-----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, PqvVRyF/lUfo46beyWBDsCvuy5linBkr8tBVq4x8CWbItjBmoA6UVcX9KJHUCizp 8XXPgdR5Auln3tCvDwei3Q== 0000910647-99-000129.txt : 19990512 0000910647-99-000129.hdr.sgml : 19990512 ACCESSION NUMBER: 0000910647-99-000129 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990327 FILED AS OF DATE: 19990511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLIGENT CONTROLS INC CENTRAL INDEX KEY: 0000762953 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 010354107 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24894 FILM NUMBER: 99617394 BUSINESS ADDRESS: STREET 1: 74 INDUSTRIAL PARK ROAD CITY: SACO STATE: ME ZIP: 04072 BUSINESS PHONE: 2072830156 MAIL ADDRESS: STREET 1: PO BOX 638 CITY: SACO STATE: ME ZIP: 04072 10QSB 1 BODY OF 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 27, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _________ to _________ Commission File Number 1-13628 INTELLIGENT CONTROLS, INC. (Exact name of small business issuer as specified in its charter) Maine 01-0354107 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 74 Industrial Park Road, Saco, Maine 04072 (Address of principal executive offices) (207) 283-0156 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- There were 5,061,123 shares of Common Stock of the issuer outstanding as of April 30, 1999. Transitional Small Business Disclosure Format: Yes No X ----- ----- PART I ITEM 1. FINANCIAL STATEMENTS Unaudited financial statements of the Company appear beginning at page F-1 below, and are incorporated herin by reference. These financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations for Three Months Ended March 27, 1999: For the three months ended March 27, 1999, sales increased 24% to $4,409,063 compared to sales in the first quarter of 1998 of $3,537,314. Sales of fuel management systems (FMS) products grew by 22% in the first quarter of 1999, as compared to the same period in 1998. The increase in sales resulted from shipping a record backlog carried through year-end 1998 as well as new first quarter 1999 bookings that increased 12% when compared to the same period in 1998. As previously reported, the robust business of the second half of 1998 resulted from strong new construction activity, a successful new product, namely the 1001/2001 automatic tank gauge (ATG), and numerous customer programs to automate leak detection systems to meet the EPA mandated December 22, 1998 compliance deadline. In addition, shipments to a single OEM customer of a digital probe were $125,000 higher in the first quarter 1999 than in the same period of 1998. Sales of power utility/predictive maintenance products increased by 45% in the first quarter of 1999 as compared to the first quarter of 1998. Bookings increased by 13% compared to the first three months of 1998 and a significant portion of the first quarter shipments were from the year-end 1998 backlog. Gross margins improved to 55.8% in the first quarter of 1999, as compared to 43.7% for the same period in 1998. The improvement in gross margin is attributable to material purchase price improvements, manufacturing volume efficiencies, and favorable product mix. Margins for first quarter of 1998 were adversely affected by a $592,000 shipment to Chinese Petroleum, at reduced margin so the true gross margin improvement, although still quite strong, is somewhat overstated on a directly comparable basis. Operating expenses increased 8.7% overall in the first three months of 1999, compared to the same period in 1998. This increase was primarily due to additional investment in the sales and marketing department as well as R & D. Net income increased twelve-fold from $36,972 in the first quarter of 1998, to $505,057 in the first quarter of 1999. The increase is primarily due to increased sales volume and higher gross margins. With a significant cash balance and reduced debt as compared to 1998, the Company earned significant interest income while having very small interest expense. The combined effect of these working capital changes created an increase to pretax income of $65,109. Liquidity and Capital Resources at March 27, 1999: As of March 27, 1999 the Company had $4.5 million in cash and 100% availability on its $3.5 million dollar line of credit. The Company expects that current resources will be sufficient to finance the Company's operating needs through the end of 1999. Year 2000 Issues Except as stated below, the Company's Y2K compliance status remains essentially unchanged from that reported in our Form 10-KSB for the fiscal year ended December 26, 1998. The total cost of the Company's Y2K compliance efforts through March 27, 1999 is estimated at $12,000. The aggregate projected costs for 1999 (including costs incurred in the first quarter) are $18,000. This discussion of Y2K issues contains forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934. Examples of such statements include estimates of completion dates for evaluation of systems and estimates of costs associated with Y2K compliance efforts. The Company cautions investors that numerous factors could cause actual results to differ materially from those reflected in such forward-looking statements including, but not limited to, the following: unanticipated problems with IT systems that vendors have represented as Y2K compliant, unanticipated customer or distributor resistance to INCON plans for addressing Y2K issues on the Model TS-1001/2001 ATGs, or unanticipated problems in the field with installed INCON products believed to be Y2K compliant. PART II ITEM 1. LEGAL PROCEEDINGS On April 21, 1999 the Company received notice of the filing of an action entitled Omega Environmental, Inc. v. INCON International, Inc. in United States Bankruptcy Court for the Western District of Washington. The action was brought by Omega Environmental, Inc. for avoidance and recovery of approximately $60,000 in alleged preferential transfers under 11 U.S.C. Sections 547 and 550. The Company is currently evaluating the validity of this claim. ITEM 5. OTHER INFORMATION During the first quarter 1999 the Company fully released System Sentinel Software, Version 1.0. This software product allows operators of multiple petroleum distribution facilities to remotely poll fuel inventory levels and monitor tanks for leaks from one or more centrally located computers. An ISO 9001 quality review was completed in March 1999, and NTS (National Testing Service), an outside auditing organization, recommended the Company be certified for ISO 9001. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K An index of the exhibits filed with this report appears beginning at page E-1 below, and is incorporated herein by reference. No reports on Form 8-K were filed during the prior fiscal quarter. SIGNATURES In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTELLIGENT CONTROLS, INC. By: /s/ Andrew B. Clement --------------------- Andrew B. Clement, Controller (on behalf of the Company and as Date: May 11, 1999 principal financial officer) Index to Exhibits Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of INTELLIGENT CONTROLS, INC. We have reviewed the accompanying balance sheet of Intelligent Controls, Inc. as of March 27, 1999, and the related statements of income and cash flows for the three month periods ended March 27, 1999 and March 28, 1998. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We previously audited and expressed an unqualified opinion on the Company's consolidated financial statements for the year ended December 26, 1998 (not presented herein). In our opinion, the information set forth in the accompanying balance sheet as of December 26, 1998 is fairly stated in all material respects, in relation to the statement of financial position from which it has been derived. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. /s PricewaterhouseCoopers L.L.P. - ------------------------------------- Portland, Maine April 8, 1999 INTELLIGENT CONTROLS, INC. BALANCE SHEETS ASSETS -------
(unaudited) March 27 December 26 1999 1998 Current assets: Cash and cash equivalents $ 4,520,264 $ 4,202,084 Accounts receivable, net of allowance of $215,000 in 1999 and $170,000 in 1998 2,791,487 3,253,477 Inventories (Note 4) 1,570,395 1,320,913 Prepaid expenses and other 131,392 127,425 Deferred income taxes 343,520 343,520 -------------------------- Total current assets 9,357,058 9,247,419 Property and equipment, net (Note 3) 873,537 889,748 Other assets 32,513 31,611 -------------------------- $10,263,108 $10,168,778 ========================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Income taxes payable $ 221,117 $ 299,269 Accounts payable 889,247 1,007,400 Accrued expenses 1,043,607 1,144,682 Current portion of long-term debt 194,000 194,000 -------------------------- Total current liabilities 2,347,971 2,645,351 Long-term debt, net of current portion 100,061 140,279 Deferred taxes 76,740 76,740 Stockholders' equity: Common stock, no par value; 8,000,000 shares authorized; 5,061,123 issued in 1999 and 5,060,760 in 1998 7,585,534 7,585,080 Retained earnings 1,644,253 1,139,196 Receivable from stockholder (1,395,082) (1,376,728) Treasury stock, 136,951 shares in 1999 and 115,951 shares in 1998 (96,369) (41,140) -------------------------- 7,738,336 7,306,408 -------------------------- $10,263,108 $10,168,778 ==========================
The accompanying notes are an integral part of the financial statements INTELLIGENT CONTROLS, INC. STATEMENTS OF INCOME
Three Months Ended (unaudited) (unaudited) March 27 March 28 1999 1998 Net sales $4,409,063 $3,537,314 Cost of sales 1,947,442 1,992,464 ------------------------- 2,461,621 1,544,850 Operating expenses: Selling, general and administrative 1,391,160 1,191,186 Research and development 266,801 245,161 ------------------------- 1,657,961 1,436,347 ------------------------- Operating income 803,660 108,503 Other income (expense): Interest income (expense) 65,109 (17,024) Other expense (26,712) (29,857) ------------------------- 38,397 (46,881) ------------------------- Income before income tax expense 842,057 61,622 Income tax expense 337,000 24,650 ------------------------- Net income $ 505,057 $ 36,972 ========================= Net income per share basic and diluted: $ .10 $ .01 ========================= Weighted average number of Common shares outstanding 4,928,637 3,289,336 ========================= Weighted average common and Common equivalent shares outstanding 4,964,192 3,423,531 =========================
The accompanying notes are an integral part of the financial statements INTELLIGENT CONTROLS, INC. STATEMENTS OF CASH FLOWS
Three Months Ended (unaudited) (unaudited) March 27 March 28 1999 1998 Cash flows from operating activities: Net income $ 505,057 $ 36,972 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 61,108 64,212 Loss on disposal of property, plant & equipment 398 - Changes in assets and liabilities: Accounts receivable 461,990 (680,707) Inventories (249,482) 248,496 Prepaid expenses and other current assets (3,967) 33,072 Income taxes payable (78,152) - Income taxes receivable - 24,650 Accounts payable and accrued expenses (219,228) (124,776) Other assets (902) (784) ------------------------- Net cash provided (used) by operating activities 476,822 (398,865) Cash flows from investing activities: Purchases of equipment and leasehold improvements, net (45,295) (54,495) ------------------------- Net cash (used) by investing activities (45,295) (54,495) Cash flows from financing activities: Increase in non-interest bearing overdraft - 302,093 Net borrowings on note payable - bank - 170,143 Repayment of long-term debt (40,218) (48,398) Issuance of common stock 454 65,360 Acquisition of treasury stock (55,229) (12,500) Increase in receivable from stockholder (18,354) (23,338) ------------------------- Net cash (used) provided by financing activities (113,347) 453,360 ------------------------- Net increase in cash and cash equivalents 318,180 0 Cash and cash equivalents at beginning of year 4,202,084 300 ------------------------- Cash and cash equivalents at end of period $4,520,264 $ 300 ========================= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 6,226 $ 29,857 ========================= Income taxes $ 415,152 $ - =========================
The accompanying notes are an integral part of the financial statements INTELLIGENT CONTROLS, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. General ------- The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not to be misleading. In the opinion of management, the amounts shown reflect all adjustments necessary to present fairly the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature. The year-end balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. It is suggested that the financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 10-KSB for the fiscal year ended December 26, 1998. 2. Earnings Per Common Share ------------------------- Basic earnings per share of common stock have been determined by dividing net earnings by the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share reflect the potential dilution that would occur if existing stock options were exercised. Following is a reconciliation of the dual presentations of earnings per share for the periods presented.
Net Income Common Shares Earnings (Numerator) (Denominator) Per Share ----------- ------------- --------- March 27, 1999 -------------- Basic earnings per share $505,057 4,928,637 $0.10 ===== Dilutive potential shares - 35,555 ------------------------- Diluted earnings per share $505,057 4,964,192 $0.10 ==================================== March 28, 1998 -------------- Basic earnings per share $ 36,972 3,289,336 $0.01 ===== Dilutive potential shares - 134,195 ------------------------- Diluted earnings per share $ 36,972 3,423,531 $0.01 ====================================
3. Property, Plant, and Equipment ------------------------------ Property, plant, and equipment, at cost,
(Unaudited) March 27 December 26 1999 1998 Leasehold improvements $ 154,344 $ 109,512 Equipment 1,248,423 1,217,932 Computer software 169,176 169,176 Furniture and fixtures 178,659 102,874 Construction in progress 0 105,813 ------------------------ 1,750,602 1,705,307 Less accumulated depreciation and amortization 877,065 815,559 ------------------------ $ 873,537 $ 889,748 ========================
4. Inventories consisted of the following at March 27, 1999 and December 26, 1998.
(Unaudited) March 27 December 26 1999 1998 Raw Material $ 989,573 $ 960,552 Work in Progress 302,039 167,512 Finished Goods 273,782 187,849 Other 5,000 5,000 ------------------------- $1,570,395 $1,320,913 =========================
5. Legal Proceedings ----------------- On April 21, 1999 the Company received notice of the filing of an action entitled Omega Environmental, Inc. v. INCON International, Inc. in United States Bankruptcy Court for the Western District of Washington. The action was brought by Omega Environmental, Inc. for avoidance and recovery of approximately $60,000 of alleged preferential transfers under 11 U.S.C. Sections 547 and 550. The Company is currently evaluating the validity of this claim, therefore nothing has been accrued at this time. EX-27 2 FDS FOR 1ST QUARTER
5 3-MOS DEC-25-1999 MAR-27-1999 4,520,264 0 3,006,105 214,618 1,570,395 9,357,058 1,750,602 877,065 10,263,108 2,347,971 100,061 0 0 7,585,534 152,802 10,263,108 4,409,063 4,409,063 1,947,442 3,605,403 26,712 0 6,226 842,057 337,000 505,057 0 0 0 505,057 .10 .10
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