<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] 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: 0-22046
Bogen Communications International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 38-3114641
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
50 Spring Street, Ramsey, New Jersey 07446
(Address of principal executive offices) (Zip Code)
(201) 934-8500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 10, 1997, 5,758,850 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
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BOGEN COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 (Unaudited) 3
Condensed Consolidated Statements of Operations for the three and nine
months ended September 30, 1997 and 1996 (Unaudited) 5
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the nine months ended September 30, 1997 (Unaudited) 6
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 (Unaudited) 7
Notes to Condensed Consolidated Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8K 17
</TABLE>
2
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BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 632 $ 885
Accounts receivable (less allowance for doubtful
accounts of $324 and $470 at September 30,
1997 and December 31, 1996, respectively)
6,430 6,517
Inventories, net
7,424 6,519
Prepaid expenses and other current assets
887 780
------------- ------------
TOTAL CURRENT ASSETS
15,373 14,701
Property and equipment, net
2,209 2,130
Goodwill and intangible assets, net
13,701 14,308
Other assets
265 247
------------- ------------
TOTAL ASSETS
$31,548 $31,386
============= ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
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BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts outstanding under revolving credit agreement $ 4,163 $ 4,828
Accounts payable
3,444 3,707
Accrued expenses
2,454 3,026
Income taxes payable
290 --
Advances and notes payable to related parties
225 746
Current maturities of notes payable to non-related parties
8 5
-------- --------
TOTAL CURRENT LIABILITIES
10,584 12,312
Advances and notes payable to related parties
328 361
Notes payable to non-related parties
6 8
Other liabilities
433 536
Minority interest
987 593
-------- --------
TOTAL LIABILITIES 12,338 13,810
======== ========
Preferred stock - $.001 par value; 1,000,000 shares
authorized; none issued and outstanding at
September 30, 1997 and December 31, 1996 -- --
Common stock - .001 par value; 50,000,000 shares
authorized; 5,758,850 shares issued and outstanding
at September 30, 1997 and December 31, 1996
6 6
Additional paid-in-capital
21,774 21,774
Accumulated deficit
(2,303) (4,177)
Currency translation adjustments
(267) (27)
-------- --------
TOTAL STOCKHOLDERS' EQUITY
19,210 17,576
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 31,548 $ 31,386
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 13,090 $ 12,388 $ 37,135 $ 34,078
Cost of goods sold 7,091 6,530 20,024 18,628
----------- ----------- ----------- -----------
Gross profit 5,999 5,858 17,111 15,450
Operating expenses:
Research and development 617 808 1,992 2,150
Selling, general and administrative 3,675 3,794 10,991 10,278
Amortization of goodwill and intangible assets 111 110 332 330
----------- ----------- ----------- -----------
Income from operations 1,596 1,146 3,796 2,692
Other (income) expenses:
Interest expense, net 113 167 336 476
Interest expense to related parties (5) 21 16 49
Minority interest of consolidated subsidiaries 119 125 393 228
Other (income) expense (19) -- (53) --
----------- ----------- ----------- -----------
Income before income taxes 1,388 833 3,104 1,939
Income taxes 487 84 1,230 589
----------- ----------- ----------- -----------
Net income $ 901 $ 749 $1,874 $ 1,350
=========== =========== =========== ===========
Net income per common share $ 0.16 $ 0.13 $ 0.33 $ 0.23
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 5,758,850 5,758,850 5,758,850 5,759,100
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
</TABLE>
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<TABLE>
<CAPTION>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Additional Currency
Number of Paid-In Accumulated Translation
Shares Amount Capital Deficit Adjustments Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 5,758,850 $ 6 $ 21,774 $ (4,177) $ (27) $ 17,576
Translation adjustments (240) (240)
Net income for the nine months ended
September 30, 1997 1,874 1,874
---------- ---------- ---------- ---------- ---------- ----------
Balance at September 30, 1997 5,758,850 $ 6 $ 21,774 $ (2,303) $ (267) $ 19,210
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
</TABLE>
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<TABLE>
<CAPTION>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
For the Nine Months Ended
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES $ 1,596 $ 982
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (848) (668)
Acquisition of New England Audio Resource, Inc. (278) --
Purchase of intangible assets -- (39)
Collection of notes receivable -- 15
------- -------
Net cash used in investing activities (1,126) (692)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Payments to reacquire common stock -- (3)
Amounts (paid) borrowed under notes payable (428) (216)
Amounts (paid) borrowed under revolving credit agreements (282) (275)
Advances and notes payable - related parties (11) (352)
------- -------
Net cash used in financing activities (721) (846)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(251) (556)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 885 1,276
Effects of Foreign Exchange Rate on Cash (2) (59)
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 632 $ 661
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
NON CASH FINANCING ACTIVITIES
Restructuring of $3,000 related party note and related interest $ - $ 2,602
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
</TABLE>
<PAGE> 8
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. Basis of Presentation
The condensed consolidated balance sheet of Bogen Communications
International, Inc. and its subsidiaries (the "Company") as of December
31, 1996 has been derived from the audited consolidated balance sheet
contained in the Company's Form 10-K and is presented for comparative
purposes. In the opinion of management, all significant adjustments
including normal recurring adjustments necessary to present fairly the
financial position, results of operations and cash flows for all
periods presented have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for the
full year.
Footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for
the most recent fiscal year.
2. The Company
On August 21, 1995, the Company acquired a 99% interest in Bogen
Corporation ("Bogen") and a 67% interest in Speech Design GmbH ("Speech
Design") from Geotek Communications, Inc. ("Geotek"). The Company paid
Geotek $7,000 in cash, issued a convertible promissory note in the
aggregate principal amount of $3,000, issued 3,700,000 shares of the
Company's common stock ("Common Stock") and warrants to acquire 200,000
shares of Common Stock. In addition, there was an agreement to pay
contingent consideration of up to $11,000, based upon an earnout
calculation of operating results of Bogen and Speech Design during the
two years after the acquisition. As a result of this transaction,
Geotek acquired approximately 64% of the stock of the Company, thereby
giving it a controlling interest in the Company. Geotek, in addition,
contributed approximately $7,155 of intercompany indebtedness from
Bogen to equity as part of the transaction.
For accounting purposes, the August 21, 1995 acquisition is being
treated as a joint acquisition of the Company by Bogen and Speech
Design, companies under the common control of Geotek. The transaction
is considered a reverse acquisition with Geotek as the acquirer for
accounting purposes. The historical financial statements reflect the
combination of Bogen and Speech Design in a manner similar to a pooling
of interests. Accordingly, the historical financial statements reflect
the combined operations of Bogen and Speech Design prior to the
transaction.
In May 1996, the Company and Geotek entered into the most recent
amendment to the Stock Purchase Agreement effective January 1, 1996.
Pursuant to such agreement, (i) the $3,000 convertible promissory note
payable by the Company to Geotek, due February 1997, was reduced and
restructured to a $500 non-convertible promissory note due and paid in
July 1997, (ii) the earnout formula was revised to reflect an increase
in the amount the Company could be liable to pay Geotek from $11,000 to
$13,500 in connection with the reduction of the principal amount of the
promissory note, and (iii) Geotek was granted an option to purchase, at
any time through October 31, 1997, $3,000 worth of Common Stock with
exercise prices ranging from 100% to 65% of market price, depending on
the date of exercise. Based on a review of the earnout calculation by
the Company's independent accountants, which takes into account Speech
Design and Bogen's operating results for the last two quarters of 1995,
all of 1996 and the first two quarters of 1997, no contingent
consideration payment will be paid to Geotek.
8
<PAGE> 9
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
2. The Company (Continued)
On July 1, 1997, the Company acquired substantially all the assets of
New England Audio Resource, Inc. ("NEAR"). The acquisition has been
accounted for as a purchase in accordance with APB Opinion 16 and
included in the Company's consolidated financial statement. NEAR is a
manufacturer of high performance, weather-proof speakers. NEAR products
are marketed with the Company's product lines. The effect of this
acquisition was not material to the financial position of the Company.
3. Summary of Significant Accounting Policies.
A. Principles of Consolidation
The condensed consolidated financial statements include the
accounts of Bogen Communications International, Inc., Bogen
and Speech Design. All significant intercompany balances and
transactions have been eliminated in consolidation.
B. Inventory, at lower of cost (first in, first out) or market,
as of September 30, 1997 and December 31, 1996, is as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Raw materials and supplies $1,609 $1,525
Work in progress 991 701
Finished goods 4,824 4,293
------ ------
Total $7,424 $6,519
====== ======
</TABLE>
The inventory balances are net of a reserve for inventory
valuation and obsolescence of $637 and $1,126 at September 30,
1997 and December 31, 1996, respectively.
C. Net Income Per Share
Net income per common share is computed by dividing net income
by the weighted average number of shares of common stock and
common stock equivalents, (unless anti-dilutive) outstanding
during the year.
D. Recently Issued Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement 128, Earnings Per Share, effective
for periods ending after December 15, 1997. This statement
establishes standards for computing and presenting earnings
per share ("EPS"), and replaces the current presentation of
primary EPS with basic EPS, which does not include dilutive
effects on earnings. It is calculated by dividing income
available to common stockholders by the weighted-average
number of common shares outstanding. The Company will adopt
this standard in 1997, and is presently analyzing the impact
of this new standard on its financial statements and related
disclosures.
9
<PAGE> 10
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
3. Summary of Significant Accounting Policies.(Continued)
In June 1997, the FASB issued Statement 130, Reporting Comprehensive
Income, effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains, and
losses) in a full set of general-purpose financial statements. The
statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company will adopt this
standard in 1998, and is presently analyzing the impact of this new
standard on its financial statements and related disclosures.
In June 1997, the FASB issued Statement 131, Disclosures about Segments
of an Enterprise and Related Information, effective for fiscal years
beginning after December 15, 1997. This statement establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company is
currently analyzing this statement and will determine whether to adopt
such standard based upon the results of its analysis.
4. Revolving Credit Agreements
During the first quarter of 1997, Bogen Communications, Inc. ("BCI"), a
wholly owned subsidiary of Bogen, obtained a new revolving senior
credit line with a term of two years. The new credit line has a maximum
line of borrowing of $7,000 and bears an annual interest rate of .5%
over the lender's prime rate, and replaces Bogen's previous line of
$10,000 which had an annual interest rate of 2% to 2.75% over the
lender's prime rate (9.0% and 11% at September 30, 1997 and 1996,
respectively). The senior loan is collaterized by all of the accounts
receivable, inventory, property, plant and equipment, and general
intangibles of BCI and is guaranteed by the Company. Under the terms of
this line of credit, BCI cannot, among other things, declare or pay
dividends, return capital to its stockholders or redeem or repurchase
any of its outstanding capital stock.
5. Income Tax
Domestic and foreign earnings before taxes on income from operations
include income derived from operations in the respective U.S. and
foreign geographic areas, whereas provisions for taxes on income
include all income taxes payable to U.S., foreign and other governments
as applicable, regardless of the sites in which the taxable income is
generated. Income tax expense for 1997 and 1996 differs from the amount
computed by applying the U.S. federal statutory rates due to higher tax
rates in Europe for which no U.S. tax benefit has been provided and the
utilization of U.S. preacquisition loss carryforwards for which the
benefit has been charged to goodwill. In accordance with SFAS No. 109,
the Company has established a valuation allowance of $4,137 as of
December 31, 1996. The valuation allowance was established due to the
uncertainty of the realization of the deferred tax assets. A
significant portion of the deferred tax assets which are currently
subject to a valuation allowance may be allocated to reduce goodwill or
other noncurrent intangible assets when subsequently recognized.
10
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BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
6. Subsequent Event
On October 31, 1997, Geotek's option to acquire $3,000 of Common
Stock, with exercise prices ranging from 100% to 65% of market price,
expired.
Thereafter, on November 4, 1997 a letter of intent was entered into
pursuant to which Geotek agreed to sell 3,701,919 shares of Common
Stock and Warrants to acquire 200,000 shares of Common Stock in
consideration of $18.5 million in cash. The acquisition will be
financed by a group of investors, which upon consummation of the
transaction will own a majority equity interest in the Company. The
closing of the transaction is subject to, among other things, final
documentation and there can be no assurances that the transaction will
ultimately be consummated.
11
<PAGE> 12
All statements contained herein that are not historical facts,
including, but not limited to statements regarding the Company's current
business strategy, the Company's projected sources and uses of cash, and the
Company's plans for future development and operations, are based upon current
expectations. These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause actual results to differ materially are the
following: competitive factors, including the fact that the Company's
competitors are highly focused and may have greater resources and/or name
recognition than the Company; changes in technology and the Company's ability to
develop or acquire new or improved products and/or modify and upgrade its
existing products; changes in labor, equipment and capital costs; changes in
access to suppliers; currency fluctuations; changes in regulations affecting the
Company's business; future acquisitions or strategic partnerships; the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; general business and economic conditions;
political instability in certain regions; and other factors described from time
to time in the Company's reports filed with the Securities and Exchange
Commission. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements which statements are made pursuant to the
Private Litigation Reform Act of 1995 and, as such, speak only as of the date
made.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS OF DOLLARS)
GENERAL
The financial statements and the following discussion include the accounts of
Bogen Corporation ("Bogen"), the Company's 99% owned subsidiary, and Speech
Design GmbH ("Speech Design"), its 67% owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net Sales.
Net sales increased by $702, or 5.67% to $13,090, for the three months ended
September 30, 1997, as compared to $12,388 for the same period in 1996. The
increase in sales primarily resulted from increased sales of $859 in the
Company's core products, which includes Commercial Sound, Engineered Systems and
Telco product lines. This increase was partially offset by the phase out of the
Office Automated Systems ("OAS") product line, which accounted for $156 of net
sales for the three months ended September 30, 1996.
Net sales from the Commercial Sound products increased to $3,268 for the three
months ended September 30, 1997, or 6.88% over net sales of $3,058 for the same
period in 1996. Net sales from the Engineered Systems products increased to
$2,389 for the three months ended September 30, 1997, or 20.17% over net sales
of $1,971 for the same period in 1996. Net sales from the Telco product
increased to $7,454 for the three months ended September 30, 1997, or 3.48% over
net sales of $7,203 for the same period in 1996. The Telco product line includes
foreign sales from Speech Design. Domestic sales decreased to $3,035 for the
three months ended September 30, 1997, or 5.42% over net sales of $3,209 for the
three months ended September 30, 1996. Foreign sales translated into U.S.
dollars increased to $4,419 for the three months ended September 30, 1997, or
10.63% over net sales of $3,994 for the same period in 1996. However, foreign
net sales stated in local currency increased to 7,972 Deutche Marks ("DM") for
the three months ended September 30, 1997, or 33.33% over net sales of 5,979 DM
for the three months ended September 30, 1996.
12
<PAGE> 13
Gross Profit
Gross profit as a percentage of total net sales decreased by 1.5% to 45.8% for
the three months ended September 30, 1997, compared to 47.3% for the period in
1996. The gross profits decreased as a result of increased sales of lower gross
profit products.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") decreased by $119, or
3.14% for the three months ended September 30, 1997, as compared to the three
months ended September 30, 1996. SG&A was $3,675, or 28.07% of net sales for the
three months ended September 30, 1997, as compared to $3,794, or 30.63% of net
sales for same period in 1996. The decrease is primarily attributable to the
restructuring of the sales staff of the Company's Engineered Systems unit. As a
result of such restructuring, sales are now consummated by Bogen employees as
opposed to independent representatives, who received commissions. This decrease
was partially offset by increased salaries, personnel and professional services
expenses which is directly attributable to the Company's increased net sales.
Research and Development
The Company's Research and Development ("R&D") programs are designed to
efficiently introduce innovative products in a timely manner. R&D expense was
$618, or 4.72% of net sales for the three months ended September 30, 1997, as
compared to $808, or 6.52% of net sales for the three months ended September 30,
1996. The decrease is primarily attributable to refocusing R&D on specific
projects during 1997 as well as changes in personnel which have been cost
efficient to the Company without sacrificing the integrity of the Company's R&D
department. Additionally, during the third quarter of 1996 the Company incurred
a one time charge of $100 for a proposed project.
Interest Expense
Interest expense was $113, or 0.86% of net sales for the three months ended
September 30, 1997, as compared to $167, or 1.35% of net sales for the three
months ended September 30, 1996. The decrease of $54, or 32.34%, primarily
relates to the new revolving credit line the Company entered into in February
1997 which decreased the Company's borrowing rate by 2 percentage points to 9%
at September 30, 1997, compared to 11.5% at September 30, 1996, as well as the
final repayment of a $500 note to Geotek on July 3, 1997, which accrued interest
at 11% per annum.
Income Taxes
Income tax expense increased for the three months ended September 30, 1997 to
$487, as compared to $84 for the comparable period in 1996. The increase of $403
is due to increased profits, both domestic and foreign. Foreign taxes increased
by $180, which is directly attributable to increased profits. Domestic taxes
increased by $223 principally due to the requirement under SFAS No. 109 to
credit the utilization of U.S. preacquisition loss carryforwards to goodwill
rather than tax expense.
13
<PAGE> 14
NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Net Sales
Net sales increased by $3,057, or 8.97%, to $37,135 for the nine months ended
September 30, 1997, as compared to $34,078 for the same period in 1996. The
increase in sales primarily resulted from increased sales of $4,447 in the
Company's core products, which includes Commercial Sound, Engineered Systems and
Telco product lines. This increase was partially offset by the phase out of the
Office Automated Systems ("OAS") product line which accounted for $1,390 of net
sales for the nine months ended September 30, 1996.
Net sales from the Commercial Sound products increased to $8,189 for the nine
months ended September 30, 1997, or 12.68% over net sales of $7,267 for the same
period in 1996. Net sales from the Engineered Systems products increased to
$6,333 for the nine months ended September 30, 1997, or 27.43% above net sales
of $4,970 for the same period in 1996. Net sales from the Telco product
increased to $22,613 for the nine months ended September 30, 1997, or 10.57%
above net sales of $20,451 for the same period in 1996. The Telco product line
includes foreign sales from Speech Design. Domestic sales increased to $9,230
for the nine months ended September 30, 1997, or .77% above net sales of $9,160
for the nine months ended September 30, 1996. Foreign sales translated into U.S.
dollars increased to $13,383 for the nine months ended September 30, 1997, or
18.52% over net sales of $11,291 for the same period in 1996. Foreign net sales
stated in local currency increased to 23,106 Deutche Marks ("DM") for the nine
months ended September 30, 1997, or 36.84% over net sales of 16,886 DM for the
nine months ended September 30, 1996.
Gross Profit
Gross profit for the nine months ended September 30, 1997 was $17,111, or 46.08%
of net sales, an increase of $1,661, as compared to $15,450, or 45.34% of net
sales for the same period in 1996. The increase in gross profit is primarily
attributable to the renegotiation of certain supply agreements during 1996 which
had a positive effect on 1997 cost of sales. This was partially offset by
increased sales of products with lower gross profits.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $713 for the
nine months ended September 30, 1997 as compared to the nine months ended
September 30, 1996. SG&A was $10,991, or 29.6% of net sales for the nine months
ended September 30, 1997, as compared to $10,278, or 30.16% of net sales for the
same period in 1996. The increase is a result of increased personnel and
professional services directly attributable to the Company's increased net
sales. This increase was partially offset by decreased commissions paid to
outside representatives since sales are now consummated by Bogen employees for
the Engineered Systems products.
Research and Development
The Company's Research and Development ("R&D") programs are designed to
efficiently introduce innovative products in a timely manner. R&D expense was
$1,992, or 5.36% of net sales for the nine months ended September 30, 1997, as
compared to $2,150, or 6.3% of net sales for the nine months ended September 30,
1996. The decrease is primarily attributable to refocusing R&D on specific
projects during 1997 as well as changes in personnel which have been cost
efficient to the Company without sacrificing the integrity of the Company's R&D
department. Additionally, during the third quarter 1996 the Company incurred a
one time charge of $100 for a proposed project.
14
<PAGE> 15
Interest Expense
Interest expense was $336, or .9% of net sales for the nine months ended
September 30, 1997, as compared to $476, or 1.46% of net sales for the nine
months ended June September 30, 1996. The decrease of $140, or 29.4%, primarily
relates to the new revolving credit line the Company entered into in February
1997, which decreased the Company's borrowing rate by 2% to 9% at September 30,
1997, compared to 11% as September 30, 1996, as well as the final repayment of a
$500 note to Geotek on July 3, 1997, which accrued interest at 11% per annum.
Income Taxes
Income tax expense increased for the nine months ended September 30, 1997 to
$1,230, compared to $589 for the comparable period in 1996. The increase of $641
is due to increased profits, both domestic and foreign. Foreign taxes increased
by $299 which is directly attributable to increased profits. Domestic taxes
increased by $342 principally due to the requirement under SFAS No. 109 to
credit the utilization of U.S. preacquisition loss carryforwards to goodwill
rather than tax expense.
Liquidity and Capital Resources
During the nine months ended September 30, 1997, the Company focused its efforts
on long-term growth by strengthening its profitable product lines. Cash
utilization focused on current working capital requirements, the paydown of
related party debt and subordinated notes, and the purchase of equipment and
leasehold improvements.
The Company's operating activities provided $1,596 of operating capital. The
Company's net income of $1,874 includes net non-cash charges of $1,924, which
principally consisted of (i) depreciation and amortization of $1,026, (ii) a
reduction of inventory reserves of $464 (iii) minority interest of consolidated
subsidiaries of $393, (iv) a $147 decrease in reserves for bad debt and a $188
utilization of pre-acquisition NOL charged to goodwill. Further, net changes in
operational assets and liabilities used $2,184 in cash. Additionally, accounts
receivable decreased by $343, inventory increased by $1,526, prepaid expenses
and other assets decreased by $158, accounts payable decreased by $604, accrued
liabilities decreased by $307 and net changes in other operating assets and
liabilities used $103 in cash.
Net cash used in investing activities amounted to $1,126. During the first nine
months of 1997, the Company purchased equipment and other fixed assets of $848.
Net cash used in financing activities amounted to $721. Notes payable decreased
$439, of which $436 were from related parties. Net repayments of $282 were made
under revolving credit agreements.
As of September 30, 1997, the Company's total liabilities were $12,338, of which
$10,584 is due and payable within one year. Such indebtedness included loans
from third parties and advances from Geotek.
During the first quarter of 1997, Bogen Communications, Inc., a wholly owned
subsidiary of Bogen, obtained from Summit Bank a new $7,000 revolving credit
line of two years. This new line is collateralized by the accounts receivable,
inventory and general intangibles of Bogen Communications, Inc. This line is
guaranteed by the Company. This new line, which meets Bogen's needs, is lower
than the previous line and has a lower annual interest rate than the previous
line, while substantially decreasing the associated fees to be paid on an annual
basis. As November 10, 1997, $2,870 was outstanding under the revolving credit
line. In addition, Bogen has an established working capital line of credit with
Geotek in the aggregate amount of $2,000. The Company has never had any
borrowings outstanding under the working capital line with Geotek.
15
<PAGE> 16
Speech Design, has credit lines and overdraft facilities of approximately 6
million DM, or $3.4 million. At September 30, 1997 borrowing and availability
under these lines amounted to 2.8 million DM and 3.2 million DM, respectively.
These lines are collateralized by all of Speech Design's accounts receivable and
inventory.
A letter of intent was entered into pursuant to which Geotek agreed to sell its
interest in the Company for $18.5 million. The acquisition will be financed by a
group of investors, which upon consummation of the transaction will own a
majority equity interest in the Company. The closing of the transaction is
subject to, among other things, final documentation, and there can be no
assurances that a transaction will ultimately be consummated. The consummation
of the transactions will result in the loss of the Company's credit line with
Geotek. The Company has never had any borrowings outstanding under the working
capital line with Geotek.
The Company believes that it has adequate liquidity to finance its ongoing
activities and capital expenditures for the near term but may be required to
seek additional capital in the event it wishes to expand its operations through
acquisitions or otherwise.
16
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
17
<PAGE> 18
EXHIBIT INDEX
The following exhibits are filed as part of this report (Exhibit numbers
correspond to the exhibits required by Item 601 of Regulation S-K for an Annual
Report on Form 10-K):
Exhibit No.
- -----------
3.1 Certificate of Incorporation(1)
3.2 By-Laws(1)
3.3 Certificate of Correction to the Certificate of Incorporation,
dated March 8, 1995 and filed with the Secretary of State of
the State of Delaware on March 10, 1995(2)
3.4 Certificate of Amendment to the Certificate of Incorporation,
dated August 21, 1995 and filed with the Secretary of State of
the State of Delaware on August 21, 1995(3)
4.1 Form of Common Stock Certificate(1)
4.2 Form of Warrant Certificate(1)
4.3 Unit Purchase Option Granted to GKN Securities Corp.(1)
4.4 Warrant Agreement between Continental Stock Transfer & Trust
Company and the Company(1)
4.5 Bogen Communications International, Inc. 1996 Incentive Stock
Option Plan(7)
10.1 Form of Agency Agreement, dated as of June 28, 1993, between
the Company and GKN Securities Corp. (without schedules)(1)
10.2 Letter Agreement among each of the Stockholders of the
Company, the Company and GKN Securities Corp. (without
schedules).(1)
10.3 Form of Investment Management Trust Agreement between United
States Trust Company of New York and the Company.(1)
10.4 Form of Share Escrow Agreement between the Company and
Continental Stock Transfer & Trust Company.(1)
10.5 Form of Indemnification Agreement between the Company and its
officers, directors and advisors.(4)
10.6 Stock Purchase Agreement, dated April 6, 1995, by and between
Geotek Communications, Inc. and European Gateway Acquisition
Corp.(2)
10.7 Letter Amendment, dated May 10, 1995, to the Stock Purchase
Agreement.(5)
10.8 Side Letter Agreement, dated May 10, 1995, between Geotek
Communications, Inc. and European Gateway Acquisition Corp.
regarding the issuance of certain stock warrants.(6)
10.9 Letter Amendment, dated May 30, 1995, to the Stock Purchase
Agreement.(5)
10.10 Letter Amendment, dated June 27, 1995, to the Stock Purchase
Agreement.(5)
10.11 Letter Amendment, dated August 21, 1995, to the Stock Purchase
Agreement.(4)
10.12 Letter Agreement, dated August 21, 1995, to the Stock Purchase
Agreement.(4)
10.13 Letter Agreement, dated May 8, 1996, to the Stock Purchase
Agreement.
10.14 Summary of Agreement for Business Credit between Speech Design
GmbH and Statelparkasse Munchen(8)
10.15 Secured Revolving Promissory Note dated February 6, 1997
between Summit Bank and Bogen Communications, Inc.(8)
10.16 Loan and Security Agreement dated February 6, 1997 between
Summit Bank and Bogen Communications, Inc.(8)
10.17 Corporate Guaranty of Bogen Communications International, Inc.
(8)
10.18 Corporate Guaranty of Bogen Corporation.(8)
*27.1 Financial Data Schedule
----------------
*Filed Herewith:
18
<PAGE> 19
(1) Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-1 (File No. 33-65294), dated
October 7, 1993.
(2) Incorporated by reference to the Exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994.
(3) Incorporated by reference to the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1995.
(4) Incorporated by reference to the Exhibits to the Company's
Current Report on form 8-K dated August 21, 1995.
(5) Incorporated by reference to the Exhibits to the Company's
Proxy Statement, dated July 12, 1995, for a Special Meeting of
Stockholders, as amended by addendum, dated July 18, 1995.
(6) Incorporated by reference to the Exhibits to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1995.
(7) Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-8 (File No. 333-21245), dated
February 4, 1997.
(8) Incorporated by reference to the exhibits to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
19
<PAGE> 20
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.
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
(Registrant)
Date: November 14, 1997 By: /s/ John J. Egidio
----------------------------
Name: John J. Egidio
Title: Acting President/CEO
Date: November 14, 1997 By: /s/ Yoav M. Cohen
---------------------------
Name: Yoav M. Cohen
Title: Chief Financial Officer
20
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