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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 1996
---------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-21274
Liberty Technologies, Inc.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Pennsylvania 23-2295708
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Lee Park
555 North Lane
Conshohocken, PA 19428
610-834-0330
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(Address, including zip code, and
telephone number (including area code) of
registrant's principal executive office)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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 last 90 days. YES _X_ NO___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Shares Outstanding at May 7, 1996
------------------ -----------------------------------------
Common Stock 4,966,480
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<PAGE>
LIBERTY TECHNOLOGIES, INC.
INDEX
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Consolidated Financial Statements: Page No.
--------
<S> <C> <C>
Consolidated Statements of Income (unaudited)
Three months ended March 31, 1996 and 1995...................... 3
Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31 , 1995............... 4
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 1996 and 1995...................... 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 10
Signatures...................................................................... 11
Exhibit Index................................................................... 13
Exhibit - Calculation of Earnings Per Share..................................... 14
</TABLE>
<PAGE>
PART I. Financial Information
Item 1. Consolidated Financial Statements
LIBERTY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended March 31,
(Unaudited)
1996 1995
------- -------
<S> <C> <C>
Revenues:
Product ................................................... $ 3,094 $ 3,490
Service ................................................... 5,197 6,326
------- -------
8,291 9,816
------- -------
Cost of revenues:
Product ................................................... 941 1,191
Service ................................................... 3,251 4,070
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4,192 5,261
------- -------
Gross profit ................................... 4,099 4,555
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Operating expenses:
Engineering and product development ....................... 1,000 729
Selling, general and administrative ....................... 3,135 3,524
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4,135 4,253
------- -------
Operating income (loss) ........................ (36) 302
Interest income (expense), net ............................... (50) 6
------- -------
Income (loss) before taxes and minority interest (86) 308
Income taxes (benefit) ....................................... (41) 114
------- -------
Income (loss) before minority interest ......... (45) 194
Minority interest ............................................ (78) --
------- -------
Net income (loss) ............................................ $(123) $ 194
------- -------
Net income (loss) per share: ................................ $(.02) $ .04
======= =======
Shares used in computing net income (loss) per share ......... 4,961 5,203
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
LIBERTY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................... $ 198 $ 356
Accounts receivable, net ............................ 8,158 9,050
Inventories ......................................... 2,044 2,075
Deferred income taxes................................ 731 730
Prepaid income taxes ................................ 298 319
Prepaid expenses and other .......................... 387 377
-------- --------
Total current assets ...................... 11,816 12,907
Property and equipment, net ............................. 4,143 3,890
Goodwill, net ........................................... 5,259 5,325
Other assets ............................................ 1,653 1,681
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$ 22,871 $ 23,803
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit ...................................... $ 2,125 $ 2,200
Current maturities of long-term debt ................ 4 92
Accounts payable .................................... 2,259 2,277
Accrued compensation and benefits ................... 1,285 1,361
Unearned revenue .................................... 36 340
Other accrued expenses............................... 491 864
-------- --------
Total current liabilities ................. 6,200 7,134
-------- --------
Long-term debt .......................................... 205 259
-------- --------
Due to minority shareholders ............................ 101 --
-------- --------
Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized, 4,994,112 and 4,994,112 shares issued,
and 4,956,264 and 4,957,151 outstanding .......... 50 50
Additional paid-in capital .......................... 17,198 17,195
Retained earnings (deficit).......................... (730) (606)
Treasury stock at cost............................... (215) (237)
Cumulative translation adjustment ................... 62 8
-------- --------
Total shareholders' equity ................ 16,365 16,410
-------- --------
$ 22,871 $ 23,803
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
LIBERTY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the three months ended March 31,
(Unaudited)
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................ $ (123) $ 194
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization ................................ 462 547
Minority interest in earnings of joint venture ............... 78 --
Change in assets and liabilities (Increase) decrease in:
Accounts receivable .............................. 892 (1,699)
Inventories ...................................... 31 160
Prepaid expenses and other ....................... 11 237
Other assets ..................................... (67) (29)
Increase (decrease) in:
Accounts payable ................................. (18) 93
Accrued expenses and compensation ................ (268) 433
Accrued income taxes ............................. (194) 100
Unearned revenue ................................. (304) 79
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Net cash provided by operating activities ............. 500 115
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Cash flows from investing activities:
Purchases of property and equipment .............................. (570) (467)
Capitalization of software development costs ..................... -- (431)
Payment of earn-out in connection with acquisition ............... -- (500)
Investment in joint venture....................................... 15
Sale of assets ................................................... 100
Other ............................................................ 11 37
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Net cash used in investing activities ................. (544) (1,261)
------- -------
Cash flows from financing activities:
Payments of long-term debt (other) ............................... (141) (123)
Net borrowings under line of credit .............................. (75) 500
Proceeds from Employee Stock Purchase Plan ....................... 24 17
Investment from minority shareholder in joint venture ............ 23 --
------- -------
Net cash provided by (used in) financing activities ... (169) 394
------- -------
Effect of foreign exchange rate changes on cash ..................... 55 --
------- -------
Net decrease in cash and cash equivalents ........................... (158) (752)
Cash and cash equivalents, beginning of period ...................... 356 1,083
------- -------
Cash and cash equivalents, end of period ............................ $ 198 $ 331
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
Item 1 -- Financial Statements -- Cont'd.
LIBERTY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements as of March 31, 1996 and for the
three month periods ended March 31, 1996 and 1995 are unaudited and reflect
all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the entire year.
The consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
Certain reclassifications have been made to the 1995 financial statements
to conform to 1996 presentations.
2. Inventories are summarized as follows:
March 31, 1996 December 31, 1995
--------------- -----------------
Raw materials $1,714,000 $1,687,000
Finished goods 330,000 388,000
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$2,044,000 $2,075,000
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3. Cash paid for income taxes for the three months ended March 31, 1996 and
1995 were approximately $39,000 and $14,000, respectively, all of which
pertained to payment of the previous year's taxes. Interest paid for the
three months ended March 31, 1996 and 1995 was $52,000 and $4,000,
respectively.
4. Liberty M.P., S.A.S. (LMP) commenced operations in January 1996. This joint
venture, of which the Company has a 51% ownership interest, was formed with
Electricite de France for the sale of products and services within the
European Union. LMP had revenues of $1,021,000 in the three months ended
March 31, 1996.
<PAGE>
LIBERTY TECHNOLOGIES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995:
Total Revenues. Total revenues decreased from $9,816,000 to $8,291,000, or
(16)%, from the first quarter of 1995 to the first quarter of 1996.
Service revenues decreased from $6,326,000 to $5,197,000, or (18)%, principally
as a result of lower nuclear service revenues as customers reduced the scope and
duration of their maintenance outages. This decline was partially offset by
stronger industrial service revenues.
Product revenues decreased from $3,490,000 to $3,094,000, or (11)%, on lower
condition monitoring product sales due to order delays. This decline was
partially offset by initial sales of RADView, a product introduced in October
1995. International sales increased from $1,085,000 to $1,288,000, or 18%. Sales
through Liberty M.P., S.A.S. to Electricite de France (EdF) totaled $1,021,000
in 1996 as compared to $526,000 of direct sales from Liberty Technologies, Inc.
to EdF in 1995. Partially offsetting this increase were other international
sales, which declined from $559,000 in 1995 to $202,000 in 1996.
Cost of Revenues. Cost of revenues decreased from $5,261,000 to $4,192,000, or
(20)%, from the first quarter 1995 to the first quarter 1996. As a percentage of
total revenues, overall cost of revenues decreased from 54% to 51% on
improvements in both service and product margins.
Cost of service revenues decreased as a percentage of service revenues from 64%
in 1995 to 63% in 1996 due to the increased mix of higher margin industrial
testing services relative to nuclear services.
Cost of product revenues decreased as a percentage of product sales from 34% in
1995 to 30% in 1996. This lower cost of sales percentage was a result of lower
manufacturing overhead costs resulting from the reorganization of the Company's
product operations in the fourth quarter of 1995 and a more favorable mix of
higher margin products.
Gross Profit. Gross profit decreased from $4,555,000 to $4,099,000 from the
first quarter of 1995 to the first quarter of 1996. As a percentage of total
revenues, gross profit improved from 46% to 49%. The Company expects that gross
profit margin will vary from quarter to quarter depending on the mix and volume
of products and services sold.
<PAGE>
Operating Expenses. Excluding the impact of software development costs
capitalized in 1995 ($431,000), operating expenses have decreased 12% from the
first quarter of 1995 to the first quarter of 1996. Reported operating expenses
decreased 3%, from $4,253,000 to $4,135,000 from the first quarter of 1995 to
the first quarter of 1996.
In accordance with SFAS No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed," expenditures of $431,000 were
recorded as capitalized software development costs in the first quarter 1995.
The Company wrote-off the balance of capitalized software development costs at
the end of 1995 and has not capitalized any additional software development
costs in the first quarter of 1996.
Income taxes. The Company's effective income tax rate was unchanged at 37% in
the first quarter of 1996 versus the first quarter of 1995.
Net income (loss). Net income decreased from earnings of $194,000 or $.04 per
share in the first quarter of 1995 to a loss in the first quarter of 1996 of
$(123,000) or $(.02) per share. The number of shares used in calculating
earnings (loss) per share decreased from 5,193,000 in 1995 to 4,961,000 in 1996.
The decrease resulted from the inclusion of the dilutive effect of options in
1995, offset by the exercise of stock options during 1995 under the Company's
1988 and 1992 Stock Option Plans and the sale of stock through the Company's
Employee Stock Purchase Plan.
Liquidity and Capital Resources
The Company has financed its working capital requirements and capital
expenditures through cash flows generated from operations and borrowings against
a revolving credit facility.
At March 31, 1996, the Company had cash and cash equivalents aggregating
$198,000 compared to $356,000 at December 31, 1995, reflecting the cash used by
investing activities, offset by stronger cash provided from operations.
Net cash provided by operations increased from $115,000 during the first quarter
of 1995 to $500,000 during the first quarter of 1996. The change was principally
attributable to collections of accounts receivable offset by a decrease in
accounts payable and unearned revenue.
Net cash used in investing activities decreased from $1,261,000 in the first
quarter 1995 to $544,000 in the first quarter 1996. This decrease resulted from
there being no capitalization of software development costs and no acquisition
related earn-out payments in 1996, offset by an increase in capital additions.
Net cash used by financing activities in the first quarter 1996 was $169,000
compared to cash provided of $394,000 in the first quarter of 1995. The 1996
amount reflects a repayment of $75,000 against the revolving credit facility,
while the 1995 amount reflects a borrowing of $500,000 against that facility.
The Company has a multi-year unsecured $5,000,000 revolving credit facility with
a commercial bank under which $500,000 and $2,125,000 was outstanding at March
31, 1995 and 1996, respectively. The credit facility may be used for working
capital or acquisitions. Borrowings under this facility bear interest at a rate
equal to the lower of the bank's prime rate less 0.5% or the Eurodollar rate
plus 1.25%.
The Company believes that its current cash and cash equivalents on hand, cash
generated from operations and the availability under its line of credit will be
sufficient to fund the Company's operations, expected capital expenditures and
other expenditures for the current year.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
1. Exhibit 11 - Calculation of Earnings Per Share
2. No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
<PAGE>
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.
Dated: May 7, 1996
LIBERTY TECHNOLOGIES, INC.
----------------------------------
(Registrant)
/s/ R. Nim Evatt
----------------------------------
R. Nim Evatt, President and
Chief Executive Officer
/s/ Daniel G. Clare
----------------------------------
Daniel G. Clare, V.P. Finance and
Chief Financial Officer (principal
financial and accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Page Numbered
Number Number
- - ------ ------
11 Calculation of Earnings Per Share 13
27 FDS
<PAGE>
Exhibit 11
Liberty Technologies, Inc.
Earnings Per Share Calculation
Three Months Ended
March 31,
1996 1995
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Net income (loss) $ (123,000) $ 194,000
Weighted average shares outstanding 4,961,264 4,933,803
Dilutive effect of outstanding options and
warrants, net of tax benefit -0- 269,235
Shares used in computing earnings per share
4,961,264 5,203,038
Earnings per share (primary and fully diluted)
$ (0.02) $ 0.04
=========== ===========
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 0
<CASH> 198
<SECURITIES> 0
<RECEIVABLES> 8,269
<ALLOWANCES> (111)
<INVENTORY> 2,044
<CURRENT-ASSETS> 11,816
<PP&E> 8,163
<DEPRECIATION> 4,020
<TOTAL-ASSETS> 22,871
<CURRENT-LIABILITIES> 6,200
<BONDS> 306
17,248
0
<COMMON> 0
<OTHER-SE> (883)
<TOTAL-LIABILITY-AND-EQUITY> 22,871
<SALES> 8,291
<TOTAL-REVENUES> 8,291
<CGS> 4,192
<TOTAL-COSTS> 4,192
<OTHER-EXPENSES> 4,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> (86)
<INCOME-TAX> (41)
<INCOME-CONTINUING> (45)
<DISCONTINUED> 0
<EXTRAORDINARY> (78)
<CHANGES> 0
<NET-INCOME> (123)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
