-----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, D7WnBrdA+wK7akQK2EIXd98aeqNuOQPI9QBwtglIu1q54wq3ONaPHY3mP8Fv0h9T 5XiL4L/8YC9IDPzEw/KIIg== 0000092769-96-000011.txt : 19960627 0000092769-96-000011.hdr.sgml : 19960627 ACCESSION NUMBER: 0000092769-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960626 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: 96585657 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 UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Thirteen Weeks Ended May 31, 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 the filing requirements for at least 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 close of the period covered by this report. CLASS NUMBER OF SHARES OUTSTANDING AS OF JUNE 15, 1996 Common, no par value 10,755,900 SPECTRUM CONTROL, INC. AND SUBSIDIARIES INDEX Page No. PART I FINANCIAL INFORMATION Consolidated Condensed Balance Sheets -- May 31, 1996 and November 30, 1995 3-4 Consolidated Condensed Statements of Income - Thirteen Weeks Ended and Twenty-Six Weeks Ended May 31, 1996 and 1995 5 Consolidated Condensed Statements of Cash Flows - Thirteen Weeks Ended amd Twenty-Six Weeks Ended May 31, 1996 and 1995 6 Notes to Consolidated Condensed Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II OTHER INFORMATION 9 SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Thousands of Dollars) May 31, 1996 November 30, 1995 ASSETS CURRENT ASSETS Cash $ 262 $ 202 Accounts receivable, net of allowances 9,593 9,365 Inventories Finished goods 2,297 1,876 Work-in-process 6,672 6,075 Raw materials 4,365 3,371 Total inventories 13,334 11,322 Prepaid expenses and other current assets 582 226 Total current assets 23,771 21,115 PROPERTY, PLANT AND EQUIPMENT, at cost less accumulated depreciation of $22,173 in 1996 and $20,897 in 1995 17,365 16,752 OTHER ASSETS Intangible assets 960 1,201 Deferred income taxes 204 332 Deferred charges 88 98 Total other assets 1,252 1,631 TOTAL ASSETS $42,388 $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) May 31, 1996 November 30, 1995 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 5,368 $ 4,252 Accounts payable 4,355 2,646 Accrued salaries and wages 1,452 1,725 Accrued interest 65 51 Accrued federal and state income taxes 77 224 Accrued other expenses 638 405 Current portion of long-term debt 1,223 1,845 Total current liabilities 13,178 11,148 LONG-TERM DEBT 5,930 6,569 STOCKHOLDERS' EQUITY Common stock 13,587 13,493 Retained earnings 9,997 8,472 Foreign currency translation adjustment (304) (184) Total stockholders' equity $23,280 21,781 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $42,388 $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 Twenty-Six Weeks Ended May 31,1996 May 31,1995 May 31,1996 May 31,1995 Net sales $13,642 $12,081 $27,511 $23,390 Cost of products sold 9,179 8,274 18,752 16,141 Selling, general and administrative expense 3,129 2,636 6,233 5,088 12,308 10,910 24,985 21,229 Income from operations 1,334 1,171 2,526 2,161 Interest expense 206 250 408 515 Income before provision for income taxes 1,128 921 2,118 1,646 Provision for income taxes 316 213 593 437 Net income $ 812 $ 708 $ 1,525 $ 1,209 Earnings per common share $0.08 $0.07 $0.14 $0.12 Dividends declared per common share -- -- -- -- Weighted average number of common shares outstanding 10,738,270 10,555,624 10,696,995 10,552,081 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) Twenty-Six Weeks Ended May 31, 1996 1995 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,035 $2,996 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (2,094) (957) Net cash used in investing activities (2,094) (957) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (repayment) of short-term debt 1,153 (218) Repayment of long-term debt (1,123) (1,833) Net proceeds from issuance of common stock 94 24 Net cash provided by (used in) financing activities 124 (2,027) EFFECT OF EXCHANGE RATE CHANGES ON CASH (5) 6 NET INCREASE IN CASH 60 18 CASH, BEGINNING OF PERIOD 202 102 CASH, END OF PERIOD $ 262 $ 120 CASH PAID DURING THE PERIOD FOR Interest $ 394 $ 573 Income taxes $ 715 $ 205 The accompanying notes are an integral part of the financial statements.
SPECTRUM CONTROL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MAY 31, 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 SECOND QUARTER 1996 VERSUS SECOND QUARTER 1995 Results of Operations Net sales increased 13% during the period, with consolidated net sales of $13.6 million in 1996 and $12.1 million in 1995. The increase in sales reflects additional shipment volume in several of the Company's electromagnetic interference ("EMI") product offerings, particularly EMI filtered connectors and EMI filter plates used by customers in the telecommunication industry. Gross margin was $4.5 million or 33% of sales in 1996 compared to $3.8 million or 32% of sales in 1995. The increase in gross margin percentage principally reflects economies of scale realized with additional shipment volume. As a result of greater sales volume, selling expense increased to $1.7 million or 12% of sales in 1996, compared to $1.5 million or 12% of sales in 1995. General and administrative expense increased $322,000 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. The Company expects to incur these additional general and administrative expenses throughout 1996. Twenty-Six Weeks 1996 Versus Twenty-Six Weeks 1995 Results of Operations Consolidated 1996 net sales increased by $4.1 million or 18% from the first half of 1995. The increase in sales reflects the continued growth of the Company's telecommunications business. Overall, average selling prices remained relatively stable throughout the period. During the first half of 1996, gross margin was $8.8 million or 32% of sales, compared to $7.2 million or 31% of sales for the first half of 1995. Apart from additional sales volume, the increase in gross margin primarily reflects changes in sales mix and reductions in certain manufacturing overhead costs. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Selling, general and administrative expense increased by $1.1 million in the first half of 1996 and was 23% of net sales compared to 22% in 1995. As a percentage of sales, selling expense remained constant at 12% or $3.3 million in 1996 and $2.9 million in 1995. As discussed above, the Company has incurred additional general and administrative expense in 1996 for improvements to its business information system and initial implementation of the Company's Rapid Response program. Management believes that the Rapid Response 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 $107,000 during the period, from $515,000 in 1995 to $408,000 in 1996. The decrease in interest expense reflects reduced bank indebtedness and lower short-term interest rates. During the first half of 1996, average short- term interest rates were 8%, compared to 9% during the same period in 1995. The Company's effective income tax rate remained relatively constant throughout the period at 28% for the first half of 1996 and 27% for the comparable period of 1995. 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 payments 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 May 31,1996, the Company had borrowed $4.9 million under this financing arrangement, with an additional borrowing availability of approximately $1.1 million under the asset formula. The current Line of Credit Agreement expires on April 30, 1997. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company's wholly-owned foreign subsidiary maintains unsecured Deutsche Mark lines of credit with German financial institutions aggregating $1.3 million (2.0 million DM). At May 31, 1996, the Company had borrowed $480,000 (734,000 DM) 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 May 31, 1996, the Company had net working capital of $10.6 million compared to $10.0 million at November 30, 1995. Current assets were 1.80 times current liabilities at May 31, 1996, compared to 1.89 at November 30, 1995. As a result of increased inventories, net cash provided by operations decreased during the period. During the first half of 1996,net cash provided by operations amounted to approximately $2.0 million, a decrease of $961,000 from the comparable period of 1995. Inventory levels increased by $2.1 million, 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 half of 1996, The Company's cash expenditures for property, plant and equipment amounted to approximately $2.1 million. These capital expenditures primarily related to manufacturing capacity expansion and improvements. During the first twenty-six weeks of 1996, the Company also repaid $1.1 million 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 (b) 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 June 25, 1996 By /s/John P. Freeman John P. Freeman, Vice President and Chief Financial Officer EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SPECTRUM CONTROL, INC. CONSOLIDATED CONDENSED BALANCE SHEET AT MAY 31, 1996 AND CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ITS FORM 10-Q FOR THE SECOND QUARTER ENDED MAY 31, 1996 1,000 6-MOS NOV-30-1996 MAY-31-1996 262 0 9,593 0 13,334 23,771 39,538 22,173 42,388 13,178 0 13,587 0 0 9,693 42,388 27,511 27,511 18,752 18,752 6,233 0 408 2,118 593 1,525 0 0 0 1,525 0.14 0.14
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