U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended August 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-18253
NDC Automation, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 56-1460497
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
(Address of principal executive offices)
(704) 362-1115
(Issuer's telephone number)
N/A
(Former name, former address, and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___No___
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 15, 1996, there were 3,453,451 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes___; No X
This document contains 17 pages. The Exhibit Index is located on page 15.
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I N D E X
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
August 31, 1996 (Unaudited) and November 30, 1995 3 - 4
Condensed Consolidated Statements of Operations
Three and nine months ended August 31, 1996
and August 31, 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows Nine
months ended August 31, 1996 and August 31, 1995
(Unaudited) 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
(a) Exhibits -- Press Releases and other Exhibits 13
(b) Reports on Form 8-K 13
SIGNATURES 14
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NDC AUTOMATION, INC.
CONDENSED BALANCE SHEETS
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, November 30,
1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents $ 153,232 $ 164,781
Accounts receivables, net 913,975 1,203,137
Inventories 1,332,473 1,929,649
Costs and estimated earnings in excess of
billings on uncompleted contracts 94,479 123,260
Prepaid expenses and other assets 50,852 31,333
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets $2,545,011 $3,452,160
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS $ 16,281 $ 16,281
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures and office equipment, 391,694 389,709
Machinery and equipment 371,512 371,512
Software 103,557 103,557
Vehicles 36,729 30,754
- ------------------------------------------------------------------------------------------------------------------------------------
$2,330,115 $2,322,155
Less accumulated depreciation 1,056,884 964,600
- ------------------------------------------------------------------------------------------------------------------------------------
$1,273,231 $1,357,555
- ------------------------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS $ 181,600 $ 258,454
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
$4,016,123 $5,084,450
</TABLE>
Note: The Condensed Balance sheet at November 30, 1995 has been taken from the
Audited Consolidated Financial Statements at that date.
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
AUGUST 31, November 30,
1996 1995
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $ 651,045 $ 644,375
Current maturities of long- term debt (Note 4) 67,101 288,324
Accounts payable and accrued expenses;
including amounts owed to affiliates
of $125,757 at 1996 and $25,104 at 1995 392,771 1,002,574
Billings in excess of costs and estimated
earnings on uncompleted contracts 233,564 277,527
Deferred income taxes -- 12,216
- --------------------------------------------------------------------------------------------------------------
Total current liabilities $ 1,344,481 $ 2,225,016
- --------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 4 ) $ 1,119,730 $ 1,170,311
- --------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES $ -- $ 16,613
- --------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share
authorized 1,000,000 shares; no shares issued $ -- $ --
Common stock, par value $.01 per share;
11,000,000 shares authorized
at 1996 and 1995; 3,453,451 shares
Issued at 1996 and 1995 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (2,694,188) (2,573,590)
- --------------------------------------------------------------------------------------------------------------
$ 1,551,912 $ 1,672,510
==============================================================================================================
$ 4,016,123 $ 5,084,450
==============================================================================================================
</TABLE>
4
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NDC AUTOMATION, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
AUGUST 31, August 31, AUGUST 31, August 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 1,144,829 $ 1,817,270 $ 4,098,724 $ 6,064,440
Cost of goods sold 782,217 1,334,460 2,582,449 3,938,477
- -----------------------------------------------------------------------------------------------------------------------
Gross profit $ 362,612 $ 482,810 $ 1,516,275 $ 2,125,963
- -----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 144,820 $ 103,727 $ 488,264 $ 550,061
General and administrative 319,169 1,036,837 1,021,504 2,710,679
Research and development -- 47,000 3,943 144,254
- -----------------------------------------------------------------------------------------------------------------------
$ 463,989 $ 1,187,564 $ 1,513,711 $ 3,404,994
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ (101,377) $ (704,754) $ 2,564 $ (1,279,031)
- -----------------------------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ -- $ 1,605 $ -- $ 6,539
Interest expense (43,087) (202,575) (151,991) (528,289)
- -----------------------------------------------------------------------------------------------------------------------
$ (43,087) $ (200,970) $ (151,991) $ (521,750)
- -----------------------------------------------------------------------------------------------------------------------
Loss before income taxes $ (144,464) $ (905,724) $ (149,427) $ (1,800,781)
Federal and state income taxes (benefit)
(Note 2) (28,829) 24,122 (28,829) 73,282
- -----------------------------------------------------------------------------------------------------------------------
Net loss $ (115,635) $ (929,846) $ (120,598) $ (1,874,063)
=======================================================================================================================
Weighted average number of common
shares outstanding 3,453,451 2,902,514 3,453,451 2,902,514
- -----------------------------------------------------------------------------------------------------------------------
Loss per common share (Note 3) $ (0.03) $ (0.32) $ (0.03) $ (0.65)
=======================================================================================================================
Dividends per common share $ -- $ -- $ -- $ --
=======================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
NDC AUTOMATION, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
AUGUST 31, August 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 284,187 $ 1,179,403
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment $ -- $ 3,782
Purchase of property and equipment (31,004) (51,186)
- ----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES $ (31,004) $ (47,404)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) on revolving credit agreement $ 6,670 $ (984,500)
Principal payments on long-term borrowings (271,804) (90,847)
- ----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN
FINANCING ACTIVITIES $(265,134) $(1,075,347)
- ----------------------------------------------------------------------------------------------------------------------
Effect of foreign currency exchage rates changes
on cash and cash equivalents $ 402 $ (13,101)
- ----------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents $ (11,549) $ 43,551
Cash and cash equivalents:
Beginning 164,781 256,037
- ----------------------------------------------------------------------------------------------------------------------
Ending $ 153,232 $ 299,588
======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for :
Interest $ 140,741 $ 511,854
Income taxes $ -- $ (454,011)
======================================================================================================================
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
6
<PAGE>
NDC AUTOMATION, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1.
The unaudited internal condensed consolidated financial statements and related
notes have been prepared by NDC Automation, Inc. (the "Company"), without audit
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated financial
position, results of operations and changes in cash flows at August 31, 1996,
and for all periods presented, have been made.
The condensed consolidated financial statements at August 31, 1995 include the
accounts of the Company and its wholly-owned subsidiaries, NDC Technology
Australia PTY Ltd. and NDC Laser AB. The two subsidiaries were sold November 30,
1995; accordingly, the August 31, 1996 financial statements include only the
Company's accounts. All material inter-company balances and transactions have
been eliminated in consolidation.
The functional currency for the Company's foreign operations is the applicable
local currency. The translation of the foreign currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the Company's audited consolidated
financial statements and notes thereto for the fiscal year ended November 30,
1995. The results of operations for the three and nine months ended August 31,
1996 are not necessarily indicative of the operating results for the full year.
NOTE 2. INCOME TAXES
The Company recognized a tax benefit of $28,829 in 1996 domestically for its
current loss by reducing its deferred tax liability. Income tax expense of
$73,282 for the nine months ended August 31, 1995 is due primarily to income
taxes of one of its foreign subsidiaries.
NOTE 3. LOSS PER COMMON SHARE
Loss per common share is computed by dividing net loss applicable to common
shareholders by the weighted average common shares outstanding. Options issued
pursuant to the Stock Option Plans which are normally considered common stock
equivalents, have been excluded, as their inclusion does not dilute the
computation beyond the 3% materiality test or their exercise price was above the
market price for substantially all of three consecutive months .
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PLEDGED ASSETS, NOTES PAYABLE, BANK AND LONG-TERM DEBT
The Company has the following notes payable to a bank at August 31, 1996:
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Line of credit for $900,000 with interest at prime plus 4.00%. Advances under
the line of credit will not exceed the lesser of 1) $900,000 or 2) the sum of 80% of
the Company's current accounts receivable, plus 40% of the book value of its current
inventory. The line of credit also contains certain financial covenants to which the
Company must adhere.
The termination date of the line is November 29, 1996.(1),(2) $ 651,045
========================================================================================================
Long-term debt consists of the following at August 31, 1996:
Mortgage note payable to a bank, based on a 7.75% fixed rate. Original principal
balance to be repaid in fifty-nine (59) consecutively monthly principal and interest
payments of $13,057, with one final payment of approximately $1,025,936 due on
February 10, 1998. The note is collaterized by the Company's land and building
with a carrying value of $1,071,884. The loan also contains certain financial covenants
to which the Company must adhere. $1,186,831
Less current maturities:
Mortgage $ 67,101
- --------------------------------------------------------------------------------------------------------
$1,119,730
========================================================================================================
</TABLE>
(1) The prime rate at August 31,1996 was 8.25%.
(2) The line of credit is secured by a first priority security interest in the
Company's accounts receivable, inventory, software and patents.
Maturities of long-term debt at August 31, 1996 are as follows:
Maturities
of
Year Ending Long-term
August 31 Debt
- --------------------------------------------------------------------------------
1997 $ 67,101
1998 1,119,730
1999 -
- --------------------------------------------------------------------------------
$1,186,831
================================================================================
8
<PAGE>
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the condensed consolidated financial statements (including the notes
thereto) presented elsewhere herein.
OVERVIEW
The Company derives virtually all of its revenues from the sale of hardware,
software and engineering services in connection with projects incorporating its
Automated Guided Vehicle (AGV) control technology and from the sale of its
products. For the past several fiscal years, the Company's net revenues from AGV
systems, vehicles and technology have been derived primarily from sales to
customers serving two industries -- textiles and newspaper publishing. Net
revenues in 1995 and during 1996, however, have been concentrated in other
industries as the newspaper industry itself has undergone contraction and the
Company has focused its sales efforts away from the textile industry during and
subsequent to the Schlafhorst, Inc. arbitration proceedings. The Company's
results of operations can be expected to continue to depend substantially upon
the capital expenditure levels in those industries and in other industries that
it may enter. In addition, during 1995 and early 1996, net revenues derived from
RFID products and services have generally declined due to increased competition
among RFID suppliers and the decreased demand from the North American automobile
industry, which is the primary market for the sale of its RFID systems. The net
revenues in RFID were primarily derived from after market sales to existing
customers in 1995. The Company assigned the exclusive distribution agreement and
manufacturing rights back to Statec Technologies SA, the Company's supplier of
such products, in March of 1996.
Due to the long sales cycle involved, uncertainties in timing of projects
and the large percentage that the dollar amount of a typical project usually
bears to the Company's historical and current quarterly and annual net revenues,
the Company has experienced, and may be expected to continue to experience,
substantial fluctuations in its quarterly and annual results of operations.
The Company sells its products and services primarily in two ways. Vehicles,
technology and other products and services may be sold in a "project" that
becomes an integrated AGV system. "Projects" are undertaken by the Company in
cooperation with its customers. The primary business is to sell hardware,
software and services to be sold as standard items to OEM customers, with less
involvement by the Company in overall system design. The Company generally would
recognize lower net revenue but would enjoy a higher gross profit margin
percentage in selling standard items, in each case compared to the sale of a
project, due to the inclusion in project sales of other vendors' products and
services with margins generally lower than the Company's own products and
services. Between any given accounting periods, the levels of and mixture of
standard item sales and project sales can cause considerable variance in net
revenues, gross profit, gross profit margin, operating income and net income.
Revenues from standard item sales are recognized upon shipment, while
revenues from project sales are recognized under the "percentage of completion"
method. Under this method, with respect to any particular customer contract,
revenues are recognized as costs are incurred relative to each major segment of
the project. Although the percentage of completion method will ordinarily smooth
out over time the net revenue and profitability effects of large projects, such
method nevertheless subjects the Company's results of operations to substantial
fluctuations dependent upon the progress of work on project segments. Such
segments can differ markedly from one another in amount and in gross profit
margin.
Project contracts are billed upon attainment of certain "milestones." The
Company grants payment terms of 30 to 90 days to its customers. It typically
receives a cash advance ranging from 10% to 20% of the total contract amount.
Bills are thereafter delivered as milestones are reached. Upon delivery of the
project, the customer typically reserves a "retainage" of 10% to 20% pending
system acceptance.
Notwithstanding the receipt by the Company of cash advances and periodic
payments upon reaching project milestones, the Company requires external
financing for its costs and estimated earnings in excess of billings on
uncompleted contracts, inventories, receivables and other assets.
The Company's backlog consists of all amounts contracted to be paid by
customers but not yet recognized as net revenues by the Company.
9
<PAGE>
RESULTS OF OPERATIONS
The table below shows (a) the relationship of income and expense items
relative to net revenues, and (b) the change between the comparable prior period
and current period, for the three-month and nine-month periods ended August 31,
1996 and 1995, respectively. This table should be read in the context of the
Company's condensed consolidated statements of income presented elsewhere
herein:
<TABLE>
<CAPTION>
Percentage of Change
Period to Period
Percentage of Net Revenues Increase(Decrease)
- --------------------------------- ------------------------------------------------------ ---------------------------
Three Nine
Months Months
Three Months Nine Months Ended Ended
Ended Ended August 31, August 31,
August 31, August 31, August 31, August 31, 1995 to 1995 to
1996 1995 1996 1995 1996 1996
% % % % % %
- --------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 100.0 100.0 100.0 100.0 (37.0) (32.4)
Cost of Goods Sold 68.3 73.4 63.0 64.9 (41.4) (34.4)
- --------------------------------- ------------- ------------- ------------- -------------
Gross Profit 31.7 26.6 37.0 35.1 (24.9) (28.7)
- --------------------------------- ------------- ------------- ------------- -------------
Operating expenses:
Selling 12.6 5.7 11.9 9.1 39.6 (11.2)
General and administrative 27.9 57.1 24.9 44.7 (69.2) (62.3)
Research and development - 2.6 0.1 2.4 (100.0) (97.3)
- --------------------------------- ------------- ------------- ------------- -------------
40.5 65.4 36.9 56.2 (60.9) (55.5)
- --------------------------------- ------------- ------------- ------------- -------------
Operating income (loss) (8.8) (38.8) 0.1 (21.1) (85.6) (100.2)
Net interest expense: (3.8) 11.1 (3.7) 8.6 (78.6) (70.9)
- --------------------------------- ------------- ------------- ------------- -------------
Loss before income taxes (12.6) (49.9) (3.6) (29.7) (84.0) (91.7)
Federal and state income taxes
(benefit) (2.5) 1.3 (0.7) 1.2 (219.5) (139.3)
- --------------------------------- ------------- ------------- ------------- -------------
Net Loss (10.1) (51.2) (2.9) (30.9) (87.6) (93.6)
================================= ============= ============= ============= =============
</TABLE>
QUARTER ENDED AUGUST 31, 1996 COMPARED TO THE QUARTER ENDED AUGUST 31, 1995
Net revenues decreased by $672,441 or 37.0% from $1,817,270 in the earlier
period to $1,144,829 in the latter period. The primary reasons for the decrease
was that the Company had a lower opening backlog at May 31, 1996 compared to the
prior year and due to the sale of its two subsidiaries the Company recognized no
revenues in 1996 from NDC Laser AB and NDC Technology Australia PTY Ltd.
Cost of goods sold decreased from $1,334,460 to $782,217 or 41.4% due primarily
to lower net revenues in 1996. As a percentage of net revenues, cost of goods
sold was lower compared in 1996 due to a higher mix of standard product sales
and engineering services compared to the prior year. During the current quarter
ended the Company wrote-down $45,000 of inventory due to obsolescence. Gross
profit decreased by $120,198 or 24.9% from $482,810 to $362,612, while gross
profit as a percentage of net revenues increased to 31.7%, from 26.6% again
due to a higher mix of standard product sales and engineering services.
Selling expenses increased from $103,727 to $144,820 or 39.6% due primarily to
an Australian grant received during the third quarter of 1995 while no such
grant was received in 1996. General and administrative expenses decreased from
$1,036,837 to $319,169, or 69.2% due to lower legal and associated expenses
related to the resolution of the Schlafhorst, Inc. arbitration case and large
overhead reductions due to the Company's restructuring in the last quarter of
1995. In 1995 the Company incurred personnel severance expenses of approximately
$370,000 associated with the restructuring. During the last quarter in 1995, the
Company sold its foreign subsidiaries. NDC Laser was sold to Netzler & Dahlgren
Co. A.B. and NDC Technologies Australia was sold to an officer of the
10
<PAGE>
Australian company. The Company also sold its laser technology to Netzler and
Dahlgren Co. A.B.. These developments allowed the Company to significantly
reduce its depreciation and amortization expense in 1996. General and
administrative expenses are expected to be significantly lower in 1996 compared
to 1995. As a percentage of net revenues, general and administrative expenses
decreased from 57.1% to 27.9%.
Primarily as a result of the foregoing, the operating loss decreased by $603,377
or 85.6% from $704,754 in the earlier period to $101,377 in the latter period.
Net interest expense decreased from $200,970 to $43,087, a decrease of $157,883.
The net decrease is primarily due to lower borrowings compared to the prior year
due to a significant cash receipt from the settlement of the Schlafhorst, Inc.
arbitration case in the fourth quarter of 1995 and the reduction of current debt
resulting from the Company's restructuring.
Loss before income taxes decreased by $761,260 from $905,724 to a loss of
$144,464, due primarily to the foregoing factors.
The Company recognized a tax benefits in 1996 domestically for its current loss
by reducing its deferred tax payable. The income tax expense in 1995 is due
primarily to income taxes of one of its foreign subsidiaries.
Primarily as a result of the foregoing, net loss decreased by $814,211 from
$929,846 to a net loss of $115,635.
BACKLOG. Backlog consists of all amounts contracted to be paid by customers but
not yet recognized as net revenues by the Company. At August 31, 1996, the
Company had a backlog of approximately $1,200,000 compared to approximately
$2,400,000 one year earlier. The Company announced the receipt of an order for
approximately $585,000 in September of 1996. Substantial fluctuations in backlog
are considered normal due to the size of AGV system contracts. Substantial
fluctuations in the industry makeup of the Company's backlog also are considered
normal.
NINE MONTHS ENDED AUGUST 31, 1996 COMPARED TO NINE MONTHS ENDED AUGUST 31, 1995
Net revenues decreased by $1,965,716, or 32.4%, from $6,064,440 in the earlier
period to $4,098,724 in the latter period. Approximately $850,000 of revenues
were received from its subsidiaries in 1995 , the subsidiaries where sold
November 30,1995 thereby providing no revenues for 1996.
Cost of goods sold decreased from $3,938,477 to $2,582,449, or 34.4 %, due
primarily to the lower level of net revenues. As a percentage of net revenues,
cost of goods sold decreased from 64.9% to 63.0%. Gross profit decreased by
$609,688, or 28.7%, from $2,125,963 to $1,516,275, while gross profit as a
percentage of net revenues increased from 35.1% to 37.0%.
Selling expenses decreased from $550,061 to $488,264, or 11.2% due to lower
show, personnel and general selling expenses. General and administrative
expenses decreased from $2,710,679 to $1,021,504, or 62.3%, primarily due to the
Company's restructuring.
Primarily as a result of the foregoing, the operating income for the period was
$2,564 compared to an operating loss of $1,279,031 the prior year.
Net interest expense decreased from $521,750 to $151,991, a decrease of 70.9%.
The decrease is primarily due to decreased borrowing needs compared to the prior
year.
Loss before income taxes decreased by $1,651,354, or 91.7%, from $1,800,781, to
$149,427 due primarily to the foregoing factors.
The Company recognized a tax benefits of $28,829 in 1996 by applying its current
loss against its deferred tax liability. Income tax expense in 1995 of $73,282
is due primarily to income taxes of one of its foreign subsidiaries.
Primarily as a result of the foregoing, the net loss decreased by $1,753,465, or
93.6%, from $1,874,063 to a net loss of $120,598.
LIQUIDITY AND CAPITAL RESOURCES
The Company experiences needs for external sources of financing to support its
working capital, capital expenditures and acquisition requirements when such
requirements exceed its cash generated from operations in any particular fiscal
period. The amount and timing of external financing requirements depend
significantly upon the nature, size, number and timing of projects and
contractual billing arrangements with customers relating to project
11
<PAGE>
milestones. The Company has relied upon bank financing under a revolving working
capital facility, as well as long-term debt and capital leases and proceeds of
its public offerings, to satisfy its external financing needs.
During the nine months ended August 31, 1996 net cash provided by operating
activities was $284,187. The Company reduced its inventory by $597,176 during
the nine month period ending August 31, 1996 which allowed it to create
operating cash flows to reduce current liabilities.
The Company continues to operate with the line of credit under modified
financial covenants and cash collateral accounts. The net effect of the cash
collateral accounts gives the lender the authority to monitor the Company's
outgoing cash flows. As of September 30, 1996 the Company had $375,575 available
under the current borrowing base calculation. The Company's present line of
credit was extended initially from March 31, 1996 to May 31, 1996 at a lending
rate of prime plus 3 1/2%. The line was then further extended to November 29,
1996. The new terms of the extension includes 1) an increase in the interest
rate to prime plus 4% per annum, 2) the percentage of inventory against which
financing is available was reduced to 40% from 50% and 3) the available facility
was lowered to a maximum of $1,050,000 from May 31, 1996 through June 27, 1996
and then lowered to $900,000 from June 28, 1996 and thereafter. The Company has
entered into discussions with other lenders to replace the current primary
lender. The Company has no assurance that such line will be replaced by a new
lender.
The Company eliminated its note payable of $200,000 to Netzler & Dahlgren by
successfully negotiating the return of certain excess inventory at cost to such
company. Furthermore, the Company returned additional inventory at cost to
Netzler & Dahlgren to reduce inventory back to a normal operating level and
reduce current accounts payable to the affiliate. The Company believes that its
working capital of $1,200,530 at August 31, 1996 is adequate for it current
operations. However, management believes the working capital may be inadequate
should the Company not secure a suitable long-term line of credit arrangement.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits --
Press releases:
1. Announces receipt of order from Munck Automation Technology,
Inc.
2. Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NDC AUTOMATION, INC.
(Registrant)
BY: /S/ Ralph Dollander
Ralph Dollander
President
Date: Oct. 8, 1996
BY: /s/ Claude Imbleau
Claude Imbleau
VP - Finance & Administration
(Chief Financial Officer)
Date: Oct. 8, 1996
14
<PAGE>
EXHIBIT INDEX
The following documents are included in this Form 10-QSB as an Exhibit:
<TABLE>
<CAPTION>
Designation Number
Under Item 601 of
Exhibit Number Regulation S-K Page
Exhibit Description Number
- ------------------ --------------------- ------------------------------------------------------------ -----------
<S> <C> <C>
1. 99 Press release announces receipt of order from Munck 16
Automation Technology, Inc.
2. 27 Financial Data Schedule 17
</TABLE>
15
<PAGE>
FOR IMMEDIATE RELEASE
SEPTEMBER 24, 1996
NDC AUTOMATION, INC.
ANNOUNCES RECEIPT OF A PURCHASE ORDER
FOR A LASER GUIDED VEHICLE SYSTEM
CHARLOTTE, NC, SEPTEMBER 24, 1996, NDC AUTOMATION, INC. ( OTC BULLETIN
BOARD "AGVS") received a purchase order from Munck Automation Technology, Inc.,
of Newport News, VA, an original equipment manufacturer ( OEM) providing
automated material handling systems to end users.
The order is for Laser Guided Vehicle (LGV) controls hardware ,
software and engineering services totaling approximately $585,000. The Lazerway
system will be installed in an automated manufacturing facility which produces
CD disks .
NDC President Mr. Ralph Dollander states " This order is significant as
we continue to pursue qualified OEM's and system integrators who can incorporate
Laser guidance technology into their systems to end users.
Munck Automation Technology, Inc. is such a company."
NDC Automation, Inc. sells hardware, software, and engineering services
incorporated into and used to control laser and other Automatic Guided Vehicle
Systems (AGVS). NDC's sales are targeted to OEM's and system integrators, which
buy technology solutions from the Company and incorporate them into their
material handling systems for the industries in which they specialize.
###
================================================================================
For further information contact:
Gayle Hentz Ralph Dollander
Investor Relations President
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000859621
<NAME> NDC AUTOMATION, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 153,232
<SECURITIES> 0
<RECEIVABLES> 958,975
<ALLOWANCES> 45,000
<INVENTORY> 1,332,473
<CURRENT-ASSETS> 2,545,011
<PP&E> 2,330,115
<DEPRECIATION> 1,056,884
<TOTAL-ASSETS> 4,016,123
<CURRENT-LIABILITIES> 1,344,481
<BONDS> 0
0
0
<COMMON> 34,534
<OTHER-SE> 1,517,378
<TOTAL-LIABILITY-AND-EQUITY> 4,016,123
<SALES> 4,098,724
<TOTAL-REVENUES> 4,098,724
<CGS> 2,582,449
<TOTAL-COSTS> 2,582,449
<OTHER-EXPENSES> 1,513,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (151,991)
<INCOME-PRETAX> (149,427)
<INCOME-TAX> (28,829)
<INCOME-CONTINUING> (120,598)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,598)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
