-----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, JNGuzHJSJfvmQKcVv9K1nx8npZ5FI9+x6lmw6Fc5SdQAGflkmV7Rgzy50RnbtSME asFxVwmIqGkxaaSKppdT6g== 0000950123-97-009663.txt : 19971117 0000950123-97-009663.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950123-97-009663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-10004 FILM NUMBER: 97721555 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 SECURITIES 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, 1997 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, 1997 COMMON STOCK, $.01 PAR VALUE PER SHARE 4,375,727 2 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES INDEX SEPTEMBER 30, 1997
Page ---- PART I: FINANCIAL INFORMATION (unaudited) Condensed Consolidated Balance Sheets, September 30, 1997 and June 30, 1997 3 Condensed Consolidated Statements of Income for the Three Months Ended September 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II: OTHER INFORMATION 9 SIGNATURE PAGE 10 INDEX TO EXHIBITS 11 Computation of Earnings Per Share E-1
3 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
September 30, June 30, ASSETS 1997 1997 ------ ----------------- ---------------- Current Assets: (in thousands, except share data) Cash and cash equivalents $ 548 $ 1,006 Accounts receivable, less allowance for doubtful accounts: September 30, 1997 $768,000 June 30, 1997 $805,000 13,832 13,937 Inventories, net (Note 2) 27,029 25,702 Prepaid expenses and other current assets 345 390 Deferred income taxes, net 986 986 -------- -------- Total current assets 42,740 42,021 Property, Plant and Equipment, net of accumulated depreciation and amortization (Note 3): September 30, 1997 $10,613,000 June 30, 1997 $10,344,000 11,930 12,088 Goodwill, net 2,673 2,699 Other Assets 254 436 ======== ======== $ 57,597 $ 57,244 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 900 $ 900 Accounts payable 4,424 5,500 Accrued and other current liabilities 1,712 1,808 Accrued taxes 3,805 3,677 -------- -------- Total current liabilities 10,841 11,885 Long-Term Debt 14,313 13,313 Deferred Income Taxes 828 828 -------- -------- Total liabilities 25,982 26,026 Stockholders' Equity: Common stock: par value $.01 per share; 21,000,000 shares authorized; 5,904,602 and 5,896,602 shares issued, respectively; 4,375,727 and 4,367,727 shares outstanding, respectively 59 59 Additional paid-in capital 739 724 Retained earnings 30,818 30,436 Less: Treasury stock, at cost (1,528,875 shares) (1) (1) -------- -------- Total stockholders' equity 31,615 31,218 ======== ======== $ 57,597 $ 57,244 ======== ========
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, ---------------------------- 1997 1996 ---------- ---------- (in thousands, except share and per share data) Net Sales $ 12,253 $ 12,156 Cost of Sales 9,081 9,021 ---------- ---------- Gross Profit 3,172 3,135 Selling, General and Administrative Expenses 2,363 2,282 ---------- ---------- Operating income 809 853 ---------- ---------- Interest Expense, net 261 282 Other (Income) Expense, net 25 45 ---------- ---------- 286 327 ---------- ---------- Income before provision for income taxes 523 526 Provision for Income Taxes 141 153 ---------- ---------- Net income $ 382 $ 373 ========== ========== Earnings Per Share $ 0.09 $ 0.09 ========== ========== Weighted Average Number of Shares Outstanding 4,397,929 4,375,014 ========== ==========
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, ----------------------- 1997 1996 ------- ------- (in thousands) Net Cash Provided by Operating Activities $(1,347) $ 636 ------- ------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (111) (153) ------- ------- Net cash used in investing activities (111) (153) ------- ------- Cash Flows from Financing Activities: Proceeds from long-term debt borrowings 1,000 -- Principal payments on long-term debt -- (600) ------- ------- Net cash used in financing activities 1,000 (600) ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents (458) (117) Cash and Cash Equivalents at Beginning of Period 1,006 426 ------- ------- Cash and Cash Equivalents at End of Period $ 548 $ 309 ======= ======= Cash Paid During the Period for: Interest $ 347 $ 284 ======= ======= Income taxes $ 13 $ 9 ======= =======
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, 1997 and 1996 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, 1997 1997 ------- ------- (in thousands) Component parts $12,527 $12,197 Work-in-process 3,448 3,374 Finished products 11,054 10,131 ------- ------- $27,029 $25,702 ======= =======
3.) Property, Plant and Equipment
Property, Plant and Equipment consists of: September 30, June 30, 1997 1997 ------- ------- (in thousands) Land $ 904 $ 904 Building 8,911 8,911 Molds and dies 2,565 2,554 Furniture and fixtures 982 977 Machinery and equipment 8,750 8,660 Building improvements 431 426 ------- ------- 22,543 22,432 Less: Accumulated depreciation and amortization 10,613 10,344 ======= ======= $11,930 $12,088 ======= =======
4.) 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 advised the Company that the case had been returned to the Audit Division for further consideration. Subsequently, the case has again been returned to the Appeals Division of the IRS, with a meeting with such division scheduled for November, 1997. The Company believes that it has provided adequate reserves at September 30, 1997 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. -6- 7 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, 1997 remained constant at $12,253,000 as compared to $12,156,000 for the same period a year ago. This level of sales was maintained primarily due to the continued positive reception to the Company's new product offerings as partially offset by the reduction in sales to one of the Company's major customers and the ongoing market shift towards low-cost, high value products. The Company's gross margin for the three months ended September 30, 1997 remained relatively constant at $3,172,000 or 25.9% of sales as compared to $3,135,000 or 25.8% of sales for the same period a year ago. Selling, general and administrative expenses for the three months ended September 30, 1997 increased by 4% to $2,363,000 as compared to $2,282,000 a year ago. This increase is primarily due to the continued marketing efforts relating to several new recently introduced products. Interest and other expense for the three months ended September 30, 1997 decreased slightly to $286,000 from $327,000 for the same period a year ago due primarily to lower average outstanding debt and lower interest rates. Provision for income taxes for the three months ended September 30, 1997 remained relatively consistent at $141,000 as compared to $153,000 for the same period a year ago due to similar pre-tax earnings and effective tax rates. Net income remained constant at $382,000 or $.09 per share for the three months ended September 30, 1997 as compared to $373,000 or $.09 per share for the same period a year ago. These levels are due to the relative consistency in performance in the areas described above. -7- 8 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, 1997 the Company utilized its cash generated from operations as well as additional borrowings to increase its investment in inventory and to purchase property and equipment. This investment resulted in a decrease in cash and cash equivalents to $548,000 at September 30, 1997 from $1,006,000 as of June 30, 1997. and an increase in outstanding debt of $1,000,000 to $15,213,000 at September 30, 1997 from $14,213,000 at June 30, 1997. Accounts Receivable at September 30, 1997 decreased slightly to $13,832,000 as compared to $13,937,000 at June 30, 1997. This decrease is primarily the result of the higher sales volume during the quarter ended June 30, 1997 as compared to the quarter ended September 30, 1997. Inventory at September 30, 1997 was $27,029,000, increasing by $1,327,000 from $25,702,000 at June 30, 1997. This increase is predominantly the result of the Company's stocking of two satellite warehouses that are intended to better service the Company's customers by locating inventory closer to certain international markets. On May 13, 1997, the Company refinanced the majority of its bank debt with a new primary bank and entered into a $16,000,000 secured revolving credit agreement, a $3,000,000 line of credit to be used in connection with commercial and standby letters of credit, and replaced the $2,500,000 standby letter of credit securing an earlier loan from another bank in connection with the Company's international operations. These agreements replaced the existing $11,000,000 and $2,000,000 credit agreements with another bank. The Company restructured its debt to allow for future growth and expansion as well as to obtain terms more favorable to the Company. As part of the debt restructuring, the Company retired the outstanding Industrial Revenue Bonds relating to the financing of the construction of the Company's Amityville facility. The revolving credit agreement will expire in May, 2000 and any outstanding borrowings are to be repaid on or before that time. On April 26, 1993 the Company's foreign subsidiary entered into a 99 year 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, 1997 the Company had no material commitments for capital expenditures. -8- 9 PART II: OTHER INFORMATION Item 1. Legal Proceedings 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 advised the Company that the case had been returned to the Audit Division for further consideration. Subsequently, the case has again been returned to the Appeals Division of the IRS, with a meeting with such division scheduled for November, 1997. The Company believes that it has provided adequate reserves at September 30, 1997 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 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, 1997. -9- 10 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. November 12, 1997 NAPCO SECURITY SYSTEMS, INC. (Registrant) 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) -10- 3 11 INDEX TO EXHIBITS Exhibits Page - -------- ---- 11 Computation of Earnings Per Share E-1 27 Financial Data Schedule -11- 4 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, ----------------------- 1997 1996 ------ ------ (in thousands, except per share data) Average Shares Outstanding 4,371 4,368 Add: Common Stock Equivalents 27 7 ------ ------ Weighted Average Shares Outstanding 4,398 4,375 ====== ====== Net Income $ 382 $ 373 ====== ====== Earnings Per Share $ 0.09 $ 0.09 ====== ======
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-30-1998 JUL-01-1997 SEP-30-1997 548 0 14,600 768 27,029 42,740 22,543 10,613 57,597 10,841 0 0 0 59 738 57,597 12,253 12,253 9,081 9,081 2,363 0 286 523 141 382 0 0 0 382 0.09 0.09
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