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, 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.
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(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
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As of May 11, 2000, 10,042,256 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 3
Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 4
Consolidated Statement of Changes in Stockholders' Equity
for the three months ended March 31, 2000 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Market Risk Discussion 14
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 14
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 8K 15
</TABLE>
2
<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,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,737 $ 792
Accounts receivable (less allowance for doubtful amounts of
$806 and $650 at March 31, 2000, and December 31, 1999,
respectively) 7,421 8,455
Inventories, net 11,059 9,310
Prepaid expenses and other current assets 815 658
Deferred income taxes 908 882
-------- --------
TOTAL CURRENT ASSETS 23,940 20,097
Equipment and leasehold improvements, net 4,615 3,837
Goodwill and intangible assets, net 19,108 19,730
Other assets 284 214
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TOTAL ASSETS $ 47,947 $ 43,878
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts outstanding under revolving credit agreement $ 325 $ 2,339
Current maturities of capital lease obligations 219 224
Accounts payable 3,100 4,199
Accrued expenses 3,444 3,167
Income taxes payable 99 1,431
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TOTAL CURRENT LIABILITIES 7,187 11,360
Advances and notes payable to related parties 186 194
Deferred income taxes 1,024 1,024
Capital lease obligations 441 505
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TOTAL LIABILITIES 8,838 13,083
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STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 1,000,000 shares authorized;
none issued and outstanding at March 31, 2000 or
December 31, 1999 -- --
Common stock - $.001 par value; 50,000,000 shares authorized;
8,289,305 and 6,784,121 shares issued and outstanding at March 31
2000, and December 31, 1999, respectively 8 7
Additional paid-in-capital 38,370 30,093
Retained earnings 1,554 1,252
Accumulated other comprehensive loss (823) (557)
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TOTAL STOCKHOLDERS' EQUITY 39,109 30,795
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,947 $ 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
March 31, March 31,
2000 1999
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<S> <C> <C>
Net sales $ 16,319 $ 12,522
Cost of goods sold 8,107 6,109
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Gross profit 8,212 6,413
Operating expenses:
Research and development 866 920
Selling, general and administrative 6,449 4,450
Amortization of goodwill and intangible assets 242 187
-------- --------
Income from operations 655 856
Other expenses, net:
Interest expense, net 49 63
Other expense, net -- 11
-------- --------
Income before provision for income taxes 606 782
Provision for income taxes 304 311
-------- --------
Net income $ 302 $ 471
======== ========
Basic net income per common share $ 0.04 $ 0.07
======== ========
Diluted net income per common share $ 0.03 $ 0.06
======== ========
Weighted average number of common
shares outstanding-Basic 7,091,399 6,663,671
========= =========
Weighted average number of common
shares outstanding-Diluted 9,050,677 7,761,498
========= =========
</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>
Accumulated
Common Stock Additional Other
Number of Paid-In Retained Comprehensive
Shares Amount Capital Earnings Loss Total
--------- ------ ------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 6,784,121 $ 7 $ 30,093 $ 1,252 $ (557) $ 30,795
Sale of Common Stock and Warrants 1,505,184 1 8,277 - - 8,278
Comprehensive income:
Net income - - - 302 -
Translation adjustments - - - - (266)
Comprehensive income - - - - - 36
--------- ------ -------- ------- ------ --------
Balance at March 31, 2000 8,289,305 $ 8 $ 38,370 $ 1,554 $ (823) $ 39,109
========= ====== ======== ======= ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<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,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 302 $ 471
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 399 251
Amortization of goodwill and intangible assets 242 187
Provisions for doubtful accounts and
inventory obsolescence 158 (51)
Utilization of pre-acquisition NOL charged to goodwill 17 27
Deferred income taxes (26) 104
Change in operating assets and liabilities
(net of effects from acquisitions):
Accounts receivable 772 (356)
Inventories (1,899) (454)
Prepaid expenses and other current assets (111) 61
Accounts payable and accrued expenses (1,920) (1,139)
Other (47) 171
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Net cash used in operating activities (2,113) (728)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (923) (340)
Acquisition of intangibles (199) -
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Net cash used in investing activities (1,122) (340)
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CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock, common stock and warrants 8,278 74
Principal payments under capital lease obligations (60) -
Amounts (paid) borrowed under revolving credit agreements (1,987) 442
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Advances and notes payable - related parties - -
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Net cash provided by financing activities 6,231 516
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Effects of foreign exchange rate on cash (51) (256)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,945 (808)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 792 1,048
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,737 $ 240
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 102 $ 56
Cash paid for income taxes 1,408 590
</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 March 31,
2000, the consolidated statements of operations and cash flows for the
three months ended March 31, 2000 and 1999, and the consolidated
statement of changes in stockholders' equity for the three months ended
March 31, 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. 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% 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 $36 and $8 for the three months ended March 31, 2000 and
1999, respectively. 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>
Bogen Speech Design
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<S> <C> <C>
March 31, 2000:
Revenue from external customers $11,354 $4,965
Operating profit 382 504
</TABLE>
<TABLE>
<CAPTION>
Bogen Speech Design
------- -------------
<S> <C> <C>
March 31, 1999:
Revenue from external customers $7,455 $5,067
Operating profit 580 435
</TABLE>
A reconciliation of reportable segment operating profit to the
Company's consolidated totals for the quarter ended March 31, 2000 and
1999 are as follows:
<TABLE>
<CAPTION> Three months ended
March 31, March 31,
2000 1999
---- ---------
<S> <C> <C>
Operating profit
Total operating profit for reportable segments $886 $1,015
Other corporate expenses (231) (159)
---- -----
Operating profit $655 $ 856
==== =====
</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 March 31, 2000 and December
31, 1999, inventories are as follows:
March 31, December 31,
2000 1999
------- --------
Raw materials and supplies $ 3,397 $ 3,649
Work in progress 950 770
Finished goods 6,712 4,891
------- -------
Total $11,059 $ 9,310
======= =======
6. Income Per Share
Income per common share ("EPS") has been computed based upon FASB 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.
8
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO 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 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 March 31, 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 March 31, 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 faciliities of
approximately 8,000 DM, or $3,933, from three area banks. These lines
of credit are collateralized by all of Speech Design's accounts receivable
and inventory. At March 31, 2000, 661 DM (approximately $325) was
outstanding under the short-term credit lines.
Speech Design has also secured a 15,000 DM (approximately $7,375) 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 March 31, 2000.
As of March 31, 2000, and December 31, 1999, total outstanding lines of
credit are summarized as follows:
March 31, December 31,
2000 1999
--------- -----------
Domestic Lines of Credit Utilized $ -- $1,150
Foreign Lines of Credit Utilized:
Speech Design -- 627
Digitronic 199 405
Satelco 126 157
---- ------
Total $325 $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. At March 31, 2000, 1,666,434 have been exercised and
1,793,566 remained outstanding.
As of May 1, 2000, an additional 1,728,951 Warrants have been
exercised, leaving 64,615 warrants which were not redeemed.
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.
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, 2000 and the results of its operations for the three month period
ended March 31, 2000, compared to the same period last year. The
9
<PAGE>
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 March 31, 2000, Compared to the Three Months
Ended March 31, 1999
Net Sales
Net sales increased by $3,797 or 30.3% to $16,319 for the three months ended
March 31, 2000, as compared to $12,522 for the same period in 1999.
Approximately 50% of the increase came from organic growth in the Company's
domestic product lines. The remaining sales increase was a result of the
inclusion of Apogee, which was acquired in the third quarter of 1999 and had
revenues of $1,905 in the first quarter of 2000.
Net sales from the Commercial Audio product line, including the Apogee product
line, increased to $4,218 for the three months ended March 31, 2000, or 52.4%,
over net sales of $2,767 for the same period in 1999. Excluding Apogee, sales
from the Commercial Audio product line decreased $454 when compared to the same
period in 1999. Net sales from the Engineered Systems product line increased to
$2,708 for the three months ended March 31, 2000, or 50.7% over net sales of
$1,797 for the same period in 1999. Net sales from the Telco product line
increased to $9,393 for the three months ended March 31, 2000, or 18.0%, from
net sales of $7,958 for the same period in 1999. The Telco product line includes
foreign sales from Speech Design. Domestic sales increased to $4,428 for the
three months ended March 31, 2000, or 53.2% from net sales of $2,891 for the
three months ended March 31, 1999. Foreign sales translated into U.S. dollars
decreased to $4,965 for the three months ended March 31, 2000, or 2.0% below net
sales of $5,067 for the same period in 1999. However, foreign net sales stated
in local currency increased to 9,861 Deutsche Marks ("DM") for the three months
ended March 31, 2000, or 8.0% over net sales of 9,131 DM for the three months
ended March 31, 1999.
Gross Profit
Gross profit, as a percentage of total net sales, decreased to 50.3% for the
three months ended March 31, 2000, compared to 51.2% for the same period in
1999. Excluding the Apogee product line, gross profit as a percentage of sales
rose to 52.4%. 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 $5,123, or 45.1% of sales, in the first
quarter of 2000 from $3,356, or 44.9% of sales, in the first quarter of 1999.
The improvement is attributable in part to cost reductions achieved in 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 $3,089, or 62.2% of sales, in the
first quarter of 2000 from $2,996, or 59.2% of sales, in the first quarter of
1999. The increase is partially attributable to better margins on Speech
Design's Teleserver Pro TM and Thor TM product lines.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $1,999, or
44.9%, for the three months ended March 31, 2000, as compared to the three
months ended March 31, 1999. SG&A was $6,449, or 39.5% of net sales, for the
three months ended March 31, 2000, as compared to $4,450, or 35.6% of net sales
for same period in 1999. SG&A expenses include $527 of costs due to the
acquisition of Apogee in 1999. Approximately $300 represents the increase of
sales 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 primarily represents the establishment of a sales
force at Speech Design to address the PABX after-market and increased
depreciation expense relating to the 1999 installation of an Enterprise Resource
Planning (ERP) system in the United States.
10
<PAGE>
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
$866, or 5.3% of net sales for the three months ended March 31, 2000, as
compared to $920, or 7.4% of net sales for the three months ended March 31,
1999.
Interest Expense, Net
Interest expense was $49, or 0.3% of net sales for the three months ended March
31, 2000, as compared to $63, or 0.5% of net sales for the three months ended
March 31, 1999. The decrease of $14 is a result of the Company's overall reduced
borrowing.
Income Taxes
Income tax expense decreased by $7 for the three months ended March 31, 2000, to
$304, as compared to $311 for the comparable period in 1999. The decrease is
primarily the result of lower domestic profits, resulting in a reduction of
domestic income taxes by $61, offset by higher foreign profits, which increased
foreign taxes by $54.
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 recorded a non-cash investment in
goodwill of approximately $1,857.
Liquidity and Capital Resources
During the three months ended March 31, 2000, cash utilization focused on
current working capital requirements, pay-down of accounts payable and accrued
expenses, tax payments and the purchase of equipment and leasehold improvements.
The Company's operating activities utilized $2,113 of cash. The Company's net
income of $302 includes net non-cash charges of $790, which were (i)
depreciation and amortization expenses of $641, (ii) an increase of $158 for
inventory reserves and allowance for doubtful accounts, and (iii) acquired tax
of $17 credited to goodwill, offset by (iv) deferred income tax benefits of $26.
Accounts receivable decreased $772; inventories increased $1,899; prepaid
expenses and other assets increased $111; accounts payable and accrued expenses
decreased $1,920; and net changes in other operating assets and liabilities were
$47.
Net cash used in investing activities amounted to $1,122, including $923 for the
purchase of equipment, computer hardware and software, and other fixed assets
and $199 for intangible assets.
Net cash provided by financing activities amounted to $6,231. The company
received $8,278 from the exercise of warrants, which partly offset by repayments
of $60 on capitalized lease obligations and $1,987 of existing lines of credit.
As of March 31, 2000, the Company's total liabilities were $8,838, of which
$7,187 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,
11
<PAGE>
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 March 31, 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 $3,933, from three area banks. These lines of credit
are collateralized by all of Speech Design's accounts receivable and inventory.
At March 31, 2000, 661 DM (approximately $325) was outstanding under the
short-term credit lines.
Speech Design has also secured a 15,000 DM (approximately $7,375) 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
March 31, 2000.
The Company believes that it has adequate liquidity to finance its normal
business activities and capital expenditures for the near term.
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.
In general, the Company does not use derivative instruments or hedging to manage
its exposure and does not currently hold any material risk sensitive instruments
for trading purpose at March 31, 2000. During the quarter ending March 31, 2000,
the Company has no material changes of its market risk assessment.
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.
12
<PAGE>
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
13
<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. 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.
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)
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)
14
<PAGE>
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)
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 February 26, 1997 between the
Company and Mr. Jonathan Guss.
10.34 Amendment to Employment Agreement dated February 26, 1997 between the
Company and Mr. Michael Fleischer.
*27.1 Financial Data Schedule
15
<PAGE>
- -----------------
* 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.
16
<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 15, 2000 By: /s/ Michael P. Fleischer
------------------------------------
Name: Michael P. Fleischer
Title: President
Date: May 15, 2000 By: /s/ Maureen A. Flotard
------------------------------------
Name: Maureen A. Flotard
Title: Acting Chief Financial
Officer (Principal Financial
and Accounting Officer)
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