SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. - 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 March 31, 2000
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. 0-12588
_________________________
SALIENT 3 COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2280922
(State of Incorporation) (IRS Employer Identification No.)
P.O. Box 1498, Reading, Pennsylvania 19603
(Mailing address of principal executive offices) (Zip Code)
(610) 856-5500
________________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Class A Class B
------- -------
Number of shares of each class of
common stock outstanding as of
March 31, 2000 (including 156,250
shares of restricted stock
and excluding 2,844,189
Class A treasury shares): 5,646,981 494,130
<PAGE>
SALIENT 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1.
Consolidated Condensed Balance Sheets at
March 31, 2000 (unaudited) and December 31, 1999
Consolidated Condensed Statements of Operations for the
three month periods ended March 31, 2000
and April 2, 1999 (unaudited)
Consolidated Condensed Statements of Cash Flows
for the three month periods ended March 31, 2000
and April 2, 1999 (unaudited)
Notes to Consolidated Condensed Financial Statements
Item 2.
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
Part I. Financial Information
Salient 3 Communications, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
March 31, 2000 and December 31, 1999
(Unaudited)
(000's)
March 31, December 31,
2000 1999
--------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,031 $ 1,687
Accounts receivable, net of allowance
for doubtful accounts of $1,964 and
$1,556, respectively 23,080 27,239
Inventories 18,372 17,425
Deferred income taxes 4,940 4,940
Other current assets 8,146 7,302
------ ------
Total current assets 56,569 58,593
------ ------
Property, plant and equipment, at cost 43,359 42,777
Less accumulated depreciation and
amortization 26,038 24,973
------ ------
17,321 17,804
------ ------
Deferred income taxes 6,470 6,470
Other assets 2,850 2,850
Software development costs 5,108 4,068
Goodwill 34,606 34,762
------- -------
Total Assets $ 122,924 $ 124,547
======= =======
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,197 $ 202
Accounts payable 7,534 9,946
Salaries and wages 1,698 1,428
Income taxes, currently payable 317 406
Deferred revenue 2,577 2,164
Other accrued liabilities 9,581 10,446
------ ------
Total current liabilities 24,904 24,592
------ ------
Long-term debt 13,343 13,647
Other long-term liabilities 6,795 6,990
Stockholders' equity:
Common stock 8,985 8,985
Capital in excess of par value 36,969 36,974
Warrants outstanding 1,755 1,755
Retained earnings 72,829 74,178
Foreign currency translation adjustment (77) (14)
Deferred compensation-restricted stock (1,373) (1,420)
Treasury stock (41,206) (41,140)
------- -------
77,882 79,318
------- -------
Total Liabilities and Stockholders' Equity $ 122,924 $ 124,547
======= =======
The accompanying notes are an integral part of the consolidated condensed
financial statements.
</TABLE>
<PAGE>
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
(000's except for share and per share information)
Three Months Ended
--------------------------
March 31, April 2,
2000 1999
--------- ---------
<S> <C> <C>
Sales $ 25,015 $ 28,623
Cost of goods sold 14,668 16,975
------ ------
Gross profit 10,347 11,648
Selling, general and administration 9,616 8,607
Research and development 2,161 2,421
Goodwill amortization 507 376
------ ------
Operating profit(loss) (1,937) 244
------ ------
Interest and other income 91 94
Interest expense 329 241
------ ------
Pre-tax income(loss) (2,175) 97
------ ------
Provision(benefit) for
taxes on income(loss) (827) 29
------ ------
Net income(loss) $ (1,348) $ 68
====== ======
Net income(loss) per share of common
stock (basic and diluted) $ (0.23) $ 0.01
Basic weighted average shares
outstanding 5,989,073 5,952,391
The accompanying notes are an integral part of the consolidated condensed
financial statements.
</TABLE>
<PAGE>
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited) Three Months Ended
(000's) ----------------------
March 31, April 2,
2000 1999
--------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (1,348) $ 68
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 2,026 1,585
Reserve provisions 711 120
Deferred income tax provision (benefit) - 300
Changes in current assets and current liabilities
net of effects from acquisition:
Accounts receivable and unbilled revenue 3,696 5,321
Inventories (1,196) (607)
Other current assets (843) (434)
Accounts payable and salaries and wages (2,142) 493
Other accrued liabilities (572) (2,799)
Income taxes, currently payable (89) 158
Other, net 47 48
------ -----
Net cash provided by operating activities 290 4,253
------ -----
Cash flows from investing activities:
Payments for acquisition, net of cash acquired (351) (3,967)
Payments for property, plant and equipment (601) (859)
Software development costs (1,475) (563)
----- -----
Net cash used for investing activities (2,427) (5,389)
----- -----
Cash flows from financing activities:
Payments of long-term debt (183) (86)
Borrowings under note payable 2,995 230
Issuance of treasury stock in connection
with stock purchase plan 32 100
Payments to acquire treasury stock (103) (219)
Other, net (260) (194)
----- -----
Net cash provided by (used for) financing activities 2,481 (169)
----- -----
Net increase (decrease) in cash and cash equivalents 344 (1,305)
Cash and cash equivalents at beginning of period 1,687 2,582
----- -----
Cash and cash equivalents at end of period $ 2,031 $ 1,277
===== =====
Supplemental cash flow disclosures:
Interest paid $ 321 $ 209
===== =====
Income taxes paid, net of refunds received $ 150 $ (96)
===== =====
The accompanying notes are an integral part of the consolidated condensed
financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(000's except for share and per share information)
1. The financial statements furnished herein reflect all adjustments which are,
in the opinion of management, necessary for a fair presentation of financial
position and results of operations for the interim periods. Such adjustments
are of a normal recurring nature. The Consolidated Condensed Statements of
Cash Flows were reclassified to conform with current period presentation. The
accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual Form 10-K filing. Accordingly, the
reader of this Form 10-Q may wish to refer to the Company's Form 10-K for the
year ended December 31, 1999 for further information.
2. Net income per share of common stock was determined using the average number
of Class A and Class B shares outstanding excluding 156,250 shares of restricted
stock for both 2000 and 1999. No preferred stock was outstanding as of March
31, 2000.
Dilutive shares outstanding were determined on the assumption that all
outstanding options, warrants and shares of restricted stock with a strike
price below the average stock price for the period would be exercised and the
related shares issued. Dilutive shares outstanding for the first quarter of
2000 and 1999 were 6,083,780 and 5,954,827, respectively. These additional
shares had an immaterial effect on the Company's earnings per share
calculation.
3. In the first quarter of 2000, the Company accrued for retention bonuses of
$266 (see note 11) and severance costs of $100. The Company also eliminated
reserves of $326 due to collection of a note receivable and receipt of credits
from an insurance company in connection with its conversion to a stock company.
The net effect of these adjustments was a $40 increase in selling, general and
administration expense.
4. The components of inventories as of the balance sheet dates were as follows:
<TABLE>
Mar. 31, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
Raw material and components $10,289 $ 9,760
Work in process 2,839 2,995
Finished goods 7,178 6,430
Reserves (1,934) (1,760)
------ ------
$18,372 $17,425
====== ======
</TABLE>
5. Other accrued liabilities included an accrual primarily for workers'
compensation of $1,039 and $1,187 at March 31, 2000 and December 31, 1999,
respectively, and current maturities of long-term debt of $1,224 and $1,115
at March 31, 2000 and December 31, 1999, respectively.
6. The Company capitalizes costs associated with the development of software for
external use in accordance with Statement of Financial Accounting Standards No.
86 "Accounting for Cost of Computer Software to be Sold, Leased, or Otherwise
Marketed." Costs are being amortized in relation to revenue from the products,
but no less than on a straight line basis over 2 to 3 years. Capitalized
software development costs and associated amortization expense were $1,475 and
$435 respectively, in the quarter ended March 31, 2000 and $563 and $66
respectively, in the quarter ended April 2, 1999.
7. In November and December 1999, the Company acquired the net assets of Irmel
S.r.l. and Red Alert, Inc., respectively, for a total of $4,467, including a
deferred payment of $884 due December 31, 2000 and acquisition costs of $253.
The acquisitions were accounted for as purchases and cost was assigned to the
net assets acquired based on their estimated fair values at the dates of
acquisition. The acquisitions resulted in goodwill of $4,068 which is being
amortized on a straight-line basis over 15 years. Irmel, based in Milan,
Italy, expands the Industrial Segment's European Operations and Red Alert was
merged into its US operations.
Effective February 23, 1999, the Company acquired all of the outstanding stock
of ComOpt AB (ComOpt) for $4,098, including acquisition costs. The Company
recorded goodwill of $3,892, which is being amortized on a straight-line basis
over 10 years. In March 2000, the Company paid an additional $351 to ComOpt's
former shareholders based upon the achievement of certain performance goals.
The additional payment increased goodwill. ComOpt is part of the Company's
Wireless Segment and was merged into the operations of SAFCO Technologies, Inc.
8. Under terms of a 1999 loan agreement with First Union National Bank, the
Company has a working capital line of credit of $12,000 and an acquisition line
of credit of $6,000. The agreement requires the Company to pay a commitment fee
of one-quarter of one percent on the unused portion of the lines. As of
March 31, 2000, approximately $7,000 was available under the working capital
line of credit based on outstanding borrowings ($3,197), and outstanding letters
of credit. The loan agreement contains a number of financial and other
covenants, the most restrictive of which requires a certain ratio of funded debt
to earnings before interest and taxes. The agreement also contains a provision
that limits the working capital line to a defined borrowing base consisting of
eligible receivables and inventory amounts. As of March 31, 2000, the borrowing
base aggregated $10,600. Although the Company was not in compliance with one of
its loan covenants as of March 31, 2000, it received a compliance waiver from
its lenders.
The working capital line of credit is available through June 30, 2000. The
Company expects to renew the line on such date. At March 31, 2000 and December
31, 1999, $1,939 and $2,228, respectively, were committed for stand-by letters
of credit.
The acquisition line of credit is available through June 30, 2000. Any balance
outstanding at that time, excluding the current outstanding balance of $3,343,
will convert to a term loan and be amortized in equal principal payments over
the following 60 months. Monthly repayments on the current outstanding balance
of the acquisition line of $58 plus interest began in March of 2000 and will
continue through 2005.
Interest charges are based, at the Company's option, on the bank's prime rate
or a function of LIBOR. The loan is collateralized by substantially all of the
Company's tangible and intangible assets.
9. The Company has three reportable segments: Industrial, Access Products and
Wireless. The Industrial Segment develops, assembles and markets
communication systems for industrial operations. Industrial communication
products are designed to operate under extraordinary plant conditions and
provide emergency notification. In addition, the segment includes land mobile
radio communications devices. The Access Products Segment designs and markets
voice and data transmission system products. The access products provide
access to telecommunications services and automated monitoring and maintenance
of telecommunications network performance. The Wireless Segment's products
and services focus on the measurement and analysis of signal strength, data
communications and radio frequency transmitted between the wireless phone and
cellsites. The Wireless Segment also provides radio frequency engineering
design services.
Each reportable segment operates as a separate, standalone business unit with
its own management.
The Company evaluates segment performance based on profit or loss from
continuing operations before income tax, goodwill amortization and corporate
overhead allocation. Profit or loss is determined in accordance with
generally accepted accounting principles described in the summary of
significant accounting policies. Intersegment sales are not significant.
<TABLE>
Three Months Ended
----------------------
Mar. 31, Apr. 2,
2000 1999
----------------------------------------------------
Sales
-----
<S> <C> <C>
Industrial $ 13,614 $ 16,124
Access Products 3,392 6,552
Wireless 8,009 5,947
------ ------
25,015 28,623
------ ------
Segment Profit (Loss)
---------------------
Industrial (24) 2,213
Access Products (612) (18)
Wireless 214 (652)
General interest expense (294) (222)
General corporate expenses (1,043) (941)
Goodwill amortization (507) (377)
Interest income and other 91 94
------ ------
Pre-tax income (loss) $ (2,175) $ 97
=====================================================
</TABLE>
10. The Company will adopt the Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"(SFAS 133),
in the first quarter of 2001. SFAS 133 is not expected to have a material
impact on the Company's consolidated results of operations, financial position
or cash flows.
11. In October 1999, the Company retained Robert W. Baird & Co. to assist in
evaluating strategic alternatives intended to enhance shareholder value. After
assessing the preliminary values for the individual subsidiaries generated by
Robert W. Baird's sale process and receiving Baird's advice, the Board of
Directors determined that the Company would maximize shareholder value by
selling its subsidiaries and distributing the net proceeds to its shareholders.
In April 2000, the Board agreed to ask Class B shareholders for the authority
to sell its operating units and approve the dissolution and liquidation of the
Company.
The Board also authorized immediate vesting of all outstanding restricted
stock, and, effective with the first subsidiary sale, vesting of stock options
granted under the 1989 Stock Option Plan and the 1996 Long Term Incentive Plan
and extension of the exercise period to the record date of the initial
liquidating dividend. The Board also added a provision to convert all
unexercised options at the record date of the initial liquidating dividend into
Limited Stock Appreciation Rights. As a result of these actions, the
unamortized balance of deferred compensation-restricted stock will be charged to
expense in the second quarter of 2000.
In order to ensure continuing value in the Company and its operating
subsidiaries, various members of management and key employees have been offered
incentives to continue employment through the completion of the sale process.
Portions of these incentives are guaranteed to the employees subject to
continued employment through December 15, 2000, and are being recognized over
the related service period, including $266 charged to selling, general and
administration during the first quarter of 2000. Other incentives, including
sale bonuses and severance, are dependent on completion of sale transactions
and will be recognized if and when there is a triggering event.
On May 11, 2000, the Company reached an agreement to sell the common stock of
its wireless subsidiary, SAFCO Technologies, Inc., to Agilent Technologies, Inc.
for approximately $120,000 in cash, subject to certain closing date balance
sheet adjustments. The closing of the sale is subject to the approval by the
Company's Class B shareholders of the sale of the Company's operating units and
the dissolution and liquidation of the Company. The exact purchase price will
be dependent on the net adjusted assets of SAFCO on date of closing compared
to the net adjusted assets at March 31, 2000. To the extent that the net
adjusted assets are less than at March 31, 2000, the purchase price will be
adjusted downward, dollar for dollar. If the net adjusted assets are higher
than at March 31, 2000, the purchase price will increase by 50% of the increase
to a maximum price of $121,500. Salient 3's gain after tax on the transaction
cannot be precisely determined at this time but will be based on the final
purchase price less Salient 3's basis in SAFCO's assets at closing
(approximately $38,000 at March 31, 2000) and taxes and expenses specifically
related to the transaction, estimated to be no less than $34,000. Any gain
could be further reduced by any charges against an $11,000 escrow for seller
representations and warranties, required to be maintained for one year from
closing.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.
(000's except for share and per share information)
Results of Operations
Summary
The Company reported a net loss for the first quarter of 2000 of $1,348,
or $.23 per share compared to net income of $68, or $.01 per share for
the same period of 1999. Sales decreased 13% for the quarter from
$28,623 in 1999 to $25,015 in 2000. The decline in net income was
due to decreased sales and gross margins in the Industrial and Access
Products Segments. The Wireless Segment reported improved operating income for
the first quarter of 2000.
In November and December 1999, the Company acquired the net assets of
Irmel S.r.l. and Red Alert, Inc., respectively, for a total of $4,467,
including a deferred payment of $884 due December 31, 2000 and
acquisition costs of $253. Irmel, based in Milan, Italy, expands the
Industrial Segment's European Operations and Red Alert was merged into
its US operations.
Effective February 23, 1999, the Company acquired all of the outstanding
stock of ComOpt AB (ComOpt), a Swedish wireless software company, for
$4,098, including acquisition costs. ComOpt is part of the Company's
Wireless Segment.
Sales and Gross Profit
<TABLE>
The following is a breakdown of sales by segment:
2000 1999
---- ----
<S> <C> <C>
Access Products $ 3,392 $ 6,552
Industrial 13,614 16,124
Wireless 8,009 5,947
------ ------
Total $25,015 $28,623
====== ======
</TABLE>
Access Products sales declined by 48% in 2000 compared to 1999, due to a
continuing reduction in customer demand for analog channel units and a
slowdown of orders for partnership products. Contributing to the decreases
were customer reuse programs and customer evaluation of their inventory
stocking programs. This segment also suffered from delays in completing
development of its new integrated access product, which is now planned for
production in the second quarter of 2000. Industrial sales decreased 16% in
2000 compared to 1999, primarily because of lower sales by the Reading,
Pennsylvania location due to sluggish capital spending by domestic crude oil
related industries. Sales declines in the European operations were offset by
sales by Irmel, acquired in December 1999. Wireless sales grew 35% year-over-
year due to improved hardware sales, increased demand for engineering services
and the ComOpt acquisition in February, 1999.
The consolidated gross profit percentage increased from 40.7% in 1999 to 41.4%
in 2000. The increase was due to a larger percentage of sales from the
Wireless Segment, which traditionally has higher gross profit percentages from
its software-based products. Both the Access Products and Industrial Segments
experienced declines in gross profit percentages due to their sales declines.
Selling, General and Administration
Selling, general and administration increased 12% in 2000 compared to 1999.
As a percentage of sales, selling, general and administration was 38% and 30%
in 2000 and 1999, respectively. The increases came from the Wireless Segment,
which normally has higher operating costs than the other segments, and the
Industrial Segment, where the cost increases relate to the acquisitions and to
increased selling expense. In addition, the first quarter of 2000 includes
charges of $266 for retention bonuses and $100 for severance costs and credits
of $326 for elimination of reserves due to collection of a note receivable and
receipt of credits from an insurance company in connection with its conversion
to a stock company.
Research and Development, Goodwill Amortization and Interest Expense
Research and development decreased 11% due to capitalization of software
development costs, net of amortization, of $1,040 during the first quarter of
2000 compared to $500 during the first quarter of 1999. Costs are capitalized
for the development of software for external use in accordance with Statement
of Financial Accounting Standards No. 86 "Accounting for Cost of Computer
Software to be Sold, Leased, or Otherwise Marketed." The Wireless and Access
Products Segments are responsible for most of the capitalized costs.
Goodwill amortization increased 35% due to the amortization of goodwill
related to the acquisitions of ComOpt, Irmel and Red Alert.
Interest expense increased 37% due to additional borrowings for the
acquisition of ComOpt, an increase in short-term borrowings in 2000 and interest
rate increases.
Provision for taxes on income
The effective tax rate was 38% for 2000 and 30% for 1999. The change in the
effective tax rate was due to the anticipated reduction in utilization of
research and development tax credits in 2000. Capitalized software development
costs are not eligible for the credit.
Liquidity and Capital Resources
Working capital decreased $2,336 in the first quarter of 2000. The decline in
working capital was primarily due to increases in short-term borrowings to
support ongoing operations and software development costs. Amounts generated
from operations, available cash and cash equivalents and an existing line of
credit should provide adequate working capital through 2000.
Under the terms of a loan agreement, the Company has a maximum working capital
line of credit of $12,000 and an acquisition line of credit of $6,000 with
First Union National Bank that expire on June 30, 2000. The Company expects
to renew the lines of credit on that date, pending completion of one or more
subsidiary sale transactions. The loan agreement contains a number of
financial and other covenants, the most restrictive of which requires a
certain ratio of funded debt to earnings before interest and taxes. The
Company was not in compliance with this covenant at March 31, 2000; however,
the lender waived compliance. The agreement also contains a provision that
limits the working capital line of credit to a defined borrowing base consisting
of eligible receivables and inventory amounts. As of March 31, 2000, the
availability under the working capital line of credit was approximately $7,000,
after reductions for outstanding borrowings of $3,197 and issued letters of
credit aggregating $1,939.
The Company estimates that its total capital expenditures in 2000, excluding
acquisitions and assuming its operating businesses are owned for the entire
year, would be approximately $3,300. No restrictions on cash transfers between
the Company and its subsidiaries exist.
Other
In October 1999, the Company retained Robert W. Baird & Co. to assist in
evaluating strategic alternatives intended to enhance shareholder value.
After assessing the preliminary values for the individual subsidiaries
generated by Robert W. Baird's sale process and receiving Baird's advice, the
Board of Directors determined that the Company would maximize shareholder
value by selling its subsidiaries and distributing the net proceeds to its
shareholders. In April 2000, the Board agreed to ask Class B shareholders for
the authority to sell its operating units and approve the dissolution and
liquidation of the Company.
The Board also authorized immediate vesting of all outstanding restricted
stock, and, effective with the first subsidiary sale, vesting of stock options
granted under the 1989 Stock Option Plan and the 1996 Long Term Incentive Plan
and extension of the exercise period to the record date of the initial
liquidating dividend. The Board also added a provision to convert all
unexercised options at the record date of the initial liquidating dividend into
Limited Stock Appreciation Rights. As a result of these actions, the
unamortized balance of deferred compensation-restricted stock will be charged to
expense in the second quarter of 2000.
In order to ensure continuing value in the Company and its operating
subsidiaries, various members of management and key employees have been
offered incentives to continue employment through the completion of the sale
process. Portions of these incentives are guaranteed to the employees subject
to continued employment through December 15, 2000, and are being recognized
over the related service period, including $266 charged to selling, general
and administration during the first quarter of 2000. Other incentives,
including sale bonuses and severance, are dependent on completion of sale
transactions and will be recognized if and when there is a triggering event.
On May 11, 2000, the Company reached an agreement to sell the common stock of
its wireless subsidiary, SAFCO Technologies, Inc., to Agilent Technologies, Inc.
for approximately $120,000 in cash, subject to certain closing date balance
sheet adjustments. The closing of the sale is subject to the approval by the
Company's Class B shareholders of the sale of the Company's operating units and
the dissolution and liquidation of the Company. See Note 11 for additional
discussion of this transaction.
Continued improvement in the Company's operations is dependent upon successful
product releases within the Wireless Segment. Continued lack of demand for
the analog products within the Access Products Segment could depress results;
however, the Company is continuing the process of entering into new technology
partnerships, which are expected to offset declining analog product sales.
Additionally the Company is nearing completion on development of a new product
for the access market, to be released in the second quarter of 2000.
In the second quarter of 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). The Company will
adopt SFAS 133 during the first quarter of 2001. SFAS 133 is not expected to
have a material impact on the Company's consolidated results of operations,
financial position or cash flows.
During the past few years, the Company has carried out a program to identify,
assess and address issues associated with the Year 2000 problem and its
potential effects on information technology ("IT") systems. The program
considered effects on internal IT systems as well as IT systems of business
partners, including suppliers and customers. The Company has experienced no
significant problems with such issues, and anticipates that no such problems
will surface. Costs of the Year 2000 program were charged to expense as
incurred, and such costs were not material.
This Form 10-Q contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Such statements are only predictions and involve risks and uncertainties, and
actual events or performance may differ materially as expressed in any such
forward looking statements. Potential risks and uncertainties include,
without limitation: projections regarding 2000 sales, capital requirements,
product diversity, operating profitability, expected orders from contracts,
market position, expected new technology partnerships, sales from new
products, the effect of general economic conditions in the United States, Asia
and Latin America, the impact of competitive products, services and pricing,
and demand and market acceptance risks of current and new products and
services, technology change, risks of product development and
commercialization difficulties and the outcome of the process to sell the
operating units and dissolve and liquidate the company. Further information
on factors that could affect the Company's future financial performance can be
found in the Company's other filings with the Securities and Exchange
Commission. Words such as "estimates", "positioned", "yields", "should
generate", "appears", "viewed", "could", "would position",
"expected", "does not expect" and "should allow" indicate the presence of
forward looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's only financial instruments with market risk exposure are
revolving credit borrowings and variable rate term loans, which total $6,540
at March 31, 2000. Based on this balance, a change of one percent in the
interest rate would cause a change in the interest expense for the year of
approximately $65. This interest amount, less a related tax effect, would
change net income per share by less than $.01 per share.
These financial instruments are non-trading in nature (not entered into for
trading purposes) and carry interest at either the bank's prime interest rate
or a function of London Interbank Offering Rate (LIBOR). The Company's
objective in maintaining these variable rate borrowings is the flexibility
obtained regarding early repayment without penalties and lower overall cost as
compared with fixed rate borrowings.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Salient 3 Communications, Inc.
/s/Paul H. Snyder
Paul H. Snyder
Senior Vice President and
Chief Financial Officer
Date: May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-2000
<PERIOD-END> MAR-31-2000
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0
0
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</TABLE>
