FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended
September 30, 1997
[ ] 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
1-11916
WIRELESS TELECOM GROUP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2582295
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
East 64 Midland Avenue
Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201) 261-8797
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the most recent practicable date.
Common Stock - Par Value $.01 17,461,098
Class Outstanding Shares
At October 6, 1997
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page(s)
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996 3
Condensed Statements of Operations for the Three and Nine
Months Ended September 30, 1997 and 1996 (unaudited) 4
Condensed Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996 (unaudited) 5
Notes to Interim Condensed Financial Statements (unaudited) 6 - 7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 2 -- Changes in Securities 11
Item 3 -- Defaults upon Senior Securities 11
Item 4 -- Submission of Matters to a Vote of Security Holders 11
Item 5 -- Other Information 11
Item 6 -- Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 11.1 13
Exhibit 27 14
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
SEPTEMBER 30, DECEMBER 31,
1997 1996
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 7,924,910 $ 8,039,128
Accounts receivable -- net of allowance for
doubtful accounts of $88,364 and $74,707,
respectively 5,431,245 4,252,115
Inventories 7,233,498 4,998,575
Prepaid expenses and other current assets 485,222 272,960
---------- ----------
TOTAL CURRENT ASSETS 21,074,875 17,562,778
PROPERTY, PLANT AND EQUIPMENT - NET 1,708,452 1,022,686
OTHER ASSETS 625,775 458,778
---------- ----------
$ 23,409,102 $ 19,044,242
========== ==========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES
Accounts payable $ 1,687,117 $ 1,219,754
Accrued expenses and other
current liabilities 259,617 159,887
--------- ---------
TOTAL CURRENT LIABILITIES 1,946,734 1,379,641
DEFERRED INCOME TAXES 132,594 65,075
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,611,098 and 17,502,898 shares
issued, respectively 176,111 175,029
Additional paid-in-capital 6,414,661 6,044,782
Retained earnings 15,008,477 11,441,707
Treasury stock at cost, 150,000 and
130,000 shares, respectively (269,475) (61,992)
---------- ----------
21,329,774 17,599,526
---------- ----------
$ 23,409,102 $ 19,044,242
========== ==========
The accompanying notes are an integral part of these financial statements.
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WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
NET SALES $ 6,761,626 $ 6,058,702 $ 20,940,413 $ 16,437,840
--------- --------- ---------- ----------
COSTS AND EXPENSES
Cost of sales 2,121,168 1,434,126 6,080,358 4,232,570
Operating expenses 1,844,685 1,442,661 5,427,572 3,824,521
Interest, dividend
and other income (110,848) (92,865) (333,662) (255,265)
--------- --------- ---------- ---------
TOTAL COSTS AND EXPENSES 3,855,005 2,783,922 11,174,268 7,801,826
--------- --------- ---------- ---------
INCOME FROM OPERATIONS
BEFORE PROVISION FOR
INCOME TAXES 2,906,621 3,274,780 9,766,145 8,636,014
PROVISION FOR INCOME TAXES 1,105,874 1,212,718 3,583,154 3,226,537
--------- --------- --------- ---------
NET INCOME $ 1,800,747 $ 2,062,062 $ 6,182,991 $ 5,409,477
========= ========= ========= =========
NET INCOME PER COMMON SHARE (Note 2):
PRIMARY $.10 $.12 $.35 $.31
FULLY DILUTED $.10 $.12 $.35 $.31
The accompanying notes are an integral part of these financial statements.
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WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months
Ended September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,182,991 $ 5,409,477
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 194,994 119,116
Deferred income taxes 67,519 11,982
Provision for losses on accounts receivable 13,657 36,112
Changes in assets and liabilities:
(Increase) in accounts receivable (1,192,787) (1,422,918)
(Increase) in inventories (2,234,923) (1,537,179)
(Increase) decrease in prepaid expenses
and other assets (192,737) 369,761
Increase in accounts payable and accrued expenses 567,093 430,584
--------- ---------
Net cash provided by operating activities 3,405,807 3,416,935
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (880,760) (315,021)
Officer's life insurance (186,522) (139,845)
---------- -------
Net cash (used) for investing activities (1,067,282) (454,866)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (2,616,221) (1,907,305)
Acquisition of treasury stock (207,483) -
Proceeds from exercise of stock options 370,961 255,064
--------- ---------
Net cash (used) for financing activities (2,452,743) (1,652,241)
========= =========
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (114,218) 1,309,828
Cash and cash equivalents, at beginning of year 8,039,128 5,839,865
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 7,924,910 $ 7,149,693
========= =========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 3,555,000 $ 2,607,000
The accompanying notes are an integral part of these financial statements.
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WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
The condensed consolidated balance sheet as of September 30, 1997 and the
condensed consolidated statements of operations for the three and nine month
periods ended September 30, 1997 and 1996 and the condensed consolidated
statements of cash flows for the nine month periods ended September 30, 1997
and 1996 have been prepared by the Company without audit. The consolidated
financial statements include the accounts of Wireless Telecom Group, Inc. and
its wholly-owned subsidiary WTG Foreign Sales Corporation. WTG Foreign Sales
Corporation began operations as a subsidiary of the Company in February 1996.
In the opinion of management, the accompanying condensed consolidated
financial statements referred to above contain all necessary adjustments,
consisting of normal accruals and recurring entries only, which are necessary
to present fairly the Compan y's results for the interim periods being
presented.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements included in its annual report on Form 10-K for
the year ended December 31, 1996, which is incorporated herein by reference.
Specific refer ence is made to this report for a description of the Company's
securities and the notes to financial statements included therein.
The results of operations for the three and nine month periods ended September
30, 1997 and 1996 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 - INCOME PER COMMON SHARE
Income per common share is computed by dividing the net income by the weighted
average number of common shares and common equivalent shares outstanding
during each period.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 "Earnings Per Share" ("SFAS 128"), which changes the method for
calculating earnings per share. SFAS 128 requires the presentation of "basic"
and "diluted" earnings p er share on the face of the income statement. SFAS
128 is effective for financial statements for periods ending after December
15, 1997. The Company will adopt SFAS 128 for the year ending December 31,
1997, and accordingly restate prior periods, as early adoption is not
permitted. Statement No. 128 is not expected to materially differ from primary
or fully diluted earnings per share as reported in Exhibit 11.1 in the
Company's quarterly Form 10-Q.
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WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 - REVOLVING CREDIT LINE
The Company renewed the agreement with its bank which provides for an
unsecured line of credit in the amount of $5,000,000 at the bank's prime
lending rate. In September 1997, the bank increased the line of credit to
$7,000,000. There are no direct borrowings currently against the line of
credit. This agreement expires on September 30, 1998.
NOTE 4 - DIVIDENDS
On January 27, 1997, May 19, 1997 and July 18, 1997, the Company announced the
declaration of quarterly cash dividends of $.05 per share to shareholders of
record on March 24, 1997, June 23, 1997 and September 22, 1997, respectively.
These cash dividends aggregated $2,616,221 and were paid by March 31, 1997,
June 30, 1997 and September 30, 1997, respectively.
It is the Company's present intention to maintain a quarterly dividend policy.
The Company paid cash dividends aggregating $.15 per share for the year ending
December 31, 1996.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc., formerly Noise Com, Inc., (the "Company")
develops, manufactures and markets a wide variety of electronic noise sources
and test instruments for wireless telecommunications. The Company's products
are used to test the performance and capability of satellite, cellular and
personal (PCS) communications, radio, radar, wireless local area network
(WLAN), high-definition television (HDTV) and other communications systems. To
further address the needs of the ever-evolving wireless telecommunications
industry, the Company has been developing and marketing test instruments
designed to fulfill the requirements of such customers. The Company is
expanding its product offerings to these customers as this emerging industry
is expected to provide an opportunity for substantial growth.
The financial information presented herein includes:
(i) Condensed consolidated balance sheets as of September 30, 1997 and as of
December 31, 1996 (ii) Condensed consolidated statements of operations for
the three and nine month periods ended September 30, 1997 and 1996 and (iii)
Condensed consolidated statements of cash flows for the nine month periods
ended September 30, 1997 and 1996.
OPERATIONS
For the nine months ended September 30, 1997 as compared to the corresponding
period of the previous year, net sales increased to $20,940,413 from
$16,437,840 an increase of $4,502,573 or 27.4%. For the quarter ended
September 30, 1997 as compared to the corresponding period of the previous
year, net sales increased to $6,761,626 from $6,058,702 an increase of
$702,924 or 11.6%. These volume increases are the result of the continued
growth of commercial applications of the Company's products of which the most
notable are the sales of the Company's wireless telecommunications
instruments.
The Company's gross profit on net sales for the nine months ended September
30, 1997 was $14,860,055 or 71.0% as compared to $12,205,270 or 74.3% for the
nine months ended September 30, 1996. Gross profit on net sales for the
quarter ended September 30, 1997 was $4,640,458 or 68.6% as compared to
$4,624,576 or 76.3% for the three months ended September 30, 1996. Variations
in gross profit are attributed to an increase in labor costs due to the hiring
of additional personnel to support the Company's expanding product line. In
addition, the Company can experience variations in gross profit based upon the
mix of product sales as well as variations due to revenue volume and economies
of scale. The Company continues to rigidly monitor costs associated with
material acquisition, manufacturing and production.
Operating expenses for the nine months ended September 30, 1997 were
$5,427,572 or 25.9% of net sales as compared to $3,824,521 or 23.3% of net
sales for the nine months ended September 30, 1996. Operating expenses for the
quarter ended September 30, 1997 were $1,844,685 or 27.3% of net sales as
compared to $1,442,661 or 23.8% of net sales for the quarter ended September
30, 1996.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
For the nine months ended September 30, 1997 as compared to the same period of
the prior year, operating expenses increased in dollars by $1,603,051.
Approximately 44% of this increase is due to greater expenditures for research
and development of new products. An additional 37% of the increase is
attributable to greater advertising and selling expenses incurred to generate
sales and to expand customer awareness of the Company's products. Also,
increased rent expense for the Company's larger facility accounted for 6% of
the dollar increase from 1996.
For the quarter ended September 30, 1997 as compared to the same period of the
prior year, operating expenses increased in dollars by $402,024. Approximately
64% of this increase is due to greater expenditures for research and
development of new prod ucts. An additional 18% of the increase is
attributable to greater advertising and selling expenses incurred to generate
sales and to expand customer awareness of the Company's wireless
telecommunications instruments. Also, increased rent expense for the Company's
larger facility accounted for 9% of the increase in dollars from 1996.
Interest, dividend and other income increased by $78,397 for the nine months
ended September 30, 1997 and by $17,983 for the quarter ended September 30,
1997. This increase was due to a larger average investment balance during
1997.
Net income increased to $6,182,991, or $.35 per share, for the nine months
ended September 30, 1997 as compared to $5,409,477, or $.31 per share for the
nine months ended September 30, 1996. Net income for the quarter ended
September 30, 1997 was $1,800,747 or $.10 per share as compared to $2,062,062
or $.12 per share for the three months ended September 30, 1996. The
explanation of these changes can be derived from the analysis given above of
operations for the nine month periods ending September 30, 1997 and 1996,
respectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital has increased by $2,945,004 to $19,128,141 at
September 30, 1997, from $16,183,137 at December 31, 1996. At September 30,
1997 the Company had a current ratio of 10.8 to 1, and a ratio of debt to net
worth of .1 to 1. At December 31, 1996 the Company had a current ratio of 12.7
to 1, and a ratio of debt to net worth of less than .1 to 1.
Net cash provided from operations has allowed the Company to meet its
liquidity requirements, research and development activities and capital
expenditures. Operating activities provided $3,405,807 in cash for the nine
month period ending September 30, 1997 versus $3,416,935 in cash flows for the
comparable period in 1996. Cash provided from operations was primarily due to
net income offset by increases in accounts receivable and inventory.
Management believes that accounts receivable have been increasing commensurate
with the increase in sales. The Company has historically been able to turn
over its accounts receivable approximately every two months. This average
collection period has been sufficient to provide the working capital and
liquidity necessary to operate the Company.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Due to the Company's expanding product line, the volume of items and
accordingly the total dollar value of inventory has increased. As the Company
plans to further expand its product line, inventory is being monitored closely
to balance production requirements while maintaining manageable levels of
goods on hand.
Net cash used for investing activities for the nine month periods ending
September 30, 1997 and 1996 were $1,067,282 and $454,866, respectively.
Capital expenditures for the Company's increasing product line and workforce
were the primary use of funds. In addition, funds were used for premiums on
life insurance for certain of the Company's officers and other key employees.
Net cash used for financing activities for the nine month periods ending
September 30, 1997 and 1996 were $2,452,743 and $1,652,241, respectively. The
payment of quarterly cash dividends were the primary use of these funds. The
Company also reacquired 20,000 shares of its common stock in the open market
during the second quarter of 1997. These cash outlays were partially offset
by proceeds from the exercise of stock options. The Company increased its
quarterly cash dividend payout by 25% to $ .05 per share in the first quarter
of 1997.
On January 27, 1997, May 19, 1997 and July 18, 1997, the Company announced the
declaration of quarterly cash dividends of $.05 per share payable to
shareholders of record on March 24, 1997, June 23, 1997 and September 22,
1997, respectively. These cash dividends aggregated $2,616,221 and were paid
by March 31, 1997, June 30, 1997 and September 30, 1997, respectively.
In February 1996, the Company established a Foreign Sales Corporation.
On May 13, 1996 the Company announced the declaration of a two-for-one stock
split on the Company's common stock. The split was effective for shareholders
of record on May 22, 1996 and was paid on May 28, 1996. All share and per
share data have been retroactively adjusted to show the effects of the split.
During 1996, the Company declared quarterly cash dividends aggregating
$2,602,215 or $.15 per common share. It is the Company's present intention to
maintain a quarterly dividend policy.
The Company believes that its financial resources from working capital
provided by operations and its bank line of credit are adequate to meet
current requirements.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly impact its
business nor does it believe that its business is seasonal.
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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
Not applicable.
Item 5. OTHER INFORMATION
On July 18, 1997 the Company announced a quarterly cash dividend
of $.05 per share to shareholders of record on September 22,
1997. The cash dividend was paid by September 30, 1997.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarterly period ended September 30, 1997.
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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.
WIRELESS TELECOM GROUP, INC.
(Registrant)
Date: October 17, 1997 /S/Dale Sydnor
--------------------
Dale Sydnor
Chairman and Chief
Executive Officer
Date: October 17, 1997 /S/Eugene Ferrara
--------------------
Eugene Ferrara
Chief Financial Officer