<PAGE> 1
================================================================================
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 March 31,1995
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 NUMBER 0-15277
_____________________
VERTEX COMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)
TEXAS 75-1982974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2600 N. LONGVIEW STREET, KILGORE, TEXAS 75662
(Address of principal executive offices) (Zip Code)
903-984-0555
(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 30 days.
YES X NO
--- ---
______________________
As of March 31, 1995, there were 4,404,456 shares outstanding of the
Registrant's Common Stock $.10 par value.
================================================================================
<PAGE> 2
VERTEX COMMUNICATIONS CORPORATION
Table of Contents to Form 10-Q For the
three months ended March 31, 1995
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION PAGE
- - ------------------------------ ----
<S> <C>
Condensed Consolidated Balance Sheets - March 31, 1995
and September 30, 1994.................................... 1
Condensed Consolidated Statements of Income
Three months ended March 31, 1995 and
April 1, 1994............................................. 2
Condensed Consolidated Statements of Income
Six months ended March 31, 1995 and
April 1, 1994............................................. 3
Condensed Consolidated Statements of Cash Flows
Six months ended March 31, 1995 and
April 1, 1994............................................. 4
Notes to Condensed Consolidated Financial Statements........5 & 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition....................... 7
Part II - OTHER INFORMATION
- - ---------------------------
Item 4 - Submission of matters to a vote of
security holders..................................... 8
Item 6 - Exhibits and reports on Form 8-K..................... 9
Signature..................................................... 10
</TABLE>
<PAGE> 3
PART I-FINANCIAL INFORMATION
----------------------------
Item l. FINANCIAL STATEMENTS
Vertex Communications Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 September 30
(In thousands, except share amounts) 1995 1994
----------- ------------
(Unaudited) *
<S> <C> <C>
ASSETS
- - ------
Current assets:
Cash and cash equivalents $12,867 $20,527
Accounts receivable, net 16,448 16,371
Inventories (Note B) 12,320 8,940
Prepaid income taxes 148 668
------- -------
41,783 46,506
Property and equipment, at cost 19,914 18,063
Less accumulated depreciation (7,915) (6,967)
------- -------
11,999 11,096
Goodwill, less amortization of $90 5,322 ---
Other assets 891 855
------- -------
TOTAL ASSETS $59,995 $58,457
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Accounts payable $ 3,016 $ 2,396
Accrued compensation 1,682 2,381
Other accrued liabilities 3,445 3,875
Customers' advances 2,558 1,186
Deferred income taxes 474 633
------- -------
11,175 10,471
Deferred income taxes 801 801
Other liabilities 1,312 ---
Commitments and contingencies --- ---
Shareholders' equity:
Common stock, $.10 par value, 20,000,000
shares authorized, 4,661,402 shares issued 466 466
Capital in excess of par value 24,910 25,212
Retained earnings 24,056 21,563
Treasury stock, 256,946 shares in March
and 37,746 shares in September (2,917) (109)
Translation adjustment 192 53
------- -------
46,707 47,185
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $59,995 $58,457
======= =======
</TABLE>
* The balance sheet at September 30, 1994, has been taken from
audited financial statements at that date and condensed.
1
<PAGE> 4
Vertex Communications Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
(In thousands, except share amounts) March 31 April 1
1995 1994
----------- -----------
<S> <C> <C>
Net Sales $ 16,258 $ 14,160
Costs and Expenses:
Cost of sales 11,729 10,310
Research and development 679 695
Marketing 1,065 724
General and administrative 1,144 899
---------- ----------
14,617 12,628
---------- ----------
Operating income 1,641 1,532
Other income (expense):
Income from investments 173 150
Interest expense (25) ---
---------- ----------
Income before income taxes and
effect of accounting change 1,789 1,682
Provision for income taxes 521 489
---------- ----------
Income before accounting change 1,268 1,193
Cumulative effect of change in accounting --- ---
---------- ----------
Net income $ 1,268 $ 1,193
========== ==========
Earnings per share:
Earnings before effect of
accounting change $ .28 $ .25
Cumulative effect of change in
accounting --- ---
---------- ----------
$ .28 $ .25
========== ==========
Average shares and equivalent
shares outstanding 4,538,000 4,700,000
========== ==========
</TABLE>
2
<PAGE> 5
Vertex Communications Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
(In thousands, except share amounts) March 31 April 1
1995 1994
---------- ----------
<S> <C> <C>
Net Sales $ 30,965 $ 28,045
Costs and Expenses:
Cost of sales 22,757 20,729
Research and development 1,086 1,379
Marketing 1,779 1,350
General and administrative 2,123 1,672
---------- ----------
27,745 25,130
---------- ----------
Operating income 3,220 2,915
Other income (expense):
Income from investments 319 306
Interest expense (25) ---
---------- ----------
Income before income taxes and
effect of accounting change 3,514 3,221
Provision for income taxes 1,021 965
---------- ----------
Income before accounting change 2,493 2,256
Cumulative effect of change in accounting --- 65
---------- ----------
Net income $ 2,493 $ 2,321
========== ==========
Earnings per share:
Earnings before effect of
accounting change $ .54 $ .48
Cumulative effect of change in
accounting --- .01
---------- ----------
$ .54 $ .49
========== ==========
Average shares and equivalent
shares outstanding 4,607,000 4,710,000
========== ==========
</TABLE>
3
<PAGE> 6
Vertex Communications Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
(In thousands) March 31 April 1
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,493 $ 2,321
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,198 808
Cumulative effect of change in accounting
for income taxes --- (65)
Change in accounts receivable,
inventories, prepaid taxes, and
other assets (453) (2,288)
Change in current liabilities (993) 472
------- -------
2,245 1,248
Cash flows from investing activities:
Purchase of property and equipment (1,247) (2,305)
Purchase of Maxtech, Inc. (5,669) ---
------- -------
(6,916) (2,305)
Cash flows from financing activities:
Proceeds from exercise of stock options 76 183
Purchase of treasury stock (3,186) ---
------- -------
(3,110) 183
Effect of exchange rate changes on cash 121 ---
------- -------
Net increase (decrease) in cash (7,660) (874)
Cash and cash equivalents at beginning
of period 20,527 23,537
------- -------
Cash and cash equivalents at end of period $12,867 $22,663
======= =======
</TABLE>
4
<PAGE> 7
Vertex Communications Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note A - Basis of Presentation
The accompanying condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instruc-
tions 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 the adjustments
(consisting of normal recurring accruals) considered necessary for
fair presentation have been included.
For further information, refer to the consolidated financial state-
ments and footnotes thereto included in the Company's Annual Report
on Form 10-K for the year ended September 30, 1994.
Note B - Inventories (In thousands)
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31 September 30
1995 1994
----------- ------------
<S> <C> <C>
Raw materials $ 4,638 $ 3,364
Work-in-process 7,119 5,070
Finished goods 563 506
------- -------
$12,320 $ 8,940
======= =======
</TABLE>
5
<PAGE> 8
Vertex Communications Corporation and Subsidiaries
NOTES TO CONDENSED CONSOLIDATION FINANCIAL STATEMENTS (Unaudited)
Note C - Acquisition
On January 25, 1995 (effective January 1, 1995) the Company
acquired all of the outstanding common stock of Maxtech, Inc.
(Maxtech) for cash paid at closing of $4,049,000, four-year
unsecured promissory notes in the aggregate principal sum of
$1,750,000, certain contingent consideration based on future
net pre-tax income of Maxtech, and direct acquisition costs
incurred of approximately $150,000. An additional sum of
$1,650,000 was paid at closing to pay-off certain promissory
notes of Maxtech. The Maxtech acquisition was accounted for
under the purchase method and, accordingly, the assets acquired
and liabilities assumed were recorded at their fair values on
the acquisition date. The excess of the purchase price over the
assets acquired of approximately $5,412,000 is being amortized
over fifteen years using the straight line method.
In connection with the purchase of Maxtech, contingent consider-
ation will be due in an amount equal to 50 percent of the net
pre-tax income above $1,750,000 that Maxtech earns for the
cumulative period of three years and nine months ending September
30, 1998, not to exceed $2,250,000. The contingent consideration,
if any, will be recorded when determinable as additional goodwill
and amortized over the remaining life of the intangible asset
as discussed above.
Maxtech's results of operations have been included in the
Company's consolidated financial statements from the effective
date of the acquisition.
Below are the unaudited pro forma results of operations as if
Maxtech had been acquired on October 1, 1993.
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
March 31, 1995 April 1, 1994
---------------- ----------------
<S> <C> <C>
Net Sales $32,331,000 $30,802,000
Net Income $ 2,301,000 $ 2,206,000
Earnings Per Share $ .50 $ .47
</TABLE>
6
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company acquired Maxtech, Inc. of State College, Pennsylvania,
at the beginning of the second quarter of fiscal 1995 for a
purchase price of approximately $6 million, (excludes any con-
tingent consideration). Maxtech is engaged in the design,
manufacture, and distribution of precision radio frequency and
microwave telecommunications components and subsystems, with
particular emphasis on earth station satellite and point-to-
point radio applications. Maxtech's products and capabilities
further broaden and complement the Company's existing product
lines. Management expects that as a result, future operating
results will be favorably impacted. (Refer to Note C for
additional information).
Net sales increased by 14.8 percent and 10.4 percent in the
second quarter and six months ended March 31, 1995 when compared
to the same periods one year earlier, respectively. This increase
in sales volume is largely attributable to the acquisition of
Maxtech.
Research and development spending decreased by 2.3 percent and
21.2 percent in the second quarter and six-month period of fiscal
1995 over the comparable periods of fiscal 1994, respectively.
This was primarily due to absence of certain product development
projects which were successfully completed last year. Marketing
expenses combined with general and administrative expenses in-
creased 36.1 percent and 29.1 percent in three-month period and
six-month period ended March 31, 1995 over the comparable
periods, respectively, due to stepped-up bid proposal activity
and the inclusion of Maxtech's operations at the beginning of
January 1995.
Financial Condition as of March 31, 1995
Cash provided by operations of $2.2 million was more than offset
by the acquisition of Maxtech and purchase of Vertex's common stock
pursuant to the Company's stock repurchase plan. The Company also
invested $1.2 million in property and equipment additions. As a
result of the foregoing significant factors, cash and cash equiva-
lents decreased by $7.7 million during the six-month period ended
March 31, 1995.
Management does not have in place a credit line facility since the
Company's financial condition remains very healthy. Management is
not aware of any demands which are likely to impact liquidity in
an adverse manner.
7
<PAGE> 10
PART II
OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on January 26,
1995. Of the total 4,567,356 shares entitled to vote, 4,161,239
shares (91.1%) were represented in person or by proxy at the
meeting.
The following matters were submitted to the meeting and approved
by more than the requisite majority of shares outstanding and
entitled to vote thereon and required to approve each matter as
shown below:
(1) Election of the following Directors:
<TABLE>
<CAPTION>
FOR AGAINST
--------- -------
<S> <C> <C>
J. Rex Vardeman 4,106,605 54,634
A. Don Branum 4,105,605 54,634
James D. Carter 4,106,595 54,644
Bill R. Womble 4,106,505 54,734
Donald E. Heitzman, Sr. 4,106,091 55,148
</TABLE>
No votes were abstained on this matter.
(2) Approval of the Company's 1995 Stock Compensation
Plan for the benefit of certain officers,
directors, employees, and advisors of the Company.
<TABLE>
<S> <C>
For: 2,327,143
Against: 910,748
Abstain: 22,068
</TABLE>
(3) Ratification of the appointment of Arthur Andersen
LLP as independent public accountants of the
Company for the fiscal year ending September 30,
1995.
<TABLE>
<S> <C>
For: 4,134,279
Against: 11,760
Abstain: 15,200
</TABLE>
8
<PAGE> 11
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits.
Exhibit 27 - Article 5 financial data schedule.
(B) Form 8-K.
The Company filed a current report on Form
8-K, dated February 7, 1995, regarding the
Company's acquisition of Maxtech, Inc. on
January 25, 1995 (effective January 1, 1995)
covering Items 2 and 7. This Report on Form
8-K was subsequently amended by an amendment
on Form 8-K/A, dated March 20, 1995, amending
Item 7 of the current report on Form 8-K and
including (1) audited financial statements of
Maxtech, Inc. at December 31, 1994, and (2)
unaudited pro forma condensed combined
financial information in compliance with
Article 11 of Regulation S-X, relative to the
Company and Maxtech, Inc.
9
<PAGE> 12
S I G N A T U R E
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.
VERTEX COMMUNICATIONS CORPORATION
(Registrant)
Date: May 4, 1995 J. D. Carter
J. D. Carter
V. P. - Finance and Treasurer
(Duly Authorized Principal
Financial and Accounting Officer)
10
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- - ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 12,867
<SECURITIES> 0
<RECEIVABLES> 16,711
<ALLOWANCES> 263
<INVENTORY> 12,320
<CURRENT-ASSETS> 41,783
<PP&E> 19,914
<DEPRECIATION> 7,915
<TOTAL-ASSETS> 59,995
<CURRENT-LIABILITIES> 11,175
<BONDS> 0
<COMMON> 466
0
0
<OTHER-SE> 46,241
<TOTAL-LIABILITY-AND-EQUITY> 59,995
<SALES> 30,965
<TOTAL-REVENUES> 30,965
<CGS> 22,757
<TOTAL-COSTS> 22,757
<OTHER-EXPENSES> 4,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 3,514
<INCOME-TAX> 1,021
<INCOME-CONTINUING> 1,021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,493
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
