<PAGE>
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): FEBRUARY 22, 1999
---------------------------------------------
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
<PAGE>
ITEM 5. Other Events.
On February 22, 1999, 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 fourth quarter and year-end 1998 results of
operations and a special provision of $10.0 million relating to the federal and
state class action lawsuits pending in Nebraska against the Company and certain
of its current and former officers.
On March 1, 1999, Transcrypt International, Inc. issued a press
release, a copy of which is filed herewith as Exhibit 99.2 and is
incorporated herein by this reference, announcing Michael E. Jalbert as
President and CEO of the Company effective March 1, 1999.
<PAGE>
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 February 22, 1999.
99.2 Press release of Registrant dated March 1, 1999.
<PAGE>
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: March 5, 1999 By:/S/ CRAIG J.HUFFAKER
-----------------------
Craig J. Huffaker
Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
99.1 Press release of Registrant dated February 22, 1999
99.2 Press release of Registrant dated March 1, 1999.
</TABLE>
<PAGE>
EXHIBIT 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE
For Further Information:
Contact: Jim Stark
Director, Investor Relations
(402) 479-8306
TRANSCRYPT REPORTS FOURTH QUARTER LOSS -
ACCRUES $10 MILLION SPECIAL PROVISION FOR CLASS ACTION LAWSUITS
LINCOLN, NEBRASKA, FEBRUARY 22, 1999 -- Transcrypt International, Inc. (OTC
bulletin board: TRII) today announced revenues of $11.9 million for the quarter
ended December 31, 1998 compared to revenues of $20.6 million for the quarter
ended December 31, 1997, a decrease of 42.4%. For the year ended December 31,
1998, revenues were $62.0 million compared to revenues of $40.4 million for the
year ended December 31, 1997. The 53.5% increase in revenues, on a year over
year basis, was due primarily to revenues generated by the Company's subsidiary,
E. F. Johnson Company ("EFJ"), which was acquired on July 31, 1997.
The loss for the quarter ended December 31, 1998 was $14.7 million, or $1.13 per
share compared to a net income of $725,000 or $0.06 per share for the comparable
period in 1997. The fourth quarter loss includes a special provision of $10.0
million relating to the federal and state class action lawsuits pending in
Nebraska against the Company and certain of its current and former officers. As
previously reported, the Company is in ongoing settlement discussions regarding
these lawsuits. While no settlement agreement has been reached, the $10.0
million special provision is the Company's best estimate of the amount that
would be necessary for the Company to contribute to settle the class actions.
The Company would anticipate satisfying any settlement by issuing shares of
common stock to the class members rather than using its cash reserves. Despite
the taking of the special provision, the Company can give no assurances whether
any settlement can be reached, what would be the terms of any settlement or
whether the Company would be required to contribute more than $10.0 million.
The loss for the year ended December 31, 1998 was $22.3 million or $1.72 per
share compared to a loss of $10.9 million or $1.09 per share for the year ended
December 31, 1997. In addition to the $10.0 million special provision, during
the year ended December 31, 1998, the Company incurred a charge of $1.2 million
for restructuring the workforce and incurred legal, audit and severance expenses
of $3.0 million associated with the Company's restatement of its financial
statements, the audit committee investigation, class action lawsuits and SEC
investigation. During the year ended December 31, 1997, the Company incurred a
charge of $9.8 million for in-process research and development cost in
connection with its acquisition of EFJ.
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<PAGE>
The gross margin in the fourth quarter of 1998 was 16.3%, down from the 21.7%
reported in the third quarter of 1998. Sales volume, mix of sales and the cost
related to fixing troubled contracts inherited with the acquisition of EFJ,
adversely impacted the gross margin for the fourth quarter of 1998. No provision
was made for future tax benefits in connection with the loss in the quarter
ending December 31, 1998. The Company currently has deferred tax assets of $12.4
million.
Transcrypt Chairman and interim Chief Executive Officer John T. Connor said,
"Our sales were below expectations as our system sales backlog did not build as
we had anticipated through the end of the year. We are encouraged that our loss
from operations has continued to decline each of the last three quarters of
1998."
"Our focus is clearly on growing our sales", said Ed Osborn, Chief Operating
Officer for Transcrypt. "We have spent a large amount of resources during the
last six months of 1998 fixing the troubled systems we inherited with the
acquisition of EFJ. I am pleased to report that most of these systems are
meeting our customers' expectations, which have resulted in several of these
customers ordering additional equipment to expand their systems."
At the end of 1998, the Company had $20.3 million in cash and cash equivalents
as compared to $20.5 million at the end of the third quarter of 1998. Of this
amount, $10.0 million is pledged as collateral on the Company's revolving line
of credit. Subsequent to the year ended December 31, 1998, the Company has also
pledged cash collateral of $2.8 million as additional security on its long-term
indebtedness. $2.6 million of long-term debt was reclassified to a current
liability on the Company's balance sheet at December 31,1998 pending the
Company's efforts to refinance the debt.
Transcrypt International, Inc., manufactures information security products that
prevent the unauthorized interception on sensitive voice and data communication
and also designs, develops, manufactures and markets stationary land mobile
radio transmitters/receivers and mobile and portable radios.
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 COMPANY'S EFFORTS
TO SETTLE THE PENDING FEDERAL AND STATE CLASS ACTION LAWSUITS AND ITS ABILITY
TO GENERATE POSITIVE SALES GROWTH. 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 COMPANY MAY NOT
BE ABLE TO SETTLE THE PENDING CLASS ACTION LAWSUITS, ANY RESOLUTION
OF THE CLASS ACTION LAWSUITS MAY REQUIRE THE COMPANY TO RECORD A LIABILITY
IN EXCESS OF $10.0 MILLION AND TO SATISFY ANY SUCH OBLIGATION WITH A
FORM OF CONSIDERATION IN ADDITION TO COMMON STOCK 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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<PAGE>
TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1998 and December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
ASSETS (unaudited) (audited)
DECEMBER 31, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,262 $ 15,384
Investments -- 15,900
Accounts receivable, net 9,287 16,008
Receivables - other 605 785
Cost in excess of billings on
uncompleted contracts 1,216 942
Inventory 13,907 18,363
Income tax recoverable -- 1,065
Prepaid expenses 552 478
Deferred tax assets 5,157 3,523
--------- ---------
Total current assets 50,986 72,448
Property, plant and equipment, net 11,885 11,261
Deferred tax assets 7,219 4,504
Intangible assets, net of accumulated
amortization 16,711 18,029
Other assets 411 452
--------- ---------
$ 87,212 $ 106,694
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 7,426 $ --
Current portion of long-term debt 2,732 2,545
Accounts payable 2,620 9,305
Billings in excess of cost on
uncompleted contracts 4,541 6,696
Deferred revenue 1,140 1,743
Accrued expenses 5,101 7,323
Provision for litigation settlement 10,000 --
--------- ---------
Total current liabilities 33,560 27,612
Long-term debt, net of current portion 6 2,758
Deferred revenue 550 934
--------- ---------
34,116 31,304
--------- ---------
Stockholders' equity:
Common stock 129 129
Additional paid-in capital 90,315 90,315
Accumulated deficit (37,348) (15,054)
--------- ---------
53,096 75,390
--------- ---------
$ 87,212 $ 106,694
========= =========
</TABLE>
---MORE----
<PAGE>
TRANSCRYPT INTERNATIONAL, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and twelve months ended December 31, 1998 and 1997
(in thousands, except share and per share data) (unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, December 31,
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 11,851 $ 20,568 $ 62,041 $ 40,423
Cost of sales 9,922 12,984 44,905 26,106
------------ ------------ ------------ ------------
Gross profit 1,929 7,584 17,136 14,317
------------ ------------ ------------ ------------
Operating expenses:
Research and development 1,897 1,855 8,812 4,469
In-process research and development -- -- -- 9,828
Sales and marketing 2,285 2,997 11,476 7,031
General and administrative 2,671 1,841 12,529 4,711
Restructuring charge -- -- 1,230 --
Provision for litigation settlement 10,000 -- 10,000 --
------------ ------------ ------------ ------------
Total operating expenses 16,853 6,693 44,047 26,039
------------ ------------ ------------ ------------
Income (loss) from operations (14,924) 891 (26,911) (11,722)
Other income (expense) 165 18 46 18
Interest income 255 438 1,304 874
Interest expense (166) (215) (649) (643)
------------ ------------ ------------ ------------
Income (loss) before income taxes (14,670) 1,132 (26,210) (11,473)
Income tax provision (benefit) -- 407 (3,916) (524)
------------ ------------ ------------ ------------
Net income(loss) $ (14,670) $ 725 $ (22,294) $ (10,949)
============ ============ ============ ============
Net Income (loss) per share - Basic $ (1.13) $ 0.06 $ (1.72) $ (1.09)
============ ============ ============ ============
Net Income (loss) per share - Diluted $ (1.13) $ 0.06 $ (1.72) $ (1.09)
============ ============ ============ ============
Weighted average common shares - Basic 12,946,624 12,361,944 12,946,624 10,056,690
============ ============ ============ ============
Weighted average common shares - Diluted 12,946,624 13,103,404 12,946,624 10,056,690
============ ============ ============ ============
</TABLE>
###
<PAGE>
PRESS RELEASE
FOR IMMEDIATE RELEASE
For Further Information:
Contact: Jim Stark
Director, Investor Relations
(402) 479-8306
TRANSCRYPT NAMES MICHAEL JALBERT CEO
LINCOLN, NEBRASKA, MARCH 1, 1999 -- Transcrypt International, Inc. (OTC
Bulletin Board: TRII) today announced that Michael E. Jalbert has been hired
as President and Chief Executive Officer of the Company. Prior to joining
Transcrypt, Mr. Jalbert (pronounced jal-bear) was President & CEO of
Microdyne Corporation of Alexandria, VA; a Nasdaq listed company, which was
recently acquired by L-3 Communications. Microdyne is a communications
company specializing in the manufacturing and sale of signaling and telemetry
products and technology outsourcing services. After joining Microdyne in
1997, Mr. Jalbert refocused the company business units and successfully
concentrated the management team on profitable growth strategies. Mr.
Jalbert, 54, also served as CEO of IDB Mobile Communications in Bethesda, MD
and prior to that held executive positions with Diversey Corporation and Air
Products.
Mr. Jalbert will join Transcrypt on March 1, 1999. Transcrypt's Board of
Directors intends to elect him as Chairman of the Board at its next regular
meeting on March 25th. "Combining these three jobs into one position makes
good business sense and allowed us to attract someone of Mike Jalbert's
experience" stated current Chairman of the Board, John Connor.
Tom Thomsen, Chair of the Transcrypt Search Committee, stated that, "The
Company reviewed or interviewed over 50 candidates in this national search.
The Board is very pleased to be able to hire someone, who in a series of
increasing accountabilities, has demonstrated strong leadership skills,
professional executive capabilities and impeccable integrity. He brings a
working knowledge of related industry marketing and manufacturing as well as
corporate governance of publicly held companies."
"The Board thanks John Connor for his dedicated hard work in stepping back in
as interim CEO during the past eight months of the search", Thomsen added.
Connor, who has been Chairman of Transcrypt since 1991, will remain as an
outside director and has agreed to a one year consulting arrangement to
assist with the CEO transition, matters relating to the class action lawsuits
and strategic initiatives that may arise.
Mr. Jalbert has a Bachelor of Science degree in Biology and Chemistry from
Concordia University in Montreal and he has been a very active member of the
Young Presidents Organization, World Presidents, Hospice and Amateur Athletic
Association. Jalbert and his wife, Helene, will be moving to Lincoln during
the next few months. The couple has three grown children living in various
regions of North America.
Transcrypt International, Inc., manufactures information security products
that prevent the unauthorized interception on sensitive voice and data
communication and also designs, develops, manufactures and markets stationary
land mobile radio transmitters/receivers and mobile and portable radios.
###
