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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number: 001-14217
INDUSTRIAL DATA SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
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(State of incorporation or organization)
88-0322261
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(I.R.S. Employer Identification Number)
600 CENTURY PLAZA DRIVE, BUILDING 140, HOUSTON, TEXAS 77073-6013
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(Address of Principal Executive Offices) (Zip Code)
(281) 821-3200
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 15(d) of the Securities Exchange act of 1934 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 [ ]
Shares outstanding of the issuer's Common Stock as of November 1, 2000 was
12,964,918.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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QUARTERLY REPORT ON FORM 10-QSB
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART 1 FINANCIAL INFORMATION NUMBER
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<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2000 and
December 31, 1999............................................... 1
Condensed Consolidated Statements of Operations for the Three
Months and Nine Months ended September 30, 2000 and
September 30, 1999.............................................. 2
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 2000 and September 30, 1999.......... 3
Notes to Condensed Consolidated Financial Statements............ 4
ITEM 2 Management's Discussion and Analysis............................ 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................... 11
Item 2. Changes in Securities........................................... 11
ITEM 3. Defaults Upon Senior Securities................................. 11
ITEM 4. Submission of Matters to a Vote of Security Holders............. 11
ITEM 5. Other Information............................................... 11
ITEM 6. Exhibits and Reports on Form 8-K................................ 11
Signature....................................................... 12
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
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(Unaudited)
ASSETS
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 352,521 $ 663,972
Marketable securities, at market value - available for sale 437,957 300,000
Accounts receivable - trade, less allowance for doubtful accounts of
approximately $17,000 in 2000 and $6,500 for 1999 3,542,416 2,540,835
Inventory 765,766 771,808
Notes receivable from stockholder 150,000 150,000
Federal income tax receivable 19,621 53,000
Prepaid and other 625,460 329,441
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Total current assets 5,893,741 4,809,056
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PROPERTY AND EQUIPMENT, Net 1,406,626 1,070,218
GOODWILL, Net 22,500 34,650
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Total assets $7,322,867 $5,913,924
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable to bank $ 519,476 $ 342,010
Current portion - Long term debt and capital lease 2,197 39,259
Accounts payable 1,426,942 779,017
Deferred income taxes payable 45,000 45,000
Accrued expenses and other current liabilities 471,494 297,454
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Total current liabilities 2,465,109 1,502,740
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Long term debt 386,303 384,658
Capital lease payable 141,266 --
DEFERRED INCOME TAX 52,000 52,000
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Total liabilities 3,044,678 1,939,398
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STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 75,000,000 shares authorized; 12,964,918
shares issued in 2000, 12,964,918 shares issued in 1999 12,965 12,965
Additional paid-in capital 2,640,154 2,640,154
Retained earnings 1,625,070 1,321,407
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Total stockholder' equity 4,278,188 3,974,526
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Total liabilities and stockholders' equity $7,322,867 $5,913,924
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</TABLE>
See accompanying notes to these condensed consolidated financial statements.
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 5,141,149 $ 2,884,379 $11,865,102 $ 8,739,224
OPERATING EXPENSES:
Cost of goods sold 3,605,427 2,256,524 8,635,054 6,395,397
Selling, G&A, Depreciation & Amortization 1,139,025 529,008 2,820,065 1,976,358
----------- ----------- ----------- -----------
4,744,452 2,785,532 11,455,119 8,371,755
----------- ----------- ----------- -----------
Operating Profit 396,697 98,847 409,983 367,469
OTHER INCOME (EXPENSE
Realized gains on marketable securities, net -- 30,318 -- 99,118
Net unrealized gains (losses) on marketable
securities -- (83,949) -- (35,391)
Other income -- 85 32,012 803
Interest expense, net (18,988) (953) (57,333) (15,048)
----------- ----------- ----------- -----------
(18,988) (54,499) (25,321) 49,482
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION
FOR INCOME TAXES 377,709 44,348 384,662 416,951
PROVISION FOR INCOME TAXES 81,000 (72,812) 81,000 85,727
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 296,709 117,160 303,662 331,224
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS -- 6,229 -- (630,829)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 296,709 $ 123,389 $ 303,662 $ (299,605)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.023 $ 0.009 $ 0.023 $ (0.023)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING 12,964,918 13,073,718 12,964,918 13,073,718
=========== =========== =========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
2
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 303,662 $ (299,605)
Non-cash write-off of goodwill -- 765,261
Depreciation and amortization 137,858 97,148
Changes in working capital (558,612) (847,014)
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Net cash used in operating activities (117,092) (284,210)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment acquired (336,408) (45,749)
Purchase of investments -- (137,152)
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Net cash used in investing activities (336,408) (182,901)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment on long term note payable (35,417) (44,480)
Repayment on notes payable, net 177,466 (285,676)
Purchase of treasury stock -- (67,045)
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Net cash provided by (used in) financing activities 142,049 (397,201)
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NET CHANGE IN CASH AND
CASH EQUIVALENTS (311,451) (864,312)
CASH AND CASH EQUIVALENTS, at beginning of period 663,972 1,225,821
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CASH AND CASH EQUIVALENTS, at end of period $ 352,521 $ 361,509
========= ==========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 57,333 $ 38,499
Income taxes paid 2,000 210,000
* Non-Cash Transactions: Equipment Lease 151,471 --
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
3
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements of Industrial Data Systems
Corporation (the "Company") 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 consolidated 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 misleading. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest Annual Report to
Shareholders and the Annual Report on Form 10KSB for the year ended December
31, 1999. In the opinion of the Company, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position as of September 30, 2000; the results of operations for the three
months and nine months ended September 30, 2000 and 1999; and cash flows for
the nine months ended September 30, 2000 and 1999 have been included. The
foregoing interim results are not necessarily indicative of the results of
the operations for the full fiscal year ending December 31, 2000.
2. NOTE RECEIVABLE FROM STOCKHOLDER:
At September 30, 2000, the Company had notes receivable due from a
stockholder in the amount of $150,000. The notes are unsecured, due on
demand and bear interest at a rate of 9% per annum. Interest on the notes is
accrued monthly and is due annually.
3. DISCONTINUED OPERATIONS:
In October 1999, the Company entered into a settlement agreement with the
former owner of IDS FAB to rescind the original acquisition agreement dated
November 1, 1998. As a result of the settlement agreement, the Company
received the originally issued 50,000 shares of its Common Stock, valued at
$43,750 at the date of the rescission, back from the former owner. All
assets and liabilities of IDS FAB, except amounts owed to other Company
entities, were transferred back to and assumed by the former owner of IDS
FAB.
The results of operation of IDS FAB have been reclassified as discontinued
operations during the 1999 period.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is qualified in its entirety by, and should be read
in conjunction with, the Company's Condensed Consolidated Financial Statements
including the notes thereto, included elsewhere herein.
OVERVIEW
The Company's Engineering segment generates approximately 70% of the revenues
for the Company. These revenues are generated by providing engineering
consulting services to the pipeline and process divisions of major integrated
oil and gas companies. These services include the development, management and
turnkey execution of engineering projects. The engineering consulting segment,
which had previously operated as Industrial Data Systems, Inc. dba IDS
Engineering, was incorporated as a Texas corporation under the name of IDS
Engineering, Inc. (IED), in November 1997. In February 1999, a business
development office was established in Tulsa, Oklahoma to pursue turnkey
engineering, procurement and construction (EPC) projects.
The Company generates other revenues through segments involved in the made-
to-order manufacture of industrial equipment.
Thermal Corporation, the Air Handling segment, was acquired in February 1997.
This segment fabricates air handling equipment for commercial heating
ventilation and cooling systems and represents approximately 18% of the
Company's revenues.
Constant Power Manufacturing, Inc., the Power Systems segment, was acquired
in March 1998. This segment manufactures industrial grade uninterruptible
electrical power systems and battery chargers and represents approximately 12%
of the Company's revenues.
Industrial Data Systems, Inc, the Products segment, configures and assembles
specialty computer systems for commercial customers. Due to increased
competition in the computer hardware market and diminishing profit margins,
management is considering alternative plans for this segment. This segment
represents approximately 1% of the Company's revenues.
MLC Enterprises, Inc. (MLC), was acquired in November 1998. The name was
changed to IDS Fabricated Systems, Inc. (IDS FAB), the Fabricating segment. Due
to previously disclosed litigation between the Company and a former principal of
MLC, operations at this segment were suspended in April 1999 and in October
1999, the original acquisition agreement was rescinded (see Notes to Condensed
Consolidated Financial Statements - Note 3). The operating results of this
segment were reported as discontinued operations in 1999.
FORWARD-LOOKING STATEMENTS
Certain information contained in this Quarterly Report on Form 10-QSB
(including statements contained in Part 1, Item 2. "Management's Discussion and
Analysis", as well as other written and oral statements made or incorporated by
reference from time to time by the Company and its representatives in other
reports, filings with the Securities and Exchange Commission, press releases,
conferences, or otherwise, may be deemed to be forward-looking statements within
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the meaning of Section 21E of the Securities Exchange Act of 1934. This
information includes, without limitation, statements concerning the Company's
future financial position, and results of operations; planned capital
expenditures; business strategy and other plans for future operations; the
future mix of revenues and business; commitments and contingent liabilities;
Year 2000 issues; and future demand and industry conditions. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. When used in this report, the words "anticipate,"
"believe," "estimate," "expect," "may," and similar expressions, as they relate
to the Company and its management, identify forward-looking statements. The
actual results of future events described in such forward-looking statements
could differ materially from the results described in the forward-looking
statements due to the risks and uncertainties set forth within this Quarterly
Report on Form 10-QSB generally.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data derived from the Company's consolidated statements of operations and
indicates percentage of total revenue for each item.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------------------- -------------------- ------------------- -------------------
Amount % Amount % Amount % Amount %
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Engineering $3,516,564 68.4 $1,631,762 56.6 $ 7,166,075 60.4 $4,312,430 49.3
Air Handling 936,046 18.2 709,561 24.6 2,525,704 21.3 2,421,778 27.7
Power Systems 613,590 11.9 422,183 14.6 1,871,021 15.8 1,526,121 17.5
Products 74,949 1.5 120,873 4.2 302,302 2.5 478,895 5.5
---------- ------- ---------- ------- ----------- ----- ---------- -----
Total Revenue $5,141,149 100.0 $2,884,379 100.0 $11,865,102 100.0 $8,739,224 100.0
========== ======= ========== ======= =========== ===== ========== =====
Gross Profit:
Engineering $ 986,162 28.0 $ 478,349 29.3 $ 2,016,751 28.1 $1,402,711 32.5
Air Handling 329,009 35.1 79,924 11.3 596,107 23.6 471,340 19.5
Power Systems 233,787 38.1 77,299 18.3 601,506 32.1 398,714 26.1
Products (13,236) (17.7) (7,717) (6.4) 15,684 5.2 71,062 14.8
---------- ---------- ----------- ----------
Total gross profit $1,535,722 29.9 $ 627,855 21.8 $ 3,230,048 27.2 $2,343,827 26.8
========== ======= ========== ======= =========== ===== ========== =====
Selling, general and
administrative expenses $1,139,025 22.2 529,008 18.3 $ 2,820,065 23.8 $1,976,358 22.6
---------- ---------- ----------- ----------
Operating Profit 396,697 7.7 98,847 3.4 409,983 3.5 367,469 4.2
Other income (expense) (18,988) (0.4) (54,499) (1.9) (25,321) (0.2) 49,482 0.6
---------- ---------- ----------- ----------
Income from continuing
operations before
provision for income
taxes 377,709 7.3 44,348 1.5 384,662 3.2 416,951 4.8
Provision for income
taxes 81,000 1.6 (72,812) (2.5) 81,000 0.7 85,727 1.0
---------- ---------- ----------- ----------
Income from continuing
operations 296,709 5.8 117,160 4.1 303,662 2.6 331,224 3.8
Income (loss) from
discontinued
operations -- 0.0 6,229 0.2 -- 0.0 (630,829) (7.2)
---------- ---------- ----------- ----------
Net Income (Loss) $ 296,709 5.8 $ 123,389 4.3 $ 303,662 2.6 $ (299,605) (3.4)
========== ======= ========== ======= =========== ===== ========== =====
</TABLE>
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THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000
TOTAL REVENUE. Total revenue increased by $2,256,770 or 78.2% from
$2,884,379 for the three months ended September 30, 1999, compared to $5,141,149
in 2000. Revenue from Engineering, which comprised 68.4% of total revenue for
the three months ended September 30, 2000, increased by $1,884,802 or 115.5%
over the same period in 1999. This increase is due to the wider scope of
projects the Engineering segment is now undertaking, to additional projects
attributable to the Tulsa operation and to the large Caspian Sea contracts
awarded to the Company in February and June, 2000.
The Air Handling segment generated revenues comprising 18.2% of total
revenue for the three months ended September 30, 2000. The revenue for this
segment increased by $226,485 or 31.9% from the 1999 period. This increase was
attributable to a seasonal upturn during the third quarter period. A sales
order backlog of approximately $900,000 was on the books as of September 30,
2000.
Revenue from the Power Systems segment which accounted for 11.9% of total
revenue for the three months ended September 30, 2000, was $613,590, an increase
of $191,407 or 45.3% from the 1999 period. This increase was attributable to
several sizable jobs completed during the 2000 period. Management believes this
level of sales revenue is indicative of this segment's capabilities under normal
market conditions. However, there can be no assurance that this will be the
case. The sales order backlog for the Power Systems segment at the end of the
third quarter 2000 was approximately $1.0 million.
GROSS PROFIT. Total gross profit increased by $907,867 or 144.6% from
$627,855 for the three months ended September 30, 1999 to $1,535,722 for the
same period in 2000. The gross margin as a percentage of total revenues
increased from 21.8% for the three months ended September 30, 1999 to 29.9% for
the same period in 2000. The increase in gross margin was attributable to the
increased levels of revenue in the Engineering, Air Handling and the Power
Systems segments. Each of these segments experienced favorable market
conditions during the three months ended September 30, 2000, resulting in
substantially larger sales than what was experienced in the 1999 period. The
gross margin for the Engineering segment decreased from 29.3% for the period
ended September 30, 1999 to 28.0% for the same period in 2000. The gross margin
for the Air Handling segment increased from 11.3% for the period ended September
30, 1999 to 35.1% for the same period in 2000. Management believes the 1999
gross margin was abnormally low due to a tighter market and it believes the
gross margin generated in the 2000 period is more representative of what can be
expected from this segment. The gross margin for the Power Systems segment
increased from 18.3% for the period ended September 30, 1999 to 38.1% for the
same period in 2000. This increase was due to the 1999 gross margin being
unusually low because of a slow down in demand for equipment from the oil and
gas and energy markets. It is the belief of management that the 2000 gross
margin level for this segment is more in line with what may be expected from
this segment. However, there can be no assurance that this will be the case.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $610,017 or 115.3% from $529,008 for the
three months ended September 30, 1999 compared to $1,139,025 for the same period
in 2000. As a percentage of total revenue,
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selling, general and administrative expenses increased from 18.3% for the three
months ended September 30, 1999 to 22.2% for the same period in 1999. This
increase was attributable to additional expenses related to the expansion of the
Tulsa engineering operation office and to higher overall overhead costs related
to maintaining additional office space and paying additional employee benefits.
OPERATING PROFIT. Operating profit increased by $297,850 or 301.3% from
$98,847 for the three months ended September 30, 1999, compared to $396,697 for
the same period in 2000. Operating income increased as a percentage of total
revenue from 3.4% for the three months ended June 30, 1999 to 7.7% for the same
period in 2000. The increase in operating profit was a result of the increase
in revenues and higher gross margins.
OTHER INCOME AND (EXPENSE). Other expense decreased by $35,511 from
$54,499 for the three months ended September 30, 1999 to $18,988 for the same
period in 2000. This increase was due to higher interest costs related to the
use of the Company's line of credit during the 1999 period.
NET INCOME OR (LOSS). Net income after taxes and impact of discontinued
operations increased by $173,320 from $123,389 for the three months ended
September 30, 1999 to $296,709 for the same period in 2000. Net income after
taxes increased as a percentage of total revenue from 4.3% for the three months
ended September 30, 1999 to 5.8% for the same period in 2000. This increase was
attributable to the higher revenues recorded in the 2000 period and to an
increase in gross margins generated in several of the segments. The net income
for the quarter was positively affected by adjustments to the provision for
taxes due to overpayment of taxes during the 1999 fiscal year.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
TOTAL REVENUE. Total revenue increased by $3,125,878 or 35.8% from $8,739,224
for the nine months ended September 30, 1999, compared to $11,865,102 in 2000.
Revenue from the Engineering segment, which comprised 49.3% of total revenue for
the nine months ended September 30, 1999 increased by $2,853,645 or 66.2% from
$4,312,430 in 1999 to $7,166,075 for the same period in 2000. The increase was
due to the expanded scope of projects completed by the Engineering segment, to
additional revenue generated by the Tulsa operation and to several substantial
contracts secured by the segment.
Revenue from the Air Handling segment, which comprised 27.7% of the total
revenue for the nine months ended September 30, 1999, increased by $103,926 or
4.3% from $2,421,778 in 1999 to $2,525,704 for the same period in 2000. This
increase is primarily attributable to better market conditions during the 2000
period resulting in a higher sales volume.
Revenue generated from the Power Systems segment during the nine months ended
September 30, 1999 was $1,526,121. For the nine months ended September 30,
2000, the revenue generated was $1,871,021, an increase of $344,900 or 22.6%.
This increase in revenue was due to better market conditions in the oil and gas
and energy markets, the major source of sales for this segment. Management
believes that new product development and sales and marketing efforts will
diversify and expand the market served by this segment. However, there can be
no assurance that this will be the case.
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GROSS PROFIT. Total gross profit increased by $886,221 or 37.8% from
$2,343,827 for the nine months ended September 30, 1999 to $3,230,048 for the
same period in 2000. The gross margin generated by the Engineering segment
increased by $614,040 or 43.8% from the 1999 period. The increase resulted from
the higher margins generated by an increased number of lump-sum projects being
awarded to this segment. The Air Handling segment's gross margin increased from
19.5% for the nine months ended September 30, 1999 to 23.6% for the nine months
ended September 30, 2000. This increase was attributable to the segment
successfully bidding jobs with higher margins during the 2000 period. The Power
Systems segment's gross margin increased from 26.1% for the nine-month period
ended September 30, 1999 to 32.1% for the nine months ended September 30, 2000.
This increase was attributable to higher sales revenues and higher margin jobs
as a result of a better market environment in the 2000 period
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $843,707 or 42.7% from $1,976,358 for the
nine months ended September 30, 1999 compared to $2,820,065 for the same period
in 2000. As a percentage of total revenue, selling, general and administrative
expenses increased from 22.6% for the nine months ended September 30, 1999 to
23.8% for the same period in 2000. The increase was attributable to additional
expenses related to expanding the Tulsa office facilities, to costs related to
maintaining additional facilities and to employee benefit costs related to a
greater work force.
OPERATING PROFIT. Operating profit increased by $42,514 or 11.6% from
$367,469 for the nine months ended September 30, 1999, compared to $409,983 for
the same period in 2000. Operating income as a percentage of total revenue
remained approximately the same at 4.2% in 1999 and 3.5% for the 2000 period.
This resulted in the increase in selling, general and administrative expenses
offsetting the increase in gross margin.
OTHER INCOME AND (EXPENSE). Other income and expense changed by $74,803
from other income of $49,482 for the nine months ended September 30, 1999 to an
expense of $25,321 for the same period in 2000. This resulted from discontinuing
the marketable securities investment activities, which generated other income in
the 1999 period.
NET INCOME (LOSS). Net income before taxes and discontinued operations
decreased by $32,289 or 7.7% from $416,951 for the nine months ended September
30, 1999 to $384,662 for the same period in 2000. This decrease is due to
higher selling, general and administrative expenses. Net income after taxes and
discontinued operations increased by $603,267 or 201.4% from ($299,605) for the
nine months ended September 30, 1999 to $303,662 for the same period in 2000.
Net income after taxes and discontinued operations increased as a percentage of
total revenue from (3.4%) for the nine months ended September 30, 1999 to 2.6%
for the same period in 2000. This increase was due to primarily to the impact
of the discontinued operations on the 1999 period.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its cash requirements principally
through borrowings under its line of credit with Frost National Bank (the "Line
of Credit") and through operations. Management believes that, as of September
30, 2000, the Company's cash position, including marketable securities, was
sufficient to meet its working capital requirements for at least the next 12
months. The Company has no current plans to raise additional funds in the next
twelve months. The Company had, as of September 30, 2000, $885,000 in
additional advances available under its Line of Credit. The Company's Line of
Credit, which provides for maximum
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borrowings of $1,250,000 and bears interest at prime plus .500% per annum, is
for a term of one year and matures on April 24, 2001. The Line of Credit is
secured by accounts receivable, inventory and the personal guarantees of certain
stockholders and officers of the Company. The Company's working capital was
$3,306,316 and $3,428,632 at December 31, 1999 and September 30, 2000,
respectively.
Operating activities used net cash totaling $284,210 for the nine months
ended September 30, 1999 and used net cash of $117,092 for the nine months ended
September 30, 2000. Trade accounts receivable increased $1,001,581 since
December 31, 1999, due to the increase in revenues.
Investing activities used cash totaling $182,901 for the nine months ended
September 30, 1999 and used cash totaling $336,408 for the same period in 2000.
The cash used during the period ended September 30, 2000 was primarily related
to the purchase of new furniture and equipment for the expanded offices in
Tulsa.
As of September 30, 2000, the Company had a portfolio of marketable
securities, that had a fair market value of $437,957 and consisted of bonds and
mutual funds. The mutual funds that the Company has available for sale are
open-end stock funds managed by Smith Barney & Co. These mutual fund
investments are generally held for longer than a one-year period. These
securities are traded by the Company as part of its plan to provide additional
cash for working capital requirements.
Financing activities provided net cash totaling $142,049 for the nine
months ended September 30, 2000, which was the result of an insurance premium
note for the Company's annual insurance premiums and the result of repayment on
the Company's Line of Credit and repayment of a term note executed in connection
with the acquisition of the Thermal facilities.
The Company's Board of Directors authorized a stock repurchase plan on June
29, 1999 authorizing the repurchase of up to 400,000 shares of the Company's
Common Stock over a 24 month period. Pursuant to the Stock Repurchase Program,
the Company purchased 40,000 shares of its Common Stock during the quarter ended
September 30, 1999. The funds to purchase these shares came from surplus cash
or operating funds. The total cumulative cost related to the purchase of these
40,000 shares was $67,045, an average price of $1.47 per share. Under the Stock
Repurchase Program, an additional 360,000 shares remain authorized for
repurchase. No additional shares have been purchased under the Stock Repurchase
Program during the 2000 period.
ASSET MANAGEMENT
The Company's cash flow from operations has been affected primarily by the
timing of its collection of trade accounts receivable. The Company typically
sells its products and services on short-term credit terms and seeks to minimize
its credit risk by performing credit checks and conducting its own collection
efforts. The Company had net trade accounts receivable of $3,542,416 and
$2,087,226 at September 30, 2000 and 1999, respectively. The number of days'
sales outstanding in trade accounts receivable at September 30, 2000 and 1999
was 28 days and 66 days, respectively. Bad debt expenses have been
insignificant for each of these periods.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10.40 Business Park Lease for Tulsa Office Space
Exhibit 10.41 Business Park Lease for Tulsa Office Space
Exhibit 27 Financial Data Schedule
b. Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
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SIGNATURE
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.
INDUSTRIAL DATA SYSTEMS CORPORATION
Dated: November 13, 2000 By: /s/ Hulda L. Coskey
--------------------------------
Hulda L. Coskey, Chief Financial Officer,
Secretary and Treasurer
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