-----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, Ehtsu+1vP9kMVUhH+3RU/AKeBftuLxlboKOriC1VQHB1p6nV1FXamOVIYyYEnIkA NqqJ1x+Y5f+kUXYl3Uz4Aw== 0000047035-95-000014.txt : 19951208 0000047035-95-000014.hdr.sgml : 19951208 ACCESSION NUMBER: 0000047035-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951029 FILED AS OF DATE: 19951206 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERLEY INDUSTRIES INC /NEW CENTRAL INDEX KEY: 0000047035 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] 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: 95599669 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 OCT 29 1995 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: October 29, 1995 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 5, 1995 - 2,802,274 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 - October 29, 1995 and July 30,1995 2 Consolidated Statements of Operations - For the thirteen weeks ended October 29, 1995 and October 30, 1994 3 Consolidated Statements of Cash Flows - For the thirteen weeks ended October 29, 1995 and October 30, 1994 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 October 29, July 30, 1995 1995 ----------- ----------- Unaudited Audited --------- ------- ASSETS Current Assets: Cash and cash equivalents $ 928,651 $ 272,755 Accounts receivable 4,122,772 4,679,917 Other receivables 187,729 163,402 Inventories 8,627,950 9,330,053 Prepaid expenses and other 1,079,943 1,006,503 ------------ ------------ Total Current Assets 14,947,045 15,452,630 Property, Plant and Equipment, net 13,464,068 13,775,710 Intangibles, net of amortization 4,784,311 4,852,336 Available-for-sale Securities 3,113,995 4,114,614 Other Investments 3,727,506 3,727,506 Other Assets 258,604 306,486 ------------ ------------ $ 40,295,529 $ 42,229,282 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 343,708 $ 357,078 Accounts payable and accrued expenses 6,833,756 7,644,148 Reserve for contract losses 312,660 496,000 Advance payments on contracts 2,484,076 1,476,640 ------------ ------------ Total Current Liabilities 9,974,200 9,973,866 ------------ ------------ Long-term Debt 9,325,000 10,525,000 Deferred Income Taxes 1,385,954 1,282,179 Excess of fair value of net assets of business acquired over cost, net of amortization 1,338,792 1,460,500 ------------ ------------ 22,023,946 23,241,545 ------------ ------------ Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 10,000,000 shares; issued 2,802,274 at October 29, 1995 and 3,015,988 at July 30, 1995 280,227 301,599 Additional paid-in capital 11,837,649 13,040,622 Retained earnings 6,136,347 5,620,516 ------------ ------------ 18,254,223 18,962,737 Less: Unrealized gain on available-for-sale securities (17,360) (25,000) ------------ ------------ Total Shareholders' Equity 18,271,583 18,987,737 ------------ ------------ $ 40,295,529 $ 42,229,282 ============ ============ The accompanying notes are an integral part of these financial statements. 2 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 13 weeks ended ---------------- October 29, October 30, 1995 1994 ----------- ----------- Net sales $ 7,062,891 $ 6,298,609 ---------- ---------- Cost and expenses: Cost of products sold 4,888,421 4,641,688 Selling and administrative expenses 1,414,561 1,228,094 ---------- ---------- 6,302,982 5,869,782 ---------- ---------- Operating income 759,909 428,827 ---------- ---------- Other income (expense): Gain (loss) on sale of marketable 55,554 (190,628) securities Dividend and interest income 62,786 237,734 Interest expense (227,018) (286,850) ---------- ---------- (108,678) (239,744) ---------- ---------- Income before income taxes 651,231 189,083 Provision for income taxes 135,400 5,000 ---------- ---------- Net income $ 515,831 $ 184,083 ========== ========== Earnings per common and common equivalent share $ .17 $ .04 ==== ==== Weighted average number of common and common equivalent shares outstanding 2,960,242 4,175,689 ========= ========= The accompanying notes are an integral part of these financial statements. 3 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
13 weeks ended -------------- October 29, October 30, 1995 1994 ------------ ----------- Cash flows from operating activities: Net income $ 515,831 $ 184,083 ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 384,168 525,058 (Gain) loss on sale of marketable securities (55,554) 262,349 Decrease (increase) in deferred tax assets (19,291) (91,908) Increase in deferred tax liabilities 103,798 32,530 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 557,145 1,139,598 Decrease (increase) in other receivables (24,327) 101,150 Decrease (increase) in inventories 702,103 122,939 Decrease (increase) in prepaid expenses and other (54,172) (101,171) Increase (decrease) in accounts payable and accrued expenses (810,392) (378,262) (Decrease) in reserve for contract losses (183,340) - Increase (decrease) in advance payments on contracts 1,007,436 (981,836) Other, net 40,000 2,468 ---------- ---------- Total adjustments 1,647,574 632,915 ---------- ---------- Net cash provided by operating activities 2,163,405 816,998 ---------- ---------- Cash flows from investing activities: Purchase of available-for-sale securities (1,071,498) (12,751,696) Proceeds from sale of available-for-sale securities 2,120,031 12,547,732 Capital expenditures (118,327) (10,521) ---------- ---------- Net cash provided by (used in) investing activities 930,206 (214,485) ---------- ---------- Cash flows from financing activities: Borrowings under bank line of credit 275,000 - Payments under lines of credit (1,475,000) (700,000) Payments of long-term debt (13,370) (30,384) Purchase of treasury stock (1,224,345) - ---------- ---------- Net cash provided by (used in) financing activities (2,437,715) (730,384) ---------- ---------- Net increase (decrease) in cash and cash equivalents 655,896 (127,871) Cash and cash equivalents at beginning of period 272,755 539,729 ---------- ---------- Cash and cash equivalents at end of period $ 928,651 $ 411,858 ========== ==========
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 30,1995) 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 October 29, 1995 and July 30,1995 are summarized as follows: October 29, 1995 July 30,1995 ---------------- ------------ Purchased parts and raw materials $ 4,942,473 $ 5,749,455 Work in process 3,571,026 3,478,268 Finished products 114,451 102,330 --------- --------- $ 8,627,950 $ 9,330,053 ========= ========= 3. The following is a summary of available-for-sale securities: Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value --------- --------- --------- --------- October 29, 1995 Government bonds $2,651,897 $ 37,679 $ 8,746 $2,680,830 Other 429,073 - - 429,073 --------- --------- --------- --------- Total debt securities 3,080,970 37,679 8,746 3,109,903 Equity securities 4,092 - - 4,092 --------- --------- --------- --------- $3,085,062 $ 37,679 $ 8,746 $3,113,995 ========= ========= ========= ========= July 30, 1995 Government bonds $3,878,937 $ 72,968 $ 31,302 $3,920,603 Other 189,919 - - 189,919 --------- --------- --------- --------- Total debt securities 4,068,856 72,968 31,302 4,110,522 Equity securities 4,092 - - 4,092 --------- --------- --------- --------- $4,072,948 $ 72,968 $ 31,302 $4,114,614 ========= ========= ========= ========= During the quarter ended October 29, 1995, the Company liquidated $1,100,000 of its available-for-sale securities and used the proceeds to purchase shares of its common stock in the open market. The Company purchased a total of 213,714 shares of its common stock during the quarter, all of which have been retired. 4. The Company has a revolving credit facility with a bank, secured by its portfolio of available-for-sale securities, that provides for the extension of credit in the aggregate principal amount of $9,000,000. 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 daily at 1% over the bank's earliest daily rate quoted for Federal Funds (5.75% at October 29, 1995) applied to outstanding 5 balances up to 80% of the net equity value of certain investments, and at .5% over the bank's National Commercial Rate (8.75% at October 29, 1995) for outstanding balances in excess of this limit. In addition, the agreement provides for a fee of 1/8 of 1% of the unused availability under the facility payable quarterly. The agreement contains various financial covenants, including, among other matters, the maintenance of working capital, tangible net worth, aggregate debt levels, and restrictions on cash dividends. The Company maintains a letter of credit facility with a bank that provides for the issuance of stand-by letters of credit in the aggregate of $4,200,000. The facility requires the payment of a fee of 1.25% per annum of the amounts outstanding under the facility. The facility expires January 31, 1997. At October 29, 1995 stand-by letters of credit aggregating $2,277,401 were outstanding under this facility. 5. Supplemental cash flow information is as follows: October 29, 1995 October 30, 1994 ---------------- ---------------- Cash paid during the period for: Interest $ 119,404 $ 721,202 Income Taxes 1,538 69,699 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources As of October 29, 1995 and July 30, 1995, working capital was approximately $4,973,000 and $5,479,000, respectively, and the ratio of current assets to current liabilities was 1.50 to 1 and 1.55 to 1, respectively. The Company maintains a revolving credit facility with a bank, secured by available-for-sale securities, for an aggregate of $9,000,000 which expires January 31, 1998. As of October 29, 1995 and July 30, 1995, the Company had borrowings outstanding of $5,800,000 and $7,000,000, respectively under this facility. At October 29, 1995, the Company owned high grade investment securities having a market value of approximately $3,114,000, and cash and cash equivalents of approximately $929,000. The Company believes that presently anticipated future cash requirements will be provided by internally generated funds, and existing credit facilities. Results of Operations Thirteen weeks ended October 29, 1995 and October 30, 1994 Net sales for the thirteen weeks ended October 29, 1995 increased by $764,282 or 12% over the comparable period of the prior year due to an increase in flight instrumentation products net sales of approximately $1,663,000 of which the acquisition of Stewart Warner Electronics Co. contributed approximately $1,193,000; offset by a decrease in net sales of microwave components of approximately $899,000. Cost of products sold for the thirteen weeks ended October 29, 1995 decreased as a percentage of net sales from 74% in 1994 to 69% in 1995. This decrease is attributable to higher margins on foreign sales, which were $1,410,000 in the quarter as compared to $615,000 in 1994, and increased absorption of fixed costs due to the increase in sales volume. Selling and administrative expenses for the thirteen weeks ended October 29, 1995 increased approximately $186,000 over the comparable period of the prior year. This increase is attributable to representative fees of $198,000 on foreign sales, personnel costs of $153,000, and other costs of $74,000; offset by a reduction in legal fees of $239,000. Other income (expense) for the thirteen weeks ended October 29, 1995 increased $131,000 from the comparable prior year period due to increased investment income of $71,000, and a decrease in interest expense of $60,000. 7 Herley Industries, Inc. and Subsidiaries PART I I - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS: In April 1992, Litton Systems, Inc. Electron Devices Division ("Litton") commenced an action in the Essex Superior Court of Massachusetts against the Company (the "Litton Action") alleging, among other claims for relief, theft of trade secrets, unfair trade practices and related common law claims in connection with the defendants' alleged misappropriation of Litton's beacon magnetron drawings. In a jury trial which ended April 3, 1995, a verdict on liability was rendered against the Company and the other defendants. Prior to a separate, subsequent trial to determine damages, the Company settled the action on April 12, 1995 for the sum of $4,000,000, and agreed to the entry of an injunction precluding the use by the Company of the alleged misappropriated drawings in connection with the manufacture of beacon magnetrons. The settlement provides for two equal payments of $2,000,000 each without interest, the first of which was paid, and the second is due in July, 1996. 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 tentative settlement of all claims in consideration for a payment of $450,000 subject to the negotiation and execution of a satisfactory Settlement Agreement and Court approval after notice to Class Members. The parties are negotiating the terms of the Settlement Agreement for submission to the Court. 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. The Company believes it has a meritorious defense and intends to vigorously defend against the action. In or about March, 1994, the principal selling shareholders of Carlton Industries, Inc. ("Carlton") and its subsidiary, Vega Precision Laboratories, Inc. ("Vega"), as claimants, commenced an arbitration proceeding before the American Arbitration Association in New York City pursuant to the terms of the Stock Purchase Agreement ("Agreement") by which the Company acquired the stock of Carlton and Vega. The claimants principally are seeking to recover damages for the Company's alleged failure to register timely the claimants' shares of the Company's common stock in accordance with the provisions of the Agreement and other breaches of the Agreement. The Company has denied and has contested vigorously the legitimacy of the claimants' claims and has interposed several counterclaims seeking indemnification under the Agreement against the principal selling shareholders, for damages suffered by the Company in an aggregate amount exceeding $1 million as a result of breaches of contractual representations. Hearings have been closed and final briefs were submitted. The matter has yet to be determined by the Arbitrators. There is no certainty as to the outcome of the above unresolved matters. However, in the opinion of management, the ultimate liability on these matters, if any, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. ITEM 2 - CHANGES IN SECURITIES: None 8 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 6, 1995 ------------------ 10 EX-11 2 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS HERLEY INDUSTRIES, INC. AND SUBSIDIARIES Exhibit 11 COMPUTATION OF PER SHARE EARNINGS Thirteen weeks ended -------------------- October 29, October 30, 1995 1994 ----------- ----------- Net Income $ 515,831 $ 184,083 ======= ======= Weighted average number of common shares outstanding 2,960,242 4,175,689 ========= ========= Number of shares outstanding 2,802,274 4,175,689 ========= ========= Earnings per common and common equivalent share: Net income $ .17 $ .04 === === 11 EX-27 3 FDS--OCT-29-1995
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 13 WEEKS ENDED OCTOBER 29, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUL-28-1996 JUL-31-1995 OCT-29-1995 928,651 0 4,122,772 0 8,627,950 14,947,045 23,438,502 9,974,434 40,295,529 9,974,200 0 280,227 0 0 17,991,356 40,295,529 7,062,891 7,062,891 4,888,421 6,302,982 0 0 227,018 651,231 135,400 515,831 0 0 0 515,831 0.17 0.17
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