-----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, VEhdgDBzI2P3s/zBTDiHzi3cFHkRifOv7xhnA3HEGDiqf1YmPCh8WeaN0zv2coBL faCXjJ1H2VkJKjtY6J+Pgg== 0000895755-99-000038.txt : 19990518 0000895755-99-000038.hdr.sgml : 19990518 ACCESSION NUMBER: 0000895755-99-000038 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARI L CO INC CENTRAL INDEX KEY: 0000917173 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 060678347 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23866 FILM NUMBER: 99624975 BUSINESS ADDRESS: STREET 1: 4895 PEORIA STREET CITY: DENVER STATE: CO ZIP: 80239 BUSINESS PHONE: 303/371-1560 MAIL ADDRESS: STREET 1: 11101 EAST 51ST AVENUE CITY: DENVER STATE: CO ZIP: 80239 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended Commission File No. 0-23866 March 31, 1999 VARI-L COMPANY, INC. (Exact name of Registrant as specified in its charter.) Colorado 06-0679347 ----------------------- ----------------------------------- (State of Incorporation) (I.R.S. Employer identification No.) 4895 Peoria Street Denver, Colorado 80239 ----------------------- (Address of principal executive offices) (303) 371-1560 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 1999: Class of Securities Outstanding Securities ------------------- ---------------------- $0.01 par value 5,498,858 shares Common shares Item 1. Financial Statements - ----------------------------- VARI-L COMPANY, INC. BALANCE SHEETS MARCH 31, 1999 AND DECEMBER 31, 1998 (000's Omitted)
3/31/99 12/31/98 ASSETS (Unaudited) (Audited) - ------ ---------- -------- Current Assets: Cash and cash equivalents $ 5,644 $ 6,515 Trade receivables, less $23 allowance for doubtful accounts 3,799 4,417 Inventories 7,860 7,901 Prepaid expenses and other 2,146 1,235 -------- -------- Total Current Assets 19,449 20,068 -------- -------- Property and Equipment: Machinery and equipment 23,512 22,299 Furniture and fixtures 1,521 1,499 Leasehold improvements 8,030 7,797 -------- -------- 33,063 31,595 Less accumulated depreciation and amortization (4,821) (4,444) -------- -------- Net Property and Equipment 28,242 27,151 -------- -------- Other Assets: Long-term inventories 475 475 Covenant not to compete 25 33 Patents, net of accumulated amortization of $180 and $141 1,576 1,173 Other 1,507 1,771 -------- -------- Total Other Assets 3,583 3,452 -------- -------- TOTAL ASSETS $ 51,274 $ 50,671 - ------------ ======== ======== (Continued)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. BALANCE SHEETS, CONTINUED MARCH 31, 1999 AND DECEMBER 31, 1998 (000's Omitted)
3/31/99 12/31/98 LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) (Audited) - ------------------------------------ ----------- --------- Current Liabilities: Current installments of long-term debt $ 931 $ 832 Financed insurance premiums 81 22 Trade accounts payable 1,527 2,147 Accrued expenses and other 267 684 Income taxes payable 465 0 -------- -------- Total Current Liabilities 3,271 3,685 Bank line of credit 4,406 4,756 Long-term debt 6,275 5,901 Deferred income taxes 3,904 3,904 -------- -------- Total Liabilities 17,856 18,246 -------- -------- Stockholders' Equity: Common stock, $.01 par value, 50,000 shares authorized; 5,499 and 5,464 shares outstanding, respectively 55 54 Paid-in capital 22,341 22,103 Retained earnings 11,040 10,286 Less: Loans for purchase of stock (18) (18) -------- -------- Total Stockholders' Equity 33,418 32,425 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,274 $ 50,671 - ---------------------- ======== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. STATEMENTS OF INCOME FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1999 AND MARCH 31, 1998 (000's Omitted,except for share amounts)
Three Months Three Months Ended Ended 3/31/99 3/31/98 (Unaudited) (Unaudited) ------------ ------------ Net sales $ 5,313 $ 4,045 Cost of products sold 2,366 1,843 -------- -------- Gross profit 2,947 2,202 -------- -------- Other costs and expenses: General and administrative 477 471 Engineering 334 265 Selling 618 476 Interest expense 243 74 Interest income (68) (76) Profit sharing plan contribution 108 0 Other 16 26 -------- -------- 1,728 1,236 -------- -------- Income before taxes 1,219 966 Income taxes 465 386 -------- -------- NET INCOME $ 754 $ 580 - ---------- ======== ======== Basic earnings per share $ 0.14 $ 0.11 ======== ======== Basic weighted average shares outstanding 5,488 5,290 ======== ======== Diluted earnings per share $ 0.14 $ 0.11 ======== ======== Diluted weighted average shares outstanding 5,580 5,370 ======== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1999 AND MARCH 31, 1998 (000's Omitted)
Three Months Three Months Ended Ended 3/31/99 3/31/98 (Unaudited) (Unaudited) ------------ ------------ Net cash provided by operating activities (Note 7) $ 352 $ 408 -------- -------- Cash flows from investing activities: Purchases of property and equipment (1,468) (2,243) -------- -------- Net cash used in investing activities (1,468) (2,243) -------- -------- Cash flows from financing activities: Increases in long-term debt 733 534 Repayments of long-term debt (260) (151) Borrowings under bank line of credit 900 1,735 Repayments under bank line of credit (1,250) (850) Net borrowings (repayments) for insurance financing activities 59 (8) Treasury stock purchase (22) 0 Net proceeds from stock issuances 85 410 -------- -------- Net cash provided by financing activities 245 1,670 -------- -------- Net (decrease) in cash (871) (165) Beginning cash 6,515 5,971 -------- -------- ENDING CASH $ 5,644 $ 5,806 - ----------- ======== ======== Supplemental disclosure of cash flows information: Cash paid for interest $ 275 $ 181 ======== ======== Cash paid for income taxes $ 0 $ 0 ======== ========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS Vari-L Company, Inc. (the Company) was founded in 1953 and is a manufacturer of electronic components. The Company's products are used in commercial and military communications systems where electrical processing of radio frequency signals is required. NOTE 1 - FINANCIAL PRESENTATION These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1998 and notes thereto. In the opinion of management, the accompanying interim, unaudited financial statements contain all the adjustments necessary to present fairly the financial position of the Company as of March 31, 1999, and the results of its operations, and its cash flows for the three months ended March 31, 1999 and March 31, 1998. All adjustments made are of a normal recurring nature. NOTE 2 - INVENTORIES Inventories consist of the following:
(000's Omitted) --------------------- 3/31/99 12/31/98 (Unaudited) (Audited) ----------- --------- Finished goods $ 2,124 $ 2,174 Work in process 3,368 3,365 Raw materials 2,217 2,211 Gold bullion 151 151 -------- -------- $ 7,860 $ 7,901 ======== ======== Long-term inventories $ 475 $ 475 ======== ========
NOTE 3 - INCOME TAXES Income tax expense reflects effective tax rates of 38.13% for 1999 and 40% for 1998. NOTE 4 - CREDIT FACILITY The Company has two credit facilities. The first consists of a line of credit. The second consists of a term loan and a revolving equipment term loan. The line of credit provides for borrowings of up to $5.0 million. Interest is payable monthly, calculated at prime. The line of credit matures April 30, 2000. At March 31, 1999, the outstanding balance due under the line of credit was approximately $4.4 million. On August 21, 1998, the Company renegotiated its term loan and revolving equipment term loan. The Company extended its term loan for an additional year and converted the loan to a floating rate of Libor plus 1.50% and obtained fixed rate protection by executing an interest rate swap which results in an all-in fixed rate of 7.75% through the maturity date of February 24, 2002. Monthly principal and interest payments of approximately $64,000 are required. At March 31, 1999, the balance due under the term loan was approximately $3.9 million. The revolving equipment term loan provides for borrowings up to $4.0 million. Interest accrues on the outstanding principal balance of the revolving equipment term loan at prime plus .25% when advances are made under the revolver. These borrowings can be converted to term notes at rates which adjust to the 3-year treasury note rate plus 1.95%. When converted, the term debt requires monthly principal and interest payments calculated on a seven-year amortization basis with a 42 month maturity. The revolving loan matures on August 13, 1999. As of March 31, 1999, the balance of the advances under the revolving loan that had been converted to term notes totaled approximately $3.2 million. Interest accrues on the outstanding principal balances of these term notes at rates ranging from 6.108% to 7.72% and monthly principal and interest payments totalling $47,812 are required. Continued VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 5 - SECURITIES PURCHASE AGREEMENT On March 4, 1997, the Company entered into an agreement to sell up to 75 units of debentures and warrants. The units consisted of an aggregate of $7.5 million in 4-year, 7%, subordinated, convertible debentures and 750,000 non-redeemable warrants to purchase common stock at a price of $9.50 per share, exercisable for a period of three years. As provided for in the agreement, all of the debentures plus accrued interest were converted into common stock during 1997. As of March 31, 1999, 85,000 of the warrants had been exercised and 665,000 warrants were still outstanding. NOTE 6 - STOCK COMPENSATION PLANS The Company has three stock-based compensations plans: a stock option plan, an employee stock purchase plan and a stock grant plan. Stock Option Plan - ----------------- The Company has reserved 3,000,000 shares of its common stock for issuance upon exercise of rights and options under the stock option plan. Typically, rights and options have been granted, subject to a vesting schedule, vesting at the rate of 20 percent per year, becoming fully vested upon the change of control of the Company, and expiring 10 years from the date of issuance. Certain options granted to senior management are fully vested upon issuance. In the three months ended March 31, 1999, the Company granted 207,000 options pursuant to the plan. No options were exercised in the quarter. Employee Stock Purchase Plan - ---------------------------- Under the Company's employee stock purchase plan, eligible employees may contribute up to 10 percent of their earnings, through payroll deductions, to purchase shares of the Company's common stock. The purchase price is equal to 85 percent of the fair value of the stock on specified dates. A total of 800,000 shares were reserved under the plan and the maximum number of shares to be issued is 200,000 per year. For the plan year 1998, a total of 12,851 shares were issued in January 1999 at $6.43 per share. Stock Grant Plan - ---------------- During 1996, the Company adopted a stock grant plan under which stock grants can be made to the Company's officers, directors, employees, consultants, and advisors. The Company reserved 100,000 shares of its common stock for issuance under the stock grant plan. The plan provides for automatic grants of 50 shares per month to nonmanagement members of the Company's Board of Directors. During the first quarter of 1999, those members received grants for 450 shares. Compensation cost charged to operations was measured by the fair market value of the stock on the date of the grants. In connection with certain executive employment agreements, the Compensation Committee granted stock bonuses of 25,000 shares to each of the Company's two senior officers. The grants are subject to a vesting schedule whereby one-half of the shares were vested during 1997 and 1998. Shares are granted only as earned pursuant to the vesting schedule in the employment agreement. 6,250 shares vested in March 1999, and the remaining shares are scheduled to vest in 2000. Additionally, the Company is liable for income and payroll taxes attributable to the stock bonuses. The grants are subject to forfeiture provisions related to fulfillment of various terms of the employment agreements. Accordingly, the Company is amortizing the cost of the stock bonuses over the term of the employment agreements. As of March 31, 1999, the value of the vested stock bonuses, and the related income and payroll taxes, totaled approximately $698,000 and the unamortized, prepaid expense portion of this cost was approximately $317,000. Continued VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 7 - RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES The reconciliation of net income to net cash provided by operating activities for the three months ended March 31, 1999 and March 31, 1998 is as follows:
(000's Omitted) -------------------------- 3/31/99 12/31/98 (Unaudited) (Audited) ----------- --------- Net Income $ 754 $ 580 -------- -------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 377 240 Amortization of covenant not to compete 8 8 Stock contribution to profit sharing plan 101 0 Changes in assets and liabilities: Decrease in accounts receivable 618 115 Decrease (increase) in inventories 41 (460) (Increase) in prepaid expenses and other (836) (370) (Increase) in patents and other assets (139) (40) Increase (decrease) in accounts payable (620) 86 (Decrease) in accrued expenses (417) (137) Increase in income taxes payable 465 386 -------- -------- Total adjustments (402) (172) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 352 $ 408 ======== ======== Continued
VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 8 - EARNINGS PER SHARE The following is a reconciliation of the net income (numerator) and number of shares (denominator) for the computations of basic and diluted earnings per shares:
(000's Omitted) ------------------------ For the quarter ended March 31, 1998 Income Shares Per Share - ------------------------------------ (Numerator) (Denominator) Amount ---------- ------------ -------- Basic earnings per share $ 580 5,290 $0.11 Effect of dilutive stock options 0 80 ----- ----- Diluted earnings per share $ 580 5,370 $0.11 ===== =====
(000's Omitted) ------------------------ For the quarter ended March 31, 1998 Income Shares Per Share - ------------------------------------ (Numerator) (Denominator) Amount ---------- ------------ -------- Basic earnings per share $ 754 5,488 $0.14 Effect of dilutive stock options 0 92 ----- ----- Diluted earnings per share $ 754 5,580 $0.14 ===== =====
At March 31, 1999, the Company had 5,498,858 common shares outstanding. During the three months ended March 31, 1999, the Company issued 34,724 shares. For purposes of computing earnings per share, the shares issued during the period were weighted for the period of time they were outstanding. RESULTS OF OPERATIONS Three months ended - ------------------ March 31, 1999 and March 31, 1998 - ---------------------------------- Total Revenues - -------------- Sales revenue increased approximately $1.3 million (31%) in the three months ended March 31, 1999 as compared with the three months ended March 31, 1998, from $4.0 million to $5.3 million The strong increase in sales reflects continuing demand for products in both the commercial and military/aerospace markets, including the initial shipments against an 840,000 unit order for VCOs to be used in subscriber devices. The Company has seven major product lines: 1. Signal Processing components for industrial, military and aerospace (Military/Aerospace Signal Processing, or MSP). 2. Signal Source components, primarily wide-band VCOs, for industrial, military and aerospace (Military/Aerospace Signal Source, or MSS). 3. Special Assemblies that combine MSP and MSS components (Military/Aerospace Special Assemblies, or MSA). 4. Commercial Signal Source components including PLLs and narrow-band VCOs (Commercial Signal Source, or CSS). 5. Commercial Signal Processing components, including optoelectronic components and subassemblies used in magnetic and fiberoptic products for CATV applications (Commercial Signal Processing, or CSP). 6. Subscriber product components used in hand-held telephone sets, pagers and other consumer-oriented products (Subscriber Signal Source, or SSS). 7. Commercial Special Assemblies (CSA). In the first three months of 1999, the composition of sales revenue was 6% MSP, 7% MSS, less than 1% MSA, 68% CSS, 7% CSP, 12% SSS and less than 1% CSA. In the first three months of 1998, the composition of sales revenue was 10% MSP, 31% MSS, 1% MSA, 54% CSS, 4 % CSP, 0% SSS and 0% CSA. Cost of Goods Sold ------------------ Cost of goods sold, as a percent of sales revenue, was 45% and 46% in the three months ended March 31, 1999 and 1998, respectively. The improvement in these ratios for the period ended March 31, 1999 resulted from the Company's continuing efforts to make additional efficiencies in its processes and the installation of additional automated production facilities. Selling and Engineering Expense ------------------------------- Selling expenses increased approximately $142,000, or 30%, for the three months ended March 31, 1999 as compared to the three months ended March 31, 1998, primarily reflecting commissions on approximately $1.3 million in increased sales in the quarter. The Company continues to actively advertise and travel to promote its product lines. Engineering expenses increased approximately $69,000, or 26%, for the three months ended March 31, 1999 as compared to the three months ended March 31, 1998. These increases reflect ongoing improvements to the engineering department, including increased engineering staff and related equipment costs and expenses, to support new product development and expansion of existing product lines. General and Administrative and Other Expenses --------------------------------------------- General and administrative expenses increased approximately $6,000, or 1%, for the three months ended March 31, 1999 as compared to the three months ended March 31, 1998. Other expenses decreased approximately $10,000 in the three months ended March 31, 1999 as compared to the three months ended March 31, 1998. Interest Income and Expense --------------------------- The Company manages its credit facility and money fund in tandem. Interest income is earned on the Company's short-term investments in a U.S. government securities money fund purchased with proceeds from the March 1997 convertible debenture and warrant offering. Interest income decreased approximately $8,000, or 10%, to approximately $68,000, in the three months ended March 31, 1999 compared to the three months ended March 31, 1998 This decrease reflects usage of these funds during the interim period for expansion of production facilities. Interest expense increased approximately $169,000 (228%) for the three months ended March 31, 1999 as compared with the three months ended March 31, 1998. The increase in the quarter is attributable to interest on increased borrowings during the year to support facilities improvements and equipment for expanded and improved production facilities. In addition, the first quarter of 1998 included an interest accrual adjustment which was not applicable to 1999. Depreciation and Amortization ----------------------------- Depreciation and amortization increased approximately $137,000 (57%) for the three months ended March 31, 1999 as compared with the three months ended March 31, 1998. The increase reflects depreciation on increased investments in property, equipment and leasehold improvements. Depreciation and amortization expense is expected to continue to increase as a result of these and future capital investments. FINANCIAL CONDITION Liquidity --------- At March 31, 1999, the Company's working capital was $16.2 million compared to $16.4 million at December 31, 1998. The Company's current ratio was 5.9 to 1 as of March 31, 1999 and 5.4 to 1 at December 31, 1998. Capital Resources ----------------- The Company has two credit facilities. The first consists of a line of credit. The second consists of a term loan and a revolving equipment term loan. The line of credit provides for borrowings of up to $5.0 million. Interest is payable monthly, calculated at prime. The line of credit matures April 30, 2000. At March 31, 1999, the outstanding balance due under the line of credit was approximately $4.4 million. On August 21, 1998, the Company renegotiated its term loan and revolving equipment term loan. The Company extended its term loan for an additional year and converted the loan to a floating rate of Libor plus 1.50% and to receive fixed rate protection by executing an interest rate swap which results in an all-in fixed rate of 7.75% through the maturity date of February 24, 2002. Monthly principal and interest payments of approximately $64,000 are required. At March 31, 1999, the balance due under the term loan was approximately $3.9 million. The revolving equipment term loan provides for borrowings up to $4.0 million. Interest accrues on the outstanding principal balance of the revolving equipment term loan at prime plus .25% when advances are made under the revolver. These borrowings can be converted to term notes at rates which adjust to the 3-year treasury note rate plus 1.95%. When converted, the term debt requires monthly principal and interest payments calculated on a seven-year amortization basis with a 42 month maturity. The revolving loan matures on August 13, 1999. As of March 31, 1999, the balance of the advances under the revolving loan that had been converted to term notes totaled approximately $3.2 million. Interest accrues on the outstanding principal balances of these term notes at rates ranging from 6.108% to 7.72% and monthly principal and interest pay-ments totaling $47,812 are required. The Company finances certain of its annual insurance premiums through a financing company. The amounts due under these loans totaled approximately $81,000 as of March 31, 1999 and are paid in monthly installments of $11,581 with interest at 6.21%. On March 4, 1997, the Company entered into an agreement to sell up to 75 units of debentures and warrants. The units consisted of an aggregate of $7.5 million in four year, 7% convertible debentures and 750,000 non- redeemable common stock purchase warrants exercisable at $9.50 per share for a period of three years. All of the debentures plus accrued interest were converted into common stock during 1997. During April 1998, 85,000 warrants were exercised. 665,000 warrants remained outstanding as of March 31, 1999. The Company believes that it has sufficient financial resources available to meet its short-term working capital needs through cash flows generated by operating activities and through the management of its sources of financing. The Company also believes that, as the result of the sales of the convertible debentures, it has adequate capital resources to continue its growth plans. Backlog ------- Total backlog of unfilled firm customer orders ("backlog") at March 31, 1999 was $16.8 million compared with $16.5 million at March 31, 1998. Backlog at December 31, 1998 was $18.1 million. Year 2000 Issues ---------------- The Company has given serious attention to the potential problems that could arise from the rollover of computer clocks with two-digit year fields when the year 2000 arrives. Assessment of the affect on both IT (information technology) and non-IT issues is progressing rapidly. IT assessment is substantially complete. Non IT assessment is also substantially complete except for suppliers, for which we have had a 52% response rate to date. The Company currently expects to have all assessment, remediation and testing completed by the end of August 1999. In the area of business and operations, the Company has completed most of its automation in recent years. Accordingly, the computers and software that have been acquired during those years incorporated Year 2000 compliant technology. This compliance is being continuously confirmed in the Company's various business applications as a byproduct of another technology project the Company initiated early this year, a licensing audit designed to ensure that all software utilized by Company personnel is properly licensed by the software provider. The same software used to verify the software installed on each PC also verifies Year 2000 readiness. The Company has also instituted a policy prohibiting the purchase of any new computers or other devices that have clocks without empirical proof that they can recognize the year 2000 without malfunctioning. In the non-IT area, which includes test equipment, the Company's principal hardware vendor has provided certification and warranty as to Year 2000 compliance. In addition, as routine, scheduled maintenance and calibration is performed on this equipment, veracity of that certification is tested and confirmed. To address the other non-IT issues, such as elevators, heating systems, utilities, etc., an outside consultant will be brought in by the Company to run independent tests of these systems and the various vendors will be providing certification as to Year 2000 compliance. The Company will continue to investigate whether its customers and vendors are also becoming Year 2000 compliant. Like other businesses, the Company has been providing information to its customers, upon their request, concerning the Company's efforts in this matter. To date, the costs that the Company has incurred which are specific to the assessment and remediation of Year 2000 issues have not been material. No special expenditures have been required in the area of software or hardware. Some legal fees and educational expenses have been incurred to heighten awareness and to help organize business activities to incorporate assessment and remediation and the MIS staff was increased to perform and manage compliance. For the most part, however, Year 2000 issues have been incorporated into other management routines, thereby minimizing extraordinary costs. It is presently anticipated that future, separately identifiable costs of assessment and remediation will also be nominal, and it is very likely that such costs will be less than $50,000 in 1999. In order to minimize the impact of any unanticipated Year 2000 "non- readiness" problems, the Company plans to have manual backup systems in place to forestall any interruption of operations resulting from the failure of automated systems. In addition, the data generated and collected in those systems is continuously being archived as a part of the Company's existing business practices. The Company does not foresee any serious Year 2000 problems occurring with its vendors or customers. While it is not possible to predict what kinds of minor Year 2000 issues might arise that have not been addressed as a priority by the Company, or by some other company with which the Company does business, the Company believes that it has multiple sources for the vast majority of the raw materials and services that it presently procures from vendors or third-party contractors. Unless a major problem of a national or global scope occurs, the Company believes it will be able to maintain sufficient inventory levels to continue production while it seeks to rectify any smaller problems that may arise. The Company is continuing to follow up on Year 2000 compliance with those suppliers who have not yet responded, as well as those who have indicated that their Year 2000 compliance is not yet complete. With respect to the Company's customer base, substantially all of the Company's most significant customers are very large, well-capitalized, multi-national companies with substantial resources. The Company believes that these customers are doing everything possible to protect themselves and, indirectly, the Company, from business losses resulting from Year 2000 issues. While there is no guarantee that the Company will reach Year 2000 compliance by the necessary deadline, the Company believes that it is applying the resources and effort sufficient to do so. Forward looking statements -------------------------- Some of the statements contained in this document are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks including, but not limited to the success of the products into which the Company's products are integrated, governmental action relating to wireless communications licensing and regulation, internal projections as to the demand for certain types of technological innovation, competitive products and pricing, the success of new product development efforts, the timely release for production and the delivery of products under existing contracts, future economic conditions generally, as well as other factors, including any events that result from the year 2000 computer clock rollover. VARI-L COMPANY, INC. PART II--OTHER INFORMATION Item 1 Legal Proceedings ----------------- None Item 2 Changes in Securities --------------------- None Item 3 Defaults Upon Senior Securities ------------------------------- None Item 4 Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5 Other Information ----------------- None Item 6 Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VARI-L COMPANY, INC. Date: May 14, 1999 By: /s/ Jon L. Clark ------------------------ ---------------------------- Jon L. Clark, V.P. Finance and Principal Financial Officer EXHIBIT INDEX No. Description Method of Filing - --- ----------- ---------------- 27 Financial Data Schedule Filed herewith electronically EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VARI-L'S UNAUDITED FINANCIAL STATEMENTS PREPARED AS OF MARCH 31, 1999 AND FOR THE THREE-MONTH PERIOD THEN ENDED, INCLUDED WITH ITS 1ST QUARTER 1999 10-QSB FILING WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 MAR-31-1999 5,644 0 3,822 23 7,860 19,449 33,063 4,821 51,274 3,271 0 0 0 55 33,363 51,274 5,313 5,381 2,366 2,366 1,688 0 108 1,219 465 754 0 0 0 754 .14 .14
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