<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended March 31, 1995
----------------------------------------------------------
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.: 0-18114
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LASERMASTER TECHNOLOGIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Minnesota 41-1612861
- - --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
7156 Shady Oak Road, Eden Prairie, Minnesota 55344
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
(612) 941-8687
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed 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 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at 3/31/95
- - ----- ----------------------
Common Stock, $.01 par value 11,147,744
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASERMASTER-Registered Trademark- TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31, June 30,
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,441,486 $ 2,193,673
Accounts receivable, less allowance for
doubtful accounts and sales returns of
$1,537,000 and $1,890,000, respectively 17,149,725 15,928,666
Inventory 19,638,305 13,571,039
Other current assets 2,234,687 1,764,741
Deferred tax asset 2,086,000 1,557,000
----------- -----------
TOTAL CURRENT ASSETS 42,550,203 35,015,119
PROPERTY AND EQUIPMENT, less
accumulated depreciation of $11,579,205 and
$9,598,425, respectively 6,465,009 6,023,209
CAPITALIZED SOFTWARE, less accumulated
amortization of $5,959,813 and $6,698,850,
respectively 5,000,312 4,580,387
ACQUIRED TECHNOLOGY, PATENTS
AND LICENSES, less accumulated amortization
of $825,415 and $632,751, respectively 3,030,767 1,782,520
----------- -----------
$57,046,291 $47,401,235
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 7,546,770 $ 4,452,841
Accounts payable 14,751,526 12,008,334
Accrued payroll and payroll taxes 2,658,066 2,193,476
Income taxes payable 387,129 422,679
Other current liabilities 2,032,452 1,150,960
Current maturities of long-term debt 949,160 813,713
----------- -----------
TOTAL CURRENT LIABILITIES 28,325,103 21,042,003
LONG-TERM DEBT, less current maturities 1,676,442 1,589,542
DEFERRED INCOME TAXES 2,234,000 1,631,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
30,000,000 shares; 11,147,744 and 10,945,916
shares issued and outstanding, respectively 111,477 109,459
Preferred stock, $.01 par value; authorized
5,000,000 shares; no shares issued or
outstanding
Additional paid-in capital 15,086,737 14,681,047
Retained earnings 9,612,532 8,348,184
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 24,810,746 23,138,690
----------- -----------
$57,046,291 $47,401,235
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- -----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $30,978,737 $28,197,900 $89,726,111 $74,489,311
COST OF GOODS SOLD 19,467,341 15,504,325 53,185,605 42,217,597
------------ ------------ ------------ ------------
GROSS PROFIT 11,511,396 12,693,575 36,540,506 32,271,714
OPERATING EXPENSES:
Sales and Marketing 6,852,431 5,823,665 20,814,714 15,123,537
Research and Development 1,813,033 876,175 4,612,586 2,250,463
General and Administrative 2,828,359 2,636,087 8,362,940 6,842,574
------------ ------------ ------------ ------------
11,493,823 9,335,927 33,790,240 24,216,574
------------ ------------ ------------ ------------
OPERATING PROFIT 17,573 3,357,648 2,750,266 8,055,140
OTHER INCOME (EXPENSE):
Interest expense (309,865) (318,201) (807,443) (1,074,037)
Interest income 5,707 41,750 21,018 84,379
Other (expense) income (126,159) 30,433 (157,491) (26,561)
------------ ------------ ------------ ------------
(430,317) (246,018) (943,916) (1,016,219)
------------ ------------ ------------ ------------
(LOSS) EARNINGS BEFORE INCOME TAXES (412,744) 3,111,630 1,806,350 7,038,921
INCOME TAX BENEFIT (PROVISION) 124,000 (1,088,000) (542,000) (2,463,000)
------------ ------------ ------------ ------------
NET (LOSS) EARNINGS $ (288,744) $ 2,023,630 $ 1,264,350 $ 4,575,921
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
PER COMMON SHARE:
Primary Net (Loss) Earnings $ (.02) $ .17 $ .10 $ .40
Fully Diluted Net (Loss) Earnings (.02) .17 .10 .37
Average common and common
equivalent shares outstanding
Primary 12,099,081 11,735,095 12,265,318 11,360,402
Fully Diluted 12,186,830 12,624,146 12,414,108 12,549,175
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 1,264,350 $ 4,575,921
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,590,423 3,642,630
Amortization of deferred financing costs 66,400 168,697
Loss on sale of property and equipment 32,616 7,509
Deferred income taxes 74,000 706,000
Stock option tax benefit 567,000
Change in current assets and current liabilities:
(Increase) decrease in:
Accounts receivable (1,221,059) (4,894,622)
Inventory (6,067,266) (5,334,699)
Other current assets (536,346) (581,812)
Increase (decrease) in:
Accounts payable 2,743,192 4,074,560
Accrued payroll and payroll taxes 464,590 349,108
Other current liabilities 881,490 102,267
Income taxes payable (35,550) 405,553
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,256,840 3,788,112
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,185,833) (1,939,480)
Additions to capitalized software costs (2,766,292) (2,124,987)
Proceeds from sale of property and equipment 16,640 49,245
Additions to patents and other assets (1,440,911) (410,124)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (6,376,396) (4,425,346)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 407,708 547,715
Net borrowings (repayments) under revolving credit lines 3,093,929 (65,048)
Net repayments of a note payable (620,000)
Additions to long-term debt 470,938 2,187,000
Payments on long-term debt (605,206) (323,951)
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 3,367,369 1,725,716
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (752,187) 1,088,482
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,193,673 1,519,437
------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,441,486 $ 2,607,919
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation -
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. They do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been
no material change in the information disclosed in the notes to
consolidated financial statements included in the Annual Report on Form 10-
K of LaserMaster Technologies, Inc. and subsidiaries (the "Company") for
the year ended June 30, 1994. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month and
nine-month periods ended March 31, 1995 are not necessarily indicative of
the results that may be expected for the year ending June 30, 1995.
2. Inventory -
Inventory consists of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
----------- -----------
<S> <C> <C>
Raw materials
Third party printer engines $ 770,304 $ 1,854,714
Completed subassemblies 5,435,899 3,564,896
Raw materials 6,265,676 3,255,224
Work in process 1,543,427 521,205
Finished goods 5,622,999 4,375,000
----------- -----------
$19,638,305 $13,571,039
----------- -----------
----------- -----------
</TABLE>
Certain prior year amounts have been reclassified to conform to March 31,
1995 presentation. Such reclassification had no impact on net income and
stockholders' equity.
3. Short-term financing -
On April 25, 1994 the Company's subsidiary LaserMaster Corporation (LMC)
established an operating line of credit with a commercial bank which
allowed LMC to borrow up to $5,000,000 of eligible accounts receivable. On
November 11, 1994 and December 16, 1994, the agreement was amended to
increase the line of credit from $5,000,000 to $9,250,000 of eligible
accounts receivable and inventory. The amended agreement allows LMC to
borrow up to 70% of the net eligible accounts receivable and 40% of the net
eligible inventory subject to a sublimit of $3,000,000. For the period
from December 16, 1994 to April 3, 1995, $1,000,000 of availability was
granted in excess of the eligible accounts receivable and inventory
borrowing base. Borrowings are secured by eligible accounts receivable and
inventory and bear interest at a defined bank Reference Rate (prime) plus
1.75% (10.75% at March 31, 1995) with a 0.5% unused line fee. At March 31,
1995 approximately $2,327,000 was unused under this credit line. The term
of the agreement expires April 25, 1996. The loan agreement requires LMC
to meet various covenants involving capital expenditure limitations, cash
flow leverage, quarterly pre-tax profit and maintain a minimum net worth of
$10,250,000. LMC failed to meet and was granted a waiver of the cash flow
covenant for the March 1995 quarter and the profitability covenant for the
December 1994 and March 1995 quarters.
LaserMaster Europe, Ltd. (LME), a subsidiary of the Company's LaserMaster
Corporation subsidiary, maintains a receivables financing arrangement with
a Dutch commercial finance company whereby LME
5
<PAGE>
may borrow up to 70% of its eligible accounts receivable, with a maximum
advance of $1,500,000. At March 31, 1995 approximately $451,000 was
unused under this credit line. Borrowings are available in U.S. Dollars
and Dutch Guilders. Borrowings in Dutch Guilders are due on demand and
bear interest at the Promissory Note Discount Rate of the Dutch Central
Bank plus 2.5% (6.75% at March 31, 1995). Borrowings in U.S. Dollars are
due on demand and bear interest at a rate that fluctuates with the market
(no U.S. Dollars were borrowed at March 31, 1995). Other fees include a
cash advance commission of 0.1% per month on the highest monthly loan
balance and a commission equal to 0.1% of all accounts financed, with an
annual minimum charge of $10,000.
4. Long-term debt -
LaserMaster Corporation maintains a promissory note payable to a commercial
finance company. The note is secured by specified fixed assets owned by
LMC and is repayable in 42 consecutive monthly installments, the first of
which was made on March 7, 1994. The note bears interest at the fixed rate
of 8.53%.
During December 1994, LaserMaster Corporation signed two new promissory
notes with the same commercial finance company. Proceeds from the two
notes were $269,621 and $201,317, and are repayable in 36 consecutive
monthly installments, the first of which were made February 5, 1995.
Borrowings under the new notes are secured by specified fixed assets owned
by LMC and bear interest at the "One-Month" Commercial Paper rate plus 4%
(10.06% at March 31, 1995).
5. Supplemental disclosure of cash flow information and non-cash financing
activities -
The Company paid and received cash for the following items:
<TABLE>
<CAPTION>
Nine months ended
March 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Interest paid $ 782,293 $ 977,995
Income tax paid 577,550 784,446
Interest received 22,813 85,796
</TABLE>
Capital lease obligations of $356,615 and $45,319 were incurred during the
nine months ended March, 31, 1995, and 1994, respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Net sales for the three months ended March 31, 1995 were $31 million, an
increase of 9.9% over the same period one year ago. Net sales for the nine
months ended March 31, 1995 were $89.7 million, an increase of 20.5% over the
same period one year ago. Net loss for the three months ended March 31, 1995
was $289,000 or $.02 per share compared to net income of $2.0 million or $.17
per share for the three months ended March 31, 1994. Net income for the nine
months ended March 31, 1995 was $1.3 million compared to $4.6 million for the
same period one year ago.
The increase in net sales for the quarter was primarily attributable to
production volume shipments of the Company's chemical-free imagesetter,
PressMate-Trademark-, and an increase in sales of the Company's Big Color-
Trademark- products. The Company shipped 248 units of PressMate in the three
months ended March 31, 1995, including 163 units in March 1995. PressMate uses
the Company's proprietary ThermalRes-Trademark- software and proprietary
hardware design to produce film used in the traditional commercial printing
process. Big Color revenues for the third quarter increased over the same
period one year ago primarily as a result of sales of Halon-Trademark-, an
interface card for color laser copiers, and increased sales of ink and media to
the installed base of Big Color DisplayMaker-Trademark- printers. Sales of
plain-paper typesetting products in the three months ended March 31, 1995
decreased 10% from the same period one year ago.
The Company's strategy is to maintain and enhance its position as a leading
provider of affordable, high-quality products and consumables to the digital
pre-press and wide-format color printing markets. Key elements of the Company's
strategy include (1) increasing recurring consumables revenue; (2) developing
proprietary print engines, hardware and value-added software; (3) continuing
to emphasize telemarketing to targeted professional markets as a direct sales
approach; and (4) increasing international sales.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's Consolidated
Statements of Operations expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three months Nine months
ended March 31, ended March 31,
--------------- ---------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of goods sold . . . . . . . . . . 62.8 55.0 59.3 56.7
------ ------ ------ ------
Gross profit. . . . . . . . . . . . 37.2 45.0 40.7 43.3
Operating expenses:
Sales and marketing . . . . . . . 22.1 20.7 23.2 20.3
Research and development. . . . . 5.9 3.1 5.1 3.0
General and administrative. . . . 9.1 9.3 9.3 9.2
------ ------ ------ ------
Total operating expenses. . . . . 37.1 33.1 37.6 32.5
------ ------ ------ ------
Operating profit . . . . . . . . . . . 0.1 11.9 3.1 10.8
Other income (expense):
Interest expense. . . . . . . . . (1.0) (1.1) (0.9) (1.5)
Interest income . . . . . . . . . 0.0 0.1 0.0 0.1
Other . . . . . . . . . . . . . . (0.4) 0.1 (0.2) (0.0)
------ ------ ------ ------
Earnings before income taxes . . . . . (1.3) 11.0 2.0 9.4
Income tax provision . . . . . . . . . 0.4 (3.8) (0.6) (3.3)
------ ------ ------ ------
Net earnings . . . . . . . . . . . . (0.9)% 7.2% 1.4% 6.1%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
7
<PAGE>
NET SALES. The Company's net sales for the three and nine months ended March
31, 1995 increased 10% and 20%, respectively, over the same periods one year
ago. The following table sets forth net sales by product line expressed in
thousands and as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended March 31, Nine months ended March 31,
-------------------------------------- -------------------------------------
1995 1994 1995 1994
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plain-paper typesetting $12,177 39.3% $13,568 48.1% $43,615 48.6% $44,424 59.7%
PressMate 4,524 14.6 0 0.0 4,753 5.3 0 0.0
Big Color 13,129 42.4 11,648 41.3 36,114 40.3 20,963 28.1
WinPrint/OEM/Imaging 1,149 3.7 2,982 10.6 5,244 5.8 9,102 12.2
------- ------ ------- ------ ------- ------ ------- ------
Total net sales $30,979 100.0% $28,198 100.0% $89,726 100.0% $74,489 100.0%
------- ------ ------- ------ ------- ------ ------- ------
------- ------ ------- ------ ------- ------ ------- ------
</TABLE>
Net sales of plain-paper typesetters for the three months ended March 31, 1995
decreased 10% from the same period one year ago. The decrease in plain-paper
typesetter sales is primarily attributable to a segmentation of this market into
two distinct markets. In the first market, which is interested in high-
performance black and white plain-paper typesetters, the Company continued to
experience increased competition in the form of faster and less expensive plain-
paper typesetters with quality approaching or equaling that of its Unity 1200
XL-O. Over the past several months, the Company has reduced the prices and
added features enhancing performance on several of its Unity typesetters in an
effort to maintain its market share. In the second market, which is interested
in the control of the pre-press process and high quality issues, customers
delayed purchasing decisions awaiting the release of the Company's announced
chemical-free imagesetter, PressMate. PressMate shipments reached production
volumes with 163 units sold in March 1995. Higher volume shipments of PressMate
began to address the concerns of customers interested in control and quality,
who were waiting to view this new chemical-free product in operation.
Big Color sales for the three months ended March 31, 1995 increased 12.7% over
the same period one year ago. Included in Big Color net sales for the third
quarter of fiscal 1995 were revenues from the sale of DisplayMaker and related
systems of $7.5 million, consumables of $3.7 million, Halon color laser copier
interfaces of $901,000 and miscellaneous of $1 million. 293 DisplayMaker units
were sold during the three months ended March 31, 1995.
Net sales of WinPrint-Registered Trademark- and OEM/Imaging products declined
primarily because of increased competition and decreased sales and marketing
expenditures for such products.
INTERNATIONAL SALES. International sales for the three and nine months ended
March 31, 1995 increased 6% and 30%, respectively, over the same periods one
year ago. Increased sales in the European market were primarily attributable to
the introduction of the Big Color and PressMate products. Increased sales in
the Japanese and Asian markets were attributable to growth in sales of Japanese-
language versions of the Company's Unity products and growth in sales of Big
Color products. The following table sets forth international sales by region
expressed in thousands and as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended March 31, Nine months ended March 31,
------------------------------------- -------------------------------------
1995 1994 1995 1994
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Europe $5,757 18.6% $5,056 17.9% $16,158 18.0% $12,432 16.7%
Japan, Asia, Pacific 2,678 8.6 2,504 8.9 9,556 10.7 6,444 8.6
Latin America 1,537 5.0 1,406 5.0 3,626 4.0 2,805 3.8
Canada 463 1.5 873 3.1 1,727 1.9 2,266 3.0
------- ----- ------ ----- ------- ----- ------- -----
Total international sales $10,435 33.7% $9,839 34.9% $31,067 34.6% $23,947 32.1%
------- ----- ------ ----- ------- ----- ------- -----
------- ----- ------ ----- ------- ----- ------- -----
</TABLE>
GROSS PROFIT. The Company's gross profit margin for the three and nine months
ended March 31, 1995 was 37.2% and 40.7%, respectively, compared to 45.0% and
43.3% for the same periods one year ago. Gross
8
<PAGE>
margins on plain-paper typesetters in the three months ended March 31, 1995,
decreased to approximately 30% as a result of price decreases related to
increased competition. Gross margins on Big Color products in the third quarter
of fiscal 1995 were approximately 50%, decreasing from 53% in the preceding
quarter. The decrease in Big Color margins is attributable to increased
competition and the implementation of a dealer distribution channel. PressMate
gross margins were approximately 50% during the three months ended March 31,
1995, excluding any production startup costs associated with the product.
Production startup costs of approximately $1.2 million associated with PressMate
primarily include costs of rework, repair, scrap obsolescence, tooling and
personnel-related overtime expense. The Company considers these costs to be
normal expenses associated with the implementation and startup of the PressMate
production line.
Overall, the Company's gross margins in the quarter were decreased by price
reductions on the plain-paper typesetting products, and to a lesser extent Big
Color products, which was primarily offset by increased sales of higher margin
Big Color and PressMate products. Production startup costs of approximately
$1.2 million account for the majority of the overall gross margin decrease from
42% in the December 1994 quarter to 37% in the March 1995 quarter.
Future gross margins may be negatively impacted by several factors. While
management believes that production startup costs related to PressMate can be
reduced over the next several quarters, if they cannot be reduced, margins on
PressMate and the Company's overall margins will be negatively affected as a
result. In addition, the Company expects to experience some short-term
increases in production startup costs related to DisplayMaker Express as the
production line initiates production in the June 1995 quarter and subsequently
increases units produced to anticipated normal levels. Another factor which
may decrease margins in the fall 1995 quarter and beyond is the decrease in
value of the dollar compared to the Japanese yen which may increase the
Company's cost of raw print engines and memory purchased from vendors in Japan.
As production volumes for both PressMate and DisplayMaker Express increase, it
is expected that both of these higher margin products will positively impact
overall gross margins. The Company believes overall gross margins will be
favorably impacted in the long-term as the overall product mix includes more
proprietary print engines.
EXPENSES. Sales and marketing expense for the three months ended March 31, 1995
increased $1.0 million to $6.8 million, compared to $5.8 million for the same
period one year ago. Sales and marketing expense for the third quarter of
fiscal 1995 was 22% of net sales compared to 21% for the third quarter of fiscal
1994. Sales and marketing expense increased in anticipation of the release of
new products and included increases in sales related expenses of $675,000,
marketing related expenses of $234,000 and technical support related expenses of
$120,000.
Research and development expenditures, including amounts expensed and
capitalized, were $2.7 million in the three months ended March 31, 1995,
compared to $1.7 million for the same period one year ago. Research and
development expenditures capitalized for the three months ended March 31, 1995
were $884,000 compared to $837,000 for the three months ended March 31, 1994.
The overall increase in research and development expenditures by the Company is
primarily attributable to the Company's increased emphasis on developing
proprietary print engines and related hardware for its software technology.
Software development expenditures capitalized declined as a percentage of total
research and development expenditures as the Company's hardware development
increased more rapidly than its continuing software development programs.
General and administrative expenses for the three months ended March 31, 1995
increased $192,000 to $2.8 million, compared to $2.6 million for the same period
one year ago in conjunction with overall revenue growth of the Company. Overall
operating expenses for the three months ended March 31, 1995 increased to $11.5
million or 37.1% of net sales, compared to $9.3 million or 33.1% of net sales
for the same period one year ago.
Interest expense was $310,000 and $807,000 for the three and nine months ended
March 31, 1995, respectively, compared to $318,000 and $1.1 million in the same
periods one year ago.
9
<PAGE>
The Company's effective income tax rate for the three and nine months ended
March 31, 1995, was 30%, compared to a rate of 35% for the same periods one
year ago. The decline in the Company's effective rate was primarily
attributable to tax benefits associated with the Company's use of its Foreign
Sales Corporation for international activity.
FOREIGN CURRENCY. The Company purchases certain raw materials, primarily from
Japan, which are subject to currency fluctuations. It also sells finished
goods, extends credit, and maintains accounts receivable and payable in five
major European denominations. The impact of currency fluctuations on these
activities to date is immaterial to the financial statements taken as a whole.
The Company has some contractual protection against currency fluctuations
(primarily the Japanese yen) with regard to purchases of raw printer engines and
memory. The Company does not consider its exposure with regard to European
currencies to be material and has not entered into any substantial currency
hedging transactions as they relate to those currencies.
LIQUIDITY AND CAPITAL RESOURCES
Cash of $6.1 million was used to acquire inventory in the nine months ended
March 31, 1995, compared to $5.3 million used for the same period one year ago.
The increased inventory levels are primarily a result of the purchase of
components for new products released or anticipated to be released in fiscal
1995 and 1996. Cash of $1.2 million was used during the nine months ended March
31, 1995 to fund an increase in accounts receivable, compared to an increase of
$4.9 million in accounts receivable for the same period one year ago. The level
of accounts receivable, in relation to sales levels, has risen slightly over the
past nine months. The Company continues to place increasing emphasis on cash
collection and third-party leasing. Cash of $2.7 million was provided by an
increase in accounts payable for the nine months ended March 31, 1995, compared
to $4.1 million provided during the same period one year ago.
Cash used in investing activities for the nine months ended March 31, 1995 was
$6.4 million compared to $4.4 million for the same period one year ago. Cash
used in investing activities during the nine months ended March 31, 1995,
included $2.8 million used in the development of software, $2.2 million used to
purchase capital equipment and $1.4 million used to acquire intellectual
property, including patents, trademarks and licenses. Increased use of cash
related to investing activities is primarily a result of increased sales of new
products requiring support in all areas of the Company, increased emphasis on
the research and development of new proprietary products and a significant
increase in activity related to the protection of intellectual property
including numerous patent and trademark filings related to the Company's
development of two new proprietary printer engines. Cash provided by financing
activities for the nine months ended March 31, 1995 was $3.4 million as a result
of increased borrowings under existing lines of credit compared to $1.7 million
for the same period one year ago.
The Company maintains a credit facility with a commercial bank providing up to
$9.25 million of eligible accounts receivable and inventory. The agreement
allows LMC, the Company's primary operating subsidiary, to borrow up to 70% of
the net eligible accounts receivable and 40% of the net eligible inventory
subject to a sublimit of $3.0 million. The loan agreement requires LMC to meet
various covenants involving capital expenditure limitations, cash flow leverage,
quarterly pre-tax profit and maintenance of a minimum net worth of $10.25
million. As typesetting sales stalled due to delays in PressMate shipments
early in the quarter and increased competition, LMC failed to meet and was
granted a waiver of the cash flow covenant for the March 1995 quarter and the
profitability covenant for the December 1994 and March 1995 quarters. LME
maintains a receivable financing arrangement with a Dutch commercial finance
company providing up to $1.5 million of eligible net receivables.
The Company believes that its current cash position, together with cash flow
from future operations and amounts which should be available to the Company
under credit facilities, will be adequate to fund the Company's operations
through fiscal 1995. The Company's business plan is contingent on continuing to
obtain reasonably priced sources of capital and sales remaining uninterrupted.
If sales are less than expected or sources of financing are unavailable, the
Company will be required to revise its business plans.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
During the quarter, the Company's LaserMaster Corporation subsidiary reached a
confidential settlement of the patent infringement suit which was filed against
Colossal Graphics, Inc. Commercial terms of the settlement are not material.
ITEM 2: CHANGES IN SECURITIES
Nothing to report.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Nothing to report
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Shareholders' Meeting was held on April 20, 1995. At that
meeting, Jean-Louis Gassee and Lawrence J. Lukis were reelected as directors of
the Company with terms expiring in 1997.
The vote with respect to the directors elected at the meeting was:
Director For Withhold Authority
Jean-Louis Gassee 10,113,689 101,544
Lawrence J. Lukis 10,115,697 99,536
ITEM 5: OTHER INFORMATION
Nothing to report.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) LISTING OF EXHIBITS
None.
(b) REPORTS ON FORM 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LASERMASTER TECHNOLOGIES, INC.
/s/Melvin L.Masters
- - ------------------------------
Melvin L. Masters
Chief Executive Officer
/s/Randall L. Ruegg
- - ------------------------------
Randall L. Ruegg
Chief Financial Officer
Dated: May 3, 1995
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERNAL
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 1,441,486
<SECURITIES> 0
<RECEIVABLES> 17,149,725
<ALLOWANCES> 1,537,000
<INVENTORY> 19,638,305
<CURRENT-ASSETS> 42,550,203
<PP&E> 6,465,009
<DEPRECIATION> 11,579,205
<TOTAL-ASSETS> 57,046,291
<CURRENT-LIABILITIES> 28,325,103
<BONDS> 1,676,442
<COMMON> 111,477
0
0
<OTHER-SE> 24,699,269
<TOTAL-LIABILITY-AND-EQUITY> 57,046,291
<SALES> 89,726,111
<TOTAL-REVENUES> 89,726,111
<CGS> 53,185,605
<TOTAL-COSTS> 53,185,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 33,790,240
<INTEREST-EXPENSE> 807,443
<INCOME-PRETAX> 1,806,350
<INCOME-TAX> 542,000
<INCOME-CONTINUING> 1,264,350
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,264,350
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
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