<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 March 31, 1996
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 May 1, 1996, 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 MARCH 31, 1996
In this report, Electronic Tele-Communications, Inc. is also referred to as
Electronic Tele-Communications, ETC, and the Company.
_______________
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<PAGE> 3
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31 December 31
1996 1995
-----------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 353,619 $ 497,971
Trade accounts receivable, net 1,194,324 1,280,955
Inventories (Note 2) 2,324,802 2,495,822
Refundable income taxes 291,281 201,072
Deferred income tax benefits 341,637 320,402
Prepaid expenses and other current assets 121,259 63,271
-----------------------------------
Total current assets 4,626,922 4,859,493
LEASED SERVICE EQUIPMENT, NET 31,607 37,993
PROPERTY, PLANT AND EQUIPMENT, NET 2,005,599 2,053,482
DEFERRED INCOME TAX BENEFITS 25,763 46,998
EXCESS COST OVER NET ASSETS ACQUIRED 1,116,139 1,126,285
-----------------------------------
Total Assets $ 7,806,030 $ 8,124,251
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 132,737 $ 238,608
Accrued expenses 725,512 639,851
Deferred revenue 106,747 100,937
-----------------------------------
Total current liabilities 964,996 979,396
OTHER LONG-TERM LIABILITIES 301,668 324,479
-----------------------------------
Total liabilities 1,266,664 1,303,875
-----------------------------------
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 3,190,799 3,471,809
-----------------------------------
Total stockholders' equity 6,539,366 6,820,376
-----------------------------------
Total Liabilities and Stockholders' Equity $ 7,806,030 $ 8,124,251
===================================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statement
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<PAGE> 4
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1996 1995
--------------------------
<S> <C> <C>
NET SALES $2,870,133 $2,963,568
COST OF PRODUCTS SOLD 1,458,052 1,429,435
--------------------------
GROSS PROFIT 1,412,081 1,534,133
OPERATING EXPENSES:
General and administrative 430,163 470,458
Marketing and selling 637,697 747,410
Research and development 563,435 728,194
--------------------------
1,631,295 1,946,062
--------------------------
EARNINGS (LOSS) FROM OPERATIONS (219,214) (411,929)
OTHER INCOME (EXPENSE):
Interest expense (1,091) (744)
Interest and dividend income 51 948
Miscellaneous 4,880 (10,146)
--------------------------
3,840 (9,942)
--------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES (215,374) (421,871)
Income taxes (benefit) (54,600) (144,500)
--------------------------
NET EARNINGS (LOSS) $ (160,774) $ (277,371)
==========================
EARNINGS (LOSS) PER SHARE:
Class A common $ (0.05) $ (0.10)
Class B common $ (0.11) $ (0.16)
Weighted average common
shares outstanding 2,503,949 2,503,949
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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<PAGE> 5
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 - (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1996 1995
---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (160,774) $ (277,371)
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 120,193 149,091
Gain (loss) from sale of equipment (15,027) -
Changes in operating assets and liabilities:
Accounts receivable 86,631 599,123
Inventories 171,020 (602,918)
Prepaid expenses and other current assets (57,988) 27,058
Accounts payable and accrued expenses (43,021) (231,316)
Income taxes (90,209) (152,435)
Deferred revenue 5,810 8,005
---------------------------
Total adjustments 177,409 (203,392)
---------------------------
Net cash provided (used) by operating activitie 16,635 (480,763)
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (55,778) (101,415)
Proceeds from sale of equipment 15,027 -
---------------------------
Net cash used by investing activities (40,751) (101,415)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (120,236) (120,237)
Borrowings on revolving credit facility - 400,000
---------------------------
Net cash provided (used) by financing activitie (120,236) 279,763
---------------------------
Net decrease in cash and cash equivalents (144,352) (302,415)
Cash and cash equivalents at beginning of year 497,971 627,045
---------------------------
Cash and cash equivalents at end of period $ 353,619 $ 324,630
===========================
Supplemental disclosures of cash flow information:
Cash received from income tax refunds $ - $ -
Cash paid for income taxes 35,548 227,935
Cash paid for interest expense 1,091 744
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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<PAGE> 6
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996 - (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 periods ended March 31,
1996, are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
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 1995 Annual
Report to Shareholders.
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
----------- ----------
<S> <C> <C>
Raw materials and supplies $1,207,697 $1,218,365
Work-in-process and finished goods 897,125 1,013,766
Maintenance and demo parts 610,758 624,281
Reserve for obsolescence (390,778) (360,590)
----------- ----------
Total inventories $2,324,802 $2,495,822
========== ==========
</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
MARCH 31, 1996 AND 1995, AND DECEMBER 31, 1995
(UNAUDITED)
RESULTS OF OPERATIONS
Net sales for the three-month period ended March 31, 1996, were $2,870,133,
compared to $2,963,568 for the corresponding period of 1995. Demand continued
to be slow for the Company's interactive voice information systems from several
large original equipment manufacturers and several operating telephone
companies. Revenues from leases of time/weather/temperature equipment remained
relatively constant between years. Product pricing for the Company's equipment
also remained relatively constant between periods.
Gross profit as a percentage of net sales for the three-month periods ended
March 31, 1996 and 1995, was 49% and 52%, 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 $1,631,295, or 57% of net sales for the three-month
period ended March 31, 1996, compared to $1,946,062, or 66% for the
corresponding period of 1995. Operating expenses were lower in all three
categories, general and administrative, marketing and selling, and research and
development, due primarily to lower staffing levels in the 1996 period. In
addition, advertising and convention expenses decreased slightly between years.
Net loss for the three-month period ended March 31, 1996, was $160,774 versus a
net loss of $277,371 for the same period of 1995. The reduction in the net
loss between periods was due to the decrease in operating expenses, partially
offset by lower sales volume.
LIQUIDITY AND FINANCIAL RESOURCES
Working capital was $3,661,926 as of March 31, 1996, compared to $3,880,097 at
December 31, 1995. Cash provided by operating activities was $16,635 for the
three-month period ended March 31, 1996, compared to cash used of $480,763 for
the corresponding 1995 period. The cash provided by operating activities in
the 1996 period was due primarily to reductions of inventories and accounts
receivable, partially offset by a net loss. Cash was used for capital
expenditures and payment of dividends in the 1996 period.
As of March 31, 1996, 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
At the annual meeting of the Registrant on May 3, 1996, shareholders voted on
the election of directors for a one year term. The Class B common stock of the
Registrant is the only class of voting securities. The Class B common stock is
not registered under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the nominees proposed and there were no
abstentions or broker non-votes. Each of the nominees were elected as follows:
<TABLE>
<CAPTION>
Director Votes Votes
Name For Withheld
-------------------------------- ------------ ----------
<S> <C> <C>
Dean W. Danner 439,529 0
Bonita M. Danner 439,529 0
Hazel Danner 439,529 0
George W. Danner 439,529 0
A. William Huelsman 439,529 0
Joanne B. Huelsman 439,529 0
Peter J. Lettenberger 439,529 0
Richard A. Gabriel 439,529 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
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<PAGE> 9
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: May 6, 1996
-8-
<PAGE> 1
EXHIBIT 11
ELECTRONIC TELE-COMMUNICATIONS, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1996 1995
----------------------------
<S> <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
============================
Class B common 500,000 500,000
============================
Net earnings (loss) $ (160,774) $ (277,371)
Less dividends paid:
Class A common 120,236 120,237
Class B common - -
----------------------------
Undistributed earnings (loss) $ (281,010) $ (397,608)
============================
Allocation of undistributed
earnings (loss):
Class A common $ (224,897) $ (318,212)
Class B common (56,113) (79,396)
Calculation of earnings (loss) per share:
Class A common:
Dividends paid $ 0.06 $ 0.06
Allocation of undistributed
earnings (loss) (0.11) (0.16)
----------------------------
Earnings (loss) per Class A common share $ (0.05) $ (0.10)
============================
Class B common:
Dividends paid $ - $ -
Allocation of undistributed
earnings (loss) (0.11) (0.16)
----------------------------
Earnings (loss) per Class B common share $ (0.11) $ (0.16)
============================
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Balance Sheet at March 31, 1996 (Unaudited) and the
Consolidated Condensed Statement of Operations for the Three Months Ended March
31, 1996 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 353,619
<SECURITIES> 0
<RECEIVABLES> 1,324,170
<ALLOWANCES> 129,846
<INVENTORY> 2,324,802
<CURRENT-ASSETS> 4,626,922
<PP&E> 5,964,383
<DEPRECIATION> 3,927,177
<TOTAL-ASSETS> 7,806,030
<CURRENT-LIABILITIES> 964,996
<BONDS> 0
0
0
<COMMON> 25,039
<OTHER-SE> 6,514,327
<TOTAL-LIABILITY-AND-EQUITY> 7,806,030
<SALES> 2,870,133
<TOTAL-REVENUES> 2,870,133
<CGS> 1,458,052
<TOTAL-COSTS> 1,458,052
<OTHER-EXPENSES> 1,636,144
<LOSS-PROVISION> (2,100)
<INTEREST-EXPENSE> 1,091
<INCOME-PRETAX> (215,374)
<INCOME-TAX> (54,600)
<INCOME-CONTINUING> (160,774)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (160,774)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
