-----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, IjAJLaTwed8ReJLPeYfqxXdaCrzmhFEMvuGXBGocWEJxgAtcJ01Ecd4B1XRDG2UN gHrKAsKFfw0GhVxXE/hi+g== 0000950123-96-006793.txt : 19961121 0000950123-96-006793.hdr.sgml : 19961121 ACCESSION NUMBER: 0000950123-96-006793 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961119 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: 96669320 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, INC. 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: SEPTEMBER 30, 1996 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 Number) incorporation or organization) 333 Bayview Avenue Amityville, New York 11701 - --------------------------------- -------------------------- (Zip Code) (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 and Exchange Act of 1934 during the preceding 12 months (or 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: SEPTEMBER 30, 1996 COMMON STOCK, $.01 PAR VALUE PER SHARE 4,367,727 2 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES INDEX SEPTEMBER 30, 1996
Page ---- PART I: FINANCIAL INFORMATION (unaudited) Condensed Consolidated Balance Sheets, September 30, 1996 and June 30, 1996 3 Condensed Consolidated Statements of Income for the Three Months ended September 30, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows for the Three Months ended September 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II: OTHER INFORMATION 10 SIGNATURE PAGE 11 INDEX TO EXHIBITS 12 Computation of Earnings Per Share E-1
-2- 3 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
September 30, June 30, ASSETS 1996 1996 ---------- ---------- Current Assets: Cash and cash equivalents $ 309 $ 426 Accounts receivable, less allowance for doubtful accounts: September 30, 1996 $ 897,000 June 30, 1996 $ 864,000 12,918 13,759 Inventories, net (Note 2) 25,469 25,944 Prepaid expenses and other current assets 601 489 Deferred income taxes, net 911 911 -------- -------- Total current assets 40,208 41,529 Property, Plant and Equipment, net of accumulated depreciation and amortization (Note 3): September 30, 1996 $ 9,438,000 June 30, 1996 $ 9,137,000 12,401 12,549 Excess of Cost Over Fair Value of Assets Acquired, net 2,779 2,806 Other Assets 239 435 -------- -------- $ 55,627 $ 57,319 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 2,188 $ 1,500 Accounts payable 5,516 5,986 Accrued and other current liabilities 1,071 2,216 Accrued taxes 3,301 3,151 -------- -------- Total current liabilities 12,076 12,853 Long-Term Debt 12,862 14,150 Deferred Income Taxes 742 742 -------- -------- Total liabilities 25,680 27,745 Stockholders' Equity: Common stock: par value $.01 per share; 21,000,000 shares authorized, 5,896,602 shares issued 59 59 Additional paid-in capital 719 719 Retained earnings 29,170 28,797 Less: Treasury stock, at cost (1,528,875 shares) (1) (1) -------- -------- Total stockholders' equity 29,947 29,574 -------- -------- $ 55,627 $ 57,319 ======== ========
See accompanying notes to Condensed consolidated Financial Statements -3- 4 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended September 30, --------------------------- 1996 1995 ---------- ---------- (in thousands, except per share data) Net Sales $ 12,156 $ 11,769 Cost of Sales 9,021 8,797 ---------- ---------- Gross Profit 3,135 2,972 Selling, General and Administrative Expenses 2,282 2,031 ---------- ---------- Operating income 853 941 ---------- ---------- Interest Expense, net 282 354 Other Expense, net 45 40 ---------- ---------- 327 394 ---------- ---------- Income before provision for income taxes 526 547 Provision for Income Taxes 153 209 ---------- ---------- Net income $ 373 $ 338 ========== ========== Earnings Per Share $ 0.09 $ 0.08 ========== ========== Weighted Average Number of Shares Outstanding 4,375,014 4,402,727 ========== ==========
See accompanying notes to Condensed consolidated Financial Statements. -4- 5 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended September 30, ---------------------- 1996 1995 -------- ------- (in thousands) Net Cash Provided by Operating Activities $ 636 $ 1,892 ----- ------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (153) (349) ----- ------- Net cash used in investing activities (153) (349) ----- ------- Cash Flows from Financing Activities: Principal payments on long-term debt (600) (305) ----- ------- Net cash used in financing activities (600) (305) ----- ------- Net Increase (Decrease) in Cash and Cash Equivalents (117) 1,238 Cash and Cash Equivalents at Beginning of Period 426 368 ----- ------- Cash and Cash Equivalents at End of Period $ 309 $ 1,606 ===== ======= Cash Paid During the Period for: Interest $ 284 $ 361 ===== ======= Income taxes $ 9 $ 21 ===== =======
See accompanying notes to Condensed consolidated Financial Statements. -5- 6 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 months ended September 30, 1996 and 1995 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: September 30, June 30, 1996 1996 ------- ------- Component parts $17,580 $17,908 Work-in-process 4,368 4,449 Finished products 3,521 3,587 ======= ======= $25,469 $25,944 ======= ======= 3.) Property, Plant and Equipment ---------------------------------------------------------------- Property, Plant and Equipment consists of: September 30, June 30, 1996 1996 ------- ------- Land $ 904 $ 904 Building 8,852 8,807 Molds and dies 2,362 2,339 Furniture and fixtures 958 942 Machinery and equipment 8,337 8,268 Building improvements 426 426 ------- ------- 21,839 21,686 Less: Accumulated depreciation and amortization 9,438 9,137 ======= ======= $12,401 $12,549 ======= =======
-6- 7 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4.) 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 is proposing adjustments to the Company's Federal tax returns for fiscal years 1987 through 1992. The IRS has issued a report to the Company that the proposed adjustments 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. In October 1996, the Company gave the IRS additional information supporting its position. As a result, the Appeals Division of the IRS has advised the Company that the case will be returned to the Audit Division for further consideration. The Company believes that it has provided adequate reserves at September 30, 1996 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. -7- 8 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Sales for the three months ended September 30, 1996 increased by 3% to $12,156,000 as compared to $11,769,000 for the same period a year ago. This increase is primarily attributable to the introduction of several new products during the fiscal quarter. The Company's gross profit for the three months ended September 30, 1996 increased 5% to $3,135,000 or 25.8% of sales as compared to $2,972,000 or 25.3% of sales for the same period a year ago. The Company's 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 three months ended September 30, 1996 increased by 12.4% to $2,282,000 as compared to $2,031,000 a year ago. This increase is primarily the result of increased sales and marketing efforts related to the Company's introduction of several new product during the fiscal quarter. Interest and other expense for the three months ended September 30, 1996 decreased by 17% to $327,000 from $394,000 for the same period in fiscal 1996. This decrease is primarily the result of a reduction of approximately $2,000,000 in the Company's average outstanding debt as compared to the same period in fiscal 1996. The effective income tax rate for the three months ended September 30, 1996 was 29.1% as compared to 38.2% for the comparable quarter in fiscal 1996. This decrease is primarily the result of lower levels of permanent non-deductible expenses along with lower reserve requirements. Net income increased to $373,000 or $.09 per share for the three months ended September 30, 1996 from $338,000 or $.08 per share for the same period a year ago. This increase is primarily the result of the items discussed above. -8- 9 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 three months ended September 30, 1996 the Company utilized a large portion of its cash generated from operations to make principal payments on its debt. Accounts Receivable at September 30, 1996 decreased by $841,000 to $12,918,000 as compared to $13,759,000 at June 30, 1996. This decrease is primarily the result of the higher sales volume during the quarter ended June 30, 1996 as compared to the quarter ended September 30, 1996. Inventory at September 30, 1996 was $25,469,000, decreasing by $475,000 from $25,944,000 at June 30, 1996. This decrease is predominantly the result of the Company's initial shipments of its recently introduced products. 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 September 30, 1996 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. The balance under this line was fully paid in October 1995. 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 September 30, 1996 the Company had no material committments for capital expenditures. -9- 10 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 is proposing adjustments to the Company's Federal tax returns for fiscal years 1987 through 1992. The IRS has issued a report to the Company that the proposed adjustments 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. In October 1996, the Company gave the IRS additional information supporting its position. As a result, the Appeals Division of the IRS has advised the Company that the case will be returned to the Audit Division for further consideration. The Company believes that it has provided adequate reserves at September 30, 1996 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 On October 24, 1996 the Company registered the 814,733 shares and related options under its 1992 Incentive Stock Option Plan, as amended, on Form S-8 with the Securities and Exchange Commission. 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) Exhibits (11) Computation of Earnings Per Share (b) No reports on Form 8-K have been filed during the Company's fiscal quarter ended September 30, 1996. -10- 11 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. NAPCO SECURITY SYSTEMS, INC. (Registrant) November 15, 1996 By: /s/ Richard Soloway By: /s/ Kenneth Rosenberg ----------------------------------- --------------------------------- Richard Soloway Kenneth Rosenberg Chairman of the Board of Directors President and Treasurer 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) -11- 12 INDEX TO EXHIBITS
Exhibits Page - -------- ---- 11 Computation of Earnings Per Share E-1 27 Financial Data Schedule
-12- EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit (11) NAPCO SECURITY SYSTEMS, INC. COMPUTATION OF EARNINGS PER SHARE (unaudited)
Three Months Ended September 30, -------------------------------- 1996 1995 --------- --------- (in thousands, except per share data) Average Shares Outstanding 4,368 4,368 Add: Common Stock Equivalents 7 59 ------ ------ Weighted Average Shares Outstanding 4,375 4,427 ====== ====== Net Income $ 373 $ 338 ====== ====== Earnings Per Share $ 0.09 $ 0.08 ====== ======
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 3-MOS JUN-30-1997 JUL-01-1996 SEP-30-1996 309 0 12,918 897 25,469 40,208 21,839 9,438 55,627 12,076 0 0 0 59 29,888 55,627 12,156 12,156 9,021 9,021 2,282 0 282 526 153 373 0 0 0 373 .09 .09
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