<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, 1997 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: 1,093,678
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Consolidated Statement of Income
For Nine Months Ended September 30
1997 1996
Net sales $6,715,381 $6,689,936
Costs and expenses:
Cost of sales 4,038,256 3,948,391
Selling, general & administrative 2,164,791 2,342,523
Interest/other 187,305 167,736
Total costs and expenses 6,390,352 6,458,650
Income from operations 325,029 231,286
Provision for taxes based on income 148,000 106,000
Net income $ 177,029 $ 125,286
Net income per share $ 0.16 $ 0.11
Shares outstanding 1,093,678 1,109,278
See Notes to Unaudited Condensed Consolidated Financial Statements
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Condensed Consolidated Statement of Income
For Three Months Ended September 30
1997 1996
Net sales $2,839,053 $2,144,490
Costs and expenses:
Cost of sales 1,836,889 1,226,716
Selling, general & administrative 784,784 786,003
Interest 81,025 58,240
Total costs and expenses 2,702,698 2,070,959
Income from operations 136,355 73,531
Provision for taxes based on income 63,000 33,000
Net income $ 73,355 $ 40,531
Net income per share $ 0.07 $ 0.04
Shares outstanding 1,093,678 1,109,278
See Notes to Unaudited Condensed Consolidated Financial Statements
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Balance Sheets
September 30, 1997 and December 31, 1996
ASSETS 1997 1996
(Audited)
Current assets:
Cash $ 102,357 $ 364,094
Accounts receivable, less allowance
for doubtful accounts ($38,000 in
1997 and 1996) 2,581,220 1,882,305
Unbilled production costs 228,803 94,143
Finished goods inventory 17,470 28,939
Other current assets 410,684 188,440
Total current assets 3,340,534 2,557,921
Equipment and leasehold improvements,
at cost 11,351,896 9,589,699
Less accumulated depreciation 5,837,359 5,164,177
Net equipment and leasehold
improvements 5,514,537 4,425,522
Other assets 197,250 148,507
$ 9,052,321 $ 7,131,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes Payable $ 600,000 $ --
Accounts payable 502,249 330,056
Deferred income 455,069 444,388
Accrued payroll and related
liabilities 343,014 191,290
Other accrued liabilities 141,394 127,037
Current portion of long-term debt 655,000 655,000
Total current liabilities 2,696,726 1,747,771
Long-term debt, less current portion 2,944,073 2,100,881
Deferred taxes based on income 664,939 664,939
Total liabilities 6,305,738 4,513,591
Stockholders' equity:
Foreign Currency Translation 1,195 --
Common stock, $.10 par value,
4,000,000 shares authorized,
1,093,678 shares issued and
outstanding in 1997, and
1,109,278 shares issued and
outstanding in 1996 109,368 110,928
Capital in excess of par value 1,135,999 1,138,651
Retained earnings 1,500,021 1,368,780
Total stockholders' equity 2,746,583 2,618,359
$ 9,052,321 $ 7,131,950
See Notes to Unaudited Condensed Consolidated Financial Statements
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<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Statements of
Cash Flows
For the Nine Months Ended September 30
Increase (Decrease) in Cash
1997 1996
Cash flows from operating activities:
Net income $ 177,029 $ 125,286
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 673,182 712,987
Deferred taxes -- --
Changes in operating assets
and liabilities:
Accounts receivable (698,915) 447,961
Unbilled production costs (134,661) (23,342)
Finished goods inventory 11,469 13,704
Other current assets (222,244) (14,584)
Other assets (48,743) (273,392)
Accounts payable 172,193 (319,121)
Deferred income 10,681 (97,431)
Accrued payroll and
related liabilities 151,725 105,674
Other accrued liabilities 29,913 (9,038)
Interest and income taxes
payable (15,556) 88,455
Net cash provided by
operating activities 106,073 757,159
Cash flows from investing activities:
Capital expenditures (1,762,197) (818,991)
Cash flows from financing activities:
Borrowings under long-term debt 1,295,000 550,000
Principal payments under debt
agreements (451,808) (405,000)
Net borrowings (payments)under
line-of-credit agreement 600,000 --
Repurchase of capital stock (50,000) (60,350)
Net cash provided by (used in)
financing activities 1,393,192 84,650
Effect of exchange rate change on cash 1,195 --
Net change in cash (261,737) 22,818
Cash at beginning of year 364,094 106,518
Cash at end of year $ 102,357 $ 129,336
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 212,265 $ 193,589
Income taxes 163,555 17,546
See Notes to Unaudited Condensed Consolidated Financial Statements
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Notes to
Unaudited Condensed Consolidated Financial Statements
September 30, 1997
NOTE 1. The Unaudited Condensed Consolidated 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, 1997, the results of
operations and the statement of cash flows for the nine months ended
September 30, 1997 and 1996 pursuant to the rules and regulations of the
Securities and Exchange Commission. The consolidated financial statements
include the accounts of Auto-Graphics, Inc. and all its wholly-owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated.
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, 1996 including, without
limitation, the financial statements included therein.
NOTE 2. 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 1997, the Company
purchased and retired the third block of 15,600 shares.
NOTE 3. As of July 1, 1997, the Company acquired the assets of the
Library Information Systems ("LIS") division of ISM Information Systems
Management Manitoba Corporation ("ISM"), a subsidiary of IBM Canada,
Ltd. The LIS business includes bibliographic cataloging and
interlibrary resource sharing software and related services. The
assets acquired include a database containing over 55 million
bibliographic and authority records together with the holdings of
most Canadian public and university libraries, software, computer
equipment, furniture, and leasehold improvements. The Company has
formed a wholly-owned subsidiary in Canada called A-G Canada Ltd.
headquartered in Etobicoke, Ontario near Toronto, and hired
seventeen former employees of the LIS division. Results for the
three months ending September 30, 1997 have been included in these
consolidated financial statements.
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FINANCIAL CONDITION
December 31, 1996 to September 30, 1997
Liquidity and capital resources. Working capital decreased
$166,000. Long-term debt was increased by $843,000 as a result of the
acquisition financing. Actual capital expenditures were $1,762,000. The
average collection period for accounts receivable increased from 67 days at
December 31, 1996 to 82 days at September 30, 1997, partially due to delayed
funding of two large customers.
The Company has a revolving credit facility under which borrowings
are secured by accounts receivable, whereby the Company may borrow against its
eligible accounts receivable up to a maximum of $1,250,000 ($650,000 available
at September 30, 1997) with interest at the bank's prime rate. Management
believes that the current line of credit, which is renewed annually in June,
will again be renewed in 1998, and is sufficient to handle cyclical working
capital needs. There are no compensating balance requirements, or note
guarantors. This agreement contains the same loan covenants as the capital
line of credit.
The Company also has a capital line of credit facility providing for
maximum borrowings of $3,750,000 ($206,000 available at June 30, 1997), with
interest equal to the bank's prime rate, for the purchase of equipment and
financing of internal software development costs. The capital line of credit
is renewed annually in June and management believes that the current line of
credit will be renewed in 1998. Among other requirements, the capital line of
credit note payable requires the Company to maintain minimum financial
covenant ratios, and prohibits the payment of cash dividends. There are no
commitment fees, or compensatory balance requirements.
In June 1995, the Company entered into a stock repurchase agreement
with a former director of the Company, whereby the Company agreed to purchase
and retire, in 1995, 115,000 of 141,000 shares of Company stock owned by the
stockholder. The total transaction cost of $230,000 will be paid in four
annual installments beginning in 1995 plus interest of 5.5% per annum ($65,000
paid in June 1995, $55,000 paid in June 1996 and 1997, and $55,000 to be paid
in June 1998).
The Company's capital resources may be used to support working
capital requirements, capital investment and possible acquisitions of
businesses, products or technologies complementary to the Company's current
business. The Company believes that current cash reserves and cash flow from
operations are sufficient to fund its operations in 1997. However, during
this period or thereafter, the Company may require additional financing.
There can be no assurance that such additional financing will be available on
terms favorable to the Company, or at all.
</PAGE>
<PAGE>
AUTO-GRAPHICS, INC.
Form 10-Q
RESULTS OF OPERATIONS
First Nine Months 1997 as Compared to First Nine Months 1996
Net sales were essentially unchanged at $6.7 million year to date.
Cost of sales increased $90,000 or 2%.
Selling, general and administrative expenses decreased $178,000 or 8%.
As a percentage of sales, these expenses decreased from 35% to 32%.
Interest expense/other increased $20,000 or 11%. Net interest expense
increased $19,000 as a result of lower interest rates on higher average
borrowings in 1997 associated with the acquisition financing. Other
income in 1996 was $26,000 versus $25,000 in 1997 representing expense
reimbursements from other firms.
Income from operations increased $94,000, or 41%, to $325,000 in 1997,
up from $231,000 in 1996.
Net income increased $52,000, or 41%, to a $177,000 net income in 1997,
up from an $125,000 net profit in 1996. Net income per share increased
45% to $0.16 in 1997, up from $0.11 in 1996.
Third Quarter 1997 as Compared to Third Quarter 1996
Net sales increased $695,000 or 32%.
Cost of sales increased $610,000 or 50% reflecting additional
operating costs associated with additional sales.
Selling, general and administrative expenses were essentially
unchanged from 1996. As a percentage of sales, these expenses
decreased from 37% to 28%.
Interest expense/other increased $23,000. Net interest expense
increased $22,000 due to higher debt levels associated with financing
the acquisition offset by lower interest rates. Other income in 1996
was $26,000 versus $25,000 in 1997 representing expense reimbursements
from other firms.
Income from operations increased $62,000 from $74,000 in 1996 to
$136,000 in 1997 due to the marginal contribution of the revenues from
the acquisition.
Net income increased $33,000 to $73,000 in 1997, up 81%. Net income per
share increased from $0.04 to $0.07.
</PAGE>
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AUTO-GRAPHICS, INC.
Form 10-Q
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. The Company filed Form 8-K on April 29, 1997 covering exhibits
to the Form 10-K report for the year ended December 31, 1996.
These exhibits were separated from the 10-K prior to the filing
thereof and were subsequently refiled during the period covered
by this report.
b. The Company filed Form 8-K on July 15, 1997 covering the
Company's acquisition of the assets of the Library Information
Systems division of ISM Information Systems Management Manitoba
Corporation, a subsidiary of IBM Canada, Ltd. as of July 1, 1997.
c. Exhibits: 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.
AUTO-GRAPHICS, INC.
Date 11/14/97 ss/ Robert S. Cope
Robert S. Cope, President
and Treasurer
Date 11/14/97 ss/ Daniel E. Luebben
Daniel E. Luebben, Chief Financial
Officer and Secretary
</PAGE>
[ARTICLE] 5
[LEGEND]
This schedule contains summary financial information extraxted from the Balance
Sheet and related Statement of Income of Auto-Graphics, Inc. as of September 30,
1997 and is qualified in its entirety by reference to such financial statements.
[/LEGEND]
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] SEP-30-1997
[CASH] 102357
[SECURITIES] 0
[RECEIVABLES] 2619220
[ALLOWANCES] 38000
[INVENTORY] 246273
[CURRENT-ASSETS] 410684
[PP&E] 11351896
[DEPRECIATION] 5837359
[TOTAL-ASSETS] 9052321
[CURRENT-LIABILITIES] 2696726
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 109368
[OTHER-SE] 2637215
[TOTAL-LIABILITY-AND-EQUITY] 9052321
[SALES] 6715381
[TOTAL-REVENUES] 6740341
[CGS] 4038256
[TOTAL-COSTS] 6203047
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 212265
[INCOME-PRETAX] 325029
[INCOME-TAX] 148000
[INCOME-CONTINUING] 177029
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 177029
[EPS-PRIMARY] .16
[EPS-DILUTED] .16
</TABLE>
