1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(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, 1997 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 0-20046
RESOUND CORPORATION
(Exact name of Registrant as specified in its charter)
California 77-0019588
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
220 Saginaw Drive, Seaport Centre, Redwood City, California
94063 (Address, including zip code, of principal executive offices)
(650) 780-7800
(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 of the Registrant's common stock issued and
outstanding as of November 5, 1997 was 20,048,602 shares.
1
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets................................3
Condensed Consolidated Statements of Operations......................4
Condensed Consolidated Statements of Cash Flows......................5
Notes to Condensed Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations................................................8
Liquidity and Capital Resources.....................................11
Outlook.............................................................12
Item 3. Quantitative and Qualitative Disclosures about Market Risks.........12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................12
Item 2. Changes in Securities and Use of Proceeds...........................12
Item 3. Defaults upon Senior Securities.....................................13
Item 4. Submission of Matters to a Vote of Security Holders.................13
Item 5. Other Information...................................................13
Item 6. Exhibits and Reports on Form 8-K....................................13
SIGNATURES ...........................................................................14
2
3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
RESOUND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
September 30, December 31,
1997 1996
------------- ------------
(Unaudited) (Note)
Current assets:
Cash and cash equivalents ............................ $ 12,288 $ 7,980
Accounts receivable, net ............................. 20,114 20,497
Inventories .......................................... 16,620 23,853
Prepaid expenses and other ........................... 3,614 4,218
--------- ---------
Total current assets .......................... 52,636 56,548
Property and equipment, net .............................. 11,642 13,494
Other assets ............................................. 4,872 4,899
Goodwill ................................................. 23,449 39,811
--------- ---------
$ 92,599 $ 114,752
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans and current debt ............................... $ 5,112 $ 4,717
Accounts payable ..................................... 5,642 8,478
Accrued liabilities .................................. 19,435 17,976
--------- ---------
Total current liabilities ..................... 30,189 31,171
Long-term debt ........................................... 17,399 19,515
Employee benefits ........................................ 3,649 5,110
Other accrued liabilities ................................ 1,086 1,360
Commitments and contingencies ............................ -- --
Shareholders' equity:
Preferred stock ...................................... 5,450 5,225
Common stock ......................................... 91,224 90,680
Accumulated deficit .................................. (55,115) (39,202)
Cumulative translation adjustment .................... (1,283) 893
--------- ---------
Total shareholders' equity .................... 40,276 57,596
--------- ---------
$ 92,599 $ 114,752
========= =========
Note: The balance sheet at December 31, 1996 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
4
RESOUND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
Three months ended Nine months ended
------------------ -----------------
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Net sales ........................................... $ 31,934 $33,821 $ 96,376 $90,805
Cost of sales ....................................... 16,224(1) 15,364 46,066(1) 40,408
-------- ------- -------- -------
Gross profit ............................... 15,710 18,457 50,310 50,397
Operating expenses
Research and development ........................ 4,244 3,904 12,443 10,463
Selling, general and administrative ............. 13,028(1) 12,472 40,026(1) 34,888
Restructuring and other charges ................. 11,184(1) -- 11,184(1) --
-------- ------- -------- -------
Total operating expenses ................. 28,456 16,376 63,653 45,351
-------- ------- -------- -------
Income (loss) from operations ....................... (12,746) 2,081 (13,343) 5,046
Interest expense, net ............................... 296 397 1,078 1,519
Other expense/minority interest ..................... 36 71 371 189
-------- ------- -------- -------
Income (loss) before income taxes ................... (13,078) 1,613 (14,792) 3,338
Provision for income taxes (2) ...................... 217 472 896 1,005
-------- ------- -------- -------
Net income (loss) ................................... $(13,295)(1) $ 1,141 $(15,688)(1) $ 2,333
======== ======= ======== =======
Net income (loss) applicable to common
shareholders ...................................... $(13,370) $ 1,066 $(15,913) $ 2,183
======== ======= ======== =======
Net income (loss) per share (3) ..................... $ (0.69) $ 0.06 $ (0.82) $ 0.13
======== ======= ======== =======
Shares used in above calculation (3) ................ 19,441 19,481 19,391 17,466
======== ======= ======== =======
(1) Includes special charges of $13.6 million as follows: cost of sales -- $1.8
million; selling, general and administrative -- $0.6 million; restructuring
and other -- $11.2 million (of which $10.3 million is the result of
writedown of goodwill).
(2) Consists principally of state and foreign income taxes.
(3) See Exhibit 11.1 "Statement of Computation of Net Income (Loss) per Share."
See notes to condensed consolidated financial statements.
4
5
RESOUND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
(Unaudited)
Nine months ended
-----------------
September 30, September 30,
1997 1996
------------- -------------
Cash flows from operating activities:
Net income (loss) ....................................................... $(15,688) $ 2,333
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ....................................... 3,977 4,316
Restructuring and other charges ..................................... 10,688 --
Changes in assets and liabilities:
Accounts receivable ................................................. 383 (4,444)
Inventories ......................................................... 7,233 (403)
Prepaid expenses and other assets ................................... (1,169) (3,802)
Accounts payable .................................................... (2,836) (1,218)
Accrued liabilities ................................................. (51) 424
-------- --------
Net cash provided by (used in) operating activities .............. 2,537 (2,794)
Cash flows from investing activities:
Investment in Sonar Hearing Health ...................................... -- (25,443)
Purchase of minority shareholder's interest in a
subsidiary of Viennatone .............................................. -- (1,857)
Proceeds from patent contributions to partnership (net) ................. 1,800 7,300
Change in cumulative translation adjustment ............................. 2,176 (897)
Additions of property and equipment, net ................................ (1,028) (4,724)
-------- --------
Net cash provided by (used in) investing activities .............. 2,948 (25,621)
Cash flows from financing activities:
Decrease in bank borrowings ............................................. (2,116) (8,978)
Loans payable ........................................................ 395 --
Issuance of preferred stock .......................................... -- 5,000
Issuance of common stock ............................................... 544 36,211
-------- --------
Net cash provided by (used in) financing activities .............. (1,177) 32,233
-------- --------
Net increase in cash and cash equivalents ................................... 4,308 3,818
Cash and cash equivalents at the beginning of the period .................... 7,980 5,091
-------- --------
Cash and cash equivalents at the end of the period .......................... $ 12,288 $ 8,909
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................................................ $ 1,259 $ 1,863
Income taxes ............................................................ $ 1,086 $ 702
Supplemental schedule of non-cash investing and financing activities:
Accrual of preferred stock dividend ....................................... $ 225 $ 150
Conversion of convertible promissory notes to common stock ............... $ -- $ 2,000
See notes to condensed consolidated financial statements.
5
6
ReSound Corporation
Notes to Condensed Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine-month period ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. For further information, refer to the audited consolidated financial
statements for the year ended December 31, 1996 and footnotes thereto included
in the Company's 1996 Annual Report on Form 10-K.
Earnings Per Share
Net income (loss) per share is computed using the net income (loss) applicable
to common shareholders and the weighted average number of shares outstanding.
For the three-month and nine-month periods ended September 30, 1996 outstanding
options to purchase common shares are included in the calculation. The net
losses for the three-month and nine-month periods ended September 30, 1997 are
increased by the dividend accrued on Series B Preferred Stock to arrive at net
loss applicable to common shareholders. The net income for the three-month
period ended September 30, 1996 is reduced by the dividend accrued on Series B
Preferred Stock to arrive at net income applicable to common shareholders.
In February 1997, Statement of Financial Accounting Standards No. 128 was issued
and is required to be adopted for both interim and annual periods ending after
December 15, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements, the currently presented primary net
earnings per share will be replaced by basic earnings per share. The fundamental
difference is that basic earnings per share excludes the dilutive effect of
stock options. The computed basic earnings per share is not materially different
from earnings per share for the three-month and nine-month periods ended
September 30, 1997 and September 30, 1996. Additionally, fully diluted earnings
per share will be replaced by diluted earnings per share, which will be
calculated on a similar basis and will always be required to be presented on the
consolidated statements of operations. The computed diluted earnings per share
is not materially different from the earnings per share as reported for these
periods.
6
7
NOTE B - RESTRUCTURING AND OTHER CHARGES
In the third quarter of 1997, the Company announced a restructuring program
designed to streamline operations and control costs through management
restructuring, operational consolidations, and increased focus on core
activities and product lines. This restructuring program is anticipated to
result in a work force reduction of up to 100 people out of 975 people
worldwide, and special charges in the second half of 1997 of approximately $18.0
million. Of the estimated $18.0 million in special charges, approximately $13.5
million reflects non-cash items for the writedown of goodwill and discontinued
product lines. The remaining estimated $4.5 million reflects cash items
pertaining primarily to employee severance and consolidation activities. The
third quarter 1997 results include $13.6 million of the special charges as
follows: Cost of sales -- $1.8 million (for writedown of discontinued products);
Selling, general and administrative -- $0.6 million (for product line exit
costs); Restructuring and other -- $11.2 million (for writedown of goodwill --
$10.3 million, and employee severance and lease termination costs -- $0.9
million). The Company anticipates incurring approximately $4.4 million in
special charges in the fourth quarter of 1997 relating to the restructuring
program.
NOTE C - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market. The
components of inventories consist of the following (in thousands):
September 30, December 31,
1997 1996
------------- ------------
Raw materials $ 8,237 $ 9,934
Work in process 2,653 6,838
Finished products 5,730 7,081
------- -------
$16,620 $23,853
======= =======
NOTE D - ACCOUNTING FOR INCOME TAXES
Income taxes have been provided for on a year-to-date basis and represent taxes
on profits earned at the Company's European subsidiaries in Ireland, Germany,
and Holland, plus California taxes.
NOTE E - USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results inevitably will differ from those estimates, and such differences
may be material to the financial statements.
7
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains forward-looking statements, which can be identified by
words such as "may," "will," "believe," "expect," "anticipate," "estimate,"
"plan," "intend" and the like. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
contemplated in the statements. These risks and uncertainties are discussed in
the section below entitled "Outlook" and in the Company's reports filed with the
Securities and Exchange Commission, including its Report on Form 10-K for the
fiscal year ended December 31, 1996.
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I
- -- Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto, the Introductory Statement and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
RESULTS OF OPERATIONS
Three months ended September 30, 1997 and September 30, 1996
In the third quarter of 1997, the Company announced a restructuring program
designed to streamline operations and control costs through management
restructuring, operational consolidations, and increased focus on core
activities and product lines. This restructuring program is anticipated to
result in a work force reduction of up to 100 people out of 975 people
worldwide, and special charges in the second half of 1997 of approximately $18.0
million. Of the estimated $18.0 million in special charges, approximately $13.5
million reflects non-cash items for the writedown of goodwill and discontinued
product lines. The remaining estimated $4.5 million reflects cash items
pertaining primarily to employee severance and consolidation activities. The
third quarter 1997 results include $13.6 million of the special charges as
follows: Cost of sales -- $1.8 million (for writedown of discontinued products);
Selling, general and administrative -- $0.6 million (for product line exit
costs); Restructuring and other -- $11.2 million (for writedown of goodwill --
$10.3 million, and employee severance and lease termination costs -- $0.9
million). The Company anticipates incurring approximately $4.4 million in
special charges in the fourth quarter of 1997 relating to the restructuring
program.
Net sales decreased by 5.6 percent to $31.9 million in the quarter ended
September 30, 1997, from $33.8 million in the quarter ended September 30, 1996.
Excluding the adverse impact of recent foreign currency exchange fluctuations,
net sales increased two percent compared to the same quarter a year ago. Sales
in the U.S. and Canada, at $17.5 million in the current quarter, were unchanged
from the comparable prior year period. The flat U.S. and Canadian sales
performance in the third quarter primarily reflects intensified competition in
the programmable segment of the hearing device market due to increased
competition from digital signal processing product offerings, pricing pressures
from competitors' analog products, and a product mix shift to more moderately
priced
8
9
models. International sales for the third quarter of 1997 were $14.4 million, a
decrease of 11.4 percent from the same period last year. The decrease in
international sales was the result of several factors in Europe, including
weaker European currencies compared to the U.S. dollar, increased competition
from digital sound processing product offerings, increased competition and
pricing pressures in the Company's Viennatone operations, unfavorable changes in
governmental regulatory and reimbursement policies, and continued adverse
economic conditions in certain key countries. Asia Pacific-Latin America sales
were $1.3 million, slightly below the amount recorded for the same period in
1996. The flat performance compared to the third quarter of 1996 was primarily
due to lower shipments to the Company's Japanese distributor in order to improve
the balance of inventory levels and in-market sales. International sales
accounted for 45.3 percent of ReSound's net sales in the third quarter of 1997,
compared to 48.2 percent in the same quarter of 1996.
Gross profit was 49.2 percent of net sales in the third quarter of 1997,
compared to 54.6 percent of net sales for the same quarter of 1996. The third
quarter 1997 gross profit was adversely affected by one-time costs attributable
to the writedown of discontinued products of $1.8 million. Excluding the impact
of this one-time charge, gross profit was 54.8 percent of net sales. Average
unit sales prices have declined due to increasing competition and product mix
sales shifts, particularly in the U.S., from the higher priced premium product
line to the more moderately priced Encore(TM) product line. This impact has been
largely offset by reductions in the cost of goods sold.
Research and development ("R&D") spending during the third quarter of 1997 was
$4.2 million (13.2 percent of net sales) compared to $3.9 million (11.5 percent
of net sales) in the same quarter of 1996. The increase in R&D spending was
largely attributable to the development of new products, including the Company's
digital signal processing (DSP) platforms and its first completely-in-the-canal
(CIC) digitally programmable device which is expected to be introduced in the
first quarter of 1998.
Selling, general and administrative expenses ("SG&A") were $13.0 million (40.8
percent of net sales) for the third quarter of 1997, compared to $12.5 million
(36.9 percent of net sales) in the third quarter of 1996. The
quarter-over-quarter increase was largely attributable to certain product line
exit costs and expenses to implement a new automated business system in the
Viennatone subsidiary.
Net interest expense was $296,000 for the third quarter of 1997 compared to
$397,000 for the third quarter of 1996. This quarter-to-quarter decrease is
attributable to reduction of debt and the effect of a stronger U.S. dollar
compared to European currencies.
Income taxes have been provided for on a year-to-date basis and represent taxes
on profits earned at ReSound's European subsidiaries in Ireland, Germany and
Holland, plus California taxes.
The Company had a net loss of $13.3 million in the quarter ended September 30,
1997, compared to net income of $1.1 million in the quarter ended September 30,
1996. The third quarter 1997 results include $13.6 million of special charges
in connection with the Company's restructuring program. As previously noted,
$10.3 million of the $13.6 million charge in the third quarter relates to the
writedown of goodwill. Excluding the impact of the special charges, net income
was $0.3 million
9
10
for the third quarter of 1997. The Company anticipates incurring approximately
$4.4 million in additional special charges in the fourth quarter of 1997.
Nine months ended September 30, 1997 and September 30, 1996
Net sales increased by six percent to $96.4 million in the nine months ended
September 30, 1997, from $90.8 million in the nine months ended September 30,
1996. Sales in the U.S. and Canada increased 21 percent for the nine months
ended September 30, 1997 to $48.9 million from $40.5 million for the comparable
prior year period, primarily due to the inclusion of sales relating to products
obtained through the acquisition of certain assets of the hearing health
business activity of Minnesota Mining and Manufacturing Company (3M) in the
second quarter of 1996 and increased sales of the Company's ITC and Encore(TM)
hearing device products, partially offset by a decline in sales of the Company's
premium product series. International sales for the nine months ended September
30, 1997 were $47.5 million, a decrease of 5.5 percent from the same period last
year. The decrease in international sales was the result of several factors in
Europe including weaker European currencies compared to the U.S. dollar,
increased competition from digital signal processing product offerings,
increased competition and pricing pressures in the Viennatone subsidiary,
unfavorable changes in governmental regulatory and reimbursement policies, and
continued adverse economic conditions in certain key countries. Excluding the
negative impact of foreign currency exchange fluctuations, European net sales
increased six percent on a year-to-date nine-month basis when compared to the
equivalent period in 1996. These adverse European market factors on
international sales for the nine months ended September 30, 1997 were partially
offset by sales to the Asia Pacific-Latin America markets which increased 11
percent to $4.4 million from the comparable period last year due largely to
continued growth in Japan. International sales accounted for 49 percent of
ReSound's net sales in the first nine months of 1997, compared to 55 percent in
the same period of 1996.
Gross profit was 52.2 percent of net sales in the first nine months of 1997,
compared to 55.5 percent of net sales for the same period of 1996. Without the
third quarter 1997 special charge of $1.8 million, gross profit for the
nine-month period was 54.1 percent of net sales. The decline in gross profit
versus 1996 was largely attributable to increased sales of Sonar Hearing
Health's (the former 3M business activity) hearing devices sold at lower margins
than ReSound's product lines, coupled with product mix shifts to more
moderately-priced Encore models, and increased price and unit volume erosion for
Viennatone's products due to greater competition.
R&D spending during the first nine months of 1997 was $12.4 million (12.9
percent of net sales) compared to $10.5 million (11.5 percent of net sales) for
the same period of 1996. The increase in R&D spending was largely attributable
to the development of new products, the inclusion of Sonar Hearing Health R&D
expenses, and advanced development programs (most of which in the future are
likely to be jointly developed with Motorola, Inc.) which were not incurred in
the prior year.
SG&A expenses were $40.0 million (41.5 percent of net sales) for the first nine
months of 1997 compared to $34.9 million (38.4 percent of net sales) in the
first nine months of 1996. This increase for the nine month year-to-date 1997
period versus the equivalent period in 1996 was due primarily to the acquisition
of the hearing health business activity from 3M in June 1996, combined with
business system implementation costs at the Company's Viennatone subsidiary,
higher marketing
10
11
costs for expansion into certain European and Asian markets, higher
administration costs, and certain product line exit costs.
Restructuring and other charges of $11.2 million were incurred in the first nine
months of 1997. As noted above, $10.3 million of these charges related to
writedown of goodwill, with the balance relating to employee severance and other
restructuring costs.
Net interest expense was $1.1 million for the first nine months of 1997 compared
to $1.5 million for the comparable period in 1996. This decrease is attributable
to reduction of debt and the effect of a stronger U.S. dollar compared to
European currencies.
Transaction losses due to foreign currency fluctuations were $558,000 for the
first nine months of 1997 compared to $115,000 of transaction losses for the
comparable period in 1996.
Income taxes have been provided for on a year-to-date basis and represent taxes
on profits earned at ReSound's European subsidiaries in Ireland, Germany and
Holland, plus California taxes.
The Company had a net loss of $15.7 million in the nine months ended September
30, 1997, compared to net income of $2.3 million in the nine months ended
September 30, 1996. The net loss was primarily the result of the $13.6 million
of special charges discussed above, together with lower gross margins and
increased R&D and SG&A costs, largely attributable to the Company's Sonar
Hearing Health subsidiary (acquired in June 1996) and increased competition.
Additionally, SG&A costs increased due to the expansion into certain Asian and
European markets, incremental marketing and promotional activities in the U.S.,
and higher business system implementation costs in Europe. R&D spending also
increased due to expenses associated with new product development programs that
were initiated in the latter half of 1996 and during 1997. Excluding the impact
of the special charges in the third quarter of 1997, the net loss was $2.1
million for the nine months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
In the nine months ended September 30, 1997, the Company generated $2.5 million
in cash from operations, compared to using $2.8 million of cash in operations in
the first nine months of 1996. Cash generated from operations in the first nine
months of 1997 primarily resulted from significant improvements in inventory
management and the cash requirements for the restructuring and other charges
being approximately $0.5 million versus the $11.2 million charged to expenses.
This positive cash flow from operations was partially offset by a net loss of
$15.7 million and decreases in accounts payable and accrued liabilities of $2.9
million.
Net cash provided by investing activities for the nine months ended September
30, 1997 of $2.9 million resulted from changes in the cumulative translation
adjustment account of $2.2 million and proceeds of $1.8 million for patents
contributed by ReSound to a partnership of hearing aid manufacturers, including
ReSound, established in 1996. These amounts were offset by additions to property
and equipment.
11
12
The primary financing activity in the nine months ended September 30, 1997 was
the net reduction in borrowings of $1.7 million by the Company's Viennatone
subsidiary.
At September 30, 1997, the Company had available cash and cash equivalents of
$12.3 million. The Company believes this will be sufficient to meet the
Company's operating expenses and capital requirements for at least the next
twelve months. From time to time, the Company may also consider the acquisition
of, or evaluate investments in, certain products and businesses complementary to
the Company's business. Any such acquisition or investment may require
additional capital resources.
OUTLOOK
The hearing device market is becoming increasingly competitive with the
introduction of new, digital signal processing hearing devices. The Company's
ability to grow and achieve profitability will depend upon its ability to
develop and effectively market competitive products in a timely manner and to
continue to reduce its costs. New product development is always subject to
technological risks which could affect product performance and delay product
introduction, and to the risk that the expected level of customer acceptance
will not be met. The Company anticipates that it will continue to experience, at
least for the near-term, lower average unit sales prices of its products due to
aggressive competitive pricing and the product mix shift to the Company's more
moderately priced products. This is expected to be partially offset by increased
unit sales volume. While the Company has mechanisms in place to lessen the
negative impact of foreign currency fluctuations, continued or increased
weakness of European currencies against the US Dollar will adversely impact the
Company's sales growth in Europe, as will a persistence of the adverse economic
conditions and governmental cost reduction programs in Germany, Austria and
France. Finally, there can be no assurance that the Company will be able to
implement its recently announced restructuring program in a timely manner,
consolidate targeted operations successfully, and otherwise achieve the cost
reductions and other restructuring benefits anticipated to result from the
restructuring.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
12
13
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
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.32: Change of Control Agreement
(b) Exhibit 11.1: Statement of computation of net income (loss) per
share
(c) Exhibit 27: Financial data schedule
(d) Reports on Form 8-K
None
13
14
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.
RESOUND CORPORATION
/s/ Arthur T. Taylor
----------------------------------------------
Arthur T. Taylor
Sr. Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 7, 1997
14
15
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
10.32 Change of Control Agreement
11.1 Statement of Computation of net income (loss) per share
27 Financial data schedule