TRANSACT TECHNOLOGIES INC - Quarter Report: 2012 May (Form 10-Q)

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x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware		06-1456680
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

One Hamden Center, 2319 Whitney Avenue, Suite 3B, Hamden, CT		06518
(Address of Principal Executive Offices)		(Zip Code)

(203) 859-6800

(Registrant’s Telephone Number, Including Area Code)

Large accelerated filer  o	Accelerated filer  ý
Non-accelerated filer  o (Do not check if a smaller reporting company)	Smaller reporting company  o

 

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PART I - Financial Information:		Page
Item 1	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011	3
	Condensed Consolidated Statements of Income for the three months ended March 31, 2012 and 2011	4
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and 2011	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4	Controls and Procedures	16
PART II - Other Information:
Item 1	Legal Proceedings	16
Item 1A	Risk Factors	16
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3	Defaults Upon Senior Securities	17
Item 4	Mine Safety Disclosures	17
Item 5	Other Information	17
Item 6	Exhibits	17
SIGNATURES		18

		March 31,				December 31,
		2012				2011
Assets:		(In thousands, except share data)
Current assets:
Cash and cash equivalents		$	7,873			$	6,863
Accounts receivable, net			12,830				9,583
Inventories			11,822				14,151
Refundable income taxes			-				446
Deferred tax assets			1,636				1,636
Other current assets			583				375
Total current assets			34,744				33,054
Fixed assets, net			3,146				3,358
Goodwill			2,621				2,518
Deferred tax assets			885				890
Intangible assets, net of accumulated amortization of $877 and $730, respectively			2,724				2,861
Other assets			133				59
			9,509				9,686
Total assets		$	44,253			$	42,740
Liabilities and Shareholders’ Equity:
Current liabilities:
Accounts payable		$	2,844			$	3,019
Accrued liabilities			2,481				2,672
Deferred revenue			650				141
Total current liabilities			5,975				5,832
Deferred revenue, net of current portion			201				224
Deferred rent, net of current portion			347				357
Accrued contingent consideration (Note 3)			680				680
Other liabilities			307				334
			1,535				1,595
Total liabilities			7,510				7,427
Shareholders’ equity:
Common stock, $0.01 par value, 20,000,000 shares authorized; 10,868,702 and 10,851,955 shares issued, respectively; 9,386,854 and 9,390,262 shares outstanding, respectively			109				108
Additional paid-in capital			25,413				25,058
Retained earnings			22,821				21,613
Accumulated other comprehensive loss, net of tax			(60	)			(71	)
Treasury stock, at cost, 1,481,848 and 1,461,693 shares, respectively			(11,540	)			(11,395	)
Total shareholders’ equity			36,743				35,313
Total liabilities and shareholders’ equity		$	44,253			$	42,740

 

		Three Months Ended
		March 31,
		2012				2011
		(In thousands, except share data)
Net sales		$	17,559			$	20,694
Cost of sales			10,781				13,762
Gross profit			6,778				6,932
Operating expenses:
Engineering, design and product development			1,213				769
Selling and marketing			1,601				1,519
General and administrative			2,000				1,856
Business consolidation and restructuring (Note 6)			54				-
			4,868				4,144
Operating income			1,910				2,788
Interest and other (expense) income:
Interest, net			2				4
Other, net			(24	)			15
			(22	)			19
Income before income taxes			1,888				2,807
Income tax provision			680				982
Net income		$	1,208			$	1,825
Net income per common share:
Basic		$	0.13			$	0.19
Diluted		$	0.13			$	0.19
Shares used in per-share calculation:
Basic			9,427				9,446
Diluted			9,532				9,702

 

		Three Months Ended
		March 31,
		2012				2011
		(In thousands)
Net income		$	1,208			$	1,825
Foreign currency translation adjustment, net of tax			11				8
Comprehensive income		$	1,219			$	1,833

 

		Three Months Ended
		March 31,
		2012				2011
		(In thousands)
Cash flows from operating activities:
Net income		$	1,208			$	1,825
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Share-based compensation expense			157				140
Incremental tax benefits from stock options exercised			(6	)			(48	)
Depreciation and amortization			447				384
Loss on sale of fixed assets			2				-
Foreign currency transaction losses (gains)			20				(15	)
Changes in operating assets and liabilities:
Accounts receivable			(3,238	)			(3,807	)
Inventories			2,183				(319	)
Refundable income taxes			464				-
Other current and long term assets			(282	)			(187	)
Accounts payable			(175	)			579
Accrued liabilities and other liabilities			375				190
Net cash provided by (used in) operating activities			1,155				(1,258	)
Cash flows from investing activities:
Capital expenditures			(44	)			(122	)
Additions to capitalized software			(10	)			(318	)
Net cash used in investing activities			(54	)			(440	)
Cash flows from financing activities:
Proceeds from stock option exercises			59				107
Purchases of common stock for treasury			(145	)			(544	)
Incremental tax benefits from stock options exercised			6				48
Net cash used in financing activities			(80	)			(389	)
Effect of exchange rate changes on cash and cash equivalents			(11	)			(3	)
Increase (decrease) in cash and cash equivalents			1,010				(2,090	)
Cash and cash equivalents, beginning of period			6,863				11,285
Cash and cash equivalents, end of period		$	7,873			$	9,195

 

		March 31,				December 31,
		2012				2011
		(In thousands)
Raw materials and purchased component parts		$	6,875			$	6,863
Work-in-process			61				71
Finished goods			4,886				7,217
		$	11,822			$	14,151

			(In thousands)
Balance, beginning of period		$	421
Accruals for warranties issued during the period			19
Changes in estimates			5
Settlements during the period			(69	)
Balance, end of period		$	376

 

		(In thousands)
Accrual balance, beginning of period		$	45
Severance and moving charges			54
Cash payments			(43	)
Accrual balance, end of period		$	56

		Three months ended
		March 31,
		2012				2011
		(In thousands, except per share data)
Net income		$	1,208			$	1,825
Shares:
Basic:  Weighted average common shares outstanding			9,427				9,446
Add:  Dilutive effect of outstanding options and restricted stock as determined by the treasury stock method			105				256
Diluted:  Weighted average common and common equivalent shares outstanding			9,532				9,702
Net income per common share:
Basic		$	0.13			$	0.19
Diluted		$	0.13			$	0.19

Balance at December 31, 2011		$	35,313
Net income			1,208
Share-based compensation expense			157
Issuance of deferred stock units			134
Proceeds from issuance of shares from exercise of stock options			59
Foreign currency translation adjustment			11
Tax benefit related to employee stock sales and vesting of restricted stock			6
Purchases of common stock for treasury			(145	)
Balance at March 31, 2012		$	36,743

		Three months ended								Three months ended								Change
		March 31, 2012								March 31, 2011								$					%
Banking and point-of-sale		$	2,336				13.3	%		$	2,462				11.9	%		$	(126	)			(5.1	%)
Casino and gaming			9,411				53.6	%			6,954				33.6	%			2,457				35.3	%
Lottery			1,030				5.9	%			7,542				36.4	%			(6,512	)			(86.3	%)
Printrex			1,239				7.0	%			-				-				1,239				100	%
TSG			3,543				20.2	%			3,736				18.1	%			(193	)			(5.2	%)
		$	17,559				100.0	%		$	20,694				100.0	%		$	(3,135	)			(15.1	%)
International *		$	6,222				35.4	%		$	5,422				26.2	%		$	800				14.8	%
* International sales do not include sales of printers made to domestic distributors or other domestic customers who may in turn ship those printers to international destinations.

		Three months ended								Three months ended								Change
		March 31, 2012								March 31, 2011								$					%
Domestic		$	2,271				97.2	%		$	2,084				84.6	%		$	187				9.0	%
International			65				2.8	%			378				15.4	%			(313	)			(82.8	%)
		$	2,336				100.0	%		$	2,462				100.0	%		$	(126	)			(5.1	%)

		Three months ended								Three months ended								Change
		March 31, 2012								March 31, 2011								$					%
Domestic		$	3,827				40.7	%		$	2,350				33.8	%		$	1,477				62.9	%
International			5,584				59.3	%			4,604				66.2	%			980				21.3	%
		$	9,411				100.0	%		$	6,954				100.0	%		$	2,457				35.3	%

		Three months ended								Three months ended								Change
		March 31, 2012								March 31, 2011								$					%
Domestic		$	1,015				98.5	%		$	7,395				98.1	%		$	(6,380	)			(86.3	%)
International			15				1.5	%			147				1.9	%			(132	)			(89.8	%)
		$	1,030				100.0	%		$	7,542				100.0	%		$	(6,512	)			(86.3	%)

		Three months ended
		March 31, 2012
Domestic		$	1,075				86.8	%
International			164				13.2	%
		$	1,239				100.0	%

		Three months ended								Three months ended								Change
		March 31, 2012								March 31, 2011								$					%
Domestic		$	3,149				88.9	%		$	3,443				92.2	%		$	(294	)			(8.5	%)
International			394				11.1	%			293				7.8	%			101				34.5	%
		$	3,543				100.0	%		$	3,736				100.0	%		$	(193	)			(5.2	%)

Three months ended March 31,								Percent				Percent of				Percent of
2012				2011				Change				Total Sales - 2012				Total Sales - 2011
$	6,778			$	6,932				(2.2	%)			38.6	%			33.5	%

Three months ended March 31,								Percent				Percent of				Percent of
2012				2011				Change				Total Sales - 2012				Total Sales - 2011
$	1,213			$	769				57.7	%			6.9	%			3.7	%

Three months ended March 31,								Percent				Percent of				Percent of
2012				2011				Change				Total Sales - 2012				Total Sales - 2011
$	1,601			$	1,519				5.4	%			9.1	%			7.3	%

Three months ended March 31,								Percent				Percent of				Percent of
2012				2011				Change				Total Sales - 2012				Total Sales - 2011
$	2,000			$	1,856				7.8	%			11.4	%			9.0	%

Three months ended March 31, 2012			Percent of Total Sales - 2012
$	54		0.3%

Three months ended March 31,								Percent				Percent of				Percent of
2012				2011				Change				Total Sales - 2012				Total Sales - 2011
$	1,910			$	2,788				(31.5	%)			10.9	%			13.5	%

·	We reported net income of $1,208,000.

·	We recorded depreciation, amortization, and non-cash compensation expense of $604,000, including $95,000 of amortization related to intangible assets acquired from Printrex.

·	Accounts receivable increased $3,238,000 due to a higher concentration of sales made during the latter portion of the quarter.

·	Inventories decreased $2,183,000 due to a concerted effort to significantly reduce inventory purchases and to fulfill sales during the quarter with existing inventory stock.

·	Accounts payable decreased $175,000 due to lower inventory purchases and the timing of payments during the quarter.

·

Accrued liabilities and other liabilities increased $375,000 due primarily to additional deferred revenue associated with new contracts for paper qualification testing entered into during the quarter and the recognition of an income tax payable (after fully reducing refundable income taxes) to reflect our estimated tax liability for the first quarter results. These increases were partially offset by lower payroll and fringe benefit related accruals based on the payment of 2011 annual bonuses in March 2012.

·	We reported net income of $1,825,000.

·	We recorded depreciation, amortization, and non-cash compensation expense of $524,000.

·	Accounts receivable increased $3,807,000 due to higher sales volume and the timing of sales during the quarter.

·	Inventories increased $319,000 due to higher stocking levels resulting from anticipated higher sales volume in the first half of 2011.

·	Accounts payable increased $579,000 due to increased inventory purchases and the timing of payments during the quarter.

·	Accrued liabilities and other liabilities increased $190,000 due primarily to higher income tax liabilities resulting from a higher level of income before taxes, largely offset by lower payroll and fringe benefit related accruals based on the payment of 2010 annual bonuses in March 2011.

Financial Covenant	Requirement/Restriction	Calculation at March 31, 2012
Operating cash flow / Total debt service	Minimum of 1.25 times	92.1 times
Funded Debt / EBITDA	Maximum of 3.0 times	0 times

Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Approximate Dollar Value of Shares that May Yet Be Purchased under the May 2010 Program
January 1, 2012 – January 31, 2012			447			$	7.65				447			$	7,140,000
February 1, 2012 – February 29, 2012			-				-				-			$	7,140,000
March 1, 2012 – March 31, 2012			19,708				7.19				19,708			$	11,998,000	*
Total			20,155			$	7.20				20,155

Item 5.  OTHER INFORMATION

Item 6.  EXHIBITS

Exhibit 10.16		Amendment No. 1 to Lease Agreement between Bomax Properties, LLC and Transact Technologies, Inc.
Exhibit 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

	TRANSACT TECHNOLOGIES INCORPORATED
	(Registrant)
	/s/ Steven A. DeMartino
May 10, 2012	Steven A. DeMartino
	President, Chief Financial Officer, Treasurer and Secretary
	(Principal Financial and Accounting Officer)

Exhibit
10.16		Amendment No. 1 to Lease Agreement between Bomax Properties, LLC and Transact Technologies, Inc.
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.