-----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, TndPdRg2OmVNfJ2gAuTpI8szY1i8CcHYRqiLdUWgPAOeU8FZkX/BTd0XCeWFvEjd AeP6Qs7PLO5qZzkeDjCzmQ== 0000898432-95-000356.txt : 19951106 0000898432-95-000356.hdr.sgml : 19951106 ACCESSION NUMBER: 0000898432-95-000356 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951030 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL TRAINING CORP CENTRAL INDEX KEY: 0000764867 STANDARD INDUSTRIAL CLASSIFICATION: 7812 IRS NUMBER: 521078263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13741 FILM NUMBER: 95585428 BUSINESS ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DR CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7037133335 MAIL ADDRESS: STREET 1: 13515 DULLES TECHNOLOGY DRIVE CITY: HERNDON STATE: VA ZIP: 22071 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Quarter ended September 30, 1995 Commission File Number 0-13741 INDUSTRIAL TRAINING CORPORATION ------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-1078263 -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 13515 Dulles Technology Drive, Herndon, Virginia 22071 ------------------------------------------------------ (Address of principal executive offices and zip code) Registrant's telephone number (703)713-3335 (including area code) COMMON STOCK ------------ 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 ____ -------- As of October 25, 1995, 3,355,088 shares of Common Stock were outstanding. Table of Contents Part I Page ------ ---- Item 1 Financial Statements (Unaudited) Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 1995 and 1994 1 Condensed Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 2 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994 4 Notes to Condensed Consolidated Financial Statements 5 Item 2 Management's Discussion and Analysis or Plan of Operation 7 Part II ------- Item 1 Legal Proceedings 10 Item 2 Changes in Securities 10 Item 3 Defaults Upon Senior Securities 10 Item 4 Submission of Matters to a Vote of Security Holders 10 Item 5 Other Information 10 Item 6 Exhibits and Reports on Form 8-K 10 10-QSB 2 ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 1995 1994 1995 1994 ---- ---- ---- ---- Net revenues $ 6,038,329 $ 5,428,468 $ 17,293,961 $ 14,792,110 Cost of sales 3,505,498 3,487,607 9,957,906 9,072,561 --------- --------- ---------- ---------- Gross profit 2,532,831 1,940,861 7,336,055 5,719,549 Selling, general, and administrative expenses 1,786,161 1,527,418 5,380,882 4,617,964 Equity earnings of affiliates (65,644) (68,372) (143,605) (138,529) Interest expense, net 26,661 46,437 80,961 134,263 --------- --------- --------- --------- 1,747,178 1,505,483 5,318,238 4,613,698 --------- --------- --------- --------- Earnings before income taxes 785,653 435,378 2,017,817 1,105,851 Income taxes 322,000 173,136 827,000 441,978 --------- --------- --------- --------- Net earnings $ 463,653 $ 262,242 $ 1,190,817 $ 663,873 ========= ========= ========= ========= Earnings per common share $ 0.18 $ 0.11 $ 0.46 $ 0.28 ==== ==== ==== ==== Weighted average number of shares outstanding 2,641,228 2,403,587 2,597,335 2,413,207 ========= ========= ========= ========= See accompanying Notes to Condensed Consolidated Financial Statements.
10-QSB 3
INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS September 30, December 31, 1995 1994 ---- ---- (Unaudited) Current assets: Cash $ 1,779,359 $ 439,923 Accounts receivable, net (Note 2) 5,621,919 7,293,477 Stock proceeds receivable (Note 6) 7,934,063 Due from affiliates 47,492 86,111 Inventories, net 732,352 1,203,876 Prepaid expenses 278,360 118,446 --------- --------- Total current assets 16,393,545 9,141,833 Property and equipment: Video and computer equipment 2,807,535 2,366,661 Furniture and fixtures 1,037,204 1,032,563 Leasehold improvements 93,106 89,106 Videotape masters 144,180 144,180 --------- --------- 4,082,025 3,632,510 Less accumulated depreciation and amortization (2,942,703) (2,507,393) ----------- ----------- Net property and equipment 1,139,322 1,125,117 Deferred program development costs, net (Note 5) 5,536,859 4,358,315 Goodwill 2,061,376 2,185,126 Investments in affiliates 187,152 245,887 Other 73,306 73,769 ---------- ---------- $ 25,391,560 $ 17,130,047 ========== ========== See accompanying Notes to Condensed Consolidated Financial Statements.
10-QSB 4
INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31, 1995 1994 ---- ---- (Unaudited) Current liabilities: Note payable to bank (Note 3) $ $ 80,000 Current installments of long-term debt (Note 6) 561,175 328,637 Accounts payable 1,125,415 2,112,271 Due to affiliates 197,900 419,895 Accrued expenses: Compensation and benefits payable 533,122 942,215 Deferred revenue 232,798 77,648 Other accrued expenses payable 520,889 1,086,571 Income taxes payable 340,000 --------- --------- Total current liabilities 3,511,299 5,047,237 Deferred lease obligations 108,295 119,316 Deferred income taxes (Note 4) 1,233,340 1,136,522 Long-term debt, excluding current installments (Note 6) 1,473,098 772,826 --------- --------- Total liabilities 6,326,032 7,075,901 Stockholders' equity: Common stock, $0.10 par value, 4,000,000 shares authorized; 3,378,828 and 2,466,828 issued in 1995 and 1994, respectively (Note 6) 337,883 246,683 Additional paid-in capital (Note 6) 13,346,222 5,698,147 Note receivable from ESOP (277,177) (358,177) Retained earnings 5,719,764 4,528,947 ---------- ---------- 19,126,692 10,115,600 Treasury stock, at cost, 17,404 and 18,004 shares at September 30, 1995 and December 31, 1994, respectively (61,164) (61,454) ---------- ---------- Total stockholders' equity 19,065,528 10,054,146 ---------- ---------- $ 25,391,560 $ 17,130,047 ========== ========== See accompanying Notes to Condensed Consolidated Financial Statements.
10-QSB 5
INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended September 30, 1995 1994 ---- ---- Cash Flows From Operating Activities: Net earnings $ 1,190,817 $ 663,873 Reconciling items: Provision for deferred taxes 96,818 430,596 Depreciation and amortization 2,174,441 1,328,716 Increase in reserve for doubtful accounts 75,000 Salesperson award of treasury shares 1,650 Loss on disposal of fixed asset 35,726 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 1,596,558 (202,407) Decrease (increase) in inventories 471,524 (109,341) Increase in prepaid expenses (159,914) (49,709) Decrease (increase) in other assets 463 (29,389) (Decrease) increase in accounts payable (986,856) 144,070 Decrease in due to affiliates, net (183,376) (5,071) Decrease in accrued other expenses (819,625) (32,767) Increase in income taxes payable 340,000 Decrease in deferred lease liability (11,021) (17,956) ---------- ---------- Net cash provided by operating activities 3,822,205 2,120,615 Cash Flows From Investing Activities: Deferred program development costs (Note 5) (2,735,190) (1,125,000) Capital expenditures (485,241) (212,610) Investment in affiliates (38,268) ---------- ---------- Net cash used in investing activities (3,220,431) (1,375,878) Cash Flows From Financing Activities: Repayments under line of credit (80,000) (200,000) Principal payments under long-term debt (348,905) (559,673) Principal payments under capital lease obligation (38,285) (21,070) Proceeds from long-term debt 1,320,000 Payments related to public offering (306,566) Issuance of common stock 110,418 18,425 Acquisition of treasury stock (60,072) Employee stock ownership plan note collection 81,000 83,250 ---------- ---------- 10-QSB 6 Net cash provided by (used in) financing activities 737,662 (739,140) Net Increase in Cash 1,339,436 5,597 Cash at Beginning of Period 439,923 126,136 ---------- ---------- Cash at End of Period $ 1,779,359 $ 131,733 ========== ========== See accompanying Notes to Condensed Consolidated Financial Statements.
10-QSB 7 INDUSTRIAL TRAINING CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 (Unaudited) 1) Basis of Presentation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, ComSkill Learning Centers, Inc. In the opinion of management, the interim condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The interim condensed consolidated financial statements should be read in conjunction with the Company's December 31, 1994 and 1993 audited financial statements included with the Company's filing on Form 10-KSB. The interim operating results are not necessarily indicative of the operating results for a full year. 2) Accounts Receivable Accounts receivable include the following: September 30, December 31, 1995 1994 ---- ---- Trade accounts receivable $ 5,775,664 $ 7,245,294 Unbilled contract receivables 76,183 242,279 Less allowance for doubtful accounts (355,714) (280,714) ------------ ------------ Trade accounts receivable, net 5,496,133 7,206,859 Other receivables 125,786 86,618 ------------ ------------ $ 5,621,919 $ 7,293,477 ============ ============ 3) Note Payable to Bank At September 30, 1995, the Company had available a revolving bank line of credit bearing interest at prime plus 1/2% in the amount of $2,500,000. The line is collateralized by all the Company's business assets. At September 30, 1995, the Company had no outstanding balance under the terms of the line of credit. 10-QSB 8 4) Income Taxes The Company provides for income taxes using the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes result primarily from differences between financial statement and income tax treatment of program development costs and net operating loss carryforwards. 5) Deferred Program Development Costs On February 17, 1995, the Company purchased all rights, title and all other ownership interests in the 51 lessons in the INVOLVE(REGISTERED TRADEMARK) Series (INVOLVE(REGISTERED TRADEMARK)) from the Instrument Society of America (ISA). The aggregate purchase price for this transaction was approximately $1,590,000 of which approximately $1,400,000 represented an addition to deferred program development costs. These programs are being amortized over a period of five years. 6) Stockholders' Equity On July 28, 1995, the Company filed a registration statement on form SB-2 with the Securities and Exchange Commission (SEC) for a public offering of 1,050,000 shares of its common stock, including 175,000 shares being sold by certain current Company shareholders. This registration statement was declared effective by the SEC on September 28, 1995. The offering was priced at $9.75 per share and the shares were underwritten on September 29, 1995. On October 4, 1995, the offering was completed and the Company re- ceived net proceeds from the offering of approximately $7,934,000. Immedi- ately following, the Company used approximately $1,763,000 of the proceeds to reduce its borrowings under two separate term loans. The payments represented approximately $444,000 of current loan installments and approximately $1,319,000 of long-term loan installments. The Company intends to use the remaining net proceeds received from the offering to finance product development efforts, increase marketing efforts, finance potential acquisitions of compatible businesses, products or technologies, or for other working capital purposes. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (a) Operations ---------- For the quarter ending September 30, 1995, the Company achieved strong revenues and net earnings. Total revenues for the third quarter aggregated $6,038,000 as compared to revenues of 5,428,000 for the same period in 1994, an increase of $610,000 or 11%. Net earnings for the third quarter totaled $464,000 or 18 cents per share as compared to $262,000 or 11 cents per share for the corresponding quarter in 1994, representing an increase of $202,000 (77%) and 7 cents per share (64%), respectively. The increases for the quarter in both revenues and net earnings continues to be the result of the strong performance of the Company's core multimedia training products. Overall sales of multimedia 10-QSB 9 training courseware increased to $4,863,000 from $3,359,000, a $1,504,000 or 45% increase over the third quarter in 1994. Total revenues for the nine months ended September 30, 1995 aggregated $17,294,000, while net earnings aggregated $1,191,000 or 46 cents per share. These figures represent increases over the comparable period in 1994 of $2,502,000 (17%), $527,000 (79%) and 18 cents (64%) per share, respectively. The strong growth in both revenues and net earnings for the year is due primarily to the performance of the Company's core multimedia training products and the profitability resulting therefrom. Sales of multimedia training courseware increased to $12,447,000 from $8,801,000, a $3,646,000 or 41% increase over the same period in 1994. The growth of multimedia training products during this period was due primarily to the expansion of distribution channels and product development efforts in 1994. The growth rate in earnings per share of 64% differs from the growth rate of net earnings of 79% due to a 184,000 share increase in the weighted average number of shares outstanding at September 30, 1995 as compared to September 30,1994. Hardware revenues for the three months ended September 30, 1995 aggregated $914,000; this represents a decrease of $127,000 or 12% as compared to the same period in 1994. As a percentage of total revenues, hardware sales accounted for 15% of total revenues during the third quarter of 1995 as compared to 19% for the same period in 1994. The decrease in the sales of hardware systems during the third quarter of 1995 can be attributed to several factors including lower overall hardware prices, increased competition for hardware sales, and increased efforts by the Company to sell multimedia training courseware. The Company views this decline as temporary and not significant due to revenue levels achieved during the first nine months of 1995. For the nine month period, hardware revenues totaled $3,314,000, representing a $583,000 or 21% increase over the comparable 1994 period. For the nine months ended September 30, 1995, hardware sales accounted for 19% of total revenues, consistent with the comparable period in 1994. While hardware sales do not add significantly to the Company's earnings, management believes that increased hardware sales are an important factor in developing the demand for the Company's off-the-shelf courseware.Fees and royalties from the Company's franchise network, ComSkill Learning Centers, Inc. amounted to $53,000 for the quarter ended September 30, 1995 as compared to $217,000 for the same period in 1994. During the third quarter of 1995, the Company did not sell any new franchise territories, compared to five territories which were sold during the same period in 1994. Overall revenues achieved from fees and royalties for the nine months ended September 30, 1995 have amounted to $357,000. This compares to $273,000 achieved during the first nine months of 1994; a $84,000 or 31% increase. Sales of the Company's linear products, marketed under the label USA Training, amounted to $117,000 for the third quarter of 1995 and $578,000 for the nine months ended September 30, 1995. This represents decreases of $149,000 or 56% and $304,000 or 34% for the comparable periods in 1994. The decline in sales of these products is consistent with industry trends. Due to the relative size of ITC's linear products division in comparison to ITC, this decline is not considered significant. 10-QSB 10 (b) Earnings Before Provision For Income Taxes ------------------------------------------ Earnings before provision for income taxes for the third quarter 1995 aggregated $786,000 as compared to $435,000 in 1994, an increase of $351,000 or 81%. For the nine months ended September 30, 1995, earnings before provision for taxes totaled $2,018,000, as compared to $1,106,000 for 1994, an increase over the prior year of $912,000 or 82%. The significant improvement in earnings before provision for income taxes over 1994, on both a quarter to date and year to date basis, was a result of several factors. These factors include the Company's improved revenue performance including strong sales of the Company's core multimedia products, the reduction in royalty expense due to the Company's purchase of the INVOLVE(REGISTERED TRADEMARK) Series [Item (d), below], and the Company's efforts to control costs. Selling, general and administrative expenses aggregated $1,786,000 during the third quarter and $5,381,000 for the nine months ended September 30, 1995. This compares to $1,527,000 and $4,618,000 for the same periods in 1994. The increase in selling, general and administrative expenses over third quarter of 1994 of $259,000 and over the nine months ended September 30, 1994 of $763,000 is primarily due to additional sales and marketing personnel costs, and increased trade show and other marketing activities. For the nine months ended September 30, 1995, the amount of selling, general and administrative expenses as a percentage of sales was 31%, consistent with levels achieved during the same period in 1994.Net earnings for the third quarter of 1995 were $464,000, or 18 cents per share, as compared to $262,000 or 11 cents per share achieved in 1994. Year to date net earnings as of September 30, 1995 aggregated $1,191,000 or 46 cents per share as compared to $664,000 or 28 cents during the first nine months of 1994. The substantial increase in net earnings during 1995 was a result of the same factors that contributed to the increases in earnings before provision for income taxes. (c) Taxes ----- As a result of the Company's available tax loss carryforwards (as described in Note 9 to the financial statements filed with the Company's 10-KSB for the year ending December 31, 1994), the Company had, historically, paid a minimal amount of income taxes. However, as a result of the Company's increasing level of profitability, combined with the restrictions on the utilization of certain of the Company's net operating losses, the Company began to pay a larger amount of income taxes beginning in 1995. These increased levels of payments are expected to continue, provided the Company continues to operate profitably. (d) Liquidity, and Capital Resources -------------------------------- Working capital at September 30, 1995 was $12,882,000 as compared to $4,095,000 at December 31, 1994. The increase of $8,787,000 was primarily due to the September 29, 1995 underwriting of 1,050,000 shares of the Company's common stock, of which 875,000 shares were sold by the Company and 175,000 were sold by certain Company shareholders. The public offering generated net proceeds of $7,934,000 (excluding expenses paid 10-QSB 11 directly by the Company of approximately $307,000) which were received by the Company on October 4, 1995. In addition to the offering, the Company experienced an increase in cash provided from operations during the first nine months of 1995. Operations generated $3,822,000 of cash as compared to $2,121,000 for the nine months ended September 30, 1995 and 1994, respectively. Additionally, during the first quarter, the Company borrowed $1,320,000 of long term debt in order to finance the acquisition of the INVOLVE(REGISTERED TRADEMARK) Series as described below. This note was paid in full with a portion of the proceeds from the offering. The cash flow generated from operations was primarily used as follows: $1,415,000 to fund the Company's product development efforts (net of $1,320,000 of financing for purchase of the INVOLVE(REGISTERED TRADEMARK) Series), $485,000 for certain capital expenditures, $349,000 for principal payments on the Company's long term debt, and $80,000 repayment of the Company's revolving line of credit. The Company's borrowings against its revolving credit line decreased from $80,000 at December 31, 1994 to zero at September 30, 1995. Trade accounts receivable at September 30, 1995 aggregated $5,496,000, representing a decrease of $1,711,000 or 24% from December 31, 1994. On February 17, 1995, ITC purchased all rights, title and all other ownership interests in the 51 lessons in the INVOLVE(REGISTERED TRADEMARK) Series (INVOLVE(REGISTERED TRADEMARK)). These products, which were developed for the Instrument Society of America (ISA) by ITC, had previously been sold by the Company under an exclusive third party sales and marketing agreement. The aggregate purchase price for this transaction was approximately $1,590,000. The price included the forgiveness of a receivable from ISA of approximately $90,000, and purchase of approximately $180,000 of INVOLVE(REGISTERED TRADEMARK) inventory. 10-QSB 12 PART II ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description Page Number 3.1 Amended Articles of Incorporation Incorporated by reference to Exhibit 3.1 filed with form SB-2 on July 28, 1995 #33-61393 3.2 Restated Bylaws Incorporated by reference to Exhibit 3.2 filed with form SB-2 on July 28, 1995 #33-61393 (b) Reports on Form 8-K None. 10-QSB 13 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INDUSTRIAL TRAINING CORPORATION (Registrant) /s/ James H. Walton --------------------- DATE: October 30, 1995 By: James H. Walton Chairman of the Board, President and Chief Executive Officer /s/ Philip J. Facchina ----------------------- DATE: October 30, 1995 By: Philip J. Facchina Vice President, Treasurer and Chief Financial Officer /s/ Christopher E. Mack DATE: October 30, 1995 ------------------------- By: Christopher E. Mack Controller 10-QSB 14 EX-27 2
5 This schedule contains summary financial information extracted from the registrant's 10-qsb as for the quarter ended September 30, 1995 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-30-1995 SEP-30-1995 1,779,359 0 5,977,633 (355,714) 732,352 16,393,545 4,082,025 (2,942,703) 25,391,560 3,511,299 1,473,098 0 0 337,883 18,727,645 25,391,560 17,293,961 17,293,961 9,957,906 9,957,906 5,318,238 75,000 0 2,017,817 827,000 1,190,817 0 0 0 1,190,817 0.46 0
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