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, 1999
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 - 4,298,351 shares of as of November 15, 1999.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $505,758 $76,204
Accounts receivables 1,554,624 1,761,262
Cost and estimated earnings in excess
of billings 156,261 1,136,910
Inventory 2,521,997 1,828,240
Other 64,512 368,870
___________ ___________
Total Current Asset 4,803,152 5,171,486
Property, Plant, and Equipment,
less accumulated depreciation
and amortization of $1,312,893
and $1,241,053 679,731 536,111
Deposits and Other Assets 102,085 36,734
___________ __________
TOTAL ASSETS $5,584,968 $5,744,331
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 686,780 $752,286
Accrued payroll 182,006 106,848
Accrued expenses 602,411 732,655
Accrued income taxes 26,840 -
Contract billings on contracts in progress in
excess of costs and estimated earnings - 117,192
Estimated losses on
uncompleted contracts 11,673 11,673
Line of credit - 650,571
Shareholder loans payable - 55,000
Current maturities of long-term notes 25,000 28,410
_________ __________
Total Current Liabilities 1,534,710 2,454,635
Long-term liabilities:
Long-term notes payable 56,250 75,000
_________ __________
Total liabilities 1,590,960 2,529,635
Stockholders' Equity:
Common stock, $.01 par value, 42,984 42,984
Additional paid in capital 2,316,236 2,316,236
Retained Earnings 1,634,788 855,476
___________ ___________
Total Stockholders' Equity 3,668,470 3,214,696
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,584,968 $5,744,331
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
September 30,
1999 1998
___________ ___________
<S> <C> <C>
Revenues $ 3,133,389 $ 2,508,093
Cost of Goods Sold 1,716,634 1,484,976 ___________ __________
Gross Profit 1,416,755 1,023,117
Research and Development Expenses 357,108 221,036
Selling, General, and
Administrative Expenses 534,632 483,996
___________ ___________
Income (Loss) from Operations 525,015 318,085
Other Expense - 14,121
Interest Expense 13,477 13,268
Income (Loss) before Provision ____________ ___________
for Income Taxes 511,538 290,696
Provisions for Income Taxes 186,000 95,550
____________ ___________
Net Income (Loss) $ 325,538 $ 195,146
Net Income (Loss) per Common Share $.08 $.05
Weighted Average Number
of Common Shares 4,298,351 4,224,384
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1999 1998
___________ ___________
<S> <C> <C>
Revenues $ 8,727,213 $ 6,402,820
Cost of Goods Sold 4,913,045 3,932,435 ___________ __________
Gross Profit 3,814,168 2,470,385
Research and Development Expenses 827,605 673,412
Selling, General, and
Administrative Expenses 1,750,429 1,473,573
___________ ___________
Income (Loss) from Operations 1,236,134 323,400
Other Income (Expense) (7,804) 172,606
Interest Expense 33,518 41,957
Income (Loss) before Provision ____________ ___________
for Income Taxes 1,194,812 454,049
Provisions for Income Taxes 415,500 (160,795)
____________ ___________
Net Income (Loss) $ 779,312 $ 614,844
Net Income (Loss) per Common Share $.18 $.15
Weighted Average Number
of Common Shares 4,298,351 4,225,356
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1999 1998
___________ ___________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 779,312 $614,844
Noncash items included in net income (loss):
Depreciation and amortization 80,983 75,134
(Gain) Loss on sale of assets - (206,106)
(Increase) Decrease in:
Accounts receivables 206,638 689,909
Costs and estimated earnings in
excess of contract billings 980,649 13,337
Inventory (693,757) (416,064)
Prepaid items and other 229,861 (347,849)
Increase (Decrease) in:
Accounts payable (65,507) 71,964 Accrued expenses (172,277) (3,697)
Accrued income taxes 26,840 (110,359)
Estimated losses on uncompleted contracts - (21,909)
Net Cash Provided (Used) by Operating Activities 1,372,742 359,203
Cash Flows from Investing Activities:
Purchase of property and equipment (215,440) (411,715)
Net Cash Used in Investing Activities (215,440) (411,715)
Cash Flows from Financing Activities:
Payments on line of credit (650,588) (448,482)
Payments on installment loans (3,410) (2,544)
Payments on stockholder loans (55,000) (25,000)
Payments on term notes payable (18,750) (271,939)
Payment for Treasury Stock - (6,980)
Proceeds from sale of land - 699,226
Net Cash (Used) Provided by Financing Activities (727,748) (55,719)
Net Increase (Decrease) in Cash and Cash Equivalents 429,554 (108,231)
Cash and Cash Equivalents, January 1 76,204 168,549
Cash and Cash Equivalents, September 30 $505,758 $60,318
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
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 1998 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 1999 Compared to 1998
Net Revenues. Sutron Corporation revenues for the
fiscal quarters ended September 30, 1999 and
September 30, 1998 were $3,133,389 and $2,508,093,
respectively (an increase of 24%). Sales of the
8210 Data Recorder/Transmitter are the primary
reason for the increase.
Gross Profit. The Company's gross profit for the quarter
ended September 30, 1999 increased 87% to $1,716,634
from $1,023,117 for September 30, 1998. Gross profit
as a percentage of sales increased to 45.2% from 40.8%.
Gross profits increased in 1999 due to strong
sales of the 8210 Data Recorder/GOES Satellite
Transmitter and to reduced manufacturing costs of the 8210's.
Selling, General And Administrative. Selling, general
And administrative costs increased $50,636 to $534,632
for the quarter ended September 30, 1999 from $483,996
for 1998. The increase is due to increased sales and
marketing expenses by the Integrated Services
Division, the addition of a network supervisor and increased
General and administrative expenses.
Research And Development. Research and development
expenses increased 61% to $357,108 in the quarter ended
September 30, 1999 from $221,036 in the quarter ended
September 30, 1998. The Company incurred higher engineering
Expenses due to the addition of new engineers who were
not on staff during the third quarter of 1998 and increased
applications and software development projects.
Nine months ended September 30, 1999 Compared to 1998
Revenues. The Company's revenues for the nine months ended
September 30, 1999 increased 36% to $8,727,213 from revenues
of $6,402,820 in 1998 due to increased sales of the
8210 Data Recorder/Transmitter product line. The US
Geological Survey placed two orders totaling $1,912,000
for the 8210 Data Recorder/GOES Transmitter during
the first six months. The 8210's are to replace older
units which are being retired by the US Geological
Survey.
Gross Profit. Gross profit for 1999 increased to $3,814,167
from $2,470,422 in 1998. Gross margin as a percentage of
revenues for 1999 increased to 43.7% as compared to 38.6%
in 1998. The increase in the Company's gross margin as a
percentage of sales is attributed to the increased sales volume
and to reduced manufacturing costs of the 8210's.
Selling, General and Administrative. Selling, general and
administrative expenses increased to $1,750,429 in 1999 from
$1,473,573 in 1998, an increase of $276,856 due to increased
sales and marketing activities by the Integrated Services
Division, the addition of a network supervisor and increased
general and administrative expenses.
Research and Development. Research and development
expenses increased 22% to $827,605 in 1999 from $673,412
in 1998, an increase of $154,193. The Company reduced its
use of subcontractors in 1999 as compared to the prior
year, added additional engineers and support staff and
increased application and software development projects
during the nine months ended September 30, 1999.
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.
Due to slow sales, Sutron bought out Virginia Energy Services as
of December 31, 1998 for approximately $4,500. Expenses relating
to the joint venture were $7,682 in 1999 and $33,500 in 1998.
In 1998, The Company sold its 4.2 acre lot in the Loudoun Tech
Center 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 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. The Company's backlog of orders at September 30, 1999 was
approximately $2,620,000. The Company anticipates that 85%
of its backlog will be shipped in 1999.
Liquidity and Capital Resources
Cash and cash equivalents increased to $505,758 at September 30, 1999,
compared to $76,204 at December 31, 1998.
The ratio of current assets to current liabilities was 3.1 as of
September 30, 1999, compared to 2.1 as of December 31, 1998. Working
capital increased $551,591 to $3,268,442 at the end of the third
quarter of fiscal 1999 compared to $2,716,854 at the end of fiscal 1998.
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 1999.
Impact of the Year 2000 Issue
The Company's current line of products is year 2000 ready. In addition,
The Company has made available to its customers year 2000 information
Concerning its products, services and support. The Company's suppliers
Have been contacted and have informed us that they are compliant. The
Company's Information Systems group has reviewed the critical
Applications and has identified no significant problems.
The Company has determined its worst case scenario as being the
Development of service or product supply difficulties by
business and critical suppliers. There can be no assurance that the
Systems or products of other companies on which the Company's
Systems rely will be timely converted or that any such failure to
Convert by a vendor, customer or another company would not have
An adverse effect.
<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 15, 1999 By /s/ Raul S. McQuivey
Date Raul S. McQuivey
Principal Executive Officer
November 15, 1999 By /s/ Sidney C. Hooper
Date Sidney C. Hooper
Treasurer and 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,
1999 1998 1999 1998
___________ _________ ________ ________
<S> <C> <C> <C> <C>
Basic EPS
Average shares outstanding 4,298,351 4,224,384 4,298,351 4,225,356
Net Income $325,538 $195,146 $779,312 $614,844
Net Income per common share $.08 $.05 $.18 $.15
Dilutive EPS
Average shares outstanding 4,298,351 4,224,384 4,298,351 4,225,356
Effect of dilutive securities 93,386 148,761 77,391 169,110
Total average shares
outstanding 4,391,737 4,373,145 4,375,742 4,394,466
Net earnings $325,538 $195,146 $779,312 $614,844
Net income per diluted share $.07 $.04 $.18 $.14
</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-31-1999
<PERIOD-END> SEPT-30-1999
<CASH> 505758
<SECURITIES> 0
<RECEIVABLES> 1554624
<ALLOWANCES> 0
<INVENTORY> 2521997
<CURRENT-ASSETS> 4803152
<PP&E> 1992624
<DEPRECIATION> 1312893
<TOTAL-ASSETS> 5584968
<CURRENT-LIABILITIES> 1534710
<BONDS> 0
<COMMON> 42984
0
0
<OTHER-SE> 3625486
<TOTAL-LIABILITY-AND-EQUITY> 4488382
<SALES> 8727213
<TOTAL-REVENUES> 8727213
<CGS> 4913045
<TOTAL-COSTS> 4913045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33518
<INCOME-PRETAX> 1194812
<INCOME-TAX> 415500
<INCOME-CONTINUING> 779312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 779312
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>