-----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, THdgns06I+o/2YD8T1bUpsjfU9yYu3mOzr8Sv/5A1mfYdvlR7QBTY+owOoZbza9k FvSuCkh/OwZkBaEE2u2ybw== /in/edgar/work/20000801/0000950153-00-001042/0000950153-00-001042.txt : 20000921 0000950153-00-001042.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950153-00-001042 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADYNE COMSTREAM INC CENTRAL INDEX KEY: 0000718573 STANDARD INDUSTRIAL CLASSIFICATION: [3663 ] IRS NUMBER: 112569467 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11685 FILM NUMBER: 683778 BUSINESS ADDRESS: STREET 1: 3138 EAST ELWOOD STREET CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6024379620 MAIL ADDRESS: STREET 1: 3138 EAST ELWOOD STREET CITY: PHOENIX STATE: AZ ZIP: 85034 FORMER COMPANY: FORMER CONFORMED NAME: RADYNE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 e10-q.txt 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the three month period ended June 30, 2000. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-11685-NY RADYNE COMSTREAM INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 11-2569467 (IRS EMPLOYER IDENTIFICATION NO.) 3138 EAST ELWOOD STREET, PHOENIX, AZ 85034 (Address of principal executive offices) 602-437-9620 (Registrant's Telephone number) Indicate by check mark whether the registrant (1) 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 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 by check mark whether the registrant 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 / / The registrant had 14,379,450 shares of its common stock, par value $.001, outstanding as of June 30, 2000. 2 PART I - FINANCIAL INFORMATION RADYNE COMSTREAM INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000 December 31, 1999 ITEM 1 Unaudited Audited Assets Current assets: Cash & cash equivalents $ 22,796,136 $ 2,947,660 Accounts receivable - trade, net of allowance for doubtful accounts of $826,746 and $791,746, respectively 8,390,459 8,678,153 Inventories, net 11,485,134 8,339,112 Prepaid expenses 509,222 929,076 -------------------------------- Total current assets 43,180,951 20,894,001 -------------------------------- Property and equipment, net 3,284,539 3,595,168 Other assets: Purchased technology, net of accumulated amortization of $705,000 and $505,000, respectively 1,795,000 1,995,000 Goodwill, net of accumulated amortization of $341,389 and $253,530, respectively 1,457,002 1,544,861 Deposits and other 59,818 207,032 -------------------------------- Total other assets 3,311,820 3,746,893 ================================ $ 49,777,310 $ 28,236,062 ================================ Liabilities and Stockholders' equity Current liabilities: Notes payable under line of credit agreement $ 5,500,000 $ 12,920,000 Current installments of obligations under capital leases 22,719 44,332 Accounts payable, trade 3,843,350 3,911,742 Accrued expenses 6,343,028 5,043,391 Customer advances 2,040,323 545,218 Taxes Payable 647,422 684,382 -------------------------------- Total Current Liabilities 18,396,842 23,149,065 Obligations under capital leases, excluding current installments 36,234 64,652 Accrued stock option compensation 552,621 695,433 -------------------------------- Total Liabilities 18,985,697 23,909,150 -------------------------------- Stockholders' equity: Preferred Stock, $.001 par value, 10,000,000 shares authorized; shares issued and outstanding, 0 at June 30, 2000 and December 31, 1999 -- -- Common Stock, $.001 par value, 50,000,000 shares authorized; shares issued and outstanding, 14,379,450 at June 30, 2000 and 10,739,382 at December 31, 1999 14,379 10,738 Additional Paid-In Capital 45,946,473 23,364,056 Accumulated deficit (15,169,239) (19,047,882) -------------------------------- Total stockholders' equity 30,791,613 4,326,912 -------------------------------- $ 49,777,310 $ 28,236,062 ================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 3 RADYNE COMSTREAM INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 Net sales $17,920,824 $12,943,629 $34,672,998 $25,262,334 Cost of sales 9,532,974 7,022,695 18,454,492 13,795,124 -------------------------------------------------------------------------- Gross profit 8,387,850 5,920,934 16,218,506 11,467,210 -------------------------------------------------------------------------- Operating expenses: Selling, general and administrative 3,571,533 2,748,038 7,729,956 5,748,728 Research and development 2,410,953 2,208,099 4,585,125 4,515,574 -------------------------------------------------------------------------- Total operating expenses 5,982,486 4,956,137 12,315,081 10,264,302 -------------------------------------------------------------------------- Earnings from operations 2,405,364 964,797 3,903,425 1,202,908 Other (income) expense: Interest expense 165,409 543,255 383,929 1,098,029 Other (income) (295,546) -- (437,323) -- -------------------------------------------------------------------------- Earnings before income taxes 2,535,501 421,542 3,956,819 104,879 Income taxes 49,176 -- 78,176 -- ========================================================================== Net earnings $2,486,325 $421,542 $3,878,643 $104,879 ========================================================================== Basic net earnings per common share $0.17 $0.07 $0.29 $0.02 ========================================================================== Diluted net earnings per common share $0.15 $0.06 $0.25 $0.02 ========================================================================== Weighted average shares used in computation Basic 14,342,733 5,944,574 13,400,527 5,938,303 ========================================================================== Weighted average shares used in computation Diluted 16,310,365 6,552,574 15,292,433 6,550,417 ==========================================================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 RADYNE COMSTREAM INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 Cash flows from operating activities: Net earnings $3,878,643 $104,879 Adjustments to reconcile net earnings to cash flows provided by Operating activities: Loss on disposal of assets 30,307 -- Depreciation and amortization 1,176,196 1,483,929 Increase (decrease) in cash resulting from changes in: Accounts receivable 287,694 2,045,684 Inventories (3,146,022) 1,031,789 Prepaid expenses 419,854 (248,304) Deposits and other 147,214 (1,918) Accounts payable, trade (68,392) (1,163,444) Accounts payable, affiliates -- (8,150) Accrued expenses 1,299,637 (190,129) Customer advances 1,495,105 -- Taxes payable (36,960) -- Accrued stock option compensation (142,812) (46,673) ----------------------------------------------- Net cash provided by operating activities 5,340,464 3,007,663 ----------------------------------------------- Cash flows from investing activities: Capital expenditures (608,015) (119,074) ----------------------------------------------- Net cash used in investing activities (608,015) (119,074) ----------------------------------------------- Cash flows from financing activities: Payments on notes payable under line of credit (7,420,000) (2,000,000) Net proceeds from exercise of stock options 839,114 -- Net proceeds from sale of common stock 21,746,944 71,345 Principal payments on capital lease obligations (50,031) (71,153) ----------------------------------------------- Net cash provided by(used in) financing activities 15,116,027 (1,999,808) ----------------------------------------------- Net increase in cash 19,848,476 888,781 Cash and cash equivalents, beginning of year 2,947,660 254,956 ----------------------------------------------- Cash and cash equivalents, end of period $22,796,136 $1,143,737 =============================================== Supplemental disclosure of cash flow information: Cash paid for interest $541,857 $ 378,145 =============================================== Cash paid for taxes $108,000 $ -- ===============================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 RADYNE COMSTREAM INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR JUNE 30, 2000 AND JUNE 30, 1999 IS UNAUDITED) 1 BUSINESS Radyne ComStream Inc. (the "Company") was incorporated on November 25, 1980 and commenced operations on May 22, 1981. On August 12, 1996 the Company became a majority owned subsidiary of Singapore Technologies Pte Ltd ("STPL"), through its wholly-owned subsidiary, Stetsys US, Inc. ("ST"). In March 1999, Radyne Corp. changed its name to Radyne ComStream Inc. The Company's principal manufacturing and headquarters facilities are located in Phoenix, Arizona and San Diego, California. The Company designs, manufactures, and sells products, systems and software used for the transmission and reception of data over satellite and cable communication networks. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The interim unaudited condensed consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of financial position as of June 30, 2000 and the results of operations and cash flows for the six months ended June 30, 2000 and 1999. Such adjustments are of a normal recurring nature. This information should be read in conjunction with the consolidated financial statements included in the Company's Form 10-K for the year ended December 31, 1999. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. (b) 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 and disclosure of contingent assets and liabilities as of the financial statement date and the reported amounts of revenue and expenses during the reporting period. Rapid technological change and short product life cycles characterize the industry in which the Company operates. As a result, estimates are required to provide for product obsolescence and warranty returns as well as other matters. Actual results could differ from those estimates. (c) Principles of Consolidation The condensed consolidated financial statements include the accounts of the Radyne Comstream Inc. and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in the consolidation. (d) Cash Equivalents All money market accounts with a maturity of 90 days or less are considered cash equivalents. (b) Revenue Recognition The Company recognizes revenue upon transfer of title and shipment of product. (b) Inventories Inventories, consisting of satellite modems and related products, are valued at the lower of cost (first-in, first-out) or market. (b) Property and Equipment Property and equipment are stated at cost. Equipment held under capital leases is stated at the present value of future minimum lease payments. Expenditures for repairs and maintenance are charged to operations as incurred, and improvements which extend the useful lives of the assets are capitalized. Depreciation and amortization of machinery and equipment are computed using the straight-line method over an estimated useful 5 6 life of three to ten years. Equipment held under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful lives of the assets. (b) Goodwill Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over ten years. (b) Purchased Technology In connection with the acquisition of ComStream, value was assigned to purchased technology. Purchased technology is being amortized on a straight-line basis over the expected period to be benefited of 6.25 years. (j) Impairment of Long-Lived Assets Management reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (k) Warranty Costs The Company provides limited warranties on certain of its products and systems for periods generally not exceeding two years. The Company accrues estimated warranty costs for potential product liability and warranty claims based on our claim experience. Such costs are accrued as cost of sales at the time revenue is recognized. (l) Research and Development The cost of research and development is charged to expense as incurred. (m) Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future consequences attributed to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Differences between income for financial and tax reporting purposes arise primarily from accruals for warranty reserves and compensated absences. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (n) Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, are principally accounts receivable. The Company maintains ongoing credit evaluations of our customers and generally does not require collateral. The Company provides reserves for potential credit losses and such losses have not exceeded management's expectations. (o) Net Earnings/Per Share Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or contracts to issue common stock were exercised or converted to common stock or resulted in the issuance of common stock that then shared in the earnings of Radyne Comstream. (p) Fair Value of Financial Instruments The fair value of accounts receivable, accounts payable and accrued expenses approximates the carrying value due to the short-term nature of these instruments. Management has estimated that the fair values of the notes payable, approximate the current balances outstanding, based on currently available rates for debt with similar terms. 6 7 (q) Employee Stock Options Management has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee stock options and to adopt the "disclosure only" alternative treatment under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123 requires the use of fair value option valuation models that were not developed for use in valuing employee stock options. Under SFAS No. 123, deferred compensation is recorded for the excess of the fair value of the stock on the date of the option grant, over the exercise price of the option. The deferred compensation is amortized over the vesting period of the option. (r) Segment Reporting The Company has only one operating business segment, the sale of equipment for satellite and cable communications networks. 3 PUBLIC OFFERING In January 2000, the Board of Directors approved a public offering of 2,760,000 units which became effective on February 11, 2000 upon the approval by the Securities and Exchange Commission of the S-2/A Registration Statement which was filed on February 7, 2000. Each unit offered consisted of one share of the Company's common stock and one warrant to purchase an additional share of common stock. The units were offered at a net price of $6.44 each (after a $0.56 per unit underwriting discount), subject to adjustment in certain circumstances. As a result, we received $17,302,000 in proceeds which were offset by $810,000 in costs associated with the offering. Management anticipates that these proceeds will primarily be used in on-going research and development projects for the purpose of expanding current product lines. Additionally, warrant holders exercised a total of 616,483 warrants to buy shares at $8.75 per share, which generated approximately another $5,255,000 of cash, net. 7 8
4 INVENTORIES JUNE 30, 2000 DECEMBER 31, 1999 Inventories consist of the following: Raw materials and components $7,652,487 $5,550,279 Work in process 4,425,355 3,724,908 Finished goods 1,083,775 863,154 ----------------------------------------------- 13,161,617 10,138,341 Obsolescence reserve (1,676,483) (1,799,229) ----------------------------------------------- Total $11,485,134 $8,339,112 ===============================================
5 PROPERTY AND EQUIPMENT JUNE 30, 2000 DECEMBER 31, 1999 Property and equipment consist of the following: Machinery and equipment $3,918,828 $3,674,803 Furniture and fixtures 2,272,774 2,048,976 Leasehold improvements 445,127 445,127 Computers and software 525,389 462,042 ----------------------------------------------- 7,162,118 6,630,948 Less accumulated depreciation & amortization (3,877,579) (3,035,780) ----------------------------------------------- Total $3,284,539 $3,595,168 ===============================================
6 ACCRUED LIABILITIES JUNE 30, 2000 DECEMBER 31, 1999 Accrued liabilities consist of the following: Wages and related payroll taxes $1,819,713 $788,559 Warranty reserve 983,772 924,928 Other 3,539,543 3,329,904 ----------------------------------------------- Total $6,343,028 $5,043,391 ===============================================
7 NOTES PAYABLE The Company has a $20,500,000 credit agreement with Citibank, N.A. that includes $20,000,000 available under an uncommitted line of credit facility and facilities for bank guarantees and/or standby letters of credit up to $500,000. An affiliate of ST has issued a nonbinding letter of awareness in connection with this credit agreement. Borrowings under the line of credit bear interest at a fluctuating rate equal to LIBOR plus 1% per annum or an alternative Citibank Quoted Rate plus 1% per annum (rates varied from 7.18 % to 7.37% on balances owed at June 30, 2000). The credit agreement requires the Company to maintain certain financial leverage ratios. At June 30, 2000, the Company was in compliance with all such covenants. The availability of additional borrowings under the credit agreement expires September 28, 2000 and is renewable annually at the option of the bank. The Company owed principal of $5,500,000 under the line of credit as of June 30, 2000 and $12,920,000 as of December 31, 1999. 8 9 8 EARNINGS/ PER SHARE A summary of the reconciliation from basic earnings per share to diluted earnings per share follows:
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30 JUNE 30 ------------------------------------------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Net Earnings $ 2,486,325 421,542 3,878,643 104,879 =============================================================== Basic EPS--Weighted Average Shares Outstanding 14,342,733 5,944,574 13,400,527 5,938,303 =============================================================== Basic Earnings Per Share $ 0.17 0.07 0.29 0.02 =============================================================== Basic Weighted Average Shares 14,342,733 5,944,574 13,400,527 5,938,303 Effect of diluted stock options 1,967,632 608,000 1,891,906 612,144 --------------------------------------------------------------- Diluted EPS--Weighted Average Shares Outstanding 16,310,365 6,552,574 15,292,433 6,550,417 =============================================================== Diluted Earnings Per Share $ 0.15 0.06 0.25 0.02 =============================================================== Stock Options not included in Diluted EPS Since Antidilutive -- 634,000 -- 634,500 ===============================================================
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of Part I 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 December 31, 1999 contained in the Company's 1999 Annual Report on Form 10-K. Except for the historical information contained herein, the following discussion contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Radyne ComStream Inc., 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: - loss of, and failure to replace, any significant customers; - timing and success of new product introductions; - product developments, introductions and pricing of competitors; - timing of substantial customer orders; - availability of qualified personnel; - the impact of local political and economic conditions and foreign exchange fluctuations on international sales; - performance of suppliers and subcontractors; - market demand and industry and general economic or business conditions; - availability, cost and terms of capital; 9 10 - Radyne ComStream's level of success in effectuating its strategic plan, including realization of all of the anticipated benefits of the integration of Radyne and the recently acquired ComStream Holdings, Inc.; - other factors to which this report refers or to which the Company's 1999 Annual Report on Form 10-K refers. RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTH PERIOD ENDED JUNE 30, 1999, WERE AS FOLLOWS: Net sales increased 38% to $17,921,000 during the period ended June 30, 2000 from $12,944,000 during the period ended June 30, 1999 as a result of the increased interest our product lines are enjoying in the market place. Our customer base has increased as we have expanded the number of products we produce. Our newest High Speed (Broadband Data, Internet, Video) and Earth Station Terminal (Internet, Telephony) products have enjoyed remarkable acceptance in the market places that they have been introduced and account for the major portion of the increase in sales for the quarter ended June 30, 2000 as compared to the quarter ended June 30, 1999. We expect that this trend will continue as our marketing and business development teams continue to penetrate new markets and gain access to new customers in the markets where we already have a presence. Our legacy products continue to lead the way in terms of total sales and account for the balance of the increase in sales for the quarter. Cost of sales as a percentage of net sales decreased to 53% during the three month period ended June 30, 2000 from 54% during the three month period ended June 30, 1999. This decrease is primarily the result of sales associated with higher margin product during the current quarter compared to the second quarter of 1999. Selling, general and administrative costs increased 30% to $3,571,000 (20% of sales) during the three month period ended June 30, 2000 from $2,748,000 (21% of sales) during the three month period ended June 30, 1999. The increased level of expenses for the period was primarily the result of the increased level of business activity, in addition to higher commissions and executive bonuses. Marketing expenses have remained high, based on the Company's attempts to position itself to compete head-to-head with larger competitors without giving up margin advantages. Research and development expenditures increased 9% to $2,411,000 (13% of sales) during the three month period ended June 30, 2000 from $2,208,000 (17% of sales) during the three month period ended June 30, 1999. These expenditures may fluctuate from period to period depending on the staging of on-going projects. In future periods, we anticipate research and development expenditures will remain high and even increase as we expand current product lines to address new markets and customer requirements. Based on the above, the Company experienced net operating income of $2,405,000 (13% of sales) for the three month period ended June 30, 2000 as compared to $965,000 (7% of sales) for the three month period ended June 30, 1999. This increase is mainly attributed to the increase in sales and product margins, as offset by increased operating expenses, discussed above. Interest expense decreased to $165,000 (1% of sales) in the three month period ended June 30, 2000 from $543,000 (4% of sales) in the three month period ended June 30, 1999 due to a decrease in the Company's debt level. Other income increased to $296,000 in the three month period ended June 30, 2000 from $0 during the three month period ended June 30, 1999 due mainly to interest earned on interest bearing cash accounts. Overall cash levels increased by $19,848,000 from December 31, 1999 to $22,796,000 at June 30, 2000. New-orders-booked (Bookings) increased by 50% to $17,828,000 for the three month period ended June 30, 2000 from $11,860,000 during the three month period ended June 30, 1999. Backlog (the level of unfilled-orders-to-ship) increased 67% to $18,462,000 at June 30, 2000 from $11,036,000 at June 30, 1999. 10 11 RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTH PERIOD ENDED JUNE 30, 1999, WERE AS FOLLOWS: Net sales increased 37% to $34,673,000 during the six month period ended June 30, 2000 from $25,262,000 during the six month period ended June 30, 1999 primarily as a result of the increased interest in our product lines from the market place. Our customer base has increased as we have expanded the number of products we produce. Our newest High Speed (Broadband Data, Internet, Video) and Earth Station Terminal (Internet, Telephony) products have enjoyed remarkable acceptance in the market places that they have been introduced and account for the major portion of the increase in sales for the six month period ended June 30, 1999. We expect that this trend will continue as our marketing and business development teams are successful in penetrating new markets and we continue to gain access to new customers in the markets where we currently compete. Our legacy products continue to lead the way in terms of total sales and account for the balance of the increase in sales for the six month period ended June 30, 1999. Cost of sales as a percentage of net sales decreased to 53% during the six month period ended June 30, 2000 from 55% during the six month period ended June 30, 1999. This decrease is primarily the result of sales associated with higher margin product during the current period compared to the same period in 1999. These costs may fluctuate from period to period depending on the staging of on-going projects, timing of requested delivery dates and the mix of products to be shipped during the period. Selling, general and administrative costs increased 34% to $7,729,000 (22% of sales) during the six month period ended June 30, 2000 from $5,748,000 (23% of sales) during the six month period ended June 30, 1999. The increased level of expenses for the period was primarily the result of the increased level of business activity. Marketing expenses have remained high, based on the Company's attempts to position itself to compete head-to-head with larger competitors without giving up margin advantages. Research and development expenditures increased 2% to $4,585,000 (13% of sales) during the six month period ended June 30, 2000 from $4,516,000 (18% of sales) during the six month period ended June 30, 1999. These expenditures may fluctuate from period to period depending on the staging of on-going projects and customer demand for new product lines. In future periods, we anticipate research and development expenditures to remain high as we plan to expand current product lines and develop new products to meet current market demand and to enter new markets as the opportunities arise. Based on the above, we experienced net operating income of $3,903,000 (11% of sales) for the six month period ended June 30, 2000 as compared to $1,203,000 (5% of sales) for the six month period ended June 30, 1999. This increase is mainly attributed to the increase in sales and product margins, as offset by increased operating expenses, discussed above. Interest expense decreased to $384,000 the six month period ended June 30, 2000 from $1,098,000 during the six month period ended June 30, 1999 due to a decrease in the Company's debt level. Other income increased to $437,000 during the six month period ended June 30, 2000 from $0 during the six month period ended June 30, 1999 due mainly to interest earned on interest bearing cash accounts. Overall cash levels increased by $19,848,000 from December 31, 1999 to $22,796,000 at June 30, 2000. New-orders-booked (Bookings) increased by 49% to $38,073,000 during the six month period ended June 30, 2000 from $25,467,000 during the six month period ended June 30, 1999. Backlog (the level of unfilled-orders-to-ship) increased 67% to $18,462,000 at June 30, 2000 from $11,036,000 at June 30, 1999. LIQUIDITY AND CAPITAL RESOURCES Working capital was $24,784,000 at June 30, 2000, an increase in working capital of $27,039,000 from ($2,255,000) at December 31, 1999. This change is primarily a result of the public offering in February, which 11 12 provided cash of $16,492,000, the exercise of stock options, which provided cash of $839,000, and the exercise of warrants for common stock, which provided another $5,255,000 in cash. Net cash provided by operating activities was $5,340,000 for the six month period ended June 30, 2000, as compared to $3,008,000 used in the six month period ended June 30, 1999. This increase is primarily attributed to an increase in net earnings of $3,774,000 between the two periods and an increase in accrued expenses of $1,293,000, and customer advances of $1,495,000. This increase was partially offset by a large decrease in cash attributed to an increase in inventory of $3,146,000. Cash used in investing activities, consisted of additions to property and equipment of $608,000 during the six month period ended June 30, 2000 as compared to $119,000 during the six month period ended June 30, 1999. Net cash provided by (used in) financing activities increased to $15,116,000 from ($2,000,000) for six periods ended June 30, 2000 and June 30, 1999, respectively. The increase is primarily attributed to the public offering completed in February and subsequent exercise of stock warrants which provided cash of $21,746,944, partially offset by $7,420,000 of payments on notes payable under lines of credit. In addition, the Company received $839,000 in proceeds from the exercise of stock options. As a result of the foregoing, we increased our cash balances by $19,848,000 during the six month period ended June 30, 2000, compared to an increase in cash balances of $889,000 during the six month period ended June 30, 1999. Management believes that its bank credit lines, cash on hand, and cash from operations will be sufficient to fund its planned future operations and capital requirements for continued growth for the next twelve months. ITEM 3- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk on our financial instruments from changes in interest rates. We do not use financial instruments for trading purposes or to manage interest rate risk. Increases in market interest rates would not have a substantial adverse effect on profitability. Our financial instruments consist primarily of short-term variable rate revolving credit lines. Our debt at June 30, 2000 consisted of notes payable under a line of credit agreement. Interest income from cash invested in interest bearing accounts should offset interest expense on borrowings for the remainder of the current fiscal period. PART II - OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of shareholders was held on June 29, 2000. Proxies were solicited and 13,207,686 shares were represented at the meeting. The following matters were voted on at the meeting: 1) The board of directors was elected in its entirety by approximately 99.8% of the shares represented at the meeting. 2) The Company's Long-Term Incentive Plan was approved by 10,553,785 or 79.9% of the shares represented at the meeting. 3) 10,974,945 or 83.1% of the shares represented at the meeting approved the Plan of Reincorporation which changed the Company's state of incorporation from New York to Delaware. ITEM 5 - OTHER INFORMATION - RECENT DEVELOPMENTS Public Offering 12 13 Radyne ComStream Inc. completed a public offering as of February 11, 2000. The Company received $17,302,000 in gross proceeds from the sale of 2,760,000 units each consisting of one common share and one warrant to purchase a common share. In addition, as of June 30, 2000, a total of 616,483 warrants had been exercised for the net exercise price of $5,255,000. Stock The Board of Directors authorized the company to issue two classes of stock to be designated respectively, "Common Stock" and "Preferred Stock". The total number of shares of Common Stock that the company shall have authority to issue is 50,000,000 and the total number of shares of Preferred Stock that the company shall have the authority to issue is 10,000,000 and each of such shares of each class shall have a par value of $.001. ITEM 6- EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT DESCRIPTION ------- ----------- 3.1* Certificate of Incorporation 3.2** Bylaws 27 Financial Data Schedule * Incorporated by reference from exhibit 3.1 to registrant's description of capital stock on form 8-K, as amended and filed on July 13, 2000. ** Incorporated by reference from exhibit 3.2 to registrant's description of capital stock on form 8-K, as amended and filed on July 13, 2000. (b) Registrant filed the following reports on Form 8-K during the period of January 1, 2000 through June 30, 2000: Current Report on Form 8-K dated February 8, 2000, Item 5. Current Report on Form 8-K dated March 3, 2000, Item 5. 13 14 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: AUGUST 1, 2000 RADYNE COMSTREAM INC. By:/S/ ROBERT C. FITTING ------------------------ Robert C. Fitting Chief Executive Officer and President By: /S/ GARRY D. KLINE ---------------------- Garry D. Kline Vice President, Finance (Chief Financial Officer and Accounting Officer) 14 15 EXHIBIT INDEX ------------- 27 Financial Data Schedule EX-27 2 ex27.txt EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FOR THE PERIOD ENDED 6/30/00 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS DEC-31-1999 APR-01-2000 JUN-30-2000 22,796,136 0 9,217,205 (826,746) 11,485,134 43,180,951 7,162,118 (3,877,579) 49,777,310 18,396,842 0 0 0 14,379 30,777,234 47,172,303 34,672,998 34,672,998 18,454,492 18,454,492 12,315,081 0 383,929 3,956,819 78,176 3,878,819 0 0 0 3,878,819 0.29 0.25
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