-----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, Mu/9tCikY7F1Dn2g14fuwsO2Oq1Ssu+QMv9C3i2G6ezs+iVbIrQcvV/8tRIRBFDq j1joPjDcV0ckhR+bu5cYAw== 0000912057-97-001792.txt : 19970128 0000912057-97-001792.hdr.sgml : 19970128 ACCESSION NUMBER: 0000912057-97-001792 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970127 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: 97511314 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, 1996 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 5,416,624 shares of common stock, par value $.01 per share, of the Registrant outstanding as of January 10, 1997. 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, 1996 and December 31, 1996 3 Condensed Consolidated Statements of Income for the three and six months ended December 31, 1996 and 1995 5 Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 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, 1996 1996 ------------ ---------- (UNAUDITED) (NOTE) (000'S OMITTED) ASSETS CURRENT ASSETS Cash and cash equivalents $ 839 $ 266 Accounts receivable, less $435 and $431 allowance for doubtful accounts, respectively 19,663 16,494 Inventories: Finished products 9,472 9,146 Work in process 7,907 7,167 Materials 7,601 7,513 ---------- ---------- 24,980 23,826 Prepaid expenses and sundry 246 150 Deferred income taxes 1,032 1,032 ---------- ---------- TOTAL CURRENT ASSETS 46,760 41,768 PROPERTY AND EQUIPMENT Property and equipment 17,326 15,487 Allowances for depreciation (deduction) (9,405) (8,115) ---------- ---------- 7,921 7,372 PROPERTY UNDER CAPITAL LEASE Building and machinery 3,220 3,435 Amortization (deduction) (1,203) (1,328) ---------- ---------- 2,017 2,107 OTHER ASSETS Cost in excess of net assets acquired, less amortization of $2,066 and $1,818, respectively 8,686 8,647 Patents, trademarks and other intangibles, less amortization of $1,637 and $1,492, respectively 170 315 Loan proceeds appropriated for debt service and other 491 504 ---------- ---------- 9,347 9,466 ---------- ---------- $ 66,045 $ 60,713 ---------- ---------- ---------- ----------
Note: The balance sheet at June 30, 1996 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, 1996 1996 ------------ ---------- (UNAUDITED) (NOTE) (000'S OMITTED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term bank borrowings (Note 2) $ 6,855 $ 3,065 Accounts payable 3,272 3,218 Accrued compensation and payroll taxes 3,817 4,207 Other liabilities and accrued expenses 2,682 1,566 Current maturity of capital lease obligations 228 249 Current maturity of long-term debt (Note 3) 67 1,649 Federal and state income taxes and local taxes 1,075 541 ---------- ---------- TOTAL CURRENT LIABILITIES 17,996 14,495 CAPITAL LEASE OBLIGATIONS 1,993 2,110 LONG-TERM DEBT (NOTE 3) 693 645 DEFERRED INCOME TAXES 95 95 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 6,409 6,135 Cost of common stock in treasury---761,584 and 654,195 shares, respectively (deduction) (7,636) (5,708) Cumulative translation adjustment 579 (149) Retained earnings 45,854 43,028 ---------- ---------- 45,268 43,368 ---------- ---------- $ 66,045 $ 60,713 ---------- ---------- ---------- ----------
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, 1996 1995 1996 1995 --------- --------- --------- --------- (000'S OMITTED, EXCEPT PER SHARE DATA) SALES $ 26,987 $ 23,507 $ 50,245 $ 43,364 COST OF PRODUCTS SOLD 16,285 14,872 30,679 27,655 --------- --------- --------- --------- GROSS PROFIT 10,702 8,635 19,566 15,709 OPERATING EXPENSES Selling 3,275 2,675 5,807 5,060 Administrative 2,081 1,628 4,035 3,122 Engineering 2,773 2,101 5,144 4,473 --------- --------- --------- --------- 8,129 6,404 14,986 12,655 --------- --------- --------- --------- OPERATING INCOME 2,573 2,231 4,580 3,054 OTHER INCOME (EXPENSE) 76 (83) 71 (233) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 2,649 2,148 4,651 2,821 INCOME TAXES 1,033 855 1,825 1,120 --------- --------- --------- --------- NET INCOME $ 1,616 $ 1,293 $ 2,826 $ 1,701 --------- --------- --------- --------- --------- --------- --------- --------- Net Income Per Common Share $ 0.29 $ 0.24 $ 0.50 $ 0.31 --------- --------- --------- --------- --------- --------- --------- --------- Average Common Shares Outstanding 5,569 5,489 5,602 5,489 --------- --------- --------- --------- --------- --------- --------- ---------
See notes to condensed consolidated financial statements. 5 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1996 1995 ---------- ---------- (000'S OMITTED) OPERATING ACTIVITIES Net income $ 2,826 $ 1,701 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 1,189 1,057 Amortization of intangibles 393 416 Changes in operating assets and liabilities: Accounts receivable (3,456) (4,708) Inventories (1,154) 786 Other current assets (96) (67) Accounts payable and accrued liabilities 780 (571) Other current liabilities 534 797 --------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,016 (589) INVESTING ACTIVITIES Purchases of property and equipment (1,444) (801) Sundry 13 (24) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (1,431) (825) FINANCING ACTIVITIES Purchases of capital stock for treasury (3,114) (235) Principal payment on capital lease obligations (138) (95) Principal payment on long-term debt (183) (33) Principal payments on short-term bank borrowings (12,890) (9,145) Proceeds from short-term bank borrowings 16,680 11,230 Proceeds from exercise of common stock options 286 20 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 641 1,742 Effect of exchange rate changes on cash 347 (47) --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS 573 281 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 266 662 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 839 $ 943 --------- --------- --------- ---------
See notes to condensed consolidated financial statements. 6 IFR SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1996 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, 1996 are not necessarily indicative of the results that may be expected for the year ending June 30, 1997. 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, 1996. 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, 1996, the effective interest rate charged by the bank was 7.75 percent and the Company had unused lines of credit aggregating $8,145,000. NOTE 3 -- LONG-TERM DEBT The Company had a note payable due to York 1995 Limited, related to the acquisition made during June 1995. Final payment was made on December 31, 1996 via 80,000 shares of common stock and cash of $166,000. At December 31, 1996, no balance due is remaining. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales for the quarter ended December 31, 1996 increased $3,480,000, or 15 percent compared to the same period in the prior year. This increase was primarily a result of increased sales of communication test equipment which was up 33 percent over the prior year quarter and avionics test equipment, up 45 percent over the previous year period. Included in the sales of communications test equipment were sales to the U.S. Army of $804,000, an increase of 34 percent as compared to the previous year 7 quarter. Sales of test and measurement (spectrum analyzers) and fiber optics test equipment were essentially flat compared to the prior year quarter. Gross margin for the current quarter was 40 percent compared to 37 percent for the previous year quarter. This improvement is related to a more favorable product mix and improved manufacturing efficiencies. Total operating expenses as percent of sales increased three percent from the prior year quarter. Selling expenses increased one percent as percent of sales, which was related to higher commissions expense during the period and the addition of sales and marketing personnel. Administrative expenses increased $453,000, or as a percent of sales, from seven percent to eight percent. This increase is related to recruiting costs incurred during the period. Engineering expenses increased as a percent of sales from nine percent to ten percent. The increase in engineering expenses is primarily due to the expansion of the Company's engineering staff. Net other income was $76,000 for the quarter compared to net other expense of $83,000 in the prior year quarter. This improvement is related to a favorable foreign currency exchange rate during the period. The estimated effective income tax rate was 39 percent as compared to 40 percent in the previous year quarter. The decrease in the rate is related to the anticipated research and development credits for the current year and an increase in the estimated annual pre-tax income relative to the amount of non- deductible goodwill amortization. Sales for the six months ended December 31, 1996 increased $6,881,000, or 16% compared to a year ago. Sales of communications test equipment was up 23 percent as compared to the prior year. Sales of avionics test equipment was up 39 percent as compared to the previous year period. Sales of Test and Measurement (spectrum analyzers) equipment were flat compared to the prior year, while Fiber Optics test equipment was up ten percent on a year to year basis. Gross margins were 39 percent compared to 36 percent for the prior year. Operating expenses increased as a percent of sales one percent compared to the previous year. Selling and engineering expenses remained unchanged as a percent of sales while administrative expenses as percent of sales increased one percent. This increase is related to higher recruiting costs for the period. Net other income was $71,000 for the six month ended period compared to net other expense of $233,000 in the previous year. This improvement is related to reduced interest expense and a favorable foreign currency exchange rate for the year. The estimated effective income tax rate was 39 percent for the six month ended period compared to 40 percent in the previous year. The decrease in the effective rate is related to the anticipated research and development credits for the current year and an increase in the estimated annual pre-tax income relative to the amount of non-deductible goodwill amortization. 8 LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operations were $994,000 for the six month period ended December 31, 1996. This compares to cash flows used in operations of $589,000 in the prior year period. This increase is primarily related to an increase in accounts payable and accrued liabilities of $780,000 for the six months ended as compared to a decrease of $571,000 in the prior year period. Working capital increased from $27,273,000 at June 30, 1996 to $28,764,000 at December 31, 1996. On September 20, 1996, the Board of Directors of the Company authorized the repurchase of up to 500,000 shares of the Company's common stock. The main purpose of the shares buyback program is to offset stock option exercises from treasury stock and as a utilization of the anticipated excess cash flow during the year. As of December 31, 1996, the company had purchased an aggregate of 63,012 shares under the program. The Company has available unsecured lines of credit for $15,000,000 which expire on June 30, 1997. At December 31, 1996, $6,855,000 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, 1997. 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, 1996. 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 27, 1997 /s/ Alfred H. Hunt, III ---------------- --------------------------------------- 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 2 EXHIBIT 11 Exhibit (11.0) IFR SYSTEMS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, 1996 1995 1996 1995 --------- --------- --------- --------- (000's OMITTED, EXCEPT PER SHARE DATA) PRIMARY: Average shares outstanding 5,358 5,489 5,409 5,489 Net effect of dilutive stock options-based on the treasury stock method using average market price 211 111 193 133 --------- --------- --------- --------- Totals 5,569 5,600 5,602 5,622 --------- --------- --------- --------- --------- --------- --------- --------- Net Income $ 1,616 $ 1,293 $ 2,826 $ 1,701 --------- --------- --------- --------- --------- --------- --------- --------- Per Share Amount $ 0.29 $ 0.23 $ 0.50 $ 0.30 --------- --------- --------- --------- --------- --------- --------- --------- FULLY DILUTED: Average shares outstanding 5,358 5,489 5,409 5,489 Net effect of dilutive stock options-based on the treasury stock method using the period- end market price, if greater than average market price 218 111 225 133 Assumed conversion of 10% convertible notes 4 16 4 16 --------- --------- --------- --------- Totals 5,580 5,616 5,638 5,638 --------- --------- --------- --------- --------- --------- --------- --------- Net Income $ 1,616 $ 1,293 $ 2,826 $ 1,701 Add 10% convertible note interest, net of federal income tax effect 1 2 2 4 --------- --------- --------- --------- Totals $ 1,617 $ 1,295 $ 2,828 $ 1,705 --------- --------- --------- --------- --------- --------- --------- --------- Per Share Amount $ 0.29 $ 0.23 $ 0.50 $ 0.30 --------- --------- --------- --------- --------- --------- --------- ---------
EX-27 3 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FROM FORM 10-Q FOR DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 839 0 20098 435 24980 46760 20546 10608 66045 17996 2686 0 0 62 45206 66045 50245 50245 30679 45665 52 15 277 4651 1825 2826 0 0 0 2826 .50 .50
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