<PAGE> 1
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
For the quarterly period ended June 30, 1997
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 Number
0-27678
TRIDENT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-6403301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Federal Road, Brookfield, Connecticut 06804
(Address of principal executive offices) (Zip Code)
(203) 740-9333
(Registrant's telephone number, including area code)
(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 such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, par value
$.01 per share, as of July 31, 1997 was 6,918,618.
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1996 and June 30, 1997.................................... 3
Condensed Consolidated Statements of Operations for the three
months and nine months ended June 30, 1996
and 1997................................................................ 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended June 30, 1996 and
1997.................................................................... 5
Notes to Condensed Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................... 13
Signatures................................................................ 13
</TABLE>
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PART I. FINANCIAL INFORMATION
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Factors that might cause such a
difference are discussed in the section entitled "Business Environment and
Future Results" on page 11 of this Form 10-Q.
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted)
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1997
------------------ -------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 17,349 $ 21,473
Accounts receivable, net ...................................... 3,915 3,900
Inventories ................................................... 1,563 1,618
Deferred income taxes ......................................... 431 462
Other current assets .......................................... 167 150
-------- --------
Total current assets ...................................... 23,425 27,603
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, net ........................... 1,443 1,638
DEFERRED INCOME TAXES ............................................... 919 777
INTANGIBLE ASSETS, net .............................................. 12,544 11,943
-------- --------
$ 38,331 $ 41,961
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .............................................. $ 999 $ 1,097
Accrued expenses .............................................. 1,101 991
Income taxes payable .......................................... 269 516
-------- --------
Total current liabilities ................................. 2,369 2,604
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 30,000,000
shares authorized; 7,010,234 and 7,163,618
shares issued at September 30, 1996 and
June 30, 1997 .............................................. 70 71
Additional paid-in capital .................................... 40,059 40,119
Retained earnings (deficit) ................................... (4,167) 1,531
-------- --------
35,962 41,721
Less-Treasury stock at cost,common stock,125,000 shares ....... -- (2,364)
-------- --------
Total stockholders' equity ................................ 35,962 39,357
-------- --------
$ 38,331 $ 41,961
======== ========
</TABLE>
See accompanying notes.
3
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000's Omitted, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES ............................................ $ 6,681 $ 8,069 $ 18,908 $ 22,356
COST OF SALES ........................................ 2,392 2,878 6,992 7,860
----------- ----------- ----------- -----------
Gross profit .................................... 4,289 5,191 11,916 14,496
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Marketing and selling ........................... 409 580 1,039 1,606
Research and development ........................ 579 813 1,577 2,184
Write-off of purchased in-process
research and development .................... -- -- 3,052 --
General and administrative ...................... 510 606 1,942 1,620
Amortization of intangibles ..................... 199 200 600 600
Amortization of deferred compensation ........... -- -- 443 --
----------- ----------- ----------- -----------
Total operating expenses .................. 1,697 2,199 8,653 6,010
----------- ----------- ----------- -----------
Operating income .......................... 2,592 2,992 3,263 8,486
OTHER (INCOME) EXPENSE:
Interest (income) expense, net .................. (179) (284) 433 (779)
Redeemable warrant interest charge .............. -- -- 1,710 --
----------- ----------- ----------- -----------
Income before income taxes ................. 2,771 3,276 1,120 9,265
PROVISION FOR INCOME TAXES ........................... 1,183 1,261 1,466 3,567
----------- ----------- ----------- -----------
Net income (loss) before extraordinary item 1,588 2,015 (346) 5,698
EXTRAORDINARY ITEM, net of income tax benefit of
$1,253 ............................................. -- -- (1,803) --
----------- ----------- ----------- -----------
NET INCOME (LOSS) .................................... 1,588 2,015 (2,149) 5,698
INCREASE IN REDEMPTION VALUE
OF PREFERRED STOCK ............................... -- -- (83) --
----------- ----------- ----------- -----------
INCOME (LOSS) APPLICABLE TO COMMON
STOCKHOLDERS ..................................... $ 1,588 $ 2,015 $ (2,232) $ 5,698
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) before extraordinary item ..... $ 0.22 $ 0.28 $ (0.11) $ 0.79
Extraordinary item, net of tax .................. -- -- (0.45) --
----------- ----------- ----------- -----------
Net income (loss) ............................... $ 0.22 $ 0.28 $ (0.56) $ 0.79
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ...................................... 7,275,383 7,223,593 4,019,529 7,194,538
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
June 30, June 30,
1996 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................... $ (2,149) $ 5,698
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization .................... 1,014 853
Amortization of deferred compensation ............ 443 --
Write-off of unamortized original issue discount . 2,158 --
Write-off of consulting agreement ................ 438 --
Write-off of deferred financing cost ............. 898 --
Deferred income taxes ............................ (1,280) 111
Accretion of interest on zero coupon notes ....... 108 --
Accretion of redeemable warrant interest charge .. 1,710 --
Changes in operating assets and liabilities:
Accounts receivable, net .................... (937) 15
Inventories ................................. (185) (55)
Other current assets ........................ (26) 17
Accounts payable and accrued expenses ....... 242 (12)
Income taxes payable ........................ (510) 247
-------- --------
Net cash provided by operating activities 1,924 6,874
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of leasehold improvements and
equipment, net ................................... (597) (447)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from initial public offering ........... 28,264 --
Net proceeds from sale of common stock .............. -- 41
Purchase of treasury stock .......................... -- (2,364)
Exercise of warrants and options .................... 418 20
Repayment of long-term debt ......................... (17,247) --
Payments of offering costs .......................... (1,065) --
-------- --------
Net cash provided by financing
activities ........................... 10,370 (2,303)
-------- --------
INCREASE IN CASH .......................................... 11,697 4,124
CASH, beginning of period ................................. 2,988 17,349
-------- --------
CASH, end of period ....................................... $ 14,685 $ 21,473
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for -
Interest ......................................... $ 3,120 $ --
Income taxes ..................................... $ 1,988 $ 3,209
Non-cash transactions -
Increase in redemption value of preferred stock .. $ 83 $ --
</TABLE>
See accompanying notes.
5
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business:
Trident International, Inc. (the Company) designs,
manufactures and markets impulse ink jet subsystems, including
printheads, inks and other consumables, and related components for the
industrial market. The Company markets its products worldwide principally
to original equipment manufacturers (OEMs), who integrate the products
into systems which are then sold to end-users directly or via
distributors. The largest market segment currently addressed by the
Company's products is that of printing onto shipping cartons. Other
industrial market segments in which the Company's products are currently
being utilized include check coding, addressing and imprinting business
forms, postal bar coding and stamp cancellation and plotting garment
patterns.
The interim financial statements reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods presented. These interim financial statements should be read in
conjunction with the financial statements and notes included in the
Company's Form 10-K.
The foregoing interim results are not necessarily indicative
of the results of operations for the full fiscal year ending September
30, 1997.
2. Inventories:
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1997
--------------- ---------------
(000's Omitted) (000's Omitted)
<S> <C> <C>
Raw materials $ 894 $1,080
Work-in process 331 326
Finished goods 338 212
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$1,563 $1,618
====== ======
</TABLE>
3. Contingency:
In connection with the prior acquisition (Acquisition), the
Company undertook an environmental compliance audit which identified
certain environmental deficiencies on properties leased by the Company.
The site of one of the Company's leased facilities was contaminated due
to prior uses by a prior occupant and may require remedial action.
Although the Company obtained an indemnification agreement in
connection with the Acquisition with respect to such prior
contamination, if the Company is found to be liable as a result of any
contamination of the site, there can be no assurance that such
indemnification will be available or that, if available, it will be
sufficient. While the ultimate results of future claims, if any,
against the Company with regard to these matters cannot be determined,
management does not anticipate that these matters will have a material
adverse impact on the consolidated results of operations or financial
position of the Company.
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4. Initial Public Offering:
In connection with the consummation of the Company's initial
public offering in February, 1996, the Company paid down all of its
indebtedness and fully amortized a number of expenses incurred in
connection with the 1994 acquisition. As a result, period to period
comparison involving periods through March 31, 1996 may not necessarily
be meaningful or indicative of trends in operating results.
5. Effect of Accounting Pronouncement:
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share" which superseded Accounting Principles Board
Opinion No. 15. This new standard replaces the computation of primary
earnings per share with a new computation of "basic earnings per
share". The Company will be required to adopt this standard in fiscal
1998. Based on the Company's initial evaluation, adoption is not
expected to have a material impact on the Company's earnings per share.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company designs, manufactures and markets impulse ink jet subsystems,
including printheads, inks and other consumables, and related components for the
industrial market. The Company markets its products worldwide principally to
OEMs, who integrate the products into systems which are then sold to end-users
directly or via distributors. The largest market segment currently addressed by
the Company's products is that of printing onto shipping cartons. Other
industrial market segments in which the Company's products are currently being
utilized include check coding, addressing and imprinting business forms, postal
bar coding and stamp cancellation and plotting garment patterns.
The Company's predecessor (the Predecessor) was founded in 1989 as Trident,
Inc. Shortly after its incorporation, a majority interest in the Predecessor was
purchased by Johnson Worldwide Associates (JWA) through JWA's direct subsidiary,
Porelon. At that time, the Predecessor also obtained a license from Dataproducts
Corporation (the Dataproducts License), which gave the Predecessor exclusive
rights to a series of liquid ink jet technology patents for use in the
"industrial marking field." The technology covered by the Dataproducts License
is at the core of the Company's current line of industrial printing subsystems.
In December 1992, Porelon purchased the remaining minority interests in the
Predecessor and the Predecessor became a wholly-owned subsidiary of Porelon.
On June 24, 1994, the Company acquired all of the capital stock of the
Predecessor (the 1994 Acquisition). The aggregate cash consideration paid by the
Company in the 1994 Acquisition was approximately $19.9 million, including $1.0
million for a consulting agreement (the Consulting Agreement). The 1994
Acquisition has been accounted for as a purchase and, accordingly, the total
consideration has been allocated to the assets acquired and liabilities assumed
based on their estimated fair value at the date of the 1994 Acquisition. The
excess of the purchase price over the fair value of the net assets acquired
($13.9 million) is being amortized over 20 years. Periodically, the Company
evaluates the realizability of this asset based upon expectations of
undiscounted cash flows and operating income. Based upon its most recent
analysis, the Company believes that no impairment of the current net book value
of this asset exists. The $1.0 million payment made by the Company under the
consulting agreement was being amortized. The services provided under the
consulting agreement largely related to transition services in connection with
the establishment of stand-alone operations and assistance in preparation for an
initial public offering. Other long-term assets acquired in the 1994 Acquisition
are being depreciated over their respective useful lives of 5 years.
In February 1996, the Company completed the initial public offering (the
Offering) of its common stock which provided proceeds, after underwriting
discounts and commissions, of $28.3 million. The Company incurred certain
significant charges relating to the 1994 Acquisition from the beginning of
fiscal year 1996 through the consummation of the Offering. The Company incurred
charges of $4.2 million, net of related income tax benefits, comprised of $2.1
million of recurring charges which were expensed through consummation of the
offering and did not recur thereafter, and $2.1 million of extraordinary or
non-recurring charges which were expensed at the closing of the Offering. The
Company used approximately $10.8 million to repay the outstanding indebtedness
under its credit facility and $4.5 million to retire all of the $5.0 million in
principal amount of the zero coupon notes issued by the Company for $1.9 million
in connection with the 1994 Acquisition. The remaining net proceeds are being
used for working capital and general corporate purposes. As a result of the
offering, the Company incurred extraordinary charges to earnings for
approximately $2.2 million of unamortized original issue discount and
approximately $898,000 of unamortized financing costs relating to its former
credit facility and notes. The Company also recognized a non-recurring charge of
approximately $438,000, representing the unamortized portion of the cost of the
Consulting Agreement as of the Offering date, which was terminated at the time
of the Offering. Collectively, these items resulted in extraordinary or
non-recurring charges to earnings of approximately $2.1 million, net of related
income tax benefits, at the time of the Offering.
In March 1996, the Company acquired from Dataproducts Corporation a
non-exclusive license for patented solid ink jet printhead technology in certain
licensed industrial marking fields. This agreement allows the Company to use
these patents in the development and commercialization of its own solid ink
printhead. At the
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time of the purchase of the solid ink jet technology, certain technological
hurdles had not been overcome to enable the Company to commercialize a product.
Commercialization of this technology by the Company will require extensive
development work both on the solid ink itself and the ink jet printheads used to
apply that ink in commercial applications. The Company plans to further develop
this technology and develop new products using this technology. This development
process should continue until the Spring of 1998 and the Company anticipates to
expend in excess of $750,000 to complete the development of this technology.
Consequently, the Company recorded a charge of approximately $3.1 million during
Fiscal 1996 as a write-off of purchased in-process research and development to
record the cost of evaluating and acquiring this license. The Company intends to
continue to evaluate potential acquisitions and licenses of new technologies.
RESULTS OF OPERATIONS
Net Sales. Net sales increased $1.4 million, or 21% to $8.1 million for the
three months ended June 30, 1997 from $6.7 million for the three months ended
June 30, 1996. Net sales of printheads increased by approximately $363,000 or 9%
in the three months ended June 30, 1997 as compared to the same quarter in the
prior fiscal year due to increases in units sold and average selling prices.
Sales of ink products increased by $707,000 or 33% in the three months ended
June 30, 1997 as compared to the same quarter in the prior fiscal year due to
the expanding installed base of printheads and resulting increase in ink volume
sold. Net sales to international customers increased by $576,000, or 31% for the
three months ended June 30, 1997 as compared to the three months ended June 30,
1996. The Company has commenced the development of an improved bar code
printhead and ink which the Company expects to be available for sale to its OEM
customers later this calendar year. The new printhead and ink should provide
improved reliability and economy relative to existing bar coding products.
Management anticipates some reduction in the rate of revenue growth with the
transition to these new products due to potential disruptions in the
distribution channel.
Net sales increased $3.5 million, or 18% to $22.4 million for the nine
months ended June 30, 1997 from $18.9 million for the nine months ended June 30,
1996. Net sales of printheads increased by approximately $519,000 or 4% in the
nine months ended June 30, 1997 as compared to the same period in the prior
fiscal year due primarily to an increase in average selling prices. Sales of ink
products increased by $2.5 million or 43% in the nine months ended June 30, 1997
as compared to the same period in the prior fiscal year due to the expanding
installed base of printheads. Net sales to international customers increased by
$721,000 or 12% for the nine months ended June 30, 1997 as compared to the nine
months ended June 30, 1996.
Because of the size of the carton coding market and the relatively small
market penetration achieved to date, the Company believes that it can continue
to sell printheads into its principal market and expand its installed base of
printheads. There can, however, be no assurance that such sales and expansion
will experience continued growth at similar rates or not be limited or otherwise
adversely affected by competition, emerging or alternative technologies, shifts
in customer demands or other factors.
Gross Profit. Gross profit increased $902,000 or 21% to $5.2 million for the
three months ended June 30, 1997 from $4.3 million for the three months ended
June 30, 1996. Gross profit as a percentage of net sales increased from 64.2%
for the three months ended June 30, 1996 to 64.3% for the three months ended
June 30, 1997. The increase in gross profit as a percentage of net sales was due
to higher average printhead selling prices and higher percentage of ink sales.
Gross profit increased $2.6 million, or 22% to $14.5 million for the nine
months ended June 30, 1997 from $11.9 million for the nine months ended June 30,
1996. Gross profit as a percentage of net sales increased from 63.0% for the
nine months ended June 30, 1996 to 64.8% for the nine months ended June 30,
1997. The increase in gross profit as a percentage of net sales was due to
higher average printhead selling prices and higher percentage of ink sales.
Marketing and Selling Expenses. Marketing and selling expenses increased
$171,000 or 42% to $580,000 for the three months ended June 30, 1997 from
$409,000 for the three months ended June 30, 1996 due to the addition of sales
personnel and associated travel expenses and marketing support. As a percentage
of net sales, these expenses increased to 7.2% for the three months ended June
30, 1997 from 6.1% for the three months ended June 30, 1996.
Marketing and selling expenses increased $567,000 or 55% to $1.6 million
for the nine months ended June 30, 1997 from $1.0 million for the nine months
ended June 30, 1996 due to the addition of sales personnel and
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associated travel expenses and marketing support. As a percentage of net sales,
these expenses increased to 7.2% for the nine months ended March 31, 1997 from
5.5% for the nine months ended June 30, 1996.
Research and Development Expenses. Research and development expenses
increased $234,000 or 40% to $813,000 for the three months ended June 30, 1997
from $579,000 for the three months ended June 30, 1996 due principally to the
addition of engineering personnel and contract research as well as increases in
research project materials and supplies. As a percentage of net sales, these
expenses increased to 10.1% for the three months ended June 30, 1997 from 8.7%
for the three months ended June 30, 1996. The Company's product research and
development groups work in teams on engineering development programs to design
and develop new products and enhancements to existing products.
Research and development expenses increased $607,000 or 38% to $2.2 million
for the nine months ended June 30, 1997 from $1.6 million for the nine months
ended June 30, 1996 due principally to the addition of engineering personnel and
contract research as well as increases in research project materials and
supplies. As a percentage of net sales, these expenses increased to 9.8% for the
nine months ended June 30, 1997 from 8.3% for the nine months ended June 30,
1996.
Write-off of Purchased In-Process Research and Development. In March 1996,
the Company acquired from Dataproducts Corporation a non-exclusive license for
patented solid ink jet printhead technology in certain licensed industrial
marking fields. This agreement allows the Company to use these patents in the
development and commercialization of its own solid ink printhead. At the time of
the purchase of the solid ink jet technology, certain technological hurdles had
not been overcome to enable the Company to commercialize a product.
Commercialization of this technology by the Company will require extensive
development work both on the solid ink itself and the ink jet printheads used to
apply that ink in commercial applications. The Company plans to further develop
this technology and develop new products using this technology. This development
process should continue until the Spring of 1998 and the Company anticipates to
expend in excess of $750,000 to complete the development of this technology.
Consequently, the Company recorded a charge of approximately $3.1 million during
the nine months ended June 30, 1996 as a write-off of purchased in-process
research and development to record the cost of evaluating and acquiring this
license. There were no similar expenses in the three months and nine months
ended June 30, 1997.
General and Administrative Expenses. General and administrative expenses
increased $96,000 or 19% to $606,000 for the three months ended June 30, 1997
from $510,000 for the three months ended June 30, 1996. These increases were due
to increases in professional fees, training and insurance. As a percentage of
net sales, these expenses decreased to 7.5% for the three months ended June 30,
1997 from 7.6% for the three months ended June 30, 1996.
General and administrative expenses decreased $322,000 or 17% to $1.6
million for the nine months ended June 30, 1997 from $1.9 million for the nine
months ended June 30, 1996. The decrease in expenses is due to amortization and
write-off of the Consulting Agreement during the nine months ended June 30,
1996. The Consulting Agreement terminated with the initial public offering and
consequently there were no amortization or write-offs during the nine months
ended June 30, 1997. These decreases were partially offset by increases in
personnel, professional fees, training and insurance. As a percentage of net
sales, these expenses decreased to 7.2% for the nine months ended June 30, 1997
from 10.3% for the nine months ended June 30, 1996.
Amortization of Intangibles and Amortization of Deferred Compensation. The
amortization amounts for intangibles of $200,000 and $199,000, respectively, did
not vary materially in amount for the three months ended June 30, 1997 as
compared to the three months ended June 30, 1996.
The amortization amounts for intangibles of $600,000 was the same amount
for the nine months ended June 30, 1997 as compared to the nine months ended
June 30, 1996. Deferred compensation was fully amortized effective February,
1996 and accordingly there were no further charges for deferred compensation
during the three months or the nine months ended June 30, 1997.
Interest (Income) Expense, net. Interest income increased by $105,000 or 59%
to $284,000 for the three months ended June 30, 1997 from $179,000 for the three
months ended June 30, 1996 due to higher cash balances.
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Interest income was $779,000 for the nine months ended June 30, 1997 as
compared to interest expense of $433,000 for the nine months ended June 30,
1996. This was due the repayment of all outstanding borrowings with the proceeds
of the initial public offering and an increase in interest income on higher cash
balances.
Redeemable Warrant Interest Charge. Redeemable warrant interest charge
decreased by $1.7 million to $0 for the nine months ended June 30, 1997 from
$1.7 million for the nine months ended June 30, 1996 because the redeemable
warrants were fully accreted as of February 1996.
Provision for Income Taxes. The provision for income taxes for the three
months ended June 30, 1997 was $1.3 million on income before income taxes of
$3.3 million. The provision for income taxes for the nine months ended June 30,
1997 was $3.6 million on income before income taxes of $9.3 million. The
effective tax rate for the three months and nine months ended June 30, 1997
differed from the statutory rate principally due to the non-deductibility of
amortization costs related to the excess of the purchase price over fair value
of net assets acquired and state income taxes.
BUSINESS ENVIRONMENT AND FUTURE RESULTS
The industrial printing industry is highly competitive and the Company
believes it will need to continue to develop new products and applications in
order to remain competitive. Several of the Company's competitors are larger and
have greater financial, research and development, marketing and other resources
than the Company. For example, Nu-Kote Holdings, Inc. released a piezoelectric
printhead intended for use in industrial and other applications. No assurance
can be given that the Company will be able to compete successfully against
current or future competitors or that the competitive pressures faced by the
Company will not adversely affect its results of operations. The Company is
aware that manufacturers of certain ink products are claiming that their inks
could be utilized with certain of the Company's impulse ink jet printheads.
Although the use of such other inks will void the Company's warranties on its
printheads, and could, in the Company's judgment, result in inferior performance
and permanent damage to its printheads, there can be no assurance that the
introduction and sale of such other inks will not have a material adverse effect
on the Company's financial condition or results of operations or that end users
will continue to purchase their ink requirements from the Company.
The markets for the Company's products are characterized by changing
technology, evolving industry standards and changing customer needs. The
Company's future success will depend in part on its ability to enhance its
current products and to develop new products on a timely and cost-effective
basis in order to respond to technological developments and changing customer
needs. There can be no assurance that the Company will be successful in
developing new products or enhancing its existing products on a timely or
cost-effective basis.
New products could also have the effect of decreasing customer demand for
the Company's current products. The Company has commenced the development of an
improved bar code printhead and ink which the Company expects to be available
for sale to its OEM customers later this calendar year. The new printhead and
ink should provide improved reliability and economy relative to existing bar
coding products. Management anticipates some reduction in the rate of revenue
growth with the transition to these new products due to potential disruptions in
the distribution channel. Although the Company historically has not experienced
any material adverse impact on its business attributable to delays in the
introduction of new products, there can be no assurance that delays will not
occur in the future. The Company expects a component of its growth strategy to
be the acquisition of new technologies, whether through entering into licensing
arrangements, acquiring businesses owning desirable technology, or otherwise. An
example of this is the new solid ink jet printing technology. There can be no
assurance that the Company's investments in new technologies, including solid
ink, will lead to the successful development of new products.
The Company's net sales are dependent upon the ability of its OEM customers
to develop and sell products that incorporate the Company's impulse ink jet
products. Factors such as economic conditions, inventory positions, limited
marketing resources and other factors affecting these OEM customers could have a
substantial impact upon the Company's financial results. No assurances can be
given that the Company's OEM customers will not experience financial or other
difficulties that could adversely affect their operations and, in turn, the
results of operations of the Company.
11
<PAGE> 12
For the three months ended June 30, 1997, approximately 76% of the Company's
net sales were to its top ten OEM customers, while approximately 21% and 11% of
the Company's net sales for this period were to Marsh Company and Foxjet, Inc.,
respectively. A significant diminution in the sales to or loss of any of the
Company's major customers would have a material adverse effect on the Company's
results of operations.
For the three months ended June 30, 1997, approximately 70% of the Company's
net sales were derived from carton coding and the Company anticipates that
carton coding will continue to account for a substantial portion of the
Company's total net sales. A reduction in demand for carton coding systems would
have a material adverse effect on the Company's business, results of operations
and financial condition.
The Company's annual and quarterly operating results may fluctuate due to
factors such as the timing of new product announcements and introductions by the
Company and its competitors, market acceptance of new or enhanced versions of
the Company's products, changes in product mix, changes in manufacturing costs
or other expenses, competitive pricing pressures, the gain or loss of
significant customers, increased research and development expenses and general
economic conditions.
The trading price of the Company's Common Stock could be subject to wide
fluctuations in response to quarterly variations in the Company's operating
results, shortfalls in such operating results from levels forecast by securities
analysts and other events or factors. In addition, the stock market has, from
time to time, experienced extreme price and volume fluctuations that have often
been unrelated to the operating performance of the affected companies.
In connection with the consummation of the Company's initial public offering
in February, 1996, the Company paid down all of its indebtedness and fully
amortized a number of expenses incurred in connection with the 1994 acquisition.
As a result, period to period comparisons involving periods through March 31,
1996 may not necessarily be meaningful or indicative of trends in operating
results.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of $25.0 million compared
to $21.1 million at September 30, 1996. At June 30, 1997, the Company has cash
and temporary cash investments of $21.5 million.
The Board of Directors of the Company authorized the Company to acquire up
to 500,000 shares of its common stock through purchases on the NASDAQ National
Market under a stock repurchase program. As of June 30, 1997, the Company had
purchased 125,000 shares under this program.
The Company's long-term capital requirements will depend on numerous factors
including the rate at which the Company identifies, evaluates and acquires new
technologies, whether through entering into licensing arrangements or acquiring
businesses, purchase of Company stock under its stock repurchase program, the
timing of the expansion of the Company's facilities and the purchase of
additional factory automation equipment. The Company anticipates that it will
incur expenditures to acquire its stock and to expand its facilities during the
next 12 months. The Company believes the proceeds of the initial public
offering, together with amounts available from cash generated by its operating
activities, will be adequate to meet the Company's anticipated needs for working
capital and capital expenditures through at least the next 12 months.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
The following exhibit is filed as a part of this report:
<TABLE>
<CAPTION>
Exhibit Number Title
-------------- -----
<S> <C>
27 Financial Data Schedule.
</TABLE>
b. Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: August 14, 1997
Trident International, Inc.
(Registrant)
/s/ Elaine A. Pullen
--------------------------------------
Elaine A. Pullen
President and Chief Executive Officer
/s/ J. Leo Gagne
--------------------------------------
J. Leo Gagne
Vice President and Chief
Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 21,473
<SECURITIES> 0
<RECEIVABLES> 4,200
<ALLOWANCES> 300
<INVENTORY> 1,618
<CURRENT-ASSETS> 27,603
<PP&E> 2,410
<DEPRECIATION> 772
<TOTAL-ASSETS> 41,961
<CURRENT-LIABILITIES> 2,604
<BONDS> 0
0
0
<COMMON> 71
<OTHER-SE> 39,286
<TOTAL-LIABILITY-AND-EQUITY> 41,961
<SALES> 22,356
<TOTAL-REVENUES> 22,356
<CGS> 7,860
<TOTAL-COSTS> 6,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,265
<INCOME-TAX> 3,567
<INCOME-CONTINUING> 5,698
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<NET-INCOME> 5,698
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0.79
</TABLE>
