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 April 2, 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 May 1, 1995 was 2,368,284 shares.
PARLEX CORPORATION
INDEX
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Financial Statements:
Consolidated Balance Sheets - April 2, 1995 and June 30, 1994.............. 3
Consolidated Statements of Income - For the Three Months
and Nine Months Ended April 2, 1995 and April 3, 1994..................... 4
Consolidated Statements of Cash Flows - For the Nine Months
ended April 2, 1995 and April 3, 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
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PARLEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 2, 1995 AND JUNE 30, 1994
(Unaudited)
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<CAPTION>
April 2, 1995 June 30, 1994
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ASSETS
Current assets:
Cash and cash equivalents $ 116,235 $ 194,048
Accounts receivable - net 6,688,460 6,161,716
Inventories:
Raw material 1,567,614 1,540,134
Work in process 4,237,815 3,646,232
Deferred income taxes 316,026 316,026
Other current assets 555,271 260,233
Total current assets 13,481,421 12,118,389
Property, plant and equipment:
Land 468,864 468,864
Buildings 6,499,202 6,123,264
Machinery and equipment 20,680,188 19,352,888
Leasehold improvements and other 759,542 694,650
Total 28,407,796 26,639,666
Less accumulated depreciation and amortization (19,011,589) (18,082,029)
Property, plant and equipment - net 9,396,207 8,557,637
Other assets 228,610 169,269
Total $23,106,238 $20,845,295
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 200,000 $ 200,000
Accounts payable 3,316,263 2,794,821
Accrued liabilities 2,102,159 2,056,743
Income taxes payable - 362,940
Total current liabilities 5,618,422 5,414,504
Long-term debt 1,650,000 950,000
Other non-current liabilities 1,647,046 1,600,671
Stockholders' equity
Preferred stock -0- -0-
Common stock 257,828 252,186
Additional paid-in capital 3,149,741 2,930,620
Retained earnings 11,820,826 10,734,939
Less treasury stock at cost (1,037,625) (1,037,625)
Total Stockholders' equity 14,190,770 12,880,120
Total $23,106,238 $20,845,295
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See Notes to Unaudited Consolidated Financial Statements
PARLEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Nine Months Ended April 2, 1995 and April 3,1994
(Unaudited)
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Three Months Ended Nine Months Ended
Apr. 2, 1995 Apr. 3, 1994 Apr. 2, 1995 Apr. 3, 1994
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Net Sales $9,946,585 $8,885,214 $29,246,220 $25,405,528
Costs and Expenses:
Cost of products sold 8,285,192 7,497,918 23,884,405 21,287,853
Selling, general and administrative expenses 1,380,592 1,177,410 3,731,173 3,433,713
Operating costs and expenses 9,665,784 8,675,328 27,615,578 24,721,566
Operating income 280,801 209,886 1,630,642 683,962
Other income - (Note 4) 160,017 2,403 273,318 42,097
Interest expense (38,151) (29,395) (95,923) (81,014)
Income before income taxes 402,667 182,894 1,808,037 645,045
Credit (provision) for income taxes (Note 3) (161,600) 19,938 (722,150) 19,938
Net income $241,067 $202,832 $1,085,887 $664,983
Net income per common share $.10 $.09 $.45 $.29
Weighted average number of common and
common stock equivalent shares
outstanding 2,482,733 2,311,359 2,424,835 2,310,503
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See Notes to Unaudited Consolidated Financial Statements
PARLEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended April 2, 1995 and April 3, 1994
(Unaudited)
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Nine Months Ended
April 2, 1995 April 3, 1994
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Cash Flows Provided by Operating Activities:
Net income $1,085,887 $ 664,983
Adjustments to reconcile net income to net
cash provided by (used for)operating activities:
Depreciation and amortization 1,146,184 1,116,839
Gain on sale of equipment (500) (13,957)
Deferred income taxes - 6,000
Deferred compensation 46,375 60,673
Increase (decrease) in cash from:
Accounts receivable - net (526,744) (617,837)
Other current assets (233,353) (304,708)
Inventories (619,063) (313,720)
Accounts payable 521,442 454,615
Accrued liabilities 45,416 331,116
Income taxes payable (424,625) -
Total adjustments (44,868) 719,021
Net cash provided by operating activities 1,014,019 1,384,004
Investment Activities:
Additions to property, plant and equipment (1,984,754) (1,144,254)
Increase in other assets (59,341) (22,948)
Proceeds from the sale of equipment 500 20,406
Net cash used for investment activities (2,043,595) (1,146,796)
Financing Activities:
Increase (decrease) of long-term debt 700,000 (375,000)
Exercise of stock options 224,763 16,000
Net cash from (used for) financing activities 924,763 (359,000)
Net Decrease in Cash and Cash Equivalents (77,813) (121,792)
Cash and Cash Equivalents at Beginning of Period 194,048 313,835
Cash and Cash Equivalents at End of Period $116,235 $192,043
</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 April 2, 1995 and the results of operations and cash
flows for the three and nine months ended April 2, 1995 and April 3, 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, 1994, and this filing should be read in
conjunction with that annual report.
2. Income Per Share
In the third quarter and first nine months of this year, the income per
share computations are based on the weighted average number of common and
common stock equivalent shares outstanding during the respective periods.
Last year, common stock equivalents were not used as they were deemed to be
immaterial.
3. Income Taxes
In the current year, the Company has provided for taxes at an effective rate
of 40%. Last year, the Company had an effective tax rate of zero resulting
from the recognition of federal and state net operating loss (NOL)
carryforwards. At April 2, 1995, the Company had available, for state income
tax purposes, net operating loss carryforwards of approximately $463,000 which
expire in 1996 and 1997.
4. Other Income
This year, other income is comprised of fees associated with licensing
agreements, as well as items of a miscellaneous nature. Last year, no monies
were earned regarding any licensing arrangements.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operations
Net sales in the third quarter of the current fiscal year were $9,946,585,
an increase of approximately 12% from the sales of $8,885,214 reported for the
same quarter last year. For the first nine months of the year, sales totalled
$29,246,220 versus $25,405,528 for the comparable period last year, an
increase of about 15%. These results reflect increased shipments in both the
Laminated Cable and the Flexible Circuit Products Division. The introduction
of several new technologies and a continuing focus in making further
penetration into the various commercial markets are the primary factors
contributing to the increase. As further evidence of the Company's success in
expanding upon its non-military business, commercial sales constituted 68% of
the overall shipments through the first nine months this year versus 62% last
year.
Sales are recognized upon shipment.
The cost of products sold as a percentage of sales this year was 83% and 82%
for the third quarter and first nine months, respectively. This compares to
84% in the respective periods last year. The reduction in the cost of sales
percentage resulted from enhanced operational efficiency, improved absorption
of manufacturing overhead, and the Company's ongoing efforts to reduce costs.
These reductions were offset, in part, by some training and start-up costs
associated wtih a major multiyear contract that commenced in the current
quarter.
Selling, general, and administrative expenses as a percentage of sales was
14% in the current quarter and 13% for the nine months to date. Last year, the
selling, general, and administrative expenses was 13% for both time periods.
Some additional sales and marketing costs were incurred in the current quarter
resulting in a slight increase in the percentage.
Interest expense in the third quarter was $38,151 as compared to $29,395
last year. For the first nine months, interest expense was $95,923 versus
$81,014 last year. The increase in expense is primarily due to the increase in
the average level of borrowings and the increase in the prime lending rate.
Other income this quarter was $160,017 versus $2,403 last year. For the
first nine months, other income totalled $273,318 as compared to $42,097 last
year. This year, other income is comprised of fees associated with some
licensing agreements, as well as items of a miscellaneous nature. Last year,
no monies were earned regarding any licensing arrangements.
The above factors resulted in income before income taxes of $402,667 and
$1,808,037 for the third quarter and first nine months this year,
respectively. This compares to income before income taxes of $182,894 in the
third quarter and $645,045 for the first nine months last year .
The Company's effective tax rate was 40% for both the current quarter and
first nine months this year. Last year, the Company recognized a tax credit of
approximately $20,000. During fiscal 1993, the Company adopted FASB-109 -
Accounting for Income Taxes. In accordance with that standard, the Company
provided for a valuation allowance approximating $650,000 at June 30, 1993 for
possible expiration of federal and state net operating loss (NOL) carryovers
prior to realization. During last fiscal year, because of the Company's
sustained profitability, it became apparent that the Company would be able to
utilize a portion of those previously reserved NOLs and adjusted its effective
tax rate accordingly.
The net income for the quarter, as a result of the above factors, was
$241,067 versus $202,832 last year. For the first nine months this year, the
net income was $1,085,887 as compared to $664,983 last year.
Liquidity and Capital Resources
The Company's borrowings under its $3,000,000 revolving credit facility were
$1,500,000 at April 2, 1995, an increase of $850,000 since the end of the
preceding fiscal year ended June 30, 1994. These additional borrowings were
fully anticipated since the Company had major commitments relating to
expenditures for equipment and building improvements that will increase
capacity, provide for more cost effective processing, and enhance the
technology capabilities of the Company. Furthermore, the Company had to
increase its working capital to satisfy the anticipated increases in
shipments.
The Company expects to expend a considerable amount in additional equipment
next quarter as well. Most of the Company's needs will be satisfied through
internally generated funds, while the remainder will come from its revolving
credit facility.
PART II - OTHER INFORMATION
Items 1-4 THESE ITEMS ARE INAPPLICABLE
Item 5 Other Events
On May 4, 1995, the Board of Directors of Parlex Corporation
elected Peter J. Murphy president and chief operating officer
effective July 1, 1995. He succeeds Herbert W. Pollack who will
remain as chief executive officer and chairman of the board.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) The Company filed a Form 8-K on March 21, 1995
which reported that on February 16, 1995, the Board of
Directors of Parlex Corporation appointed Richard Hale
to serve as a Class I Director until the Company's annual
meeting in 1995 and until his successor is elected and
qualified, and appointed Sheldon Buckler to serve as a
Class III Director until the Company's annual meeting in
1997 and until his successor is elected and qualified.
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
President
/s/ STEVEN M. MILLSTEIN
Steven M. Millstein
Vice President of Finance
May 12, 1995
Date
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<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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> APR-02-1995
<CASH> $116,235
<SECURITIES> 0
<RECEIVABLES> 6,794,525
<ALLOWANCES> 106,065
<INVENTORY> 5,805,429
<CURRENT-ASSETS> 13,419,736
<PP&E> 28,407,796
<DEPRECIATION> 19,011,589
<TOTAL-ASSETS> 23,044,553
<CURRENT-LIABILITIES> 5,356,737
<BONDS> 350,000
<COMMON> 257,828
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,044,553
<SALES> 29,246,220
<TOTAL-REVENUES> 29,246,220
<CGS> 23,884,405
<TOTAL-COSTS> 27,615,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,923
<INCOME-PRETAX> 1,808,037
<INCOME-TAX> 722,150
<INCOME-CONTINUING> 1,085,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,085,887
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
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