SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarter Ended September 30, 2000 Commission File Number 0-7475
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PHOTO CONTROL CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0831186
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4800 Quebec Avenue North, Minneapolis, Minnesota 55428
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (763) 537-3601
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(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 October 13, 2000
---------------------------- --------------------------------
Common Stock, par value $.08 1,604,163 Shares
1
<PAGE>
PHOTO CONTROL CORPORATION
INDEX
PART I Page Number
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ITEM 1: Financial Information
Balance Sheet -
September 30, 2000 and December 31, 1999 3
Statement of Operations -
Nine Months and Three Months Ended
September 30, 2000 and 1999 4
Statement of Cash Flows -
Nine Months Ended September 30, 2000 and 1999 5
Notes to Financial Statements 6
ITEM 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II
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ITEM 2: Changes in Securities 9
ITEM 6: Exhibits and Reports on Form 8-K 9
2
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PHOTO CONTROL CORPORATION
BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30 DECEMBER 31
2000 1999
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ASSETS
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Current Assets
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Cash $2,815,550 $ 819,302
Accounts Receivable 693,173 647,597
Inventories 3,381,189 4,478,640
Prepaid Expenses 55,577 74,430
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Total Current Assets 6,945,489 6,019,969
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Other Assets
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Cash Value of Life Insurance 326,463 308,166
Deferred Income Taxes 160,000 160,000
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Total Other Assets 486,463 468,166
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Plant and Equipment
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Land and Building 2,316,824 2,293,818
Machinery and Equipment 3,003,916 3,173,990
Accumulated Depreciation (3,835,391) (3,846,133)
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Total Plant and Equipment 1,485,349 1,621,675
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$8,917,301 $8,109,810
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
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Accounts Payable $ 220,971 $ 281,417
Accrued Payroll and Employee Benefits 404,447 220,848
Accrued Expenses 274,526 264,952
Customer Deposit 406,250
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Total Current Liabilities 898,944 1,173,467
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Other Accrued Expense 746,047 685,148
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Stockholders' Equity
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Common Stock 128,333 128,333
Additional Paid-In Capital 1,393,484 1,393,484
Retained Earnings 5,750,493 4,729,378
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Total Stockholders' Equity 7,272,310 6,251,195
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$8,917,301 $8,109,810
========= =========
See accompanying notes to financial statements.
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PHOTO CONTROL CORPORATION
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $3,720,897 $2,963,156 $9,548,359 $7,537,035
Cost of Sales 2,550,954 2,127,361 6,726,094 5,362,191
---------- ---------- ---------- ----------
Gross Profit 1,169,943 835,795 2,822,265 2,174,844
Expenses
Marketing & Administrative 431,431 424,659 1,395,638 1,349,319
Research, Development & Eng 139,158 147,018 405,512 478,209
---------- ---------- ---------- ----------
570,589 571,677 1,801,150 1,827,528
---------- ---------- ---------- ----------
Net Income $ 599,354 $ 264,118 $1,021,115 $ 347,316
========== ========== ========== ==========
Net Income Per Common
Share - Basic $ .38 $ .17 $ .64 $ .22
========== ========== ========== ==========
Net Income Per Common
Share - Diluted $ .36 $ .17 $ .61 $ .22
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
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PHOTO CONTROL CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
-----------------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net from operations $ 1,021,115 $ 347,316
Items not affecting cash-
Depreciation 198,000 216,000
Deferred compensation 112,500 112,500
Loss on sale of equipment 12,889 36,354
Payment of deferred compensation (51,601) (51,601)
Change in:
Receivables (45,576) (394,125)
Inventories 1,097,451 73,885
Prepaid Expenses 18,853 39,978
Accounts Payable (60,446) 158,934
Accrued Expenses (214,077) 33,198
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Net Cash provided by
operating activities 2,089,108 572,439
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Cash flows from investing activities:
Additions to plant and equipment (83,538) (27,847)
Additions to cash value of life insurance (18,297) (18,297)
Proceeds from sale of equipment 8,975 10,500
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Net cash used in investing activities (92,860) (35,644)
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Change in cash 1,996,248 536,795
Cash at beginning of period 819,302 731,426
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Cash at end of period $ 2,815,550 $ 1,268,221
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
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PHOTO CONTROL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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:
SEPTEMBER 30 DECEMBER 31
2000 1999
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Raw Materials $3,434,058 $4,237,561
Work in Progress 355,435 257,031
Finished Goods 1,368,696 1,626,048
Reserve for Obsolescence (1,777,000) (1,642,000)
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$3,381,189 $4,478,640
========== ==========
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.
6
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PHOTO CONTROL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
Sales for the third quarter ended September 30, 2000 were $3,721,000, an
increase of 25.6% from the same quarter in the prior year. Sales for the nine
months ended September 30, 2000 were $9,548,000, an increase of 26.7% over the
same period in the prior year. Lighting sales decreased $291,000 for the third
quarter and $1,001,000 for the year to date period, as compared to the same
periods in the prior year. A decrease in orders from large customers accounted
for the sales decreases in the lighting product line. The camera product line
accounts for an increase in sales of $1,769,000 for the third quarter and
$3,718,000 for the year to date period, as compared to the same periods in the
prior year. The increase in camera product line sales is attributable to the
$6,200,000 camera contract for which shipment began in December of 1999 and will
continue through April of 2001. As of September 30, 2000 the contract is
fifty-six percent complete. Sales of the third product line, printers, decreased
by $720,000 for the third quarter and decreased $706,000 for the year to date
period, as compared to the same periods in the prior year. The sales trend for
the printer line continues to decline because the optical photographic printer
market continues to experience consolidation and excess capacity.
The gross profit margin for the third quarter of 2000 increased to 31.4% from
28.2% in the third quarter of 1999. The gross profit margin for the nine months
ended September 30, 2000 increased to 29.6% from 28.9% in the prior year period.
Gross margin varies depending upon the product mix of sales. Management expects
that the margins for the year 2000 will be approximately 28%.
Marketing and administrative expenses decreased as a percentage of sales to
11.6% for the third quarter of 2000 from 14.3% for the third quarter of 1999 and
decreased to 14.6% for the first nine months of 2000 from 17.9% for the same
period in 1999. Marketing and administrative expenses increased $7,000 for the
third quarter of 2000 as compared to the third quarter of 1999 and increased
$46,000 for the first nine months of 2000 compared to the same period in 1999.
Research, development and engineering expense decreased by $8,000 for the third
quarter of 2000 compared to the third quarter of 1999 and decreased by $73,000
for the first nine months of 2000 compared to the same period of 1999. The
increase in the marketing and administrative expense reflects additional
compensation earned as the result of increased profitability. Research,
development and engineering expense reflects the reorganization of the
engineering department in 1999 which has resulted in lower cost, primarily due
to a reduction in staff and increased efficiencies.
7
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LIQUIDITY & CAPITAL RESOURCES
Cash increased by $1,996,000 to $2,815,000 since December 31, 1999. Operations
for the nine months ended September 30, 2000 resulted in $2,089,000 of positive
cash flow.
At September 30, 2000 there is no borrowing under the line of credit. The
Company can borrow up to $1,000,000 under its line of credit. The line is
unsecured, at the prime rate of interest and renewed annually in May.
The Company believes that its cash flow from future 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.
8
<PAGE>
ITEM 2. CHANGES IN SECURITIES
<TABLE>
<CAPTION>
Common Stock
-------------------------
Additional
Number of Paid In Retained
Shares Amount Capital Earnings
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at
December 31,1999 1,604,163 $ 128,333 $1,393,484 $4,729,378
Net Income -- -- -- 1,021,115
--------- ---------- ---------- ----------
Balance at
September 30, 2000 1,604,163 $ 128,333 $1,393,484 $5,750,493
========== ========== ========== ==========
</TABLE>
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
A. Exhibits - 27 Financial Data Schedule
B. Reports on Form 8-K - None
PHOTO CONTROL CORPORATION
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(Registrant)
October 13, 2000 /s/ J. R. Helmen
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Date J. R. Helmen, President and Chief Executive Officer
October 13, 2000 /s/ C. R. Jackels
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Date C. R. Jackels, Vice President-Finance
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