-----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, QeMbGDwXQcuEBwDFxs/Iq0TgtI9ESLs8z7ElxZN8mjKBVOjIA5vv+fwrmhnS7XVf SxkRBdi/yDEeK6jL3OhgkA== 0000950135-96-004885.txt : 19961115 0000950135-96-004885.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950135-96-004885 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 96662097 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, 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 SEPTEMBER 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 - September 30, 1996 (Unaudited) and December 31, 1995 ....................... 3 Consolidated Statements of Operations (Unaudited) - Nine Months Ended September 30, 1996 and September 30, 1995 .................................. 4 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 1996 and September 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 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) September 30, 1996 December 31, 1995 ------------------ ----------------- Current Assets: Cash and equivalents $ 2,429 $ 3,595 Accounts receivable-net 3,186 4,019 Inventories 4,050 3,375 Other current assets 430 405 ------- ------- Total Current Assets 10,095 11,394 Equipment and Improvements, net 1,824 2,348 ------- ------- Total Assets $11,919 $13,742 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts payable and accrued expenses $ 4,399 $ 5,199 Shareholders' Equity: Class A Common Stock, par value $.01: Authorized, 20,000,000 shares; issued and outstanding, 5,633,819 and 5,193,615 shares 56 52 Convertible Class C Common Stock, par value $.01: Authorized, 2,250,000 shares; issued and outstanding, -0- and 393,904 0 4 shares Additional paid-in capital 17,353 17,230 Deficit (9,889) (8,743) ------- ------- Total Shareholders' Equity 7,520 8,543 ------- ------- Total Liabilities and Shareholders' Equity $11,919 $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 Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1996 1995 1996 1995 ---- ---- ---- ---- Revenue $ 3,077 $ 4,523 $ 14,642 $ 17,748 Cost of sales 1,463 2,736 8,445 11,008 ---------- ---------- ---------- ---------- Gross profit 1,614 1,787 6,197 6,740 Expenses: Selling, general & administrative 2,079 2,923 6,507 8,581 Engineering & development 351 331 1,056 965 Restructure expense (income) -- 497 (100) 497 ---------- ---------- ---------- ---------- Operating loss (816) (1,964) (1,266) (3,303) Other income 20 54 120 219 ---------- ---------- ---------- ---------- Loss before income taxes (796) (1,910) (1,146) (3,084) Income tax -- -- -- -- ---------- ---------- ---------- ---------- Net loss $ (796) $ (1,910) $ (1,146) $ (3,084) ---------- ---------- ---------- ---------- Net loss per share $ (0.14) $ (0.35) $ (0.20) $ (0.57) ========== ========== ========== ========== Common and common equivalent shares used in calculation of loss per share 5,633,819 5,522,552 5,612,629 5,429,730 ========== ========== ========== ==========
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 ---------------------- Sept. 30, Sept. 30, 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,146) $(3,084) ------- ------- Adjustments to reconcile net loss to net cash from operating activities: Restructure expenses (income) (100) 497 Depreciation and amortization 729 832 Changes in assets and liabilities: Accounts receivable 833 4,982 Inventories (675) (1,577) Prepaid expenses and other current assets (25) 1,185 Accounts payable and accrued expenses (700) (1,777) ------- ------- Total adjustments 62 4,142 ------- ------- Net cash used by operating activities (1,084) 1,058 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to equipment and improvements (205) (329) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of stock 123 655 ------- ------- CASH AND EQUIVALENTS: Net increase (decrease) (1,166) 1,384 BALANCE, beginning of period 3,595 2,239 ------- ------- BALANCE, end of period $ 2,429 $ 3,623 ======= ======= SUPPLEMENTARY CASH FLOW INFORMATION: Taxes paid $ 19 $ 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 September 30, 1996, and the consolidated statements of operations and cash flows for the nine month periods ended September 30, 1996 and September 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 September 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 September 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) September 30, 1996 December 31, 1995 ------------------ ----------------- Total accounts receivable $4,457 $6,130 Less allowance for doubtful accounts 1,271 2,111 ------ ------ Net Accounts Receivable $3,186 $4,019 ====== ======
3. Equipment and Improvements -------------------------- Equipment and improvements consist of the following:
(Thousands of dollars) September 30, 1996 December 31, 1995 ------------------ ----------------- Customer support equipment $ 3,643 $ 3,500 Manufacturing equipment 4,939 4,883 Office equipment & fixtures 2,322 2,320 Leasehold improvements 1,339 1,335 ------- ------- 12,243 12,038 Less accumulated depreciation 10,419 9,690 ------- ------- $ 1,824 $ 2,348 ======= =======
7 8 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, if any, there was no income tax recorded in the first nine months of 1996. There was no tax benefit recorded with the first nine 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 September 30, 1996 ----------------- -------- ---- ------------------ Occupancy Costs $595 $100 $169 $326
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 - ------------- The discussion contained in this item as well as elsewhere in this report may contain forward-looking statements based on the current expectations of the Company's management. Such statements are subject to certain risks and uncertainties which would cause actual results to differ materially from those projected. See "Important Factors Regarding Forward-Looking Statements of IPL Systems, Inc." Filed as Exhibit 99.1 to the Company's Annual Report on form 10K for the fiscal year ended December 31, 1995, which is incorporated by reference into this report. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS --------------------- Quarterly Results - ----------------- Revenues for the third quarter of 1996 were $3,077,000 compared to $4,523,000 for the third quarter of 1995. This 32% decrease was primarily the result of lower than expected revenues associated with the company's continued repositioning of its sales effort in the open systems environment. The number of U.S. sales representatives was at a lower level than in 1995, contributing to the lower sales. Additional sales personnel subsequently have been added in the fourth quarter of 1996. In the third quarter of 1996, the Company's sales of open systems products were 55% of total product revenue. In the U.S. 69% of sales were in open systems products while 21% of international sales were from open systems products. Total U.S. sales were 74% and international sales were 26% in the second quarter of 1996, approximately the same percentages as in the same quarter of 1995. Disk sales accounted for 80% of revenue in the third quarter of 1996 compared with 76% in the same period in 1995. Tape sales accounted for 2% and 12% respectively for the comparable periods in 1996 and 1995. The Company is not promoting tape sales in 1996. In the third quarter of 1996, the gross margin was 52.5% compared to 39.5% in the same period last year. The increase reflects a 7% improvement in the gross margin percentage resulting from sales of higher margin open systems products, and a 6% increase in the gross margin attributable to partial recovery of a bad debt reserved in 1994. The Company has recently entered into a settlement with this customer which is expected to produce a final payment by year end 1996. Selling, general and administrative expenses decreased 29% to $2,079,000 in the third quarter of 1996 compared with $2,923,000 in the third quarter of 1995. This $844,000 decrease is the result of fewer sales representatives and ongoing expense control. Engineering and development expenses increased $20,000 in the second quarter of 1996 compared to the second quarter of 1995. These additional expenses permitted the Company to 9 10 release on October 3, 1996, for general availability the RAIDTower II storage system with dual active technology which provides storage failover with significantly higher performance than commonly available active/passive implementations. In 1995, the Company increased its restructuring accrual by $497,000 to cover the occupancy costs for unused space in its Maynard facility for the balance of the lease terms. There were no provisions for taxes provided in the third quarter of 1996 and 1995. The Company reported a net loss of $796,000, or $0.14 per share, compared with a net loss of $1,910,000, or $0.35 per share, for the third quarter 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 third quarter of 1995 since the Company fully utilized the benefit from its tax net operating carryback in 1994. Nine months Results - ------------------- Revenues for the first nine months of 1996 were $14,642,000 compared to $17,748,000 for the first nine months of 1995. The decrease was primarily due to the continued reduction in purchases made by the Company's European distributors. In addition, sales in the second and third quarters declined primarily because the number of U.S. sales representatives was at a lower level than last year. The Company's transition to sales of open systems products continues to move at a slower pace in international markets than in the U.S. In the U.S. 67% of sales were in open systems products while 9% of international sales were from open systems products. International revenue declined to 26% of revenue in 1996 compared with 33% in 1995. U.S. revenue accounted for 74% of the Company's revenue through the third quarter of 1996 compared with 67% in the same period last year. The disk product line represents 76% and 77% of the Company's revenue in the first nine months of 1996 and 1995 respectively. The tape product line accounted for 9% and 12%, respectively, of the Company's revenue for the same period. Gross margins in the first nine months of 1996 were 42.3% compared with 38.0% in the first nine months of 1995. The increase reflects a 5.2% improvement in the gross margin percentage resulting from sales of higher margin open systems products, and a .9% decrease in the gross margin attributable to a lower than 1995 partial recovery of a bad debt reserved in 1994. The Company has recently entered into a settlement with this customer which is expected to produce a final payment by year end 1996. Total operating expenses decreased 21% in the first nine months of 1996 compared to the same period in 1995. Selling, general and administrative expenses decreased by $2,072,000 or 24% compared to the same period in 1995, due to lower level of sales representatives and ongoing expense control. Engineering and development expenses increased $91,000 during the first nine months of 1996 in comparison to the same period in 1995. This increase is due to advancing the development of open systems products. 10 11 The restructure accrual was reduced by $100,000 in 1996, as the Company sublet a portion of the unused space in its Maynard facility. The unused space in the Maynard facility was expensed in 1995. The loss before income taxes for the first nine months of 1996 was $1,146,000 comparable with $3,084,000 for the comparable period of 1995. The Company's net loss was also $1,146,000, or $0.20 per share comparable with a net loss of $3,084,000, or $0.57 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 nine months of 1995 since the Company fully utilized the benefit from its tax net operating carryback in 1994. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's cash and equivalents as of September 30, 1996 were $2,429,000, reflecting a decrease of $1,166,000 or 32% from December 31, 1995. Accounts receivable balances decreased by 21% to $3,186,000 due to lower sales at the end of the third quarter of 1996 than at year end of 1995. Inventories increased by $675,000 to $4,050,000 due to lower third quarter sales and to the establishment of adequate levels of inventory for expected sales of the new open systems products in the fourth quarter of 1996. Accounts payable and accrued expenses decreased $800,000 primarily due to reduced operating expenses. Management believes that its cash and equivalents, as well as cash that may be provided by operations, will be sufficient to meet its operating and capital requirements for its existing business for the near term, but that the longer term financial stability and any future growth of the business will be dependent upon achieving profitable operations and obtaining additional capital resources through debt or equity financing. There can be no assurance that profitability will be achieved or that any such financing will be obtained. 11 12 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. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed with the Securities and Exhange Commission during the fiscal quarter ended September 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: November 12, 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, SEPTEMBER 30, 1996 EXHIBIT INDEX ------------- Exhibit No. Description Page No. - ------- ----------- -------- 11. Computation of Net Loss per Common Share. 15 14 EX-11 2 COMPUTATION OF EARNINGS 1 EXHIBIT 11 IPL SYSTEMS, INC. ----------------- COMPUTATION OF NET LOSS PER COMMON SHARE ---------------------------------------- (Thousands of dollars except per share amounts)
Three Months Ended ------------------ September 30, September 30, 1996 1995 ------------- ------------- Primary - ------- Net loss $ (796) $ (1,910) ---------- ---------- Weighted average shares outstanding 5,633,819 5,522,552 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 5,633,819 5,522,552 ========== ========== Net loss per share $ (0.14) $ (0.35) ---------- ---------- Fully Diluted - ------------- Net loss $ (796) $ (1,910) ========== ========== Weighted average shares outstanding 5,633,819 5,522,552 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 4,999 211,832 ---------- ---------- Common shares used in calculation of net loss per share 5,638,818 5,734,384 ========== ========== Net loss per share $ (0.14) $ (0.33) ========== ========== (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)
Nine Months Ended --------------------------------- September 30, September 30, 1996 1995 ------------- ------------- Primary - ------- Net loss $ (1,146) $ (3,084) ---------- ---------- Weighted average shares outstanding 5,612,629 5,429,730 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 5,612,629 5,429,730 ========== ========== Net loss per share $ (0.20) $ (0.57) ========== ========== Fully Diluted - ------------- Net loss $ (1,146) $ ( 3,084) ========== ========== Weighted average shares outstanding 5,612,629 5,429,730 Dilutive stock options based on the treasury stock method using the higher of average or period end market price (A) 110,382 239,341 ---------- ---------- Common shares used in calculation of net loss per share 5,723,011 5,669,071 ========== ========== Net loss per share $ (0.20) $ (0.54) ========== ========== (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 U.S. DOLLARS 3-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 1 2,429 0 4,457 1,271 4,050 10,095 12,243 10,419 11,919 4,399 0 56 0 0 0 11,919 3,077 3,077 1,463 3,893 (20) 0 0 (796) 0 (796) 0 0 0 (796) (.14) (.14)
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