SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No. 0-23866
March 31, 1999
VARI-L COMPANY, INC.
(Exact name of Registrant as specified in its charter.)
Colorado 06-0679347
----------------------- -----------------------------------
(State of Incorporation) (I.R.S. Employer identification No.)
4895 Peoria Street
Denver, Colorado 80239
-----------------------
(Address of principal executive offices)
(303) 371-1560
--------------
(Registrant's telephone number, including area code)
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
The number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 1999:
Class of Securities Outstanding Securities
------------------- ----------------------
$0.01 par value 5,498,858 shares
Common shares
Item 1. Financial Statements
- -----------------------------
VARI-L COMPANY, INC.
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(000's Omitted)
<TABLE>
<CAPTION>
3/31/99 12/31/98
ASSETS (Unaudited) (Audited)
- ------ ---------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,644 $ 6,515
Trade receivables, less $23
allowance for doubtful accounts 3,799 4,417
Inventories 7,860 7,901
Prepaid expenses and other 2,146 1,235
-------- --------
Total Current Assets 19,449 20,068
-------- --------
Property and Equipment:
Machinery and equipment 23,512 22,299
Furniture and fixtures 1,521 1,499
Leasehold improvements 8,030 7,797
-------- --------
33,063 31,595
Less accumulated depreciation
and amortization (4,821) (4,444)
-------- --------
Net Property and Equipment 28,242 27,151
-------- --------
Other Assets:
Long-term inventories 475 475
Covenant not to compete 25 33
Patents, net of accumulated
amortization of $180 and $141 1,576 1,173
Other 1,507 1,771
-------- --------
Total Other Assets 3,583 3,452
-------- --------
TOTAL ASSETS $ 51,274 $ 50,671
- ------------ ======== ========
(Continued)
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
VARI-L COMPANY, INC.
BALANCE SHEETS, CONTINUED
MARCH 31, 1999 AND DECEMBER 31, 1998
(000's Omitted)
<TABLE>
<CAPTION>
3/31/99 12/31/98
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) (Audited)
- ------------------------------------ ----------- ---------
<S> <C> <C>
Current Liabilities:
Current installments of
long-term debt $ 931 $ 832
Financed insurance premiums 81 22
Trade accounts payable 1,527 2,147
Accrued expenses and other 267 684
Income taxes payable 465 0
-------- --------
Total Current Liabilities 3,271 3,685
Bank line of credit 4,406 4,756
Long-term debt 6,275 5,901
Deferred income taxes 3,904 3,904
-------- --------
Total Liabilities 17,856 18,246
-------- --------
Stockholders' Equity:
Common stock, $.01 par value,
50,000 shares authorized;
5,499 and 5,464 shares
outstanding, respectively 55 54
Paid-in capital 22,341 22,103
Retained earnings 11,040 10,286
Less:
Loans for purchase of stock (18) (18)
-------- --------
Total Stockholders' Equity 33,418 32,425
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 51,274 $ 50,671
- ---------------------- ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
VARI-L COMPANY, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1999 AND MARCH 31, 1998
(000's Omitted,except for share amounts)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
3/31/99 3/31/98
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
Net sales $ 5,313 $ 4,045
Cost of products sold 2,366 1,843
-------- --------
Gross profit 2,947 2,202
-------- --------
Other costs and expenses:
General and administrative 477 471
Engineering 334 265
Selling 618 476
Interest expense 243 74
Interest income (68) (76)
Profit sharing plan contribution 108 0
Other 16 26
-------- --------
1,728 1,236
-------- --------
Income before taxes 1,219 966
Income taxes 465 386
-------- --------
NET INCOME $ 754 $ 580
- ---------- ======== ========
Basic earnings per share $ 0.14 $ 0.11
======== ========
Basic weighted average shares outstanding 5,488 5,290
======== ========
Diluted earnings per share $ 0.14 $ 0.11
======== ========
Diluted weighted average shares outstanding 5,580 5,370
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
VARI-L COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 1999 AND MARCH 31, 1998
(000's Omitted)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
3/31/99 3/31/98
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
Net cash provided by operating
activities (Note 7) $ 352 $ 408
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (1,468) (2,243)
-------- --------
Net cash used in investing
activities (1,468) (2,243)
-------- --------
Cash flows from financing activities:
Increases in long-term debt 733 534
Repayments of long-term debt (260) (151)
Borrowings under bank line of credit 900 1,735
Repayments under bank line of credit (1,250) (850)
Net borrowings (repayments) for
insurance financing activities 59 (8)
Treasury stock purchase (22) 0
Net proceeds from stock issuances 85 410
-------- --------
Net cash provided by
financing activities 245 1,670
-------- --------
Net (decrease) in cash (871) (165)
Beginning cash 6,515 5,971
-------- --------
ENDING CASH $ 5,644 $ 5,806
- ----------- ======== ========
Supplemental disclosure of cash flows
information:
Cash paid for interest $ 275 $ 181
======== ========
Cash paid for income taxes $ 0 $ 0
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
Vari-L Company, Inc. (the Company) was founded in 1953 and is a
manufacturer of electronic components. The Company's products are used in
commercial and military communications systems where electrical processing
of radio frequency signals is required.
NOTE 1 - FINANCIAL PRESENTATION
These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1998 and notes
thereto.
In the opinion of management, the accompanying interim, unaudited
financial statements contain all the adjustments necessary to present
fairly the financial position of the Company as of March 31, 1999, and
the results of its operations, and its cash flows for the three months
ended March 31, 1999 and March 31, 1998. All adjustments made are of a
normal recurring nature.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(000's Omitted)
---------------------
3/31/99 12/31/98
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Finished goods $ 2,124 $ 2,174
Work in process 3,368 3,365
Raw materials 2,217 2,211
Gold bullion 151 151
-------- --------
$ 7,860 $ 7,901
======== ========
Long-term inventories $ 475 $ 475
======== ========
</TABLE>
NOTE 3 - INCOME TAXES
Income tax expense reflects effective tax rates of 38.13% for 1999 and 40%
for 1998.
NOTE 4 - CREDIT FACILITY
The Company has two credit facilities. The first consists of a line of
credit. The second consists of a term loan and a revolving equipment term
loan.
The line of credit provides for borrowings of up to $5.0 million.
Interest is payable monthly, calculated at prime. The line of credit
matures April 30, 2000. At March 31, 1999, the outstanding balance due
under the line of credit was approximately $4.4 million.
On August 21, 1998, the Company renegotiated its term loan and revolving
equipment term loan. The Company extended its term loan for an additional
year and converted the loan to a floating rate of Libor plus 1.50% and
obtained fixed rate protection by executing an interest rate swap which
results in an all-in fixed rate of 7.75% through the maturity date of
February 24, 2002. Monthly principal and interest payments of
approximately $64,000 are required. At March 31, 1999, the balance due
under the term loan was approximately $3.9 million.
The revolving equipment term loan provides for borrowings up to $4.0
million. Interest accrues on the outstanding principal balance of the
revolving equipment term loan at prime plus .25% when advances are made
under the revolver. These borrowings can be converted to term notes at
rates which adjust to the 3-year treasury note rate plus 1.95%. When
converted, the term debt requires monthly principal and interest payments
calculated on a seven-year amortization basis with a 42 month maturity.
The revolving loan matures on August 13, 1999. As of March 31, 1999,
the balance of the advances under the revolving loan that had been
converted to term notes totaled approximately $3.2 million. Interest
accrues on the outstanding principal balances of these term notes at rates
ranging from 6.108% to 7.72% and monthly principal and interest payments
totalling $47,812 are required.
Continued
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTE 5 - SECURITIES PURCHASE AGREEMENT
On March 4, 1997, the Company entered into an agreement to sell up to 75
units of debentures and warrants. The units consisted of an aggregate of
$7.5 million in 4-year, 7%, subordinated, convertible debentures and
750,000 non-redeemable warrants to purchase common stock at a price of
$9.50 per share, exercisable for a period of three years. As provided for
in the agreement, all of the debentures plus accrued interest were
converted into common stock during 1997. As of March 31, 1999, 85,000 of
the warrants had been exercised and 665,000 warrants were still
outstanding.
NOTE 6 - STOCK COMPENSATION PLANS
The Company has three stock-based compensations plans: a stock option
plan, an employee stock purchase plan and a stock grant plan.
Stock Option Plan
- -----------------
The Company has reserved 3,000,000 shares of its common stock for issuance
upon exercise of rights and options under the stock option plan.
Typically, rights and options have been granted, subject to a vesting
schedule, vesting at the rate of 20 percent per year, becoming fully
vested upon the change of control of the Company, and expiring 10 years
from the date of issuance. Certain options granted to senior management
are fully vested upon issuance.
In the three months ended March 31, 1999, the Company granted 207,000
options pursuant to the plan. No options were exercised in the quarter.
Employee Stock Purchase Plan
- ----------------------------
Under the Company's employee stock purchase plan, eligible employees may
contribute up to 10 percent of their earnings, through payroll deductions,
to purchase shares of the Company's common stock. The purchase price is
equal to 85 percent of the fair value of the stock on specified dates. A
total of 800,000 shares were reserved under the plan and the maximum
number of shares to be issued is 200,000 per year. For the plan year
1998, a total of 12,851 shares were issued in January 1999 at $6.43 per
share.
Stock Grant Plan
- ----------------
During 1996, the Company adopted a stock grant plan under which stock
grants can be made to the Company's officers, directors, employees,
consultants, and advisors. The Company reserved 100,000 shares of its
common stock for issuance under the stock grant plan. The plan provides
for automatic grants of 50 shares per month to nonmanagement members of
the Company's Board of Directors. During the first quarter of 1999,
those members received grants for 450 shares. Compensation cost charged
to operations was measured by the fair market value of the stock on the
date of the grants.
In connection with certain executive employment agreements, the
Compensation Committee granted stock bonuses of 25,000 shares to each of
the Company's two senior officers. The grants are subject to a vesting
schedule whereby one-half of the shares were vested during 1997 and 1998.
Shares are granted only as earned pursuant to the vesting schedule in the
employment agreement. 6,250 shares vested in March 1999, and the
remaining shares are scheduled to vest in 2000. Additionally, the Company
is liable for income and payroll taxes attributable to the stock bonuses.
The grants are subject to forfeiture provisions related to fulfillment of
various terms of the employment agreements. Accordingly, the Company is
amortizing the cost of the stock bonuses over the term of the employment
agreements. As of March 31, 1999, the value of the vested stock bonuses,
and the related income and payroll taxes, totaled approximately $698,000
and the unamortized, prepaid expense portion of this cost was
approximately $317,000.
Continued
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTE 7 - RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
The reconciliation of net income to net cash provided by operating
activities for the three months ended March 31, 1999 and March 31, 1998 is
as follows:
<TABLE>
<CAPTION>
(000's Omitted)
--------------------------
3/31/99 12/31/98
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Net Income $ 754 $ 580
-------- --------
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 377 240
Amortization of covenant
not to compete 8 8
Stock contribution to profit sharing plan 101 0
Changes in assets and liabilities:
Decrease in accounts receivable 618 115
Decrease (increase) in inventories 41 (460)
(Increase) in prepaid expenses
and other (836) (370)
(Increase) in patents and
other assets (139) (40)
Increase (decrease) in accounts
payable (620) 86
(Decrease) in accrued expenses (417) (137)
Increase in income taxes payable 465 386
-------- --------
Total adjustments (402) (172)
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 352 $ 408
======== ========
Continued
</TABLE>
VARI-L COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NOTE 8 - EARNINGS PER SHARE
The following is a reconciliation of the net income (numerator) and number
of shares (denominator) for the computations of basic and diluted earnings
per shares:
<TABLE>
<CAPTION>
(000's Omitted)
------------------------
For the quarter ended March 31, 1998 Income Shares Per Share
- ------------------------------------ (Numerator) (Denominator) Amount
---------- ------------ --------
<S> <C> <C> <C>
Basic earnings per share $ 580 5,290 $0.11
Effect of dilutive stock options 0 80
----- -----
Diluted earnings per share $ 580 5,370 $0.11
===== =====
</TABLE>
<TABLE>
<CAPTION>
(000's Omitted)
------------------------
For the quarter ended March 31, 1998 Income Shares Per Share
- ------------------------------------ (Numerator) (Denominator) Amount
---------- ------------ --------
<S> <C> <C> <C>
Basic earnings per share $ 754 5,488 $0.14
Effect of dilutive stock options 0 92
----- -----
Diluted earnings per share $ 754 5,580 $0.14
===== =====
</TABLE>
At March 31, 1999, the Company had 5,498,858 common shares outstanding.
During the three months ended March 31, 1999, the Company issued 34,724
shares. For purposes of computing earnings per share, the shares issued
during the period were weighted for the period of time they were
outstanding.
RESULTS OF OPERATIONS
Three months ended
- ------------------
March 31, 1999 and March 31, 1998
- ----------------------------------
Total Revenues
- --------------
Sales revenue increased approximately $1.3 million (31%) in the three
months ended March 31, 1999 as compared with the three months ended March
31, 1998, from $4.0 million to $5.3 million The strong increase in sales
reflects continuing demand for products in both the commercial and
military/aerospace markets, including the initial shipments against an
840,000 unit order for VCOs to be used in subscriber devices.
The Company has seven major product lines:
1. Signal Processing components for industrial, military and aerospace
(Military/Aerospace Signal Processing, or MSP).
2. Signal Source components, primarily wide-band VCOs, for industrial,
military and aerospace (Military/Aerospace Signal Source, or MSS).
3. Special Assemblies that combine MSP and MSS components
(Military/Aerospace Special Assemblies, or MSA).
4. Commercial Signal Source components including PLLs and narrow-band
VCOs (Commercial Signal Source, or CSS).
5. Commercial Signal Processing components, including optoelectronic
components and subassemblies used in magnetic and fiberoptic products
for CATV applications (Commercial Signal Processing, or CSP).
6. Subscriber product components used in hand-held telephone sets,
pagers and other consumer-oriented products (Subscriber Signal
Source, or SSS).
7. Commercial Special Assemblies (CSA).
In the first three months of 1999, the composition of sales revenue was 6%
MSP, 7% MSS, less than 1% MSA, 68% CSS, 7% CSP, 12% SSS and less than 1%
CSA. In the first three months of 1998, the composition of sales revenue
was 10% MSP, 31% MSS, 1% MSA, 54% CSS, 4 % CSP, 0% SSS and 0% CSA.
Cost of Goods Sold
------------------
Cost of goods sold, as a percent of sales revenue, was 45% and 46% in the
three months ended March 31, 1999 and 1998, respectively. The
improvement in these ratios for the period ended March 31, 1999 resulted
from the Company's continuing efforts to make additional efficiencies in
its processes and the installation of additional automated production
facilities.
Selling and Engineering Expense
-------------------------------
Selling expenses increased approximately $142,000, or 30%, for the three
months ended March 31, 1999 as compared to the three months ended March
31, 1998, primarily reflecting commissions on approximately $1.3 million
in increased sales in the quarter. The Company continues to actively
advertise and travel to promote its product lines.
Engineering expenses increased approximately $69,000, or 26%, for the
three months ended March 31, 1999 as compared to the three months ended
March 31, 1998. These increases reflect ongoing improvements to the
engineering department, including increased engineering staff and related
equipment costs and expenses, to support new product development and
expansion of existing product lines.
General and Administrative and Other Expenses
---------------------------------------------
General and administrative expenses increased approximately $6,000, or 1%,
for the three months ended March 31, 1999 as compared to the three months
ended March 31, 1998.
Other expenses decreased approximately $10,000 in the three months ended
March 31, 1999 as compared to the three months ended March 31, 1998.
Interest Income and Expense
---------------------------
The Company manages its credit facility and money fund in tandem.
Interest income is earned on the Company's short-term investments in a
U.S. government securities money fund purchased with proceeds from the
March 1997 convertible debenture and warrant offering. Interest income
decreased approximately $8,000, or 10%, to approximately $68,000, in the
three months ended March 31, 1999 compared to the three months ended March
31, 1998 This decrease reflects usage of these funds during the interim
period for expansion of production facilities.
Interest expense increased approximately $169,000 (228%) for the three
months ended March 31, 1999 as compared with the three months ended March
31, 1998. The increase in the quarter is attributable to interest on
increased borrowings during the year to support facilities improvements
and equipment for expanded and improved production facilities. In
addition, the first quarter of 1998 included an interest accrual
adjustment which was not applicable to 1999.
Depreciation and Amortization
-----------------------------
Depreciation and amortization increased approximately $137,000 (57%) for
the three months ended March 31, 1999 as compared with the three months
ended March 31, 1998. The increase reflects depreciation on increased
investments in property, equipment and leasehold improvements.
Depreciation and amortization expense is expected to continue to increase
as a result of these and future capital investments.
FINANCIAL CONDITION
Liquidity
---------
At March 31, 1999, the Company's working capital was $16.2 million
compared to $16.4 million at December 31, 1998. The Company's current
ratio was 5.9 to 1 as of March 31, 1999 and 5.4 to 1 at December 31, 1998.
Capital Resources
-----------------
The Company has two credit facilities. The first consists of a line of
credit. The second consists of a term loan and a revolving equipment term
loan.
The line of credit provides for borrowings of up to $5.0 million.
Interest is payable monthly, calculated at prime. The line of credit
matures April 30, 2000. At March 31, 1999, the outstanding balance due
under the line of credit was approximately $4.4 million.
On August 21, 1998, the Company renegotiated its term loan and revolving
equipment term loan. The Company extended its term loan for an additional
year and converted the loan to a floating rate of Libor plus 1.50% and to
receive fixed rate protection by executing an interest rate swap which
results in an all-in fixed rate of 7.75% through the maturity date of
February 24, 2002. Monthly principal and interest payments of
approximately $64,000 are required. At March 31, 1999, the balance due
under the term loan was approximately $3.9 million.
The revolving equipment term loan provides for borrowings up to $4.0
million. Interest accrues on the outstanding principal balance of the
revolving equipment term loan at prime plus .25% when advances are made
under the revolver. These borrowings can be converted to term notes at
rates which adjust to the 3-year treasury note rate plus 1.95%. When
converted, the term debt requires monthly principal and interest payments
calculated on a seven-year amortization basis with a 42 month maturity.
The revolving loan matures on August 13, 1999. As of March 31, 1999,
the balance of the advances under the revolving loan that had been
converted to term notes totaled approximately $3.2 million. Interest
accrues on the outstanding principal balances of these term notes at rates
ranging from 6.108% to 7.72% and monthly principal and interest pay-ments
totaling $47,812 are required.
The Company finances certain of its annual insurance premiums through a
financing company. The amounts due under these loans totaled
approximately $81,000 as of March 31, 1999 and are paid in monthly
installments of $11,581 with interest at 6.21%.
On March 4, 1997, the Company entered into an agreement to sell up to 75
units of debentures and warrants. The units consisted of an aggregate of
$7.5 million in four year, 7% convertible debentures and 750,000 non-
redeemable common stock purchase warrants exercisable at $9.50 per share
for a period of three years. All of the debentures plus accrued interest
were converted into common stock during 1997. During April 1998, 85,000
warrants were exercised. 665,000 warrants remained outstanding as of
March 31, 1999.
The Company believes that it has sufficient financial resources available
to meet its short-term working capital needs through cash flows generated
by operating activities and through the management of its sources of
financing. The Company also believes that, as the result of the sales of
the convertible debentures, it has adequate capital resources to continue
its growth plans.
Backlog
-------
Total backlog of unfilled firm customer orders ("backlog") at March 31,
1999 was $16.8 million compared with $16.5 million at March 31, 1998.
Backlog at December 31, 1998 was $18.1 million.
Year 2000 Issues
----------------
The Company has given serious attention to the potential problems that
could arise from the rollover of computer clocks with two-digit year
fields when the year 2000 arrives. Assessment of the affect on both IT
(information technology) and non-IT issues is progressing rapidly. IT
assessment is substantially complete. Non IT assessment is also
substantially complete except for suppliers, for which we have had a 52%
response rate to date. The Company currently expects to have all
assessment, remediation and testing completed by the end of August 1999.
In the area of business and operations, the Company has completed most of
its automation in recent years. Accordingly, the computers and software
that have been acquired during those years incorporated Year 2000
compliant technology. This compliance is being continuously confirmed in
the Company's various business applications as a byproduct of another
technology project the Company initiated early this year, a licensing
audit designed to ensure that all software utilized by Company personnel
is properly licensed by the software provider. The same software used to
verify the software installed on each PC also verifies Year 2000
readiness. The Company has also instituted a policy prohibiting the
purchase of any new computers or other devices that have clocks without
empirical proof that they can recognize the year 2000 without
malfunctioning.
In the non-IT area, which includes test equipment, the Company's principal
hardware vendor has provided certification and warranty as to Year 2000
compliance. In addition, as routine, scheduled maintenance and
calibration is performed on this equipment, veracity of that certification
is tested and confirmed. To address the other non-IT issues, such as
elevators, heating systems, utilities, etc., an outside consultant will be
brought in by the Company to run independent tests of these systems and
the various vendors will be providing certification as to Year 2000
compliance.
The Company will continue to investigate whether its customers and vendors
are also becoming Year 2000 compliant. Like other businesses, the Company
has been providing information to its customers, upon their request,
concerning the Company's efforts in this matter.
To date, the costs that the Company has incurred which are specific to the
assessment and remediation of Year 2000 issues have not been material. No
special expenditures have been required in the area of software or
hardware. Some legal fees and educational expenses have been incurred to
heighten awareness and to help organize business activities to incorporate
assessment and remediation and the MIS staff was increased to perform and
manage compliance. For the most part, however, Year 2000 issues have been
incorporated into other management routines, thereby minimizing
extraordinary costs. It is presently anticipated that future, separately
identifiable costs of assessment and remediation will also be nominal, and
it is very likely that such costs will be less than $50,000 in 1999.
In order to minimize the impact of any unanticipated Year 2000 "non-
readiness" problems, the Company plans to have manual backup systems in
place to forestall any interruption of operations resulting from the
failure of automated systems. In addition, the data generated and
collected in those systems is continuously being archived as a part of the
Company's existing business practices.
The Company does not foresee any serious Year 2000 problems occurring with
its vendors or customers. While it is not possible to predict what kinds
of minor Year 2000 issues might arise that have not been addressed as a
priority by the Company, or by some other company with which the Company
does business, the Company believes that it has multiple sources for the
vast majority of the raw materials and services that it presently procures
from vendors or third-party contractors. Unless a major problem of a
national or global scope occurs, the Company believes it will be able to
maintain sufficient inventory levels to continue production while it seeks
to rectify any smaller problems that may arise. The Company is continuing
to follow up on Year 2000 compliance with those suppliers who have not yet
responded, as well as those who have indicated that their Year 2000
compliance is not yet complete.
With respect to the Company's customer base, substantially all of the
Company's most significant customers are very large, well-capitalized,
multi-national companies with substantial resources. The Company believes
that these customers are doing everything possible to protect themselves
and, indirectly, the Company, from business losses resulting from Year
2000 issues.
While there is no guarantee that the Company will reach Year 2000
compliance by the necessary deadline, the Company believes that it is
applying the resources and effort sufficient to do so.
Forward looking statements
--------------------------
Some of the statements contained in this document are forward-looking
statements. The accuracy of these statements cannot be guaranteed as they
are subject to a variety of risks including, but not limited to the
success of the products into which the Company's products are integrated,
governmental action relating to wireless communications licensing and
regulation, internal projections as to the demand for certain types of
technological innovation, competitive products and pricing, the success of
new product development efforts, the timely release for production and the
delivery of products under existing contracts, future economic conditions
generally, as well as other factors, including any events that result from
the year 2000 computer clock rollover.
VARI-L COMPANY, INC.
PART II--OTHER INFORMATION
Item 1 Legal Proceedings
-----------------
None
Item 2 Changes in Securities
---------------------
None
Item 3 Defaults Upon Senior Securities
-------------------------------
None
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5 Other Information
-----------------
None
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARI-L COMPANY, INC.
Date: May 14, 1999 By: /s/ Jon L. Clark
------------------------ ----------------------------
Jon L. Clark, V.P. Finance
and Principal Financial
Officer
EXHIBIT INDEX
No. Description Method of Filing
- --- ----------- ----------------
27 Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VARI-L'S
UNAUDITED FINANCIAL STATEMENTS PREPARED AS OF MARCH 31, 1999 AND FOR THE
THREE-MONTH PERIOD THEN ENDED, INCLUDED WITH ITS 1ST QUARTER 1999 10-QSB FILING
WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,644
<SECURITIES> 0
<RECEIVABLES> 3,822
<ALLOWANCES> 23
<INVENTORY> 7,860
<CURRENT-ASSETS> 19,449
<PP&E> 33,063
<DEPRECIATION> 4,821
<TOTAL-ASSETS> 51,274
<CURRENT-LIABILITIES> 3,271
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 33,363
<TOTAL-LIABILITY-AND-EQUITY> 51,274
<SALES> 5,313
<TOTAL-REVENUES> 5,381
<CGS> 2,366
<TOTAL-COSTS> 2,366
<OTHER-EXPENSES> 1,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108
<INCOME-PRETAX> 1,219
<INCOME-TAX> 465
<INCOME-CONTINUING> 754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 754
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
