-----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, IA9KRp/7klPVavHKGLna4UTkGhZLV/cmFflpZTEt/rYxy6jzUpbPVX+Ab+4nI5GS GZ/uoXcLDmoRPM8uMsys4g== 0000020232-96-000018.txt : 19960513 0000020232-96-000018.hdr.sgml : 19960513 ACCESSION NUMBER: 0000020232-96-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 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: 96559413 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 March 31, 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 - 96,761,913 as of May 1, 1996 This document consists of 10 pages CHYRON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In thousands except per share amounts) (Unaudited) 1996 1995 Net sales............................. $ 13,725 $ 11,437 Costs and expenses: Manufacturing ...................... 5,939 5,075 Selling, general and administrative. 3,705 3,589 Research and development ........... 1,108 980 Management fee...................... 232 Total costs and expenses ............. 10,752 9,876 Operating income ..................... 2,973 1,561 Interest expense, net................. (124) (153) Income before provision for income taxes............................... 2,849 1,408 Income taxes/equivalent provision..... 969 528 Net income............................ 1,880 880 Retained earnings/(accumulated deficit)-beginning of period....... 1,343 (6,133) Retained earnings/(accumulated deficit)-end of period.............. $ 3,223 $(5,253) Earnings per common share............. $ .02 $ .01 Weighted average number of common and common equivalent shares outstanding......................... 92,445 89,844 See Notes to Consolidated Financial Statements ITEM 1. FINANCIAL STATEMENTS CHYRON CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) (unaudited) ASSETS March 31, December 31, 1996 1995 Current assets: Cash and cash equivalents................... $ 8,830 $ 5,012 Accounts and notes receivable............... 13,155 13,967 Inventories................................. 12,124 11,645 Prepaid expenses............................ 886 578 Deferred tax asset.......................... 6,258 6,457 Total current assets...................... 41,253 37,659 Property and equipment...................... 3,646 3,300 Investment in RT-SET........................ 1,950 Software development costs.................. 1,582 1,716 Deferred tax asset.......................... 1,403 1,403 Other assets................................ 219 254 TOTAL ASSETS................................ $50,053 $44,332 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses....... $ 9,859 $ 8,120 Management fee payable................... 1,000 Reserve for West Coast restructuring..... 138 158 Capital lease obligations................ 166 160 Total current liabilities................ 10,163 9,438 Loans payable............................... 5,644 4,741 Capital lease obligations................... 194 170 Total liabilities..................... 16,001 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 - 93,615,708 shares at March 31, 1996, 90,071,394 shares at December 31, 1995.... 936 901 Additional paid-in capital................ 29,893 27,739 Retained earnings......................... 3,223 1,343 Total Shareholders' equity............... 34,052 29,983 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.. $50,053 $44,332 See Notes to the Consolidated Financial Statements. CHYRON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In Thousands) (Unaudited) 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net income................................. $ 1,880 $ 880 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization .......... 582 442 Income tax equivalent provision......... 199 516 Changes in operating assets and liabilities: Accounts and trade notes receivable..... 812 (118) Inventories............................. (479) (472) Prepaid expenses ....................... (308) 180 Accounts payable and accrued expenses... 1,739 738 Management fee payable.................. (1,000) Deferred revenue........................ 37 Reserve for West Coast restructuring.... (20) (735) Net cash provided by operating activities.. 3,405 1,468 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment...... (617) (202) Capitalized software development .......... (87) (46) Other...................................... 35 (7) Net cash (used in) investing activities.... (669) (255) CASH FLOWS FROM FINANCING ACTIVITIES Payments of capital lease obligations...... (60) (63) Proceeds from exercise of common stock purchase warrants, net................... 239 8 Borrowings from revolving credit agreement. 903 Payments of revolving credit agreement..... (5,644) Net proceeds from new credit facility...... 5,644 Net cash provided by (used in) financing activities.............................. 1,082 (55) Change in cash and cash equivalents........ 3,818 1,158 Cash and cash equivalents at beginning of period................................... 5,012 1,555 Cash and cash equivalents at end of period. $ 8,830 $2,713 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the period for: Interest................................... $ 166 $ 122 Income..................................... $ 100 $ 18 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 2 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 accordance 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 months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 2. 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 March 31, 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, when exercised, will result in the Company owning up to a 51% interest in RT-SET. Chyron and RT-SET will jointly market and distribute RT-SET products and Chyron will provide infrastructure for installation, service and support functions. 3. ACCOUNTS AND NOTES RECEIVABLE Trade accounts and notes receivable are stated net of an allowance for doubtful accounts of $2,805,000 and $3,134,000 at March 31, 1996 and December 31, 1995, respectively. 4. INVENTORIES Inventories at March 31, 1996 and December 31, 1995, respectively consist of the following (in thousands): Finished goods $ 4,295 $ 3,345 Work-in-process 5,225 5,250 Raw material 2,604 3,050 $ 12,124 $11,645 7. LOANS PAYABLE 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 properties and 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 Prime or adjusted LIBOR plus 175 basis points (8.25% at March 31, 1996) and is payable monthly. The revolving portion of the facility will mature on March 28, 1999. The term loan is payable in quarterly installments of $500,000, commencing June 1, 1996. Interest on the term loan is equal to Prime or adjusted LIBOR plus 200 basis points (8.25% at April 16, 1996) and is payable monthly. The term portion of the facility matures April 16, 2000. The Company had $5.6 million outstanding under the revolving credit facility at March 31, 1995. At December 31, 1995, the Company had $4.7 million outstanding with another financial institution under a secured revolving credit facility. Interest was payable monthly at the prime rate plus 2% per annum (8.5% at December 31, 1995). The facility was due to expire on April 27, 1997, but was replaced by the aforementioned banking facility. 6. SUBSEQUENT EVENTS 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. The transaction will be accounted for as a purchase. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS OVERVIEW This discussion should be read in conjunction with the Consolidated Financial Statements including the Notes thereto: COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 Sales increased 20% to $13.7 million in 1996 mainly as a result of a 15.2% increase in the Company's upperline products; the Infinit!, Max, and Maxine. Increases were also seen in the Company's Codi products, which showed a 52.8% improvement over the prior year. Gross margin increased to $7.8 million as a result of the 20% increase in sales. Gross margins increased to 56.7% in 1996 compared to 55.6% in 1995 which is a direct result of enhanced productivity in the factory. Selling, general and administrative expenses increased by $116,000 or 3%, which was primarily due to the writeoff of certain capitalized financing costs related to the former credit facility held by the Company and the establishment of an overseas sales office. Additional increases were seen due to increases in costs related to the 20% increase in sales. These increases were offset by cost cutting measures instituted by the Company as is seen by the decrease in SGA as a percentage of sales from 31% in 1995 to 27% in 1996. Research and development (R&D) expenses increased in 1996 by $128,000 or 13%. This increase is mainly due to additional expenditures for new product development to address emerging markets targeted by the Company, as well as the development of new features for the Company's existing product lines. R&D includes the amortization of software development costs, which increased $62,000 due to the release of new options in 1996 for the Company's character generator product lines. Net interest expense decreased $29,000 or 19% due mainly to increases in earnings on the Company's cash equivalents. This increase was partially offset by increases in interest expense related to the Company's capital lease obligations. Income before income taxes improved $1.4 million or 102% due to the increases in sales volume and gross margins coupled with cost savings measures instituted by the Company that decreased selling, general and administrative expense as a percentage of sales as described above. The increase in income before income taxes is also due to elimination of the management fee, which resulted from the termination of the agreement by the Company in December 1995. LIQUIDITY AND CAPITAL RESOURCES 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. At March 31, 1996, the Company's current ratio was 4.06 and its working capital was $31,090,000. At March 31, 1996, the Company had operating lease commitments for equipment and factory and office space totaling $3.9 million of which $795,000 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. 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) May 10, 1996 /s/ Michael Wellesley-Wesley Michael Wellesley-Wesley Chairman of the Board and Chief Executive Officer May 10, 1996 /s/Patricia Lampe Patricia Lampe Chief Financial Officer and Treasurer EX-27 2
5 3-MOS DEC-31-1996 MAR-31-1996 8,830 0 13,155 0 12,124 41,253 3,646 0 50,053 10,163 0 0 0 936 0 50,053 13,725 13,725 5,939 10,752 0 0 124 2,849 969 0 0 0 0 1,880 .02 0
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