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, 1998 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, 1998
- ---------------------------- -----------------------------
Common Stock, par value $.08 1,604,163 Shares
<PAGE>
PHOTO CONTROL CORPORATION
INDEX
-------------------------
PART I Financial Information Page Number
Item 1: Financial Statements
Consolidated Balance Sheet -
March 31, 1998 and December 31, 1997 3
Consolidated Statement of Operations
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1998 and 1997 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
<PAGE>
PHOTO CONTROL CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 December 31
1998 1997
----------- -----------
ASSETS
Current Assets
Cash $ 271,688 $ 808,169
Accounts Receivable 402,172 505,373
Other Receivables 2,700 2,700
Inventories 4,732,358 4,322,603
Prepaid Expenses 135,642 201,899
----------- -----------
Total Current Assets 5,544,560 5,840,744
----------- -----------
Investments and other Assets
Cash Value of Life Insurance 270,657 261,966
Deferred Income Taxes 200,000 200,000
----------- -----------
Total Investments and other Assets 470,657 461,966
----------- -----------
Plant and Equipment
Land and Building 2,207,871 2,204,871
Machinery and Equipment 3,429,548 3,303,719
Accumulated Depreciation (3,675,665) (3,629,310)
----------- -----------
Total Plant and Equipment 1,961,754 1,879,280
----------- -----------
$ 7,976,971 $ 8,181,990
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable 588,014 288,724
Accrued Payroll and Employee Benefits 319,219 270,214
Accrued Expenses 163,521 114,908
----------- -----------
Total Current Liabilities 1,070,754 673,846
----------- -----------
Deferred Compensation 561,193 540,312
----------- -----------
Stockholders' Equity
Common Stock 128,333 128,333
Additional Paid-In Capital 1,393,484 1,393,484
Retained Earnings 4,823,207 5,446,015
----------- -----------
Total Stockholders' Equity 6,345,024 6,967,832
----------- -----------
$ 7,976,971 $ 8,181,990
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
PHOTO CONTROL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31
1998 1997
----------- -----------
Net Sales $ 1,947,046 $ 2,246,642
Cost of Sales 1,807,289 1,839,319
----------- -----------
Gross Profit 139,757 407,323
Expenses
Marketing and Administrative 531,949 820,520
Research, Development & Eng 230,616 296,120
Interest 9,147
----------- -----------
762,565 1,125,787
----------- -----------
Loss Before Income Tax (622,808) (718,464)
Income Tax Benefit (194,000)
----------- -----------
Net Loss $ (622,808) $ (524,464)
=========== ===========
Net Loss Per Common Share $ (.39) $ (.33)
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
PHOTO CONTROL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
March 31
--------
1998 1997
--------- ---------
Cash flows from operating activities:
Net Loss from operations $(622,808) $(524,464)
Items not affecting cash-
Depreciation 78,000 92,578
Deferred compensation 37,500 9,333
Loss on sale of assets 6,153
Payment of deferred compensation (16,619) (6,156)
Change in:
Receivables 103,201 (347,290)
Inventories (409,755) 30,878
Prepaid expenses 66,257 30,668
Accounts payable 299,290 126,230
Accrued expenses 97,618 70,737
--------- ---------
Net cash used in operating
expenses (361,163) (517,486)
--------- ---------
Cash flows from investing activities:
Additions to plant and equipment (175,761) (87,087)
Proceeds from sale of equipment 9,134
Additions to cash value of life
insurance (8,691) (8,690)
--------- ---------
Net cash used in investing
activities: (175,318) (95,777)
--------- ---------
Cash flow from financing activities:
Repayment of long-term debt (5,431)
Proceeds from note payable 21,725
--------- ---------
Net cash provided by financing
activities 16,294
--------- ---------
Change in cash (536,481) (596,969)
Cash at beginning of period 808,169 736,031
--------- ---------
Cash at end of period $ 271,688 $ 139,062
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
PHOTO CONTROL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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
1998 1997
---- ----
Raw Materials $3,179,199 $2,666,732
Work in Progress 680,424 492,833
Finished Goods 872,735 1,163,038
---------- ----------
$4,732,358 $4,322,603
========== ==========
NOTE 3
Net Income per common share is computed based on the weighted average number of
common shares outstanding during the period when computing the basic earnings
per share. When dilutive, stock options are included as equivalents using the
Treasury Stock method when computing the diluted earnings per share.
<PAGE>
PHOTO CONTROL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATIONS
Sales for the first quarter ended March 31, 1998, were $1,947,000, a decrease of
13.3% and $299,000 from the first quarter in 1997. The decrease in sales was
primarily due to decline of OEM and dealer sales in the flash equipment product
line. The camera product line sales increased $230,000, but was offset by a
decrease in the printer product line sales of approximately the same amount. In
October 1997, the manufacturing of the flash equipment product line was moved
from California to Minnesota. Because of the inefficiency associated with the
move, certain sales backlog was not shipped in the the first quarter of 1998. It
is expected that production will be sufficient in the second quarter to ship all
backlog. Demand for the camera product line increased in the first quarter of
1998 as compared to the first quarter of 1997, however, the sales trend for the
printer line continues to decline.
The gross profit margin for the first quarter of 1998 decreased to 7.2% compared
to 18.1% in the first quarter of 1997. The decline is attributable to the
inefficient production of the flash equipment line as a result of the move from
California to Minnesota. Management continues to expect that the margins for the
year 1998 will be comparable to 1995 which approximated 26%.
Research, development and engineering expenses decreased by $55,000 for the
first quarter of 1998 compared to the first quarter of 1997 and marketing and
administrative expenses decreased $289,000. The decreases reflect staff
reductions as a result of consolidation of operations in Minnesota.
Interest expense decreased by $9,000 compared to the first quarter of 1997
because all debt was paid off at the end of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased $536,000 to $272,000 since December 31, 1997. Operations for the
quarter resulted in $361,000 of negative cash flow. In addition, $175,000 was
spent on capital equipment. At March 31, 1998 there was no bank borrowing and
the Company had $1,500,000 available under its line of credit.
The Company believes that its cash flow from operations and available borrowing
capacity will be sufficient to finance operations and capital requirements.
<PAGE>
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.
<PAGE>
ITEM 2. Changes in Securities
Common Stock
------------------------
Additional
Number of Paid In Retained
Shares Amount Capital Earnings
---------- ---------- ---------- ----------
Balance at
December 31, 1997 1,604,163 $ 128,333 $1,393,484 $5,446,015
---------- ---------- ---------- ----------
Net Loss (622,808)
---------- ---------- ---------- ----------
Balance at
March 31, 1998 1,604,163 $ 128,333 $1,393,484 $4,823,207
========== ========== ========== ==========
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)
- ------------------ --------------------------------------
Date John R. Helmen, C.E.O. and President
- ------------------ --------------------------------------
Date C.R. Jackels, Vice President-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 271,688
<SECURITIES> 0
<RECEIVABLES> 404,872
<ALLOWANCES> 0
<INVENTORY> 4,732,358
<CURRENT-ASSETS> 5,544,560
<PP&E> 5,637,419
<DEPRECIATION> 3,675,665
<TOTAL-ASSETS> 7,976,971
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0
0
<COMMON> 128,333
<OTHER-SE> 1,393,484
<TOTAL-LIABILITY-AND-EQUITY> 7,976,971
<SALES> 1,947,046
<TOTAL-REVENUES> 1,947,046
<CGS> 1,807,289
<TOTAL-COSTS> 1,807,289
<OTHER-EXPENSES> 762,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (622,808)
<INCOME-TAX> 0
<INCOME-CONTINUING> (622,808)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (622,808)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> 0
</TABLE>
