<PAGE> 1
U.S. Securities and Exchange Commission
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _____________
___________________
Commission file number: 0-23342
___________________
ELTRON INTERNATIONAL, INC.
(Exact name of issuer as specified in its charter)
California 95-4302537
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
41 Moreland Road
Simi Valley, California 93065
(Address of principal executive offices)
(805) 579-1800
(Issuer's telephone number)
___________________
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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 7,231,874 common
shares as of July 30, 1996.
___________________
Transitional Small Business Disclosure Format (Check one): Yes ___; No X
<PAGE> 2
ELTRON INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 729,055 $ 3,278,520
Short term investments 15,552,076 6,312,078
Accounts receivable, net of allowance for doubtful accounts of $367,468
and $325,105, respectively 9,397,603 13,251,109
Inventories 11,506,936 13,804,791
Prepaid expenses and other current assets 3,037,891 2,361,077
----------- -----------
Total current assets 40,223,561 39,007,575
PROPERTY AND EQUIPMENT, net 3,769,436 5,863,114
COST IN EXCESS OF NET ASSETS ACQUIRED, net 962,305 1,256,713
OTHER ASSETS 668,923 1,263,578
----------- -----------
$45,624,225 $47,390,980
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings under line of credit . . . . . . . . . . . . . . . . . . . . . $ 768,000 $ --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,091,008 4,386,990
Accounts payable to shareholder . . . . . . . . . . . . . . . . . . . . . 1,816,909 1,040,974
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,011,816 3,269,914
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 8,687,733 8,697,878
LONG TERM OBLIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751,313 814,739
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred stock, 10,000,000 shares authorized of which none are outstanding -- --
Common stock, no par value:
Authorized -- 30,000,000 shares
Issued and outstanding -- 6,809,966 and 7,219,637 shares, respectively 23,990,634 23,644,840
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . (13,733) (37,024)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,208,278 14,270,547
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 36,185,179 37,878,363
----------- -----------
$45,624,225 $47,390,980
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 3
ELTRON INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES . . . . . . . . . . . . . . . . . . . . . . . $12,180,973 $22,729,508 $23,955,439 $41,748,693
COST OF SALES . . . . . . . . . . . . . . . . . . . 6,739,021 12,788,900 13,068,928 23,040,441
----------- ----------- ----------- -----------
Gross profit . . . . . . . . . . . . . . . . . 5,441,952 9,940,608 10,886,511 18,708,252
OPERATING EXPENSES:
Selling, general and administrative . . . . . . 2,473,690 4,161,827 4,915,450 7,897,495
Research and product development . . . . . . . 691,745 1,279,083 1,223,703 2,516,554
Write off of acquisition expenses . . . . . . . -- -- -- 3,198,555
INCOME FROM OPERATIONS . . . . . . . . . . . . . . 2,276,517 4,499,698 4,747,358 5,095,648
OTHER (INCOME) EXPENSE:
Interest, net . . . . . . . . . . . . . . . . . (41,304) (19,315) (54,233) (69,590)
Other, net . . . . . . . . . . . . . . . . . . 59,460 -- 33,460 7,644
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES . . . . . . . . . . . . . . . 2,258,361 4,519,013 4,768,131 5,157,594
PROVISION FOR INCOME TAXES . . . . . . . . . . . . 763,978 1,694,630 1,643,046 3,075,999
----------- ----------- ----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . $ 1,494,383 $ 2,824,383 $ 3,125,085 $ 2,081,595
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE . . . . . . . . . . . . $ 0.21 $ 0.36 $ 0.45 $ 0.27
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING . . . . . . . . . . . . . 7,082,623 7,755,725 6,917,270 7,768,861
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 4
ELTRON INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,125,085 $ 2,081,595
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 204,366 648,666
Write off of purchased in-process technology . . . . . . . . . . . . . . . . -- 2,500,000
Changes in assets and liabilities; Net of effect from acquisitions:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . (1,932,943) (3,121,449)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,117,572) (1,555,904)
Prepaids and other assets . . . . . . . . . . . . . . . . . . . . . . . . (648,702) 228,387
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . (249,386) (781,818)
Accounts payable to shareholder . . . . . . . . . . . . . . . . . . . . . (871,551) (775,936)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,140,753) 832,214
------------ ------------
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . (2,631,456) 55,755
CASH FROM INVESTING ACTIVITIES:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . (609,412) (2,440,219)
Cash paid in connection with acquisition of Privilege . . . . . . . . . . . . . (3,196,373)
Sale of short term investments, net . . . . . . . . . . . . . . . . . . . . . . (13,190,766) 9,239,998
------------ ------------
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . (13,800,178) 3,603,406
CASH FROM FINANCING ACTIVITIES:
Net borrowings (repayments) of long term debt. . . . . . . . . . . . . . . . . . (4,000) (16,611)
Net borrowings (repayments) under line of credit . . . . . . . . . . . . . . . . (350,000) (724,000)
Common stock purchased in connection with merger of RJS . . . . . . . . . . . . (775,581)
Proceeds from sale of stock . . . . . . . . . . . . . . . . . . . . . . . . . . 16,398,537 429,787
------------ ------------
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . 16,044,537 (1,086,405)
EFFECT OF EXCHANGE RATE ON CASH . . . . . . . . . . . . . . . . . . . . . . . . . . 24,293 (23,291)
------------ ------------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . (362,804) 2,549,465
CASH BALANCE, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 1,740,905 729,055
------------ ------------
CASH BALANCE, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,378,101 $ 3,278,520
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 5
ELTRON INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION
The financial statements of Eltron International, Inc. (the "Company")
included herein are unaudited; however, they contain all normal recurring
accruals which, in the opinion of management, are necessary to present fairly
the financial position of the Company at June 30, 1996 and the results of
operations and cash flows for the three and six month periods ended June 30,
1995 and June 30, 1996. It should be understood that accounting measurements
at interim dates inherently involve greater reliance on estimates than at year
end. The results of operations for the three and six month period ended June
30, 1996 are not necessarily indicative of the results to be expected for
future quarters or the full year.
The accompanying financial statements do not include footnotes and
certain financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
Company's financial statements for the year ended December 31, 1995 as filed in
the Company's annual report on form 10K.
2. BUSINESS COMBINATIONS
Acquisition of Privilege S.A.
At January 1, 1996, the Company purchased all of the outstanding capital
stock of Privilege S.A. ("Privilege"), a French company primarily engaged in
the design, manufacture and distribution of custom color card printers. This
transaction has been accounted for as a purchase for financial reporting
purposes. Acquired in-process technology valued at $2,500,000 was expensed
immediately. The purchase price paid by Eltron was approximately $3.2 million
in cash and the assumption of approximately $1.3 million in trade liabilities
and debt. The assets acquired by Eltron consisted of trade receivables,
inventories, equipment and technology.
The estimated fair values of the assets of Privilege acquired are
summarized as follows:
<TABLE>
<S> <C>
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 964,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370,000
Equipment and other tangible assets . . . . . . . . . . . . . . . . . . . . . . . 328,000
In process research and development projects . . . . . . . . . . . . . . . . . . 2,500,000
Cost in excess of net assets acquired . . . . . . . . . . . . . . . . . . . . . . 397,000
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,559,000
===========
</TABLE>
The results of operations relating to Privilege are included with those of
the Company from January 1, 1996. Net revenues generated from Privilege
operations totaled approximately $4,292,859 for the period from January 1,
1996 to June 30, 1996. The cost in excess of the net assets of Privilege
acquired is being amortized on a straight-line basis over a five year period.
Merger with RJS, Incorporated
Effective March 1, 1996, the Company acquired RJS, Incorporated ("RJS") in
a business combination accounted for as a pooling of interests. RJS is a
manufacturer of bar code label printers, bar code verifiers and verified
printing systems located in Monrovia, California. In accordance with the terms
of the merger, Eltron paid $776,000 in cash (in lieu of 22,861 shares of Eltron
Common Stock) and issued 322,991 shares of its Common Stock to the shareholders
of RJS as consideration for all of the outstanding capital stock of RJS.
The accompanying financial statements are based on the assumption that the
two companies were combined at the beginning of the year, and all financial
statements for prior periods presented have been restated to give effect to the
combination. Earning per share data reflects the shares issued in the merger
for all periods presented. Prior to February 1996, Eltron and RJS, in the
normal course of business, entered into certain transactions for the purchase
and sale of merchandise. These intercompany transactions have been eliminated
in the accompanying financial statements.
<PAGE> 6
In connection with the merger, RJS changed its fiscal year end from
September 30 to December 31, which conforms to Eltron's year end. During the
three months ended December 31, 1995, RJS reported sales of $3.0 million and
a net loss of $19,000. In order to reflect this change in fiscal year-end,
retained earnings has been decreased by RJS' net loss for the three months
ended December 31, 1995. The consolidated financial statements for all periods
prior to 1996 have not been restated to reflect RJS' change in fiscal year and
include RJS' results of operations on a September 30 fiscal year end basis and
Eltron on a December 31 calendar year basis.
A reconciliation of net sales and net income previously reported to net
sales and net income as adjusted to reflect the merger is as follows:
<TABLE>
<CAPTION>
Period Ended June 30 ,1995 Year Ended December 31,
-------------------------- -----------------------
Three Months Six Months 1995 1994
------------ ---------- ---- -----
<S> <C> <C> <C> <C>
Sales:
As previously reported:
By Eltron......................... $ 8,904,973 $ 17,824,439 $ 42,361,064 $ 17,530,490
By RJS (a)........................ 3,276,000 6,131,000 12,610,000 11,746,000
------------ ------------- ------------ ------------
As restated $ 12,180,973 $ 23,955,439 $ 54,971,064 $ 29,276,490
============ ============= ============ ============
Net Income:
As previously reported:
By Eltron......................... $ 1,336,383 $ 2,849,085 $ 6,369,701 $ 2,913,204
By RJS (a)........................ 127,000 219,000 750,000 710,000
------------ ------------- ------------ ------------
As restated $ 1,494,383 $ 3,125,085 $ 7,119,701 $ 3,623,204
============ ============= ============ ============
</TABLE>
3. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
----------- -----------
<S> <C> <C>
Subassemblies and raw materials............................ $ 8,569,233 $ 9,037,092
Work in process............................................ 386,519 1,645,521
Finished goods............................................. 2,551,184 3,122,178
----------- -----------
$11,506,936 $13,804,791
=========== ===========
</TABLE>
4. RECLASSIFICATIONS
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period's presentation.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Eltron designs, manufactures and markets bar code label printers, software,
and related accessories designed for use in Auto ID systems. The Company also
designs, manufactures and markets thermal printers which allow users to create
photo-realistic full color credit cards and drivers licenses on demand. Eltron
manufactures and distributes a full range of supplies designed for use with its
printers. The Company believes that its success to date has resulted from
Eltron's ability to, at a lower cost, offer high-quality printers and related
products with features comparable to or exceeding those of available competing
products.
The Company currently offers a full range of direct thermal and thermal
transfer bar code printers, color card printers and custom print engines for
applications such as airline ticketing. These printers, together with the
Company's software, printer supplies and accessories, are sold by the Company
through multiple distribution channels that include over 400 value added
resellers, systems integrators, original equipment manufacturers and
distributors located through out the world. Industries for which the Company
believes its printers are particularly well-suited include shipping and package
delivery, retail distribution and point-of-sale, health care, manufacturing,
financial services and governmental licensing. The Company currently focuses
its sales efforts in these markets, although it continues to explore the
potential for new markets.
Eltron is currently seeking to expand its line of quality printers and
related accessories to meet the needs of a broad range of end users and to be
positioned as price and value leaders. Management is engaged in efforts to
accomplish this expansion through both internal development efforts and
strategic acquisitions and alliances. In the first quarter of 1996, the
Company enhanced its market position through the acquisition of Privilege S.A.
("Privilege") and RJS, Incorporated ("RJS"). Privilege, located in Varades,
France, is a manufacturer of custom color card printers with 1995 sales in
excess of $3 million. RJS, located in Monrovia, California, is a manufacturer
of high speed thermal bar code printers, bar code verifiers and verified
printing systems with 1995 sales in excess of $12 million.
The acquisition of RJS has been accounted for as a pooling of interests for
financial reporting purposes. The accompanying financial statements are based
on the assumption that the two companies were combined at the beginning of the
year, and all financial statements for prior periods presented have been
restated to give effect to the combination. In connection with the
acquisition, RJS changed its fiscal year end from September 30 to December 31,
which conforms to Eltron's year end. The consolidated financial statements for
all periods prior to 1996 have not been restated to reflect RJS' change in
fiscal year, and include RJS' results of operations on a September 30 fiscal
year end basis and Eltron on a December 31 calendar year basis.
RESULTS OF OPERATIONS:
The following table presents certain information derived from the Company's
Statements of Operations for the three and six month periods ended June 30,
1995 and 1996, expressed as a percentage of sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
COST OF SALES . . . . . . . . . . . . . . . . . . . . 55.3 56.3 54.6 55.2
----- ----- ----- -----
Gross profit . . . . . . . . . . . . . . . . . . 44.7 43.7 45.4 44.3
OPERATING EXPENSES:
Selling, general and administrative . . . . . . . 20.3 18.3 20.5 18.9
Research and product development . . . . . . . . 5.7 5.6 5.1 6.0
Write off of acquisition expenses . . . . . . . . 0.0 0.0 0.0 7.7
----- ----- ----- -----
INCOME FROM OPERATIONS . . . . . . . . . . . . . . . 18.7 19.8 19.8 12.2
OTHER (INCOME) EXPENSE:
Interest, net . . . . . . . . . . . . . . . . . . 0.2 (.1) (.1) (.2)
----- ----- ----- -----
INCOME BEFORE PROVISION
FOR INCOME TAXES . . . . . . . . . . . . . . . 18.5 19.9 19.9 12.4
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . 6.2 7.5 6.9 7.4
----- ----- ----- -----
NET INCOME . . . . . . . . . . . . . . . . . . . . . 12.3% 12.4% 13.0% 5.0%
===== ===== ===== =====
</TABLE>
<PAGE> 8
COMPARISON OF THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1996:
SALES:
Sales for the three months ended June 30, 1996 totaled $22.7 million, an
increase of $10.5 million or 87% over sales for the same period in 1995 which
totaled $12.2 million. Sales for the six months ended June 30, 1996 totaled
$41.7 million, an increase of $17.8 million or 74% over sales for the same
period in 1995 which totaled $23.9 million. This increase in sales can be
attributed to wider market acceptance of the Company's bar code printers,
initial market acceptance of the Company's P-300 color card printers, higher
than anticipated demand from the Company's largest customer, United Parcel
Service ("UPS") as well as increased supply sales. Sales were also bolstered
by the inclusion of operating results for Donner and Privilege, which were
acquired in September 1995 and January 1996, respectively.
Throughout 1996 sales of printers have been enhanced by increased sales to
UPS, which contributed approximately $4.1 million and $8.6 million to sales
for the three month periods ended June 30, 1995 and 1996, respectively. Sales
to UPS contributed approximately $7.3 million and $14.7 million to sales for
the six month periods ended June 30, 1995 and 1996, respectively. Although the
Company had outstanding orders from UPS in excess of $5.0 million as of June
30, 1996, there is no obligation on the part of UPS to place any further orders
with Eltron. The Company has derived a significant portion of its revenues
from UPS and may in the future be dependent on UPS, or other significant
customers, the loss of any one of which could materially and adversely affect
the Company's financial position, results of operations and cash flows. No
customer other than UPS contributed greater than 10% of the Company's net sales
in the first quarter of 1995 or 1996.
GROSS PROFIT:
Gross profit for the three months ended June 30, 1996 totaled $9.9
million, an increase of $4.5 million or 83% over gross profit for the same
period in 1995. As a percentage of revenues, gross profit decreased 1% to 44%
for the second quarter of 1996 from 45% in the second quarter of 1995.
Gross profit for the six months ended June 30, 1996 totaled $18.7 million,
an increase of $7.8 million or 72% over gross profit for the same period in
1995. As a percentage of revenues, gross profit decreased 1% to 45% for the
second quarter of 1996 from 46% in the second quarter of 1995.
Sales to high volume customers or OEMs are typically transacted at a price
which yields a lower than average gross margin, although the incremental
selling costs associated with these transactions are generally less than those
associated with a non-OEM sale. Sales of supplies are typically made at lower
than average gross margins, as a result of general market conditions and the
commodity nature of these products. During the period from September 1995 to
February 1996 the Company completed the acquisition of two companies: Donner
and Privilege. These companies had aggregate 1995 sales of approximately $5
million. These companies have historically exhibited gross margins which are
lower than Eltron's. Although management is currently seeking to increase the
gross margins of these subsidiaries, there can be no assurance that gross
margins similar to Eltron's will be achieved. As a result, management believes
that it is not reasonable to assume that the 44% gross margin exhibited in
the second quarter of 1996 will necessarily be maintained in the future.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses as a percentage of sales were
18% and 20% for the three months ended June 30, 1996 and 1995,
respectively. Selling, general and administrative expenses decreased as a
percentage of sales in the second quarter of 1996 when compared to the second
quarter of 1995. On an absolute dollar basis, selling, general and
administrative expenses increased $1.7 million or 68%. $.8 million of
this increase relates to Donner and Privilege, whose operating results were
included in the second quarter of 1996 and are not included in results for the
second quarter of 1995.
Selling, general and administrative expenses as a percentage of sales were
19% and 21% for the six months ended June 30, 1996 and 1995, respectively.
Selling, general and administrative expenses decreased as a percentage of sales
in the first half of 1996 when compared to the first half of 1995. On an
absolute dollar basis, selling, general and administrative expenses increased
$3.0 million or 61%. $1.4 million of this increase relates to Donner and
Privilege, whose operating results were included in the first half of 1996 and
are not included in results for the first half of 1995.
<PAGE> 9
The Company currently anticipates that selling, general and administrative
expense will increase in future quarters but may decrease as a percentage of
sales. The actual amount spent will depend on a variety of factors, including
the Company's level of operations, and the number of new markets the Company
chooses to enter.
RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenses as a percentage of sales were 5% and 6%
for the three months ended June 30, 1996 and 1995, respectively. Research and
development expenses remained consistent as a percentage of sales in the second
quarter of 1996 when compared to the second quarter of 1995.
Research and development expenses as a percentage of sales were 6% and 5%
for the six months ended June 30, 1996 and 1995, respectively. Research and
development expenses increased as a percentage of sales in the second quarter of
1996 when compared to the second quarter of 1995. This increase related
primarily to increased efforts to develop new products.
The Company currently anticipates that research and product development
expense will increase in future quarters and may increase as a percentage of
sales. The actual amount spent will depend on a variety of factors, including
the Company's level of operations, and the number of product development
projects that it embarks upon.
WRITE OFF OF ACQUIRED IN PROCESS TECHNOLOGY AND OTHER COSTS ASSOCIATED WITH
ACQUISITIONS:
In the first quarter of 1996, in-process technology valued at $2.5 million
was purchased in connection with the acquisition of Privilege and expensed
immediately. In addition, costs related to the acquisition of Privilege and RJS
totaling $0.7 million were incurred and expensed during the first quarter of
1996. These costs are not deductible for income tax purposes and are included
in operating results for the six month period ending June 30, 1996.
PROVISION FOR INCOME TAXES:
The provision for income taxes for the three months ended June 30, 1996 was
$1,694,000 or 37% of pretax income, is based on the Company's expected tax rate
for the full year and reflects the utilization of certain tax credits and
current benefit of the recognition of deferred tax assets under SFAS 109. The
Company's provision for income taxes for the three months ended June 30, 1995
was $764,000 or 34% of pretax income.
The provision for income taxes for the six months ended June 30, 1996 was
$3.1 million, or approximately 60% of pretax income, which reflects the
utilization of certain tax credits and current benefit of deferred tax assets
under SFAS 109 which have been substantially offset by purchased in-process
technology and other acquisition related costs totaling $3.2 million which were
expensed in the first quarter of 1996. The tax effect of these non-deductible
expense were fully reflected in the first quarter of 1996 and are included in
results of operations for the six month period ended June 30 ,1996. The
Company's provision for income taxes for the first six months of 1995 was $1.6
million or 35% of pretax income.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Eltron's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its revolving bank line of credit
and cash provided by public offerings of its common stock which generated $6.1
million and $16.7 million in 1994 and 1995, respectively.
During the six months ended June 30, 1996, operating activities provided
cash totaling $56,000 as compared to using cash of $2.6 million during the same
period in 1995. Significant changes in the first six months of 1996 included
cash used resulting from increases in accounts receivable and inventory of $3.1
million and $1.6 million, respectively, which was partially offset by decrease
in trade payables and accrued liabilities totaling $.7 million.
During the six months ended June 30, 1996, investing activities provided
cash totaling $3.6 million. This was primarily due to the sale of $9.2 million
in short term investments. In addition, the Company purchased property and
equipment totaling $26.4 million during the first six months of 1996 as compared
to $517,000 of equipment purchased during the first six months of 1995.
During the six months ended June 30, 1996, financing activities used cash
totaling $1.1 million as compared to $16.1 million provided during the same
period in 1995. In 1995, cash from financing activities was provided by the
sale of 850,000 shares of the Company's common stock in a follow-on offering
which generated net proceeds of $16.7 million. On May 5, 1996 the Company's line
of credit expired. The Company is currently in negotiation to procure a new bank
line of credit.
The Company did not have any material capital commitments as of June 30,
1996.
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
ELTRON INTERNATIONAL, INC.
Date: July 14, 1996 By: /s/ Daniel C. Toomey, Jr.
--------------------- ---------------------------------
Daniel C. Toomey, Jr.
Vice President Finance
and Chief Financial Officer
<PAGE> 11
PART L, ITEM L TWELVE MONTHS EARNINGS STATEMENT
The following is a Statement of Operations for the twelve month period
ending June 30, 1996. This earnings statement for the twelve month period
ending June 30, 1996 covers a period of twelve months beginning one and a half
months after the effective date of the Company's Registration Statement (File
No. 33-9148) for its secondary offering, and is hereby made available to
security holders pursuant to Rule 158 of the Securities Act of 1933, as
amended.
ELTRON INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Twelve month
period ended
June 30,1996
------------
<S> <C>
SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72,918,319
COST OF SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,248,990
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,669,329
OPERATING EXPENSES:
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . 14,395,337
Research and product development. . . . . . . . . . . . . . . . . . . . . . 4,224,855
Write off of acquisition expenses . . . . . . . . . . . . . . . . . . . . . 3,198,555
INCOME FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,850,582
OTHER (INCOME) EXPENSE:
Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (393,815)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,471
INCOME BEFORE PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . 11,149,926
PR0VISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . 5,073,715
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,076,211
NET INCOME PER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . . . 0.84
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING . . . . . . . . . . . . . . . 7,219,637
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS 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> 3,279
<SECURITIES> 6,312
<RECEIVABLES> 13,576
<ALLOWANCES> 325
<INVENTORY> 13,805
<CURRENT-ASSETS> 39,008
<PP&E> 5,863
<DEPRECIATION> 647
<TOTAL-ASSETS> 47,391
<CURRENT-LIABILITIES> 8,698
<BONDS> 0
0
0
<COMMON> 23,645
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 47,391
<SALES> 41,749
<TOTAL-REVENUES> 41,749
<CGS> 23,040
<TOTAL-COSTS> 36,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,158
<INCOME-TAX> 3,076
<INCOME-CONTINUING> 2,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
