UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 1999
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 11, 1999: 21,292,954
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
REPORT TO SECURITIES AND EXCHANGE COMMISSION ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1999
-------------------------------------------------
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited),
three and nine months ended June 30, 1999 and 1998 1
Consolidated Statements of Comprehensive Loss
(unaudited) three and nine months ended
June 30, 1999 and 1998. 2
Consolidated Balance Sheets (unaudited),
June 30, 1999 and September 30, 1998 3
Consolidated Statements of Cash Flows (unaudited),
nine months ended June 30, 1999 and 1998 4
Notes to Consolidated Statements 5-6
Item 2. Management's Discussion and Analysis 7-10
Part II. Other Information, Item 6(b) Reports on Form 8-K 11
Signatures 12
<PAGE>
<TABLE>
<CAPTION>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------------------- --------------------------
Revenues:
<S> <C> <C> <C> <C>
Sales .................................................. $ 1,320 $ 1,665 $ 3,335 $ 3,052
Service ................................................ 1,207 2,399 5,876 7,647
-------------------------- --------------------------
2,527 4,064 9,211 10,699
Costs and expenses:
Cost of sales .......................................... 275 134 755 354
Cost of service ........................................ 415 828 1,604 3,102
Research and product development ....................... 1,322 1,500 4,669 4,529
Marketing, general and administrative .................. 2,572 2,803 6,932 7,717
-------------------------- --------------------------
4,584 5,265 13,960 15,702
Loss from operations ................................... (2,057) (1,201) (4,749) (5,003)
Interest income ........................................ 9 50 76 63
Interest expense ....................................... 180 134 618 498
-------------------------- --------------------------
Loss before income taxes ............................... (2,228) (1,285) (5,291) (5,438)
Income tax expense/(benefit) ........................... 2 0 3 0
-------------------------- --------------------------
Net loss ............................................... $ (2,230) $ (1,285) (5,294) (5,438)
========================== ==========================
Basic and diluted loss per share ....................... (.13) (.10) (.32) (.49)
Weighted average number of basic and
diluted common shares outstanding ......................... 17,244 12,626 16,453 10,987
1
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
THREE AND NINE MONTHS ENDED JUNE 30, 1999 (in
thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
------------------------ -------------------------
Net Loss ....................................................... $(2,230) $(1,285) $(5,294) $(5,438)
Other Comprehensive Income/(Loss) net of tax:
Foreign Currency translation Adjustments .................. (433) (149) 356 (44)
------------------------ ------------------------
Total Comprehensive Income/(Loss) .............................. $(2,663) $(1,434) $(4,938) $(5,482)
See Notes to Consolidated Financial Statements
2
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amounts)
June September
30, 1999 30, 1998
(unaudited)
-----------------------------
ASSETS
Current Assets:
Cash and cash equivalents ........................................ $ 287 $ 1,325
Receivables, net of allowance of $69 and $153 .................... 1,905 1,860
Inventories and Billable Services ................................ 62 50
Prepaid expenses ................................................. 212 305
------------------------------
Total current assets ........................................ 2,466 3,540
------------------------------
Property, facilities and equipment:
Land ............................................................. 356 356
Building and improvements ........................................ 8,453 8,435
Machinery and equipment .......................................... 6,794 7,005
Furniture, fixtures and leasehold improvements ................... 1,126 920
-----------------------------
16,729 16,716
Less accumulated depreciation and amortization ................... (10,972) (10,948)
-----------------------------
5,757 5,768
Purchased software, net of accumulated amortization
of $1,510 and $1,428 ................................................ 286 290
Other assets ..................................................... 49 139
-----------------------------
Total assets ................................................ $ 8,558 $ 9,737
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ................................ $ 280 $ 240
Accounts payable ................................................. 213 402
Accrued interest payable, related party portion $ 497 and $398 ... 558 421
Unearned service revenue and customer deposits ................... 1,218 1,410
Accrued compensation and related taxes ........................... 233 362
Other liabilities ................................................ 558 1,118
-----------------------------
Total current liabilities ................................... 3,060 3,953
Long-term debt, related party portion $4,750 and $4,125 .............. 5,978 5,325
-----------------------------
Total liabilities ........................................... 9,038 9,278
-----------------------------
Shareholders' equity:
Common stock, $.02 par value; authorized
40,000,000 shares; issued (including treasur
shares 42621,292,954 and 14,895,093 shares ..................... 426 298
Additional paid-in capital ....................................... 99,546 95,674
Cumulative currency translation adjustments ...................... (452) (808)
Accumulated deficit .............................................. (99,515) (94,220)
Treasury stock, 26,020 common shares at cost ..................... (485) (485)
-----------------------------
Total shareholders' equity .................................. (480) 459
-----------------------------
$ 8,558 $ 9,737
=============================
See Notes to Consolidated Financial Statements
3
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
June 30,
1999 1998
---------------------------
Cash flow from operating activities:
Net loss ............................................................ $(5,294) $(5,438)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization ....................................... 581 892
Loss (gain) on disposal of property, facilities and equipment ....... 0 24
Changes in operating assets and liabilities
Receivables .................................................... (45) 1,518
Inventories/Work in Process .................................... (12) (7)
Prepaid Expenses ............................................... 93 (69)
Accounts payable ............................................... (189) (232)
Accrued interest payable ....................................... 137 (60)
Increase in Income Tax payable ................................. 0 0
Unearned revenue and customer deposits .................................... (192) 503
Other liabilities .............................................. (651) (590)
---------------------------
Net cash used by operating activities ..................................... (5,572) (3,459)
Cash flows from investing activities:
Capital expenditures ................................................ 9 (713)
Proceeds from sale of property, facilities and equipment ............ 3 34
Other assets ........................................................ (90) 0
---------------------------
Net cash used by investing activities ............................... (78) (679)
Cash flows from financing activities:
Proceeds from issuance of notes payable, related party .............. 4,625 8,100
Payments on notes payable, capital leases and long-term debt ........ 0 (4,008)
Proceeds from issuance of common stock .............................. 0 2
---------------------------
Net cash provided by financing activities ................................. 4,625 4,094
Effect of exchange rate changes on cash ................................... (13) (77)
---------------------------
Net increase (decrease) in cash and cash equivalents ...................... (1,038) (121)
Cash and cash equivalents at the beginning of the year .................... 1,325 1,421
---------------------------
Cash and cash equivalents at the end of the period ........................ $ 287 $ 1,300
===========================
See Notes to Consolidated Financial Statements
4
</TABLE>
<PAGE>
AUTO-TROL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1999
(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-QSB and Rule
10-01 of Regulation S-X. Financial information as of September 30, 1998 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, 1998 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 nine months period ending June
30, 1999 are not necessarily indicative of the results that may be expected for
the year ending September 30, 1999.
(2) Loss Per Share
The provisions of Statement of Financial Accounting Standards No. 128, Earnings
Per Share, are effective for financial statements for interim periods ending
after December 15, 1997. Basic loss per share is computed on the basis of
weighted-average common shares outstanding. Diluted loss per share is the same
as basic loss per share for the six month period ending June 30, 1999 and 1998,
as no dilutive common stock equivalents were outstanding.
(3) Comprehensive Loss
On January 1, 1999, the Company adopted Statement of Financial Accounting
Standards No. 30, "Reporting Comprehensive Income." This standard established
requirements for disclosure of comprehensive income which includes certain items
previously not included in the statement of operations including minimum pension
liability adjustments and foreign currency translation adjustments, among
others. The financial statements for three and nine months ended June 30, 1999
and 1998 have been reclassified to disclose items of comprehensive income. There
are no significant tax effects related to these items.
(4) Related Tax Effects Allocated to each Component of Other Comprehensive
Income (Loss)
Nine Months Ended June 30, 1999
Before-Tax Tax (Expense) Net of Tax
Amount or Benefit Amount
---------- ------------ ----------
Foreign Currency
Translation Adjustments: 356 0 356
---------- ------------ ----------
5
<PAGE>
(5) Disclosure of Accumulative Other Comprehensive Income (Loss) Balance
Foreign Currency Translation Adjustments
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Beginning Balance: (808) (1,035) (19) (930)
Current Period Change: 356 (44) (433) (149)
------------- -------------- ------------- -------------
Ending Balance: (452) (1,079) (452) (1,079)
------------- -------------- ------------- --------------
</TABLE>
(6) Increase in Common Shares
The increase in shares for the nine months ended June 30,1999 are a result of
the conversion of related party loans to common stock in the amount of
$2,000,000.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussions contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or circumstances that may
subsequently arise. Some additional factors, among others, are: the likelihood
that actual future revenues that are realized may differ from those inferred
from existing total backlog; the ability of the Company to attract and retain
highly trained professional employees; the delay or deferral of customer
implementations; the Company's success in expanding its direct sales force and
indirect distribution channels; the timing of new product introductions and
product enhancements by the Company and its competitors; the mix of products and
services sold; levels of international sales; the ability of the Company to
develop and market new products and control costs and general domestic and
international economic and political conditions.
Results of Operations
Overview
Operating losses for the third quarter ended June 30, 1999 continued, and
increased $945,000 as compared to the third quarter ended June 30, 1998. The
company continues to believe that its Product Data Management (PDM), Electronic
Publishing Solutions (EPS) and when completed, network configuration products,
will present a unique complementary combination that will differentiate the
Company from its competitors.
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. The Company believes that its products are competitive both
functionally and from a pricing perspective. 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.
The three months ended June 30, 1999 compared to three months ended June 30,
1998
- --------------------------------------------------------------------------------
Revenues - For the quarter ended June 30, 1999, total sales and service revenue
decreased $1,537,000 or 38%, from the quarter ended June 30, 1998. The decrease
was due primarily to the wide swing in customer scheduling of consulting
personnel, as well as a reduction in historic maintenance as a consequence of
capped legacy products.
<TABLE>
<CAPTION>
In Thousands Increase %
Three Months Ended (Decrease
June 30, 1999 June 30, 1998
------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Sales Revenue $ 1,320 $ 1,665 $ (345) 21%
Service Revenue $ 1,207 $ 2,399 $(1,192) 50%
===================================== ===============================
$ 2,527 $ 4,064 $(1,537) 38%
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-(continued)
Gross Profit Margins - For the third quarter ended June 30, 1999, gross profit
margins on total revenue decreased 41% from the third quarter ended June 30,
1998.
<TABLE>
<CAPTION>
In Thousands Increase %
Three Months Ended (Decrease)
June 30, 1999 June 30, 1998
------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Gross Profit Sales $ 1,045 $ 1,531 $ (486) (32%)
Gross Profit Services $ 792 $ 1,571 $ (779) 50%
====================================== ===============================
Total $ 1,837 $ 3,102 $ (1,265) (41%)
Research and Product Development - Research and development expenses were
approximately 53% of revenue for the quarter ended June 30, 1999 and 37% of
revenue for the quarter ended June 30, 1998. Total research and development
expense decreased by 12% or $178,000 in the third quarter ended June 30, 1999
compared to the previous year's third quarter.
Marketing, General, and Administrative - In the third quarter ended June 30,
1999, marketing, general and administrative expenses decreased $231,000, or
8.21%, from the third quarter ended June 30, 1998.
Interest - In the quarter ended June 30, 1999, interest expense increased
$46,000 from the quarter ended June 30, 1998 as a result of increased
borrowings. Interest income decreased $41,000 as compared to the third quarter
of fiscal 1998.
The nine months ended June 30, 1999 compared to nine months ended June 30, 1998
- --------------------------------------------------------------------------------
Revenues - For the nine months ended June 30, 1999, total sales and service
revenue decreased $1,488,000 or 14%, from the quarter ended June 30, 1998.
In Thousands Increase %
Nine Months Ended (Decrease)
-------------------------------------- -------------------------------
June 30, 1999 June 30, 1998
Sales Revenue $ 3,335 $ 3,052 $ 283 9%
Service Revenue 5,876 7,647 (1,771) (23%)
======================================= ===============================
$9,211 $10,699 $(1,488) (14%)
Gross Profit Margins - For the nine months ended June 30, 1999, gross profit
margins on total revenue decreased 6% from over the nine months ended June 30,
1998.
In Thousands Increase %
Nine Months Ended (Decrease)
June 30, 1999 June 30, 1998
----------------------------------- -------------------------------
Gross Profit Margins Sales $ 2,580 $ 2,698 $( 118) (4%)
Gross Profit Margins Service 4,272 4,545 (273) (6%)
=================================== ================================
$6,852 $7,243 $(391) (5%)
</TABLE>
Research and Product Development - Research and development expenses were
approximately 51% of revenue for the nine months ended June 30, 1999 and 42% of
revenue for the quarter ended June 30, 1998. Total research and development
expense increased by 3% or $140,000 in the first nine months ended June 30, 1999
compared to the previous year's nine months.
Marketing, General, and Administrative - In the nine months ended June 30, 1999,
marketing, general and administrative expenses decreased $785,000, or 10.2%,
from the nine months ended June 30, 1998. This decrease was due to a continuing
effort to streamline costs.
8
<PAGE>
Interest - In the nine months ended June 30, 1999, interest expense increased
$120,000 from the nine months ended June 30, 1998 as a result of increased
borrowings. Interest income increased $13,000 as compared to the nine months of
fiscal 1998.
Liquidity and Capital Resources
Financial Condition - At June 30, 1999, the Company had approximately $287,000
in cash and cash equivalents, which was 79% lower than cash balances at
September 30, 1998. The Company's net working capital deficit was $594,000 June
30, 1999, as compared to a working capital deficit of $413,000 at September 30,
1998. 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. At June 30, 1999, the
Company had outstanding related party debt of $4,750,000 from an affiliate of
Howard B. Hillman, the Company's President, Chairman of the Board and principle
shareholder. 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, 1999. If the Company does not achieve profitability in the near
future, it will continue to be dependent on its majority shareholder for
additional funding and to continue as a going concern. The Company's long term
viability will be in jeopardy if it is not able to achieve financial
independence through improved results, or should support from its majority
shareholder not continue after December 31, 1999.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-(continued)
Currency Fluctuations
The Company has three wholly owned International subsidiaries and one branch
operation. The three subsidiaries are located in Germany, 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, such as Norway, Switzerland and Italy. These
local currency revenues and expenses are translated into dollars for U.S.
reporting and consolidation purposes.
The Company does not use foreign exchange contracts, interest rate swaps, or
option 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. For the first three months ended June
30, 1999, the Company had realized a loss of approximately $13,000 through
payments it had received from its subsidiaries as compared to a $29,000 loss for
the same period in 1998. This amount is included in the Marketing, General, and
administrative line of the consolidated statement of operations.
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 11 , 1999 /s/ HOWARD B. HILLMAN
---------------------------------------------
Howard B. Hillman,
Chairman of the Board, President
(Principal Executive and Financial Officer and
Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 287
<SECURITIES> 0
<RECEIVABLES> 1,905
<ALLOWANCES> 0
<INVENTORY> 62
<CURRENT-ASSETS> 2,466
<PP&E> 16,729
<DEPRECIATION> 10,972
<TOTAL-ASSETS> 8,558
<CURRENT-LIABILITIES> 3,060
<BONDS> 1,200
0
0
<COMMON> 426
<OTHER-SE> (906)
<TOTAL-LIABILITY-AND-EQUITY> 8,558
<SALES> 2,527
<TOTAL-REVENUES> 2,527
<CGS> 687
<TOTAL-COSTS> 687
<OTHER-EXPENSES> 3,894
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> (2,228)
<INCOME-TAX> 2
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,230)
<EPS-BASIC> 0
<EPS-DILUTED> (.13)
</TABLE>
