SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _____________________
Commission File Number 0-11704
COMPUTER IDENTICS CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2443539
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Shawmut Road, Canton, Massachusetts 0202l
(Address of principal executive offices) (Zip Code)
(617) 821-0830
(Registrant's telephone number, including area code)
_________________________________________________
(Former name, former address and former fiscal year,if changed since last
report)Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class
Outstanding at September 30, 1995
Common Stock, $.l0 par value
10,837,593
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE AND NINE MONTHS MONTHS ENDED SEPTEMBER 30 , 1995 AND
1994Three months ended September 30,Nine Months ended September 30,1995
199419951994Revenues: Net product sales
$ 5,948,748 $ 5,879,974 $ 17,862,344 $ 15,983,981
Customer support services892,876 745,138 2,518,879 2,394,464
Total6,841,624 6,625,112 20,381,223 18,378,445
Cost and expenses:
Cost of products sold3,112,621 2,846,569 8,872,405 8,175,009
Cost of customer support services 486,898 556,560 1,250,764 1,500,435
Selling, general and administrative2,511,325 2,425,194 7,638,543 7,570,514
Research and development606,535 537,418 1,946,063 1,644,853
Separation Costs - - -468,819
Total6,717,379 6,365,741 19,707,775 19,359,630
Income (loss) from operations124,245 259,371 673,448 (981,185)
Interest income11,278 1,885 24,978 23,817
Interest expense14,266 1,113 23,557 5,550
Income (loss) before provision for income taxes121,257 260,143 674,869(962,918)
(Benefit from) Provision for income taxes(412)24,834 52,256 73,529
Net income (loss)$ 121,669 $ 235,309 $ 622,613 $ (1,036,447)
Net income (loss) per share$ .01 $ .02 $ .06 $ (.10)
Weighted average number of common and common equivalent shares outstanding
11,124,39410,556,04810,937,86710,327,563
See notes to consolidated financial statements.
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
Nine months ended September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $622,613 $(1,036,447)
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating
activities:
Depreciation and amortization 320,017 289,540
Non-cash compensation 55,350 45,422
Increase (decrease) in cash from:
Accounts receivable 852,684 (503,064)
Inventory (697,125) (266,606)
Other current assets (61,324) (127,504)
Accounts payable (247,183) 1,068,639
Accrued compensation and related benefits (102,854) 181,549
Accrued income taxes 43,486 (12,943)
Other current liabilities (418,302) (423,028)
Deferred revenue 34,290 (119,588)
Total adjustments (220,961) 132,417
Net cash provided by (used for) operating activities 401,652 (904,030)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (547,668) (287,505)
Decrease in other assets 3,657 -
Net cash used for investing activities (544,011) (287,505)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable 998,527 -
Principal payments under capital lease obligations (26,087) (23,287)
Proceeds from exercise of stock options 234,699 82,000
Net cash provided by financing activities 1,207,139 58,713
Effect of exchange rate changes on cash and cash equivalents 28,125 13,151
Net increase(decrease) in cash and cash equivalents 1,092,905 (1,119,671)
" Cash and cash equivalents, beginning of year 755,089 1,673,76
" Cash and cash equivalents, end of quarter $1,847,994 $554,092
Supplemental information:
Cash paid for interest $23,557 $5,551
Cash paid for income taxes $8,991 $61,509
COMPUTER IDENTICS CORPORATIONAND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(UNAUDITED)The Notes to the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, contain information pertinent to the accompanying financial
statements. There has been no material change in the information contained
in such notes except as set forth below. The Balance Sheet at September 30,
1995, the Statements of Operations for the three and nine months ended
September 30, 1995 and 1994 and the Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994, are unaudited. However, in the
opinion of management, all adjustments (consisting only of normal recurring
accrual entries) necessary for a fair presentation of such financial results
have been included.
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ComputerIdentics
Corporation (the Company) and its wholly-owned subsidiaries, Computer Identics
N.V./S.A. (CINV), Computer Identics Ltd., Computer Identics GmbH, Computer
Identics S.A., and Computer Identics, Inc.
2. RECLASSIFICATION
Certain amounts in the prior year have been reclassified to conform to the
1995 presentation.
3. NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is computed based on the weighted average
number of common and the dilutive effect of common equivalent shares
outstanding for the period.
4. INVENTORY
Inventory is recorded at the lower of cost (first in, first out method) or
market.
At September 30, 1995 and December 31, 1994, inventory consisted of the
following:
5. INCOME TAXES
The Company's income taxes were $53,000 in 1995 versus a provision of $74,000
in 1994. Due to the Company's ability to use its U.S. net operating loss
carryforwards, the provision for income taxes is comprised primarily of state
and foreign income taxes for which net operating loss carryforwards are not
available.Item 2. Management's Discussion and Analysis of Financial
Condition and Results of OperationsFor the Three Months Ended September 30,
1995 and 1994:
Revenue for the third quarter of 1995 was 3% above the comparable 1994 period.
Third quarter bookings decreased 5% for 1995 compared to the prior year.
Backlog increased slightly from $3.1 million at December 31, 1994 to $3.2
million at September 30, 1995. The $3.2 million backlog is lower than the
comparable third quarter 1994 total of $4.3 million.
Revenues by the Company's four European subsidiaries, the Canadian subsidiary,
and exports to Rest of World were 63% and 47% of the total revenue for the
third quarter of 1995 and 1994, respectively. European revenues increased 32%
and Rest of World revenues were up 118% over the 1994 third quarter. Revenues
for North America declined 28% compared with the same period in 1994. This
continued international performance can be directly related to the continued
recovery and improvement in the European economy, and increased penetration in
the Far East/Asia market.
Gross margin from product and services was 47.4% compared to 48.6% for the
third quarters of 1995 and 1994 respectively. Product gross margin decreased
to 47.7% in 1995 from 51.6% in 1994 due to a larger mix of international
revenues with lower margins and a change in strategy in the North American
business from direct to lower margin indirect channels. Service gross margin
increased in 1995 to 45.5% from 25.3% in 1994 reflecting two factors:
elimination from our service base of those older products we have removed from
our current product offerings, coupled with cost reductions from our 1995
restructuring program. Selling, general and administrative expenses as a
percentage of revenue remained constant at 36.7% in the third quarter of 1995
and 1994.
Research and development expenses increased to 9% of revenues in the third
quarter of 1995 from 8% in the comparable quarter of 1994, as the Company
continued its planned program to increase spending on new product development.
The Company continues to invest in its future by improving performance of
existing products, expanding its overall product line, and exploring new
technology.
For the third quarter of 1995, the Company reported net income of $122,000 as
compared with a 1994 third quarter profit of $235,000. This decrease is
directly related to increased spending for sales, marketing, research and
development, while the gross margin remained virtually flat.
For the Nine Months Ended September 30, 1995 and 1994.
Revenue for the first nine months of 1995 was 11% above the comparable 1994
period. Bookings for the same period increased 8% for 1995 compared to the
prior year.
Revenues by the Company's four European subsidiaries, the Canadian subsidiary,
and exports to Rest of World were 61% and 49% of the total revenue for the
first nine months of 1995 and 1994 respectively. European revenues increased
33% and Rest of World revenues were up 119% over the 1994 third quarter.
Revenues for North America declined 16% compared with the same period in 1994.
This continued strong international performance can be directly related to
several factors: strong OMNI CIX sales by our European subsidiaries,continued
recovery and improvement in the European economy, a weaker U.S. dollar, and
increased penetration in the Far East/Asia market. Since over half the
Company's revenue was derived from foreign sources, its operating results can
be sensitive to foreign currency fluctuations. In the first nine months of
1995, these foreign currency fluctuations worked in the Company's favor.
Gross margin from product and services was 50.3% compared to 47.4% for the
first nine months of 1995 and 1994, respectively. Product gross margin
increased to 50.3% in 1995 from 48.9% in 1994, primarily reflecting the
European subsidiaries ability to increase the sales mix of higher margin
scanners. Service gross margin increased in 1995 to 50.3% from 37.3% in 1994
reflecting two factors: elimination from our service base of those older
products we have removed from our current product offerings, coupled with cost
reductions from our 1995 restructuring program. Selling, general and
administrative expenses as a percentage of revenue were 37.5% in the first
nine months of 1995 vs. 41.2% in the comparable 1994 period. Overall, the
Company has, through its ongoing cost reduction program, minimized increases
in selling, general and administrative spending while growing revenue by 11%.
Research and development expenses were 10% and 9% of revenues in the first nine
months of 1995 and 1994, respectively, as the Company continued its planned
program to increase spending on new product development. The Company continues
to invest in its future by improving performance of existing products,
expanding its overall product line, and exploring new technology.
For the first nine months of 1995, the Company reported net income of $623,000
as compared with a 1994 nine month loss of $(1,036,000). This improvement is
directly related to a 11% increase in revenue coupled with improved gross
margins, minimized spending increases in selling, general and administrative
expenses, and the non-recurrence of the $469,000 one-time charge in 1994 for
employee separation costs.
Liquidity and Capital Resources
Management believes that continued profitable operations and the current
level of working capital are sufficient to finance its needs through 1996.
From a capital expenditures viewpoint, in the fourth quarter of 1995 the
Company is contemplating the acquisition of a new management information
system which is estimated to cost between $150,000 and $250,000. The
liquidity results over the periods under discussion are:
September 30, December 31,
1995 1994
Working Capital $6,309,000 $5,299,000
Current Ratio 2.2 to 1 2.1 to 1
Total Liability to Net Worth Ratio .7 to 1 .8 to 1
Each of the liquidity factors listed have remained relatively stable as of the
dates listed. Working capital has increased by $1,010,000 during the first
nine months of 1995 compared to December 31, 1994, primarily resulting from an
increase in inventory of $814,000 and decreases in accounts receivable of
$635,000 and other current liabilities of $504,000.
The Company currently has two bank lines of credit available. The principal
line of credit, $1,000,000, is held with a commercial bank. The second line of
credit is held with a Belgium bank for 5,000,000 Belgium Francs (approximately
$150,000). Computer Identics GmbH, a wholly owned German subsidiary, borrowed
in DM the entire $1,000,000 line of credit with a commercial bank. The loan is
a demand note at an interest rate of 7.25%. These funds were used to pay down
their inter-company accounts payable balance due to their parent company,
Computer Identics. The Company's cash balance at September 30, 1995 reflects
the proceeds from the draw down of the $1,000,000 line of credit noted
previously. The Company also has available a program to hedge its foreign
denominated accounts receivable in an effort to minimize foreign currency
exposure. At September 30, 1995, the Company did not have any hedging
contracts outstanding, but may utilize limited hedging in the future should the
Company foresee the need.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Articles of Organization effective December 21, 1984, and
Amendment thereto effective June 1, 1987, (filed as Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference.
3.2 By-laws of the Company (filed as Exhibit 3.4 to Registration Statement
No. 2-85807, and incorporated herein by reference).
4.1 Copy of Common Stock Certificate (filed as Exhibit 4.1 to Registration
Statement No. 2-85807, and incorporated herein by reference).
11. Statement regarding computation of per share earnings. (See footnote 3
to Notes to Consolidated Financial Statements).
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPUTER IDENTICS CORPORATION
Registrant
DATE: October 31, 1995
_________________________________________
Jeffrey A. Weber
Duly Authorized Officer and Principal Financial Officer
(Senior Vice President, Operations and Finance and
Chief Financial Officer)
COMPUTER IDENTICS CORPORATION
TABLE OF CONTENTS
Page
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 1
Consolidated Balance Sheets --
September 30, 1995 and December 31, 1994 1
Consolidated Statements of Operations --
Three and Nine Months ended September 30, 1995,
and September 30, 1994 2
Consolidated Statements of Cash Flows --
Nine Months ended September 30, 1995, and
September 30, 1994 3
Notes to Consolidated Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 5
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,848,000
<SECURITIES> 0
<RECEIVABLES> 5,854,000
<ALLOWANCES> 359,000
<INVENTORY> 3,918,000
<CURRENT-ASSETS> 11,566,000
<PP&E> 3,998,000
<DEPRECIATION> 3,004,000
<TOTAL-ASSETS> 12,560,000
<CURRENT-LIABILITIES> 5,256,000
<BONDS> 0
<COMMON> 1,084,000
0
0
<OTHER-SE> 6,158,000
<TOTAL-LIABILITY-AND-EQUITY> 12,560,000
<SALES> 17,862,000
<TOTAL-REVENUES> 20,381,000
<CGS> 8,872,000
<TOTAL-COSTS> 19,708,000
<OTHER-EXPENSES> (26,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,000
<INCOME-PRETAX> 675,000
<INCOME-TAX> 52,000
<INCOME-CONTINUING> 623,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 623,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
