SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1998
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.)
29 Laing Avenue
Dixonville, Pennsylvania 15734
(Address of principal executive (Zip Code)
offices)
(724) 254-4321
(Registrant's telephone number, including area code)
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 registrant's Common Stock,
par value $.001 per share, as of March 14, 1998, was 8,561,772.
POLYVISION CORPORATION
FORM 10-Q
INDEX
Page
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
January 31, 1998 and April 30, 1997
Condensed Consolidated Statements Of Operations -
Three Months Ended January 31, 1998 and 1997
Condensed Consolidated Statements Of Operations -
Nine Months Ended January 31, 1998 and 1997
Condensed Consolidated Statements Of Cash Flows -
Three Months Ended January 31, 1998 and 1997
Condensed Consolidated Statements Of Cash Flows -
Nine Months Ended January 31, 1998 and 1997
Notes To Condensed Consolidated Financial Statements -
January 31, 1998
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
PART II OTHER INFORMATION
SIGNATURES
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
POLYVISION CORPORTION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
[CAPTION]
<TABLE>
<S> <C> <C>
(In thousands, except per January 31, April 30,
share data) 1998 1997
Assets
Current assets:
Cash and cash equivalents $179 $415
Accounts receivable, less
allowance (January -- $683
and April -- $1,013) 7,693 7,020
Inventories 3,804 3,336
Cash and estimated earnings
in excess of billings on
uncompleted contracts 854 690
Prepaid expenses, deposits
and other 433 146
Total current assets 12,963 11,607
Property, plant and equipment:
Furniture and fixtures 183 157
Building and leasehold
improvements 1,526 1,507
Machinery and equipment 2,579 2,125
4,288 3,789
Less allowance for
depreciation (2,517) (2,347)
Net property, plant and
equipment 1,771 1,442
Goodwill, less accumulated
amortization (January --
$1,504 and April --
$1,396) 3,728 3,836
Other Assets 30 16
Total assets $18,492 $16,901
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORTION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS January 31, 1998 and April
30, 1997
(Unaudited)
[CAPTION]
<TABLE>
<S> <C> <C>
(In thousands, except per January 31, April 30,
share data) 1998 1997
Liabilities and stockholders'
equity
Current liabilities:
Short-term borrowings $3,156 $2,298
Current maturities of
long-term debt 240 980
Accounts payable 2,100 2,361
Accrued expenses 2,176 2,494
Accrued dividends 5,643 4,099
Billings in excess of costs
and estimated earnings on
uncompleted contracts 374 259
Total current liabilities 13,689 12,491
Long-term debt, less current
maturities 220 --
Royalties payable 750 750
Indebtedness to The Alpine
Group, Inc. 6,888 6,382
Excess of net assets over
purchase price of acquisition,
less accumulated amortization
(January -- $22 and April --
$17) 263 268
Stockholders' equity:
Series A Preferred stock,
$.01 par value, at $25 per
share liquidation value;
authorized 1,500,000
shares, issued and outstand-
ing 1,029,253 shares 25,731 25,731
Common stock, $.001 par value;
authorized 25,000,000 shares,
issued and outstanding
8,561,772 shares 9 9
Capital in excess of par
value 38,668 38,618
Accumulated deficit (67,726) (67,348)
Total stockholders'
equity (3,318) (2,990)
Total liabilities and
stockholders' equity $18,492 $16,901
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORTION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended
January 31, 1998 and 1997
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
For The Three Months Ended
January 31,
(In thousands, except per 1998 1997
share data)
Net sales $7,672 $5,972
Cost of goods sold 5,543 4,811
Gross profit 2,129 1,161
Research and development -- 304
Selling, general and adminis-
trative 2,092 2,254
Operating profit (loss) 37 (1,397)
Other income (expense):
Interest (expense) (271) (232)
Interest and other income 60 24
Income (loss) before income
taxes (174) (1,605)
Income taxes -- --
Net income (loss) (174) (1,605)
Preferred stock dividends 515 515
Loss applicable to common stock ($689) ($2,120)
Loss per share of common
stock - basic ($0.08) ($0.25)
Loss per share of common stock -
fully diluted ($0.08) ($0.25)
Average common shares out-
standing - basic 8,561,772 8,530,073
Average common shares out-
standing - fully diluted 8,711,772 8,530,073
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORTION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended
January 31, 1998 and 1997
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
For The Nine Months Ended
January 31,
(In thousands, except per 1998 1997
share data)
Net sales $25,711 $25,137
Cost of goods sold 18,253 18,691
Gross profit 7,458 6,446
Research and development -- 929
Selling, general and adminis-
trative 6,028 6,636
Operating profit (loss) 1,430 (1,119)
Other income (expense):
Interest (expense) (633) (629)
Interest and other income 369 101
Income (loss) before income
taxes 1,166 (1,647)
Income taxes -- --
Net income (loss) 1,166 (1,647)
Preferred stock dividends 1,544 1,544
Net income (loss) applicable to
common stock ($378) ($3,191)
Loss per share of common
stock - basic ($0.04) ($0.37)
Loss per share of common
stock - fully diluted ($0.04) ($0.37)
Average common shares out-
standing - basic 8,561,772 8,530,073
Average common shares out-
standing - fully diluted 8,611,772 8,530,073
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORTION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
January 31, 1998 and 1997
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
Three Months Ended January 31,
(In thousands) 1998 1997
Cash flow from operating activities
Net income (loss) $ (174) $(1,605)
Non-cash expenses included in
net income (loss):
Depreciation and amortization 117 99
Deferred interest 182 155
Changes in operating assets and
liabilities:
Accounts receivable 318 1,551
Inventory (275) (497)
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,367 390
Prepaid expenses, deposits
and other (26) 90
Accounts payable and accrued
liabilities (538) (768)
Billings in excess of costs
and estimated earnings on
uncompleted contracts 44 56
Cash provided (used) for operating
activities 1,015 (529)
Cash flow from investing activities
Purchases of property, plant and
equipment (131) (88)
Proceeds from sale of equipment -- --
Cash used for investing activities (131) (88)
Cash flow from financing activities
Short-term borrowings (843) (56)
Repayments of long-term borrowings (104) (60)
Borrowings on Alpine promissory note 4 578
Cash provided (used) by financing
activities (943) 462
Net increase (decrease) in cash
and cash equivalents (59) (155)
Cash and cash equivalents at
beginning of period 238 305
Cash and cash equivalents at
end of period $ 179 $ 150
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORTION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended
January 31, 1998 and 1997
(Unaudited)
[CAPTION]
<TABLE>
<S> <C>
Nine Months Ended January 31,
(In thousands) 1998 1997
Cash flow from operating activities
Net income (loss) $1,166 $(1,647)
Non-cash expenses included in
net income (loss):
Depreciation and amortization 325 369
Deferred interest (47) 387
Changes in operating assets and
liabilities:
Accounts receivable (673) 553
Inventory (468) (167)
Costs and estimated earnings
in excess of billings on
uncompleted contracts (164) 193
Prepaid expenses, deposits and
other (302) 126
Accounts payable and accrued
liabilities (580) (1,881)
Billings in excess of costs
and estimated earnings on
uncompleted contracts 115 83
Cash used for operating activities (628) (1,984)
Cash flow from investing activities
Purchases of property, plant and
equipment (499) (299)
Proceeds from sale of equipment -- 35
Cash used for investing activities (499) (264)
Cash flow from financing activities
Short-term borrowings 858 350
Repayments of long-term borrowings (520) (160)
Borrowings on Alpine promissory note 553 1,538
Cash provided by financing activities 891 1,728
Net increase (decrease) in cash
and cash equivalents (236) (520)
Cash and cash equivalents at
beginning of period 415 670
Cash and cash equivalents at end
of period $ 179 $ 150
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
POLYVISION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31,
1998
(Unaudited)
January 31, 1998
(Dollars in thousands, unless otherwise noted)
NOTE 1 - BASIS OF PRESENTATION
PolyVision Corporation (formerly Information Display Technology,
Inc. or ("IDT")), 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 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. APV was engaged in the
research, development, licensing and initial manufacturing and
testing of a proprietary display technology known as PolyVision.TM
In April 1997, the Company determined to discontinue its research
and development efforts and to market this technology solely
through third-party licensing agreements.
On December 21, 1994, The Alpine Group, Inc. ("Alpine") acquired an
additional 82% of the outstanding common stock of Adience, Inc.
("Adience") to increase its ownership in Adience to approximately
87%, resulting in an indirect ownership in IDT of approximately
70%. 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 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 has 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, 1998, 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, 1997.
Net income (loss) applicable to common stock is computed by
dividing net income (loss) available to common stock by the
weighted average number of shares outstanding.
[CAPTION]
<TABLE>
<S> <C>
For the Nine Months ended January 31,
1998
Per Share
Income Shares Amount
Income before extraordinary
item and accounting change $1,166,000
Less: Preferred stock
dividends (1,544,000)
Basic EPS
Income available to common
stockholders (378,000) 8,561,772 ($.04)
Effect of Dilutive Securities
Stock Options -- 50,000
Diluted EPS
Income available to common
stockholders + assumed
conversions (378,000) 8,611,772 ($.04)
</TABLE>
Options to purchase 63,000 shares of common stock at an exercise
price of $1.00 per share and options to purchase 355,000 shares of
common stock at an exercise price of $3.86 per share were
outstanding as of January 31, 1998, but were not included in the
computation of diluted EPS because the options' exercise price was
greater than the average market price of the common stock. The
options, which expire in October 2005 and December 2007,
respectively, were still outstanding as of January 31, 1998.
NOTE 2 - INVENTORIES
Inventories consist primarily of raw materials of $3,250 and
$2,679, work in process of $372 and $527, and finished goods of
$182 and $130 at January 31, 1998 and April 30, 1997, 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
estimated in excess
earnings in of costs
excess of and esti-
billings mated earnings Net
January 31, 1998:
Cost and estimated
earnings $5,207 $2,355 $7,562
Billings (4,353) (2,729) (7,082)
$854 $(374) $480
April 30, 1997:
Cost and estimated
earnings $2,779 $6,218 $8,997
Billings (2,089) (6,477) (8,566)
$690 $(259) $431
</TABLE>
Accounts receivable at January 31, 1998 and April 30, 1997 include
amounts billed but not yet paid by customers under retainage
provisions of $1,141 and $1,384, respectively. Such amounts are
generally due within one year.
NOTE 4 - FINANCING ARRANGEMENTS
On July 23, 1997, Greensteel, as borrower, and the Company, as
guarantor, entered into a restated master credit agreement with the
Bank of Boston, Connecticut, which amends the previous agreement
dated April 25, 1996 and which would have expired August 31, 1997.
The new agreement provides for a revolving credit line of up to
$3,800 based upon eligible accounts receivable and inventory, as
defined, at the Bank's prime rate plus a margin based on certain
performance ratios (10.0% at January 31, 1998) and a $920 term loan
payable in 17 consecutive equal monthly installments of $20 with
interest at the Bank's prime rate plus a margin based on certain
performance ratios (10.5% at January 31, 1998) with the remaining
unpaid principal due on May 31, 1999. The agreement terminates on
May 31, 1999 and provides for renewal at the Bank's discretion. As
of January 31, 1998, the Company had reduced the balance of the
term loan to $460, including an additional payment of $296 made in
September 1997.
Substantially all of Greensteel's assets are pledged as collateral
under the credit facility. The agreement requires Greensteel's
compliance with certain financial covenants including specific
levels of earnings before interest, taxes and depreciation, and
specific current ratio levels and debt levels. Greensteel was in
violation of the current ratio covenant but has received a waiver
from the bank with respect to this provision. Greensteel is in
compliance with all other covenants at January 31, 1998.
On May 24, 1995, the Company entered into an agreement with Alpine,
pursuant to which the Company may borrow up to $5,000 from Alpine
to be used by the Company to fund its working capital needs,
including research, development and commercialization activities in
connection with 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. As of
January 31, 1998, $5,000 was outstanding under this agreement.
From May 1, 1997 through January 31, 1998, the Company executed
promissory notes with Alpine totaling $1,887 including accrued
interest, to fund the Company's corporate borrowing requirements.
Borrowings under the agreement are at Alpine's cost of borrowing
such funds (8-1/2% at January 31, 1998).
As of January 31, 1998, the Company owed Alpine a total of $6,888
under this note and the foregoing agreement. Alpine has agreed to
advance further funds to the Company through July 31, 1998 as may
be necessary for the Company to meet its financial commitments
incurred in the ordinary course of business. The decision to
continue to provide such financial support is made annually by
Alpine and future decisions will be based upon the conditions
existing at that time.
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. 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 (the "NJCFA") (which might permit treble
damages), while preserving the right of the defendants, including
the Company to challenge the applicability of the NJCFA. The
amended complaint was served during April, 1997 and Plaintiff
currently seeks $1,405 in damages as well as treble damages and
attorney's fees under the NJCFA. The Company has served its answer
to the amended complaint substantially denying Plaintiff's
allegations of defective design and manufacture and pleading
affirmative defenses, as well as commencing third party claims
against an adhesives supplier whose product was utilized by the
Company in fabricating the subject panels. As of the date hereof,
discovery has yet to commence and 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 of which the Company paid $175 and Adience paid $25. In
addition, the consent order required the payment of stipulated
penalties of up to $1 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 and 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.
In October 1997, the Company received notice that the Ohio EPA had
approved the closure plan for the Alliance facility and as such the
Company should abandon the ground water monitoring wells per the
approved closure plan. The plan included the former surface
impoundment and landfill disposal sites. On December 12, 1997, the
Ohio EPA completed a closure inspection and a review of documents
pertaining to these sites. Pursuant to this inspection and review,
the Ohio EPA notified the Company on December 19, 1997 that it had
determined that these sites had been closed in accordance with the
approved closure plan and that the Alliance facility was no longer
a hazardous waste treatment, storage, and disposal facility and
hazardous waste is no longer generated at this site. As such, the
Company will not be required to maintain financial assurance for
closure costs and liability coverage for accidental occurrences at
the Alliance location. Since 1991, the Company and Adience have
together paid $1,457 (excluding the $200 civil penalty) for the
environmental cleanup related to the Alliance facility.
Under the acquisition agreement pursuant to which the Company
acquired the Alliance facility from Adience, Adience represented
and warranted that, except as otherwise disclosed to the Company,
no hazardous material had been stored or disposed of on such
property and agreed to indemnify the Company for any losses in
excess of $250. The Company has notified Adience that it is
claiming the right to indemnification for all costs in excess of
$250 incurred by the Company in this matter, and has received
assurance from Alpine that Adience will honor such claim. Adience
has reimbursed the Company $1,373 through January 31, 1998. 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
(Dollars in thousands unless otherwise noted)
THREE AND NINE MONTHS ENDED JANUARY 31, 1998, COMPARED WITH THREE
AND NINE MONTHS ENDED JANUARY 31, 1997
The following table summarizes, for the periods presented, the
respective amounts of Greensteel, Posterloid and APV (except as to
Bookings, Backlog, 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,
1998 1997 1998 1997
(in thousands, except percentages)
Net Sales
Greensteel $6,050 $4,743 $21,077 $20,157
Posterloid 1,622 1,229 4,634 4,980
7,627 5,972 25,711 25,137
Gross profit
Greensteel 1,511 997 5,704 4,821
Posterloid 618 164 1,754 1,625
2,129 1,161 7,458 6,446
Gross profit percent 27.8% 19.4% 29.0% 25.6%
Selling, general and
administrative
expenses
Greensteel 1,529 1,528 4,391 4,686
Posterloid 484 495 1,331 1,390
APV and Corporate 79 231 306 560
2,092 2,254 6,028 6,636
Research and development
APV -- 304 -- 929
Operating income (loss)
Greensteel (18) (531) 1,313 135
Posterloid 134 (331) 423 235
APV and Corporate (79) (535) (306) (1,489)
$37 $1,397 $1,430 $(1,119)
Operating income 0.5% 23.4% 5.6% (4.5%)
Bookings
Greensteel 8,310 5,924 24,718 20,628
Posterloid 1,920 804 5,057 5,016
$10,230 $6,728 $29,775 $25,644
Backlog
Greensteel 15,515 12,059
Posterloid 996 525
$16,511 $12,584
</TABLE>
NINE MONTHS ENDED JANUARY 31, 1998 COMPARED WITH NINE MONTHS ENDED
JANUARY 31, 1997
The Company's net sales for the nine months ended January 31, 1998
increased to $25,711,000 compared to net sales of $25,137,000 for
the nine months ended January 31, 1997. Greensteel's sales
increased by 5% to $21,077,000. The Company's conversion to a
distribution network using specialty school supply dealers
continues to result in increased volume. Dealer revenue for the
nine months ended January 31, 1998 is ahead of last year by
$3,148,000 or 35%. This increase is offset by installation work
that was previously done by the Company and is now performed by the
dealer resulting in a reduction of revenues to Greensteel. Total
bookings year to date for Greensteel are $24,718,000 this year
versus $20,628,000 last year, an increase of $4,090,000 and 20%.
Backlog at the end of the third quarter stood at $15,515,000 versus
$12,059,000 last year. Posterloid's net sales for the nine months
ended January 31, 1998 were $4,634,000 versus $4,980,000 last year.
Year to date bookings are slightly higher at $5,057,000 versus
$5,016,000 and the backlog at the end of the quarter is
substantially higher, $996,000 versus $525,000 representing strong
bookings in the third quarter.
Year to date consolidated gross margins improved by $1,012,000 to
$7,458,000. The gross profit percent increased to 29.0% from
25.6%. Greensteel margins have improved to 27.1% from 23.9%
reflecting improved product mix related to additional sales to
dealers and increased plant throughput. Margins at Posterloid are
higher this year when compared to last year, $1,754,000 versus
$1,625,000, 37.8% versus 32.6%. Last years performance included
costs related to plant relocation.
Selling and general and administrative expenses for the nine months
ended January 31, 1998 dropped by $608,000 when compared to the
prior year. Lower selling expenses due to selling through dealers
instead of direct are partially offset by higher legal and
professional fees.
In April, 1997, the Company decided to discontinue its research and
development efforts and market the PolyVision display technology
through third party licensing agreements. Therefore, there are no
longer any research and development costs in fiscal year 1998,
compared to $929,000 in 1997.
Operating income for the nine months ended January 31, 1998
resulted in a profit of $1,430,000 versus a loss of $1,119,000 for
last year.
THREE MONTHS ENDED JANUARY 31, 1998 COMPARED WITH THREE MONTHS
ENDED JANUARY 31, 1997
The Company's net sales for the three months ended January 31, 1998
increased by 28% to $7,672,000 compared to net sales of $5,972,000
for the three months ended January 31, 1997. Greensteel's revenues
increased by $1,307,000 or 28% continuing to reflect increased
dealer sales. Bookings for the quarter also increased over last
year, $8,310,000 compared to $5,924,000 or an improvement of 40%.
Posterloid's sales for the third quarter this year were $1,622,000
versus $1,229,000 for the third quarter last year. This
improvement of 32% reflects an increased direct selling effort.
Bookings for the quarter were higher by $1,116,000 or 139%.
Gross profit for the three months ended January 31, 1998 increased
by 83% or $968,000 to $2,129,000 and the gross margin percent
improved to 27.8% from 19.4%. Greensteel's gross profit increased
to $1,511,000 from $997,000 and the gross margin percent improved
to 25.0% from 21.0%. Increased manufacturing costs for the quarter
were offset by improved plant throughput and a more profitable
product mix related to additional sales to dealers. Posterloid
improved its gross profit in the third quarter to $618,000 from
$164,000. Last year's third quarter was negatively impacted by
plant relocation expenses.
Selling and general and administrative costs were lower for the
third quarter ending January 31, 1998. They dropped by $162,000 to
$2,092,000 from $2,254,000 last year. Selling expenses for
salaries, fringes, travel and related expenses are lower due to the
change in channels of distribution from direct sales to dealer
sales.
Operating profit for the third quarter was $37,000 versus a loss of
$1,397,000 for last year.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended January 31, 1998, $628,000 of cash was
used to support operating activities. This included increases of
$673,000 for accounts receivable and $468,000 for inventories and
a $580,000 reduction in accounts payable and accrued liabilities.
Funds from operating activities were provided by the net income and
depreciation from operations of $1,166,000 and $325,000
respectively. Cash financing was provided by an increase of
$858,000 in the revolving line of credit with the Bank of Boston
and an increase in borrowings from The Alpine Group of $553,000.
During the nine months ended January 31, 1998, Greensteel provided
$104,000 from its operating activities while Posterloid used
$60,000 for its operating activities.
On July 23, 1997, Greensteel, as borrower, and the Company, as
guarantor, entered into a restated master credit agreement with the
Bank of Boston Connecticut, which amended the previous agreement,
dated April 25, 1996, and which would have expired on August 31,
1997. The new agreement provides for a revolving credit line of
up to $3,800,000, based upon eligible accounts receivable and
inventory, as defined (unused and available borrowings were
$749,000 at January 31, 1998), at the Bank's prime rate plus a
margin based on certain performance ratios (10.0% at January 31,
1998) and a $920,000 term loan payable in 17 consecutive equal
monthly installments of $20,000 with interest at the Bank's prime
rate plus a margin based on certain performance ratios (10.5% at
January 31, 1998) with the remaining unpaid principal amount of
$580,000 due on May 31, 1999. The agreement terminates on May 31,
1999 and provides for renewal at the Bank's discretion. As of
January 31, 1998 the Company had reduced the balance of the term
loan to $460,000 including an additional payment of $296,000 made
in September.
Substantially all of Greensteel's assets are pledged as collateral
under the credit facility. The agreement requires Greensteel's
compliance with certain financial covenants including specific
levels of earnings before interest, taxes and depreciation, and
specific current ratio levels and debt levels. Greensteel was in
violation of the current ratio covenant but has received a waiver
from the bank with respect to this provision. Greensteel is in
compliance with all other covenants at January 31, 1998.
On May 24 1995, the Company entered into an agreement with Alpine,
pursuant to which the Company may borrow 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 in
connection with 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. As of
January 31, 1998 $5,000,000 was outstanding under this agreement.
On January 31, 1998, the Company executed a promissory note with
Alpine to borrow $1,888,000, including accrued interest, to fund
the Company's corporate borrowing requirements. Borrowings under
the agreement are at Alpine's cost of borrowing such funds (8-1/2%
at January 31, 1998). As of January 31, 1998, the Company owed
Alpine a total of $6,888,000 under this note and the foregoing
agreement. Alpine has agreed to advance further funds to the
Company through July 31, 1998 as may be necessary for the Company
to meet its financial commitments to third parties incurred in the
ordinary course of business. The decision to continue to provide
such financial support is made annually by Alpine and future
decisions will be based upon the conditions existing at that time.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control.
Actual results could differ materially from these forward-looking
statements as a result of, among other factors, risks related to
the Company's history of operating losses and accumulated deficit;
future capital requirements; competition, technological advances
and seasonality; environmental matters; dependence on the
construction market generally; and other risks. In light of these
risks and uncertainties, there can be no assurance that the
forward-looking information contained in this report will in fact
occur.
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:
27.1 Financial Data Schedule.
(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 13, 1998 By:/s/Lawrence W. Hay
Lawrence W. Hay
Vice President-Finance (as
both a duly authorized
officer of the registrant
and the principal financial
officer or chief accounting
officer of the registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 179
<SECURITIES> 0
<RECEIVABLES> 7,693
<ALLOWANCES> (683)
<INVENTORY> 3,804
<CURRENT-ASSETS> 12,963
<PP&E> 4,288
<DEPRECIATION> 2,517
<TOTAL-ASSETS> 18,492
<CURRENT-LIABILITIES> 13,689
<BONDS> 0
0
25,731
<COMMON> 9
<OTHER-SE> 38,668
<TOTAL-LIABILITY-AND-EQUITY> 18,492
<SALES> 25,711
<TOTAL-REVENUES> 25,711
<CGS> 18,253
<TOTAL-COSTS> 18,253
<OTHER-EXPENSES> 6,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 633
<INCOME-PRETAX> 1,166
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,166
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
