<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, 1999
------------------------
( )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 of (I.R.S. Employer Identification No.)
incorporation or organization)
11300 West 89th Street
Overland Park, Kansas 66214
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(address of principal executive offices)
(913)492-0861
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(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 1,
1999
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTER ENDED JULY 31, 1999
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 Income 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 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE 12
</TABLE>
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PART 1. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
July 31, April 30,
1999 1999
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(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash & cash equivalents 504 152
Accounts receivable, net 4,892 5,968
Inventories, net 3,882 3,947
Other current assets 116 690
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Total current assets 9,395 10,757
Property and equipment, at cost 3,274 3,232
Accumulated depreciation and amortization (1,780) (1,696)
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1,494 1,536
Other assets 30 30
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Total assets 10,919 12,323
======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 975 1,085
Accrued expenses 1,782 1,828
Notes payable to bank 0 1,325
Current portion of long-term debt 20 20
Total current liabilities 2,778 4,258
Long-term debt, less current portion 1,169 1,177
Stockholders' equity:
Common stock 22 22
Additional paid-in capital 7,218 7,218
Retained earnings (268) (352)
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Total stockholders' equity 6,972 6,888
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Total liabilities and stockholders' equity 10,919 12,323
======= =======
</TABLE>
NOTE: The balance sheet at April 30, 1999 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.
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
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1999 1998
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<S> <C> <C>
Sales 4,251 4,727
Cost of products sold 2,864 3,150
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Gross margin 1,387 1,577
Selling, general and administrative expenses 931 1,071
Research and development expenses 328 484
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Operating income 128 22
Other income (expense):
Interest expense (44) (23)
Other, net 0 23
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Income before income taxes 84 22
Provision for income taxes 0 8
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Net income 84 14
====== ======
Income per share:
Basic 0.04 0.01
====== ======
Diluted 0.04 0.01
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</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>
Three Months Ended
July 31,
------------------
1999 1998
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(In thousands)
<S> <C> <C>
Operating activities:
Net income 84 14
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 84 96
Changes in operating assets and liabilities:
Accounts receivable, net 1,076 (238)
Inventories, net 276 (1,068)
Accounts payable (109) 291
Accrued expenses and customer deposits (197) (214)
Other, net 574 62
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Net cash provided by (used in) operating activities 1,788 (1,057)
Investing activities:
Purchases of property and equipment (42) (57)
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Net cash used in investing activities (42) (57)
Financing activities:
Net repayments on note payable to bank (1,325) 0
Principal payments on long-term debt (5) (5)
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Net cash used in financing activities (1,330) (5)
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Net increase (decrease) in cash and cash equivalents 416 (1,119)
Cash and cash equivalents at beginning of period 88 2,449
------ ------
Cash and cash equivalents at end of period 504 1,330
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 23 24
====== ======
Income taxes 0 25
====== ======
</TABLE>
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AIRPORT SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 31, 1999
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, 1999 are not
necessarily indicative of the results that may be expected for the year ended
April 30, 2000. 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, 1999.
2. Notes Payable to Banks
The Company has a line of credit agreement with a bank which expires September
1, 2000. The agreement allows for borrowings up to a maximum of $6,000,000 at an
interest rate of, at the Company's option, either LIBOR plus 250 basis points
(7.69% at July 31, 1999) or prime plus 25 basis points(8.25% at July 31, 1999).
The line of credit matures on September 1, 2000 and is secured by accounts
receivable, inventory, and equipment. There were no borrowings at July 31, 1999.
4. Earnings Per Share
Under SFAS No. 128, basic earnings per share is calculated by dividing income
available to common stockholders by the weighted average common shares
outstanding. Fully diluted earnings per share includes the effect of all
potentially dilutive securities, including stock options. A reconciliation of
the numerators and the denominators of the basic and diluted per-share
computations is as follows:
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<TABLE>
<CAPTION>
Three Months Ended
July 31, 1999 July 31, 1998
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<S> <C> <C>
Numerator:
Net Income $ 84,000 $ 14,000
Denominator:
Denominator for basic
earnings per share - weighted
average shares 2,230,500 2,230,500
Effect of dilutive securities:
Employee stock options 146,191 189,324
Denominator for diluted
earnings per share - adjusted
weighted average shares with
assumed conversions 2,376,691 2,419,824
Earnings per share - Basic $ 0.04 $ 0.01
Earnings per share - Dilutive $ 0.04 $ 0.01
</TABLE>
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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-KSB for the year ended April 30, 1999. 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 2000 decreased 10% to $4.2 million from
$4.7 million for the first quarter of fiscal 1999. The decrease in sales is due
to a decrease in units shipped as a result of a lower beginning backlog compared
to the same period of fiscal 1999.
Gross margin decreased 12% to $1.4 million in the first quarter of fiscal 2000
from $1.6 million for the first quarter of fiscal 1999. Gross margin as a
percent of sales remained unchanged at 33% in the first quarter of fiscal 2000
compared to the first quarter of fiscal 1999. The Company expects gross margins
will fluctuate in the future due to the timing and mix of contract awards and
delivery of product and services.
Selling, general, and administrative expenses decreased $140,000 or 13% during
the first quarter of fiscal 2000 compared to the first quarter of fiscal 1999.
As a percent of sales, selling, general, and administrative expenses decreased
from 23% in the first quarter of fiscal 1999 to 22% in the first quarter of
fiscal 2000. The decrease in selling, general and administrative expenses is
attributable to cost reductions made by the Company, primarily in administrative
personnel positions.
Research and development expenses decreased during the first quarter of fiscal
2000 to $328,000 from $484,000 in the first quarter of fiscal 1999. The decrease
is a result of decreased labor and expenses related to development work on the
new Category II/III Instrument Landing System (ILS). This work was substantially
completed in fiscal 1999 and certified by the FAA during the first quarter of
fiscal 2000.
Interest expense increased $21,000 for the first quarter
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of fiscal 2000 compared to the first quarter of fiscal 1999 due to an increase
in the average debt obligations outstanding compared to the prior year period.
No income tax provision was recorded for the first quarter of fiscal 2000
reflecting the use of net operating loss carry forwards available to the
Company, compared to an estimated provision for income taxes of $8,000 of 36.4%
during the first quarter of 1999.
Net income for the first quarter was $84,000, compared with a fiscal 1999 first
quarter net income of $14,000. The increase in net income is primarily due to
reduced sales, general and administrative expenses and research and development
expenses as previously mentioned.
BACKLOG
The Company's backlog was $1.7 million at July 31, 1999, compared to $7.9
million at July 31, 1998, and $4.9 million at April 30, 1999. Approximately 89%
of the backlog at July 31, 1999, was represented by four contracts and call for
providing navaid equipment and services to the United States (11% of backlog),
Asia (23% of backlog) and South America (13% of backlog). The Company expects to
ship substantially all of the total backlog through the end of fiscal 2000.
The decline in backlog, as compared to April 30, 1999, is the result of bookings
not keeping pace with shipments. Through the first quarter of fiscal 2000,
bookings continued to be slowed by economic difficulties experienced in
Southeast Asia, which began in fiscal 1998 and continued through fiscal 1999. In
reaction to this, the Company shifted its focus from Southeast Asia to other
geographic areas. The company expects that this, combined with the completion of
the new Category II/III ILS and the addition of the airfield product line will
position the Company to increase market penetration in its markets as well as
improve its competitive position on future procurements. Orders through the
early part of the second quarter of fiscal 2000 have been encouraging with over
$3.0 million booked, primarily from countries in Europe, Latin America and the
United States, and included orders for both navaids and airfield lighting
products. Though the Company is optimistic about its prospects for fiscal 2000,
any delays and cancellation of orders will negatively impact the Company's
revenue during the second, third and fourth quarters and could result in
operating losses or breakeven operating results in those quarters. The extent of
any loss in those quarters, or the ability to achieve break-even operating
results, is difficult to ascertain due to uncertainties in the timing of the
receipt of orders. 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 $1.8 million was provided by operations for the first quarter of
fiscal 2000 compared to $1.1 million used in the first quarter of fiscal 1999.
The increase in cash provided was primarily due to decreases in accounts
receivable and inventory during the period. Accounts receivable decreased
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as large contracts, in particular the Indonesia contract, were completed and all
amounts due were paid. Inventories declined with the completion and billing of
the remaining work on the Indonesia contact and lower purchases in the first
quarter of fiscal 2000 as compared to fiscal 1999.
Cash used in investing activities was $42,000 for the first quarter of fiscal
2000 unchanged from $57,000 used in the first quarter of fiscal 1999.
Cash used in financing activities was $1.3 million in the first quarter of
fiscal 2000 compared to cash used of $5,000 in the first quarter of fiscal 1999.
The increase in cash used was the result of repayments made on the Company's
short-term note payable in the current year period.
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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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 July 31, 1999.
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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
September 14, 1999 /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>
27 Financial Data Schedule (SEC Use Only)
</TABLE>
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AIRPORT
SYSTEMS INTERNATIONAL, INC. FORM 10Q-SB FOR THE QUARTER ENDED JULY 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH AS EXHIBIT 27 OF THE AIRPORT
SYSTEMS INTERNATIONAL, INC. FORM 10Q-SB.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1
<CASH> 504
<SECURITIES> 0
<RECEIVABLES> 4,932
<ALLOWANCES> 40
<INVENTORY> 3,882
<CURRENT-ASSETS> 9,395
<PP&E> 3,274
<DEPRECIATION> 1,780
<TOTAL-ASSETS> 10,919
<CURRENT-LIABILITIES> 2,778
<BONDS> 1,169
0
0
<COMMON> 22
<OTHER-SE> 6,950
<TOTAL-LIABILITY-AND-EQUITY> 10,919
<SALES> 4,251
<TOTAL-REVENUES> 4,251
<CGS> 2,864
<TOTAL-COSTS> 4,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> 84
<INCOME-TAX> 0
<INCOME-CONTINUING> 84
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
