SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from.........to..........
Commission File Number 1-7037
ENVIRONMENT ONE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 14-1505298
- ------------------------------------ --------------------
(State or other jurisdiction of (IRS Employer
incorporation or other organization) Identification No.)
2773 Balltown Road, Schenectady, NY 12309-1090
----------------------------------------------
(Address of principal executive offices)
(518) 346-6161
---------------------------
(Issuer's telephone number)
___________________________________________________
(Former name, former address and former fiscal year
if changed since last report)
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 [ ]
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date:
Title of Class Outstanding at September 30, 1995
-------------- ---------------------------------
Common stock, par value $.10 per share 4,104,684
Transitional Small Business Disclosure Format (check one):
Yes [ ]; No: [ X ]
<PAGE>
Environment One Corporation
FORM 10-QSB
INDEX
Part I. Financial Information-
Item 1. - Financial Statements
Consolidated Balance Sheets September 30, 1995 and
December 31, 1994
Consolidated Statements of Operations for the Nine Months
Ended September 30, 1995 and 1994
Consolidated Statements of Operations for the Three Months
Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Signatures
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Environment One Corporation
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
9/30/95 12/31/94
----------- ---------
<S> <C> <C>
Assets
- ----------------------------------------------
Current Assets
Cash ............................... $ 80,867 223,701
Accounts Receivable, Net ........... 3,057,166 2,289,297
Inventories
Raw Materials ................... 1,395,615 1,178,598
Work in Process ................. 172,966 384,672
Finished Goods .................. 256,249 131,468
----------- ---------
1,824,830 1,694,738
Note Receivable .............................. 9,935 24,476
Other Current Assets ......................... 281,049 214,432
----------- ---------
Total Current Assets .................... 5,253,847 4,446,644
----------- ---------
Property, Plant and Equipment
Land .................................... 334,491 334,491
Buildings ............................... 2,105,740 2,105,740
Machinery and Equipment ................. 4,506,069 4,388,731
Construction in Progress ................ 112,927 12,439
Less: Accumulated Depreciation .......... (3,649,672) (3,199,672)
----------- ---------
Net Property, Plant and Equipment ....... 3,409,555 3,641,729
Note Receivable .............................. 131,523 116,982
Other Assets ................................. 175,421 174,013
----------- ---------
Total Assets ................................. $ 8,970,346 8,379,368
=========== =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
Environment One Corporation
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
(Continued)
<TABLE>
<CAPTION>
9/30/95 12/31/94
----------- ---------
<S> <C> <C>
Liabilities and Shareholders' Equity
- ----------------------------------------------
Current Liabilities
Current Installment - Long Term Debt .... $ 338,322 367,735
Notes Payable - Bank .................... 750,000 1,000,000
Accounts Payable ........................ 1,343,134 1,179,368
Accrued Expenses ........................ 499,035 225,618
Taxes Other than on Income .............. 1,731 40,483
Interest Payable ........................ 26,802 26,641
----------- ---------
Total Current Liabilities .......... 2,959,024 2,839,845
Minority Interest ............................ 64,017 35,816
Long Term Debt ............................... 1,769,155 2,022,925
----------- ---------
Total Liabilities ...................... 4,792,196 4,898,586
----------- ---------
Shareholders' Equity
Common Stock at Par Value ............... 411,401 411,401
Additional Paid in Capital .............. 7,284,575 7,268,461
Accumulated Deficit ..................... (3,499,860) (4,152,228)
----------- ---------
4,196,116 3,527,634
Less: Treasury Stock at Cost ............ (17,966) (46,852)
----------- ---------
Total Shareholders' Equity ............ 4,178,150 3,480,782
----------- ---------
Total Liabilities and Shareholders' Equity ... $ 8,970,346 8,379,368
=========== =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
Environment One Corporation
Consolidated Statements of Operations
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
------------ ---------
<S> <C> <C>
Revenue and Other Income ................... $ 12,963,253 9,116,483
------------ ---------
Costs and Expenses
Cost of Sales and Contracts ...... 8,641,059 6,872,783
Selling and Marketing ............ 1,489,451 1,338,208
General and Administrative ....... 1,525,427 1,327,841
Interest Expense ................. 257,673 195,701
Other Expense (Income) ........... (6,355) (213,132)
------------ ---------
Total Expenses, Net ........................ 11,907,255 9,521,401
------------ ---------
Net Earnings (Loss) Before Taxes ........... 1,055,998 (404,918)
Income Tax Expense (Benefit) ............... 403,633 (106,520)
------------ ---------
Net Earnings (Loss) ........................ $ 652,365 (298,398)
============ =========
Net Earnings (Loss) per Common Share ....... $ 0.16 (0.07)
============ =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
Environment One Corporation
Consolidated Statements of Operations
For the Three Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1994
---------- ---------
<S> <C> <C>
Revenue and Other Income ...................... $4,576,170 3,004,920
---------- ---------
Costs and Expenses
Cost of Sales and Contracts ......... 2,919,108 2,252,448
Selling and Marketing ............... 515,859 406,404
General and Administrative .......... 565,140 403,553
Interest Expense .................... 82,164 73,781
---------- ---------
Total Expenses, Net ........................... 4,082,271 3,136,186
---------- ---------
Net Earnings (Loss) Before Taxes .............. 493,899 (131,266)
Income Tax Expense (Benefit) .................. 187,400 (15,000)
---------- ---------
Net Earnings (Loss) ........................... $ 306,499 (116,266)
========== =========
Net Earnings (Loss) per Common Share .......... $ 0.07 (0.03)
========== =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
Environment One Corporation
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,1995 and 1994
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
--------- ---------
<S> <C> <C>
Cash Flows-Operating Activities:
Net Earnings (Loss) ................................ $ 652,365 (298,398)
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and Amortization ...................... 450,000 304,407
Non-cash Compensation Expense ...................... 45,000 0
Decrease (Increase) - Accounts Receivable, Net ..... (931,355) 278,285
Decrease (Increase) - Inventories .................. (130,092) 71,929
Decrease (Increase) - Uncompleted Contracts ........ 0 5,433
Decrease (Increase) - Income Tax Receivable ....... 178,027 (107,000)
Decrease (Increase) - Prepaid Expenses ............. (66,617) (41,224)
Decrease (Increase) - Other Assets ................. (15,946) 0
Increase (Decrease) - Accounts Payable ............. 163,766 (175,613)
Increase (Decrease) - Accrued Expenses and
other Liabilities .......... 234,826 3,900
Increase (Decrease) - Minority Interest ............ 28,201 (3,801)
--------- ---------
Net Cash Provided by Operating Activities .......... 608,175 37,918
--------- ---------
Cash Flows Used in Investing Activities:
Capital Expenditures ............................... (217,826) (724,299)
--------- ---------
Cash Flows From Financing Activities:
Increase (Decrease) - Notes Payable to Banks ....... (250,000) 225,000
Increase (Decrease) - Long Term Debt ............... (283,183) 402,098
Proceeds From Sale of Common Stock ................. 0 3,375
--------- ---------
Net Cash Provided (Used) by Financing Activities ... (533,183) 630,473
--------- ---------
Net (Decrease) in Cash ............................. (142,834) (55,908)
Cash at Beginning of Period ........................ 223,701 100,180
--------- ---------
Cash at End of Period .............................. $ 80,867 44,272
========= =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
<PAGE>
Environment One Corporation
Notes to Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, which are only of a
normal recurring nature, necessary to fairly present Environment One
Corporation's financial position as of September 30, 1995 and December 31, 1994
as well as the results of operations for the three and nine months ended
September 30, 1995 and 1994. Operating results for any quarter are not
necessarily indicative of results for any future periods.
2. Net earnings (loss) per share computations are based on the weighted
average number of shares of Common Stock outstanding during the periods.
(September 30, 1995; 4,096,743 shares, September 30, 1994; 4,081,429 shares).
3. In the second quarter of 1994 the Company entered into an asset
purchase agreement with General Testing Corporation, a Rochester, New York
laboratory that provides environmental testing services, for the purchase by
General Testing Corporation of certain assets owned by Environment One
Corporation used in its Measurement Services Laboratory business. The selling
price was $271,458 comprised of $130,000 paid in cash and Environment One
Corporation financing the remaining amount of $141,458 at 7.25% annual interest.
Interest payments only will be made for the first two years with monthly
principal and interest payments beginning 5/1/96 and ending 4/1/2001. A
non-compete agreement for a period of five years was initiated at the time of
the sale with consideration in the amount of $20,000 paid to Environment One
Corporation by General Testing Corporation. The pre-tax impact of the sale was a
gain of $213,132 and is recorded as other income at September 30, 1994.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following information should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 1 of this Quarterly
Report, and the financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Conmpany's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
Nine Months Ended September 30, 1995 and 1994
(all figures rounded to the nearest 000's)
Revenue for the period increased $3,847,000, or 42% over the same period last
year. Sewer Systems revenue increased $4,093,000 while Detection Systems revenue
decreased $168,000 when compared to the same period last year. In addition,
revenue not realized as a result of the sale of the Measurement Services
business in quarter two of 1994 was $75,000. As part of the Detection Systems
business revenue decrease, Incipient Fire Detector sales fell $223,000 while
sales of Generator Condition Monitors increased $55,000. The decrease in
Incipient Fire Detector sales is attributable to a large, international shipment
in the first half of 1994 which boosted sales for that period.
Management is of the opinion that the revenue increase in the Sewer Systems
business is attributable to three factors. The first factor is the roll out of
the new GP2000 Grinder Pump in October, 1994 resulting in $3.5 million in orders
shortly after the roll out. The second factor is the increased bidding activity
for the small municipal and community sewer projects. Lastly, a strong sales and
marketing team has provided the catalyst to winning key bids on large projects.
Cost of Sales increased $1,768,000 when compared to the same period last year.
Expressed in percent of sales, cost of sales declined from 75.4% in the first
nine months of 1994 to 66.7% in the nine months ended September 30, 1995.
Incremental cost of sales as a percent of incremental sales was 46%. The lower
incremental percent when compared to total percent is attributable to the
Company being past break-even sales levels whereby fixed indirect costs and
corporate allocations have been fully absorbed. As a result, gross margins
reflect a nine point gain over the same period last year. In percent of sales,
direct material costs remained flat while direct labor costs decreased compared
to the same period last year.
Selling and Marketing costs increased $151,000 compared to last year. Sewer
Systems marketing costs increased $272,000 while Detection Systems marketing
costs decreased $69,000 (excluding the effect of the sale of the Measurement
Services business). Planned expenditures in advertising, promotion and sales
literature resulting from the roll out of the GP2000, increased expenses for the
district offices (which included the opening of a new Florida district office)
and miscellaneous other expenses accounted for the increased Sewer Systems
non-labor marketing costs. Sewer Systems marketing labor costs increased over
the same period last year due to the addition of the Florida district manager
and internal sales commissions. The Detection Systems decrease resulted from
delayed advertising and sales literature expenditures, reduced travel and living
and internal sales commission expenditures.
The Company announced in the second quarter that it has received an agreement
from the General Electric Company for the purchase of Hydrogen Control Cabinets
to be manufactured by Environment One. Shipments will commence in the fourth
quarter of 1995. In preparation, Environment One will incur selling and
marketing along with research and development expenses in advance of revenue. In
the first nine months of 1995, the Company incurred $31,000 of selling and
marketing expenses related to this project. The Hydrogen Control Cabinet will be
included with the Detection Systems business.
General and Administrative costs, including research and development, increased
$198,000 over the same period last year. Research and development costs
decreased $34,000 while other general and administrative costs increased
$232,000.
Research and development labor costs decreased $19,000 while non-labor costs
decreased $15,000. Reductions in Sewer Systems research and development costs
were due to the expenses related to the development of the GP2000 Grinder Pump
expensed in 1994. Partially offsetting that reduction was an increase in
Detection Systems research and development costs due to the development of the
Hydrogen Control Cabinet. The research and development expenses related to the
Hydrogen Control Cabinet were $93,000 for the nine months ended September 30,
1995.
The primary reasons for the other general and administrative cost increase of
$232,000 were the expenses related to profit sharing and management bonuses of
$173,000, increases in consultant expenses of $9,000, increases in travel and
living of $7,000, additional expenses of $18,000 for Environment One Japan and
$45,000 related to the expense associated with the a stock grant of 15,000
shares to Stephen Ardia, the new chairman of Environment One. Offsetting these
increases was a reduction in salaries of $20,000 due to a decrease in staff.
Interest expense increased $62,000 over the first nine months of 1994. For the
first nine months of 1995, average monthly debt was $80,000 greater than the
same period in 1994. The increased debt level coupled with the increase in the
company's borrowing rate which fluctuates with prime rate changes resulted in
the increase in interest expense for the period.
Other income decreased $207,000 over last year as a result of the sale of the
Measurements Services business to General Testing Corporation in the second
quarter or 1994.
<PAGE>
Three Months Ended September 30, 1995 and 1994
(all figures rounded to the nearest 000's)
Revenue for the period increased $1,571,000, or 52% over the same period last
year. Sewer Systems revenue increased $1,486,000 while Detection Systems revenue
increased $99,000. As part of the Detection Systems revenue increase, Incipient
Fire Detector revenue and Generator Condition Monitor revenue increased $83,000
and $16,000 respectively.
Management is of the opinion that the revenue increase in the Sewer Systems
business is attributable to three factors. The first factor is the roll out of
the new GP2000 Grinder Pump in October, 1994 resulting in $3.5 million in orders
shortly after the roll out. The second factor is the increased bidding activity
for the small municipal and community sewer projects. Lastly, a strong sales and
marketing team has provided the catalyst to winning key bids on large projects.
Quotation and bidding activity are at the highest historical levels as
increasing numbers of communities consider installing low pressure central
sewers using Environment One Grinder Pumps.
Cost of sales increased $667,000 when compared to a year ago. In percentage
terms, cost of sales dropped from 74.9% of sales in quarter three of 1994 to
63.8% of sales in quarter three of 1995. Incremental cost of sales as a percent
of incremental sales was 42.4%. The lower incremental percent when compared to
total percent is attributable to the Company being past break-even sales levels
whereby fixed indirect costs and corporate allocations have been fully absorbed.
As a result, gross margins reflect an eleven point gain over the same period
last year. Direct material and direct labor expressed as a percent of sales were
flat over the two periods.
Selling and Marketing costs increased $109,000 when compared to last year. Sewer
Systems marketing costs increased $137,000 while Detection Systems marketing
costs decreased $28,000 versus the same period last year. Planned expenditures
in advertising, promotion and sales literature resulting from the roll out of
the GP2000, increased expenses for the district offices (which included the
opening of a new Florida district office) and increased consultant expenses
related to marketing projects accounted for the increased Sewer Systems
non-labor marketing costs. Sewer Systems marketing labor costs increased over
the same period last year due to the addition of the Florida district manager
and internal sales commissions. The Detection Systems decrease resulted from
delayed advertising and sales literature expenditures, reduced travel and living
and internal sales commission expenditures.
The Company announced in the second quarter that it has received an agreement
from the General Electric Company for the purchase of Hydrogen Control Cabinets
to be manufactured by Environment One. Shipments will commence in the fourth
quarter of 1995. In preparation, Environment One will incur selling and
marketing along with research and development expenses in advance of revenue.
During the third quarter of 1995, the Company incurred $22,000 of selling and
marketing expenses related to this project. The Hydrogen Control Cabinet will be
included with the Detection Systems business.
General and Administrative costs, including research and development, increased
$162,000 when compared to last year. Research and development increased $39,000
while other general and administrative costs increased $123,000.
Research and development labor costs decreased $2,000 while non-labor costs
increased $41,000. The main driver of the non-labor cost increase was due to
expenditures related to the new Hydrogen Control Cabinet. A decrease in research
and development labor costs in the Sewer Systems business was offset by
expenditures incurred in the development of the Hydrogen Control Cabinet. The
total research and development expenses related to the Hydrogen Control Cabinet
was $74,000 for the third quarter of 1995.
The primary reasons for the other general and administrative cost increase of
$123,000 were the expenses related to profit sharing and management bonuses of
$81,000, increases in travel and living expenses of $5,000 and additional
expenses of $23,000 for Environment One Japan. Other general and administrative
labor costs increased $12,000.
Interest expense increased $8,000 over the same period last year. This is
attributable to an increase in the Company's borrowing rate resulting from
increases in the prime lending rate during 1994.
Financial Position and Liquidity
(all figures rounded to the nearest 000's)
Cash needs for the first nine months of 1995 ended 9/30/95 were met by an
opening cash balance of $224,000 and cash provided from operations of $608,000.
As a result of the available cash, the Company was able to reduce the balance on
the operating line of credit by $250,000. Capital expenditures for the period
were $218,000 along with a net reduction in long term debt of $283,000. During
the same period last year, the Company had to borrow $225,000 from the line of
credit and increased net long term borrowing by $402,000 on the building and
equipment loan to support operations and capital expenditure needs.
Continued strong control over inventory, operating expenses and capital
expenditures along with forecasted cash receipts and line of credit availability
will enable the Company to meet its day-to-day working capital requirements in
the near term.
<PAGE>
Environment One Corporation
FORM 10-QSB
Part II - Other Information
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ENVIRONMENT ONE CORPORATION
Date: November 2, 1995 By: /s/ Stephen Ardia
-------------------------
Stephen Ardia
Chairman of the Board,
Director
Date: November 2, 1995 By: /s/ Angelo Dounoucos
-------------------------
Angelo Dounoucos
President, Director and
Chief Executive Officer
Date: November 2, 1995 By: /s/ Philip W. Welsh
-------------------------
Philip W. Welsh
Director of Finance
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 80,867
<SECURITIES> 0
<RECEIVABLES> 3,098,971
<ALLOWANCES> 31,870
<INVENTORY> 1,824,830
<CURRENT-ASSETS> 5,253,847
<PP&E> 7,059,227
<DEPRECIATION> 3,649,672
<TOTAL-ASSETS> 8,970,346
<CURRENT-LIABILITIES> 2,959,024
<BONDS> 1,769,155
<COMMON> 411,401
0
0
<OTHER-SE> 3,766,749
<TOTAL-LIABILITY-AND-EQUITY> 8,970,346
<SALES> 12,945,337
<TOTAL-REVENUES> 12,963,253
<CGS> 8,641,059
<TOTAL-COSTS> 8,641,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 257,673
<INCOME-PRETAX> 1,055,998
<INCOME-TAX> 403,633
<INCOME-CONTINUING> 652,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 652,365
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
