U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995.
Commission File No. 0-15205
ELCOTEL, INC.
(Exact name of small business issuer in its charter)
Delaware 59-2518405
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6428 Parkland Drive, Sarasota, Florida 34243
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(Address of principal executive offices)
(941) 758-0389
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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
----- -----
The number of shares of the issuer's Common Stock outstanding as of
August 7, 1995 was 7,768,765.
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<TABLE>
PART I - FINANCIAL INFORMATION
--------------------------------
ELCOTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
June 30, March 31,
1995 1995
----------- -----------
(Unaudited) (See Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and temporary investments $2 $366
Accounts receivable, net 3,856 2,809
Notes receivable 3,247 3,289
Inventories 2,441 2,354
Refundable income taxes 177 177
Deferred tax asset 636 636
Prepaid expenses and other current as 222 296
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TOTAL CURRENT ASSETS 10,581 9,927
Property, plant and equipment, net 3,219 3,188
Notes receivable, noncurrent 2,202 2,695
Deferred tax asset 339 339
Other assets 69 76
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$16,410 $16,225
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $2,997 $2,860
Line of credit 1,098 1,425
Current portion of long-term debt 67 67
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TOTAL CURRENT LIABILITIES 4,162 4,352
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LONG TERM DEBT, less current portion 710 782
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SHAREHOLDERS' EQUITY:
Common Stock 78 77
Additional paid-in capital 10,039 9,966
Retained earnings 1,598 1,225
Less treasury stock (177) (177)
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11,538 11,091
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$16,410 $16,225
======= =======
<FN>
Note: The balance sheet at March 31, 1995, has been derived from
the audited financial statements.
1
See Notes to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
ELCOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
-------------------------
1995 1994
------ ------
<S> <C> <C>
NET SALES $5,820 $5,223
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COSTS AND EXPENSES:
Cost of sales 3,322 2,962
Research and development 521 364
Selling, general and
administrative 1,547 1,167
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TOTAL COSTS AND EXPENSES 5,390 4,493
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PROFIT FROM OPERATIONS 430 730
INTEREST INCOME, net 145 59
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PROFIT BEFORE INCOME TAXES 575 789
INCOME TAX PROVISION 202 189
------- -------
NET PROFIT $373 $600
======= =======
NET PROFIT PER COMMON AND COMMON
EQUIVALENT SHARE $0.05 $0.08
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 8,212 7,833
======= =======
<FN>
2
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ELCOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit $373 $600
Adjustments to reconcile net profit
to net cash provided from operations:
Depreciation and amortization 82 60
Provision for doubtful accounts (9) 8
Change in operating assets and liabilities:
Accounts receivable (1,038) (219)
Notes receivable, trade 535 147
Deposits - (37)
Inventories (87) (1,263)
Prepaid expenses and other
current assets 74 2
Accounts payable and accrued expenses 137 1,013
Other, net 7 4
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Net cash flow provided from operations 74 315
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (113) (84)
------ ------
Net cash flow used in investing activities (113) (84)
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<FN>
3
</TABLE>
<PAGE>
<TABLE>
ELCOTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
(continued)
<CAPTION>
Three Months Ended
June 30,
------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term borrowings (327) -
Payments on long-term debt (72) -
Issuance of common stock 74 43
------ ------
Net cash flow provided by (used in)
financing activities (325) 43
------ ------
Net (decrease)/increase in cash
and temporary investments (364) 274
Cash and temporary investments at
beginning of year 366 547
------ ------
Cash and temporary investments at
end of quarter $2 $821
====== ======
ADDITIONAL CASH FLOW INFORMATION:
Cash Paid During the period for:
Interest $56 $57
Income taxes - 6
<FN>
4
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
ELCOTEL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for share amounts)
(Unaudited)
NOTE A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet as of June 30, 1995, and the
consolidated statements of operations for the three month periods ended
June 30, 1995 and 1994, and the consolidated statements of cash flows for the
three month periods ended June 30, 1995 and 1994, have been prepared by the
Company, without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at June 30, 1995, and
for all periods presented, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-KSB
for the fiscal year ended March 31, 1995. The results of operations for the
three month period ended June 30, 1995, are not necessarily indicative of the
results for the full fiscal year.
NOTE B. INVENTORIES:
Inventories by stage of completion are as follows:
June 30, March 31,
1995 1995
-------- --------
Finished products $ 148 $ 407
Work-in-process 343 162
Purchased components 1,950 1,785
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$2,441 $2,354
====== ======
5
<PAGE>
NOTE C. SHAREHOLDERS' EQUITY:
During the three month period ended June 30, 1995, shareholders' equity
increased as a result of a net profit of $373, and employee and director
exercise of stock options at prices between $.75 per share and $3.25 per
share for a total of $74.
NOTE D. SUBSEQUENT EVENT:
On August 3, 1995, one of the Company's customers, Amtel Communications, Inc.
("Amtel"), filed a voluntary petition under Chapter 11 of the Bankruptcy Code.
The Company is owed approximately $3,200 by Amtel relative to sales made by
the Company to Amtel. The Company has a security interest in payphones sold
to Amtel and a collateral assignment of agreements between Amtel and the
owners of certain sites where those payphones have been installed. While the
Company's evaluation of the effect of this bankruptcy filing is in its early
stages, the Company believes that the value of its collateral is sufficient
to cover the outstanding principal amount of the obligations, but that the
payment will be delayed. The Company believes that the delay of payment will
not have any negative effect on the Company's liquidity or operations.
6
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.
---------------------------------------------
Results of Operations
---------------------
(Dollars in thousands)
Quarter ended June 30, 1995, compared to the quarter ended June 30, 1994:
Net sales for the quarter ended June 30, 1995 ("first quarter 1996"), increased
to $5,820 from $5,223 for the quarter ended June 30, 1994 ("first quarter
1995"), an increase of $597, or approximately 11%, principally as a result of
an increase in sales of electronic assemblies of approximately 14% offset by
a decrease in sales of complete payphones of approximately 18% Unit sales of
electronic assemblies increased by approximately 36% while unit sales of
complete payphones decreased by approximately 21%. Average selling prices of
payphones in the quarter were approximately 4% higher than in the same quarter
last year, while average selling prices of electronic assemblies were 16% lower
than last year due to credits given to customers for trade-in of older
electronic assemblies in connection with the purchase of electronic assemblies
that satisfy the requirements of the North American Numbering Plan. This
trade-in program was extended through the end of the current fiscal year, due
to large customer response, but the Company believes that the level of trade-ins
will decrease during the fiscal year. In addition the Company sold a
substantial number of upgrade modules which allow customers who have older
versions of the Company's products to comply with the North American Numbering
Plan. Sales of these upgrade modules are expected to continue throughout the
current fiscal year at decreasing levels toward the latter part of the fiscal
year.
Cost of sales as a percentage of net sales were substantially the same as in
the previous year.
Research and development costs increased by $157, or approximately 43%, from
$364 in the first quarter 1995 to $521 in the first quarter 1996 due to the
hiring of additional development staff and increased use of outside contractors.
Selling, general and administrative expenses increased by $380, or approximately
33%, from $1,167 in the first quarter 1995 to $1,547 in the first quarter 1996
principally as a result of increased sales commissions related to the Company's
higher sales level compared to the prior year, an increase in the number of
employees supporting international sales efforts and a one-time expense in
connection with the Company's listing on the NASDAQ National Market System.
Interest income increased by $96, or approximately 108%, from $89 in first
quarter 1995 to $185 in first quarter 1996 due to an increase in the Company's
note receivable portfolio. Interest expense increased by $10, or approximately
33%, from $30 in first quarter 1995 to $40 in first quarter 1996 due to
increased borrowings against the Company's line of credit facility with its
bank.
The current year tax provision of $202, which represents an effective tax rate
of approximately 35%, is compared against the prior year's tax provision of
$189, which was at an effective tax rate of 24% due to the Company having not
utilized all of its net operating losses.
7
<PAGE>
Liquidity and Capital Resources
-------------------------------
(Dollars in thousands)
The Company recorded an increase in current assets of $654, or approximately 7%,
from $9,927 at March 31, 1995 to $10,581 at June 30, 1995, predominantly from
an increase in accounts receivable of $1,047, due to a significant amount of
shipments in the latter part of the quarter, partially offset by a decrease of
$364 in cash and temporary investments, due to the Company's repayments on its
line of credit. Current liabilities decreased by $190, or approximately 4%,
from $4,352 at March 31, 1995 to $4,162 at June 30, 1995 predominantly from
the repayment of $327 to the Company's bank of amounts borrowed against its
line of credit.
Since August 31, 1994 the Company has had a $2,000 working capital line of
credit secured by the Company's accounts receivable, notes receivable and
inventories. Interest on amounts borrowed on the line of credit is at prime
plus one-half percent. The Company borrows against and repays the line of
credit throughout the year depending upon its working capital needs and cash
generated from operations, with the outstanding amount under the line of credit
during fiscal 1996 ranging from $1,098 to $1,425. The Company believes its
lender will renew the line of credit when it matures on August 31, 1995.
The Company believes that its anticipated cash flow from operations will be
sufficient to fund its working capital needs, its capital expenditures and
its short and long term note obligations through June 30, 1996.
8
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 5. Other Information
-----------------
On August 3, 1995, one of the Company's customers, Amtel
Communications, Inc. and certain related entities ("Amtel"),
filed a voluntary petition under Chapter 11 of the Bankruptcy
Code. The Company is owed approximately $3,200 by Amtel arising
out of the sale of approximately 3,500 payphones by the Company
to Amtel. The Company has not delivered any phones to Amtel since
February 1995. Payment of those obligations is secured by a
security interest in payphones sold to Amtel and a collateral
assignment of agreements between Amtel and the owners of certain
sites where those payphones have been installed. While the
Company's evaluation of the effect of this bankruptcy filing is in
its early stages, the Company believes that the value of its
collateral is sufficient to cover the outstanding principal amount
of the obligations, but that the payment will be delayed. The
Company believes that the delay of payment will not have any
negative effect on the Company's liquidity or operations. The
Company believes that immediate relief from the automatic stay with
respect to this collateral is important in protecting its value and
will be requesting such relief.
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
A. Exhibits:
None
B. Form 8-K:
None
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Elcotel, Inc.
-------------
(Registrant)
Date: August 11, 1995 By: Ronald M. Tobin
----------------
Ronald M. Tobin
Vice President
(Principal Financial Officer and
Chief Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 3,856
<ALLOWANCES> 0
<INVENTORY> 2,441
<CURRENT-ASSETS> 10,581
<PP&E> 3,219
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,410
<CURRENT-LIABILITIES> 4,162
<BONDS> 0
<COMMON> 78
0
0
<OTHER-SE> 11,460
<TOTAL-LIABILITY-AND-EQUITY> 16,410
<SALES> 5,820
<TOTAL-REVENUES> 5,820
<CGS> 3,322
<TOTAL-COSTS> 3,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (145)
<INCOME-PRETAX> 575
<INCOME-TAX> 202
<INCOME-CONTINUING> 373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 373
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
