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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Under Section 13 or 15 (d)
- ------- of the Securities Exchange Act of 1934
For quarterly period ended June 30, 1995
or
Transition Report Pursuant To Section 13 or 15(d)
- ------- of The Securities and Exchange Act of 1934
For the transition period from _____ to ______.
Commission File No. 0-16227
IMPACT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
California 94-2672923
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1075 East Brokaw Road, San Jose, California 95131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (408) 453-3700
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
----- -----
At June 30, 1995 there were 10,273,500 shares of the Company's common stock
outstanding.
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IMPACT SYSTEMS, INC.
Quarterly Report on Form 10-Q
INDEX
<TABLE>
<CAPTION>
Part I: Financial Information Page Number
-----------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Signature 9
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Exhibit 27 - Financial Data Schedule 10
</TABLE>
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PART I - FINANCIAL INFORMATION
IMPACT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)
(Unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
ASSETS 1995 1995
-------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,431 $ 3,247
Short-term investments 3,727 2,953
Trade and other accounts receivable 4,191 4,057
Inventories 3,088 2,858
Prepaid expenses and other 103 41
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Total current assets 13,540 13,156
Property and equipment, net of accumulated depreciation and
amortization of $4,250 ($4,241 at March 31, 1995) 242 239
Non-current trade receivables 794 865
Minority equity investment in and advances to foreign affiliates 762 676
Other assets 199 198
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$15,537 $15,134
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,246 $ 757
Accrued installation and warranty costs 655 456
Accrued salaries, wages and employee benefits 232 477
Accrued commissions 233 335
Other liabilities 931 1,234
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Total current liabilities 3,297 3,259
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Stockholders' equity:
Preferred stock, no par: 2,000,000 shares authorized;
none outstanding
Common stock, no par value; 20,000,000 shares authorized;
10,273,500 and 10,203,500 shares issued and outstanding 24,828 24,776
Accumulated deficit (12,311) (12,616)
Cumulative translation adjustments (277) (285)
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Total stockholders' equity $12,240 $11,875
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$15,537 $15,134
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</TABLE>
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IMPACT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
June 30,
----------------------------
1995 1994
---- ----
<S> <C> <C>
Net revenues $ 3,729 $ 3,941
Cost of goods sold 1,927 1,980
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Gross margin 1,802 1,961
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Operating expenses:
Research and development 401 418
Selling, general and administrative 1,279 1,327
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Total operating expense 1,680 1,745
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Operating income 122 216
Interest income, net 98 40
Foreign currency (loss), net (3) (3)
Equity in net income of investee 88 22
------- -------
Net income before income taxes 305 275
Income taxes - -
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Net income $ 305 $ 275
======= =======
Net income per common share and equivalent:
Net income per common share $.03 $.03
==== ====
Common and common equivalent shares
used in calculating income per share
10,860 10,606
======= =======
</TABLE>
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IMPACT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 305 $ 275
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 42 40
Equity in net (income) of investee (88) (22)
Cumulative translation effects 8 31
Changes in assets and liabilities:
Trade and other accounts receivable (63) (471)
Inventories (230) 40
Prepaid expenses and other (63) (133)
Accrued installation and warranty costs 199 36
Accounts payable 489 148
Accrued salaries, wages and employee benefits (245) 11
Accrued commissions (102) 112
Other liabilities (303) 208
Deferred income taxes - -
------ ------
Cash Provided (Used) By Operating Activities (51) 275
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Cash Provided (Used) By Investing Activities:
Purchase of short-term investments (774) (27)
Capital expenditures, net (45) (14)
Minority equity investment in and advances to affiliate 2 14
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Cash (Used) By Investing Activities (817) (27)
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Cash Provided By Financing Activities:
Issuance of capital stock, net of expenses 52 16
Repayment of borrowings - -
------ ------
Cash Provided By Financing Activities 52 16
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Net Increase (Decrease) in Cash and Cash Equivalents (816) 264
Cash & Cash Equivalents At Beginning of Period 3,247 3,700
------ ------
Cash & Cash Equivalents at End of Period $2,431 $3,964
====== ======
</TABLE>
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IMPACT SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(In Thousands, Unless Otherwise Noted)
(Unaudited)
NOTE 1 - Basis of Presentation
In the opinion of management, the consolidated financial statements
contain all adjustments necessary to present fairly the financial
position as of June 30, 1995, the results of operations for the three
months ended June 30, 1995 and June 30, 1994 and cash flows for the
three months ended June 30, 1995 and June 30, 1994. These statements
should be read in conjunction with the March 31, 1995 financial
statements and notes thereto incorporated in the Company's Annual
Report for the year ending March 31, 1995 (Form 10-K) previously filed
with the Securities and Exchange Commission.
The interim financial results are not necessarily indicative of the
results to be expected for the full fiscal year.
NOTE 2 - Receivables From Affiliate
Trade and other accounts receivable include trade receivables from the
Company's minority owned affiliate - Impact Systems Asia KK - in the
amount of $295 at June 30, 1995 and $76 at March 31, 1995. Such
receivables arose from the sale of systems and spare parts to the
affiliate.
NOTE 3 - Balance Sheet Details
Inventories
Inventories include material, labor, and overhead costs; are stated at
the lower of first-in, first-out cost or market; and consist of the
following components.
<TABLE>
<CAPTION>
June 30, 1995 March 31, 1995
------------- --------------
<S> <C> <C>
Raw materials and components $2,417 $2,463
Work-in-process 548 353
Finished goods 45 42
Inventory at customer sites for evaluation 78 --
------ ------
$3,088 $2,858
====== ======
</TABLE>
Minority Equity Investments in and Advances to Affiliates
The Company has a 40% interest in Impact Systems Asia, KK. Advances to
the affiliate were $502 at June 30, 1995 and $507 at March 31, 1995.
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<TABLE>
<CAPTION>
June 30, 1995 March 31, 1995
------------- --------------
<S> <C> <C>
Other Assets
Building rent deposits and other $199 $ 198
Other Liabilities
Accrued liabilities and other reserves $768 $ 839
Customer deposits 163 395
---- ------
$931 $1,234
==== ======
</TABLE>
Note 4 - Income Per Common Share
Income per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding. Dilutive common equivalent shares consist of stock options
using the treasury stock method.
Note 5 - Income Taxes
The Company prospectively adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"),
effective April 1, 1993. The adoption of SFAS 109 changes the Company's
method of accounting for income taxes from the deferred method (APB 11)
to an asset and liability approach. Previously, the Company deferred
the tax effects of differences between financial reporting and taxable
income. The asset and liability approach requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and
the tax bases of assets and liabilities. Adoption of SFAS 109 did not
have a material effect on the consolidated financial statements.
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ITEM 2
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net Revenues
Net revenues for the current quarter (ended June 30, 1995) were $3.7 million
compared to $3.9 million for the prior quarter (ended March 31, 1995) and for
the prior year's quarter (ended June 30, 1994). The slight decrease in revenue
for the current quarter is the result of longer delivery schedules on many of
the system orders received at the end of fiscal 1995.
Gross Margins
Gross margins, as a percentage of net revenues, declined to 48.3% from 51.3% and
49.8% for the prior and prior year quarters, respectively, as the result of
product mix. Current quarter margins were also effected by higher costs
associated with new product shipments.
Operating Expenses
Operating expenses were approximately $1.7 million for the current quarter
approximating the levels of the prior year quarter and slightly below the $1.8
million for the prior quarter. The Company expects a gradual increase in
operating expenses in the second half of fiscal 1996 reflecting the expansion of
its sales force in primary markets to more effectively promote its expanded
product line.
Other Income and Expense
The Company's net interest income increased to $98,000 for the current quarter
compared to $40,000 for the prior year quarter reflecting higher interest yields
on short-term investments along with increased collections on the Company's
long-term contract receivables.
The Company recorded income of $88,000 in the current quarter on its 40%
investment in Impact Systems Asia which compares to income of $97,000 and
$22,000 for the prior and prior year's quarters, respectively. The significant
improvements in profitability from the prior year quarter is the result of
increased system shipments coupled with higher margins which are attributable to
the effect of the falling dollar versus Japanese yen on purchases from the
Company.
Liquidity and Capital Resources
The Company has cash balances and short-term investments of $6.2 million at June
30, 1995 and a current ratio of 4.1 to 1. The Company also has a domestic credit
facility of $6.0 million (which expires in August, 1996) under which there are
no loan balances outstanding. The Company expects that existing cash balances
together with cash flow from operations and borrowings, if necessary, will be
adequate to meet its working capital requirements through at least the current
fiscal year.
Accounts payable balances increased by approximately $0.5 million during the
current quarter as the result of the timing of inventory receipts and deliveries
along with payment timing differences. Other liabilities decreased by
approximately $0.3 million during the current quarter reflecting lower customer
deposit balances.
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SIGNATURES
Pursuant to the requirements 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.
IMPACT SYSTEMS, INC.
Registrant
Date: August 10, 1995 By: /s/ Robert M. Gorski
--------------------
Robert M. Gorski
Vice President, Finance &
Chief Financial Officer
(Principal Financial & Accounting Officer)
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PART II - OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,431
<SECURITIES> 3,727
<RECEIVABLES> 4,268
<ALLOWANCES> (77)
<INVENTORY> 3,088
<CURRENT-ASSETS> 13,540
<PP&E> 4,492
<DEPRECIATION> (4,250)
<TOTAL-ASSETS> 15,537
<CURRENT-LIABILITIES> 3,297
<BONDS> 0
<COMMON> 24,828
0
0
<OTHER-SE> (12,588)
<TOTAL-LIABILITY-AND-EQUITY> 15,537
<SALES> 3,729
<TOTAL-REVENUES> 3,729
<CGS> 1,927
<TOTAL-COSTS> 3,607
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 305
<INCOME-TAX> 0
<INCOME-CONTINUING> 305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 305
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
