<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: September 30, 1996 Commission File Number 0-4431
AUTO-GRAPHICS, INC.
(exact name of registrant as specified in its charter)
California 95-2105641
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3201 Temple Avenue, Pomona, California 91768
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (909) 595-7004
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
Total Shares Outstanding: Common Stock: 1,109,278
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AUTO-GRAPHICS, INC.
Form 10-Q
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Statement of Income
For Nine Months Ended September 30
1996 1995
Net sales $6,689,936 $6,952,801
Costs and expenses:
Cost of sales 3,948,391 4,401,095
Selling, general & administrative 2,342,523 2,264,250
Interest/other 167,736 120,481
Total costs and expenses 6,458,650 6,785,826
Income from operations 231,286 166,975
Provision for taxes based on income 106,000 78,000
Net income $ 125,286 $ 88,975
Net income per share $ 0.11 $ 0.08
Shares outstanding 1,109,278 1,130,478
See Notes to Unaudited Condensed Financial Statements
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<PAGE>
Unaudited Condensed Statement of Income
For Three Months Ended September 30
1996 1995
Net sales $2,144,490 $2,429,726
Costs and expenses:
Cost of sales 1,226,716 1,527,812
Selling, general & administrative 786,003 805,266
Interest 58,240 38,667
Total costs and expenses 2,070,959 2,371,745
Income from operations 73,531 57,981
Provision for taxes based on income 33,000 28,000
Net income $ 40,531 $ 29,981
Net income per share $ 0.04 $ 0.03
Shares outstanding 1,109,278 1,130,478
See Notes to Unaudited Condensed Financial Statements
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Unaudited Balance Sheet
September 30, 1996 and December 31, 1995
ASSETS
CURRENT ASSETS 1996 1995
(Audited)
Cash $ 129,336 $ 106,518
Accounts receivable, less allowance
for doubtful accounts of $38,000
in 1996 and 1995 1,531,284 1,979,245
Unbilled production costs 255,859 232,517
Finished goods 47,242 60,946
Prepaid expenses and other 183,200 168,616
Total current assets 2,146,921 2,547,842
EQUIPMENT & LEASEHOLD IMPROVEMENTS,
at cost 8,805,482 7,986,491
Less accumulated depreciation 4,718,227 4,057,170
Net equipment & leasehold improvements 4,087,255 3,929,321
OTHER ASSETS 432,005 210,543
TOTAL ASSETS $6,666,181 $6,687,706
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ -- $ --
Accounts payable 205,310 524,431
Customers' advance payments 392,736 490,167
Accrued expenses 118,001 38,585
Accrued payroll & related liabilities 293,575 187,901
Current portion of long-term debt 655,000 505,000
Total current liabilities 1,664,622 1,746,084
LONG-TERM DEBT 1,900,881 1,905,881
DEFERRED TAXES BASED ON INCOME 593,939 593,939
TOTAL LIABILITIES 4,159,442 4,245,904
STOCKHOLDER'S EQUITY
Common stock, $.10 par value; 4,000,000
shares authorized, 1,109,278 shares
issued and outstanding in 1996, and
1,130,478 in 1995 110,928 113,048
Capital in excess of par value 1,138,651 1,151,092
Retained earnings 1,257,160 1,177,662
Total stockholders' equity 2,506,739 2,441,802
TOTAL LIABILITIES AND EQUITY $6,666,181 $6,687,706
See Notes to Unaudited Condensed Financial Statements
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Unaudited Statement of
Cash Flows
For Nine Months Ended September 30
1996 1995
Cash flows from operating activities:
Net income $ 125,286 $ 88,975
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 712,987 677,231
Provision for losses on
accounts receivable -- --
(Increase) decrease in accounts
receivable 447,961 235,170
(Increase) decrease in unbilled
production costs (23,342) (102,626)
(Increase) decrease in finished
goods inventory 13,704 (2,374)
(Increase) decrease in other
current assets (14,584) (11,560)
(Increase) decrease in other assets (273,392) (7,494)
Increase (decrease) in accounts
payable (319,121) 11,188
Increase (decrease) in customer
advances (97,431) (46,187)
Increase (decrease) in accrued
expenses (9,038) (49,385)
Increase (decrease) in accrued payroll
and related liabilities 105,674 134,137
Increase (decrease) in interest and
income taxes payable 88,455 (22,885)
Increase (decrease) in deferred taxes -- (8,500)
Net cash provided by operating
activities $ 757,159 $ 895,690
Cash flows from investing activities:
Proceeds from sale of fixed assets $ -- $ --
Capital expenditures (818,991) (1,079,531)
Net cash used in investing activities (818,991) (1,079,531)
Cash flows from financing activities:
Borrowings under long-term debt 550,000 250,000
Principal payments under debt
agreements (405,000) (337,500)
Net borrowings under line-of-credit
agreement -- 375,000
Repurchase of capital stock (60,350) (303,094)
Stock repurchase debt (see Note 4) -- 165,000
Net cash provided by (used in)
financing activities 84,650 149,406
Net increase (decrease) in cash 22,818 (34,435)
Cash at beginning of period 106,518 80,852
Cash at end of period $ 129,336 $ 46,417
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 193,589 $ 164,350
Income taxes 17,546 109,298
See Notes to Unaudited Condensed Financial Statements
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Notes to Unaudited Condensed Financial Statements
September 30, 1996
NOTE 1. The unaudited condensed financial statements included herein have
been prepared by Registrant and include all normal and recurring adjustments
which are, in the opinion of Management, necessary for a fair presentation of
the financial position at September 30, 1996, the results of operations and
the statement of cash flows for the six months ended September 30, 1996 and
1995 pursuant to the rules and regulations of the Securities and Exchange
Commission.
The results of operations for the subject periods are not necessarily
indicative of the results for the entire year.
This Quarterly Report on Form 10-Q is qualified in its entirety by the
information included in the Company's Annual Report to the SEC on Form 10-K
for the period ending December 31, 1995 including, without limitation, the
financial statements included therein.
NOTE 2. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 121, Accounting for the
Impairment of Long-Lived Assets, which the Company adopted in 1995. The
Standard requires the Company to review the carrying amount of long-lived
assets, identifiable intangibles, and related goodwill to determine whether
any indicators of impairment are present. At September 30, 1996 the Company's
review of it's long-lived assets showed no indications of loss or impairment
and, therefore, has not had a material effect on the Company's financial
position or results of operations.
NOTE 3. The Company entered into a stock repurchase agreement with a former
employee and officer of the Company, Douglas K. Bisch, whereby the Company
agreed to purchase and retire, over a seven-year period, 156,000 of 171,000
shares of Company stock owned by Mr. Bisch. In January 1996, the Company
purchased and retired the second block of 15,600 shares.
</PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FINANCIAL CONDITION
December 31, 1995 to September 30, 1996
Liquidity and capital resources. Working capital decreased $319,000
due to an increase in accrued payroll and related liabilities, as well
as an increase in current portion of long-term debt as a result of an
increase earlier this year of the Company's capital line of credit note.
Other assets increased $221,000 due to deferred database costs on
several major contracts which will be recovered over more than one year.
Net long-term debt decreased by $5,000. Capital expenditures were
$819,000. The average collection period for accounts receivable
improved from 70 days at December 31, 1995 to 66 days as of September
30, 1996.
The Company has a revolving credit agreement with a bank under which
borrowings are secured by accounts receivable, whereby the Company may
borrow against its eligible accounts receivable up to a maximum of
$1,000,000 ($1,000,000 available at September 30, 1996) with interest at
0.5% above the bank's prime rate. Management believes that the current
line of credit, which is renewed annually in May, will again be renewed
in 1997, and is sufficient to handle cyclical working capital needs.
There are no compensating balance requirements or commitment fees. This
agreement contains the same loan covenants as the equipment line of
credit note payable.
The Company also has a line of credit agreement with the bank providing
for maximum borrowings of $3,000,000 ($554,119 available at September
30, 1996), with interest at 0.75% above the bank's prime rate, for the
purchase of equipment and financing of up to $1,000,000 in internal
software development costs. The capital line of credit is renewed
annually in May and management believes that the current line of credit
will be renewed in 1997. Management does not currently believe that
increased credit will be required to finance capital improvements in
1996. Among other requirements, the capital line of credit note payable
requires the Company to maintain minimum ratios of current assets to
current liabilities, debt to equity and cash flow to debt service,
minimum working capital and equity amounts, limits capital expenditures
and capital lease obligations and prohibits the payment of cash
dividends. There are no commitment fees or compensatory balance
requirements or note guarantors.
The Company has a note payable due to a stockholder (per a stock
repurchase agreement) with an outstanding balance at September 30, 1996
of $110,000. The note is payable in annual installments of $55,000 (to
be paid June 1997 and 1998) plus interest at 5.5% per annum.
</PAGE>
<PAGE>
RESULTS OF OPERATIONS
First Nine Months 1996 as Compared to First Nine Months 1995
Net sales decreased $263,000 or 4%.
Cost of sales decreased $453,000 or 10% as a result of changes in
variable costs fluctuating with product mix, continuing cost
reduction measures and productivity gains.
Selling, general and administrative expenses increased $78,000 or
3% as a result of the company's focus on sales and marketing. The
primary increases are in additional sales and marketing staff, new
product promotion and a reorganization of the sales and marketing
departments. As a percentage of sales, these expenses increased from
33% to 35%.
Interest expense/other increased $47,000 or 39%. Net interest expense
increased $29,000 as a result of higher interest rates on higher
average borrowings in 1996. Other income in 1996 was $26,000. In
1995 other income was $44,000.
Income from operations increased $64,000, or 38%, to $231,000 in 1996,
up from $167,000 in 1995.
Net income increased $36,000, or 40%, to a $125,000 net profit in
1996, up from an $89,000 net profit in 1995.
Net Income per Share increased 38% to $0.11, up from $0.08 in 1995.
Third Quarter 1996 as Compared to Third Quarter 1995
Net sales decreased $285,000 or 12%.
Cost of sales decreased $301,000 or 20%. Significant factors in cost
of sales include changes in operating costs generally attributable to
variable costs fluctuating with product mix.
Selling, general and administrative expenses decreased $19,000 or 2%.
As a percentage of sales, these expenses increased from 33% to 37%.
Interest expense/other increased $20,000. Net interest expense
increased $9,000. Other income in third quarter of 1995 was $19,000.
In the third quarter 1996 other income was of $8,000.
Income from operations increased $16,000 to $74,000 in 1996.
Net income increased to $41,000 in 1996, up 35%.
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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: None
(b) The Company filed Form 8-K on April 29, 1996 covering
exhibits to the Form 10-K report for the year ended December
31, 1995. These exhibits were separated from the 10-K prior
to the filing thereof and were subsequently refiled
separately.
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.
AUTO-GRAPHICS, INC.
Date 11/14/96 ss/ Robert S. Cope
Robert S. Cope, President
and Treasurer
Date 11/14/96 ss/ Daniel E. Luebben
Daniel E. Luebben, Chief Financial
Officer and Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet and related Statement of Income of Auto-Graphics, Inc. as of September 30,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
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