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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended: January 31, 1999
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from to .
----------- ----------------
Commission file number: 0-10187
------------------------------------
Prab, Inc.
- -----------------------------------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
Michigan 38-1654849
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5944 E. Kilgore Rd, P.O. Box 2121, Kalamazoo, Michigan 49003
- -----------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(616) 382-8200
- -----------------------------------------------------------------------------
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrants was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes__X__ No_____
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, par value $.10 per share - 1,757,339 shares outstanding at
February 28, 1999.
Transitional Small Business Disclosure Format
(Check One): Yes___ No__X__
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
--------------------
The following Financial Statements are attached hereto in response to
Item 1:
Condensed Consolidated Balance Sheet
January 31, 1999 (Unaudited)
October 31, 1998
Consolidated Statement of Earnings
Three months ended January 31, 1999
and 1998 (Unaudited)
Condensed Consolidated Statement of Cash Flows
Three months ended January 31, 1999
and 1998 (Unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Material Changes in Financial Condition. Accounts receivable decrease
resulted from lower sales in the first quarter of 1999 versus the fourth
quarter of 1998. Inventory increased to meet higher shipment levels in
February versus January 1999. Other current assets increased primarily from
prepaid insurance.
Accounts and note payable decrease resulted from lower accounts
payables combined with paying down the line of credit by $200,000. Other
current liabilities decreased from paying the fiscal year 1998 accrued bonus
combined with lower accruals for customer deposits and commissions.
Additional paid-in capital increased from recording income tax
recoveries directly to paid-in capital.
Material Changes in Results of Operation. Sales in the first quarter of
1999 were 22% lower than the first quarter of 1998. Lower sales are the
result of a lower backlog going into the first quarter and a weakness in
booking new business for the Company's Prab Conveyor product line.
Costs of products sold were 62% in the first quarter of 1999 compared
to 64% a year ago resulting primarily from increased parts sales and
decreased equipment sales. Selling, general and administrative expenses were
36% in the first quarter of 1999 compared to 30% in the same period a year
ago. The increase primarily results from lower sales without having a
corresponding decrease in overhead.
Interest expense continues to decrease as a result of lower debt.
The order backlog of $2,829,000 at the end of the first quarter ended
January 31, 1999 compares with $3,174,000 at the end of the previous quarter
ended October 31, 1998.
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Sales and earnings may continue to materially decrease in fiscal year
1999. The extent of the decrease in sales and earnings cannot be accurately
determined at this time and will be affected by the general economy in 1999
and efforts by the Company to increase sales and reduce expenses.
YEAR 2000 ISSUE. The company has been, and is currently, in the process
of addressing a significant issue facing all users of automated information
systems. The problem is that many computer systems that process transactions
based on two digits representing the year of transaction may recognize a date
using "00" as the year 1900 rather than the year 2000, or otherwise not
properly process dates in the year 2000.
The company has evaluated its products, both past and present, for year
2000 compliance. None of the products that the Company currently supplies
contain a date function, and therefore, are not affected by the year 2000
problem. While the Company cannot determine with certainty that no products
supplied in the past are affected by the year 2000 problem, the Company is
not aware of any such products which contain a year 2000 defect.
The Company has evaluated its internal systems and, in the opinion of
management, there is no reason to believe that any computer systems or
software used internally by the Company will materially affect its operations
or any transactions with any customer, supplier or business partner, now or
in the future. The Company has also conducted an evaluation of its key
suppliers of goods and services and, in the opinion of management, there is
no reason to believe that any computer systems operated by the Company's
suppliers and business partners will encounter a year 2000 problem which
would have a material adverse effect on the Company's operations. In
addition, the Company believes that it has alternative sources for all goods
and services presently provided to the Company. In the event that the year
2000 problem causes a disruption of basic services such as utilities or
banking or a sustained disruption of the economy in general, the Company will
be adversely affected. The Company has not adopted any contingency plans
regarding year 2000 because it does not believe any materially adverse events
are likely to occur for which such plans would be of benefit.
The Company anticipates that its total expenditures to address the year
2000 problem will not exceed $50,000. This amount does not include the cost
of upgrading the Company's computer system in fiscal year 1998, which upgrade
was undertaken for reasons other than year 2000 concerns. The total cost of
the upgrade was approximately $150,000.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on form 8-K have been filed during the quarter
for which this report is filed.
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SIGNATURES
----------
Pursuant to the requirements of the Exchange Act, the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PRAB, INC.
Date: March 5, 1999 By: /S/ Gary A. Herder
------------------------
Gary A. Herder
Its: President and Chief
Executive Officer
Date: March 5, 1999 By: /S/ Robert W. Klinge
------------------------
Robert W. Klinge
Its: Controller
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report on Form 10-QSB
For the Quarter Ended January 31, 1999
Financial Statements
PRAB, INC.
(A Michigan Corporation)
5944 E. Kilgore Road
P.O. Box 2121
Kalamazoo, Michigan 49003
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PRAB, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
January 31, October 31,
1999 1998
----------- -----------
Unaudited (Note)
ASSETS
Current assets:
Cash $ 259,923 $ 51,621
Accounts Receivable 2,218,770 3,367,308
Inventories (Note 2) 1,495,445 1,413,078
Other current assets 187,916 117,148
Deferred income taxes 431,296 431,296
---------- ----------
Total current assets 4,593,350 5,380,451
---------- ----------
Property, plant and equipment
(net of accumulated depreciation
of $3,520,065 and $3,476,845
respectively) 1,053,672 1,085,202
---------- ----------
Other assets
Deferred charges and other
assets 121,012 134,054
Deferred income taxes 390,114 381,704
---------- ----------
Total other assets 511,126 515,758
---------- ----------
Total assets $6,158,148 $6,981,411
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts and note payable $ 679,720 $1,186,312
Other current liabilities 1,582,539 1,934,525
---------- ----------
Total current liabilities 2,262,259 3,120,837
---------- ----------
Long term debt 420,000 420,000
---------- ----------
Other non-current liabilities 17,480 17,183
---------- ----------
Stockholder's equity:
Convertible preferred stock 275,000 275,000
Common stock 175,734 175,734
Additional paid-in capital 1,181,698 1,161,828
Retained Earnings 1,825,977 1,810,829
---------- ----------
Total stockholders' equity 3,458,409 3,423,391
---------- ----------
Total liabilities and stock-
holders' equity $6,158,148 $6,981,411
========== ==========
Note: The balance sheet at October 31, 1998, has been taken from the audited
financial statements at that date and condensed.
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PRAB, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended
January 31
------------------
1999 1998
---- ----
Net Sales $3,298,912 $4,232,763
---------- ----------
Costs and expenses:
Cost of products sold 2,040,921 2,725,385
Selling, general and
administrative expenses 1,199,446 1,280,322
---------- ----------
3,240,367 4,005,707
---------- ----------
Operating income 58,545 227,056
---------- ----------
Interest expense 21,259 38,707
---------- ----------
Income before income taxes
and extraordinary item 37,286 188,349
Provision for income taxes 16,637 68,250
---------- ----------
Income - before extraordinary item 20,649 120,099
Extraordinary Item - Loss on
extinguishment of debt (net of
income taxes of $39,931) (Note 4) -- 77,512
---------- ----------
Net income $ 20,649 $ 42,587
========== ==========
Earnings (Loss) Per Common Share:
(Note 5)
Basic:
Earnings before extraordinary item $ .01 $ .07
Extraordinary item -- (.05)
---------- ----------
Net Earnings $ .01 $ .02
========== ==========
Diluted:
Earnings before extraordinary item $ .01 $ .05
Extraordinary item -- (.03)
---------- ----------
Net Earnings $ .01 $ .02
========== ==========
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PRAB, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended
January 31
------------------
1999 1998
---- ----
Net cash provided by (used in)
operating activities $ 425,492 $ 793,548
--------- ---------
Cash flows from investing activities:
Acquisition of property,
plant and equipment (11,690) (61,812)
--------- ---------
Net cash provided by (used in)
investing activities: (11,690) (61,812)
Cash flows from financing activities:
(Payment)/Proceeds on long-term debt
and current maturities -- (770,000)
Net Increase (Decrease) in short
term borrowings (200,000) 100,000
Dividend payments (5,500) (4,813)
--------- ---------
Net cash provided by (used in)
financing activities (205,500) (674,813)
--------- ---------
Net increase (decrease) in cash $ 208,302 $ 56,923
========= =========
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet at January 31, 1999, the
consolidated statement of earnings and the condensed consolidated statement of
cash flows for the three-month periods ended January 31, 1999 and 1998, have
been prepared by the Company without audit. In the opinion of management, all
adjustments necessary to present fairly the financial position, results of
operations and cash flows at January 31, 1999, and for all periods presented
have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's October 31,
1998, annual report to stockholders. The results of operations for the period
ended January 31, 1999, is not necessarily indicative of the operating results
for the full year.
2. INVENTORIES:
Inventories consist of the following:
January 31, October 31,
1999 1998
----------- -----------
Raw materials $ 788,744 $1,036,846
Work in process 538,683 208,214
Finished goods and display units 168,018 168,018
---------- ----------
Total inventories $1,495,445 $1,413,078
========== ==========
3. UNUSED LINE OF CREDIT:
The current agreement allows maximum financing of $1,670,000. All of the
Company's assets provide security for the borrowings. As of January 31, 1999
there were no borrowings on the line of credit.
4. LONG-TERM DEBT:
The Company's 12% subordinated notes were repaid in November 1997. Since
the payoff amount of this debt exceeded its carryng amount, the transaction
decreased income by $77,512 net of income taxes of $39,931.
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. RECONCILIATION OF EARNINGS PER SHARE:
FOR THE QUARTER ENDED JANUARY 31, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ---------
Income before
extraordinary item $ 20,649
Less: Preferred stock
dividends 5,500
--------
Basic EPS
Income Available
to common stockholders 15,149 1,757,339 $.01
====
Effect of dilutive securities
Stock options 132,769
Convertible preferred stock -- --
-------- ---------
Diluted EPS
Income available to Common
stockholders + assumed
conversions $ 15,149 1,890,108 $.01
======== ========= ====
FOR THE QUARTER ENDED JANUARY 31, 1998
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ---------
Income before
extraordinary item $120,099
Less: Preferred stock
dividends 4,813
--------
Basic EPS
Income Available
to common stockholders 115,286 1,757,339 $.07
====
Effect of dilutive securities
Stock options 119,107
Convertible preferred stock 4,813 366,667
-------- ---------
Diluted EPS
Income available to Common
stockholders + assumed
conversions $120,099 2,243,113 $.05
======== ========= ====
Convertible preferred stock had an antidilutive effect on diluted earnings
per share for the quarter ended January 31, 1999 and was not used in the
calculation of diluted earnings per share for this quarter.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 259,923
<SECURITIES> 0
<RECEIVABLES> 2,218,770
<ALLOWANCES> 0
<INVENTORY> 1,495,445
<CURRENT-ASSETS> 4,593,350
<PP&E> 4,573,737
<DEPRECIATION> 3,520,065
<TOTAL-ASSETS> 6,158,148
<CURRENT-LIABILITIES> 2,262,259
<BONDS> 0
<COMMON> 175,734
0
275,000
<OTHER-SE> 3,007,675
<TOTAL-LIABILITY-AND-EQUITY> 6,158,148
<SALES> 3,298,912
<TOTAL-REVENUES> 3,298,912
<CGS> 2,040,921
<TOTAL-COSTS> 3,240,367
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,259
<INCOME-PRETAX> 37,286
<INCOME-TAX> 16,637
<INCOME-CONTINUING> 20,649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,649
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
