-----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, UIfWSSmGMW9/UOvd66Xk3mw2xsYQUpBKHV4tWjil+wPcuzUEEh+R9XN1P/YKLCRR ASFmX15M35r6QzqwvVjVRw== 0000912057-97-014165.txt : 19970428 0000912057-97-014165.hdr.sgml : 19970428 ACCESSION NUMBER: 0000912057-97-014165 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970425 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: 97587610 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 FORM 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 March 31, 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 0-14224 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 5,414,710 shares of common stock, par value $.01 per share, of the Registrant outstanding as of April 7, 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 March 31, 1997 3 Condensed Consolidated Statements of Income for the three and nine months ended March 31, 1997 and 1996 5 Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 1997 and 1996 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 MARCH 31, JUNE 30, 1997 1996 ---------- -------- (UNAUDITED) (NOTE) ASSETS (000'S OMITTED) CURRENT ASSETS Cash and cash equivalents $ 3,753 $ 266 Accounts receivable, less $458 and $431 allowance for doubtful accounts, respectively 18,031 16,494 Inventories: Finished products 10,678 9,146 Work in process 7,170 7,167 Materials 6,870 7,513 -------- -------- 24,718 23,826 Prepaid expenses and sundry 294 150 Deferred income taxes 1,032 1,032 -------- -------- TOTAL CURRENT ASSETS 47,828 41,768 PROPERTY AND EQUIPMENT Property and equipment 18,020 15,487 Allowances for depreciation (deduction) (9,928) (8,115) -------- -------- 8,092 7,372 PROPERTY UNDER CAPITAL LEASE Building and machinery 3,220 3,435 Amortization (deduction) (1,237) (1,328) -------- -------- 1,983 2,107 OTHER ASSETS Cost in excess of net assets acquired, less amortization of $2,197 and $1,818, respectively 8,437 8,647 Patents, trademarks and other intangibles, less amortization of $1,709 and $1,492, respectively 98 315 Loan proceeds appropriated for debt service and other 187 504 -------- -------- 8,722 9,466 -------- -------- $ 66,625 $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 MARCH 31, JUNE 30, 1997 1996 ---------- -------- (UNAUDITED) (NOTE) (000'S OMITTED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term bank borrowings (Note 2) $ 4,340 $ 3,065 Accounts payable 3,451 3,218 Accrued compensation and payroll taxes 4,907 4,207 Other liabilities and accrued expenses 2,319 1,566 Current maturity of capital lease obligations (Note 3) 175 249 Current maturity of long-term debt (Note 4) 32 1,649 Federal and state income taxes and local taxes 906 541 ------- ------- TOTAL CURRENT LIABILITIES 16,130 14,495 CAPITAL LEASE OBLIGATIONS (NOTE 3) 3,765 2,110 LONG-TERM DEBT (NOTE 4) 653 645 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 6,233 6,135 Cost of common stock in treasury---759,390 and 654,195 shares, respectively (deduction) (8,011) (5,708) Cumulative translation adjustment 118 (149) Retained earnings 47,580 43,028 ------- ------- 45,982 43,368 ------- ------- $66,625 $60,713 ------- ------- ------- ------- See notes to condensed consolidated financial statements. 4 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, ------------------------------------------------- 1997 1996 1997 1996 (000'S OMITTED, EXCEPT PER SHARE DATA) SALES $ 26,238 $ 22,802 $ 76,483 $ 66,166 COST OF PRODUCTS SOLD 15,305 14,144 45,984 41,798 -------- -------- -------- -------- GROSS PROFIT 10,933 8,658 30,499 24,368 OPERATING EXPENSES Selling 2,817 2,379 8,624 7,439 Administrative 2,142 1,795 6,177 4,917 Engineering 2,938 1,915 8,082 6,389 -------- -------- -------- -------- 7,897 6,089 22,883 18,745 -------- -------- -------- -------- OPERATING INCOME 3,036 2,569 7,616 5,623 OTHER INCOME (EXPENSE) (128) (106) (57) (340) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 2,908 2,463 7,559 5,283 INCOME TAXES 1,182 984 3,007 2,104 -------- -------- -------- -------- NET INCOME $ 1,726 $ 1,479 $ 4,552 $ 3,179 -------- -------- -------- -------- -------- -------- -------- -------- Net Income Per Common Share $ 0.30 $ 0.26 $ 0.81 $ 0.56 -------- -------- -------- -------- -------- -------- -------- -------- Average Common Shares Outstanding 5,661 5,642 5,647 5,628 -------- -------- -------- -------- -------- -------- -------- -------- See notes to condensed consolidated financial statements. 5 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED MARCH 31, ------- ------- 1997 1996 (000'S OMITTED) OPERATING ACTIVITIES Net income $ 4,552 $ 3,179 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 1,720 1,609 Amortization of intangibles 597 623 Changes in operating assets and liabilities: Accounts receivable (1,824) (3,424) Inventories (892) 121 Other current assets (144) (2) Accounts payable and accrued liabilities 1,686 (265) Other current liabilities 365 547 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 6,060 2,388 INVESTING ACTIVITIES Purchases of property and equipment (2,240) (1,552) Sundry 317 3 ------- ------- NET CASH USED IN INVESTING ACTIVITIES (1,923) (1,549) FINANCING ACTIVITIES Purchases of capital stock for treasury (4,178) (235) Principal payment on capital lease obligations (2,359) (202) Principal payment on long-term debt (221) (112) Principal payments on short-term bank borrowings (23,325) (17,525) Proceeds from issuance of Industrial Revenue Bond 3,940 - Proceeds from short-term bank borrowings 24,600 16,870 Proceeds from exercise of common stock options 799 201 ------- ------- NET CASH USED BY FINANCING ACTIVITIES (744) (1,003) Effect of exchange rate changes on cash 94 (82) ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,487 (246) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 266 662 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,753 $ 416 ------- ------- ------- ------- See notes to condensed consolidated financial statements. 6 IFR SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1997 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 nine month periods ended March 31, 1997 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 March 31, 1997, the effective interest rate charged by the bank was 8.00 percent and the Company had unused lines of credit aggregating $10,660,000. NOTE 3 - CAPITAL LEASE OBLIGATIONS On March 26, 1997, the Company completed the transaction for an Industrial Revenue Bond totaling $3,940,000. Proceeds from the Bond were used to pay off the 1989 Bond in the amount of $1,960,000. The remaining funds are contractually restricted and are to be used for the purchase of plant equipment and building improvements. NOTE 4 -- 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 March 31, 1997, no balance due is remaining. NOTE 5 -- NEW ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE. The Statement is 7 effective for periods ending after December 15, 1997, including interim periods, and earlier application is not permitted. Although the Company has not yet completed its detailed analysis of the Statement, management does not believe application of the Statement will have any significant adverse impact on its current earnings per share amounts. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales for the quarter ended March 31, 1997 increased $3,436,000, or 15 percent compared to the same period in the prior year. This increase was primarily due to increased sales of communication test equipment, which was up 20 percent over the prior year quarter and fiber optics test equipment, up 25 percent over the previous year period. Included in the sales of communications test equipment were sales to the U.S. Army of $3,017,000, an increase of 26 percent as compared to the previous year quarter. Sales of test and measurement equipment (spectrum analyzers) and sales of avionics test equipment were both down as compared to the prior year quarter. Gross margin for the current quarter was 42 percent compared to 38 percent for the previous year quarter. The increased sales of fiber optics test equipment and improved manufacturing efficiencies contributed to the improvement. Total operating expenses as a percent of sales increased three percent from the prior year quarter. Selling and administrative expenses remained flat as a percent of sales while engineering expenses increased three percent as a percent of sales. The increase in engineering expenses is related to additional employees to support the Company's expanded product development growth plans. Net other expense was $128,000 for the quarter compared to $106,000 for the prior year quarter. The Company incurred expenses of $42,000 during the quarter for the early payoff of the 1989 Industrial Revenue Bond issue. The estimated effective income tax rate was 41 percent compared to 40 percent in the previous year quarter. The increase in the rate is related to additional state income tax payments made during the current quarter for prior year periods. Sales for the nine months ended March 31, 1997 increased $10,317,000, or 16 percent compared to a year ago. Sales of communications test equipment were up 22 percent as compared to the prior year. Sales of avionics test equipment were up 16 percent as compared to the previous year period. Sales of fiber optics test equipment was up 11 percent while sales of test and measurement equipment (spectrum analyzers) were down 24 percent on a year to year comparison. 8 Gross margins were 40 percent compared to 37 percent for the prior year. The increased sales of higher margin products and improved manufacturing efficiencies have contributed to this improvement. Operating expenses increased as a percent of sales one percent compared to the previous year. Selling and administrative expenses remained unchanged as a percent of sales while engineering expenses as a percent of sales increased one percent. This increase is related to additional employees to support the Company's accelerated product development plan. Net other expense was $57,000 for the nine months ended period compared to $340,000 for the prior year period. 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 unchanged at 40 percent for both periods. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operations were $6,060,000 for the nine months ended March 31, 1997. This compares to cash flows provided by operations of $2,388,000 in the prior year period. This increase is related to an increase in accounts payable and accured liabilities of $2,051,000 for the nine months ended as compared to an increase of $282,000 in the prior year period. Working capital increased from $27,273,000 at June 30, 1996 to $31,698,000 at March 31, 1997. 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 March 31, 1997, the Company had purchased an aggregate of 128,884 shares under the program. The Company has available unsecured lines of credit for $15,000,000 which expire on June 30, 1997. At March 31, 1997, $4,340,000 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 March 31, 1997. 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: April 24, 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) EX-11 2 EXHIBIT 11 IFR SYSTEMS, INC. EXHIBIT (11.0) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, 1997 1996 1997 1996 ------ ------ ------ ------ (000'S OMITTED, EXCEPT PER SHARE DATA) PRIMARY: Average shares outstanding 5,443 5,481 5,446 5,487 Net effect of dilutive stock options-based on the treasury stock method using average market price 218 161 201 142 ------- ------- ------- ------- Totals 5,661 5,642 5,647 5,629 ------- ------- ------- ------- ------- ------- ------- ------- Net Income $ 1,726 $ 1,479 $ 4,552 $ 3,179 ------- ------- ------- ------- ------- ------- ------- ------- Per Share Amount $ 0.30 $ 0.26 $ 0.81 $ 0.56 ------- ------- ------- ------- ------- ------- ------- ------- FULLY DILUTED: Average shares outstanding 5,443 5,481 5,446 5,487 Net effect of dilutive stock options-based on the treasury stock method using the period- end market price, if greater than average market price 220 219 206 225 Assumed conversion of 10% convertible notes 4 16 4 16 ------- ------- ------- ------- Totals 5,667 5,716 5,656 5,728 ------- ------- ------- ------- ------- ------- ------- ------- Net Income $ 1,726 $ 1,479 $ 4,552 $ 3,179 Add 10% convertible note interest, net of federal income tax effect 1 2 4 6 ------- ------- ------- ------- Totals $ 1,727 $ 1,481 $ 4,556 $ 3,185 ------- ------- ------- ------- ------- ------- ------- ------- Per Share Amount $ 0.30 $ 0.26 $ 0.81 $ 0.56 ------- ------- ------- ------- ------- ------- ------- ------- EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FROM FORM 10-Q FOR MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 3,753 0 18,489 458 24,718 47,828 21,240 11,165 66,625 16,130 4,418 0 0 62 45,920 66,625 76,483 76,483 45,984 68,867 42 30 421 7,559 3,007 4,552 0 0 0 4,552 .81 .81
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