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, 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
(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
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Statement of Income
For Six Months Ended June 30
1997 1996
Net sales $3,876,328 $4,545,446
Costs and expenses:
Cost of sales 2,201,367 2,721,675
Selling, general & administrative 1,380,007 1,556,520
Interest/other 106,280 109,496
Total costs and expenses 3,687,654 4,387,691
Income from operations 188,674 157,755
Provision for taxes based on income 85,000 73,000
Net income/(loss) $ 103,674 $ 84,755
Net income/(loss) per share $ .09 $ .08
Shares outstanding 1,093,678 1,109,678
See Notes to Unaudited Condensed Financial Statements
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Condensed Statement of Income
For Three Months Ended June 30
1997 1996
Net sales $2,081,960 $2,278,345
Costs and expenses:
Cost of sales 1,230,603 1,420,366
Selling, general & administrative 701,444 730,486
Interest/other 50,091 49,532
Total costs and expenses 1,982,138 2,200,384
Income from operations 99,822 77,961
Provision for taxes based on income 46,000 36,000
Net income $ 53,822 $ 41,961
Net income per share $ .05 $ .04
Shares outstanding 1,093,678 1,109,678
See Notes to Unaudited Condensed Financial Statements
AUTO-GRAPHICS, INC.
Form 10-Q
Unaudited Balance Sheets
June 30, 1997 and December 31, 1996
ASSETS 1997 1996
Current assets: (Audited)
Cash $ 60,649 $ 364,094
Accounts receivable, less allowance
for doubtful accounts ($38,000 in
1997 and 1996) 1,441,648 1,882,305
Unbilled production costs 310,220 94,143
Finished goods inventory 18,890 28,939
Other current assets 279,157 188,440
Total current assets 2,110,564 2,557,921
Equipment and leasehold improvements,
at cost 10,030,910 9,589,699
Less accumulated depreciation 5,570,459 5,164,177
Net equipment and leasehold
improvements 4,460,451 4,425,522
Other assets 195,944 148,507
Total Assets $ 6,766,959 $ 7,131,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes Payable $ 225,000 $ --
Accounts payable 199,045 330,056
Deferred income 270,169 444,388
Accrued payroll and related
liabilities 178,901 191,290
Other accrued liabilities 105,992 127,037
Current portion of long-term debt 655,000 655,000
Total current liabilities 1,634,107 1,747,771
Long-term debt, less current portion 1,795,881 2,100,881
Deferred taxes based on income 664,939 664,939
Total liabilities 4,094,927 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 1,426,665 1,368,780
Total stockholders' equity 2,672,032 2,618,359
Total Equity and Liabilities $ 6,766,959 $ 7,131,950
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
Increase (Decrease) in Cash
1997 1996
Cash flows from operating activities:
Net income $ 103,674 $ 84,755
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 406,282 500,780
Deferred taxes -- --
Changes in operating assets
and liabilities:
Accounts receivable 440,657 285,087
Unbilled production costs (216,077) (26,802)
Finished goods inventory 10,049 14,438
Other current assets (90,717) (32,309)
Other assets (47,437) (197,871)
Accounts payable (131,011) (262,294)
Deferred income (174,219) (354,409)
Accrued payroll and
related liabilities (12,389) (3,398)
Other accrued liabilities 3,054 (10,893)
Interest and income taxes
payable (24,100) 63,716
Net cash provided by
operating activities 267,766 60,800
Cash flows from investing activities:
Capital expenditures (441,211) (587,159)
Cash flows from financing activities:
Borrowings under long-term debt -- 550,000
Principal payments under debt
agreements (305,000) (255,000)
Net borrowings (payments)under
line-of-credit agreement 225,000 350,000
Repurchase of capital stock (50,000) (59,650)
Net cash provided by (used in)
financing activities (130,000) 585,350
Net increase in cash (303,445) 58,991
Cash at beginning of year 364,094 106,518
Cash at end of year $ 60,649 $ 165,509
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 123,394 $ 126,971
Income taxes 109,100 9,285
See Notes to Unaudited Condensed Financial Statements.
AUTO-GRAPHICS, INC.
Form 10-Q
Notes to
Unaudited Condensed Financial Statements
June 30, 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 June 30, 1997, the
results of operations and the statement of cash flows for the three
months ended June 30, 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.
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 June 30, 1997
Liquidity and capital resources. Working capital decreased $333,700
due to a decrease in the Company's accounts receivable. Long-term debt was
reduced by $305,000. Actual capital expenditures were $441,000. The average
collection period for accounts receivable improved from 67 days at December
31, 1996 to 62 days at June 30, 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 $1,250,000 ($1,025,000
available at June 30, 1997) with interest equal to the bank's prime rate.
Management believes that the current line of credit, which is renewed annually
in June, will again be renewed in 1998, 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 ($604,000 available at June 30, 1997), with
interest equal to 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 June and management believes that the current line of
credit will be renewed in 1998. 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 1997, and $55,000 to be paid
in June 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.
RESULTS OF OPERATIONS
First Six Months 1997 as Compared to First Six Months 1996
Net sales decreased $669,000 or 15% to $3,876,000. Timing differences in the
delivery of CD-ROM catalogs, combined with a 51% decrease in equipment
sales, were the primary reasons behind the reduction in revenues for the
first six months of 1997.
Cost of sales decreased $520,000 or 19%. 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 $176,500 or 11%.
As a percentage of sales, these expenses increased from 34% in 1996
to 36% in 1997.
Interest expense/other decreased $3,200 or 3%.
Income from operations increased $31,000 or 20% to $189,000 in 1997.
Net income increased $19,000 to $104,000 net profit in 1997, up 23% from
an $85,000 net profit in 1996.
Net income per share improved from $0.08 per share in 1996 to $0.09 per
share in 1997, an increase of 13%.
Second Quarter 1997 as Compared to Second Quarter 1996
Net sales decreased $196,000 or 9% to $2,082,000.
Cost of sales decreased $190,000 or 13%. 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 $29,000 or 4%. As
a percent of sales these expenses increased 2% from 32% in 1996
to 34% in 1997.
Interest expense/other was $50,000 in 1997, unchanged from 1996.
Income from operations increased 28% or $22,000 to $100,000 in 1997.
Net income increased $12,000 to $54,000 in 1997, up 29% from $42,000 in
1996.
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. The Company filed Form 8-K on April 29, 1997 covering exhibits
to the Form 10-K report for the year ended December 31, 1996.
These exhibits were separated from the 10-K prior to the filing
thereof and were subsequently refiled during the period covered
by this report.
b. The Company filed Form 8-K on July 15, 1997 covering the
Company's acquisition of the assets of the Library Information
Systems division of ISM Information Systems Management Manitoba
Corporation, a subsidiary of IBM Canada, Ltd. as of July 1,
1997.
c. Exhibits: A copy of the Asset Purchase Agreement between A-G
Canada, Ltd., a wholly owned subsidiary of Auto-Graphics, Inc.
and ISM Information Systems Management Manitoba Corporation, a
subsidiary of IBM Canada, Ltd. dated June 30, 1997.
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 8/14/97 ss/ Robert S. Cope
Robert S. Cope, President
and Treasurer
Date 8/14/97 ss/ Daniel E. Luebben
Daniel E. Luebben, Chief Financial Officer
and Secretary