UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
Commission file number 0-12227
Sutron Corporation
(Exact name of registrant as specified in its charter.)
Virginia 54-1006352
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation organization)
21300 Ridgetop Circle, Sterling Virginia 20166
(Address of principal executive offices) (Zip Code)
(703) 406-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $.01 Par Value - 4,225,851 shares of as of August 11, 1998.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1997
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $289,921 $168,548
Accounts receivables 1,208,762 1,804,525
Cost and estimated earnings in excess
of billings 136,110 402,523
Inventory 1,786,369 1,528,802
Other 424,100 71,670
___________ ___________
Total Current Asset 3,845,262 3,976,068
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,198,343
and $1,154,351 477,083 184,551
Investment 699,224 493,118
Deposits and Other Assets 63,269 38,746
___________ __________
TOTAL ASSETS $5,084,838 $4,692,483
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 533,171 $610,568
Accrued payroll 80,061 80,521
Accrued expenses 493,162 415,021
Accrued income taxes 0 110,359
Contract billings on contracts in progress in
excess of costs and estimated earnings 169,238 169,238
Estimated losses on
uncompleted contracts 5,620 24,902
Line of credit 787,526 573,171
Shareholder loans payable 55,000 80,000
Installment notes payable - current portion 5,321 6,657
Term notes payable- current portion 171,504 171,504
_________ __________
Total Current Liabilities 2,300,603 2,241,941
Long-term liabilities:
Installment note payable 0 253
Term notes payable 14,683 100,435
_________ __________
Total liabilities 2,315,286 2,342,629
Stockholders' Equity:
Common stock, $.01 par value, 42,259 42,259
Additional paid in capital 2,282,866 2,282,866
Retained Earnings 444,427 24,729
___________ ___________
Total Stockholders' Equity 2,769,552 2,349,854
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,084,838 $ 4,692,483
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1998 1997
___________ ___________
<S> <C> <C>
Revenues $ 2,084,978 $ 2,169,214
Cost of Goods Sold 1,338,971 1,430,206
___________ __________
Gross Profit 746,007 739,008
Research and Development Expenses 250,136 195,906
Selling, General, and
Administrative Expenses 508,626 516,643
___________ ___________
Income (Loss) from Operations (12,755) 26,459
Other Income 193,946 0
Interest Expense 14,887 38,178
Income (Loss) before Provision ____________ ___________
for Income Taxes 166,304 (11,719)
Provisions for Income Taxes (245,595) (16,000)
____________ ___________
Net Income (Loss) $ 411,899 $ 4,281
Net Income (Loss) per Common Share $.10 $ $.0
Weighted Average Number
of Common Shares 4,225,851 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
___________ ___________
<S> <C> <C>
Revenues $ 3,894,727 $ 4,841,355
Cost of Goods Sold 2,447,459 3,011,942
___________ __________
Gross Profit 1,447,268 1,829,413
Research and Development Expenses 452,376 411,503
Selling, General, and
Administrative Expenses 989,577 961,962
___________ ___________
Income from Operations 5,315 455,948
Other Income 186,727 0
Interest Expense 28,689 76,372
Income before Provision ____________ ___________
for Income Taxes 163,353 377,615
Provisions for Income Taxes (256,345) 136,000
____________ ___________
Net Income $ 419,698 $ 241,615
Net Income (Loss) per Common Share $.10 $ $.06
Weighted Average Number
of Common Shares 4,225,851 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1998 1997
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 419,698 $ 241,615
Noncash items included in net income:
Depreciation and amortization 50,089 50,089
Loss on sale of asset 0 1,961
Gain on increase of land investment (206,106) 0
(Increase) Decrease in:
Accounts receivables 595,763 (176,909)
Costs and estimated earnings in
excess of contract billings 266,413 (263,010)
Inventory (257,567) 462,551
Other current assets (352,429) (33,305)
Other assets (30,621) 0
Increase (Decrease) in:
Accounts payable (77,397) (265,122)
Accrued expenses (32,678) 356,887
Estimated losses on uncompleted
contracts (19,282) 0
__________ __________
Net Cash Provided by Operating Activities 355,884 374,757
Cash Flows from Investing Activities:
Capital expenditures (336,526) (91,808)
___________ ___________
Net Cash Used in Investing Activities (336,526) (81,308)
Cash Flows from Financing Activities:
Proceeds from line of credit 214,355 9,839
Payments on Term notes payable (85,752) (123,213)
Payments on Installment notes payable (1,589) (14,023)
Payments on Stockholder loans (25,000) 0
___________ __________
Net Cash (Used) by Financing Activities 102,014 (127,397)
Net Increase (Decrease) in Cash 121,372 166,052
Cash and Cash Equivalents, January 1 168,549 78,971
___________ __________
Cash and Cash Equivalents, June 30 $ 289,921 $ 245,023
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. Basis of Presentation
The accompanying financial statements, which should be read in conjunction
with the financial statements of Sutron Corporation ("the Company") included
in the 1997 Annual Report filed on Form 10-KSB, are unaudited but have
been prepared in the ordinary course of business for the purpose of providing
information with respect to the interim period. The Company believes that all
adjustments (none of which were other than normal recurring accruals)
necessary for a fair presentation for such periods have been included.
2. Earnings Per Share
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 128 which establishes standards for
computing and presenting earnings per share (EPS) for entities
with publicly held common stock. The standard requires
presentation of two categories of earning per share, basic EPS
and diluted EPS. Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for
the year. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings
of the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Second Quarter 1998 Compared to 1997
Net Revenues. Sutron Corporation revenues for the
fiscal quarters ended June 30, 1998 and June 30, 1997 were
$2,084,978 and $2,169,214, respectively (a decrease of 4%).
Gross Profit. The Company's gross profit for the quarter
ended June 30, 1998 increased 1% to $746,007 from $739,008
for June 30, 1997. Gross profit as a percentage of sales increased
to 35.8% from 34.1%. Gross profit in 1998 was affected by
increased indirect labor and expense charges relating to the opening
of a new customer support facility in Boise, Idaho and reduced sales
volume. The gross margin in 1998 was affected by cost overruns
on the installation of the SIMEPAR contract in Brazil and
an Air Force repair contract.
Selling, General And Administrative. Selling, general and
administrative costs increased $8,018 to $508,626 for the quarter
ended June 30, 1998 from $516,643 for 1997. The increase is due
to the increased sales and marketing activities and increased
general and administrative costs.
Research And Development. Research and development
expenses increased 28% to $250,136 in the quarter ended June 30,
1998 from $195,906 in the quarter ended June 30, 1997. The
Company is currently developing five new products to
improve existing product lines and to access new markets.
Other Income. A joint venture between Sutron and Virginia
Energy Services was started on February 27, 1998 to
sell remote monitoring systems of backup power generators.
One employee was hired in February 1998 to do sales and
marketing. The joint venture recognized its first revenues in
June 1998 from product sales to Hickam AFB in Hawaii. For the
three months ended June 30, 1998, Sutron's investment had
decreased by $12,160 representing our share of the loss for
the joint venture.
The Company sold its 4.2 acre lot in the Loudoun
Tech Center on July 13, 1998 to Bavar Properties Group, a
developer located in Baltimore, for $700,000. The land was
originally purchased for $1,219,792 in October 1986. An
additional $80,518 was spent on architectural drawings. The
loss of approximately $600,000 on the sale resulted in a
deferred tax benefit of $230,000 as of June 30, 1998 which
tax benefit reduced income tax expenses. At June 30, 1998
the Company wrote the land up from its book value of $493,000
resulting in a gain of $206,106.
Six months ended June 30, 1997 Compared to 1996
Revenues. The Company's revenues for the six months ended
June 30, 1998 decreased 19.6% to $3,894,727 from revenues
of $4,841,355 in 1997 due to decreased product sales of
primarily the 8200, 8210 and 8400 products of $891,503.
A strong backlog of these products was carried over into
1997. Revenues from services decreased $55,125 from the
prior year due to increased work on indirect tasks
relating to sales and marketing applications.
Gross Profit. Gross profit for 1998 decreased to $1,447,268
from $1,829,413 in 1997. Gross margin as a percentage of
revenues for 1998 decreased to 37.2% as compared to 37.8%
in 1997. The decrease in the Company's gross margin as a
percentage of sales is attributed to the reduced sales volume
of $946,628 and to increased indirect labor and expenses relating
to a new customer support facility opened in Boise, Idaho.
Selling, General and Administrative. Selling, general and
administrative expenses increased to $989,577 in 1998 from
$961,962 in 1997, an increase of $27,615 due to of increased
proposal efforts relating to projects and increased general and
administrative expenses. Selling, general and administrative
expenses were offset by a $56,975 decrease in agent
commissions.
Research and Development. Research and development
expenses increased 9.9% to $452,376 in 1998 from $411,503
in 1997, a increase of $40,872. The Company is currently
developing five new products certain of which involve
subcontractors. One new R&D employee
was added in March, an RF engineer, and an entry level
software engineer was added in June.
Other Income. A joint venture between Sutron and Virginia
Energy Services was started on February 27, 1998 to
sell remote monitoring systems of backup power generators.
One employee was hired in February 1998 to do sales and
marketing. The joint venture recognized its first revenues in
June 1998 from product sales to Hickam AFB in Hawaii. As of
June 30, 1998, Sutron's investment had decreased by $19,379
representing our share of the loss for the joint venture.
The Company sold its 4.2 acre lot in the Loudoun Tech
Center on July 13, 1998 to Bavar Properties Group, a developer
located in Baltimore, for $700,000. The land was originally
purchased for $1,219,792 in October 1986. An additional
$80,518 was spent on architectural drawings. The loss of
approximately $600,000 on the sale resulted in a deferred tax
benefit of $230,000 as of June 30, 1998 which tax benefit reduced
income tax expenses. At June 30, 1998 the Company wrote
the land up from its book value of $493,000 resulting in a
gain of $206,106.
Backlog. he Company's backlog of orders at June 30, 1998 was
approximately $1,528,000. The Company anticipates that 90%
of its June backlog will be shipped in 1998.
Liquidity and Capital Resources
Cash and cash equivalents increased to $289,921 at June 30, 1998,
compared to $168,549 at December 31, 1997.
The ratio of current assets to current liabilities was 1.7 as of
June 30, 1998, compared to 1.8 as of December 31, 1997. Working
capital decreased $189,470 to $1,544,659 at June 30, 1998
compared to $1,734,129 at the end of fiscal 1997.
In February 1998, the Corporation entered into a contract to sell 4.2
acres of land acquired in 1986. The Company sold the lot
on July 13, 1998 to Bavar Properties Group, a developer
located in Baltimore, for $700,000. The land was originally
purchased for $1,219,792. An additional $80,518 was spent on
architectural drawings. The land was originally intended to
be the site of a headquarters and manufacturing facility.
The loss of approximately $600,000 on the sale resulted in
a deferred tax benefit of $230,000 as of June 30, 1998 which
tax benefit reduced income tax expenses.
Management believes internally generated funds and short-term
borrowings on our existing credit line will provide adequate resources
for supporting operations during the remainder of fiscal 1998.
Forward-Looking Statements
The Company believes that this report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are subject to certain risks and uncertainties. Forward-looking
statements represent the Company's expectations or beliefs concerning future
events, including the following: any statements regarding future sales and
gross profit percentages, any statements regarding the continuation of
historical trends, any statements regarding the sufficiency of the Company's
cash balances and cash generated from operating and financing activities for
the Company's future liquidity and capital resource needs, any statements
regarding the effect of regulatory changes, the success of development and
enhancement of the Company's products, the adequacy of the Company's
facilities, potential acquisitions, and any statements regarding the future of
the instrumentation industry and the various parts of the instrumentation
markets in which the Company conducts its business. The Company cautions
that any forward-looking statements made by the Company in this report
or in other announcements made by the Company are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including, without limitations, the
factors set forth in to the Company's report on Form 10K for the fiscal
year ended December 31, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 13, 1998, an Annual Meeting of Shareholders
of Sutron Corporation was held. Directors elected at the
meeting were Raul S. McQuivey, Thomas N. Keefer,
Daniel W. Farrell, Glenn A. Conover and Ronald C. Dodson.
Thompson, Greenspon & Co., P.C. were appointed as
independent accountants for 1998. The election of directors
and the appointment of the independent accountants were
the only matters voted upon at the meeting. The number of
shares eligible to vote at the meeting were 4,225,851. The
results of the voting on these three matters are shown below.
<TABLE>
<CAPTION>
1. Election of Directors
Name Votes For Votes Against Votes Withheld
<S> <C> <C> <C>
Raul S. McQuivey 3,854,715 -- 4,380
Thomas N. Keefer 3,854,715 -- 4,380
Daniel W. Farrell 3,854,715 -- 4,380
Glenn A. Conover 3,854,715 -- 4,380
Ronald C. Dodson 3,849,796 -- 9,199
</TABLE>
2. Appointment of Thompson, Greenspon & Co., P.C.
as Independent Accountants.
For Against Abstain
3,761,415 480 97,200
Item 6. Exhibits and Reports on Form 8-K
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
<PAGE>
SUTRON CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Sutron Corporation
(Registrant)
August 11, 1998 Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
August 11, 1998 Sidney C. Hooper
Date Sidney C. Hooper
Principal Accounting Officer
<SEQUENCE>2
[DESCRIPTION]STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Exhibit 11
Sutron Corporation
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
___________ _________ ________ ________
<S> <C> <C> <C> <C>
Basic EPS
Average shares outstanding 4,225,851 4,225,851 4,225,851 4,225,851
Net Income $411,899 $4,281 $419,698 $241,615
Net Income per common share $.10 $.0 $.10 $.06
Dilutive EPS
Average shares outstanding 4,225,851 4,225,851 4,225,851 4,225,851
Effect of dilutive securities 210,991 126,122 188,650 131,033
Total average shares outstanding 4,436,842 4,351,973 4,414,501 4,356,884
Net earnings $411,899 $4,281 $419,698 $241,615
Net income per diluted share $.09 $.0 $ .10 $.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 2nd Qtr 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 289921
<SECURITIES> 0
<RECEIVABLES> 1208762
<ALLOWANCES> 0
<INVENTORY> 1786369
<CURRENT-ASSETS> 3845262
<PP&E> 1675426
<DEPRECIATION> 1198343
<TOTAL-ASSETS> 5084838
<CURRENT-LIABILITIES> 2300603
<BONDS> 0
<COMMON> 42259
0
0
<OTHER-SE> 2727293
<TOTAL-LIABILITY-AND-EQUITY> 5084838
<SALES> 3894727
<TOTAL-REVENUES> 3894727
<CGS> 2447459
<TOTAL-COSTS> 2447459
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28689
<INCOME-PRETAX> 163353
<INCOME-TAX> (256345)
<INCOME-CONTINUING> 419698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4196981
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
