-----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, Cc00KXZ9s4pR0BcEBOg+xa5oBEtnGnHJA8iNI7sTgrkXx3QiAkyTxwHQapH0Ww2p usHzYrjth4V4lWqkJlKQCw== 0000910647-99-000288.txt : 19991111 0000910647-99-000288.hdr.sgml : 19991111 ACCESSION NUMBER: 0000910647-99-000288 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990926 FILED AS OF DATE: 19991110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARLEX CORP CENTRAL INDEX KEY: 0000724988 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 042464749 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12942 FILM NUMBER: 99745733 BUSINESS ADDRESS: STREET 1: 145 MILK ST CITY: METHUEN STATE: MA ZIP: 01844 BUSINESS PHONE: 5086854341 10-Q 1 BODY OF 10-Q 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 Quarter Ended September 26, 1999 Commission File No. 0-12942 PARLEX CORPORATION ------------------ (Exact Name of Registrant as Specified in its Charter) Massachusetts 04-2464749 - ------------------------------- ------------------------------------ (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) One Parlex Place, Methuen, Massachusetts 01844 ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) 978-685-4341 ------------ (Registrant's telephone number, including area code) 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. YES [X] NO [ ] ----- ----- The number of shares of the Registrant's Common Stock, par value $.10 per share, outstanding at October 29, 1999, was 4,807,459 shares. PARLEX CORPORATION ------------------ INDEX ----- Part I - Financial Information Page ---- Item 1. Consolidated Financial Statements: Consolidated Balance Sheets - September 26, 1999 and June 30, 1999 3 Consolidated Statements of Income - For the Three Months Ended September 26, 1999 and September 27, 1998 4 Consolidated Statements of Cash Flows - For the Three Months Ended September 26, 1999 and September 27, 1998 5 Notes to Unaudited Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition And Results of Operations 7 Part II - Other Information 11 Exhibit Index 12 Signatures 15 PARLEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 26, 1999 and June 30, 1999 (Unaudited)
September 26, 1999 June 30, 1999 ------------------ ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,082,416 $ 1,175,889 Short-term investments 928,704 1,606,953 Accounts receivable - less allowance for doubtful accounts 15,761,815 14,053,046 Inventories: Raw material 4,136,342 3,746,245 Work in process 8,016,155 7,197,212 Refundable income taxes - 129,790 Deferred income taxes 559,084 559,084 Other current assets 1,658,549 1,585,435 ------------ ------------ Total current assets 32,143,065 30,053,654 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT: Land 468,864 468,864 Buildings 8,159,588 7,796,488 Machinery and equipment 32,195,405 30,756,650 Leasehold improvements and other 3,052,529 2,929,101 Construction in progress 13,586,228 13,844,489 ------------ ------------ 57,462,614 55,795,592 Less accumulated depreciation and amortization (24,896,951) (23,915,018) ------------ ------------ Property, plant and equipment - net 32,565,663 31,880,574 ------------ ------------ OTHER ASSETS 1,554,795 1,586,383 ------------ ------------ TOTAL $ 66,263,523 $ 63,520,611 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILIITES: Current portion of long-term debt $ 619,206 $ 619,206 Accounts payable 7,661,999 8,080,085 Accrued liabilities 3,581,784 2,592,655 ------------ ------------ Total current liabilities 11,862,989 11,291,946 ------------ ------------ LONG-TERM DEBT 2,276,638 1,631,782 ------------ ------------ OTHER NONCURRENT LIABILITIES 2,497,013 2,611,942 ------------ ------------ MINORITY INTEREST IN PARLEX SHANGHAI 2,889,228 2,651,711 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock - - Common stock 501,733 499,115 Additional paid-in capital 24,651,279 24,568,566 Retained earnings 22,628,790 21,288,296 Accumulated other comprehensive income (6,522) 14,878 Less treasury stock (1,037,625) (1,037,625) ------------ ------------ Total stockholders' equity 46,737,655 45,333,230 ------------ ------------ TOTAL $ 66,263,523 $ 63,520,611 ============ ============
PARLEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended September 26, 1999 and September 27, 1998 (Unaudited)
September 26, 1999 September 27, 1998 ------------------ ------------------ REVENUES: Product sales $20,119,207 $15,419,212 License fees and royalty income 246,352 72,544 ----------- ----------- Total revenues 20,365,559 15,491,756 ----------- ----------- COSTS AND EXPENSES: Cost of products sold 15,664,031 13,051,471 Selling, general and administrative expenses 2,570,809 2,114,422 ----------- ----------- Total costs and expenses 18,234,840 15,165,893 ----------- ----------- OPERATING INCOME 2,130,719 325,863 OTHER INCOME, Net 12,289 169,283 INTEREST EXPENSE (58,136) (76,440) ----------- ----------- INCOME FROM OPERATIONS BEFORE INCOME TAXES 2,084,872 418,706 (PROVISION) CREDIT FOR INCOME TAXES (506,861) 70,850 ----------- ----------- INCOME BEFORE MINORITY INTEREST 1,578,011 489,556 MINORITY INTEREST (237,517) (290,486) ----------- ----------- NET INCOME $ 1,340,494 $ 199,070 =========== =========== BASIC INCOME PER SHARE $ 0.28 $ 0.04 =========== =========== DILUTED INCOME PER SHARE $ 0.28 $ 0.04 =========== =========== WEIGHTED AVERAGE SHARES - BASIC 4,794,858 4,640,795 =========== =========== WEIGHTED AVERAGE SHARES - DILUTED 4,843,188 4,788,893 =========== ===========
PARLEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended September 26, 1999 September 27, 1998 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,340,494 $ 199,070 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment and other assets 1,016,892 796,526 Gain on sale of investments available for sale Deferred compensation 22,601 21,921 Minority interest 237,517 290,486 Changes in assets and liabilities: Accounts receivable - net (1,708,769) 238,381 Inventories (1,209,040) (287,030) Refundable income taxes 129,790 196,693 Other current assets (73,114) 766,210 Deferred compensation payments (37,530) - Accounts payable and accrued liabilties 471,043 (1,786,167) ----------- ----------- Total adjustments (1,150,610) 237,020 ----------- ----------- Net cash provided by operating activities 189,884 436,090 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturities of investments available for sale, net 676,363 1,557,959 Additions to property, plant and equipment (1,667,022) (2,880,469) Increase in other assets (3,371) (517,591) ----------- ----------- Net cash used for investing activities (994,030) (1,840,101) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bank loan - 50,000 Payment of bank loan (80,000) - Borrowings under revolving credit agreement 900,000 1,200,000 Payments of other long-term debt (175,144) (116,852) Proceeds from exercise of stock options 85,331 1,092 ----------- ----------- Net cash provided by financing activities 730,187 1,134,240 ----------- ----------- Effect of exchange rate changes on cash (19,514) 321 ----------- ----------- Net decrease in cash and cash equivalents (93,473) (269,450) Cash and cash equivalents, beginning of year 1,175,889 5,824,233 ----------- ----------- Cash and cash equivalents, end of period $ 1,082,416 $ 5,554,783 =========== ===========
PARLEX CORPORATION AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements ---------------------------------------------------- 1. Management Statement -------------------- The financial statements as reported in Form 10-Q reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position as of September 26, 1999 and the results of operations and cash flows for the three months ended September 26, 1999 and September 27, 1998. All adjustments made to the interim financial statements were of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the entire fiscal year. The Company followed the same accounting policies in the preparation of this interim financial statement as described in the Company's annual filing on Form 10-K for the year ended June 30, 1999, and this filing should be read in conjunction with that annual report. 2. Comprehensive Income -------------------- Comprehensive Income, as required by SFAS No. 130, "Reporting Comprehensive Income." for the three months ended September 26, 1999 and September 27, 1998, is as follows:
September 26, 1999 September 27, 1998 ------------------ ------------------ Other Comprehensive Income: Unrealized gain (loss) on short term investments $ (1,886) $3,280 Cumulative translation adjustments (19,514) 321 -------- ------ $(21,400) $3,601 ======== ======
The accumulated other comprehensive income balance is as follows:
Unrealized gains (losses) on Cumulative Trans- Short term Investments lation Adjustments Total ---------------------- ------------------ ----- Beginning Balance $(1,886) $ 12,992 $ 14,878 Current Period Change (1,886) (19,514) (21,400) ------- -------- -------- Ending Balance -0- $ (6,522) $ (6,522) ======= ======== ========
Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with "Factors that May Affect Future Results" set forth on Page 10 herein and in the Company's other filings with the U.S. Securities and Exchange Commission. Total revenues in the first quarter of the current fiscal year were $20,365,559, an increase of 31% from $15,491,756 in revenues for the first quarter last year. Revenues were generated primarily from product sales, while some were derived from licensing and royalty fees. Sales were robust in all markets with the largest gains coming from the telecommunication sector. Each of the Company's operating locations reported an increase in revenue. The cost of products sold was $15,664,031 or 77% of revenues in the current quarter versus $13,051,471 or 84% of revenues in the first quarter last year. Operating margins improved as more automotive product was shifted to the Company's proprietary PALFlex(r) technology, which provides for a lower cost and a higher performance flexible circuit as compared to the use of conventional materials. Additionally, operations in Mexico continue to improve and additional product is being sent to the facility for its cost effective finishing processes. Dynaflex, the Company's quick turn/prototype facility in San Jose, California, is satisfying the customers' prototype demands, allowing other facilities to concentrate on the larger production orders, which contributes to enhanced operational efficiency. In the first quarter last year, the Company incurred some unanticipated losses in the manufacturing of flexible circuits associated with automotive applications and involving its' Mexican facility. The Company also failed to achieve desired yields on its PALFlex(r) process for automotive applications. Both of these problems were remedied subsequent to the first quarter last year and no longer exist. Selling, general, and administrative expenses were $2,570,809 or 13% of revenues this quarter versus $2,114,422 or approximately 14% of revenue for the comparable quarter last year. Other income was $12,289 in the first quarter this year versus $169,283 for the same period last year. Last year's amount was primarily associated with interest income earned on the remaining proceeds from the Company's stock offering in October 1997. Subsequent to the first quarter, most of the proceeds were expended for a new addition to the building in Methuen, Massachusetts, as well as for capital equipment and working capital requirements at the Company's operating locations. The above factors resulted in income before taxes of $2,084,872 this quarter versus $418,706 in the first quarter last year, or an increase of nearly 400%. The Company provided for taxes of $506,861 or an effective tax rate of about 24%, including a tax rate of 7.5% on income derived from the Company's 50.1% interest in Parlex (Shanghai), the Chinese joint venture. The Company is anticipating a slightly higher tax rate in the current year versus the effective tax rate of 21% for the fiscal year ended June 30, 1999. In the first quarter of last year, the tax credit related to the loss incurred in the Company's US operations, while the Company generated income from its Chinese joint venture, which, at that time, was not subject to tax. The Company's net income, after providing for taxes and recognizing the minority interest in its Chinese joint venture, was $1,340,494, an increase of 573% from the income of $199,070 reported in the same quarter a year ago. Liquidity and Capital Resources - ------------------------------- As of September 26, 1999, the Company had cash on hand and short term investments of approximately $2,000,000. In addition, the Company has available for use $8,500,000 from its unsecured revolving credit facility of $10,000,000. In the first quarter this year, the Company expended nearly $1,700,000 for fixed assets, after having spent nearly $13,000,000 on additions to plant, property, and equipment in the fiscal year ended June 30, 1999. The Company anticipates a lower level of spending during the remainder of the year. The Company believes that its cash on hand, its anticipated cash flow from operations, and the amount available under its revolving credit facility, should be sufficient to meet its foreseeable needs during the remainder of the current fiscal year. New Accounting Pronouncements - ----------------------------- Recently Adopted Accounting Pronouncements - SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company organizes itself as one segment reporting to the chief operating decision-maker. Revenue consists of product sales, license fees and royalty income. Future Adoption of Accounting Pronouncements - In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contract and for hedging activities. SFAS No. 133 will be adopted by the Company during fiscal year 2001. The Company has not completed an evaluation of the effects of adopting SFAS No. 133 on its consolidated financial position, results of operations and financial statement disclosures. Year 2000 Disclosure Statement - ------------------------------ The information provided below constitutes a "Year 2000 Readiness Disclosure" under the Year 2000 Information and Readiness Disclosure Act. The Year 2000 may affect the Company's internal computer systems, and certain external systems with which the Company exchanges any date related information with its customers, suppliers, banks, insurance companies, stockholders, etc. In order to properly assess the extent this problem may have on its operations, the Company has and is continuing to survey its key suppliers, service providers, and trading partners as to their level of preparedness and the effect it will have (if any) on the Company's operations. The Company believes all necessary undertakings have been completed and that its enterprise system is fully year 2000 compliant. Quite apart from the Year 2000 problem, the Company has replaced its legacy computer with a client server system for which the hardware and software have been certified as year 2000 compliant. The Company has completed an inventory of all of its mission critical manufacturing systems in order to determine any Year 2000 issues. All identified issues have been remediated and as a result the Company does not believe that any issues exist which will prevent these systems from operating as expected after January 1, 2000. The testing necessary to validate being Year 2000 ready is scheduled to be completed in November 1999. The Year 2000 issue does present some risk that the Company's operations may suffer disruption as a result of either a computer malfunction or a corruption of date sensitive data. If in the event this does occur, the Company believes that it will most likely be due to factors external to the Company, and contingency plans have been prepared to deal with any such occurrence. These include provisions for extra raw materials above that needed for normal operations, staffing the plant with critical personnel on January 1st, scheduling the New Year's holiday to provide extra time for recovery in the event it is needed, and duplication of production capability at its various facilities. These contingency plans apply to all Company facilities as appropriate. Because of the Company's internal Year 2000 program, the Company does not believe there is a significant risk of disruption of operations due to malfunction of its internal systems or equipment. Quantitative and Quality Disclosures About Market Risk - ------------------------------------------------------ As of September 26, 1999, the Company is exposed to market risks which include changes in U.S. and foreign interest rates and fluctuations in exchange rates. The Company maintains a portion of its cash and cash equivalents in financial instruments with purchased maturities of three months or less. These financial instruments are subject to interest rate risk and will decline in value if interest rates decrease. Due to the short duration of these financial instruments, an immediate decrease in interest rates would not have a material adverse effect upon the Company's financial position. The Company also has a revolving line of credit agreement which bears interest at the bank's corporate base rate which is also affected by changes in market interest rates. As of September 26, 1999, $1,500,000 was borrowed under this line of credit. The Company has the option to repay borrowings at anytime without penalty and therefore believes that the market risk is not material. Sales in Parlex Shanghai are typically denominated in the local currency (functional currency), thereby creating exposure to changes in exchange rates. The changes in the Chinese/U.S. exchange rate may positively or negatively impact the joint venture's sales, gross margins and retained earnings. Based upon the current volume of transactions in China and the stable nature of the exchange rate between China and the U.S., the Company does not believe the market risk is material. Factors That May Affect Future Results - -------------------------------------- This Quarterly Report on Form 10-Q contains certain forward-looking statements as defined under the Federal Securities Laws. The Company's actual results of operations may differ significantly from those contemplated by such forward-looking statements as a result of various risk factors beyond its control, including, but not limited to, economic conditions in the electronics industry, particularly in the principal industry sectors served by the Company, changes in customer requirements and in the volume of sales to principal customers, competition, and technological change. PART II - OTHER INFORMATION --------------------------- Items 1-5 THESE ITEMS ARE INAPPLICABLE Item 6 Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits - See Exhibit Index (b) Reports on Form 8-K - No reports on Form 8-K Were filed by the Company for the quarter ended September 26, 1999. EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT PAGE - ------- ---------------------- ---- 11 Statement Regarding Computation of Per Share Earnings 13 27 Financial Data Schedule 14
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. PARLEX CORPORATION ------------------ By: --------------- Peter J. Murphy President By: ------------------- Steven M. Millstein Vice President of Finance (Principal Accounting and Financial Officer) ---------------------- Date EX-11 2 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 PARLEX CORPORATION AND SUBSIDIARIES Computation of Net Income Per Common Share
Three Months Ended Sept. 26, 1999 Sept. 27, 1998 -------------- -------------- Net Income Per Share - Basic $ .28 $ .04 Weighted Average Number of Shares Outstanding 4,794,858 4,640,795 Net Income Per Share - Diluted $ .28 $ .04 Weighted Average Number of Shares Outstanding 4,794,858 4,640,795 Effect of Dilutive Stock Options 48,330 148,098 Adjusted Weighted Average Number of Shares Outstanding 4,843,188 4,788,893
EX-27 3 ART. 5 FDS FOR FIRST QUARTER 10-Q
5 This schedule contains a summary of financial information extracted from the Consolidated Balance Sheet and Consolidated Statement of Operations and is qualified in its entirety by reference to such financial statements. 1 3-MOS JUN-30-2000 SEP-26-1999 1,082,416 928,704 16,071,208 309,393 12,152,497 32,143,065 57,462,614 24,896,951 66,263,523 11,862,989 0 0 0 501,733 0 66,263,523 20,119,207 20,365,559 15,664,031 18,234,840 0 0 58,136 2,084,872 506,861 1,340,494 0 0 0 1,340,494 .28 .28
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