United States
Securities and Exchange CommissionUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMForm 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from To1996
------------------
Commission File Number 0-19051
LXE Inc.INC.
------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1829757
------------------------------ ----------------------
(State or other jurisdiction of (IRS Employer IdentificationID Number)
incorporation orof organization) Number)
303 Research Drive
Norcross, GA 30092-2993
AddressGeorgia 30092
-------------------------------------- ----------
(Address of principal executive offices Zip Codeoffices) (Zip Code)
Registrant's Telephone Number, Including Area Code-(404)Code: (770) 447-4224
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
----- -----
The number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on November 1, 1995:13, 1996:
Class Number of Shares
Common Stock, $.01 Parpar Value 5,554,644
2
Index5,574,518
FORM 10-Q
-2-
LXE INC.
AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations -
Three Months Ended and Nine Months Ended
September 30, 19951996 and 19941995 3
Consolidated Balance sheetsSheets - September 30,
19951996 and December 31, 19941995 4-5
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 19951996
and 19941995 6
Notes to Interim Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II.II Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 9
3
PartItem 6. Exhibits and Reports on Form 8-K 9
FORM 10-Q
-3-
LXE INC.
PART I
Financial Information
ItemFINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
Three Months Endedmonths ended Nine Months Endedmonths ended
September 30 September 30
------------------- -----------------
1996 1995 19941996 1995
1994------ ------ ------ ------
Net sales $18,243 11,348 17,03148,935 45,188 45,431
Cost of sales 10,756 7,197 8,68727,711 25,718
22,443------ ------ ------ ------
Gross profit 7,487 4,151 8,34421,224 19,470 22,988
Selling, general and
administrative expenses 4,717 5,395 4,82415,276 15,170 13,936
Product development and
engineering expenses 1,703 1,993 1,6525,118 5,100
4,472------ ------ ------ ------
Operating income (loss) 1,067 (3,237) 1,868830 (800) 4,580
Interest and other income, net
of foreign exchange gains
and losses (50) 55 31 473
90
Interest expense (204) (132) (50)(536) (247)
(147)------ ------ ------ ------
Earnings (loss) before
income taxes 813 (3,314) 1,849325 (574)
4,523
Income tax expense (benefit)taxes 309 (1,291) 740125 (275)
1,729------ ------ ------ ------
Net earnings (loss) $ 504 (2,023) 1,109200 (299)
2,794
Earnings====== ====== ====== ======
Net earnings (loss) per
common and common equivalentequiva-
lent share $ .09 (.36) .19.04 (.05)
.48====== ====== ====== ======
Weighted average number
of common and common
equivalent shares 5,734 5,555 5,7655,659 5,525 5,764
See accompanying notes to interim consolidated financial statements.
4FORM 10-Q
-4-
LXE INC.
Consolidated Balance Sheets (Unaudited)
(In thousands)
September 30 December 31
1996 1995
1994
Assets------------ -----------
ASSETS
Current assets:
Cash and interest bearing deposits 1,708 1,537
Marketable securities (reverse re-
purchase agreements in 1994) 307 6,400
Total cash and cash equivalents 2,015 7,937$ 2,547 1,881
Trade accounts receivable, net 12,939 16,22218,969 16,237
Inventories:
Work in process 5,470 3,3342,859 3,623
Parts and materials 9,052 6,14510,094 8,906
------- ------
Total inventories 14,522 9,47912,953 12,529
Prepaid income taxes 1,291 1,027
Deferred income tax benefit 778 778869 869
------- ------
Total current assets 30,254 34,41636,629 32,543
Property, plant and equipment:
Land 250 250
Building and leasehold improvements 4,917 4,8725,462 5,371
Machinery and equipment 17,125 13,91919,721 17,213
Furniture and fixtures 1,219 1,051
23,511 20,0921,248 1,238
------- -------
Total property, plant
and equipment 26,681 24,072
Less accumulated depreciation and
amortization 11,261 9,37613,996 11,949
------- -------
Net property, plant and
equipment 12,250 10,71612,685 12,123
Other assets 5,791 609
Total assets 48,295 45,741(note 4) 5,074 4,815
------- -------
$ 54,388 49,481
======= =======
See accompanying notes to interim consolidated financial statements.
5FORM 10-Q
-5-
LXE INC.
Consolidated Balance Sheets (Unaudited), Continuedcontinued
(In thousands, except share data)
September 30 December 31
1996 1995
1994
Liabilities and Stockholders' Equity------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt 267 244$ 143 275
Current installments of long-term debt
to Parent 275 275
Short term borrowings 4,650 -
Accounts payable 5,330 5,552
Income taxes payable - 1,1867,224 4,431
Accrued compensation costs 1,177 1,4521,061 994
Deferred revenue 955 1,1471,463 1,296
Other current liabilities 564 593495 220
Due to Parent 372 355290 240
------ ------
Total current liabilities 13,590 10,80410,951 7,731
Long-term debt, excluding current
installments 144 3508,500 6,925
Long-term debt to Parent, excluding
current installments 1,466 1,6721,191 1,397
Deferred income taxes 617 617817 817
------ ------
Total liabilities 15,817 13,43321,459 16,870
------ ------
Stockholders' equity:
Preferred stock of $1.00 par value
per share. Authorized 5,000,000
shares; none issued or outstanding - -
Common stock of $.01 par value per
share. Authorized 20,000,000 shares;
5,555,000 issued and outstanding 5,574,518 in
1996 and 5,436,275 in 1995 and 5,436,000 in 1994 56 5456
Additional paid-in capital 18,950 18,47319,067 18,949
Retained earnings 13,472 13,77113,806 13,606
------ ------
Total stockholders' equity 32,478 32,298
Total liabilities and stockholders'
equity 48,295 45,74132,929 32,611
------ ------
$54,388 49,481
====== ======
See accompanying notes to interim consolidated financial statements.
6FORM 10-Q
-6-
LXE INC.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended September 30
1996 1995
1994-------- --------
Cash flowsflow from operating activities:
Net earnings (loss) $ 200 (299) 2,794
Adjustments to reconcile net earnings (loss)to
net cash flows fromused in operating activities:
Depreciation and amortization 2,047 2,038 1,712
Changes in operating assets and
liabilities:
Trade accounts receivable (2,732) 3,283
(2,105)
Inventories (424) (5,043) 970
Accounts payable 2,793 (222) 1,069
Income taxes (264) (1,760) 388
Accrued compensation costs 67 (275) 515
Deferred revenue 167 (192) 52
Due to Parent and other 389 (791)
205----- -----
Net cash provided by (used in)
operating activities 2,243 (3,261)
5,600----- -----
Cash flows from investing activities:
Purchase of property, plant and equipment (2,609) (3,643) (1,858)
Capitalized product software costs and
other market-related investments (323) (3,143)
-
Proceeds from maturity of marketable
securities - 800----- -----
Net cash used in investing
activities (2,932) (6,786)
(1,058)----- -----
Cash flows from financing activities:
Payments onRepayment of long-term debt (207) (183)
(163)
Payments onRepayment of long-term debt to Parent (206) (206)
Short term borrowingsBorrowing under line of credit 1,650 4,650 -
Proceeds from exercise of stock options net of withholding taxes paid118 (136)
69----- -----
Net cash provided by (used in)
financing
activities 1,355 4,125
(300)----- -----
Net change in cash and cash
equivalents 666 (5,922) 4,242
Cash and cash equivalents at January 1 1,881 7,937
2,697----- -----
Cash and cash equivalents at September 30 $2,547 2,015
6,939===== =====
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 204 247 127
Cash paid for income taxes $ 70 1,378 1,212
See accompanying notes to interim consolidated financial statements.
7FORM 10-Q
-7-
LXE INC.
Notes to Interim Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
In the opinion of management, these interim consolidated financial
statements reflect all normal and recurring adjustments necessary for a
fair presentation of results for such periods. The results of operations
for any interim period are not necessarily indicative of results for the
full year. These financial statements should be read in conjunction with
the financial statements and related notes contained in the Company's
Annual Reportreport on Form 10-K for the year ended December 31, 1994.1995.
(2) Earnings (Loss) Per Share
Earnings Earnings(loss)per common and common equivalent share for the interim
periods were based on the weighted average number of shares of common
stock outstanding and equivalentequivalents shares derived from dilutive stock
options, (exceptexcept dilutive stock options are excluded for loss periods).periods.
Fully diluted earnings per share are not significantly different from the
primary earnings per share presented.
(3) Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board adopted
Statement of financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," effective for fiscal years
beginning after December 15, 1995. The Company intends to comply with
the provisions of SFAS 123 in fiscal 1996 by continuing to recognize
compensation cost from stock options under the "intrinsic value" method,
with additional footnote disclosures to be provided, including the pro
forma effects of applying the "fair value" method of SFAS 123. Based
upon this accounting policy, the Company does not expect to recognize any
compensation cost associated with stock options granted in 1996.
(4) Other Assets
In the second quarterFollowing is a summary of other assets as of September 30, 1996 and
December 31, 1995 the(in thousands):
September 30, December 31,
1996 1995
------------ -----------
Investment in non-public U.S. Company acquired$ 2,500 2,500
Capitalized software costs 1,392 1,167
Other 898 1,148
----- -----
Total other assets $ 4,790 4,815
===== =====
The Company's investment in a non-public U.S. company comprises a
minority ownership interest and a loan repayable in a non-public U.S. company.three years. This
investment is valued at cost
and is included in other assets on the accompanying balance sheet.
(4) New Accounting Standardcost.
The Company has adopted SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which was issued
by the Financial Accounting Standards Board in March 1995. No adjustments
to the carrying value of recorded assets were required as a result of
adopting SFAS 121.
(5) Capitalization of Software Costs
In 1995, the company hasalso capitalized $643,000 of certain costs incurred to develop software which will
be licensed to customers. Capitalized software costs which are included in other assets, will be amortized
using the greater of the ratio of current gross revenues for the product
to the total of current and anticipated future gross revenues or the
straight-line method over three years.
8
ItemFORM 10-Q
-8-
LXE INC.
ITEM 2. Management's Discussion andAnd Analysis of Financial
Condition and Results of Operations
Results of Operations
Net- ---------------------
Consolidated sales and the underlying level of orders activity decreased infor the third quarter and first nine months of
19951996 were $18.2 million and $48.9 million, respectively, compared
with $11.3 million and $45.2 million for the same respective
periods in 1995. Sales for materials handling applications
increased in both North American and international markets.
Sales also increased due to the Company's entry into the market
for healthcare information management.
Cost of sales for the third quarter, for 1994. Management
believes that these decreases related to short-term effects of the
Company's transition to an expanded product line that will support DOS,
Windows and client/server networks. The Company has undertaken efforts
during this product line expansion to stimulate orders for its current
products, including an initiative to encourage customers to upgrade their
systems from the earlier generations of LXE equipment. As a result of this
initiative and other specific orders expected to be received, the Company's
order and sales activity should increase in the fourth quarter compared
with the third quarter; however, the Company's 1995 fourth quarter results
are likely to be significantly less profitable than prior profitable
quarters in 1995 or the fourth quarter of 1994.
Cost of sales, as a percentage of net
sales, was 59% in 1996 compared with 63% in the third quarter
of 1995, and 57%mainly
reflecting a higher sales base in 1996 to absorb fixed expenses.
For the first nine months, of 1995, compared with 51% and
49%, respectively, in the same periods in 1994. The increases in the 1995
cost of sales percentage reflect increased distribution of the Company's
products through indirect channels that generally have a lower profit
margin than direct sales; the change in the cost of sales percentage also
reflects competitive pricing pressuresdid not
vary significantly in 1996 from 1995, although the mix of export
and for the three months, a lowerNorth American sales base to absorb fixed overhead expenses.has changed.
Selling, general and administrative expenses increasedin 1996 compared
with 1995 were lower for the third quarter and comparable for the
first nine months, due mainly to expansion of the European sales
subsidiaries and expansionreorganization of the Company's
internal sales support efforts. Product development and engineering expenses did
not vary significantly in 1995 also increased to
develop new products with DOS, Windows and client/server capabilities.
Other income for the interim periods has been higher in 19951996 compared with 1994 due1995, as the Company
continued efforts to currency translationexpand its product line.
Interest and other income was reported net of a foreign exchange
loss in the third quarter of 1996 and lower gains associated with the Company's
European operations.
The consolidated tax benefit recognized for the first
nine months of 1996 compared with 1995, is based upon a weighted average effective tax rate (comparable withresulting from currency
fluctuations that affected the 38%
as reportedaccounting translation of European
subsidiaries' financial statements into U.S. dollars. Interest
expense increased in the previous fiscal year) as well as other tax benefits,
including those related to certain export activities.
Liquidity and Capital Resources
Cash and cash equivalents decreased1996 as a result of several factors, mainlyincreased borrowing
under the transition to the expanded product line and associated increase in
inventories. In addition, the Company has had total capital expenditures
of $6.8 millionCompany's revolving credit agreement.
The effective income tax rate for market related investments, development of product
software and the purchase of equipment and internal software. As a result
of the use of cash in the first nine months of 1996
was 38%, which is comparable with the year, the Company
borrowed $4.7 million on an unsecuredpreceding fiscal year.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations, net of cash used in investing
activities (mainly purchases of property, plant and equipment),
and borrowings under a revolving credit agreement resulted in a
net increase in cash and cash equivalents to $2.5 million as of
September 30, 1996, compared with a commercial
bank, with interest$1.9 million at the bank's prime rate.beginning
of the year. Management does not expect to generate significant
positive cash flow in the fourth quarter of 1995,1996; however,
management believes that the Company's present liquidity,
together with cash from operations and sources of cash andexternal
financing, are believed to be sufficient to fundwill support its current business activities.
9activities and
capital investment plans.
FORM 10-Q
-9-
LXE INC.
PART II
Other InformationOTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - NoThe following exhibits are filed as part of this
Report on Form 8-K.report:
27.1 Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed by
the registrantRegistrant during the period covered by this report on Form
10-Q.
10FORM 10-Q
-10-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrantRegistrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LXE INC.
By: /s/ Date: 11/14/9596
--------------------------------------- -----------
Thomas E. Sharon, Chairman of the Board
and Chief Executive Officer
By: /s/ Date: 11/14/9596
--------------------------------------- -----------
Don T. Scartz
Chief Financial Officer and Treasurer