-----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, PYqSbDs1ImwF94kxlymDonaBpotW3tJQnnLmrS+Tu4J4Uh6nW5WcPoCzXVp6ThQw DQYos7C/pImfIreHm5g16A== 0000950123-95-003373.txt : 19951127 0000950123-95-003373.hdr.sgml : 19951127 ACCESSION NUMBER: 0000950123-95-003373 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95592982 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 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, 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 September 30, 1995: COMMON STOCK, $.01 PAR VALUE PER SHARE 4,367,727 -------------------------------------------------------------------- 2 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES INDEX SEPTEMBER 30, 1995
PAGE ---- PART I - FINANCIAL INFORMATION (unaudited) Condensed Consolidated Balance Sheets, September 30, 1995 and June 30, 1995 3 Condensed Consolidated Statements of Income for the Three Months Ended September 30, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 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)
September 30, June 30, ASSETS 1995 1995 ----------- ---------- (in thousands) Current Assets: Cash and cash equivalents $ 1,606 $ 368 Accounts receivable, less allowance for doubtful accounts (Note 2): September 30, 1995 $631,000 June 30, 1995 $662,000 12,751 13,647 Inventories, net (Note 3) 23,693 24,178 Prepaid expenses and other current assets 368 445 Deferred income tax benefits, net 1,278 1,278 Total current assets 39,696 39,916 Property, Plant and Equipment, net of accumulated depreciation and amortization of $8,314 and $8,013 respectively (Note 4) 12,550 12,503 Excess of Cost Over Fair Value of Assets Acquired, net 2,886 2,913 Deferred Financing Costs, net 67 70 Other Assets 232 337 ------- ------- $55,431 $55,739 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 2,177 $ 2,182 Notes payable to bank 500 500 Accounts payable 3,947 4,001 Accrued and other liabilities 4,286 4,573 ------- ------- Total current liabilities 10,910 11,256 Long-Term Debt 14,975 15,275 Deferred income taxes 648 648 ------ ------ Total liabilities 26,533 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 28,121 27,783 Less: Treasury stock, at cost (1,528,875 shares) (1) (1) ------- ------- Total stockholders' equity 28,898 28,560 ------- ------- $55,431 $55,739 ======= =======
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, ------------------------- 1995 1994 --------- --------- (in thousands, except per share data) Net Sales $ 11,769 $ 11,170 Cost of Sales 8,797 8,476 ---------- ---------- Gross profit 2,972 2,694 Selling, General and Administrative Expenses 2,031 2,160 ---------- ---------- Operating income 941 534 ---------- ---------- Interest Expense, net 354 276 Other Expense, net 40 22 ---------- ---------- 394 298 ---------- ---------- Income before provision for income taxes 547 236 Provision for Income Taxes (Note 5) 209 30 ---------- ---------- Net income $ 338 $ 206 ========== ========== Earnings Per Share $ 0.08 $ 0.05 ========== ========== Weighted Average Number of Shares Outstanding 4,402,727 4,383,830 ========== ==========
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, ------------------------ 1995 1994 ---------- ---------- (in thousands) Net Cash Provided by (Used in) Operating Activities $1,892 $(1,737) -------- -------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (349) (721) ------ -------- Net cash used in investing activities (349) (721) ------ -------- Cash Flows from Financing Activities: Proceeds from long-term debt borrowings - 1,668 Principal payments on long-term debt (305) (8) ------ -------- Net cash provided by (used in) financing activities (305) 1,660 ------ -------- Net Increase (Decrease) in Cash and Cash Equivalents 1,238 (798) Cash and Cash Equivalents at Beginning of Period 368 1,335 ------ -------- Cash and Cash Equivalents at End of Period $1,606 $ 537 ====== ======== Cash Paid During the Period for: Interest $ 361 $ 294 ====== ======== Income taxes $ 21 $ 52 ====== ========
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, 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: September 30, June 30, 1995 1995 ------- ------- (unaudited) (in thousands) Component parts $ 9,511 $ 9,706 Work-in-process 6,408 6,539 Finished products 7,774 7,933 ------- ------- $23,693 $24,178 ======= =======
3.) Property, Plant and Equipment -----------------------------------------------------
Property, Plant and Equipment consists of: September 30, June 30, 1995 1995 ------- ------- (unaudited) (in thousands) Land $ 904 $ 904 Building 8,627 8,595 Molds and dies 1,902 1,971 Furniture and fixtures 950 1,005 Machinery and equipment 7,433 7,633 Leasehold improvements 405 408 ------- ------- 20,221 20,516 Less: Accumulated depreciation and amortization 8,314 8,013 ------- ------- $11,907 $12,503 ======= =======
-6- 7 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. The implementation of SFAS No. 109 did not have a material impact on the Company's financial statements during fiscal 1994. 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 inter-company 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 September 30, 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. -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 first three months of fiscal 1996 increased approximately 5.4% to $11,769,000 from $11,170,000 for the same period in fiscal 1995. 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 Chapter 7 bankruptcy filing of one of its major customers at the end of fiscal 1995. The Company's gross profit margin increased to 25.3% of sales for the first three months of fiscal 1996 as compared to 24.1% for the first three months of fiscal 1995. This increase is primarily due to the reduction in the Company's production costs resulting from the increased efficiencies associated with the Company's recently completed production facility in the Dominican Republic. Selling, general and administrative expenses for the first three months of fiscal 1996 decreased by 6% to $2,031,000 as compared to $2,160,000 for the same period in fiscal 1995. This decrease is primarily due to general cost control procedures established by management. Interest and other expense increased 32% to $394,000 for the first three months of fiscal 1996 as compared to $298,000 for the same period in fiscal 1995. This increase is primarily due to increased average outstanding debt attributable to the construction of the Company's manufacturing facility in the Dominican Republic, as well as higher interest rates. Provision for income taxes increased $179,000 to $209,000 or approximately 38% of income before provision for income taxes for the three months ended September 30, 1995. This compared to a provision of $30,000 or 13% of income before provision for income taxes for the same quarter a year ago. This increase reflects the relative increase in taxable income of the Company's domestic operations in comparison to its foreign subsidiary. Net income increased by 64% to $338,000 or $.08 per share for the three months ended September 30, 1995 from $206,000 or $.05 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, 1995 the Company utilized a large portion of its cash generated from operations to purchase property and equipment as well as to make principal payments on its long-term debt. The remaining cash provided by operations resulted in an increase in cash and cash equivalents to $1,606,000 from $368,000 as of June 30, 1995. Accounts receivable at September 30, 1995 decreased by $896,000 to $12,751,000 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 September 30, 1995. Inventory at September 30, 1995 was $23,693,000, decreasing by $485,000 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 has reduced 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 September 30, 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 September 30, 1995, outstanding borrowings under this line amounted to $500,000, which was subsequently repaid in November 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, 1995 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 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 September 30, 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 -10- 11 PART II - OTHER INFORMATION (continued) --------------------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5. Other Information ----------------- 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, 1995. -11- 12 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 13, 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 (Co-Principal Executive Officer) Officer) By:/s/ KEVIN S. BUCHEL --------------------------- Kevin S. Buchel Senior Vice President of Operations and Finance (Principal Financial and Accounting Officer) -12- 13 INDEX TO EXHIBITS -----------------
Exhibits PAGE -------- ---- 11 Computation of Earnings Per Share E-1 27 Financial Data Schedule
-13- 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, -------------------------- 1995 1994 --------- --------- (in thousands, except per share data) Average Shares Outstanding 4,368 4,368 Add: Common Stock Equivalents 35 16 ------ ------ Weighted Average Shares Outstanding 4,403 4,384 ====== ====== Net Income $ 338 $ 206 ====== ====== Earnings Per Share $ 0.08 $ 0.05
====== ====== 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-30-1996 JUL-01-1995 SEP-30-1995 1,606 0 12,751 631 23,693 39,696 20,864 8,314 55,431 10,910 0 59 0 0 28,839 55,431 11,769 11,769 8,797 8,797 2,031 0 354 547 209 338 0 0 0 338 .08 .08
-----END PRIVACY-ENHANCED MESSAGE-----