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 March 31, 1996
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
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(Address of principal executive offices)
(518) 346-6161
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(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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of Common Stock, par value $.10 as of March 31, 1996:
4,115,709.
Transitional Small Business Disclosure Format (check one):
Yes [ ]; No: [ X ]
<PAGE>
Environment One Corporation
FORM 10-QSB
INDEX
Page No.
Part I. Financial Information-
Item 1. - Financial Statements
Consolidated Balance Sheets March 31, 1996 and
December 31, 1995 3-4
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II. Other Information 10
Signatures 10
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<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
Assets 3/31/96 12/31/95
- - --------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Current Assets
Cash $134,758 91,115
Accounts Receivable, Net 3,340,827 2,715,795
Inventories
Raw Materials 1,362,502 1,202,527
Work in Process 249,849 387,165
Finished Goods 424,730 259,869
------------------ ------------------
2,037,081 1,849,561
Note Receivable 22,258 16,041
Other Current Assets 253,590 223,018
------------------ ------------------
Total Current Assets 5,788,514 4,895,530
------------------ ------------------
Property, Plant and Equipment
Land 334,491 334,491
Buildings 2,271,832 2,271,832
Machinery and Equipment 4,572,461 4,573,834
Construction in Progress 242,965 109,343
Less: Accumulated Depreciation (3,915,318) (3,752,410)
------------------ ------------------
Net Property, Plant and Equipment 3,506,431 3,537,090
Note Receivable 119,200 125,417
Other Assets 163,273 163,878
------------------ ------------------
Total Assets 9,577,418 8,721,915
================== ==================
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<PAGE>
<CAPTION>
Environment One Corporation
Consolidated Balance Sheets -- Continued
March 31, 1996 and December 31, 1995
Assets 3/31/96 12/31/95
- - --------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
- - ---------------------------------------------------
Current Liabilities
Current Installments - Long Term Debt 338,159 338,245
Notes Payable - Bank 900,000 550,000
Accounts Payable 1,528,572 1,144,408
Accrued Expenses 449,522 407,136
Taxes Other than on Income 1,615 5,067
Interest Payable 19,715 20,410
------------------ ------------------
Total Current Liabilities 3,237,583 2,465,266
Deferred Tax Liability 21,716 21,716
Minority Interest 42,132 48,530
Long Term Debt 1,754,069 1,838,594
------------------ ------------------
Total Liabilities 5,055,500 4,374,106
------------------ ------------------
Shareholders' Equity
Common Stock at Par Value 412,961 412,761
Additional Paid in Capital 7,296,790 7,295,115
Accumulated Deficit (3,142,008) (3,330,851)
------------------ ------------------
4,567,743 4,377,025
Less: Treasury Stock at Cost (45,825) (29,216)
------------------ ------------------
Total Shareholders' Equity 4,521,918 4,347,809
------------------ ------------------
Total Liabilities and Shareholders' Equity $9,577,418 8,721,915
================== ==================
(See Accompanying Notes to Consolidated Financial Statements)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and 1995
Three Months Ended March 31,
----------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
Revenue $3,945,236 3,775,068
------------------ ------------------
Costs and Expenses
Cost of Sales 2,866,375 2,717,327
Selling and Marketing 529,357 470,273
General and Administrative 362,202 383,493
Interest Expense 62,723 89,889
Other Expense (Income) (177,964) 0
------------------ ------------------
Total Expenses, Net 3,642,693 3,660,982
------------------ ------------------
Net Earnings Before Taxes 302,543 114,086
Income Tax Expense 113,700 46,241
------------------ ------------------
Net Earnings 188,843 67,845
================== ==================
Net Earnings per Common Share $0.05 0.02
================== ==================
(See Accompanying Notes to Consolidated Financial Statements)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Environment One Corporation
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,1996 and 1995
Three Months Ended March 31,
----------------------------------------
1996 1995
------------------- ------------------
<S> <C> <C>
Cash Flows-Operating Activities:
Net Earnings $188,843 67,845
Adjustments to Reconcile Net Earnings
to Net Cash Provided (Used) by Operating Activities:
Depreciation and Amortization 162,908 150,000
Decrease (Increase) - Accounts Receivable, Net (625,032) (3,578)
Decrease (Increase) - Inventories (187,520) (46,612)
Decrease (Increase) - Prepaid Expenses (30,572) (55,898)
Decrease (Increase) - Other Assets 605 2,492
Increase (Decrease) - Accounts Payable 384,164 (4,211)
Increase (Decrease) - Accrued Expenses and other Liabilities 38,239 21,149
Increase (Decrease) - Minority Interest (6,398) (9,226)
------------------- ------------------
Net Cash Provided (Used) by Operating Activities (74,763) 121,961
------------------- ------------------
Cash Flows Used in Investing Activities:
Capital Expenditures (132,249) (37,199)
------------------- ------------------
Cash Flows From Financing Activities:
Increase (Decrease) - Notes Payable to Banks 350,000 (150,000)
Increase (Decrease) - Long Term Debt (84,611) (99,137)
Issuance of Common Stock 1,875 0
Purchase of Treasury Stock (16,609) 0
------------------- ------------------
Net Cash Provided (Used) by Financing Activities 250,655 (249,137)
------------------- ------------------
Net Increase (Decrease) in Cash 43,643 (164,375)
Cash at Beginning of Period 91,115 223,701
------------------- ------------------
Cash at End of Period $134,758 59,326
=================== ==================
</TABLE>
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<PAGE>
Environment One Corporation
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1996 and 1995
(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 March 31, 1996 and December 31, 1995 as
well as the results of operations and cash flows for the three months ended
March 31, 1996 and 1995. Operating results for any quarter are not necessarily
indicative of results for any future periods.
2. Net earnings per share computations are based on the weighted
average number of shares of Common Stock outstanding during the periods. (March
31, 1996; 4,114,657 shares, March 31, 1995; 4,089,684 shares).
3. In January, 1996, the Company concluded an agreement with PROTEC
Fire Detection, plc of Nelson, Lancashire, England for the sale of its Cirrus
IFD product line. In a two-stage transaction with an approximate value of
$750,000, the Company transferred all Cirrus IFD assets and operations to PROTEC
and simultaneously entered into a product technology development contract to be
concluded during 1996. The pre-tax impact of the sale, net of certain expenses,
was a gain of $176,000 and is recorded as other income in the statement of
operations for the quarter ended March 31, 1996.
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<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 consolidated financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995.
Three Months Ended March 31, 1996 and 1995
------------------------------------------
(all figures rounded to the nearest 000's)
Revenue for the period increased $170,000, or 4.5% over the same period last
year. Sewer Systems revenue increased $132,000 while Detection Systems revenue
increased $45,000 when compared to the same period last year. As part of the
Detection Systems business revenue increase, Generator Condition Monitor sales
increased $203,000 while sales of Cirrus IFD decreased $158,000. The increase in
Generator Condition Monitor sales reflects some market resumption in capital
equipment purchases of monitoring equipment following a period of expenditures
on air pollution control equipment. The decrease in Cirrus IFD sales is
attributable to the sale of the business to PROTEC, although the Company will
continue to supply units to PROTEC until completion of the technology
development contract in 1996. The Company did not ship any Hydrogen Control
Cabinets in the first quarter due to customer delays in placing orders. The
first units of this product were shipped in quarter four of 1995 with shipments
anticipated to resume in quarter two of 1996.
In spite of extreme weather conditions and funding delays in municipal projects,
sales in Sewer Systems improved over the prior comparative period. Management is
of the opinion that the strategic direction planned in 1995 which included
expanded emphasis on marketing and distribution, the opening of sales offices
during 1995 in Florida, Maryland and Minnesota, emphasis on southern
distribution and the continued growth of the marketplace contributed to the
sales growth.
Cost of Sales increased $149,000 when compared to the same period last year.
Expressed in percent of sales, cost of sales increased slightly from 72.0% in
the first three months of 1995 to 72.6% in the three months ended March 31,
1996. In percent of sales, direct material and labor costs decreased less than
.5% each when compared to the same period in 1995. Indirect labor increased
$22,000 due to shifting engineering labor from research and development to
manufacturing support. Indirect non-labor costs increased $30,000 reflecting
higher variable indirect manufacturing costs as a result of increased production
over the same period in 1995.
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<PAGE>
Three Months Ended March 31, 1996 and 1995, continued
-----------------------------------------------------
(all figures rounded to the nearest 000's)
Selling and Marketing costs increased $59,000 compared to the first quarter of
1995. Sewer Systems marketing costs increased $112,000 while Detection Systems
marketing costs decreased $53,000. The increase in Sewer Systems marketing costs
reflects the opening of three additional sales offices and increased marketing
consultant expenses. The decrease in Detection Systems marketing costs is
attributable to the sale of the Cirrus IFD product line. Partially offsetting
the reduction due to the sale of the Cirrus IFD product line are marketing costs
for the Hydrogen Control Cabinet.
General and Administrative costs, including research and development, decreased
$21,000 over the same period last year. Research and development costs decreased
$18,000 while other general and administrative costs decreased $3,000.
The decrease in Research and Development costs are attributable to the shifting
of effort to manufacturing and marketing support in Sewer Systems and Detection
Systems along with cost reductions due to the sale of the Cirrus IFD product
line.
In regard to other general and administrative costs, increased salaries, legal
fees and costs incurred by the Company's subsidiary were offset by reduced
profit sharing, tuition reimbursement, outside storage fees and allocated
facilities charges.
Interest expense decreased $27,000 over the first three months of 1995. Average
debt during the first quarter of 1996 was $685,000 less than the same period in
1995. The reduced debt level along with a reduction in interest rates of
one-half percent account for the lower interest cost.
Other income increased $178,000 over last year as a result of the sale of the
Cirrus IFD product line to PROTEC in the first quarter of 1996.
Financial Position and Liquidity
--------------------------------
(all figures rounded to the nearest 000's)
Cash needs for the first three months of 1996 were met by an opening cash
balance of $91,000 and short term borrowing on the Company's line of credit of
$350,000. Capital expenditures for the period were $132,000 along with a
reduction in long term debt of $85,000. Borrowing on the line of credit was
primarily due to an increase in accounts receivable as shipments were stronger
in the second half of the quarter. During the same period last year, the Company
was able to reduce short term borrowing by $150,000 along with reducing long
term debt by $99,000.
Continued 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.
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<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: May 3, 1996 By: /s/Stephen V. Ardia
------------------------------
Stephen V. Ardia
Chairman of the Board,
Director
Date: May 3, 1996 By: /s/Angelo Dounoucos
------------------------------
Angelo Dounoucos
President, Director and
Chief Executive Officer
Date: May 3, 1996 By: /s/Philip W. Welsh
------------------------------
Philip W. Welsh
Director of Finance
Treasurer
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 134,758
<SECURITIES> 0
<RECEIVABLES> 3,392,443
<ALLOWANCES> 29,358
<INVENTORY> 2,037,081
<CURRENT-ASSETS> 5,788,514
<PP&E> 7,421,749
<DEPRECIATION> 3,915,318
<TOTAL-ASSETS> 9,577,418
<CURRENT-LIABILITIES> 3,237,583
<BONDS> 1,754,069
0
0
<COMMON> 412,961
<OTHER-SE> 4,108,957
<TOTAL-LIABILITY-AND-EQUITY> 9,577,418
<SALES> 3,945,236
<TOTAL-REVENUES> 3,945,236
<CGS> 2,866,375
<TOTAL-COSTS> 2,866,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,723
<INCOME-PRETAX> 302,543
<INCOME-TAX> 113,700
<INCOME-CONTINUING> 188,843
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,843
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
