-----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, CJ/sZetxbALBZUKHY2C6KrZ2j9hE9vgDGyrv+W+yDXE6QvLrjTyBSJuiLWAtU1Wb Xpy88uzZ4V6RUU6J3rSV6Q== 0000950135-95-002365.txt : 19951119 0000950135-95-002365.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950135-95-002365 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 95590723 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 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 SEPTEMBER 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 incorporation or organization) Identification No.) 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 SEPTEMBER 30, 1995 ----- --------------------------------- Class A $.01 par value 5,193,615 Class C $.01 par value 393,904 =============================================================================== 2 IPL SYSTEMS, INC. FORM 10-Q INDEX
PAGE NO. -------- Part I. Financial Information Item 1. Consolidated Financial Statements Consolidated Balance Sheets - September 30, 1995 (Unaudited) and December 31, 1994....................................... 3 Consolidated Statements of Operations (Unaudited) - Nine Months Ended September 30, 1995 and September 30, 1994...................................................... 4 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 1995 and September 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 .................................... 8-10 Part II. Other Information 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) SEPTEMBER 30, 1995 DECEMBER 31, 1994 ------------------ ----------------- Current Assets: Cash and equivalents $3,623 $ 2,239 Accounts receivable - net 3,633 8,615 Inventories 4,637 3,060 Refundable income taxes - 1,425 Prepaid expenses and other current assets 598 358 ------- ------- Total Current Assets 12,491 15,697 Equipment and Improvements, net 2,564 3,067 ------- ------- Total Assets $15,055 $18,764 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 6,132 $ 7,412 Shareholders' Equity: Class A Common Stock, par value $.0l: Authorized, 20,000,000 shares; issued and outstanding, 5,193,615 and 4,501,776 shares 52 45 Convertible Class C Common Stock, par value $.0l: Authorized, 2,250,000 issued and outstanding, 393,904 and 879,743 shares 4 9 Additional paid-in capital 17,230 16,577 Deficit (8,363) (5,279) ------- ------- Total Shareholders' Equity 8,923 11,352 ------- ------- Total Liabilities and Shareholders' Equity $15,055 $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 Nine Months Ended September 30, September 30, ------------------- ------------------ 1995 1994 1995 1994 ------- ------- ------- ------- Revenues $ 4,523 $ 8,025 $17,748 $21,724 Cost of sales 2,736 5,960 11,008 15,685 ------- ------- ------- -------- Gross profit 1,787 2,065 6,740 6,039 Expenses: Selling, general and administrative 2,923 3,504 8,581 11,550 Engineering and development 331 384 965 1,355 Restructure Expense 497 - 497 - ------- ------- ------- -------- Loss from operations (1, 964) (1,823) (3,303) (6,866) ------- ------- ------- -------- Other income 54 97 219 256 ------- ------- ------- -------- Loss before income taxes (1,910) (1,726) (3,084) (6,610) Income tax expense (benefit) - 494 - (1,167) ------- ------- ------- -------- Net loss $(1,910) $(2,220) $(3,084) $( 5,443) ------- ------- ------- -------- Net loss per share $ (0.35) $ (0.41) $ (0.57) $ (1.01) ------- ------- ------- -------- Common and common equivalent shares used in the calculation of loss per share 5,522,552 5,381,519 5,429,730 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)
Nine Months Ended September 30, ----------------------- 1995 1994 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................................ $(3,084) $(5,443) ------- ------- Adjustments to reconcile net loss to net cash provided by operating activities: Restructure expense......................................... 497 - Depreciation and amortization............................... 832 1,390 Changes in assets and liabilities: Accounts receivable....................................... 4,982 8,611 Inventories .............................................. (1,577) 2,845 Prepaid expenses and other current assets ................ 1,185 393 Deferred income tax....................................... - 395 Accounts payable and accrued expenses .................... (1,777) (5,432) ------- ------- Total adjustments......................... 2,813 8,202 ------- ------- Net cash provided by operating activities....................... 1,058 2,759 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to equipment and improvements........................ (329) (1,537) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of stock ............................... 655 - ------- ------- CASH AND EQUIVALENTS: Net increase .................................................. 1,384 1,222 BALANCE, beginning of period................................... 2,239 4,131 ------- ------- BALANCE, end of period......................................... $ 3,623 $ 5,353 ======= ======= 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 September 30, 1995, and the consolidated statements of operations and cash flows for the nine months ended September 30, 1995 and September 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 September 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 September 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) September 30, 1995 December 31, 1994 ------------------ ----------------- Total accounts receivable $6,330 $ 12,283 Less allowance for doubtful accounts 2,697 3,668 ------ -------- Net Accounts Receivable $3,633 $ 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) September 30, 1995 December 31, 1994 ------------------ ----------------- Customer support $ 3,499 $ 3,167 Manufacturing equipment 4,853 4,815 Office equipment & fixtures 2,370 2,412 Leasehold improvements 1,335 1,335 ------- ------- 12,057 11,729 ======= ======= Less accumulated depreciation 9,493 8,662 ------- ------- $ 2,564 $ 3,067 ======= =======
4. INCOME TAXES There was no income tax benefit recorded in 1995 as the Company has fully utilized the available net operating loss carryback in 1994. The $494,000 income tax charge recorded in the third quarter of 1994 was the result of a significant reduction in the effective tax, and as a result, the Company's income tax benefit for the nine months ended September 30, 1994 was $1,167,000. 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 Company increased its estimate of the remaining occupancy costs by $497,000 in the third quarter of 1995 to cover the full occupancy costs for the balance of the lease term for unused space in its Maynard facility. The changes in the restructuring accrual are as follows:
Balance Balance December 31, 1994 Increase Paid September 30, 1995 ----------------- -------- ---- ------------------ Occupancy costs $471 $497 $255 $713 Severance costs 88 - 88 - ---- ---- ---- ---- $559 $497 $343 $713 ==== ==== ==== ====
The occupancy costs will be paid through 1998. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS QUARTERLY RESULTS Revenues for the third quarter of 1995 were $4,523,000 compared to $8,025,000 for the third quarter of 1994. This 44% decrease in revenue is primarily due to a substantial reduction in international sales of the Company's AS/400 disk product line and a slow transition to open system products in the Company's overseas markets. In the third quarter of 1995, the Company 's sales of open systems products were 40% of total revenue. In the U.S. 49% of their respective sales were in open systems products while international was 8% of their respective sales in open systems products. International sales accounted for 23% of the total revenue in the third quarter of 1995 compared to 48% of the total revenue in the third quarter of 1994. Total U.S. sales decreased 17% in the third quarter of 1995 from the third quarter of 1994, mainly due to delays in certain large orders which were not received by the Company until October 1995. Disk sales accounted for 76% of revenue in the third quarter 1995 compared to 73% in the same period in 1994. Tape sales accounted for 12% and 17% respectively for the comparable period. In the third quarter of 1995, the gross margin was 39.5% compared to 25.7% in the same period last year. This improvement is the result of the transition from the AS/400 to the open systems market, and a partial recovery of a doubtful accounts receivable, as well as the continuing lower cost structure for 1995. Selling, general and administrative expenses decreased approximately 17% to $2,923,000 in the third quarter of 1995 compared with $3,504,000 in the third quarter of 1994. This $581,000 decrease is primarily due to the positive effect of reengineering of the Company's operations during 1994 and ongoing expense management. Engineering and development expenses were $53,000 lower in the third quarter of 1995 compared to last year due to lower overhead and reduced costs associated with the development of open systems products. Engineering headcount remains unchanged from 1994. In 1994 the Company's restructure accrual 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. In the third quarter 1995, the Company increased its restructuring accrual by $497,000 to cover the occupancy costs for the balance of the lease term for unused space in its Maynard facility. The loss before income taxes for the third quarter of 1995 was $1,910,000 including the restructuring accrual of $497,000 compared with $1,726,000 for the same period last year. The Company's reported net loss was also $1,910,000, or $(0.35) per share compared with a net loss of $2,220,000, or $(0.41) per share, for the third quarter of 1994. There was no income tax benefit recorded in the third quarter of 1995. The Company plans to reduce taxes on anticipated future earnings. The Company fully utilized the benefit from its net operating loss carryback in 1994. The $494,000 income tax provision was the result of adjusting the 1994 annual estimated tax rate after reevaluating the Company's projected annual operating results. 8 9 NINE MONTH RESULTS Revenue for the first nine months of 1995 were $17,748,000 compared to $21,724,000 for the first nine months of 1994, primarily due to a continued reduction in purchases made by the Company's European distributors. International revenue declined to 33% of revenue in 1995 compared to 44% in 1994. The Company is planning to expand its number of European distributors to more effectively penetrate the European open systems market. U.S. revenue accounted for 67% of the Company's revenue through the third quarter of 1995 compared with 56% in the same period last year. This improvement reflects the continued progress of the Company's strategy of selling open systems products which accounted for 44% of the total nine months revenue. There were no sales to the open systems market in the same period of 1994. The disk product line represents 77% and 73% of the Company's revenue in the first nine months of 1995 and 1994, respectively. The tape product line accounted for 12% and 18%, respectively, of the Company's revenue for the same period. Gross margins in the first nine months of 1995 were 38% compared with 28% in the first nine months of 1994. The improvement in gross margin is primarily due to a partial recovery of a doubtful accounts receivable, as well as sales of open systems products and the lower cost structure resulting from the 1994 reengineering. (See Note 2 to the Consolidated Financial Statements.) Total operating expenses decreased 23% in the first nine months of 1995 compared with the same period of 1994. Selling, general and administrative expenses decreased by $2,969,000 or 26% compared to the same period in 1994, primarily due to the positive effect of the Company's restructuring plan and ongoing expense control. Engineering and development expenses decreased $390,000 during the first nine months of 1995 in comparison to the first nine months of 1994. This decrease is due to lower overhead and reduced cost associated with the development of open systems products. Engineering headcount remains unchanged from 1994. The loss before income taxes for the first nine months of 1995 was $3,084,000 compared with $6,610,000 for the comparative period of 1994. The Company's net loss was also $3,084,000, or $(0.57) per share compared with a net loss of $5,443,000, or $(1.01) per share, for the same period of 1994. There was no income tax benefit recorded in the first nine months of 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and equivalents as of September 30,1995 were $3,623,000, reflecting an increase of $1,384,000, or 62%, from 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, net of cash used to support operations and increased purchases of inventory. The accounts receivable balance decreased by $4,982,000 or 58% primarily due to the quarter to quarter fluctuation in channel mix of the Company's sales. Inventories increased $1,577,000 from year-end as the Company has established adequate levels of inventory for expected sales of open systems products. Accounts payable and accrued expenses decreased $1,280,000 primarily due to reduced operating expenses. 9 10 The Company continues to evaluate external financing requirements for the 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 meets its operating and capital requirements for its existing business. The Company remains free of any short-term and long-term obligations. 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 14-15 (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 September 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: November 10, 1995 By: /s/ Stephen J. Ippolito ------------------------------ Stephen J. Ippolito Chairman 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 EARNINGS PER SHARE 1 EXHIBIT 11 IPL SYSTEMS, INC. COMPUTATION ON NET LOSS PER COMMON SHARE (Thousands of dollars except per share amounts)
THREE MONTHS ENDED --------------------------------- SEPTEMBER 30, SEPTEMBER 30, PRIMARY 1995 1994 ------- -------------- ------------- Net loss $ (1,910) $ (2,220) ========== ========== Weighted average shares outstanding 5,522,552 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 5,522,552 5,381,519 ========== ========== Net loss per share $ (0.35) $ (0.41) ========== ========== FULLY DILUTED ------------- Net loss $ (1,910) $ (2,220) ---------- ---------- Weighted average shares outstanding 5,522,552 5,381,519 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 211,832 - ---------- ---------- Common shares used in calculation of net loss per share 5,734,384 5,381,519 ---------- ---------- Net loss per share $ (0.33) $ (0.41) ---------- ---------- (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)
NINE MONTHS ENDED -------------------------------- SEPTEMBER 30, SEPTEMBER 30, PRIMARY 1995 1994 ------- ------------- ------------- Net loss $ (3,084) $ (5,443) ========== ========== Weighted average shares outstanding 5,429,730 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 5,429,730 5,381,519 ========== ========== Net loss per share $ ( 0.57) $ (1.01) ========== ========== FULLY DILUTED ------------- Net loss $ (3,084) $ (5,443) ---------- ---------- Weighted average shares outstanding 5,429,730 5,381,519 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 211,832 17,795 ---------- ---------- Common shares used in calculation of net loss per share 5,641,562 5,399,314 ---------- ---------- Net loss per share $ (0.55) $ (1.01) ---------- ---------- (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.
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 SEPTEMBER 1, 1995 AND THE SIX MONTHS ENDED SEPTEMBER 1, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS 6-MOS DEC-31-1995 DEC-31-1994 JUL-01-1995 JUL-01-1994 SEP-01-1995 SEP-01-1994 1 1 3,623 3,623 0 0 6,330 6,330 2,697 2,697 4,637 4,637 12,491 12,491 12,057 12,057 9,493 9,493 15,055 15,055 6,132 6,132 0 0 56 56 0 0 0 0 8,867 8,867 15,055 15,055 4,523 4,523 4,523 4,523 2,736 2,736 6,487 6,487 (54) (54) 0 0 0 0 (1,910) (1,910) 0 0 (1,910) (1,910) 0 0 0 0 0 0 (1,910) (1,910) (.35) (.35) (.33) (.33)
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