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, 1997
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
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
(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 August 29, 1997 was 2,800,052.
Transitional Small Business Disclosure Format.
Yes No X .
Page 1 of 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
ASSETS
July 31, 1997 April 30,
(unaudited) 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $290,808 $547,837
Accounts receivable, net of allowance for
doubtful accounts and allowance for sales
returns of $63,940 at July 31, 1997 and
$61,104 at April 30, 1997 1,323,685 1,557,566
Short-term investments 1,171,692 904,724
Inventories 1,325,938 1,256,597
Prepaid expenses 89,947 23,845
Income taxes receivable 178,160 160,848
Other receivables 25,348 62,602
Deferred income taxes 208,986 224,342
--------- ---------
Total current assets 4,614,564 4,738,361
--------- ---------
Property and equipment, at cost:
Land 568,940 568,940
Building & improvements 1,619,595 1,619,595
Vehicles 22,196 22,196
Machinery and equipment 3,462,396 3,106,342
Office furniture and fixtures 955,509 950,271
--------- ---------
6,628,636 6,267,344
Less accumulated depreciation (4,078,410) (3,981,412)
--------- ---------
Net property and equipment 2,550,226 2,285,932
--------- ---------
Other assets 105,534 109,335
TOTAL ASSETS: $7,270,324 $7,133,628
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
(Continued)
Page 2 of 10
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
July 31, 1997 April 30,
(unaudited) 1997
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 400,766 $ 418,382
Accounts payable 825,707 612,538
Accrued liabilities 468,924 515,848
--------- ---------
Total current liabilities 1,695,397 1,546,768
--------- ---------
Long-term liabilities:
Deferred income taxes 183,300 188,100
--------- ---------
Total long-term liabilities 183,300 188,100
--------- ---------
Stockholders' equity:
Common stock, $.01 par value;
5,000,000 shares authorized;
2,990,452 shares issued at July 31, 1997,
2,988,452 shares issued at April 30, 1997,
2,800,052 shares outstanding at July 31, 1997,
2,798,052 shares outstanding at April 30, 1997, 29,905 29,885
Capital in excess of par value 2,054,107 2,047,877
Unrealized holding losses (17,182) (30,409)
Retained earnings 3,954,496 3,981,106
Treasury stock at cost; 190,400 shares at
July 31, 1997, 190,400 shares at
April 30, 1997 (629,699) (629,699)
--------- ---------
Total stockholders' equity 5,391,627 5,398,760
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: $7,270,324 $7,133,628
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3 of 10
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended July 31,
1997 1996
<S> <C> <C>
Sales $2,290,337 $2,452,302
Cost of sales 1,430,265 1,331,591
---------- ----------
Gross margin on sales 860,072 1,120,711
---------- ----------
Operating expenses:
Selling 542,751 561,939
General and administrative 238,044 235,211
Research and development 170,729 138,459
---------- ----------
Total operating expenses 951,524 935,609
---------- ----------
Income from operations (91,452) 185,102
---------- ----------
Other income/(expense):
Gain/(loss) on sale of stock 45,533 (1,073)
Interest expense (9,157) (10,919)
Royalty and other income 14,911 33,010
---------- ----------
Total other income 51,287 21,018
Income/(loss) from operations before
income taxes (40,165) 206,120
Income tax provision/(benefit) (13,555) 82,193
---------- ----------
Net income/(loss) (26,610) 123,927
========== ==========
Net earnings/(loss) per share ($0.01) $0.05
Net earnings/(loss) per share on a fully
diluted basis ($0.01) $0.04
========== ==========
Weighted average number of
shares outstanding 2,798,719 2,753,052
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4 of 10
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS: INCREASE/(DECREASE) IN CASH
(Unaudited)
<TABLE>
Three Months Ended July 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ (26,610) $123,927
Adjustments to reconcile net income to
net cash provided by operating activities--
Depreciation and amortization 108,747 77,803
Deferred tax provision/(benefit) 2,100 26,325
Provision for doubtful accounts 2,836 (1,635)
Gain/(Loss) on sales of investments (35,637) (6,917)
Changes in assets and liabilities-
Receivables 268,299 (323,004)
Inventories (69,341) 100,841
Income taxes receivable and prepaid expenses (83,414) (40,019)
Accounts payable and accrued liabilities 166,245 (36,617)
--------- --------
Net cash provided/(used) by operating activities 333,225 (79,296)
--------- --------
Cash flows from investing activities:
Capital expenditures, net (367,698) (87,201)
Expenditures for intangible assets (1,542) (2,119)
Investment purchases (757,352) (10,345)
Proceeds from sale of investments 547,704 121,374
---------- --------
Net cash provided by/(used) in
investing activities (578,888) 21,709
---------- --------
Cash flows from financing activities:
Payments of long and short term debt (17,616) (50,950)
Proceeds from exercise of stock options 6,250 0
Principle payment under capital lease
obligations 0 (4,531)
---------- --------
Net cash used in financing activities (11,366) (55,481)
Net increase/(decrease) in cash and cash ---------- --------
equivalents (257,029) (113,068)
Cash and cash equivalents at beginning of period 547,837 532,721
---------- --------
Cash and cash equivalents at end of period $ 290,808 $419,653
========== ========
Supplemental disclosure of cash flow information:
Cash paid during period for--
Interest $ 9,157 $ 11,169
Income taxes 3,033 158,368
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5 of 10
<PAGE>
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, 1997 are not necessarily indicative
of the results that may be expected for the fiscal year ending April 30, 1998.
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, 1997.
1. Inventories
Inventories, stated at the lower of cost (first-in, first-out method) or
market, are as follows:
<TABLE>
July 31, 1997 April 30, 1997
<S> <C> <C>
Raw materials and work-in-process $1,156,221 $1,081,823
Finished goods 169,717 174,774
---------- ----------
$1,325,938 $1,256,597
========== ==========
</TABLE>
2. Investments
Investments are carried at fair market value. The Company's investment
securities are classified as available for sale and recorded on the balance
sheet at fair market value with unrealized gains and losses on these
investments shown as a separate component of stockholder's equity, net of
related taxes.
3. Income Taxes
Deferred income taxes are provided for items which are reported for tax
purposes in different periods than in the Statements of Operations.
4. 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. Also during the quarter ended July 31,
1997, there were a total of 213,275 shares outstanding under the Company's
stock option plans. Any dillutive effect of the outstanding options and
conversion of debt into common stock of 561,041 shares as of July 31, 1997
is reflected in the financial statements.
The FASB issued Statements of Financial Accounting Standards (SFAS) 128,
Earnings per Share, which will be effective for periods ending after
December 15, 1997. Early application is not permitted. Had SFAS 128 been
adopted, the following table illustrates the Basic and Diluted EPS for the
quarter ended July 31, 1997:
Page 6 of 10
<PAGE>
<TABLE>
For the Quarter Ended July 31, 1997
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Net Loss ($26,610)
=========
Basic EPS
Net Loss available to common stockholders ($26,610) 2,798,719 ($0.01)
Effective of Dilutive Securities
Options and convertible debt 5,490 387,584
-------- ---------
Diluted EPS
Income available to stockholders plus
assumed conversions ($21,120) 3,186,303 ($0.01)
========= ========= =======
</TABLE>
5. 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 decreased approximately $272,000 during the
three months ended July 31, 1997, primarily due to decreases in cash,
receivables, and increases in inventory, accounts payable and short term
investments. The current ratio decreased from 3.1 to 2.7 during the period.
Cash and cash equivalents decreased approximately $257,000 at July 31, 1997
compared to April 30, 1997, due to capital expenditures of approximately
$368,000 during the period. The Company intends to continue investing excess
cash in high grade investment securities until the cash is needed for
operations.
Accounts receivable decreased by approximately $234,000 at July 31, 1997,
primarily due to lower sales and improved collections. The Days Sales
Outstanding (DSO) improved to 52.2 days for the three months ended July 31,
1997 compared to 57.7 days for the same period last year.
Inventories increased approximately $69,000 in the first three months of the
fiscal year. The inventory turnover ratio for the three months ended July
31, increased to 1.99 compared to 1.86 in fiscal 1997. Management will
continue to emphasize inventory management.
The Company is making monthly payments of principal and interest, of
approximately $9,000 to pay off loans from a stockholder. 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 10
<PAGE>
B. Results of Operations
Three months ended July 31, 1997 compared
to the three months ended July 31, 1996
Sales were approximately $162,000 lower in 1997 compared to 1996, a 6.6%
decrease, due to lower demand in the international market for the current
year. The Company's order backlog is lower at July 31, 1997 at approximately
$1,237,000, compared to $1,580,000 at July 31, 1996.
Gross profit decreased by approximately $261,000 to 37.6% of sales in 1997
compared to 45.7% in 1996. Lower sales volume than expected accounted for
the decrease in the gross profit as labor and overhead were both higher at
4% and 5% respectively. Operating expenses are up approximately $16,000
from last year due to increased product development costs. Income from
operations decreased approximately $276,000 for the three months ended
July 31, 1997 compared to the same period a year ago.
The Company recognized gains of approximately $46,000 from the sale of stock
for the three months ended July 31, 1997, compared to a loss of approximately
$1,000 for the three months ended July 31, 1996.
Royalty and other income for the three months ended July 31, 1997, decreased
approximately $18,000 to approximately $15,000 due to lower interest and
dividend income from high grade investment securities and the termination of
the royalty agreement at April 30, 1997, compared the same period last year.
The Company's interest expense has decreased approximately $2,000 for the
period ended July 31, 1997 compared to the same period ended in 1996, due to
the Company's lower outstanding debt.
The income tax benefit for the three months ended July 31, 1997 was
approximately $14,000 compared to an income tax provision of approximately
$82,000 the same period in 1996. The impact of deferred tax items resulted
in current tax rates of approximately 33.7% and 39.9% in 1997 and 1996,
respectively.
Net cash provided by operating activities was $333,225 due primarily to
dereases in receivables.
Page 8 of 10
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None filed in the quarter ended July 31, 1997.
B. Reports on Form 8-K
None filed in the quarter ended July 31, 1997.
Page 9 of 10
<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 5, 1997 By: /s/ Charles E. Miller
Charles E. Miller, Chairman
(Principal Financial Officer and
Chief Accounting Officer)
Page 10 of 10
<PAGE>
September 5, 1997
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
loss of $26,610 ($.01) per share for the first quarter ended July 31, 1997.
Sales for the period were approximately $2.29 million; compared to sales of
approximately $2.45 million for the same period last year.
Net loss for the first quarter was 1.2% of sales, compared to net income of
5.1% for the same period last year.
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, 1997
<TABLE>
Three Months Ended
July 31,
1997 1996
<S> <C> <C>
Net sales $2,290,337 $2,452,302
Income (loss) from operations before taxes (91,452) 206,120
Net income(loss) (26,610) 123,927
Net earnings(loss) per share ($.01) $.05
Number of shares outstanding 2,798,719 2,753,052
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extrated from the Balance
Sheet and statement of operations found on pages 2, 3 and 4 of the company's
form 10-QSB for the year-to-date, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 291
<SECURITIES> 1,172
<RECEIVABLES> 1,388
<ALLOWANCES> 64
<INVENTORY> 1,326
<CURRENT-ASSETS> 4,615
<PP&E> 6,629
<DEPRECIATION> 4,078
<TOTAL-ASSETS> 7,270
<CURRENT-LIABILITIES> 1,695
<BONDS> 0
<COMMON> 30
0
0
<OTHER-SE> 5,362
<TOTAL-LIABILITY-AND-EQUITY> 7,270
<SALES> 2,290
<TOTAL-REVENUES> 2,290
<CGS> 1,430
<TOTAL-COSTS> 1,430
<OTHER-EXPENSES> 888
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (40)
<INCOME-TAX> (13)
<INCOME-CONTINUING> (27)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
