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 March 31, 1997 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 latest practical date.
Class Outstanding at April 30, 1997
- ---------------------------- -----------------------------
Common Stock, par value $.08 1,604,163 Shares
PHOTO CONTROL CORPORATION
INDEX
PART I Financial Information Page Number
Item 1: Financial Statements
Consolidated Balance Sheet -
March 31, 1997 and December 31, 1996 3
Consolidated Statement of Operations
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial
Statements 6
Item 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II Other Information
Item 2: Changes in Securities 9
Item 6: Exhibits and Reports on Form 8-K 9
<TABLE>
<CAPTION>
PHOTO CONTROL CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 December 31
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 139,062 $ 736,031
Accounts Receivable 869,569 522,279
Other Receivables 2,700 2,700
Inventories 5,773,625 5,804,503
Prepaid Expenses 239,433 270,101
------------ ------------
Total Current Assets 7,024,389 7,335,614
------------ ------------
Investments and other Assets
Cash Value of Life Insurance 247,557 238,867
Deferred Income Taxes 254,000 254,000
------------ ------------
Total Investments and other Assets 501,557 492,867
------------ ------------
Plant and Equipment
Land and Building 4,240,778 4,240,777
Machinery and Equipment 3,450,706 3,363,630
Accumulated Depreciation (4,255,545) (4,162,977)
------------ ------------
Total Plant and Equipment 3,435,939 3,441,430
------------ ------------
$ 10,961,885 $ 11,269,911
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long-Term Debt 127,590 111,296
Accounts Payable 579,802 453,572
Accrued Payroll and Employee Benefits 350,396 303,320
Accrued Expenses 139,701 116,040
------------ ------------
Total Current Liabilities 1,197,489 984,228
------------ ------------
Long-Term Debt 530,000 530,000
------------ ------------
Deferred Compensation 531,777 528,600
------------ ------------
Stockholders' Equity
Common Stock 128,333 128,333
Additional Paid-In Capital 1,393,484 1,393,484
Retained Earnings 7,180,802 7,705,266
------------ ------------
Total Stockholders' Equity 8,702,619 9,227,083
------------ ------------
$ 10,961,885 $ 11,269,911
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
PHOTO CONTROL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31
---------------------------
1997 1996
----------- -----------
Sales $ 2,246,642 $ 3,260,981
Cost and Expenses
Cost of Goods Sold 1,839,319 2,421,589
Marketing and Administrative 820,520 799,281
Research, Development & Eng. 296,120 311,539
Interest 9,147 21,613
----------- -----------
2,965,106 3,554,022
----------- -----------
Loss Before Income Tax (718,464) (293,041)
Income Tax Benefit (194,000) (97,000)
----------- -----------
Net Loss (524,464) (196,041)
----------- ===========
Net Loss Per Common Share $ (.33) $ (.12)
=========== ===========
See accompanying notes to consolidated financial statements.
PHOTO CONTROL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
March 31
--------
1997 1996
--------- ---------
Cash flows from operating activities:
Net Loss from operations $(524,464) $(196,041)
Items not affecting cash-
Depreciation 92,578 99,486
Deferred compensation 9,333 7,698
Payment of deferred compensation (6,156) (6,156)
Change in:
Receivables (347,290) (166,987)
Inventories 30,878 117,246
Prepaid expenses 30,668 (43,189)
Accounts payable 126,230 (240,499)
Accrued expenses 70,737 50,878
--------- ---------
Net cash used in operating
expenses (517,486) (377,564)
--------- ---------
Cash flows from investing activities:
Additions to plant and equipment (87,087) (56,697)
Additions to cash value of life
insurance (8,690) (5,307)
--------- ---------
Net cash used in investing
activities: (95,777) (62,004)
--------- ---------
Cash flow from financing activities:
Borrowing (repayment) on line of credit 300,000
Repayment of long-term debt (5,431) (4,831)
Proceeds from note payable 21,725
--------- ---------
Net cash provided by financing
activities 16,294 295,169
--------- ---------
Change in cash (596,969) (144,399)
Cash at beginning of period 736,031 145,899
--------- ---------
Cash at end of period $ 139,062 $ 1,500
========= =========
See accompanying notes to consolidated financial statements.
PHOTO CONTROL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(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:
March 31 December 31
1997 1996
---- ----
Raw Materials $3,695,944 $3,851,706
Work in Progress 774,773 559,321
Finished Goods 1,302,908 1,393,476
---------- ----------
$5,773,625 $5,804,503
========== ==========
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 OPERATIONS
OPERATIONS
Sales for the first quarter ended March 31, 1997, were $2,246,000, a decrease of
31.1% and $1,014,000 from the first quarter in 1996. The decrease in sales was
primarily due to decline of OEM and dealer sales in the flash equipment product
line of $688,000. The camera product line accounts for the balance of the
decrease in sales. A new zoom lens camera has been introduced and will be
available for shipment in June. The volume of sales that will be realized from
the new zoom lens camera is uncertain. Sales of the third product line,
printers, remained level with 1996. Sales for the second quarter of 1997 are
expected to be below sales for the second quarter of 1996; however, this trend
is not necessarily indicative of year-end results.
The gross profit margin for the first quarter of 1997 decreased to 18.1%
compared to 25.7% in the first quarter of 1996 reflecting the under-absorption
of fixed overhead due to the 31.1% sales volume decline.
Research, development and engineering expenses decreased by $15,000 for the
first quarter of 1997 compared to the first quarter of 1996 as the result of
employing fewer engineering personnel.
Marketing and administrative expenses increased $21,000 in the first quarter of
1997 as compared to the first quarter of 1996 reflecting additional staff
personnel.
Interest expense decreased by $12,000 compared to the first quarter of 1996 due
to lower outstanding debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased $597,000 to $139,000 since December 31, 1996. Operations for the
quarter resulted in $517,000 of negative cash flow. Although at March 31, 1997
there was no bank borrowing, as of April 29, 1997 the Company has borrowed
$300,000 under the $1,500,000 line of credit. The Company believes that it has
borrowing capacity in addition to its $1,500,000 line of credit if necessary.
Since July 1989 a total of $2,000,000 has been authorized for the stock
repurchase program and $388,000 remains available at March 31, 1997 for
additional repurchases.
The Company believes that its cash flow from operations and available borrowing
capacity will be sufficient to finance operations and capital requirements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements included or incorporated by reference in this Quarterly Report on
Form 10-Q which are not historical in nature are identified as "forward looking
statements" for the purposes of the safe harbor provided by Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. The Company cautions readers that forward looking
statements, including without limitation, those relating to the Company's future
business prospects, revenues, working capital, liquidity, capital needs,
interest costs, and income, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward looking statements. The risks and uncertainties include, but are not
limited to, economic conditions, product demand and industry capacity,
competitive products and pricing, manufacturing efficiencies, new product
development and market acceptance, the regulatory and trade environment, and
other risks indicated in filings with the Securities and Exchange Commission.
ITEM 2. Changes in Securities
Common Stock
------------
Additional
Number of Paid In Retained
Shares Amount Capital Earnings
------ ------ ------- --------
Balance at
December 31, 1996 1,604,163 $128,333 $1,393,484 $7,705,266
Net Loss (524,464)
--------- -------- ---------- ----------
Balance at
March 31, 1996 1,604,163 $128,333 $1,393,484 7,180,802
========= ======== ========== ==========
ITEM 6. Exhibit and Reports on Form 8-K
A. Exhibits - None
B. Reports on Form 8-K - There was no Form 8-K filed during the
quarter.
PHOTO CONTROL CORPORATION
(Registrant)
May 1, 1997 /s/ L.A. Willig
Date L.A. Willig, Chairman of the Board
May 1, 1997 /s/ C.R. Jackels
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> MAR-31-1997
<CASH> 139,062
<SECURITIES> 0
<RECEIVABLES> 872,269
<ALLOWANCES> 0
<INVENTORY> 5,773,625
<CURRENT-ASSETS> 7,024,389
<PP&E> 7,691,484
<DEPRECIATION> 4,255,545
<TOTAL-ASSETS> 10,961,885
<CURRENT-LIABILITIES> 1,197,489
<BONDS> 530,000
0
0
<COMMON> 128,333
<OTHER-SE> 8,574,286
<TOTAL-LIABILITY-AND-EQUITY> 10,961,985
<SALES> 2,246,642
<TOTAL-REVENUES> 2,246,642
<CGS> 1,839,319
<TOTAL-COSTS> 1,839,319
<OTHER-EXPENSES> 1,116,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,147
<INCOME-PRETAX> (718,464)
<INCOME-TAX> (194,000)
<INCOME-CONTINUING> (524,464)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (524,464)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> 0
</TABLE>
