<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Period ended September 30, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_______________
Commission File Number 0-13981
_______________
ELECTRONIC TELE-COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Wisconsin 39-1357760
(State of incorporation) (IRS Employer Identification No.)
1915 MacArthur Road Waukesha, Wisconsin 53188
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(414) 542-5600
_______________
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 _____
_______________
As of November 1, 1995, there were outstanding 2,003,949 shares of Class A
common stock and 500,000 shares of Class B common stock. The Class B common
stock, 79.5% of which is owned by affiliates, is the only voting stock. There
is no market for the Class B common stock.
<PAGE> 2
FORM 10-Q QUARTERLY REPORT
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
In this report, Electronic Tele-Communications, Inc. is also referred to as
Electronic Tele-Communications, ETC, and the Company.
_______________
Table of Contents
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<CAPTION>
Page
PART I Financial Information
Item 1. Financial Statements
<S> <C> <C>
Consolidated Condensed Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Operations . . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30 December 31
1995 1994
---------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 689,816 $ 627,045
Trade accounts receivable, net 820,911 1,836,679
Inventories (Note 2) 2,328,537 2,429,979
Refundable income taxes 111,461 -
Deferred income tax benefits 329,586 387,540
Prepaid expenses and other current assets 88,717 152,659
---------------------------
Total current assets 4,369,028 5,433,902
LEASED SERVICE EQUIPMENT, NET 44,255 59,123
PROPERTY, PLANT AND EQUIPMENT, NET 2,443,136 2,420,569
DEFERRED INCOME TAX BENEFITS 199,114 141,160
EXCESS COST OVER NET ASSETS ACQUIRED 1,136,431 1,166,869
---------------------------
$ 8,191,964 $ 9,221,623
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 103,407 $ 384,511
Accrued expenses 915,965 853,332
Income taxes payable - 50,426
Deferred revenue 116,756 205,296
---------------------------
Total current liabilities 1,136,128 1,493,565
OTHER LONG-TERM LIABILITIES 357,466 416,492
---------------------------
Total liabilities 1,493,594 1,910,057
---------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000
shares, none issued - -
Class A common stock, authorized 10,000,000
shares, par value $.01, issued and
outstanding 2,003,949 shares 20,039 20,039
Class B common stock, authorized 10,000,000
shares, par value $.01, issued and
outstanding 500,000 shares 5,000 5,000
Additional paid-in capital 3,323,528 3,323,528
Retained earnings 3,349,803 3,962,999
---------------------------
Total stockholders' equity 6,698,370 7,311,566
---------------------------
$ 8,191,964 $ 9,221,623
===========================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 -
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------------------- ----------------------------------------
1995 1994 1995 1994
--------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 2,958,538 $ 4,244,757 $ 9,698,902 $ 12,089,400
COST OF PRODUCTS SOLD 1,569,926 2,126,146 4,710,049 5,751,253
--------------------------------------- ----------------------------------------
GROSS PROFIT 1,388,612 2,118,611 4,988,853 6,338,147
OPERATING EXPENSES:
General and administrative 403,150 449,969 1,313,374 1,439,858
Marketing and selling 718,808 713,865 2,162,736 2,096,578
Research and development 622,011 627,530 1,985,366 1,902,389
--------------------------------------- ----------------------------------------
1,743,969 1,791,364 5,461,476 5,438,825
--------------------------------------- ----------------------------------------
EARNINGS (LOSS) FROM OPERATIONS (355,357) 327,247 (472,623) 899,322
OTHER INCOME (EXPENSE):
Interest expense (584) (1,288) (10,491) (19,500)
Interest and dividend income 37 2,041 1,135 3,724
Miscellaneous (10,146) (11,209) (20,143) (46,182)
--------------------------------------- ----------------------------------------
(10,693) (10,456) (29,499) (61,958)
--------------------------------------- ----------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES (366,050) 316,791 (502,122) 837,364
Income taxes (103,100) 102,100 (149,400) 268,800
--------------------------------------- ----------------------------------------
NET EARNINGS (LOSS) $ (262,950) $ 214,691 $ (352,722) $ 568,564
======================================= ========================================
EARNINGS (LOSS) PER SHARE:
Class A common $ (0.10) $ 0.09 $ (0.12) $ 0.24
Class B common $ (0.12) $ 0.07 $ (0.20) $ 0.16
Weighted average common
shares outstanding 2,503,949 2,503,949 2,503,949 2,509,408
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 5
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 - (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------
1995 1994
--------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (352,722) $ 568,564
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 441,553 478,774
Use of acquired loss carryforwards -- 39,772
Deferred income taxes -- (49,300)
(Increase) decrease in trade accounts receivable 1,015,768 (506,682)
Decrease in inventories 101,442 700,604
Increase in refundable income taxes (111,461) --
Decrease in prepaid expenses and
other current assets 63,942 39,637
Increase (decrease) in accounts payable
and accrued expenses (277,497) 50,486
Increase (decrease) in income taxes payable (50,426) 74,739
Increase (decrease) in deferred revenue (88,540) 17,608
--------------------------------------
Total adjustments 1,094,781 845,638
--------------------------------------
Net cash provided by operating activities 742,059 1,414,202
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (418,814) (283,469)
--------------------------------------
Net cash used by investing activities (418,814) (283,469)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (260,474) (260,385)
Repayment of revolving credit facility -- (650,000)
Proceeds from issuance of common stock -- 8,775
--------------------------------------
Net cash used by financing activities (260,474) (901,610)
--------------------------------------
Net increase in cash and cash equivalents 62,771 229,123
Cash and cash equivalents at beginning of year 627,045 623,599
--------------------------------------
Cash and cash equivalents at end of period $ 689,816 $ 852,722
======================================
Supplemental disclosures of cash flow information:
Cash received from income tax refunds $ -- $ --
Cash paid for income taxes 232,549 203,589
Cash paid for interest expense 10,491 19,500
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 - (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, such
consolidated condensed financial statements reflect all adjustments, which
consist only of normal recurring adjustments, necessary for a fair
presentation. Operating results for the three-month and nine-month periods
ended September 30, 1995, are not necessarily indicative of the results that
may be expected for the year ended December 31, 1995.
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 the SEC rules and regulations
dealing with interim financial statements. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's 1994 Annual
Report to Shareholders.
2. INVENTORIES
Inventories consisted of the following:
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<CAPTION>
SEPTEMBER 30 December 31
1995 1994
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<S> <C> <C>
Raw materials and supplies $ 1,373,355 $ 1,733,826
Work-in-process and finished goods 1,194,136 1,153,383
Maintenance parts 412,805 317,890
Reserve for obsolescence (651,759) (775,120)
----------- -----------
Total inventories $ 2,328,537 $ 2,429,979
============ ===========
</TABLE>
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<PAGE> 7
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995 AND 1994, AND DECEMBER 31, 1994
(UNAUDITED)
RESULTS OF OPERATIONS
Net sales for the nine-month period ended September 30, 1995, were $9,698,902,
compared to $12,089,400 for the corresponding period of 1994. For the
three-month periods ended September 30, 1995 and 1994, net sales were
$2,958,538 and $4,244,757, respectively. The decrease in net sales in the 1995
periods was due primarily to reduced capital expenditures by the telephone
companies and original equipment manufacturers resulting in lower than expected
demand for the Company's interactive voice response systems. Product pricing
remained relatively constant between periods for the Company's equipment.
Gross profit as a percentage of net sales for the nine-month periods ended
September 30, 1995 and 1994, were 51% and 52%, respectively. For the
three-month periods ended September 30, 1995 and 1994, gross profit was 47% and
50%, respectively. The decrease in gross profit as a percentage of net sales
was due to lower sales volume over which to spread fixed manufacturing costs.
Operating expenses were $5,461,476, or 56% of net sales for the nine-month
period ended September 30, 1995, compared to $5,438,825, or 45% for the
corresponding period of 1994. Operating expenses for the quarters ended
September 30, 1995 and 1994, were 59% and 42%, resepectively, of net sales. As
a percentage of net sales, operating expenses increased in the 1995 periods due
to spreading these costs over a lower sales volume. Operating expense dollars
remained relatively constant between periods.
Net loss for the nine-month period ended September 30, 1995, was $352,722
versus net earnings of $568,564 for the same period of 1994. For the three
month period ended September 30, 1995, there was a net loss of $262,950
compared to net earnings of $214,691 for the same period of 1994. The decrease
in net earnings between periods was due to lower sales volume and the inability
to proportionately reduce fixed manufacturing and operating expenses.
LIQUIDITY AND FINANCIAL RESOURCES
Working capital was $3,232,900 as of September 30, 1995, compared to $3,940,337
at December 31, 1994. Cash provided by operating activities was $742,059 for
the nine-month period ended September 30, 1995, compared to $1,414,202 for the
corresponding 1994 period. The cash provided by operating activities in the
1995 period was due primarily to decreases in accounts receivable, partially
offset by a net loss. Cash used for capital expenditures increased in the
1995 period due primarily to personal computer upgrades.
As of September 30, 1995, the Company had no borrowings on its available
$3,500,000 revolving credit facility.
At current operating levels, management believes that cash generated from
operations, together with the available revolving credit facility, will provide
adequate funds to meet the Company's needs for the foreseeable future.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
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.
ELECTRONIC TELE-COMMUNICATIONS, INC.
/s/ Dean W. Danner
-------------------------------------------
Dean W. Danner
President and
Chief Executive Officer
/s/ Jeffrey M. Nigl
-------------------------------------------
Jeffrey M. Nigl
Vice President, Chief Financial
Officer, Treasurer and Principal
Accounting Officer
Date: November 1, 1995
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<PAGE> 1
Exhibit 11
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------------------- ------------------------------------
1995 1994 1995 1994
-------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding:
Class A common 2,003,949 2,003,949
Class B common 500,000 500,000
Net effect of dilutive stock options -
based on the treasury stock method
using averaged market price:
Class A common -- --
--------------------------------------
Total shares:*
Class A common 2,003,949 2,003,949 2,003,949 2,509,408
====================================== ====================================
Class B common 500,000 500,000 500,000 500,000
====================================== ====================================
Net earnings (loss) $ (262,950) $ 214,691 $ (352,722) $ 568,564
Less dividends paid:
Class A common 120,237 120,237 240,474 240,334
Class B common 20,000 20,000 20,000 20,000
-------------------------------------- ------------------------------------
Undistributed earnings (loss) $ (403,187) $ 74,454 $ (613,196) $ 308,230
====================================== ====================================
Allocation of undistributed
earnings (loss):
Class A common $ (322,677) $ 59,587 $ (490,750) $ 246,815
Class B common (80,510) 14,867 (122,446) 61,415
Calculation of earnings (loss) per share:
Class A common:
Dividends paid $ 0.06 $ 0.06 $ 0.12 $ 0.12
Allocation of undistributed
earnings (loss) (0.16) 0.03 (0.24) 0.12
-------------------------------------- ------------------------------------
Earnings (loss) per Class A common share $ (0.10) $ 0.09 $ (0.12) $ 0.24
====================================== ====================================
Class B common:
Dividends paid $ 0.04 $ 0.04 $ 0.04 $ 0.04
Allocation of undistributed
earnings (loss) (0.16) 0.03 (0.24) 0.12
-------------------------------------- ------------------------------------
Earnings (loss) per Class B common share $ (0.12) $ 0.07 $ (0.20) $ 0.16
====================================== ====================================
</TABLE>
* Total shares of Class A common and Class B common for the Nine Months Ended
September 30, 1995 and 1994, are calculated as the weighted average of the
quarters included.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Balance Sheet at September 30, 1995 (Unaudited) and the
Consolidated Condensed Statement of Operations for the Nine Months Ended
September 30, 1995 (Unaudited) and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 689,816
<SECURITIES> 0
<RECEIVABLES> 986,642
<ALLOWANCES> 165,731
<INVENTORY> 2,328,537
<CURRENT-ASSETS> 4,369,028
<PP&E> 6,518,721
<DEPRECIATION> 4,075,585
<TOTAL-ASSETS> 8,191,964
<CURRENT-LIABILITIES> 1,136,128
<BONDS> 0
<COMMON> 25,039
0
0
<OTHER-SE> 6,673,331
<TOTAL-LIABILITY-AND-EQUITY> 8,191,964
<SALES> 9,698,902
<TOTAL-REVENUES> 9,698,902
<CGS> 4,710,049
<TOTAL-COSTS> 4,710,049
<OTHER-EXPENSES> 5,468,484
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 10,491
<INCOME-PRETAX> (502,122)
<INCOME-TAX> (149,400)
<INCOME-CONTINUING> (352,722)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (352,722)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
