FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 3, 1999
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 No. 0-11003
WEGENER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 81-0371341
(State of incorporation) (I.R.S. Employer
Identification No.)
11350 TECHNOLOGY CIRCLE, DULUTH, GEORGIA 30097-1502
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 623-0096
REGISTRANT'S WEB SITE: HTTP://WWW.WEGENER.COM
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:
Common Stock, $.01 par value 11,771,016 Shares
- ---------------------------- -----------------------------
Class Outstanding December 31, 1999
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
Form 10-Q For the Quarter Ended December 3, 1999
INDEX
Page(s)
-------
PART I. Financial Information
Item 1. Consolidated Financial Statements
Introduction ........................................................3
Consolidated Statements of Operations
(Unaudited) - Three Months Ended
December 3, 1999 and November 27, 1998 ..............................4
Consolidated Balance Sheets - December 3,
1999 (Unaudited) and September 3, 1999 ..............................5
Consolidated Statements of Shareholders' Equity
(Unaudited) - Three Months Ended December 3,
1999 and November 27, 1998 ..........................................6
Consolidated Statements of Cash Flows
(Unaudited) - Three Months Ended December 3,
1999 and November 27, 1998 ..........................................7
Notes to Consolidated Financial
Statements (Unaudited) ...........................................8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................12-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........15
PART II. Other Information
Item 1. None
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. Exhibits and Reports on Form 8-K ...................................16
Signatures .........................................................17
2
<PAGE>
PART I. FINANCIAL INFORMATION Item 1. Financial Statements
- ----------------------------- ----------------------------
INTRODUCTION - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The consolidated balance sheet as of December 3, 1999; the consolidated
statements of shareholders' equity as of December 3, 1999 and November 27, 1998;
the consolidated statements of operations for the three months ended December 3,
1999 and November 27, 1998; and the consolidated statements of cash flows for
the three months ended December 3, 1999 and November 27, 1998 have been prepared
without audit. The consolidated balance sheet as of September 3, 1999 has been
examined by independent certified public accountants. 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, although the Company believes
that the disclosures herein are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K, for the fiscal year ended September 3,
1999, File No. 0-11003.
In the opinion of the Company, the statements for the unaudited interim
periods presented include all adjustments, which were of a normal recurring
nature, necessary to present a fair statement of the results of such interim
periods. The results of operations for the interim periods presented are not
necessarily indicative of the results of operations for the entire year.
3
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
DECEMBER 3, November 27,
1999 1998
- --------------------------------------------------------------------------------
Revenues $ 7,014,503 $ 6,466,251
- --------------------------------------------------------------------------------
Operating costs and expenses
Cost of products sold 4,687,903 4,367,280
Selling, general, and administrative 1,479,827 1,125,739
Research and development 810,933 633,639
- --------------------------------------------------------------------------------
Operating costs and expenses 6,978,663 6,126,658
- --------------------------------------------------------------------------------
Operating income 35,840 339,593
Interest expense (24,888) (43,496)
Interest income 104,239 82,956
- --------------------------------------------------------------------------------
Earnings before income taxes 115,191 379,053
Income tax expense 43,000 148,000
- --------------------------------------------------------------------------------
Net earnings $ 72,191 $ 231,053
================================================================================
Net earnings per share:
Basic $ .00 $ .02
Diluted $ .00 $ .02
================================================================================
Shares used in per share calculation
Basic 11,740,545 11,971,877
Diluted 12,189,009 12,035,217
================================================================================
See accompanying notes to consolidated financial statements.
4
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 3, September 3,
1999 1999
- --------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 8,015,676 $ 8,858,591
Accounts receivable 4,103,486 2,618,296
Inventories 7,192,318 6,488,813
Deferred income taxes 1,334,000 1,325,000
Other 27,645 263,090
- --------------------------------------------------------------------------------
Total current assets 20,673,125 19,553,790
Property and equipment 4,298,159 4,242,588
Capitalized software costs 1,093,717 1,100,747
Other assets 42,248 56,690
- --------------------------------------------------------------------------------
$ 26,107,249 $ 24,953,815
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,749,039 $ 2,018,149
Accrued expenses 1,787,798 1,554,572
Customer deposits 1,011,450 884,066
Current maturities of long-term obligations 996,888 1,119,835
- --------------------------------------------------------------------------------
Total current liabilities 6,545,175 5,576,622
Long-term obligations, less current maturities 52,769 85,424
Deferred income taxes 509,000 512,000
- --------------------------------------------------------------------------------
Total liabilities 7,106,944 6,174,046
- --------------------------------------------------------------------------------
Commitments
Shareholders' equity
Common stock, $.01 par value; 20,000,000 shares
authorized; 12,314,575 shares issued 123,146 123,146
Additional paid-in capital 19,558,367 19,492,570
Retained earnings 167,972 95,781
Less treasury stock, at cost (849,180) (931,728)
- --------------------------------------------------------------------------------
Total shareholders' equity 19,000,305 18,779,769
- --------------------------------------------------------------------------------
$ 26,107,249 $ 24,953,815
================================================================================
See accompanying notes to consolidated financial statements.
5
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Retained Treasury Stock
------------ Paid-in Earnings --------------
Shares Amount Capital (Deficit) Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, at August 28, 1998 12,314,575 $ 123,146 $19,407,417 $ (117,492) (358,546) $ (332,926)
Treasury stock reissued through
stock options and 401(k) plan -- -- 20,289 -- 24,796 23,024
Net earnings for the three months -- -- -- 231,053 -- --
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, at November 27, 1998 12,314,575 $ 123,146 $19,427,706 $ 113,561 (333,750) $ (309,902)
==============================================================================================================================
BALANCE, at September 3, 1999 12,314,575 $ 123,146 $19,492,570 $ 95,781 (632,459) $ (931,728)
Treasury stock reissued through
stock options and 401(k) plan -- -- 65,797 -- 88,900 82,548
Net earnings for the three months -- -- -- 72,191 -- --
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, AT DECEMBER 3, 1999 12,314,575 $ 123,146 $19,558,367 $ 167,972 (543,559) $ (849,180)
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
DECEMBER 3, November 27,
1999 1998
- --------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Net earnings $ 72,191 $ 231,053
Adjustments to reconcile net earnings to
cash provided by operating activities
Depreciation and amortization 424,365 407,123
Issuance of treasury stock for
compensation expenses 43,478 42,954
Bad debt allowance 20,000 --
Inventory reserves 25,000 50,000
Deferred income taxes (12,000) (47,000)
Changes in assets and liabilities
Accounts receivable (1,505,190) 773,369
Inventories (728,505) (250,681)
Other assets 235,445 (30,433)
Accounts payable and accrued expenses 964,116 207,654
Customer deposits 127,384 664,865
- --------------------------------------------------------------------------------
(333,716) 2,048,904
- --------------------------------------------------------------------------------
CASH USED FOR INVESTMENT ACTIVITIES
Property and equipment expenditures (353,618) (200,168)
Capitalized software additions (104,846) (84,647)
- --------------------------------------------------------------------------------
(458,464) (284,815)
- --------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Proceeds from long-term debt -- 1,359,508
Repayment of long-term debt and capitalized
lease obligations (155,602) (1,456,076)
Debt issuance cost -- (11,632)
Proceeds from stock options exercised 104,867 359
- --------------------------------------------------------------------------------
(50,735) (107,841)
- --------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (842,915) 1,656,248
Cash and cash equivalents, beginning of period 8,858,591 6,492,760
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 8,015,676 $ 8,149,008
================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the three months for:
Interest $ 24,888 $ 53,569
Income taxes $ 38,500 $ --
================================================================================
See accompanying notes to consolidated financial statements.
7
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Significant Accounting Policies
The significant accounting policies followed by the Company are set
forth in Note 1 to the Company's audited consolidated financial
statements included in the annual report on Form 10-K for the year
ended September 3, 1999.
Earnings Per Share
Basic and diluted net earnings per share were computed in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share". Basic net earnings per share is computed by dividing net
earnings available to common shareholders (numerator) by the weighted
average number of common shares outstanding (denominator) during the
period and excludes the dilutive effect of stock options. Diluted net
earnings per share gives effect to all dilutive potential common
shares outstanding during a period. In computing diluted net earnings
per share, the average stock price for the period is used in
determining the number of shares assumed to be reacquired under the
treasury stock method from the exercise of stock options.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
vary from these estimates.
Fiscal Year
The Company uses a fifty-two, fifty-three week year. The fiscal year
ends on the Friday closest to August 31. Fiscal year 2000 contains
fifty-two weeks while fiscal 1999 contained fifty-three weeks.
8
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 2 Accounts Receivable
Accounts receivable are summarized as follows:
DECEMBER 3, September 3,
1999 1999
----------- -----------
(UNAUDITED)
Accounts receivable - trade $ 4,187,207 $ 2,675,022
Other receivables 108,828 115,859
----------- -----------
4,296,035 2,790,881
Less allowance for
doubtful accounts (192,549) (172,585)
----------- -----------
$ 4,103,486 $ 2,618,296
=========== ===========
Note 3 Inventories
Inventories are summarized as follows:
DECEMBER 3, September 3,
1999 1999
----------- -----------
(UNAUDITED)
Raw material $ 3,108,465 $ 2,845,784
Work-in-process 2,430,556 3,146,479
Finished goods 3,876,791 2,695,044
----------- -----------
9,415,812 8,687,307
Less inventory reserves (2,223,494) (2,198,494)
----------- -----------
$ 7,192,318 $ 6,488,813
=========== ===========
Note 4 Income Taxes
For the three months ended December 3, 1999, income tax expense of
$43,000 was comprised of a current federal and state income tax
expense of $51,000 and $4,000, respectively, and a deferred federal
tax benefit of $12,000. Net deferred tax assets increased $12,000 in
the first quarter.
9
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 5 Earnings Per Share
The following tables represent required disclosure of the reconciliation of the
numerators and denominators of the basic and diluted net earnings per share
computations.
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------------------------
DECEMBER 3, 1999 November 27, 1998
---------------------------------- ----------------------------------
PER Per
EARNINGS SHARES SHARE Earnings Shares share
(NUMERATOR) (DENOMINATOR) AMOUNT (Numerator) (Denominator) amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Net earnings $ 72,191 $231,053
======== ========
Basic earnings per share:
Net earnings available
to common shareholders $ 72,191 11,740,545 $ 0.00 $231,053 11,971,877 $ 0.02
====== ======
Effect of dilutive potential common shares:
Stock options -- 448,464 -- 63,340
-------- ---------- -------- ----------
Diluted earnings per share:
Net earnings available
to common shareholders
plus assumed conversions $ 72,191 12,189,009 $ 0.00 $231,053 12,035,217 $ 0.02
======== ========== ====== ======== ========== ======
</TABLE>
Stock options which were excluded from the diluted net earnings per share
calculation due to their anti-dilutive effect are as follows:
Three months ended
------------------------------------
DECEMBER 3, November 27,
1999 1998
-------------- --------------
Common stock options:
Number of shares - 173,500
Range of exercise prices - $2.00 to 12.13
============== ==============
Note 6 Segment Information and Significant Customers
In accordance with Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information, the Company
operates within a single reportable segment, the manufacture and sale of
satellite communications equipment.
10
<PAGE>
In this single operating segment the Company has three distinct product lines.
Revenues from customers in each of these product lines are as follows:
Three months ended
------------------------------------
DECEMBER 3, November 27,
1999 1998
- --------------------------------------------------------------------------------
Product Line
Direct Broadcast Satellite $6,210,248 $5,673,730
Telecom and Custom Products 675,548 595,572
Service 128,707 196,949
- --------------------------------------------------------------------------------
$7,014,503 $6,466,251
================================================================================
For the three months ended December 3, 1999, revenues by geographical area were
approximately: United States - $5,878,000; Mexico - $820,000; all other -
$317,000. For the three months ended November 27, 1998, revenues by geographical
area were approximately: United States - $6,038,000; Europe - $191,000; Latin
America - $140,000; all other - $97,000. Revenue attributed to geographic areas
is based on the location of the customer. All of the Company's long-lived assets
are located in the United States.
For the three months ended December 3, 1999, two customers accounted for 27.1%
and 11.7% of revenues, respectively. For the three months ended November 27,
1998, three other customers accounted for 27.7%, 14.0% and 11.8% of revenues,
respectively.
11
<PAGE>
WEGENER CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This information should be read in conjunction with the consolidated financial
statements and the notes thereto included in Item 1 of this Quarterly Report and
the audited consolidated financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended September 3, 1999 contained in the Company's 1999 Annual Report on
Form 10-K.
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements relating to financial results, future business or product
development plans, research and development activities, capital spending,
financing sources or capital structure, the effects of regulation and
competition, and are thus prospective. Such forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to, economic conditions, customer plans and commitments, product
demand, government regulation, rapid technological developments and changes,
performance issues with key suppliers and subcontractors, delays in product
development and testing, material availability, new and existing
well-capitalized competitors, and other uncertainties detailed in the Company's
Form 10-K for the year ended September 3, 1999 and from time to time in the
Company's periodic Securities and Exchange Commission filings.
The Company manufactures satellite communications equipment through Wegener
Communications, Inc. (WCI), a wholly-owned subsidiary. WCI designs and
manufactures communications transmission and receiving equipment for the
business broadcast, data communications, cable and broadcast radio and
television industries.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 3, 1999 COMPARED TO THREE MONTHS
ENDED NOVEMBER 27, 1998
Net earnings were $72,000 or less than $0.01 per share for the three month
period ended December 3, 1999, compared to $231,000 or $0.02 per share for the
three month period ended November 27, 1998.
REVENUES - The Company's revenues for the first quarter of fiscal 2000 were
$7,015,000, up 8.5% as compared to $6,466,000 for the same period in fiscal
1999.
Direct Broadcast Satellite (DBS) revenues increased $536,000 or 9.5%, in the
first quarter of fiscal 2000 to $6,210,000 from $5,674,000 for the same period
in fiscal 1999. The increase was mainly due to an increase in shipments of
digital video products principally to one customer for an upgrade of their
private network used to distribute live pari-mutuel racing signals to off-track
facilities. Telecom and Custom Products Group revenues increased $80,000 or
13.4% to $675,000 in the first quarter of fiscal 2000 from $595,000 in the first
quarter of fiscal 1999. The increase was mainly due to higher level shipments of
cue and control equipment to provide local commercial insertion capabilities to
cable television headend systems. For the three months ended December 3, 1999,
two customers accounted for 27.1% and 11.7% of revenues, respectively. For the
three months ended November 27, 1998, three other customers accounted for 27.7%,
14.0% and 11.8% of revenues,
12
<PAGE>
respectively. The Company's backlog is comprised of undelivered, firm customer
orders, which are scheduled to ship within eighteen months. WCI's backlog was
approximately $12,500,000 at December 3, 1999, compared to $15,691,000 at
September 3, 1999 and $11,600,000 at November 27, 1998.
GROSS PROFIT MARGINS - Gross profit increased $228,000 or 10.8% in the three
month period ended December 3, 1999, compared to the three month period ended
November 27, 1998. Gross profit as a percent of revenues was 33.2% in the first
quarter of fiscal 2000 compared to 32.5% in the first quarter of fiscal 1999.
The increase in gross profit dollars and percentages are primarily a result of
an increase in revenues for the period.
SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
expenses increased $354,000 or 31.5% to $1,480,000 in the first quarter of
fiscal 2000 from $1,126,000 in the first quarter of fiscal 1999. The increase
was primarily due to higher levels of selling and marketing expenses, outside
sales agent commissions, software implementation costs, and maintenance
expenses. As a percentage of revenues, selling, general and administrative
expenses were 21.1% for the three month period ended December 3, 1999 compared
to 17.4% for the same period ended November 27, 1998.
RESEARCH AND DEVELOPMENT - Research and development expenditures, including
capitalized software development costs, were $916,000 or 13.1% of revenues in
the first quarter of fiscal 2000 compared to $718,000 or 11.1% of revenues for
the same period of fiscal 1999. Capitalized software development costs amounted
to $105,000 in the first quarter of fiscal 2000 compared to $85,000 in the first
quarter of fiscal 1999. Research and development expenses, excluding capitalized
software development costs, were $811,000 or 11.6% of revenues in the first
quarter of fiscal 2000, and $634,000 or 9.8% of revenues in the same period of
fiscal 1999. The increase in expenses was primarily due to increases in
engineering consulting expenses and personnel costs.
INTEREST EXPENSE - Interest expense decreased $18,000 to $25,000 in the first
quarter of fiscal 2000 from $43,000 in the same period in fiscal 1999. The
decrease was primarily due to a decrease in average outstanding debt balances
and a decrease in the interest rate on the mortgage debt.
INTEREST INCOME - Interest income was $104,000 for the three months ended
December 3, 1999 compared to $83,000 for the same period ended November 27,
1998. The increase was mainly due to higher average cash equivalent balances for
the period.
INCOME TAX EXPENSE - For the three months ended December 3, 1999, income tax
expense of $43,000 was comprised of a current federal and state income tax
expense of $51,000 and $4,000, respectively, offset by a deferred federal tax
benefit of $12,000.
LIQUIDITY AND CAPITAL RESOURCES
THREE MONTHS ENDED DECEMBER 3, 1999
During the first quarter of fiscal 2000, operating activities used $334,000 of
cash. Net earnings adjusted for non-cash expenses provided $573,000 of cash,
while changes in accounts payable and customer deposit balances provided
$1,091,000 of cash. Changes in accounts receivable, inventories, and other
assets used $1,998,000 of cash. Cash used by investing activities for property
and equipment expenditures and capitalized software additions was $458,000.
Financing activities used cash of $156,000 for scheduled repayments of long-term
obligations. Proceeds from exercised stock options provided $105,000 of cash.
13
<PAGE>
WCI maintains a loan facility with a bank which provides a maximum available
credit limit of $10,000,000 with sublimits as defined. The loan facility matures
on June 21, 2000 or upon demand and requires an annual facility fee of $55,000
plus an additional .75% of $3,000,000 if borrowings, at any time, exceed
$5,500,000. The loan facility consists of 1) a term loan and a revolving line of
credit with a combined borrowing limit of $8,500,000, bearing interest at the
bank's prime rate (8.50% at December 3, 1999) and 2) a real estate advance
facility with a maximum borrowing limit of $1,500,000 bearing interest at a
fixed rate of 250 basis points over the five year U.S. Treasury rate. The
interest rate on outstanding real estate advances is 6.519%
The term loan facility provides for a maximum of $1,000,000 for advances of up
to 80% of the cost of equipment acquisitions. Principal advances are payable
monthly over sixty months with a balloon payment due at maturity. The revolving
line of credit is subject to availability advance formulas of 80% against
eligible accounts receivable; 20% of eligible raw materials inventories; 20% of
eligible work-in-process kit inventories; and 40% to 50% of eligible finished
goods inventories. Advances against inventory are subject to a sublimit of
$2,000,000. The real estate advance portion of the loan facility provides for
advances of up to 70% of the appraised value of certain real property. Advances
for real property are payable in 35 equal principal payments with a balloon
payment due at maturity. At December 3, 1999, outstanding balances on real
property advances aggregated $855,000, and no balances were outstanding on the
revolving line of credit or equipment term loan portions of the loan facility.
Additionally, at December 3, 1999, approximately $4,155,000 was available to
borrow under the advance formulas.
The Company's loan facility matures on June 21, 2000 along with a balloon
payment due on the mortgage note. The Company believes that the existing line of
credit and term loan facility will be renewed in June 2000 or that a suitable
replacement line will be available from other financing sources. The Company
expects that its current cash and cash equivalents combined with expected cash
flows from operating activities and an available line of credit will be
sufficient to support the Company's operations during fiscal 2000.
YEAR 2000
Prior to December 31, 1999, management of the Company completed its review of
internal information systems, manufacturing and engineering equipment, and
facilities, as well as surveys of key vendors and service providers for Year
2000 risks. As of the date of this filing, the Company has experienced no
disruptions or other significant problems related to Year 2000 issues.
Additionally, to date, there have been no Year 2000 related failures in the
respect of supplies or services from vendors and service providers. To date,
there have been no Year 2000 related problems reported from customers regarding
the Company's hardware or software products.
However, if Year 2000 issues develop subsequent to the date of this filing which
impact the ability of vendors or service providers to adequately supply the
Company, there could be a material adverse impact on the Company's operations.
Additionally, if the Company's products were to incur Year 2000 performance
problems, there could be an adverse impact on results of operations and
financial condition due to increased warranty costs, litigation expenses and
other material liabilities, or a loss of customers.
The Company did not incur significant costs related to Year 2000 issues and does
not expect to incur material Year 2000 transition costs in the future.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market rate risk for changes in interest rates relates
primarily to its revolving line of credit and cash equivalents. The interest
rate on certain advances under the line of credit and term loan facility
fluctuates with the bank's prime rate. There were no borrowings outstanding at
December 3, 1999 subject to variable interest rate fluctuations.
The Company's cash equivalents consist of a repurchase agreement and a bank
certificate of deposit. The cash equivalents have maturities of less than three
months and therefore are subject to minimal market risk.
The Company does not enter into derivative financial instruments. All sales and
purchases are denominated in U.S. dollars.
15
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: 27 - Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended December 3, 1999.
16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on it behalf by the
undersigned thereunto duly authorized.
WEGENER CORPORATION
-------------------
(Registrant)
Date: January 18, 2000 By: /s/ Robert A. Placek
--------------------------
Robert A. Placek
President
(Principal Executive Officer)
Date: January 18, 2000 By: /s/ C. Troy Woodbury, Jr.
------------------------------
C. Troy Woodbury, Jr.
Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-01-2000
<PERIOD-START> SEP-04-1999
<PERIOD-END> DEC-03-1999
<CASH> 8,015,676
<SECURITIES> 0
<RECEIVABLES> 4,296,035
<ALLOWANCES> (192,549)
<INVENTORY> 7,192,318
<CURRENT-ASSETS> 20,673,125
<PP&E> 13,238,933
<DEPRECIATION> (8,940,774)
<TOTAL-ASSETS> 26,107,249
<CURRENT-LIABILITIES> 6,545,175
<BONDS> 52,769
0
0
<COMMON> 123,146
<OTHER-SE> 18,877,159
<TOTAL-LIABILITY-AND-EQUITY> 26,107,249
<SALES> 7,014,503
<TOTAL-REVENUES> 7,014,503
<CGS> 4,687,903
<TOTAL-COSTS> 6,978,663
<OTHER-EXPENSES> (104,239)
<LOSS-PROVISION> 20,000
<INTEREST-EXPENSE> 24,888
<INCOME-PRETAX> 115,191
<INCOME-TAX> 43,000
<INCOME-CONTINUING> 72,191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,191
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
