SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarter Ended March 31, 1996 Commission File No. 1-7939
------------------------- -------
VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK STATE 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
525 Broad Hollow Road, Melville, New York 11747
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 293-2200
(Former name, address, and 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
At March 31, 1996, the registrant had outstanding 2,762,828 shares of Common
Stock, $.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
3/31/96 3/31/95
Net sales........................... $10,855,627 $10,952,150
Costs and expenses:
Cost of goods sold................ 8,107,322 8,601,648
Selling, general & admin.
expenses........................ 2,417,914 2,451,930
Interest expense.................. 184,967 253,974
Unrealized foreign
exchange (gain) loss............ (5,012) 95,667
----------- -----------
Total costs and expenses....... 10,705,191 11,403,219
Income (loss) before income taxes... 150,436 (451,069)
Provision for
income taxes.................... 25,000 16,000
----------- -----------
Net income (loss)................... $ 125,436 $ (467,069)
=========== ===========
Net income (loss) per share $ .05 $ (.17)
=== ===
Shares outstanding 2,762,828 2,762,828
See Notes to (Condensed) Consolidated Financial Statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
3/31/96 3/31/95
Net sales........................... $21,368,095 $22,779,679
Costs and expenses:
Cost of goods sold................ 15,914,178 17,731,056
Selling, general & admin.
expenses........................ 4,775,855 4,830,051
Interest expense.................. 420,338 533,583
Unrealized foreign
exchange (gain) loss............ (19,384) 95,667
----------- -----------
Total costs and expenses....... 21,090,987 23,190,357
----------- -----------
Income (loss) before income taxes... 277,108 (410,678)
Provision for
income taxes.................... 50,000 40,000
----------- -----------
Net income (loss)................... $ 227,108 $ (450,678)
=========== ===========
Net income (loss) per share $ .08 $ (.16)
=== ===
Shares outstanding 2,762,828 2,762,828
See Notes to (Condensed) Consolidated Financial Statements.
3
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 3/31/96 9/30/95
CURRENT ASSETS
Cash............................................ $ 23,669 $ 1,151,850
Accounts receivable (less allowance
of $306,000 at March 31, 1996 and
$542,000 at September 30, 1995)............... 8,866,616 8,352,845
Other receivables............................... 228,335 261,864
Inventories:
Parts, components, and materials.............. 1,331,736 1,594,462
Work-in-process............................... 2,545,726 1,686,287
Finished products............................. 9,731,287 8,831,852
----------- -----------
13,608,749 12,112,601
Prepaid expenses................................ 339,483 309,288
----------- -----------
TOTAL CURRENT ASSETS............................ 23,066,852 22,188,448
- --------------------
Property, plant and equipment................... 13,412,378 13,222,497
Less: accumulated depreciation................. (10,281,832) (9,960,558)
----------- -----------
3,130,546 3,261,939
Other assets.................................... 1,067,002 973,107
----------- -----------
TOTAL ASSETS.................................... $27,264,400 $26,423,494
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 776,402 $ 906,955
Current maturities of long-term debt............ 209,172 220,739
Accounts payable:
Related party................................. 7,318,362 6,895,073
Other......................................... 2,200,696 1,335,935
Accrued wages and expenses...................... 1,336,514 1,697,732
Income taxes payable............................ 127,912 78,583
Deferred gain on sale and leaseback............. 332,100 332,100
------------ -----------
TOTAL CURRENT LIABILITIES 12,301,158 11,467,117
- -------------------------
Long-term debt:
Related party................................. 2,270,331 2,437,259
Other......................................... 3,070,514 2,901,490
Deferred gain on sale and leaseback............. 267,944 433,993
Other long-term liabilities..................... 534,092 550,609
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 27,882 27,882
Capital in excess of par value.................. 9,396,890 9,396,890
Accumulated deficit............................. (356,681) (583,789)
------------ -----------
9,068,091 8,840,983
Less Treasury stock 25,400 shares, at cost...... (82,901) (82,901)
Foreign currency translation adjustment......... (164,829) (125,056)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 8,820,361 8,633,026
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 27,264,400 $26,423,494
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
4
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
3/31/96 3/31/95
Cash flows from operating activities:
Net income (loss).............................. $ 227,108 $ (450,678)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization................ 335,947 305,325
Amortization of sale and leaseback........... (166,050) (166,050)
Unrealized foreign exchange (gain) loss...... (19,384) 95,667
Change in assets and liabilities:
Accounts receivable.......................... (585,249) 1,873,040
Other receivables............................ 13,086 36,621
Inventories.................................. (1,538,560) 1,247,311
Prepaid expenses............................ (33,460) (78,185)
Other assets................................. (93,895) 5,008
Accounts payable............................ 1,304,196 (1,132,578)
Accrued wages and expenses................... (346,606) 109,274
Income taxes payable......................... 50,711 36,445
Other liabilities........................... (16,517) (37,774)
--------- ---------
Net cash (used in) provided by
operating activities.................. (868,673) 1,843,426
--------- ---------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals........................... (249,979) (372,237)
--------- ----------
Net cash used in investing activities.... (249,979) (372,237)
--------- ----------
Cash flows from financing activities:
Net borrowings under new credit and
security agreement......................... 3,011,904 -
Repayments of U.S. revolving credit
agreement.................................. (2,800,000) (1,100,000)
Decrease in borrowings under U.K. revolving
credit agreement........................... (102,516) (451,935)
Repayments of other debt..................... (203,965) (87,939)
---------- ----------
Net cash used in financing activities...... (94,577) (1,639,874)
---------- ----------
Effect of exchange rate changes on cash.......... 85,048 5,467
---------- ----------
Net decrease in cash............................. (1,128,181) (163,218)
Cash at beginning of year........................ 1,151,850 910,400
---------- ----------
Cash at end of period............................ $ 23,669 $ 747,182
========== ==========
See Notes to (Condensed) Consolidated Financial Statements.
5
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
Note 1: Basis of Presentation
The accompanying unaudited (condensed) consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ended September 30, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended September 30, 1995.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended March 31, 1996 Compared with March 31, 1995
Net sales for the quarter ended March 31, 1996 were approximately $10.9 million
compared with $11.0 million in the corresponding quarter last year. The backlog
of orders decreased $.5 million during the quarter to $2.8 million at March 31,
1996 due to lower order intake principally in the U.S. market.
Gross profit margins for the current quarter were 25.3% compared with 21.5% in
the corresponding quarter one year ago. The margin increase was due principally
to a beneficial sales mix of products with higher margins such as control and
certain new digital video products.
Operating expenses for the current quarter were similar to last year at $2.4
million. Inflationary increases were offset by ongoing cost control measures.
Interest expense decreased approximately $69,000 to $185,000 for the current
year quarter due principally to a lower cost of borrowing.
During the prior year quarter, the Company incurred an unrealized foreign
exchange loss of approximately $96,000. This loss resulted from the Company's
revaluation of its yen denominated mortgage obligation into U.S. dollars.
The increase in current quarter pretax income of approximately $602,000 was
principally due to increased gross profit margins on sales, lower interest
expense and favorable foreign currency effects during the quarter.
Results of Operations
Six Months Ended March 31, 1996 Compared with March 31, 1995
Net sales for the six months ended March 31, 1996 were approximately $21.4
million compared with $22.8 million in the corresponding period last year. The
decrease of 6.2% was principally due to lower European sales.
Gross profit margins for the six months ended March 31, 1996 were 25.5% compared
with 22.2% in the corresponding period one year ago. The margin increase was due
principally to a beneficial sales mix of products with higher margins such as
control and certain new digital video products.
Operating expenses for the six months ended March 31, 1996 were similar to last
year at $4.8 million. Inflationary increases were offset by ongoing cost control
measures. Interest expense decreased by approximately $113,000 to $420,000 for
the current period due principally to a lower cost of borrowing.
During the current period, the Company incurred an unrealized foreign exchange
gain of $19,000 compared with a $96,000 loss in the corresponding period last
year. These gains and losses resulted from the Company's revaluation of its yen
denominated mortgage obligation into U.S. dollars.
The increase in current period pretax income of approximately $688,000 was
principally due to increased gross profit margins on sales, lower interest
expense and favorable foreign currency effects during the period.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
March 31, 1996 Compared with September 30, 1995
Working capital remained essentially the same at approximately $10.8 million at
March 31, 1996.
Accounts receivable increased approximately $.5 million to $8.9 million at March
31, 1996, principally as a result of slower receivable turnover. Inventories
increased approximately $1.5 million to $13.6 million at March 31, 1996 due
mainly to increased inventory levels of new products. Accounts payable increased
approximately $1.3 million to $9.5 million at March 31, 1996 as a result of the
increased inventory levels.
The Company has a revolving credit facility of 700,000 pounds sterling (approx.
$1.1 million) in the U.K. to support local cash requirements. At March 31, 1996,
borrowings under this agreement were approximately $776,000, which was used for
general working capital purposes.
In December 1995, the Company repaid $2.8 million of bank debt with the proceeds
of a new U.S. bank loan. The new two year loan agreement provides for maximum
borrowings of $4,000,000, subject to an availability formula based on U.S.
accounts receivable and inventories. Borrowings under such agreement amounted to
approximately $3.0 million at March 31, 1996. Concurrent with the new loan
agreement, the Company amended its $2,000,000 secured promissory note with
Chugai Boyeki Co., Ltd., a related party, to defer all scheduled principal
installments to July 1998. The Company believes that the new loan agreement and
its other sources of credit provide adequate funding to meet its near term cash
requirements.
8
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company has no material outstanding litigation.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting was held on April 25, 1996.
The following directors were elected at the meeting:
Donald H. Horn
Peter F. Barry
Arthur D. Roche
The terms of the following directors continued after the meeting:
Kenneth M. Darby
Milton F. Gidge
Michael D. Katz
Peter F. Neumann
Kazuyoshi P. Sudo
W. Gregory Robertson
Arthur V. Wallace
The matters voted upon at the meeting and the results of each vote are as
follows:
Nominees Withhold
For Directors: For Authority
Mr. Horn 2,572,982 39,317
Mr. Barry 2,282,775 329,524
Mr. Roche 2,572,332 39,967
Ratification of
Auditors 2,589,541 19,925
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
No Form 8-K was required to be filed during the current quarter.
9
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 9, 1996
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
10
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 9, 1996
VICON INDUSTRIES, INC.
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996
<PERIOD-END> MAR-31-1996 MAR-31-1996
<CASH> 23,669 23,669
<SECURITIES> 0 0
<RECEIVABLES> 9,740,310 9,740,310
<ALLOWANCES> (305,876) (305,876)
<INVENTORY> 13,608,749 13,608,749
<CURRENT-ASSETS> 23,066,852 23,066,852
<PP&E> 14,479,380 14,479,380
<DEPRECIATION> (10,281,832) (10,281,832)
<TOTAL-ASSETS> 27,264,400 27,264,400
<CURRENT-LIABILITIES> 12,301,158 12,301,158
<BONDS> 6,142,881 6,142,881
0 0
0 0
<COMMON> 27,882 27,882
<OTHER-SE> 8,792,479 8,792,479
<TOTAL-LIABILITY-AND-EQUITY> 27,264,400 27,264,400
<SALES> 10,855,627 21,368,095
<TOTAL-REVENUES> 0 0
<CGS> 8,107,322 15,914,178
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,367,902 4,666,471
<LOSS-PROVISION> 45,000 90,000
<INTEREST-EXPENSE> 184,967 420,338
<INCOME-PRETAX> 150,436 277,108
<INCOME-TAX> 25,000 50,000
<INCOME-CONTINUING> 125,436 227,108
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 125,436 227,108
<EPS-PRIMARY> .05 .08
<EPS-DILUTED> .05 .08
</TABLE>
