UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended: January 30, 2000
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 0-5411
HERLEY INDUSTRIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE #23-2413500
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 Industry Drive, Lancaster, Pennsylvania 17603
- ------------------------------------------ --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (717) 397-2777
--------------
--------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of March 9, 2000 - 4,622,921 shares of Common Stock.
HERLEY INDUSTRIES, INC
AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION PAGE
----
Item 1 - Financial Statements:
Consolidated Balance Sheets -
January 30, 2000 and August 1, 1999 2
Consolidated Statements of Income -
For the thirteen and twenty-six weeks ended
January 30, 2000 and January 31, 1999 3
Consolidated Statements of Cash Flows -
For the thirteen and twenty-six weeks ended
January 30, 2000 and January 31, 1999 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10
PART II -OTHER INFORMATION 11
Signatures 13
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 30, August 1,
2000 1999
------------- -------------
Unaudited Audited
ASSETS
Current Assets:
Cash and cash equivalents $ 3,486,190 $ 2,741,163
Accounts receivable 13,445,651 10,678,638
Other receivables 223,347 212,515
Inventories 23,662,103 19,880,370
Deferred taxes and other 3,009,197 2,703,179
----------- -----------
Total Current Assets 43,826,488 36,215,865
Property, Plant and Equipment, net 19,089,171 21,888,553
Intangibles, net of amortization of $2,555,739 at
January 30, 2000 and $2,137,459 at August 1, 1999 17,742,194 13,573,653
Available-for-sale Securities 147,576 148,105
Other Investments 983,199 947,983
Other Assets 1,340,516 1,282,078
----------- -----------
$83,129,144 $74,056,237
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 279,119 $ 258,383
Notes payable - other 1,535,468 --
Accounts payable and accrued expenses 9,262,920 8,035,211
Income taxes payable 916,761 276,160
Reserve for contract losses 1,340,344 1,505,048
Advance payments on contracts 1,431,087 438,538
----------- -----------
Total Current Liabilities 14,765,699 10,513,340
Long-term Debt 23,071,033 15,437,390
Deferred Income Taxes 5,572,880 5,143,837
Minority interest 62,062 62,062
----------- -----------
43,471,674 31,156,629
----------- -----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued and outstanding
4,600,699 at January 30, 2000
and 5,030,283 at August 1, 1999 460,070 503,028
Additional paid-in capital 8,290,148 15,071,964
Retained earnings 30,907,252 27,324,616
----------- -----------
Total Shareholders' Equity 39,657,470 42,899,608
----------- -----------
$83,129,144 $74,056,237
=========== ===========
The accompanying notes are an integral part of these financial statements
2
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended Twenty-six weeks ended
January 30, January 31, January 30, January 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net sales $ 16,217,470 $ 14,532,161 $ 32,356,747 $ 26,183,006
------------ ------------ ------------ ------------
Cost and expenses:
Cost of products sold 10,313,557 8,920,244 19,978,606 15,691,564
Selling and administrative expenses 3,141,823 2,528,057 6,387,824 4,651,830
------------ ------------ ------------ ------------
13,455,380 11,448,301 26,366,430 20,343,394
------------ ------------ ------------ ------------
Operating income 2,762,090 3,083,860 5,990,317 5,839,612
------------ ------------ ------------ ------------
Other income (expense):
Investment income 47,119 82,539 101,373 185,656
Interest expense (309,133) (163,272) (581,054) (265,188)
------------ ------------ ------------ ------------
(262,014) (80,733) (479,681) (79,532)
------------ ------------ ------------ ------------
Income before income taxes 2,500,076 3,003,127 5,510,636 5,760,080
Provision for income taxes 874,000 1,051,000 1,928,000 2,016,000
------------ ------------ ------------ ------------
Net income $ 1,626,076 $ 1,952,127 $ 3,582,636 $ 3,744,080
============ ============ ============ ============
Earnings per common share - Basic $.36 $.37 $.76 $.71
==== ==== ==== ====
Basic weighted average shares 4,563,286 5,290,225 4,684,214 5,281,957
========= ========= ========= =========
Earnings per common share -Diluted $.34 $.34 $.72 $.67
==== ==== ==== ====
Diluted weighted average shares 4,844,369 5,696,776 4,971,652 5,614,895
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
3
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Twenty-six weeks ended
January 30, January 31,
2000 1999
------------ ------------
Cash flows from operating activities:
Net income $ 3,582,636 $ 3,744,080
------------ ------------
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,913,305 1,325,890
(Gain) loss on disposal of property and equipment (18,327) 7,841
Equity in income of limited partnership (35,216) (47,059)
(Increase) in deferred tax assets (90,580) (316,326)
Increase in deferred tax liabilities 429,043 952,425
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (648,754) 652,731
(Increase) in costs incurred and income recognized
in excess of billings on uncompleted contracts -- (2,395,591)
(Increase) decrease in other receivables (10,832) 30,883
Decrease in prepaid income taxes -- 377,448
(Increase) decrease in inventories (1,916,464) 1,431,491
(Increase) decrease in prepaid espenses and other (182,775) 5,418
Increase (decrease) in accounts payable
and accrued expenses 368,775 (1,477,930)
Increase (decrease) in income taxes payable 630,601 (109,858)
(Decrease) in reserve for contract losses (164,704) (59,080)
Increase (decrease) in advance payments on contracts 620,381 (878,729)
Other, net 730 64,565
------------ ------------
Total adjustments 895,183 (435,881)
------------ ------------
Net cash provided by operating activities 4,477,819 3,308,199
------------ ------------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (6,020,000) (20,101,475)
Proceeds from sale of property and equipment 4,124,505 1,250
Capital expenditures (1,794,226) (990,869)
------------ ------------
Net cash used in investing activities (3,689,721) (21,091,094)
------------ ------------
Cash flows from financing activities:
Borrowings under bank line of credit 11,500,000 19,400,000
Proceeds from exercise of stock options and warrants 226,624 398,201
Payments under lines of credit (4,000,000) (8,900,000)
Payments of long-term debt (204,320) (309,370)
Purchase of treasury stock (7,565,375) (1,583,700)
------------ ------------
Net cash provided by (used in) financing activities (43,071) 9,005,131
------------ ------------
Net (decrease) increase in cash and cash equivalents 745,027 (8,777,764)
Cash and cash equivalents at beginning of period 2,741,163 10,689,193
------------ ------------
Cash and cash equivalents at end of period $ 3,486,190 $ 1,911,429
============ ============
The accompanying notes are an integral part of these financial statements.
4
Herley Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Unaudited)
1. The consolidated financial statements include the accounts of Herley
Industries, Inc. and its subsidiaries, all of which are wholly-owned. All
significant inter-company accounts and transactions have been eliminated in
consolidation.
In the opinion of the Company, the accompanying consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of operations and cash
flows for the periods presented. These financial statements (except for the
balance sheet presented at August 1, 1999) are unaudited and have not been
reported on by independent public accountants.
Results of operations for interim periods are not necessarily indicative of
the results of operations for a full year due to external factors which are
beyond the control of the Company.
2. The Company entered into an agreement, as of January 3, 2000, to acquire
substantially all of the assets of Robinson Laboratories, Inc. ("Robinson"
or "Robinson Labs"), a New Hampshire corporation, which is being operated
as a division of Herley Industries, Inc. The transaction, which closed on
February 1, 2000, provided for the payment of $6,000,000 in cash, the
issuance of 33,841 shares of Common Stock of the Company valued at $15.188
per share, and the assumption of approximately $3,135,000 in liabilities.
In addition, the agreement provides for the issuance of additional shares
of Common Stock at a future date, aggregating 97,841shares, based on new
orders booked through January 31, 2001. The transaction has been accounted
for under the purchase method. Accordingly, the consolidated balance sheet
includes the assets and liabilities of Robinson at January 30, 2000, and
the consolidated statement of income includes the results of Robinson's
operations from January 3, 2000. Excess cost over the fair value of net
assets acquired of approximately $4,587,000 is being amortized over 20
years. The allocation of the aggregate estimated purchase price of
$6,534,000 will be revised when additional information concerning asset and
liability valuations is obtained. Adjustments, which could be significant,
will be made during the allocation period based on detailed reviews of the
fair values of assets acquired and liabilities assumed and could result in
a substantial change in the excess of cost over the fair value of net
assets acquired.
On the basis of a pro forma consolidation of the results of operations as
if the acquisition had taken place at the beginning of fiscal 1999,
unaudited consolidated net sales, net income, basic earnings per share, and
diluted earnings per share for the thirteen and twenty-six weeks ended
January 31, 1999 would have been approximately $16,888,000, $1,997,000,
$.38, and $0.35, and approximately $30,510,000, $3,582,000, $.68, and
$0.64, respectively, and for the twenty-six weeks ended January 30, 2000
would have been approximately $35,066,000, $3,246,000, $.69, and $.65,
respectively. The pro forma information includes adjustments for additional
depreciation based on the estimated fair market value of the property,
plant, and equipment acquired, the amortization of intangibles, and
additional interest on bank borrowings arising from the transaction. The
pro forma financial information is not necessarily indicative of the
results of operations as they would have been had the transaction been
affected at the beginning of fiscal 1999.
Notes payable - other at January 30, 2000 consists of bank debt of $946,849
and notes payable to a former shareholder of Robinson in the amount of
$588,619. The notes and bank debt were paid at the time of closing.
5
3. Inventories at January 30, 2000 and August 1, 1999 are summarized as
follows:
January 30, 2000 August 1, 1999
---------------- --------------
Purchased parts and raw materials $ 11,022,075 $ 9,862,727
Work in process 11,976,276 8,780,767
Finished products 663,752 1,236,876
---------- ----------
$ 23,662,103 $ 19,880,370
========== ==========
4. In January 2000, the Company entered into an amendment to its revolving
loan agreement with a bank that provides for a revolving unsecured loan in
the aggregate principal amount of $30,000,000 which may be used for general
corporate purposes, including business acquisitions. The revolving credit
facility requires the payment of interest only on a monthly basis and
payment of the outstanding principal balance on January 31, 2002. Interest
is set at 1.65% over the FOMC Federal Funds Target Rate based on tangible
net worth in excess of $25,000,000, or at an increment of 1.80% if tangible
net worth is less than $25,000,001. The aggregate rate was 7.15% at January
30, 2000, including an increment of 1.80%. There is a fee of 15 basis
points per annum on the unused portion of the credit line in excess of
$20,000,000 payable quarterly. Borrowings under the line were $20,000,000
at January 30, 2000. The credit facility also provides for the issuance of
stand-by letters of credit with a fee of 1.0% per annum of the amounts
outstanding under the facility. At January 30, 2000, stand- by letters of
credit aggregating $1,135,122 were outstanding under this facility.
The agreement contains various financial covenants, including, among other
matters, minimum tangible net worth, debt to tangible net worth, debt
service coverage, and restrictions on other borrowings.
5. The following table shows the calculation of basic earnings per share and
earnings per share assuming dilution:
Thirteen weeks ended
--------------------
January 30, January 31,
2000 1999
----------- -----------
Numerator:
Net Income $1,626,076 $1,952,127
========= =========
Denominator:
Basic weighted-average shares 4,563,286 5,290,225
Effect of dilutive securities:
Employee stock options and warrants 281,083 406,551
--------- ---------
Diluted weighted-average shares 4,844,369 5,696,776
========= =========
Earnings per common share - Basic $.36 $.37
=== ===
Earnings per common share - Diluted $.34 $.34
=== ===
Options and warrants to purchase 2,648,675 shares of common stock, with
exercise prices ranging from $13.88 to $16.46, were outstanding during the
second quarter of fiscal 2000, but were not included in the computation of
diluted EPS because the exercise prices are greater than the average market
price of the common shares. The options and warrants, which expire at
various dates through December 28, 2009, were still outstanding as of
January 30, 2000. Options and warrants to purchase 2,582,342 shares of
common stock, with exercise prices ranging from $12.19 to $16.46, were
outstanding during the second quarter of fiscal 1999 but were not included
in the computation of diluted EPS because the exercise prices are greater
than the average market price of the common shares.
6
Twenty-six weeks ended
----------------------
January 30, January 31,
2000 1999
----------- -----------
Numerator:
Net Income $3,582,636 $3,744,080
========= =========
Denominator:
Basic weighted-average shares 4,684,214 5,281,957
Effect of dilutive securities:
Employee stock options and warrants 287,437 332,938
--------- ---------
Diluted weighted-average shares 4,971,652 5,614,895
========= =========
Earnings per common share - Basic $.76 $.71
=== ===
Earnings per common share - Diluted $.72 $.67
=== ===
Options and warrants to purchase 2,648,675 shares of common stock, with
exercise prices ranging from $13.88 to $16.46, were outstanding during the
first six months of fiscal 2000, but were not included in the computation
of diluted EPS because the exercise prices are greater than the average
market price of the common shares. The options and warrants, which expire
at various dates through December 28, 2009, were still outstanding as of
January 30, 2000. Options and warrants to purchase 2,630,175 shares of
common stock, with exercise prices ranging from $10.81 to $16.46, were
outstanding during the first six months of fiscal 1999 but were not
included in the computation of diluted EPS because the exercise prices are
greater than the average market price of the common shares.
6. Supplemental cash flow information is as follows:
January 30, January 31,
2000 1999
----------- -----------
Cash paid during the period for:
Interest $ 168,990 $ 198,100
Income Taxes 1,119,758 1,206,058
Cashless exercise of stock options 47,119 228,353
Warrants issued for business acquired - 1,450,000
Common stock issued for business acquired 513,977 -
Tax benefit related to stock options 161,000 210,000
7
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
The statements contained in this report which are not historical fact are
"forward-looking statements" that involve various important assumptions, risks,
uncertainties and other factors which could cause the Company's actual results
for fiscal 2000 and beyond to differ materially from those expressed in such
forward-looking statements. These important factors include, without limitation,
competitive factors and pricing pressures, changes in legal and regulatory
requirements, technological change or difficulties, product development risks,
commercialization and trade difficulties and general economic conditions, as
well as other risks previously disclosed in the Company's securities filings and
press releases.
Results of Operations
- ---------------------
Thirteen weeks ended January 30, 2000 and January 31, 1999
- ----------------------------------------------------------
Net sales for the thirteen weeks ended January 30, 2000 were $16,217,000
compared to $14,532,000 in the second quarter of fiscal 1999. The sales increase
of $1,685,000 (11.6%) is primarily attributable to revenue generated by General
Microwave, which was included in fiscal 1999 for one month, of $2,863,000, and
revenue of $816,000 from Robinson Labs which was acquired as of January 3, 2000.
In addition microwave products revenue increased $596,000 in the second quarter
fiscal 2000 as compared to fiscal 1999. These increases in revenue from the
microwave technology group were offset by reductions in revenues from flight
instrumentation products of $2,590,000.
The gross profit margin of 36.4%, in the thirteen weeks ended January 30, 2000,
was 2.2 percentage points lower than the margin of 38.6% in the second quarter
of the prior year. The decrease is due to lower margins on microwave components,
and certain foreign contracts, as well as lower margins than the Company's
historical margins from the General Microwave revenues.
Selling and administrative expenses for the thirteen weeks ended January 30,
2000 increased $614,000 as compared to the second quarter of fiscal 1999.
Selling and administrative expenses of General Microwave account for $658,000 of
the increase, and Robinson Labs accounts for $143,000. Synergies from the
consolidation of Metraplex and Steward Warner into the Lancaster facilities
reduced expenses by approximately $198,000.
Investment income declined $35,000 from the prior year due to the liquidation of
investments during the second quarter fiscal 1999, the proceeds of which were
used to partially fund the acquisition of General Microwave. In addition, bank
borrowings of $11,400,000 used to fund the acquisition contributed to an
increase in interest expense of approximately $146,000.
Twenty-six weeks ended January 30, 2000 and January 31, 1999
- ------------------------------------------------------------
Net sales for the twenty-six weeks ended January 30, 2000 were $32,357,000
compared to $26,183,000 in the comparable prior year period. The sales increase
of $6,174,000 (23.6%) is primarily attributable to revenue generated by General
Microwave, which was included in fiscal 1999 for one month, of $6,918,000, and
revenue of $816,000 from Robinson Labs which was acquired as of January 3, 2000.
In addition microwave products revenue increased $1,571,000 in the second
quarter fiscal 2000 as compared to fiscal 1999. These increases in revenue from
the microwave technology group were offset by reductions in revenues from flight
instrumentation products of $3,131,000.
Gross profit margin for the twenty-six weeks ended January 30, 2000 was 38.3% as
compared to 40.1% in fiscal 1999. The decline in margin of 1.8 percentage points
is due primarily to lower margins on microwave components
8
and certain foreign contracts, as well as lower margins than the Company's
historical margins from the General Microwave revenues.
Selling and administrative expenses for the twenty-six weeks ended January 30,
2000 were $6,388,000 compared to $4,652,000 in the first six months of fiscal
1999, an increase of $1,736,000. The increase is primarily attributable to
expenses of General Microwave of $1,708,000 and Robinson Labs of $143,000.
Synergies from the consolidation of Metraplex and Steward Warner into the
Lancaster facilities reduced expenses by approximately $451,000. Other
significant changes include increases in performance incentives of $232,000,
corporate contributions of $101,000, personnel costs of $144,000, and outside
services of $121,000. Representative fees decreased $248,000.
Investment income declined $84,000 from the prior year due to the liquidation of
investments during the second quarter fiscal 1999, the proceeds of which were
used to partially fund the acquisition of General Microwave. In addition, bank
borrowings of $11,400,000 used to fund the acquisition contributed to an
increase in interest expense of approximately $316,000.
Business Acquisition
- --------------------
The Company entered into an agreement, as of January 3, 2000, to acquire
substantially all of the assets of Robinson Laboratories, Inc. ("Robinson" or
"Robinson Labs"), a New Hampshire corporation, which is being operated as a
division of Herley Industries, Inc. The transaction, which closed on February 1,
2000, provided for the payment of $6,000,000 in cash, the issuance of 33,841
shares of Common Stock of the Company valued at $15.188 per share, and the
assumption of approximately $3,135,000 in liabilities. In addition, the
agreement provides for the issuance of additional shares of Common Stock at a
future date, aggregating 97,841shares, based on new orders booked through
January 31, 2001. The cash portion of the purchase price was financed by
borrowing under the Company's existing line of credit with its bank. The
transaction has been accounted for under the purchase method. Accordingly, the
consolidated balance sheet includes the assets and liabilities of Robinson at
January 30, 2000, and the consolidated statement of income includes the results
of Robinson's operations from January 3, 2000. Excess cost over the fair value
of net assets acquired of approximately $4,587,000 is being amortized over 20
years. The allocation of the aggregate estimated purchase price of $6,534,000
will be revised when additional information concerning asset and liability
valuations is obtained. Adjustments, which could be significant, will be made
during the allocation period based on detailed reviews of the fair values of
assets acquired and liabilities assumed and could result in a substantial change
in the excess of cost over the fair value of net assets acquired.
On the basis of a pro forma consolidation of the results of operations as if the
acquisition had taken place at the beginning of fiscal 1999, unaudited
consolidated net sales, net income, basic earnings per share, and diluted
earnings per share for the thirteen and twenty-six weeks ended January 31, 1999
would have been approximately $16,888,000, $1,997,000, $.38, and $0.35, and
approximately $30,510,000, $3,582,000, $.68, and $0.64, respectively, and for
the twenty-six weeks ended January 30, 2000 would have been approximately
$35,066,000, $3,246,000, $.69, and $.65, respectively. The pro forma information
includes adjustments for additional depreciation based on the estimated fair
market value of the property, plant, and equipment acquired, the amortization of
intangibles, and additional interest on bank borrowings arising from the
transaction. The pro forma financial information is not necessarily indicative
of the results of operations as they would have been had the transaction been
affected at the beginning of fiscal 1999.
Liquidity and Capital Resources
- -------------------------------
As of January 30, 2000 and August 1, 1999, working capital was $29,061,000 and
$25,703,000, respectively, and the ratio of current assets to current
liabilities was 2.97 to 1 and 3.44 to 1, respectively. The reduction in the
current ratio is primarily attributable to the purchase of assets and assumption
of certain liabilities of Robinson Labs.
9
As is customary in the defense industry, inventory is partially financed by
progress payments. The unliquidated balance of these advanced payments was
approximately $1,431,000 at January 30, 2000, and $439,000 at August 1, 1999.
Net progress payments of $862,000 received during the quarter relate to a new
contract.
Net cash provided by operations during the period was approximately $4,478,000,
up from $3,308,000 in the prior fiscal year.
Net cash used in investing activities consists of the acquisition of Robinson
Labs, in part for cash of approximately $6,000,000, as discussed above under
"Business Acquisition", and $1,794,000 for capital expenditures, including
building and leasehold improvements of $1,249,000 to accommodate the move of
General Microwave from Amityville, NY to a leased facility in Farmingdale, NY
and consolidation of the General Microwave leased facilities in Billerica, MA
with Herley-MDI in Woburn, MA. Net cash received from the sale of the facility
in Amityville was $4,125,000.
The Company maintains a revolving credit facility with a bank for an aggregate
of $30,000,000, as amended in January 2000, which expires January 31, 2002. As
of January 30, 2000 and August 1, 1999, the Company had borrowings outstanding
of $20,000,000 and $12,500,000, respectively.
During the period ended January 30, 2000, the Company received net proceeds of
approximately $227,000 from the exercise of common stock options and warrants by
employees and acquired 512,000 shares of treasury stock through open market
purchases at a cost of $7,565,000. The Company has acquired an aggregate of
858,050 shares under the 1,250,000 share buyback programs approved by the Board
of Directors. The Company also acquired 6,027 shares of common stock valued at
$86,766 in connection with certain "stock-for-stock" exercises of stock options
by which certain employees elected to surrender "mature" shares owned in
settlement of the option price, and related tax obligations of $39,647. Such
exercises are treated as an exercise of a stock option and the acquisition of
treasury shares by the Company. All such treasury shares have been retired.
At January 30, 2000, the Company had cash and cash equivalents of approximately
$3,486,000.
The Company believes that presently anticipated future cash requirements will be
provided by internally generated funds and existing credit facilities.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risk associated with changes in interest rates
and stock prices. The Company has not entered into any derivative financial
instruments to manage the above risks and the Company has not entered into any
market risk sensitive instruments for trading purposes. There have been no
material changes in market risk to the Company since its fiscal year end as
disclosed in the Company's Annual Report Form 10K as of August 1, 1999.
10
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
The Company is not involved in any material legal proceedings.
ITEM 2 - CHANGES IN SECURITIES:
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
(a) The Registrant held its Annual Meeting of Stockholders on February 1, 2000.
(b) Two directors were elected at the Annual Meeting of Stockholders as
follows:
Class III - To serve until the Annual Meeting of Stockholders in 2002
or until their successors are chosen and qualified:
Name Votes For Votes Withheld
-------------------------- --------- --------------
Adm. Thomas J. Allshouse 3,930,420 222,891
David H. Lieberman 3,930,420 222,891
(c) The adoption of a 1997 Stock Option Plan was ratified as follows:
Votes For Votes Against Abstained
--------- ------------- ---------
1,540,464 1,341,070 92,495
(d) The adoption of a 1998 Stock Option Plan was ratified as follows:
Votes For Votes Against Abstained
--------- ------------- ---------
2,106,897 772,821 94,311
ITEM 5 - OTHER INFORMATION:
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
10.1 Amendment to Loan Agreement dated January 11, 2000 between
Registrant and Allfirst Bank, successor to The First National
Bank of Maryland.
11
10.2 Asset Purchase Agreement dated as of February 1, 2000 between
Registrant and Robinson Laboratories, Inc.
27. Financial Data Schedule (for electronic submission only).
` (b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of fiscal
2000.
12
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HERLEY INDUSTRIES, INC.
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Registrant
BY: /S/ Myron Levy
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Myron Levy, President
BY: /S/ Anello C. Garefino
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Anello C. Garefino
Principal Financial Officer
DATE: March 13, 2000
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