<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
----------------------------
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-22760
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AIRPORT SYSTEMS INTERNATIONAL, INC.
-----------------------------------
(Exact name of small business issuer as specified in its charter)
Kansas 48-1099142
- -----------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or ogganization) Identification No.)
11300 West 89th Street
Overland Park, Kansas 66214
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(address of principal executive offices)
(913)492-0861
---------------------------------
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the previous 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 ( )
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common stock, $0.01 par value - 2,230,500 shares outstanding as of December 2,
1996
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTER ENDED OCTOBER 31, 1996
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM I - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 10
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE 11
EXHIBIT INDEX 12
</TABLE>
<PAGE> 3
Part I. - Financial Information
ITEM I. Financial Statements
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, April 30,
1996 1996
----------- ---------
(In thousands)
(Unaudited) (Note)
<S> <C> <C>
Assets
Current assets:
Cash & cash equivalents $ 1,310 $ 621
Restricted cash 210 ---
Short-term investments 997 ---
Accounts receivable, net 4,056 4,722
Inventories, net 3,460 3,686
Other current assets 161 490
----------- ---------
Total current assets 10,194 9,519
Property and equipment, at cost 2,942 3,030
Accumulated depreciation and amortization 1,171 1,136
----------- ---------
1,771 1,894
Cost in excess of net assets acquired, net 1,300 1,337
Other assets 84 128
----------- ---------
Total assets $ 13,349 $ 12,878
=========== =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,410 $ 1,279
Accrued expenses 1,404 1,267
Current portion of long-term debt 17 16
Other current liabilities 172 165
----------- ---------
Total current liabilities 3,003 2,727
Long-term debt, less current portion 1,212 1,221
Stockholders' equity:
Common stock 22 22
Additional paid-in capital 7,293 7,286
Retained earnings 1,819 1,622
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Total stockholders' equity 9,134 8,930
----------- ---------
Total liabilities and stockholders' equity $ 13,349 $ 12,878
=========== =========
</TABLE>
NOTE: The balance sheet at April 30, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to condensed consolidated financial statements.
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
-------- -------- -------- --------
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Sales $ 4,014 $ 2,671 $ 9,169 $ 5,985
Cost of products sold 2,749 2,101 6,346 4,327
-------- -------- -------- --------
Gross margin 1,265 570 2,823 1,658
Selling, general and administrative expenses 975 859 2,068 1,677
Research and development expenses 212 291 447 561
-------- -------- -------- --------
Operating income (loss) 78 (580) 308 (580)
Other income (expense):
Interest expense (25) (37) (51) (70)
Other, net 44 29 54 63
-------- -------- -------- --------
Income (loss) before income taxes 97 (588) 311 (587)
Provision (benefit) for income taxes 35 (220) 114 (220)
-------- -------- -------- --------
Net income (loss) $ 62 $ (368) $ 197 $ (367)
======== ======== ======== ========
Income (loss) per share:
Primary $ 0.03 $ (0.15) $ 0.08 $ (0.15)
======== ======== ======== ========
Fully diluted $ 0.03 $ (0.15) $ 0.08 $ (0.15)
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
--------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Operating activities:
Net income (loss) $ 197 $ (367)
Adjustments to reconcile net income (loss) to net cash
provided by (used in ) operating activities:
Depreciation and amortization 250 248
Loss on sale of equipment 3 3
Changes in operating assets and liabilities:
Restricted cash (210) (90)
Accounts receivable, net 666 1,760
Inventories, net 226 (632)
Accounts payable 131 5
Accrued expenses 137 (807)
Other, net 355 (235)
-------- --------
Net cash provided by (used in) operating activities 1,755 (115)
Investing activities:
Purchase of short-term investments (997) ---
Liquidation of short-term investments --- 1,939
Proceeds from sale of property and equipment 15 ---
Purchases of property and equipment (81) (98)
-------- --------
Net cash provided by (used in) investing activities (1,063) 1,841
Financing activities:
Principal payments on notes payable to banks (570) ---
Borrowing on notes payable to banks 570 ---
Payments on long-term debt and capital lease
obligations (10) (6)
Proceeds from exercise of stock options 7 ---
-------- --------
Net cash used in financing activities (3) (6)
Net increase in cash and cash equivalents 689 1,720
Cash and cash equivalents at beginning of period 621 556
Cash and cash equivalents at end of period $ 1,310 $ 2,276
======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 53 $ 70
======== ========
Income taxes $ 49 $ 61
======== ========
</TABLE>
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 1996
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements of
Airport Systems International, Inc. (the Company) include the accounts of the
Company and its wholly owned subsidiary, ASII International, Inc., a foreign
sales corporation incorporated in Barbados. All intercompany balances and
transactions have been eliminated. The 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-QSB. 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 adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended October 31, 1996,
are not necessarily indicative of the results that may be expected for the year
ended April 30, 1997. For further information, refer to the consolidated
financial statements and footnotes included in the Airport Systems
International Inc. and Subsidiary annual report on Form 10-KSB for the year
ended April 30, 1996.
Certain reclassifications have been made to the prior year statements to
conform with the current year presentation.
2. Notes Payable to Banks
During September, 1996, the Company amended its line of credit to provide for
maximum borrowings of $4,000,000, at an interest rate of prime (8.25% at
October 31, 1996), secured by accounts receivable, inventory, and equipment.
The agreement matures in September, 1997.
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The discussions set forth in this Form 10-QSB may contain forward-looking
comments based on current expectations that involve a number of risks and
uncertainties. Actual results could differ materially from those projected or
suggested in the forward-looking comments. The difference could be caused by a
number of factors, including, but not limited to the factors and conditions
which are described under the headings "Results of Operations," and "Backlog,"
and the timely completion of financing for the Indonesia project through the
Export/Import Bank of the United States and competitive and pricing pressures
related to all contracts. Further information on the factors that could affect
the Company's financial results are included in the Company's other SEC
filings, including the Form 10-QSB for the quarter ended July 31, 1996, and the
Form 10-KSB for the year ended April 30, 1996. The reader is cautioned that
the Company does not have a policy of updating or revising forward-looking
statements and thus he or she should not assume that silence by management of
the Company over time means that actual events are bearing out as estimated in
such forward-looking statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the second quarter of fiscal 1997 increased 50.3%, to $4.0 million
from $2.7 million for the second quarter of fiscal 1996. Sales for the first
six months of fiscal 1997 increased 53.2%, to $9.2 million from $6.0 million
for the same period in fiscal 1996. The increase in sales for both periods is
due to an increase in units shipped as a result of a higher beginning backlog
and increased bookings vs. the comparative periods in fiscal 1996.
Gross margin increased to $1.3 million (or 31.5% of sales) in the second
quarter of fiscal 1997 compared to $570,000 (or 21.3% of sales) in the second
quarter of fiscal 1996. Gross margin for the first six months of fiscal 1997
increased to $2.8 million (or 30.8% of sales) compared to $1.7 million (or
27.7% of sales) for the first six months of fiscal 1996. Gross margin as a
percent of sales increased during both periods compared to the comparative
periods in fiscal 1996 due to the delivery of higher gross margin products and
services as well as reduced manufacturing costs. In addition, the Company's
mix of international sales increased from 50% in the fiscal 1996 six month
period to 85% in the fiscal 1997 six month period. As international sales have
historically generated a higher gross margin, this change in mix contributed to
the increase in the overall gross margin increase. The Company expects margins
to continue to fluctuate due to the timing and mix of contract awards and
delivery of product and services.
Selling, general, and administrative expenses increased during the second
quarter to $975,000 (24.3% of sales) from $859,000 (32.2% of sales) in the
second quarter of fiscal 1996. For the first six months of fiscal 1997,
selling, general, and administrative expenses increased to $2.1 million (22.6%
of sales) from $1.7 million (28.0% of sales) in the same period of fiscal 1996.
The increase in dollar terms reflects growth associated with increased sales,
backlog, and
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international marketing opportunities. The decrease as a percent of sales is
due to economies of scale associated with higher sales as certain costs are
fixed in nature.
Research and development expenses decreased during the second quarter to
$212,000 from $291,000 in the second quarter of fiscal 1996. In the first six
months, research and development expenses decreased to $447,000 from $561,000
for the first six months of fiscal 1996. The decrease for both periods is a
result of decreased labor associated with the current integration and testing
stage of the Company's GPS navaids product. In the comparative periods of
fiscal 1996, the Company was primarily involved in the labor intensive initial
design stage of the project which resulted in higher levels of research and
development expenses.
Interest expense decreased $12,000 for the second quarter and $19,000 for the
first six months compared to the respective periods in the prior year due to a
decrease in the average debt obligations outstanding compared to the prior year
period. Other income increased $15,000 compared to the second quarter of
fiscal 1996 but decreased $9,000 compared to the first six months of fiscal
1996. The decrease for the first six months is due to lower average cash and
short-term investment balances during the first quarter. On average, the cash
and short-term investment balances increased during the second quarter compared
to the prior year period.
The Company's provision for income taxes amounted to 36.1% and 36.7% for the
second quarter and first six months, respectively, resulting from the
generation of pretax income in fiscal 1997. In the prior year comparative
periods, the Company recorded an effective income tax benefit of approximately
37% due to the Company's loss position.
Net income for the second quarter was $62,000, compared with a fiscal 1996
second quarter net loss of $368,000. For the first six months, net income was
$197,000, compared with a net loss of $367,000 for the first six months of
fiscal 1996. On a per share basis, net income for the quarter was $.03
compared with a net loss of $.15 in the prior year second quarter. For the
first six months, net income was $.08 compared with a net loss of $.15 for the
first six months of fiscal 1996. The per share increase in net income is
primarily due to increased sales and margin, as previously mentioned.
BACKLOG
The Company's backlog was $5.6 million at October 31, 1996, compared to $2.8
million at October 31, 1995, and $6.5 million at April 30, 1996. Approximately
33% of the backlog at October 31, 1996, was represented by contracts with two
countries in the Middle East, with an additional 22% of the backlog represented
by a contract with Taiwan and 15% each for contracts with Thailand and Turkey.
Substantially all of the backlog at October 31, 1996 is expected to be
completed and shipped in fiscal 1997.
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The decline in backlog, as compared to April 30, 1996, is the result of
bookings not keeping pace with shipments during the first quarter. During the
second quarter, though, the Company was awarded contracts totaling $5.1 million
which exceeded second quarter revenue of $4.0 million. Subsequent to
quarter-end, the Company announced the signing of a $17.7 million contract with
the Republic of Indonesia. Upon financing approval from the Export/Import Bank
of the United States, the contract will be recorded in backlog. While the
Company is confident it can obtain approval of the financing over the next
several months, a delay could effect results during the Company's third and
fourth quarter of fiscal 1997. A number of other bids remained active at
quarter end, but the Company is unable to determine when or if the related
contracts will be awarded. The Company is continuing with plans to strengthen
its marketing group and expand its international sales representative network
during the remainder of fiscal 1997. The Company expects that these actions,
combined with a planned increase in marketing activities, will better position
the Company to capture existing programs and identify and market upcoming
programs. The Company expects backlog and bidding activities as well as
contract awards to continue to fluctuate due to the size and timing of contract
programs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $1,755,000 was provided by operations for the first six months of
fiscal 1997 compared to $115,000 used in the first six months of fiscal 1996.
The increase was principally the result of cash generated from lower accounts
receivable and inventory balances in addition to higher net income compared to
the comparative period of fiscal 1996.
Cash used in investing activities was $1,063,000 for the first six months of
fiscal 1997 compared to cash provided of $1,841,000 in the first six months of
fiscal 1996. The decrease in cash provided is primarily the result of
short-term investment purchases of $997,000 during the current year and the
liquidation of short-term investments in the prior year period of $1,939,000.
Cash used in financing activities was $3,000 in the first six months of fiscal
1997 compared to cash used of $6,000 in the first six months of fiscal 1996.
The decrease in net cash used is mainly due to proceeds received from the
exercise of stock options in the current year.
The Company expects that it will meet its ongoing requirements for working
capital and capital expenditures from a combination of cash expected to be
generated from operations, existing cash and cash equivalents and short-term
investments, and available borrowings under its existing revolving credit
facility.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders of the Company was held on
September 10, 1996. The following items were approved :
(a) Keith S. Cowan and Robert D. Taylor were reelected Class III
directors of the Company for a period of three years until the
1999 Annual Meeting of Stockholders and until a successor has
been elected and qualified. For Keith S. Cowan, 2,091,966
shares were voted for election with 11,910 shares withheld. For
Robert D. Taylor, 2,091,966 shares were voted for election with
11,910 shares withheld. Members of the Board continuing in
office include the Class I directors serving until the 1997
annual meeting, Thomas C. Blackburn and Thomas C. Cargin, and
the Class II directors serving until the 1998 annual meeting,
Michael J. Meyer and Walter H. Stowell, Jr.
(b) Appointment of Ernst and Young LLP as independent accountants
was approved with 2,103,241 shares for appointment and 260
shares against. 375 shares abstained from voting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11.1 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K: No reports on Form 8-K were filed by the
Registrant during the three months ended October 31, 1996.
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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.
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
December 11, 1996 /s/ Thomas C. Cargin,
- ------------------------- --------------------------------------------------
Date Thomas C. Cargin, Vice President of Finance and
Administration, Secretary, and Principal
Accounting Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
11.1 Computation of Earnings Per Share, filed herewith. 13
27 Financial Data Schedule (for SEC use only)
</TABLE>
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<PAGE> 1
EXHIBIT 11.1
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NET INCOME PER SHARE COMPUTATION
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
-------- -------- -------- --------
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands, except per share data)
PRIMARY
- --------------------------------------------
<S> <C> <C> <C>
Net income (loss) applicable to common stockholders $ 62 $ (368) $ 197 $ (367)
======== ======== ======== ========
Weighted average number of common
shares outstanding during the periods 2,231 2,190 2,231 2,190
Add - dilutive common equivalent shares
(determined using the "treasury stock method")
representing shares issuable upon the exercise
of stock options 168 201 169 203
-------- -------- -------- --------
Weighted average number of shares used
in calculation of primary net income (loss) per share 2,399 2,391 2,400 2,393
======== ======== ======== ========
Net income (loss) per common share - primary $ 0.03 $ (0.15) $ 0.08 $ (0.15)
======== ======== ======== ========
FULLY DILUTED
- --------------------------------------------
Net income (loss) applicable to common stockholders $ 62 $ (368) $ 197 $ (367)
======== ======== ======== ========
Weighted average number of shares used in calculating
primary net income per common share computation 2,399 2,391 2,400 2,393
Add (deduct) incremental shares representing:
Shares issuable upon exercise of stock options
included in primary calculation above (168) (201) (169) (203)
Shares issuable upon exercise of stock options
based on period-end market price 171 201 171 203
-------- -------- -------- --------
Weighted average number of shares used in
calculation of fully diluted net income (loss) per share 2,402 2,391 2,402 2,393
======== ======== ======== ========
Net income (loss) per common share - fully diluted $ 0.03 $ (0.15) $ 0.08 $ (0.15)
======== ======== ======== ========
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AIRPORT
SYSTEMS INTERNATIONAL, INC. FORM 10-QSB FOR THE PERIOD ENDED OCTOBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,517
<SECURITIES> 0
<RECEIVABLES> 4,110
<ALLOWANCES> 54
<INVENTORY> 3,460
<CURRENT-ASSETS> 10,194
<PP&E> 2,942
<DEPRECIATION> 1,171
<TOTAL-ASSETS> 13,349
<CURRENT-LIABILITIES> 3,003
<BONDS> 1,212
0
0
<COMMON> 22
<OTHER-SE> 9,112
<TOTAL-LIABILITY-AND-EQUITY> 13,349
<SALES> 9,169
<TOTAL-REVENUES> 9,169
<CGS> 6,346
<TOTAL-COSTS> 8,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 311
<INCOME-TAX> 114
<INCOME-CONTINUING> 197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
