<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 0-21202
BROCK INTERNATIONAL, INC.
(Formerly Brock Control Systems, Inc.)
7372 GEORGIA 58-1588291
(Primary Std. Ind. (State of incorporation) (IRS Employer
Classification Code #) Identification #)
2859 PACES FERRY ROAD, SUITE 1000
ATLANTA, GEORGIA 30339
(Address of principal executive offices)
(770-431-1200)
(Telephone number of registrant)
Indicate by check mark whether the registrant (1) has filed all reports
required to be fil 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
------------- -------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of August 12, 1996:
Common Stock, no par value 4,931,083 Shares
<PAGE> 2
BROCK INTERNATIONAL, INC. *
FORM 10-Q
For the quarter ended June 30, 1996
<TABLE>
<CAPTION>
INDEX
Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet - December 31, 1995 and June 30, 1996 3
Income Statement - For the Three and Six Months ended
June 30, 1995 and June 30, 1996 4
Statement of Changes in Shareholders' Equity -
For the Six Months Ended June 30, 1996 5
Statement of Cash Flows - For the Six Months Ended
June 30, 1995 and June 30, 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II. Other Information 11
</TABLE>
* Brock Control Systems, Inc. officially changed its name to Brock
International, on February 7, 1996.
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BROCK INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DEC 31, JUN 30,
1995 1996
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(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND MARKETABLE SECURITIES $ 8,137 $ 7,846
ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $1,415 AND $1,333 RESPECTIVELY 8,092 6,743
OTHER ASSETS 822 931
------------- -------------
TOTAL CURRENT ASSETS 17,051 15,520
PROPERTY AND EQUIPMENT, NET 4,035 4,119
DEFERRED INCOME TAX BENEFIT 974 911
SOFTWARE DEVELOPMENT COSTS, NET 3,985 4,313
------------- -------------
$ 26,045 $ 24,863
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 957 $ 922
DEFERRED REVENUE 1,971 1,241
ACCRUED EMPLOYEE COMPENSATION
AND BENEFITS 1,126 576
BORROWINGS UNDER LINE OF CREDIT 985 2,100
CURRENT PORTION OF NOTES PAYABLE 0 83
OTHER ACCRUED LIABILITIES 776 90
------------- -------------
TOTAL CURRENT LIABILITIES 5,815 5,012
LONG TERM LIABILITIES:
NOTES PAYABLE 0 167
SHAREHOLDERS' EQUITY 20,230 19,684
------------- -------------
$ 26,045 $ 24,863
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE> 4
BROCK INTERNATIONAL, INC.
INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
------------------------- ----------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1996 1995 1996
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NET REVENUES
SOFTWARE $ 2,558 $ 2,377 $ 4,589 $ 5,600
SERVICES 2,217 1,875 4,993 4,214
MAINTENANCE 1,321 1,310 2,558 2,661
OTHER 319 256 808 568
------- -------- -------- --------
6,415 5,818 12,948 13,043
------- -------- -------- --------
COST AND EXPENSES
COST OF REVENUES
SOFTWARE 628 511 1,319 1,118
SERVICES 1,938 1,609 4,309 3,430
MAINTENANCE 523 510 1,018 1,046
OTHER 318 194 786 495
SALES AND MARKETING 3,141 2,393 5,808 5,272
PRODUCT DEVELOPMENT 446 576 864 1,090
GENERAL AND ADMINISTRATIVE 1,035 1,051 2,981 1,894
------- -------- -------- --------
8,029 6,844 17,085 14,345
------- -------- -------- --------
OPERATING (LOSS) (1,614) (1,026) (4,137) (1,302)
INTEREST EXPENSE (1) (44) (1) (68)
INTEREST INCOME 128 79 251 114
------- -------- -------- --------
INCOME BEFORE INCOME TAXES (1,487) (991) (3,887) (1,256)
INCOME TAX BENEFIT 549 387 1,441 481
------- -------- -------- --------
NET (LOSS) ($938) ($604) ($2,446) ($775)
======= ======= ======= =======
NET (LOSS) PER SHARE ($0.19) ($0.12) ($0.50) ($0.16)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON SHARE EQUIVALENTS 4,900 4,950 4,900 5,000
======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<PAGE> 5
BROCK INTERNATIONAL, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
UNREALIZED
COMMON STOCK ADD'L (LOSS)/GAIN ON
------------------------- PAID-IN MARKETABLE RETAINED
SHARES AMOUNT CAPITAL SECURITIES EARNINGS TOTAL
---------- ---------- ----------- -------------- ------------ ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 4,908,815 $9 $18,744 ($121) $1,598 $20,230
UNREALIZED (LOSS)/GAIN ON
MARKETABLE SECURITIES 107 107
EMPLOYEE STOCK PURCHASE 9,578 0 63 63
EXERCISE OF COMMON STOCK
OPTIONS 9,242 0 59 59
NET (LOSS) (775) (775)
---------- ---------- ----------- -------------- --------- -------
BALANCE AT JUNE 30, 1996 4,927,635 $9 $18,866 ($14) $823 $19,684
========== ========== =========== ============== ========= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
- 5 -
<PAGE> 6
BROCK INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------------------
JUN 30, 1995 JUN 30, 1996
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET (LOSS) ($2,446) ($775)
-------------- --------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 1,447 1,659
PROVISION FOR BAD DEBT 480 131
DEFERRED INCOME TAX (60) 63
CHANGES IN ASSETS AND LIABILITIES
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE 2,316 1,218
(INCREASE) DECREASE IN OTHER ASSETS 372 (109)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE (486) (35)
INCREASE (DECREASE) IN DEFERRED REVENUE (404) (730)
INCREASE (DECREASE) IN ACCRUED EMPLOYEE
COMPENSATION AND BENEFITS (14) (550)
INCREASE (DECREASE) IN OTHER ACCRUED LIABILITIES (1,375) (686)
-------------- --------------
TOTAL ADJUSTMENTS 2,276 961
-------------- --------------
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (170) 186
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
SOFTWARE DEVELOPMENT COSTS (1,286) (1,332)
PURCHASES OF PROPERTY AND EQUIPMENT (998) (739)
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (2,284) (2,071)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
BORROWINGS UNDER LINE OF CREDIT 200 1,515
REPAYMENTS OF BORROWINGS UNDER LINE OF CREDIT 0 (400)
BORROWINGS UNDER NOTES PAYABLE 0 250
PROCEEDS FROM EMPLOYEE STOCK PURCHASE PLAN 31 63
EXERCISE OF COMMON STOCK OPTIONS 6 59
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 237 1,487
-------------- --------------
UNREALIZED GAIN ON CASH EQUIVALENTS 60 107
-------------- --------------
INCREASE (DECREASE) IN CASH (2,157) (291)
CASH AND MARKETABLE SECURITIES, BEGINNING OF PERIOD 11,705 8,137
-------------- --------------
CASH AND MARKETABLE SECURITIES, END OF PERIOD $9,548 $7,846
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -------------- --------------
CASH PAID DURING THE PERIOD FOR INTEREST $0 $69
============== ==============
</TABLE>
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<PAGE> 7
BROCK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
A. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of manage-
ment, all adjustments (consisting only of normal occurring accruals)
considered necessary for a fair presentation have been included.
B. ACCOUNTING POLICIES
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common shares and common share equivalents outstanding. Common share
equivalents consist of the Company's common shares issuable upon the
exercise of stock options using the treasury stock method.
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<PAGE> 8
BROCK INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THE QUARTER ENDED JUNE 30, 1996 COMPARED TO THE
QUARTER ENDED JUNE 30, 1995, AND THE SIX MONTHS ENDED JUNE 30, 1996
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1995.
Total revenues decreased 9.3% from $6,415,000 in the second quarter of 1995 to
$5,818,000 in the second quarter of 1996 as a result of decreased software,
services, maintenance, and other revenues. For the first six months of 1996,
total revenues increased 0.7% to $13,043,000 from $12,948,000 in 1995.
Software revenues for the quarter decreased 7.1% from $2,558,000 in 1995 to
$2,377,000 in 1996 as a result of fewer licenses sold to new and existing
customers as well as decreases in third party software licenses sold. For the
first six months of 1996 software revenues have increased 22.0% to $5,600,000
from $4,589,000 in 1995, primarily as a result of increased licenses sold to
international customers.
Software revenues from international licenses for the quarter increased 18.0%
to $806,000 in 1996 from $683,000 in 1995. For the first six months of 1996
compared to the first six months of 1995, international license revenues
increased 95.0% to $2,804,000 from $1,438,000, and increased as a percentage
of total revenues to 21.5% in 1996 from 11.1% in 1995. The increases resulted
from additional penetration of international markets.
Services revenues decreased 15.4% from $2,217,000 in the second quarter of 1995
to $1,875,000 in the second quarter of 1996 primarily due to prior decreases in
software licenses and the Company's commitment to enhance customer
satisfaction, which in certain instances, resulted in providing services free
of charge or at reduced rates. Year to date, services revenues decreased 15.6%
from $4,993,000 in 1995 to $4,214,000 in 1996. Maintenance revenues decreased
0.8% to $1,310,000 in the second quarter of 1996 from $1,321,000 during the
same period of 1995. For the first six months of 1996, maintenance revenues
increased 4.0% to $2,661,000 from $2,558,000 for the first six months of 1995,
primarily as a result of increases in international installations. Other
revenues decreased 19.7% from $319,000 in the second quarter of 1995 to
$256,000 in the second quarter of 1996. Year to date, other revenues
decreased 29.7% to $568,000 in 1996 from $808,000 in 1995, primarily due to
decreases in certain reimbursable travel charges.
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<PAGE> 9
Cost of software revenues decreased 18.6% from $628,000 in the second quarter
of 1995 to $511,000 in the second quarter of 1996 primarily as a result of
decreased third party software revenues. Year to date, software revenue costs
decreased 15.2% from $1,319,000 in 1995 to $1,118,000 in 1996 as a result of
decreased third party software costs offset by a slight increase in
amortization of capitalized software costs. Costs of software revenues include
costs of third party software, amortization of capitalized software costs, and
costs of packaging and documentation materials and related media costs.
Cost of revenues for services decreased 17.0% from $1,938,000 in the second
quarter of 1995 to $1,609,000 in the second quarter of 1996 due to decreases in
the number of service personnel, and personnel related costs. For the six
months ended June 30, 1996, costs of revenues for services decreased 20.4% to
$3,430,000 from $4,309,000 during the same period of 1995. Cost of revenues
for maintenance decreased 2.5% from $523,000 in the second quarter of 1995 to
$510,000 in 1996. Year to date, costs of revenues for maintenance increased
2.8% from $1,018,000 in 1995 to $1,046,000 in 1996 due to increases in
international maintenance costs which are directly related to increases in
international maintenance revenue.
Cost of other revenues decreased 39.0% from $318,000 in the second quarter of
of 1995 to $194,000 in the second quarter of 1996; and, year to date, decreased
37.0% from $786,000 in 1995 to $495,000 in 1996 due to decreases in certain
reimbursable travel charges.
Sales and marketing expenses decreased 23.8% from $3,141,000 in the second
quarter of 1995 to $2,393,000 in the second quarter of 1996. For the six
months of 1996, sales and marketing expense decreased 9.2% to $5,272,000 from
$5,808,000 in 1995. The decreases were due to decreases in personnel and
personnel associated costs, and decreased advertising campaigns, offset by
increases in international distributor commissions which are directly related
to increases in international software revenue.
The Company's product innovation and development expenditures increased
15.2% from $1,112,000 in the second quarter of 1995 to $1,281,000 in the second
quarter of 1996. The capitalized portions of these amounts were $666,000 and
$705,000 respectively. Product development expense increased 29.1% from
$446,000 in the second quarter of 1995 to $576,000 in the second quarter of 1996
due to increased product development activities for new and existing products.
For the six months ended June 30, 1996, product development expense increased
26.2% to $1,090,000 from $864,000 during the same period of 1995.
-9-
<PAGE> 10
General and administrative expenses increased 1.5% from $1,035,000 in the
second quarter of 1995 to $1,051,000 in the second quarter of 1996 primarily
due to increases in provision for doubtful receivables and professional fees,
offset by decreases in personnel related costs of insurance. Year to date,
general and administrative expenses decreased 36.5% from $2,981,000 in 1995 to
$1,894,000 in 1996. The decrease resulted from the fact that the provision for
doubtful receivables was less during the first quarter of fiscal 1996 than for
the first quarter of the prior year.
The above factors combined to result in a decrease of 35.6% in net loss for the
second quarter of 1996, from a net loss of $938,000 in the second quarter of
1995 to a net loss of $604,000 in the second quarter of 1996. Net loss per
share for the period decreased 36.8% from a loss of $.19 per share for the
second quarter of 1995 to a loss of $.12 per share for the second quarter of
1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and marketable securities of $7,846,000,
and believes that its present liquidity position is sufficient to finance the
Company's operations during 1996.
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<PAGE> 11
<TABLE>
<CAPTION>
PART II. OTHER INFORMATION
<S> <C>
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
July 12, 1996 - Brock International announced the promotion of
Michael Kohlsdorf to President and Chief Operating Officer.
Mr. Kohlsdorf joined Brock in March 1993 as Chief Financial
Officer.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule (for SEC use only)
No reports on Form 8-K were filed during the period.
</TABLE>
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<PAGE> 12
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.
BROCK INTERNATIONAL, INC.
DATE: August 12, 1996 /s/ Judith A. Vitale
----------------- ----------------------------------
Judith A. Vitale
Director Finance and Adminstration
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q
FOR QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 474
<SECURITIES> 7,372
<RECEIVABLES> 6,743<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,520
<PP&E> 4,119<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,863
<CURRENT-LIABILITIES> 5,012
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 19,675
<TOTAL-LIABILITY-AND-EQUITY> 24,863
<SALES> 5,600
<TOTAL-REVENUES> 13,043
<CGS> 1,118
<TOTAL-COSTS> 6,089
<OTHER-EXPENSES> 8,256
<LOSS-PROVISION> 131
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> (1,256)
<INCOME-TAX> (481)
<INCOME-CONTINUING> (775)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (775)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
<FN>
<F1>A/R AND PPE ASSET VALUES REPRESENT NET AMOUNTS.
</FN>
</TABLE>
