SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
January 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to
_____________
Commission File No. 1-10555
POLYVISION CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-3482597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1790 Broadway
New York, New York 10019
(Address of principal (Zip Code)
executive offices)
(212) 757-3333
(Registrant's telephone number, including area code)
Former address: 866 N. Main Street, Wallingford, Connecticut 06492
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.
Yes X No
The number of shares outstanding of the issuer's Common Stock, par
value $.001 per share, as of March 14, 1997, was 8,530,073.
POLYVISION CORPORATION
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . .
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
January 31, 1997 and April 30, 1996 . . . . . . .
Condensed Consolidated Statements of Operations -
Three Months Ended January 31, 1997 and 1996. . .
Condensed Consolidated Statements of Operations -
Nine Months Ended January 31, 1997 and 1996 . . .
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended January 31, 1997 and 1996 . . .
Notes to Condensed Consolidated Financial Statements -
January 31, 1997. . . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . .
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C> <C>
January 31, April 30,
(In thousands, except 1997 1996
share data)
Assets
Current assets:
Cash and cash equivalents $ 150 $ 670
Accounts receivable, less
allowance (January--$638
and April--$413) 7,474 8,027
Inventories 3,902 3,735
Costs and estimated earnings
in excess of billings on
uncompleted contracts 630 823
Prepaid expenses, deposits and
other 204 345
Total current assets 12,360 13,600
Property, plant and equipment:
Furniture and fixtures 402 142
Building and leasehold
improvements 1,491 1,320
Machinery and equipment 1,759 2,080
3,652 3,542
Less allowance for depreciation 2,252 2,140
Net property, plant and equipment 1,400 1,402
Goodwill, less accumulated
amortization 3,873 3,981
(January--$1,359 and April--
$1,251)
Other Assets 15 --
Total assets $17,648 $18,983
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C> <C>
January 31, April 30,
(In thousands, except 1997 1996
share data)
Liabilities and stockholders'
equity
Current liabilities:
Short-term borrowings $1,602 $1,252
Current maturities of
long-term debt 1,040 220
Accounts payable 1,969 2,877
Accrued expenses 1,694 2,667
Accrued dividends 3,584 2,040
Billings in excess of costs
and estimated earnings on
uncompleted contracts 586 503
Total current liabilities 10,475 9,559
Long-term debt, less current
maturities -- 980
Promissory note 4,873 3,335
Deferred interest 387 --
Royalties payable 750 750
Excess of net assets over
purchase price of acquisition,
less accumulated amortization
(January--$15 and April--$10) 270 275
Stockholders' equity:
Series A Preferred stock, $.01
par value, at liquidation
value; authorized 1,500,000
shares, issued 1,029,253
shares 25,731 25,731
Common stock, $.001 par value;
authorized 25,000,000 shares,
issued and outstanding
8,530,073 shares 9 9
Capital in excess of par value 38,524 38,524
Accumulated deficit (63,371) (60,180)
Total stockholders' equity 893 4,084
Total liabilities and stockholders'
equity $17,648 $18,983
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
For The Three Months Ended
January 31,
(In thousands, except per 1997 1996
share data)
Net sales $5,972 $7,354
Cost of goods sold 4,811 5,962
Gross profit 1,161 1,392
Research and development 304 735
Selling, general and
administrative 2,254 2,334
Operating profit (loss) (1,397) (1,677)
Other income (expense):
Interest (expense) (232) (161)
Interest and other income 24 --
Income (loss) before income
taxes (1,605) (1,838)
Income taxes -- --
Net income (loss) (1,605) (1,838)
Preferred stock dividends 515 508
Loss applicable to common stock ($2,120) ($2,346)
Loss per share of common
stock ($0.25) ($0.28)
Average common shares
outstanding 8,530,073 8,301,033
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
For The Nine Months Ended
January 31,
(In thousands, except per 1997 1996
share data)
Net sales $25,137 $28,417
Cost of goods sold 18,691 21,606
Gross profit 6,446 6,811
Research and development 929 2,131
Selling, general and
administrative 6,636 7,026
Operating profit (loss (1,119) (2,346)
Other income (expense):
Interest (expense) (629) (384)
Interest and other income 101 71
Income (loss) before income
taxes (1,647) (2,659)
Income taxes -- --
Net income (loss) (1,647) (2,659)
Preferred stock dividends 1,544 1,530
Loss applicable to common'
stock ($3,191) ($4,189)
Loss per share of common stock ($0.37) ($0.50)
Average common shares
outstanding 8,530,073 8,301,033
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
Nine Months Ended
January 31,
(In thousands) 1997 1996
Cash flow from operating
activities
Net income (loss) $(1,647) $(2,659)
Non-cash expenses included
in net income (loss):
Depreciation and amortization 369 705
Deferred interest 387 123
Changes in operating assets and
liabilities:
Accounts receivable 553 (833)
Inventory (167) 1,471
Costs and estimated earnings
in excess of billings on
uncompleted contracts 193 43
Prepaid expenses, deposits
and other 126 107
Accounts payable and accrued
liabilities (1,881) (2,515)
Billings in excess of costs
and estimated earnings on
uncompleted contracts 83 19
Cash used for operating
activities (1,984) (3,539)
Cash flow from investing
activities
Purchases of property, plant
and equipment (299) (690)
Proceeds from sale of equipment 35 --
Cash used for investing
activities (264) (690)
Cash flow from financing
activities
Short-term borrowings 350 1,121
Repayments of long-term
borrowings (160) (1,115)
Net receipts of receivable
from affiliates -- 3,584
Borrowings on Alpine promissory
note 1,538 2,788
Repayments to Alpine -- (2,052)
Cash provided by financing
activities 1,728 4,326
Net increase (decrease) in
cash and cash equivalents (520) 97
Cash and cash equivalents
at beginning of period 670 260
Cash and cash equivalents
at end of period $150 $357
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
January 31, 1997
(Dollars in thousands, unless otherwise noted)
NOTE 1 - BASIS OF PRESENTATION
PolyVision Corporation, through its wholly-owned subsidiaries,
Greensteel, Inc. ("Greensteel"), Posterloid Corporation
("Posterloid") and APV, Inc. ("APV"), collectively the "Company,"
is engaged in the development, manufacture and sale of information
display products. Greensteel is engaged in the manufacture and
sale of custom-designed and engineered writing, projection and
other visual display surfaces (such as porcelain chalkboards and
marker boards), custom cabinets, and work station and conference
center casework. Posterloid, which became a wholly-owned subsidiary
as a result of the Merger (see below), is engaged in the
manufacture and sale of indoor and outdoor menuboard display
systems to the fast food and convenience store industries, and
changeable magnetic signs used principally by banks to display
interest rates, currency exchange rates and other information. In
addition, Posterloid, through its Viscon products operation is also
involved in full branch merchandising for banks and other financial
institutions. APV, which also became a wholly-owned subsidiary of
the Company as a result of the Merger is engaged in the research,
development, licensing and initial manufacturing and testing of a
proprietary technology known as PolyVisionTM, a materials
technology with electrochemical and physical characteristics that
allow it to address potential applications in a number of display
niche markets.
On December 21, 1994, The Alpine Group, Inc. ("Alpine") acquired an
additional 82 percent of the outstanding common stock of Adience,
Inc. ("Adience") to increase its ownership in Adience to
approximately 87 percent, resulting in an indirect ownership in IDT
of approximately 70 percent. Also on December 21, 1994, IDT
entered into a Merger Agreement with Alpine and two of its
subsidiaries, APV and Posterloid (together, "IDG"), whereby the
Company would merge with IDG (the "Merger") and the Company would
be named PolyVision Corporation. Because Alpine controlled both
IDG and IDT, the Merger, which was completed on May 24, 1995,
resulted in a new reporting entity which is being accounted for as
a reorganization of entities under common control. The merged
entity adopted IDG's April 30 fiscal year end. The accompanying
financial statements give effect to push-down accounting to adjust
IDT's accounting basis to fair value related to the December 21,
1994 acquisition of Adience by Alpine. All significant
intercompany transactions and accounts have been eliminated in the
accompanying consolidated financial statements.
In connection with the Merger, APV transferred its previously
wholly-owned subsidiary, PolyVision France S.A., to Alpine at its
book value. Also in connection with the Merger, Alpine distributed
to its shareholders 76% of its ownership in the Company resulting
in Alpine retaining a 19% ownership of the Company's common stock.
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. The results of operations for the nine month
period ended January 31, 1997, are not necessarily indicative of
the results that may be expected for a full fiscal year.
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited
financial statements included in the Company's annual report on
Form 10-K for the year ended April 30, 1996.
Loss applicable to common stock is computed by dividing net income
available to common stock by the weighted average number of shares
outstanding.
NOTE 2 - INVENTORIES
Inventories consist primarily of raw materials of $3,084 and
$3,206, work in process of $610 and $365, and finished goods of
$208 and $164 at January 31, 1997 and April 30, 1996, respectively.
NOTE 3 - CONTRACTS IN PROGRESS
The status of contract costs on uncompleted construction contracts
was as follows:
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Costs and Billings in
estimated excess of
earnings in costs and
excess of estimated
billings earnings Net
January 31, 1997:
Costs and estimated
loss of ($42) $2,911 $6,814
Billings (2,281) (7,400)
$ 630 $ (586) $ 44
April 30, 1996:
Costs and estimated
earnings of $1,425 $5,132 $6,551
Billings (4,309) (7,054)
$ 823 $ (503) $ 320
</TABLE>
Accounts receivable at January 31, 1997 and April 30, 1996 include
amounts billed but not yet paid by customers under retainage
provisions of $1,396, and $1,754, respectively. Such amounts are
generally due within one year.
NOTE 4 - FINANCING ARRANGEMENTS
On April 25, 1996, Greensteel, as borrower, and the Company, as
guarantor, entered into a $5,000,000 Master Credit Agreement (the
"Agreement") with the Bank of Boston Connecticut to provide
financing for Greensteel's general working capital requirements.
The Agreement provides for a revolving credit facility of up to
$3,800,000 based upon eligible accounts receivable and inventory as
defined (unused and available borrowings were $1,584,000 at January
31, 1997) at the Bank's prime rate plus 1% (9.25% at January 31,
1997) and a $1,200,000 term loan payable in equal monthly
installments of $20,000 with interest at the Bank's prime rate plus
1-1/2% (9.75% at January 31, 1997) beginning June 1, 1996 through
August 1, 1997, with the remaining unpaid principal amount of
$900,000 due on August 31, 1997. The Agreement terminates August
31, 1997 and provides for renewal at the Bank's sole and absolute
discretion.
Substantially all of Greensteel's assets are pledged as collateral
for the credit facility. The Agreement requires Greensteel's
compliance with certain financial covenants including maintenance
of a minimum tangible net worth and minimum debt service coverage,
as defined, and a restriction on dividends to the Company, which
requires maintenance of a modified debt service coverage after
taking into account any such dividends, and on other transfers of
funds to the Company or its other subsidiaries. The Company is a
guarantor of the Agreement and has pledged Greensteel's common
stock in connection therewith. Greensteel is in violation of the
debt service coverage, but has received a waiver from the bank for
this provision. The Company is in compliance with all other
covenants at January 31, 1997.
On May 24, 1995, the Company entered into an agreement with Alpine
pursuant to which the Company may borrow from time to time, until
May 24, 1997, up to $5,000,000 from Alpine to be used by the
Company to fund its research, development and commercialization
activities of APV's PolyVisionTM display technology. Borrowings
under the agreement are unsecured and bear interest at a market
rate reflecting Alpine's cost of borrowing such funds (13% at
January 31, 1997), with interest payable semiannually in cash (but
added to the outstanding principal amount for the first 18 months).
The principal balance outstanding is due on May 24, 2005, subject
to mandatory prepayment of principal and interest, in whole or in
part, from the net cash proceeds of any public or private, equity
or debt financing made by the Company at any time before maturity.
Alpine's obligation to lend such funds to the Company is subject to
a number of conditions, including review by Alpine of the proposed
use of such funds by the Company.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In 1994, Reliance Insurance Company of New York (the "Plaintiff")
commenced an action in the Supreme Court of the State of New York,
County of Suffolk, against several defendants including the Company
seeking money damages based on the purported sale and delivery by
defendants of some 860 insulated metal curtain wall panels
manufactured by the Company in 1987 and of an additional 520
replacement panels in 1991 and 1992. Plaintiff has alleged that
such panels were defective in their design and manufacture. In its
original complaint, the Plaintiff seeks $820,000 for alleged
damages. Among the theories of liability advanced by Plaintiff are
breach of contract, breach of express warranty and implied
warranty. Pursuant to orders of the Court, the causes of action
based on the 1987 transaction were dismissed on statute of
limitation grounds. However, Plaintiff has been granted leave to
serve an amended complaint to allege, among other things, a claim
under the New Jersey Consumer Fraud Act (which might permit treble
damages), while preserving the right of the defendants, including
the Company to challenge the applicability of such Act. Since an
amended complaint has not yet been served, Plaintiff's theories of
liability and damages are as yet not completely certain. Moreover,
since an answer to the amended complaint, if served, remains to be
served, and, as well, discovery has yet to commence, it is
premature to render an estimate of the outcome of this litigation.
In February 1992, the Company was cited by the Ohio Environmental
Protection Agency (the Ohio EPA) for violations of Ohio's hazardous
waste regulations, including speculative accumulation of waste and
illegal disposal of hazardous waste on the site of its Alliance,
Ohio, facility.
In December 1993, the Company and Adience signed a consent order
with the Ohio EPA and Ohio Attorney General that required the
Company and Adience to pay to the State of Ohio a civil penalty
of $200,000 of which the Company paid $175,000 and Adience paid
$25,000. In addition, the consent order required the payment of
stipulated penalties of up to $1,000 per day for failure to satisfy
certain requirements of the consent order, including milestones in
the closure plan. Removal and remediation activities as
contemplated under the consent order have been completed.
The Company has submitted risk assessment reports which
demonstrate, in management's opinion, that no further cleanup
actions will be required on the remaining property area not
addressed under the closure plan. Based on administrative
precedent, the Company believes that it is likely that the Ohio EPA
will agree with the risk assessment reports. If such an agreement
is not reached, additional costs may have to be incurred to
complete additional remediation efforts. Although there are no
assurances that additional costs will not have to be incurred, the
Company believes that such costs will not need to be incurred. At
January 31, 1997, environmental accruals amounted to $10,000, which
represents management's reasonable estimate of the amounts to be
incurred in the resolution of this matter. Since 1991, Adience and
the Company have paid $1,433,000 (excluding the $200,000 civil
penalty) for the environmental cleanup related to the Alliance
facility.
Under the acquisition agreement pursuant to which the Company
acquired the property from Adience in 1990, Adience represented and
warranted that, except as otherwise disclosed to the Company, no
hazardous material had been stored or disposed of on such property.
No disclosure of storage or disposal of hazardous material on the
site was made; accordingly, Adience is required to indemnify the
Company for any losses in excess of $250,000. The Company has
notified Adience that it is claiming the right to indemnification
for all costs in excess of $250,000 incurred by the Company in this
matter, and has received assurance from Alpine that Adience will
honor such claim. Adience has reimbursed the Company $1,383,000
through January 31, 1997. If Adience is financially unable to
honor its remaining obligation, such costs would be borne by the
Company.
The Company is involved in other various matters of litigation
incidental to the normal conduct of its business. In
management's opinion, the disposition of such litigation
will not have a material adverse impact on the Company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three and Nine Months Ended January 31, 1997, Compared With Three
and Nine Months Ended January 31, 1996
The following table summarizes, for the periods presented, the
respective amounts of
Greensteel, Posterloid and APV (except as to Net sales and Gross
profit, of which there were none):
[CAPTION]
<TABLE>
<S> <C> <C>
Three Months Nine Months
Ended January 31, Ended January 31,
1997 1996 1997 1996
(in thousands, except
percentages)
Net sales
Greensteel $4,743 $5,939 $20,157 $24,203
Posterloid 1,229 1,415 4,980 4,214
5,972 7,354 25,137 28,417
Gross profit
Greensteel 997 1,033 4,821 5,597
Posterloid 164 359 1,625 1,214
1,161 1,392 6,446 6,811
Gross margin 19.4% 18.9% 25.6% 24.0%
Research and
development
APV 304 735 929 2,131
Selling, general
and administrative
expenses
Greensteel 1,528 1,452 4,686 4,572
Posterloid 495 416 1,390 1,209
APV and Corporate 231 466 560 1,245
2,254 2,334 6,636 7,026
Operating income (loss)
Greensteel (531) (419) 135 1,025
Posterloid (331) (57) 235 5
APV and Corporate (535) (1,201) (1,489) (3,376)
($1,397) ($1,677) ($1,119) ($2,346)
</TABLE>
Nine Months Ended January 31, 1997 and 1996
The Company's net sales for the nine months ended January 31, 1997
decreased 12% to $25,137,000 compared to net sales of $28,417,000
for the nine months ended January 31, 1996. This decline resulted
from reduced sales of $4,046,000 at Greensteel. The Company is in
the process of converting its distribution channels to sales
through dealers and distributors which do not require extended
project management and are not subject to construction cost
overruns or increased working capital requirements for performance
bonds and retainage. As a result of selling through distributors,
installation work that was previously done by the Company is now
performed by the distributor, resulting in reduced revenues for the
Company. In fiscal year '97, the Company has added 19 new
distributors covering various portions of the United States. Year
to date sales to distributors have increased by 27%. Posterloid
increased its net sales by $766,000 representing an 18% improvement
in revenues. This increase is due to additional sales to several
major restaurant chains.
The Company's gross profit for the nine months ended January 31,
1997 decreased to $6,446,000 from $6,811,000 for the nine months
ended January 31, 1996, while gross margin percentage increased to
25.6% from 24.0%. Gross profit decreased at Greensteel from
$5,597,000 to $4,821,000 due to the lower revenues. Gross profit
margins improved, however, to 24% from 23% due to cost reduction
efforts and due to a favorable union contract. Posterloid
increased its gross profit by $411,000 as a result of higher
revenues and an improvement in margins to 33%. In the third
quarter ended January 31, 1997 Posterloid moved its production
facilities to a larger plant to support its growth in revenues and
also to provide a more productive material flow. The Posterloid
moving costs unfavorably impacted gross margins by $181,000.
Selling, general and administrative costs for the nine months ended
January 31, 1997 were $6,636,000 compared to $7,026,000 for the
prior year. The decrease was due to lower administrative personnel
expense and healthcare costs offset by higher bad debt expense and
professional fees.
Research and development costs decreased from $2,131,000 last year
to $929,000 this year. The Company has determined that the most
cost effective method in the event of full scale production of
PolyVision products is through third party sub-contractors. In
connection with this decision, R & D manufacturing related costs
have been reduced.
In September 1996, the Company and General Atomics of San Diego, a
leading technology development company, entered into a joint
development and licensing agreement to develop and produce
PolyVision based electrochromic displays for consumer retail
applications. These applications will utilize the unique
characteristics of the PolyVision technology to address the demand
for low-cost dynamic point of purchase displays. Development
continues according to the schedule as outlined in the agreement.
In addition, McDonnell Douglas Technologies, Inc. is continuing its
R & D activity for both government and commercial applications
without any funding from PolyVision. All other licensees are
continuing their internal programs to commercialize PolyVision
technology. There can be no assurance, however, that commercially
viable products will be introduced or that such additional sources
of funding will be available on reasonable terms.
The operating loss for the nine months ended January 31, 1997 was
reduced to ($1,119,000) compared to a loss of ($2,346,000) for the
nine month period ending January 31, 1996.
Interest expense for the nine months ended January 31, 1997
increased to $629,000 from $384,000. This increase reflected
higher borrowing levels to support working capital needs and
research and development expenditures.
Three Months Ended January 31, 1997 and 1996
The Company's net sales for the three months ended January 31, 1997
decreased 19% to $5,972,000 compared to net sales of $7,354,000 for
the three months ended January 31, 1996. Greensteel's sales
declined by 20% to $4,743,000. The Company continued its efforts
to convert its distribution channels to sales through dealers and
distributors which do not require extended project management and
have reduced working capital requirements. As a result of selling
through distributors, installation work that was previously done by
the Company is now performed by the distributor, resulting in
reduced revenues for the Company. Distributor sales increased by
60% for the third quarter when compared to last year.
Posterloid's sales decreased by 13% for the third quarter to
$1,229,000 versus $1,415,000 for last year. Posterloid's move to
a larger facility with better material flow resulted in a deferral
of certain customer orders for this quarter.
The Company's gross profit for the three months ended January 31,
1997 decreased to $1,161,000 from $1,392,000 for the three months
ended January 31, 1996. Gross margins increased to 19.4% from
18.9% primarily due to lower production costs at Greensteel, mainly
due to a favorable union contract. The gross margins at Posterloid
were unfavorably impacted by $181,000 of moving expenses.
Selling, general and administrative expenses for the three months
ended January 31, 1997 were $2,254,000 compared to $2,334,000 for
the corresponding period last year. The decreased costs were due
to lower corporate administrative expenses offset by higher bad
debt expenses.
Research and development costs for the three months ended January
31, 1997 were $304,000 compared to $735,000 for the third quarter
last year. This is due to the Company's decision to reduce the
manufacturing related research and development costs.
Interest expense for the third quarter is $232,000 compared to
$161,000 for last year. This is due to a higher level of debt in
order to fund working capital needs and R & D expenses.
Liquidity and Capital Resources
During the nine months ended January 31, 1997, the principal uses
of cash included $1,984,000 to support operating activities and
$264,000 for capital expenditures. Approximately $1,881,000 was
used to reduce accounts payable and accrued expenses, and
$1,647,000 to support operations, this was offset by reductions in
accounts receivable of $553,000 and additional depreciation and
deferred interest of $756,000. Funds for capital expenditures were
used primarily for an air filtration system at the new Posterloid
facility. Sources of funds included $350,000 of short term
borrowings and $1,538,000 of borrowings from Alpine. During the
nine months ended January 31, 1997, Greensteel used $464,000 for
its operating activities while Posterloid provided $288,000 from
its operating activities.
On April 25, 1996, Greensteel, as borrower, and the Company, as
guarantor, entered into a $5,000,000 Master Credit Agreement with
the Bank of Boston Connecticut to provide financing for
Greensteel's general working capital requirements. The Agreement
provides for a revolving credit facility of up to $3,800,000 based
upon eligible accounts receivable and inventory (unused and
available borrowings were $1,584,000 at January 31, 1997) at the
Bank's prime rate plus 1% (9.25% at January 31, 1997) and a
$1,200,000 term loan payable in equal monthly installments of
$20,000 with interest at the Bank's prime rate plus 1-1/2% (9.75%
at January 31, 1997) beginning June 1, 1996 through August 1, 1997,
with the remaining unpaid principal amount of $900,000 due on
August 31, 1997.
Substantially all of Greensteel's assets are pledged as collateral
for the credit facility. The Agreement requires Greensteel's
compliance with certain financial covenants including maintenance
of a minimum net worth, current ratio, debt to net worth and a
minimum debt service coverage. Greensteel was not in compliance
with the debt service coverage as of January 31, 1997. The bank
has provided a waiver for this covenant. All other financial
covenants were in compliance. The Agreement terminates August 31,
1997 and provides for renewal at the Bank's discretion. In order
to meet working capital and long term financing requirements, it is
the intent of the Company to re-negotiate the bank facility beyond
August 31, 1997, however, there can be no assurances this will be
accomplished.
On May 24, 1995, the Company entered into an agreement with Alpine
pursuant to which the Company may borrow from time to time, until
May 24, 1997, up to $5,000,000 from Alpine to be used by the
Company to fund its working capital needs, including research,
development and commercialization activities of APV's PolyVisionTM
display technology. Borrowings under the agreement are unsecured
and bear interest at a market rate reflecting Alpine's cost of
borrowing such funds (13% at January 31, 1997). The principal
balance outstanding will be due on May 24, 2005, subject to
mandatory prepayment of principal and interest, in whole or in
part, from the net cash proceeds of any public or private, equity
or debt financing made by the Company at any time before maturity.
Alpine's obligation to lend such funds to the Company is subject to
a number of conditions, including review by Alpine of the proposed
use of such funds by the Company.
In the long term, the successful introduction of commercially
viable products will be required for APV to continue to support a
sustained research and development effort at its current level.
APV will continue to explore development and licensing
opportunities that further broaden the applications of its
PolyVisionTM technology and provide additional funding, of which
there can be no assurance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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.
POLYVISION CORPORATION
Date: March 14, 1996 By:/s/Lawrence W. Hay
Lawrence W. Hay
Vice President-Finance and
Secretary
(as both a duly authorized
officer of the registrant and
the principal financial officer
or chief accounting officer of
the registrant)
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