-----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, TynOflMGOPU9dXuKQGq/iqjr7GkBEPGP1s5hJyU/25LUccAX/Pn/oihYREPrNqxa 79AL1MxHP3myJpVE/PnzhQ== 0000720671-97-000014.txt : 19971117 0000720671-97-000014.hdr.sgml : 19971117 ACCESSION NUMBER: 0000720671-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-08964 FILM NUMBER: 97720611 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 SEPTEMBER 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 September 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. 2,008,935 as of November 11, 1997 HALIFAX CORPORATION CONTENTS PART I. FINANCIAL INFORMATION page Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1997 (Unaudited) and March 31, 1997 3 Condensed Consolidated Statements of Earnings - Three and Six Months EndedSeptember 30, 1997 and 1996 (Unaudited) 4 Condensed Consolidated Statements of Stockholders' Equity - Six Months Ended September 30, 1997 and 1996 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows - Six Months Ended September 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 SEPTEMBER 30, 1997 AND MARCH 31, 1997
SEPTEMBER 30, MARCH 31, 1997* 1997 (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash $ 661,000 $ 268,000 Accounts receivable 19,522,000 22,013,000 Inventory 7,409,000 6,860,000 Prepaid expenses and other current assets 1,783,000 2,002,000 TOTAL CURRENT ASSETS 31,143,000 29,375,000 PROPERTY AND EQUIPMENT, at cost less accumulated 6,740,000 6,624,000 depreciation and amortization OTHER ASSETS AND COST IN EXCESS OF NET ASSETSACQUIRED, net of accumulated amortization 2,998,000 3,233,000 TOTAL ASSETS $ 39,113,000 $41,000,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 8,488,000 $ 12,450,000 Current portion of long-term debt & mortgage note payable 1,183,000 1,206,000 TOTAL CURRENT LIABILITIES 9,671,000 13,656,000 LONG-TERM DEBT AND OTHER LIABILITIES 19,198,000 16,821,000 TOTAL LIABILITIES 28,869,000 30,477,000 STOCKHOLDERS' EQUITY Common stock 544,000 542,000 Additional paid-in capital 4,392,000 4,358,000 Retained earnings 5,521,000 5,836,000 10,457,000 10,736,000 Less treasury stock at cost 213,000 213,000 TOTAL STOCKHOLDERS' EQUITY 10,244,000 10,523,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,113,000 $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 AND SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (Unaudited)
Three Months Ended Six Months Ended September 30 September 30 1997 1996 1997 1996 Revenues $18,673,000 $20,531,000 $36,708,000 $ 36,171,000 Operating costs and expenses: Cost of services 16,912,000 19,636,000 33,725,000 32,287,000 Selling, general and administrative 1,183,000 80,000 2,364,000 2,421,000 Total operating costs 18,095,000 19,716,000 36,089,000 34,708,000 and expenses Operating income 578,000 815,000 619,000 1,463,000 Interest expense 382,000 279,000 807,000 492,000 Income before income 196,000 536,000 (188,000) 971,000 taxes Income taxes 78,000 217,000 (74,000) 383,000 Net earnings $ 118,000 $319,000 $ (114,000) $ 588,000 Net earnings per common and common $ .06 $ .16 $ (.05) $ .29 equivalent share - primary Net earnings per common and common equivalent share - $ .06 $ .16 $ (.05) $ .29 fully diluted Weighted average number of common shares outstanding - 2,062,207 2,041,011 2,060,831 2,027,388 primary Weighted average number of common shares outstanding - fully 2,073,911 2,057,196 2,072,535 2,041,131 diluted
See notes to Condensed Consolidated Financial Statements. insert table HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (Unaudited)
Additional Common Treasury Stock 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 Net Income - - - (114,000) - - (114,000) Cash - - - (201,000) - - (201,000) Dividends Exercise of Stock 2,000 Options 6,800 34,000 - - - 36,000 Balance Sept 30, 2,265,666 $ 544,000 $ 4,392,000 $ 5,521,000 258,234 $(213,000) $ 10,244,000 1997 Balance April 1, 1,480,015 $ 518,000 $ 3,401,000 $ 5,253,000 311,786 $(388,000) $8,784,000 1996 Net income - - - 588,000 - - 588,000 Cash - - - (179,000) - - (179,000) Dividends Exercise of Stock 23,000 8,000 149,000 - - - 157,000 Options CMSA Acquisition - - 803,000 - (139,630) 175,000 978,000 Balance Sept 30, 1,503,015 $ 526,000 $ 4,353,000 $5,662,000 172,156 $ (213,000) $10,328,000 1996
See notes to Condensed Consolidated Financial Statements. HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (Unaudited)
Six Months Ended September 30 1997 1996 Cash flows from operating activities: Net income $ (114,000) $ 588,000 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 618,000 510,000 Decrease (increase) in 2,491,000 (6,375,000) accounts receivable Decrease (increase) in (549,000) (442,000) inventory Decrease (increase) in other 321,000 30,000 assets (Decrease) increase in accounts payable and accrued expenses (3,918,000) (174,000) Total adjustments (1,037,000) (6,451,000) Net cash provided (used) by (1,151,000) (5,865,000) operating activities Cash flows from investing activities: Acquisition of CMSA 0 (348,000) Acquisition of property and equipment, net of (644,000) (345,000) purchased operations Net cash used in investing (644,000) (693,000) activities Cash flows from financing activities: Proceeds from borrowing of 19,382,000 14,486,000 long-term debt Retirement of long-term debt (17,029,000) (10,160,000) Issuance of treasury stock - 0 (348,000) CMSA Acquisition Cash dividends paid (201,000) (179,000) Proceeds from sale of stock upon exercise of stock options 36,000 158,000 Net cash provided (used) by 2,188,000 4,414,000 financing activities Net (decrease) increase in cash 393,000 (2,144,000) Cash at beginning of period 268,000 2,743,000 Cash at end of period $ 661,000 $ 599,000 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 and six month periods ended September 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, 1996 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 Company ("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 In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which establishes new standards for computing and disclosing earnings per share. The Statement requires dual presentation of "basic" and "diluted" earnings per share, each as defined therein, which replaces primary and fully diluted earnings per share, respectively, required under the current guidance. SFAS No. 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. Early adoption is not permitted; however, after the effective date, all prior period earnings per share data presented will be required to be restated to conform to the provisions of the new standard. Management does not currently anticipate that earnings per share computed under the new standard will differ materially from earnings per share computed and disclosed under current guidance. Item 2 Management's' Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations Revenues for the second quarter and six months ended September 30, 1997 of $18,673,000 and $36,708,000 represent a decrease of approximately $1,858,000 or 9% and an increase of $537,000 or 1.5% respectively over those in the comparable periods ended September 30, 1996. The decrease was due to a decline in orders in an existing line of business. Total operating costs and expenses as a percentage of revenues were 91% and 96% for the second quarter and 96% and 89% for the six months of FY 1998 and FY 1997 respectively. During 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, a year-to-date total of approximately $858,000 of expense was reallocated from general & administrative expense to cost of sales and services. General & Administrative expense was 6% and 7% for the six months of FY 1998 and FY 1997 respectively. Interest expense for the second quarter and six months increased between fiscal years from 1.4% of revenue to 2.1% due to increased borrowing to fund losses from operations. Net income for the second quarter was $118,000 compared with $319,000 for the same quarter of the prior year. For the six months ended September 30, 1997, net loss was $114,000 compared with net income of $588,000 for the prior year. The company returned to profitablity in the second quarter after its first quarterly loss in seven years. Second quarter and six months FY 1998 earnings were influenced by losses in our new business line of computer-printer maintenance contracts which have undergone a restructuring program. Financial Condition The financial condition of the Company remains solid with working capital of $19,704,000 and a current ratio of 3.04:1. Liquidity and Sources of Capital Net cash outflows from operations were $1,151,000 for the second quarter of FY 1998 as compared with net cash outflows of $5,865,000 in the comparable period of FY 1997. This comparitive decrease in net cash outflows resulted from decreases in accounts receivable during the FY 1998 period. Long-term debt and cash balances provided the financing for these operating cash outflows. At September 30, 1997, the Company's Long-term debt increased by $2,377,000. The Company expects that cash generated from operations, the sale of its office complex 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 - Not Applicable 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 - At the annual meeting of shareholders held September 7, 1997, the shareholders voted approval of the Halifax Corporation Non-Employee Directors Stock Option Plan. Item 5. Other Information Properties On November 5, 1997, the Company concluded the sale of its twin- building office complex and the lease-back of the Company's headquarters building. The purchase price was $5.25 million. The sale will be reported in the Company's fiscal third 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: November 14, 1997 By: s/Howard C. Mills Howard C. Mills President Date: November 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-SEPTEMBER-1997 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 10Q-SEPTEMBER-1997 1 0 MAR-31-1998 APR-1-1997 SEPT-30-1997 6-MOS 1 661,000 0 19,552,000 0 7,409,000 29,375,000 6,740,000 0 39,113,000 0 0 0 544,000 9,913,000 39,113,000 36,708,000 36,708,000 33,725,000 36,089,000 0 0 807,000 (188,000) (74,000) (114,000) 0 0 0 (114,000) (.05) (.05)
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