-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RBRTEXxCdzzcfyuwsSV4y7X/WkZHgFUfD8wJD2jyY4DUrI+dKQSNxRqeWc7aL1Gw /eowzDEkQo4Y80Tj5OlIOg== 0000950117-95-000156.txt : 19950517 0000950117-95-000156.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950117-95-000156 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAI TECHNOLOGIES INC CENTRAL INDEX KEY: 0000072575 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 111798773 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03704 FILM NUMBER: 95537863 BUSINESS ADDRESS: STREET 1: 1000 WOODBURY RD STREET 2: SUITE 412 CITY: WOODBURY STATE: NY ZIP: 11797-2530 BUSINESS PHONE: 5163644433 MAIL ADDRESS: STREET 2: 1000 WOODBURY ROAD STE 412 CITY: WOODBURY STATE: NY ZIP: 11797-2530 FORMER COMPANY: FORMER CONFORMED NAME: NORTH ATLANTIC INDUSTRIES INC DATE OF NAME CHANGE: 19920703 10-Q 1 NAI 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 quarterly period ended April 1, 1995 OR 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 0-3704 NAI TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) New York 11-1798773 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1000 Woodbury Road, Woodbury, New York 11797-2530 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 364-4433 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 ----- ----- As of May 8, 1995, 7,445,567 shares of NAI Technologies, Inc.'s $.10 par value Common Stock were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements NAI TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands) [CAPTION] - ---------------------------------------------------------------------------- Apr. 1, Dec. 31, 1995 1994 (Audited) - ---------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 3,346 $ 1,658 Accounts receivable, net 11,147 12,508 Income taxes receivable 786 4,732 Inventories, net 15,170 14,052 Deferred tax assets 379 378 Other current assets 746 871 - ---------------------------------------------------------------------------- Total current assets 31,574 34,199 - ---------------------------------------------------------------------------- Property, plant and equipment, net 7,514 7,657 Excess of cost over fair value of assets acquired, net 10,707 10,865 Other assets 1,069 999 - ---------------------------------------------------------------------------- Total assets $50,864 $53,720 ============================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ - $ 127 Current installments of long-term debt 15,707 2,179 Accounts payable 7,454 7,484 Accrued payroll and commissions 376 535 Other accrued expenses 4,847 6,435 Income taxes payable 861 774 - ---------------------------------------------------------------------------- Total current liabilities 29,245 17,534 - ---------------------------------------------------------------------------- Notes payable - 6,000 Long-term debt 344 7,990 Other accrued expenses 1,579 1,522 Deferred income taxes 378 378 - ---------------------------------------------------------------------------- Total liabilities 31,546 33,424 - ---------------------------------------------------------------------------- Shareholders' Equity: Capital Stock: Preferred stock, no par value, 2,000,000 shares authorized and unissued - - Common stock, $.10 par value, 10,000,000 shares authorized; shares issued: 7,195,567 in 1995 and 7,174,592 in 1994 720 717 Capital in excess of par value 14,740 14,718 Foreign currency translation adjustment 198 107 Retained earnings 3,660 4,754 - ---------------------------------------------------------------------------- Total shareholders' equity 19,318 20,296 - ---------------------------------------------------------------------------- Total liabilities and shareholders' equity $50,864 $53,720 ============================================================================
NAI TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands except per share amounts) (Unaudited)
- -------------------------------------------------------------------------------- For the Three Months Ended -------------------------- Apr. 1, Apr. 2, 1995 1994 - -------------------------------------------------------------------------------- Net sales $12,687 $15,516 - -------------------------------------------------------------------------------- Cost of sales 10,169 13,961 - -------------------------------------------------------------------------------- Gross margin 2,518 1,555 - -------------------------------------------------------------------------------- Selling expense 1,264 2,266 General and administrative expense 1,351 1,924 Research and development 541 1,011 Restructuring expense - 7,321 Other 30 150 - -------------------------------------------------------------------------------- Total expenses 3,186 12,672 - -------------------------------------------------------------------------------- Operating loss (668) (11,117) - -------------------------------------------------------------------------------- Non-operating income (expense) Interest income 54 12 Interest expense (394) (314) - -------------------------------------------------------------------------------- (340) (302) - -------------------------------------------------------------------------------- Loss before income taxes (1,008) (11,419) Provision for (recovery of) income taxes 86 (4,079) - -------------------------------------------------------------------------------- Net loss $(1,094) $(7,340) ================================================================================ Loss per common share $( 0.15) $( 1.08) ================================================================================ Average shares outstanding 7,190 6,781 ================================================================================
NAI TECHNOLOGIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) (Unaudited)
- -------------------------------------------------------------------------------- For the Three Months Ended -------------------------- Apr. 1, Apr. 2, 1995 1994 - -------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net loss $(1,094) $(7,340) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 549 810 Gain on disposal of property, plant & equipment (4) - Change in assets and liabilities, excluding effects from acquisitions and foreign currency adjustments: Accounts receivable 1,361 2,734 Inventories (1,118) 1,983 Accounts payable and other accrued expenses (1,720) 6,711 Income taxes 4,032 (4,308) Other, net 55 640 - -------------------------------------------------------------------------------- Net cash flow provided by operating activities 2,061 1,230 - -------------------------------------------------------------------------------- Cash Flows from Investing Activities: Contingent payment on purchase of KMS Advanced Products - (71) Purchase of property, plant and equipment (239) (348) Proceeds from sale of property, plant and equipment 6 3 - -------------------------------------------------------------------------------- Net cash used in investing activities (233) (416) - -------------------------------------------------------------------------------- Cash Flows from Financing Activities: Issuances of notes payable 6 5,779 Payments of notes payable (133) (5,053) Payments of long-term debt (118) (1,123) Receipts of notes receivable - 106 Proceeds from exercise of stock options and stock purchase plan 25 54 - -------------------------------------------------------------------------------- Net cash used in financing activities (220) (237) - -------------------------------------------------------------------------------- Effect of foreign currency exchange rates on cash 80 (14) - -------------------------------------------------------------------------------- Net increase in cash and cash equivalents 1,688 563 Cash and cash equivalents at beginning of year 1,658 1,717 - -------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 3,346 $ 2,280 ================================================================================ Supplemental disclosure of cash flow information: Cash paid for (refunded): Interest $ 371 $ 292 Income taxes $(3,961) $ 176
OTHER FINANCIAL INFORMATION UNAUDITED FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. The consolidated statements of operations for the three months ended April 1, 1995 are not necessarily indicative of the results to be expected for the full year. These unaudited financial statements should be read in conjunction with the audited financial statements and accompanying notes included in the Company's 1994 Annual Report on Form 10-K for the year ended December 31, 1994. INVENTORIES Inventories are summarized by major classification as follows:
- ---------------------------------------------------------------------------- Apr. 1, Dec. 31, 1995 1994 (Audited) - ---------------------------------------------------------------------------- (In thousands of dollars) Raw materials and components $10,020 $ 9,698 Work-in-process 4,535 3,849 Finished goods 615 662 Unliquidated progress payments - (157) - ---------------------------------------------------------------------------- Inventories, net $15,170 $14,052 ============================================================================
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations First Quarter 1995 Compared with First Quarter 1994 The nature of the Company's business is such that year to year changes in sales levels are predominantly due to changes in shipping volume or product mix rather than changing sales prices. Net sales for the first quarter of 1995 were $12.7 million, an 18% decrease when compared with $15.5 million for the same period in 1994. The following chart provides the sales breakdown by product line:
In thousands of dollars 1995 1994 % Change - -------------------------------------------------------------------------------- Electronic Systems Segment Systems $ 4,477 $ 5,609 (20%) Component 4,631 4,357 6% Service 1,849 3,327 (44%) -------------------------------------- Total Electronic Systems Segment 10,957 13,293 (18%) Telecommunications Segment Line treatment 1,199 1,380 (13%) Test equipment 513 843 (39%) Data comm 18 0 100% -------------------------------------- Total Telecommunications Segment 1,730 2,223 (22%) -------------------------------------- TOTAL $12,687 $15,516 (18%) ======================================
Sales in the Electronic Systems segment (net of intercompany eliminations) decreased 18% to $11.0 million from $13.3 million for the same period in 1994. The sales decrease was primarily attributable to lower systems revenue and service revenue, partially offset by higher component revenue. The decrease in systems revenue was principally attributable to delayed shipments at Codar. The Company has experienced significant delays in shipping products since mid-1994 when it consolidated its military products division located in Hauppauge, NY into Codar Technology, Inc., its wholly owned subsidiary in Longmont, CO. The decrease in service revenue is primarily attributable to the lower revenue from the Codar Division. In recent years the Company has reduced its dependency on the United States defense budget by expanding its non-military business operations. However, the Company still expects approximately 50% of 1995 sales to be directly to the military or through prime contractors to the military. The Company is not aware of any programs in which it participates that are specifically targeted for termination or curtailment. The Company's products are utilized on many different U.S. Government programs which reduces the adverse impact of cancelling a single specific program. However, changes in future U.S. defense spending levels could impact the Company's future sales volume. Sales in the Telecommunications segment decreased 22% to $1.7 million as compared to $2.2 million for the same period in 1994. The decrease in sales was attributable to lower test equipment and line treatment revenues which were adversely affected by lower orders from the regional Bell operating companies and foreign telecommunications companies primarily due to their cost cutting initiatives. The Company believes this decline is temporary and that revenue will increase in the latter part of 1995 as the Company starts delivery of its new Enhanced Line Powered Amplifier products. The gross margin percentage for the first quarter 1995 was 19.8% as compared with 10.0% for the same period in 1994. The 1995 gross margin percentage, while better than 1994, was still below historical standards as a result of reduced shipping volumes and significant rework costs experienced at Codar on products transferred from the Military Products division in Hauppauge, NY. The 1994 gross margin percentage was adversely affected by a $2.2 million charge to operations and an unfavorable mix of high and low margin product deliveries. The $2.2 million charge to operations was comprised of inventory write-offs and cost overruns associated with the start-up production of two new programs (principally the NST-II program which is an enhanced version of the NST-I). Lower margins are expected to continue at least during the first half of 1995 as the Company continues its consolidation and repositioning efforts. Selling expense for the first quarter 1995 was $1.3 million as compared with $2.3 million for the same period in 1994. This decrease is attributable to savings associated with the consolidation of the military products division in 1994. General and administrative expenses for the first quarter 1995 were $1.4 million as compared with $1.9 million for the same period in 1994. This decrease is primarily attributable to savings associated with the previously mentioned restructuring in 1994. Company-sponsored research and development expenditures for the first quarter 1995 were $0.5 million as compared with $1.0 million for the same period in 1994. This decrease is attributable to savings associated with the previously mentioned restructuring and the change in mix between Company-sponsored research and development and customer-funded research and development. A key component to the Electronic Systems' segment strategy is to focus on system integration business. Although systems integration work by its nature will require significant engineering content, such costs must be classified as contract costs and charged to cost of sales as opposed to Company-sponsored research and development (IR&D). Therefore, the amount charged to IR&D is expected to decrease from 1994 levels. For the first quarter 1995 the Company had an operating loss of $0.7 million as compared with $11.1 million for the same period in 1994. The operating loss is primarily attributable to lower sales volume and margins and continuing inefficiencies. The 1994 operating loss included a $7.3 million restructuring expense. Interest expense, net of interest income, remained the same at $0.3 million in the first quarters of 1995 and 1994. The effective income tax recovery rate is below the combined statutory federal and state rates for the first quarter of 1995. The Company was unable to recognize a tax benefit for its loss in the first quarter of 1995 due to uncertainties as to whether or not a future benefit will be realized. Any earnings in 1995 will not be taxed at the statutory rate. For the first quarter of 1995 the Company had a net loss of $1.1 million as compared with a net loss of $7.3 million in the first quarter of 1994. Loss per share was ($0.15) as compared with $(1.08) for the same period in 1994, based on a weighted average of 7.2 million and 6.8 million shares outstanding, respectively. The 1994 loss per share includes a pre-tax restructuring charge of $7.3 million. Liquidity and Capital Resources Although the Company reported a net loss of $1.1 million in the first quarter of 1995, it still generated a positive cash flow of $2.1 million from operations due to the receipt of a Federal tax refund of $4.0 million attributable to a tax loss carryback. Company operations have historically provided a positive cash flow. However, the Company is currently experiencing financial difficulties due to lower shipping volumes. On April 7, 1995 the Company entered into an amended and restated credit agreement with its two primary lending institutions. Under the terms of the new agreement, the existing term debt and lines of credit were converted into a revolving credit line in exchange for a cash payment of $100,000 and the issuance of 250,000 shares of the Company's common stock. The new agreement requires quarterly principal payments, commencing in September 1995, of $875,000. The agreement, unless extended, expires on January 15, 1996 at which time the remaining principal balance of $13,425,000 will be due. The agreement allows for an extended maturity date to April 15, 1996 under certain conditions. The repayment of the amount due will be dependent upon the Company's ability either to obtain alternate financing or to restructure the remaining balance due. The Company is considering several alternatives to achieve this, including the sale of common or preferred stock, the issuance of convertible debt, a business combination, the sale of all or a portion of the Company and the establishment of a borrowing relationship with new lending institutions. The Company has engaged Needham & Company, Inc. as its investment advisor to assist in this process. The ability of the Company to accomplish this will be dependent upon the Company's business prospects and operating results in 1995. The restructuring actions taken in 1994 have significantly reduced the expense structure of the Company. However, it is not certain that the Company will be able to achieve the revenue level necessary to return to profitability. The Company is taking action to minimize its cash outlays by deferring or eliminating discretionary expenses and capital asset purchases. The Company must increase its shipment rate to an acceptable level within the near future, or obtain additional financing, in order to meet its cash flow requirements during 1995. At April 1, 1995 the Company's long-term secured debt totaled $16.1 million of which current installments were $15.7 million. This compares to $16.2 million at December 31, 1994 of which current installments were $2.2 million. The Company's long-term borrowings, secured by plant and equipment, bear interest at rates ranging from 70% of prime (9.0% at April 1, 1995) to 12.43%. With the acquisition of Lynwood, the Company assumed a 5 year business term loan in the amount of $0.3 million, with interest at 2% above the U.K. base rate (6.75% at April 1, 1995). Cash and cash equivalents totaled $3.3 million at April 1, 1995 as compared to $1.7 million at December 31, 1994. Cash provided by operating activities amounted to $2.1 million in the first quarter of 1995 as compared to $1.2 million in the first quarter of 1994. In January 1995, the Company received a Federal tax refund of $4.0 million. Cash of $0.2 million was used in investing activities during the first quarter of 1995. The major component was comprised of $0.2 million for the purchase of property, plant and equipment. Management expects total 1995 capital expenditures to be slightly higher than the 1994 expenditures. However, the Company expects to receive approximately $2.3 million from the sale of real estate over the next two years, including $1.7 million from the sale of its vacated manufacturing facility in Hauppauge, NY. Such sale is expected to take place in May 1995, and requires a down payment of $0.6 million with a note for the balance payable in two years. The down payment will be applied against existing debt under the revolving credit agreement. During the first quarter of 1995, the Company made debt payments of $0.1 million and payments of notes payable of $0.1 million. Inflation The Company's financial statements are prepared in accordance with historical accounting systems, and therefore do not reflect the effect of inflation. The impact of changing prices on the financial statements is not considered to be significant. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits 27 - Financial Data Schedule b) Reports on Form 8-K None. S I G N A T U R E S 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. NAI TECHNOLOGIES, INC. (Registrant) DATE May 12, 1995 By:\s\Richard A. Schneider ----------------------- --------------------------- Richard A. Schneider Executive Vice President (On behalf of the registrant and as Principal Financial Officer) EX-27 2 EXHIBIT 27
5 1,000 3-MOS DEC-31-1995 APR-01-1995 3,346 0 11,933 0 15,170 31,574 14,275 ( 6,761) 50,864 29,245 344 720 0 0 18,598 50,864 12,687 12,687 10,169 13,355 0 0 340 ( 1,008) 86 ( 1,094) 0 0 0 ( 1,094) ( 0.15) 0
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