UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
Commission file number I-4334
SUNAIR ELECTRONICS, INC.
A Florida Corporation I.R.S. Employer I.D. No. 59-0780772
Executive Offices, 3101 S.W. Third Avenue
Fort Lauderdale, FL 33315
Telephone (954) 525-1505
Securities registered pursuant to section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- --------------------------- -----------------------------------------
Common (Par Value 10 Cents) American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
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 Exchange Act of 1934
during the preceding 12 months (or for such shorter period 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 ____
The aggregate market value of the voting stock held by non-affiliates of the
registrant approximated $4,044,958 as of December 14, 1995 based on the closing
price of stock on the American Stock Exchange on said date.
Registrant's common stock - par value 10 cents, outstanding as of November 30,
1995 - 3,932,370 shares.
Documents Incorporated by Reference:
Portions of the annual shareholders' report for the years ended September 30,
1995 and September 30, 1994 are incorporated by reference into Parts I and II.
This Annual Report on Form 10-K has 21 pages. The exhibit index (Item 14a) is on
page 20.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Sunair Electronics, Inc. is a Florida corporation organized in 1956. It is
engaged in the design, manufacture and sale of high frequency single sideband
communications equipment utilized for long range voice and data communications
in fixed station, airborne, mobile and marine "para-military" applications.
MARKETS
Sunair products are marketed both domestically and internationally and are
primarily intended for strategic military and other governmental applications.
Sales are executed direct through systems engineering companies, worldwide
commercial and business airframe manufacturers or direct to the U.S. Government
for foreign military assistance.
PRODUCTS
Sunair's line of equipment is composed of proprietary HF/SSB radio equipment and
ancillary items sold as operating units or combined into sophisticated systems
that may interface with teleprinters, antennae, power sources, modems, message
switching devices, cryptographic equipment and the like provided by others.
Sunair products employ advanced solid state designs with computer controlled
networking capabilities. Principal product areas are as follows:
High frequency transceivers
High frequency receivers
High frequency exciters
Automatic antenna couplers
Linear power amplifiers
Computer remote control systems
Digital modems
Frequency management systems
Transportable systems
High frequency airborne transceivers
In addition, the Company custom designs systems incorporating various
combinations of the above into equipment racks and control consoles that may
interface with products and systems of other manufacturers.
-2-
<PAGE>
DISTRIBUTION
Sunair sells through a network of dealers and representatives located throughout
the United States and over 100 other nations. In addition, sales are made on a
direct basis to airframe manufacturers and segments of the U.S. government. A
substantial amount of the Company's sales are made to customers outside the
United States and are handled through its wholly owned subsidiary, Sunair
International Sales Corp., an IC-DISC corporation established in 1985. The
Company maintains a sales and service organization geared to train and assist
not only its dealers, but larger governmental users throughout the world.
Training programs are conducted at the Company's facilities and in the field.
The following is included to supplement the business information.
a. Sunair competes with other US and foreign companies several of
which have substantially greater sales and assets than Sunair.
b. The backlog of unfilled orders of the Company as of September 30
is as follows:
1995 1994
-------- --------
$366,819 $247,683
All orders at September 30, 1995 are expected to be shipped within the current
fiscal year. Sunair attempts to fill most orders from its finished goods stock
and thus does not look to backlog as a major indication of activity.
c. Raw materials, purchased parts and related items are available from
various suppliers located throughout the country. Management believes that the
items required in the manufacture of its electronic equipment are available in
sufficient quantities to meet manufacturing requirements with some extended
deliveries.
d. The Company maintains an engineering department which included five
engineers and two other technical personnel in 1995. During the fiscal years
ended September 30, 1993, 1994 and 1995, Sunair expended $230,000, $251,000 and
$268,000 respectively, on product development and engineering.
e. The Company had 41 active full time employees at the end of the
fiscal year.
f. In the opinion of the Company, its business is subject to limited
seasonal variation.
g. Essentially all export sales are covered by irrevocable letters of
credit or sight drafts. It is believed that over 80% of the non-US Government
sales ultimately enter the export market either directly or via resale by
domestic customers. For amounts of export sales by geographic area, sales to
governmental agencies of the U.S. and to foreign governments for the years ended
September 30, 1995, 1994 and 1993, see Note 6 to the consolidated financial
statements included in Item 8 herein.
-3-
<PAGE>
ITEM 2. PROPERTIES
Manufacturing, Sales and Administrative operations are conducted in Fort
Lauderdale, Florida within two concrete block buildings containing approximately
67,700 sq. ft. of floor space on approximately 10 acres of land, all of which is
owned in fee simple by the Company.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year to a vote
of security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The following table sets forth the high and low sale price of the Company's
common stock as traded on the American Stock Exchange under the symbol SNR.
1995
----
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------
High 2 1-15/16 2-1/8 2-1/4
Low 1-13/16 1-13/16 1-13/16 1-13/16
1994
----
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------
High 2-7/8 3-1/8 2-1/2 2-3/16
Low 2-5/8 2-1/8 2-1/8 1-11/16
(b) As of December 1, 1995, it is estimated that there were approximately 800
shareholders of record.
-4-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales $ 3,333,268 $ 2,494,777 $ 5,903,533 $ 8,010,176 $ 4,581,990
Cost of sales (A) 2,113,354 1,388,600 3,797,138 5,029,441 3,330,805
----------- ----------- ----------- ----------- -----------
Gross profit 1,219,914 1,106,177 2,106,395 2,980,735 1,251,185
Selling, general & administrative expenses 1,168,238 1,340,877 1,455,527 1,580,539 1,733,035
----------- ----------- ----------- ----------- -----------
Income (loss) from operations 51,676 (234,700) 650,868 1,400,196 (481,850)
----------- ----------- ----------- ----------- -----------
Other income (deductions)
Interest income 232,523 321,609 333,614 211,700 182,442
Interest expense (79,718) (43,913) (32,693) (52,527) (57,916)
Other income (expenses) 10,788 (39,760) 42,028 18,897 25,166
----------- ----------- ----------- ----------- -----------
163,593 237,936 342,949 178,070 149,692
----------- ----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes 215,269 3,236 993,817 1,578,266 (332,158)
Provision (benefit) for income taxes 47,800 (4,000) 186,000 441,000 0
----------- ----------- ----------- ----------- -----------
Net income (loss) before
extraordinary income 167,469 7,236 807,817 1,137,266 (332,158)
Extraordinary income, net of
income taxes 0 0 0 243,000 171,992
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 167,469 $ 7,236 $ 807,817 $ 1,380,266 $ (160,166)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income (loss) per common share:
Before extraordinary income $0.04 $0.00 $0.21 $0.29 $(0.08)
Extraordinary income 0.00 0.00 0.00 0.06 0.04
----------- ----------- ----------- ----------- -----------
Net income (loss) $0.04 $0.00 $0.21 $0.35 $(0.04)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Average shares outstanding 3,932,370 3,932,370 3,932,257 3,931,620 3,920,788
Cash dividends per share $0.00 $0.00 $0.00 $0.00 $0.00
Working capital year end $12,559,292 $ 8,396,050 $10,307,839 $ 9,437,728 $ 9,042,867
Total Assets $13,981,338 $13,783,537 $13,728,032 $13,032,921 $11,226,943
Stockholders' equity per share $3.41 $3.37 $3.36 $3.16 $2.81
<FN>
(A) Included in cost of sales for the year ended September 30, 1991 is a charge
of approximately $426,000 to reduce inventory to market due to obsolescence
resulting from new equipment designs.
</FN>
</TABLE>
-5-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
LIQUIDITY:
During the fiscal year ended September 30, 1995, the Company had short term
investments and cash or cash equivalents more than adequate to cover known
requirements, unforeseen events or uncertainties that might occur. During this
twelve month period, Cash and Short Term Investments had an average balance of
$2,968,000 as opposed to an average balance of $2,850,000 for the twelve months
ending September 30, 1994, or an average balance of $3,407,000 for the twelve
months ended September 30, 1993. Short Term Investments are tax exempt money
market funds that are readily available for immediate use should the occasion
arise. It is anticipated that the Company will remain as liquid during fiscal
1996. The current ratio of the Company as of September 30, 1995 was 31.6
compared to 21.7 as of September 30, 1994, or 21.7 as of September 30, 1993.
Inventories contain no obsolescence as adjustments are made as they occur.
Accounts and Notes Receivable contain no bad debts. Interim reserves are
maintained to cover cancellation charges unpaid and any freight charge disputes.
All monetary transactions are in U.S. dollars and no letters of credit involve
foreign exchange.
CAPITAL RESOURCES:
During the twelve months of fiscal 1995, $141,000 was spent for Capital Assets.
These funds were primarily used for new software development for Sunair
Equipment. No expenditures are contemplated for Plant Expansion or Extensive
Maintenance. The Company has no long term debt and none is contemplated other
than the long-term lease purchase of the AS400 computer. Liabilities consist of
current accounts payable, accrued expenses related to the current accounting
period and the capital lease.
RESULTS OF OPERATIONS:
During 1995 shipments of $3,333,000 were up 34% or $838.000 from fiscal 1994 and
down 44% or $2,570,000 from fiscal 1993. Domestic shipments of $1,834,000 for
fiscal 1995 were up 77% or $798,000 from fiscal 1994 and down 38% or $1,110,000
from fiscal 1993. Export shipments for fiscal 1995 were $1,499,000 up 3% or
$41,000 from fiscal 1994 and down 49% or $1,461,000 from fiscal 1993. The above
comparative sales reflect a continuing sluggish market for domestic and export
activity. Selling, general and administrative expenses were reduced $174,000 or
13% from fiscal 1994 and reduced 20% from 1993 expenses. Interest income
decreased proportionate to the change in investments and lower interest rates.
Interest expense paid on the deferred taxes of the Company's wholly-owned
subsidiary, Sunair International Sales Corporation, an interest charge DISC,
reflect the changes in interest rates of one year treasury bills at the end of
each fiscal year. Net income was up in 1995 from 1994 proportionate to
shipments. The 9000 series of communication equipment continues to receive
considerable interest in the foreign and domestic markets although funding
continues to be tight. The direct labor force continues at a reduced level due
to sufficient inventory levels in finished goods.
-6-
<PAGE>
RESULTS OF OPERATIONS: (CONTINUED)
As previously stated, the user community continues to struggle with accelerating
technological requirements brought by the changing role of high frequency
communications, as well as a lack of funding for new programs. System definition
and preparation of procurement documents which used to take about a year are now
averaging about three years. The typical base station requirement in the 1980's
would generally consist of a transceiver, linear power amplifier, antenna
coupler and teletype terminal and would cost $29,000. Today the typical base
station consists of the aforementioned products plus separate receivers,
pre/post selectors, high speed data modems, multiplexing equipment, phone
patches and fax terminals and costs about $135,000. The typical order has
increased greatly in scope and dollar value, but occurs far less frequently than
in prior periods. These events have brought about great changes in the way the
Company conducts business. Pre-sale demands are placed on the marketing and
engineering functions which heretofore did not exist. Sunair has kept pace with
these shifting demands at the price of accelerated company investment and
remains optimistic about the long term results. Product development included a
fully automated totally integrated capability to communicate error free data and
facsimile over high frequency radio channels using our "PATHFINDER" Data Switch
Terminal. Production was also resumed on the Airborne ASB500 line of equipment.
Sunair sales force continues to aggressively pursue international business with
a program of extensive travel.
-7-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,408,135 $ 961,403
Accounts receivable 729,778 186,734
Inventories 7,676,352 7,492,385
Prepaid expenses and other current assets 155,864 161,073
----------- -----------
12,970,129 8,801,595
INVESTMENTS 0 4,006,864
PROPERTY, PLANT AND EQUIPMENT
Land 224,299 224,299
Buildings and improvements 1,684,728 1,684,728
Machinery and equipment 2,115,055 1,973,945
----------- -----------
4,024,082 3,882,972
Less: Accumulated depreciation 3,012,873 2,907,894
----------- -----------
1,011,209 975,078
----------- -----------
$13,981,338 $13,783,537
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY SEPTEMBER 30,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 389,841 $ 386,141
Current portion of capitalized lease 20,996 19,404
----------- -----------
410,837 405,545
LONG-TERM LIABILITIES
Long-term portion of capitalized lease 57,012 78,772
Deferred income taxes 108,800 62,000
----------- -----------
165,812 140,772
576,649 546,317
STOCKHOLDERS' EQUITY
Preferred stock, no par value
500,000 shares authorized
no shares issued
Common stock, $.10 par value
6,000,000 shares authorized
4,800,740 shares issued 480,074 480,074
Additional paid-in capital 2,606,899 2,606,899
Retained earnings 15,274,327 15,106,858
----------- -----------
18,361,300 18,193,831
Less: Cost of treasury stock
(868,370 shares in 1995 and 1994) (4,956,611) (4,956,611)
----------- -----------
13,404,689 13,237,220
----------- -----------
$13,981,338 $13,783,537
----------- -----------
----------- -----------
</TABLE>
Notes to Consolidated Financial Statements are an integral part of this
statement
-8-
<PAGE>
PURITZ & WEINTRAUB
CERTIFIED PUBLIC ACCOUNTANTS
(A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS)
1244 N. UNIVERSITY DRIVE
PLANTATION, FLORIDA 33322
TELEPHONE (305) 370-2727 - FAX (305) 370-2776
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders of Sunair Electronics, Inc. and
Subsidiary
We have audited the accompanying consolidated balance sheets of Sunair
Electronics, Inc. and Subsidiary as of September 30, 1995 and 1994 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sunair Electronics,
Inc. and Subsidiary as of September 30, 1995 and 1994 and the results of its
operations and cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 2 to these financial statements, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 109, 'Accounting for
Income Taxes', in fiscal 1994.
November 6, 1995
/S/ PURITZ & WEINTRAUB
-----------------------
Puritz and Weintraub
Certified Public Accountants
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENTS YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Sales $3,333,268 $2,494,777 $5,903,533
Cost of sales 2,113,354 1,388,600 3,797,138
---------- ---------- ----------
Gross profit 1,219,914 1,106,177 2,106,395
Selling, general and administrative expenses 1,168,238 1,340,877 1,455,527
---------- ---------- ----------
Income (loss) from operations 51,676 (234,700) 650,868
---------- ---------- ----------
Other income (deductions)
Interest income 232,523 321,609 333,614
Interest expense (79,718) (43,913) (32,693)
Other income (expenses) 10,788 (39,760) 42,028
---------- ---------- ----------
163,593 237,936 342,949
---------- ---------- ----------
Income before provision (benefit) for income taxes 215,269 3,236 993,817
Provision (benefit) for income taxes 47,800 (4,000) 186,000
---------- ---------- ----------
Net income $ 167,469 $ 7,236 $ 807,817
---------- ---------- ----------
---------- ---------- ----------
Net income per common share $0.04 $0.00 $0.21
---------- ---------- ----------
---------- ---------- ----------
Average shares outstanding 3,932,370 3,932,370 3,932,257
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Notes to Consolidated Financial Statements are an integral part of this
statement
-9-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
OPERATING ACTIVITIES 1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Net income $ 167,469 $ 7,236 $ 807,817
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 105,159 109,495 84,709
(Increase) decrease in accounts receivables (543,044) 200,165 474,209
(Increase) in inventory (183,967) (591,349) (1,099,536)
Decrease (increase) in prepaid and other assets 5,209 (98,387) (12,568)
Increase (decrease) in accounts payable and
accrued expenses 3,700 (111,907) (113,325)
Increase in deferred income taxes 46,800 62,000 0
---------- ---------- -----------
Cash (used) provided by operating activities (398,674) (422,747) 141,306
---------- ---------- -----------
INVESTING ACTIVITIES
Purchase of equipment (142,054) (58,891) (23,034)
Sale (purchase) of investments, net 4,006,864 (64,093) (404,384)
---------- ---------- -----------
Cash provided (used) in investing activities 3,864,810 (122,984) (427,418)
---------- ---------- -----------
FINANCING ACTIVITIES
Principal payments of capital lease (19,404) (13,629) 0
Exercise of employee stock options 0 0 619
---------- ---------- -----------
Cash (used) provided in financing activities (19,404) (13,629) 619
---------- ---------- -----------
Net increase (decrease) in cash and cash equivalents 3,446,732 (559,360) (285,493)
Cash and cash equivalents at beginning of year 961,403 1,520,763 1,806,256
---------- ---------- -----------
Cash and cash equivalents at end of year $4,408,135 $ 961,403 $ 1,520,763
---------- ---------- -----------
---------- ---------- -----------
Supplemental Disclosure of Cash Flow information:
Cash paid during the year for interest $ 44,904 $ 43,913 $ 52,527
---------- ---------- -----------
---------- ---------- -----------
Cash paid during the year for income taxes $ 0 $ 57,258 $ 171,788
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
--------------------- PAID-IN RETAINED ----------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
--------- -------- ---------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1992 4,800,740 $480,074 $ 2,608,849 $14,291,805 868,820 $(4,959,180)
Employee stock options exercised 0 0 (1,950) 0 (450) 2,569
1993 net income 0 0 0 807,817 0 0
--------- -------- ----------- ----------- ------- -----------
Balances at September 30, 1993 4,800,740 480,074 2,606,899 15,099,622 868,370 (4,956,611)
1994 net income 0 0 0 7,236 0 0
--------- -------- ----------- ----------- ------- -----------
Balances at September 30, 1994 4,800,740 480,074 2,606,899 15,106,858 868,370 (4,956,611)
1995 net income 0 0 0 167,469 0 0
--------- -------- ----------- ----------- ------- -----------
Balances at September 30, 1995 4,800,740 $480,074 $ 2,606,899 $15,274,327 868,370 $(4,956,611)
--------- -------- ----------- ----------- ------- -----------
--------- -------- ----------- ----------- ------- -----------
</TABLE>
Notes to Consolidated Financial Statements are an integral part of this
statement
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
Sunair Electronics, Inc. is a Florida corporation organized in 1956. It is
engaged in the design, manufacture and sale of high frequency single sideband
communications equipment utilized for long range voice and data transmissions
in fixed station, airborne, mobile and marine 'para-military' applications.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Sunair Electronics, Inc. and its wholly-owned subsidiary, Sunair
International Sales Corporation, (the 'Company'). All significant
intercompany accounts and transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Sunair Electronics, Inc. and Subsidiary are on the accrual basis of
accounting. Sales revenues are recorded when products are shipped. Interest
and dividends earned on investments are recorded when earned.
ACCOUNTS RECEIVABLE
Since bad debts are insignificant, the Company uses the direct write-off
method of accounting for uncollectible receivables.
INVENTORIES
Inventories are stated at the lower of cost or market value using the first
in, first out method. Costs include material, labor and overhead.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash bank accounts, money funds, and
municipal commercial paper with original maturities of three months or less.
RECLASSIFICATION
Certain amounts in prior periods have been reclassified to conform to the
1995 presentations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is provided
over the estimated useful lives of the assets using both the straight-line
and accelerated methods. The estimated useful lives used to compute
depreciation are as follows:
Buildings and improvements 10 to 30 years
Machinery and equipment 4 to 10 years
The cost of maintenance and repairs is charged to income as incurred;
renewals and betterments are capitalized. When properties are retired or
otherwise disposed of, the cost of such properties and the related
accumulated depreciation are removed from the accounts. Any profit or loss is
credited or charged to income.
RESEARCH AND DEVELOPMENT
Expenditures for research and development are charged to income as incurred
and amounted to approximately $268,000 in 1995, $251,000 in 1994 and $230,000
in 1993.
INCOME (LOSS) PER SHARE
Income (loss) per share is based upon the weighted average number of shares
outstanding during each year. Shares subject to options are not included in
the computation since the present effects thereof are not materially
dilutive.
INVESTMENTS
Investments are carried at cost less amortization of premium (discount), if
any, and include Private Export Funding Corporation (PEFCO) notes at
September 30, 1994. These notes are guaranteed by the Export-Import Bank of
the United
-11-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
States, an agency of the United States. These investments were excluded from
current assets due to their maturity dates. These notes were sold in April
of this year due to market fluctuations and were invested in short term
municipal bonds. These municipal bonds are reflected in cash and cash
equivalents at September 30, 1995. Approximately $3,200,000 of the short
term municipal bonds were re-invested in PEFCO notes in October, 1995.
The following schedule reflects values at September 30, 1994:
<TABLE>
<CAPTION>
NAME OF ISSUER AND
TITLE OF EACH ISSUE PRINCIPAL COST MARKET CARRYING
- ------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PEFCO 6.86% secured note
series TT due April 30, 2004 $1,000,000 $ 993,890 $ 956,560 $ 993,890
PEFCO 7.7% secured note
series X due January 31, 1997 1,000,000 1,000,000 1,010,000 1,000,000
PEFCO 7.9% secured note
series LL due March 31, 2000 1,000,000 1,010,780 1,007,500 1,006,996
PEFCO 7.3% secured note
series NN due January 31, 2002 1,000,000 1,006,250 965,000 1,005,978
---------- ---------- ---------- ----------
$4,000,000 $4,010,920 $3,939,060 $4,006,864
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
2. INCOME TAXES
The components of the Company's income tax (benefit) provision are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Current
Federal $ 1,000 $(66,000) $ 179,400
State 0 0 6,600
-------- -------- ---------
1,000 (66,000) 186,000
-------- -------- ---------
Deferred
Federal 43,000 57,000 0
State 3,800 5,000 0
-------- -------- ---------
46,800 62,000 0
-------- -------- ---------
$ 47,800 $ (4,000) $ 186,000
-------- -------- ---------
-------- -------- ---------
Income before income taxes and
use of net operating losses $215,269 $ 3,236 $ 993,817
Income tax (1,000) 0 (186,000)
Income tax benefit due to net
operating loss carryback 0 66,000 0
Deferred income taxes (46,800) (62,000) 0
-------- -------- ---------
Net income $167,469 $ 7,236 $ 807,817
-------- -------- ---------
-------- -------- ---------
</TABLE>
The Company has approximately $109,000 of income tax deposits and benefits to
be applied to future periods. This amount is included in prepaid expenses and
other current assets.
-12-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. INCOME TAXES--(Continued)
On October 1, 1993, the Company changed its method of accounting for income
taxes as required by Statement of Financial Accounting Standards ('SFAS') No.
109, 'Accounting for Income Taxes'. SFAS No. 109 retains the requirement to
record deferred income taxes for temporary differences that are reported in
different years for financial reporting and for tax purposes; however, the
methodology for calculating and recording deferred income taxes has changed.
Under the liability method adopted by SFAS No. 109, deferred tax liabilities
or assets are computed using the tax rates expected to be in effect when the
temporary differences reverse. Also, requirements for recognition of deferred
tax assets and operating loss and tax credit carryforwards were liberalized
by requiring their recognition when and to the extent that their realization
is deemed to be more likely than not.
As a result of the Tax Reform Act of 1984, Sunair International Sales
Corporation (SISC), a wholly owned subsidiary, had elected as of January 1,
1985, to be treated as an Interest Charge Domestic International Sales
Corporation. Accordingly, for 1985 and future years, only one-seventeenth
(1/17) of its net income will be considered as a deemed dividend to the
parent corporation. The Company intends that the balance of SISC's net
income will be permanently retained by SISC and that the Company will only be
required to pay an annual interest charge on the amount of taxes it defers on
this retained income which interest charged amounted to $72,900, $38,086 and
$32,693 at September 30, 1995, 1994 and 1993, respectively. However, due to
SFAS No. 109, beginning in fiscal 1994 the Company has a deferred income tax
liability of $108,800 on SISC's undistributed retained earnings. Deferred
income taxes were not provided on SISC's undistributed retained earnings
prior to 1994 since it is intended to be indefinitely invested. SISC's
undistributed retained earnings are approximately $3,000,000.
The total provisions for 1995, 1994 and 1993 are less than amounts computed
by applying the statutory rates to income before income taxes for the
following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Income taxes at the statutory rates $ 73,191 $ 1,100 $ 337,898
State income taxes, net of federal tax benefit 0 0 19,678
Tax benefit attributable to undistributed
earnings of SISC 0 0 (100,000)
Tax savings due to tax exempt income (28,000) (21,000) (60,801)
Capital losses 3,400 19,000 0
Other (791) (3,100) (10,775)
-------- -------- ---------
$ 47,800 $ (4,000) $ 186,000
-------- -------- ---------
-------- -------- ---------
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Materials $1,609,299 $1,506,005 $2,193,540
Work in process 3,047,844 3,222,864 2,945,380
Finished goods 3,019,209 2,763,516 1,762,116
---------- ---------- ----------
$7,676,352 $7,492,385 $6,901,036
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
-13-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. CAPITAL LEASE
During fiscal year 1994, the Company entered into a capital lease for an
upgrade of computer software and hardware.
Obligations under capital leases require minimum payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
- ----------- ------
<S> <C>
1996 $ 26,976
1997 26,976
1998 26,976
1999 7,568
--------
Total minimum lease payments 88,496
Less amount representing interest 10,488
--------
Obligations under capital leases 78,008
Less current portion 20,996
--------
$ 57,012
--------
--------
</TABLE>
5. PREFERRED AND COMMON STOCK
The Company has 500,000 authorized shares of preferred stock, no par value,
that may be issued at terms and provisions determined by the Board of
Directors.
The number of issued and outstanding shares of common stock was 3,932,370 at
September 30, 1995 and 1994, respectively.
At September 30, 1995, the Company has 20,100 shares of common stock reserved
for issuance under a stock option plan for officers and key employees. 20,100
shares were exercisable at September 30, 1995. Options outstanding are
summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------------------------
1995 1994 1993
------------------- ------------------------ ------------------------
NUMBER OF OPTION NUMBER OF OPTION NUMBER OF OPTION
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ------ --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 23,100 $ 1.375 75,200 $1.375-3.25 81,050 $1.375-3.25
Exercised 0 0 (450) 1.375
Canceled (3,000) 1.375 (52,100) 1.375-3.25 (5,400) 1.375-3.25
--------- ------- --------- ----------- --------- -----------
End of year 20,100 $ 1.375 23,100 $ 1.375 75,200 $1.375-3.25
--------- ------- --------- ----------- --------- -----------
--------- ------- --------- ----------- --------- -----------
</TABLE>
The options expire in a maximum of five years from issue and become
exercisable in installments beginning after the first year.
When treasury shares are sold to optionees, proceeds are applied to treasury
stock to the extent of average cost of treasury shares held by the Company
and the difference charged to additional paid in capital. This reflects the
difference between the Company's average cost of treasury shares of $5.71 and
the exercise price per share.
-14-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. SEGMENT INFORMATION
The Company operates in a single industry, its principal products being
communications equipment.
Sales by geographic areas, to U.S. governmental agencies and foreign
governments were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Geographic area:
Europe $ 117,194 $ 356,044 $ 336,921
Asia 911,023 895,295 2,241,661
South America 129,506 19,792 37,959
Africa 40,541 32,585 257,887
North America 1,850,578 1,076,012 2,974,949
Australia 284,426 115,049 54,156
---------- ---------- ----------
$3,333,268 $2,494,777 $5,903,533
---------- ---------- ----------
---------- ---------- ----------
Sales to U.S. governmental agencies $1,461,840 $ 642,967 $1,691,967
---------- ---------- ----------
---------- ---------- ----------
Direct sales to foreign governments $ 427,457 $ 80,850 $1,430,801
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
7. QUARTERLY INFORMATION (UNAUDITED)
Summarized quarterly results of operations and common stock market values for
each quarter of 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995
---------------------------------------------------------
1 2 3 4
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Sales $ 573,324 $622,729 $705,074 $1,432,141
Gross profit 211,188 285,276 268,750 454,700
Net income (14,260) 14,498 25,947 141,284
Net income per common share $ 0.00 $ 0.00 $ 0.00 $ 0.04
---------- -------- -------- ----------
---------- -------- -------- ----------
Dividends per share None None None None
---------- -------- -------- ----------
---------- -------- -------- ----------
Market price per share
High 2 1 15/16 2 1/8 2 1/4
Low 1 13/16 1 13/16 1 13/16 1 13/16
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------------
1 2 3 4
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Sales $1,084,901 $612,276 $532,928 $ 264,672
Gross profit 453,384 286,297 245,109 121,387
Net income 158,751 (14,895) (28,241) (108,379)
Net income per common share $ 0.04 $ 0.00 $ (0.01) $ (0.03)
---------- -------- -------- ----------
---------- -------- -------- ----------
Dividends per share None None None None
---------- -------- -------- ----------
---------- -------- -------- ----------
Market price per share
High 2 7/8 3 1/8 2 1/2 2 3/16
Low 2 5/8 2 1/8 2 1/8 1 11/16
</TABLE>
-15-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
-16-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
FAMILY
NAME AGE POSITION HELD RELATIONSHIP
- ---- --- ------------- ------------
Robert Uricho 80 Chairman of the Husband of
Board, President, Shirley Uricho
Chief Executive
Officer and
Director Since
1956
Shirley Uricho 62 Assistant Wife of
Secretary Robert Uricho
Since 1959
Acting
Secretary
Since 1992
James E. Laurent 60 Vice President/ None
Marketing
Since 1988
Synnott B. Durham 54 Cost Manager None
Since
1979
Treasurer
Since 1994
Earl M. Anderson, Jr. 70 Director None
Since 1969
George F. Arata, Jr. 66 Director None
Since 1995
None- All directors' terms are for one year and until their successors are duly
elected and qualified.
-17-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following information is given on an accrual basis for the year ending
September 30, 1995 with respect to each director of the corporation whose
aggregate salary and fees paid by the Corporation and its subsidiaries were more
than $100,000 and each of the five highest paid officers of the Corporation
whose aggregate direct remuneration exceeded that amount and all officers and
directors of the Corporation as a group.
CASH AND CASH EQUIVALENT
FORMS OF REMUNERATION
SALARIES, FEES, SECURITIES OR PROPERTY
CAPACITY DIRECTOR'S FEES, INSURANCE BENEFITS OR
IN WHICH COMMISSIONS AND REIMBURSEMENTS, PERSONAL
NAME SERVED BONUSES BENEFITS
- ---- -------- ---------------- ------------------------
Robert Chairman of the $175,000 -
Uricho Board, President
and Chief Executive
Officer
All Officers
and Directors
(8 Persons
including the 1
named above) $385,378 -
-18-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information is given with respect to any person who to the
knowledge of the Corporation's management owns beneficially more than 5% of any
class of voting securities of the Corporation outstanding on the most recent
record date (exclusive of Treasury shares), and with respect to ownership of
such securities by the Corporation's officers and directors.
(A) Security Ownership of Certain Beneficial Owners
TITLE NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------- -------------------- ----------------------- --------
Common Robert Uricho, Jr. *2,272,900 57.80%
Board Chairman & CEO
3101 S.W. 3rd Avenue
Fort Lauderdale, FL
(B) Security Ownership of Management
TITLE NAME AND ADDRESS AMOUNT AND NATURE (1) PERCENT
OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------- ------------------- ----------------------- --------
Common Robert Uricho, Jr. *2,272,900 57.80%
Board Chairman & CEO
3101 S.W. 3rd Avenue
Fort Lauderdale, FL
Common All Other 6,076 **
Officers and Directors
Common All Officers and Directors 2,278,976 57.95%
As a group (6)
* Includes 278,900 shares held by the University of Florida Foundation, Inc. as
Trustee of a Charitable Remainder Unitrust of which Mr. Uricho is the income
beneficiary.
** Less than 1%
(1) Based upon 3,932,370 shares outstanding at December 15, 1995, and 4,800
shares issuable upon exercise of presently exercisable options.
While the Corporation has 500,000 authorized shares of preferred stock, no par
value, none have been issued. The only stock outstanding is 10 cents par value
Common Stock.
-19-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements filed as a part of the Form 10-K
Consolidated Balance Sheets as of
September 30,1995 and 1994 Page 8
Statements of Consolidated Income for each of the
three years in the period ended September 30, 1995 Page 9
Statements of stockholders' equity for each of the
three years in the period ended September 30, 1995 Page 10
Consolidated Statements of Cash Flows for each
of the three years in the period ended September
30, 1995 Page 10
Notes to Consolidated Financial Statements Pages 11-15
(a) 2. Financial Statement Schedules filed as part of the
Form 10-K:
Report on Financial Statements Schedules of
Independent Public Accountants Page 9
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements or
notes thereto.
Separate financial statements of the Company are omitted
because of the absence of the conditions under which they are
required.
(b) Reports on Form 8-K
On November 16,1995, the Company issued a report on Form 8-K
to advise of the resignation of Everett A. Cooper from
the Board of Directors effective September 30, 1995, due to health
reasons.
On November 16, 1995, the Company issued a report on Form 8-K
that George F. Arata, Jr. was appointed to the Board of
Directors of Sunair Electronics, Inc. effective October 3, 1995.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
SUNAIR ELECTRONICS, INC. Date NOVEMBER 14, 1995
By /S/ ROBERT URICHO, JR.
--------------------------------
Robert Uricho, Jr.
Chairman of the Board, Director
President and Principal
Executive Officer
By /S/ SYNNOTT B. DURHAM
--------------------------------
Synnott B. Durham
Treasurer and Principal
Accounting Officer
By /S/ SHIRLEY URICHO
--------------------------------
Shirley Uricho
Acting Secretary
By /S/ EARL M. ANDERSON, JR.
--------------------------------
Earl M. Anderson, Jr.
Director
By /S/ GEORGE F. ARATA, JR.
--------------------------------
George F. Arata, Jr.
Director
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 463,121
<SECURITIES> 3,945,014
<RECEIVABLES> 729,778
<ALLOWANCES> 0
<INVENTORY> 7,676,352
<CURRENT-ASSETS> 12,970,129
<PP&E> 4,024,082
<DEPRECIATION> 3,012,873
<TOTAL-ASSETS> 13,981,338
<CURRENT-LIABILITIES> 410,837
<BONDS> 0
0
0
<COMMON> 480,074
<OTHER-SE> 12,924,615
<TOTAL-LIABILITY-AND-EQUITY> 13,981,338
<SALES> 3,333,268
<TOTAL-REVENUES> 3,565,791
<CGS> 2,113,354
<TOTAL-COSTS> 2,113,354
<OTHER-EXPENSES> 1,168,238
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,718
<INCOME-PRETAX> 215,269
<INCOME-TAX> 47,800
<INCOME-CONTINUING> 167,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,469
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
