FORM 10-Q/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 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
---------------------- ----------------------
Commission file number 0-10605
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ODETICS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-2588496
- ----------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1515 SOUTH MANCHESTER AVE., ANAHEIM, CA 92802
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 774-5000
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(Registrant's telephone number, including area code)
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(Former name, former addressed 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
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF FEBRUARY 10, 1996
CLASS A COMMON STOCK - 5,240,791 SHARES.
CLASS B COMMON STOCK - 1,135,531 SHARES.
1
INDEX
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PART I FINANCIAL INFORMATION Page
- ----------------------------- ----
ITEM 1. CONSOLIDATED STATEMENTS OF INCOME FOR 3
THE THREE MONTH AND NINE MONTHS ENDED
DECEMBER 31, 1995 AND 1996 (UNAUDITED)
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1996 4
AND DECEMBER 31, 1996 (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR 6
THE NINE MONTHS ENDED DECEMBER 31, 1995 AND
1996 (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Part II OTHER INFORMATION
- -------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
PART 1 FINANCIAL INFORMATION
ODETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1995 1996 1995 1996
------- ------- ------- -------
Net sales and contract revenues:
Net sales $24,356 $34,290 $65,204 $ 93,413
Contract revenues 3,038 2,018 8,112 7,291
------- ------- ------- --------
27,394 36,308 73,316 100,704
Costs and expenses:
Cost of sales 16,684 21,699 43,319 60,104
Cost of contract revenues 1,364 1,166 4,232 3,843
Selling, general and administrative expenses 6,073 7,585 16,841 21,220
Research and development expenses 1,573 4,073 4,957 9,380
Interest expense 552 516 1,835 1,453
------- ------- ------- --------
26,246 35,039 71,184 96,000
------- ------- ------- --------
Income before income taxes 1,148 1,269 2,132 4,704
Income taxes 423 495 797 1,835
------- ------- ------- --------
Net Income $ 725 $ 774 $ 1,335 $ 2,869
======= ======= ======= ========
Weighted average number of shares outstanding 6,309 6,702 6,099 6,576
======= ======= ======= ========
Net income per share of common stock $ 0.11 $ 0.12 $ 0.22 $ 0.44
======= ======= ======= ========
See notes to consolidated financial statements.
-3-
ODETICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DEC. 31,
1996 1996
(UNAUDITED)
--------- -----------
ASSETS
Current Assets
Cash $ 1,142 $ 461
Trade accounts receivable, net 24,772 27,214
Costs and estimated earnings in excess
of billings on uncompleted contracts 3,428 2,538
Inventories:
Finished goods 3,717 2,693
Work in process 2,927 2,633
Materials and supplies 16,076 16,511
--------- -----------
Total inventories 22,720 21,837
Prepaid expenses 1,122 1,550
Deferred income taxes 2,516 2,516
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Total Current Assets 55,700 56,116
Property, plant and equipment
Land 2,090 2,090
Buildings and improvements 17,553 17,786
Equipment, furniture and fixtures 24,914 27,134
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44,557 47,010
Less accumulated depreciation (22,950) (24,821)
--------- -----------
Net property, plant and equipment 21,607 22,189
Other Assets 1,504 2,494
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Total Assets $ 78,811 $ 80,799
========= ===========
See notes to consolidated financial statements.
-4-
ODETICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DEC. 31,
1996 1996
(UNAUDITED)
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 11,519 $ 9,851
Accrued expenses 2,441 5,217
Accrued incentive programs 1,229 1,044
Accrued vacation 1,504 1,643
Income taxes payable 1,412 1,604
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,414 3,511
Current portion of long-term debt 1,791 1,927
--------- ----------
Total current liabilities 25,310 24,797
Long-term debt - Less current portion 22,019 19,528
Deferred income taxes 497 503
Stockholders' equity
Preferred stock, authorized 2,000,000 shares;
none issued -- --
Common stock, authorized 10,000,000
shares of class A and 2,600,000 shares
of class B; 5,211,319 shares of
class A and 1,135,531 shares of
class B issued and outstanding at
December 31, 1996 - $.10 par value 610 635
Paid-in capital 21,905 23,892
Foreign currency translation (10) 95
Retained earnings 8,480 11,349
--------- ----------
Total stockholders' equity 30,985 35,971
--------- ----------
Total liabilities and stockholders' equity $ 78,811 $ 80,799
========= ==========
See notes to consolidated financial statements.
-5-
ODETICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
NINE MONTHS ENDED
DECEMBER 31,
------------------------
1995 1996
--------- --------
OPERATING ACTIVITIES
Net income $ 1,335 $ 2,869
Adjustments to reconcile net income to net cash
provided by (used) in operating activities:
Depreciation and amortization 2,026 2,790
Provision for inventory reserves 946 450
Provision for losses on accounts receivable 99 196
Provision (Benefit) for deferred income taxes 795 198
Net proceeds from settlement of litigation 0 5,860
Gain on sale of assets (30) (186)
Foreign currency translation gain (loss) (21) 105
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (2,933) (4,358)
(Increase) Decrease in costs and estimated
earnings in excess of billings on
uncompleted contracts (1,169) 890
(Increase) Decrease in inventories and prepaid
expenses 1,718 (1,633)
(Increase) in other assets (719) (1,358)
Increase (Decrease) in accounts payable and
accrued expenses 1,100 (1,525)
Increase (Decrease) in billings in excess of
costs and estimated earnings on uncompleted
contracts 1,267 (1,903)
--------- --------
Net cash provided by (used) in operating activities 4,414 2,395
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (2,258) (2,739)
Proceeds from sale of equipment 47 7
--------- --------
Net cash used in investing activities (2,211) (2,732)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and
long-term borrowings 27,360 41,940
Principal payments on line of credit, long-term
debt and capital lease obligations (28,728) (44,296)
Proceeds from sale of common stock 370 2,012
--------- --------
Net cash used in financing activities (998) (344)
--------- --------
Increase (Decrease) in cash 1,205 (681)
Cash at beginning of year 378 1,142
--------- --------
Cash at December 31 $ 1,583 $ 461
========= ========
See notes to consolidated financial statements.
-6-
ODETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - In the opinion of management, the accompanying unaudited consolidated
- ------ financial statements contain all adjustments, consisting of normal
recurring accruals necessary to present fairly the Company's
consolidated financial position as of December 31, 1996 and the
consolidated results of operations for the three-month and nine-month
periods ended December 31, 1995 and 1996 and its cash flows for the
nine-month periods ended December 31, 1995 and 1996. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results of
operations for the nine-month period ended December 31, 1996 are not
necessarily indicative of those to be expected for the entire year.
Note 2 - Income tax expense for the three-month and nine-month periods ended
- ------ December 31, 1995 and 1996 have been provided at the estimated
annualized effective tax rates based on the estimated income tax
liability or asset and change in deferred taxes for their respective
fiscal years. Deferred taxes result primarily from temporary
differences in the reporting of income for financial statement and
income tax purposes. These differences relate principally to the use
of accelerated cost recovery depreciation methods for tax purposes,
capitalization of interest and taxes for tax purposes, capitalization
of computer software costs for financial statement purposes, deferred
compensation, other payroll accruals, and reserves for inventory and
accounts receivable for financial statement purposes and general
business tax credit and alternative minimum tax credit carryforwards
for tax purposes.
Note 3 - Long-term Debt
- ------
(in thousands)
March 31, December 31,
1996 1996
--------- ------------
Line of credit $10,700 $ 9,400
Mortgage note 11,040 10,399
Contracts payable 2,070 1,656
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23,810 21,455
Less current portion 1,791 1,927
--------- ------------
$22,019 $19,528
========= ============
Note 4 - In November 1994 and February 1995, the Company and E-Systems, Inc.
- ------ (E-Systems), respectively filed legal actions related to E-Systems'
cancellation of purchase orders for ATL Products' DataLibrary and
DataTower products. In May 1996, the parties entered into a settlement
agreement under which, among other things, E-Systems agreed to pay the
Company $6,160,000, and all claims asserted by the parties were
released and the litigation dismissed. In addition, the parties agreed
to an equitable disposition of disputed inventory and entered into a
five year service agreement for Odetics to service units that had been
sold to E-Systems at agreed upon prices. The Company has not to
recorded any material gain or loss based on the terms of the settlement
agreement.
7
Note 5 - In December, 1996, ATL Products, Inc., ("ALT") a wholly owned
subsidiary of Odetics, filed a registration statement with the Securities
and Exchange Commission covering an initial public offering of 1,650,000 shares
of its common stock. Following the completion of the offering, Odetics will own
8,005,000 shares, or 82.9% of the common stock of ATL. Subject to certain
conditions, including the receipt of a favorable ruling from the Internal
Revenue Service, Odetics intends to distribute all of its shares of ATL to
Odetics stockholders in a tax-free spin-off prior to December 31, 1997. The
Registration Statement relating to these securities has been filed with the
Securities Exchange Commission but has not yet become effective.
8
ODETICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales and contract revenues consist of sales of products and services
to commercial customers ("Net Sales") and revenues derived from contracts
with the agencies of the United States Government or its prime contractor
and long-term contracts with foreign entities related to space recorders
for geographical information systems ("contract revenues"). Net sales and
contract revenues for Odetics, Inc. (the "Company") in the quarter ended
December 31, 1996 increased approximately $8,914,000 or 32.5% compared to
the third quarter of the prior fiscal year. The increase reflects a
$9,934,000, or 40.8% increase in net sales which was offset partially by a
$1,020,000, or 33.6% decrease in contract revenues. Net sales and contract
revenues for the nine-months ended December 31, 1996 increased
approximately $27,388,000, or 37.4%, compared to the same period in the
prior fiscal year. For the nine-months ended December 31, 1996, net sales
increased 43.3%, and contract revenues decreased 10.1%.
The growth in net sales for the third quarter and nine-month period was
primarily due to an increase in sales in the Company's wholly owned
subsidiary, ATL Products, Inc. ("ATL"). ATL's sales growth resulted from
increased unit sales of DLT-based tape library products. The Company's
Communication Division experienced growth in sales in its telecommunication
products from increased unit sales of its synchronization products for
cellular telephone systems and sales of its LIMO family of products for
telecommunication interfacess. The Company's Gyyr Division experienced 15%
and 6% growths in revenues respectively for the third quarter and nine-
month period while the Company's Broadcast Division decreased 3%, and 12%
in revenues respectively compared to the third quarter and nine-months
ended December 31, 1995.
Cost of sales and contract revenues as a percentage of net sales and
contract revenues ("the cost of sales percentage") decreased to 63.0% in
the third quarter ended December 31, 1996 from 65.9% during the same period
in the prior fiscal year. The cost of sales percentage for the nine-months
ended December 31, 1996 decreased to 63.5% from 64.9% for the same period
in the prior fiscal year. The decrease in the cost of sales percentage
principally reflects improved absorption of fixed manufacturing overhead
costs on higher sales volume at ATL.
Selling, general, and administrative expenses ("S,G,&A") increased
$1,512,000 in the third quarter ended December 31, 1996 compared to the
third quarter of the prior year and increased $4,379,000 in the nine-months
ended December 31, 1996, compared to the prior fiscal year. The increase
principally reflects increased expenses for advertising, sales commissions,
and labor costs and related benefits attendant to the Company's expanded
commercial sales and marketing activities. As a percentage of net sales,
SG&A have decreased in all interim periods presented because of increased
sales volume.
Research and development (R&D) expenses increased approximately $2,500,000
to 11.2% of net sales and contract revenues for the third quarter ended
December 31, 1996 compared to 5.7% for the third quarter of fiscal year
1996. R&D expenses for the nine months ended December, 1996 increased
approximately $4,423,000 to 9.3% of net sales and contract revenues
compared to 6.8% for the comparable period in the prior fiscal year. The
increased R&D expenses primarily reflect
9
material, consulting, and to a lesser extent, labor and related benefits
accompanying the development of new tape library products in the Company's
ATL Products subsidiary.
Interest expense declined approximately $36,000 and $382,000 for the third
quarter and nine-month periods of fiscal 1997, respectively, compared to
the same periods for the prior fiscal year. These decreases were primarily
due to overall lower average borrowings.
The effective income tax rate was 39% for the nine-month period of fiscal
1997 compared to a 37% tax rate for the same period of the prior year. The
increase in the effective tax rate projected for fiscal 1997 is due to a
reduction in the effect of general business tax credits on total income tax
expense.
In December 1996, the Company's wholly owned subsidiary, ATL Products, Inc.
filed a registration statement with the Securities and Exchange
Commission. The "Selected Consolidated Financial Data" and "Quarterly Data"
as reported in "Management Discussion and Analysis of Financial Condition
and Results of Operations" contained in the registration statement reported
the following information regarding net sales and income (loss) before
income taxes for ATL Products Inc., for the Quarter and Nine Month periods
ended December 31, 1995 and 1996, respectively:
Q395 Q396 YTD95 YTD96
Total Net Sales $ 8,558 $15,412 $17,571 $45,452
Income (loss) before
Income taxes $ (190) $ 839 $(2,347) $ 4,687
Odetics net sales and contract revenues, net of the results reported for
ATL Products, Inc., increased $2.0 million, or 10.9% in the third quarter
ended December 31, 1996 compared to the third quarter ended December 31,
1995. For the nine months ended December 31, 1996, net sales and contract
revenues increased $3.0 million, or 5.5% compared to the comparable nine
month period of the previous year. Odetics experienced increased sales for
both the quarter and nine month periods in its Gyyr and Telecommunications
Products Divisions, which was partially offset by a decline in sales of its
Broadcast Division.
Odetics gross profits on sales, net of the results reported for ATL
Products, Inc., improved in the third quarter ended December 31, 1996
compared to the previous year's third quarter with improvements in pricing
and product mix in its Broadcast and Telecommunications Products Divisions.
For the nine month period ended December 31, 1996, gross profits in both
absolute dollars and as a percent of net sales and contract revenues
declined compared to the previous year's nine month period because of
certain large international sales to a single customer in the Odetics
Broadcast Division.
Odetics income before income taxes, net of the results reported of ATL
Products Inc., decreased $908,000, or 67.9% in the third quarter ended
December 31, 1996 compared to the third quarter ended December 31, 1995.
For the nine months ended December 31, 1996, income before income taxes
decreased $4.3 million, or 95.4% compared to the nine months ended December
31, 1995. The decrease in income before income taxes for Odetics, in the
three and nine month periods ended December 31, 1996 principally reflects
the effect of increased spending for Research and Development and increased
Sales and Marketing expenses in its Gyyr and Telecommunications Products
Divisions.
10
Liquidity and Sources of Capital
The Company reported net income of $2,869,000 during the nine-months ended
December 31, 1996 and cash flow from operating activities of $2,395,000.
Cash flow from operating activities included the receipt of net proceeds
from the settlement of the litigation with E-Systems (see Note 4 of Notes
to Consolidated Financial Statements), which was offset by an increases in
accounts receivable and inventories aggregating $5,991,000 to support
increased commercial product sales. The Company has a $17,000,000 bank
line of credit providing for borrowings generally at or below the bank's
prime rate. Borrowing's are available for general working capital
purposes, and at December 31, 1996, $7,600,000 was available for borrowing
under the line. The Company anticipates that net cash flow from operating
activities in conjunction with its bank credit arrangements will be
sufficient to execute its operating plans and meet its obligations on a
timely basis. The Company does not have any material commitments for
capital expenditures as of December 31, 1996.
11
ODETICS, INC.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed
for the three-month period ended
December 31, 1996.
12
ODETICS, INC.
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.
ODETICS, INC.
(Registrant)
By /s/ GREGORY A. MINER
-------------------------------------------------
Gregory A. Miner
Vice President, Chief Financial Officer
By /s/ GARY SMITH
-------------------------------------------------
Gary Smith
Vice President, Controller
(Principal Accounting Officer)
Date February 24, 1996
--------------------
13
5
1,000
9-MOS
MAR-31-1997
OCT-01-1996
DEC-31-1996
461
0
27,214
0
21,837
56,116
47,010
(24,821)
80,799
24,797
0
0
0
635
35,336
80,799
100,704
100,704
63,947
63,947
30,600
0
1,453
4,704
1,835
1,835
0
0
0
2,869
.44
.44
