1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-20732
COMPUTER INTEGRATION CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0506623
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
7900 GLADES ROAD, BOCA RATON, FLORIDA 33434
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 482-6678
Check 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 6,915,000 shares of
common stock outstanding as of May 1, 1996.
This report contains a total of 17 pages.
The Exhibit Index appears on page 14.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed, consolidated financial statements included herein have
been prepared by the Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been consolidated
or omitted pursuant to such rules and regulations; however, the Registant
believes that the disclosures are adequate to make the information presented
not misleading. It is suggested that these condensed, consolidated financial
statements be read in conjunction with the financial statements, and the notes
thereto, included in the Registrant's consolidated financial statements for the
year ended June 30, 1995.
The condensed, consolidated financial statements for the interim
periods included herein, which are unaudited, include, in the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial position and results of operations of
the Registrant for the periods presented. The results of operations for
interim periods should not be considered indicative of results to be expected
for the full year.
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3
Computer Integration Corp.
and Subsidiary
Condensed Consolidated Balance Sheets
MARCH 31, JUNE 30,
1996 1995
-------------------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash $ 1,894,034 $ 797,678
Accounts receivable, net 61,792,226 31,355,179
Inventory 22,719,330 11,547,902
Deferred income taxes 564,298 513,272
Prepaid expenses 220,005 353,688
------------ -----------
Total current assets 87,189,893 44,567,719
Property and equipment, net 2,692,605 1,693,723
Other assets:
Goodwill, net 12,577,166 7,705,754
Other 821,480 787,449
---------------------------
Total other assets 13,398,646 8,493,203
---------------------------
Total assets $103,281,144 $54,754,645
===========================
Continued on next page.
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Computer Integration Corp.
and Subsidiary
Condensed Consolidated Balance Sheets (continued)
MARCH 31, JUNE 30,
1996 1995
---------------------------
(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 11,262,441 $ 9,920,603
Accounts payable 44,263,269 22,829,019
Accrued expenses 4,689,350 1,712,415
Current portion of subordinated notes payable 302,440 -
Current portion of capital lease obligations 8,480 34,655
Other 886,198 849,110
----------------------------
Total current liabilities 61,412,178 35,345,802
Noncurrent liabilities:
Term note payable 27,500,000 12,500,000
Subordinated notes payable, less current portion 1,610,560 -
Capital lease obligations, less current portion 2,299 7,753
Other 325,000 310,260
----------------------------
Total noncurrent liabilities 29,437,859 12,818,013
Shareholders' equity:
Preferred stock, $.001 par value, total
authorized 2,000,000 shares, issued and
outstanding as follows:
Series A, 9% cumulative, convertible,
redeemable preferred stock; 40,000 shares
authorized, 19,250 issued and outstanding in
both periods 19 19
Common stock, $.001 par value, authorized
20,000,000 shares, issued and outstanding
6,915,000 and 6,400,000 shares at March 31,
1996 and June 30, 1995, respectively 6,915 6,400
Additional paid-in capital 9,780,065 5,534,154
Retained earnings 2,644,108 1,050,257
----------------------------
Total shareholders' equity 12,431,107 6,590,830
----------------------------
Total liabilities and shareholders' equity $ 103,281,144 $54,754,645
============================
Note: The balance sheet at June 30, 1995 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
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Computer Integration Corp.
and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)
THREE MONTHS ENDED
MARCH 31
1996 1995
----------------------------------
Net sales $111,289,220 $53,070,283
Cost of goods sold 101,196,921 47,859,734
--------------------------------
Gross profit 10,092,299 5,210,549
Selling, general and administrative expenses:
Salaries and benefits 6,310,951 3,034,092
Other selling and administrative 2,316,825 778,802
Occupancy costs 556,245 202,189
Depreciation and amortization 451,333 331,261
--------------------------------
9,635,354 4,346,344
--------------------------------
Income from operations 456,945 864,205
Interest expense 1,083,078 619,712
--------------------------------
Income (loss) before income taxes (626,133) 244,493
Income taxes (262,999) 107,000
--------------------------------
Net income (loss) (363,134) 137,493
Less required payments on convertible preferred stock (55,010) (53,815)
--------------------------------
Income (loss) applicable to common stock $ (418,144) $ 83,678
================================
Net income (loss) per share:
Primary $ (.06) $ .01
================================
Fully diluted $ (.06) $ .02
================================
Common shares and common share equivalents
outstanding:
Primary 6,915,000 6,415,540
================================
Fully diluted 6,915,000 7,685,540
================================
See accompanying notes.
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Computer Integration Corp.
and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)
NINE MONTHS ENDED
MARCH 31
1996 1995
----------------------------------
Net sales $343,998,166 $150,838,254
Cost of goods sold 311,892,874 135,848,032
---------------------------------
Gross profit 32,105,292 14,990,222
Selling, general and administrative expenses:
Salaries and benefits 18,042,441 8,792,129
Other selling and administrative 4,941,831 1,713,741
Occupancy costs 1,510,186 598,237
Depreciation and amortization 1,272,928 864,067
---------------------------------
25,767,386 11,968,174
---------------------------------
Income from operations 6,337,906 3,022,048
Interest expense 3,400,232 1,684,267
---------------------------------
Income before income taxes 2,937,674 1,337,781
Income taxes 1,233,800 553,000
---------------------------------
Net income 1,703,874 784,781
Less required payments on convertible preferred stock (165,030) (147,884)
---------------------------------
Income applicable to common stock $ 1,538,844 $ 636,897
=================================
Net income per share:
Primary $ .22 $ .10
=================================
Fully diluted $ .20 $ .10
=================================
Common shares and common share equivalents
outstanding:
Primary 7,131,000 6,414,985
=================================
Fully diluted 8,401,000 7,591,217
=================================
See accompanying notes.
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Computer Integration Corp.
and Subsidiary
Condensed Consolidated Statements of
Cash Flows (Unaudited)
NINE MONTHS ENDED
MARCH 31
1996 1995
------------------------
OPERATING ACTIVITIES
Net income $ 1,703,874 $ 784,781
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 1,272,928 864,067
Changes in operating assets and liabilities,
exclusive of effects from acquisitions:
Accounts receivable 8,886,086 (5,552,836)
Inventory 4,880,920 (566,306)
Prepaid expenses 200,904 (3,489)
Other assets (264,558) (211,716)
Accounts payable (8,063,273) 4,806,770
Accrued expenses and other current liabilities 77,444 (1,546,522)
Other noncurrent liabilities 14,740 58,693
------------------------
Net cash provided (used) by operating activities 8,709,065 (1,366,558)
INVESTING ACTIVITIES
Issuance of note receivable - (115,000)
Acquisition of property and equipment (823,363) (558,552)
Purchase of net assets of Dataprint, Inc., net of cash acquired - 185,494
------------------------
Net cash used in investing activities (823,363) (488,058)
FINANCING ACTIVITIES
Proceeds from sale of preferred stock, net of offering costs - 1,898,697
Net (repayments) advances on line of credit (6,461,520) 1,074,432
Principal payments on subordinated notes payable (186,174) (847,842)
Repayments of capital lease obligations (31,629) (20,492)
Dividends paid (110,023) (112,605)
------------------------
Net cash (used) provided by financing activities (6,789,346) 1,992,190
------------------------
Net increase in cash 1,096,356 137,574
Cash at beginning of period 797,678 909,805
------------------------
Cash at end of period $ 1,894,034 $1,047,379
========================
SUPPLEMENTAL INFORMATION
Interest paid $ 3,290,986 $1,684,267
========================
Taxes paid $ 1,537,598 $ 945,400
========================
See accompanying notes.
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Computer Integration Corp.
and Subsidiary
Notes to Condensed Consolidated
Financial Statements (Unaudited)
March 31, 1996
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Computer Integration Corp. (the Company) and its wholly-owned operating
subsidiary, CIC Systems, Inc. (CICS). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Certain information and footnote disclosures
required by generally accepted accounting principles for complete financial
statements have been condensed or omitted. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly the financial position, results of operations and cash flows
have been included. The results of operations for the three and nine months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for fiscal year 1996. 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 consolidated financial
statements for the year ended June 30, 1995.
2. ACQUISITION
Effective July 1, 1995, the Company through CICS acquired substantially all of
the assets and assumed all of the trade payables and certain other liabilities
of Cedar Computer Center, Inc. (Cedar), an Iowa corporation, for a combination
of cash, notes and securities of the Company. The purchase price for the net
assets of Cedar and related acquisition costs consisted of approximately
$9,820,327 in cash, $3,760,000 of subordinated promissory notes, $4,246,426
representing the fair value of the guaranteed price for 515,000 shares of the
Company's Common Stock and other liabilities incurred of $1,124. The purchase
price was determined by arms length negotiations between the sellers and the
Company. The cash portion of the purchase price was obtained from a $70 million
revolving credit facility from Congress Financial Corporation (New England).
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Computer Integration Corp.
and Subsidiary
Notes to Condensed Consolidated
Financial Statements (Unaudited) (continued)
2. ACQUISITION (CONTINUED)
The total purchase price of $17,827,877 was allocated to assets acquired and
liabilities assumed, based on their respective estimated fair value. The excess
of the purchase price over the aggregate amount assigned to the identifiable
net assets acquired was recorded as an intangible asset which will be amortized
using the straight-line method over 20 years. The allocation of the purchase
price is summarized as follows:
Accounts receivable $ 40,773,369
Inventories 16,052,348
Furniture and office equipment 764,587
Prepaid expenses 155,598
Accounts payable and accrued expenses (44,063,183)
------------
Fair value of assets acquired, net of liabilities assumed 13,682,719
Cost in excess of net assets acquired (goodwill) 4,145,158
------------
$ 17,827,877
============
The asset purchase agreement related to the acquisition of Cedar, provided for
adjustment of the purchase price based on the ultimate realization of certain
assets and the assumption of certain liabilities. As a result of such
adjustments, the asset purchase agreement was amended to reflect a reduction of
$2,025,016 in the net assets acquired and a corresponding reduction in the
purchase price of $1,682,780. The subordinated seller notes were also reduced
by $1,682,780 and related goodwill increased by $342,236.
At the time Cedar was acquired, management, with the approval of the Board of
Directors, was assessing the activities conducted at Cedar to determine which
functions, if any, were duplicative and should be eliminated. This assessment
resulted in a plan to exit certain activities conducted at Cedar and resulted
in an adjustment of the purchase price of $800,000, consisting of employee
termination benefits of $311,000, write-off of assets no longer required of
$200,000, lease termination payments of $52,000 and other costs associated with
the facility closing of $237,000. The plan to exit was fully executed in April
1996, therefore, only $10,000 of previously accrued costs relating to the
write-off of fixed assets was utilized during the three-months ended March 31,
1996.
The results of operations of Cedar have been included in the Company's
condensed consolidated statement of income since the effective date of
acquisition, July 1, 1995.
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Computer Integration Corp.
and Subsidiary
Notes to Condensed Consolidated
Financial Statements (Unaudited) (continued)
2. ACQUISITION (CONTINUED)
The following summarized unaudited pro forma results of operations for the
period from July 1, 1994 through March 31, 1995 assume the acquisition
occurred on July 1, 1994.
Sales $336,461,446
Net income 2,916,528
Net income per common share .36
The pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which would have
resulted had the combination been in effect on the date indicated or which may
result in the future.
3. BORROWINGS
During July 1995, the Company's revolving line was replaced by a $70,000,000
revolving line of credit with its existing lender under terms and conditions
similar to the existing agreement. Outstanding borrowings as of March 31, 1996
under such facility were $38,762,441. In addition to amounts outstanding, a $10
million irrevocable letter of credit has been issued against the revolving line
to a major supplier of the Company.
In connection with the acquisition of Cedar, discussed in Note 2 above,
subordinated promissory notes in the aggregate principal amount of
approximately $1,913,000 and a short-term promissory note in the principal
amount of $250,000 were issued to the seller. The subordinated promissory notes
are payable in four annual installments of principal and interest at an
interest rate of 7.25% per annum, commencing July 2, 1996 through July 2, 1999.
The short-term promissory note was payable in six equal monthly installments of
principal and interest at an interest rate of 10% per annum. Such note has been
satisfied as of March 31, 1996. The notes are subordinate and junior in right
of payment to the prior payment of all indebtedness of CICS to its senior
lenders, secured by a pledge of 15% of the issued and outstanding shares of
common stock of CICS subject to the prior security interest of CICS' senior
lenders and is guaranteed by the Company.
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11
Computer Integration Corp.
and Subsidiary
Notes to Condensed Consolidated
Financial Statements (Unaudited) (continued)
4. EQUITY TRANSACTIONS
At the October 12, 1995 annual stockholders meeting, the stockholders approved
the following:
- An increase in the number of authorized shares of capital stock from
12,000,000 shares to 22,000,000 shares, including an increase in the
number of authorized shares of common stock from 10,000,000 shares to
20,000,000 shares.
- An amendment to the Company's 1994 Stock Option Plan (the Plan) to (i)
increase the total number of shares reserved for issuance under the Plan
from 500,000 to 1,050,000 shares and (ii) modify the formula under the
Plan to grant each nonemployee director a nonqualified option to purchase
10,000 shares (compared to the present 5,000) of the Company's common
stock upon election to the Board of Directors or one year anniversary of
election and continued service on the Board.
5. SUBSEQUENT EVENT
On April 3, 1996, the Company's Board of Directors authorized the issuance of
two new series of cumulative convertible redeemable preferred stock, designated
Series D and Series E. The Series D Preferred Stock is identical to the
Company's existing Series A Preferred Stock, and the Series E Preferred Stock is
identical to the Company's existing Series C Preferred Stock, with the single
exception that the mandatory conversion feature of the Series A and Series C
Preferred Stock has been modified to extend the date of that conversion.
On May 5, 1996, the Company completed a private exchange offer with the holders
of its outstanding shares of Series A and Series C convertible preferred stock.
As a result of the exchange offer, the Registrant will issue 19,250 shares of
Series D Preferred stock in exchange for 19,250 outstanding shares of Series A
Preferred Stock and 125 shares of Series E Preferred Stock in exchange for 125
outstanding shares of Series C Preferred Stock.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 4(a) - Certificate of Designation for Series D, 9%
Cumulative Convertible Redeemable Preferred Stock
Exhibit 4(b) - Certificate of Designation for Series E, 9%
Cumulative Convertible Redeemable Preferred Stock
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is being filed.
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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.
COMPUTER INTEGRATION CORP.
By: JOHN CHISTE
-----------
John Chiste
Chief Financial Officer (Principal Financial
and Principal Accounting Officer)
Dated: May 20, 1996
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EXHIBIT INDEX
Page
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*Exhibit 4(a) - Certificate of Designation for Series D, 9%
Cumulative Convertible Redeemable Preferred Stock
*Exhibit 4(b) - Certificate of Designation for Series E, 9%
Cumulative Convertible Redeemable Preferred Stock
Exhibit 11 - Statement Re: Computation of Per Share Earnings 15
*Exhibit 27 - Financial Data Schedule (for SEC use only)
* previously filed.
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