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 period ended: April 30, 2000
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 0-5411
HERLEY INDUSTRIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE #23-2413500
----------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 Industry Drive, Lancaster, Pennsylvania 17603
------------------------------------------ --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (717) 397-2777
--------------
--------------------------------------------------------------
(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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of June 9, 2000 - 5,773,535 shares of Common Stock.
<PAGE>
HERLEY INDUSTRIES, INC
AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION PAGE
----
Item 1 - Financial Statements:
Consolidated Balance Sheets -
April 30, 2000 and August 1, 1999 2
Consolidated Statements of Income -
For the thirteen and thirty-nine weeks ended
April 30, 2000 and May 2, 1999 3
Consolidated Statements of Cash Flows -
For the thirteen and thirty-nine weeks ended
April 30, 2000 and May 2, 1999 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10
PART II -OTHER INFORMATION 11
Signatures 12
<PAGE>
<TABLE>
<CAPTION>
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, August 1,
2000 1999
----------- -----------
Unaudited Audited
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,814,688 $ 2,741,163
Accounts receivable 13,463,231 10,678,638
Other receivables 122,517 212,515
Inventories 23,842,850 19,880,370
Deferred taxes and other 3,009,027 2,703,179
---------- ----------
Total Current Assets 42,252,313 36,215,865
Property, Plant and Equipment, net 18,832,887 21,888,553
Intangibles, net of amortization of $2,812,514 at
April 30, 2000 and $2,137,459 at August 1, 1999 17,485,419 13,573,653
Available-for-sale Securities 147,576 148,105
Other Investments 998,597 947,983
Other Assets 1,285,423 1,282,078
---------- ----------
$81,002,215 $74,056,237
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 281,441 $ 258,383
Accounts payable and accrued expenses 9,807,368 8,035,211
Income taxes payable 1,056,801 276,160
Reserve for contract losses 1,020,687 1,505,048
Advance payments on contracts 510,451 438,538
---------- ----------
Total Current Liabilities 12,676,748 10,513,340
Long-term Debt 19,993,023 15,437,390
Deferred Income Taxes 5,582,725 5,143,837
Minority interest 62,062 62,062
---------- ----------
38,314,558 31,156,629
---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued and outstanding
4,664,054 at April 30, 2000
and 5,030,283 at August 1, 1999 466,405 503,028
Additional paid-in capital 9,248,583 15,071,964
Retained earnings 32,972,669 27,324,616
---------- ----------
Total Shareholders' Equity 42,687,657 42,899,608
---------- ----------
$81,002,215 $74,056,237
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
April 30, May 2, April 30, May 2,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 19,247,574 $ 17,467,640 $ 51,604,321 $ 43,650,646
---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold 11,866,344 10,661,290 31,844,950 26,352,854
Selling and administrative expenses 3,834,202 3,553,443 10,222,026 8,205,273
---------- ---------- ---------- ----------
15,700,546 14,214,733 42,066,976 34,558,127
---------- ---------- ---------- ----------
Operating income 3,547,028 3,252,907 9,537,345 9,092,519
---------- ---------- ---------- ----------
Other income (expense):
Investment income 39,268 62,748 140,641 248,404
Interest expense (420,879) (248,830) (1,001,933) (514,018)
---------- ---------- ---------- ----------
(381,611) (186,082) (861,292) (265,614)
---------- ---------- ---------- ----------
Income before income taxes and
extraordinary item 3,165,417 3,066,825 8,676,053 8,826,905
Provision for income taxes 1,100,000 1,073,000 3,028,000 3,089,000
---------- ---------- ---------- ----------
Income before extraordinary item 2,065,417 1,993,825 5,648,053 5,737,905
Extraordinary item - loss on extinguishment
of debt (net of income tax benefit
of $ 68,000) -- 126,826 -- 126,826
---------- ---------- ---------- ----------
Net income $ 2,065,417 $ 1,866,999 $ 5,648,053 $ 5,611,079
========== ========== ========== ==========
Earnings per common share - Basic
Earnings before extraordinary item $ .45 $ .38 $ 1.21 $ 1.09
Extraordinary loss on extinguishment
of debt - .02 - .02
--- --- ---- ----
Net earnings per common share - Basic $ .45 $ .36 $ 1.21 $ 1.07
=== === ==== ====
Basic weighted average shares 4,637,344 5,185,761 4,666,852 5,249,936
========= ========= ========= =========
Earnings per common share - Diluted
Earnings before extraordinary item $ .40 $ .35 $ 1.13 $ 1.02
Extraordinary loss on extinguishment
of debt - .02 - .02
--- --- ---- ----
Net earnings per common share - Diluted $ .40 $ .33 $ 1.13 $ 1.00
=== === ==== ====
Diluted weighted average shares 5,219,981 5,623,513 5,000,145 5,621,622
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirty-nine weeks ended
-----------------------
April 30, May 2,
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,648,053 $ 5,611,079
---------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,964,379 2,293,323
(Gain) loss on disposal of property and equipment (18,327) 7,841
Extraordinary loss on extinguishment of debt, net of
income taxes -- 126,826
Equity in income of limited partnership (50,614) (77,795)
(Increase) in deferred tax assets (120,344) --
Increase in deferred tax liabilities 438,888 933,145
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (666,334) 226,912
(Increase) in costs incurred and income recognized
in excess of billings on uncompleted contracts -- (3,337,318)
Decrease in other receivables 89,998 34,527
Decrease in prepaid income taxes -- 377,448
(Increase) decrease in inventories (2,097,211) 1,081,707
(Increase) decrease in prepaid expenses and other (152,841) 104,207
Increase (decrease) in accounts payable
and accrued expenses 856,513 (903,687)
Increase in income taxes payable 1,027,141 569,738
(Decrease) in reserve for contract losses (484,361) (59,080)
(Decrease) in advance payments on contracts (300,255) (1,284,915)
Other, net 26,822 46,064
---------- ----------
Total adjustments 1,513,454 138,943
---------- ----------
Net cash provided by operating activities 7,161,507 5,750,022
---------- ----------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (6,020,000) (20,101,475)
Proceeds from sale of property and equipment 4,124,505 1,250
Capital expenditures (2,303,240) (1,275,665)
---------- ----------
Net cash used in investing activities (4,198,735) (21,375,890)
---------- -----------
Cash flows from financing activities:
Borrowings under bank line of credit 12,000,000 24,500,000
Proceeds from refinance of mortgage note -- 2,915,000
Proceeds from exercise of stock options and warrants 934,894 399,494
Payments under lines of credit (7,500,000) (15,450,000)
Payments of long-term debt (1,758,766) (336,153)
Extinguishment of debt -- (3,005,600)
Purchase of treasury stock (7,565,375) (2,318,103)
---------- ----------
Net cash provided by (used in) financing activities (3,889,247) 6,704,638
---------- ----------
Net (decrease) in cash and cash equivalents (926,475) (8,921,230)
Cash and cash equivalents at beginning of period 2,741,163 10,689,193
---------- ----------
Cash and cash equivalents at end of period $ 1,814,688 $ 1,767,963
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Herley Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Unaudited)
1. The consolidated financial statements include the accounts of Herley
Industries, Inc. and its subsidiaries, all of which are wholly-owned. All
significant inter-company accounts and transactions have been eliminated in
consolidation.
In the opinion of the Company, the accompanying consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of operations and cash
flows for the periods presented. These financial statements (except for the
balance sheet presented at August 1, 1999) are unaudited and have not been
reported on by independent public accountants.
Results of operations for interim periods are not necessarily indicative of
the results of operations for a full year due to external factors which are
beyond the control of the Company.
2. The Company entered into an agreement, as of January 3, 2000, to acquire
substantially all of the assets of Robinson Laboratories, Inc. ("Robinson"
or "Robinson Labs"), a New Hampshire corporation, which is being operated
as a division of Herley Industries, Inc. The transaction, which closed on
February 1, 2000, provided for the payment of $6,000,000 in cash, the
issuance of 33,841 shares of Common Stock of the Company valued at $15.188
per share, and the assumption of approximately $3,135,000 in liabilities.
In addition, the agreement provides for the issuance of additional shares
of Common Stock at a future date, aggregating 97,841shares, based on new
orders booked through May 2, 2001. The transaction has been accounted for
under the purchase method. Accordingly, the consolidated balance sheet
includes the assets and liabilities of Robinson at April 30, 2000, and the
consolidated statement of income includes the results of Robinson's
operations from January 3, 2000. Excess cost over the fair value of net
assets acquired of approximately $4,587,000 is being amortized over 20
years. The allocation of the aggregate estimated purchase price of
$6,534,000 will be revised when additional information concerning asset and
liability valuations is obtained. Adjustments, which could be significant,
will be made during the allocation period based on detailed reviews of the
fair values of assets acquired and liabilities assumed and could result in
a substantial change in the excess of cost over the fair value of net
assets acquired.
On the basis of a pro forma consolidation of the results of operations as
if the acquisition had taken place at the beginning of fiscal 1999,
unaudited consolidated net sales, net income, basic earnings per share, and
diluted earnings per share for the thirteen and thirty-nine weeks ended May
2, 1999 would have been approximately $19,339,000, $1,885,000, $.36, and
$0.34, and approximately $49,849,000, $5,342,000, $1.02, and $0.95,
respectively, and for the thirty-nine weeks ended April 30, 2000 would have
been approximately $54,313,000, $5,183,000, $1.11, and $1.04, respectively.
The pro forma information includes adjustments for additional depreciation
based on the estimated fair market value of the property, plant, and
equipment acquired, the amortization of intangibles, and additional
interest on bank borrowings arising from the transaction. The pro forma
financial information is not necessarily indicative of the results of
operations as they would have been had the transaction been affected at the
beginning of fiscal 1999.
Pre-acquisition debt in the amount of $1,478,758 was paid during the
quarter ended April 30, 2000.
5
<PAGE>
3. Inventories at April 30, 2000 and August 1, 1999 are summarized as follows:
April 30, 2000 August 1, 1999
-------------- --------------
Purchased parts and raw materials $ 11,838,296 $ 9,862,727
Work in process 11,333,071 8,780,767
Finished products 671,483 1,236,876
---------- ----------
$ 23,842,850 $ 19,880,370
========== ==========
4. In January 2000, the Company entered into an amendment to its revolving
loan agreement with a bank that provides for a revolving unsecured loan in
the aggregate principal amount of $30,000,000 which may be used for general
corporate purposes, including business acquisitions. The revolving credit
facility requires the payment of interest only on a monthly basis and
payment of the outstanding principal balance on May 2, 2002. Interest is
set at 1.65% over the FOMC Federal Funds Target Rate based on tangible net
worth in excess of $25,000,000, or at an increment of 1.80% if tangible net
worth is less than $25,000,001. The aggregate rate was 7.80% at April 30,
2000, including an increment of 1.80%. There is a fee of 15 basis points
per annum on the unused portion of the credit line in excess of $20,000,000
payable quarterly. Borrowings under the line were $17,000,000 at April 30,
2000. Subsequent to the close of the quarter, the Company paid off the
balance of the bank debt using the proceeds of the exercise of common stock
purchase warrants which were due to expire on May 18, 2000. The credit
facility also provides for the issuance of stand-by letters of credit with
a fee of 1.0% per annum of the amounts outstanding under the facility. At
April 30, 2000, stand-by letters of credit aggregating $1,102,785 were
outstanding under this facility.
The agreement contains various financial covenants, including, among other
matters, minimum tangible net worth, debt to tangible net worth, debt
service coverage, and restrictions on other borrowings.
5. The following table shows the calculation of basic earnings per share and
earnings per share assuming dilution:
Thirteen weeks ended
--------------------
April 30, 2000 May 2, 1999
-------------- -----------
Numerator:
Net Income $ 2,065,417 $ 1,866,999
========= =========
Denominator:
Basic weighted-average shares 4,637,344 5,185,761
Effect of dilutive securities:
Employee stock options and warrants 582,637 437,752
--------- ---------
Diluted weighted-average shares 5,219,981 5,623,513
========= =========
Earnings per common share - Basic $ .45 $ .36
=== ===
Earnings per common share - Diluted $ .40 $ .33
=== ===
Options and warrants to purchase 85,422 shares of common stock, with
exercise prices ranging from $16.88 to $17.88, were outstanding during the
third quarter of fiscal 2000, but were not included in the computation of
diluted EPS because the exercise prices are greater than the average market
price of the common shares. The options and warrants, which expire at
various dates through April 28, 2010, were still outstanding as of April
30, 2000. Options and warrants to purchase 2,543,703 shares of common
stock, with exercise prices ranging from $13.15 to $16.46, were outstanding
during the third quarter of fiscal 1999 but were not included in the
computation of diluted EPS because the exercise prices are greater than the
average market price of the common shares.
6
<PAGE>
Thirty-nine weeks ended
-----------------------
April 30, 2000 May 2, 1999
-------------- -----------
Numerator:
Net Income $ 5,648,053 $ 5,611,079
========= =========
Denominator:
Basic weighted-average shares 4,666,852 5,249,936
Effect of dilutive securities:
Employee stock options and warrants 333,293 371,686
--------- ---------
Diluted weighted-average shares 5,000,145 5,621,622
========= =========
Earnings per common share - Basic $ 1.21 $ 1.07
==== ====
Earnings per common share - Diluted $ 1.13 $ 1.00
==== ====
Options and warrants to purchase 2,501,875 shares of common stock, with
exercise prices ranging from $13.88 to $17.88, were outstanding during the
first nine months of fiscal 2000, but were not included in the computation
of diluted EPS because the exercise prices are greater than the average
market price of the common shares. The options and warrants, which expire
at various dates through April 28, 2010, were still outstanding as of April
30, 2000. Options and warrants to purchase 2,617,119 shares of common
stock, with exercise prices ranging from $11.44 to $16.46, were outstanding
during the first nine months of fiscal 1999 but were not included in the
computation of diluted EPS because the exercise prices are greater than the
average market price of the common shares.
Subsequent to the close of the quarter, approximately 1,212,000 of the
warrants which were due to expire on May 18, 2000 were exercised at $15.60
per share of common stock resulting in proceeds of approximately
$18,900,000. As noted above the proceeds were used to pay off the bank debt
under the revolving credit facility.
As of June 9, 2000 5,773,535 shares of common stock were outstanding.
6. Supplemental cash flow information is as follows:
April 30, 2000 May 2, 1999
-------------- -----------
Cash paid during the period for:
Interest $ 956,233 $ 496,922
Income Taxes 1,585,227 1,195,058
Cashless exercise of stock options 47,119 228,353
Warrants issued for business acquired - 1,450,000
Common stock issued for business acquired 513,977 -
Tax benefit related to stock options 256,500 210,000
7
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
The statements contained in this report which are not historical fact are
"forward-looking statements" that involve various important assumptions, risks,
uncertainties and other factors which could cause the Company's actual results
for fiscal 2000 and beyond to differ materially from those expressed in such
forward-looking statements. These important factors include, without limitation,
competitive factors and pricing pressures, changes in legal and regulatory
requirements, technological change or difficulties, product development risks,
commercialization and trade difficulties and general economic conditions, as
well as other risks previously disclosed in the Company's securities filings and
press releases.
Results of Operations
---------------------
Thirteen weeks ended April 30, 2000 and May 2, 1999
---------------------------------------------------
Net sales for the thirteen weeks ended April 30, 2000 were $19,248,000 compared
to $17,468,000 in the third quarter of fiscal 1999. The sales increase of
$1,780,000 (10.2%) is primarily attributable to revenue generated by Robinson
Labs, which was acquired as of January 3, 2000.
The gross profit margin of 38.3%, in the thirteen weeks ended April 30, 2000,
was slightly lower than the margin of 39.0% in the third quarter of the prior
year. The relative mix of products shipped was unchanged.
Selling and administrative expenses for the thirteen weeks ended April 30, 2000
increased $281,000 as compared to the third quarter of fiscal 1999, and
relatively constant as a percentage of net sales. Contributing to this increase
were the selling and administrative expenses of Robinson Labs of $488,000.
Synergies from both the consolidation of Metraplex and Stewart Warner into the
Lancaster facilities and the streamlining of the General Microwave operations
offset the increase from the Robinson Labs expenses in the third quarter.
Investment income declined $23,000 from the prior year due to a reduction in
income from the limited partnership, and reduction in interest earned on the
investment of excess operating cash. Bank borrowings of $11,400,000 and
$6,000,000 used to fund the acquisitions of General Microwave and Robinson Labs,
respectively, contributed to an increase in interest expense of approximately
$172,000.
Thirty-nine weeks ended April 30, 2000 and May 2, 1999
------------------------------------------------------
Net sales for the thirty-nine weeks ended April 30, 2000 were $51,604,000
compared to $43,651,000 in the comparable prior year period. The sales increase
of $7,953,000 (18.2%) is primarily attributable to revenue generated by General
Microwave, which was included in fiscal 1999 for four months, of $5,810,000, and
revenue of $2,642,000 from Robinson Labs which was acquired as of January 3,
2000. In addition microwave products revenue increased $3,823,000 in fiscal 2000
as compared to fiscal 1999. These increases in revenue from the microwave
technology group were offset by reductions in revenues from flight
instrumentation products of $4,322,000.
Gross profit margin for the thirty-nine weeks ended April 30, 2000 was 38.3% as
compared to 39.6% in fiscal 1999. The decline in margin of 1.3 percentage points
is due primarily to lower margins on microwave components, including lower
margins than the Company's historical margins from the General Microwave and
Robinson Labs revenues, as well as on certain foreign contracts.
Selling and administrative expenses for the thirty-nine weeks ended April 30,
2000 were $10,222,000 compared to $8,205,000 in the first nine months of fiscal
1999, an increase of $2,017,000. The increase is primarily
8
<PAGE>
attributable to expenses of General Microwave of $1,610,000, which was included
in fiscal 1999 for only four months, and Robinson Labs of $631,000, which is
included in fiscal 2000 from January 3, 2000. Synergies from the consolidation
of Metraplex and Stewart Warner into the Lancaster facilities offset these
increases. Also offsetting the increased expenses is a reduction of
representatives fees on certain foreign sales.
Investment income declined $108,000 from the prior year due primarily to the
liquidation of investments during the second quarter of fiscal 1999, the
proceeds of which were used to partially fund the acquisition of General
Microwave, and to a reduction in income from the limited partnership. Bank
borrowings of $11,400,000 and $6,000,000 used to fund the acquisitions of
General Microwave and Robinson Labs, respectively, contributed to an increase in
interest expense of approximately $488,000.
Business Acquisition
--------------------
The Company entered into an agreement, as of January 3, 2000, to acquire
substantially all of the assets of Robinson Laboratories, Inc. ("Robinson" or
"Robinson Labs"), a New Hampshire corporation, which is being operated as a
division of Herley Industries, Inc. The transaction, which closed on February 1,
2000, provided for the payment of $6,000,000 in cash, the issuance of 33,841
shares of Common Stock of the Company valued at $15.188 per share, and the
assumption of approximately $3,135,000 in liabilities. In addition, the
agreement provides for the issuance of additional shares of Common Stock at a
future date, aggregating 97,841 shares, based on new orders booked through May
2, 2001. The cash portion of the purchase price was financed by borrowing under
the Company's existing line of credit with its bank. The transaction has been
accounted for under the purchase method. Accordingly, the consolidated balance
sheet includes the assets and liabilities of Robinson at April 30, 2000, and the
consolidated statement of income includes the results of Robinson's operations
from January 3, 2000. Excess cost over the fair value of net assets acquired of
approximately $4,587,000 is being amortized over 20 years. The allocation of the
aggregate estimated purchase price of $6,534,000 will be revised when additional
information concerning asset and liability valuations is obtained. Adjustments,
which could be significant, will be made during the allocation period based on
detailed reviews of the fair values of assets acquired and liabilities assumed
and could result in a substantial change in the excess of cost over the fair
value of net assets acquired.
On the basis of a pro forma consolidation of the results of operations as if the
acquisition had taken place at the beginning of fiscal 1999, unaudited
consolidated net sales, net income, basic earnings per share, and diluted
earnings per share for the thirteen and thirty-nine weeks ended May 2, 1999
would have been approximately $19,339,000, $1,885,000, $.36, and $0.34, and
approximately $49,849,000, $5,342,000, $1.02, and $0.95, respectively, and for
the thirty-nine weeks ended April 30, 2000 would have been approximately
$54,313,000, $5,183,000, $1.11, and $1.04, respectively. The pro forma
information includes adjustments for additional depreciation based on the
estimated fair market value of the property, plant, and equipment acquired, the
amortization of intangibles, and additional interest on bank borrowings arising
from the transaction. The pro forma financial information is not necessarily
indicative of the results of operations as they would have been had the
transaction been affected at the beginning of fiscal 1999.
Liquidity and Capital Resources
-------------------------------
As of April 30, 2000 and August 1, 1999, working capital was $29,576,000 and
$25,703,000, respectively, and the ratio of current assets to current
liabilities was 3.33 to 1 and 3.44 to 1, respectively.
As is customary in the defense industry, inventory is partially financed by
progress payments. The unliquidated balance of these advanced payments was
approximately $510,000 at April 30, 2000, and $439,000 at August 1, 1999.
Net cash provided by operations during the period was approximately $7,162,000,
up from $5,750,000 in the prior fiscal year.
9
<PAGE>
Net cash used in investing activities consists of the acquisition of Robinson
Labs, in part for cash of approximately $6,000,000, as discussed above under
"Business Acquisition", and $2,303,000 for capital expenditures, including
building and leasehold improvements of $1,574,000 to accommodate the move of
General Microwave from Amityville, NY to a leased facility in Farmingdale, NY,
and consolidation of the General Microwave leased facilities in Billerica, MA
with Herley-MDI in Woburn, MA. Net cash received from the sale of the facility
in Amityville was $4,125,000.
The Company maintains a revolving credit facility with a bank for an aggregate
of $30,000,000, as amended in January 2000, which expires May 2, 2002. As of
April 30, 2000 and August 1, 1999, the Company had borrowings outstanding of
$17,000,000 and $12,500,000, respectively. Subsequent to the close of the
quarter, the Company paid off the balance of the bank debt using the proceeds of
the exercise of common stock purchase warrants which were due to expire on May
18, 2000.
During the period ended April 30, 2000, the Company received net proceeds of
approximately $935,000 from the exercise of common stock options and warrants by
employees and publicly traded warrants, and acquired 512,000 shares of
treasury stock through open market purchases at a cost of $7,565,000. The
Company has acquired an aggregate of 858,050 shares under the 1,250,000 share
buyback programs approved by the Board of Directors. The Company also acquired
6,027 shares of common stock valued at $86,766 in connection with certain
"stock-for-stock" exercises of stock options by which certain employees elected
to surrender "mature" shares owned in settlement of the option price, and
related tax obligations of $39,647. Such exercises are treated as an exercise of
a stock option and the acquisition of treasury shares by the Company. All such
treasury shares have been retired.
Subsequent to the close of the quarter, approximately 1,212,000 of the warrants
which were due to expire on May 18, 2000 were exercised at $15.60 per share of
common stock resulting in proceeds of approximately $18,900,000. As noted above
the proceeds were used to pay off the bank debt under the revolving credit
facility.
At April 30, 2000, the Company had cash and cash equivalents of approximately
$1,815,000.
The Company believes that presently anticipated future cash requirements will be
provided by internally generated funds and existing credit facilities.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risk associated with changes in interest rates
and stock prices. The Company has not entered into any derivative financial
instruments to manage the above risks and the Company has not entered into any
market risk sensitive instruments for trading purposes. There have been no
material changes in market risk to the Company since its fiscal year end as
disclosed in the Company's Annual Report Form 10K as of August 1, 1999.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
The Company is not involved in any material legal proceedings.
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:
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
27. Financial Data Schedule (for electronic submission only).
` (b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter of fiscal
2000.
11
<PAGE>
FORM 10-Q
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.
HERLEY INDUSTRIES, INC.
-----------------------
Registrant
BY: /S/ Myron Levy
-------------------------
Myron Levy, President
BY: /S/ Anello C. Garefino
---------------------------
Anello C. Garefino
Principal Financial Officer
DATE: June 13, 2000
12
