-----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, Mo64Ru4U/TLydri9LdbFJeBHSdvtFy/ANZ36MredB5J/czdar0rPLfD4y9qtQnel zMvfhp+YJyWnt9UpsxJHTw== 0000070415-97-000031.txt : 19970515 0000070415-97-000031.hdr.sgml : 19970515 ACCESSION NUMBER: 0000070415-97-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97605721 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 March 31, 1997 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 May 9, 1997: Common Stock 10,640,020 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 - March 31, 1997 and December 31, 1996 1 Consolidated Condensed Statements of Operations- Three Months Ended March 31, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996 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 12 Part II. Other Information 13 Signatures 14 PART I. FINANCIAL INFORMATION NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) March 31, December 31, 1997 1996 ASSETS (audited) * Current assets Cash and cash equivalents $ 19,730 $ 22,677 Marketable securities 1,375 3,250 Accounts and other receivables 45,759 40,633 Inventories 26,158 23,193 Costs and estimated earnings in excess of billings on uncompleted contracts 9,722 9,466 Prepaid expenses and other current assets 3,608 3,462 -------- --------- Total current assets 106,352 102,681 -------- -------- Investments and advances 23,667 25,108 -------- --------- Property, plant and equipment, at cost 36,657 36,045 Less accumulated depreciation (27,540) (26,767) -------- --------- 9,117 9,278 -------- --------- Intangible assets, net of accumulated amortization of $30,095 and $29,577 54,318 34,476 -------- --------- Deferred tax asset 1,701 843 -------- --------- Other assets 3,619 3,641 -------- --------- $198,774 $176,027 ======== ======== * The Consolidated Condensed Balance Sheet as of December 31, 1996 has been summarized from the Company's audited Consolidated Balance Sheet as of that date. See accompanying notes to the consolidated condensed financial statements. 1 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (in thousands) March 31, December 31, 1997 1996 LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) * Current liabilities Current maturities of long-term debt and notes payable 7,041 $ 9,309 Short-term borrowings 32,816 20,281 Accounts payable and accrued expenses 27,103 22,879 Billings in excess of costs and estimated earnings on uncompleted contracts 8,041 8,521 -------- --------- Total current liabilities 75,001 60,990 -------- --------- Long-term debt less current maturities 5,795 10,807 -------- -------- Minority interests and other 2 10,201 -------- -------- Stockholders' equity Common stock 105 75 Class B capital stock 1 1 Capital in excess of par value 157,083 131,388 Deficit (41,745) (40,759) Net unrealized gain on available- for-sale securities 2,532 3,324 -------- ----------- Total stockholders' equity 117,976 94,029 -------- --------- $198,774 $176,027 ======== ======== * The Consolidated Condensed Balance Sheet as of December 31, 1996 has been summarized from the Company's audited Consolidated Balance sheet as of that date. See accompanying notes to the consolidated condensed financial statements. 2 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Three months ended March 31, 1997 1996 Sales $ 54,760 $ 48,156 Costs of goods sold 46,544 41,064 --------- -------- Gross margin 8,216 7,092 Selling, general and administrative expenses (7,411) (6,911) --------- --------- Operating income 805 181 --------- ---------- Interest (998) (1,001) Investment and other income, net 773 1,245 Gain (loss) on trading securities (1,875) 500 Minority interest 25 (325) ----------- ---------- Income (loss) before income taxes (1,270) 600 Income tax benefit (expense) 284 (517) ---------- ---------- Net income (loss) $ (986) $ 83 --------- ---------- Net income (loss) per share $ (.10) $ .01 --------- ---------- Dividends per share none none ======= ====== See accompanying notes to the consolidated condensed financial statements. 3 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three months ended March 31, 1997 1996 ----------- ------- Cash flows from operations: Net income (loss) $ (986) $ 83 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 1,291 1,469 Unrealized loss (gain) on trading securities 1,875 (500) Deferred income taxes (400) Changes in other operating items (7,657) (3,865) -------- --------- Net cash used for operations (5,877) (2,813) -------- --------- Cash flows from investing activities: Additions to property, plant and equipment (612) (1,070) Additions to intangible assets (2,270) (159) Reduction in investments and other assets, net 284 22 -------- --------- Net cash used for investing activities (2,598) (1,207) -------- -------- Cash flows from financing activities: Net proceeds from short-term borrowings 6,060 2,124 Proceeds from issuance of long-term debt 400 Reduction of long-term debt (532) (2,143) Proceeds from issuance of common stock 2,533 -------- --------- Net cash provided by financing activities 5,528 2,914 -------- -------- 4 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (in thousands) Three months ended March 31, 1997 1996 Net decrease in cash and cash equivalents $ (2,947) $ (1,106) Cash and cash equivalents at the beginning of the periods 22,677 8,094 --------- -------- Cash and cash equivalents at the end of the periods $ 19,730 $ 6,988 --------- -------- Supplemental disclosures of cash flow information: Cash paid during the periods for: Interest $ 1,147 $ 1,122 ======== ======== Income taxes $ 498 $ 155 ========= ========= Supplemental schedule of non-cash transactions: Issuance of common stock related to the acquisition of General Physic Corporation $(25,228) Additions to intangible assets 15,154 Reduction of minority interest 10,074 See accompanying notes to the consolidated condensed financial statements. 5 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): March 31, December 31, 1997 1996 Raw materials $ 752 $ 793 Work in process 293 210 Finished goods 25,113 22,190 --------- -------- $ 26,158 $ 23,193 ======== ======== 2. Long-term debt Long-term debt consists of the following (in thousands): March 31, December 31, 1997 1996 8% Swiss bonds due 2000 $ 2,026 $ 2,189 5% convertible bonds due 1999 1,775 1,755 12% Subordinated debentures 6,711 6,732 Term loans with banks 6,722 7% convertible note 1,000 1,000 Other 1,324 1,718 --------- --------- 12,836 20,116 Less current maturities 7,041 9,309 --------- --------- $ 5,795 $ 10,807 ======== ======== 6 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. Revolving credit agreement On March 26, 1997, the Company and its wholly-owned subsidiaries, GP and MXL Industries, Inc. (MXL), entered into a three year secured $25,000,000 Revolving Credit Agreement, with a syndicate of three banks. The Agreement replaces the MXL Loan Agreement, the GP Revolving Credit Agreement and the Company's Term Loan Agreement. The Agreement bears interest at the prime rate or 1.75% over LIBOR. The borrowing formula is based upon eligible accounts receivable of GP and MXL, as well as various corporate assets. Under the Agreement, the full $25,000,000 of the Revolving Credit Agreement would be available to the Company and/or GP and/or MXL. At March 31,1997, the amount outstanding was approximately $13,815,000. 4. General Physics Corporation On January 24, 1997, the Company acquired the remaining 5,047,623 shares (48% of the outstanding shares) of GP that it did not already own, in exchange for .60 shares of National Patent common stock for each share of GP. The transaction has been accounted for as a purchase of a minority interest. The Company issued an aggregate of 3,028,574 shares of its common stock, valued at $25,228,000 in the transaction. The value of the Company's common stock issued in this transaction has been reflected in Stockholders' equity as an increase to Common stock and Capital in excess of par value. GP provides engineering, environmental, training, analytical, and technical support services to commercial nuclear and fossil power utilities, the U.S. Departments of Defense and Energy, Fortune 500 companies, and other commercial and governmental customers. 5. Subsequent event On May 9, 1997, the Company announced that its Board of Directors had authorized the purchase of up to approximately 7% or 750,000 shares of the Company's common stock. 7 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company had a loss before income taxes of $(1,270,000) for the quarter ended March 31, 1997 compared to income of $600,000 for the quarter ended March 31, 1996. The reduced operating results were primarily the result of a $1,875,000 unrealized loss on certain trading marketable securities (GTS Duratek, Inc.) in the first quarter of 1997 compared to a $500,000 gain in 1996. In addition, included in Investment and other income, net was a $225,000 loss recognized on the Company's equity investments for the quarter ended March 31, 1997 compared to income of $325,000 recognized for the quarter ended March 31, 1996. The losses on the Company's investments were partially offset by improved operating results within the Physical Science Group, Distribution Group and the Optical Plastics Group partially mitigated by reduced operating profits within the Company's Hydro Med Sciences (HMS) division. Sales For the quarter ended March 31, 1997, consolidated sales increased by $6,604,000 to $54,760,000 from the $48,156,000 in the corresponding quarter of 1996. The increased sales were the result of increased sales within the Distribution Group and Physical Science Group. The increased sales within the Physical Science Group were the result of increased revenues within General Physics Corporation's (GP) Commercial Training and Technical Services Group. The increased sales within the Distribution Group, which is comprised of the Five Star Group, Inc. (Five Star), were the result of significant growth in sales to independent retail stores, primarily as a result of the expansion of Five Star's hardware lines. 8 Gross margin Consolidated gross margin of $8,216,000, or 15%, for the quarter ended March 31, 1997, increased by $1,124,000 compared to the consolidated gross margin of $7,092,000, or 15%, for the quarter ended March 31, 1996. The increased gross margin in 1997 was principally the result of increased gross margin generated by Five Star and GP due to increased sales. Selling, general and administrative expenses For the three months ended March 31, 1997, selling, general and administrative (SG&A) expenses were $7,411,000 compared to the $6,911,000 incurred in the first quarter of 1996. The increase in SG&A for the first quarter of 1997 was the result of increased selling expenses incurred by Five Star during 1997 as a result of increased sales. Investment and other income (expense), net Investment and other income was $773,000 for the quarter ended March 31, 1997, as compared to $1,245,000 for the first quarter of 1996. The change was principally due to the effect of a $225,000 loss recognized on the Company's equity investments in the quarter ended March 31, 1997 compared to income of $325,000 recognized in the quarter ended March 31, 1996. Income tax expense In the quarter ended March 31, 1997, the Company recorded an income tax benefit of $284,000. The current income tax provision of $116,000 represents primarily state and local income taxes. The deferred income tax benefit of $400,000 results from a reduction in the valuation allowance, among other factors. The decrease in the valuation allowance in 1997 was attributable in part to the expected utilization of the Company's net operating loss carryforwards, and to the Company's expectation of generating sufficient taxable income that will allow for the realization of a portion of its deferred tax assets. 9 Recent accounting pronouncement In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128), was issued. SFAS No. 128 simplifies the standards for computing earnings per share, and makes the United States standards for computing earnings per share more comparable to international standards. SFAS No. 128 requires presentation of "basic" earnings per share (which excludes dilution) and "diluted" earnings per share. The Company does not believe the adoption of SFAS No. 128 in fiscal 1997 will have a material impact on the Company's reported earnings per share. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement of all prior period earnings per share presented. Forward-Looking Statements. This report contains certain forward-looking statements reflecting management's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to the Company's ability to reverse its history of operating losses; the Company's dependence on its subsidiaries and its investments as its primary source to service outstanding debt and to fund its operations; and the Company's ability to comply with financial covenants in connection with various loan agreements. 10 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company had cash and cash equivalents totaling $19,730,000. SGLG and American Drug Company had cash and cash equivalents of $295,000 at March 31, 1997. 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. 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 $6,711,000 of 12% Subordinated Debentures scheduled to mature in the third quarter of 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. At March 31, 1997, 250,000 shares of Duratek stock valued at $1,375,000 were classified as marketable securities due to the Company's intention to sell the shares in 1997. 11 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES QUALIFICATION RELATING TO FINANCIAL INFORMATION March 31, 1997 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 for a fair statement of the results for the interim periods. The results for the 1997 interim period are not necessarily indicative of results to be expected for the entire year. 12 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At a Special Meeting of the Stockholders held on January 23, 1997, the following matters were voted upon: Proposal to approve and adopt an Agreement and Plan of Merger, dated as of November 19, 1996, among General Physics Corporation, National Patent and GPX Acquisition Inc., a wholly-owned subsidiary of National Patent , as amended by Amendment No. 1, dated as of December 18, 1996 was adopted with a vote of 7,218,150 for, and 126,419 votes against the adoption of this proposal. Proposal to approve and adopt an amendment to the Restated Certificate of Incorporation of the Registrant decreasing the total number of authorized shares of the Registrant's Common Stock from 40,000,000 shares to 25,000,000 shares was adopted with a vote of 6,593,150 for and 76,345 votes against. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits none B. Reports Form 8-K filed on January 28, 1997 reporting events under Items 2 and 7. 13 NATIONAL PATENT DEVELOPMENT CORPORATION AND SUBSIDIARIES March 31, 1997 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: May 13, 1997 Jerome I. Feldman President & Chief Executive Officer DATE: May 13, 1997 Scott N. Greenberg Vice President & Chief Financial Officer EX-27 2
5 0000070415 NATIONAL PATENT DEVELOPMENT CORPORATION 3-MOS DEC-31-1997 MAR-31-1997 19,730 1,375 45,759 1,712 26,158 106,352 36,657 (27,540) 198,774 75,001 0 0 0 105 117,871 198,774 54,760 55,533 46,554 7,411 0 0 998 (1,270) 284 (986) 0 0 0 (986) .10 .10
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