-----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, Wo2vuV7lHdBcbj2oUoWhFN1bvKDq+Fq/aJFlqLSYRww3SLT+xFNnAbrDIcWGMtEr RJusFdlnXI3GYqZPbl7eKw== 0000950135-96-003537.txt : 19960814 0000950135-96-003537.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950135-96-003537 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96609827 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 JUNE 30, 1996. 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 periods 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, 1996 ----- ----------------------------- Class A $.01 par value 5,633,819
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, 1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Operations (Unaudited) - Three Months Ended June 30, 1996 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended June 30, 1996 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Unaudited Quarterly Consolidated Statements . . . . . . . . . . . . . . . . . . . . . . . 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-11 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders.......... . . . . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 3 PART I. FINANCIAL INFORMATION - ----------------------------- Item 1. Consolidated Financial Statements IPL SYSTEMS, INC. ---------------- CONSOLIDATED BALANCE SHEETS -------------------------- (Thousands of Dollars) ASSETS ------
(Unaudited) June 30, 1996 December 31, 1995 ------------- ----------------- Current Assets: Cash and equivalents $ 2,357 $ 3,595 Accounts receivable-net 4,375 4,019 Inventories 3,619 3,375 Other current assets 296 405 ------- ------- Total Current Assets 10,647 11,394 Equipment and Improvements, net 1,916 2,348 ------- ------- Total Assets $12,563 $13,742 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts payable and accrued expenses $ 4,247 $ 5,199 Shareholders' Equity: Class A Common Stock, par value $.01: Authorized, 20,000,000 shares; issued and outstanding, 5,633,819 and 5,200,590 shares 56 52 Convertible Class C Common Stock, par value $.01: Authorized, 2,250,000 shares issued and outstanding, -0- shares and 386,929 shares 0 4 Additional paid-in capital 17,352 17,230 Deficit (9,092) (8,743) ------- ------- Total Shareholders' Equity 8,316 8,543 ------- ------- Total Liabilities and Shareholders' Equity $12,563 $13,742 ======= =======
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, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Revenues $ 4,464 $ 6,707 $ 11,566 $ 13,224 Cost of sales 2,693 4,078 6,983 8,271 ---------- ---------- ---------- ---------- Gross profit 1,771 2,629 4,583 4,953 Expenses: Selling, general & administrative 2,064 2,824 4,429 5,657 Engineering & development 338 304 705 634 Restructure expense (income) --- --- (100) --- ---------- ---------- ---------- ---------- Operating income (loss) (631) (499) (451) (1,338) Other income 50 110 100 164 ---------- ---------- ---------- ---------- Income (loss) before income taxes (581) (389) (351) (1,174) ---------- ---------- ---------- ---------- Income tax - - - - ---------- ---------- ---------- ---------- Net income (loss) $ (581) $ (389) $ (351) $ (1,174) ---------- ---------- ---------- ---------- Net Income (loss) per share $ (0.10) $ (0.07) $ (0.06) $ (0.22) ========== ========== ========== ========== Common and common equivalent shares used in calculation of income (loss) per share 5,613,326 5,384,519 5,602,034 5,383,319 ========== ========== ========== ==========
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, 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $ (351) $(1,174) ------- ------- Adjustments to reconcile net income (loss) to net cash from operating activities: Restructure expenses (income) . . . . . . . . . . . . . . . . . (100) -- Depreciation and amortization . . . . . . . . . . . . . . . 497 605 Changes in assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . (356) 5,005 Inventories . . . . . . . . . . . . . . . . . . . . . . . (244) (621) Prepaid expenses and other current assets . . . . . . . . 109 1,264 Accounts payable and accrued expenses . . . . . . . . . . (852) (1,832) ------- ------- Total adjustments . . . . . . . . . . . . . . . . (946) 4,421 ------- ------- Net cash used by operating activities . . . . . . . . . . . . . (1,297) 3,247 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to equipment and improvements . . . . . . . . . . . . (63) (427) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of stock . . . . . . . . . . . . . . 122 8 ------- ------- CASH AND EQUIVALENTS: Net increase (decrease) . . . . . . . . . . . . . . . . . . . (1,238) 2,828 BALANCE, beginning of period . . . . . . . . . . . . . . . . . 3,595 2,239 ------- ------- BALANCE, end of period . . . . . . . . . . . . . . . . . . . . $ 2,357 $ 5,067 ======= ======= SUPPLEMENTARY CASH FLOW INFORMATION: Taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 $ 11 ======= =======
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, 1996, and the consolidated statements of operations and cash flows for the six month periods ended June 30, 1996 and June 30, 1995 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, 1996, and for all periods presented, have been made. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation" which will be effective for the Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share. 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, 1995, including the audited financial statements and related notes included therein. The results of operations for the period ended June 30, 1996 are not necessarily indicative of the operating results for the full year. 6 7 PART I. FINANCIAL INFORMATION - Continued - ------------------------------------------ 2. Accounts Receivable ------------------- Accounts receivable consist of the following:
(Thousands of dollars) June 30, 1996 December 31, 1995 ------------- ----------------- Total accounts receivable $6,178 $6,130 Less allowance for doubtful accounts 1,803 2,111 ------ ------ Net Accounts Receivable $4,375 $4,019 ------ ------
3. Equipment and Improvements -------------------------- Equipment and improvements consist of the following:
(Thousands of dollars) June 30, 1996 December 31, 1995 ------------- ----------------- Customer support equipment $ 3,546 $ 3,500 Manufacturing equipment 4,887 4,883 Office equipment & fixtures 2,316 2,320 Leasehold improvements 1,339 1,335 ------- ------- 12,088 12,038 Less accumulated depreciation 10,172 9,690 ------- ------- $ 1,916 $ 2,348 ======= =======
7 8 PART I. FINANCIAL INFORMATION - Continued - ------------------------------------------ 4. Income Taxes ------------ The Company plans to offset its 1996 federal income tax obligations through the use of prior unrecognized net operating loss carry forward amounts. Accordingly, there was no income tax recorded in the first six months of 1996. There was no tax benefit recorded with the first six months 1995 pre-tax loss. 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. In March 1996, a portion of the Maynard facility was leased resulting in a $100,000 reduction in restructuring expenses. The changes in the restructuring accrual are as follows:
Balance Balance December 31, 1995 Decrease Paid June 30, 1996 ----------------- ---------- ----- ------------- Occupancy Costs $ 595 $ 100 $ 121 $ 374
The occupancy costs will be paid through March 31, 1998. 8 9 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 1996 were $4,460,000 compared to $6,707,000 for the second quarter of 1995. This 33% decrease in revenue compared to a year ago is the result of several factors. These were: the continuing slow transition from A/S 400 to open systems product sales through our European distributors; the departure of three key sales executives, one being the Vice President of U.S. Sales, mid-quarter; and the Company's decision to delay the introduction of strategic new technology to incorporate product enhancements identified by customers during the beta test process. On June 1, 1996, a new Vice President of Sales was appointed, and on June 11, 1996, the Company released for general availability its new database backup and disaster recovery solution called ParallelBACK(TM). In the second quarter of 1996, the Company's sales of open systems products were 48% of total product revenue. In the U.S. 70% of sales were in open systems products while 5% of international sales were from open systems products. Total U.S. sales accounted for 69% of the total revenue in the second quarter of 1996 compared with 76% of total revenue in the second quarter of 1995. Total international sales decreased 15% in the second quarter of 1996 from the second quarter of 1995 due to a reduction in purchases of AS/400 disk product and a slow transition to open systems products in the Company's overseas markets. Disk sales accounted for 79% of revenue in the second quarter of 1996 compared with 81% in the same period in 1995. Tape sales accounted for 6% and 9% respectively for the comparable period. In the second quarter of 1996, the gross margin was 39.7% compared to 39.2% in the same period last year. The continued improvement is the result of increased open system sales and reduced costs in 1996. Selling, general and administrative expenses decreased 27% to $2,064,000 in the second quarter of 1996 compared with $2,824,000 in the second quarter of 1995. This $760,000 decrease is the result of ongoing expense management as a key factor in assuring the Company's competitiveness going forward. Engineering and development expenses increased $34,000 in the second quarter of 1996 compared to the same period last year. The ParallelBACK technology, new backup and disaster recovery solution for the database storage segment of the UNIX market, is now in general release. The loss before income taxes for the second quarter of 1996 was $581,000 compared with $389,000 for the same period last year. The Company's reported net loss was also $581,000, or $ 0.10 per share compared with a net loss of $389,000, or $ 0.07 per share for the second quarter of 1995. 9 10 The Company plans to offset any 1996 federal and state income tax obligations through the use of prior unrecognized net operating loss carry forward amounts. There was no tax benefit recorded in the second quarter of 1995 since the Company fully utilized the benefit from its tax net operating carryback in 1994. Six Months Results - ------------------ Revenue for the first six months of 1996 were $11,566,000 compared to $13,224,000 for the first six months of 1995 primarily due to the continued reduction in purchases made by the Company's European distributors. Despite continuing decreases in international revenue, U.S. sales were in line with expectations in the first quarter 1996. Sales in the second quarter declined due to the departure of the Vice President of North American Sales and two field sales people. The Company also chose to delay the introduction of strategic new technology to incorporate enhancements identified by customers during the beta test process. The Company's transition to the open systems products continues to move at a slower pace in Europe than in the U.S.. International revenue declined to 26% of revenue in 1996 compared to 36% in 1995. U.S. revenue accounted for 74% of the Company's revenue through the second quarter of 1996 compared with 64% 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 42% of the six months revenue. The disk product line represents 75% and 77% of the Company's revenue in the first six months of 1996 and 1995, respectively. The tape product line accounted for 11% and 12%, respectively, of the Company's revenue for the same period. Gross margins in the first six months of 1996 were 39.6% compared with 37.5% in the first six months of 1995. The improvement in gross margin is primarily due to increasing open systems product sales and reduced costs in the first six months of 1996. Total operating expenses decreased 20% in the first six months of 1996 compared with the same period of 1995. Selling, general and administrative expenses decreased by $1,228,000 or 22% compared to the same period in 1995, primarily due to ongoing expense control. Engineering and development expenses increased $71,000 during the first six months of 1996 in comparison to the first six months of 1995. This increase is due to advancing the development of open systems products. The loss before income taxes for the first six months of 1996 was $351,000 compared with $1,174,000 for the comparative period of 1995. The Company's net loss was also $351,000, or $0.06 per share compared with a net loss of $1,174,000, or $0.22 per share, for the same period of 1995. The Company plans to offset any 1996 federal and state income tax obligations through the use of prior unrecognized net operating loss carryforward amounts. There was no tax benefit recorded in the first six months of 1995 since the Company fully utilized the benefit from its tax net operating carryback in 1994. 10 11 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's cash and equivalents as of June 30, 1996 were $2,357,000, reflecting a 34% decrease or $1,238,000 from December 31, 1995. Accounts receivable balances increased by 9% to $4,375,000 due to increased days sales outstanding at the end of the second quarter 1996. Inventories increased from $3,375,000 at December 31, 1995 to $3,619,000 at June 30, 1996 to establish adequate levels of inventory for expected sales of open systems products. Accounts payable and accrued expenses decreased $952,000 primarily due to reduced operating expenses. 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. The Company continues to evaluate its operating capital requirements should the future growth of the business require additional financial investment. Accordingly, the Company is pursuing contingency arrangements should such financing be required. 11 12 PART II. OTHER INFORMATION - Continued - -------------------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The Company held its annual meeting of stockholders on Wednesday, May 29, 1996. The following represents the results of the proposals submitted to a vote of security holders:
Votes Cast Against or Absentions and Votes Cast For Withheld Broker Non-Votes -------------- -------- ---------------- Fix the number of Directors at four 4,148,179 80,630 34,471 Election of Directors Ronald J. Gellert 4,098,806 59,474 0 Stephen J. Ippolito 4,098,806 59,474 0 Cornelius P. McMullan 4,098,806 59,474 0 Harris Ravine 4,098,806 59,474 0 Approval of the Company's 1996 Equity Incentive Plan, its 1995 Equity Incentive Plan, and the consolidation of such plans as the 1996 Consolidated Equity Incentive Plan 1,205,059 405,009 2,549,212
Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (a) Exhibits -------- Exhibit 11 - Computation of Net Income (Loss) Per Common Share - Page 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 June 30, 1996. 12 13 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 9, 1996 By: /s/Ronald J. Gellert -------------------- Ronald J. Gellert President Chief Executive Officer By: /s/Eugene F. Tallone -------------------- Eugene F. Tallone Chief Financial Officer Principal Accounting Officer 13 14 IPL SYSTEMS, INC. FORM 10-Q, JUNE 30, 1996 EXHIBIT INDEX -------------
Exhibit No. Description Page No. - ------- ------------------- -------- 11 Computation of weighted average shares used in computing earnings per share amounts. Filed herewith 15
14 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, 1996 1995 ---------- ---------- Primary ------- Net income (loss) $ ( 581) $ ( 389) ---------- ---------- Weighted average shares outstanding 5,613,326 5,384,519 ---------- ---------- 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 5,613,326 5,384,519 ========== ========== Net income (loss) per share $ (0.10) $ (0.07) ========== ========== Fully Diluted ------------- Net income (loss) $ (581) $ (389) ========== ========== Weighted average shares outstanding 5,613,326 5,384,519 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 177,089 259,342 ---------- ---------- Common shares used in calculation of net loss per share 5,790,415 5,643,861 ========== ========== Net income (loss) per share $ (0.10) $ (0.07) ========== ==========
(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 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, 1996 1995 ---------- ---------- Primary ------- Net loss $ (351) $ (1,174) ---------- ---------- Weighted average shares outstanding 5,602,034 5,383,319 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 5,602,034 5,383,319 ========== ========== Net loss per share $ (0.06) $ (0.22) ========== ========== Fully Diluted ------------- Net income (loss) $ (351) $ (1,174) ========== ========== Weighted average shares outstanding 5,602,034 5,383,319 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 163,074 303,261 ---------- ---------- Common shares used in calculation of net loss per share 5,765,108 5,687,780 ========== ========== Net income (loss) per share $ (0.06) $ (0.21) ========== ==========
(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. 16 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 2,357 0 6,178 1,803 3,619 10,647 12,088 10,172 1,916 4,247 0 0 0 56 0 12,563 4,464 4,464 2,693 5,095 (50) 0 0 (581) 0 0 0 0 0 (581) (.10) (.10)
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