-----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, J+dCqqEOEvDjfNea002O7M5am+A7u4x80vYi9bi6TU/ii7eyjFPbiGPH5mM4qfma /BkGHXZouOvyZe1/TOHHnQ== 0000914190-99-000366.txt : 19991115 0000914190-99-000366.hdr.sgml : 19991115 ACCESSION NUMBER: 0000914190-99-000366 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRO SENSORS INC CENTRAL INDEX KEY: 0000351789 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 410943459 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-09587 FILM NUMBER: 99747229 BUSINESS ADDRESS: STREET 1: 6111 BLUE CIRCLE DR CITY: MINNETONKA STATE: MN ZIP: 55343-9108 BUSINESS PHONE: 6129300100 MAIL ADDRESS: STREET 1: 6111 BLUE CIRCLE DR CITY: MINNETONKA STATE: MN ZIP: 55343 10QSB 1 FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 Commission File Number 0-9587 ELECTRO-SENSORS, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) MINNESOTA 41-0943459 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 6111 Blue Circle Drive, Minnetonka, Minnesota 55343-9108 (Address of Principal Executive Offices) (Zip Code) (612)930-0100 (Issuer's telephone number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Shares of $.10 par value common stock outstanding at November 4, 1999: 1,979,773 Transitional Small Business Disclosure Format (check one): Yes No X 1 Part I. Financial Information The interim financial statements included in this form 10-QSB are unaudited and reflect in the opinion of management all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results of operations for these periods. ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED INCOME STATEMENTS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- ---------------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ---------- SALES $1,362,883 $1,514,693 $4,269,102 $4,722,662 COST OF SALES 586,327 674,619 1,890,304 2,023,558 --------- --------- --------- --------- GROSS MARGIN 776,556 840,074 2,378,798 2,699,104 --------- --------- --------- --------- OPERATING EXPENSES: Selling expense 368,929 386,265 1,311,238 1,359,187 Administrative expense 144,087 185,794 555,311 552,260 Research and development 227,764 178,667 601,670 474,747 --------- --------- --------- --------- TOTAL OPERATING EXPENSES 740,780 750,726 2,468,219 2,386,194 --------- --------- --------- --------- INCOME FROM OPERATIONS 35,776 89,348 (89,421) 312,910 --------- --------- --------- --------- OTHER INCOME (EXPENSE): Gain (loss) on sale of Investment securities 1,185 23,748 1,185 23,748 Interest income 22,655 29,537 65,172 83,206 Other (24,431) (29,208) (78,284) (104,514) --------- --------- --------- --------- TOTAL OTHER INCOME (591) 24,077 (11,927) 2,440 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 35,185 113,425 (101,348) 315,350 PROVISION FOR INCOME TAXES 12,900 41,400 (38,200) 115,300 --------- --------- --------- --------- NET INCOME $ 22,285 $ 72,025 $ (63,148) $ 200,050 ========= ========= ========= =========
2 (Continued)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- ---------------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES: BASIC 1,979,773 1,971,522 1,979,773 1,971,522 ========= ========= ========= ========= DILUTED 1,979,773 1,977,292 1,980,369 1,982,002 ========= ========= ========= ========= EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES: BASIC $.01 $.04 $(.03) $.10 === === === === DILUTED $.01 $.04 $(.03) $.10 === === === ===
3 ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, ASSETS 1999 1998 - ------ ------------ ------------ CURRENT ASSETS Cash $2,199,077 $2,313,606 Investment in available-for-sale securities 252,503 215,778 Trade receivables, less allowance for doubtful accounts of $19,500 and $18,000, respectively 658,741 720,289 Inventories 875,497 974,612 Prepaid expenses 74,987 69,969 Prepaid income taxes 120,489 97,257 --------- --------- TOTAL CURRENT ASSETS 4,181,294 4,391,511 PROPERTY AND EQUIPMENT, NET 1,722,785 1,775,369 INVESTMENTS 2,021,739 2,910,835 --------- --------- TOTAL ASSETS $7,925,818 $9,077,715 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Note payable $ -0- $ 44,843 Accounts payable 114,247 142,249 Accrued expense 197,799 182,938 Deferred taxes 3,500 12,800 --------- --------- TOTAL CURRENT LIABILITIES 315,546 382,830 --------- --------- DEFERRED INCOME TAXES 253,100 561,900 --------- --------- SHAREHOLDERS' EQUITY: Common stock par value $.10 per share; Authorized 10,000,000 shares; issued 1,979,773 and 1,975,454 Shares, respectively 197,977 197,545 Additional paid-in capital 710,970 702,576 Retained earnings 5,967,976 6,209,044 Unrealized holding gain on investment Securities, net 480,249 1,023,820 --------- --------- Total shareholders' equity 7,357,172 8,132,985 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,925,818 $9,077,715 ========= ========= 4
ELECTRO-SENSORS, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
Nine Months Ended September 30, ---------------------------------- 1999 1998 ---------- ---------- CASH FLOW FROM OPERATING ACTIVITIES Cash received from customers $ 4,337,400 $ 4,783,844 Cash paid to suppliers and employees (4,258,217) (4,546,929) Interest received 65,172 83,206 Income taxes paid 5,668 (46,725) ----------- ---------- Net cash provided by operating activities 150,023 273,396 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Sales of investment in Available-for-sale securities 1,185 31,098 Purchase of property and equipment (51,800) (86,005) Notes receivable -0- 1,034 ---------- ---------- Net cash (used in) investing activities (50,615) (53,873) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (177,920) (177,156) Payments on short-term borrowings (44,843) (145,479) Proceeds from issuance of stock 8,826 21,051 ---------- ---------- Net cash (used in) financing activities (213,937) (301,584) ---------- ---------- Increase (decrease) in cash (114,529) (82,061) CASH AND CASH EQUIVALENTS Beginning 2,313,606 2,536,685 ---------- ---------- End $ 2,199,077 $ 2,454,624 ========== ========== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ (63,148) $ 200,050 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 104,384 102,386 Provision for losses on trade receivables (6,750) 15,750 Realized (gain) loss on sale of marketable securities (1,185) (23,748) (Increase) decrease in: Trade receivables 68,298 61,182 Inventory 99,115 (147,853) Prepaid expenses (5,018) (611) Prepaid income taxes (23,232) 68,575 Increase (decrease) in: Accounts payable (28,002) 90,551 Accrued expenses 14,861 (92,886) Deferred income taxes (9,300) 0 ---------- ---------- Net cash provided by operating activities $ 150,023 $ 273,396 ========== ========== NONCASH INVESTING AND FINANCING ACTIVITIES Unrealized gain(loss) on marketable securities (852,371) (1,542,493) ---------- ---------- Total noncash investing and financing $ (852,371) $(1,542,493) ========== ==========
5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION RESULTS OF OPERATION The Company's sales for the third quarter decreased 10.0% and 9.6%, respectively for the third quarter and the nine months of 1999 as compared to the same periods of 1998. Each operating segment shared in the declining sales for the third quarter of 1999. Slowed sales continued for the Controls division as a result of both the residual effects of the Asian currency crisis and customer distractions caused by Year 2000 planning strategies. Businesses are holding back investments in plant and equipment improvements while they address their own Y2K issues. In addition, price reductions to enhanced higher-end control products are challenging the market of the Controls segment. The Controls segment did, however, notice a resurgence in late August and September customer sales. AutoData is awaiting an impending market application in the healthcare industry initially scheduled for release during the first half of 1999. The anticipated Medicare/Medicaid certified application would require the reporting of statistical data on a state-by-state level. The Company's wholly-owned subsidiary, Microflame, Inc., has experienced a 33.6% decrease in sales during the nine months of 1999. The decline in sales reflects the discontinued buying of the two-gas torch by its largest customer, Radio Shack. Current sales have required the restructuring of Microflame operations to a positive income producing level. Cost of sales decreased, but increased as a percentage of sales when compared to a year ago. The decreased margins resulted from both increased labor and material costs in the production monitoring divisions and increased sales in the AutoData division which carries a higher cost of sales. The Company also made a $30,000 charge to the Microflame inventory based on declining sales activity. Operating expenses increased 3.4% during the nine months of 1999 when compared to the same period of 1998. The increased expenses occurred in administrative and research and development areas. Administrative expenses increased primarily from both software enhancements needed for Y2K compliance and legal costs associated with employee benefit plan revisions. Research and Development expenses increased in both the Speed Monitoring and AutoData divisions. Both segments continue to work aggressively toward new product development. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1999, working capital decreased $142,933 to a total of $3,865,748. The decrease in the fair market value of marketable securities resulted from the decreased quoted market price of certain securities. In addition, the Company holds investments in securities that are not readily marketable. These securities are included in the caption `Investments' at their original cost. Management believes that the current fair value of these investments exceeds the original cost. Accounts receivable decreased due to lower sales levels. Inventory and accounts payable decreased as a result of the sales decline. In addition, the employee stock purchase plan generated $8,826 during 1999. The Company made three dividend payments of 6 $59,264, $59,264 and $59,392 during the nine months of 1999. In addition, the Company invested an additional $51,800 in office and manufacturing equipment. The Company believes it can pay projected capital and operating expenses out of income and current reserves. The cost related to year 2000 conversion is not material to the Company. YEAR 2000 The Company is aware of the computer difficulties that the new millennium presents for the Year 2000 (`Y2K'). The Y2K millennium problem will virtually affect every computer operation in some form. Consequently, the Company has been examining all internal processes using date-related data and the programming code used in our computer systems since mid 1997. The first phase has been completed and subsequently major internal systems have been upgraded to Y2K readiness. Several electronic control products are designed with microprocessors, but do not require date or time based processing in their operations. AutoData software is Y2K compliant with two minor exceptions to the PRO product that will be resolved prior to the 1999 year end. The Company will continue to evaluate and test for additional issues as they arise. The second phase is in progress and includes a formalized communication with critical suppliers to confirm their Y2K readiness. To date, confirmations received from the Company's vendors indicating that plans are being developed to address processing of transactions in the Year 2000 have not been evaluated. The Company cannot predict the outcome of other companies' corrective Y2K efforts. At this time, the Company believes the worst-case scenario is temporary disruption in channels of distribution of products and demand of end user customers who become distracted by other Y2K problems. The Company does not believe that this scenario will occur, but if it does, the Company does not expect that it would have a material effect on the Company's financial position or results. Contingency plans will be prepared to allow for continued operation of critical business operations on January 1, 2000 and beyond. In addition, remaining Y2K costs are not expected to be significant. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable. PART II OTHER INFORMATION Item 1. Legal Proceedings There were no material developments in previously reported legal proceedings. Item 2. Changes in Securities No changes have been made in any registered securities. Item 3. Defaults Upon Senior Securities No event constituting a default has occurred respecting any senior security of the Registrant. 7 Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to vote of shareholders during the period covered by this Form 10-QSB. Item 5. Other Information The Company wishes to caution investors that the following important factors, among others, in some cases have affected and in the future could affect the Company's actual results of operations and cause such results to differ materially from those anticipated in forward-looking statements made in this document and elsewhere by or on behalf of the Company: the uncertainty of market acceptance of products of the Company's AutoData Systems division which is in the continuing stage of development; fluctuations and declines in operating results of the Company's Drive Control Systems, Speed Monitoring and Microflame divisions; fluctuations in the value of the Company's investments, particularly PPT Vision, and sales of such investments; competition, particularly with regard to the pricing of products; the Company's ability to develop new products; and dependence on suppliers. For additional information, please see the Company's Annual Report on Form 10-KSB. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27. Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended September 30, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. ELECTRO-SENSORS, INC. Date November 4, 1999 By Bradley D. Slye Bradley D. Slye, President Date November 4, 1999 By Mark D. Laumann Mark D. Laumann, Treasurer (principal financial officer) 8 EXHIBIT INDEX ELECTRO-SENSORS, INC. FORM 10-QSB For Fiscal Quarter Ended September 30, 1999 Exhibit No. Description 27 Financial Data Schedule EX-27 2 FDS FOR QTR ENDED SEPTEMBER 30, 1999
5 1 U.S. Dollars 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 2,199,077 252,503 678,241 19,500 875,497 4,181,294 2,702,221 979,436 7,925,818 315,546 0 0 0 197,977 7,159,195 7,925,818 4,269,102 4,335,459 1,890,304 4,358,523 77,746 (6,750) 538 (101,348) (38,200) 0 0 0 0 (63,148) (0.03) (0.03)
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