-----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, Gch4z70xXsdvf3xjoFsse7cvW3YZEuTMEoVOqj7ijzblJQp6wlPf8s7F+682+ouh 5m3YCQaHK+FoD69pAJmV0Q== 0000801448-97-000001.txt : 19970222 0000801448-97-000001.hdr.sgml : 19970222 ACCESSION NUMBER: 0000801448-97-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELCOTEL INC CENTRAL INDEX KEY: 0000801448 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 592518405 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15205 FILM NUMBER: 97529056 BUSINESS ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 BUSINESS PHONE: 8137580389 MAIL ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996. Commission File No. 0-15205 ELCOTEL, INC. (Exact name of registrant as specified in its charter) Delaware 59-2518405 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6428 Parkland Drive, Sarasota, Florida 34243 -------------------------------------------- (Address of principal executive offices) (Zip Code) (941) 758-0389 ------------------------ (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) 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 ----- ----- The number of shares of the issuer's Common Stock outstanding as of February 3, 1997 was 8,167,676. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- ELCOTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)

ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)

ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited)

ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited) (continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ---------------------------------------------- Results of Operations - --------------------- (Dollars in thousands) Quarter ended December 31, 1996, compared to the quarter ended December 31, 1995: Net sales for the quarter ended December 31, 1996 ("third quarter 1997"), increased from $5,069 for the quarter ended December 31, 1995 ("third quarter 1996") to $7,206, an increase of $2,137, or approximately 42%, principally as a result of an increase in sales of complete payphones of approximately 57% and an increase in sales of electronic assemblies of approximately 40%. Unit sales of complete payphones increased by approximately 68% and unit sales of electronic assemblies increased by approximately 14%. Average selling prices of payphones in the quarter were approximately 6% lower than in the same quarter last year due to discounts given to customers for competitive reasons, while average selling prices of electronic assemblies were approximately 23% higher than last year due to fewer trade in credits given to customers who upgraded older electronic assemblies, that they previously purchased from either the Company or other manufacturers, for the Company's current models as compared with the same period last year. Sales to international customers accounted for 42% of net sales for the third quarter 1997 and represented a 443% increase as compared with the third quarter 1996. Cost of sales as a percentage of net sales decreased from 64% for the third quarter 1996 to 60% for the third quarter 1997, principally as a result of higher sales of both complete payphones and electronic assemblies as compared with last year. The Company realizes higher prices but lower margins on sales of complete payphones than on electronic assembly products because the cabinets included with the Company's complete telephones are a significant portion of the total cost of the telephone but are priced only nominally above cost. Research and development costs increased by $105, or approximately 18%, from $587 in the third quarter 1996 to $692 in the third quarter 1997 due to the hiring of additional development staff partially offset by a reduction in the use of outside contractors. Selling, general and administrative expenses decreased by $357, or approximately 20%, from $1,764 in the third quarter 1996 to $1,407 in the third quarter 1997 principally as a result of a reduction in the Company's provision for doubtful accounts due to cash collection or product return of previously reserved amounts as well as improved aging of current accounts during the third quarter 1997, partially offset by an increase in sales commission expenses and international travel expense, as compared with the third quarter 1996. Interest income decreased by $7, or approximately 8%, from $85 in the third quarter 1996 to $78 in the third quarter 1997 due to a decrease in the Company's note receivable portfolio. Interest expense decreased by $28, or approximately 51%, from $55 in the third quarter 1996 to $27 in the third quarter 1997 due to decreased borrowings under the Company's line of credit facility with its bank. 6 Nine months ended December 31, 1996, compared to the nine months ended December 31, 1995: Net sales for the nine months ended December 31, 1996 ("nine-months 1997"), increased from $16,373 for the nine months ended December 31, 1995 ("nine-months 1996") to $18,858, an increase of $2,485, or approximately 15%, principally as a result of an increase in sales of complete payphones of approximately 24% and an increase in sales of electronic assemblies of approximately 10%. Unit sales of complete payphones increased by approximately 34% and unit sales of electronic assemblies increased by approximately 5% during the nine-months 1996. Average selling prices of payphones during the nine-months 1997 were approximately 7% lower than during the nine-months 1996 due to discounts given to customers for competitive reasons, while average selling prices of electronic assemblies were approximately 5% higher than last year due to fewer trade in credits given to customers who upgraded older electronic assemblies, that they previously purchased from either the Company or other manufacturers, for the Company's current models as compared with the same period last year. Sales to international customers accounted for 30% of net sales for the nine-months 1997 and represented a 472% increase as compared with the nine-months 1996. Cost of sales as a percentage of net sales was 60% for the nine-months 1997 which percentage is unchanged as compared to the nine-months 1996. Research and development costs increased by $281, or approximately 17%, from $1,651 in the nine-months 1996 to $1,932 in the nine-months 1997 due to the hiring of additional development staff partially offset by a reduction in the use of outside contractors. Selling, general and administrative expenses decreased by $853, or approximately 17%, from $4,908 in the nine-months 1996 to $4,055 in the nine-months 1997 principally as a result of a reduction in the Company's provision for doubtful accounts due to cash collection or product return of previously reserved amounts as well as improved aging of current accounts during the nine-months 1997, partially offset by an increase in sales commission expense as compared with the nine-months 1996. Interest income decreased by $140, or approximately 37%, from $375 in the nine-months 1996 to $235 in nine-months 1997 due to a decrease in the Company's note receivable portfolio. Interest expense decreased by $49, or approximately 31%, from $157 in the nine-months 1996 to $108 in the nine-months 1997 due to decreased borrowings under the Company's line of credit facility with its bank. 7 Liquidity and Capital Resources - ------------------------------- (Dollars in thousands) The Company's current assets increased by $379, or approximately 4%, from $10,227 at March 31, 1996 to $10,606 at December 31, 1996, predominantly from an increase in accounts receivable of $582 and an increase in cash of $814, partially offset by a reduction in notes receivable of $994. Current liabilities decreased by $471, or approximately 12%, from $3,939 at March 31, 1996 to $3,468 at December 31, 1996 predominantly from a reduction in the current portion of long term debt and a reduction in the amount owed under the Company's line of credit with its bank, partially offset by an increase in accounts payable and accrued expenses. Since August 31, 1995 the Company has had a $2,000 working capital line of credit secured by the Company's accounts receivable, notes receivable and inventories. Interest on amounts borrowed on the line of credit is at the bank's floating 30 day libor rate plus 2.75%. The Company borrows against and repays the line of credit throughout the year depending upon its working capital needs and cash generated from operations, with the outstanding amount under the line of credit during fiscal 1997 ranging from zero to $1,270. The line of credit was renewed effective August 28, 1996 and the Company believes its lender will renew the line of credit when it matures on August 31, 1997. In addition, on August 31, 1995, the Company borrowed $1,000 from the same lender for an eighteen month term with interest at the bank's floating 30 day libor rate plus 2.75%. The Company also refinanced its mortgage note with its lender on the same date without changing the maturity date of May 23, 1999, but lowering its interest rate to a fixed rate of 8.50% from the floating rate of 9.25% as of the closing date, for the remainder of the original five year term. The Company believes that its anticipated cash flow from operations will be sufficient to fund its working capital needs, its capital expenditures and its short and long term note obligations through December 31, 1997. CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in this Quarterly Report on Form 10-Q which are not historical facts contain forward looking information with respect to plans, projections or future performance of the Company, the occurrence of which involve certain risks and uncertainties that could cause the Company's actual results to differ materially from those expected by the Company, including the risk of adverse regulatory action affecting the Company's business or the business of the Company's customers, competition, the risk of obsolescence of its products, the ultimate outcome of the class action lawsuit, and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. 8 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- In re ACI-HDT Supply Company, debtor and related cases. Nogah Bethlahmy, et al., plaintiffs v. Randy S. Kuhlmann, et al., defendants. Adversary Proceeding No. 95-90809 in the United States Bankruptcy Court, Southern District of California. As previously reported, this putative class action was filed in the Superior Court of the State of California for the County of San Diego ("State Court") alleging that Amtel conspired with its own officers and professionals, and with various telephone suppliers (including the Company) to defraud investors in Amtel by operating a Ponzi scheme. See Item 3, Legal Proceedings of Part I of the Company's Form 10-KSB for the fiscal year ended March 31, 1996, and Item I, Legal Proceedings of Part II of the Company's Form 10-Q for the fiscal quarter ended September 30, 1996. On January 24, 1997, the Bankruptcy Appellate Panel ruled that this litigation should be remanded to State Court, and it is expected that the case will shortly be returned to State Court. Thereafter, the Company will be required to answer the second amended complaint and the plaintiffs' motion for class certification and authorization of contingent fee arrangement, presently pending in Bankruptcy Court, will be rescheduled for hearing in State Court. Discovery in the litigation is continuing. Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------- On October 15, 1996, the Company held its Annual Meeting of Shareholders (the "Meeting"). The matters voted upon at the Meeting were the election of directors, a proposal to amend the 1991 Stock Option Plan and ratification of the appointment of Deloitte & Touche LLP as the Company's independent accountants for the fiscal year ending March 31, 1997. At the Meeting, the Shareholders were asked to elect seven directors with each director to serve until the next annual meeting of shareholders or until the election and qualification of a respective successor. All of the nominees for director recommended by the Board of Directors were elected and the results of the voting were as follows: Votes Name Votes For Against Abstentions ----------------- --------- -------- ----------- Tracey L. Gray 7,655,300 56,316 0 C. Shelton James 7,656,200 55,416 0 Dwight Jasmann 7,655,800 55,816 0 Charles H. Moore 7,656,200 55,416 0 Thomas E. Patton 7,655,800 55,816 0 T. Raymond Suplee 7,656,200 55,416 0 Thomas R. Wiltse 7,656,200 55,416 0 9 At the Meeting, the shareholders were asked to act upon a proposal to amend the 1991 Stock Option Plan to, among other things, increase the number of shares by 500,000. The outcome of the voting was: 4,392,959 For; 321,881 Against; 20,861 Abstentions; and 2,975,915 broker non-votes. At the Meeting, the shareholders ratified the appointment of Deloitte & Touche LLP as the Company's independent public accountants for the fiscal year ending March 31, 1997, and the outcome of the voting was: 7,690,026 For; 13,175 Against; and 8,415 Abstentions. There were no broker non-votes in connection with any of the matters other than for the amendment to the 1991 Stock Option Plan. 9 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: None 10 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. Elcotel, Inc. ---------------------- (Registrant) Date: February 13, 1997 By: /s/ Ronald M. Tobin ---------------------- Ronald M. Tobin Vice President (Principal Financial Officer and Chief Accounting Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE FOR 10Q-12/31/96
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAR-31-1997 APR-01-1996 DEC-31-1996 1,046 0 4,769 0 3,205 10,606 3,140 0 15,544 3,468 0 0 0 82 10,884 15,544 18,858 18,858 11,350 11,350 5,987 0 0 1,648 577 1,071 0 0 0 1,071 .13 .13

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