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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 March 31, 1998
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 May 4, 1998 was 6,650,632.
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
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Page
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PART I. FINANCIAL INFORMATION
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1997 and March 31, 1998.................................. 3
Condensed Consolidated Statements of Operations
for the three months and six months and ended March 31, 1997
and 1998................................................................ 4
Condensed Consolidated Statements of Cash Flows
for the six months ended March 31, 1997 and
1998.................................................................... 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 1. Legal Proceedings......................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders....................... 13
Item 6. Exhibits and Reports on Form 8-K.......................................... 14
Signatures................................................................ 14
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PART 1. 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)
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September 30, 1997 March 31, 1998
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ASSETS (Unaudited)
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CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 7,065 $ 4,524
Marketable securities .................................................. 12,728 14,865
Accounts receivable, net ............................................... 4,385 5,277
Inventories ............................................................ 1,745 2,145
Deferred income taxes .................................................. 465 451
Other current assets ................................................... 148 265
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Total current assets .......................................... 26,536 27,527
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, net .................................. 1,924 2,362
DEFERRED INCOME TAXES ....................................................... 704 610
INTANGIBLE ASSETS, net ...................................................... 11,743 11,342
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Total assets ................................................... $40,907 $41,841
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ...................................................... $ 1,540 $ 1,451
Accrued expenses ...................................................... 1,067 1,091
Income taxes payable .................................................. 411 262
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Total current liabilities ....................................... 3,018 2,804
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 30,000,000 shares authorized; 7,167,981 and
7,176,632 shares issued and outstanding at September 30, 1997
and March 31, 1998 ................................................... 72 72
Additional paid-in capital .............................................. 40,146 40,186
Retained earnings ....................................................... 3,346 7,065
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43,564 47,323
Less - Treasury stock at cost, 345,000 and 528,000 shares
at September 30, 1997 and March 31, 1998, respectively .............. 5,675 8,286
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Total stockholders' equity ....................................... 37,889 39,037
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$40,907 $41,841
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</TABLE>
See accompanying notes
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<TABLE>
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000's Omitted, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
March 31, 1997 March 31, 1998 March 31, 1997 March 31, 1998
-------------- -------------- -------------- --------------
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NET SALES ...................................... $ 7,743 $ 8,411 $ 14,287 $ 16,168
COST OF SALES .................................. 2,762 3,058 4,982 5,882
----------- ----------- ----------- -----------
Gross profit ................................ 4,981 5,353 9,305 10,286
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Marketing and selling ....................... 585 783 1,026 1,492
Research and development .................... 759 885 1,371 1,745
General and administrative .................. 536 763 1,014 1,299
Amortization of intangibles ................. 199 200 400 401
----------- ----------- ----------- -----------
Total operating expenses .............. 2,079 2,631 3,811 4,937
----------- ----------- ----------- -----------
Operating income ...................... 2,902 2,722 5,494 5,349
OTHER INCOME:
Interest income, net ..................... (259) (279) (495) (554)
----------- ----------- ----------- -----------
Income before income taxes ............ 3,161 3,001 5,989 5,903
PROVISION FOR INCOME TAXES ..................... 1,217 1,110 2,306 2,184
----------- ----------- ----------- -----------
NET INCOME ..................................... $ 1,944 $ 1,891 $ 3,683 $ 3,719
=========== =========== =========== ===========
BASIC EARNINGS PER COMMON SHARE ................ $ 0.27 $ 0.28 $ 0.52 $ 0.56
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING FOR BASIC EARNINGS PER
SHARE .................................... 7,097,898 6,650,589 7,059,644 6,695,090
=========== =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE .............. $ 0.27 $ 0.28 $ 0.51 $ 0.55
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING FOR DILUTED EARNINGS PER
SHARE ..................................... 7,254,003 6,767,616 7,211,088 6,811,433
=========== =========== =========== ===========
See accompanying notes.
4
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<TABLE>
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TRIDENT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
(Unaudited)
Six Months Ended
----------------
March 31, 1997 March 31, 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................ $ 3,683 $ 3,719
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ................................................... 564 624
Deferred income taxes ........................................................... 88 108
Changes in operating assets and liabilities:
Accounts receivable, net ................................................................. (441) (892)
Inventories .............................................................................. (283) (400)
Other current assets ..................................................................... (33) (117)
Accounts payable and accrued expenses .................................................... (117) (65)
Income taxes payable ..................................................................... 75 (149)
-------- --------
Net cash provided by operating activities ................................ 3,536 2,828
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities, net .............................................. - (2,137)
Purchases of leasehold improvements
and equipment, net........................................................................... (286) (661)
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Net cash used in investing activities ................................... (286) (2,798)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................................ 26 40
Exercise of warrants and options ...................................................... 18 -
Purchases of treasury stock ........................................................... - (2,611)
-------- --------
Net cash provided by ( used in) financing activities ...................... 44 (2,571)
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS ................................................ 3,294 (2,541)
CASH AND CASH EQUIVALENTS, beginning of period .............................................. 17,349 7,065
-------- --------
CASH AND CASH EQUIVALENTS, end of period .................................................... $ 20,643 $ 4,524
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Income taxes ........................................................................ $ 2,143 $ 2,225
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See accompanying notes.
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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, 1998.
2. Cash and cash equivalents:
For purposes of the consolidated statements of cash flows, the Company
considers all investment instruments purchased with a maturity of three
months or less to be cash equivalents.
3. Marketable securities:
The Company invests in marketable securities of highly rated financial
institutions and investment grade debt instruments and limits the amount
of credit exposure in any one entity. The Company has classified its
marketable securities as "available for sale" and accordingly carries
such securities at aggregate fair value. Unrealized gains or losses are
included in stockholders' equity as a component of additional paid-in
capital. At March 31, 1998, the fair value of the Company's marketable
securities approximated its cost.
4. Inventories:
Inventories consisted of the following:
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September 30, March 31,
1997 1998
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Raw materials $ 943 $1,362
Work-in process 511 488
Finished goods 291 295
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$1,745 $2,145
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5. 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.
6. Earning Per Share:
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share" which superceded 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 has adopted this standard effective October 1, 1997. As a result,
the Company's recorded earnings per share for the six months ended March
31, 1997 were restated from $0.51 per share to $0.52 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 Predecessor was founded in 1989 as Trident, Inc. Shortly after its
incorporation, a majority interest in the Predecessor was purchased by JWA
through JWA's direct subsidiary, Porelon. At that time, the Predecessor also
obtained the Dataproducts License from Dataproducts Corporation, 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 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 of its
common stock, which provided proceeds, after underwriting discounts and
commissions, of $28.3 million. 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.
RESULTS OF OPERATIONS
Net Sales. Net sales increased $668,000, or 9% to $8.4 million for the three
months ended March 31, 1998 from $7.7 million for the three months ended March
31, 1997. Net sales of printheads increased by approximately $73,000 or 2% in
the three months ended March 31, 1998 as compared to the same quarter in the
prior fiscal year due primarily to an increase in average selling prices
partially offset by a reduction in printhead unit sales. Sales of ink products
increased by $704,000 or 26% in the three months ended March 31, 1998 as
compared to the same quarter in the prior fiscal year due to the increased
volume of ink sold. These increases were partially offset by a $109,000 decrease
in sales of other products. Net sales to international customers decreased by
$73,000, or 3% for the three months ended March 31, 1998 as compared to the
three months ended March 31, 1997 due to a decline in sales of approximately
$370,000 to customers located in Asia.
8
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Net Sales. Net sales increased $1.9 million, or 13% to $16.2 million for the
six months ended March 31, 1998 from $14.3 million for the six months ended
March 31, 1997. Net sales of printheads increased by approximately $392,000 or
5% in the six months ended March 31, 1998 as compared to the same period in the
prior fiscal year due primarily to an increase in average selling price of
printheads. Sales of ink products increased by $1.5 million or 27% in the six
months ended March 31, 1998 as compared to the same quarter in the prior fiscal
year due to increased volume of ink sold. Net sales to international customers
increased by $490,000, or 12% for the six months ended March 31, 1998 as
compared to the six months ended March 31, 1997.
Gross Profit. Gross profit increased $372,000, or 7% to $5.4 million for the
three months ended March 31, 1998 from $5.0 million for the three months ended
March 31, 1997. Gross profit as a percentage of net sales decreased from 64.3 %
for the three months ended March 31, 1997 to 63.6% for the three months ended
March 31, 1998. The decrease in gross profit as a percentage of net sales was
due to higher average printhead costs and lower average ink products selling
prices.
Gross Profit. Gross profit increased $981,000, or 11% to $10.3 million for
the six months ended March 31, 1998 from $9.3 million for the six months ended
March 31, 1997. Gross profit as a percentage of net sales decreased from 65.1%
for the six months ended March 31, 1997 to 63.6% for the six months ended March
31, 1998. The decrease in gross profit as a percentage of net sales was due to
lower average ink products selling prices.
Marketing and Selling Expenses. Marketing and selling expenses increased
$198,000, or 34% to $783,000 for the three months ended March 31, 1998 from
$585,000 for the three months ended March 31, 1997 due to the addition of sales
personnel and associated recruiting cost and increased advertising expenses. As
a percentage of net sales, these expenses increased to 9.3% for the three months
ended March 31, 1998 from 7.6% for the three months ended March 31, 1997.
Marketing and Selling Expenses. Marketing and selling expenses increased
$466,000, or 45% to $1.5 million for the six months ended March 31, 1998 from
$1.0 million for the six months ended March 31, 1997 due to the addition of
sales personnel and associated recruiting cost and travel expenses and increased
advertising expenses. As a percentage of net sales, these expenses increased to
9.2% for the six months ended March 31, 1998 from 7.2% for the six months ended
March 31, 1997.
Research and Development Expenses. Research and development expenses
increased $126,000, or 17% to $885,000 for the three months ended March 31, 1998
from $759,000 for the three months ended March 31, 1997 due principally to the
addition of engineering personnel as well as increases in research project
materials and supplies. As a percentage of net sales, these expenses increased
to 10.5% for the three months ended March 31, 1998 from 9.8% for the three
months ended March 31, 1997.
Research and Development Expenses. Research and development expenses
increased $374,000, or 27% to $1.7 million for the six months ended March 31,
1998 from $1.4 million for the six months ended March 31, 1997 due principally
to the addition of engineering personnel as well as increases in research
project materials and supplies. As a percentage of net sales, these expenses
increased to 10.8% for the six months ended March 31, 1998 from 9.6% for the six
months ended March 31, 1997.
General and Administrative Expenses. General and administrative expenses
increased $227,000, or 42% to $763,000 for the three months ended March 31, 1998
from $536,000 for the three months ended March 31, 1997. The increase in
expenses is due to additional legal fees arising from the legal proceedings
described on page 13 (see Part II, Item I. Legal Proceedings), consulting fees,
training, travel and insurance expenses. As a percentage of net sales, these
expenses increased to 9.1% for the three months ended March 31, 1998 from 6.9%
for the three months ended March 31, 1997.
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General and Administrative Expenses. General and administrative expenses
increased $285,000, or 28% to $1.3 million for the six months ended March 31,
1998 from $1.0 million for the six months ended March 31, 1997. The increase in
expenses is due to additional legal fees, consulting fees, training, travel and
insurance expenses. As a percentage of net sales, these expenses increased to
8.0% for the six months ended March 31, 1998 from 7.1% for the six months ended
March 31, 1997.
Amortization of Intangibles and Amortization of Deferred Compensation. The
amortization amounts for the excess of purchase price over the fair market value
of net assets acquired and other intangibles of approximately $200,000 in both
periods did not vary in amount for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997.
Amortization of Intangibles and Amortization of Deferred Compensation. The
amortization amounts for the excess of purchase price over the fair market value
of net assets acquired and other intangibles of approximately $400,000 in both
periods did not vary in amount for the six months ended March 31, 1998 as
compared to the six months ended March 31, 1997.
Interest Income, net. Interest income was $279,000 for the three months
ended March 31, 1998 as compared to $259,000 for the three months ended March
31, 1997.
Interest Income, net. Interest income was $554,000 for the six months ended
March 31, 1998 as compared to $495,000 for the six months ended March 31, 1997.
Provision for Income Taxes. The provision for income taxes for the three
months ended March 31, 1998 was $1.1 million on income before income taxes of
$3.0 million. The effective tax rate for the three months ended March 31, 1998
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.
Provision for Income Taxes. The provision for income taxes for the six
months ended March 31, 1998 was $2.2 million on income before income taxes of
$5.9 million. The effective tax rate for the six months ended March 31, 1998
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.
10
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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. In December, 1997 the Company filed a civil action charging
several such manufacturers with infringing two of the Company's patents (see
Part II, Item 1. Legal Proceedings). This has resulted in counterclaims by two
defendants that include patent invalidity and antitrust violations. No assurance
can be given that the Company's litigation in this area will result in a
favorable decision, or that any adverse decision on the counterclaims could not
have a material adverse effect on the Company's results of operations.
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. 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.
For the three months ended March 31, 1998, approximately 77% of the
Company's net sales were to its top ten OEM customers, while approximately 25.5%
of the Company's net sales for this period were to Marsh Company. 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 March 31, 1998, approximately 69% 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.
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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 March 31, 1998, the Company had working capital of $24.7 million compared
to $23.5 million at September 30, 1997. At March 31, 1998, the Company has cash
and temporary cash investments of $19.4 million.
The primary financing cash flows activity for the six months ended March 31,
1998 was the purchase of treasury stock of $2.6 million. The major investing
cash flow activities for the six months ended March 31, 1998 included purchases
of $2.1 million in marketable securities and $661,000 in purchases of leasehold
improvements and equipment. Cash flows from operations of $2.8 million results
primarily from net income of $3.7 million plus depreciation and amortization of
$624,000 offset by increases in inventories and accounts receivable. The Company
also has a line of credit with Fleet Bank, which allows it to borrow up to
$1,000,000. There were no borrowings under this line at March 31, 1998.
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, the timing of the expansion of the Company's facilities and the
purchase of additional factory automation equipment. The Company believes that
it has sufficient cash resources to meet its anticipated needs for working
capital and capital expenditures through at least the next 12 months.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In December, 1997, the Company filed a civil action in the U.S.
District Court for the Southern District of Illinois charging Applied Technology
Group of Belleville, Illinois, AP Products, Inc. of Deer Park, New York,
Renewable Resources, Inc of Deer Park, New York and Franklin, Tennessee and
Independent Ink, Inc of Gardena, California with infringing two of the Company's
patents. Renewable Resources, Inc. and Applied Technology Group have since
counterclaimed against the Company for a declaration of noninfringement and
patent invalidity while also alleging violations of the antitrust laws relating
to the Company's sales of ink products.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on January 29,
1998. At the Annual Meeting, the Company's stockholders voted (i) to re-elect
Elaine A. Pullen, Michael K. Lorelli and John R. Webb to serve as Class II
Directors of the Company until the 2000 Annual Meeting of Stockholders and until
their respective successors are duly elected and qualified; and (ii) to approve
the amendment and restatement of the Trident International, Inc. Second Amended
and Restated 1994 Stock Option and Grant Plan, as described in the Company's
Proxy Statement distributed to stockholders in connection with the Annual
Meeting. Set forth below are the results of the stockholders votes at the Annual
Meeting on the foregoing matters.
Election of Class II Directors
<TABLE>
<CAPTION>
Nominee Votes in Favor Votes Withheld
------- -------------- --------------
<S> <C> <C>
Elaine A. Pullen 5,914,092 39,680
Michael K. Lorelli 5,913,092 40,680
John R. Webb 5,914,092 39,680
</TABLE>
Approval of Amendment and Restatement of Second Amended and Restated
1994 Stock Option and Grant Plan
<TABLE>
<CAPTION>
Votes in Favor Votes Against Abstentions
-------------- ------------- -----------
<S> <C> <C>
5,189,010 762,661 2,101
</TABLE>
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
The following exhibits are filed as a part of this report:
<TABLE>
<CAPTION>
Exhibit Number Title
-------------- -----
<S> <C>
27.1 Financial Data Schedule.
27.2 Amended Financial Data Schedule for Periods Ended December 31, 1996,
March 31, 1997, June 30, 1997, and September 30, 1997.
</TABLE>
b. Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31, 1998.
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: May 14, 1998
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
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,524
<SECURITIES> 14,865
<RECEIVABLES> 5,577
<ALLOWANCES> 300
<INVENTORY> 2,145
<CURRENT-ASSETS> 27,527
<PP&E> 3,456
<DEPRECIATION> 1,094
<TOTAL-ASSETS> 41,841
<CURRENT-LIABILITIES> 2,804
<BONDS> 0
0
0
<COMMON> 72
<OTHER-SE> 38,965
<TOTAL-LIABILITY-AND-EQUITY> 41,841
<SALES> 16,168
<TOTAL-REVENUES> 16,168
<CGS> 5,882
<TOTAL-COSTS> 4,937
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,903
<INCOME-TAX> 2,184
<INCOME-CONTINUING> 3,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,719
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS INDICATED BELOW AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997 SEP-30-1997 SEP-30-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 19,768 20,643 21,473 7,065
<SECURITIES> 0 0 0 12,728
<RECEIVABLES> 3,899 4,656 4,200 4,685
<ALLOWANCES> 300 300 300 300
<INVENTORY> 1,914 1,846 1,618 1,745
<CURRENT-ASSETS> 25,796 27,485 27,603 26,536
<PP&E> 2,046 2,247 2,410 2,795
<DEPRECIATION> 598 681 772 871
<TOTAL-ASSETS> 40,467 42,016 41,961 40,907
<CURRENT-LIABILITIES> 2,766 2,327 2,604 3,018
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 70 71 71 72
<OTHER-SE> 37,631 39,618 39,286 37,817
<TOTAL-LIABILITY-AND-EQUITY> 40,467 42,016 41,961 40,907
<SALES> 6,544 14,287 22,356 30,283
<TOTAL-REVENUES> 6,544 14,287 22,356 30,283
<CGS> 2,220 4,982 7,860 10,818
<TOTAL-COSTS> 1,732 3,811 6,010 8,321
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> 2,828 5,989 9,265 12,216
<INCOME-TAX> 1,089 2,306 3,567 4,703
<INCOME-CONTINUING> 1,739 3,683 5,698 7,513
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 1,739 3,683 5,698 7,513
<EPS-PRIMARY> 0.25<F1> 0.52<F1> 0.81<F1> 1.07<F1>
<EPS-DILUTED> 0.24 0.51 0.79 1.05
<FN>
<F1>The value shown for the caption "EPS Primary" is Basic EPS computed in
accordance with FAS128.
</FN>
</TABLE>
