|
|
|
|
|
|
|
|
|
|
Previous: MOTOROLA INC, SC 13G/A, 1996-02-20 |
Next: NBTY INC, DEF 14A, 1996-02-20 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 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
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
333 BAYVIEW AVENUE
AMITYVILLE, NEW YORK 11701
- -------------------------------------------------------------------------------
(Address of principle (Zip Code)
executive offices)
(516) 842-9400
- -------------------------------------------------------------------------------
(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 December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK, $.01 PAR VALUE 4,367,727
PER SHARE
</TABLE>
<PAGE> 2
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
INDEX
DECEMBER 31, 1995
PAGE
PART I - FINANCIAL INFORMATION (unaudited)
Condensed Consolidated Balance Sheets,
December 31, 1995 and June 30, 1995 3
Condensed Consolidated Statements of
Income for the Six Months Ended
December 31, 1995 and 1994 4
Condensed Consolidated Statements of
Income for the Three Months Ended
December 31, 1995 and 1994 5
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
December 31, 1995 and 1994 6
Notes to Condensed Consolidated
Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II - OTHER INFORMATION 11
SIGNATURE PAGE 13
INDEX TO EXHIBITS 14
Computation of Earnings Per Share E-1
-2-
<PAGE> 3
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1995 1995
------------ --------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,052 $ 368
Accounts receivable, less allowance for doubtful
accounts: December 31, 1995 $617,000
June 30, 1995 $662,000 12,190 13,647
Inventories, net (Note 2) 23,341 24,178
Prepaid expenses and other current assets 687 445
Deferred income tax benefits, net 1,278 1,278
-------- --------
Total current assets 38,548 39,916
Property, Plant and Equipment, net of accumulated
depreciation and amortization of $8,388 and $8,013
respectively (Note 3) 12,694 12,503
Excess of Cost Over Fair Value of Assets Acquired, net 2,849 2,913
Deferred Financing Costs, net 64 70
Other Assets 158 337
-------- --------
$ 54,313 $ 55,739
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,270 $ 2,182
Notes payable to bank -- 500
Accounts payable 3,203 4,001
Accrued and other liabilities 1,561 1,365
Accrued taxes 3,770 3,208
-------- --------
Total current liabilities 9,804 11,256
Long-Term Debt 14,675 15,275
Deferred Income Taxes 648 648
-------- --------
Total liabilities 25,127 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 28,409 27,783
Less: Treasury stock, at cost (1,528,875 shares) (1) (1)
-------- --------
Total stockholders' equity 29,186 28,560
-------- --------
$ 54,313 $ 55,739
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-3-
<PAGE> 4
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
---------------------------
1995 1994
---------- ----------
(in thousands, except per
share data)
<S> <C> <C>
Net Sales $ 23,276 $ 23,214
Cost of Sales 17,385 17,619
---------- ----------
Gross profit 5,891 5,595
Selling, General and Administrative Expenses 4,154 4,445
---------- ----------
Operating income 1,737 1,150
---------- ----------
Interest Expense, net 583 582
Other Expense, net 103 82
---------- ----------
686 664
---------- ----------
Income before provision for income taxes 1,051 486
Provision for Income Taxes (Note 4) 425 83
---------- ----------
Net income $ 626 $ 403
========== ==========
Earnings Per Share $ 0.14 $ 0.09
========== ==========
Weighted Average Number of Shares Outstanding 4,390,646 4,426,501
========== ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-4-
<PAGE> 5
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------------
1995 1994
---------- ----------
(in thousands, except per
share data)
<S> <C> <C>
Net Sales $ 11,507 $ 12,044
Cost of Sales 8,588 9,143
---------- ----------
Gross profit 2,919 2,901
Selling, General and Administrative Expenses 2,123 2,285
---------- ----------
Operating income 796 616
---------- ----------
Interest Expense, net 229 306
Other Expense, net 63 60
---------- ----------
292 366
---------- ----------
Income before provision for income taxes 504 250
Provision for Income Taxes (Note 4) 216 53
---------- ----------
Net income $ 288 $ 197
========== ==========
Earnings Per Share $ 0.07 $ 0.04
========== ==========
Weighted Average Number of Shares Outstanding 4,375,136 4,428,805
========== ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-5-
<PAGE> 6
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Net Cash Provided by (Used in) Operating Activities $ 3,212 $ (952)
------- -------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (516) (1,982)
------- -------
Net cash used in investing activities (516) (1,982)
------- -------
Cash Flows from Financing Activities:
Principle payments on short-term debt (500) --
Proceeds from long-term debt borrowings -- 2,668
Principle payments on long-term debt (1,512) (961)
------- -------
Net cash provided by (used in) financing activities (2,012) 1,707
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents 684 (1,227)
Cash and Cash Equivalents at Beginning of Period 368 1,335
------- -------
Cash and Cash Equivalents at End of Period $ 1,052 $ 108
------- -------
Cash Paid During the Period for:
Interest $ 640 $ 568
======= =======
Income taxes $ 137 $ 60
======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-6-
<PAGE> 7
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 and six months ended December 31, 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: December 31, June 30,
1995 1995
------------ ---------
(unaudited)
(in thousands)
<S> <C> <C>
Component parts $ 9,370 $ 9,706
Work-in-process 6,313 6,539
Finished products 7,658 7,933
========= ========
$ 23,341 $ 24,178
========= ========
</TABLE>
3.) Property, Plant and Equipment
----------------------------------------------------------------------
Property, Plant and Equipment consists of:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
------------ ---------
(unaudited)
(in thousands)
<S> <C> <C>
Land $ 904 $ 904
Building 8,721 8,595
Molds and dies 2,132 1,971
Furniture and fixtures 1,029 1,005
Machinery and equipment 7,874 7,633
Building improvements 422 408
--------- --------
21,082 20,516
Less: Accumulated depreciation and amortization 8,388 8,013
========= ========
$ 12,694 $ 12,503
========= ========
</TABLE>
-7-
<PAGE> 8
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. 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 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 December 31, 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.
-8-
<PAGE> 9
NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ------------------------
Sales for the six months ended December 31, 1995 remained relatively flat at
$23,276,000 as compared to $23,214,000 for the same period a year ago. For the
three months ended December 31, 1995 sales decreased 4% to $11,507,000 from
$12,044,000 a year ago. This decrease is primarily attributable to a delay in
delivery of a component part which was critical to the manufacturing process of
one of the Company's primary products. This component has subsequently been
delivered and sales orders previously held up due to this delay are now
shipping regularly.
The Company's gross profit margin for the six months ended December 31, 1995
increased 5% to $5,891,000 or 25.3% of sales as compared to $5,595,000 or
24.1% of sales for the same period a year ago. For the three months ended
December 31, 1995, gross profit remained relatively flat at $2,919,000 as
compared to $2,901,000 a year ago. As a percentage of sales, however, gross
profit increased to 25.4% of sales as compared to 24.1% last year. The increases
in both gross profit and gross profit percentage are primarily attributable to
cost savings being generated by the Company's offshore facility in the Dominican
Republic. These savings are a direct result of improved production efficiencies
resulting from its manufacturing operations now being under one roof.
Selling, general and administrative expenses for the six months ended December
31, 1995 decreased by 7% to $4,154,000 as compared to $4,445,000 a year ago. For
the three months ended December 31, 1995, selling, general and administrative
expenses decreased by 7% to $2,123,000 from $2,285,000 last year. These
decreases are due to the Company's continuing efforts towards cost containment.
Interest and other expense for the six months ended December 31, 1995 remained
relatively flat at $686,000 as compared to $664,000 for the same period a year
ago. For the three months ended December 31, 1995, interest and other expenses
decreased 20% to $292,000 as compared to $366,000 for the same period in fiscal
1995. This decrease is due to a decrease in the Company's average outstanding
debt from the same period a year ago.
Provision for income taxes increased $342,000 to $425,000 for the six months
ended December 31, 1995 as compared to $83,000 a year ago. Provision for income
taxes for the three months ended December 31, 1995 increased $163,000 to
$216,000 as compared to $53,000 a year ago. These increases reflect the relative
increase in taxable income of the Company's domestic operations in comparison to
its foreign subsidiary.
Net income increased by 55% to $626,000 or $.14 per share for the six months
ended December 31, 1995 from $403,000 or $.09 per share for the same period a
year ago. For the three months ended December 31, 1995 net income increased by
46% to $288,000 or $.07 per share as compared to $197,000 or $.04 per share for
the same quarter a year ago. This increase is primarily the result of the items
discussed above.
-9-
<PAGE> 10
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 six months ended December 31, 1995 the Company utilized a large
portion of its cash generated from operations to make principle payments on its
debt as well as to purchase property and equipment. The remaining cash
provided by operations resulted in an increase in cash and cash equivalents to
$1,052,000 at December 31, 1995 from $368,000 as of June 30, 1995.
Accounts receivable at December 31, 1995 decreased by $1,457,000 to $12,190,000
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 December 31, 1995 as well as improved collection
procedures.
Inventory at December 31, 1995 was $23,341,000, decreasing by $837,000 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 continues to reduce
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
December 31, 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 December 31, 1995 there were no
outstanding borrowings under this line.
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 December 31, 1995 the Company had no material committments for capital
expenditures.
-10-
<PAGE> 11
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 December 31, 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
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) An annual meeting of the stockholders of the Company
(the "Annual Meeting") was held on November 21, 1995.
(b) The names of the directors elected at the Annual Meeting
are: Richard Soloway, Kenneth Rosenberg, Randy B.
Blaustein and Andrew J. Wilder.
(c) A stockholder proposal to expand the Board of Directors
from four (4) to six (6) directors, three (3) of which
would be independent, was not passed.
-11-
<PAGE> 12
PART II - OTHER INFORMATION (continued)
---------------------------------------
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 December 31, 1995.
-12-
<PAGE> 13
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.
February 20, 1996
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 Officer)
(Co-Principal Executive Officer)
By:/s/ KEVIN S. BUCHEL
---------------------------
Kevin S. Buchel
Senior Vice President of
Operations and Finance
(Principal Financial and
Accounting Officer)
-13-
<PAGE> 14
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibits PAGE
-------- ------
<S> <C>
11 Computation of Earnings Per Share E-1
27 Financial Data Schedule
</TABLE>
-14-
<PAGE> 1
Exhibit (11)
NAPCO SECURITY SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1995 1994
------ ------
(in thousands, except per
share data)
<S> <C> <C>
Average Shares Outstanding 4,368 4,368
Add: Common Stock Equivalents 23 59
------ ------
Weighted Average Shares Outstanding 4,391 4,427
====== ======
Net Income $ 626 $ 403
====== ======
Earnings Per Share $ 0.14 $ 0.09
====== ======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------------
1995 1994
------ ------
(in thousands, except per
share data)
<S> <C> <C>
Average Shares Outstanding 4,368 4,368
Add: Common Stock Equivalents 7 61
------ ------
Weighted Average Shares Outstanding 4,375 4,429
====== ======
Net Income $ 288 $ 197
====== ======
Earnings Per Share $ 0.07 $ 0.04
====== ======
</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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,052
<SECURITIES> 0
<RECEIVABLES> 12,190
<ALLOWANCES> 617
<INVENTORY> 23,341
<CURRENT-ASSETS> 38,548
<PP&E> 21,082
<DEPRECIATION> 8,388
<TOTAL-ASSETS> 54,313
<CURRENT-LIABILITIES> 9,804
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 29,127
<TOTAL-LIABILITY-AND-EQUITY> 54,313
<SALES> 23,276
<TOTAL-REVENUES> 23,276
<CGS> 17,385
<TOTAL-COSTS> 17,385
<OTHER-EXPENSES> 4,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 583
<INCOME-PRETAX> 1,051
<INCOME-TAX> 425
<INCOME-CONTINUING> 626
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 626
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
|
|