FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: January 31, 2000
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 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 March 1, 2000, was 4,110,549.
Transitional Small Business Disclosure Format.
Yes No X .
Page 1 of 12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(Unaudited)
ASSETS
January 31,2000 April 30,1999
Current assets:
Cash and cash equivalents $667,030 $697,697
Accounts receivable,net of allowance for doubtful
accounts and allowance for sales returns of
$86,435 at January 31, 2000 and $75,990 at
April 30, 1999 1,185,110 1,097,330
Short-term investments 636,021 556,288
Inventories 1,449,293 1,667,011
Prepaid expenses 58,682 31,757
Income taxes receivable 50,589 0
Deferred income taxes 302,412 260,649
--------- ---------
Total current assets 4,349,137 4,310,732
--------- ---------
Property and equipment, at cost:
Land 568,940 568,940
Building & improvements 1,650,514 1,624,950
Vehicles 22,196 22,196
Machinery and equipment 4,326,656 4,099,524
Office furniture and fixtures 1,252,259 1,301,489
--------- ---------
7,820,565 7,617,099
Less accumulated depreciation (4,800,351) (4,725,996)
----------- -----------
Net property and equipment 3,020,214 2,891,103
----------- -----------
Other assets
Note receivable 0 138,920
Other assets, net of amortization of $119,341
at January 31, 2000 and $103,306 at April 30, 1999 294,272 132,351
--------- ---------
Total other assets 294,272 271,271
--------- ---------
TOTAL ASSETS $7,663,623 $7,473,106
========== ==========
The accompanying notes are an integral part of these financial statements.
(Continued)
Page 2 of 12
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
January 31, 2000 April 30, 1999
Current liabilities:
Accounts payable $400,200 $320,853
Accrued compensation 273,699 278,238
Accrued liabilities 337,198 372,218
-------- --------
Total current liabilities 1,011,097 971,309
--------- --------
Long-term liabilities:
Deferred income taxes 219,200 220,500
-------- --------
Total long-term liabilities 219,200 220,500
-------- --------
Stockholders' equity:
Common stock, $.01 par value;
15,000,000 shares authorized;
4,284,949 shares issued at January 31, 2000,
4,232,774 shares issued at April 30, 1999,
4,094,549 shares outstanding at January 31, 2000,
4,042,374 shares outstanding at April 30, 1999, 42,849 42,328
Capital in excess of par value 2,868,711 2,650,332
Unrealized holding losses (net of taxes) (112,789) (38,711)
Retained earnings 4,264,254 4,257,047
Treasury stock at cost; 190,400 shares at
January 31, 2000, and April 30, 1999 (629,699) (629,699)
--------- ---------
Total stockholders' equity 6,433,326 6,281,297
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' $7,663,623 $7,473,106
EQUITY
========== ==========
The accompanying notes are an integral part of these financial statements.
Page 3 of 12
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
January 31, January 31,
2000 1999 2000 1999
Sales $2,142,267 $2,605,677 $6,822,157 $7,554,412
Cost of sales 1,303,737 1,550,189 4,117,799 4,434,213
---------- --------- ---------- ---------
Gross margin on sales 838,530 1,055,488 2,704,358 3,120,199
---------- --------- ---------- ---------
Operating expenses:
Selling 449,174 527,116 1,409,407 1,656,009
General and administrative 205,002 234,007 647,498 721,340
Research and development 212,848 197,621 672,667 531,459
---------- --------- ---------- ---------
Total operating expenses 867,024 958,744 2,729,572 2,908,808
---------- --------- ---------- ---------
(28,494) 96,744 (25,214) 211,391
---------- --------- ---------- ---------
Other income/(expense):
Gain/(loss) on sale of stock 0 3,182 16,380 16,609
Interest expense (15) (60) (289) (264)
Other income 16,563 29,163 44,929 94,447
---------- --------- ---------- ---------
Total other income 16,548 32,285 61,020 110,792
Other income/(loss) from
operations before income taxes (11,946) 129,029 35,806 322,183
Income tax
provision/(benefit) (2,990) 49,329 28,599 82,435
---------- --------- ---------- ---------
Net income/(loss) (8,956) 79,700 $7,207 $239,748
====== ====== ===== =======
Other comprehensive income
Unrealized holding gain/(loss) (9,881) (3,524) (74,078) (34,191)
Tax benefit of stock
option exercise 32,000 0 54,000 0
------------ --------- ---------- ---------
Comprehensive income (loss) 13,163 76,176 (12,871) 205,557
====== ====== ====== =======
Net earnings/(loss) per share $0.00 $0.02 $0.00 $0.06
Net earnings/(loss) per share
on a fully diluted basis $0.00 $0.02 $0.00 $0.06
===== ===== ===== =====
Weighted average number of
shares outstanding 4,093,232 4,026,237 4,072,036 4,015,600
========= ========= ========= =========
Page 4 of 12
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
STATEMENTS OF CASH FLOWS: INCREASE/(DECREASE) IN CASH
(Unaudited)
Nine Months Ended January 31,
2000 1999
Cash flows from operating activities:
Net income $ 7,207 $ 239,748
Adjustments to reconcile net income to
net cash provided by operating activities--
Depreciation and amortization 401,279 353,436
Deferred tax provision/(benefit) 4,300 14,900
Provision for doubtful accounts 10,445 3,138
(Gain)/Loss on sales of investments (16,380) (16,609)
(Gain)/Loss on disposal of assets (2,790) (9,600)
Stock compensation 1,000 ---
Changes in assets and liabilities-
Receivables (98,225) (38,585)
Inventories 217,718 (178,749)
Income taxes receivable and prepaid expenses (77,514) 48,644
Accounts payable and accrued liabilities 39,788 61,503
--------- ---------
Net cash provided/(used) by operating activities 486,828 477,826
--------- ---------
Cash flows from investing activities:
Capital expenditures, net (509,110) (720,034)
Expenditures for intangible assets (44,836) (4,000)
Proceeds from/(expenditures for) note receivable 1,800 (77,155)
Investment purchases (499,623) (716,028)
Proceeds from sale of investments 314,829 545,243
Proceeds from sale of fixed assets 1,545 9,600
--------- ---------
Net cash provided by/(used) in investing activities (735,395) (962,374)
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options 217,900 147,814
-------- --------
Net cash used in financing activities 217,900 147,814
-------- --------
Net increase/(decrease) in cash and cash
equivalents (30,667) (336,734)
Cash and cash equivalents at beginning of period 697,697 940,687
-------- -------
Cash and cash equivalents at end of period $ 667,030 $ 603,953
======== ========
Supplemental disclosure of cash
flow information:
Cash paid during period for--
Interest $ 289 $ 264
Income taxes 24,446 3,428
Supplemental disclosure for non cash items:
Stock Compensation $ 1,000 -
The accompanying notes are an integral part of these financial statements.
Part 5 of 12
<PAGE>
ENGINEERING MEASUREMENTS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 nine months ended January 31, 2000,
are not necessarily indicative of the results that may be expected for the
fiscal year ending April 30, 2000. 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, 1999.
1. Inventories
Inventories, stated at the lower of cost (first-in, first-out method) or
market, are as follows:
January 31, 2000 April 30, 1999
Raw materials and work-in-process $1,141,493 $1,263,617
Finished goods 307,800 403,394
---------- ----------
$1,449,293 $1,667,011
========== ==========
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 stockholders' equity, net of
related taxes. The impact of these unrealized gains and losses, net of
related taxes, is shown as a part of other comprehensive income on the
statements of income and comprehensive income.
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. Revenue Recognition
Revenue from manufactured products is recognized at the time of shipment to
the customer. Service revenue is recognized at the time of shipment of
goods or delivery of services to the customer. The sale price is fixed at
the time of shipment or delivery of the service and all risks transfer to
the customer at that point. Commissioned sales representatives do not
stock product. Returns, exchanges and restock charges are handled on a
case-by-case basis.
5. Earnings (Loss) Per Share
Earnings (loss) per share is computed by dividing net income by the
weighted average number of shares outstanding during the period. During the
nine months ended January 31, 2000, there were a total of 317,095 shares
outstanding under the Company's stock option plans. Any dilutive effect of
the outstanding options into common stock as of January 31, 2000, is reflected
in the financial statements.
Page 6 of 12
<PAGE>
For the Nine Months Ended January 31, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $ 7,207
Basic EPS
Net Income available to common stockholders $ 7,207 4,072,036 $0.00
Effect of Dilutive Securities Options 0 123,777
Diluted EPS
Income available to stockholders plus $ 7,207 4,195,813 $0.00
assumed conversions
There were no anti-dilutive securities at January 31, 2000.
6. Changes in Accounting Principles
There have been no changes in accounting principles during these reporting
periods.
7. Segment Information
EMCO's core business has been, and continues to be, in the manufacture of
flow measurement devices and systems segment, SIC Code No. 3823. In the
past, EMCO has reported all of its operations in this segment. Effective
with the filing of the Company's 10-QSB for the period ending October 31,
1999, EMCO adopted SFAS 131 related to reporting for segments of the
business. EMCO's contract electronics manufacturing (CEM) division,
operating under the trade name Advanced Technology Group (ATG), comes
within the definition of SIC Code No. 3672. ATG sales (all domestic) for
the three and nine month periods ending January 31, 2000, exceeded 10% of
the total Company's sales which triggered the requirement to report
information by segments.
The information reported below is similar to information used by the
management and directors of the company to assess the performance of the
operating segments and/or to allocate resources to those segments. This
information is based upon the Company's books, contains no inter-segment
revenues and utilizes estimated allocations of expenses and assets.
Segment profits (losses) are computed at the same level as income from
operations on the Statements of Income and Comprehensive Income. Segment
assets for ATG are for directly purchased long term equipment and do not
reflect any allocation of the building or other assets such as cash,
accounts receivable or inventory.
<TABLE>
FY 2000 FY 1999
Contract Contract
Flow Electronics Flow Electronics
Products Manufacturing Totals Products Manufacturing Totals
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended January 31:
Revenues 6,028,684 793,473 6,822,157 6,975,292 579,120 7,554,412
Depreciation & Amortization 293,805 107,474 401,279 273,605 79,831 353,436
Segment Profits(Losses) (107,055) 81,841 (25,214) 150,389 61,002 211,391
Segment Assets 7,168,301 495,322 7,663,623 7,076,893 526,102 7,602,995
Expenditures for Segment Assets 437,254 71,856 509,110 349,841 370,193 720,034
Three months ended January 31:
Revenues 1,914,927 227,340 2,142,267 2,368,500 237,177 2,605,677
Depreciation & Amortization 102,440 36,692 139,132 92,615 33,530 126,145
Segment Profits (Losses) (4,824) (23,670) (28,494) 69,627 27,117 96,744
Segment Assets 7,168,311 495,322 7,663,623 7,076,893 526,102 7,602,995
Expenditures for Segment Assets 169,163 16,020 185,183 12,243 6,277 18,520
</TABLE>
Page 7 of 12
<PAGE>
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 $1,000 during the
nine months ended January 31, 2000. The most significant items impacting
working capital in this period are decreases in inventory offset by
increases in accounts receivable, short term investments, deferred income
tax assets, income taxes receivable and accounts payable. The current
ratio was at 4.3 at January 31, 2000 and 4.4 April 30, 1999.
Cash and cash equivalents decreased approximately $31,000 at January 31,
2000, compared to April 30, 1999. Net investment purchases of approximately
$185,000 and capital and intangibles expenditures of approximately $554,000
were the principal consumers of cash during the period. Cash from
operations of approximately $487,000 and proceeds from stock option
exercises of approximately $218,000 were the primary sources of cash during
the first nine months of the fiscal year. The Company intends to continue
investing excess cash in investment securities until the cash is needed for
operations.
Accounts receivable increased by approximately $88,000 at January 31, 2000,
due to higher sales than the quarter ended April 30, 1999. The Days Sales
Outstanding (DSO) improved to 49.2 days for the nine months ended January
31, 2000, compared to 54.3 days for the year ended April 30, 1999.
Inventories decreased approximately $218,000 in the first nine months of
the fiscal year. The inventory turnover ratio for the nine months ended
January 31, decreased to 1.45 compared to 1.84 in fiscal 1999. Inventory
turns have decreased while inventory levels have also decreased, reflecting
the decrease in sales of flow products and the growth of the contract
electronics manufacturing business, which, to date, has not required the
Company to buy and hold inventory. Management will continue to review
inventory levels in order to optimize shipments.
The Company had a note receivable of $138,920 at April 30, 1999, with an
unaffiliated third party to provide financing for the development of a new
flowmeter technology. The Company exercised the option to purchase the
undivided one-half interest of the developed technology for the balance of
the receivable during May 1999. This undivided one-half interest of the
developed technology is reflected on the balance sheet within "Other
assets" and will be amortized over its expected life.
The Company currently has no loans outstanding. 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 has renewed
its $500,000 revolving line of credit with Norwest Bank Colorado through
September 2000. The Company currently has no outstanding loan balance on
the line of credit.
Page 8 of 12
<PAGE>
B. Results of Operations
Nine months ended January 31, 2000, compared
to the nine months ended January 31, 1999
Sales for the nine months ended January 31, 2000, were approximately
$732,000 less than the nine months ended January 31, 1999. The decline in
sales is attributable to reduced worldwide sales of flowmeters and digital
valve products of approximately $947,000 partially offset by increases in
sales of contract electronics manufacturing services of approximately
$214,000. The Company introduced and shipped its first Sono-TrakTM transit
time ultrasonic flowmeters in the third quarter. Order backlog for all
products at January 31, 2000, is approximately $1,124,000 compared to
$1,361,000 at January 31, 1999. The decrease in backlog is attributable to
the Company's emphasis on reducing lead times as well as reflecting the
reduced level of orders.
Gross profit is down approximately $416,000 from the same period a year ago
to 39.6% of sales from 41.3% of sales for the period ending January 31,
2000. Decreases in material cost as a percentage of revenue were more than
offset by increases in labor and overhead. Decreases in material costs as
a percent of sales of 2.7% from the same period in 1999 reflect the lower
sales of flow products and increases in sales of the contract electronics
manufacturing (ATG) operation. ATG operations to date have consisted almost
entirely of labor and capital. As a result of this change in product mix,
the Company has also seen increases in labor of 3.4% and overhead of 1.0%
from 1999 to 2000.
Operating expenses decreased approximately $179,000 from the same period a
year earlier. Reduced selling expenses of approximately $247,000, are the
result of lower commissions from reduced sales levels, reduced spending on
promotional activities and fewer personnel. General and administrative
expenses are lower by approximately $74,000, primarily due to personnel
reassigned to sales and marketing activities. These reductions are offset
by a $142,000 increase in engineering expenses, attributable to new product
development costs. The loss from operations is approximately $25,000 in
the nine months ended January 31, 2000, compared to a profit from
operations of approximately $211,000 for the nine months ended January 31,
1999, reflecting the decrease in gross profit.
Other income for the nine months ended January 31, 2000, was approximately
$61,000 compared to approximately $111,000 in the same nine month period a
year ago. Reduced interest income of approximately $34,000 as a result of
a shift in investment strategy and lower gains from asset disposals
($8,000) and miscellaneous income ($16,000) account for this change.
The income tax provision for the nine month period ending January 31, 2000,
was approximately $29,000 compared to approximately $82,000 for the same
period in 1999. The impact of deferred tax items and additional taxes for
the year ended April 30, 1999, resulted in a current tax rate of
approximately 79.9% for the nine months ended January 31, 2000. The impact
of deferred tax items and tax refunds resulted in a tax rate of
approximately 25.6% for the nine months ended January 31, 1999.
The Company adopted Statement of Financial Standards No. 130 (SFAS 130),
Reporting Comprehensive Income with its 10KSB dated April 30, 1999. Other
Comprehensive Income for the nine month period ended January 31, 2000,
consisted of approximately $74,000 of unrealized holding losses on
investment securities, net of the related tax effects, and $54,000 of tax
benefits associated with the exercise of stock options. This compares to
approximately $74,000 of unrealized holding losses on investment
securities, net of the related tax effects, in the nine months ended
January 31, 1999. There were no tax benefits associated with the exercise
of stock options in 1999, as the amounts were not material.
Net cash provided by operating activities was $486,828 for the nine months
ended January 31, 2000.
Three months ended January 31, 2000, compared
to the three months ended January 31, 1999
Sales were approximately $463,000 lower in the period ending January 31,
2000, compared to the period ending January 31, 1999, a 17.8% decrease, due
to lower demand in the world-wide flowmeter market. International sales
fell 46%, or approximately $402,000 from the same quarter last year. As a
result, international sales, which had accounted for 29% of total revenues
in the quarter ended January 31, 1999, fell to just 16% of revenues in the
same quarter this year. Aggressive pricing by European competitors and a
strong Dollar hindered international sales in the period. Large sales to
Page 9 of 12
<PAGE>
China and Taiwan and a niche market sale to Switzerland contributed over
$270,000 in sales for the quarter ended January 31, 1999, which were not
repeated in the current year.
Gross profit decreased by approximately $216,000 to 39.1% of sales in 2000
compared to 40.5% in 1999. Labor was 3.2% higher due to lower volume and a
more labor intensive product mix; material cost was down 1.6% and overhead
was down .2%, again due to product mix.
Operating expenses have decreased approximately $92,000 from last year.
Decreases in selling expenses of approximately $78,000 and general and
administrative costs of approximately $29,000 were partially offset by
increased research and development costs. Research and development
expenses increased approximately $15,000 over the same period in the prior
year.
Other income for the three months ended January 31, 2000, decreased
approximately $16,000 or 50% primarily due to lower interest income from
high grade investment securities, than in the period ending January 31,
1999. The Company had no interest expense attributable to debt in the
periods ending January 31, 2000, and 1999, respectively.
The income tax benefit for the three months ended January 31, 2000, was
approximately $3,000 compared to an income tax provision of approximately
$49,000 for the same period in 1999. The impact of deferred tax items
resulted in current tax rate of approximately 25.0% in 2000. The income
tax expense rate in the comparable period in 1999 was 38.2% due to the
impact of deferred tax items.
Other Comprehensive Income for the three month period ended January 31,
2000, consisted of approximately $10,000 of unrealized holding losses on
investment securities, net of the related tax effects, and $32,000 of tax
benefits associated with the exercise of stock options. This compares to
approximately $4,000 of unrealized holding losses on investment securities,
net of the related tax effects, in the three months ended January 31, 1999.
Tax benefits associated with the exercise of stock options in 1999 were not
material.
Year 2000 Compliance
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the
Year 1900 (this is commonly known as the `Year 2000 Problem' or `Y2K'
problem). The Company replaced its inventory and financial software in
fiscal year 1998 with a system which is Year 2000 compliant. The Company
has evaluated its other internal-use software and hardware for Year 2000
compliance, and has implemented a plan to replace all non-compliant items
either through upgrade or replacement. The planned completion date for
this task was December 15, 1999, and was completed on time. To date the
Company has not experienced any Y2K problems that were not anticipated and
has successfully dealt with the issues that have arisen.
The Company may be vulnerable to the failure of other companies to be Year
2000 compliant. The Company has been assessing whether third parties with
whom the Company has material relationships are Year 2000 compliant. The
Company is also evaluating its vendors and suppliers to determine if there
would be a material effect on the Company's business if they do not become
Year 2000 compliant. The same analysis is also being made for significant
customers.
The Company's products do not use time/date logic for internal sequencing
or calculation, and therefore the Company believes its products are Year
2000 compliant.
Although management does not expect Year 2000 issues to have a material
impact on its business or future results of operation, there can be no
assurance that there will not be interruptions of operations or other
system functionality limitations or that the Company will not incur
significant costs to avoid such interruptions or limitations.
Page 10 of 12
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None filed in the quarter ended January 31, 2000.
B. Reports on Form 8-K
Two filed in the quarter ended January 31, 2000.
1. A press release dated November 22, 1999, announcing a joint development
agreement with Micron Technology, Inc., of Boise, Idaho.
2. A press release dated January 17, 2000, announcing the appointment of Mr.
Trung Doan, Vice President of Process Development at Micron Technology,
Inc., to Engineering Measurements Company's Board of Directors.
Page 11 of 12
<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: March 15, 2000 By: /s/Charles E. Miller
Charles E. Miller, Chairman
(Principal Financial Officer
and Chief Accounting Officer)
Page 12 of 12
<PAGE>
Contact:
Charles E. Miller Philip Bourdillon/Eugene Heller
President and CEO Silverman Heller Associates
303-651-0550 310-208-2550
ENGINEERING MEASUREMENTS COMPANY REPORTS
THIRD-QUARTER RESULTS
LONGMONT, COLORADO - March 15, 2000 Engineering Measurments Company (Nasdaq:
EMCO) today reported results for the three months and nine months ended January
31, 2000. The Company's current fiscal year ends on April 30, 2000.
Net sales for the three months ended January 31, 2000 were $2.1 million versus
$2.6 million in the comparable prior-year period, a decrease of 18%. Net sales
for the nine months ended January 31, 2000 were $6.8 million versus $7.6 million
for the comparable prior-year period, a decrease of 10%.
Net loss for the three months ended January 31, 2000 was $8,956, or $0.00 per
diluted share, compared to net income of $79,700, or $0.02 per diluted share,
for the comparable prior-year period. For the nine months ended January 31,
2000 the Company reported net income of $7,207, or $0.00 per diluted share,
compared compared to net income of $239,748, or $0.06 per diluted share, in the
comparable prior-year period.
Charles E. Miller, president and CEO of Engineering Measurements Company (EMCO),
attributed the lower top-and bottom-line results in the third quarter to lower
international sales resulting from aggressive pricing by European competitors,
a strong dollar, and the fact that in the third quarter of fiscal 1999 the
Company benefited large sales to China and Taiwan, as well as a one-time sale
to Switzerland, that were not duplicated in the third quarter of fiscal 2000.
Mr. Miller noted that the decline in gross profit, to 39.1% in the third quarter
of fiscal 2000 from 40.5% a year ago, was primarily due to lower volumes.
"Although the overall market for flowmeters declined year-to-year," said Mr.
Miller, "we have seen some growth in demand for water metering, and we expect
that our moderately priced Hydrow-FlowTM line of vortex flowmeters wil prove to
be increasingly popular in a variety of commercial applications. We are also
encouraged by the initial response to our recently introduced Sono-TrakTM clamp-
on ultrasonic flowmeter, which we began shipping in January 2000; totally non-
intrusive and virtually maintenance free, it is suitable for a wide variety of
applications and promises to be a significant contributor to future revenues.
Our contract electronics manufacturing division continues to do well and is
expected to remain an important ingredient in the Company's ongoing program of
diversication.
"Our program of diversification," concluded Mr. Miller,"is being driven in large
part by the modest growth potential in worldwide demand for basic flowmeters.
The year-to-date increase in research and development expense of approximately
25% is, however, indicative of our ongoing commitment to utilizing EMCO's
considerable intellectual and financial resources in the pursuit of new markets
and new opportunities. With over $3 million in working capital and no debt,
EMCO is well-positioned to capitalize on its longstanding ability to employ
innovative approaches and technologies in meeting its customers' needs."
Engineering Measurements Comapny designs, manufactures, and markets electronic
and electro-mechanical precision instruments for measuring and controlling the
flow of liquids, steam, and gases.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: The matters discussed in this news release contain comments and forward-
looking statements based on current plans, expectations, events, and financial
and industry trends which may affect the Company's future operating results and
financial position. Such statements involve risks and uncertanties which cannot
be predicted or quantified and which may cause future activities and results of
operations to differ materially from those discussed above. The historical
results achieved are not necessarily indicative of future prospects of the
Company. For additional information, refer to the Company's filings with the
Securities and Exchange Commission.
(Statements of Income Follow)
ENGINEERING MEASUREMENTS COMPANY
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
January 31, January 31,
2000 1999 2000 1999
Sales $2,142,267 $2,605,677 $6,822,157 $7,554,412
Cost of sales 1,303,737 1,550,189 4,117,799 4,434,213
---------- --------- ---------- ---------
Gross margin on sales 838,530 1,055,488 2,704,358 3,120,199
---------- --------- ---------- ---------
Operating expenses:
Selling 449,174 527,116 1,409,407 1,656,009
General and administrative 205,002 234,007 647,498 721,340
Research and development 212,848 197,621 672,667 531,459
---------- --------- ---------- ---------
Total operating expenses 867,024 958,744 2,729,572 2,908,808
---------- --------- ---------- ---------
(28,494) 96,744 (25,214) 211,391
---------- --------- ---------- ---------
Other income/(expense):
Gain/(loss) on sale of stock 0 3,182 16,380 16,609
Interest expense (15) (60) (289) (264)
Other income 16,563 29,163 44,929 94,447
---------- --------- ---------- ---------
Total other income 16,548 32,285 61,020 110,792
Other income/(loss) from
operations before income taxes (11,946) 129,029 35,806 322,183
Income tax
provision/(benefit) (2,990) 49,329 28,599 82,435
---------- --------- ---------- ---------
Net income/(loss) (8,956) 79,700 $7,207 $239,748
======= ====== ====== =======
Other comprehensive income
Unrealized holding gain/(loss) (9,881) (3,524) (74,078) (34,191)
Tax benefit of stock
option exercise 32,000 0 54,000 0
------------ --------- ---------- ---------
Comprehensive income (loss) 13,163 76,176 (12,871) 205,557
====== ====== ======= =======
Net earnings/(loss) per share $0.00 $0.02 $0.00 $0.06
Net earnings/(loss) per share
on a fully diluted basis $0.00 $0.02 $0.00 $0.06
===== ===== ===== =====
Weighted average number of
shares outstanding 4,093,232 4,026,237 4,072,036 4,015,600
========= ========= ========= =========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted 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> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JAN-31-2000
<CASH> 667
<SECURITIES> 636
<RECEIVABLES> 1,271
<ALLOWANCES> 86
<INVENTORY> 1,449
<CURRENT-ASSETS> 4,349
<PP&E> 7,820
<DEPRECIATION> 4,800
<TOTAL-ASSETS> 7,664
<CURRENT-LIABILITIES> 1,011
<BONDS> 0
<COMMON> 43
0
0
<OTHER-SE> 6,390
<TOTAL-LIABILITY-AND-EQUITY> 7,664
<SALES> 6,822
<TOTAL-REVENUES> 6,822
<CGS> 4,118
<TOTAL-COSTS> 4,118
<OTHER-EXPENSES> 2,729
<LOSS-PROVISION> (25)
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<INCOME-PRETAX> 36
<INCOME-TAX> 29
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7
<EPS-BASIC> .00
<EPS-DILUTED> .00
