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 June 30, 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 June 30, 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
6/30/96 6/30/95
Net sales........................... $10,901,705 $10,287,108
Costs and expenses:
Cost of goods sold................ 8,166,548 8,039,902
Selling, general & admin.
expenses........................ 2,474,716 2,534,706
Interest expense.................. 209,270 259,006
Unrealized foreign
exchange gain................... (14,365) (6,021)
----------- -----------
Total costs and expenses....... 10,836,169 10,827,593
Income (loss) before income taxes... 65,536 (540,485)
Provision for
income taxes.................... 25,000 -
----------- -----------
Net income (loss)................... $ 40,536 $ (540,485)
=========== ===========
Net income (loss) per share $ .01 $ (.20)
=== ===
Weighted average number of shares
used in computing net income (loss)
per share 2,857,545 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)
Nine Months Ended
6/30/96 6/30/95
Net sales........................... $32,269,800 $33,066,787
Costs and expenses:
Cost of goods sold................ 24,080,725 25,770,958
Selling, general & admin.
expenses........................ 7,250,572 7,364,758
Interest expense.................. 629,608 792,588
Unrealized foreign
exchange (gain) loss............ (33,749) 89,646
----------- -----------
Total costs and expenses....... 31,927,156 34,017,950
----------- -----------
Income (loss) before income taxes... 342,644 (951,163)
Provision for
income taxes.................... 75,000 40,000
----------- -----------
Net income (loss)................... $ 267,644 $ (991,163)
=========== ===========
Net income (loss) per share:
Primary $ .10 $ (.36)
=== ===
Fully diluted $ .09 $ (.36)
=== ===
Weighted average number of shares used in computing net income (loss) per share:
Primary 2,788,299 2,762,828
Fully diluted 2,893,889 2,762,828
See Notes to (Condensed) Consolidated Financial Statements.
3
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 6/30/96 9/30/95
CURRENT ASSETS
Cash............................................ $ 39,786 $ 1,151,850
Accounts receivable (less allowance
of $358,000 at June 30, 1996 and
$542,000 at September 30, 1995)............... 9,054,343 8,352,845
Other receivables............................... 224,934 261,864
Inventories:
Parts, components, and materials.............. 1,849,383 1,594,462
Work-in-process............................... 1,984,091 1,686,287
Finished products............................. 11,384,494 8,831,852
----------- -----------
15,217,968 12,112,601
Prepaid expenses................................ 378,253 309,288
----------- -----------
TOTAL CURRENT ASSETS............................ 24,915,284 22,188,448
- --------------------
Property, plant and equipment................... 13,540,439 13,222,497
Less: accumulated depreciation................. (10,469,548) (9,960,558)
----------- -----------
3,070,891 3,261,939
Other assets.................................... 1,032,342 973,107
----------- -----------
TOTAL ASSETS.................................... $29,018,517 $26,423,494
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 897,569 $ 906,955
Current maturities of long-term debt............ 207,432 220,739
Accounts payable:
Related party................................. 7,932,643 6,895,073
Other......................................... 2,520,948 1,335,935
Accrued wages and expenses...................... 1,166,469 1,697,732
Income taxes payable............................ 76,035 78,583
Deferred gain on sale and leaseback............. 332,100 332,100
------------ -----------
TOTAL CURRENT LIABILITIES 13,133,196 11,467,117
- -------------------------
Long-term debt:
Related party................................. 2,264,142 2,437,259
Other......................................... 4,016,548 2,901,490
Deferred gain on sale and leaseback............. 184,918 433,993
Other long-term liabilities..................... 519,433 550,609
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............................. (316,145) (583,789)
------------ -----------
9,108,627 8,840,983
Less Treasury stock 25,400 shares, at cost...... (82,901) (82,901)
Foreign currency translation adjustment......... (125,446) (125,056)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 8,900,280 8,633,026
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 29,018,517 $26,423,494
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
4
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
6/30/96 6/30/95
Cash flows from operating activities:
Net income (loss).............................. $ 267,644 $ (991,163)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization................ 516,834 494,607
Amortization of sale and leaseback........... (249,075) (249,075)
Unrealized foreign exchange (gain) loss...... (33,749) 89,646
Change in assets and liabilities:
Accounts receivable.......................... (747,546) 2,443,523
Other receivables............................ 36,930 77,901
Inventories.................................. (3,128,810) 855,550
Prepaid expenses............................ (70,221) (127,467)
Other assets................................. (59,235) (48,732)
Accounts payable............................ 2,232,871 607,823
Accrued wages and expenses................... (520,030) 153,664
Income taxes payable......................... (2,484) 1,813
Other liabilities........................... (31,176) (50,649)
--------- ---------
Net cash (used in) provided by
operating activities.................. (1,788,047) 3,257,441
--------- ---------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals........................... (352,918) (439,444)
--------- ----------
Net cash used in investing activities.... (352,918) (439,444)
--------- ----------
Cash flows from financing activities:
Net borrowings under new credit and
security agreement......................... 3,976,344 -
Repayments of U.S. revolving credit
agreement.................................. (2,800,000) (1,500,000)
Increase (decrease) in borrowings under U.K.
revolving credit agreement................. 7,782 (85,923)
Repayments of other debt..................... (201,758) (214,278)
---------- ----------
Net cash provided by (used in)
financing activities...................... 982,368 (1,800,201)
---------- ----------
Effect of exchange rate changes on cash.......... 46,533 (98,978)
---------- ----------
Net (decrease) increase in cash.................. (1,112,064) 918,818
Cash at beginning of year........................ 1,151,850 910,400
---------- ----------
Cash at end of period............................ $ 39,786 $1,829,218
========== ==========
Non-cash investing and financing activities:
Capital lease obligations entered into....... $ - $ 178,151
See Notes to (Condensed) Consolidated Financial Statements.
5
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 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 nine months ended June 30, 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 June 30, 1996 Compared with June 30, 1995
Net sales for the quarter ended June 30, 1996 were approximately $10.9 million
compared with $10.3 million in the corresponding quarter last year. The increase
was principally due to higher international sales. The backlog of orders
decreased $.3 million during the quarter to $2.5 million at June 30, 1996 due to
lower order intake principally in the U.S. market.
Gross profit margins for the current quarter were 25.1% compared with 21.8% 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 $2.5
million. Inflationary increases were offset by ongoing cost control measures.
Interest expense decreased approximately $50,000 to $209,000 for the current
year quarter due principally to a lower cost of borrowing.
During the current quarter, the Company incurred an unrealized foreign exchange
gain of approximately $14,000 compared with a $6,000 gain in the corresponding
quarter last year. These gains 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 $606,000 was
principally due to higher sales and gross profit margins on sales, lower
interest expense and favorable foreign currency effects during the quarter.
Results of Operations
Nine Months Ended June 30, 1996 Compared with June 30, 1995
Net sales for the nine months ended June 30, 1996 were approximately $32.3
million compared with $33.1 million in the corresponding period last year. The
decrease of 2.4% was principally due to lower European sales.
Gross profit margins for the nine months ended June 30, 1996 were 25.4% compared
with 22.1% 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 nine months ended June 30, 1996 declined to $7.3
million from $7.4 million in the corresponding period last year due to ongoing
cost control measures. Interest expense decreased by approximately $163,000 to
$630,000 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 $34,000 compared with a $90,000 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 $1.3 million was
principally due to increased gross profit margins on sales, lower operating
expenses, lower interest expense, and favorable foreign currency effects during
the period.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
June 30, 1996 Compared with September 30, 1995
Working capital increased approximately $1.1 million to $11.8 million at June
30, 1996 principally as a result of increased bank borrowings used to finance
higher inventory levels.
Accounts receivable increased approximately $.7 million to $9.1 million at June
30, 1996, principally as a result of slower receivable turnover. Inventories
increased approximately $3.1 million to $15.2 million at June 30, 1996 due
mainly to increased inventory levels of new products. Accounts payable increased
approximately $2.2 million to $10.5 million at June 30, 1996 to support the
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 working capital requirements. At June
30, 1996, borrowings under this agreement were approximately $898,000.
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 $4.0 million at June 30, 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
None
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.
August 13, 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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 39,786 39,786
<SECURITIES> 0 0
<RECEIVABLES> 10,015,392 10,015,392
<ALLOWANCES> (357,862) (357,862)
<INVENTORY> 15,217,968 15,217,968
<CURRENT-ASSETS> 24,915,284 24,915,284
<PP&E> 14,572,781 14,572,781
<DEPRECIATION> (10,469,548) (10,469,548)
<TOTAL-ASSETS> 29,018,517 29,018,517
<CURRENT-LIABILITIES> 13,133,196 13,133,196
<BONDS> 6,985,041 6,985,041
0 0
0 0
<COMMON> 27,882 27,882
<OTHER-SE> 8,872,398 8,872,398
<TOTAL-LIABILITY-AND-EQUITY> 29,018,517 29,018,517
<SALES> 10,901,705 32,269,800
<TOTAL-REVENUES> 0 0
<CGS> 8,166,548 24,080,725
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,415,351 7,081,823
<LOSS-PROVISION> 45,000 135,000
<INTEREST-EXPENSE> 209,270 629,608
<INCOME-PRETAX> 65,536 342,644
<INCOME-TAX> 25,000 75,000
<INCOME-CONTINUING> 40,536 267,644
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 40,536 267,644
<EPS-PRIMARY> .01 .10
<EPS-DILUTED> .01 .09
</TABLE>
