<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 June 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)
Wisconsin 39-1357760
(State of incorporation) (IRS Employer Identification No.)
1915 MacArthur Road Waukesha, Wisconsin 53188
(Address of principal executive offices) (Zip Code)
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 August 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 JUNE 30, 1995
In this report, Electronic Tele-Communications, Inc. is also referred to as
Electronic Tele-Communications, ETC, and the Company.
_______________
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Table of Contents
Page
<S> <C> <C>
PART I Financial Information
Item 1. Financial Statements
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 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 7
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
JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30 DECEMBER 31
1995 1994
-------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 772,283 $ 627,045
Trade accounts receivable, net 1,088,305 1,836,679
Inventories (Note 2) 2,637,772 2,429,979
Refundable income taxes 4,157 -
Deferred income tax benefits 338,770 387,540
Prepaid expenses and other current assets 116,653 152,659
-------------------------------------------
Total current assets 4,957,940 5,433,902
LEASED SERVICE EQUIPMENT, NET 50,517 59,123
PROPERTY, PLANT AND EQUIPMENT, NET 2,373,469 2,420,569
DEFERRED INCOME TAX BENEFITS 189,930 141,160
EXCESS COST OVER NET ASSETS ACQUIRED 1,146,577 1,166,869
-------------------------------------------
$ 8,718,433 $ 9,221,623
===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 177,961 $ 384,511
Accrued expenses 820,712 853,332
Income taxes payable - 50,426
Deferred revenue 240,938 205,296
-------------------------------------------
Total current liabilities 1,239,611 1,493,565
OTHER LONG-TERM LIABILITIES 377,265 416,492
-------------------------------------------
Total liabilities 1,616,876 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 3,752,990 3,962,999
-------------------------------------------
Total stockholders' equity 7,101,557 7,311,566
-------------------------------------------
$ 8,718,433 $ 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 SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 - (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
------------------------ ---------------------------
1995 1994 1995 1994
------------------------ ---------------------------
<S> <C> <C> <C> <C>
NET SALES $3,776,796 $3,918,547 $6,740,364 $7,844,643
COST OF PRODUCTS SOLD 1,710,688 1,766,440 3,140,123 3,625,107
------------------------ ---------------------------
GROSS PROFIT 2,066,108 2,152,107 3,600,241 4,219,536
OPERATING EXPENSES:
General and administrative 439,766 509,469 910,224 989,889
Marketing and selling 696,518 703,795 1,443,928 1,382,713
Research and development 635,161 644,172 1,363,355 1,274,859
------------------------ ---------------------------
1,771,445 1,857,436 3,717,507 3,647,461
------------------------ ---------------------------
EARNINGS (LOSS) FROM OPERATIONS 294,663 294,671 (117,266) 572,075
OTHER INCOME (EXPENSE):
Interest expense (9,163) (4,767) (9,907) (18,212)
Interest and dividend income 150 926 1,098 1,683
Miscellaneous 149 (16,859) (9,997) (34,973)
------------------------ ---------------------------
(8,864) (20,700) (18,806) (51,502)
------------------------ ---------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 285,799 273,971 (136,072) 520,573
Income taxes 98,200 92,400 (46,300) 166,700
------------------------ ---------------------------
NET EARNINGS (LOSS) $187,599 $181,571 ($89,772) $353,873
======================== ===========================
EARNINGS (LOSS) PER SHARE:
Class A common $0.08 $0.07 ($0.02) $0.15
Class B common $0.08 $0.07 ($0.08) $0.09
Weighted average common
shares outstanding 2,503,949 2,503,768 2,503,949 2,512,137
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six-Month Periods Ended June 30, 1995 and 1994 - (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1995 1994
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($89,772) $353,873
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 297,428 330,778
Use of acquired loss carryforwards -- 26,515
Deferred income taxes -- (23,800)
(Increase) decrease in trade accounts receivable 748,374 (824,137)
(Increase) decrease in inventories (207,793) 509,912
Increase in refundable income taxes (4,157) --
(Increase) decrease in prepaid expenses and
other current assets 36,006 (17,334)
Increase (decrease) in accounts payable
and accrued expenses (278,397) 10,963
Increase (decrease) in income taxes payable (50,426) 65,667
Increase (decrease) in deferred revenue 35,642 (10,227)
------------------------
Total adjustments 576,677 68,337
------------------------
Net cash provided by operating activities 486,905 422,210
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (221,430) (206,807)
------------------------
Net cash used by investing activities (221,430) (206,807)
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (120,237) (120,148)
Repayment of revolving credit facility -- (300,000)
Proceeds from issuance of common stock -- 8,775
------------------------
Net cash used by financing activities (120,237) (411,373)
------------------------
Net increase (decrease) in cash and cash equivalents 145,238 (195,970)
Cash and cash equivalents at beginning of year 627,045 623,599
------------------------
Cash and cash equivalents at end of period $772,283 $427,629
========================
Supplemental disclosures of cash flow information:
Cash received from income tax refunds $ - $ --
Cash paid for income taxes 228,283 98,318
Cash paid for interest expense 9,907 18,212
</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
JUNE 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 six-month periods
ended June 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:
<TABLE>
<CAPTION>
JUNE 30 December 31
1995 1994
-------------- --------------
<S> <C> <C>
Raw materials and supplies $ 1,577,303 $ 1,733,826
Work-in-process and finished goods 1,257,031 1,153,383
Maintenance parts 390,189 317,890
Reserve for obsolescence (586,751) (775,120)
--------------- ---------------
Total inventories $ 2,637,772 $ 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
JUNE 30, 1995 AND 1994, AND DECEMBER 31, 1994
(UNAUDITED)
RESULTS OF OPERATIONS
Net sales for the six-month period ended June 30, 1995, were $6,740,364,
compared to $7,844,643 for the corresponding period of 1994. For the
three-month periods ended June 30, 1995 and 1994, net sales were $3,776,796 and
$3,918,547, 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 six-month periods ended June
30, 1995 and 1994, were 53% and 54%, respectively. For the three-month periods
ended June 30, 1995 and 1994, gross profit was 55%. Despite lower sales volume
in the 1995 periods over which to spread fixed manufacturing costs, gross
profit as a percentage of sales was relatively constant due to more efficient
manufacturing operations.
Operating expenses were $3,717,507, or 55% of net sales for the six-month
period ended June 30, 1995, compared to $3,647,461, or 46% for the
corresponding period of 1994. As a percentage of net sales, operating
expenses increased in the 1995 six-month period due to spreading these costs
over a lower sales volume. Operating expense dollars also increased slightly
in the 1995 six-month period due primarily to higher marketing activity and
hiring personnel in sales, marketing and engineering positions which were
vacant in the 1994 period.
Net loss for the six-month period ended June 30, 1995, was $89,772 versus net
earnings of $353,873 for the same period of 1994. The decrease in net earnings
between periods was due to lower sales volume and higher operating expenses,
partially offset by more efficient manufacturing operations. For the three-
month period ending June 30, 1995, net earnings were slightly higher than
the comparable period of 1994 despite lower 1995 sales. This was the result of
lower operating expenses in the 1995 period.
LIQUIDITY AND FINANCIAL RESOURCES
Working capital was $3,718,329 as of June 30, 1995, compared to $3,940,337 at
December 31, 1994. Cash provided by operating activities was $486,905 for the
six-month period ended June 30, 1995, compared to $422,210 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 an increase in inventories. Cash used for capital expenditures was
relatively constant between periods.
As of June 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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<PAGE> 8
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-- None --
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
(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.
ELECTRONIC TELE-COMMUNICATIONS, INC.
/s/ Jeffrey M. Nigl
----------------------------------
Jeffrey M. Nigl
Vice President, Chief Financial
Officer, Treasurer and Principal
Accounting Officer
Date: August 8, 1995
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<PAGE> 1
Exhibit 11
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
------------------------ ---------------------
1995 1994 1995 1994
------------------------ ---------------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding:
Class A common 2,003,949 2,003,768
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 2,003,768 2,003,949 2,012,137
======================= ==========================
Class B common 500,000 500,000 500,000 500,000
======================= ==========================
Net earnings (loss) $187,599 $181,571 ($89,772) $353,873
Less dividends paid:
Class A common -- -- 120,237 120,147
Class B common -- -- -- --
----------------------- --------------------------
Undistributed earnings (loss) $187,599 $181,571 ($210,009) $233,726
======================= ==========================
Allocation of undistributed
earnings (loss):
Class A common $150,138 $145,311 ($168,073) $187,207
Class B common 37,461 36,260 (41,936) 46,519
Calculation of earnings (loss) per share:
Class A common:
Dividends paid $ -- $ -- $0.06 $0.06
Allocation of undistributed
earnings (loss) 0.08 0.07 (0.08) 0.09
----------------------- --------------------------
Earnings (loss) per Class A common share $0.08 $0.07 ($0.02) $0.15
======================= ==========================
Class B common:
Dividends paid $ -- $ -- $ -- $ --
Allocation of undistributed
earnings (loss) 0.08 0.07 (0.08) 0.09
----------------------- --------------------------
Earnings (loss) per Class B common share $0.08 $0.07 ($0.08) $0.09
======================= ==========================
</TABLE>
* Total shares of Class A common and Class B common for the Six Months Ended
June 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 June 30, 1995 (Unaudited) and the
Consolidated Condensed Statement of Operations for the Six Months Ended June 30,
1995 (Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 772,283
<SECURITIES> 0
<RECEIVABLES> 1,261,675
<ALLOWANCES> 173,370
<INVENTORY> 2,637,772
<CURRENT-ASSETS> 4,957,940
<PP&E> 6,366,066
<DEPRECIATION> 3,942,080
<TOTAL-ASSETS> 8,718,433
<CURRENT-LIABILITIES> 1,239,611
<BONDS> 0
<COMMON> 25,039
0
0
<OTHER-SE> 7,076,518
<TOTAL-LIABILITY-AND-EQUITY> 8,718,433
<SALES> 6,740,364
<TOTAL-REVENUES> 6,740,364
<CGS> 3,140,123
<TOTAL-COSTS> 3,140,123
<OTHER-EXPENSES> 3,720,406
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 9,907
<INCOME-PRETAX> (136,072)
<INCOME-TAX> (46,300)
<INCOME-CONTINUING> (89,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,772)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
