-----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, HkYvGkZSQ2JJsOdA2OEIlq/d0rwoS1E7QkUEG4aldpNJsiwVTIKBtrrARzlrTp+j YijF4kMFPIiKZXs7z2X/1w== 0000950115-98-001436.txt : 19980817 0000950115-98-001436.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950115-98-001436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RELM WIRELESS CORP CENTRAL INDEX KEY: 0000002186 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 042225121 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07336 FILM NUMBER: 98690038 BUSINESS ADDRESS: STREET 1: 7505 TECHNOLOGY DRIVE CITY: WEST MELBOURNE STATE: FL ZIP: 32904 BUSINESS PHONE: 2154303900 MAIL ADDRESS: STREET 1: 750 TECHNOLOGY DRIVE CITY: WEST MELBOURNE STATE: FL ZIP: 32904 FORMER COMPANY: FORMER CONFORMED NAME: ADAGE INC DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT 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 Quarter Ended June 30, 1998 --------------------------------------- Commission file number 33-31797 ---------------------------------- RELM WIRELESS CORPORATION -------------------------------------------- (Exchange name of registrant as specified in its charter) Nevada 04-2225121 -------------------------- ----------------- (State or other jurisdiction of I.R.S. Employer Identification Number Incorporation or organization) 7505 Technology Drive, West Melbourne, Florida 32904 -------------------------------------------------------- (Address of principal executive officers) (Zip Codes) (407) 984-1414 ---------------------------------- (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 ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date of June 30, 1998. 5,043,604 shares of Common Stock, par value $.60 per share PART I- FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS RELM WIRELESS CORPORATION Condensed Consolidated Balance Sheets (In thousands except share data) June 30, 1998 December 31, (Unaudited) 1997 ------------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 593 $ 213 Accounts receivable, net 4,751 5,379 Inventories 11,137 11,504 Investment securities-trading 1,038 881 Notes receivable -- 400 Real estate investments held for sale 1,661 1,833 Prepaid expenses and other current 225 288 ------- ------- Total Current Assets 19,405 20,498 Property, Plant and Equipment, net 8,728 8,805 Notes Receivable 2,200 2,200 Other Assets 62 162 ------- ------- Total Assets $30,395 $31,665 ======= ======= See notes to condensed consolidated financial statements ITEM 1 - FINANCIAL STATEMENTS - Continued RELM WIRELESS CORPORATION Condensed Consolidated Balance Sheets (In thousands except share data)
June 30 December 31 1998 1997 (Unaudited) ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term liabilities: $ 1,134 $ 1,584 Accounts payable 2,317 1,935 Accrued expenses 4,292 3,773 Accrued restructuring liability 657 1,872 Accrued research costs 599 1,027 -------- ------- Total Current Liabilities 8,999 10,191 Long-Term Liabilities Loans, notes and mortgages 6,562 5,405 Capital lease obligations 1,620 2,035 -------- ------- Total Long-Term Liabilities 8,182 7,440 Stockholders' equity: Common; $.60 par value: 10,000,000 authorized shares: issued and outstanding shares 5,043,604 at June 30, 1998 and 5,035,779 at December 31, 1997 3,026 3,021 Additional paid-in capital 20,211 20,185 Retained earnings (deficit) (10,023) (9,172) -------- ------- Total stockholders' equity 13,214 14,034 -------- ------- Total Liabilities and Stockholders' Equity $ 30,395 $31,665 ======== =======
See notes to condensed consolidated financial statements. 2 ITEM 1 - FINANCIAL STATEMENTS - continued RELM WIRELESS CORPORATION Consolidated Statements of Operations (In thousands except share data)
THREE MONTHS ENDED SIX MONTHS ENDED June 30 June 30 ---------------------------- ---------------------------- 1998 1997 1998 1997 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ----------- ----------- Sales $ 7,067 $ 14,648 $ 14,782 $ 24,597 Expenses: Cost of sales 5,460 11,148 11,594 18,634 Selling, general & administrative 2,239 3,322 3,933 5,982 -------- -------- -------- -------- 7,699 14,470 15,527 24,616 -------- -------- -------- -------- Operating income (loss) (632) 178 (745) (19) Other income (expense): Interest expense (200) (311) (401) (632) Net gains (losses) on investments 51 (58) 157 (109) Other income 131 -- 138 95 -------- -------- -------- -------- Loss from continuing operations before income taxes (650) (191) (851) (665) Income tax benefit -- (38) -- (199) -------- -------- -------- -------- Loss from continuing operations (650) (153) (851) (466) Discontinued operations: Loss from discontinued operations net of income taxes -- (250) -- (266) Loss on sale of discontinued operations net of income taxes -- (2,570) -- (2,570) -------- -------- -------- -------- Net loss $ (650) $ (2,973) $ (851) $ (3,302) ======== ======== ======== ======== Earnings (loss) per share-basic and diluted: Continuing operations $ (0.13) $ (0.03) $ (0.17) $ (0.09) Discontinued operations $ -- $ (0.55) -- $ (0.56) -------- -------- -------- -------- Net loss $ (0.13) $ (0.58) $ (0.17) $ (0.65) ======== ======== ======== ========
See notes to condensed consolidated financial statements. 3 ITEM 1 - FINANCIAL STATEMENTS - continued RELM WIRELESS CORPORATION Condensed Consolidated Statement of Cash Flow (In thousands) SIX MONTHS ENDED JUNE 30 -------------------------- 1998 1997 (Unaudited) (Unaudited) ----------- ---------- Cash (used) provided by operations $ 562 $ (525) Investing activities: Property, plant and equipment purchases (518) (1,267) Proceeds from sale of segments 7,693 Other 337 ------- ------- Cash provided (used) by investing activities (518) 6,763 Financing activities: Proceeds from debt -- 3,289 Changes in lines of credit 1,026 (9,526) Capital lease, Mortgage (721) (616) Sale (purchase) of stock 31 (40) ------- ------- Cash provided (used) by financing activities 336 (6,893) ------- ------- Increase (decrease) in cash 380 (655) Cash and cash equivalent at beginning of period 213 599 ------- ------- Cash and cash equivalent at end of period (over draft) $ 593 $ (56) ======= ======= Supplemental disclosure Interest paid 401 632 See notes to condensed consolidated financial statements. 4 Notes to Condensed Consolidated Financial Statements (Unaudited) (In thousands except share data) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of June 30, 1998, the condensed consolidated statements of operations for the three months and six months ended June 30, 1998 and 1997, and the condensed consolidated statements of cash flows for six months ended June 30, 1998 and 1997 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows at June 30, 1998 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1997 Annual Report to Shareholders. The results of operations for the period ended June 30, 1998 are not necessarily indicative of the operating results for a full year. As of January 1, 1998, the Company adopted FASB Statement 130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components: however, the adoption of this Statement had no impact on the Company's net loss or stockholders' equity for 1998 or 1997. 2. Inventories: June 30, December 31, 1998 1997 -------- ------------ Inventories consisted of: Raw Material $ 5,128 $ 4,139 Work in Process 1,710 2,245 Finished Goods 4,299 5,120 -------- -------- $ 11,137 $ 11,504 ======== ======== 5 3. Stockholders' Equity The consolidated changes in stockholders' equity for the six months ended June 30, 1998 are follows:
Additional Retained Common Stock Paid-In Earnings ---------------------------------------------------------------------- Shares Amount Capital (Deficit) Total --------- --------- --------- --------- --------- Balance at January 1, 1998 5,035,779 $ 3,021 $ 20,185 $ (9,172) $ 14,034 Exercise of stock options 7,825 5 26 -- 31 Net loss -- -- -- (851) (851) --------- --------- --------- --------- --------- Balance June 30, 1998 5,043,604 $ 3,026 $ 20,211 $ (10,023) $ 13,214 ========= ========= ========= ========= =========
4. Earnings (Loss) Per Share In 1997, the FASB issued SFAS No. 128, Earnings per Share. This statement replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share are very similar to the previously reported fully diluted earnings per share. All earnings (loss) per share amounts for all periods have been presented, and where appropriate, restated to conform to the Statement 128 requirements. The following table sets the computation of basic and diluted earnings (loss) per share from continuing operations:
THREE MONTHS ENDED SIX MONTHS ENDED --------------------------- -------------------------- June 30 June 30 June 30 June 30 1998 1997 1998 1997 ----------- ----------- ---------- ----------- Numerator Net loss (numerator for basic and diluted earnings (loss) per share) $ (650) $ (153) $ (851) $ (466) ----------- ----------- ---------- ----------- Denominator Denominator for basic earnings per share- weighted average shares 5,041,034 5,109,449 5,042,319 5,113,338 Effect of dilutive securities: Options -- -- -- -- ----------- ----------- ---------- ----------- Dilutive potential shares -- -- -- -- ----------- ----------- ---------- ----------- Denominator for diluted earnings (loss) per share-adjusted weighted average shares 5,04l,034 5,109 449 5,042,319 5,l13,338 =========== =========== ========== =========== Basic earnings (loss) per share $ (0.13) $ (0.03) $ (0.17) $ (0.09) =========== =========== ========== =========== Diluted earnings (loss) per share $ (0.13) $ (0.03) $ (0.17) $ (0.09) =========== =========== ========== ===========
Shares related to options are not included in the computation of earnings (loss) per share because too so would have been anti-dilutive for the periods presented. 6 5. Reclassifications In accordance with Staff Accounting Bulletin No. 93, the Company's real estate operations have been classified in continuing operations for all periods presented as the real estate business has not been completely disposed of. The real estate operations were previously reported in discontinued operations. Management anticipates selling the remaining real estate assets and exiting the business in 1998. The summarized results of operations of the real estate business are as follows:
THREE MONTHS ENDED SIX MONTHS ENDED June 30 June 30 ------------------------------- ------------------------------- 1998 1997 1998 1997 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ----------- ----------- Sales $ 382 $ 550 $ 740 $ 1,039 Cost of sales 395 569 747 1,023 Selling, general & administrative 33 150 93 265 ------- ------- ------- ------- Operating Loss $ (46) $ (169) $ (100) $ (249) ======= ======= ======= =======
The statements of operations for the three and six months ended June 30, 1997 have been restated to properly reflect discontinued operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS Results of Operations As an aid to understanding the Company's operating results, the following table shows each item from the consolidated statements of operations expressed as a percentage of net sales:
THREE MONTHS ENDED SIX MONTHS ENDED --------------------------------- --------------------------------- June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 ------------- ------------- ------------- ------------- Sales 100.0% 100.0% 100.0% 100.0% Cost of sales (77.3%) (76.1%) (78.4%) (75.8%) ----- ----- ----- ----- Gross margin 22.7% 23.9% 21.6% 24.2% Selling, general and administrative expenses (31.7%) (22.7%) (26.6%) (24.3%) Interest expense (2.8%) (2.1%) (2.7%) (2.6%) Other income (expense) 2.6% (0.4%) 1.9% -- ----- ----- ----- ----- Loss from continuing operations before income tax benefit (9.2%) (1.3%) (5.8%) (2.7%) Income tax benefit -- (0.3%) -- (0.8%) ----- ----- ----- ----- Net loss from continuing operations (9.2%) (1.0%) (5.8%) (1.9%) Loss from discontinued operations -- (1.7%) -- (1.1%) Loss on sale of discontinued operations -- (17.5%) -- (10.4%) ----- ----- ----- ----- Net loss (9.2%) (20.2%) (5.8%) (13.4%) ----- ----- ----- -----
Net Sales Net sales for the three months and six months ended June 30, 1998 decreased $7,581,000 (51.8%) and $9,815,000 (39.9%) respectively compared to sales for the same periods in 1997. This decrease is primarily the result of reduced radio requirements for the U. S. Army. The Company's five-year, $40 million contract with the Army remains intact. However, the Army's current inventory on-hand is sufficient to satisfy their requirements through Quarter 1 of 1999. Shipments are expected to resume at that time. As previously announced, the Company discontinued products and businesses that were inadequately profitable or do not fit the Company's strategic focus in land mobile radios. Consistent with that Strategy, lower sales have been realized in Demand Side Management and component products as well as in the commercial real estate business. In order to achieve sales growth in both existing and exciting new product offerings, sales and marketing efforts are being restructured under the direction of a new Senior Vice-President. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS -- CONTINUED. Cost of Sales Cost of sales as a percentage of net sales for the three months and six months ended June 30, 1998 increased 1.2% to 77.3% and 2.6% to 78.4%, respectively, compared to the same periods in 1997. Manufacturing volumes were lower in the first six months of 1998 as a result of the aforementioned sales decreases, resulting in the under-absorption of manufacturing overhead costs. The Company responded by dramatically reducing staff and expenses to levels that are consistent with present revenue run-rates. Reductions were initially implemented at the end of February 1998. Further reductions were implemented in July 1998. Under the direction of a new Executive Vice President and Chief Operating Officer, the Company is focused on manufacturing improvements that will yield lower material costs and increased labor efficiencies. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses consist of marketing, sales, commissions, sustaining engineering, product development, information systems, accounting, and headquarters. SG&A expenses as a percentage of sales for the three months ended June 30, 1998 increased from 22.7% to 31.7% compared to the same period in 1997. SG&A expenses for the six months ended June 30, 1998 increased from 24.3% to 26.6% compared to the same period in 1997. SG&A expenses in all areas have been reduced as a result of the Company's restructuring program with the exception of new product development. The Company is continuing to invest in three aggressive new product initiatives. These initiatives will yield the new products that are necessary to fuel sales growth in 1999 and beyond. This highly-compressed development effort will be largely completed in 1998. Subsequently, R&D expenses and overall SG&A expenses will return to levels that are consistent with the Company's revenues. Interest Expense Interest expense for the three months and six months ended June 30, 1998 decreased $111,000 and $231,000 respectively compared to the same periods in 1997. During the second half of 1997, debt levels were reduced using cash flow from operations and from the sales of discontinued operations. There was no significant change in interest expense between the first and second quarters of 1998. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS -- CONTINUED. Income Taxes The Company has evaluated its tax position versus the requirements of SFAS No. 109, Accounting for Income Taxes and does not believe that it has met the more-likely-than-not criteria for recognizing a deferred tax asset and has provided valuation allowances against net deferred tax assets. Therefore, an income tax benefit was not provided for the three months and six months ended June 30, 1998. Liquidity and Capital Resources As of June 30, 1998 the Company had working capital of $10,406,000 compared with $10,307,000 as of December 31, 1997. As of June 30, 1998, the Company has available credit of $4 million under a revolving line of credit. The increase in cash of $380,000 during the six months ended June 30,1998 is a combination of cash from operations of $562,000, a net increase in debt of $305,000 and capital expenditures of $518,000. Capital expenditures for the comparable period in 1997 were $1,267,000. Discontinued Operations There were no discontinued operations for the three months and six months ended June 30, 1998. For the same periods in 1997, the Company reported losses from discontinued operations of $250,000 and $266,000, respectively. The discontinued operations (specialty manufacturing and recycled paper manufacturing) were sold during the second quarter of 1997 at a net loss of approximately $2.6 million. Inflation and Changing Prices Inflation and changing prices for the quarters June 30, 1998 and 1997 have contributed to increases in wages, facilities, and raw material costs. These inflationary effects were partially offset by increased prices to customers. The Company believes that it will be able to pass on most of its future inflationary increases to its customers. The Company is also subject to changing foreign currency exchange rates in its purchase of some raw materials. The Company employs several methods to protect against increases in cost due to currency fluctuations. It is not always possible to pass on these effects. Competitors in the land-mobile radio markets are subject to similar fluctuations. 10 Forward-Looking Statements This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe-harbor created by such sections. Such forward-looking statements concern the Company's operations, economic performance and financial condition. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: General economic and business conditions; changes in customer preferences; competition; changes in technology; the integration of any acquisitions; changes in business strategy; the indebtedness of the Company; quality of management, business abilities and judgment of the Company's personnel; the availability, terms and deployment of capital; and various other factors referenced in this Report. The forward-looking statements are made as of the date of this Report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. Year 2000 Discussion As the year 2000 approaches, an issue has emerged with many companies regarding how existing application software programs and operating systems will accommodate this date value. Many existing software products were designed to accommodate only a two-digit date position that represents the year. As a result, the year 1999 could be the maximum date value that the systems will be able to process. RELM installed a new enterprise-wide software package in 1997. This software is able to process the year 2000. Consequently, management does not expect to incur additional costs to resolve the year 2000 issue. ITEM 6. Exhibits and Reports of Form 8-K b.) Reports on Form 8-K The Registrant was not required to file reports on Form 8K during the quarter ended June 30, 1998. Pursuant to the requirements of securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. RELM WIRELESS CORPORATION --------------------------- William P. Kelly Chief Financial Officer and Date: August 13, 1998 Vice President - Finance EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 3-MOS DEC-31-1998 JAN-1-1998 JUN-30-1998 593 1,038 4,900 (149) 11,137 19,405 13,922 (5,194) 30,395 8,999 0 0 0 3,026 10,188 30,395 7,067 7,067 5,460 0 2,239 0 200 (650) 0 0 0 0 0 (650) (.13) (.13)
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