-----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, SnGv0dFOiPZ+edJ6WdpgAOnWjHcUCIAzBw+QkqVls6nVJJ3JWFc9gXdqYUaeVBxf 5fLqyp1zAlLJnAirURCFwg== 0000047035-01-000002.txt : 20010313 0000047035-01-000002.hdr.sgml : 20010313 ACCESSION NUMBER: 0000047035-01-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010128 FILED AS OF DATE: 20010312 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: SEC FILE NUMBER: 000-05411 FILM NUMBER: 1566605 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 0001.txt QUARTERLY REPORT FOR QUARTER ENDED JAN. 28, 2001 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: January 28, 2001 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) 3061 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, 2001 - 7,020,086 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 - January 28, 2001 and July 30, 2000 2 Consolidated Statements of Income - For the thirteen and twenty-six weeks ended January 28, 2001 and January 30, 2000 3 Consolidated Statements of Cash Flows - For the twenty-six weeks ended January 28, 2001 and January 30, 2000 4 Notes to Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10 PART II -OTHER INFORMATION 11 Signatures 12
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share data) January 28, July 30, 2001 2000 ------------ ---------- (Unaudited) (Audited) ASSETS Current Assets: Cash and cash equivalents $ 11,981 $ 7,665 Accounts receivable 15,903 14,315 Costs incurred and income recognized in excess of billings on uncompleted contracts 964 146 Other receivables 105 293 Inventories 28,508 23,045 Deferred taxes and other 2,828 2,795 --------- --------- Total Current Assets 60,289 48,259 Property, Plant and Equipment, net 19,553 18,004 Intangibles, net of amortization of $3,799 at January 28, 2001 and $3,095 at July 30, 2000 26,471 18,096 Available-For-Sale Securities 146 146 Other Investments 1,054 1,020 Other Assets 1,107 1,131 --------- --------- $ 108,620 $ 86,656 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 284 $ 282 Accounts payable and accrued expenses 13,182 9,602 Income taxes payable 778 1,426 Reserve for contract losses 296 467 Advance payments on contracts 1,039 1,006 --------- --------- Total Current Liabilities 15,579 12,783 Long-term Debt 2,811 2,931 Deferred Income Taxes 5,451 5,571 --------- --------- 23,841 21,285 --------- --------- Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 20,000,000 shares; issued and outstanding 7,018,086 at January 28, 2001 and 5,993,870 at July 30, 2000 702 599 Additional paid-in capital 45,479 29,808 Retained earnings 38,598 34,964 --------- --------- Total Shareholders' Equity 84,779 65,371 --------- --------- $ 108,620 $ 86,656 ========= =========
The accompanying notes are an integral part of these financial statements. 2
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands except per share data) Thirteen weeks ended Twenty-six weeks ended -------------------- ---------------------- January 28, January 30, January 28, January 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Net sales $ 18,322 $ 16,217 $ 36,416 $ 32,357 -------- -------- -------- -------- Cost and expenses: Cost of products sold 12,367 10,313 23,606 19,978 Selling and administrative expenses 3,579 3,142 7,384 6,388 -------- -------- -------- -------- 15,946 13,455 30,990 26,366 -------- -------- -------- -------- Operating income 2,376 2,762 5,426 5,991 -------- -------- -------- -------- Other income (expense): Investment income 157 47 281 101 Interest expense (64) (309) (114) (581) -------- -------- -------- -------- 93 (262) 167 (480) -------- -------- -------- -------- Income before income taxes 2,469 2,500 5,593 5,511 Provision for income taxes 865 874 1,959 1,928 -------- -------- -------- -------- Net income $ 1,604 $ 1,626 $ 3,634 $ 3,583 ======== ======== ======== ======== Earnings per common share - Basic $ .23 $ .36 $ .57 $ .76 === === === === Basic weighted average shares 6,842 4,563 6,416 4,684 ===== ===== ===== ===== Earnings per common share - Diluted $ .22 $ .34 $ .51 $ .72 === === === === Diluted weighted average shares 7,400 4,844 7,088 4,972 ===== ===== ===== =====
The accompanying notes are an integral part of these financial statements. 3
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Twenty-six weeks ended ---------------------- January 28, January 30, 2001 2000 ------------ ------------ Cash flows from operating activities: Net income $ 3,634 $ 3,583 ---------- ---------- Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 2,171 1,913 (Gain) on sale of fixed assets - (18) Equity in income of limited partnership (34) (35) Decrease (increase) in deferred tax assets 38 (90) (Decrease) increase in deferred tax liabilities (120) 429 Changes in operating assets and liabilities: (Increase) in accounts receivable (331) (649) (Increase) in costs incurred and income recognized in excess of billings on uncompleted contracts (818) - Decrease (increase) in other receivables 188 (11) (Increase) in inventories (3,991) (1,916) (Increase) in prepaid expenses and other (71) (183) (Decrease) increase in accounts payable and accrued expenses (1,009) 369 (Decrease) increase in income taxes payable (648) 631 (Decrease) in reserve for contract losses (171) (165) Increase in advance payments on contracts 33 620 Other, net ( - ---------- ---------- Total adjustments (4,777) 895 ---------- ---------- Net cash (used in) provided by operating activities (1,143) 4,478 ---------- ---------- Cash flows from investing activities: Acquisition of businesses, net of cash acquired (8,373) (6,020) Proceeds from sale of fixed assets - 4,124 Capital expenditures (1,177) (1,794) ---------- ---------- Net cash (used in) investing activities (9,550) (3,690) ---------- ---------- Cash flows from financing activities: Borrowings under bank line of credit 1,000 11,500 Proceeds from exercise of stock options and warrants 15,968 226 Payments under lines of credit (1,000) (4,000) Payments of long-term debt (765) (204) Purchase of treasury stock (194) (7,565) ---------- ---------- Net cash provided by (used in) financing activities 15,009 (43) ---------- ---------- Net increase in cash and cash equivalents 4,316 745 Cash and cash equivalents at beginning of period 7,665 2,741 ---------- ---------- Cash and cash equivalents at end of period $ 11,981 $ 3,486 ========== ==========
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 inter-company 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 30, 2000) 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. The Company entered into an agreement effective as of the close of business September 30, 2000, to acquire all of the issued and outstanding common stock of Terrasat, Inc. ("Terrasat"), a California corporation. The transaction provides for the payment of $6,000,000 in cash, $3,000,000 which was paid in December 2000 and $3,000,000 to be paid in December 2001, and the assumption of approximately $1,025,000 in liabilities. In addition, the agreement provides for additional cash payments in the future up to $2,000,000, based on gross revenues through December 31, 2001. The transaction has been accounted for under the purchase method. Accordingly, the consolidated balance sheet includes the assets and liabilities of Terrasat at January 28, 2001, and the consolidated statement of income includes the results of Terrasat operations from October 1, 2000. Excess cost over the fair value of net assets acquired of approximately $4,971,000 is being amortized over 20 years. The allocation of the aggregate estimated purchase price will be revised when additional information concerning asset and liability valuations is obtained. Adjustments, which could be significant, will be made during the allocation period based on detailed reviews of the fair values of assets acquired and liabilities assumed and could result in a substantial change in the excess of cost over the fair value of net assets acquired. The Company entered into an agreement as of September 1, 2000 to acquire certain assets and the business, subject to the assumption of certain liabilities, of American Microwave Technology, Inc., ("AMT"), a California corporation, which is being operated as a division of Herley Industries, Inc. The transaction provided for the payment of $5,400,000 in cash, and the assumption of approximately $1,153,000 in liabilities. In addition, the Company entered into an exclusive license agreement for certain products providing for a royalty of 10% on the net shipments of such products through October 2004. The transaction has been accounted for under the purchase method. Accordingly, the consolidated balance sheet includes the assets and liabilities of AMT at January 28, 2001, and the consolidated statement of income includes the results of AMT's operations from September 1, 2000. Excess cost over the fair value of net assets acquired of approximately $4,109,000 is being amortized over 20 years. The allocation of the aggregate purchase price will be revised when additional information concerning asset and liability valuations is obtained. Adjustments, which could be significant, will be made during the allocation period based on detailed reviews of the fair values of assets acquired and liabilities assumed and could result in a substantial change in the excess of cost over the fair value of net assets acquired. 5 3. Inventories at January 28, 2001 and July 30, 2000 are summarized as follows (in thousands): January 28, 2001 July 30, 2000 ---------------- ------------- Purchased parts and raw materials $ 14,942 $ 12,804 Work in process 12,373 9,358 Finished products 1,193 883 $ 28,508 $ 23,045 4. In February 2001, the Company entered into an amendment to its revolving loan agreement with a bank that provides for a revolving unsecured loan in the aggregate principal amount of $30,000,000 which may be used for general corporate purposes, including business acquisitions. The revolving credit facility requires the payment of interest only on a monthly basis and payment of the outstanding principal balance on January 31, 2003. Interest is set at 1.65% over the FOMC Federal Funds Target Rate based on tangible net worth in excess of $25,000,000, or at an increment of 1.80% if tangible net worth is less than $25,000,001. The FOMC Federal Funds Target Rate was 6.00% at January 28, 2001. There is a fee of 15 basis points per annum on the unused portion of the credit line in excess of $20,000,000 payable quarterly. There were no borrowings outstanding as of January 28, 2001 and July 30, 2000. 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 January 28, 2001, stand-by letters of credit aggregating $2,982,195 were outstanding under this facility. The agreement contains various financial covenants, including, among other matters, minimum tangible net worth, debt to tangible net worth, debt service coverage, and restrictions on other borrowings. 5. The following table shows the calculation of basic earnings per share and earnings per share assuming dilution (in thousands except per share data): Thirteen weeks ended ------------------------ January 28, January 30, 2001 2000 ----------- ----------- Numerator: Net Income $ 1,604 $ 1,626 Denominator: Basic weighted-average shares 6,842 4,563 Effect of dilutive securities: Employee stock options and warrants 558 281 Diluted weighted-average shares 7,400 4,844 Options to purchase 62,000 shares of common stock, with exercise prices ranging from $18.88 to $21.38, were outstanding during the second quarter of fiscal 2001, but were not included in the computation of diluted EPS because the exercise price is greater than the average market price of the common shares. The options, which expire December 4, 2005, were still outstanding as of January 28, 2001. Options and warrants to purchase 2,648,675 shares of common stock, with exercise prices ranging from $13.88 to $16.46, were outstanding during the second quarter of fiscal 2000 but were not included in the computation of diluted EPS because the exercise prices are greater than the average market price of the common shares. 6 Approximately 946,300 of the warrants which were called for redemption as of November 13, 2000 were exercised during the second quarter at $15.60 per share of common stock resulting in proceeds of approximately $14,762,000. The proceeds have been invested in a short term money fund. Twenty-six weeks ended ---------------------- January 28, January 30, 2001 2001 ---- ---- Numerator: Net Income $ 3,634 $ 3,583 Denominator: Basic weighted-average shares 6,416 4,684 Effect of dilutive securities: Employee stock options and warrants 672 288 Diluted weighted-average shares 7,088 4,972 Options to purchase 45,417 shares of common stock, with exercise prices ranging from $20.50 to $21.38, were outstanding during the first six months of fiscal 2001, but were not included in the computation of diluted EPS because the exercise price is greater than the average market price of the common shares. The options, which expire December 4, 2005, were still outstanding as of January 28, 2001. Options and warrants to purchase 2,648,675 shares of common stock, with exercise prices ranging from $13.88 to $16.46, were outstanding during the first six months of fiscal 2000 but were not included in the computation of diluted EPS because the exercise prices are greater than the average market price of the common shares. As of March 6, 2001, 7,020,086 shares of common stock were outstanding. 6. Supplemental cash flow information is as follows (in thousands): Twenty-six weeks ended ---------------------- January 28, January 30, 2001 2000 ---- ---- Cash paid during the period for: Interest $ 161 $ 553 Income Taxes 2,733 876 Cashless exercise of stock options - 47 Common stock issued for business acquired - 514 Tax benefit related to stock options - 161 7. In connection with the acquisition of Robinson Laboratories, Inc. in January 2000, the Company is obligated to issue additional shares of Common Stock based on new orders booked through January 31, 2001. Based on orders booked, the Company will issue 97,841 shares of Common Stock during the third quarter. The additional shares will be valued at the closing price of the common stock on the date of issue. 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations ------------- Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 The statements contained in this report which are not historical fact are "forward-looking statements" that involve various important assumptions, risks, uncertainties and other factors which could cause the Company's actual results for fiscal 2001 and beyond to differ materially from those expressed in such forward-looking statements. These important factors include, without limitation, competitive factors and pricing pressures, changes in legal and regulatory requirements, technological change or difficulties, product development risks, commercialization and trade difficulties and general economic conditions, as well as other risks previously disclosed in the Company's securities filings and press releases. Results of Operations - --------------------- Thirteen weeks ended January 28, 2001 and January 30, 2000 - ---------------------------------------------------------- Net sales for the thirteen weeks ended January 28, 2001 were approximately $18,322,000 compared to $16,217,000 in the second quarter of fiscal 2000. The sales increase of $2,105,000 (13.0%) is attributable to an increase in revenue of $291,000 from microwave products, and $3,891,000 in commercial products, offset by a decrease of $2,078,000 in microwave systems revenue. Included in commercial products are revenues of $2,952,000 attributable to businesses acquired during the first quarter of fiscal 2001. The gross profit margin of 32.5% in the thirteen weeks ended January 28, 2001 was lower than the margin of 36.4% in the second quarter of the prior year primarily due to the shift in volume to commercial products as noted above, with lower gross margins, and the investment in new product development related to commercial wireless applications. Selling and administrative expenses for the thirteen weeks ended January 28, 2001 increased approximately $437,000 as compared to the second quarter of fiscal 2001. Contributing to this increase were selling and administrative expenses of $723,000 from businesses acquired. Incentive compensation decreased $93,000 and legal expenses decreased $210,000. Investment income increased approximately $110,000 from the prior year second quarter primarily from the investment of proceeds from the exercise of warrants in May and November 2000. Interest expense decreased $245,000 as compared to the second quarter of fiscal 2000 due to the repayment of bank borrowings out of the proceeds of the exercise of the warrants. Twenty-six weeks ended January 28, 2001 and January 30, 2000 - ------------------------------------------------------------ Net sales for the twenty-six weeks ended January 28, 2001 were approximately $36,416,000 compared to $32,357,000 in the first six months of fiscal 2000. The sales increase of $4,059,000 (12.5%) is attributable to an increase in revenue of $3,147,000 from microwave products, and $6,129,000 in commercial products, offset by a decrease of $5,217,000 in microwave systems revenue. Included in commercial products are revenues of $4,017,000 attributable to businesses acquired during the first quarter of fiscal 2001. The gross profit margin of 35.2% in the twenty-six weeks ended January 28, 2001 was lower than the margin of 38.3% in fiscal 2000 primarily due to the shift in volume to commercial products as noted above , with lower gross margins, and the investment in new product development related to commercial wireless applications. Selling and administrative expenses for the twenty-six weeks ended January 28, 2001 increased approximately $996,000 as compared to fiscal 2000. Contributing to this increase were selling and administrative expenses of 8 $1,396,000 from businesses acquired. Incentive compensation decreased $323,000 and legal expenses decreased $238,000. Investment income increased approximately $180,000 from the prior year primarily from the investment of proceeds from the exercise of warrants in May and November 2000. Interest expense decreased $467,000 as compared to fiscal 2000 due to the repayment of bank borrowings out of the proceeds of the exercise of the warrants. Bank borrowings outstanding at January 30, 2000 were $11,500,000. There was no bank debt outstanding during the quarter ended January 28, 2001. Business Acquisitions - --------------------- In connection with the acquisition of Robinson Laboratories, Inc. in January 2000, the Company is obligated to issue additional shares of Common Stock based on new orders booked through January 31, 2001. Based on orders booked, the Company will issue 97,841 shares of Common Stock during the third quarter. The additional shares will be valued at the closing price of the common stock on the date of issue. The Company entered into an agreement effective as of the close of business September 30, 2000, to acquire all of the issued and outstanding common stock of Terrasat, Inc. ("Terrasat"), a California corporation. The transaction provides for the payment of $6,000,000 in cash, $3,000,000 of which was paid in December 2000 and $3,000,000 to be paid in December 2001, and the assumption of approximately $1,025,000 in liabilities. In addition, the agreement provides for additional cash payments in the future up to $2,000,000, based on gross revenues through December 31, 2001. The transaction has been accounted for under the purchase method. Accordingly, the consolidated balance sheet includes the assets and liabilities of Terrasat at January 28, 2001, and the consolidated statement of income includes the results of Terrasat operations from October 1, 2000. Excess cost over the fair value of net assets acquired of approximately $4,971,000 is being amortized over 20 years. The allocation of the aggregate estimated purchase price will be revised when additional information concerning asset and liability valuations is obtained. Adjustments, which could be significant, will be made during the allocation period based on detailed reviews of the fair values of assets acquired and liabilities assumed and could result in a substantial change in the excess of cost over the fair value of net assets acquired. The Company entered into an agreement, as of September 1, 2000, to acquire certain assets and the business, subject to the assumption of certain liabilities, of American Microwave Technology, Inc., ("AMT"), a California corporation, which is being operated as a division of Herley Industries, Inc. The transaction provided for the payment of $5,400,000 in cash, and the assumption of approximately $1,153,000 in liabilities. In addition, the Company entered into an exclusive license agreement for certain products providing for a royalty of 10% on the net shipments of such products through October 2004. The transaction has been accounted for under the purchase method. Accordingly, the consolidated balance sheet includes the assets and liabilities of AMT at January 28, 2001, and the consolidated statement of income includes the results of AMT's operations from September 1, 2000. Excess cost over the fair value of net assets acquired of approximately $4,109,000 is being amortized over 20 years. The allocation of the aggregate purchase price will be revised when additional information concerning asset and liability valuations is obtained. Adjustments, which could be significant, will be made during the allocation period based on detailed reviews of the fair values of assets acquired and liabilities assumed and could result in a substantial change in the excess of cost over the fair value of net assets acquired. Liquidity and Capital Resources - ------------------------------- As of January 28, 2001 and July 30, 2000, working capital was $44,710,000 and $35,476,000, respectively, and the ratio of current assets to current liabilities was 3.87 to 1 and 3.78 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 $1,039,000 at January 28, 2001, and $1,006,000 at July 30,2000. 9 Net cash used in operations during the period was approximately $1,143,000 as compared to cash provided by operations of $4,478,000 in the prior fiscal year. Significant changes causing the decrease from fiscal 2000 include net increases in inventories of $3,991,000 and costs incurred on uncompleted contracts of $818,000, and reductions in accounts payable and accrued expenses of $1,009,000 and income taxes payable of $648,000. Net cash used in investing activities consists of the acquisitions of AMT and Terrasat for net cash of approximately $8,373,000, as discussed above under "Business Acquisition", and $1,177,000 for capital expenditures. During the period ended January 28, 2001, the Company received proceeds of $210,633 from the exercise of common stock options by employees, $997,920 from the exercise of Managing Underwriters' Warrants, and $14,759,186 from the exercise of 946,349 of the warrants which were called for redemption as of November 13, 2000 which were exercised at $15.60 per share of common stock. The proceeds have been invested in a short term money fund. Payments of long-term debt includes the payment of approximately $622,000 of debt assumed in the acquisitions of AMT and Terrasat with interest rates ranging from 9% to 18%. The Company acquired 10,800 shares of treasury stock through open market purchases at a cost of $194,000. All treasury shares have been retired. The Company maintains a revolving credit facility with a bank for an aggregate of $30,000,000, as amended in February 2001, which expires January 31, 2003. There were no borrowings outstanding as of January 28, 2001 and July 30, 2000. At January 28, 2001, the Company had cash and cash equivalents of approximately $11,981,000. The Company believes that presently anticipated future cash requirements will be provided by internally generated funds and existing credit facilities. Item 3: Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- The Company is subject to market risk associated with changes in interest rates and stock prices. The Company has not entered into any derivative financial instruments to manage the above risks and the Company has not entered into any market risk sensitive instruments for trading purposes. There have been no material changes in market risk to the Company since its fiscal year end as disclosed in the Company's Annual Report Form 10K as of July 30, 2000. 10 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS: The Company is not involved in any material legal proceedings. 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 January 18, 2001. (b) Two directors were elected at the Annual Meeting of Stockholders as follows: Class I - To serve until the Annual Meeting of Stockholders in 2002 or until their successors are chosen and qualified: Name Votes For Votes Withheld ---------------------------- --------- -------------- Lee N. Blatt 5,594,464 217,001 Adm. Edward K. Walker, Jr. 5,594,464 217,001 (c) The adoption of a 2000 Stock Option Plan was ratified as follows: Votes For Votes Against Abstained --------- ------------- --------- 1,815,715 1,790,622 319,834 ITEM 5 - OTHER INFORMATION: None ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits 10.1 Amendment to Loan Agreement dated February 15, 2001 between Registrant and Allfirst Bank, successor to The First National Bank of Maryland. (b) Reports on Form 8-K No reports on Form 8-K were filed during the second quarter of fiscal 2001. 11 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 12, 2001 12 EX-10 2 0002.txt AMENDMENT TO LOAN AGREEMENT Exhibit 10.1 ------------ SECOND AMENDMENT TO LOAN AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "Second Amendment") is and entered into this 15th day of February, 2001, by and between HE INDUSTRIES, INC., a Delaware corporation, having offices at 10 Industry Dr Lancaster, Pennsylvania 17603 (the "Borrower") and ALLFIRST BANK, a Mary state-chartered commercial bank successor to The First National Bank Maryland, a division of FMB Bank, having offices at 1703 Oregon Pike, Lancas Pennsylvania 17601 (the "Lender"). B A C K G R O U N D: A. Borrower has borrowed from Lender and desires to continue to borrow Lender in connection with the operation of Its business(es). On February 1999 the parties entered Into a Loan Agreement relative to a Revolving Loan a Mortgage Loan (the "Agreement"). On January 11th, 2000, the parties ent into an Amendment to Loan Agreement (the "Amendment") relative to the Agreem The Agreement and Amendment are incorporated herein by reference and made a hereof. All capitalized terms used herein without definition which are def in the Agreement shall have the meanings set forth therein. B. The parties desire to further amend the Agreement. C. Borrower has no defense, charge defalcation, claim, plea, demand or off against the Agreement, Amendment or any of the Loan Documents. NOW, THEREFORE, for valuable consideration, receipt of which is he acknowledged, and intending to be legally bound hereby, the parties he covenant and agree as follows: 1. That the above Background is incorporated herein by reference. 2. That Section 1.1 of the Agreement is amended to extend the cur Revolving Loan Maturity Date from January 31, 2002 to January 31, 2003. 3. That the terms and conditions, paragraph sections, collateral guaranty requirements, representations and warranties of the Agreement, Amendment and Loan Documents, together with all understandings by between the parties to this Second Amendment evidenced by writings of same or subsequent date not in conflict with the above modifications u this Second Amendment shall remain In full force and effect as agreement of the parties relative to the Loans, and are hereby ratif reaffirmed and confirmed. 4. That all references to the Agreement, the Amendment, the Documents and the other documents and Instruments delivered pursuant t in connection therewith as well as in writings of the same or subseq date, shall mean the Agreement as amended hereby and as each may in future be amended, restated, supplemented or modified from time to t Similarly, all references to The First National Bank of Maryland division of FMB Bank, shall be deemed to have been made and to refe Allfirst Bank, successor to The First National Bank of Maryland, a divi of FMB Bank. 5. That the parties hereto shall, at any time, and from time to following the execution of this Second Amendment, execute and deliver such further instruments and take all such further action as ma reasonably necessary or appropriate in order to carry out the provision this Second Amendment, as well as in the Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendmen be executed by their respective duly authorized officers all as of the day year first above written. ATTEST: HERLEY INDUSTRIES, INC. a Delaware corporation ________________________ By:________________________ Title:__________________ Title:_____________________ ________________________ By:________________________ Title:__________________ Title:_____________________ ALLFIRST BANK, successor to The First National Bank of Maryland, a Division of FMB Bank By:__________________________________ Title:_______________________________ -----END PRIVACY-ENHANCED MESSAGE-----