FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 29, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to:
__________________________________________
Commission file number:
__________________________________________
TRIDEX CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0682273
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
61 Wilton Road, Westport CT 06880
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(203) 226-1144
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(Registrant's telephone number, including area code)
Former address:
________________________________________________________________________________
(Former name, former address 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 |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES |_| NO |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding April 26, 1997
- --------------- ---------------------------
Common stock, no par value 5,373,310
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. Financial Information:
- ------- ----------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 29, 1997 and December 31, 1996 3
Consolidated Statements of Income for the
Quarters Ended March 29, 1997 and March 4
30, 1996
Consolidated Statements of Cash Flows for
the Quarters Ended March 29, 1997 and 5
March 30, 1996
Notes to Consolidated Condensed Financial 6
Statements
Item 2. Management's Discussion and Analysis of
the Results of Operations and Financial 8
Condition
PART II. Other Information:
- -------- ------------------
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
EXHIBIT INDEX
-------------
Exhibit 11 Computation of Per Share Earnings 11
- ----------
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
(Unaudited)
March 29, 1997
-------------- December
Historical ProForma 31, 1996
---------- ---------- --------
(Note 7)
ASSETS
Current assets:
Cash and cash equivalents $ 9,363 $ 9,363 $ 3,354
Receivables 6,246 6,246 5,681
Inventories 4,778 4,778 5,609
Deferred tax assets 140 140 140
Other current assets 399 399 345
---------- ---------- --------
Total current assets 20,926 20,926 15,129
---------- ---------- --------
Plant and equipment, net 3,777 3,777 3,535
Excess of cost over fair value of net assets 6,319 6,319 6,493
acquired
Other assets 849 849 1,923
Investment in net assets of discontinued
TransAct operations
(Notes 2 and 7) 12,446 0 11,573
---------- ---------- --------
$44,317 $31,871 $38,653
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans payable $ 909 $ 909 $ 740
Current portion of long term debt 454 454 3,997
Accounts payable 3,308 3,308 3,859
Accrued liabilities 2,279 2,279 3,233
---------- ---------- --------
Total current liabilities 6,950 6,950 11,829
---------- ---------- --------
Long term debt, less current portion 946 946 809
---------- ---------- --------
Shareholders' equity:
Common stock, at stated value 1,377 1,377 1,043
Additional paid-in capital 34,653 25,069 23,361
Retained earnings 2,877 0 2,239
Cumulative valuation adjustments 102 117 245
Unearned compensation (822) (822)
Receivables from sale of stock (893) (893)
Common shares held in treasury, at cost (873) (873) (873)
---------- ---------- --------
36,421 23,975 26,015
---------- ---------- --------
$44,317 $31,871 $38,653
========== ========== ========
See notes to consolidated condensed financial statements.
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Quarters Ended
----------------------
March 29, March 30,
1997 1996
--------- ---------
Net sales $ 9,392 $ 7,752
--------- ---------
Operating costs and expenses:
Cost of sales 7,287 5,331
Engineering, design and product development costs 294 283
Selling, administrative and general expenses 2,393 1,804
--------- ---------
9,974 7,418
--------- ---------
Operating income (loss) (582) 334
Other charges:
Interest expense, net 21 311
Other, net 16 42
--------- ---------
37 353
--------- ---------
Loss from continuing operations before income taxes (619) (19)
Provision (benefit) for income taxes (384) 50
--------- ---------
Loss from continuing operations (235) (69)
Discontinued operations (Note 2):
Equity in subsidiary's income from discontinued
operations
(net of income taxes of $582,000 and $576,000) 873 865
--------- ---------
Net income $ 638 $ 796
========= =========
Earnings (loss) per common and common equivalent share:
Primary:
Income (loss) from continuing operations $ (0.05) $ (0.02)
Income from discontinued operations 0.18 0.22
--------- ---------
$ 0.13 $ 0.20
========= =========
Weighted average common and common equivalent shares
outstanding
Primary 4,822,000 3,938,000
========= =========
See notes to consolidated condensed financial statements.
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Quarters Ended
----------------------
March 29, March 30,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 638 $ 796
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in subsidiary's income from discontinued
operations (873) (865)
Stock incentive compensation
expense 404
Depreciation and amortization 392 386
Changes in operating assets and liabilities:
Receivables (766) (567)
Inventory 769 310
Other current assets (68) (38)
Other assets 13 (102)
Accounts payable, accrued liabilities and
income taxes payable (894) (148)
--------- ---------
Net cash provided by (used in) operating
activities (385) (228)
--------- ---------
Cash flows from investing activities:
Purchases of plant and equipment (561) (77)
Receipt of principal of note receivable from
TransAct 1,000
--------- ---------
Net cash provided by (used in) investing 439 (77)
--------- ---------
activities
Cash flows from financing activities:
Net change in borrowings under line of credit 201 1,058
Net proceeds from issuance of long term debt 381 27
Principal payments on long term borrowings (104) (263)
Proceeds from exercise of stock options and warrants 5,503 26
Net transactions with TransAct prior to IPO (1,111)
Other (2) (2)
--------- ---------
Net cash provided by (used in) financing
activities 5,979 (265)
--------- ---------
Effect of exchange rate changes on cash (24)
--------- ---------
Increase in cash and cash equivalents 6,009 (570)
Cash and cash equivalents at beginning of period 3,354 933
--------- ---------
Cash and cash equivalents at end of period $ 9,363 $ 363
========= =========
Supplemental cash flow information:
Interest paid $ 97 $ 294
Income taxes paid 86 25
Supplemental non-cash investing and financing activities:
Conversion of convertible notes and debentures to $ 3,710
common stock
See notes to consolidated condensed financial statements.
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly its
financial position as of March 29, 1997, the results of its operations
for the quarters ended March 29, 1997 and March 30, 1996 and changes in
its cash flows for the quarters ended March 29, 1997 and March 30,
1996. The December 31, 1996 consolidated condensed balance sheet has
been derived from the Company's audited financial statements at that
date. These interim financial statements should be read in conjunction
with the financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. See note 7 for
discussion of pro forma presentation.
The financial position and results of operations of the Company's foreign
subsidiaries are measured using local currency as the functional currency.
Assets and liabilities of such subsidiaries have been translated at current
exchange rates, and related revenues and expenses have been translated at
weighted average exchange rates. The aggregate effect of translation
adjustments so calculated is included as a separate component of
shareholders' equity. Transaction gains and losses are included in other
income.
The results of operations for the quarters ended March 29, 1997 and March
30, 1996 are not necessarily indicative of the results to be expected for
the full year.
2. Discontinued operations: During 1996, the Company implemented a plan to
spin-off its printer group, which was formed in December 1995 by
combining the operations of its subsidiaries, Magnetec Corporation
("Magnetec") and Ithaca Peripherals Incorporated ("Ithaca"). In April
1996, the Company announced that it had engaged an investment banking
firm to pursue an underwritten public offering of up to 20% of the
printer group. In June 1996, the Company incorporated TransAct
Technologies Incorporated ("TransAct") as a wholly-owned subsidiary.
Following the incorporation, Tridex, TransAct, Magnetec and Ithaca
entered into a Plan of Reorganization (the "Plan of Reorganization"),
pursuant to which: (i) Ithaca merged into Magnetec; (ii) Magnetec
transferred to Tridex certain assets used in manufacturing operations of
the Tridex Ribbons Division; (iii) TransAct issued 5,400,000 shares of
its common stock to Tridex in exchange for all the outstanding shares of
Magnetec; (iv) TransAct sold in an initial public offering 1,322,500
shares or approximately 19.7% of its common stock; (v) TransAct repaid
$8,500,000 of intercompany indebtedness to Tridex; (vi) Tridex applied
to the Internal Revenue Service (the "IRS") for a ruling that the pro
rata distribution to Tridex stockholders of the 5,400,000 shares of
TransAct owned by Tridex (the "Distribution") would constitute a
tax-free reorganization for federal income tax purposes; and (vii)
Tridex agreed to effect the Distribution promptly after receipt of a
favorable ruling from the IRS and the satisfaction of certain other
conditions. TransAct received approximately $8,991,000 of net proceeds
from its initial public offering and used $7,500,000 to repay
intercompany indebtedness to Tridex. The balance was used for
TransAct's working capital and general corporate purposes. Of the
$7,500,000 received from TransAct, Tridex used approximately $5,254,000
to repay all outstanding indebtedness to Fleet National Bank. TransAct
paid the remaining $1,000,000 of intercompany indebtedness on February
14, 1997, together with interest at the rate of 8.25 percent.
On February 12, 1997, Tridex received a favorable ruling from the IRS
confirming the tax-free nature of the Distribution and announced that it
would effect the Distribution on March 31, 1997 to Tridex stockholders of
record on March 14, 1997. Since the Distribution, Tridex and TransAct have
been separate publicly traded companies. The Consolidated Financial
Statements have been restated from historical financial statements to
present the results of operations of TransAct as discontinued operations.
TransAct's results are summarized below.
<PAGE>
Quarters Ended
-------------------------------------
March 29, 1997 March 30, 1996
-------------------------------------
(Dollars in thousands)
Net sales $14,014 $10,463
Operating income 1,833 1,271
Net income 1,087 865
Earnings per share $ 0.16 $ 0.16
3. Primary earnings per common share is based on the weighted average
number of shares outstanding during the period after consideration of
the dilutive effect of stock options and warrants. In February of 1997,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 128, "Earnings Per Share." The Company will
adopt this standard, as required, at the end of this year. Had this
standard been adopted in the first quarter of 1997, the Company would
have reported basic earnings per share from continuing operations of
$(0.05) and basic earnings per share from discontinued operations of
$0.19.
4. Inventories: Components of inventory are:
March 29, 1997 December 31, 1996
--------------------------------------
(Dollars in Thousands)
Raw materials and $ 2,191 $ 2,051
component parts
Work-in-process 385 359
Finished goods 2,202 3,199
$ 4,778 $ 5,609
======= =======
5. Other income, net: Other non-operating expense for the current quarter
consists of net realized transactional foreign exchange losses. Other
non-operating expenses in the prior year's quarter includes a $30,000
provision for the estimated loss on disposal of unused real estate and
$15,000 of net realized transactional foreign exchange losses.
6. Commitments and contingencies: The Company is involved in an environmental
matter discussed in footnote number 9 to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. As of March 29, 1997 and to the date of this
report, there has been no material development in the resolution of this
matter.
7. Subsequent events: On March 31, 1997 the Company effected the distribution
of 5,400,000 shares of common stock of TransAct to Tridex stockholders on
the basis of 1.005 shares of TransAct common stock for each share of Tridex
common stock owned. The accompanying March 29, 1997 pro forma consolidated
condensed balance sheet reflects the financial position of the Company as
if the distribution had occurred on that date.
On April 17, 1997 Tridex announced that it had entered into a letter of
intent to sell its wholly-owned subsidiary Cash Bases GB Limited to a group
comprised of the present executive directors of Cash Bases and Lloyds
Development Capital Limited for up to $6,200,000, consisting of $5,200,000
in cash, a $250,000 unsecured promissory note bearing interest at the rate
of 10% per annum payable in full on April 30, 2000, contingent payments of
up to $750,000 depending upon Cash Bases' earnings before interest and
taxes for the fiscal years ending December 31, 1998 and December 31, 1999,
and a 10% equity stake in the newly organized buyer. The proposed
transaction is subject to approval by the board of directors of Lloyds
Development Capital Limited and to the execution of a definitive agreement.
The Company expects to close the transaction in May, pending satisfactory
completion of the above. The accompanying March 29, 1997 pro forma
consolidated condensed balance sheet does not reflect this proposed
transaction.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Certain statements included in this report, including, but not limited to,
statements in this Management's Discussion and Analysis of the Results of
Operations and Financial Condition, which are not historical facts may be deemed
to contain forward looking statements with respect to events the occurrence of
which involves risks and uncertainties, including, but not limited to, the
Company's expectations regarding net sales, gross profit, operating income,
financial condition and the previously announced proposed sale of Cash Bases GB
Limited..
Results of Operations
As described in Notes 2 and 7 of the Notes to Consolidated Financial Statements,
on March 31, 1997 the Company distributed all of its 5,400,000 shares of common
stock of TransAct pro rata to the holders of record of the Company's common
stock on March 14, 1997. The Company's Consolidated Condensed Financial
Statements have been restated from historical financial statements to present
the results of operations of TransAct as discontinued operations. The
Consolidated Financial Statements may not necessarily reflect what the results
of operations or the financial position of the Company would have been if
TransAct had been a separate entity during the periods presented. The discussion
and analysis set forth below is based upon continuing operations only.
Quarter Ended March 29, 1997 Compared to Quarter Ended March 30, 1996
Consolidated net sales for the quarter ended March 29, 1997 increased $1,640,000
(21%) to $9,392,000 from $7,752,000 in the comparable quarter of the prior year.
The increase reflects greater volume of shipments of certain point-of-sale
("POS") products, including cash drawers. Sales of POS terminal systems
decreased, while sales of other POS products increased compared to the prior
year's quarter. The Company expects sales of POS terminal systems to increase
during the remainder of 1997. The sales value of cash drawers manufactured in
Great Britain and sold into other European countries was adversely impacted by
the relatively strong value of the Pound Sterling compared to other European
currencies.
Consolidated gross profit decreased $316,000 (13%) to $2,105,000 from $2,421,000
in the prior year's quarter, primarily as a result of a change in sales mix to a
lower proportion of terminal systems sold into the domestic POS market and to
the adverse impact of foreign exchange rate changes in the European markets.
Consolidated gross profit decreased to 22% of sales from 31% of sales in the
prior year's quarter. The Company expects the gross profit generated by the sale
of POS products to improve during the remainder of 1997 as the mix of sales
shifts to a larger proportion of terminal systems. With respect to its European
cash drawer operations, the Company expects that gross profit will increase
during the remainder of 1997 as a result of increases in sales prices and cost
reductions attained through redesign of products and improved manufacturing
efficiencies.
Consolidated engineering, design and product development costs increased $
11,000 (4%) to $294,000 from $283,000 in the prior year's quarter. The increase
is primarily the result of the cost of developing new POS terminal products and,
to a lesser degree, enhancing existing products.
Consolidated selling, administrative and general expenses increased $589,000
(33%) to $2,393,000 from $1,804,000 in the prior year's quarter. The increase in
selling expenses is primarily the result of more intensive efforts in the
selling of POS terminal systems, including increased advertising and sales
support personnel. Administrative and general expenses include a current period
non-cash expense of $404,000 related to a stock incentive compensation agreement
with the principal executive officers of the Company's wholly-owned subsidiary,
Ultimate Technology Corporation.
Consolidated operating income (loss) for the current quarter was a loss of
$582,000 compared to income of $334,000 in the prior year's quarter. The loss in
the current period was primarily the result of the decrease in gross profit and
the expense of the stock incentive compensation agreement discussed above.
Consolidated operating income (loss) as a percentage of sales was a 6% loss
compared to 4% gain in the prior year's quarter. The Company expects operating
margins to improve during the reminder of 1997 as a result of a more favorable
mix of sales into the domestic POS market and productivity improvements at its
European cash drawer operations.
<PAGE>
Net interest expense decreased $290,000 (93%) to $21,000 from $311,000 in the
prior year's quarter. The decrease in interest expense reflects the lower level
of indebtedness as well as interest income of $75,000, primarily earned on
temporary cash investment.
Other non-operating income, net for the current quarter consists of net realized
transactional foreign exchange losses. Other non-operating expenses in the prior
year's quarter includes a $30,000 provision for the estimated loss on disposal
of unused real estate and $15,000 of net realized transactional foreign exchange
losses.
Provision for income taxes in the current quarter reflects an estimated
effective tax rate for 1997.
Loss from continuing operations was $235,000 (or $0.05 per share) compared to
$69,000 (or $0.02 per share) in the prior year's quarter. Discontinued
operations reflect the Company's equity in the income of TransAct.
Net income for the current quarter, which includes income from discontinued
operations, was $638,000 (or $0.13 per share) as compared to $796,000 (or $0.20
per share) in the prior year's quarter. The average number of common and common
equivalent shares outstanding increased to 4,822,000 shares from 3,938,000
shares in the prior year's quarter.
Liquidity and Capital Resources
The Company's working capital at March 29, 1997 was $13,976,000 compared with
$3,300,000 at December 31, 1996. The current ratio was 3.0 : 1.0 at March 29,
1997 and 1.3 : 1.0 at December 31, 1996. The increase in working capital
reflects (a) the receipt of cash upon the exercise of options and warrants for
the purchase of common stock and (b) the decrease in the current portion of long
term debt resulting from the conversion of notes and debentures into common
stock.
The Company has a $2,000,000 Working Capital Facility (the "Working Capital
Facility") with Fleet National Bank ("Fleet"). Under this facility, the Company
is required to comply with certain financial covenants, including a minimum
tangible net worth, a maximum leverage ratio, a minimum interest coverage ratio
and a minimum current ratio, otherwise Fleet may withdraw its commitment. The
Company was in compliance with these covenants at March 29, 1997 and expects to
be in compliance with these covenants for the remainder of 1997.
During the first quarter of 1997, the Company's operating cash needs were
satisfied by cash received upon the exercise of stock options and warrants and
cash received from TransAct in payment of a $1,000,000 note. At March 29, 1997,
the Company had availability of $2,000,000 under the Working Capital Facility
and no material commitment for capital expenditures. During the remainder of
1997, the Company expects that funds generated from operations, supplemented by
existing cash balances, if necessary, will be sufficient to satisfy its needs
for working capital, scheduled debt retirements and capital expenditures,
primarily tooling for new products.
Over the long term, the Company believes that funds generated from operations
and the use of existing cash balances, if necessary, will continue to satisfy
its working capital needs, support a certain level of growth and meet scheduled
debt retirements.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11. Computation of Per Share Earnings
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K on February 21,
1997 to report that on February 12, 1997 it received a ruling
from the Internal Revenue Service confirming the tax-free
nature of the pro-rata distribution of 5,400,000 shares of
common stock of TransAct to the Company's stockholders.
<PAGE>
SIGNATURES
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.
TRIDEX CORPORATION
------------------
(Registrant)
May 9, 1997 /s/Seth M. Lukash
---------------------
Seth M. Lukash
Chairman of the Board, President, Chief
Executive Officer, and Chief Operating
May 9, 1997 /s/George T. Crandall
---------------------
George T. Crandall
Vice President and Treasurer
TRIDEX CORPORATION AND SUBSIDIARIES
Exhibit 11 Computation of Per Share Earnings
(Dollars in Thousands)
(Unaudited)
Quarters Ended
-----------------------------------
March 29, 1997 March 30, 1996
---------------- -----------------
PRIMARY:
EARNINGS:
Income (loss) from continuing $ (235) $ (69)
operations
Income from discontinued operations 873 865
---------------- -----------------
Net income $ 638 $ 796
================ =================
SHARES:
Average common shares outstanding 4,528,000 3,804,000
Dilutive effect of outstanding
options and warrants
as determined by the treasury
stock method 294,000 134,000
---------------- -----------------
4,822,000 3,938,000
================ =================
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Income (loss) from continuing $ (0.05) (0.02)
operations
Income from discontinued operations 0.18 0.22
---------------- -----------------
Net income $ 0.13 $ 0.20
================ =================
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<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 9363
<SECURITIES> 0
<RECEIVABLES> 6364
<ALLOWANCES> 118
<INVENTORY> 4778
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<PP&E> 6286
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<CURRENT-LIABILITIES> 6950
<BONDS> 946
0
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<COMMON> 1377
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<CGS> 7287
<TOTAL-COSTS> 9974
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