-----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, SThHFfS83/6evK1HLC2aGSi6byIos064YVyxSt+p6FCZLYY6MlpjZoV34Mpr+CE5 JMztFRsLfhevlV68L7rbzQ== 0000801448-97-000007.txt : 19970814 0000801448-97-000007.hdr.sgml : 19970814 ACCESSION NUMBER: 0000801448-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97659450 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, 1997. 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 12, 1997 was 8,182,216. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- ELCOTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, March 31, 1997 1997 ----------- ----------- (Unaudited) (See Note) ASSETS CURRENT ASSETS Cash and temporary investments $1 $1,009 Accounts receivable, net 4,824 4,678 Notes receivable, net 2,423 1,318 Inventories 3,561 2,733 Refundable income taxes 95 95 Deferred tax asset 692 692 Prepaid expenses and other current as 499 457 ------- ------- TOTAL CURRENT ASSETS 12,145 10,982 Property, plant and equipment, net 3,287 3,184 Notes receivable, noncurrent 692 711 Deferred tax asset 799 799 Other assets 281 268 ------- ------- $17,204 $15,944 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $3,295 $2,886 Line of credit 525 - Current portion of long-term debt 199 199 ------- ------- TOTAL CURRENT LIABILITIES 4,019 3,085 ------- ------- LONG TERM DEBT, less current portion 183 232 ------- ------- SHAREHOLDERS' EQUITY: Common Stock 82 82 Additional paid-in capital 11,160 11,160 Retained earnings 1,937 1,562 Less treasury stock (177) (177) ------- ------- 13,002 12,627 ------- ------- $17,204 $15,944 ======= ======= Note: The balance sheet at March 31, 1997, has been derived from the audited financial statements. See Notes to Condensed Consolidated Financial Statements
1 ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)
Three Months Ended June 30, ----------------------- 1997 1996 ------ ------ NET SALES $6,753 $5,551 ------ ------ COSTS AND EXPENSES: Cost of sales 3,838 3,254 Research and development 708 545 Selling, general and administrative 1,695 1,480 ------ ------ TOTAL COSTS AND EXPENSES 6,241 5,279 ------ ------ PROFIT FROM OPERATIONS 512 272 INTEREST INCOME, net 63 30 ------ ------ PROFIT BEFORE INCOME TAXES 575 302 INCOME TAX PROVISION 200 105 ------ ------ NET PROFIT $375 $197 ====== ====== NET PROFIT PER COMMON AND COMMON EQUIVALENT SHARE $0.05 $0.02 ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,301 8,279 ====== ====== See Notes to Condensed Consolidated Financial Statements
2 ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited)
Three Months Ended June 30, 1997 1996 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net profit $375 $197 Adjustments to reconcile net profit to net cash provided from operations: Depreciation and amortization 105 89 Provision for doubtful accounts (15) (30) Change in operating assets and liabilities: Accounts receivable (131) 466 Notes receivable (1,136) (547) Inventories (828) (103) Prepaid expenses and other current assets (42) 184 Accounts payable and accrued expenses 409 (72) Other, net (13) (192) ------ ------ Net cash flow used in operations (1,276) (8) ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (208) (35) ------ ------ Net cash flow used in investing activities (208) (35) ------ ------
3 ELCOTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (Unaudited) (continued)
Three Months Ended June 30, 1997 1996 ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds related to short-term borrowings 525 125 Payments on long-term debt (49) (216) Issuance of common stock - 41 ------ ------ Net cash flow used in financing activities 476 (50) ------ ------ Net decrease in cash and temporary investments (1,008) (93) Cash and temporary investments at beginning of year 1,009 232 ------ ------ Cash and temporary investments at end of quarter $1 $139 ====== ====== ADDITIONAL CASH FLOW INFORMATION: Cash Paid During the period for: Interest $11 $49 Income taxes - - See Notes to Condensed Consolidated Financial Statements
4 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, 1997, and the consolidated statements of operations for the three month periods ended June 30, 1997 and 1996, and the consolidated statements of cash flows for the three month periods ended June 30, 1997 and 1996, 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, 1997, 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-K for the fiscal year ended March 31, 1997. The results of operations for the three month period ended June 30, 1997, 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, 1997 1997 -------- -------- Finished products $ 548 $ 569 Work-in-process 405 248 Purchased components 2,608 1,916 ------- ------- $3,561 $2,733 ======= ======= NOTE C. SHAREHOLDERS' EQUITY: During the three month period ended June 30, 1997, shareholders' equity increased as a result of a net profit of $375. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ----------------------------------------------- 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, changes in the international business climate, general economic conditions, seasonality, changes in industry practices, the outcome of the Bethlahmy class action lawsuit, and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. Results of Operations - --------------------- (Dollars in thousands) Quarter ended June 30, 1997, compared to the quarter ended June 30, 1996: Net sales for the quarter ended June 30, 1997 ("first quarter 1998"), increased to $6,753 from $5,551 for the quarter ended June 30, 1996 ("first quarter 1997"), an increase of $1,202, or approximately 22%, principally as a result of an increase in sales of complete payphones of approximately 69% offset by a decrease in sales of electronic assemblies of approximately 8%. Unit sales of complete payphones increased by approximately 61% while unit sales of electronic assemblies decreased by approximately 13%. Average selling prices of payphones in the quarter were approximately 5% higher than in the same quarter last year and average selling prices of electronic assemblies were approximately 6% higher than last year. Sales to international customers accounted for 6% of net sales for the first quarter 1998 as compared to 10% for the first quarter 1997. This represented a 24% decrease in international sales as compared to the first quarter 1997. Cost of sales as a percentage of net sales decreased from 59% for the first quarter 1997 to 57% for the first quarter 1998, due to the higher volume of payphones sold during the quarter as well as the higher selling prices of payphones and electronic assemblies. Research and development costs increased by $163, or approximately 30%, from $545 in the first quarter 1997 to $708 in the first quarter 1998 prinicipally due to the hiring of additional development staff during the quarter. Selling, general and administrative expenses increased by $215, or approximately 15%, from $1,480 in the first quarter 1997 to $1,695 in the first quarter 1998 principally as a result of additional staff and related expenses in support of the Company's increased sales activities. Interest income increased by $5, or approximately 7%, from $73 in first quarter 1997 to $78 in first quarter 1998 due to an increase in the Company's note receivable portfolio. Interest expense decreased by $28, or approximately 65%, from $43 in first quarter 1997 to $15 in first quarter 1998 due to decreased borrowings against the Company's line of credit facility with its bank. 6 Liquidity and Capital Resources - ------------------------------- (Dollars in thousands) Current assets increased by $1,163, or approximately 11%, from $10,982 at March 31, 1997 to $12,145 at June 30, 1997, predominantly from an increase in accounts receivable of $146, an increase of $1,155 in notes receivable and an increase of $828 in inventories, partially offset by a decrease of $1,008 in cash. Current liabilities increased by $934, or approximately 30%, from $3,085 at March 31, 1997 to $4,019 at June 30, 1997 predominantly from an increase in accounts payable and accrued expenses of $409 and borrowing under the Company's line of credit facility with its bank of $525. Since August 31, 1994 the Company has had a $2,000 working capital line of credit collateralized 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 1998 ranging from zero to $525. 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 refinanced its mortgage note with its lender 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, 1998. New Accounting Pronouncements - ----------------------------- In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS 128 requires disclosure of basic earnings per share based on income available to common stockholders and the weighted average number of common shares outstanding during the period, and diluted earnings per share based on income available to common stockholders and the weighted average number of common and dilutive potential common shares outstanding during the period. The adoption of SFAS 128 is required for fiscal years ending after December 15, 1997, and earlier adoption is not permitted. The adoption of SFAS 128 is not expected to have a material effect on the Company's results of operations or financial position. Also, in February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 129, Disclosure of Information about Capital Structure ("SFAS 129"). SFAS 129 requires a Company to explain the privileges and rights of its various outstanding securities, the number of shares issued upon conversion, exercise or satisfaction of required conditions during the most recent annual fiscal period, liquidation preferences of preferred stock and other matters with respect to preferred stock. Although the statement is effective for periods ending after December 15, 1997, the Company's financial statement disclosures are in compliance with SFAS 129. 7 In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as the change in equity of a business during a period from transactions and events and circumstances from non-owner sources, and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. SFAS 130 is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS 130 is not expected to have a material effect on the Company's results of operations or financial position. Also, in June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 requires public entities to report certain information about operating segments, their products and services, the geographic areas in which they operate, and their major customers, in complete financial statements and in condensed interim financial statements issued to stockholders. SFAS 131 is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS 131 is not expected to have a material effect on the Company's results of operations or financial position. 8 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- Nogah Bethlahmy, et al. plaintiffs v. Randy S. Kuhlmann, et al. defendants. - --------------------------------------------------------------------------- San Diego Superior Court Case No. 691635. As previously reported, this putative class action was filed in the Superior Court of the State of California for the County of San Diego alleging that Amtel Communications, Inc. ("Amtel"), a former customer of the Company that filed for bankruptcy, 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 quarter ended September 30, 1996. On or about April 11, 1997, the case was remanded to the San Diego Superior Court (San Diego Superior Court Case No. 691635). Plaintiffs have filed a motion in state court for leave to file a third amended complaint, which is expected to contain the same allegations as the second amended complaint that was previously filed by plaintiffs in the bankruptcy court. In July 1997 plaintiffs' motion for class certification was tentatively denied, without prejudice. Discovery is still in its initial stages. The Company disputes liability and intends to defend this matter vigorously, although the Company cannot predict the ultimate outcome of this litigation. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: None 9 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 13, 1997 By: /s/ Ronald M. Tobin Ronald M. Tobin Vice President (Principal Financial Officer and Chief Accounting Officer) 10 EX-27 2 FINANCIAL DATA SCHEDULE FOR 10Q-6/30/97
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 1 0 7,297 0 3,561 12,145 3,287 0 17,204 4,019 0 0 0 82 12,920 17,204 6,753 6,753 3,838 3,838 2,403 0 15 575 200 375 0 0 0 375 .05 .05
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