SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
[ ] 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 0-11069
INTERPOINT CORPORATION
Incorporated under the laws I.R.S. Identification
of the State of Washington No. 91-0850556
10301 Willows Road
P.O. Box 97005
Redmond, Washington 98073-9705
(206) 882-3100
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.
[ X ] Yes [ ] No
The total shares of common stock without par value outstanding at the end of
the quarter reported is 3,825,185.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial statements
<TABLE>
CONSOLIDATED BALANCE SHEETS
July 31, 1995 and October 31, 1994
<CAPTION>
July 31, 1995 October 31, 1994
(Unaudited)
----------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 166,618 $ 541,805
Trade accounts receivable, less
allowance for doubtful accounts
of $132,000 in 1995 and $108,000
in 1994 14,419,055 12,095,295
Inventories 16,671,318 14,453,920
Prepaid expenses and other 453,524 399,206
Deferred income taxes 461,400 467,830
---------- ----------
Total current assets 32,171,915 27,958,056
Property, plant and equipment, at cost:
Land 1,324,988 1,324,988
Buildings and improvements 4,879,732 4,890,474
Machinery and equipment 12,710,610 11,946,535
Office equipment 2,809,574 2,620,412
Leasehold improvements 509,802 405,929
---------- ----------
22,234,706 21,188,338
Less accumulated depreciation and
amortization 13,349,192 11,950,335
---------- ----------
Net property, plant and equipment 8,885,514 9,238,003
Investment in common stock 1,473,103 1,331,669
Other assets 637,019 611,593
---------- ----------
$ 43,167,551 $ 39,139,321
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable $ 8,015,111 $ 6,253,840
Accounts payable 4,631,507 4,584,858
Income taxes payable 740,148 230,409
Accrued wages and commissions 2,881,296 2,484,036
Other current liabilities 557,158 564,131
Long-term debt, current portion 1,384,955 1,504,502
---------- ----------
Total current liabilities 18,210,175 15,621,776
Long-term debt 3,364,386 4,029,172
Accrued retirement benefits 572,260 518,451
Other liabilities 93,520 112,870
Deferred income taxes 831,446 834,387
Commitments:
Stockholders' equity:
Preferred stock, 500,000 shares
authorized, none issued -- --
Common stock, 10,000,000 shares
authorized, 3,825,185 shares
issued and outstanding, (3,802,272
in 1994) 504,856 shares reserved 4,656,361 4,561,859
Retained earnings 14,945,801 13,125,229
Cumulative translation adjustments 493,602 335,577
---------- ----------
Total stockholders' equity 20,095,764 18,022,665
---------- ----------
$ 43,167,551 $ 39,139,321
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Three months and nine months ended July 31, 1995 and 1994
(Unaudited)
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
---------------------- ---------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
---------- ---------- ---------- ----------
Net sales $18,889,634 $14,307,243 $48,472,739 $38,093,642
Cost of sales 12,869,726 9,625,300 33,136,411 26,743,019
---------- ---------- ---------- ----------
Gross profit 6,019,908 4,681,943 15,336,328 11,350,623
Selling and administrative 3,780,121 2,777,318 10,782,410 7,801,880
Research and development 560,168 406,882 1,420,660 1,290,510
Acquisition expenses -- -- -- 728,743
---------- ---------- ---------- ----------
Operating profit 1,679,619 1,497,743 3,133,258 1,529,490
Other expenses (net) 228,685 210,613 691,148 568,421
Equity in net income
of an affiliate 101,569 22,559 141,434 61,600
---------- ---------- ---------- ----------
Income before provision
for income taxes 1,552,503 1,309,689 2,583,544 1,022,669
Provision for income taxes 458,815 399,000 762,972 364,000
---------- ---------- ---------- ----------
Net income $ 1,093,688 $ 910,689 $ 1,820,572 $ 658,669
========== ========== ========== ==========
Average number of common
and common equivalent
shares outstanding 4,013,866 3,984,341 3,988,567 3,997,111
========== ========== ========== ==========
Net income per share $ .27 $ .23 $ .46 $ .16
========== ========== ========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1995 and 1994
(Unaudited)
<CAPTION>
<S> <C> <C>
1995 1994
---------- ----------
Operating activities:
Net income $ 1,820,572 $ 658,669
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,498,382 1,334,982
Deferred income tax -- (123,802)
Equity in net income of an affiliate (141,434 (61,600)
Net book value of assets retired 3,627 11,917
Foreign currency translation of intercompany
debt (45,984) --
Change in assets and liabilities:
Receivables (2,151,332) (2,388,667)
Inventories (2,155,830) (1,030,763)
Prepaid expenses and other (46,576) 130,818
Other assets (71,521) 10,853
Accounts payable 5,871 1,231,498
Income taxes payable 513,219 (19,824)
Accrued liabilities 353,323 154,196
Accrued retirement benefits 56,622 53,253
Other liabilities (19,350) (7,604)
---------- ----------
Net cash used in operating activities (380,411) (46,074)
Investing activities:
Purchases of property, plant and equipment (1,080,004) (825,520)
Acquisition of ADIC Europe SARL -- (540,014)
---------- ----------
Net cash used in investing activities (1,080,004) (1,365,534)
Financing activities:
Net proceeds from loans payable 1,761,271 2,064,870
Proceeds from long-term borrowings 312,045 154,807
Repayment of long-term debt (1,096,378) (1,987,919)
Proceeds from issuance of common stock for stock
options 94,501 81,614
---------- ----------
Net cash provided by financing activities 1,071,439 313,372
Effect of exchange rate changes on cash 13,789 402
---------- ----------
Net decrease in cash (375,187) (1,097,834)
Cash at beginning of period 541,805 1,396,618
---------- ----------
Cash at end of period $ 166,618 $ 298,784
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1995
(Unaudited)
Note 1. Basis of presentation - The accompanying condensed financial
statements are unaudited and should be read in conjunction with the
Interpoint financial statements included in the Company's fiscal 1994
Annual Report on Form 10-K. Operating results for the nine-month period
ended July 31, 1995, are not necessarily indicative of the results that
may be expected for the full year. In the opinion of management, all
adjustments necessary for a fair presentation of interim operating results
are reflected herein.
Note 2. Per share calculations - Per-share calculations are determined on
the weighted average number of common and common equivalent shares
outstanding during each period.
Note 3. Merger agreement with Advanced Digital Information Corporation.
On February 11, 1994, Interpoint Corporation acquired Advanced Digital
Information Corporation (ADIC) pursuant to an Agreement and Plan of Merger
dated October 29, 1993, in which ADIC was merged into a wholly-owned
subsidiary of Interpoint. Pursuant to the terms of the merger agreement,
each outstanding share of Common Stock of ADIC was converted into .55 shares
of Interpoint Common Stock. A total of 1,340,255 shares of Common Stock of
Interpoint were issued to ADIC shareholders. The acquisition was accounted
for as a pooling-of-interests in accordance with Accounting Principles Board
Opinion No. 16 "Business Combinations."
All amounts are presented as if Interpoint and ADIC had been combined as of
the beginning of the period presented.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Net sales increased 32 percent from the third quarter of fiscal 1994 to the
comparable quarter of 1995, primarily on the strength of ADIC sales. ADIC
Europe, which was formerly a reseller of ADIC products, was acquired in June
1994 and accounts for a substantial portion of this increase. The 1995
quarter shows strong growth both in library systems and in other
complementary tape storage products.
Sales for the Microelectronics Group also increased for the period, with
growth in both the Power Products and Custom Microelectronics divisions,
although the Power Products Division showed lower growth than expected due
to the rescheduling of certain large orders. Fiscal year bookings have been
strong, resulting in a microelectronics backlog of $42 million.
Continued comparative growth is expected over the next few quarters with
sales increases anticipated from both the Microelectronics divisions and
from ADIC.
Gross margin for the quarter is 32 percent, down from 33 percent in the
comparable 1994 quarter. This drop results from a change in the overall mix
of products sold by the Company. Because of the significant growth in ADIC
sales, these sales comprise a larger percentage of total sales in 1995 than
in 1994, while power products are decreasing as a percentage of total sales.
The shift away from higher margin power products to lower margin ADIC
products resulted in a reduction of gross margin which was partially offset
by improved Microelectronics Group gross margin. Microelectronics Group
gross margin percentage increased due both to greater volumes and a
continuing trend to produce more of the power products in the Kaohsiung,
Taiwan facility.
Sales and administrative costs increased by $1 million in 1995 over the
comparable quarter but remained at 20 percent of net sales. Costs for ADIC
Europe, which were included for only part of the 1994 period, comprised the
largest portion of the increase. Increased sales and marketing costs for
both the Power Products Division and ADIC U.S. operations were significant
as well.
Research and development costs have increased in both the ADIC and Power
Products divisions and relate to new products being introduced in the fourth
quarter.
Other expenses are comprised primarily of interest expense and have
increased as a result of higher short-term borrowings and higher interest
rates. Interest expense related to long-term debt has decreased as these
loans are paid down.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1995, the primary source of cash was short-term borrowings on bank
lines of credit. The domestic line of $8.5 million bears interest at the
bank's prime rate or adjusted LIBOR rate. The line is subject to certain
restrictive covenants, however, the Company is well within these limits. In
addition to the working line of credit, the Company has a financing line with
which to purchase capital equipment. At July 31, 1995, Interpoint had
approximately $400 thousand of capital expenditures to be reimbursed under
this line.
Significant increases can be seen in trade accounts receivable and
inventories for the fiscal year to date. The increase in receivables
is attributable to the increase in quarterly sales, much of which shipped in
July. Inventories have increased in both the ADIC and microelectronics
segments. As expected, inventory growth has stabilized somewhat in the third
quarter, although balances remain at higher than desirable levels. The
rescheduling of certain power product orders contributed to inventory growth
for the period. The Company continues to expect stable inventory throughout
the remainder of the year, and anticipates that the Company will generate
cash from operations for the year as a whole. The Company believes that it
has sufficient liquidity to meet its cash requirements for the next twelve
months.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other information.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
<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.
INTERPOINT CORPORATION
Dated: September 14, 1995 /s/ Peter H. van Oppen
-----------------------
Peter H. van Oppen
Chairman
Chief Executive Officer
Dated: September 14, 1995 /s/ Leslie S. Rock
-------------------------
Leslie S. Rock
Vice President, Treasurer
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the third
quarter 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JUL-31-1995
<CASH> 167
<SECURITIES> 0
<RECEIVABLES> 14,419
<ALLOWANCES> 132
<INVENTORY> 16,671
<CURRENT-ASSETS> 32,172
<PP&E> 22,235
<DEPRECIATION> 13,349
<TOTAL-ASSETS> 43,168
<CURRENT-LIABILITIES> 18,210
<BONDS> 3,364
<COMMON> 4,656
0
0
<OTHER-SE> 14,946
<TOTAL-LIABILITY-AND-EQUITY> 43,168
<SALES> 48,473
<TOTAL-REVENUES> 48,473
<CGS> 33,136
<TOTAL-COSTS> 33,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 691
<INCOME-PRETAX> 2,584
<INCOME-TAX> 763
<INCOME-CONTINUING> 1,821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,821
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
