-----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, WZf89siiqGPT4iKSlNnMMX0EuFsurcHRxTZmHcXFKfss8cZVthp41VeQE/FeP9rh pUaIipGpWo45kiWB6GWgww== 0000808220-99-000013.txt : 19990512 0000808220-99-000013.hdr.sgml : 19990512 ACCESSION NUMBER: 0000808220-99-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990327 FILED AS OF DATE: 19990511 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: SEC FILE NUMBER: 000-16473 FILM NUMBER: 99617015 BUSINESS ADDRESS: STREET 1: 47823 WESTINGHOUSE DRIVE STREET 2: -- CITY: FREMONT STATE: CA ZIP: 94539 BUSINESS PHONE: (510) 657-7552 MAIL ADDRESS: STREET 1: 47823 WESTINGHOUSE DRIVE STREET 2: STE 710 CITY: FREMONT STATE: CA ZIP: 94539 10-Q 1 2ND QUARTER 10-Q FISCAL YEAR 1999 - ------------------------------------------------------------------------------ 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 MARCH 27, 1999 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 0-16473 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.) 47823 Westinghouse Drive Fremont, California 94539 (Address of principal executive office) Registrant's telephone number, including area code: (510) 657-7552 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 April 20, 1999, the number of shares outstanding of the registrant's common stock, par value $.01 was 5,791,456. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page Condensed Consolidated Statements of Operations for the three months and six months ended March 27, 1999 and March 28, 1998 (unaudited) 3 Condensed Consolidated Balance Sheets as of March 27, 1999 (unaudited) and September 26, 1998 4 Condensed Consolidated Statements of Cash Flows for the six months ended March 27, 1999 and March 28, 1998 (unaudited) 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3. Quantitative and Qualitative Disclosure about Market Risk 11 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12-13 Item 6. Exhibits and Reports on Form 8-K 13 PART I - FINANCIAL INFORMATION
Item 1. Financial Statements SSE Telecom, Inc. Condensed Consolidated Statements of Operations (Unaudited) For The Three Months and Six Months Ended March 27, 1999 and March 28, 1998 (dollars and shares in thousands, except per share data) Three Months Ended Six Months Ended March 27, March 28, March 27, March 28, 1999 1998 1999 1998 --------------- ------------- ------------- ------------- Revenue $4,718 $11,095 $12,422 $23,432 Cost of revenue 4,966 8,826 12,173 17,931 --------------- ------------- ------------- ------------- Gross margin (248) 2,269 249 5,501 Expenses Research and development 957 1,632 1,951 3,027 Marketing, general and administrative 2,062 2,164 4,037 3,903 Amortization - intangible -- 15 -- 34 --------------- ------------- ------------- ------------- Operating income (loss) (3,267) (1,542) (5,739) (1,463) Net interest expense 29 150 49 331 Gain on sale of investment, net -- (4,229) (3,198) (7,117) Other expense (income) (128) (5) (211) 34 --------------- ------------- ------------- ------------- Income (loss) before income taxes (3,168) 2,542 (2,378) 5,289 Provision (benefit) for income taxes (1,310) 890 (1,034) 1,851 --------------- ------------- ------------- ------------- Net income (loss) ($1,858) $1,652 ($1,345) $3,438 --------------- ------------- ------------- ------------- Basic income (loss) per share $(0.32) $0.29 $(0.23) $0.60 =============== ============= ============= ============= Diluted income (loss) per share $(0.32) $0.28 $(0.23) $0.59 =============== ============= ============= ============= Shares used in computing basic income (loss) per share 5,791 5,731 5,785 5,731 =============== ============= ============= ============= Shares used in computing diluted income (loss) per share 5,791 5,959 5,785 5,969 =============== ============== ============ ============= The Notes to Consolidated Financial Statements are an integral part of these statements.
SSE Telecom, Inc. Condensed Consolidated Balance Sheets (dollars in thousands) March 27, 1999 September 26, 1998* (unaudited) ASSETS Current Assets: Cash and cash equivalents $1,193 $3,327 Accounts receivable, net 5,186 5,702 Inventories 7,495 8,894 Deferred tax assets 3,845 2,762 Other current assets 262 198 -------------------------------------------- Total current assets 17,981 20,883 Property, plant and equipment 11,967 11,692 Less accumulated depreciation 8,789 8,109 -------------------------------------------- Property, plant and equipment, net 3,178 3,583 Long-term investments 5,357 6,583 -------------------------------------------- Total Assets $ 26,516 $31,049 ============================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,168 $3,745 Accrued salaries and employee benefits 1,336 1,217 Short-term debt 2,016 3,036 Other accrued liabilities 2,878 2,492 -------------------------------------------- Total current liabilities 9,398 10,490 Deferred tax liabilities 627 930 Long-term debt 257 1,451 Stockholders' equity Common stock and paid in capital 12,694 12,639 Treasury stock (1,782) (1,782) Retained earnings 4,158 5,503 Net unrealized gain on available for sale investments 1,164 1,818 -------------------------------------------- Total stockholders' equity 16,234 18,178 -------------------------------------------- Total Liabilities & Stockholders' Equity $ 26,516 $31,049 ============================================
* Derived from audited Financial Statements. The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
SSE Telecom, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) For The Six Months Ended March 27, 1999, and March 28, 1998 (dollars in thousands) March 27, 1999 March 28, 1998 Cash used for operating activities: Net income $ (1,345) $ 3,438 Adjustments to reconcile net income to net cash used for: Depreciation and amortization 680 687 Gain on sale of investment, net (3,198) (7,117) Deferred interest expense -- 99 Deferred income taxes 26 -- Changes in operating assets and liabilities: Accounts receivable 516 587 Inventories 1,399 (211) Other current assets (16) 153 Accounts payable (577) 274 Other accrued liabilities (606) 979 ---------------------------------------------- Net cash used for operating activities (3,121) (1,111) ---------------------------------------------- Cash provided by investing activities: Purchases of equipment (275) (596) Proceeds from sale of investment 3,419 7,847 Purchase of Media4 debenture/equity -- (931) ---------------------------------------------- Net cash provided by investing activities 3,144 6,320 ---------------------------------------------- Cash used for financing activities: Net (payment) under debt obligations (992) (2,105) Net payments on convertible notes payable (1,220) (1,767) Proceeds from issuance of common stock 55 1 Payments of debenture interest -- (232) ---------------------------------------------- Net cash used for financing activities (2,157) (4,103) ---------------------------------------------- Net increase (decrease) in cash and cash equivalents (2,134) 1,106 ---------------------------------------------- Cash and cash equivalents beginning of period 3,327 408 ---------------------------------------------- Cash and cash equivalents end of period $ 1,193 $ 1,514 ==============================================
The Notes to Condensed Consolidated Financial Statements are an integral part of these statements. SSE TELECOM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The financial information at March 27, 1999, and for the three month and six month periods ended March 27, 1999 and March 28, 1998, is unaudited. In the opinion of management, all adjustments (consisting of 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 26, 1998 Form 10-K. The interim results presented are not necessarily indicative of results for any subsequent quarter or for the year ending September 25, 1999. 2. INVENTORIES Inventories consist of manufacturing raw materials, work-in process and finished goods. Inventories are valued at the lower of cost or market. Cost is based on the average cost method, which approximates actual cost on the first-in, first-out ("FIFO") basis. At March 27, 1999 and September 26, 1998, inventories consisted of:
(in thousands) March 27, 1999 September 26, 1998* -------------- ------------------- (unaudited) Manufacturing raw materials $3,800 $3,440 Work-in-process 2,948 3,657 Finished goods 746 1,797 ========================= ========================== Total $7,494 $8,894 ========================= ==========================
* Derived from audited financial statements. 3. INVESTMENTS On February 1, 1999, in connection with the purchase by EchoStar Communications Corp. (NASDAQ: DISH) of MEDIA4 Inc., the Company sold its interest in MEDIA4 in exchange for 77,768 shares of EchoStar common stock. The EchoStar common stock has been classified as an available-for-sale investment and was valued at $5.4 million at March 27, 1999. 4. LONG TERM DEBT At March 27, 1999, the Company's long term portion of capital lease balance outstanding was $256,917. During the first six months of fiscal 1999 the Company repaid $1.2 million of convertible subordinated debentures due Echostar Communication Corporation. 5. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net (loss)/income per shares: (in thousands, except per share) Three Months Ended Six Months Ended March 27, 1999 March 28, 1998 March 27, 1999 March 28, 1998 Numerator: Net Income $ (1,858) $1,652 $(1,345) $3,438 Numerator for basic net (loss)/income per share (1,858) 1,652 (1,345) 3,438 Effect of dilutive securities: Interest expense, net of taxes on 61/2% convertible securities -- 26 -- 64 ---------------- --------------- ---------------- --------------- Numerator for diluted net (loss)/income per share (1,858) 1,678 (1,345) 3,502 Denominator: Denominator for basic net (loss)/income per share- weighted average shares 5,791 5,731 5,785 5,731 Effect of dilutive securities: Employee stock options -- -- -- 1 61/2% convertible debentures -- 228 -- 238 ---------------- --------------- ---------------- --------------- Dilutive potential common shares -- 228 -- 239 Denominator for diluted net (loss)/income per share- adjusted weighted average shares and assumed conversions 5,791 5,959 5,785 5,969 Basic income (loss) per share $(0.32) $0.29 $(0.23) $0.60 Diluted income (loss) per share $(0.32) $0.28 $(0.23) $0.59
6. RELATED PARTY TRANSACTIONS On March 8, 1999, the Company issued a promissory note in the principal amount of $150,000 to the Executive Vice President of Product Development, George M. Walley. The promissory note is due and payable one year from the date of issuance and is interest free. The funds are for relocation expenses and closing costs associated with Mr. Walley's principal residence. The loan principal of $150,000 is classified as a current asset under accounts receivables, net. 7. SUBSEQUENT EVENTS On March 26, 1999 the Company entered into a stock purchase agreement with NationsBanc Montgomery Securities to sell a portion of its holdings of Echostar common stock. On March 31, 1999 the Company sold 40,000 shares, at a price of $69.25 per share, for an aggregate of $2.8 million. 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 fact, 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 vendors and consumers and international sales could cause actual results to differ from those described in these statements and current and prospective investors and stockholders should carefully consider these factors in evaluating these forward-looking statements. Overview Sales for the quarter ended March 27, 1999 decreased substantially and were affected by adverse economic conditions in Asia, Latin America, and Eastern Europe. Profitability was impacted by these poor market conditions and continuing weakness in the world Satcom market. The Company is concerned about continued operating losses and has undertaken a number of strategic initiatives. On April 23, 1999, the Company announced a 44% reduction in workforce. The reduction was focused on the Company's operations and material operations employees and will become effective on June 25, 1999. During the quarter ended March 27, 1999 the Company commenced outsourcing of its SM3000 and SM4000 modem products which enabled the Company to reduce overhead expenses and improve its speed and flexibility in meeting customer requirements. Manufacturing operations were not interrupted. During the quarter ended March 27, 1999, significant effort was expended on marketing and development of a new product line in an effort to reposition the Company to address the opportunities in the Internet-via-satellite market. Results of Operations for the Three Months and Six Months Periods Ended March 27, 1999 and March 28, 1998 Revenue: Sales decreased to $4.7 million for the second quarter of fiscal 1999 from $11.1 million for the same period in fiscal 1998. The decline is attributable in part to past production flow problems, and an overall weakness in the Satcom market for the Company's products largely driven by international economic conditions. The Company's products represent a capital item to its customers and funding for capital has been either reduced, delayed or canceled in several international markets. Sales for the first six months of fiscal 1999 were $12.4 million as compared to $23.4 million for the same period in fiscal 1998. Gross Margin: Gross margin decreased to ($248,000) in the second quarter of fiscal 1999, compared to $2.3 million for the second quarter of 1998. Gross margin for the first six months of fiscal year 1999 was $249,000 as compared to $5.5 million in fiscal year 1998. The decline in gross margin was primarily due to (1) pricing pressure, (2) continued decreases in satellite transceiver and modem orders leading to reduced shipments and lower absorption of fixed costs, and (3) higher warranty costs. Research and Development: Research and development expenses decreased to $957,000 for the second quarter of fiscal 1999 from $1.6 million for the second quarter of fiscal 1998. Research and development declined to $1.9 million for the first six months of fiscal year 1999 from $3.0 million for the first six months of fiscal year 1998. The decrease reflects an overall reduction in research and development project labor, material and services in fiscal 1999. While the Company reduced expenditures in fiscal 1999, it has also refocused it efforts from sustaining activities for current products to the development of new product platforms and to the Company's outsourcing initiatives. Marketing, General and Administrative: Marketing, general and administrative expenses were $2.1 million in the second quarter of fiscal 1999 as well as the second quarter of fiscal 1998. For the first six months of fiscal year 1999 expenses were $4.0 million as compared to $3.9 million in fiscal year 1998. The expense level remained constant due to increases in marketing activity and travel in the second quarter of fiscal year 1999 related to business development initiatives for the Company's new product platforms, offset by decreases in international sales representative commissions and general and administrative expenses. Net Interest Expense. Net interest expense was $29,000 in the second quarter of fiscal 1999 as compared to $150,000 for the same period last year. For the first six months of fiscal year 1999 interest expense was $49,000 as compared to $331,000 during the same period in fiscal year 1998. As of March 27, 1999 all of the Company's debentures held by EchoStar Communication Corp. had been retired. Net Gain on Sale of Investments. During the first six months of fiscal 1999 the Company realized a gain of $4.2 million on sales of 118,905 shares of Echostar Communication Corporation (NASDAQ: DISH) common stock at an average selling price of $28.75 per share. The proceeds generated from these sales were used for repayment of convertible debentures payable to Echostar, repayment of operating line of credit, and to fund operating expenditures. As of March 27, 1999 the Company holds a total of 77,768 shares of Echostar common stock valued at $5.4 million. Other Income/Expense. Other income for the second quarter of fiscal 1999 was $128,000 as compared to $5,000 during the same period in fiscal 1998. For the first six months of fiscal 1999 other income was $211,000 as compared to other expense of $34,000 in fiscal 1998. Other income in fiscal 1999 included a $100,000 payment to the Company under a sublease agreement with Roche Industries for subleasing space at Westinghouse Drive, and a insurance claim payment for stolen property. Provision for Income Taxes. The effective tax (benefit) rate was 35% for the second quarter and the first six months of fiscal year 1999 as well as 35% for the second quarter and first six months of fiscal year 1998. Backlog. The Company's total backlog was approximately $2.5 million at the end of the second quarter of fiscal year 1999, as compared to backlog of approximately $3.0 million at the end of the second quarter in fiscal year 1998. Management expects substantially all backlog to be delivered in fiscal 1999. 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 March 27, 1999, the Company had working capital of $8.6 million, including $1.2 million in cash and cash equivalents, compared with working capital of $10.4 million, including cash and cash equivalents of $3.3 million at September 26, 1998. Net cash used by operating activities was $3.1 million during the first six months of fiscal 1999 as compared to net cash used of $1.1 million in the similar period of fiscal 1998. Cash used was principally due to operating losses. The Company expects continued operating losses for the current fiscal year. The Company's investing activities provided $3.1 million during the first six months of fiscal 1999 as compared to cash provided of $6.3 million during the same period in fiscal year 1998. During the first six months of fiscal 1999 $3.4 million was realized from the sale of Echostar shares which offset $275,000 in capital expenditures. The Company's financing activities used $2.2 million during the first six months of fiscal 1999 as compared to net cash used of $4.1 million during the first six months of fiscal year 1998. The Company reduced convertible debentures by $1.2 million and made payments of debt obligations of $992,000. At March 27, 1999, the Company's principal sources of liquidity consisted of $1.2 million in cash, a $3.0 million bank line of credit, and 77,768 shares of Echostar common stock. At March 27, 1999, $1.6 million was outstanding on a $3.0 million operating line of credit. In addition, the Company had a term loan with a principal balance of $295,000. The line of credit and term loan requires the Company to be in compliance with certain financial covenants. As of March 27, 1999, the Company was not in compliance with the operating profitability and quick ratio covenants and has obtained a waiver from the bank. In addition, the Company has $365,000 outstanding under capital lease financing. The Company's capital requirements could change in the event of factors such as lower than anticipated demand for the Company's products, the uncertainty of the cost associated with the special warranty expense 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, and debt services for the near term. 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. Impact of Year 2000 The following constitutes a "Year 2000 Disclosure" under the Year 2000 Information and Readiness Disclosure Act of 1998. The Company is aware that many existing Information Technology ("IT") systems, such as computer and software products, as well as non-IT systems that included embedded technology, were not designed to correctly process data after December 31, 1999. The Company has created a Year 2000 project team to review, and evaluate the Company's products, computer systems, test equipment systems and other non-IT systems. The Company has determined that it will be necessary to modify or replace portions of its software so that its computer and non-IT systems will properly utilize dates beyond 1999. The Company believes that with modifications and conversions to new software, the Year 2000 issue can be mitigated, and anticipates completion of all Year 2000 efforts by the end of fiscal 1999. However, if such modifications and conversions are not made, or are not completed in a timely manner, the Year 2000 issue could have a material impact on the operations of the Company. The Company has also initiated discussions with its suppliers regarding their plans to investigate and address their Year 2000 problems, if any. Failures by the Company's suppliers' computer systems could adversely affect the demand for product. There can be no assurance that the systems of other companies on which the Company's systems, services, and products rely will be timely converted, or that any such failure to convert by another company would not have an adverse affect on the Company's business financial conditions or results of operations. The Company has been using both external and internal resources to upgrade its commercial software programs for the Year 2000 issue. To date, the amounts incurred and expensed for developing and carrying out the plan have not had a material effect on the Company's operations. The Company plans to complete the Year 2000 modifications, including testing, by the end of 1999. The total remaining estimated cost for addressing the Year 2000 Issue of approximately $220,000,which is based on management's current estimates, is not expected to be material to the Company's operations. All remaining Year 2000 issue costs will be funded through operating cash flows. As the efforts of the Year 2000 project team continue, the Company may identify situations that present material Year 2000 risks and/or that will require substantial time and material expense to address. In addition, if any customers, suppliers or service providers fail to appropriately address their Year 2000 issues, such failure could have a material adverse effect on the Company's business, financial condition and results of operations. For example, because a significant percentage of the purchase orders received from the Company's customers are computer generated and electronically transmitted, a failure of one or more of the computer systems of the Company's customers could have a significant adverse effect on the level and timing of orders from such customers. Similarly, if Year 2000 problems experienced by any of the Company's significant suppliers or service providers cause or contribute to delays or interruptions in the delivery of products or services to the Company, such delay or interruptions could have a material adverse effect on the Company's business, financial condition and results of operations. Finally, disruption in the economy generally resulting from Year 2000 issues could also materially adversely affect the Company. Although the Year 2000 project team has not determined the most likely worst-case Year 2000 scenarios or quantified the likely impact of such scenarios, it is clear that the occurrence of one or more of the risks described above could have a material adverse effect on the Company's business, financial conditions or results of operations. The Company's Year 2000 project team's activities will include the development of contingency plans in the event the Company has not completed all of its remediation programs in a timely manner. In addition, the Year 2000 project team will develop contingency plans in the event that any third parties who provide goods and services essential to the Company's business fail to appropriately address their Year 2000 issues. The Year 2000 project team expects to conclude the development of these contingency plans by the end of fiscal 1999. Even if these plans are completed on time and put in place, there can be no assurance that such plans will be sufficient to address any third party failures or that unresolved or undetected internal and external Year 2000 issues will not have a material adverse effect on the Company's business, financial condition and results of operations. The Company is reviewing the material risk associated with the Year 2000 issue on computer hardware and software. Computer systems are at risk where the date using "00" is recognized as the year 1900 rather than the year 2000. The Company is currently assessing its exposure and will have a plan in place by Q4 of FY '99. While the Company doesn't anticipate costs for the Year 2000 issue to be material final results of this review could be significantly different. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK On February 1, 1999, in connection with the purchase by EchoStar Communications Corp. (NASDAQ: DISH) of MEDIA4 Inc., the Company sold its interest in MEDIA4 in exchange for 77,768 shares of EchoStar common stock. The value of these shares is subject to market risk and general economic conditions. As of March 27, 1999, the Company had 77,768 shares with the closing price on that date of $68.88. The 52-week range for Echostar's common stock as of May 4, 1999 was a low of $17.00 and a high of $115.12. At March 26, 1999, the Company was operating under a credit facility with outstanding borrowings of $1.6 million. This facility allows for a $3.0 million operating line-of-credit. Borrowings under this line-of-credit bear interest at prime plus 1.25% (prime rate was 7.875% at March 26, 1999). The Company was in compliance with all covenants, except the profitability and quick ratio covenants, for which the Company received a waiver for the quarter ending March 27, 1999. The credit facility agreement, originally set to expire March 15, 1999, was extended until June 15, 1999. The Company also had a term note outstanding at March 27, 1999. The total principal outstanding on this note was $295,000 with interest payable at prime plus 1.0%. Interest payments are made on a monthly basis. The term note has a maturity date of August 31, 1999. The Company's exposure to market risk due to fluctuations in interest rates primarily relates to the Company's credit facility and term note. If market interest rates were to increase immediately and uniformly by 10% from levels prevailing at March 27, 1998, the fair value of the debt obligations would not change materially. The Company does not use derivative financial instruments to mitigate interest rate risk. Notwithstanding the foreign analysis of the direct effects of interest rate risk, the indirect effects of fluctuations could have a material adverse effect on the Company's business, financial condition and results of operations. For example, worldwide demand for the Company's products could be effected by interest rate fluctuations that could change the buying patterns of the Company's customers. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In February 1999, in connection with its 1999 Annual Meeting of Stockholders (the "Annual Meeting"), held on March 22, 1999, the Company solicited the written consent of its stockholders with respect to various matters. The matters for which stockholder consent was solicited were as follows: PROPOSAL 1: To elect directors to serve for the ensuing year and until their successors are elected. At the Annual Meeting, the voting of stockholders with respect to Proposal 1 was as follows:
---------------------------------------- ------------------ ------------- ------------------- Director For % Withheld ---------------------------------------- ------------------ ------------- ------------------- ---------------------------------------- ------------------ ------------- ------------------- Leon F. Blachowicz 4,409,311 73.2 47,554 ---------------------------------------- ------------------ ------------- ------------------- ---------------------------------------- ------------------ ------------- ------------------- Daniel E. Moore 4,409,311 73.2 47,554 ---------------------------------------- ------------------ ------------- ------------------- ---------------------------------------- ------------------ ------------- ------------------- Joseph T. Pisula 4,409,311 73.2 47,554 ---------------------------------------- ------------------ ------------- ------------------- ---------------------------------------- ------------------ ------------- ------------------- Lawrence W. Roberts 4,409,311 73.2 47,554 ---------------------------------------- ------------------ ------------- ------------------- ---------------------------------------- ------------------ ------------- ------------------- Erik H. van der Kaay 4,409,311 73.2 47,554 ---------------------------------------- ------------------ ------------- ------------------- ---------------------------------------- ------------------ ------------- ------------------- Olin L. Wethington 4,409,311 73.2 47,554 ---------------------------------------- ------------------ ------------- -------------------
PROPOSAL 2: To approve the Company's 1999 Employee Stock Purchase Plan. At the Annual Meeting, the voting of stockholders with respect to Proposal 2 was as follows: For Against Abstain 4,373,778 76,587 6,500
PROPOSAL 3: To approve an amendment to the Company's 1997 Directors' Stock Option Plan to increase the aggregate number of shares of Common Stock authorized for issuance under such plan by 50,000 shares. At the Annual Meeting, the voting of stockholders with respect to Proposal 3 was as follows: For Against Abstain 4,237,720 210,745 8,400
PROPOSAL 4: To ratify the selection of Deloitte & Touche LLP, as independent public auditors for the Company. At the Annual Meeting, the voting of stockholders with respect to Proposal 4 was as follows: For Against Abstain 4,316,581 13,487 126,797
Item 5. OTHER EVENTS Reduction in Force On April 23, 1999, in an effort to reduce fixed costs, the Company issued a news release announcing its decision to reduce total employee headcount by 68 of its 153 employees, or approximately 44% of its workforce. The news release is incorporated herein by reference to Exhibit 99.1 attached hereto. Board of Directors On March 3, 1999, Erik van der Kaay resigned from the Company's Board of Directors to pursue other interests. In addition, on April 12, 1999 Daniel E. Moore resigned from his position as Chairman of the Board of Directors. Mr. Moore will, nevertheless, continue to remain a member of the Board. On May 6, 1999 Mr. Frank Trumbower was appointed Chairman of the Board. The news release announcing such appointment is incorporated herein by reference to Exhibit 99.2 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 27 Financial Data Schedule Page 13 99.1 Press release dated April 23, 1999 Page 14 99.2 Press release dated May 6, 1999 Page 15
(b) Reports on Form 8-K February 12, 1999, reporting under item 2 - Acquisition or Disposition of Assets, acquisition of Media4, Inc. by EchoStar Communications Corp. 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: May 7, 1999 SSE TELECOM, INC. By:/s/ Leon F. Blachowicz, Leon F. Blachowicz, Chief Executive Officer By:/s/ James J. Commendatore, James J. Commendatore, Chief Financial Officer EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-Q
5 1,000 Sep-25-1999 Sep-27-1998 Mar-27-1999 6-MOS 1,193 0 5,888 702 7,495 17,981 11,967 8,789 26,516 9,398 0 0 0 60 16,234 26,516 0 12,422 12,173 5,988 (3,409) 0 49 (2,378) (1,034) (1,344) 0 0 0 (1,344) (0.23) (0.23)
EX-99 3 PRESS RELEASE DATED APRIL 23, 1999 Exhibit 99.1 For Immediate Release - -------------------------------------------------------------------------------- Company Contacts: 47823 Westinghouse Drive - -------------------------------------------------------------------------------- Lee Blachowicz/Chief Executive Officer Fremont, CA 94539 USA - -------------------------------------------------------------------------------- Tel: (510) 657-7552 - -------------------------------------------------------------------------------- Agency Contact: Fax: (510) 490-5891 - -------------------------------------------------------------------------------- Berkman Associates (310) 277-5162 - -------------------------------------------------------------------------------- SSE TELECOM DOWNSIZES WORKFORCE FREMONT, CALIFORNIA - April 23, 1999 - SSE TELECOM, INC. (NASDAQ: SSET) today announced a headcount reduction of approximately 44% of its 153 employee workforce. The staffing reduction primarily affects manufacturing and material operations employees and will become effective in 60 days. Lee Blachowicz, SSE Telecom's CEO and President commented, "This workforce reduction significantly lowers our fixed costs and frees financial resources for investment in marketing and new product development. We are currently completing local outsourcing arrangements for product manufacturing which will enable the Company to continue offering our customers quality products with competitive manufacturing lead times." "We are implementing a program over the coming sixty days to assist affected employees in finding new positions, and hope this, combined with the currently strong economy in the Silicon Valley area, will result in minimal disruption of our employees' careers." Headquartered in Fremont, California, SSE Telecom, Inc. () is a leading satellite earth station product provider. To date, more than 40,000 of the Company's transceivers or modems have been installed in satellite earth stations in more than 110 countries worldwide. The statements contained in this release which are not historical facts may be deemed to contain forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties, including, without limitation, demand and competition for the Company's products, and other risks or uncertainties detailed in the Company's Securities and Exchange Commission filings. * * * * EX-99 4 PRESS RELEASE DATED MAY 6, 1999 Exhibit 99.2 For Immediate Release Company Contacts: Lee Blachowicz/Chief Executive Officer Agency Contact: Berkman Associates (310) 277-5162 47823 Westinghouse Drive Fremont, CA 94539 USA Tel: (510) 657-7552 Fax: (510) 490-5891 SSE TELECOM, INC. ELECTS FRANK S. TRUMBOWER CHAIRMAN OF THE BOARD FREMONT, CALIFORNIA - May 6, 1999 - SSE TELECOM, INC. (NASDAQ: SSET) announced today that its Board of Directors has elected Frank S. Trumbower to its Board as Chairman. Daniel E. Moore, a Board member since 1989, resigned as chairman on April 12, 1999 and remains a Board member. The Company also announced that Erik H. van der Kaay has resigned from its Board so that he can devote more effort to his position as President and CEO of Datum, Inc. Commenting on the changes, Lee Blachowicz, CEO and President of SSET said: "I am delighted to welcome Frank Trumbower back to the SSET Board. His experience in developing technology businesses and his commitment to the Company are exactly what we need as we reposition ourselves in the Internet era of telecommunications. His perspective as our largest individual shareholder will be valuable to the Board and management as well. I wish to thank Dan Moore for his able assistance in the management transition of the last year, and Erik van der Kaay for his many years of service to the Company. We wish them every success in their new endeavors." Mr. Trumbower said: "I look forward to working with SSET's new management team. We agree our immediate task is to reposition the company with new products and services that create value for our worldwide customers as they roll out modern telecommunications infrastructure." Frank S. Trumbower, 61, served as President, Chief Executive Officer of SSE Telecom from 1990 to 1994 and served as a Director from 1989 to 1994. He also served as President and Chief Executive Officer of DirectSat Corporation, a Direct Broadcast Satellite (DBS) licensee partly owned by SSE Telecom (now part of EchoStar Communications Corp.), from 1990 to 1994. Mr. Trumbower subsequently served as a Director of SSE Telecom from 1995 to 1997. Mr. Trumbower is currently the President of Cambridge Technology Partners, Inc., a private venture capital firm specializing in telecommunications and related computer technology. Mr. Trumbower did undergraduate studies at the University of San Francisco and, as a Marshall Scholar, did graduate work in microeconomics at the London School of Economics. Headquartered in Fremont, California, SSE Telecom, Inc. ( is a leading satellite earth station product provider. To date, more than 40,000 of SSE's transceivers or modems have been installed in satellite earth stations in more than 110 countries worldwide. The statements contained in this release which are not historical facts may be deemed to contain forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties, including, without limitation, demand and competition for the Company's products, and other risks or uncertainties detailed in the Company's Securities and Exchange Commission filings. * * * * * -----END PRIVACY-ENHANCED MESSAGE-----