<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- -- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- -- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------- -------
Commission File Number 0-10004
- -------------------------------------------------------------------------------
NAPCO SECURITY SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2277818
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(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
333 BAYVIEW AVENUE
AMITYVILLE, NEW YORK 11701
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(Address of principle (Zip Code)
executive offices)
(516) 842-9400
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(Registrant's telephone number including area code)
NONE
--------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed from 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
-------- --------
Number of shares outstanding of each of the issuer's classes of common
stock, as of September 30, 1995:
COMMON STOCK, $.01 PAR VALUE
PER SHARE 4,367,727
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<PAGE> 2
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
INDEX
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION (unaudited)
<S> <C>
Condensed Consolidated Balance Sheets,
September 30, 1995 and June 30, 1995 3
Condensed Consolidated Statements of
Income for the Three Months Ended
September 30, 1995 and 1994 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
September 30, 1995 and 1994 5
Notes to Condensed Consolidated
Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION 10
SIGNATURE PAGE 12
INDEX TO EXHIBITS 13
Computation of Earnings Per Share E-1
</TABLE>
-2-
<PAGE> 3
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
ASSETS 1995 1995
----------- ----------
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,606 $ 368
Accounts receivable, less allowance for doubtful
accounts September 30, 1995 $631,000
June 30, 1995 $662,000 12,751 13,647
Inventories, net (Note 2) 23,693 24,178
Prepaid expenses and other current assets 368 445
Deferred income tax benefits, net 1,278 1,278
----- ------
Total current assets 39,696 39,916
Property, Plant and Equipment, net of accumulated
depreciation and amortization of $8,314 and $8,013
respectively (Note 3) 12,550 12,503
Excess of Cost Over Fair Value of Assets Acquired, net 2,886 2,913
Deferred Financing Costs, net 67 70
Other Assets 232 337
------- -------
$55,431 $55,739
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,177 $ 2,182
Notes payable to bank 500 500
Accounts payable 3,947 4,001
Accrued and other liabilities 4,286 4,573
------- -------
Total current liabilities 10,910 11,256
Long-Term Debt 14,975 15,275
Deferred Income Taxes 648 648
------ ------
Total liabilities 26,533 27,179
------ ------
Stockholders' Equity:
Common stock - par value $.01 per share;
authorized 21,000,000 shares, 5,896,602 issued 59 59
Additional paid-in capital 719 719
Retained earnings 28,121 27,783
Less: Treasury stock, at cost (1,528,875 shares) (1) (1)
------- -------
Total stockholders' equity 28,898 28,560
------- -------
$55,431 $55,739
======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE> 4
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1995 1994
--------- ---------
(in thousands, except per
share data)
<S> <C> <C>
Net Sales $ 11,769 $ 11,170
Cost of Sales 8,797 8,476
---------- ----------
Gross profit 2,972 2,694
Selling, General and Administrative Expenses 2,031 2,160
---------- ----------
Operating income 941 534
---------- ----------
Interest Expense, net 354 276
Other Expense, net 40 22
---------- ----------
394 298
---------- ----------
Income before provision for income taxes 547 236
Provision for Income Taxes (Note 4) 209 30
---------- ----------
Net income $ 338 $ 206
========== ==========
Earnings Per Share $ 0.08 $ 0.05
========== ==========
Weighted Average Number of Shares Outstanding 4,402,727 4,383,830
========== ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------
1995 1994
---------- ----------
(in thousands)
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities $1,892 $(1,737)
-------- --------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (349) (721)
------ --------
Net cash used in investing activities (349) (721)
------ --------
Cash Flows from Financing Activities:
Proceeds from long-term debt borrowings - 1,668
Principal payments on long-term debt (305) (8)
------ --------
Net cash provided by (used in) financing activities (305) 1,660
------ --------
Net Increase (Decrease) in Cash and Cash Equivalents 1,238 (798)
Cash and Cash Equivalents at Beginning of Period 368 1,335
------ --------
Cash and Cash Equivalents at End of Period $1,606 $ 537
====== ========
Cash Paid During the Period for:
Interest $ 361 $ 294
====== ========
Income taxes $ 21 $ 52
====== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE> 6
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.) Summary of significant accounting policies
and other disclosures
-----------------------------------------------------
The information for the three months ended September 30, 1995
and 1994 is unaudited, but in the opinion of the Company, all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation of the results of
operations for such periods have been included. The results of
operations for the periods may not necessarily reflect the
annual results of the Company.
The Company has adopted all recently effective accounting
standards which have an impact on its condensed financial
statements.
2.) Inventories
-----------------------------------------------------
<TABLE>
<CAPTION>
Inventories consist of: September 30, June 30,
1995 1995
------- -------
(unaudited)
(in thousands)
<S> <C> <C>
Component parts $ 9,511 $ 9,706
Work-in-process 6,408 6,539
Finished products 7,774 7,933
------- -------
$23,693 $24,178
======= =======
</TABLE>
3.) Property, Plant and Equipment
-----------------------------------------------------
<TABLE>
<CAPTION>
Property, Plant and Equipment consists of:
September 30, June 30,
1995 1995
------- -------
(unaudited)
(in thousands)
<S> <C> <C>
Land $ 904 $ 904
Building 8,707 8,595
Molds and dies 2,043 1,971
Furniture and fixtures 1,019 1,005
Machinery and equipment 7,776 7,633
Leasehold improvements 415 408
------- -------
20,864 20,516
Less: Accumulated depreciation and amortization 8,314 8,013
------- -------
$12,550 $12,503
======= =======
</TABLE>
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<PAGE> 7
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.) Income Taxes
-----------------------------------------------------
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes", effective July 1, 1993. The implementation of SFAS No.
109 did not have a material impact on the Company's financial
statements during fiscal 1994. SFAS No. 109 requires
recognition of deferred tax liabilities and assets for the
estimated future tax effects of events that have been
recognized in the Company's financial statements or tax
returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the
differences are expected to reverse.
In August 1995, the Internal Revenue Service ("IRS") informed
the Company that it had completed the audit of the Company's
Federal tax returns for fiscal years 1987 through 1992. The
IRS has issued a report to the Company proposing adjustments
that would result in taxes due of approximately $4.3 million
excluding interest charges. The primary adjustments presented
by the IRS relate to inter-company pricing and royalty
charges, DISC earnings and charitable contributions. The
Company disagrees with the IRS and intends to vigorously
appeal this assessment using all remedies and procedural
actions available under the law. The Company believes that it
has provided adequate reserves at September 30, 1995 to
address the ultimate resolution of this matter, so that it
will not have a material adverse effect on the Company's
consolidated financial statements.
-7-
<PAGE> 8
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales for the first three months of fiscal 1996 increased approximately 5.4% to
$11,769,000 from $11,170,000 for the same period in fiscal 1995. The Company
was able to achieve these sales levels primarily as a result of continued
customer demand of its new and existing products. This increase was also
achieved despite the Chapter 7 bankruptcy filing of one of its major customers
at the end of fiscal 1995.
The Company's gross profit margin increased to 25.3% of sales for the first
three months of fiscal 1996 as compared to 24.1% for the first three months of
fiscal 1995. This increase is primarily due to the reduction in the Company's
production costs resulting from the increased efficiencies associated with the
Company's recently completed production facility in the Dominican Republic.
Selling, general and administrative expenses for the first three months of
fiscal 1996 decreased by 6% to $2,031,000 as compared to $2,160,000 for the same
period in fiscal 1995. This decrease is primarily due to general cost control
procedures established by management.
Interest and other expense increased 32% to $394,000 for the first three
months of fiscal 1996 as compared to $298,000 for the same period in
fiscal 1995. This increase is primarily due to increased average outstanding
debt attributable to the construction of the Company's manufacturing facility
in the Dominican Republic, as well as higher interest rates.
Provision for income taxes increased $179,000 to $209,000 or approximately 38%
of income before provision for income taxes for the three months ended
September 30, 1995. This compared to a provision of $30,000 or 13% of income
before provision for income taxes for the same quarter a year ago. This
increase reflects the relative increase in taxable income of the Company's
domestic operations in comparison to its foreign subsidiary.
Net income increased by 64% to $338,000 or $.08 per share for the three
months ended September 30, 1995 from $206,000 or $.05 per share for the same
period a year ago. This increase is primarily the result of the items discussed
above.
-8-
<PAGE> 9
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources
- -------------------------------
During the three months ended September 30, 1995 the Company utilized a
large portion of its cash generated from operations to purchase property and
equipment as well as to make principal payments on its long-term debt. The
remaining cash provided by operations resulted in an increase in cash and cash
equivalents to $1,606,000 from $368,000 as of June 30, 1995.
Accounts receivable at September 30, 1995 decreased by $896,000 to $12,751,000
as compared to $13,647,000 at June 30, 1995. This decrease is primarily the
result of the higher sales volume during the quarter ended June 30, 1995 as
compared to the quarter ended September 30, 1995.
Inventory at September 30, 1995 was $23,693,000, decreasing by $485,000 from
$24,178,000 at June 30, 1995. This decrease is predominantly the result of the
completion of the Company's move into its new production facility in the
Dominican Republic. With the move completed, the Company has reduced the
additional inventory which it carried as a precaution against possible
inefficiencies during the move.
On July 27, 1994, the Company entered into an $11,000,000 secured revolving
credit and term loan facility with two banks, with the Company's primary bank
acting as agent. In conjunction with this agreement, the banks have received as
collateral all accounts receivable and inventory located in the United States.
The revolving credit loan, which bears interest based on a number of options
available to the Company, converts to a term loan on June 30, 1997 payable in
sixteen (16) equal quarterly installments beginning on September 30, 1997. The
agreement contains various covenants and restrictions on the Company. As of
September 30, 1995 the Company was not in compliance with certain of these
financial covenants for which they anticipate receiving the appropriate waivers
from the banks. On March 31, 1995, the Company amended its existing revolving
credit and term loan facility to provide for an additional $2,000,000 secured
line of credit. Any borrowings arising from this additional line are to be
repaid in full on or before April 1, 1996. As of September 30, 1995,
outstanding borrowings under this line amounted to $500,000, which was
subsequently repaid in November 1995.
On July 28, 1994 the Company entered into a separate $2,000,000 line of credit
with its primary bank to be used in connection with commercial and standby
letters of credit.
On April 26, 1993, the Company's foreign subsidiary entered into a 99
year land lease of approximately four acres of land in the Dominican Republic,
at an annual cost of approximately $272,000. The foreign subsidiary relocated
its operations to this site at the end of fiscal 1995.
As of September 30, 1995 the Company had no material committments for capital
expenditures.
-9-
<PAGE> 10
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
There are no pending or threatened material legal proceedings
to which NAPCO or its subsidiaries or any of their property is
subject other than as follows:
In August 1995, the Internal Revenue Service ("IRS") informed
the Company that it had completed the audit of the Company's
Federal tax returns for fiscal years 1987 through 1992. The
IRS has issued a report to the Company proposing adjustments
that would result in taxes due of approximately $4.3 million
excluding interest charges. The primary adjustments presented
by the IRS relate to intercompany pricing and royalty charges,
DISC earnings and charitable contributions. The Company
disagrees with the IRS and intends to vigorously appeal this
assessment using all remedies and procedural actions available
under the law. The Company believes that it has provided
adequate reserves at September 30, 1995 to address the
ultimate resolution of this matter, so that it will not have a
material adverse effect on the Company's consolidated
financial statements.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
-10-
<PAGE> 11
PART II - OTHER INFORMATION (continued)
---------------------------------------
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
(11) Computation of Earnings Per Share
(b) No reports on Form 8-K have been filed
during the Company's fiscal quarter ended
September 30, 1995.
-11-
<PAGE> 12
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.
November 13, 1995
NAPCO SECURITY SYSTEMS, INC.
(Registrant)
By:/s/ RICHARD SOLOWAY By:/s/ KENNETH ROSENBERG
------------------------- -------------------------
Richard Soloway Kenneth Rosenberg
Chairman of the Board of President and Treasurer
Directors and Secretary (Co-Principal Executive
(Co-Principal Executive Officer) Officer)
By:/s/ KEVIN S. BUCHEL
---------------------------
Kevin S. Buchel
Senior Vice President of
Operations and Finance
(Principal Financial and
Accounting Officer)
-12-
<PAGE> 13
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibits PAGE
-------- ----
<S> <C> <C>
11 Computation of Earnings Per Share E-1
27 Financial Data Schedule
</TABLE>
-13-
<PAGE> 1
Exhibit (11)
NAPCO SECURITY SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
1995 1994
--------- ---------
(in thousands, except per
share data)
<S> <C> <C>
Average Shares Outstanding 4,368 4,368
Add: Common Stock Equivalents 35 16
------ ------
Weighted Average Shares Outstanding 4,403 4,384
====== ======
Net Income $ 338 $ 206
====== ======
Earnings Per Share $ 0.08 $ 0.05
</TABLE> ====== ======
Primary earnings per share computations are based on the weighted
average number of shares outstanding plus common stock equivalents
calculated at the monthly average market price per share.
E-1
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,606
<SECURITIES> 0
<RECEIVABLES> 12,751
<ALLOWANCES> 631
<INVENTORY> 23,693
<CURRENT-ASSETS> 39,696
<PP&E> 20,864
<DEPRECIATION> 8,314
<TOTAL-ASSETS> 55,431
<CURRENT-LIABILITIES> 10,910
<BONDS> 0
<COMMON> 59
0
0
<OTHER-SE> 28,839
<TOTAL-LIABILITY-AND-EQUITY> 55,431
<SALES> 11,769
<TOTAL-REVENUES> 11,769
<CGS> 8,797
<TOTAL-COSTS> 8,797
<OTHER-EXPENSES> 2,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> 547
<INCOME-TAX> 209
<INCOME-CONTINUING> 338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 338
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
