0000950135-95-001671.txt : 19950810 0000950135-95-001671.hdr.sgml : 19950810 ACCESSION NUMBER: 0000950135-95-001671 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950809 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IPL SYSTEMS INC CENTRAL INDEX KEY: 0000351810 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 042511897 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10370 FILM NUMBER: 95560131 BUSINESS ADDRESS: STREET 1: 124 ACTON ST CITY: MAYNARD STATE: MA ZIP: 01754 BUSINESS PHONE: 5084611000 MAIL ADDRESS: STREET 2: 124 ACTON STREET CITY: MAYNARD STATE: MA ZIP: 01754 10-Q 1 FORM 10-Q FOR IPL SYSTEMS, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q X Quarterly Report Under Section 13 or 15(d) of the Securities --- Exchange Act of 1934 FOR QUARTER ENDED JUNE 30, 1995 or --- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to ____________ COMMISSION FILE NUMBER 0-10370 IPL SYSTEMS, INC. (Exact name of Registrant as specified in its charter) ---------------------------- MASSACHUSETTS 04-2511897 (State or jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 124 ACTON STREET, MAYNARD, MASSACHUSETTS 01754 (Address of principal executive offices and Zip Code) (508) 461-1000 (Registrant s Telephone Number, including area code) ---------------------------- -------------------------------------------------------------------------- Former name, former address, and former fiscal year, if changed since last report. Indicate by a 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT JUNE 30, 1995 ----- ---------------------------- Class A $.01 par value 4,504,776 Class C $.01 par value 879,743 1 2 IPL SYSTEMS, INC. FORM 10-Q INDEX
Page No. Part I. Financial Information Item 1. Consolidated Financial Statements Consolidated Balance Sheets - June 30, 1995 (Unaudited) and December 31, 1994....................................... 3 Consolidated Statements of Operations (Unaudited) - Six Months Ended June 30, 1995 and June 30, 1994........................................................... 4 Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 1995 and June 30, 1994,....................... 5 Notes to Unaudited Quarterly Consolidated Statements.................... 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 8-9 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders..................... 10 Item 6. Exhibits and Reports on Form 8-K........................................ 11 Signatures ............................................................. 12
2 3 PART I. FINANCIAL INFORMATION ----------------------------- Item 1. Consolidated Financial Statements IPL SYSTEMS, INC. ----------------- CONSOLIDATED BALANCE SHEETS --------------------------- (Thousands of Dollars)
ASSETS ------ (Unaudited) June 30, 1995 December 31, 1994 ------------- ----------------- Current Assets: Cash and equivalents $5,067 $ 2,239 Accounts receivable - net 3,610 8,615 Inventories 3,681 3,060 Refundable income taxes 140 1,425 Prepaid expenses and other current assets 379 358 ------- ------- Total Current Assets 12,877 15,697 Equipment and Improvements, net 2,889 3,067 ------- ------- Total Assets $15,766 $18,764 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts payable and accrued expenses $ 5,580 $ 7,412 Shareholders' Equity: Class A Common Stock, par value $.0l: Authorized, 20,000,000 shares; issued and outstanding, 4,504,776 and 4,501,776 shares 45 45 Convertible Class C Common Stock, par value $.0l: Authorized, 2,250,000 issued and outstanding 879,743 shares 9 9 Additional paid-in capital 16,585 16,577 Deficit (6,453) (5,279) Total Shareholders Equity 10,186 11,352 ------- ------- Total Liabilities and Shareholders Equity $15,766 $18,764 ======= =======
See notes to unaudited quarterly consolidated financial statements. 3 4 PART I. FINANCIAL INFORMATION - Continued ------------------------------------------- IPL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Thousands of Dollars, Except Per Share Amounts)
Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 1995 1994 1995 1994 -------- -------- -------- -------- Revenues $ 6,707 $ 6,158 $13,224 $13,700 Cost of sales 4,078 4,864 8,271 9,726 ------- ------- ------- ------- Gross profit 2,629 1,294 4,953 3,974 Expenses: Selling, general and administrative 2,824 4,039 5,657 8,046 Engineering and development 304 458 634 971 ------- ------- ------- ------- Operating loss (499) (3,203) (1,338) (5,043) ------- ------- ------- ------- Other income: Interest 59 43 94 65 Other, net 51 42 70 93 ------- ------- ------- ------- 110 85 164 158 ------- ------- ------- ------- Loss before income taxes (389) (3,118) (1,174) (4,885) Income tax benefit - 1,060 - 1,661 ------- ------- ------- ------- Net loss $ (389) $(2,058) $(1,174) $(3,224) ------- ------- ------- ------- Net loss per share $ (0.07) $ (0.38) $ (0.22) $ (0.60) ------- ------- ------- ------- Common and common equivalent shares used in the calculation of loss per share 5,384,519 5,381,519 5,383,319 5,381,519 ========= ========= ========= =========
See notes to unaudited quarterly consolidated financial statements. 4 5 PART I FINANCIAL INFORMATION - Continued ----------------------------------------- IPL SYSTEMS, INC. ----------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited) (Thousands of Dollars)
Six Months Ended ---------------- June 30, June 30, 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss..................................................... $ (1,174) $(3,224) -------- ------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization............................ 605 893 Changes in assets and liabilities: Accounts receivable.................................... 5,005 9,521 Inventories ........................................... (621) 1,692 Prepaid expenses and other current assets ............. 1,264 250 Accounts payable and accrued expenses ................. (1,832) (5,410) ------ ------- Total adjustments ........................ 3,816 6,053 ------ ------- Net cash provided by operating activities.................... 3,247 3,722 ------ ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to equipment and improvements..................... (427) (1,176) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of stock ............................ 8 0 ------ ------- CASH AND EQUIVALENTS: Net increase ............................................... 2,828 2,546 BALANCE, beginning of period................................ 2,239 4,131 ------ ------- BALANCE, end of period...................................... $5,067 $ 6,677 ====== ======= SUPPLEMENTARY CASH FLOW INFORMATION: Taxes paid.................................................. $ 11 $ 23 ====== =======
See notes to unaudited quarterly consolidated financial statements. 5 6 PART I. FINANCIAL INFORMATION - Continued ------------------------------------------ IPL SYSTEMS, INC. ----------------- NOTES TO UNAUDITED QUARTERLY CONSOLIDATED STATEMENTS ---------------------------------------------------- 1. Financial Statements -------------------- The consolidated balance sheet as of June 30, 1995, and the consolidated statements of operations and cash flows for the six months ended June 30, 1995 and June 30, 1994 have been prepared by the Company without audit. The consolidated financial statements include the accounts for the Company and its wholly-owned subsidiaries, IPL Investments, Inc. and IPL Foreign Sales Corporation. All intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 1995, and for all periods presented, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the Securities and Exchange Commission rules and regulations. It is suggested that these financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1994, including the audited financial statements and related notes included therein. The results of operations for the period ended June 30, 1995 are not necessarily indicative of the operating results for the full year. 2. Accounts Receivable ------------------- Accounts receivable consist of the following:
(Thousands of dollars) June 30, 1995 December 31, 1994 ------------- ----------------- Total accounts receivable $6,545 $ 12,283 Less allowance for doubtful accounts 2,935 3,668 ------ -------- Net Accounts Receivable $3,610 $ 8,615 ====== ========
6 7 PART I. FINANCIAL INFORMATION - Continued ------------------------------------------ 3. Equipment and Improvements -------------------------- Equipment and improvements at cost consist of the following:
(Thousands of dollars) June 30, 1995 December 31, 1994 ------------- ----------------- Customer support $ 3,541 $ 3,167 Manufacturing equipment 4,844 4,815 Office equipment & fixtures 2,436 2,412 Leasehold improvements 1,335 1,335 ------- ------- $12,156 $11,729 ======= ======= Less accumulated depreciation 9,267 8,662 ------- ------- $ 2,889 $ 3,067 ======= =======
4. Income Taxes ------------ There was no income tax benefit recorded in the second quarter of 1995 as the Company fully utilized the benefit from its tax net operating loss carryback in 1994. The $1,661,000 income tax benefit recorded in the second quarter of 1994 was the result of the operating loss and the anticipated utilization of that loss during the remainder of 1994. 5. Restructuring ------------ In November 1994, the Company approved and executed a restructuring program (the Plan ) to focus future product development and sales efforts in the open systems market. As a result of this change, the Company streamlined its operations by reducing its workforce, consolidating and closing certain facilities and writing off idle and excess assets. A restructuring charge of $1,971,000 was recorded in 1994. The payments made in the first six months of 1995 and the accrual at December 31, 1994 and June 30, 1995 are as follows:
Remaining Accrual at Paid in Accrual at December 31, 1994 First Six Months June 30, 1995 ----------------- ---------------- ------------- Occupancy costs $ 471 $ 135 $ 336 Severance costs 88 88 - ----- ----- ----- $ 559 $ 223 $ 336 ===== ===== =====
The occupancy costs will be paid out in 1995 through 1998 and the remaining severance cost was paid out in the second quarter of 1995. There have been no changes to the Plan, the estimate of Plan costs or to the original Plan assumptions. 7 8 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- RESULTS OF OPERATIONS --------------------- Quarterly Results ----------------- Revenues for the second quarter of 1995 were $6,707,000 compared to $6,158,000 for the second quarter of 1994. This 9% increase in revenue is primarily the result of the market acceptance of the Company's open systems products in the U.S. In the second quarter of 1995, the Company achieved 44% of its total revenue through open systems products, of which, 57% was achieved in the U.S. International sales accounted for 24% of the total revenue in the second quarter of 1995 compared to 42% of the total revenue in the second quarter of 1994. Total U.S. sales increased 44% in the second quarter of 1995 from the second quarter of 1994, primarily the result of the addition of open systems products sold through the Company s direct sales and STAR distribution channels. The Company's OEM business strategy is ongoing and it recently signed two high-technology niche companies who are integrating IPL technology into their own products. Initial revenues from these companies should begin in the third quarter of 1995. Disk revenues increased 37% to $5,105,000 in the second quarter of 1995 compared with $3,941,000 in the second quarter of 1994. Tape revenue decreased 64% to $634,000 in the second quarter of 1995 compared with $1,754,000 in the second quarter of 1994. In the second quarter of 1995, the gross margin was 39.2% compared with 21.0% in the same period last year. This improvement is primarily the result of the change to the open systems market, and a reduction in the allowance for doubtful accounts receivable as well as the lower cost structure as a result of the 1994 re-engineering. Selling, general and administrative expenses decreased approximately 30% to $2,824,000 in the second quarter of 1995 compared with $4,039,000 in the second quarter of 1994. This $1,215,000 decrease is primarily due to the re engineering of the Company's operations during 1994 and ongoing aggressive expense management. Engineering and development expenses were $154,000 lower in the second quarter of 1995 compared to the second quarter of 1994. This decrease is due to lower overhead and reduced costs associated with the development of open systems products. Engineering headcount remained flat compared to the 1994 level. In the fourth quarter of 1994, the Company recorded a $1,971,000 charge to restructure the Company's operations. The Company's restructuring plan substantially reduced its cost structure and refocused product development and sales efforts on the open systems market in addition to the Company's traditional AS/400 markets. There were no changes in the second quarter of 1995 to the restructuring plan, the estimate of plan costs or to the original plan assumptions. The loss before income taxes for the second quarter of 1995 was $389,000 compared with $3,118,000 for the comparable period of 1994. The improvement is primarily due to the 103% increase in gross margin dollars and the 30% reduction in operating expenses. The Company's reported net loss was also $389,000, or $(0.07) per share compared with a net loss of $2,058,000, or $(0.38) per share, for the second quarter of 1994. There was no income tax benefit recorded in the second quarter of 1995. The Company plans to reduce taxes on anticipated future earnings. The Company fully utilized the benefit from its tax net operating loss carryback in 1994. The $1,060,000 income tax benefit recorded in the second quarter of 1994 was the result of the operating loss. 8 9 Six Month Results ----------------- Revenue for the first six months of 1995 were $13,224,000 compared to $13,700,000 for the first six months of 1994, primarily due to a reduction in purchases made by the Company's European distributors, which was partially offset by a 7% increase in U.S. sales, mainly open systems products. U.S. sales accounted for 64% of the Company's revenue through the second quarter of 1995 compared with 58% in the comparable period in 1994. This improvement reflects the continued progress of the Company's strategy in selling open systems products, which accounted for 31% of the total six months revenue. The revenue mix between disk and tape product lines in the first six months of 1995 reflects a 5% increase in disk products and a 37% decrease in tape products compared to the same period of 1994. The disk product line represented 78% and 74% of the Company's revenue in the first six months of 1995 and 1994, respectively. The tape product line accounted for 12% and 19%, respectively, of the Company's revenue for the same period. Gross margins in the first six months of 1995 were 37.5% compared with 29.0% in the first six months of 1994. The improvement in gross margin is primarily due to the reduction in the allowance for doubtful accounts receivable, as well as to sales of open systems products and the lower cost structure resulting from the 1994 re-engineering. (See Note 2 to the Consolidated Financial Statements.) Total operating expenses decreased 30% in the first half of 1995 compared with the same period of 1994. Selling, general and administrative expenses decreased in the first six months of 1995 by $2,389,000 or 29% compared to the same period in 1994, primarily due to the 1994 restructure. Engineering and development expenses decreased $337,000 during the first half of 1995 in comparison to the first half of 1994. This decrease is due to lower overhead and reduced costs associated with the development of open systems products. Engineering headcount remained flat for both periods. The loss before income taxes for the first six months of 1995 was $1,174,000 compared with $4.885,000 for the comparative period of 1994. The Company's net loss was also $1,174,000, or $(0.22) per share compared with a net loss of $3,224,000, or $(0.60) per share, for the same period of 1994. There was no income tax benefit recorded in the first six months of 1995. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's cash and equivalents as of June 30, 1995 were $5,067,000, reflecting an increase of $2,828,000, or 126% , from the balance at December 31, 1994. The cash balance increase reflects an aggregate of approximately $2 million received through a Federal income tax refund and a partial recovery of a previously reserved accounts receivable balance. The accounts receivable balance decreased by $5,005,000 or 58% due to the quarter-to-quarter fluctuation in geographic mix of the Company s sales and improved collections resulting in days-sales-outstanding of 48 days, compared with 96 days at year-end. Inventories increased $600,000 from year-end as the Company established adequate levels of inventory for open systems products. Accounts payable and accrued expense decreased by $1,800,000 primarily due to reduced material requirements and expenses. The Company continues to evaluate external financing requirements for future growth of its business and alternatives for such financing during 1995. Management believes that its cash and equivalents, cash provided by operations, and other capital resources will be sufficient to meet its operating and capital requirements for its existing business. The Company remains free of any short-term and long-term debt obligations. 9 10 PART II. OTHER INFORMATION -------------------------- Item 4. Submission of Matters to a Vote of Security-Holders --------------------------------------------------- The Company held its annual meeting of stockholders on Thursday, May 25, 1995, which was adjourned to Friday, June 9, 1995 for the purpose of electing the Class A Directors of the Company. The following represents the results of the proposals submitted to a vote of security holders:
Votes Cast Abstentions Votes Cast Against or and Broker For Withheld Non-Votes ---------- ---------- ---------- Fix the Number of Directors at Three 3,133,485 58,233 20,970 Election of Directors A. By the Class A Common Shares Gregory R. Grodhaus 2,278,087 54,858 0 Stephen J. Ippolito 2,278,087 54,858 0 B. By the Class C Common Shares Jeanne M. Sullivan 879,743 0 0
10 11 PART II. OTHER INFORMATION - Continued -------------------------------------- Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (a) Exhibits -------- Exhibit 11 - Computation of Net Loss Per Common Share - Page 13 (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed with the Securities and Exchange Commission during the fiscal quarter ended June 30, 1995.
11 12 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IPL SYSTEMS, INC. ----------------- DATE: August 2, 1995 By: /s/ Gregory R. Grodhaus ---------------------------- Gregory R. Grodhaus President Chief Executive Officer By: /s/ Eugene F. Tallone ---------------------------- Eugene F. Tallone Chief Financial Officer Principal Accounting Officer 12 13 IPL SYSTEMS, INC. FORM 10-Q, JUNE 30, 1995 EXHIBIT INDEX -------------
Exhibit No. Description Page No. ------- ----------- -------- 11 Computation of weighted average shares used in computing earnings per share amounts. Filed herewith 14-15
13 EX-11 2 COMPUTATION OF NET LOSS PER COMMON SHARE 1 EXHIBIT 11 IPL SYSTEMS, INC. ----------------- COMPUTATION OF NET LOSS PER COMMON SHARE ---------------------------------------- (Thousands of dollars except per share amounts) -----------------------------------------------
Three Months Ended ------------------ June 30, June 30, Primary 1995 1994 -------- -------- Net loss $ (389) $ (2,058) ========== ========== Weighted average shares outstanding 5,384,519 5,381,519 Dilutive stock options based on the treasury stock method using average market price for the period - - ---------- ---------- Common shares used in calculation of net loss per share 5,384,519 5,381,519 ========== ========== Net loss per share $ (0.07) $ (0.38) ========== ========== Fully Diluted ------------- Net loss $ (389) $ (2,058) ---------- ---------- Weighted average shares outstanding $5,384,519 $5,381,519 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 259,342 1,168 ---------- ---------- Common shares used in calculation of net loss per share 5,643,861 5,382,687 ---------- ---------- Net loss per share $ (0.07) $ (0.38) ---------- ---------- (A) This calculation is presented in accordance with Item 601 of Regulation S-X although it is not required by Paragraph 14 of APB Opinion No. 15.
14 2 EXHIBIT 11 (CONTINUED) IPL SYSTEMS, INC. ----------------- COMPUTATION OF NET LOSS PER COMMON SHARE ---------------------------------------- (Thousands of dollars except per share amounts) -----------------------------------------------
Six Months Ended ---------------- June 30, June 30, Primary 1995 1994 ------- -------- -------- Net loss $ (1,174) $ (3,224) ========== ========== Weighted average shares outstanding 5,383,319 5,381,519 Dilutive stock options based on the treasury stock method using average market price for the period - - ---------- ---------- Common shares used in calculation of net loss per share 5,383,319 5,381,519 ========== ========== Net loss per share $ (0.22) $ (0.60) ========== ========== Fully Diluted ------------- Net loss $ (1,174) $ (3,224) ---------- ---------- Weighted average shares outstanding $5,383,319 $5,381,519 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 303,261 26,693 ---------- ---------- Common shares used in calculation of net loss per share 5,687,780 5,408,212 ---------- ---------- Net loss per share $ (0.21) $ (0.60) ---------- ---------- (A) This calculation is presented in accordance with Item 601 of Regulation S-X although it is not required by Paragraph 14 of APB Opinion No. 15.
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF IPL SYSTEMS, INC. FOR THE THREE MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1995 APR-01-1995 JUN-30-1995 1 5,067 0 6,545 2,935 3,681 12,877 12,156 9,267 15,766 5,580 0 54 0 0 10,132 15,766 6,707 6,707 4,078 7,206 (110) 0 0 (389) 0 (389) 0 0 0 (389) (.07) (.07)