-----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, BFW/K0PuXDwOoaUutLLeU5wJahOgEj69VUyGPb7pxNgUEKQSHHbnh5MMH39glOxB 3nRSblKqW1cjtWQj+Q50Ow== 0000950123-97-001486.txt : 19970222 0000950123-97-001486.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950123-97-001486 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970219 SROS: NONE 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: 97537788 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. QUARTERLY REPORT 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, 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 11701 Amityville, New York (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: December 31, 1996
COMMON STOCK, $.01 PAR VALUE PER SHARE 4,367,727
2 NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES INDEX December 31, 1996 Page ---- PART I: FINANCIAL INFORMATION (unaudited) Condensed Consolidated Balance Sheets, December 31, 1996 and June 30, 1996 3 Condensed Consolidated Statements of Income for the Six Months Ended December 31, 1996 and 1995 4 Condensed Consolidated Statements of Income for the Three Months Ended December 31, 1996 and 1995 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1996 and 1995 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 12 INDEX TO EXHIBITS 13 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 1996 1996 --------- ---------- (in thousands) Current Assets: Cash and cash equivalents $ 878 $ 426 Accounts receivable, less allowance for doubtful accounts: December 31, 1996 $ 582,000 June 30, 1996 $ 662,000 12,124 13,759 Inventories, net (Note 2) 25,619 25,944 Prepaid expenses and other current assets 709 489 Deferred income taxes, net 911 911 --------- ---------- Total current assets 40,241 41,529 Property, Plant and Equipment, net of accumulated depreciation and amortization (Note 3): December 31, 1996 $ 9,743,000 June 30, 1996 $ 9,137,000 12,320 12,549 Excess of Cost Over Fair Value of Assets Acquired, net 2,753 2,806 Other Assets 229 435 ========= ========== $ 55,543 $ 57,319 ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 2,575 $ 1,500 Accounts payable 5,017 5,986 Accrued and other current liabilities 1,091 2,216 Accrued taxes 3,463 3,151 --------- ---------- Total current liabilities 12,146 12,853 Long-Term Debt 12,175 14,150 Deferred Income Taxes 742 742 --------- ---------- Total liabilities 25,063 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 29,703 28,797 Less: Treasury stock, at cost (1,528,875 shares) (1) (1) --------- ---------- Total stockholders' equity 30,480 29,574 ========= ========== $ 55,543 $ 57,319 ========= ==========
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, --------------------------- 1996 1995 ---------- ---------- (in thousands, except per share data) Net Sales $ 24,484 $ 23,276 Cost of Sales 18,193 17,385 ---------- ---------- Gross Profit 6,291 5,891 Selling, General and Administrative Expenses 4,386 4,154 ---------- ---------- Operating income 1,905 1,737 ---------- ---------- Interest Expense, net 558 583 Other Expense, net 118 103 ---------- ---------- 676 686 ---------- ---------- Income before provision for income taxes 1,229 1,051 Provision for Income Taxes 323 425 ---------- ---------- Net income $ 906 $ 626 ========== ========== Earnings Per Share $ 0.21 $ 0.14 ========== ========== Weighted Average Number of Shares Outstanding 4,377,489 4,390,646 ========== ==========
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, --------------------------- 1996 1995 ---------- ---------- (in thousands, except per share data) Net Sales $ 12,328 $ 11,507 Cost of Sales 9,172 8,588 ---------- ---------- Gross Profit 3,156 2,919 Selling, General and Administrative Expenses 2,104 2,123 ---------- ---------- Operating income 1,052 796 ---------- ---------- Interest Expense, net 276 229 Other Expense, net 73 63 ---------- ---------- 349 292 ---------- ---------- Income before provision for income taxes 703 504 Provision for Income Taxes 170 216 ---------- ---------- Net income $ 533 $ 288 ========== ========== Earnings Per Share $ 0.12 $ 0.07 ========== ========== Weighted Average Number of Shares Outstanding 4,377,379 4,375,136 ========== ==========
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, ---------------------- 1996 1995 ------- ------- (in thousands) Net Cash Provided by Operating Activities $ 1,729 $ 3,212 ------- ------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (377) (516) ------- ------- Net cash used in investing activities (377) (516) ------- ------- Cash Flows from Financing Activities: Principal payments on short-term debt -- (500) Proceeds from long-term debt borrowings -- -- Principal payments on long-term debt (900) (1,512) ------- ------- Net cash used in financing activities (900) (2,012) ------- ------- Net Increase in Cash and Cash Equivalents 452 684 Cash and Cash Equivalents at Beginning of Period 426 368 ------- ------- Cash and Cash Equivalents at End of Period $ 878 $ 1,052 ======= ======= Cash Paid During the Period for: Interest $ 563 $ 640 ======= ======= Income taxes $ 17 $ 137 ======= =======
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, 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:
December 31, June 30, 1996 1996 ------------ -------- Component parts $17,684 $17,908 Work-in-progress 4,393 4,449 Finished products 3,542 3,587 ------- ------- $25,619 $25,944 ======= =======
3.) Property, Plant and Equipment Property, Plant and Equipment consists of:
December 31, June 30, 1996 1996 ------------ -------- Land $ 904 $ 904 Building 8,882 8,807 Molds and dies 2,426 2,339 Furniture and fixtures 965 942 Machinery and equipment 8,460 8,268 Building improvements 426 426 ------- ------- 22,063 21,686 Less: Accumulated depreciation and amortization 9,743 9,137 ======= ======= $12,320 $12,549 ======= =======
-7- 8 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 Appeals division additional information supporting its position. 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. -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, 1996 increased 5% to $24,484,000 as compared to $23,276,000 for the same period a year ago. For the three months ended December 31, 1996 sales increased 7% to $12,328,000 from $11,507,000 a year ago. These increases were primarily due to the introduction of new products and increased availability of finished goods due to improvements in production efficiency. The Company's gross profit margin for the six months ended December 31, 1996 increased 7% to $6,291,000 or 25.7% of sales as compared to $5,891,000 or 25.3% of sales for the same period a year ago. For the three months ended December 31, 1996, gross profit increased 8% to $3,156,000 as compared to $2,919,000 a year ago. These 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, 1996 increased by 6% to $4,386,000 as compared to $4,154,000 a year ago. For the three months ended December 31, 1996, selling, general and administrative expenses remained relatively constant at $2,104,000 from $2,123,000 last year. The increase for the six month period was the result of increased sales and marketing efforts relating to the Company's recently introduced new products. Interest and other expense for the six months ended December 31, 1996 decreased to $558,000 from $583,000 for the same period a year ago. This decrease is due to the continuing decrease in the Company's average outstanding debt as compared to the same period a year ago. The effective income tax rate for the six months ended December 31, 1996 was 26.3% as compared to 40.4% for the same period a year ago. The effective income tax rate for the three months ended December 31, 1996 was 24.2% as compared to 42.9% for the comparable quarter a year ago. This decrease is primarily the result of lower levels of permanent non-deductible expenses along with lower reserve requirements. Net income increased by 45% to $906,000 or $.21 per share for the six months ended December 31, 1996 from $626,000 or $.14 per share for the same period a year ago. For the three months ended December 31, 1996 net income increased by 85% to $533,000 or $.12 per share as compared to $288,000 or $.07 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, 1996 the Company utilized a large portion of its cash generated from operations to make principal 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 $878,000 at December 31, 1996 from $426,000 as of June 30, 1996. Accounts receivable at December 31, 1996 decreased by $1,635,000 to $12,124,000 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 December 31, 1996 as well as improved collection procedures. Inventory at December 31, 1996 was $25,619,000, decreasing by $325,000 from $25,944,000 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 as partially offset by increased production to support the introduction of several new 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 December 31, 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 December 31, 1996 the Company had no material commitments 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 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 Appeals division additional information supporting its position. The Company believes that it has provided adequate reserves at December 31, 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 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, 1996. (b) The names of the directors elected at the Annual Meeting are: Richard Soloway, Kenneth Rosenberg, Randy B. Blaustein, and Andrew J. Wilder. 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, 1996. -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. February 13, 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) -12- 13 INDEX TO EXHIBITS Exhibits Page - -------- ---- 11 Computation of Earnings Per Share E-1 22 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)
Six Months Ended December 31, ------------------------ 1996 1995 ------ ------ (in thousands, except per share data) Average Shares Outstanding 4,368 4,368 Add: Common Stock Equivalents 10 23 ------ ------ Weighted Average Shares Outstanding 4,377 4,391 ====== ====== Net Income $ 906 $ 626 ====== ====== Earnings Per Share $ 0.21 $ 0.14 ====== ======
Three Months Ended December 31, ------------------------ 1996 1995 ------ ------ (in thousands, except per share data) Average Shares Outstanding 4,368 4,368 Add: Common Stock Equivalents 10 7 ------ ------ Weighted Average Shares Outstanding 4,377 4,375 ====== ====== Net Income $ 533 $ 288 ====== ====== Earnings Per Share $ 0.12 $ 0.07 ====== ======
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-30-1997 JUL-01-1996 DEC-31-1996 878 0 12,124 582 25,619 40,211 12,320 9,743 55,543 12,146 0 0 0 59 30,421 55,543 24,484 24,484 18,193 1,905 118 0 558 1,229 323 906 0 0 0 906 .21 .21
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