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
March 31, 1998
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[ ] 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
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WIRELESS TELECOM GROUP, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 22-
2582295
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(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
East 64 Midland Avenue
Paramus, New Jersey
07652
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(Address of principal executive offices)
(Zip Code)
(201) 261-8797
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Registrant's telephone number, including area code
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(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 17,557,298
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Class Outstanding Shares
At April 17, 1998
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page(s)
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of March 31, 1998
(unaudited) and December 31, 1997 3
Condensed Statements of Operations for the Three
Months Ended March 31, 1998 and 1997 (unaudited) 4
Condensed Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1997 (unaudited) 5
Notes to Interim Condensed Financial Statements (unaudited) 6
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 10
Item 2 -- Changes in Securities 10
Item 3 -- Defaults upon Senior Securities 10
Item 4 -- Submission of Matters to a Vote of Security Holders 10
Item 5 -- Other Information 10
Item 6 -- Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 11.1 12
Exhibit 27 13
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
MARCH 31, DECEMBER 31,
1998 1997
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 6,477,694 $ 7,546,625
Accounts receivable -- net of allowance
for doubtful accounts of $138,022 and
$120,616, respectively 5,980,427 4,728,640
Inventories 8,465,281 8,810,230
Prepaid expenses and other current assets 216,617 224,413
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TOTAL CURRENT ASSETS 21,140,019 21,309,908
PROPERTY, PLANT AND EQUIPMENT - NET 2,292,423 2,254,829
OTHER ASSETS 608,299 646,317
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$ 24,040,741 $ 24,211,054
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- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES
Accounts payable $ 886,600 $ 1,652,601
Accrued expenses and other current
liabilities 267,535 204,818
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TOTAL CURRENT LIABILITIES 1,154,135 1,857,419
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DEFERRED INCOME TAXES 131,395 125,404
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,701,098 and 17,613,498
shares issued, respectively 177,011 176,135
Additional paid-in-capital 6,626,074 6,422,971
Retained earnings 16,219,935 15,896,934
Treasury stock at cost, 145,000 shares (267,809) (267,809)
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22,755,211 22,228,231
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$ 24,040,741 $ 24,211,054
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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 Ended March 31,
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1998 1997
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NET SALES $ 6,058,887 $ 7,142,501
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COSTS AND EXPENSES
Cost of sales 2,405,377 1,967,196
Operating expenses 1,872,536 1,750,331
Interest, dividend and other income (99,909) (105,176)
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TOTAL COSTS AND EXPENSES 4,178,004 3,612,351
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INCOME FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES 1,880,883 3,530,150
PROVISION FOR INCOME TAXES 680,337 1,290,870
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NET INCOME $ 1,200,546 $ 2,239,280
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NET INCOME PER COMMON SHARE (Note 2):
BASIC $ .07 $ .13
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DILUTED $ .07 $ .13
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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 Three Months
Ended March 31,
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,200,546 $2,239,280
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 101,695 53,241
Deferred income taxes 5,991 5,991
Provision for losses on accounts receivable 17,406 3,993
Changes in assets and liabilities:
(Increase) in accounts receivable (1,269,193) (500,977)
(Increase) decrease in inventories 344,949 (796,434)
Decrease in prepaid expenses and other assets 45,814 64,402
Increase (decrease) in accounts payable and
accrued expenses (703,284) 229,289
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Net cash (used in)provided by operating activities(256,076) 1,298,785
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (139,289) (94,541)
Officer's life insurance - (34,163)
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Net cash (used) for investing activities (139,289) (128,704)
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CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (877,545) (871,631)
Proceeds from exercise of stock options 203,979 170,767
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Net cash (used) for financing activities (673,566) (700,864)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,068,931) 469,217
Cash and cash equivalents, at beginning of year 7,546,625 8,039,128
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CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 6,477,694 8,508,345
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SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 636,000 $ 1,125,000
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 March 31, 1998 and the condensed
consolidated statements of operations for the three month periods ended March
31, 1998 and 1997 and the condensed consolidated statements of cash flows for
the three month periods ended March 31, 1998 and 1997 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 Company'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, 1997, which is incorporated herein by reference.
Specific reference 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 month periods ended March 31, 1998 and
1997 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. The Company has adopted SFAS 128 "Earnings Per Share" ("SFAS
128"), which has changed the method for calculating earnings per share. SFAS
128 requires the presentation of "basic" and "diluted" earnings per share on
the face of the income statement. Prior period earnings per share data have
been restated in accordance with Statement 128.
NOTE 3 - REVOLVING CREDIT LINE
The Company has an agreement with its bank for an unsecured line of credit in
the amount of $7,000,000 at the bank's prime lending rate. There are no direct
borrowings currently against the line of credit. This agreement expires on
September 30, 1998.
NOTE 4 - DIVIDENDS
On January 26, 1998, the Company announced the declaration of quarterly cash
dividends of $.05 per share to shareholders of record on March 23, 1998. These
cash dividends aggregated $877,545 and were paid by March 31, 1998. Although
the Company has historically paid a cash dividend, the Company continually
evaluates the appropriateness of this policy. The Company paid cash dividends
aggregating $.20 per share for the year ending December 31, 1997.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc. (the "Company"), develops, manufactures and
markets a wide variety of test instruments and electronic noise sources for
wireless telecommunications. The Company's products are primarily used to test
the performance and capability of cellular/PCS and satellite communications
systems. Other applications include radio, radar, wireless local area network
(WLAN) and digital television. 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 March 31, 1998 and as of
December 31, 1997
(ii) Condensed consolidated statements of operations for the three month
periods ended March 31,1998 and 1997 and
(iii) Condensed consolidated statements of cash flows for the three month
periods ended March 31, 1998 and 1997.
OPERATIONS
For the three months ended March 31, 1998 as compared to the corresponding
period of the previous year, net sales decreased to $6,058,887 from $7,142,501
a decrease of $1,083,614 or 15.2%. This decrease was due to the weakness of the
Asian economy resulting in a decline in sales to international and domestic
customers. In addition, a decline in current demand for the Company's existing
products is being experienced. This decline in current demand is due to a
transition in technology as the industry focuses on test solutions for third
generation phones. The Company has been aggressively pursuing the development
of products for this new technology.
The Company's gross profit on net sales for the three months ended March 31,
1998 was $3,653,510 or 60.3% as compared to $5,175,305 or 72.5% for the three
months ended March 31, 1997. Variations in gross profit are attributed to an
increase in labor costs due to the hiring of additional personnel. The Company
has increased its headcount to gain additional production capacity and to
provide greater customer support for existing products. 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 has incurred greater material costs due to the increasing complexity of
the products it provides to its customers. The need to provide expanded
features and greater performance to allow the Company to differentiate
its products in the marketplace is the primary reason for the increase in
material costs.
Operating expenses for the three months ended March 31, 1998 were $1,872,536 or
30.9% of net sales as compared to $1,750,331 or 24.5% of net sales for the
three months ended March 31, 1997.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
For the three months ended March 31, 1998 as compared to the same period of the
prior year, operating expenses increased in dollars by $122,205. Of this
increase, approximately 61% is due to greater expenditures for research and
development of new products. An additional 29% is attributable to greater
promotional, advertising and selling efforts incurred to generate sales
and to expand awareness of the Company and its products.
Interest, dividend and other income decreased by $5,267 for the three months
ended March 31, 1998. This decrease was due to a lower average investment
balance during 1998.
Net income decreased to $1,200,546, or $.07 per share, for the three months
ended March 31, 1998 as compared to $2,239,280, or $.13 per share for the three
months ended March 31, 1997. The explanation of these changes can be derived
from the analysis given above of operations for the quarter ending March 31,
1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital has increased by $533,395 to $19,985,884 at March
31, 1998, from $19,452,489 at December 31, 1997. At March 31, 1998 the Company
had a current ratio of 18.3 to 1, and a ratio of debt to net worth of less than
.1 to 1. At December 31, 1997 the Company had a current ratio of 11.5 to 1, and
a ratio of debt to net worth of less than .1 to 1.
The Company utilized cash from operations of $256,076 for the period ending
March 31, 1998. Cash provided by net income of $1,200,546 was offset by an
increase in accounts receivable of $1,269,193. The increase in receivables was
due primarily to timing and management believes that the collection of its
receivables is still in line with the historical turn over rate of
approximately two months.
In addition, the company reduced its trade payables by $703,284. These
payables were settled in the normal course of business consistent with the
Company's customary payment practices. The Company also realized a reduction in
inventory of $344,949. This reduction in inventory is a result of balancing
production requirements while maintaining manageable levels of goods on hand.
Operating activities provided $1,298,785 in cash flows for the comparable
period in 1997. Cash provided from operations was primarily due to net income
offset by increases in accounts receivable and inventory.
Net cash used for investing activities for the quarter ending March 31, 1998
and 1997 were $139,289 and $128,704, respectively. Capital expenditures for the
Company's increasing product line and workforce were the primary use of funds.
In addition, in 1997 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 quarter ending March 31, 1998
and 1997 were $673,566 and $700,864, respectively. The payment of quarterly
cash dividends was the primary use of these funds. These cash outlays were
partially offset by proceeds from the exercise of stock options.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
On January 26, 1998, the Company announced the declaration of quarterly cash
dividends of $.05 per share payable to shareholders of record on March 23,
1998. This cash dividend aggregated $877,545 and was paid by March 31, 1998.
During 1997, the Company declared quarterly cash dividends aggregating
$3,489,646 or $.20 per common share. Although the Company has historically paid
a cash dividend, the Company continually evaluates the appropriateness of this
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 January 26, 1998 the Company announced the declaration of a
quarterly cash dividend of $.05 per share to shareholders of record on March
23, 1998. The cash dividend was paid by March 31, 1998.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of per share earnings
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarterly period ended March 31, 1998.
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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.
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(Registrant)
Date: April 24, 1998 /S/Dale Sydnor
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Dale Sydnor
Chairman and Chief Executive
Officer
Date: April 24, 1998 /S/Eugene Ferrara
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Eugene Ferrara
Chief Financial Officer
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