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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________________
Commission File Number: 0-26524
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MACKIE DESIGNS INC.
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(Exact name of registrant as specified in its charter)
Washington 91-1432133
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16220 Wood-Red Road, N.E., Woodinville, Washington 98072
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(Address of principal executive offices) (Zip Code)
(425) 487-4333
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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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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, no par value 12,255,458
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Class Number of Shares Outstanding
(as of May 12, 1999)
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MACKIE DESIGNS INC.
FORM 10-Q/A
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
This Current Report on Form 10-Q/A amends the Current Report on Form 10-Q filed
by Mackie Designs Inc. on November 16, 1998 solely to add to the discussion of
known material events, trends, or uncertainties in the Management's Discussion
and Analysis of Financial Condition and Results of Operations section as
required by Part I Item 2.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
YEAR 2000 ISSUE
The "Year 2000" or "Y2K" issue refers to the potential risks associated
with the fact that many existing computer programs use only the last two digits
in reference to a year. When the year changes from 1999 to 2000 these programs
may not be able to distinguish whether the year begins with 19 or with 20. This
could result in a system failure or miscalculations causing disruptions of
operations. The following analysis addresses the Y2K issue at the Company's
locations in Woodinville, Washington (referred to as "Mackie-Woodinville") and
in Italy (referred to as "RCF").
READINESS
INFORMATION SYSTEM - ENTERPRISE RESOURCE PLANNING SYSTEM (ERP).
Y2K inspection at Mackie-Woodinville has revealed two systems requiring
updating: the shipping manifest system, and the general ledger module of the
manufacturing system. Integration of the replacement shipping system is
scheduled to begin March 1999 and be completed in mid-May 1999. The general
ledger module is to be replaced by a Y2K compliant version from the software
developer. This work is scheduled to begin May 1999, and be completed by the end
of the second quarter of 1999.
RCF completed the analysis of its system in mid-1998. Its Enterprise Resource
Planning System (ERP) was determined to be Y2K non-compliant and implementation
of a solution began February 1999. The project is scheduled to have the first
release of converted software available for testing in early April 1999, with a
six-week test cycle to follow. The problem resolution phase of the project is
scheduled to run for a six-week period following the test cycle. The revised
software is scheduled to be in place in July 1999. At present, the project is on
schedule.
INFORMATION SYSTEMS - HARDWARE.
Hardware at Mackie-Woodinville has undergone a preliminary review showing no
major problems. A detailed PC hardware analysis is under way and is scheduled to
be completed by end of May 1999. Server hardware has already been found to be
Y2K compliant. The primary ERP server at Mackie recently had its Unix operating
system upgraded to make it entirely Y2K compliant. Other equipment with embedded
systems are currently also being inspected, with completion scheduled for the
end of the second quarter of 1999.
RCF has purchased all server hardware required for Y2K compliance. The new
hardware will be used initially for testing of the Y2K modifications, then run
as the live system following the conversion. The PC and network server analyses
are expected to take place in October 1999. The Company does not consider this
to be a point of risk given that, with the exception of a small number of PCs,
all hardware is new and Y2K compliant.
VENDORS.
Mackie-Woodinville has undergone a process to evaluate the Y2K preparedness of
its critical vendors. Of these vendors, any that are "in the process" of
completing their Y2K preparations will be audited quarterly for progress.
Mackie-Woodinville has in place a plan to evaluate the cost and time to develop
alternate sources for goods, plus a program to evaluate the cost and storage
requirements to ensure an uninterrupted supply of goods while engaging alternate
suppliers.
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RCF has begun the process of identifying key vendors and assessing the Y2K
compliance of these vendors. Vendors will be asked about their Y2K compliance
plans and based on their responses, RCF plans to take appropriate actions to
mitigate the possible impact of Y2K issues.
CUSTOMERS.
A customer evaluation process is being put in place by Mackie-Woodinville to
ensure that critical customers will be compliant. Of these customers who are not
already Y2K compliant, those preparing for Y2K compliance will be audited
quarterly. These customers may ultimately receive an onsite visit and be asked
to demonstrate contingency plans if Y2K preparation efforts do not appear to be
adequate or timely.
RCF plans to assess customer Y2K issues through direct inquiry of key customers.
Based on their responses, RCF will determine the steps that need to be taken to
minimize the impact of Y2K issues.
PRODUCTS.
All Mackie products using microprocessors or other digital-based technology have
been reviewed and found to be Y2K compliant.
All RCF products are manufactured without a microprocessor or other
digital-based technology and, therefore, are not affected by the Y2K issue.
COSTS
The resolution of all Y2K issues at Mackie-Woodinville has been budgeted to cost
less than $50,000.
RCF has a total Y2K budget of $250,000. All costs will be funded by cash flow
from operations.
RISKS
Risk to Mackie-Woodinville is fairly low regarding issues that are directly
within the Company's control. Systems at risk of failure are scheduled to be Y2K
compliant by the end of July 1999. External influences are being managed to
minimize any potential impact on the business.
The greatest risk for RCF is in the conversion of the manufacturing/MRP module
of its ERP. In this area, the most likely error would be missing the conversion
of a date field, or incorrectly converting a date. The company contracted to do
the Y2K conversion will be available following the "go live" date of the
converted software and will support the system on a maintenance agreement basis.
CONTINGENCY PLANS
Given progress to date, there is a high level of confidence in the conversion
effort of the RCF business systems. Contingency plans focus on the potential for
minor issues to be introduced during the Y2K conversion process, and hence for
the possible need to put manual systems in place until the business system can
be corrected. The Company believes that any such disruption would be brief and
addressed through the use of internal resources.
If the remediation efforts of the Company's key suppliers and customers are
unsuccessful in dealing with Y2K problems and if the Company's efforts to
mitigate the impact of such problems are unsuccessful, there may be a material
adverse impact on the Company's consolidated results and financial condition.
The Company is unable to quantify any potential impact at this time, but will
continue to monitor and evaluate the situation.
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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.
MACKIE DESIGNS INC.
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(Registrant)
Dated: May 12, 1999 By: /s/ William A. Garrard
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William A. Garrard
VICE PRESIDENT, FINANCE AND CHIEF
FINANCIAL OFFICER
(Principal Financial and Accounting
Officer)
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