FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1997
OR
( ) 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 0-4025
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SYMETRICS INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-0954868
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(State of Incorporation) (I.R.S. Employer Identification No.)
1615 W. NASA Boulevard, Melbourne, Florida 32901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 254-1500
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Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (Par Value .25 cents per share)
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(Title of class)
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 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 [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. YES [ ] NO [ ]
Based on the average bid and asked prices on May 16, 1997 the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$10,598,283.
The number of shares outstanding of the registrant's common stock, $.25 par
value was 1,625,463 at May 16, 1997.
Documents Incorporated by Reference
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Proxy Statement dated June 6, 1997 (Incorporated by Reference into Part III).
<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Symetrics Industries, Inc. ("Symetrics" or the "Company") was incorporated
in Florida in 1962. The business of the Company which may be broadly defined as
electronics, consists of the design, development and manufacture of electronic
systems and system components and related computer software. The principal
market for this electronic equipment is agencies of the U.S. Government.
Historically, essentially all of the Company's business has been the manufacture
and testing of electronic equipment and sub-assemblies to Government furnished
specifications and drawings.
Beginning in 1993, the Company began diversifying its business primarily
through acquisitions. In July 1993, the Company acquired a 25% interest in an
interactive voice response product line, and during fiscal year 1994 increased
its percentage ownership in this product line to 50%. With the interactive voice
response product line as a base, the Company's Computer Telephony Systems
Division designs, develops and markets advanced, cost effective electronic
systems and related software for telecommunications applications such as mass
notification of emergency and non-emergency events, community service,
international callback and debit card calling.
In January 1995, the Company acquired substantially all of the assets of a
Melbourne, Florida company engaged in contract manufacturing of commercial and
industrial electronics. The Company's Contract Manufacturing Division builds
electronic assemblies for commercial and industrial customers.
Effective April 1996, the company acquired substantially all of the
outstanding capital stock of American Digital Switching, Inc. ("ADS"). ADS is a
supplier of complete telephone systems for the smaller cities of the United
States and Canada. The Company's Contract Manufacturing Division served as the
manufacturing arm of ADS.
(b) Financial Information about Industry Segments
The Company and its subsidiary operate primarily in four industry
segments: 1) Defense products accounted for 67.8% of total Company revenues for
the year ended March 31, 1997. These products are electronic systems and system
components for the U. S. Government. 2) Contract manufacturing of electronic
assemblies for commercial and industrial customers. This business segment
contributed 17.5% to the Company's fiscal 1997 revenues. 3) Computer Telephony
Systems for a broad spectrum of industries including commercial, industrial,
state and local Governments, Department of Defense as well as international
markets. This business segment contributed 4.4% to the Company's revenues in
fiscal 1997. 4) ADS which manufactures and supplies complete telephone systems
for small cities in the U.S. and Canada contributed 10.3% to the Company's
revenues in fiscal year 1997.
The following table reflects the revenues generated by each of the above
industry segments during the prior three fiscal years:
PERCENT OF TOTAL REVENUES
FISCAL YEAR ENDED MARCH 31
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1997 1996 1995
---- ---- ----
Defense Products 67.8% 77.2% 72.4%
Contract Manufacturing 17.5% 9.5% 0.8%
Computer Telephony Systems 4.4% 2.4% 1.2%
Telephone Systems 10.3% 10.9% 25.6%
(c) Narrative Description of Business and Competition
1
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Defense Products
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The Company manufactures electronic assemblies and systems to the highest
workmanship and quality standards recognized by the Department of Defense. All
electronic components, bare printed circuit boards ("PCB's"), metal parts and
enclosures are purchased by the Company from suppliers. Thereafter, the complete
manufacturing process including soldering, wiring harnesses, cables, inspection,
test, conformal coating and environmental stress screening is performed by the
Company. The Company's facilities are designed for medium volume production
where, typically, several hundred of a particular assembly or system are
manufactured in a continuous production run. Contract durations range from
accelerated deliveries in two to three months to longer term contracts of two to
three years. Symetrics' Improved Data Modem (IDM) contract awarded in March 1993
is expected to continue through 1999. A typical contract would be completed in
ten to fifteen months including procurement of components and the manufacturing
phase. The Company believes that its manufacturing process and cycle are typical
for an electronic system and component manufacturer of its size.
During the past fiscal year the majority of Symetrics Defense Products
business segment was the manufacture and testing of electronic equipment and
sub-assemblies to Government furnished specifications and drawings. These
contracts generally resulted from advertised Government procurements set aside
for small business concerns. The competition for this business is severe with
several (typically ten to fifteen) small business concerns bidding for these
fixed price contracts. Price is the principal competitive factor for these
contracts, however, the business risks involved are normally well defined and
quantifiable. In addition, the Government normally provides monthly progress
payments, typically 90 percent of costs incurred, during these contracts.
Typical electronic systems and assemblies being manufactured by the Company on
these contracts are:
1) Telemetry sets for processing down-link performance data for training
flights of the Sparrow Missile for the U.S. Navy, U.S. Air Force and NATO
countries. Symetrics has shipped 3318 systems during the past nine years
on five previous production contracts. In September 1995, Symetrics won a
new contract for an additional 545 AN/DKT-61A Telemetry Sets. In March
1996 an option was exercised increasing the total to 755 sets.
Manufacturing on this new contract will continue through 1997. Each system
consists of seven circuit card assemblies, a power supply and a high
frequency transmitter mounted in an aluminum chassis and housed inside a
section of the missile's shell.
2) Improved Data Modems (IDMs) are used aboard aircraft, in ground
vehicles and at fixed sites to transmit and receive digital targeting data
via existing radios. The IDM is a four-channel terminal that performs
message processing and distribution and communicates with the on-board
electronics via a standard 1553 communications bus. This ruggedized
electronic subsystem comprises three advanced surface mount technology
(SMT) microprocessor modules, a power module and a rigid-flex back
plane/connector assembly. The IDM is 7.4 inches high, 5.4 inches wide, 9
inches long and weighs less than fifteen pounds. Symetrics initial
quantity of 188 IDMs has been increased to 1761. Qualification testing and
reliability demonstration testing of the IDMs have been successfully
completed. Full production is underway and through March 1997
approximately 1200 IDMs have been shipped. The completed manufacturing
process for the IDM including the SMT portion of the assembly is now being
performed at Symetrics facilities along with all other manufacturing
operations.
3) Printed circuit card and module assemblies for communications and
information processing equipment for various agencies of the U.S.
Government and for several prime contractors. Quantities of each type of
assembly typically run between 100 and 1000 on each individual contract.
Raw materials essential to the business are widely available from a
variety of sources. Symetrics is not required to carry significant amounts of
inventory to meet rapid delivery requirements of customers. Most of Symetrics'
sales are made directly to the U. S. Government under contracts which can
include standard Government clauses providing for termination for convenience of
the Government or for default of the contractor. These contracts are not
normally subject to renegotiation of profit.
Symetrics could be affected by across the board cutbacks in the U.S.
Government defense spending; however, the Company's principal products are for
equipment already in operational use by the Government and are not as vulnerable
to cutbacks as are research and development contracts for new equipment.
2
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Although the contract backlog is with several Governmental agencies and prime
contractors on various programs, Symetrics has one contract, which if terminated
for any reason, would have a material adverse affect on operations. This
contract, for Improved Data Modems, is expected to comprise as much as 40 to 50
percent of the Company's fiscal year 1998's revenues. However, this contract,
through the U. S. Government's Foreign Military Sales, is in effect a
multinational contract with around half the 1,761 IDMs now under contract being
funded by foreign countries. Consequently the contract is not overly dependent
on the Department of Defense's budget. Also, this IDM is being purchased to
significantly improve the communications capability of aircraft, helicopters and
other equipment already in operational use and consequently it is not as
vulnerable to cutbacks as research and development programs
Symetrics intends to concentrate on expanding its customer base for
Defense Products through new contracts with additional U.S. Government Agencies
and other prime contractors for military electronics equipment similar to those
presently being manufactured.
Contract Manufacturing
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Contract Manufacturing Division (CMD) specializes in production of surface
mount technology ("SMT") technology assemblies for commercial and industrial
customers. Located in a modern 14,500 square foot facility, Symetrics CMD
provides value added assembly services that range from circuit card
manufacturing, in-circuit testing, functional testing and top level system
testing up to the final integration of chassis and circuit cards. Symetrics CMD
provides experienced material procurement for all types of electronic
components, including hardware, cables and special enclosures. As a contract
manufacturer, Symetrics CMD provides complete turn-key service to our customers
in the computer, medical, aircraft and satellite communications markets.
The Company believes that the market for contract assembly continues to
grow to an estimated $20 billion by the year 2000, surface mount technology
(SMT) will remain the core in this commercial industry segment. Studies have
indicated that 79% of the components placed in the contract assembly area were
surface mount or fine pitch component packages. Management believes that
Symetrics CMD has the proper mix of advanced machines and industry recognized
professionals to succeed in this market.
During Fiscal 1997 Symetrics CMD's shipments increased by over 150% for
such products as worldwide paging networks, computer hard drives and liquid
oxygen management systems for health care. Symetrics CMD also manufactures the
circuit card assemblies for CenturaTM 2000 central office telephone switch which
is a product of America Digital Switching, Inc. a subsidiary of Symetrics.
Computer Telephony Systems
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In July, 1993 Symetrics acquired a 25% interest in an Interactive Voice
Response product line and during fiscal year 1994 increased it's share to 50%.
These products include international callback, debit card platforms, telephone
switching/routing, faxing, Interactive Voice Response with text to speech. The
Econ-O-Voice product line is for international callback and debiting. The
SureCallTM product line is for interactive voice response for counties for
automated child support payment and fax on demand. SureCallTM also has
applications for mass calling for emergency notification and evacuation. These
turnkey platforms are all created using the Icon-O-Voice award winning
application generator which runs in Microsoft Windows NT. Larger platforms
utilizing digital T1 interface cards (El for International) with capacities up
to 672 lines can be implemented with the new NT version of software. Numerous
options such as text-to-speech, voice recognition, voice mail, fax-on-demand,
audio text, conferencing and auto attendant can be integrated to all platforms.
The Company believes that the line capacities and features provided in the
Symetrics Icon-O-Voice systems offer a very cost effective and flexible solution
for these up and coming markets.
Systems have been installed in Paris, France; Sidney, Australia;
Georgetown, Guyana, and Moscow, Russia. The Company believes that since
Symetrics CTS has gained recognition in the Callback/Debit Card markets,
opportunities are available for larger systems and for integration with larger
telephony service companies.
The Company believes with the new features of the Windows NT based
platform, Symetrics CTS is well poised to increase its share of the T1 computer
telephony market estimated to be $8 Billion by the year 2000.
3
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American Digital Switching
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Effective April 1, 1996, the Company acquired substantially all of the
outstanding capital stock of American Digital Switching, Inc. ("ADS") of
Melboume, Florida. ADS is a provider of central office switching systems and
support services to telephone companies serving the communication requirements
of the United States and Canada. ADS was formed in 1988 by 24 independent phone
companies and acquired the Vidar Division of TRW Inc., securing a 37 year
heritage in central office switching dating back to 1980 as Vider Corp., 1970 as
the Vider Division of Continental Telephone and 1975 as the Vidar Division of
TRW, Inc.
ADS has completed the development of its basic CenturaTM 2000 central
office telephone switching system. This price competitive, next generation
product offers: advanced features, a capacity of 20,000 subscriber telephone
lines, smaller physical size and lower power consumption. With the growth in the
size of the rural telephone systems and demand for small telephone systems
created by the Telecommunications Act of 1996, the Company believes that this
product line is well conceived and timely. The CenturaTM 2000 product line
includes: Advanced System Features, Distributed Architecture, Digital Data
Transport, Integrated Voice System, Integrated Data Collection, and a host of
other features designed to meet the existing needs of customers.
ADS currently serves over 300 sites in the U.S. and Canada, including the
entire telephone system for 75 cites. The Company believes that this customer
base, which includes 31 telephone companies owned by GTE and 2 by Sprint United,
benefits from ADS's long established relationship in the industry, its reliable
product and responsive customer service. The new CenturaTM 2000 telephone system
is designed with segments that are compatible and interchangeable with the other
designs. Each of the new segments of the CenturaTM 2000 system provide new
features and additional revenue for existing customers. The basic version of the
new CenturaTM 2000 central office switching system was displayed during the
annual users meeting on April 28, 1997. Installation is anticipated to begin in
June, 1997.
Future releases planned include: Caller ID and associated CLASS features
Local Number portability (LMP)
Interested Services Digital Network
(ISDN) support
Companies which have products competing directly with, ADS's CenturaTM
2000 switches are AT&T, Mitel, Northern Telecom, and Siemens. Competition is
typically from one or two of these companies which have products that perform
similar functions and are targeted for use by rural telephone companies. Raw
materials and electronic components for ADS's products are in most cases readily
available through a multitude of electronic and technology suppliers. In certain
instances, raw materials and electronic components are supplied by sole source
vendors, and the impact of the loss of these materials has been investigated and
solutions have been identified. The Company does not believe that the loss of
any sole source vendor would have a material adverse effect on the operations of
ADS.
ADS operates as a wholly owned subsidiary of Symetrics Industries, Inc. On
a consolidated basis, the acquisition of ADS added approximately $1.8 million of
backlog to the Company, and generated revenues of $2.4 million during fiscal
year 1997. During fiscal year 1998, ADS intends to focus on continued product
development, and marketing and sales efforts to a select portion of the
approximately 1300 independent telephone companies which are not currently part
ADS's established base.
Backlog
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At the end of fiscal year 1997, backlog, believed to be firm, was $9.8
million compared with $13.8 million at March 31, 1996. About 90% of this $9.8
million backlog is expected to be filled in the current fiscal year.
Research and Development
- ------------------------
During the past fiscal year the Company expended $277,527 for research and
development primarily for continued development of its interactive voice
response product line compared with $365,568 in fiscal 1996 and $534,571 in
fiscal 1995. Fiscal year 1996 and 1995 research and development expenses include
the development expenses for the Centura(TM) 2000 which have been capitalized
4
<PAGE>
starting in fiscal year 1997 and are to be amortized over the estimated life of
the Centura switches delivered.
Environmental Considerations
- ----------------------------
The manufacturing facilities of the Company do not normally generate
emissions or large amounts of waste. However, Symetrics' facilities and
products, in common with those of the industry generally, are subject to
numerous laws and regulations designed to protect the environment, provide
standards for occupational health and safety and customer product safety. It is
the Company's policy to comply with these laws and compliance in the past has
not had a material adverse affect on its operations. Although Symetrics cannot
predict the full effect on its business of additional regulations or standards
that may be imposed in the future, the Company is not presently subject to any
unusual emission controls and does not anticipate any material expenditure to
comply with existing regulations.
Employees
- ---------
As of March 31, 1997 Symetrics, including ADS had 154 employees compared
to 91 employees (excluding ADS) as of March 31, 1996. The Company considers its
relationship with its employees to be satisfactory.
ITEM 2. PROPERTIES
Symetrics' corporate office and primary engineering and manufacturing
facility is a 40,000 square foot building, which it owns, on approximately 5
acres in Melbourne, Florida. Symetrics uses 40% of this facility for its own
business and leases and/or offers for lease the balance of the building for
terms typically of one to five years. Rental rates charged by Symetrics are
consistent with rates for similar type buildings in the area. The Company also
owns the adjoining property to the east which consists of a 50,000 square foot
building on a five acre lot. This property was acquired through the conversion
of the prior year's mortgage receivable. Symetrics leases a 14,500 square foot
building for $6,360 per month, with 27 months remaining on the term thereof, for
its commercial contract manufacturing products. ADS leases a 14,428 square foot
building for approximately $7,500 per month, with 47 months remaining on the
lease. Symetrics considers its facilities to be suitable and adequate for the
purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS
During the fiscal year reported, the Company was not involved in any
material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Symetrics Industries, Inc. common stock is traded in the NASDAQ National
Market System under the symbol SYMT. As of May 16, 1997 there were approximately
480 holders of record of the common stock. The following quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Fiscal Year 1997 Fiscal Year 1996
---------------- ----------------
Bid Asked Bid Asked
--- ----- --- -----
Quarter Ending Low - High Low - High Low - High Low - High
- -------------- ---------- ---------- ---------- ----------
June 30 7 5/8 16 5/8 8 13 1/2
September 30 7 3/4 12 7 7/8 11 1/4
December 31 7 8 3/4 6 3/4 10 1/4
March 31 7 10 1/4 6 1/2 8 1/4
The Company did not pay a cash dividend for fiscal year 1997 or 1996.
5
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PART II (CONTINUED)
In April 1996, the Company issued 207,399 shares of its common stock in a
private transaction in exchange for substantially all of the outstanding capital
stock of American Digital Switching, Inc. ("ADS"). Subsequently, in October 1996
and January 1997, the Company completed the acquisition of the remaining
outstanding shares of ADS in exchange for 6,666 shares of the Company's common
stock. The Company exchanged one share of its common stock for every 4.5 shares
of common stock of ADS owned by the shareholders of ADS. For purposes of the
transaction, the Company's common stock was valued at $7.626 per share.
In May 1996, the Company issued 10,000 shares of common stock to Richard E.
Nichols, a vice president of the Company, as an employee stock bonus for
services rendered to the Company.
In addition to rule 505 of Regulation D with respect to the private exchange
transaction, both of the foregoing transactions were made in reliance on Section
4(2) of the Securities Act of 1933 (the "Securities Act"). No general
advertisement or solicitation of offerees was made and all purchasers signed and
delivered to the Company agreements wherein they represented, among other
things, that the securities would be held for their own account for investment
only and not with the intent to engage in a distribution of such securities. The
certificates representing such securities bear legends restricting
transferability in transactions not registered under the Securities Act, and the
securities registers of the Company bear stop transfer legends.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31 March 31 March 31 March 31 March 31
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Contract Revenues $ 23,174,328 $ 22,096,589 $ 28,698,111 $ 11,185,085 $ 6,316,601
Cost of Revenues $ 17,040,793 $ 16,096,618 $ 21,345,050 $ 8,061,120 $ 4,218,781
Research & development $ 277,527 $ 365,568 $ 534,571 $ 93,533 $ 56,868
General & administrative and other
expenses $ 3,624,423 $ 3,769,826 $ 3,456,856 $ 2,395,633 $ 2,545,630
------------ ------------ ------------ ------------ ------------
Income (loss) from operations $ 2,231,585 $ 1,864,577 $ 3,361,634 $ 634,799 $ (504,678)
Other revenue, net $ 580,087 $ (14,151) $ $ $
Net Interest income (expense) $ (61,759) $ 59,627 $ 60,675 $ (21,040) $ (15,943)
Income (loss) before taxes $ 2,749,913 $ 1,910,053 $ 3,422,309 $ 613,759 $ (520,621)
Net Income (loss) $ 1,756,469 $ 1,051,385 $2,545,364 * $500,642 ** $ (516,543)
Net Income (loss) per share *** $ 1.09 $ 0.66 $ 1.78 $ 0.36 ($ 0.37)
Working Capital at end of year $ 3,566,209 $ 4,701,861 $ 4,180,472 $ 2,141,536 $ 2,017,005
Total Assets $ 16,854,250 $ 10,086,498 $ 10,783,632 $ 5,264,997 $ 4,294,470
Long ten Debt $ 1,838,446 $ 568,363 $ 592,118 $ 1,036,830 $ 1,100,411
Shareholders Equity $ 8,306,708 $ 6,453,364 $ 5,365,041 $ 2,192,674 $ 1,808,080
* Includes a loss on disposal of a discontinued line of business of $ 49,138
** Includes extraordinary item of $ 74,514 or $.09 per share due to the realization of a cumulative change in
adopting financial standard No. 109
*** Earnings per share have been adjusted to reflect the 3 for 2 stock split in May 1995.
</TABLE>
6
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Symetrics acquisition of American Digital Switching, Inc. was effective
April 1, 1996, the start of fiscal 1997. Consequently all financial results for
fiscal 1997 are presented on a consolidated basis for the entire year and the
comparative results for 1996 and 1995 have been restated on consolidated basis
as though the acquisition had occurred prior to the start of fiscal 1995.
Results of Operations
- ---------------------
FISCAL 1997 COMPARED WITH 1996
Consolidated contract revenues of $23,174,328 for fiscal 1997 increased 5%
over the previous year due to the growing volume of the commercial contract
manufacturing business. Net income of $1,756,469 or $1.09 per share for fiscal
1997 included a $370,523 or $0.23 per share gain (net of income taxes), from the
sale of the Company's former corporate headquarters in Melbourne, Florida. Net
income of $1,385,946 or $0.86 per share exclusive of the gain, was 31.8% higher
than the $1,051,385 or $0.66 per share for fiscal 1996 due in part to American
Digital Switching, Inc.'s ("ADS") lower income tax benefit rate (19.5%) applied
to loss carryovers during fiscal 1996. Other factors contributing to the
increase in net income in 1997 were lower research and development expenses and
a lower combined total of marketing and proposal and general and administrative
expenses. It should be noted that marketing and proposal expenses of ADS for
each year prior to fiscal 1997 are included in the general and administrative
expense pool rather than being separately stated. Also in fiscal 1997 ADS'
research and development expenses for the new CENTURA(TM) 2000 Systems have been
capitalized and will be amortized over the anticipated quantity of the systems
and subsystems to be sold.
The higher interest expense in fiscal 1997 is attributed primarily to the
interest on funds borrowed to finance the development of the CENTURA telephone
switch. The income tax benefit rate applied to the ADS loss before taxes in
fiscal 1996 was significantly lower than fiscal 1997 because the effective
income tax rate for 1997 was 36.1% as compared to 45.0% for 1996. This decrease
was largely attributable to the income tax benefit of consolidating ADS' current
year net loss and net loss carryovers with Symetrics' taxable income. In 1996
and prior years, ADS recognized income tax benefits at a lower effective rate
due to both the graduated tax brackets and deferred tax valuation allowances. In
1997, however, ADS' losses reduced income on a consolidated basis which would
have been taxed at the maximum corporate rate. In addition, the previously
established valuation allowances have been eliminated during 1997 since it is
more likely than not that ADS' loss carryovers will be fully utilized. This
resulted in a consolidated income tax rate of 36.1% for fiscal 1997 versus 45.0%
for fiscal 1996.
Backlog at March 31,1997 was $9.8 million compared with $13.8 million at
March 31, 1996 due in part to an unexpected delay in an anticipated award from
the Government. During fiscal 1997 the number of Company employees, including
ADS, increased from 126 to 154 primarily because of the increased business in
the Contract Manufacturing Division and ADS' increased staffing for the CENTURA
development.
Consolidated contract revenues for fiscal 1995 at $28,698,111 were
substantially higher than $22,096,589 for 1996 since both Symetrics Industries
and ADS had record years. Symetrics was operating with a very high backlog
throughout 1995 on its Improved Data Modem ("IDM") contract and ADS was
completing a large contract for Enhanced Processors for GTE's telephone switches
that are installed in 32 cities. Net income from continuing operations for
fiscal 1995 at $2,545,364 or $1.75 per share was also substantially higher than
$1,051,385 or $0.66 per share for fiscal 1996 due to the higher business volume
in 1995 and the tax benefit of loss carryforwards which significantly reduced
the effective income tax rate applicable to ADS' 1995 income.
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations (Continued)
- ---------------------------------
FISCAL 1996 COMPARED WITH 1995
Backlog at March 31, 1996 was $13.8 million, down from $19.3 million the
prior year primarily because the Government exercised more options in fiscal
1995 on the IDM contract than in fiscal 1996. During fiscal 1996 the Company's
employees, including ADS, increased from 120 to 126 primarily because of the
increased business in the Contract Manufacturing Division.
Liquidity and Capital Resources
- -------------------------------
During fiscal year 1997, the Company made significant progress on a large
scale development program at ADS for the CENTURA central office telephone
switch. As shown on the balance sheet, these product development costs of
$2,187,758, funded by both short and long term debt financing, produced a
negative cash flow for the year as working capital of $3,566,209 at March 31,
1997 was less than the $4,701,861 at March 31, 1996. Excluding this development
program, cash flow was positive with working capital derived primarily from
profitable operations of the Defense Products Division (DPD). The Company
receives 90% progress payments on costs incurred and additional payments equal
to 10% of costs plus about 8% profit that are billable as shipments are made on
the largest contracts - Telemetry Sets and the IDM.
Referring to the balance sheet, cash was substantially lower and current
liabilities substantially higher for fiscal 1997 versus 1996 due to the cash
requirements for the ADS product development, capital expenditures of $1,891,792
paid by cash and an increase in inventories of $1,025,356. The increase in
inventories resulted from the purchase of $500,000 of electronic components to
be utilized in anticipated contract awards in the first quarter of fiscal year
1998. The balance of the inventory is for shipments of the CENTURA telephone
switches in the first half of fiscal 1998. The receivables relative to the
payables was essentially the same for both years. Costs and estimated earnings
in excess of billings on uncompleted contracts increased in 1997 compared with
1996 primarily because of the lower shipping volume on the IDM contract as the
Government was implementing a design change to increase the IDM's computer
memory. These costs and estimated earnings represent the work-in-process that is
unbillable until shipments are made. The Company had about 55 contract accounts
in 1997 compared with 30 in 1996. The 1996 mortgage receivable of $450,000 was
converted into real property and has been consolidated with other real estate
investments as an other asset. The balance sheet current portion of deferred
income tax assets reflects the difference in timing of income and expense for
accounting and income tax purposes.
During fiscal year 1997, the Company acquired all of the outstanding stock
of American Digital Switching, Inc. (ADS) of Melbourne, Florida. The purchase
price was paid by cash of $35,000 and the delivery of 214,065 shares of
Symetrics common stock. The consolidated balance sheet at March 31, 1997
includes $202,650 of ADS goodwill and $377,927 goodwill from the purchase of
Southern Circuit Technology, Inc.(SCTI) in January 1995. The SCTI purchase price
of $580,206, including $431,916 goodwill, was paid with $135,000 cash and the
balance in Symetrics common stock. The Company has realized a markedly improved
productivity of IDMs due to the acquired SCTI electronics assembly capability
and believes this goodwill will be readily recovered by the cost savings on the
IDM program.
Referring again to the balance sheet, the net increase of $1,828,731 of
property, plant and equipment is primarily related to the Company's new $1.8
million corporate headquarters facility purchased in October 1996 less the net
book value of the previous facility. Other capital expenditures were for
manufacturing equipment ($386,665), office computers and related equipment
($143,992) and leasehold and building improvements ($90,626). In fiscal year
1996 capital expenditures were $879,291, primarily for manufacturing equipment
($746,064), vehicles ($51,299), and land ($50,000).
Capital expenditures for fiscal 1998 are anticipated to be about $750,000
for manufacturing equipment and special purpose software. Large capital
purchases are normally financed for five years with the purchased items being
used as collateral. However, in fiscal 1997and 1996, substantially all capital
purchases were paid by cash and a $600,000 mortgage note on the new corporate
headquarters facility.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources (Continued)
- -------------------------------------------
The balance sheet deferred income tax assets reflects the adoption in
fiscal 1994 of Statement of Financial Accounting Standards No. 109 which
resulted from the customary difference in timing of income and expense for
accounting and income tax purposes. Investment in real property in 1997 was
$513, 298 reflecting the purchase of two parcels of property in Melbourne
totaling $93,771 and the conversion of the prior year mortgage receivable into
ownership ($419,527) of a 50,000 square foot building on a five acre lot
adjacent to the Company's new facility.
The increase in billings in excess of costs and estimated earnings reflect
advanced customer payments. Accrued liabilities increased by $276,963 primarily
reflecting the accrual for advanced billings for ADS customers. The $218,545
income tax liability for fiscal 1997 reflects current taxes of $762,102 for the
profitable year, less payments during the year. The non-current deferred tax
liability of $191,584 resulted primarily from a tax deferred gain on the
Company's previous facility and the acquisition of the new facility. Long term
debt increased $1,270,083 previously for the mortgage on the new corporate
facility and the development costs for the CENTURA switch.
As of March 31, 1997, $400,000 was available to the Company on its
unsecured $1,500,000 line-of-credit and the Company had an unused commitment of
$500,000 for equipment purchases.
Referring to the statement of cash flows, during fiscal year 1997 net cash
used by operating activities was $1,657,905. Other material items, not covered
previously, include the borrowing of $1,099,000 on the Company's line of credit
for short term working capital purposes as well as the increase of long term
debt of $1,590,633. Also, a fifteen year mortgage of $600,000 was established
for the new corporate facility purchased for $1,850,637. During fiscal year 1997
proceeds from the exercise of 13,500 stock options by employees totaled $
46,875.
For financial management the Company uses a number of measures of
liquidity and profitability. The following figures represent year end values for
the last three fiscal years:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Working capital $3,566,209 $4,701,861 $4,180,472
Current ratio 1.59 2.79 1.95
Leverage ratios - Current debt to net worth .31 .01 .01
- Total debt to net worth .53 .09 .20
Profitability ratios - Return on sales, net 7.58% 4.76% 9.04%
- Return on net worth 21.15% 16.38% 48.34%
- Gross profit 26.47% 27.15% 25.62%
</TABLE>
These measurement factors for the past three years, indicate a strong
financial posture despite increased cash outlays and borrowings for development
of new products. The current and leverage ratios are also favorable considering
high level of business volume over the last three fiscal years.
The United States Government spending for defense related products appear
to have stabilized. Although each solicitation is very competitive, the Company
believes that sufficient new business opportunities exist and that it has the
capability and technical expertise to win its share of the awards. During fiscal
1997, the Company's IDM contract, increased to a total contract value of $57.7
million for 1761 IDMs since the contract award in March 1993. Although there can
be no assurance with respect to future orders, the Company's IDM contract has
option provisions whereby the Government may order additional equipment through
September 1998. The Company believes the IDM program will be a significant part
of its business for several years.
The Company believes that its backlog of $ 9.8 million at March 31, 1997,
although down from the backlog of $13.8 million last year, is still a solid base
for strong financial results in fiscal 1998. In the last three fiscal years, the
Company has diversified into three commercial/industrial markets that accounted
for over 32% of the Company's total revenues in fiscal 1997. Although there can
be no assurance, the Company believes that its diversification efforts will
contribute up to 40 percent of total revenues in fiscal 1998, with the potential
for additional growth in subsequent years with sales of the CENTURA telephone
switch a potentially strong high-end commercial product.
9
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
----
Independent Auditor's Report 11
Financial Statements:
Balance Sheet, March 31, 1997 and 1996 12, 13
Statement of Operations, Years Ended March 31, 1997, 1996, 14
and 1995
Statement of Stockholders' Equity, Years Ended March 31, 15
1996, 1995 and 1994
Statement of Cash Flows, Years Ended March 31, 1996, 1995 16,17
and 1994
Notes to Financial Statements 18-26
10
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors
Symetrics Industries, Inc.
We have audited the accompanying consolidated balance sheet of Symetrics
Industries, Inc. and subsidiary as of March 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1997. 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 audits 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Symetrics
Industries, Inc. and subsidiary at March 31, 1997 and 1996 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Pricher and Company
-----------------------
Pricher and Company
-------------------
Orlando, Florida
May 22, 1997
11
<PAGE>
SYMETRICS INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1997 and 1996
1997 1996
-------------- --------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 56,638 $ 1,657,905
Contract and accounts receivable 2,365,365 1,581,428
Costs and estimated earnings in excess
of billings on uncompleted contracts 5,452,394 2,931,069
Inventories 1,661,249 635,893
Mortgage receivable 450,000
Deferred income taxes 51,677
Other 57,453 65,898
----------- ------------
Total current assets 9,644,776 7,322,193
----------- ------------
Property, plant and equipment 5,163,389 3,336,076
Less accumulated depreciation 1,571,167 1,572,585
----------- ------------
3,592,222 1,763,491
----------- ------------
Deferred income taxes 273,549 325,453
----------- ------------
Other assets:
Product development costs 2,187,758
Investment in real property 513,298
Goodwill, less accumulated amortization:
1997, $122,313; 1996, $74,334 501,064 549,043
Other 141,583 126,318
----------- ------------
3,343,703 675,361
----------- ------------
$ 16,854,250 $ 10,086,498
=========== ============
See accompanying notes to consolidated financial statements.
13
<PAGE>
SYMETRICS INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1997 and 1996
1997 1996
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,523,000 $ 1,000
Current maturities of long-term debt 72,719 25,436
Accounts payable 2,157,360 1,448,181
Billings in excess of costs and estimated
earnings on uncompleted contracts 144,373 7,869
Accrued liabilities 962,570 685,607
Income taxes payable 218,545 452,239
----------- ------------
Total current liabilities 6,078,567 2,620,332
----------- ------------
Deferred income taxes 191,584
Deferred compensation liability 438,945 479,439
Long-term debt, less current maturities 1,838,446 568,363
----------- ------------
2,468,975 1,047,802
----------- ------------
Stockholders' equity:
Common stock, par value $.25 per share;
authorized
5,000,000 shares, issued 1,625,463 and
1,601,963 shares 406,366 400,491
Additional paid-in capital 2,209,358 2,083,358
Retained earnings 5,690,984 3,934,515
----------- ------------
Total stockholders' equity 8,306,708 6,418,364
----------- ------------
$ 16,854,250 $ 10,086,498
=========== ============
See accompanying notes to consolidated financial statements.
13
<PAGE>
SYMETRICS INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Contract revenues $ 23,174,328 $ 22,096,589 $ 28,698,111
------------ ------------ ------------
Cost and expenses:
Cost of revenues earned 17,040,793 16,096,618 21,345,050
Research and development 277,527 365,568 534,571
Marketing and proposals 1,771,781 880,150 418,255
General and administrative 1,852,642 2,889,676 3,038,601
------------ ------------ ------------
20,942,743 20,232,012 25,336,477
------------ ------------ ------------
Income from operations 2,231,585 1,864,577 3,361,634
------------ ------------ ------------
Other income (expense):
Gain (loss) on sale of property and equipment 580,087 (14,151)
Interest and other income 129,073 110,439 137,720
Interest expense (190,832) (50,812) (77,045)
------------ ------------ ------------
518,328 45,476 60,675
------------ ------------ ------------
Income before income taxes 2,749,913 1,910,053 3,422,309
Income taxes 993,444 858,668 828,807
------------ ------------ ------------
Income from continuing operations 1,756,469 1,051,385 2,593,502
Discontinued operations:
Loss on disposal of discontinued line of
business (net of $12,727 income tax benefit) (48,138)
------------ ------------ ------------
Net income $ 1,756,469 $ 1,051,385 $ 2,545,364
============ ============ ============
Earnings per common share:
Weighted average shares outstanding 1,615,148 1,592,448 1,458,008
============ ============ ============
From continuing operations $ 1.09 $ 0.66 $ 1.78
From discontinued operations (0.03)
------------ ------------ ------------
Net income $ 1.09 $ 0.66 $ 1.75
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
SYMETRICS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock
-----------------------------
Additional Total
Number of Par Paid-In Retained Stockholders'
Shares Value Capital Earnings Equity
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1994 1,016,970 $ 254,242 $ 1,635,666 $ 337,766 $ 2,227,674
Stock options exercised 86,071 21,518 125,279 146,797
Shares issued in connection with
purchase of assets of SCTI 29,680 7,420 437,786 445,206
Net income for the year
ended March 31, 1995 2,545,364 2,545,364
------------ ----------- ----------- ------------ -----------
Balance, March 31, 1995 1,132,721 283,180 2,198,731 2,883,130 5,365,041
Adjustments to number of shares
issued in connection with
purchase of assets of SCTI (3,313) (828) 828
Stock options exercised 14,250 3,563 33,375 36,938
Three for two stock split 458,305 114,576 (114,576)
Net income for the year
ended March 31, 1996 1,051,385 1,051,385
------------ ----------- ----------- ------------ -----------
Balance, March 31, 1996 1,601,963 400,491 2,118,358 3,934,515 6,453,364
Stock bonus paid as
compensation 10,000 2,500 82,500 85,000
Stock options exercised 13,500 3,375 43,500 46,875
Purchase of ADS shares for cash (35,000) (35,000)
Net income for the year
ended March 31, 1997 1,756,469 1,756,469
------------ ----------- ----------- ------------ -----------
Balance, March 31, 1997 1,625,463 $ 406,366 $ 2,209,358 $ 5,690,984 $ 8,306,708
============ =========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
SYMETRICS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Reconciliation of net income
to net cash provided by (used in) operating activities
Net income $ 1,756,469 $ 1,051,385 $ 2,545,364
Items not requiring cash:
Loss (gain) on sale of equipment (580,087) 16,011
Loss on sale of marketable securities 8,225
Depreciation and amortization 455,471 406,654 306,719
Deferred compensation (40,494) 46,740 45,300
life insurance (4,017) (7,647)
Stock bonus 85,000 -- --
Deferred income taxes 191,811 25,736 (13,257)
Changes in assets and liabilities net
of effects from purchase of SCTI:
Contract receivables (144,546) 725,677 (1,365,866)
Other receivables (639,391) 929,515 (867,061)
Costs and estimated earnings in excess
of billings on uncompleted contracts (2,521,325) 644,432 (2,160,915)
Inventory (1,025,356) 187,912 182,311
Prepaid expenses 8,445 111,030 (108,746)
Product development costs (2,187,758) -- --
Other assets (15,265) (178,591) (117,529)
Accounts payable 709,179 (1,576,615) 1,877,761
Billings in excess of costs and estimated
earnings on uncompleted contracts 136,504 (159,103) 166,309
Accrued liabilities 276,963 153,418 53,766
Income taxes payable (233,694) (260,551) 631,759
Decrease in deposits -- 16,379 19,080
----------- ----------- -----------
Net cash provided by (used in) operating
activities (3,768,074) 2,136,012 1,195,573
----------- ----------- -----------
See accompanying notes to consolidated financial statements.
16
<PAGE>
SYMETRICS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Years Ended March 31, 1997, 1996 and 1995
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of marketable securities -- -- (11,313)
Proceeds from sale of marketable securities -- -- 168,264
Acquisition of investment property (100,887) -- --
Capital expenditures (1,891,792) (879,291) (358,124)
Proceeds from sale of equipment 748,245 1,050 587
Payment for purchase of SCTI, net of
cash acquired -- -- (126,359)
Investment in mortgage receivable 125,000 -- (450,000)
Proceeds from surrender of life insurance policy -- 101,166 91,296
Payment of deferred acquisition costs -- (15,739) --
----------- ----------- -----------
Net cash used in investing activities (1,119,434) (792,814) (685,649)
----------- ----------- -----------
Cash flows from financing activities:
Reduction of long-term debt (50,267) (40,369) (699,455)
Proceeds from line of credit 1,099,000 -- --
Proceeds from long-term debt 2,190,633 -- 80,508
Proceeds from stock options 46,875 36,938 146,797
----------- ----------- -----------
Net cash provided by (used in) financing
activities 3,286,241 (3,431) (472,150)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (1,601,267) 1,339,767 37,774
Cash and cash equivalents at beginning
of year 1,657,905 318,138 280,364
----------- ----------- -----------
Cash and cash equivalents at end of year
$ 56,638 $ 1,657,905 $ 318,138
=========== =========== ===========
Supplemental cash flow information:
Amounts paid during the year for:
Interest $ 190,832 $ 55,757 $ 78,557
=========== =========== ===========
Income taxes $ 1,035,327 $ 576,307 $ 208,571
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less to be
cash equivalents.
REVENUE AND COST RECOGNITION
Revenues from fixed-price contracts are recognized on the
percentage-of-completion method, measured by the percentage of cost incurred to
date to the estimated total cost for each contract.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance. General and administrative costs
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period such losses are determined.
Estimates of total contract costs are reviewed periodically during each year and
the cumulative effects of changes in total estimated contract costs are
recognized in the period determined. Revenues recognized in excess of amounts
billed are classified under current assets as "costs and estimated earnings in
excess of billings on uncompleted contracts". Amounts billed in excess of
revenues recognized to date are classified under current liabilities as
"billings in excess of costs and estimated earnings on uncompleted contracts".
CONTRACT RECEIVABLES
Contract receivables are due from the U.S. Government and commercial
customers and are considered current and fully collectible at March 31, 1997 and
1996. Contract receivables include only those amounts which are currently due
and payable and do not include retainages or recognized but unbilled revenues.
Billings are determined based on the terms of the individual contracts
which generally provide for progress payment billings based on ninety percent of
contract costs incurred. As of March 31, 1997 and 1996, there were no
significant amounts included in contract receivables related to claims or other
similar items subject to uncertainty concerning their determination or ultimate
realization.
INVENTORY
Inventory is valued at lower of cost or market. Cost is determined
generally on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
property which ranges from five to twenty-five years. When assets are retired or
otherwise disposed, the cost and related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is recognized as income for
the period. The cost of maintenance and repairs is charged to income when
incurred; significant renewals and betterments are capitalized. Deduction is
made for retirements resulting from renewals or betterments.
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. If
the sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and carrying value of the asset.
INCOME TAXES
On April 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires that deferred taxes be established for all temporary
differences between the book and tax bases of assets and liabilities. In
addition, deferred tax balances must be adjusted to reflect tax rates that will
be in effect in the years in which the temporary differences are expected to
reverse. Accordingly, deferred tax assets and liabilities represent the future
tax consequences of those differences, which will be either taxable or
deductible when the assets and liabilities are recovered or settled. The primary
temporary differences between financial and income tax reporting relate to
depreciation methods and deferred compensation expense.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are generally charged to expense as
incurred. However, costs for the development of the Company's central office
telephone switch, by its subsidiary, that will be sold, leased or otherwise
marketed are capitalized when technological feasibility has been established.
These capitalized costs are subject to an ongoing assessment of recoverability
based upon anticipated future revenues and changes in hardware and software
technologies. Costs that are capitalized include materials, direct labor and
related overhead.
Amortization is provided on a product-by-product basis using the sales
ratio method. Unamortized capitalized development costs determined to be in
excess of net realizable value of the product are expensed immediately.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Symetrics
Industries, Inc. and its wholly owned subsidiary, American Digital Switching,
Inc. Intercompany accounts and transactions are eliminated.
GOODWILL
Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases. Goodwill is
amortized on a straight-line basis over the periods benefited, 10 years.
Goodwill is reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the sum of the
expected future undiscounted cash flows is less than the carrying amount of the
goodwill, a loss is recognized for the difference between the fair value and
carrying value of the goodwill.
2. BUSINESS SEGMENTS
The Company operates principally in four industries, a) the manufacture
and sale of electronic components to the United States Government primarily for
defense-related applications, b) the manufacture and sale of electronic
components to commercial and industrial customers, c) the development and sale
of software products to commercial customers and, d) telephone systems
manufacturing. All four activities are generally performed under fixed-price
contracts. Total revenue by industry includes only sales to unaffiliated
customers.
Operating profits are total revenue less operating expenses. In computing
operating profit, none of the following items have been added or deducted:
general corporate expenses, interest expense, rental income, interest income and
income taxes.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry. Corporate assets are principally cash, a
mortgage receivable, a portion of property, plant and equipment, and investments
in real property.
The following summarizes certain financial information for the years ended
March 31, 1997, 1996 and 1995 classified as described above:
1997 1996 1995
-------- -------- --------
(in thousands)
--------------
SALES TO UNAFFILIATED CUSTOMERS
Defense products $ 15,696 $ 17,060 $ 20,764
Contract manufacturing 4,073 2,103 230
Computer Telephony 1,011 530 348
Telephone systems 2,394 2,404 7,356
-------- -------- --------
$ 23,174 $ 22,097 $ 28,698
======== ======== ========
Operating profit (loss)
--------
Defense products $ 2,997 $ 3,325 $ 2,686
Contract manufacturing 98 38 (18)
Computer Telephony (279) (363) (234)
Telephone systems (392) (977) 1,014
-------- -------- --------
2,424 2,023 3,448
Corporate expenses 192 158 86
-------- -------- --------
2,232 1,865 3,362
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1997 1996 1995
-------- -------- --------
Unallocated components of
other income and expense 518 45 60
-------- -------- --------
Net income before income taxes $ 2,750 $ 1,910 $ 3,422
======== ======== ========
IDENTIFIABLE ASSETS
Defense products $ 6,503 $ 3,431 $ 5,607
Contract manufacturing 3,033 2,317 1,250
Computer Telephony 815 411 229
Telephone systems 3,925 1,652 2,788
Corporate assets 2,578 2,275 959
-------- -------- --------
$ 16,854 $ 10,086 $ 10,833
======== ======== ========
The following summarizes the depreciation and amortization of and
additions to property, plant and equipment for the three years ended March 31,
1997, 1996 and 1995.
1997 1996 1995
-------- ---- ----
(in thousands)
--------------
Depreciation
- ------------
Defense products $ 147 $ 141 $ 127
Contract manufacturing 127 76 15
Computer Telephony 25 11 2
Telephone systems 93 91 114
Corporate 15 8 8
--- --- ---
$ 407 $ 327 $ 266
==== === ===
Additions
- ---------
Defense products $1,615 $ 257 $ 66
Contract manufacturing 115 627 387
Computer Telephony 38 33 18
Telephone systems 202 43 85
Corporate 492 51 2
----- ----- ---
$2,462 $1,011 $ 558
===== ===== ===
3. BUSINESS COMBINATION
Effective April 1, 1996, the Company acquired approximately 98% of the
outstanding capital stock of American Digital Switching, Inc. ("ADS") of
Melbourne, Florida. ADS is a provider of central office digital switching
systems and support services to telephone companies serving the communications
requirements of rural communities.
The acquisition was accomplished by the exchange of one share of
Symetrics' common stock for every 4.5 shares of ADS common stock (the
"Exchange"). Pursuant to the Exchange, Symetrics exchanged 214,065 shares of
Symetrics common stock, or approximately 13% of the outstanding capital stock of
Symetrics after the Exchange, for 963,334 shares of ADS. The remaining 20,000
outstanding shares were acquired for $35,000 in cash. The transaction has been
accounted for as a pooling of interests. Accordingly, the accompanying
consolidated financial statements for periods prior to the merger have been
restated to present the combined operations of the merged companies.
Operating results of the separate companies for periods prior to the
merger, assuming that the merger occurred on April 1, 1994 were:
Year Ended March 31,
--------------------
1996 1995
---- ----
Contract revenues:
Symetrics $19,692,320 $21,341,695
ADS 2,404,269 7,356,416
----------- -----------
$22,096,589 $28,698,111
=========== ===========
Net income (loss)
Symetrics $ 1,846,477 $ 1,469,807
ADS (795,092) 1,123,695
----------- -----------
$ 1,051,385 $ 2,593,502
=========== ===========
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. CONCENTRATIONS OF CREDIT RISK
At March 31, 1997 and 1996, accounts receivable due from the U.S.
Government comprised 14% and 23%, respectively of the total amounts due to the
Company.
For the years ended March 31, 1997, 1996 and 1995, respectively,
approximately 68%, 77% and 72% of Company's revenues were derived from contracts
with the U.S. Government
5. CONTRACTS IN PROCESS
Comparative information with respect to contracts in process at March 31,
1997 and 1996 is as follows:
1997 1996
---- ----
Cost incurred $52,639,440 $39,505,908
Estimated earnings 12,524,071 8,136,268
----------- -----------
65,163,511 47,642,176
Less billings to date 59,855,490 44,718,976
----------- -----------
$ 5,308,021 $ 2,923,200
=========== ===========
Included in the accompanying balance sheet under the following captions:
1997 1996
---- ----
Costs and estimated earnings in excess
of billings on uncompleted contracts $5,452,394 $2,931,069
Billings in excess of costs and estimated
earnings on uncompleted contracts 144,373 7,869
---------- ----------
$5,308,021 $2,923,200
========== ==========
Costs incurred on uncompleted contracts do not exceed the aggregate
estimated cost of all in-process and delivered units on the basis of the
estimated average cost of all units expected to be produced under contracts not
yet complete. All costs incurred on uncompleted contracts are expected to be
absorbed in cost of revenues earned based on existing firm orders at March 31,
1997 and 1996. As of March 31, 1997 and 1996, there were no significant amounts
included in uncompleted contracts related to claims or other similar items
subject to uncertainty concerning their determination or ultimate realization.
6. PROPERTY, PLANT AND EQUIPMENT
Depreciation expense for the years ended March 31, 1997, 1996 and 1995 was
$407,493 and $327,525 and $265,470, respectively. Property, plant and equipment
at March 31, 1997 and 1996 include the following:
1997 1996
---- ----
(in thousands)
Land $505 $97
Buildings and improvements 1,444 551
Machinery and equipment 2,816 2,332
Office furniture and equipment 354 242
Transportation equipment 44 114
------ ------
$5,163 $3,336
====== ======
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. NOTES PAYABLE
Notes payable consists of the following:
March 31,
1997 1996
---------- ----------
Unsecured line of credit of $2,000,000; with a bank;
interest payable monthly at the lending bank's prime
rate less 0.25% (prime was 7.28% at March 31, 1997
and 8.259% at March 31, 1996) or at the option of the
Company, the 30-day London Interbank Offering Rate
("LIBOR") base rate plus 1.5 basis points. Of the
$2,000,000, $1,500,000 may be used for general
short-term working capital requirements and $500,000
is available for equipment purchases. The agreement
contains financial covenants which require the
Company to maintain debt to net worth ratio of no
greater than 2 to 1 and current ratio of no less than
1.5 to $1,100,000 $ 1,000
1. This line of credit expires July 31, 1998.
Unsecured line of credit of $1,500,000 with a bank;
interest payable monthly at the 30-day LIBOR plus 1.5
basis points (rate was 6.9375% at March 31, 1997).
Unused balance expires October 11, 1997; remaining
balance
due October 11, 2001. 1,423,000
---------- ----------
Total $2,523,000 $ 1,000
========== ==========
8. LONG-TERM DEBT
March 31,
1997 1996
---------- ----------
Long-term debt consists of the following:
Note payable to Rural Telephone Finance Cooperative
(RTFC) under revolving line of credit; maximum
principal outstanding not to exceed $2,000,000;
secured by inventory, receivables and equipment;
prime (7.0% at March 31, 1997); matures June 26,
2000. $1,250,000 $ 500,000
Note payable, unsecured, to former corporate officer;
due $2,122 monthly, including interest at 8%,
beginning January 1, 1995 until maturity on December
1, 1999. 62,679 82,272
Note payable to a bank; due $3,334 monthly plus
interest at 1.5% above the one-month LIBOR rate
(6.9375% at March 31, 1997); matures on October 11,
2011. 579,996
Note payable to bank; secured by equipment; due $533
monthly, including interest at 6.217%; until maturity
on February 21, 1998. 5,683 11,527
Note payable secured by leasehold improvements; $271
monthly, including interest at 10.25%, maturity on
June 26, 2000. 12,807
--------- ---------
1,911,165 593,799
Less current portion 72,719 25,436
--------- ---------
Long-term portion $1,838,446 $ 568,363
========== =========
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company may draw advances on the revolving line of credit up to the maximum
principal amount of $2,000,000; however, unpaid advances may not exceed 65% of
the sum of the Company's inventory and non-delinquent trade accounts receivable.
The loan and security agreement requires that the Company obtain the RTFC's
written approval prior to incurring certain additional indebtedness. Prior
approval is also required before the Company may make payment of any cash
dividends to its owners or make any other cash distribution beyond that in the
ordinary course of business.
Annual maturities of long-term debt outstanding at March 31, 1997 are
summarized as follows:
1998 $72,719
1999 $69,421
2000 $1,309,053
2001 $40,008
2002 $40,008
6. STOCK OPTIONS
Under the Company's 1983 Incentive Stock Option Plan, 117,975 shares of
common stock (adjusted for the effect of 1985, 1986 and 1995 stock dividends)
were reserved for issuance upon exercise of options granted to officers and key
employees. All of the shares issued under this plan have been exercised or have
lapsed at March 31, 1997.
During 1994, the Company adopted another Stock Option Plan which reserves
240,000 shares of common stock (adjusted for the effect of 1995 stock dividend)
for issuance upon exercise of options granted to key employees, officers,
directors and consultants. The option price shall not be less than one hundred
percent of the fair market value of the stock on the date of the grant. All
options granted expire ten years after the date of grant.
Transactions and other information relating to the plans for the years
ended March 31, 1997 and 1996 are as follows:
Number of Option Price
Shares Per Share
------ ---------
Options outstanding at beginning of year:
1997 83,250 $1.25 to $10.92
1996 64,500 $1.25 to $ 6.25
Options granted during:
1997 50,268 $7.38 to $ 8.50
1996 33,000 $11.375 to $14.50
Options exercised during:
1997 13,500 $1.25 to $ 9.67
1996 14,250 $1.25 to $ 6.25
Options lapsing during:
1997 -0-
1996 -0-
Options outstanding at end of year:
1997 120,018 $1.25 to $10.92
1996 83,250 $1.875 to $14.50
Options exercisable at March 31, 1997 and 1996 totaled 46,068 and 35,250,
respectively.
10. STOCK SPLIT
The Company declared a three-for-two stock split effective May 1, 1995
with a payment date of May 15, 1995.
11. LEASES
The Company leases portions of its facilities to various tenants on both
month-to-month and long-term bases. As of March 31, 1997, monthly rental income
under these arrangements was approximately $10,000.
The Company entered into several long-term operating lease agreements for
the premises which house its contract manufacturing division and the premises
which houses its telephone systems division. Rent expense for these leases
during the year ended March 31, 1997 was $200,793. The leases expire beginning
March 31, 1998.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Annual lease payments are as follows:
Year Ending March 31,
--------
1998 $286,064
1999 $234,690
2000 $204,690
2001 $204,690
2002 $ 84,036
Thereafter $ 2,287
12. EMPLOYEE BENEFIT PLAN
Effective January 1, 1990, the Company established a profit-sharing plan,
as provided for under Section 401(k) of the Internal Revenue Code, whereby all
eligible employees are entitled to defer up to the lesser of $9,500 or fifteen
percent of their salary. Substantially all employees are eligible to participate
in the plan depending on the length of service and attainment of minimum age
requirements. Under the terms of the plan, the Company contributes an amount
equal to seventy -five percent (75%) of the first six percent (6%) of
compensation each employee elects to defer. At the discretion of the Board of
Directors, the Company may make additional contributions to the plan or modify
the employer matching contribution percentage. Employer contributions to the
plan in 1997, 1996 and 1995 were $70,319, $57,691, and $31,725, respectively.
The Company does not provide health care benefits or life insurance
coverage for retired employees and therefore the accompanying financial
statements do not include any expense related to such benefits.
13. GAIN ON SALE OF PROPERTY AND EQUIPMENT
In October 1996, the Company sold its administrative and defense products
manufacturing facility on Harbor City Boulevard in Melbourne, Florida for
approximately $730,000. The property had a net book value of $150,000 resulting
in a gain of approximately $580,000 which is included in other income in the
accompanying statement of operations.
The Company purchased a new facility on West NASA Boulevard in Melbourne
for approximately $1.8 million which presently serves as its corporate
headquarters and defense products manufacturing facility.
14. INCOME TAXES
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, ("SFAS No. 109") "Accounting for Income Taxes".
The cumulative effect of the change in accounting principle is included in
determining net income for 1994. Financial statements for prior years have not
been restated. The components of income taxes (benefit) are as follows:
1997 1996 1995
---- ---- ----
Current:
Federal $ 695,219 $ 938,523 $ 791,443
State 66,883 87,375 64,262
--------- --------- ---------
762,102 1,025,898 855,705
========= ========= =========
Deferred:
Federal 213,579 (154,403) (24,835)
State 17,363 ( 12,827) ( 2,063)
--------- --------- ---------
231,342 (167,230) (26,898)
========= ========= =========
$ 993,444 $ 858,668 $ 828,807
========= ========= =========
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that result in deferred tax assets and
deferred tax liabilities at March 31, 1997 and 1996 are as follows:
1997 1996
---- ----
Deferred tax assets:
Net operating loss and tax credit carryovers $291,862 $308,332
Deferred compensation due to accrual
for financial reporting purposes. 157,208 171,711
Compensated absences, due to accrual
for financial reporting purposes 42,649 34,558
Other 9,028
-------- --------
Total deferred tax assets 500,747 514,601
Less valuation allowance 86,929
-------- --------
Total deferred tax assets 500,747 427,672
Deferred tax liabilities:
Property, plant and equipment, due
to differences in depreciation 367,105 102,219
------- -------
Net deferred tax assets $133,642 $325,453
======== ========
Since it is more likely than not that the deferred tax assets will be
realized in future reversals of existing temporary differences, future taxable
income and tax planning strategies, the Company has determined that it is not
required to establish a valuation allowance as of March 31, 1997 for the
deferred tax assets as required by SFAS No. 109.
The effective tax rate varied from the statutory federal income tax rate
as follows:
1997 1996 1995
---- ---- ----
Statutory federal income tax rate 34.0% 34.0% 34.0%
Increase (decrease):
State income taxes, net of federal benefit 2.0% 2.0% 2.0%
Change in valuation allowance for net operating
loss and tax credit carryovers 8.7% (12.1)%
Non-deductible expenses 0.2% 0.2%
Other 0.1% 0.1% 0.1%
----- ----- -------
Effective income tax 36.1% 45.0% 24.2%
==== ==== ====
The Company has loss carryforwards totaling $220,642 that may be offset
against future taxable income and research credits totaling $71,220 that may be
offset against future federal income taxes. If not used, the carryforwards and
credits will begin to expire in the fiscal year ending March 31, 2008.
15. COMMITMENTS AND CONTINGENCIES
The Company has a deferred compensation agreement with its president that
requires eight annual payments of $80,000 upon retirement. The present value of
this liability at March 31, 1997 and 1996 was $438,945 and $479,439,
respectively.
The Company has also entered into an employment agreement with its
president which provides for an annual base salary and an incentive bonus. For
the years ended March 31, 1997 and 1996, bonuses under this arrangement amounted
to $71,353 and $120,542, respectively, which are reported as accrued liabilities
in the accompanying balance sheet.
In January, 1995, the Company entered into a four-year employment
agreement with its vice president of manufacturing. In addition to a base
salary, the agreement provides for a maximum bonus of $70,000 for calendar year
1997 and increases to $80,000 in 1998.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has guaranteed certain bank debt of KTA Management, Inc.
totaling approximately $1,000,000 at March 31, 1997.
16. EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock outstanding during each year.
Stock options were not included in the calculation of such per share data as
their effect would be immaterial. The 29,680 shares issued in connection with
the purchase of the assets of SCTI were treated as common stock equivalents as
of the purchase date of January 5, 1995. However, the number of shares issued in
connection with the SCTI acquisition was actually 26,367. The effect of this
change has not been reflected in the weighted average number of shares as it
would be immaterial.
All share and per share data, except shares authorized, have been
retroactively adjusted to reflect a three-for-two stock split effective May 1,
1995.
17. NON-CASH FINANCING AND INVESTING ACTIVITIES
For the year ended March 31, 1997, the Company acquired property with a
total cost of $2,491,792. Of this amount $1,891,792 was paid in cash and the
remaining $600,000 was paid by a note payable.
The Company also acquired investment property in the amount of $463,298.
Of this amount, $362,411 was acquired in foreclosure on a mortgage receivable
and related accrued interest and $100,887 was paid in cash.
26
<PAGE>
PART II
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with Accountants on accounting
and financial disclosures required to be disclosed by Item 304 of Regulation
S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained on pages 4, 5 and 6 of the Company's definitive
proxy statement dated June 6, 1997 with respect to Directors and Executive
Officers is incorporated herein by reference in response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 6 and 7 of the Company's definitive
proxy statement dated June 6, 1997 with respect to executive compensation is
incorporated herein by reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on page 2 of the Company's definitive proxy
statement dated June 6, 1997 with respect to security ownership of certain
beneficial owners and management is incorporated herein by reference in response
to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 8 of the Company's definitive proxy
statement dated June 6, 1997 with respect to certain relationships and related
transactions is incorporated herein by reference in response to this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following financial statements of Symetrics Industries, Inc. are
included in Part II, Item 8:
(a) 1. Financial Statements Page
----
Independent Auditor's 11
Report
Balance Sheet 12,13
Statement of Operations 14
Statement of 15
Stockholders' Equity
Statement of Cash Flows 16,17
Notes to Financial Statements 18-26
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
2. Financial Statement Schedules
All schedules have been omitted because they are not applicable, not
required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits
2.1 Agreement for Purchase and Sale of Assets dated January 5,
1995 by and among Southern Circuit Technologies, Inc., Symetrics
Industries, Inc., Anton Szpendyk and Kenneth R. Derossett
(Incorporated by reference to the Company's Current Report on
Form 8-K dated January 5, 1995).
2.2 Stock Purchase Agreement signed April 20, 1996 and effective
as of April 1, 1996 by and among Symetrics Industries, Inc.,
American Digital Switching, Inc. , and the Selling Shareholders
named in Schedule 1 thereto (Incorporated by reference to the
Company's Current Report on
Form 8-K dated April 20, 1996.
3.1 Articles of Incorporation (Incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1991).
3.2 By-laws
10.1 Employment Agreement dated February 9, 1994 between the
Company and Dudley E. Garner, Jr.* (Incorporated by reference to
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1994).
10.2 Deferred Compensation and Salary Continuation Agreement
dated November 1, 1983 between the Company and Dudley E. Garner,
Jr., (Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1991).*
10.3 Symetrics Industries, Inc. Stock Option Plan (Incorporated
by reference to Exhibit A to the Company's Proxy Statement dated
May 21, 1993).*
10.4 Employment Agreement dated January 5, 1995 between the
Company and Anton Szpendyk (Incorporated by reference to the
Company's Current Report on Form 8-K dated January 5, 1995). *
10.5 Loan agreement dated October 1, 1996 in favor of First Union
National Bank of Floirda by KTA Management, Inc. and Symetrics
Industries, Inc. as guarantor.
23 Consent of Pricher and Company, independent certified public
accountants.
25 Subsidaries of the Registrant.
27 Financial data schedule.
* Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K.
28
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
SYMETRICS INDUSTRIES, INC.
(Registrant)
/s/ Dudley E. Garner, Jr.
----------------------------
Dudley E. Garner, Jr.
President
Principal Executive Officer
Principal Financial & Accounting Officer
Date: June 13, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Dudley E. Garner, Jr Chairman, Treasurer, President and June 13, 1997
- ------------------------ Director -------------
Dudley E. Garner,
Jr..
/s/ Jane J. Beach Director, Secretary June 13, 1997
- ------------------ -------------
Jane J. Beach
/s/ Michael E. Terry Director June 13, 1997
- --------------------- -------------
Michael E. Terry
/s/ Earl J. Claire Director June 13, 1997
- ------------------- -------------
Earl J. Claire
/s/ Edwin H. Eichler Director June 13, 1997
- -------------------- -------------
Edwin H. Eichler
/s/ Michael D. Jensen Director June 13, 1997
- --------------------- -------------
Michael D. Jensen
29
Exhibit 10.5
THIS INSTRUMENT PREPARED BY: ------------
Robert W. Wattwood, Esq.
REINMAN & WATTWOOD, PA.
1825 S. RIVER VIEW DRIVE
MELBOURNE, FL 32901
(407) 768-2001
LOAN AGREEMENT
THIS LOAN AGREEMENT is made the 4th day of October, 1 996, in favor of
First Union National Bank of Florida, whose address is 700 S. Babcock Street,
Suite 201, Melbourne, Florida 32901 (hereinafter called "Lender"), by KTA
MANAGEMENT, INC., a Florida corporation, whose address is 410 E. Strawbridge
Avenue, Melbourne, Florida 32901 (hereinafter called "Borrower"), and by
SYMETRICS INDUSTRIES, INC., a Florida corporation, whose address is 557 N.
Harbor City Blvd., Melbourne, Florida 32935 (hereinafter called "Guarantor").
In consideration of Lender making a loan of $1,000,000.00 to Borrower (the
"Loan "), as evidenced by a Real Estate Promissory Note of even date herewith:
1. Borrower and Guarantor agree as follows:
(a) Borrower shall deliver to Lender, within thirty (30) days of filing,
complete copies of federal and state tax returns, as applicable, each which
shall be signed and certified by Borrower to be true, correct and complete
copies of such returns. In the event an extension is filed, Borrower shall also
deliver a copy of such extension within thirty (30) days of filing.
(b) Guarantor shall furnish to Lender, within thirty (30) days after the
end of each fiscal semi-annual period, a profit and loss statement and
reconciliation of surplus statement of the Guarantor for such period, a balance
sheet for such period, a complete and accurate listing and aging of all of the
Guarantors accounts receivable, and a work-in-process/contract backlog report as
of the last day of the fiscal semi-annual period then ended, prepared in
accordance with generally accepted accounting principles and certified by the
Chief Financial Officer of the Guarantor as being true and accurate.
(c) Guarantor shall furnish to Lender within ninety (90) days after the
end of each fiscal year, a profit and loss statement and reconciliation of
surplus statement of the Guarantor for such year, and a balance sheet as of the
end of such year, audited by independent certified public accounts of recognized
standing selected by the Guarantor and satisfactory to Lender, Reports shall be
prepared in accordance with generally accepted accounting principles and
certified by the Chief Financial Officer of the Guarantor as being true and
correct.
(d) Guarantor shall deliver to Lender, within thirty (30) days of
filing, complete copies of federal and state tax returns, as applicable, each of
which shall be signed and certified by Guarantor to be true, correct and
complete copies of such returns. In the event an extension is filed, Guarantor
shall also deliver a copy of such extension within thirty (30) days of filing.
(e) Guarantor shall, at all times, maintain a Current Ratio of not less
than 1.50 to 1.00 to be tested upon fiscal year end. "Current Ratio" shall mean
the ratio of current assets divided by current liabilities.
(f) Guarantor shall, at all times, during the term of the Loan, maintain
a debt to worth ratio of no greater than 2 to 1, to be tested upon fiscal year
end.
(g) Guarantor will maintain its primary depository relationship with
Lender.
(h) Guarantor shall not make a change in the chairman/president of the
company, specifically the chief executive officer, Dudley E. Garner, Jr.
30
<PAGE>
(i) Guarantor shall deliver to Lender, with the annual and semi-annual
financial statements required above, a certification by Guarantor's independent
certified public accountant that Guarantor is in full compliance with the
Mortgage, Note, Guaranty, this Loan Agreement and the Loan Documents associated
therewith.
(j) A default in the payment or performance of any obligation under any
other loans, contracts or agreements of Guarantor, any subsidiary or affiliate
of Guarantor, any general partner of or the holders of the majority owner
interests of Guarantor, with First Union or its affiliates, shall be a default
under this Agreement, the Note, the Mortgage, the Guaranty, and all other Loan
Documents associated therewith.
2. ACCELERATION. Lender shall have the option to declare the entire
unpaid amount of the Loan and accrued interest immediately due and payable,
without presentment, demand, or notice of any kind, if any of the provisions
contained in this Agreement are breached.
3. WAIVER. No failure or delay on the part of Lender in exercising any
power or right hereunder, and no failure of Lender to give Borrower or Guarantor
notice of default hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power preclude any other or
further exercise thereof or the exercise of any other right or power hereunder.
No modification or waiver of any provision of this Agreement or any instrument
executed pursuant hereto or consent to any departure by Borrower or Guarantor
from this Agreement or such instrument shall in any event be effective unless
the same shall be in writing, and such waiver or consent shall be effective only
in the specific instance and for the particular purpose for which given.
4. BENEFIT. This Agreement shall be binding upon and shall inure to the
benefit of Borrower, Guarantor and Lender and their respective successors and
assigns. Lender may assign this Agreement in whole or in part with any
assignment of the loan. Borrower and Guarantor may not assign this Agreement or
its obligations under the loan without Lender's written consent.
5. This Agreement shall be governed and construed in accordance with
the laws of the State of Florida, and any litigation arising out of or relating
to this Agreement or the loan shall be commenced and conducted in the courts of
that State or in the federal courts of that State.
6. WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, THE UNDERSIGNED
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY AGREES THAT: (A) NEITHER THE
UNDERSIGNED NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF THE
SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY
OTHER LITIGATION PROCEDURE ARISING FROM OR BASED UPON THIS AGREEMENT, ANY OTHER
LOAN AGREEMENT OR ANY LOAN DOCUMENT EVIDENCING, SECURING OR RELATING TO THE
OBLIGATIONS OR TO THE DEALINGS OR RELATIONSHIP BETWEEN OR AMONG THE PARTIES
THERETO; (B) NEITHER THE UNDERSIGNED NOR LENDER WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED; (c) THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIE~ HERETO, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS; (D) NEITHER THE UNDERSIGNED NOR LENDER HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCLD IN ALL INSTANCES; AND (E) THIS
PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS TRANSACTION.
IN WITNESS WHEREOF, Borrower has hereunto set its hand and seal the day
and year first above written.
BORROWER:
Signed, sealed and delivered KTA MANAGEMENT, INC.,
in the presence of: a Florida corporation
/S/ By: /S/ M.A. Kessinger
- -------------------------------- --------------------------------
Witness: M.A. KESSINGER, as its President
/S/
- --------------------------------
Witness:
31
<PAGE>
GUARANTOR:
Signed, sealed and delivered SYMETRICS INDUSTRIES, INC.,
in the presence of: a Florida corporation
/S/ By: /S/ Dudley E. Garner
- -------------------------------- -----------------------------------
Witness: Dudley E. Garner, Jr., as President
/S/
- --------------------------------
Witness:
32
Exhibit 23
----------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Symetrics Industries, Inc.
We hereby consent to the incorporation by reference in the October 4, 1993
Registration Statement on Form S-8 and the December 6, 1996 Registration
Statement on Form S-3 of Symetrics Industries, Inc. of our report dated May 22,
1997, which appears on page 11 of this annual report on Form 10-K for the year
ended March 31, 1997.
Pricher and Company
Orlando, Florida
June 12, 1997
33
Exhibit 25
----------
Subsidiaries of the Registrant
------------------------------
American Digital Switching, Inc., a Florida corporation.
34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYMETRICS INDUSTRIES INC. FOR THE TWELVE MONTHS ENDED
MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 57
<SECURITIES> 0
<RECEIVABLES> 2,365
<ALLOWANCES> 0
<INVENTORY> 1,661
<CURRENT-ASSETS> 9,645
<PP&E> 5,163
<DEPRECIATION> 1,571
<TOTAL-ASSETS> 16,854
<CURRENT-LIABILITIES> 6,079
<BONDS> 0
0
0
<COMMON> 406
<OTHER-SE> 7,901
<TOTAL-LIABILITY-AND-EQUITY> 16,854
<SALES> 23,174
<TOTAL-REVENUES> 23,174
<CGS> 17,040
<TOTAL-COSTS> 20,943
<OTHER-EXPENSES> (580)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61
<INCOME-PRETAX> 2,750
<INCOME-TAX> 993
<INCOME-CONTINUING> 1,756
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,756
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
