-----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, WbH0jNds3DUk3p9xw8k3Qf4nB1YRiZJ1nVaOVnpLnSQ5EAQ3+X2rlJTe2tQeRnk9 8JYjY25cMwN5Loiu8oo2dg== 0000720671-97-000012.txt : 19970815 0000720671-97-000012.hdr.sgml : 19970815 ACCESSION NUMBER: 0000720671-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97662875 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 JUNE 30, 1997 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 quarterly period ended June 30, 1997 ( ) 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 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. (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 be 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 of the latest practicable date. 2,003,632 as of August 11, 1997 HALIFAX CORPORATION CONTENTS PART I. FINANCIAL INFORMATION page Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1997 (Unaudited) and March 31, 1997 3 Condensed Consolidated Statements of Earnings- Three Months Ended June 30, 1997 and 1996 (Unaudited) 4 Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended June 30, 1997 and 1996 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows - Three Months EndedJune 30, 1997 and 1996 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II OTHER INFORMATION Item 1.Legal Proceedings 10 Item 2.Changes in Securities 10 Item 3.Defaults Upon Senior Securities 10 Item 4.Submission of Matters to a Vote of Security Holders 10 Item 5.Other Information 10 Item 6.Exhibits and Reports on Form 8-K 10 Item 1. FINANCIAL STATEMENTS HALIFAX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1997 AND MARCH 31, 1997
JUNE 30, 1997 MARCH 31, 1997* (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash $ 95,000 $ 268,000 Accounts receivable 18,864,000 22,013,000 Inventory 7,194,000 6,860,000 Prepaid expenses and other current assets 1,849,000 2,002,000 TOTAL CURRENT ASSETS 28,002,000 31,143,000 PROPERTY AND EQUIPMENT, at cost less accumulated depreciation and amortization 6,630,000 6,624,000 OTHER ASSETS AND COST IN EXCESS OF NET ASSETS ACQUIRED, net of accumulated 3,086,000 3 ,233,000 amortization TOTAL ASSETS $ 37,718,000 $ 41,000,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 9,955,000 $ 12,450,000 Current portion of long-term debt & 1,206,000 1,206,000 mortgage note payable TOTAL CURRENT LIABILITIES 11,161,000 13,656,000 LONG-TERM DEBT AND OTHER LIABILITIES 16,350,000 16,821,000 TOTAL LIABILITIES 27,511,000 30,477,000 STOCKHOLDERS' EQUITY Common stock 543,000 542,000 Additional paid-in capital 4,374,000 4,358,000 Retained earnings 5,503,000 5,836,000 10,420,000 10,736,000 Less treasury stock at cost 213,000 213,000 TOTAL STOCKHOLDERS' EQUITY 10,207,000 10,523,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,718,000 $ 41,000,000
*Condensed from March 31, 1997 Audited Financial Statements. See Form 10-K filed June 30, 1997. See notes to Condensed Consolidated Financial Statements. HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited)
Three Months Ended June 30 1997 1996 Revenues $ 18,035,000 $ 15,640,000 Operating costs and expenses: Cost of services 16,813,000 12,651,000 Selling, general and 1,181,000 2,341,000 administrative Total operating costs and 17,994,000 14,992,000 expenses Operating income 41,000 648,000 Interest expense 425,000 213,000 Income before income taxes (384,000) 435,000 Income taxes (152,000) 166,000 Net earnings $ (232,000) $ 269,000 Net earnings per common and common $ (.11) $ .13 equivalent share - primary Net earnings per common and common $ (.11) $ .13 equivalent share - fully diluted Weighted average number of common shares 2,041,891 2,014,640 outstanding - primary Weighted average number of common shares 2,041,891 2,026,211 outstanding - fully diluted
See notes to Condensed Consolidated Financial Statements. HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited)
Common Stock Additional Treasury Stock Paid-In Retained Shares Par Value Capital Earnings Shares Cost Total Balance April 1, 2,258,866 $ 542,000 $ 4,358,000 $ 5,836,000 258,234 $(213,000) $10,523,000 1997 Cash - - - (101,000) - - (101,000) Dividends Net Income - - - (232,000) - - (232,000) Exercise of Stock 3,000 1,000 16,000 - - - 17,000 Options Balance June 30, 2,261,866 543,000 4,374,000 5,503,000 258,234 (213,000 10,207,000 1997 Balance April 1, 2,220,022 $518,000 $3,401,000 $5,253,000 467,679 $(388,000) $ 8,784,000 1996 Cash - - - (85,000) - - (85,000) Dividends Net income - - - 269,000 - - 269,000 Exercise of Stock 5,250 1,000 22,000 - - - 23,000 Options CMSA - 803,000 - (209,445 175,000 978,000 Acquisition Balance June 30, 2,225,272 $ 519,000 $ 4,226,000 $ 5,437,000 258,234 $(213,000) $ 9,969,000 1996
See notes to Condensed Consolidated Financial Statements. HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited)
Three Months Ended June 30 1997 1996 Cash flows from operating activities: Net income $ (232,000) $ 269,000 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and 295,000 257,000 amortization Decrease (increase) in 3,150,000 369,000 accounts receivable Decrease (increase) in inventory (334,000) 34,000 Decrease (increase) in other assets 213,000 (587,000) (Decrease) increase in accounts payable and accrued expenses (2,453,000) (10,413,000) Total adjustments 871,000 (10,340,000) Net cash provided (used) by 639,000 (10,071,000) operating activities Cash flows from investing activities: Acquisition of property and equipment, net of purchased operations (255,000) (140,000) Net cash used in investing activities (255,000) (140,000) Cash flows from financing activities: Proceeds from borrowing of 9,136,000 12,199,000 long-term debt Retirement of long-term debt (9,609,000) (4,429,000) Cash dividends paid (100,000) (85,000) Proceeds from sale of stock upon exercise of stock options 17,000 - Net cash provided (used) by (556,000) 7,709,000 financing activities Net (decrease) increase in cash (172,000) (2,502,000) Cash at beginning of period 267,000 2,743,000 Cash at end of period $ 95,000 $ 241,000
See notes to Condensed Consolidated Financial Statements. Halifax Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Financial Statements 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 month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending March 31, 1998. 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, 1997. All share and per share presentations take into account the 3:2 common stock split effective December 27, 1997 Note B - 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 shareholders who held promissory notes of CMS in the amount of $450,000 converted said debt to equity in CMS. In addition to the initial issuance of 209,445 shares of Halifax stock to CMS shareholders which was based on the net equity value of CMS, Halifax stock will be awarded annually for three (3) years subsequent of the merger to the CMS shareholders on a pro- rate basis, excluding Halifax stock issued as a result of the conversion of debt to equity, having a value equal to one-third of the net after tax income of CMSA operating as a wholly-owned subsidiary of Halifax. The assets acquired 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 the transaction. In April 1997, CMSA was renamed to Halifax Technology Services Co. ("HTSC") Note C - Contingent Matters The Company is a co-defendant or is defendant in various lawsuits wherein any potential liability is fully insured against. 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 position or results of operations 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 D - 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 this standard did not have a material effect on the Company's consolidated earnings or financial position. In 1997, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 allows companies to continue to measure compensation cost for stock-based employee compensation plans using the intrinsic value method of accounting as prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. The Company elected to continue its APB Opinion No. 25 accounting treatment for stock-based compensation, and has adopted the provisions of SFAS No. 123 requiring disclosure of the pro forma effect on net earnings and earnings per share as if compensation cost had been recognized based upon the estimated fair value at the date of grant for options awarded. Item 2 Management's' Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations Revenues for the first quarter of fiscal 1998 of $18,036,000 represent an increase of approximately $2,396,000 or 15% over those in the first quarter of fiscal 1997. The increase was due to growth in existing lines of business. Costs of services, as a percentage of revenue, increased from 81% in the first quarter of fiscal 1997 to 93% in the first quarter of fiscal 1998. The degradation in this margin resulted from the combination of high direct costs, especially parts usage, in the Company's computer- printer maintenance business and a cost mix at HTSC which emphasized low margin computer and system hardware. Selling, general and administrative expenses as a percentage of revenue was 6.5% in the first quarter of fiscal 1998 as contrasted to 15% in the first quarter of fiscal 1997 before the Company aligned the HTSC cost accounting structure, primarily certain selling costs, to the Company's format. The net loss for the quarter, $232,000 or $.11 per share, is primarily due to our new-business line of computer-printer maintenance contracts. Interest expense in the fiscal 1998 period was 2.4% of revenue versus 1% in fiscal 1997. The first quarter fiscal 1997 relationship was lowered by the effect of a large cash prepayment discussed below under Liquidity and Sources of Capital which retired debt during the first quarter of fiscal 1997. Financial Condition The financial condition of the Company remains solid with working capital of $16,800,000 and a current ratio of 2.51:1. Liquidity and Sources of Capital Net cash outflows from operations were $10,071,000 for the first quarter of fiscal 1997 as compared with net cash inflows of $639,000 in the comparable period of fiscal 1998. The paydown of accrued liabilities for a large hardware delivery order made in the fourth quarter of fiscal 96 accounted for the significant outflow of cash in the first quarter of fiscal 1997. Long-term debt and cash balances provided the financing for this significant reduction of current accounts payable. At fiscal year end 1996, the Company's Long-term debt had been significantly reduced and cash balances increased by prepayments received for the aforementioned hardware delivery order. 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 Systems, 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, 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 overturned by the judge in the case and final judgment entered in favor of Halifax. The plaintiff appealed to the Supreme Court of Virginia which ruled in favor of the trial judge thereby confirming final judgment in favor of Halifax. Item 2. Changes in Securities - Not applicable 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 Properties During 1997, the Company placed its office complex up for sale and received an offer. However, the offeror was unable to complete the transaction. The office complex remains for sale and another agreement to purchase has been received which, if it closes, would result in a transaction during the Company's 1998 third fiscal quarter. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Not applicable (b) Reports on Form 8-K - None 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: August 14, 1997 By: s/Howard C. Mills Howard C. Mills President Date: August 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-JUNE-1997
5 10Q-JUNE-1997 1 0 MAR-31-1998 APR-1-1997 JUN-30-1997 3-MOS 1 95,000 0 18,864,000 0 7,194,000 28,002,000 6,630,000 0 37,718,000 11,161,000 0 0 0 543,000 9,877,000 37,718,000 18,035,000 18,035,000 16,813,000 17,994,000 0 0 425,000 (384,000) (152,000) (232,000) 0 0 0 (232,000) (.11) (.11)
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