1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Commission File Number 0-6072
ELECTROMAGNETIC SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1035424
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
660 Engineering Drive
Norcross, Georgia 30092
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code - (404) 263-9200
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
The number of shares outstanding of each of the issuer's classes
of common stock, as of the close of business on May 1, 1995:
Class Number of Shares
Common Stock, $.10 Par Value 6,867,536
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PART I
Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings (Unaudited)
(In thousands, except net earnings per share)
Three months ended March 31
1995 1994
Net sales $ 32,757 26,240
Cost of sales 20,702 16,078
Selling, general and
administrative expenses 7,511 6,570
Research and development expenses 2,383 2,018
Operating income 2,161 1,574
Interest and other income 131 32
Interest expense (123) (98)
Earnings before income taxes
and LXE minority interest 2,169 1,508
Income taxes 839 645
LXE minority interest 253 198
Net earnings $ 1,077 665
Net earnings per common and
common equivalent share $ .15 .09
Weighted average number of common
and common equivalent shares 7,085 6,985
See accompanying notes to interim consolidated financial statements.
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Consolidated Balance Sheets (Unaudited)
(In thousands)
March 31 December 31
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 6,725 13,071
Marketable securities 400 400
Trade accounts receivable, net 39,565 36,355
Inventories:
Work in process 5,926 4,905
Parts and materials 7,395 6,809
Total inventories 13,321 11,714
Deferred income tax benefit 992 992
Total current assets 61,003 62,532
Property, plant and equipment:
Land 1,150 1,150
Building and leasehold improvements 13,627 13,626
Machinery and equipment 49,489 47,256
Furniture and fixtures 3,470 3,367
Total cost of property, plant
and equipment 67,736 65,399
Less accumulated depreciation
and amortization 40,091 38,868
Net property, plant and equipment 27,645 26,531
Other assets 2,561 2,142
Goodwill, net of accumulated amortization 5,441 5,546
$ 96,650 96,751
See accompanying notes to interim consolidated financial statements.
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Consolidated Balance Sheets (Unaudited), continued
(In thousands except share data)
March 31 December 31
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 3,878 3,830
Accounts payable 10,355 10,762
Income taxes 925 1,490
Accrued compensation costs 3,558 3,656
Accrued retirement costs 368 1,305
Deferred revenue 1,405 1,147
Other liabilities 981 976
Total current liabilities 21,470 23,166
Long-term debt, excluding
current installments 4,484 4,592
Deferred income taxes 3,881 3,881
Total liabilities 29,835 31,639
Minority interest in LXE 9,165 8,681
Stockholders' equity:
Preferred stock of $1.00 par value
per share. Authorized 10,000,000
shares; none issued or outstanding - -
Common stock of $.10 par value per
share. Authorized 75,000,000 shares;
issued and outstanding 6,837,000 in
1995 and 6,821,000 in 1994 684 682
Additional paid-in capital 9,436 9,329
Foreign currency translation adjustment (82) (115)
Retained earnings 47,612 46,535
Total stockholders' equity 57,650 56,431
$ 96,650 96,751
See accompanying notes to interim consolidated financial statements.
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Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Three Months Ended March 31
1995 1994
Cash flows from operating activities:
Net earnings $ 1,077 665
Adjustments to reconcile net earnings
to net cash used in operating
activities:
LXE minority interest 253 198
Depreciation and amortization 1,328 1,370
Changes in operating assets
and liabilities:
Trade accounts receivable (3,210) (2,427)
Inventories (1,607) (1,071)
Accounts payable (407) (794)
Income taxes (565) 70
Accrued retirement costs (937) (806)
Accrued compensation costs,
deferred revenue and other
current liabilities 165 322
Other (321) (239)
Net cash used in
operating activities (4,224) (2,712)
Cash flows from investing activities:
Purchases of property, plant
and equipment (2,337) (1,119)
Proceeds from maturities of
marketable securities - 1,000
Net cash used in
investing activities (2,337) (119)
Cash flows from financing activities:
Net increase (decrease) in
long-term debt (60) 442
Proceeds from exercise of stock options 275 150
Net cash provided by
financing activities 215 592
Net change in cash and
cash equivalents (6,346) (2,239)
Cash and cash equivalents at January 1 13,071 8,411
Cash and cash equivalents at March 31 $ 6,725 6,172
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 123 98
Cash paid for income taxes $ 1,354 794
See accompanying notes to interim consolidated financial statements.
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Notes to Interim Consolidated Financial Statements (Unaudited)
(1) Basis of presentation
The interim consolidated financial statements include the
accounts of Electromagnetic Sciences, Inc., its wholly-owned subsidiary,
EMS Technologies, Inc. and its majority-owned subsidiaries LXE Inc.
and CAL Corporation (collectively, "the Company"). In the opinion of
management, the interim consolidated financial statements reflect
all normal and recurring adjustments necessary for a fair
presentation of results for such periods. The results of operations for
any interim period are not necessarily indicative of results for the full
year. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Company's Annual report on Form 10-K for the year ended
December 31, 1994.
(2) Earnings per share
Earnings per common and common equivalent share for the
interim periods were based on the weighted average number of shares
outstanding and equivalents shares derived from dilutive stock options.
For purposes of calculating primary earnings per share, the Company's
proportionate share of the net earnings of LXE Inc. has been
adjusted to reflect the dilutive effect of LXE's outstanding stock
options. Fully diluted earnings per share are not significantly different
from the primary earnings per share presented.
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ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated net sales for the first quarter of 1995 increased
25% to $32.8 million compared with net sales of $26.2 million in the
first quarter of 1994. All of the company's business segments
contributed to the first quarter sales growth. Sales of wireless data
communications systems increased to $17.3 million compared with $13.1
million for the same period a year earlier, due principally to increased
sales to international markets and third-party distributors in domestic
markets. First quarter sales of advanced antenna and space communications
systems increased to $15.5 million in 1995 from $13.1 million in
1994.
Cost of sales as a percentage of consolidated net sales increased
slightly to 63% in the first quarter of 1995 compared with 61% in
1994 due to increased distribution through third-party channels and
enhancements in customer service operations. The cost of first
quarter selling, general and administrative expenses decreased as
a percentage of net sales to 23% in 1995 from 25% in 1994. The
decrease resulted mainly from a larger sales base to absorb the fixed
components of these costs. Research and development expenses were
comparable to the first quarter of last year, increasing to $2.4 million
from $2.0 million.
The effective tax rate for the first quarter of 1995 decreased to
39% from 41% for the 1994 fiscal year, primarily as a result of a
more favorable tax position for certain foreign operations.
Liquidity and Capital Resources
Total cash, cash equivalents, and marketable securities decreased
to $7.1 million at March 31, 1995, from $13.5 million at the
beginning of the year. The decrease resulted from higher levels of
accounts receivable (in part due to the timing of certain billings for the
Company's antenna and space communications products and increased
sales towards the end of the quarter), increases in inventory levels,
and payments of accrued retirement plan costs, as well as capital
expenditures. The timing of capital expenditures may require the
use of additional cash during the second quarter. Management believes
that it will generate positive cash flow from operations for the
remainder of the year, and that existing sources of cash will be sufficient
to fund capital investments required to proceed with the Company's
long-term strategic plans.
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PART II
Other Information
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibit is filed as part of this
report:
11.1 Statement re Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K - The Company has not filed any reports
on Form 8-K during the three months ended March 31, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ELECTROMAGNETIC SCIENCES, INC.
By: Thomas E. Sharon Date: 5/15/95
President and Chief Executive
Officer
By: Don T. Scartz Date: 5/15/95
Vice President - Finance
and Treasurer
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Exhibit 11.1
Statement re: Computation of Per Share Earnings
(In thousands, except per share data)
Three months ended March 31
1995 1994
Common and common equivalent shares:
Common stock - weighted average
shares outstanding 6,831 6,730
Dilutive effect of outstanding common
stock options (as determined by the
treasury stock method using the
average market price for the period) 254 255
Total common and
common equivalent shares 7,085 6,985
For purposes of calculating primary
earnings per share the Company's
proportionate share of the net
earnings of LXE Inc. has been ad-
justed to reflect the dilutive effect
of LXE's outstanding stock options.
following is a summary of net earnings
applicable to earnings per common and
common equivalent share:
Net earnings excluding LXE Inc. $ 423 96
Adjusted proportionate share of
net earnings of LXE Inc. 654 529
Total net earnings applicable
to earnings per common and
common equivalent share $ 1,077 625
Net earnings per common and
common equivalent share $ .15 .09