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
March 31, 1997 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 91768-3200
(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: 1,093,678
AUTO-GRAPHICS, INC.
Form 10-Q
March 31, 1997
TABLE OF CONTENTS
Unaudited Condensed Statements of
Income............................................1
Unaudited Balance Sheets............................2
Unaudited Statements of Cash Flows..............3 & 4
Notes to the Unaudited Condensed
Financial Statements..............................5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................6
Part II - Other Information.........................8
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AUTO-GRAPHICS, INC.
Form 10-Q
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Statements of Income
For the Three Months Ended March 31
1997 1996
Net sales $ 1,794,368 $ 2,267,101
Costs and expenses:
Cost of sales 970,764 1,301,309
Selling, general & administrative 678,563 826,034
Interest/Other 56,189 59,964
Total costs and expenses 1,705,516 2,187,307
Income from operations 88,852 79,794
Provision for taxes based on income 39,000 37,000
Net income $ 49,852 $ 42,794
Net income per share $ .05 $ .04
Shares outstanding 1,093,678 1,110,178
See Notes to Unaudited Condensed Financial Statements
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AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Balance Sheets
March 31, 1997 and December 31, 1996
ASSETS 1997 1996
Current assets:
Cash $ 140,786 $ 364,094
Accounts receivable, less allowance
for doubtful accounts ($38,000 in
1996 and 1995) 1,406,580 1,882,305
Unbilled production costs 292,073 94,143
Finished goods inventory 50,398 28,939
Other current assets 218,881 188,440
Total current assets 2,108,718 2,557,921
Equipment and leasehold improvements,
at cost 9,784,816 9,589,699
Less accumulated depreciation 5,363,733 5,164,177
Net equipment and leasehold
improvements 4,421,083 4,425,522
Other assets 195,944 148,507
TOTAL ASSETS $ 6,725,745 $ 7,131,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 144,015 $ 330,056
Deferred income 364,061 444,388
Accrued payroll and related
liabilities 228,170 191,290
Other accrued liabilities 100,469 127,037
Current portion of long-term debt 655,000 655,000
Total current liabilities 1,491,715 1,747,771
Long-term debt, less current portion 1,950,881 2,100,881
Deferred taxes based on income 664,939 664,939
Total liabilities 4,107,535 4,513,591
Stockholders' equity:
Common stock, $.10 par value,
4,000,000 shares authorized,
1,093,678 shares issued and
outstanding in 1997, and
1,109,278 shares issued and
outstanding in 1996 109,368 110,928
Capital in excess of par value 1,135,999 1,138,651
Retained earnings 1,372,843 1,368,780
Total stockholders' equity 2,618,210 2,618,359
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 6,725,745 $ 7,131,950
See Notes to Unaudited Condensed Financial Statements
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AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Statements of
Cash Flows
For the Three Months Ended March 31
Increase (Decrease) in Cash
1997 1996
Cash flows from operating activities:
Net income $ 49,852 $ 42,794
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 199,556 268,740
Deferred taxes -- --
Changes in operating assets
and liabilities:
Accounts receivable 475,725 194,558
Unbilled production costs (197,930) (180,341)
Finished goods inventory (21,459) 12,189
Other current assets (30,441) (41,113)
Other assets (47,437) --
Accounts payable (186,041) (103,698)
Deferred income (80,327) (204,960)
Accrued payroll and
related liabilities 36,880 82,493
Other accrued liabilities (2,269) (7,673)
Interest and income taxes
payable (24,300) 27,716
Net cash provided by
operating activities 171,809 90,705
Cash flows from investing activities:
Capital expenditures (195,117) (316,649)
Cash flows from financing activities:
Borrowings under long-term debt -- 350,000
Principal payments under debt
agreements (150,000) (112,500)
Repurchase of capital stock (50,000) (58,900)
Net cash provided by (used in)
financing activities (200,000) 178,600
Net increase in cash (223,308) (47,344)
Cash at beginning of year 364,094 106,518
Cash at end of year $ 140,786 $ 59,174
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 65,238 $ 68,789
Income taxes 63,000 37,000
See Notes to Unaudited Condensed Financial Statements.
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AUTO-GRAPHICS, INC.
Form 10-Q
Notes to
Unaudited Condensed Financial Statements
March 31, 1997
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 March 31, 1997, the results of operations and the
statement of cash flows for the three months ended March 31, 1997 and 1996
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, 1996 including, without limitation, the
financial statements included therein.
NOTE 2. 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 1997, the Company
purchased and retired the third block of 15,600 shares.
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AUTO-GRAPHICS, INC.
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
December 31, 1996 to March 31, 1997
Liquidity and capital resources.
Working capital decreased $193,000. Long-term debt was reduced by $150,000.
Actual capital expenditures were $195,000. The average collection period for
accounts receivable increased from 67 days at December 31, 1996 to 71 days at
March 31, 1997.
The Company has a revolving credit facility 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 ($1,000,000 available at
March 31, 1997) 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.
The Company also has a capital line of credit facility providing for maximum
borrowings of $3,000,000 ($504,000 available at March 31, 1997), with interest
at 0.75% above the bank's prime rate, for the purchase of equipment and
financing of 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. Among other requirements, the capital line of
credit note payable requires the Company to maintain minimum financial
covenant ratios, and prohibits the payment of cash dividends. There are no
commitment fees, compensatory balance requirements or note guarantors.
In June 1995, the Company entered into a stock repurchase agreement with a
former director of the Company, whereby the Company agreed to purchase and
retire, in 1995, 115,000 of 141,000 shares of Company stock owned by the
stockholder. The total transaction cost of $230,000 will be paid in four
annual installments beginning in 1995 plus interest of 5.5% per annum
($65,000 paid in June 1995, $55,000 paid in June 1996 and $55,000 to be paid
in June 1997 and 1998).
The Company's capital resources may be used to support working capital
requirements, capital investment and possible acquisitions of businesses,
products or technologies complementary to the Company's current business.
The Company believes that current cash reserves and cash flow from operations
are sufficient to fund its operations in 1997. However, during this period
or thereafter, the Company may require additional financing. There can be no
assurance that such additional financing will be available on terms favorable
to the Company, or at all.
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RESULTS OF OPERATIONS
First Quarter 1997 as Compared to First Quarter 1996
Net sales decreased $473,000 or 21% to $1,794,000. Sales in first quarter
1996, of $2,267,000, were higher as they included initial service and
equipment sales for new customers of the Company's Impact/ONLINE(tm) product,
while 1997 reflects the on-going sales of services.
Cost of sales decreased $330,000 or 25%. Gross margins continue to improve
from 43% in 1996 to 46% in 1997 due to changes in operating costs generally
attributable to variable costs fluctuating with product mix and sales volume.
Selling, general and administrative expenses decreased $147,000 or 18%. As a
percentage of sales, these expenses increased from 36% to 39%.
Interest expense/other was $56,000 in 1997, down 6% from $60,000 in 1996
primarily due to lower interest as a result of lower average borrowings.
Net Income improved 16% to $49,900, up from $42,800 in 1996.
Net Income per share increased 25% to $0.05 in 1997 from $0.04 in 1996.
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AUTO-GRAPHICS, INC.
Form 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Gannam/Kubat Publishing, Inc. (which is the other 50% stockholder in the
Company's Datacat, Inc. subsidiary) and such shareholder's wholly owned
affiliate Diversified Printing and Publishing, Inc. (which has rendered
printing services to Datacat payment of which has been deferred) filed a
complaint against the Company and its President in a legal action previously
initiated by Diversified against Datacat seeking to collect payments for
printing services which it had previously agreed to defer in the approximate
amount of $350,000. The suit against the Company alleges that payments by
Datacat against a commitment to the Company for pre-1994 database creation
and maintenance services in the approximate amount of $575,000 were
unauthorized or excessive; and that, absent such prior obligation and
payments in respect thereof, Datacat would not have had to defer payment to
Diversified. The Company also agreed to defer collection for certain
services rendered to Datacat equal to or exceeding the amount claimed by
Diversified. The Company anticipates the resolution of such matter in favor
of Datacat, and thus the Company; and, in any event, the Company does not
expect the outcome of such dispute will have a materially adverse effect
on the Company's financial position or results of operations. The pleadings
in the above referenced legal action were filed as an exhibit with the
Company's Annual Report to the US Securities and Exchange Commission on
Form 10-K as of December 31, 1996.
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
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AUTO-GRAPHICS, INC.
Form 10-Q
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: None
(b) The Company has not filed any reports on Form 8-K 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 5/14/97 ss/ Robert S. Cope
Robert S. Cope, President
and Treasurer
Date 5/14/97 ss/ Daniel E. Luebben
Daniel E. Luebben, Vice-President,
Chief Financial Officer and Secretary