<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 August 31, 1995
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
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
- ---------------------------- ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
1400 PAGE MILL ROAD, PALO ALTO, CALIFORNIA 94304
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number - including area code (415) 852-2400
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NOT APPLICABLE
- --------------------------------------------------------------------------------
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 X No
----- -----
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 August 31, 1995 - 4,851,951
This report, including all exhibits and attachments, contains 12 pages.
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<PAGE>
TAB PRODUCTS CO.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets
August 31, 1995 and May 31, 1995 3
Consolidated Condensed Statements of Earnings
Three months ended August 31,
1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
Three months ended August 31,
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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ITEM 1: Financial Statements
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(000's omitted except share data)
<TABLE>
<CAPTION>
ASSETS August 31, 1995 May 31, 1995
--------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,632 $ 6,753
Short-term investments 2,082 1,600
Accounts receivable, less allowances of
$730 and $708 for doubtful accounts 24,644 24,692
Inventories 15,204 14,584
Prepaid income taxes and other expenses 2,969 3,704
----------- ------------
Total current assets 51,531 51,333
Property, Plant and Equipment, net of accumulated
depreciation of $34,115 and $33,246 21,433 21,652
Goodwill 5,202 5,241
Other Assets 3,455 3,423
----------- ------------
$ 81,621 $ 81,649
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 3,312 $ 3,313
Accounts payable 6,972 7,292
Commissions payable 2,768 2,918
Other accrued liabilities 7,855 7,728
----------- ------------
Total current liabilities 20,907 21,251
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Long-Term debt, less current portion 18,655 18,733
----------- ------------
Deferred taxes and other non-current liabilities 1,837 1,837
----------- ------------
Stockholders' Equity:
Preferred stock: $0.01 par value, authorized -
500,000 shares, issued - none - -
Common stock: $0.01 par value, authorized -
25,000,000 shares, issued - August 1995 and
May 1995 - 7,284,178 shares 73 73
Additional paid-in capital 12,705 12,705
Retained earnings 58,248 57,898
Treasury stock: August 1995 and May 1995 -
2,432,227 shares (31,365) (31,365)
Cumulative translation adjustment 561 517
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40,222 39,828
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$ 81,621 $ 81,649
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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 August 31
------------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenues $ 37,414 $ 36,614
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Costs and expenses:
Cost of revenues 22,823 22,286
Selling 10,234 9,916
General and administrative 2,787 2,876
Research and development 104 197
---------- ----------
Total costs and expenses 35,948 35,275
---------- ----------
Operating income 1,466 1,339
Interest, net (418) (481)
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Earnings before income taxes 1,048 858
Provision for income taxes 455 373
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Net earnings $ 593 $ 485
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---------- ----------
Earnings per share $ 0.12 $ 0.10
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---------- ----------
Average common and equivalent shares outstanding 4,851,951 4,833,040
</TABLE>
Page 4
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended August 31,
1995 1994
--------------- ---------------
Operating Activities:
<S> <C> <C>
Net earnings $ 593 $ 485
Depreciation and amortization 910 929
Other 26 87
Changes in operating assets and liabilities:
Accounts receivable 26 3,342
Inventories (620) (779)
Prepaid income taxes and other expenses 735 234
Other assets 7 84
Accounts payable (320) (1,107)
Commissions payable (150) (78)
Other accrued liabilities 127 128
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Net cash provided by Operating Activities 1,334 3,325
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Investing Activities:
Purchase of property, plant and equipment (703) (293)
Purchases of short-term investments (482) -
Sales of short-term investments 8 -
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Net cash used by Investing Activities (1,177) (293)
---------- ----------
Financing Activities:
Issuance of debt - 6
Repayment of long-term debt (79) -
Proceeds from issuance of common stock - 89
Dividends (243) (240)
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Net cash used by Financing Activities (322) (145)
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Effect of exchange rate changes on cash 44 271
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Increase (decrease) in cash and cash equivalents (121) 3,158
Cash and cash equivalents at beginning of period 6,753 2,371
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Cash and cash equivalents at end of period $ 6,632 $ 5,529
---------- -----------
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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>
August 31, 1995 May 31, 1995
--------------- ------------
<S> <C> <C>
Finished goods $ 9,212 $ 8,914
Work in process 693 653
Raw materials 5,299 5,017
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$ 15,204 $ 14,584
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----------- -----------
</TABLE>
2. Earnings per share data are computed using the average number of common and
dilutive common equivalent shares outstanding.
3. Dividends declared for the three month period ended August 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
Record Date Shares Outstanding Per Share Dividend
----------- ------------------ ------------------
<S> <C> <C>
August 25, 1995 4,851,951 $ 0.05
August 25, 1994 4,838,188 $ 0.05
</TABLE>
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, 1995.
5. During the quarter ended August 31, 1995 the Company canceled stock
options to purchase 798,500 shares of the Company's common stock at prices
ranging from $6.125 to $13.50 and exchanged them for options to purchase
598,500 shares of the Company's common stock at current market value of $6.00
per share with new vesting periods.
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
At August 31, 1995 the company had cash and short-term investments of $8.7
million, an increase of $.3 million from the $8.4 million at May 31, 1995. The
company's working capital position at August 31, 1995 was $30.6 million as
compared with $30.1 million at May 31, 1995. The current ratio of 2.5 at August
31, 1995 was up from the 2.4 reported May 31, 1995. Inventories at August 31,
1995 were higher as a result of increased demand on certain products, the build
up of inventory for product transitions and raw materials required for
manufacturing of products previously supplied from third parties. Management
believes that the company's cash and cash equivalents, available credit
facilities and operational cash flows will adequately finance anticipated
growth, capital expenditures and debt obligations for the foreseeable future.
Investments in property, plant and equipment to support operations were $0.7
million during the three months ended August 31, 1995. Capital expenditures to
support operations for fiscal 1996 are expected to be in the range of $2.5 to
$3.0 million.
For the three month period ended August 31, 1995 the company paid cash dividends
of $243,000 as compared to $240,000 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, 1996. There were no borrowings outstanding under
the line of credit at August 31, 1995.
RESULTS OF OPERATIONS
REVENUES for the first quarter of fiscal 1996 were $37.4 million, up $.8 million
or 2.2% from revenues of $36.6 million for the first quarter of fiscal 1995.
The company increased list prices, in the United States, on major product lines
in late fiscal 1995 and early fiscal 1996. During the first quarter of fiscal
1996 revenues from major product lines increased $1.4 million over the first
quarter of fiscal 1995 but were partially offset by $.6 million decrease in
revenues in other products. The increased revenues were attributable to both
the price increases and higher unit volume during the quarter.
COST OF REVENUES, as a percentage of revenues, was 61.0% for the first quarter
of fiscal 1996, up slightly from the 60.9% reported for the first quarter of
fiscal 1995. While overall cost of revenues as a percentage of revenues
increased 0.1%; cost of revenues as a percentage of revenues, on major U.S.
product lines with price increases was equal to the first quarter of fiscal
1995.
SELLING EXPENSES were $10.2 million or 27.4% of total revenues for the first
quarter of fiscal 1996 as compared to $9.9 million or 27.1% of total revenues
for the first quarter of fiscal 1995. Total selling expenses for the first
quarter of fiscal 1996 increased $.3 million over the first quarter of the prior
fiscal year. The increased selling expenses were attributable to higher
commission expense in the quarter.
Page 7
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GENERAL AND ADMINISTRATIVE EXPENSES, in the first quarter of fiscal 1996 were
$2.8 million, $.1 million lower than the $2.9 million reported in the first
quarter of fiscal 1995. As a percentage of revenues, general and administrative
expenses for the first quarter of fiscal 1996 were 7.4% as compared to 7.9% for
the first quarter of fiscal 1995. General and administrative expenses for the
first quarter of fiscal 1996 declined as a percentage of revenues from the first
quarter of fiscal 1995 as result of increased revenues.
OPERATING INCOME for the quarter ended August 31, 1995 was $1.5 million, an
increase of $.2 million or 9.5% from the $1.3 million reported in the first
quarter of last year.
INTEREST EXPENSE, net, was $418,000 in the first quarter of fiscal 1996 as
compared to $481,000 in the first quarter of fiscal 1995. The decrease in
interest expense, net for the three months ended August 31, 1995 were primarily
due to a lower level of debt during the first quarter of fiscal 1996 compared to
the first quarter of fiscal 1995 as a result of debt repayments during fiscal
1995.
EARNINGS PER SHARE for the three months ended August 31, 1995 were $.12 per
share, an increase of 20% over the $.10 per share earned in the first quarter
of the prior fiscal year.
Page 8
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PART II: OTHER INFORMATION
ITEMS 1 - 5. Not applicable.
Page 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)
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)
Page 10
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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)
10.32 Letter dated June 15, 1995 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.32 filed
with the 1995 Form 10-K)(2)
10.33 Letter dated July 21, 1995 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.33 filed
with the 1995 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
undersigned thereunto duly authorized.
TAB PRODUCTS CO.
------------------------------
(Registrant)
Date: October 12, 1995 /s/ John M. Palmer
-----------------------------------
John M. Palmer, Vice President,
Finance and Chief Financial Officer
Date: October 12, 1995 /S/James L. Anderson
-----------------------------------
James L. Anderson, Controller
Page 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 6632
<SECURITIES> 2082
<RECEIVABLES> 25374
<ALLOWANCES> 730
<INVENTORY> 15204<F1>
<CURRENT-ASSETS> 51531
<PP&E> 55548
<DEPRECIATION> 34115
<TOTAL-ASSETS> 81621
<CURRENT-LIABILITIES> 20907
<BONDS> 18655
<COMMON> 39661
0
0
<OTHER-SE> 561
<TOTAL-LIABILITY-AND-EQUITY> 81621
<SALES> 35142
<TOTAL-REVENUES> 37414
<CGS> 20819
<TOTAL-COSTS> 22823
<OTHER-EXPENSES> 13125
<LOSS-PROVISION> 38
<INTEREST-EXPENSE> 418
<INCOME-PRETAX> 1048
<INCOME-TAX> 455
<INCOME-CONTINUING> 593
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<FN>
<F1>Footnote #1 - Tag #14 Inventory detail at August 31, 1995 was finished goods
$9212; Work in process $693; raw materials $5299.
</FN>
</TABLE>
