-----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, GsSc113oTpPD6uFjdA6B9NxM2ySh+kS/VVgjTT8/BTR0QT1olapCfkJETolbf4up NWA5sv0J9uN9pnZLBAzgzA== 0000205303-99-000007.txt : 19991216 0000205303-99-000007.hdr.sgml : 19991216 ACCESSION NUMBER: 0000205303-99-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991215 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: 99775247 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 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: October 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO 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 December 2, 1999, was 4,087,886. Transitional Small Business Disclosure Format. Yes No X . Page 1 of 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) ASSETS October 31,1999 April 30,1999 Current assets: Cash and cash equivalents $478,493 $697,697 Accounts receivable, net of allowance for doubtful accounts and allowance for sales returns of $101,210 at October 31, 1999 and $75,990 April 30, 1999 1,406,069 1,097,330 Short-term investments 657,409 556,288 Inventories 1,379,434 1,667,011 Prepaid expenses 65,642 31,757 Deferred income taxes 297,694 260,649 ---------- --------- Total current assets 4,284,741 4,310,732 ---------- --------- Property and equipment, at cost: Land 568,940 568,940 Building & improvements 1,661,870 1,624,950 Vehicles 22,196 22,196 Machinery and equipment 4,340,390 4,099,524 Office furniture and fixtures 1,347,630 1,301,489 ---------- --------- 7,941,026 7,617,099 Less accumulated depreciation (4,976,354) (4,725,996) ---------- ---------- Net property and equipment 2,964,672 2,891,103 ---------- --------- Other assets Note receivable --- 138,920 Other assets, net of amortization of $112,019 at October 31, 1999 and $103,306 at April 31, 1999 280,371 132,351 ---------- -------- Total other assets 280,371 271,271 TOTAL ASSETS: $7,529,784 $7,473,106 ============ ============ The accompanying notes are an integral part of these financial statements. (Continued) Page 2 of 10 ENGINEERING MEASUREMENTS COMPANY BALANCE SHEETS (Unaudited) LIABILITIES AND STOCKHOLDERS EQUITY October 31, 1999 April 30, 1999 Current liabilities: Accounts payable $324,559 $320,853 Accrued compensation 254,821 278,238 Accrued liabilities 385,943 372,218 ------------ ------------ Total current liabilities 965,323 971,309 ------------ ------------ Long-term liabilities: Deferred income taxes 220,100 220,500 ------------ ------------ Total long-term liabilities 220,100 220,500 ------------ ------------ Stockholders' equity: Common stock, $.01 par value; 5,000,000 shares authorized; 4,260,261 shares issued at October 31,1999, 4,232,774 shares issued at April 30, 1999, 4,069,861 shares outstanding at October 31, 1999, 4,042,374 shares outstanding at April 30, 1999, 42,603 42,328 Capital in excess of par value 2,761,155 2,650,332 Unrealized holding losses (net of taxes) (102,908) (38,711) Retained earnings 4,273,210 4,257,047 Treasury stock at cost; 190,400 shares at October 31, 1999, and April 30, 1999 (629,699) (629,699) ------------ ------------ Total stockholders' equity 6,344,361 6,281,297 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY: $7,529,784 $7,473,106 ============ ============ The accompanying notes are an integral part of these financial statements. Page 3 of 10 ENGINEERING MEASUREMENTS COMPANY STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended October 31, October 31, 1999 1998 1999 1998 Sales $2,452,300 $2,479,486 $4,679,890 $4,948,735 Cost of sales 1,457,149 1,489,431 2,814,062 2,884,024 ----------- ---------- ----------- --------- Gross margin on sales 995,151 990,055 1,865,828 2,064,711 ----------- ---------- ----------- --------- Operating expenses: Selling 506,236 534,641 960,233 1,128,893 General and administrative 211,142 221,604 442,496 487,333 Research and development 222,192 173,280 459,819 333,838 ----------- ---------- ----------- --------- Total operating expenses 939,570 929,525 1,862,548 1,950,064 ----------- ---------- ----------- --------- Income from operations 55,581 60,530 3,280 114,647 ----------- ---------- ----------- --------- Other income/(expense): Gain on sale of stock 1,395 3,714 16,380 13,427 Interest expense (110) (204) (274) (204) Other income 14,882 28,869 28,366 65,284 ----------- ---------- ----------- --------- Total other income 16,167 32,379 44,472 78,507 Income from operations before income taxes 71,748 92,909 47,752 193,154 Income tax provision 61,046 7,640 31,589 33,106 ----------- ---------- ----------- --------- Net income $10,702 $85,269 $16,163 $160,048 =========== ========== =========== ========= Other comprehensive income Unrealized holding gain/(loss) (62,884) (14,997) (64,197) (30,667) Tax benefit of stock option exercise 22,000 0 22,000 0 ----------- ---------- ----------- --------- Comprehensive income (loss) ($30,182) $70,272 ($26,034) $129,381 =========== ========== =========== ========= Net earnings per share $0.00 $0.02 $0.00 $0.04 Net earnings per share on a fully diluted basis $0.00 $0.02 $0.00 $0.04 =========== ========== ========== ========= Weighted average number of shares outstanding 4,068,194 4,021,237 4,061,438 4,010,282 =========== ========== ========== =========
The accompanying notes are an integral part of these financial statements. Page 4 of 10 ENGINEERING MEASUREMENTS COMPANY STATEMENTS OF CASH FLOWS: INCREASE/(DECREASE) IN CASH (Unaudited) Six Months Ended October 31, 1999 1998 Cash flows from operating activities: Net income $ 16,163 $ 160,048 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 262,147 227,291 Deferred tax provision/(benefit) 3,600 (45,700) Provision for doubtful accounts 25,220 2,806 (Gain)/Loss on sales of investments (16,380) (13,427) (Gain)/Loss on disposal of assets --- (5,000) Stock compensation 1,000 --- Changes in assets and liabilities- Receivables (333,959) (80,879) Inventories 287,577 (102,484) Income taxes receivable and prepaid expenses (33,885) 18,666 Accounts payable and accrued liabilities (5,986) 461,654 ----------- ---------- Net cash provided/(used) by operating activities 205,497 622,975 ----------- ---------- Cash flows from investing activities: Capital expenditures, net (323,927) (701,514) Expenditures for intangible assets (22,689) --- Proceeds from/(expenditures for) note receivable 1,800 (51,297) Investment purchases (499,623) (187,220) Proceeds from sale of investments 309,640 275,292 Proceeds from sale of fixed assets --- 5,000 ----------- ---------- Net cash provided by/(used) in investing activities (534,799) (659,739) ----------- ---------- Cash flows from financing activities: Proceeds from exercise of stock options 88,098 87,814 Tax benefit of stock options exercised 22,000 --- ----------- ---------- Net cash used in financing activities 110,098 87,814 ----------- ---------- Net increase/(decrease) in cash and cash equivalents (219,204) 51,050 Cash and cash equivalents at beginning of period 697,697 940,687 ----------- ---------- Cash and cash equivalents at end of period $ 478,493 $ 991,737 Supplemental disclosure of cash flow information: Cash paid during period for-- Interest $ 274 $ 204 Income taxes 6,335 2,048 Supplemental disclosure for non cash items: Stock Compensation $ 1,000 - The accompanying notes are an integral part of these financial statements. Page 5 of 10 ENGINEERING MEASUREMENTS COMPANY NOTES TO 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 six months ended October 31, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2000. 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, 1999. 1. Inventories Inventories, stated at the lower of cost (first-in, first-out method) or market, are as follows: October 31, 1999 April 30, 1999 Raw materials and work-in-process $1,060,867 $1,263,617 Finished goods 318,567 403,394 ------------ ------------ $1,379,434 $1,667,011 ============ ============ 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 stockholders' 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. During the six months ended October 31, 1999, there were a total of 340,432 shares outstanding under the Company's stock option plans. Any dilutive effect of the outstanding options into common stock as of October 31, 1999, is reflected in the financial statements. Page 6 of 10 The FASB issued Statements of Financial Accounting Standards (SFAS) 128, Earnings per Share, which is effective for periods ending after December 15, 1997. For the Six Months Ended October 31, 1999 Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $16,163 Basic EPS Net Income available to common stockholders $16,163 4,061,438 $0.00 Effect of Dilutive Securities Options 0 94,599 Diluted EPS Income available to stockholders plus assumed conversions $16,163 4,156,037 $0.00 5. Changes in Accounting Principles There have been no changes in accounting principles during these reporting periods. 6. Segment Information EMCO's core business has been, and continues to be, in the manufacture of flow measurement devices and systems segment, SIC Code No. 3823. In the past, EMCO has reported all of its operations in this segment. Effective with this filing of the Company's 10-QSB, EMCO adopts SFAS 131 related to reporting for segments of the business. EMCO's contract electronics manufacturing (CEM) division, operating under the trade name Advanced Technology Group (ATG), comes within the definition of SIC Code No. 3672. ATG sales (all domestic) for the three and six month periods ending October 31, 1999, exceeded 10% of the total Company's sales which triggered the requirement to report information by segments. The information reported below is similar to information used by the management and directors of the company to assess the performance of the operating segments and/or to allocate resources to those segments. This information is based upon the Company's books, contains no inter-segment revenues and utilizes estimated allocations of expenses and assets. Segment profits are computed at the same level as income from operations on the Statement of Operations. Segment assets for ATG are for directly purchased long term equipment and do not reflect any allocation of the building or other assets such as cash, accounts receivable or inventory. This information has not been audited. FY 2000 FY 1999 Contract Contract Electronics Electronics Flow Products Manufacturing Totals Flow Products Manufacturing Totals Six Months Ended October 31: Revenues 4,113,757 566,133 4,679,890 4,606,792 341,943 4,948,735 Depreciation & Amortization 191,365 70,782 262,147 193,761 33,530 227,291 Segment Profits (72,231) 75,511 3,280 80,762 33,885 114,647 Segment Assets 7,013,789 515,995 7,529,784 7,251,915 553,355 7,805,270 Expenditures for Segment Assets 268,090 55,837 323,927 337,598 363,916 701,514 Three months ended October 31: Revenues 2,169,637 282,663 2,452,300 2,300,575 178,911 2,479,486 Depreciation & Amortization 96,616 35,707 132,323 97,710 19,808 117,518 Segment Profits 17,614 37,967 55,581 76,068 (15,538) 60,530 Segment Assets 7,013,789 515,995 7,529,784 7,251,915 553,355 7,805,270 Expenditures for Segment Assets 196,760 53,049 249,809 129,048 363,916 492,964
Page 7 of 10 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 $20,000 during the six months ended October 31, 1999. The decrease is primarily due to decreases in cash and inventory offset by increases in accounts receivable, short term investments. The current ratio was at 4.4 at both October 31, 1999 and April 30, 1999. Cash and cash equivalents decreased approximately $219,000 at October 31, 1999, compared to April 30, 1999. Net investment purchases of approximately $190,000 and capital and intangibles expenditures of approximately $346,000 were the principal consumers of cash during the period. Cash from operations of approximately $227,000 and proceeds from stock option exercises of approximately $88,000 were the primary sources of cash during the first six months of the fiscal year. The Company intends to continue investing excess cash in investment securities until the cash is needed for operations. Accounts receivable increased by approximately $334,000 at October 31, 1999, due to higher sales. The Days Sales Outstanding (DSO) improved to 48.7 days for the six months ended October 31, 1999, compared to 54.3 days for the year ended April 30, 1999. Inventories decreased approximately $288,000 in the first six months of the fiscal year. The inventory turnover ratio for the six months ended October 31, decreased to 1.54 compared to 1.84 in fiscal 1999. Management will continue to review inventory levels in order to optimize shipments. The Company currently has no loans outstanding. 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 has renewed its $500,000 revolving line of credit with Norwest Bank Colorado through September 2000. The Company currently has no outstanding loan balance on the line of credit. Page 8 of 10 B. Results of Operations Six months ended October 31, 1999, compared To the six months ended October 31, 1998 Sales for the six months ended October 31, 1999, were approximately $269,000 less than the six months ended October 31, 1998. The decline in sales is attributable to reduced domestic sales of flowmeter and digital valve products partially offset by increases in sales of contract electronics manufacturing services. Order backlog at October 31, 1999 is approximately $1,197,000 compare to $1,538,000 at October 31, 1998. The decrease in backlog is attributable to the Company's emphasis on reducing lead times as well as reflecting the reduced level of orders. Gross profit is down approximately $199,000 from the same period a year ago to 39.9% of sales from 41.7% of sales in the period ending October 31, 1998. Decreases in material costs as a percent of sales of 2.1% from the same period in 1998 reflect the increase in sales of the contract electronics manufacturing (ATG) operation in the product mix. This is also reflected in the increase in labor of 3.1% and overhead of 1.3% from 1998 to 1999. Operating expenses decreased approximately $88,000 from the same period a year earlier. Reduced spending for selling and general and administrative expenses more than offset a nearly $126,000 increase in engineering expenses. Income from operations is approximately $3,000 in the six months ended October 31, 1999, compared to approximately $115,000 for the six months ended October 31, 1998, reflecting the decrease in gross profit. Other income for the six months ended October 31, 1999, was approximately $44,000 compared to approximately $79,000 in the same six month period a year ago. The income tax provision for the six month period ending October 31, 1999, was approximately $32,000 compared to approximately $33,000 for the same period in 1998. The impact of deferred tax items and additional taxes for the year ended April 30, 1999, resulted in a current tax rate of approximately 66.2% for the six months ended October 31, 1999, while the impact of deferred tax items and tax refunds resulted in a tax rate of approximately 17.1% for the six months ended October 31, 1998. Net cash provided by operating activities was $205,497 for the six months ended October 31, 1999. Three months ended October 31, 1999, compared to the three months ended October 31, 1998 Sales were approximately $27,000 lower in 1999 compared to 1998, a 1.1% decrease, due to lower demand throughout the domestic flowmeter market. Gross profit increased by approximately $5,000 to 40.6% of sales in 1999 compared to 39.9% in 1998. Labor was 1% higher due to lower volume and a more labor intensive product mix; material cost was down 2.0% and overhead was up .3%, again due to product mix. Operating expenses have increased approximately $10,000 from last year due to increased research and development costs and partially offset by decreased selling and general and administrative costs. Research and development expenses increased approximately $49,000 over the same period in the prior year. Income from operations decreased approximately $5,000 for the three months ended October 31, 1999, compared to the same period a year ago. Other income for the three months ended October 31, 1999, decreased approximately $16,000 or 50% to $32,000 primarily due to lower interest income from high grade investment securities, than in the period ending October 31, 1998. The Company had no interest expense attributable to debt in the periods ending October 31, 1999, and 1998, respectively. Page 9 of 10 The income tax provision for the three months ended October 31, 1999, was approximately $39,000 compared to an income tax provision of approximately $8,000 for the same period in 1998. The impact of deferred tax items and the impact of final adjustments on the Company's fiscal year 1999 tax returns resulted in current tax rate of approximately 54.4% in 1999. The income tax expense rate in the comparable period in 1998 was 8.2% due to the impact of deferred tax items and the impact of income tax refunds. Year 2000 Compliance Many computer systems were designed using only two digits to designate years. These systems may not be able to distinguish the Year 2000 from the Year 1900 (this is commonly known as the `Year 2000 Problem' or `Y2K' problem). The Company replaced its inventory and financial software in fiscal year 1998 with a system which is Year 2000 compliant. The Company has evaluated its other internal-use software and hardware for Year 2000 compliance, and has implemented a plan to replace all non-compliant items either through upgrade or replacement. The planned completion date for this task is December 15, 1999, and the cost of remaining upgrades/replacements is anticipated to be approximately $15,000. The Company may be vulnerable to the failure of other companies to be Year 2000 compliant. The Company has been assessing whether third parties with whom the Company has material relationships are Year 2000 compliant. The Company is also evaluating its vendors and suppliers to determine if there would be a material effect on the Company's business if they do not become Year 2000 compliant. The same analysis is also being made for significant customers. The Company's products do not use time/date logic for internal sequencing or calculation, and therefore the Company believes its products are Year 2000 compliant. Although management does not expect Year 2000 issues to have a material impact on its business or future results of operation, there can be no assurance that there will not be interruptions of operations or other system functionality limitations or that the Company will not incur significant costs to avoid such interruptions or limitations. PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K A. Exhibits None filed in the quarter ended October 31, 1999. B. Reports on Form 8-K None filed in the quarter ended October 31, 1999. Page 10 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: December 15, 1999 By: /s/ Charles E. Miller Charles E. Miller, Chairman (Principal Financial Officer and Chief Accounting Officer) December 15, 1999 ENGINEERING MEASUREMENTS COMPANY (NASDAQ SYMBOL: EMCO) First Quarter Results Corporate Contact: Charles E. Miller (303)651-0550 Longmont, Colorado: Engineering Measurements Company announced today net income of $10,702 or $.00 per share for the second quarter ended October 31, 1999. Net income for the six month period ended October 31, 1999, was $16,163, also $.00 per share. This compares to net income for the three-month and six-month periods last year of $85,269 ($.02 per share) and $160,048 ($.04 per share), respectively. Sales for the quarter were approximately $2.45 million; compared to sales of approximately $2.48 million for the same period last year. Six month year to date sales were approximately $4.68 million, or approximately 5.5% less than the year earlier period. 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 Three Months Ended Six Months Ended October 31, October 31, 1999 1998 1999 1998 Net sales $2,452,300 $2,479,486 $4,679,890 $4,948,735 Income from operations before taxes 71,748 92,909 47,752 193,154 Income 10,702 85,269 16,163 160,048 Net earnings per share $.00 $.02 $.00 $.04 Number of shares outstanding 4,068,194 4,021,237 4,061,438 4,010,282 ========= ========= ========= =========
EX-27 2 ART. 5 FDS FOR 1ST 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 6-MOS APR-30-2000 OCT-31-1999 478 657 1,406 101 1,379 4,285 7,941 4,976 7,530 965 0 43 0 0 6,301 7,530 4,680 4,680 2,814 2,814 1,863 13 0 48 32 16 0 0 0 38 .01 .01 -----END PRIVACY-ENHANCED MESSAGE-----