-----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, CUUJwcrNpAcoS2vDI9AG+g2lgWgBlBrAb6vrdNR3GkFJ7uJkYDoK2aT+dw5e8H2Y BVZsDGuLTkK4SujKMsApdA== 0000950148-97-001846.txt : 19970725 0000950148-97-001846.hdr.sgml : 19970725 ACCESSION NUMBER: 0000950148-97-001846 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970724 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELTRON INTERNATIONAL INC CENTRAL INDEX KEY: 0000915910 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE MACHINES, NEC [3579] IRS NUMBER: 954302537 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23342 FILM NUMBER: 97644689 BUSINESS ADDRESS: STREET 1: 41 MORELAND RD CITY: SIMI VALLEY STATE: CA ZIP: 93065 BUSINESS PHONE: 8055791800 10-Q 1 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q ------------------- (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _____________________ to __________________ ------------------- Commission file number: 0-23342 ------------------- ELTRON INTERNATIONAL, INC. (Exact name of business issuer as specified in its charter) California 95-4302537 (State or other jurisdiction of (IRS Employer) incorporation or organization) Identification No.) 41 Moreland Road Simi Valley, California 93065 (Address of principal executive offices) (805) 579-1800 (Issuer's telephone number) ------------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ---- ---- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No ---- ---- ------------------- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date 7,375,722 common shares as of July 15, 1997. ------------------- Transitional Small Business Disclosure Format (Check one): Yes ; No X. -- -- 2 ELTRON INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS
December 31, June 30, 1996 1997 ----------- ----------- CURRENT ASSETS: Cash ............................................................... $ 1,291,396 $ 2,543,976 Short term investments ............................................. 7,945,254 8,604,610 Accounts receivable, net of allowance for doubtful accounts of $452,234 and $570,912, respectively ................................ 16,331,124 18,062,357 Inventories ........................................................ 16,947,780 19,030,669 Prepaid expenses and other current assets .......................... 700,145 843,824 Deferred tax asset ................................................. 1,291,468 1,291,468 Total current assets ........................................... 44,507,167 50,376,904 PROPERTY AND EQUIPMENT, net .......................................... 7,724,700 8,681,206 DIFFERENCE BETWEEN COST AND FAIR VALUE OF NET ASSETS ACQUIRED ........ 1,125,164 921,405 OTHER ASSETS ......................................................... 888,028 673,911 ----------- ----------- $54,245,059 $60,653,426 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ................................................... $ 7,041,719 $ 6,275,599 Accrued liabilities ................................................ 1,179,415 1,571,065 Accrued compensation ............................................... 1,311,862 1,305,229 Deferred Service Contract Revenue .................................. 349,516 261,892 Income Taxes Payable ............................................... -- 970,013 ----------- ----------- Total current liabilities ............................................ 9,882,512 10,383,798 LONG TERM OBLIGATION ................................................. 811,313 867,420 SHAREHOLDERS' EQUITY: Preferred stock, 10,000,000 shares authorized of which none are outstanding .................................................. -- -- Common stock, no par value: Authorized -- 30,000,000 shares Issued and outstanding 7,302,294 and 7,369,485 shares, respectively ................................................... 24,238,345 24,407,603 Cumulative translation adjustment .................................. 25,400 (231,297) Retained earnings .................................................. 19,287,489 25,225,902 ----------- ----------- Total shareholders' equity ..................................... 43,551,234 49,402,208 ----------- ----------- $54,245,059 $60,653,426 =========== ===========
The accompanying notes are an integral part of these financial statements 3 ELTRON INTERNATIONAL, INC. STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1996 1997 1996 1997 ----------- ----------- ----------- ----------- SALES .......................................... $22,729,508 $27,513,022 $41,748,693 $50,682,593 COST OF SALES .................................. 12,788,900 15,435,621 23,040,441 28,294,939 ----------- ----------- ----------- ----------- Gross profit ............................... 9,940,608 12,077,401 18,708,252 22,387,654 OPERATING EXPENSES: Selling, general and administrative .......... 4,161,827 4,883,530 7,897,495 9,632,034 Research and product development ............. 1,279,083 1,894,671 2,516,554 3,431,236 Write off of acquired in process technology and other costs associated with acquisitions -- -- 3,198,555 -- INCOME FROM OPERATIONS ......................... 4,499,698 5,299,200 5,095,648 9,324,384 OTHER (INCOME) EXPENSE: Interest, net ................................ (19,315) (62,122) (69,590) (174,968) Other, net ................................... -- 38,314 7,644 38,314 ----------- ----------- ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES ....... 4,519,013 5,323,008 5,157,594 9,461,038 PROVISION FOR INCOME TAXES ..................... 1,694,630 1,969,513 3,075,999 3,499,158 ----------- ----------- ----------- ----------- NET INCOME ..................................... $ 2,824,383 3,353,495 $ 2,081,595 5,961,880 ----------- ----------- ----------- ----------- NET INCOME PER COMMON SHARE .................... $ 0.36 $ 0.43 $ 0.27 $ 0.76 =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING ........................ 7,755,725 7,887,298 7,768,861 7,883,697 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements 4 ELTRON INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
1996 1997 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ..................................................... $ 2,081,595 $ 5,961,880 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization .............................. 648,666 1,310,725 Write off of purchased in-process technology ............... 2,500,000 -- Changes in assets and liabilities; Net of effect from acquisitions: Accounts receivable, net ................................. (3,121,449) (1,984,239) Inventories .............................................. (1,555,904) (2,082,887) Prepaids and other assets ................................ 228,387 (70,438) Accounts payable ......................................... (781,818) (766,120) Accounts payable to shareholder .......................... (775,936) -- Accrued liabilities and compensation ..................... 832,214 385,017 Accrued Income Taxes Payable ............................. -- 970,013 ----------- ----------- Net cash provided by operating activities ........................ 55,755 3,723,951 CASH FROM INVESTING ACTIVITIES: Purchases of property and equipment ............................ (2,440,219) (2,063,471) Cash paid in connection with acquisition of Privilege .......... (3,196,373) -- Sale (purchase) of short term investments, net ................. 9,239,998 (659,356) ----------- ----------- Net cash provided by (used in) investing activities ............ 3,603,406 (2,722,827) CASH FROM FINANCING ACTIVITIES: Net borrowings (repayments) of long term debt .................. (16,611) 56,107 Repayments under line of credit ................................ (724,000) -- Common stock purchased in connection with merger of RJS ........ (775,581) -- Proceeds from sale of stock .................................... 429,787 422,274 ----------- ----------- Net cash provided by (used in) financing activities ............ (1,086,405) 478,381 EFFECT OF EXCHANGE RATE ON CASH .................................. (23,291) (226,925) ----------- ----------- NET INCREASE IN CASH ............................................. 2,549,465 1,252,580 CASH BALANCE, beginning of period ................................ 729,055 1,291,396 ----------- ----------- CASH BALANCE, end of period ...................................... $ 3,278,520 $ 2,543,976) =========== =========== Non-cash transaction: Settlement of receivable with common stock ..................... -- $ 253,016
The accompanying notes are an integral part of these financial statements 5 ELTRON INTERNATIONAL, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 1. BASIS OF PRESENTATION The financial statements of Eltron International, Inc. (the "Company") included herein are unaudited; however, they contain all normal recurring accruals which, in the opinion of management, are necessary to present fairly the financial position of the Company at June 30, 1997 and the results of operations and cash flows for the three and six month periods ended June 30, 1996 and June 30, 1997. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the three and six month period ended June 30, 1997 are not necessarily indicative of the results to be expected for future quarters or the full year. The accompanying financial statements do not include footnotes and certain financial presentations normally required under generally accepted accounting principles and, therefore, should be read in conjunction with the Company's financial statements for the year ended December 31, 1996 as filed in the Company's annual report on Form 10-K. 2. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. Inventories consist of the following: December 31, June 30, 1996 1997 ----------- ----------- Subassemblies and raw materials ............... $10,958,660 $12,347,907 Work in process ............................... 1,924,981 2,157,212 Finished goods ................................ 4,064,139 4,525,550 ----------- ----------- $16,947,780 $19,030,669 3. RECLASSIFICATIONS Certain amounts in the prior period financial statements have been reclassified to conform to the current period's presentation. 4. STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share." This statement required dual presentation of newly defined basic and diluted earnings per share ("EPS") on the face of the income statements for all entities with complex capital structures. The accounting standard is effective for all fiscal years ending after December 15, 1997 and requires restatement of all prior period EPS presented. Earlier application is not permitted. SFAS No. 128 specifies the computation, presentation and disclosure requirements for EPS. The implementation of SFAS 128 is not expected to have a material impact on data previously presented by the Company. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Eltron International, Inc. and subsidiaries (the "Company" or "Eltron") design, manufacture and market a full range of direct thermal and thermal transfer bar code printers, plastic card printers, related accessories, software, and custom print engines for applications such as airline ticketing. Eltron also manufactures and distributes a full range of supplies designed for use with its printers. The Company believes that its success to date has resulted from its ability to offer high-quality printers and related products with features comparable to or exceeding those of available competing products at lower cost. The Company's products are sold through multiple distribution channels that include value added resellers, system integrators, original equipment manufacturers and independent distributors located in more than 70 countries. Industries for which the Company believes its printers are particularly well-suited include shipping and package delivery, retail distribution and point of sale, healthcare, manufacturing, financial services, security and access control, and governmental licensing. The Company currently focuses its sales efforts in these markets, although it continues to explore the potential for new markets in which it can apply its expertise in the design and manufacture of high quality, low cost thermal printers. STATEMENTS OF OPERATIONS DATA: The following table presents certain information derived from the Company's Statements of Operations for the three and six month periods ended June 30, 1996 and 1997, expressed as a percentage of sales.
Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 1996 1997 1996 1997 ----- ----- ----- ----- SALES ........................................... 100.0% 100.0% 100.0% 100.0% COST OF SALES ................................... 56.3 56.1 55.2 55.8 ----- ----- ----- ----- Gross profit ................................ 43.7 43.9 44.8 44.2 OPERATING EXPENSES: Selling, general and administrative ........... 18.3 17.7 18.9 19.0 Research and product development .............. 5.6 6.9 6.0 6.8 Write off acquired in process technology and other costs associated with acquisitions .... 0.0 0.0 7.7 0.0 ----- ----- ----- ----- INCOME FROM OPERATIONS .......................... 19.8 19.3 12.2 18.4 OTHER (INCOME) EXPENSE: Interest, net ................................. (0.1) (0.1) (0.2) (0.3) ----- ----- ----- ----- INCOME BEFORE PROVISION FOR INCOME TAXES ........ 19.9 19.4 12.4 18.7 PROVISION FOR INCOME TAXES ...................... 7.5 7.2 7.4 6.9 ----- ----- ----- ----- NET INCOME ...................................... 12.4% 12.2% 5.0% 11.8% ===== ===== ===== =====
7 COMPARISON OF THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997: Sales: Sales for the three months ended June 30, 1997 totaled $27.5 million, an increase of $4.8 million or 21% over sales for the same period in 1996 which totaled $22.7 million. Sales for the six months ended June 30, 1997 totaled $50.7 million, an increase of $9.0 million or over sales for the same period in 1996 which totaled $41.7 million. This increase in sales can be attributed to wider market acceptance of the Company's bar code printers and higher than anticipated demand for the Company's plastic card printers. In both 1996 and 1997 sales of printers have been enhanced by increased sales to UPS, which contributed approximately $8.6 million and $6.7 million to sales for the three month periods ended June 30, 1996 and 1997, respectively. Sales to UPS contributed approximately $14.7 million and $11.5 million to sales for the six month periods ended June 30, 1996 and 1997, respectively. Although the Company had outstanding orders from UPS in excess of $4.3 million as of June 30, 1997, there is no obligation on the part of UPS to place any further orders with Eltron. The Company has derived a significant portion of its revenues from UPS and may in the future be dependent on UPS, or other significant customers, the loss of any one of which could materially and adversely affect the Company's financial position, results of operations and cash flows. No customer other than UPS contributed greater than 10% of the Company's net sales in the second quarter of 1996 or 1997. Gross Profit: Gross profit for the three months ended June 30, 1997 totaled $12.1 million, an increase of $2.1 million or 21% over gross profit for the same period in 1996. As a percentage of revenues, gross profit remained constant at 44% for the second quarter. Gross profit for the six months ended June 30, 1997 totaled $22.4 million, an increase of $3.7 million or 20% over gross profit for the same period in 1996. As a percentage of revenues, gross profit decreased 1% to 44% for the first six months of 1997 from 45% for the same period in 1996. Sales to high volume customers or OEMs are typically transacted at a price which yields a lower gross margin, although the incremental selling costs associated with these transactions are generally less than those associated with a non-OEM sale. Sales of supplies are typically made at lower gross margins, as a result of general market conditions and the commodity nature of these products. Eltron's OEM sales and sales of supplies have been increasing. As a result, management believes that it is not reasonable to assume that the 44% gross margin exhibited in the second quarter of 1997 will necessarily be maintained in the future. Selling, General and Administrative Expenses: Selling, general and administrative expenses as a percentage of sales were 18% for three months ended June 30, 1997 and 1996. On an absolute dollar basis, selling, general and administrative expenses increased $.7 million or 17%. Selling, general and administrative expenses as a percentage of sales were 19% for the six months ended June 30, 1997 and 1996. On an absolute dollar basis, selling, general and administrative expenses increased $1.7 million or 22%. The Company currently anticipates that selling, general and administrative expense will increase in future quarters but may decrease as a percentage of sales. The actual amount spent will depend on a variety of factors, including the Company's level of operations, and the number of new markets the Company chooses to enter. Research and Development Expenses: Research and development expenses as a percentage of sales were 7% and 6% for the three months ended June 30, 1997 and 1996, respectively. Research and development expenses increased as a percentage of sales in the second quarter of 1997 when compared to the second quarter of 1996. This increase related primarily to increase efforts to develop new products. 8 The Company currently anticipates that research and product development expense will increase in future quarters and may increase as a percentage of sales. The actual amount spent will depend on a variety of factors, including the Company's level of operations, and the number of product development projects that it embarks upon. Write Off of Acquired In-Process Technology and Other Costs Associated With Acquisitions: In the first quarter of 1996, in-process technology valued at $2.5 million was purchased in connection with the acquisition of Privilege and expenses immediately. In addition, costs related to the acquisition of Privilege and RJS totaling $0.7 million were incurred and expenses during the first quarter of 1996. These costs are not deductible for income tax purposes. Provision for Income Taxes: The provision for income taxes for the three months ended June 30, 1997 was $2.0 million or 37% of pretax income, which reflects the utilization of certain tax credits and current benefit of deferred tax assets under SFAS 109. The Company's provision for income taxes for the three months ended June 30, 1996 was $1.7 million or 37% of pretax income. The provision for income taxes for the six months ended June 30, 1997 was $3.5 million, or approximately 37% of pretax income which reflects the utilization of certain tax credits and current benefit of deferred tax assets under SFAS 109. The Company's provision for income taxes for the first six months of 1996 was $3.1 million or 60% of pretax income, which reflects the utilization of certain tax credits and current benefit of deferred tax assets under SFAS 109 which have been substantially offset by purchased in-process technology and other acquisition related costs totaling $3.2 million which were expensed in the first quarter of 1996. The tax effect of these non-deductible expenses were fully reflected in the first quarter of 1996 and are included in results of operations for the six month period ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES Historically, Eltron's primary source of liquidity has been cash flow from operations and cash provided by public offerings of its common stock which generated $6.1 million and $16.7 million in 1994 and 1995, respectively. During the six months ended June 30, 1997, operating activities provided cash totaling $3.7 million as compared to $56,000 during the same period in 1996. Significant changes in the first six months of 1997 included cash used resulting from increases in accounts receivable and inventory of $1.7 million and $2.1 million, respectively, which was partially offset by increases in income taxes payables and accrued liability totaling $1.3 million. During the six months ended June 30, 1997, investing activities used cash totaling $2.7 million. This was primarily due to the purchase of property and equipment of $2.1 million. In addition, the Company made net purchases of short term investments totaling $.7 million during the first six months of 1997 as compared to net purchases of $9.2 million in short term investments during the first six months of 1996. During the six months ended June 30, 1997, financing activities provided cash totaling $.5 million as compared to $1.1 million used during the same period in 1996. In 1996, cash from financing activities was used for the purchase of common stock in connection with the merger of RJS of $.8 million and $.7 million was repaid under the line of credit. In 1997, Eltron entered a revolving credit agreement with a bank. The revolving credit facility allows Eltron to borrow up to $8 million on an unsecured basis. Borrowings under the revolving credit facility would bear interest at the Bank's prime rate. Under the terms of the revolving credit facility, Eltron is not able to enter into certain transactions or declare dividends without receiving prior written consent from the Bank and is required to comply with certain covenants as well as maintain certain debt to net worth ratios, current ratios and minimum net worth requirements. The revolving credit agreement expires in May 1998. The Company did not have any material capital commitments as of June 30, 1997. The Company believes that cash provided by operating activities, existing cash and short-term investments will be sufficient to fund the Company's capital needs for the foreseeable future. STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share." This statement requires dual presentation of newly defined basic and diluted earnings per share ("EPS") on the face of the income statement for all entities with complex capital structures. The accounting standard is effective for all fiscal years ending after December 15, 1997 and requires restatement of all prior period EPS presented. Earlier application is not permitted. SFAS No. 128 specifies the computation, presentation and disclosure requirements for EPS. The implementation of SFAS 128 is not expected to have a material impact on data previously presented by the Company. 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, thereto duly authorized. ELTRON INTERNATIONAL, INC. Date: July 24, 1997 By: /s/ DONALD K. SKINNER --------------------------------- Donald K. Skinner Chairman of the Board and Chief Executive Officer Date: July 24, 1997 By: /s/ DANIEL C. TOOMEY, JR. --------------------------------- Daniel C. Toomey, Jr. Vice President Finance and Chief Financial Officer EX-11.1 2 EXHIBIT 11.1 1 EXHIBIT 11.1 COMPUTATION OF EARNINGS PER SHARE --------------------------------- June 30, June 30, 1996 1997 ---------- ---------- Net income (loss) $2,824,383 $3,353,495 ========== ========== Weighted average shares outstanding 7,214,642 7,371,366 Number of shares calculated using the treasury stock method in accordance with APB15 541,084 515,932 ---------- ---------- Total weighted average shares outstanding 7,752,634 7,887,298 ========== ========== Earnings per share (loss) $ 0.36 $ 0.43 ========== ========== EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 2,544 8,605 18,062 571 19,031 50,377 12,251 3,570 60,653 10,384 0 0 0 24,407 0 60,653 27,513 27,513 15,436 22,214 38 0 0 5,323 1,970 3,353 0 0 0 3,353 .43 .43
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