boston automation systems, inc. (1)

8/4/2019 Boston Automation Systems, Inc. (1)

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Boston Automation Systems, Inc.


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BAS Sales Distribution

Sales during 1999: $1.8 billion

Glendale

Division

Advanced

Technology

Division

Technical

Devices

Division

Sales $1.21 $0.39 $0.21

Income (Loss) before taxes 0.29 0.06 (0.02)


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Consolidated Balance Sheets December 31,

1999 and 1998 (in Thousands)

1999 1998 1999 1998

ASSETS

Current assets:

Cash and cash equivalents $181,345 $185,514 12 14

Marketable securities 66,316 15,914 4 1

Accounts receivable, less allowance for doubtful accounts of

$4,410 and $2,395 in 1999 and 1998, respectively 296,159 219,303 19 17

Inventories: 0 0Parts 123,300 154,706 8 12

Assemblies in process 145,393 111,641 9 9

268,693 266,347 17 20

Deferred tax assets 49,716 49,262 3 4

Prepayment and other current assets 45,458 23,200 3 2

Total current assets 907,687 759,540 58 58

Property, plant and equipment 0 0

Land 41,774 41,060 3 3

Buildings and improvements 238,136 171,895 15 13

Machinery and equipment 692,383 591,897 44 45Construction in progress 9,693 52,699 1 4

Total 981,986 857,551 63 65

Less: Accumulated depreciation -484,247 -422,594 -31 -32

Net property, plant, and equipment 497,739 434,957 32 33

Marketable securities 139,752 96,494 9 7

Other assets 23,035 21,823 1 2

Total assets $1,568,213 $1,312,814 100 100


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Consolidated Balance Sheets December 31,

1999 and 1998 (in Thousands)

1999 1998 1999 1998

LIABILITIES

Current liabilities:

Notes payable-banks $8,221 $7,393 1 1

Current portion of long-term debt 4,659 1,309 0 0

Accounts payable 104,335 45,042 7 3

Accrued employees' compensationand withholdings 117,314 68,431 7 5Uneamed service revenue and customer advances 60,096 64,674 4 5

Other accrued liabilities 66,223 54,071 4 4

Accrued income taxes 31,478 14,770 2 1

Total current liabilities 392,326 255,690 25 19

Deferred tax liabilities 13,907 17,554 1 1

Long-term debt 8,948 13,200 1 1

Total liabilities 415,181 286,444 26 22

Shareholders equityCommon stock, $0.125 par value, 250,000 shares authorized,

170,319 and 83,744 net shares issued and outstanding in 1999

and 1998, respectively 21,290 10,468 1 1

Additional paid in capital 234,198 310,052 15 24

Retained earnings 897,544 705,850 57 54

Total shareholders equity 1,153,032 1,026,370 74 78

Total liabilities and shareholders equity $1,568,213 $1,312,814 100 100


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Consolidated Statements of Income, Years EndedDecember 31 (in Thousands, Except Per-Share Amounts)

1999 1998 1997 1999 1998 1997

Net sales $1,790,912 $1,489,151 $1,266,274 100 100 100

Expenses:

Cost of sales 1,047,752 947,174 734,370 59 64 58

Engineering and development 228,570 195,158 162,500 13 13 13

Selling and administrative 256,392 212,885 194,103 14 14 15

1,532,714 1,355,217 1,090,973 86 91 86

Income from operations 258,198 133,934 175,301 14 9 14

Interest income 17,307 13,514 20,289 1 1 2

Interest expense -1,656 -1,566 -2,245 0 0 0

Income before income taxes 273,849 145,882 193,345 15 10 15

Provision for income taxes 82,155 43,765 65,737 5 3 5Net income $191,694 $102,117 $127,608 11 7 10

Net income per common share-basic $1.12 $0.61 $0.76 0 0 0

Net income per common share-diluted $1.07 $0.59 $0.74 0 0 0

Shares used in net income per common share-basic 170,519 167,645 166,868 10 11 13

Share used in net income per common share-diluted 178,550 171,930 172,638 10 12 14


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Consolidated Statements of Changes in ShareholdersEquity, Years Ended December 31, 1999, 1998, and 1997

(in Thousands)

Shares

Issued

Share

Reacquired

Common

Stock Par

Value

Additional

Paid-In

Capital

Retained

Earnings

Total

Balance, December 31, 199687,242 4,762 $10,310 $355,576 $476,125 $842,011

Is suance of s tock to employees

under benefit plans 3,373 422 43,643 44,065

Tax benefit from stock options27,982 27,982

Repurchase of stock2,550 -319 -104,216 -104,535

Net income127,608 127,608

Balance, December 31, 199790,615 7,312 10,413 322,985 603,733 937,131


under benefit plans 1,796 224 26,355 26,579



Net income102,117 102,117

Balance, December 31, 199892,411 8,667 10,468 310,052 705,850 1,026,370

Is suance of s tock to employeesunder benefit plans 3,205 401 60,730 61,131


Two-for-one stock split effected in the

form of a 100% stock dividend 95,616 10,033 10,698 -10,698 0


under benefit plans after two-for-one

stock split 1,973 246 20,947 21,193


Repurchase of stock after two-for-one

stock split 2,820 -352 -120,315 -120,667

Net income$191,694 191,694

Balance, December 31, 1999193,205 22,886 $21,290 $234,198 $897,544 $1,153,032


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Consolidated Statement of Cash Flows, Years

Ended December 31 (in Thousands)1999 1998 1997

Cash flows from operating activities:

Net income $191,694 $102,117 $127,608

Adjustments to reconcile net income to net cash Provided by

operating activities:

Depreciation 85,279 75,351 57,983Amortization 1,107 953 1,168

Charge for excess inventory 23,000

Deferred income tax provision (credit) -4,101 -14,607 1,341

Other non-cash items, net 4,354 -804 1,377

Changes in operating assets and liabilities:

Accounts receivable -76,856 81,630 -122,503

Inventories -2,346 -16,990 -131,014

Other assets -24,576 -1,184 -3,861

Accounts payable and accruals 115,750 18,530 41,261

Accrued income taxes 77,171 7,685 40,092

Net cash provided by operating activities 367,476 275,681 13,452


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Consolidated Statement of Cash Flows, Years

Ended December 31 (in Thousands)1999 1998 1997

Cash flows from investing activities:

Additions to property, plant, and equipment -119,780 -119,457 -106,436

Increase in equipment manufactured by the company -31,376 -44,983 -25,695

Purchases of held-to-maturity marketable securities -177,650 -20,000 -111,033

Maturities of held-to-maturity marketable securities 118,990 20,000 206,556

Purchases of available-for-sale marketable securities -204,824 -162,092 -192,174

Proceeds for sales and maturities of available-for-sale marketable

securities 169,824 224,951 151,426

Net cash used in investing activities -244,816 -101,581 -77,356

Cash flows from financing activites:

Payments of long-term debt -1,333 -1,615 -2,410

Issuance of common stock under s tock opt ion and stock

purchase plans 82,323 26,579 44,065

Acquisition of treasury stock -207,819 -51,158 -104,535

Net cash used by financing activities -126,829 -26,194 -62,880

Increase (decrease) in cash and cash equivalents -4,169 110,846 -126,784

Cash and cash equivalents at beginning of year $185,514 74,668 201,452

Cash and cash equivalents at end of year $181,345 $185,514 $745,668

Supplementary disclosure of cash flow information:

Cash paid during the year for:

Interest $1,615 $1,525 $2,257

Income taxes $22,747 $47,225 $31,971


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Revenue Recognition Policy

Product revenues: on shipment

Product with warranty: estimated cost is provided while

recognizing revenue Service revenues: as services are provided or over

period of related contract

Contracts: percentage-of-completion method based

upon efforts-expended method Changes to estimated costs: in period in which

determined


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Discussion Question

Cookbook Rules vs. General Principles?


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Revenue

Actual + expected cash inflows

Types.. Inflows of cash

Enhancement of assets of an entity

Settlement of liabilities

Inflows resulting in an increase in equity

Increased value of a product resulting from production

Resulting from.., Sale of goods

Delivering goods Producing goods

Rendering services

Use of enterprise resources yielding interest, royalties and dividends

Other activities that constitute the entitys ongoing major or central operations


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Items Not Included in Revenues

Appreciation in the value on disposal of fixed assets or non current assetsCapital gain

Unrealized holding gains on change in value of current assets

Natural increasein, Herds

Agricultural

Forest products

Realized and unrealized gains from change in exchange rates

Realized gains resulting from discharge of an obligation less than its carryingamount

Unrealized gains resulting from restatement of the carrying amount of anobligation


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Recognizing Revenues

Sale or cash preceding production and delivery: on productionand delivery

Product contracted for before production: on percentagecompletion

Services rendered or rights use assets extended continuouslyover time: as earned

Products readily realizable: on production

Products, services, other assets exchanged: as already earned

Doubtful of receipt = on the basis of cash receipt


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Revenue Recognition

CIF sales.., Sales price includes cost, insurance and freight

Paid by the seller Transfer of ownership takes place on receipt of bill of

lading / acknowledged lorry receipt

FOB sales.., Sales price does not include insurance or freight All insurance, freight etc would be borne by the buyer

Recognize revenues at the time of dispatch


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Revenue Recognition

Recognition

Services

Advertising (Media/production) commisions Completion of service

Insurance agnecy commissions On effective commencement of renewal dates of the related policiesInstallation fees When equipment is installed and accepted by the customers

Financial service commissions

Driven by..,

(a) Nature of service

(b) Incidence of costs related to service

When the payment of the service will be received

Others

Interest

Time proportion basis, taking into account..,

(a) Amount outstanding

(b) Rate applicable

Royalties Accrual basis, in accordance with terms of agreement

Dividends When owner's right to receive payment is established

Revenue Recognition


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Discussion Question

How should the revenue recognition criteria beimplemented for the following situations?

Customers pay prior to delivery Products / services are provided over multiple years

Credit-worthiness of the customer is questionable

Money-back guarantees are offered


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Discussion Question

Warehouse clubs charge an annual membershipfee that provides the subscribers with the

opportunity to buy merchandise at discountprices

How should the membership fee be recorded?

Have the warehouse merchandisers fulfilled theircommitments to members at sign-up, justifying immediaterecognition of revenues, or should revenues be deferredand recognized throughout the year?


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Discussion Question

Two year agreement made with clinet to build a yacht

Money agreed to pay on contract completion: $10

million Expected cost of yacht construction: $8 million

Gross profit as per.., Percentage completion method: $1 million per year

Completed contract method: $0 in first year and $2 in the second year


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Discussion Question

How are customer dissatisfaction and returnrisks reflected in financial reporting?


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Discussion Question

A company does systems integration for largecustomers

A project requires about.., Design and gain approval from customer: 6 months

Implement the project: 12 months

Customer gets no real value form the project until the

whole thing is complete When have the company earned revenue that the

project generates?


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Discussion Question

A company sells to retailers

Based on bill-and-hold, the company allows

customers to buy product well in advance of timethey need it

The company warehouse it for them and ship it

out later When does company earns the revenue?


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Discussion Question

You work for an architectural firm

The firm provides clients with plans for buildings, deals

with the local building authorities, and supervises theconstruction or reconstruction

All these services are included in the firms fee, which is

generally figured as a percentage of construction costs

How do you figure out when the firm has earned itsrevenue?


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Channel Stuffing

Manufacturers under stock market pressure tomake their numbers, are frequently tempted to

ship unordered software to distributors at theend of a quarter

Example: Macromedia


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Adelphia

Big cable TV operator

Wound up in bankruptcy few years ago

Bought large no. of cable boxes and installed in customers homes

Cost per box: $500 Additionally charged the cable-box supplier a marketing fee of $26 for its boxes and let

the supplier raise its price just enough to cover the fee

No change of cash to the extent of $26

The cable box supplier, Marketing campaign charges were amortized over severalyears

Adelphia billed million of $ additional revenues without doing anything

Inflated company earnings by.., 2000: $37 million

2001: $54 million


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