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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): AUGUST 6, 1998
---------------------------------------------
TRANSCRYPT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21681 47-0801192
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
4800 NW FIRST STREET, LINCOLN, NEBRASKA 68521
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code: (402) 474-4800
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ITEM 5. Other Events.
On August 6, 1998, Transcrypt International, Inc. issued a press
release, a copy of which is filed herewith as Exhibit 99.1 and is incorporated
herein by this reference, announcing second quarter results of operations and a
reduction in workforce plan.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
None required.
(b) Pro Forma Financial Information.
None required.
(c) Exhibits.
The following is furnished as an exhibit to this report:
99.1 Press release of Registrant dated August 6, 1998.
1
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TRANSCRYPT INTERNATIONAL, INC.
Date: August 11, 1998 By: /s/ JOHN T. CONNOR
--------------------------------------
John T. Connor
Chairman of the Board of Directors and
interim Chief Executive Officer
(Principal executive officer and duly
authorized signatory)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
99.1 Press release of Registrant dated August 6, 1998.
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EXHIBIT 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION:
CONTACT: CRAIG HUFFAKER JIM STARK
CHIEF FINANCIAL OFFICER OR DIRECTOR, INVESTOR RELATIONS
402-479-8330 402-479-8306
TRANSCRYPT INTERNATIONAL REPORTS SECOND QUARTER LOSS
ANNOUNCES PLAN TO REDUCE WORKFORCE
LINCOLN, NEBRASKA, AUGUST 6, 1998 -- Transcrypt International, Inc. today
announced a net loss of $5.0 million, or $.39 per share, on revenues of $13.9
million for the quarter ended June 30, 1998. For the comparable quarter in 1997,
the net loss was $790,000, or $.09 per share, on revenues of $2.9 million. Of
the $13.9 million in revenues for the second quarter of 1998, approximately $2.4
million of revenues were related to timing issues associated with the Company's
restatement of the audited consolidated financial statements for the years ended
December 31, 1997 and 1996.
For the six-month period ended June 30, 1998, the net loss was $3.7 million, or
$.29 per share, on revenues of $35.9 million, compared to a net loss of
$648,000, or $.07 per share, on revenues of $6.4 million for the same period in
1997. The increase in revenues was due primarily to revenues generated by the
Company's subsidiary, E. F. Johnson Company, which was acquired on July 31,
1997. Approximately $5.9 million of revenues for the first six months of 1998
were related to timing issues as mentioned above.
During the quarter ended June 30, 1998, the Company experienced declining
revenues from the first quarter of 1998 and incurred substantial costs primarily
in connection with the audit and legal fees associated with the restatement of
the Company's financial statements, severance payments, class action lawsuits,
SEC investigation and Audit Committee investigation. The costs incurred in the
second quarter of 1998 related to the above mentioned events were approximately
$2.6 million.
Transcrypt Chairman and interim Chief Executive Officer John T. Connor said,
"Customers' confidence was adversely affected by the delay in receipt of the
1997 audited consolidated financial statements and related events. As a result,
our revenues for the quarter were down substantially from the first quarter of
1998. We believe customer confidence is returning to Transcrypt, but we need to
take action to reduce our operating expenses."
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To reduce expenses, the Company announced that it was implementing a plan to
reduce its workforce by approximately 25%. Initially, the Company will offer a
voluntary severance program to its employees, which will, among other things,
provide outplacement services to those employees who choose to participate in
the program. The Company anticipates that it will take a restructuring charge in
the third quarter of 1998 of approximately $1.4 million in connection with the
reduction in its workforce. "In view of our current situation, we will continue
to evaluate initiatives to reduce costs and improve our overall financial
performance," Connor added.
As a result of the loss in the second quarter of 1998, the Company was in
default of the tangible net worth covenant under the Company's bank credit
facility. The Company has received a waiver for this default and is working to
amend the credit facility with its lender.
Transcrypt International, Inc., manufactures information security and wireless
communication products that prevent the unauthorized interception on sensitive
voice and data communication.
CERTAIN MATTERS DISCUSSED IN THIS PRESS RELEASE CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE FORWARD LOOKING STATEMENTS RELATE TO THE LEVEL OF CUSTOMER
CONFIDENCE, THE EFFECT OF THE REDUCTION IN WORKFORCE PROGRAM AND THE ANTICIPATED
RESTRUCTURING CHARGE IN THE THIRD QUARTER OF 1998. THESE FORWARD LOOKING
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE THE
ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED, SUGGESTED OR IMPLIED BY THE FORWARD LOOKING STATEMENTS DUE TO THE
NUMBER OF RISK FACTORS INCLUDING, BUT NOT LIMITED TO, THE TIMING OF AND THE
COSTS INCURRED IN CONNECTION WITH THE REDUCTION IN WORKFORCE PROGRAM, THE IMPACT
OF THE REDUCTION IN WORKFORCE PROGRAM ON THE COMPANY'S BUSINESS, RESULTS OF
OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY AND OTHER RISKS DETAILED IN THE
COMPANY'S REPORTS FILED WITH THE SECURITIES & EXCHANGE COMMISSION, INCLUDING ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
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TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
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(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 22,895 $ 15,384
INVESTMENTS 3,000 15,900
ACCOUNTS RECEIVABLE, NET 9,970 16,008
RECEIVABLES - OTHER 163 785
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 4,139 942
INVENTORY 19,593 18,363
INCOME TAX RECOVERABLE 322 1,065
PREPAID EXPENSES 955 478
DEFERRED TAX ASSETS 3,528 3,523
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TOTAL CURRENT ASSETS 64,565 72,448
PROPERTY, PLANT AND EQUIPMENT, NET 12,372 11,261
DEFERRED TAX ASSETS 6,497 4,504
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION 17,267 18,029
OTHER ASSETS 514 452
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$ 101,215 $ 106,694
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
REVOLVING LINE OF CREDIT $ 9,117 $ --
CURRENT PORTION OF LONG-TERM DEBT 160 2,545
ACCOUNTS PAYABLE 5,210 9,305
BILLINGS IN EXCESS OF COST ON UNCOMPLETED CONTRACTS 4,965 6,696
DEFERRED REVENUE 1,306 1,743
ACCRUED EXPENSES 5,533 7,323
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TOTAL CURRENT LIABILITIES 26,291 27,612
LONG-TERM DEBT, NET OF CURRENT PORTION 2,592 2,758
DEFERRED REVENUE 669 934
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29,551 31,304
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STOCKHOLDERS' EQUITY:
COMMON STOCK 129 129
ADDITIONAL PAID-IN CAPITAL 90,315 90,315
ACCUMULATED DEFICIT (18,781) (15,054)
--------- ---------
71,663 75,390
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$ 101,215 $ 106,694
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TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
REVENUES $ 13,877 $2,915 $ 35,865 $ 6,427
COST OF SALES 10,853 2,289 23,763 3,561
------------ ------------ ------------ ------------
GROSS PROFIT 3,024 626 12,102 2,866
------------ ------------ ------------ ------------
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT 2,703 683 4,741 1,316
SALES AND MARKETING 3,355 731 6,565 1,673
GENERAL AND ADMINISTRATIVE 4,715 651 6,828 1,223
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 10,773 2,065 18,134 4,212
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (7,749) (1,439) (6,032) (1,346)
OTHER INCOME 97 -- 113 --
INTEREST INCOME 174 192 568 317
INTEREST EXPENSE (163) (33) (262) (82)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (7,641) (1,280) (5,613) (1,111)
BENEFIT FROM INCOME TAXES (2,598) (490) (1,886) (463)
------------ ------------ ------------ ------------
NET LOSS $ (5,043) $ (790) $ (3,727) $ (648)
============ ============ ============ ============
NET LOSS PER SHARE -
BASIC AND DILUTED $ (0.39) $ (0.09) $ (0.29) $ (0.07)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES -
BASIC AND DILUTED 12,946,624 9,283,078 12,946,624 8,991,412
============ ============ ============ ============
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