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, 1999
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 3,740,776 shares of the Issuer's common stock, no par
value, outstanding as of September 30, 1999.
<TABLE>
MESA LABORATORIES, INC.
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS SEPTEMBER 30, 1999 MARCH 31, 1999
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 6,212,882 $ 6,675,417
Accounts Receivable, Net 1,701,000 1,744,066
Inventories 1,617,652 1,741,815
Prepaid Expenses 4,983 33,879
Deferred Income Taxes 91,000 91,000
TOTAL CURRENT ASSETS 9,627,517 10,286,177
PROPERTY, PLANT & EQUIPMENT, NET 1,560,590 1,600,304
OTHER ASSETS
Intangible Assets, Net 687,837 752,670
TOTAL ASSETS $11,875,944 $12,639,151
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 116,597 $ 89,400
Accrued Salaries & Payroll Taxes 238,834 300,976
Other Accrued Expenses 140,273 265,151
TOTAL CURRENT LIABILITIES 495,704 655,527
LONG TERM LIABILITIES
Deferred Income Taxes Payable 78,000 78,000
STOCKHOLDERS' EQUITY
Preferred Stock, No Par Value - -
Common Stock, No Par Value;
authorized 8,000,000 shares;
issued and outstanding,
3,740,776 shares (9/30/99)
and 4,035,183 shares (3/31/99) 2,384,768 2,894,900
Retained Earnings 8,917,472 9,010,724
TOTAL STOCKHOLDERS' EQUITY 11,302,240 11,905,624
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,875,944 $12,639,151
</TABLE>
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1998
<S> <C> <C>
Sales $1,803,475 $2,038,722
Cost of Goods Sold 684,306 726,422
Selling, General & Administrative 503,212 515,613
Research and Development 59,885 49,315
Other (Income) and Expenses (67,853) (74,630)
1,179,550 1,216,720
Earnings Before Income Taxes 623,925 822,002
Income Taxes 219,000 288,000
Net Income $ 404,925 $ 534,002
Net Income Per Share (Basic) $ .11 $ .13
Net Income Per Share (Diluted) $ .11 $ .13
Average Common Shares Outstanding
(Basic) 3,819,000 4,158,000
Average Common Shares Outstanding
(Diluted) 3,849,000 4,214,000
</TABLE>
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Six Months Six Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1998
<S> <C> <C>
Sales $3,669,082 $3,822,617
Cost of Goods Sold 1,316,092 1,303,586
Selling, General & Administrative 1,031,689 1,049,661
Research and Development 130,902 106,166
Other (Income) and Expenses (132,761) (150,698)
2,345,922 2,308,715
Earnings Before Income Taxes 1,323,160 1,513,902
Income Taxes 463,000 530,000
Net Income $ 860,160 $ 983,902
Net Income Per Share (Basic) $ .22 $ .23
Net Income Per Share (Diluted) $ .22 $ .23
Average Common Shares Outstanding
(Basic) 3,881,000 4,216,000
Average Common Shares Outstanding
(Diluted) 3,911,000 4,278,000
</TABLE>
<TABLE>
MESA LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Six Months
Increase (Decrease) in Cash and Cash Ended Ended
Equivalents Sept. 30, 1999 Sept. 30, 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 860,160 $ 983,902
Depreciation and Amortization 106,586 119,469
Change in Assets and Liabilities-
(Increase) Decrease in Accounts
Receivable 43,066 (47,368)
(Increase) Decrease in Inventories 124,163 92,612
(Increase) Decrease in Prepaid Expenses 28,896 44,341
Increase (Decrease) in Accounts Payable 27,197 46,004
Increase (Decrease) in Accrued
Liabilities (187,020) (106,729)
Net Cash (Used) Provided by Operating
Activities 1,003,048 1,132,231
Cash Flows From Investing Activities:
(Increase) Decrease in Marketable Securities - (1,075)
Capital Expenditures, Net of Retirements (2,039) (10,685)
Net Cash (Used) Provided by Investing
Activities (2,039) (11,760)
Cash Flows From Financing Activities:
Treasury Stock Purchases (1,486,503) (1,044,250)
Proceeds From Stock Options Exercised 22,959 19,781
Net Cash (Used) Provided by Financing
Activities (1,463,544) (1,024,469)
Net Increase (Decrease) In Cash and
Equivalents (462,535) 96,002
Cash and Cash Equivalents at Beginning
of Period 6,675,417 3,358,968
Cash and Cash Equivalents at End of
Period $6,212,882 $3,454,970
</TABLE>
MESA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE A. SUMMARY OF ACCOUNTING POLICIES
The summary of the Issuer's significant accounting policies is
incorporated by reference to the Company's annual report on Form
10KSB, at March 31, 1999.
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, 1999, the Company had cash and short term
investments of $6,212,882. In addition, the Company had other current
assets totaling $3,414,635 and total current assets of $9,627,517.
Current liabilities of Mesa Laboratories, Inc. Were $495,704 which
resulted in a current ratio of 19.4:1.
The Company has made net capital asset purchases of $2,039 for
the fiscal year-to-date.
During the first half of the fiscal year, the Company repurchased
304,585 shares of its outstanding common stock. In August 1999, the
Board of Directors approved the repurchase of 500,000 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. Repurchases will be made with
existing cash flows until such time as this capital is required for
internal development programs or for acquisition of product lines or
businesses, which the company continues to pursue.
The year 2000 issue is the result of computer programs being
written using two digits rather than four digits to define the
applicable year. Some computer programs that have time-sensitive
software may recognize a date using 00 as the year 1900 rather than
the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including a
temporary inability to process transactions, send invoices, or engage
in normal business and operating activities.
Most of the Company's systems are Year 2000 compliant. The
Company has a program in place to assess the remaining software and
systems and bring them into Year 2000 compliance in time to minimize
any significant detrimental effects on operations. The program
focuses on four main functional areas:
(i) Information technology which addresses data, phone and
administrative systems, including personal computers,
telecommunications, local area networks, and business
applications. These systems are computer devices and
software that the Company wrote or purchased. The software
systems include applications developed or purchased by
corporate departments and operated by departmental
personnel. The computer devices are desktop personal
computers and server computer equipment including system
hardware, firmware, and installed commercial application
software.
(ii) Embedded chip technology that addresses manufacturing
systems, laboratory instruments and plant maintenance
systems with programmable logic controllers with date
functions. The Process Control Systems are used in the
Company's manufacturing and research and development
processes, among other operations. These generally are
systems, devices and instruments which utilize date
functionality and generate, send, receive or manipulate
date-stamped data and signals. These systems may be found
in data acquisition/processing software, laboratory
instrumentation, and other equipment with embedded code.
(iii) Material suppliers and marketing partners that address third
parties that are critical to the Company's manufacturing
process and distribution of product. The Company has
identified critical providers of information, goods and
services in order to assess their Year 2000
compliance/readiness. The Company recognizes that to a
certain degree it is relying on information provided by such
third parties regarding their Year 2000 compliance
readiness. While the Company is attempting to evaluate
information provided by these third parties, there can be no
assurance that in all instances accurate information is
being provided. Failure of these third parties' systems to
be Year 2000 compliant could have a material adverse effect
on the Company's financial position, results of operations
and cash flows.
(iv) Products manufactured by the Company utilize microprocessors
that utilize date functions. Additionally, the Company has
developed software packages that are sold and utilized with
the Company's electronic hardware. These systems have been
tested extensively, and currently, the Company believes all
of its products are Year 2000 compliant.
The Company is using both internal and external resources to
identify, correct/reprogram, and test its computer systems, equipment
and software for Year 2000 compliance.
The Company estimates that the costs associated with the Year
2000 issue will not be material, and as such will not have a
significant impact on the Company's financial position or operating
results. However, the failure to correct a material Year 2000 problem
could result in an interruption in certain normal business activities
or operations. Such failures could materially and adversely affect
the Company's results of operations, liquidity and financial
condition. The aggregate additional costs of the Company's Year 2000
program cannot be known at this time. However, given the current
status of the validation phase the additional costs are expected to be
less than $25,000. The actual additional costs will depend on
numerous factors, including without limitation, the costs of
replacing, upgrading or repairing systems, software and equipment, and
consulting fees and expenses. All costs are expected to be funded
through operations.
The Company is also developing a contingency plan to address a
situation in which Year 2000 problems do cause an interruption in
normal business activities. Once developed, contingency plans and
related cost estimates will be continually refined, as additional
information becomes available.
There can be no assurance that the Company will be able to
complete all of the modifications in the required time frame, that
unanticipated events will not occur or that the Company will be able
to identify all Year 2000 issues before problems arise. Therefore,
there can be no assurance that the Year 2000 issue will not have a
material adverse effect on the Company's financial position, results
of operations and cash flows.
RESULTS OF OPERATIONS
REVENUE
Net sales for the six months ended September 30, 1999 decreased
$153,535 or 4% to $ 3,669,082 from the $3,822,617 net sales level
achieved for the same six month period last year. Net sales for the
quarter decreased $235,247 or 12% to $1,803,475 from the $2,038,722
net sales level achieved in the same quarter last year. During the
first six months of the fiscal year, the Datatrace product sales
increased more than 13%. Sales of the newer humidity and pressure
sensors showed increases of over twenty and forty percent,
respectively. A marked rise in Datatrace export sales for the second
fiscal quarter contributed to the increase. Medical product sales
decreased about 4% for the first six months of the fiscal year. Sales
of the Reuse Data Management Systems and ECHO Reprocessors have
increased 18%, while Western Meter sales have softened to offset this
increase. Nusonics Product sales have continued their downward sales
trend of the last two years. Demand for Flow Meters has been steady
this year, but demand for Concentration Analyzers has been down. The
disruptions in the Concentration Analyzer product demand are expected
to be temporary, and our position in this market should be further
improved by introduction of a new product later this year.
COST OF GOODS SOLD
Cost of goods sold for the first six months as a percent of net
sales was 36% which represents a 2% increase from the 34% level for
the same six-month period last year. Cost of goods sold for the
current quarter as a percent of net sales was 38%, representing a 2%
increase compared to the 36% level in the same quarter last year.
Most of the increase realized in the quarter and year-to-date was
attributable to an increase in reserve levels for obsolete inventory.
The Company expects to continue to have to adjust its reserves through
the fiscal year due to introduction of a new generation of Nusonics
Ultrasonic products and continued weakness in Flow Meter sales.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the first six
months decreased 2% or $17,972 to $1,031,689 from $1,049,661 in the
same period last year. For the current quarter, selling, general and
administrative expenses totaled $503,212, which was down 2% or $12,401
from $515,613 expended in the same quarter one year ago. Marketing
expenses changed less than 1% for the three and six month periods.
For the year-to-date, Medical marketing expenses gained 23% from the
prior year while Datatrace gained 11%. These cost increases are
attributed mostly to increased commission expenses. Nusonics
marketing expenses offset these increases with a 35% decrease overall
due to the elimination of consulting fees incurred to study marketing
alternatives in the Flow Meter market and a decrease in commissions.
Administrative costs accounted for an overall 3% decrease for the
first six months of the year due to decreases in consulting and
payroll expenses.
RESEARCH AND DEVELOPMENT
Research and development for the first six months increased to
$130,902 from $106,166 which represents a 23% increase over the same
period last year. Research and development for the quarter was
$59,885 which represents an increase of $10,570 or 21% from the
$49,315 level expensed in the same quarter last year. For the first
six months of the fiscal year, research and development costs
increased due to Datatrace and Medical software projects and continued
activity on the Company's new Nusonics Concentration Analyzer, which
is expected to be released later in this fiscal year.
NET INCOME
Net income for the six months ended September 30, 1999 decreased
13% to $860,160 or $.22 per share from $983,902 or $.23 per share last
year. Net income for the quarter was $404,925 or $.11 per share
compared to net income of $534,002 or $.13 per share in the same
quarter last year. Increases in cost of goods sold coupled with
decreased sales contributed to the overall decrease in net income for
both the quarter and year-to-date.
PART II-OTHER INFORMATION
The Annual Meeting of Shareholders of Mesa Laboratories, Inc. was
held on October 21, 1999. Of the 3,790,476 Shares entitled to vote,
3,454,488 were represented either in person or by proxy. Five
directors were elected to serve until the next Annual Meeting of
Shareholders.
The five directors elected were:
Michael T. Brooks
H. Stuart Campbell
Paul D. Duke
Philip D. Quedenfeld
Luke R. Schmieder
On August 5, 1999, the Board of Directors adopted, subject to
shareholder approval, the 1999 Stock Compensation Plan (the "1999
Plan). The purpose of the 1999 Plan is to encourage ownership of the
Common Stock of the Company by certain officers, directors, employees,
and advisors of the Company or any subsidiary of the Company in order
to provide additional incentive for such persons to promote the
success and the business of the Company or its subsidiaries and to
encourage them to remain in the employ of the Company or its
subsidiaries by providing such persons an opportunity to benefit from
any appreciation of the Common Stock of the Company through the
issuance of stock options to such persons in accordance with the terms
of the 1999 Plan. The 1999 Plan provides that incentive stock options
be granted to certain officers, directors, employees and advisors of
the Company or its subsidiaries, if any, as selected by the
Compensation Committee. A total of 300,000 shares of Common Stock are
authorized and reserved for issuance under the 1999 Plan, subject to
adjustment to reflect changes in the Company's capitalization in the
case of a stock split, stock dividend or similar event. The 1999
Stock Compensation Plan Proposal was voted on and approved by the
shareholders.
MESA LABORATORIES, INC.
SEPTEMBER 30, 1999
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: 11/4/99 BY: /s/ Luke R. Schmieder
. Luke R. Schmieder
President, Chief Executive
Officer,
Treasurer and Director
DATED: 11/4/99 BY: /s/ Steven W. Peterson
. Steven W. Peterson
Vice President-Finance, Chief
Financial and Accounting
Officer and Secretary
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 6-MOS 6-MOS
[FISCAL-YEAR-END] MAR-31-2000 MAR-31-1999
[PERIOD-END] SEP-30-1999 SEP-30-1998
[CASH] 6,212,882 5,504,244
[SECURITIES] 0 0
[RECEIVABLES] 1,755,045 1,850,166
[ALLOWANCES] (54,045) (48,015)
[INVENTORY] 1,617,652 1,802,661
[CURRENT-ASSETS] 9,627,517 9,225,866
[PP&E] 2,762,404 2,744,792
[DEPRECIATION] 1,201,814 1,110,976
[TOTAL-ASSETS] 11,875,944 11,678,800
[CURRENT-LIABILITIES] 495,704 483,497
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[COMMON] 2,384,767 2,989,595
[OTHER-SE] 8,917,472 8,130,709
[TOTAL-LIABILITY-AND-EQUITY] 11,875,944 11,678,800
[SALES] 3,669,082 3,822,617
[TOTAL-REVENUES] 3,669,082 3,822,617
[CGS] 1,316,092 1,303,586
[TOTAL-COSTS] 2,345,922 2,308,715
[OTHER-EXPENSES] 0 0
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 0 0
[INCOME-PRETAX] 1,323,160 1,513,902
[INCOME-TAX] 463,000 530,000
[INCOME-CONTINUING] 860,160 983,902
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 860,160 983,902
[EPS-BASIC] .22 .23
[EPS-DILUTED] .22 .23
</TABLE>
