-----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, AkAyWQxN0JzrktmAGrsenHgMKQ3WzX+h90Rv5OAbJl/Z+/Y/961aSg3bfCcF+omP 5pUuKwOs1SGgXX/UzAf0tw== 0000912057-96-001257.txt : 19960205 0000912057-96-001257.hdr.sgml : 19960205 ACCESSION NUMBER: 0000912057-96-001257 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960202 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IFR SYSTEMS INC CENTRAL INDEX KEY: 0000785546 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 480777904 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14224 FILM NUMBER: 96510483 BUSINESS ADDRESS: STREET 1: 10200 W YORK ST CITY: WICHITA STATE: KS ZIP: 67215 BUSINESS PHONE: 3165224981 MAIL ADDRESS: STREET 1: 10200 WEST YORK STREET CITY: WICHITA STATE: KS ZIP: 67215 10-Q 1 10-Q 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 December 31, 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 0-14224 IFR SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 48-0777904 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10200 WEST YORK STREET, WICHITA, KANSAS 67215 (Address and zip code of principal executive offices) (316) 522-4981 (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 periods 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 . ------ ------ There were 5,477,093 shares of common stock, par value $.01 per share, of the Registrant outstanding as of January 31, 1996. IFR SYSTEMS, INC. FORM 10 - Q INDEX PART I -- FINANCIAL INFORMATION PAGE Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets at June 30, 1995 and December 31, 1995 3 Condensed Consolidated Statements of Income for the three and six months ended December 31, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 1995 and 1994 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II -- OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K 10 SIGNATURES 11 2 PART I -- FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS IFR SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, 1995 1995 ----------- ----------- (UNAUDITED) (NOTE) ASSETS (000'S OMITTED) CURRENT ASSETS Cash and cash equivalents $ 943 $ 662 Accounts receivable, less $451 and $472 allowance for doubtful accounts, respectively 16,527 11,819 Inventories: Finished products 6,791 8,579 Work in process 7,697 8,692 Materials 8,787 6,790 ----------- ----------- 23,275 24,061 Prepaid expenses and sundry 363 296 Deferred income taxes 822 822 ----------- ----------- TOTAL CURRENT ASSETS 41,930 37,660 PROPERTY AND EQUIPMENT Property and equipment 14,481 13,680 Allowances for depreciation (deduction) (7,157) (6,204) ----------- ----------- 7,324 7,476 PROPERTY UNDER CAPITAL LEASE Building and machinery 3,436 3,436 Amortization (deduction) (1,228) (1,124) ----------- ----------- 2,208 2,312 OTHER ASSETS Cost in excess of net assets acquired, less amortization of $1,542 and $1,271, respectively 9,572 9,843 Patents, trademarks and other intangibles, less amortization of $1,347 and $1,202, respectively 460 605 Loan proceeds appropriated for debt service and other 530 506 ----------- ----------- 10,562 10,954 ----------- ----------- $ 62,024 $ 58,402 ----------- ----------- ----------- -----------
Note: The balance sheet at June 30, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 3
DECEMBER 31, JUNE 30, 1995 1995 ----------- ----------- (UNAUDITED) (NOTE) (000'S OMITTED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term bank borrowings (Note 2) $ 7,630 $ 5,545 Accounts payable 3,262 3,500 Accrued compensation and payroll taxes 2,086 2,187 Other liabilities and accrued expenses 2,575 2,807 Current maturity of capital lease obligations 282 251 Current maturity of long-term debt 88 88 Federal and state income taxes and local taxes 1,131 334 ----------- ----------- TOTAL CURRENT LIABILITIES 17,054 14,712 CAPITAL LEASE OBLIGATIONS 2,220 2,346 LONG-TERM DEBT 2,602 2,635 DEFERRED INCOME TAXES 73 73 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value---authorized 1,000,000 shares, none issued --- --- Common stock, $.01 par value---authorized 50,000,000 shares, issued 6,177,500 shares 62 62 Additional paid-in capital 6,128 6,187 Cost of common stock in treasury---705,523 and 689,784 shares, respectively (deduction) (6,036) (5,880) Cumulative translation adjustment (47) - Retained earnings 39,968 38,267 ----------- ----------- 40,075 38,636 ----------- ----------- $ 62,024 $ 58,402 ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 4 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------------ ------------------------- 1995 1994 1995 1994 (000'S OMITTED, EXCEPT PER SHARE DATA) SALES $ 23,507 $ 21,220 $ 43,364 $ 38,416 COST OF PRODUCTS SOLD 14,872 12,957 27,655 24,184 --------- ---------- ---------- ---------- GROSS PROFIT 8,635 8,263 15,709 14,232 OPERATING EXPENSES Selling 2,675 2,567 5,060 4,579 Administrative 1,628 1,476 3,122 2,639 Engineering 2,101 2,693 4,473 5,121 --------- ---------- ---------- ---------- 6,404 6,736 12,655 12,339 --------- ---------- ---------- ---------- OPERATING INCOME 2,231 1,527 3,054 1,893 OTHER INCOME (EXPENSE) (83) (55) (233) (106) --------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 2,148 1,472 2,821 1,787 INCOME TAXES 855 594 1,120 724 --------- ---------- ---------- ---------- NET INCOME $ 1,293 $ 878 $ 1,701 $ 1,063 --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Net Income Per Common Share $ 0.24 $ 0.17 $ 0.31 $ 0.20 --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Average Common Shares Outstanding 5,489 5,268 5,489 5,262 --------- ---------- ---------- ---------- --------- ---------- ---------- ----------
See notes to condensed consolidated financial statements. 5 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1995 1994 ---------- ----------- (000'S OMITTED) OPERATING ACTIVITIES Net income $ 1,701 $ 1,063 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 1,057 1,079 Amortization of intangibles 416 396 Deferred compensation expense - 31 Changes in operating assets and liabilities: Accounts receivable (4,708) 2,626 Inventories 786 (89) Other current assets (67) (54) Accounts payable and accrued liabilities (571) 142 Other current liabilities 797 (365) ---------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (589) 4,829 INVESTING ACTIVITIES Purchases of property and equipment (801) (701) Sundry (24) (13) ---------- ----------- NET CASH USED IN INVESTING ACTIVITIES (825) (714) FINANCING ACTIVITIES Purchases of capital stock for treasury (235) - Principal payment on capital lease obligations (95) (113) Principal payment on long-term debt (33) - Principal payments on short-term bank borrowings (9,145) (11,855) Proceeds from issuance of common stock 20 22 Proceeds from short-term bank borrowings 11,230 7,850 ---------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,742 (4,096) Effect of exchange rate changes on cash (47) - ---------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 281 19 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 662 64 ---------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 943 $ 83 ---------- ----------- ---------- -----------
See notes to condensed consolidated financial statements. 6 IFR SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1995 NOTE 1 -- 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 December 31, 1995 are not necessarily indicative of the results that may be expected for the year ending June 30, 1996. 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 June 30, 1995. NOTE 2 -- SHORT TERM BANK BORROWINGS The Company has unsecured lines of credit with a bank whereby it could borrow in the aggregate up to $15,000,000 at interest rates approximating the prime rate charged by major banks. At December 31, 1995 the Company had unused lines of credit aggregating $7,370,000. NOTE 3 -- ACQUISITION On June 21, 1995, the Company acquired substantially all of the assets of York Technology, Ltd., a company incorporated in England, and York Technology, Inc., a New Jersey Corporation, as well as the real estate and building previously leased by York Technology, Ltd. The acquisition has been accounted for as a purchase. On an unaudited pro forma basis, sales, net income and net income per share for the quarter ended December 31,1994 were $22,163,000, $165,000 and $.03 respectively, and for the six months ended December 31,1994 were $41,627,000, $456,000 and $.09 respectively. This pro forma data presents the consolidated results of operations as if the acquisition had occurred on July 1, 1994, after giving effect to certain adjustments, including amortization of intangibles, increased interest expense and related income tax expense. The pro forma results have been provided for comparative purposes only and do not purport to indicate the results of operations which would have actually occurred had the acquisition been in effect on the date indicated, or which may occur in the future. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales for the quarter ended December 31, 1995 increased $2,287,000 or 11 percent compared to the same period in the prior year. This increase was primarily a result of increased sales of commercial communications test equipment and fiber optics test instruments. Sales of government communications test equipment was down $2,326,000 compared to the prior year period. Sales of avionics and test and measurement (spectrum analyzers) equipment remained strong compared to the previous year quarter. Gross margin for the current quarter was 37 percent compared to 39 percent for the previous year quarter. This decrease is related to the large order of fiber optics test equipment at much higher margins in the previous year quarter. Total operating expenses as a percent of sales decreased five percent from the prior year quarter. Selling expenses as percent of sales decreased one percent from the prior year quarter. Administrative expenses as a percent of sales remained flat compared to prior year quarter. Engineering expenses as a percent of sales decreased four percent compared to the same period of a year ago. This decrease is related to a reduction in development costs at the Fiber Optics Division and the funding of a large research and development contract in the RF Division. This contract is a time and materials contract with sales during the quarter in excess of $400,000. The estimated effective income tax rate was unchanged at 40 percent compared to the prior year period. Sales for the six months ended December 31, 1995 increased $4,948,000 or 13 percent compared to the same period of the prior year. This increase is primarily a result of higher sales of fiber optics test equipment. Sales to the U.S. Army were down $3,067,000 compared to the year earlier. Sales of avionics, test and measurement (spectrum analyzers) and commercial communications test equipment are all up compared to the prior year. Gross margins were 36 percent for the current year compared to 37 percent for the prior year. Operating expenses decreased as a percent of sales three percent compared to the previous year. Selling and administration expenses as a percent of sales remained unchanged while engineering expenses as a percent of sales decreased three percent. This decrease is related to the time and materials contract mentioned earlier. 8 For the six month ended period of fiscal 1996 and fiscal 1995, the effective income tax rate was 40 percent and 41 percent, respectively. The decrease in the effective rate is due to an increase in the estimated annual pre-tax income relative to the amount of nondeductible goodwill amortization. LIQUIDITY AND CAPITAL RESOURCES Cash flows used in operations were $589,000 for the six month period ended December 31, 1995. This compares to cash flows provided by operations of $4,829,000 in the prior year period. This decrease was primarily due to an increase in accounts receivable of $4,708,000 for the six months ended as compared to a decrease of $2,626,000 in the prior year period. The increase in accounts receivable is due to the higher sales during the end of the quarter. Funding for the company pension plan of $1,035,000 also contributed to the decrease. Working capital increased from $22,948,000 at June 30, 1995 to $24,876,000 at December 31, 1995. The Board of Directors of the Company has authorized the repurchase of up to 1,000,000 shares of the Company's common stock. As of December 31, 1995, the company had purchased an aggregate of 815,950 shares under the program. The Company has available unsecured lines of credit for $15,000,000 which expire on June 30, 1996. At December 31, 1995, $7,630,000 was outstanding under the lines of credit. The Company anticipates that available lines of credit and funds generated from operations will be adequate to meet capital asset expenditures and working capital needs for the current fiscal year ending June 30, 1996. 9 PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11.0 Statement Re: Computation of Per Share Earnings 27.0 Financial Data Schedule No form 8-K was filed during the quarter ended December 31, 1995. 10 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. IFR SYSTEMS, INC. Date: January 31, 1996 /s/ Alfred H. Hunt ------------------------------ Alfred H. Hunt, III, President and CEO (Duly authorized officer) /s/ Jeffrey A. Bloomer ------------------------------ Jeffrey A. Bloomer Chief Financial Officer and Treasurer (Principal financial and chief accounting officer) 11 EX-11.0 2 EXHIBIT 11.0 IFR SYSTEMS, INC. EXHIBIT (11.0) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, 1995 1994 1995 1994 ---------- ---------- ---------- ---------- (000'S OMITTED, EXCEPT PER SHARE DATA) PRIMARY: Average shares outstanding 5,489 5,268 5,489 5,262 Net effect of dilutive stock options-based on the treasury stock method using average market price 111 88 133 28 ---------- ---------- ---------- ---------- Totals 5,600 5,356 5,622 5,290 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Income $ 1,293 $ 878 $ 1,701 $ 1,063 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Per Share Amount $ 0.23 $ 0.16 $ 0.30 $ 0.20 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- FULLY DILUTED: Average shares outstanding 5,490 5,268 5,490 5,262 Net effect of dilutive stock options-based on the treasury stock method using the period- end market price, if greater than average market price 111 122 133 122 Assumed conversion of 10% convertible notes 16 153 16 153 ---------- ---------- ---------- ---------- Totals 5,617 5,543 5,639 5,537 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Income $ 1,293 $ 878 $ 1,701 $ 1,063 Add 10% convertible note interest, net of federal income tax effect 2 18 2 37 ---------- ---------- ---------- ---------- Totals $ 1,295 $ 896 $ 1,703 $ 1,100 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Per Share Amount $ 0.23 $ 0.16 $ 0.30 $ 0.20 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Note: Average shares outstanding used for Net Income Per Share included in the Company's financial statements do not reflect the effect of the stock options granted or convertible notes since their aggregate effect is less than 3%. EX-27.0 3 EXHIBIT 27.0
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of income from Form 10-Q for December 31, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS JUN-30-1996 JUL-01-1995 DEC-31-1995 943 0 16,978 451 23,275 41,930 17,917 8,385 62,024 17,054 4,822 0 0 62 40,013 62,024 43,364 43,364 27,655 40,310 184 0 437 2,821 1,120 1,701 0 0 0 1,701 .31 .31
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