FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended December 31, 1996 ----------------- ( ) 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 ------ SYMETRICS INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Florida 59-0954868 ----------------------- ------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 557 N. Harbor City Boulevard, Melbourne, Florida 32935 ------------------------------------------------------ (Address of principal executive offices) (407) 254-1500 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at February 14, 1997 ---------------------------- -------------------------------- (Common stock, $.25 par value) 1,618,713 PART 1 - FINANCIAL INFORMATION SYMETRICS INDUSTRIES, INC. AND SUBSIDARY CONDENSED CONSOLIDATED BALANCE SHEET ASSETS DECEMBER 31 MARCH 31 1996 1996 ---- ---- (UNAUDITED) (DERIVED FROM AUDITED FINANCIAL STATEMENTS) Current assets: Cash $ 34,951 $ 1,657,905 Receivables 2,717,655 1,581,428 Costs and estimated earnings in excess of billings on uncompleted contracts 4,690,444 2,931,069 Inventory 972,688 635,893 Mortgage receivable 450,000 450,000 Other assets 139,130 65,898 ----------- ----------- Total current assets 9,004,868 7,322,193 ----------- ----------- Property, plant and equipment 4,966,749 3,336,076 Less accumulated depreciation 1,456,898 1,572,585 ----------- ----------- 3,509,851 1,763,491 ----------- ----------- Deferred income taxes 298,720 325,453 ----------- ----------- Other assets: Other 1,791,654 94,784 Goodwill, less accumulated amortization 519,807 580,577 ----------- ----------- 2,311,461 675,361 ----------- ----------- Total assets $15,124,900 $10,086,498 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 300,000 $ 1,000 Current maturities of long-term debt 70,732 25,436 Accounts payable and accrued expenses 2,719,333 2,098,788 Billings in excess of costs and estimated earnings on uncompleted contracts 371,449 7,869 Income taxes payable 243,455 452,239 ----------- ----------- Total current liabilities 3,704,969 2,585,332 ----------- ----------- Deferred compensation 505,355 479,439 Non-current deferred tax liability 226,234 Long-term debt, less current maturities 2,729,598 568,363 ----------- ----------- 3,461,187 1,047,802 ----------- ----------- Shareholders' equity Common stock, $.25 par value 404,123 398,824 Additional paid-in capital 2,153,163 2,120,025 Retained earnings 5,401,458 3,934,515 ----------- ----------- Total shareholders' equity 7,958,744 6,453,364 ----------- ----------- Total liabilities and shareholders' equity $15,124,900 $10,086,498 =========== =========== See accompanying notes to the condensed consolidated financial statements -2- SYMETRICS INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) NINE MONTHS ENDED THREE MONTHS ENDED DEC. 31 DEC. 31 DEC. 31 DEC. 31 ------- ------- ------- ------- 1996 1995 1996 1995 Contract revenue $ 18,634,480 $ 17,225,808 $ 5,900,494 $ 5,028,388 Costs and expenses Costs of revenues earned 13,863,446 12,788,297 4,215,215 3,648,535 General and administrative 2,626,454 2,489,150 937,343 900,828 Research and development 212,290 392,879 66,911 12,419 ------------ ------------ ------------ ------------ 16,702,190 15,670,326 5,219,469 4,561,782 ------------ ------------ ------------ ------------ Income from operations 1,932,290 1,555,482 681,025 466,606 Other income (expense) Rental and other income 47,593 28,451 28,357 9,914 Related expense (23,671) (11,916) (15,043) 44,376 ------------ ------------ ------------ ------------ 23,922 16,535 13,314 54,290 ------------ ------------ ------------ ------------ Interest income 57,638 45,547 7,448 (15,121) Gain (loss) on sale of 580,087 (14,151) 580,087 (14,151) property Interest expense (96,181) (39,264) (53,343) (10,163) ------------ ------------ ------------ ------------ 541,544 (7,868) 534,192 (39,435) ------------ ------------ ------------ ------------ Income before taxes 2,497,756 1,564,149 1,228,531 481,461 Income (taxes) (1,030,813) (736,436) (529,749) (235,954) ------------ ------------ ------------ ------------ Net income $ 1,466,943 $ 827,713 $ 698,782 $ 245,507 ============ ============ ============ ============ Earnings per share $ .91 $ .52 $ 0.43 $ 0.15 ============ ============ ============ ============ Weighted average number of shares outstanding 1,609,601 1,602,795 1,616,153 1,607,931 See accompanying notes to the condensed financial statements. -3- SYMETRICS INDUSTRIES, INC. AND SUBSIDARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED ----------------- DECEMBER 31 DECEMBER 31 ----------- ----------- 1996 1995 ---- ---- Cash provided by (used in) Operations Net income $ 1,466,943 $ 827,713 Adjustments for non cash charge 317,384 221,380 Changes in assets and liabilities (3,976,278) 802,614 ----------- ----------- Net cash provided by (used in) operations (2,191,951) 1,851,707 Investing Capital expenditures (1,630,673) (691,785) ----------- ----------- Cash used for investing (1,630,673) (691,785) ----------- ----------- Financing Proceeds from stock options 38,435 36,936 Borrowing (repayment) of long-term debt 2,161,235 (230,769) ----------- ----------- Cash provided by (used) for financing 2,199,670 (193,833) ----------- ----------- Increase (decrease) in cash (1,622,954) 966,089 Cash beginning of period 1,657,905 318,138 ----------- ----------- Cash end of period $ 34,951 $ 1,284,227 =========== =========== Cash payments for interest $ 97,380 $ 39,264 Cash payments for income taxes $ 999,626 $ 951,398 See accompanying notes to the condensed consolidated financial statements - 4 - SYMETRICS INDUSTRIES, INC. AND SUBSIDARY FORM 10-Q QUARTER ENDED DECEMBER 31, 1996 Notes to Condensed Consolidated Financial Statements (Unaudited) o BASIS OF PRESENTATION --------------------- * The financial statements contained herein are unaudited but, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, which are necessary to a fair statement of the results for the periods ended December 31, 1996 and 1995. The results of operations for the period ended December 31, 1996 are not necessarily indicative of the results to be expected for the full fiscal year. * Refer to the Company's Form 10-K for the year ended March 31, 1996 as filed with the Securities and Exchange Commission on June 14, 1996 for a description of accounting policies which have been continued without change. Refer to the Form 8-K filed by the Company on May 3, 1996 as amended by the 8-K/A filed on July 5, 1996 regarding the acquisition of American Digital Switching effective April 1, 1996. Also refer to notes included in the financial statements for additional details of the Company's financial condition, results of operations and changes in financial position. * Inventories stated on the balance sheet are raw materials, work in process and finished assemblies primarily for Symetrics' subsidiary American Digital Switching for future shipments of existing orders and to provide field service support to their customers. Refer to the Company's Form 10-K for the year ended March 31, 1996 for discussion of costs incurred on uncompleted contracts. o ACQUISTION DURING THE QUARTER ENDED JUNE 30, 1996 ------------------------------------------------- Effective April 1, 1996, Symetrics acquired 933,334 (approximately 95%) of the outstanding common stock of American Digital Switching, Inc. ("ADS") in exchange for 207,399 shares of Symetrics' common stock or approximately 13% of the outstanding capital stock of Symetrics after the exchange. The transaction has been accounted for under the pooling-of-interest method of accounting. Accordingly, the condensed consolidated statements of income and cash flows for the periods ended December 31, 1996 include the combined operations of the Companies. The condensed consolidated balance sheet as of March 31, 1996 includes the combined assets and liabilities of the two Companies and is derived from separate audited financial statements of the Companies at that date. Similarly, the condensed consolidated statements of income and cash flows for the periods ended December 31, 1995 presented herein for comparative purposes, includes the combined operations of the Companies as if the combination had occurred at April 1, 1995. Such statements were derived from the unaudited interim financial statements of the separate Companies. The weighted average number of common shares outstanding used in the computation of earnings per share for the periods ended December 31, 1995 and December 31, 1996 includes the shares issued by Symetrics in the ADS acquisition. - 5 - SYMETRICS INDUSTRIES, INC. AND SUBSIDARY FORM 10-Q QUARTER ENDED DECEMBER 31, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations For the nine months ended December 31, 1996, contract revenues were $18,634,480 a 8.2% increase over the $17,225,808 for the corresponding period last year. For the current nine month period, net income was $1,466,943, or $0.91 per share, including $353,853 (net of income taxes) or $0.22 per share resulting from the gain on exchange of property in the acquisition of the Company's new facilities in Melbourne, Florida, Net income (excluding the gain on exchange of property) was $1,113,090 or $0.69 per share, a 34% increase over the $827,713 or $0.52 per share, a year ago. Working capital increased by $563,038 for the nine months. The backlog closed at $9.8 million, compared with the $9.6 million at December 31, 1995 . The increase in contract revenues for the current nine months is attributable to growth in the Company's commercial products that generated 28.6% of the total revenue. The increase in net income for the current nine months is attributed to continued profitability of the Company's Defense Products Division and the incorporation of American Digital Switching's financial performance which has the effect of reducing the Company's consolidated net income last year. The higher general and administrative expense is due to the continued marketing emphasis on the Company's products. The reduced research and development costs are attributed to capitalizing American Digital Switching's (ADS) development expenses for fiscal 1997 which will be amortized over the anticipated quantity of Centura TM 2000 systems and subsystems to be sold. Prior to fiscal year 1997 these development costs were expensed as incurred by ADS. Increased interest expense resulted from the continued financing requirements of American Digital Switching for the developmental phase of the Centura TM 2000 telephone switch. The $580,087 gain on sale of property reflects the tax deferred exchange of the Company's previous property in the acquisition of the new facility on NASA boulevard. Referring to the Balance Sheet, the Company's combined cash and receivables, less the accounts payable are significantly lower due to increased research and development costs for the Centura TM 2000 switch as well as marketing expenses attributed to the Company's commitment to foster growth in it's commercial divisions. Cost and estimated earnings in excess of billings on uncompleted contracts increased primarily due to the booking of cost related to ongoing Defense Products and Contract Manufacturing programs which as of December 31, 1996 were unbillable due to timing of customer invoicing. The increase in inventory reflects American Digital Switching's procurement of electronic components and production of assemblies which are to be utilized primarily toward fulfillment of backlog. Other current assets increased, reflecting a upward adjustments in the current portion of deferred income taxes as well as a the prepaid expense accounts. The increase in property, plant and equipment reflects primarily the acquisition of the new facility for $1.8 million and also capital purchases for manufacturing equipment. The increase in long-term debt and the current maturities portion reflect the American Digital -6- Switching continued financing requirements for the development of the Centura TM 2000 telephone switch and $552,724, fifteen year note for the new facility.The capitalized development expenses in fiscal year 1997 for the Centura TM 2000 telephone switch are classified under other assets on the Company's balance sheet. These capitalized developmental expenses will be amortized to cost of goods sold as shipments of the Centura TM 2000 telephone switching system commence. An increase in notes payable to $300,000 reflects use of an unsecured line of credit by the Company to take prompt payment discounts . The increase in billings in excess of costs and estimated earnings on uncompleted contracts in fiscal year 1997 reflects primarily the advanced payment by customers of American Digital Switching. The estimated corporate income tax for the three months ended December 31, 1996 of $529,749 has been accrued and is reflected on the balance sheet as $243,455 (net of estimated payments) income tax payable. The non-current deferred tax liability of $226,234 resulted from the exchange of the Company's previous facility as part of the acquisition of the new facility. For the three months ended December 31, 1996, contract revenues were $5,900,494, a 17.3% increase over the $5,028,388 for the corresponding period last fiscal year. The net income for the current period of $698,782 or $0.43 per share, includes $353,853 (net of income taxes), or $0.22 per share, on exchange of property. Net income from operations of $344,929 or $0.21 per share, was 40.5% higher than the $245,507 or $0.15 per share for the comparative three month period last year. These improvements are attributed to continued profitability on the Company's Improved Data Modem (IDM) contract with the Government as well as the incorporation of American Digital Switching's financial performance which had the effect of reducing the Company's consolidated net income last year. A comparison of the current quarter ended December 31, 1996 to the immediately preceding quarter, shows contract revenues at $5,900,494 for the current quarter were essentially the same as $5,854,581 for the three months ended September 30, 1996. Net income from operations of $ 344,929 was slightly higher than the $327,141 of the immediately preceding quarter. Backlog at the end of the current quarter was $9.8 million compared with $10.4 million at September 30, 1996. Part II OTHER INFORMATION Item 6. Reports on Form 8-K No reports on Form 8-K were filed for the quarter ended December 31, 1996. - 7 - SYMETRICS INDUSTRIES, INC. AND SUBSIARY FORM 10-Q QUARTER ENDED DECEMBER 31, 1996 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. SYMETRICS INDUSTRIES, INC. DATE FEBRUARY 14, 1997 /s/ Dudley E. Garner, Jr. ----------------------------- Dudley E. Garner, Jr. President, Principal Executive Officer Principal Financial Officer - 8 -