UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 18, 2023, NAPCO Security Technologies, Inc., a Delaware corporation (the “Company”), issued a press release to report Management’s preliminary estimates of revenue and net income for the fourth quarter of fiscal year ended June 30, 2023. A copy of the press release is furnished as Exhibit 99.1 herein. As reported, the Company expects to report fourth quarter and fiscal year end results on or about August 28, 2023 with preliminary estimates for the quarter ended June 30, 2023 as follows: Equipment revenues- $28.6 million, Service revenue-$16.1 million, Total net sales- $44.7 million. ($44.7 million would represent a quarterly net sales record). Net income for the quarter is preliminarily estimated to be between $10.0 million and $11.0 million.
The Company’s balance sheet remains strong, with approximately $67 million of cash, and cash equivalents, investments and marketable securities as of June 30, 2023 and no debt.
The above preliminary results are current estimates based on facts and information available to the Company’s management as of the date of this report and are subject to potential further changes upon completion of the Company’s quarterly closing procedure.
The information in Item 2.02 of this Current Report, including the accompanying exhibit, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of Section 18. The information in Item 2.02 of this Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language contained in such filing.
Forward-Looking Statements
This Current Report on Form 8-K and Exhibit 99.1 hereto contain “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “potential,” “seek,” “should,” “think,” “will,” “would” and similar expressions, or they may use future dates These forward-looking statements are subject to assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual results could differ materially from those expressed in any forward-looking statements. The Company undertakes no obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law. All forward-looking statements in this document are qualified in their entirety by this cautionary statement.
Item 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW.
On August 14, 2023, the Audit Committee of the Board of Directors of the Company, concluded that the Company’s previously issued unaudited interim financial statements for fiscal quarters ended September 30, 2022, December 31, 2022 and March 31, 2023, respectively, included in the Company’s quarterly report on Form 10-Q for such respective quarters should no longer be relied upon.
During the preparation of the Company’s consolidated financial statements for the fiscal year ended June 30, 2023, management of the Company identified certain errors related to the Company’s calculation of cost of goods sold (“COGS”) and inventory for each of the first three quarters of fiscal 2023. Specifically, although the costs of several components fluctuated substantially during fiscal 2023, the Company’s costing procedures did not appropriately account for such fluctuations. As a result, inventories were overstated and COGS was understated, resulting in overstated gross profit, operating income and net income for each period.
The Company is in the process of preparing amended Forms 10-Q for each of the first three quarters of fiscal 2023 and intends to file such amendments as soon as reasonably practicable after the restatement process is completed. Based on the information available as of this filing date, the Company estimates that net income for the first three quarters will be revised as follows:
Period End | Net Income – Previously Reported | Net Income - Restated Estimate | $ Difference |
First quarter ended September 30, 2022 | $6.4M | $2.9M | $3.5M |
Second quarter ended December 31, 2022 | $8.4M | $3.7M | $4.7M |
Third quarter ended March 31, 2023 | $10.8M | $9.5M | $1.3M |
The above estimates reflect preliminary information for the affected quarters and are based on facts and information available to the Company’s management as of the date of this report and are subject to potential further changes upon completion of the Company’s financial review and restatement procedures.
Net sales during these periods are not expected to be affected by these restatements.
Due to the aforementioned restatements, management of the Company has determined that a material weakness existed in the Company’s internal controls over financial reporting for each of the first three quarters of fiscal 2023, rendering the Company’s disclosure controls and procedures ineffective at the end of each such quarter. The Company has begun the process to enhance its internal control procedures for determining inventory cost in accordance with FIFO and COGS at the end of each fiscal quarter and will continue to refine these procedures and controls. While the Company has begun to take measures which it believes will remediate the underlying causes of this material weakness, there can be no assurance as to when the remediation plan will be fully developed and implemented and whether such measures will be effective. Until the Company’s remediation plan is fully implemented and effective, the Company will continue to devote time, attention and financial resources to these efforts.
The Company’s management and Chair of the Audit Committee of the Company’s Board of Directors have discussed with the Company’s independent registered public accounting firm, Baker Tilly US, LLP, the matters disclosed in Item 4.02.
Item 5.03. AMENDMENT TO THE ARTICLES OF INCORPORATION OR BYLAWS; CHANGES IN FISCAL YEAR.
On August 18, 2023, the Company’s Board of Directors approved an amendment and re-statement to article VI of the Company’s Second Amended and Restated Bylaws.
A copy of the Amendment and Restatement of Article VI is furnished as Exhibit 3 (v).
Item 7.01 REGULATION FD DISCLOSURE
On August 18, 2023, the Company’s Board of Directors declared a cash dividend of $0.08 per share to stockholders of record on September 1, 2023, representing an increase of $0.0175 per share or 28%, from the previous quarterly dividend. The dividend will be payable on September 22, 2023
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits:
99.1 |
| Press Release issued by Napco Security Technologies, Inc. dated August 18, 2023. |
10 4 | Cover Page Interactive Data File (formatted as Inline XBRL). |
SIGNATURE
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 thereunder duly authorized.
| NAPCO SECURITY TECHNOLOGIES, INC. | ||
| (Registrant) | ||
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Date: August 18, 2023 | By: | /s/ Kevin S. Buchel | |
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| Kevin S. Buchel | |
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| Executive Vice President and Chief Financial Officer |
EXHIBIT 3(v)
ARTICLE VI
VENUE FOR CERTAIN ACTIONS
Unless the Corporation consents in writing to the selection of an alternative forum, (A) (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these Bylaws (as either may be amended or restated) or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the United States District for the District of Delaware and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VI. If any provision of this Article VI shall be held to be invalid, illegal or unenforceable as applied to any person, entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provision in any other circumstance and of the remaining provisions of this Article VI, and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
EXHIBIT 99.1
NAPCO Reports Preliminary Fourth Quarter Fiscal 2023 Net Sales and Net Income, Restatement of Prior Three Quarters and Declaration of Increased Dividend
-4th Quarter Net Sales Estimated to be a Q4 Record of $44.7 Million -
-4th Quarter Net Income Estimated to be Between $10.0 Million and $11.0 Million-
-Financials for the First Three Fiscal Quarters of Fiscal 2023 to be Restated Due to Cost Accounting Error-
-Company Announces a 28% Increase in Quarterly Dividend to $0.08 Per Share-
AMITYVILLE, N.Y.,August 18, 2023 /PRNewswire/ -- NAPCO Security Technologies, Inc. (NASDAQ: NSSC), one of the leading manufacturers and designers of high-tech electronic security equipment, wireless communication devices for intrusion and fire alarm systems and the related recurring service revenues as well as a leading provider of school safety solutions, today announced preliminary financial results for its fourth quarter of fiscal year ended June 30, 2023, the restatements of its financial statements for the first three fiscal quarters of fiscal 2023 and the declaration of a quarterly cash dividend.
Fourth Quarter Estimates
The Company expects to report fourth quarter and fiscal year end results on or about August 28, 2023 with preliminary estimates of revenue and net income for the fourth quarter of fiscal year ended June 30, 2023 as follows: Equipment revenues- $28.6 million, Services revenue-$16.1 million, Total net sales $44.7 million. ($44.7 million would represent a quarterly net sales record). Net income for the quarter is preliminarily estimated to be between $10.0 million and $11.0 million.
The Company’s balance sheet remains strong, with approximately $67 million of cash, and cash equivalents, investments and marketable securities as of June 30, 2023 and no debt.
Restatement
On August 14, 2023, the Audit Committee of the Board of Directors of the Company, concluded that the Company’s previously issued unaudited interim financial statements for the fiscal quarters ended September 30, 2022, December 31, 2022 and March 31, 2023, respectively, included in the Company’s quarterly report on Form 10-Q for such respective quarters, should no longer be relied upon.
During the preparation of the Company’s consolidated financial statements for the fiscal year ended June 30, 2023, management of the Company identified certain errors related to the Company’s calculation of cost of goods sold (“COGS”) and inventory for each of the first three quarters of fiscal 2023. Specifically, although the costs of several components fluctuated substantially during fiscal 2023, the Company’s costing procedures did not appropriately account for such fluctuations. As a result, inventories were overstated and COGS was understated, resulting in overstated gross profit, operating income and net income for each period.
The Company is in the process of preparing amended Forms 10-Q for each of the first three quarters of fiscal 2023 and intends to file such amendments as soon as reasonably practicable after the restatement process is completed. Based on the information available as of this date, the Company estimates that net income for the first three quarters will be revised as follows:
Period End | Net Income – | Net Income - | $ Difference |
First quarter ended | $6.4M | $2.9M | $3.5M |
Second quarter ended | $8.4M | $3.7M | $4.7M |
Third quarter ended | $10.8M | $9.5M | $1.3M |
The above estimates reflect preliminary information for the affected quarters and are based on facts and information available to the Company’s management as of the date of this release and are subject to potential further changes upon completion of the Company’s financial review and restatement procedures.
Net sales during these periods are not expected to be affected by these restatements
Due to the aforementioned restatements, management of the Company has determined that a material weakness existed in the Company’s internal controls over financial reporting for each of the first three quarters of fiscal 2023, rendering the Company’s disclosure controls and procedures ineffective at the end of each such quarter. The Company has begun the process to enhance its internal control procedures for determining inventory cost in accordance with FIFO and COGS at the end of each fiscal quarter and will continue to refine these procedures and controls. While the Company has begun to take measures which it believes will remediate the underlying causes of this material weakness, there can be no assurance as to when the remediation plan will be fully developed and implemented and whether such measures will be effective. Until the Company’s remediation plan is fully implemented and effective, the Company will continue to devote time, attention and financial resources to these efforts.
Dividend Declaration
On August 18, 2023, the Company’s Board of Directors declared a cash dividend of $0.08 per share to stockholders of record on September 1, 2023, representing an increase of $0.0175 per share or 28%, from the previous quarterly dividend. The dividend will be payable on September 22, 2023.
About NAPCO Security Technologies, Inc.
NAPCO Security Technologies, Inc., is one of the leading manufacturers and designers of high-tech electronic security devices, wireless recurring communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions, The Company consists of four Divisions: NAPCO, plus three wholly owned subsidiaries: Alarm Lock, Continental Instruments, and Marks USA. Headquartered in Amityville, New York, its products are installed by tens of thousands of security professionals worldwide in commercial, industrial, institutional, residential and government applications. NAPCO products have earned a reputation for innovation, technical excellence and reliability, positioning the Company for growth in the multi-billion dollar and rapidly expanding electronic security market. For additional information on NAPCO, please visit the Company's web site at http://www.napcosecurity.com.
Forward-Looking Statements
This press release contains “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “potential,” “seek,” “should,” “think,” “will,” “would” and similar expressions, or they may use future dates These forward-looking statements are subject to assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual results could differ materially from those expressed in any forward-looking statements. The Company undertakes no obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law. All forward-looking statements in this document are qualified in their entirety by this cautionary statement.
Contacts:
Patrick McKillop
Vice President of Investor Relations
NAPCO Security Technologies, Inc.
Office 800-645-9445 x 374
Mobile 516-404-3597
pmckillop@napcosecurity.com
Cover |
Aug. 14, 2023 |
---|---|
Cover [Abstract] | |
Document Type | 8-K |
Current Fiscal Year End Date | --06-30 |
Document Period End Date | Aug. 14, 2023 |
Securities Act File Number | 0-10004 |
Entity Registrant Name | NAPCO SECURITY TECHNOLOGIES, INC. |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 11-2277818 |
Entity Address, Address Line One | 333 Bayview Avenue |
Entity Address, City or Town | Amityville |
Entity Address, State or Province | NY |
Entity Address, Postal Zip Code | 11701 |
City Area Code | 631 |
Local Phone Number | 842-9400 |
Written Communications | false |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Title of 12(b) Security | Common Stock, par value $0.01 per share |
Trading Symbol | NSSC |
Security Exchange Name | NASDAQ |
Entity Emerging Growth Company | false |
Entity Central Index Key | 0000069633 |
Amendment Flag | false |
N-2 |
Aug. 14, 2023 |
---|---|
Cover [Abstract] | |
Entity Central Index Key | 0000069633 |
Amendment Flag | false |
Securities Act File Number | 0-10004 |
Document Type | 8-K |
Entity Registrant Name | NAPCO SECURITY TECHNOLOGIES, INC. |
Entity Address, Address Line One | 333 Bayview Avenue |
Entity Address, City or Town | Amityville |
Entity Address, State or Province | NY |
Entity Address, Postal Zip Code | 11701 |
City Area Code | 631 |
Local Phone Number | 842-9400 |
Entity Emerging Growth Company | false |
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