<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the period ended June 30, 1996
or
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER: 0-9247
AUTO-TROL TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-0515221
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12500 North Washington Street, Denver, Colorado 80241-2400
(Address of principal executive offices)
(303) 452-4919
(Registrant's telephone number, including area code)
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. [X] Yes [_] No
Number of shares outstanding as of August 9, 1996: 6,079,262
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
--------------------------------
REPORT TO SECURITIES AND EXCHANGE COMMISSION ON FORM 10-Q
---------------------------------------------------------
FOR THE NINE MONTHS ENDED JUNE 30, 1996
---------------------------------------
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited) nine months ended June 30, 1996 and 1995 1
Consolidated Balance Sheets (unaudited) June 30, 1996 and September 30, 1995 2-3
Consolidated Statements of Cash Flow (unaudited) June 30, 1996 and 1995 4
Notes to Consolidated Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-10
Part II. Other Information, Item 6 Exhibits, Reports on Form 8-K 11
Signatures 12
</TABLE>
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales............................................... $ 3,381 $ 2,228 $ 7,637 $ 8,535
Service............................................. 3,056 3,584 9,091 11,484
-----------------------------------------------------------
6,437 5,812 16,728 20,019
Costs and expenses:
Cost of sales....................................... 1,416 965 2,930 3,390
Cost of service..................................... 1,577 1,584 4,557 5,124
Research and product development.................... 2,249 2,257 6,844 6,464
Marketing, general and administrative............... 3,561 3,985 10,520 12,276
-----------------------------------------------------------
8,803 8,791 24,851 27,254
Loss from operations................................... (2,366) (2,979) (8,123) (7,235)
Interest income..................................... 31 82 180 176
Interest expense.................................... 197 166 585 525
-----------------------------------------------------------
Loss before income taxes............................... (2,532) (3,063) (8,529) (7,584)
Income tax (benefit)................................... (20) (3) (40) 52
-----------------------------------------------------------
Net loss before........................................ $(2,512) $(3,060) $(8,489) $(7,636)
===========================================================
Loss per share......................................... $(.42) $(.95) $(1.81) $(2.83)
Weighted average number of shares outstanding 6,053 3,221 4,700 2,694
</TABLE>
See Notes to Consolidated Financial Statements
1
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AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
(UNAUDITED)
----------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 2,557 $ 2,388
Receivables net of allowance of $129,000 and $132,000.......................... 3,925 4,325
Inventories.................................................................... 225 196
Service parts and prepaid expenses............................................. 448 330
----------------------------------
Total current assets........................................................ $ 7,154 $ 7,239
----------------------------------
Property, facilities and equipment:
Land........................................................................... 356 355
Building and improvements...................................................... 8,205 8,098
Machinery and equipment........................................................ 9,024 8,574
Furniture, fixtures and leasehold improvements................................. 902 898
---------------------------------
18,486 17,925
Less accumulated depreciation and amortization................................. (11,729) (11,421)
----------------------------------
6,758 6,504
Purchased software, net of accumulated amortization of $1,056,000 and
$991,000....................................................................... 523 548
Other assets..................................................................... 84 97
---------------------------------
Total assets................................................................ $ 14,519 $ 14,388
=================================
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
(UNAUDITED)
------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 240 $ 240
Current portion of capital lease obligations 99 254
Accounts payable 984 1,309
Interest payable, related-party portion $360,000 and $370,000 417 407
Unearned service revenue and customer deposits 1,565 1,188
Accrued compensation and related taxes 537 554
Other liabilities 1,155 1,910
------------------------------------
Total current liabilities $ 4,997 $ 5,862
Capital lease obligations 92 173
Long-term debt, related-party portion $5,400,000 and $2,900,000 7,320 4,820
------------------------------------
Total liabilities $ 7,412 $ 10,855
------------------------------------
Shareholders' equity:
Common stock, $.02 par value authorized 40,000,000 shares; issued
(including treasury shares) 6,079,262 and 3,220,567 shares 122 64
Additional paid-in capital 79,140 71,689
Cumulative currency translation adjustments (854) (411)
Accumulated deficit (75,813) (67,324)
Treasury stock, 26,140 and 26,140 common shares at cost (485) (485)
------------------------------------
Total shareholders' equity 2,110 3,533
------------------------------------
$ 14,519 $ 14,388
====================================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
1996 1995
---------------------
<S> <C> <C>
Cash flow from operating activities:
Net loss.................................................................... $(8,489) $(7,636)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization............................................... 1,333 1,247
(Gain) loss on disposal of property, facilities and equipment............... 232 (110)
Provision for inventory obsolescence and shrinkage.......................... 0 0
(Increase) decrease receivables............................................. 135 1,826
Increase (decrease) inventories............................................. (42) 40
(Increase) decrease service parts and prepaids.............................. (82) 138
Decrease accounts payable................................................... (383) (716)
Decrease interest payable.................................................. 10 (234)
Increase (decrease) income tax payable...................................... (84) (70)
Increase (decrease) unearned service revenue and customer deposits.......... 377 121
Increase (decrease) other liabilities....................................... (778) (186)
---------------------
Net cash used by operating activities............................................ (7,771) (5,580)
Cash flow from investing activities:
Capital expenditures........................................................ (1,868) (645)
Proceeds from sale of property, facilities and equipment.................... 66 285
(Increase) decrease of non-current service parts and other assets........... 13 (23)
---------------------
Net cash used by investing activities............................................ (1,789) (383)
Cash flow from financing activities:
Proceeds from issuance of notes payable, related party...................... 10,000 5,750
Write-down on related party debt debt....................................... 0 (8)
Payments to acquire related party........................................... 0 (5)
Payments on notes payable, capital lease and long-term debt................. (236) 0
Proceeds from issue of common stock......................................... 9 13
Capital contributions to subsidiary......................................... 0 289
---------------------
Net cash provided by financing activities...................................... 9,773 6,039
Effect of exchange rate changes on cash.......................................... (44) (47)
---------------------
Net increase in cash and cash equivalents........................................ 169 29
Cash and cash equivalents at the beginning of the year........................... 2,388 2,120
---------------------
Cash and cash equivalents at the end of the period............................... $ 2,557 $ 2,149
=====================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, related party portion $457,000 and $579,000....................... $ 457 $ 579
Income taxes................................................................ 0 0
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for the
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Financial information as of September 30, 1995 has
been derived from the audited consolidated financial statements of Auto-trol
Technology Corporation and subsidiaries (the Company).
The condensed consolidated financial statements do not include all information
and notes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to the consolidated
financial statements as of and for the year ended September 30, 1995 included in
Form 10-K previously filed with the SEC. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included in the accompanying Condensed Consolidated
Financial Statements. Operating results for the three and nine month periods
ending June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending September 30, 1996.
(2) BUSINESS COMBINATION WITH RELATED PARTY
On June 30, 1995, AT Development Inc., a wholly owned subsidiary of Auto-trol
Technology Corporation, acquired a 100% interest in Metaware, Inc., doing
business as Centra 2000, Inc. (Centra). The consideration for the purchase was
four shares of the Company's common stock for each share of Centra common stock
outstanding. The 1,212,008 shares of the Company's common stock exchanged were
not registered under Federal or State securities laws and are subject to
restrictions on resale. Additional consideration for existing Centra
shareholders consists of a cash bonus and stock in the Company in each of the
next four years, which is contingent upon meeting a development schedule and
market acceptance of the Centra 2000 product.
The Company's President and Chairman of the Board, Howard B. Hillman, controls,
through various affiliates, the majority of the outstanding shares of capital
stock of both the Company and Centra.
The effect of applying the purchase method of accounting to the acquisition of
the common stock of Centra owned by the other shareholders was not significant.
Accordingly, the acquisition has been accounted for in a manner similar to a
pooling of interests of entities under common control. The accompanying
consolidated financial statements have been restated for all periods prior to
the merger to include the accounts and operations of Centra with those of the
Company from the commencement of Centra's operations of October 1, 1994. The
effects of restating the Company's December 31, 1994, consolidated balance sheet
for the business combination were not significant. Intercompany transactions
between Centra and the Company prior to the date of the combination have been
eliminated.
(3) LOSS PER SHARE
Loss per share is computed on the basis of the weighted average number of shares
outstanding and is adjusted, if applicable, for common stock equivalents. At
June 30, 1996 and 1995, the weighted average number of shares outstanding
includes no weighted common stock equivalent shares because their effect would
be antidilutive. Share amounts have been retroactively adjusted for the one-
for-ten reverse stock split effective January 30, 1996.
5
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Operating losses for the third quarter and the nine months ended June 30, 1996
continued due to decreased revenue in mature product areas. New product revenue
from the Product Data Management (PDM) and network configuration markets grew in
the nine months ended June 30, 1996 over the same period ended June 30, 1995,
however, the Company continues to operate below break-even.
Due to the nature of the software industry, the future operating results of the
Company depend largely on its ability to rapidly and continuously develop and
deliver new software products that are competitively priced and offer enhanced
performance. However, the Company is unable to predict the impact of new
products or the effect that industry economic conditions will have on future
results of operations.
BUSINESS COMBINATION WITH RELATED PARTY - On June 30, 1995, AT Development
Inc., a wholly owned subsidiary of Auto-trol Technology Corporation, acquired a
100% interest in Metaware, Inc. doing business as Centra 2000, Inc. Financial
results for the quarter and the nine months ended June 30, 1995 reflect the
combination of the Company's results of operations. Both the Company and Centra
2000, Inc. were under common control at the date of acquisition.
Three months ended June 30, 1996 compared to three months ended June 30, 1995
- -----------------------------------------------------------------------------
REVENUES - For the quarter ended June 30, 1996, total sales and service revenue
increased $625,000, or 11%, from the quarter ended June 30, 1995. Total sales
revenue for the third quarter of fiscal 1996 increased $1.2 million, or 52%,
from the quarter ended June 30, 1995. Hardware revenue for the third quarter of
fiscal 1996 increased $276,000, or 23%, as compared to the third quarter of
fiscal 1995. Hardware sales increased as the Company sold hardware primarily as
part of a total systems solution. The Company continues to shift the sales and
support focus from hardware to internally developed software and systems
integration. Total software revenue increased $877,000, or 88%, as compared to
the third quarter of fiscal 1995. The increase can be attributed to increased
sales of the Company's product data management product, network configuration
products, Series 5000 and related products based on that technology. North
America hardware sales revenue decreased $297,000, or 30%, while North America
software sales revenue increased $1.1 million during the third quarter of fiscal
1996. European hardware sales revenue increased $562,000, or 234% as software
revenue decreased $250,000, or 43% from the third quarter of fiscal 1995. This
net increase consisted of an unfavorable exchange rate variance of 57% and a
157% increase in sales volume.
Total service revenue for the quarter ended June 30, 1996, decreased $528,000,
or 15%, from the previous year's quarter ended June 30, 1995. Service revenue
is comprised of hardware and software maintenance, training and billable service
revenue. Hardware maintenance revenue decreased $312,000, or 46%, while
software maintenance revenue decreased $275,000, or 14% for the third quarter of
fiscal 1996 as compared to the third quarter of fiscal 1995. The Company
experienced a decline in service revenue in both North America and Europe. As
the Company shifts from being a hardware and software solution provider to a
software, systems integration, and service provider, revenue from hardware and
hardware maintenance will continue to decline. The Company's management expects
this trend to continue into the future. The declines in software maintenance
revenue can be attributed to a decline in older products maintenance revenue.
Billable services and training revenue increased slightly to $987,000 from
$928,000, respectively, for the quarters ended June 30, 1996 and 1995. North
American service revenue,
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
which comprised 78% of the total worldwide service revenue, declined $390,000,
or 14%, as compared to the third quarter of fiscal 1995. European service
revenue declined $170,000, or 22%, as compared to the third quarter of fiscal
1995.
COST OF SALES AND SERVICE - The gross margin on total revenue for the third
quarter ended June 30, 1996 was 54%, a decrease of 2 percentage points from the
prior year third quarter. Gross margin on sales revenue for the third quarter
ending June 30, 1996, increased slightly to 58% from 57% for the third quarter
ended June 30, 1995 due to a mix shift from hardware to software. In the third
quarter of fiscal 1996 gross profit margins on hardware declined, yielding a
gross margin of 20%, as compared to a gross margin of 29% in the third quarter
of fiscal 1995. This decline reflects the continued pressure on hardware
pricing throughout the computer industry. In the third quarter of fiscal 1996
the gross margin on software sales decreased to 89% as compared to a gross
margin of 91% for the same period in fiscal 1995.
The gross profit margin for total service revenue in the third quarter of fiscal
1996 decreased $522,000, yielding a gross margin of 48%, as compared to a gross
margin of 56% in fiscal 1995. Gross profit margins on billable services and
training in the third quarter of fiscal 1996 decreased $158,000 yielding a gross
margin of 32% as compared with 51% gross margin during the third quarter of
fiscal 1995. The decline in training and billable services revenue was the
result of the timing of software sales occurring late in the third quarter and
the corresponding training and billable services were deferred. Gross profit
margins on hardware maintenance declined $130,000 yielding a gross margin of 12%
in the third quarter of fiscal 1996 as compared to a gross margin of 25% in the
third quarter of fiscal 1995. This decline reflects the Company's continuing
transition from directly providing hardware maintenance to relying on outside
third parties for this service. The software maintenance gross margin of 66% in
the third quarter of fiscal 1996 was only three percentage points less than in
the third quarter of 1995 even though software maintenance sales reduced by 14%
over the two periods.
RESEARCH AND PRODUCT DEVELOPMENT - Research and development expenses were
approximately 35% of revenue for the quarter ended June 30, 1996, and 39% of
revenues for the quarter ended June 30, 1995. Total research and development
expenses were almost equal for the third quarter ended June 30, 1996 and 1995 at
$2.2 million. The Company is continuing to invest in new product technology in
the PDM, network configuration and manufacturer computer aided design markets.
For the balance of fiscal 1996 the Company expects to slightly increase its
spending in research and development as it brings several enhanced products to
the marketplace.
MARKETING, GENERAL, AND ADMINISTRATIVE - In the third quarter ended June 30,
1996, marketing, and general and administrative expenses decreased $425,000, or
11%, from the third quarter ended June 30, 1995. In the third quarter of fiscal
1996, North American marketing, and general and administrative expenses,
decreased approximately $52,000, or 2%, as compared to the third quarter of
fiscal 1996 due primarily to reduced occupancy costs. European marketing and
general and administrative spending declined $378,000 due to a favorable
exchange rate variance of $41,000, and a decrease in spending of $337,000,
caused by reduced headcount and occupancy costs.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
INTEREST - In the quarter ended June 30, 1996, the Company's average debt level
increased resulting in increased interest expense of 19% to $197,000 from
$166,000 the quarter ended June 30, 1995. Interest income also decreased
$51,000, or 62% as compared to the third quarter of fiscal 1995.
Nine months ended June 30, 1996 compared to nine months ended June 30, 1995
- ---------------------------------------------------------------------------
REVENUES - For the nine months ended June 30, 1996, total sales and service
revenue decreased $3.3 million, or 16%, from the same period ended June 30,
1995. Total sales revenue for the first nine months of fiscal 1996 decreased
$898,000, or 11%, from the nine month period ended June 30, 1995. Hardware
revenue for the first nine months of fiscal 1996 declined $732,000 or 19%, as
compared to the same period in fiscal 1995. Total software revenue declined
$166,000, or 4%, as compared to the first nine months of fiscal 1995. The
decline can be attributed to reduced sales of some of the Company's mature
products, however, there was revenue growth in the PDM and network configuration
markets, as compared to the same period in fiscal 1995. North America hardware
sales revenue decreased $1.0 million, or 41%, while North America software
sales revenue increased $309,000, or 12% during the first nine months of fiscal
1996. European sales revenue decreased $337,000, or 11% from the same period in
fiscal 1995. This decrease consisted of an unfavorable exchange rate variance
of 5% and a 95% decrease in sales volume. European hardware revenue increased
$107,000 or 8% as compared to the same nine month period of fiscal 1995.
European software revenue decreased $445,000, or 26%, as compared to the same
nine month period of fiscal 1995.
Total service revenue for the nine months ended June 30, 1996, decreased $2.4
million, or 21%, from the previous year's comparable period. Hardware
maintenance revenue decreased $1.1 million, or 48%, while software maintenance
revenue decreased $1.2 million, or 19% for the first nine months of fiscal 1996
as compared to the same period of fiscal 1995. Billable services and training
revenue decreased $89,000, or 3% for the nine month period ended June 30, 1996,
as compared to the prior year's nine month period. North American service
revenue, which comprised 76% of the total worldwide service revenue, declined
$1.9 million, or 22%, as compared to the first nine months of fiscal 1995.
European service revenue declined $418,000, or 18%, as compared to the prior
year's nine month period ended June 30, 1995.
COST OF SALES AND SERVICE - For the nine months ended June 30, 1996, the gross
margin on total revenue was 55%, a decrease of two percentage points from the
comparable period in the prior year. The gross margin on sales revenue for the
nine months ending June 30, 1996, increased slightly to 62% from 61% for the
nine months ended June 30, 1995 due to a mix shift from hardware to software.
For the first nine months of fiscal 1996 gross profit margins on hardware
declined $375,000, yielding a gross margin of 22%, as compared to a gross margin
of 27% in the comparable first nine months of fiscal 1995. Increased hardware
costs reflect continued pricing pressure throughout the computer industry
combined with lower volume pricing for the Company. In the first nine months of
fiscal 1996 the gross margin on software sales increased slightly to 90% as
compared to a gross margin of 89% for the same period in fiscal 1995.
The gross profit margin for total service revenue in the first nine months of
fiscal 1996 decreased $1.8 million, yielding a gross margin of 50%, as compared
to a gross margin of 55% in the first nine months of fiscal 1995. As the gross
margin on billable services and training during the first nine months of fiscal
1996 was 36% compared to 52% in the first nine months of fiscal 1995 due to
higher fixed costs not being offset by a commensurate increase in revenue.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
Gross profit margins on hardware maintenance declined $499,000 yielding a gross
margin of 20% in the first nine months of fiscal 1996 as compared to a gross
margin of 31% in the first nine months of fiscal 1995. The Company is increasing
its reliance on third party vendors for hardware maintenance and, as a result,
the gross margin is decreasing. The software maintenance gross margin of 65%
during the first nine months of fiscal 1996 was only two percentage points less
than in the first nine months of fiscal 1995 even though software maintenance
sales reduced by 22% over the two periods. The Company maintenance related
costs were reduced accordingly.
RESEARCH AND PRODUCT DEVELOPMENT - Research and development expenses were
approximately 41% of revenue for the nine months ended June 30, 1996, and 32% of
revenues for the nine months ended June 30, 1995. The increase in research and
development spending, as a percentage of revenue in the first nine months of
fiscal 1996, is due in part to an increase of $380,000, or 6%, in spending,
coupled with the overall 16% decrease in total revenue as compared to the first
nine months of fiscal 1995.
In addition, the first nine months of fiscal 1995 research and product
development expenditures were restated to reflect the acquisition of Centra
2000, Inc., which occurred on June 30, 1995. Accordingly, research and product
development expenses were increased by $367,000 for the first nine months of
fiscal 1995.
MARKETING, GENERAL, AND ADMINISTRATIVE - In the nine months ended June 30, 1996,
marketing, and general and administrative expenses decreased $1.8 million, or
14%, from the nine months ended June 30, 1995. In North America, for the nine
months ended June 30, 1996, marketing, and general and administrative expenses
decreased approximately $985,000, or 11%, as compared to the first nine months
of fiscal 1995 due primarily to reduced marketing and selling expenses, lower
personnel related expenses and occupancy costs. European marketing, and general
and administrative spending declined $770,000, or 25% due to a favorable
exchange rate variance of $34,000 and a decrease in spending of $736,000
primarily due to reduced headcount and occupancy costs in the first nine months
of fiscal 1996.
INTEREST - In the nine months ended June 30, 1996, interest expense increased
11% to $585,000 from $525,000 for the nine months ended June 30, 1995 as the
Companys debt level increased. Interest income also increased slightly by
$4,000, or 2% as compared to the same period in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION - At June 30, 1996, the Company had approximately $2.6
million in cash and cash equivalents, which was 19% higher than cash balances at
June 30, 1995. The Company's net working capital was approximately $2.1 million
at June 30, 1996, as compared to $1.1 million at June 30, 1995. Other than the
uncertainty of future profitability, there are no known demands, commitments,
events, or uncertainties that will result in the Company's liquidity increasing
or decreasing in any material way. However, during the third quarter of fiscal
1996, the Company has borrowed an additional $4,000,000, totaling $10,000,000
for the nine months ended June 30, 1996, with the notes bearing interest at 10%
per annum, from an affiliate of Howard B. Hillman, the Company's President,
Chairman of the Board and principal shareholder. In March 1996, the Company
converted $7,500,000 of the outstanding related-party debt into common stock.
On May 2, 1989, the Company announced a program to repurchase the Company's
stock in the open market. The maximum cost of the shares to be purchased was
limited to $2 million. To date, 261,400 shares have been purchased at a cost of
$485,000.
During fiscal 1994, the Company received a permanent waiver of financial
covenants of its outstanding Industrial Development Revenue Bonds. The Company
received a permanent waiver of financial ratio
9
<PAGE>
requirements which placed restrictions on long-term lease agreements, debt
agreements, and current ratio requirements.
The Company will require additional funds from its majority shareholder to
continue to fund future operating losses. The shareholder has committed, in
writing, to continue providing financial support at least through December 31,
1996. If the Company is not able to achieve financial independence and
profitability through improved results in the near future, it will continue to
be dependent on its majority shareholder for additional funding to continue as a
going concern.
CURRENCY FLUCTUATIONS
The Company has four wholly owned subsidiaries and one branch operation. The
four subsidiaries are located in Germany, Sweden, Canada and the United Kingdom;
the branch is located in Australia. The Company does business in the local
currencies of these countries, in addition to other countries where the
subsidiaries may have customers. These local currency revenues and expenses are
translated into dollars for U.S. reporting purposes. A stronger U.S. dollar
will decrease the level of reported U.S. dollar revenues and expenses.
Approximately $68,000 of unfavorable exchange rate variance and a $290,000
decrease in revenue volume resulted in a $358,000 decrease in non-U.S. revenue
between the quarters ended June 30, 1996 and 1995. These effects on the
Company's results of operations could become significant if the percentage of
revenues and expenses attributed to international operations increases and/or if
the dollar fluctuates significantly against international currencies. The
Company's international operations are also subject to certain risks inherent in
doing business abroad and may be adversely affected by government policies,
restrictions, or other factors.
The Company does not use foreign exchange contracts, interest rate swaps, or
options contracts. Foreign currency risk for the Company is limited to
outstanding debt owed to the Company by the subsidiaries. The Company invoices
its subsidiaries in their local currencies for products that are sold to the
subsidiaries' end customers. Upon receipt of payment from the subsidiaries, a
foreign currency gain or loss can occur. As of June 30, 1996, and 1995, the
Company had realized a loss of approximately $22,000 and $4,000 respectively,
through payments it had received from its subsidiaries.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6(B) REPORTS ON FORM 8-K:
None
11
<PAGE>
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.
AUTO-TROL TECHNOLOGY CORPORATION
(Registrant)
Date: August 9,1996 /s/HOWARD B. HILLMAN
----------------------------------
Howard B. Hillman,
President
Date: August 9, 1996 /s/David C. O'Brien
----------------------------------
David C. O'Brien
Vice President, Finance
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2557
<SECURITIES> 0
<RECEIVABLES> 4054
<ALLOWANCES> 129
<INVENTORY> 225
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122
0
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</TABLE>
