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 quarterly period ended October 1, 1995
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 No. 0-12942
PARLEX CORPORATION
(Exact Name of Registrant As Specified in its Charter)
Massachusetts 04-2464749
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
145 Milk Street, Methuen, Massachusetts 01844
(Address of principal executive offices) (Zip Code)
508-685-4341
(Registrant's telephone number, including area code)
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 [ ]
The number of shares of the Registrant's Common Stock, par value $.10
per share, outstanding at October 31, 1995 was 2,370,659 shares.
PARLEX CORPORATION
INDEX
Financial Statements:
Consolidated Balance Sheets - October 1, 1995 and June 30, 1995 3
Consolidated Statements of Income - For the Three Months
ended October 1, 1995 and October 2, 1994 4
Consolidated Statements of Cash Flows - For the Three Months
ended October 1, 1995 and October 2, 1994 5
Notes to Unaudited Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II - Other Information 9
Signatures 10
PARLEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1995 AND JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
October 1, 1995 June 30, 1995
--------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 119,358 $ 161,392
Accounts receivable - net 7,830,135 7,171,553
Inventories:
Raw material 2,260,539 1,867,370
Work in process 3,527,335 4,216,706
Refundable income taxes 202,511 206,669
Deferred income taxes 263,150 263,150
Other current assets 635,925 441,866
----------- -----------
Total current assets 14,838,953 14,328,706
----------- -----------
Property, plant and equipment:
Land 468,864 468,864
Buildings 6,811,157 6,629,301
Machinery and equipment 21,765,946 21,140,403
Leasehold improvements and other 776,620 737,863
----------- -----------
Total 29,822,587 28,976,431
Less accumulated depreciation and amortization (19,451,336) (19,047,539)
----------- -----------
Property, plant and equipment - net 10,371,251 9,928,892
----------- -----------
Other assets 376,244 259,503
----------- -----------
Total $25,586,448 $24,517,101
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 200,000 $ 200,000
Accounts payable 4,742,609 3,405,642
Accrued liabilities 1,590,894 2,257,184
----------- -----------
Total current liabilities 6,533,503 5,862,826
----------- -----------
Long-term debt 2,650,000 2,300,000
----------- -----------
Other non-current liabilities 1,704,351 1,686,816
----------- -----------
Stockholders' equity:
Preferred stock -0- -0-
Common stock 258,065 257,941
Additional paid-in capital 3,233,254 3,226,316
Retained earnings 12,244,900 12,220,827
Less treasury stock at cost (1,037,625) (1,037,625)
----------- -----------
Total Stockholders' equity 14,698,594 14,667,459
----------- -----------
Total $25,586,448 $24,517,101
=========== ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statments
PARLEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended October 1, 1995 and October 2, 1994
(Unaudited)
<TABLE>
<CAPTION>
October 1, 1995 October 2, 1994
--------------- ---------------
<S> <C> <C>
Product Sales $11,611,410 $9,417,346
----------- ----------
Costs and Expenses:
Cost of products sold 10,295,136 7,615,948
Selling, general and administrative expenses 1,252,331 1,176,961
----------- ----------
Operating costs and expenses 11,547,467 8,792,909
----------- ----------
Operating income 63,943 624,437
Other income - (Note 3) 44,452 16,451
Interest expense (69,622) (22,246)
----------- ----------
Income before income taxes 38,773 618,642
Provision for income taxes (14,700) (245,800)
----------- ----------
Net income $ 24,073 $ 372,842
=========== ==========
Net income per common share $.01 $.16
==== ====
Weighted average number of common and common
stock equivalent shares outstanding 2,447,328 2,339,695
=========== ==========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
PARLEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended October 1, 1995 and October 2, 1994
(Unaudited)
<TABLE>
<CAPTION>
October 1, 1995 October 2, 1994
--------------- ---------------
<S> <C> <C>
Cash Flows Provided by Operating Activities:
Net income $ 24,073 $ 372,842
---------- ---------
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 403,797 386,812
Deferred compensation 17,535 13,961
Increase (decrease) in cash from:
Accounts receivable - net (658,582) (472,872)
Refundable income taxes 4,158 -
Inventories 296,202 (64,793)
Other current assets (194,059) (108,249)
Accounts payable 1,336,967 110,439
Accrued liabilities (666,290) (195,269)
Income taxes payable - 69,025
---------- ---------
Total adjustments 539,728 (260,946)
---------- ---------
Net cash provided by operating activities 563,801 111,896
---------- ---------
Investment Activities:
Additions to property, plant and equipment (846,157) (471,131)
(Increase) decrease in other assets (116,741) 219
---------- ---------
Net cash used for investment activities (962,898) (470,912)
---------- ---------
Financing Activities:
Increase in long-term debt 350,000 100,000
Exercise of stock options 7,063 215,325
---------- ---------
Net cash from financing activities 357,063 315,325
---------- ---------
Net Decrease in Cash and Cash Equivalents (42,034) (43,691)
Cash and Cash Equivalents at Beginning of Period 161,392 194,048
---------- ---------
Cash and Cash Equivalents at End of Period $ 119,358 $ 150,357
========== =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
PARLEX CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. Management Statement
- --------------------------
The financial statements as reported in Form 10-Q reflect all
adjustments which are, in the opinion of management, necessary to present
fairly the financial position as of October 1, 1995 and the results of
operations and cash flows for the three months ended October 1, 1995 and
October 2, 1994. All adjustments made to the interim financial statements
were of a normal recurring nature.
The Company followed the same accounting policies in the preparation
of this interim financial statement as described in the Company's annual
filing on Form 10-K for the year ended June 30, 1995, and this filing should
be read in conjunction with that annual report.
2. Income Per Share
- ----------------------
The income per share computations in the current period are based on
the weighted average number of common and common stock equivalent shares
outstanding. Last year, common stock equivalents were not used as they were
deemed to be immaterial.
3. Other Income
- ------------------
Other income in the current and preceding year was comprised of items
of miscellaneous nature.
4. Joint Venture
- -------------------
In May 1995, the Company entered into an agreement to establish a
limited liability company in the form of a joint venture in the People's
Republic of China. The Company owns 50.1% of the Joint Venture. The Joint
Venture commenced operations September 1, 1995. Due to its relative
insignificance, as well as time concerns regarding the availability of all
necessary financial data, the Company intends to report the financial
results of this venture on a three month time lag.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operations
- ----------
Net sales in the first quarter of the current fiscal year were
$11,611,410, an increase of 23% over the sales of $9,417,346 reported in the
comparable quarter last year. The primary factors contributing to the
increase in shipments involved a major program in the Flexible Circuit
Products Division and an increase in sales in the Laminated Cable Division.
Sales are recognized upon shipment.
The cost of products sold as a percentage of sales was 89% and 81% for
the first quarter this year and last year, respectively. The increase in
the cost of sales percentage was attributed entirely to the rapid buildup in
shipments of a large multi-year contract in the Flexible Circuit Products
Division, involving new technology, new equipment, the use of very thin
materials with special handling requirements, and some incurred costs
associated with learning curve issues. The Company now anticipates
improvements in yields and other production cost factors, which should
reduce the cost of sales percentage in subsequent quarters.
Selling, general, and administrative expenses as a percentage of sales
was 11% in the current quarter versus 12% last year. The improvement was a
result of the Company's ability to generate additional sales without
incurring a commensurate increase in expenses.
Interest expense was $69,622 this quarter as compared to $22,246 last
year. Although the Company was able to generate positive cash flow from
operating activities during the past fiscal year, the Company still had to
borrow money to facilitate its growth through the purchase of equipment and
to satisfy its additional working capital needs. These additional
borrowings are responsible for the increase in expenses.
Other income, both this year as well as last year, is comprised of
items of a miscellaneous nature.
The above factors resulted in income before income taxes of $38,773 in
the first quarter this year versus $618,642 for the comparable period last
year.
The Company's effective tax rate was 38% and 40% for the current
quarter this year and last year, respectively.
After providing for taxes, the Company's net income was $24,073 this
quarter versus $372,842 for the comparable quarter last year.
Liquidity and Capital Resources
- -------------------------------
Since the Company is anticipating continuous growth, additional
borrowings to finance further working capital needs and capital expenditures
will be necessary. Additionally, monies will also be needed to finance some
of the requirements associated with Parlex (Shanghai) Circuit Company, Ltd.,
the Chinese Joint Venture (of which Parlex Corporation owns 50.1%) that
commenced operations September 1, 1995. The Company's investment, valued at
approximately $1,500,000, will include technology, equipment, training,
technical support, and cash (of approximately $600,000) during fiscal year
1996. The Company is currently in the process of renegotiating its current
revolving loan agreement for the purpose of increasing its credit line. The
Company presently has an unsecured revolving credit agreement of $3,000,000
that became effective June 1994, and expires December 1996.
With the positive cash flow expected to be generated internally,
together with the increased line that should be in place shortly, the
Company believes it will be in a secure financial position to accommodate
its future requirements.
PART II - OTHER INFORMATION
Items 1-5 THESE ITEMS ARE INAPPLICABLE
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) The Company filed no reports on Form 8-K
during the quarter for which this report is filed.
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.
PARLEX CORPORATION
-------------------------------
/s/ HERBERT W. POLLACK
-------------------------------
Herbert W. Pollack
Chairman
/s/ PETER J. MURPHY
-------------------------------
Peter J. Murphy
President
/s/ STEVEN M. MILLSTEIN
-------------------------------
Steven M. Millstein
Vice President of Finance
November 13, 1995
-------------------------------
Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains a summary of financial information extracted from the
Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of
Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> OCT-01-1995
<CASH> 119,358
<SECURITIES> 0
<RECEIVABLES> 7,916,380
<ALLOWANCES> 86,245
<INVENTORY> 5,787,874
<CURRENT-ASSETS> 14,838,953
<PP&E> 29,822,587
<DEPRECIATION> 19,451,336
<TOTAL-ASSETS> 25,586,448
<CURRENT-LIABILITIES> 6,333,503
<BONDS> 250,000
<COMMON> 258,065
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,586,448
<SALES> 11,611,410
<TOTAL-REVENUES> 11,611,410
<CGS> 10,259,136
<TOTAL-COSTS> 11,547,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,622
<INCOME-PRETAX> 38,773
<INCOME-TAX> 14,700
<INCOME-CONTINUING> 24,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,073
<EPS-PRIMARY> $.01
<EPS-DILUTED> $.01
</TABLE>
