SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter ended: September 30, 1997 Commission File Number: 0-19589
ARGUSS HOLDINGS, INC.
(formerly "Conceptronic, Inc.")
(Exact Name of Small Business Issuer as Specified
in its Charter)
Delaware 02-0413153
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification Number)
One Church Street, Suite 302, Rockville, Maryland 20850
(Address of Principal Executive Offices) (Zip Code)
(Issuer's Telephone Number including 301-315-0027
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:
As of November 6, 1997, there were 8,514,870 shares of
Common Stock, $.0l par value per share outstanding.
ARGUSS HOLDINGS, INC.
INDEX
Part I - Financial Statements:
Item I - Financial Statements
Consolidated Balance Sheets (Unaudited) -
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations (Unaudited) -
Three Months and Nine Months Ended
September 30, 1997 and September 30, 1996 4
Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1997 and
September 30, 1996 5
Notes to Consolidated Financial Statements
(Unaudited) 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II - Other Information
Items I through 6 14
Signatures 15
Exhibits 16
ARGUSS HOLDINGS, INC.
Consolidated Balance Sheets
(Unaudited)
Sept. 30, 1997 Dec. 31,1996
Assets
Current assets:
Cash $ 3,161,000 $ 10,318,000
Accounts receivable, net 12,624,000 2,917,000
Inventories 4,504,000 4,133,000
Other assets, current 1,711,000 339,000
Total current assets 22,000,000 17,707,000
Property, plant and equipment 9,974,000 1,393,000
Goodwill and other assets 21,800,000 7,000
$53,774,000 $ 19,107,000
Liabilities and Stockholders' Equity
Current liabilities:
Current portion long-term debt $1,210,000 $ 48,000
Short-term borrowings 4,100,000 -
Accounts payable 3,016,000 1,479,000
Accrued expenses and other
liabilities 4,055,000 1,771,000
Total current liabilities 12,381,000 3,298,000
Long-term debt, excluding
current portion 5,400,000 1,038,000
Deferred income taxes 873,000 -
Stockholders' equity:
Common stock $.0l par value 73,000 57,000
Additional paid-in capital 34,407,000 16,077,000
Retained Earnings 640,000 (1,363,000)
Total stockholders' equity 35,120,000 14,771,000
53,774,000 19,107,000
The accompanying notes are an integral part of these consolidated financial
statements.
ARGUSS HOLDINGS, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
Net Sales $14,168,000 $4,072,000 $ 35,826,000 $11,632,000
Cost of sales excluding
depreciation 9,610,000 2,763,000 24,375,000 7,931,000
Gross profit 4,558,000 1,309,000 11,451,000 3,701,000
Expenses:
Selling, general and
administrative 2,374,000 830,000 5,943,000 2,675,000
Depreciation 376,000 86,000 824,000 254,000
Engineering and
development 238,000 211,000 811,000 761,000
Income from operations 1,570,000 182,000 3,873,000 11,000
Other expense:
Goodwill amortization 225,000 - 618,000 -
Interest expense, net 104,000 46,000 250,000 137,000
Income (loss) before
income taxes 1,241,000 136,000 3,005,000 (126,000)
Income tax expense 631,000 - 1,003,000 -
Net income (loss) $ 610,000 $ 136,000 $ 2,002,000 $ (126,000)
Net income (loss)
per share $ .08 $ .08 $ .26 $ (.07)
Weighted average number
of shares outstanding 8,017,000 1,700,000 7,671,000 1,700,000
The accompanying notes are an integral part of these consolidated financial
statements.
ARGUSS HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
Cash flows from operating activities:
Net income (loss) $ 2,002,000 $ (126,000)
Adjustments to reconcile net income (loss) to net
Cash provided by (used for) operating activities:
Goodwill amortization 618,000 -
Depreciation 824,000 254,000
Deferred income taxes 187,000 -
Stock option expense 128,000 -
Changes in assets and liabilities:
Accounts receivable (2,853,000) (227,000)
Inventories (80,000) (444,000)
Refundable income taxes and other assets (637,000) 10,000
Accounts payable (1,595,000) 216,000
Accrued expenses and other liabilities 1,928,000 19,000
Net cash provided by (used for)
operating activities 522,000 (298,000)
Cash flows used for investing activities:
Purchase of White Mountain Cable Construction
Corp. and TCS Communications, Inc. (8,711,000) -
Additions to property, plant and equipment (3,898,000) (58,000)
Net cash used for investing activities (12,609,000) (58,000)
Cash flows used for financing activities:
Proceeds from line of credit 10,860,000 390,000
Repayments of notes payable (5,930,000) (32,000)
Net cash provided by financing activities 4,930,000 358,000
Net increase (decrease) in cash (7,157,000) 2,000
Cash at beginning of period 10,318,000 10,000
Cash at end of period $ 3,161,000 $ 12,000
The accompanying notes are an integral part of these consolidated financial
statements.
ARGUSS HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
A) Restructuring
Prior to May 1997, Arguss Holdings, Inc. (the "Company")
operated as a single entity under the name "Conceptronic, Inc."
On May 9, 1997, the shareholders of the Company approved a plan
providing for the internal restructuring of the Company whereby
the Company became a holding company and its operating assets
were held by wholly owned operating subsidiaries. Accordingly,
on May 9, 1997, the Company transferred substantially all of its
Conceptronic, Inc. operating assets to a newly formed, wholly
owned subsidiary of the Company, and the Company changed its
name to "Arguss Holdings, Inc." The subsidiary then adopted the
name "Conceptronic, Inc." The Company's other wholly owned
operating subsidiary is White Mountain Cable Construction Corp.
("WMC").
The Company conducts its operations through its wholly owned
subsidiaries, WMC and Conceptronic. WMC is engaged in the
construction, reconstruction, maintenance, repair and expansion
of communications systems, cable television and data systems,
including providing aerial construction and splicing of both
fiber optic and coaxial cable to major communications customers.
Conceptronic manufactures and sells highly advanced, computer-
controlled equipment used in the SMT circuit assembly industry.
B) Basis for Presentation
As permitted by the rules of the Securities and Exchange
Commission (the "Commission") applicable to quarterly reports on
Form 10-QSB, these notes are condensed and do not contain all
disclosures required by generally accepted accounting
principles. Reference should be made to the financial
statements and related notes included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996,
filed with the Commission on March 31, 1997.
In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments considered
necessary to present fairly the financial position of the
Company as of September 30, 1997 and the results of operations
and cash flows for the periods presented. The Company prepares
its interim financial information using the same accounting
principles as it does for its annual financial statements.
Research and development expenses incurred and expensed were
$371,000 and $95,000, respectively, for the nine and three
months ended September 30, 1997 and $295,000 and $70,000,
respectively, for the nine and three months ended September 30,
1996.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the
full year.
The Company reclassified certain information from prior year
financial statements to conform to the current year
presentation.
C) Earnings per Share
Earnings per share is computed based on the weighted average
number of common shares outstanding adjusted, when dilutive, for
the number of shares issuable upon assumed exercise of stock
options after the assumed repurchase of shares with the related
proceeds. Earnings per share for individual quarters during the
year may not aggregate to year to date earnings per share due to
differences in the number of weighted average shares used in
each reporting period's calculation and mathematical rounding.
On May 25, 1997, 4,000,000 shares of the Company's Class A
Common Stock converted into 4,000,000 shares of the Company's
Common Stock pursuant to the terms of the Class A Common Stock.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS No. 128). SFAS No. 128 supersedes
Accounting Principles Board Opinion No. 15 and specifies the
computation, presentation and disclosure requirements for
earnings per share. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after
December 15, 1997 and early application is not permitted.
Accordingly, the Company will apply SFAS No. 128 for the quarter
and year ended December 31, 1997 and restate prior period
information as required under the statement. The Company has
determined that if SFAS No. 128 had been applied for the nine
months and three months ended September 30, 1997 the impact on
earnings per share as currently stated would be immaterial.
D) Taxes
During the nine months ended September 30, 1997, the Company
reversed the valuation allowance previously recorded against the
entire deferred tax asset of approximately $554,000. Based on
the weight of evidence available, management determined that it
is more likely than not that the deferred tax asset will be
realized at a future date. During the nine months ended
September 30, 1997, the Company also recorded tax expense of
$1,556,000 based on its estimated annual effective tax rate
applied to pretax income.
E) White Mountain Cable Construction Corp.
In the first quarter of 1997, the Company acquired WMC. The
purchase price was approximately $17,200,000 and consisted of
1,571,326 shares of Common Stock, $ .01 par value per share, of
the Company and approximately $8,642,000 in cash. The Company
has classified as goodwill approximately $15,700,000, which
represents the cost in excess of the fair value of the net
assets of WMC. The acquisition was accounted for as a purchase
transaction. Goodwill is being amortized using the straight-
line method over 20 years. The Company also acquired, during
the third quarter of 1997, a corporate office and operations
facility directly from the previous owners of WMC for an
acquisition price of approximately $345,000.
F) TCS Communications, Inc.
The Company acquired, effective September 1, 1997, through its
wholly owned subsidiary WMC, the assets of TCS Communications,
Inc. ("TCS") headquartered in Palm Harbor, Florida.
TCS provides underground and aerial construction services and
splicing for fiber optic and coaxial cable to major
telecommunications customers on a national level. The purchase
price for TCS' assets was approximately $10,000,000, and was
satisfied by the issuance of approximately 1,170,000 shares of
the Company's common stock. Of this amount, 662,000 shares were
issued at closing representing approximately $5,000,000 of the
purchase price.
The total number of shares of the Company's common stock to be
issued will change as the Company has agreed to issue sufficient
shares of common stock to provide $5,000,000 in value for the
remainder of the purchase price. As at the acquisition date,
the number of such shares of common stock required to realize
$5,000,000 will be known when TCS sells these shares in market
transactions within ninety days.
The TCS purchase agreement contains provision for additional
payments by the Company to the TCS shareholders to be satisfied
by the issuance of Company common stock if certain minimum
EBITDA thresholds are met for the year ended August 31, 1998.
One-half of the additional payment will be satisfied by the
issuance of shares of common stock valued at $6.40 per share.
The second half of the payment will be satisfied by the issuance
of shares of common stock valued at prevailing market prices
during the ninety day period following August 31, 1998. Any
additional payments earned under the terms of the agreement will
be recorded as an increase of the total acquisition price.
The TCS acquisition has been accounted for as a purchase. The
excess of the total acquisition cost over the fair value of the
net assets acquired of $6,716,000 is being amortized by the
straight-line method over twenty years resulting in $28,000 of
goodwill amortized for the three months ended September 30,
1997.
G) Business Segment Information
The Company's operations have been classified into two business segments
for the three and nine month periods ended September 30, 1997, Cable
Construction and Manufacturing. Summary financial information for the two
segments is as follows:
Sept. 30, 1997
Three Months Ended Nine Months Ended
Cable Cable
Construction Mfg. Construction Mfg.
Net Sales $ 9,251,000 $ 4,917,000 $22,180,000 $ 13,646,000
Cost of sales excluding
depreciation 6,444,000 3,166,000 15,311,000 9,064,000
Gross profit 2,807,000 1,751,000 6,869,000 4,582,000
Operating expenses
before depreciation 912,000 1,684,000 2,040,000 4,675,000
Depreciation expense 320,000 55,000 650,000 173,000
Goodwill amortization 225,000 - 618,000 -
Net interest and other
expense (1) 81,000 40,000 190,000 100,000
Pretax operating
income (loss) $ 1,269,000 $(28,000) $3,371,000 $(366,000)
Capital Expenditures $ 1,803,000 $16,000 $3,668,000 $98,000
Property Plant and
Equipment, Net $ 8,522,000 $1,413,000 $8,522,000 $1,413,000
(1) Net interest and other expense at the segment level
does not include corporate interest income and as a
consequence it does not aggregate to consolidated financial
amounts reported.
H) Litigation
On December 13, 1991, the Company was served with a complaint
from Vitronics Corporation ("Vitronics"), one of the Company's
competitors, alleging patent infringement involving its reflow
soldering ovens. Vitronics sought an injunction, together with
unspecified damages and costs. The claim was filed in the
United States Federal District Court, District of New Hampshire.
In August 1995, the U.S. District Court issued a directed
verdict of non-infringement in the Company's favor regarding
method patent #4,654,502. Additionally, a decision was reached
on the apparatus patent #4,833,301 by a jury, which found non-
infringement on all past and current Conceptronic ovens.
Vitronics appealed the directed verdict on patent #4,654,502 and
the United States Court of Appeals for the First Circuit ("Court
of Appeals") subsequently reversed and remanded the case for
further proceeding. In October 1997, the Court of Appeals
administratively dismissed the case.
In related actions, in April 1997, the United States Patent
Office ("PTO") rejected certain claims of Vitronics' patent
#4,654,502 as being unpatentable. This decision by the PTO, if
upheld on appeal, should terminate the pending lawsuit. In
December 1996, the Company named Vitronics and its Chairman and
CEO, James Manfield in a lawsuit, filed in Superior Court of the
State of New Hampshire, citing malicious prosecution and abuse
of process. The suit claims that Vitronics, when it initiated
the 1991 patent infringement case against Conceptronic, knew or
should have known that the suit was without merit and that claim
1 of U.S. Patent #4,883,301 was invalid, unenforceable and as
consequence that the patent was not infringed.
In the opinion of counsel, the ultimate outcome of this
litigation cannot presently be determined. Management of the
Company believes that Vitronics' claim is without merit and that
the Company will ultimately prevail. Accordingly, no provision
has been made in the accompanying financial statements for any
potential liability that might result.
I) Subsequent Events
In October 1997, the Company acquired, through its wholly owned
subsidiary WMC, Rite Cable Construction, Inc. ("RITE")
headquartered in Deland, Florida. The purchase price was
approximately $3.8 million and was satisfied by the issuance of
154,000 shares of the Company's common stock and $1,613,000 in
cash.
The Rite purchase agreement contains provision for additional
payments by the Company to the Rite shareholders to be satisfied
by the issuance of Company common stock if certain EBITDA
thresholds are met for the year ended September 30, 1998. One-
half of the additional payment will be satisfied by cash and the
remainder by the issuance of common stock at $8.50 per share.
The Company continues to pursue acquisitions in the cable
construction industry. As of October 31, 1997, the Company had
signed letters of intent to purchase Can-Am Construction, Inc.,
Line Techs, Inc. and Schenck Communications, Inc. The
consummation of these proposed transactions is contingent upon
the completion of due diligence analysis, the signing of a
definitive purchase and sale agreement, approval of both
companies' boards of directors and other conditions.
ARGUSS HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1997 Compared to Three Months
Ended September 30, 1996.
The Company had net income of approximately $610,000 for the
three months ended September 30, 1997 compared to net income of
$136,000 for the three months ended September 30, 1996. The
increase in net income was due primarily to the profitable
results of WMC whose pretax income was $1,300,000. (See Note E
to Consolidated Financial Statements).
Net sales for the three months ended September 30, 1997
increased $10,096,000 or 248% to approximately $14,168,000 from
approximately $4,072,000 for the three months ended September
30, 1996 due primarily to the acquisition of WMC which had sales
of $8,097,000 and to Conceptronic's increase in sales of
$845,000 or 21%. Conceptronic sales for the third quarter of
1997 were favorably impacted by increased bookings of 22% or
$847,000 during the quarter. The increase in Conceptronic sales
resulted from concerted efforts to increase market penetration
in the SMT circuit assembly equipment industry.
Gross profit margin, excluding depreciation, was 32% of sales
for the three months ended September 30, 1997 compared to 32%
for the comparable period in 1996. WMC had approximately a 31%
gross profit margin for the three month period in 1997, while
Conceptronic improved its margins to 36% through improved
absorption of manufacturing costs and by higher sales levels
with a product mix which had favorable margins.
Selling, general and administrative expenses for the three
months ended September 30, 1997 were $2,374,000 compared to
$830,000 for the comparable period one year ago. The increase
was largely due to the acquisition of WMC, which accounted for
$668,000 in expenses as well as increased costs at Conceptronic
for infrastructure expenditures.
Depreciation expense increased to $376,000 for the three months
ended September 30, 1997 compared to $86,000 for the three
months ended September 30, 1996 due primarily to WMC which had
$260,000 of depreciation expense.
In the first quarter of 1997, the Company acquired WMC for a
purchase price of approximately $17,200,000 which consisted of
1,571,326 shares of Common Stock, $ .01 par value per share, of
the Company and approximately $8,642,000 in cash. The Company
has classified as goodwill approximately $15,700,000, which
represents the cost in excess of the fair value of the net
assets of WMC, which was accounted for as a purchase
transaction. Goodwill is being amortized using the straight-
line method over 20 years resulting in goodwill amortization of
$197,000 for the three months ended September 30, 1997.
The Company acquired, effective September 1, 1997, through its
wholly owned subsidiary WMC, the assets of TCS Communications,
Inc. ("TCS") headquartered in Palm Harbor, Florida.
TCS provides underground and aerial construction services and
splicing for fiber optic and coaxial cable to major
telecommunications customers on a national level. The purchase
price for TCS' assets was approximately $10,000,000, and was
satisfied by the issuance of approximately 1,170,000 shares of
the Company's common stock. Of this amount, 662,000 shares were
issued at closing representing approximately $5,000,000 of the
purchase price. The total number of shares of the Company's
common stock to be issued will change as the Company has agreed
to issue sufficient shares of common stock to provide $5,000,000
in value for the remainder of the purchase price. As at the
acquisition date, the number of such shares of common stock
required to realize $5,000,000 will be known when TCS sells
these shares in market transactions within ninety days.
The TCS purchase agreement contains provision for additional
payments by the Company to the TCS shareholders to be satisfied
by the issuance of the Company's common stock if certain minimum
EBITDA thresholds are met for the year ended August 31, 1998.
One-half of the additional payment will be satisfied by the
issuance of shares of common stock valued at $6.40 per share.
The second half of the payment will be satisfied by the issuance
of shares of common stock valued at prevailing market prices
during the ninety day period following August 31, 1998. Any
additional payments earned under the terms of the agreement will
be recorded as an increase of the total acquisition price.
The TCS acquisition has been accounted for as a purchase. The
excess of the total acquisition cost over the fair value of the
net assets acquired of $6,716,000 is being amortized by the
straight-line method over twenty years resulting in $28,000 of
goodwill amortized for the three months ended September 30,
1997.
Net interest expense for the three months ended September
30,1997 was $104,000 compared to $46,000 for the comparable
period one year ago. The WMC net interest expense for the third
quarter of 1997 was $77,000.
Income tax expense increased from zero to $630,000 due primarily
to the profitable operations of WMC.
Nine Months Ended September 30, 1997 Compared to Nine Months
Ended September 30, 1996.
The Company had net income of approximately $2,002,000 for the
nine months ended September 30,1997 compared to a net loss of
$126,000 for the comparable period of 1996. During the nine
months ended September 30, 1997 improvement in earnings was due
primarily to the profitable results of WMC whose pretax income
was $3,404,000 and whose results are included commencing January
1, 1997. The increase in Conceptronic's pretax operating loss
to $366,000 for the nine months ended September 30, 1997
compared to a pretax loss of $126,000 in the comparable period
one year ago is due to increased operating expenses. (See
discussion below.)
Net sales for the nine months ended September 30, 1997 were
approximately $35,826,000 compared to $11,632,000 for the
comparable period of 1996, an increase of 208%. The increase is
primarily due to WMC sales of $21,026,000 and an increase of
$2,014,000 or 17% in Conceptronic sales for the nine months
ended September 30, 1997 which were favorably impacted by
increased bookings of 17% or $1,944,000 during the nine months
ended September 30, 1997. The increase in Conceptronic sales
resulted from concerted efforts to increase market penetration
in the SMT circuit-assembly equipment industry.
Gross profit margin, excluding depreciation, was 32% for the
nine months ended September 30, 1997 compared to 32% for the
same period in 1996. WMC had a 31% gross profit margin and
Conceptronic improved its margins to 34% through improved
absorption of manufacturing costs by higher sales levels with a
product mix, which has favorable margins.
Selling, general and administrative expenses for the nine months
ended September 30, 1997 were $5,943,000 compared to $2,675,000
for the same period in 1996. The increase is largely due to
WMC, which accounted for $1,799,000 of these expenses and
increased costs at Conceptronic, which was the result of its
infrastructure expenditures.
Depreciation expense was $824,000 for the nine months ended
September 30, 1997 compared to $254,000 for the nine months
ended September 30, 1996 due primarily to WMC which had $590,000
of depreciation expense.
Net interest expense for the nine months ended September 30,
1997 was $250,000 compared to $137,000 for the comparable period
of 1996. The WMC net interest expense was $186,000 for the
first nine months of 1997. Conceptronic's expense for the nine
months ended September 30, 1997 decreased $37,000, to $100,000,
due to reduced average amounts outstanding under its credit
line. These amounts were partially offset by short-term
interest income.
Income tax expense increased from zero to $1,003,000 due
primarily to the profitable operations of WMC. The effective
income tax rate was reduced as a result of the reversing of
valuation allowances previously recorded against the entire
deferred tax asset of $554,000.
Liquidity and Capital Resources
Net cash provided by operations for the nine months ended
September 30, 1997 improved to $522,000 from a net use of cash
of $298,000 for the nine months ended September 30, 1996. The
positive impact of the WMC acquisition is reflected in the
$632,000 positive cash flow from operations that WMC provided
during the nine months ended September 30, 1997. The negative
cash flow from Conceptronic operations for the nine months ended
September 30, 1997 is due to the pretax loss of $366,000 for the
nine months ended September 30, 1997 and an increase in
inventories to support on time reflow oven deliveries. Net cash
used for investing activities for the nine months ended
September 30, 1997 was $12,609,000, compared to $58,000 in the
comparable period of 1996. The increase in investing activities
is primarily due to the acquisition of WMC and TCS, as well as
its capital equipment acquisition program to support WMC's
continued sales growth. Net cash flows provided by financing
activities was $4,930,000 for the nine months ended September
30, 1997 compared to net cash flows provided by financing
activities of $358,000 for the comparable period in 1996. The
net increase reflects the proceeds from the Company's working
capital and equipment acquisition credit lines.
The acquisition of WMC significantly impacted various balance
sheet accounts during 1997. Cash declined by $7,157,000 to
$3,161,000 due primarily to the WMC acquisition, which used net
cash of $8,879,000. Accounts receivable increased $9,707,000
primarily due to the consolidation of WMC and TCS receivables of
$9,051,000 and the increased quarter end sales activity at
Conceptronic. Long-term debt increased $4,362,000 due primarily
to the addition of WMC's and TCS'$4,399,000 in long-term debt.
The Company has $4,500,000 in revolving lines of credit with
commercial banks of which $4,100,000 was drawn down as of
September 30, 1997 to fund increased inventories and capital
asset purchases.
Arguss continues to actively pursue acquisitions in the cable
construction industry. Subject to due diligence and other
considerations, the Company's commercial banking relationships
have supported the acquisition program by expansion of the
Company's credit facilities for equipment financing, revolving
lines of credit and acquisition financing facilities.
The Company believes it has sufficient cash flows from
operations, cash on hand, and availability under its credit line
to meet its liquidity needs for the foreseeable future.
ARGUSS HOLDINGS, INC.
PART II
Other Information
Item 1: Legal proceedings: On December 13, 1991, the
Company was served with a complaint from Vitronics Corporation
("Vitronics"), one of the Company's competitors, alleging patent
infringement involving its reflow soldering ovens. Vitronics
sought an injunction, together with unspecified damages and
costs. The claim was filed in the United States Federal
District Court, District of New Hampshire.
In August 1995, the U.S. District Court issued a directed
verdict of non-infringement in the Company's favor regarding
method patent #4,654,502. Additionally, a decision was reached
on the apparatus patent #4,833,301 by a jury, which found non-
infringement on all past and current Conceptronic ovens.
Vitronics appealed the directed verdict on patent #4,654,502 and
the United States Court of Appeals for the First Circuit ("Court
of Appeals") subsequently reversed and remanded the case for
further proceeding. In October 1997, the Court of Appeals
administratively dismissed the case.
In related actions, in April 1997, the United States Patent
Office ("PTO") rejected certain claims of Vitronics' patent
#4,654,502 as being unpatentable. This decision by the PTO, if
upheld on appeal, should terminate the pending lawsuit. In
December 1996, the Company named Vitronics and its Chairman and
CEO, James Manfield in a lawsuit, filed in Superior Court of the
State of New Hampshire, citing malicious prosecution and abuse
of process. The suit claims that Vitronics, when it initiated
the 1991 patent infringement case against Conceptronic, knew or
should have known that the suit was without merit and that claim
1 of U.S. Patent #4,883,301 was invalid, unenforceable, and as a
consequence the patent was not infringed.
In the opinion of counsel, the ultimate outcome of this
litigation cannot presently be determined. Management of the
Company believes that Vitronics' claim is without merit and that
the Company will ultimately prevail. Accordingly, no provision
has been made in the accompanying financial statements for any
potential liability that might result.
Items 2, 3, 4 and 5: Not Applicable.
Item 4: Submission of Matters to a Vote of Security Holders.
Item 6: Exhibits and Reports on Form 8-K.
(a) 11a Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
In a report on Form 8-K, dated September 19, 1997, the
Company reported under item 2, "Acquisition or Disposition
of Assets," the acquisition by the company, through a
wholly owned subsidiary, of TCS Communications, Inc. As an
exhibit on Form 8-K, the company reported under item 7 -
Financial Statements and Exhibits - the audited balance
sheet of TCS Communications, Inc. as of December 31, 1996
and 1995, and related statements of income, retained
earnings and cash flow for the years then ended, as well as
the unaudited pro forma balance sheet of Arguss as of June
30, 1997 and unaudited statements of operations for the
fiscal year ended December 31, 1996 and for the six months
ended June 30, 1997 giving effect to the pro forma impact
of the acquisition of TCS.
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.
Arguss Holdings, Inc.
November 10, 1997 By: \\Rainer H. Bosselmann
Rainer H. Bosselmann
Chief Executive Officer
November 10, 1997 By: \\ Arthur F. Trudel
Arthur F. Trudel
Principal Financial Officer
and Principal
Accounting Officer
EXHIBIT 11a
ARGUSS HOLDINGS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
NET INCOME (LOSS) $2,002,000 $(126,000)
PRIMARY EARNINGS PER SHARE
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 7,395,000 1,700,000
STOCK OPTIONS 276,000 -
7,671,000 1,700,000
NET INCOME (LOSS)PER SHARE $.26 $(.07)
Three Months Ended
Sept. 30, 1997 Sept. 30, 1996
NET INCOME $610,000 $136,000
PRIMARY EARNINGS PER SHARE
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 7,644,000 1,700,000
STOCK OPTIONS 373,000 -
8,017,000 1,700,000
NET INCOME PER SHARE $.08 $.08
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,161,000
<SECURITIES> 0
<RECEIVABLES> 12,624,000
<ALLOWANCES> 0
<INVENTORY> 4,504,000
<CURRENT-ASSETS> 22,000,000
<PP&E> 16,150,000
<DEPRECIATION> (6,176,000)
<TOTAL-ASSETS> 53,774,000
<CURRENT-LIABILITIES> 12,381,000
<BONDS> 0
0
0
<COMMON> 34,480,000
<OTHER-SE> 640,000
<TOTAL-LIABILITY-AND-EQUITY> 53,774,000
<SALES> 14,168,000
<TOTAL-REVENUES> 14,168,000
<CGS> 9,610,000
<TOTAL-COSTS> 9,610,000
<OTHER-EXPENSES> 3,213,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,000
<INCOME-PRETAX> 1,241,000
<INCOME-TAX> (631,000)
<INCOME-CONTINUING> 610,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 610,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
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