<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
-----------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _____________________
Commission File Number: 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.
x Yes No
------ -----
11,231,778 shares of the issuer's common stock, par value $0.0001
per share, were outstanding as of August 1, 1997.
<PAGE>
FORM 10-Q
---------
CONTENTS
--------
Page Number
PART I - FINANCIAL INFORMATION -----------
Item 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1997 (unaudited)
and March 31, 1997 . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations for the three
month periods ended June 30, 1997 and 1996 . . . . . . . . . 4
Unaudited Consolidated Statements of Cash Flows for the three
month periods ended June 30, 1997 and 1996 . . . . . . . . . 5
Notes to the Consolidated Financial Statements . . . . . . . . 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 1: Legal Proceedings. . . . . . . . . . . . . . . . . . . . 14
Item 2: Changes in Securities. . . . . . . . . . . . . . . . . . 14
Item 3: Defaults upon Senior Securities. . . . . . . . . . . . . 14
Item 4: Submission of Matters to a Vote of Security Holders. . . 14
Item 5: Other Information . . . . . . . . . . . . . . . . . . . 14
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
(UNAUDITED) (RESTATED,
SEE NOTE 1)
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 2,979 $ 3,832
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . 5,162 4,599
Accounts receivable, net (Note 2) . . . . . . . . . . . . . . . . . 24,632 23,539
Inventories, net (Note 3) . . . . . . . . . . . . . . . . . . . . . 4,447 5,174
Prepaid expenses and other current assets.. . . . . . . . . . . . . 356 518
Deferred income tax. . . . . . . . . . . . . . . . . . . . . . . . 955 1,058
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 38,531 38,720
Property, plant and equipment - net. . . . . . . . . . . . . . . . . . 5,412 5,570
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 2,866 2,867
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,305 2,401
--------- ---------
$ 49,114 $ 49,558
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,867 $ 4,431
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 6,105 4,595
Current portion of long-term debt (Note 4). . . . . . . . . . . . . 353 302
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . 3,571 3,919
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . 11 631
--------- ---------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 13,907 13,878
Long-term debt, less current portion (Note 4). . . . . . . . . . . . . 760 1,524
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . 159 159
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 14,826 15,561
Stockholders' equity:
Common stock ($.0001 par value; 20,000,000 shares authorized;
11,115,816 and 10,425,494 shares issued and outstanding) . . . . 1 1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 16,940 16,756
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 17,581 17,527
Note receivable from stockholder. . . . . . . . . . . . . . . . . . (300) (300)
Cumulative foreign exchange translation adjustment. . . . . . . . . 66 13
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 34,288 33,997
--------- ---------
$ 49,114 $ 49,558
--------- ---------
--------- ---------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1997 1996
(RESTATED,
SEE NOTE 1)
------------ ------------
<S> <C> <C>
REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,406 $ 11,448
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,856 2,668
--------- ---------
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,262 14,116
COST OF REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,350 5,645
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,625 1,527
--------- ---------
Total cost of revenues. . . . . . . . . . . . . . . . . . . . . . . 7,975 7,172
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,287 6,944
OPERATING EXPENSES:
Research, development and engineering. . . . . . . . . . . . . . . . . 2,590 2,955
Selling, general and administrative. . . . . . . . . . . . . . . . . . 3,810 3,211
--------- ---------
Total operating expenses. . . . . . . . . . . . . . . . . . . . . . 6,400 6,166
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . 887 778
Other expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (804) (264)
--------- ---------
Income before provision for income taxes. . . . . . . . . . . . . . 83 514
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . 29 194
--------- ---------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54 $ 320
--------- ---------
--------- ---------
Net income per share (Note 5). . . . . . . . . . . . . . . . . . . $ .00 $ .04
--------- ---------
--------- ---------
Weighted average shares outstanding . . . . . . . . . . . . . . . . 11,742 9,091
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1997 1996
(RESTATED,
SEE NOTE 1)
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54 $ 320
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 718 575
Loss (gain) on sale of fixed assets . . . . . . . . . . . . . . . . (1) 49
Deferred tax provision. . . . . . . . . . . . . . . . . . . . . . . 104 78
Changes in operating assets and liabilities:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . (1,093) 1,162
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . 474 (1,776)
Prepaid expenses and other current assets. . . . . . . . . . . 162 (300)
Accounts payable and other current liabilities . . . . . . . . (1,184) (191)
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . 1,510 410
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . (348) (1,529)
------- -------
Net cash (used in) provided by operating activities . . . . . . . . 396 (1,202)
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . (306) (457)
Proceeds from notes receivable & other assets . . . . . . . . . . . 95 130
Purchases of short-term investments . . . . . . . . . . . . . . . . (563) --
------- -------
Net cash (used in) provided by investing activities . . . . . . . . (774) (327)
Cash flows from financing activities:
Proceeds from long-term debt. . . . . . . . . . . . . . . . . . . . 3,312 2,140
Principal payments on long-term debt. . . . . . . . . . . . . . . . (4,025) (3,244)
Additional Paid in Capital. . . . . . . . . . . . . . . . . . . . . 184 --
Deferred offering costs . . . . . . . . . . . . . . . . . . . . . . -- (682)
------- -------
Net cash provided by (used in) financing activities . . . . . . . . (529) (1,786)
Effect of exchange rate changes on cash balances . . . . . . . . . . . 54 (75)
------- -------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . (853) (3,390)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . 3,832 3,625
------- -------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . $ 2,979 $ 235
------- -------
------- -------
Non-Cash Transaction-Transfer of Inventory to Fixed Assets . . . . . . 253 2,113
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense. . . . . . . . . . $ 41 $ 118
------- -------
------- -------
Cash paid during the period for income taxes. . . . . . . . . . . . $ 474 $ 65
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<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 May 7, 1997, Printrak International Inc. acquired all of the issued and
outstanding capital stock of TFP Inc., a South Carolina corporation, in a
transaction accounted for as a pooling-of-interest. As a result of the
acquisition, TFP became a wholly-owned subsidiary of the Company and the
outstanding shares and outstanding warrants to purchase shares of TFP Common
Stock and Series A Preferred Stock have been converted into an aggregate
1,399,494 shares of fully paid and non-assessable Common Stock, $.0001 par
value of Printrak. The outstanding options to purchase shares of TFP Common
Stock have been converted into the right to acquire 116,496 shares of Common
Stock of the Company. The purchase price and all other terms of the
Agreement were determined pursuant to arms-length negotiations between the
parties.
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 periods
ended June 30, 1997 and 1996. The accompanying consolidated financial
statements as of March 31, 1997 and for the three months ended June 30, 1996
have been restated to reflect the business combination between Printrak and TFP
accounted for on a pooling-of-interests basis and are based on each Company's
respective historical financial statements and notes thereto. The results of
operations for the three month period ended June 30, 1997 are not necessarily
indicative of the results of operations for the entire fiscal year ending
March 31, 1998. 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 10-K.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
JUNE 30, MARCH 31,
1997 1997
-------- ---------
Billed receivables . . . . . . . . . . . . . . $17,392 $15,435
Unbilled receivables . . . . . . . . . . . . . 7,508 8,337
------- -------
24,900 23,772
Less allowance for doubtful accounts . . . . . (268) (233)
------- -------
$24,632 $23,539
------- -------
------- -------
Unbilled receivables consist of system and maintenance revenues which have been
earned but not invoiced because of contractual terms of the underlying
agreements.
6
<PAGE>
3. INVENTORIES
Inventories consist of the following (in thousands):
JUNE 30, MARCH 31,
1997 1997
------ ------
Raw materials. . . . . . . . . . . . . . . . . $3,544 $3,725
Work in process. . . . . . . . . . . . . . . . 1,320 1,690
Finished goods . . . . . . . . . . . . . . . . -- 36
------ ------
4,864 5,451
Less allowance for inventory obsolescence. . . (417) (277)
------ ------
$4,447 $5,174
------ ------
------ ------
4. DEBT
Debt consists of the following (in thousands):
JUNE 30, MARCH 31,
1997 1997
(unaudited)
------ ------
Revolving line of credit with bank . . . . . . $ 296 $1,000
Obligations under capital leases . . . . . . . 762 771
Other. . . . . . . . . . . . . . . . . . . . . 55 55
------ ------
Total debt. . . . . . . . . . . . . . . . . 1,113 1,826
Less current installments of
long-term debt. . . . . . . . . . . . . . . (353) (302)
------ ------
$ 760 $1,524
------ ------
------ ------
The Company's revolving credit agreement 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 June 30, 1997, the Company had
approximately $14.7 million of available borrowings. Additionally, the
Company has a revolving loan agreement which provides an additional
$5.0 million in secured borrowings. The revolving loan agreement, which bears
interest at variable rates and expires on January 31, 2001, provides for loan
proceeds which can be used for general working capital purposes, including
acquisitions.
The revolving credit and loan agreements contain 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, 1997.
5. ACQUISITIONS
On May 7, 1997, the Company acquired all of the issued and outstanding
capital stock of TFP Inc. ("TFP"), a South Carolina corporation, in a
transaction accounted for as a pooling-of-interest. As a result of the
acquisition, TFP became a wholly-owned subsidiary of the Company and the
outstanding shares and outstanding warrants to purchase shares of TFP Common
Stock and Series A Preferred Stock were converted into an aggregate
1,399,494 shares of fully paid and non-assessable Common Stock, $.0001 par
value, of the Company. The outstanding options to purchase shares of TFP
Common Stock were converted into the right to acquire 116,496 shares of
Common Stock of the Company. The purchase price and all other terms of the
Agreement were determined pursuant to arm's-length negotiations between the
parties.
TFP develops, markets, sells and fully supports complete "turnkey"
computerized video electronic image-based systems for law enforcement and
correctional agencies worldwide. TFP also sells computerized video electronic
image-based systems and document retrieval systems to non-law enforcement
entities including other governmental entities and private companies.
As a result of the pooling-of-interest transaction between the Company and
TFP, the consolidated financial statements and notes thereto for all periods
presented have been restated to include the accounts of TFP. Separate results
of operation of the combined entities for the three months ended June 30,
1996 are as follows:
<TABLE>
<CAPTION>
Three Months
Ended
June 30, 1996
(in thousands, except per share data)
-------------------------------------
<S> <C>
Revenues:
Company (As previously reported) $ 12,120
TFP 1,996
----------
Combined $ 14,116
----------
----------
Net Income:
Company (As previously reported) $ 149
TFP 171
----------
Combined $ 320
----------
----------
Net Income per Common Share:
As previously reported $ 0.02
----------
----------
As restated $ 0.04
----------
----------
</TABLE>
Merger expenses incurred to consummate the TFP transaction totaled
$.8 million, consisting of accounting fees, legal fees, financial printing
fees, stock transfer fees and certain other transaction costs, all of which
are included in the accompanying June 30, 1997 Consolidated Statement of
Operations.
6. 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.
7
<PAGE>
7. SUBSEQUENT EVENTS
On July 21, 1997, the Company acquired a business unit of SCC Communications
Corp (SCC). The business unit, with headquarters in Boulder, Colorado,
provides computer-aided dispatch (CAD) systems and records management systems
(RMS) for law enforcement, fire and emergency medical services agencies. The
business unit also offers a product called Open Query, which allows
cost-effective connectivity, data warehousing, and message switching with
CAD, RMS and other local, state and federal databases and files. The
acquisition will be accounted for under purchase accounting, and the business
unit will operate as a division of Printrak International with continued
focus on CAD and RMS technologies.
8
<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 June 30, 1997 with the
three-month period ended June 30, 1996. This discussion should be read in
conjunction with the financial statements and associated notes.
9
<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, 1997 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 1996
- --------------------------------------------------
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 $15.3 million for the quarter ended June 30, 1997, increasing
8.1% from revenues of $14.1 million for the quarter ended June 30, 1996. TFP
contributed $2.4 million to revenue during the quarter, as compared with
$2.0 million for the prior year period, an increase of 18.2%. System revenues
increased 8.4% to $12.4 million for the first quarter, up from $11.4 million
for the first quarter of the previous year.
Maintenance revenues equaled $2.9 million for the three-month period ended
June 30, 1997, up from revenues of $2.7 million for the three-month period
ended June 30, 1996. The increase in maintenance revenues is reflective of
the expiration of warranties on some contracts and an overall expansion in the
customer installed base over the prior year. Upon expiration of the system
warranty, customers generally 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 consists of purchased materials procured for use in
the assembly of the Company's products, file conversion costs and maintenance
expenses.
Overall gross profit increased 4.9% to $7.3 million for the quarter ended
June 30, 1997 in comparison to $6.9 million for the quarter ended June 30,
1996. Gross margin was 47.7% for the three months ended June 30, 1997, down
from 49.2% for the three months ended June 30, 1996. The gross profit for
system revenues increased to $6.1 million for the quarter ended June 30, 1997
from $5.8 million for the same quarter of the previous fiscal year. The
system gross margin decreased to 48.8% for the current quarter from 50.7% for
the first quarter of the previous year. Overall maintenance gross profit
remained consistent at $1.2 million for the quarter ended June 30, 1997
versus $1.1 million for the quarter ended June 30, 1996. Gross margin related
to maintenance revenues increased to 43.1% for the first quarter of the
current year in comparison to 42.8% for the first quarter of the previous
year.
The decline in system margin was due primarily from lower overall material
costs which resulted from the shipment of several high margin contracts in
the first three months of the previous year. The nominal 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.
10
<PAGE>
PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 decreased 12.4% to $2.6 million for the quarter ended June 30,
1997, down from $3.0 million for the quarter ended June 30, 1996. The
decrease in RD&E expense is due primarily to a reduction in contract labor
utilized during the current year. RD&E expenses, as a percentage of
revenues, decreased to 17.0% for the three month period ended June 30, 1997
from 20.9% for the three month period ended June 30, 1996.
Management expects that RD&E expenses will remain relatively constant during
the remainder of fiscal 1998.
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, 1997, SG&A expenses increased to
$3.8 million from $3.2 million for the three month period ended June 30,
1996. This reflects an overall increase in SG&A expense of $0.6 million or
18.7% between the first quarter of the current year and the prior year's
first quarter. The increase in SG&A expenses is due to increased personnel
in sales and marketing 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 25.0% for the quarter
ended June 30, 1997 higher by 2.3 percentage points from the same period of
the previous year.
OTHER EXPENSE
Other expense for the quarter ended June 30, 1997 equaled $0.8 million in
comparison to $0.3 million for the quarter ended June 30, 1996. Other
expense for the period ended June 30, 1997 is comprised of $774,000 of
acquisition expenses resulting from the acquisition of TFP Inc.
PROVISION FOR INCOME TAXES
Income tax expense for the quarter ended June 30, 1997 equaled $29,000 in
comparison to expense of $194,000 for the quarter ended June 30, 1996. The
Company's current year tax provision is based on a statutory rate of 35% and
reflects the impact of state and foreign taxes, as well as the utilization of
limited net operating loss carryforwards.
11
<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, 1997
the Company's system revenues backlog was approximately $24.3 million,
compared to $14.2 million at March 31, 1997. The significant increase in the
Company's backlog is due to the $22.6 million in orders booked in the first
three months of the fiscal year.
Much of the Company's backlog as of June 30, 1997 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
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Cash, cash equivalents, and short-term investments decreased slightly from
$8.4 million at March 31, 1997 to $8.1 million at June 30, 1997. Trade
receivables rose $1.1 million from $23.5 million at March 31, 1997 to $24.6
million at June 30, 1997, primarily as a result of the elimination of
receivables factoring for the TFP Inc. division. Total inventory levels
declined $0.7 million from $5.2 million at March 31, 1997 to $4.4 million at
June 30, 1997 due to continued effort on the part of the Company to outsource
hardware that was previously manufactured in-house.
Total current liabilities remained flat quarter-over-quarter at $13.9
million. The decline in accounts payable is attributable to reduced inventory
receipts in the first quarter. The increase in accrued liabilities of $1.5
million is primarily due to a third party commission owed as a result of a
substantial contract that shipped in June 1997, as well as to an increase in
certain other accruals contributed to the higher accrued liabilities balance.
Deferred revenue declined $0.4 million from March 31, 1997 to June 30, 1996.
The $0.7 million decline in total debt from March 31, 1997 to June 30, 1997
is primarily the result of a lower amount outstanding on the Company's
revolving line of credit.
LIQUIDITY AND CAPITAL RESOURCES
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The Company finances its operations through the cash provided by its
operations, short-term investments and the utilization of its revolving
credit line. The Company's operating activities generated cash of
approximately $0.4 million for the three months ended June 30, 1997. The
Company's operating activities used cash of approximately $1.2 million for
the period ended June 30, 1996.
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PRINTRAK INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's investing activities used cash of approximately $0.8 million
for the three months ended June 30, 1997, as a result of capital expenditures
of $0.3 million and $0.6 million of short-term investment purchases. The
Company's investing activities used cash of approximately $0.3 million for
the three months ended June 30, 1996 due to capital expenditures.
Financing activities used net cash of approximately $0.5 million and $1.8
million for the three months ended June 30, 1997 and June 30, 1996. For the
current period, net debt repayments equaled $.7 million. For the period
ended June 30, 1996, net debt repayments equaled $1.1 million.
The Company believes that the cash generated from operations and short-term
investments as well as its credit facility, will be sufficient to meet its
cash requirements at least through the end of fiscal year 1998.
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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
--------------------------------
The Registrant filed the following Current Reports on Form 8-K during the
first quarter of the fiscal year 1998:
May 15, 1997 Acquisition of TFP Inc., a South Carolina Corporation
May 21, 1997 TFP Inc. pro forma financial statements
Exhibit Index:
99.1 May 7, 1997 Printrak announces completion of TFP Inc. acquisition
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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)
August 14, 1997 /s/ RICHARD M. GILES
---------------------------------
Richard M. Giles
Chairman of the Board, Chief
Executive Officer, President and
acting Chief Financial Officer
(Principal Financial Officer)
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