-----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, IpccYYNjaWljuPaqCm7v0ACuo53LXNGNJYQBd6GPahmGlH0lLz4y9tEfifhTcdUM oeDTCF7gcu5OuuvQMq1olg== 0000876884-97-000014.txt : 19970815 0000876884-97-000014.hdr.sgml : 19970815 ACCESSION NUMBER: 0000876884-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTWOOD CORP/NV/ CENTRAL INDEX KEY: 0000876884 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 870430944 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19381 FILM NUMBER: 97662615 BUSINESS ADDRESS: STREET 1: 5314 SOUTH YALE AVENUE STREET 2: SUITE 1100 CITY: TULSA STATE: OK ZIP: 74135 BUSINESS PHONE: (918) 524-0002 MAIL ADDRESS: STREET 1: PO BOX 35493 CITY: TULSA STATE: OK ZIP: 74153 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 1997 or [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ___________ to ____________ Commission File Number: 0-19381 WESTWOOD CORPORATION (Exact name of registrant as specified in its charter) Nevada 87-0430944 - ------------------------- ------------------- (State or other juris- (I.R.S. Employer diction of incorporation) Identification No.) 5314 South Yale, Suite 1100, Tulsa, Oklahoma 74135 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (918)524-0002 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 and 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. [ X ] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Outstanding at August 14, 1997 - ----------------------------- ------------------------------ Common Stock, $.003 par value 6,264,933 INDEX ----- Page No. -------- Part I Financial Information: Consolidated Balance Sheets as of June 30, 1997 and March 31, 1997 1 Consolidated Statements of Income for the First Quarter ended June 30, 1997 and 1996 3 Consolidated Statements of Cash Flows for the nine months ended June 30, 1997, and 1996 4 Notes to Consolidated Financial Statements 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II Other Information: Item 1. Legal Proceedings (None) Item 2. Changes in Securities (None) Item 3. Defaults Upon Senior Securities (None) Item 4. Submission of Matters to a Vote of Security Holders (None) Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 9 PART I - FINANCIAL INFORMATION WESTWOOD CORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands)
June 30 March 31 1997 1997 ------------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 287 $ 1,165 Accounts receivable (including retainage receivable of $625,000 at June 30, 1997, and $767,000 at March 31, 1997) net of allowance for doubtful accounts 4,656 4,485 Income Tax Receivable 228 - Note receivable - Officer 52 51 Costs and estimated earnings in excess of billings on uncompleted contracts 1,366 332 Inventories: Raw materials and purchased parts 5,261 4,605 Work-in-process 3,439 1,210 ------ ------ 8,700 5,815 Prepaid expenses 208 220 Current deferred income taxes 335 553 ------ ------ Total current assets 15,832 12,621 Plant and equipment, at cost: Leasehold improvements 1,630 768 Machinery and equipment 4,884 3,733 Patterns and tools 359 383 ------ ------ 6,873 4,884 Accumulated depreciation (3,156) (2,588) ------ ------ 3,717 2,296 Other assets: Drawings (net) 14 19 Long-term accounts receivable, retainage 973 980 Deferred charges & other 440 240 Goodwill (net) 3,281 - ------ ------ 4,708 1,239 ------ ------ Total assets $24,257 $16,156 ====== ====== See accompanying notes.
1 WESTWOOD CORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands)
June 30 March 31 1997 1997 ------------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,451 $ 886 Income taxes payable - 612 Accrued liabilities 1,387 671 Accrued rent 81 81 Billings in excess of costs and estimated earnings on uncompleted contracts 1,633 1,087 Current portion of long-term debt: Payable to bank 2,700 - Note payable 47 47 ------ ------ 2,747 47 ------ ------ Total current liabilities 8,299 3,384 Accrued rent 283 325 Long-term debt: Payable to bank 2,000 - Note payable 588 600 Installments payable 1,263 - ------ ------ 3,851 600 ------ ------ Deferred income taxes 363 372 Stockholders' equity: Preferred stock, 5,000,000 shares authorized, $.001 par value, no shares issued and outstanding - - Common stock, 20,000,000 shares authorized, $.003 par value, 6,264,933 and 6,139,933 shares issued and outstanding at June 30, 1997, and March 31, 1997, respectively 19 18 Capital in excess of par value 4,806 4,627 Retained earnings 6,636 6,830 ------ ------ Total stockholders' equity 11,461 11,475 ------ ------ Total liabilities and stockholders' equity $24,257 $16,156 ====== ====== See accompanying notes.
2 WESTWOOD CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In Thousands)
First Quarter Ended June 30 1997 1996 ------------------- (Unaudited) Sales $6,574 $7,789 Cost of sales 5,393 6,108 ----- ----- Gross profit 1,181 1,681 Operating expenses: Selling, general & administrative 1,140 1,097 Special charge (See Note D) 210 - ----- ----- 1,350 1,097 Operating income (loss) (169) 584 Other income (expense): Interest expense (66) (31) Other income 20 6 ----- ----- (46) (25) ----- ----- Income (loss) before taxes (215) 559 Provision (benefit) for income taxes (82) 212 ----- ----- Net income (loss) $ (133) $ 347 ===== ===== Earnings (loss) per share (Note B) $(.021) $ .056 Cash dividends per share $ .010 $ .009 See accompanying notes.
3 WESTWOOD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
Three Months Ended June 30 1997 1996 ------------------ (Unaudited) OPERATING ACTIVITIES Net income (loss) $ (133) $ 347 Adjustments to reconcile net income (loss) to cash used in operations: Depreciation and amortization 184 144 Amortization of Goodwill 19 - Deferred income taxes 209 (10) Cash flows impacted by changes in: Accounts receivable 1,351 (2,661) Costs and estimated earnings in excess of billings on uncompleted contracts (773) 588 Inventories (652) (1,604) Prepaid expenses 24 (233) Long-term accounts receivable, retainage 7 240 Deferred charges (172) (56) Accounts payable 586 66 Accrued liabilities (196) (33) Billings in excess of costs and estimated earnings on uncompleted contracts 340 1,319 Income taxes payable/receivable (783) (73) Other (102) (2) ------ ------ Net cash used in operating activities (91) (1,968) INVESTING ACTIVITIES Purchase of plant and equipment (44) (86) Acquisition of Roflan - (990) Acquisition of TANO (2,000) - Acquisition of MCII (500) - ------ ------ Net cash used in investing activities (2,544) (1,076) FINANCING ACTIVITIES Principal payments on debt (2,882) (1,002) Borrowings on debt 4,700 3,025 Assumed debt to insurance company - 647 Dividends paid (61) (56) ------ ------ Net cash provided by financing activities 1,757 2,614 ------ ------ Net decrease in cash (878) (430) Cash at beginning of period 1,165 598 ------ ------ Cash at end of period $ 87 $ 168 ===== ====== See accompanying notes.
4 Note A - Basis of Presentation - ------------------------------ The accompanying unaudited consolidated financial statements include Westwood wholly-owned subsidiaries NMP Corp., Roflan Associates, Inc. (and its wholly-owned subsidiary Peter Gray Corporation), Rox Corp, TANO Corp., and MCII Electric Company, Inc. (See Note C). These 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. Management believes all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the fiscal first quarter ended June 30, 1997 may not necessarily be indicative of the results that may be expected for the year ended March 31, 1998. For further information, refer to the consolidated financial statements and footnotes included in Westwood Corporation's annual report on Form 10-K for the year ended March 31, 1997, and Forms 8-K dated May 13, 1997 and May 28, 1997. Note B - Common Stock - --------------------- The financial statements, including earnings and dividend per share calculations, reflect the impact of 10% stock dividends approved by the Board of Directors on November 7, 1996, as well as the issuance of 125,000 shares in connection with the acquisition of MCII Electric Company, Inc. on May 28, 1997. As of June 30, 1997, stock options issued under directors and employees plans were for 645,900 shares, and no options have been exercised or canceled. Note C - Acquisitions - --------------------- On May 13, 1997, the Company purchased the assets and liabilities of TANO Automation, Inc.'s Marine Automation Control Division ("TANO") for a total purchase price of $2,500,000. TANO designs, manufactures, sells and services electrical automation and control systems for both military and commercial ships and machinery plant automation and control systems. The transaction involved the payment of $2,000,000 in cash plus the signing of a 60-day noninterest bearing note of $500,000. The transaction is subject to certain purchase price adjustments which could potentially reduce the final purchase price. A $1,800,000 draw on NMP's revolving credit facility plus $654,000 in existing 5 cash was advanced to the Company for the purchase of TANO and for the payment of certain of the liabilities assumed. The transaction was accounted for as a purchase and the purchase price and related direct expenses associated with the acquisition were allocated on a preliminary basis to the fair value of the assets purchased and liabilities assumed. These costs exceeded the fair value of the net assets acquired by $1,500,000, and are being amortized over a fifteen-year period. The results of operations have been included from the date of acquisition. On May 28, 1997, the Company purchased 100% of the issued and outstanding common stock of MCII Electric Company, Inc. ("MCII") for $2,000,000 in cash plus 125,000 shares of the Company's common stock. MCII designs and manufactures mobile generator sets for both military and commercial applications. The transaction involved the payment of $500,000 on May 28, 1997 plus three noninterest-bearing annual installments of $500,000 each through May 28, 2000. The transaction was funded by a $2,700,000 draw on NMP's amended revolving credit facility to purchase MCII and pay certain of the liabilities assumed. In accordance with purchase accounting, the purchase price and related direct expenses associated with the acquisition were allocated on a preliminary basis to the fair value of the assets purchased and liabilities assumed. These costs exceeded the fair value of the net assets acquired by $1,800,000 and are being amortized over a fifteen-year period. The results of operations have been included from the date of acquisition. Note D - Special Charge - ----------------------- During the first quarter ended June 30, 1997, the Company implemented plans to reorganize and relocate certain manufacturing and engineering operations in Tulsa, as well as relocate Roflan's manufacturing operations from Massachusetts to Tulsa. A special charge of $210,000 was recorded for the direct costs relating to this relocation. 6 WESTWOOD CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION June 30, 1997 GENERAL Results of Operations - --------------------- The first quarter ended June 30, 1997 saw a number of major changes for Westwood Corporation. The Company completed the acquisitions of TANO and MCII, and completed a major relocation of certain manufacturing operations. These changes were in line with the Company's plans to diversify and improve long-term profitability. The Company had been dependent upon long-term switchgear contracts relating to major new shipbuilding programs for the bulk of its sales revenues, and the recent acquisitions are major steps in a redirection into potential growth areas. The Company anticipates that the full positive effects of the recent acquisitions, as well as cost savings from the recent manufacturing relocations, will begin to be realized in the third and fourth quarters of fiscal 1998. First Quarter Ended June 30, 1997 and 1996 - ------------------------------------------ Consolidated sales for the fiscal first quarter ended June 30, 1997 were $6,574,000, a 15.6% reduction compared to the same quarter last year. Operations for the quarter lost $169,000, compared to an operating income of $584,000 for the same period last year. For the quarter, the Company incurred a net loss of $133,000, compared to earning net income of $347,000 for the same quarter last year. Lower sales revenues were primarily a result of the winding down of the major DDG-51 contract, as well as the negative impact on production and shipments as the result of the relocation of certain manufacturing operations. This relocation had a significant impact on marine hardware production in May and June, and the Company recorded a special charge of $210,000 for costs associated with the relocation. Also contributing to lower operating income during the quarter were lower sales volume and increased scrap costs at the Peter Gray Corporation. Of the two acquisitions completed during the quarter, TANO had a positive impact on operations. MCII had a negative impact on operations during the quarter due to the development and 7 production stages of its major contracts, as well as the requirement for major contract reviews and systems improvements throughout MCII's operations. Liquidity and Capital Resources - ------------------------------- Operating activities for the fiscal first quarter ended June 30, 1997 resulted in net cash used of $91,000. During this period, cash was used in a net loss of $133,000, with other major cash adjustments and sources being depreciation and amortization of $184,000, reduction in accounts receivable of $1,351,000, increases in accounts payable of $586,000, and increases in billings in excess of costs and estimated earnings of $340,000. Major uses of cash were increases in costs and estimated earnings in excess of billings of $773,000, increases in inventories of $652,000, increases in deferred charges of $172,000, reductions in accrued liabilities of $196,000, and change in income taxes payable/receivable of $783,000. Lower sales volume was the primary factor in the above changes, except for the changes in deferred charges and accrued liabilities. The acquisitions of TANO and MCII were the significant investing activities during the quarter. To facilitate these acquisitions, the Company utilized available cash funds of $654.000, and borrowed a total of $4,500,000, of which $2,500,000 was under an amended revolving credit agreement, and $2,000,000 under a short- term loan. Subsequently, through June 30, 1997, the Company borrowed an additional $200,000 under the revolving credit agreement. As a result of these acquisitions and related debt, the Company's debt to equity ratio changed from .4:1 at March 31, 1997 to 1.1:1 at June 30, 1997. A new banking agreement now in process of completion provides for a $4,000,000 revolving line of credit and a $2,500,000 5-year term loan, which will include the retirement of the $635,000 term loan of the Peter Gray Company. This agreement is expected to be finalized by the end of August. The Company believes that this increased borrowing capacity, along with operating cash flows, will be adequate for future operations. The discussions in this section contain forward looking statements that involve a number of risks and uncertainties. Among factors that would cause actual results to differ materially are the following: business conditions in the military and commercial industries served by the Company, conditions in the general economy; changes in customer order patterns including timing of delivery; risk of non-payment customer receivables; competitive factors; and other risk factors listed from time to time in the Company's reports with the Securities and Exchange Commission. 8 PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION Regular Quarterly Dividend - -------------------------- The regular quarterly dividend of $.01 per common share has been declared to stockholders of record on September 1, 1997, and payable on September 22, 1997. ITEM 6. REPORTS ON FORM 8-K On June 5, 1997, the Company filed a Form 8-K to disclose the acquisition of the Marine Automation Control Division of TANO Automation, Inc., a Louisiana corporation, by the Company's newly formed wholly-owned Louisiana subsidiary. The June 5, 1997 Form 8-K also included the TANO Agreement of Purchase and Sale of Assets as Exhibit 10.11. On June 12, 1997, the Company filed a Form 8-K to disclose the acquisition of 100% of the issued and outstanding shares of common stock of MCII Electric Company, Inc., a Texas corporation. The June 12, 1997 Form 8-K included the MCII Electric Company, Inc.'s Stock Purchase Agreement as Exhibit 10.12. The June 12, 1997 Form 8-K, the Company also disclosed the appointment of John H. Williams, of Tulsa, Oklahoma, to the Company's Board of Directors. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DATE: August 14, 1997 WESTWOOD CORPORATION By: /s/ Ernest H. McKee ---------------------------- Ernest H. McKee, Director President and Chief Executive Officer By: /s/ Paul R. Carolus ---------------------------- Paul R. Carolus, Director Secretary/Treasurer and Chief Financial Officer 9 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENT OF INCOME, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 287 0 4,656 0 8,700 15,832 6,873 3,156 24,257 8,299 0 0 0 19 11,442 24,257 6,574 6,574 5,393 6,723 0 0 66 (215) (82) (133) 0 0 0 (133) (.021) 0
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