FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: July 31, 1995
or
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File No.: 0-9880
ENGINEERING MEASUREMENTS COMPANY
(Exact name of Registrant as specified in its charter)
Colorado 84-0572936
(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
600 Diagonal Highway, Longmont, Colorado 80501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303)651-0550
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
The number of shares outstanding of Registrant's $.01 par value common stock,
as of July 31, 1995 was 2,733,052.
Transitional Small Business Disclosure Format.
Yes [ ] No [X].
Page 1 of 11
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ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS
July 31, 1995
(unaudited) April 30, 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 225,330 $ 312,183
Accounts receivable, net of allowance for doubtful
accounts of $124,509 at July 31, 1995
and $135,913 at April 30, 1995 1,316,641 1,272,481
Short-term investments 753,664 744,672
Inventories 1,611,397 1,479,384
Prepaid expenses 70,749 34,296
Other receivables 29,949 67,020
Deferred income taxes 466,000 437,175
--------- ---------
Total current assets 4,473,730 4,347,211
--------- ---------
Property and equipment, at cost:
Land 568,940 568,940
Building & improvements 1,562,109 1,534,811
Vehicles 16,791 16,791
Machinery and equipment 2,530,414 2,515,343
Office furniture and fixtures 1,015,820 1,004,285
--------- ---------
5,694,074 5,640,170
Less accumulated depreciation (3,813,095) (3,735,375)
--------- ---------
Net property and equipment 1,880,979 1,904,795
--------- ---------
Other assets:
Other 81,037 68,159
Investment in common stock of Marcum Natural
Gas Services, Inc. 267,750 357,001
--------- ---------
Total other assets 348,787 425,160
--------- ---------
TOTAL ASSETS: $6,703,496 $6,677,166
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
(Continued)
PAGE 2 OF 11
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ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, 1995
(unaudited) April 30, 1995
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $220,556 $220,556
Accounts payable 609,937 504,201
Accrued liabilities 530,790 582,226
----------- -----------
Total current liabilities 1,361,283 1,306,983
----------- -----------
Long-term liabilities:
Loans from stockholder less current maturities 493,453 544,402
Leases less current maturities 7,588 11,608
Deferred income taxes 165,000 167,000
----------- -----------
Total long-term liabilities 666,041 723,010
----------- -----------
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares
authorized; 2,923,452 shares issued
at July 31, 1995, 2,923,452 shares issued
at April 30, 1995, 2,733,052 shares out-
standing at July 30, 1995, 2,733,052
shares outstanding at April 30, 1995 29,235 29,235
Capital in excess of par value 1,956,927 1,956,927
Deferred Compensation --- ---
Unrealized holding gains (71,513) (18,555)
Retained earnings 3,391,222 3,309,265
Treasury stock at cost; 190,400 shares at
July 31, 1995, 190,400 shares at
April 30, 1995 (629,699) (629,699)
----------- -----------
Total stockholders' equity 4,676,172 4,647,173
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: $6,703,496 $6,677,166
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
(Continued)
PAGE 3 OF 11
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ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended
July 31,
1995 1994
<S> <C> <C>
Sales $2,092,689 $2,511,603
Cost of sales 1,200,533 1,446,209
---------- ----------
Gross margin on sales 892,156 1,065,394
---------- ----------
Operating expenses:
Selling 499,211 649,775
General and administrative 187,691 148,007
Research and development 93,591 116,593
Provision for doubtful accounts 10,391 1,708
---------- ----------
Total operating expenses 790,884 916,083
---------- ----------
Income from operations 101,272 149,311
---------- ----------
Other income/(expense):
Gain/(loss) on sale of stock 12,348 (63)
Interest expense (16,051) (20,999)
Royalty and other income 31,805 35,048
---------- ----------
Total other income 28,102 13,986
---------- ----------
Income from operations before income
taxes 129,374 163,297
Income tax provision 47,417 59,449
---------- ----------
Net income 81,957 103,848
======== ========
Earnings per share from operations 0.03 0.04
Net earnings per share on a fully
diluted basis $0.03 $0.03
======== ========
Weighted average number of
shares outstanding 2,733,052 2,836,402
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
PAGE 4 OF 11
<PAGE>
<TABLE>
ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS:
INCREASE/(DECREASE) IN CASH
Three Months Ended July
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 81,957 $ 103,848
Adjustments to reconcile net income to
net cash provided by operating activities--
Depreciation and amortization 80,951 100,261
Deferred tax provision/(benefit) 3,034 (22,784)
Provision for doubtful accounts (11,404) 1,708
Gain on sales of investments (12,347) 63
Stock option compensation 0 0
Changes in assets and liabilities-
Receivables 4,315 156,283
Inventories (132,013) 7,216
Prepaid expenses (36,453) (34,690)
Accounts payable and accrued
liabilities 54,300 (423,997)
Net cash provided by ---------- ----------
operating activities 32,340 (112,092)
---------- ----------
Cash flows from investing activities:
Capital expenditures, net (53,904) (135,539)
Expenditures for intangible assets (16,109) (613)
Investment purchases (12,841) (1,041,954)
Proceeds from sale of investments 18,630 914,380
Net cash provided by/(used) in ---------- ----------
investing activities (64,224) (263,726)
---------- ----------
Cash flows from financing activities:
Payments of long and short term debt (50,949) (50,949)
Purchase of treasury stock --- ---
Proceeds from exercise of stock options 0 0
Principle payment under capital lease
obligations (4,020) (6,799)
---------- ----------
Net cash used in financing activities (54,969) (57,748)
Net increase/(decrease) in cash and cash ---------- ----------
equivalents (86,853) (433,566)
Cash and cash equivalents at beginning of
period 312,183 810,631
---------- ----------
Cash and cash equivalents at end of period $ 225,330 $ 377,065
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during period for--
Interest $ 16,051 $ 20,999
Income taxes 24,080 188,681
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
PAGE 5 OF 11
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ENGINEERING MEASUREMENTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited, condensed financial statements have been prepared
in accordance with the instructions to the Form 10-QSB and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the three months ended July 31, 1995 are not necessarily indicative of the
results that may be expected for the fiscal year ending April 30, 1996.
These statements should be read in conjunction with the financial statements
and footnotes thereto included in the Company's Form 10-KSB for the fiscal
year ended April 30, 1995.
1. Principles of Consolidation
The consolidated financial statements include the accounts of Engineering
Measurements Company (the Company) and its subsidiary, General Metrology
Corporation. All significant intercompany accounts and transactions have been
eliminated in consolidation.
2. Inventories
Inventories, stated at the lower of cost (first-in, first-out method) or
market, are as follows:
<TABLE>
July 31, 1995 April 30, 1995
<S> <C> <C>
Raw materials and work-in-process $1,371,287 $1,259,015
Finished goods 240,110 220,369
------------ ----------
$1,611,397 $1,479,384
============ ===========
</TABLE>
3. Investments
Certain investments in debt and equity securities are classified into three
categories: held to maturity, available for sale, or trading. Held to
maturity investments will be carried at amortized cost. Available for
sale securities will be carried at fair value and unrealized gains and
losses will be reflected as a separate component of stockholders equity,
net of the income tax effect which is included in deferred taxes.
Trading securities will be carried at fair value and unrealized holding
gains or losses shall be included in earnings. The unrealized holding loss
on available for sale securities were approximately $72,000 and $19,000
at July 31, 1995 and April 30, 1995 respectivley. All the Company's short
term investments are debt and equity securities and considered to be
trading securities, cost approximates market. The Company's investment
in common stock of Marcum Natural Gas Services, Inc. is considered to be
available for sale securities.
4. Income Taxes
Deferred income taxes are provided for items which are reported for tax
purposes in different periods than in the Statements of Operations.
5. Earnings Per Share
Earnings per share is computed by dividing net income by the weighted
average number of shares outstanding during the period. Pursuant to the
terms of a loan agreement, a stockholder may convert up to $353,790
in principal and accrued interest into 345,766 shares of common stock
at an average price of $1.02 per share. There are a total of 195,275
shares subject to outstanding options under the Company's stock option
plans at July 31, 1995. The effect of the outstanding options and
conversion right to purchase the total of 541,041 shares as of July
PAGE 6 OF 11
<PAGE>
31, 1995 is dilutive and reflected in the financial statements.
Earnings per share on a fully dilutive basis using the treasury stock
method was $.03 at July 31, 1995 for the three month period. In 1994 the
shares issuable pursuant to the terms of a stockholder loan agreement were
dilutive. Earnings per share on a fully dilutive basis using the treasury
stock method was $.03 at July 31, 1994.
6. Changes in Accounting Principles
There have been no changes in accounting principles during these reporting
periods.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
A. Financial Condition
The Company's net working capital increased approximately $72,000 during the
quarter ended July 31, 1995, primarily because of increases in inventories of
approximately $132,000. The current ratio remained unchanged at 3.3.
Cash and cash equivalents decreased approximately $87,000 at July 31, 1995
compared to April 30, 1995, due to the Company's purchases of inventory,
capital expenditures and debt repayment during the quarter. The Company
intends to continue investing cash in high grade investment securities
until the cash is needed for operations.
Trade accounts receivable increased by approximately $44,000 at July 31, 1995,
on lower sales of approximately $41,000 for the quarter ending July 31, 1995
as compared to sales for the previous quarter ending April 30, 1995. The Days
Sales Outstanding (DSO) continues to be strong, 61.5 for the quarter ended
July 31, 1995 compared to 58.9 for the quarter ended April 30, 1995. Other
receivables decreased by approximately $37,000 in the period.
Inventories increased by approximately $132,000 during the quarter ended
July 31, 1995. The inventory turnover ratio for the three months ended
July 31, decreased from 2.53 in 1994 to 1.63 in 1995. This reflects
management's cost reduction effort of making parts internally instread of
purchasing them from vendors and purchasing in cost effective quantities,
thereby increasing parts availability.
Investments in common stock of Marcum Natural Gas Services, Inc. decreased
approximately $89,000 in accordance with FASB 115, in which available for
trade securities will be carried on the books at fair value and unrealized
gains and losses will be included in stockholders equity. (See Note 3 in the
Notes to Consolidated Financial Statements).
The Company is making monthly payments of principal and interest, of
approximately $22,000 to pay off the loans from shareholder. The company
does not expect any material capital expenditures in the next six months,
and anticipates all cash needs will be satisfied from operations. The
Company currently does not have any line of credit arrangements.
PAGE 7 OF 11
<PAGE>
B. Results of Operations
Three months ended July 31, 1995 compared
to the three months ended July 31, 1994.
Sales were approximately $420,000 lower in 1995 compared to 1994. Sales
of insertion meter products continues at the same levels as 1994. Reduced
sales efforts in the Digital Valve line resulted in a decease of approximately
$140,000. Vortex meter sales decreased by approximately $170,000. Sales of
EMCO's other products also deceased slightly to make up the remaining decrease.
The backlog at the end of July 31, 1995 was approximately $1,300,000 compared
to a backlog at July 31, 1994 of approximately $1,400,000.
Gross margin on sales decreased approximately $185,000 due to lower sales but
improved margins. As a percent of sales, margins increased from 42.4% in 1994
to 42.6% in 1995. Operating expenses decreased by approximately $125,000, but
as a percent to sales for the quarter ended July 31, increased from 36.5%
in 1994 to 37.8% in 1995 due to lower revenue.
For the quarter ended July 31, Royalty and other income increased approximately
$14,000 in 1995 compared to 1994, due to higher interest and dividend income
from the Company's high grade investment securities.
The income tax provision for the three months ended July 31, stayed
approximately the same as a percent of income 36.5% in both 1994 and 1995.
Net income for the period as a percentage of sales remained about the same,
3.9% in 1995 versus 4.1% in 1994. The comparable net income percentage for
1995 was accomplished despite lower sales of approximately $420,000, through
management cost containment and material cost savings.
PAGE 8 OF 11
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None filed in the quarter ended July 31, 1995.
B. Reports on Form 8-K
None filed in the quarter ended July 31, 1995.
PAGE 9 OF 11
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, Engineering Measurements Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ENGINEERING MEASUREMENTS COMPANY
Registrant
Date: September 13, 1995 By: /s/ Charles E. Miller
Charles E. Miller, President,
Chief Executive Officer
(Principal Financial Officer
and Principal Accounting Officer)
PAGE 10 OF 11
<PAGE>
September 14, 1995
ENGINEERING MEASUREMENTS COMPANY
(NASDAQ SYMBOL: EMCO)
First Quarter Results
Corporate Contact: Charles E. Miller
(303) 651-0550
Longmont, Colorado: Engineering Measurements Company announced today a net
profit of $81,957 ($.03 per share) for the first quarter ended July 31, 1995.
Sales for the period were approximately $2.1 million; compared to sales of
approximately $2.5 million last year.
Net income for the first quarter was $81,957 or 3.9% of sales, compared
to 4.1% the prior year or $103,848.
<TABLE>
E N G I N E E R I N G M E A S U R E M E N T S C O M P A N Y
Operating Results
First Quarter Ended July 31, 1995
Three Months Ended
July 31,
1995 1994
<S> <C> <C>
Net sales $2,092,689 $2,511,603
Income from operations before taxes 129,374 163,297
Net income 81,957 103,848
Net earnings per share $.03 $.04
Number of shares outstanding 2,733,052 2,836,402
</TABLE>
PAGE 11 OF 11
