-----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, I6QD7J0XgiT6McCVdtfZiBndW8qtqieV/KVKZqK/3OIIevNEMH7STYbFLCOt2J5l 5XpZVqGFnJuIrqc99Ykwmg== 0000928385-96-000959.txt : 19960726 0000928385-96-000959.hdr.sgml : 19960726 ACCESSION NUMBER: 0000928385-96-000959 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960725 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: 96598967 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 June 30, 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 20171 ------------------------------------------------------ (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 July 19, 1996, 3,586,224 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 Six Months Ended June 30, 1996 and 1995 1 Condensed Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 2 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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 the 3 Months Ended June 30 For the 6 Months Ended June 30 1996 1995 1996 1995 ---- ---- ---- ---- Net revenues $7,605,160 $6,285,888 $11,320,881 $11,255,632 Cost of sales 4,771,966 3,659,611 7,417,404 6,452,408 ---------- ---------- ----------- ----------- Gross margin 2,833,194 2,626,277 3,903,477 4,803,224 Selling, general, and administrative expense 2,409,555 1,846,566 4,339,969 3,596,371 Equity in earnings of affiliates (49,275) (35,903) (112,357) (77,961) Interest expense (income), net (107,665) 33,850 (242,521) 54,300 ---------- ---------- ----------- ----------- 2,252,615 1,844,513 3,985,091 3,572,710 ---------- ---------- ----------- ----------- Income (loss) before income taxes 580,579 781,764 (81,614) 1,230,514 Income taxes (benefit) 232,000 321,000 (33,000) 505,000 ---------- ---------- ----------- ----------- Net income (loss) $ 348,579 $ 460,764 $ (48,614) $ 725,514 ========== ========== =========== =========== Net income (loss) per common share $.10 $.18 $(.01) $.28 ========== ========== =========== =========== Weighted average number of shares outstanding 3,635,322 2,593,942 3,608,086 2,588,176 ========== ========== =========== ===========
See accompanying notes to condensed consolidated financial statements. 10QSB-1 INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
June 30, December 31, 1996 1995 ---- ---- (Unaudited) Current assets: Cash and cash equivalents $ 9,278,309 $10,348,762 Accounts receivable, net (Note 2) 5,060,684 4,802,054 Due from affiliates (Note 4) 16,620 18,842 Inventories 704,607 871,072 Prepaid expenses 352,493 253,061 Income taxes receivable 70,200 -- ----------- ----------- Total current assets 15,482,913 16,293,791 Long-term receivable (Note 3) 1,537,831 -- Property and equipment: Video and computer equipment 3,444,270 3,221,982 Furniture and fixtures 1,043,318 1,037,404 Leasehold improvements 95,422 93,106 ----------- ----------- 4,583,010 4,352,492 Less accumulated depreciation and amortization (3,380,519) (3,036,918) ----------- ----------- Net property and equipment 1,202,491 1,315,574 Deferred program development costs, net 7,356,177 5,941,079 Goodwill, net 1,878,799 1,961,299 Investment in affiliates (Note 4) 199,650 231,315 Other 31,096 31,089 ----------- ----------- $27,688,957 $25,774,147 =========== ===========
See accompanying notes to condensed consolidated financial statements. 10QSB-2 INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31, 1996 1995 ---- ---- (Unaudited) Current liabilities: Current installments of long-term debt $ 117,175 $ 117,175 Accounts payable 2,183,402 1,621,543 Due to affiliates (Note 4) 465,407 261,230 Accrued compensation and benefits 618,133 594,796 Deferred revenues 996,406 100,769 Other accrued expenses 558,200 219,029 Income taxes payable -- 105,000 ----------- ----------- Total current liabilities 4,938,723 3,019,542 Deferred lease obligations 94,646 102,964 Deferred income taxes 1,575,522 1,608,522 Long-term debt, excluding current installments 72,170 130,745 ----------- ----------- Total liabilities 6,681,061 4,861,773 Stockholders' equity: Common stock, $.10 par value, 12,000,000 shares authorized; 3,586,224 and 3,556,424 issued and outstanding in 1996 and 1995, respectively 358,622 355,643 Additional paid-in capital 14,858,510 14,770,853 Note receivable from ESOP (196,677) (250,177) Retained earnings 5,987,441 6,036,055 ----------- ----------- Total stockholders' equity 21,007,896 20,912,374 ----------- ----------- $27,688,957 $25,774,147 =========== ===========
See accompanying notes to condensed consolidated financial statements. 10QSB-3 INDUSTRIAL TRAINING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For 6 Months Ended June 30, 1996 1995 ---- ---- Cash flows from operating activities: Net income (loss) $ (48,614) $ 725,514 Reconciling items: Provision for deferred taxes (33,000) 102,540 Depreciation and amortization 1,958,984 1,307,661 Sales awards of treasury shares -- 1,650 Increase in allowance for doubtful accounts 76,816 45,000 Changes in operating assets and liabilities: Increase in accounts receivable (335,446) (9,233) Decrease in inventories 166,465 103,839 Increase in prepaid expenses (99,432) (187,400) Increase in income taxes receivable (70,200) -- Increase in long term receivable (1,537,831) -- (Increase) decrease in other assets (7) 111 Increase in accounts payable 561,859 135,323 Increase (decrease) in due to affiliates, net 206,399 (98,643) Increase (decrease) in accrued compensation and benefits 23,337 (453,956) Increase in deferred revenues 895,637 635,199 Increase (decrease) in other accrued expenses 339,171 (428,900) (Decrease) increase in income taxes payable (105,000) 300,000 Decrease in deferred lease obligations (8,318) (7,348) ----------- ----------- Net cash from operating activities 1,990,820 2,171,357 Cash flows from investing activities: Deferred program development costs (2,916,316) (2,154,083) Capital expenditures (230,518) (361,416) ----------- ----------- Net cash used in investing activities (3,146,834) (2,515,499) Cash flows from financing activities: Repayments under line of credit -- (80,000) Principal payments of long-term debt (58,575) (212,152) Payments under capital lease obligations -- (14,387) Proceeds from long-term debt -- 1,320,000 Issuance of common stock 90,636 15,400 Employee stock option note collections 53,500 54,000 ----------- ----------- Net cash provided by financing activities 85,561 1,082,861 ----------- ----------- Net (decrease) increase in cash (1,070,453) 738,719 Cash and cash equivalents at beginning of period 10,348,762 439,923 ----------- ----------- Cash and cash equivalents at end of period $ 9,278,309 $ 1,178,642 =========== ===========
See accompanying notes to condensed consolidated financial statements. 10QSB-4 INDUSTRIAL TRAINING CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996 (Unaudited) 1) Significant Accounting Policies a) 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. b) Revenues and Cost ----------------- Revenues include both off-the-shelf and custom courseware sales, courseware licenses, consulting service revenues and hardware revenues. The Company recognizes revenues on off-the-shelf product and hardware sales as units are shipped. The Company permits the customer the right to return the courseware within 30 days of purchase. In the event that sales returns are material, the Company adjusts revenue accordingly. Revenues from sales of custom training programs that are developed and produced under specific contracts with customers, including contracts with affiliated joint ventures and limited partnerships, are recognized on the percentage of completion basis as related costs are incurred during the production period. Gross revenues from sales of affiliated joint venture and limited partnership copyrighted courseware are included in the Company's financial statements, as are related production, selling and distribution costs. Amounts due to co-owners of the affiliated venture/partnerships related to such courseware sales are reflected as royalties and included in cost of sales in the financial statements. Revenues from courseware licenses are recognized upon the delivery of the initial copy of each product licensed, and related duplication costs are accrued based on estimates. Revenues from consulting services are recognized as services are performed. 2) Accounts Receivable
Accounts receivable include the following: June 30, December 31, 1996 1995 ---- ---- Trade accounts receivable $4,098,471 $4,619,145 Current portion of long-term receivable, net (Note 3) 952,287 -- Unbilled contract receivables 249,959 291,311 Less allowance for doubtful accounts (266,863) (190,047) ---------- ---------- Trade accounts receivable, net 5,033,854 4,720,409 Other receivables 26,830 81,645 ---------- ---------- $5,060,684 $4,802,054 ========== ==========
10QSB-5 3) Long-term Receivable During the second quarter of 1996, the Company entered into a contract with the DeKalb County (GA) Board of Education ("DeKalb") for the sale of a district-wide multicopy courseware license, hardware and certain future services. The total contract amount of $5,060,000 is payable in four installments, $1,535,000 upon contract execution, and the remaining $3,525,000 in three equal annual installments beginning in June, 1997. Total revenues recognized under the contract during the second quarter for the courseware license and hardware were $3,838,000, representing 34% of the Company's year to date revenues. Dealer fees relating to this sale have been charged against the related revenues, and are only payable when proceeds are received by the Company. The long-term portion of the net receivable has been discounted assuming a 6% interest rate. Components of long-term receivable include the following:
June 30, 1996 ---- Receivable from DeKalb County (GA) Board of Education $ 3,525,000 Related dealer fees payable (797,083) Less amounts classified as current, net of related dealer fees (952,287) Less amount representing interest (237,799) ----------- $ 1,537,831 ===========
4) 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 each 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 $1,243,000 and $1,200,000 for the first six months of 1996 and 1995 respectively. Additionally, during the fourth quarter of 1995 and the first six months 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 June 30, 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 six months of 1996. 5) Note Payable to Bank At June 30, 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 June 30, 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 June 30, 1996, the Company achieved record quarterly revenues and returned to profitability after experiencing a loss in the first quarter of 1996. Total revenues for the second quarter aggregated $7,605,000 as compared to revenues of $6,286,000 for the same period in 1995. This represented an increase of $1,319,000 or 21%. Net earnings for the second quarter totaled $349,000 or 10 cents per share as compared to $461,000 or 18 cents per share for the corresponding quarter in 1995, representing a decrease of $112,000 and 8 cents per share, respectively. The substantial increase in revenues for the quarter was the result of strong sales of the Company's off-the-shelf multimedia training products. Overall courseware sales increased to $5,833,000, representing a $1,566,000 or 37% increase over the second quarter of 1995. The increased courseware sales was primarily due to the sale of a district-wide multicopy courseware license to the DeKalb County (GA) Board of Education under an agreement valued at $5,060,000, which included courseware, hardware, and certain future services. This sale generated net courseware and hardware revenues of $3,838,000 during the quarter. Total revenues for the six months ended June 30, 1996 were $11,321,000 with year to date net loss of $49,000 or 1 cent per share as compared to revenues of $11,256,000, net earnings of $461,000 and 28 cents per share for the comparable period of 1995. During 1996, the Company has faced many factors that have impacted sales performance and profitability of the Company. These factors include the slower than anticipated growth of sales generated by third party distribution channels, and delayed sales due to the Company's conversion of its courseware libraries to CD-ROM, which was substantially completed during the second quarter. Hardware revenues for the three months ended June 30, 1996 aggregated $1,388,000 representing a decrease of $123,000 or 8% as compared to the same period in 1995. For the six month period, hardware revenues totaled $1,837,000, representing a decrease of $563,000 or 23% as compared to the corresponding period in 1995. The decreases in the sales of hardware systems can be attributed to the standardization and availability of CD-ROM hardware systems. The resulting impact has been a reduction in unit prices and increased availability through multiple distribution channels, resulting in increased competition to the Company. b) Income (Loss) Before Provision for Taxes Earnings before income taxes for the second quarter of 1996 aggregated $581,000 as compared to $782,000 for the same period in 1995, a decrease of $201,000. For the six months ended June 30, 1996, the Company experienced a loss before income taxes totaling $82,000 as compared to income before taxes of $1,231,000 achieved during the comparable period in 1995. The decrease in earnings for the three months and six months ended June 30, 1996 was primarily due to increased product amortization associated with the Company's program development activities and increased dealers fees associated with certain third party product sales, principally the sale to DeKalb noted above. Selling, general and administrative expenses totaled $2,410,000 for the second quarter and $4,340,000 for the six months ended June 30, 1996. This compares to $1,847,000 and $3,596,000 for the same periods in 1995. The increases in selling, general and administrative expenses over second quarter 1995 of $563,000 and over the six months ended June 30, 1994 of $744,000 is primarily due to increased marketing activities and an increase in the allowance for doubtful accounts recorded during the second quarter of 1996. c) Net Income (Loss) Net income for the quarter ended June 30, 1996 totaled $349,000 or 10 cents per share while year to date results accumulated a net loss of $49,000. This represents decreases of $122,000 or 8 cents per share and 774,000 or 29 cents per share as compared to the corresponding periods in 1995. 10QSB-7 d) Cash Flow, Liquidity and Capital Resources Working capital at June 30, 1996 was $10,544,000 as compared to $13,274,000 at December 31, 1995, a decrease of $2,730,000. The decrease is primarily due to the Company's first quarter operating loss and the significant investment in program development made by the Company during the first six months of 1996. The Company's working capital primarily consists of the cash proceeds from the Company's third quarter 1995 public offering. The proceeds received from the offering were approximately $9,048,000. For the period ended June 30, 1996, the Company experienced strong cash flow from operations despite the lower overall operating results. Cash provided by operations was $1,991,000 for the first six months of 1996. While the Company has experienced a year to date net loss of $48,614, cash was generated by operations due to the significant non-cash charges for amortization of product development and other assets and depreciation. The reduction in cash flow due to the long term receivable arising from the transaction with DeKalb was offset by increases in accounts payable, deferred revenues and other accruals, principally relating to that transaction. The cash provided by operations was offset by the investment of $3,147,000 for product development and certain capital expenditures. The most significant investment in product development was the conversion of the Company's courseware libraries to CD-ROM, which was substantially completed in the second quarter of 1996. Due to the decline in profitability during the first six months of 1996, during June the Company implemented a 10% corporate-wide work force reduction and also took additional steps to reduce overall costs. 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 in 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 (a) The Company held its annual meeting of shareholders on May 7, 1996. There were four agenda items submitted to a vote of security holders, including the election of two directors to the Company's Board of Directors: (i) Daniel R. Bannister was elected to serve on the Board for a term of three years. The number of votes cast in favor of Mr. Bannister's election was 3,206,452; (ii) Philip J. Facchina was elected to serve on the Board for a term of three years. The number of votes cast in favor of Mr. Facchina's election was 3,233,592. (b) The shareholders approved the amendment to the Articles of Incorporation, increasing the shares of authorized Common Stock from Four Million (4,000,000) to Twelve Million (12,000,000). The number of votes cast in favor of this proposal was 3,048,329. (c) The shareholders approved the First Amendment to the 1992 Key Employee Incentive Stock Option Plan, increasing the number of shares reserved for the granting of options thereunder by 200,000. There were 2,468,224 votes cast in favor of this item. (d) The shareholders approved the First Amendment to the 1992 Director Stock Option Plan, increasing the number of shares reserved for the granting of stock options thereunder by 100,000. There were 2,373,646 votes cast in favor of this item. No other matters were submitted to the security holders for a vote. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits See attached Exhibit Index. (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 7/25/96 ------------------------------ ------- James H. Walton Chairman of the Board and Chief Executive Officer BY /s/Philip J. Facchina DATE 7/25/96 --------------------------------- ------- Philip J. Facchina President and Chief Operating Officer BY /s/Frank A. Carchedi DATE 7/25/96 -------------------------------- ------- Frank A. Carchedi Vice President, Treasurer and Chief Financial Officer BY /s/Christopher E. Mack DATE 7/25/96 ---------------------------------- ------- Christopher E. Mack Controller 10QSB-10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANTS 10-QSB AS FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JUN-30-1996 9,278,309 0 5,327,547 (266,863) 704,607 15,482,913 4,583,010 (3,380,519) 27,688,957 4,938,723 72,170 0 0 358,642 20,649,254 27,688,957 11,320,881 11,320,881 7,417,402 7,417,402 3,783,275 201,816 0 (81,612) (33,000) (48,612) 0 0 0 (48,612) (0.01) 0
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