-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KxMVohUwy+LkXZT9v8B2WxIZ2MvCrkBhsqfkm06pr7r7sk5ufjjdrRxVUMLOj6be 4WnQ59Yc8/bPBhah9Ekvvg== 0000728331-01-000003.txt : 20010409 0000728331-01-000003.hdr.sgml : 20010409 ACCESSION NUMBER: 0000728331-01-000003 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUTRON CORP CENTRAL INDEX KEY: 0000728331 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 541006352 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-12227 FILM NUMBER: 1590352 BUSINESS ADDRESS: STREET 1: 21300 RIDGETOP C CITY: STERLING STATE: VA ZIP: 20166 BUSINESS PHONE: 7034062800 10KSB 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 KSB Annual Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act Of 1934 For the fiscal year ended: December 31, 2000 Commission file number: 0-12227 Sutron Corporation (Exact name of registrant as specified in its charter.) Virginia 54-1006352 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 21300 Ridgetop Circle, Sterling Virginia 20166 (Address of principal executive offices) (Zip Code) (703) 406-2800 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendments to this Form 10-KSB. [ X ] Issuer's revenues for its most recent fiscal year were $9,906,775. The aggregate market value of the voting stock held by non- affiliates as of March 30, 2001 was approximately $1,148,000 based on the fair market value of such stock. The number of shares outstanding of the issuer's Common Stock, $.01 par value, as of March 30, 2001 was 4,291,851. Documents Incorporated by Reference Portions of the registrant's definitive proxy statement dated April 9, 2001 are incorporated in Part III as set forth herein. PART I Item 1. Business Business Development Sutron Corporation, incorporated in 1975, is an environmental monitoring firm. The Company designs and manufactures environmental monitoring and control systems for use by government agencies and industry. The Company's business is to provide real-time data collection, telemetry, and technical expertise to monitor, control, manage, and forecast activities in the areas of hydrology, meteorology and water management. Business The Company offers products and professional services in the areas of hydrology, meteorology and water mangement. Sutron's products consist of sensors, data collection platforms (DCP's) and remote terminal units (RTU's) with telemetry capability and system and application software. Sutron provides services in the integration and installation of turnkey real-time data collection systems, the support of Sutron's data management software and in the maintenance and repair of field site sensors and data collection platforms. Sutron's customers include a diversified base of federal, state and foreign government agencies, universities, the Department of Defense and hydropower companies. Products The Hydromet Products Division manufactures data collection platforms, remote terminal units and sensors. Sutron's data collection platforms and remote terminal units collect and transmit sensor data to central facilities by radio, telephone, cable, fiber optics, or microwave. Sutron's sensors support the collection of hydrological and meteorological data and include a tipping bucket rain gauge, a barometric pressure sensor, a temperature sensor, and several water level sensors. The Company's equipment is compatible with sensors from other companies. Sutron has long-standing relationships with suppliers for wind speed and wind direction, water quality, humidity and solar radiation sensors. The Company received an ISO 9001 certification on March 12, 1999. The Company's principal products are described below. 8200/8210 Data Logger/Transmitter The 8200/8210 Data Logger/Transmitter is a simple-to- operate, low-cost data collection platform which supports a wide variety of telemetry applications. The 8200/8210 is environmentally hardened, capable of operating from -40 C to 60 C, making it ideal for remote locations. As a data recorder, the 8200/8210 will store over 65,000 readings in battery backed memory. The 8200/8210 supports a wide variety of communications, including radio, satellite, and telephone. The Telephone/Voice Synthesis option allows communications over standard telephone circuits using either a synthesized voice message or a modem connected to a computer terminal. 8400 Digital Data Logger The 8400 Digital Data Recorder consists of a shaft encoder and data logger integrated into a single enclosure that is compatible with the accessories of older analog water level recorders which it was designed to replace. The 8400 is a low cost, low maintenance system that reduces te time required for site servicing and data processing and makes water level monitoring networks more efficient. Accubar Gauge Pressure Sensor The Accubar Gauge Pressure sensor is a highly accurate solid state pressure transducer capable of measuring air/dry gas pressures from 0 to 22 psi with a maximum pressure of 35 psi. It is housed in an aluminum case and with its low power consumption and low maintenance requirements, it is ideal for remote monitoring applications. AccuBubble Self-Contained Bubbler The AccuBubble Self-Contained Bubbler is a mercury-free and nitrogen-free bubbler apparatus designed for low maintenance water level measuring. Using the Sutron Accubar Pressure Sensor as the control and sensing element makes the AccuBubble a very stable and highly accurate water level measuring device. The AccuBubble uses power conservation techniques to minimize current consumption. The bubbler purges the orifice line prior to each measurement. This eliminates the need for a constant bubble rate, which has been known to consume excessive power. In addition, the purging sequence prevents debris build up in the orifice line. The AccuBubble uses an oil-less, non-lubricated piston and cylinder compressor. This type of compressor is designed to give consistent air delivery without the use of a diaphragm which can rupture over time. The AccuBubble uses the SDI-12 communications protocol as the control interface. This allows the unit to be configured by any data loggers supporting the SDI-12 standard. Services The company provides system integration services which include the sale of Sutron's real-time database software (PC Base II), the design and development of customer-specific hardware configurations and software applications, and long- term software support for PC Base II users. This capability allows the Company to provide turnkey hydrological and meteorological systems to a variety of users. Distribution Methods of Products and Services The Company's products and services are currently sold in the United States by the Company's direct sales force. As of December 31, 2000, the Company employed ten salaried sales and marketing personnel, including five engaged directly in field sales activities, and five in various other marketing and sales support functions. Internationally, the Company utilizes sales agents to sell its products and services. Customers During 2000, approximately 43% of the Company's products and services were sold to the Federal Government. Revenues in 2000 among the various agencies were as follows: U.S. Army Corps of Engineers, 7%; Department of Defense, 4%; Department of the Interior, 28%; and various other agencies of the federal government, 4%. The revenues from the Corps of Engineers were spread among some ten (10) separate Districts, and the revenues from the Department of the Interior among two (2) agencies, the U.S. Geological Surveyand the Bureau of Reclamation. The Company also performed on various contracts of foreign origin. Total revenues from foreign customers amounted to approximately 32% of total revenues in 2000, 11% in 1999 and 29% of total revenues in 1998. Sutron actively markets its products and services internationally. Contracts for products or services with federal, state and local government agencies typically allow for termination at the convenience of the government and for audit and annual negotiation of overhead rates. Upon termination, the Company would be entitled to reimbursement for allowable costs incurred and to a proportionate share of profits or fees earned to the date of termination. Such contracts are also typically dependent upon compliance by the contractor with applicable civil rights, equal employment opportunity, and contract procurement requirements. The Company at this time has no reason to believe that any material changes will occur in the foreseeable future with respect to federal, state, or local government programs or services with respect to which the Company has been granted its contracts or provides its services. However, due to changes in administration, national goals and budgetary restrictions, funding of such programs or services could be altered or abolished. If a substantial cut- back in the level of funding by the applicable government agency were to occur, it would have a material adverse effect on the Company. Competition The Company is aware of both domestic and foreign competitors offering complete real-time networks of their own, and companies which fabricate real-time networks from components manufactured by themselves and others. The Company is also aware of numerous additional firms, ranging in size from large to small, from general to highly specialized, and from new to well established, offering competitive sensors and other instruments, DCPs, telemetry equipment, satellite and other electronic equipment, and software. Several of these companies have financial, research and development, marketing, management and technical resources substantially greater than those of the Company. The Company may also be at a competitive disadvantage because it purchases certain sensors and other equipment components, as well as computer hardware and peripheral equipment, from manufacturers who are or may become competitors with respect to one or more of the Company's products. The Company, with respect to its professional engineering and technical services, is in competition with numerous diverse engineering and consulting firms, many of which have larger staffs and facilities, and are better known, have greater financial resources, and have more experience than the Company. As to its maintenance services, the Company is aware that many of the firms offering competitive products, as well as several independent service organizations, offer maintenance services; some of these companies have larger staffs, are better equipped, and have greater financial, marketing and management resources than the Company. Price, performance and integration capabilities are believed by the Company to be the primary competitive factors with respect to all of its products and services. Research and Development During the three years ended December 31, 2000, 1999, and 1998, Sutron's internally funded research and development costs were $1,352,506, $1,145,070 and $937,991 respectively. In 2000, the company released two new products, the Digital Water Level Monitoring System and the metric DMX. The majority of the development effort, however, was focused on two products that were near completion at the end of fiscal year 2000. SATLINK is a high data rate satellite transmitter that transmits at 100, 300 and 1200 baud and is eagerly awaited by our GOES customers who are mandated by NESDIS to purchase a higher rate satellite transmitter. EXPERT is the Companys next generation data logger that uses Microsoft CE as the operating system. It will enable the Company to enter closely related environmental markets such as tides and weather monitoring. Patents, Trademarks, Copyrights and Agreements Although the Company does not deem patent protection to be of significant importance to its industry, it has and may in the future seek patents for certain of its products, real-time networks, and technology as well as Company software products, real-time networks, and technology. Company software products and innovations may not be patentable but may be subject to automatic but limited copyright protection. The Company has treated its products, real-time networks, technology and software as proprietary and relies on trade secret laws and internal non-disclosure safeguards rather than making their designs and processes generally available to the public by applying for patents. Further, the Company believes that, because of the rapid pace of technological change in the computer, electronics and telecommunications industries, patent and copyright protection is of less significance than factors such as the knowledge and experience of Company personnel and their ability to design and develop enhanced and new products, real-time networks and their components. Raw Materials The raw materials used by the Company, such as electronic components and fabricated parts, are generally available from a wide variety of sources at competitive prices. The Company does not anticipate that its present or proposed business activities would be substantially adversely affected by the scarcity of any raw materials. Backlog The Company's backlog at December 31, 2000 was $2,619,672 as compared with $2,120,447 at December 31, 1999 . The Company anticipates that 95% of its 2000 year-end backlog will be shipped in 2001. Employees The Company had a total of 64 employees as of December 31, 2000 of which 63 were full time. Item 2. Properties On July 30, 1992, the Company entered into a five and one-half year lease, for approximately 17,000 square feet of manufacturing and office space in Sterling, Virginia. The lease commenced on October 23, 1992. This facility allowed the Company to consolidate it's manufacturing, systems integration, research and development, and sales and administration departments into one building. An option for an additional five years was exercised in 1997. The Company opened a customer service facility in Boise, Idaho in 1998 and currently leases 2,500 square feet. The facility is used to repair equipment and to perform assembly operations. In July, 1999, the Company leased additional space of approximately 7,000 square feet in Sterling, Virginia. Two departments were relocated to the new space during fiscal year 2000 in order to provide increased production and warehouse space at the corporate headquarters. The Company believes that its facilities are adequate for its present needs and that its properties are in good condition, well maintained and adequately insured. Item 3. Legal Proceedings The Company is not a party to any pending legal proceeding nor is its property the subject of a pending legal proceeding. Item 4. Submission of Matters To A Vote of Security Holders No matter was submitted during the fourth quarter of 2000 to a vote of the Company's security holders, either through the solicitation of proxies or otherwise. PART II Item 5. Market for Common Equity and Related Stockholder Matters (a) Market Information The common stock of Sutron Corporation is quoted over the counter through the NASD Bulletin Board supplied by the National Association of Securities Dealers, Inc. under the symbol STRN, and through the Pink Sheet Service of the National Quotation Bureau, Inc. The following table shows the high and low bid quotations in 2000 and 1999 by quarter as reported by the National Quotation Bureau, Inc. and the National Association of Securities Dealers, Inc. These quotations represent prices between dealers in securities, do not include retail mark-ups, mark-downs, or commissions and do not necessarily represent actual transactions. MARKET INFORMATION
2000 1999 HIGH LOW HIGH LOW First Quarter $2.50 $1.13 $1.38 $1.13 Second Quarter 1.75 .82 1.44 1.00 Third Quarter 1.25 .82 1.84 1.06 Fourth Quarter 1.15 .69 2.00 1.34
(b) Approximate Number of Equity Shareholders: Title of Class: Common Stock, $.01 par value Approximate Number of Record Holders At March 30, 2001: 745 (c) Dividends: The Company has never paid a dividend on its common stock and the Board of Directors intends for the foreseeable future to retain all earnings for use in the Company's business. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains forward-looking statements, which reflect the current views of the Company with respect to future events that could have an effect on its future financial performance. These statements may include such words as "expects," "believes," "estimates," and similar expressions. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. The following table sets forth, for the periods presented, certain income statement data of the Company expressed as a percentage of revenues: Percentage of Revenues
2000 1999 1998 Revenues 100.0% 100.0% 100.0% Cost of sales 62.6 58.3 62.8 Gross profit 37.4 41.7 37.2 Selling, general and administrative expenses 24.8 21.3 21.2 Research and Development expenses 13.6 10.0 9.5 Operating income (1.0) 10.4 6.5 Other income - - 1.6 Interest expense .4 .4 .5 Income before income taxes (1.4) 10.0 7.6 Income taxes (1.0) 3.5 (.8) Net income (.4) 6.5% 8.4%
Fiscal 2000 Compared to Fiscal 1999 Results of Operations The Companys Revenues for 2000 decreased 13% to $9.9 million from revenues of $11.4 million in 1999. Revenues from sales to domestic customers decreased in 2000 to $6.7 million from $10.1 million in 1999, a decrease of 34%. Export sales increased to $3.2 million in 2000 from $1.3 million in 1999. The Company was awarded several major international projects in 2000 in Peru. These contracts totaled $1.6 million. The Company expects export sales to increase significantly in fiscal year 2001 to $4.8 million due to expanding demand world-wide for hydrological and meteorological data. Datalogger/Transmitter product sales decreased 60% to $3.3 million in 2000 from $7.6 million in 1999. The decrease is due to one time orders totaling $1.9 million for the 8210 Datalogger with a satellite transmitter in 1999 which were not repeated in 2000 and due to the Company classifying standard products used in systems as systems sales rather than product sales in 2000. Systems sales and services increased to $3.8 million from $1.3 million reflecting the change in the classification of standard products used in systems and the increase in international sales. Sales of sensor and accessory products increased to $2.8 million from $2.5 million. The Companys largest customer in each of 2000 and 1999 was the Department of the Interior, the principal agencies being the US Geological Survey and the Bureau of Reclamation, which accounted for 28% and 52% of revenues. Commercial and international revenues represented 57% of revenues in 2000 versus 31% in 1999. Gross Profit Gross profit for 2000 decreased 22% to $3.7 million from $4.8 million in 1999. Gross margin as a percentage of revenues for 2000 decreased to 37.4% as compared to 41.7% in 1999. The decrease in gross margin in 2000 is a result of increased product costs and less absorption of overhead due to decreased volumes and efficiencies. The Companys gross margin is dependent in part on product costs, product mix and overhead expenses, all of which fluctuate from year to year. Selling, General and Administrative Expenses Selling, general and administrative expenses increased 1% to $2.5 million in 2000 from $2.4 million in 1999. Selling, general and administrative expenses as a percentage of revenues increased to 24.8% in 2000 from 21.3% in 1999 due to the decrease in revenues. Research and Development Expenses Research and development expenses increased 18% to $1.35 million in 2000 from $1.15 million in 1999. Research and development expenses as a percentage of revenues increased to 13.6% in 2000 from 10% in 1999. In 2000, the company released two new products, the Digital Water Level Monitoring System and the metric DMX. The majority of the development effort, however, was focused on two products that were near completion at the end of fiscal year 2000. SATLINK is a high data rate satellite transmitter that transmits at 100, 300 and 1200 baud and is eagerly awaited by our GOES customers who are mandated by NESDIS to purchase a higher rate satellite transmitter. EXPERT is the Companys next generation data logger that uses Microsoft CE as the operating system. It will enable the Company to enter closely related environmental markets such as tides and weather monitoring. Other Income (Expense) Other income and expenses consisted of interest expenses of $38 thousand in 2000 compared to $45 thousand in 1999. Fiscal 1999 Compared to Fiscal 1998 Results of Operations The Company's revenues for 1999 increased 15% to $11.4 million from revenues of $9.9 million in 1998. Sales to domestic customers increased to $10.1 million from $7 million in 1998, an increase of 44%. Export sales decreased to $1.3 million in 1999 from $2.9 million in 1998. The Company was not awarded any major international projects in 1999. Datalogger/Transmitter product sales increased 54% to $7.6 million in 1999 from $5 million in 1998. The US Geological Survey placed several orders totaling $1.9 million for the 8210 Datalogger with a satellite transmitter. These orders were for the replacement of older equipment no longer supported by a competitor. Sales of services and special parts used in systems decreased to $1.3 million from $1.7 million reflecting the decrease in export sales. Sales of sensor and accessory products decreased to $2.5 million from $3.2 million, also a result of the decrease in export sales. The Company's largest customer in each of 1999 and 1998 was the Department of the Interior, the principal agencies being the U.S. Geological Survey and the Bureau of Reclamation, which accounted for 52% and 35% of revenues. Commercial and international revenues represented 31% of revenues in 1999 versus 50% in 1998. Gross Profit Gross profit for 1999 increased 29% to $4.8 million from $3.7 million in 1998. Gross margin as a percentage of revenues for 1999 increased to 41.7% as compared to 37.2% in 1998. The improved gross margin in 1999 is a result of reduced product costs as well as greater absorption of overhead due to increased volumes and efficiencies. The Company's gross margin is dependent in part on product costs, product mix and overhead expenses, all of which fluctuate from year to year. Selling, General and Administrative Expenses Selling, general and administrative expenses increased 15% to $2.4 million in 1999 from $2.1 million in 1998. Selling, general and administrative expenses as a percentage of revenues increased to 21.3% in 1999 from 21.2% in 1998 due to increased sales personnel and expanded marketing activities. Research and Development Expenses Research and development expenses increased 22% to $1.1 million in 1999 from $.9 million in 1998. Research and development expenses as a percentage of revenues increased to 10% in 1999 from 9.5% in 1998. In 1999, the company released two new products, the DMXpert and SmartPond. The DMXpert fully automates the velocity and discharge calculations for streams while adding real-time quality control procedures. SmartPond is a remote site monitoring and control system used to maximize fish production by collecting real-time water quality data. Other Income (Expense) Other income and expenses consisted of interest expenses of $45 thousand in 1999 compared to $51,000 in 1998. On December 31, 1998, the Company purchased Virginia Energy Services (VES) 50% share of GenCom LLC for $5 thousand. GenCom LLC was formed in February 1998 to market and manufacture remote monitoring and control systems for power generators. The LLC was owned equally by the Company and by VES. The Company terminated the LLC in July 1999. Expenses relating to the GenCom joint venture were $8 thousand in 1999 compared to expenses of $42,000 in 1998. Liquidity and Capital Resources The Companys working capital was $3.2 million at December 31, 2000, compared to $3.3 million at December 31, 1999. Cash on hand was $2,799 at December 31, 2000, compared to $159,507 at December 31, 1999. Net cash used by operating activities was $.3 million for the year ended December 31, 2000, compared to cash provided by operations of $1.3 million for the year ended December 31, 1999 and cash used by operations of $.3 million for the year ended December 31, 1998. Net cash used in investing activities was $.3 million for the year ended December 31, 2000, compared to cash used of $.3 million and cash provided of $.3 million for the years ended December 31, 1999 and 1998, and was primarily due to purchases of property and equipment. Cash provided in 1998 was due to the sale of land. Net cash provided by financing activities was $.5 million in 2000 due to draws on the line of credit to finance operating and investing activities. Net cash used by financing activities was $.7 million and $.1 million for the years ended December 31, 1999 and 1998. The Company has a revolving credit facility of $2.0 million and a capital equipment credit facility of $.4 million, of which $168,420 had been utilized as of December 31, 2000. The terms of the credit facility and capital equipment facility are until July 1, 2001 and are subject to renewals thereafter. Management believes that its existing cash resources, cash flow from operations and short-term borrowings on our existing credit line will provide adequate resources for supporting operations during fiscal 2001. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Sutron Corporation Sterling, Virginia We have audited the accompanying balance sheets of Sutron Corporation as of December 31, 2000 and 1999, and the related statements of operations, stockholders' equity, and cash flows for each of the three years ended December 31, 2000, 1999 and 1998. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sutron Corporationas of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years ended December 31, 2000, 1999 and 1998 in conformity with generally accepted accounting principles. Thompson, Greenspon & Co. Fairfax, Virginia March 1, 2001 PART I. - FINANCIAL INFORMATION SUTRON CORPORATION BALANCE SHEETS (In thousands)
December 31, December 31, 2000 1999 ASSETS Current assets Cash and cash equivalents $ 3 $ 159 Accounts receivable 2,029 1,683 Inventory 2,702 2,537 Prepaid items and other 572 226 ----- ------ Total current assets 5,306 4,605 Property, plant and equipment 2,351 2,033 Accumulated depreciation and amortization (1,522 (1,355) ----- ------ Net property, plant, and equipment 829 678 ----- ------ Other assets 14 14 ----- ------ Total Assets $6,149 $5,297 ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $1,046 $503 Accrued payroll 151 152 Other accrued expenses 473 591 Contract billings on contracts in progress in excess of costs and estimated earnings - 4 Estimated losses on uncompleted contracts - 22 Line of credit 406 - Current maturities of long-term notes 57 25 ----- ----- Total current liabilities 2,133 1,297 Long-term notes 112 50 ----- ----- Total liabilities 2,245 1,347 ----- ----- Stockholders' equity Common stock, 43 43 Additional paid-in capital 2,310 2,316 Retained Earnings (Deficit) 1,551 1,591 ----- ----- Total stockholders' equity 3,904 3,950 ----- ----- Total liabilities and stockholders' equity $6,149 $5,297 ====== ===== See Accompanying Notes to Financial Statements
SUTRON CORPORTION STATEMENTS OF OPERATIONS (In thousands, except per share data)
Year Ended December 31, 2000 1999 1998 Revenue $9,907 $11,405 $9,888 Cost of sales 6,198 6,644 6,209 ----- ----- ----- Gross profit 3,709 4,761 3,679 Selling, general and administrative expenses 2,457 2,425 2,103 Research and development expenses 1,353 1,145 938 ----- ----- ----- Operating income (101) 1,191 638 Other income (expense) 1 (8) 164 Interest expense, net (38) (45) (51) ----- ----- ----- Income before income taxes (138) 1,138 751 Income taxes (98) 403 (80) ----- ----- ----- Net income (40) $735 $831 ===== ===== ===== Net income per common share (.01) .17 .20 Net Income per diluted share (.01) .17 .19 See Accompanying Notes to Financial Statements
SUTRON CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000, 1999, and 1998 (In thousands, except shares data)
COMMON PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAl Balance, December 31, 1997 4,225,851 $42 $2,282 25 2,350 Retirement of treasury shares (5,000) - (7) - (7) Exercise of stock options 77,500 1 40 - 41 Net income 831 831 -------- --- ------ ----- ----- Balances, December 31, 1998 4,298,351 $43 2,316 856 3,215 Net income - - - 735 735 --------- --- ----- ----- ----- Balance, December 31, 1999 4,298,351 $43 $2,316 $1,591 $3,950 Retirement of treasuary shares (5,000) - (6) - (6) Net income for 2000 - - - (40) (40) --------- --- ----- ----- ----- Balances, December 31,2000 4,293,351 $43 $2,310 $1,551 $3,904 ========= === ====== ====== ====== See Accompanying Notes to Financial Statements
SUTRON CORPORTION STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31,
2000 1999 1998 Cash flows from operating activities: Net income $(40) $735 $831 Non-cash items included in net income: Depreciation and amortization 167 114 87 Gain (loss) on sale of equipment, net (1) - (207) Changes in current assets and liabilities: Accounts receivables (346) 78 43 Costs and estimated earnings in excess of billings on contracts in progress - 1,137 (734) Inventory (165) (709) (300) Prepaid items and other (346) 143 (297) Other assets - 23 2 Accounts payable 543 (249) 142 Accrued expenses (119) (96) 344 Contract billings in excess of costs and estimated earnings (4) (113) (52) Estimated losses on uncompleted Contracts (22) 10 (13) Income taxes payable - - (111) ----- ----- ----- Net cash provided by operating activities (333) 1,073 (265) Cash flows from investing activities: Purchase of property and equipment (317) (256) (438) Proceeds from sale of investment - - 700 ----- ----- ----- Net cash used by investing activities (317) (256) 262 Cash flows from financing activities: Proceeds from issuance of common stock (6) - 34 Proceeds from line of credit, net 406 - 77 Proceeds from term notes payable 94 - 100 Payments on line of credit, net - (651) -- Payments on term notes payable - (25) (272) Payments on installment loans - (3) (4) Payments on stockholder loans - (55) (25) ----- ----- ----- Net cash used by financing activities 494 (734) (90) Net increase (decrease) in cash and cash equivalents (156) 83 (93) Cash and cash equivalents, beginning of year 159 76 169 ----- ----- ----- Cash and cash equivalents, end of year $ 3 $ 159 $ 76 ===== ===== ===== See Accompanying Notes to Financial Statements
SUTRON CORPORATION NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Sutron Corporation ("the Company") was incorporated on December 30, 1975 under the General Laws of the Commonwealth of Virginia. The Company designs and manufactures environmental monitoring and control systems for use by government agencies and industry. The Company's products include sensors, data collection platforms and remote terminal units with telemetry capability and system and application software. Sutron's customers include a diversified base of Federal, state and foreign government agencies, universities, and hydropower companies. Revenue Recognition The Company utilizes the accrual method of accounting for both financial statement and tax return reporting purposes. The Company recognizes revenue from product sales upon shipment. Selling, general, and administrative expenses are charged against periodic income as incurred. Revenue from cost-plus-fee contracts is recognized to the extent of costs incurred, plus a proportionate amount of fees earned. Revenue from fixed-price contracts is recognized on the percentage-of-completion method based on costs incurred in relation to total estimated costs. Revenue from time-and-materials contracts is recognized to the extent of billable rates, times hours delivered, plus materials costs incurred. Contract costs include allocated indirect costs and general and administrative expenses. Anticipated losses are recognized as soon as they become known. Cash and Cash Equivalents For purposes of the statements of cash flows, cash equivalents include time deposits and all highly liquid debt instruments with original maturities of three months or less. Interest paid amounted to $34,866 in 2000, $75,555 in 1999, and $59,808 in 1998. Income taxes paid amounted to $50,000 in 2000, $442,065 in 1999 and $130,627 in 1998. Accounts Receivable The Company set a provision of $44,000 in 2000 and $15,000 in 1999 for account that may not be collected in future periods. Bad debt expense amounted to $39,199 for 2000, $17,719 in 1999 and $2,783 in 1998. Amounts earned on completed contracts and receivables that have not yet been billed, are recorded as unbilled receivables. Property, Plant and Equipment Equipment is recorded at cost and depreciated over estimated useful lives ranging from 3 to 7 years using the straight-line method for financial statement purposes and the straight-line and accelerated methods for income tax purposes. Expenditures for maintenance, repairs, and improvements which do not materially extend the useful lives of the assets are charged to earnings. When items of property, plant, and equipment are disposed of, the cost of the asset and the related accumulated depreciation are removed from the accounts. Any gain or loss resulting from the removal from service is taken into the current period earnings. Investment Land held for sale is recorded at lower of cost or net realizable value, based on management's estimate. Income Taxes The Company utilizes an asset and liability approach to accounting for income taxes. The objective is to recognize the amount of income taxes payable or refundable in the current year based on the Company's income tax return and the deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The assets and liability method accounts for deferred income taxes by applying enacted statutory rates to temporary differences, the difference between financial statement amounts and tax bases of assets and liabilities. The resulting deferred tax liabilities or assets are classified as current or noncurrent based on the classification of the related asset or liability. Deferred income tax liabilities or assets are adjusted to reflect changes in tax laws or rates in the year of enactment. Financial Instruments The estimated fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short term notes receivable approximate their carrying amounts in the financial statements. Based on the borrowing rates currently available to the Company for debt with similar maturity dates and collateral, the estimated fair value of long-term debt is $111,841 at December 31, 2000. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from the estimates that were used. Capital The Company has 12,000,000, $.01 par value, shares authorized. There were 4,293,351 shares issued and outstanding at December 31, 2000 and 4,298,351 shares issued and outstanding at December 31, 1999 and December 31, 1998. The Company's Board of Directors has authorized the repurchase of up to 100,000 shares of its common stock in open market transactions. As of December 31, 2000, 10,000 shares have been repurchased. Earnings Per Share The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 128 which establishes standards for computing and presenting earnings per share (EPS) for entities with publicly held common stock. The standard requires presentation of two categories of earnings per share, basic EPS and diluted EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Contracts to issue common stock which are antidilutive in nature are not included in the earnings per share calculations.
Years Ended December 31, 2000 1999 1998 Weighted average shares used in 4,298 4,298 4,235 Basic computation Common stock equivalents-options -- 47 37 Weighted average shares used in 4,298 4,345 4,272 Diluted computation
2. CONTRACTS IN PROGRESS Information with respect to contracts in progress at December 31, is as follows (in thousands): 2000 1999 Direct and indirect costs, including overhead -- $654 Earnings (loss) -- (57) Totals -- $597 Billings -- $624 Costs and estimated earnings in excess of billings -- (5) Estimated losses on contracts in process -- (22) Totals -- $597
3. INVENTORY Inventory is stated at the lower of cost or market. Electronic components and work in process and finished goods Costs consisting of materials, labor and overhead are Recorded at a standard cost. Inventory consists of the following at December 31 (in thousands): 2000 1999 Electronic components $ 1,311 $ 991 Work in process 882 879 Finished goods 509 667 Totals $ 2,702 $2,537
4. ACCUMULATED DEPRECIATION AND AMORTIZATION Accumulated depreciation and amortization at December 31, is as follows (in thousands): 2000 1999 Furniture and equipment $1,471 $1,315 Automotive equipment 35 28 Leasehold improvements 16 12 Totals $1,522 $1,355 5. LINE OF CREDIT The Company signed a loan and security agreement which extends the Company a revolving line of credit. The maximum amount of borrowing under the line is not to exceed the lesser of $2,000,000 or the Company's borrowing base as determined by the bank. Interest on the unpaid balance is payable monthly at prime plus one half percent. The maturity date of the line is July 1, 2001, and the outstanding balance at December 31, 2000, amounted to $406,181 and was $0 at December 31, 1999. 6. NOTE PAYABLE The Company repaid the original loan and security agreement during 1998 with the proceeds from the sale of the land investment. The Company borrowed an additional $100,000 in December, 1998. The note calls for monthly payments of principal of $2,083 and accrued interest. The interest rate is 8.35 percent and matures in December, 2002. Additionally, the note agreement contains certain financial covenants. In July 2000, the Company borrowed $126,315 under a separate term note payable. The note calls for monthly principal and interest of $2,632. The interest rate is 10 percent and matures October 2004. The above referenced lince of credit and term note payable are secured by substantially all assets of the Company. Principal maturities for all indebtedness described in Notes 6 and 7 are as follows at December 31 (in thousands): Year ending December 31: 2001 $463 2002 57 2003 31 2004 24 --- Total $575 === 7. LEASE OBLIGATIONS The Company signed a 5 year option under the current lease for its headquarters and production facilities which expires in March 2003. The operating lease calls for monthly rent of $14,594 including $4,240 estimated as the Company's pro rata share of operating expenses and annual rent increases of three percent. The Company entered into a lease agreement for office space and a repair facility in Boise, Idaho. The three year lease, expiring in November, 2001, calls for monthly payments of $1,250 and annual rent increases of three percent. The Company entered into a lease agreement for additional office and warehouse space in Sterling, Virinia. The 45 month lease, expiring in March, 2003, calls for monthly Payments of $10,043 and annual rent increases of three percent. Rent expenses amounted to $238,000 in 2000, $165,000 for 1999, and $160,000 for 1998. The following is a schedule, by years, of future minimum payments due (in thousands): Year ending December 31: 2001 $248 2002 239 2003 69 Total $548 8. INCOME TAXES The income tax (benefit) expense charged to operations for the years ended December 31, were as follows (in thousands): 2000 1999 1998 Current income tax (benefit) expense $(141) $386 $(40) Deferred tax benefit 43 17 (40) Total tax (benefit) expense $ (98) $403 $(80) Deferred tax assets, are comprised of the following at December 31 (in thousands): 2000 1999 1998 Estimated losses on contracts $ -- $ 9 $ 4 Accrued vacation and warranty 104 96 88 Gross deferred tax assets 104 105 92 Gross deferred tax liability - depreciation (94) (52) (22) Net $ 10 $ 53 $ 70
A reconciliation between the amount of reported income tax expense and the amount computed by multiplying the applicable statutory Federal income tax rate is as follows: 2000 1999 1998 Income before income taxes $(138) $1,138 $ 831 Applicable statutory tax rate 34% 34% 34% Computed "expected" Federal tax expense (47) 387 283 Adjustments to Federal income tax resulting from: State income tax (7) 56 --- Tax credits (44) (40) (44) Change in valuation allowance -- -- (319) Income tax (benefit) expense $ (98) $ 403 (80)
10. MAJOR CUSTOMERS Set forth below are customers, including agencies of the U.S. Government, from which the Company received more than 10 percent of total revenue, for the years ended December 31: 2000 1999 1998 Department of Interior 28% 52% 35% International 32% 11% 29% Commercial 25% 20% 21% Department of Defense 11% 15% 10. STOCK OPTIONS PLANS Stock Options The Company has granted stock options under the 1998 and the 1996 Stock Option Plans to key employees and directors for valuable services to the Company. Under the 1996 Plan a maximum of 260,000 shares may be granted at not less than 100 percent of the fair market value at the grant date. The Company authorized 60,000 shares and granted 5,000 shares under the 1998 stock option plan. All options have a ten year term from the date of grant. The following summarizes the option activity under the 1998 and 1996 Stock Option Plans for the last three years:
Number of Option Price Shares (in thousands) Per Share Outstanding, December 31, 1997 362 $.53 - 1.125 Grants 5 1.44 Exercised (78) .53 Canceled or expired (25) .53 Outstanding, December 31, 1998 264 1.125 - 1.44 Grants - - Exercised - - Canceled or expired (9) 1.125 - 1.44 Outstanding, December 31, 1999 255 1.125 Grants -- -- Exercised -- -- Canceled or expired -- -- Outstanding at Decembr 31, 2000 255 $1.l25
The vesting period of the remaining options is as follows: Vested and exercisable 204 November 1, 2001 51 Total 255 The Company adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation and will continue to apply Accounting Principles Board Statement No. 25 and related interpretations in accounting for its employee compensation plans. SFAS 123 establishes standards of financial accounting and reporting for stock-based employee compensation plans including stock option plans, stock purchase plans and other arrangements by which employees receive shares of stock or other equity instruments based on the market price of an entity's stock. If the Company had elected to recognize compensation cost for the plan based on the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS No. 123, net income and earnings per share would have been changed to the pro forma amounts indicated below:
2000 1999 1998 Net income As reported $(40) $735 $831 Pro forma (40) 735 797 Earnings per share As reported (.01) .17 .20 Pro forma (.01) .17 .19
The fair value of the options granted in 1998 amounted to $7,000. Compensation costs under SFAS 123 are recognized when the options are vested and exercisable. The fair value of Sutron Corporation stock options used to compute pro forma net income and earnings per share disclosures is the estimated present value at grant date using the Black Scholes pricing model with the following assumptions: a risk free interest rate of 6.45 percent, no estimated dividend yield, an expected volatility of 34 percent and an expected holding period of five years. 11. PROFIT SHARING PLAN The 401 (k) Profit Sharing Plan covers substantially all full time employees. The contributions, if any, to the plan will be determined each year by the Board of Directors based on profits. The contribution was $0 for 2000, $190,692 for 1999, and $147,000 for 1998. 12. EXPORT SALES Export sales from the Company's operations were as follow (in thousands):
Year ended December 31, 2000 1999 1998 Central and South America $2,202 $ 64 $ 887 Canada 242 492 371 Asia 447 425 1,310 Australia/New Zealand 52 29 57 Europe and other 219 278 257 $3,162 $1,288 $2,882
13. SEGMENT INFORMATION The Company currently reports its results in two divisions, Hydromer Products and integrated Systems. Hydromet Products division produces Sutron's standard environmental monitoring products including dataloggers. The integrated Systems division produces integrated systems of Sutron products with software, installation, training and special parts. Segment information including revenues, cost of sales and gross margin are as follows (in thousands):
Years Ended December 31, 2000 1999 1998 Revenue Hydromet Products $ 6,130 $10,095 $8,141 Integrated Systems $ 3,777 1,310 1,746 Totals $ 9,907 $11,405 $9,887 Cost of Goods Sold Hydromet Products $3,570 $5,489 $4,848 Integrated Systems 2,628 1,156 1,360 Totals $6,198 $6,645 $6,208 Gross Margin Hydromet Products $2,560 $4,606 $3,293 Integrated Systems 1,149 154 386 Totals $3,709 $4,760 $3,679
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Information required by Item 10 - Executive Compensation, Item 11 - Security Ownership of Certain Beneficial Owners and Management and Item 12 - Certain Relationships and Related Transactions and certain information required by Item 9 - Directors, Executive Officers, Promoters and Control Persons will be contained on pages 1 through 6 of the registrant's definitive proxy statement to be filed on April 9, 2001 and is incorporated herein by reference. Item 9. Directors, Executive Officers, Promoters and Control Persons Executive Officers The following tabulation sets forth the names of the executive officers at December 31, 2000, the positions and offices with the Company held by them, the date they first became officers, and their ages at December 31, 2000: First Became Name Office an Officer Age Raul S. McQuivey President, Chief Executive 1980 61 Officer and Chairman Glenn A. Conover Executive Vice President and a Director 1985 61 Daniel W. Farrell Vice President, Secretary 1984 48 and a Director Sidney C. Hooper Treasurer 1993 42 Item 13. Exhibits and Reports on Form 8-K. (A) Index to Exhibits Exhibit No. Description 3(a) Copy of Articles of Incorporation of Sutron Corporation, received and approved December 30, 1975 (1) 3(b) Copy of Articles of Amendment to the Articles of Incorporation and Articles of Reduction of Stated Capital of Sutron Corporation received and approved September 7, 1983(1) 3(c) By-laws of the Registrant(1) 3(d) Copy of Articles of Amendment to the Articles of Incorporation received and approved June 8, 1995(10) 4(a) Specimen Shares of Common Stock Certificate(2) 4(b) Form of Warrant to be issued as part of Unit (2) 4(c) Amended Form of Warrant issued as part of Unit(3) 4(d) Incentive Stock Option Plan dated August 31, 1983(1) 4(e) Stock Bonus Plan dated August 31, 1983(1) 4(f) Loan and Security Agreement, dated December 11, 1992 between the Company and Crestar Bank (8) 4(g) 1996 Stock Option Plan (11) 10(a) Employment Agreement dated as of July 1, 1983 with Kenneth W. Whitt(1) 10(b) Employment Agreement dated as of July 1, 1983 with Dr. Raul S. McQuivey(1) 10(c) Employment Agreement dated as of July 1, 1983 with Dr. Thomas N. Keefer(1) 10(d) Employment Agreement dated as of July 1, 1983 with Duane M. Preble(1) 10(e) Purchase Agreement dated as of July 1, 1983 with Eric S. Clyde(1) 10(f) Stock Option Agreement between Registrant and Gerald Calhoun dated July 1, 1983(1) 10(g) Certified Copy of Resolution of Commissioners of Fairfax County Economic Development Authority, adopted October 12, 1982, approving $425,000 Industrial revenue bond loan to registrant(1) 10(h) Certified Copy of Resolution of Commissioners of Fairfax County Economic Development Authority, adopted March 8, 1983, approving $400,000 industrial revenue bond loan to registrant (1) 10(i) Certified Copy of Resolution of Board of Supervisors of Fairfax County, adopted March 21, 1983, approving issuance of industrial revenue bonds for purpose of $400,000 loan to Registrant(1) 10(j) License agreement dated January 29, 1987, with TSUKASA SOKKEN Co., Ltd. of Japan, to use U.S. Patent No. 3,677,085 (4) 10(k) License agreement dated November 10, 1986, with S.A. Des Caliberies et Trefileries de Cossonay of Switzerland, to use U.S. Patent No. 4,279,147 and Canada Patent No. 1,120,286 (4) 10(l) Lease agreement dated September 18, 1987, with Squire Court Limited Partnership to lease building space (9,000 sq. ft.) (4) 10(m) Copy of termination agreement with Duane Preble dated April 1, 1988 (5) 10(n) Sale agreement with National Hospital Health System Corporation, dated November 29, 1989, and subsequent amendments dated December 29, 1989, February 28, 1990, and March 27, 1990, to sell land and building in Herndon, Virginia (6) 10(o) Lease agreement dated May 9, 1990 with National Hospital Health SystemCorporation to lease building space (5545 sq.ft.) (7) 10(p) Stock Option Agreement between Sutron Corporation and Glenn A. Conover dated October 15, 1990 (7) 10(q) Stock Option Agreement between Sutron Corporation and Daniel W. Farrell dated October 15, 1990 (7) 10(r) Lease agreement dated July 30, 1992 with Loudoun Holding Inc. to lease building space (16,794 sq. ft.) (8) 10(s) Stock Option Agreement between Sutron Corporation and Ronald C. Dodson dated December 6, 1993 (9) 10(t) Stock Option Agreement between Sutron Corporation and Raul S. McQuivey dated November 1, 1996 (11) 10(u) Stock Option Agreement between Sutron Corporation and Glenn A. Conover dated November 1, 1996 (11) 10(v) Stock Option Agreement between Sutron Corporation and Daniel W. Farrell dated November 1, 1996 (11) 10(w) Stock Option Agreement between Sutron Corporation and Sidney C. Hooper November 1, 1996 (11) (1) Filed as Exhibits to Registrant's Registration Statement on Form S-18 (File No. 2-86573-W) dated September 16, 1983, and incorporated herein by reference. (2) Filed as Exhibits to Amendment No. 1 to Registrant's Registration Statement on Form S-18 (File No. 2-86573-W) dated October 26, 2983, and incorporated herein by reference. (3) Filed as Exhibits to Amendment No. 2 to Registrant's Registration Statement on form S-18 (File No. 2-896573-W) dated November 4, 1983 and incorporated herein by reference. (4) Filed as Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. (5) Filed as Exhibit on Form 8-K dated April 1, 1990, and incorporated herein by reference. (6) Filed as Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. (7) Filed as Exhibits to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference. (8) Filed as Exhibits to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1992 and incorporated herein by reference. (9) Filed as Exhibits to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1993 and incorporated herein by reference. (10) Filed as Exhibits to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1995 and incorporated herein by reference. (11) Filed as Exhibits to Registrants Annual Report on Form 10-KSB for the year ended December 31, 1996 and incorporated herein by reference. (B) Reports on Form 8-K The registrant did not file any reports on Form 8-K during the fourth quarter of the fiscal year ended December 31, 2000. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Sutron Corporation (Registrant) Date: April 2, 2001 By /s/ Raul S. McQuivey Raul S. McQuviey, President and Director (Principal Executive and Financial Officer) In accordance with the Securities Exchange Act, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: April 2, 2001 By /s/ Raul S. McQuivey Raul S. McQuivey, President and Director President and Chief Executive Officer Date: April 2, 2001 By /s/ Thomas N. Keefer Thomas N. Keefer, Vice President and Director Date: April 2, 2001 By /s/ Daniel W. Farrell Daniel W. Farrell, Vice President and Director Date: April 2, 2001 By /s/ Ronald C. Dodson Ronald C. Dodson Director Date: April 2, 2001 By /s/ Sidney C. Hooper Sidney C. Hooper, Treasurer and Chief Accounting Officer EX-27 2 0002.txt
5 Article 5 Fin. Data Schedule for fiscal ended DEC-31-00 12-MOS DEC-31-2000 JAN-01-2000 DEC-31-2000 3 0 2069 40 2702 5306 2351 1522 6149 2133 0 43 0 0 3864 6149 9907 9907 6198 6198 (1) 0 38 (138) (98) (40) 0 0 0 (40) (.1) (.1)
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