-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HouSezgyVeSLnuCDqZJ/URM5f7JU8imonqA4uf9pfHjKU+/33a2LrHScG/nn+opz oD81NNBkoSU0FiRF1LkcPw== 0000070415-96-000043.txt : 19960814 0000070415-96-000043.hdr.sgml : 19960814 ACCESSION NUMBER: 0000070415-96-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: AMEX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL PATENT DEVELOPMENT CORP CENTRAL INDEX KEY: 0000070415 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 131926739 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07234 FILM NUMBER: 96611433 BUSINESS ADDRESS: STREET 1: 9 W 57TH ST STREET 2: SUITE 4170 CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2128268500 10-Q 1 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 quarter ended June 30, 1996 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: 1-7234 NATIONAL PATENT DEVELOPMENT CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 13-1926739 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9 West 57th Street, New York, NY 10019 (Address of principal executive offices) (Zip code) (212) 826-8500 (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 Number of shares outstanding of each of issuer's classes of common stock as of August 6, 1996: Common Stock 7,375,386 shares Class B Capital 62,500 shares NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS Page No. Part I. Financial Information Consolidated Condensed Balance Sheets - June 30, 1996 and December 31, 1995 1 Consolidated Condensed Statements of Operations - Three Months and Six Months Ended June 30, 1996 and 1995 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 4 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Qualification Relating to Financial Information 11 Part II. Other Information 12 Signatures 13 PART I. FINANCIAL INFORMATION NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) June 30, December 31, 1996 1995 ASSETS (unaudited) * Current assets Cash and cash equivalents $ 23,152 $ 8,094 Marketable securities 3,563 Accounts and other receivables 43,502 39,466 Inventories 20,604 20,444 Costs and estimated earnings in excess of billings on uncompleted contracts 9,425 9,118 Prepaid expenses and other current assets 3,591 3,640 Total current assets 100,274 84,325 Investments and advances 26,465 21,452 Property, plant and equipment, at cost 35,168 33,367 Less accumulated depreciation (25,793) (24,374) 9,375 8,993 Intangible assets, net of amortization 32,347 33,053 Other assets 3,645 3,897 $172,106 $151,720 * The Consolidated Condensed Balance Sheet as of December 31, 1995 has been summarized from the Company's audited Consolidated Balance Sheet as of that date. See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (in thousands) June 30, December 31, 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) * Current liabilities: Current maturities of long-term debt and notes payable $ 2,171 $ 4,167 Short-term borrowings 21,689 18,043 Accounts payable and accrued expenses 19,846 20,865 Billings in excess of costs and estimated earnings on uncompleted contracts 8,211 8,301 Total current liabilities 51,917 51,376 Long-term debt less current maturities 18,405 19,765 Minority interests and other 9,978 9,581 Stockholders' equity Common stock 73 68 Class B capital stock 1 1 Capital in excess of par value 129,511 125,419 Deficit (41,253) (52,139) Net unrealized gain (loss) on available-for-sale securities 4,385 (1,440) Minimum pension liability adjustment (911) (911) Total stockholders' equity 91,806 70,998 $172,106 $151,720 * The Consolidated Condensed Balance Sheet as of December 31, 1995 has been summarized from the Company's audited Consolidated Balance sheet as of that date. See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Three months Six months ended June 30, ended June 30, 1996 1995 1996 1995 Revenues Sales $ 51,048 $ 48,416 $ 99,204 $ 94,968 Investment and other income, net 344 812 2,089 678 Share of loss of an affiliate due to buy back of marketing rights (563) (563) 50,829 49,228 100,730 95,646 Costs and expenses Cost of goods sold 43,304 40,584 84,368 79,866 Selling, general & administrative 7,269 7,387 14,180 14,549 Interest 1,018 1,435 2,019 2,433 51,591 49,406 100,567 96,848 Minority interests (367) (204) (692) (504) Unrealized loss on investments (4,000) (4,000) Gain on disposition of stock of an affiliate 12,200 12,200 2,567 Gain on issuance of stock by an affiliate 1,938 1,938 Income (loss) before income taxes, discontinued operation and extraordinary item 9,009 (382) 9,609 861 Income tax benefit (expense) 1,794 (528) 1,277 (825) Income (loss) before discontinued operation and extraordinary item 10,803 (910) 10,886 36 Discontinued operation Loss from discontinued operation (412) (1,139) Income (loss) before extraordinary item 10,803 (1,322) 10,886 (1,103) Extraordinary item Extinguishment of debt (220) 8 Net income (loss) $10,803 $(1,542) $10,886 $(1,095) Income (loss) per share Income (loss) before discontinued operation and extraordinary item $ 1.43 (.14) $ 1.49 $ .01 Discontinued operation (.06) (.18) Extraordinary item (.03) Net income (loss) per share $ 1.43 $ (.23) $ 1.49 $ (.17) Dividends per share none none none none See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six months ended June 30, 1996 1995 Cash flows from operations: Net income (loss) $10,886 $(1,095) Adjustments to reconcile net income to net cash used for operating activities: Provision for discontinued operation 1,100 Depreciation and amortization 2,533 2,573 Gains from extinguishment of debt (8) Gain on disposition of stock of an affiliate (12,200) (2,567) Gain on issuance of stock by an affiliate (1,938) Unrealized loss on investments 4,000 Reduction in valuation allowance for deferred tax asset (2,386) Changes in other operating items (6,561) 277 Net cash (used for) provided by operations (5,666) 280 Cash flows from investing activities: Proceeds from sale of stock of an affiliate 17,700 5,000 Additions to property, plant & equipment (1,801) (1,803) Additions to intangible assets, net (408) (679) Reduction of (additions to) investments and other assets, net 1,360 (172) Net cash provided by investing activities 16,851 2,346 Cash flows from financing activities: Net proceeds from short-term borrowings 3,646 2,330 Proceeds from issuance of long-term debt 400 4,910 Reduction of long-term debt (2,732) (8,131) Exercise of common stock options and warrants 7 Proceeds from issuance of common stock 2,552 Net cash provided by (used for) financing activities 3,873 (891) Net increase in cash and cash equivalents 15,058 1,735 Cash and cash equivalents at the beginning of the periods 8,094 10,075 Cash and cash equivalents at the end of the periods $23,152 $11,810 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (in thousands) Six months ended June 30, 1996 1995 Supplemental disclosures of cash flow information: Cash paid during the periods for: Interest $ 2,274 $ 2,589 Income taxes $ 445 $ 479 See accompanying notes to the consolidated condensed financial statements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Inventories Inventories are valued at the lower of cost or market, principally using the first-in, first-out (FIFO) method. Inventories consisting of material, labor, and overhead are classified as follows (in thousands): June 30, December 31, 1996 1995 Raw materials $ 749 $ 580 Work in process 195 219 Finished goods 19,660 19,645 $20,604 $20,444 2. Long-term debt Long-term debt consists of the following (in thousands): June 30, December 31, 1996 1995 8% Swiss bonds due 1995 $ $ 247 8% Swiss bonds due 2000 2,301 2,365 Swiss convertible bonds 1,751 5% convertible bonds due 1999 1,700 2,249 12% Subordinated debentures due 1997 6,734 6,749 Term loans with banks 7,968 8,713 Other 1,873 1,858 20,576 23,932 Less current maturities 2,171 4,167 $18,405 $19,765 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company realized income before income taxes, discontinued operation and extraordinary item of $9,009,000 and $9,609,000 for the quarter and six months ended June 30, 1996, as compared with income (loss) of $(382,000) and $861,000 for the corresponding periods of 1995. The improvement in the Company's results before discontinued operation and extraordinary item is due to several factors. In April 1996, the Company sold 1,000,000 shares of the Company's GTS Duratek, Inc. (Duratek) common stock, realized proceeds of $17,700,000 and recognized a gain of $12,200,000. This gain was partially offset by a $4,000,000 loss recognized on the Company's investments in American White Cross, Inc. (AWC), due to AWC filing for protection under Chapter 11 of the United States Bankruptcy Code in July 1996. In addition, in April 1996, Interferon Sciences, Inc. (ISI), the Company's approximately 17% owned affiliate, issued additional shares of common stock, which resulted in the Company recognizing a gain of $1,938,000. For the quarter and six months ended June 30, 1996, the Company's share of loss of an affiliate (ISI) due to the buy back of certain marketing rights was $563,000. In January 1995, the Company realized a $2,567,000 gain on the sale of 1,666,667 shares of the Company's Duratek common stock. As a result of such transaction, the Company's ownership fell below 50% and commencing in January 1995, the Company accounted for its investment in Duratek on the equity basis. At June 30, 1996, the Company owns approximately 15% of the outstanding common stock of Duratek and currently accounts for its investment as a long-term available-for-sale equity security. Included in investment and other income, net for the quarter and six months ended June 30, 1996, is $80,000 of foreign currency transaction gain, compared to a loss of $(991,000) for the six months ended June 30, 1995. The Company had improved operating results within the Physical Science and Distribution Groups in 1996 partially offset by reduced operating profits within the Optical Plastics Group and at the Company's Hydro Med Sciences (HMS) division. In addition, for the six months ended June 30, 1996, the Company also achieved reduced interest expense at the corporate level, as a result of reduced long-term debt. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Sales For the quarter ended June 30, 1996, consolidated sales increased by $2,632,000 to $51,048,000 from the $48,416,000 recorded in the corresponding quarter of 1995. For the six months ended June 30, 1996, consolidated sales increased by $4,236,000 to $99,204,000 from $94,968,000 recorded for the six months ended June 30, 1995. The increased sales for the quarter and six months ended June 30, 1996, were the result of increased sales within the Distribution Group and Physical Science Group, partially offset by reduced sales within the Optical Plastics Group and by the Company's Hydro Med Sciences division (HMS). The increased sales within the Physical Science Group were the result of General Physics Corporation's (GP) expansion of managerial and technical training services in manufacturing and process industries, partially offset by reduced activity at commercial nuclear power utilities and U.S. Department of Energy facilities. The increased sales within the Distribution Group, which is comprised of the Five Star Group, Inc. (Five Star), were the result of sales generated by a major retail chain, which was not a customer of Five Star during the first nine months of 1995, as well as an overall increase in sales of hardware products. The reduced sales within the Optical Plastic Group were due to a slowdown by MXL Industries, Inc.'s (MXL) major customer as a result of the customer's decision to reduce its inventory level. The reduced sales within HMS were due to the timing of sales to two customers. Gross margin Consolidated gross margin of $7,744,000, or 15%, for the quarter ended June 30, 1996, decreased by $88,000 when compared to the consolidated gross margin of $7,832,000, or 16%, for the quarter ended June 30, 1995. For the six months ended June 30, 1996, consolidated gross margin of $14,836,000 or 15% of consolidated sales decreased by $266,000 when compared to $15,102,000 or 16% of consolidated sales earned in the six months ended June 30, 1995. These decreases were principally the result of decreased gross margin achieved by MXL and HMS as a result of reduced sales levels partially offset by increased gross margin generated by Five Star and GP, as a result of increased sales. In addition, Five Star and MXL achieved lower gross margin percentages due to a change in their customer mix. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Selling, general and administrative expenses For the quarter and six months ended June 30, 1996, selling, general and administrative expenses (SG&A) of $7,269,000 and $14,180,000 were $118,000 and $369,000 lower than the $7,387,000 and $14,549,000 of SG&A expenses incurred during the quarter and six months ended June 30, 1995. The decrease in SG&A for the quarter and six months ended June 30, 1996, was principally the result of efforts by GP and Five Star during 1995 to consolidate and streamline their organizations, which have been realized in the current periods. Interest expense For the quarter and six months ended June 30, 1996, interest expense was $1,018,000 and $2,019,000, compared to $1,435,000 and $2,433,000 for the second quarter and six months ended June 30, 1995. The decreased interest expense for the quarter and six months ended June 30, 1996, was the result of reduced long-term debt. Investment and other income, net Investment and other income, net of $344,000 and $2,089,000 for the quarter and six months ended June 30, 1996 decreased by $468,000 and increased $1,411,000, respectively, as compared to $812,000 and $678,000 for the corresponding periods of 1995. The change was principally due to an $80,000 foreign currency transaction gain recognized during the six months ended June 30, 1996, compared to a loss of $(991,000) for the six months ended June 30, 1995. Income tax expense For the quarter and six months ended June 30, 1996, the Company had an income tax benefit (expense) of $1,794,000 and $1,277,000, respectively, compared to $(528,000) and $(825,000) for the corresponding periods of 1995. The benefit recognized in 1996 is the result of the reduction of $2,386,000 in the valuation allowance for deferred tax assets due to management's assessment that it is more likely than not that the Company will realize the benefits of this amount of deferred tax assets, based upon unrealized gains on the Company's investments and other factors, offset by state and local taxes, as well as GP's Federal income tax expense. GP is not included in the Company's Federal income tax return. The expense in 1995 relates primarily to state and local taxes and GP's Federal income tax expense. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company had cash and cash equivalents totaling $23,152,000. GP, SGLG, Inc. and American Drug Company had cash and cash equivalents of $203,000 at June 30, 1996. The minority interests of these two companies are owned by the general public, and therefore the assets of these subsidiaries have been dedicated to the operations of these companies and may not be readily available for the general corporate purposes of the parent. In April 1996, the Company sold 1,000,000 shares of Duratek common stock, and realized net proceeds of $17,700,000. The Company currently owns approximately 1,846,000 shares of Duratek common stock. During the first quarter of 1996, the Company completed a private placement of its common stock, totaling approximately $2,300,000. The Company used the proceeds from this transaction to retire long-term debt, which was currently due. As a result of the above transactions, the Company has sufficient cash, cash equivalents and marketable securities and borrowing availability under existing and potential lines of credit to satisfy its cash requirements for the repayment of approximately $6,734,000 of 12% Subordinated Debentures scheduled to mature in 1997. In addition to its ability to issue equity securities, the Company believes that it has sufficient marketable long-term investments, the ability to obtain additional funds from its operating subsidiaries and the potential to enter into new credit arrangements in order to fund its working capital requirements. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES QUALIFICATION RELATING TO FINANCIAL INFORMATION June 30, 1996 The financial information included herein is unaudited. In addition, the financial information does not include all disclosures required under generally accepted accounting principles because certain note information included in the Company's Annual Report has been omitted; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods. The results for the 1996 interim period are not necessarily indicative of results to be expected for the entire year. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (b) At the Annual Meeting of Stockholders held on June 18, 1996, the following individuals were elected to serve as directors of the Company for a one-year term, with each individual nominee receiving the following votes from the Common Stock: Director Votes For Votes Withheld Jerome I. Feldman 4,799,621 103,334 Martin M. Pollak 4,801,321 101,634 Scott N. Greenberg 4,803,351 99,604 Ogden R. Reid 4,804,008 98,947 Dr. Roald Hoffmann 4,804,083 98,872 Paul A. Gould 4,804,083 98,872 Herbert R. Silverman 4,803,401 99,554 and each received 625,000 votes for and none withheld from the Class B Capital Stock. (c) The proposal to amend the Company's Restated Certificate of Incorporation to decrease the total number of authorized shares of Common Stock, Class B Capital Stock and Preferred Stock which the Company shall have authority to issue was withdrawn by the Board of Directors of the Company. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit I. - Copy of Notice and Proxy Statement for Annual Meeting of Shareholders held June 19, 1996, filed with the Securities and Exchange Commission pursuant to Section 14 of the Securities and Exchange Act of 1934 and incorporated herein by reference. (b) Reports on Form 8-K There were no reports on Form 8-K filed for the period ended June 30, 1996. NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES June 30, 1996 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. NATIONAL PATENT DEVELOPMENT CORPORATION DATE: August 13, 1996 BY: Scott N. Greenberg Vice President and Chief Financial Officer DATE: August 13, 1996 BY: Jerome I. Feldman President and Chief Executive Officer EX-27 2
5 0000070415 NATIONAL PATENT DEVELOPMENT CORPORATION 6-MOS DEC-31-1996 JAN-1-1996 JUN-30-1996 23,152 0 43,502 2,274 20,604 100,274 35,165 25,793 172,106 51,917 20,576 0 0 73 1 172,106 99,204 100,730 84,368 14,180 0 0 2,019 9,609 1,277 10,886 0 0 0 10,886 1.49 0
-----END PRIVACY-ENHANCED MESSAGE-----