U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from _________ to _________
Commission File Number 1-13628
INTELLIGENT CONTROLS, INC.
Exact name of small business issuer as
specified in its charter)
Maine 01-0354107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
74 Industrial Park Road, Saco, Maine 04072
(Address of principal executive offices)
(207) 283-0156
(Issuer's telephone number)
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 (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
----- -----
There were 3,244,547 shares of Common Stock of the issuer outstanding as of
July 29, 1997.
Transitional Small Business Disclosure Format: Yes No X
----- -----
Page 1 of
Exhibit Index at page
PART I
ITEM 1. FINANCIAL STATEMENTS.
Unaudited financial statements of the Company appear beginning at page F-1
below, and are incorporated herein by reference. These financial statements
include all adjustments which, in the opinion of management, are necessary
in order to make the financial statements not misleading.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations For Six Months Ended June 30, 1997
For the six months ended June 30, 1997 sales grew 45% to $6.2 million
compared to $4.3 million for the same period in 1996.
The growth in sales was attributable to 53% growth in Petroleum segment
sales to $5.5 million compared to $3.6 million for the same period in 1996.
Strong market conditions, improved product quality and the first shipment
under the Company's Chinese Petroleum contract contributed to the sales
growth.
Utility segment sales for the first six months of 1997 grew 6% to $725,000
compared to $676,000 for the same period in 1996. The slight growth in sales
can be attributable to continued shipments of evaluation units of the
Optimizer circuit breaker monitor.
Gross margins for the first six months were 40.0% compared to 47.1% for the
same period in 1996. The decline in gross margins was attributable to higher
percentage of the Company's sales to key accounts, such as Chinese
Petroleum; lower percentage of sales to the Utility segment, which carry
higher margins then the Petroleum segment; and lower pricing in certain
markets in the Petroleum market. Through better purchasing, resulting in
lower material prices and improved efficiencies in manufacturing, gross
margins improved in the second quarter of 1997 to 44.5% compared to 35.1% in
the first quarter of 1997.
For the first six months of 1997 operating expenses declined to 35.4% of
sales compared to 49.6% of sales for the same six month period in 1996. Real
dollars have increased $81,000 due to higher commissions paid, which is
attributable to the higher sales. The lower operating expenses along with
the increased sales have resulted in net income of $91,000 for the first six
months of 1997 compared to a loss of $115,500 for the first six months of
1996.
Liquidity and Capital Resources at June 30, 1997
As of June 30, 1997 the Company had $230,000 in cash and $1.9 million
available to be borrowed on its $3.5 million dollar line of credit. On April
16, 1997, the working capital line of credit was increased to $3.5 million
from $3.0 million. The Company expects that current resources will be
sufficient to finance the Company's operating needs for the next twelve
months.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on June 19, 1997. At the
meeting, the following matters were voted upon by shareholders. All matters
were approved as indicated:
1. Establishing the number of directors at five and electing Alan Lukas,
Charlton H. Ames, Henry Powers, George E. Hissong and Paul F. Walsh as
directors.
<TABLE>
<CAPTION>
Withheld
Authority
For For Total
--- --------- -----
<S> <C> <C> <C>
Alan Lukas 2,496,847 35,950 2,532,797
Charlton Ames 2,496,847 35,950 2,532,797
Henry Powers 2,496,847 35,590 2,532,797
George Hissong 2,496,847 35,590 2,532,797
Paul Walsh 2,496,847 35,590 2,532,797
</TABLE>
2. Ratification of Coopers & Lybrand L.L.P. as independent accountants to
the Company for the year ended December 31, 1997.
<TABLE>
<CAPTION>
For Against Abstain Total
--- ------- ------- -----
<C> <C> <C> <C>
2,518,697 1,500 12,600 2,532,797
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The following exhibits are filed with the report:
27 Financial data schedule
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTELLIGENT CONTROLS, INC.
By: /s/ Kenneth J. Burek
----------------------------------------
Kenneth J. Burek, Vice President
of Finance (on behalf of the
Company and as principal
Date: July 30, 1997 financial officer)
To the Board of Directors and Shareholders of
INTELLIGENT CONTROLS, INC.
We have reviewed the accompanying balance sheet of Intelligent Controls, Inc.,
as of June 30, 1997 and the related statements of income for the three month
and six month periods ended June 30,1997 and related statements of cash flows
for the six month period ended June 30, 1997. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding financial statements taken as a
whole. Accordingly, we do not express such an opinion. We previously audited
and expressed an unqualified opinion on the Company's financial statements for
the year ended December 31, 1996 (not presented herein). In our opinion, the
information set forth in the accompanying balance sheet as of December 31,
1996, is fairly stated in all materials respects, in relation to the statement
of financial position from which it has been derived.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
- ------------------------------
Portland, Maine
July 31, 1997
INTELLIGENT CONTROLS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
June 30 December 31
1997 1996
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 230,431 $ 133,690
Accounts receivable, net of allowance
for doubtful accounts of $56,505 in
1997 and $60,000 in 1996 2,102,644 1,960,979
Inventories 2,308,326 2,863,335
Prepaid expenses and other 228,877 312,837
Income taxes receivable 160,000 160,000
Deferred income taxes 210,000 210,000
-------------------------
Total current assets 5,240,278 5,640,841
Property, Plant, and Equipment, net 844,103 851,081
Other assets 22,335 19,979
Restricted cash - 199,120
-------------------------
$6,106,716 $6,711,021
=========================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Note payable - bank $1,628,536 $2,015,862
Accounts payable 698,560 881,349
Accrued expenses 627,380 673,767
Accrued income taxes 55,509 -
Current portion of long-term debt 191,700 191,700
-------------------------
Total current liabilities 3,201,685 3,762,678
Long-term debt, net of current portion 471,470 409,967
Deferred taxes 58,450 58,450
Deposit from stockholder - 199,120
Stockholders' Equity
Common stock, no par value; 5,000,000 shares
authorized; 3,244,547 issued in 1997 and
3,238,952 in 1996. 2,255,140 2,252,041
Retained earnings 124,276 33,071
Less: Treasury stock, 2,153 shares at cost
in 1997 and 1996 (4,306) (4,306)
-------------------------
2,375,111 2,280,806
-------------------------
$6,106,716 $6,711,021
=========================
</TABLE>
See accompanying notes.
INTELLIGENT CONTROLS, INC.
STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30 June 30 June 30 June 30
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $3,164,323 $2,286,432 $6,197,986 $4,269,686
Cost of sales 1,752,845 1,221,899 3,720,327 2,256,943
-------------------------------------------------
1,411,478 1,064,533 2,477,659 2,012,743
Operating expenses:
Selling, general and
administrative 964,366 839,218 1,797,949 1,633,515
Research and develop. 183,926 238,131 401,464 484,856
-------------------------------------------------
1,148,292 1,077,349 2,199,413 2,118,371
Operating income (loss) 263,186 (12,816) 278,246 (105,628)
Other income (expense):
Interest expense (48,390) (44,252) (101,208) (78,092)
Other(expense) (17,319) (18,964) (30,325) (12,664)
-------------------------------------------------
(65,709) (63,216) (131,533) (90,756)
Income (loss) before income
tax expense (benefit) 197,478 (76,032) 146,714 (196,384)
Income tax expense
(benefit) 75,469 (29,876) 55,509 (80,830)
-------------------------------------------------
Net income (loss)
after tax $ 122,009 $ (46,156) $ 91,205 $ (115,554)
=================================================
Earnings per share:
Net income (loss) $ .04 $ (.01) $ .03 $ (.03)
=================================================
Weighted average number of
common shares
outstanding 3,435,191 3,366,617 3,435,191 3,366,617
=================================================
</TABLE>
See accompanying notes.
INTELLIGENT CONTROLS, INC.
STATEMENT OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
June 30 June 30
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ 91,205 $ (115,554)
Adjustments to reconcile net income
(loss)to net cash provided (used) by
operating activities:
Depreciation and amortization 114,947 101,714
Changes in assets and liabilities:
Accounts receivable (141,665) 244,535
Inventories 555,009 (1,000,761)
Prepaid expenses and other 83,960 (32,575)
Accounts payable and accrued expenses (229,175) 357,303
Accrued income taxes 55,509 (51,068)
Other (2,356) (2,357)
------------------------
Net cash provided(used) by operating
activities 527,434 (498,763)
Cash flows from investing activities:
Purchases of equipment and leasehold
improvements, net (107,969) (139,760)
------------------------
Net cash (used) by investing activities (107,969) (139,760)
Cash flows from financing activities:
Net borrowings on note payable - bank (387,326) 600,925
Net borrowings of long-term debt 61,503 69
Issuance of common stock, net 3,099 -
Decrease in restricted cash (199,120) -
Decrease in deposit from shareholder 199,120 -
------------------------
Net cash provided (used)by financing
activities (322,724) 600,994
Net increase (decrease) in cash 96,741 (37,529)
Cash and cash equivalents beginning of year 133,690 225,518
Cash and cash equivalents end of period $ 230,431 $ 187,989
========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 101,208 $ 78,092
========================
Income taxes $ - $ 55,000
========================
</TABLE>
See accompanying notes.
INTELLIGENT CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not to be
misleading. In the opinion of management, the amounts shown reflect all
adjustments necessary to present fairly the financial position and results
of operations for the periods presented. All such adjustments are of a
normal recurring nature.
Earnings per share of common stock have been determined by dividing net
earnings by the weighted average number of shares of common stock
outstanding.
It is suggested that the financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 10-KSB.
2. Property, Plant, and Equipment
Property, plant, and equipment, at cost,
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31
1997 1996
----------- -----------
<S> <C> <C>
Leasehold improvements $ 107,529 $ 105,442
Equipment 1,185,240 1,119,610
Software 159,806 119,554
Furniture and Fixtures 120,087 120,087
-------------------------
1,572,662 1,464,693
Less accumulated depreciation and
amortization (728,559) (613,612)
-------------------------
$ 844,103 $ 851,081
=========================
</TABLE>
3. Inventories consisted of the following at June 30, 1997 and December
31,1996.
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31
1997 1996
----------- -----------
<S> <C> <C>
Raw Material $1,286,149 $1,930,834
Work in Progress 295,306 294,576
Finished Goods 625,557 587,788
Other 101,314 50,137
-------------------------
$2,308,326 $2,863,335
=========================
</TABLE>
4. New accounting pronouncements
During February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards SFAS No. 128, "Earnings per
Share" , which will require a change in how the Company calculates earnings
per share. This statement is effective for financial statements issued for
periods after December 15, 1997, with earlier application not permitted. The
statement requires a dual presentation of basic and diluted earnings per
share on the statements of income. Had the earnings per share calculation
been applied on a basis consistent with the provisions of SFAS No. 128,
basic and diluted earnings per share would be equivalent to the amounts
reported in the statements of income.
In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income",
which requires the separate reporting of all changes to Stockholders'
Equity, and SFAS No. 131, " Disclosures About Segments of an Enterprise and
Related Information", which revises existing guidelines about the level of
financial disclosure of a Company's operations. Both statements are
effective for financial statements issued after December 15, 1997. The
Company has not determined the impact of the new standards, but does not
expect them to make a material impact to existing financial reporting.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 230,432
<SECURITIES> 0
<RECEIVABLES> 2,102,644
<ALLOWANCES> 0
<INVENTORY> 2,308,326
<CURRENT-ASSETS> 5,157,310
<PP&E> 1,572,662
<DEPRECIATION> 728,559
<TOTAL-ASSETS> 6,106,716
<CURRENT-LIABILITIES> 3,201,685
<BONDS> 362,307
0
0
<COMMON> 2,250,834
<OTHER-SE> 124,276
<TOTAL-LIABILITY-AND-EQUITY> 6,106,716
<SALES> 3,033,663
<TOTAL-REVENUES> 6,197,986
<CGS> 3,720,327
<TOTAL-COSTS> 2,199,413
<OTHER-EXPENSES> 30,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,208
<INCOME-PRETAX> 146,714
<INCOME-TAX> 55,509
<INCOME-CONTINUING> 91,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,205
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
