LXE INC.
POST OFFICE BOX 7700
NORCROSS, GA 30091-7700
May 14, 1996
Securities and Exchange Commission
Washington, D. C. 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of
1934, we are transmitting herewith the following Form 10-Q for
the quarter ended March 31, 1996.
Sincerely,
LXE INC.
Gail Fairchild
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 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 March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-19051
LXE Inc.
(Exact name of registrant as specified in its charter)
Georgia 58-1829757
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
303 Research Drive
Norcross, Georgia 30092-2993
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area 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 May 1, 1996:
Class Number of Shares
Common Stock, $.01 Par Value 5,574,518
Page 1 of 10.
FORM 10-Q
-2-
PART I
Financial Information
Item 1. Financial Statements
LXE Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31
1996 1995
Net sales $14,163 17,306
Cost of sales 7,622 9,174
Gross profit 6,541 8,132
Selling, general and administrative
expenses 5,256 5,031
Product development and engineering
expenses 2,020 1,672
Operating income (loss) (735) 1,429
Interest and other income 244 108
Interest expense (145) (52)
Earnings (loss) before income taxes (636) 1,485
Income tax expense (benefit) (242) 578
Net earnings (loss) $ (394) 907
Net earnings (loss) per common and
common equivalent share $ (.07) .16
Weighted average number of common
and common equivalent shares 5,555 5,790
See accompanying notes to interim consolidated financial
statements.
FORM 10-Q
-3-
LXE Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)
March 31 December 31
1996 1995
Assets
Current assets:
Cash and interest bearing deposits $ 1,572 1,881
Trade accounts receivable, net 15,137 16,237
Inventories:
Work in process 3,419 3,623
Parts and materials 9,312 8,906
Total inventories 12,731 12,529
Prepaid income taxes 1,332 1,027
Deferred income tax benefit 869 869
Total current assets 31,641 32,543
Property, plant and equipment:
Land 250 250
Building and leasehold improvements 5,394 5,371
Machinery and equipment 18,035 17,213
Furniture and fixtures 1,234 1,238
Total property, plant and equipment 24,913 24,072
Less accumulated depreciation and
amortization 12,579 11,949
Net property, plant and equipment 12,334 12,123
Other assets (note 4) 5,014 4,815
$48,989 49,481
See accompanying notes to interim consolidated financial statements.
FORM 10-Q
-4-
LXE Inc.
Consolidated Balance Sheets (Unaudited), Continued
(In thousands, except share data)
March 31 December 31
1996 1995
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 280 275
Current installments of long-term debt
to Parent 275 275
Accounts payable 5,017 4,431
Accrued compensation costs 1,191 994
Deferred revenue 1,784 1,296
Other current liabilities 367 220
Due to Parent 362 240
Total current liabilities 9,276 7,731
Long-term debt, excluding current installments 5,351 6,925
Long-term debt to Parent, excluding current
installments 1,328 1,397
Deferred income taxes 817 817
Total liabilities 16,772 16,870
Stockholders' equity:
Preferred stock of $1.00 par value per share. - -
Authorized 5,000,000 shares; none issued
Common stock of $.01 par value per share.
Authorized 20,000,000 shares; issued and
outstanding 5,554,644 in 1996 and 5,436,275
in 1995 56 56
Additional paid-in capital 18,949 18,949
Retained earnings 13,212 13,606
Total stockholders' equity 32,217 32,611
$48,989 49,481
See accompanying notes to interim consolidated financial statements.
FORM 10-Q
-5-
LXE Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Three Months Ended March 31
1996 1995
Cash flows from operating activities:
Net earnings (loss) $ (394) 907
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 630 645
Changes in operating assets and liabilities:
Trade accounts receivable 1,100 (925)
Inventories (202) (1,719)
Accounts payable 586 (7)
Income taxes (305) (357)
Accrued compensation costs 197 (4)
Deferred revenue 488 258
Due to Parent and other 224 (388)
Net cash provided by (used in)
operating activities 2,324 (1,590)
Cash flows from investing activities:
Purchase of property, plant and equipment (841) (1,213)
Capitalized product software (154) -
Net cash used in investing activities (995) (1,213)
Cash flows from financing activities:
Payments on long-term debt (1,569) (61)
Payments on long-term debt to Parent (69) (69)
Proceeds from exercise of stock options - 165
Net cash provided by (used in)
financing activities (1,638) 35
Net change in cash and interest
bearing deposits (309) (2,768)
Cash and interest bearing deposits at January 1 1,881 7,937
Cash and interest bearing deposits at March 31 $ 1,572 5,169
Supplemental disclosure of cash flow information:
Cash paid for interest $ 132 51
Cash paid for income taxes $ 63 939
See accompanying notes to interim consolidated financial statements.
FORM 10-Q
-6-
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 Report on Form 10-K for the year ended December 31, 1995.
(2) Earnings (Loss) per Share
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 equivalent shares derived from dilutive stock options,
except dilutive stock options are excluded for loss 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
Following is a summary of other assets as of March 31, 1996 and December
31, 1995 (in thousands):
March 31, December 31,
1996 1995
Investment in non-public U.S. Company $2,500 2,500
Capitalized software costs 1,321 1,167
Other 1,193 1,148
Total other assets 5,014 4,815
The Company's investment in a non-public U.S. company comprises a minority
ownership interest and a loan repayable in three years. This investment is
valued at cost.
The Company also capitalized certain costs to develop software which will
be licensed to customers. Capitalized software costs 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.
FORM 10-Q
-7-
LXE Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
First quarter revenues were higher in the Company's international markets
but lower in the North American market, resulting in a net decrease in
consolidated revenues from the first quarter of 1996 compared with the same
period in 1995. The Company is addressing its lower North American
revenues by continuing to expand its product line to support more
industry-standard technology platforms and systems, and by seeking to form
strategic partnerships in new markets such as health care information
management.
Cost of sales, as a percentage of net sales, was 54% in the first quarter
of 1996 compared with 53% in 1995, reflecting competitive pricing
pressures. Selling, general and administrative expenses were higher in
1996 due to continued growth of the European sales subsidiaries. Product
development and engineering expenses increased in the first quarter of 1996
compared with 1995 due to efforts to expand the product line.
Other income for the first quarter of 1996 was higher than in 1995 because
of currency translation gains associated with the Company's European
operations. Interest expense has increased with the Company's higher level
of borrowing under its revolving credit agreement. The effective tax rate
for the first quarter of 1996 was 38%, which was comparable with the rate
for the preceding fiscal year.
Liquidity and Capital Resources
Net cash provided by operations, less cash used in investing activities
(mainly purchases of property, plant and equipment), resulted in $1.3
million net positive cash flow before debt payments. The Company made
total debt payments of $1.6 million, including $1.5 million to reduce the
level of borrowing under the revolving credit loan. Management does not
expect to generate significant positive cash flow in the second quarter of
1996, but believes that the Company's present liquidity, together with cash
from operations and sources of external financing, will support its current
business activities and capital investment plans.
FORM 10-Q
-8-
LXE Inc.
PART II
Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibit filed as part of this Report:
27.1 Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Registrant during the period covered by this report on Form 10-Q.
FORM 10-Q
-9-
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.
LXE Inc.
By: /s/ Date: 5/14/96
Thomas E. Sharon, Chairman of the Board
and Chief Executive Officer
By: /s/ Date: 5/14/96
Don T. Scartz, Treasurer
(Chief Financial Officer)
FORM 10-Q
-10-
LXE Inc.
Exhibit Index
Page No.
Exhibit 27.1 Financial Data Schedule 11