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 March 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 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 March 31, 1996
Common Stock, $.l0 par value 10,866,793
COMPUTER IDENTICS CORPORATION
TABLE OF CONTENTS
Page
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS. 1
Consolidated Balance Sheets --
March 31, 1996, and December 31, 1995 1
Consolidated Statements of Operations --
Three Months ended March 31, 1996, and
March 31, 1995 2
Consolidated Statements of Cash Flows --
Three Months ended March 31, 1996, and
March 31, 1995 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 7
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Unaudited)
March 31, December 31,
(In thousands, except share amount 1996 1995
Assets
Current Assets:
Cash and cash equivalents $ 2,200 $ 1,752
Accounts receivable (less allowance for
doubtful accounts of $245 in 1996 and
$225 in 1995) 6,204 6,062
Inventory 3,745 3,625
Other 446 380
Total current assets 12,595 11,819
Property and equipment:
Equipment 3,348 3,674
Furniture and fixtures 313 324
Leasehold improvements 46 64
Total property and equipment 3,707 4,062
Less accumulated depreciation and amortization (2,617) (3,133)
Net property and equipment 1,090 929
Total assets $13,685 $12,748
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable to bank 974 1,002
Obligation under capital lease 16 15
Accounts payable 3,109 2,402
Accrued compensation and related benefits 1,099 1,063
Accrued income taxes 22 29
Other current liabilities 621 684
Deferred revenue 496 289
Total current liabilities 6,337 5,484
Long-term capital lease obligation 53 57
Stockholders' equity :
Common stock, $.10 par value -
authorized 14,000,000 shares, 10,866,793 shares
at March 31,1996 and 10,856,793 shares
at December 31,1995 1,087 1,086
Additional paid-in capital 24,013 24,005
Deferred compensation (53) (60)
Accumulated deficit (17,784) (17,889)
Cumulative translation adjustments 32 65
Total stockholders' equity 7,295 7,207
Total liabilities and stockholders' equity $13,685 $12,748
See notes to consolidated financial statements.
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
Three months ended
(In thousands, except per share amounts) March 31,
1996 1995
Revenues:
Net product sales $6,136 $5,969
Customer support services 1,130 811
Total revenues 7,266 6,780
Cost and expenses:
Cost of products sold 3,493 3,001
Cost of customer support services 449 309
Selling, general and administrative 2,578 2,473
Research and development 629 715
Total costs and expenses 7,149 6,498
Income from operations 117 282
Interest income 0 8
Interest expense 6 3
Income before provision for income taxes 111 287
Provision for income taxes 6 30
Net income $ 105 $ 257
Net income per share $ .01 $ .02
Primary weighted average number of common shares 11,071 10,707
See notes to consolidated financial statements.
COMPUTER IDENTICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
Three months ended
(In thousands) March 31,
1996 1995
OPERATING ACTIVITIES:
Net income $ 105 $ 257
Adjustments to reconcile net income
to net cash provided by (used for) operating
activities:
Depreciation and amortization 154 91
Non-cash compensation 7 14
Increase (decrease) in cash from:
Accounts receivable (144) 1,047
Inventory (167) (439)
Other current assets (71) (14)
Accounts payable 705 (349)
Accrued compensation and related benefits 51 (97)
Accrued income taxes (6) 47
Other current liabilities (36) (189)
Deferred revenue 209 146
Total adjustments 702 257
Cash provided by operating activities 807 514
INVESTING ACTIVITIES:
Acquisition of property and equipment (319) (147)
Decrease in other assets 0 3
Net cash used for investing activities (319) (144)
FINANCING ACTIVITIES
Principal payments under capital lease obligations (4) (11)
Proceeds from exercise of stock options 8 88
Net cash provided by financing activities 4 77
Effect of exchange rate changes on cash and cash
equivalents (44) 75
Net increase in cash and cash equivalents 448 522
Cash and cash equivalents, beginning of year 1,752 755
Cash and cash equivalents, end of period $2,200 $1,277
Supplemental information:
Cash paid for interest $ 22 $ 4
Cash paid for income taxes $ 13 $ 3
See notes to consolidated financial statements.
COMPUTER IDENTICS CORPORATION
AND SUBSIDIARIES
NOTES 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, 1995,
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 March 31, 1996, the
Statements of Operations for the three months ended March 31, 1996 and 1995
and the Statements of Cash Flows for the three months ended March 31, 1996 and
1995, 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 Computer
Identics 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
1996 presentation.
3. NET INCOME (LOSS) PER SHARE
Net income 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 March 31, 1996 and December 31, 1995, inventory consisted of the following:
(In thousands) March 31, 1996 December 31, 1995
Raw Materials $ 1,862 $ 1,821
Work-in-Process 95 336
Finished Goods 1,788 1,468
Total $ 3,745 $ 3,625
5. INCOME TAXES
The provisions for income taxes were $6,000 in 1996 versus a provision of
$30,000 in 1995. 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 Operations
Revenue for the first quarter of 1996 was 7% above the comparable
1995 period. The 1996 revenue gains were reflected in all three geographic
areas of the Company, North America, Europe and Rest of World. First quarter
bookings decreased 3% for 1996 compared to the same quarter in the prior year.
Backlog decreased from $3.5 million at December 31, 1995, to $3.3 million at
March 31, 1996. The $3.3 million in backlog is lower than the comparable
first quarter 1995 total of $3.8 million.
Sales by the Company's four European subsidiaries, the Canadian
subsidiary, and exports to Rest of World were 64% of total revenue for the
first quarter of 1996 compared to 65% for 1995. 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 quarter, these
foreign currency fluctuations did not work in the Company's favor. The Company
does have available a program to hedge its foreign denominated accounts
receivable in an effort to minimize foreign currency exposure. At March 31,
1996, the Company did not have any hedging contracts outstanding. We may
utilize limited hedging in the future should the Company foresee the need.
Gross Margin from product and services was 46% compared to 51% for
the first quarters of 1996 and 1995, respectively. Product gross margin
decreased from 50% in 1995 to 43% in 1996 primarily reflecting a higher mix of
lower margin non-CI manufactured product sales in Europe, a change in
distribution strategy in North America from direct to lower margin indirect
channels, and the unfavorable foreign currency impact due to a stronger
dollar. This trend will continue unless the Company can achieve further
material and labor cost reductions in manufacturing which more than offset the
effect of the larger mix of international revenues with lower margins and the
change in distribution strategy in North America. Service gross margin
decreased in 1996 to 60% from 62% in 1995. Selling, General and
Administrative expenses as a percentage of revenue were 35% in the first
quarter of 1996 versus 36% in the comparable 1995 period, reflecting a
continued emphasis on controlling gross spending while increasing revenue.
Research and Development expenses were 9% and 10% of revenuesin the
first quarter of 1996 and 1995, respectively as the Company continued its
planned program to invest in its future by improving performance of existing
products, expanding its overall product line, and exploring new technology.
As a result of the foregoing, net income for the first quarter of 1996
and 1995 was $105,000 and $257,000, respectively.
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 first quarter
of 1996 the Company completed the acquisition of a new management information
system which cost approximately $200,000.
March 31, December 31,
1996 1995
Working Capital $6,258,000 $6,335,000
Current Ratio 2.0 to 1 2.2 to 1
Total Liability to Net Worth Ratio .9 to 1 .8 to 1
Each of the liquidity factors listed have remained relatively stable
over the two periods listed. Working capital has decreased by $77,000 during
the first three months of 1996 compared to December 31, 1995, primarily
resulting from increases in cash of $448,000, inventory of $120,000, accounts
receivable of $142,000, accounts payable of $707,000, and deferred revenue of
$207,000.
The Company currently has two bank lines of credit available. A small
line of credit is held with a Belgium bank for 5 million Belgium Francs
(approximately $170,000). The principal line of credit is held with a
commercial bank and was increased from $1 to $2 million during the quarter
ended March 31, 1996. Borrowings, however, did not change during the quarter.
Computer Identics GmbH, a wholly owned German subsidiary, has in DM $1 million
of this line of credit outstanding. Therefore the Company still has available
$1 million of this credit line.
PART II
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 a 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).
27. Financial Data Schedule.
(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: May 7, 1996
________________________________________
Jeffrey A. Weber
Duly Authorized Officer and Chief Financial Officer
(Senior Vice President, Operations and Finance and
Chief Financial Officer)
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