United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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[ ] TRANSITON REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11883
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TELEBYTE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2510138 (State or other jurisdiction of incorporation (IRS Employer
Identification No.)
or organization)
270 Pulaski Road, Greenlawn, New York 11740
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(631) 423-3232
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(Issuer's telephone number)
(Former name,former address and former fiscal year if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 November 14, 2000, there were outstanding 1,253,631 shares of Common
Stock, $.01 par value.
Transitional Small Business Disclosure Format (check one);
Yes No X
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TELEBYTE, INC. & SUBSIDIARY
INDEX
Part I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet
September 30, 2000 (Unaudited)
Consolidated Statements of Earnings Three
and nine months ended September 30, 2000 and
1999 (Unaudited)
Consolidated Statement of Shareholders' Equity
Nine months ended
September 30, 2000 (Unaudited)
Consolidated Statements of Cash Flows
Nine months ended
September 30, 2000 and 1999 (Unaudited)
Notes to Consolidated Financial
Statements (Unaudited)
Item 2. Management's Discussion and
Analysis or Plan of Operation
Part II Other Information
Part I Financial Information
Item 1. Financial Statements
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 878,443
Accounts receivable, less
allowance for doubtful accounts 762,866
Inventory 1,548,833
Prepaid expenses 114,844
Deferred income taxes 135,000
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TOTAL CURRENT ASSETS 3,439,986
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization 1,129,400
OTHER ASSETS 277,089
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$ 4,846,475
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 321,814
Accrued expenses 143,884
Income taxes payable 160,689
Current maturities of long-term debt 75,120
----------------------
TOTAL CURRENT LIABILITIES 701,507
LONG-TERM DEBT, less current maturities 997,130
DEFERRED INCOME TAXES 195,000
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 9,000,000 shares authorized;
1,253,631 shares issued and outstanding 12,536
Capital in excess of par value 1,781,672
Retained earnings 1,158,630
----------------------
2,952,838
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,846,475
======================
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
-------------------------- ------------------ --------------------------- -------------------
NET SALES $ 1,621,109 $ 1,415,555 $ 4,874,014 $ 4,143,801
COST OF SALES 781,653 665,086 2,277,947 1,964,494
-------------------------- ------------------ --------------------------- -------------------
GROSS PROFIT 839,456 750,469 2,596,067 2,179,307
-------------------------- ------------------ --------------------------- -------------------
OPERATING EXPENSES
Selling, G & A 474,894 406,062 1,384,654 1,341,702
Research and development 135,001 124,652 396,940 403,539
-------------------------- ------------------ --------------------------- -------------------
609,895 530,714 1,781,594 1,745,241
-------------------------- ------------------ --------------------------- -------------------
Operating Income 229,561 219,755 814,473 434,066
-------------------------- ------------------ --------------------------- -------------------
OTHER INCOME (EXPENSE)
Rental Income 12,048 12,048 36,146 36,146
Interest Income 11,641 873 22,270 5,868
Interest Expense (26,347) (26,761) (75,578) (87,650)
-------------------------- ------------------ --------------------------- -------------------
Earnings before income taxes 226,903 205,915 797,311 388,430
Provision for income taxes 81,380 77,602 301,880 147,602
-------------------------- ------------------ --------------------------- -------------------
NET EARNINGS $ 145,523 $ 128,313 $ 495,431 $ 240,828
========================== ================== =========================== ===================
Earnings per common share:
Basic $ 0.12 $ 0.10 $ 0.40 $ 0.19
========================== ================== =========================== ===================
Diluted $ 0.09 $ 0.10 $ 0.31 $ 0.18
========================== ================== =========================== ===================
Shares used in computing earnings per common share:
Basic 1,253,631 1,248,631 1,252,404 1,266,718
========================== ================== =========================== ===================
Diluted 1,574,366 1,341,965 1,594,512 1,310,385
========================== ================== =========================== ===================
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
Number of Capital in
shares Common excess of Retained
issued stock par value earnings Total
------- ------ ---------- -------- -----
Balance at January 1, 2000 1,248,631 $ 12,486 $ 1,740,472 $ 663,199 $ 2,416,157
Common stock issued for purchase
of intangibles 5,000 50 41,200 41,250
Net earnings 495,431 495,431
- - -
------------------- ------------------ --------------------- -------------------- --------------
Balance at September 30, 2000 1,253,631 $ 12,536 $ 1,781,672 $ 1,158,630 $ 2,952,838
=================== ================== ===================== ==================== ==============
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended September 30,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 495,431 $240,828
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 206,314 113,082
Decrease (increase) in operating assets:
Accounts receivable 96,051 (23,612)
Inventories (29,556) (171,934)
Prepaid expenses and other (43,511) 28,274
Increase (decrease) in operating liabilities:
Accounts payable 49,298 (61,958)
Accrued expenses and taxes (24,389) 192,869
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Net cash provided by operating activities 749,638 317,549
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (98,253) (66,499)
Purchase of intangibles (110,000) -
Cost of non-compete agreement - (203,124)
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Net cash used in investing activities (208,253) (269,623)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under mortgage obligation (49,423) (46,775)
Net borrowings under debt obligations 15,954 217,178
Purchase of treasury stock - (927,430)
Proceeds from exercise of stock options - 3,950
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Net cash used in financing activities (33,469) (753,077)
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Net increase (decrease) in cash and cash equivalents 507,916 (705,151)
Cash and cash equivalents at beginning of period 370,527 919,630
--------------------------- ------------------
Cash and cash equivalents at end of period $ 878,443 $ 214,479
=========================== ==================
Non cash financing activities
Issuance of common stock and note payable for purchase of
intangibles $ 60,825
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 2000, the consolidated
statement of earnings, stockholders' equity and cash flows for the nine-month
and three-month periods then ended have been prepared by us without audit. In
the opinion of management, all adjustments (which include only normal recurring
accrual adjustments) necessary to present fairly, the financial position,
results of operations and cash flows as of September 30, 2000 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes thereto included
in our Annual Report to Shareholders for the fiscal year ended December 31,
1999. The results of operations for the period ended September 30, 2000 are not
necessarily indicative of the operating results for the full year.
2. EARNINGS PER SHARE
The numbers of shares used in the Company's basic and diluted earnings per share
computations are as follows:
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------------------------------------------
2000 1999 2000 1999
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Weighted average common shares outstanding
for basic earnings per share 1,253,631 1,248,631 1,252,404 1,266,718
Common stock equivalents for stock options 320,735 93,334 342,108 43,667
----------- ------ ------- ------
Weighted average common shares outstanding
for diluted earnings per share 1,574,366 1,341,965 1,594,512 1,310,385
========= ========= ========= =========
Item 2. Management's Discussion and Analysis or Plan of Operation.
When used herein, the words "believe," "anticipate," "think," "intend," "will
be," "expect" and similar expressions identify forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are not guarantees of future performance and involve certain risks
and uncertainties discussed herein and under the caption "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 1999, which could
cause actual results to differ materially from those in the forward-looking
statements. Readers are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date hereof. Readers are
also urged carefully to review and consider the various disclosures made by us
which attempt to advise interested parties of the factors which affect our
business, including, without limitation, the disclosures made under the caption
"Management's Discussion and Analysis or Plan of Operation." All references to a
fiscal year are to our fiscal year, which ends December 31.
RESULTS OF OPERATIONS
Sales during the third quarter ended September 30, 2000 increased 15% to
$1,621,109 compared to sales of $1,415,555 for the same period in 1999. The
increase in sales was primarily due to an increase in sales of our Digital
Subscriber Line (DSL) Test Equipment.
Cost of sales for the third quarter of $781,653 (or 48.2% of sales) increased
compared to the $665,086 (or 47.0% of sales) during the same period in 1999. The
decrease in our profit margin percentage was primarily a function of product
mix.
Selling, general and administrative costs for the third quarter of $474,894
increased by $68,832 from $406,062 during the third quarter of 1999. The
increase during the third quarter was due primarily to expenses incurred by
Nextday.com, a wholly owned e-commerce subsidiary, and promotion of the
Company's DSL product line. In particular, the Company participated at DSLcon
'00 Asia held in Hong Kong and DSLcon '00 Fall held in Boston. Also during the
third quarter, the Company announced the appointment of Mr. Jim Wright as its
new Vice President, Chief Marketing Officer of Broadband Products. Mr. Wright
will lead the Company's program in marketing DSL test equipment and other
Broadband Products. Mr. Wright has more than 30 years experience in the
telecommunications industry, including most recently as General Manager of
Consultronics, Inc., a leading supplier of broadband test equipment including
local loop simulators.
Research and development expenses for the third quarter of $135,001 increased by
$10,349 from $124,652 during the same quarter in 1999. During the third quarter,
we continued the development of our Universal Serial Bus (USB) product line and
expect to introduce our first USB products during the fourth quarter of 2000.
The USB products that should be introduced in the fourth quarter of 2000 include
a USB-to-EIA 232 converter, a USB-to-RS 422 converter, a USB-to-RS 485 converter
and a USB-to-Fiber converter. During the third quarter, the Company completed
the development of a multi-line wire line simulator, the Model 458, which can
simulate up to 16 local loops up to 20,500 feet each. The Company expects to
begin shipping the model 458 during the fourth quarter of 2000.
Interest income increased to $11,641 during the third quarter of 2000 compared
to $873 for the same period in 1999. This increase in interest income was due
primarily to higher levels of cash on deposit. During the third quarter of 2000,
we had rental income of $12,048, which was in line with the comparable quarter
of 1999.
The effective tax rate in third quarter of 2000 was 35.9%, compared with 37.7 %
in same quarter in 1999.
The net earnings of $145,523 or $.09 diluted per share for the third quarter of
2000 increased 13.4% compared to the net earnings of $128,313 or $.10 diluted
per share in the same quarter in 1999. The increase in profitability is
attributed to the increase in sales during the third quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended September
30, 2000 was $749,638 compared to net cash provided of $317,549 in the same
period of 1999. This change was due primarily to an increase in net earnings.
Working capital increased as of September 30, 2000 by $471,522 to $2,738,479
compared with $2,266,957 from December 31, 1999. The current ratio as of
September 30, 2000 increased to 4.90:1 compared to 4.37:1 as of December 31,
1999.
We have an agreement with a financial institution, which provides us with a line
of credit of up to $500,000 based on our eligible accounts receivable and
purchased components and materials and finished goods inventories, as defined in
the agreement. Further, the agreement contains certain financial covenants that
require us to maintain a minimum level of tangible net worth and places
limitations on the ratio of our total debt to our tangible net worth, as defined
in the agreement. Borrowings under the line of credit bear interest at the
bank's specified prime rate plus .75%. There was no outstanding indebtedness
under this line of credit as of September 30, 2000.
In January 1999, we secured an additional reducing revolving line of credit from
the same institution that provides for initial borrowings up to a maximum of
$1,000,000. Availability under the reducing revolving line of credit decreases
by approximately $11,900 per month, and the line expires January 2006.
Availability under this line at of September 30, 2000 was approximately
$524,000. Borrowings under this loan agreement bear interest at the 30-Day
Commercial Paper Rate plus 2.90%. Net borrowings under this line of credit
totaled $237,895 at September 30, 2000.
We believe that cash generated by our operations, current cash and cash
equivalents, and the lines of credit should supply sufficient cash resources to
meet our cash needs for the next 12 months.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
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Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELEBYTE, INC.
By: __________\s\_________________
Kenneth S. Schneider
Chairman of the Board
(Principal Executive Officer)
By: ___________\s\________________
Michael Breneisen
President
(Principal Financial and Accounting Officer)
Date: November 14, 2000