HALIFAX CORPORATION
FORM 10-Q
SEPTEMBER 30, 1995
<PAGE>
FORM 10Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-26589. eff. 4/12/89.)
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 September 30, 1995
( )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 1-8964
Halifax
Corporation (Exact name of
registrant as specified in its charter)
Virginia
54-0829246
(State or other jurisdiction of incorporation of organization)
(IRS Employer Identification No.)
5250 Cherokee Avenue, Alexandria, VA 22312
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 750-2202
N/A
(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 Section 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.
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.
1,168,229
<PAGE>
HALIFAX CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION
page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1995
(Unaudited) and March 31, 1995 3
Condensed Consolidated Statement of Income - Three and
Six Months Ended September 30, 1995 and 1994 (Unaudit) 4
Condensed Consolidated Statement of Stockholders'
Equity - Six Months Ended September 30, 1995 and 1994
(Unaudited) 5
Condensed Consolidated Statement of Cash Flows - Six
Months EndedSeptember 30, 1995 and 1994 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters for a Vote of
Security Holders 10
item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
HALIFAX CORPORATION
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND MARCH 31, 1995
<CAPTION>
SEPTEMBER 30, 1995 MARCH 31, 1995*
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 93,000 18,000
Trade accounts receivable 9,266,000 11,077,000
Inventory 3,170,000 3,480,000
Prepaid expenses and other current assets 627,000 781,000
TOTAL CURRENT ASSETS 13,156,000 15,356,000
PROPERTY AND EQUIPMENT, at cost less accumulated
depreciation and amortization 4,597,000 4,717,000
INTANGIBLES AND OTHER ASSETS, net of accumulated
amortization 2,150,000 2,034,000
TOTAL ASSETS $ 19,903,000 $ 22,107,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $4,801,000 $5,916,000
Current portion of long-term debt 583,000 595,000
TOTAL CURRENT LIABILITIES 5,384,000 6,511,000
LONG-TERM DEBT 6,130,000 7,195,000
TOTAL LIABILITIES 11,514,000 13,706,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock 518,000 518,000
Additional paid-in capital 3,401,000 3,401,000
Retained earnings 4,858,000 4,795,000
8,777,000 8,714,000
Less treasury stock - at cost 388,000 313,000
STOCKHOLDERS' EQUITY 8,389,000 8,401,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,903,000 $ 22,107,000
<FN>
*Condensed from March 31, 1995 Audited Financial Statements
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
HALIFAX CORPORATION
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For The Three and Six Months Ended September 30, 1995 and 1994
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues $9,076,000 $10,638,000 $18,022,000 $24,709,000
Operating Costs and expenses:
Cost of Services 7,831,000 9,471,000 15,548,000 22,245,000
Selling, general and administrative expenses 803,000 658,000 1,615,000 1,476,000
Total operating costs and expenses 8,634,000 10,129,000 17,163,000 23,721,000
Operating income 442,000 509,000 859,000 988,000
Litigation expense 260,000 - 260,000 -
Interest expense 135,000 159,000 243,000 334,000
Income before income taxes 47,000 350,000 356,000 654,000
Income taxes 20,000 135,000 141,000 252,000
Net Income 27,000 $ 215,000 $ 215,000 $ 402,000
Net income per common share: $ .02 $ 0.18 $ .18 $ 0.34
Weighted average number of common
shares outstanding 1,168,229 1,196,529 1,174,279 1,196,979
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
HALIFAX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
Common Stock Additional Treasury Stock
Paid-In Retained
Shares Par Value Capital Earnings Shares Cost Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
April 1, 1995 1,480,015 $ 518,000 $ 3,401,000 $ 4,795,000 299,686 $(313,000) $ 8,401,000
Cash Dividends - - - (152,000) - - (152,000)
Purchase of
Treasury Stock 12,100 (75,000) (75,000)
Net Income - - - 215,000 - - 215,000
Balance
September 30, 1995 1,480,015 $ 518,000 $ 3,401,000 $ 4,858,000 311,786 $ (388,000) $ 8,389,000
Balance
April 1, 1994 1,480,015 $ 518,000 $ 3,401,000 $ 4,240,000 282,586 $ (193,000) $ 7,966,000
Net Income - - - 402,000 - - 402,000
Cash Dividends - - - (149,000) - - (149,000)
Purchase of
Treasury Stock - - - - 2,700 $ (20,000) $ (20,000)
Balance
September 30, 1994 1,480,000 $ 518,000 $ 3,401,000 $ 4,493,000 285,286 $ (213,000) $ 8,199,000
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
HALIFAX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
Six Months Ended
September 30
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 215,000 $ 402,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 292,000 293,000
Decrease in accounts receivable 1,811,000 3,820,000
Decrease in inventory 310,000 511,000
Decrease (Increase) in other assets (45,000) 188,000
(Decrease) Increase in accounts payable
and accrued expenses (1,115,000) (2,871,000)
Total adjustment 1,253,000 1,941,000
Net cash provided (used) by operating activities 1,468,000 2,343,000
Cash flows from investing activities:
Acquisition of property and equipment (92,000) (245,000)
Proceeds from sale of property and equipment 3,000 (29,000)
Net cash used in investing activities (89,000) (245,000)
Cash flows from financing activities:
Proceeds from borrowing of long-term debt 5,627,000 10,124,000
Retirement of long-term debt (6,704,000) (12,432,000)
Cash dividends paid (152,000) (149,000)
Purchase of treasury stock (75,000) (20,000)
Net cash (used) provided by financing activities (1,304,000) (2,477,000)
Net decrease in cash 75,000 (379,000)
Cash beginning of period 18,000 509,000
Cash end of period $ 93,000 $ 130,000
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
Halifax Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated 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
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three and six month periods ended September 30,
1995 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1996. For further
information refer to the consolidated financial statements and
footnotes thereto included in the Halifax Corporation annual report
on Form 10-K for the year ended March 31, 1995.
Note B - Contingent Matters
The Company is a co-defendant or is defendant in various lawsuits.
In one of these lawsuits the plaintiff sought damages for alleged
interference with its business. On October 27, 1995 a jury awarded
$435,177 for compensatory damages plus interest from January 14,
1990, but a final judgement has not been entered by the court
pending the outcome of post trial motions. The Company provides
for costs related to contingencies when a loss is probable and the
amount is reasonably determinable. In this situation, the Company
believes that the evidence does not support any liability and has
filed a motion with the court to set aside the verdict. It is
therefore the opinion of management, based on advice of counsel,
that the ultimate resolution of this contingency will not have a
material adverse effect on the financial condition of the Company.
<PAGE>
Managements' Discussion and Analysis
of Financial Condition and
Results of Operations
Results of Operations
Revenues for the second quarter and six months ended September 30,
1995 were $9.1 million and $18 million respectively. Comparable
revenues for the same periods in the prior year were $10.6 million
and $24.7 million. Substantially all of the revenue decrease in
the six months ending September 30, 1995 was due to the termination
of the very large USMC contract early in the first quarter of the
prior year.
Operating margin percentages for the second quarter and year to
date through September 30, 1995 improved slightly over the same
periods for the prior year because of increased efficiencies
associated with communication contracts and termination of the low
margin USMC contract. The ratio of costs of services and of
general and administrative expenses to revenue, decreased and
increased, respectively as a result of the change in business mix.
Litigation expenses of $260,000 in the three and six month periods
ending September 30, 1995 include legal costs associated with a
trial of a lawsuit described below. Interest expense decreased
$24,000 in the second quarter ending September 30, 1995 and $91,000
in the six months then ended from the comparable periods in the
prior fiscal year due to a reduction in borrowings.
Net income for the second quarter was $27,000 compared with
$215,000 for the same quarter of the prior year. For the six
months ending September 30, 1995, net income was $215,000 compared
with $402,000 for the prior year. Operating income in the second
quarter was largely offset by the legal costs associated with the
trial.
Liquidity and Sources of Capital
The Company's financial position at September 30, 1995 remains
strong. The Company had $7.9 million of working capital at
September 30, 1995 and a current ratio of 2.44:1. The debt to
equity ratio improved to 1.37:1 and the Company has almost $5
million of its $7 million credit facility available to finance
growth.
Cash flows from operations were $1,468,000 for the first six months
of fiscal year 1996 as compared with $2,343,000 in the comparable
period of 1995. The $215,000 in net income for the period combined
with decreases in working capital accounts provided cash inflows
sufficient to repay long term debt by approximately $875,000. The
Company expects that cash generated from operations and the
Company's line of credit will be sufficient to meet its normal
operating requirements in the foreseeable future.
<PAGE>
Contingent Matters
The Company is a co-defendant or is defendant in various lawsuits.
In one of these lawsuits the plaintiff sought damages for alleged
interference with its business. On October 27, 1995 a jury awarded
$435,177 for compensatory damages plus interest from January 14,
1990, but a final judgement has not been entered by the court
pending the outcome of post trial motions. The Company provides
for costs related to contingencies when a loss is probable and the
amount is reasonably determinable. In this situation, the Company
believes that the evidence does not support any liability and has
filed a motion with the court to set aside the verdict. It is
therefore the opinion of management, based on advice of counsel,
that the ultimate resolution of this contingency will not have a
material adverse effect on the financial condition of the Company.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Commercial Business Systems, Inc. v. Halifax Corporation, et al.
Plaintiff's claim, which has been the subject of judicial
proceedings since August of 1990 and was consolidated with a
similar claim against BellSouth, went to trail on October 18, 1995,
resulting in a jury verdict against Halifax, a former employee and
a non-employee, for wrongful interference with a prospective
business relationship. The jury award was $435,177 for
compensatory damages plus interest from January 14, 1990, but a
final judgement has not been entered by the court pending the
outcome of post trial motions.
Item 2. Changes in Securities - Not applicable
Item 3. Defaults upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not
applicable
Item 5. Other Information - Not applicable
Item 6. Exhibits and Reports on Form 8-K
The following exhibits and reports included herein:
(a) Exhibits - EX-27
(b) Reports on Form 8-K - None
<PAGE>
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.
HALIFAX CORPORATION
(Registrant)
Date: November 10, 1995 By: s/Howard C. Mills
Howard C. Mills
President
Date: November 10, 1995 By: s/Richard J. Smithson
Richard J. Smithson
Vice President Administration
& Treasurer
<PAGE>
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.
HALIFAX CORPORATION
Date: By:
Howard C. Mills
President
Date: By:
Richard J. Smithson
Vice President Administration
& Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
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<PERIOD-START> APR-1-1995
<PERIOD-END> SEP-30-1995
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<CASH> 93,000
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<COMMON> 518,000
<OTHER-SE> 7,871,000
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<SALES> 18,022,000
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<CGS> 15,548,000
<TOTAL-COSTS> 17,163,000
<OTHER-EXPENSES> 260,000
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 356,000
<INCOME-TAX> 141,000
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</TABLE>
