SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File Number 0-4431
AUTO-GRAPHICS, INC.
(exact name of registrant as specified in its charter)
California 95-2105641
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3201 Temple Avenue, Pomona, California 91768
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (909) 595-7204
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 ( )
Total Shares Outstanding: Common Stock - 1,109,678
AUTO-GRAPHICS, INC.
Form 10-Q
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Statement of Income
For Six Months Ended June 30
1996 1995
Net sales $4,545,446 $4,523,075
Costs and expenses:
Cost of sales 2,721,675 2,873,283
Selling, general & administrative 1,556,520 1,458,984
Interest/other 109,496 81,814
Total costs and expenses 4,387,691 4,414,081
Income from operations 157,755 108,994
Provision for taxes based on income 73,000 50,000
Net income/(loss) $ 84,755 $ 58,994
Net income/(loss) per share $ .08 $ .05
Shares outstanding 1,109,678 1,130,478
See Notes to Unaudited Condensed Financial Statements
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Condensed Statement of Income
For Three Months Ended June 30
1996 1995
Net sales $2,278,345 $2,331,364
Costs and expenses:
Cost of sales 1,420,366 1,480,528
Selling, general & administrative 730,486 754,519
Interest/other 49,532 41,489
Total costs and expenses 2,200,384 2,276,536
Income from operations 77,961 54,828
Provision for taxes based on income 36,000 25,000
Net income $ 41,961 $ 29,828
Net income per share $ .04 $ .03
Shares outstanding 1,109,678 1,130,478
See Notes to Unaudited Condensed Financial Statements
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Balance Sheet
June 30, 1996 and December 31, 1995
ASSETS
CURRENT ASSETS 1996 1995
(Audited)
Cash $ 165,509 $ 106,518
Accounts receivable, less allowance
for doubtful accounts of $38,000
in 1996 and 1995 1,694,158 1,979,245
Unbilled production costs 259,319 232,517
Finished goods 46,508 60,946
Prepaid expenses and other 200,925 168,616
Total current assets 2,366,419 2,547,842
EQUIPMENT & LEASEHOLD IMPROVEMENTS,
at cost 8,573,650 7,986,491
Less accumulated depreciation 4,523,330 4,057,170
Net equipment & leasehold improvements 4,050,320 3,929,321
OTHER ASSETS 373,794 210,543
TOTAL ASSETS $6,790,533 $6,687,706
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 350,000 $ --
Accounts payable 262,137 524,431
Customers' advance payments 135,758 490,167
Accrued expenses 91,407 38,585
Accrued payroll & related liabilities 184,503 187,901
Current portion of long-term debt 655,000 505,000
Total current liabilities 1,678,805 1,746,084
LONG-TERM DEBT 2,050,881 1,905,881
DEFERRED TAXES BASED ON INCOME 593,939 593,939
TOTAL LIABILITIES 4,323,625 4,245,904
STOCKHOLDER'S EQUITY
Common stock, $.10 par value; 4,000,000
shares authorized, 1,109,678 shares
issued and outstanding in 1996, and
1,130,478 in 1995 110,968 113,048
Capital in excess of par value 1,139,311 1,151,092
Retained earnings 1,216,629 1,177,662
Total stockholders' equity 2,466,908 2,441,802
TOTAL LIABILITIES AND STOCKHOLDER EQUITY $6,790,533 $6,687,706
See Notes to Unaudited Condensed Financial Statements
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Statements of
Cash Flows
For the Six Months Ended June 30
1996 1995
Cash flows from operating activities:
Net income $ 84,755 $ 58,994
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 500,780 468,923
Provision for losses on accounts receivable -- --
(Increase) decrease in accounts receivable 285,087 440,751
(Increase) decrease in unbilled production costs (26,802) (136,982)
(Increase) decrease in finished goods inventory 14,438 (28,543)
(Increase) decrease in other current assets (32,309) (36,312)
(Increase) decrease in other assets (197,871) (48,560)
Increase (decrease) in accounts payable (262,294) 8,328
Increase (decrease) in customer advances (354,409) (100,016)
Increase (decrease) in accrued expenses (10,893) (80,955)
Increase (decrease) in accrued payroll
and related liabilities (3,398) 13,861
Increase (decrease) in interest and
income taxes payable 63,716 7,913
Increase (decrease) in deferred taxes -- (8,500)
Net cash provided by operating activities $ 60,800 $ 558,902
Cash flows from investing activities:
Capital expenditures (587,159) (529,824)
Net cash used in investing activities $ (587,159) $ (529,824)
Cash flows from financing activities:
Borrowings under long-term debt 550,000 165,000
Principal payments under debt agreements (255,000) (225,000)
Net borrowings (payments) under
line-of-credit agreement 350,000 305,000
Repurchase of capital stock (59,650) (303,094)
Net cash provided by (used in)
financing activities 585,350 (58,094)
Net increase (decrease) in cash 58,991 (29,016)
Cash at beginning of period 106,518 80,852
Cash at end of period $ 165,509 $ 51,836
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 126,971 $ 106,642
Income taxes 9,285 50,600
See Notes to Unaudited Condensed Financial Statements.
AUTO-GRAPHICS, INC.
Form 10-Q
Notes to Unaudited Condensed Financial Statements
June 30, 1996
NOTE 1. The unaudited condensed financial statements included herein
have been prepared by Registrant and include all normal and recurring
adjustments which are, in the opinion of Management, necessary for a
fair presentation of the financial position at June 30, 1996, the results
of operations and the statement of cash flows for the six months ended
June 30, 1996 and 1995 pursuant to the rules and regulations of the
Securities and Exchange Commission.
The results of operations for the subject periods are not necessarily
indicative of the results for the entire year.
This Quarterly Report on Form 10-Q is qualified in its entirety by the
information included in the Company's Annual Report to the SEC on Form 10-K
for the period ending December 31, 1995 including, without limitation, the
financial statements included therein.
NOTE 2. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 121, Accounting for the
Impairment of Long-Lived Assets, which the Company adopted in 1995. The
Standard requires the Company to review the carrying amount of long-lived
assets, identifiable intangibles, and related goodwill to determine whether
any indicators of impairment are present. At June 30, 1996 the Company's
review of it's long-lived assets showed no indications of loss or impairment
and, therefore, has not had a material effect on the Company's financial
position or results of operations.
NOTE 3. The Company entered into a stock repurchase agreement with a former
employee and officer of the Company, Douglas K. Bisch, whereby the Company
agreed to purchase and retire, over a seven-year period, 156,000 of 171,000
shares of Company stock owned by Mr. Bisch. In January 1996, the Company
purchased and retired the second block of 15,600 shares.
AUTO-GRAPHICS, INC.
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
December 31, 1995 to June 30, 1996
Liquidity and capital resources. Working capital decreased $114,000 due to
an increase in current portion of long-term debt as a result of the recent
increase of Company's capital line of credit note. Long-term debt increased
by $145,000 as a result of borrowings on the Company's capital line of credit.
Capital expenditures were $587,000. The average collection period for
accounts receivable improved from 70 days at December 31, 1995 to 67 days as
of June 30, 1996.
The Company has a revolving credit agreement with a bank under which borrowings
are secured by accounts receivable, whereby the Company may borrow against its
eligible accounts receivable up to a maximum of $1,000,000 ($650,000 available
at June 30, 1996) with interest at 0.5% above the bank's prime rate.
Management believes that the current line of credit, which is renewed annually
in May, will again be renewed in 1997, and is sufficient to handle cyclical
working capital needs. There are no compensating balance requirements,
commitment fees or note guarantors. This agreement contains the same loan
covenants as the capital line of credit note payable.
The Company also has a line of credit agreement with the bank, which was
recently increased from $2,250,000, to provide for maximum borrowings of
$3,000,000 ($404,000 available at June 30, 1996), with interest at 0.75%
above the bank's prime rate, for the purchase of equipment and financing of
up to $1,000,000 in internal software development costs. The capital line of
credit is renewed annually in May and management believes that the current
line of credit will be renewed in 1997. Management does not currently believe
that increased credit will be required to finance capital improvements in 1996.
Among other requirements, the capital line of credit note payable requires the
Company to maintain minimum ratios of current assets to current liabilities,
debt to equity and cash flow to debt service, minimum working capital and
equity amounts, limits capital expenditures and capital lease obligations and
prohibits the payment of cash dividends. There are no commitment fees,
compensatory balance requirements or note guarantors.
The Company has a note payable due to a stockholder (per a stock repurchase
agreement) with an outstanding balance at June 30, 1996 of $110,000. The note
is payable in annual installments of $55,000 (to be paid June 1997 and 1998)
plus interest at 5.5% per annum.
RESULTS OF OPERATIONS
First Six Months 1996 as Compared to First Six Months 1995
Net sales increased $22,000 to $4,545,000.
Cost of sales decreased $152,000 or 5%. Significant factors in cost of sales
include changes in operating costs generally attributable to variable costs
fluctuating with product mix.
Selling, general and administrative expenses increased $97,500 or 7% as a
result of the company's focus on sales and marketing. The primary increases
are in additional sales and marketing staff, new product promotion and a
reorganization of the sales and marketing departments. As a percentage of
sales, these expenses increased from 32% to 34%.
Interest expense/other increased $27,700 primarily as a result of higher
interest rates on higher average borrowings in 1996.
Income from operations increased $49,000 or 45% to $158,000 in 1996.
Net income increased $26,000 to $85,000 net profit in 1996, up 44% from a
$59,000 net profit in 1995.
Net income per share improved from $0.05 per share in 1995 to $0.08 per share
in 1996, an increase of 60%.
Second Quarter 1996 as Compared to Second Quarter 1995
Net sales decreased $53,000 or 2% to $2,278,000.
Cost of sales decreased $60,000 or 4%. Significant factors in cost of sales
include changes in operating costs generally attributable to variable costs
fluctuating with product mix.
Selling, general and administrative expenses decreased $24,000 or 3%. These
expenses remained at 32% of sales in 1996 and 1995.
Interest expense/other increased $8,000 as a result of higher interest rates
on higher average borrowings in 1996.
Income from operations increased 42% or $23,000 to $78,000 in 1996.
Net income increased $12,000 to $42,000 in 1996, up 40% from $30,000 in 1995.
AUTO-GRAPHICS, INC.
Form 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits: None
b. The Company filed Form 8-K on April 29, 1996 covering exhibits to
the Form 10-K report for the year ended December 31, 1995. These
exhibits were separated from the 10-K prior to the filing thereof and
were subsequently refiled during the period covered by this report.
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.
AUTO-GRAPHICS, INC.
Date 8/14/96 ss/ Robert S. Cope
Robert S. Cope, President
and Treasurer
Date 8/14/96 ss/ Daniel E. Luebben
Daniel E. Luebben, Chief Financial Officer
and Secretary