<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 OR 15 (d) of the Securities
- - - - - --- Exchange Act of 1934
For the six months ended May 3, 1996
Or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- - - - - --- Exchange Act of 1934
For the transition period from ________________________ to_________________
Commission File No. 33-99278
AUTOLOGIC INFORMATION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3855697
- - - - - ---------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No,)
1050 Rancho Conejo Boulevard, Thousand Oaks, CA 91360
- - - - - ------------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 498-9611
</TABLE>
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, and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes x No
--- ---
The number of shares of Common Stock, $0.01 par value, outstanding as of June
4, 1996 was 5,786,870.
<PAGE> 2
AUTOLOGIC INFORMATION INTERNATIONAL, INC
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statement of Stockholders' Equity 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
------------------------------ -----------------------------
May 3, April 28, May 3, April 28,
1996 1995 1996 1995
------ --------- ------ ---------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES
Systems and equipment $ 18,967 $ 12,002 $ 30,840 $ 23,569
Customer service and support 6,977 4,701 11,651 9,134
-------------- -------------- -------------- ------------
25,944 16,703 42,491 32,703
-------------- -------------- -------------- ------------
OPERATING COSTS AND EXPENSES
Cost of systems and equipment 11,335 7,211 19,872 14,059
Cost of customer service and support 4,949 4,165 9,269 8,142
Operating expenses 7,950 5,154 13,253 9,936
Restructuring charge -- -- 700 --
Charges from Volt
Rent 201 425 620 851
General and administrative 9 226 206 450
-------------- -------------- -------------- ------------
24,444 17,181 43,920 33,438
-------------- -------------- -------------- ------------
OPERATING INCOME (LOSS) 1,500 (478) (1,429) (735)
-------------- ------------- ------------- ------------
OTHER INCOME (EXPENSE)
Interest income 108 -- 149 --
Interest expense charged by Volt -- (623) (583) (1,267)
Foreign exchange (loss)/gain (161) 29 (343) (24)
Other, net (118) 54 (360) (34)
-------------- -------------- ------------- ------------
(171) (540) (1,137) (1,325)
-------------- -------------- ------------- -------------
INCOME (LOSS) BEFORE
INCOME TAXES 1,329 (1,018) (2,566) (2,060)
INCOME TAX PROVISION 489 280 341 470
-------------- -------------- -------------- -------------
NET INCOME (LOSS) $ 840 $ (1,298) $ (2,907) $ (2,530)
============== ============== ============= =============
NET INCOME (LOSS) PER SHARE $ 0.15 $ (0.39) $ (0.63) $ (0.76)
============== ============== ============= =============
Average number of shares outstanding 5,775 3,337 4,650 3,337
============== ============== ============== ==============
</TABLE>
See accompanying notes
3
<PAGE> 4
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
May 3, November 3,
1996 1995
------------ -----------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,844 $ 2,542
Accounts receivable less allowance for doubtful
accounts of $1,790 and $651 19,431 15,205
Inventories 11,056 9,318
Deferred income tax benefit 5,110 116
Prepaid expenses and other assets 3,094 1,014
--------------- ---------------
Total current assets 48,535 28,195
PROPERTY AND EQUIPMENT, at cost net of
accumulated depreciation and amortization
of $4,107 and $3,852 5,574 3,444
DEFERRED INCOME TAX BENEFIT 2,422 --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net of amortization of $138 2,615 --
OTHER ASSETS 105 52
--------------- ---------------
$ 59,251 $ 31,691
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ -- $ 707
Accounts payable 7,869 5,737
Payable to Volt 777 88,109
Accrued expenses 6,178 3,654
Restructuring costs 2,388 --
Customer advances 3,627 2,657
Income taxes payable 368 880
--------------- -------------
Total current liabilities 21,207 101,744
--------------- -------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, par value $0.01
Authorized-1,000,000 shares; issued - none -- --
Common stock, par value $0.01
Authorized - 12,000,000 shares; issued and outstanding 5,786,870 58 133
Paid-in capital 112,614 1,535
Accumulated deficit (74,628) (71,721)
--------------- --------------
38,044 (70,053)
--------------- --------------
$ 59,251 $ 31,691
=============== =============
</TABLE>
See accompanying notes.
4
<PAGE> 5
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
$0.01 Par Value
---------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Balance at November 3, 1995 -- $ 133 $ 1,535 $ (71,721)
Contribution to capital of amounts
payable to Volt -- -- 89,525 --
Issuance of 3,337,000 shares of Common
Stock to Volt in connection with merger
of Autologic Incorporated and transfer
of stock of Volt Subsidiaries 3,337,000 (100) 100 --
Issuance of 2,429,870 shares of Common
Stock to Triple-I stockholders to purchase
the net assets of Triple-I, net of $357,000
of expenses related to registering shares 2,429,870 25 20,272 --
Value of stock options issued by the
Company in exchange for outstanding stock
options issued by Triple-I -- -- 1,027 --
Stock issued upon exercise of stock options 20,000 -- 155 --
Net loss -- -- -- (2,907)
--------------- --------------- ------------- -----------
Balance at May 3, 1996 5,786,870 $ 58 $ 112,614 $ (74,628)
=============== ============== ============= ===========
</TABLE>
See accompanying notes
5
<PAGE> 6
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------------
May 3, April 28,
1996 1995
------ ---------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,907) $ (2,530)
Adjustments to reconcile net loss to net cash
provided by (applied to) operating activities:
Depreciation and amortization 1,257 747
Provision for doubtful receivables 91 228
(Gains) losses on foreign currency translations (373) 232
Gains on dispositions of property and equipment (23) (17)
Deferred income tax benefit (304) --
Changes in operating assets and liabilities:
Decrease in accounts receivable 324 1,873
(Increase) decrease in inventories 1,251 (525)
Increase in prepaid expenses and
other assets (1,627) (107)
Increase (decrease) in accounts payable 868 (1,059)
Decrease in accrued expenses (292) (712)
Increase in customer advances 139 1,162
Increase (decrease) in income taxes payable 6 261
Increase in payable to Volt 777 1,788
--------------- -------------
NET CASH PROVIDED BY (APPLIED TO) OPERATING
ACTIVITIES (813) 1,341
---------------- --------------
</TABLE>
6
<PAGE> 7
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
For the Six Months Ended
May 3, April 28,
1996 1995
---- ---------
(Dollars in thousands)
<S> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash of acquired companies (Triple-I) $ 8,764 $ --
Proceeds from disposal of property
and equipment -- 244
Purchases of property and equipment (854) (494)
------------- -------------
NET CASH PROVIDED BY (APPLIED
TO) INVESTING ACTIVITIES 7,910 (250)
-------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Decrease in notes payable (680) (92)
Proceeds from exercise of stock options 155 --
-------------- --------------
NET CASH PROVIDED BY (APPLIED
TO) FINANCING ACTIVITIES (525) (92)
------------- -------------
Effect of exchange rate changes on cash 730 (229)
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,302 770
Cash and cash equivalents, beginning of period 2,542 2,242
-------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,844 $ 3,012
============== ============
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $ 10 $ 20
Income taxes 660 261
============== ============
</TABLE>
See accompanying notes
7
<PAGE> 8
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A--DESCRIPTION OF BUSINESS
Autologic Information International, Inc. ("the Company") and its subsidiaries
design, develop, manufacture, assemble, integrate, market, sell and service
computerized image-setting and publication systems equipment and software that
automate the various prepress production steps in the publishing process. The
products are primarily marketed and sold to the newspaper, publishing and
commercial printing industries and to companies and other organizations having
internal publishing facilities.
NOTE B--FORMATION OF THE COMPANY AND MERGER
The Company was incorporated in Delaware on September 5, 1995 as a wholly-owned
subsidiary of Volt Information Sciences, Inc. ("Volt"). On January 29, 1996,
pursuant to the terms of an Agreement and Plan of Merger ("the Merger
Agreement") dated October 5, 1995, as subsequently amended, among the Company,
Volt and Information International, Inc. ("Triple-I"), Volt contributed to the
capital of Autologic, Incorporated ("Autologic") and certain foreign
subsidiaries of Volt ("Volt Subsidiaries") the amounts they or their
subsidiaries owed to Volt and subsequent thereto caused Autologic to merge with
and into the Company. Volt also assigned to the Company all of the issued and
outstanding shares of the Volt Subsidiaries. In addition, pursuant to the
Merger Agreement on such date, following approval by its stockholders, Triple-I
merged with and into the Company.
Pursuant to the Merger Agreement, Volt received 3,337,000 shares of the
Company's Common Stock and the stockholders of Triple-I received 2,429,870
shares of the Company's Common Stock based on one share of the Company being
issued for each outstanding share of Triple-I.
On June 25, 1995, the date the general terms of the merger were agreed to and
announced, Triple-I had outstanding options to purchase approximately 590,000
shares of its Common Stock. In accordance with Triple-I's stock option plans,
each outstanding Triple-I option automatically became fully vested and
immediately exercisable upon consummation of the merger. As part of the Merger
Agreement, the parties agreed to a formula to limit the dilution of Volt's
percentage ownership in the Company as a result of the exercise of those
Triple-I options. Under that formula, Volt is to receive 100 shares of the
Company's Common Stock for every 590 shares of the Company Common Stock issued
with respect to Triple-I options exercised subsequent to June 25, 1995, up to a
maximum of 100,000 shares. Since June 25, 1995, 44,250 shares have been issued
upon the exercise of Triple-I options, and Volt has received 4,000 shares and
is entitled to receive an additional 3,500 shares with respect to such
exercises. Accordingly, Volt through its wholly-owned subsidiary Nuco, I,
Ltd., owns beneficially 3,395,500 shares (59%) of the Company's Common Stock
(including 58,500 shares issued to Volt as a result of Triple-I common stock
owned by Volt prior to the Merger).
As the Company, Autologic, and the Volt Subsidiaries were under common control,
the merger of Autologic and the transfer of the stock of the Volt Subsidiaries
to the Company has been accounted for on a pooling of interest basis.
Accordingly, the assets and liabilities of such entities and their stockholders'
equity accounts have been accounted for at their historical carrying amounts and
the accompanying statement of operations reflects the results of operations of
such entities for such periods. The merger of Triple-I has been accounted for
under the purchase method of accounting, and, accordingly, the purchase price,
which was based on the quoted market price of the Triple-I Common Stock at the
time the general terms of the acquisition were agreed to and announced, plus the
value of stock options issued in exchange for outstanding stock options of
Triple-I, has been allocated to net assets based upon their estimated fair
values. A $2,753,000 excess of the purchase price over the estimated fair
values of Triple-I's identifiable assets, including the estimated future tax
benefits of Triple-I's net operating loss carryforwards and deductible temporary
differences was recorded on the effective date of the merger and is being
amortized over a five-year period. Such excess has been reduced by estimated
future tax benefits of Autologic resulting from previously unrecognized
deductible temporary differences at date of acquisition. The operating results
of Triple-I have been included in the Company's condensed consolidated financial
statements since the date of acquisition, which was limited to five days of
operations for the first quarter of 1996, but are included for the whole second
quarter of 1996. A liability for restructuring costs at May 3, 1996 of
$2,388,000 provides for estimated costs related to closing of certain facilities
of Triple-I.
8
<PAGE> 9
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
NOTE B--FORMATION OF THE COMPANY AND MERGER--Continued
The accompanying statement of operations for the six months ended May 3, 1996
includes a charge of $700,000 related principally to the termination of
Autologic employees and the restructuring of operations in connection with the
merger.
The following pro forma information presents a summary of consolidated results
of operations of the Company as if the merger had occurred at the beginning of
each of the respective periods presented with pro forma adjustments for the
amortization of the excess of purchase price over net assets acquired, the
elimination of interest expense and a portion of rent previously charged by
Volt, and certain income tax adjustments. The pro forma financial information
is not necessarily indicative of the results of operations as they would have
been had the transactions been effected on the assumed dates, or of future
results of operations of the combined entities.
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
May 3, April 28,
1996 1995
---- ----
(Dollars in thousands, except per share amounts)
<S> <C> <C>
Revenues $52,449 $48,868
Loss from continuing
operations (255) (23)
Net loss (255) (1,023)
Loss from continuing
operations per share (0.04) --
Net loss per share (0.04) (0.18)
</TABLE>
NOTE C-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year: The Company's fiscal year consists of the 52 or 53 weeks ending on
the Friday nearest October 31.
Consolidation: The condensed consolidated financial statements include the
accounts of the Company and its subsidiaries after elimination of all
significant intercompany balances and transactions.
Revenue Recognition: Revenues are recognized when products are shipped and
when services are rendered.
Inventories: Inventories are stated at the lower of cost (first-in first-out)
or market.
Property and Equipment: Property and equipment are stated at cost, net of
depreciation and amortization which are provided on the straight-line method
over their estimated useful lives, generally as follows:
Equipment - 3 to 7 years
Leasehold improvements- length of lease or life of asset, whichever is
shorter
9
<PAGE> 10
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
NOTE C--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Translation of Foreign Currencies: The U.S. dollar is the Company's functional
currency throughout the world. Foreign currency gains and losses resulting
from the translation of the foreign currency financial statements of the
subsidiaries and foreign currency transactions are included in the results of
operations.
Per Share Data: Per share data are computed on the basis of the weighted
average number of shares of common stock outstanding and, if applicable, the
assumed exercise of dilutive outstanding stock options using the treasury stock
method.
NOTE D--INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
May 3, November 3,
1996 1995
-------- -----------
(Dollars in thousands)
<S> <C> <C>
Service parts $ 1,765 $ 1,137
Materials 4,039 3,374
Work-in-process 2,735 1,431
Finished goods 2,517 3,376
--------------- -------------
$ 11,056 $ 9,318
=============== =============
</TABLE>
NOTE E--INCOME TAXES
The Company applies the liability method of accounting for deferred taxes in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities and are measured using tax rates and
tax laws that are scheduled to be in effect when the differences are scheduled
to reverse.
Prior to the Merger, Autologic and its subsidiaries were included in the
consolidated federal income tax return of Volt and were therefore jointly and
severally liable with Volt for any income taxes payable by the consolidated
group. Volt has indemnified the Company against any loss or liability that may
result from such inclusion. Federal income taxes were provided for in the
accompanying condensed consolidated financial statements as if the Company and
its domestic subsidiary had filed their own consolidated income tax returns
prior to the Merger.
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
--------------------------- ---------------------------
May 3, April 28, May 3, April 28,
1996 1995 1996 1995
-------- -------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Significant components of the income
tax provision (benefit) attributable to
operations are as follows:
Current Taxes -
Foreign $ 611 $ 279 $ 645 $ 468
Deferred Taxes -
Federal (140) -- (303) --
State and local 18 1 (1) 2
Foreign -- -- -- --
-------------- -------------- -------------- ------------
Total income tax provision $ 489 $ 280 $ 341 $ 470
============= ============= ============ =============
</TABLE>
10
<PAGE> 11
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
NOTE E--INCOME TAXES--Continued
Deferred income taxes reflect the net tax effects of changes in the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
As described in Note B, as of the date of acquisition, a deferred tax asset was
established representing the estimated future tax benefit anticipated to be
realized from the use of Triple-I's net operating loss carryforward and
deductible temporary differences and the Company's deductible temporary
differences existing at the date of merger to reduce anticipated taxable income
of the Company to be realized subsequent to acquisition. The Company believes
that it is more likely than not that such tax benefits will be realized based
on the combined companies' past and anticipated future results of operations
and after considering provisions of the tax law, such as the change in
ownership provisions, that restrict the future use of Triple-I's tax benefits.
NOTE F--STOCK OPTIONS
Pursuant to the Merger Agreement, the Company has adopted the Triple-I 1976
Employees' Stock Option Incentive Plan ("Employees' Plan"), and the Triple-I
1992 Directors' Stock Option Plan ("Directors' Plan"), and has established a
1995 Employees' Incentive Stock Option Plan ("New Plan"). Under the former
Triple-I plans, shares of the Company will now be issued instead of the shares
of Triple-I. A summary of each of these plans follows.
Employees' Plan: The Plan provided for the granting of options to purchase
Triple-I's common stock at a price equal to at least 100% of the fair market
value of Triple-I's stock on the date of grant. As of May 3, 1996, options to
purchase 474,000 shares of the Company's common stock at exercise prices
ranging from $7.25 to $9.75 per share are outstanding. All such options are
fully vested.
Directors' Plan: The Plan provided for the granting of options to purchase
Triple-I's common stock at a price equal to at least 100% of the fair market
value of Triple-I's stock on the date of grant. As of May 3, 1996, options to
purchase 16,000 shares of the Company's common stock at exercise prices ranging
from $7.25 to $11.50 per share are outstanding. All such options are fully
vested.
New Plan: On the Merger date the Company adopted a stock option plan that
provides for the granting of options to purchase up to 150,000 shares of the
Company's common stock at a price equal to at least 100% of the fair market
value of the Company's stock on the date of grant to employees, directors or
consultants of the Company, its subsidiaries and Volt. The options may be
exercised for periods up to ten years, and options granted to holders of over
10% of the shares of the Company or Volt may be exercised during a five-year
period beginning after one year from the date of grant. As of May 3, 1996,
options to purchase 92,500 shares of the Company's common stock which were
granted to employees of the Company at a price of $12.00 per share and options
to purchase 40,500 shares of the Company common stock which were granted to
officers of Volt (18,000 at $13.20 per share and 22,500 at $12.00 per share)
are outstanding. Options were granted to officers of Volt in connection with
the acquisition of Triple-I.
NOTE G--PREFERRED STOCK
The Preferred Stock authorized is issuable in one or more series from
time-to-time at the discretion of the Company's Board of Directors. The Board
is authorized, with respect to each series, to fix its designation, powers,
preferences, rights and limitations.
11
<PAGE> 12
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
NOTE H--CHARGES FROM VOLT
In addition to rent expense, Volt allocated to Autologic a proportional share
of corporate general and administrative expenses on the basis of assets
employed and interest on the payable to Volt on a non-compound basis.
Subsequent to the merger, the rent is significantly reduced (see Note I),
general and administrative service are being substantially performed by the
Company's internal staff and third-party providers, and due to the contribution
to capital, interest charged by Volt has ceased.
During the three month period ended May 3, 1996, the Company incurred $9,000 in
legal fees payable to Volt under a $3,000 per month retainer arrangement that
provides the Company limited access to Volt's in-house legal staff.
As of May 3, 1996, the Company had a $777,000 payable to Volt due as a result
of pre-merger business, including certain merger costs incurred by the Company
and paid by Volt.
NOTE I--RELATED PARTY LEASE
A new three-year lease, commencing on the effective date of the Merger, was
entered into between the Company, as lessee, and a wholly-owned subsidiary of
Volt, as lessor, for space previously occupied by Autologic as its headquarters
and manufacturing facility in Thousand Oaks, California. The lease provides
for an initial monthly rental of $67,107 for a six-month period, subject to
adjustment by the Board of Directors of the Company within seven months after
the commencement date of the lease, as to the base rent, the term of the lease
and/or the amount of space rented. The lease provides for further adjustment
not earlier than two years after such date and from time-to-time thereafter.
The lease also provides for the Company to pay all real estate taxes, insurance,
utilities and repairs related to the facility.
12
<PAGE> 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
General
As set forth in Note B in the accompanying financial statements, the Company's
reported results of operations for all periods prior to January 29, 1996
reflect only the results of operations of Autologic (and, accordingly do not
reflect the results of Triple-I prior to January 29, 1996). In addition, such
results do not give effect to the elimination of interest theretofore charged
by Volt to Autologic on intercompany borrowings (which were contributed to
Autologic's capital prior to the merger on January 29, 1996), the reduction in
rental of a facility leased from Volt (under a new lease entered into on
January 29, 1996 in connection with the merger), or cost savings (such as from
staff and facilities reductions and the ability of existing staff to absorb
general and administrative functions previously provided by Volt and charged to
Autologic) and other synergies implemented, and being implemented, since the
merger. Accordingly, results prior to January 29, 1996 and the Company's
balance sheet as at November 3, 1995 are not reflective of the operations and
financial position of the Company as presently constituted.
Three Months Ended May 3, 1996 Compared to Three Months Ended April 28, 1995
The $9,241,000 increase in revenues in the second quarter of fiscal 1996
period resulted primarily from the integration of the two businesses (thus
adding Triple-I's revenues to Autologic's revenues) and approximately $1,000,000
of increased combined revenues (including approximately $375,000 of revenues
related to shipments which, as a result of consummation of the Merger, Autologic
was unable to ship during the last week of the first quarter of fiscal 1996).
Gross profit expressed as a percentage of sales from systems, equipment,
customer service and support revenues increased by five percentage points in
the second quarter of fiscal 1996 over the second quarter of fiscal 1995,
principally as a result of adding Triple-I's 3850 family of imagers to the
manufactured product base of the Company, increased sales of software products,
efficiencies realized by combining Autologic's and Triple-I's customer service
and support revenue bases and reducing costs through the reorganization and
reduction of combined staff implemented after the merger.
Operating expenses in the second quarter of fiscal 1996 reflect the combined
operations of Triple-I and Autologic and are therefore higher than Autologic's
operating expenses alone were in the second quarter of fiscal 1995. As a result
of combining the two companies and reorganizing and reducing staff, operating
expenses as a percentage of revenues have been decreased.
The $224,000 reduction in rent charged by Volt for a facility leased by the
Company from Volt resulted from a new lease entered into between the Company
and Volt in connection with the merger.
13
<PAGE> 14
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Continued
The $217,000 reduction in general administrative expenses charged by Volt
resulted from substantially all of the services previously performed by Volt
being performed by the Company's internal staff and, to some extent,
third-party providers.
Interest income resulted from the investment of Triple-I funds acquired by the
Company in the merger.
The elimination of interest expense charged by Volt resulted from the
contribution by Volt to Autologic of intercompany borrowings of Autologic just
prior to the merger.
The foreign exchange loss in fiscal 1996 resulted from the cost of foreign
currency options purchased to minimize the potential adverse impact on foreign
currency receivables and sales in order to protect against the dollar
strengthening against foreign currencies and, to a lesser extent, losses on
currencies not hedged.
The tax provision in fiscal 1995 related to taxes on foreign earnings without
U.S. tax benefit. U.S. net operating losses incurred by Autologic were
utilized by Volt prior to the merger.
Six Months Ended May 3, 1996 Compared to Six Months Ended April 28, 1995
Included in the loss for the six months ended May 3, 1996 were the following
non-recurring expenses incurred by Autologic (and, accordingly, reflected in the
Company's financial statements) during the first three months of the period
(ended February 2, 1996) and prior to the merger: (1) restructuring charges of
approximately $700,000 related principally to the termination of Autologic
employees and the restructuring of its operations in connection with the merger
charged during the first three months of fiscal 1996 and prior to the merger;
(2) interest expense charged by Volt of $583,000 (which has been eliminated as a
result of Volt's contribution of the underlying indebtedness to Autologic's
capital prior to the merger and charged during the first quarter of fiscal
1996); (3) charges from Volt to Autologic for rent of $620,000 (which rent to
the Company would have been $402,000 had the merger been completed at the
beginning of this period); and (4) charges from Volt for general administrative
expenses of $206,000 (the services related to which are being substantially
performed by the Company's internal staff and, to some extent, third-party
providers). The results of operations for periods prior to February 3, 1996 do
not give effect to amortization expense of approximately $138,000 per fiscal
quarter (for five years commencing with the quarter beginning February 3, 1996)
of the excess purchase price over the estimated fair value of Triple-I's
identifiable assets.
Included in the loss for the six months ended April 28, 1995 was interest
expense of $1,267,000 on loans from Volt (which are no longer outstanding),
rent of $851,000 (which would have been reduced to approximately $403,000 had
the merger arrangements then been in effect) and general and administrative
expenses of $450,000 (the services related to which are being substantially
performed by the Company's internal staff and, to some extent, third-party
providers).
The $9,788,000 increase in revenues in the six month fiscal 1996 period
resulted primarily from the integration of the two businesses (thus adding
Triple-I's revenues subsequent to January 29, 1996 to
14
<PAGE> 15
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Continued
Autologic's revenues), an increase in Autologic's revenues of $547,000 in the
first quarter of fiscal 1996 and approximately $1,000,000 of increased combined
revenues in the second quarter of fiscal 1996.
The increase in gross profit expressed as a percentage of sales from systems,
equipment, customer service and support revenues that were realized in the
second quarter of 1996 was offset by a decrease in gross profit of Autologic
during the first quarter of 1996 (compared to the same period in 1995)
principally due to the product mix of systems and equipment sales favoring
lower gross profit margin imager products.
The $3,317,000 increase in operating expenses in the six months ended May 3,
1996 over the comparable period in fiscal 1995 reflects the combined operations
of Triple I and Autologic and are therefore higher than Autologic's operating
expenses alone were in the first half of fiscal 1995. Although improved in the
second quarter, operating expenses as a percentage of revenues for the six
month period of fiscal 1996 were adversely effected by the salaries for the
combined continuing staff during the last week of the first quarter of fiscal
1996 (immediately following the merger) during which virtually no shipments
were made.
The restructuring charge of $700,000 is related principally to the termination
of Autologic employees and the restructuring of its operations in connection
with the merger.
The $231,000 reduction in rent charged by Volt for a facility leased by the
Company from Volt resulted from the effect since the merger on January 29, 1996
of a new lease entered into between the Company and Volt in connection with the
merger.
The $244,000 reduction in general administrative expenses charged by Volt
resulted from substantially all of the services previously performed by Volt
being performed since the merger on January 29, 1996 by the Company's internal
staff and, to some extent, third-party providers.
Interest income resulted from the investment of Triple-I funds acquired by the
Company in the merger.
The $684,000 reduction in interest expense charged by Volt resulted from the
contribution by Volt to Autologic of intercompany borrowings just prior to the
merger toward the end of the first quarter of fiscal 1996.
The foreign exchange loss in fiscal 1996 resulted from the cost of foreign
currency options purchased to minimize the potential adverse impact on foreign
currency receivables and sales in order to protect against the dollar
strengthening against foreign currencies and, to a lesser extent, losses on
currencies not hedged.
Other expenses in 1996 include a $180,000 charge related to an unfavorable
lawsuit judgment.
15
<PAGE> 16
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Continued
Financial Position, Liquidity and Capital Resources
The balance sheet as of November 3, 1995 represents the financial position of
Autologic only, while the balance sheet as of May 3, 1996 represents the
financial position of the Company after the merger and includes the accounts of
Autologic and Triple-I.
During the six months ended May 3, 1996, cash and cash equivalents increased by
$7,302,000. Cash was applied in operating activities in the amount of $813,000
principally as a result of the year to date net loss, net of depreciation and
amortization, and the net impact of various changes in operating assets and
liability accounts.
The principal factor in cash provided by investing cash activities was the cash
and cash equivalents balance of Triple-I acquired in the merger.
The repayment of the notes payable to banks resulted in the use of $680,000 of
cash for financing activities.
The Company's working capital as of May 3, 1996 is $27,328,000, which includes
$9,844,000 in cash and cash equivalents. These resources, along with a credit
facility of $2,250,000 available from Volt, are anticipated to be sufficient to
meet the Company's liquidity and capital needs for the near term in the normal
course of business.
As part of the consolidation of operations and facilities, the Board of
Directors has approved up to $1,000,000 for communications, facilities and
fixtures for plant renovation. The company has no other plans for significant
capital expenditures other than those expenditures in the normal course of
business anticipated to be provided from ongoing operations.
16
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
15 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended May 3, 1996.
17
<PAGE> 18
SIGNATURE
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.
AUTOLOGIC INFORMATION INTERNATIONAL, INC.
BY: DENNIS DOOLITTLE
----------------------------
Dennis Doolittle
Chief Operating Officer
BY: JOHN GRIFFIN
----------------------------
John Griffin
Controller
(Chief Accounting Officer)
Date: June 14, 1996
18
<PAGE> 1
EXHIBIT 15
[ERNST & YOUNG LLP LETTERHEAD]
The Board of Directors
Autologic Information International, Inc.
We have reviewed the accompanying unaudited condensed consolidated balance
sheet of Autologic Information International, Inc. and subsidiaries as of
May 3, 1996, and the related condensed consolidated statements of operations
for the three-month and six-month periods ended May 3, 1996 and April 28, 1995,
and the condensed consolidated statements of cash flows for the six-month
periods ended May 3, 1996 and April 28, 1996. These financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of November 3, 1996, and the
related consolidated statements of operations and cash flows for the year then
ended, not presented herein; and in our report dated January 2, 1996, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of November 3, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
ERNST & YOUNG LLP
June 2, 1996
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