-----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, GOygFnuLbpupxOyfo6E97M3YmdEZt0lk89bNXXSMT9k5X+MYKKDMXK5S9Q2CPvHf 4I3i5hGGSbw4LBRE4/OphA== 0000720671-97-000005.txt : 19970222 0000720671-97-000005.hdr.sgml : 19970222 ACCESSION NUMBER: 0000720671-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALIFAX CORP CENTRAL INDEX KEY: 0000720671 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 540829246 STATE OF INCORPORATION: VA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08964 FILM NUMBER: 97531843 BUSINESS ADDRESS: STREET 1: 5250 CHEROKEE AVE CITY: ALEXANDRIA STATE: VA ZIP: 22312 BUSINESS PHONE: 7037502202 MAIL ADDRESS: STREET 1: 5250 CHEROKEE AVENUE CITY: ALEXANDRIA STATE: VA ZIP: 22312 FORMER COMPANY: FORMER CONFORMED NAME: HALIFAX ENGINEERING INC/VA DATE OF NAME CHANGE: 19911204 10-Q 1 HALIFAX CORPORATION FORM 10-Q DECEMBER 31, 1996 FORM 10Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No 312905 eff. 4/26/93. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) (x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended December 31, 1996 (x) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file Number 1-8964 Halifax Corporation (Exact name of registrant as specified in its charter) Virginia 54-0829246 (State or other jurisdiction of incorporation of organization (IRS Employer Identification No.) 5250 Cherokee Avenue, Alexandria, VA 22312 (Address of Principal executive offices) Registrant's telephone number, including area code(703) 750-2202 N/A (former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filled 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 filings requirements for the past 90 days. (x)Yes ( )No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as the latest practicable date 1,999,831 as of February 11, 1997. HALIFAX CORPORATION CONTENTS PART I FINANCIAL INFORMATION Item 1. Financial Statements page Condensed Consolidated Balance Sheets - December 31, 1996 (Unaudited) and March 31, 1996 3 Condensed Consolidated Statements of Income - Three and Nine Months Ended December 31, 1996 and 1995 (Unaudited) 4 Condensed Consolidated Statements of Stockholders' Equity - Nine Months Ended December 31, 1996 and 1995 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended December 31, 1996 and 1995 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2 Changes in Securities 11 Item 3. Default Upon Senior Securities 11 Item 4. Submission of Matters for a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 12 Item 1. FINANCIAL STATEMENTS HALIFAX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND MARCH 31, 1996
December 31, MARCH 31, 1996 1996* (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash $1,079,000 $2.743,000 Trade accounts receivable 23,061,000 11,639,000 Inventory 6,987,000 2,792,000 Prepaid expenses and other 1,160,000 814,000 current assets TOTAL CURRENT ASSETS 32,287,000 17,988,000 PROPERTY AND EQUIPMENT, at cost less accumulated 6,020,000 4,527,000 depreciation and amortization INTANGIBLES AND OTHER ASSETS, net of accumulated 3,234,000 2,313,000 amortization TOTAL ASSETS $41,541,000 $24,828,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued $14,070,000 $11,508,000 expenses Current portion of long-term debt 1,220,000 556,000 TOTAL CURRENT LIABILITIES 15,290,000 12,064,000 LONG-TERM DEBT AND OTHER LIABILITIES 15,644,000 3,980,000 TOTAL LIABILITIES 30,934,000 16,044,000 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock 542,000 518,000 Additional paid-in capital 4,350,000 3,401,000 Retained earnings 5,928,000 5,253,000 10,820,000 9,172,000 Less treasury stock - at cost 213,000 388,000 TOTAL STOCKHOLDERS' EQUITY 10,607,000 8,784,000 TOTAL LIABILITIES AND STOCKHOLDERS' $41,541,000 $24,828,000 EQUITY *Condensed from March 31, 1996 Audited Financial Statements. See Form 10-K filed June 28, 1996. See notes to Condensed Consolidated Financial Statements.
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
Three Months Ended Nine Months Ended December 31, December 31, 1996 1995 1996 1995 Revenues $21,913,000 $11,217,0000 $58,084,000 $29,239,000 Operating costs and expenses: Cost of services 20,109,000 9,874,000 52,396,000 25,422,000 Selling, general and 936,000 858,000 3,357,000 2,473,000 administrative expenses Total operating costs and 21,045,000 10,732,000 55,753,000 27,895,000 expenses Operating income 868,000 485,000 2,331,000 1,344,000 Litigation expense - 34,000 - 294,000 Interest expense 274,000 137,000 766,000 380,000 Income before income taxes 594,000 314,000 1,565,000 670,000 Income taxes 235,000 123,000 618,000 264,000 Net income $359,000 $191,000 $947,000 $406,000 Net income per common share* $0.18 $0.11 $0.48 $0.23 Weighted average number of common 1,997,033 1,752,344 1,981,082 1,758,393 shares outstanding* See notes to consensed consolidated financial statements. *Takes into account the 3:2 common stock split effective December 27, 1996.
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
Common Stock Additional Treasury Stock Paid-In Retained Shares Par Value Capital Earnings Shares Cost Total Balance April 1, 1,480,015 $518,000 $3,401,000 $5,253,000 311,786 $(388,000) $8,784,000 1996 Net Income - - - 947,000 - - 947,00 Cash - - - (272,000) - - (272,000) Dividends Stock 24,800 8,000 162,000 - - - 170,000 Options Stock- 752,118 - - - 86,078 - - Split 3:2 CMSA - - 803,000 - (139,630) 175,000 978,000 Acquisiton Balance December 2,256,933 $526,000 $4,366,000 $5,928,000 258,234 $(213,000) $10,607,000 31, 1996 Balance April 1, 1,480,015 $518,000 $3,401,000 $4,795,000 299,686 $(313,000) $8,401,000 1995 Net Income - - - 406,000 - - 406,000 Cash - - - (229,000) - - (229,000) Dividends Purchase of - - - - 12,100 (75,000) (75,000) Treasury Stock Balance December 1,480,015 $518,000 $3,401,000 $4,972,000 311,786 $(388,000) $8,503,000 31, 1995 See notes to condensed consolidated financial statements.
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITIED) Nine Months Ended December 31, 1996 1995 Cash flows from operating activities: Net income $947,000 $406,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 772,000 443,000 Loss on disposal equipment 142,000 - Decrease (Increase) in accounts (7,688,000) (569,000) receivable Decrease (Increase) in inventory (1,611,000) 439,000 Decrease (Increase) in other (785,000) 106,000 assets (Decrease) Increase in accounts payable 398,000 (1,182,000) and accrued expenses Total adjustments (8,772,000) (763,000) Net cash provided (used) by (7,825,000) (357,000) operating activities Cash flows from investing activities: Acquisition of property and (888,000) (219,000) equipment net of purchased operations Proceeds from sale of property and - 2,000 equipment Net cash used in investing (888,000) (217,000) activities Cash flows from financing activities: Proceeds from borrowing of long- 30,652,000 12,587,000 term debt Retirement of long-term debt (23,609,000) (11,173,000) Issuance of treasury stock - CMSA 108,000 - acquisiton Cash dividends paid (272,000) (229,000) Proceeds from sale of stock upon 170,000 - exercise of stock options Purchase of treasury stock - (75,000) Net cash (used) provided by 7,049,000 1,110,000 financing activities Net (decrease) increase in cash (1,664,000) 536,000 Cash beginning of period 2,743,000 18,000 Cash end of period $1,079,000 $554,000 See notes to condensed consolidated financial statements.
Halifax Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended December 31, 1996 are not necessarily indicative of the results that may be expected for the year ending March 31, 1997. For further information refer to the consolidated financial statements and footnotes thereto included in the Halifax Corporation Annual Report on Form 10-K for the year ended March 31, 1996. Note B - Acquisition CMS Automation, Inc. Acquisition In accordance with a Plan of Merger ("Plan") which was duly adopted by the board of directors of both parties to the merger, CMS Automation, Inc. ("CMS"), a Virginia corporation, merged into CMSA Acquisition Corporation ("CMSA"), a Virginia corporation wholly owned by Halifax Corporation, a Virginia corporation. CMS merged into CMSA on the following basis. Pursuant to the Plan, each issued and outstanding share of CMS common stock was converted into, and became exchangeable for, the number of shares of validly issued, fully paid and nonassessable common stock of Halifax equal to a conversion ratio meaning a fraction, the numerator of which is 139,630 and the denominator of which is equal to the sum of the number of shares of CMS issued and outstanding on the effective date of the merger plus the number of shares that would be represented by the conversion of $450,000 worth of debt to equity. In this regard, CMS shareholders who held promissory notes of CMS in the amount of $450,000 converted said debt to equity in CMS. In addition to the issuance of 139,630 shares of Halifax common stock to CMS shareholders on the effective date of the merger, which number of shares was based on the net equity value of CMS, additional Halifax common stock will be issued on each of the first three anniversaries of the effective date of the merger to CMS shareholders, on a pro-rata basis, excluding CMS stock issued as a result of the conversion of debt to equity, having an aggregate value equal to one-third of the net after tax income of CMSA, operating as a wholly owned subsidiary of Halifax, subject to certain limitations. The assets of CMS included accounts receivable and the inventory and equipment used in conducting and operating the business of CMS which consists of computer systems integration including wide area and local area networking, consulting, application development and training. Closing of the transaction took place on April 1, 1996 with a Certificate of Merger issued by the State Corporation Commission of Virginia effective April 9, 1996. Results of CMSA operations have been included since the date of closing. Completion of Asset Purchase from Consolidated Computer Investors, Inc. On November 25, 1996, Halifax Corporation, through its wholly-owned subsidiary CMS Automation, Inc. ("CMSA"), acquired the ongoing computer network integration and business solution business of Consolidated Computer Investors, Inc. ("CCI") of Hanover, Maryland through an asset purchase. These computer network integration and business solution activities operate as a division of CMSA. The assets purchased included accounts receivable, inventory and furniture, fixtures and equipment used in the conduct of CCI's operations. The Company paid $114,210 in cash and assumed secured debt totaling approximately $1,680,000. The cash paid was equal to the estimated net assets purchased. The source of the consideration was the Company's ongoing working capital line of credit. Note C - Pro Forma Financial Information The following unaudited pro forma combined summary statement of operations information presents the historical results of operation of the Company, CMSA and CCI for the nine month periods ended December 31, 1996 and 1995, with pro forma adjustments as if the CMS acquisition transaction and the CCI asset purchase had been consummated as of the beginning of the periods presented. The pro forma information is based upon certain estimates and assumptions that the management of the Company believes are reasonable in the circumstances. The unaudited pro forma information is not necessarily indicative of what the results of operations actually would have been if the transaction had occurred on the dates indicated. Moreover, they are not intended to be indicative of future results of operations. Pro Forma Information Nine Months Ended December 31, 1996 1995 Revenue $68,229,000 $55,584,000 Net Income $ 1,127,000 $ 628,000 Earnings Per Common Share* $ .57 $ .32 Weighted Average Number of Common Share Outstanding* 1,981,082 1,967,838 *Takes into account the 3:2 Halifax common stock split effected December 27, 1996, Note D - Contingent Matters The Company is a defendant in various lawsuits. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably determinable. In the opinion of management, based on advice of counsel, the ultimate resolution of any contingencies, to the extent not previously provided for, will not have a material adverse effect on the financial condition of the Company. However, depending on the amount and timing of an unfavorable resolution of these contingencies, it is possible that the Company's future results of operation or cash flows could be materially affected in a particular quarter. Note E - New Accounting Pronouncements The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long - Lived Assets to be Disposed of," effective April 1, 1996. SFAS No. 121 requires that certain long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additionally, SFAS No. 121 requires that certain long-lived assets to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The adoption of SFAS No. 121 did not have a material effect on the Company's consolidated earnings and financial condition. Part 1, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues for the third quarter and nine months ended December 31, 1996 were $21.9 million and $58.1 million, representing growth of 96% and 99% respectively, over comparable revenues for the same periods in the prior year of $11.2 million and $29.2 million. The increase for the nine month period is due approximately equally to internal growth and the CMSA acquisition. Total operating costs and expenses as a percentage of revenues were 96% for both the third quarter and first nine months of FY 1997 and FY 1996, respectively. Beginning in the second quarter of FY 1997, a change was made to the accounting structure of the CMSA operation, acquired in the first quarter, to align its accounting structure to that of the Company. As a result of conforming the accounting structure, selling, general & administrative expense for the Company declined to 6% of revenue for the nine months ending December 31, 1996 and is expected to approximate 7% to 9% over FY 1997 based on the Company's experience in prior years. Through the third quarter of FY 1996, $294,000 of litigation expense associated with a trial of a lawsuit previously described was incurred. There has been no similar litigation expense in FY 1997. Interest expense for the third quarter and nine months remained level between fiscal years 1996 and 1997 at approximately 1.3% of revenue. Net income for the third quarter of FY 1997 was $359,000 compared with $191,000 for the same quarter of the prior year. For the nine months ending December 31, 1996, net income was $947,000, compared with $406,000 for the nine month period of the prior year. The prior year was adversely affected by the aforementioned litigation expense. Net income for the third quarter of FY 1997 versus second quarter of FY 1997 increased by 13% on a 7% increase in revenues. Liquidity and Sources of Capital The financial condition of the Company remains solid with working capital of $17.0 million and a current ratio of 2.11. Long-term debt has increased by more than $11.7 million between March 31, 1996 and December 31, 1996 and was applied to convert CMSA and CCI short-term accounts receivable financing to long-term financing at reduced interest rates, to finance the growth in accounts receivable in the Company's communications division which resulted from higher revenue in the second and third quarters of FY 1997 and to the purchase of inventory to support the internal growth of the Company's computer services division. As of December 31, 1996, the Company's line of credit was permanently increased from $8.5 million to $9.8 million. Subsequent to December 31, 1996, a temporary $3.0 million addition to the line of credit was put in place effective through April 30, 1997. The total line of credit commitment is $12.8 million as of February 13, 1997. $9.6 million was outstanding as of December 31, 1996. The Company expects that cash generated from operations and the Company's line of credit will be sufficient to meet its normal operating and dividend requirements in the foreseeable future. Part II. Other information Item 1. Legal Proceedings Commercial Business System, Inc. v. Halifax Corporation et al. Plaintiff's claim, which has been the subject of judicial proceedings since August of 1990 and was consolidated with a similar claim against BellSouth Corporation, went to trial on October 18, 1995, resulting in a jury verdict against Halifax, a former employee and a non-employee, for wrongful interference with a prospective business relationship. The jury award for compensatory damages plus interest was rejected by the trial judge who entered final judgment in favor of Halifax and its co-defendents. The plaintiff has been granted the right to appeal this decision to the Virginia Supreme Court and oral argument on the appeal has been scheduled for the week of February 24, 1997. Item 2. Changes in Securities On November 18, 1996, the Board of Directors approved a three-for-two stock split of the Company's common stock. The stock split was effective for shareholders of record on December 13, 1996. The additional shares were mailed or delivered on December 27, 1996 by the Company's transfer agent, American Stock Transfer & Trust Company. The table below illustrates the effect of the stock split at December 31, 1996: Pre Split Post Split Par Value $ .35 $.24 Authorized Shares #3,000,000 #4,500,000 Issued Shares #1,504,815 #2,256,933 Treasury Stock Shares # 172,156 # 258,234 Outstanding Shares #1,332,659 #1,998,699 Item 3. Defaults upon Senior Securities - Not applicable Item 4. Submission of Matters to a Vote of Security Holders - Not applicable . Item 5. Other information Agreement for Sale of Office Complex On December 26, 1996, the Company announced that it had entered into an agreement for the sale of its two-building office complex and the lease- back of one of the buildings, which contains the Company's headquarters. The complex, located in Fairfax County, Virginia and known as Halifax Office Park, will retain its name. The purchase price is $5.25 million; however, the closing which is contingent on the purchaser satisfactorily completing an engineering and economic study and obtaining suitable financing, is currently scheduled to take place prior to March 24, 1997. Item 6. Exhibits and Reports on Form 8-K The following exhibits and reports included herein: (a) Exhibits - Not applicable (b) Reports on Form 8-K - Form 8-K, Amendment 1 dated November 25, 1996 filed on February 12, 1997. 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. HALIFAX CORPORATION (Registrant) Date: February 14, 1997 By: s/Howard C. Mills Howard C. Mills President Date: February 14, 1997 By: s/John D. D'Amore John D. D'Amore Vice President, Finance & Accounting For a menu of Halifax Corporation news releases available by fax 24 hours (no charge) or to retrieve a specific release, please call 1-800-758-5804, ext. 391950, or access the address http://www.prnewswire.com on the Internet. EX-27 2 10Q-DECEMBER-1996
5 10Q-DECEMBER-1996 1 0 MAR-31-1997 APR-1-1996 DEC-31-1996 9-MOS 1 1,079,000 0 23,061,000 0 6,987,000 32,287,000 6,020,000 0 41,541,000 15,290,000 0 0 0 542,000 10,065,000 41,541,000 58,084,000 58,084,000 52,396,000 55,753,000 0 0 766,000 1,565,000 618,000 947,000 0 0 0 947,000 .48 .48
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