1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended: April 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
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Commission file number: 0-10187
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Prab, Inc.
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(Exact name of small business issuer as
specified in its charter)
Michigan 38-1654849
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5944 E. Kilgore Rd, P.O. Box 2121, Kalamazoo, Michigan 49003
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(Address of principal executive offices)
(Zip Code)
(616) 382-8200
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, par value $.10 per share - 1,767,339 shares outstanding at May 31,
2000.
Transitional Small Business Disclosure Format
(Check One): Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following Financial Statements are attached hereto in response to Item 1:
Condensed Consolidated Balance Sheet
April 30, 2000 (Unaudited)
October 31, 1999
Consolidated Statement of Earnings
Three months ended April 30, 2000
and 1999 (Unaudited)
Six months ended April 30, 2000
and 1999 (Unaudited)
Condensed Consolidated Statement
of Cash Flows (Unaudited)
Six months ended April 30, 2000
and 1999 (Unaudited)
Notes to Condensed Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
Material Changes in Financial Condition. Accounts receivable decrease
resulted from lower sales in the second quarter of 2000 versus the fourth
quarter of 1999. Note receivable resulted from the sale of the Prab Robot
product line, refer to note 6. Inventory increase resulted from a combination of
additional work in process and stock inventory.
Accounts and note payable increase resulted primarily from an increase in
accounts payable partially due to the increased inventory purchased.
The Company repurchased all of its outstanding convertible preferred
stock from the State of Michigan Retirement Systems on December 28, 1999 for a
price of $1.63 per share plus accrued dividends of $3,544. This transaction
eliminated the convertible stock and reduced additional paid in capital by
$322,667, the premium paid above book value.
Material Changes in Results of Operations. Sales in the first six months
of 2000 were 8% higher than the first six months of 1999. Higher sales are the
result of increased
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order activity in the first six months of 2000 versus a year ago in both the
Prab Conveyor and Hapman Conveyor product lines. New business order bookings
have increased 14% in the first six months of 2000 compared to the same period a
year ago.
Costs of products sold were 63% in the first six months of 2000 and 1999.
Selling, general and administrative expenses were 35% in the first six months of
2000 and the same period a year ago. The increase in expenses primarily results
from the addition of new employees in sales and marketing.
Lower interest expense resulted from low levels of debt until December
28, 1999 when $601,000 was drawn on the line of credit to repurchase the
convertible preferred stock.
Litigation settlement resulted from the Company's disposal of waste at a
local landfill, refer to note 7.
The order backlog of $3,055,000 at the end of the second quarter ended
April 30, 2000 compares with $2,820,000 at the end of the previous quarter ended
January 31, 2000 and $3,672,000 at the end of the second quarter a year ago.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. The Company's
"Annual Meeting of Shareholders" was held on March 23, 2000. At the meeting the
following directors were elected: Gary A. Herder, James H. Haas, Eric V. Brown,
Jr., John W. Garside, William G. Blunt and Frederick J. Schroeder, Jr.
Also, a proposal to adopt the Prab, Inc. 2000 Stock Option Plan was voted upon
and approved. The 2000 Plan provides for the grant of options covering up to
100,000 shares of common stock to any employee or director of the Company and
its subsidiaries.
In addition, the appointment of Plane & Moran, LLP to be the principal
independent accountants for the Company for the current fiscal year was ratified
by the shareholders.
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Following is the voting breakdown for each matter and nominee for office:
Broker
For Against Withheld Abstentions Non-Votes
--- ------- -------- ----------- ---------
Nominees for Board of Directors:
Gary A. Herder 1,497,582 0 0 5,597 0
James H. Haas 1,491,117 0 0 12,332 0
John W. Garside 1,492,087 0 0 11,362 0
William G. Blunt 1,492,337 0 0 11,112 0
Frederick J.
Schroeder 1,477,914 0 0 25,535 0
Proposal to Adopt the Prab, Inc. 2000 Stock Option Plan:
962,492 117,174 0 21,506 402,277
Ratification of the Selection of Plante & Moran, LLP as Independent Public
Accountants:
1,489,538 10,378 0 3,533 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
PRAB, INC.
Date: June 9, 2000 By: /S/ Gary A. Herder
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Gary A. Herder
Its: Chairman, President and
Chief Executive Officer
Date: June 9, 2000 By: /S/ Robert W. Klinge
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Robert W. Klinge
Its: Chief Financial Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report on Form 10-QSB
For the Quarter Ended April 30, 2000
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Financial Statements
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PRAB, INC.
(A Michigan Corporation)
5944 E. Kilgore Road
P.O. Box 2121
Kalamazoo, Michigan 49003
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PRAB, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
April 30, October 31,
2000 1999
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Unaudited (Note)
ASSETS:
Current assets:
Cash $ 43,597 $ 46,637
Note Receivable 15,000 --
Accounts Receivable 2,371,238 3,031,402
Inventories (Note 2) 2,008,326 1,549,939
Other current assets 191,022 189,388
Deferred income taxes 411,442 411,442
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Total current assets $ 5,040,625 $ 5,228,808
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Property, plant and equipment
(net of accumulated depreciation of
$3,770,723 and $3,666,262 respectively) 998,250 1,027,069
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Other Assets
Deferred charges and other assets 113,910 113,118
Deferred income taxes 302,604 350,803
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Total other assets 416,514 463,921
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Total assets $ 6,455,389 $6,719,798
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts and note payable $ 1,434,608 $ 1,187,267
Other current liabilities 1,330,167 1,335,960
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Total current liabilities 2,764,775 2,523,227
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Other non-current liabilities 18,990 18,372
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Stockholders' equity:
Convertible preferred stock (Note 4) -- 275,000
Common Stock 176,734 175,734
Additional paid-in capital 1,080,202 1,395,743
Retained earnings 2,414,688 2,331,722
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Total stockholders' equity 3,671,624 4,178,199
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Total liabilities and stockholders' equity $ 6,455,389 $ 6,719,798
================= =================
Note: The balance sheet at October 31, 1999, has been taken from the audited
financial statements at that date and condensed.
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PRAB, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
April 30 April 30
---------------------------------------- -----------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales $ 4,024,328 $ 3,596,153 $ 7,447,542 $ 6,895,065
Costs and expenses:
Cost of products sold 2,551,553 2,292,738 4,686,938 4,333,660
Selling, general and administrative
Expenses 1,332,133 1,237,915 2,605,184 2,437,361
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3,883,686 3,530,653 7,292,122 6,771,021
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Operating Income 140,642 65,500 155,420 124,044
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Other income (expenses):
Interest expense (7,774) (11,712) (12,214) (32,971)
Gain on sale of property, plant and
equipment (Note 6) 20,000 -- 20,000 --
Litigation settlement (Note 7) (25,000) -- (25,000) --
------------- ---------------- -------------- --------------
Income before income taxes $ 127,868 $ 53,788 $ 138,206 $ 91,073
Provision for income taxes 46,775 15,168 51,695 31,805
------------- --------------- -------------- --------------
Net Income $ 81,093 $ 38,620 $ 86,511 $ 59,268
============= ================ ============== ==============
Earnings (loss) per common share:
(Note 5)
Basic $ .05 $ .02 $ (.14) $ .03
============= ================ ============== ==============
Diluted $ .04 $ .02 $ (.14) $ .03
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PRAB, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six months ended
April 30,
----------------
2000 1999
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Net cash provided by (used in) operating activities $ 635,687 $ 898,919
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Cash flows from investing activities:
Acquisition of property, plant and equipment (75,642) (64,732)
Proceeds from sale of property and equipment 5,000 2,250
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Net cash provided by (used in) investing
activities: (70,642) (62,482)
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Cash flows from financing activities:
(Payment) \Proceeds on long term debt and
current maturities 0 (780,000)
Net increase (decrease) in short term borrowings 25,000 (50,000)
Proceeds from sale of common stock 8,125 0
Dividend payments (3,544) (11,000)
Repurchase of stock (597,666) 0
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Net cash provided by (used in) financing activities (568,085) (841,000)
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Net increase (decrease) in cash $ (3,040) $ (4,563)
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet at April 30, 2000, the
consolidated statement of earnings and the condensed consolidated statement of
cash flows for the three-month and six month periods ended April 30, 2000 and
1999, have been prepared by the Company without audit. In the opinion of
management, all adjustments necessary to present fairly the financial position,
results of operations and cash flows at April 30, 2000, and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's October 31, 1999, annual
report to stockholders. The results of operations for the period ended April 30,
2000, is not necessarily indicative of the operating results for the full year.
2. INVENTORIES:
Inventories consist of the following:
April October
30, 2000 31, 1999
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Raw materials $ 1,283,645 $ 1,061,442
Work in process 527,349 236,471
Finished goods and display
Units 197,332 252,026
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Total inventories $ 2,008,326 $ 1,549,939
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3. UNUSED LINE OF CREDIT:
The company has a $1,750,000 line of credit which is subject to a
borrowing formula based upon certain asset levels of the Company. As of April
30, 2000, $1,750,000 was available to the Company under the line of credit and
the Company had borrowed $325,000 of such amount.
4. CONVERTIBLE PREFERRED STOCK:
On December 28, 1999 the Company redeemed 366,667 shares of convertible
preferred stock from the State of Michigan Retirement Systems (SMRS). The
redemption price of $1.63 per share plus accrued dividends of $3,544 totaled
$601,210. The purchase was financed by a draw on the Company's line of credit.
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. RECONCILIATION OF EARNINGS PER SHARE:
FOR THE QUARTER ENDED APRIL 30, 2000
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
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Net Income $ 81,093
Basic EPS
Income available to
Common stockholders 81,093 1,761,228 $ .05
==========
Effect of dilutive securities
Stock options 129,300
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Diluted EPS
Income available to
Common stockholders &
Assumed conversions $ 81,093 1,890,528 $ .04
=========== ============ ==========
FOR THE QUARTER ENDED APRIL 30, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
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Net Income $ 38,620
Less: Preferred stock dividends 5,500
-----------
Basic EPS
Income available to
Common stockholders 33,120 1,757,339 $ .02
==========
Effect of dilutive securities
Stock options 101,479
Convertible preferred stock 5,500 366,667
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Diluted EPS
Income available to
Common stockholders &
Assumed conversions $ 38,620 2,225,485 $ .02
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. RECONCILIATION OF EARNINGS PER SHARE (CONTINUED):
FOR THE SIX MONTHS ENDED APRIL 30, 2000
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
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Net Income $ 86,511
Less: Preferred stock dividends 3,544
Preferred stock redemption
Premium 322,667
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Basic EPS
Income (loss) available to common stockholders
(239,700) 1,759,262 $ (.14)
==========
Effect of dilutive securities
Stock options
Convertible preferred stock --
-- --
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Diluted EPS
Income (loss) available to
common stockholders & assumed
conversions
$ (239,700) 1,759,262 $ (.14)
========== ========== ===========
FOR THE SIX MONTHS ENDED APRIL 30, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
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Net Income $ 59,268
Less: Preferred stock dividends 11,000
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Basic EPS
Income available to common
Stockholders 48,268 1,757,339 $ .03
============
Effect of dilutive securities
Stock options 119,081
Convertible preferred stock -- --
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Diluted EPS
Income available to
Common stockholders & assumed
Conversions $ 48,268 1,876,420 $ .03
========== ========== =============
Convertible preferred stock had an antidilutive effect on diluted earnings per
share for the six months ended April 30, 2000 and 1999 and was not used in the
calculation of diluted earnings per share for these periods. Stock options had
an antidilutive effect on diluted earnings per share for the six months ended
April 30, 2000 and was not used in the calculation of diluted earning per share
for that period.
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SALE OF PRAB ROBOT PRODUCT LINE:
During March 2000, the Company entered into an agreement to sell the
remaining Prab Robot product line assets, including inventory, test equipment,
engineering drawings, job files, vendor information, customer lists, sales
history, sales aids, and five-year convenant not to compete for $5,000 cash, and
a non-interest bearing note of $15,000. The note receivable is payable in two
payments, $5,000 before June 30, 2000, and the balance due no later than March
31, 2001. The book value of the assets sold totaled approximately $0 due to
offsetting inventory reserves for lifo, obsolescence, and slow moving items.
7. LITIGATION SETTLEMENT:
The Company has been involved in a legal action arising out of its
disposal of waste at a local landfill. During April 2000, the Company settled
this matter for a total of $25,000, which will be paid in May 2000.
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Exhibit Index
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Exhibit No. Description
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27 Financial Data Schedule