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 March 31, 1998
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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
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Bogen Communications International, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3114641
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
50 Spring Street, Ramsey, New Jersey 07446
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(201) 934-8500
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(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 May 15, 1998, 2,273,994 shares of the registrant's common stock, par value
$.001 per share, were outstanding.
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997 5
Consolidated Statement of Changes in Stockholders' Equity
for the three months ended March 31, 1998 6
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
2
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share and Per Share Amounts)
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,004 $ 964
Accounts receivable (less allowance for doubtful
accounts of $359 and $376 at March 31, 1998
and December 31, 1997, respectively) 5,352 6,291
Inventories, net 8,355 8,285
Prepaid expenses and other current assets 491 468
------- -------
TOTAL CURRENT ASSETS 15,202 16,008
Property, equipment and leasehold improvements, net 2,131 2,136
Goodwill and intangible assets, net 13,374 13,569
Other assets 278 257
------- -------
TOTAL ASSETS $30,985 $31,970
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts outstanding under revolving credit agreement $ 1,179 $ 2,891
Accounts payable 2,208 2,376
Accrued expenses 2,757 3,084
Income taxes payable 383 238
Advances and notes payable to related parties -- 6
-------- --------
TOTAL CURRENT LIABILITIES 6,527 8,595
Advances and notes payable to related parties 203 212
Preferred dividends payable 628 178
Other liabilities 365 433
Minority interest 1,287 1,130
-------- --------
TOTAL LIABILITIES 9,010 10,548
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 1,000,000 shares
authorized; 200,000 shares issued and outstanding
at March 31, 1998 and December 31, 1997,
(Liquidation preference of $100 per share
plus accrued dividends - $20,628)
-- --
Common stock - $.001 par value; 50,000,000 shares
authorized; 2,240,894 and 2,118,226 shares issued
and outstanding at March 31, 1998 and
December 31, 1997, respectively 2 2
Additional paid-in-capital 24,113 23,468
Accumulated deficit (1,683) (1,690)
Accumulated other comprehensive loss (457) (358)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 21,975 21,422
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,985 $ 31,970
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 11,432 $ 11,508
Cost of goods sold 6,087 6,188
----------- -----------
Gross profit 5,345 5,320
Operating expenses:
Research and development 626 686
Selling, general and administrative 3,655 3,618
Amortization of goodwill and intangible assets 112 109
----------- -----------
Income from operations 952 907
Other (income) expenses:
Interest expense, net 42 116
Interest expense to related parties -- 17
Minority interest of consolidated subsidiaries 157 139
Other income (41) (26)
----------- -----------
Income before provision for income taxes 794 661
Provision for income taxes 337 336
----------- -----------
Net income $ 457 $ 325
Preferred dividends 450 --
----------- -----------
Net income available to common shareholders $ 7 $ 325
=========== ===========
Basic net income per common share $ 0.00 $ 0.06
=========== ===========
Diluted net income per common share $ 0.00 $ 0.06
=========== ===========
Weighted average number of common
shares outstanding - Basic 2,151,023 5,758,850
=========== ===========
Weighted average number of common
shares outstanding - Diluted 3,618,860 5,758,850
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars, Except Share and Per Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------------- -----------------------
Number of Number of
Shares Amount Shares Amount
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 200,000 -- 2,118,226 $ 2
Acquisition costs of Common Stock held by Geotek -- -- -- --
Sale of Common Stock and Warrants -- -- 122,668 --
Translation adjustments -- -- -- --
Preferred dividends -- -- -- --
Net income -- -- -- --
------- ----- --------- ------
Balance at March 31, 1998 200,000 -- 2,240,894 $ 2
======= ===== ========= ======
<CAPTION>
Accumulated
Additional Other
Paid-In Accumulated Comprehensive
Capital Deficit Loss Total
---------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $23,468 $(1,690) $(358) $21,422
Acquisition costs of Common Stock held by Geotek (30) -- -- (30)
Sale of Common Stock and Warrants 675 -- -- 675
Translation adjustments -- -- (99) (99)
Preferred dividends -- (450) -- (450)
Net income -- 457 -- 457
------- ------- ----- -------
Balance at March 31, 1998 $24,113 $(1,683) $(457) $21,975
======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 457 $ 325
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 339 237
Amortization of goodwill and intangible assets 119 109
Provisions for doubtful accounts and
inventory obsolescence 13 (34)
Utilization of pre-acquisition NOL charged to goodwill 76 28
Minority Interest 157 139
Change in operating assets and liabilities
Accounts receivable 963 128
Inventories (102) (443)
Prepaid expenses and other assets (44) 63
Payables and accrued expenses (356) (349)
Other (69) (34)
------- -----
Net cash provided by operating activities 1,553 169
------- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment and leasehold improvements (335) (353)
------- -----
Net cash used in investing activities (335) (353)
------- -----
CASH FLOW FROM FINANCING ACTIVITIES
Acquisition costs of common stock held by Geotek (30) --
Proceeds from sale of common stock and warrants 675 --
Amounts paid under revolving credit agreements (1,712) (159)
Advances and notes payable - related parties (12) 18
------- -----
Net cash used in financing activities (1,079) (141)
------- -----
Effects of Foreign Exchange Rate on Cash (99) (27)
------- -----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 40 (352)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 964 885
------- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,004 $ 533
======= =====
NON CASH FINANCING ACTIVITIES
Preferred stock dividends accrued 450 --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
1. Basis of Presentation
The consolidated balance sheet of Bogen Communications International, Inc.
and its subsidiaries (the "Company") as of December 31, 1997 has been
derived from the audited consolidated balance sheet contained in the
Company's Annual Report on Form 10-K and is presented for comparative
purposes. The consolidated balance sheet as of March 31, 1998, the
consolidated statements of operations and cash flows for the three months
ended March 31, 1998 and 1997 and the consolidated statement of changes in
stockholders' equity for the three months ended March 31, 1998 have been
prepared by the Company without audit. 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
substantially omitted in accordance with the published rules and
regulations of the Securities and Exchange Commission. These consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the most recent fiscal year.
2. Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of the Company's 99% owned subsidiary, Bogen Corporation ("Bogen"), and
Bogen's wholly-owned subsidiary, Bogen Communications, Inc. ("BCI"), BCI's
wholly-owned subsidiary, New England Audio Resource Corp. ("NEAR"), as well
as Speech Design GmbH, a 67% owned subsidiary ("Speech Design"), its 67%
owned subsidiary Satelco AG ("Satelco"), and its wholly-owned subsidiaries,
Speech Design (Israel), Ltd. and Speech Design (UK), Ltd. All significant
intercompany balances and transactions have been eliminated in
consolidation.
The ownership interest of minority owners in the equity and earnings of the
Company's less than 100 percent-owned consolidated subsidiaries is recorded
as minority interest.
3. Acquisition
On July 1, 1997, the Company, through its 99% owned subsidiary Bogen,
acquired substantially all of the net assets of NEAR, a leading
manufacturer of high performance, weather-proof speakers. The total
purchase price, including direct costs incurred as result of the
acquisition, amounted to $242 in cash and assumption of certain
liabilities. Excess of the purchase price over the estimated fair values of
the net assets acquired was $236 and has been recorded as goodwill, which
is being amortized over 20 years.
The acquisition has been accounted for by the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
assets acquired based on estimates of fair values at the date of
acquisition. The operating results of this acquisition is included in the
Company's consolidated statements of operations from the date of
acquisition.
8
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
4. Inventories
Inventory, at lower of cost (first in, first out) or market, as of March
31, 1998 and December 31, 1997, is as follows:
1998 1997
------ ------
Raw materials and supplies $2,231 $1,874
Work in progress 698 742
Finished goods 5,426 5,669
------ ------
Total $ 8,355 $8,285
======= ======
The inventory balances are net of a reserve for inventory valuation and
obsolescence of $559 and $529 at March 31, 1998 and December 31, 1997,
respectively.
5. Income Per Common Share
Income per common share ("EPS") has been computed based upon Financial
Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"). Basic EPS
is calculated by dividing net income available to common shareholders by
the weighted-average number of common shares outstanding for the periods
presented. Diluted EPS gives effect to all dilutive potential common shares
that were outstanding during the period. As a result of applying the
if-converted method, the potential common shares attributable to the
preferred stock during the first quarter of 1998 and potential common
shares attributable to the outstanding options and warrants during the
first quarter of 1997 were not included in the calculation of the dilutive
net income per common share since their inclusion would be anti-dilutive.
Restated basic and diluted net income per common share for the first
quarter of 1997, therefore, are essentially the same. At March 31, 1998,
the Company had outstanding convertible preferred stock, options and
warrants which could potentially dilute basic earnings per share in the
future.
The following presents a reconciliation of the numerator and denominator
used in computing Basic and Diluted net income per share for the first
quarter of 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
-------------------------------------------
Income Shares Per share
(numerator) (denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic net income per share - net income and weighted average
common shares outstanding $ 7 2,151,023 $0.00
Effect of dilutive securities - stock options and warrants -- 1,467,837
--- --------- -----
Diluted net income per share - net income, weighted average common
shares outstanding and effect of stock options and warrants $ 3,618,860 $0.00
=== ========= =====
</TABLE>
9
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
5. Income Per Common Share (continued)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
-------------------------------------------
Income Shares Per share
(numerator) (denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic net income per share - net income and weighted average
common shares outstanding $325 5,758,850 $0.06
Effect of dilutive securities - stock options and warrants -- --
---- --------- -----
Diluted net income per share - net income, weighted average common
shares outstanding and effect of stock options and warrants $325 5,758,850 $0.06
==== ========= =====
</TABLE>
6. Revolving Credit Agreements
In the first quarter of 1997, Bogen Communications, Inc. ("BCI"), a
wholly-owned subsidiary of Bogen, entered into a revolving credit facility
(the "Facility") with a bank, which was scheduled to mature on February 5,
1999. The Facility provided, subject to certain terms and conditions, for
borrowings up to a maximum of $7,000 with a $700 sub-limit for letters of
credit, unreimbursed time drafts and/or bankers acceptances, and were
limited to specified levels of eligible accounts receivable and inventory.
Borrowings under the Facility were available for working capital and
general corporate purposes and accrued interest at the bank's prime rate
plus .50% (9.00% at March 31, 1998 and December 31, 1997). Obligations
under the Facility were collateralized by all of the accounts receivable,
inventory, property and equipment, and general intangibles of BCI and was
guaranteed by the Company. The Facility contained certain covenants, which
limited the ability of BCI to declare or pay dividends, return capital to
its stockholders or redeem or repurchase any of its outstanding capital
stock. Net assets of BCI restricted under the Facility were $8,914 and
$9,710 at March 31, 1998 and December 31, 1997, respectively.
On April 21, 1998, the Company entered into a $27 million credit facility
(the "New Facility") with KeyBank N.A., which matures on April 30, 2000.
The New Facility replaces the previous borrowing Facility. The New Facility
provides, subject to certain criteria, a $20 million revolving line for
acquisition financing and a $7 million working capital line with a $1
million sub-limit for letters of credit, unreimbursed time drafts and/or
bankers acceptances. The working capital line is limited to specified
levels of eligible accounts receivable and inventory. The New Facility
bears interest at either the bank's prime rate or, at the Company's option,
Libor plus 125 to 200 basis points, based on certain financial conditions.
10
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
7. 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 the first quarter of fiscal 1998 and 1997 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 covering substantially all of its net
deferred tax assets as of March 31, 1998 and December 31, 1997. 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.
8. Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components. SFAS 130 requires the unrealized
losses on the Company's foreign currency translation adjustments, which
prior to adoption were reported separately in stockholders' equity, to be
included in other comprehensive income.
The following presents a reconciliation of the net income to comprehensive
income for the first quarter of 1998 and 1997:
Three Months Ended
-----------------------
March 31, March 31,
1998 1997
--------- ---------
Net income $457 $325
Other comprehensive loss
Foreign currency translation adjustment (99) (193)
---- ----
Other comprehensive loss, net of tax (99) (193)
---- ----
Comprehensive income $358 $132
==== ====
9. Subsequent Event
On May 7, 1998, the Company entered into a letter of intent to purchase the
entire outstanding minority ownership interest in Speech Design. The
purchase price will be approximately $8,000 consisting of approximately
$4,400 in cash and $3,600 of the Company's common stock. The shares of
common stock to be issued in connection with the transaction will be
unregistered and restricted for a certain period of time. The operating
results of the remaining minority interest will be included in the
Company's consolidated statements of operations from the date of
acquisition.
On May 19, 1998, the Company received notices from its Preferred
Shareholders that they are exercising their option to convert their shares
of Preferred Stock into shares of Common Stock effective July 1, 1998. In
addition, any dividends payable in-kind through the date of conversion will
be paid directly in the form of shares of Common Stock. The Board of
Directors has determined to exercise the Company's option to pay the
dividends accruing on the Preferred Stock through June 30, 1998 in-kind in
lieu of cash. It is therefore anticipated that holders of Preferred Stock
will receive 3,921,562 shares of Common Stock as of July 1, 1998.
11
<PAGE>
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)
The following discussion addresses the financial condition of the Company as of
March 31, 1998 and the results of its operations for the three month period
ended March 31, 1998, compared to the same period last year. The discussion
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations for the fiscal year ended December
31, 1997 included in the Company's 1997 Annual Report on Form 10-K.
Results of Operations
Three Months Ended March 31, 1998, Compared to the Three Months Ended March
31, 1997
Net Sales
Net sales decreased by $76, or 0.7% to $11,432, for the three months ended March
31, 1998, as compared to $11,508 for the same period in 1997. The decrease in
sales primarily resulted from decreased sales of $719 in the Company's Telco
product lines. This decrease was offset by increases in the Commercial Sound and
Engineered Systems product lines of $389 and $254, respectively.
Net sales from the Commercial Sound products increased to $2,443 for the three
months ended March 31, 1998, or 18.9% over net sales of $2,055 for the same
period in 1997. Net sales from the Engineered Systems products increased to
$1,423 for the three months ended March 31, 1998, or 21.7% over net sales of
$1,169 for the same period in 1997. Net sales from the Telco product decreased
to $7,566 for the three months ended March 31, 1998, or 8.7% from net sales of
$8,284 for the same period in 1997. The Telco product line includes foreign
sales from Speech Design. Domestic sales decreased to $2,810 for the three
months ended March 31, 1998, or 26.0% from net sales of $3,799 for the three
months ended March 31, 1997. Foreign sales translated into U.S. dollars
increased to $4,756 for the three months ended March 31, 1998, or 6.0% over net
sales of $4,485 for the same period in 1997. However, foreign net sales stated
in local currency increased to 8,683 Deutche Marks ("DM") for the three months
ended March 31, 1998, or 24.7% over net sales of 6,966 DM for the three months
ended March 31, 1997.
Gross Profit
Gross profit as a percentage of total net sales increased by 0.6% to 46.8% for
the three months ended March 31, 1998, compared to 46.2% for the same period in
1997. The increase in gross profit is attributable to cost reduction measures
primarily through the renegotiation of certain purchase agreements which were
implemented subsequent to March 31, 1997.
12
<PAGE>
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $37, or 1.0%
for the three months ended March 31, 1998, as compared to the three months ended
March 31, 1997. SG&A was $3,655, or 32.0% of net sales for the three months
ended March 31, 1998, as compared to $3,618, or 31.4% of net sales for same
period in 1997. The increase is primarily attributable to expenses incurred as
part of the Company's plans to implement a new marketing focus and to grow
through acquisitions and joint ventures.
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
$626, or 5.5% of net sales for the three months ended March 31, 1998, as
compared to $686, or 6.0% of net sales for the three months ended March 31,
1997. The decrease is primarily attributable to refocusing R&D on specific
projects during the latter part of 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.
Interest Expense
Interest expense was $42, or 0.4% of net sales for the three months ended March
31, 1998, as compared to $133, or 1.2% of net sales for the three months ended
March 31, 1997. The decrease of $91, or 68.4%, primarily relates to reductions
in amounts outstanding under revolving lines of credit, as well as the final
repayment of a $500 note to Geotek on July 3, 1997, which accrued interest at a
rate of 11% per annum.
Income Taxes
Income tax expense increased for the three months ended March 31, 1998 to $337,
as compared to $336 for the comparable period in 1997. The increase of $1 is due
to increased profit, which were offset by a 4% decrease in the effective foreign
tax rate relating to Speech Design.
Liquidity and Capital Resources
During the three months ended March 31, 1998, 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 generated $1,553 of cash. The Company's net
income of $457 includes net non-cash charges of $704, which principally
consisted of (i) depreciation and amortization of $458, (ii) an increase in
inventory reserves of $13 (iii) minority interest of consolidated subsidiaries
of $157, and (iv) utilization of acquired tax benefits credited to goodwill of
$76. Further, net changes in operational assets and liabilities provided $392 in
cash. Additionally, accounts receivable decreased by $963, inventory increased
by $102, prepaid expenses and other assets increased by $44, accounts payable
and accrued expenses decreased by $356 and net changes in other operating assets
and liabilities used $69 in cash.
Net cash used in investing activities amounted to $335 and was used solely for
the purchase of equipment and other fixed assets.
Net cash used in financing activities amounted to $1,079. The Company paid down
$1,724 of revolving credit agreement debt and related party debt. The Company
received $645 from the sales of certain equities (net of $30 of acquisition
expenses).
As of March 31, 1998, the Company's total liabilities were $9,010, of which
$6,527 is due and payable within one year.
In the first quarter of 1997, BCI obtained, from a bank, a $7,000,000 revolving
credit line for a period of two years. This line was collateralized by the
accounts receivable, inventory, property and equipment and general intangibles
of BCI and was guaranteed by the Company. As of March 31, 1998, Bogen had
short-term domestic borrowings
13
<PAGE>
outstanding under the line of credit of $531. The amount available under the
credit line based on eligible accounts receivable and inventory was
approximately $3,761 at March 31, 1998.
In April 1998, the Company obtained, from a bank, a $27,000 revolving credit
facility, which matures on April 30, 2000. The new facility replaces the
previous borrowing facility. This facility includes a $20,000 revolving credit
line for acquisition financing and a $7,000 revolving credit line for working
capital requirements. The interest rate under the new revolving line is at the
bank's prime rate, or at Bogen's option, LIBOR plus 125 to 200 basis points,
based on certain financial criteria.
Speech Design, has credit lines and overdraft facilities of approximately 6
million DM, or $3.2 million. At March 31, 1998 borrowings and availability under
these lines amounted to 1.2 million DM, or $648 and 4.8 million DM, or $2,552,
respectively. These lines are collateralized by all of Speech Design's accounts
receivable and inventory.
The Company believes that it has adequate liquidity to finance its normal
business activities and capital expenditures for the near term.
Recently Issued Accounting Pronouncements
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 will
comply with the disclosure requirements of the statement in its 1998 Annual
Report on Form 10-K.
Year 2000
The Company has engaged consultants to evaluate the effect of modifying computer
software systems to accommodate year 2000 transactions. The Company expects to
expend up to $1,000,000, which may be necessary for systems upgrade projects
that will, among other things, address concerns about the Year 2000. The Company
plans to complete such modification and conversions prior to June 30, 1999.
14
<PAGE>
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.
15
<PAGE>
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.(5)
4.6 Certificate of Designation, Preferences and Rights of
Convertible Preferred Stock of Bogen Communications
International, Inc.(7)
4.7 Certificate of Correction to the Certificate of
Designation, Preferences and Rights of Convertible
Preferred Stock of Bogen Communications International,
Inc.(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 Option Agreement, dated August 21, 1995, among Geotek
Communications, Inc., European Gateway Acquisition Corp.,
Mr. Kasimir Arciszewski and Mr. Hans Meiler.(9)
10.7 Summary of Agreement for Business Credit between Speech
Design GmbH and Statelparkasse Munchen.(6)
10.8 Secured Revolving Promissory Note dated February 6, 1997
between Summit Bank and Bogen Communications, Inc.(6)
10.9 Loan and Security Agreement dated February 6, 1997 between
Summit Bank and Bogen Communications, Inc.(6)
10.10 Corporate Guaranty of Bogen Communications International,
Inc.(6)
10.11 Corporate Guaranty of Bogen Corporation.(6)
10.12 Asset Purchase Agreement, dated as of July 1, 1997, between
Bogen Communications International, Inc. Bog-Comm
Acquisition Corporation, New England Audio Resource, Inc.,
Mr. William Kieltyka and Mr. Lee Lareau.(9)
16
<PAGE>
10.13 First Amendment to the Loan and Security Agreement, dated
July 1, 1997, between Summit Bank and Bogen Communications,
International, Inc.(9)
10.14 Stock Purchase Agreement, dated November 26, 1997, between
the Company and Geotek.(7)
10.15 Convertible Preferred Stock Purchase Agreement, dated
November 26, 1997, between the Company and the
Investors.(7)
10.16 Employment Agreement, dated November 26, 1997, between the
Company and Mr. Jonathan Guss.(7)
10.17 Employment Agreement, dated November 26, 1997, between the
Company and Mr. Michael Fleischer.(7)
10.18 Option Agreement, dated November 26, 1997, between the
Company and Mr. Jonathan Guss.(7)
10.19 Option Agreement, dated November 26, 1997, between the
Company and Mr. Michael Fleischer.(7)
10.20 Common Stock and Warrant Purchase Agreement, dated November
26, 1997 between the Company and D&S Capital, LLC.(7)
10.21 Warrant, dated November 26, 1997, issued by the Company to
D&S Capital, LLC.(7)
10.22 Mergers and Acquisition Engagement Agreement, dated August,
1997, as amended as of November 28, 1997 between Helix
Capital Services, LLC and Bogen Communications
International, Inc.(8)
10.23 Warrant Purchase Agreement, dated as of November 28, 1997,
between Helix Capital II, LLC and Bogen Communications
International, Inc.(8)
10.24 Warrant, dated November 28, 1997, issues by Bogen
Communications International, Inc. to Helix Capital II,
LLC.(8)
*27.1 Financial Data Schedule
- ------------
*Filed Herewith
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 Registration
Statement on Form S-8 (File No. 333-21245), dated February 4, 1997.
6. Incorporated by reference to the Exhibits to the Company's Annual report on
Form 10-K for the year ended December 31, 1996.
7. Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K, dated November 25, 1997.
8. Incorporated by reference and the Exhibits to the Company's Current report
on Form 8-K, dated December 12, 1997.
9. Incorporated by reference to the Exhibits to the Company's Annual report on
Form 10-K for the year ended December 31, 1997.
17
<PAGE>
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: May 19, 1998 By: /s/ Michael P. Fleischer
------------------------------------
Name: Michael P. Fleischer
Title: President
Date: May 19, 1998 By: /s/ Yoav M. Cohen
------------------------------------
Name: Yoav M. Cohen
Title: Chief Financial Officer
18
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