<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the three month period ended September 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-11685-NY
RADYNE COMSTREAM INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE
--------
(State or other jurisdiction of incorporation or organization)
11-2569467
----------
(IRS EMPLOYER IDENTIFICATION NO.)
3138 EAST ELWOOD STREET, PHOENIX, AZ 85034
------------------------------------------
(Address of principal executive offices)
602-437-9620
------------
(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) 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 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 by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
YES [X] NO [ ]
The registrant had 14,511,948 shares of its common stock, par value $.001,
outstanding as of September 30, 2000.
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<PAGE> 2
PART I - FINANCIAL INFORMATION
RADYNE COMSTREAM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
ITEM 1 Unaudited Audited
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash & cash equivalents $ 16,487,510 $ 2,947,660
Accounts receivable - trade, net of allowance for doubtful
accounts of $1,000,814 and $791,746, respectively 7,987,800 8,678,153
Other receivable 21,500 --
Inventories, net 12,098,420 8,339,112
Prepaid expenses 356,748 929,076
Deferred tax assets 5,376,000 --
------------ ------------
Total current assets 42,327,978 20,894,001
------------ ------------
Property and equipment, net 3,260,937 3,595,168
Other assets:
Purchased technology, net of accumulated amortization of
$805,000 and $505,000, respectively 1,695,000 1,995,000
Goodwill, net of accumulated amortization of $385,319 and
$253,530, respectively 1,413,072 1,544,861
Deposits and other 59,818 207,032
------------ ------------
Total other assets 3,167,890 3,746,893
------------ ------------
$ 48,756,805 $ 28,236,062
============ ============
Liabilities and Stockholders' equity
Current liabilities:
Notes payable under line of credit agreement $ -- $ 12,920,000
Current installments of obligations under capital leases 16,753 44,332
Accounts payable, trade 2,578,002 3,911,742
Accrued expenses 5,247,651 5,043,391
Customer advances 695,193 545,218
Taxes Payable 697,323 684,382
------------ ------------
Total Current Liabilities 9,234,922 23,149,065
Obligations under capital leases, excluding current installments 34,281 64,652
Accrued stock option compensation 510,908 695,433
------------ ------------
Total Liabilities 9,780,111 23,909,150
------------ ------------
Stockholders' equity:
Preferred Stock, $.001 par value, 10,000,000 shares authorized;
shares issued and outstanding: 0 at September 30, 2000 -- --
and December 31, 1999
Common Stock, $.001 par value, 50,000,000 shares authorized;
shares issued and outstanding: 14,511,948 at September 30,
2000 and 10,739,382 at December 31, 1999 14,512 10,738
Additional Paid-In Capital 47,566,339 23,364,056
Accumulated deficit (8,604,157) (19,047,882)
------------ ------------
Total stockholders' equity 38,976,694 4,326,912
------------ ------------
$ 48,756,805 $ 28,236,062
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
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RADYNE COMSTREAM INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 17,334,187 $ 13,999,479 $ 52,007,185 $ 39,261,814
Cost of sales 9,502,554 7,295,589 27,957,046 21,090,713
------------ ------------ ------------ ------------
Gross profit 7,831,633 6,703,890 24,050,139 18,171,101
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 3,187,510 3,390,169 10,917,469 9,138,897
Research and development 2,433,205 2,214,649 7,018,330 6,730,223
------------ ------------ ------------ ------------
Total operating expenses 5,620,715 5,604,818 17,935,799 15,869,120
------------ ------------ ------------ ------------
Earnings from operations 2,210,918 1,099,072 6,114,340 2,301,981
Other (income) expense:
Interest expense 89,529 463,587 473,458 1,561,616
Other (income) (321,494) -- (758,817) --
------------ ------------ ------------ ------------
Earnings before extraordinary item and income taxes 2,442,883 635,485 6,399,699 740,365
Extraordinary item -- 188,182 -- 188,182
------------ ------------ ------------ ------------
Earnings before income taxes 2,442,883 823,667 6,399,699 928,547
Income tax expense/(benefit) (4,122,199) 15,000 (4,044,023) 15,000
------------ ------------ ------------ ------------
Net earnings $ 6,565,082 $ 808,667 $ 10,443,722 $ 913,547
============ ============ ============ ============
Basic net earnings per common share:
Earnings before extraordinary item and taxes $ 0.17 $ 0.11 $ 0.46 $ 0.12
Extraordinary item 0.00 0.03 0.00 0.03
------------ ------------ ------------ ------------
Earnings before taxes 0.17 0.14 0.46 0.16
Taxes 0.28 0.00 0.29 0.00
------------ ------------ ------------ ------------
Net earnings $ 0.45 $ 0.13 $ 0.76 $ 0.15
============ ============ ============ ============
Diluted net earnings per common share:
Earnings before extraordinary item and taxes $ 0.15 $ 0.10 $ 0.41 $ 0.12
Extraordinary item 0.00 0.03 0.00 0.03
------------ ------------ ------------ ------------
Earnings before taxes 0.15 0.13 0.41 0.15
Taxes 0.26 0.00 0.26 0.00
------------ ------------ ------------ ------------
Net earnings $ 0.41 $ 0.13 $ 0.67 $ 0.14
============ ============ ============ ============
Weighted average shares used in computation
Basic 14,492,029 6,008,435 13,767,017 5,961,937
============ ============ ============ ============
Diluted 15,952,767 6,101,879 15,511,717 6,401,161
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
RADYNE COMSTREAM INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 10,443,722 $ 913,547
Adjustments to reconcile net earnings to cash flows provided by
operating activities:
Forgiveness of interest on debt -- (188,182)
Loss on disposal of assets 30,307 --
Depreciation and amortization 1,709,410 1,807,551
Increase (decrease) in cash resulting from changes in:
Accounts receivable 690,353 1,707,971
Other receivables (21,500) --
Inventories (3,759,308) 1,142,276
Prepaid expenses 572,328 159,625
Deposits and other 147,214 35,024
Deferred tax assets (4,332,000) --
Accounts payable, trade (1,333,740) (779,191)
Accounts payable, affiliates -- (8,150)
Accrued expenses 204,260 (1,884,823)
Customer advances 149,975 --
Taxes payable 12,941 15,000
Accrued stock option compensation (184,525) (46,673)
------------ ------------
Net cash provided by operating activities 4,329,437 2,873,975
------------ ------------
Cash flows from investing activities:
Net Proceeds from sale of fixed assets -- 144,597
Capital expenditures (973,694) (256,404)
------------ ------------
Net cash used in investing activities (973,694) (111,807)
------------ ------------
Cash flows from financing activities:
Payments on notes payable under line of credit (12,920,000) --
Borrowings on notes payable under line of credit -- 4,920,000
Payments on note payable -- (5,962,599)
Net proceeds from exercise of stock options 1,035,579 --
Net proceeds from sale of common stock 22,126,478 83,706
Payment of rights offering costs -- (363,629)
Principal payments on capital lease obligations (57,950) (72,346)
------------ ------------
Net cash provided by(used in) financing activities 10,184,107 (1,394,868)
------------ ------------
Net increase in cash 13,539,850 1,367,300
Cash and cash equivalents, beginning of year 2,947,660 254,956
------------ ------------
Cash and cash equivalents, end of period $ 16,487,510 $ 1,622,256
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 776,663 $ 813,096
============ ============
Cash paid for taxes $ 475,036 $ --
============ ============
Purchase price adjustment to note payable and goodwill $ -- $ 515,940
============ ============
Conversion of notes payable to affiliate to common stock in
Connection with rights offering $ -- $ 15,618,272
============ ============
Deferred tax asset for stock options exercised and sold $ 1,044,000 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
RADYNE COMSTREAM INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999 IS UNAUDITED)
1 BUSINESS
Radyne ComStream Inc. (the "Company") was incorporated on November 25,
1980 and commenced operations on May 22, 1981. On August 12, 1996 the Company
became a majority owned subsidiary of Singapore Technologies Pte Ltd ("STPL"),
through its wholly-owned subsidiary, Stetsys US, Inc. ("ST").
In March 1999, Radyne Corp. changed its name to Radyne ComStream Inc. The
Company's principal manufacturing and headquarters facilities are located in
Phoenix, Arizona and San Diego, California. The Company designs, manufactures,
and sells products, systems and software used for the transmission and reception
of data over satellite and cable communication networks.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The interim unaudited condensed consolidated financial statements
furnished reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of financial position as of September 30, 2000
and the results of operations and cash flows for the three and nine months ended
September 30, 2000 and 1999. Such adjustments are of a normal recurring nature.
This information should be read in conjunction with the consolidated financial
statements included in the Company's Form 10-K for the year ended December 31,
1999.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year.
(b) 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 and
disclosure of contingent assets and liabilities as of the financial statement
date and the reported amounts of revenue and expenses during the reporting
period. Rapid technological change and short product life cycles characterize
the industry in which the Company operates. As a result, estimates are required
to provide for product obsolescence and warranty returns as well as other
matters. Actual results could differ from those estimates.
(c) Principles of Consolidation
The condensed consolidated financial statements include the accounts of
the Radyne ComStream Inc. and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in the consolidation.
(d) Cash Equivalents
All money market accounts with a maturity of 90 days or less are
considered cash equivalents.
(e) Revenue Recognition
The Company recognizes revenue upon transfer of title and shipment of
product.
(f) Inventories
Inventories, consisting of satellite modems and related products, are valued
at the lower of cost (first-in, first-out) or market.
(g) Property and Equipment
Property and equipment are stated at cost. Equipment held under capital
leases is stated at the present value of future minimum lease payments.
Expenditures for repairs and maintenance are charged to operations as incurred,
and improvements which extend the useful lives of the assets are capitalized.
Depreciation and amortization of machinery and equipment are computed using the
straight-line method over an estimated useful life of three to ten years.
Equipment held under capital leases and leasehold improvements are amortized on
a straight-line basis over the shorter of the lease term or estimated useful
lives of the assets.
(h) Goodwill
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Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over ten years.
(i) Purchased Technology
In connection with the acquisition of ComStream, value was assigned to
purchased technology. Purchased technology is being amortized on a straight-line
basis over the expected period to be benefited of 6.25 years.
(j) Impairment of Long-Lived Assets
Management reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amounts of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(k) Warranty Costs
The Company provides limited warranties on certain of its products and
systems for periods generally not exceeding two years. The Company accrues
estimated warranty costs for potential product liability and warranty claims
based on our claim experience. Such costs are accrued as cost of sales at the
time revenue is recognized.
(l) Research and Development
The cost of research and development is charged to expense as incurred.
(m) Income Taxes
The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future
consequences attributed to differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Differences between income for financial and tax reporting
purposes arise primarily from accruals for warranty reserves and compensated
absences. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(n) Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, are principally accounts receivable. The Company
maintains ongoing credit evaluations of our customers and generally does not
require collateral. The Company provides reserves for potential credit losses
and such losses have not exceeded management's expectations.
(o) Net Earnings/ Per Share
Basic earnings per share is computed by dividing earnings available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or contracts to issue common stock were exercised or
converted to common stock or resulted in the issuance of common stock that then
shared in the earnings of the Company.
(p) Fair Value of Financial Instruments
The fair value of accounts receivable, accounts payable and accrued
expenses approximates the carrying value due to the short-term nature of these
instruments.
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(q) Employee Stock Options
Management has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options and to adopt the
"disclosure only" alternative treatment under Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123
requires the use of fair value option valuation models that were not developed
for use in valuing employee stock options. Under SFAS No. 123, deferred
compensation is recorded for the excess of the fair value of the stock on the
date of the option grant, over the exercise price of the option. The deferred
compensation is amortized over the vesting period of the option.
(r) Segment Reporting
The Company has only one operating business segment, the sale of equipment
for satellite and cable communications networks.
3 PUBLIC OFFERING
In January 2000, the Board of Directors approved a public offering
of 2,760,000 units which became effective on February 11, 2000 upon the
approval by the Securities and Exchange Commission of the S-2/A
Registration Statement which was filed on February 7, 2000. Each unit
offered consisted of one share of the Company's common stock and one
warrant to purchase an additional share of common stock. The units were
offered at a net price of $6.44 each (after a $0.56 per unit underwriting
discount), subject to adjustment in certain circumstances. As a result, we
received $17,302,000 in proceeds which were offset by $810,000 in costs
associated with the offering. Management anticipates that these proceeds
will primarily be used in on-going research and development projects for
the purpose of expanding current product lines. Additionally, warrant
holders exercised a total of 616,483 warrants to buy shares at $8.75 per
share, which generated approximately another $5,243,000 of cash, net.
7
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4 INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
Inventories consist of the
following:
Raw materials and components $ 9,970,572 $ 5,550,279
Work in process 2,555,825 3,724,908
Finished goods 1,983,315 863,154
------------ ------------
14,509,712 10,138,341
Obsolescence reserve (2,411,292) (1,799,229)
------------ ------------
Total $ 12,098,420 $ 8,339,112
============ ============
</TABLE>
5 PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
Property and equipment consist of the following:
Machinery and equipment $ 4,001,520 $ 3,674,803
Furniture and fixtures 2,478,901 2,048,976
Leasehold improvements 826,278 445,127
Computers and software 220,897 462,042
----------- -----------
7,527,596 6,630,948
Less accumulated depreciation &
amortization (4,266,659) (3,035,780)
----------- -----------
Total $ 3,260,937 $ 3,595,168
=========== ===========
</TABLE>
6 ACCRUED LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
Accrued liabilities consist of the following:
Wages and related payroll taxes $1,633,078 $ 788,559
Warranty reserve 992,841 924,928
Other 2,621,732 3,329,904
---------- ----------
Total $5,247,651 $5,043,391
========== ==========
</TABLE>
7 NOTES PAYABLE
The Company had a $20,500,000 credit agreement with Citibank, N.A. that
included $20,000,000 available under an uncommitted line of credit facility and
facilities for bank guarantees and/or standby letters of credit up to $500,000.
The availability of additional borrowings under this credit agreement expired on
September 28, 2000 as the Company retired all notes payable during the current
period. The Company owed a principal of $12,920,000 under the line of credit as
of December 31, 1999.
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8 EARNINGS/PER SHARE
A summary of the reconciliation from basic earnings per share to diluted
earnings per share follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
-----------------------------------------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Earnings $ 6,565,082 $ 808,667 $10,443,722 $ 913,547
=========== =========== =========== ===========
Basic EPS-Weighted Average Shares Outstanding 14,492,029 6,008,435 13,767,017 5,961,937
=========== =========== =========== ===========
Basic Earnings Per Share $ 0.45 $ 0.13 $ 0.76 $ 0.15
=========== =========== =========== ===========
Basic Weighted Average Shares 14,492,029 6,008,435 13,767,017 5,961,937
Effect of diluted stock options 1,460,738 93,444 1,744,700 439,224
----------- ----------- ----------- -----------
Diluted EPS-Weighted Average Shares Outstanding 15,952,767 6,101,879 15,511,717 6,401,161
=========== =========== =========== ===========
Diluted Earnings Per Share $ 0.41 $ 0.13 $ 0.67 $ 0.14
=========== =========== =========== ===========
Stock Options not included in Diluted EPS
Since Antidilutive 1,167,053 1,026,086 1,167,053 1,026,086
=========== =========== =========== ===========
</TABLE>
9 CONCENTRATIONS OF RISK
For the three months ended September 30, 2000, one customer accounted for
18.2% of the Company's revenues. Outstanding receivables from this customer were
$1,052,000.
10 DEFERRED TAX ASSETS
The Company recorded a deferred tax asset of $4,332,000 for an income tax
benefit related to net operating loss carryforward. In addition, the Company
recorded a deferred asset of $1,044,000 resulting from the exercise of stock
options and subsequent sales of the underlying stock during the current period.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This information should be read in conjunction with the condensed
consolidated financial statements and the notes thereto included in Item 1 of
Part I 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 December 31,
1999 contained in the Company's 1999 Annual Report on Form 10-K.
Except for the historical information contained herein, the following
discussion includes statements that constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act") and Radyne ComStream claims the protection of the safe-harbor for
forward-looking statements contained in the Reform Act. These forward-looking
statements are often characterized by the terms "may," "believes," "projects,"
"expects," or "anticipates," and do not reflect historical facts. Specific
forward-looking statements contained in the following discussion include, but
are not limited to, (i) a continuing increase in Radyne ComStream's customer
base, (ii) the penetration of additional markets, (iii) continuing acceptance of
the High Speed and Earth Station Terminal products and (iv) sufficient cash
reserves and cash from operations to fund ongoing operations for the next twelve
months.
Forward-looking statements involve risks, uncertainties and other factors which
may cause actual results, performance or achievements of Radyne ComStream to be
materially different from those expressed or implied by such forward-looking
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statements. Factors that could affect Radyne ComStream's results and cause them
to materially differ from those contained in the forward-looking statements
include:
- loss of, and failure to replace, any significant customers;
- timing and success of new product introductions;
- product developments, introductions and pricing of competitors;
- timing of substantial customer orders;
- availability of qualified personnel;
- the impact of local political and economic conditions and foreign
exchange fluctuations on international sales;
- performance of suppliers and subcontractors;
- market demand and industry and general economic or business
conditions;
- availability, cost and terms of capital;
- Radyne ComStream's level of success in effectuating its strategic
plan;
- other factors to which this report refers or to which the Company's
1999 Annual Report on Form 10-K refers.
- Other factors that the Company is currently unable to identify or
quantify, but may arise or become known in the future.
In addition, the foregoing factors may affect generally Radyne ComStream's
business, results of operations and financial position.
Forward-looking statements speak only as of the date the statement was made.
Radyne ComStream does not undertake and specifically declines any obligation to
update any forward-looking statements.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2000
COMPARED TO THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999, WERE AS FOLLOWS:
Net sales increased 24% to $17,334,000 during the period ended September
30, 2000 from $13,999,000 during the period ended September 30, 1999 as a result
of the increased interest our product lines are enjoying in the market place.
Our customer base has increased as we have expanded the number of products we
produce. Our newest High Speed (Broadband Data, Internet, Video) and Earth
Station Terminal (Internet, Telephony) products have enjoyed remarkable
acceptance in the market places that they have been introduced and account for
the major portion of the increase in sales for the quarter ended September 30,
2000 as compared to the quarter ended September 30, 1999. We expect that this
trend will continue as our marketing and business development teams continue to
penetrate new markets and gain access to new customers in the markets where we
already have a presence. Our legacy products continue to lead the way in terms
of total sales and account for the balance of the increase in sales for the
quarter.
Cost of sales as a percentage of net sales increased to 55% during the
three month period ended September 30, 2000 from 52% during the three month
period ended September 30, 1999. This increase is primarily due to the costs of
our introduction of new products to the market place during the current quarter
compared to the third quarter of 1999.
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<PAGE> 11
Selling, general and administrative costs decreased 6% to $3,188,000 (18%
of sales) during the three month period ended September 30, 2000 from $3,390,000
(24% of sales) during the three month period ended September 30, 1999. The
decrease in expenses as a percentage of sales was primarily the result of
unusually high expenses related to bonuses and commission expenses during the
prior period compared to the current period. Marketing expenses have remained
high, as expected, based on the Company's attempt to position itself to compete
head-to-head with larger competitors without giving up margin advantages.
However, general and administrative expenses have remained fairly consistent
with prior periods (in terms of real dollars) resulting in the overall decrease
in SG&A as a percentage of sales. We expect SG&A expenses to increase as we
increase levels of business in which the Company is operating.
Research and development expenditures increased 10% to $2,433,000 (14% of
sales) during the three month period ended September 30, 2000 from $2,215,000
(16% of sales) during the three month period ended September 30, 1999. These
expenditures may fluctuate from period to period depending on the staging of
on-going projects. The decrease in expenses as a percentage of sales is the
result of the significant increase in the level of sales during the current
period compared with the third quarter of 1999. In future periods, we anticipate
research and development expenditures will remain high and even increase as we
expand current product lines to address new markets and customer requirements.
Based on the above, the Company experienced earnings from operations of
$2,210,000 (13% of sales) for the three month period ended September 30, 2000 as
compared to $1,099,000 (8% of sales) for the three month period ended September
30, 1999.
Interest expense decreased to $90,000 (.5% of sales) and interest income
increased to $321,000 (2% of sales) in the three month period ended September
30, 2000 from $464,000 (3% of sales) and $0, respectively, in the three month
period ended September 30, 1999 as a result of the company eliminating its notes
payable and increasing its cash levels during the current period compared with
the third quarter of 1999.
New-orders-booked (Bookings) increased by 8% to $17,404,000 for the three
month period ended September 30, 2000 from $16,156,000 during the three month
period ended September 30, 1999.
Backlog (the level of unfilled-orders-to-ship) increased 32% to
$17,436,000 at September 30, 2000 from $13,193,000 at September 30, 1999.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
COMPARED TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999, WERE AS FOLLOWS:
Net sales increased 32% to $52,007,000 during the nine month period ended
September 30, 2000 from $39,262,000 during the nine month period ended September
30, 1999 primarily as a result of the increased interest in our product lines
from the market place. Our customer base has increased as we have expanded the
number of products we produce. Our newest High Speed (Broadband Data, Internet,
Video) and Earth Station Terminal (Internet, Telephony) products have enjoyed
remarkable acceptance in the market places that they have been introduced and
account for the major portion of the increase in sales for the nine month period
ended September 30, 2000. We expect that this trend will continue as our
marketing and business development teams are successful in penetrating new
markets and we continue to gain access to new customers in the markets where we
currently compete. Our legacy products continue to lead the way in terms of
total sales and account for the balance of the increase in sales for the nine
month period ended September 30, 2000.
Cost of sales as a percentage of net sales remained consistent at 54%
during the nine month periods ended September 30, 2000 and 1999. However, these
costs may fluctuate from period to period depending on the staging of on-going
projects, timing of requested delivery dates and the mix of products to be
shipped during the period.
Selling, general and administrative costs increased 19% to $10,917,000
(21% of sales) during the nine month period ended September 30, 2000 from
$9,139,000 (23% of sales) during the nine month period ended September 30, 1999.
The increased level of expenses, in terms of dollars, for the period was
primarily the result of the increased level of business activity as evidenced by
the decrease in terms of percentage of sales. Marketing
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expenses have remained high, based on the Company's attempts to position itself
to compete head-to-head with larger competitors without giving up margin
advantages.
Research and development expenditures increased 4% to $7,018,000 (13% of
sales) during the nine month period ended September 30, 2000 from $6,730,000
(17% of sales) during the nine month period ended September 30, 1999. These
expenditures may fluctuate from period to period depending on the staging of
on-going projects and customer demand for new product lines. In future periods,
we anticipate research and development expenditures will remain high as we plan
to expand current product lines and develop new products to meet current market
demand and to enter new markets as the opportunities arise.
Based on the above, we experienced earnings from operations of $6,114,000
(12% of sales) for the nine month period ended September 30, 2000 as compared to
$2,302,000 (6% of sales) for the nine month period ended September 30, 1999.
Interest expense decreased to $473,000 (.9% of sales) and interest income
increased to $759,000 (1.5% if sales) in the nine month period ended September
30, 2000 from $1,562,000 (4% of sales) and $0, respectively, in the nine month
period ended September 30, 1999 as a result of the company eliminating its notes
payable and increasing its cash levels during the current period compared with
the comparative period in 1999.
New-orders-booked (Bookings) increased by 25% to $54,921,000 during the
nine month period ended September 30, 2000 from $43,849,000 during the nine
month period ended September 30, 1999.
Backlog (the level of unfilled-orders-to-ship) increased 32% to
$17,436,000 at September 30, 2000 from $13,193,000 at September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $33,093,000 at September 30, 2000, an increase in
working capital of $35,348,000 from ($2,255,000) at December 31, 1999. This
change is primarily a result of the public offering in February, which provided
cash of $16,492,000, the exercise of stock options, which provided cash of
$1,036,000, the exercise of warrants for common stock, which provided another
$5,243,000 in cash and cash provided by operating activities as explained below.
Net cash provided by operating activities was $4,329,000 for the nine
month period ended September 30, 2000, as compared to $2,874,000 provided by the
nine month period ended September 30, 1999. This increase is primarily
attributed to an increase in net earnings of $9,530,000 between the two periods,
a decrease in accounts receivable of $690,000, and an increase in customer
deposits of $150,000. This increase was partially offset by a large decrease in
cash attributed to an increase in inventory of $3,759,000 and a decrease in
accounts payable of $1,334,000.
Cash used in investing activities, consisted of additions to property and
equipment of $974,000 during the nine month period ended September 30, 2000 as
compared to additions of $256,000 which were offset by net proceeds from the
sale of fixed assets of $145,000 during the nine month period ended September
30, 1999.
Net cash provided by (used in) financing activities increased to
$10,184,000 from ($1,395,000) for the nine month periods ended September 30,
2000 and September 30, 1999, respectively. The increase is primarily attributed
to the public offering completed in February, and the subsequent exercise of
stock warrants and employee stock plan purchases which provided cash of
$22,126,000, partially offset by a reduction in cash from net payments under
line of credit and note payable agreements (borrowings less payments) of
($12,920,000) during the nine month period ended September 30, 2000 compared to
($1,043,000) during the nine month period ended September 30, 1999. In addition,
the Company received $1,036,000 in proceeds from the exercise of stock options.
As a result of the foregoing, we increased our cash balances by
$13,540,000 during the nine month period ended September 30, 2000, compared to
an increase in cash balances of $1,367,000 during the nine month period ended
September 30, 1999.
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Management believes that its, cash on hand, and cash from operations will
be sufficient to fund its planned future operations and capital requirements for
continued growth for the next twelve months.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk on our financial instruments from changes in
interest rates. We do not use financial instruments for trading purposes or to
manage interest rate risk. Increases in market interest rates would not have a
substantial adverse effect on profitability.
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on June 29, 2000. Proxies were
solicited and 13,207,686 shares were represented at the meeting. The following
matters were voted on at the meeting:
1) The board of directors was elected in its entirety by approximately
99.8% of the shares represented at the meeting.
2) The Company's Long-Term Incentive Plan was approved by 10,553,785 or
79.9% of the shares represented at the meeting.
3) 10,974,945 or 83.1% of the shares represented at the meeting
approved the Plan of Reincorporation which changed the Company's
state of incorporation from New York to Delaware and authorized the
company to issue two classes of stock to be designated respectively,
"Common Stock" and "Preferred Stock". The total number of shares of
Common Stock that the company shall have authority to issue is
50,000,000 and the total number of shares of Preferred Stock that
the company shall have the authority to issue is 10,000,000 and each
of such shares of each class shall have a par value of $.001.
ITEM 5 - OTHER INFORMATION - RECENT DEVELOPMENTS
Public Offering
Radyne ComStream Inc. completed a public offering as of February 11, 2000.
The Company received $17,302,000 in gross proceeds from the sale of 2,760,000
units each consisting of one common share and one warrant to purchase a common
share. In addition, as of September 30, 2000, a total of 616,483 warrants had
been exercised for the net exercise price of $5,243,000.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) EXHIBIT DESCRIPTION
------------- -----------
<S> <C>
3.1* Certificate of Incorporation
3.2** Bylaws
27 Financial Data Schedule
</TABLE>
* Incorporated by reference from exhibit 3.1 to registrant's description of
capital stock on form 8-K, as amended and filed on July 13, 2000.
** Incorporated by reference from exhibit 3.2 to registrant's description of
capital stock on form 8-K, as amended and filed on July 13, 2000.
(b) Registrant filed the following reports on Form 8-K during the period of
January 1, 2000 through September
13
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30, 2000:
Current Report on Form 8-K dated February 8, 2000, Item 5.
Current Report on Form 8-K dated March 3, 2000, Item 5.
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: November 6, 2000 RADYNE COMSTREAM INC.
By: /s/ ROBERT C. FITTING
---------------------------
Robert C. Fitting
Chief Executive Officer and President
By: /s/ GARRY D. KLINE
---------------------------
Garry D. Kline
Vice President, Finance
(Chief Financial Officer and
Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.1* Certificate of Incorporation
3.2** Bylaws
27 Financial Data Schedule
</TABLE>
* Incorporated by reference from exhibit 3.1 to registrant's description of
capital stock on form 8-K, as amended and filed on July 13, 2000.
** Incorporated by reference from exhibit 3.2 to registrant's description of
capital stock on form 8-K, as amended and filed on July 13, 2000.
