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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 December 31, 1998
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 February 11, 1999: 14,892,954
AUTO-TROL TECHNOLOGY CORPORATION
--------------------------------
REPORT TO SECURITIES AND EXCHANGE COMMISSION ON FORM 10-Q
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FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
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Page Number
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited), three months ended December 31, 1998 1
and 1997
Consolidated Balance Sheets (unaudited), December 31, 1998 and September 30, 1998 2
Consolidated Statements of Cash Flows (unaudited), three months ended December 31, 1998 and 1997 3
Notes to Consolidated Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-7
Part II. Other Information, Item 6(b) Reports on Form 8-k 8
Signatures 9
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AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
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<CAPTION>
Three Months Ended
December 31,
1998 1997
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<S> <C> <C>
Revenues:
Sales................................................... $ 1,319 $ 831
Service................................................. 2,337 2,913
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3,656 3,744
Costs and expenses:
Cost of sales........................................... 255 210
Cost of service......................................... 925 1,144
Research and product development........................ 1,460 1,511
Marketing, general and administrative................... 1,958 2,386
-----------------------------
4,598 5,251
Loss from operations...................................... (942) (1,507)
Interest income........................................... 19 20
Interest expense (related party, $234, $75)............... (281) (177)
-----------------------------
Loss before income taxes.................................. (1,204) (1,664)
Income tax benefit........................................ 2
-----------------------------
Net loss.................................................. $(1,204) $(1,666)
=============================
Basic and diluted loss per share.......................... $(.08) $(.17)
Weighted average number of basic and diluted common 14,894 9,578
shares outstanding.......................................
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See Notes to Consolidated Financial Statements
1
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AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
(unaudited)
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................. $ 1,645 $ 1,325
Receivables, net of allowance of $145 and $153............................ 1,901 1,860
Inventories and Billable Services......................................... 35 50
Prepaid expenses.......................................................... 309 305
------------------------------------
Total current assets................................................... 3,890 3,540
------------------------------------
Property, facilities and equipment:
Land...................................................................... 356 356
Building and improvements................................................. 8,450 8,435
Machinery and equipment................................................... 6,949 7,005
Furniture, fixtures and leasehold improvements............................ 1,234 920
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16,989 16,716
Less accumulated depreciation and amortization............................ (10,873) (10,948)
------------------------------------
6,116 5,768
Purchased software, net of accumulated amortization of $1,447, and $1,428 446 290
Other assets................................................................ 61 139
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Total assets........................................................... $ 10,513 $ 9,737
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................................... $ 240 $ 240
Accounts payable.......................................................... 742 402
Accrued interest payable, related party portion $235 and $398............. 408 421
Unearned service revenue and customer deposits............................ 1,014 1,410
Accrued compensation and related taxes.................................... 251 362
Other liabilities......................................................... 1,248 1,118
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Total current liabilities.............................................. 3,903 3,953
Long-term debt, related party portion $3,850 and $4,125..................... 5,050 5,325
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Total liabilities...................................................... 8,953 9,278
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Shareholders' equity:
Common stock, $.02 par value; authorized 40,000,000 shares; issued 362 298
(including treasury shares)14,893,954 and 14,895,093 shares..............
Additional paid-in capital................................................ 97,610 95,674
Cumulative currency translation adjustments............................... (563) (808)
Accumulated deficit....................................................... (95,364) (94,220)
Treasury stock, 26,020 common shares at cost.............................. (485) (485)
------------------------------------
Total shareholders' equity............................................. 1,560 459
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10,513 $ 9,737
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</TABLE>
See Notes to Consolidated Financial Statements
2
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AUTO-TROL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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<CAPTION>
Three Months Ended
December 31,
1998 1997
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Cash flow from operating activities:
Net loss..................................................................... $(1,204) $(1,633)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization................................................ 349 301
Loss (gain) on disposal of property, facilities and equipment................ (2) 24
Changes in operating assets and liabilities
Receivables............................................................. 265 959
Inventories............................................................. 5 9
Prepaids................................................................ 168 84
Accounts payable........................................................ (40) (89)
Accrued interest payable................................................ (121) 139
Increase in Income Tax payable.......................................... (108) 66
Unearned revenue and customer deposits.......................................... (883) 756
Other liabilities.................................................. 60 (811)
-----------------------------------
Net cash used by operating activities........................................... (1,511) (195)
Cash flows from investing activities:
Capital expenditures......................................................... (605) (161)
Proceeds from sale of property, facilities and equipment..................... 15
Other assets................................................................. (2) (1)
-----------------------------------
Net cash used by investing activities........................................... (607) (147)
Cash flows from financing activities:
Proceeds from issuance of notes payable, related party....................... 4,635 (2,000)
Payments on notes payable, capital leases and long-term debt, (2,000) (9)
related party portion $ 2,000 and $0
Proceeds from issuance of common stock....................................... 85 2,002
-----------------------------------
Net cash provided by financing activities....................................... 2,720 (7)
Effect of exchange rate changes on cash......................................... 53 (82)
-----------------------------------
Net decrease in cash and cash equivalents....................................... 655 (431)
Cash and cash equivalents at the beginning of the year.......................... 990 1,421
-----------------------------------
Cash and cash equivalents at the end of the period.............................. 1,645 $ 990
===================================
</TABLE>
See Notes to Consolidated Financial Statements
3
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AUTO-TROL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998
(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 three month periods ending
December 31, 1998 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 three month period ending December 31, 1998 and
1997, as no dilutive common stock equivalents were outstanding.
4
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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 first quarter ended December 31, 1998 continued,
however they decreased $462,000 as compared to the first quarter ended December
31, 1997. The company continues to believe that its Product Data Management
(PDM), Electronic Publishing Solutions (EPS) and when it is 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 December 31, 1998 compared to three months ended December
- --------------------------------------------------------------------------------
31, 1997
- --------
Revenues - For the quarter ended December 31, 1998, total sales and service
revenue decreased $87,000 or 2.3%, from the quarter ended December 31, 1997.
Total sales revenue for the first quarter of fiscal 1999 increased $488,000, or
59%, from the quarter ended December 31, 1997. The increase is primarily due to
increased sales of the Company's PDM and EPS solutions domestically and in
Europe.
Total service revenue for the quarter ended December 31, 1998, decreased
$576,000 , or 19.7%, from the quarter ended December 31, 1997. Service revenue
is comprised of software maintenance, training and billable service revenue.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-(continued)
Cost of Sales and Service - For the first quarter ended December 31, 1998,
gross profit margins on total revenue increased to 67.7% from 63.8%% for the
first quarter ended December, 1997. Gross profit margins on sales revenue for
the first quarter ending December 31, 1998, increased to 80.6% from 74.7% for
the first quarter ended December 31, 1997.
Gross profit margins for total service revenue in the first quarter of fiscal
1999 decreased $357,000, yielding a gross margin of 60.4 %, as compared to a
gross margin of 60.7% in the first quarter of fiscal 1998.
Research and Product Development - Research and development expenses were
approximately 40.1% of revenue for the quarter ended December 31, 1998 and 40.4%
of revenue for the quarter ended December 31, 1997. Total research and
development expense decreased by 3.3% or $51,000 in the first quarter ended
December 31, 1998 compared to the previous year's first quarter.
Marketing, General, and Administrative - In the first quarter ended December 31,
1998, marketing, general and administrative expenses decreased $428,000, or
17.9%, from the first quarter ended December 31, 1997. This decrease was due
to a continuing effort to streamline costs.
Interest - In the quarter ended December 31, 1998, interest expense increased
$104,000 from the quarter ended December 31, 1997 as a result of increased
borrowings. Interest income decreased $1,000 as compared to the first quarter
of fiscal 1997.
Liquidity and Capital Resources
Financial Condition - At December 31, 1998, the Company had approximately
$1,645,000 in cash and cash equivalents, which was 24.1% higher than cash
balances at September 30, 1998. The Company's net working capital was a deficit
of approximately $12,000 at December 31, 1998, 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 December , 1998, the Company had outstanding related party
debt of $3,850,000 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.
6
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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 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
December 31, 1998, the Company had realized a loss of approximately $9,979
through payments it had received from its subsidiaries as compared to a $27,800
loss for the same period in 1997.
7
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PART II. OTHER INFORMATION
Item 6(b) Reports on Form 8-k
No reports on Form 8-k were filed during the quarter for which this report is
filed.
8
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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: February 12, 1999 /s/ HOWARD B.HILLMAN
----------------------------------------------
Howard B. Hillman,
Chairman of the Board, President
(Principal Executive and Financial Officer and
Principal Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-12-1999
<CASH> 1,645
<SECURITIES> 0
<RECEIVABLES> 1,901
<ALLOWANCES> 0
<INVENTORY> 35
<CURRENT-ASSETS> 3,090
<PP&E> 16,989
<DEPRECIATION> 10,873
<TOTAL-ASSETS> 10,513
<CURRENT-LIABILITIES> 3,903
<BONDS> 2,050
240
0
<COMMON> 0
<OTHER-SE> 1,560
<TOTAL-LIABILITY-AND-EQUITY> 10,513
<SALES> 1,319
<TOTAL-REVENUES> 3,656
<CGS> 1,180
<TOTAL-COSTS> 1,180
<OTHER-EXPENSES> 3,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 281
<INCOME-PRETAX> (1,204)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,204)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
