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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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
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BARRINGER TECHNOLOGIES INC.
---------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------
DELAWARE 84-0720473
- ------------------------------- ----------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
OR ORGANIZATION) INCORPORATION NUMBER)
30 TECHNOLOGY DRIVE, WARREN, NEW JERSEY 07059
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(908) 222-9100
----------------------------------------------------
(Registrant's telephone number, including area code)
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
CHANGED SINCE LAST REPORT)
Indicate by 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
1939 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common stock, $0.01 par value -- outstanding as of October 29, 1999 --
6,907,502 shares.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Item 1. Financial Statements
- Consolidated Balance Sheets as of September 30, 1999
(unaudited) and December 31, 1998......................... 3
- Consolidated Statements of Operations (unaudited) for
the three months and nine months ended September 30, 1999
and 1998.................................................. 5
- Consolidated Statement of Stockholders' Equity and
Comprehensive Income (unaudited) for the nine months
ended September 30, 1999.................................. 7
- Consolidated Statements of Cash Flows (unaudited) for
the three months and nine months ended September 30, 1999
and 1998.................................................. 8
- Notes to Consolidated Financial Statements.............. 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... 11
Item 3. Quantitative and Qualitative Disclosures About Market
Risk .................................................... 16
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K ........................ 17
Signatures ........................................................ 18
Index to Exhibits ................................................. 19
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<PAGE>
Part I. Financial Information
Item 1. Financial Statements
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31,
1999 1998
------------- ------------
(unaudited)
Current assets:
Cash and cash equivalents $19,791,000 $18,802,000
Marketable securities 6,311,000 15,606,000
Accounts receivable, less
allowances of $383,000 and $626,000 9,139,000 6,502,000
Inventories 5,540,000 3,943,000
Prepaid expenses and other 1,370,000 1,111,000
Deferred tax asset (note 2) 2,642,000 3,092,000
-------------------------------
Total current assets 44,793,000 49,056,000
Property and equipment 2,896,000 2,349,000
Other assets 565,000 1,239,000
-------------------------------
Total assets $48,254,000 $52,644,000
===============================
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
1999 1998
-------------- --------------
Current liabilities: (unaudited)
Accounts payable $894,000 $1,169,000
Accrued liabilities 730,000 1,073,000
Accrued payroll and related taxes 1,259,000 1,005,000
Income taxes payable - 112,000
-----------------------------
Total current liabilities 2,883,000 3,359,000
Non-current liabilities 139,000 145,000
-----------------------------
Total liabilities 3,022,000 3,504,000
-----------------------------
Stockholders' 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, 35,000 and 39,000 shares
outstanding less discount of $27,000
and $30,000, respectively 43,000 47,000
730,000 shares designated class B convertible 45,000 45,000
preferred stock, 22,500 shares outstanding
Common stock, $.01 par value, 20,000,000 shares
authorized, 7,866,000 and 7,851,000 shares
outstanding, respectively 79,000 79,000
Additional paid-in capital 54,776,000 54,693,000
Accumulated deficit (3,325,000) (4,359,000)
Foreign currency translation (796,000) (786,000)
-----------------------------
50,822,000 49,719,000
Less: common stock in treasury at cost, 907,000
and 92,000 shares, respectively (5,590,000) (579,000)
-----------------------------
Total stockholders' equity 45,232,000 49,140,000
-----------------------------
Total liabilities and stockholders' equity $ 48,254,000 $ 52,644,000
=============================
See notes to consolidated financial statements.
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1999 1998 1999 1998
-------------------- -------------------
<S> <C> <C> <C> <C>
Revenues $ 5,304 $ 3,075 $ 15,733 $ 13,888
Cost of revenues 2,314 1,107 6,472 5,368
-------------------- -------------------
Gross profit 2,990 1,968 9,261 8,520
-------------------- -------------------
Operating expenses:
Selling, general and administrative 1,874 1,653 5,750 5,268
Product development 340 475 1147 1,215
2,214 2,128 6,897 6,483
-------------------- -------------------
Operating income (loss) 776 (160) 2,364 2,037
-------------------- -------------------
Other income (expense):
Interest income 343 523 1,248 1,158
Other, net 43 (25) 85 (74)
-------------------- -------------------
386 498 1,333 1,084
-------------------- -------------------
Income from continuing
operations before income tax
provision (benefit) 1,162 338 3,697 3,121
Income tax provision (benefit) 442 (195) 1,405 (545)
-------------------- -------------------
Income from continuing
operations 720 533 2,292 3,666
Discontinued operation (note 4)
Loss from operations, net of
tax benefit of $0, $210 and $0 -- (108) (344) (619)
Loss on disposition, net of
tax benefit of $555 -- -- (909) --
-------------------- -------------------
0 (108) (1,253) (619)
-------------------- -------------------
Net Income 720 425 1,039 3,047
Preferred stock dividend requirements (2) (2) (7) (7)
-------------------- -------------------
Net income attributable to
common stockholders $ 718 $ 423 $ 1,032 $ 3,040
==================== ===================
</TABLE>
See notes to consolidated financial statements.
(Continued)
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(continued)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30, September 30,
------------------------- ---------------------
1999 1998 1999 1998
------------------------- ---------------------
Basic earnings per common share
(note 3)
<S> <C> <C> <C> <C>
Continuing operations $ 0.10 $ 0.07 $ 0.31 $ 0.52
Discontinued operation -- loss from - (0.01) (0.05) (0.09)
operations
Discontinued operation -- loss on - - (0.12) -
disposition
------------------------- ------------------------
$ 0.10 $ 0.06 $ 0.14 $ 0.43
========================= ========================
Diluted earnings per common share
(note 3)
Continuing operations $ 0.10 $ 0.06 $ 0.29 $ 0.48
Discontinued operation -- loss from - (0.01) (0.04) (0.08)
operations
Discontinued operation -- loss on - - (0.12) -
disposition
------------------------- ------------------------
$ 0.10 $ 0.05 $ 0.13 $ 0.40
========================= ========================
Weighted average common and common
equivalent shares outstanding:
Basic 6,982 7,719 7,269 6,992
========================= ========================
Diluted 7,518 8,313 7,859 7,687
========================= ========================
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
Preferred Preferred
Common Stock Stock Stock
--------------- -------------- --------------
Total Equity Shares Amount Shares Amount Shares Amount
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1999 $ 49,140 7,851 $ 79 39 $ 47 23 $ 45
Net income 1,039
Translation adjustment (10)
Comprehensive Income
Exercise of stock options and
warrants 77 14
Conversion of preferred 0 1 (4) (4)
stock
Repurchase of common stock (5,074)
Sale of treasury stock, net
of notes receivable ($97) 0
Dividend on preferred stock (5)
Repayment of stockholder 65
loan
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Balance - September 30, 1999 $ 45,232 7,866 $ 79 35 $ 43 23 $ 45
============================================================
<CAPTION>
Paid-in Deficit Translation Treasury Comprehensive
Capital* Adjustment Stock Income
---------------------------------------------------------------
Balance - January 1, 1999 $ 54,693 $(4,359) $ (786) $ (579)
Net income 1,039 $ 1,039
Translation adjustment (10) (6)
------------
Comprehensive Income $ 1,033
============
Exercise of stock options and
warrants 77
Conversion of preferred 4
stock
Repurchase of common stock (5,074)
Sale of treasury stock, net
of notes receivable ($97) (63) 63
Dividend on preferred stock (5)
Repayment of stockholder 65
loan
-----------------------------------------------
Balance - September 30, 1999 $ 54,776 $(3,325) $ (796) $(5,590)
===============================================
- ----------
* At September 30, 1999, net of notes receivable of $1,515 from the sale of
stock.
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
OPERATING ACTIVITIES 1999 1998 1999 1998
----------------- ------------------
<S> <C> <C> <C> <C>
Net Income $720 $425 $1,039 $3,047
Items not affecting cash:
Depreciation and amortization 175 109 619 335
Deferred tax provision (benefit) 300 (200) 450 (750)
Inventory and accounts receivable
reserves 27 79 185 183
Loss from discontinued operation - - 1,253 -
Write-off of acquired technology - - - 435
Other 47 (204) (5) (278)
Increase in non-cash working capital balances
-continuing operations (2,167) (1,407) (5,473) (890)
------------------- ------------------
Cash provided by (used in) operating
activities - continuing operations (898) (1,198) (1,932) 2,082
Net cash used in discontinued operation (384) - (187) -
------------------- ------------------
Cash provided by (used in) operating
activities (1,282) (1,198) (2,119) 2,082
------------------- ------------------
INVESTING ACTIVITIES
Purchase of equipment and other (488) (204) (1,213) (662)
Purchase of DigiVision and related costs - - - (821)
Sale (purchase) of marketable securities 7,774 2,026 9,295 (12,603)
------------------- ------------------
Cash provided by (used in) investing
activities 7,286 1,822 8,082 (14,086)
------------------- ------------------
FINANCING ACTIVITIES
Proceeds on sale of common stock, net of $2,393
of offering costs - - - 25,207
Warrant and option exercises - - 40 204
Payment of dividends on preferred stock - - (5) (5)
Repayment from (loan to) employees - (500) 65 (500)
Acquisition of treasury stock (374) (1,540) (5,074) (1,540)
Reduction in bank debt and other - - - (67)
------------------- ------------------
Cash provided by (used in) financing
activities (374) (2,040) (4,974) 23,299
------------------- -----------------
Increase (decrease) in cash and cash equivalents 5,630 (1,416) 989 11,295
Cash and cash equivalents at beginning of period 14,161 20,899 18,802 8,188
------------------- -----------------
Cash and cash equivalents at end of period $19,791 $19,483 $19,791 $19,483
=================== =================
CHANGES IN COMPONENTS OF NON-CASH WORKING CAPITAL
BALANCES RELATED TO CONTINUING OPERATIONS
Accounts receivable $(1,496) $684 $(2,766) $3,034
Inventories 931 (1,114) (1,935) (1,687)
Other current assets 21 (223) (303) (153)
Accounts payable and accrued liabilities (1,623) (754) (469) (2,084)
------------------- -----------------
Increase in non-cash working capital
balances - continuing operations $(2,167) $(1,407) $(5,473) $(890)
------------------- -----------------
Cash paid during the period for income taxes $74 $249 $310 $450
=================== =================
</TABLE>
See notes to consolidated financial statements.
-8-
<PAGE>
See notes to consolidated financial statements.
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 September 30, 1999 and the results of its operations and its cash
flows for the three months and nine months ended September 30, 1999 and 1998,
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-K for the year ended December 31, 1998. This report
should be read in conjunction therewith. The results of operations for the nine
months ended September 30, 1999 are not necessarily indicative of the results to
be expected for any other interim period or for the full year.
2. At September 30, 1999, a valuation allowance has been provided for
certain limitations applied to the net operating loss carryforward of a
subsidiary. At September 30, 1999, the net deferred tax asset of $2,642,000
included approximately $445,000 and $2,197,000 related to the Company's Canadian
and U.S. operations, respectively. Based on historical results and estimated
1999 earnings, which include earnings from certain contracts, as well as
available tax planning strategies, management considers realization of the
unreserved deferred tax asset more likely than not.
3. Basic and diluted earnings per share for continuing operations for
the three months and nine months ended September 30, 1999 and 1998,
respectively, have been computed as follows:
<TABLE>
<CAPTION>
For the three months end | For the nine months ended
September 30, 1999 | September 30, 1999
----------------------------------------|----------------------------------
Income Shares Per | Income Shares Per
(Numerator) (Denominator) Share | (Numerator) (Denominator) Share
Amount | Amount
<S> <C> <C> <C> | <C> <C> <C>
Basic Earnings Per Share |
|
Income attributable to |
common stockholders from 718 6,982 $ 0.10 | 1,032 7,269 $ 0.14
continuing operations ======= | =======
|
Effect of dilutive securities |
|
Warrants and options 516 | 570
|
Convertible preferred |
dividend requirements 2 20 | 7 20
--------------------------- | ---------------------
Diluted Earnings Per Share |
|
Income attributable to |
common stockholders |
and assumed conversions |
from continuing operations $ 720 7,518 $ 0.10 | $ 1,039 7,859 $ 0.13
=============================================================================
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
For the three months ended | For the nine months ended
September 30, 1998 | September 30, 1998
-----------------------------------|------------------------------------
|
Income Shares Per | Income Shares Per
(Numerator) (Denominator) Share | (Numerator) (Denominator) Share
Amount | Amount
-----------------------------------|------------------------------------
<S> <C> <C> <C> | <C> <C> <C>
Basic Earnings Per Share |
|
Income attributable to |
common stockholders |
from continuing operations 533 7,719 $ 0.07 | 3,666 6,992 $ 0.52
======= | =======
Effect of dilutive securities |
|
Warrants and options 572 | 673
|
Convertible preferred |
dividend requirements 2 22 | 7 22
------------------------- | ----------------------
Diluted Earnings Per Share |
|
Income attributable to |
common stockholders |
and assumed conversions |
from continuing operations $ 535 8,313 $ 0.06 | $ 3,673 7,687 $ 0.48
========================================================================
</TABLE>
4. Effective June 30, 1999, the Company determined that it will
discontinue its video-enhancement business segment (`DigiVision") and began
seeking buyers for DigiVision. Accordingly, DigiVision has been reclassified as
a discontinued operation on the Company's financial statements. In accordance
with generally accepted accounting principles, the Company has estimated
anticipated operating losses up to the date of disposition as well as
anticipated losses on such disposition and has separately reflected such amounts
in its statement of operations for the period ending September 30, 1999.
For the nine months ended September 30, 1999 and September 30, 1998,
revenues from DigiVision were $407,000 and $659,000 , respectively, and for the
three months ended September 30, 1999 and September 30, 1998, revenues from
DigiVision were $55,000 and $332,000, respectively.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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
continuing operations from the Company's consolidated statements of operations
expressed as a percentage of revenues from continuing operations for the periods
indicated.
PERCENTAGE OF REVENUES
THREE MONTHS NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
1999 1998 1999 1998
---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenues............................... 100.0 100.0 100.0 100.0
Cost of revenues....................... 43.6 36.0 41.1 38.7
----------------------------------
Gross profit........................... 56.4 64.0 58.9 61.3
Selling, general and administrative
expenses .............................. 35.4 53.8 36.6 37.9
Product development..................... 6.4 15.4 7.3 8.7
----------------------------------
Operating income (loss) ................ 14.6 (5.2) 15.0 14.7
Other income, net...................... 7.3 16.2 8.5 7.8
Income tax (provision) benefit ........ (8.3) 6.3 (8.9) 3.9
----------------------------------
Income from continuing operations ...... 13.6 17.3 14.6 26.4
Preferred stock dividend requirements.. * * * *
----------------------------------
Income attributable to common
stockholders from continuing operations 13.6 17.3 14.6 26.4
==================================
* less than 0.1%
COMPARISON OF THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 TO THE
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
CONTINUING OPERATIONS:
REVENUES. For the quarter ended September 30, 1999, revenues increased by
approximately $2.2 million, or 72.5%, to $5.3 million from $3.1 million for the
quarter ended September 30, 1998. Sales of IONSCAN(R)s and related products
increased by approximately $2.3 million, or 78.8%, due to an increase in the
number of IONSCAN(R)s sold along with increases in the sale of consumables,
spares and related services, offset in part by a decrease in average selling
prices due to competitive pressures. The increase in unit sales during the third
quarter of 1999 was primarily due to sales to the Federal Aviation
Administration pursuant to an order received in June 1999. Sales of specialty
instruments were insignificant in both quarters as were revenues from funded
research and development. The Company anticipates that, as a result of
continuing competitive pressure and technological innovation, average selling
prices of IONSCAN(R)s will continue to decline.
GROSS PROFIT. For the quarter ended September 30, 1999, gross profit
increased by approximately $1.1 million, or 51.9%, to $3.0 million from $2.0
million in the 1998 period. As a percentage of revenues, gross profit decreased
to 56.4% in the quarter ended September 30, 1999 from 64.0% in the 1998 period.
The dollar increase in gross profit was due primarily to higher revenues during
the three months ended September 30, 1999. The decrease in gross profit
percentage was primarily attributable to a decrease in the average selling price
of an IONSCAN(R) and lower international sales which generally carry higher
margins. It is anticipated that average selling prices of IONSCAN(R)s will
continue to decline.
SELLING, GENERAL AND ADMINISTRATIVE. For the quarter ended September 30,
1999, selling, general and administrative expenses increased by approximately
$221,000, or 13.4%, to approximately $1.8 million. As a
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<PAGE>
percentage of revenues, selling, general and administrative expenses decreased
to 35.4% in the 1999 period from 36.6% in the 1998 period. Selling and marketing
expenses decreased by approximately $104,000 primarily due to recovery of
certain marketing and selling expenses. General and administrative expenses
increased by $325,000 primarily as a result of costs and expenses relating to
the Company's business development group formed in late 1998, and increased
payroll and payroll related costs. A significant portion of the expenses
relating to the business development group resulted from a shifting of expense
from manufacturing overhead due to personnel re-alignment.
PRODUCT DEVELOPMENT. For the quarter ended September 30, 1999, product
development expenses decreased by approximately $135,000, or 28.4%, to $340,000
from $475,000 in the 1998 period. As a percentage of revenues, product
development expenses decreased to 6.4% for the quarter ended September 30,1999
from 15.4% in the 1998 period. During the quarter, the Company capitalized
approximately $360,000 of product development expenses related to the new SABRE
2000 hand held trace detector introduced in October 1999. The SABRE 2000
incorporates proven IONSCAN detection technology into a small and lightweight
portable package. Management generally 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.
OPERATING INCOME. For the quarter ended September 30, 1999, operating
income increased by $936,000 to $776,000 from a loss of $160,000 in the 1998
period. As a percentage of revenues, operating income increased to 14.6% from a
negative 5.2% in the 1998 period. The increase was due to the factors described
above.
OTHER INCOME AND EXPENSE. For the quarter ended September 30, 1999,
interest income decreased by $180,000, or 34.4%, to $343,000 from $523,000 in
the 1998 period due primarily to the Company's stock repurchase program.. The
decrease was the result of decreased interest earned on smaller cash and short
term investment balances and lower interest rates on such investments.
INCOME TAXES. For the quarter ended September 30, 1999, the Company had a
tax provision of $442,000, as compared to a net tax benefit of $195,000 in the
1998 period.
DISCONTINUED OPERATIONS:
Effective June 30, 1999, the Company decided to discontinue its
video-enhancement business segment, DigiVision, and to seek buyers for the
business. Accordingly, DigiVision has been reclassified as a discontinued
operation. In accordance with generally accepted accounting principles, the
Company has estimated anticipated operating losses up to the expected date of
disposition as well as anticipated losses on such disposition and has separately
reflected such amounts in its statement of operations for the period ending June
30, 1999. At June 30, 1999, the Company recorded a charge to income of
approximately $900,000, net of related taxes, to recognize estimated operating
losses to the expected date of disposition, write-off of remaining goodwill and
estimated loss on such disposition.
COMPARISON OF THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 TO THE
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
CONTINUING OPERATIONS:
REVENUES. For the nine months ended September 30, 1999, revenues increased
by approximately $1.8 million, or 13.3%, to $15.7 million from $13.9 million for
the nine months ended September 30, 1998. Sales of IONSCAN(R)s and related
products increased by approximately $2.0 million, or 14.6%, due to an increase
in unit sales and an increase in the sale of consumables, spares and related
services, offset in part by a decrease in average selling price. Sales of
specialty instruments were insignificant in both periods as were revenues from
funded research and development. The Company anticipates that, as a result of
continuing competitive pressure and technological innovation, average selling
prices of IONSCAN(R)s will continue to decline.
GROSS PROFIT. For the nine months ended September 30, 1999, gross profit
increased by approximately $741,000, or 8.7%, to $9.3 million from $8.5 million
in the 1998 period. As a percentage of revenues, gross profit decreased to 58.9%
in the nine months ended September 30, 1999 from 61.3% in the 1998 period.
SELLING, GENERAL AND ADMINISTRATIVE. For the nine months ended September
30, 1999, selling, general and administrative expenses increased by
approximately $482,000, or 9.1%, to $5.8 million from $5.3 million in the 1998
-12-
<PAGE>
period. As a percentage of revenues, selling, general and administrative
expenses decreased to 36.6% in the 1999 period from 37.9% in the 1998 period.
Selling and marketing expenses decreased by approximately $113,000 primarily due
to the recovery of certain selling and marketing expenses. General and
administrative expenses increased by $595,000 primarily as a result of increased
payroll and related costs and expenses related to the Company's business
development group formed in late 1998. 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.
PRODUCT DEVELOPMENT. For the nine months ended September 30, 1999, product
development expenses decreased by approximately $68,000, or 5.6%, to
approximately $1.1 million from approximately $1.2 million in the 1998 period.
As a percentage of revenues, product development expenses decreased to 7.3% for
the nine months ended September 30,1999 from 8.7% in the 1998 period . During
the period, the Company capitalized approximately $600,000 of product
development expenses related to the new SABRE 2000 hand held trace detector
introduced in October 1999. The SABRE 2000 incorporates proven IONSCAN detection
technology into a small and lightweight portable package. Management generally
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.
OPERATING INCOME. For the nine months ended September 30, 1999, operating
income increased by approximately $327,000, or 16.1%, to $2.4 million from $2.0
million in the 1998 period. As a percentage of revenues, operating income
increased to 15.0% from 14.7% in the 1998 period. The increase was due primarily
to the factors described above.
OTHER INCOME AND EXPENSE. For the nine months ended September 30, 1999,
interest income decreased by approximately $90,000, or 7.8%, to $1.2 million
from $1.1 million in the 1998 period due primarily to the Company's stock
repurchase program. The decrease was the result of a decrease in interest earned
on lower cash and short term investment balances.
INCOME TAXES. For the nine months ended September 30, 1999, the Company had
a tax provision of approximately $1.4 million as compared to a net tax benefit
of $545,000 in the 1998 period.
DISCONTINUED OPERATIONS:
Effective June 30, 1999, the Company decided to discontinue its
video-enhancement business segment, DigiVision, and to seek buyers for the
business. Accordingly, DigiVision has been reclassified as a discontinued
operation. In accordance with generally accepted accounting principles, the
Company has estimated anticipated operating losses up to the expected date of
disposition as well as anticipated losses on such disposition and has separately
reflected such amounts in its statement of operations. For the nine months ended
September 30, 1999, the Company recorded a charge to income of approximately
$900,000, net of related taxes, to recognize estimated operating losses to the
expected date of disposition, write-off of remaining goodwill and estimated loss
on such disposition.
CAPITAL RESOURCES AND LIQUIDITY
Cash used in operating activities was $2.1 million in the nine months ended
September 30, 1999, as compared to cash provided by operating activities of $2.1
million for the same period in 1998. Cash used in operating activities in the
nine months ended September 30, 1999 resulted primarily from net increases in
working capital balances partially offset by net income of $1.0 million and
depreciation, amortization and changes in reserves aggregating $800,000. Cash
provided by operations in the nine months ended September 30, 1998 resulted
primarily from net income of $3.0 million, and depreciation, amortization and
changes in reserves and non-cash write-offs aggregating $203,000, partially
offset by net increases in working capital balances.
At September 30, 1999, the Company had receivables of approximately $5.7
million dollars (of total receivables of $9.1 million) due from the FAA that was
beyond the Company's normal payment terms. The delay in payment is the result of
the failure of an FAA third party vendor over which the Company has no control,
to provide the FAA with certain required documentation in a timely fashion. The
Company has taken appropriate action with the FAA and expects to receive payment
in the fourth quarter. There is no dispute concerning the amounts due and the
FAA has acknowledged that the equipment is in place and operating to its
satisfaction.
Cash provided by investing activities was $8.1 million in the nine months
ended September 30, 1999, and cash
13
<PAGE>
used in investing activities was $14.1 million in the same period in 1998. Cash
provided by investing activities in the nine months ended September 30, 1999
resulted from the sale of $9.3 million of marketable securities, partially
offset by the purchase of $1.2 million of equipment. Cash used in investing
activities in the nine months ended September 30, 1998 resulted from the
purchase of $12.6 million of marketable securities, the purchase of equipment
and the purchase of DigiVision.
Cash used in financing activities was $5.0 million in the nine months ended
September 30, 1999, and cash provided by financing activities was $23.3 million
in the same period in 1998. Cash used in financing activities in the nine months
ended September 30, 1999 resulted from the repurchase of $5.1 million of the
Company's common stock pursuant to the Company's previously announced stock
repurchase program, partially offset by the exercise of options and warrants and
the partial repayment of a stockholder loan. Cash provided by financing
activities in the nine months ended September 30, 1998, resulted primarily from
the sale of the Company's common stock.
The Company's capital expenditures in the nine months ended September 30,
1999 aggregated approximately $1.2 million. Such expenditures consisted
primarily of leasehold improvements, equipment and costs related to the
development of the Company's SABRE 2000 product. The Company believes that it
will require approximately $350,000 in additional capital investment in tooling,
equipment, and facility improvements for the remainder of 1999.
The Company has a $5.0 million unsecured credit facility with Fleet Bank,
N.A. to be used for general working capital purposes, including the issuance of
standby letters of credit. At September 30, 1999, $4.8 million was available
under this Facility.
At December 31, 1998, the Company had approximately $7.3 million of tax
loss carryforwards to offset future taxable income in the U.S and $2.1 million
of expenses available to offset future taxable income in Canada.
As of September 30, 1999, the Company had cash and cash equivalents of
$19.8 million and marketable securities of $6.3 million. The Company believes
that its existing cash balances, marketable securities and income from
operations in future periods will be sufficient to fund its working capital
requirements for at least the next twelve months.
The Company has a common stock repurchase program under which it is
authorized to repurchase up to 2,000,000 shares of the Company's outstanding
Common Stock. As of September 30, 1999, the Company had repurchased 1,049,000
shares at an aggregate cost of approximately $6.7 million.
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.
The Company has established a team to assess risk, identify and correct
exposures when possible, and develop contingency plans for Year 2000 compliance
issues. The Company has completed its assessment of Y2K risk and has identified
several areas of potential concern to the Company, most particularly the
software and hardware used as part of its own information systems, the impact of
Year 2000 problems on the operation of its products, both current and
discontinued, the impact of Year 2000 issues on its vendors, the impact of Year
2000 issues as it affects the physical working environment in which the Company
operates, the potential impact of Year 2000 problems on the markets that the
Company sells into and finally, crisis planning.
The Company has completed its review of the software and hardware systems
used by the Company's information systems. The Company believes that with minor
modifications to existing software and hardware and conversions to new software,
its internal systems and hardware will be Year 2000 compliant . The Company
expects to complete these modifications before year-end.
-14-
<PAGE>
The Company has completed a review of its IONSCAN(R) products and believes
that Year 2000 issues will have no impact on the performance of its IONSCAN(R)
product line as the IONSCAN(R)'s functionality is not dependent on date or time
references. The Company has sold many custom, one of a kind products other than
the IONSCAN(R) over the years. It will investigate Year 2000 issues related to
such products only when requested to do so by the end user. However, based upon
its internal review, the Company believes that the functionality of those
products is not dependent on date or time references.
The Company has communicated with its significant suppliers, customers, and
critical business partners to determine the extent to which the Company may be
vulnerable in the event that those parties fail to properly remediate their own
Year 2000 issues. Based upon those results, the Company is currently evaluating
its risks as relates to each responder and what action, if any, it needs to take
in each case. The Company continues to take steps to monitor the progress made
by those parties, and intends to monitor others with whom it does business as
the Year 2000 approaches.
The Company has reviewed the operating environment within which it
functions to assess the Year 2000 risks relating to, among other things, its
heating and air conditioning systems, security systems, communication systems
and related hardware. The Company has determined that such systems are Year 2000
compliant. To the extent possible, it will also assess certain market risks to
try and determine, the effects, if any, Year 2000 issues could have on its
customers that would affect their ability to purchase and pay for the Company's
products. Based on its assessments, the Company does not believe that Year 2000
issues will significantly alter demand for the Company's products.
The Company has developed a crisis plan to deal with certain critical Year
2000 "what if" situations should they arise. The Company currently expects that
it will either shift supply orders to suppliers that can demonstrate Year 2000
compliance or will stockpile significant supplies of critical components as
January 1, 2000 approaches. The Company believes, however, that due to the
widespread nature of potential Year 2000 issues, the contingency planning
process is an ongoing one which may require further modifications as the Company
obtains additional information regarding the Company's state of preparedness and
the status of third party Year 2000 readiness.
The Company believes that the actions it has taken to date will allow it to
be Year 2000 compliant in a timely manner. There can be no assurances, however,
that the Company's internal systems and products or those of third parties on
which the Company relies will be Year 2000 compliant in a timely manner or that
the Company's or third parties' contingency plans will mitigate the effects of
any noncompliance. The failure to achieve Year 2000 compliance or to have
appropriate contingency plans in place to deal with any noncompliance could
result in a significant disruption of the Company's operations and could have a
material adverse effect on the Company's financial condition, results of
operations, liquidity and future prospects.
The Company estimates the cost of achieving Year 2000 compliance will not
be material to its results of operations or financial condition.
The final costs of compliance and the dates on which the Company believes
it will complete its Year 2000 modifications, are based on managements best
estimates, based upon many different assumptions of future events and other
factors. However, there can be no assurances that the Company's estimates will
be achieved and actual results could differ from those anticipated.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 in this
Quarterly Report on Form 10-Q Report, 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 cannot 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 contained 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
-15-
<PAGE>
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
dependency of the Company on its ability to successfully develop and market new
products 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 reference is hereby made thereto for additional
information with respect to the matters referenced above. Other factors may be
described from time to time in the Company's other filings with the Securities
and Exchange Commission, news releases and other communications. 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 obligation
to release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements set forth above and contained elsewhere in
this Quarterly Report on Form 10-Q.
Part I - Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-16-
Not Applicable.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
Part II - Other Information
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 The Company's Certificate of Incorporation of the Company, as amended
(previously filed as Exhibit 3.1A to the Company's Registration
Statement on Form SB-2 (File No. 333-33129) and incorporated herein by
reference).
3.2 By-laws of the Company is (previously filed as Exhibit 3.1 to the
Company's Current Report on Form 8-K dated August 26, 1998 (File No.
0-3207) and incorporated herein by reference).
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
-17-
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
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.
BARRINGER TECHNOLOGIES INC. (Registrant)
/s/ STANLEY S. BINDER
- -------------------------------------------------
Stanley S. Binder, Chairman
/s/ RICHARD S. ROSENFELD
- -------------------------------------------------
Richard S. Rosenfeld, Chief Financial Officer
(Principal Accounting Officer)
Date: November 1, 1999
-18-
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO EXHIBITS
Exhibit Number Page No.
27.1 Financial Data Schedule 20
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Quarterly Report on Form 10-Q for the
period ending September 30, 1999 and is qualified
in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 19791
<SECURITIES> 6311
<RECEIVABLES> 9522
<ALLOWANCES> 383
<INVENTORY> 5540
<CURRENT-ASSETS> 44793
<PP&E> 5417
<DEPRECIATION> 2521
<TOTAL-ASSETS> 48254
<CURRENT-LIABILITIES> 2883
<BONDS> 0
0
88
<COMMON> 79
<OTHER-SE> 45065
<TOTAL-LIABILITY-AND-EQUITY> 48254
<SALES> 15733
<TOTAL-REVENUES> 15733
<CGS> 6472
<TOTAL-COSTS> 6897
<OTHER-EXPENSES> (1333)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3697
<INCOME-TAX> 1405
<INCOME-CONTINUING> 2292
<DISCONTINUED> (1253)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1039
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.13
</TABLE>
