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 June 30, 2000
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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
----------------------------------------------------
(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 August 2, 2000, 10,038,684 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 June 30, 2000
and December 31, 1999 3
Consolidated Statements of Operations for the three and six months
ended June 30, 2000 and 1999 4
Consolidated Statement of Changes in Stockholders' Equity
for the six months ended June 30, 2000 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Market Risk Discussion 15
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 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8K 16
2
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,486 $ 792
Accounts receivable (less allowance for doubtful amounts of $818
and $650 at June 30, 2000, and December 31, 1999, respectively) 9,966 8,455
Inventories, net 12,844 9,310
Prepaid expenses and other current assets 834 658
Deferred income taxes
934 882
-------- --------
TOTAL CURRENT ASSETS 35,064 20,097
Equipment and leasehold improvements, net 4,332 3,837
Goodwill and intangible assets, net 19,216 19,730
Other assets 390 214
-------- --------
TOTAL ASSETS $ 59,002 $ 43,878
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts outstanding under revolving credit agreements $ 1,176 $ 2,339
Current maturities of capital lease obligations 266 224
Accounts payable 2,773 4,199
Accrued expenses 3,275 3,167
Income taxes payable 375 1,431
-------- --------
TOTAL CURRENT LIABILITIES 7,865 11,360
Advances and notes payable to related parties 189 194
Deferred income taxes 1,024 1,024
Capital lease obligations 399 505
-------- --------
TOTAL LIABILITIES 9,477 13,083
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 1,000,000 shares authorized;
none issued and Outstanding at June 30, 2000 or
December 31, 1999 - -
Common stock - $.001 par value; 50,000,000 shares authorized;
10,038,684 and 6,784,121 shares issued and outstanding at
June 30, 2000, and December 31, 1999, respectively 10 7
Additional paid-in-capital 47,907 30,093
Retained earnings 2,426 1,252
Accumulated other comprehensive loss (786) (557)
Treasury stock at cost - 3,572 shares at June 30, 2000 (32) -
-------- --------
TOTAL STOCKHOLDERS' EQUITY 49,525 30,795
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 59,002 $ 43,878
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<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 Six Months Ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 17,222 $ 13,761 $ 33,541 $ 26,283
Cost of goods sold 8,516 6,664 16,623 12,773
---------- ---------- ---------- ----------
Gross profit 8,706 7,097 16,918 13,510
Operating expenses:
Research and development 900 1,067 1,766 1,987
Selling, general and administrative 5,979 4,220 12,428 8,670
Amortization of goodwill and intangible
assets 237 166 479 353
---------- ---------- ---------- ----------
Income from operations 1,590 1,644 2,245 2,500
Other (income) expenses, net:
Interest (income) expense, net (125) 22 (76) 85
Other (income) expense, net 21 (8) 21 3
---------- ---------- ---------- ----------
Income before provision for income taxes 1,694 1,630 2,300 2,412
Provision for income taxes 822 495 1,126 806
---------- ---------- ---------- ----------
Net income $ 872 $ 1,135 $ 1,174 $ 1,606
========== ========== ========== ==========
Basic net income per common share $ 0.09 $ 0.17 $ 0.14 $ 0.24
========== ========== ========== ==========
Diluted net income per common share $ 0.09 $ 0.14 $ 0.13 $ 0.20
========== ========== ========== ==========
Weighted average number of common
shares outstanding - Basic 9,455,436 6,772,854 8,273,418 6,681,145
========== ========== ========== ==========
Weighted average number of common
shares outstanding - Diluted 9,885,679 8,134,104 9,241,281 7,910,215
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands Of Dollars, Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Treasury Stock
Common Stock Accumulated ----------------
--------------------- Additional Other Number
Number of Paid-In Retained Comprehensive of
Shares Amount Capital Earnings Loss Shares Amount Total
---------- ------ ----------- -------- ------------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 6,784,121 $ 7 $ 30,093 $ 1,252 $ (557) - $ - $ 30,795
Proceeds from sales of
Options and Warrants 3,258,135 3 17,814 - - - - 17,817
Treasury Stock - - - - - 3,572 (32) (32)
Comprehensive income:
Net income - - - 1,174 - - - -
Translation adjustments - - - - (229) - - -
Total comprehensive income - - - - - - - 945
---------- ---- -------- ------- ------ ----- ----- --------
Balance at June 30, 2000 10,042,256 $ 10 $ 47,907 $ 2,426 $ (786) 3,572 $ (32) $ 49,525
========== ==== ======== ======= ====== ===== ===== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars, Except Share And Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
June 30, June 30,
2000 1999
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,174 $ 1,606
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 821 529
Amortization of goodwill and intangible assets 479 353
Provisions for doubtful accounts and inventory obsolescence 287 (187)
Utilization of pre-acquisition NOL charged to goodwill - 34
Deferred income taxes (54) 105
Changes in operating assets and liabilities (net of effects from
acquisitions):
Accounts receivable (1,812) (1,055)
Inventories (3,829) (685)
Prepaid expenses and other current assets (130) (95)
Accounts payable and other current assets (2,118) (1,338)
Other (162) 125
-------- -------
Net cash used in operating activities (5,344) (608)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (1,351) (599)
Acquisition of intangibles (274) -
-------- -------
Net cash used in investing activities (1,625) (599)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock and warrants 17,817 234
Principal payments under capital lease obligations (111) -
(Decrease) increase in borrowings under revolving credit agreements (1,112) 144
-------- -------
Net cash provided by financing activities 16,594 378
-------- -------
Effects of foreign exchange rate on cash 69 (137)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,694 (966)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 792 1,048
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,486 $ 82
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 101 $ 75
Cash paid for income taxes 2,119 930
NON-CASH FINANCING ACTIVITIES:
Capital lease obligations related to new office equipment 56 -
</TABLE>
See accompanying notes to consolidated financial statements
6
<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, 1999 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 June 30, 2000, the
consolidated statements of operations for the three and six months ended
June 30, 2000 and 1999, and the consolidated statements of cash flows and
the consolidated statement of changes in stockholders' equity for the six
months ended June 30, 2000, are unaudited. 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. Certain prior year balances have
been reclassified to conform to the current year's presentation. 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 ("SEC"). 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 year ended December 31, 1999.
2. Principles of Consolidation
The consolidated financial statements of the Company include the accounts of
the Company's 99.3% owned subsidiary, Bogen Corporation ("Bogen"); Bogen's
wholly-owned subsidiary, Bogen Communications, Inc. ("BCI"); BCI's
wholly-owned subsidiaries: New England Audio Resource Corp. ("NEAR") and
Apogee Sound International, LLC ("Apogee"); the Company's wholly-owned
subsidiary, Speech Design GmbH ("Speech Design"); Speech Design's 67% owned
subsidiary Satelco AG ("Satelco"); and Speech Design's wholly-owned
subsidiaries: Speech Design (Israel), Ltd., Speech Design (UK), Ltd., and
Digitronic Computersysteme GmbH ("Digitronic"). All significant
inter-company 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 are recorded as minority interest.
3. Comprehensive Income
Comprehensive income has been calculated in accordance with the Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income". The Company has determined total comprehensive income to be $909
and $945 for the three and six months ended June 30, 2000, respectively, and
total comprehensive income to be $1,240 and $1,248 for the three and six
months ended June 30, 1999. The Company's total comprehensive income
represents net income plus the change in the cumulative translation
adjustment equity account for the periods presented.
4. Segments
The Company operates in two reportable business segments, Bogen (domestic)
and Speech Design (foreign). The domestic segment is primarily engaged in
commercial and engineered sound equipment and telecommunications
peripherals. The foreign segment focuses on digital voice processing systems
for the mid-sized PBX market and in unified messaging products and services,
targeting the rapidly growing European voice processing and unified
messaging markets.
7
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
The following table presents information about the Company by segment area.
Inter-segment revenues and transfers are not considered material:
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 June 30, 1999
------------------ --------------------------- ---------------------------
Bogen Speech Design Bogen Speech Design
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Revenue from external customers $12,254 $ 4,968 $ 8,398 $ 5,363
Operating profit 1,351 455 1,039 768
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 June 30, 1999
--------------------------- ---------------------------
Bogen Speech Design Bogen Speech Design
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Revenue from external customers $23,608 $ 9,933 $15,853 $10,430
Operating profit 1,733 959 1,619 1,215
</TABLE>
A reconciliation of reportable segment operating profit to the Company's
consolidated totals for the three and six months ended June 30, 2000 and
1999, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- --------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating profit
Total operating profit for reportable segments $ 1,806 $ 1,807 $2,692 $ 2,834
Other corporate expenses (216) (163) (447) (334)
------- ------- ------- -------
Operating profit $ 1,590 $ 1,644 $ 2,245 $ 2,500
======= ======= ======= =======
</TABLE>
5. Inventories
Inventories are stated at the lower of cost or market and are valued using
the first-in, first-out method. As of June 30, 2000 and December 31, 1999,
inventories are as follows:
June 30, December 31,
2000 1999
------- -------
Raw materials and supplies $ 3,943 $ 3,649
Work in progress 781 770
Finished goods 8,120 4,891
------- -------
Total $12,844 $ 9,310
======= =======
8
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
6. Income Per Share
Income per common share ("EPS") has been computed based upon SFAS No. 128,
"Earnings Per Share". 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 is calculated by
dividing net income available to common shareholders by the weighted-average
number of common shares outstanding and all potential common shares,
consisting of outstanding warrants and stock options, for the periods
presented.
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. Income tax
expense for the first six months of fiscal 2000 and 1999 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. pre-acquisition loss carryforwards for which the benefit
reduces goodwill. In accordance with SFAS No. 109, "Accounting for Income
Taxes", the Company has established a valuation allowance covering certain
of its net deferred tax assets as of June 30, 2000 and December 31, 1999.
The valuation allowance was established due to the uncertainty of the
realization of the deferred tax assets. A portion of the deferred tax
assets, which are currently subject to a valuation allowance, may be
allocated to reduce goodwill or other non-current intangible assets when
subsequently recognized.
8. Revolving Credit Agreements
On April 21, 1998, BCI and the Company entered into a $27,000 credit
facility (the "New Facility") with KeyBank N.A., which matures on April 30,
2001. The New Facility replaces a previous facility. The New Facility
provides, subject to certain criteria, a $20,000 revolving line for
acquisition financing and a $7,000 working capital line. 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.
At June 30, 2000, there were no borrowings under either the working capital
line of the New Facility or the acquisition revolving line.
Speech Design has short-term credit lines and overdraft facilities of
approximately 8,000 DM, or $3,900, from three area banks. These lines of
credit are collateralized by all of Speech Design's accounts receivable and
inventory. At June 30, 2000, 2,414 DM (approximately $1,176) was outstanding
under the short-term credit lines.
Speech Design has also secured a 15,000 DM (approximately $7,300) credit
facility for acquisition financing from D.G. Bank of Frankfurt. The interest
rate under the new credit facility is up to 200 basis points above the
German LIBOR rate. There were no borrowings under the acquisition financing
line at June 30, 2000.
9
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
As of June 30, 2000, and December 31, 1999, total outstanding lines of
credit are summarized as follows:
June 30, December 31,
2000 1999
------- -------------
Domestic Lines of Credit Utilized $ 0 $1,150
Foreign Lines of Credit Utilized:
Speech Design 731 627
Digitronic 323 405
Satelco 122 157
------ ------
Total $1,176 $2,339
====== ======
9. Warrant Call
On March 30, 2000, the Company announced that it had determined to call all
outstanding Redeemable Common Stock Purchase Warrants for redemption for
$0.01 per Warrant, effective May 1, 2000. Such redemption is authorized by
the terms of the Warrant Agreement dated as of October 7, 1993, following
any period of twenty trading days on which the Company's Common Stock market
price closes at $10 per share or higher. As a result of the Warrant call,
3,395,385 Warrants were exercised and the remaining 64,615 Warrants were
cancelled.
10. Forward Contracts
The Company enters into forward exchange contracts principally to serve as
economic hedges of the currency risk associated with the purchase of
inventory. Gains or losses related to contracts accounted for as hedges are
deferred until the contracts mature. The Company does not anticipate any
material adverse impact on its results of operations or financial position
from these contracts.
11. Treasury Stock
In conjunction with the final adjustments related to the 1998 acquisition of
the Speech Design GmbH minority interest, during the quarter ended June 30,
2000, 3,572 shares of the Company's common stock previously held in escrow
were returned to the Company and recorded as treasury stock.
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding Bogen Communications International, Inc.
and its subsidiaries, (collectively the "Company"), and its current business
strategy, projected sources and uses of cash, and 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, including, but not limited to, the
introduction and development of the Company's products; changes in labor,
equipment and capital costs; changes in access to suppliers and sub-contractors,
including the recurrence of instability in Asia which may adversely affect the
Company's suppliers and subcontractors; currency fluctuations; changes in United
States and foreign 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; employee turnover; issues relating to the Company's internal systems;
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 are made pursuant to the Private Litigation Reform Act of 1995 and, as
such, speak only as of the date made.
10
<PAGE>
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
June 30, 2000, and the results of its operations for the three and six-month
periods ended June 30, 2000, compared to the same periods 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, 1999, included in the Company's 1999 Annual Report on Form
10-K for the year ended December 31, 1999.
Results of Operations
Three Months Ended June 30, 2000, Compared to the Three Months
Ended June 30, 1999
Net Sales
Net sales increased by $3,461 or 25.2% to $17,222 for the three months ended
June 30, 2000, as compared to $13,761 for the same period in 1999. The increase
came from organic growth in the Company's domestic product lines of
approximately 63% and the inclusion of Apogee, which was acquired in the third
quarter of 1999. Apogee had revenues of $1,660 in the second quarter of 2000. In
U.S. dollars, Speech Design revenues decreased approximately 7%.
Net sales from the Commercial Audio product line, including the Apogee product
line, increased to $4,156 for the three months ended June 30, 2000, or 34.2%
over net sales of $3,098 for the same period in 1999. Excluding Apogee, sales
from the Commercial Audio product line decreased $602 when compared to the same
period in 1999. Net sales from the Engineered Systems product line increased to
$3,590 for the three months ended June 30, 2000, or 48.3% over net sales of
$2,420 for the same period in 1999. Net sales from the Telco product line
increased to $9,476 for the three months ended June 30, 2000, or 15.0% from net
sales of $8,243 for the same period in 1999. The Telco product line includes
foreign sales from Speech Design. Domestic sales increased to $4,508 for the
three months ended June 30, 2000, or 56.5 % from net sales of $2,880 for the
three months ended June 30, 1999. Foreign sales translated into U.S. dollars
decreased to $4,968 for the three months ended June 30, 2000, or 7.4% below net
sales of $5,363 for the same period in 1999. However, foreign net sales stated
in local currency increased to 10,408 Deutsche Marks ("DM") for the three months
ended June 30, 2000, or 4.9% over net sales of 9,926 DM for the three months
ended June 30, 1999.
Gross Profit
Gross profit increased to $8,706, or 50.6% as a percentage of total net sales,
for the three months ended June 30, 2000, compared to $7,097, or 51.6% for the
same period in 1999. Excluding the Apogee product line, gross profit as a
percentage of sales rose to 52.8%. Additionally, a greater proportion of sales
was generated by the domestic business segment, which generates lower gross
profit margins than the foreign business segment, compared to the same period
last year.
Bogen's gross profit increased to $5,743, or 46.9% of sales, in the second
quarter of 2000 from $3,927, or 46.8% of sales, in the second quarter of 1999.
The improvement is attributable in part to cost reductions achieved throughout
1999 and the better absorption of fixed costs relative to sales volume, offset
by lower margins on the Apogee product line.
Speech Design's gross profit as a percent of sales increased 59.6% in the second
quarter of 2000 from 59.1% for the same period in 1999. The increase is
partially attributable to better margins on Speech Design's Teleserver Pro TM
and Thor TM product lines. Speech Design's gross profit in local currency
increased 341 DM, or 5.8%.
11
<PAGE>
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $1,759 or
41.7%, for the three months ended June 30, 2000, compared to the same period in
1999. SG&A was $5,979, or 34.7% of net sales, in 2000, as compared to $4,220, or
30.7% of net sales in 1999. SG&A expenses include $573 of costs due to the
inclusion of Apogee. Approximately $400 represents sales and support costs
incurred as a result of the original equipment manufacturers (OEM) agreement
with Lucent Technologies which was established late in 1999. The remainder of
the increase represents the establishment of a sales force at Speech Design to
address the PABX after-market, increased depreciation and maintenance related to
the 1999 installation of an Enterprise Resource Planning (ERP) system in the
United States, and the increased expense necessary to support the higher sales
levels, in particular sales and administrative compensation and its related
costs.
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
$900, or 5.2% of net sales for the three months ended June 30, 2000, as compared
to $1,067 or 7.8% of net sales for the three months ended June 30, 1999.
Interest Expense, Net
Interest income was $125 for the three months ended June 30, 2000, as compared
to interest expense of $22 for the three months ended June 30, 1999. The
increase in interest income primarily reflects the Company's investment of the
net cash proceeds from the warrants exercised in the first half of 2000.
Income Taxes
Income tax expense increased by $372 for the three months ended June 30, 2000,
to $822, as compared to $494 for the comparable period in 1999. The increase is
primarily the result of the reduction of a portion of the U.S. operation's
valuation allowance in 1999, which did not recur in 2000.
Goodwill and Intangible Asset Amortization
On August 26, 1999, Bogen Communications, Inc., through ASI Acquisitions, LLC, a
newly formed Bogen subsidiary, acquired substantially all of the assets of
Apogee Sound, Inc., a privately-owned company headquartered in Petaluma,
California. Consideration for the acquisition was the assumption or payment of
approximately $2.6 million of Apogee Sound Inc.'s liabilities. The acquisition
has been accounted for by the purchase method of accounting and accordingly, the
purchase price has been allocated to the assets acquired and liabilities assumed
based on estimate of fair market values at the date of acquisition. In
connection with the acquisition, the Company has recorded a non-cash investment
in goodwill of approximately $1,820. The increase in amortization of goodwill
and intangible assets for the three months ended June 30, 2000, from the same
period in 1999 is primarily attributable to the Apogee acquisition.
Six Months Ended June 30, 2000, Compared to the Six Months Ended June 30, 1999
Net Sales
Net sales increased by $7,258 or 27.6% to $33,541 for the six months ended June
30, 2000, as compared to $26,283 for the same period in 1999. The increase came
from organic growth in the Company's domestic product lines of approximately 58%
and the inclusion of Apogee, which was acquired in the third quarter of 1999.
Apogee had revenues of $3,565 in the first half of 2000. In U.S. dollars, Speech
Design revenues decreased approximately 5%.
12
<PAGE>
Net sales from the Commercial Audio product line, including the Apogee product
line, increased to $8,374 for the six months ended June 30, 2000, or 35.6% over
net sales of $6,174 for the same period in 1999. Excluding Apogee, sales from
the Commercial Audio product line decreased $1,365 when compared to the same
period in 1999. Net sales from the Engineered Systems product line increased to
$6,297 for the six months ended June 30, 2000, or 49.3% over net sales of $4,217
for the same period in 1999. Net sales from the Telco product line increased to
$18,869 for the six months ended June 30, 2000, or 18.7% from net sales of
$15,892 for the same period in 1999. The Telco product line includes foreign
sales from Speech Design. Domestic sales increased to $8,936 for the six months
ended June 30, 2000, or 63.6% from net sales of $5,462 for the six months ended
June 30, 1999. Foreign sales translated into U.S. dollars decreased to $9,933
for the six months ended June 30, 2000, or 4.8% below net sales of $10,430 for
the same period in 1999. However, foreign net sales stated in local currency
increased to 20,269 Deutsche Marks ("DM") for the six months ended June 30,
2000, or 6.4% over net sales of 19,057 DM for the six months ended June 30,
1999.
Gross Profit
Gross profit, increased to $16,918, or 50.4% as a percentage of total net sales,
for the six months ended June 30, 2000, compared to $13,510, or 51.4% for the
same period in 1999. Excluding the Apogee product line, gross profit as a
percentage of sales rose to 52.6%. Additionally, a greater proportion of sales
was generated by the domestic business segment, which generates lower gross
profit margins than the foreign business segment, compared to the same period
last year.
Bogen's gross profit increased to $10,866 or 4.6% of sales, in the first half of
2000 from $7,344, or 46.3% of sales, in the first six months of 1999. The
improvement is attributable in part to cost reductions achieved throughout 1999
and the better absorption of fixed costs relative to sales volume, offset by
lower margins on the Apogee product line.
Speech Design's gross profit increased to 60.9% of sales in the first half of
2000, up from 59.1% of sales in the first half of 1999. The increase is
partially attributable to better margins on Speech Design's Teleserver Pro TM
and Thor TM product lines. Speech Design's gross profit in local currency
increased 1,077 DM, or 10%.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $3,758, or
43.3%, for the six months ended June 30, 2000, from the six months ended June
30, 1999. SG&A was $12,428 or 37.1% of net sales, for the six months ended June
30, 2000, as compared to $8,670 or 33.0% of net sales for same period in 1999.
SG&A expenses include $1,101 of costs due to the inclusion of Apogee in 1999.
Approximately $830 represents the increase of sales and support costs incurred
as a result of the original equipment manufacturers (OEM) agreement with Lucent
Technologies which was established late in 1999. The remainder of the increase
represents the establishment of a sales force at Speech Design to address the
PABX after-market, increased depreciation and maintenance related to the 1999
installation of an Enterprise Resource Planning (ERP) system in the United
States, and the increased expense necessary to support the higher sales levels,
in particular sales and administrative compensation and its related costs.
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
$1,766, or 5.3% of net sales for the three months ended June 30, 2000, as
compared to $1,987 or 7.6% of net sales for the six months ended June 30, 1999.
Interest Expense, Net
Interest income was $76 for the three months ended June 30, 2000, as compared to
interest expense of $85 for the three months ended June 30, 1999. The increase
in interest income primarily reflects the Company's investment of the net cash
proceeds from the warrants exercised in the first half of 2000.
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Income Taxes
Income tax expense increased by $320 for the six months ended June 30, 2000, to
$1,126, as compared to $806 for the comparable period in 1999. The increase is
primarily the result of the reduction of a portion of the U.S. operation's
valuation allowance in 1999, which did not recur in 2000. Additionally, a higher
foreign effective tax rate has contributed to the increase.
Goodwill and Intangible Asset Amortization
The increase in amortization of goodwill and intangible assets for the six
months ended June 30, 2000, from the same period in 1999 is primarily
attributable to the Apogee acquisition.
Liquidity and Capital Resources
During the six months ended June 30, 2000, cash utilization focused on current
working capital requirements, including stocking up for the third quarter, the
pay-down of accounts payable, accrued expenses and tax payments, and the
purchase of equipment.
The Company's operating activities utilized $5,344 of cash. The Company's net
income of $1,174 includes net non-cash charges of $1,533, which were (i)
depreciation and amortization expenses of $1,300 and (ii) an increase of $287
for inventory reserves and allowance for doubtful accounts, offset by (iii)
deferred income tax benefits of $54. Accounts receivable increased $1,812;
inventories increased $3,829, prepaid expenses and other assets increased $130;
accounts payable and accrued expenses decreased $2,118; and net changes in other
operating assets and liabilities were $162.
Net cash used in investing activities amounted to $1,625, including $1,351 for
the purchase of equipment, computer hardware and software, and other fixed
assets and $274 for intangible assets.
Net cash provided by financing activities amounted to $16,594. The company
received $17,817 from the exercise of warrants, which were partly offset by
repayments of $111 on capitalized lease obligations and of $1,112 of existing
lines of credit.
As of June 30, 2000, the Company's total liabilities were $9,477, of which
$7,865 is due and payable within one year.
On April 21, 1998, BCI and the Company entered into a $27,000 credit facility
(the "New Facility") with KeyBank N.A., which matures on April 30, 2001. The New
Facility replaces a previous facility. The New Facility provides, subject to
certain criteria, a $20,000 revolving line for acquisition financing and a
$7,000 working capital line. 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. At June 30, there were no
borrowings under either the working capital line of the New Facility or the
acquisition revolving line.
Speech Design has short-term credit lines and overdraft facilities of
approximately 8,000 DM, or $3,900, from three area banks. These lines of credit
are collateralized by all of Speech Design's accounts receivable and inventory.
At June 30, 2000, 2,414 DM (approximately $1,176) was outstanding under the
short-term credit lines.
Speech Design has also secured a 15,000 DM (approximately $7,300) credit
facility for acquisition financing from D.G. Bank of Frankfurt. The interest
rate under the new credit facility is up to 200 basis points above the German
LIBOR rate. There were no borrowings under the acquisition financing line at
June 30, 2000.
The Company believes that it has adequate liquidity to finance its normal
business activities and capital expenditures for the near term.
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Other Matters
Recently Issued Accounting Standards
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities", was issued to establish standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This statement was amended so that it is
effective for all quarters of fiscal years beginning after June 15, 2000. The
Company does not believe that this statement will have a material impact on the
consolidated financial statements.
ITEM 3. MARKET RISK DISCUSSION
Since the Company operates on a global basis, it is exposed to various foreign
currency risks, primarily from the operations of the Company's German
subsidiary, Speech Design. The Company's consolidated financial statements are
denominated in U.S. dollars, whereas Speech Design and its subsidiaries are
denominated in different foreign currencies, as follows: Speech Design's
currency is the DM, Satelco's currency is the Swiss Franc, Speech Design U.K.'s
currency is the British Pound and Speech Design Israel's currency is the Israeli
Shekel. All Speech Design subsidiaries' financial statements are first
translated into DM, and then, Speech Design's consolidated financial statements
are then translated into the U.S. dollar.
Accordingly, changes in exchange rates between the applicable foreign currency
and the DM, and changes in the exchange rates between the DM and the U.S. dollar
will affect the translation of each foreign subsidiary's financial results into
U.S. dollars for the purposes of reporting the Company's consolidated financial
results.
The above discussion should be read in conjunction with Management's discussion
of market risk as reported on Form 10-K for the year ended December 31, 1999,
filed with the Securities and Exchange Commission on March 30, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material pending or threatened legal proceedings
to which it is a party or of which any of its property is subject.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 19, 2000, the Company held its annual shareholders meeting. At the
meeting, the following matters were approved by the shareholders by the
following votes:
1. Election of Directors:
For Withheld
--------- --------
Jonathan Guss 6,004,975 55,900
Michael P. Fleischer 6,004,975 55,900
Daniel A. Schwartz 6,004,975 55,900
Glenn R. Dubin 6,004,975 55,900
2. Approval of Amended and Restated Stock Incentive Plan:
For Against Abstain
--- ------- -------
5,948,975 11,000 900
3. Ratification of appointment of KPMG LLP as auditors for the fiscal year
ending December 31, 2000:
For Against Abstain
--- -------- -------
5,948,975 11,000 900
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
16
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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. Description
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 Amendment to Unit Purchase Option Granted to GKN Securities Corp.(12)
10.1 Form of Agency Agreement, dated as of June 28, 1993, between the
Company and GKN Securities Corp. (without schedules)(1)
10.2 Form of Indemnification Agreement between the Company and its officers,
directors and advisors.(4)
10.3 Summary of Agreement for Business Credit between Speech Design GmbH and
Statelparkasse Munchen.(6)
10.4 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)
10.5 Stock Purchase Agreement, dated November 26, 1997, between the Company
and Geotek.(7)
10.6 Convertible Preferred Stock Purchase Agreement, dated November 26, 1997,
between the Company and the Investors.(7)
10.7 Employment Agreement, dated November 26, 1997, between the Company and
Mr. Jonathan Guss.(7)
10.8 Employment Agreement, dated November 26, 1997, between the Company and
Mr. Michael Fleischer.(7)
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10.9 Option Agreement, dated November 26, 1997, between the Company and Mr.
Jonathan Guss.(7)
10.10 Option Agreement, dated November 26, 1997, between the Company and Mr.
Michael Fleischer.(7)
10.11 Common Stock and Warrant Purchase Agreement, dated November 26, 1997
between the Company and D&S Capital, LLC.(7)
10.12 Warrant, dated November 26, 1997, issued by the Company to D&S
Capital, LLC.(7)
10.14 Warrant Purchase Agreement, dated as of November 28, 1997, between
Helix Capital II, LLC and Bogen Communications International, Inc.(8)
10.15 Warrant, dated November 28, 1997, issued by Bogen Communications
International, Inc. to Helix Capital II, LLC.(8)
10.16 Share Transfer Agreement, dated May 20, 1998, by and among Bogen
Communications International, Inc., Kasimir Arciszewski and Hans
Meiler.(10)
10.17 Management Agreement, dated May 20, 1998, between Speech Design
GmbH and Kasimir Arciszewski.(10)
10.18 Management Agreement, dated May 20, 1998, between Speech Design
GmbH and Hans Meiler.
10.19 Credit Agreement, dated as of April 21, 1998, among Bogen Communications
International, Inc., Bogen Communications, Inc., various financial
institutions and KeyBank National Association.(10)
10.20 Guaranty of Payment and Performance, dated April 21, 1998, by Bogen
Corporation.(10)
10.21 Guaranty of Payment and Performance, dated April 21, 1998, by New
England Audio Resource Corp.(10)
10.22 Security Agreement, dated April 21, 1998, by Bogen Communications
International, Inc. in favor of KeyBank National Association.(10)
10.23 Security Agreement, dated April 21, 1998, by Bogen Communications, Inc.
in favor of KeyBank National Association.(10)
10.24 Security Agreement, dated April 21, 1998, by Bogen Corporation in favor
of KeyBank National Association.(10)
10.25 Security Agreement, dated April 21, 1998, by New England Audio Resource
Corp. in favor of KeyBank National Association.(10)
10.26 Borrower Pledge Agreement, dated April 21, 1998, by and between Bogen
Communications International, Inc. and KeyBank National
Association.(10)
10.27 Borrower Pledge Agreement, dated April 21, 1998, by and between Bogen
Communications International, Inc. and KeyBank National
Association.(10)
10.28 Guarantor Pledge Agreement, dated April 21, 1998, by and between Bogen
Corporation and KeyBank National Association.(10)
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10.29 Guarantor Pledge Agreement, dated April 21, 1998, by and between Bogen
Communications, Inc. and KeyBank National Association.(10)
10.30 Term Sheet for Acquisition Line, dated September 18, 1998, between
Speech Design GmbH and DG Bank.(11)
10.31 Amended and Restated Mergers and Acquisition Engagement Agreement,
dated as of October 1, 1998, between Helix Capital Services, Inc. and
Bogen Communications International, Inc.(11)
10.32 Mergers and Acquisition Engagement Agreement, dated as of October 1,
1998, between Speech Design GmbH and Helix Capital Services, Inc.(11)
10.33 Amendment to Employment Agreement dated November 26, 1997 between the
Company and Mr. Jonathon Guss.(12)
10.34 Amendment to Employment Agreement dated November 26, 1997 between the
Company and Mr. Michael Fleischer. (12)
*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 to 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.
10. Incorporated by reference to the Exhibits to the Company's Current
Registration Form 8-K, dated May 20, 1998.
11. Incorporated by reference to the Exhibits to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
12. Incorporated by reference to the Exhibits to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
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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: August 10, 2000 By: /s/ Michael P. Fleischer
------------------------------------
Name: Michael P. Fleischer
Title: President
Date: August 10, 2000 By: /s/ Maureen A. Flotard
------------------------------------
Name: Maureen A. Flotard
Title: Acting Chief Financial Officer
(Principal Financial and
Accounting Officer)
20
