-----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, VqajKIW3ti4YFZGMPjZkUOABmopc5IwS2AaXXx5jIUYbBM6q+M2bNLl452Z4tOR2 ChnIS8Q9DV8wNiaJTXz3sg== 0001012709-98-000007.txt : 19980113 0001012709-98-000007.hdr.sgml : 19980113 ACCESSION NUMBER: 0001012709-98-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971128 FILED AS OF DATE: 19980112 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: SEC FILE NUMBER: 000-11003 FILM NUMBER: 98505129 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 WEGENER CORPORATION - 1ST QUARTER 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 November 28, 1997 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 30097-1502 (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 December 31, 1997. Common Stock, $.01 par value 11,890,088 Shares - ---------------------------- ---------------------------- Class Outstanding December 31,1997 WEGENER CORPORATION AND SUBSIDIARIES Form 10-Q For the Quarter Ended November 28, 1997 INDEX Page(s) ------- PART I. Financial Information Item 1. Consolidated Financial Statements Introduction ....................................................3 Consolidated Statements of Operations (Unaudited) - Three Months Ended November 28, 1997 and November 29, 1996 ..........................4 Consolidated Balance Sheets - November 28, 1997 (Unaudited) and August 29, 1997 .............................5 Consolidated Statements of Shareholders' Equity (Unaudited) - Three Months Ended November 28, 1997 and November 29, 1996 .......................................6 Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended November 28, 1997 and November 29, 1996 .......................................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. None 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 November 28, 1997; the consolidated statements of shareholders' equity as of November 28, 1997 and November 29, 1996; the consolidated statements of operations for the three months ended November 28, 1997 and November 29, 1996; and the consolidated statements of cash flows for the three months ended November 28, 1997 and November 29, 1996 have been prepared without audit. The consolidated balance sheet as of August 29, 1997 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 August 29, 1997, 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 November 28, November 29, 1997 1996 - -------------------------------------------------------------------------------- Revenues $ 6,706,020 $6,642,663 - -------------------------------------------------------------------------------- Operating costs and expenses Cost of products sold 4,531,739 4,419,722 Selling, general, and administrative 1,050,310 985,652 Research and development 669,896 566,830 - -------------------------------------------------------------------------------- Operating costs and expenses 6,251,945 5,972,204 - -------------------------------------------------------------------------------- Operating income 454,075 670,459 Interest expense (75,786) (181,682) Interest income 77,634 1,429 - -------------------------------------------------------------------------------- Earnings before income taxes 455,923 490,206 Income tax expense 173,000 186,000 ================================================================================ Net earnings $ 282,923 304,206 ================================================================================ Net earnings per share: Primary $ .02 $ .03 Fully diluted $ .02 $ .03 ================================================================================ Shares used in per share calculation Primary 11,572,475 9,135,008 Fully diluted 12,026,157 9,985,094 ================================================================================ See accompanying notes to consolidated financial statements. 4 WEGENER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
November 28, August 29, 1997 1997 - ------------------------------------------------------------------------------------------------- Assets (Unaudited) Current assets Cash and cash equivalents $10,610,165 $2,242,433 Accounts receivable 4,854,687 4,612,634 Inventories 9,667,627 9,992,672 Deferred income taxes 1,241,000 1,241,000 Other 16,865 21,376 - ------------------------------------------------------------------------------------------------- Total current assets 26,390,344 18,110,115 Property and equipment 4,900,594 4,979,856 Capitalized software costs 1,656,284 1,701,416 Deferred income taxes 380,000 553,000 Other assets 209,609 269,566 - ------------------------------------------------------------------------------------------------- $33,536,831 $25,613,953 ================================================================================================= Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 1,837,113 $2,128,941 Accrued expenses 1,454,548 1,440,945 Customer deposits 11,522,427 3,458,401 Current maturities of long-term obligations 594,343 599,157 - ------------------------------------------------------------------------------------------------- Total current liabilities 15,408,431 7,627,444 Long-term obligations, less current maturities 1,652,274 1,782,460 Convertible debentures 321,004 1,285,195 - ------------------------------------------------------------------------------------------------- Total liabilities 17,381,709 10,695,099 - ------------------------------------------------------------------------------------------------- Commitments Shareholders' equity Common stock, $.01 par value, 20,000,000 shares authorized; 12,022,940 and 11,363,917 shares issued 120,229 113,639 Additional paid-in capital 19,023,801 18,084,700 Deficit (2,594,752) (2,877,675) Less treasury stock, at cost (424,487 and 432,730 shares) (394,156) (401,810) - ------------------------------------------------------------------------------------------------- Total shareholders' equity 16,155,122 14,918,854 ================================================================================================= $33,536,831 $25,613,953 =================================================================================================
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 August 30, 1996 9,231,930 $92,319 $14,369,157 $(1,068,475) (470,397) $(436,785) Treasury stock reissued through stock options and 401(k) plan - - 20,478 - 7,777 7,221 Issuance of common stock for convertible debentures 247,377 2,474 991,904 - - - Net earnings for the three months - - - 304,206 - - - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, at November 29, 1996 9,479,307 $94,793 $15,381,539 $ (764,269) (462,620) $(429,564) ================================================================================================================================= BALANCE, at August 29, 1997 11,363,917 $113,639 $18,084,700 $(2,877,675) (432,730) $(401,810) Treasury stock reissued through stock options and 401(k) plan - - 13,466 - 8,243 7,654 Issuance of common stock for convertible debentures 659,023 6,590 925,635 - - - Net earnings for the three months - - - 282,923 - - - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, at November 28, 1997 12,022,940 $120,229 $19,023,801 $(2,594,752) (424,487) $(394,156) =================================================================================================================================
See accompanying notes to consolidated financial statements. WEGENER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Three months ended November 28, November 29, 1997 1996 - ---------------------------------------------------------------------------------------- Cash provided (used) by operating activities Net earnings $ 282,923 $ 304,206 Adjustments to reconcile net earnings to cash provided by operating activities Depreciation and amortization 422,265 321,597 Issuance of treasury stock for compensation expenses 21,120 23,199 Issuance of convertible debt for interest expense - 101,222 Inventory reserves 50,000 - Deferred income taxes 173,000 173,000 Changes in assets and liabilities Accounts receivable (242,053) 1,491,170 Inventories 275,045 378,169 Other assets 4,511 (30,854) Accounts payable (291,828) (214,583) Customer deposits and accrued expenses 8,077,629 (690,541) - ---------------------------------------------------------------------------------------- 8,772,612 1,856,585 - ---------------------------------------------------------------------------------------- Cash provided (used) by investment activities Property and equipment expenditures (148,008) (190,246) Capitalized software additions (121,872) (110,867) - ---------------------------------------------------------------------------------------- (269,880) (301,113) - ---------------------------------------------------------------------------------------- Cash provided (used) by financing activities Net change in borrowings under revolving line-of-credit - (1,530,332) Repayment of long-term debt and capitalized lease obligations (135,000) (145,726) Proceeds from stock options exercised - 4,500 - ---------------------------------------------------------------------------------------- (135,000) (1,671,558) - ---------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 8,367,732 (116,086) Cash and cash equivalents, beginning of period 2,242,433 171,687 ======================================================================================== Cash and cash equivalents, end of period $10,610,165 $ 55,601 ======================================================================================== Supplemental disclosure of cash flow information: Cash paid during the three months for: Interest $ 80,134 $ 78,248 Income taxes $ - $ - ========================================================================================
See accompanying notes to consolidated financial statements. 8 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 August 29, 1997. Earnings Per Share Primary earnings per share are calculated by dividing net earnings by the weighted average number of common shares and dilutive common stock equivalents using the treasury stock method. Fully diluted earnings per share assumed conversion of the outstanding convertible debentures. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share" superseding Accounting Principles Board (APB) Opinion No. 15, "Earnings per Share". The Company plans to adopt SFAS No. 128 in the second quarter of fiscal 1998. Earnings per share computed under the provisions of SFAS No. 128 were the same as those computed under APB Opinion No. 15 for the first quarters of fiscal 1998 and 1997. 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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. 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 1998 and 1997 contain fifty-two weeks. Note 2 Accounts Receivable Accounts receivable are summarized as follows: November 28, August 29, 1997 1997 ------------ ------------ (Unaudited) Accounts receivable - trade $5,136,845 $4,881,565 Other receivables 79,851 92,812 ------------ ------------ 5,216,696 4,974,377 Less allowance for doubtful accounts (362,009) (361,743) ------------ ------------ $4,854,687 $4,612,634 ============ ============ 9 WEGENER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3 Inventories Inventories are summarized as follows: November 28, August 29, 1997 1997 ------------- ------------- (Unaudited) Raw material $ 4,596,671 $ 4,550,550 Work-in-process 3,858,010 4,051,281 Finished goods 3,129,153 3,256,294 ------------- ------------- 11,583,834 11,858,125 Less inventory reserves (1,916,207) (1,865,453) ============= ============= $ 9,667,627 $ 9,992,672 ============= ============= Note 4 Income Taxes For the three months ended November 28, 1997, income tax expense of $173,000 was comprised of a federal and state deferred income tax expense of $155,000 and $18,000, respectively. There was no current federal or state income tax expense due to utilization of tax net operating loss carryforwards. Deferred tax assets decreased $173,000 in the first quarter. At November 28, 1997, the Company had approximately $2,557,000 of federal net operating loss carryforwards which expire in 2008 through 2012; and $137,000 of alternative minimum tax credits and $159,000 of other federal tax credits expiring through 2004 available to offset future tax liabilities. 10 WEGENER CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended August 29, 1997 contained in the Company's 1997 Annual Report on Form 10-K. Certain statements contained in this filing are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results, plans for future business development activities, capital spending or financing sources, capital structure and the effects of regulation and competition, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, product demand, governmental regulation and technological developments, competition and other uncertainties detailed in the Company's Form 10-K for the year ended August 29, 1997 and from time to time in the Company's Securities and Exchange Commission filings. The Company manufactures satellite communications equipment through Wegener Communications, Inc. (WCI), a wholly-owned subsidiary. WCI designs and manufactures communications transmission and receiving equipment for the business broadcast, data communications, cable and broadcast radio and television industries. RESULTS OF OPERATIONS THREE MONTHS ENDED NOVEMBER 28, 1997 COMPARED TO THREE MONTHS ENDED NOVEMBER 29, 1996 Net earnings were $283,000 or $0.02 per share for the three month period ended November 28, 1997, compared to $304,000 or $0.03 per share for the three month period ended November 29, 1996. Revenues - The Company's revenues for the first quarter of fiscal 1998 were $6,706,000, compared to $6,643,000 for the same period in fiscal 1997. Direct Broadcast Satellite (DBS) revenues decreased $377,000 in the first quarter of fiscal 1998 to $5,355,000 from $5,732,000 for the same period in fiscal 1997. The decrease is mainly due to the scheduled timing of shipments in the order backlog. Fiscal 1997 revenues included completion of deliveries of MPEG-2 products for use by the MSNBC network. International DBS revenues in the first quarter of the current fiscal year increased $446,000 to $1,123,000 from $677,000 in the same period of fiscal 1997. The increase was due to shipments of digital video products for use in India. Telecom and Custom Products Group revenues increased $386,000 to $1,129,000 in the first quarter of fiscal 1998 from $743,000 in the first quarter of fiscal 1997. The increase was mainly due to higher levels of shipments of cue and control equipment to provide local commercial insertion capabilities to cable television headend systems. The Company's backlog is comprised of undelivered, firm customer orders, which are scheduled to ship within eighteen months. WCI's backlog was approximately $19,268,000 at November 28, 1997, compared to $19,501,000 at 11 August 29, 1997 and $10,653,000 at November 29, 1996. Subsequent to November 28, 1997, additional orders booked amounted to approximately $4,972,000. Gross Profit Margins - Gross profit decreased $49,000 or 2.2% in the three month period ended November 28, 1997, compared to the three month period ended November 29, 1996, as a result of a decrease in revenues for the period. Gross profit as a percent of revenues was 32.4% in the first quarter of fiscal 1998 compared to 33.5% in the first quarter of fiscal 1997. The decrease in the percentage was mainly due to the mix of products sold. Selling, General and Administrative - Selling, general and administrative expenses increased $65,000 or 6.6% to $1,050,000 in the first quarter of fiscal 1998 from $986,000 in the first quarter of fiscal 1997. The increase is primarily due to higher levels of selling and marketing expenses, and ISO 9000 certification costs. As a percentage of revenues, selling, general and administrative expenses were 15.7% for the three month period ended November 28, 1997 compared to 14.8% for the same period ended November 29, 1996. As a percentage of revenues, selling, general and administrative expenses are expected to decrease in fiscal 1998 compared to fiscal 1997 due to an expected increase in fiscal 1998 revenues. Research and Development - Research and development expenditures, including capitalized software development costs, were $777,000 or 11.6% of revenues in the first quarter of fiscal 1998 compared to $678,000 or 10.2% of revenues for the same period of fiscal 1997. Capitalized software development costs amounted to $107,000 in the first quarter of fiscal 1998 compared to $111,000 in the first quarter of fiscal 1997. Research and development expenses, excluding capitalized software development costs, were $670,000 or 10.0% of revenues in the first quarter of fiscal 1998, and $567,000 or 8.5% of revenues in the same period of fiscal 1997. The increase in expenses is primarily due to an increase in engineering personnel and higher depreciation and proto-type material expenses. 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 dollar amount of research and development expenditures in fiscal 1998 is expected to increase compared to fiscal 1997 and to decrease as a percent of revenues due to an expected increase in fiscal 1998 revenues. Interest Expense - Interest expense decreased $106,000 to $76,000 in the first quarter of fiscal 1998 from $182,000 in the same period in fiscal 1997. The decrease is primarily due to a decrease in the average outstanding balance of the convertible debentures. Interest Income - Interest income was $77,600 for the three months ended November 28, 1997 compared to $1,400 for the same period ended November 26, 1996. The increase is due to the increase in cash equivalent balances at November 28, 1997, primarily as a result of an increase in customer deposits. Income Tax Expense - For the three months ended November 28, 1997, income tax expense of $173,000 was comprised of a federal and state deferred income tax expense of $155,000 and $18,000, respectively. There was no current federal or state income tax expense due to utilization of tax net operating loss carryforwards. 12 LIQUIDITY AND CAPITAL RESOURCES THREE MONTHS ENDED NOVEMBER 28, 1997 During the first quarter of fiscal 1998, operating activities provided cash of $8,773,000. Increases in customer deposits and net earnings adjusted for non-cash expenses provided cash of $8,064,000 and $949,000, respectively. Changes in accounts receivable, inventories and accounts payable balances used cash of $254,000. Cash used by investing activities for property and equipment expenditures and capitalized software additions was $270,000. Financing activities used cash of $135,000 for scheduled repayments of long-term obligations. At November 28, 1997, no balances were outstanding under the revolving line-of-credit, which expires May 4, 1999, or upon demand. Borrowings under the revolving line of credit are subject to availability advance formulas of 80% against eligible accounts receivable; 20% of eligible raw material inventories; 20% of eligible work-in-process kit inventories; and 40% to 50% of eligible finished goods inventories. Advances against inventory are subject to a sublimit of $2,000,000. Approximately, $3,342,000 was available to borrow at November 29, 1997 under the advance formulas. In addition, at November 29, 1997, the Company was in compliance with the line-of-credit covenants. During the first quarter of fiscal 1998, $964,000 of convertible debentures were converted into 659,023 shares of common stock. Subsequent to November 28, 1997, the remaining outstanding convertible debentures of $321,000 were converted into 291,635 shares of common stock. The Company expects that its current cash and cash equivalents combined with expected cash flows from operating activities and the Company's available line-of-credit will be sufficient to support the Company's operations during fiscal 1998. 13 PART II. OTHER INFORMATION -------------------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended November 28, 1997. 14 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: January 12, 1998 By: /s/ Robert A. Placek -------------------------- Robert A. Placek President (Principal Executive Officer) Date: January 12, 1998 By: /s/ C. Troy Woodbury, Jr. ------------------------------ C. Troy Woodbury, Jr. Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) 15 EX-27 2 FDS --
5 3-MOS AUG-28-1998 AUG-30-1997 NOV-28-1997 10,610,165 0 5,216,696 (362,009) 9,667,627 26,390,344 13,267,098 (8,366,504) 33,536,831 15,408,431 1,973,278 0 0 120,229 16,034,893 33,536,831 6,706,020 6,706,020 4,531,739 6,251,945 (77,634) 0 75,786 455,923 173,000 282,923 0 0 0 282,923 .02 .02
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