SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 1998
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 0-3207
Barringer Technologies Inc.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 84-0720473
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION) NUMBER)
219 South Street, Murray Hill, New Jersey 07974
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(908) 665-8200
(Issuer's telephone number)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
CHANGED SINCE LAST REPORT)
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common stock, $0.01 par value - outstanding as of August 12, 1998 - 7,851,297
shares
Transitional Small Business Disclosure Format (check one): Yes ; No X
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX
Page No.
Part IFinancial Information
Item 1. Financial Statements
- Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 3
- Consolidated Statements of Operations (unaudited)
for the three months and six months ended June 30,
1998 and 1997 5
- Consolidated Statements of Cash Flows (unaudited)
for the three months and six months ended June 30,
1998 and 1997 6
- Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operations 10
Part II Other Information:
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Index to Exhibits 17
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS JUNE 30, DEC. 31,
1998 1997
(unaudited)
Current assets:
Cash and cash equivalents $20,899,000 $8,188,000
Marketable securities 17,128,000 2,499,000
Accounts receivable, less allowances
of $213,000 and $109,000 5,516,000 7,908,000
Inventories 3,814,000 3,049,000
Prepaid expenses and other 835,000 887,000
Deferred tax asset 2,056,000 1,506,000
--------------- -----------------
Total current assets 50,248,000 24,037,000
Property and equipment 1,811,000 1,505,000
Other assets 831,000 66,000
--------------- -----------------
Total assets $52,890,000 $25,608,000
=============== =================
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY JUNE 30, DEC. 31,
1998 1997
(unaudited)
Current liabilities:
Accounts payable $1,767,000 $1,324,000
Accrued liabilities 651,000 473,000
Accrued payroll and related taxes 1,060,000 1,520,000
Accrued commission payable 191,000 801,000
Foreign income tax payable 3,000 255,000
------------ ----------
Total current liabilities 3,672,000 4,373,000
Other non-current liabilities 150,000 121,000
------------ ----------
Total liabilities 3,822,000 4,494,000
------------ ----------
Shareholders' equity:
Convertible preferred stock, $1.25 par value,
1,000,000 shares authorized, none outstanding
Preferred stock, $2.00 par value, 4,000,000
shares authorized:
270,000 shares designated class A convertible
preferred stock, 38,616 and 45,146 shares
outstanding less discount of $30,000 and 47,000 55,000
$35,000, respectively
730,000 shares designated class B convertible
preferred stock, 22,500 shares outstanding 45,000 45,000
Common stock, $.01 par value, 20,000,000 shares
authorized, 7,851,000 and 5,495,000 shares
outstanding, respectively 79,000 55,000
Additional paid-in capital 55,609,000 30,209,000
Accumulated deficit (6,164,000) (8,780,000)
Foreign currency translation (535,000) (457,000)
------------ ------------
49,081,000 21,127,000
Less: common stock in treasury at cost,
31,000 shares (13,000) (13,000)
------------ ------------
Total shareholders' equity 49,068,000 21,114,000
----------- ------------
Total liabilities and shareholders' equity $52,890,000 $25,608,000
=========== =============
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS,EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Revenues $5,188 $5,816 $11,135 $9,438
Cost of revenues 1,978 2,494 4,412 3,955
------------- -------------- ------------ ---------------
Gross profit 3,210 3,322 6,723 5,483
------------- -------------- ------------ ---------------
Operating expenses:
Selling, general and administrative 2,095 1,905 3,791 3,200
Product development 423 163 785 338
Write-off of acquired technology 435 - 435 -
------------- -------------- ------------ ---------------
2,953 2,068 5,011 3,538
------------- -------------- ------------ ---------------
Operating income 257 1,254 1,712 1,945
------------- -------------- ------------ ---------------
Other income (expense):
Interest income 485 115 635 212
Other, net (62) (10) (76) (28)
------------- -------------- ------------ ---------------
423 105 559 184
------------- -------------- ------------ ---------------
Income before income tax benefit 680 1,359 2,271 2,129
Income tax benefit 150 56 350 131
------------- -------------- ------------ ---------------
Net income 830 1,415 2,621 2,260
Preferred stock dividends (2) (3) (5) (6)
------------- -------------- ------------ ---------------
Net income attributable to common $ 828 $1,412 $2,616 $2,254
stockholders
============= ============== ============ ===============
Per share data (note 4):
Basic earnings per common share $ 0.11 $ 0.26 $ 0.40 $ 0.42
============= ============== ============ ===============
Diluted earnings per common share $ 0.10 $ 0.22 $ 0.35 $ 0.36
============= ============== ============ ===============
Weighted average common and common
equivalent shares outstanding:
Basic 7,710 5,453 6,624 5,423
============= ============== ============ ===============
Diluted 8,435 6,327 7,426 6,205
============= ============== ============ ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
Three Months Six Months
Ended Ended
June 30, June 30,
------------ ------------- ------------- -----------
OPERATING ACTIVITIES 1998 1997 1998 1997
------------ ------------- ------------- -----------
<S> <C> <C> <C> <C>
Net Income $830 $1,415 $2,621 $2,260
Items not affecting cash:
Depreciation and amortization 126 40 226 80
Deferred tax benefit (250) (175) (550) (300)
Inventory and accounts receivable reserves
(62) 94 104 94
Write-off of acquired technology 435 - 435 -
Other (73) 41 (73) (13)
Decrease (increase) in non-cash working capital balances 2,192 (1,411) 517 (3,416)
------------ ------------- ------------- ----------
Cash provided by (used in) operating 3,198 4 3,280 (1,295)
activities
------------ ------------- ------------- ----------
INVESTING ACTIVITIES
Purchase of equipment and other (154) (140) (458) (513)
Purchase of DigiVision and related costs (821) (821)
Sale (purchase) of marketable securities (16,628) 821 (14,629) 273
----------- ------------ ------------- ---------
Cash provided by (used in) investing (17,603) 681 (15,908) (240)
activities
------------ ------------ ------------- ---------
FINANCING ACTIVITIES
Proceeds on sale of common stock, net of $2,393 25,207 - 25,207 -
of offering costs
Warrant and option exercises 99 167 204 335
Payment of dividends on preferred stock (5) (6) (5) (6)
Reduction in bank debt and other (67) - (67) (174)
----------- ------------ ------------ ----------
Cash provided by financing activities 25,234 161 25,339 155
----------- ------------ ------------ ----------
Increase (decrease) in cash and cash equivalents 10,829 846 12,711 (1,380)
Cash and cash equivalents at beginning of period 10,070 3,050 8,188 5,276
----------- ------------ ------------ ----------
Cash and cash equivalents at end of period $20,899 $3,896 $20,899 $ 3,896
=========== ============ ============ ==========
CHANGES IN COMPONENTS OF NON-CASH WORKING
CAPITAL BALANCES RELATED TO OPERATIONS
Accounts receivable $2,046 $(1,377) $2,350 $(2,925)
Inventories (198) (774) (573) (1,154)
Other current assets 130 (257) 70 3
Accounts payable and accrued liabilities 214 997 (1,330) 660
------------ ------------- ------------- ---------
Decrease (increase) in non-cash working capital $2,192 $(1,411) $517 $(3,416)
balances
============ ============= ============= =========
Cash paid during the period for interest - - - $2
============ ============= ============= =========
Cash paid during the period for income taxes $156 $8 $201 $158
============ ============= ============= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the consolidated financial position of the
Company as of June 30, 1998 and the results of its operations and its cash flows
for the three months and six months ended June 30, 1998 and 1997, respectively.
The accounting policies followed by the Company are set forth in the Notes to
Consolidated Financial Statements in the audited consolidated financial
statements of Barringer Technologies Inc. and Subsidiaries included in its
Annual Report on Form 10-KSB for the year ended December 31, 1997. This report
should be read in conjunction therewith. The results of operations for the three
months and six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for any other interim period or for the full year.
2. As a result of the Company's losses in periods prior to 1996, a valuation
allowance had been provided for a portion of the U.S. and Canadian deferred tax
assets. The U.S. valuation allowance was reduced by $250,000 and $550,000 for
the three months and six months ended June 30, 1998, respectively, which created
a deferred tax benefit of an equivalent amount. Based on historical results and
estimated 1998 earnings, as well as available tax planning strategies,
management considers realization of the unreserved deferred tax asset more
likely than not. Additional reductions to the valuation allowance will be
recorded when, in the opinion of management, the Company's ability to generate
taxable income sufficient to reduce additional amounts of the valuation
allowance is considered more likely than not.
3. On March 13, 1998, the Company established a $5.0 million unsecured credit
facility with Fleet Bank, N.A. (the "Bank") to be used for general working
capital purposes, including the issuance of standby letters of credit (the
"Facility"). Borrowings under the Facility may not be used to fund acquisitions
unless approved in advance by the Bank. Amounts drawn under the Facility bear
interest at a variable rate per annum selected by the Company and equal to
either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a
30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility
expires on June 30, 1999 and is subject to renewal. The Facility is guaranteed
by the Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII").
Pursuant to the Facility, the Company and BII are required to comply with
certain customary covenants, including certain financial tests. In addition, BII
and the Company's Canadian subsidiary, Barringer Research Limited, have agreed
not to pledge their assets to any other creditor without the Bank's prior
written consent. At June 30, 1998, $4,800,000 was available under this facility.
4. Basic and diluted earnings per share for the three months and six months
ended June 30, 1998 and 1997, respectively, have been computed as follows:
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, 1998 ended June 30, 1998
------------------------------------------------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------------------------===========------------------------------------------
<S> <C> <C>
Net income for the period $ 830 $ 2,621
Less: Preferred dividend
requirements (2) (5)
-------------- --------------
Basic Earnings Per Share
Income attributable to
common shareholders 828 7,710 $ 0.11 2,616 6,624 $ 0.40
=========== ===========
Effect of dilutive securities
Warrants and options 703 780
Convertible preferred
dividend requirements 2 22 5 22
-------------------------- -------------------------------------
Diluted Earnings Per Share
Income attributable to
common shareholders and
assumed conversions $ 830 8,435 $ 0.10 $ 2,621 7,426 $ 0.35
====================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, 1997 ended June 30, 1997
-----------------------------------------------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-----------------------------------------------------------------------------------
<S> <C> <C>
Net income for the period $ 1,415 $ 2,260
Less: Preferred dividend
requirements (3) (6)
---------- -------
Basic Earnings Per Share
Income attributable to
common shareholders 1,412 5,453 $ 0.26 $ 2,254 5,423 $0.42
======== ========
Effect of dilutive securities
Warrants and options 845 753
Convertible preferred
dividend requirements 3 29 6 29
------------------------------- ---------------------------------
Diluted Earnings Per Share
Income attributable to
common shareholders and
assumed conversions $ 1,415 6,327 $ 0.22 $ 2,260 6,205 $0.36
======================================= ========================================
</TABLE>
5. In the six months ended June 30, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", (SFAS
130), which requires that all components of comprehensive income and total
comprehensive income be reported on one of the following: a statement of income
and comprehensive income, a statement of comprehensive income or a statement of
stockholders' equity. Comprehensive income is comprised of net income and all
changes in stockholders' equity, except those due to investments by stockholders
(changes in paid in capital) and distributions to stockholders (dividends). For
interim reporting purposes, SFAS 130 requires disclosure of total comprehensive
income.
Total comprehensive income is as follows:
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, June 30,
---------------- ------------------ ------------------ -------------------
1998 1997 1998 1997
---------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Net income $ 830 $ 1,418 $ 2,621 $ 2,265
Other comprehensive income (loss)
(principally foreign exchange (75) 72 (78) (2)
translation)
---------------- ------------------ ------------------ -------------------
Comprehensive income $ 755 $ 1,490 $ 2,543 $ 2,263
================ ================== ================== ===================
</TABLE>
6. On April 3, 1998, the Company completed the sale of 2,000,000 shares of its
common stock through an underwritten public offering, which provided the Company
with net proceeds of approximately $22 million. On April 30, 1998, the Company
completed the sale of an additional 300,000 shares of its common stock pursuant
to the exercise of the underwriters' over-allotment option, which provided the
Company with additional net proceeds of approximately $3.2 million. The Company
expects to use the net proceeds to increase its sales, marketing and customer
support capabilities, to expand its facilities, to pursue possible acquisitions
of, or investments in, complementary businesses, products or technologies and
for general corporate purposes.
7. On April 30, 1998, the Company acquired all of the outstanding capital stock
of DigiVision, Inc. ("DigiVision"), a San Diego-based developer of video
enhancement products, for an aggregate cash purchase price of approximately
$821,000, including related incurred acquisition costs, in a business
combination accounted for as a purchase. DigiVision's results of operations are
included in the accompanying financial statements from the acquisition date
forward. With respect to this acquisition, DigiVision's results of operations
from January 1, 1998 through the acquisition date were not material and
accordingly, pro-forma operating results are not presented. Acquired in process
research and development projects of DigiVision, which could not be capitalized,
were valued at $435,000 and were expensed at the time of the acquisition. The
excess of the purchase price (including acquisition related costs) over the fair
value of net assets acquired ($778,000) is being amortized over a five year
period.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain income and expense items from
the Company's consolidated statements of operations expressed as a percentage of
revenues for the periods indicated.
<TABLE>
<CAPTION>
Percentage of Revenues
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
------- ---- ---- -------
<S> <C> <C> <C> <C>
Statement of operations data:
Revenues........................................ 100.0 100.0 100.0 100.0
Cost of revenues................................ 38.1 42.9 39.6 41.9
------- ----- ----- -----
Gross profit.................................... 61.9 57.1 60.4 58.1
Selling, general and administrative expenses 40.4 32.8 34.1 33.9
Product development............................. 8.2 2.8 7.0 3.6
Write-off of acquired technology................ 8.4 - 3.9 -
------- ----- ----- -----
Operating income ............................... 4.9 21.5 15.4 20.6
Other income (expense), net..................... 8.2 1.8 5.0 1.9
Income tax benefit ............................. 2.9 1.0 3.1 2.3
------- ----- ----- -----
Net income ..................................... 16.0 24.3 23.5 24.8
Preferred stock dividend requirements........... * * * *
------- ----- ----- -----
Net income attributable to common 16.0 24.3 23.5 24.8
stockholders................................. ======= ===== ===== =====
* less than 0.1%
</TABLE>
Comparison of the Three-Month Period Ended June 30, 1998 to the Three-Month
Period Ended June 30, 1997
Revenues. For the quarter ended June 30, 1998, revenues decreased by
approximately $600,000, or 10.8%, to $5.2 million from $5.8 million for the
quarter ended June 30, 1997. Sales of IONSCAN(R)s and related products decreased
by approximately $900,000, or 15.5%, due to a decline in average unit selling
price and lower orders for consumables and accessories. The decrease in average
selling prices resulted primarily from an increase in the number of IONSCAN(R)s
sold to U.S. government agencies, which are at lower unit prices than sales to
other customers and competitive pressures in the Company's other markets. During
the three-month period ended June 30, 1997, the FAA placed a large stocking
order for consumables and accessories in connection with its initial procurement
of IONSCAN(R)s. As a result, sales of such consumables and accessories were
lower in the three-month period ended June 30, 1998. These decreases were offset
in part by revenues of $323,000 generated by DigiVision subsequent to its
acquisition during the second quarter of 1998. Sales of specialty instruments
were insignificant in both quarters. The Company has placed less emphasis on
marketing its specialty instruments and anticipates that revenues from sales of
such instruments will continue to be immaterial to the Company's overall
results. Revenues derived from funded research and development decreased by
approximately $115,000, or 63.9%, in the quarter ended June 30, 1998 as compared
to the 1997 period. Funded research and development revenues decreased as a
result of a hiatus caused by the wait for the FAA to formally approve an
increase in the scope of work of the first phase of a $700,000 FAA project
awarded to the Company to design an automated luggage explosives detection
system utilizing the Company's trace detection technology. The first phase of
this project which involves a proof of concept, including the planned increase
in scope, is expected to be completed by the end of the fourth quarter of 1998.
<PAGE>
Gross Profit. For the quarter ended June 30, 1998, gross profit decreased by
approximately $100,000, or 3.4%, to $3.2 million from $3.3 million in the 1997
period. As a percentage of revenues, gross profit increased to 61.9% in the
quarter ended June 30, 1998 from 57.1% in the 1997 period. Excluding the effects
of DigiVision, gross profit for the first quarter of 1998 decreased by
approximately $285,000 compared to the first quarter of 1997, and as a
percentage of revenues, gross profit increased to 62.5%. The dollar decrease in
gross profit was due primarily to lower revenues during the three months ended
June 30, 1998. The increase in gross profit percentage was primarily
attributable to reduced production costs resulting from larger, more efficient
production runs of the IONSCAN(R) and related reductions in cost of materials
due to higher volume purchases.
Selling, General and Administrative. For the quarter ended June 30, 1998,
selling, general and administrative expenses increased by approximately
$191,000, or 10.0%, to $2.1 million from $1.9 million in the 1997 period
primarily as a result of the inclusion of DigiVision. As a percentage of
revenues, selling, general and administrative expenses increased to 40.4% in the
1998 period from 32.8% in the 1997 period. Selling and marketing expenses
decreased by approximately $62,000, primarily due to reduced commission expense.
Excluding the effects of DigiVision, selling and marketing expenses would have
decreased by approximately $151,000. General and administrative expenses
increased by $253,000 primarily as a result of increased payroll and related
costs and expenses relating to the Company's recently formed business
development group. Excluding the effects of DigiVision, general and
administrative expenses increased by approximately $165,000. A significant
portion of the expenses relating to the business development group resulted from
a shifting of expense from production due to personnel re-alignment. The Company
will be adding additional personnel to the business development group and
accordingly, expects that general and administrative expenses will increase.
Product Development. For the quarter ended June 30, 1998, product
development expenses increased by approximately $260,000, or 160%, to $423,000
from $163,000 in the 1997 period. As a percentage of revenues, product
development expenses increased to 8.2% for the quarter ended June 30,1998 from
2.8% in the 1997 period as a result of a higher level of internally funded new
product development activity and the reduction of funded projects. Excluding the
effects of DigiVision, product development increased by $216,000. Management
expects to incur increased product development expenses in future periods in
connection with the enhancement of existing products and the development of new
products and applications.
Write-off of Acquired Technology. During the second quarter of 1998, the
Company completed the acquisition of DigiVision. In connection therewith, the
Company acquired approximately $435,000 of certain technology that was in the
research and development stage. The costs related to such technology were
expensed at the time of the acquisition.
Operating Income. For the quarter ended June 30, 1998, operating income
decreased by $997,000, or 79.5%, to $257,000 from $1.3 million in the 1997
period. As a percentage of revenues, operating income decreased to 4.9% from
21.5% in the 1997 period. The decrease was due to the factors described above.
Other Income and Expense. For the quarter ended June 30, 1998, interest
income increased by $370,000, or 322%, to $485,000 from $115,000 in the 1997
period. The increase was the result of increased interest earned on larger cash
and short term investment balances.
Income Taxes. For the quarter ended June 30, 1998, the Company had a net
tax benefit of $150,000, composed of foreign taxes of $100,000, offset by a
$250,000 deferred tax benefit. Such deferred tax benefit was due in part to a
reduction in the deferred tax valuation allowance as a result of changes in
management's estimates of the utilization of U.S. tax loss carryforwards caused
primarily by improved operating results. Management anticipates that further
deferred tax benefits will be recognized in future quarters in 1998.
<PAGE>
Comparison of the Six-Month Period Ended June 30, 1998 to the Six-Month Period
Ended June 30, 1997
Revenues. For the six months ended June 30, 1998, revenues increased by
approximately $1.7 million, or 18.0%, to $11.1 million from $9.4 million for the
six months ended June 30, 1997. Sales of IONSCAN(R)s and related products
increased by approximately $1.6 million, or 17.1%, due to a 47.7% increase in
unit sales offset in part by a decline in average unit selling price. The
decrease in average selling prices resulted primarily from an increase in the
number of IONSCAN(R)s sold to U.S. government agencies, which are at lower unit
prices than sales to other customers and competitive pressures in the Company's
other markets. Sales of specialty instruments were insignificant in both
periods. The Company has placed less emphasis on marketing its specialty
instruments and anticipates that revenues from sales of such instruments will
continue to be insignificant to the Company's overall results. Revenues derived
from funded research and development decreased by approximately $181,000, or
57.8%, in the six months ended June 30, 1998 as compared to the 1997 period.
Funded research and development revenues decreased as a result of a hiatus
caused by the wait for the FAA to formally approve an increase in the scope of
work of the first phase of a $700,000 FAA project awarded to the Company to
design an automated luggage explosives detection system utilizing the Company's
trace detection technology. The first phase of this project which involves a
proof of concept, including the planned increase in scope, is expected to be
completed during 1998. In addition, DigiVision recorded sales of $323,000 in the
period.
Gross Profit. For the six months ended June 30, 1998, gross profit increased
by approximately $1.2 million or 22.6%, to $6.7 million from $5.5 million in the
1997 period. As a percentage of revenues, gross profit increased to 60.4% in the
six months ended June 30, 1998 from 58.1% in the 1997 period. Excluding the
effects of DigiVision, gross profit increased by approximately $1.1 million, and
as a percentage of revenues, gross profit increased to 60.8%. The increase in
gross profit was primarily attributable to increased sales, as well as reduced
production costs resulting from larger, more efficient production runs of the
IONSCAN(R) and related reductions in cost of materials due to higher volume
purchases.
Selling, General and Administrative. For the six months ended June 30, 1998,
selling, general and administrative expenses increased by approximately
$591,000, or 18.5%, to $3.8 million from $3.2 million in the 1997 period.
DigiVision accounted for approximately $177,000, or 5.3% of the increase. As a
percentage of revenues, selling, general and administrative expenses increased
to 34.1% in the 1998 period from 33.9% in the 1997 period. Selling and marketing
expenses increased by approximately $67,000. Excluding DigiVision, selling and
marketing expenses would have decreased by approximately $21,000. General and
administrative expenses increased by $525,000 primarily as a result of increased
payroll and related costs and expenses related to the Company's recently formed
business development group. Excluding DigiVision, general and administrative
expenses increased by approximately $437,000. A significant portion of the
expenses relating to the business development group resulted from a shifting of
expense from production due to personnel re-alignment. The Company will be
adding additional personnel to the business development group and accordingly
expects that general and administrative expenses will increase.
Product Development. For the six months ended June 30, 1998, product
development expenses increased by approximately $447,000, or 132%, to $785,000
from $338,000 in the 1997 period. As a percentage of revenues, product
development expenses increased to 7.0% for the six months ended June 30,1998
from 3.6% in the 1997 period as a result of a higher level of internally funded
new product development activity and the reduction of funded projects. Excluding
DigiVision, product development increased by $403,000. Management expects to
incur increased product development expenses in future periods in connection
with the enhancement of existing products and the development of new products
and applications.
Write-off of Acquired Technology. On April 30, 1998, the Company completed
the acquisition of DigiVision. In connection therewith, the Company acquired
approximately $435,000 of certain technology that was in the research and
development stage. The costs related to such technology were expensed at the
time of the acquisition.
Operating Income. For the six months ended June 30, 1998, operating income
decreased by approximately $233,000, or 12.0%, to $1.7 million from $1.9 million
in the 1997 period. As a percentage of revenues, operating income decreased to
15.4% from 20.6% in the 1997 period. The decrease was due primarily to the
factors described above.
Other Income and Expense. For the six months ended June 30, 1998, interest
income increased by $423,000, or 200%, to $635,000 from $212,000 in the 1997
period. The increase was the result of increased interest earned on larger cash
and short term investment balances.
<PAGE>
Income Taxes. For the six months ended June 30, 1998, the Company had a net
tax benefit of $350,000, composed of foreign taxes of $200,000, offset by a
$550,000 deferred tax benefit. Such deferred tax benefit was due in part to a
reduction in the deferred tax valuation allowance as a result of changes in
management's estimates of the utilization of U.S. tax loss carryforwards caused
primarily by improved operating results. Management anticipates that further
deferred tax benefits will be recognized in future quarters in 1998.
Capital Resources and Liquidity
Cash provided by operations was approximately $3.3 million in the six
months ended June 30, 1998, and cash used in operations was approximately $1.3
million in the same period in 1997. Cash provided by operations in the six
months ended June 30, 1998 resulted primarily from net income of $2.6 million
and lower accounts receivable, offset in part by reduced accounts payable and
accrued liabilities. Cash used in operating activities in the same period in
1997, resulted primarily from increases in accounts receivable and inventory,
which more than offset net income of $2.3 million for the period.
Cash used in investing activities was $15.9 million in the six months ended
June 30, 1998 and $240,000 in the same period in 1997. Cash used in investing
activities in the six months ended June 30, 1998 resulted from the purchase of
marketable securities, the acquisition of DigiVision and capital expenditures.
Cash used in investing activities in the same period in 1997 resulted from
capital expenditures partially offset by the sale of marketable securities.
Cash provided by financing activities was $25.3 million in the six months
ended June 30, 1998, and $155,000 in the same period in 1997. Cash provided by
financing activities in the six months ended June 30, 1998 resulted primarily
from the net proceeds of the sale of 2.3 million shares of the Company's common
stock in an underwritten public offering. Cash provided by financing activities
in the same period in 1997 resulted primarily from the net proceeds of certain
option and warrant exercises, offset by the repayment of indebtedness.
The Company's capital expenditures in the six months ended June 30, 1998
aggregated approximately $458,000. Such expenditures consisted primarily of
fixed assets purchased to support product development projects and computer
hardware relating to the modernization of the Company's computer network. The
Company believes that it will require approximately $500,000 in additional
capital investment in tooling, equipment, and facility improvements for 1998.
In March 1998, the Company established a $5.0 million unsecured credit
facility with Fleet Bank, N.A. (the "Bank") to be used for general working
capital purposes, including the issuance of standby letters of credit (the
"Facility"). Drawings under the Facility may not be used to fund acquisitions
unless approved in advance by the Bank. Amounts drawn under the Facility bear
interest at a variable rate per annum selected by the Company and equal to
either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a
30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility
expires on June 30, 1999, subject to renewal. The Facility is guaranteed by the
Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant
to the Facility, the Company and BII are required to comply with certain
customary covenants, including certain financial tests. In addition, BII and the
Company's Canadian subsidiary, Barringer Research Limited, have agreed not to
pledge their assets to any other creditor without the Bank's prior written
consent. At June 30, 1998, $4.8 million was available under this Facility.
On July 7, 1998 the Company announced that its Board of Directors had
authorized the repurchase of up to 1,000,000 shares or approximately 12.7% of
the Company's outstanding Common Stock. The repurchases will be made from time
to time in open market transactions in amounts as determined by the Company's
management and will be funded out of the Company's working capital.
The Company has tax loss carryforwards to offset future tax liabilities
in the U.S.
As of June 30, 1998, the Company had cash and cash equivalents of $20.9
million and marketable securities of $17.1 million. The Company believes that
its existing cash balances, marketable securities and expected income from
operations in future periods will be sufficient to fund its working capital
requirements for at least the next twelve months.
<PAGE>
Inflation
Inflation was not a material factor in either the sales or the
operating expenses of the Company during the periods presented herein.
Year 2000 Issue
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Certain
computer programs may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activity.
Based on a recent internal assessment, the Company has determined that
the cost to modify its existing software and/or to convert to new software will
not be significant. However, if customers, suppliers or others with whom the
Company does business experience problems relating to the year 2000 issue, the
Company's business, financial condition or results of operations could be
materially adversely affected.
Effects of Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments and hedging
activities. Due to its recent issuance, the Company is currently reviewing the
effects of SFAS No. 133. This standard will be adopted by the Company no later
than its year ending December 31, 2000.
Disclosure Regarding Forward-Looking Statements
This Form 10-QSB contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that are based on the beliefs of
the Company's management as well as assumptions made by and information
currently available to the Company's management. When used herein, the words
"estimate," "project," "believe," "anticipate," "intend," "expect," "plan,"
"predict," "may," "should," "will," the negative thereof and similar expressions
are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which can not be predicted with accuracy and some of
which might not even be anticipated. Future events and actual results, financial
and otherwise, could differ materially from those set forth in or contemplated
by the forward-looking statements herein. Important factors that could
contribute to such differences include, but are not limited to, the development
and growth of markets for the Company's products, the Company's dependence on
and the effect of governmental regulations on demand for the Company's products,
the impact of both foreign and domestic governmental budgeting decisions and the
timing of governmental expenditures, the reliance of the Company on its
IONSCAN(R) products, and the dependence of the Company on its ability to
successfully develop and market new product applications, the effects of
competition, and the effect of general economic and market conditions, as well
as conditions prevailing in the markets for the Company's products. Certain of
the factors summarized above are described in more detail in the Company's
Registration Statement on Form SB-2 (File no. 333-33129) and the Company's 1997
Annual Report on Form 10-KSB (File No. 0-3207) and reference is hereby made
thereto for additional information with respect to the matters referenced above.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company does not
undertake any obligations to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect occurrence of unanticipated events.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1998 Annual Meeting of Stockholders of the Company was held
on May 13, 1998.
(b) - (c) The matters voted on at the Annual Meeting of Stockholders
and the results of such voting were as follows:
1) Election of Directors
<TABLE>
<CAPTION>
Nominee For Withheld
------- ------------ --------
<S> <C> <C>
Stanley S. Binder 5,673,146 0
John H. Davies 5,673,233 0
John J. Harte 5,673,358 0
Richard D. Condon 5,673,358 0
John D. Abernathy 5,672,883 0
James C. McGrath 5,673,358 0
</TABLE>
2) Ratification of appointment of BDO Seidman, LLP as independent
auditors of the Company's 1998 financial statements
FOR: 5,688,720; AGAINST: 8,647; ABSTAIN: 9,756; NOT-VOTED: 1,859,812
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1A The Company's Certificate of Incorporation, as amended
(previously filed as Exhibit 3.1A to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995
(File No. 0-3207) and incorporated herein by reference).
3.2A By-laws of the Company is (previously filed as Exhibit 3.2A to
the Company's Annual Report on Form 10-K/A-2 for the fiscal
year ended December 31, 1994 (File No. 0-3207) and incorporated
herein by reference).
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act , the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BARRINGER TECHNOLOGIES INC.
(Registrant)
/S/ STANLEY S. BINDER
Stanley S. Binder President,
/S/ RICHARD S. ROSENFELD
Richard S. Rosenfeld, Chief Financial Officer
(Principal Accounting Officer)
Date: August 12, 1998
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO EXHIBITS
Exhibit Number Page No.
27.1 Financial Data Schedule 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-QSB FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000010119
<NAME> BARRINGER TECHNOLOGIES INC.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 20,899
<SECURITIES> 17,128
<RECEIVABLES> 5,729
<ALLOWANCES> 213
<INVENTORY> 3,814
<CURRENT-ASSETS> 50,248
<PP&E> 3,446
<DEPRECIATION> 1,635
<TOTAL-ASSETS> 52,890
<CURRENT-LIABILITIES> 3,672
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0
92
<COMMON> 79
<OTHER-SE> 48,897
<TOTAL-LIABILITY-AND-EQUITY> 52,890
<SALES> 11,135
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