-----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, V+QNrEgtui4yd8NpSYX31bfzFs3ewZu/mGoDrP2GKDtTqGm9ZMosAZlvP2/mho54 JlhTzDSbak0mDXdBbYd6kw== 0000950134-97-003651.txt : 19970513 0000950134-97-003651.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950134-97-003651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970328 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERTEX COMMUNICATIONS CORP /TX/ CENTRAL INDEX KEY: 0000780416 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 751982974 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15277 FILM NUMBER: 97600517 BUSINESS ADDRESS: STREET 1: 2600 N LONGVIEW ST STREET 2: PO BOX 1277 CITY: KILGORE STATE: TX ZIP: 75662 BUSINESS PHONE: 9039840555 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1997 1 =============================================================================== 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 March 28, 1997 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: 0-15277 VERTEX COMMUNICATIONS CORPORATION (Exact name of Registrant as specified in its charter) TEXAS 75-1982974 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2600 N. LONGVIEW STREET, KILGORE, TEXAS 75662 (Address of principal executive offices and zip code) (903) 984-0555 (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 ----- ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. AS OF MARCH 28, 1997, THERE WERE 4,476,689 SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK $.10 PAR VALUE. =============================================================================== 2 VERTEX COMMUNICATIONS CORPORATION TABLE OF CONTENTS TO FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 28, 1997 PART I - FINANCIAL INFORMATION Item 1. Financial Statements - (Unaudited) Condensed Consolidated Balance Sheets - March 28, 1997 and September 30, 1996 Condensed Consolidated Statements of Income - Three months ended March 28, 1997 and March 29, 1996 Condensed Consolidated Statements of Income - Six months ended March 28, 1997 and March 29, 1996 Condensed Consolidated Statements of Cash Flows - Six months ended March 28, 1997 and March 29, 1996 Notes to Condensed Consolidated Financial Statements - March 28, 1997 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K SIGNATURE 3 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
March 28 September 30 1997 1996 ------------- ------------- ASSETS (Unaudited) * CURRENT ASSETS: Cash and equivalents $ 18,388 $ 17,396 Accounts receivable, net 20,352 21,136 Inventories 16,326 15,626 ------------- ------------- 55,066 54,158 PROPERTY AND EQUIPMENT, at cost 25,423 22,947 Less accumulated depreciation (11,686) (10,520) ------------- ------------- 13,737 12,427 GOODWILL, less accumulated amortization of $813 and $632 4,604 4,785 OTHER ASSETS 431 604 ------------- ------------- TOTAL ASSETS $ 73,838 $ 71,974 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,028 $ 4,615 Accrued compensation 2,034 3,024 Other accrued liabilities 3,783 4,017 Customers' advances 2,767 1,737 Income taxes payable 940 1,281 Current portion of long-term debt 592 -- ------------- ------------- 13,144 14,674 ACQUISITION INDEBTEDNESS 303 875 LONG-TERM DEBT - less current portion 450 -- DEFERRED INCOME TAXES 951 951 COMMITMENTS AND CONTINGENCIES -- -- SHAREHOLDERS' EQUITY: Common stock, $.10 par value, 20,000,000 shares authorized, 4,661,402 shares issued 466 466 Capital in excess of par value 24,743 24,806 Retained earnings 36,077 32,858 Treasury stock, at cost, 184,713 shares and 222,346 shares (2,269) (2,733) Translation adjustment (27) 77 ------------- ------------- 58,990 55,474 ------------- ------------- TOTAL LIABILITIES AND EQUITY $ 73,838 $ 71,974 ============= =============
* The balance sheet at September 30, 1996 has been taken from audited financial statements at that date and condensed. 1 4 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts)
Three Months Ended March 28 March 29 1997 1996 ---------- ---------- SALES $ 20,436 $ 19,233 COSTS AND EXPENSES: Cost of sales 14,502 13,918 Research and development 683 1,005 Marketing 1,185 971 General and administrative 1,755 1,429 ---------- ---------- 18,125 17,323 ---------- ---------- OPERATING INCOME 2,311 1,910 OTHER INCOME (EXPENSE): Income from investments 198 200 Interest expense (29) (26) ---------- ---------- INCOME BEFORE INCOME TAXES 2,480 2,084 Provision for income taxes 786 624 ---------- ---------- NET INCOME $ 1,694 $ 1,460 ========== ========== EARNINGS PER SHARE $ .36 $ .32 ========== ========== AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,665 4,600 ========== ==========
2 5 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts)
Six Months Ended March 28 March 29 1997 1996 ---------- ---------- SALES $ 40,116 $ 38,197 COSTS AND EXPENSES: Cost of sales 28,791 27,901 Research and development 1,448 1,669 Marketing 2,273 1,975 General and administrative 3,295 2,857 ---------- ---------- 35,807 34,402 ---------- ---------- OPERATING INCOME 4,309 3,795 OTHER INCOME (EXPENSE): Income from investments 406 334 Interest expense (49) (52) ---------- ---------- INCOME BEFORE INCOME TAXES 4,666 4,077 Provision for income taxes 1,447 1,224 ---------- ---------- NET INCOME $ 3,219 $ 2,853 ========== ========== EARNINGS PER SHARE $ .69 $ .62 ========== ========== AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,663 4,605 ========== ==========
3 6 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Six Months Ended March 28 March 29 1997 1996 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES $ 2,734 $ (1,634) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,476) (1,771) CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock -- (150) Payment for business purchased in fiscal 1995 (709) (438) Proceeds from long-term debt 1,285 -- Repayment of debt (243) -- Proceeds from exercise of stock options 401 123 ---------- ---------- 734 (465) ---------- ---------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS 992 (3,870) CASH AND EQUIVALENTS: At beginning of period 17,396 14,870 ---------- ---------- AT END OF PERIOD $ 18,388 $ 11,000 ========== ==========
4 7 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying 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 the adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1996. NOTE B - INVENTORIES (IN THOUSANDS) The components of inventory consist of the following:
March 28 September 30 1997 1996 --------- --------- Raw Materials $ 5,183 $ 5,854 Work-In-Process 9,386 7,979 Finished Goods 1,757 1,793 --------- --------- $ 16,326 $ 15,626 ========= =========
NOTE C - LONG-TERM DEBT In December 1996, the Company borrowed $1,285,000 (2 million German marks) from a bank through its German subsidiary. The debt is to be repaid in monthly installments with accrued interest charged at 4.7 percent per annum. Repayment began in January 1997. NOTE D - NEW ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" which is effective for the Company's fiscal 1998 financial statements. This new standard simplifies the method for computing earnings per share ("EPS") whereas the Company will report basic EPS without the effect of any outstanding potentially dilutive stock options and diluted EPS with the effect of those outstanding stock options that are potentially dilutive. 5 8 NOTE E - PENDING ACQUISITION The Company has reached a definitive agreement, dated May 8, 1997, to acquire all of the outstanding common stock of TIW Systems, Inc. ("TIW"), a California corporation, for aggregate consideration of approximately $19.4 million. Such aggregate consideration will consist of cash of approximately $7.8 million, 574,359 shares of Vertex's common stock, and approximately $.4 million of direct acquisition costs. The transaction is subject to, among other conditions, approval by the shareholders of TIW. Assuming TIW shareholder approval is obtained and other conditions of the transaction are satisfied, the Company expects the acquisition to be consummated in June 1997. The acquisition will be accounted for under the purchase method of accounting. 6 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Sales increased by 6 percent and 5 percent in the second quarter and the six-month period ended March 28, 1997 as compared to the same periods one year earlier, respectively. Gross profit margins expressed as a percent of sales, improved by 1.4 percentage points and 1.3 percentage points for the quarter and the first six months of fiscal 1997 over the fiscal 1996 periods, respectively, mainly due to a more favorable sales mix. The improved profit margins were principally a result of increased sales of higher margin solid state amplifiers, while sales of lower margin low noise amplifiers declined over the comparable periods. Research and development expenditures of $683,000 and $1,448,000 in the second quarter and the six-month period of fiscal 1997, were 32 percent and 13 percent below the comparable quarter and six-month period, respectively, largely because of the absence of design efforts in the 9-meter antenna product line which was successfully completed last year. General and administrative and marketing spending increased 23 percent and 15 percent over from the comparable quarter and six-month period of fiscal 1996, respectively, because of increased staffing levels. The effective tax rate for fiscal 1997 is lower than the prescribed statutory rates mainly due tax incentives available from export shipments and the favorable impact of interest income from certain investments that is exempt from federal taxes. FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION GENERAL The Company's future operating results and financial condition may be affected by various trends and factors including general economic conditions, technology changes, product demand, product development, volume and mix of products sold, size and timing of individual orders booked, competition, market acceptance of products, availability of certain raw materials, rising costs for or unavailability of selected components, domestic and foreign government regulations and spending, or fluctuation in certain foreign currency exchange rates as related to the U.S. dollar. Due to the factors noted above, the Company's future earnings and stock price may be subject to fluctuation, particularly on a quarterly basis. Past business trends should not be used to anticipate future trends and historical performance should not be considered as a reliable indicator of future performance. Additionally, any shortfall in revenue or earnings from levels anticipated by securities analysts could have an immediate and significant adverse effect on the trading price of the Company's common stock. 7 10 FORWARD-LOOKING STATEMENTS With the exception of historical information, certain matters discussed in this quarterly report are forward-looking statements that involve risks and uncertainties, including but not limited to, economic conditions, trends in the telecommunications industry, product acceptance and demand, competitive products and pricing, new product development, availability of competitive components and other risks indicated in this filing and prior filings of the Company with the Securities and Exchange Commission. FINANCIAL CONDITION Cash and equivalents increased $992,000 during the six months ended March 28, 1997. Cash provided by operations was $2.7 million mainly due to net income of $3.2 million. Cash of $2.5 million was used to purchase additional property and equipment. During the first half of fiscal 1997, the Company purchased a building containing 37,000 square feet of manufacturing and office space situated on 3 acres of land located near its Kilgore, Texas facility. Including renovation which has been completed, total cost of the facility amounted to $800,000. The facility will accommodate manufacturing of certain antenna components that were previously being purchased and will allow for expanded production capacity of the Company's DMK (Deployable Mobile Ku-band) antenna product line. Net cash of $734,000 was provided since September 30, 1996 by financing activities, the most significant of which were proceeds received from bank debt (discussed below) and payments made relative to the 1995 Maxtech acquisition. The Company borrowed $1.3 million (2 million German marks) from a bank in December 1996. The debt is scheduled for payment over a 24 month period and the initial payment began in January 1997. The Company has reached a definitive agreement to acquire by purchase all of the outstanding stock of TIW Systems, Inc. ("TIW"), of Santa Clara, California, for consideration consisting of cash of $7.8 million and 574,359 shares of Vertex's common stock and certain acquisition costs. TIW is a designer and manufacturer of satellite communications systems, earth station antennas and related subsystem components used primarily in commercial applications. The Company estimates that the transaction will be completed before the end of the fiscal 1997 third quarter. TIW is a privately held company founded in 1976 who recorded 1996 sales of approximately $41 million. Management believes that the combined strength and abilities of the Company after the acquisition could materially increase its market share throughout the world. Management believes that forecasted cash flows combined with the Company's strong financial conditions will be sufficient to fund the acquisition discussed above and operations over the foreseeable future. The Company is currently evaluating the possibility of implementing a domestic bank credit facility. 8 11 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on January 23, 1997. Of the 4,442,056 total shares entitled to vote, 4,109,921 shares or 92.5 percent were represented in person or by proxy at the meeting. The following matters were submitted to the meeting and approved by more than the requisite majority of shares outstanding and entitled to vote as shown below: (1) Election of the following Directors:
Votes Votes For Withheld --------- -------- J. Rex Vardeman 4,094,787 15,134 A. Don Branum 4,094,787 15,134 James D. Carter 4,091,287 18,634 Bill R. Womble 4,094,787 15,134 Donald E. Heitzman, Sr 4,090,683 19,238
(2) Ratification of the appointment of Arthur Andersen LLP as independent public accountants of the Company for the fiscal year ending September 30, 1997. Shares Voted For: 4,100,837 Shares Voted Against: 5,584 Shares Abstaining: 3,500
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Form 8-K: The Company filed no reports on Form 8-K and none were required to be filed during the three months ended March 28, 1997. 9 12 SIGNATURE 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. VERTEX COMMUNICATIONS CORPORATION --------------------------------- (Registrant) Date: May 12, 1997 /s/ J. D. Carter ----------------- --------------------------------- J. D. Carter Vice President - Finance (Duly Authorized Officer and Principal Financial and Accounting Officer) 10 13 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS SEP-30-1997 OCT-01-1996 MAR-28-1997 18,388 0 20,622 270 16,326 55,066 25,423 11,686 73,838 13,144 0 0 0 466 58,524 73,838 40,116 40,116 28,791 35,807 0 0 49 4,666 1,447 3,219 0 0 0 3,219 .69 .69
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