UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________.
Commission file number: 0-4041
HATHAWAY CORPORATION
(Incorporated Under the Laws of the State of Colorado)
8228 Park Meadows Drive
Littleton, Colorado 80124
Telephone: (303) 799-8200
84-0518115
(IRS Employer Identification Number)
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 ninety (90) days.
YES X NO
-----
Number of Shares of the only class of Common Stock outstanding:
(4,284,000 as of September 30, 1997)
HATHAWAY CORPORATION
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1997 (Unaudited) and June 30, 1997..................... 1
Condensed Consolidated Statements of Operations
Three months ended September 30, 1997 and 1996 (Unaudited)........... 2
Condensed Consolidated Statements of Cash Flows
Three months ended September 30, 1997 and 1996 (Unaudited)........... 3
Notes to Condensed Consolidated Financial Statements (Unaudited).......... 4
Item 2. Management's Discussion and Analysis of Operating
Results and Financial Condition.......................................... 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................... 6
HATHAWAY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
September 30, June 30,
1997 1997
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
Assets
Current Assets:
Cash and cash equivalents $ 4,021 $ 3,431
Restricted cash 222 253
Trade receivables, net 5,761 6,910
Inventories, net 4,912 4,907
Other 1,855 2,034
- ------------------------------------------------------------------------------------------------------------------
Total current assets 16,771 17,535
Property and equipment, net 1,822 1,841
Cost in excess of net assets acquired, net 946 591
- ------------------------------------------------------------------------------------------------------------------
Total Assets $ 19,539 $ 19,967
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Long-term debt classified as current $ 1,718 $ 1,769
Accounts payable 2,359 1,843
Accrued and other current liabilities 3,111 3,329
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 7,188 6,941
Stockholders' Investment:
Common stock 100 100
Additional paid-in capital 9,954 9,954
Retained earnings 6,229 6,818
Treasury stock (3,971) (3,971)
Other 39 125
- ------------------------------------------------------------------------------------------------------------------
Total Stockholders' Investment 12,351 13,026
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Investment $ 19,539 $ 19,967
==================================================================================================================
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
1
HATHAWAY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
- --------------------------------------------------------------------------------
Revenues $ 9,539 $ 8,818
Operating costs and expenses:
Cost of products sold 6,325 5,537
Selling 2,090 1,802
General and administrative 1,024 1,088
Engineering and development 913 885
Amortization of intangibles and other 61 46
- --------------------------------------------------------------------------------
Total operating costs and expenses 10,413 9,358
- --------------------------------------------------------------------------------
Operating loss (874) (540)
Other income (expenses), net:
Interest and dividend income 61 72
Interest expense (42) (42)
Other income (expenses), net 2 (22)
- --------------------------------------------------------------------------------
Total other income, net 21 8
- --------------------------------------------------------------------------------
Loss before income taxes (853) (532)
Benefit for income taxes 264 157
- --------------------------------------------------------------------------------
Net loss $ (589) $ (375)
================================================================================
Primary and fully diluted net loss per share $ (0.14) $ (0.09)
================================================================================
Shares used in computing primary per share amounts 4,331 4,264
================================================================================
Shares used in computing fully diluted per
share amounts 4,339 4,264
================================================================================
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
2
HATHAWAY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
For the three months ended
September 30,
1997 1996
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (589) $ (375)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciaiton and amortization 252 254
Other (40) (36)
Changes in assets and liabilities, net of effect of purchase of Tate
Integrated Systems (Note 3):
(Increase) decrease in -
Restricted cash 31 (43)
Receivables 1,130 (265)
Inventories (421) 194
Prepaid expenses and other 178 (96)
Increase (decrease) in -
Accounts payable 516 41
Accrued liabilities (218) (291)
- -----------------------------------------------------------------------------------------------------------------
Net cash from oeprating activities 839 (617)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (182) (95)
Proceeds from maturity of marketable securities -- 198
- -----------------------------------------------------------------------------------------------------------------
Net cash from inveting activities (182) 103
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on line of credit and long-term debt (51) (44)
Proceeds from exercise of employee stock options -- 37
Purchase of treasury stock -- (82)
- -----------------------------------------------------------------------------------------------------------------
Net cash from fiancing activities (51) (89)
Effect of foreign exchange rate changes on cash (16) 7
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 590 (596)
Cash and cash equibalents at beginning of year 3,431 4,925
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at September 30 $ 4,021 $4,329
=================================================================================================================
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
3
HATHAWAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Preparation and Presentation
-------------------------------------
The accompanying unaudited condensed consolidated financial statements
include the accounts of Hathaway Corporation, its wholly-owned subsidiaries
and investments in joint ventures (the Company). All significant
intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior year
balances in order to conform to the current year's presentation.
The condensed consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and include all adjustments which are, in
the opinion of management, necessary for a fair presentation. Certain
information and footnote disclosures normally included in financial
statements that are prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. The Company believes that the disclosures herein are
adequate to make the information presented not misleading. The financial
data for the interim periods may not necessarily be indicative of results to
be expected for the year.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain estimates
and assumptions. Such estimates and assumptions affect the reported amounts
of assets and liabilities as well as disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
It is suggested that the accompanying condensed interim financial statements
be read in conjunction with the Consolidated Financial Statements and
related Notes to such statements included in the June 30, 1997 Annual Report
and Form 10-K previously filed by the Company.
2. Inventories
-----------
Inventories, valued at the lower of cost (first-in, first-out basis) or
market, are as follows (in thousands):
September 30, June 30,
1997 1997
--------------------------
Parts and raw materials, net $2,930 $2,141
Finished goods and work-in
process, net 1,982 2,766
--------------------------
$4,912 $4,907
==========================
3. Business Acquisition
--------------------
Effective September 30, 1996, the Company acquired a 100% partnership
interest in Tate Integrated Systems (TIS), which has since operated as
Hathaway Industrial Automation (HIA).
The acquisition has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair values at
the date of acquisition. The final net purchase price allocation was as
follows (in thousands):
Trade receivables, net $ 485
Inventories, net 649
Property and equipment,
net 123
Cost in excess of net
assets acquired 624
Accounts payable (580)
Accrued liabilities and
other (209)
------
Net purchase price $1,092
======
4
HATHAWAY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS AND FINANCIAL CONDITION
All statements contained herein that are not statements of historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that could
cause the actual results of the Company to be materially different from the
historical results or from any future results expressed or implied by such
forward-looking statements. Among the factors that could cause actual results
to differ materially are the following: the unavailability of sufficient capital
on satisfactory terms to finance the Company's business plan, increased
competition, the introduction of new technologies and competitors into the
systems and instrumentation markets where the Company competes, adverse changes
in the regulatory environment, and general business and economic conditions. In
addition to statements that explicitly describe such risks and uncertainties,
readers are urged to consider statements labeled with the terms "believes,"
"expects," "plans," "anticipates," or "intends" to be uncertain and forward-
looking. All cautionary statements made herein should be read as being
applicable to all related forward-looking statements wherever they appear. In
this connection, investors should consider the risks described herein.
Operating Results
- -----------------
For the first quarter ended September 30, 1997, the Company recognized a net
loss of $589,000 or $.14 per share, compared to a net loss of $375,000 or $.09
per share, for the same period last year. Revenues increased 8% in the first
quarter from $8,818,000 last year to $9,539,000 this year.
The 8% increase in revenues was due to a 5% increase in revenues from the
Company's power and process instrumentation products and a 16% increase in
revenues from the Company's motion control products. The increase in power and
process revenues was due to revenues generated by HIA in the first quarter of
fiscal year 1998 offset by an 8% decrease in traditional power and process
revenues.
Sales to international customers decreased from 39% to 31% of total revenues.
Excluding the effect of HIA, whose business is primarily with domestic
customers, traditional product sales to international customers represented 34%
of total revenues. The decrease in comparable international revenues (excluding
HIA) from last year was due primarily to lower international power and process
product sales.
Cost of products sold increased from 63% in the first quarter of fiscal 1997 to
66% in fiscal 1998 primarily because of the effect of HIA, whose cost of
products sold represents a higher percentage of revenues than that of the
Company's traditional product lines. Excluding the effect of HIA, the cost of
products sold in 1998 represents 64% of related revenues, a level reasonably
consistent with last year.
Selling, general and administrative, and engineering and development expenses
increased 7% in the first quarter from $3,821,000 last year to $4,088,000 in the
current year because of such expenses incurred by HIA. Excluding the effect of
HIA, these expenses would have totaled $3,547,000, a 7% decrease over comparable
expenses in the prior year, which reflects the cost savings generated from the
restructuring and cost reduction efforts initiated by the Company in fiscal 1996
and 1997.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity position as measured by cash and cash equivalents
(excluding restricted cash) increased $590,000 during the first quarter of
fiscal 1998 to a balance of $4,021,000 at September 30, 1997, compared to
$596,000 used in the first quarter in fiscal 1997. Operating activities
generated $839,000 in the first quarter of fiscal 1998 compared to $617,000 used
in the first quarter of fiscal 1997. The improved cash from operating
activities was primarily due to fluctuations in working capital balances.
Cash of $182,000 was used by investing activities in the first quarter of 1998,
compared to $103,000 generated by investing activities last year. The variance
was primarily due to the maturity of a long-term investment which was converted
into cash in the first quarter of fiscal 1997, as well as increased purchases of
property and equipment in fiscal 1998. Financing activities used reasonably
consistent amounts $51,000 and $89,000 in the first quarter of 1998 and 1997,
respectively.
5
HATHAWAY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS AND FINANCIAL CONDITION (CONTINUED)
The Company's remaining fiscal 1998 working capital, capital expenditure and
debt service requirements, including repayment of the entire balance of the
Midland loan, if necessary, are expected to be funded from the existing cash
balance of $4,021,000 at September 30, 1997. In addition, the Company may seek
additional debt, equity or other financing, particularly if it must fully repay
the Midland loan balance, in order to supplement its long-term financial
resources. There can be no assurance, however, that additional debt, equity or
other financing will be available on terms acceptable to the Company, or at all.
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
13. Annual Report containing Notes to Consolidated Financial
Statements in the Registrant's June 30, 1997 Annual Report to
Stockholders.
27. Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on August 21, 1997 to provide
investors with timely balance sheet and cash flow data for the year
ended June 30, 1997.
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.
HATHAWAY CORPORATION
DATE: November 14, 1997 By: /s/ Richard D. Smith
----------------------- -----------------------
Executive Vice President, Treasurer,
and Chief Financial and
Accounting Officer
6
5
1,000
3-MOS
JUN-30-1998
JUL-01-1997
SEP-30-1997
4,021
0
6,236
475
4,912
16,771
8,938
7,116
19,539
7,188
1,718
0
0
100
12,251
19,539
9,539
9,539
6,325
6,325
0
19
42
(853)
(264)
(589)
0
0
0
(589)
(0.14)
(0.14)
Presented gross
