-----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, FE2JzvprjR70AE8IoWx0sNjzEDUGug2TzZ17XDfAqnJoXgHOwnLkzZnaRLzHeMQO lF0E7L6O65dx1+7YzLkJsA== 0000950144-96-008092.txt : 19961118 0000950144-96-008092.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950144-96-008092 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROCK INTERNATIONAL INC CENTRAL INDEX KEY: 0000897078 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 581588291 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21202 FILM NUMBER: 96662822 BUSINESS ADDRESS: STREET 1: 2859 PACES FERRY RD STREET 2: STE 1000 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7704311200 MAIL ADDRESS: STREET 1: 2859 PACES FERRY RD STREET 2: STE 1000 CITY: ATLANTA STATE: GA ZIP: 30339 FORMER COMPANY: FORMER CONFORMED NAME: BROCK CONTROL SYSTEMS INC DATE OF NAME CHANGE: 19930208 10-Q 1 BROCK INTERNATIONAL INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER 0-21202 BROCK INTERNATIONAL, INC. (Formerly Brock Control Systems, Inc.) 7372 GEORGIA 58-1588291 (Primary Std. Ind. (State of incorporation) (IRS Employer Classification Code #) Identification #) 2859 Paces Ferry Road, Suite 1000 Atlanta, Georgia 30339 (Address of principal executive offices) (770-431-1200) (Telephone number of registrant) 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 ---------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding as of November 11, 1996: - ------------------------------------- Common Stock, no par value 4,936,555 Shares 2 BROCK INTERNATIONAL, INC. * FORM 10-Q For the quarter ended September 30, 1996 Index
Page No. -------- Part I. Financial Information Item 1. Financial Statements Balance Sheet - December 31, 1995 and September 30, 1996 3 Income Statement - For the Three and Nine Months ended September 30, 1995 and September 30, 1996 4 Statement of Changes in Shareholders' Equity - For the Nine Months Ended September 30, 1996 5 Statement of Cash Flows - For the Nine Months Ended September 30, 1995 and September 30, 1996 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of 8 Financial Condition and Results of Operations Part II. Other Information 11
* Brock Control Systems, Inc. officially changed its name to Brock International, Inc. on February 7, 1996. - 2 - 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements BROCK INTERNATIONAL, INC. Balance Sheet
DEC 31, SEPT 30, 1995 1996 ------------ ----------- (unaudited) (in thousands) ASSETS Current assets: Cash and marketable securities $ 8,137 $ 6,663 Accounts receivable, less allowance for doubtful accounts of $1,415 and $1,512 respectively 8,092 5,766 Other assets 822 1,029 ------- ------- Total current assets 17,051 13,458 Property and equipment, net 4,035 3,862 Deferred income tax benefit 974 810 Software development costs, net 3,985 4,578 ------- ------- $26,045 $22,708 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 957 $ 756 Deferred revenue 1,971 1,063 Accrued employee compensation and benefits 1,126 569 Borrowings under line of credit 985 1,975 Current portion of notes payable 0 83 Income Tax Payable 0 (1,178) Other accrued liabilities 776 573 ------- ------- Total current liabilities 5,815 3,841 Long term liabilities: Notes payable 0 146 Shareholders' equity 20,230 18,721 ------- ------- $26,045 $22,708 ======= =======
The accompanying notes are an integral part of these financial statements. - 3 - 4 BROCK INTERNATIONAL, INC. Income Statement (unaudited)
For the Quarter Ended For the Nine Months Ended ----------------------------- --------------------------------- Sept 30, Sept 30, Sept 30, Sept 30, 1995 1996 1995 1996 ---------- ---------- ------------- ------------ (In thousands, except per share amounts) Net Revenues Software $2,542 $2,532 $ 7,131 $ 8,132 Services 2,154 1,495 7,147 5,709 Maintenance 1,311 1,245 3,869 3,906 Other 317 202 1,125 770 ------ ------ ------- ------- 6,324 5,474 19,272 18,517 ------ ------ ------- ------- Cost and Expenses Cost of revenues Software 555 541 1,874 1,659 Services 1,834 1,305 6,143 4,735 Maintenance 526 477 1,544 1,523 Other 310 196 1,096 691 Sales and marketing 2,689 2,779 8,497 8,051 Product development 480 436 1,344 1,526 General and administrative 1,268 1,316 4,249 3,210 ------ ------ ------- ------- 7,662 7,050 24,747 21,395 ------ ------ ------- ------- Operating (Loss) (1,338) (1,576) (5,475) (2,878) Interest expense (28) (40) (29) (108) Interest income 119 59 370 173 ------ ------ ------- ------- (Loss) before income taxes (1,247) (1,557) (5,134) (2,813) Income tax benefit 457 574 1,898 1,055 ------ ------ ------- ------- Net (loss) ($790) ($983) ($3,236) ($1,758) ====== ====== ======= ======= Net (loss) per share ($0.16) ($0.20) ($0.66) ($0.35) ====== ====== ======= ======= Weighted average number of common and common share equivalents 4,935 5,000 4,915 5,000 ====== ====== ======= =======
The accompanying notes are an integral part of these financial statements. -4- 5 BROCK INTERNATIONAL, INC. Statement of Changes in Shareholders' Equity (unaudited) For the nine months ended September 30, 1996
Common Stock Unrealized -------------------------- Add'l (Loss)/Gain on Paid-in Marketable Retained Shares Amount Capital Securities Earnings Total ------------- -------- ------- -------------- -------- ------- (In thousands, except share data) Balance at December 31, 1995 4,908,815 $9 $18,744 ($121) $1,598 $20,230 Unrealized (Loss)/Gain on Marketable Securities 106 106 Employee Stock Purchase 13,026 0 84 84 Exercise of Common Stock Options 9,242 0 59 59 Net (loss) (1,758) (1,758) --------- ------ ------- ------ ------- ------- Balance at September 30, 1996 4,931,083 $9 $18,887 ($15) ($160) $18,721 ========= ====== ======= ====== ======= =======
The accompanying notes are an integral part of these financial statements. - 5 - 6 BROCK INTERNATIONAL, INC. Statement of Cash Flows (unaudited)
For the Nine Months Ended ----------------------------------- Sept 30, 1995 Sept 30, 1996 ------------- ------------- (In thousands) Cash flows from operating activities Net (loss) ($3,236) ($1,758) ------- ------- Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 2,226 2,550 Provision for bad debt 594 575 Deferred income tax (9) 164 Changes in assets and liabilities (Increase) decrease in accounts receivable 1,356 1,751 (Increase) decrease in other assets 470 (207) Increase (decrease) in accounts payable (581) (201) Increase (decrease) in deferred revenue (325) (908) Increase (decrease) in accrued employee compensation and benefits 47 (557) Increase (decrease) in other accrued liabilities (1,925) (1,381) ------- ------- Total adjustments 1,853 1,786 ------- ------- Net cash (used in)/provided by operating activities (1,383) 28 ------- ------- Cash flows from investing activities Software development costs (2,006) (2,135) Purchases of property and equipment (1,135) (835) ------- ------- Net cash used in investing activities (3,141) (2,970) ------- ------- Cash flows from financing activities Borrowings under line of credit 2,303 2,990 Repayments of borrowings under line of credit 0 (2,000) Borrowings under notes payable 0 250 Repayments of borrowings under notes payable 0 (21) Proceeds from employee stock purchase plan 68 84 Exercise of common stock options 26 59 ------- ------- Net cash provided by financing activities 2,397 1,362 ------- ------- Unrealized gain on cash equivalents 212 106 ------- ------- Increase (decrease) in cash (1,915) (1,474) Cash and marketable securities, beginning of period 11,705 8,137 ------- ------- Cash and marketable securities, end of period $ 9,790 $ 6,663 ======= ======= Supplemental disclosure of cash flow information ------- ------- Cash paid during the period for interest $ 29 $ 96 ======= =======
The accompanying notes are an integral part of these financial statements. -6- 7 BROCK INTERNATIONAL, INC. Notes to Financial Statements September 30, 1996 A. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of manage- ment, all adjustments (consisting only of normal occurring accruals) considered necessary for a fair presentation have been included. B. Accounting Policies Net income (loss) per share Net income (loss) per share is computed using the weighted average number of common shares and common share equivalents outstanding. Common share equivalents consist of the Company's common shares issuable upon the exercise of stock options using the treasury stock method. - 7 - 8 BROCK INTERNATIONAL, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - The quarter ended September 30, 1996 compared to the quarter ended September 30, 1995, and the nine months ended September 30, 1996 compared to the nine months ended September 30, 1995. Total revenues decreased 13.4% from $6,324,000 in the third quarter of 1995 to $5,474,000 in the third quarter of 1996 as a result of decreased software, services, maintenance, and other revenues. For the first nine months of 1996, total revenues decreased 3.9% to $18,517,000 from $19,272,000 in 1995. Software revenues for the quarter remained fairly consistent at $2,532,000 in 1996 compared to $2,542,000 for the same period in 1995. For the first nine months of 1996 software revenues have increased 14.0% to $8,132,000 from $7,131,000 in 1995, primarily as a result of increased licenses sold to international customers. Software revenues from international licenses for the quarter increased 360.5% to $1,819,000 in 1996 from $395,000 in 1995. For the first nine months of 1996 compared to the first nine months of 1995, international license revenues increased 152.2% to $4,623,000 from $1,833,000, and increased as a percentage of total revenues to 25.0% in 1996 from 9.5% in 1995. The increases resulted from additional penetration of international markets including a third quarter sale of $1,500,000 in licenses concurrent with a new distribution agreement with Policy Management Systems Corporation, which will be distributing Brock products in Asia Pacific and the United Kingdom. Software revenues from domestic licenses for the quarter decreased 64.9% to $686,000 in 1996 compared to $1,952,000 in 1995. This decrease in domestic license fees may be partially attributed to market and prospective customer damage caused by the timing of the announcement on September 9, 1996 of the resignation of Brock's President and COO, Michael E. Kohlsdorf. Services revenues decreased 30.6% from $2,154,000 in the third quarter of 1995 to $1,495,000 in the third quarter of 1996 primarily due to prior decreases in software licenses. Year to date, services revenue decreased 20.1% from $7,147,000 in 1995 to $5,709,000 in 1996 due to prior decreases in software license sales and the Company's commitment to enhance customer satisfaction, which, in certain instances, resulted in providing services free of charge or at reduced rates. The company believes these investments in customer satisfaction have resulted in a referenceable client base which should contribute to the Company's ability to increase revenue by system expansions, recurring maintenance revenue, and additional services revenue. -8- 9 Maintenance revenues decreased 5.0% to $1,245,000 in the third quarter of 1996 from $1,311,000 during the same period of 1995. For the first nine months of 1996, maintenance revenues increased 1.0% to $3,906,000 compared to $3,869,000 for the first nine months of 1995, primarily as a result of increases in international installations. Other revenues decreased 36.3% from $317,000 in the third quarter of 1995 to $202,000 in the third quarter of 1996. Year to date, other revenues decreased 31.6% to $770,000 in 1996 from $1,125,000 in 1995, primarily due to decreases in certain reimbursable travel charges. Cost of software revenues decreased 2.5% from $555,000 in the third quarter of 1995 to $541,000 in the third quarter of 1996 primarily as a result of decreased third party software revenues. Year to date, software revenue costs decreased 11.5% from $1,874,000 in 1995 to $1,659,000 in 1996 as a result of decreased third party software costs offset by an increase in amortization of capitalized software costs. Costs of software revenues include costs of third party software, amortization of capitalized software costs, and costs of packaging and documentation materials and related media costs. Cost of revenues for services decreased 28.8% from $1,834,000 in the third quarter of 1995 to $1,305,000 in the third quarter of 1996 due to decreases in the number of service personnel, and personnel related costs. For the nine months ended September 30, 1996, costs of revenues for services decreased 22.9% to $4,735,000 from $6,143,000 during the same period of 1995. Cost of revenues for maintenance decreased 9.3% from $526,000 in the third quarter of 1995 to $477,000 in the third quarter of 1996 due to decreases in domestic maintenance related personnel costs, offset by increases in international maintenance costs which are directly related to increases in international maintenance revenue. Year to date, costs of revenues for maintenance decreased 1.4% from $1,544,000 in 1995 to $1,523,000 in 1996. Cost of other revenues decreased 36.8% from $310,000 in the third quarter of 1995 to $196,000 in the third quarter of 1996; and year to date decreased 37.0% from $1,096,000 in 1995 to $691,000 in 1996 due to decreases in certain reimbursable travel charges. Sales and marketing expenses increased 3.3% from $2,689,000 in the third quarter of 1995 to $2,779,000 in the third quarter of 1996 primarily due to an increase in commission expense. The increase in commission expense results from the increase in international distributor commissions due to the increase in international license revenue. For the nine months of 1996, sales and marketing expense decreased 5.2% to $8,051,000 from $8,497,000 in 1995. The decreases were due to decreases in personnel and personnel associated costs, and decreased advertising campaigns, offset by increases in international distributor commissions. -9- 10 The Company's product innovation and development expenditures increased 3.1% from $1,201,000 in the third quarter of 1995 to $1,238,000 in the third quarter of 1996. The capitalized portions of these amounts were $721,000 and $802,000 respectively. Product development expense decreased 9.2% from $480,000 in the third quarter of 1995 to $436,000 in the third quarter of 1996 primarily due to an increase in activities qualifying for capitalization under FAS 86. For the nine months ended September 30, 1996 product development expenses increased 13.5% to $1,526,000 from $1,344,000 during the same period of 1995 due to increased product development activities for new and existing products. General and administrative expenses increased 3.8% from $1,268,000 in the third quarter of 1995 to $1,316,000 in the third quarter of 1996 primarily due to increases in the provision for doubtful receivables for the quarter, offset by decreases in personnel and personnel related costs of insurance, recruiting, and relocation. Year to date, general and administrative expenses decreased 24.5% from $4,249,000 in 1995 to $3,210,000 in 1996. This was primarily due to decreases in professional services, personnel and personnel related costs, and the year to date decrease in expense for provision for doubtful receivables. The above factors combined to result in an increase of 24.4% in net loss for the third quarter of 1996, from a net loss of $790,000 in the third quarter of 1995 to a net loss of $983,000 in the third quarter of 1996. Net loss per share for the period increased 25.0% from a loss of $0.16 per share for the third quarter of 1995 to a loss of $0.20 per share for the third quarter of 1996. Year to date, net loss decreased 45.7% from a net loss of $3,236,000 in 1995 to a net loss of $1,758,000 in 1996. Year to date, net loss per share decreased 46.9% from a net loss of $0.66 per share in 1995 to a net loss of $0.35 per share in 1996. Liquidity and Capital Resources At September 30, 1996, the Company had cash and marketable securities of $6,663,000, and believes that its present liquidity position is sufficient to finance the Company's operations. -10- 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information On September 9, 1996, the Company announced the resignation of Michael E. Kohlsdorf, President and Chief Operating Officer. Richard T. Brock has assumed these responsibilities. As an employee incentive, the Board of Directors of the Company approved an opportunity for non-officer employees to reprice stock options held. This resulted in the repricing of 253,042 options from their original grant prices to a new option price of $4.75, which represented market price at the effective date of July 12, 1996. Additionally, on September 26, 1996, the Company granted a total of 189,550 options to non-officer employees at an option price of $4.75 which represented market price on that date. Item 6. Exhibits and Reports on Form 8-K Exhibit 27 - Financial Data Schedule (for SEC use only) No reports on Form 8-K were filed during the period. - 11 - 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BROCK INTERNATIONAL, INC. DATE: November 11, 1996 /s/ Judith A. Vitale ---------------------------------- Judith A. Vitale Director Finance and Adminstration EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q FOR QUARTER ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 873 5,790 5,766 0 0 13,458 3,862 0 22,708 3,841 0 0 0 9 18,712 22,708 8,132 18,517 1,659 8,608 12,787 575 108 (2,813) (1,055) (1,758) 0 0 0 (1,758) (0.35) (0.35) A/R AND PPE ASSET VALUES REPRESENT NET AMOUNTS
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