-----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, Ga2s+JOPbp41yzDTUN8Lth/LHXnSRB++3O5IKQQltDyZeyrNYv1yP4ctcnVCzG0X WOG2qpUn1Jz+Vv2ibOOFTQ== 0000720671-98-000014.txt : 19981118 0000720671-98-000014.hdr.sgml : 19981118 ACCESSION NUMBER: 0000720671-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 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: 98751347 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, 1998 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, 1998 ( ) 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 (IRS Employer Identification No.) incorporation of organization) 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. 2,013,406 as of November 11, 1998 HALIFAX CORPORATION CONTENTS PART I. FINANCIAL INFORMATION page Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1998 (Unaudited) and March 31, 1998 3 Condensed Consolidated Statements of Earnings - Three and Six Months Ended September 30, 1998 and 1997 (Unaudited) 4 Condensed Consolidated Statements of Stockholders' Equity - Six Months Ended September 30, 1998 and 1997 (Unaudited 5 Condensed Consolidated Statements of Cash Flows - Six Months Ended September 30, 1998 and 1997 (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 4.Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 10 Item 1. FINANCIAL STATEMENTS
HALIFAX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND MARCH 31, 1998 SEPTEMBER 30, MARCH 31, 1998* 1998 (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash $ 117,000 $ 67,000 Accounts receivable 21,510,000 20,814,000 Inventory 10,138,000 8,203,000 Prepaid expenses and other current assets 2,194,000 2,298,000 TOTAL CURRENT ASSETS 33,959,000 31,382,000 PROPERTY AND EQUIPMENT, at cost less accumulated 3,317,000 3,578,000 depreciation and amortization OTHER ASSETS AND COST IN EXCESS OF NET ASSETS ACQUIRED, net of accumulated amortization 2,897,000 3,015,000 TOTAL ASSETS $40,173,000 $37,975,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES $ 9,610,000 $10,233,000 Accounts payable and accrued expenses Current portion of long-term debt & mortgage note payable 500,000 786,000 TOTAL CURRENT LIABILITIES 10,110,000 11,019,000 LONG-TERM DEBT AND OTHER LIABILITIES 19,459,000 16,348,000 TOTAL LIABILITIES 29,569,000 27,367,000 STOCKHOLDERS' EQUITY Common stock 549,000 544,000 Additional paid-in capital 4,409,000 4,399,000 Retained earnings 5,858,000 5,877,000 10,816,000 10,820,000 Less treasury stock at cost 212,000 212,000 TOTAL STOCKHOLDERS' EQUITY 10,604,000 10,608,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,173,000 $37,975,000
*Condensed from March 31, 1998 Audited Financial Statements. See Form 10-K/A filed July 10, 1998. See notes to Condensed Consolidated Financial Statements.
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Unaudited) Three Months Six Months Ended Ended September 30 September 30 1998 1997 1998 1997 Revenues $18,306,000 $18,673,000 $35,570,000 $36,708,000 Operating costs and expenses: Cost of services 16,731,000 16,912,000 32,054,000 33,725,000 Selling, general 1,220,000 1,183,000 2,526,000 2,364,000 and administrative Total operating costs 17,951,000 18,095,000 34,580,000 36,089,000 and expenses Operating income 355,000 578,000 990,000 619,000 Other income 48,000 - 48,000 - Interest expense 320,000 382,000 675,000 807,000 Income before income 83,000 196,000 363,000 (188,000) taxes Income taxes 51,000 78,000 180,000 (74,000) Net earnings $ 32,000 $ 118,000 $ 183,000 $ (114,000) Net earnings per common and common $ .01 $ .06 $ .09 $ (.06) equivalent share - primary Net earnings per common and common $ .01 $ .06 $ .09 $ (.06) equivalent share - fully diluted Weighted average number of common shares 2,013,029 2,004,340 2,011,820 2,003,152 outstanding - primary Weighted average number of common shares 2,060,455 2,069,657 2,059,685 2,003,152 outstanding - fully diluted
See notes to Condensed Consolidated Financial Statements.
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Unaudited) Addition Common al Treasury Stock Stock Paid-In Retained Shares Par Capital Earnings Shares Cost Total Value Balance April 1, 2,267,166 $544,000 $4,399,000 $5,877,000 256,684 $(212,000) $10,608,000 1998 Net - - - 183,000 - - 183,000 income Cash - - - (202,000) - - (202,000) Dividends Exercise of Stock Options 2,924 5,000 10,000 - - - 15,000 Balance Sept 30, $549,000 $4,409,000 $5,858,000 256,684 $(212,000) $10,604,000 1998 2,270,090 Balance April 1, 2,258,866 $542,000 $4,358,000 $5,836,000 258,234 $(213,000) $10,523,000 1997 Net - - - (114,000) - - (114,000) Income Cash - - - (201,000) - - (201,000) Dividends Exercise of Stock 6,800 2,000 34,000 - - - 36,000 Options Balance Sept 30, 2,265,666 $544,000 $4,392,000 $5,521,000 258,234 $(213,000) $10,244,000 1997
See notes to Condensed Consolidated Financial Statements.
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Unaudited) Six Months Ended September 30 1998 1997 Cash flows from operating activities: Net income $ 183,000 $ (114,000) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 661,00 618,000 Decrease (increase) in accounts (697,000) 2,491,000 receivable Decrease (increase) in inventory (1,936,000) (549,000) Decrease (increase) in other assets 96,000 321,000 (Decrease) increase in accounts payable and accrued expenses (649,000) (3,918,000) Total adjustments (2,525,000) (1,037,000) Net cash provided (used) by (2,342,000) (1,151,000) operating activities Cash flows from investing activities: Acquisition of property and equipment, net of (278,000) (644,000) purchased operations Net cash used in investing activities (278,000) (644,000) Cash flows from financing activities: Proceeds from borrowing of long-term 33,389,000 19,382,000 debt Retirement of long-term debt (30,533,000) (17,029,000) Cash dividends paid (201,000) (201,000) Proceeds from sale of stock upon exercise of stock options 15,000 36,000 Net cash provided (used) by financing 2,670,000 2,188,000 activities Net (decrease) increase in cash 50,000 393,000 Cash at beginning of period 67,000 268,000 Cash at end of period $ 117,000 $ 661,000 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, 1998 are not necessarily indicative of the results that may be expected for the year ending March 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Halifax Corporation Annual Report on Form 10-K/A for the year ended March 31, 1998. Note B - Earnings per Share The following table sets forth the computation of basic and diluted earnings per share.
Three Months Ended Six Months Ended September 30, September 30, 1998 1997 1998 1997 Numerator: Net earnings $32,000 $118,000 $183,000 $(114,000) Numerator for basic earnings per share - income available to common $ 32,000 $118,000 $183,000 $(114,000) stockholders Numerator for diluted earnings per share - income available to common stockholders after assumed $32,000 $118,000 $183,000 $(114,000) conversions Denominator: Denominator for basic earnings per share - weighted-average shares 2,013,029 2,004,340 2,011,820 2,003,152 Effect of dilutive securities: Employee stock options 36,320 55,023 40,235 - Contingent stock- 11,106 10,294 7,630 - acquisition 7% Convertible Subordinated Debenture - - - - Dilutive potential common 47,426 65,317 47,865 - shares Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions 2,060,455 2,069,657 2,059,685 2,003,152 Basic earnings per share $ 0.01 $(0.06) $ 0.09 $ (0.06) Diluted earnings per share $ 0.01 $ (0.06) $ 0.09 $ (0.06)
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. 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, 1998 of $18,306,000 and $35,570,000 represent decreases of approximately $367,000 or 2% and $138,000 or less than 1% respectively from those in the comparable periods ended September 30, 1997. The decreases were due to the delay until the third quarter of awards of contracts and orders that were expected to be large revenue generators. Net income for the second quarter was $32,000 compared with $118,000 for the same quarter of the prior year. For the six months ended September 30, 1998, net income was $183,000 compared with net loss of $114,000 for the prior year. Second quarter and six months FY 1998 earnings were also influenced by the aforementioned delays and resultant under-absorption of indirect costs. Total operating costs and expenses as a percentage of revenues were 98% and 97% for the second quarter and 97% and 98% for the six months of FY 1998 and FY 1997 respectively. General & Administrative expense was 7% and 6% for the six months of FY 1998 and FY 1997 respectively. While close in absolute terms, these percentages reflect the under absorption of indirect costs by the Company's contract base through the first half of 1998. Now that anticipated contracts and orders have been awarded, the second half net income is expected to grow at a higher rate than revenue as indirect costs should increase only slightly. Compared to FY 1997, interest expense for the second quarter and six months of FY 1998 decreased from 1.9% to 1.7% and 2.2% to 2.0% of revenue respectively due to lower average debt balances during FY 1998 and declining interest rates. Financial Condition The financial condition of the Company remains steady with working capital of $23,800,000 and a current ratio of 3.4:1. Liquidity and Sources of Capital Net cash outflows from operations were $2,342,000 for the six months ended September 30, 1998 as compared with net cash outflows of $1,151,000 in the comparable period of FY 1997. During the FY 1998 period, this increase in net cash outflows resulted from increases in inventory and accounts receivable which were financed through Long-Term debt rather than expansion of accounts payable. Long-term debt financed these operating cash outflows. At September 30, 1998, the Company's Long-term debt increased by $2,856,000 over March 31, 1998. The Company expects that cash generated from operations and the Company's line of credit and subordinated debt will be sufficient to meet its normal operating and dividend requirements in the foreseeable future. Year 2000 Compliance As a service provider to commercial and government entities for the assessment, remediation, and testing for year 2000 readiness of computer desktop devices and networks, the Company does not certify "Compliance" in its contract agreements. The Company provides customers with test results which it represents to be correct as backed up by test documentation. Halifax has established and is implementing a program for compliance of its own hardware, software, and files. The Company is planning for the remediation of in-house systems associated with accounting/finance, service call management, local and wide area networks, messaging systems, and administration. Some of these features are being taken care of as a by-product of the Company's program to web-enable (Internet) many of its systems to meet customer requirements and/or promote efficiency and competitive advantage. Activities are currently underway assessing and remediating the Company's systems and applications. In order to judge the stability of its business supply chain, the Company has initiated a comprehensive process of contacting clients, vendors and suppliers to ascertain their preparation for this issue. The Company estimates its costs to be fully compliant by mid-1999 at $200,000. Forward-Looking Statements The above contains certain forward-looking statements which are based on management's current views and assumptions regarding future events and financial performance. Reference should be made to Item 7 of Halifax Corporation's Annual Report on Form 10-K/A for the fiscal year ended March 31, 1998 concerning "forward-looking statements" for a description of the important factors that could cause actual results to differ materially from those discussed above. Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders - At the annual meeting of shareholders held September 18, 1998, the Company submitted for approval by the shareholders the following proposed amendments: (a) Amendment of the Articles of Incorporation to increase the authorized Common Stock to 6,000,000 shares and to authorize the creation of 1,500,000 shares of Preferred Stock. (b) Amendment of the Company's "1994 Key Employee Stock Option Plan" to increase the number of shares issuable from 180,000 to 280,000. Both proposals were approved by the shareholders. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Not applicable (b) Reports on Form 8-K - The Company filed its borrowing agreement with Crestar Bank (Fifth Amended and Restated Loan and Security Agreement dated June 25, 1998) on October 6, 1998. 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 16, 1998 By: s/Howard C. Mills Howard C. Mills President Date: November 16, 1998 By: s/John D. D'Amore John D. D'Amore Vice President Finance & CFO 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-1998 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 10Q-SEPTEMBER-1998 1 0 MAR-31-1999 APR-1-1998 SEPT-30-1998 6-MOS 1 117,000 0 21,510,000 0 10,138,000 33,959,000 3,317,000 0 40,173,000 10,110,000 0 0 0 549,000 10,055,000 40,173,000 35,570,000 35,618,000 32,054,000 34,580,000 0 0 675,000 363,000 180,000 183,000 0 0 0 183,000 .09 .09
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