-----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, MOST03D3rG/jIJD1lr1nfKXD6z3GI9fa94nLSGeOF9DlPh0dw+Op3b4L8q8R0Oxg 0x8XfCdH4MSBQXyiBcwAGg== 0000047035-97-000026.txt : 19971218 0000047035-97-000026.hdr.sgml : 19971218 ACCESSION NUMBER: 0000047035-97-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971102 FILED AS OF DATE: 19971217 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: SEC FILE NUMBER: 000-05411 FILM NUMBER: 97739706 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 NOV 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: November 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 December 16, 1997 - 5,241,146 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 2, 1997 and August 3,1997 2 Consolidated Statements of Operations For the thirteen weeks ended November 2, 1997 and the fourteen weeks ended November 3, 1996 3 Consolidated Statements of Cash Flows For the thirteen weeks ended November 2, 1997 and the fourteen weeks ended November 3, 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 9 Computation of per share earnings 10 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS November 2, August 3, 1997 1997 ----------- ----------- Unaudited Audited ASSETS Current Assets: Cash and cash equivalents $ 1,024,601 $ 1,194,650 Accounts receivable 7,689,130 5,176,523 Notes receivable-officers 2,135,819 2,100,913 Other receivables 205,217 152,148 Inventories 12,100,135 9,790,382 Deferred taxes and other 2,332,444 2,061,066 ---------- ---------- Total Current Assets 25,487,346 20,475,682 Property, Plant and Equipment, net 12,611,302 11,704,755 Intangibles, net of amortization 4,240,111 4,308,136 Available-for-sale Securities 416,962 - Other Investments 1,355,213 1,313,502 Other Assets 2,649,844 1,455,111 ========== ========== $ 46,760,778 $ 39,257,186 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 367,517 $ 335,000 Note payable to related party 846,000 846,000 Accounts payable and accrued expenses 6,252,459 4,986,740 Income taxes payable 496,905 76,635 Reserve for contract losses 478,000 478,000 Advance payments on contracts 3,187,097 3,091,001 ---------- ---------- Total Current Liabilities 11,627,978 9,813,376 ---------- ---------- Long-term Debt 3,407,438 2,890,000 Deferred Income Taxes 3,375,455 2,696,394 Excess of fair value of net assets of business acquired over cost, net of amortization 365,125 486,833 ---------- ---------- 18,775,996 15,886,603 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 10,000,000 shares; issued and outstanding 4,541,146 at November 2, 1997 and 4,209,365 at August 3, 1997 454,115 420,936 Additional paid-in capital 12,093,287 8,856,516 Retained earnings 15,437,380 14,093,131 ---------- ---------- Total Shareholders' Equity 27,984,782 23,370,583 ---------- ---------- $ 46,760,778 $ 39,257,186 ========== ========== 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 14 weeks ended November 2, November 3, 1997 1996 -------------- -------------- Net sales $ 10,573,305 $ 7,507,904 -------------- -------------- Cost and expenses: Cost of products sold 6,488,615 5,171,174 Selling and administrative expenses 2,002,796 1,398,769 -------------- -------------- 8,491,411 6,569,943 -------------- -------------- Operating income 2,081,894 937,961 -------------- -------------- Other income (expense): Gain on available-for-sale securities and other investments 41,711 15,440 Dividend and interest income 49,659 47,955 Interest expense (136,515) (129,628) -------------- -------------- (45,145) (66,233) -------------- -------------- Income before income taxes 2,036,749 871,728 Provision for income taxes 692,500 - -------------- -------------- Net income $ 1,344,249 $ 871,728 ============== ============== Earnings per common and common equivalent share $.26 $.19 ==== ==== Weighted average number of common and common equivalent shares outstanding 5,228,220 4,616,733 ========= ========= 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 14 weeks ended November 2, November 3, 1997 1996 -------------- -------------- Cash flows from operating activities: Net income $ 1,344,249 $ 871,728 -------------- -------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 443,399 377,224 (Gain) on sale of available-for-sale securities - (15,440) Equity in income of limited partnership (41,711) - (Increase) in deferred tax assets (1,205,226) - Increase in deferred tax liabilities 1,387,433 323,828 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (2,263,180) (609,390) (Increase) in notes receivable-officers (34,906) (48,822) (Increase) in other receivables 19,949 (72,008) Decrease (increase) in inventories (222,056) (444,484) (Increase) in deferred taxes and other (132,770) (388,187) Increase (decrease) in accounts payable and accrued expenses 557,675 86,430 Increase (decrease) in income taxes payable 420,270 (89,907) (Decrease) in reserve for contract losses - (66,500) Increase (decrease) in advance payments on contracts (1,519) (807,909) Other, net 359,606 - -------------- -------------- Total adjustments (713,036) (1,755,165) -------------- -------------- Net cash provided by (used in) operating activities 631,213 (883,437) -------------- -------------- Cash flows from investing activities: Purchase of available-for-sale securities - (159,650) Proceeds from sale of available-for-sale securities - 5,083,778 Capital expenditures (248,496) (289,748) -------------- -------------- Net cash provided by investing activities (248,496) 4,634,380 -------------- -------------- Cash flows from financing activities: Borrowings under bank line of credit 1,200,000 1,975,000 Proceeds from exercise of stock options 99,266 96,358 Payments under lines of credit (800,000) (6,575,000) Payments of long-term debt (1,052,032) - -------------- -------------- Net cash (used in) financing activities (552,766) (4,503,642) -------------- -------------- Net increase (decrease) in cash and cash equivalents (170,049) (752,699) Cash and cash equivalents at beginning of period 1,194,650 1,104,445 -------------- -------------- Cash and cash equivalents at end of period $ 1,024,601 $ 351,746 ============== ==============
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 August 3,1997) 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 2, 1997 and August 3,1997 are summarized as follows: November 2, 1997 August 3,1997 ---------------- ------------- Purchased parts and raw materials $ 6,554,581 $ 4,780,336 Work in process 5,025,086 4,899,551 Finished products 520,468 110,495 ---------- --------- $ 12,100,135 $ 9,790,382 ========== ========= 3. In January 1997, 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, 1999. Interest is set biweekly at 1% over the FOMC Target Rate applied to outstanding balances (none at November 2, 1997) up to 80% of the net equity value of available-for-sale securities, and at the bank's Base Rate (8.50% at November 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 the amounts outstanding under the facility. At November 2, 1997, stand-by letters of credit aggregating $3,455,175 were outstanding. The agreement contains various financial covenants, including, among other matters, the maintenance of working capital and tangible net worth. 4. On August 4, 1997, the Company completed the acquisition of Metraplex Corporation , a Maryland corporation for 313,193 (adjusted for 4-for-3 stock split) shares of common stock of the Company, with a fair market value of $3,170,684, in exchange for all of the issued and outstanding common stock of Metraplex. Metraplex is a leading manufacturer of pulse code modulation and frequency modulation, telemetry and data acquisition systems for severe environment applications. Metraplex products are used worldwide for testing space launch vehicle instrumentation, aircraft flight testing, and amphibian, industrial and automotive vehicle testing. The transaction has been accounted for by the purchase method. Accordingly, the consolidated balance sheet includes the assets and liabilities of Metraplex at November 2, 1997, and the consolidated statements of operations include the results of Metraplex operations from August 4, 1997. On the basis of a pro forma consolidation of the results of operations as if the acquisition had taken place at the beginning of fiscal 1997, unaudited consolidated net sales, net income, and earnings per share for 5 the 14 weeks ended November 3, 1996 would have been approximately $8,781,000, $894,500, and $0.18, respectively. The pro forma information includes adjustments for additional depreciation based on the fair market value of the property, plant, and equipment acquired, and the amortization of intangibles arising from the transaction. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected at the beginning of fiscal 1997. 5. On September 4, 1997 the Board of Directors declared a 4-for-3 stock split effected as a stock dividend payable September 29, 1997 to holders of record on September 15, 1997. The effect of the split is presented within shareholders' equity at August 3, 1997. The distribution increased the number of shares outstanding from 3,157,024 to 4,209,365. The amount of $105,234 was transferred from the additional paid-in capital to the common stock account to record this distribution. All share and per share data, including stock options and warrants, included in this annual report have been restated to reflect the stock split. 6. On December 16, 1997 the Company completed the sale of 1,100,000 shares of common stock to the public, of which 700,000 shares were sold by the Company and 400,000 shares were sold by certain selling stockholders. The Company received $7,999,400 after underwriting discounts and commissions of $510,600 based on a price to the public of $12.00. In addition, the Company sold 1,100,000 Common Stock Purchase Warrants for $103,400 after underwriting discounts and commissions of $6,600 based on a price to the public of $0.10 for each warrant. The warrants are exercisable for 25 months and entitle the holder to purchase one share of Common Stock at an exercise price of $14.40 per share for thirteen months from date of issuance and thereafter at $15.60 per share. The Company has also issued to the underwriters, for their own account, warrants to purchase 110,000 shares of common stock of the Company at a price of $14.40 per share, exercisable for a period of four years beginning December 16, 1998 and the right to purchase warrants for $.12 per warrant for thirteen months beginning December 16, 1998. 7. No income tax provision was recorded in the fourteen weeks ended November 3, 1996 reflecting the utilization of prior year net operating loss ("NOL") carryforwards and the reversal of a valuation allowance for the NOL carryforwards established in 1995. The valuation allowance was established based on management's uncertainty that past performance would be indicative of future earnings. Income taxes have been provided for the thirteen weeks ended November 2, 1997 at an anticipated effective rate of 34% for fiscal 1998. 8. Supplemental cash flow information is as follows: November 2, 1997 November 3, 1996 ---------------- ---------------- Cash paid during the period for: Interest $ 17,513 $ 103,594 Income Taxes 85,230 90,310 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources As of November 2, 1997 and August 3, 1997, working capital was approximately $13,859,000 and $10,662,000, respectively, and the ratio of current assets to current liabilities was 2.19 to 1 and 2.09 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 $3,187,000 at November 2, 1997, and $3,091,000 at August 3, 1997. Net cash provided by operations during the quarter was approximately $631,000. Net cash used in investing activities consists of $248,000 for capital expenditures. The Company maintains a revolving credit facility with a bank for an aggregate of $11,000,000 which expires January 31, 1999. There were no borrowings outstanding as of Novemver 2, 1997 or August 3, 1997. At November 2, 1997, the Company had cash and cash equivalents of approximately $1,025,000. On December 16, 1997 the Company completed the sale of 700,000 shares of common stock, and 1,100,000 Common Stock Purchase Warrants, to the public, and received approximately $7,499,000 in net proceeds. Concurrent with the closing, the Company also received approximately $2,170,000 from certain officers of the Company in payment of notes receivable from the officers. The Company believes that presently anticipated future cash requirements will be provided by internally generated funds, the net proceeds of the offering on December 16, 1997 and existing credit facilities. Results of Operations Thirteen weeks ended November 2, 1997 and Fourteen weeks ended November 3, 1996 Net sales for the 13 weeks ended November 2, 1997 were approximately $10,573,000 compared to $7,508,000 in the first quarter of fiscal 1997. The sales increase of $3,065000 (40.8%) is attributable to additional volume from the Metraplex acquisition of $1,166,000, and increased flight instrumentation products sales in the foreign market. Gross profit of 38.6% for the 13 weeks ended November 2, 1997 exceeded that of the first quarter in the prior year of 31.1% due to an increase of $2,509,000 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 13 weeks ended November 2, 1997 were $2,003,000 compared to $1,399,000 in the first quarter of fiscal 1997, an increase of $604,000. Of this increase, $285,000 is attributable to the acquisition of Metraplex, $118,000 for performance incentives, and $277,000 in license fees for MAGIC2. Offsetting these increases were reductions in operating expenses of the Stewart Warner facility in Chicago of $50,000, and lower consulting fees of $26,000. Other (expense) for the 13 weeks ended November 2, 1997 is $21,000 lower than the first quarter in the prior year due to a decrease in interest expense of $7,000, and equity income in a limited partnership of $42,000 as compared to a gain on sale of available-for-sale securities of $15,000 in the prior year. 7 A provision for income taxes has been provided at the anticipated effective rate of 34% for fiscal 1998. No income tax provision was recorded in the first quarter fiscal 1997 due to the decrease in the valuation allowance for net operating loss carryforwards expected to be realized. A valuation allowance was provided previously to reduce deferred tax assets to their net realizable value for amounts which management believed may expire unutilized. The uncertainty that past performance would 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. PART I I - 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: 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 8 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 17, 1997 9 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 Fourteen weeks ended November 2, 1997 November 3, 1996 ---------------- ---------------- Net Income $ 1,344,249 $ 871,728 ========== ======== Weighted average shares outstanding: Shares outstanding from beginning of period 4,525,871 3,914,829 Shares issued for options exercised 12,194 5,495 Treasury shares acquired - - Common equivalents - options and warrants 690,155 696,409 ---------- ---------- Weighted average common and common equivalent shares outstanding 5,228,220 4,616,733 ========= ========= Earnings per common and common equivalent share: $ .26 $ .19 === ===
10 EX-27 3 FDS--NOV-2-1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 13 WEEKS ENDED NOVEMBER 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS AUG-2-1998 AUG-4-1997 NOV-2-1997 1,024,601 0 7,689,130 0 12,100,135 25,487,346 26,039,849 13,428,547 46,760,778 11,627,978 0 0 0 454,115 27,530,667 46,760,778 10,573,305 10,573,305 6,488,615 8,491,411 0 0 136,515 2,036,749 692,500 1,344,249 0 0 0 1,344,249 0.26 0.26 (1)Primary and diluted EPS reflect a 4-for-3 stock split payable September 29, 1997. Prior Financial Data Schedules have not been restated for this stock split.
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