<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 July 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
----------------------------------------------
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 Identification No.)
of incorporation 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 September 10,
1997
<PAGE> 2
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTER ENDED JULY 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 6 - Exhibits and Reports on Form 8-K 10
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>
JULY 31, APRIL 30,
1997 1997
-------- ---------
(In thousands)
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 928 $ 3,122
Short-term investments 871 --
Accounts receivable, net 6,812 7,534
Inventories, net 4,752 4,717
Other current assets 275 186
------- -------
Total current assets 13,639 15,559
Property and equipment, at cost 3,067 3,037
Accumulated depreciation and amortization 1,402 1,329
------- -------
1,665 1,708
Cost in excess of net assets acquired, net 1,245 1,264
Other assets 51 63
------- -------
Total assets $16,600 $18,593
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,722 $ 2,511
Accrued expenses 3,851 4,303
Notes payable to bank -- 600
Current portion of long-term debt 26 26
Other current liabilities 113 423
------- -------
Total current liabilities 5,712 7,862
Long-term debt, less current portion 1,191 1,195
Stockholders' equity:
Common stock 22 22
Additional paid-in capital 7,293 7,293
Retained earnings 2,382 2,221
------- -------
Total stockholders' equity 9,697 9,537
------- -------
Total liabilities and stockholders' equity $16,600 $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.
Page 3
<PAGE> 4
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
(In thousands, except per share data)
Sales $ 5,753 $ 5,155
Cost of products sold 4,148 3,597
------- -------
Gross margin 1,605 1,558
Selling, general and administrative expenses 1,068 1,093
Research and development expenses 325 235
------- -------
Operating income 212 230
Other income (expense):
Interest expense 19 (26)
Other, net 0 9
------- -------
Income before income taxes 231 213
Provision for income taxes 71 79
------- -------
Net income $ 160 $ 134
======= =======
Income per share:
Primary $ 0.07 $ 0.06
======= =======
Fully diluted $ 0.07 $ 0.06
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
<PAGE> 5
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
-------------------
1997 1996
------- -------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 160 $ 134
Adjustments to reconcile net income to net cash
provided by (used in ) operating activities:
Depreciation and amortization 104 129
Loss on sale of equipment -- --
Changes in operating assets and liabilities:
Accounts receivable, net 721 1,595
Inventories, net (35) 716
Accounts payable (789) (398)
Accrued expenses (452) 201
Other, net (398) 234
------- -------
Net cash provided by (used in) operating activities (689) 2,611
INVESTING ACTIVITIES:
Purchase of short-term investments (871) (210)
Liquidation of short-term investments -- --
Proceeds from sale of property and equipment -- --
Purchases of property and equipment (31) (35)
Additions to other assets -- --
------- -------
Net cash provided by (used in) investing activities (902) (245)
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 (3) (4)
Borrowing on long-term debt and capital lease
obligations -- --
Proceeds from exercise of stock options -- 8
------- -------
Net cash provided for (used in) financing activities (603) 3
Net increase (decrease) in cash and cash equivalents (2,194) 2,370
Cash and cash equivalents at beginning of period 3,122 621
------- -------
Cash and cash equivalents at end of period $ 928 $ 2,991
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 33 $ 29
======= =======
Income taxes $ 430 --
======= =======
</TABLE>
Page 5
<PAGE> 6
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 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 three months ended July 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.
2. Notes Payable to Banks
In May, 1997, the Company amended its line of credit to provide for maximum
borrowings of $6,000,000, at an interest rate of prime (8.5% at July 31, 1997),
secured by accounts receivable, inventory, and equipment. The agreement matures
in September, 1998. There were no borrowings outstanding at July 31, 1997.
Page 6
<PAGE> 7
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-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 first quarter of fiscal 1998 were $5.7 million compared to $5.2
million for the first quarter of fiscal 1997. The increase in sales is due to an
increase in units shipped as a result of a higher beginning backlog and
increased bookings compared to the same period of fiscal 1997.
Gross margin remained unchanged in the first quarter of fiscal 1998 compared to
fiscal 1997. Gross margin as a percent of sales decreased compared to fiscal
1997 (27.9% versus 30.2%), due to the delivery of lower gross margin products
and services. The Company expects gross 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 decreased slightly in dollar
terms, but decreased from 21.2% of sales in fiscal 1997 to 18.6% in fiscal 1998.
The decrease as a percent of sales is primarily due to economies of scale
associated with higher sales as certain costs are fixed in nature.
Research and development expenses increased during the first quarter to $325,000
from $235,000 in the first quarter of fiscal 1997. The increase reflects
increased expenses related to research and development 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 income increased from a net expense of $17,000 in the first
quarter of fiscal 1997 to a net income of $19,000 in the first quarter of fiscal
1998 due to increased interest income on investments as well as reduced interest
expense resulting from a decrease in the average debt
Page 7
<PAGE> 8
obligations outstanding compared to the prior year period.
Income taxes declined in the first quarter of 1998 to $71,000 (an effective tax
rate of 31%) from $79,000 (an effective rate of 37%) in the first quarter of
1997. The decline in taxes was due primarily to reductions in the income tax
provision resulting from over-accrued of taxes in fiscal 1997.
Net income for the first quarter of 1998 was $160,000, compared with a 1997
first quarter net income of $134,000. The increase in net income is primarily
due to increased sales and gross margin, as previously mentioned.
BACKLOG
The Company's backlog was $17.6 million at July 31, 1997, compared to $4.5
million at July 31, 1997, and $19.2 million at April 30, 1997. Approximately 87%
of the backlog at July 31, 1997 was represented by three contracts. The
contracts call for providing navaid and other equipment and services to
Indonesia (64% of backlog), a domestic airport authority in the United States
(13% of backlog) and the Federal Aviation Administration (10% of backlog). The
Company expects to ship approximately $10 million of the total backlog through
the end of the fiscal year.
The decline in backlog, as compared to April 30, 1997, is the result of orders
not keeping pace with shipments, primarily the result of shipping schedules
imposed by the Indonesian and FAA contracts. The Company booked orders during
the quarter of approximately $4.0 million, one being the exercise by the FAA of
10 additional DME's under the existing contract and another to supply navaids,
approach lighting systems, weather observation systems and runway visual range
equipment to the Northwest Arkansas Regional Airport Authority. These two orders
totaled approximately $2.8 million. 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 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 $689,000 was used by operations for the first three months of fiscal
1998 compared to $2,611,000 provided by operations in the first three months of
fiscal 1997. The decrease was a result of the payment of vendor trade balances
and other accrued expenses, as well as the reduction in customer down payments
during the quarter.
Cash used in investing activities was $902,000 for the first three months of
fiscal 1998 compared to cash provided of $245,000 in the first three months of
fiscal 1997. This increase is primarily the result of the purchase of short-term
investments in the first quarter of 1998.
Cash used in financing activities was $603,000 in the first three months of
fiscal 1998 compared
Page 8
<PAGE> 9
to cash provided of $3,000 in the first three months of fiscal 1997 as a result
of the normal paydown of the Company's debt obligations as well as a net
reduction of short-term borrowings during the first quarter of $600,000.
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 available
borrowings under its existing revolving credit facility.
Page 9
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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:
None.
Page 10
<PAGE> 11
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
September 11, 1997 /s/ THOMAS C. CARGIN
- ----------------------- --------------------------------------------
Date Thomas C. Cargin, Vice President of Finance
and Administration, Secretary, and Principal
Accounting Officer
Page 11
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
11.1 Computation of Earnings Per Share, filed herewith. 107
27 Financial Data Schedule (for SEC use only)
</TABLE>
Page 12
<PAGE> 1
EXHIBIT 11.1
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NET INCOME PER SHARE COMPUTATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
------- -------
1997 1996
------- -------
<S> <C> <C>
(In thousands, except per share data)
PRIMARY
- --------------------------------------------
Net income applicable to common stockholders $ 160 $ 134
====== ======
Weighted average number of common
shares outstanding during the periods 2,386 2,400
Add - dilutive common equivalent shares
(determined using the "treasury stock method")
representing shares issuable upon the exercise
of stock options -- --
------ ------
Weighted average number of shares used
in calculation of primary net income per share 2,386 2,400
====== ======
Net income per common share - primary $ 0.07 $ 0.06
====== ======
FULLY DILUTED
- --------------------------------------------
Net income applicable to common stockholders $ 160 $ 134
====== ======
Weighted average number of shares used in calculating
primary net income per common share computation 2,386 2,400
Add (deduct) incremental shares representing:
Shares issuable upon exercise of stock options
included in primary calculation above -- --
Shares issuable upon exercise of stock options
based on period-end market price -- --
------ ------
Weighted average number of shares used in
calculation of fully diluted net income per share 2,386 2,400
====== ======
Net income per common share - fully diluted $ 0.07 $ 0.06
====== ======
</TABLE>
Page 13
<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 JULY 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> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 928
<SECURITIES> 871
<RECEIVABLES> 6,867
<ALLOWANCES> 55
<INVENTORY> 4,752
<CURRENT-ASSETS> 275
<PP&E> 3,067
<DEPRECIATION> 1,402
<TOTAL-ASSETS> 16,600
<CURRENT-LIABILITIES> 5,712
<BONDS> 0
0
0
<COMMON> 22
<OTHER-SE> 9,675
<TOTAL-LIABILITY-AND-EQUITY> 16,600
<SALES> 5,753
<TOTAL-REVENUES> 5,753
<CGS> 4,148
<TOTAL-COSTS> 4,148
<OTHER-EXPENSES> 1,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> 231
<INCOME-TAX> 71
<INCOME-CONTINUING> 160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
