-----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, FnBn1c6939xUiYdKLnaacCVBsbbjehNHaAfFcVIKSkUuN8geIqHuYi9IduTirHd2 85zMhyH9PsPwaKrDqva6yQ== 0001047469-97-002550.txt : 19971105 0001047469-97-002550.hdr.sgml : 19971105 ACCESSION NUMBER: 0001047469-97-002550 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971104 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: SEC FILE NUMBER: 000-14224 FILM NUMBER: 97707096 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 September 30, 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 5,474,034 shares of common stock, par value $.01 per share, of the Registrant outstanding as of October 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 September 30, 1997 and June 30, 1997 3 Condensed Consolidated Statements of Income for the three months ended September 30, 1997 and 1996. 5 Condensed Consolidated Statements of Cash Flow for the three months ended September 30, 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 7 PART II -- OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K 9 SIGNATURES 10 2 PART I -- FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS IFR SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, JUNE 30, 1997 1997 ------------- -------- (UNAUDITED) (NOTE) ASSETS (000'S OMITTED) CURRENT ASSETS Cash and cash equivalents $ 3,335 $ 2,379 Accounts receivable, less $484 and $500 allowance for doubtful accounts, respectively 19,444 19,707 Inventories: Finished products 8,803 8,744 Work in process 6,137 6,517 Materials 7,558 7,144 ------------ -------- 22,498 22,405 Prepaid expenses and sundry 337 99 Deferred income taxes 2,191 2,191 ------------ -------- TOTAL CURRENT ASSETS 47,805 46,781 PROPERTY AND EQUIPMENT Property and equipment 18,821 18,231 Allowances for depreciation (deduction) (10,628) (10,053) ------------ -------- 8,193 8,178 PROPERTY UNDER CAPITAL LEASE Building and machinery 4,102 3,761 Allowances for depreciation (deduction) (1,342) (1,278) ------------ -------- 2,760 2,483 OTHER ASSETS Cost in excess of net assets acquired, less amortization of $2,456 and $2,329, respectively 7,978 8,177 Patents, trademarks and other intangibles, less amortization of $1,807 and $1,782, respectively - 25 Other 142 186 ------------ -------- 8,120 8,388 ------------ -------- $ 66,878 $ 65,830 ============ ======== Note: The balance sheet at June 30, 1997 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 SEPTEMBER 30, JUNE 30, 1997 1997 ------------ -------- (UNAUDITED) (NOTE) (000'S OMITTED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term bank borrowings (Note 2) $ 45 $ 330 Accounts payable 3,451 3,649 Accrued compensation and payroll taxes 3,925 5,634 Other liabilities and accrued expenses 2,614 2,222 Current maturity of capital lease obligations 175 175 Federal and state income taxes and local taxes 2,257 1,256 ------------ -------- TOTAL CURRENT LIABILITIES 12,467 13,266 CAPITAL LEASE OBLIGATIONS 3,765 3,765 DEFERRED INCOME TAXES 645 645 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 6,338 6,400 Cost of common stock in treasury---707,466 and 753,343 shares, respectively (deduction) (7,561) (8,040) Cumulative translation adjustment (114) 58 Retained earnings 51,276 49,674 ------------ -------- 50,001 48,154 ------------ -------- $ 66,878 $ 65,830 ============ ========== See notes to condensed consolidated financial statements. 4 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, ---------------------- 1997 1996 (000'S OMITTED, EXCEPT PER SHARE DATA) SALES $ 25,521 $ 23,258 COST OF SALES 14,584 14,394 -------- --------- GROSS PROFIT 10,937 8,864 OPERATING EXPENSES Selling 2,718 2,532 Administrative 1,899 1,954 Engineering 3,141 2,371 -------- --------- 7,758 6,857 -------- --------- OPERATING INCOME 3,179 2,007 OTHER EXPENSE 47 5 -------- --------- INCOME BEFORE INCOME TAXES 3,132 2,002 INCOME TAXES 1,257 792 -------- --------- NET INCOME $ 1,875 $ 1,210 ======== ========= NET INCOME PER COMMON SHARE $ 0.33 $ 0.21 ======== ========= AVERAGE COMMON SHARES OUTSTANDING 5,708 5,633 ======== ========= See notes to condensed consolidated financial statements. 5 IFR SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 ----------- --------- (000'S OMITTED) OPERATING ACTIVITIES Net income $ 1,875 $ 1,210 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 657 541 Amortization of intangibles 152 187 Changes in operating assets and liabilities: Accounts receivable 263 2,720 Inventories (93) (1,439) Other current assets (238) (93) Accounts payable and accrued liabilities (1,515) (439) Other current liabilities 1,001 705 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,102 3,392 INVESTING ACTIVITIES Purchases of property and equipment (1,006) (540) Sundry 44 8 ------- ------- NET CASH USED IN INVESTING ACTIVITIES (962) (532) FINANCING ACTIVITIES Purchases of capital stock for treasury (24) (2,157) Principal payment on capital lease obligations - (84) Principal payment on long-term debt - (5) Principal payments on short-term bank borrowings (1,435) (7,930) Proceeds from short-term bank borrowings 1,150 7,645 Proceeds from exercise of common stock options 441 14 Payment of dividends (273) - ------- ------- NET CASH USED IN FINANCING ACTIVITIES (141) (2,517) EFFECT OF EXCHANGE RATE CHANGES ON CASH (43) 40 ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 956 383 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,379 266 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,335 $ 649 ===== ======= See notes to condensed consolidated financial statements. 6 IFR SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 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 month period ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending June 30, 1998. 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, 1997. 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 September 30, 1997 the effective interest rate charged by the bank was 7.75 percent and the Company had unused lines of credit aggregating $14,955,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales for the first quarter ended September 30, 1997 were $25,521,000 compared to $23,258,000 in the first quarter of the prior year. This represents an increase of 9.7% or $2,263,000 and was primarily due to higher sales of fiber optics test equipment. Sales in test and measurement, avionics test equipment and communication test equipment were essentially unchanged from the prior year quarter. 7 Gross margins increased to 42.9% for the current year quarter as compared to 38.1% in the previous year quarter. This increase is due to a higher mix of fiber optics test equipment, completion of the U.S. Army SINCGARS contract in March 1997 and introduction of higher margin commercial communications test equipment. Operating expenses increased one percent to 30.4% of sales for the current quarter. Engineering expenses increased two percent in support of the development of new test instruments for the fiber optics and emerging wireless digital telecommunications markets. Administrative expenses decreased one percent as the high recruiting costs incurred in the previous year quarter returned to normal levels. Selling expenses remained unchanged as a percent of sales. Other expenses increased $42,000 compared to the prior year quarter as the result of translation losses which were partially offset by higher interest income and lower interest expense. The estimated effective income tax rate was approximately 40% for both the current and previous year period. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operations were $2,102,000 and $3,392,000 for the three months period ended September 30, 1997 and 1996, respectively. The decrease in funds provided was due to a decrease in accounts receivable of $263,000 for the current quarter compared to a decrease of $2,720,000 in the prior year quarter. Also contributing to the decrease in funds provided was a decrease in accounts payable and accrued liabilities of $1,515,000 compared to a decrease of $439,000 in the prior year quarter. Partially offsetting these items was an increase in inventory of $93,000 compared to an increase of $1,439,000 in the prior year quarter and higher net income of $1,875,000 compared to $1,210,000 in the prior year quarter. Cash flows used in financing activities were $141,000 and $2,517,000 for the three months period ended September 30, 1997 and 1996, respectively. The decrease in funds used is due primarily to lower discretionary purchases of treasury stock. On August 14, 1997, the Board of Directors authorized a $.05 per share dividend which was paid on September 12, 1997. The Board of Directors will review quarterly the appropriateness of future dividend payments taking into consideration numerous factors including the Company's cash requirements and performance. Working capital increased from $33,515,000 at June 30, 1997 to $35,338,000 at September 30, 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 8 September 30, 1997, the Company had purchased an aggregate of 149,000 shares under the program. The Company has available unsecured lines of credit for $15,000,000 which expire on June 30, 1998. At September 30, 1997, $45,000 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, 1998. SAFE HARBOR STATEMENTS The statements which are not actual reported financial results or historical facts contained in this Management's Discussions and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve certain risks and uncertainties. These risks and uncertainties include, but are not limited to, product demand and market acceptance, competition and pricing, product development, product mix, capacity and supply constraints, timing of orders and shipments, availability of capital resources, general business and economic conditions, regulatory changes and other risks described in the Company's most recent Form 10-K and Annual Report as of June 30, 1997. 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 (b) No Form 8-K was filed during the quarter ended September 30, 1997. 9 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: October 20, 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) 10 EX-11.0 2 EXHIBIT 11.0 IFR SYSTEMS, INC. EXHIBIT (11.0) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED SEPTEMBER 30, 1997 1996 ---- ----- (000'S OMITTED, EXCEPT PER SHARE DATA) PRIMARY: Average shares outstanding 5,445 5,459 Net effect of dilutive stock options-based on the treasury stock method using average market price 263 174 -------- -------- Totals 5,708 5,633 ======== ======== Net Income $ 1,875 $ 1,210 ======== ======== Per Share Amount $ 0.33 $ 0.21 ======== ======== FULLY DILUTED: Average shares outstanding 5,445 5,459 Net effect of dilutive stock options-based on the treasury stock method using the period- end market price, if greater than average market price 348 227 Assumed conversion of 10% convertible notes - 4 ----- ----- Totals 5,793 5,690 ===== ===== Net Income $ 1,875 $ 1,210 Add 10% convertible note interest, net of federal income tax effect - 1 ----- ----- Totals $ 1,875 $ 1,211 ===== ====== Per Share Amount $ 0.32 $ 0.21 ===== ====== EX-27 3 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF INCOME IN THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 3335 0 19928 484 22498 47805 22923 11970 66878 12467 3940 0 0 62 49939 66878 25521 25521 14584 14584 7758 0 75 3132 1257 1875 0 0 0 1875 0.33 0.32
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