-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MnFqVHsvz5g6KZiB8SX8UjftZRZTelg06v4Rewe9rGf1cmO/fgNCx4rntjTPjnGh leUQAE53FnT1rFVklVRL8A== 0000020232-96-000025.txt : 19961111 0000020232-96-000025.hdr.sgml : 19961111 ACCESSION NUMBER: 0000020232-96-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961108 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHYRON CORP CENTRAL INDEX KEY: 0000020232 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 112117385 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09014 FILM NUMBER: 96657468 BUSINESS ADDRESS: STREET 1: 5 HUB DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5168452000 MAIL ADDRESS: STREET 1: 5 HUB DRIVE CITY: MELVILLE STATE: NY ZIP: 11747 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER EXCHANGE INC DATE OF NAME CHANGE: 19760114 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 1996 Commission File Number 1-9014 Chyron Corporation (Exact name of registrant as specified in its charter) New York 11-2117385 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 5 Hub Drive, Melville, NY 11747 (Address of principal executive offices) (Zip Code) (516) 845-2000 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by a check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock $.01 Par Value - 97,094,302 as of November 8, 1996 This document consists of 14 pages CHYRON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (In thousands except per share amounts) (Unaudited) 1996 1995 Net sales................................ $ 20,632 $14,099 Costs and expenses: Manufacturing ......................... 9,817 6,091 Selling, general and administrative ... 5,890 4,637 Research and development .............. 1,452 1,027 Management fee......................... 232 West Coast restructuring recapture..... (552) Total costs and expenses ................ 17,159 11,435 Operating income ........................ 3,473 2,664 Other expense, net....................... 450 171 Income before provision for income taxes. 3,023 2,493 Income taxes/equivalent provision........ 1,189 686 Net income............................... $ 1,834 $ 1,807 Earnings per common share................ $ .02 $ .02 Weighted average number of common and common equivalent shares outstanding.......... 98,750 91,408 See Notes to Consolidated Financial Statements CHYRON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (In thousands except per share amounts) (Unaudited) 1996 1995 Net sales.............................. $ 56,889 $ 38,596 Costs and expenses: Manufacturing ....................... 26,887 16,920 Selling, general and administrative . 16,351 12,648 Research and development ............ 3,751 3,065 Management fee....................... 695 West Coast restructuring recapture... (552) Total costs and expenses .............. 46,989 32,776 Operating income ...................... 9,900 5,820 Other expense, net..................... 872 449 Income before provision for income taxes................................ 9,028 5,371 Income taxes/equivalent provision...... 3,405 1,477 Net income............................. 5,623 3,894 Retained earnings/(accumulated deficit) - beginning of period................ 1,343 (6,133) Retained earnings/(accumulated deficit) - end of period...................... $ 6,966 $ (2,239) Earnings per common share.............. $ .06 $ .04 Weighted average number of common and common equivalent shares outstanding........ 96,558 90,597 See Notes to Consolidated Financial Statements CHYRON CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) (unaudited) ASSETS September 30, December 31, 1996 1995 Current assets: Cash and cash equivalents......... $ 3,078 $ 5,012 Accounts and notes receivable..... 20,206 13,967 Inventories....................... 24,123 11,645 Prepaid expenses.................. 794 578 Deferred tax asset................ 5,821 6,457 Other............................. 633 Total current assets........... 54,655 37,659 Property and equipment.............. 12,766 3,300 Excess of purchase price over net assets acquired................... 7,205 Investment in RT-SET................ 2,161 Software development costs.......... 1,915 1,716 Deferred tax asset.................. 1,403 1,403 Other assets........................ 1,746 254 TOTAL ASSETS $81,851 $44,332 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses......................... $16,253 $ 9,120 Current portion of long-term debt. 4,716 Capital lease obligations......... 264 160 Other............................. 99 158 Total current liabilities....... 21,332 9,438 Long-term debt...................... 14,977 4,741 Capital lease obligations........... 148 170 Total liabilities................. 36,457 14,349 Commitments Shareholders' equity: Preferred stock, par value without designation Authorized - 1,000,000 shares, Issued - none Common stock, par value $.01 Authorized - 150,000,000 shares Issued and outstanding - 97,094,302 shares at September 30, 1996 90,071,394 shares at December 31, 1995................ 971 901 Additional paid-in capital........ 37,268 27,739 Retained earnings................. 6,966 1,343 Cumulative translation adjustment. 189 Total shareholders' equity...... 45,394 29,983 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $81,851 $44,332 See Notes to the Consolidated Financial Statements CHYRON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (In Thousands) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995 Net income.................................$ 5,623 $ 3,894 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization ......... 2,001 1,481 Utilization of deferred tax asset...... 688 1,342 Changes in operating assets and liabilities: Accounts and trade notes receivable.... 914 (1,463) Inventories............................ (4,748) (4,944) Prepaid expenses ...................... (48) 586 Accounts payable and accrued expenses.. (2,020) 5,345 Management fee payable................. (1,000) Other liabilities...................... (59) (1,908) Net cash provided by operating activities. 1,351 4,333 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of Pro-Bel and Investment in RT-SET.................................. (7,226) Acquisitions of property and equipment.... (1,358) (656) Capitalized software development ......... (705) (190) Other..................................... (608) 82 Net cash (used in) investing activities... (9,897) (764) CASH FLOWS FROM FINANCING ACTIVITIES Payments of capital lease obligations..... (179) (69) Proceeds from exercise of common stock purchase warrants, net................... 239 323 Proceeds from exercise of stock options... 542 Payments of revolving credit agreement.... (5,644) (4,500) Proceeds from new credit facility, net.... 11,654 6,128 Other..................................... (52) Net cash provided by financing activities. 6,612 1,830 Change in cash and cash equivalents....... (1,934) 5,399 Cash and cash equivalents at beginning of period................................ 5,012 1,555 Cash and cash equivalents at end of period.................................. $ 3,078 $ 6,954 Noncash investing and financing activities: During January 1996, the Company entered into capital lease obligations totaling $90,000 for the purchase of equipment. On February 29, 1996, the Company acquired a 19% interest in RT-SET Ltd. in exchange for 2.4 million shares of Chyron common stock. See Note 4 to the Consolidated Financial Statements. On April 12, 1996, the Company acquired the issued and outstanding shares of Pro-Bel Limited. The consideration in addition to cash included 3,146,205 shares of Chyron common stock valued at $6,868,000 and notes payable valued at $5,349,000. See Note 3 to the Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 2. TRANSLATION OF FOREIGN CURRENCIES The functional currency for the Company's foreign operations is the applicable local currency. The translation from the applicable foreign currency to U.S. dollars is performed for asset and liability accounts using period-end exchange rates and for revenue and expense accounts using a weighted average exchange rate during the period. The gains or losses resulting from such translation are recorded in the cumulative translation adjustment account which is included in shareholders' equity. Gains or losses from foreign currency transactions are included in other income as they occur. 3. ACQUISITION OF PRO-BEL LIMITED On April 12, 1996, the Company completed the acquisition of the issued and outstanding shares of Pro-Bel Limited ("Pro-Bel"), located in the United Kingdom. Pro-Bel manufactures and distributes video signal and switching equipment and systems. The consideration consisted of $6.9 million in cash, $5.3 million in notes, and 3,146,205 shares of restricted Chyron common stock valued at $6.9 million. The acquisition of Pro-Bel was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair values. The excess of purchase price over the estimated fair value of net assets acquired amounted to $7,532,000, which is being amortized over 12 years using the straight line method. The accompanying consolidated statements of operations include the operating results of Pro-Bel since the date of the acquisition. Proforma unaudited consolidated operating results of the Company and Pro-Bel for the nine months ended September 30, 1996 and 1995, assuming the acquisition had been made as of January 1, 1996 and 1995, respectively, are summarized below (in thousands except per share amounts). September September 30, 1996 30, 1995 Net Sales $ 67,313 $ 58,533 Net Income $ 5,581 $ 2,589 Earnings per share $ .06 $ .03 These pro forma results have been prepared for comparative purposes only and include adjustments as a result of applying purchase accounting and conversion to generally accepted accounting principles in the United States, such as additional depreciation expense and cost of goods sold due to the step-up in the basis of fixed assets and inventory, respectively, goodwill amortization, a decrease in research and development due to the capitalization of software development costs and increased interest expense on acquisition debt adjusted for tax effect. The pro forma financial information is not necessarily indicative of the operating results that would have occurred if the acquisition had taken place on the aforementioned dates, or of future results of operations of the consolidated entities. 4. INVESTMENT IN RT-SET On February 29, 1996, the Company effectively purchased an option to acquire a 19% interest in RT-SET, Ltd. ("RT-SET"), located in Tel Aviv, Israel. RT-SET develops, markets and sells real time virtual studio set software and proprietary communications hardware that operate on Silicon Graphics systems. In form, Chyron purchased shares of RT-SET Convertible Preferred Stock in exchange for 2.4 million shares of Chyron restricted common stock. In accordance with the purchase agreement, the 2.4 million shares of Chyron common stock were to be held in escrow, and released in tranches of one-third and two thirds, subject to certain conditions. As of June 30, 1996, the first of these conditions had been met, which resulted in the release of 800,000 shares of Chyron restricted common stock to RT-SET. Upon the satisfaction of the remaining conditions, the remaining 1,600,000 escrowed shares will be released. If the conditions are not met, the shares of Chyron restricted common stock held in escrow will be returned to the Company. Accordingly, the transaction has been recorded as the purchase of a right to acquire a 19% interest in RT-SET. RT-SET shall retain the voting rights with respect to the escrowed shares, while such shares are held by the escrow agent. The acquisition was recorded at the estimated fair value of the Chyron restricted common stock released from escrow. In addition, Chyron was granted certain call option rights which, if and when exercised, will result in the Company owning up to a 51% interest in RT-SET. 5. ACCOUNTS AND NOTES RECEIVABLE Trade accounts and notes receivable are stated net of an allowance for doubtful accounts of $5,617,000 and $3,134,000 at September 30, 1996 and December 31, 1995, respectively. 6. INVENTORIES Inventories consist of the following (in thousands): September 30, September 30, 1996 1995 Finished goods $8,811 $ 3,345 Work-in-process 7,860 5,250 Raw material 7,452 3,050 $24,123 $11,645 7. LONG-TERM DEBT Long term debt consists of the following (in thousands): September 30, December 31, 1996 1995 Term loan, maturing April 16, 2000 (a) $7,000 $ Revolving credit facility, maturing March 28, 1999 (a) 2,730 Revolving credit facility, maturing April 27, 1997 (b) 4,741 Commercial mortgage term loan, maturing March 28, 2010 (c) 1,973 Promissory notes, payable on or before April 15, 1998 (d) 5,349 Trade finance facility, maturing December 31, 1996 (e) 915 Overdraft facility, maturing December 31, 1996 (f) 1,726 19,693 4,741 Less amounts due in one year (4,716) $14,977 $4,741 (a) On March 28, 1996 and April 16, 1996, the Company entered into agreements with a bank to obtain a revolving credit facility of $10 million and a term loan of $8 million, respectively. The entire facility is secured by the Company's assets. Borrowings are limited to amounts computed under a formula for eligible accounts receivable and inventory. Additionally, an over-advance is available above the borrowing formula in an amount not to exceed $3 million. Interest on the revolving credit facility is equal to adjusted LIBOR plus 175 basis points or prime (8.25% at September 30, 1996) and is payable monthly. The term loan is payable in quarterly installments of $500,000, commencing June 1, 1996. Interest on the term loan is equal to adjusted LIBOR plus 200 basis points or prime (8.25% at September 30, 1996) and is payable monthly. (b) At December 31, 1995, the Company had $4.7 million outstanding with a financial institution under a secured revolving credit facility. Interest was payable monthly at the prime rate (8.5% at December 31, 1995) plus 2% per annum. The facility was due to expire on April 27, 1997, but was replaced by the banking facility described in (a) above in conjunction with the financing of the acquisition of Pro-Bel. (c) Pro-Bel has a commercial mortgage term loan with a bank. The loan is secured by a building and property located in the United Kingdom. Interest is equal to LIBOR (5.98% at September 30, 1996) plus 2%. The loan (including interest) is payable in quarterly installments of 80,600 pounds sterling. (d) On April 12, 1996, the Company issued promissory notes to the shareholders of Pro-Bel for $5.3 million (3.5 million pounds sterling) in conjunction with the acquisition (See Note 4). The promissory notes are secured by an irrevocable letter of credit from a bank. The amount of this irrevocable letter of credit is included as an outstanding borrowing in the formula used to calculate borrowing availability for the facilities described in (a) above. Interest through April 15, 1997 is equal to LIBOR as of April 15, 1996 (6.46%) and is payable quarterly. The notes are due on or before April 15, 1998 and are subordinated to any obligations to a bank or financial institution currently existing or subsequently entered into. The notes can be prepaid without interest or penalty subsequent to November 1, 1996. (e) On February 1, 1996, Pro-Bel entered into an agreement with a bank to obtain a trade finance facility of 750,000 sed by $1.9 million, or 130.5%, primarily as a result of the income tax benefit realized on the 1994 West Coast restructuring. The increase is also due to increased income before income taxes for the 1996 period. Liquidity and Capital Resources On February 1, 1996, Pro-Bel, entered into several agreements with a bank to obtain borrowing facilities totaling 1.5 million pounds sterling. One of the facilities is secured by Pro-Bel's outstanding accounts receivable. These facilities replaced former bank facilities which had expired, and are used for working capital. On March 28, 1996 and April 16, 1996, the Company entered into agreements with a bank to obtain a revolving credit facility of $10 million and a term loan of $8 million, respectively. The revolving portion of the facility matures 3 years from closing, while the term portion matures 4 years from closing. The entire facility is secured by the Company's properties and assets. This facility replaced the $10,000,000 secured credit facility which was due to expire on April 27, 1997. In April 1996, a portion of this new credit facility was used to fund the acquisition of Pro-Bel Ltd. On April 12, 1996, the Company issued promissory notes to the shareholders of Pro-Bel for $5.3 million (3.5 million pounds sterling). The notes are secured by an irrevocable letter of credit from a bank and limit amounts available under the revolving credit facility described above. The notes are due on or before April 15, 1998. At September 30, 1996, the Company's current ratio was 2.56 to 1 and its working capital was $33,323,000. At September 30, 1996, the Company had operating lease commitments for equipment and factory and office space totaling $12.4 million of which $1.3 million is payable within one year. PART II. OTHER INFORMATION ITEMS 1., 2., 3., 4. AND 5. Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Not applicable. (b) Reports on Form 8-K: (1) On April 26, 1996, the Company filed a report on Form 8-K related to the acquisition of Pro-Bel Limited. This report is incorporated by reference. (2) On March 14, 1996, the Company filed a report on Form 8-K related to the investment of 19% in RT-Set, Ltd. This report is incorporated by reference. (3) On June 21, 1996, the Company filed a report on Form 8- K/A, which amended the report of Form 8-K filed on April 26, 1996, to include the financial exhibits which are automatically granted a 60 day extension for filing, related to the acquisition of Pro-Bel Limited. This report is incorporated by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHYRON CORPORATION (Registrant) November 8, 1996 /s/Michael Wellesley-Wesley (Date) Michael Wellesley-Wesley Chairman of the Board and Chief Executive Officer November 8, 1996 /s/ Patricia Lampe (Date) Patricia Lampe Chief Financial Officer and Treasurer EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 3,078 0 20,206 0 24,123 54,655 12,766 0 81,851 21,332 0 0 0 971 0 81,851 56,889 56,889 26,887 46,989 872 0 0 9,028 3,405 0 0 0 0 5,623 .06 0
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