-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ijNGULRi5OGUMiNby8CP/XcmxKxRbb7UGCvMBPChR+RBZZK5Y+JpwNpQVDIQ3x4x 7NF5wWmiX0Z5NWxQpkclrQ== 0000950123-95-001470.txt : 19950531 0000950123-95-001470.hdr.sgml : 19950531 ACCESSION NUMBER: 0000950123-95-001470 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950518 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAPCO SECURITY SYSTEMS INC CENTRAL INDEX KEY: 0000069633 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95540856 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 FORM 10-Q FOR PERIOD ENDED MARCH 31, 1995 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 MARCH 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 March 31, 1995:
COMMON STOCK, $.01 PAR VALUE PER SHARE 4,367,727 - - ------------------------------- ------------------------------- (Class) (number of shares outstanding)
2 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES INDEX MARCH 31, 1995
PAGE ------ PART I - FINANCIAL INFORMATION (unaudited) Condensed Consolidated Balance Sheets, March 31, 1995 and June 30, 1994 3 Condensed Consolidated Statements of Income for the Nine Months Ended March 31, 1995 and 1994 4 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 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)
March 31, June 30, ASSETS 1995 1994 ------ ----------------- --------------- Current Assets: (in thousands) Cash and cash equivalents $ 120 $ 1,335 Accounts receivable, less allowance for doubtful accounts (Note 2): March 31, 1995 $826,000 June 30, 1994 $454,000 11,912 14,687 Inventories, net (Note 3) 27,348 23,613 Prepaid expenses and other current assets 314 470 ----------------- ---------------- Total current assets 39,694 40,105 ----------------- ---------------- Property, Plant and Equipment 20,221 17,184 Less: Accumulated Depreciation and Amortization (Note 4) 7,710 6,824 ----------------- ---------------- 12,511 10,360 Excess of Cost Over Fair Value of Assets Acquired, net 2,940 3,020 Deferred Financing Costs, net 74 85 Other Assets 271 240 Deferred Tax Benefits, net - - ----------------- ---------------- $ 55,490 $ 53,810 ================= ================ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current portion of long-term debt $ 2,612 $ 2,596 Accounts payable 5,812 5,876 Accrued and other liabilities 3,335 3,600 ----------------- ---------------- Total current liabilities 11,759 12,072 Long-Term Debt 15,575 13,690 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 27,379 27,271 Less: Treasury stock, at cost (1,528,875 shares) (1) (1) ----------------- ---------------- Total stockholders' equity 28,156 28,048 ----------------- ---------------- $ 55,490 $ 53,810 ================= ================
See accompanying notes to Condensed Consolidated Financial Statements. -3- 4 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Nine Months Ended March 31, --------------- -------------- 1995 1994 --------------- -------------- (in thousands, except per share data) Net Sales $ 34,375 $ 33,270 Cost of Sales 26,066 24,754 ------------ ----------- Gross profit 8,309 8,516 Selling, General and Administrative Expenses 6,648 6,753 Unusual Bad Debt Expense (Note 2) 480 -- ------------ ----------- Operating income 1,181 1,763 ------------ ----------- Interest Expense, net 947 753 Other Expense, net 93 29 ------------ ----------- 1,040 782 ------------ ----------- Income before provision for income taxes 141 981 Provision for Income Taxes (Note 5) 33 -- ------------ ----------- Net income $ 108 $ 981 ============ =========== Earnings Per Share $ 0.02 $ 0.22 ============ ========== Weighted Average Number of Shares Outstanding 4,427,478 4,402,277 ============ ==========
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 March 31, --------------- -------------- 1995 1994 --------------- -------------- (in thousands, except per share data) Net Sales $ 11,161 $ 10,896 Cost of Sales 8,447 8,103 ----------- ---------- Gross profit 2,714 2,793 Selling, General and Administrative Expenses 2,203 2,345 Unusual Bad Debt Expense (Note 2) 480 -- ----------- ---------- Operating income 31 448 ----------- ---------- Interest Expense, net 365 337 Other Expense (Income), net 11 (13) ----------- ---------- 376 324 ----------- ---------- Income (loss) before income taxes (345) 124 Recovery of Income Taxes (Note 5) 50 -- ----------- ---------- Net income (loss) $ (295) $ 124 =========== ========== Earnings (loss) Per Share $ (0.07) $ 0.03 =========== ========== Weighted Average Number of Shares Outstanding 4,424,190 4,396,502 =========== ==========
See accompanying notes to Condensed Consolidated Financial Statements. -5- 6 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended March 31, --------------- -------------- 1995 1994 --------------- -------------- (in thousands) Net Cash Provided by (Used in) Operating Activities (80) $ 1,767 Cash Flows from Investing Activities: Purchases of property, plant and equipment (3,036) (1,025) ----------- ---------- Net cash used in investing activities (3,036) (1,025) ----------- ---------- Cash Flows from Financing Activities: Proceeds from long-term debt borrowings 3,567 5,615 Principal payments on long-term debt (1,666) (6,622) Proceeds from issuance of common stock -- 2 ----------- ---------- Net cash provided by (used in) financing activities 1,901 (1,005) ----------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents (1,215) (263) Cash and Cash Equivalents at Beginning of Period 1,335 871 ----------- ---------- Cash and Cash Equivalents at End of Period $ 120 $ 608 =========== =========== Cash Paid During the Period for: Interest $ 1,005 $ 671 =============== ============== Income taxes $ 188 $ -- =============== ==============
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 nine months ended March 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.) Unusual Bad Debt Expense ------------------------ In May 1995, the Company became aware of an unexpected Chapter 7 bankruptcy filing of one of its customers. The Company has therefore reflected an unusually large bad debt expense of $480,000 in its condensed consolidated statements of income for the three and nine months ended March 31, 1995. This expense is net of anticipated future cash collections relating to this customer. 3.) Inventories -----------
Inventories consist of: March 31, June 30, 1995 1994 ------------------ ---------------- (Unaudited) (in thousands) Component parts $ 11,627 $ 10,471 Work-in-process 7,975 6,022 Finished products 7,747 7,120 ------------------ ---------------- $ 27,348 $ 23,613 ================== ================
-7- 8 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 4.) Property, Plant and Equipment -----------------------------
Property, Plant and Equipment consists of: March 31, June 30, 1995 1994 ------------------ ---------------- (Unaudited) (in thousands) Land $ 904 $ 904 Building 8,627 6,014 Molds and dies 1,902 1,719 Furniture and fixtures 950 925 Machinery and equipment 7,433 7,229 Leasehold improvements 405 393 ------------------ ---------------- 20,221 17,184 Less: Accumulated depreciation and amortization 7,710 6,824 ------------------ ---------------- $ 12,511 $ 10,360 ================== ================
5.) Income Taxes ------------ Foreign income taxes are not provided on income generated by the Company's subsidiary in the Dominican Republic, as such income is presently exempt from local tax. The Company's domestic and foreign operations are both presently under review by the Internal Revenue Service ("IRS"). To date, no formal notice of deficiency has been issued by the IRS. -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 first nine months of fiscal 1995 increased approximately 3.3% to $34,375,000 from $33,270,000 for the same period in fiscal 1994. Sales for the three months ended March 31, 1995 increased approximately 2.4% to $11,161,000 as compared to $10,896,000 for the same period in fiscal 1994. The Company was able to achieve these sales levels primarily as a result of continued customer demand of its new and existing products. This increase was also achieved despite the continued pressure and competition within the Company's industry. The Company's gross profit margin decreased to 24.2% of sales for the first nine months of fiscal 1995 as compared to 25.6% for the first nine months of fiscal 1994. For the three months ended March 31, 1995 gross profit margin decreased to 24.3% from 25.6% for the same period a year ago. This decrease was primarily the result of an unfavorable product mix as well as certain production inefficiencies associated with the Company's move into its new manufacturing facility, which was operational as of May 1995. Selling, general and administrative expenses for the first nine months of fiscal 1995 remained relatively constant at $6,648,000 as compared to $6,753,000 for the same period in fiscal 1994. For the three months ended March 31, 1995 selling, general and administrative expenses decreased by 6.1% to $2,203,000 from $2,345,000 for the same period a year ago. This decrease is due primarily to the Company's concentrated efforts to increase efficiency and thus reduce the costs asociated with its selling, general and administrative overhead. In addition to the general reserve for bad debts accounted for in Selling, General and Administrative expenses, the Company recorded an unusual bad debt expense of $480,000 as a result of an unexpected Chapter 7 bankruptcy filing of one of its customers. Net interest expense increased to $947,000 for the first nine months of fiscal 1995 as compared to $753,000 for the same period in fiscal 1994. For the three months ended March 31, 1995 net interest expense increased to $365,000 from $337,000 for the same period in fiscal 1994. This increase is due primarily to the increase in average outstanding debt and effective interest rates for the three and nine months ended March 31, 1995 as compared to the same periods in fiscal 1994. The Company provided for income taxes of $33,000 and a recovery of $50,000 for the nine and three months ended March 31, 1995 respectively. This compares to no provision for the same periods in fiscal 1994. The provision for the nine months is primarily the result of taxable domestic income as partially offset by certain benefits available from non-taxable foreign source income. The recovery provided for reflects the effect of tax benefits resulting from the loss in the three months ended March 31, 1995. Net income decreased by $873,000 to $108,000 or $.02 per share for the nine months ended March 31, 1995 from $981,000 or $.22 per share for the same period a year ago. For the three months ended March 31, 1995 net income decreased by $419,000 to a loss of $295,000 or $.07 per share from net income of $124,000 or $.03 per share for the same period in fiscal 1994. This decrease is due primarily to 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 nine months ended March 31, 1995 the Company utilized a major portion of its cash generated from operations and existing cash reserves to help fund the construction and start-up of its new manufacturing facility in the Dominican Republic. These costs were also funded by borrowings from the Company's primary banks. This investment in capital assets resulted in a decrease in the Company's cash balances to $120,000 as of March 31, 1995 from $1,335,000 as of June 30, 1994. Accounts receivable at March 31, 1995 decreased by $2,775,000 to $11,912,000 as compared to $14,687,000 at June 30, 1994. This decrease is primarily the result of the higher sales volume during the quarter ended June 30, 1994 as compared to the quarter ended March 31, 1995 as well as the additional reserve previously discussed. Inventory at March 31, 1995 was $27,348,000, increasing by $3,735,000 from $23,613,000 at June 30, 1994. This increase is predominantly due to the Company's increased production in anticipation of the possible reduction in manufacturing output during the current relocation of its offshore facility. 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 March 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 entered into an agreement with its banks to increase this facility to $13,000,000 through April 1, 1996 at which time it will revert to the original limit of $11,000,000. 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 near its present facility in the Dominican Republic, at an annual cost of approximately $272,000. The foreign subsidiary is in the process of relocating to this site during final construction of a new facility pursuant to a separate contract dated May 6, 1993. The Company expects to incur approximately $115,000 in additional construction costs subsequent to March 31, 1995, to complete this new facility during fiscal 1995. As of March 31, 1995 the Company had no material committments for capital expenditures except for those discussed above. -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: C&K Systems, Inc. ("C&K") brought a patent infringement action against the Company, alleging that NAPCO infringes and induces others to infringe upon a patent on a C&K component used in computerized security systems. The Company brought its own action and counterclaims involving the infringement by C&K of NAPCO patents. Pursuant to a judicial conference, the parties have reached a settlement agreement in principal that would permit each company to continue manufacturing and marketing its existing product lines, subject to execution of a written agreement between the parties and formal approval by the court. In the Company's opinion, the proposed settlement will not have a material adverse effect on its financial condition. In May of 1995 the Company was advised of an unexpected Chapter 7 bankruptcy filing of one of its customers. As a result, the Company has recorded an unusual bad debt expense of $480,000 (see Note 2 of the Condensed 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 5. Other Information ----------------- None -11- 12 PART II - OTHER INFORMATION (continued) 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 March 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. May 18, 1995 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 Exhibit Index
-14- EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit (11) NAPCO SECURITY SYSTEMS, INC. COMPUTATION OF EARNINGS PER SHARE (unaudited)
Nine Months Ended March 31, --------------- -------------- 1995 1994 --------------- -------------- (in thousands, except per share data) Average Shares Outstanding 4,368 4,367 Add: Common Stock Equivalents 59 --------------- -------------- Weighted Average Shares Outstanding 4,427 4,367 =============== ============== Net Income $ 108 $ 981 =============== ============== Earnings Per Share $ 0.02 $ 0.22 =============== ============== Three Months Ended March 31, --------------- -------------- 1995 1994 --------------- -------------- (in thousands, except per share data) Average Shares Outstanding 4,368 4,367 Add: Common Stock Equivalents 56 --------------- -------------- Weighted Average Shares Outstanding 4,424 4,367 =============== ============== Net Income (loss) $ (295) $ 124 =============== ============== Earnings (loss) Per Share $ (0.07) $ 0.03 =============== ==============
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 9-MOS JUN-30-1995 JUL-01-1994 MAR-31-1995 120 0 11,912 526 27,348 39,694 20,221 7,710 55,490 11,759 0 59 0 0 28,097 55,490 34,375 34,375 26,066 26,666 6,648 480 1,040 141 33 108 0 0 0 108 .02 .02
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