<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1995
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: 0-9725
AURORA ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1539534
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2030 MAIN STREET, SUITE 1120, IRVINE, CALIFORNIA 92714
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 660-1232.
________________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
Indicated below is the number of shares outstanding of each class
of the registrant's common stock, as of May 10, 1995.
Title of Each Class of Common Stock Number Outstanding
----------------------------------- ------------------
Common Stock, $0.03 par value 7,486,845 shares
================================================================================
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2.
Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
</TABLE>
2
<PAGE> 3
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
April 2, September 30,
1995 1994
-------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 267 $ 1,539
Short-term investments -- 1,171
Trade receivables, less allowance for doubtful accounts
of $1,157 and $1,046, respectively 16,914 16,841
Inventories 10,354 9,445
Deferred income taxes 4,477 5,038
Other current assets 1,284 1,067
- ------------------------------------------------------------------------------------------------
Total current assets 33,296 35,101
Property, plant and equipment, net 5,885 6,075
Intangible and other assets 59,408 61,751
- ------------------------------------------------------------------------------------------------
Total assets $ 98,589 $102,927
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,229 $ 5,622
Accounts payable 10,054 11,583
Accrued compensation 1,815 1,763
Accrued acquisition expenses 733 900
Accrued interest 724 980
Reserve for discontinued operations 4,522 5,024
Other current liabilities 379 601
- ------------------------------------------------------------------------------------------------
Total current liabilities 23,456 26,473
- ------------------------------------------------------------------------------------------------
Long-term debt 47,104 49,551
- ------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, 1,000 shares authorized, none issued -- --
Common stock, 8,097 and 8,020 shares issued, respectively 242 240
Additional paid-in capital 61,825 61,827
Accumulated deficit (28,174) (29,300)
Treasury stock, at cost, 561 shares (5,864) (5,864)
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 28,029 26,903
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 98,589 $102,927
================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------- ----------------------
April 2, March 31, April 2, March 31,
1995 1994 1995 1994
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net revenues $37,707 $31,002 $75,468 $52,250
Cost of sales 28,505 24,581 56,275 41,725
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 9,202 6,421 19,193 10,525
Selling, general and administrative expenses 7,123 3,659 13,789 5,534
Amortization of intangibles 427 463 855 857
Program development costs -- 398 -- 631
- ----------------------------------------------------------------------------------------------------------------------
Operating income 1,652 1,901 4,549 3,503
Interest expense (1,381) (761) (2,728) (1,317)
Income from investments in unconsolidated affiliates -- -- -- 17
Other income (expense), net -- 57 (89) 138
- ----------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 271 1,197 1,732 2,341
Provision for income taxes 22 406 606 842
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 249 $ 791 $ 1,126 $ 1,499
======================================================================================================================
Earnings per share of common stock $ 0.03 $ 0.11 $ 0.14 $ 0.20
======================================================================================================================
Weighted average number of common and common equivalent shares 8,095 7,414 8,078 7,376
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended
---------------------------
April 2, March 31,
1995 1994
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,126 $ 1,499
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization 1,841 1,406
Gain on sale of securities -- (17)
Changes in assets and liabilities, net of acquisitions:
Trade receivables, inventories and other assets (1,037) (2,064)
Accounts payable and other liabilities (1,865) (4,127)
Accrued interest and income taxes deferred, receivable or payable 305 (1,162)
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from continuing operations 370 (4,465)
Net cash flows from discontinued operations (502) 402
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities (132) (4,063)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (556) (1,991)
Additional investment costs (10) --
Proceeds from sales of marketable securities and SSG note 1,171 481
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities 605 (1,510)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt (2,168) --
Purchases of treasury stock -- (225)
Changes in borrowings under line of credit 423 (2,455)
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (1,745) (2,680)
- ------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (1,272) (8,253)
Cash and cash equivalents at beginning of period 1,539 16,201
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 267 $ 7,948
==================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE A. BASIS OF PRESENTATION
- ------- ---------------------
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading.
These unaudited consolidated financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
annual report on Form 10-K/A for the year ended September 30, 1994.
The accompanying unaudited consolidated financial statements include
the accounts of Aurora Electronics, Inc. and all of its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain operating segments that have been sold and segments for
which a plan of disposal had been adopted as of September 30, 1992 have been
reported as discontinued operations. In the opinion of management, the
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position as of December
31, 1994 and the results of operations and cash flows for the periods shown.
Investments in affiliated companies are included based upon the equity or cost
methods of accounting, as appropriate. Operating results for the interim
period ending April 2, 1995 are not necessarily indicative of the results that
may be expected for the year ending September 30,1995.
NOTE B. FISCAL PERIOD
- ------- -------------
Effective fiscal 1995, the Company adopted a 52-53 week year ending on
September 30. Consequently, the second fiscal quarter ended on April 2, 1995.
NOTE C. ACQUISITIONS
- ------- ------------
Micro - C Corporation ("Micro-C")
- ---------------------------------
Pursuant to the terms of the purchase agreement for the acquisition
of Micro-C, the Company was required to pay certain additional consideration to
the sellers of Micro-C based upon Micro-C's annual operating results and
revenues during a three year period beginning with the fiscal year ended
September 30, 1993. As a result of actual operating results achieved by
Micro-C during the year, the Company issued 77,414 and 60,820 shares of common
stock on December 31, 1994 and 1993, respectively.
Century Computer Marketing ("Century")
- --------------------------------------
Effective March 1, 1994, the Company acquired substantially all of
the assets and liabilities of Century. Century is a distributor of new and
refurbished spare parts to the computer maintenance market, supporting the
products of over 500 manufacturers. Pursuant to the terms of the Asset
Purchase Agreement the total consideration paid to Century was approximately
$29 million in cash and $4.7 million in common stock of the Company. The
Company financed the acquisition of Century with proceeds from a new five year
$25 million bank term loan facility and internally generated cash.
6
<PAGE> 7
NOTE D. EARNINGS PER SHARE OF COMMON STOCK
- ------- ----------------------------------
Earnings per share of common stock is based upon the weighted average
number of common and common equivalent shares outstanding. Outstanding stock
options and warrants are treated under the treasury stock method as common
stock equivalents when dilution results from their assumed exercise. The
Company's 7-3/4% Convertible Subordinated Debentures due April 15, 2001 and 7%
Subordinated Convertible Promissory Notes (the "7% Notes") due September 30,
1997 were not common stock equivalents at the time of issuance and are
therefore not included in the calculation of primary earnings per share. Fully
diluted net earnings per share is not presented due to its anti-dilutive
effect.
NOTE E. INVENTORIES
- ------- -----------
Inventories consisted of the following:
<TABLE>
<CAPTION>
APRIL 2, 1995 SEPTEMBER 30, 1994
------------- ------------------
<S> <C> <C>
Spare and repair parts $1,751 $1,083
Work in process 1,374 1,152
Finished goods and purchased product 7,229 7,210
------- -------
Total Inventories $10,354 $9,445
======= ======
</TABLE>
NOTE F. CONCENTRATION RISK
- ------- ------------------
During the three and six months ended April 2, 1995, the Company
derived approximately 11.3% and 16.4% of its revenue from material received
from one supplier. This compares to 49.5% and 49.8% for the three and six
months ended March 31, 1994. In December 1994, this major supplier
indefinitely suspended the program under which it supplied reduced
specification integrated circuits to the Company. Although the Company was
able to obtain in total an acceptable supply of materials from this major
supplier and new suppliers during the three and six months ended April 2, 1995,
there can be no assurance that the Company will be able to secure a continued
supply in the future. In the event these new relationships do not provide the
expected levels of revenue and profits, there would be a substantial negative
effect on the Company's business and results of operations.
NOTE G. GOODWILL
- ------- --------
The Company assesses the recoverability of its goodwill by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through projected non-discounted future cash flows over the remaining
amortization period. If projected future cash flows indicate that unamortized
goodwill will not be recovered, an adjustment is made to reduce the net
goodwill to an amount consistent with projected future cash flows discounted at
the Company's incremental borrowing rate. Cash flow projections, although
subject to a degree of uncertainty, are based on trends of historical
performance and management's estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions.
NOTE H. COMMITMENTS AND CONTINGENCIES
- ------- -----------------------------
Settlement of Class Action Complaint
- ------------------------------------
In the fourth quarter of fiscal 1994, the Company recorded a charge to
operations in the amount of $1,693 to reflect a preliminary agreement to settle
a securities class action complaint against the Company. The settlement
requires the Company to issue $1,250 of common stock valued at fair market
value at the time of issuance and $250 in cash. The balance of the settlement
of $1,500 will be funded
7
<PAGE> 8
by the Company's insurer. The settlement is subject to mutually agreeable
settlement documents and court approval.
Indemnification Claim
- ---------------------
In accordance with the stock purchase agreement relating to the
Micro-C acquisition, the Company and the former owners submitted to arbitration
a dispute concerning a claim by the Company against the former owners for
indemnification under the stock purchase agreement. On April 12, 1995, the
arbitrator awarded the Company $4,731 in damages, interest and attorneys fees
and costs. The Company has recorded the $4,731 arbitration award as a
reduction in the principal balance of the 7% Notes and a corresponding
reduction in cost of goodwill, net of expenses.
Contingent Lender Warrants
- --------------------------
During the quarter ended April 2, 1995, the Company re-negotiated the
additional common stock purchase warrants previously issued to the Company's
Senior bank lenders ("Contingent Warrants"). As re-negotiated, the Contingent
Warrants are warrants to purchase shares of common stock at an exercise price
equal to 50% of the Fair Market Value (as defined in the Warrant Agreements
governing the Contingent Warrants) of one share of Common Stock as of the
exercise date ("Exercise Price"). If any amount is past due under the 7% Notes
and a holder of the 7% Notes accelerates, demands payment or takes other
enforcement action, the number of shares underlying the Contingent Warrants is
equal to the balance of principal and accrued and unpaid interest outstanding
under the 7% Notes as of the exercise date, divided by the Exercise Price. If
any amount is past due under the 7% Notes and a holder of the 7% Notes has not
accelerated, demanded payment or taken other enforcement action, the number of
shares underlying the Contingent Warrants is equal to the amount past due for
principal and interest under the 7% Notes as of the exercise date, divided by
the Exercise Price. The aggregate principal balance of the 7% Notes has been
reduced from $7,379 to $2,648 as a result of the arbitration award described
above under Indemnification Claim. The Contingent Warrants will be nullified
in proportional amount to the extent of principal and accrued and unpaid
interest then payable if, prior to September 30, 1995, 1996 or 1997 (the
principal payment dates under the 7% Notes), (i) the 7% Notes are restructured
so that the principal payment due on that payment date is canceled or
rescheduled to fall after October 1, 1999, (ii) the principal payment due on
that payment date is converted into Common Stock, or (iii) the principal
payment due on a payment date is prepaid with the proceeds of the issuance of
Common Stock or subordinated debt under which no principal payment is required
until after October 1, 1999.
Management is pursuing various alternatives to render the Contingent
Lender Warrants null and void. However, should one of the events noted above
not occur before each one of the three principal payments dates under the 7%
Notes the Company will incur a non-cash charge to operations during the
quarters ended September 30, 1995, 1996 and 1997, respectively, for the amount
of the principal and accrued interest on the 7% Notes then due and payable at
that date (approximately $883 as of September 30, 1995 assuming non
acceleration of the 7% Notes).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS (In thousands, except share data)
-------------------------------------------------------
RESULTS OF OPERATIONS - THREE MONTHS ENDED APRIL 2, 1995 AS COMPARED TO THE
- ---------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1994
- ---------------------------------
Net revenues for the three months ended April 2, 1995 were $37,707 as
compared to $31,002 in net revenues for the three months ended March 31, 1994.
The increase was due primarily to the inclusion of the Century business for a
full three months for the current quarter ($13,200) compared to only one month
in the comparable 1994 period ($4,900). Revenues also reflect a 36% growth in
8
<PAGE> 9
revenues generated by the Asset Recovery Services division ("ARS"), which was
more than offset by a 57% decrease in the Century division's repair business
revenues.
Gross profit for the three months ended April 2, 1995 was $9,202 or
24.4% of net revenue as compared to $6,421 in gross profit for the three months
ended March 31, 1994 or 20.7% of net revenue. The gross profit dollars and the
gross profit as a percentage of net revenues increased from the comparable
quarter last year due to the full three months inclusion of the Century
business, the increased volume in the ARS division and margin improvement due
to higher yields and product mix in the Premier Computer Products division
("Premier"). This increase was offset by a significant decrease in gross
profit dollars in Century's repair business.
Selling, general and administrative expenses for the three months
ended April 2, 1995 were $7,123, or 18.9% of revenues as compared to $3,659 or
11.8% for the comparable 1994 period. The increase of $3,464 was primarily due
to the inclusion of three months of Century's expenses compared to one month in
the 1994 period. In addition, the Company has made significant investments in
systems and employees required to support the growth in the Company's
operations.
Amortization expense for the three months ended April 2, 1995 was $427
or 1.1% of revenues as compared to $463 or 1.5% for the comparable 1994 period.
During the quarter, there were no program development costs for the
three months ended April 2, 1995 as compared to $398 or 1.3% of revenues for
the comparable 1994 period. This reflects the completed development of a new
service line to complement the existing repair business during the fiscal year
ended September 30, 1994.
Net interest expense for the three months ended April 2, 1995 was
$1,381 or 3.7% of revenues as compared to $761 or 2.5% of revenues for the
comparable 1994 period. The increase of $620 was primarily due to additional
debt incurred as a result of the acquisition of Century during fiscal year
1994.
Net income for the three months ended April 2, 1995 was $249 or .7% of
revenues, as compared to net income of $791 or 2.6% for the comparable period
in 1994. The decrease in net income is due to the higher level of selling,
general and administrative expenses primarily attributable to the Century
division, higher interest expense as a result of the increases in Company
borrowings and the operation losses generated by the Century repair business.
SIX MONTHS ENDED APRIL 2, 1995 AS COMPARED TO THE SIX MONTHS ENDED MARCH 31,
- ----------------------------------------------------------------------------
1994
- ----
Net revenues for the six months ended April 2, 1995 were $75,468 as
compared to $52,250 in net revenue for the six months ended March 31, 1994.
The increase was due primarily to the inclusion of the Century business for a
full six months ended April 2, 1995 ($24,700) compared to only one month in the
comparable 1994 period ($4,900). Revenues also reflect a $6,800 or 53.9%
growth in the ARS division partially offset by a decline in revenues of
approximately $4,500 in the Century repair business.
Gross profit for the six months ended April 2, 1995 was $19,193 (25.4%
of net revenues) as compared to $10,525 in gross profit for the six months
ended March 31, 1994 (20.1% of net revenues). Gross profit dollars and margin
increased compared to the same period last year due primarily to the addition
of the Century business, as well as volume increase in the ARS division and
overall margin improvement due to higher yields and product mix in the Premier
division. Such improvement was offset, however, by a significant decrease in
volume and profitability in Century's repair business.
Selling, general and administrative expenses for the six months ended
April 2, 1995 were $13,789, or 18.3% of revenues, as compared to $5,534, or
10.6% for the comparable 1993 period. The increase of $8,255 is due primarily
to the inclusion of Century's selling, general and administrative expenses and
the significant investments in systems and employees required to support the
growth in the Company's operations.
9
<PAGE> 10
Amortization expense for the six months ended April 2, 1995 was $855,
or 1.1% of revenue, as compared to $857, or 1.6% for the comparable 1994
period.
There were no program development costs for the six months ended April
2, 1995 as compared to $631 or 1.2% of revenues for the comparable 1994
period. The expense in the 1994 period was related to development of a new
service line to complement the existing repair business.
Net interest expense for the six months ended April 2, 1995 was $2,728
or 3.6% of revenues, as compared to $1,317 or 2.5% for the comparable 1994
period. The increase of $1,411 in net interest expense was principally due to
the additional debt incurred in the acquisition of Century and the interest
expense related to the working capital facilities.
Net income for the six months ended April 2, 1995 was $1,126 or 1.5%
of net revenue, as compared to $1,499 or 2.9% of net revenues for the
comparable period in 1994. This decrease in net income is due to the higher
selling, general and administrative expenses primarily attributable to the
Century division, the higher level of interest expense as a result of the
increased Company borrowings and the continued losses generated by the repair
business.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary requirements for capital are directly related to
its levels of accounts receivable, inventories, additions to its property and
equipment, costs resulting from the consolidation of its businesses, and
required debt principal payments. The Company's working capital was $9,840 as
of April 2, 1995 compared to $8,628 as of September 30, 1994. The Company has
financed acquisitions to date using bank debt, internally generated cash and
issuances of common stock.
As of April 2, 1995, the Company was not in compliance with certain
financial covenants and obtained a waiver of noncompliance from its lenders for
the quarter ended April 2, 1995. The primary reason for the noncompliance was
due to the continued losses in the Century repair business and the margin
pressure in the Premier division's reduced specification IC business. The
financial covenants with which the Company was not in compliance were the debt
service coverage ratio, total interest coverage ratio, senior interest coverage
ratio and net profitability covenants. Management is in good faith negotiation
with its lenders to amend the financial covenants of the credit agreement
beginning with the quarter ending July 2, 1995, based on the internally
prepared financial projection, which takes into account a restructuring of
Century and its repair business.
During the third quarter of fiscal 1995, the Company will begin to
implement a strategic restructuring of Century and its repair business. This
restructuring is expected to eliminate approximately 100 payroll positions,
result in the closure of three facilities, include inventory liquidation costs,
and the write-off of goodwill related to acquisition of repair operations. A
significant portion of the funds required to implement this restructuring will
be provided by the liquidation of certain inventories of the Company.
Other than the funds required for (i) the restructuring mentioned
above, (ii) operations during fiscal 1995 and (iii) funds for the remaining
discontinued operations, the Company had no material capital commitments at
April 2, 1995.
Management believes that cash on hand, cash flows from operations, and
funds available under its credit facilities should be sufficient to meet the
Company's operating requirements, restructuring plans, capital commitments and
the required principal payments on its long-term debt through fiscal 1996.
Management is pursuing alternate sources of capital for the retirement of the
9 1/4% Senior subordinated notes due in November of 1996.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Inapplicable.
ITEM 2. CHANGES IN SECURITIES
---------------------
Inapplicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company held its annual meeting of shareholders on March 22,
1994. At the March meeting, shareholders were requested to vote on two
proposals and the election of Directors.
The results of the vote on this proposal are as follows:
<TABLE>
<CAPTION>
DIRECTORS VOTES FOR AUTHORITY WITHHELD
--------- --------- ------------------
<S> <C> <C>
Robert G. Allison 5,722,444 110,856
Harvey B. Cash 5,722,444 110,856
Jim C. Cowart 5,722,544 110,756
Amin J. Khoury 5,723,544 109,756
David A. Lahar 5,723,544 109,756
William H. Watkins, Jr. 5,723,544 109,756
</TABLE>
The second proposal considered at the March meeting was the adoption
of Aurora Electronics, Inc. 1995 Employee Stock Purchase Plan. This proposal
received 5,475,030 for the adoption, 202,893 votes against, and 28,300
abstentions.
The third proposal considered at the March meeting was the amendment
of Aurora Electronics, Inc. Restated Certificate of Incorporation to Increase
the number of authorized shares of Common Stock from 14,000,000 to 25,000,000.
This proposal received 5,313,904 votes for the amendment, 382,433 votes
against, and 136,963 abstentions.
ITEM 5. OTHER INFORMATION
- ------- -----------------
Inapplicable.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Item Page
---- ----
(a)(1) Exhibit 3 -- Restated Certificate of Incorporation 15
(a)(2) Exhibit 11 -- Computation of Per Share Earnings 19
(a)(3) Exhibit 27 -- Financial Data Schedule 20
12
<PAGE> 13
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.
AURORA ELECTRONICS, INC.
May 15, 1995 By: /s/ John P. Grazer
--------------------------------------
John P. Grazer,
Senior Vice President-Finance and
Administration and Chief Financial Officer
(Principal Accounting and Financial
Officer)
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item Description of Exhibits Page
- ---------- --------------------------------------------------------- ---------
<S> <C> <C>
Exhibit 3 Restated Certificate of Incorporation 15
Exhibit 11 Computation of Per Share Earnings 19
Exhibit 27 Financial Data Schedule -- Article 5 of Regulation S-X 20
</TABLE>
14
<PAGE> 1
EXHIBIT 3
RESTATED CERTIFICATE OF INCORPORATION
"FIRST. The name of the Corporation is Aurora Electronics, Inc.
SECOND. The registered office of the Corporation in the State of
Delaware is located at 32 Lookerman Square, Suite L-100, Dover, Delaware 19901;
and the name and address of its registered agent is The Prentice-Hall
Corporation System, Inc., 32 Lookerman Square, Suite L-100, Dover, Delaware
19901.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH. A. The total number of shares of capital stock which the
Corporation shall have the authority to issue is Twenty-Five Million
(25,000,000) shares of Common Stock, $0.03 par value per share, and One Million
(1,000,000) shares of Preferred Stock, $0.01 par value per share.
B. DESIGNATIONS, ETC. OF PREFERRED STOCK
1. Shares of Preferred Stock may be issued from time to time in
one or more series, each such series to have distinctive
serial designations, as shall hereafter be determined in the
resolution or resolutions providing for the issue of such
series from time to time adopted by the Board of Directors
pursuant to the authority which is hereby vested in the Board
of Directors.
2. Each series of Preferred Stock
(i) may have such number of shares;
(ii) may have such voting power, full or limited, or may
be without voting power;
(iii) may be subject to redemption at such time or times
and at such prices;
(iv) may be entitled to receive dividends (which may be
cumulative or noncumulative) at such rate or rates, on such
conditions, and at such times, and payable in preference to,
or in such relation to, the dividends payable in any other
class or classes or series of stock;
(v) may be made convertible into, or exchangeable for,
shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the
Corporation at such price or prices or at such rates of
exchange, and with such adjustments;
(vi) may be entitled to the benefit of a sinking fund or
purchase fund to be applied to the purchase or redemption of
shares of such series in such amount or amounts;
(vii) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the
Corporation or any subsidiary, upon the issue of any
additional stock (including additional shares of such series
or of any other series) and upon the payment of dividends or
the making of other distributions on, and the purchase,
redemption, or other acquisition by the Corporation or any
subsidiary, of any outstanding stock of the Corporation; and
(viii) may have such other relative, participating, optional
or other special rights and qualifications, limitations or
restrictions thereof;
15
<PAGE> 2
all as shall be stated in resolution or resolutions providing
for the issue of such Preferred Stock. Except where otherwise
set forth in the resolution or resolutions adopted by the
Board of Directors providing for the issue of any series of
Preferred Stock, the number of shares comprising such series
may be increased or decreased (but not below the number of
shares then outstanding) from time to time by action of the
Board of Directors.
C. No holder of stock of any class of the Corporation shall be
entitled as of right to purchase or subscribe for any part of any
unissued stock of any class or of any securities convertible into or
exercisable or exchangeable for stock of the Corporation.
D. The minimum amount of capital with which the Corporation shall
commence business is $1,000.
FIFTH. The Board of Directors shall have the power to make and to
alter or amend the Bylaws, to fix the amount to be reserved as working capital,
and to authorize and cause to be executed, mortgages and liens without limit as
to the amount, upon the property and franchise of the Corporation.
In addition to the powers and authorities herein or by statute
expressly conferred upon them, the Board of Directors may exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the express provisions of the laws of
the State of Delaware, of this Restated Certificate of Incorporation, and of
the Bylaws of the Corporation.
SIXTH. Any contract, transaction, or act of the Corporation or of the
Board of Directors or any Committee thereof which shall be ratified by the
holders of a majority of the shares of stock of the Corporation having voting
power and voting, at any annual meeting, or at any special meeting called for
such purpose, shall be as valid and binding as though ratified by every
stockholder of the Corporation; provided, however, that any failure of the
stockholders to approve or ratify such contract, transaction, or act, when and
if submitted, shall not be deemed in any way to invalidate the same or to
deprive the Corporation, its directors, or officers of their right to proceed
with such contract, transaction, or action.
SEVENTH. The Corporation reserves the right to amend, alter, change,
or repeal any provision contained in this Restated Certificate of Incorporation
in the manner now or hereafter prescribed by statute; and all rights herein
conferred upon the stockholders are granted subject to this reservation.
EIGHTH. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law is
amended after approval by the stockholders of this Article EIGHTH to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
NINTH. A. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware
16
<PAGE> 3
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including,
without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith and such indemnification
shall continue as to an indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the indemnitee's heirs, executors and
administrative; provided, however, that, except as provided in paragraph (B)
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Article NINTH shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Article or otherwise.
B. Right of Indemnitee to Bring Suit. If a claim under paragraph
(A) of this Article is not paid in full by the Corporation within sixty days
after a written claim has been received by the Corporation (except in the case
of a claim for an advancement of expenses, in which case the applicable period
shall be twenty days), the indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to be
paid also the expense of prosecuting or defending such suit. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the Corporation
to recover an advancement of expenses pursuant to the terms of an undertaking,
the Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. Neither the failure
of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that the indemnitee met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit, brought by
the indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article or otherwise shall be on the Corporation.
C. Non-Exclusivity of Rights. The rights to indemnification and
to the advancement of expenses conferred in this Article NINTH shall not be
exclusive of any other right which any person may have or hereafter acquire
under this Restated Certificate of Incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise.
D. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director or officer of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
17
<PAGE> 4
E. Indemnity of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article NINTH with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation."
18
<PAGE> 1
EXHIBIT 11
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ---------------------
April 2, March 31, April 2, March 31,
1995 1994 1995 1994
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
NET INCOME $ 249 $ 791 $1,126 $1,499
=============================================================================================
ADJUSTED NUMBER OF COMMON SHARES
Weighted average shares outstanding 7,780 7,112 7,780 7,112
Incremental shares for exercise of stock
options and warrants and common stock
issuable 315 302 298 264
Adjusted number of common shares 8,095 7,414 8,078 7,376
=============================================================================================
Net earnings per common shares $ 0.03 $ 0.11 $ 0.14 $ 0.20
=============================================================================================
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> APR-02-1995
<CASH> 267
<SECURITIES> 0
<RECEIVABLES> 16,914
<ALLOWANCES> 1,157
<INVENTORY> 10,354
<CURRENT-ASSETS> 33,296
<PP&E> 5,885
<DEPRECIATION> 2,104
<TOTAL-ASSETS> 98,589
<CURRENT-LIABILITIES> 23,456
<BONDS> 47,104
<COMMON> 242
0
0
<OTHER-SE> 27,787
<TOTAL-LIABILITY-AND-EQUITY> 98,589
<SALES> 75,468
<TOTAL-REVENUES> 75,468
<CGS> 56,275
<TOTAL-COSTS> 56,275
<OTHER-EXPENSES> 14,733
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,728
<INCOME-PRETAX> 1,732
<INCOME-TAX> 606
<INCOME-CONTINUING> 1,126
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,126
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
