-----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, LYPVIpzd4QfTambbfjwAIyX8aM4B2w8jy8vKVgFvj1Bfe10pfVM+GLw5oNZV0aTC RoFotH80bV7ybH6F7joBkw== 0000892569-97-002249.txt : 19970815 0000892569-97-002249.hdr.sgml : 19970815 ACCESSION NUMBER: 0000892569-97-002249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STM WIRELESS INC CENTRAL INDEX KEY: 0000765414 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 953758983 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19923 FILM NUMBER: 97659969 BUSINESS ADDRESS: STREET 1: ONE MAUCHLY CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 7147537864 MAIL ADDRESS: STREET 2: ONE MAUCHLY CITY: IRVINE STATE: CA ZIP: 92718-2305 FORMER COMPANY: FORMER CONFORMED NAME: SATELLITE TECHNOLOGY MANAGEMENT INC DATE OF NAME CHANGE: 19950518 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark one) [X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Period Ended June 30, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File No. 0-19923 STM WIRELESS, INC. (Exact name of Registrant as specified in its charter) Delaware 95-3758983 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification number) One Mauchly Irvine, California 92618 (Address of principal executive offices) (Zip code) (714) 753-7864 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the last 90 days. Yes [X] No [ ] As of August 12, 1997, there were 5,899,208 shares of Common Stock, $0.001 par value, outstanding. Page 1 of 12 2 STM WIRELESS, INC. INDEX
PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Consolidated Balance Sheets at June 30, 1997 and December 31, 1996 3 Consolidated Statements of Operations for the three and six month periods ended June 30, 1997 and June 30, 1996 4 Consolidated Statements of Cash Flows for the six month periods ended June 30, 1997 and June 30, 1996 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8-10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11
2 3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS STM WIRELESS, INC CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) ASSETS
June 30, December 31, 1997 1996 ------------ ------------ (unaudited) Current assets: Cash and cash equivalents $ 5,555 $ 9,148 Short-term investments 4,509 4,509 Accounts receivable, net 7,597 11,957 Inventories, net 12,510 9,199 Current portion of long-term receivables 536 536 Deferred income taxes 2,826 2,826 ------------ ------------ Total current assets 33,533 38,175 Property & equipment, net 8,408 8,450 Long-term receivables 1,730 1,991 Other assets 1,357 1,188 ------------ ------------ $ 45,028 $ 49,804 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 1,600 $ 6,400 Current portion of long-term debt 168 233 Accounts payable 7,092 8,137 Accrued liabilities 1,500 1,785 Customer deposits 188 -- Income taxes payable 587 457 ------------ ------------ Total current liabilities 11,135 17,012 Long-term debt 4,561 4,601 Minority Interest 314 385 Stockholders' equity: Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued or outstanding -- -- Common stock, $0.001 par value; 20,000,000 shares authorized; issued and outstanding 5,893,875 shares at June 30, 1997 and 5,849,160 shares at December 31, 1996 32,440 32,164 Accumulated deficit (3,422) (4,358) ------------ ------------ Total stockholders' equity 29,018 27,806 ------------ ------------ $ 45,028 $ 49,804 ============ ============
See accompanying notes to consolidated financial statements. 3 4 STM WIRELESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
For the three months For the six months ended June 30, ended June 30, ----------------------- ----------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Revenues Products 14,044 $ 9,079 $ 20,919 $ 15,617 Services 304 757 921 1,686 -------- -------- -------- -------- Total revenues 14,348 9,836 21,840 17,303 Cost of revenues Products 9,879 5,928 14,366 9,886 Services 279 388 616 652 -------- -------- -------- -------- Total cost of revenues 10,158 6,316 14,982 10,538 Gross profit 4,190 3,520 6,858 6,765 Operating costs Selling, general & administrative expenses 1,900 1,402 3,073 2,873 Research & development 1,482 1,377 2,782 2,966 -------- -------- -------- -------- Total operating costs 3,382 2,779 5,855 5,839 Operating income 808 741 1,003 926 Other income 49 (72) 66 (72) Interest income 175 177 325 558 Interest expense (249) (188) (390) (332) -------- -------- -------- -------- Income from continuing operations, before minority interest and income taxes 783 658 1,004 1,080 Income tax expense (108) (221) (140) (372) -------- -------- -------- -------- Incomefrom continuing operations before minority interest 675 437 864 708 Minority interest in net loss of consolidated subsidiary 45 32 72 81 -------- -------- -------- -------- Income from continuing operations 720 469 936 789 Income from and gain on sale of discontinued operations -- -- -- 84 -------- -------- -------- -------- Net income $ 720 $ 469 $ 936 $ 873 ======== ======== ======== ======== Net income per share: Continuing operations $ 0.12 $ 0.08 $ 0.16 $ 0.13 Discontinued operations -- -- -- $ 0.02 -------- -------- -------- -------- Total net income per share: $ 0.12 $ 0.08 $ 0.16 $ 0.15 ======== ======== ======== ======== Weighted average shares outstanding 5,983 5,998 5,981 5,998 ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 4 5 STM WIRELESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
For the six months ended June 30, --------------------- 1997 1996 ------- ------- Net cash provided by (used in) operating activities $ 1,356 $(2,464) ------- ------- Cash flows provided by (used in) investing activities: Net decrease in short-term investments -- 400 Acquisition of property, plant and equipment (581) (393) ------- ------- Net cash provided by (used by) investing activities (581) 7 ------- ------- Cash flows from financing activities: Net (increase) decrease in long-term receivables 291 (782) Proceeds from issuance of common stock 276 75 (Repayments to) borrowings from banks (4,800) 3,500 Repayments of long-term debt (105) (52) ------- ------- Net cash (used in) provided by financing activities (4,368) 2,684 ------- ------- Net increase (decrease) in cash and cash equivalents (3,593) 284 Cash and cash equivalents at beginning of period 9,148 4,145 ------- ------- Cash and cash equivalents at end of period $ 5,555 $ 4,429 ======= =======
See accompanying notes to consolidated financial statements. 5 6 STM WIRELESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended June 30, 1997 and 1996 (Unaudited) 1. BASIS OF PRESENTATION These financial statements are unaudited; however, the information contained herein for STM Wireless, Inc. (the "Company", or "STM") gives effect to all adjustments (which are normal recurring accruals) necessary, in the opinion of Company management, to present fairly the financial statements for the interim periods presented. The results of operations for the current interim period are not necessarily indicative of the results to be expected for the current year. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, 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 the rules and regulations of the Securities and Exchange Commission (the "SEC"), and these financial statements should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, which is on file with the SEC. 2. DISCONTINUED OPERATIONS Effective March 31, 1996 the Company sold its RF Microsystems subsidiary to Remec, Inc. for cash in the amount of $2,926,000. The gain on the sale has been accounted for as discontinued operations and prior period financial statements have been restated to reflect discontinuance of this segment of the business. A summary of operating results for discontinued operations is shown below:
For the three months For the six months ended June 30, June 30, ------------------------------------ ----------------------------------- 1997 1996 1997 1996 ----------------- ----------------- ----------------- ----------------- Net revenues $ - $ - $ - $ 1,216,000 ================= ================= ================= ================= Net income from and gain on sale of discontinued operations, net of income taxes $ - $ - $ - $ 84,000 ================= ================= ================= =================
6 7 3. INVENTORIES Inventories are summarized as follows:
June 30, December 31, 1997 1996 ------------------- ------------------- Raw materials $ 7,486 $ 5,512 Work in process 1,504 1,662 Finished goods 3,520 2.025 =================== =================== $ 12,510 $ 9,199 =================== ===================
4. INCOME PER COMMON AND COMMON EQUIVALENT SHARE Income per share of common stock is computed using the weighted average number of common and common equivalent shares of stock outstanding during the period. Common stock equivalents consist of dilutive outstanding stock options and warrants and are calculated using the treasury stock method. Primary earnings per share approximates fully diluted earnings per share for all periods presented. In February 1997, the Financial Standards Board issued SFAS no. 128, "Earnings Per Share". SFAS No. 128 specifies new standards designed to improve the earnings per share ("EPS") information provided in financial statements by simplifying the existing computational guidelines, revising the disclosure requirements and increasing the comparability of EPS data on an international basis. Some of the changes made to simplify the EPS computations include: (a) eliminating the presentation of primary EPS and replacing it with basic EPS, with the principal difference being that common stock equivalents are not considered in computing basic EPS, (b) eliminating the modified treasury stock method and the three percent materiality provision and (c) revising the contingent share provision and the supplemental EPS data requirements. SFAS No. 128 also makes a number of changes to existing disclosure requirements. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The Company has not determined the impact of the implementation of SFAS No. 128. 5. RECLASSIFICATIONS Certain reclassifications have been made to the 1996 consolidated financial statements to conform to the 1997 presentation. 7 8 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION General STM Wireless, Inc. (the "Company" or "STM"), founded in 1982, is a manufacturer of satellite communications products including VSATs (very small aperture terminals), hubs/gateways, multiplexers, modems and other networking equipment. The Company's products are designed to support data, fax, voice and video networks requiring cost-effective connections between geographically dispersed locations. The Company's proprietary equipment and software are utilized by businesses, government agencies and telephone companies in Europe, the Americas, Africa and Asia. The Company also operates and sells services to customers on networks it owns. Effective March 31, 1996 , the Company sold all the outstanding common stock of RF Microsystems, Inc., its wholly owned subsidiary, for $2,926,000 cash to Remec, Inc. Results of Operations RESULTS OF CONTINUING OPERATIONS Combined product and service revenues were $14,348,000 and $21,840,000, respectively, for the three and six-month periods ended June 30, 1997, compared to $9,836,000 and $17,303,000, respectively, for the corresponding periods of 1996, representing increases of 46% and 26%, respectively, over the prior year periods. Product revenues were $14,044,000 and $20,919,000, respectively, for the three and six-month periods ended June 30, 1997, compared to $9,079,000 and $15,617,000, respectively, for the corresponding periods in 1996, representing increases of 55% and 34%, respectively, over the prior year periods. The product revenue increases were primarily due to shipments related to a major contract for a rural telephony network in Southeast Asia. Service revenues were $304,000 and $921,000, respectively, for the three and six-month periods ended June 30, 1997, compared to $757,000 and $1,686,000, respectively, for the corresponding periods in 1996, representing decreases of 60% and 45%, respectively, from the prior year periods. A large component of service revenues is program management which is subject to variations depending upon the makeup of particular contracts. The contract for rural telephony network in Southeast Asia has no service content, hence the decrease in service revenues. Combined product and service gross profit margins in the three and six-month periods ended June 30, 1997, were 29% and 31%, respectively, compared to 36% and 39%, respectively, for the comparable periods in 1996. Product gross profit margins in the three and six-month periods ended June 30, 1997, were 30% and 31%, respectively, compared to 35% and 37%, respectively, for the comparable periods in 1996. The 8 9 reduction in gross profit margins was in line with Company expectations and was primarily due to relatively lower gross margins earned on the large rural telephony contract in Southeast Asia. Service gross profit margins in the three and six-month periods ended June 30, 1997, were 8% and 33%, respectively, compared to 49% and 61%, respectively, for the comparable periods in 1996. The reduction in service gross margins was due to the lower level of service revenues and the relatively fixed level of expenses. Selling, general, and administrative expenses for the three-month period ended June 30, 1997, increased to $1,900,000 from $1,402,000, but decreased as a percentage of revenue from 14% to 13%. For the six months ended June 30, 1997, such expenses increased to $3,073,000 from $2,873,000, but decreased as a percentage of revenue from 17% to 14%. The dollar increases in expenditures in both periods in 1997 were the result of increases in expenses to support the Company's growth in core product revenues. Research and development expenses for the three-month period ended June 30, 1997, increased to $1,482,000, or 10% of revenues, from $1,377,000, or 14% of revenues, in the corresponding period of 1996. For the six-month period ended June 30, 1997, such expenses decreased to $2,782,000, or 13% of revenues, from $2,966,000, or 17% of revenues, in the corresponding period in 1996. Interest income decreased by $2,000 to $175,000 for the three-month period ended June 30, 1997. Interest income decreased by $233,000 to $325,000 for the six-month period ended June 30, 1997, over the six-month period ended June 30, 1996. The decrease in interest income for the six-month period was primarily the result of the recognition of less interest related to a long-term financing lease in Brazil. Interest expense increased by $61,000 to $249,000 for the three-month period ended June 30, 1997, over the three-month period ended June 30, 1996. Interest expense increased by $58,000 to $390,000 for the six-month period ended June 30, 1997, over the six-month period ended June 30, 1996. The increases were primarily due to interest expense incurred as a result of discounting customer letters of credit. DISCONTINUED OPERATIONS Effective March 31, 1996 , the Company sold all the outstanding common stock of RF Microsystems, Inc., its wholly owned subsidiary, for $2,926,000 cash to Remec, Inc.. A summary of operating results for discontinued operations is shown below:
For the three months For the six months ended June 30, June 30, ------------------------------------ ----------------------------------- 1997 1996 1997 1996 ----------------- ----------------- ----------------- ----------------- Net revenues $ - $ - $ - $ 1,216,000 ================= ================= ================= ================= Net income from and gain on sale of discontinued operations, net of income taxes $ - $ - $ - $ 84,000 ================= ================= ================= =================
9 10 Liquidity and Capital Resources For the first six months of 1997, the Company had positive cash flows from operations of $1,356,000, compared to negative cash flows of $2,464,000 in the same period of 1996. The increase in cash flows was primarily due to net income and a reduction in accounts receivable, partially offset by increased investments in inventories and decreases in accounts payable and accrued liabilities. Cash used in acquisition of fixed assets in the first six months of 1997 totaled $581,000. Cash used in financing activities during the first six months of 1997 totaled $4,368,000. A reduction in short-term borrowings used $4,800,000 and repayment of long-term debt used $105,000. A decrease in long-term receivables provided $291,000 and proceeds from issuance of common stock related to the exercise of stock options totaled $276,000. Overall, the Company's cash, cash equivalents, and short-term investments totaled $10,064,000 at June 30, 1997, as compared to $13,657,000 at December 31, 1996. The Company believes it has adequate capital resources to meet its current working capital requirements and capital expenditure commitments for at least the next 12 months, including the expansion of its international marketing and sales efforts, and the purchase of additional capital equipment for manufacturing and research and development. Risk Factors and Forward Looking Statements THIS REPORT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE RISKS AND UNCERTAINTIES. IN ADDITION, THE COMPANY MAY FROM TIME TO TIME MAKE ORAL FORWARD LOOKING STATEMENTS. ACTUAL RESULTS ARE UNCERTAIN AND MAY BE IMPACTED BY THE FACTORS DISCUSSED IN MORE DETAIL IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDIED DECEMBER 31, 1996. IN PARTICULAR, CERTAIN RISKS AND UNCERTAINTIES THAT MAY IMPACT THE ACCURACY OF THE FORWARD LOOKING STATEMENTS WITH RESPECT TO REVENUES, EXPENSES AND OPERATING RESULTS INCLUDE WITHOUT LIMITATION, LONG TERM CYCLES INVOLVED IN COMPLETING MAJOR CONTRACTS, PARTICULARLY IN FOREIGN MARKETS, INCREASING COMPETITIVE PRESSURES, GENERAL ECONOMIC CONDITIONS, TECHNOLOGICAL ADVANCES, THE TIMING OF NEW PRODUCT INTRODUCTIONS, POLITICAL AND ECONOMIC RISKS INVOLVED IN FOREIGN MARKETS AND FOREIGN CURRENCIES AND THE TIMING OF OPERATING AND OTHER EXPENDITURES. AS A RESULT, THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD LOOKING STATEMENTS. BECAUSE OF THESE AND OTHER FACTORS THAT MAY AFFECT THE COMPANY'S OPERATING RESULTS, PAST FINANCIAL PERFORMANCE SHOULD NOT BE CONSIDERED AN INDICATOR OF FUTURE PERFORMANCE, AND INVESTORS SHOULD NOT USE HISTORICAL TRENDS TO ANTICIPATE RESULTS OR TRENDS IN FUTURE PERIODS. 10 11 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 None 11 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STM Wireless, Inc. Date: August 12, 1997 By: /s/ JOSEPH WALLACE -------------- Joseph Wallace Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer) 12 13 INDEX TO EXHIBITS
Exhibit Number Exhibits - -------- -------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE PERIOD ENDED 6-30-97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 5,555 4,509 8,230 633 12,510 33,533 12,925 4,517 45,028 11,135 4,561 0 0 32,440 (3,422) 45,028 14,044 14,572 9,879 10,158 3,382 0 249 783 108 720 0 0 0 720 0.12 0.12
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