-----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, E3VsqiCrcyeLsnPWktBoew0DSnqRMQxnJSBZOZ2Fm9UG1joTtLplB2ff5OcWq3u0 YXtjpq50Pr8wsm1nBLZY2Q== 0000047035-97-000006.txt : 19970312 0000047035-97-000006.hdr.sgml : 19970312 ACCESSION NUMBER: 0000047035-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970202 FILED AS OF DATE: 19970311 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: 97554288 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 13 WEEKS ENDED FEB 2, 1997 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: February 2, 1997 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 March 6, 1997 - 3,167,012 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 - February 2, 1997 and July 28, 1996 2 Consolidated Statements of Operations For the thirteen and twenty-seven weeks ended February 2, 1997, and the thirteen and twenty-six weeks ended January 28, 1996 3 Consolidated Statements of Cash Flows For the thirteen and twenty-seven weeks ended February 2, 1997, and the thirteen and twenty-six weeks ended January 28, 1996 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 February 2, July 28, 1997 1996 ----------- ---------- Unaudited Audited ----------- ---------- ASSETS Current Assets: Cash and cash equivalents $ 443,585 $ 1,104,445 Accounts receivable 4,519,629 3,249,225 Notes receivable-officers 2,066,526 2,083,543 Other receivables 133,057 124,992 Inventories 8,783,608 8,010,687 Deferred taxes and other 1,740,451 1,689,988 ---------- ---------- Total Current Assets 17,686,856 16,262,880 Property, Plant and Equipment, net 12,113,364 12,579,044 Intangibles, net of amortization 4,444,186 4,580,236 Available-for-sale Securities - 4,912,387 Other Investments 3,000,000 3,000,000 Other Assets 1,161,645 1,174,395 ========== ========== $ 38,406,051 $ 42,508,942 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 300,000 $ 300,000 Accounts payable and accrued expenses 4,295,201 5,123,868 Billings in excess of costs and earnings on contracts in process 528,336 - Income taxes payable 32,170 166,295 Reserve for contract losses 279,900 489,110 Advance payments on contracts 959,234 1,480,033 ---------- ---------- Total Current Liabilities 6,394,841 7,559,306 ---------- ---------- Long-term Debt 6,546,000 11,021,000 Deferred Income Taxes 1,866,993 1,923,058 Excess of fair value of net assets of business acquired over cost, net of amortization 730,249 973,667 ---------- ---------- 15,538,083 21,477,031 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 10,000,000 shares; issued 3,115,846 at February 2, 1997 and 2,936,122 at July 28, 1996 311,584 293,612 Additional paid-in capital 11,615,605 11,448,827 Retained earnings 10,940,779 9,289,472 ---------- ---------- Total Shareholders' Equity 22,867,968 21,031,911 ========== ========== $ 38,406,051 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)
Thirteen weeks ended 27 weeks ended 26 weeks ended February 2, January 28, February 2, January 28, 1997 1996 1997 1996 --------- --------- ---------- ---------- Net sales $ 7,146,208 $ 7,197,155 $ 14,654,112 $ 14,260,046 --------- --------- ---------- ---------- Cost and expenses: Cost of products sold 4,916,166 5,028,481 10,087,340 9,916,902 Selling and administrative expenses 1,352,441 1,541,345 2,751,210 2,955,906 --------- --------- ---------- ---------- 6,268,607 6,569,826 12,838,550 12,872,808 --------- --------- ---------- ---------- Operating income 877,601 627,329 1,815,562 1,387,238 --------- --------- ---------- ---------- Other income (expense): Gain (loss) on sale of available-for-sale securities and other investments (173) 1,109,443 15,267 1,164,997 Dividend and interest income 89,930 99,608 137,885 162,394 Interest expense (187,779) (218,531) (317,407) (445,549) --------- --------- ---------- ---------- (98,022) 990,520 (164,255) 881,842 --------- --------- ---------- ---------- Income before income taxes 779,579 1,617,849 1,651,307 2,269,080 Provision for income taxes - 80,700 - 216,100 --------- --------- ---------- ---------- Net income $ 779,579 $ 1,537,149 $ 1,651,307 $ 2,052,980 ========= ========= ========== ========== Earnings per common and common equivalent share $ .22 $ .49 $ .47 $ .70 ========= ========= ========== ========= Weighted average number of common and common equivalent shares outstanding 3,575,365 3,131,001 3,548,711 2,944,782 ========= ========= ========== ==========
The accompanying notes are an integral part of these financial statements. 3 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
27 weeks ended 26 weeks ended February 2, January 28, 1997 1996 ---------- ---------- Cash flows from operating activities: Net income $ 1,651,307 $ 2,052,980 ---------- ---------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 754,083 773,071 (Gain) loss on sale of available-for-sale securities and other investments (15,440) (1,164,997) Decrease (increase) in deferred tax assets - 214,380 Increase (decrease) in deferred tax liabilities (56,065) 112,818 Recovery of unrealized loss on securities - 550 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (1,270,404) 851,504 Decrease (increase) in notes receivable-officers 17,017 (1,723,148) Decrease (increase) in other receivables (8,065) (57,410) Decrease (increase) in inventories (772,921) 1,244,671 Decrease (increase) in deferred taxes and other (50,463) (271,060) (Decrease) in accounts payable and accrued expenses (828,667) (1,211,505) Increase in billings in excess of costs and earnings on contracts in process 528,336 - Increase (decrease) in income taxes payable (134,125) 204,370 Increase (decrease) in reserve for contract losses (209,210) 55,660 Increase (decrease) in advance payments on contracts (520,799) 1,094,896 Other, net - 40,001 ---------- ---------- Total adjustments (2,566,723) 163,801 ---------- ---------- Net cash provided by (used in) operating activities (915,416) 2,216,781 ---------- ---------- Cash flows from investing activities: Purchase of available-for-sale securities (159,364) (6,617,407) Proceeds from sale of available-for-sale securities 5,083,908 3,745,645 Proceeds from sale of other investments - 3,823,233 Proceeds from sale of fixed assets 9,392 - Capital expenditures (389,130) (287,803) ---------- ---------- Net cash provided by investing activities 4,544,806 663,668 ---------- ---------- Cash flows from financing activities: Borrowings under bank line of credit 2,325,000 7,875,000 Proceeds from exercise of stock options 184,750 - Payments under lines of credit (6,800,000) (8,975,000) Payments of long-term debt - (28,979) Purchase of treasury stock - (1,224,345) ---------- ---------- Net cash (used in) financing activities (4,290,250) (2,353,324) ---------- ---------- Net increase (decrease) in cash and cash equivalents (660,860) 527,125 Cash and cash equivalents at beginning of period 1,104,445 272,755 ---------- ---------- Cash and cash equivalents at end of period $ 443,585 $ 799,880 ========== ==========
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 February 2, 1997 and July 28,1996 are summarized as follows: February 2, 1997 July 28,1996 ---------------- ------------ Purchased parts and raw materials $ 4,077,807 $ 3,358,256 Work in process 4,610,603 4,580,538 Finished products 95,198 71,893 --------- --------- $ 8,783,608 $ 8,010,687 ========= ========= 3. The following is a summary of available-for-sale securities at July 28, 1996: Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value --------- -------- -------- ---------- 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 ========= ======== ======== ========== The Company liquidated all of its available-for-sale securities during the first quarter and used the proceeds to pay down its bank debt. 4. In January 1997, the Company renewed its 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, 1999. Interest is at 1% over the FOMC Target Rate applied to outstanding balances (none at February 2, 1997) up to 80% of the net equity value of available- for-sale securities, and at the bank's Base Rate (8.25% at February 2, 1997) 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 5 the amounts outstanding under the facility. At February 2, 1997, stand-by letters of credit aggregating $2,888,633 were outstanding. 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 1997 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: February 2, 1997 January 28, 1996 ---------------- ---------------- Cash paid during the period for: Interest $ 331,106 $ 483,488 Income Taxes 134,527 5,488 Cashless exercise of stock options $ 1,884,708 $ - 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- As of February 2, 1997 and July 28, 1996, working capital was approximately $11,292,015 and $8,704,000, respectively, and the ratio of current assets to current liabilities was 2.77 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 $959,000 at February 2, 1997, and $1,480,000 at July 28, 1996, a reduction of $521,000 during the period. Net cash used in operations during the quarter was approximately $915,000, which was primarily funded through the reduction in cash and cash equivalents and the exercise of stock options. Net cash provided from investing activities of approximately $4,545,000 during the period 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, 1999. As of February 2, 1997 and July 28, 1996, the Company had borrowings outstanding of $2,475,000 and $6,950,000, respectively. At February 2, 1997, the Company had cash and cash equivalents of approximately $444,000. The Company believes that presently anticipated future cash requirements will be provided by internally generated funds, and existing credit facilities. The Board of Directors has authorized the purchase of up to an aggregate of 300,000 shares of the Company's common stock from time to time, at prevailing market prices, in the open market or in parivate transactions. Results of Operations - --------------------- Thirteen weeks ended February 2, 1997 and January 28, 1996 - ---------------------------------------------------------- Net sales for the thirteen weeks ended February 2, 1997 were essentially unchanged from the comparable period of the prior year. Cost of products sold for the thirteen weeks ended February 2, 1997 decreased as a percentage of net sales from 70% in 1996 to 69% in 1997. This decrease is attributable to more aggressive pricing as well as control of our variable costs. Selling and administrative expenses for the thirteen weeks ended February 2, 1997 decreased by $188,900 as compared to the prior year second quarter. The reduction is attributable primarily to reduced representative fees and personnel costs. Other income (expense) for the thirteen weeks ended February 2, 1997 decreased $1,089,000 from the prior year due to net gains on the sale of a partnership interest in M. D. SASS RE/ENTERPRISE PARTNERS, L.P. and other marketable securities of approximately $1,109,000 in 1996 and a reduction in investment income of $10,000 in 1997; offset by a decrease in interest expense of $30,000. No income tax provision has been recorded in the thirteen weeks ended February 2, 1997 due to the anticipated utilization of certain net operating loss carryforwards. 7 Twenty-seven weeks ended February 2, 1997 and twenty-six weeks ended January 28, 1996 - -------------------------------------------------------------------------------- Net sales for the twenty-seven weeks ended February 2, 1997 increased by approximately $394,000, or 3%. Cost of products sold for the twenty-seven weeks ended February 2, 1997 decreased as a percentage of net sales from 70% in 1996 to 69% in 1997. This decrease is attributable to higher margins due to more aggressive pricing as well as control of our variable costs. Selling and administrative expenses for the twenty-seven weeks ended February 2, 1997 decreased approximately $205,000 from the prior year which is attributable to decreased representative fees and personnel costs. Other income (expense) for the twenty-seven weeks ended February 2, 1997 decreased approximately $1,046,000 from the prior year period due to net gains on the sale of a partnership interest in M. D. SASS RE/ENTERPRISE PARTNERS, L.P. and other marketable securities of approximately $1,165,000 in 1996 and a $25,000 decrease in investment income in 1997; offset by a decrease in interest expense of $128,000. PART I I - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS: 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. In January, 1997 the parties negotiated a settlement of all claims in consideration for a payment of $170,000 subject to Certification of the Class, Notice and Court approval. A Stipulation of Settlement is being prepared for submission to the Court requesting a Preliminary Order and a Subsequent hearing prior to final Approval. ITEM 2 - CHANGES IN SECURITIES: None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES: None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: (a) The Registrant held its Annual Meeting of Stockholders on December 17, 1996. 8 (b) Five directors were elected at the Annual Meeting of Stockholders as follows: Class I - To serve until the Annual Meeting of Stockholders in 1997 or until their successors are chosen and qualified: Name Votes For Votes Withheld ------------------------ --------- -------------- David H. Lieberman 2,425,780 10,050 Class II - To serve until the Annual Meeting of Stockholders in 1998 or until their successors are chosen and qualified: Name Votes For Votes Withheld ------------------------ --------- -------------- Myron Levy 2,425,780 10,050 Adm. Thomas J. Allshouse 2,425,780 10,050 Class III - To serve until the Annual Meeting of Stockholders in 1999 or until their successors are chosen and qualified: Name Votes For Votes Withheld ----------------------- --------- -------------- Lee N. Blatt 2,425,780 10,050 John A. Thonet 2,425,780 10,050 (c) A proposal to ratify the issuance of Warrants to the Company's executive officers and certain directors was approved at the Annual Meeting. Votes cast at this meeting were 1,538,427 for, 125,596 shares against, and 12,610 shares abstaining. 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: March 11, 1997 10 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11 - ---------- HERLEY INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS
Thirteen weeks ended February 2, 1997 January 28, 1996 ---------------- ---------------- Net Income $ 779,579 $ 1,537,149 ======= ========= Weighted average shares outstanding: Shares outstanding from beginning of period 2,951,247 2,802,274 Shares issued for options exercised 240,594 - Treasury shares acquired (103,617) - Common equivalents - options and warrants 487,141 328,727 --------- --------- Weighted average common and common equivalent shares outstanding 3,575,365 3,131,001 ========= ========= Earnings per common and common equivalent share: $ .22 $ .49 === ===
Twenty-seven Twenty-six weeks ended weeks ended February 2, 1997 January 28, 1996 ---------------- ---------------- Net Income $ 1,651,307 $ 2,052,980 ========= ========= Weighted average shares outstanding: Shares outstanding from beginning of period 2,936,122 3,015,988 Shares issued for options exercised 130,980 - Treasury shares acquired (72,531) (185,022) Common equivalents - options and warrants 554,140 113,816 --------- --------- Weighted average common and common equivalent shares outstanding 3,548,711 2,944,782 ========= ========= Earnings per common and common equivalent share: $ .47 $ .70 === ===
11 EX-27 3 FDS--FEB-02-1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 27 WEEKS ENDED FEBRUARY 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS AUG-03-1997 JUL-29-1996 FEB-02-1997 443,585 0 3,591,206 0 8,783,608 17,686,856 24,183,559 12,070,195 38,406,051 6,394,841 0 0 0 311,584 22,556,384 38,406,051 14,654,112 14,654,112 10,087,340 12,838,550 0 0 317,407 1,651,307 0 1,651,307 0 0 0 1,651,307 0.47 0.47
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