FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998 Commission File Number 1-9014
Chyron Corporation
(Exact name of registrant as specified in its charter)
New York 11-2117385
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
5 Hub Drive, Melville, NY 11747
(Address of principal executive offices) (Zip Code)
(516) 845-2000
(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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock $.01 Par Value - 32,072,372 as of
August 12, 1998
This document consists of 12 pages
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands except per share amounts)
(Unaudited)
1998 1997
Net sales..................................... $21,096 $21,897
Cost of products sold......................... 11,416 11,980
Gross profit.................................. 9,680 9,917
Operating Expenses:
Selling, general and administrative ........ 8,966 7,481
Research and development ................... 2,506 1,937
Restructuring and other non-recurring charges 3,979 2,407
Total operating expenses...................... 15,451 11,825
Operating loss ...................... (5,771) (1,908)
Interest and other expense, net............... 478 434
Loss before provision for income taxes (6,249) (2,342)
Income taxes/equivalent (benefit)... (1,417) (810)
Net loss ............................ $(4,832) $(1,532)
Net loss per common share - Basic and Diluted $ (.15) $ ($.05)
Weighted average shares used in computing net
loss per common share Basic and Diluted 32,972 32,036
See Notes to the Consolidated Financial Statements
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands except per share amounts)
(Unaudited)
1998 1997
Net sales..................................... $42,621 $40,098
Cost of products sold......................... 22,219 22,031
Gross profit.................................. 20,402 18,067
Operating Expenses:
Selling, general and administrative ........ 16,685 14,708
Research and development ................... 5,016 3,448
Restructuring and other non-recurring charges 3,979 3,082
Total operating expenses...................... 25,680 21,238
Operating loss ...................... (5,278) (3,171)
Interest and other expense, net............... 836 764
Loss before provision for income taxes (6,114) (3,935)
Income taxes/equivalent (benefit) ... (1,316) (1,307)
Net loss ............................ (4,798) (2,628)
Retained earnings beginning of period 9,237 9,997
Retained earnings end of period $ 4,439 $ 7,369
Net loss per common share Basic and Diluted $ (.15) $ (.08)
Weighted average shares used in computing net
loss per common share Basic and Diluted 32,072 31,949
See Notes to the Consolidated Financial Statements
CHYRON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
(Unaudited)
ASSETS
June 30, December 31,
1998 1997
Current assets:
Cash and cash equivalents................... $ 1,912 $ 2,968
Accounts and notes receivable............... 20,384 21,125
Inventories................................. 22,333 26,540
Prepaid expenses............................ 3,256 1,897
Deferred tax asset.......................... 6,485 4,301
Other....................................... 341 283
Total current assets...................... 54,711 57,114
Property and equipment........................ 13,098 12,373
Excess of purchase price over net
tangible assets acquired.................... 5,879 6,779
Investment in RT-SET.......................... 2,161 2,161
Software development costs.................... 3,637 5,224
Deferred tax asset............................ 7,070 7,070
Other......................................... 3,362 3,359
TOTAL ASSETS $89,918 $94,080
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses....... $12,910 $14,164
Current portion of long-term debt .......... 2,503 2,318
Deferred revenue ............... 3,952 1,327
Capital lease obligations 177 350
Total current liabilities................. 19,542 18,159
Long-term debt................................ 16,685 17,774
Accrued pension expense....................... 2,202 2,007
Other......................................... 1,843 1,861
Capital lease obligations 273 317
Total liabilities........................... 40,545 40,118
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value without designation
Authorized - 1,000,000 shares, Issued - none
Common stock; par value $.01
Authorized - 150,000,000 shares
Issued and outstanding -
32,072,372 shares at June 30, 1998
and 32,605,705 at December 31, 1997......... 321 326
Additional paid-in capital................... 44,021 44,016
Retained earnings............................ 4,439 9,237
Cumulative translation adjustment............ 592 383
Total shareholders' equity................. 49,373 53,962
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $89,918 $94,080
See Notes to the Consolidated Financial Statements
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997
Net loss.............................. $(4,798) $(2,628)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Restructuring and non-recurring charges 3,979 1,924
Depreciation and amortization 2,600 1,909
Deferred income tax (benefit)............... (1,590) (1,855)
Changes in operating assets and liabilities:
Accounts and trade notes receivable.......... 997 3,460
Inventories.................................. 3,772 (745)
Prepaid expenses ............................ (1,336) (1,484)
Other assets................................. (60) (282)
Accounts payable and accrued expenses ....... (3,163) 1,709
Deferred revenue 2,610 247
Other liabilities............................ 177 (271)
Net cash provided by operating activities....... 3,188 1,984
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Axis Holdings Incorporated....... (413)
Acquisitions of property and equipment.......... (1,381) (1,016)
Capitalized software development ............... (1,573) (756)
Net cash used in investing activities........... (2,954) (2,185)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of term loan........................... (1,000) (1,000)
(Payments of) borrowings from revolving credit
agreement, net.......................... (60) 200
Payments of capital lease obligations........... (232) (65)
Net cash used in financing activities........... (1,292) (865)
Effect of foreign currency rate fluctuations
on cash and cash equivalents................... 2 (4)
Change in cash and cash equivalents............. (1,056) (1,070)
Cash and cash equivalents at beginning
of period............................... 2,968 4,555
Cash and cash equivalents at end of period...... $1,912 $3,485
Non-cash investing and financing activities:
On March 31, 1997, the Company acquired all the issued and outstanding
shares of Axis Holdings Incorporated. The consideration, in addition to
cash paid, included the issuance of 173,913 shares of Chyron Corporation
common stock valued at $750,000 and notes payable of $667,000.
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles for
interim financial reporting. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These statements should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1997.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June
30,1998 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1998.
2. NEW ACCOUNTING POLICIES
In the first quarter of 1998, the Company adopted AICPA Statement of
Position 97-2 ("SOP 97-2"), "Software Revenue Recognition." The adoption
of SOP 97-2 did not have a material affect on the results of operations of
the Company in the second quarter of 1998.
During 1997 and 1998 the Financial Accounting Standards Board ("FASB")
issued Statement on Financial Accounting Standards ("SFAS") No. 129,
"Disclosure of Information About Capital Structure", SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information" and
SFAS No. 132, "Employers' Disclosures About Pensions and Other Post
Retirement Benefits." These accounting standards are effective for
financial statements issued for fiscal years beginning after December 15,
1997 and requires restatement of disclosures for earlier periods.
The Company will adopt the new requirements in its annual financial
statements in 1998. The Company does not anticipate the adoption of these
new standards to have a material effect on the Company's consolidated
financial statements.
3. RESTATEMENT AND RECLASSIFICATION
In 1997, the Financial Accounting Standards Board issued Statement No. 128
"Earnings per Share", which was effective for the year ended December 31,
1997. Accordingly, all prior period amounts have been restated to reflect
this new statement. In addition, certain prior year amounts have been
reclassified to conform to current year presentation.
4. PRODUCT LINE RESTRUCTURING
During the second quarter of 1998, as a result of continuing poor operating
results and specifically the inability of the Company's Concerto Division
to meet revenue and operating targets, management determined that it would
be in the Company's best interest to implement a restructuring plan and
refocus on its core business of graphics, routing and automation products
for television broadcast, cable and post production industries. Such
restructuring plan involves the disposal of the Concerto and Trilogy
Divisions, the modification of the investment in RT-SET and the
reorganization of the Company's core product sales force to be complimentary
to its new sales and marketing strategy. As a result, the Company has
recorded a $3,979,000 million charge to operations during the second quarter
of 1998. Such charge resulted from a write-down of assets to estimated net
realizable value, employee severance, selling costs, as a result of such
restructuring plans. Additional amounts were accrued for litigation and
other legal costs.
5. ACCOUNTS AND NOTES RECEIVABLE
Trade accounts and notes receivable are stated net of an allowance for
doubtful accounts of $3,357,000 and $3,124,000 at June 30, 1998 and December
31, 1997, respectively.
6. INVENTORIES
Inventories, net of obsolescence reserves consist of the following (in
thousands):
June 30, December 31,
1998 1997
Finished goods $10,812 $12,346
Work-in-process 3,002 9,303
Raw material 8,519 4,891
$22,333 $26,540
7. INVESTMENT IN RT-SET
On February 29, 1996, the Company effectively purchased an option to acquire
a 19% interest in Real Time Synthesized Entertainment Technology, Ltd. ("RT-
SET"), located in Tel Aviv, Israel. RT-SET develops, markets and sells real
time virtual studio set software and proprietary communications
hardware that operate on Silicon Graphics systems. In form, Chyron purchased
shares of RT-SET Convertible Preferred Stock, which are convertible into RT-
SET common stock, in exchange for 800,000 shares of Chyron restricted stock.
In accordance with the purchase agreement, the 800,000 of Chyron restricted
common stock were to be held in escrow and released in tranches of one-third
and two-thirds, subject to certain conditions. During 1996, the first of
these conditions was met, which resulted in the release of 266,666 shares
of Chyron restricted common stock to RT-SET. In addition, Chyron was
granted certain call option rights which, if exercised, would result in the
Company owning up to a 51% interest in RT-SET.
On May 26, 1998, the Company entered into a Modification Agreement with RT-
SET whereby 1) Chyron forfeited its call option rights, 2) RT-SET returned
the 533,334 shares of Chyron common stock, previously issued and held in
escrow, to the Company, 3) Chyron agreed to convert all of its shares of RT-
SET Preferred Stock into RT-SET common shares with no less than the current
value or $2,161,000 at the earlier of (i) the closing of certain financing
to be obtained by RT-SET which may include an initial public offering of RT-
SET stock or (ii) June 1, 1999. RT-SET will retain the 266,666 shares of
Chyron stock released from escrow in 1996, and Chyron will continue to hold
an investment in RT-SET.
8. SUBSEQUENT EVENT
On August 4, 1998, the Company entered into an agreement for the
Sale of all of the voting and non-voting shares of Trilogy Broadcast,
Limited ("Trilogy"), a wholly-owned subsidiary of Pro-Bel, Limited to the
management of Trilogy. The sale agreement provides for gross proceeds of
2.0 million British Pounds Sterling, an interest bearing note for 300,000
British Pounds Sterling and a 19% interest in the new company that results
from this transaction. The Company estimates the gain on the sale of
Trilogy to be approximately $1.1 million and expects the transaction to
close in the third quarter of 1998.
As a result of this sale, the Company's assets, and liabilities will
decrease by approximately $3.6 million and $1.2 million, respectively.
Trilogy contributed sales, gross profit and operating income of $2.7
million, $1.5 million and $200,000, respectively, for the six months ended
June 30, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
From time to time, including in this Quarterly Report on Form 10-Q, the
Company may publish forward-looking statements relating to such matters as
anticipated financial performance, business prospects, technological
developments, changes in the industry, new products, research and
development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for such forward-
looking statements. In order to comply with the terms of the safe harbor,
the Company notes that a variety of factors could cause the Company's actual
results to differ from the anticipated results or other expectations
expressed in the Company's forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include, without limitation, the
following: product concentration in a mature market, dependence on the
emerging digital market and the industry's transition to DTV and HDTV, rapid
technological changes, highly competitive environment, new product
introductions, seasonality, fluctuations in quarterly operating results,
expansion into new markets and the Company's ability to implement
successfully its acquisition and alliance strategy.
Results of Operations
Overview
This discussion should be read in conjunction with the Consolidated
Financial Statements including the Notes thereto:
Comparison of the Three Months Ended June 30, 1998 and 1997
Sales for the quarter ended June 30, 1998 were $21.1 million, a decrease of
$800,000, or 3.7%, over the $21.9 million reported for the second quarter
of 1997. This decrease was a result of decreases in sales for the Chyron
Graphics line and international sales of the Pro-Bel line of 9% and 11.6%
respectively, offset by substantial increases in U.S. sales of the Pro-Bel
line, which grew by over 500% for the comparable periods.
Gross profit decreased to $9.7 million for the quarter ended June 30, 1998.
The decrease of $240,000, or 2.4%, from the $9.9 million reported for the
second quarter of 1997 was attributable to the decrease in sales for the
second quarter of 1998. Gross margins as a percentage of sales increased
to 45.8% in 1998 versus 45.3% in 1997 mainly as a result of the change in
the product mix. Pro-Bel sales included an increased level of software
product for 1998 as compared to the prior year, which led to the increase
in margin percentage in 1998.
Selling, general and administrative (SG&A) expenses increased by $1.5
million or 19.9%, to $9.0 million in 1998 compared to $7.5 million for the
second quarter of 1997. Increases were seen at both Chyron and Pro-Bel
mainly as a result of new sales and marketing initiatives implemented by the
Company. Chyron's marketing costs increased by approximately $500,000, and
customer service expenses increased by approximately $300,000 as a result
of efforts to improve service. Increases of approximately $225,000 and
$275,000 were seen in Pro-Bel America sales support and Pro-Bel U.K. sales
and marketing costs (inclusive of the establishment of a Chyron/Pro-Bel
sales office in France), respectively. Additional increases of $260,000
were seen in expenses relating to the Concerto product line, which will be
non-recurring as a result of the product line restructuring discussed below.
These increases were offset by decreases in Chyron selling costs.
Gross research and development (R&D) costs increased during the second
quarter of 1998 compared to the same period in 1997 by $641,000. Increases
were incurred at both Chyron and Pro-Bel as the Company has focused its
attention on new product development to address the FCC ruling requiring
broadcasters to utilize digital advanced television transmission beginning
in 1998. Additional increases of $330,000 were incurred related to the
Concerto product line which will be non-recurring as a result of the
product line restructuring described below. These increases were offset by
net capitalized software costs which increased $72,000 for the three months
ended June 30, 1998 versus the same period in 1997.
During the second quarter, management determined than it would be in the
Company's best interest to implement a restructuring plan and refocus its
efforts on its core products of graphics, routing and automation for
television broadcast, cable and post production industries. This product
line restructuring has resulted in an agreement for the sale of Trilogy
Broadcast, Limited, a wholly-owned subsidiary of Pro-Bel, Limited; the
modification of the Company's investment in RT-SET; the reorganization of
Chyron's sales and marketing organization; and the planned disposition of
the Concerto Division. As a result, the Company has recorded restructuring
and other non-recurring charges of $3,979,000 during the second quarter of
1998.
The restructuring charge includes the write-down of Concerto assets, accrued
severance, legal costs and costs of disposition of such division totaling
$2.9 million. Other non-recurring charges relate to management's initiative
to refocus the Company's core products and total $1.1 million. Included in
other non-recurring charges are costs related to the sales reorganization,
accrued severance of $245,000 and other miscellaneous costs of $315,000, all
of which will require cash outlays. Additional accruals have been made for
litigation and other legal costs.
Operating costs as a result of the product line restructuring are projected
to benefit by a savings of approximately $500,000 in the third quarter of
1998 and approximately $800,000 in the fourth quarter of 1998 due to the
disposition of the Concerto product line and approximately $600,000 per
quarter as a result of the sale of Trilogy; principally due to an estimated
reduction in annual salaries and employee benefits of $2.3 million, a
decrease in software amortization expense of $837,000 per year and a
reduction in overhead costs of approximately $2.5 million per year. Such
savings will be offset by a reduction in the Trilogy product line gross
profit of approximately $600,000.
The result of these measures is a restructuring and other non-recurring
charge of $3,979,000. The specific components of this charge are as
follows:
(In thousands)
Asset write downs:
Write down of Concerto assets to net
realizable value $2,300
Total non-cash charges 2,300
Cash Outlays:
Accrued severance 645
Accrued litigation and other
legal costs 500
Loss on lease commitment 120
Other 414
Total restructuring and other
Non-recurring charges $3,979
In the second quarter of 1997, the Company recorded a non-recurring
charge of $2,407,000 primarily as a result of a repositioning to address an
FCC ruling requiring digital advanced television transmission beginning in
1998. The components of this charge included a write-down of inventory
related to product lines which were discontinued as a result of a new
marketing positioning strategy, severance expense related to a staff
reduction, the write-off of software development projects related to
products not within the new strategy, the consolidation of certain Chyron
offices, the settlement of litigation dating back several years and the
write-off of costs related to a potential acquisition that was abandoned due
to the new strategy.
Operating losses for the June 30, 1998 quarter, inclusive of the $3,979,000
product line restructuring and other non-recurring charges, amounted to
$5,771,000 versus an operating loss of $1,908,000 (including non-recurring
charges of $2,407,000) for the comparable 1997 period. Such increases in
losses reflects the increases in operating costs described above as well as
the restructure and other non-recurring charges of $3,979,000.
Interest and other expense, net increased primarily as a result of foreign
currency transaction losses for the quarter ended June 30, 1998 of
approximately $130,000, offset by a decrease in the outstanding debt
balance.
Comparison of the Six Months Ended June 30, 1998 and 1997
Sales for the six months ended June 30, 1998 were $42.6 million, an increase
of $2.5 million, or 6.3%, over the $40.1 million reported for the first half
of 1997. This increase was a result of substantial increases in the
domestic sales of the Pro-Bel line which showed a growth of nearly 600%,
offset by slight decreases in sales of the Chyron graphics line, and
international Pro-Bel sales of 3.7% and 2.7% respectively.
Gross profit increased to $20.4 million for the six months ended June 30,
1998. The increase of $2.3 million, or 12.9%, over the $18.1 million
reported for the first half of 1997 was attributable in part to the increase
in sales for the first quarter of 1998. Gross margins as a percentage of
sales increased to 47.8% in 1998 versus 45.06% in 1997 mainly as a result
of the change in the product mix. Chyron sales, although showing slight
decreases for the comparative periods, included more volume of the high end
iNFiNiT graphic system which increased 50% over the comparable prior year
period. Additionally, Pro-Bel sales included an increased level of software
product for the six months ended June 30, 1998 as compared to the prior
year. Both of these items led to increased gross profit for the first half
of 1998.
SG&A expenses increased by $2 million, or 13.4%, to $16.7 million in 1998
compared to $14.7 million for the first half of 1997. As outlined in the
three month comparison, increases were seen at both Chyron and Pro-Bel
totaling approximately $1.3 million as a result of the new sales and
marketing initiatives implemented by the Company. Additional increases of
$466,000 resulted from expenses related to the Concerto product line, which
will be non-recurring as a result of the product line restructuring
described earlier.
Gross R&D cost increased during the first half of 1998 compared to the same
period in 1997 by $2.0 million. Increases were incurred at both Chyron and
Pro-Bel as the Company has focused its attention on new product development
to address an FCC ruling requiring broadcasters to utilize digital advanced
television transmission beginning in 1998. Additional increases of $545,000
were incurred related to the Concerto product line, which will be non-
recurring as a result of the product line restructuring. These increases
were offset by net capitalized software costs which increased $455,000 for
the six months ended June 30, 1998 versus the same period in 1997.
For the six months ended June 30, 1998, the Company recorded restructuring
and other non-recurring charges totaling approximately $3,979,000. See the
discussion of the components of this charge in the three month comparison
above. In the prior year's comparable period, the Company had non-recurring
charges totaling approximately $3.1 million. As discussed in the three
month comparison, $2.4 million of this charge related to the repositioning
by the Company to address the effects of an FCC ruling requiring digital
advanced television transmission beginning in 1998, with the remaining
$675,000 being attributable to the Company's planned secondary offering of
common stock which was terminated due to the market valuation of the stock.
Operating losses for the first half of 1998, inclusive of the $3,979,000
product line restructuring and other non-recurring charges totaled $5.3
million versus an operating loss of $3.2 million (including non-recurring
costs of $3.0 million) for the comparable 1997 period. This increase is a
result of increases in operating costs described above combined with the
restructure and other non-recurring charges, offset by increases in gross
profit for the six months ended June 30, 1998 as compared to 1997.
Interest and other expenses, net increased mainly as a result of foreign
currency transaction losses for the period as compare to a gain in the prior
year, offset by a decrease in the outstanding debt balance.
Liquidity and Capital Resources
At June 30, 1998, the Company had cash on hand of $1.9 million and working
capital of $35.2 million.
In connection with the acquisition of Axis, the Company issued promissory
notes to the shareholders of Axis for $667,000. The amount of installment
payments was contingent upon the Axis division realizing certain revenue
targets. $250,000 of such notes was paid from Chyron's operating cash flow
on March 31, 1998, with the remaining $417,000 being due on March 31, 1999.
The Company's promissory note to the former shareholders of Pro-Bel for 3.5
million British Pounds Sterling was paid on April 15, 1998. The funds to
pay the notes were drawn from the Company's facility with Fleet Bank
described below.
On March 28, 1996 and April 16, 1996, the Company entered into agreements
with Fleet Bank (formerly NatWest Bank) to obtain a revolving credit
facility of $10.0 million and a term loan of $8.0 million, respectively. The
entire facility is secured by certain of the Company's assets. Borrowings
are limited to amounts computed under a formula for eligible accounts
receivable and inventory. Interest on the revolving credit facility is
equal to adjusted LIBOR plus 175 basis points or prime (8.50% at June 30,
1998) and is payable monthly. The term loan is payable in quarterly
installments of $500,000, commencing June 1, 1996. Interest on the term
loan is equal to adjusted LIBOR plus 200 basis points or prime and is
payable monthly. At June 30, 1998, the Company did not comply with certain
financial covenants and, accordingly, has obtained approval for waivers for
the period with respect to certain covenants and approval of amendments for
periods up to and including April 16, 2000 for certain other covenants. The
revolving credit facility is scheduled to expire on March 28, 1999.
Management intends to seek renewal of such facility prior to the expiration
date.
Pro-Bel has a commercial mortgage term loan with Barclay's Bank Plc.
("Barclays"). The loan is secured by a building and property located in the
United Kingdom. Interest is equal to LIBOR plus 2% (9.44% at June 30,
1998). The loan (including interest) is payable in quarterly installments
of 80,600 British Pounds Sterling ($136,000 converted at the June 30, 1998
exchange rate).
On January 13, 1998, Pro-Bel entered into an agreement with Barclays whereby
Barclays agreed to provide an overdraft facility of up to 4.0 million
British Pounds Sterling ($6,750,000 converted at the June 30, 1998 exchange
rate) through December 31, 1998 to Pro-Bel, and its subsidiaries. The
overdraft facility provides for interest at 1.5% per annum over the bank's
base rate (9.00% at June 30, 1998). Interest is payable quarterly in
arrears. This facility replaces the overdraft facility of up to 3.0 million
pounds sterling in place at December 31, 1997. All monies under the
facility are repayable upon written demand. Management intends to seek
renewal of this facility prior to the expiration date. Total borrowings are
limited to amounts computed under multiple formulas of eligible accounts
receivable and inventory.
On December 20, 1996, Pro-Bel entered into an agreement with a bank to
obtain an overdraft facility of up to 3.0 million British Pounds Sterling
through December 31, 1997, subsequently extended to January 12, 1998
($4,943,000 converted at the December 31, 1997 exchange rate). Total
borrowings were limited to amounts computed under a formula for eligible
accounts receivable. Interest was equal to the bank's base rate plus 1.5%
(8.75% at December 31, 1997) and was payable in arrears. The facility was
payable upon written demand by the bank and any undrawn portion was
cancellable by the bank at any time. This facility was replaced by the
facility with Barclays, described above, dated January 13, 1998.
At June 30, 1998, the Company had operating and capital lease commitments
totaling $12.6 million and $.6 million, respectively, of which $1.2 million
and $.3 million, respectively, is payable within one year. Such lease
commitments were for equipment, factory and office space and are expected
to be paid out of operating cash flows of the Company.
The Year 2000
The Company has taken actions to make its system products and infrastructure
year 2000 compliant. The 1998 budget includes an allocation of $400,000 for
a new integrated information system at Pro-Bel. Additional monies are
planned to be allocated in 1999. Management believes based on available
information that aside from the amounts described above, additional year
2000 cost will be immaterial and that the year 2000 transition will not have
material adverse effects on the Company's business, operations, products or
financial prospects.
PART II. OTHER INFORMATION
ITEMS 1., 2., 3. Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
On May 13, 1998, the Company held its Annual Meeting of shareholders. At
this meeting, the Company's shareholders re-elected Charles Diker, Donald
P. Greenberg, Raymond Hartman, Edward Grebow, Alan J. Hirschfield, Wesley
W. Lang, Jr., Eugene M. Weber, and Michael Wellesley-Wesley to the Board of
Directors. No less than 19,120,782 shares were voted for the election of
each director. The number of shares voted totaled 20,392,506.
ITEM 5. Other Information
The Company from time to time is involved in routine legal matters
incidental to its business. In the opinion of management, the ultimate
resolution of such matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
ITEM 6. Not applicable.
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 thereunto duly authorized.
CHYRON CORPORATION
(Registrant)
August 13, 1998 /s/ Edward Grebow
(Date) Edward Grebow
President and
Chief Executive Officer
August 13, 1998 /s/ Patricia Lampe
(Date) Patricia Lampe
Chief Financial Officer
and Treasurer
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] JUN-30-1998
[CASH] 1,912
[SECURITIES] 0
[RECEIVABLES] 20,384
[ALLOWANCES] 0
[INVENTORY] 22,333
[CURRENT-ASSETS] 54,711
[PP&E] 13,098
[DEPRECIATION] 0
[TOTAL-ASSETS] 89,918
[CURRENT-LIABILITIES] 19,542
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 321
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 89,918
[SALES] 42,621
[TOTAL-REVENUES] 0
[CGS] 22,219
[TOTAL-COSTS] 25,680
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 836
[INCOME-PRETAX] (6,114)
[INCOME-TAX] (1,316)
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (4,798)
[EPS-PRIMARY] (.15)
[EPS-DILUTED] (.15)
</TABLE>
