-----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, QWh7Kuu1N5BI5lRp1zY9jBr5Ud9s4kR3N5PtODOPdAHF4g4+WV744I0Wsvkg0hR3 OswcuyWq/N1p7p6ccGMZmA== 0000310056-99-000002.txt : 19990215 0000310056-99-000002.hdr.sgml : 19990215 ACCESSION NUMBER: 0000310056-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VICON INDUSTRIES INC /NY/ CENTRAL INDEX KEY: 0000310056 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 112160665 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07939 FILM NUMBER: 99533054 BUSINESS ADDRESS: STREET 1: 89 ARKAY DR CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5169522288 MAIL ADDRESS: STREET 1: 89 ARKAY DR CITY: HAUPPAUGE STATE: NY ZIP: 11788 10-Q 1 VICON QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 1998 Commission File No. 1-7939 ---------------------------- ------- VICON INDUSTRIES, INC. (Exact name of registrant as specified in its charter) NEW YORK STATE 11-2160665 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 89 Arkay Drive, Hauppauge, New York 11788 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 952-2288 (Former name, address, and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At December 31, 1998, the registrant had outstanding 4,496,693 shares of Common Stock, $.01 par value. PART I - FINANCIAL INFORMATION VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended 12/31/98 12/31/97 Net sales............................. $17,127,727 $14,874,200 Cost of sales......................... 11,518,969 10,245,524 ----------- ----------- Gross profit........................ 5,608,758 4,628,676 Operating expenses: Selling expense................... 2,802,178 2,192,954 General & administrative expense.. 1,005,665 1,022,952 ---------- ---------- 3,807,843 3,215,906 ---------- ---------- Operating income.................... 1,800,915 1,412,770 Interest expense...................... 153,026 338,797 Interest income....................... (47,509) - ----------- --------- Income before income taxes........ 1,695,398 1,073,973 Income tax expense.................... 635,000 65,000 ----------- ------------ Net income........................ $ 1,060,398 $ 1,008,973 =========== ============ Earnings per share: Basic $ .24 $ .34 === === Diluted $ .23 $ .31 === === Shares used in computing earnings per share: Basic 4,476,111 3,001,108 Diluted 4,691,819 3,292,725 See Notes to (Condensed) Consolidated Financial Statements. -2- VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS 12/31/98 9/30/98 CURRENT ASSETS Cash............................................ $ 2,606,179 $ 4,854,557 Accounts receivable (less allowance of $767,000 at December 31, 1998 and $694,000 at September 30, 1998)............... 13,044,772 12,758,080 Inventories: Parts, components, and materials.............. 5,139,543 2,944,303 Work-in-process............................... 2,079,562 2,374,769 Finished products............................. 11,204,205 12,079,335 ----------- ----------- 18,423,310 17,398,407 Deferred income taxes........................... 1,246,736 1,079,736 Prepaid expenses................................ 428,177 332,241 ----------- ----------- TOTAL CURRENT ASSETS............................ 35,749,174 36,423,021 - -------------------- Property, plant and equipment................... 12,868,210 12,702,390 Less accumulated depreciation and amortization.. (5,764,137) (5,565,352) ----------- ----------- 7,104,073 7,137,038 Deferred income taxes........................... 116,973 116,973 Other assets.................................... 886,902 709,369 ----------- ----------- TOTAL ASSETS.................................... $43,857,122 $44,386,401 - ------------ =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Borrowings under U.K. revolving credit agreement $ 485,579 $ 634,388 Current maturities of long-term debt............ 1,182,982 1,179,367 Accounts payable................................ 2,535,276 3,133,505 Accrued compensation and employee benefits...... 1,112,479 1,955,462 Accrued expenses................................ 1,451,412 1,316,855 Income taxes payable............................ 829,676 561,173 ---------- ---------- TOTAL CURRENT LIABILITIES 7,597,404 8,780,750 - ------------------------- Long-term debt.................................. 6,685,709 7,001,819 Other long-term liabilities..................... 758,874 767,528 SHAREHOLDERS' EQUITY Common stock, par value $.01.................... 45,592 45,347 Capital in excess of par value.................. 20,997,396 20,947,515 Retained earnings............................... 8,151,286 7,090,888 ------------ ----------- 29,194,274 28,083,750 Less treasury stock at cost, 62,517 shares...... (409,687) (409,687) Foreign currency translation adjustment......... 30,548 162,241 ------------ ----------- TOTAL SHAREHOLDERS' EQUITY 28,815,135 27,836,304 - -------------------------- ------------ ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $43,857,122 $44,386,401 - ------------------------------------------ ============ =========== See Notes to (Condensed) Consolidated Financial Statements. -3- VICON INDUSTRIES, INC. AND SUBSIDIARIES (CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended 12/31/98 12/31/97 Cash flows from operating activities: Net income..................................... $ 1,060,398 $ 1,008,973 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization................ 213,964 166,752 Deferred income taxes........................ (167,000) - Change in assets and liabilities: Accounts receivable........................ (333,597) (548,035) Inventories................................ (1,060,543) 487,928 Prepaid expenses........................... (98,863) (83,995) Other assets............................... (177,533) 29,936 Accounts payable........................... (594,255) 39,982 Accrued compensation and employee benefits. (841,192) (217,837) Accrued wages and expenses................. 138,545 (45,039) Income taxes payable....................... 271,768 46,419 Other liabilities.......................... (8,654) (18,656) ------------ ------------ Net cash (used in) provided by operating activities................... (1,596,962) 866,428 ------------ ----------- Cash flows from investing activities: Capital expenditures, net of minor disposals............................ (217,865) (107,865) ------------ ------------ Net cash used in investing activities..... (217,865) (107,865) ------------ ------------ Cash flows from financing activities: Decrease in borrowings under U.S. bank credit agreement........................... - (1,107,861) (Decrease) increase in borrowings under U.K. revolving credit agreement................. (134,689) 301,169 Increase in interest-bearing accounts payable to related party................... - 89,253 Proceeds from exercise of stock options...... 50,126 - Repayments of U.S. term loan................. (225,000) - Repayments of other debt..................... (70,453) (48,839) ------------ ------------ Net cash used in financing activities..... (380,016) (766,278) ------------ ------------ Effect of exchange rate changes on cash.......... (53,535) (54,589) ------------ ------------ Net decrease in cash............................. (2,248,378) (62,304) Cash at beginning of year........................ 4,854,557 287,580 ------------ ----------- Cash at end of period............................ $ 2,606,179 $ 225,276 ============ =========== See Notes to (Condensed) Consolidated Financial Statements. -4- VICON INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) December 31, 1998 Note 1: Basis of Presentation The accompanying unaudited (condensed) consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 1998 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended September 30, 1998. Note 2: Earnings per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which requires companies to present basic and diluted earnings per share (EPS) instead of primary and fully diluted EPS that was previously required. Basic EPS are computed based on the weighted average number of shares outstanding for the period. Diluted EPS reflect the maximum dilution that would have resulted from the exercise of stock options and incremental shares issuable under a deferred compensation agreement. The new standard was initially adopted by the Company in the quarter ended December 31, 1997. The following table provides the components of the basic and diluted earnings per share (EPS) computations for the three months ended December 31, 1998 and 1997: 1998 1997 ---------- ------ (Unaudited) (Unaudited) Basic EPS Computation Net income.............................. $1,060,398 $1,008,973 Weighted average shares outstanding..... 4,476,111 3,001,108 Basic earnings per share................ $ .24 $ .34 ========== ========== Diluted EPS Computation Net income.............................. $1,060,398 $1,008,973 Weighted average shares outstanding... 4,476,111 3,001,108 Stock options......................... 208,129 291,264 Stock compensation arrangement........ 7,579 353 ---------- ---------- Diluted shares outstanding.............. 4,691,819 3,292,725 Diluted earnings per share.............. $ .23 $ .31 ========== ========== -5- Note 3: Comprehensive Income Effective October 1, 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", which requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the financial statements. The Company's total comprehensive income for the three months ended December 31, 1998 and 1997 was as follows: 1998 1997 ----------- -------- (Unaudited) (Unaudited) Net income............................. $ 1,060,398 $ 1,008,973 Other comprehensive income (loss), net of tax: Change in equity due to foreign currency translation adjustments.. (131,693) 8,415 ----------- ----------- Comprehensive income................... $ 928,705 $ 1,017,388 =========== =========== -6- MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations Three Months Ended December 31, 1998 Compared with December 31, 1997 Net sales for the quarter ended December 31, 1998 increased $2.2 million or 15% to $17.1 million compared with $14.9 million in the year ago period. The sales growth was experienced in the U.S. as domestic sales increased $4.2 million or 46% to $13.2 million principally as a result of system sales supplied under a contract with the U.S. Postal Service. International sales declined $1.9 million or 33% to $3.9 million due principally to the economic problems in Asia. The backlog of unfilled orders was $13.8 million at December 31, 1998 compared with $8.7 million at December 31, 1997. Gross profit margins for the first quarter of 1999 increased to 32.7% compared with 31.1% in the year ago period. The margin improvement was primarily the result of a favorable sales mix of higher margin products, lower procurement costs for certain video products and greater fixed cost absorption associated with the sales growth. Operating expenses for the first quarter of 1999 were $3.8 million or 22.2% of net sales compared with $3.2 million or 21.6% of net sales in the year ago period. The increase was principally the result of higher selling expenses associated with the sales growth. Operating income increased to $1.8 million for the first quarter of 1999 compared with $1.4 million in the year ago period principally as a result of increased sales and higher gross margins. Interest expense decreased $186,000 to $153,000 for the first quarter of 1999 as $9.0 million of interest-bearing debt was repaid in May 1998 with the net proceeds from a public stock offering. Income tax expense was $635,000 for the first quarter of 1999 compared with $65,000 in the year ago period. The current period reflects a normal income tax provision whereas U.S. taxable income in the year ago period was substantially reduced by the utilization of available federal and state net operating loss carryforwards. As a result of the foregoing, net income increased to $1.1 million for the first quarter of 1999 compared with $1.0 million for the year ago period. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS Liquidity and Financial Condition Net cash used in operating activities was $1.6 million for the first quarter of 1999. Net income for the quarter of $1.1 million was offset by an increase in inventory of $1.1 million to support new product production, a decrease in accrued compensation and employee benefits of $.8 million due to the payment of prior year profit related bonuses, and a decrease in accounts payable of $.6 million. Net cash used in investing activities was $.2 million for the first quarter of 1999 due principally to capital expenditures for office equipment. Net cash used in financing activities was $.4 million for the first quarter of 1999 due primarily to the scheduled repayment of mortgage debt and the reduction in outstanding borrowings under the Company's U.K. bank overdraft facility. As a result of the foregoing, cash decreased by $2.2 million for the first quarter of 1999 after the nominal effect of exchange rate changes on the cash position of the Company. The Company has a $7.5 million revolving credit facility with a bank which expires in July 2002, with an option to increase the facility to $9.5 million at any time through July 2000. Borrowings under the facility bear interest at the bank's prime rate minus 2% or, at the Company's option, LIBOR plus 90 basis points (5.75% and 5.96%, respectively, at December 31, 1998). At December 31, 1998, there were no borrowings outstanding under this agreement. The agreement contains restrictive covenants which, among other things, require the Company to maintain certain levels of earnings and ratios of debt service coverage and debt to tangible net worth. In addition, the Company maintains a bank overdraft facility of 600,000 Pounds Sterling (approximately $996,000) in the U.K. to support local working capital requirements of Vicon U.K. At December 31, 1998, outstanding borrowings under this facility were approximately $486,000. The Company believes that cash flow from operations and funds available under its credit agreements will be sufficient to meet its anticipated operating, capital expenditures and debt service requirements for at least the next twelve months. Year 2000 The Company's software-based products have been tested for year 2000 compliance and the Company believes that such products are year 2000 compatible. With respect to its own computer operating systems, the Company is in the process of upgrading its principal operating computer software to the most recent available revisions sold by its software suppliers, which the suppliers have represented to be year 2000 compliant. The Company believes that such upgrades will identify and solve those year 2000 problems that could affect its operating software and can be accomplished before the year 2000. The costs for such upgrades are not expected to be material. It is possible that certain computer systems or software products of the Company's customers or suppliers may experience year 2000 problems and that such problems could adversely affect the Company. The Company is in the process of assessing the status of its principal suppliers' year 2000 readiness and their plans to address problems that their computer systems may face in correctly processing date information as the year 2000 approaches. However, since the ultimate success of the Company's customers and suppliers to become compliant is largely outside of the Company's control, no assurances can be made that the Company will be unaffected by the year 2000. -8- Should the Company's suppliers fail to achieve year 2000 compliance, the supply of product to the Company may be interrupted resulting in possible lost revenue to the Company due to its inability to supply finished product to its customers. If such interruptions were prolonged, it could have a material adverse effect on the Company. The Company intends to consider contingency plans to address the risk its principal suppliers will not be year 2000 compliant during fiscal 1999. "Safe" Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements in this Report on Form 10-Q and other statements made by the Company or its representatives that are not strictly historical facts including, without limitation, statements included herein under the captions "Liquidity and Financial Condition" and "Year 2000" are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 that should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. The forward-looking statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the actual results, performance and/or achievements of the Company to differ materially from any future results, performance or achievements, express or implied, by the forward-looking statements. Readers are cautioned not to place undue reliance on these forward- looking statements, and that in light of the significant uncertainties inherent in forward-looking statements, the inclusion of such statements should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. The Company also assumes no obligation to update its forward-looking statements or to advise of changes in the assumptions and factors on which they are based. -9- PART II ITEM 1 - LEGAL PROCEEDINGS The Company has no material outstanding litigation. ITEM 2 - CHANGES IN SECURITIES None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 - OTHER INFORMATION None ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K No Form 8-K was required to be filed during the current quarter. -10- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. February 11, 1999 VICON INDUSTRIES, INC. Kenneth M. Darby Arthur D. Roche President Executive Vice President Chief Executive Officer Chief Financial Officer -11- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. February 11, 1999 VICON INDUSTRIES, INC. VICON INDUSTRIES, INC. Kenneth M. Darby Arthur D. Roche Kenneth M. Darby Arthur D. Roche President Executive Vice President Chief Executive Officer Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1999 DEC-31-1998 2,606,179 0 15,487,154 (767,469) 18,423,310 35,749,174 13,872,085 (5,764,137) 43,857,122 7,597,404 7,444,583 0 0 45,592 28,769,543 43,857,122 17,127,727 0 11,518,969 0 3,747,843 60,000 105,517 1,695,398 635,000 1,060,398 0 0 0 1,060,398 .24 .23
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