UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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: 0-19381
WESTWOOD CORPORATION
(Exact name of registrant as specified in its charter)
Nevada, U.S.A. 87-0430944
(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
12437 East 60th Street, Tulsa, Oklahoma 74146
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 252-1774
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
and 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.
[x] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common Stock, $.003 par value - 6,139,933 shares as of
February 12, 1996.
<PAGE>
WESTWOOD CORPORATION
FORM 10-Q
For the Quarter Ended December 31, 1996
INDEX
-----
Part I. Financial Information:
Consolidated Balance Sheets as of
December 31, 1996 and March 31, 1996
Consolidated Statements of Income for
the Third Quarter and Nine Months ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows
for the Nine Months ended December 31,
1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information:
Item 1. Legal Proceedings
(None)
Item 2. Changes in Securities
(None)
Item 3. Defaults Upon Senior Securities
(None)
Item 4. Submission of Matters to a Vote
of Security Holders
(None)
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(None)
Signatures
<PAGE>
<TABLE>
PART 1 - FINANCIAL INFORMATION
WESTWOOD CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
December 31 March 31
1996 1996
-----------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,217 $ 598
Accounts receivable (including retainage
receivable of $933,225 at December 31,
1996 and $1,425,000 at March 31, 1996)
net of allowance for doubtful accounts 5,083 3,973
Note receivable - Officer 106 100
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,450 2,989
Inventories:
Raw materials and purchased parts 4,874 3,887
Work-in-process 1,157 906
------- -------
6,031 4,793
Prepaid expenses 324 73
Current deferred income taxes 248 -
------- -------
Total current assets 14,459 12,526
Plant and equipment, at cost:
Leasehold improvements 768 269
Machinery and equipment 3,562 2,698
Patterns and tools 378 227
Other - 335
------- -------
4,708 3,529
Accumulated depreciation 2,445 2,057
------- -------
2,263 1,472
Other assets:
Drawings, (net) 25 41
Long-term accounts receivable, retainage 1,039 1,302
Deferred charges 375 383
------- -------
1,439 1,726
------- -------
Total assets $18,161 $15,724
======= =======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
WESTWOOD CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
December 31 March 31
1996 1996
-----------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,805 $ 1,744
Income taxes payable 393 352
Accrued liabilities 852 868
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,952 2,393
Current deferred income taxes - 10
Current portion of long-term debt:
Payable to bank 7 19
Acquisition debt 21 21
------- -------
28 40
------- -------
Total current liabilities 6,030 5,40
Long-term debt:
Payable to bank 65 67
Payable to insurance company 630 -
------- -------
695 67
Deferred income taxes 152 177
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized,
$.001 par value, no shares issued and
outstanding - -
Common stock, 20,000,000 shares authorized,
$.003 par value, 6,139,933 shares issued
and outstanding (Note B) 18 17
Capital in excess of par value 4,758 3,511
Retained earnings 6,508 6,545
------- -------
Total stockholders' equity 11,284 10,073
Total liabilities and stockholders' equity $18,161 $15,724
======= =======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
WESTWOOD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<CAPTION>
Third Quarter Ended Nine Months Ended
December 31 December 31
1996 1995 1996 1995
------------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $8,911 $5,985 $24,988 $22,206
Cost of sales 6,814 4,822 19,272 18,233
------ ------ ------- -------
Gross profit 2,097 1,163 5,716 3,973
Operating expenses:
Marketing and
selling expenses 463 355 1,387 947
General and
administrative expenses 852 509 2,246 1,418
------ ------ ------ ------
1,315 864 3,633 2,365
------ ------ ------ ------
Operating income 782 299 2,083 1,608
Other income (expense):
Interest expense (41) (14) (109) (54)
Other income (expense) 8 23 36 41
------ ------ ------ ------
(33) 9 (73) (13)
------ ------ ------ ------
Income before taxes 749 308 2,010 1,595
Provision for income taxes 285 116 762 605
------ ------ ------ ------
Net income $ 464 $ 192 $1,248 $ 990
====== ====== ====== ======
Earnings per share (Note B) $ .076 $ .031 $ .203 $ .161
Cash dividends per share $ .010 $ .010 $ .030 $ .030
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
WESTWOOD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Nine Months Ended
December 31
1996 1995
-----------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,248 $ 990
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization 404 380
Deferred income taxes (348) (310)
Cash flows impacted by changes in:
Accounts receivable 151 3,332
Costs and estimated earnings in excess
of billings on uncompleted contracts 1,539 390
Inventories (38) 536
Prepaid expenses (165) 8
Long-term accounts receivable, retainage 263 (30)
Deferred charges 98 (82)
Accounts payable 118 (1,543)
Accrued liabilities (407) (212)
Billings in excess of costs and estimated
earnings on uncompleted contracts (441) (102)
Income taxes payable 42 409
Other (6) (98)
------- -------
Net cash provided by operating activities 2,458 3,668
INVESTING ACTIVITIES
Purchase of plant and equipment (189) (249)
Acquisition of Roflan (990) -
------ ------
Net cash used in investing activities (1,179) (249)
FINANCING ACTIVITIES
Principal payments on bank notes (5,043) (5,058)
Borrowings on bank notes 4,550 3,505
Cash dividends paid (167) (153)
------ ------
Net cash used in financing activities (660) (1,706)
------ ------
Net increase in cash 619 1,713
Cash at beginning of period 598 103
------ ------
Cash at end of period $1,217 $1,816
====== ======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
WESTWOOD CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Note A. Basis of Presentation
- ------------------------------
The accompanying unaudited consolidated financial statements,
which include NMP Corp. and Roflan Associates, Inc. (since May 1st,
1996, see Note C), Westwood Corporation's wholly-owned subsidiaries,
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.
Management believes all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the fiscal third quarter and nine
months ended December 31, 1996, may not necessarily be indicative of
the results that may be expected for the year ended March 31, 1997.
For further information, refer to the consolidated financial
statements and footnotes included in the Westwood Corporation's annual
report on Form 10-K for the year ended March 31, 1996, and Form 8-K
dated May 1, 1996.
Note B. Common Stock
- ---------------------
The financial statements, including earnings per share
calculation, reflect the impact of a 10% stock dividend declared by
the Board of Directors in November, 1996. Earnings per share are
based on 6,139,933 shares issued and outstanding.
Shares reserved under stock option plans for directors and
employees aggregate 952,050 shares. As of December 31, 1996, total
options actually issued under these plans were for 645,920 shares, and
no options have been exercised or cancelled.
Note C. Acquisition of Roflan Associates, Inc.
- -----------------------------------------------
On May 1, 1996 Westwood Corporation acquired 100% of the issued
and outstanding common stock of Roflan Associates, Inc. and through
<PAGE>
Roflan's ownership interest, 100% of the outstanding common stock of
its wholly-owned subsidiary, Peter Gray Corporation.
Westwood Corporation's acquisition of Roflan for $990,000 has
been accounted for as a purchase. The Company utilized its bank
credit line for the purchase of Roflan and the payment of certain
Roflan liabilities.
The pro forma unaudited results of operations for the nine months
ended December 31, 1996 and 1995, assuming consummation of the
purchase as of the beginning of the periods are as follows:
Nine Months Ended December 31
1996 1995
---- ----
($000 except share data)
Sales $ 25,556 $ 28,853
Net Income $ 1,225 $ 1,031
Earnings per share $ .200 $ .168
<PAGE>
WESTWOOD CORPORATION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
December 31, 1996
General
- -------
Results of Operations
- ---------------------
The Company has been dependent upon long-term switchgear
contracts relating to major new shipbuilding programs for the bulk of
its sales revenues. However, the Company has been successful in
becoming somewhat less dependent upon these major contracts due to
recent acquisitions and increased sales of RoxSystem products.
The DDG-51 and LHD programs are the most significant switchgear
contracts currently in production. The DDG-51 contract will be
completed in the fiscal year ending March 31, 1998, and the Company
was not the low bidder for renewal of this contract. The current LHD
contract will also be completed in the 1998 fiscal year, and it is
uncertain whether any follow-on orders will be received under this
program.
As a result of the completion of these major contracts, revenues
and profits are expected to decline significantly in fiscal 1998. The
company is actively involved in preliminary proposals on three Navy
ship classes, as well as extensive new programs in Malaysia and
Australia. The company is also actively seeking strategic
acquisitions.
Third Quarter Ended December 31, 1996 and 1995
- ----------------------------------------------
Sales for the fiscal third quarter ended December 31, 1996 were
$8,911,000, a 48.9% increase over the same quarter last year. Most of
the sales increase was in marine hardware products as a result of the
recent acquisition of Roflan Associates, as well as increased sales of
RoxSystem products.
<PAGE>
Gross profit for the quarter was $2,097,000, or 23.5% of sales,
compared to $1,163,000 or 19.4% of sales for the same period of last
year. Higher sales volume and an improved product mix, accounted for
most of the increases in margin.
Operating expenses for the quarter were $1,315,000, a 52.2%
increase over the same quarter last year, and primarily resulted from
the acquisition of Roflan.
Operating income for the quarter was $782,000, or 8.8% of sales,
compared to $299,000 or 5.0% of sales for the same period last year.
Net income for the quarter was $464,000 or $.076 per share, and a
141.7% increase over the same quarter last year.
Nine Months Ended December 31, 1996 and 1995
- --------------------------------------------
Sales for the nine months ended December 31, 1996 were
$24,988,000, a 12.5% increase compared to last year. Sales of marine
hardware products increased substantially as a result of the Roflan
acquisition, and sales of RoxSystem products also increased
significantly over the same period last year.
Gross profit for the nine months ended December 31, 1996 was
$5,716,000 or 22.9% of sales, compared to $3,973,000 or 17.9% of sales
for the same period last year. Higher volume and an improved product
mix accounted for the higher margin. The prior year's sales included
a large shipment of low-margin air circuit breakers.
Operating expenses for the period were $3,633,000, compared to
$2,365,000 for the same period last year. The 53.6% increase in
expenses was primarily due to the Roflan acquisition.
Operating income for the nine months ended December 31, 1996 was
$2,083,000 or 8.3% of sales, compared to $1,608,000 or 7.2% for the
same period last year. Net income was $1,248,000 or $.203 per share,
compared to $990,000, or $.161 per share for the same period last
year.
Liquidity and Capital Resources
- -------------------------------
For the nine months ended December 31, 1996, net cash provided by
operating activities was $2,458,000. Net income provided $1,248,000,
with other cash adjustments and major sources being depreciation and
<PAGE>
amortization of $404,000, and decreases in costs and estimated
earnings in excess of billings on uncompleted contracts of $1,539,000.
Significant uses of operating cash flow were reductions in accrued
liabilities of $407,000, and billings in excess of costs and estimated
earnings on uncompleted contracts of $441,000.
The substantial decrease in costs and estimated earnings in
excess of billings on uncompleted contracts, as well as the reduction
in billings in excess of costs and estimated earnings on uncompleted
contracts, resulted from reduced purchasing and manufacturing activity
on major switchgear contracts. Most of the decrease in accrued
liabilities relates to the payment of Roflan accruals.
The major use of cash for investing activities was the Roflan
acquisition for $990,000, discussed in Note C to the financial
statements. The Company borrowed $2,000,000 under its revolving
credit facility, which has subsequently been repaid, to fund this
purchase and pay certain Roflan liabilities.
The Company has a bank credit agreement which provides a
$3,000,000 revolving facility based upon a borrowing base of
qualifying accounts receivables and inventory. This credit agreement
has been renewed to expire on July 31, 1997. The Company borrows from
time-to-time under this credit facility to support working capital
requirements, and believes that available borrowing capacity, along
with cash flows from operations, is adequate for future operations.
The above discussion in this section contain forward looking
statements that involve a number of risks and uncertainties. Among
factors that would cause actual results to differ materially are the
following: business conditions in the military and commercial
industries served by the Company; conditions in the general economy;
changes in customer order patterns including timing of delivery; risk
of non-payment of customer receivables; competitive factors; and other
risk factors listed from time to time in the Company's reports with
the Securities and Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
- ---------------------------
Regular Quarterly Dividend
- --------------------------
On November 7, 1996, the Board of Directors approved a regular
quarterly dividend of $.01 per common share to stockholders of record
on December 1, 1996, and paid on December 22, 1996.
Issuance of Stock Dividend
- --------------------------
On November 7, 1996, the Board of Directors approved a ten percent
stock dividend (one new share of common stock, par value $.003 for
each ten shares now held) to stockholders of record on December 1,
1996. The new shares were issued on December 22, 1996.
Approval of Fourth Quarter Dividend
- -----------------------------------
On January 30th, 1997, the Board of Directors approved a regular
quarterly dividend of $.01 per common share to stockholders of record
on March 1, 1997, and paid on March 22, 1997.
<PAGE>
WESTWOOD CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DATE: February 12, 1997 WESTWOOD CORPORATION
By: /s/ Ernest H. McKee
---------------------------------
Ernest H. McKee, Director
President and Chief Executive
Officer
By: /s/ Paul R. Carolus
--------------------------------
Paul R. Carolus, Director
Secretary/Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, AND STATEMENT OF INCOME, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,217
<SECURITIES> 0
<RECEIVABLES> 5,083
<ALLOWANCES> 0
<INVENTORY> 6,031
<CURRENT-ASSETS> 14,459
<PP&E> 4,708
<DEPRECIATION> 2,445
<TOTAL-ASSETS> 18,161
<CURRENT-LIABILITIES> 6,030
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 11,266
<TOTAL-LIABILITY-AND-EQUITY> 18,161
<SALES> 24,988
<TOTAL-REVENUES> 24,988
<CGS> 19,272
<TOTAL-COSTS> 22,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109
<INCOME-PRETAX> 2,010
<INCOME-TAX> 762
<INCOME-CONTINUING> 1,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,248
<EPS-PRIMARY> .203
<EPS-DILUTED> .203
</TABLE>
