Page 1 of 14
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: July 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
August 31, 1999.
Transitional Small Business Disclosure Format
(Check One): Yes _______ No __ X ___
Page 2 of 14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following Financial Statements are attached hereto in response to
Item 1:
Condensed Consolidated Balance Sheet
July 31, 1999 (Unaudited)
October 31, 1998
Consolidated Statement of Earnings
Three months ended July 31, 1999
and 1998 (Unaudited)
Nine months ended July 31, 1999
and 1998 (Unaudited)
Condensed Consolidated Statement
of Cash Flows
Nine months ended July 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 third quarter compared to the
fourth quarter of 1998. Inventory increased due to increased shipments
scheduled for the fourth quarter.
Accounts and note payable decrease resulted primarily from paying
down the line of credit $200,000. Other current liabilities decreased mainly
from paying the fiscal year 1998 accrued bonus combined with a lower accrual
for commissions. The Company also paid in full the remaining portion of the
term debt which included $360,000 in other current liabilities.
Long term debt was completely paid off in the first six months of
1999, approximately two and one half years ahead of schedule.
Additional paid-in capital increased from recording income tax
recoveries directly to additional paid-in capital.
Material Changes in Results of Operations. Sales in the first nine
months of 1999 were 21% lower than the first nine months of 1998. Lower sales
are the result of a lower backlog going into fiscal year 1999 and a
continuing weakness in booking new business for the Company's Prab Conveyor
product line.
Costs of products sold were 63% in the first nine months of 1999
compared to 61% a year ago. Selling, general and administrative expenses were
34% in the first nine months of 1999 compared to 30% in the same period a
year ago. The increase primarily results from the Company deciding to keep
nearly
Pg 3 of 14
all employees and focus on increasing sales in the short term rather than try
to cut costs by laying off employees due to the lower sales.
Interest expense decreased as a result of lower debt. With the
early payoff of the term debt, interest expense will be significantly lower
for the balance of the year.
The order backlog of $3,867,000 at the end of the third quarter
ended July 31, 1999 compares with $3,672,000 at the end of the previous
quarter ended April 30, 1999 and $4,674,000 at the end of the third quarter a
year ago. Sales and earnings are expected to be materially lower 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 efforts of the
Company to increase sales in the fourth quarter.
Year 2000 Issue. The company has been, and is currently, in 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
the 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 caused a disruption of basic services such as utilities or
banking or a sustained disruption on the economy in general, the Company will
be adversely affected. The Company has not adopted any contingency plans
regarding the 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.
Pg 4 of 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8K:
No reports on Form 8-K have been filed during the
quarter for which this report is filed.
Page 5 of 14
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: September 6, 1999 By: /s/ Gary A. Herder
-----------------------
Gary A. Herder
Its: Chairman, President and
Chief Executive Officer
Date: September 6, 1999 By: /s/ Robert W. Klinge
------------------------
Robert W. Klinge
Its: Chief Financial Officer
Page 6 of 14
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report on Form 10-QSB
For the Quarter Ended July 31, 1999
Financial Statements
PRAB, INC.
(A Michigan Corporation)
5944 E. Kilgore Road
P.O. Box 2121
Kalamazoo, Michigan 49003
Page 7 of 14
PRAB, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, October 31,
1999 1998
----------- -----------
(Unaudited) (Note)
ASSETS
Current Assets:
Cash ...................................... $ 156,539 $ 51,621
Accounts receivable ....................... 2,194,612 3,367,308
Inventories (Note 2) ...................... 1,630,709 1,413,078
Other current assets ...................... 148,385 117,148
Deferred income taxes ..................... 431,296 431,296
---------- ----------
Total current assets .................... 4,561,541 5,380,451
---------- ----------
Property, plant and equipment
(net of accumulated depreciation
of $3,609,117 and $3,476,845
respectively) ............................. 1,034,616 1,085,202
---------- ----------
Other assets
Deferred charges and other assets ......... 93,591 134,054
Deferred income taxes ..................... 409,014 381,704
---------- ----------
Total other assets ...................... 502,605 515,758
---------- ----------
Total assets ............................ $6,098,762 $6,981,411
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts and note payable ................. $ 961,668 $1,186,312
Other current liabilities ................. 1,416,603 1,934,525
---------- ----------
Total current liabilities ............... 2,378,271 3,120,837
---------- ----------
Long term debt .............................. -- 420,000
---------- ----------
Other non-current liabilities ............... 18,075 17,183
---------- ----------
Stockholder's equity:
Convertible preferred stock ............... 275,000 275,000
Common stock .............................. 175,734 175,734
Additional paid in capital ................ 1,262,307 1,161,828
Retained earnings ......................... 1,989,375 1,810,829
---------- ----------
Total stockholders' equity .............. 3,702,416 3,423,391
---------- ----------
Total liabilities and stock-
holders' equity ....................... $6,098,762 $6,981,411
========== ==========
Note: The balance sheet at October 31, 1998, has been taken from the
audited financial statements at that date and condensed.
Page 8 of 14
<TABLE>
<CAPTION>
PRAB, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three months ended Nine months ended
July 31, July 31,
--------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ...................... $ 3,733,295 $ 4,795,518 $ 10,628,360 $ 13,471,304
------------ ------------ ------------ ------------
Cost and expenses:
Cost of products sold ........ 2,312,548 2,848,939 6,646,207 8,178,648
Selling, general and
administrative
expenses ................... 1,211,184 1,437,399 3,649,370 4,059,097
------------ ------------ ------------ ------------
3,523,732 4,286,338 10,295,577 12,237,745
------------ ------------ ------------ ------------
Operating Income ........... 209,563 509,180 332,783 1,233,559
------------ ------------ ------------ ------------
Other income (deductions):
Interest expense ............. 661 (26,666) (32,310) (92,820)
Gain on sale of property,
plant and equipment ........ -- -- 825 1,276
------------ ------------ ------------ ------------
Income before income taxes
and extraordinary item ....... 210,224 482,514 301,298 1,142,015
Provision for income taxes ..... 74,446 168,015 106,252 390,769
------------ ------------ ------------ ------------
Income before extraordinary
item ......................... 135,778 314,499 195,046 751,246
Extraordinary Item - Loss on
extinguishment of debt (net of
income taxes of $39,931)
(Note 5) ..................... -- -- -- 77,512
------------ ------------ ------------ ------------
Net Income ..................... $ 135,778 $ 314,499 $ 195,046 $ 673,734
============ ============ ============ ============
Earnings (Loss) Per
Common Share: (Note 4)
Basic:
Earnings before
extraordinary item ....... $ .07 $ .18 $ .10 $ .42
Extraordinary item ......... -- -- -- (.04)
------------ ------------ ------------ ------------
Net Earnings ............... $ .07 $ .18 $ .10 $ .38
============ ============ ============ ============
Diluted:
Earnings before
extraordinary item ....... $ .06 $ .14 $ .09 $ .33
Extraordinary item ......... -- -- -- (.03)
------------ ------------ ------------ ------------
Net Earnings ............... $ .06 $ .14 $ .09 $ .30
============ ============ ============ ============
</TABLE>
Page 9 of 14
PRAB, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
July 31,
--------------------------
1999 1998
---- ----
Net cash provided by (used in)
operating activities ................ $ 1,185,842 $ 1,188,163
----------- -----------
Cash flows from investing activities:
Acquisition of property,
plant and equipment ............... (86,674) (185,807)
Proceeds from sale of equipment ..... 2,250 1,700
----------- -----------
Net cash provided by (used in)
investing activities: ............. (84,424) (184,107)
----------- -----------
Cash flows from financing activities:
Payment on long-term debt and
current maturities ................ (780,000) (950,000)
Net increase (decrease) in short-term
borrowings ........................ (200,000) (3,000)
Dividend payments ................... (16,500) (14,438)
----------- -----------
Net cash provided by (used in)
financing activities ................ (996,500) (967,438)
----------- -----------
Net increase (decrease) in cash ....... $ 104,918 $ 36,618
=========== ===========
Pg 10 of 14
PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet at July 31, 1999, the
consolidated statement of earnings and the condensed consolidated statement
of cash flows for the three month and nine month periods ended July 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 July 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 July 31, 1999, is not necessarily indicative of the operating
results for the full year.
2. INVENTORIES:
Inventories consist of the following:
July October
31, 1999 31, 1998
-------- --------
Raw materials ............ $ 845,833 $1,036,846
Work in process .......... 567,440 208,214
Finished goods and display
units .................. 217,436 168,018
---------- ----------
Total inventories ........ $1,630,709 $1,413,078
========== ==========
3. UNUSED LINE OF CREDIT:
The current agreement allows maximum financing of $1,750,000. All of the
Company's assets provide security for the borrowings. As of July 31, 1999
there were no borrowings on the line of credit.
Page 11 of 14
PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. RECONCILIATION OF EARNINGS PER SHARE:
FOR THE QUARTER ENDED JULY 31, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ----------
Income before
extraordinary item $ 135,778
Less: Preferred stock
dividends 5,500
---------
Basic EPS
Income available
to common
stockholders 130,278 1,757,339 $.07
==========
Effect of dilutive
securities
Stock options 98,772
Convertible
preferred stock 5,500 366,667
--------- ---------
Diluted EPS
Income available to common
stockholders & assumed
conversions $ 135,778 2,222,778 $.06
========= ========= ==========
FOR THE QUARTER ENDED JULY 31, 1998
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ----------
Income before
extraordinary item $314,499
Less: Preferred stock
dividends 4,813
---------
Basic ESP
Income available
to common
stockholders 309,686 1,757,339 $.18
==========
Effect of dilutive
securities
Stock options 131,984
Convertible
preferred stock 4,813 366,667
--------- ---------
Diluted EPS
Income available to common
stockholders & assumed
conversions $ 314,499 2,255,990 $.14
========= ========= ==========
Pg 12 of 14
PRAB, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. RECONCILIATION OF EARNINGS PER SHARE (CONTINUED):
FOR THE NINE MONTHS ENDED JULY 31, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ---------
Income before
extraordinary item $ 195,046
Less: Preferred stock
dividends 16,500
---------
Basic EPS
Income available
to common
stockholders 178,546 1,757,339 $.10
=========
Effect of dilutive
securities
Stock options 112,617
Convertible
preferred stock 16,500 366,667
--------- ---------
Diluted EPS
Income available to common
stockholders & assumed
conversions $ 195,046 2,236,623 $.09
========= ========= =========
FOR THE NINE MONTHS ENDED JULY 31, 1998
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ---------
Income before
extraordinary item $ 751,246
Less: Preferred stock
dividends 14,438
---------
Basic EPS
Income available
to common
stockholders 736,808 1,757,339 $.42
=========
Effect of dilutive
securities
Stock option 128,732
Convertible
preferred stock 14,438 366,667
--------- ---------
Diluted EPS
Income available to common
stockholders & assumed
conversions $ 751,246 2,252,738 $.33
========= ========= =========
Pg 13 of 14
PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT:
The company's 12% subordinated notes were repaid in November 1997.
Since the payoff amount of this debt exceeded its carrying amount, the
transaction decreased income by $77,512 net of income taxes of $39,931.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 156,539
<SECURITIES> 0
<RECEIVABLES> 2,194,612
<ALLOWANCES> 0
<INVENTORY> 1,630,709
<CURRENT-ASSETS> 4,561,541
<PP&E> 4,643,733
<DEPRECIATION> 3,609,117
<TOTAL-ASSETS> 6,098,762
<CURRENT-LIABILITIES> 2,378,271
<BONDS> 0
<COMMON> 175,734
0
275,000
<OTHER-SE> 3,251,682
<TOTAL-LIABILITY-AND-EQUITY> 6,098,762
<SALES> 10,628,360
<TOTAL-REVENUES> 10,628,360
<CGS> 6,646,207
<TOTAL-COSTS> 10,295,577
<OTHER-EXPENSES> (825)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,310
<INCOME-PRETAX> 301,298
<INCOME-TAX> 106,252
<INCOME-CONTINUING> 195,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,046
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.09
</TABLE>
