-----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, RTKDLcUjx8bFPON7WCQw+0ZKRoOA3Vp3ybVFRxbob/DgKAypOXZoo1MKURYPKnQp WyYG0YQemQRN7sI5ZFMqEQ== 0000912057-96-006124.txt : 19960409 0000912057-96-006124.hdr.sgml : 19960409 ACCESSION NUMBER: 0000912057-96-006124 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960301 FILED AS OF DATE: 19960408 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEGENER CORP CENTRAL INDEX KEY: 0000715073 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 810371341 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11003 FILM NUMBER: 96545116 BUSINESS ADDRESS: STREET 1: 11350 TECHNOLOGY CIRCLE CITY: DULUTH STATE: GA ZIP: 30136-1528 BUSINESS PHONE: 4046230096 MAIL ADDRESS: STREET 1: 11350 TECHNOLOGY CIRCLE CITY: DULUTH STATE: GA ZIP: 30136-1528 FORMER COMPANY: FORMER CONFORMED NAME: TELECRAFTER CORP DATE OF NAME CHANGE: 19890718 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 1, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________________to_______________________ Commission file No. 0-11003 WEGENER CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 81-0371341 (State of incorporation) (I.R.S. Employer Identification No.) 11350 TECHNOLOGY CIRCLE, DULUTH, GEORGIA 30155-1528 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 623-0096 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 April 1, 1996. COMMON STOCK, $.01 PAR VALUE 8,741,788 SHARES - ---------------------------- ------------------------- Class Outstanding April 1, 1996 WEGENER CORPORATION AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 1, 1996 INDEX Page(s) ------- PART I. Financial Information Item 1. Consolidated Financial Statements Introduction....................................................3 Consolidated Statements of Operations (Unaudited) - Six Months Ended March 1, 1996 and March 3, 1995.................................4 Consolidated Balance Sheets - March 1, 1996 (Unaudited) and September 1, 1995..........................5 Consolidated Statements of Shareholders' Equity (Unaudited) - Six Months Ended March 1, 1996 and March 3, 1995..........................................6 Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended March 1, 1996 and March 3, 1995..........................................7 Notes to Consolidated Financial Statements (Unaudited)........................................8-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................10-12 PART II. Other Information Item 1. None Item 2. None Item 3. None Item 4. Submission of Matters to a Vote of Security Holders............13 Item 5. None Item 6. Exhibits and Reports on Form 8-K...............................13 Signatures.......................................................14 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTRODUCTION - CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The consolidated balance sheet as of March 1, 1996; The consolidated statements of shareholders' equity as of March 1, 1996 and March 3, 1995; the consolidated statements of operations for the six months ended March 1, 1996 and March 3, 1995; and the consolidated statements of cash flows for the six months ended March 1, 1996 and March 3, 1995 have been prepared without audit. The consolidated balance sheet as of September 1, 1995 has been examined by independent certified public accountants. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K, for the fiscal year ended September 1, 1995, File No. 0-11003. In the opinion of the Company, the statements for the unaudited interim periods presented include all adjustments, which were of a normal recurring nature, necessary to present a fair statement of the results of such interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results of operations for the entire year. 3 WEGENER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Six months ended March 1, March 3, March 1, March 3, 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------------- Revenues $5,540,490 $3,476,784 $9,909,295 $7,310,396 - ------------------------------------------------------------------------------------------------------------------------- Operating costs and expenses Cost of products sold 3,673,081 2,424,091 6,443,979 4,839,369 Selling, general, and administrative 918,924 715,089 1,764,057 1,442,453 Research and development 620,380 361,957 1,189,670 913,236 - ------------------------------------------------------------------------------------------------------------------------- Operating costs and expenses 5,212,385 3,501,137 9,397,706 7,195,058 - ------------------------------------------------------------------------------------------------------------------------- Operating income (loss) 328,105 (24,353) 511,589 115,338 Interest expense (153,605) (149,349) (310,798) (276,135) Interest income 12,409 - 50,638 - Other (expense) income, net 150 - 262 - - ------------------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes 187,059 (173,702) 251,691 (160,797) Income tax expense (benefit) - - - - - ------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 187,059 $ (173,702) $ 251,691 $ (160,797) - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) per common and common equivalent share $ .02 $ (.02) $ .03 $ (.02) - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Weighted average number of shares outstanding 9,076,083 7,028,229 9,073,250 7,010,829 - ------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 4 WEGENER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 1, September 1, 1996 1995 - ------------------------------------------------------------------------------- ASSETS (Unaudited) Current assets Cash and cash equivalents $ 1,285,437 $ 4,913,962 Accounts receivable 4,244,834 4,571,589 Inventories 12,182,447 7,232,521 Other 52,970 57,328 - ------------------------------------------------------------------------------- Total current assets 17,765,688 16,775,400 Property and equipment, net 4,602,223 4,412,183 Capitalized software costs 903,500 626,739 Other assets, net 134,145 203,785 - ------------------------------------------------------------------------------- $23,405,556 $22,018,107 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Note payable $ 3,212,795 $ 3,078,965 Accounts payable 4,686,184 3,762,219 Accrued expenses 611,540 643,757 Customer deposits 553,942 517,060 Current maturities of long-term obligations 802,452 831,838 - ------------------------------------------------------------------------------- Total current liabilities 9,866,913 8,833,839 Long-term obligations, less current maturities 1,905,070 1,964,227 - ------------------------------------------------------------------------------- Total liabilities 11,771,983 10,798,066 - ------------------------------------------------------------------------------- Commitments Shareholders' equity Common stock, $.01 par value, 10,000,000 shares authorized; 9,231,930 and 9,193,680 shares issued 92,320 91,937 Additional paid-in capital 14,269,234 14,131,187 Deficit (2,272,862) (2,524,553) Less treasury stock, at cost (490,142 and 515,354 shares) (455,119) (478,530) - ------------------------------------------------------------------------------- Total shareholders' equity 11,633,573 11,220,041 - ------------------------------------------------------------------------------- $23,405,556 $22,018,107 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 5 WEGENER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Common Stock Additional Treasury Stock ------------------- Paid-in --------------------- Shares Amount Capital Deficit Shares Amount - -------------------------------------------------------------------------------------------------------------------------------- BALANCE, at September 2, 1994 7,493,580 $74,937 $6,489,358 $(2,909,423) (589,351) $(631,242) Treasury stock reissued through stock options and 401(k) plan - - (72,321) - 21,302 95,859 Net loss for the six months - - - (160,797) - - - -------------------------------------------------------------------------------------------------------------------------------- BALANCE, at March 3, 1995 7,493,680 $74,937 $6,426,037 $(3,070,220) (568,049) $(535,383) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- BALANCE, at September 1, 1995 9,193,680 $91,937 $14,131,187 $(2,524,553) (515,354) $(478,530) Common stock issued 38,250 383 111,873 - - - Treasury stock reissued through stock options and 401(k) plan - - 26,210 - 25,212 23,411 Net earnings for the six months - - - 251,691 - - - -------------------------------------------------------------------------------------------------------------------------------- BALANCE, at March 1, 1996 9,231,930 $92,320 $14,269,234 $(2,272,862) (490,142) $(455,119) - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 6 WEGENER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Six months ended March 1, March 3, 1996 1995 - ------------------------------------------------------------------------------- CASH PROVIDED (USED) BY OPERATING ACTIVITIES Net earnings (loss) $ 251,691 $(160,797) Adjustments to reconcile net earnings (loss) to cash provided by operating activities Depreciation and amortization 477,154 327,506 Bad debt allowance 15,000 - Issuance of treasury stock for compensation expenses 28,201 17,663 Changes in assets and liabilities Accounts receivable 311,755 575,618 Inventories (4,949,926) 576,317 Other current and non-current assets 4,957 (89,545) Accounts payable 923,965 (849,145) Customer deposits and accrued expenses 4,665 (119,160) - ------------------------------------------------------------------------------- (2,932,538) 278,457 - ------------------------------------------------------------------------------- CASH PROVIDED (USED) BY INVESTMENT ACTIVITIES Property and equipment expenditures (326,199) (100,314) Capitalized software additions (388,832) (219,372) - ------------------------------------------------------------------------------- (715,031) (319,686) - ------------------------------------------------------------------------------- CASH PROVIDED (USED) BY FINANCING ACTIVITIES Net change in borrowings under revolving line-of-credit 133,830 (235,029) Repayment of long-term debt and capitalized lease obligation (248,426) (179,770) Proceeds from long-term debt - 453,594 Proceeds from issuance of common stock 112,219 - Proceeds from stock options exercised 21,421 5,875 - ------------------------------------------------------------------------------- 19,044 44,670 - ------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (3,628,525) 3,441 Cash and cash equivalents, beginning of period 4,913,962 2,515 - ------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 1,285,437 $ 5,956 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Supplemental disclosure of cash flow information: Cash paid during the six months for: Interest $ 308,356 $ 268,843 Income taxes $ - $ - - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Supplemental schedule of noncash transactions: Capital lease obligations incurred to acquire equipment $ 159,883 $ - - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 7 WEGENER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 Significant Accounting Policies The significant accounting policies followed by the Company are set forth in Note 1 to the Company's audited consolidated financial statements included in the annual report on Form 10-K for the year ended September 1, 1995. Fiscal Year The Company uses a fifty-two, fifty-three week year. The fiscal year ends on the Friday closest to August 31. Fiscal years 1996 and 1995 contain fifty-two weeks. Financial Presentation Certain prior period amounts have been reclassified to conform with current period presentation. Note 2 Accounts Receivable Accounts receivable are summarized as follows:
March 1, September 1, 1996 1995 ----------- ------------ (Unaudited) Accounts receivable - trade $4,218,558 $4,501,509 Other receivables 89,655 111,682 ----------- ------------ 4,308,213 4,613,191 Less allowance for doubtful accounts (63,379) (41,602) ----------- ------------ $4,244,834 $4,571,589 ----------- ------------ ----------- ------------
8 WEGENER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3 Inventories Inventories are summarized as follows:
March 1, September 1, 1996 1995 ----------- ------------ (Unaudited) Raw material $ 6,046,020 $3,929,885 Work-in-process 4,035,386 2,594,977 Finished goods 2,847,967 1,443,949 ----------- ------------ 12,929,373 7,968,811 Less inventory reserves (746,926) (736,290) ----------- ------------ $12,182,447 $7,232,521 ----------- ------------ ----------- ------------
Note 4 Income Taxes For the six months ended March 1, 1996 no income tax expense was recorded due to a reduction in the deferred tax asset valuation allowance. The valuation allowance decreased approximately $86,000 in the first six months of fiscal 1996. At March 1, 1996, net deferred tax assets of approximately $947,000 were fully reserved by a valuation allowance as a result of the Company's history of operating losses. At March 1, 1996, the Company had approximately $1,334,000 of federal net operating loss carryforwards which expire in 2009 and 2010; and $137,000 of alternative minimum tax credits and $159,000 of other federal tax credits expiring through 2004. 9 WEGENER CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company manufactures satellite communications equipment through Wegener Communications, Inc. (WCI), a wholly-owned subsidiary. WCI manufactures products for transmission of audio, data, and video via satellite. RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED MARCH 1, 1996 COMPARED TO THREE AND SIX MONTHS ENDED MARCH 3, 1995 The operating results for the three and six month periods ended March 1, 1996 were net earnings of $187,000 or $0.02 per share and $252,000 or $0.03 per share compared to net losses of $(174,000) or $(0.02) per share and $(161,000) or $(0.02) per share for the three and six month periods ended March 3, 1995. REVENUES - The Company's revenues for the three months ended March 1, 1996 were $5,540,000, up 59.4% from revenues of $3,477,000 for the three months ended March 3, 1995. Revenues were $9,909,000 for the six months ended March 1, 1996, up 35.6% from revenues of $7,310,000 for the six months ended March 3, 1995. The increase in revenues in the second quarter and first six months of fiscal 1996 reflect 61.5% and 39.8% increases in the Direct Broadcast Satellite (DBS) revenues compared to fiscal 1995, primarily due to increased shipments of digital audio and video products to the business music and private network industries. Second quarter revenues reflected initial shipments of MPEG-2 satellite news gathering digital video products. Telecom and Custom Products Group revenues increased 66.9% and 26.4% in the second quarter and first six months of fiscal 1996 compared to fiscal 1995, principally due to increased shipments of uplink equipment to radio networks for conversion from analog to digital broadcasting. WCI's backlog was approximately $28,763,000 as of March 1, 1996, compared to $27,402,000 as of September 1, 1995, and $29,215,000 as of March 3, 1995. GROSS PROFIT MARGINS - The Company's gross profit margins were 33.7% and 35.0% for the three and six month periods ended March 1, 1996 compared to 30.3% and 33.8% for the three and six month periods ended March 3, 1995. The improvements in profit margin percentages for the periods were mainly due to an improved DBS product mix which included new digital audio and video compression products which have higher margins than analog DBS products. Profit margins for the three and six month periods were adversely impacted by manufacturing overhead expenses which were increased to support increased manufacturing capacity. Additionally, fiscal 1996 second quarter margins were adversely impacted by start-up costs associated with initial shipments of new digital products. SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative (SG&A) expenses were $919,000 and $1,764,000 for the three and six month periods ended March 1, 1996 compared to $715,000 and $1,442,000 for the same periods of fiscal 1995. The increases in expenses for the three and six month periods are due to higher levels of compensation, selling, and marketing expenses compared to the same periods of fiscal 1995. As a percentage of revenues, SG&A expenses were 16.6% and 17.8% for the three and six month periods ended March 1, 1996 compared to 20.6% and 19.7% for the same periods of fiscal 1995. 10 RESEARCH AND DEVELOPMENT - Research and development expenditures, including capitalized software development costs, were $836,000 and $1,579,000 for the three and six month periods ended March 1, 1996, up 46.9% and 34.3%, compared to $569,000 and $1,176,000 for the same periods of fiscal 1995. Capitalized software development costs amounted to $216,000 and $389,000 for the second quarter and first six months of fiscal 1996 compared to $207,000 and $262,000 for the same periods of fiscal 1995 The increases in these expenditures are for the continued development of digital products. The Company remains committed to such research and development expenditures as are required to effectively compete and maintain pace with the rapid technological changes in the communications industry and to support innovative engineering and design in its future products. The amount of future research and development expenditures are expected to increase compared to fiscal 1995 and decrease as a percent of revenues. The Company's ability to continue the rapid development of new digital products is directly tied to its ability to obtain additional funding, if required. INTEREST EXPENSE - Interest expense increased 2.8% in the three month period ended March 1, 1996 compared to the same period of fiscal 1995 primarily due to increases in the average outstanding borrowings which were partially offset by decreases in the prime rate. For the six month period ended March 1, 1996 interest expense increased 12.6% compared to the same period of fiscal 1995 primarily due to increases in the average outstanding borrowings. LIQUIDITY AND CAPITAL RESOURCES SIX MONTHS ENDED MARCH 1, 1996 Depending on the level of revenues and profitability in fiscal 1996 additional funds for working capital may be required. Management of the Company believes that additional funds will be available, if required, through a private placement or a public offering of additional shares of common stock or through additional borrowings or issuance of additional debt. If additional financing is required and is not available, management of the Company is committed to cutting the necessary costs throughout the organization and limiting certain planned programs in order to keep cash requirements within the current line-of-credit availability. This action would very likely result in lower revenues. This would ultimately impact the level of expenditures available for research and development expenses. However, management believes that suitable financing will be successfully obtained if required. During the first six months of fiscal 1996 cash and cash equivalents decreased $3,629,000. Operating activities used $2,933,000 of cash. Inventory increases used cash of $4,950,000 which was partially offset by increases in accounts payable of $924,000 and decreases in accounts receivable of $311,000. The Company's revolving line of credit limits inventory advances to a maximum of the lesser of $1,500,000 or 75% of accounts receivable availability. The inventory advances are currently at the maximum availability. As a result, the Company is paying its trade payable creditors under informal extended payment arrangements. No assurances can be given that extended payment arrangements will continue to be granted by vendors and suppliers. Any suspension or delay in the delivery of materials would have an adverse effect on results of operations. Inventory levels and accounts payable balances were adversely impacted by delays in the introduction of new products which were expected to begin shipping in the first quarter. Initial shipments of certain new products were made at the end of the second quarter. The Company believes shipments of new products will increase during the third quarter resulting in decreases in inventory levels and decreases in past due accounts payable balances. 11 Cash used by investment activities for property and equipment expenditures and capitalized software additions was $715,000. Cash provided by financing activities was $19,000. Non-cash investing and financing transactions included capital lease obligations of $160,000 to acquire equipment. The outstanding balance on the line-of-credit was $3,213,000 at March 1, 1996, compared to $3,079,000 at September 1, 1995. At March 1, 1996, approximately $960,000 was available to borrow under the accounts receivable portion of the advance formula. Long-term debt and current maturities were $2,708,000 at the end of the second quarter compared to $2,796,000 at September 1, 1995. 12 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On January 16, 1996, the Annual Meeting of Shareholders was held and the following matters were voted upon: (1) The shareholders approved the election of the following nominees to the Board of Directors: C. Troy Woodbury, Jr. and Joe K. Parks 5,433,265 votes for 25,210 votes withheld 1,840 votes abstaining (2) Certain amendments to the 1989 Director's Incentive Plan, including, among other things, amendments to increase the number of shares available under the Plan from 100,000 shares to 300,000 shares and to provide for automatic annual grants of options to non-employee directors, were approved with 4,924,688 votes for, 90,337 votes against, and 420,189 votes abstaining. (3) The appointment of BDO Seidman, LLP as auditors for the Company for the fiscal year 1996 was approved with 5,423,992, votes for, 26,934 votes against, and 9,888 votes abstaining. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended March 1, 1996. 13 SIGNATURES ----------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on it behalf by the undersigned thereunto duly authorized. WEGENER CORPORATION ------------------- (Registrant) Date: April 4, 1996 By: /s/ Robert A. Placek ------------------------------ Robert A. Placek President Date: April 4, 1996 By: /s/ C. Troy Woodbury, Jr. ------------------------------- C. Troy Woodbury, Jr. Treasurer and Chief Financial Officer 14 -----END PRIVACY-ENHANCED MESSAGE-----