-----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, We6tGXs1mBkwgc93HLituBM0xf9Wn2FDp+pHzswHqQkbWMafk4kaSmPUoK7sL5iH otPUEl9XM6gosKd8uRMdlQ== 0000928385-96-000366.txt : 19960429 0000928385-96-000366.hdr.sgml : 19960429 ACCESSION NUMBER: 0000928385-96-000366 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960426 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL TRAINING CORP CENTRAL INDEX KEY: 0000764867 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [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: 96551814 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 FORM 10QSB UNITED STATES 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 March 31, 1996 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) 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 April 19, 1996, 3,556,684 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 Ended March 31, 1996 and 1995 1 Condensed Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 4 Notes to Condensed Consolidated Financial Statements 5 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - ------- Item 1 Legal Proceedings 9 Item 2 Changes in Securities 9 Item 3 Defaults Upon Senior Securities 9 Item 4 Submission of Matters to a Vote of Security Holders 9 Item 5 Other Information 9 Item 6 Exhibits and Reports on Form 8-K 9
PART I ITEM 1. FINANCIAL STATEMENTS INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For Three Months Ended March 31, 1996 1995 ---- ---- Net revenues $ 3,715,723 $ 4,969,744 Cost of sales 2,642,176 2,792,797 ----------- ----------- Gross margin 1,073,547 2,176,947 Selling, general and administrative expense 1,933,680 1,749,805 Equity in earnings of affiliates (63,086) (42,058) ----------- ----------- Income (loss) before interest and income taxes (797,047) 469,200 Interest expense (income), net (134,855) 20,450 ----------- ----------- Income (loss) before income taxes (662,192) 448,750 Income tax expense (benefit) (265,000) 184,000 ----------- ----------- Net income (loss) $ (397,192) $ 264,750 =========== =========== Income (loss) per common share $(.11) $.10 =========== =========== Weighted average number of common shares outstanding 3,614,474 2,595,661 =========== ===========
See accompanying notes to condensed consolidated financial statements. 10QSB-1 INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
March 31, December 31, 1996 1995 ---- ---- (Unaudited) Current assets: Cash and cash equivalents $ 10,105,249 $ 10,348,762 Accounts receivable, net (Note 2) 3,632,639 4,802,054 Due from affiliates (Note 3) 15,141 18,842 Inventories 611,000 871,072 Prepaid expenses 501,580 253,061 Income tax receivable 512,000 -- ------------ ------------ Total current assets 15,377,609 16,293,791 Property and equipment: Video and computer equipment 3,354,859 3,221,982 Furniture and fixtures 1,043,318 1,037,404 Leasehold improvements 95,422 93,106 ------------ ------------ 4,493,599 4,352,492 Less accumulated depreciation and amortization (3,198,994) (3,036,918) ------------ ------------ Net property and equipment 1,294,605 1,315,574 Deferred program development costs, net 6,782,866 5,941,079 Goodwill, net 1,920,049 1,961,299 Investment in affiliates (Note 3) 215,630 231,315 Other 24,484 31,089 ------------ ------------ $25,615,243 $ 25,774,147 ============ ============
See accompanying notes to condensed consolidated financial statements. 10QSB-2 INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31, 1996 1995 ---- ---- (Unaudited) Current liabilities: Current installments of long-term debt $ 117,175 $ 117,175 Accounts payable 1,644,626 1,621,543 Due to affiliates (Note 3) 332,512 261,230 Accrued compensation and benefits 569,336 594,796 Other accrued expenses 403,391 319,798 Income taxes payable -- 105,000 ------------ ------------ Total current liabilities 3,067,040 3,019,542 Deferred lease obligations 99,886 102,964 Deferred income taxes 1,785,322 1,608,522 Long-term debt, excluding current installments 101,750 130,745 ------------ ------------ Total liabilities 5,053,998 4,861,773 Stockholders' equity: Common stock, $.10 par value, 4,000,000 shares authorized; 3,562,424 and 3,556,424 issued and outstanding in 1996 and 1995, respectively 356,242 355,643 Additional paid-in capital 14,789,317 14,770,853 Note receivable from ESOP (223,177) (250,177) Retained earnings 5,638,863 6,036,055 ------------ ------------ Total stockholders' equity 20,561,245 20,912,374 ------------ ------------ $ 25,615,243 $ 25,774,147 ============ ============
See accompanying notes to condensed consolidated financial statements. 10QSB-3 INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For Three Months Ended March 31, 1996 1995 ---- ---- Cash flows from operating activities: Net income (loss) $ (397,192) $ 264,750 Reconciling items: Provision for deferred taxes 176,800 131,540 Depreciation and amortization 876,918 608,726 Increase in reserve for doubtful accounts 8,816 15,000 Changes in assets and liabilities: Decrease in accounts receivable 1,160,599 1,744,116 Decrease in inventories 260,072 142,592 Increase in prepaid expenses (248,519) (182,827) Increase in income tax receivable (512,000) -- Increase (decrease) in due to affiliates, net 74,983 (57,075) Decrease (increase) in other assets 6,605 (1,998) Increase (decrease) in accounts payable 23,083 (975,740) Increase (decrease) in accrued expenses 58,133 (659,181) Decrease in income taxes payable (105,000) -- Decrease in deferred lease obligations (3,078) (3,674) ------------ ------------ Net cash provided by operating activities 1,380,220 1,026,229 Cash flows from investing activities: Deferred program development costs (1,499,694) (1,835,973) Capital expenditures (141,107) (173,409) ------------ ------------ Net cash used in investing activities (1,640,801) (2,009,382) Cash flows from financing activities: Repayments under line-of-credit -- (80,000) Principal payments under term loans (28,995) (71,825) Payments under capital lease obligations, net of deferred interest -- (8,208) Proceeds from other long-term debt -- 1,320,000 Issuance of common stock 19,063 -- Employee stock option note collections 27,000 27,000 ------------ ------------ Net cash provided by financing activities 17,068 1,186,967 ------------ ------------ Net increase (decrease) in cash (243,513) 203,814 Cash and cash equivalents at beginning of period 10,348,762 439,923 ------------ ------------ Cash and cash equivalents at end of period $ 10,105,249 $ 643,737 ============ ============
See accompanying notes to condensed consolidated financial statements. 10QSB-4 INDUSTRIAL TRAINING CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 (Unaudited) 1) BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries ComSkill Learning Centers, Inc. ("ComSkill") and Activ Training, Ltd. In the opinion of the Company, 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, 1995 and 1994 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 the full fiscal year. 2) ACCOUNTS RECEIVABLE Accounts receivable include the following:
March 31, December 31, 1996 1995 ---- ---- Trade accounts receivable $ 3,407,112 $ 4,619,145 Unbilled contract receivables 357,792 291,311 Less allowance for doubtful accounts (198,863) (190,047) ----------- ----------- Trade accounts receivable, net 3,566,041 4,720,409 Other receivables 66,598 81,645 ----------- ----------- $ 3,632,639 $ 4,802,054 =========== ===========
3) INVESTMENTS IN AND DUE TO AFFILIATES The Company is a participant in five separate limited partnerships with Industrial Training Partners, Ltd. (the ITP partnerships) and a joint venture with DynCorp. In all of the ITP partnerships, the Company is a 5% general partner and in certain partnerships the Company has acquired limited partnership interest as well. In the joint venture with DynCorp, the Company has a 50% ownership interest. The ITP partnerships and the DynCorp joint venture were formed to develop and produce various series of training programs. Under the contracts to market the programs for the partnerships and joint venture, ITC receives 50%-70% of the sales price for the costs of reproducing and marketing the training materials. In the case of the joint venture agreement, the Company also receives an additional 25% for its share of joint venture profits. Sales of programs related to these activities were $655,000 and $618,000 for the first quarter of 1996 and 1995 respectively. Additionally, during the fourth quarter of 1995 and the first quarter of 1996, the Company developed new training products for certain partnerships. In order to finance the product development activities for these partnerships, the Company has guaranteed two bank loans for two of the partnerships. At March 31, 1996, the outstanding balance of these loans totaled $565,000. Revenues recognized by the Company for the development of these training programs were $532,000 for the first quarter of 1996. 10QSB-5 4) NOTE PAYABLE TO BANK At March 31, 1996, the Company had no amounts outstanding relating to its $2,500,000 revolving bank line of credit, which bears interest at prime plus 1/2% (8.75% at March 31, 1996). Borrowings under the line are collateralized by the Company's accounts receivable and inventory. The loan agreement includes certain covenants which limit borrowings and the ability to merge or dispose of assets, and requires the maintenance of minimum working capital and tangible net worth ratios. 10QSB-6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS a) Operations ---------- For the quarter ended March 31, 1996, revenues aggregated $3,716,000 as compared to $4,970,000 for the quarter ended March 31, 1995, a decrease of $1,254,000 or 25%. As a result of the lower overall revenues, the Company recorded a net loss of $397,000 or 11 cents per share. This compares to net income of $265,000 or 10 cents per share recorded during the first quarter of 1995. The decrease in the Company's revenues was primarily due to lower sales of the Company's off-the-shelf multimedia training courseware and multimedia hardware systems. For the quarter ended March 31, 1996, sales of multimedia training courseware totaled $2,531,000, a decrease of $786,000 or 24% from the first quarter of 1995. Sales of hardware systems for the quarter ended March 31, 1996 totaled $449,000 as compared to $888,000 achieved during the comparable period in 1995, representing a decrease of $439,000 or 49%. The decrease in revenues was due to many of the same factors that impacted the Company's fourth quarter 1995 performance, including: continued slow sales of multimedia products through third party channels; lower than expected sales of multimedia hardware; and, the conversion of its courseware libraries to CD-ROM technologies. Management believes that this latter factor has caused many of its traditional customers to delay purchasing decisions until the libraries have been fully converted to CD-ROM, which is anticipated in the second quarter of 1996. Revenues from custom courseware and consulting services amounted to $594,000 for the first quarter of 1996, an increase of $318,000 as compared to the first quarter of 1995. The sizable increase is due to the completion of existing contract backlog from fiscal 1995, principally for the development of training products for the Company's affiliates. During the first quarter of 1996, the Company reorganized a new multimedia services division and expects to emphasize service related activities such as implementation support, hardware and network integration and instructional design. The Company believes this newly created division will create opportunities to develop future multimedia courseware and hardware sales. Revenues from international operations totaled $707,000 for the three months ended March 31, 1996 as compared to $442,000 for the same period in 1995. The significant increase of $265,000 or 60% was due to the late 1995 staffing of Activ Training, Ltd., the Company's newly created London-based subsidiary. Activ Training, Ltd. was incorporated during the fourth quarter of 1995 in order to expand the Company's sales, marketing and distribution activities within the international marketplace. b) Loss Before Provision For Income Taxes -------------------------------------- Loss before provision for income taxes for the quarter ended March 31, 1996 aggregated $662,000 as compared to income before provision for income taxes of $449,000 achieved for the comparable 1995 period. The decrease of $1,111,000 was primarily due to the aforementioned shortfall in sales during the first quarter of 1996. Selling, general and administrative expenses totaled $1,934,000 during the first quarter of 1996, representing an increase of $184,000 over the comparable period in 1995. The overall increase in selling, general and administrative expenses was primarily due to additional operational and sales support and increased marketing activities. This increase was partially offset by a $155,000 increase in net interest income from the investment of the Company's available cash balances. c) Net Loss -------- The substantial decrease in earnings before taxes was partially offset by the recognition of an interim tax benefit, resulting in a net loss for the three months ended March 31, 1996 was $397,000 or 11 10QSB-7 cents per share. This represents a decrease of $662,000 or 21 cents per share as compared to the corresponding 1995 period. d) Cash Flow, Liquidity and Capital Resources ------------------------------------------ Working capital at March 31, 1996 was $12,311,000 as compared to $13,274,000 at December 31, 1995. The decrease of $963,000 is primarily due to the significant investment in program development made by the Company during the first quarter of 1996. The Company's working capital primarily consists of the cash proceeds generated from the Company's third quarter 1995 public offering. The proceeds received from the offering were approximately $9,048,000. During the first quarter of 1996, the Company experienced strong cash flows from operations despite the lower overall operating results. For the three months ended March 31, 1996, cash flow generated by operations was approximately $1,380,000. The increase in cash flow from operations was primarily due to a significant decrease in accounts receivable as compared to December 31, 1995. Additionally, the Company continues to have increases in non-cash operating charges, resulting principally from amortization of deferred program development costs. The operating cash flow was offset by the investment of $1,641,000 for the development and conversion of new and existing programs and the purchase of certain capital expenditures. Management believes that the cash generated from operations combined with the Company's existing resources and available line of credit are adequate to meet ITC's working capital needs and other financing requirements for 1996. 10QSB-8 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 10-KSB on March 15, 1996 (Commission File No. 0-13741)
(b) Reports on Form 8-K None. 10QSB-9 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) BY /s/James H. Walton DATE April 25, 1996 ---------------------------- -------------- James H. Walton Chairman of the Board and Chief Executive Officer BY /s/Philip J. Facchina DATE April 25, 1996 ---------------------------- -------------- Philip J. Facchina President and Chief Operating Officer BY /s/Frank A. Carchedi DATE April 25, 1996 ---------------------------- -------------- Frank A. Carchedi Vice President, Treasurer and Chief Financial Officer BY /s/Christopher E. Mack DATE April 25, 1996 ---------------------------- -------------- Christopher E. Mack Controller 10QSB-10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S 10-QSB AS FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 MAR-31-1996 10,105,249 0 3,831,503 (198,864) 611,000 15,377,609 4,493,599 (3,198,994) 25,615,243 3,067,040 101,750 0 0 356,242 20,205,003 25,615,243 3,715,723 3,715,723 2,642,176 2,642,176 1,726,923 8,816 0 (662,192) (265,000) (397,192) 0 0 0 (397,192) (0.11) 0
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