-----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, Sq9VIxziNtItJrL49A1ipW2GPWEYMNUsa2SV8qX8zEyg72pN0G2+1wkWLFl4KOSp m3mELr4D0u0BChbKFoXHnQ== 0000801448-96-000004.txt : 19960816 0000801448-96-000004.hdr.sgml : 19960816 ACCESSION NUMBER: 0000801448-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96613742 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 U.S. 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 JUNE 30, 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 past 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 August 9, 1996 was 8,073,807. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- ELCOTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, March 31, 1996 1996 ----------- ----------- (Unaudited) (See Note) ASSETS CURRENT ASSETS Cash and temporary investments $139 $232 Accounts receivable, net 2,507 2,943 Notes receivable, net 2,478 2,238 Inventories 2,903 2,800 Refundable income taxes 403 507 Deferred tax asset 1,332 1,332 Prepaid expenses and other current as 192 175 ------- ------- TOTAL CURRENT ASSETS 9,954 10,227 Property, plant and equipment, net 3,049 3,103 Notes receivable, noncurrent 952 646 Deferred tax asset 782 782 Other assets 362 171 ------- ------- $15,099 $14,929 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $2,187 $2,164 Line of credit 1,090 965 Current portion of long-term debt 644 810 ------- ------- TOTAL CURRENT LIABILITIES 3,921 3,939 ------- ------- LONG TERM DEBT, less current portion 382 432 ------- ------- SHAREHOLDERS' EQUITY: Common Stock 81 81 Additional paid-in capital 10,761 10,720 Retained earnings/(deficit) 131 (66) Less treasury stock (177) (177) ------- ------- 10,796 10,558 ------- ------- $15,099 $14,929 ======= ======= Note: The balance sheet at March 31, 1996, has been derived from the audited financial statements. 1 See Notes to Condensed Consolidated Financial Statements
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)
Three Months Ended June 30, ----------------------- 1996 1995 ------ ------ NET SALES $5,551 $5,820 ------ ------ COSTS AND EXPENSES: Cost of sales 3,254 3,322 Research and development 545 521 Selling, general and administrative 1,377 1,547 Other Charges (see Note D) 103 - ------ ------ TOTAL COSTS AND EXPENSES 5,279 5,390 ------ ------ PROFIT FROM OPERATIONS 272 430 INTEREST INCOME, net 30 145 ------ ------ PROFIT BEFORE INCOME TAXES 302 575 INCOME TAX PROVISION 105 202 ------ ------ NET PROFIT $197 $373 ====== ====== NET PROFIT PER COMMON AND COMMON EQUIVALENT SHARE $0.02 $0.05 ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,279 8,212 ====== ====== 2 See Notes to Condensed Consolidated Financial Statements
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited)
Three Months Ended June 30, 1996 1995 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net profit $197 $373 Adjustments to reconcile net profit to net cash provided from operations: Depreciation and amortization 89 82 Provision for doubtful accounts (30) (9) Change in operating assets and liabilities: Accounts receivable 466 (1,038) Notes receivable (547) 535 Inventories (103) (87) Prepaid expenses and other current assets 184 74 Accounts payable and accrued expenses (72) 137 Other, net (192) 7 ------ ------ Net cash flow (used in)/provided from operations (8) 74 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (35) (113) ------ ------ Net cash flow used in investing activities (35) (113) ------ ------ 3
ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited) (continued)
Three Months Ended June 30, 1996 1995 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments)/proceeds related to short-term borrowings 125 (327) Payments on long-term debt (216) (72) Issuance of common stock 41 74 ------ ------ Net cash flow used in financing activities (50) (325) ------ ------ Net decrease in cash and temporary investments (93) (364) Cash and temporary investments at beginning of year 232 366 ------ ------ Cash and temporary investments at end of quarter $139 $2 ====== ====== ADDITIONAL CASH FLOW INFORMATION: Cash Paid During the period for: Interest $49 $56 Income taxes - - 4 See Notes to Condensed Consolidated Financial Statements
ELCOTEL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except for share amounts) (Unaudited) NOTE A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: The condensed consolidated balance sheet as of June 30, 1996, and the consolidated statements of operations for the three month periods ended June 30, 1996 and 1995, and the consolidated statements of cash flows for the three month periods ended June 30, 1996 and 1995, have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 1996, and for all periods presented, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-KSB for the fiscal year ended March 31, 1996. The results of operations for the three month period ended June 30, 1996, are not necessarily indicative of the results for the full fiscal year. NOTE B. INVENTORIES: Inventories by stage of completion are as follows: June 30, March 31, 1996 1996 -------- -------- Finished products $ 557 $ 470 Work-in-process 260 240 Purchased components 2,086 2,089 ------ ------ $2,903 $2,800 ====== ====== NOTE C. SHAREHOLDERS' EQUITY: During the three month period ended June 30, 1996, shareholders' equity increased as a result of a net profit of $197, and employee and director exercises of stock options at prices between $.75 per share and $3.50 per share for a total of $41. 5 NOTE D. OTHER CHARGES: During the three month period ended June 30, 1996, the Company incurred continuing expenses for legal fees pertaining to the Amtel bankruptcy filing in the amount of $103. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a further description of this matter. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ---------------------------------------------- Results of Operations - --------------------- (Dollars in thousands) Quarter ended June 30, 1996, compared to the quarter ended June 30, 1995: Net sales for the quarter ended June 30, 1996 ("first quarter 1997"), decreased to $5,820 from $5,551 for the quarter ended June 30, 1995 ("first quarter 1996"), a decrease of $269, or approximately 5%, principally as a result of a decrease in sales of complete payphones of approximately 7% offset by an increase in sales of electronic assemblies of approximately 11%. Unit sales of complete payphones increased by approximately 3% and unit sales of electronic assemblies increased by approximately 4%. Average selling prices of payphones in the quarter were approximately 10% 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 7% higher than last year due to the phase out of credits given to customers under its trade in program. The trade in program, which initially began in conjunction with the North American Numbering Plan ("NANP"), was continued for competitive reasons to permit customers to receive a credit for upgrading older electronic assemblies, that either they previously purchased from the Company or other manufacturers, for the Company's current models. Cost of sales as a percentage of net sales were slightly higher than last year due to product mix and the sale of more payphones at lower prices than last year. Research and development costs increased by $24, or approximately 5%, from $521 in the first quarter 1996 to $545 in the first quarter 1997 due to the hiring of additional development staff offset by a reduction in the use of outside contractors. Selling, general and administrative expenses decreased by $170, or approximately 11%, from $1,547 in the first quarter 1996 to $1,377 in the first quarter 1997 principally as a result of reduced sales commissions related to the Company's lower sales level compared to the prior year, a reduction in the Company's provision for doubtful accounts due to the lower sales level as well as a reduction in accounts receivable during the first quarter 1997, and a one-time expense in connection with the Company's listing on the NASDAQ National Market System during the first quarter 1996. Interest income decreased by $112, or approximately 61%, from $185 in first quarter 1996 to $73 in first quarter 1997 due to a decrease in the Company's note receivable portfolio. Interest expense increased by $3, or approximately 8%, from $40 in first quarter 1996 to $43 in first quarter 1997 due to increased borrowings against the Company's line of credit facility with its bank. During fiscal 1996, one of the Company's customers, to whom the Company had sold approximately 3,500 payphones during fiscal 1995, filed for protection under Chapter 11 of the Bankruptcy Code. On the date of the bankruptcy filing, the Company was owed approximately $3,200. In July 1996, the Company and the debtor reached an agreement in principle with respect to the treatment of the Company's claims under the debtors' plan of reorganization. See "Legal Proceedings." The agreement in principle resulted in an allowance of approximately $1,602 against the Company's receivable from the debtor. 7 In addition, the Company had incurred approximately $242 in legal and related expenses in connection with its claim against the debtor. The total charge to the Company's consolidated financial statements for the fiscal year ended March 31, 1996, relating to this matter was $1,844. Continuing expenses for legal fees pertaining to this matter during the first quarter 1997 are $103 and are shown as "Other Charges" on the Consolidated Statements of Operations. Liquidity and Capital Resources - ------------------------------- (Dollars in thousands) The Company incurred a decrease in current assets of $273, or approximately 3%, from $10,227 at March 31, 1996 to $9,954 at June 30, 1996, predominantly from a decrease in accounts receivable of $436, partially offset by an increase of $240 in notes receivable. Current liabilities decreased by $18, or approximately 1%, from $3,939 at March 31, 1996 to $3,921 at June 30, 1996 predominantly from a reduction in the current portion of long term debt offset by an increase in the amount owed under the Company's line of credit with its lender. 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 $425 to $1,175. The Company believes its lender will renew the line of credit when it matures on August 31, 1996. 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 June 30, 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 Amtel bankruptcy proceeding, and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. 8 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- As previously reported, on August 3, 1995, one of the Company's customers, Amtel Communications, Inc. and four related entities ("Amtel"), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, which were administratively consolidated under the case name of In re ACI-HDT Supply Company, United States Bankruptcy Court for the Southern District of California, Administratively Consolidated Case No. 95-08253-A11. In late 1994 and early 1995, the Company had sold Amtel on credit approximately 3,500 payphones and related equipment. To secure Amtel's obligations to pay the Company for the payphones and related equipment pursuant to five promissory notes, Amtel granted the Company a security interest in payphones sold to Amtel and collateral assignments of agreements between Amtel and the owners of certain sites where those payphones had been or were to be installed. On the date of the bankruptcy filing, the Company was owed approximately $3,200,000 by Amtel. The Company has reached an agreement in principle with Amtel with respect to the treatment of the Company's claims in the bankruptcy case. That agreement in principle provides that the Company would receive in satisfaction of all claims by the Company against Amtel and by Amtel against the Company $1.7 million in cash plus all of the payphones (approximately 1,350) and related equipment currently in the Company's possession and being warehoused by the Company pursuant to a prior Bankruptcy Court order. There can be no assurance that this agreement in principle with respect to the treatment of the Company's claims will be implemented. This settlement between the Company and Amtel is subject to the approval of the Bankruptcy Court. Bankruptcy Court approval of such settlement is expected to be sought in advance of and independent of any plan of reorganization. Amtel is in the process of preparing an amended disclosure statement that accurately reflects the terms of its agreement in principle with the Company. Since the reorganization plan involving Pacific Coin has been abandoned, the only reorganization plan presently proposed involves PhoneTel's purchase of Amtel's pay phone assets and business for approximately $13 million, payable $7 million in cash and $6 million in publicly tradeable shares of PhoneTel stock. Amtel has filed a motion to sell, outside of a plan of reorganization, substantially all of Amtel's payphone assets to PhoneTel. In order to protect the Company's security interest in the payphones to be sold to PhoneTel, the Company intends to conditionally oppose that sale motion until the Bankruptcy Court approves the settlement between the Company and Amtel (or the Company's liens on the payphones are transferred to the cash portion of the sale proceeds.) A hearing on the motion to sell those assets is scheduled for August 29, 1996. 9 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. The Company has offered to settle this class action case by taking $300,000 of the $1.7 million to be received by the Company in connection with the settlement of its claims in the Amtel bankruptcy case and depositing that amount in an interest bearing account. That account would be available for the benefit of the Amtel lessor/investors who, as a class, vote by at least 80 percent in amount of outstanding interests to accept such $300,000 payment in full and complete satisfaction of any claims they may have against the Company, including those asserted in the class action. If less than 80 percent of the Amtel lessor/investors vote as a class to give the Company full and complete releases in exchange for the $300,000 plus accrued interest, the Company may elect either (i) to proceed with the settlement with those who have elected to accept the settlement or (ii) to receive immediately free of any claims the $300,000 plus accrued interest thereon. Those members of the class who do not settle with the Company can proceed against the Company in the class action. 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: August 14, 1996 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-6/30/96
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 139 0 4,985 0 2,903 9,954 3,049 0 15,099 3,921 0 0 0 81 10,715 15,099 5,551 5,551 3,254 3,254 2,025 0 43 302 105 197 0 0 0 197 .02 .02
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