-----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, IKM6UdoE4AwviITvG8unNH4G+W8ch5hRYCUFdVl4BqzKYmF+iTi+cB0giwxN6dxH BUB6VTz9IztaRQzmCG69zw== 0000808220-97-000002.txt : 19970222 0000808220-97-000002.hdr.sgml : 19970222 ACCESSION NUMBER: 0000808220-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SSE TELECOM INC CENTRAL INDEX KEY: 0000808220 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 521466297 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16473 FILM NUMBER: 97530795 BUSINESS ADDRESS: STREET 1: SUITE 710 8230 LEESBURG PIKE CITY: VIENNA STATE: VA ZIP: 22182 BUSINESS PHONE: 7034424503 MAIL ADDRESS: STREET 1: SUITE 710 8230 LEESBURG PIKE CITY: VIENNA STATE: VA ZIP: 22182 10-Q 1 2 _______________________________________________________________________ _______ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________________________________________________________ _______ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED DECEMBER 28, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 33-10965 SSE TELECOM, INC. (Exact name of registrant as specified in its charter) Delaware 52-1466297 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8230 Leesburg Pike, Suite 710 Vienna, Virginia 22182 (Address of principal executive office) Registrant's telephone number, including area code: (703) 442-4503 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 ____ As of February 7, 1997, the following number of shares of each of the issuer's classes of common stock were outstanding: Common Stock 6,037,671 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page Consolidated Statements of Income for the three months ended December 28, 1996 and December 30, 1995 3 Consolidated Balance Sheets as of December 28, 1996 and September 28, 1996 4 Consolidated Statements of Cash Flows for the three months ended December 28, 1996 and December 30, 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9-12 PART I - FINANCIAL INFORMATION Item 1. Financial Statements SSE Telecom, Inc. Consolidated Statements of Income For the three months ended December 28, 1996, and December 30, 1995 (dollars and shares in thousands) 1996 1995 Revenue $12,295 $9,019 Cost of revenue 9,006 6,129 Gross margin 3,289 2,890 Operating expenses Research and development 1,222 687 Marketing, general and administrative 1,872 1,381 Operating income 195 822 Gain on sale of investments, 2,642 -- net of transaction expense Net interest expense 128 43 Other expense -- 21 Income before income taxes 2,709 758 Provision for income taxes 948 265 Net income $1,761 $493 Primary net income per share $0.30 $0.09 Fully diluted earnings per $0.29 $0.09 share Shares used in computing primary net income per share 5,956 5,441 Shares used in computing fully diluted earnings per share 6,327 5,441 The Notes to Consolidated Financial Statements are an integral part of these statements. SSE Telecom, Inc. Consolidated Balance Sheets (dollars in thousands) December 28, September 28, 1996 1996 (unaudited) (audited) Current Assets Cash and cash equivalents $ 911 $ 1,241 Accounts receivable, net 12,226 11,041 Inventories 11,093 12,024 Other current assets 2,837 3,314 Total current assets 27,067 27,620 Net property, equipment, and leasehold improvements 3,983 3,501 Long-term investments 17,191 23,421 Intangible assets 577 611 Other assets 110 110 Total assets $ 48,928 $ 55,263 Current liabilities Accounts payable $ 2,426 $ 4,275 Short-term debt 5,363 3,342 Income taxes payable 585 672 Other accrued liabilities 2,431 2,605 Total current liabilities 10,805 10,894 Deferred tax liabilities 5,511 8,310 Convertible notes payable 3,644 4,771 Commitments and contingencies Stockholders' equity Common stock 59 59 Additional paid in capital 12,305 12,276 Treasury stock (1,376) (502) Retained earnings 8,486 6,725 Net unrealized gain on available for sale investments 9,494 12,730 Total stockholders' equity 28,968 31,288 Total liabilities & stockholders' equity $ 48,928 $ 55,263 The Notes to Consolidated Financial Statements are an integral part of these statements. SSE Telecom, Inc. Consolidated Statements of Cash Flows For the three months ended December 28, 1996, and December 30, 1995 (dollars in thousands) Operating Activities: 1996 1995 Net income $1,761 $493 Adjustments to reconcile net income to net cash (used)by operating activities: Depreciation and amortization 171 188 Gain on sale of Echostar stock (2,642) - Deferred interest expense 48 147 Changes in operating assets and liabilities: Accounts receivable (1,185) (331) Inventories 930 (1,295) Other current assets 478 (174) Accounts payable (1,849) 559 Other accrued liabilities (262) (6) Net cash (used) by operating activities (2,550) (419) Investing Activities: Purchases of equipment (616) (140) Sale of Echostar shares 2,835 - Other assets - (33) Net cash provided (used) by investing 2,219 (173) activities Financing Activities: Net borrowings under lines of credit 1,781 - Net borrowings under equipment line of credit 240 - Payments on convertible notes payable (1,175) - Proceeds from issuance of common stock - 4 Treasury stock purchase (874) (735) Other 29 - Net cash provided (used) by financing 1 (731) activities Net (decrease) in cash and cash equivalents (330) (1,323) Cash and cash equivalents beginning of period 1,241 3,547 Cash and cash equivalents end of period $ 911 $ 2,224 The Notes to Consolidated Financial Statements are an integral part of these statements. SSE TELECOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The financial information at December 28, 1996, and for the three months periods ended December 28, 1996 and December 30, 1995, is unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows for the interim periods have been made. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September 28, 1996 Form 10-K. The results of operations for the period ended December 28, 1996 are not necessarily indicative of the operating results for the full year. 2. INVENTORIES Inventories consist of manufacturing raw materials, work-in process and finished goods. Inventories are valued at the lower of cost or realizable current value. Cost is based on the average cost method, which approximates actual cost on the first-in, first-out ("FIFO") basis. At December 28, 1996 and September 28, 1996, inventories consisted of: ($000's) December 28, September 28, 1996 1996 Manufacturing raw $4,777 $5,693 materials Work-in-process 5,817 6,016 Finished goods 499 315 Total $11,093 $12,024 3. COMMITMENTS, AND CONVERTIBLE NOTES PAYABLE The Company leases office and manufacturing space under leases that expire in June 2001 At December 28, 1996, the Company had an outstanding balance of $3.58 million on its 6 1/2% convertible subordinated debentures due March 1, 2001, payable to Echostar Communication Corporation. During the first quarter of fiscal 1997 the Company repaid $1.0 million of the debenture principle and $.2 million of debenture interest from the proceeds from the sale of Echostar shares. 4. NET INCOME PER SHARE Net income per share is computed using the weighted average number of common and common equivalent shares (stock options and warrants) outstanding during the period (using the treasury stock method). Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Information contained in this Form 10-Q that is not historical facts, including any statements about expectations for the fiscal year and beyond, involve certain risks and uncertainties. This Form 10-Q contains "forward-looking" statements: within the meaning of the Private Securities Litigation Reform Act of 1995, many of which can be identified by the use of forward-looking terminology such as "may", "will", "believe", "expect", "anticipate", "estimate", "plan", "intend", or "continue" or the negative thereof or other variations thereon or comparable terminology. There are a number of important factors with respect to such forward-looking statements that could cause actual results to differ materially from those contemplated in such forward-looking statements. Numerous factors, such as economic and competitive conditions, incoming order levels, timing of product shipments, product margins, new product development, and reliance on key consumers and international sales could cause actual results to differ from those described in these statements and prospective investors and stockholders should carefully consider these factors in evaluating these forward-looking statements. The following table sets forth, for the quarters ended on the dates indicated, certain income and expense items expressed as an approximate percentage of the Company's total revenues: Three months ended December 28, December 30, 1996 1995 Revenue 100% 100% Gross margin 27% 32% Research and development expense 10% 8% Marketing, general and administrative 15% 15% expenses Operating income 2% 9% Net interest expense 1% -- Other expense -- -- Net gain on sale of investments 21% Income before income taxes 22% 9% Provision for income taxes 8% 3% Net income 14% 6% Overview On January 28, 1996, the Company acquired the business and assets of Fairchild Data (the Company's Datacom subsidiary), a leading manufacturer of satellite modems and related earth station products. Comparisons between the first quarter of 1996 and 1995 on an absolute and percentage change basis are affected by the results of the Company's SSE Datacom subsidiary. Revenue. Sales were $12.3 million for the first quarter of fiscal year 1997 as compared to $9.0 million for the same period in fiscal year 1996, representing an increase of 37%. The increase in revenue mainly reflects shipments of the Company's Deployable Downsized Terminal (DDT) to the federal government, and the inclusion of modem sales from Datacom. The Company continues to increase the number of units shipped of its STAR series of advanced transceivers products. Gross Margin. Gross margin was $3.3 million or 27% of sales in the first quarter of fiscal year 1997, compared to $2.9 million or 32% of sales for the first quarter of 1996. The decline in gross margin percentage from the first quarter of 1996 was due to continued competitive price pressure and product mix. In the fourth quarter of fiscal year 1996 gross margin as percentage of sales was 24%. The improvements in gross margin during the first quarter of fiscal 1997 were attributable to better manufacturing efficiencies related to higher production volume of the new STAR line of transceivers. Research and Development. Research and development expenses grew by 78% to $1.2 million or 10% of sales for the first quarter of fiscal 1997 from $.7 million or 8% of sales for the first quarter of fiscal 1996. The Company continues to focus on the development of the STAR line of transceivers, and advanced digital modem products. Research and development expenses may fluctuate in the future both in dollars and as a percentage of sales. Marketing, General and Administrative. Marketing, general and administrative expenses were $1.9 million or 15% of sales in the first quarter of fiscal year 1997 as compared to $1.4 million or 15% of sales for the same period in fiscal 1996. The majority of the increase in expenses relates to the expansion of sales and marketing efforts to generate additional customers for the Company's products, particularly in international markets, and a relocation of the Company's repair center from Singapore to Bangkok, Thailand. Net Interest Expense. Interest expense was $128,000 in the first quarter of fiscal 1997. During the same period of last fiscal year, interest income was $114,000 and interest expense was $157,000. The decrease in interest expense reflects a reduction of the Company's debenture principle offset with a need of the Company to borrow against its credit lines to fund operating and capital expenditures. The loss of interest income in the first quarter of fiscal 1997 reflects the redirection of funds previously invested in short term securities that were utilized for the purchase of Fairchild Data. Net (Gain) on Sale of Investments. During the first quarter of fiscal 1997 the Company realized a gain of $2.6 million on sales of 92,937 shares of Echostar Communication Corporation (NASDAQ: DISH) common stock. The proceeds generated from these sales were used for repayment of convertible debentures payable to Echostar, purchase of treasury stock, and to fund operating expenditures. As of December 28, 1996 the Company has a total of 709,780 shares of Echostar common stock. Provision for Income Taxes.. The effective tax rate was 35% for the first quarter of fiscal year 1997 as well as the first quarter of fiscal year 1996. Backlog. The Company's total backlog was $6.8 million at the end of the first quarter of fiscal year 1997, as compared to backlog of $8.9 million at the end of fiscal year 1996. Management expects substantially all backlog to be delivered in fiscal 1997. Timing differences from quarter to quarter as to the receipt of large orders and changes in factory production make meaningful quarter to quarter comparisons of backlog difficult. LIQUIDITY AND CAPITAL RESOURCES At December 28, 1996, the Company had working capital of $16.2 million, including $.9 million in cash and cash equivalents, compared with working capital of $16.7 million, including cash and cash equivalents of $1.2 million at September 28, 1996. Net cash used in operating activities was $2.6 million during the first quarter of fiscal year 1997 as compared to net cash used of $.4 million in the similar period of fiscal year 1996. Cash used in operations was primarily due to an increase in accounts receivable and decreases in accounts payable during the period. The increase in accounts receivable of $1.2 million in the first quarter of fiscal year 1997 was due to the consolidation of SSE Datacom and the timing of shipments in the quarter. The decrease in accounts payable of $1.9 million in the first quarter of fiscal year 1997 was attributable to lowering of inventories purchased during the quarter. The Company's investing activities provided $2.2 million during the first quarter of fiscal 1997 as compared to cash used of $.2 million during the same period in fiscal year 1996. During the first quarter of fiscal 1997 $2.8 million was realized from the sale of Echostar shares which offset capital expenditures of $.6 million. The Company's financing activities provided $1,000 during the first quarter of fiscal 1997 as compared to net cash used of $731,000 during the first quarter of fiscal year 1996. The Company utilized its lines of credit to finance operations and used funds to reduce convertible debentures by $1.2 million and to purchase 108,200 shares of treasury stock. At December 28, 1996 the Company's principal sources of liquidity consisted of $.9 million in cash, and bank lines of credit of $5.0 million for operations and $2.0 million for equipment financing. At December 28, 1996, $4.8 million was outstanding under the operating line of credit and $.6 million under the equipment lines. The lines of credit require the Company to be in compliance with certain financial covenants. As of December 28, 1996 the Company was in compliance with all covenants. The Company intends to renew these lines of credit in fiscal year 1997. The Company's capital requirements could change in the event of factors such as lower than anticipated demand for the Company's products or unanticipated limitations on debt financing. The Company believes that its current cash position, funds generated from operations, funds available from its equity holdings in Echostar common stock and its lines of credit will be adequate to meet its requirements for working capital, capital expenditures, debt services and external investment for the foreseeable future. Due to certain constraints on the ability to sell Echostar shares and potential volatility of the value of the stock, there could be a significant reduction in funding available from the liquidation of Echostar stock. If these events occur, the Company may be required to raise additional capital using other means to meet all of its needs. PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits included herein (numbered in accordance with Item 601 of Regulation S-K) Exhibit Number Description Sequential Page Number 11 Computation of Per Share Page 11 Earnings 27 Financial Data Schedule Page 12 (b) Reports on Form 8-K None. 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 hereunto duly authorized. Dated: February 13, 1997 SSE TELECOM, INC. By:/s/Frederick C.Toombs Frederick C. Toombs, President By:/s/Daniel E. Moore Daniel E. Moore, Chief Financial Officer EX-11 2 EXHIBIT 11 Attached and Made Part of Part II Of 10Q for the Quarters Ended December 28, 1996 and December 30, 1995 (dollars and shares in thousands, except per share) Three months ended December 28, December 30, 1996 1995 Primary Weighted common average shares outstanding applying the treasury stock method 5,877 5,310 Increase in weighted average shares due to applying the treasury stock method for stock options and warrants 79 131 Primary weighted average shares 5,956 5,441 Primary net income $1,761 $493 Net income per share $.30 $.09 Fully diluted Weighted common average shares outstanding applying the treasury stock method 5,877 5,310 Increase in weighted average shares due to applying the treasury stock method for stock options and warrants 79 190 Shares issuable from assumed exercises of conversion of 6 1/2% convertible subordinated debentures 371 729 Fully diluted weighted average shares 6,327 6,229 Net income $1,761 $493 Interest on 6 1/2% convertible subordinated debentures, net of income tax effect 43 99 Net income, as adjusted $1,804 $592 Total fully diluted net income per share $.29 $.10* * This calculation is submitted in accordance with Regulation S-K item 601 (b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive effect.. EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. [DESCRIPTION]Article 5 Fin. Data Schedule for 1st Qtr 10-Q [TEXT]
5 1,000 Sep-27-1997 Sep-29-1996 Dec-28-1996 3-MOS 911 0 12,736 510 11,093 27,067 10,967 6,984 48,928 10,805 3,644 0 0 59 28,909 48,928 0 12,295 9,006 3,094 (2,642) 0 128 2,709 948 1,761 0 0 0 1,761 .30 .29
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