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 September 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 - 4,220,851 shares of as of November 11, 1998.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $60,318 $168,548
Accounts receivables 1,114,616 1,804,525
Cost and estimated earnings in excess
of billings 389,186 402,523
Inventory 1,944,866 1,528,802
Other 400,519 71,670
___________ ___________
Total Current Asset 3,909,505 3,976,068
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,220,339
and $1,154,351 530,277 184,551
Investment 0 493,118
Deposits and Other Assets 48,600 38,746
___________ __________
TOTAL ASSETS $4,488,382 $4,692,483
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 682,532 $610,568
Accrued payroll 152,547 80,521
Accrued expenses 339,298 415,021
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 2,993 24,902
Line of credit 124,689 573,171
Shareholder loans payable 55,000 80,000
Installment notes payable - current portion 4,366 6,657
Term notes payable- current portion 0 171,504
_________ __________
Total Current Liabilities 1,530,663 2,241,941
Long-term liabilities:
Installment note payable 0 253
Term notes payable 0 100,435
_________ __________
Total liabilities 1,530,663 2,342,629
Stockholders' Equity:
Common stock, $.01 par value, 42,259 42,259
Additional paid in capital 2,282,866 2,282,866
Treasury Stock (6,980) -
Retained Earnings 639,574 24,729
___________ ___________
Total Stockholders' Equity 2,957,718 2,349,854
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,488,382 $ 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 $ 2,508,093 $ 2,311,053
Cost of Goods Sold 1,484,976 1,532,069
___________ __________
Gross Profit 1,023,117 778,984
Research and Development Expenses 221,036 169,882
Selling, General, and
Administrative Expenses 483,996 446,474
___________ ___________
Income (Loss) from Operations 318,085 162,628
Other Expense 14,121 0
Interest Expense 13,268 23,386
Income (Loss) before Provision ____________ ___________
for Income Taxes 290,696 139,242
Provisions for Income Taxes 95,550 26,200
____________ ___________
Net Income (Loss) $ 195,146 $ 113,042
Net Income (Loss) per Common Share $.05 $.03
Weighted Average Number
of Common Shares 4,224,384 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1998 1997
___________ ___________
<S> <C> <C>
Revenues $ 6,402,820 $ 7,152,408
Cost of Goods Sold 3,932,435 4,544,011
___________ __________
Gross Profit 2,470,385 2,608,397
Research and Development Expenses 673,412 581,385
Selling, General, and
Administrative Expenses 1,473,573 1,410,397
___________ ___________
Income (Loss) from Operations 323,400 616,615
Other Income 172,606 0
Interest Expense 41,957 99,758
Income (Loss) before Provision ____________ ___________
for Income Taxes 454,049 516,857
Provisions for Income Taxes (160,795) 162,200
____________ ___________
Net Income (Loss) $ 614,844 $ 354,859
Net Income (Loss) per Common Share $.15 $.08
Weighted Average Number
of Common Shares 4,225,356 4,225,851
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1998 1997
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 614,844 $ 354,657
Noncash items included in net income (loss):
Depreciation and amortization 75,134 76,782
(Gain) Loss on sale of assets (206,106) 1,961
(Increase) Decrease in:
Accounts receivables 689,909 (17,898)
Costs and estimated earnings in excess of contract
billings 13,337 (62,354)
Inventory (416,064) 331,747
Prepaid items and other (347,849) (26,904)
Increase (Decrease) in:
Accounts payable 71,964 (327,822)
Accrued expenses (3,697) 243,323
Accrued income taxes (110,359) 0
Estimated losses on uncompleted contracts (21,909) 0
Net Cash Provided (Used) by Operating Activities 359,203 573,492
Cash Flows from Investing Activities:
Purchase of property and equipment (411,715) (47,049)
Net Cash Used in Investing Activities (411,715) (47,049)
Cash Flows from Financing Activities:
Payments on line of credit (448,482) (346,277)
Payments on installment loans (2,544) (15,229)
Payments on stockholder loans (25,000) 0
Payments on term notes payable (271,939) (151,407)
Payment for Treasury Stock (6,980) 0
Proceeds from sale of land 699,226 0
Net Cash (Used) Provided by Financing Activities (55,719) (512,913)
Net Increase (Decrease) in Cash and Cash Equivalents (108,231) (43,142)
Cash and Cash Equivalents, January 1 168,549 78,970
Cash and Cash Equivalents, September 30 $60,318 $35,828
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 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
Third Quarter 1998 Compared to 1997
Revenues. The Company's revenues for the three months ended
September 30, 1998 increased 8.5% to $2,508,093 from revenues
of $2,311,053 in 1997, an increase of $197,040. Increased sales of
services offset decreased product sales. Revenues from services
increased $349,939 to $642,302 in 1998 from $292,363 in the prior
year. Product sales decreased $152,899 to $1,865,791 in 1998 from
$2,018,690 in the prior year.
Gross Profit. The Company's gross profit for the quarter ended September
30, 1998 increased to $1,023,117 from $778,984 for September 30, 1998.
Gross profit as a percentage of sales increased to 40.8% from 33.7%.
Increased sales volume improved the gross margin in 1998 while the gross margin
in 1998 was decreased 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 $37,522 to $483,996 for the quarter
ended June 30, 1998 from $446,474 for 1997. The increase is due
primarily to increased sales and marketing activities relating to systems
and services.
Research And Development. Research and development
expenses increased 30% to $221,036 in the quarter ended
September 30, 1998 from $169,882 in the quarter ended
September 30, 1997, an increase of $51,154. The Company
released three new products during the third quarter and
added one additional engineer.
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 September 30, 1998, Sutron's investment had
decreased by $14,121 representing our share of the loss for
the joint venture for the quarter.
Nine months ended September 30, 1998 Compared to 1997
Revenues. The Company's revenues for the nine months ended
September 30, 1998 decreased 10.5% to $6,402,820 from revenues
of $7,152,408 in 1997, a decrease of $749,588. Increased sales of
services offset decreased product sales. Revenues from services
increased $294,815 to $1,147,344 in 1998 from $852,529 in the prior
year. Product sales decreased $1,044,403 to $5,255,476 in 1998 from
$6,299,879 in the prior year. A strong product backlog was carried
over into 1997 primarily of 8200 and 8400 products. Decreased sales
of these products have been partially offset by increased sales of
8210 products in 1998.
Gross Profit. Gross profit for 1998 decreased to $2,470,385
from $2,608,397 in 1997. Gross margin as a percentage of
revenues for 1998 increased to 38.6% as compared to 36.5%
in 1997. In 1997 the Company had cost overruns on the installation
of the SIMEPAR contract in Brazil and an Air Force repair contract
which reduced margins.
Selling, General and Administrative. Selling, general and
administrative expenses increased to $1,473,573 in 1998 from
$1,410,397 in 1997, an increase of $63,176 due to of increased
proposal efforts relating to systems and services and increased
general and administrative expenses.
Research and Development. Research and development
expenses increased 15.8% to $673,412 in 1998 from $581,385
in 1997, an increase of $92,027. The Company has released four new
products in 1998 and has added two new engineers during 1998.
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
September 30, 1998, Sutron's investment had decreased by $33,500
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 which reduced income tax expenses..
The Company wrote the land up from its book
value of $493,000 resulting in a gain of $206,106.
The Company's backlog of orders at September 30, 1998 was
approximately $4,420,045. The Company anticipates that 80% of its
September backlog will be shipped in 1998.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $60,318 at September 30, 1998,
compared to $168,549 at December 31, 1997.
The ratio of current assets to current liabilities was 2.55 as of
September 30, 1998, compared to 1.8 as of December 31, 1997. Working
capital increased $644,713 to $2,378,842 at September 30, 1998
compared to $1,734,129 at the end of fiscal 1997.
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 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)
November 11, 1998 Raul S. McQuivey
Date Raul S. McQuviey
Principal Executive Officer
November 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 Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
___________ _________ ________ ________
<S> <C> <C> <C> <C>
Basic EPS
Average shares outstanding 4,224,384 4,225,851 4,225,356 4,225,851
Net Income $195,146 $113,042 $614,844 $354,859
Net Income per common share $.05 $.03 $.15 $.08
Dilutive EPS
Average shares outstanding 4,224,384 4,225,851 4,225,356 4,225,851
Effect of dilutive securities 148,761 170,506 169,110 163,957
Total average shares outstanding 4,373,145 4,396,357 4,394,466 4,389,808
Net earnings $195,146 $113,042 $614,844 $354,859
Net income per diluted share $.04 $.03 $ .14 $.08
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for 3rd Qtr 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEPT-30-1998
<CASH> 60318
<SECURITIES> 0
<RECEIVABLES> 1114616
<ALLOWANCES> 0
<INVENTORY> 1944866
<CURRENT-ASSETS> 3909505
<PP&E> 1750616
<DEPRECIATION> 1220339
<TOTAL-ASSETS> 4488382
<CURRENT-LIABILITIES> 1530663
<BONDS> 0
<COMMON> 42259
0
0
<OTHER-SE> 2915459
<TOTAL-LIABILITY-AND-EQUITY> 4488382
<SALES> 6402820
<TOTAL-REVENUES> 6402820
<CGS> 3932435
<TOTAL-COSTS> 3932435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41956
<INCOME-PRETAX> 454049
<INCOME-TAX> (160795)
<INCOME-CONTINUING> 614844
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614844
<EPS-PRIMARY> .15
<EPS-DILUTED> .14
</TABLE>
