HALIFAX CORPORATION
FORM 10-Q
December 31, 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 December 31, 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
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HALIFAX CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION
page
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets - December 31, 1995
(Unaudited) and March 31, 1995 3
Condensed Consolidated Statements of Income - Three and
Nine Months Ended December 31, 1995 and 1994 (Unaudited) 4
Condensed Consolidated Statements of Stockholders' Equity
- Nine Months Ended December 31, 1995 and 1994 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended December 31, 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 9
Item 2. Changes in Securities 9
Item 3. Default Upon Senior Securities 9
Item 4. Submission of Matters for a Vote of Security Holders 9
item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
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HALIFAX CORPORATION
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND MARCH 31, 1995
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1995*
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $554,000 $18,000
Trade accounts receivable 11,646,000 11,077,000
Inventory 3,041,000 3,480,000
Prepaid expenses and other current assets 473,000 781,000
TOTAL CURRENT ASSETS 15,714,000 15,356,000
PROPERTY AND EQUIPMENT, at cost less
accumulated depreciation and amortization 4,615,000 4,717,000
INTANGIBLES AND OTHER ASSETS, net of
accumulated amortization 2,112,000 2,034,000
TOTAL ASSETS $2,441,000 $22,107,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $4,734,000 $5,916,000
Current portion of long-term debt 556,000 595,000
TOTAL CURRENT LIABILITIES 5,290,000 6,511,000
LONG-TERM DEBT 8,648,000 7,195,000
TOTAL LIABILITIES 3,938,000 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 4,972,000 4,795,000
8,891,000 8,714,000
Less treasury stock - at cost 388,000 313,000
STOCKHOLDERS' EQUITY 8,503,000 8,401,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,441,000 $22,107,000
<FN>
*Condensed from March 31, 1995 Audited Financial Statements
</TABLE>
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HALIFAX CORPORATION
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For The Three and Nine Months Ended December 31, 1995 and 1994
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues $11,217,000 $ 9,510,000 $29,239,000 $34,219,000
Operating costs and expenses:
Cost of Services 9,874,000 8,278,000 25,422,000 30,523,000
Selling, general and administrative expenses 858,000 722,000 2,473,000 2,198,000
Total operating costs and expenses 10,732,000 9,000,000 27,895,000 32,721,000
Operating income 485,000 510,000 1,344,000 1,498,000
Litigation expense 34,000 - 294,000 -
Interest expense 137,000 163,000 380,000 497,000
Income before income taxes 314,000 347,000 670,000 1,001,000
Income taxes 123,000 138,000 264,000 390,000
Net Income $ 191,000 $ 209,000 $ 406,000 $ 611,000
Net income per common share: $ 0.16 $ 0.18 $ 0.35 $ 0.51
Weighted average number of common
shares outstanding 1,168,229 1,184,396 1,172,262 1,192,785
<FN>
See notes to consolidated financial statements.
</TABLE>
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HALIFAX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994 (Unaudited)
<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 - - - (229,000) - - (229,000)
Purchase of
Treasury Stock - - - - 12,100 (75,000) (75,000)
Net Income - - - 406,000 - - 406,000
Balance
December 31, 1995 1,480,015 $518,000 $3,401,000 $4,972,000 311,786 (388,000) $8,503,000
Balance
April 1, 1994 1,480,015 $518,000 $3,401,000 $4,240,000 282,586 $(193,000) $7,966,000
Cash Dividends - - - (226,000) - - (226,000)
Purchase of
Treasury Stock 17,100 (120,000) (120,000)
Net Income - - - 611,000 - - 611,000
Balance
December 31, 1994 1,480,015 $518,000 $3,401,000 $4,625,000 299,686 $(313,000) $8,231,000
</TABLE>
<PAGE>
HALIFAX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994 (Unaudited)
<CAPTION>
Nine Months Ended
December 31
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $406,000 $611,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 443,000 431,000
Decrease (Increase) in accounts receivable (569,000) 3,444,000
Decrease in inventory 439,000 746,000
Decrease in other assets 106,000 165,000
(Decrease) in accounts payable
and accrued expenses (1,182,000) (2,362,000)
Total adjustments (763,000) 2,424,000
Net cash provided (used) by operating activities (357,000) 3,035,000
Cash flows from investing activities:
Acquisition of property and equipment (219,000) (302,000)
Proceeds from sale of property and equipment 2,000 -
Net cash used in investing activities (217,000) (302,000)
Cash flows from financing activities:
Proceeds from borrowing of long-term debt 12,587,000 14,770,000
Retirement of long-term debt (11,173,000) (17,232,000)
Cash dividends paid (229,000) (226,000)
Purchase of treasury stock (75,000) (120,000)
Proceeds from sale of stock upon exercise of
stock options - -
Net cash (used) provided by financing activities 1,110,000 (2,808,000)
Net decrease in cash 536,000 (75,000)
Cash beginning of period 18,000 509,000
Cash end of period $554,000 434,000
</TABLE>
<PAGE>
Halifax Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Condensed Consolidated Financial Statements
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 nine month periods ended
December 31, 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.
<PAGE>
Managements' Discussion and Analysis
of Financial Condition and
Results of Operations
Results of Operations
Net revenues increased 18% in the third quarter of fiscal 1996 to $11.2 million,
up $1.7 million over the third quarter of fiscal 1995. The increase was
primarily due to improved revenues on communication service contracts. For the
first nine months of fiscal 1996, net revenues of $29 million were $5 million or
15% less than the same period in fiscal 1995. The nine month period decrease
resulted from the completion of a large U.S. Marine Corp. contract in fiscal
1995. The contact contributed $5.5 million of revenues in the first quarter of
the prior year.
Net income for the third quarter of fiscal 1996 was $191,000, down slightly from
$209,000 for the same quarter last year. For the nine months ending December
31, 1995, net income was $406,000, or 34% less than the comparable period of the
prior year. The reduction in income is primarily the result of litigation
expenses of $294,000 associated with a trial and lawsuit described below.
Operating margins for the year to date through December 31, 1995, remained
comparable to the same period for the prior year. However, operating margins
for the third quarter were lower than those of the prior year due to increased
resale revenues associated with one of the communication contracts. Decreased
interest expense reflects lower borrowing levels and lower interest rates in the
current year.
Liquidity and Sources of Capital
Cash flows used by operations were $357,000 for the first nine months ended
December 31, 1995 as compared with $3,035,000 provided by operations in the
comparable period of the prior year. The $406,000 increase in net income for
the period was offset by other changes in working capital accounts. Accounts
payable and accrued expenses declined during the period by $1,182,000 and
accounts receivable increased $569,000. These uses of cash were partly offset
by decreased inventory balances and non-cash depreciation and amortization
expense.
The Company's financial position continued to improve in the third quarter ended
December 31, 1995. The Company's current ratio improved to 2.97 at December 31,
1995. This current ratio compares with 2.36 at March 31, 1995. Long-term
borrowings increased approximately $2.4 million in the third quarter to finance
increased revenues. The debt to equity ratio of 1.64:1 at December 31, 1995
remains comparable to the debt to equity ratio of 1.63:1 at March 31, 1995. The
Company has approximately $2.3 million of its $7 million credit facility
available to finance future growth.
<PAGE>
The Company is confident that cash generated from normal operations and the
corporation's line of credit will be sufficient to meet its normal operating
requirements in the foreseeable future. The Company's funded backlog for
services as of December 31, 1995 was $30,000,000 as compared to $17,000,000 at
March 31, 1995. As of December 31, 1995, based on total amounts bid on
contracts awarded, the company's five year potential revenues for work remaining
to be performed under existing contracts are approximately $106,000,000.
Contingent Matters
The Company is a defendant or co-defendant in various law suits. In one of
these lawsuits, the plaintiff sought damages for alleged interference with its
business expectency. As previously reported on October 27, 1995, a jury awarded
the plainfiff $435,177 for compensatory damages plus interest from January 14,
1990. On January 16, 1996, a final judgement was entered in Halifax's favor by
the court, which granted Halifax's post-trial motion to set aside the earlier
jury verdict. The plaintiff has filed an appeal of this judgement. The Company
provides for costs related to contingencies when a loss is probable and the
amount is reasonably determinable. It continues to be the belief of management,
based on advice from 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 trial 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 for compensatory damages plus interest
has been overturned by the judge in the case and final judgment entered in
favor of Halifax. The plaintiff has appealed this decision.
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 - Not applicable
(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 February 12, 1996 By:s/Howard C. Mills
Howard C. Mills
President
Date: February 12, 1996 By:s/Richard J. Smithson
Richard J. Smithson
Vice President Administration
& Treasurer
For a menu of Halifax Corporation new releases available by fax 24 hours (no
charge) or to retrieve a specific release, please call 1-800-758-5804, ext.
391950, or access the address http://www.prnewswire.com on the Internet.
<PAGE>
<TABLE> <S> <C>
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<PERIOD-START> APR-1-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> 9-MOS
<EXCHANGE-RATE> 1
<CASH> 554,000
<SECURITIES> 0
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<COMMON> 518,000
<OTHER-SE> 7,985,000
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<SALES> 29,239,000
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<CGS> 25,422,000
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<OTHER-EXPENSES> 294,000
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<INCOME-PRETAX> 670,000
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