-----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, Iom2miTPs3CxDECej9Ya6EAEYRqK+/a0zDzPxUAZTwnBLUfcKG4Y4uv+1lgH/hkX Yg4wxKHtzx7ELI3Z3DOFuQ== 0000092769-96-000007.txt : 19960329 0000092769-96-000007.hdr.sgml : 19960329 ACCESSION NUMBER: 0000092769-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRUM CONTROL INC CENTRAL INDEX KEY: 0000092769 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 251196447 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08796 FILM NUMBER: 96539506 BUSINESS ADDRESS: STREET 1: 6000 WEST RIDGE ROAD CITY: ERIE STATE: PA ZIP: 16506 BUSINESS PHONE: 8148354000 MAIL ADDRESS: STREET 2: 6000 WEST RIDGE ROAD CITY: ERIE STATE: PA ZIP: 16506 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Thirteen Weeks Ended February 29, 1996 Commission File Number 0-8796 SPECTRUM CONTROL, INC. Exact name of registrant as specified in its charter Pennsylvania 25-1196447 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 6000 West Ridge Road, Erie, Pennsylvania 16506 (Address) (Zip Code) Registrant's telephone number, including area code (814) 835-4000 Not Applicable Former name, former address and former fiscal year, if changed since last report 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 period 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. CLASS NUMBER OF SHARES OUTSTANDING Common Stock, AS OF MARCH 15, 1996 no par value 10,733,900 SPECTRUM CONTROL, INC. AND SUBSIDIARIES INDEX PART I FINANCIAL INFORMATION Consolidated Condensed Balance Sheets -- February 29, 1996 and November 30, 1995 Consolidated Condensed Statements of Income - Thirteen Weeks Ended February 29, 1996 and February 28, 1995 Consolidated Condensed Statements of Cash Flows - Thirteen Weeks Ended February 29, 1996 and February 28, 1995 Notes to Consolidated Condensed Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Thousands of Dollars) February 29, November 30, 1996 1995 ASSETS CURRENT ASSETS Cash $ 309 $ 202 Accounts receivable, net of allowances 9,328 9,365 Inventories Finished goods 2,001 1,876 Work-in-process 6,365 6,075 Raw materials 3,796 3,371 Total inventories 12,162 11,322 Prepaid expenses and other current assets 446 226 Total current assets 22,245 21,115 PROPERTY, PLANT AND EQUIPMENT, at cost less accumulated depreciation of $21,538 in 1996 and $20,897 in 1995 16,982 16,752 OTHER ASSETS Intangible assets 1,077 1,201 Deferred income taxes 272 332 Deferred charges 90 98 Total other assets 1,439 1,631 TOTAL ASSETS $ 40,666 $ 39,498 The accompanying notes are an integral part of the financial statements. SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Thousands of Dollars) February 29, November 30, 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 5,114 $ 4,252 Accounts payable 3,171 2,646 Accrued salaries and wages 1,274 1,725 Accrued interest 29 51 Accrued federal and state income taxes 250 224 Accrued other expenses 679 405 Current portion of long-term debt 1,434 1,845 Total current liabilities 11,951 11,148 LONG-TERM DEBT 6,204 6,569 STOCKHOLDERS' EQUITY Common stock 13,545 13,493 Retained earnings 9,185 8,472 Foreign currency translation adjustment (219) (184) Total stockholders' equity 22,511 21,781 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 40,666 $ 39,498 The accompanying notes are an integral part of the financial statements. SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Thousands of Dollars Except Per Share Data) Thirteen Weeks Ended February 29, February 28, 1996 1995 Net Sales $ 13,869 $ 11,309 Cost of products sold 9,573 7,867 Selling, general and administrative expense 3,104 2,452 12,677 10,319 Income from operations 1,192 990 Interest expense 202 265 Income before provision for income taxes 990 725 Provision for income taxes 277 224 Net income $ 713 $ 501 Earnings per common share $ 0.07 $ 0.05 Dividends declared per common share - - Weighted average number of common shares outstanding 10,654,185 10,548,540 The accompanying notes are an integral part of the financial statements. SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Thousands of Dollars) Thirteen Weeks Ended February 29, February 28, 1996 1995 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 874 $ 1,431 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (967) (264) Net cash used in investing activities (967) (264) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds(repayment) of short- term debt 862 (54) Repayment of long-term debt (708) (1,076) Net proceeds from issuance of common stock 52 - Net cash provided by (used in) financing activities 206 (1,130) EFFECT OF EXCHANGE RATE CHANGES ON CASH (6) - NET INCREASE IN CASH 107 37 CASH, BEGINNING OF PERIOD 202 102 CASH, END OF PERIOD $ 309 $ 139 CASH PAID DURING THE PERIOD FOR: Interest $ 224 $ 306 Income taxes $ 213 33 The accompanying notes are an integral part of the financial statements. SPECTRUM CONTROL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FEBRUARY 29, 1996 The accompanying unaudited consolidated condensed 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 notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments which are normal, recurring and necessary to present fairly the results for the interim periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year. For further information, refer to the consolidated financial statements and notes thereto included in the Spectrum Control, Inc. and Subsidiaries annual report on Form 10-K for the fiscal year ended November 30, 1995. NOTE 1 - PRINCIPLES OF CONSOLIDATION The consolidated condensed financial statements include the accounts of Spectrum Control, Inc. and its subsidiaries (the Company), all of which are wholly-owned, except for Spectrum Polytronics, Inc. which is 96% owned. To facilitate timely reporting, the fiscal quarters of a foreign subsidiary are based upon a fiscal year which ends October 31. All significant intercompany accounts are eliminated upon consolidation. NOTE 2 - FOREIGN CURRENCY TRANSLATION The assets and liabilities of the foreign subsidiary are translated into U.S. dollars at current exchange rates. Revenue and expense accounts of these operations are translated at average exchange rates prevailing during the period. These translation adjustments are accumulated in a separate component of stockholders' equity. Foreign currency transaction gains and losses are included in determining net income for the period in which the exchange rate changes. NOTE 3 - EARNINGS PER COMMON SHARE Earnings per common share is computed based on the weighted average number of shares of common stock outstanding during the period of computation. Although the Company has issued potentially dilutive common stock equivalents in the form of stock options, the dilutive effect of these securities in the aggregate is less than three percent of earnings per common share. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales increased 23% during the period, with consolidated net sales of $13.9 million in 1996 and $11.3 million in 1995. The increase in sales of approximately $2.6 million reflects the continued strength of the telecommunications market and the Company's increased military market share. Overall, average selling prices remained relatively stable throughout the period. Gross margin was $4.3 million or 31% of sales in 1996, compared to $3.4 million or 30% of sales in 1995. The increase in gross margin principally reflects economies of scale realized with additional shipment volume. Selling, general and administrative expense, as a percentage of sales, was constant during the period with overall expenses of $3.1 million or 22% of sales in 1996 and $2.5 million or 22% of sales in 1995. As a result of greater sales volume, selling expense increased in 1996, amounting to $1.6 million in 1996 and $1.4 million in 1995. General and administrative expense increased during the period, primarily related to enhancements in the Company's information system and expenses associated with the implementation of the Company's Rapid Response program. Management believes that this program, which will be implemented throughout 1996 and 1997, will significantly reduce manufacturing lead times, decrease inventories, and provide greater responsiveness to customers. Interest expense decreased by $63,000 during the period, from $265,000 in 1995 to $202,000 in 1996. The decrease in interest expense reflects reduced bank indebtedness and lower short-term interest rates. During the first quarter of 1996, average short-term interest rates were approximately 8%, compared to 9% during the first quarter of 1995. During the first quarter of 1996, the Company's effective income tax rate was 28% compared to 31% during the same period last year. The decline in effective tax rate reflects decreases in the valuation allowance for deferred tax assets relating to certain foreign and state net operating loss carryforwards. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION The Company has a $6.0 million line of credit with PNC Bank of Erie, Pennsylvania (the "Bank"). Under the terms of the Line of Credit Agreement, borrowings and required repayments are based upon an asset formula involving accounts receivable and inventories. The revolving credit line is collateralized by substantially all of the Company's tangible and intangible property, with average interest rates on all borrowings of approximately 1/2% below the Bank's prevailing prime rate. At February 29, 1996, the Company had borrowed $5.1 million under this financing arrangement, with an additional borrowing availability of approximately $900,000 under the asset formula. The current Line of Credit Agreement expires on April 30, 1997. The Line of Credit Agreement contains certain negative covenants. These negative covenants require the Company to receive prior written approval from the Bank before the Company permits any additional encumbrances on its assets, guarantees or incurs any additional indebtedness, or merges or consolidates with any entity. In addition, the Line of Credit Agreement requires the Company to maintain certain minimum levels of tangible net worth and operating cash flow. At February 29, 1996, the Company was in compliance with all of these financial covenants. The Company's wholly-owned foreign subsidiary maintains unsecured Deutsche Mark lines of credit with German financial institutions aggregating $1.4 million (2.0 million DM). At February 29, 1996, the Company had no outstanding borrowings against these lines of credit. Borrowings under the lines of credit bear interest at rates approximating the prevailing prime rate and are payable upon demand. The Company's working capital and current ratio remained relatively unchanged during the period. At February 29, 1996, the Company had net working capital of $10.3 million compared to $10.0 million at November 30, 1995. Current assets were 1.86 times current liabilities at February 29, 1996 compared to 1.89 at November 30, 1995. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) As a result of increased inventories, net cash provided by operations decreased during the period. During the first thirteen weeks of 1996, net cash provided by operations amounted to $874,000, a decrease of $557,000 from the comparable period of 1995. Inventory levels increased by $865,000, principally as a result of additional sales demand and planned stocking increases. Management anticipates that the benefits of the Company's Rapid Response program, including improved inventory turnover rates, will begin to be realized late in 1996. During the first quarter of 1996, the Company's cash expenditures for property, plant and equipment amounted to approximately $1.0 million. These capital expenditures primarily related to manufacturing capacity expansion and improvements. During the first thirteen weeks of 1996, the Company also repaid $708,000 of long-term bank indebtedness. The Company expects that cash generated from operations and existing lines of credit will be sufficient to meet its operating requirements throughout 1996, including scheduled long-term debt repayment and planned capital expenditures. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. 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. SPECTRUM CONTROL, INC. (Registrant) Date March 26, 1996 By /s/ John P. Freeman John P. Freeman, Vice President and Chief Financial Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SPECTRUM CONTROL, INC. CONSOLIDATED CONDENSED BALANCE SHEET AT FEBRUARY 29, 1996, AND CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE THREE-MONTH PERIOD ENDED FEBRUARY 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFER- ENCE TO ITS FORM 10-Q FOR THE FIRST QUARTER ENDED FEBRUARY 29, 1996. 0000092769 SPECTRUM CONTROL INC 1,000 3-MOS NOV-30-1996 FEB-29-1996 309 0 9,328 0 12,162 22,245 38,520 21,538 40,666 11,951 0 13,545 0 0 8,966 40,666 13,869 13,869 9,573 9,573 3,104 0 202 990 277 713 0 0 0 713 .07 .07
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