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, 2001
[ ] 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 17,339,877
------------------------------ ------------------
Class Outstanding Shares
At October 16, 2001
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, 2001
(unaudited) and December 31, 2000 3
Condensed Statements of Operations for the Three and Nine
Months Ended September 30, 2001 and 2000 (unaudited) 4
Condensed Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000 (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 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
2
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $19,313,196 $21,451,256
Accounts receivable -- net of allowance for doubtful accounts of
$124,372 and $70,758, respectively 2,635,693 2,932,461
Inventories 5,148,078 4,664,264
Current portion of deferred tax benefit 140,000 98,000
Prepaid expenses and other current assets 241,482 306,716
----------- -----------
TOTAL CURRENT ASSETS 27,478,449 29,452,697
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 5,197,095 5,251,603
----------- -----------
OTHER ASSETS:
Goodwill - net 2,073,718 2,198,718
Deferred tax benefit 70,435 112,435
Other assets 723,115 640,820
----------- -----------
TOTAL OTHER ASSETS 2,867,268 2,951,973
----------- -----------
TOTAL ASSETS $35,542,812 $37,656,273
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 485,199 $ 979,040
Accrued expenses and other current liabilities 480,670 888,158
Current portion of mortgage payable 28,594 32,168
Income taxes payable 470,561 -
----------- -----------
TOTAL CURRENT LIABILITIES 1,465,024 1,899,366
----------- -----------
LONG TERM LIABILITIES:
Mortgage payable 3,180,972 3,201,295
Other long term liabilities 27,764 172,574
----------- -----------
TOTAL LONG TERM LIABILITIES 3,208,736 3,373,869
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Note 3):
Preferred stock, $.01 par value, 2,000,000 shares authorized,
none issued - -
Common stock, $.01 par value, 75,000,000 shares authorized,
19,803,677 and 19,781,677 shares issued, in 2001 and 2000, respectively 198,037 197,817
Additional paid-in-capital 12,785,947 12,748,855
Retained earnings 23,926,994 21,466,402
Treasury stock at cost, - 2,354,300 and 907,100, in 2001 and 2000,
respectively (6,041,926) (2,030,036)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 30,869,052 32,383,038
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,542,812 $37,656,273
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- --------------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES $4,264,986 $4,742,774 $15,379,806 $13,685,906
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 1,797,544 1,917,995 7,012,238 5,859,952
Operating expenses 1,415,868 2,218,142 4,384,269 6,543,492
Interest, dividend and other income (94,541) (302,561) (509,872) (1,030,778)
---------- ---------- ----------- -----------
TOTAL COSTS AND EXPENSES 3,118,871 3,833,576 10,886,635 11,372,666
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,146,115 909,198 4,493,171 2,313,240
PROVISION FOR INCOME TAXES 427,626 365,878 1,678,123 915,420
---------- ---------- ----------- -----------
NET INCOME $ 718,489 $ 543,320 $ 2,815,048 $ 1,397,820
========== ========== =========== ===========
NET INCOME PER COMMON
SHARE (Note 2):
BASIC $ 0.04 $ 0.03 $ 0.16 $ 0.07
========== ========== =========== ===========
DILUTED $ 0.04 $ 0.03 $ 0.15 $ 0.07
========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months
Ended September 30,
-----------------------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,815,048 $ 1,397,820
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 393,284 359,072
Non-cash compensation - 33,750
Provision for losses on accounts receivable 73,711 31,938
Other income (50,004) (50,004)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 223,057 (1,093,588)
(Increase) in inventories (483,814) (1,353,668)
(Increase) decrease in prepaid expenses and other current assets (9,959) 1,211,640
(Decrease) in accounts payable and accrued expenses (996,134) (901,431)
Increase (decrease) in income taxes payable 470,561 (143,955)
------------ ------------
Net cash provided by (used for) operating activities 2,435,750 (508,426)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (213,776) (292,513)
Purchase of investment - (500,000)
Increase in real estate escrow (7,104) (6,314)
------------ ------------
Net cash (used for) investing activities (220,880) (798,827)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of mortgage note (23,897) (20,350)
Payments of loans - (215,932)
Payment of related party borrowings - (37,500)
Acquisition of treasury stock (4,011,890) -
Cash dividends paid (354,456) -
Proceeds from exercise of stock options/warrants 37,313 424,776
------------ ------------
Net cash (used for) provided by financing activities (4,352,930) 150,994
------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (2,138,060) (1,156,259)
Cash and cash equivalents, at beginning of year 21,451,256 22,225,763
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 19,313,196 $ 21,069,504
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 1,105,480 $ 1,517,900
Interest $ 182,754 $ 184,274
The accompanying notes are an integral part of these financial statements.
5
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, 2001 and the
condensed, consolidated statements of operations for the three and nine
month periods ended September 30, 2001 and 2000 and the condensed,
consolidated statements of cash flows for the nine month periods ended
September 30, 2001 and 2000 have been prepared by the Company without
audit. The consolidated financial statements include the accounts of
Wireless Telecom Group, Inc. and its wholly-owned subsidiaries Boonton
Electronics Corporation, WTG Foreign Sales Corporation and NC Mahwah, Inc.
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. Certain items in the statement of operations for 2000 have
been reclassed to conform to the 2001 presentation. There was no change to
net income.
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, 2000, 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, since certain information and footnote disclosures normally
included in financial statements in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted from this report.
The results of operations for the three and nine month periods ended
September 30, 2001 and 2000 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 utilizes 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.
NOTE 3 - SHAREHOLDERS' EQUITY
During the nine months ended September 30, 2001, the Company repurchased
1,447,200 shares (300,200 shares for the quarter ended September 30, 2001)
of its common stock, pursuant to a stock repurchase program authorized by
the Board of Directors on November 27, 2000 and as amended on October 5,
2001.
6
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, business combinations can no
longer be reflected by using the pooling of interests method of accounting
and goodwill (and intangible assets deemed to have indefinite lives) will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter in the year beginning
January 1, 2002. Application of the nonamortization provisions of the
Statement is expected to result in an increase in net income of $166,667
($.01 per share) per year. During calendar 2002, the Company will perform
the first of the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002 and has not yet determined what the
effect of these tests will be on the earnings and financial position of the
Company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc., a New Jersey corporation, and Boonton
Electronics Corporation (collectively, the "Company"), develop, manufacture
and market a wide variety of electronic noise sources and electronic testing
and measuring instruments including power meters, voltmeters and modulation
meters. The Company's products have historically been primarily used to test
the performance and capability of cellular/PCS and satellite communication
systems and to measure the power of RF and microwave systems. Other
applications include radio, radar, wireless local area network (WLAN) and
digital television.
On July 7, 2000, Wireless Telecom Group, Inc. and Boonton Electronics Corp.
closed on a merger under an agreement dated March 2, 2000. A newly formed,
wholly-owned subsidiary of the Company, WTT Acquisition Corp., merged with and
into Boonton, a public entity. The merger was accounted for as a pooling of
interests and accordingly, all periods prior to the merger have been restated
to include the results of operations and cash flows of Boonton.
The financial information presented herein includes:
(i) Condensed consolidated balance sheets as of September 30, 2001 and as
of December 31, 2000 (ii) Condensed consolidated statements of operations
for the three and nine month periods ended September 30, 2001 and 2000 and
(iii) Condensed consolidated statements of cash flows for the nine month
periods ended September 30, 2001 and 2000.
7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
OPERATIONS
For the nine months ended September 30, 2001 as compared to the corresponding
period of the previous year, net sales increased to $15,380,000 from
$13,686,000, an increase of $1,694,000 or 12.4%. For the quarter ended
September 30, 2001 as compared to the corresponding quarter of the previous
year, net sales decreased to $4,265,000 from $4,743,000 a decrease of $478,000
or 10.1%. The increase for the nine months ended September 30, 2001 is
primarily due to an increase in application of the Company's products as
built-in testers in wireless networks and an increase in the market for the
Company's noise-based communication and power measurement products. The
decrease for the quarter ended September 30, 2001 is reflective of an overall
softness in the wireless telecommunications market.
The Company's gross profit on net sales for the nine months ended September
30, 2001 was $8,368,000 or 54.4% as compared to $7,826,000 or 57.2% for the
nine months ended September 30, 2000. Gross profit on net sales for the
quarter ended September 30, 2001 was $2,467,000 or 57.9% as compared to
$2,825,000 or 59.6% for the three months ended September 30, 2000. 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 purchases,
manufacturing and production.
Operating expenses for the nine months ended September 30, 2001 were
$4,384,000 or 28.5% of net sales as compared to $6,543,000 or 47.8% of net
sales for the nine months ended September 30, 2000. Operating expenses for the
quarter ended September 30, 2001 were $1,416,000 or 33.2% of net sales as
compared to $2,218,000 or 46.8% of net sales for the quarter ended September
30, 2000.
For the three and nine months ended September 30, 2001 as compared to the same
period of the prior year, operating expenses decreased in dollars by $802,000
and $2,159,000, respectively. These decreases are primarily due to a reduction
in professional fees and shareholder expenses associated with the acquisition
of Boonton in 2000. These reductions were partially offset by increases in
Research and Development and advertising expenses.
Interest, dividend and other income decreased by $521,000 for the nine months
ended September 30, 2001 and by $208,000 for the quarter ended September 30,
2001. These decreases were primarily due to declining interest rates on
short-term investments in 2001.
Net income increased to $2,815,000, or $.15 per share (diluted), for the nine
months ended September 30, 2001 as compared to $1,398,000, or $.07 per share
(diluted) for the nine months ended September 30, 2000. The Company realized
net income for the quarter ended September 30, 2001 of $718,000 or $.04 per
share (diluted) as compared to net income of $543,000 or $.03 per share
(diluted) for the three months ended September 30, 2000. The explanation of
these changes can be derived from the analysis given above of operations for
the three and nine month periods ending September 30, 2001 and 2000,
respectively.
8
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital decreased by $1,540,000 to $26,013,000 at
September 30, 2001, from $27,553,000 at December 31, 2000. At September 30,
2001 the Company had a current ratio of 18.8 to 1, and a ratio of debt to net
worth of .15 to 1. At December 31, 2000 the Company had a current ratio of
15.5 to 1, and a ratio of debt to net worth of .16 to 1.
The Company realized cash provided by operations of $2,436,000 for the nine
month period ending September 30, 2001. This increase was primarily due to
cash provided by net income of $2,815,000 and an increase in income taxes
payable of $471,000, offset by a decrease in accounts payable and accrued
expenses of $996,000 and an increase in inventories of $484,000.
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. The Company continues to monitor production requirements and
delivery times while maintaining manageable levels of goods on hand.
Net cash used in operating activities for the comparable period in 2000 was
$508,000. Cash provided by net income of $1,398,000 and a reduction of prepaid
expenses and other current assets of $1,212,000 was offset by increases in
inventories of $1,354,000 and accounts receivable of $1,094,000 and a decrease
in accounts payable and accrued expenses of $901,000.
Net cash used for investing activities for the nine months ended September 30,
2001 was $221,000. The primary use of these funds was capital expenditures of
$214,000. For the nine months ended September 30, 2000, net cash used for
investing activities was $799,000. The primary use of these funds was the
purchase of a $500,000 investment in equity securities of an unrelated entity
and capital expenditures of $293,000.
Net cash used for financing activities for the nine months ended September 30,
2001 was $4,353,000. The primary use of these funds was for the acquisition of
treasury stock in the amount of $4,012,000 and the payment of dividends of
$354,000. Net cash provided by financing activities in the same period of 2000
was $151,000. The primary source of these funds was the proceeds from the
exercise of stock options and warrants of $425,000, partially offset by the
payment of loans of $216,000.
The Company believes that its financial resources from working capital
provided by operations 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.
FORWARD LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements. Such forward-looking
statements may be identified by, among other things, the use of
forward-looking terminology such as "believes," "expects," "intends," "plans,"
"may," "will," "should," or "anticipates," or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy
that involve risks and uncertainties. These forward-looking statements involve
predictions. Our actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements.
9
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
(a) The Registrant held its Annual Meeting of Stockholders on June 29,
2001. The following proposal was adopted by the votes indicated.
(b)(c)(1) Five directors were elected at the Annual Meeting to serve
until the Annual Meeting of Stockholders in 2002. The names of these
Directors and votes cast in favor of their election and shares withheld
are as follows:
NAME VOTES FOR VOTES WITHHELD
Edward J. Garcia 15,732,204 674,074
John Wilchek 15,734,021 672,257
Demir Richard Eden 15,727,741 678,537
Franklin H. Blecher 15,729,249 677,029
Henry L. Bachman 15,848,786 557,492
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of per share earnings
(b) Reports on Form 8-K:
Not applicable.
10
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 25, 2001 /s/ Edward Garcia
--------------------------------
Edward Garcia
Chairman and Chief Executive Officer
Date: October 25, 2001 /s/ Marc Wolfsohn
--------------------------------
Marc Wolfsohn
Chief Financial Officer
11