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, 2002
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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
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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 17,204,307
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Class Outstanding Shares
At April 26, 2002
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page(s)
Item 1 -- Condensed Consolidated Financial Statements:
Condensed Balance Sheets as of March 31, 2002
(unaudited) and December 31, 2001 3
Condensed Statements of Operations for the Three
Months Ended March 31, 2002 and 2001 (unaudited) 4
Condensed Statements of Cash Flows for the Three
Months Ended March 31, 2002 and 2001 (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
2
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-ASSETS-
MARCH 31, DECEMBER 31,
2002 2001
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(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $14,617,505 $15,138,640
Accounts receivable -- net of allowance for doubtful accounts of
$170,378 and $113,950, respectively 3,358,570 2,867,538
Inventories 6,194,269 6,316,085
Current portion of deferred tax benefit 140,000 140,000
Prepaid expenses and other current assets 549,376 476,454
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TOTAL CURRENT ASSETS 24,859,720 24,938,717
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PROPERTY, PLANT AND EQUIPMENT - NET 5,572,896 5,499,540
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OTHER ASSETS:
Goodwill 1,351,392 1,351,392
Deferred tax benefit 364,927 364,927
Other assets 743,675 750,682
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TOTAL OTHER ASSETS 2,459,994 2,467,001
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TOTAL ASSETS $32,892,610 $32,905,258
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- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $687,936 $660,249
Accrued expenses and other current liabilities 519,056 760,868
Current portion of mortgage payable 35,346 34,686
Income taxes payable 292,050 164,650
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TOTAL CURRENT LIABILITIES 1,534,388 1,620,453
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LONG TERM LIABILITIES:
Mortgage payable 3,157,522 3,166,609
Other long term liabilities -- 11,096
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TOTAL LONG TERM LIABILITIES 3,157,522 3,177,705
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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,
19,865,707 and 19,807,677 shares issued, in 2002 and 2001, respectively 198,657 198,077
Additional paid-in-capital 12,896,249 12,792,657
Retained earnings 22,004,870 21,979,416
Treasury stock at cost, -- 2,666,400 and 2,654,400, shares in 2002
and 2001, respectively (6,899,076) (6,863,050)
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TOTAL SHAREHOLDERS' EQUITY 28,200,700 28,107,100
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $32,892,610 $32,905,258
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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
Ended March 31,
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2002 2001
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NET SALES $5,082,312 $5,779,552
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COSTS AND EXPENSES:
Cost of sales 2,837,892 2,604,625
Operating expenses 1,642,048 1,460,463
Interest and other income (67,954) (309,626)
Interest expense 64,899 61,556
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TOTAL COSTS AND EXPENSES 4,476,885 3,817,018
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INCOME BEFORE INCOME TAXES 605,427 1,962,534
PROVISION FOR INCOME TAXES 236,775 738,659
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NET INCOME $ 368,652 $1,223,875
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NET INCOME PER COMMON
SHARE (Note 2):
BASIC $ 0.02 $ 0.07
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DILUTED $ 0.02 $ 0.07
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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 Three Months
Ended March 31,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 368,652 $ 1,223,875
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 115,756 96,109
Provision for losses on accounts receivable 6,428 59,586
Loss on disposal of fixed assets 483 488
Other income (11,096) --
Changes in assets and liabilities:
(Increase) in accounts receivable (497,459) (644,582)
Decrease (increase) in inventories 121,816 (328,792)
(Increase) in prepaid expenses and other current assets (63,548) (73,220)
(Decrease) in accounts payable and accrued expenses (214,123) (37,857)
Increase in income taxes payable 127,400 --
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Net cash (used for) provided by operating activities (45,691) 295,607
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (189,598) (20,057)
Proceeds from sale of fixed assets -- 900
Increase in real estate escrow (2,368) (2,368)
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Net cash (used for) investing activities (191,966) (21,525)
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments of mortgage note (8,427) (7,816)
Acquisition of treasury stock (36,025) (2,667,055)
Cash dividends paid (343,198) --
Proceeds from exercise of stock options/warrants 104,172 188
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Net cash (used for) financing activities (283,478) (2,674,683)
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS (521,135) (2,400,601)
Cash and cash equivalents, at beginning of year 15,138,640 21,451,256
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CASH AND CASH EQUIVALENTS, AT END OF PERIOD $14,617,505 $19,050,655
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SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 32,000 $ 360,480
Interest $ 60,456 $ 61,067
The accompanying notes are an integral part of these financial statements.
5
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
The condensed, consolidated balance sheet as of March 31, 2002 and the
condensed, consolidated statements of operations and cash flows for the
three month periods ended March 31, 2002 and 2001 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, Microlab/FXR, 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.
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, 2001, 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 month periods ended March 31,
2002 and 2001 are not necessarily indicative of the results to be
expected for the full year.
On December 21, 2001, the Company acquired Microlab/FXR, a private
entity, for the net purchase price of $3,800,000. The acquisition of
Microlab/FXR was recorded under the purchase method of accounting for
financial statement purposes. Microlab/FXR's Balance Sheets are included
in the Condensed Consolidated Balance Sheets at March 31, 2002 and
December 31, 2001. Microlab/FXR's results of operations and cash flows
for the three months ended March 31, 2002 are included in the Condensed
Consolidated Statements of Operations and Cash Flows, but their results
of operations and cash flows for the three months ended March 31, 2001
are not included.
The following pro forma results were developed assuming the acquisition
had occurred on January 1, 2001. Intercompany transactions would have
been eliminated had there been any, but there were none.
Unaudited Pro Forma Information for the Three Months
Ended March 31, 2001
Net Sales $7,770,232
Net Income $1,346,707
Earnings Per Share:
Basic $0.07
Diluted $0.07
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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Continued)
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 three months ended March 31, 2002, the Company repurchased
12,000 shares 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.
NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets". In accordance with SFAS No. 142, intangible assets, including
purchased goodwill, must be evaluated for impairment. Those intangible
assets that will continue to be classified as goodwill or as other
intangibles with indefinite lives are no longer amortized. 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.
The following table presents pro forma net income and earnings per share
data restated to include the retroactive impact of the adoption of SFAS
No. 142.
Unaudited Pro Forma Information for the Three Months
Ended March 31, 2001
Reported net income $1,223,875
Add back: goodwill amortization, net of tax 26,000
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Pro forma net income $1,249,875
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Reported earnings per share - basic $0.07
SFAS No. 142 effect, net of tax --
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Pro forma earnings per share - basic $0.07
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Reported earnings per share - diluted $0.07
SFAS No. 142 effect, net of tax --
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Pro forma earnings per share - diluted $0.07
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc., and its operating subsidiaries Boonton Electronics
Corporation and Microlab/FXR (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 December 21, 2001, the Company acquired Microlab/FXR. The acquisition of
Microlab/FXR was recorded under the purchase method of accounting for financial
statement purposes. Microlab/FXR designs and manufactures high-power, passive
microwave components for the wireless infrastructure market and for other
commercial, aerospace and military markets. The Company's products are used in
microwave systems, Universal Mobile Telecommunications Systems (UMTS), Personal
Communications Service (PCS) and cellular communications base stations,
television transmitters, avionic systems and medical electronics. Microlab/FXR
is one of the leaders in serving the needs of the in-building distributed
antenna system market, which facilitates seamless wireless coverage throughout
the insides of buildings and building complexes.
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 were 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 March 31, 2002 and as of
December 31, 2001 (ii) Condensed Consolidated Statements of Operations for the
three month periods ended March 31, 2002 and 2001 and (iii) Condensed
Consolidated Statements of Cash Flows for the three month periods ended
March 31, 2002 and 2001.
Microlab/FXR's Balance Sheets are included in the Condensed Consolidated Balance
Sheets at March 31, 2002 and December 31, 2001. Microlab/FXR's results of
operations and cash flows for the three months ended March 31, 2002 are included
in the Condensed Consolidated Statements of Operations and Cash Flows, but their
results of operations and cash flows for the three months ended March 31, 2001
are not included.
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with our interim condensed consolidated financial
statements and the notes to those statements included in Part I, Item I of this
Quarterly Report on Form 10-Q and in conjunction with the consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2001.
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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, 2002 as compared to the corresponding
period of the previous year, net sales decreased to $5,082,000 from $5,780,000,
a decrease of $698,000 or 12.1%. The decrease for the quarter ended March 31,
2002 is reflective of an overall softness in the wireless telecommunications and
power meter markets, despite the inclusion of Microlab/FXR's sales in the first
quarter of 2002 of $1,702,000.
The Company's gross profit on net sales for the quarter ended March 31, 2002 was
$2,244,000 or 44.2% as compared to $3,175,000 or 54.9% for the three months
ended March 31, 2001. The nature of Microlab's products and markets have
historically commanded a lower gross profit percentage. As Microlab is a new
addition to the Company's operations for 2002, the Company's overall gross
margins will be lower than past reports. Additionally, the mixture and volume
of products, which shipped in the first quarter of 2002, had lower gross profit
percentages than those of the first quarter of 2001. The Company continues to
rigidly monitor costs associated with material purchases, manufacturing and
production.
Operating expenses for the three months ended March 31, 2002 were $1,642,000 or
32.3% of net sales as compared to $1,460,000 or 25.3% of net sales for the three
months ended March 31, 2001.
For the three months ended March 31, 2002 as compared to the same period of the
prior year, operating expenses increased in dollars by $182,000. This increase
is primarily due to the additional expenses incurred by Microlab/FXR as a new
subsidiary of Wireless Telecom Group, Inc. in 2002. Additionally, sales and
marketing and research and development expenses increased in 2002 as compared to
the same period in 2001. These increases were partially offset by the
elimination of goodwill amortization in 2002 and a reduction of bad debt
expense.
Interest and other income decreased by $242,000 for the three months ended March
31, 2002. This decrease was primarily due to lower investment balances and
interest rates on short-term investments in 2002. Interest expense increased by
$3,000 for the three months ended March 31, 2002.
Net income decreased to $369,000, or $.02 per share (diluted), for the three
months ended March 31, 2002 as compared to $1,224,000, or $.07 per share
(diluted) for the three months ended March 31, 2001. The explanation of these
changes can be derived from the analysis given above of operations for the three
month periods ending March 31, 2002 and 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital increased by $7,000 to $23,325,000 at March 31,
2002, from $23,318,000 at December 31, 2001. At March 31, 2002 the Company had a
current ratio of 16.2 to 1, and a ratio of debt to net worth of .17 to 1. At
December 31, 2001 the Company had a current ratio of 15.4 to 1, and a ratio of
debt to net worth of .17 to 1.
The Company used cash for operations of $46,000 for the three month period
ending March 31, 2002. This use was primarily due to an increase in accounts
receivable of $497,000, a decrease in accounts payable and accrued expenses of
$214,000, partially offset by net income of $369,000.
9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
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 provided by operating activities for the comparable period in 2001 was
$296,000. Cash provided by net income of $1,224,000 was partially offset by
increases in accounts receivable of $645,000 and inventories of $329,000.
Net cash used for investing activities for the three months ended March 31, 2002
was $192,000. The primary use of these funds was capital expenditures of
$190,000. For the three months ended March 31, 2001, net cash used for investing
activities was $22,000. The primary use of these funds was capital expenditures.
Net cash used for financing activities for the three months ended March 31, 2002
was $283,000. The primary use of these funds was for the payment of dividends of
$343,000, partially offset by the proceeds from the exercise of stock options of
$104,000. Net cash used for financing activities in the same period of 2001 was
$2,675,000. The primary use of these funds was the acquisition of treasury stock
in the amount of $2,667,000.
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.
CRITICAL ACCOUNTING POLICIES
The Company has provided, through its Notes to Interim Condensed Consolidated
Financial Statements above and the Notes to Consolidated Financial Statements
included in its annual report on Form 10-K previously filed and incorporated
herein by reference, all significant information addressing the accounting
measurements that would have a material impact on the reported financial
statements. The policies used, including accounting for uncollectible accounts
under the allowance method and valuing raw material inventories at the lower of
cost (first-in, first-out method) or market, are policies that the Company has
used for many years and believes to be the appropriate methods for our business
and in our industry. The Company continues to apply these policies fairly and
consistently.
National and global economic market conditions continue to present challenges to
the technology sector, to our customers and to our Company. Despite some
appearances that the markets for our products may be stabilizing, visibility
remains difficult, as does their impact on our future sales and earnings.
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.
10
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
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.
11
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: May 13, 2002 /S/Edward Garcia
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Edward Garcia
Chairman and Chief Executive Officer
Date: May 13, 2002 /S/Marc Wolfsohn
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Marc Wolfsohn
Chief Financial Officer
12