SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
1934
For Quarter Ended June 30, 1996 Commission File Number 0-7475
PHOTO CONTROL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0831186
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4800 Quebec Avenue North, Minneapolis, Minnesota 55428
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (612) 537-3601
- -------------------------------------------------------------------------------
Former name, former address, and former fiscal year if changes 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 twelve 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 ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at July 15, 1996
- ---------------------------- ----------------------------
Common Stock, par value $.08 1,608,163 Shares
PHOTO CONTROL CORPORATION
INDEX
PART I Page Number
ITEM 1: Financial Information
Consolidated Balance Sheet -
June 30, 1996 and December 31, 1995 3
Consolidated Statement of Operations -
Six Months and Three Months Ended
June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial
Statements 6
ITEM 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II
ITEM 2: Changes in Securities 8
ITEM 4: Results of Vote of Security Holders 8
ITEM 6: Exhibits and Reports on Form 8-K 8
<TABLE>
<CAPTION>
PHOTO CONTROL CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JUNE 30 DECEMBER 31
1996 1995
------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 67,700 $145,899
Accounts Receivable 2,005,678 1,262,540
Other Receivables 2,700 15,706
Inventories 6,324,418 6,658,336
Prepaid Expenses 13,513 351,263
----------- -----------
Total Current Assets 8,414,009 8,433,744
----------- -----------
Investments and other Assets
Cash Value of Life Insurance 229,261 215,263
Deferred Income Taxes 332,000 332,000
----------- -----------
Total Investments and other Assets 561,261 547,263
----------- -----------
Plant and Equipment
Land and Building 4,244,716 4,197,081
Machinery and Equipment 3,551,173 3,551,997
Accumulated Depreciation (4,322,159) (4,134,974)
------------ ------------
Total Plant and Equipment 3,473,730 3,614,104
----------- -----------
$12,449,000 $12,595,111
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note Payable to Bank $300,000 $450,000
Current Maturities of Long-Term Debt 120,956 130,616
Accounts Payable 957,723 1,384,830
Accrued Payroll and Employee Benefits 405,508 213,872
Accrued Expenses 106,111 120,991
Accrued Income Taxes 161,323
----------- -----------
Total Current Liabilities 2,051,621 2,300,309
----------- -----------
Long-Term Debt 565,000 600,000
----------- -----------
Deferred Compensation 525,792 522,494
----------- -----------
Stockholders' Equity
Common Stock 128,653 128,653
Additional Paid-In Capital 1,396,524 1,396,524
Retained Earnings 7,781,410 7,647,131
----------- -----------
Total Stockholders' Equity 9,306,587 9,172,308
----------- -----------
$12,449,000 $12,595,111
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PHOTO CONTROL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------- -------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $4,466,143 $3,496,583 $7,727,124 $6,540,663
---------- ---------- ---------- ----------
Cost and Expenses
Cost of Goods Sold 2,891,630 2,482,528 5,313,219 4,755,931
Marketing & Administrative 811,157 740,400 1,610,438 1,712,177
Research, Development & Engineering 246,265 309,933 557,804 709,122
Interest 22,771 33,077 44,384 52,025
---------- ---------- ---------- ----------
3,971,823 3,565,938 7,525,845 7,229,255
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes 494,320 (69,355) 201,279 (688,592)
Income Tax Provision (Benefit) 164,000 (24,000) 67,000 (247,000)
---------- ---------- ---------- ----------
Net Income (Loss) $330,320 $(45,355) $134,279 $(441,592)
========== =========== ========== ==========
Net Income (Loss) Per Common Share $ .20 $ (.03) $ .08 $ (.28)
========== =========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PHOTO CONTROL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS
ENDED JUNE 30
1996 1995
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (Loss) from operations $134,279 $(441,592)
Items not affecting cash-
Depreciation 198,972 200,286
Amortization 12,918
Deferred compensation 15,610 11,281
(Gain) Loss on sale of equipment (1,000) 8,774
Payment of deferred compensation (12,312) (12,312)
Change in:
Receivables (730,132) (344,996)
Inventories 333,918 (650,193)
Prepaid Expenses 337,750 (143,185)
Income Taxes 161,323
Accounts Payable (427,107) 325,377
Accrued Expenses 176,756 44,756
--------- ----------
Net cash provided (used) by operating activities 188,057 (988,886)
--------- -----------
Cash flows from investing activities:
Additions to plant and equipment (58,598) (161,861)
Additions to cash value of life insurance (13,998) (6,281)
Proceeds from sale of equipment 1,000 20,833
--------- ----------
Net cash used in investing activities (71,596) (147,309)
--------- -----------
Cash flow from financing activities:
Repayment of long-term debt (44,660) (11,836)
Purchase of common stock (142,816)
(Repayment) borrowing on line of credit (150,000) 1,000,000
Proceeds from stock option exercised 54,835
--------- ----------
Net cash used in financing activities (194,660) 900,183
--------- ----------
Change in cash (78,199) (236,012)
Cash at beginning of period 145,899 307,227
--------- ----------
Cash at end of period $ 67,700 $ 71,215
========= ==========
See Accompanying notes to consolidated financial statements
</TABLE>
PHOTO CONTROL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1
Notes to financial statements presented herein do not include all the
footnotes normally presented in the Company's annual report to
stockholders.
The accompanying financial statements reflect, in the opinion of
management, all normal and recurring adjustments necessary to a fair
presentation of financial position, results of operations, and cash
flows for the interim periods. The results for interim periods are not
necessarily indicative of results to be expected for the year.
NOTE 2
Inventories are analyzed as follows:
JUNE 30 DECEMBER 31
1996 1995
---------- ----------
Raw Materials $4,094,635 $4,272,903
Work in Progress 1,107,686 819,686
Finished Goods 1,122,097 1,565,747
---------- ----------
$6,324,418 $6,658,336
========== ==========
NOTE 3
Net Income per common share is computed based on the weighted average
number of common shares outstanding and the potentially dilutive
effective of stock options during the respective periods. Stock option
dilution is computed under the Treasury Stock method using the average
market price of the Company's common stock.
PHOTO CONTROL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
Sales for the second quarter ended June 30, 1996 were $4,466,000, an increase of
27.7% from the same quarter in the prior year. Sales for the six months ended
June 30, 1995 were $7,727,000, an increase of 18.1% over the same period in the
prior year. The increase in sales was primarily due to a increase in lighting
sales of $816,000 for the second quarter and $1,505,000 increase for the year to
date period, as compared to the same periods in the prior year. The lighting
sales increase is substantially due to sales of OEM equipment to two customers.
OEM equipment is sold direct and not marketed through the dealer sales
organization. It is not certain if OEM sales of this level will continue.
Printer sales increased by $121,000 and camera sales by $33,000 for the second
quarter of 1996 from the same quarter in the prior year. Printer sales for the
six months ended June 30, 1995 declined by $170,000 and camera sales declined
$149,000. The printer and camera sales decline reflect a slight softening in the
markets for these products.
The gross profit margin for the second quarter of 1996 increased to 35.3% from
29.0% in the second quarter of 1995. The gross profit margin for the six months
ended June 30, 1996 increased to 31.2% from 27.3% in the prior year period. The
gross profit margin increases are due to higher levels of production in 1996 as
compared to 1995 and a 7% price increase on the lighting products. Marketing and
administrative expenses decreased as a percentage of sales to 18.1% for the
second quarter of 1996 from 21.1% for the second quarter of 1995 and decreased
to 20.8% for the first six months of 1996 from 26.2% for the same period in
1995. These decreases resulted from decreased marketing expense due to a
restructuring of the commission plans while sales were increasing.
Research, development and engineering expense decreased by $64,000 for the
second quarter of 1996 compared to the second quarter of 1995 and decreased by
$151,000 for the first six months of 1996 compared to the same period of 1995 as
the result of employing fewer engineering personnel. As a result of decreased
outstanding debt, interest expense decreased by $11,000 in the second quarter of
1996 compared to the second quarter of 1995 and decreased $8,000 dollars for the
first six months of 1996 compared to the same period in 1995.
LIQUIDITY & CAPITAL RESOURCES
Cash decreased $78,000 to $68,000 since December 31, 1995. Operations for the
six months ended June 30, 1996 resulted in $188,000 of cash flow. As a result of
this cash flow, the Company paid its line of credit down to $300,000 from
$450,000 at December 31, 1995. The Company can borrow up to $1,500,000 under its
line of credit.
Since July 1989 a total of $2,000,000 has been authorized for the stock
repurchase program and $402,000 remains available at June 30, 1996 for
additional repurchases.
The Company believes that its cash flow from operations and available borrowing
capacity will be sufficient to finance operations, the stock repurchase program
and capital requirements.
ITEM 2. CHANGES IN SECURITIES
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
ADDITIONAL
NUMBER OF PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 1,608,163 $128,653 $1,396,524 $7,647,131
Net Income 134,279
--------- -------- ---------- ----------
Balance at June 30, 1996 1,608,163 $128,653 $1,396,524 $7,781,410
========= ======== ========== ==========
</TABLE>
ITEM 4. RESULTS OF VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on May 11, 1996 the following matters
were approved by the Company's stockholders:
1. Set the number of directors at six (6). The voting results were:
1,458,616 For, 34,223 Against and 4,999 Abstained.
2. Elected Messrs.Thomas J. Cassady and Joe M. Kilgore to the Board of
Directors for a three-year term or until the election and
qualification of a respective successor.
The voting results were as follows:
FOR TO WITHHOLD AUTHORITY
Thomas J. Cassady 1,454,461 43,377
Joe M. Kilgore 1,452,492 45,346
Messrs. Leslie A. Willig, George A. Kiproff, James R. Loomis, and
William L. Norman are directors of the Company whose terms of office
continued after the annual meeting of stockholders.
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
A. Exhibits - None
B. Reports on Form 8-K - None
PHOTO CONTROL CORPORATION
(Registrant)
- ------------------ --------------------------------------
Date L. A. Willig, Chairman of the Board
- ------------------ --------------------------------------
Date C. R. Jackels, Vice President-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 67,700
<SECURITIES> 0
<RECEIVABLES> 2,005,678
<ALLOWANCES> 0
<INVENTORY> 6,324,418
<CURRENT-ASSETS> 8,414,009
<PP&E> 7,795,889
<DEPRECIATION> 4,322,159
<TOTAL-ASSETS> 12,449,000
<CURRENT-LIABILITIES> 2,501,621
<BONDS> 565,000
0
0
<COMMON> 128,653
<OTHER-SE> 9,177,934
<TOTAL-LIABILITY-AND-EQUITY> 12,449,000
<SALES> 4,466,143
<TOTAL-REVENUES> 4,466,143
<CGS> 2,891,630
<TOTAL-COSTS> 2,891,630
<OTHER-EXPENSES> 1,057,422
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,771
<INCOME-PRETAX> 494,320
<INCOME-TAX> 164,000
<INCOME-CONTINUING> 330,320
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330,320
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
</TABLE>
