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 December 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 December 31 1996, the registrant had outstanding 2,777,328 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
12/31/96 12/31/95
Net sales........................... $11,297,775 $10,512,468
Costs and expenses:
Cost of goods sold................ 8,116,967 7,806,854
Selling, general & admin.
expenses........................ 2,721,195 2,357,942
Interest expense.................. 263,948 235,372
Unrealized foreign
exchange gain................... (33,623) (14,372)
----------- -----------
Total costs and expenses....... 11,068,487 10,385,796
Income before income taxes.......... 229,288 126,672
Provision for
income taxes.................... 14,000 25,000
----------- -----------
Net income.......................... $ 215,288 $ 101,672
=========== ===========
Net income per share $ .08 $ .04
=== ===
Weighted average number of
shares outstanding and
equivalent shares 2,870,000 2,763,000
See Notes to (Condensed) Consolidated Financial Statements.
2
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 12/31/96 9/30/96
CURRENT ASSETS
Cash............................................ $ 124,994 $ 205,876
Accounts receivable (less allowance
of $449,000 at December 31, 1996 and
$396,000 at September 30, 1996)............... 8,800,449 8,635,020
Other receivables............................... 69,058 71,819
Inventories:
Parts, components, and materials.............. 2,808,332 2,175,408
Work-in-process............................... 2,384,297 1,391,552
Finished products............................. 10,475,281 11,135,798
----------- -----------
15,667,910 14,702,758
Prepaid expenses................................ 601,902 529,631
----------- -----------
TOTAL CURRENT ASSETS............................ 25,264,313 24,145,104
- --------------------
Property, plant and equipment................... 13,751,068 13,640,198
Less: accumulated depreciation................. (10,675,885) (10,606,013)
----------- -----------
3,075,183 3,034,185
Other assets.................................... 919,055 905,327
----------- -----------
TOTAL ASSETS.................................... $29,258,551 $28,084,616
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 1,262,092 $ 959,583
Current maturities of long-term debt............ 393,989 203,719
Accounts payable:
Related party................................. 7,331,514 7,457,482
Other......................................... 1,861,218 1,811,730
Accrued wages and expenses...................... 1,464,496 1,229,087
Income taxes payable............................ 108,770 87,205
Deferred gain on sale and leaseback............. 90,783 332,100
------------ -----------
TOTAL CURRENT LIABILITIES 12,512,862 12,080,906
- -------------------------
Long-term debt:
Related party................................. 1,923,989 2,262,005
Other......................................... 4,917,678 4,166,881
Deferred gain on sale and leaseback............. - 101,893
Other long-term liabilities..................... 489,640 504,776
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 28,027 28,027
Capital in excess of par value.................. 9,423,089 9,423,089
Accumulated deficit............................. (68,323) (283,611)
------------ -----------
9,382,793 9,167,505
Less Treasury stock 25,400 shares, at cost...... (82,901) (82,901)
Foreign currency translation adjustment......... 114,490 (116,449)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 9,414,382 8,968,155
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 29,258,551 $28,084,616
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
3
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
12/31/96 12/31/95
Cash flows from operating activities:
Net income................................... $ 215,288 $ 101,672
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 183,127 164,207
Amortization of sale and leaseback......... (343,210) (83,025)
Unrealized foreign exchange gain........... (33,623) (14,372)
Change in assets and liabilities:
Accounts receivable........................ (29,940) 45,762
Other receivables............................ 2,761 10,586
Inventories.................................. (819,790) (591,402)
Prepaid expenses............................ (57,163) (60,592)
Other assets................................. (13,728) (51,194)
Accounts payable............................ (107,485) 1,721,152
Accrued wages and expenses................... 217,849 (377,884)
Income taxes payable......................... 13,844 26,912
Other liabilities........................... (15,136) (14,246)
--------- ---------
Net cash (used in) provided by
operating activities.................. (787,206) 877,576
--------- ---------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals........................... (102,286) (74,136)
--------- ----------
Net cash used in investing activities.... (102,286) (74,136)
--------- ----------
Cash flows from financing activities:
Net borrowings under new credit and
security agreement......................... 767,426 1,882,078
Repayments of U.S. revolving credit
agreement.................................. - (2,800,000)
Increase (decrease) in borrowings under U.K.
revolving credit agreement................ 302,509 (69,556)
Repayments of other debt..................... (158,425) (178,639)
---------- ----------
Net cash provided by (used in)
financing activities.................... 911,510 (1,166,117)
---------- -----------
Effect of exchange rate changes on cash.......... (102,900) 36,027
---------- ----------
Net decrease in cash............................. (80,882) (326,650)
Cash at beginning of quarter..................... 205,876 1,151,850
---------- ----------
Cash at end of period............................ $ 124,994 $ 825,200
========== ==========
See Notes to (Condensed) Consolidated Financial Statements.
4
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 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 three months ended December 31, 1996
are not necessarily indicative of the results that may be expected for the
fiscal year ended September 30, 1997. 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,
1996.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended December 31, 1996 Compared with December 31, 1995
Net sales for the quarter ended December 31, 1996 were approximately $11.3
million compared with $10.5 million in the corresponding quarter last fiscal
year. The increase was due principally to sales of the Company's new Aurora
digital video product line. The backlog of orders increased $1.4 million to $4.4
million at December 31, 1996.
Gross profit margins for the quarter increased to 28.2% compared with 25.7% in
the corresponding quarter one year ago. The margin improvement was due
principally to increased sales of higher margin products, particularly new
proprietary digital video products. The Company's video product margins also
rose principally as a result of cost reductions.
Operating expenses for the current quarter increased to $2.7 million compared
with $2.4 million in the corresponding quarter last year due principally to
higher selling expenses. Interest expense increased by approximately $29,000 to
$264,000 for the current year quarter as the level of bank borrowings increased.
During the quarter, the Company recorded an unrealized foreign exchange gain of
$34,000 compared with a $14,000 gain in the corresponding quarter last year.
This gain resulted from the Company's revaluation of its yen denominated
mortgage obligation into U.S. dollars as the value of the British pound sterling
gained against the Japanese yen during the period.
The increase in pretax income of $103,000 was due principally to higher sales
and gross margins, offset in part by increased operating expenses.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
December 31, 1996 Compared with September 30, 1996
Working capital increased $.7 million to $12.8 million at December 31, 1996
principally as a result of increased bank borrowings, which were used to finance
higher inventory levels.
Accounts receivable increased $.2 million to $8.8 million at December 31, 1996
due principally to higher sales levels. Inventories increased $1.0 million to
$15.7 million at December 31, 1996 as a result of increased component part and
work-in-process inventories related to the production of a new dome camera
product line. Total accounts payable remained principally unchanged at
approximately $9.2 million at December 31, 1996 since inventory increases were
financed through additional bank borrowings and operating profits.
The Company has a revolving line of credit of 700,000 pounds sterling (approx.
$1.2 million) in the U.K. to support local cash requirements. At December 31,
1996, borrowings under this agreement were approximately $1,262,000, which was
used for general working capital purposes.
The Company's bank loan agreement provides for maximum borrowings of $5.5
million subject to an availability formula based on accounts receivable and
inventories and expires in December 1997. Borrowings under such agreement
amounted to approximately $4.9 million at December 31, 1996 compared with $4.1
million at September 30, 1996. The increase was used principally to finance the
higher inventory levels. In February 1997, the loan agreement was amended to
increase maximum borrowings to $6.5 million. Further, the term of the agreement
was extended to January 31, 1999 and the interest rate was reduced from 1.25% to
1% over the prime rate. Concurrent with this amendment, the Company amended its
$2,000,000 secured promissory note with Chugai Boyeki Co., Ltd., a related
party, to require installments of $200,000 upon execution, $360,000 in July 1998
and the balance of $1,440,000 upon expiration in July 1999. The Company believes
that its bank loan agreements and other sources of credit provide adequate
funding to meet its near term cash requirements.
7
<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.
8
<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.
February 13, 1997
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
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.
February 13, 1997
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
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 124,994
<SECURITIES> 0
<RECEIVABLES> 9,920,877
<ALLOWANCES> (449,468)
<INVENTORY> 15,667,910
<CURRENT-ASSETS> 25,264,313
<PP&E> 14,670,123
<DEPRECIATION> (10,675,885)
<TOTAL-ASSETS> 29,258,551
<CURRENT-LIABILITIES> 12,512,862
<BONDS> 7,331,307
0
0
<COMMON> 28,027
<OTHER-SE> 9,386,355
<TOTAL-LIABILITY-AND-EQUITY> 29,258,551
<SALES> 11,297,775
<TOTAL-REVENUES> 0
<CGS> 8,116,967
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,642,572
<LOSS-PROVISION> 45,000
<INTEREST-EXPENSE> 263,948
<INCOME-PRETAX> 229,288
<INCOME-TAX> 14,000
<INCOME-CONTINUING> 215,288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,288
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
