<PAGE>
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-10605
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ODETICS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2588496
- ----------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1515 SOUTH MANCHESTER AVE., ANAHEIM, CA 92802
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(Address of principal executive offices) (Zip Code)
(714) 774-5000
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(Registrant's telephone number, including area code)
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(Former name, former addressed and former 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares of Common Stock outstanding as of July 30, 1996
Class A Common Stock - 5,144,208 shares.
Class B Common Stock - 1,129,431 shares.
1
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INDEX
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<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
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<S> <C>
ITEM 1. CONSOLIDATED STATEMENTS OF OPERATIONS FOR 3
THE THREE MONTHS ENDED JUNE 30, 1995 AND
1996 (UNAUDITED)
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1996 4
AND JUNE 30, 1996 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 6
THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 8
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II OTHER INFORMATION
- ----------------------------
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
</TABLE>
2
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PART I
ITEM 1 FINANCIAL INFORMATION
ODETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
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1995 1996
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<S> <C> <C>
Net sales and contract revenues:
Net sales $ 19,167 $ 28,304
Contract revenues 2,270 2,499
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21,437 30,803
Costs and expenses:
Cost of sales 12,185 18,206
Cost of contract revenues 1,359 1,272
Selling, general and administrative expenses 5,143 6,893
Research and development expenses 1,730 2,288
Interest expense 680 493
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21,097 29,152
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Income before income taxes 340 1,651
Income taxes 129 644
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Net Income $ 211 $ 1,007
========= =========
Weighted average number of shares outstanding 5,965 6,477
========= =========
Net income per share of common stock $ 0.04 $ 0.16
========= =========
</TABLE>
See notes to consolidated financial statements.
3
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ODETICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
ASSETS (UNAUDITED)
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<S> <C> <C>
Current Assets
Cash $ 1,142 $ 512
Trade accounts receivable, net 24,772 22,259
Costs and estimated earnings in excess
of billings on uncompleted contracts 3,428 3,733
Inventories:
Finished goods 3,717 2,914
Work in process 2,927 2,959
Materials and supplies 16,076 17,880
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Total inventories 22,720 23,753
Prepaid expenses 1,122 1,070
Deferred income taxes 2,516 2,516
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Total Current Assets 55,700 53,843
Property, plant and equipment
Land 2,090 2,090
Buildings and improvements 17,553 17,585
Equipment, furniture and fixtures 24,914 25,745
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44,557 45,420
Less accumulated depreciation (22,950) (23,543)
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Net property, plant and equipment 21,607 21,877
Other Assets 1,504 2,130
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Total Assets $ 78,811 $ 77,850
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</TABLE>
See notes to consolidated financial statements.
4
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ODETICS, INC.
CONSOLIDATED BALANCE SHEETS (cont'd)
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
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<S> <C> <C>
Current Liabilities
Trade accounts payable $ 11,519 $ 10,880
Accrued expenses 2,441 5,797
Accrued incentive programs 1,229 786
Accrued vacation 1,504 1,516
Income taxes payable 1,412 1,176
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,414 4,821
Current portion of long-term debt 1,791 1,653
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Total current liabilities 25,310 26,629
Long-term debt - Less current portion 22,019 17,566
Deferred income taxes 497 495
Stockholders' equity
Preferred stock, authorized 2,000,000 shares;
none issued - -
Common stock, authorized 10,000,000
shares of class A and 2,600,000 shares
of class B; 5,132,323 shares of
class A and 1,139,431 shares of
class B issued and outstanding at
June 30, 1996 - $.10 par value 610 627
Paid-in capital 21,905 22,997
Foreign currency translation (10) 49
Retained earnings 8,480 9,487
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Total stockholders' equity 30,985 33,160
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Total liabilities and stockholders' equity $ 78,811 $ 77,850
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</TABLE>
See notes to consolidated financial statements.
5
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ODETICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
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1995 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 211 $ 1,007
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 563 853
Provision for inventory reserves 152 572
Provision for losses on accounts receivable 43 41
Provision (Benefit) for deferred income taxes 11 (238)
Net proceeds from settlement of litigation 0 5,860
Gain on sale of assets 0 (200)
Foreign currency translation gain 4 59
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (1,139) 752
(Increase) in costs and estimated earnings
in excess of billings on uncompleted contracts (356) (305)
(Increase) Decrease in inventories and prepaid
expenses 1,544 (3,083)
(Increase) in other assets (236) (687)
Increase (Decrease) in accounts payable and
accrued expenses (2,020) (301)
Increase (Decrease) in billings in excess of cost
and estimated earnings on uncompleted
contracts 425 (593)
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Net cash provided by (used in) operating activities (798) 3,737
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (233) (884)
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Net cash used in investing activities (233) (884)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and
long-term borrowings 10,750 12,100
Principal payments on line of credit, long-term
debt and capital lease obligations (9,769) (16,691)
Proceeds from sale of common stock 1 1,108
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Net cash provided by (used in) financing activities 982 (3,483)
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Increase (decrease) in cash (49) (630)
Cash at beginning of year 378 1,142
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Cash at June 30 $ 329 $ 512
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</TABLE>
See notes to consolidated financial statements.
6
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ODETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - In the opinion of management, the accompanying unaudited
- ------ consolidated financial statements contain all adjustments consisting of
normal recurring accruals necessary to present fairly the Company's
consolidated financial position as of June 30, 1996 and the
consolidated results of operations and cash flows for the three-month
periods ended June 30, 1995 and 1996. Certain information and footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. The results of operations for the
three-month period ended June 30, 1996 are not necessarily indicative
of those to be expected for the entire year.
Note 2 - Income tax expense for the three-month periods ended June 30,
- ------ 1995 and 1996 have been provided at the estimated annualized effective
tax rates based on the estimated income tax liability or asset and
change in deferred taxes for their respective fiscal years. Deferred
taxes result primarily from temporary differences in the reporting of
income for financial statement and income tax purposes. These
differences relate principally to the use of accelerated cost recovery
depreciation methods for tax purposes, capitalization of interest and
taxes for tax purposes, capitalization of computer software costs for
financial statement purposes, deferred compensation, other payroll
accruals, and reserves for inventory and accounts receivable for
financial statement purposes and general business tax credit and
alternative minimum tax credit carryforwards for tax purposes.
Note 3 - Long-term Debt
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<TABLE>
<CAPTION>
(in thousands)
March 31, June 30,
1996 1996
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<S> <C> <C>
Line of credit $10,700 $ 6,600
Mortgage note 11,040 10,830
Contracts payable 2,070 1,789
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23,810 19,219
Less current portion 1,791 1,653
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$22,019 $17,566
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</TABLE>
Note 4 - In November 1994 and February 1995, The Company and E-Systems,
- ------ Inc. (E-Systems), respectively filed legal actions related to E-
Systems' cancellation of purchase orders for ATL Products' DataLibrary
and DataTower products. In May 1996, the parties entered into a
settlement agreement under which, among other things, E-Systems agreed
to pay the Company $6,160,000, all claims asserted by the parties were
released and the litigation dismissed. In addition, the parties agreed
to an equitable disposition of disputed inventory and entered into a
five year service agreement for Odetics to service units that had been
sold to E-Systems at agreed upon prices. The Company does not expect to
record any material gain or loss based on the terms of the settlement
agreement.
7
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ODETICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales and contract revenues for Odetics, Inc. (the "Company") in the
first quarter of fiscal year 1997 increased approximately $9,366,000 or 43.7%
compared to the first quarter of the prior fiscal year. The components of
this overall increase consisted of an increase in net sales (commercial
products) of approximately $9,137,000, or 47.7% and an increase in contract
revenues (government products) of approximately $229,000, or 10.1%.
The 47.7% growth in commercial net sales reflects a sharp increase in sales
in the Company's wholly owned subsidiary, ATL Products, Inc. ("ATL"). ATL's
sales growth resulted from the introduction of new products and expansion of
their sales channels for their product offerings. The Company's Communication
division also showed strong growth with sales of it's synchronization
products for cellular telephone systems.
Cost of sales and contract revenues as a percentage of net sales and contract
revenues for the first quarter of fiscal 1997 when compared to the same
period in the prior fiscal year held constant at 63.2%.
Selling, general, and administrative (SG&A) expenses increased approximately
$1,750,000, although as a percentage of net sales and contract revenues, SG&A
declined to 22.4% in the current year first quarter compared to 24.0% in the
prior year first quarter. SG&A expenses increased due to increased selling
expenses to support the increased commercial product sales primarily in the
areas of commissions, advertising, and labor and related benefits.
Research and development (R&D) expenses increased approximately $558,000,
although as a percentage of net sales and contract revenues, R&D declined to
7.4% in the current first year quarter compared to 8.1% in the prior year
first quarter. The increased R&D expenses reflect prototype material,
consulting and labor and related benefits accompanying increased new product
development activities.
Interest expense decreased approximately $187,000 for the first quarter for
fiscal 1997 compared to the same period during the prior fiscal year
primarily due to decreased line of credit borrowings.
The effective income tax rate was 39% for the first quarter of fiscal 1997
compared to a 38% tax rate for the same period of the prior year. The
increase in the effective tax rate projected for fiscal 1997 is due to a
reduction in the effect of general business tax credits on total income tax
expense.
8
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Liquidity and Sources of Capital
The Company reported net income of $1,007,000 during the first quarter of
fiscal 1997 and cash flow from operating activities of $3,737,000. Cash flow
from operating activities included the receipt of net proceeds from the
settlement of the litigation with E-Systems (see Note 4 of Notes to
Consolidated Financial Statements), which was partially offset by an increase
in inventories to support increased commercial product sales, especially in
the Company's ATL Products Subsidiary. The Company has a $17,000,000 bank
line of credit providing for borrowings generally at or below the bank's
prime rate. Borrowings are available for general working capital purposes,
and at June 30, 1996, $10,400,000 was available for borrowing under the line.
The Company anticipates that net cash flow from operating activities in
conjunction with its bank credit arrangements will be sufficient to execute
its operating plans and meet its obligations on a timely basis. The Company
does not have any material commitments for capital expenditures as of June
30, 1996.
9
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ODETICS, INC.
PART II OTHER INFORMATION
<TABLE>
<CAPTION>
<C> <S>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed
for the three-month period ended
June 30, 1996.
</TABLE>
10
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ODETICS, INC.
SIGNATURES
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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.
ODETICS, INC.
(Registrant)
By /s/ GREGORY A. MINER
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Gregory A. Miner
Vice President, Chief Financial Officer
By /s/ GARY SMITH
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Gary Smith
Vice President, Controller
(Principal Accounting Officer)
Date August 14, 1996
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11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 512
<SECURITIES> 0
<RECEIVABLES> 22,259
<ALLOWANCES> 0
<INVENTORY> 23,753
<CURRENT-ASSETS> 53,843
<PP&E> 45,420
<DEPRECIATION> (23,543)
<TOTAL-ASSETS> 77,850
<CURRENT-LIABILITIES> 26,629
<BONDS> 0
0
0
<COMMON> 627
<OTHER-SE> 32,533
<TOTAL-LIABILITY-AND-EQUITY> 77,850
<SALES> 30,803
<TOTAL-REVENUES> 30,803
<CGS> 19,478
<TOTAL-COSTS> 19,478
<OTHER-EXPENSES> 9,181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 493
<INCOME-PRETAX> 1,651
<INCOME-TAX> 644
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,007
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
