-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LsQUNPG8G5PpawiEAH0OOMSTzMNcQDXZoPLF6d0W+4ndkOnnkn9+PdHhpO3B3UBd rGeIvAEcGAGbHqlugXe9qw== 0000205303-98-000001.txt : 19980305 0000205303-98-000001.hdr.sgml : 19980305 ACCESSION NUMBER: 0000205303-98-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980304 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENGINEERING MEASUREMENTS CO CENTRAL INDEX KEY: 0000205303 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 840572936 STATE OF INCORPORATION: CO FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-09880 FILM NUMBER: 98557114 BUSINESS ADDRESS: STREET 1: 600 DIAGONAL HWY CITY: LONGMONT STATE: CO ZIP: 80501 BUSINESS PHONE: 3036510550 MAIL ADDRESS: STREET 1: 600 DIAGONAL HWY CITY: LONGMONT STATE: CO ZIP: 80501 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: January 31, 1998 or [ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File No.: 0-9880 E N G I N E E R I N G M E A S U R E M E N T S C O M P A N Y (Exact name of Registrant as specified in its charter) Colorado 84-0572936 (State or other jurisdiction of (I.R.S. Identification No.) incorporation or organization) 600 Diagonal Highway, Longmont, Colorado 80501 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303)651-0550 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 Registrant's $.01 par value common stock, as of February 25, 1998 was 2,840,052. Transitional Small Business Disclosure Format. Yes No X . Page 1 of 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements ENGINEERING MEASUREMENTS COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS January 31, April 30, 1998 1997 (unaudited) Current assets: Cash and cash equivalents $763,266 $547,837 Accounts receivable, net of allowance for doubtful accounts and allowance for sales returns of $73,089 at January 31, 1998 and $61,104 at April 30, 1997 1,626,100 1,557,566 Short-term investments 721,492 904,724 Inventories 1,131,815 1,256,597 Prepaid expenses 67,904 23,845 Income taxes receivable 0 160,848 Other receivables 295 62,602 Deferred income taxes 247,374 224,342 ---------- ---------- Total current assets 4,558,246 4,738,361 ---------- ---------- Property and equipment, at cost: Land 568,940 568,940 Building & improvements 1,619,595 1,619,595 Vehicles 22,196 22,196 Machinery and equipment 3,471,155 3,106,342 Office furniture and fixtures 1,164,656 950,271 ----------- ---------- 6,846,542 6,267,344 Less accumulated depreciation (4,290,344) (3,981,412) ----------- ---------- Net property and equipment 2,556,198 2,285,932 ----------- ---------- Other assets 153,250 109,335 TOTAL ASSETS: $7,267,694 $7,133,628 =========== ==========
Page 2 of 10 ENGINEERING MEASUREMENTS COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited) LIABILITIES AND STOCKHOLDER'S EQUITY January 31, April 30, 1998 1997 (unaudited) Current liabilities: Current portion of long-term debt $353,790 $418,382 Accounts payable 565,901 612,538 Accrued liabilities 562,369 515,848 ---------- ----------- Total current liabilities 1,482,060 1,546,768 ---------- ----------- Long-term liabilities: Deferred income taxes 179,700 188,100 ---------- ----------- Total long-term liabilities 179,700 188,100 ---------- ----------- Stockholders' equity: Common stock, $.01 par value; 5,000,000 shares authorized; 3,030,452 shares issued at January 31, 1998, 2,988,452 shares issued at April 30, 1997, 2,840,052 shares outstanding at January 31, 1998, 2,798,052 shares outstanding at April 30, 1997, 30,305 29,885 Capital in excess of par value 2,136,957 2,047,877 Unrealized holding losses (36,247) (30,409) Retained earnings 4,104,618 3,981,106 Treasury stock at cost; 190,400 shares at January 31, 1998, 190,400 shares at April 30, 1997 (629,699) (629,699) ---------- ----------- Total stockholders' equity 5,605,934 5,398,760 ---------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: $7,267,694 $7,133,628 ========== ===========
Page 3 of 10 ENGINEERING MEASUREMENTS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended January 31, January 31, 1998 1997 1998 1997 Sales $2,575,432 $2,402,136 $7,628,677 $7,433,055 Cost of sales 1,533,057 1,335,880 4,530,073 4,099,979 ---------- ---------- ---------- ---------- Gross margin on sales 1,042,375 1,066,256 3,098,604 3,333,076 ---------- ---------- ---------- ---------- Operating expenses: Selling 576,075 620,754 1,792,938 1,784,805 General and administrative 237,561 204,280 733,869 660,741 Research and development 137,895 167,973 471,941 463,641 ---------- ---------- ---------- ---------- Total operating expenses 951,531 993,007 2,998,748 2,909,187 ---------- ---------- ---------- ---------- Income from operations 90,844 73,249 99,856 423,889 ---------- ---------- ---------- ---------- Other income/(expense): Gain/(loss) on sale of stock 37,014 7,812 75,629 13,800 Interest expense (7,930) (9,381) (26,593) (30,281) Royalty and other income 6,206 63,292 46,164 135,313 ---------- ---------- ---------- ---------- Total other income 35,290 61,723 95,200 118,832 Income/(loss) from operations before income taxes 126,134 134,972 195,056 542,721 Income tax provision/(benefit) 44,301 47,461 71,544 205,910 ---------- ---------- ---------- ---------- Net income/(loss) 81,833 87,511 123,512 336,811 ======== ======== ======== ======== Net earnings/(loss) per share $0.03 $0.03 $0.04 $0.12 Net earnings/(loss) per share on a fully diluted basis $0.03 $0.03 $0.04 $0.11 ======== ======== ======== ======== Weighted average number of shares outstanding 2,828,385 2,781,385 2,810,830 2,766,941 ======== ======== ======== ========
Page 4 of 10 ENGINEERING MEASUREMENTS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS: INCREASE/(DECREASE) IN CASH (Unaudited) Nine Months Ended January 31, 1998 1997 Cash flows from operating activities: Net income $ 123,512 $ 336,811 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 348,044 245,398 Deferred tax provision/(benefit) (27,700) (72,300) Provision for doubtful accounts 11,985 (5,831) Gain/(Loss) on sales of investments (95,705) (13,800) Gain on disosal of assets 2,805 2,352 Changes in assets and liabilities- Receivables (18,212) (64,598) Inventories 124,782 123,614 Income taxes receivable and prepaid expenses 116,789 (4,813) Accounts payable and accrued liabilities (116) 117,148 Net cash provided/(used) by ---------- ---------- operating activities 586,184 663,981 ---------- ---------- Cash flows from investing activities: Capital expenditures, net (604,304) (396,666) Expenditures for intangible assets (60,726) (22,197) Investment purchases (1,356,732) (951,102) Proceeds from sale of investments 1,626,099 692,166 Net cash provided by/(used) in ---------- ---------- investing activities (395,663) (677,799) ---------- ---------- Cash flows from financing activities: Payments of long and short term debt (64,592) (108,404) Proceeds from exercise of stock options 89,500 60,000 Principle payment under capital lease obligations 0 (11,538) ---------- ---------- Net cash used in financing activities 24,908 (59,942) Net increase/(decrease) in cash and cash ---------- ---------- equivalents 215,429 (73,760) Cash and cash equivalents at beginning of period 547,837 532,721 ---------- ---------- Cash and cash equivalents at end of period $ 763,266 $ 458,961 ========= ========= Supplemental disclosure of cash flow information: Cash paid during period for-- Interest $ 26,593 $ 30,995 Income taxes 6,659 303,932
Page 5 of 10 ENGINEERING MEASUREMENTS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited, condensed financial statements have been prepared in accordance with the instructions to the Form 10-QSB and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended January 31, 1998 are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 1998. These statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's Form 10-KSB for the fiscal year ended April 30, 1997. 1. Inventories Inventories, stated at the lower of cost (first-in, first-out method) or market, are as follows: January 31, 1998 April 30, 1997 Raw materials and work-in-process $ 973,888 $1,081,823 Finished goods 157,927 174,774 ------------- ------------- $1,131,815 $1,256,597 ========== ==========
2. Investments Investments are carried at fair market value. The Company's investment securities are classified as available for sale and recorded on the balance sheet at fair market value with unrealized gains and losses on these investments shown as a separate component of stockholder's equity, net of related taxes. 3. Income Taxes Deferred income taxes are provided for items which are reported for tax purposes in different periods than in the Statements of Operations. 4. Earnings Per Share Earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. Pursuant to the terms of a loan agreement, a stockholder may convert up to $353,790 in principal and accrued interest into 345,766 shares of common stock at an average price of $1.02 per share. Also during the quarter ended January 31, 1998, there were a total of 197,275 shares outstanding under the Company's stock option plans. Any dillutive effect of the outstanding options and conversion of debt into common stock of 543,041 shares as of January 31, 1998 is reflected in the financial statements. The FASB issued Statements of Financial Accounting Standards (SFAS) 128, Earnings per Share, which will be effective for periods ending after December 15, 1997. Early application is not permitted. Had SFAS 128 been adopted, the following table illustrates the Basic and Diluted EPS for the nine months ended January 31, 1998: Page 6 of 10 For the Nine Months Ended January 31, 1998 Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $123,512 Basic EPS Net Income available to common stockholders $123,512 2,810,830 $0.04 Effective of Dilutive Securities Options and convertible debt 15,581 350,564 Diluted EPS Income available to stockholders plus $139,093 3,161,394 $0.04 assumed conversions
5. Changes in Accounting Principles There have been no changes in accounting principles during these reporting periods. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations A. Financial Condition The Company's net working capital decreased approximately $115,000 during the nine months ended January 31, 1998, primarily due to decreases in short-term investments $183,000, current portion of long term debt $65,000, income taxes receivable $160,000, inventories $125,000, and other receivables $62,000, and increases in accounts receivable $69,000. The current ratio remained relatively unchanged, 3.06 at April 30, 1997, to 3.08 at January 31, 1998. Cash and cash equivalents increased approximately $215,000 at January 31, 1998, compared to April 30, 1997. Capital expenditures were approximately $604,000 during the period, offset by proceeds from investments of approximately $228,000 and cash provided by operations of approximately $586,000. The Company intends to continue investing excess cash in high grade investment securities until the cash is needed for operations. Accounts receivable increased by approximately $18,000 at January 31, 1998, primarily due to higher sales in the third quarter. The Days Sales Outstanding (DSO) rose to 56.4 days for the nine months ended January 31, 1998, compared to 53.5 days for the fiscal year ended April 30, 1997. Inventories decreased approximately $125,000 in the first nine months of the fiscal year. The inventory turnover ratio for the six months ended January 31, 1998, increased to 2.36 compared to 2.03 in fiscal year 1997. Increased sales and better management of the inventory contributed to the improvement in inventory turns. Management will continue to emphasize inventory management. The Company is making monthly payments of interest, of approximately $2,400 to pay off loans from a stockholder; this loan will be paid in full by the end of the current fiscal year. The company does not expect any material capital expenditures in the next six months, and anticipates all cash needs will be satisfied from operations. The Company currently does not have any line of credit arrangements. Page 7 of 10 B. Results of Operations Nine months ended January 31, 1998 compared to the nine months ended January 31, 1997 Sales were approximately $196,000 higher in 1998 compared to 1997, a 2.6% increase for the current year. New product sales year to date are approximately $542,000. The Company's order backlog is lower at January 31, 1998 at approximately $1,162,000, compared to approximately $987,000 at January 31, 1997. Gross profit decreased by approximately $234,000 to 40.6% of sales in 1998 compared to 44.8% in 1997. The lower gross profit is due primarily to labor and overhead being higher at 2.5% and 1.3% respectively. Operating expenses are up approximately $90,000 from last year due primarily to increased selling costs related to new product introduction and product development costs, and increases in bad debt reserves and legal fees. Income from operations decreased approximately $324,000 for the nine months ended January, 1998, compared to the same period a year ago. The Company recognized gains of approximately $76,000 from the sale of stock for the nine months ended January 31, 1998, compared to approximately $14,000 for the nine months ended January 31, 1997. Royalty and other income for the nine months ended January 31, 1998, decreased approximately $89,000 to approximately $46,000 due to lower interest and dividend income from high grade investment securities and the termination of the royalty agreement at April 30, 1997, compared the same period last year. The Company's interest expense has decreased approximately $3,700 for the nine months ended January 31, 1998, compared to the same period ended in 1997, due to the Company's lower outstanding debt. The income tax provision for the nine months ended January 31, 1998 was approximately $72,000 compared to approximately $206,000 for the same period in 1997. The impact of deferred tax items resulted in current tax rates of approximately 36.7% and 37.9% in 1998 and 1997, respectively. Net cash provided by operating activities was $586,184, due to decreases in inventories, income tax receivables and prepaid expenses, along with increased depreciation and amortization costs. Three months ended January 31, 1998 compared to the three months ended January 31, 1997 Sales were approximately $173,000 higher in 1998 compared to 1997, a 7.2% increase, due primarily to new product sales of approximately $244,000. Gross margin decreased by approximately $24,000 to 40.5% of sales in 1998 compared to 44.4% for the same quarter in 1997. The decrease in gross margin in 1998 is due to increases in material cost due to product mix, labor associated with new products and overhead, primarily depreciation, compared to the same period last year. Operating expenses are $50,000 less than last year due primarily to lower selling expenses of approximately $45,000. The Company anticipates selling expenses related to new product sales, and R&D expenses for new product development to continue for several quarters. Management makes no assurance that any of the new products will produce significant additional revenue for the Company. Royalty and other income is approximately $57,000 less for the three months ended January 31, 1998 than for the same period last year due primarily to the termination of the royalty agreement at April 30, 1997, and the collection of a bad debt written off in the same period last year. Page 8 of 10 The income tax provision for the three months ended January 31, 1998 was approximately $44,000 compared to approximately $47,000 for the same period in 1997. The impact of deferred tax items resulted in current tax rates of approximately 35.1% and 35.2% in 1998 and 1997, respectively. PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K A. Exhibits None filed in the quarter ended January 31, 1998. B. Reports on Form 8-K None filed in the quarter ended January 31, 1998. Page 9 of 10 S I G N A T U R E S Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Engineering Measurements Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ENGINEERING MEASUREMENTS COMPANY Registrant Date: March 4, 1998 By: /s/ Charles E. Miller Charles E. Miller, Chairman (Principal Financial Officer and Chief Accounting Officer) Page 10 of 10 March 4, 1998 ENGINEERING MEASUREMENTS COMPANY (NASDAQ SYMBOL: EMCO) Second Quarter Results Corporate Contact: Charles E. Miller (303) 651-0550 Longmont, Colorado: Engineering Measurements Company announced today a net income of $81,833 ($.03 per share) for the second quarter ended January 31, 1998. Net income for the nine-month period ended January 31, 1998 was $123,512 ($.04 per share). This compares to net income for the three-month and nine- month periods last year of $87,511 ($.03 per share) and $336,811 ($.12 per share), respectively. Sales for the quarter were approximately $2.58 million, and for the nine-month period approximately $7.63 million; a 7.2% and a 2.6% increase respectively over the comparable periods last year. Income from operations for the three and nine month periods ended January 31, 1998, were approximately $82,000 and $124,000, as compared to approximately $88,000 and $337,000 for the same periods last year. E N G I N E E R I N G M E A S U R E M E N T S C O M P A N Y Operating Results Third Quarter Ended January 31, 1998 Three Months Ended Nine Months Ended January 31, January 31, 1998 1997 1998 1997 Net sales $2,575,432 $2,402,136 $7,628,677 $7,433,055 Income from operations 90,844 73,249 99,856 423,889 Other income 35,290 61,723 95,200 118,832 Income taxes 44,301 47,461 71,544 205,910 Net income 81,833 87,511 123,512 336,811 Net earnings per share $.03 $.03 $.04 $.12 Number of shares outstanding 2,828,385 2,781,385 2,810,830 2,766,941
EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-QSB
5 This schedule contains summary financial information extracted from the Balance Sheet and statement of operations found on pages 2, 3 and 4 of the company's form 10-QSB for the year-to-date, and is qualified in its entirety by reference to such financial statements. 1000 9-MOS APR-30-1998 JAN-31-1998 763 721 1,699 73 1,132 4,558 6,847 4,290 7,268 1,482 0 30 0 0 5,576 7,268 7,629 7,629 4,530 4,530 2,972 27 27 195 71 124 0 0 0 124 .04 .04 -----END PRIVACY-ENHANCED MESSAGE-----