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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, 1996
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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 X No
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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 August 31, 1996 - 4,851,951
This report, including all exhibits and attachments, contains 13 pages.
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TAB PRODUCTS CO.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets
August 31, 1996 and May 31, 1996 3
Consolidated Condensed Statements of Earnings
Three months ended August 31,
1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
Three months ended August 31,
1996 and 1995 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 9
Signatures 12
2
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TAB PRODUCTS CO.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(000's omitted except share data)
ASSETS August 31, 1996 May 31, 1996
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Current assets:
Cash and cash equivalents $ 8,134 $ 9,331
Short-term investments 3,772 2,322
Accounts receivable, less allowances of
$679 and $620 for doubtful accounts 23,290 23,898
Inventories 11,241 11,313
Prepaid income taxes and other expenses 2,231 1,851
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Total current assets 48,668 48,715
Property, plant and equipment, net of accumulated
depreciation of $32,752 and $33,250 20,471 20,800
Goodwill, net 4,659 4,777
Other assets 4,476 4,835
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$ 78,274 $ 79,127
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,813 $ 3,813
Accounts payable 5,670 5,823
Compensation payable 2,587 3,553
Other accrued liabilities 7,980 8,102
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Total current liabilites 20,050 21,291
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Long-term debt 14,063 14,141
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Deferred taxes and other non-current liabilities 2,234 2,233
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Stockholders' equity:
Preferred stock: $.01 par value, authorized -
500,000 shares, issued - none - -
Common stock: $.01 par value, authorized -
25,000,000 shares, issued - August 1996 and
May 1996 - 7,284,178 shares 73 73
Additional paid-in capital 12,705 12,705
Retained earnings 60,125 59,689
Treasury stock: August 1996 and May 1996 -
2,432,227 shares (31,365) (31,365)
Cumulative translation adjustment 389 360
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Total stockholders' equity 41,927 41,462
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$ 78,274 $ 79,127
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3
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TAB PRODUCTS CO.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
(000's omitted except share data)
Three Months Ended
August 31
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1996 1995
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Revenues $ 35,012 $ 37,414
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Costs and expenses:
Cost of revenues 20,907 22,823
Selling, general and administrative 12,449 13,021
Research and development 173 104
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Total costs and expenses 33,529 35,948
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Operating income 1,483 1,466
Interest, net (281) (418)
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Earnings before income taxes 1,202 1,048
Provision for income taxes 523 455
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Net earnings $ 679 $ 593
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Earnings per common and equivalent shares $ 0.14 $ 0.12
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Average common and equivalent shares outstanding 4,861,596 4,851,951
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TAB PRODUCTS CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's omitted)
Three Months Ended
August 31
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1996 1995
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Operating Activities:
Net earnings $ 679 $ 593
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property, 869 910
plant and equipment
Other 60 26
Changes in operating assets and liabilities:
Accounts receivable 549 26
Inventories 72 (620)
Prepaid income taxes and other expenses (380) 735
Goodwill and other assets 477 7
Accounts payable (153) (320)
Commissions payable (966) (150)
Other accrued liabilities (121) 127
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Net cash provided by operating activities 1,086 1,334
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Investing Activities:
Purchase of property, plant and equipment, net (541) (703)
Purchases of short-term investments (1,929) (482)
Sales of short-term investments 479 8
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Net cash required by investing activities (1,991) (1,177)
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Financing Activities:
Repayment of long-term debt (78) (79)
Dividends paid (243) (243)
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Net cash required by financing activities (321) (322)
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Effect of exchange rate changes on cash 29 44
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Decrease in cash and cash equivalents (1,197) (121)
Cash and cash equivalents at beginning of period 9,331 6,753
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Cash and cash equivalents at end of period $ 8,134 $ 6,632
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5
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TAB PRODUCTS CO.
SUPPLEMENTAL FINANCIAL
DATA-NOTES (UNAUDITED)
1. Inventories consisted of the following (000's omitted):
August 31, 1996 May 31, 1996
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Finished goods $ 7,685 $ 7,421
Work in process 455 516
Raw materials 3,101 3,376
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$ 11,241 $ 11,313
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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 periods ended August 31, 1996 and
1995 were as follows:
Shares Dividend
Record Date Outstanding Per Share
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August 26, 1996 4,851,951 $.05
August 25, 1995 4,851,951 $.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, 1996.
5. During the quarter ended August 31, 1995 the company canceled stock options
to purchase 776,500 shares of the company's common stock at prices ranging from
$6.125 to $13.50 and exchanged them for options to purchase 576,500 shares of
the company's common stock at current market value of $6.00 per share with new
vesting periods.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
At August 31, 1996 the company had cash and short-term investments of $11.9
million, an increase of $.2 million from the $11.7 million at May 31, 1996. The
company's working capital position at August 31, 1996 increased by $1.2 million
to $28.6 million as compared with $27.4 million at May 31, 1996. The current
ratio of 2.4 at August 31, 1996 was up from the 2.3 reported May 31, 1996.
Accounts receivable at August 31, 1996 was $23.3 million as compared to $23.9
million at May 31, 1996. The company has an unsecured revolving line of credit
of $10 million with a bank which expires on October 31, 1998. There were no
borrowings outstanding under the line of credit at August 31, 1996. 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 $.5
million during the three months ended August 31, 1996. Capital expenditures to
support operations for fiscal 1997 are expected to be in the range of $3.0 to
$3.5 million.
At August 31, 1996, the company had $14.1 million of long-term debt outstanding
which bears interest rates ranging from 6.9% to 9.0%.
For the three month period ended August 31, 1996 the company paid cash dividends
of $243,000 equal to the amount paid in the first quarter of fiscal 1996.
RESULTS OF OPERATIONS
REVENUES for the first quarter of fiscal 1997 were $35.0 million, down $2.4
million or 6.4% from revenues of $37.4 million for the first quarter of fiscal
1996. The decrease in revenues is due to lower revenues in several core product
areas, which is primarily the result of a decrease in U.S. government revenues
in the quarter. U.S. government revenues in the first quarter of fiscal 1996
were substantially higher than historical averages, while first quarter fiscal
1997 revenues were more in line with historical levels.
COST OF REVENUES, as a percentage of revenues, was 59.7% for the first quarter
of fiscal 1997, down from the 61.0% reported for the first quarter of fiscal
1996. Cost of revenues, as a percentage of revenues, declined from the first
quarter of fiscal 1996 primarily as a result of continued emphasis on programs
to reduce product costs.
OPERATING EXPENSES, for the quarter ended August 31, 1996 were $12.6 million as
compared to $13.1 million for the quarter ended August 31, 1995. The decrease
in operating expenses is primarily the result of lower commissions expense on
lower revenues compared to the first quarter of fiscal 1996. As a percentage of
revenues, operating expenses were 36.1% for the quarter ended August 31, 1996 as
compared to 35.1% for the quarter ended August 31, 1995.
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INTEREST EXPENSE, net, was $281,000 in the first quarter of fiscal 1997 as
compared to $418,000 in the first quarter of fiscal 1996. The decreases in
interest expense, net for the three months ended August 31, 1996 was primarily
due to a lower level of debt, as a result of debt repayments, and an increase
of cash equivalents and short-term investment balances during the first quarter
of fiscal 1997 as compared to the first quarter of fiscal 1996.
EARNINGS PER SHARE for the three months ended August 31, 1996 were $.14 per
share, an increase of 17% over the $.12 per share earned in the first quarter
of the prior fiscal year.
FACTORS WHICH MAY AFFECT QUARTERLY RESULTS
The company's actual results could differ materially from those anticipated as a
result of risks related to the company's ability to develop and market new
products and services, market acceptance of new products and services,
increasing demands for technological innovation, the costs of components for the
company's products, competition and economic conditions in the company's
markets, product sales mix and risks relating to government contracting.
PART II: OTHER INFORMATION
ITEMS 1 - 5. Not applicable.
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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)
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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)
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)
10.36 Bank of America Business Loan Agreement dated August 26,
1996 (Exhibit 10.36 filed with the 1996 Form 10-K)(2)
10
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10.37 Letter dated August 20, 1996 amending the Prudential Note
Agreement dated March 20, 1992 (Exhibit 10.37 filed with
the 1996 Form 10-K)(2)
(1) Compensatory Plan or Arrangement.
(2) Incorporated by reference from the noted previously filed
document.
(b) None
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.
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(Registrant)
Date: October 15, 1996 /s/ John M. Palmer
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John M. Palmer, Vice President,
Finance and Chief Financial Officer
Date: October 15, 1996 /s/ James L. Anderson
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James L. Anderson, Controller
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-1-1996
<PERIOD-END> AUG-31-1996
<CASH> 8134
<SECURITIES> 3772
<RECEIVABLES> 23969
<ALLOWANCES> 679
<INVENTORY> 11241<F1>
<CURRENT-ASSETS> 48668
<PP&E> 53223
<DEPRECIATION> 32752
<TOTAL-ASSETS> 78274
<CURRENT-LIABILITIES> 20050
<BONDS> 14063
0
0
<COMMON> 41538
<OTHER-SE> 389
<TOTAL-LIABILITY-AND-EQUITY> 78274
<SALES> 32576
<TOTAL-REVENUES> 35012
<CGS> 18795
<TOTAL-COSTS> 20907
<OTHER-EXPENSES> 12622
<LOSS-PROVISION> 53
<INTEREST-EXPENSE> 281
<INCOME-PRETAX> 1202
<INCOME-TAX> 523
<INCOME-CONTINUING> 679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 679
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
<FN>
<F1>Inventory detail at August 31, 1996 was finished goods $7685; work in process
$455; raw materials $3101.
</FN>
</TABLE>
