<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[_X_] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the quarter ended January 31, 1997
OR
[___ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) For the transition period from
________________________ to _______________________
Commission File No. 0-3223
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 91320
- - - - ------------------------------------------------ --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 498-9611
</TABLE>
Not Applicable
--------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
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 reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares of common stock outstanding as of March 7, 1997 was
5,783,370.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
January 31, November 1,
1997 1996
----------- -----------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,976 $ 6,133
Accounts receivable less allowance for doubtful
accounts of $2,422 (1997) and $2,221 (1996) 19,275 21,761
Inventories--Notes C 10,552 12,301
Deferred income tax benefit--Notes B and D 5,797 5,797
Prepaid expenses and other assets 889 1,093
--------- ----------
Total current assets 40,489 47,085
PROPERTY AND EQUIPMENT, at cost net of
accumulated depreciation and amortization
of $5,282 (1997) and $5,084 (1996) 5,702 6,212
DEFERRED INCOME TAX BENEFIT--Notes B and D 3,554 3,554
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net of amortization of $275--Note B 2,202 2,340
OTHER ASSETS 85 94
--------- ----------
$ 52,032 $ 59,285
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 600 $ --
Accounts payable 4,517 10,311
Payable to Volt--Note F 266 771
Accrued expenses 4,084 5,282
Accrued restructuring costs 2,197 2,334
Customer advances 4,211 3,402
Income taxes payable--Note D 919 1,174
--------- ----------
Total current liabilities 16,794 23,274
STOCKHOLDERS' EQUITY (DEFICIENCY)--Notes B, E and I
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 5,783,370 shares (1997) and
5,793,870 shares (1996) 58 58
Paid-in capital 112,620 112,665
Accumulated deficit (77,440) (76,712)
--------- ---------
35,238 36,011
$ 52,032 $ 59,285
========= =========
</TABLE>
See accompanying notes.
2
<PAGE> 3
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
January 31, February 2,
1997 1996
---- ----
(Dollars in thousands, except
per share and share amounts)
<S> <C> <C>
REVENUES
Systems and equipment $ 11,245 $ 11,873
Customer service and support 6,850 4,674
---------- ----------
18,095 16,547
---------- ----------
OPERATING COSTS AND EXPENSES
Cost of systems and equipment 6,601 8,537
Cost of customer service and support 4,840 4,320
Operating expenses 7,076 5,303
Restructuring charge 700
Charges from Volt--Note F
Rent 201 419
General and administrative 9 197
---------- ----------
18,727 19,476
---------- ----------
OPERATING LOSS (632) (2,929)
OTHER INCOME (EXPENSE)
Interest income 31 36
Interest expense charged by Volt--Note F - (583)
-
Foreign exchange gain (loss) 261 (182)
Other, net (127) (237)
---------- ----------
165 (966)
---------- ----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (467) (3,895)
INCOME TAX PROVISION (BENEFIT)--Note D 58 (148)
---------- ----------
LOSS FROM CONTINUING OPERATIONS (525) (3,747)
LOSS FROM DISCONTINUED OPERATIONS-Note H (203) --
---------- -----------
NET LOSS (728) (3,747)
===========
NET LOSS PER SHARE
CONTINUING OPERATIONS $ (0.09) $ (1.06)
=========== ===========
NET LOSS PER SHARE
DISCONTINUED OPERATIONS $ (0.04) $ --
=========== ==========
NET LOSS PER SHARE--Note I $ (0.13) $ (1.06)
----------- ----------
Average number of shares outstanding 5,790,370 3,531,913
========= =========
</TABLE>
See accompanying notes
3
<PAGE> 4
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 1, 1996 5,793,870 $ 58 $ 112,665 $ (76,712)
Retirement of stock in connection
with Digiflex sale (10,500) (45)
Net loss for the three months -- -- (728)
----------- ----------- ----------- -----------
Balance at January 31, 1997 5,783,370 $ 58 $ 112,620 $ (77,440)
=========== =========== =========== ===========
</TABLE>
See accompanying notes
4
<PAGE> 5
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
January 31, February 2,
1997 1996
---- ----
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (728) $ (3,747)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on sale of discontinued operations 75 --
Loss from discontinued operations 128 --
Depreciation and amortization 744 382
Provision for doubtful accounts 503 123
Gains on foreign currency translation (198) (152)
Loss on dispositions of property and equipment 5 4
Deferred income tax benefit -- (182)
Changes in operating assets and liabilities:
Decrease in accounts receivable 1,556 407
Decrease in inventories 1,749 464
(Increase) decrease in prepaid expenses
and other assets 213 (1,143)
Increase (decrease) in accounts payable (5,671) 3,458
Increase (decrease) in accrued expenses (1,319) 661
Increase in customer advances 910 1,081
Decrease in income taxes payable (255) (171)
Decrease in payable to Volt (505) --
-------------- --------------
NET CASH (APPLIED TO) PROVIDED BY
OPERATING ACTIVITIES $ (2,793) $ 1,185
-------------- --------------
</TABLE>
Continued on next page
5
<PAGE> 6
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Year the Three Months Ended
---------------------------
January 31, February 2,
1997 1996
----------- -----------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Cash of acquired company (Triple-I) $ -- $8,764
Purchases of property and equipment (349) (142)
------ ------
NET CASH PROVIDED BY (APPLIED
TO) INVESTING ACTIVITIES (349) 8,622
------ ------
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in notes payable 600 (737)
------ ------
NET CASH PROVIDED BY (APPLIED
TO) FINANCING ACTIVITIES 600 (737)
------ ------
Effect of exchange rate changes on cash 385 339
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,157) 9,409
Cash and cash equivalents, beginning of period 6,133 2,542
------ ------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $3,976 $11,951
------ -------
SUPPLEMENTAL CASH TRANSACTIONS
Cash paid during the period:
Interest expense 1 5
Income tax 225 163
</TABLE>
See accompanying notes
6
<PAGE> 7
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q and Article 10
of Regulation S-X and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Company's
financial position at January 31, 1997 and results of operations and cash flows
for the quarters ended January 31, 1997 and February 2, 1996. Operating
results for the three months ended January 31, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending
October 31, 1997.
These statements should be read in conjunction with the financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the year
ended November 1, 1996. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report. The Company's fiscal year ends on the Friday nearest October 31.
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 Autologic or such
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 January 29, 1996, following approval by its stockholders,
Triple-I merged with and into the Company.
Pursuant to the Merger Agreement, Volt, through its wholly-owned subsidiary
Nuco I, Ltd., received 3,333,000 shares of the Company's common stock for its
transfer of Autologic and certain other Volt subsidiaries 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
(including 58,500 shares issued to Volt as a result of Triple-I common stock
owned by Volt prior to the merger).
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 594,000
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. Between June 25, 1995 and November 1, 1996, 51,250
shares have been issued upon the exercise of Triple-I options, and Volt has
received 4,000, and is entitled to receive an additional 4,600 shares, of the
Company's common stock with respect to such exercises. Accordingly, Volt owned
beneficially 3,399,500 shares (59%) of the Company's common stock at January 31,
1997.
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 value 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. The operating results
of Triple-I have been included in the Company's 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 all periods
thereafter. The liability for restructuring costs incurred prior to the merger
($2,197,000 at January 31, 1997) provides for estimated costs related to
closing of certain facilities of Triple-I.
7
<PAGE> 8
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE B--FORMATION OF THE COMPANY AND MERGER--Continued
Therefore, results of the combined operations for the quarter ended January 31,
1997 are not comparable to results for the quarter ended February 2, 1996 which
(except for the last five days of the quarter) reflect only the results of
operations of Autologic and the Volt Subsidiaries.
The accompanying statement of operations for the quarter ended February 2, 1996
includes a charge of $700,000 related principally to the reduction of
Autologic's workforce and the restructuring of Autologic's 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 transactions described above had
occurred at the beginning of fiscal 1996 with pro forma adjustments for the
amortization of the excess of purchase price over net assets acquired, the
elimination of interest expense (on indebtedness of Autologic and the Volt
Subsidiaries contributed to such companies by Volt prior to the Merger) and a
portion of rent previously charged by Volt (to reflect the reduced rent charged
by Volt after the merger), 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 Three Months Ended
--------------------------
February 2,
1996
----
(In thousands, except per share amounts)
<S> <C>
Revenues $ 26,565
Net loss (1,095)
Net loss per share (0.19)
</TABLE>
NOTE C--INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
January 31, November 1,
1997 1996
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Service parts $ 2,110 $ 2,396
Materials 4,225 5,257
Work-in-process 2,371 2,654
Finished goods 1,846 1,994
--------------- ---------------
$ 10,552 $ 12,301
=============== ===============
</TABLE>
8
<PAGE> 9
AUTOLOGIC INFORMATION INTERNATIONAL, INC>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE D--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 agreed to indemnify the Company against any loss or liability
that may result from such inclusion. Federal income taxes were provided for in
the accompanying 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
--------------------------
January 31, February 2,
1997 1996
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Significant components of the income tax
provision (benefit) attributable to
operations are as follows:
Current Taxes:
Foreign $ 58 $ 34
-------- --------
Deferred Taxes:
Federal -- (163)
State and local -- (19)
Foreign -- --
-------- --------
Total deferred -- (182)
-------- --------
Total income tax provision (benefit) $ 58 $ (148)
======== ========
</TABLE>
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 the merger, 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 merger. 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 E--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.
NOTE F--CHARGES FROM VOLT
In addition to rent expense, prior to the merger of Autologic into the Company,
Volt allocated to Autologic a proportional share of corporate general and
administrative expenses(on the basis of assets employed) and interest on
amounts payable by Autologic and the Volt subsidiaries to Volt on a
non-compounding basis. Subsequent to the merger, the rent has been
significantly reduced (see Note G), general and administrative services are
being substantially performed by the Company's internal staff and third-party
providers and, due to the contribution by Volt to capital of the amounts owed
Volt by Autologic and the Volt subsidiaries, interest charged by Volt has
ceased.
9
<PAGE> 10
AUTOLOGIC INFORMATION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE G--RELATED PARTY TRANSACTIONS
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. During the period from
the date of the merger through November 1, 1996, the Company paid rent to Volt
aggregating $604,000. Pursuant to the terms of the lease, as amended in
December 1996, the Company's Board of Directors established a new rental rate
based on prevailing rates in the general area, which resulted in a slight
decrease in rent. During the remaining term of the lease, the Company's Board
of Directors may again, unilaterally, but in good faith and utilizing certain
reasonableness standards, redetermine whether there should be a further
increase or decrease in the base rent and/or increase (if the space is then
available) or decrease the amount of rented space. The lease also provides for
the Company to pay all real estate taxes, insurance, utilities and repairs
related to the facility.
Volt has agreed to provide the Company credit facilities of $2,250,000 at the
prime rate in effect at The Chase Manhattan Bank. As of January 31, 1997,
$600,000 had been drawn against the facility, which bore interest at 8.25% per
annum. The $600,000 was repaid in February 1997.
NOTE H--DISCONTINUED OPERATIONS
On January 2, 1997, the Company disposed of the assets and discontinued
Digiflex, its advertisement delivery operation. Digiflex was acquired at the
end of January 1996. The loss from discontinued operations includes an
operating loss of $128,000 on revenues of $82,000 and a loss on disposal of
$75,000; no realizable income tax benefits are available to be allocated to the
loss. The period ended February 2, 1996 consists of only five days of
operations, which is not significant, and thus the results of operations for
the period have not been restated to reflect the discontinued operation.
NOTE I--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.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
As set forth in Note B in the accompanying financial statements, on January 29,
1996, Volt Information Sciences, Inc. ("Volt") assigned the capital stock of
certain of Volt's foreign subsidiaries to the Company and each of Autologic,
Inc. (together with such foreign subsidiaries, "Autologic") and Information
International, Inc. ("Triple-I") were merged into the Company (such
transactions being collectively referred to as the "Merger"). The acquisition
of Autologic and the Volt subsidiaries has been accounted for under the pooling
of interest method of accounting and the acquisition of Triple-I was accounted
for under the purchase method of accounting. Accordingly, the Company's
reported results of operations for all periods prior to January 29, 1996
reflect only the results of operations of Autologic. In addition, results
prior to the Merger 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), the reduction in rent
of a facility lease from Volt (under a new lease entered into in connection
with the Merger), or cost savings from the aggregate amounts incurred by
Autologic and Triple-I separately (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.
Therefore, results of the combined operations for the quarter ended January 31,
1997 are not comparable to results for the quarter ended February 2, 1996 which
(except for the last five days of the quarter) reflect only the results of
operations of Autologic.
The information which appears below relates to prior periods, the results of
operations for which periods are not necessarily indicative of the results
which may be expected for any subsequent periods. Management has made no
predictions or estimates as to future operations and no inferences as to future
operations should be drawn.
10
<PAGE> 11
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Three month's ended January 31, 1997 compared to three month's ended February
2, 1996
Results of Operations
Included in the loss for the three months ended February 2, 1996 were the
following non-recurring expenses (aggregating $1,700,000) incurred by Autologic
(and, accordingly, reflected in the Company's financial statements) during the
first three months of fiscal 1996 (ended February 2, 1996) and prior to the
Merger: (1) restructuring charges of approximately $700,000 related
principally to the reduction of Autologic's workforce and the restructuring of
its operations in connection with 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);
(3) charges from Volt to Autologic for rent of $419,000 (which rent would have
been $201,300 had the Merger been completed at the beginning of fiscal 1996);
(4) charges from Volt for general and administrative services of $197,000 (the
services related to which are, since the Merger, 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 $137,500 per fiscal quarter
(being incurred for five years commencing with the quarter beginning February 3,
1996) of excess purchase price over the estimated fair value of Triple-I's
identifiable assets.
In fiscal 1997, revenues increased by $1,548,000, or 9.4%, to $18,095,000 due
to an increase of $2,176,000 or 46.6% on customer service sales offset by an
$628,000, or 5.3%, decrease in sales of systems and equipment. The decrease in
system sales was due primarily to weaker sales in the foreign operations. The
increase in customer service sales resulted primarily from the integration of
the two business (thus adding Triple-I's revenues to Autologic's revenues).
Had the Merger occurred at the beginning of fiscal 1996. Revenues in the first
quarter of fiscal 1996 would have been $26,565,000 compared to $18,095,000 in
the first quarter of fiscal 1997. The decrease is due primarily to a decline
in sales of systems and equipment in domestic and European operations.
Gross margins improved by 13.2 percentage points from 28.1% to 41.3% due
principally to improved gross profit margins relating to sales of systems and
equipment on 3850 imagers. Gross margins relating to customer service improved
by 21.7 percentage points from 7.6% to 29.3% due primarily to consolidation of
staff at the time of the Merger.
Selling, general and administrative expenses increased by $725,000, or 19.0%,
in 1997 over to the first quarter of fiscal 1996 primarily as a result of
combining the operations of Autologic and Triple-I (although there has been a
decrease in selling, general and administrative expenses from the total of
those expenses incurred separately by Autologic and Triple-I prior to the
Merger in the first quarter of fiscal 1996) and efforts to expand into new
markets. As a percentage of sales, selling, general and administrative
expenses increased from 22.8% to 24.8%.
Research and development increased $604,000 due to combining the staffs of
Autologic and Triple-I, and the development of new products. Depreciation
increased by $444,000 due to the combined operations after the Merger. These
expenses increased as a percentage of revenues (although the dollar amounts
thereof were lower than the total of those expenses incurred separately by
Autologic and Triple-I in the first quarter of fiscal 1996 prior to the Merger),
as combined sales of Autologic and Triple-I did not increase by the same
percentage as did the overall increases in these expenses.
The results of operations for each of the periods also include aggregate charges
from Volt for rent, and general and administrative services of $210,000 and
$616,000 for 1997 and 1996, respectively. Following the Merger general and
administrative services have been performed internally by the Company and a new
lease has been entered into which results in reduced rental expenses (see
Financial Statement Note G).
The elimination of interest expense charged by Volt resulted from the
contribution by Volt to Autologic of intercompany borrowings of Autologic prior
to the merger.
The foreign exchange gain in 1997 resulted from gains on currencies hedged.
The loss in 1996 was due to 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.
See Financial Statement Note D and Note H for information on income taxes and
discontinued operations respectively.
11
<PAGE> 12
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Continued
Liquidity and Capital Resources
During the first three months of the fiscal 1997, cash was applied to operating
activities in the amount of $2,793,000 principally as a result of various net
changes in operating assets and liability accounts (primarily a reduction in
accounts payable) which used approximately $4,040,000 of cash. While the
Company had a net loss of $728,000, such loss included non-cash charges
aggregating approximately $1,450,000.
Cash applied to investing activities was $349,000 for the purchase of property
plant and equipment
Cash from financing activities $600,000 was provided from Volt under a credit
facility, which was repaid after the end of the quarter. See Financial
Statement Note G.
As a result of the foregoing, during the three months ended January 31, 1997,
cash and cash equivalents decreased by $2,157,000. The Company's working
capital as of January 31, 1997 was $23,695,000, which includes $3,976,000 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 Company's
Board of Directors has approved the expenditure of up to $1,000,000 for
communications, facilities and fixtures for plant renovation. Of this
approximately, $860,000 has been incurred through January 31, 1997. The
Company has no other plans for significant capital expenditures other than
expenditures in the normal course of business anticipated to be funded from
ongoing operations.
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 January 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AUTOLOGIC INFORMATION INTERNATIONAL, INC.
Dated: Thousand Oaks, California
March 14, 1997
BY: /s/ Anthony Marrelli
----------------------------------
Anthony Marrelli
Vice President and Chief Financial
Officer
12
<PAGE> 1
INDEPENDENT ACCOUNTANT'S REPORT; ERNST & YOUNG LLP
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
January 31, 1997, and the related condensed consolidated statements of
operations for the three-month periods ended January 31, 1997 and February 2,
1996, and the condensed consolidated statements of cash flows for the
three-month periods ended January 31, 1997 and February 2, 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 1, 1996, and the
related consolidated statements of operations and cash flows for the year then
ended, not presented herein; and in our report dated December 19, 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 1, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ ERNST & YOUNG LLP
------------------------------
February 27, 1997
Woodland Hills, California
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