-----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, PVGhWMaFpYLJo48QbYvwkwFRxT4IdaWGX/b29MiI+ILaMC/UA83gm5K8AbFldRQV D/BCCua2I2Q/l0pd9EpM4w== 0000950123-96-000681.txt : 19960221 0000950123-96-000681.hdr.sgml : 19960221 ACCESSION NUMBER: 0000950123-96-000681 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960220 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAPCO SECURITY SYSTEMS INC CENTRAL INDEX KEY: 0000069633 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 112277818 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10004 FILM NUMBER: 96523208 BUSINESS ADDRESS: STREET 1: 333 BAYVIEW AVE CITY: AMITYVILLE STATE: NY ZIP: 11701 BUSINESS PHONE: 5168429400 MAIL ADDRESS: STREET 1: C/O CURTO BARTON & ALESI, PC STREET 2: ONE HUNTINGTON QUADRANGLE STE 1 NORTH 5 CITY: MELVILLE STATE: NY ZIP: 11747 10-Q 1 NAPCO SECURITY SYSTEMS QUARTERLY REPORT, 12/31/95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ Commission File Number 0-10004 - ------------------------------------------------------------------------------- NAPCO SECURITY SYSTEMS, INC. - ------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 11-2277818 - ------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 333 BAYVIEW AVENUE AMITYVILLE, NEW YORK 11701 - ------------------------------------------------------------------------------- (Address of principle (Zip Code) executive offices) (516) 842-9400 - ------------------------------------------------------------------------------- (Registrant's telephone number including area code) NONE - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed from 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. Yes X No --- ---- Number of shares outstanding of each of the issuer's classes of common stock, as of December 31, 1995:
COMMON STOCK, $.01 PAR VALUE 4,367,727 PER SHARE
2 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES INDEX DECEMBER 31, 1995 PAGE PART I - FINANCIAL INFORMATION (unaudited) Condensed Consolidated Balance Sheets, December 31, 1995 and June 30, 1995 3 Condensed Consolidated Statements of Income for the Six Months Ended December 31, 1995 and 1994 4 Condensed Consolidated Statements of Income for the Three Months Ended December 31, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1995 and 1994 6 Notes to Condensed Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION 11 SIGNATURE PAGE 13 INDEX TO EXHIBITS 14 Computation of Earnings Per Share E-1 -2- 3 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, June 30, ASSETS 1995 1995 ------------ -------- (in thousands) Current Assets: Cash and cash equivalents $ 1,052 $ 368 Accounts receivable, less allowance for doubtful accounts: December 31, 1995 $617,000 June 30, 1995 $662,000 12,190 13,647 Inventories, net (Note 2) 23,341 24,178 Prepaid expenses and other current assets 687 445 Deferred income tax benefits, net 1,278 1,278 -------- -------- Total current assets 38,548 39,916 Property, Plant and Equipment, net of accumulated depreciation and amortization of $8,388 and $8,013 respectively (Note 3) 12,694 12,503 Excess of Cost Over Fair Value of Assets Acquired, net 2,849 2,913 Deferred Financing Costs, net 64 70 Other Assets 158 337 -------- -------- $ 54,313 $ 55,739 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 1,270 $ 2,182 Notes payable to bank -- 500 Accounts payable 3,203 4,001 Accrued and other liabilities 1,561 1,365 Accrued taxes 3,770 3,208 -------- -------- Total current liabilities 9,804 11,256 Long-Term Debt 14,675 15,275 Deferred Income Taxes 648 648 -------- -------- Total liabilities 25,127 27,179 -------- -------- Stockholders' Equity: Common stock - par value $.01 per share; authorized 21,000,000 shares, 5,896,602 issued 59 59 Additional paid-in capital 719 719 Retained earnings 28,409 27,783 Less: Treasury stock, at cost (1,528,875 shares) (1) (1) -------- -------- Total stockholders' equity 29,186 28,560 -------- -------- $ 54,313 $ 55,739 ======== ========
See accompanying notes to Condensed Consolidated Financial Statements. -3- 4 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Ended December 31, --------------------------- 1995 1994 ---------- ---------- (in thousands, except per share data) Net Sales $ 23,276 $ 23,214 Cost of Sales 17,385 17,619 ---------- ---------- Gross profit 5,891 5,595 Selling, General and Administrative Expenses 4,154 4,445 ---------- ---------- Operating income 1,737 1,150 ---------- ---------- Interest Expense, net 583 582 Other Expense, net 103 82 ---------- ---------- 686 664 ---------- ---------- Income before provision for income taxes 1,051 486 Provision for Income Taxes (Note 4) 425 83 ---------- ---------- Net income $ 626 $ 403 ========== ========== Earnings Per Share $ 0.14 $ 0.09 ========== ========== Weighted Average Number of Shares Outstanding 4,390,646 4,426,501 ========== ==========
See accompanying notes to Condensed Consolidated Financial Statements. -4- 5 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended December 31, --------------------------- 1995 1994 ---------- ---------- (in thousands, except per share data) Net Sales $ 11,507 $ 12,044 Cost of Sales 8,588 9,143 ---------- ---------- Gross profit 2,919 2,901 Selling, General and Administrative Expenses 2,123 2,285 ---------- ---------- Operating income 796 616 ---------- ---------- Interest Expense, net 229 306 Other Expense, net 63 60 ---------- ---------- 292 366 ---------- ---------- Income before provision for income taxes 504 250 Provision for Income Taxes (Note 4) 216 53 ---------- ---------- Net income $ 288 $ 197 ========== ========== Earnings Per Share $ 0.07 $ 0.04 ========== ========== Weighted Average Number of Shares Outstanding 4,375,136 4,428,805 ========== ==========
See accompanying notes to Condensed Consolidated Financial Statements. -5- 6 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended December 31, ---------------------- 1995 1994 ------- ------- (in thousands) Net Cash Provided by (Used in) Operating Activities $ 3,212 $ (952) ------- ------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (516) (1,982) ------- ------- Net cash used in investing activities (516) (1,982) ------- ------- Cash Flows from Financing Activities: Principle payments on short-term debt (500) -- Proceeds from long-term debt borrowings -- 2,668 Principle payments on long-term debt (1,512) (961) ------- ------- Net cash provided by (used in) financing activities (2,012) 1,707 ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents 684 (1,227) Cash and Cash Equivalents at Beginning of Period 368 1,335 ------- ------- Cash and Cash Equivalents at End of Period $ 1,052 $ 108 ------- ------- Cash Paid During the Period for: Interest $ 640 $ 568 ======= ======= Income taxes $ 137 $ 60 ======= =======
See accompanying notes to Condensed Consolidated Financial Statements. -6- 7 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1.) Summary of significant accounting policies and other disclosures ---------------------------------------------------------------------- The information for the three and six months ended December 31, 1995 and 1994 is unaudited, but in the opinion of the Company, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations for such periods have been included. The results of operations for the periods may not necessarily reflect the annual results of the Company. The Company has adopted all recently effective accounting standards which have an impact on its condensed financial statements. 2.) Inventories ----------------------------------------------------------------------
Inventories consist of: December 31, June 30, 1995 1995 ------------ --------- (unaudited) (in thousands) Component parts $ 9,370 $ 9,706 Work-in-process 6,313 6,539 Finished products 7,658 7,933 ========= ======== $ 23,341 $ 24,178 ========= ========
3.) Property, Plant and Equipment ---------------------------------------------------------------------- Property, Plant and Equipment consists of:
December 31, June 30, 1995 1995 ------------ --------- (unaudited) (in thousands) Land $ 904 $ 904 Building 8,721 8,595 Molds and dies 2,132 1,971 Furniture and fixtures 1,029 1,005 Machinery and equipment 7,874 7,633 Building improvements 422 408 --------- -------- 21,082 20,516 Less: Accumulated depreciation and amortization 8,388 8,013 ========= ======== $ 12,694 $ 12,503 ========= ========
-7- 8 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 4.) Income Taxes The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", effective July 1, 1993. SFAS No. 109 requires recognition of deferred tax liabilities and assets for the estimated future tax effects of events that have been recognized in the Company's financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In August 1995, the Internal Revenue Service ("IRS") informed the Company that it had completed the audit of the Company's Federal tax returns for fiscal years 1987 through 1992. The IRS has issued a report to the Company proposing adjustments that would result in taxes due of approximately $4.3 million excluding interest charges. The primary adjustments presented by the IRS relate to intercompany pricing and royalty charges, DISC earnings and charitable contributions. The Company disagrees with the IRS and intends to vigorously appeal this assessment using all remedies and procedural actions available under the law. The Company believes that it has provided adequate reserves at December 31, 1995 to address the ultimate resolution of this matter, so that it will not have a material adverse effect on the Company's consolidated financial statements. -8- 9 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - ------------------------ Sales for the six months ended December 31, 1995 remained relatively flat at $23,276,000 as compared to $23,214,000 for the same period a year ago. For the three months ended December 31, 1995 sales decreased 4% to $11,507,000 from $12,044,000 a year ago. This decrease is primarily attributable to a delay in delivery of a component part which was critical to the manufacturing process of one of the Company's primary products. This component has subsequently been delivered and sales orders previously held up due to this delay are now shipping regularly. The Company's gross profit margin for the six months ended December 31, 1995 increased 5% to $5,891,000 or 25.3% of sales as compared to $5,595,000 or 24.1% of sales for the same period a year ago. For the three months ended December 31, 1995, gross profit remained relatively flat at $2,919,000 as compared to $2,901,000 a year ago. As a percentage of sales, however, gross profit increased to 25.4% of sales as compared to 24.1% last year. The increases in both gross profit and gross profit percentage are primarily attributable to cost savings being generated by the Company's offshore facility in the Dominican Republic. These savings are a direct result of improved production efficiencies resulting from its manufacturing operations now being under one roof. Selling, general and administrative expenses for the six months ended December 31, 1995 decreased by 7% to $4,154,000 as compared to $4,445,000 a year ago. For the three months ended December 31, 1995, selling, general and administrative expenses decreased by 7% to $2,123,000 from $2,285,000 last year. These decreases are due to the Company's continuing efforts towards cost containment. Interest and other expense for the six months ended December 31, 1995 remained relatively flat at $686,000 as compared to $664,000 for the same period a year ago. For the three months ended December 31, 1995, interest and other expenses decreased 20% to $292,000 as compared to $366,000 for the same period in fiscal 1995. This decrease is due to a decrease in the Company's average outstanding debt from the same period a year ago. Provision for income taxes increased $342,000 to $425,000 for the six months ended December 31, 1995 as compared to $83,000 a year ago. Provision for income taxes for the three months ended December 31, 1995 increased $163,000 to $216,000 as compared to $53,000 a year ago. These increases reflect the relative increase in taxable income of the Company's domestic operations in comparison to its foreign subsidiary. Net income increased by 55% to $626,000 or $.14 per share for the six months ended December 31, 1995 from $403,000 or $.09 per share for the same period a year ago. For the three months ended December 31, 1995 net income increased by 46% to $288,000 or $.07 per share as compared to $197,000 or $.04 per share for the same quarter a year ago. This increase is primarily the result of the items discussed above. -9- 10 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources - ------------------------------- During the six months ended December 31, 1995 the Company utilized a large portion of its cash generated from operations to make principle payments on its debt as well as to purchase property and equipment. The remaining cash provided by operations resulted in an increase in cash and cash equivalents to $1,052,000 at December 31, 1995 from $368,000 as of June 30, 1995. Accounts receivable at December 31, 1995 decreased by $1,457,000 to $12,190,000 as compared to $13,647,000 at June 30, 1995. This decrease is primarily the result of the higher sales volume during the quarter ended June 30, 1995 as compared to the quarter ended December 31, 1995 as well as improved collection procedures. Inventory at December 31, 1995 was $23,341,000, decreasing by $837,000 from $24,178,000 at June 30, 1995. This decrease is predominantly the result of the completion of the Company's move into its new production facility in the Dominican Republic. With the move completed, the Company continues to reduce the additional inventory which it carried as a precaution against possible inefficiencies during the move. On July 27, 1994, the Company entered into an $11,000,000 secured revolving credit and term loan facility with two banks, with the Company's primary bank acting as agent. In conjunction with this agreement, the banks have received as collateral all accounts receivable and inventory located in the United States. The revolving credit loan, which bears interest based on a number of options available to the Company, converts to a term loan on June 30, 1997 payable in sixteen (16) equal quarterly installments beginning on September 30, 1997. The agreement contains various covenants and restrictions on the Company. As of December 31, 1995 the Company was not in compliance with certain of these financial covenants for which they anticipate receiving the appropriate waivers from the banks. On March 31, 1995, the Company amended its existing revolving credit and term loan facility to provide for an additional $2,000,000 secured line of credit. Any borrowings arising from this additional line are to be repaid in full on or before April 1, 1996. As of December 31, 1995 there were no outstanding borrowings under this line. On July 28, 1994 the Company entered into a separate $2,000,000 line of credit with its primary bank to be used in connection with commercial and standby letters of credit. On April 26, 1993, the Company's foreign subsidiary entered into a 99 year land lease of approximately four acres of land in the Dominican Republic, at an annual cost of approximately $272,000. The foreign subsidiary relocated its operations to this site at the end of fiscal 1995. As of December 31, 1995 the Company had no material committments for capital expenditures. -10- 11 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- There are no pending or threatened material legal proceedings to which NAPCO or its subsidiaries or any of their property is subject other than as follows: In August 1995, the Internal Revenue Service ("IRS") informed the Company that it had completed the audit of the Company's Federal tax returns for fiscal years 1987 through 1992. The IRS has issued a report to the Company proposing adjustments that would result in taxes due of approximately $4.3 million excluding interest charges. The primary adjustments presented by the IRS relate to intercompany pricing and royalty charges, DISC earnings and charitable contributions. The Company disagrees with the IRS and intends to vigorously appeal this assessment using all remedies and procedural actions available under the law. The Company believes that it has provided adequate reserves at December 31, 1995 to address the ultimate resolution of this matter so that it will not have a material adverse effect on the Company's consolidated financial statements. 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) An annual meeting of the stockholders of the Company (the "Annual Meeting") was held on November 21, 1995. (b) The names of the directors elected at the Annual Meeting are: Richard Soloway, Kenneth Rosenberg, Randy B. Blaustein and Andrew J. Wilder. (c) A stockholder proposal to expand the Board of Directors from four (4) to six (6) directors, three (3) of which would be independent, was not passed. -11- 12 PART II - OTHER INFORMATION (continued) --------------------------------------- Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits (11) Computation of Earnings Per Share (b) No reports on Form 8-K have been filed during the Company's fiscal quarter ended December 31, 1995. -12- 13 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. February 20, 1996 NAPCO SECURITY SYSTEMS, INC. (Registrant) By:/s/ RICHARD SOLOWAY By:/s/ KENNETH ROSENBERG ------------------------- ------------------------- Richard Soloway Kenneth Rosenberg Chairman of the Board of President and Treasurer Directors and Secretary (Co-Principal Executive Officer) (Co-Principal Executive Officer) By:/s/ KEVIN S. BUCHEL --------------------------- Kevin S. Buchel Senior Vice President of Operations and Finance (Principal Financial and Accounting Officer) -13- 14 INDEX TO EXHIBITS -----------------
Exhibits PAGE -------- ------ 11 Computation of Earnings Per Share E-1 27 Financial Data Schedule
-14- EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit (11) NAPCO SECURITY SYSTEMS, INC. COMPUTATION OF EARNINGS PER SHARE (unaudited)
Six Months Ended December 31, -------------------------- 1995 1994 ------ ------ (in thousands, except per share data) Average Shares Outstanding 4,368 4,368 Add: Common Stock Equivalents 23 59 ------ ------ Weighted Average Shares Outstanding 4,391 4,427 ====== ====== Net Income $ 626 $ 403 ====== ====== Earnings Per Share $ 0.14 $ 0.09 ====== ======
Three Months Ended December 31, -------------------------- 1995 1994 ------ ------ (in thousands, except per share data) Average Shares Outstanding 4,368 4,368 Add: Common Stock Equivalents 7 61 ------ ------ Weighted Average Shares Outstanding 4,375 4,429 ====== ====== Net Income $ 288 $ 197 ====== ====== Earnings Per Share $ 0.07 $ 0.04 ====== ======
Primary earnings per share computations are based on the weighted average number of shares outstanding plus common stock equivalents calculated at the monthly average market price per share. E-1 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JUN-30-1996 JUL-01-1995 DEC-31-1995 1,052 0 12,190 617 23,341 38,548 21,082 8,388 54,313 9,804 0 0 0 59 29,127 54,313 23,276 23,276 17,385 17,385 4,154 0 583 1,051 425 626 0 0 0 626 0.14 0.14
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