FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-15967
EFI ELECTRONICS CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 75-2072203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1751 South 4800 West, Salt Lake City, Utah 84104
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 977-9009
Check 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 past twelve 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. x Yes No
Number of shares of the registrant's $0.0001 par value common stock
outstanding at February 1, 2000 5,575,638 shares.
Transitional Small Business Disclosure Format Yes ____ No _X___
<PAGE>
EFI Electronics Corporation
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Balance Sheets as of December 31, 1999 (Unaudited) and
March 31, 1999 .............................................3
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
for the three months ended December 31, 1999 and 1998 ......4
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
for the nine months ended December 31, 1999 and 1998 .......5
Statements of Cash Flows ( Unaudited) for the nine months
ended December 31, 1999 and 1998 ...........................6
Notes to Financial Statements (Unaudited).............7 - 9
Item 2. Management's Discussion and Analysis or
Plan of Operations ................................10 - 12
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.........................13
Signatures..........................................................13
<PAGE>
EFI Electronics Corporation
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
December 31, 1999 March 31, 1999
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 26,102 $ 263,135
Receivables, net 2,390,321 2,241,200
Inventories, net 1,693,449 2,119,336
Prepaid expenses 118,118 221,986
Total current assets 4,227,990 4,845,657
Property - net 2,455,355 2,448,376
Other assets:
Goodwill, net 649,806 742,803
Other assets 76,281 43,991
Total other assets 726,087 786,794
Total assets $7,409,432 $8,080,827
LIABILITIES
Current liabilities:
Revolving line of credit $ 1,783,624 $ 2,583,210
Current maturities of
capital lease obligations 159,958 177,763
Current maturities of notes payable 503,940 990,533
Accounts payable 1,157,100 825,291
Reserve for customer
warranty claims - current 192,751 215,000
Accrued liabilities 340,931 303,982
Total current liabilities 4,138,304 5,095,779
Long-term liabilities:
Reserve for customer warranty
claims - long-term 185,193 122,738
Capital lease obligations,
less current maturities 323,986 163,350
Notes payable, less current maturities 996,685 817,726
Total long-term liabilities 1,505,864 1,103,814
Total liabilities 5,644,168 6,199,593
STOCKHOLDERS' EQUITY
Common stock 558 558
Additional paid-in capital 3,117,190 3,117,190
Accumulated other comprehensive loss -
foreign currency translation
adjustment (156,047) (27,506)
Accumulated deficit (986,437) (999,008)
1,975,264 2,091,234
Less:
Notes receivable from officer (210,000) (210,000)
Total stockholders' equity 1,765,264 1,881,234
Total liabilities and
stockholders' equity $7,409,432 $8,080,827
See notes to financial statements.
<PAGE>
EFI Electronics Corporation
CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE
INCOME ( LOSS ) (Unaudited)
For the three months ended December 31, 1999 1998
Net sales $ 2,853,241 $ 3,461,503
Cost of sales 1,686,451 2,272,761
Gross profit 1,166,790 1,188,742
Operating expenses:
Selling, general and
administrative expenses 901,813 858,328
Research and development 172,730 156,894
Total operating expenses 1,074,543 1,015,222
Earnings from operations 92,247 173,520
Other income/(expense):
Interest expense (106,253) (108,990)
Other, net (45,886) (27,066)
Total other expense, net (152,139) (136,056)
Earnings / (loss) before income taxes (59,892) 37,464
Income taxes -0- -0-
Net earnings / (loss) (59,892) 37,464
Other comprehensive income - foreign currency
translation adjustment (31,775) (64,067)
Comprehensive income / (loss) $ ( 91,667) $ (26,603)
Earnings/ (loss) per share:
Basic $ ( 0.01) $ 0.01
Diluted $ ( 0.01) $ 0.01
Weighted average shares outstanding
Basic 5,574,853 5,574,460
Diluted 5,574,853 5,574,460
See notes to financial statements.
<PAGE>
EFI Electronics Corporation
CONSOLIDATED STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE INCOME ( LOSS )
(Unaudited)
For the nine months ended December 31, 1999 1998
Net sales $ 9,377,079 $ 11,313,164
Cost of sales 5,708,428 7,421,738
Gross profit 3,668,651 3,891,426
Operating expenses:
Selling, general and
administrative expenses 2,688,421 2,719,418
Research and development 506,624 510,421
Total operating expenses 3,195,045 3,229,839
Earnings from operations 473,606 661,587
Other income/(expense):
Interest expense (345,587) (379,352)
Other, net (115,448) (91,292)
Total other expense, net (461,035) (470,644)
Earnings before income taxes 12,571 190,943
Income taxes -0- -0-
Net earnings $ 12,571 $ 190,943
Other comprehensive income - foreign currency
translation adjustment (128,541) (8,137)
Comprehensive income / (loss) $(115,970) $ 182,806
Earnings per share:
Basic $ 0.00 $ 0.03
Diluted $ 0.00 $ 0.03
Weighted average shares outstanding
Basic 5,574,591 5,556,448
Diluted 5,582,674 5,556,448
See notes to financial statements.
<PAGE>
EFI ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASHFLOWS (Unaudited)
For the nine months ended December 31, 1999 1998
Cash flows from operating activities:
Net earnings $ 12,571 $ 190,943
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 481,056 536,985
Amortization 92,997 92,851
Provision for obsolete inventory (52,653) 127,503
Provision for bad debts 35,977 38,273
Provision for warranty expenses 209,273 300,049
Increase/(decrease) in cash due to change in:
Receivables (171,899) 1,195,812
Inventories 488,481 (90,226)
Prepaid expenses 45,269 (58,514)
Other assets 6,721 17,464
Accounts payable 343,024 (661,371)
Warranty payments (169,066) (190,255)
Accrued liabilities 37,837 49,518
Net cash provided by operating activities 1,359,588 1,549,032 Cash
flows from investing activities:
Investment in joint venture (39,011) -0-
Capital expenditures (221,845) (521,903)
Net cash used in investing activities (260,856) (521,903)
Cash flows from financing activities:
Net change under revolving line of credit (799,586) (649,168)
Principal payments on notes payable (307,634) (275,364)
Principal payments under capital lease obligations(126,455) (117,747)
Proceeds from exercise of stock options -0- 22,058
Net cash (used in) financing activities (1,233,675) (1,020,221)
Effect of exchange rate changes on cash (102,090) (2,267)
Net increase/(decrease)in cash and cash equivalents (237,033) 4,641
Cash and cash equivalents at beginning of period 263,135 9,566
Cash and cash equivalents at end of period $ 26,102 $ 14,207
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Income taxes $ -0- $ -0-
Interest $ 327,788 $ 402,154
Supplemental schedule of non-cash investing activities:
1999 The Company retired fully depreciated property having an initial cost
of $307,624.
See notes to financial statements.
<PAGE>
EFI ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
In the opinion of Management, the accompanying consolidated financial statements
contain adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of the financial position of EFI Electronics Corporation (the
"Company") and subsidiary at December 31, 1999 and March 31, 1999, and the
results of their operations and their cash flows for the three and nine months
ended December 31, 1999 and 1998. The results of operations for the three months
and nine months ended December 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending March 31, 2000.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as specified by the instructions to Form 10-QSB
and Item 310 of Regulation S-B. It is suggested that these financial statements
and related notes be read in conjunction with the Company's Annual Report on
Form 10-KSB for the year ended March 31, 1999.
1. RECEIVABLES
Receivables consisted of the following:
December 31,1999 March 31, 1999
Trade and other receivables $2,441,572 $ 2,256,864
Allowance for doubtful accounts (51,251) (15,664)
Total Receivables $2,390,321 $ 2,241,200
2. INVENTORIES
Inventories consisted of the following:
December 31, 1999 March 31, 1999
Raw materials $1,309,741 $ 1,238,439
Work-in-process 118,449 121,775
Finished goods 342,829 889,344
1,771,019 2,249,558
Less allowance for obsolete inventory (77,570) (130,222)
Inventories, net $1,693,449 $ 2,119,336
3. NET EARNINGS / (LOSS) PER COMMON SHARE
Basic earnings / (loss) per share is computed by dividing net earnings by the
weighted average number of shares outstanding during each period. Diluted
earnings / (loss) per share are similarly calculated, except that the weighted
average number of shares outstanding includes shares that may be issued subject
to existing rights with dilutive potential.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
EARNINGS / (LOSS) PER SHARE, continued
The following data show the amounts used in computing earnings per share,
including the weighted average number of shares and dilutive potential common
stock.
Nine Months Ended December 31,
1999 1998
Shares outstanding during
the entire period 5,574,460 5,504,644
Weighted average shares issued
during the period 131 51,804
--------- ----------
Weighted average number of
shares used in basic EPS 5,574,591 5,556,448
Dilutive effect of stock
options and warrants 8,083 -0-
Weighted average number of ---------- ----------
shares and dilutive potential
stock used in diluted EPS 5,582,674 5,556,448
Three Months Ended December 31,
1999 1998
Shares outstanding during
the entire period 5,574,460 5,574,414
Weighted average shares issued
during the period 393 46
---------- ----------
Weighted average number of
shares used in basic EPS 5,574,853 5,574,460
Dilutive effect of stock
options and warrants -0- -0-
Weighted average number of
shares and dilutive potential ---------- ----------
stock used in diluted EPS 5,574,853 5,574,460
4. REVOLVING LINE OF CREDIT, CAPITAL LEASE OBLIGATIONS AND NOTES PAYABLE
At December 31 and March 31, 1999, revolving line of credit, capital lease
obligations and notes payable, the carrying value of which approximates fair
value, consisted of the following:
December 31, 1999 March 31, 1999
Revolving line of credit $ 1,783,624 $ 2,583,210
Capitalized lease obligations $ 483,944 $ 341,113
Less current maturities (159,958) (177,763)
Capitalized lease obligations ---------- ----------
(less current maturities) $ 323,986 $ 163,350
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - Continued
REVOLVING LINE OF CREDIT, CAPITAL LEASE OBLIGATIONS AND NOTES PAYABLE, continued
December 31, 1999 March 31, 1999
Notes payable:
Collateralized promissory note $ 481,920 $ 654,877
Uncollateralized subordinated
note - director 900,000 900,000
Collateralized promissory
note - machinery 102,490 133,243
Uncollateralized note
- acquisition 16,215 120,139
1,500,625 1,808,259
Less current maturities (503,940) (990,533)
Total notes payable, less
current installments $ 996,685 $ 817,726
The revolving line of credit in place at December 31, 1999 provides for
borrowings up to $3,700,000 collateralized by accounts receivable and
inventories. Interest is payable monthly at a rate of prime (8.5% as of December
31, 1999) plus 2.5%. Principal payments are made as cash is received from
customers for accounts receivable. Borrowings are based on formulas involving
balances of eligible accounts receivable and inventories. The line of credit
agreement expires in March 2001.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations
General:
The following discussion should be read in conjunction with the unaudited
financial statements and notes contained in this report and in conjunction with
" Management's Discussion and Analysis or Plan of Operations" and the audited
consolidated financial statements and notes included in the Company's Annual
report on Form 10-KSB for the year ended March 31, 1999.
Results of Operations:
Net Sales for the three-month period ended December 31, 1999 decreased by
approximately $608 thousand (18%) compared to the three month period ended
December 31, 1998. For the nine months ended December 31, 1999, net sales
decreased approximately $1.9 million (17%) over the same period of the previous
year. The following factors were primarily responsible for the changes.
In the prior year, the Company was beginning the transition from selling certain
of its products directly to electrical distribution customers to selling its
products to Hubbell Incorporated ( "Hubbell" ) for resale into electrical
distribution markets. During this period, Hubbell placed significant stocking
orders. The Company also had some residual direct sales to electrical
distributors. In the three-month period and nine-month period ended December 31,
1999 there were no direct sales to electrical distributors and sales to Hubbell
were at a maintenance level. The combination of these factors reduced sales by
approximately $229 thousand in the three-month period and approximately $1.0
million in the nine month period.
In June 1998, the Company changed its method of doing business with Thompson
Consumer Electronics ( "TCE" ). The Company no longer sells products to TCE
instead the Company is paid a fee income based on the number of units sold by
TCE. Fee income for the three-month period ended December 31, 1999 increased
approximately $67 thousand compared to the comparable three-month period in
1998. However, on a year-to-date basis this change reduced revenue by $509
thousand in 1999.The revenue decrease was offset by improved gross profit from
the fee income.
Sales to US government agencies for the three-month period ended December 31,
1999 were approximately $211 thousand lower as compared to the same three- month
period in 1998. Government sales for the nine-month period ended December 31,
1999 were approximately $ 160 thousand lower than for the comparable nine-month
period in 1998. The decrease was due to the inventory reductions associated with
the closing of the GSA regional warehouses, conclusion of the Social Security
Administration contract and reduced computer sales during the third quarter of
FY 2000 with respect to the Y2K issue. The Company expects an increase in
Government sale during the next three month period.
International sales for the three- month period ended December 31, 1999 were
$47,000 lower, primarily due to a slow down in the European machine tool market.
International sales for the nine months ended December 31, 1999 were slightly
below the comparable nine-month period in 1998.
In 1998, the Company sold approximately $277 thousand of custom obsolete
inventory to a previous private label customer at much lower than average
margins. This decision enabled the Company to recover its manufacturing cost and
avoid a significant inventory writeoff. This one-time event did not recur in the
current year.
Gross Profit for the three-month period ended December 31, 1999, declined
approximately $22 thousand (2%) compared to the three months ended December 31,
1998. For the nine months ended December 31, 1999, gross profit decreased by
approximately $223 thousand (6%). The Company's gross margin improved to 41% of
net sales in the three-month period ended December 31, 1999 as compared to 34%
in the prior year. For the nine months ended December 31, 1999 gross margin was
39% as compared to 34% in the prior year. The decrease in the amount of gross
profit was primarily attributable to the sales decline offset by significant
improvements in indirect costs and direct material. The improvement of gross
margin percentage was primarily due to the following factors:
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations
Fee income from TCE yields a substantially greater margin than the product sales
that it displaces.
During the last half of fiscal 1999, the Company focused on decreasing its
direct product costs for several product lines. The impact of these reductions
began during the fourth quarter of fiscal year 1999. This reduction effort has
continued during the current fiscal year. Management anticipates the program
will reduce direct product costs by approximately $750 thousand per year.
Indirect costs decreased by approximately $212 thousand in the three-month
period ended December 31, 1999 and approximately $452 thousand for the nine
month period ended December 31, 1999. This is primarily the result of staff
headcount reductions made in March 1999, reductions in scrap and rework and
substantial improvements in productivity.
Operating Expenses for the three months ended December 31, 1999 increased by
approximately $59 thousand (6%), compared to the three months ended December 31,
1998. For the nine month period ended December 31, 1999, operating expenses were
approximately $35 thousand ( 1% ) lower than in the same period of the previous
year.
Research and development expenses increased approximately $16 thousand for the
three-month period due to certification expenses for several new products.
Research and development expenses for the nine-month period ended December 31,
1999 were slightly lower than in the previous year.
Selling, general and administrative expenses increased approximately $43
thousand during the three- month period ended December 31, 1999.The Company
experienced one-time expenses associated with its ISO registration program and
increases in its employee compensation costs. For the nine-month period ended
December 31, 1999 administrative expenses were approximately $31 thousand lower
than the same period of the prior year due primarily to the change from selling
direct to electrical distribution customers to selling to Hubbell, as described
above, and lower bonus expenses.
Net Earnings/ (Loss) for the three months ended December 31, 1999 declined by
approximately $97 thousand as compared to the three months ended December 31,
1998, as a result of the sales decline and the increase in operating expenses.
These earnings reductions were partially offset by improved gross margins and
manufacturing efficiencies. These same factors primarily accounted for the
approximate $178 thousand decline in net earnings for the nine-month period
ended December 31, 1999 as compared to the same period in 1998.
Liquidity and Capital Resources:
Cash Flows From Operating Activities for the nine months ended December 31, 1999
decreased by approximately $189 thousand compared to the nine months ended
December 31, 1998. In addition to net earnings and non-cash items for the nine
months, the items that influenced this decrease are described below:
Receivables increased by approximately $136 thousand net of bad debt
allowance during the nine-month period. This increase was due primarily
to significantly higher sales in December as compared to the other
months in the quarter.
Inventories decreased by approximately $436 thousand. This decrease was
due primarily to the strong sales effort at quarter end.
Accounts payable increased by approximately $343 thousand. The Company
has maintained adequate relationships with its suppliers and remains on
"open account" with all significant vendors.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations
Accrued liabilities increased approximately $38 thousand. This increase
was due primarily to normal fluctuations in payroll and fringe benefit
accruals, which are affected by timing of actual payments.
Reserve for customer warranty increased approximately $40 thousand as a
result of increased product shipments.
Cash Flows Used In Investing Activities increased slightly for the nine months
ended December 31, 1999 as compared to the nine months ended December 31, 1998.
An increase in the Company's investment in the EFI Asia Pacific joint venture
was partially offset by reduced capital expenditures.
Cash Flows Used In Financing Activities decreased by approximately $58 thousand
for the nine months ended December 31, 1999 compared to the nine months ended
December 31, 1998 as the Company utilized external financing sources to launch a
new product introduction.
Management believes that existing cash balances, borrowings available under the
line of credit, and cash generated from operations will be adequate to meet the
Company's anticipated cash requirements through March 31, 2000. Management's
expectations are subject to risks and uncertainties that include, but are not
limited to, the Company's dependence on several key customers and its limited
liquidity and financial condition.
Factors Affecting Future Results:
This Form 10-QSB may contain forward-looking statements within the meaning of
that term in the Private Securities Litigation Reform Act of 1995 (Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). These can be identified by the use of forward-looking terminology such as
"may," "will," "should," "expect," "anticipate," "estimate," or "continue," or
the negative thereof or other variations thereon or comparable terminology.
Additional written or oral forward-looking statements may be made by the Company
from time to time, in filings with the Securities and Exchange Commission or
otherwise.
These forward-looking statements are subject to risks and uncertainties that
include, but are not limited to, the Company's limited liquidity and reliance on
certain customers that represent significant portions of the Company's total
revenue, as well as those identified in this report, described from time to time
in the Company's other Securities and Exchange Commission filings, or discussed
in the Company's press releases. Actual results may vary materially from
expectations. Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to update these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unexpected events.
Year 2000
The Company addressed Year 2000 (Y2K) compliance issues. The Company's current
software information systems are Y2K compliant. The Company installed an
information system that complied with Y2K requirements. Compliance with Y2K
requirements cost the Company an estimated $300,000 in fiscal year 1999 capital
expenditures to be amortized over 3-7 years.
In addition, the Company took steps to ensure that its banking and lending
relationships were with Y2K compliant financial institutions.During fiscal 2000,
the Company continued to work with its major customers and suppliers to ensure
that Y2K compliance issues would not interrupt the normal activities supported
by these relationships. None of these items is expected to involve material
investment or expense to the Company in fiscal 2000.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits.
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.
EFI ELECTRONICS CORPORATION
(Registrant)
February 15, 2000
----------------------------------
Richard D. Clasen
Chief Executive Officer, President and
Director (Principal Executive Officer)
February 15, 2000
-----------------------------------
James A. Grada
Controller ( Principal Financial Officer)
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<PERIOD-START> Apr-1-1999
<PERIOD-END> Dec-31-1999
<CASH> 26,102
<SECURITIES> 0
<RECEIVABLES> 2,441,572
<ALLOWANCES> 51,251
<INVENTORY> 1,693,449
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<PP&E> 6,435,013
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<COMMON> 558
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<TOTAL-REVENUES> 9,377,079
<CGS> 5,708,428
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