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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 December 27, 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 DECEMBER 27, 1996, THERE WERE 4,442,056 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 DECEMBER 27, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - (Unaudited)
Condensed Consolidated Balance Sheets - December 27, 1996 and
September 30, 1996
Condensed Consolidated Statements of Income - Three months ended
December 27, 1996 and December 29, 1995
Condensed Consolidated Statements of Cash Flows - Three months
ended December 27, 1996 and December 29, 1995
Notes to Condensed Consolidated Financial Statements -
December 27, 1996
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II - OTHER INFORMATION
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>
December 27 September 30
1996 1996
----------- ------------
(Unaudited) *
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 19,246 $ 17,396
Accounts receivable, net 19,640 21,136
Inventories (Note B) 15,783 15,626
-------- --------
54,669 54,158
PROPERTY AND EQUIPMENT, at cost 24,021 22,947
Less accumulated depreciation (11,162) (10,520)
-------- --------
12,859 12,427
GOODWILL, less accumulated amortization of $723 and $632 4,694 4,785
OTHER ASSETS 497 604
-------- --------
TOTAL ASSETS $ 72,719 $ 71,974
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,343 $ 4,615
Accrued compensation 1,112 3,024
Other accrued liabilities 4,354 4,017
Customers' advances 2,892 1,737
Deferred income taxes 1,340 1,281
Current portion of long-term debt 482 --
-------- --------
13,523 14,674
ACQUISITION INDEBTEDNESS 438 875
LONG-TERM DEBT - less current portion 803 --
DEFERRED INCOME TAXES 951 951
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 24,799 24,806
Retained earnings 34,383 32,858
Treasury stock, at cost, 219,346 shares and 222,346 shares (2,696) (2,733)
Translation adjustment 52 77
-------- --------
57,004 55,474
-------- --------
TOTAL LIABILITIES AND EQUITY $ 72,719 $ 71,974
======== ========
</TABLE>
* The balance sheet at September 30, 1996 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
December 27 December 29
1996 1995
------------ -------------
<S> <C> <C>
SALES $ 19,680 $ 18,964
COSTS AND EXPENSES:
Cost of sales 14,289 13,983
Research and development 765 664
Marketing 1,088 1,004
General and administrative 1,540 1,428
-------- --------
17,682 17,079
-------- --------
OPERATING INCOME 1,998 1,885
OTHER INCOME (EXPENSE):
Income from investments 208 134
Interest expense (20) (26)
-------- --------
INCOME BEFORE INCOME TAXES 2,186 1,993
Provision for income taxes 661 600
-------- --------
NET INCOME $ 1,525 $ 1,393
======== ========
EARNINGS PER SHARE $ .33 $ .30
======== ========
AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,630 4,618
======== ========
</TABLE>
2
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VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 27 December 29
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 2,046 $ (1,776)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,074) (677)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock -- (150)
Payment for business purchased in fiscal 1995 (437) (438)
Proceeds from long-term debt 1,285 --
Other 30 19
-------- --------
878 (569)
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 1,850 (3,022)
CASH AND EQUIVALENTS:
At beginning of period 17,396 14,870
-------- --------
AT END OF PERIOD $ 19,246 $ 11,848
======== ========
</TABLE>
3
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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, 1996.
NOTE B - INVENTORIES (IN THOUSANDS)
The components of inventory consist of the following:
<TABLE>
<CAPTION>
December 27 September 30
1996 1996
----------- ------------
<S> <C> <C>
Raw Materials $ 5,207 $ 5,854
Work-In-Process 8,879 7,979
Finished Goods 1,697 1,793
------- -------
$15,783 $15,626
======= =======
</TABLE>
NOTE C - LONG-TERM DEBT
In December 1996, the Company borrowed $1,285,000 (2 million German marks) from
a bank through its German subsidiary. The debt is to be repaid in 24
installments with accrued interest charged at 4.7 percent per annum. The first
installment is due in January 1997.
4
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Sales in the first quarter of fiscal 1997 increased by 4 percent over the
comparable period of fiscal 1996.
Cost of sales in terms of a percent of sales improved by 1.1 percentage points
in the first quarter of fiscal 1997 over the comparable quarter due to
production efficiency gains.
Research and development expenses were up 15 percent over the first quarter
last year reflecting increased product design efforts in the small aperture
antenna product line. General & administrative and marketing spending increased
8 percent from the comparable quarter due to increased staffing.
Income from investments of $208,000 increased 55 percent or $74,000 over last
year principally due to higher average cash balances available for investment.
The effective tax rate for fiscal 1997 is lower than the prescribed statutory
rates mainly due tax incentives available from export shipments and the
favorable impact of interest income from certain investments that is exempt
from federal taxes.
Fiscal 1997 first quarter's net income of $1.5 million, increased by 9 percent
over the same period one year ago because of the above factors.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
GENERAL
The Company's future operating results and financial condition may be affected
by various trends and factors including general economic conditions, technology
changes, product demand, product development, volume and mix of products sold,
size and timing of individual orders booked, competition, market acceptance,
availability of certain raw materials, rising costs for or unavailability of
selected components, domestic and foreign government regulations and spending,
or fluctuation in certain foreign currency exchange rates as related to the
U.S. dollar.
Due to the factors noted above, the Company's future earnings and stock price
may be subject to fluctuation, particularly on a quarterly basis. Past business
trends should not be used to anticipate future trends and historical
performance should not be considered as a reliable indicator of future
performance.
Additionally, any shortfall in revenue or earnings from levels anticipated by
securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's common stock.
5
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FORWARD-LOOKING STATEMENTS
With the exception of historical information, certain matters discussed in this
quarterly report are forward-looking statements that involve risks and
uncertainties, including but not limited to, economic conditions, trends in the
telecommunications industry, product acceptance and demand, competitive
products and pricing, new product development, availability of competitive
components and other risks indicated in this filing and prior filings of the
Company with the Securities and Exchange Commission.
FINANCIAL CONDITION
During the first three months of fiscal 1997, operating activities generated $2
million of cash primarily due to net income of $1.5 million and the reduction
of accounts receivable but partially offset by lower current liabilities. Cash
of $1.1 million was invested in capital asset additions.
Financing activities provided net cash of $.9 million as the Company incurred
long-term debt and made the payment due pursuant to the terms of the 1995
Maxtech acquisition.
The Company borrowed $1.3 million (2 million German marks) from a bank in
December 1996. This debt is scheduled for repayment over a 24 month period.
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.
6
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PART II - OTHER INFORMATION
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 December 27, 1996.
7
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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: February 7, 1997 /s/ J. D. Carter
---------------------------------
J. D. Carter
Vice President - Finance
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
8
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 27, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-27-1996
<CASH> 19,246
<SECURITIES> 0
<RECEIVABLES> 19,910
<ALLOWANCES> 270
<INVENTORY> 15,783
<CURRENT-ASSETS> 54,669
<PP&E> 24,021
<DEPRECIATION> 11,162
<TOTAL-ASSETS> 72,719
<CURRENT-LIABILITIES> 13,523
<BONDS> 0
0
0
<COMMON> 466
<OTHER-SE> 56,538
<TOTAL-LIABILITY-AND-EQUITY> 57,004
<SALES> 19,680
<TOTAL-REVENUES> 19,680
<CGS> 14,289
<TOTAL-COSTS> 17,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 2,186
<INCOME-TAX> 661
<INCOME-CONTINUING> 1,525
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,525
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
