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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 June 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
30 TECHNOLOGY DRIVE, WARREN, NEW JERSEY 07059
---------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(908) 222-9100
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(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 July 30, 1999 - 7,024,052
shares
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX
PAGE NO.
---------
Part I Financial Information
Item 1. Financial Statements
- Consolidated Balance Sheets as of June 30, 1999 (unaudited)
and December 31, 1998 ............................................ 3
- Consolidated Statements of Operations (unaudited) for the
three months and six months ended June 30, 1999 and 1998 ......... 5
- Consolidated Statement of Stockholders' Equity and
Comprehensive Income for the six months ended June 30, 1999 ...... 7
- Consolidated Statements of Cash Flows (unaudited) for the
three months and six months ended June 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 4. Submission of Matters to a Vote of Security Holders ............... 17
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
JUNE 30, December 31,
1999 1998
------------ ------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents ..................... $14,161,000 $18,802,000
Marketable securities ......................... 14,085,000 15,606,000
Accounts receivable, less allowances of
$375,000 and $626,000 ....................... 7,670,000 6,502,000
Inventories ................................... 6,471,000 3,943,000
Prepaid expenses and other .................... 1,391,000 1,111,000
Deferred tax asset (note 2) ................... 2,942,000 3,092,000
----------- -----------
Total current assets ...................... 46,720,000 49,056,000
Property and equipment ......................... 2,677,000 2,349,000
Other assets ................................... 565,000 1,239,000
----------- -----------
Total assets .............................. $49,962,000 $52,644,000
=========== ===========
See notes to consolidated financial statements.
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<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable .................................................................... $ 2,300,000 $ 1,169,000
Accrued liabilities ................................................................. 1,005,000 1,073,000
Accrued payroll and related taxes ................................................... 1,024,000 1,005,000
Reserve for losses from discontinued operation ...................................... 572,000 --
Income taxes payable ................................................................ 69,000 112,000
------------ ------------
Total current liabilities ........................................................ 4,970,000 3,359,000
------------ ------------
Non-current liabilities .............................................................. 131,000 145,000
------------ ------------
Total liabilities ............................................................... 5,101,000 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 preferred
stock, 22,500 shares outstanding ............................................... 45,000 45,000
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 .......................................................... 54,739,000 54,693,000
Accumulated deficit ................................................................. (4,045,000) (4,359,000)
Cumulative comprehensive loss ........................................................ (784,000) (786,000)
------------ ------------
50,077,000 49,719,000
Less: common stock in treasury at cost, 842,000 and 92,000
shares, respectively ............................................................... (5,216,000) (579,000)
------------ ------------
Total stockholders' equity ....................................................... 44,861,000 49,140,000
------------ ------------
Total liabilities and stockholders' equity ........................................... $ 49,962,000 $ 52,644,000
============ ============
</TABLE>
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 Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1999 1998 1999 1998
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues ................................................... $ 5,476 $ 4,864 $ 10,429 $ 10,813
Cost of revenues ........................................... 2,198 1,826 4,158 4,261
-------- -------- -------- --------
Gross profit ............................................. 3,278 3,038 6,271 6,552
-------- -------- -------- --------
Operating expenses:
Selling, general and administrative ...................... 1,893 1,919 3,876 3,615
Product development ...................................... 301 378 807 740
-------- -------- -------- --------
2,194 2,297 4,683 4,355
-------- -------- -------- --------
Operating income ......................................... 1,084 741 1,588 2,197
-------- -------- -------- --------
Other income (expense):
Interest income .......................................... 419 486 906 635
Other, net ............................................... 27 (35) 43 (49)
-------- -------- -------- --------
446 451 949 586
-------- -------- -------- --------
Income from continuing operations
before income tax provision (benefit).................... 1,530 1,192 2,537 2,783
Income tax provision (benefit) ............................. 600 (139) 965 (339)
-------- -------- -------- --------
Income from continuing operations ........................ 930 1,331 1,572 3,122
Discontinued operation (note 4)
Loss from operations, net of tax
benefit of $146, $11, $210 and $11 ...................... (202) (501) (344) (501)
Loss on disposition, net of tax
benefit of $555 and $555 ................................ (909) -- (909) --
-------- -------- -------- --------
(1,111) (501) (1,253) (501)
-------- -------- -------- --------
Net Income (loss) ........................................ (181) 830 319 2,621
Preferred stock dividends .................................. (2) (2) (5) (5)
-------- -------- -------- --------
Net income (loss) attributable to
common stockholders .................................... $ (183) $ 828 $ 314 $ 2,616
======== ======== ======== ========
(Continued)
</TABLE>
-5-
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(continued)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------- --------------------
1999 1998 1999 1998
------- ------ ------- -------
<S> <C> <C> <C> <C>
Basic earnings per common share (note 3)
Continuing operations ......................................... $ 0.13 $ 0.17 $ 0.21 $ 0.47
Discontinued operation - loss from operations ................. (0.03) (0.06) (0.05) (0.07)
Discontinued operation - loss on disposition .................. (0.13) -- (0.12) --
------ ------ ------ ------
$(0.03) $ 0.11 $ 0.04 $ 0.40
====== ====== ====== ======
Diluted earnings per common share (note 3)
Continuing operations ......................................... $ 0.12 $ 0.16 $ 0.20 $ 0.42
Discontinued operation - loss from operations ................. (0.03) (0.06) (0.04) (0.07)
Discontinued operation - loss on disposition .................. (0.12) -- (0.12) --
------ ------ ------ ------
$(0.03) $ 0.10 $ 0.04 $ 0.35
====== ====== ====== ======
Weighted average common and common equivalent
shares outstanding:
Basic ......................................................... 7,119 7,710 7,414 6,624
====== ====== ====== ======
Diluted ....................................................... 7,673 8,435 8,038 7,426
====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
-6-
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Class A Preferred Class B
Common Stock Stock Preferred Stock
---------------- ----------------- ---------------- Paid-in
Total Equity Shares Amount Shares Amount Shares Amount Capital*
------------ ------ ------ -------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1999 ................. $ 49,140 7,851 $ 79 39 $47 23 $45 $54,693
Net income .............................. 319
Translation adjustment ................... 2
Comprehensive Income ..................
Exercise of stock options and
warrants .............................. 40 14 40
Conversion of preferred stock ........... 0 1 (4) (4) 4
Repurchase of common stock .............. (4,700)
Sale of treasury stock, net of notes
receivable ($97) ...................... 0 (63)
Dividend on preferred stock ............. (5)
Repayment of stockholder loan ........... 65 65
-------- ----- ---- -- --- -- --- -------
Balance - June 30, 1999 ................... $ 44,861 7,866 $ 79 35 $43 23 $45 $54,739
======== ===== ==== == === == === =======
<CAPTION>
Cumulative
comprehensive
other
income Treasury Comprehensive
Deficit (loss) Stock Income
------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Balance - January 1, 1999 ................. $(4,359) $(786) $ (579)
Net income .............................. 319 $319
Translation adjustment ................... 2 1
----
Comprehensive Income .................. $320
====
Exercise of stock options and
warrants ..............................
Conversion of preferred stock ...........
Repurchase of common stock .............. (4,700)
Sale of treasury stock, net of notes
receivable ($97) ...................... 63
Dividend on preferred stock ............. (5)
Repayment of stockholder loan ...........
------- ----- -------
Balance - June 30, 1999 ................... $(4,045) $(784) $(5,216)
======= ===== =======
</TABLE>
- ----------------
* At June 30, 1999, net of notes receivable of $1,517 from the sale of stock.
See notes to consolidated financial statements.
-7-
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
OPERATING ACTIVITIES 1999 1998 1999 1998
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net Income (loss) ............................................. $ (181) $ 830 $ 319 $ 2,621
Items not affecting cash:
Depreciation and amortization ......................... 226 126 444 226
Deferred tax provision (benefit) ...................... (100) (250) 150 (550)
Inventory and accounts receivable reserves ............ 116 (62) 158 104
Loss from discontinued operation ...................... 1,111 -- 1,253 --
Write-off of acquired technology ...................... -- 435 -- 435
Other ................................................. (17) (73) (52) (73)
Decrease (increase) in non-cash working capital balances
-continuing operations ...................................... (2,845) 2,192 (3,306) 517
------------------------- -------------------------
Cash provided by (used in) operating activities -
continuing operations ................................. (1,690) 3,198 (1,034) 3,280
Net cash provided by discontinued operation ........... 339 -- 197 --
------------------------- -------------------------
Cash provided by (used in) operating activities .. (1,351) 3,198 (837) 3,280
------------------------- -------------------------
INVESTING ACTIVITIES
Purchase of equipment and other ............................... (409) (154) (725) (458)
Purchase of DigiVision and related costs ...................... -- (821) -- (821)
Sale (purchase) of marketable securities ...................... 3,477 (16,628) 1,521 (14,629)
------------------------- -------------------------
Cash provided by (used in) investing activities .. 3,068 (17,603) 796 (15,908)
------------------------- -------------------------
FINANCING ACTIVITIES
Proceeds on sale of common stock, net of $2,393
of offering costs ........................................... -- 25,207 -- 25,207
Warrant and option exercises .................................. 12 99 40 204
Payment of dividends on preferred stock ....................... (5) (5) (5) (5)
Payment of shareholder loan ................................... -- -- 65 --
Acquisition of treasury stock ................................. (2,195) -- (4,700) --
Reduction in bank debt and other .............................. -- (67) -- (67)
------------------------- -------------------------
Cash provided by (used in) financing activities .. (2,188) 25,234 (4,600) 25,339
------------------------- -------------------------
Increase (decrease) in cash and cash equivalents .............. (471) 10,829 (4,641) 12,711
Cash and cash equivalents at beginning of period .............. 14,632 10,070 18,802 8,188
------------------------- -------------------------
Cash and cash equivalents at end of period .................... $ 14,161 $ 20,899 $ 14,161 $ 20,899
========================= =========================
CHANGES IN COMPONENTS OF NON-CASH WORKING
CAPITAL BALANCES RELATED TO OPERATIONS
Accounts receivable ........................................... $ (2,038) $ 2,046 $ (1,270) $ 2,350
Inventories ................................................... (1,625) (198) (2,866) (573)
Other current assets .......................................... (47) 130 (324) 70
Accounts payable and accrued liabilities ...................... 865 214 1,154 (1,330)
------------------------- -------------------------
Decrease (increase) in non-cash working capital
balances - continuing operations ........................... $ (2,845) $ 2,192 $ (3,306) $ 517
========================= =========================
Cash paid during the period for income taxes .................. $ 25 $ 156 $ 236 $ 201
========================= =========================
See notes to consolidated financial statements.
</TABLE>
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<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, 1999 and the results of its operations and its cash flows
for the three months and six months ended June 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 six
months ended June 30, 1999 are not necessarily indicative of the results to be
expected for any other interim period or for the full year.
2. At June 30, 1999, a valuation allowance has been provided for certain
limitations applied to the net operating loss carryforward of a subsidiary. At
June 30, 1999, the net deferred tax asset of $2,942,000 included approximately
$445,000 and $2,497,000 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 six months ended June 30, 1999 and 1998, respectively, have been
computed as follows:
<TABLE>
<CAPTION>
For the three months ended June 30, 1999 For the six months ended June 30, 1999
------------------------------------------- -------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Income attributable to
common shareholders
from continuing operations .... 928 7,119 $0.13 1,567 7,414 $0.21
===== =====
Effect of dilutive securities
Warrants and options ............ 534 604
Convertible preferred
dividend requirements .......... 2 20 5 20
------------------------ -------------------------
Diluted Earnings Per Share
Income attributable to
common shareholders and
assumed conversions from
continuing operations ......... $930 7,673 $0.12 $1,572 8,038 $0.20
==========================================================================================
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
For the three months ended June 30, 1998 For the six months ended June 30, 1998
---------------------------------------- ---------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Income attributable to
common shareholders
from continuing operations ............. 1,329 7,710 $ 0.17 3,117 6,624 $ 0.47
======== =========
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 from
continuing operations .................. $1,331 8,435 $ 0.16 $3,122 7,426 $ 0.42
=================================================================================
</TABLE>
4. Effective June 30, 1999, the Company determined that it will discontinue its
video-enhancement business, DigiVision, and is currently seeking buyers for it.
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 June 30, 1999.
For the six months ended June 30, 1999 and June 30, 1998, revenues from
DigiVision were $352,000 and $324,000, respectively, and for the three months
ended June 30, 1999 and June 30, 1998, revenues from DigiVision were $28,000 and
$324,000, respectively.
5. 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 June 30, 1999, the Company had repurchased 972,500 shares at
an aggregate cost of approximately $6.2 million.
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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
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... 100.0 100.0 100.0 100.0
Cost of revenues.................................. 40.1 37.5 39.9 39.4
------------------------------------------
Gross profit...................................... 59.9 62.5 60.1 60.6
Selling, general and administrative expenses ..... 34.6 39.5 37.2 33.4
Product development............................... 5.5 7.8 7.7 6.8
------------------------------------------
Operating income ................................. 19.8 15.2 15.2 20.4
Other income, net................................. 8.1 9.3 9.2 5.4
Income tax (provision) benefit ................... (10.9) 2.9 (9.3) 3.1
------------------------------------------
Income from continuing operations ................ 17.0 27.4 15.1 28.9
Preferred stock dividend requirements............. * * * *
------------------------------------------
Income attributable to common
stockholders from continuing operations........ 17.0 27.4 15.1 28.9
==========================================
</TABLE>
* less than 0.1%
COMPARISON OF THE THREE-MONTH PERIOD ENDED JUNE 30, 1999
TO THE THREE-MONTH PERIOD ENDED JUNE 30, 1998
CONTINUING OPERATIONS:
Revenues. For the quarter ended June 30, 1999, revenues increased by
approximately $612,000, or 12.6%, to $5.5 million from $4.9 million for the
quarter ended June 30, 1998. Sales of IONSCAN(R)'s and related products
increased by approximately $627,000, or 13.1%, due to a 23.8% increase in the
number of IONSCAN(R)'s sold along with a 50.3% increase in the sale of
consumables, spares and related services, offset in part by a decrease in
average selling prices. Sales of specialty instruments were insignificant in
both quarters as were revenues from funded research and development.
Gross Profit. For the quarter ended June 30, 1999, gross profit increased
by approximately $240,000, or 7.9%, to $3.3 million from $3.1 million in the
1998 period. As a percentage of revenues, gross profit decreased to 59.9% in the
quarter ended June 30, 1999 from 62.5% in the 1998 period. The dollar increase
in gross profit was due primarily to higher revenues during the three months
ended June 30, 1999. The decrease in gross profit percentage was primarily
attributable to a decrease in the average selling price of an IONSCAN(R) during
the same quarter.
Selling, General and Administrative. For the quarter ended June 30, 1999,
selling, general and administrative expenses decreased by approximately $26,000,
or 1.4%, to $1.9 million. As a percentage of revenues, selling, general and
administrative expenses decreased to 34.6% in the 1999 period from 39.5% in the
1998 period. Selling and marketing expenses decreased by approximately $236,000
primarily due to reduced commissions. General and administrative expenses
increased by $210,000 primarily as a result of costs and expenses relating 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.
-11-
<PAGE>
Product Development. For the quarter ended June 30, 1999, product
development expenses decreased by approximately $77,000, or 20.4%, to $301,000
from $378,000 in the 1998 period. As a percentage of revenues, product
development expenses decreased to 5.5% for the quarter ended June 30,1999 from
7.8% in the 1999 period. During the quarter, the Company capitalized
approximately $250,000 of product development expenses related to new product.
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 June 30, 1999, operating income
increased by $343,000, or46.3%, to $1.1 million from $741,000 in the 1998
period. As a percentage of revenues, operating income increased to 19.8% from
15.2% in the 1998 period. The increase was due to the factors described above.
Other Income and Expense. For the quarter ended June 30, 1999, interest
income decreased by $67,000, or 13.6%, to $419,000 from $486,000 in the 1998
period. 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 June 30, 1999, the Company had a tax
provision of $600,000, as compared to a net tax benefit of $139,000 in the 1998
period. At December 31, 1998, the Company had substantially eliminated its
deferred tax valuation allowance and accordingly is providing for taxes on its
income.
DISCONTINUED OPERATIONS:
Effective June 30, 1999, the Company determined that it will discontinue
its video-enhancement business segment, DigiVision. It is currently seeking
buyers for DigiVision. 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
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 $909,000, net of related taxes, to recognize estimated
operating losses to date of disposition, write-off of remaining goodwill and
estimated loss on such disposition.
For the three months ended June 30, 1999 and June 30, 1998, revenues from
DigiVision were $28,000 and $324,000, respectively, and operating losses, net of
related taxes, for the same periods were $202,000 and $501,000, respectively.
COMPARISON OF THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1998
CONTINUING OPERATIONS:
Revenues. For the six months ended June 30, 1999, revenues decreased by
approximately $384,000, or 3.6%, to $10.4 million from $10.8 million for the six
months ended June 30, 1998. Sales of IONSCAN7s and related products decreased by
approximately $276,000, or 2.6%, due to a decrease in unit sales and a decrease
in the average selling prices, offset in part by a 47.0% increase in the sale of
consumables, spares and related services. Sales of specialty instruments were
insignificant in both periods as were revenues from funded research and
development.
Gross Profit. For the six months ended June 30, 1999, gross profit
decreased by approximately $281,000, or 4.3%, to $6.3 million from $6.5 million
in the 1998 period. As a percentage of revenues, gross profit decreased to 60.1%
in the six months ended June 30, 1999 from 60.6% in the 1998 period. The
decrease in gross profit was primarily attributable to decreased sales.
Selling, General and Administrative. For the six months ended June 30,
1999, selling, general and administrative expenses increased by approximately
$261,000, or 7.2%, to $3.9 million from $3.6 million in the 1998 period. As a
percentage of revenues, selling, general and administrative expenses decreased
to 33.4% in the 1999 period from 37.2% in the 1998 period. Selling and marketing
expenses were unchanged at $2.0 million. General and administrative expenses
increased by $270,000 primarily as a result of increased payroll and related
costs and
-12-
<PAGE>
expenses related to the Company's recently formed business development group. 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 six months ended June 30, 1999, product
development expenses increased by approximately $67,000, or 9.1%, to $807,000
from $740,000 in the 1998 period. As a percentage of revenues, product
development expenses increased to 7.7% for the six months ended June 30,1999
from 6.8% in the 1998 period as a result of a higher level of internally funded
new product and applications development activity. During the period, the
Company capitalized approximately $250,000 of product development expenses
related to new product. 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 six months ended June 30, 1999, operating income
decreased by approximately $609,000, or 27.7%, to $1.6 million from $2.2 million
in the 1998 period. As a percentage of revenues, operating income decreased to
15.2% from 20.3% in the 1998 period. The decrease was due primarily to the
factors described above.
Other Income and Expense. For the six months ended June 30, 1999, interest
income increased by $271,000, or 42.7%, to $906,000 from $635,000 in the 1998
period. The increase was the result of increased interest earned on larger cash
and short term investment balances.
Income Taxes. For the six months ended June 30, 1999, the Company had a tax
provision of approximately $1.0 million as compared to a net tax benefit of
$339,000 in the 1998 period. At December 31, 1998, the Company had substantially
eliminated its deferred tax valuation allowance and accordingly is providing for
taxes on its income.
DISCONTINUED OPERATIONS:
Effective June 30, 1999, the Company determined that it will discontinue
its video-enhancement business, DigiVision, and is currently seeking buyers for
it. 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 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 date of disposition,
write-off of remaining goodwill and estimated loss on such disposition.
For the six months ended June 30, 1999 and June 30, 1998, revenues from
DigiVision were $352,000 and $324,000, respectively, and operating losses, net
of related taxes, for the same periods were $344,000 and $501,000, respectively.
CAPITAL RESOURCES AND LIQUIDITY
Cash used in operating activities was $837,000 in the six months ended June
30, 1999, as compared to cash provided by operating activities of $3.3 million
for the same period in 1998. Cash used in operating activities in the six months
ended June 30, 1999 resulted primarily from net increases in working capital
balances partially offset by net income of $319,000, depreciation, amortization
and changes in reserves of $752,000 and the losses attributable to the
discontinued operation. Cash provided by operations in the six months ended June
30, 1998, resulted primarily from net income of $2.6 million, net decreases in
working capital balances and write-off of acquired technology, partially offset
by changes in reserves of $220,000.
Cash provided by investing activities was $796,000 in the six months ended
June 30, 1999, and cash used in investing activities was $15.9 million in the
same period in 1998. Cash provided by investing activities in the six months
ended June 30, 1999 resulted from the sale of $1.6 million of marketable
securities, partially offset by the purchase of $725,000 of equipment. Cash used
in investing activities in the six months ended June 30, 1998, resulted from the
purchase of $14.6 million of marketable securities, the purchase of equipment
and the purchase of DigiVision.
Cash used in financing activities was $4.6 million in the six months ended
June 30, 1999, and cash provided by financing activities was $25.3 million in
the same period in 1998. Cash used in financing activities in the six months
ended June 30, 1999 resulted from the repurchase of $4.7 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
-13-
<PAGE>
and the partial repayment of a stockholder loan. Cash provided by financing
activities in the six months ended June 30, 1998, resulted primarily from the
sale of the Company's common stock.
The Company's capital expenditures in the six months ended June 30, 1999
aggregated approximately $725,000. Such expenditures consisted primarily of
leasehold improvements and equipment. The Company believes that it will require
approximately $500,000 in additional capital investment in tooling, equipment,
and facility improvements for the remainder of 1999.
The Company is currently renegotiating its $5.0 million unsecured credit
facility with Fleet Bank, N.A. which is used for general working capital
purposes, including the issuance of standby letters of credit. At June 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 June 30, 1999, the Company had cash and cash equivalents of $14.2
million and marketable securities of $14.1 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 June 30, 1999, the Company had repurchased 972,500 shares at
an aggregate cost of approximately $6.2 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 an assessment plan according to its timetable
and expects to complete implementation of its action plan by September 30, 1999.
To date, the committee 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
modifications to existing software and hardware and conversions to new software,
its internal systems and hardware will be Year 2000 compliant.
The Company has substantially completed a review of its IONSCAN(R) products
and believes that Year 2000 issues will have no impact on the performance of its
IONSCAN7 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,
the Company believes that the functionality of those products is not dependent
on date or time references.
The Company has initiated formal communications with its significant
suppliers, customers, and critical business
-14-
<PAGE>
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
and is currently in the process of evaluating the replies. The Company intends
to monitor the progress made by those parties, as well as 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 assessments made to date, the Company does not believe that
Year 2000 issues will significantly alter demand for the Company's products.
The Company intends to develop 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 attempt to 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 will 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 and steps it
intends to take in the future 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 or results of operations.
Because the Company is still in the process of assessing its Year 2000
issues, the Company cannot estimate the cost of achieving Year 2000 compliance
at this time. However, based on the assessments conducted to date, the Company
does not believe that the costs of achieving such compliance will be material to
its results of operations or financial condition.
The costs of compliance and the dates on which the Company believes it will
complete its Year 2000 modifications and risk assessments, 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 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
-15-
<PAGE>
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.
Not Applicable.
-16-
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1999 Annual Meeting of Stockholders of the Company was
held on May 12, 1999.
(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
Nominee For Withheld
------- --- --------
Stanley S. Binder 5,707,405 0
John H. Davies 5,797,305 0
John J. Harte 5,797,405 0
Richard D. Condon 5,707,405 0
John D. Abernathy 5,797,405 0
James C. McGrath 5,797,405 0
Lorraine M. Lavet 5,797,405 0
Kenneth S. Wood 5,797,305 0
2) The adoption of an amendment to the Company's Stock
Compensation Program to increase the number of shares of Common
Stock available for grant thereunder from 600,000 to 1,100,000.
FOR: 2,658,966; AGAINST: 673,226; ABSTAIN: 11,881;
NOT-VOTED: 2,934,491
3) Ratification of appointment of BDO Seidman, LLP as independent
auditors of the Company's 1998 financial statements
FOR: 6,023,463; AGAINST: 249,032; ABSTAIN: 6,069
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: August 6, 1999
-18-
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO EXHIBITS
Exhibit Number Page No.
27.1 Financial Data Schedule 20
-19-
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<CURRENCY> US
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 14,161
<SECURITIES> 14,085
<RECEIVABLES> 8,045
<ALLOWANCES> 375
<INVENTORY> 6,471
<CURRENT-ASSETS> 46,720
<PP&E> 5,001
<DEPRECIATION> 2,324
<TOTAL-ASSETS> 49,962
<CURRENT-LIABILITIES> 4,970
<BONDS> 0
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88
<COMMON> 79
<OTHER-SE> 44,694
<TOTAL-LIABILITY-AND-EQUITY> 49,962
<SALES> 10,429
<TOTAL-REVENUES> 10,429
<CGS> 4,158
<TOTAL-COSTS> 4,683
<OTHER-EXPENSES> (949)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,537
<INCOME-TAX> 965
<INCOME-CONTINUING> 1,572
<DISCONTINUED> (1,253)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319
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