-----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, GEL1tRcmtG2Fkp2XX23cgjV3C6l51j34MUigQMa4SkzdsLKICelPkW7Wgd97x9V9 4/pSPAH0rPoommppq6+Yfg== 0000092769-97-000008.txt : 19970326 0000092769-97-000008.hdr.sgml : 19970326 ACCESSION NUMBER: 0000092769-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRUM CONTROL INC CENTRAL INDEX KEY: 0000092769 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] 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: 97562151 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 February 28, 1997 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 latest practical date. Class Number of Shares Outstanding as of March 15, 1997 Common, no par value 10,774,233 SPECTRUM CONTROL, INC. AND SUBSIDIARIES INDEX PAGE NO. PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Condensed Balance Sheets -- February 28, 1997 and November 30, 1996 Consolidated Condensed Statements of Income -- Thirteen Weeks Ended February 28, 1997 and February 29, 1996 Consolidated Condensed Statements of Cash Flows -- Thirteen Weeks Ended February 28, 1997 and February 29, 1996 Notes to Consolidated Condensed Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signature SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS Dollar Amounts in Thousands (UNAUDITED)
Feb. 28, 1997 Nov. 30, 1996 ASSETS CURRENT ASSETS Cash $ 408 $ 413 Accounts receivable, net of allowances 9,057 10,202 Inventories Finished goods 2,651 2,631 Work-in-process 5,043 5,549 Raw materials 4,663 3,897 Total inventories 12,357 12,077 Prepaid expenses and other current assets 401 303 Total current assets 22,223 22,995 PROPERTY, PLANT AND EQUIPMENT, at cost,less accumulated depreciation of $23,423 in 1997 and $22,731 in 1996 15,880 16,017 OTHER ASSETS Intangible assets 478 524 Debt issuance costs 185 191 Deferred income taxes 281 281 Deferred charges 142 205 Total other assets 1,086 1,201 TOTAL ASSETS $39,189 $40,213 The accompanying notes are an integral part of the financial statements.
SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS Dollar Amounts in Thousands (UNAUDITED)
Feb. 28, 1997 Nov.30, 1996 LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES Short-term debt $ 2,044 $ 3,278 Accounts payable 2,978 3,038 Accrued salaries and wages 1,020 1,308 Accrued interest 37 48 Accrued federal and state income taxes 152 72 Accrued other expenses 428 325 Current portion of long-term debt 2,185 2,392 Total current liabilities 8,844 10,461 LONG-TERM DEBT 4,040 4,072 DEFERRED INCOME TAXES 328 301 STOCKHOLDERS' EQUITY Common stock, no par value, authorized 25,000,000 shares, issued and outstanding 10,774,223 shares in 1997 and 1996 13,755 13,755 Retained earnings 12,544 11,890 Foreign currency translation adjustment (322) (266) Total stockholders' equity 25,977 25,379 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $39,189 $40,213 The accompanying notes are an integral part of the financial statements.
SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME Dollar Amounts in Thousands Except Per Share Data (UNAUDITED)
Thirteen Weeks Ended Feb. 28, 1997 Feb. 29, 1996 Net sales $12,712 $13,869 Cost of products sold 8,998 9,573 Selling, general and administrative expense 2,676 3,104 11,674 12,677 Income from operations 1,038 1,192 Interest expense 130 202 Income before provision for income taxes 908 990 Provision for income taxes 254 277 Net income $ 654 $ 713 Earnings per common share $ 0.06 $ 0.07 Dividends declared per common share $ -- $ -- Weighted average number of common shares outstanding 10,774,233 10,654,185 The accompanying notes are an integral part of the financial statements.
SPECTRUM CONTROL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Dollar Amounts in Thousands (UNAUDITED)
Thirteen Weeks Ended Feb. 28, 1997 Feb. 29, 1996 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,873 $ 874 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (587) (967) Net cash used in investing activities (587) (967) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds(repayment) of short-term debt (1,203) 862 Repayment of long-term debt (104) (708) Net proceeds from issuance of common stock -- 52 Net cash provided by (used in) financing activities (1,307) 206 EFFECT OF EXCHANGE RATE CHANGES ON CASH 16 (6) NET INCREASE(DECREASE) IN CASH (5) 107 CASH, BEGINNING OF PERIOD 413 202 CASH, END OF PERIOD $ 408 $ 309 CASH PAID DURING THE PERIOD FOR: Interest $ 141 $ 224 Income taxes 18 213 The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FEBRUARY 28, 1997 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, 1996. 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. Results of Operations Net sales decreased 8% during the period, with consolidated net sales of $12.7 million in 1997 and $13.9 million in 1996. Customer orders during the fourth quarter of 1996 were soft, amounting to $11.8 million. This softening of customer orders, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS particularly from telecommunication customers, resulted in lower shipments for the first quarter of fiscal 1997. Customer orders received during the first thirteen weeks of fiscal 1997, however, increased to $14.1 million. As a result, Management believes shipment levels will increase during the second quarter of 1997. Gross margin was $3.7 million or 29% of sales in 1997, compared to $4.3 million or 31% of sales in 1996. The decrease in gross margin primarily reflects the impact of fixed manufacturing overhead and lower shipment levels. As a percentage of sales, selling expense remained constant during the period at 11%, with total selling expense of $1.5 million in 1997 and $1.6 million in 1996. General and administrative expense decreased during the period, amounting to $1.2 million or 10% of sales during the first quarter of 1997, compared to $1.5 million or 11% of sales for the comparable period of 1996. The decrease in general and administrative expense primarily reflects reduced expenses associated with the implementation of the Company's Rapid Response program. Although Rapid Response will continue to be implemented throughout 1997 and 1998, the expenses associated with the program were principally incurred by the Company during fiscal 1996 in the form of consulting fees and employee education. Accordingly, Management expects that overall general and administrative expense in 1997 will be lower than fiscal 1996 levels. Interest expense decreased by $72,000 during the period, from $202,000 in 1996 to $130,000 in 1997. The decrease in interest expense primarily reflects reduced bank indebtedness. Overall average interest rates remained stable throughout the period. The Company's effective income tax rate also was constant at 28% for the first thirteen weeks of fiscal 1997 and 1996. Liquidity, Capital Resources and Financial Condition The Company has a $6.0 million line of credit with PNC Bank of Erie, Pennsylvania (the Bank ). Prior to March 18, 1997, borrowings and required payments under the revolving credit line were based upon an asset formula involving accounts receivable and inventories. On March 18, 1997, the line of credit agreement was renewed through April 30, 1999. Under the terms of the renewal, borrowings under the line of credit are no longer limited by an asset formula. The revolving credit line is collateralized by substantially all of the Company's tangible and intangible property, with current interest rates on borrowings below the Bank's prevailing prime rate. At February 28, 1997, the Company had borrowed $1.7 million under this financing arrangement. 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 $1.2 million (2.0 million DM). At February 28, 1997, the Company had borrowed $334,000 (551,000 DM) against these lines of credit. Borrowings under the lines of credit currently bear interest at rates below the prevailing prime rate and are payable upon demand. The Company's working capital continued to increase during the period. At February 28, 1997, the Company had net working capital of $13.4 million, compared to $12.5 million at November 30, 1996. The Company's current ratio also improved during the first thirteen weeks of fiscal 1997, with current assets at 2.51 times current liabilities at February 28, 1997 and 2.20 at November 30, 1996. As a result of improved accounts receivable and inventory turnover rates, net cash from operations increased significantly during the period. During the first thirteen weeks of fiscal 1997, net cash provided by operations amounted to $1.9 million, an increase of $1.0 million from the comparable period of 1996. With the ongoing implementation of the Company's Rapid Response program, Management anticipates that inventory turnover rates will continue to improve throughout 1997. During the first quarter of 1997, the Company's cash expenditures for property, plant and equipment amounted to $587,000. These capital expenditures primarily related to operating improvements and manufacturing equipment for new product offerings, including resonator and band pass filter products. During the first thirteen weeks of 1997, the Company also repaid $1.3 million of bank indebtedness. Current financial resources, including working capital and existing lines of credit, and anticipated funds from operations are expected to be sufficient to meet cash requirements throughout 1997, including scheduled long-term debt repayment and planned capital expenditures. Forward-Looking Information Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements which reflect Management's current views with respect to future shipment and operating expense levels, inventory turnover rates, and ongoing cash requirements. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words believe, expect, anticipate and similar expressions identify forward-looking statements. Readers are cautioned not MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) to place undue reliance on these forward-looking statements. The following factors could cause actual results to differ materially from historical results or those anticipated: (1) increased price competition in the Company's marketplace; (2) technology advances effecting the demand for the Company's products; (3) other changes in market demand, particularly among telecommu- nications customers; (4) market acceptance and penetration for the Company's new product offerings; (5) changes in the overall economic climate; (6) operating cost fluctuations and availability of raw materials; and (7) unplanned capital replacement or expansion. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) None (b) No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURE 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 25, 1997 By: /s/ John P. Freeman John P. Freeman, Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) EX-27 2 ART.5 FDS FOR FIRST QTR 1997 FORM 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SPECTRUM CONTROL, INC. CONSOLIDATED BALANCE SHEET AT FEBRUARY 28, 1997 AND CONSOLIDATED STATEMENT OF INCOME FOR THE QUARTER ENDED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ITS FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 28, 1997. 1,000 3-MOS NOV-30-1997 FEB-28-1997 408 0 9439 382 12357 22223 39303 23423 39189 8844 4040 0 0 13755 12222 39189 12712 12712 8998 8998 0 0 130 908 254 654 0 0 0 654 0.06 0.06
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