-----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, Oxn4pNWxy7n+aF0a4ResnqbaMYNwgYwq0suM9disyNtF3l2umU7g9DOuz9xe6DFd 1cwTAUX+D0nSrj1Df+mBSA== /in/edgar/work/20000727/0001035704-00-000558/0001035704-00-000558.txt : 20000921 0001035704-00-000558.hdr.sgml : 20000921 ACCESSION NUMBER: 0001035704-00-000558 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENGINEERING MEASUREMENTS CO CENTRAL INDEX KEY: 0000205303 STANDARD INDUSTRIAL CLASSIFICATION: [3823 ] IRS NUMBER: 840572936 STATE OF INCORPORATION: CO FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 000-09880 FILM NUMBER: 679530 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 10KSB40 1 e10ksb40.txt FORM 10KSB FOR FISCAL YEAR END APRIL 30, 2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-KSB X Annual report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934. For the Fiscal Year ended: April 30, 2000 or Transition report under Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 for the transition period from to . ---- ---- Commission File No.: 0-9880 ENGINEERING MEASUREMENTS COMPANY -------------------------------- (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) Issuer's telephone number: (303) 651-0550 -------------- Securities registered under Section 12(b) of the Act: None ---- Securities registered under Section 12(g) of the Act: Common Stock par value $.01 --------------------------- (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 --- --- Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X --- Issuer's revenues for its most recent fiscal year: $9,234,052. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of July 12, 2000 was $41,525,284. The number of shares outstanding of Registrant's $.01 par value common stock, as of July 12, 2000 was 4,205,092. No documents are incorporated by reference into the text of this report. Transitional Small Business Disclosure Format : Yes ; No X --- --- 2 PART I ITEM 1. BUSINESS GENERAL Engineering Measurements Company ("EMCO" or the "Company") is a Colorado corporation that was incorporated on January 4, 1967. The Company's executive offices and factory are located at 600 Diagonal Highway, Longmont, Colorado 80501. Its telephone number is (303) 651-0550. The Company has a website at www.emcoflow.com. The Company designs, manufactures, and markets electronic and electro-mechanical instruments (flowmeters) for measuring the flow of liquids, steam and gases. The Company operates within the flow measurement devices and systems industry segment (S.I.C. Code No. 3823). The Company generates its revenues from the sales of flowmeter hardware in both foreign and domestic markets. Revenue is also generated through contract electronic printed circuit board assembly. With its 33 years experience in the field of flow measurement, EMCO is able to provide its customers with a family of products capable of measuring almost any kind of fluid or gas flow. While the Company has historically been strongest in energy utility flow measurement (particularly steam metering), it has products capable of measuring most types of process fluids, as well as fuel oils and natural gas. Primarily utilizing a network of distributors and commissioned sales representatives as well as a direct sales force, the Company markets flowmeters worldwide. The Company has a marketing agreement with Danfoss A/S, a flowmeter company in Denmark which distributes products in different markets, which was renewed October 6, 1998, and runs for a period of 30 months with a six month renegotiation period. Terms of the agreement with Danfoss A/S allow the Company to be the non-exclusive distributor for Danfoss' MAG and MASS flowmeters in the U.S. industrial market under the "EMCO" label. EMCO features six types of flowmeters capable of handling a broad spectrum of applications (steam, gas and liquid), as well as a large range of line sizes. These flowmeters position the Company to compete on a product level with any flowmeter manufacturer in the world. PRODUCTS The Company has developed and markets a series of products to measure the flow of steam, chilled and hot water, natural gas, compressed gases and other fluids in a pipeline. Also included are products, which support the primary flow measurements, such as pressure and temperature measurements and supporting electronics. Sales of flowmeters and related products account for approximately 88% of the total sales for the Company. The Company flowmeter products use two major technologies in its product lines. The sales contribution by each technology as a percent of sales for fiscal years 1999 and 1998 are as follows:
Technology FY 1999 FY 2000 - ------------------------------------------------------- Volumetric 74% 68% Mass 26% 20%
Volumetric technologies include the following products: turbine, vortex shedding, ultrasonic, and positive displacement meters. Mass technologies include the following products: electromagnetic, coriolis, flow processors and digital valves. The Company manufactures several series of insertion meters for various applications of steam, liquids and compressed gas measurement. The insertion meters offer customers solutions for metering flows in large size pipes. Each is available with an assortment of options allowing for extremes in flow range, pressure and temperature, with adaptation to various output requirements which provide mass and energy measurement for totalizing or computer input. The Company introduced a line of vortex shedding flowmeters in fiscal year 1992. The Vortex PhD has no moving parts, provides high reliability, has low maintenance requirements and is capable of operating with dirty fluids. The Company introduced a clamp-on transit time ultrasonic flowmeter in January 2000. This product is a non-intrusive meter, which is attached to the outside of pipes, and is used primarily to measure water, but is capable of measuring other liquids including oil. 2 3 The Company also develops, manufactures and markets a series of positive displacement meters which provide accurate measurements of fluid flow rates. The products' primary applications relate to the measurement of viscous fluids, such as crude oil, as well as applications requiring a high degree of accuracy. As a result of the marketing agreement with Danfoss A/S of Denmark, EMCO serves as the non-exclusive distributor for Danfoss' electromagnetic (MAG) flowmeters and coriolis (MASS) flowmeters in the U.S. industrial marketplace. These two Danfoss meters are marketed and distributed under the "EMCO" label in the U.S., establishing EMCO as one of the few companies in the world to offer a complete line of flowmetering technologies. Digital valves are digitally actuated control valves providing industry with a unique means of controlling and measuring the flow of fluids. Because of their accuracy and speed of response, these products are capable of providing a high degree of control that cannot easily be matched by other valves. In addition, this product can be configured as a metering valve, thus providing both measurement and control. All Company flowmeter products utilize a family of digital flow processors to provide a wide range of measurement processing. The flow processors provide the desired outputs in engineering units, such as gallons, liters, etc., with provisions for computing density, mass flow and enthalpy. The Company introduced a commercial vortex shedding water flowmeter in March 1997. This product is marketed into the commercial HVAC, ultra-pure and de-ionized water and landscape/irrigation markets. The Company provides contract electronic printed circuit board assembly. These services provided 8% of EMCO's revenues in 1999 and 12% in 2000. PRODUCT DISTRIBUTION The Company primarily uses a network of distributors and commissioned sales representatives, as well as a direct sales force, to market the Company's flowmeters worldwide. The Company utilizes a direct sales force to market its contract electronic printed circuit board assembly services. COMPETITION The Company encounters various levels of competition in its different product lines. The flow products face somewhat less competition when the application is large size steam lines. Here, the product is sold primarily on the basis of quality, performance and return on investment, with little price competition. In smaller sized steam lines, as well as applications where other energy utilities or process fluids are being measured, the Company faces a greater level of competition and price is often a factor. However, no one company is a major force in this market segment. The positive displacement meter products encounter direct competition in most of their markets. Two companies, one utilizing the same technology and the other employing a different technological approach, comprise most of the competition. Quality, performance and selling price are all important competitive factors. The Company's ultrasonic products are sold into various water markets, and face competition from both comparable and non-comparable technologies. Price can be a factor, but so are reliability and maintenance costs. No one company is a dominant force in this market segment. Digital Valve products offer unique performance characteristics as regards to speed, accuracy and direct digital control. Where the application requires these characteristics, the Company experiences no direct competition and price is generally not a factor. In less demanding installations, the Company faces direct competition from the manufacturers of more traditional control valves. In such cases, price does become a competitive factor. Contract surface mount technology board assembly faces extensive direct competition for larger production runs. The Company is focusing on the engineering prototype and small production run market niches where the emphasis is on production quality and rapid turn around. In these markets there is generally less competition and price is generally not a factor. No one company is a major force in this market segment. RAW MATERIALS The Company purchases electronic components, printed circuit boards, fabricated sheet metal parts, machined components, raw steel and aluminum, metallic castings, various other materials and electrical energy from various 3 4 suppliers. These purchased components are generally available and the loss of any one supplier would not have a material adverse impact on the Company's operations. CUSTOMERS In Fiscal Years 1999 and 2000 no single customer accounted for more than 10% of the Company's revenues. PATENTS EMCO has acquired, or is currently pursuing, patent protection on a number of its products. Although management believes that the protection afforded by patenting is generally not important to the success of the Company's flowmeter business, it is believed critical for its upcoming semi-conductor products. Patents are prevalent in the flowmetering and semi-conductor industries and, since the Company has not conducted exhaustive infringement searches on all of its products, it is possible that one or more of its products may infringe upon the patents of others. Depending on the product involved, a lawsuit against the Company for patent infringement could result in damages in a material amount being assessed against the Company, which would have an adverse effect on the financial condition of the Company. At this time the Company is not aware of any existing or threatened litigation regarding matters involving the Company and its products. SEASONAL AND OTHER CONDITIONS The Company's sales and production are affected by slight seasonality caused by the Company's emphasis on steam energy measurement. However, the Company's marketing initiatives designed to increase the importance of the Process Control market (a non-seasonal market) if successful, and the growth of the contract printed circuit board assembly services should mitigate against the effect of seasonality in the future. Sales are also affected by the capital budgeting plans of large industrial firms, as well as by other economic and political conditions in the U.S. and internationally. WORKING CAPITAL REQUIREMENTS The Company is not required to carry significant amounts of inventory to meet rapid delivery requirements of customers or to assure itself of a continuous allotment of goods from suppliers. In addition, the Company believes its working capital of approximately $3,432,000 as of April 30, 2000, is adequate to meet its current obligations. Although no assurances can be made, the Company believes it has adequate cash flows from operations to fund future operations and capital expenditure requirements for the next twelve months. BACKLOG At April 30, 2000, the total order backlog was approximately $1,386,000 as compared to $1,290,000 at April 30, 1999. It is anticipated that the entire backlog outstanding at April 30, 2000, will be shipped in the fiscal year ending April 30, 2001. GOVERNMENT APPROVALS AND REGULATION The Company's principal products and services are not subject to government approvals. The Company does not expect any significant effect on its business from existing or probable government regulations. No material portion of the Company's sales is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. If the Company's products become subject to government regulation or approval however, it could have a material adverse effect on the Company. RESEARCH AND DEVELOPMENT The Company maintains research and development programs on a continuing basis. Research activities are primarily directed toward flow measurement and control. The Company spent approximately $881,000 for research and development in the fiscal year ending April 30, 2000, and about $790,000 in the fiscal year ending April 30, 1999. 4 5 In 2000, the emphasis of research and development (R&D) was on new product development. There is no assurance that the R&D efforts will result in additional sales for the Company. Management believes that R&D expenses will continue at the current levels in the future due to further new product development and enhancements. The intent of the Company's R&D is twofold: 1) Develop new flowmeter products for industries and applications for which it has not historically provided products, and 2) Continue to lower product cost and improve quality. EFFECTS OF ENVIRONMENTAL REGULATIONS Compliance with present federal, state and local regulations regarding the discharge of materials into the environment or otherwise relating to the protection of the environment should not have any material adverse effect on the capital expenditures, earnings and competitive position of the Company. The Company does not plan any capital expenditures for environmental control facilities during the current and succeeding fiscal year. If the Company's products, business or operations become subject to such environmental regulations, however, it could have a material adverse effect on the Company's results of operations and competitive position. EMPLOYEES At April 30, 2000, EMCO had 91 full-time employees, of which 8 are employed in administrative duties, 14 in sales, marketing and customer service duties, 8 in R&D and 61 in production. This compares with 86 full-time employees at April 30, 1999. The Company had 2 part time employees at April 30, 2000. FOREIGN SALES In fiscal year 2000, the Company had foreign sales of approximately $2,242,000, or 24.3% of sales, compared to approximately $2,691,000, or 27.8% of sales in fiscal year 1999. The decrease of sales for fiscal year 2000 in Europe is due primarily to lower sales to Danfoss in 2000. The Company experienced a decrease in sales to Asia due to a shift in the product mix to lower cost meters. Other foreign sales are lower due to lower activity overall, rather than sales of a single large project. The breakdown of foreign sales for fiscal years 2000 and 1999, in dollars and percent of total sales are:
FY 2000 FY 1999 ------- ------- Europe $1,335,000 14.5% $1,580,000 16.3% Asia 658,000 7.1% 755,000 7.8% Other 249,000 2.7% 356,000 3.7%
All foreign sales are exports from domestic operations. ITEM 2. PROPERTIES The Company maintains its executive offices and factory at 600 Diagonal Highway, Longmont, Colorado in a 44,800 square foot brick, concrete and cinder block facility. In Management's opinion, the current executive offices and factory space are more than adequate for the Company's current operations and should provide enough space through Fiscal Year 2001 or later. Management also believes the building is in adequate condition for office and factory use, and will require no substantial improvements through Fiscal Year 2001 or later. ITEM 3. LEGAL PROCEEDINGS Not applicable. 5 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 6 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS MARKET INFORMATION The Company's common stock is listed and traded on the NASDAQ National Market (Symbol EMCO). The table below represents the high and low bid prices of the Company's common stock for its two most recent fiscal years. Such prices reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.
Quarters Ended in Fiscal Year 2000 ---------------------------------- 07/31/99 10/31/99 01/31/00 04/30/00 -------- -------- -------- -------- High $6.25 $7.94 $9.50 $8.13 Low $4.25 $4.50 $4.75 $5.81 Quarters Ended in Fiscal Year 1999 ---------------------------------- 07/31/98 10/31/98 01/31/99 04/30/99 -------- -------- -------- -------- High $6.25 $4.63 $5.03 $5.00 Low $4.00 $3.20 $4.00 $4.00
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK The number of holders of record of the Company's common stock as of July 6, 2000, were 451. COMPANY DIVIDEND POLICY DISCLOSURE The Company has never paid cash dividends on its common stock and currently has no plans to do so in the foreseeable future. However, the Company had a 25% stock dividend in October 1998. As a result, the Company issued an additional 804,189 shares of $.01 par value common stock. The Company has no restrictions on the ability to pay dividends. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain written statements of management of the Company included in this Form 10-KSB and elsewhere may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations and contain certain words such as "anticipate", "believe", "plan", "expect" or similar words. The forward-looking statements included herein and elsewhere are based on current expectations and assumptions about an industry or business and involve judgments which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements will prove to be accurate. The forward looking statements are dependent on certain risks and uncertainties including among others, a discontinuance of the Danfoss arrangement, lack of market acceptance of new products, research and development efforts which result in no additional sales and the cost and impact of Year 2000 compliance by the Company and its suppliers. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as representation by the Company or any other person that the objectives and plans of the Company will be achieved. The actual results of the Company could differ materially from those anticipated in the forward-looking statements contained herein and elsewhere. 7 8 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION: LIQUIDITY, CAPITAL RESOURCES AND CASH FLOWS Net working capital increased approximately $92,000 during the fiscal year ended April 30, 2000, due primarily to higher income taxes receivable and accounts receivable offset by lower cash and inventories and higher accrued liabilities. The working capital ratio for fiscal year 2000 decreased to 4.2 from 4.4 in the previous fiscal year. The Company has a $500,000 revolving line of credit with Wells Fargo Bank West, N.A. through September 30, 2000, collateralized by accounts receivable. The interest rate is at with Wells Fargo Bank West's prime rate. The Company has not drawn against this line of credit as of the date of this Form 10-KSB. The Company uses excess cash to invest in high grade securities until the cash is needed for operations. As of April 30, 2000, the Company holds approximately $616,000 in high grade investment securities. Cash and cash equivalents decreased approximately $89,000, due to increases in capital expenditures, income taxes receivable, and accounts receivable offset by decreases in inventories. Management believes it has adequate cash to support operations. This belief is supported by positive cash flows from operating activities for fiscal year 2000 of approximately $426,000. The Company will continue to manage cash in order to support operations. Net accounts receivable increased by approximately $122,000, due to higher sales volume of approximately $271,000 in the fourth quarter of fiscal year 2000 compared to the previous year. Collections of accounts receivable improved as reflected by the 6.7 day decrease of the Company's Days Sales Outstanding (DSO) to 47.6 days from 54.3 days in fiscal years 2000 and 1999, respectively. Short-term investments increased approximately $60,000 during the year ended April 30, 2000. The impact of recording investments at market value decreased the cost by approximately $81,000. Inventories decreased approximately $151,000 during the year ended April 30, 2000, which decreased the inventory turn ratio from 1.84 in 1999 to 1.47 in 2000. The lower inventories are mainly due to a shift in product mix from material intensive to labor intensive sales. The decrease in inventory turns in the face of lower inventory levels reflects this change in sales mix. Income taxes receivable of approximately $75,000 in fiscal year 2000 has replaced the income taxes payable of approximately $4,000 in fiscal year 1999. The receivable was a result of the taxable loss in fiscal year 2000. The Company had a note receivable of $138,920 at April 30, 1999, with an unaffiliated third party to provide financing for the development of a new flowmeter technology. The Company exercised the option to purchase the undivided one-half interest of the developed technology for the balance of the receivable during May 1999. This undivided one-half interest of the developed technology is reflected on the balance sheet within "Other assets" and will be amortized over its expected life. Accounts payable increased approximately $11,000 in fiscal year 1999. The Company does not have any material commitments for capital expenditures. The Company believes that the proposed capital expenditures can be financed from the Company's cash flow. Net working capital and the working capital ratio for the last two fiscal years were:
As of April 30 -------------- 2000 1999 ---- ---- Working capital $3,431,886 $3,339,423 Working capital ratio 4.2 4.4
8 9 Material changes in cash flows are summarized as follows:
As of April 30 -------------- 2000 1999 ---- ---- Net cash provided by operating activities $ 426,316 $ 546,074 Net cash (used in) investing activities $(829,361) $(949,630) Net cash provided by financing activities $ 314,398 $ 160,566 Net decrease in cash and cash equivalents $ (88,647) $(242,990)
Management believes EMCO will enjoy improved results in the future. Although there is no assurance this will occur, management believes is that the Company has a strong foundation upon which to grow. The Company has accomplished the following: A. The Company introduced a commercial vortex water flowmeter in March 1997. Sales of this product grew more than 8% in fiscal year 2000. Fiscal year 1999 sales of the water flowmeter increased more than 150%. Management believes sales will grow in fiscal year 2001 since the product was made more rugged in a fiscal year 2000 design change. Increased marketing efforts are being devoted to the water markets. B. The Company continues to perform contract electronic printed circuit board assembly. Sales from contract manufacturing in fiscal year 2000 were up more than 40% over the previous fiscal year. Additional sales efforts are being made to increase sales of this service. C. The Company introduced a clamp-on transit time ultrasonic flowmeter in January 2000. This non-intrusive meter is attached to the outside of pipes and is used to measure liquids, primarily water, but is capable of measuring other liquids including oil. This product is in the early introductory phase of its product life cycle. D. The Company expects to continue R&D activity for new products to be introduced in coming years. There is no assurance that the R&D activity will result in additional sales for the Company. The Company also intends to emphasize value engineering to sustain margin despite increasing price competition. E. The Company continues to make improvements in overall production efficiency through increased investments in equipment. The Company is now capable of greater production capacity at little or no increased fixed cost. All equipment purchases were paid from the Company's cash flow. F. The Company's balance sheet remains strong. The Company has recently eliminated a poorly performing investment which resulted in a loss on the sale of stock of $119,000 in the year ended April 30, 2000. Interest and dividend income for the year was $55,000. There can be no assurance, however, that these accomplishments will result in improved or continued sales of its products or services. Actual results of operations could differ materially from management's expectations. Management is not aware of any known trends, events or uncertainties that have had, or are likely to have, an impact on short-term or long-term liquidity of the Company. 9 10 RESULTS OF OPERATIONS: SALES REVENUES Sales revenues for the Company decreased approximately $460,000 or 4.8% in fiscal year 2000 as compared to fiscal year 1999. Existing product (Flow) sales were lower in fiscal year 2000, primarily due to reduced sales to a major European customer of approximately $348,000 in fiscal year 2000 as a result of a restructuring of a sales agreement from a headquarters to a local operating unit agreement. Sales were impacted as headquarters inventories were worked down. Lower sales of a niche product of approximately $315,000 were impacted by an OEM customer production problem which was resolved late in the fourth quarter. This decrease in sales was partially offset by increased sales of the new water meter introduced in March 1997, the ultrasonic flowmeter introduced in January 2000 and contract printer circuit board assembly. The Company continues to place a high priority on product quality and customer satisfaction. Management believes this emphasis will have long-term positive impacts on sales. The Company expects to continue to maintain a healthy product development program. NET INCOME (LOSS) In fiscal year 2000, the Company recognized net losses of $138,860, as compared to net income of $196,938 for fiscal year 1999. The loss in 2000 can be attributed to the following:
2000 1999 ---- ---- Gross margin on sales 3,540,483 3,983,907 Income from operations (130,600) 113,696 Loss on sale of stock (119,025) (6,574) Other income 59,504 125,054 Interest expense (744) (266) Income tax provision/(benefit) (52,005) 34,972
The Company's decrease in net income in 2000 is due to the following reasons: The gross margin on sales in 2000 was 38.3% compared to 41.1% in 1999, which is attributable to higher labor and overhead cost , offset by lower material costs. The loss from operations for 2000 was 1.41% of total sales compared to income from operations of 1.17% in 1999. The change from income to loss from operations is due to lower gross margin and increased research and development costs offset by lower sales and marketing and general and administrative expenses. The loss on sale of stock is approximately $112,000 greater in fiscal year 2000 than in 1999 primarily due to the loss on one investment. Other income is approximately $66,000 lower in fiscal year 2000, due in part to shifts in the makeup of the investment portfolio and gains on the disposal of assets in fiscal year 1999. Interest expense was minimal in both years as there was no corporate debt. Income taxes are approximately $87,000 less in fiscal year 2000 due to taxable losses in 2000 compared to taxable income in 1999. GROSS MARGINS Overall gross margins for the past two years are reflected as follows:
As of April 30 -------------- 2000 1999 ---- ---- Gross margin 38% 41%
The decrease in gross margin from 1999 to 2000 was due to higher overhead (.8%) and labor (3.1%) and warranty costs (0.5%) partially offset by lower material (1.7%) costs. Management believes investments made in 2000 will make manufacturing more efficient in the future. 10 11 SELLING EXPENSE The Company incurred the following selling expenses as a percent of sales:
As of April 30 -------------- 2000 1999 ---- ---- Selling expense 21% 22%
Selling expense decreased by approximately $224,000 and as a percent to sales. The savings were achieved in part due to a decrease in sales subject to commissions and reduced labor and marketing promotion expenses. In the future, management expects to continue to promote the Company's products through increased electronic (internet) sales activities, advertising in trade journals, telemarketing and trade shows. GENERAL AND ADMINISTRATIVE General and administrative expense for the Company as a percent of sales for the past two years is as follows:
As of April 30 -------------- 2000 1999 ---- ---- General and administrative expense 9% 10%
General and administrative expenses in fiscal year 2000 were slightly lower than the prior year as a percent of sales. Actual expenses were approximately $66,000 lower in fiscal year 2000, primarily due to lower labor. Although no assurances can be made, management intends in the future for general and administrative expenses not to increase as quickly as sales. RESEARCH AND DEVELOPMENT Research and development expense as a percent of the Company's sales over the past two years is:
As of April 30 -------------- 2000 1999 ---- ---- Research and development expense 10% 8%
Research and development expenses increased approximately $91,000 in fiscal year 2000, due to higher new product development costs. Management intends in the future to continue product development activities; while continuing to perform value engineering to lower product cost and improve product quality. There is no assurance that the new product development activities will result in additional sales for the Company. LOSSES ON SALE/EXCHANGE OF STOCK The Company recognized losses from the sale of stock, from investments, of approximately $119,000 in fiscal year 2000, compared to losses of approximately $7,000 in fiscal year 1999. INTEREST RATES The Company did not borrow any money in fiscal years 1999 and 2000. INCOME TAXES Income taxes as a percentage of pre-tax income are depicted below:
As of April 30 -------------- 2000 1999 ---- ---- Income tax (benefit) expense (27)% 15%
Please see Note 8 of the Notes to Financial Statements for a discussion of the reasons income taxes have varied. 11 12 TRENDS Most of the Company's sales (approximately 76%) are generated in the United States. Therefore, the health of the U.S. economy has a significant impact on the Company. However, the Company currently has such a small share of the total market that management believes the Company can continue to grow despite the fluctuations in the domestic economy. While the Company generates approximately 24% of sales internationally, management believes that an improved Asian economy, along with continued sales emphasis in developing nations, could result in increased international sales beyond the current 24% in the near future. Management can make no assurances, however, that the economic and political conditions of the U. S., Asia, Europe and developing countries will result in increased sales in the future. The Company has a diverse product mix. Therefore, it is unlikely that any single current competitor could have a decidedly negative impact on EMCO. The Company is able to address a number of different markets with a variety of products and technologies. Therefore, the Company's product market risk is also lower than many companies with less diverse product lines in the flow measurement industry. In recent years the Company has developed a new product line for the commercial water market, and also a non-intrusive flowmeter which is attached to the outside of the pipe. The Company is also selling contract manufacturing of electronic printed circuit board assembly services. Revenues for these products and services are increasing rapidly and now account for nearly 25% of the Company's total revenues. The Company intends to continue to devote resources to new product development. However, there are no assurances that the new product development costs will result in additional sales for the Company. Finally, the Company has no debt. During fiscal year 1999 the Company established a line of credit with Wells Fargo Bank West, N.A. which was renewed in fiscal year 2000. In light of these events, management feels it has reduced its exposure to developments that might impact capital markets and the availability of capital. Although it can make no assurances, the Company knows of no events and does not anticipate any events to cause material changes in the revenue/cost relationship in the foreseeable future. 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 (commonly known as the `Year 2000 Problem'). The Company replaced its inventory and financial software in fiscal year 1998 with a system, which is Year 2000 compliant. The Company evaluated its other internal-use software and hardware for Year 2000 compliance, and implemented a plan to replace all non-compliant items either through upgrade or replacement. The cost of these upgrades/replacements was approximately $50,000. 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. To date, any impacts of the Year 2000 Problem have been minimal and dealt with as they appear. 12 13 ITEM 8. FINANCIAL STATEMENTS The following financial statements of Engineering Measurements Company are found on Pages 15 through 29.
Page ---- Report of Independent Certified Public Accountants 14 Balance Sheets-April 30, 2000 and 1999 15,16 Statements of Operations-Years Ended April 30, 2000, and 1999 17 Statements of Cash Flows-Years Ended April 30, 2000, and 1999 18 Statements of Changes in Stockholders' Equity-Years Ended April 30, 2000, and 1999 19 Notes to Financial Statements 20-28
13 14 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Engineering Measurements Company We have audited the accompanying balance sheets of Engineering Measurements Company, a Colorado corporation as of April 30, 2000 and 1999, and the related statements of operations (and comprehensive operations), stockholders' equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects the financial position of Engineering Measurements Company as of April 30, 2000 and 1999, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States. GRANT THORNTON LLP Denver, Colorado June 15, 2000 (except for Note 14, as to which the date is July 6, 2000) 14 15 ENGINEERING MEASUREMENTS COMPANY BALANCE SHEETS ASSETS
April 30, 2000 April 30, 1999 -------------- -------------- Current assets: Cash and cash equivalents $ 609,050 $ 697,697 Accounts receivable, net of allowance for doubtful accounts and allowance for sales returns of $78,927 at April 30, 2000 and $75,990 at April 30, 1999 1,219,365 1,097,330 Short-term investments 615,793 556,288 Inventories 1,516,251 1,667,011 Prepaid expenses 89,439 31,757 Income taxes receivable 75,000 0 Deferred income taxes 382,551 260,649 -------------- -------------- Total current assets 4,507,449 4,310,732 -------------- -------------- Property and equipment, at cost: Land 568,940 568,940 Building & improvements 1,689,824 1,624,950 Vehicles 22,196 22,196 Machinery and equipment 4,268,002 4,099,524 Office furniture and fixtures 1,223,750 1,301,489 -------------- -------------- 7,772,712 7,617,099 Less accumulated depreciation (4,811,402) (4,725,996) -------------- -------------- Net property and equipment 2,961,310 2,891,103 -------------- -------------- Other assets Note receivable 0 138,920 Other assets, net of amortization of $133,282 at April 30, 2000 and $99,306 at April 30, 1999 298,488 132,351 -------------- -------------- Total other assets 298,488 271,271 TOTAL ASSETS: $ 7,767,247 $ 7,473,106 ============== ==============
The accompanying notes are an integral part of these financial statements. 15 16 ENGINEERING MEASUREMENTS COMPANY BALANCE SHEETS (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY
April 30, 2000 April 30, 1999 -------------- -------------- Current liabilities: Accounts payable $ 332,161 $ 320,853 Accrued compensation 301,513 278,238 Accrued liabilities 441,889 372,218 -------------- -------------- Total current liabilities 1,075,563 971,309 -------------- -------------- Long-term liabilities: Deferred income taxes 244,400 220,500 -------------- -------------- Total long-term liabilities 244,400 220,500 -------------- -------------- Stockholders' equity: Common stock, $.01 par value; 15,000,000 shares authorized at April 30, 2000, 5,000,000 shares authorized at April 30, 1999; 4,321,006 shares issued at April 30, 2000, 4,232,774 shares issued at April 30, 1999, 4,125,259 shares outstanding at April 30, 2000, 4,042,374 shares outstanding at April 30, 1999, 43,210 42,328 Capital in excess of par value 3,001,606 2,650,332 Unrealized holding losses (net of taxes) (49,262) (38,711) Retained earnings 4,118,187 4,257,047 Treasury stock at cost; 195,747 shares at April 30, 2000, and 190,400 at April 30, 1999 (666,457) (629,699) -------------- -------------- Total stockholders' equity 6,447,284 6,281,297 -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: $ 7,767,247 $ 7,473,106 ============== ==============
The accompanying notes are an integral part of these financial statements. 16 17 ENGINEERING MEASUREMENTS COMPANY STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
Twelve Months Ended April 30, 2000 1999 ---- ---- Sales $ 9,234,052 $ 9,694,913 Cost of sales 5,693,569 5,711,006 ------------ ------------ Gross margin on sales 3,540,483 3,983,907 ------------ ------------ Operating expenses: Selling 1,917,928 2,142,086 General and administrative 872,223 937,873 Research and development 880,932 790,252 ------------ ------------ Total operating expenses 3,671,083 3,870,211 ------------ ------------ Income(loss) from operations (130,600) 113,696 ------------ ------------ Other income/(expense): Loss on sale of stock (119,025) (6,574) Interest expense (744) (266) Interest and Dividend Income 54,697 93,237 Other income 4,807 31,817 ------------ ------------ Total other income/(expense) (60,265) 118,214 Income/(loss) before income taxes (190,865) 231,910 Income tax provision/(benefit) (52,005) 34,972 ------------ ------------ Net income/(loss) $ (138,860) $ 196,938 ============ ============ Other comprehensive income (loss) Unrealized holding loss (10,551) (12,441) Tax benefit of stock option exercise 93,400 0 ------------ ------------ Comprehensive income (loss) (56,011) 184,497 ============ ============ Net earnings/(loss) per share $ (0.03) $ 0.05 Net earnings/(loss) per share on a fully diluted basis $ (0.03) $ 0.05 ============ ============ Weighted average number of shares outstanding 4,082,890 4,021,729 ============ ============
The accompanying notes are an integral part of these financial statements. 17 18 ENGINEERING MEASUREMENTS COMPANY STATEMENTS OF CASH FLOWS: INCREASE/(DECREASE) IN CASH
Twelve Months Ended April 30, 2000 1999 Cash flows from operating activities: Net income (loss) $ (138,860) $ 196,938 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization 541,450 479,642 Deferred tax provision/(benefit) (98,002) 10,700 Provision for doubtful accounts/(recovery) 2,936 (12,223) Loss on sales of investments 119,025 6,574 (Gain)/Loss on disposal of assets 1,406 (9,600) Stock compensation 1,000 3,000 Changes in assets and liabilities- Receivables (124,971) 329,349 Inventories 150,760 (429,960) Income taxes receivable and prepaid expenses (132,682) 43,132 Accounts payable and accrued liabilities 104,254 (71,478) ------------ ------------ Net cash provided by operating activities 426,316 546,074 ------------ ------------ Cash flows from investing activities: Capital expenditures, net (579,848) (834,604) Expenditures for intangible assets (62,993) (6,295) Proceeds from/(expenditures for) note receivable 1,800 (92,155) Investment purchases (657,498) (1,277,561) Proceeds from sale of investments 468,417 1,251,385 Proceeds from sale of fixed assets 761 9,600 ------------ ------------ Net cash used in investing activities (829,361) (949,630) ------------ ------------ Cash flows from financing activities: Purchase of treasury stock (36,758) -- Proceeds from exercise of stock options 351,156 160,566 ------------ ------------ Net cash provided by financing activities 314,398 160,566 ------------ ------------ Net decrease in cash and cash equivalents (88,647) (242,990) Cash and cash equivalents at beginning of period 697,697 940,687 ------------ ------------ Cash and cash equivalents at end of period $ 609,050 $ 697,697 ============ ============ Supplemental disclosure of cash flow information: Cash paid during period for-- Interest $ 744 $ 266 Income taxes 24,633 3,428 Supplemental disclosure for non cash items: Stock Compensation $ 1,000 $ 3,000
The accompanying notes are an integral part of these financial statements. 18 19 ENGINEERING MEASUREMENTS COMPANY STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Capital in Unrealized Common Stock excess of Holding Retained Treasury Shares Par Value Par value Losses Earnings Stock ---------- ---------- ---------- ---------- ---------- ---------- Balance at April 30, 1998 4,172,599 $ 41,726 $2,487,368 $ (26,270) $4,060,109 $ (629,699) Net income 196,938 Stock Options Exercised 59,538 596 159,970 Stock Compensation 637 6 2,994 Unrealized holding (losses) (12,441) ---------- ---------- ---------- ---------- ---------- ---------- Balance at April 30, 1999 4,232,774 $ 42,328 $2,650,332 $ (38,711) $4,257,047 $ (629,699) Net income (138,860) Treasury Stock (36,758) Employee Stock Purchase Plan 4,495 45 20,606 Stock Options Exercised 83,519 835 329,670 Stock Compensation 218 2 998 Unrealized holding (losses) (10,551) ---------- ---------- ---------- ---------- ---------- ---------- Balance at April 30, 2000 4,321,006 $ 43,210 $3,001,606 $ (49,262) $4,118,187 $ (666,457) ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 19 20 ENGINEERING MEASUREMENTS COMPANY NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND BUSINESS Engineering Measurements Company (EMCO or the Company) designs, manufactures, and markets electronic and electro-mechanical instruments (flowmeters) for measuring the flow of liquids, steam and gases. The Company sells products for energy utility flow measurement (particularly steam metering), and it also has products capable of measuring most types of process fluids, as well as fuel oils and natural gas. Utilizing a network of distributors and commissioned sales representatives, the Company markets flowmeters worldwide. (See Note 8 to the Financial Statements). The Company also markets contract electronics manufacturing services through its direct sales force to businesses in northern Colorado. (See Note 9 to the Financial Statements). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES Inventories are stated at the lower of cost or market determined by the first-in, first-out method. INVESTMENTS Investments in debt and qualifying equity securities are classified as either held-to-maturity, trading or available-for-sale. Held-to-maturity investments are debt securities that the Company has the positive intent and ability to hold to maturity. These investments are recorded at amortized cost. Debt and equity securities purchased for the purpose of resale in the near term are classified as trading investments and are recorded at fair value. Unrealized gains or losses on these investments are included in earnings of the current period. Other debt and equity securities that are not categorized as held-to-maturity or trading are classified as available-for-sale and reported at fair value. Unrealized gains or losses on these securities are reported as a separate component of stockholders' equity, net of applicable income tax expense or benefit. All of the debt and qualifying equity securities of the Company are considered available-for-sale. REVENUE RECOGNITION Revenue from manufactured products is recognized at the time of shipment to the customer. Service revenue is recognized at the time of shipment of goods or delivery of services to the customer. The sale price is fixed at the time of shipment or delivery of the service and all risks transfer to the customer at that point. Commissioned sales representatives do not stock product. Returns, exchanges and restock charges have historically been insignificant. DEPRECIATION AND AMORTIZATION Depreciation of property and equipment is provided on the straight-line method over the estimated useful lives listed below. Patents, product safety approvals and purchased technology are amortized on a straight-line basis over the periods listed below: Building and improvements 10-25 years Vehicles 3-8 years Machinery and equipment 5-10 years Office furniture and fixtures 4-8 years Patents 5-17 years Product Safety Approvals 5-6 years Purchased Technology 5 years
20 21 WARRANTY An estimated liability for warranty costs, based on management's estimate of future warranty costs, is recorded in the year in which sales are made. EARNINGS PER SHARE Primary earnings per share are based on the weighted average number of shares outstanding during the year. Diluted earnings per share are based on the assumption that all diluted potential common shares are dilutive stock options that were converted at the beginning of the year. The Company's common stock was split five-for-four in the form of a stock dividend in October 1998. All shares, stock option data, and earnings per share amounts have been restated to give effect to this stock dividend.
For the Year Ended April 30, 2000 --------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ------------ ------------ ------------ Net (Loss) $ (138,860) ============ BASIC EPS Net Income available to common stockholders $ (138,860) 4,082,890 $ (0.03) EFFECT OF DILUTIVE SECURITIES -- 124,690 Options DILUTED EPS $ (138,860) 4,207,580 $ (0.03) ============ ============ ============
For the Year Ended April 30, 1999 --------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount ------------ ------------ ------------ Net Income $ 196,938 ============ BASIC EPS Net Income available to common stockholders $ 196,938 4,021,729 $ 0.05 EFFECT OF DILUTIVE SECURITIES Options -- 80,832 DILUTED EPS ------------ ------------ ------------ Income available to stockholders plus assumed conversions $ 196,938 4,102,561 $ 0.05 ============ ============ ============
CASH EQUIVALENTS For purpose of the statements of cash flows, the Company considers all highly liquid cash investments with original maturity dates of three months or less to be cash equivalents. RECLASSIFICATIONS Certain reclassifications have been made to conform prior year's information with the current year presentation. 21 22 USE OF ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. COMPREHENSIVE INCOME The Company adopted Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income. SFAS 130 establishes standards for the reporting and display of comprehensive income and its components. 3. INVESTMENTS The Company classifies debt and equity securities as available-for-sale securities. Available-for-sale securities are measured at fair value, with net unrealized gains and losses reported in equity. The amortized cost, unrealized gains and losses, and fair values of the Company's available-for-sale securities held at April 30, 1999 and 2000 are amortized as follows:
Gross Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ---------- ---------- ---------- ---------- Available-for-sale securities Equity securities $ 387,004 $ 1,134 $ 32,031 $ 356,107 Debt securities 232,744 -- 32,563 200,181 ---------- ---------- ---------- ---------- April 30, 1999 $ 619,748 $ 1,134 $ 64,594 $ 556,288 ========== ========== ========== ========== Available-for-sale securities Equity securities $ 328,777 $ 0 $ 47,836 $ 280,941 Debt securities 367,775 610 $ 33,533 334,852 ---------- ---------- ---------- ---------- April 30, 2000 $ 696,552 $ 610 $ 81,369 $ 615,793 ========== ========== ========== ==========
The following table lists the maturities of debt securities held at April 30, 2000, classified as available-for sale:
Estimated Amortized Cost Fair Value --------- ---------- Due in one year or less $257,877 $258,485 Due after one year through five years 109,898 76,367 -------- -------- $367,775 $334,852 ======== ========
Proceeds on sales of securities classified as available-for-sale were $461,670 in fiscal year 2000, compared to $1,251,385 in fiscal year 1999. Gains of $29,763 and losses of $148,788 were realized on these sales for 2000, and $48,810 in gains and $55,384 of losses for 1999. The Company uses the specific identification method to determine cost of securities sold. 22 23 4. INVENTORIES Inventories are as follows:
April 30 -------- 2000 1999 ---------- ---------- Raw material and work-in-process $1,201,216 $1,263,617 Finished goods 315,035 403,394 ---------- ---------- $1,516,251 $1,667,011 ========== ==========
5. NOTE RECEIVABLE At April 30, 1999, the Company had a note receivable of $138,920 with an unaffiliated third party to provide financing in the development of a new flowmeter technology. The note had a 6% interest rate and was payable upon demand or upon termination of the loan agreement. The Company exercised the option to purchase the undivided one-half interest of the developed technology for the balance of the receivable in May, 1999. 6. SHORT-TERM DEBT The Company signed a line of credit for up to $500,000 with Wells Fargo Bank West, N.A., secured by accounts receivable on October 27, 1998. The line of credit matured on September 30, 1999, at which time the agreement was renewed. The new maturity date is September 30, 2000, and has an interest rate of 9.00%, equal to Wells Fargo Bank's prime rate. The Company has not utilized the line of credit. 7. INCOME TAXES The Company accounts for income taxes under the liability method. Deferred taxes are provided based upon the tax rate at which items of income and expense are expected to be settled in the Company's tax return. 23 24 The following is a summary of the provision (benefit) for income taxes:
Year Ended April 30 ------------------- 2000 1999 ---- ---- Current provision (benefit) Federal $ 40,097 $ 21,292 State 5,900 2,980 ---------- ---------- $ 45,997* $ 24,272 ========== ========== Deferred provision (benefit) Federal $ (85,442) $ 9,180 State (12,560) 1,520 ---------- ---------- $ (98,002) $ 10,700 ========== ========== Total provision (benefit) Federal $ (45,345) $ 30,472 State (6,660) 4,500 ---------- ---------- $ (52,005) $ 34,972 ========== ==========
*Current provision does not include the benefit of the tax effect related to the exercise of stock options. The provision for income taxes differs from the amount determined by applying the statutory rate to income before taxes, due to the following reasons:
Year Ended April 30 ------------------- 2000 1999 ---- ---- Income taxes at statutory rate $ (72,500) $ 88,100 Permanent tax differences 4,700 (21,500) Change in estimate of prior year accrual 11,863 (29,321) Other 3,932 (2,307) ---------- ---------- Income tax expense(benefit) $ (52,005) $ 34,972 ========== ==========
Components of deferred tax assets and liabilities:
April 30, --------- 1999 1999 ---- ---- Assets Reserve for bad debt $ 31,000 $ 30,000 Inventory cost capitalization 15,000 9,000 Reserve for obsolete inventory 68,000 75,000 Book basis of stock less than tax basis 81,000 35,000 Investments stated at market 31,000 25,000 Reserve for warranty costs 18,000 21,000 Vacation accrual 50,000 47,000 Net operating loss carry forward 72,000 0 Other 16,551 18,649 ---------- ---------- $ 382,551 $ 260,649 Liabilities Accelerated depreciation (244,400) (220,500) ---------- ---------- Net Asset $ 138,151 $ 40,149 ========== ==========
24 25 Included in the Company's balance sheets as follows:
April 30, --------- 2000 1999 ---- ---- Current assets $ 382,551 $ 260,649 Long-term liabilities (244,400) (220,500) ------------ ------------ Net Asset $ 138,151 $ 40,149 ============ ============
8. FOREIGN SALES The Company had foreign sales of 24.3% and 27.8% of total sales in the fiscal years ended April 30, 2000 and 1999, respectively. The breakdown of foreign sales for fiscal years 2000 and 1999, in dollars and percent of total sales are:
Year ended April 30, -------------------- 2000 1999 ---- ---- Europe $1,335,000 14.5% $1,580,000 16.3% Asia 658,000 7.1% 755,000 7.8% Other 249,000 2.7% 356,000 3.7%
9. 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 the filing of the Company's 10-QSB for the period ending October 31, 1999, EMCO adopted 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 period ending April 30, 2000, 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 (losses) are computed at the same level as income from operations on the Statements of Operations and Comprehensive 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. 25 26
FY 2000 FY 1999 ------------------------------------------- -------------------------------------------- Contract Contract Electronics Electronics Flow Products Manufacturing Totals Flow Products Manufacturing Totals ------------------------------------------- -------------------------------------------- Twelve Months Ended April 30: Revenues 8,096,555 1,137,497 9,234,052 8,892,756 802,157 9,694,913 Depreciation & Amortization 396,357 145,093 541,450 378,880 100,762 479,642 Segment Profits (Losses) (197,989) 67,389 (130,600) 38,854 74,842 113,696 Segment Assets 7,296,172 471,075 7,767,247 6,942,166 530,940 7,473,106 Expenditures for Segment Assets 476,563 103,285 579,848 417,233 417,371 834,604
10. STOCK OPTION PLANS The 1991 Nonemployee Director Stock Plan authorized 200,000 shares, while the 1991 Incentive Plan authorized 600,000 shares. During fiscal year 1998, EMCO terminated the 1991 Nonemployee and Incentive Plans and adopted a new plan, the 1997 Incentive Plan with 625,000 shares authorized. The Company issued options for 127,000 shares under the plan in fiscal year 2000 and 164,375 shares in fiscal year 1999. A summary of stock option transactions follows:
2000 1999 ------------------------ ------------------------ Weighted Weighted Average average Exercise exercise Shares Price Shares price ---------- ---------- ---------- ---------- Options outstanding May 1, ........... 295,182 $ 3.55 246,595 $ 2.86 Granted ................................ 127,000 $ 5.42 164,375 $ 4.00 Canceled ............................... (625) $ 4.80 (56,250) $ 2.72 Exercised .............................. (83,519) $ 2.84 (59,538) $ 2.70 ---------- ---------- Options outstanding April 30, ........ 338,038 $ 4.43 295,182 $ 3.55 ========== ==========
Weighted average fair value of options granted during the year ended April 30, 2000 and April 30, 1999 is $ 3.07 and $ 2.34 per share respectively. The following information applies to options outstanding at April 30, 2000:
Options Outstanding Options Exercisable ---------------------------------------------- ----------------------------- Weighted average Weighted Weighted remaining Average average Number contractual Exercise Number exercise outstanding life (years) price exercisable price ------------ ------------ ------------ ------------ ------------ Range of exercise prices $2.00 - $2.99 58,125 1.40 $ 2.68 58,125 $ 2.68 $3.00 - $4.49 84,188 2.23 $ 3.90 46,688 $ 3.85 $4.50 - $6.74 179,725 8.18 $ 5.11 174 725 $ 5.08 $6.75 - $10.12 16,000 9.80 $ 7.50 16,000 $ 7.50 ------------ ------------ 338,038 295,538 ============ ============
26 27 Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the method of SFAS No. 123, the Company's net earnings(loss) and earnings(loss) per share would have been:
2000 1999 ------------ ------------ Net income (loss) As reported (138,860) 196,938 Pro forma - net of deferred tax benefit (442,524) 81,520 Primary earnings (loss) per share As reported $ (0.03) $ 0.05 Pro forma $ (0.11) $ 0.02
These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation expense related to grants made before the fiscal year ended April 30, 1996. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for 2000 and 1999: Expected life (years)........ 5.741 Risk-free interest rate...... 6.037% Volatility................... 50.000%
The Black Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 11. EMPLOYEE STOCK PURCHASE PLAN Shareholders approved the 1998 Employee Stock Purchase Plan in October 1998. The plan provides for eight semi-annual offering periods with an aggregate of 187,500 shares of the Company's common stock. Eligible employees include those having at least two years of continuous service at the beginning of the offering period, who work at least 20 hours per week, are not 5% or greater shareholders, and who earn less that $80,000 per year in annual base salary. Employees may elect to have up to 10% of their regular base salary withheld for the purchase of shares of the Company's common stock subject to limits of a maximum of 500 shares or $25,000 worth of Common Stock per year. The Company grants each participant an option to purchase on the last day of the six month offering period the number of full shares of Common Stock as their payroll deductions for that period will allow at the Option price for the period. The option price for any period is ordinarily the lesser of 85% of the closing price of the stock on the first or last day of the offering period or the nearest prior day on which trading occurred. The first offering period began January 1, 1999. Employees purchased a total of 4,495 shares in the offering periods ending June 30, 1999, and December 31, 1999. 27 28 12. EMPLOYEE BENEFIT PLAN The Company implemented a 401(k) Retirement Plan in July 1993. Employees may join the plan after one year of service, providing they are 21 years or older. The Company has a 5 year vesting schedule on the plan. The Company match for the fiscal years ending 2000 and 1999 was $21,925 and $22,360, respectively. 13. FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS Estimated fair value of financial instruments held for purposes other than trading are as follows as of April 30:
2000 1999 ---- ---- Carrying Fair Carrying Fair Value Value Value Value ----- ----- ----- ----- Cash and cash equivalents $609,050 $609,050 $697,697 $697,697 Short-term investments 615,793 615,793 556,288 556,288 Note receivable 0 0 138,920 138,920
The following methods and assumptions were used to estimate the fair market value of each class of financial instruments for which it is practicable to estimate that value. Cash, Cash Equivalents, and Note Receivable The carrying amount approximates fair value because of the short maturity of those instruments. 14. SUBSEQUENT EVENT On July 6, 2000, the Company's Board of Directors voted unanimously to sign a definitive agreement to enter into a merger to be accounted for as a pooling of interests with Advanced Energy Industries, Inc., a Delaware corporation headquartered in Fort Collins, Colorado. Under the terms of the agreement, all of EMCO's outstanding common stock as of the effective date of the merger will be exchanged for shares of Advanced Energy Industries, Inc. common stock based upon an exchange ratio. The exchange ratio is determined by dividing 900,000 by the sum of EMCO's outstanding shares plus outstanding options as of the closing of the transaction. It is intended that this merger qualify as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended for federal income tax purposes. 28 29 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. The following table sets forth the name and age of each Director and Executive Officer of the Company, indicating all positions and offices with the Company presently held by him, and the period during which he has served as such:
Year Elected as Position, Date first held Name of Director Director or and Principal Occupation or Officer Age Officer (For Past Five Years) ---------- --- ------- --------------------- Charles E. Miller 62 1967 Chief Executive Officer, President, Director and Chairman of the Board, previously President from 1967 to 1987; Member of the Board of Director Option Committee. Saeid Hosseini 37 1995 Vice President of Sales and Marketing. Previously National Sales Manager, Product Line Manager, and Manager of Applications Engineering. Employed by the Company for more than five years prior to this report. Ken Teegardin 38 1997 Vice President of Operations. Previously Director of Manufacturing since February 1995. Employed in a manufacturing management capacity at Johnson Yokogawa Corporation, Newnan, Georgia, which is not an affiliate of the Company, for more than five years prior to the date of this report. Mr. Teegardin resigned effective June 23, 2000. William A. Ringer 66 1978 Director, Member of the Audit and Compensation Committees; Former President of Granville Phillips Company, Boulder, Colorado, which is not an affiliate of the Company. Employed by Granville Phillips in an executive capacity for more than five years prior to the date of this report. Thomas G. Miller 53 1995 Director, Member of the Incentive Plan and Compensation Committees; CEO and physician of College Park Family Care Center of Overland Park, Kansas, which is not an affiliate of the Company. Employed by College Park Family Care Center in an executive capacity for more than five years prior to the date of this report. Walter Kluck 72 1995 Director, Member of the Audit, Compensation, and Incentive Plan Committees; CEO of Industrial Representatives, Inc. of Clifton, New Jersey, which is not an affiliate of the Company. Employed by Industrial Representatives, Inc. in an executive capacity for more than five years prior to the date of this report. Trung T. Doan 41 2000 Director, Member of the Audit Committee. Vice President of Process Development at Micron Technology, Inc., Boise, Idaho, which is not an affiliate of the Company. Director of Nutool Corporation, Santa Clara, California, which is not an affiliate of the Company. Employed by Micron Technology, Inc. in an executive capacity for more than five years prior to the date of this report.
29 30 The Board of Directors has standing Audit, Compensation, and Incentive Plan Committees. Mr. Ringer, Mr. Kluck and Mr. Doan constitute the members of the Audit Committee, and Messrs. Thomas Miller, Ringer, and Kluck serve on the Compensation Committee. Mr. Kluck and Mr. Thomas Miller serve on the Incentive Plan Committee. The Audit Committee reviews financial statements. The Audit Committee met once during the fiscal year ending April 30, 2000. The Compensation Committee meets informally as required to recommend to the Board of Directors the compensation to be paid to the officers of the Company and to recommend to the Board of Directors any other profit sharing and bonus issues that may come before the Board of Directors. The entire Board of Directors administers the Incentive Plan. Incentive Plan Committee and the Board of Director Option Committee make recommendations regarding the Incentive Plan. Such Committees did not meet formally during the last fiscal year. The Board of Directors held five meetings during the fiscal year ending April 30, 2000. All Directors attended all meetings of the Board of Directors and all committees on which they serve. All Directors hold office until the next annual meeting of the shareholders of the Company or until their successors have been elected and qualified. Officers serve at the discretion of the Board of Directors and are elected annually. None of the Directors have been involved in any litigation or bankruptcy during the past five years. Charles E. Miller, Thomas G. Miller and David S. Miller are brothers. David Miller is one of the Company's investment brokers. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish the Company with the copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, or written representations that no Forms 5 were required, the Company believes that during the last fiscal year, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with. ITEM 10. EXECUTIVE COMPENSATION The following table sets forth all cash compensation awarded to, earned by, or paid to the Company's Chief Executive Officer for services in all capacities to the Company during the fiscal year ended April 30, 2000. There were no other executive officers of the Company who earned $100,000 or more during fiscal year 2000. SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards Payouts (a) (b) (c) (d) (e) (f) (g) (h) (i) Other Securities All Name and Annual Restricted Underlying LTIP Other Principal Compen- Stock Options/ Pay- Compen- Position Year Salary ($) Bonus ($) sation ($) Awards ($) SAR's (#) outs ($) sation ($) - -------- ---- ---------- --------- ---------- ---------- --------- -------- ---------- Charles E. Miller, 1998 $135,000 $0 $67,500 0 0 0 $1,350 CEO and Chairman of 1999 $135,000 $0 0 0 0 0 $1,350 the Board 2000 $135,000 $0 0 0 0 0 $1,350
Other Annual Compensation reflects the dollar value of the market price over the exercise price on options exercised. Other Compensation reflects the matching portion of the Company's 401K plan. 30 31 OPTION/SAR GRANTS IN LAST FISCAL YEAR None. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e) Number of Securities Underlying Value of Unexercised Unexercised In-the-Money Options/SAR's at Options/SAR's at FY-End (#) FY-End ($) Shares Acquired Exercisable/ Exercisable/ Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable ---- --------------- ------------------ ------------- ------------- Charles E. Miller 0 $0 6,250/0 $12,500/$0 6,250/0 $ 9,375/$0
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR None. COMPENSATION OF DIRECTORS Directors who are not employees of the Company received an annual Director's fee of $3,000. This fee is paid whether or not the Director attends meetings of the Board and its Committees. In fiscal year 1999, stock options to purchase 75,000 shares were issued to the outside directors. Messrs. Ringer, Kluck and Thomas Miller were each issued options to purchase 25,000 shares. In fiscal year 2000, stock options to purchase 15,000 were issued to the new director, Mr. Doan. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS. Upon the occurrence of a Change in Control, each Option granted under the Company's 1997 Incentive Plan and outstanding at such time shall become fully and immediately exercisable and shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan. A Change of Control is where any person (who is not such a person on August 1, 1997) becomes the "beneficial owner" directly or indirectly, of securities of EMCO representing 35% or more of EMCO's outstanding securities. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth as of June 30, 2000, the number and percentage of the Company's shares of Common Stock owned of record and beneficially by each person owning more than five percent (5%) of such Common Stock and by all individual directors and officers and by all directors and officers as a group: 31 32
Name of Amount and Nature Percent Title of Class Beneficial Owner of Ownership of Class -------------- ---------------- ------------ -------- Common Stock Charles E. Miller 1,556,432 (1) 37.7 Common Stock William A. Ringer 123,625 (2) 3.0 Common Stock Saeid Hosseini 89,250 (3) 2.2 Common Stock David S. Miller 492,398 (4) 12.0 Common Stock Walter Kluck 25,855 (5) 0.6 Common Stock Thomas G. Miller 520,774 (6) 12.6 Common Stock Ken Teegardin 36,000 (7) 0.9 Common Stock Trung T. Doan 15,000 (8) 0.4 All Directors and Officers as a Group (Seven Persons) 2,366,936 55.4
(1) Record and Beneficial; includes 1,543,932 shares of common stock owned directly; an option to purchase 12,500 shares of common stock under the 1991 Incentive Plan; Mr. Miller has sole voting and investing power on 1,476,057 of the owned shares; the remaining 67,875 shares have shared voting and investment power. Charles E. Miller's business address is 600 Diagonal Highway, Longmont, CO 80501. (2) Record and Beneficial; Mr. Ringer has sole voting and investment power on 98,125 shares of the owned shares; the remaining 500 shares have shared voting and investment power. Mr. Ringer also has an option to purchase 25,000 shares of common stock pursuant to the 1997 Incentive Plan. William A. Ringer's address is P.O. Box 1018, Wilson, WY 83014. (3) Record and Beneficial; includes 61,750 shares of common stock owned with sole voting and investment power; an option to purchase 15,000 shares of common stock under the 1991 Incentive Plan and an option to purchase 12,500 shares under the 1997 Incentive Plan. Saeid Hosseini's business address is 600 Diagonal Highway, Longmont, CO 80501. (4) Record and Beneficial; includes 492,398 shares of common stock owned. David Miller has sole voting and investment power for 450,488 of the shares; the remaining 41,910 shares have shared voting and investment power. David S. Miller's business address is 420 E. Armour, N. Kansas City, MO 64166. (5) Record and Beneficial; includes 855 shares of common stock owned with sole voting and investment power; and an option to purchase 25,000 shares of common stock under the 1997 Incentive Plan. Walter Kluck's business address is P.O. Box 421, Clifton, NJ 07015. (6) Record and Beneficial; Mr. Miller has sole voting and investment power on 491,837 of the owned shares; the remaining 3,937 shares have shared voting and investment power. Mr. Miller has an option to purchase 25,000 shares of common stock under the 1997 Incentive Plan. Thomas G. Miller's business address is 11725 W. 112th St., Overland Park, KS 66210. (7) Record and Beneficial; includes 1,000 shares of common stock owned with sole voting and investment power; and an option to purchase 12,500 shares of common stock under the 1991 Incentive Plan and an option to purchase 22,500 shares under the 1997 Incentive Plan. Ken Teegardin's business address is 600 Diagonal Highway, Longmont, CO 80501. (8) Record and Beneficial; Mr. Doan has an option to purchase 15,000 shares of common stock under the 1997 Incentive Plan. Trung T. Doan's business address is 8000 S. Federal Way, Boise, Idaho 83707-0006. 32 33 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (A) EXHIBITS Exhibit No. Item ------- ---- 3 Articles of Incorporation and By-laws filed as Exhibits 2.1 and 2.2, respectively, to Registrant's Registration No. 2-69601 filed with the Commission and hereby incorporated by reference. 3-1 Articles of Amendment to Articles of Incorporation as filed as Exhibit 3-1 to Registrant's 10-K for the fiscal year ended April 30, 1988 filed with the commission and hereby incorporated by reference. 10-1 Loan agreement between the Registrant and the Colorado National Bank of Denver, dated September 1, 1989, filed as Exhibit 10-2 to Registrant's 10-K for the year ended April 30, 1990 filed with the Commission and hereby incorporated by reference. 10-4 Loan agreement between the Registrant and Charles E. Miller, dated April 9, 1990, filed as Exhibit 10-4 to the Company's Report on Form 10-K for the year ended April 30, 1992 and hereby incorporated by reference. 10-5 Voting Agreement, Agreement and Plan of Merger, Voting Trust Agreement, Sale and Licensing Agreement, Amendment to Sale and Licensing Agreement, Manufacturing and Lease Agreement, and Agreement by and between the Company, Measurement Auditors Company, Marcum Natural Gas Services, Inc., and Colorado National Bank of Denver incorporated herein by reference to Exhibits 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, and 2.7, respectively, to registrant's Form 8-K dated June 25, 1991. 10-7 1991 Non-Employee Director Stock Plan, filed as Exhibit 10-7 to the Company's Report on Form 10-K for the year ended April 30, 1992 and hereby incorporated by reference. 10-9 Delivery Contract EMCO - Danfoss, Delivery Contract Danfoss - EMCO, and License Agreement, dated May 3, 1991; filed as Exhibit 10-9 to the Company's Report on Form 10-K for the year ended April 30, 1992 and hereby incorporated by reference. 10-10 Loan agreement between the Registrant and Charles E. Miller, dated June 10, 1993; filed as Exhibit 10-10 to the Company's Report on Form 10-KSB for the year ended April 30, 1993, and hereby incorporated by reference. 10-11 1991 Incentive Plan filed as Exhibit 10-11 to the Company's Report on Form 10-KSB for the year ended April 30, 1993, and hereby incorporated by reference. 10-12 Agreement, dated July 9, 1993, among Patrick Petroleum Corporation of Michigan, the Company and General Metrology Company, filed as Exhibit 10-12 to the Company's Report on Form 10-Q for the quarter ended October 31, 1993, and hereby incorporated by reference. 10-13 Amendment to License Agreement, and Delivery Contract between Danfoss and EMCO, dated June 13, 1995, filed as Exhibit 10-13 on Form 10-KSB for the year ended April 30, 1994, and hereby incorporated by reference. 10-15 1997 Incentive Plan as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Shareholders held October 22,1997, filed on September 25, 1997, and hereby incorporated by reference. 10-16 Amendment to License Agreement, and Delivery Contract between Danfoss and EMCO, dated October 6, 1998, filed as Exhibit 10-16 on Form 10-KSB for the year ended April 30, 1999. 21 List of Registrant's Subsidiaries; filed as Exhibit 22 to the Company's Report on Form 10-K for year ended April 30, 1992, and hereby incorporated by reference. 23 Consent of Grant Thornton to incorporate auditors report into the Registrant's S-8. 27 Financial Data Schedule for fiscal year ended April 30, 2000. 99 Press Release (B) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended April 30, 2000. 33 34 SIGNATURES 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 By: /s/ Charles E. Miller --------------------- Charles E. Miller (President) Date: July 25, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Charles E. Miller /s/ William A. Ringer - --------------------- --------------------- Charles E. Miller William A. Ringer (Director, Principal Executive Officer, (Director) Principal Financial Officer and July 25, 2000 Principal Accounting Officer) July 25, 2000 /s/ Walter Kluck /s/ Thomas G. Miller - ---------------- -------------------- Walter Kluck Thomas G. Miller (Director) (Director) July 25, 2000 July 25, 2000 /s/ Trung T. Doan - ----------------- Trung T. Doan (Director) July 25, 2000 34 35 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3 Articles of Incorporation and By-laws filed as Exhibits 2.1 and 2.2, respectively, to Registrant's Registration No. 2-69601 filed with the Commission and hereby incorporated by reference. 3-1 Articles of Amendment to Articles of Incorporation as filed as Exhibit 3-1 to Registrant's 10-K for the fiscal year ended April 30, 1988 filed with the commission and hereby incorporated by reference. 10-1 Loan agreement between the Registrant and the Colorado National Bank of Denver, dated September 1, 1989, filed as Exhibit 10-2 to Registrant's 10-K for the year ended April 30, 1990 filed with the Commission and hereby incorporated by reference. 10-4 Loan agreement between the Registrant and Charles E. Miller, dated April 9, 1990, filed as Exhibit 10-4 to the Company's Report on Form 10-K for the year ended April 30, 1992 and hereby incorporated by reference. 10-5 Voting Agreement, Agreement and Plan of Merger, Voting Trust Agreement, Sale and Licensing Agreement, Amendment to Sale and Licensing Agreement, Manufacturing and Lease Agreement, and Agreement by and between the Company, Measurement Auditors Company, Marcum Natural Gas Services, Inc., and Colorado National Bank of Denver incorporated herein by reference to Exhibits 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, and 2.7, respectively, to registrant's Form 8-K dated June 25, 1991. 10-7 1991 Non-Employee Director Stock Plan, filed as Exhibit 10-7 to the Company's Report on Form 10-K for the year ended April 30, 1992 and hereby incorporated by reference. 10-9 Delivery Contract EMCO - Danfoss, Delivery Contract Danfoss - EMCO, and License Agreement, dated May 3, 1991; filed as Exhibit 10-9 to the Company's Report on Form 10-K for the year ended April 30, 1992 and hereby incorporated by reference. 10-10 Loan agreement between the Registrant and Charles E. Miller, dated June 10, 1993; filed as Exhibit 10-10 to the Company's Report on Form 10-KSB for the year ended April 30, 1993, and hereby incorporated by reference. 10-11 1991 Incentive Plan filed as Exhibit 10-11 to the Company's Report on Form 10-KSB for the year ended April 30, 1993, and hereby incorporated by reference. 10-12 Agreement, dated July 9, 1993, among Patrick Petroleum Corporation of Michigan, the Company and General Metrology Company, filed as Exhibit 10-12 to the Company's Report on Form 10-Q for the quarter ended October 31, 1993, and hereby incorporated by reference. 10-13 Amendment to License Agreement, and Delivery Contract between Danfoss and EMCO, dated June 13, 1995, filed as Exhibit 10-13 on Form 10-KSB for the year ended April 30, 1994, and hereby incorporated by reference. 10-15 1997 Incentive Plan as Exhibit A to the Company's Proxy Statement for the Annual Meeting of Shareholders held October 22,1997, filed on September 25, 1997, and hereby incorporated by reference. 10-16 Amendment to License Agreement, and Delivery Contract between Danfoss and EMCO, dated October 6, 1998, filed as Exhibit 10-16 on Form 10-KSB for the year ended April 30, 1999. 21 List of Registrant's Subsidiaries; filed as Exhibit 22 to the Company's Report on Form 10-K for year ended April 30, 1992, and hereby incorporated by reference. 23 Consent of Grant Thornton to incorporate auditors report into the Registrant's S-8. 27 Financial Data Schedule for fiscal year ended April 30, 2000. 99 Press Release
EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF OPERATIONS FOUND ON PAGES 15, 16 AND 17 OF THE COMPANY'S FORM 10-KSB FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR APR-30-2000 APR-30-2000 609 816 1,298 79 1,516 4,507 7,772 4,811 7,767 1,076 0 0 0 43 6,404 7,767 9,234 9,234 5,694 5,694 3,671 3 1 (191) (52) (139) 0 0 0 (139) (.03) (.03)
EX-99 3 ex99.txt PRESS RELEASE 1 Contact: Charles E. Miller Philip Bourdillon / Eugene Heller President and CEO Silverman Heller Associates 303-651-0550 310-208-2550 ENGINEERING MEASUREMENTS COMPANY REPORTS FISCAL YEAR-END RESULTS LONGMONT, COLORADO - JULY 26, 2000 - ENGINEERING MEASUREMENTS COMPANY (NASDAQ - NMS: EMCO) today reported results for the twelve months ended April 30, 2000. For the twelve months ended April 30, 2000 the Company reported a net loss of $139,000, or $0.03 per diluted share, on net sales of $9.2 million, compared to net income of $197,000, or $0.05 per diluted share, on net sales of $9.7 million in fiscal 1999. At fiscal year-end the Company had $3.4 million in working capital, no long-term debt, and stockholders' equity of $6.4 million. As announced on July 6, 2000, the Company has entered into a definitive agreement to be acquired by Advanced Energy Industries, Inc. (Nasdaq - NMS: AEIS) in an exchange of stock. Under the terms of the agreement, which is subject to approval by EMCO's stockholders and certain other conditions, all of EMCO's outstanding common stock as of the effective date of the merger will be exchanged for shares of Advanced Energy Industries based upon an exchange ratio which is determined by dividing 900,000 by the sum of EMCO's outstanding shares plus outstanding options as of the closing of the transaction. At the Company's fiscal year-end, there were outstanding approximately 4.1 million shares of EMCO common stock and approximately 340,000 options to purchase such shares of common stock Engineering Measurements Company designs, manufactures, and markets electronic and electro-mechanical precision instruments for measuring and controlling the flow of liquids, steam, and gases, and also engages in contract electronic printed circuit board assembly. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The matters discussed in this news release contain comments and forward-looking statements based on current plans, expectations, events, and financial and industry trends which may affect the Company's future operating results and financial position. Such statements involve risks and uncertainties which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed above. The historical results achieved are not necessarily indicative of future prospects of the Company. For additional information, refer to the Company's filings with the Securities and Exchange Commission. (Statements of Operations Follow) 2 ENGINEERING MEASUREMENTS COMPANY STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
Twelve Months Ended April 30, 2000 1999 ---- ---- Sales $ 9,234,052 $ 9,694,913 Cost of sales 5,693,569 5,711,006 ------------ ------------ Gross margin on sales 3,540,483 3,983,907 ------------ ------------ Operating expenses: Selling 1,917,928 2,142,086 General and administrative 872,223 937,873 Research and development 880,932 790,252 ------------ ------------ Total operating expenses 3,671,083 3,870,211 ------------ ------------ Income (loss) from operations (130,600) 113,696 ------------ ------------ Other income/(expense): Loss on sale of stock (119,025) (6,574) Interest expense (744) (266) Interest and Dividend Income 54,697 93,237 Other income 4,807 31,817 ------------ ------------ Total other income/(expense) (60,265) 118,214 Income/(loss) before income taxes (190,865) 231,910 Income tax provision/(benefit) (52,005) 34,972 ------------ ------------ Net income/(loss) $ (138,860) $ 196,938 ============ ============ Other comprehensive income (loss) Unrealized holding loss (10,551) (12,441) Tax benefit of stock option exercise 93,400 0 ------------ ------------ Comprehensive income (loss) (56,011) 184,497 ============ ============ Net earnings/(loss) per share $ (0.03) $ 0.05 Net earnings/(loss) per share on a fully diluted basis $ (0.03) $ 0.05 ============ ============ Weighted average number of shares outstanding 4,082,890 4,021,729 ============ ============
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