<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________________to _____________________
Commission File Number: 000-20719
---------------------
PRINTRAK INTERNATIONAL INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0070547
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 North Tustin Avenue Anaheim, California 92807
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(714) 238-2000
----------------------------------------------------
(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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
9,473,200 shares of the issuer's common stock, par value $0.0001 per share,
were outstanding as of July 31, 1996.
- -------------------------------------------------------------------------------
<PAGE>
FORM 10-Q
CONTENTS
Page Number
-----------
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1996 (unaudited)
and March 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Unaudited Consolidated Statements of Operations for the three month
periods ended June 30, 1996 and 1995. . . . . . . . . . . . . . . . . 2
Unaudited Consolidated Statements of Cash Flows for the three month
periods ended June 30, 1996 and 1995. . . . . . . . . . . . . . . . . 3
Notes to the Consolidated Financial Statements. . . . . . . . . . . . 4
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 7
PART II - OTHER INFORMATION
Item 1: Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 12
Item 2: Changes in Securities . . . . . . . . . . . . . . . . . . . . 12
Item 3: Defaults upon Senior Securities . . . . . . . . . . . . . . . 12
Item 4: Submission of Matters to a Vote of Security Holders . . . . . 12
Item 5: Other Information . . . . . . . . . . . . . . . . . . . . . . 12
Item 6: Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 12
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
(unaudited)
-----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 198 $ 3,518
Accounts receivable, net of allowances for doubtful accounts
of $200 and $234 (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . 9,541 11,086
Inventories, net (Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . 8,451 8,852
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . 623 363
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,813 23,819
Property, plant and equipment - net. . . . . . . . . . . . . . . . . . . . . . . 4,898 2,889
Deferred offering costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682 -
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,769 4,847
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,208 1,390
--------- ---------
$ 30,370 $ 32,945
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,502 $ 4,761
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,570 3,116
Current installments on long-term debt (Note 4). . . . . . . . . . . . . . . . 958 888
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,201 3,904
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 234
--------- ---------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 11,402 12,903
Long-term debt, less current installments (Note 4) . . . . . . . . . . . . . . . 4,466 5,614
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,868 18,517
Stockholders' equity:
Common stock ($.0001 par value; 20,000,000 shares authorized;
7,323,200 shares issued and outstanding). . . . . . . . . . . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 308 308
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,503 14,352
Note receivable from stockholder . . . . . . . . . . . . . . . . . . . . . . . (300) (300)
Cumulative foreign exchange translation adjustment . . . . . . . . . . . . . . (10) 67
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . 14,502 14,428
--------- ---------
$ 30,370 $ 32,945
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months
ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,674 $ 5,190
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,447 2,543
------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . 12,121 7,733
COST OF REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,915 3,068
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,281 1,230
------- --------
Total cost of revenues . . . . . . . . . . . . . . . . . . . 6,196 4,298
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . 5,925 3,435
OPERATING EXPENSES:
Research, development and engineering. . . . . . . . . . . . . . 2,638 2,175
Selling, general and administrative. . . . . . . . . . . . . . . 2,844 2,296
------- --------
Total operating expenses . . . . . . . . . . . . . . . . . . 5,482 4,471
Operating income (loss). . . . . . . . . . . . . . . . . . . 443 (1,036)
Other income (expense) . . . . . . . . . . . . . . . . . . . . . (207) 241
------- --------
Income (loss) before provision for income taxes. . . . . . . 236 (795)
Provision (benefit) for income taxes . . . . . . . . . . . . . . 85 (131)
------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ 151 $ (664)
------- --------
------- --------
Net income (loss) per share (note 5) . . . . . . . . . . . . $ .02 $ (.09)
------- --------
------- --------
Weighted average shares outstanding. . . . . . . . . . . . . 7,691 7,200
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
ended June 30, ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 151 $ (664)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 626 1,012
Amortization of deferred credit . . . . . . . . . . . . . . . . . . - (302)
Loss (gain) on sale of fixed assets . . . . . . . . . . . . . . . . 23 (60)
Deferred tax provision. . . . . . . . . . . . . . . . . . . . . . . 78 -
Changes in operating assets and liabilities:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 1,545 (1,440)
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . (1,712) 946
Prepaid expenses and other current assets. . . . . . . . . . . . (260) (213)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (259) 1,013
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . 454 (314)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . (63) -
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . (1,703) (70)
------- -------
Net cash provided by (used in) operating activities . . . . . . . . (1,120) (92)
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . (545) (415)
Proceeds from notes receivable. . . . . . . . . . . . . . . . . . . 182 -
Proceeds from sale of land and building . . . . . . . . . . . . . . - 3,330
------- -------
Net cash provided by (used in) investing activities . . . . . . . . (363) 2,915
Cash flows from financing activities:
Proceeds from long-term debt. . . . . . . . . . . . . . . . . . . . 2,140 1,767
Principal payments on long-term debt. . . . . . . . . . . . . . . . (3,218) (5,520)
Deferred offering costs . . . . . . . . . . . . . . . . . . . . . . (682) -
------- -------
Net cash (used in) financing activities . . . . . . . . . . . . . . (1,760) (3,753)
Effect of exchange rate changes on cash balances. . . . . . . . . . (77) -
Net (decrease) in cash and cash equivalents. . . . . . . . . . . . . . (3,320) (930)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . 3,518 1,272
------- -------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . $ 198 $ 342
------- -------
------- -------
Non-Cash Transaction-Transfer of Inventory to Fixed Assets . . . . . . 2,113 -
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense. . . . . . . . . . $ 118 $ 134
------- -------
------- -------
Cash paid during the period for income taxes. . . . . . . . . . . . $ 65 $ 13
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRINTRAK INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
GENERAL BUSINESS
Printrak International Inc. ("the Company") designs, develops and manufactures
automated fingerprint identification systems (AFIS) primarily for use in law
enforcement applications, as well as in emerging applications for civil and
commercial markets.
On July 2, 1996, the Company completed an initial public offering of 2,000,000
shares of common stock for $8.00 per share, netting proceeds to the Company
after underwriting discounts and expenses of approximately $14.9 million. The
total offering included 2,500,000 shares, of which 2,000,000 were offered and
sold by the Company and 500,000 were offered and sold by stockholders. On
August 6, 1996, the Company's underwriters exercised an over-allotment option
for 121,000 shares which netted the Company additional proceeds of approximately
$0.9 million.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission ("SEC").
These consolidated financial statements reflect all adjustments, which are
normal and recurring in nature, and which in the opinion of management are
necessary to a fair statement of the financial position and results of
operations as of and for the three month period ended June 30, 1996 and 1995.
The results of operations for the three month period ended June 30, 1996 are not
necessarily indicative of the results of operations for the entire fiscal year
ending March 31, 1997. These consolidated financial statements and related
footnotes should be read in conjunction with the consolidated financial
statements and related footnotes presented in the Company's S-1 registration
statement.
CERTAIN TRANSACTIONS
The Company has outstanding at June 30, 1996 loans from certain related parties,
including a promissory note to Richard M. Giles, the Company's Chairman,
President and Chief Executive Officer for $150,000. Subsequent to June 30,
1996, and in conjunction with the completion of the initial public offering, Mr.
Giles repaid the $150,000, along with accrued interest.
The Company also has outstanding at June 30, 1996 a promissory note to RICOL,
LLC, a company controlled by Mr. Giles, for the principal amount of $1,230,000.
After June 30, 1996, RICOL, LLC prepaid $730,000 of principal and accrued
interest on the promissory note, and in recognition of this payment, the
Company's Board of Directors amended certain terms of the note, as follows: the
principal amount of the note is reduced to $500,000, the entire principal
balance is payable in seven years or upon sale of the property, and the interest
rate on the principal is reduced from 10% the published prime rate of the
Company's bank.
<PAGE>
PRINTRAK INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
(unaudited)
-----------
<S> <C> <C>
Billed receivables. . . . . . . . . . . . . . . . . . . $ 7,372 $ 6,005
Unbilled receivables. . . . . . . . . . . . . . . . . . 2,369 5,315
------- -------
9,741 11,320
Less allowance for doubtful accounts. . . . . . . . . . (200) (234)
------- -------
$ 9,541 $11,086
------- -------
------- -------
</TABLE>
Unbilled receivables consist of system and maintenance revenues which have been
earned but not invoiced because of contractual terms of the underlying
agreements.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
(unaudited)
-----------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . $ 3,076 $ 2,707
Work in process . . . . . . . . . . . . . . . . . . . . 5,118 4,319
Finished goods. . . . . . . . . . . . . . . . . . . . . 1,054 2,183
---------- ----------
9,248 9,209
Less allowance for inventory obsolescence
and revaluation. . . . . . . . . . . . . . . . . . . (797) (357)
---------- ----------
$ 8,451 $ 8,852
---------- ----------
---------- ----------
4. DEBT
Debt consists of the following:
June 30, March 31,
1996 1996
(unaudited)
-----------
Revolving line of credit with bank. . . . . . . . . . . $ 3,140 $ 4,200
Term loans with bank. . . . . . . . . . . . . . . . . . 1,740 1,996
Obligations under capital leases. . . . . . . . . . . . 544 306
---------- ----------
Total debt . . . . . . . . . . . . . . . . . . . . . 5,424 6,502
Less current installments of long-term debt . . . . . . (958) (888)
---------- ----------
$ 4,466 $ 5,614
---------- ----------
---------- ----------
</TABLE>
The revolving credit agreement contains certain financial and other covenants
with which the Company must comply on an on-going basis. Management believes
the Company is in compliance with all terms and covenants of this agreement at
June 30, 1996.
On July 8, 1996, upon receiving the proceeds from the Company's initial public
offering, the Company repaid the revolving line of credit which equaled $3.4
million at the pay-off date, as well as the $1.7 million outstanding under term
loans with the same bank.
<PAGE>
PRINTRAK INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE
Historical net income (loss) per share is computed by dividing historical net
income (loss) by the weighted average number of common and common equivalent
shares ouststanding. Common equivalents shares are not included for the three
months ended June 30, 1995 as the effect would be anti-dilutive. Weighted
average common and common equivalent shares include common shares and stock
options using the treasury stock method. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletin Topic 4D, stock options granted during the
twelve months prior to the date of the initial filing of the Company's Form S-1
Registration Statement have been included in the calculation of common
equivalent shares using the treasury stock method as if they were outstanding as
of the beginning of the period.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTORY NOTE
This Quarterly Report on Form 10-Q contains certain 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 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include (i) the existence and development of
the Company's technical and manufacturing capabilities, (ii) anticipated
competition, (iii) potential future growth in revenues and income, (iv)
potential future decreases in costs, and (v) the need for, and availability of,
additional financing.
The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions that the Company will not lose a significant
customer or customers or experience increased fluctuations of demand or
rescheduling of purchase orders, that the Company's markets will continue to
grow, that the Company's products will remain accepted within their respective
markets and will not be replaced by new technology, that competitive conditions
within the Company's markets will not change materially or adversely, that the
Company will retain key technical and management personnel, that the Company's
forecasts will accurately anticipate market demand, and that there will be no
material adverse change in the Company's operations or business. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the Company
believes the assumptions could prove inaccurate and, therefore, there can be no
assurance that the results contemplated in forward-looking statements will be
realized. In addition, the business and operations of the Company are subject
to substantial risks which increase the uncertainty inherent in such forward-
looking statements. In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved.
The following is management's discussion and analysis of certain significant
factors which have affected the earnings and financial position of the Company
during the period included in the accompanying financial statements. This
discussion compares the three-month period ended June 30, 1996 with the three-
month period ended June 30, 1995. This discussion should be read in conjunction
with the financial statements and associated notes.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTH PERIOD ENDED
JUNE 30, 1995
TOTAL REVENUES
The Company's total revenues are comprised of system revenues, which include
products, file conversion services, and system installation; and maintenance
revenues related to hardware and software support.
Revenues increased 56.7% to $12.1 million for the quarter ended June 30, 1996
from $7.7 million for the quarter ended June 30, 1995. System revenues increased
$4.5 million or 86.4% to $9.7 million for the first quarter from $5.2 million
for the first quarter of the previous year. The increase in revenue for the
first quarter is primarily attributable to increased market acceptance of the
Company's AFIS 2000 series of products and revenue growth in the Livescan
booking station product line.
Maintenance revenues equaled $2.4 million for the quarter ended June 30, 1996,
decreasing 3.8% from revenues of $2.5 million for the quarter ended June 30,
1995. The decline in maintenance revenues is the result of a number of customer
AFIS 2000 system upgrades which, although they yield increased system revenue,
reduce maintenance revenues during the customer's warranty period.
The Company's quarterly revenues have in the past, and in the future may be
expected to fluctuate significantly. These fluctuations are the result of a
variety of factors, including: the Company's delivery cycle, variations in order
size, variations in product mix, and the timing of orders.
GROSS PROFIT
Cost of revenues primarily consist of purchased materials procured for use in
the assembly of the Company's products, manufacturing labor and overhead, file
conversion costs and maintenance expenses.
Overall gross profit increased to $5.9 million during the quarter ended June 30,
1996 in comparison to $3.4 million for the quarter ended June 30, 1995. This
represented an increase in gross profit of $2.5 million or 72.5%. Gross margin
was 48.9% for the three months ended June 30, 1996, up from 44.4% for the three
months ended June 30, 1995. The gross profit for system revenues increased to
$4.8 million for the quarter ended June 30, 1996 from $2.1 million for the same
quarter in fiscal year 1995. Furthermore, this represented an increase in gross
margin to 49.2% from 40.9%. Gross margin related to maintenance revenues
decreased to 47.7% for the first quarter in comparison to 51.6% for the first
quarter of the previous year.
The overall increase in gross margin related to system revenues is, in part,
associated with favorable order mix, as well as favorable manufacturing
variances which resulted in overall cost reductions from the previous year's
first quarter. Additionally, $0.6 million of software amortization, absent in
the current year because all capitalized software was fully amortized in the
fourth quarter of the previous fiscal year, is included in cost of sales for the
quarter ended June 30, 1995. The Company's margin may be affected quarter-to-
quarter by several factors, including the proportion of total revenues derived
from competitive bid processes and the mix of products sold. The reduction in
the Company's maintenance revenue margin is the result of increased maintenance
support costs without a corresponding increase in the price of maintenance
support service.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company believes that gross margins were positively impacted in the first
quarter by favorable order mix, however, the Company anticipates a slight
decline in gross margins for the remainder of the fiscal year due to changes in
the projected order composition.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative (SG&A) expenses consist principally of
compensation paid to sales, marketing, and administrative personnel, payments to
consultants, professional service fees, travel and related expenses, and other
marketing expenses.
For the three month period ended June 30, 1996, SG&A expenses increased to $2.8
million from $2.3 million for the period ended June 30, 1995. This reflects an
overall SG&A expense increase of $0.5 million or 21.7% between the first
quarter of fiscal year 1996 and the first quarter of fiscal year 1995. The
increase in SG&A expenses results from increased sales and administrative salary
expense to support the infrastructure of a higher level of revenues, increased
travel costs, and increased consulting fees. SG&A expenses, as a percentage of
revenues, decreased to 23.5% for the three months ended June 30, 1996, down from
29.7% for the same period of the previous year, due primarily to the increased
level of total revenues.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses (RD&E) are comprised primarily of
compensation paid to personnel engaged in research, development and engineering
activities, amounts paid for outside services and the cost of materials used in
the development of hardware and software products.
RD&E expenses increased 21.3% to $2.6 million for the quarter ended June 30,
1996, up from $2.2 million for the quarter ended June 30, 1995. The increase in
RD&E expense is comprised of increased salary and contract labor expense related
to additional personnel engaged in research, as well as engineering enhancement
of existing products and additional depreciation expense associated with the
capitalization of equipment used principally for development efforts. RD&E
expenses, as a percentage of revenues, decreased to 21.8% for the three months
ended June 30, 1996, down from 28.1% for the same period of the previous year,
primarily due to the increased level of total revenues.
OTHER (INCOME) EXPENSE
Other expense for the quarter ended June 30, 1996 equaled $207,000 in comparison
to $241,000 of other income for the quarter ended June 30, 1995. Other expense
for the period ended June 30, 1996 is primarily due to approximately $100,000 of
interest expense associated with the Company's revolving line of credit and
other term loan agreements. For the quarter ended June 30, 1995, other income
of approximately $300,000 resulted from the amortization of a deferred credit
which became fully utilized in March, 1996. This income, along with interest
income, was partially offset by interest expense incurred on the Company's
revolving line of credit.
PROVISION FOR INCOME TAXES
Income tax expense for the quarter ended June 30, 1996 equaled $85,000 in
comparison to a benefit of $131,000 for the quarter ended June 30, 1995. This
represents an overall increase in tax expense of $216,000. The Company's tax
provision is based on the federal statutory rate of 36% and reflects the impact
of state and foreign taxes and the utilization of limited net operating loss
carryforwards.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SYSTEM BACKLOG
The Company measures its backlog of system revenues based on orders for which
contracts or purchase orders have been signed, but which have not been shipped
and for which revenues have not been recognized. At June 30, 1996, the
Company's system revenues backlog was approximately $31.0 million, compared to
$28.8 million at March 31, 1996.
Substantially all of the Company's backlog as of June 30, 1996 is expected to be
shipped during the current fiscal year. However, certain orders comprising
backlog may set forth requirements for custom software development or data file
conversion which may require extensive work to be completed prior to shipment.
Any failure of the Company to meet an agreed upon schedule could result in the
cancellation of the related order. Furthermore, variations in the size,
complexity and delivery requirements of the customer order may result in
substantial fluctuations in backlog from period to period. Accordingly, the
Company believes that backlog cannot be considered a meaningful indicator of
future financial performance.
FINANCIAL CONDITION
Cash and cash equivalents declined from $3.5 million at March 31, 1996 to $0.2
million at June 30, 1996 as a result of increased inventory purchasing levels
and a reduction in borrowings of $1.1 million. Trade receivables declined $1.6
million from $11.1 million at March 31, 1996 to $9.5 million at June 30, 1996
primarily as a result of the billing and subsequent collection of a significant
customer receivable which had previously been deferred. Total inventory levels,
after the reclassification of engineering test items into fixed assets, resulted
in increased raw material and work in process inventory levels of $1.7 million.
Work in process inventory increased primarily due to a significant order,
prepaid by the customer, for which all components were received prior to the
end of the first quarter but were not scheduled to be shipped until after the
end of the quarter.
The increase in the net balance of property, plant and equipment of $2.0 million
from $2.9 million at March 31, 1996 to $4.9 million at June 30, 1996 reflects
capital expenditures of approximately $0.5 million, depreciation expense of $0.6
million, and the capitalization of approximately $2.1 in engineering test
equipment, previously classified as finished goods inventory. Deferred offering
costs of $0.7 million were incurred in conjunction with the Company's initial
public offering and will be offset against the cash proceeds received from the
Company's initial public offering in the second quarter.
Total current liabilities decreased from $12.9 million at March 31, 1996 to
$11.4 million at June 30, 1996. The increase in accrued liabilities of $0.5
million is a result of the timing of certain payments and an increase in the
Company's warranty provision, necessitated by the increased level of system
shipments. The decline in deferred revenue from $3.9 million at March 31, 1996
to $2.2 million at June 30, 1996 is due to the recognition of revenue on a
significant customer contract which was previously deferred.
The decline in long-term debt is a result of reduced borrowing levels on the
Company's revolving line of credit, as well as principal payments on the
Company's outstanding term loans. On July 8, 1996, upon receiving the proceeds
from the Company's initial public offering, the Company repaid the revolving
line of credit, as well as the amounts outstanding under the Company's term
loans.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through the cash provided by its operations
and the utilization of its revolving credit line. The Company's operating
activities used net cash of approximately $1.1 million for the period ended June
30, 1996, primarily from reductions in net working capital. The Company's
operating activities used net cash of approximately $0.1 million for the period
ended June 30, 1995 primarily as a result the Company incurring a net loss for
the period.
The Company's investing activities used approximately $0.4 million of cash for
the quarter ended June 30, 1996, due to capital expenditures of $0.6 million and
$0.2 million cash received from a note receivable. The Company's investing
activities generated cash of approximately $2.9 million for the quarter ended
June 30, 1995, primarily from the sale of the Company's headquarters for
proceeds of $3.3 million, partially offset by the purchase of capital equipment
of $.4 million.
Financing activities used net cash of approximately $1.8 million and $3.8
million for the three months ended June 30, 1996 and June 30, 1995,
respectively. For the current period, debt repayments equaled $3.2 million
while debt proceeds totaled $2.1 million. The Company expended approximately
$.7 million for costs related to the Company's initial public offering. For the
period ended June 30, 1995, the Company borrowed $1.7 million and paid principal
payments on its long-term debt of $5.5 million.
On July 2, 1996, the Company completed an initial public offering of 2,000,000
shares of common stock for $8.00 per share, netting proceeds to the Company
after underwriting discounts and expenses of approximately $14.9 million. The
total offering included 2,500,000 shares, of which 2,000,000 were offered and
sold by the Company and 500,000 were offered and sold by stockholders. On
August 6, 1996, the Company's underwriters exercised an over-allotment option
for 121,000 million shares which netted the Company additional proceeds of
approximately $0.9 million.
The Company believes that the cash generated from operations, together with the
proceeds received from the Company's initial public offering, will be sufficient
to meet its cash requirements at least through the end of fiscal year 1998.
<PAGE>
PRINTRAK INTERNATIONAL INC.
PART II-OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this report, the Company is not a party to any legal proceedings, the adverse
outcome of which, in management's opinion, individually or in the aggregate,
would have a material adverse effect on the Company's results of operations or
financial position.
Item 2 - CHANGES IN SECURITIES
None.
Item 3 - DEFAULTS UPON SENIOR SECURITIES
None.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In June 1996, the Company submitted for approval for its stockholders by written
consent, (a) the Company's 1996 Stock Incentive Plan, (b) the Employee Stock
Purchase Plan and (c) and the Amended and Restated Certificate of Incorporation
providing for the issuance of up to 5,000,000 shares of preferred stock. Such
matters were approved by affirmation vote of holders of 7,136,400 shares, or
97.4% of the Company's common stock.
Item 5 - OTHER INFORMATION
None.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINTRAK INTERNATIONAL INC.
(REGISTRANT)
BY
------------------------------------
Name: Kevin McDonnell
Title: Chief Financial Officer
and Director
Date:
-------------------------
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