Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number 0-11740
MESA LABORATORIES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
COLORADO 84-0872291
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12100 WEST SIXTH AVENUE, LAKEWOOD, COLORADO 80228
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (303) 987-8000
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 and (2) has been
subject to the filing requirements for the past 90 days. Yes X No ___.
State the number of shares outstanding of each of the Issuer's classes of common
stock, as of the latest practicable date:
There were 4,082,793 shares of the Issuer's common stock, no par value,
outstanding as of September 30, 1998.
Page 1 of 9
ITEM 1. FINANCIAL STATEMENTS FORM 10-QSB
MESA LABORATORIES, INC.
BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents ...... $ 3,454,970 $ 3,358,968
Marketable Securities .......... 2,049,274 2,048,199
Accounts Receivable, Net ....... 1,802,150 1,754,782
Inventories .................... 1,802,661 1,895,273
Prepaid Expenses ............... 31,811 76,152
Deferred Income Taxes .......... 85,000 85,000
----------- -----------
TOTAL CURRENT ASSETS .............. 9,225,866 9,218,374
PROPERTY, PLANT & EQUIPMENT, NET . 1,633,816 1,677,023
OTHER ASSETS
Intangible Assets, Net ......... 819,118 884,695
----------- -----------
TOTAL ASSETS ................ $11,678,800 $11,780,092
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............... $ 111,019 $ 65,015
Accrued Salaries & Payroll Taxes 193,428 306,547
Other Accrued Expenses ......... 134,322 136,059
Taxes Payable .................. 44,727 36,600
----------- -----------
TOTAL CURRENT LIABILITIES ... 483,496 544,221
LONG TERM LIABILITIES
Deferred Income Taxes Payable .. 75,000 75,000
STOCKHOLDERS' EQUITY
Preferred Stock, No Par Value .. -- --
Common Stock, No Par Value;
authorized 8,000,000 shares;
issued and outstanding,
4,082,793 shares (9/30/98)
and 4,284,587 shares (3/31/98) 2,989,595 3,352,009
Retained Earnings .............. 8,130,709 7,808,862
---------- ----------
TOTAL STOCKHOLDERS' EQUITY .. 11,120,304 11,160,871
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ............. $11,678,800 $11,780,092
=========== ===========
Page 2 of 9
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FORM 10-QSB
MESA LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
Sept. 30, 1998 Sept. 30, 1997
-------------- --------------
Sales ..................................... $ 2,038,722 $ 2,158,985
Cost of Goods Sold ........................ 726,422 780,546
Selling, General & Administrative ......... 515,613 525,338
Research and Development .................. 49,315 79,215
Other (Income) and Expenses ............... (74,630) (54,967)
----------- -----------
1,216,720 1,330,132
Earnings Before Income Taxes .............. 822,002 828,853
Income Taxes .............................. 288,000 297,975
----------- -----------
Net Income ................................ $ 534,002 $ 530,878
=========== ===========
Net Income Per Share (Basic) .............. $ .13 $ .12
=========== ===========
Net Income Per Share (Diluted) ............ $ .13 $ .12
=========== ===========
Average Common Shares Outstanding
(Basic) .................................. 4,158,000 4,308,000
=========== ===========
Average Common Shares Outstanding
(Diluted) ................................ 4,214,000 4,446,000
=========== ===========
Page 3 of 9
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FORM 10-QSB
MESA LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Six Months
Ended Ended
Sept. 30, 1998 Sept. 30, 1997
-------------- --------------
Sales ..................................... $ 3,822,617 $ 4,005,044
Cost of Goods Sold ........................ 1,303,586 1,414,410
Selling, General & Administrative ......... 1,049,661 1,039,415
Research and Development .................. 106,166 140,993
Other (Income) and Expenses ............... (150,698) (100,511)
----------- -----------
2,308,715 2,494,307
Earnings Before Income Taxes .............. 1,513,902 1,510,737
Income Taxes .............................. 530,000 545,476
----------- -----------
Net Income ................................ $ 983,902 $ 965,261
=========== ===========
Net Income Per Share (Basic) .............. $ .23 $ .22
=========== ===========
Net Income Per Share (Diluted) ............ $ .23 $ .22
=========== ===========
Average Common Shares Outstanding (Basic) . 4,216,000 4,308,000
=========== ===========
Average Common Shares Outstanding (Diluted) 4,278,000 4,444,000
=========== ===========
Page 4 of 9
ITEM 1. FINANCIAL STATEMENTS (CONTINUED) FORM 10-QSB
MESA LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
Increase (Decrease) in Cash and Cash Ended Ended
Equivalents Sept. 30, 1998 Sept. 30,1997
-------------- -------------
Cash Flows From Operating Activities:
Net Income .................................. $ 983,902 $ 965,261
Depreciation and Amortization ............... 119,469 136,517
Change in Assets and Liabilities-
(Increase) Decrease in Accounts Receivable (47,368) 4,552
(Increase) Decrease in Inventories ....... 92,612 120,851
(Increase) Decrease in Prepaid Expenses .. 44,341 24,005
Increase (Decrease) in Accounts Payable .. 46,004 68,713
Increase (Decrease) in Accrued Liabilities (106,729) (88,967)
----------- -----------
Net Cash (Used) Provided by Operating
Activities .................................. 1,132,231 1,230,932
Cash Flows From Investing Activities:
(Increase) Decrease in Marketable Securities (1,075) --
Capital Expenditures, Net of Retirements .... (10,685) (134,044)
----------- ----------
Net Cash (Used) Provided by Investing Activity (11,760) (134,044)
Cash Flows From Financing Activities:
Treasury Stock Purchases .................... (1,044,250) (58,700)
Proceeds From Stock Options Exercised ....... 19,781 14,076
----------- ----------
Net Cash (Used) Provided by Financing
Activities .................................. (1,024,469) (44,624)
Net Increase (Decrease) In Cash and
Equivalents ................................. 96,002 1,052,264
Cash and Cash Equivalents at Beginning
of Period .................................... 3,358,968 3,867,549
----------- -----------
Cash and Cash Equivalents at End of Period ... $ 3,454,970 $ 4,919,813
=========== ===========
Page 5 of 9
ITEM 1. FINANCIAL STATEMENTS (CONTINUED) FORM 10-QSB
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
NOTE A. SUMMARY OF ACCOUNTING POLICIES
The summary of the Issuer's significant accounting policies are incorporated by
reference to the Company's annual report on Form 10KSB, at March 31, 1998.
The accompanying unaudited condensed financial statements reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of operations, financial position and cash flows.
The results of the interim period are not necessarily indicative of the results
for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1998, the Company had cash and short term investments of
$5,504,244. In addition, the Company had other current assets totaling
$3,721,622 and total current assets of $9,225,866. Current liabilities of Mesa
Laboratories, Inc. Were $483,496 which resulted in a current ratio of 19.1:1.
The Company has made net capital asset purchases of $10,685 for the fiscal
year-to-date.
The Company had announced its intention to repurchase up to 10% of its
outstanding common stock which was completed in July, 1998. On July 24, 1998 the
Board of Directors met and approved the repurchase of 400,000 additional shares
of outstanding common stock. Under the plan, the shares may be purchased from
time to time in the open market at prevailing prices or in negotiated
transactions off the market. Shares purchased will be used for general corporate
purposes and repurchases will be made with existing cash reserves.
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. Based on preliminary information, costs of
addressing potential problems are not currently expected to have a materially
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. However, if the Company, its customers or vendors
are unable to resolve such processing issues in a timely manner, it could result
in a material financial risk. Accordingly, the Company plans to devote the
necessary resources to resolve all significant year 2000 issues in a timely
manner.
Except for the historical information contained herein, the discussion in this
Report contains or may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially form those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this Management's Discussion
and Analysis, and the Company's Report on form 10-KSB for the year ended March
31, 1998, as well as those factors discussed elsewhere herein.
Page 6 of 9
FORM 10-QSB
RESULTS OF OPERATIONS
REVENUE Net sales for the six months ended September 30, 1998 decreased $182,427
or 5% to $3,822,617 from the $4,005,044 net sales level achieved for the same
six month period last year. Net sales for the quarter decreased $120,263 or 6%
to $2,038,722 from the $2,158,985 net sales level achieved in the same quarter
last year. During the first six months of the fiscal year, Medical product sales
continued their trend of strong improvement, increasing over 15% compared to the
previous year. Initial shipments of the Company's Reuse Data Management (RDM)
System late in the second fiscal quarter, and the continued strong sales of the
Echo Dialyzer Reprocessing System contributed to the overall increase in the
Medical division. This improvement was off-set by a decrease of 22% in Nusonics
Product sales which may be attributed to a shift in the Company's focus of sales
efforts toward Concentration Analyzer products. Datatrace product sales were
little changed compared to the prior year.
COST OF GOODS SOLD Cost of goods sold for the first six months as a percent of
net sales was 34% which represents a 1% decrease from the 35% level for the same
six month period last year. Cost of goods sold for the current quarter as a
percent of net sales was 36% and unchanged from the 36% level in the same
quarter last year. During the first six months of the fiscal year, the decrease
in product costs as a percent of sales can be attributed to the changes in the
sales mix in the Nusonics line. Strong sales in the Concentration Analyzers and
declining sales in the Flow Meter line combined to produce an overall decrease
to cost of goods sold as a percent of sales.
SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses
for the first six months increased 1% or $10,246 to $1,049,661 from $1,039,415
in the same period last year. For the current quarter, selling, general and
administrative expenses totaled $515,613 which was down 2% or $9,725 from
$525,338 expended in the same quarter one year ago. Administrative costs
accounted for an overall 3% increase. Several areas in administration received
attention for the first six months such as in the consulting and design of a
world wide web site, and upgrade and addition of computer and phone lines.
Marketing expenses increased 17% in the Medical division due to marketing of the
new RDM product line and the accompanying travel and presentations at trade
shows. The increase in the Medical division was offset by a decrease of 11% in
the Nusonics division. In comparing last year, the decrease can be attributed to
decreases in Nusonics payroll expenses due to the division's reorganization. For
the first six months of the year, the Datatrace division showed little increase
in marketing expenses compared to the same period last year.
Page 7 of 9
RESEARCH AND DEVELOPMENT Research and development for the first six months
decreased to $106,166 from $140,993 which represents a 25% decrease over the
same period last year. Research and development for the quarter was $49,315
which represents a decrease of $29,900 or 38% from the $79,215 level expensed in
the same quarter last year. For the first six months of the fiscal year,
research and development costs decreased due to Datatrace's completion and
release of its Windows software project resulting in less consulting expenses.
Legal fees and associated payroll expenses also declined compared to the same
period last year.
NET INCOME Net income for the six months ended September 30, 1998 increased 2%
to $983,902 or $.23 per share from $965,261 or $.22 per share last year. Net
income for the quarter was $534,002 or $.13 per share compared to net income of
$530,878 or $.12 per share in the same quarter last year. Improved cost of goods
sold, due to the shift in sales mix of the Nusonics Concentration Analyzer and
Flow Meter lines, coupled with an increase in other income contributed to the
overall increase in net income for both the quarter and year-to-date.
PART II-OTHER INFORMATION
None.
Page 8 of 9
FORM 10-QSB
MESA LABORATORIES, INC.
SEPTEMBER 30, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MESA LABORATORIES, INC.
(Issuer)
DATED: 11/12/98 BY: /s/ Luke R. Schmieder
Luke R. Schmieder
President, Chief Executive Officer,
Treasurer and Director
DATED: 11/12/98 BY: /s/ Steven W. Peterson
Steven W. Peterson
Vice President-Finance, Chief
Financial and Accounting Officer and
Secretary
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 3,454,970 4,919,813
<SECURITIES> 2,049,274 0
<RECEIVABLES> 1,850,166 1,704,162
<ALLOWANCES> 48,016 50,623
<INVENTORY> 1,802,661 1,842,721
<CURRENT-ASSETS> 9,225,866 8,517,177
<PP&E> 2,744,793 2,674,172
<DEPRECIATION> 1,110,977 1,006,350
<TOTAL-ASSETS> 11,678,800 11,106,813
<CURRENT-LIABILITIES> 483,496 555,219
<BONDS> 0 0
0 0
0 0
<COMMON> 2,989,595 3,419,572
<OTHER-SE> 8,130,709 7,069,222
<TOTAL-LIABILITY-AND-EQUITY> 11,678,800 11,106,813
<SALES> 3,822,617 4,005,044
<TOTAL-REVENUES> 3,822,617 4,005,044
<CGS> 1,303,586 1,414,410
<TOTAL-COSTS> 1,155,827 1,180,408
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,513,902 1,510,737
<INCOME-TAX> 530,000 545,476
<INCOME-CONTINUING> 983,902 965,261
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 983,902 965,261
<EPS-PRIMARY> .23 .22
<EPS-DILUTED> .23 .22
</TABLE>
