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 31, 1998
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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:
--------------------- ----------------------
Commission file number:
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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
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(Address of principal executive offices)
(Zip Code)
(203) 226-1144
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(Registrant's telephone number, including area code)
Former address:
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(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 May 13, 1998
- --------------- ------------------------
Common stock, no par value 6,351,124
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<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 31, 1998 and December 31, 1997 3
Consolidated Condensed Statements of
Operations for the Quarters Ended March
31, 1998 and March 29, 1997 4
Consolidated Condensed Statements of Cash
Flows for the Quarters Ended March 31,
1998 and March 29, 1997 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
the Results of Operations and Financial
Condition 7
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
EXHIBIT INDEX
Exhibit 11 Computation of Per Share Earnings 10
2
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
(Unaudited)
----------------------------------
March 31, 1998 December 31, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 16,708 $ 11,839
Short term investments 4,403
Receivables 3,445 3,043
Inventories 3,839 2,987
Deferred tax assets 659 659
Other current assets 158 343
----------------------------------
Total current assets 24,809 23,274
----------------------------------
Plant and equipment 2,511 2,436
Less accumulated depreciation (1,299) (1,195)
----------------------------------
1,212 1,241
----------------------------------
Excess of cost over fair value of
net assets acquired 2,392 2,517
Other assets 506 366
Investment in net assets of
discontinued operations 605
----------------------------------
$ 28,919 $ 28,003
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,302 $ 1,820
Accrued liabilities 2,207 1,806
Income taxes payable 129 158
----------------------------------
Total current liabilities 4,638 3,784
----------------------------------
Shareholders' equity:
Common stock no par value 1,377 1,377
Additional paid-in capital 25,273 25,273
Retained deficit (626) (673)
Receivable from sale of stock (801) (816)
Common shares held in treasury, at cost (942) (942)
----------------------------------
24,281 24,219
----------------------------------
$ 28,919 $ 28,003
==================================
See notes to consolidated condensed financial statements.
3
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in Thousands except Per Share Amounts)
(Unaudited)
Quarters Ended
--------------------------------
March 31, 1998 March 29, 1997
Net sales $ 6,212 $ 5,546
Operating costs and expenses:
Cost of sales 4,775 4,340
Engineering, design and product
development costs 308 160
Selling, administrative and
general expenses 1,263 1,605
--------------------------------
6,346 6,105
--------------------------------
Operating loss (134) (559)
Other income (expense):
Interest income, net 226 9
Other, net 1 (2)
--------------------------------
227 7
--------------------------------
Income (loss) from continuing
operations before income taxes 93 (552)
Provision (benefit) for income taxes 46 (377)
--------------------------------
Income (loss) from continuing
operations 47 (175)
Income from discontinued
operations (Note 2) 813
--------------------------------
Net income $ 47 $ 638
================================
Earnings (loss) per share - basic:
Income (loss) from continuing operations $ 0.01 $ (0.05)
Income from discontinued operations 0.19
--------------------------------
Net income $ 0.01 $ 0.14
================================
Earnings (loss) per share - diluted:
Income (loss) from continuing operations $ 0.01 $ (0.04)
Income from discontinued operations 0.17
--------------------------------
Net income $ 0.01 $ 0.13
================================
Weighted average common shares outstanding:
Basic 5,351,000 4,528,000
================================
Diluted 5,592,000 4,822,000
================================
See notes to consolidated condensed financial statements.
4
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------
March 31, 1998 March 29, 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 47 $ 638
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from
discontinued operations (813)
Stock incentive compensation expense 404
Depreciation and amortization 229 216
Changes in operating assets and liabilities:
Receivables (402) (148)
Inventory (852) 607
Other current assets (65) (63)
Other assets (59) 13
Accounts payable, accrued liabilities and
income taxes payable 854 (1,017)
---------------------------------
Net cash used in operating activities (248) (163)
---------------------------------
Cash flows from investing activities:
Purchases of plant and equipment (75) (129)
Proceeds from sale of assets 855
Receipt of principal of note receivable from
TransAct 1,000
Deferred acquisition costs (81)
---------------------------------
Net cash provided by investing activities 699 871
---------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options and
warrants 15 5,503
Net decrease in short term investments 4,403
Net transactions with discontinued operations (26)
---------------------------------
Net cash provided by financing activities 4,418 5,477
---------------------------------
Increase in cash and cash equivalents 4,869 6,185
Cash and cash equivalents at beginning of
period 11,839 2,787
---------------------------------
Cash and cash equivalents at end of period $ 16,708 $ 8,972
=================================
Supplemental cash flow information:
Interest paid $ 1 $ 67
Income taxes paid 76 86
Supplemental non-cash investing and
financing activities:
Conversion of convertible debentures to
common stock $ 3,710
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
TRIDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. General:
In the opinion of Tridex Corporation ("Tridex" or 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 31, 1998,
the results of its operations for the quarters ended March 31, 1998 and
March 29, 1997 and changes in its cash flows for the quarters ended March
31, 1998 and March 29, 1997. The December 31, 1997 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, 1997.
The results of operations for the quarters ended March 31, 1998 and March
29, 1997 are not necessarily indicative of the results to be expected for
the full year.
2. Discontinued operations:
Discontinued operations consist of the Company's former subsidiaries
TransAct Technologies Incorporated ("TransAct") and Cash Bases GB Limited
("Cash Bases"). The stock of TransAct owned by the Company was distributed
to Tridex shareholders in March 1997. The Company's investment in Cash
Bases was sold in May 1997. The final proceeds of the sale of Cash Bases
were received in March 1998. The consolidated financial statements have
been restated to present the results of operations of TransAct and Cash
Bases as discontinued operations.
3. Earnings (loss) per common share:
Basic earnings (loss) per common share is based on the weighted average
number of common shares outstanding during the period. Diluted earnings
per common share assumes the exercise of options and warrants and the
conversion of dilutive securities, when the result is dilutive.
4. Inventories: Components of inventory are:
March 31, 1998 December 31, 1997
------------------------------------
(Dollars in Thousands)
Raw materials and component parts $2,606 $2,097
Work-in-process 70 75
Finished goods 1,163 815
====================================
$3,839 $2,987
====================================
5. Commitments and contingencies:
The Company is involved in an environmental matter discussed in Note 8 to
the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. As of March 31,
1998 and to the date of this report, there has been no material
development in the resolution of this matter.
6. Subsequent events:
On April 17, 1998, the Company purchased all of the issued and outstanding
shares of privately-held Progressive Software, Inc. ("Progressive"), a
point-of-sale ("POS") software and systems provider for the restaurant and
specialty retail industries. Progressive's 1997 sales were approximately
$34 million.
The purchase price was approximately $48.5 million, comprised of $33.9
million in cash, $5.0 million in Tridex common stock and assumption of
$9.6 million of Progressive's debt. The purchase price is subject to post
closing adjustment based upon an audited closing date balance sheet.
Financing of the transaction consisted of a $12.0 million Senior Term Loan
from Fleet National Bank ("Fleet"), the purchase by Massachusetts Mutual
Life Insurance Company, MassMutual Corporate Investors, MassMutual
Participation
6
<PAGE>
Investors and MassMutual Corporate Value Partners Limited (the "MassMutual
Investors"), of $11.0 million Senior Subordinated Notes and $2.0 million
in shares of Tridex common stock, a $2.2 million borrowing from a new $8.0
million Revolving Credit Facility with Fleet, and $16.3 million in cash
from Tridex. Additionally, Tridex agreed to seek shareholder approval of
the issuance to the MassMutual Investors of a warrant to purchase 350,931
shares of Tridex common stock at $7.00 per share. If the shareholders vote
to approve the warrants, the interest rate on the senior subordinated
notes will be reduced from 19% to 12%.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements included in this report, including, but not limited to,
statements in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, 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 and
financial condition.
Results of Operations
As described in Note 2 of the Notes to Consolidated Financial Statements, the
Company completed the spin-off of TransAct in March 1997 and the sale of Cash
Bases in May 1997. The Selected Financial Data are derived from the Company's
Consolidated Financial Statements, which have been restated from historical
financial statements to present the results of operations of TransAct and Cash
Bases as discontinued operations for all periods presented. 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 and Cash
Bases had been separate entities during the periods presented. The discussion
and analysis set forth below is based upon continuing operations only.
Quarter Ended March 31, 1998 Compared to Quarter Ended March 29, 1997
Consolidated net sales for the quarter ended March 31, 1998 increased $666,000
(12%) to $6,212,000 from $5,546,000 in the comparable quarter of the prior year.
The increase reflects greater volume of shipments of certain point-of-sale
("POS") component products, particularly complete POS terminal systems.
Consolidated gross profit increased $231,000 (19.2%) to $1,437,000 from
$1,206,000 in the prior year's quarter, primarily as a result of the greater
volume of sales. Consolidated gross profit margin increased to 23.1% of sales
from 21.7% of sales in the prior year's quarter as a result of sales mix to a
higher proportion of POS terminal systems.
Consolidated engineering, design and product development costs increased
$148,000 (93%) to $308,000 from $160,000 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 decreased $342,000
(21%) to $1,263,000 from $1,605,000 in the prior year's quarter. Selling
expenses increased primarily due to the result of more intensive efforts in
selling POS terminal systems, including increased advertising and sales support
personnel. The prior year's quarter included a non-cash expense of $404,000
related to a stock incentive compensation agreement with the principal officers
of the Company's wholly-owned subsidiary, Ultimate Technology Corporation.
Consolidated operating loss for the current quarter was $134,000 compared to a
loss of $559,000 in the prior year's quarter. The decrease in the operating loss
was the result of the increase in gross profit and the absence of the non-cash
stock incentive compensation expense, offset by increases in engineering, design
and product development expense and selling expense. Consolidated operating loss
as a percentage of sales was a 2% loss compared to a 10% loss in the prior
year's quarter.
Net interest income for the quarter was $226,000 compared to a net interest
income of $9,000 in the prior year's quarter. Interest income consists of
interest earned on temporary cash investments. The Company had no debt
outstanding during the quarter.
Provision for income taxes in the current quarter reflects an estimated
effective tax rate for 1998.
7
<PAGE>
Income from continuing operations was $47,000 (or $0.01 per share) compared to a
loss from continuing operations of $175,000 (or $0.05 per share) in the prior
year's quarter.
Net income for the current quarter was $47,000 (or $0.01 per share) as compared
to $638,000 (or $0.14 per share) in the prior year's quarter, which include
income from discontinued operations of $813,000 (or $0.19 per share).
Discontinued operations reflect the Company's equity in the income of TransAct
and Cash Bases. The average number of common shares outstanding increased to
5,351,000 shares from 4,528,000 shares in the prior year's quarter.
Liquidity and Capital Resources
The Company's working capital at March 31, 1998 was $20,171,000 compared with
$19,490,000 at December 31, 1997. The current ratio was 5.3 : 1.0 at March 31,
1998 and 6.2 : 1.0 at December 31, 1997.
At March 31, 1998, the Company had a $2.0 million Working Capital Facility (the
"Working Capital Facility") with Fleet. Under this facility, the Company was
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 31, 1998 and on April
17, 1998 when the Working Capital Facility was replaced. At March 31, 1998, the
Company had availability of $2.0 million under the Working Capital Facility and
no material commitment for capital expenditures.
On April 17, 1998, the Company entered into a new Credit Agreement with Fleet
which provides for a $12.0 million term loan facility and an $8.0 million
working capital revolving credit facility. This credit agreement supercedes the
Fleet $2.0 million Working Capital Facility. Under the new Credit Agreement, the
Company is required to comply with certain financial covenants, including a
minimum tangible capital base, a maximum leverage ratio, a minimum interest
coverage ratio, and a minimum fixed coverage ratio. The Company used the entire
term loan facility and $2.2 million of the working capital revolving credit
facility to finance the purchase of Progressive.
Also on April 17, 1998, the MassMutual Investors purchased at par $11.0 million
of the Company's 19% Senior Subordinated Notes and 284,714 shares of its common
stock at a purchase price of $7.00 per share. The Company agreed to issue to the
MassMutual Investors warrants to purchase 350,931 shares of its common stock at
$7.00 a share, subject to stockholder approval. If the shareholders vote to
approve the warrants, the interest rate on the senior subordinated notes will be
reduced from 19% to 12%. The vote is scheduled for the annual meeting of
shareholders on May 27, 1998. Under the securities purchase agreement, the
Company is required to comply with certain financial covenants, including a
minimum consolidated net worth, a minimum fixed charges coverage ratio, and a
maximum leverage ratio. The Company used the entire proceeds from the sale of
notes and stock to finance the purchase of Progressive.
As part of the purchase price for Progressive, the Company issued to the sole
shareholder of Progressive 714,000 shares of the Company's common stock at a
price of $7.00 per share.
The Company believes that funds generated from operations and borrowings under
the working capital revolving credit facility of the new Credit Agreement, if
necessary, will continue to satisfy its working capital needs, support a certain
level of growth and meet scheduled debt retirements.
8
<PAGE>
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 May 1, 1998
to report that on April 17, 1998 it completed the acquisition
of Progressive Software, Inc.
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 14, 1998 /s/Seth M. Lukash
-------------------------
Seth M. Lukash
Chairman of the Board, President, Chief
Executive Officer, and Chief Operating
Officer
May 14, 1998 /s/Daniel A. Bergeron
-------------------------
Daniel A. Bergeron
Vice President and Chief Financial Officer
May 14, 1998 /s/George T. Crandall
-------------------------
George T. Crandall
Vice President and Treasurer
9
TRIDEX CORPORATION AND SUBSIDIARIES
Exhibit 11 Computation of Per Share Earnings
(Dollars in Thousands)
(Unaudited)
Quarters Ended
-------------------------------
March 31, 1998 March 29, 1997
BASIC:
EARNINGS:
Income (loss) from continuing operations $ 47 $ (175)
Income from discontinued operations 813
-------------------------------
Net income available to common stockholders $ 47 $ 638
===============================
SHARES:
Weighted average common shares outstanding 5,351,000 4,528,000
===============================
EARNINGS PER SHARE - BASIC:
Income (loss) from continuing operations $ 0.01 $ (0.05)
Income from discontinued operations 0.00 0.19
-------------------------------
Net income $ 0.01 $ 0.14
===============================
DILUTED:
EARNINGS:
Income (loss) from continuing operations $ 47 $ (175)
Income from discontinued operations 813
-------------------------------
Net income available to common stockholders $ 47 $ 638
===============================
SHARES:
Weighted average common shares outstanding 5,351,000 4,528,000
Dilutive effect of outstanding options and
warrants as determined by the treasury
stock method 241,000 294,000
-------------------------------
5,592,000 4,822,000
===============================
EARNINGS PER SHARE - DILUTED:
Income (loss) from continuing operations $ 0.01 $ (0.04)
Income from discontinued operations 0.00 0.17
-------------------------------
Net income $ 0.01 $ 0.13
===============================
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A) Tridex
Corporation Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,708
<SECURITIES> 0
<RECEIVABLES> 3,465
<ALLOWANCES> 20
<INVENTORY> 3,839
<CURRENT-ASSETS> 24,809
<PP&E> 2,511
<DEPRECIATION> 1,299
<TOTAL-ASSETS> 28,919
<CURRENT-LIABILITIES> 4,638
<BONDS> 0
1,377
0
<COMMON> 0
<OTHER-SE> 22,904
<TOTAL-LIABILITY-AND-EQUITY> 28,919
<SALES> 6,212
<TOTAL-REVENUES> 6,512
<CGS> 4,775
<TOTAL-COSTS> 6,346
<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (226)
<INCOME-PRETAX> 93
<INCOME-TAX> 46
<INCOME-CONTINUING> 47
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
