<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 29, 1996
---------------------
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.
- --------------------------------------------------------------------------------
(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
---------------------
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 February 29, 1996 - 4,851,951
This report, including all exhibits and attachments, contains 11 pages.
<PAGE>
TAB PRODUCTS CO.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets
February 29, 1996 and May 31, 1995 3
Consolidated Condensed Statements of Earnings
Three and Nine months ended February 29,
1996 and February 28, 1995
4
Consolidated Condensed Statements of Cash Flows
Nine months ended February 29, 1996 and
February 28, 1995 5
Notes to Consolidated Condensed Financial Statements 6
(unaudited)
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 6. Exhibits 9
Signatures 11
2
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: Financial Statements
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000's omitted except share data)
<TABLE>
<CAPTION>
ASSETS February 29, 1996 May 31, 1995
------------------- --------------
Unaudited Audited
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,828 $ 6,753
Short-term investments 2,047 1,600
Accounts receivable, less allowances of
$641 and $708 for doubtful accounts 25,101 24,692
Inventories 14,200 14,584
Prepaid income taxes and other expenses 2,348 3,704
--------- ---------
Total current assets 51,524 51,333
Property, plant and equipment, net of accumulated
depreciation of $34,727 and $33,246 20,934 21,652
Goodwill 4,889 5,241
Other assets 4,384 3,423
--------- ---------
$ 81,731 $ 81,649
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 4,093 $ 3,313
Accounts payable 6,346 7,292
Commissions payable 3,003 2,918
Other accrued liabilities 8,045 7,728
--------- ---------
Total current liabilites 21,487 21,251
--------- ---------
Long-term debt, less current portion 17,219 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 - February
1996 and May 1995 - 7,284,178 shares 73 73
Additional paid-in capital 12,705 12,705
Retained earnings 59,312 57,898
Treasury stock: February 1996 and May 1995 -
2,432,227 shares (31,365) (31,365)
Cumulative translation adjustment 463 517
--------- ---------
41,188 39,828
--------- ---------
$ 81,731 $ 81,649
--------- ---------
--------- ---------
</TABLE>
3
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
(000's omitted except share data)
<TABLE>
<CAPTION>
Three Months Ended
February 29/28
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 37,674 $ 38,023
------------ ------------
Costs and expenses:
Cost of revenues 22,996 23,257
Selling 10,123 10,526
General and administrative 2,713 2,608
Research and development 150 200
------------ ------------
Total costs and expenses 35,982 36,591
------------ ------------
Operating income 1,692 1,432
Interest, net (411) (468)
------------ ------------
Earnings before income taxes 1,281 964
Provision for income taxes 558 420
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Net earnings $ 723 $ 544
------------ ------------
------------ ------------
Earnings per share $ 0.15 $ 0.11
------------ ------------
------------ ------------
Average common and equivalent shares outstanding 4,858,400 4,851,951
Nine Months Ended
February 29/28
----------------------------
1996 1995
------------ ------------
Revenues $ 113,950 $ 112,988
------------ ------------
Costs and expenses:
Cost of revenues 69,311 68,907
Selling 30,892 30,959
General and administrative 8,387 7,951
Research and development 350 631
------------ ------------
Total costs and expenses 108,940 108,448
------------ ------------
Operating income 5,010 4,540
Interest, net (1,218) (1,442)
------------ ------------
Earnings before income taxes 3,792 3,098
Provision for income taxes 1,650 1,348
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Net earnings $ 2,142 $ 1,750
------------ ------------
------------ ------------
Earnings per share $ 0.44 $ 0.36
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------------ ------------
Average common and equivalent shares outstanding 4,852,509 4,843,486
</TABLE>
4
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
Nine Months Ended
February 29/28
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Operating Activities:
Net earnings $ 2,142 $ 1,750
Depreciation and amortization 2,676 2,598
Other (42) 70
Changes in operating assets and liabilities:
Accounts receivable (342) 4,058
Inventories 384 (1,629)
Prepaid income taxes and other expenses 1,356 340
Other assets (609) 438
Accounts payable (946) (3,404)
Commissions payable 85 (20)
Other accrued liabilities 317 73
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Net cash provided by Operating
Activities 5,021 4,274
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Investing Activities:
Purchase of property, plant and equipment, net (1,983) (964)
Purchases of short-term investments (2,437) -
Sales of short-term investments 1,990 -
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Net cash used by Investing Activities (2,430) (964)
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Financing Activities:
Repayment of long-term debt (734) (1,151)
Proceeds from issuance of common stock - 200
Dividends (728) (727)
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Net cash used by Financing Activities (1,462) (1,678)
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Effect of exchange rate changes on cash (54) 429
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Increase in cash and cash equivalents 1,075 2,061
Cash and cash equivalents at beginning of period 6,753 2,371
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Cash and cash equivalents at end of period $ 7,828 $ 4,432
------------ ------------
------------ ------------
</TABLE>
5
<PAGE>
TAB PRODUCTS CO. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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.
1. Inventories consisted of the following (000's omitted):
<TABLE>
<CAPTION>
February 29, 1996 May 31, 1995
----------------- -----------------
<S> <C> <C>
Finished goods $ 8,843 $ 8,914
Work in process 663 653
Raw materials 4,694 5,017
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$ 14,200 $ 14,584
----------------- -----------------
----------------- -----------------
</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 nine month periods ended February 29, 1996 and
February 28, 1995 were as follows:
<TABLE>
<CAPTION>
Record Date Shares Outstanding Per Share Dividend
----------- ------------------ ------------------
<S> <C> <C>
February 23, 1996 4,851,951 $ 0.05
November 22, 1995 4,851,951 $ 0.05
August 25, 1995 4,851,951 $ 0.05
February 25, 1995 4,851,951 $ 0.05
November 25, 1994 4,851,951 $ 0.05
August 25, 1994 4,838,188 $ 0.05
</TABLE>
4. During the nine months ended February 29, 1996 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 the then current market value of
$6.00 per share with new vesting periods.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
At February 29, 1996, the company had cash and short-term investments of $9.9
million, an increase of $1.5 million from the $8.4 million in cash and short-
term investments at May 31, 1995. The company's working capital position at
February 29, 1996, was $30.0 million as compared with $30.1 million at May 31,
1995. Accounts receivable at February 29, 1996, was $25.1 million an increase
of $.4 million from the accounts receivable of $24.7 million at May 31, 1995.
The increased accounts receivable is attributable to higher revenues in the
months preceding the February 29, 1996 quarter end as compared to May 31, 1995.
The company's days sales outstanding was lower at February 29, 1996 as
compared to May 31, 1995. Inventories at February 29, 1996 were $14.2 million
or $.4 million lower than the $14.6 million reported at May 31, 1995. The
lower inventory is a result of focused efforts to reduce the company's overall
investment in inventory. 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 $2.0
million during the nine months ended February 29, 1996. Capital expenditures to
support operations for fiscal 1996 are expected to be in the range of $2.5 to
$3.0 million.
For the nine month period ended February 29, 1996, the company paid cash
dividends of $728,000 as compared to $727,000 in the prior fiscal year.
The company has an unsecured revolving line of credit of $10 million with a bank
that expires on October 31, 1996. There were no borrowings outstanding under the
line of credit at February 29, 1996.
RESULTS OF OPERATIONS
REVENUES for the third quarter of fiscal 1996 were $37.7 million, down $.3
million from revenues of $38.0 million for the third quarter of fiscal
1995. Revenues for the nine months ended February 29, 1996, were $114.0
million, up $1.0 million from revenues of $113.0 million in the first
nine months of the prior fiscal year. The increased revenues for the nine months
ended February 29, 1996 were attributable to price increases and higher unit
volume.
COST OF REVENUES, as a percentage of revenues, was 61.0% for the third quarter
of fiscal 1996, down from the 61.2% reported for the third quarter of fiscal
1995. For the nine months ended February 29, 1996, cost of revenues was
60.8% as compared to 61.0% in the first nine months of the prior fiscal year.
The lower cost of revenues, as a percentage of revenues, is attributable to
lower product costs and increased selling prices.
7
<PAGE>
SELLING EXPENSES were $10.1 million or 26.9% of total revenues for the third
quarter of fiscal 1996 as compared to $10.5 million or 27.7% of total revenues
for the third quarter of fiscal 1995. For the nine months ended February 29,
1996, selling expenses were $30.9 million as compared to $31.0 million in the
prior fiscal year. Total selling expenses for the third quarter of fiscal 1996
decreased $.4 million over the comparable period for fiscal 1995 due to $.3
million of lower commission expense and $.1 million in lower marketing costs.
GENERAL AND ADMINISTRATIVE EXPENSES, in the third quarter of fiscal 1996 were
$2.7 million, $.1 million higher than the $2.6 million reported in the third
quarter of fiscal 1995. For the nine months ended February 29, 1996, general and
administrative expenses were $8.4 million, $.4 million higher than the $8.0
million reported the prior fiscal year. The increased general and administrative
expenses for the first nine months of fiscal 1996 are primarily due to increased
employee related costs.
OPERATING INCOME for the quarter ended February 29, 1996, was $1.7 million, an
increase of $.3 million or 18.2% from the $1.4 million reported in the third
quarter of last year. For the nine months ended February 29, 1996, operating
income was $5.0 million, $.5 million or 10.4% higher than the $4.5 million
reported for the prior fiscal year.
INTEREST EXPENSE, net, was $411,000 in the third quarter of fiscal 1996 as
compared to $468,000 in the third quarter of fiscal 1995. For the nine months
ended February 29, 1996, interest expense, net, was $1,218,000 as compared to
$1,442,000 in the prior fiscal year. The decreases in interest expense, net,
were primarily due to lower levels of debt during fiscal 1996 compared to the
same periods of fiscal 1995 as a result of debt repayments.
EARNINGS PER SHARE for the three months ended February 29, 1996, were $.15 per
share, an increase of 36% over the $.11 per share earned in the third quarter
of the prior fiscal year. For the nine months ended February 29, 1996, earnings
per share were $.44 per share, an increase of 22% over the $.36 per share in
the prior fiscal year.
PART II: OTHER INFORMATION
ITEMS 1 - 5. Not applicable.
8
<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 10.14 filed with
Form 10-Q for the quarter ended November 30, 1993)(2)
10.15 Business Loan Agreement dated August 20, 1993 (Exhibit
10.15 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 10.16
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 10.17 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 10.18 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 10.19 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 10.20 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 10.21 filed with Form 10-Q
for the quarter ended August 31, 1993)(2)
9
<PAGE>
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)
10.34 Bank of America Business Loan Agreement dated December 7,
1995 (Exhibit 10.34 filed with Form 10-Q for the quarter
ended November 30, 1995) (2)
10.35 Letter dated December 13, 1995 amending the Prudential
Note Agreement dated March 20, 1992 (Exhibit 10.35 filed
with Form 10-Q for the quarter ended November 30, 1995) (2)
(1) Compensatory Plan or Arrangement.
(2) Incorporated by reference from the noted previously filed
document.
(b) None
10
<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.
TAB PRODUCTS CO.
---------------------------------------------
(Registrant)
Date: April 11, 1996 /s/ John M. Palmer
---------------------------------------------
John M. Palmer, Vice President,
Finance and Chief Financial Officer
Date: April 11, 1996 /s/ James L. Anderson
---------------------------------------------
James L. Anderson, Controller
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 7828
<SECURITIES> 2047
<RECEIVABLES> 25742
<ALLOWANCES> 641
<INVENTORY> 14200<F1>
<CURRENT-ASSETS> 51524
<PP&E> 55661
<DEPRECIATION> 34727
<TOTAL-ASSETS> 81731
<CURRENT-LIABILITIES> 21487
<BONDS> 17219
0
0
<COMMON> 40725
<OTHER-SE> 463
<TOTAL-LIABILITY-AND-EQUITY> 81731
<SALES> 107072
<TOTAL-REVENUES> 113950
<CGS> 63015
<TOTAL-COSTS> 69311
<OTHER-EXPENSES> 39629
<LOSS-PROVISION> 123
<INTEREST-EXPENSE> 1218
<INCOME-PRETAX> 3792
<INCOME-TAX> 1650
<INCOME-CONTINUING> 2142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2142
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
<FN>
<F1>Inventory detail at February 29, 1996 was finished goods $8843; work in
process $663; raw materials $4694.
</FN>
</TABLE>
