x
|
Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
Nevada
|
88-0168936
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
7610
Miramar Road, Building 6000
San
Diego, California
|
92126
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(858) 549-6340
|
|
(Registrant’s
telephone number, including area
code)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
July 31,
2009
|
October 31,
2008
|
|||||||
(Note 1)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 2,492,045 | $ | 1,060,838 | ||||
Certificates
of deposit
|
4,502,074 | 6,315,864 | ||||||
Investments
in available-for-sale securities
|
- | 547,847 | ||||||
Trade
accounts receivable, net of allowance for doubtful accounts of $60,497 and
$46,775
|
1,867,253 | 2,071,349 | ||||||
Inventories
|
5,299,080 | 5,949,708 | ||||||
Other
current assets
|
509,048 | 217,443 | ||||||
Income
tax receivable
|
96,806 | - | ||||||
Deferred
tax assets
|
542,100 | 542,100 | ||||||
TOTAL
CURRENT ASSETS
|
15,308,406 | 16,705,149 | ||||||
Equipment
and furnishings:
|
||||||||
Equipment
and tooling
|
2,341,455 | 2,205,525 | ||||||
Furniture
and office equipment
|
390,106 | 377,286 | ||||||
2,731,561 | 2,582,811 | |||||||
Less
accumulated depreciation
|
2,185,930 | 2,016,951 | ||||||
TOTALS
|
545,631 | 565,860 | ||||||
Goodwill
|
137,328 | 347,091 | ||||||
Amortizable
intangible assets, net
|
33,945 | 54,311 | ||||||
Note
receivable from stockholder
|
66,980 | 66,980 | ||||||
Other
assets
|
28,776 | 28,382 | ||||||
TOTAL
ASSETS
|
$ | 16,121,066 | $ | 17,767,773 |
July 31,
2009
|
October 31,
2008
|
|||||||
(Note
1)
|
||||||||
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 234,180 | $ | 329,509 | ||||
Accrued
expenses
|
542,701 | 760,762 | ||||||
Income
taxes payable
|
- | 232,927 | ||||||
TOTAL
CURRENT LIABILITIES
|
776,881 | 1,323,198 | ||||||
Deferred
tax liabilities
|
105,700 | 105,700 | ||||||
Other
long-term liabilities
|
274,231 | 217,185 | ||||||
TOTAL
LIABILITIES
|
1,156,812 | 1,646,083 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Common
stock - authorized 10,000,000 shares of $0.01 par value; 2,849,253 and
3,226,264 shares issued and outstanding
|
28,493 | 32,263 | ||||||
Additional
paid-in capital
|
6,474,262 | 6,411,810 | ||||||
Retained
earnings
|
8,461,499 | 9,677,617 | ||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
14,964,254 | 16,121,690 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 16,121,066 | $ | 17,767,773 |
Three Months Ended July 31,
|
Nine Months Ended July 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
sales
|
$ | 3,294,290 | $ | 4,667,638 | $ | 10,401,589 | $ | 13,002,083 | ||||||||
Cost
of sales
|
1,670,358 | 2,351,721 | 5,409,304 | 6,454,478 | ||||||||||||
Gross
profit
|
1,623,932 | 2,315,917 | 4,992,285 | 6,547,605 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Engineering
|
255,682 | 278,600 | 805,921 | 775,463 | ||||||||||||
Selling
and general
|
1,339,847 | 1,381,549 | 3,736,126 | 4,043,177 | ||||||||||||
Totals
|
1,595,529 | 1,660,149 | 4,542,047 | 4,818,640 | ||||||||||||
Operating
income
|
28,403 | 655,768 | 450,238 | 1,728,965 | ||||||||||||
Other
income - interest
|
22,764 | 40,768 | 148,877 | 178,811 | ||||||||||||
Income
before provision for income taxes
|
51,167 | 696,536 | 599,115 | 1,907,776 | ||||||||||||
Provision
for income taxes
|
40,590 | 296,824 | 211,485 | 794,071 | ||||||||||||
Net
income
|
$ | 10,577 | $ | 399,712 | $ | 387,630 | $ | 1,113,705 | ||||||||
Basic
earnings per share
|
$ | 0.00 | $ | 0.12 | $ | 0.13 | $ | 0.34 | ||||||||
Diluted
earnings per share
|
$ | 0.00 | $ | 0.11 | $ | 0.12 | $ | 0.30 | ||||||||
Basic
weighted average shares outstanding
|
2,869,928 | 3,298,345 | 2,985,083 | 3,294,219 | ||||||||||||
Diluted
weighted average shares outstanding
|
3,161,904 | 3,741,111 | 3,278,509 | 3,720,346 | ||||||||||||
Dividends
paid
|
$ | 0 | $ | 98,723 | $ | 94,780 | $ | 295,183 |
2009
|
2008
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
income
|
$ | 387,630 | $ | 1,113,705 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Bad
debt expense adjustment
|
13,722 | (3,615 | ) | |||||
Depreciation
and amortization
|
194,171 | 152,751 | ||||||
Goodwill
impairment
|
209,763 | |||||||
Loss
on disposal of equipment
|
4,827 | |||||||
Deferred
income taxes
|
(9,900 | ) | ||||||
Stock-based
compensation expense
|
124,786 | 405,073 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
accounts receivable
|
190,374 | (104,356 | ) | |||||
Inventories
|
650,628 | (1,134,924 | ) | |||||
Income
taxes payable/receivable
|
(329,733 | ) | (225,127 | ) | ||||
Other
current assets
|
(291,605 | ) | (52,402 | ) | ||||
Other
long-term assets
|
(394 | ) | ||||||
Accounts
payable
|
(95,329 | ) | 50,234 | |||||
Accrued
expenses
|
(183,983 | ) | 516,956 | |||||
Other
long-term liabilities
|
57,046 | 16,207 | ||||||
Net
cash provided by operating activities
|
931,903 | 724,602 | ||||||
INVESTING
ACTIVITIES:
|
||||||||
Purchases
of short-term investments and certificates of deposit
|
(2,117,184 | ) | (8,691,635 | ) | ||||
Proceeds
from sales of short-term investments and certificates of
deposit
|
4,478,821 | 6,821,000 | ||||||
Capital
expenditures
|
(158,403 | ) | (251,528 | ) | ||||
Net
cash provided by (used in) investing activities
|
2,203,234 | (2,122,163 | ) | |||||
FINANCING
ACTIVITIES:
|
||||||||
Proceeds
from exercise of stock options
|
114,305 | |||||||
Purchases
of treasury stock
|
(1,609,150 | ) | ||||||
Dividends
paid
|
(94,780 | ) | (295,183 | ) | ||||
Net
cash used in financing activities
|
(1,703,930 | ) | (180,878 | ) | ||||
Net
increase (decrease) in cash and cash equivalents
|
1,431,207 | (1,578,439 | ) | |||||
Cash
and cash equivalents, beginning of period
|
1,060,838 | 3,400,566 | ||||||
Cash
and cash equivalents, end of period
|
$ | 2,492,045 | $ | 1,822,127 | ||||
Supplemental
cash flow information:
|
||||||||
Income
taxes paid
|
$ | 550,000 | $ | 1,033,000 | ||||
Retirement
of treasury stock
|
$ | 1,609,151 | ||||||
Stock
issuance related to contingent liability
|
$ | 30,000 |
July 31,
2009
|
October 31,
2008
|
|||||||
Raw
materials and supplies
|
$ | 1,409,105 | $ | 1,496,364 | ||||
Work
in process
|
18,450 | 31,131 | ||||||
Finished
goods
|
3,914,577 | 4,502,890 | ||||||
Inventory
reserve
|
(43,052 | ) | (80,677 | ) | ||||
Totals
|
$ | 5,299,080 | $ | 5,949,708 |
Three Months Ended July 31
|
Nine Months Ended July 31
|
||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||
Weighted
average shares outstanding for basic net earnings per
share
|
2,869,928
|
3,298,345
|
2,985,083
|
3,294,219
|
|||||||
Add
effects of potentially dilutive securities-assumed exercise of stock
options
|
291,976
|
442,766
|
293,426
|
426,127
|
|||||||
Weighted
average shares for diluted net earnings per share
|
3,161,904
|
3,741,111
|
3,278,509
|
3,720,346
|
2009
|
||||
Risk-free
interest rate
|
1.01%-
2.85%
|
|||
Dividend
yield
|
0%-
2.96%
|
|||
Expected
life of the option
|
2.5
- 5 years
|
|||
Volatility
factor
|
53.65%-60.37%
|
Shares
|
Weighted
Average Exercise
Price
|
Weighted Average
Remaining
Contractual Term
|
Aggregate
Intrinsic
Value
|
||||||||
Outstanding
at November 1, 2008
|
1,067,041
|
$
|
3.77
|
||||||||
Options
granted
|
26,000
|
4.01
|
|||||||||
Options
exercised
|
-
|
-
|
|||||||||
Options
canceled or expired
|
(28,690)
|
6.17
|
|||||||||
Options
outstanding at July 31, 2009
|
1,064,351
|
$
|
3.71
|
4.93 years
|
$
|
1,649,046
|
|||||
Options
exercisable at July 31, 2009
|
858,168
|
$
|
3.73
|
5.19 years
|
$
|
1,466,546
|
Three Months Ended July 31,
|
Nine Months Ended July 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
United
States
|
$ | 2,890,715 | $ | 3,895,678 | $ | 8,622,873 | $ | 11,204,414 | ||||||||
Foreign
countries:
|
||||||||||||||||
Israel
|
179,455 | 299,291 | 865,173 | 672,497 | ||||||||||||
All
other
|
224,120 | 472,669 | 913,543 | 1,125,172 | ||||||||||||
$ | 3,294,290 | $ | 4,667,638 | $ | 10,401,589 | $ | 13,002,083 |
2009
|
RF Connectors
and
Cable Assembly
|
Medical
Cabling and
Interconnector
|
RF
Wireless
|
Corporate
|
Total
|
|||||||||||||||
Net
sales
|
$
|
2,765,914
|
$
|
347,473
|
$
|
180,903
|
$
|
3,294,290
|
||||||||||||
Income
(loss) before provision for income taxes
|
313,462
|
46,528
|
(331,586)
|
$
|
22,763
|
51,167
|
||||||||||||||
Depreciation,
amortization and impairment
|
114,571
|
3,388
|
153,215
|
271,174
|
||||||||||||||||
2008
|
||||||||||||||||||||
Net
sales
|
$
|
3,697,842
|
$
|
542,243
|
$
|
427,553
|
$
|
4,667,638
|
||||||||||||
Income
(loss) before provision for income taxes
|
604,935
|
109,858
|
(59,025)
|
$
|
40,768
|
696,536
|
||||||||||||||
Depreciation
and amortization
|
1,482
|
4,988
|
7,878
|
14,348
|
2009
|
RF Connectors
and
Cable Assembly
|
Medical
Cabling and
Interconnector
|
RF
Wireless
|
Corporate
|
Total
|
|||||||||||||||
Net
sales
|
$
|
8,831,013
|
$
|
924,044
|
$
|
646,532
|
$
|
10,401,589
|
||||||||||||
Income
(loss) before provision for income taxes
|
1,057,046
|
12,772
|
(619,579)
|
$
|
148,876
|
599,115
|
||||||||||||||
Depreciation,
amortization and impairment
|
221,320
|
10,683
|
171,931
|
403,934
|
||||||||||||||||
2008
|
||||||||||||||||||||
Net
sales
|
$
|
10,305,670
|
$
|
1,173,209
|
$
|
1,523,204
|
$
|
13,002,083
|
||||||||||||
Income
(loss) before provision for income taxes
|
1,456,121
|
188,852
|
84,002
|
$
|
178,801
|
1,907,776
|
||||||||||||||
Depreciation
and amortization
|
111,614
|
17,905
|
23,232
|
152,751
|
|
July 31,
2009
|
October 31,
2008
|
||||||
Intangible
assets
|
||||||||
Non-compete
agreement
|
$
|
120,000
|
$
|
120,000
|
||||
Accumulated amortization
|
(120,000
|
)
|
(120,000
|
)
|
||||
—
|
—
|
|||||||
Software
|
47,522
|
47,522
|
||||||
Accumulated
amortization
|
(27,721
|
)
|
(15,841
|
)
|
||||
19,801
|
31,681
|
|||||||
Customer
List
|
33,945
|
33,945
|
||||||
Accumulated amortization
|
(19,801
|
)
|
(11,315
|
)
|
||||
14,144
|
22,630
|
|||||||
Totals
|
$
|
33,945
|
$
|
54,311
|
•
|
Income
Approach: To
determine its estimated fair value, we discount the expected cash flows of
our reporting units. We estimate our future cash flows after considering
current economic conditions and trends; estimated future operating
results, our views of growth rates, anticipated future economic and
regulatory conditions; and the availability of necessary technology. The
discount rate used represents the estimated weighted average cost of
capital, which reflects the overall level of inherent risk involved in our
operations and the rate of return an outside investor would expect to
earn. To estimate cash flows beyond the final year of our model, we use a
terminal value approach. Under this approach, we use estimated operating
income before depreciation and amortization in the final year of our
model, adjust it to estimate a normalized cash flow, apply a perpetuity
growth assumption and discount by a perpetuity discount factor to
determine the terminal value. We incorporate the present value of the
resulting terminal value into our estimate of fair
value.
|
·
|
As of July 31, 2009, the amount
of cash and cash equivalents was equal to $2,492,045 in the aggregate and
the Company had $4,502,074 of investments in certificates of
deposit.
|
·
|
As of July 31, 2009, the Company
had $15,308,406 in current assets, and $776,881 in current
liabilities.
|
·
|
As of July 31, 2009, the Company
had no current or long-term outstanding indebtedness (other than accounts
payable and accrued
expenses).
|
Period:
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
of Programs
|
Approximate
Dollar Value of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs
|
|||||
May
1, 2009 through May 31, 2009
|
24,480
|
$
|
3.75
|
24,480
|
$
|
0
|
|||||
June
1, 2009 through June 30, 2009
|
13,641
|
|
$
|
4.03
|
13,641
|
$
|
0
|
||||
July
1, 2009 through July 31, 2009
|
11,565
|
$
|
4.07
|
11,565
|
$
|
0
|
|||||
Totals
|
49,686
|
49,686
|
|||||||||
(1) |
The
shareholders voted for six directors, each to serve for a term of one year
and until his successor is elected. Each nominee received the
following votes:
|
(1) Name
of Nominee
|
Votes
For
|
Votes
Withheld
|
||||||
John
R. Ehret
|
1,984,058 | 89,578 | ||||||
Marvin
H. Fink
|
1,932,558 | 141,078 | ||||||
Howard
F. Hill
|
1,809,217 | 264,419 | ||||||
Robert
Jacobs
|
1,755,117 | 318,519 | ||||||
Linde
Kester
|
1,984,058 | 89,578 | ||||||
William
L. Reynolds
|
1,984,058 | 89,578 |
(2) | To ratify the selection of J.H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending October 31, 2009. Votes cast were as follows: |
For
|
Against
|
Abstain
|
1,952,451
|
96,850
|
24,335
|
Exhibit
|
||
Number
|
||
31.1:
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2:
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1:
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2:
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
99.1
|
Press release, dated September 14, 2009. |
RF
INDUSTRIES, LTD.
|
||
Dated:
September 14 , 2009
|
By:
|
/s/
Howard F. Hill
|
Howard
F. Hill, President
|
||
Chief
Executive Officer
|
Dated:
September 14 , 2009
|
By:
|
/s/
James Doss
|
James
Doss
|
||
Chief
Financial Officer
|