<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 1-7736
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TAB PRODUCTS CO.
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(Exact name of Registrant as specified in its charter)
DELAWARE 94-1190862
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(State of Incorporation) (IRS Employer Identification No.)
1400 PAGE MILL ROAD, PALO ALTO, CALIFORNIA 94304
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number - including area code (415) 852-2400
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NOT APPLICABLE
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Former name, former address and former fiscal year,
if changed since last report.
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 No X
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common shares outstanding as of February 28, 1995 - 4,851,951
This report, including all exhibits and attachments, contains 12 pages.
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Page 1
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TAB PRODUCTS CO.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets
February 28, 1995 and May 31, 1994 3
Consolidated Condensed Statements of Earnings
Three and nine months ended February 28,
1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
Nine months ended February 28,
1995 and 1994 5
Supplemental Financial Data - Notes 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 6. Exhibits 10
Signatures 12
Page 2
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PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(000's omitted except share data)
<TABLE>
<CAPTION>
Unaudited Audited
ASSETS February 28, May 31,
1995 1994
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,432 $ 2,371
Short-term investments 2,394 2,394
Accounts receivable, less allowances of
$781 and $711 for doubtful accounts 27,440 31,568
Inventories 15,448 13,819
Prepaid income taxes and other expenses 5,641 5,981
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Total current assets 55,355 56,133
Property, Plant and Equipment, net of
accumulated depreciation of $32,926
and $30,186 21,842 23,476
Other Assets 6,114 6,552
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$ 83,311 $ 86,161
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,933 $ 1,354
Accounts payable 6,863 10,267
Commissions payable 3,382 3,402
Other accrued liabilities 7,748 7,675
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Total current liabilities 19,926 22,698
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Long-Term Debt, less current portion 21,311 23,041
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Deferred Taxes and Other 1,770 1,770
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Stockholders' Equity:
Preferred stock: $.01 par value,
authorized - 500,000 shares,
issued - none
Common stock: $.01 par value,
authorized - 25,000,000 shares,
issued - February 1995 - 7,284,178
shares and May 1994 - 7,260,361
shares 73 73
Additional paid-in capital 12,704 12,504
Retained earnings 58,672 57,649
Treasury stock: February 1995 and
May 1994 - 2,432,227 shares (31,365) (31,365)
Cumulative translation adjustment 220 (209)
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40,304 38,652
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$ 83,311 $ 86,161
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</TABLE>
Page 3
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TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(000's omitted except share data)
<TABLE>
<CAPTION>
Three Months Ended
February 28,
1995 1994
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<S> <C> <C>
Revenues $ 38,023 $ 38,945
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Costs and expenses:
Cost of revenues 23,257 23,779
Selling 10,526 10,222
General and administrative 2,608 2,559
Research and development 200 203
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Total costs and expenses 36,591 36,763
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Operating Income 1,432 2,182
Interest, net (468) (425)
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Earnings before income taxes 964 1,757
Provision for income taxes 420 739
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Net earnings $ 544 $ 1,018
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Earnings per share $ 0.11 $ 0.21
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Average common and equivalent shares 4,851,951 4,814,510
outstanding
<CAPTION>
Nine Months Ended
February 28,
1995 1994
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<S> <C> <C>
Revenues $ 112,988 $ 102,459
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Costs and expenses:
Cost of revenues 68,907 61,830
Selling 30,959 28,284
General and administrative 7,951 7,578
Research and development 631 640
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Total costs and expenses 108,448 98,332
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Operating income 4,540 4,127
Interest, net (1,442) (1,188)
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Earnings before income taxes 3,098 2,939
Provision for income taxes 1,348 1,235
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Net earnings $ 1,750 $ 1,704
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Earnings per share $ 0.36 $ 0.35
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Average common and equivalent shares
outstanding 4,843,486 4,802,526
</TABLE>
Page 4
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TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Nine Months Ended
February 28,
1995 1994
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<S> <C> <C>
Operating Activities:
Net earnings $ 1,750 $ 1,704
Depreciation and amortization 2,598 2,457
Other 70 47
Changes in operating assets and liabilities:
Accounts receivable 4,058 (5,132)
Inventories (1,629) (431)
Prepaid income taxes and other expenses 340 1,111
Other assets 438 334
Accounts payable (3,404) 1,514
Commissions payable (20) 914
Other accrued liabilities 73 (505)
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Net cash provided by operating
activities 4,274 2,013
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Investing Activities:
Purchase of Datafile (6,701)
Purchases of property, plant and equipment (964) (2,216)
Investment in building for lease (866)
Proceeds from sales of property, plant
and equipment 78
Purchases of short-term investments (2,119)
Sales of short-term investments 1,982
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Net cash required by investing
activities (964) (9,842)
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Financing Activities:
Issuance of short-term debt 1,419
Issuance of long-term debt 7,518
Repayment of long-term debt (1,151) (1,500)
Proceeds from issuance of common stock 200 279
Dividends (727) (721)
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Net cash (required) provided by
financing activities (1,678) 6,995
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Effect of exchange rate changes on cash 429 (311)
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Increase (decrease) in cash and cash
equivalents 2,061 (1,145)
Cash and cash equivalents at beginning of
period 2,371 5,028
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Cash and cash equivalents at end of period $ 4,432 $ 3,883
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</TABLE>
Page 5
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TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
SUPPLEMENTAL FINANCIAL DATA - NOTES (UNAUDITED)
1. Inventories consisted of the following (000's omitted):
<TABLE>
<CAPTION>
February 28 May 31,
1995 1994
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<S> <C> <C>
Finished goods $ 9,469 $ 8,203
Work in process 1,328 966
Raw materials 4,651 4,650
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$ 15,448 $ 13,819
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</TABLE>
2. Earnings per share are computed using the average number of common and
dilutive common equivalent shares outstanding.
3. Dividends declared for the nine month periods ended February 28, 1995 and
1994 were as follows:
Record Date Shares Outstanding Per Share Dividend
----------------- ------------------ ------------------
February 25, 1995 4,851,951 $0.05
November 25, 1994 4,851,951 $0.05
August 25, 1994 4,838,188 $0.05
February 25, 1994 4,819,858 $0.05
November 25, 1993 4,810,267 $0.05
August 25, 1993 4,798,314 $0.05
4. The above financial information reflects all adjustments consisting of
normal recurring items which are, in the opinion of management, necessary
for a fair presentation of the results of the interim periods. These
financial statements should be read in conjunction with the company's
audited financial statements for the year ended May 31, 1994.
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The company's working capital position at February 28, 1995 was $35.4 million as
compared with $33.4 million at May 31, 1994. Accounts receivable at
February 28, 1995 were lower than at May 31, 1994 by $4.1 million primarily
because of an increased focus on collection of accounts receivable. The higher
level of inventories at February 28, 1995 are the result of the timing of
shipments for certain finished goods and work-in-process products. The company's
cash and short-term investments position at February 28, 1995 increased to $6.8
million from $4.8 million at May 31, 1994.
Investments in property, plant and equipment to support operations were $1.0
million during the nine months ended February 28, 1995. Capital expenditures to
support operations for fiscal 1995 are expected to be in the range of $1.5 to
$2.0 million.
For the nine month period ended February 28, 1995 the company paid cash
dividends of $727,000 as compared to $721,000 in the prior fiscal year.
The company has an unsecured revolving line of credit of $10 million with a bank
which expires on October 31, 1995. There were no borrowings outstanding under
the line of credit at February 28, 1995.
The company believes its anticipated cash flow from operations, cash and credit
facilities are adequate to finance expected growth and capital expenditures for
the foreseeable future.
RESULTS OF OPERATIONS
REVENUES for the third quarter of fiscal 1995 were $38.0 million, down
$.9 million or 2.4% from revenues of $38.9 million for the third quarter of
fiscal 1994. Revenues for the nine months ended February 28, 1995 were
$113.0 million, an increase of $10.5 million or 10.3% from the $102.5 million in
the first nine months of the prior fiscal year. Incremental revenues from the
Datafile business, which was acquired in October 1993, accounted for $7.8
million of the increased revenues for the nine months ended February 28, 1995.
The company announced price increases in the U.S. on two of its major product
lines, however the effective dates of the price increases did not effect the
third quarter operating results. In addition, the company is increasing prices
on the additional product lines during the fourth quarter. The full impact of
all the company's price increases will not be realized until the first half of
fiscal 1996.
COST OF REVENUES, as a percentage of revenues, was 61.2% for the third quarter
of fiscal 1995, up from 61.1% for the third quarter of fiscal 1994. For the
nine months ended February 28, 1995 the cost of revenues percentage was 61.0% as
compared to 60.3% in the same period a year ago. Cost of revenues in the United
States continued to be impacted by increased product costs during the third
quarter but were partially offset by the favorable impact of the company's
international markets.
7
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SELLING EXPENSES, were $10.5 million or 27.7% of total revenues for the third
quarter of fiscal 1995 as compared to $10.2 million or 26.2% of total revenues
for the third quarter of fiscal 1994. For the nine months ended
February 28, 1995 selling expenses were $31.0 million or 27.4% of total revenues
as compared to $28.3 million or 27.6% of total revenues for the prior fiscal
year. Total selling expenses for the third quarter of fiscal 1995 increased
over the third quarter of the prior fiscal year because of higher commissions
due to a change in sales mix. The increase in total selling expenses for the
nine months ended February 28, 1995 was due to selling expenses related to the
Datafile business acquired in October 1993.
GENERAL AND ADMINISTRATIVE EXPENSES, in the third quarter of fiscal 1995 were
$2.6 million or 6.9% of total revenues as compared to $2.6 million or 6.6% of
total revenues in the third quarter of fiscal 1994, For the nine months ended
February 28, 1995 general and administrative expenses were $8.0 million or 7.0%
of total revenues as compared to $7.6 million or 7.4% of total revenues in the
prior fiscal year. The increase in total general and administrative expenses for
the nine months ended February 28, 1995 was due to general and administrative
expenses related to the Datafile business acquired in October 1993. The general
and administrative expenses for the nine months ended February 28, 1994 were
impacted by the one-time charge of $440,000 for severance costs related to the
cost reduction program implemented in the first quarter of last year.
OPERATING INCOME, for the quarter ended February 28, 1995 was $1.4 million, a
decrease of 34.4% from the $2.2 million reported in the third quarter of last
year. For the nine months ended February 28, 1995 operating income was $4.5
million, an increase of 10.0% from the $4.1 million for the prior fiscal year.
INTEREST EXPENSE, net, was $468,000 in the third quarter of fiscal 1995 as
compared to $425,000 in the third quarter of fiscal 1994. For the nine months
ended February 28, 1995, interest expense, net was $1,442,000 as compared to
$1,188,000 for the prior fiscal year. The increases in interest expense, net
for the nine months ended February 28, 1995 were due primarily to the increased
debt incurred as a result of the Datafile acquisition in October 1993.
EARNINGS PER SHARE, for the three months ended February 28, 1995 were $.11 per
share as compared to $.21 per share earned in the third quarter of the prior
fiscal year. For the nine months ended February 28, 1995 earnings per share was
$.36 as compared to $.35 in the prior fiscal year.
8
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PART II: OTHER INFORMATION
ITEMS 1-5. Not applicable.
9
<PAGE>
ITEM 6. Exhibits
(a) 10.1 Registrants 1981 Incentive Stock Option Plan (Exhibit
(10) of the 1983 10-K)(1, 2)
10.2 Amended 1981 Incentive Stock Option Plan (Exhibit (10)
of the 1987 10-K)(1, 2)
10.3 1991 Stock Option Plan (Exhibit 10.1 of the 1991 10-K)(1, 2)
10.4 Employment Agreement between John W. Peth and the
Registrant dated March 21, 1991 (Exhibit 10.2 of the 1991
10-K)(1, 2)
10.5 Agreement between John W. Peth and the Registrant dated
August 18, 1991 (Exhibit 10.3 of the 1991 10-K)(1, 2)
10.6 Agreement between Michael A. Dering and the Registrant
dated May 15, 1989 (Exhibit 10.4 of the 1991 10-K)(1, 2)
10.7 Amendment to Agreement between Michael A. Dering and
the Registrant dated August 28, 1991 (Exhibit 10.5 of the
1991 10-K)(1, 2)
10.8 Common Stock Purchase Agreement (Exhibit 10.2 of the
1992 10-K)(2)
10.9 Promissory Note dated October 18, 1991 (Exhibit 10.3 of
the 1992 10-K)(2)
10.10 Bank of America Business Loan Agreement dated
October 24, 1991 (Exhibit 10.4 of the 1992 10-K)(2)
10.11 Note Agreement of Tab Products Co. dated as of March 20,
1992 in the aggregate principal amount of $15,000,000
(Exhibit 10.5 of the 1992 10-K)(2)
10.12 Bank of America Revision Agreement dated March 20, 1992
(Exhibit 10.6 of the 1992 10-K)(2)
10.13 Agreement for Purchase and Sale of Assets (Exhibit 10.7
of the 1992 10-K)(2)
10.14 Amendment dated September 15, 1992 to Business Loan
Agreement dated October 24, 1991 (Exhibit filed with
Form 10-Q for the quarter ended November 30, 1993)(2)
10.15 Business Loan Agreement dated August 20, 1993 (Exhibit
filed with Form 10-Q for the quarter ended November 30,
1993)(2)
10.16 Amendment dated July 27, 1993 to Note Agreement of
Tab Products Co. dated as of March 20, 1992 (Exhibit
filed with Form 10-Q for the quarter ended August 31,
1993)(2)
10.17 Bank of America Business Loan Agreement dated
August 20, 1993 (Exhibit filed with Form 10-Q for the
quarter ended August 31, 1993)(2)
10.18 Bank of America Amendment No. 1 dated October 6, 1993
to Business Loan Agreement (Exhibit filed with Form 10-Q
for the quarter ended August 31, 1993)(2)
Page 10
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10.19 Bank of America Amendment No. 2 dated October 13, 1993
to Business Loan Agreement (Exhibit filed with Form 10-Q
for the quarter ended August 31, 1993)(2)
10.20 Note Agreement of Tab Products Co. dated October 7,
1993 (Exhibit filed with Form 10-Q for the quarter ended
August 31, 1993)(2)
10.21 Letter dated October 7, 1993 amending the Note Agreement
dated March 20, 1992 (Exhibit filed with Form 10-Q for the
quarter ended August 31, 1993)(2)
10.22 Bank of America Amendment No. 3 dated December 3, 1993 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.22
filed with Form 10-Q for the quarter ended February 28,
1994)(2)
10.23 Bank of America Amendment No. 4 dated February 9, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.23
filed with Form 10-Q for the quarter ended February 28,
1994)(2)
10.24 Bank of America Amendment No. 5 dated February 28, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.24
filed with Form 10-Q for the quarter ended February 28,
1994)(2)
10.25 Bank of America Amendment No. 6 dated March 30, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.25
filed with Form 10-Q for the quarter ended February 28,
1994)(2)
10.26 Bank of America Amendment No. 7 dated April 5, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.26
filed with Form 10-Q for the quarter ended February 28,
1994)(2)
10.27 Letter dated October 27, 1993 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.27 filed with the
1994 Form 10-K)(2)
10.28 Bank of America Amendment No. 8 dated May 9, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.28
filed with the 1994 Form 10-K)(2)
10.29 Bank of America Amendment No. 9 to Business Loan Agreement
dated August 20, 1993 (Exhibit 10.29 filed with the 1994
Form 10-K)(2)
10.30 Bank of America Amendment No. 10 dated August 8, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.30
filed with the 1994 Form 10-K)(2)
10.31 Bank of America Amendment No. 11 dated August 22, 1994 to
Business Loan Agreement dated August 20, 1993 (Exhibit 10.31
filed with the 1994 Form 10-K)(2)
1 Compensatory Plan or Arrangement.
2 Incorporated by reference from the noted previously filed
document.
(b) None
Page 11
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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 under-
signed thereunto duly authorized.
TAB PRODUCTS CO.
-------------------------------
(Registrant)
Date: April 13, 1995 /s/ John M. Palmer
-------------------------------
John M. Palmer, Vice President,
Finance and Chief Financial Officer
Date: April 13, 1995 /s/ James L. Anderson
-------------------------------
James L. Anderson, Controller
Page 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 4432
<SECURITIES> 2394
<RECEIVABLES> 28221
<ALLOWANCES> 781
<INVENTORY> 15448<F1>
<CURRENT-ASSETS> 55355
<PP&E> 54768
<DEPRECIATION> 32926
<TOTAL-ASSETS> 83311
<CURRENT-LIABILITIES> 19926
<BONDS> 21311
<COMMON> 40084
0
0
<OTHER-SE> 220
<TOTAL-LIABILITY-AND-EQUITY> 83311
<SALES> 106583
<TOTAL-REVENUES> 112988
<CGS> 63358
<TOTAL-COSTS> 68907
<OTHER-EXPENSES> 39541
<LOSS-PROVISION> 233
<INTEREST-EXPENSE> 1442
<INCOME-PRETAX> 3098
<INCOME-TAX> 1348
<INCOME-CONTINUING> 1750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1750
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<FN>
<F1>Inventory detail at February 28, 1995 was Finished Goods $9469, Work in Process
$1328 and Raw Materials $4651.
</FN>
</TABLE>
