<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 December 31, 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.
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(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
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(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.
X Yes No
----- -----
9,670,939 shares of the issuer's common stock, par value $0.0001 per share,
were outstanding as of January 31, 1997.
- --------------------------------------------------------------------------------
<PAGE>
FORM 10-Q
CONTENTS
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1996 (unaudited)
and March 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . 1
Unaudited Consolidated Statements of Operations for the three month
periods ended December 31, 1996 and 1995. . . . . . . . . . . . . 2
Unaudited Consolidated Statements of Operations for the nine month
periods ended December 31, 1996 and 1995. . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Cash Flows for the nine month
periods ended December 31, 1996 and 1995. . . . . . . . . . . . . 4
Notes to the Consolidated Financial Statements. . . . . . . . . . 5
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 1:Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 15
Item 2:Changes in Securities. . . . . . . . . . . . . . . . . . . 15
Item 3:Defaults upon Senior Securities. . . . . . . . . . . . . . 15
Item 4:Submission of Matters to a Vote of Security Holders. . . . 15
Item 5:Other Information. . . . . . . . . . . . . . . . . . . . . 15
Item 6:Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(unaudited)
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .$ 3,482 $ 3,154
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . 4,547 364
Accounts receivable, net of allowances for doubtful accounts
of $200 and $234 (Note 2). . . . . . . . . . . . . . . . . . . . . 19,565 11,086
Inventories, net (Note 3) . . . . . . . . . . . . . . . . . . . . . . 6,021 8,852
Prepaid expenses and other current assets . . . . . . . . . . . . . . 576 363
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 34,191 23,819
Property, plant and equipment - net. . . . . . . . . . . . . . . . . . . 4,217 2,889
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 3,410 4,847
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 1,390
-------- --------
$ 42,343 $ 32,945
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . .$ 1,044 $ 4,761
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,239 3,116
Current installments on long-term debt (Note 4) . . . . . . . . . . . 163 888
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,177 3,904
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . 410 234
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 8,033 12,903
Long-term debt, less current installments (Note 4) . . . . . . . . . . . 1,161 5,614
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 9,194 18,517
Stockholders' equity:
Common stock ($.0001 par value; 20,000,000 shares authorized;
9,648,075 and 7,323,200 shares issued and outstanding). . . . . . . . 3 1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . 15,619 308
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 17,703 14,352
Note receivable from stockholder. . . . . . . . . . . . . . . . . . . ( 300) (300)
Cumulative foreign exchange translation adjustment. . . . . . . . . . 124 67
-------- --------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . 33,149 14,428
-------- --------
$ 42,343 $ 32,945
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS
ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months Three months
ended ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,773 $ 15,280
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 2,444 2,343
-------- --------
Total revenues. . . . . . . . . . . . . . . . . . . . 18,217 17,623
COST OF REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . 7,259 8,395
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 1,205 1,400
-------- --------
Total cost of revenues. . . . . . . . . . . . . . . . 8,464 9,795
Gross profit. . . . . . . . . . . . . . . . . . . . 9,753 7,828
OPERATING EXPENSES:
Research, development and engineering. . . . . . . . . . 2,555 2,200
Selling, general and administrative. . . . . . . . . . . 2,835 2,685
-------- --------
Total operating expenses. . . . . . . . . . . . . . . 5,390 4,885
Operating income. . . . . . . . . . . . . . . . . . 4,363 2,943
Other income . . . . . . . . . . . . . . . . . . . . . . 172 204
-------- --------
Income before provision for income taxes. . . . . . . 4,535 3,147
Provision for income taxes . . . . . . . . . . . . . . . 1,645 522
Net income. . . . . . . . . . . . . . . . . . . . . . $ 2,890 $ 2,625
-------- --------
-------- --------
Net income per share (Note 5). . . . . . . . . . . . $ .29 $ .34
-------- --------
-------- --------
Weighted average shares outstanding . . . . . . . . . 10,106 7,666
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS
ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,493 $ 25,867
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 7,296 7,432
-------- --------
Total revenues. . . . . . . . . . . . . . . . . . . . 43,789 33,299
COST OF REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . 18,386 14,939
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 3,838 3,928
-------- --------
Total cost of revenues. . . . . . . . . . . . . . . . 22,224 18,867
Gross profit. . . . . . . . . . . . . . . . . . . . 21,565 14,432
OPERATING EXPENSES:
Research, development and engineering. . . . . . . . . . 7,940 6,496
Selling, general and administrative. . . . . . . . . . . 8,356 7,342
-------- --------
Total operating expenses. . . . . . . . . . . . . . . 16,296 13,838
Operating income. . . . . . . . . . . . . . . . . . 5,269 594
Other income (expense) . . . . . . . . . . . . . . . . . (30) 745
-------- --------
Income before provision for income taxes. . . . . . . 5,239 1,339
Provision for income taxes . . . . . . . . . . . . . . . 1,894 222
-------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . $ 3,345 $ 1,117
-------- --------
-------- --------
Net income per share (Note 5). . . . . . . . . . . . $ .36 $ .15
-------- --------
-------- --------
Weighted average shares outstanding . . . . . . . . . 9,308 7,509
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS
ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 3,345 $ 1,117
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . 2,062 2,882
Amortization of deferred credit . . . . . . . . . . . - (905)
Loss (gain) on sale of fixed assets . . . . . . . . . 26 (60)
Deferred tax provision. . . . . . . . . . . . . . . . 1,437 -
Changes in operating assets and liabilities:
Accounts receivable, net. . . . . . . . . . . . . . (8,479) (4,575)
Inventories, net. . . . . . . . . . . . . . . . . . 25 596
Prepaid expenses and other current assets . . . . . (218) (65)
Accounts payable and other current liabilities. . . (3,541) 1,494
Accrued liabilities . . . . . . . . . . . . . . . . 1,123 656
Deferred revenue. . . . . . . . . . . . . . . . . . (1,727) (659)
-------- --------
Net cash (used in) provided by operating activities . (5,947) 481
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . . . . . (834) (1,787)
Proceeds from notes receivable. . . . . . . . . . . . 870 -
Purchases of short-term investments . . . . . . . . . (4,093) -
Proceeds from sale of land and building . . . . . . . - 3,330
-------- --------
Net cash (used in) provided by investing activities . (4,057) 1,543
Cash flows from financing activities:
Proceeds from long-term debt. . . . . . . . . . . . . 4,709 6,750
Principal payments on long-term debt. . . . . . . . . (9,709) (8,294)
Net proceeds received from stock options. . . . . . . 596 -
Net proceeds received from initial public offering. . 14,715 -
-------- --------
Net cash provided by (used in) financing activities . 10,311 (1,544)
Effect of exchange rate changes on cash balances. . . 21 46
Net increase in cash and cash equivalents. . . . . . . . 328 526
Cash and cash equivalents, beginning of year . . . . . . 3,154 1,272
-------- --------
Cash and cash equivalents, end of period . . . . . . . . $ 3,482 $ 1,798
-------- --------
-------- --------
Non-Cash Transaction-Transfer of Inventory to Fixed Assets 2,806 -
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense. . . $ 215 $ 332
-------- --------
-------- --------
Cash paid during the period for income taxes. . . . . $ 141 $ 50
-------- --------
-------- --------
</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 the 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
$.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 and nine month periods ended December
31, 1996 and 1995. The results of operations for the three month period ended
December 31, 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
During the nine month period, the Company had outstanding loans from certain
related parties, including a promissory note from Richard M. Giles, the
Company's Chairman, President and Chief Executive Officer for $150,000. In
conjunction with the completion of the initial public offering on July 2, 1996,
Mr. Giles repaid the $150,000, along with accrued interest.
The Company also had outstanding a promissory note from RICOL, LLC, a company
controlled by Mr. Giles, for the principal amount of $1,230,000. On July 8,
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 was 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% to the published prime rate of the Company's bank.
<PAGE>
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(unaudited) --------
------------
<S> <C> <C>
Billed receivables. . . . . . . . . . . . . . . . . . $ 11,463 $ 6,005
Unbilled receivables. . . . . . . . . . . . . . . . . 8,302 5,315
--------- --------
19,765 11,320
Less allowance for doubtful accounts. . . . . . . . . (200) (234)
--------- --------
$ 19,565 $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>
December 31, March 31,
1996 1996
(unaudited) --------
------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . $ 3,342 $ 2,707
Work in process . . . . . . . . . . . . . . . . . . . 2,433 4,319
Finished goods. . . . . . . . . . . . . . . . . . . . 688 2,183
--------- --------
6,463 9,209
Less allowance for inventory obsolescence . . . . . . (442) (357)
--------- --------
$ 6,021 $ 8,852
--------- --------
--------- --------
</TABLE>
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(unaudited) --------
------------
<S> <C> <C>
Revolving line of credit with bank. . . . . . . . . . $ 700 $ 4,200
Term loans with bank. . . . . . . . . . . . . . . . . - 1,996
Obligations under capital leases. . . . . . . . . . . 624 306
--------- --------
Total debt . . . . . . . . . . . . . . . . . . . . 1,324 6,502
Less current installments of
long-term debt . . . . . . . . . . . . . . . . . . (163) (888)
--------- --------
$ 1,161 $ 5,614
--------- --------
--------- --------
</TABLE>
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.
On August 12, 1996, the Company signed a new revolving credit agreement which
provides for a total of $15 million in secured borrowings and bears interest at
variable rates. The loan is scheduled to mature July 31, 1998, and as of
December 31, 1996, the Company had approximately $14.3 million of available
borrowings.
Additionally, the Company signed a revolving loan agreement on January 30, 1997
which provides an additional $5 million in secured borrowings. The revolving
loan agreement, which bears interest at variable rates and expires on January
31, 2001, provides that loan proceeds be used for general working
<PAGE>
capital purposes, including acquisitions.
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
December 31, 1996.
5. NET INCOME AND NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of common and common equivalent shares outstanding. 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. 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 December 31, 1996 with the
three-month period ended December 31, 1995, as well as the nine-month period
ended December 31, 1996 with the nine-month period ended December 31, 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 DECEMBER 31, 1996 COMPARED TO THE THREE MONTH PERIOD
ENDED DECEMBER 31, 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 were $18.2 million for the quarter ended December 31, 1996, increasing
3.4% from revenues of $17.6 million for the quarter ended December 31, 1995.
System revenues experienced an increase of 3.3% or $.5 million to approximate
$15.8 million for the third quarter, up from $15.3 million for the third quarter
of the previous year. The most significant revenue contributor for the current
period was the shipment of a significant document imaging system to the
Company's largest customer.
Maintenance revenues equaled $2.4 million for the three-month period ended
December 31, 1996, generally consistent with revenues of $2.3 million for the
three-month period ended December 31, 1995. The modest increase in maintenance
revenues is reflective of the expiration of warranty on some contracts. Upon
expiration of system warranty, customers enter into maintenance agreements which
yield revenue over the life of the maintenance agreement.
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 $9.8 million for the quarter ended December
31, 1996 in comparison to $7.8 million for the quarter ended December 31, 1995.
This resulted in an increase in gross profit of $2.0 million or 25.6%. Gross
margin was 53.8% for the three months ended December 31, 1996, up from 44.3% for
the three months ended December 31, 1995. The gross profit for system revenues
increased to $8.5 million for the quarter ended December 31, 1996 from $6.9
million for the same quarter of the previous fiscal year. The system gross
margin increased to 53.8% for the current quarter from 45.1% for the third
quarter of the previous year. Gross margin related to maintenance revenues
increased to 50.0% for the third quarter of the current year in comparison to
39.1% for the third quarter of the previous year. Overall maintenance gross
profit increased $.3 million to $1.2 million for the quarter ended December 31,
1996 from $.9 million for the quarter ended December 31, 1995.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The overall increase in system gross margin is attributable to favorable order
mix, increased sales volume, and $0.6 million of amortization expense, present
in the third quarter of the prior year but absent in the current quarter because
all remaining capitalized software was fully amortized in the fourth quarter of
the previous fiscal year. The quarterly order mix also favorably contributed to
system gross margin as several shipments had unusually high margins. The
Company does not consider this mix to be representative of all quarters, and as
such, does not expect system sales to consistently achieve such a high margin.
The increase in the Company's maintenance revenue margin is reflective of an
increased labor allocation to system cost of sales resulting from higher
warranty costs in the current year. 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.
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 18.2% to $2.6 million for the quarter ended December 31,
1996, up from $2.2 million for the quarter ended December 31, 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, increased to 14.3% for the
three month period ended December 31, 1996, up from 12.5% for the same period of
the previous year, primarily due to increased research and development activity.
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 December 31, 1996, SG&A expenses increased to
$2.8 million from $2.7 million for the three month period ended December 31,
1995. This reflects an overall SG&A expense increase of $0.1 million or 3.7%
between the third quarter of the current year and the prior year's third
quarter. The slight increase in SG&A expenses results from increased
administrative salary expense to support the infrastructure of a higher level of
revenues. Additionally, the Company invested in its direct sales force by
increasing sales personnel and by establishing a sales commission plan which
provides incentive payments based on the achievement of established goals. SG&A
expenses, as a percentage of revenues, equaled 15.4% for the quarter ended
December 31, 1996, consistent with 15.3% for the same period of the previous
year.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OTHER INCOME
Other income for the quarter ended December 31, 1996 equaled $172,000 in
comparison to $204,000 of other income for the quarter ended December 31, 1995.
Other income for the period ended December 31, 1996 is associated with $60,000
net interest income and other miscellaneous income items approximating
$112,000. For the quarter ended December 31, 1995, other income resulted from
the amortization of a deferred credit which became fully utilized in March 1996.
PROVISION FOR INCOME TAXES
Income tax expense for the quarter ended December 31, 1996 equaled $1.6 million
in comparison to expense of $.5 million for the quarter ended December 31, 1995.
This represents an overall increase in tax expense of $1.1 million or 220%. The
Company's current year tax provision is based on a statutory rate of 36% and
reflects the impact of state and foreign taxes, as well as the utilization of
limited net operating loss carryforwards.
NINE MONTH PERIOD ENDED DECEMBER 31, 1996 COMPARED TO THE NINE MONTH PERIOD
ENDED DECEMBER 31, 1995
TOTAL REVENUES
Revenues increased 31.5% to $43.8 million for the nine months ended December 31,
1996 from $33.3 million for the nine months ended December 31, 1995. System
revenues increased 40.9% or $10.6 million to $36.5 million for the nine month
period ended December 31, 1996, up from $25.9 million for the nine month period
ended December 31, 1995. The increase in revenue is attributable to on-going
increasing market acceptance of the Company's AFIS 2000 series of products, the
shipment of a significant document imaging system in the third quarter, and
continued revenue growth in the Livescan booking station product line.
Maintenance revenues equaled $7.3 million for the nine months ended December 31,
1996, decreasing 1.4% from revenues of $7.4 million for the nine months ended
December 31, 1995. The decline in maintenance revenues, on a year to date
basis, is the result of a number of customer AFIS 2000 system upgrades which,
although they yield increased system revenue, reduce maintenance revenues during
such customers' warranty periods.
GROSS PROFIT
Overall gross profit equaled $21.6 million for the nine months ended December
31, 1996, up from $14.4 million for the nine months ended December 31, 1995 and
resulted in a gross profit increase of $7.2 million or 50%. Gross margin
increased to 49.3% for the nine months ended December 31, 1996 from 43.2% for
the nine months ended December 31, 1995. The gross profit for system revenues
increased to $18.1 million for the nine month period ended December 31, 1996 in
comparison to $10.9 million for the nine month period ended December 31, 1995.
Additionally, system gross margin equaled 49.6% for the most recently ended nine
month period, up from 42.1% for the nine month period of the previous year.
Gross margin related to maintenance revenues remained relatively consistent at
47.9% for the current nine month period in comparison to 47.3% for the nine
months ended December 31, 1995. Overall maintenance gross profit approximated
$3.5 million for both periods.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The overall increase in system gross margin is partially related to $1.7 million
of software amortization, present in the prior year but absent in the current
year because all capitalized software was fully amortized in the fourth quarter
of the previous fiscal year. Additionally, favorable order mix in the third
quarter resulted in a marked increase in quarterly gross margin, clearly
impacting the gross margin on a year to date basis. The increase in the
Company's maintenance revenue margin is the result of increased margin the third
quarter, previously discussed in the three-month analysis.
RESEARCH, DEVELOPMENT AND ENGINEERING
RD&E expenses increased 21.5% to $7.9 million for nine months ended December 31,
1996 which represents a $1.4 million increase from prior year expense of $6.5
million. The increase in RD&E expense is comprised of increased salary and
contract labor expense related to additional personnel engaged in research and
engineering enhancement of existing products. Furthermore, depreciation expense
associated with the capitalization of development equipment has increased over
previous year levels. RD&E expenses, as a percentage of revenues, decreased to
18.0% for the nine months ended December 31, 1996, down from 19.5% for the same
nine month period of the previous year, primarily due to the increased level of
total revenues which promotes improved operating expense leverage.
SELLING, GENERAL AND ADMINISTRATIVE
For the nine month period ended December 31, 1996, SG&A expenses increased to
$8.4 million from $7.3 million for the period ended December 31, 1995. This
reflects an overall SG&A expense increase of $1.1 million or 15.1% between the
first three quarters of fiscal year 1997 and the first three quarters of fiscal
year 1996. The increase in SG&A expenses results from increased administrative
salary expense to support the infrastructure of a higher level of revenues,
increased travel and recruiting fees, as well as increased professional fees.
Additionally, the Company invested in its direct sales force by increasing sales
personnel and by establishing a sales commission plan which provides incentive
payments based on the achievement of established goals. SG&A expenses, as a
percentage of revenues, decreased to 19.2% for the nine months ended December
31, 1996, down from 21.9% for the same period of the previous year, due
primarily to the improved operating expense leverage resulting from an increased
level of total revenues.
OTHER INCOME (EXPENSE)
Other expense for the nine months ended December 31, 1996 equaled $30,000 in
comparison to $745,000 of other income for the nine months ended December 31,
1995. Other expense for the nine month period ended December 31, 1996 is
primarily associated with interest expense of approximately $215,000, partially
offset by interest income of $205,000, and certain other expenses incurred
during the period. For the nine months ended December 31, 1995, other income of
approximately $745,000 resulted from the amortization of a deferred credit which
became fully utilized in March 1996, offset by net interest expense associated
with the Company's revolving line of credit and term loans.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PROVISION FOR INCOME TAXES
Income tax expense for the nine months ended December 31, 1996 equaled $1.9
million in comparison to expense of $222,000 for the nine months ended December
31, 1995. This represents an overall increase in tax expense of $1.7 million.
The Company's tax provision is based on a statutory rate of 36% and reflects the
impact of state and foreign taxes and the utilization of limited net operating
loss carryforwards. The Company expects the effective tax rate to increase in
fiscal year 1998.
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 December 31, 1996, the
Company's system revenues backlog was approximately $19.1 million, compared to
$24.9 million at September 30, 1996 and $28.8 million at March 31, 1996. The
reduction in the Company's backlog is primarily due to significant shipments
during the quarter, coupled with bureaucratic delays in formally signing several
contracts which were awarded in previous periods.
Much of the Company's backlog as of December 31, 1996 is expected to be shipped
during the current fiscal year. Approximately $7.1 million of the total backlog
is scheduled to be shipped in fiscal year 1998. 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 increased from $3.5 million at March 31, 1996 to $8.0
million at December 31, 1996 due to the receipt of the net proceeds from the
Company's initial public offering, offset in part by the repayment of debt and
on-going working capital changes from operations. Trade receivables rose $8.5
million from $11.1 million at March 31, 1996 to $19.6 million at December 31,
1996 primarily as a result of increased revenues, as well as customer balances
which remained unbilled at December 31, 1996 because of terms within the
customer's contract. Total inventory levels declined $2.9 million from $8.9
million at March 31, 1996 to $6.0 million at December 31, 1996. This reduction
occurred during the third quarter as a result of significant sales activity,
offset by lowered material receipts as the majority of the inventory needed for
third quarter shipments was procured in the first and second quarters.
The increase in the net balance of property, plant and equipment of $1.3 million
from $2.9 million at March 31, 1996 to $4.2 million at December 31, 1996
reflects capital expenditures of approximately $0.8 million, depreciation
expense of $1.8 million, and the capitalization of engineering test equipment,
previously classified as finished goods inventory. Additionally, the Company
wrote off certain fixed assets which had been reserved in a previous period.
Other assets decreased primarily due to the receipt of a $.7 million prepayment
on a note receivable outstanding from RICOL, LLC, a company controlled by
Richard M. Giles, the Company's Chairman, President and Chief Executive Officer.
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Total current liabilities decreased from $12.9 million at March 31, 1996 to
$8.0 million at December 31, 1996. The decline in accounts payable is
attributable to reduced inventory receipts in the third quarter. The increase
in accrued liabilities of $1.1 million is partially associated with an increase
in the Company's warranty provision, necessitated by the increased level of
system shipments. Furthermore, an increase in certain other accruals
contributed to the higher accrued liabilities balance. The decline in deferred
revenue from $3.9 million at March 31, 1996 to $2.2 million at December 31, 1996
is due to the recognition of revenue on a significant customer contract which
had been previously deferred. Additionally, several annual pre-paid customer
maintenance contracts renew on January 1, thus, all deferred revenue is
amortized by December 31, 1996.
The decline in total debt is a result of reduced borrowings under the Company's
new revolving line of credit. After receiving the proceeds from the Company's
initial public offering, the Company repaid amounts outstanding on the Company's
revolving line of credit, as well as amounts outstanding under the Company's
term loans. As such, the Company's overall debt balance declined $5.2 million
to $1.3 million at December 31, 1996, down from $6.5 million at March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through the cash provided by its operations,
the utilization of its revolving credit line and cash provided by its initial
public offering. The Company's operating activities used net cash of
approximately $5.9 million for the nine-months ended December 31, 1996,
primarily as a result of the increase in accounts receivable, offset by other
working capital changes. The Company's operating activities generated net cash
of approximately $0.5 million for the period ended December 31, 1995.
The Company's investing activities used cash of approximately $4.1 million for
the nine months ended December 31, 1996, due to capital expenditures of $0.8
million, approximately $0.9 million cash received from the collection of a note
receivable and $4.1 million of short-term investment purchases. The Company's
investing activities generated cash of approximately $1.5 million for the nine
months ended December 31, 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 $1.8 million.
Financing activities provided net cash of approximately $10.3 million for the
nine months ended December 31, 1996 while financing activities for the nine
months ended December 31, 1995 used net cash of $1.5 million. For the current
period, net debt repayments equaled $5.0 million. Net proceeds of approximately
$14.7 million were realized from the Company's initial public offering and
proceeds of $.6 million were realized from employees' participation in the
Company's employee stock purchase plan. For the period ended December 31, 1995,
the Company borrowed $6.8 million and paid principal payments on its long-term
debt of $8.3 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
None.
Item 5 - OTHER INFORMATION
None.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
10.1 Loan Agreement between Union Bank and Printrak International Inc. dated
January 30, 1997
<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:____________________
<PAGE>
EXHIBIT INDEX
EXHIBIT NO: TITLE PAGE
10.1 Loan Agreement with Union Bank 18
<PAGE>
UNION
BANK OF
CALIFORNIA
PROMISSORY NOTE
(BASE RATE)
- -------------------------------------------------------------------------------
Borrower Name PRINTRAK INTERNATIONAL INC.
- -------------------------------------------------------------------------------
Borrower Address Office 45061 Loan Number 7144704187
1250 NORTH TUSTIN AVE. ------------------------------------------------------
ANAHEIM, CA 92807 Maturity Date JANUARY 31, 2001 Amount $5,000,000.00
- -------------------------------------------------------------------------------
ORANGE, California $5,000,000.00 Date 1/30/97
- --------------------- ------------- ---------------
FOR VALUE RECEIVED, on JANUARY 31, 2001, the undersigned ("Debtor") promises
to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated
below, the principal sum of FIVE MILLION AND NO/100 Dollars ($5,000,000.00),
or so much thereof as is disbursed, together with interest on the balance of
such principal from time to time outstanding, at the per annum rates and at
the times set forth below.
1. INTEREST PAYMENTS. Debtor shall pay interest on the LAST day of each MONTH
(commencing FEBRUARY 28, 1997). Should interest not be paid when due, it
shall become part of the principal and bear interest as herein provided. All
computations of interest under this note shall be made on the basis of a year
of 360 days, for actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding
hereunder in increments of at least $500,000 shall bear interest at a
rate to be selected by Debtor which is 2.25% per annum in excess of
Bank's Adjusted LIBOR-Rate for the Interest Period so selected by
Debtor.
Any Base Interest Rate selected by Debtor may not be changed, altered
or otherwise modified until the expiration of the Interest Period for
which it was selected. The exercise of interest options by Debtor
shall be as recorded in Bank's records, which records shall be prima
facie evidence of the amount borrowed under either interest option and
the interest rate; provided, however, that failure of Bank to make any
such notation in its records shall not discharge Debtor from its
obligations to repay in full with interest all amounts borrowed. In no
event shall any Interest Period extend beyond the maturity date of
this note.
To select a Base Interest Rate, Debtor may, from time to time with
respect to principal outstanding on which a Base Interest Rate has not
been selected and on the expiration of any Interest Period with
respect to principal outstanding on which a Base Interest Rate has
been selected, select a Base Interest Rate by telephoning an authorized
lending officer of Bank located at the banking office identified below
prior to 10:00 a.m., California time, on any Business Day and advising
that officer of the Base Interest Rate, the Interest Period and the
Origination Date selected (which Origination Date, for a Base Interest
Rate Loan based on the Adjusted LIBOR-Rate, shall follow the date of
such election by no more than two (2) Business Days).
Bank will confirm the terms of the election in writing by mail to
Debtor promptly after the election is made. Failure to send such
confirmation shall not affect Bank's rights to collect interest at the
rate selected. If, on the date of the election, the Base Interest Rate
selected is unavailable for any reason, the selection shall be void.
Bank reserves the right to fund the principal from any source of funds
notwithstanding any Base Interest Rate selected by Debtor.
b. VARIABLE INTEREST RATE. All principal outstanding hereunder which
is not bearing interest at a Base Interest Rate shall bear interest at
a rate per annum equal to the Reference Rate, which rate shall vary as
and when the Reference Rate changes.
-1-
<PAGE>
1.1 AVAILABILITY/PRINCIPAL REDUCTIONS
At any time prior to the maturity of this note, subject to the
provisions of paragraph 4, below, of this note, Debtor may borrow,
repay and reborrow hereunder so long as the maximum principal amount
outstanding does not exceed:
AMOUNT FROM TO AND INCLUDING
$5,000,000.00 the date of this note April 30, 1998
$4,583,333.00 May 1, 1998 July 31, 1998
$4,166,666.00 August 1, 1998 October 31, 1998
$3,749,999.00 November 1, 1998 January 31, 1999
$3,333,332.00 February 1, 1999 April 30, 1999
$2,916,665.00 May 1, 1999 July 31, 1999
$2,499,998.00 August 1, 1999 October 31, 1999
$2,083,331.00 November 1, 1999 January 31, 2000
$1,666,664.00 February 1, 2000 April 30, 2000
$1,249,997.00 May 1, 2000 July 31, 2000
$ 833,330.00 August 1, 2000 October 31, 2000
$ 416,667.00 November 1, 2000 January 30, 2001
$ -0- January 31, 2001
On or before the last day of each quarter, commencing April 30, 1998, Debtor
shall repay principal under this note such that the maximum principal amounts
outstanding under this note on such quarterly date does not exceed the sums
set forth above for the periods set forth above.
Debtor shall pay all amounts due under this note in lawful money of the
United States at Bank's ORANGE COUNTY COMMERCIAL BANKING Office, or such
other office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any payment required by the terms of this note shall
remain unpaid ten days after same is due, at the option of Bank, Debtor shall
pay a fee of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to five
percent (5%) in excess of the interest rate specified in paragraph 1.b, above,
of this note, calculated from the date of default until all amounts payable
under this note are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this note bearing interest at a rate based
on the Reference Rate may be prepaid in whole or in part at any time,
without penalty or premium. Amounts outstanding at a Base Interest Rate
under this note may only be prepaid, in whole or in part provided Bank
has received not less than five (5) Business Days prior written notice
of an intention to make such prepayment and Debtor pays a prepayment
fee to Bank in an amount equal to: (i) the difference between (a) the
Base Interest Rate applicable to the principal amount which Debtor
intends to prepay, and (b) the return which Bank could obtain if it
used the amount of such prepayment of principal to purchase at bid
price regularly quoted securities issued by the United States having a
maturity date most closely coinciding with the relevant Base Rate
Maturity Date and such securities were held by Bank until the
relevant Base Rate Maturity Date ("Yield Rate"); (ii) the above
difference, if greater than zero, is multiplied by a fraction, the
numerator of which is the number of days in the period between the
date of prepayment and the relevant Base Rate Maturity Date and the
denominator of which is 360 days; (iii) the above product is
multiplied by the amount of the principal so prepaid (except in the
event that principal payments are required and have been made as
scheduled under the terms of the Base Interest Rate Loan being
prepaid, then the amount multiplied in this section shall be the
lesser of the amount prepaid or 50% of the total of the amount prepaid
and the amount of principal scheduled under the terms of the Base
Interest Rate Loan being prepaid to be outstanding at the relevant
Base Rate Maturity Date); and (iv) the above product is then
discounted to present value using the Yield Rate as the annual
discount factor.
b. In no event shall Bank be obligated to make any payment or refund
to Debtor, nor shall Debtor be entitled to any setoff or other claim
against Bank, should the return which Bank could obtain under the
above prepayment formula exceed the interest that Bank would have
received if no prepayment had occurred. All prepayments shall include
payment of accrued interest on the principal amount so prepaid and
shall be applied to payment of interest before application to
principal. A determination by Bank as to the prepayment fee amount, if
any, shall be conclusive.
c. Such prepayment fee, if any, shall also be payable if prepayment
occurs as the result of the acceleration of the principal of this note
by Bank because of any default hereunder. If, following such
acceleration, all or any portion of a Base Interest Rate Loan is
satisfied, whether through sale of property encumbered by a security
agreement or other agreement securing this note, if any, at a
foreclosure sale held thereunder or through the tender of payment any
time following such acceleration, but prior to such a foreclosure
sale, then such satisfaction shall be deemed an evasion of the
prepayment conditions set forth above, and Bank shall, automatically
and without notice or demand, be entitled to receive, concurrently
with such satisfaction the prepayment fee set forth above, and the
obligation to pay such prepayment fee shall be added to the principal.
DEBTOR HEREBY ACKNOWLEDGES AND AGREES THAT BANK WOULD NOT LEND TO
DEBTOR THE LOAN EVIDENCED BY THIS NOTE WITHOUT DEBTOR'S AGREEMENT, AS
SET FORTH ABOVE, TO PAY BANK A PREPAYMENT FEE UPON THE SATISFACTION OF
ALL OR ANY PORTION OF THE PRINCIPAL BEARING INTEREST AT A BASE INTEREST
-2-
<PAGE>
RATE FOLLOWING THE ACCELERATION OF THE MATURITY DATE HEREOF BY REASON
OF A DEFAULT. DEBTOR HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON ITS
BEHALF TO SEPARATELY INITIAL THE AGREEMENT CONTAINED IN THIS PARAGRAPH
BY PLACING THEIR INITIALS BELOW:
INITIALS: [INIT]
-----
5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but
not be limited to, any of the following: (a) the failure of Debtor to make
any payment required under this note when due; (b) any breach,
misrepresentation or other default by Debtor, any guarantor, co-maker,
endorser, or any person or entity other than Debtor providing security for
this note (hereinafter individually and collectively referred to as the
("Obligor") under any security agreement, guaranty or other agreement between
Bank and any Obligor; (c) the insolvency of any Obligor or the failure of any
Obligor generally to pay such Obligor's debts as such debts become due; (d)
the commencement as to any Obligor of any voluntary of involuntary proceeding
under any laws relating to bankruptcy, insolvency, reorganization,
arrangement, debt adjustment or debtor relief; (e) the assignment by any
Obligor for the benefit of such Obligor's creditors; (f) the appointment, or
commencement of any proceeding for the appointment of a receiver, trustee,
custodian or similar official for all or substantially all of any Obligor's
property; (g) the commencement of any proceeding for the dissolution or
liquidation of any Obligor; (h) the termination of existence or death of any
Obligor; (i) the revocation of any guaranty or subordination agreement given
in connection with this note; (j) the failure of any Obligor to comply with
any order, judgement, injunction, decree, writ or demand of any court or
other public authority; (k) the filing or recording against any Obligor, or
the property of any Obligor, of any notice of levy, notice to withhold, or
other legal process for taxes other than property taxes; (l) the default by
any Obligor personally liable for amounts owed hereunder on any obligation
concerning the borrowing of money; (m) the issuance against any Obligor, or
the property of any Obligor, of any writ of attachment, execution, or other
judicial lien; or (n) the deterioration of the financial condition of any
Obligor which results in Bank deeming itself, in good faith, insecure. Upon
the occurrence of any such default, Bank, in its discretion, may cease to
advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurence of an event of
default under d, e, f, or g, all principal and interest shall automatically
become immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or
enforcement of this note. Debtor and any endorsers of this note, for the
maximum period of time and the full extent permitted by law, (a) waive
diligence, presentment, demand, notice of nonpayment, protest, notice of
protest, and notice of every kind; (b) waive the right to assert the defense
of any statute of limitations to any debt or obligation hereunder; and (c)
consent to renewals and extensions of time for the payment of any amounts due
under this note. If this note is signed by more than one party, the term
"Debtor" includes each of the undersigned and any successors in interest
thereof; all of whose liability shall be joint and several. Any married
person who signs this note agrees that recourse may be had against the
separate property of that person for any obligations hereunder. The receipt of
any check or other item of payment by Bank, at its option, shall not be
considered a payment on account until such check or other item of payment is
honored when presented for payment at the drawee bank. Bank may delay the
credit of such payment based upon Bank's schedule of funds availability, and
interest under this note shall accrue until the funds are deemed collected.
In any action brought under or arising out of this note, Debtor and any
Obligor, including their successors or assigns, hereby consent to the
jurisdiction of any competent court within the State of California, as
provided in any alternative dispute resolution agreement executed between
Debtor and Bank, and consent to service of process by any means authorized by
California law. The term "Bank" includes, without limitation, any holder of
this note. This note shall be construed in accordance with and governed by
the laws of the State of California. This note hereby incorporates any
alternative dispute resolution agreement previously, concurrently or
hereafter executed between Debtor and Bank.
7. DEFINITIONS. As used herein, the following terms shall have the meanings
respectively set forth below: "ADJUSTED LIBOR-RATE" shall mean the LIBOR Base
Rate as adjusted for reserve requirements imposed on Bank from time to time.
"BASE INTEREST RATE" shall mean a rate of interest based on the Adjusted
LIBOR-Rate. "BASE INTEREST RATE LOAN" shall mean amounts outstanding under
this note that bear interest at a Base Interest Rate. "BASE RATE MATURITY
DATE" shall mean the last day of the Interest Period with respect to
principal outstanding on which a Base Interest Rate has been selected by
Debtor. "BUSINESS DAY" shall mean a day which is not a Saturday or Sunday on
which Bank is open for business in California and on which dealings in U.S.
dollar deposits outside of the United States may be carried on by Bank.
"INTEREST PERIOD" shall mean any calendar period of one, three, six, nine or
twelve months. In determining an Interest Period, a month means a period that
starts on one Business Day in a month and ends on and includes the day
preceding the numerically corresponding day in the next month. For any month
in which there is no such numerically corresponding day, then as to that
month, such day shall be deemed to be the last calendar day of such month.
Any Interest Period which would otherwise end on a non-Business Day shall end
on the next succeeding Business Day unless that is the first day of a month,
in which event such Interest Period shall end on the next preceding Business
Day. "LIBOR BASE RATE" shall mean for each Interest Period the rate per annum
(rounded upward, if necessary, to the nearest 1/100 of 1%) at which dollar
deposits, in immediately available funds and in lawful money of the United
States would be offered to Bank, outside of the United States, for a term
coinciding with such Interest Period and for an amount equal to the amount of
principal covered by Debtor's interest rate election "ORIGINATION DATE" shall
mean the Business Day on which funds are made available to Debtor relating to
Debtor's selection of a Base Interest Rate. "REFERENCED RATE" shall mean the
rate announced by Bank from time to time at its corporate headquarters at its
"REFERENCE RATE." The Reference Rate is an index rate determined by Bank from
time to time as a means of pricing certain extensions of credit and is
neither directly tied to any external rate of interest or index nor
necessarily the lowest rate of interest charged by Bank at any given time.
PRINTRAK INTERNATIONAL INC.
- --------------------------------
By [Sig]
-----------------------------
Title Vice President, Treasurer
--------------------------
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
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0
0
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