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: July 31, 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 August
31, 2000.
Transitional Small Business Disclosure Format
(Check One): Yes No X
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Page 1 of 13
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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
July 31, 2000 (Unaudited)
October 31, 1999
Consolidated Statement of Earnings
Three months ended July 31, 2000
and 1999 (Unaudited)
Nine months ended July 31, 2000
and 1999 (Unaudited)
Condensed Consolidated Statement
of Cash Flows
Nine months ended July 31, 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 third quarter of 2000 versus the fourth quarter
of 1999 combined with decreased days sales outstanding. 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 drawing an
additional $140,000 on the line of credit. Other current liabilities decreased
mainly from paying fiscal year 1999 accrued bonuses and profit sharing combined
with a lower accrual for commissions.
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.
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Material Changes in Results of Operations. Sales in the first nine
months of 2000 were 11% higher than the first nine months of 1999. Higher sales
are the result of increased order activity in the first nine months of 2000
versus a year ago in both the Prab Conveyor and Hapman Conveyor product lines.
New business order bookings have increased 11% in the first nine months of 2000
compared to the same period a year ago.
Costs of products sold were 64% in the first nine months of 2000
compared to 63% a year ago. Selling, general and administrative expenses were
33% in the first nine months of 2000 compared to 34% a year ago.
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 $2,940,000 at the end of the third quarter ended
July 31, 2000 compares with $3,055,000 at the end of the previous quarter ended
April 30, 2000 and $3,867,000 at the end of the third quarter a year ago.
PART II - OTHER INFORMATION
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.
Page 3 of 13
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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: September 6, 2000 By: /S/ Gary A. Herder
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Gary A. Herder
Its: Chairman, President and
Chief Executive Officer
Date: September 6, 2000 By: /S/ Robert W. Klinge
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Robert W. Klinge
Its: Chief Financial Officer
Page 4 of 13
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report on Form 10-QSB
For the Quarter Ended July 31, 2000
-----------------------------
Financial Statements
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PRAB, INC.
(A Michigan Corporation)
5944 E. Kilgore Road
P.O. Box 2121
Kalamazoo, Michigan 49003
Page 5 of 13
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PRAB, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, October 31,
2000 1999
--------- -----------
Unaudited (Note)
ASSETS:
Current assets:
Cash $ 42,371 $ 46,637
Note Receivable 10,000 --
Accounts Receivable 2,409,272 3,031,402
Inventories (Note 2) 1,789,191 1,549,939
Other current assets 119,066 189,388
Deferred income taxes 411,442 411,442
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Total current assets $ 4,781,342 $ 5,228,808
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Property, plant and equipment
(net of accumulated depreciation of
$3,818,260 and $3,666,262 respectively) 999,436 1,027,069
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Other Assets
Deferred charges and other assets 110,297 113,118
Deferred income taxes 259,737 350,803
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Total other assets 370,034 463,921
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Total assets $ 6,150,812 $6,719,798
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts and note payable $ 1,406,329 $ 1,187,267
Other current liabilities 970,348 1,335,960
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Total current liabilities 2,376,677 2,523,227
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Other non-current liabilities 19,299 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 2,497,900 2,331,722
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Total stockholders' equity 3,754,836 4,178,199
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Total liabilities and stockholders' equity $ 6,150,812 $ 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 Nine Months Ended
July 31 July 31
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2000 1999 2000 1999
---- ---- ---- ----
Net Sales $ 4,318,227 $ 3,733,295 $ 11,765,768 $ 10,628,360
Costs and expenses:
Cost of products sold 2,866,366 2,312,548 7,553,303 6,646,207
Selling, general and administrative
expenses 1,309,560 1,211,184 3,914,744 3,649,370
------------ ------------ ------------ ------------
4,175,926 3,523,732 11,468,047 10,295,577
------------ ------------ ------------ ------------
Operating Income 142,301 209,563 297,721 332,783
------------ ------------ ------------ ------------
Other income (expenses):
Interest expense (8,989) 661 (21,203) (32,310)
Gain (loss) on sale of property, plant
and equipment (Note 6) (2,232) -- 17,768 825
Litigation settlement (Note 7) -- -- (25,000) --
------------ ------------ ------------ ------------
Income before income taxes 131,080 210,224 269,286 301,298
Provision for income taxes 47,867 74,446 99,562 106,252
------------ ------------ ------------ ------------
Net Income $ 83,213 $ 135,778 $ 169,724 $ 195,046
============ ============ ============ ============
Earnings (loss) per common share:
(Note 5)
Basic $ .05 $ .07 $ (.09) $ .10
============ ============ ============ ============
Diluted $ .04 $ .06 $ (.09) $ .09
============ ============ ============ ============
Page 7 of 13
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PRAB, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine months ended
July 31,
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2000 1999
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Net cash provided by (used in) operating activities $ 564,884 $ 1,185,842
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Cash flows from investing activities:
Acquisition of property, plant and equipment (126,065) (86,674)
Proceeds from sale of property and equipment 10,000 2,250
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Net cash provided by (used in) investing
activities: (116,065) (84,424)
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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 140,000 (200,000)
Proceeds from sale of common stock 8,125 0
Dividend payments (3,544) (16,500)
Repurchase of stock (597,666) 0
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Net cash provided by (used in) financing activities (453,085) (996,500)
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Net increase (decrease) in cash (4,266) 104,918
CASH - Beginning 46,637 51,621
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CASH - Ending $ 42,371 $ 156,539
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet at July 31, 2000, the
consolidated statement of earnings and the condensed consolidated statement of
cash flows for the three-month and nine month periods ended July 31, 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 July 31, 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 July 31,
2000, is not necessarily indicative of the operating results for the full year.
2. INVENTORIES:
Inventories consist of the following:
July October
31, 2000 31, 1999
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Raw materials $ 1,158,706 $ 1,061,442
Work in process 420,270 236,471
Finished goods and display
Units 210,215 252,026
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Total inventories $ 1,789,191 $ 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 July 31,
2000, $1,750,000 was available to the Company under the line of credit and the
Company had borrowed $440,000 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.
Page 9 of 13
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. RECONCILIATION OF EARNINGS PER SHARE:
FOR THE QUARTER ENDED JULY 31, 2000
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ------
Net Income $ 83,213
Basic EPS
Income available to common stockholders 83,213 1,767,339 $ .05
=======
Effect of dilutive securities
Stock options -- 121,236
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Diluted EPS
Income available to common
stockholders & assumed conversions $ 83,213 1,888,575 $ .04
========= ========= =======
FOR THE QUARTER ENDED JULY 31, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ------
Net Income $ 135,778
Less: Preferred stock dividends 5,500
---------
Basic EPS
Income available to common stockholders 130,278 1,757,339 $ .07
=======
Effect of dilutive securities
Stock options 98,772
Convertible preferred stock 5,500 366,667
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Diluted EPS
Income available to common
stockholders & assumed conversions $ 135,778 2,222,778 $ .06
========= ========= ========
Page 10 of 13
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PRAB, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. RECONCILIATION OF EARNINGS PER SHARE (CONTINUED):
FOR THE NINE MONTHS ENDED JULY 31, 2000
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ------
Net Income $ 169,724
Less: Preferred stock dividends 3,544
Preferred stock redemption
premium 322,667
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Basic EPS
Income (loss) available to common stockholders (156,487) 1,761,974 $ (.09)
=======
Effect of dilutive securities
Stock options --
Convertible preferred stock -- --
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Diluted EPS
Income (loss) available to
common stockholders & assumed
conversions $(156,487) 1,761,974 $ (.09)
========= ========= =======
FOR THE NINE MONTHS ENDED JULY 31, 1999
INCOME SHARES PER-SHARE
(Numerator) (Denominator) Amount
----------- ------------- ----------
Net Income $ 195,046
Less: Preferred stock dividends 16,500
---------
Basic EPS
Income available to common stockholders 178,546 1,757,339 $ .10
=======
Effect of dilutive securities
Stock options 112,617
Convertible preferred stock 16,500 366,667
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Diluted EPS
Income available to common
stockholders & assumed conversions $ 195,046 2,236,623 $ .09
========= ========= =======
Convertible preferred stock and stock options had an antidilutive effect on
diluted earnings per share for the nine months ended July 31, 2000 and was not
used in the calculation of diluted earnings per share for this 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, which the company received, 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 was paid in June 2000.
Page 12 of 13
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Exhibit Index
Exhibit No. Description
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27 Financial Data Schedule