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 No. 1-7939
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VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK STATE 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
89 Arkay Drive, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 952-2288
(Former name, address, and 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
At June 30, 1997, the registrant had outstanding 2,802,728 shares of Common
Stock, $.01 par value.
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
6/30/97 6/30/96
Net sales........................... $13,725,759 $10,901,705
Costs and expenses:
Cost of goods sold................ 9,815,328 8,166,548
Selling, general & admin.
expenses........................ 3,048,456 2,474,716
Interest expense.................. 309,274 209,270
Unrealized foreign
exchange gain................... (6,273) (14,365)
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Total costs and expenses....... 13,166,785 10,836,169
Income before income taxes.......... 558,974 65,536
Provision for
income taxes.................... 16,000 25,000
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Net income.......................... $ 542,974 $ 40,536
=========== ===========
Net income per share $ .18 $ .01
=== ===
Weighted average number of shares
used in computing net income
per share 3,049,335 2,857,545
See Notes to (Condensed) Consolidated Financial Statements.
2
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
6/30/97 6/30/96
Net sales........................... $37,351,404 $32,269,800
Costs and expenses:
Cost of goods sold................ 26,867,870 24,080,725
Selling, general & admin.
expenses........................ 8,468,881 7,250,572
Relocation expense................ 225,129 -
Interest expense.................. 834,207 629,608
Unrealized foreign
exchange gain................... (39,896) (33,749)
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Total costs and expenses....... 36,356,191 31,927,156
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Income before income taxes.......... 995,213 342,644
Provision for
income taxes.................... 71,000 75,000
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Net income.......................... $ 924,213 $ 267,644
=========== ===========
Net income per share:
Primary $ .31 $ .10
=== ===
Fully diluted $ .30 $ .09
=== ===
Weighted average number of shares used in computing net income per share:
Primary 2,950,071 2,788,299
Fully diluted 3,073,714 2,893,889
See Notes to (Condensed) Consolidated Financial Statements.
3
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 6/30/97 9/30/96
CURRENT ASSETS
Cash............................................ $ 105,224 $ 205,876
Accounts receivable (less allowance
of $476,000 at June 30, 1997 and
$396,000 at September 30, 1996)............... 9,520,565 8,635,020
Other receivables............................... 137,180 71,819
Inventories:
Parts, components, and materials.............. 4,066,423 2,175,408
Work-in-process............................... 2,697,957 1,391,552
Finished products............................. 11,566,399 11,135,798
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18,330,779 14,702,758
Prepaid expenses................................ 376,881 529,631
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TOTAL CURRENT ASSETS............................ 28,470,629 24,145,104
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Property, plant and equipment, net.............. 3,570,573 3,034,185
Other assets.................................... 954,116 905,327
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TOTAL ASSETS.................................... $32,995,318 $28,084,616
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 785,060 $ 959,583
Current maturities of long-term debt............ 172,163 203,719
Accounts payable:
Related party................................. 8,158,934 7,457,482
Other......................................... 2,251,814 1,811,730
Accrued wages and expenses...................... 1,949,809 1,229,087
Income taxes payable............................ 95,601 87,205
Deferred gain on sale and leaseback............. - 332,100
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TOTAL CURRENT LIABILITIES 13,413,381 12,080,906
- -------------------------
Long-term debt:
Related party................................. 1,800,000 2,262,005
Other......................................... 7,159,284 4,166,881
Deferred gain on sale and leaseback............. - 101,893
Other long-term liabilities..................... 458,094 504,776
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 28,027 28,027
Capital in excess of par value.................. 9,394,163 9,423,089
Retained earnings (deficit)..................... 640,602 (283,611)
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10,062,792 9,167,505
Less Treasury stock 25,400 shares, at cost...... - (82,901)
Foreign currency translation adjustment......... 101,767 (116,449)
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TOTAL SHAREHOLDERS' EQUITY 10,164,559 8,968,155
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 32,995,318 $28,084,616
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
4
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
6/30/97 6/30/96
Cash flows from operating activities:
Net income................................... $ 924,213 $ 267,644
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization.............. 587,666 516,834
Amortization of sale and leaseback......... (433,993) (249,075)
Unrealized foreign exchange gain........... (39,896) (33,749)
Change in assets and liabilities:
Accounts receivable.......................... (791,969) (747,546)
Other receivables............................ (65,361) 36,930
Inventories.................................. (3,534,235) (3,128,810)
Prepaid expenses............................ 162,986 (70,221)
Other assets................................. (48,789) (59,235)
Accounts payable............................ 1,122,442 2,232,871
Accrued wages and expenses................... 708,692 (520,030)
Income taxes payable......................... 4,020 (2,484)
Other liabilities........................... (46,682) (31,176)
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Net cash used in operating activities..... (1,450,906) (1,788,047)
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Cash flows from investing activities:
Capital expenditures, net of
minor disposals........................... (771,553) (352,918)
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Net cash used in investing activities.... (771,553) (352,918)
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Cash flows from financing activities:
Net borrowings under new credit and
security agreement......................... 2,065,139 3,976,344
Repayments of U.S. revolving credit
agreement.................................. - (2,800,000)
Borrowings under U.K. term loan............... 830,000 -
Repayment of mortgage loan to related party.. (353,112) (140,845)
Repayment of promissory note to related party (200,000) -
(Decrease) increase in borrowings under U.K.
revolving credit agreement................. (226,766) 7,782
Repayments of other debt..................... (79,912) (60,913)
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Net cash provided by
financing activities...................... 2,035,349 982,368
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Effect of exchange rate changes on cash.......... 86,458 46,533
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Net decrease in cash............................. (100,652) (1,112,064)
Cash at beginning of year........................ 205,876 1,151,850
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Cash at end of period............................ $ 105,224 $ 39,786
========== ==========
Non-cash investing and financing activities:
Capital lease obligations.................... $ 276,624 $ -
See Notes to (Condensed) Consolidated Financial Statements.
5
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
Note 1: Basis of Presentation
The accompanying unaudited (condensed) consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ended September 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended September 30, 1996.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended June 30, 1997 Compared with June 30, 1996
Net sales for the quarter ended June 30, 1997 were $13.7 million compared with
$10.9 million in the corresponding quarter last year. The increase was
principally due to increased sales of engineered systems and equipment. Order
intake for the quarter was $13.3 million. Unfilled orders were $4.4 million at
June 30, 1997.
Gross profit margins for the current quarter were 28.5% compared with 25.1% in
the corresponding quarter last year. The margin increase was due to lower costs
for certain products and growing sales of new higher margin products.
Operating expenses for the current quarter increased to $3.0 million compared
with $2.5 million in the corresponding quarter last year. The increase was due
principally to higher selling costs. Interest expense increased approximately
$100,000 to $309,000 for the current year quarter as a result of increased bank
borrowings to support higher working capital needs.
The increase in current quarter pretax income of approximately $493,000 was
principally due to higher sales and gross profit margins, offset in part by
increased operating expenses.
Results of Operations
Nine Months Ended June 30, 1997 Compared with June 30, 1996
Net sales for the nine months ended June 30, 1997 were $37.4 million compared
with $32.3 million in the corresponding period last year. The increase was
principally due to increased sales of engineered systems and equipment. Order
intake for the nine months was $38.7 million.
Gross profit margins for the nine months were 28.1% compared with 25.4% in the
corresponding period last year. The margin improvement was due to lower costs
for certain products and growing sales of new higher margin products.
Operating expenses increased to $8.7 million compared with $7.3 million in the
corresponding period last year due to higher selling and product promotion
costs. The Company also incurred $225,000 of moving expenses to relocate its
U.S. headquarters to a new facility. Interest expense increased by $205,000 to
$834,000 as a result of increased bank borrowings to support higher working
capital needs.
During the current period, the Company recorded an unrealized foreign exchange
gain of $40,000 compared with a $34,000 gain in the corresponding period last
year. Such gains result from the revaluation of a yen denominated mortgage note
into U.S. dollars.
The increase in current period pretax income of $653,000 was due to higher sales
and gross margins, offset in part by increased operating expenses.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
June 30, 1997 Compared with September 30, 1996
Working capital increased approximately $3.0 million to $15.1 million at June
30, 1997 principally as a result of increased bank borrowings used to finance
higher inventory levels.
Accounts receivable increased approximately $.9 million to $9.5 million at June
30, 1997, as a result of higher sales levels. Inventories increased $3.6 million
to $18.3 million at June 30, 1997 due principally to increased levels of parts
and work-in-process for a new line of domed camera products. Total accounts
payable increased $1.1 million to approximately $10.4 million at June 30, 1997
in order to finance the higher inventory levels.
The Company maintains an overdraft facility of 600,000 pounds sterling
(approx. $996,000) in the U.K. to support working capital requirements. At June
30, 1997, borrowings under this agreement were approximately $785,000.
In February, 1997, the Company's bank loan agreement was amended to increase
maximum borrowings from $5.5 million to $6.5 million, subject to an availability
formula based on accounts receivable and inventories. Further, the term of the
agreement was extended to January 31, 1999. Borrowings under such agreement
amounted to approximately $6.2 million at June 30, 1997 compared with $4.1
million at September 30, 1996. The increase was used principally to finance
higher inventory levels and capital additions. Concurrent with the foregoing
amendment, a $2,000,000 secured promissory note with Chugai Boyeki Co., Ltd., a
related party, was modified to require installments of $200,000 upon execution,
$360,000 in July 1998 and the balance of $1,440,000 upon maturity in July 1999.
In April 1997, the Company repaid its U.K. related party mortgage loan with the
proceeds of a new ten year 500,000 pound sterling (approx. $830,000) bank term
loan. The term loan is payable in equal monthly installments with interest at a
fixed rate of 9%. The Company believes that its bank loan agreements and other
sources of credit provide adequate funding to meet its near term cash
requirements.
8
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company has no material outstanding litigation.
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
No Form 8-K was required to be filed during the current quarter.
EXHIBIT
NUMBERS DESCRIPTION
10 Material Contracts
(.1) Advice of borrowing terms between the Registrant
and National Westminster Bank PLC dated April 22,
1997.
(.2) Commercial fixed rate loan agreement between the
Registrant and National Westminster Bank PLC
dated April 8, 1997.
9
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1997
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
10
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1997
VICON INDUSTRIES, INC.
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
10