<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, 1997
---------------------------
( )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 0-22760
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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 (I.R.S. Employer
of incorporation Identification No.)
or organization)
11300 West 89th Street
Overland Park, Kansas 66214
------------------------------------------
(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,
1997
<PAGE> 2
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTER ENDED OCTOBER 31, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<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 1 - Legal Proceedings 10
Item 4 - Submission of Matters to a Vote of Security Holders
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,
1997 1997
----------- ---------
(In thousands)
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 893 $ 3,122
Short-term investments 497 --
Accounts receivable, net 6,456 7,534
Inventories, net 4,715 4,717
Other current assets 337 186
------- -------
Total current assets 12,899 15,559
Property and equipment, at cost 3,160 3,037
Accumulated depreciation and amortization 1,496 1,329
------- -------
1,664 1,708
Cost in excess of net assets acquired, net 1,227 1,264
Other assets 42 63
------- -------
Total assets $15,832 $18,593
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,472 $ 2,511
Accrued expenses 2,982 4,303
Notes payable to bank -- 600
Current portion of long-term debt 26 26
Other current liabilities 90 423
------- -------
Total current liabilities 4,569 7,862
Long-term debt, less current portion 1,186 1,195
Stockholders' equity:
Common stock 22 22
Additional paid-in capital 7,293 7,293
Retained earnings 2,762 2,221
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Total stockholders' equity 10,077 9,537
------- -------
Total liabilities and stockholders' equity $15,832 $18,593
======= =======
</TABLE>
NOTE: The balance sheet at April 30, 1997 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,
----------------------- -----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Sales $ 6,167 $ 4,014 $ 11,919 $ 9,169
Cost of products sold 4,092 2,749 8,240 6,346
-------- -------- -------- --------
Gross margin 2,075 1,265 3,680 2,823
Selling, general and administrative expenses 1,143 975 2,211 2,068
Research and development expenses 394 212 719 447
-------- -------- -------- --------
Operating income (loss) 537 78 750 308
Other income (expense):
Interest expense (25) (25) (6) (51)
Other, net 37 44 36 54
-------- -------- -------- --------
Income (loss) before income taxes 549 97 780 311
Provision (benefit) for income taxes 169 35 240 114
-------- -------- -------- --------
Net income (loss) $ 381 $ 62 $ 541 $ 197
======== ======== ======== ========
Income (loss) per share:
Primary $ 0.16 $ 0.03 $ 0.22 $ 0.08
======== ======== ======== ========
Fully diluted $ 0.16 $ 0.03 $ 0.22 $ 0.08
======== ======== ======== ========
</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,
----------------------
1997 1996
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(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 541 $ 197
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 225 249
Loss on sale of equipment -- 3
Changes in operating assets and liabilities:
Restricted cash -- (210)
Accounts receivable, net 1,077 666
Inventories, net 2 226
Accounts payable (1,039) 131
Accrued expenses (1,318) 138
Other, net (485) 356
------- -------
Net cash provided by (used in) operating activities (997) 1,755
INVESTING ACTIVITIES:
Purchase of short-term investments (2,567) (997)
Liquidation of short-term investments 2,070 --
Proceeds from sale of property and equipment -- 15
Purchases of property and equipment (123) (81)
Additions to other assets -- --
------- -------
Net cash provided by (used in) investing activities (620) (1,063)
FINANCING ACTIVITIES:
Principal payments on notes payable to banks (1,400) (570)
Borrowing on notes payable to banks 800 570
Payments on long-term debt and capital lease
obligations (12) (10)
Borrowing on long-term debt and capital lease
obligations -- --
Proceeds from exercise of stock options -- 8
------- -------
Net cash used in financing activities (612) (2)
Net increase in cash and cash equivalents (2,230) 691
Cash and cash equivalents at beginning of period 3,122 621
------- -------
Cash and cash equivalents at end of period $ 893 $ 1,312
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 58 $ 53
======= =======
Income taxes $ 573 $ 49
======= =======
</TABLE>
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 1997
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, 1997 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 1998. 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, 1997.
Certain reclassifications have been made to the prior year statements to conform
with the current year presentation.
2. Notes Payable to Banks
During September, 1997, the Company amended its line of credit to provide for
maximum borrowings of $6,000,000, at an interest rate of prime (8.50% at October
31, 1997), secured by accounts receivable, inventory, and equipment. The
agreement matures in September, 1998. There were no outstanding borrowings at
October 31, 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,"
as well as the competitive and pricing pressures related to all contracts,
either already in the Company's backlog, or which the Company is pursuing.
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, 1997, and the Form 10-KSB for the year
ended April 30, 1997. 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 1998 increased 53.6%, to $6.2 million
from $4.0 million for the second quarter of fiscal 1997. Sales for the first six
months of fiscal 1998 increased 30.0%, to $11.9 million from $9.2 million for
the same period in fiscal 1997. The increase in sales for both periods is due to
an increase in units shipped as a result of a higher beginning backlog.
Gross margin increased to $2.1 million (or 33.6% of sales) in the second quarter
of fiscal 1998 compared to $1.3 million (or 31.5% of sales) in the second
quarter of fiscal 1997. Gross margin for the first six months of fiscal 1998
increased to $3.7 million (or 30.8% of sales) compared to $2.8 million (or 30.7%
of sales) for the first six months of fiscal 1997. Gross margin as a percent of
sales increased during both periods compared to the comparative periods in
fiscal 1997 due to the delivery of higher gross margin products and services as
well as reduced manufacturing costs. 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 $1.1 million (18.5% of sales) from $975,000 (24.2% of sales) in the
second quarter of fiscal 1997. For the first six months of fiscal 1998, selling,
general, and administrative expenses increased to $2.2 million (18.5% of sales)
from $2.1 million (22.5% of sales) in the same period of fiscal 1997. The
increase in dollar terms reflects growth associated with increased sales,
backlog, and 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 increased during the second quarter to
$394,000 from
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$212,000 in the second quarter of fiscal 1997. In the first six months, research
and development expenses increased to $719,000 from $447,000 for the first six
months of fiscal 1997. The increase for both periods is a result of increased
labor and expenses related to programs designed to enhance the current product
line as well as the continued development of the Company's LADGPS (Local Area
Differential Global Position System).
Other revenue decreased $7,000 for the second quarter of fiscal 1998 compared to
the same period one year ago. This decrease was due to additional expenses
incurred as the result of bank charges and other miscellaneous charges related
to the international operations of the business. For the first six months of
fiscal 1998, total other revenue (expense), including interest expense,
increased $27,000 due to increases in interest income from investments as well
as reduced interest expense from outstanding debt obligations compared to the
prior year period.
Income taxes increased to $169,000 and $240,000 for the second quarter and first
six months of fiscal 1998, respectively, for an effective tax rate of 30.8%.
Taxes for the second quarter and first six months of fiscal 1997 amounted to
$35,000 and $114,000, respectively, for an effective tax rate of 36.1%, 36.7%
for those respective periods. The increase was primarily due to the increase in
pre-tax income while the effective tax rate decrease was due to reductions in
the income tax provision resulting from over-accrued taxes in fiscal 1997.
Net income for the second quarter was $381,000, compared with a fiscal 1997
second quarter net income of $62,000. For the first six months, net income was
$541,000, compared with a net income of $197,000 for the first six months of
fiscal 1997. On a per share basis, net income for the quarter was $.16 compared
with $.03 in the prior year second quarter. For the first six months, net income
was $.22 compared with a net income of $.08 for the first six months of fiscal
1997. The per share increase in net income is primarily due to increased sales
and margin, as previously mentioned.
BACKLOG
The Company's backlog was $14.6 million at October 31, 1997, compared to $5.6
million at October 31, 1996, and $19.2 million at April 30, 1997. Approximately
62% of the backlog at October 31, 1997, was represented by three international
contracts for navaids and other equipment and services, with an additional 14%
of the backlog represented by a contract with a domestic airport authority in
the United States and 8% for a contract with the Federal Aviation
Administration. Of the total backlog at October 31, 1997, approximately $8.3
million is expected to be completed and shipped in fiscal 1998 while the
remaining $6.3 million will be completed and shipped in the subsequent fiscal
year.
The decline in backlog, as compared to April 30, 1997, is the result of bookings
not keeping pace with shipments during the first six months. This is primarily
the result of the shipping schedules imposed by the Indonesia and FAA contracts.
During the second quarter, the Company booked
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orders of approximately $3.3 million which included a contract with Thailand to
provide the Company's LADGPS system which embodies new technology based on
directional signals provided by satellites. Other contracts awarded included
traditional navaid equipment and services to Panama, Taiwan and Cambodia. Other
bids remained active at quarter end, but the Company is unable to determine when
or if the related contracts will be rewarded. 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 $997,000 was used by operations for the first six months of fiscal
1998 compared to $1,755,000 provided in the first six months of fiscal 1997. The
decrease was principally the result of the payment of vendor trade balances and
other accrued expenses, as well as the reduction in customer down payments
during the first six months.
Cash used in investing activities was $620,000 for the first six months of
fiscal 1998 compared to $1,063,000 used in the first six months of fiscal 1997.
The decrease in cash used is primarily the result of short-term investment
purchases of $2.6 million and $2.0 million in short-term investment liquidation
during the current year and the purchase of short-term investments in the prior
year period of $997,000.
Cash used in financing activities was $612,000 in the first six months of fiscal
1998 compared to cash used of $2,000 in the first six months of fiscal 1997. The
increase in net cash used is mainly due to principal payments on notes payable
to banks of $1.4 million with total borrowings from banks totaling $800,000 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 1. Legal Proceedings
None.
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, 1997. The following items were approved:
(a) Thomas C. Blackburn and Thomas C. Cargin were re-elected Class
I directors of the Company for a period of three years until
the 2000 Annual Meeting of Stockholders and until a successor
has been elected and qualified. For Thomas C. Blackburn,
2,017,770 shares were voted for election with 6,260 shares
withheld. For Thomas C. Cargin, 2,016,270 shares were voted
for election with 7,760 shares withheld. Members of the Board
continuing in office include the Class II directors serving
until the 1998 annual meeting, Michael J. Meyer and Walter H.
Stowell, Jr., and the Class III directors serving until the
1999 annual meeting, Keith S. Cowan and Robert D. Taylor.
(b) Appointment of Ernst & Young LLP as independent accountants
was approved with 2,014,970 shares for appointment and 9,060
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, 1997.
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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 12, 1997 /s/ Thomas C. Cargin
- - ----------------- -----------------------------------------
Date Thomas C. Cargin, Vice President of Finance and
Administration, Secretary, and Principal
Accounting Officer
Page 11
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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,
--------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
PRIMARY
- - ----------------------------------------------
Net income (loss) applicable to common stockholders $ 381 $ 62 $ 541 $ 197
======= ======= ======= =======
Weighted average number of common
shares outstanding during the periods 2,231 2,231 2,231 2,231
Add - dilutive common equivalent shares
(determined using the "treasury stock
method") representing shares issuable
upon the exercise of stock options 191 168 205 169
------- ------- ------- -------
Weighted average number of shares used
in calculation of primary net income
(loss) per share 2,422 2,399 2,436 2,400
======= ======= ======= =======
Net income (loss) per common share - primary $ 0.16 $ 0.03 $ 0.22 $ 0.08
======= ======= ======= =======
FULLY DILUTED
- - ---------------------------------------------
Net income (loss) applicable to common stockholders $ 381 $ 62 $ 541 $ 197
======= ======= ======= =======
Weighted average number of shares used in calculating
primary net income per common share computation 2,422 2,399 2,436 2,400
Add (deduct) incremental shares representing:
Shares issuable upon exercise of stock options
included in primary calculation above (191) (168) (205) (169)
Shares issuable upon exercise of stock options
based on period-end market price 205 171 206 171
------- ------- ------- -------
Weighted average number of shares used in
calculation of fully diluted net income (loss) per share 2,436 2,402 2,437 2,402
======= ======= ======= =======
Net income (loss) per common share - fully diluted $ 0.16 $ 0.03 $ 0.22 $ 0.08
======= ======= ======= =======
</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, 1997
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-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 893
<SECURITIES> 497
<RECEIVABLES> 6,456
<ALLOWANCES> 0
<INVENTORY> 4,715
<CURRENT-ASSETS> 12,899
<PP&E> 3,160
<DEPRECIATION> 1,496
<TOTAL-ASSETS> 15,832
<CURRENT-LIABILITIES> 4,569
<BONDS> 0
0
0
<COMMON> 22
<OTHER-SE> 7,293
<TOTAL-LIABILITY-AND-EQUITY> 15,832
<SALES> 6,167
<TOTAL-REVENUES> 6,167
<CGS> 4,092
<TOTAL-COSTS> 4,092
<OTHER-EXPENSES> 1,574
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 549
<INCOME-TAX> 169
<INCOME-CONTINUING> 381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
