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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 quarterly period ended March 29, 1996
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 and 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 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
AS OF MARCH 29, 1996, THERE WERE 4,443,256 SHARES OUTSTANDING OF THE
REGISTRANT'S COMMON STOCK $.10 PAR VALUE.
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VERTEX COMMUNICATIONS CORPORATION
TABLE OF CONTENTS TO FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 29, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - (Unaudited)
Condensed Consolidated Balance Sheets - March 29, 1996 and September
30, 1995
Condensed Consolidated Statements of Income - Three months ended March
29, 1996 and March 31, 1995
Condensed Consolidated Statements of Income - Six months ended March
29, 1996 and March 31, 1995
Condensed Consolidated Statements of Cash Flows - Six months ended
March 29, 1996 and March 31, 1995
Notes to Condensed Consolidated Financial Statements - March 29, 1996
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
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VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 29 September 30
1996 1995
---------- ------------
ASSETS (Unaudited) *
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 11,000 $14,870
Accounts receivable, net 17,001 16,295
Inventories (Note B) 18,549 14,324
-------- --------
46,550 45,489
PROPERTY AND EQUIPMENT, at cost 22,569 20,798
Less accumulated depreciation (9,401) (8,400)
-------- --------
13,168 12,398
GOODWILL, less accumulated amortization of $448 and $268 4,969 5,149
Other assets 732 818
-------- --------
TOTAL ASSETS $ 65,419 $ 63,854
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,682 $ 2,883
Accrued compensation 1,851 1,799
Other accrued liabilities 4,252 4,935
Customers' advances 1,669 2,015
Deferred income taxes 916 461
-------- --------
11,370 12,093
ACQUISITION INDEBTEDNESS 875 1,312
DEFERRED INCOME TAXES 763 763
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 24,830 24,963
Retained earnings 29,611 26,758
Treasury stock, at cost,
(218,146 shares in March; 230,146 shares in September) (2,594) (2,700)
Translation adjustment 98 199
-------- --------
52,411 49,686
-------- --------
TOTAL LIABILITIES AND EQUITY $ 65,419 $ 63,854
======== ========
</TABLE>
* The balance sheet at September 30, 1995 has been taken from audited
financial statements at that date and condensed.
1
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VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 29 March 31
1996 1995
-------- --------
<S> <C> <C>
NET SALES $ 19,233 $ 16,258
COSTS AND EXPENSES:
Cost of sales 13,918 11,729
Research and development 1,005 679
Marketing 971 1,065
General and administrative 1,429 1,144
-------- --------
17,323 14,617
-------- --------
OPERATING INCOME 1,910 1,641
OTHER INCOME (EXPENSE):
Income from investments 200 173
Interest expense (26) (25)
-------- --------
INCOME BEFORE INCOME TAXES 2,084 1,789
Provision for income taxes 624 521
-------- --------
NET INCOME $ 1,460 $ 1,268
======== ========
EARNINGS PER SHARE $ .32 $ .28
======== ========
AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,600 4,538
======== ========
</TABLE>
2
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VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
March 29 March 31
1996 1995
-------- --------
<S> <C> <C>
NET SALES $ 38,197 $ 30,965
COSTS AND EXPENSES:
Cost of sales 27,901 22,757
Research and development 1,669 1,086
Marketing 1,975 1,779
General and administrative 2,857 2,123
-------- --------
34,402 27,745
-------- --------
OPERATING INCOME 3,795 3,220
OTHER INCOME (EXPENSE):
Income from investments 334 319
Interest expense (52) (25)
-------- --------
INCOME BEFORE INCOME TAXES 4,077 3,514
Provision for income taxes 1,224 1,021
-------- --------
NET INCOME 2,853 2,493
======== ========
EARNINGS PER SHARE $ .62 $ .54
======== ========
AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,605 4,607
======== ========
</TABLE>
3
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VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 29 March 31
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ (1,634) $ 2,366
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,771) (1,247)
Payment for business purchased in fiscal 1995 (438) (5,669)
-------- --------
(2,209) (6,916)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (150) (3,186)
Other 123 76
-------- --------
(27) (3,110)
-------- --------
DECREASE IN CASH AND EQUIVALENTS (3,870) (7,660)
CASH AND EQUIVALENTS:
At beginning of period 14,870 20,527
-------- --------
AT END OF PERIOD $ 11,000 $ 12,867
======== ========
</TABLE>
4
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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 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 the adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended September 30, 1995.
NOTE B - INVENTORIES (IN THOUSANDS)
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 29 September 30
1996 1995
-------- ------------
<S> <C> <C>
Raw Materials $ 5,771 $ 4,476
Work-In-Process 11,053 8,661
Finished Goods 1,725 1,187
-------- --------
$ 18,549 $ 14,324
======== ========
</TABLE>
NOTE C - ACQUISITION
On January 25, 1995 (effective January 1, 1995), the Company acquired all of
the outstanding common stock of Maxtech, Inc. by purchase. Below are the
unaudited pro forma results of operations prepared by management, as if the
acquisition had occurred on October 1, 1994.
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1995
----------------
<S> <C>
Net Sales $ 32,331,000
Net Income $ 2,301,000
Earnings Per Share $ .50
</TABLE>
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 29, 1996
Second quarter sales set a record of $19.2 million and were up 18.3 percent
over the same quarter last year primarily due to higher product demand.
Expenditures for research and development surged to $1 million or 48 percent
over the same quarter last year primarily due to product development activities
in the 9 meter antenna product line and funding of various projects in the two
new operating divisions that were started at the beginning of fiscal 1996.
Total expenditures for marketing and G & A expenses increased 8.6 percent due
to addition of the two new operating divisions.
Net income of $1,460,000 reached a record high and was 15.1 percent greater
than the same quarter last year mainly due to the above discussed factors.
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 29, 1996
Sales for the first six months of fiscal 1996 increased by 23.4 percent over
the comparable period of fiscal 1995 as a result of the Maxtech acquisition and
increased product demand.
Research and development spending increased 53.7 percent from the comparable
period largely because of 9 meter antenna development work, start-up of two new
operating divisions, and the inclusion of Maxtech for the full six-month period
of fiscal 1996. Marketing and G & A expenses increased by 23.8 percent when
compared to the six months ended March 31, 1995 mainly as a result of the
Maxtech acquisition and start-up of two new operating divisions.
Net income for the first-half of fiscal 1996 was $2,853,000 or 14.4 percent
more than the same period of fiscal 1995. The backlog of unfilled orders was
$41.3 million at the close of business on March 29, 1996 which is an increase
of 17.8 percent from one year prior.
The effective tax rate for fiscal 1996 is lower than the prescribed statutory
rates mainly due to the effect of tax incentives available from export
shipments and certain investment income that is not taxable.
6
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FINANCIAL CONDITION AS OF MARCH 29, 1996
As of March 29, 1996, the ratio of current assets to current liabilities
improved to 4.1 from 3.8 at September 30, 1995.
During this six-month period, net cash used by operating activities was $1.6
million principally due to the increased levels of inventories and accounts
receivable necessary to support increased sales volume.
Management believes that forecasted cash flows combined with the Company's
strong financial condition will be sufficient to fund operations and planned
capital investments for the foreseeable future. Management is not aware of any
demands which are likely to impact liquidity in an adverse manner.
7
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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 25,
1996. Of the 4,423,256 total shares entitled to vote, 3,812,547
shares (86.2%) 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>
Shares Voted Shares Voted
For Against
------------ ------------
<S> <C> <C>
J. Rex Vardeman 3,765,897 46,650
A. Don Branum 3,779,897 32,650
James D. Carter 3,760,047 52,500
Bill R. Womble 3,779,897 32,650
Donald E. Heitzman, Sr. 3,780,197 32,350
</TABLE>
No votes were abstained on this matter.
(2) Ratification of the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal year
ending September 30, 1996.
<TABLE>
<S> <C>
Shares Voted For: 3,793,647
Shares Voted Against: 10,800
Shares Abstaining: 8,100
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Form 8-K:
The Company filed no reports on Form 8-K and none were required
to be filed during the three months ended March 29, 1996.
8
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SIGNATURE
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: April 26, 1996 /s/ J. D. Carter
---------------- -----------------------------------
J. D. Carter
Vice President - Finance
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
9
<PAGE> 12
Exhibit Index
Exhibit No. Description
- ----------- -----------
Ex-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANYS FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED MARCH 29, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-29-1996
<CASH> 11,000
<SECURITIES> 0
<RECEIVABLES> 17,241
<ALLOWANCES> 240
<INVENTORY> 18,549
<CURRENT-ASSETS> 46,550
<PP&E> 22,569
<DEPRECIATION> 9,401
<TOTAL-ASSETS> 65,419
<CURRENT-LIABILITIES> 11,370
<BONDS> 0
<COMMON> 466
0
0
<OTHER-SE> 51,945
<TOTAL-LIABILITY-AND-EQUITY> 65,419
<SALES> 38,197
<TOTAL-REVENUES> 38,197
<CGS> 27,901
<TOTAL-COSTS> 27,901
<OTHER-EXPENSES> 6,501
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 334
<INCOME-PRETAX> 4,077
<INCOME-TAX> 1,224
<INCOME-CONTINUING> 2,853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,853
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
