease) in income taxes payable (89,907) - (Decrease) in reserve for contract losses (66,500) (183,340) Increase (decrease) in advance payments on contracts (807,909) 1,007,436 Other, net - 40,000 ---------------- ---------------- Total adjustments (1,755,165) 1,647,574 ---------------- ---------------- Net cash provided by (used in) operating activities (883,437) 2,163,405 ---------------- ---------------- Cash flows from investing activities: Purchase of available-for-sale securities (159,650) (1,071,498) Proceeds from sale of available-for-sale securities 5,083,778 2,120,031 Capital expenditures (289,748) (118,327) ---------------- ---------------- Net cash provided by investing activities 4,634,380 930,206 ---------------- ---------------- Cash flows from financing activities: Borrowings under bank line of credit 1,975,000 275,000 Proceeds from exercise of stock options 96,358 - Payments under lines of credit (6,575,000) (1,475,000) Payments of long-term debt - (13,370) Purchase of treasury stock - (1,224,345) ---------------- ---------------- Net cash (used in) financing activities (4,503,642) (2,437,715) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents (752,699) 655,896 Cash and cash equivalents at beginning of period 1,104,445 272,755 ---------------- ---------------- Cash and cash equivalents at end of period $ 351,746 $ 928,651 ================ ================
The accompanying notes are an integral part of these financial statements. 4 Herley Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements - (Unaudited) 1. The consolidated financial statements include the accounts of Herley Industries, Inc. and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of the Company, the accompanying consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations and cash flows for the periods presented. These financial statements (except for the balance sheet presented at July 28,1996) are unaudited and have not been reported on by independent public accountants. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year due to external factors which are beyond the control of the Company. 2. Inventories at November 3, 1996 and July 28,1996 are summarized as follows: November 3, 1996 July 28,1996 ---------------- ------------ Purchased parts and raw materials $ 3,688,398 $ 3,358,256 Work in process 4,683,392 4,580,538 Finished products 83,381 71,893 ----------- ----------- $ 8,455,171 $ 8,010,687 ========= ========= 3. The following is a summary of available-for-sale securities: Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ---------- July 28, 1996 Government bonds $ 3,783,402 $ - $ - $ 3,783,402 Other 1,125,700 - - 1,125,700 --------- ---------- ---------- --------- Total debt securities 4,909,102 - - 4,909,102 Equity securities 3,285 - - 3,285 ---------- --------- ---------- --------- $ 4,912,387 $ - $ - $ 4,912,387 ========= ========= ========== ========= During the quarter ended November 3, 1996, the Company liquidated all of its available-for-sale securities and used the proceeds to pay down its bank debt. 4. In January 1996, the Company entered into a revolving credit agreement with a bank that provides for the extension of credit in the aggregate principal amount of $11,000,000 and may be used for general corporate purposes, including business acquisitions. The facility requires the payment of interest only on a monthly basis and payment of the outstanding principal balance on January 31, 1998. Interest is set biweekly at 1% over the bank's Federal Funds Rate applied to outstanding balances (none at November 3, 1996) up to 80% of the net equity value of available-for-sale securities, and at the bank's Base Rate (8.25% at November 3, 1996) for outstanding balances in excess of this limit. The premium rate portion of the facility would be secured by any available-for-sale securities. The credit facility also provides for the issuance of stand-by letters of credit with a fee of 1.0% per annum of the amounts outstanding under the facility. At November 3, 1996, stand-by letters of credit aggregating $2,811,846 were outstanding. 5 The agreement contains various financial covenants, including, among other matters, the maintenance of working capital, tangible net worth, and restrictions on cash dividends. 5. No income tax provision was recorded in the fourteen weeks ended November 3, 1996 due to the decrease in the valuation allowance for net operating loss carryforwards expected to be realized. 6. Supplemental cash flow information is as follows: November 3, 1996 October 29, 1995 ---------------- ---------------- Cash paid during the period for: Interest $ 103,594 $ 119,404 Income Taxes 90,310 1,538 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources As of November 3, 1996 and July 28, 1996, working capital was approximately $10,392,000 and $8,704,000, respectively, and the ratio of current assets to current liabilities was 2.56 to 1 and 2.15 to 1, respectively. As is customary in the defense industry, inventory is partially financed by progress payments. The unliquidated balance of these advanced payments was approximately $672,000 at November 3, 1996, and $1,480,000 at July 28, 1996, a reduction of $808,000 during the quarter. Net cash used in operations during the quarter was approximately $883,000, which was primarily funded through the reduction in cash and cash equivalents. Net cash provided from investing activities of approximately $4,634,000 in the quarter results primarily from the liquidation of all of the Company's available-for-sale securities. The Company used the proceeds to pay down $4,900,000 of its long term bank debt. The Company maintains a revolving credit facility with a bank for an aggregate of $11,000,000 which expires January 31, 1998. As of November 3, 1996 and July 28, 1996, the Company had borrowings outstanding of $2,350,000 and $6,950,000, respectively. At November 3, 1996, the Company had cash and cash equivalents of approximately $352,000. The Company believes that presently anticipated future cash requirements will be provided by internally generated funds, and existing credit facilities. Results of Operations Fourteen weeks ended November 3, 1996 and Thirteen weeks ended October 29, 1995 Net sales for the 14 weeks ended November 3, 1996 were approximately $7,508,000 compared to $7,063,000 in the first quarter of fiscal 1996. The sales increase of $445,000 (6.3%) is attributable to an increase of approximately $714,000 in microwave components; offset by a decrease of $269,000 in flight instrumentation products. Gross profit of 31.1% for the 14 weeks ended November 3, 1996 exceeded that of the first quarter in the prior year of 30.8% due to an increase of $410,000 in higher margin foreign sales and an increase in absorption of fixed costs due to the higher sales volume. Selling and administrative expenses for the 14 weeks ended November 3, 1996 were $1,399,000 compared to $1,415,000 in the first quarter of fiscal 1996, a decrease of $16,000 which is attributable primarily to a reduction in personnel costs. Other (expense) for the 14 weeks ended November 3, 1996 is $42,000 lower than the first quarter in the prior year due to a decrease in interest expense of $97,000 as the result of lower borrowing levels; offset by decreases in dividend and interest income of $15,000 and net gains on available-for-sale securities of $40,000. No income tax provision was recorded in the first quarter fiscal 1997 due to the decrease in the valuation allowancefor net operating loss carryforwards expected 7 to be realized. A valuation allowance has been provided previously to reduce deferred tax assets to their net realizable value for amounts which management believes may expire unutilized. The uncertainty that past performance will be indicative of future earnings due to the unpredictable nature of the industry in which the Company operates was a determining factor in assessing the need for a valuation allowance. 8 Herley Industries, Inc. and Subsidiaries PART I I - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS: In May and June 1994, the Company was served with two class action complaints against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Pennsylvania. The claims were made under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. One of the claims is also based upon alleged negligence. The claims relate to the Company's acquisition of Carlton Industries, Inc. and its subsidiary, Vega Precision Laboratories, Inc. The claims were combined into one matter and a consolidated Complaint. In April, 1995, the Court certified that the claims based on the Securities Exchange Act may proceed as a Class Action pursuant to Rule 23(b) (3), but without prejudice to the rights of the parties thereafter to seek modification of the Class or revocation of leave to proceed. The Court refused to certify the negligence claim as a Class Action. In May, 1995, the parties negotiated a settlement of all claims in consideration for a payment of $450,000 subject to Notice to the Class and Court approval. The Stipulation of Settlement was approved by the Court on October 15, 1996. In November 1996 payment of the settlement was made pursuant to the Stipulation and Order. In May, 1995, the Company was served with a Class Action Complaint against the Company and its Chief Executive Officer in the United States District Court for the Eastern District of Pennsylvania. The claim was made under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10(b)-5 thereunder. The claim relates to the Company's settlement of the Litton Action in the Essex Superior Court of Massachusetts and alleges, inter alia, that there was insufficient disclosure by the Company of its true potential exposure in that claim. Cross motions for summary judgment have been filed and are pending before the Court. The Company believes it has a meritorious defense and intends to vigorously defend against the action. ITEM 2 - CHANGES IN SECURITIES: None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES: None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None ITEM 5 - OTHER INFORMATION: None ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibit 11: Computation of per share earnings. (b) During the quarter for which this report is filed, the Registrant filed the following reports under Form 8-K: None 9 FORM 10-Q 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. HERLEY INDUSTRIES, INC. ----------------------- Registrant BY: /S/ Myron Levy ------------------------- Myron Levy, President BY: /S/ Anello C. Garefino --------------------------- Anello C. Garefino Principal Financial Officer DATE: December 3, 1996 10 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS HERLEY INDUSTRIES, INC. AND SUBSIDIARIES Exhibit 11 COMPUTATION OF PER SHARE EARNINGS
Fourteen weeks ended Thirteen weeks ended November 3, 1996 October 29, 1995 ---------------- ---------------- Net Income $ 871,728 $ 515,831 ======== ======== Weighted average shares outstanding: Shares outstanding from beginning of period 2,936,122 3,015,988 Shares issued for options exercised 4,121 - Treasury shares acquired - (156,330) Common equivalents - options and warrants 522,307 100,584 --------- --------- Weighted average common and common equivalent shares outstanding 3,462,550 2,960,242 ========= ========= Earnings per common and common equivalent share: $ .25 $ .17 === ===
11 EX-27 3 FDS--NOV-3-1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 14 WEEKS ENDED NOVEMBER 3, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS AUG-3-1997 JUL-29-1996 NOV-3-1996 351,746 0 3,805,517 0 8,455,171 17,073,072 24,093,569 11,647,668 40,148,390 6,681,420 0 0 0 295,125 21,704,872 40,148,390 7,507,904 7,507,904 5,171,174 6,569,943 0 0 129,628 871,728 0 871,728 0 0 0 871,728 0.25 0.25
-----END PRIVACY-ENHANCED MESSAGE-----