UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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Commission File Number 0-19051
LXE INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1829757
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(State or other jurisdiction of (IRS Employer ID Number)
incorporation of organization)
303 Research Drive
Norcross, Georgia 30092
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(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 November 13, 1996:
Class Number of Shares
Common Stock, $.01 par Value 5,574,518
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 and Nine Months Ended
September 30, 1996 and 1995 3
Consolidated Balance Sheets - September 30,
1996 and December 31, 1995 4-5
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996
and 1995 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 Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
FORM 10-Q
-3-
LXE INC.
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30 September 30
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1996 1995 1996 1995
------ ------ ------ ------
Net sales $18,243 11,348 48,935 45,188
Cost of sales 10,756 7,197 27,711 25,718
------ ------ ------ ------
Gross profit 7,487 4,151 21,224 19,470
Selling, general and
administrative expenses 4,717 5,395 15,276 15,170
Product development and
engineering expenses 1,703 1,993 5,118 5,100
------ ------ ------ ------
Operating income (loss) 1,067 (3,237) 830 (800)
Interest and other income, net
of foreign exchange gains
and losses (50) 55 31 473
Interest expense (204) (132) (536) (247)
------ ------ ------ ------
Earnings (loss) before
income taxes 813 (3,314) 325 (574)
Income taxes 309 (1,291) 125 (275)
------ ------ ------ ------
Net earnings (loss) $ 504 (2,023) 200 (299)
====== ====== ====== ======
Net earnings (loss) per
common and common equiva-
lent share $ .09 (.36) .04 (.05)
====== ====== ====== ======
Weighted average number
of common and common
equivalent shares 5,734 5,555 5,659 5,525
See accompanying notes to interim consolidated financial statements.
FORM 10-Q
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LXE INC.
Consolidated Balance Sheets (Unaudited)
(In thousands)
September 30 December 31
1996 1995
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ASSETS
Current assets:
Cash and interest bearing deposits $ 2,547 1,881
Trade accounts receivable, net 18,969 16,237
Inventories:
Work in process 2,859 3,623
Parts and materials 10,094 8,906
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Total inventories 12,953 12,529
Prepaid income taxes 1,291 1,027
Deferred income tax benefit 869 869
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Total current assets 36,629 32,543
Property, plant and equipment:
Land 250 250
Building and leasehold improvements 5,462 5,371
Machinery and equipment 19,721 17,213
Furniture and fixtures 1,248 1,238
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Total property, plant
and equipment 26,681 24,072
Less accumulated depreciation and
amortization 13,996 11,949
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Net property, plant and
equipment 12,685 12,123
Other assets (note 4) 5,074 4,815
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$ 54,388 49,481
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See accompanying notes to interim consolidated financial statements.
FORM 10-Q
-5-
LXE INC.
Consolidated Balance Sheets (Unaudited), continued
(In thousands, except share data)
September 30 December 31
1996 1995
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 143 275
Current installments of long-term debt
to Parent 275 275
Accounts payable 7,224 4,431
Accrued compensation costs 1,061 994
Deferred revenue 1,463 1,296
Other current liabilities 495 220
Due to Parent 290 240
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Total current liabilities 10,951 7,731
Long-term debt, excluding current
installments 8,500 6,925
Long-term debt to Parent, excluding
current installments 1,191 1,397
Deferred income taxes 817 817
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Total liabilities 21,459 16,870
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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 5,574,518 in
1996 and 5,436,275 in 1995 56 56
Additional paid-in capital 19,067 18,949
Retained earnings 13,806 13,606
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Total stockholders' equity 32,929 32,611
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$54,388 49,481
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See accompanying notes to interim consolidated financial statements.
FORM 10-Q
-6-
LXE INC.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended September 30
1996 1995
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Cash flow from operating activities:
Net earnings (loss) $ 200 (299)
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization 2,047 2,038
Changes in operating assets and
liabilities:
Trade accounts receivable (2,732) 3,283
Inventories (424) (5,043)
Accounts payable 2,793 (222)
Income taxes (264) (1,760)
Accrued compensation costs 67 (275)
Deferred revenue 167 (192)
Due to Parent and other 389 (791)
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Net cash provided by (used in)
operating activities 2,243 (3,261)
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Cash flows from investing activities:
Purchase of property, plant and equipment (2,609) (3,643)
Capitalized product software costs and
other market-related investments (323) (3,143)
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Net cash used in investing
activities (2,932) (6,786)
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Cash flows from financing activities:
Repayment of long-term debt (207) (183)
Repayment of long-term debt to Parent (206) (206)
Borrowing under line of credit 1,650 4,650
Proceeds from exercise of stock options 118 (136)
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Net cash provided by financing
activities 1,355 4,125
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Net change in cash and cash
equivalents 666 (5,922)
Cash and cash equivalents at January 1 1,881 7,937
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Cash and cash equivalents at September 30 $2,547 2,015
===== =====
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 204 247
Cash paid for income taxes $ 70 1,378
See accompanying notes to interim consolidated financial statements.
FORM 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 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 equivalents 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 September 30, 1996 and
December 31, 1995 (in thousands):
September 30, December 31,
1996 1995
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Investment in non-public U.S. Company $ 2,500 2,500
Capitalized software costs 1,392 1,167
Other 898 1,148
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Total other assets $ 4,790 4,815
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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
-8-
LXE INC.
ITEM 2. Management's Discussion And Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Consolidated sales for the third quarter and first nine months of
1996 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, as a percentage of net
sales, was 59% in 1996 compared with 63% in 1995, mainly
reflecting a higher sales base in 1996 to absorb fixed expenses.
For the first nine months, the cost of sales percentage did not
vary significantly in 1996 from 1995, although the mix of export
and North American sales has changed.
Selling, general and administrative expenses in 1996 compared
with 1995 were lower for the third quarter and comparable for the
first nine months, due mainly to reorganization of the Company's
sales efforts. Product development and engineering expenses did
not vary significantly in 1996 compared with 1995, as the Company
continued efforts to expand its product line.
Interest and other income was reported net of a foreign exchange
loss in the third quarter of 1996 and lower gains for the first
nine months of 1996 compared with 1995, resulting from currency
fluctuations that affected the accounting translation of European
subsidiaries' financial statements into U.S. dollars. Interest
expense increased in 1996 as a result of increased borrowing
under the Company's revolving credit agreement.
The effective income tax rate for the first nine months of 1996
was 38%, which is comparable with the preceding 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 $1.9 million at the beginning
of the year. Management does not expect to generate significant
positive cash flow in the fourth quarter of 1996; however,
management 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
-9-
LXE INC.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibits are 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
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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: 11/14/96
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Thomas E. Sharon, Chairman of the Board
and Chief Executive Officer
By: /s/ Date: 11/14/96
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Don T. Scartz
Chief Financial Officer