f10k_093009.htm
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended: September 30, 2009
Commission
File No. 1-7939
VICON
INDUSTRIES, INC.
(Exact
name of registrant as specified in its charter)
NEW
YORK
|
11-2160665
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer identification No.)
|
|
|
89
Arkay Drive, Hauppauge, New York
|
11788
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (631) 952-2288
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, Par Value $.01
|
NYSE
Amex
|
(Title
of class)
|
(Name
of each exchange on which
registered)
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes No X
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act.
Yes No
X
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
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files)
Yes
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. ____
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one)
Large
Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller
reporting company X
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of
1934)
Yes No X
The aggregate market value of voting and
non-voting Common Stock held by non-affiliates of the registrant based upon the
closing price of $5.32 per share as of March 31, 2009 was approximately
$10,902,000.
The
number of shares outstanding of the registrant's Common Stock as of December 15,
2009 was 4,575,456.
PART I
ITEM 1 -
BUSINESS
General
Vicon
Industries, Inc. (“the Company”), incorporated in 1967, designs, manufactures,
assembles and markets a wide range of video systems and system components used
for security, surveillance, safety and control purposes by a broad group of end
users. A video system is typically a private network that can
transmit and receive video, audio and data signals in accordance with the
operational needs of the user. The Company's primary business focus
is the design of network video systems that it produces and sells worldwide,
primarily to installing dealers, system integrators, government entities and
security products distributors.
The
Company operates within the electronic protection segment of the security
industry which includes, among others: fire and burglar alarm systems, access
control, biometric and video systems and asset protection. The U.S.
security industry consists of thousands of individuals and businesses (exclusive
of public sector law enforcement) that provide products and services for the
protection and monitoring of people, property and information. The security
industry includes fire and detection systems, access control, video systems,
asset protection, guard services and equipment, locks, safes, armored vehicles,
security fencing, private investigations, biometric systems and
others. The Company’s products are typically used for crime
deterrence, visual documentation, observation of inaccessible or hazardous
areas, enhancing safety, mitigating liability, obtaining cost savings (such as
lower insurance premiums), managing control systems and improving the efficiency
and effectiveness of personnel. The Company’s products are used in, among
others, office buildings, manufacturing plants, apartment complexes, retail
stores, government facilities, airports, transportation operations, prisons,
casinos, hotels, sports arenas, health care facilities and financial
institutions.
Products
The
Company’s product line consists of various elements of a video system, beginning
with a physical security information management application (PSIM) which manages
all network devices including cameras. The Company also produces
video system edge devices such as video encoders, decoders,
network/digital/hybrid video recorders, analog and IP fixed position or robotic
cameras, megapixel digital cameras, matrix video switchers and system
controls. The Company provides a comprehensive line of products due
to the many varied climatic and operational environments in which the products
are expected to perform. In addition to selling from a standard
catalog line, the Company at times produces to specification or will modify an
existing product to meet customer requirements. Recently, the Company
entered into an OEM agreement with an access control producer to supply such
products on an integrated basis with its video systems.
The
Company’s products range from a simple camera mounting bracket to a large
digital control, transmission, recording, storage and video matrix switching
system. The Company’s sales are concentrated principally among its
network video products (ViconNet and Kollector) and dome camera (Surveyor)
product lines.
Marketing
The
Company’s marketing emphasizes engineered video system solutions which includes
system design, project management, technical training and pre and post sales
support. The Company promotes and markets its products through industry trade
shows worldwide, product brochures and catalogues, direct marketing and
electronic mailings to existing and prospective customers, webinars, training
seminars for system designers, customers and end users, road shows which preview
new systems and system components, and advertising through trade and end user
magazines and the Company's web site (www.vicon-cctv.com). The Company’s
products are sold principally to independent dealers, system integrators and
security products distributors. Sales are effectuated principally by
field sales engineers and inside customer service
representatives. The Company’s sales effort is supported by in-house
customer service coordinators and technical support groups which provide product
information, application engineering, design detail, field project management,
and hardware and software technical support.
The
Company’s products are utilized in video system installations by: (1) commercial
and industrial users, such as office buildings, manufacturing plants,
warehouses, apartment complexes, shopping malls and retail
stores; (2) federal, state, and local governments for national
security purposes, agency facilities, prisons, and military installations; (3)
financial institutions, such as banks, clearing houses, brokerage firms and
depositories, for security purposes; (4) transportation departments for highway
traffic control, bridge and tunnel monitoring, and airport, subway, bus and
seaport security and surveillance; (5) gaming casinos, where video surveillance
is often mandated by regulatory authorities; (6) health care facilities, such as
hospitals; and (7) institutions of education, such as schools and
universities.
The
Company’s principal sales offices are located in Hauppauge, New York; Fareham,
England; Zaventem, Belgium; and Neumunster, Germany.
International
Sales
The
Company sells its products in the U.K., Europe, Scandinavia and the Middle East
through its European based subsidiaries and elsewhere outside the U.S.
principally by direct export from its U.S. headquarters. The Company
has a few territorial exclusivity agreements with customers but primarily uses a
wide range of installation companies and security products distributors in
international markets.
Export
sales and sales from the Company’s foreign subsidiaries amounted to $28.4
million, $32.0 million and $32.0 million or 47%, 48% and 46% of consolidated net
sales in fiscal years 2009, 2008, and 2007, respectively. The
Company’s principal foreign markets are the U.K., Europe, Middle East and the
Pacific Rim, which together accounted for approximately 83% of international
sales in fiscal 2009.
Competition
The
Company operates in a highly competitive marketplace both domestically and
internationally. The Company competes by providing high-end video
systems and system components that incorporate broad capability together with
high levels of customer service and technical support. Generally, the
Company does not compete based on price alone.
The
Company’s principal video systems competitors include the following companies or
their affiliates: Matsushita Electric Corp. (Panasonic), Sony Corporation, Pelco
Sales Company (a division of Schneider Electric), Bosch Security Systems, Inc.,
Sensormatic Electronics Corp. (a division of Tyco International), GE Security
Systems, United Technologies, AXIS Communications, On-Net Surveillance Systems,
Inc. and Honeywell Security Systems. Many additional companies, both
domestic and international, produce products that compete against one or more of
the Company’s product lines. Many of the Company’s principal
competitors are larger companies whose financial resources and scope of
operations are substantially greater than the Company’s.
Engineering and
Development
The Company’s engineering and development is
directed principally on new and improved video systems and system
components. In recent years, the trend of product development and
demand within the video security and surveillance market has been toward
enhanced software applications involving the compression, analysis,
transmission, storage, manipulation, imaging and display of digital video over
IP networks. As the demands of the Company’s target market segment
require the Company to keep pace with changes in technology, the Company has
focused its engineering effort in these developing areas. Development
projects are chosen and prioritized based on customer feedback, the Company's
analysis as to the needs of the marketplace, anticipated technological advances
and market research.
At
September 30, 2009, the Company employed a total of 36 engineers in the
following areas: software development, mechanical design, manufacturing/testing
and electrical and circuit design. Engineering and development
expense amounted to approximately 9%, 8% and 7% of net sales in fiscal years
2009, 2008 and 2007, respectively.
Source and Availability of
Raw Materials
The
Company relies upon independent manufacturers and suppliers to manufacture and
assemble most of its proprietary products and expects to continue to rely on
such entities in the future. The Company’s relationships with certain
of its independent manufacturers, assemblers and suppliers are not covered by
formal contractual agreements.
Raw
materials and components purchased by the Company and its suppliers are
generally readily available in the market, subject to market lead times at the
time of order. The Company is generally not dependent upon any single
source for a significant amount of its raw materials or components.
Intellectual
Property
The
Company owns a limited number of design and utility patents expiring at various
times. The Company owns certain trademarks and several other
trademark applications are pending both in the United States and in
Europe. Most of the Company’s key products utilize proprietary
software which is protected by copyright. The Company considers its
software to be unique and is a principal element in the differentiation of the
Company’s products from its competition. However, the laws of certain
foreign countries do not protect intellectual property rights to the same extent
or in the same manner as the laws of the U.S. The Company has no
significant licenses, franchises or concessions with respect to any of its
products or business dealings. In addition, the Company does not
believe its limited number of patents or its lack of licenses, franchises and
concessions to be of substantial significance. The Company is a
defendant in a patent infringement suit as discussed in “Item 3 - Legal
Proceedings”, the outcome of which could possibly have a material effect on the
Company’s business.
Inventories
The
Company generally maintains sufficient finished goods inventory levels to
respond to customer demand, since most sales are to installing dealers and
system integrators who normally do not carry any significant
inventory. The Company principally builds inventory to known or
anticipated customer demand. In addition to normal safety stock
levels, certain additional inventory levels may be maintained for products with
long purchase and manufacturing lead times. The Company believes that it is
important to carry adequate inventory levels of parts, components and products
to avoid production and delivery delays that may detract from the sales
effort.
Backlog
The
backlog of orders believed to be firm as of September 30, 2009 and 2008 was
approximately $2.8 million and $3.9 million, respectively. Orders are
generally cancelable without penalty at the option of the
customer. The Company prefers that its backlog of orders not exceed
its ability to fulfill such orders on a timely basis, since experience shows
that long delivery schedules only encourage the Company’s customers to look
elsewhere for product availability.
Employees
At
September 30, 2009, the Company employed 192 full-time employees, of whom 7 are
officers, 41 are in administration, 79 are in sales and technical service
capacities, 36 are in engineering and 29 are production employees. At
September 30, 2008, the Company employed 199 persons. There are no
collective bargaining agreements with any of the Company’s employees and the
Company considers its relations with its employees to be good.
ITEM 1A – RISK
FACTORS
The
Company designs, manufactures and markets a wide range of video systems and
components worldwide and is subject to all business risks that similar
technology companies and all other companies encounter in their
operations. Market risks that pertain particularly to the Company are
discussed elsewhere in this Form 10-K under Item 1 – Business; Item 3 – Legal
Proceedings; Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations; and Item 7A – Quantitative and Qualitative
Disclosures about Market Risk.
ITEM 1B – UNRESOLVED STAFF
COMMENTS
None.
ITEM 2 -
PROPERTIES
The
Company principally operates from an 80,000 square-foot facility located at 89
Arkay Drive, Hauppauge, New York, which it owns. The Company also
owns a 14,000 square-foot sales, service and warehouse facility in southern
England which services the U.K., Europe and the Middle East. In
addition, the Company operates under leases from offices in Yavne, Israel;
Neumunster, Germany; and various local sales offices throughout
Europe. The Company believes that its facilities are adequate to meet
its current and foreseeable operating needs.
ITEM 3 - LEGAL
PROCEEDINGS
The
Company is one of several defendants in a patent infringement suit commenced by
Lectrolarm Custom Systems, Inc. in May 2003 in the United States District Court
for the Western District of Tennessee. The alleged infringement by
the Company relates to its camera dome systems and other products that represent
significant sales to the Company. Among other things, the suit seeks
past and enhanced damages, injunctive relief and attorney’s fees. In
January 2006, the Company received the plaintiff’s claim for past damages
through December 31, 2005 that approximated $11.7 million plus pre-judgment
interest. The Company and its outside patent counsel believe that the
complaint against the Company is without merit. The Company is
vigorously defending itself and is a party to a joint defense with certain other
named defendants.
In
January 2005, the Company petitioned the U.S. Patent and Trademark Office
(USPTO) to reexamine the plaintiff’s patent, believing it to be
invalid. In April 2006, the USPTO issued a non-final office action
rejecting all of the plaintiff’s patent claims asserted against the Company
citing the existence of prior art of the Company and another
defendant. On June 30, 2006, the Federal District Court granted the
defendants’ motion for continuance (delay) of the trial, pending the outcome of
the USPTO’s reexamination proceedings. In February 2007, the USPTO
issued a Final Rejection of the six claims in the plaintiff’s patent asserted
against the Company, which was reaffirmed in June 2007 after the plaintiff filed
a response with the USPTO requesting reconsideration of its Final
Rejection. The plaintiff has appealed the examiner’s decision to the
USPTO Board of Patent Appeals and Interferences and has an additional appeal
available to it thereafter in the Court of Appeals for the Federal
Circuit.
The
Company is unable to reasonably estimate a range of possible loss, if any, at
this time. Although the Company has received favorable rulings from
the USPTO with respect to the reexamination proceedings, there is always the
possibility that the plaintiff’s patent claims could be upheld in appeal and the
matter would proceed to trial. Should this occur and the Company
receives an unfavorable outcome at trial, it could result in a liability that is
material to the Company’s results of operations and financial
position.
ITEM 4 - SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 - MARKET FOR THE
REGISTRANT'S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
The
Company’s stock is traded on the NYSE Amex under the symbol
(VII). The following table sets forth for the periods indicated, the
range of high and low prices for the Company's Common Stock:
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
Fiscal 2009
|
|
|
|
|
|
|
December
|
|
|
6.00 |
|
|
|
3.54 |
|
March
|
|
|
6.45 |
|
|
|
4.40 |
|
June
|
|
|
6.07 |
|
|
|
4.52 |
|
September
|
|
|
6.76 |
|
|
|
5.11 |
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
December
|
|
|
12.23 |
|
|
|
7.61 |
|
March
|
|
|
9.95 |
|
|
|
4.53 |
|
June
|
|
|
5.75 |
|
|
|
4.64 |
|
September
|
|
|
5.85 |
|
|
|
4.27 |
|
|
|
|
|
|
|
|
|
|
The last
sale price of the Company’s Common Stock on December 15, 2009 as reported on the
NYSE Amex was $5.92 per share. As of December 15, 2009, there were
approximately 150 shareholders of record.
The
Company has never declared or paid cash dividends on its Common Stock and
anticipates that any earnings in the foreseeable future will be retained to
finance the growth and development of its business.
In May
2008, the Company’s Board of Directors authorized the purchase of up to $1
million worth of shares of the Company’s outstanding common stock. In
December 2008, the Board of Directors authorized the purchase of an additional
$1 million worth of shares of the Company’s outstanding common
stock. The following table summarizes repurchases of common stock for
the three month period ended September 30, 2009:
Period
|
|
Total
Number
of
Shares
Purchased
(1)
|
|
|
Average
Price
Paid
Per
Share
|
|
|
Approximate
Dollar Value
Of
Shares that May Yet Be
Purchased Under the
Programs
|
|
|
|
|
|
|
|
|
|
|
|
07/01/09-07/31/09
|
|
|
14,627 |
|
|
$ |
5.96 |
|
|
$ |
794,885 |
|
08/01/09-08/31/09
|
|
|
13,390 |
|
|
$ |
5.69 |
|
|
$ |
718,716 |
|
09/01/09-09/30/09
|
|
|
12,787 |
|
|
$ |
5.83 |
|
|
$ |
644,121 |
|
Total
|
|
|
40,804 |
|
|
$ |
5.83 |
|
|
|
|
|
(1) All
repurchases were executed in open market transactions.
On
December 3, 2009, the Company’s Board of Directors authorized the repurchase of
an additional $1.5 million of shares of the Company’s common stock.
ITEM 6 - SELECTED FINANCIAL
DATA
(in
thousands, except per share data)
FISCAL
YEAR
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
60,445 |
|
|
$ |
66,911 |
|
|
$ |
69,073 |
|
|
$ |
56,279 |
|
|
$ |
56,056 |
|
Gross
profit
|
|
|
27,293 |
|
|
|
30,422 |
|
|
|
29,386 |
|
|
|
22,094 |
|
|
|
20,996 |
|
Operating
income (loss)
|
|
|
3,031 |
|
|
|
4,389 |
|
|
|
4,682 |
|
|
|
(367 |
) |
|
|
(2,931 |
) |
Income
(loss) before income taxes
|
|
|
3,219 |
|
|
|
4,589 |
|
|
|
4,921 |
|
|
|
(397 |
) |
|
|
(3,069 |
) |
Net
income (loss)
|
|
|
2,017 |
|
|
|
2,839 |
|
|
|
7,886 |
|
|
|
(547 |
) |
|
|
(2,885 |
) |
Net
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
.44 |
|
|
|
.59 |
|
|
|
1.67 |
|
|
|
(.12 |
) |
|
|
(.63 |
) |
Diluted
|
|
|
.43 |
|
|
|
.57 |
|
|
|
1.59 |
|
|
|
(.12 |
) |
|
|
(.63 |
) |
Total
assets
|
|
|
47,316 |
|
|
|
46,964 |
|
|
|
45,841 |
|
|
|
35,955 |
|
|
|
34,192 |
|
Long-term
debt
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,740 |
|
|
|
2,062 |
|
Working
capital
|
|
|
30,845 |
|
|
|
29,181 |
|
|
|
26,041 |
|
|
|
20,181 |
|
|
|
19,713 |
|
Property,
plant and equipment (net)
|
|
|
5,018 |
|
|
|
5,301 |
|
|
|
5,762 |
|
|
|
6,229 |
|
|
|
6,616 |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Management's
Discussion and Analysis of Financial Condition and Results of Operations
discusses our consolidated financial statements for the periods indicated, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including those related to
revenue recognition, bad debts, product warranties, inventories, long lived
assets, income taxes and contingencies and litigation. Management bases its
estimates and judgments on historical experience and on various other factors
including general market conditions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. Results for the periods reported herein are not
necessarily indicative of results that may be expected in future
periods.
Overview
The
Company designs, manufactures, assembles and markets a wide range of video
systems and system components used for security, surveillance, safety and
communication purposes by a broad group of end users worldwide. The Company’s
product line consists of various elements of a video system, including digital
video and network video recorders, video encoders, decoders, servers and related
physical security information management software, analog, megapixel and IP
fixed and robotic cameras, matrix video switches, video displays and system
peripherals.
The
Company sells high-end video systems and system components in a highly
competitive worldwide marketplace principally to authorized security dealers and
system integrators. Such dealers and integrators typically resell the Company’s
products directly to end users, among other services. The Company’s sales are
principally project based and are largely dependent upon winning projects,
construction activities and the timing of funding. Sales will vary
from period to period depending upon many factors including seasonal and
geographic trends in construction activities and the timing of deliveries due to
changes in project schedules and funding. The Company does not maintain a
sizable backlog as its customer orders are typically deliverable within three
months or often upon receipt of order. The Company’s operating cost structure is
principally fixed and therefore profitability is largely dependent upon sales
levels. In fiscal 2009, the Company’s sales levels were impacted by the
worldwide economic downturn as capital expenditure projects were
cancelled and funding for new construction and renovation projects
weakened. Thus far in fiscal 2010, the Company is experiencing continued weak
market conditions which have significantly reduced its sales
levels. The impact of such sales decline and continued lower incoming
order levels will have a material adverse impact on the Company’s near term
financial results.
The
Company competes in a market of rapid technology shifts which influence the
performance capability of security systems. As a result, the Company
spends a significant amount on new product development. In fiscal 2009 and 2008,
the Company incurred $5.4 million and $5.6 million of engineering and
development expense or 9% and 8% of net sales, respectively. The Company’s
expenditures for product development are substantially less than its larger
competitors. In recent years, the rapid pace of technology changes
has placed increased burden on the Company’s development resources which may
necessitate an increase in annual expense for product
development. Further, the Company’s sales effort requires a high
level of customer service and technical support for its
products. Customer support levels were maintained during fiscal 2009
despite a reduction in sales and such expenditure levels are expected to
continue in fiscal 2010. The Company will also consider any strategic
initiative that may augment or supplement its present product offerings and
technology platforms, among other benefits.
The
Company has a foreign sales and distribution subsidiary in Europe that conducts
business in British pounds and Euros that represented approximately 36% of the
Company’s consolidated sales for fiscal 2009. It also has an Israel based
engineering and development subsidiary that incurs a majority of its operating
expenses in Shekels that represented approximately 15% of the Company’s
operating expenses for fiscal 2009. During fiscal 2009, there were material
changes in exchange rates between world currencies that affected the Company’s
financial statements. In 2009, U.S. dollar gained on average 21% against the
British pound, 10% against the Euro and 8% against the Shekel compared with
2008. This served to reduce the Company’s consolidated reported sales and costs
in these currencies on a translation basis, increase the cost of European
subsidiaries U.S. dollar based sourced product costs and incur company-wide
negative result impacts on the settlements of transactional balances between
companies. The Company has also historically secured selected forward currency
exchange contracts to help stabilize the impact of changing exchange rates and
will continue to do so in fiscal 2010. Such contract settlements have
served to further impact currency transactions in fiscal 2009. The
aggregate net negative impacts of such complex currency exchange transactions on
the fiscal year’s results were not reasonably quantifiable.
RESULTS OF
OPERATIONS
Fiscal Year 2009 Compared
with 2008
Net sales
for 2009 decreased $6.5 million (10%) to $60.4 million compared with $66.9
million in 2008. Domestic sales decreased $2.9 million (8%) to $32.0
million compared with $34.9 million in 2008 while international sales decreased
$3.6 million (11%) to $28.4 million compared with $32.0 million in
2008. Approximately $2.8 million of the decrease in international
sales was due to negative currency exchange rate changes in the current year as
European currencies significantly weakened against the U.S.
dollar. The remaining sales decreases across all business segments
was due to weakening worldwide economic conditions as funding for new
construction and renovation projects slowed during 2009. Order intake
for 2009 decreased $7.7 million to $59.3 million compared with $67.0 million in
2008 and was similarly impacted by negative exchange rate changes in the current
year. The backlog of unfilled orders was $2.8 million at September
30, 2009 compared with $3.9 million at September 30, 2008.
Gross
profit margins for 2009 decreased slightly to 45.2% compared with 45.5% in
2008. The decrease included reduced European margins caused by
weakening European currencies during 2009. The Company’s Europe based
subsidiaries experienced increased costs on U.S. dollar denominated product
purchases as a result of unfavorable currency exchange rate
changes.
Operating
expenses for 2009 decreased to $24.3 million or 40.1% of net sales compared with
$26.0 million or 38.9% of net sales in 2008. Selling, general and
administrative expenses decreased $1.5 million to $18.9 million for 2009
compared with $20.4 million in 2008. The decrease included a $1.1
million reduction in European subsidiary operating costs due principally to
currency translation. In addition, the Company continued to invest in
new product development, incurring $5.4 million of engineering and development
expenses in 2009 compared with $5.6 million in 2008. Lower expenses
were incurred by the Company’s Israel based engineering and development
operation as a result of a stronger U.S. dollar in 2009.
The
Company generated operating income of $3.0 million for fiscal 2009 compared with
$4.4 million for 2008.
Interest
expense decreased to $2,000 for 2009 compared with $45,000 in 2008 principally
as a result of the repayment of bank borrowings in January
2008. Interest and other income decreased to $190,000 for 2009
compared with $244,000 in 2008. Although the Company generated $7.1
million of cash in 2009, its interest income decreased as a result of reduced
yields on investments.
Income
tax expense for 2009 decreased to $1.2 million compared with $1.8 million in
2008 as a result of decreased taxable income. The current year tax
expense includes a $1.1 million provision for U.S. income taxes compared with a
$1.2 million provision in 2008. The balance of tax expense for the
years presented represents foreign taxes on profits reported by the Company’s
U.K. subsidiary.
As a
result of the foregoing, the Company generated net income of $2.0 million in
2009 compared with $2.8 million in 2008.
RESULTS OF
OPERATIONS
Fiscal Year 2008 Compared
with 2007
Net sales
for 2008 decreased 3% to $66.9 million compared with $69.1 million in
2007. Domestic sales decreased 6% to $34.9 million compared with
$37.0 million in 2007 while international sales decreased slightly to $32.0
million compared with $32.1 million in 2007. The sales decreases in
these segments were due in part to weakening economic conditions in certain of
the Company’s markets during 2008. However, order intake for 2008
increased to $67.0 million compared with $65.7 million in 2007. The
backlog of unfilled orders was $3.9 million at September 30, 2008 compared with
$3.8 million at September 30, 2007.
Gross
profit margins for 2008 increased to 45.5% compared with 42.5% in 2007 as the
Company experienced higher margins on certain project business. The
margin increase also included the benefit of favorable exchange rate changes in
Europe and reduced product component costs.
Operating
expenses for 2008 increased to $26.0 million or 38.9% of net sales compared with
$24.7 million or 35.8% of net sales in 2007. Selling, general and
administrative expenses increased to $20.4 million for 2008 compared with $19.5
million in 2007 as the Company made certain investments in sales organization
infrastructure. In addition, the Company continued to invest in new
product development, incurring $5.6 million of engineering and development
expenses in 2008 compared with $5.2 million in 2007. Increased
expenses were incurred by the Company’s Israeli based engineering and
development operation as a result of a weaker U.S. dollar in 2008.
The
Company generated operating income of $4.4 million for fiscal 2008 compared with
$4.7 million for 2007.
Interest
expense decreased to $45,000 for 2008 compared with $142,000 in 2007 principally
as a result of the paydown of bank borrowings. Interest and other
income decreased to $244,000 for 2008 compared with $380,000 in
2007. The prior year included $168,000 of gains from life insurance
proceeds and policies on the death of a retired executive. Excluding
the effect of these gains, interest and other income increased $32,000
principally as a result of increased cash balances during the current year
period.
The
Company recorded income tax expense of $1.8 million for 2008 compared with a
benefit of $3.0 million for 2007. The current year tax expense
includes a $1.2 million provision for U.S. income taxes as compared with a $3.4
million tax benefit for 2007. The Company did not recognize income
tax expense on its U.S. pre-tax income of $3.9 million for 2007 as it utilized
available net operating loss carryforwards in the amount of $1.5 million (tax
effected). In the fourth quarter of 2007, the Company recorded a $3.4
million tax benefit relating to the recognition of remaining unrecognized U.S.
net deferred income tax assets. The deferred income tax asset
recognition was made as a result of an updated assessment of their
realization. The 2008 income tax expense also included a $525,000
provision for foreign taxes compared with $399,000 for 2007 relating primarily
to profits recorded by the Company’s U.K. subsidiary.
As a
result of the foregoing, the Company generated net income of $2.8 million in
2008 compared with $7.9 million in 2007. Net income for 2007 would
have been $3.1 million had income tax expense been provided at an assumed
effective tax rate.
LIQUIDITY AND CAPITAL
RESOURCES
Net cash
provided by operating activities was $8.4 million for 2009, which included $2.0
million of net income, $2.0 million of non-cash charges for the year and a $4.2
million reduction of accounts receivable due to the decrease in 2009 sales
levels. Net cash used in investing activities was $573,000 in 2009
consisting of general capital expenditures. Net cash used in
financing activities was $865,000 in 2009, which included $1.3 million of common
stock repurchases offset in part by $397,000 of proceeds received from the
exercise of stock options. As a result of the foregoing, cash
increased by $7.1 million in 2009 after the effect of exchange rate changes on
the cash position of the Company.
The
Company believes that it has sufficient cash to meet its anticipated operating
costs and capital expenditure requirements for at least the next twelve
months.
The
Company does not have any off-balance sheet transactions, arrangements or
obligations (including contingent obligations) that have, or are reasonably
likely to have, a material effect on the Company’s financial condition, results
of operations, liquidity, capital expenditures or capital
resources.
The
Company is one of several defendants in a patent infringement suit commenced by
Lectrolarm Custom Systems, Inc. in May 2003 in the United States District Court
for the Western District of Tennessee. The alleged infringement by
the Company relates to its camera dome systems and other products that represent
significant sales to the Company. Among other things, the suit seeks
past and enhanced damages, injunctive relief and attorney’s fees. In
January 2006, the Company received the plaintiff’s claim for past damages
through December 31, 2005 that approximated $11.7 million plus pre-judgment
interest. The Company and its outside patent counsel believe that the
complaint against the Company is without merit. The Company is
vigorously defending itself and is a party to a joint defense with certain other
named defendants.
In
January 2005, the Company petitioned the U.S. Patent and Trademark Office
(USPTO) to reexamine the plaintiff’s patent, believing it to be
invalid. In April 2006, the USPTO issued a non-final office action
rejecting all of the plaintiff’s patent claims asserted against the Company
citing the existence of prior art of the Company and another
defendant. On June 30, 2006, the Federal District Court granted the
defendants’ motion for continuance (delay) of the trial, pending the outcome of
the USPTO’s reexamination proceedings. In February 2007, the USPTO
issued a Final Rejection of the six claims in the plaintiff’s
patent
asserted against the Company, which was reaffirmed in June 2007 after the
plaintiff filed a response with the USPTO requesting reconsideration of its
Final Rejection. The plaintiff has appealed the examiner’s decision
to the USPTO Board of Patent Appeals and Interferences and has an additional
appeal available to it thereafter in the Court of Appeals for the Federal
Circuit.
The
Company is unable to reasonably estimate a range of possible loss, if any, at
this time. Although the Company has received favorable rulings from
the USPTO with respect to the reexamination proceedings, there is always the
possibility that the plaintiff’s patent claims could be upheld in appeal and the
matter would proceed to trial. Should this occur and the Company
receives an unfavorable outcome at trial, it could result in a liability that is
material to the Company’s results of operations and financial
position.
Critical Accounting
Policies
The
Company’s significant accounting policies are fully described in Note 1 to the
consolidated financial statements included in Part IV. Management
believes the following critical accounting policies, among others, affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements.
The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the selling price is fixed
or determinable, and collectibility of the resulting receivable is reasonably
assured. As it relates to product sales, revenue is generally
recognized when products are sold and title is passed to the
customer. Shipping and handling costs are included in cost of
sales. Advance service billings under a national supply contract with
one customer are deferred and recognized as revenues on a pro rata basis over
the term of the service agreement. Pursuant to the adoption of
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 605-25-05 (EITF Issue No. 00-21, “Revenue Arrangements with Multiple
Deliverables”), the Company evaluates multiple-element revenue arrangements for
separate units of accounting, and follows appropriate revenue recognition
policies for each separate unit. Elements are considered separate
units of accounting provided that (i) the delivered item has stand-alone value
to the customer, (ii) there is objective and reliable evidence of the fair value
of the undelivered item, and (iii) if a general right of return exists relative
to the delivered item, delivery or performance of the undelivered item is
considered probable and substantially within the control of the
Company. As applied to the Company, under arrangements involving the
sale of product and the provision of services, product sales are recognized as
revenue when the products are sold and title is passed to the customer, and
service revenue is recognized as services are performed. For products
that include more than incidental software, and for separate licenses of the
Company’s software products, the Company recognizes revenue in accordance with
the provisions of ASC 985-605 (Statement of Position 97-2, “Software Revenue
Recognition”), as amended.
The
Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required
payments. If the financial condition of its customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
The
Company provides for the estimated cost of product warranties at the time
revenue is recognized. While the Company engages in product quality
programs and processes, including monitoring and evaluating the quality of its
component suppliers, its warranty obligation is affected by product failure
rates, material usage and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage
or service delivery costs differ from its estimates, revisions to the estimated
warranty liability may be required.
The
Company writes down its inventory for estimated obsolescence and slow moving
inventory equal to the difference between the carrying cost of inventory and the
estimated net realizable market value based upon assumptions about future demand
and market conditions. Technology changes and market conditions may
render some of the Company’s products obsolete and additional inventory
write-downs may be required. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.
The
Company assesses the recoverability of the carrying value of its long-lived
assets, including identifiable intangible assets with finite useful lives,
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable. The Company evaluates the recoverability of
such assets based upon the expectations of undiscounted cash flows from such
assets. If the sum of the expected future undiscounted cash flows were less than
the carrying amount of the asset, a loss would be recognized for the difference
between the fair value and the carrying amount.
The
Company’s ability to recover the reported amounts of deferred income tax assets
is dependent upon its ability to generate sufficient taxable income during the
periods over which net temporary tax differences become deductible.
The
Company is subject to proceedings, lawsuits and other claims related to labor,
product and other matters. The Company assesses the likelihood of an
adverse judgment or outcomes for these matters, as well as the range of
potential losses. A determination of the reserves required, if any,
is made after careful analysis. The required reserves may change in
the future due to new developments.
Recent Accounting
Pronouncements
In
September 2006, the FASB issued ASC 820 (Statement of Financial Accounting
Standards (SFAS) No. 157, “Fair Value Measurement”), which defines fair
value, establishes a framework for measuring fair value and expands disclosures
regarding assets and liabilities measured at fair value, which was amended in
February 2008. The adoption of the provisions related to financial
assets and financial liabilities were effective for the Company’s first quarter
of fiscal 2009 and did not have a material impact on its consolidated financial
position, results of operations or cash flows. The Company does not
expect that the adoption of the remaining provisions of ASC 820 will have a
material impact on its consolidated financial position, results of operations or
cash flows.
In
December 2007, the FASB issued ASC 805 (SFAS 141 and SFAS 141R , “Business
Combinations”). ASC 805 will significantly change the accounting for
business combinations in a number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, IPR&D and restructuring
costs. In addition, under ASC 805, changes in deferred tax asset
valuation allowances and acquired income tax uncertainties in a business
combination after the measurement period will impact income tax
expense. ASC 805 is effective for fiscal years beginning after
December 15, 2008. The Company has not yet evaluated the impact, if any, of
adopting this pronouncement.
In
December 2007, the FASB issued ASC 810 (SFAS 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51”
(“SFAS 160”)). ASC 810 will change the accounting and reporting
for minority interests, which will be recharacterized as noncontrolling
interests (NCI) and classified as a component of equity. This new
consolidation method will significantly change the accounting for transactions
with minority interest holders. ASC 810 is effective for fiscal years
beginning after December 15, 2008. The Company has not yet
evaluated the impact, if any, of adopting this pronouncement.
In
October 2009, the FASB amended ASC 985-605 (Statement of Position 97-2,
“Software Revenue Recognition”) to provide new guidance on accounting for
revenue arrangements that include tangible products containing software and
non-software components that function together to deliver the product’s
essential functionality. These amendments become effective on a
prospective basis for fiscal years beginning after June 15, 2010, although early
adoption is permitted. The Company has not yet evaluated the impact,
if any, of adopting this pronouncement.
Foreign Currency
Activity
The
Company’s foreign exchange exposure is principally limited to the relationship
of the U.S. dollar to the British pound sterling, the Euro and the Israeli
shekel.
Sales by
the Company’s U.K. and German based subsidiaries to customers in Europe are made
in British pounds sterling or Eurodollars. In fiscal 2009,
approximately $4.5 million of products were sold by the Company to its U.K.
based subsidiary for resale. The Company has also entered into
certain engineering cost sharing agreements with its U.K. based subsidiary that
are denominated in U.S. dollars. The Company attempts to minimize its
currency exposure on these intercompany transactions through the purchase of
forward exchange contracts.
The
Company’s Israeli based subsidiary incurs shekel based operating expenses which
are funded by the Company in U.S. dollars. In fiscal 2009, the
Company purchased forward exchange contracts to hedge its currency exposure on
certain of these expenses.
As of September 30, 2009, the Company had
forward exchange contracts outstanding with notional amounts aggregating $2.0
million. The Company also attempts to reduce the impact of an
unfavorable exchange rate condition through cost reductions from its suppliers
and shifting product sourcing to suppliers transacting in more stable and
favorable currencies.
In
general, the Company seeks lower costs from suppliers and enters into forward
exchange contracts to mitigate short-term exchange rate
exposures. However, there can be no assurance that such steps will be
effective in limiting long-term foreign currency exposure.
ITEM 7A – QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Factors
The
Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. The Company has a policy
that prohibits the use of currency derivatives or other financial instruments
for trading or speculative purposes.
The
Company enters into forward exchange contracts to hedge certain foreign currency
exposures and minimize the effect of such fluctuations on reported earnings and
cash flow (see “Foreign Currency Activity”, Note 1 “Derivative Instruments” and
“Fair Value of Financial Instruments” to the accompanying financial
statements). At September 30, 2009, the Company’s foreign currency
exchange risks included an aggregate $2.6 million of intercompany account
balances between the Company and its subsidiaries, which are short term and will
be settled in fiscal 2010.
Related Party
Transactions
Refer to
Item 13 and “Note 10. Related Party Transactions” to the accompanying financial
statements.
Inflation
Inflation
has increased the Company’s operating costs in recent years. To
offset the effects of inflation, the Company seeks to increase sales and lower
its costs where possible.
“Safe Harbor” Statement
under the Private Securities Litigation Reform Act of 1995
Statements
in this Report on Form 10-K and other statements made by the Company or its
representatives that are not strictly historical facts including, without
limitation, statements included herein under the Management’s Discussion and
Analysis captions “Overview”, “Results of Operations” and “Liquidity and Capital
Resources” are “forward-looking” statements within the meaning of the Private
Securities Litigation Reform Act of 1995 that should be considered as subject to
the many risks and uncertainties that exist in the Company's operations and
business environment. The forward-looking statements are based on current
expectations and involve a number of known and unknown risks and uncertainties
that could cause the actual results, performance and/or achievements of the
Company to differ materially from any future results, performance or
achievements, express or implied, by the forward-looking
statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, and that in light of the significant
uncertainties inherent in forward-looking statements, the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be
achieved. The Company also assumes no obligation to publicly update
or revise its forward-looking statements or to advise of changes in the
assumptions and factors on which they are based.
ITEM 8 - FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
See Part
IV, Item 15, for an index to consolidated financial statements and financial
statement schedules.
ITEM 9A – CONTROLS AND
PROCEDURES
Evaluation of Disclosure
Controls and Procedures
The
Company’s management, with the participation of its Chief Executive Officer and
Chief Financial Officer, conducted an evaluation of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures, as
required by Exchange Act Rule 13a-15. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that, as of
the end of the period covered by this report, the Company’s disclosure controls
and procedures were effective to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified by the Securities and Exchange Commission’s rules and forms
and such information is accumulated and communicated to management as
appropriate to allow timely decisions regarding required
disclosures.
Management's Report on
Internal Control over Financial Reporting
The
Company's management is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company's internal control over
financial reporting is a process designed under the supervision of its Chief
Executive Officer and Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the
Company's financial statements for external reporting in accordance with
accounting principles generally accepted in the United States of America.
Management evaluates the effectiveness of the Company's internal control over
financial reporting using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework. Management, under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of the Company's internal control over financial reporting as of
September 30, 2009 and concluded that it is effective.
This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
Changes in Internal
Controls
There
were no changes in the Company's internal control over financial reporting
identified in connection with the evaluation referred to above that occurred
during the fourth quarter of the fiscal year ended September 30, 2009 that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Limitations on the
Effectiveness of Controls
The
Company believes that a control system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the control
system are met, and no evaluation of controls can provide absolute assurance
that all controls issues and instances of fraud, if any, within a Company have
been detected. The Company's disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives and the Company's
Chief Executive Officer and Chief Financial Officer have concluded that such
controls and procedures are effective at the "reasonable assurance"
level.
ITEM 9B – OTHER
INFORMATION
None.
PART III
ITEM 10 - DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT
The
Executive Officers and Directors of the Company are as follows:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Kenneth
M. Darby
|
|
|
63 |
|
Chairman
of the Board, President and
|
|
|
|
|
|
Chief
Executive Officer
|
John
M. Badke
|
|
|
50 |
|
Senior
Vice President, Finance and
|
|
|
|
|
|
Chief
Financial Officer
|
Peter
A. Horn
|
|
|
54 |
|
Vice
President, Operations
|
Bret
M. McGowan
|
|
|
44 |
|
Vice
President, U.S. Sales and Marketing
|
Yacov
A. Pshtissky
|
|
|
58 |
|
Vice
President, Technology and Development
|
Christopher
J. Wall
|
|
|
56 |
|
Managing
Director, Vicon Industries Ltd.
|
Yigal
Abiri
|
|
|
60 |
|
General
Manager, Vicon Systems Ltd.
|
Peter
F. Neumann
|
|
|
75 |
|
Director
|
Bernard
F. Reynolds
|
|
|
67 |
|
Director
|
W.
Gregory Robertson
|
|
|
66 |
|
Director
|
Arthur
D. Roche
|
|
|
71 |
|
Director
|
The
business experience, principal occupations and employment, as well as period of
service, of each of the officers and directors of the Company during at least
the last five years are set forth below.
Kenneth M. Darby - Chairman of the
Board, President and Chief Executive Officer. Mr. Darby has served
as Chairman of the Board since April 1999, as Chief Executive Officer since
April 1992 and as President since October 1991. He has served as a
director since 1987. Mr. Darby also served as Chief Operating
Officer and as Executive Vice President, Vice President, Finance and Treasurer
of the Company. He joined the Company in 1978 as Controller after
more than nine years at Peat Marwick Mitchell & Co., a public accounting
firm. Mr. Darby's current term on the Board ends in May 2011.
John M. Badke – Senior Vice
President, Finance and Chief Financial Officer. Mr. Badke has
been Senior Vice President, Finance since May 2004 and Chief Financial Officer
since December 1999. Previously, he was Vice President, Finance since
October 1998 and served as Controller since joining the Company in
1992. Prior to joining the Company, Mr. Badke was Controller for NEK
Cable, Inc. and an audit manager with the international accounting firms of
Arthur Andersen & Co. and Peat Marwick Main & Co.
Peter A. Horn - Vice President,
Operations. Mr. Horn has been Vice President, Operations
since June 1999. From 1995 to 1999, he was Vice President, Compliance and
Quality Assurance. Prior to that time, he served as Vice President in
various capacities since his promotion in May 1990.
Bret M. McGowan – Vice President,
U.S. Sales and Marketing. Mr. McGowan has been Vice President,
U.S. Sales and Marketing since April 2005. From 2001 to 2005, he
served as Vice President, Marketing. Previously, he served as
Director of Marketing since 1998 and as Marketing Manager since
1994. He joined the Company in 1993 as a Marketing
Specialist.
Yacov A. Pshtissky - Vice President,
Technology and Development. Mr. Pshtissky has been Vice
President, Technology and Development since May 1990. Mr. Pshtissky
was Director of Electrical Product Development from March 1988 through
April 1990.
Christopher J. Wall - Managing
Director, Vicon Industries, Ltd. Mr. Wall has been Managing
Director, Vicon Industries Ltd. since February 1996. Previously he
served as Financial Director, Vicon Industries, Ltd. since joining the Company
in 1989. Prior to joining the Company he held a variety of senior
financial positions within Westland plc, a UK aerospace company.
Yigal Abiri – General Manager, Vicon
Systems Ltd. Mr. Abiri has been General Manager, Vicon Systems
Ltd. since joining the Company in August 1999. Previously, he served
as President of QSR, Ltd., a developer and manufacturer of remote video
surveillance equipment.
Peter F. Neumann -
Director. Mr. Neumann has been a director of the Company
since 1987. He is the retired President of Flynn-Neumann Agency,
Inc., an insurance brokerage firm. Mr. Neumann's current term on
the Board ends in May 2012.
Bernard F.
Reynolds - Director. Mr. Reynolds has been a director of the
Company since May 2009. He has been retired since 2004 and had
previously served as the President of Aon Consulting’s Human Resources
Outsourcing Group. Prior to the merger of Aon Consulting Worldwide
and ASI Solutions Incorporated in May 2001, Mr. Reynolds served as the Chairman
and Chief Executive Officer of ASI, a company he founded in 1978. Mr.
Reynolds’ current term on the Board ends in May 2012.
W. Gregory Robertson -
Director. Mr. Robertson has been a director of the
Company since 1991. He is the Chairman of TM Capital Corporation, a
financial services company which he founded in 1989. From 1985 to
1989, he was employed by Thomson McKinnon Securities, Inc. as head of investment
banking and public finance. Mr. Robertson’s current term on the Board
ends in May 2010.
Arthur D. Roche - Director.
Mr. Roche has been a director of the Company since 1992. He served as
Executive Vice President and co-participant in the Office of the President of
the Company from August 1993 until his retirement in November
1999. For the six months prior to that time, Mr. Roche provided
consulting services to the Company. In October 1991,
Mr. Roche retired as a partner of Arthur Andersen & Co., an
international accounting firm which he joined in 1960. His current
term on the Board ends in May 2011.
There are
no family relationships between any director, executive officer or person
nominated or chosen by the Company to become a director or officer.
Audit Committee Financial
Expert
All named
directors other than Mr. Darby are independent directors and members of the
Audit Committee. The Board of Directors has determined that Arthur D. Roche,
Chairman of the Audit Committee, qualifies as an “Audit Committee Financial
Expert”, as defined by Securities and Exchange Commission Rules, based on his
education, experience and background. Mr. Roche is independent as
that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange
Act.
Code of
Ethics
The
Company has adopted a Code of Ethics that applies to all its employees,
including its chief executive officer, chief financial and accounting officer,
controller, and any persons performing similar functions. Such Code
of Ethics is published on the Company’s internet website
(www.vicon-cctv.com).
Compliance with Section
16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company during the year ended September 30,
2009 and certain written representations that no Form 5 is required, no person
who, at any time during the year ended September 30, 2009 was a director,
officer or beneficial owner of more than 10 percent of any class of equity
securities of the Company registered pursuant to Section 12 of the Exchange Act
failed to file on a timely basis, as disclosed in the above forms, reports
required by Section 16(a) of the Exchange Act during the year ended September
30, 2009, except that Mr. Reynolds filed one late report on Form 3, Mr. Neumann
filed two late reports on Form 4, and Messrs. Maloney and Reynolds each filed
one late report on Form 4.
ITEM 11 - EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Philosophy and Objectives of Our Compensation Program
The
Company’s compensation programs are intended to enable it to attract, motivate,
reward and retain the management talent required to achieve corporate
objectives, and thereby increase stockholder value. It is the Company’s policy
to provide incentives to senior management to achieve both short-term and
long-term objectives and to reward exceptional performance and contributions to
the development of the business. To attain these objectives, the executive
compensation program includes four key components:
Base
Salary. Base
salary for the Company’s executives is intended to provide competitive
remuneration for services provided to the Company over a one-year period. Base
salaries are set at levels designed to attract and retain the most appropriately
qualified individuals for each of the key management level positions within the
Company.
Cash Incentive
Bonuses. The
Company's bonus programs are intended to reward executive officers for the
achievement of various annual performance goals approved by the Company’s Board
of Directors. For fiscal 2009, a performance based bonus plan was established
for certain of the Company’s executive officers, including among others Kenneth
M. Darby, Chief Executive Officer and John M. Badke, Chief Financial Officer,
whereby the participants would share a specified pretax profit based bonus pool
of between seven percent (7%) and eleven percent (11%) upon the achievement of a
certain annual pretax profit targets ranging from $2.0 million to $4.5 million
(and above), respectively. Under such plan, Messrs. Darby and Badke
earned bonuses of $176,000 and $88,000, respectively, based upon the allocation
of an aggregate bonus pool of ten percent (10%) of the Company’s consolidated
pretax profit for 2009, after certain adjustments. Mr. Darby’s and
Mr. Badke’s bonus allocation represented approximately 49% and 25%,
respectively, of the available bonus pool. In addition, a performance
based bonus plan was established for Christopher J. Wall, the Company’s European
subsidiary Managing Director, for fiscal year 2009 whereby Mr. Wall would earn
an amount equal to between 2% and 6% (based on achievement levels) of the
combined pretax operating profits of the Company’s Europe based subsidiaries.
Under such plan, Mr. Wall earned a bonus of $127,000 (82,083 Pounds Sterling)
based upon the achievement of 5% of specified profits for fiscal
2009.
Equity-based
Compensation. Equity-based
compensation is designed to provide incentives to the Company’s executive
officers to build shareholder value over the long term by aligning their
interests with the interest of shareholders. The Compensation Committee of the
Board of Directors believes that equity-based compensation provides an incentive
that focuses the executive's attention on managing the company from the
perspective of an owner with an equity stake in the business. Among our
executive officers, the number of shares of stock awarded or common stock
subject to options granted to each individual generally depends upon the level
of that officer's responsibility. The largest grants are generally awarded to
the most senior officers who, in the view of the Compensation Committee, have
the greatest potential impact on the Company’s profitability and growth.
Previous grants of stock options or stock grants are reviewed in determining the
size of any executive's award in a particular year. In March 2007, the Board of
Directors adopted the Company’s 2007 Stock Incentive Plan, which was approved by
the Company’s stockholders at its Annual Meeting of Stockholders held on May 18,
2007. Under such plan, a total of 500,000 shares of Common Stock were reserved
for issuance and include the grant of stock options, restricted stock and other
stock awards as determined by the Compensation Committee. The purpose of the
Stock Incentive Plan is to attract and retain executive management by providing
them with appropriate equity-based incentives and rewards for superior
performance and to provide incentive to a broader range of
employees. In fiscal 2009, the Compensation Committee awarded a total
of 43,000 stock options to named executive officers, including 25,000 to Mr.
Darby, 8,000 to Mr. Badke and 10,000 to Mr. Wall.
Retirement,
Health and Welfare Benefits and Other Perquisites. The Company’s
executive officers are entitled to a specified retirement/severance benefit
pursuant to employment agreements as detailed below.
In
addition, the executive officers are entitled to participate in all of the
Company’s employee benefit plans, including medical, dental, group life,
disability, accidental death and dismemberment insurance and the Company’s
sponsored 401(k) and mandated foreign Retirement Plans. Further, Mr. Wall
receives a supplemental retirement benefit in the form of a defined contribution
of five percent (5%) of his annual salary. The Company also provides its Chief
Executive Officer with a country club membership and certain additional
insurances not covered by primary insurance plans available to other employees
and the Company’s named executive officers are provided a leased
car.
Employment
Agreements
The
Company has entered into employment agreements with its named executive officers
that provide certain benefits upon termination of employment or change in
control of the Company without Board of Director approval. Under Mr. Darby’s
employment agreement, he is entitled to receive a lump sum payment equal to the
balance owing under his agreement in the event of a change in control of the
Company under any condition. All the other agreements provide the named
executive officer with a payment of three times their average annual
compensation for the previous five year period if there is a change in control
of the Company without Board of Director approval, as defined. Such payment can
be taken in a present value lump sum or equal installments over a three year
period. The agreements also provide the named executive officers other than Mr.
Darby with certain severance/retirement benefits upon certain occurrences
including termination of employment without cause as defined, termination of
employment due to the Company’s breach of specified employment conditions (good
reason termination), death, disability or retirement at a specified age. Such
severance/retirement benefit provisions survive the expiration of the agreements
and include a fixed stated benefit of $350,000 for Mr. Badke and $159,000
(100,000 Pounds Sterling) for Mr. Wall. In addition, Mr. Badke
receives an additional deferred compensation benefit upon such employment
termination occurrences in the form of 6,561 shares of the Company’s common
stock.
On
November 13, 2009, the Company entered into a one-year employment agreement with
Kenneth M. Darby, the Company’s Chief Executive Officer, to expire on September
30, 2010. The terms of the new agreement provide for an annual base salary of
$400,000. In the event the agreement is terminated prior to its expiration for
reasons other than cause as defined, Mr. Darby is entitled to receive all
remaining salary owed him through its expiration.
2009
Summary Compensation Table
The
following table sets forth all compensation for the fiscal year ended
September 30, 2009 awarded to or earned by the Company’s Chief Executive
Officer and by each of our other named executive officers whose total
compensation exceeded $100,000 during such period.
Name
and Principal Position
|
Year
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards
($)(1)
|
|
|
Non-Equity
Incentive Plan Compensation ($)(3)
|
|
|
Nonqualified
Deferred Compensation Earnings
($)
|
|
|
All
Other Compensation ($)(2)
|
|
|
Total ($)
|
|
Kenneth
M. Darby
|
2009
|
|
$ |
400,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
34,353 |
(1) |
|
$ |
175,562 |
(2) |
|
|
- |
|
|
$ |
21,026 |
(5) |
|
$ |
630,941 |
|
Chairman
and Chief Executive Officer
|
2008
|
|
$ |
400,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
9,792 |
(1) |
|
$ |
218,182 |
(4) |
|
|
- |
|
|
$ |
23,693 |
(5) |
|
$ |
651,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Badke
|
2009
|
|
$ |
190,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
20,418 |
(1) |
|
$ |
87,781 |
(2) |
|
|
- |
|
|
$ |
8,465 |
(6) |
|
$ |
306,664 |
|
Senior
Vice President and Chief Financial Officer
|
2008
|
|
$ |
190,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
12,336 |
(1) |
|
$ |
109,091 |
(4) |
|
|
- |
|
|
$ |
7,927 |
(6) |
|
$ |
319,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
J. Wall
|
2009
|
|
$ |
159,856 |
|
|
|
- |
|
|
|
- |
|
|
$ |
19,484 |
(1) |
|
$ |
127,393 |
(3) |
|
|
- |
|
|
$ |
24,273 |
(7) |
|
$ |
331,006 |
|
Managing
Director Vicon Industries, Ltd.
|
2008
|
|
$ |
203,013 |
|
|
|
- |
|
|
|
- |
|
|
$ |
9,180 |
(1) |
|
$ |
190,891 |
(3) |
|
|
- |
|
|
$ |
31,022 |
(7) |
|
$ |
434,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents
the compensation costs recognized for financial statement reporting
purposes for the fair value of stock options in accordance with ASC 718
(Statement of Financial Accounting Standards
No. 123R). (See “Note 1” under the caption “Accounting for
Stock-Based Compensation” to the accompanying financial
statements.)
|
(2)
|
For
fiscal 2009, a performance based bonus plan was established for certain of
the Company’s executive officers, including among others Kenneth M. Darby,
Chief Executive Officer and John M. Badke, Chief Financial Officer,
whereby the participants would share a specified pretax profit based bonus
pool of between seven percent (7%) and eleven percent (11%) upon the
achievement of a certain annual pretax profit targets ranging from $2.0
million to $4.5 million (and above), respectively. Under such
plan, Messrs. Darby and Badke earned bonuses based upon the allocation of
an aggregate bonus pool of ten percent (10%) of the Company’s consolidated
pretax profit for 2009, after certain adjustments. Mr. Darby’s
and Mr. Badke’s bonus allocation represented approximately 49% and 25%,
respectively, of the available bonus
pool.
|
(3)
|
A
performance based bonus plan was established for Christopher J. Wall, the
Company’s European subsidiary Managing Director, for fiscal years 2009 and
2008 whereby Mr. Wall would earn an amount equal to between 2% and 6%
(based on achievement levels) of the combined pretax operating profits of
the Company’s Europe based subsidiaries. Under such plans, Mr. Wall earned
a bonus based upon the achievement of 5% of specified profits for each of
fiscal 2009 and 2008.
|
(4)
|
For
fiscal 2008, a performance based bonus plan was established for certain of
the Company’s executive officers, including among others Kenneth M. Darby,
Chief Executive Officer and John M. Badke, Chief Financial Officer,
whereby the participants would share a specified pretax profit based bonus
pool of between eight percent (8%) and fourteen percent (14%) upon the
achievement of a certain annual pretax profit targets ranging from $4.0
million to $7.0 million (and above), respectively. Under such
plan, Messrs. Darby and Badke earned bonuses based upon the allocation of
an aggregate bonus pool of nine percent (9%) of the Company’s consolidated
pretax profit for 2008, after certain adjustments. Mr. Darby’s
and Mr. Badke’s bonus allocation represented approximately 47% and 24%,
respectively, of the available bonus
pool.
|
(5)
|
All
other compensation represents: (a) automobile expense of $10,021 and
$12,894 for fiscal 2009 and 2008, respectively, (b) country club
membership of $8,795 and $8,589 for fiscal 2009 and 2008, respectively,
and (c) long-term disability insurance of $2,210 paid by the Company for
Mr. Darby in both fiscal 2009 and
2008.
|
(6)
|
Represents
automobile expense paid by the
Company.
|
(7)
|
All
other compensation represents: (a) automobile expense of $16,280 and
$16,929 for fiscal 2009 and 2008, respectively, and (b) supplemental
retirement contributions of $7,993 and $14,093 for fiscal 2009 and 2008,
respectively.
|
Outstanding Equity Awards at Fiscal
2009 Year-End
The
following table sets forth information with respect to the outstanding equity
awards of the named executive officers as of September 30,
2009.
Name
|
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
|
|
|
Number
of Securities Underlying Unexercised Options (#) Unexercisable
|
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
Kenneth
M. Darby
|
|
|
3,000 |
(1) |
|
|
7,000 |
(1) |
|
|
- |
|
|
$ |
3.59 |
|
10/25/12
|
Chairman
and Chief
|
|
|
4,000 |
(3) |
|
|
16,000 |
(3) |
|
|
- |
|
|
$ |
4.79 |
|
05/22/18
|
Executive
Officer
|
|
|
- |
|
|
|
25,000 |
(3) |
|
|
- |
|
|
$ |
5.00 |
|
11/05/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Badke
|
|
|
5,000 |
(1) |
|
|
- |
|
|
|
- |
|
|
$ |
3.00 |
|
05/27/11
|
Senior
Vice President
|
|
|
5,000 |
(2) |
|
|
- |
|
|
|
- |
|
|
$ |
3.17 |
|
12/09/10
|
and
Chief Financial
|
|
|
4,500 |
(1) |
|
|
10,500 |
(1) |
|
|
- |
|
|
$ |
3.59 |
|
10/25/12
|
Officer
|
|
|
2,000 |
(3) |
|
|
8,000 |
(3) |
|
|
- |
|
|
$ |
4.79 |
|
05/22/18
|
|
|
|
- |
|
|
|
8,000 |
(3) |
|
|
- |
|
|
$ |
5.00 |
|
11/05/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
J. Wall
|
|
|
5,000 |
(1) |
|
|
- |
|
|
|
- |
|
|
$ |
3.00 |
|
05/27/11
|
Managing
Director
|
|
|
3,000 |
(1) |
|
|
2,000 |
(1) |
|
|
- |
|
|
$ |
3.17 |
|
12/09/11
|
Vicon
Industries, Ltd.
|
|
|
1,500 |
(1) |
|
|
3,500 |
(1) |
|
|
- |
|
|
$ |
3.59 |
|
10/25/12
|
|
|
|
2,000 |
(3) |
|
|
8,000 |
(3) |
|
|
- |
|
|
$ |
4.79 |
|
05/22/18
|
|
|
|
- |
|
|
|
10,000 |
(1) |
|
|
- |
|
|
$ |
5.00 |
|
11/05/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Options
vest over a four year period at 30% of the shares on the first anniversary
of the grant date, 30% of the shares on the second anniversary of the
grant date and the remaining 40% of the shares on the third anniversary of
the grant date. Options expire after the sixth anniversary of the grant
date.
|
(2)
|
Options
vest over a three year period at 30% of the shares on the grant date, 30%
of the shares on the first anniversary of the grant date and the remaining
40% of the shares on the second anniversary of the grant date. Options
expire after the fifth anniversary of the grant
date.
|
(3)
|
Options
vest over a five year period in five equal annual installments beginning
on the first anniversary of the grant date. Options expire
after the tenth anniversary of the grant
date.
|
|
Fiscal
2009 Directors' Compensation
|
The table
below summarizes the compensation paid by the Company to non-employee directors
for the fiscal year ended September 30, 2009.
Name
|
|
Fees
Earned
or
Paid in
Cash
($)(1)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)(2)(3)
|
|
|
All
Other
Compensation ($)
|
|
|
Total ($)
|
|
Clifton
H.W. Maloney
|
|
$ |
32,000 |
|
|
|
- |
|
|
$ |
23,819 |
(2) |
|
|
- |
|
|
$ |
55,819 |
|
Peter
F. Neumann
|
|
$ |
30,400 |
|
|
|
- |
|
|
$ |
20,154 |
(2) |
|
|
- |
|
|
$ |
50,554 |
|
Bernard
F. Reynolds
|
|
$ |
10,000 |
|
|
|
- |
|
|
$ |
9,922 |
(2) |
|
|
- |
|
|
$ |
19,922 |
|
W.
Gregory Robertson
|
|
$ |
32,000 |
|
|
|
- |
|
|
$ |
23,819 |
(2) |
|
|
- |
|
|
$ |
55,819 |
|
Arthur
D. Roche
|
|
$ |
40,000 |
|
|
|
- |
|
|
$ |
23,819 |
(2) |
|
|
- |
|
|
$ |
63,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Directors
who are not employees of the Company received an annual fee of $22,400 for
regular Board meetings and $1,600 per committee meeting attended in person
or by teleconference. The Chairman of the Audit Committee also received an
additional annual retainer of
$8,000.
|
(2)
|
Represents
the compensation costs recognized for financial statement reporting
purposes in fiscal 2009 for the fair value of stock options in accordance
with ASC 718 (Statement of Financial Accounting Standards
No. 123R). (See “Note 1” under the caption “Accounting for
Stock-Based Compensation” to the accompanying financial
statements.)
|
(3)
|
On
November 5, 2008, Messrs. Maloney, Neumann, Robertson and Roche were each
granted 7,500 options to purchase common stock at the opening market price
of $5.00 per share. On May 21, 2009, Mr. Neumann was granted
3,500 options and Mr. Reynolds was granted 15,000 options to purchase
common stock at the opening market price of $5.51 per share. As
of September 30, 2009, Messrs. Neumann, Reynolds, Robertson and Roche held
14,500, 15,000, 14,500 and 14,500 stock options,
respectively. On September 25, 2009, Mr. Maloney died and his
estate held 23,500 vested stock options as of September 30,
2009.
|
Directors’ Compensation and
Term
Directors who are not employees of the Company
(named directors other than Mr. Darby) receive an annual fee of $22,400 for
regular Board meetings and $1,600 per committee meeting attended in person or by
teleconference. The Chairman of the Audit Committee also receives an
additional annual retainer of $8,000. Employee directors are not
compensated for Board or committee meetings. Directors may not stand
for reelection after age 70, except that any director may serve additional
three-year terms after age 70 with the unanimous consent of the Board of
Directors.
Compensation Committee
Interlocks and Insider Participation
The Compensation Committee of the Board of
Directors consists of Messrs. Neumann, Reynolds, Robertson and Roche, none of
whom has ever been an officer of the Company except for Mr. Roche, who served as
Executive Vice President from August 1993 until his retirement in November
1999.
Board Compensation Committee
Report
The Compensation Committee’s compensation
policies applicable to the Company’s officers for 2009 were to pay a competitive
market price for the services of such officers, taking into account the overall
performance and financial capabilities of the Company and the officer's
individual level of performance.
Mr. Darby makes recommendations to the
Compensation Committee as to the base salary and incentive compensation of all
officers other than himself. The Committee reviews these
recommendations with Mr. Darby and, after such review, determines
compensation. In the case of Mr. Darby, the Compensation
Committee makes its determination after direct negotiation with
him. For each officer, the Committee's determinations are based on
its conclusions concerning each officer's performance and comparable
compensation levels for similarly situated officers at comparable
companies. The overall level of performance of the Company is taken
into account but is not specifically related to the base salary of these
officers. Also, the Company has established incentive compensation
plans for certain officers, which provide for a specified bonus upon the
Company’s achievement of certain annual sales and/or profitability
targets.
The Compensation Committee grants options to
officers to link compensation to the performance of the
Company. Options are exercisable in the future at the fair market
value at the time of grant, so that an officer granted an option is rewarded by
the increase in the price of the Company’s stock. The Committee
grants options to officers based on significant contributions of such officer to
the performance of the Company. In addition, in determining Mr.
Darby’s salary and bonus for service as Chief Executive Officer, the Committee
considers the responsibility assumed by him in formulating, implementing and
managing the operational and strategic objectives of the Company.
The Compensation Committee has reviewed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
with the Company’s management. Based on such review and discussion,
the Committee has recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in the Company’s Annual Report on Form 10-K
for the fiscal year ended September 30, 2009.
Submitted
by the Compensation Committee,
Peter F.
Neumann,
Chairman Bernard
F. Reynolds
W.
Gregory
Robertson Arthur
D. Roche
ITEM 12 - SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth the beneficial ownership of the Company’s Common
Stock as of December 15, 2009 by (i) those persons known by the Company to be
beneficial owners of more than 5% of the Company’s outstanding Common Stock;
(ii) each current executive officer named in the Summary Compensation Table;
(iii) each director; and (iv) all directors and executive officers as a
group.
Name
and Address
|
|
Number
of Shares
|
|
|
|
|
|
|
|
Of Beneficial Owner
|
|
Beneficially Owned
(1)
|
|
|
|
|
|
% of Class
|
|
CBC
Co., Ltd. and affiliates
|
|
|
|
|
|
|
|
|
|
2-15-13
Tsukishima, Chuo-ku,
|
|
|
|
|
|
|
|
|
|
Tokyo,
Japan 104
|
|
|
543,715 |
|
|
|
|
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Anita
G. Zucker,
|
|
|
|
|
|
|
|
|
|
|
|
as
Trustee of Jerry Zucker Revocable Trust
|
|
|
|
|
|
|
|
|
|
|
|
c/o
The Inter Tech Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
4838
Jenkins Ave.
|
|
|
|
|
|
|
|
|
|
|
|
North
Charleston, SC 29405
|
|
|
463,214 |
|
|
|
(2 |
) |
|
|
9.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dimensional
Fund Advisors
|
|
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1299
Ocean Avenue
|
|
|
|
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|
|
|
|
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|
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|
Santa
Monica, CA 90401
|
|
|
398,871 |
|
|
|
(3 |
) |
|
|
8.3 |
% |
|
|
|
|
|
|
|
|
|
|
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Renaissance
Technologies, Corp.
|
|
|
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800
Third Avenue
|
|
|
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|
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New
York, NY 10022
|
|
|
306,700 |
|
|
|
|
|
|
|
6.4 |
% |
|
|
|
|
|
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C/O Vicon Industries, Inc.
|
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Kenneth
M. Darby
|
|
|
347,903 |
|
|
|
(4 |
) |
|
|
7.3 |
% |
Arthur
D. Roche
|
|
|
79,821 |
|
|
|
(5 |
) |
|
|
1.7 |
% |
Peter
A. Horn
|
|
|
66,797 |
|
|
|
(6 |
) |
|
|
1.4 |
% |
John
M. Badke
|
|
|
64,419 |
|
|
|
(7 |
) |
|
|
1.3 |
% |
W.
Gregory Robertson
|
|
|
39,150 |
|
|
|
(8 |
) |
|
|
* |
|
Peter
F. Neumann
|
|
|
38,572 |
|
|
|
(9 |
) |
|
|
* |
|
Christopher
J. Wall
|
|
|
35,207 |
|
|
|
(4 |
) |
|
|
* |
|
Bret
McGowan
|
|
|
35,100 |
|
|
|
(10 |
) |
|
|
* |
|
Bernard
F. Reynolds
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|
|
20,000 |
|
|
|
|
|
|
|
* |
|
Total
all Executive Officers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
as a group (11 persons)
|
|
|
769,942 |
|
|
|
(11 |
) |
|
|
16.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Less than 1%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Unless
otherwise indicated, the Company believes that all persons named in the table
have sole voting and investment control over the shares of stock
owned.
(2) These
shares are owned directly by the Jerry Zucker Revocable Trust and indirectly by
Anita Zucker, as trustee and as a beneficiary of the trust.
(3) Dimensional
Fund Advisors had voting control over 398,871 shares and investment control over
395,971 as investment advisor and manager for various mutual funds
and other clients. These shares are beneficially owned by such mutual
funds or other clients.
(4) Includes
currently exercisable options to purchase 15,000 shares.
(5) Includes
15,000 shares held by Mr. Roche’s wife and currently exercisable options to
purchase 7,250 shares.
(6) Includes
currently exercisable options to purchase 15,100 shares.
(7) Includes
currently exercisable options to purchase 22,600 shares.
(8) Includes
currently exercisable options to purchase 7,250 shares.
(9) Includes
currently exercisable options to purchase 5,500 shares.
(10) Includes
currently exercisable options to purchase 19,100 shares.
(11) Includes
currently exercisable options to purchase 120,800 shares.
EQUITY COMPENSATION PLAN
INFORMATION
at
September 30, 2009
Plan
category
|
|
Number
of securities
|
|
|
Weighted
average
exercise
price of
|
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation plans
(excluding
securities
reflected
in column (a))
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans
|
|
|
|
|
|
|
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|
approved
by security holders
|
|
|
428,783 |
|
|
$ |
4.35 |
|
|
|
269,658 |
|
|
|
|
|
|
|
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|
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Equity
compensation plans not
|
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|
|
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|
|
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|
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|
approved
by security holders
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total
|
|
|
428,783 |
|
|
$ |
4.35 |
|
|
|
269,658 |
|
|
|
|
|
|
|
|
|
|
|
|
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EQUITY COMPENSATION GRANTS
NOT APPROVED BY SECURITY HOLDERS
Through September 30, 2009 the Company had
granted certain of its officers with deferred compensation benefits aggregating
33,251 shares of common stock currently held by the Company in
treasury. Such shares vest upon retirement. All shares
vest earlier under certain occurrences including death, involuntary termination
or a change in control of the Company.
ITEM 13 - CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
Company and CBC Co., Ltd. (CBC), a Japanese corporation which beneficially owns
11.4% of the outstanding shares of the Company, have been conducting business
with each other since 1979. During this period, CBC has served as a
lender, a product supplier and a private label reseller of the Company’s
products. In fiscal 2009, the Company purchased approximately $227,000 of
products from or through CBC. CBC competes with the Company in various markets,
principally in the sale of video products and systems. Sales of Vicon
products to CBC were $30,000 in 2009.
All named
directors other than Mr. Darby are independent directors in accordance with NYSE
Amex listing requirements.
ITEM 14 – PRINCIPAL
ACCOUNTANT FEES AND SERVICES
The following table details: the aggregate fee
arrangements with BDO Seidman, LLP for professional services rendered for the
audit of the Company’s consolidated annual financial statements and review of
the financial statements included in the Company’s quarterly reports on Form
10-Q; the aggregate fees billed by BDO Seidman, LLP for audit related matters
and; the aggregate fees billed by BDO Seidman, LLP for tax compliance, tax
advice and tax planning during fiscal years ended September 30, 2009 and
2008:
|
|
2009
|
|
|
2008
|
|
Audit
fees
|
|
$ |
262,000 |
|
|
$ |
252,000 |
|
Audit
related fees
|
|
$ |
- |
|
|
$ |
5,000 |
|
Tax
fees
|
|
$ |
43,000 |
|
|
$ |
42,000 |
|
Audit Committee Pre-Approval
of Audit and Permissible Non-Audit Services of Independent
Auditors
The Audit Committee pre-approves all audit and
permissible non-audit services provided by the independent
auditors. These services may include audit services, audit related
services, tax services and other services. The Audit Committee has
adopted a policy for the pre-approval of services provided by the independent
auditors. Under the policy, pre-approval generally is provided for an
annual period and any pre-approval is detailed as to the particular service or
category of services and is subject to a specific limit. In addition,
the Audit Committee may also pre-approve particular services on a case-by-case
basis, which must be accompanied by a detailed explanation for each proposed
service. The Audit Committee may delegate pre-approval authority to
one or more of its members. Such member must report any decisions to the Audit
Committee at the next scheduled meeting.
PART IV
ITEM 15 – EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
(a)
(1) Financial
Statements
Included
in Part IV, Item 15:
Report
of Independent Registered Public Accounting Firm
Financial
Statements:
Consolidated
Statements of Operations, fiscal years ended September 30, 2009, 2008, and
2007
Consolidated
Balance Sheets at September 30, 2009 and 2008
Consolidated
Statements of Shareholders’ Equity, fiscal years ended September 30, 2009, 2008,
and 2007
Consolidated
Statements of Cash Flows, fiscal years ended September 30, 2009, 2008, and
2007
Notes to
Consolidated Financial Statements, fiscal years ended September 30, 2009, 2008,
and 2007
All
schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are not required under the related
instructions or are not applicable and, therefore, have been
omitted.
15(a)(3) Exhibits
Number
|
Description
|
3.1
|
Articles
of Incorporation and By-Laws, as amended (Incorporated by reference to the
1985 Annual Report on Form 10-K; Form S-2 filed in Registration Statement
No. 33-10435 and Exhibit A, B and C of the 1987 Proxy
Statement)
|
3.2
|
Amendment
of the Company’s By-Laws effective January 1, 2008 (Incorporated by
reference to the 2007 Annual Report on Form 10-K)
|
3.3
|
Amendment
of the Certificate of Incorporation dated May 7, 2002 (Incorporated by
reference to the 2002 Annual Report on Form 10-K)
|
4
|
Rights
Agreement dated December 4, 2001 between the Registrant and Computershare
Investor Services (Incorporated by reference to the 2001 Annual Report on
Form 10-K)
|
10.1
|
Employment
Agreement effective as of October 1, 2009 between the Registrant and
Kenneth M. Darby (Incorporated by reference to the Current Report on Form
8-K dated November 13, 2009)
|
10.2
|
1996
Incentive Stock Option Plan (Incorporated by reference to the 1997 Annual
Report on Form 10-K)
|
10.3
|
1999
Incentive Stock Option Plan (Incorporated by reference to the 1999 Annual
Report on Form 10-K)
|
10.4
|
1999
Non-Qualified Stock Option Plan (Incorporated by reference to the 1999
Annual Report on Form 10-K)
|
10.5
|
2002
Incentive Stock Option Plan (Incorporated by reference to the 2002 Annual
Report on Form 10-K)
|
10.6
|
2002
Non-Qualified Stock Option Plan (Incorporated by reference to the 2002
Annual Report on Form 10-K)
|
10.7
|
Employment
and Deferred Compensation Agreement dated January 1, 2006 between the
Registrant and John M. Badke (Incorporated by reference to the Current
Report on Form 8-K dated March 6, 2006)
|
10.8
|
Amendment
1 to the Employment and Deferred Compensation Agreement dated November 13,
2006 between the Registrant and John M. Badke (Incorporated by reference
to the Current Report on Form 8-K dated November 16,
2006)
|
10.9
|
Employment
Agreement dated November 1, 2006 between the Registrant and Christopher J.
Wall (Incorporated by reference to the Current Report on Form
8-K dated November 16, 2006)
|
10.10
|
Side
letter to the agreement dated November 14, 2007 between the Registrant and
Christopher J. Wall
|
10.11
|
2007
Stock Incentive Plan (Incorporated by reference to the Proxy Statement
filed on April 27, 2007)
|
21
|
Subsidiaries
of the Registrant (Incorporated by reference to the Notes to the
Consolidated Financial Statements)
|
23
|
Consent
of BDO Seidman, LLP
|
|
Rule 13a-14(a)/15d-14(a)
Certifications
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Section 1350
Certifications
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
No other
exhibits are required to be filed.
Other Matters - Form S-8 and
S-2 Undertaking
For the
purposes of complying with the amendments to the rules governing Form S-8
(effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant’s Registration Statements on Form S-8 Nos. 33-7892
(filed June 30, 1986), 33-34349 (filed April 1, 1990), 33-90038 (filed February
24, 1995), 333-30097 (filed June 26, 1997), 333-71410 (filed October 11, 2001),
333-116361 (filed June 10, 2004) and 333-146749 (filed October 16, 2007) and on
Form S-2 No. 333-46841 (effective May 1, 1998):
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Report of Independent
Registered Public Accounting Firm
The Board
of Directors and Stockholders
Vicon
Industries, Inc.:
We have
audited the accompanying consolidated balance sheets of Vicon Industries, Inc.
as of September 30, 2009 and 2008 and the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of the three years
ended September 30, 2009. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Vicon Industries, Inc. at
September 30, 2009 and 2008, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ BDO
Seidman, LLP
Melville,
New York
December
29, 2009
VICON
INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
Fiscal
Years Ended September 30, 2009, 2008 and 2007
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
60,444,867 |
|
|
$ |
66,911,442 |
|
|
$ |
69,072,613 |
|
Cost
of sales
|
|
|
33,152,064 |
|
|
|
36,489,172 |
|
|
|
39,686,486 |
|
Gross
profit
|
|
|
27,292,803 |
|
|
|
30,422,270 |
|
|
|
29,386,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative
expense
|
|
|
18,856,172 |
|
|
|
20,384,605 |
|
|
|
19,527,713 |
|
Engineering
and development expense
|
|
|
5,405,491 |
|
|
|
5,648,442 |
|
|
|
5,175,948 |
|
|
|
|
24,261,663 |
|
|
|
26,033,047 |
|
|
|
24,703,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
3,031,140 |
|
|
|
4,389,223 |
|
|
|
4,682,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
2,179 |
|
|
|
44,549 |
|
|
|
141,507 |
|
Interest
and other income
|
|
|
(189,680 |
) |
|
|
(244,337 |
) |
|
|
(379,750 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
3,218,641 |
|
|
|
4,589,011 |
|
|
|
4,920,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
1,202,000 |
|
|
|
1,750,000 |
|
|
|
(2,965,573 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,016,641 |
|
|
$ |
2,839,011 |
|
|
$ |
7,886,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
.44 |
|
|
$ |
.59 |
|
|
$ |
1.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$ |
.43 |
|
|
$ |
.57 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
VICON
INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
September
30, 2009 and 2008
ASSETS
|
|
2009
|
|
|
2008
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
16,650,191 |
|
|
$ |
9,560,966 |
|
Marketable
securities
|
|
|
201,665 |
|
|
|
227,237 |
|
Accounts
receivable (less allowance of
|
|
|
|
|
|
|
|
|
$1,025,000
in 2009 and $1,196,000 in 2008)
|
|
|
9,908,534 |
|
|
|
14,763,914 |
|
Inventories:
|
|
|
|
|
|
|
|
|
Parts,
components and materials
|
|
|
3,923,027 |
|
|
|
3,612,862 |
|
Work-in-process
|
|
|
2,444,994 |
|
|
|
2,407,980 |
|
Finished
products
|
|
|
5,580,908 |
|
|
|
6,545,046 |
|
|
|
|
11,948,929 |
|
|
|
12,565,888 |
|
Deferred
income taxes
|
|
|
644,215 |
|
|
|
1,230,702 |
|
Prepaid
expenses and other current assets
|
|
|
523,488 |
|
|
|
818,768 |
|
Total
current assets
|
|
|
39,877,022 |
|
|
|
39,167,475 |
|
Property,
plant and equipment:
|
|
|
|
|
|
|
|
|
Land
|
|
|
1,184,520 |
|
|
|
1,219,300 |
|
Buildings
and improvements
|
|
|
5,685,353 |
|
|
|
5,780,763 |
|
Machinery,
equipment and vehicles
|
|
|
5,984,979 |
|
|
|
5,971,651 |
|
|
|
|
12,854,852 |
|
|
|
12,971,714 |
|
Less
accumulated depreciation and amortization
|
|
|
7,836,871 |
|
|
|
7,670,717 |
|
|
|
|
5,017,981 |
|
|
|
5,300,997 |
|
Deferred
income taxes
|
|
|
1,132,457 |
|
|
|
1,224,120 |
|
Other
assets
|
|
|
1,288,277 |
|
|
|
1,271,683 |
|
TOTAL
ASSETS
|
|
$ |
47,315,737 |
|
|
$ |
46,964,275 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
4,005,870 |
|
|
$ |
4,267,620 |
|
Accrued
compensation and employee benefits
|
|
|
2,823,825 |
|
|
|
2,779,368 |
|
Accrued
expenses
|
|
|
1,311,636 |
|
|
|
1,760,147 |
|
Unearned
revenue
|
|
|
735,850 |
|
|
|
872,195 |
|
Income
taxes payable
|
|
|
154,851 |
|
|
|
307,242 |
|
Total
current liabilities
|
|
|
9,032,032 |
|
|
|
9,986,572 |
|
|
|
|
|
|
|
|
|
|
Unearned
revenue-non current
|
|
|
303,980 |
|
|
|
303,857 |
|
Other
long-term liabilities
|
|
|
2,580,241 |
|
|
|
2,069,866 |
|
Total
liabilities
|
|
|
11,916,253 |
|
|
|
12,360,295 |
|
Commitments
and contingencies - Note 8
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock, par value $.01 per share
|
|
|
|
|
|
|
|
|
authorized
- 25,000,000 shares
|
|
|
|
|
|
|
|
|
issued
- 5,266,876 and 5,124,572 shares
|
|
|
52,669 |
|
|
|
51,246 |
|
Capital
in excess of par value
|
|
|
24,294,511 |
|
|
|
23,261,936 |
|
Retained
earnings
|
|
|
14,351,424 |
|
|
|
12,334,783 |
|
Treasury
stock at cost, 645,288 shares
|
|
|
|
|
|
|
|
|
in
2009 and 384,867 shares in 2008
|
|
|
(3,145,204 |
) |
|
|
(1,768,135 |
) |
Accumulated
other comprehensive income (loss)
|
|
|
(153,916 |
) |
|
|
724,150 |
|
Total
shareholders' equity
|
|
|
35,399,484 |
|
|
|
34,603,980 |
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
$ |
47,315,737 |
|
|
$ |
46,964,275 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
VICON
INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
Fiscal Years Ended September 30,
2009, 2008, and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Capital
in
|
|
|
|
|
|
|
|
|
other
|
|
|
share-
|
|
|
|
|
|
|
Common
|
|
|
excess
of
|
|
|
Retained
|
|
|
Treasury
|
|
|
comprehensive
|
|
|
holders'
|
|
|
|
Shares
|
|
|
Stock
|
|
|
par value
|
|
|
earnings
|
|
|
Stock
|
|
|
income
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
September 30, 2006
|
|
|
4,860,901 |
|
|
$ |
48,609 |
|
|
$ |
22,562,126 |
|
|
$ |
1,734,490 |
|
|
$ |
(1,299,999 |
) |
|
$ |
973,615 |
|
|
$ |
24,018,841 |
|
Comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,886,282 |
|
|
|
- |
|
|
|
- |
|
|
|
7,886,282 |
|
Foreign
currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
689,151 |
|
|
|
689,151 |
|
Unrealized
loss on derivatives, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,566 |
) |
|
|
(16,566 |
) |
Change
in unrealized loss on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
marketable
securities, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,292 |
|
|
|
1,292 |
|
Total
comprehensive income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,560,159 |
|
Distribution
of deferred comp. shares
|
|
|
- |
|
|
|
- |
|
|
|
(472,187 |
) |
|
|
- |
|
|
|
472,187 |
|
|
|
- |
|
|
|
- |
|
Exercise
of stock options
|
|
|
192,602 |
|
|
|
1,926 |
|
|
|
594,738 |
|
|
|
- |
|
|
|
(311,916 |
) |
|
|
- |
|
|
|
284,748 |
|
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
168,671 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
168,671 |
|
Tax
benefit from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
10,327 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,327 |
|
Deferred
compensation amortization
|
|
|
- |
|
|
|
- |
|
|
|
10,610 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,610 |
|
Balance
September 30, 2007
|
|
|
5,053,503 |
|
|
$ |
50,535 |
|
|
$ |
22,874,285 |
|
|
$ |
9,620,772 |
|
|
$ |
(1,139,728 |
) |
|
$ |
1,647,492 |
|
|
$ |
33,053,356 |
|
Comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,839,011 |
|
|
|
- |
|
|
|
- |
|
|
|
2,839,011 |
|
Foreign
currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,022,427 |
) |
|
|
(1,022,427 |
) |
Unrealized
gain on derivatives, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
97,855 |
|
|
|
97,855 |
|
Change
in unrealized loss on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
marketable
securities, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,230 |
|
|
|
1,230 |
|
Total
comprehensive income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,915,669 |
|
FIN
48 income tax liability
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(125,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(125,000 |
) |
Repurchases
of common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(628,407 |
) |
|
|
- |
|
|
|
(628,407 |
) |
Exercise
of stock options
|
|
|
71,069 |
|
|
|
711 |
|
|
|
219,336 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
220,047 |
|
Tax
benefit from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
24,270 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
24,270 |
|
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
133,406 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
133,406 |
|
Deferred
compensation amortization
|
|
|
- |
|
|
|
- |
|
|
|
10,639 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,639 |
|
Balance
September 30, 2008
|
|
|
5,124,572 |
|
|
$ |
51,246 |
|
|
$ |
23,261,936 |
|
|
$ |
12,334,783 |
|
|
$ |
(1,768,135 |
) |
|
$ |
724,150 |
|
|
$ |
34,603,980 |
|
Comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,016,641 |
|
|
|
- |
|
|
|
- |
|
|
|
2,016,641 |
|
Foreign
currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(778,621 |
) |
|
|
(778,621 |
) |
Unrealized
loss on derivatives, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(103,056 |
) |
|
|
(103,056 |
) |
Change
in unrealized gain on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
marketable
securities, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,611 |
|
|
|
3,611 |
|
Total
comprehensive income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,138,575 |
|
Repurchases
of common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,262,169 |
) |
|
|
- |
|
|
|
(1,262,169 |
) |
Distribution
of deferred comp. shares
|
|
|
1,800 |
|
|
|
18 |
|
|
|
(18 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercise
of stock options
|
|
|
140,504 |
|
|
|
1,405 |
|
|
|
510,725 |
|
|
|
- |
|
|
|
(114,900 |
) |
|
|
- |
|
|
|
397,230 |
|
Tax
benefit from exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
175,440 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
175,440 |
|
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
322,580 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
322,580 |
|
Deferred
compensation amortization
|
|
|
- |
|
|
|
- |
|
|
|
23,848 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
23,848 |
|
Balance
September 30, 2009
|
|
|
5,266,876 |
|
|
$ |
52,669 |
|
|
$ |
24,294,511 |
|
|
$ |
14,351,424 |
|
|
$ |
(3,145,204 |
) |
|
$ |
(153,916 |
) |
|
$ |
35,399,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VICON
INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Fiscal
Years Ended September 30, 2009, 2008 and 2007
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,016,641 |
|
|
$ |
2,839,011 |
|
|
$ |
7,886,282 |
|
Adjustments
to reconcile net income to net
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
904,963 |
|
|
|
1,136,612 |
|
|
|
(3,497,576 |
) |
Depreciation
and amortization
|
|
|
728,138 |
|
|
|
778,276 |
|
|
|
892,534 |
|
Amortization
of deferred compensation
|
|
|
23,848 |
|
|
|
10,639 |
|
|
|
10,611 |
|
Stock
compensation expense
|
|
|
322,580 |
|
|
|
133,406 |
|
|
|
168,671 |
|
Loss
(gain) on marketable securities
|
|
|
31,303 |
|
|
|
3,661 |
|
|
|
(102,392 |
) |
Change
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
4,230,079 |
|
|
|
(2,565,752 |
) |
|
|
(1,224,166 |
) |
Inventories
|
|
|
281,925 |
|
|
|
(21,022 |
) |
|
|
(753,723 |
) |
Prepaid
expenses and other current assets
|
|
|
143,853 |
|
|
|
(194,123 |
) |
|
|
(84,724 |
) |
Other
assets
|
|
|
(16,594 |
) |
|
|
(347,241 |
) |
|
|
(49,650 |
) |
Accounts
payable
|
|
|
(147,305 |
) |
|
|
1,194,754 |
|
|
|
(903,577 |
) |
Accrued
compensation and employee benefits
|
|
|
95,497 |
|
|
|
(4,260 |
) |
|
|
393,240 |
|
Accrued
expenses
|
|
|
(203,143 |
) |
|
|
64,408 |
|
|
|
349,128 |
|
Unearned
revenue
|
|
|
(128,598 |
) |
|
|
(55,973 |
) |
|
|
(24,486 |
) |
Income
taxes payable
|
|
|
(115,660 |
) |
|
|
(71,776 |
) |
|
|
249,190 |
|
Other
liabilities
|
|
|
232,935 |
|
|
|
521,778 |
|
|
|
221,919 |
|
Net
cash provided by operating activities
|
|
|
8,400,462 |
|
|
|
3,422,398 |
|
|
|
3,531,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(573,384 |
) |
|
|
(502,896 |
) |
|
|
(296,332 |
) |
Net
cash used in investing activities
|
|
|
(573,384 |
) |
|
|
(502,896 |
) |
|
|
(296,332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases
of common stock
|
|
|
(1,262,169 |
) |
|
|
(628,407 |
) |
|
|
- |
|
Proceeds
from exercise of stock options
|
|
|
397,230 |
|
|
|
220,047 |
|
|
|
284,748 |
|
Repayments
of long-term debt
|
|
|
- |
|
|
|
(1,740,335 |
) |
|
|
(327,309 |
) |
Net
cash used in financing activities
|
|
|
(864,939 |
) |
|
|
(2,148,695 |
) |
|
|
(42,561 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
127,086 |
|
|
|
(17,951 |
) |
|
|
(23,612 |
) |
Net
increase in cash
|
|
|
7,089,225 |
|
|
|
752,856 |
|
|
|
3,168,776 |
|
Cash
at beginning of year
|
|
|
9,560,966 |
|
|
|
8,808,110 |
|
|
|
5,639,334 |
|
Cash
at end of year
|
|
$ |
16,650,191 |
|
|
$ |
9,560,966 |
|
|
$ |
8,808,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the fiscal year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
472,797 |
|
|
$ |
635,522 |
|
|
$ |
217,873 |
|
Interest
|
|
$ |
2,179 |
|
|
$ |
55,181 |
|
|
$ |
143,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
VICON
INDUSTRIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal
Years ended September 30, 2009, 2008, and 2007
NOTE 1. Summary
of Significant Accounting Policies
Nature of
Business
The
Company designs, manufactures, assembles and markets video systems and system
components for use in security, surveillance, safety and control purposes by end
users. The Company markets its products worldwide primarily to
installing dealers, systems integrators, government entities and
distributors.
Basis of
Presentation
The
accompanying consolidated financial statements include the accounts of Vicon
Industries, Inc. (the Company) and its wholly owned subsidiaries: Vicon
Industries Limited and subsidiary (Vicon Deutschland GmbH) and TeleSite U.S.A.,
Inc. and subsidiary (Vicon Systems Ltd.), after elimination of intercompany
accounts and transactions. Events subsequent to September 30, 2009
were evaluated until the time of the Form 10-K filing with the Securities and
Exchange Commission on December 29, 2009.
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the selling price is fixed
or determinable, and collectibility of the resulting receivable is reasonably
assured. As it relates to product sales, revenue is generally
recognized when products are sold and title is passed to the
customer. Shipping and handling costs are included in cost of
sales. Advance service billings under a national supply contract with
one customer are deferred and recognized as revenues on a pro rata basis over
the term of the service agreement. The Company evaluates
multiple-element revenue arrangements for separate units of accounting, and
follows appropriate revenue recognition policies for each separate
unit. Elements are considered separate units of accounting provided
that (i) the delivered item has stand-alone value to the customer, (ii) there is
objective and reliable evidence of the fair value of the undelivered item, and
(iii) if a general right of return exists relative to the delivered item,
delivery or performance of the undelivered item is considered probable and
substantially within the control of the Company. As applied to the
Company, under arrangements involving the sale of product and the provision of
services, product sales are recognized as revenue when the products are sold and
title is passed to the customer, and service revenue is recognized as services
are performed. For products that include more than incidental
software, and for separate licenses of the Company’s software products, the
Company recognizes revenue in accordance with the provisions of Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
985-605 (Statement of Position 97-2, “Software Revenue Recognition”, as
amended).
Cash and Cash
Equivalents
Cash and
cash equivalents include cash on deposit and amounts invested in highly liquid
money market funds.
Marketable
Securities
Marketable
securities consist of mutual fund investments in U.S. government debt securities
and holdings in an equity security. Such mutual fund investments are
stated at market value and are classified as available-for-sale under ASC 320
(Statement of Financial Accounting Standards (SFAS) No. 115), with unrealized
gains and losses reported in other comprehensive income as a component of
shareholders’ equity. The cost of such securities was $198,208 and
$227,391 at September 30, 2009 and 2008, respectively, with $3,457 of unrealized
gains and $154 of unrealized losses, net of tax, included in the carrying
amounts at September 30, 2009 and 2008, respectively.
Allowances for Doubtful
Accounts
The
Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required
payments. If the financial condition of its customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inventories
Inventories
are valued at the lower of cost (on a moving average basis which approximates a
first-in, first-out method) or market. When it is determined that a
product or product line will be sold below carrying cost, affected on hand
inventories are written down to their estimated net realizable
values.
Long-Lived
Assets
Property,
plant, and equipment are recorded at cost. Depreciation and
amortization of assets under capital leases is computed by the straight-line
method over the estimated useful lives of the related
assets. Machinery, equipment and vehicles are being depreciated over
periods ranging from 2 to 10 years. The Company's buildings are being
depreciated over periods ranging from 25 to 40 years and leasehold improvements
are amortized over the lesser of their estimated useful lives or the remaining
lease term. Fully depreciated fixed assets are retired from the
balance sheet when they are no longer in use.
The
Company reviews its long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and
without interest, is less than the carrying amount of the asset, an impairment
loss is recognized as the amount by which the carrying amount of the asset
exceeds its fair value.
Engineering and
Development
Product
engineering and development costs are charged to expense as incurred, and
amounted to approximately $5,400,000, $5,600,000 and $5,200,000 in fiscal 2009,
2008, and 2007, respectively.
Earnings Per
Share
Basic EPS
is computed based on the weighted average number of common shares
outstanding. Diluted EPS reflects the maximum dilution that would
have resulted from the exercise of stock options, warrants and incremental
shares issuable under a deferred compensation agreement (see Note
7). In periods when losses are incurred, the effects of these
securities are antidilutive and, therefore, are excluded from the computation of
diluted EPS.
Foreign Currency
Translation
The
Company translates the financial statements of its foreign subsidiaries by
applying the current rate method under which assets and liabilities are
translated at the exchange rate on the balance sheet date, while revenues,
costs, and expenses are translated at the average exchange rate for the
reporting period. The resulting cumulative translation adjustment of
$(114,000) and $665,000 at September 30, 2009 and 2008, respectively, is
recorded as a component of shareholders' equity in accumulated other
comprehensive income.
Income
Taxes
The Company accounts for income taxes under the
provisions of ASC 740 (SFAS No. 109, “Accounting for Income Taxes”), which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Deferred U.S. income taxes are not provided on undistributed earnings of foreign
subsidiaries as the Company presently intends to reinvest such earnings
indefinitely, and any plan to repatriate any of such earnings in the future is
not expected to result in a material incremental tax liability to the
Company. In fiscal 2007, the Company recognized $3.4 million of
previously unrecognized U.S. net deferred income tax assets based upon an
updated assessment of their realization.
Product
Warranties
The Company provides for the estimated cost of
product warranties at the time revenue is recognized. While the
Company engages in product quality programs and processes, including monitoring
and evaluating the quality of its component suppliers, its warranty obligation
is affected by product failure rates, material usage and service delivery costs
incurred in correcting a product failure. Should actual product
failure rates, material usage or service delivery costs differ from its
estimates, revisions to the estimated warranty liability may be required.
Derivative
Instruments
ASC 815 (SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities”), establishes accounting and
reporting standards for derivative instruments as either assets or liabilities
in the statement of financial position based on their fair values. Changes in
the fair values are required to be reported in earnings or other comprehensive
income depending on the use of the derivative and whether it qualifies for hedge
accounting. Derivative instruments are designated and accounted for as either a
hedge of a recognized asset or liability (fair value hedge) or a hedge of a
forecasted transaction (cash flow hedge). For derivatives designated as
effective cash flow hedges, changes in fair values are recognized in other
comprehensive income. Changes in fair values related to fair value hedges as
well as the ineffective portion of cash flow hedges are recognized in
earnings.
The Company does not use derivative instruments
for speculative or trading purposes. Derivative instruments are primarily used
to manage exposures related to transactions with the Company’s Europe and Israel
based subsidiaries. To accomplish this, the Company uses certain contracts,
primarily foreign currency forward contracts (“forwards”), which minimize cash
flow risks from changes in foreign currency exchange rates. These derivatives
have been designated as cash flow hedges for accounting purposes.
As of September 30, 2009, the Company had
currency forwards outstanding with notional amounts aggregating $2.0 million,
whose aggregate fair value was a liability of approximately $69,000. The change
in the fair value of these derivatives is reflected in other comprehensive
income in the accompanying statement of shareholders’ equity, net of tax where
applicable. The forwards have maturities of less than one year and require the
Company to exchange currencies at specified dates and rates. The Company
considers the credit risk related to the forwards to be low because such
instruments are entered into with financial institutions having high credit
ratings and are generally settled on a net basis. There were no gains
or losses recognized in operations due to hedge ineffectiveness during the
three-year period ended September 30, 2009. The Company does not
expect that the amounts currently classified in accumulated other comprehensive
income that will be recognized in operations in the next fiscal year will be
material.
Fair Value of
Financial Instruments
The carrying amounts for trade accounts and
other receivables, accounts payable and accrued expenses approximate fair value
due to the short-term maturity of these instruments. The fair value
of the Company’s foreign currency forward exchange contracts is estimated by
obtaining quoted market prices. The contracted exchange rates on
committed forward exchange contracts was approximately $69,000 less favorable
than the market rates for similar term contracts at September 30, 2009.
Fair value estimates are made at a specific
point in time based on relevant market information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
Accounting for Stock-Based
Compensation
The Company follows ASC 718 (SFAS No. 123(R),
“Share-Based Payment”), which requires that all share based payments to
employees, including stock options, be recognized as compensation expense in the
consolidated financial statements based on their fair values and over the
requisite service period. For the years ended September 30, 2009,
2008 and 2007, the Company recorded non-cash compensation expense of $322,580
($.07 per basic and diluted share), $133,406 ($.03 per basic and diluted share)
and $168,671 ($.04 and $.03 per basic and diluted share), respectively, relating
to stock-based compensation. The Company elected to utilize the
modified-prospective application method, whereby compensation expense is
recorded for all awards granted after October 1, 2005 (adoption date) and for
the unvested portion of awards granted prior to this date. Accordingly, prior
period amounts were not restated.
The fair value for options granted during the
fiscal years ended September 30, 2009, 2008 and 2007 was determined at the date
of grant using a Black-Scholes valuation model and the straight-line attribution
approach using the following weighted average assumptions:
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate |
|
|
3.0 |
% |
|
|
3.6 |
% |
|
|
4.8 |
% |
Dividend
yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Volatility
factor |
|
|
72.9 |
% |
|
|
76.3 |
% |
|
|
61.5 |
% |
Weighted
average expected life |
|
7.0 years |
|
|
7.5 years |
|
|
5.0 years |
|
The
risk-free interest rate used in the Black-Scholes valuation method is based on
the implied yield currently available in U.S. Treasury securities at maturity
with an equivalent term. The Company has not recently declared or
paid any dividends and does not currently expect to do so in the
future. Expected volatility is based on the annualized daily
historical volatility of the Company’s stock over a representative
period. The weighted-average expected life represents the period over
which stock-based awards are expected to be outstanding and was determined based
on a number of factors, including historical weighted average and projected
holding periods for the remaining unexercised shares, the contractual terms of
the Company’s stock-based awards, vesting schedules and expectations of future
employee behavior.
The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from traded options, and because changes
in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
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 revenues and expenses during the reporting
period. Such estimates include, but are not limited to, provisions
for doubtful accounts receivable, net realizable value of inventory, warranty
obligations, deferred tax valuation and assessments of the recoverability of the
Company’s long-lived assets. Actual results could differ from those
estimates.
Reclassifications
Certain
prior year amounts have been reclassified to conform to current year
presentation.
NOTE 2. Income
Taxes
The
components of income tax expense for the fiscal years indicated are as
follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
243,000 |
|
|
$ |
46,000 |
|
|
$ |
85,327 |
|
State
|
|
|
22,000 |
|
|
|
4,000 |
|
|
|
- |
|
Foreign
|
|
|
117,000 |
|
|
|
525,000 |
|
|
|
459,330 |
|
|
|
|
382,000 |
|
|
|
575,000 |
|
|
|
544,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
729,000 |
|
|
|
1,080,000 |
|
|
|
(3,151,837 |
) |
State
|
|
|
63,000 |
|
|
|
95,000 |
|
|
|
(298,063 |
) |
Foreign
|
|
|
28,000 |
|
|
|
- |
|
|
|
(60,330 |
) |
|
|
|
820,000 |
|
|
|
1,175,000 |
|
|
|
(3,510,230 |
) |
Total
|
|
$ |
1,202,000 |
|
|
$ |
1,750,000 |
|
|
$ |
(2,965,573 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation of the U.S statutory tax rate to the Company’s effective tax rate
follows:
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
statutory tax
|
|
$ |
1,094,000 |
|
|
|
34.0 |
% |
|
$ |
1,560,000 |
|
|
|
34.0 |
% |
|
$ |
1,673,000 |
|
|
|
34.0 |
% |
Increase
(decrease) in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
valuation
allowance
|
|
|
(17,000 |
) |
|
|
(0.5 |
) |
|
|
43,000 |
|
|
|
0.9 |
|
|
|
(4,739,000 |
) |
|
|
(96.3 |
) |
Foreign
tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
difference
|
|
|
(26,000 |
) |
|
|
(0.8 |
) |
|
|
(64,000 |
) |
|
|
(1.4 |
) |
|
|
51,000 |
|
|
|
1.0 |
|
Permanent
differences
|
|
|
78,000 |
|
|
|
2.4 |
|
|
|
54,000 |
|
|
|
1.2 |
|
|
|
(46,000 |
) |
|
|
(0.9 |
) |
State
tax, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
federal
benefit
|
|
|
87,000 |
|
|
|
2.7 |
|
|
|
100,000 |
|
|
|
2.2 |
|
|
|
- |
|
|
|
- |
|
Other,
net
|
|
|
(14,000 |
) |
|
|
(0.5 |
) |
|
|
57,000 |
|
|
|
1.2 |
|
|
|
95,000 |
|
|
|
1.9 |
|
Effective
tax rate
|
|
$ |
1,202,000 |
|
|
|
37.3 |
% |
|
$ |
1,750,000 |
|
|
|
38.1 |
% |
|
$ |
(2,966,000 |
) |
|
|
(60.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax
effects of temporary differences that give rise to deferred tax assets and
liabilities at September 30, 2009 and 2008 are presented below:
|
|
2009
|
|
|
2008
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Inventories
|
|
$ |
- |
|
|
$ |
507,000 |
|
Accrued
compensation
|
|
|
459,000 |
|
|
|
352,000 |
|
Warranty
accrual
|
|
|
149,000 |
|
|
|
149,000 |
|
Depreciation
|
|
|
378,000 |
|
|
|
493,000 |
|
Allowance
for doubtful accounts receivable
|
|
|
334,000 |
|
|
|
408,000 |
|
Unearned
revenue
|
|
|
372,000 |
|
|
|
436,000 |
|
U.S.
net operating loss carryforwards
|
|
|
- |
|
|
|
157,000 |
|
Foreign
net operating loss carryforwards
|
|
|
347,000 |
|
|
|
364,000 |
|
AMT
credit carryforward
|
|
|
- |
|
|
|
104,000 |
|
U.S.
capital loss carryforward
|
|
|
15,000 |
|
|
|
15,000 |
|
Other
|
|
|
151,000 |
|
|
|
87,000 |
|
Gross
deferred tax assets
|
|
|
2,205,000 |
|
|
|
3,072,000 |
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Other
|
|
|
81,000 |
|
|
|
253,000 |
|
Gross
deferred tax liabilities
|
|
|
81,000 |
|
|
|
253,000 |
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets and liabilities
|
|
|
2,124,000 |
|
|
|
2,819,000 |
|
Less
valuation allowance
|
|
|
(347,000 |
) |
|
|
(364,000 |
) |
Net
deferred tax assets and liabilities
|
|
$ |
1,777,000 |
|
|
$ |
2,455,000 |
|
|
|
|
|
|
|
|
|
|
At
September 30, 2009 and 2008, the Company maintained a valuation allowance
against certain of its deferred tax assets due to the uncertainty of future
realization. Deferred U.S. income taxes are not provided on
undistributed earnings of foreign subsidiaries as the Company presently intends
to reinvest such earnings indefinitely, and any plan to repatriate any of such
earnings in the future is not expected to result in a material incremental tax
liability to the Company.
Pretax
domestic income amounted to approximately $2,660,000, $3,191,000 and $3,899,000
in fiscal years 2009, 2008 and 2007, respectively. Pretax foreign
income amounted to approximately $559,000, $1,398,000 and $1,022,000 in fiscal
years 2009, 2008 and 2007, respectively.
The Company adopted the provisions of ASC 740
(Financial Accounting Standards Board Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN
48”) effective as of October 1, 2007. The entire amount of unrecognized
tax benefits at September 30, 2009 and 2008, if recognized, would reduce the
Company’s effective tax rate.
Unrecognized
tax benefits activity for the years ended September 30, 2009 and 2008 is
summarized below:
|
|
2009
|
|
|
2008
|
|
Beginning
balance
|
|
$ |
250,000 |
|
|
$ |
100,000 |
|
Additions
based on tax positions related to prior years
|
|
|
264,000 |
|
|
|
100,000 |
|
Additions
based on tax positions related to the current year
|
|
|
- |
|
|
|
50,000 |
|
Ending
balance
|
|
$ |
514,000 |
|
|
$ |
250,000 |
|
|
|
|
|
|
|
|
|
|
The
Company recognizes potential accrued interest and penalties related to
unrecognized tax benefits in income tax expense. At
September 30, 2009, the combined amount of accrued net interest and
penalties related to tax positions taken or to be taken on our tax returns and
recorded as part of the reserves for uncertain tax positions was
$36,000. The Company files U.S. Federal and State income tax returns
and foreign tax returns in the United Kingdom, Germany and
Israel. The Company is generally no longer subject to tax
examinations for fiscal years prior to 2003 in the U.S, 2004 in the U.K., 2005
in Germany and 2002 in Israel.
NOTE 3. Other
Comprehensive Income (Loss)
The
accumulated other comprehensive income (loss) balances at September 30, 2009 and
2008 consisted of the following:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
$ |
(113,765 |
) |
|
$ |
664,856 |
|
Unrealized
gain (loss) on derivatives, net of tax
|
|
|
(43,608 |
) |
|
|
59,448 |
|
Unrealized
gain (loss) on marketable securities, net of tax
|
|
|
3,457 |
|
|
|
(154 |
) |
Accumulated
other comprehensive income (loss)
|
|
$ |
(153,916 |
) |
|
$ |
724,150 |
|
NOTE 4. Segment
and Geographic Information
The
Company operates in one business segment which encompasses the design,
manufacture, assembly and marketing of video systems and system components for
the electronic protection segment of the security industry. Its U.S.
based operations consist of Vicon Industries, Inc., the Company’s corporate
headquarters and principal operating entity. Its Europe-based
operations consist of Vicon Industries Limited and its Videotronic subsidiary,
which market and distribute the Company’s products principally within Europe and
the Middle East.
Net sales
and long-lived assets related to operations in the United States and other
foreign countries for the fiscal years ended September 30, 2009, 2008, and 2007
are as follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$ |
38,529,000 |
|
|
$ |
40,746,000 |
|
|
$ |
42,752,000 |
|
Foreign
|
|
|
21,916,000 |
|
|
|
26,165,000 |
|
|
|
26,321,000 |
|
Total
|
|
$ |
60,445,000 |
|
|
$ |
66,911,000 |
|
|
$ |
69,073,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$ |
3,686,000 |
|
|
$ |
3,835,000 |
|
|
$ |
4,129,000 |
|
Foreign
|
|
|
1,332,000 |
|
|
|
1,466,000 |
|
|
|
1,633,000 |
|
Total
|
|
$ |
5,018,000 |
|
|
$ |
5,301,000 |
|
|
$ |
5,762,000 |
|
U.S.
sales include $6,485,000, $5,858,000 and $5,721,000 for export in fiscal years
2009, 2008, and 2007, respectively. Foreign sales principally
represent sales from the Company’s Europe based subsidiaries.
NOTE 5. Stock
Option Plans
The
Company maintains stock option plans and a stock incentive plan that provide for
the grant of incentive and non-qualified options covering a total of 698,441
shares of common stock reserved for issuance to key employees, including
officers and directors, as of September 30, 2009. All options are
issued at fair market value at the grant date and are exercisable in varying
installments according to the plans. The plans allow for the payment
of option exercises through the surrender of previously owned mature shares
based on the fair market value of such shares at the date of
surrender. Such surrendering of mature shares by holders results in
an increase to treasury stock based on the stock price on date of
surrender. During the years ended September 30, 2009 and 2007, employees
and directors surrendered mature shares for current exercises which resulted in
an increase to treasury stock of $114,900 and $311,916, respectively. No
such exercises occurred in the year ended September 30, 2008. There
were 269,658 options available for grant at September 30, 2009.
Changes
in outstanding stock options for the three years ended September 30, 2009 are as
follows:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
|
|
|
|
|
Average
|
|
Contractual
|
Aggregate
|
|
|
Number
|
|
|
Exercise
|
|
Term
|
Intrinsic
|
|
|
of
Options
|
|
|
Price
|
|
(in
years)
|
Value
|
Outstanding
at September 30, 2006
|
|
|
545,283 |
|
|
$ |
3.28 |
|
|
|
Options
granted
|
|
|
77,000 |
|
|
$ |
3.59 |
|
|
|
Options
exercised
|
|
|
(192,602 |
) |
|
$ |
3.10 |
|
|
|
Options
forfeited
|
|
|
(23,000 |
) |
|
$ |
3.00 |
|
|
|
Outstanding
at September 30, 2007
|
|
|
406,681 |
|
|
$ |
3.45 |
|
|
|
Options
granted
|
|
|
154,000 |
|
|
$ |
4.85 |
|
|
|
Options
exercised
|
|
|
(71,069 |
) |
|
$ |
3.10 |
|
|
|
Options
forfeited
|
|
|
(22,325 |
) |
|
$ |
3.14 |
|
|
|
Outstanding
at September 30, 2008
|
|
|
467,287 |
|
|
$ |
3.98 |
|
|
|
Options
granted
|
|
|
113,000 |
|
|
$ |
5.08 |
|
|
|
Options
exercised
|
|
|
(140,504 |
) |
|
$ |
3.64 |
|
|
|
Options
forfeited
|
|
|
(11,000 |
) |
|
$ |
4.93 |
|
|
|
Outstanding
at September 30, 2009
|
|
|
428,783 |
|
|
$ |
4.35 |
|
5.9
|
$ 674,357
|
Exercisable
at September 30, 2009
|
|
|
156,413 |
|
|
$ |
3.80 |
|
3.5
|
$ 325,213
|
The weighted-average grant date fair value of
options granted during the years ended September 30, 2009, 2008 and 2007 was
$3.54, $3.61 and $2.03, respectively. The total intrinsic value of options
exercised during the years ended September 30, 2009, 2008 and 2007 was $294,021,
$205,128 and $929,744, respectively.
A summary
of the status of the Company’s nonvested shares and changes during the years
presented is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Grant-Date
|
|
|
|
of
Options
|
|
|
Fair
Value
|
|
Nonvested
at September 30, 2006
|
|
|
212,356 |
|
|
$ |
1.74 |
|
Granted
|
|
|
77,000 |
|
|
$ |
2.03 |
|
Vested
|
|
|
(128,336 |
) |
|
$ |
1.75 |
|
Forfeited
|
|
|
(2,100 |
) |
|
$ |
1.52 |
|
Nonvested
at September 30, 2007
|
|
|
158,920 |
|
|
$ |
1.87 |
|
Granted
|
|
|
154,000 |
|
|
$ |
3.61 |
|
Vested
|
|
|
(37,460 |
) |
|
$ |
1.75 |
|
Forfeited
|
|
|
(12,725 |
) |
|
$ |
2.29 |
|
Nonvested
at September 30, 2008
|
|
|
262,735 |
|
|
$ |
2.89 |
|
Granted
|
|
|
113,000 |
|
|
$ |
3.54 |
|
Vested
|
|
|
(92,365 |
) |
|
$ |
2.52 |
|
Forfeited
|
|
|
(11,000 |
) |
|
$ |
3.61 |
|
Nonvested
at September 30, 2009
|
|
|
272,370 |
|
|
$ |
3.25 |
|
As of September 30, 2009, there was $645,758 of
total unrecognized compensation cost, net of estimated forfeitures, related to
nonvested share-based compensation arrangements, which is expected to be
recognized over a weighted-average period of 1.7 years. The total
fair value of shares vested during the years ended September 30, 2009, 2008 and
2007 was $232,687, $65,417 and $224,609, respectively.
NOTE
6. Shareholder Rights Plan
On
November 14, 2001, the Company’s Board of Directors adopted a Shareholder Rights
Plan, which declared a dividend of one Common Stock Purchase Right (a Right) for
each outstanding share of common stock of the Company to shareholders of record
on December 21, 2001. Each Right entitles the holder to purchase from
the Company one share of common stock at a purchase price of $15 per
share. In the event of the acquisition of or tender offer for 20% or
more of the Company’s outstanding common stock by certain persons or group
without the Board of Directors’ consent, such purchase price will be adjusted to
equal fifty percent of the average market price of the Company’s common stock
for a period of thirty consecutive trading days immediately prior to the
event. Until the Rights become exercisable, they have no dilutive
effect on the Company’s earnings per share.
The Rights, which are non-voting and
exercisable until November 30, 2011, can be redeemed by the Company in whole at
a price of $.001 per Right at any time prior to the acquisition by certain
persons or group of 50% of the Company’s common stock. Separate
certificates for the Rights will not be distributed, nor will the Rights be
exercisable, until either (i) a person or group acquires beneficial ownership of
20% or more of the Company’s common stock or (ii) the tenth day after the
commencement of a tender or exchange offer for 20% or more of the Company’s
common stock. Following an acquisition of 20% or more of the
Company’s common shares, each Right holder, except for the 20% or more
stockholder, can exercise their Right(s), unless the 20% or more stockholder has
offered to acquire all of the outstanding shares of the Company under terms that
a majority of the independent Directors of the Company have determined to be
fair and in the best interest of the Company and its stockholders.
NOTE 7. Earnings
Per Share
The
following table provides the components of the basic and diluted earnings per
share (EPS) computations:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Basic EPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,016,641 |
|
|
$ |
2,839,011 |
|
|
$ |
7,886,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
4,626,230 |
|
|
|
4,781,103 |
|
|
|
4,719,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income per share
|
|
$ |
.44 |
|
|
$ |
.59 |
|
|
$ |
1.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPS
Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,016,641 |
|
|
$ |
2,839,011 |
|
|
$ |
7,886,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
4,626,230 |
|
|
|
4,781,103 |
|
|
|
4,719,444 |
|
Stock
options
|
|
|
79,038 |
|
|
|
141,860 |
|
|
|
202,658 |
|
Stock
compensation arrangements
|
|
|
24,697 |
|
|
|
23,574 |
|
|
|
31,156 |
|
Diluted
shares outstanding
|
|
|
4,729,965 |
|
|
|
4,946,537 |
|
|
|
4,953,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
income per share
|
|
$ |
.43 |
|
|
$ |
.57 |
|
|
$ |
1.59 |
|
NOTE
8. Commitments and Contingencies
The
Company leases vehicles and occupies certain facilities under operating leases
that expire at various dates through 2013. The leases, which cover
periods from three to eight years, generally provide for renewal options at
specified rental amounts. The aggregate operating lease commitment at
September 30, 2009 was $943,000 with minimum rentals for the fiscal years shown
as follows: 2010 - $537,000; 2011 - $255,000; 2012 - $85,000; and 2013 -
$66,000.
The
Company is a party to employment agreements with certain of its officers that
provide for, among other things, the payment of compensation if there is a
change in control without Board of Director approval (as defined in the
agreements). The contingent liability under such change in control
provisions at September 30, 2009 would have been approximately $2.4
million. Certain of the Company’s employment agreements with its
officers provide for a severance/retirement benefit upon certain occurrences or
at a specified date of retirement, absent a change in control, aggregating $1.4
million at September 30, 2009. The Company is amortizing such
obligation to expense on the straight-line method through the specified dates of
retirement. Such expense amounted to approximately $207,000 and
$128,000 in fiscal 2009 and 2008, respectively.
The
Company has agreements with certain of its officers to provide a deferred
compensation benefit in the form of 33,251 shares of common stock currently held
by the Company in treasury. Such shares vest upon retirement or
earlier under certain occurrences including death, involuntary termination or a
change in control of the Company. The market value of such shares
approximated $123,000 at the dates of grant, which is being amortized on the
straight-line method through the specified dates of retirement.
NOTE
9. Litigation
The
Company is one of several defendants in a patent infringement suit commenced by
Lectrolarm Custom Systems, Inc. in May 2003 in the United States District Court
for the Western District of Tennessee. The alleged infringement by
the Company relates to its camera dome systems and other products that represent
significant sales to the Company. Among other things, the suit seeks
past and enhanced damages, injunctive relief and attorney’s fees. In
January 2006, the Company received the plaintiff’s claim for past damages
through December 31, 2005 that approximated $11.7 million plus pre-judgment
interest. The Company and its outside patent counsel believe that the
complaint against the Company is without merit. The Company is
vigorously defending itself and is a party to a joint defense with certain other
named defendants.
In
January 2005, the Company petitioned the U.S. Patent and Trademark Office
(USPTO) to reexamine the plaintiff’s patent, believing it to be
invalid. In April 2006, the USPTO issued a non-final office action
rejecting all of the plaintiff’s patent claims asserted against the Company
citing the existence of prior art of the Company and another
defendant. On June 30, 2006, the Federal District Court granted the
defendants’ motion for continuance (delay) of the trial, pending the outcome of
the USPTO’s reexamination proceedings. In February 2007, the USPTO
issued a Final Rejection of the six claims in the plaintiff’s patent asserted
against the Company, which was reaffirmed in June 2007 after the plaintiff filed
a response with the USPTO requesting reconsideration of its Final
Rejection. The plaintiff has appealed the examiner’s decision to the
USPTO Board of Patent Appeals and Interferences and has an additional appeal
available to it thereafter in the Court of Appeals for the Federal
Circuit.
The
Company is unable to reasonably estimate a range of possible loss, if any, at
this time. Although the Company has received favorable rulings from
the USPTO with respect to the reexamination proceedings, there is always the
possibility that the plaintiff’s patent claims could be upheld in appeal and the
matter would proceed to trial. Should this occur and the Company
receives an unfavorable outcome at trial, it could result in a liability that is
material to the Company’s results of operations and financial
position.
In the normal course of business, the Company
is a party to certain other claims and litigation. Management
believes that the settlement of such claims and litigation, considered in the
aggregate, will not have a material adverse effect on the Company’s financial
position and results of operations.
NOTE 10. Related
Party Transactions
As of
September 30, 2009, CBC Co., Ltd. and affiliates (“CBC”) owned approximately
11.8% of the Company’s outstanding common stock. The Company, which
has been conducting business with CBC since 1979, imports certain finished
products and components through CBC and also sells its products to
CBC. The Company purchased approximately $227,000, $448,000 and
$362,000 of products and components from CBC in fiscal years 2009, 2008, and
2007, respectively, and the Company sold $30,000, $53,000 and $163,000 of
products to CBC for distribution in fiscal years 2009, 2008, and 2007,
respectively. At September 30, 2009 and 2008, the Company owed
$17,000 and $133,000, respectively, to CBC and CBC owed $1,000 and $2,000,
respectively, to the Company resulting from purchases and sales of
products.
NOTE 11: Recent
Accounting Pronouncements
In
September 2006, the FASB issued ASC 820 (Statement of Financial Accounting
Standards (SFAS) No. 157, “Fair Value Measurement”), which defines fair
value, establishes a framework for measuring fair value and expands disclosures
regarding assets and liabilities measured at fair value, which was amended in
February 2008. The adoption of the provisions related to financial
assets and financial liabilities were effective for the Company’s first quarter
of fiscal 2009 and did not have a material impact on its consolidated financial
position, results of operations or cash flows. The Company does not
expect that the adoption of the remaining provisions of ASC 820 will have a
material impact on its consolidated financial position, results of operations or
cash flows.
In
December 2007, the FASB issued ASC 805 (SFAS 141 and SFAS 141R, “Business
Combinations”). ASC 805 will significantly change the accounting for
business combinations in a number of areas including the treatment of contingent
consideration, contingencies, acquisition costs, IPR&D and restructuring
costs. In addition, under ASC 805, changes in deferred tax asset
valuation allowances and acquired income tax uncertainties in a business
combination after the measurement period will impact income tax
expense. ASC 805 is effective for fiscal years beginning after
December 15, 2008. The Company has not yet evaluated the impact, if any, of
adopting this pronouncement.
In
December 2007, the FASB issued ASC 810 (SFAS 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51”
(“SFAS 160”)). ASC 810 will change the accounting and reporting
for minority interests, which will be recharacterized as noncontrolling
interests (NCI) and classified as a component of equity. This new
consolidation method will significantly change the accounting for transactions
with minority interest holders. ASC 810 is effective for fiscal years
beginning after December 15, 2008. The Company has not yet
evaluated the impact, if any, of adopting this pronouncement.
In
October 2009, the FASB amended ASC 985-605 (Statement of Position 97-2,
“Software Revenue Recognition”) to provide new guidance on accounting for
revenue arrangements that include tangible products containing software and
non-software components that function together to deliver the product’s
essential functionality. These amendments become effective on a
prospective basis for fiscal years beginning after June 15, 2010, although early
adoption is permitted. The Company has not yet evaluated the impact,
if any, of adopting this pronouncement.
NOTE
12. Quarterly Financial Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share
|
|
Quarter
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
Ended
|
|
Net Sales
|
|
|
Gross Profit
|
|
|
Income
|
|
|
Basic
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
$ |
15,700,000 |
|
|
$ |
7,147,000 |
|
|
$ |
508,000 |
|
|
$ |
.11 |
|
|
$ |
.11 |
|
March
|
|
|
14,707,000 |
|
|
|
6,557,000 |
|
|
|
390,000 |
|
|
|
.08 |
|
|
|
.08 |
|
June
|
|
|
14,754,000 |
|
|
|
6,513,000 |
|
|
|
474,000 |
|
|
|
.10 |
|
|
|
.10 |
|
September
|
|
|
15,284,000 |
|
|
|
7,076,000 |
|
|
|
645,000 |
|
|
|
.14 |
|
|
|
.14 |
|
Total
|
|
$ |
60,445,000 |
|
|
$ |
27,293,000 |
|
|
$ |
2,017,000 |
|
|
$ |
.44 |
|
|
$ |
.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
$ |
15,643,000 |
|
|
$ |
6,927,000 |
|
|
$ |
345,000 |
|
|
$ |
.07 |
|
|
$ |
.07 |
|
March
|
|
|
15,335,000 |
|
|
|
6,797,000 |
|
|
|
206,000 |
|
|
|
.04 |
|
|
|
.04 |
|
June
|
|
|
16,027,000 |
|
|
|
7,268,000 |
|
|
|
528,000 |
|
|
|
.11 |
|
|
|
.11 |
|
September
|
|
|
19,906,000 |
|
|
|
9,430,000 |
|
|
|
1,760,000 |
|
|
|
.37 |
|
|
|
.36 |
|
Total
|
|
$ |
66,911,000 |
|
|
$ |
30,422,000 |
|
|
$ |
2,839,000 |
|
|
$ |
.59 |
|
|
$ |
.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company has not declared or paid cash dividends on its common stock for any of
the foregoing periods.
Because
of changes in the number of common shares outstanding and market price
fluctuations affecting outstanding stock options, the sum of quarterly earnings
per share may not equal the earnings per share for the full year.
SIGNATURES
Pursuant
to the requirements of the Section 13 or 15(d) 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.
VICON
INDUSTRIES, INC.
By
/s/ Kenneth M. Darby
|
By
/s/ John M. Badke
|
Kenneth
M. Darby
|
John
M. Badke
|
Chairman
and
|
Senior
Vice President, Finance
|
Chief
Executive Officer
|
and
Chief Financial Officer
|
(Principal
Executive Officer)
|
(Principal
Financial and Accounting Officer)
|
December
29, 2009
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons in the capacities and on the dates
indicated:
VICON
INDUSTRIES, INC.
/s/ Kenneth M. Darby
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December 29, 2009
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Kenneth
M. Darby
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Chairman
and CEO
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Date
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/s/ Peter F. Neumann
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December 29, 2009
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Peter
F. Neumann
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Director
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Date
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/s/ Bernard F. Reynolds
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December 29, 2009
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Bernard
F. Reynolds
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Director
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Date
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/s/ W. Gregory Robertson
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December 29, 2009
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W.
Gregory Robertson
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Director
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Date
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/s/ Arthur D. Roche
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December 29, 2009
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Arthur
D. Roche
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Director
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Date
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