Securities and Exchange Commission Form 10−Q
Total Page:16
File Type:pdf, Size:1020Kb
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10−Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 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 No. 0−28582 CHANNELL COMMERCIAL CORPORATION (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 95−2453261 (I.R.S. Employer Identification No.) 26040 Ynez Road, Temecula, California (Address of principal executive offices) 92591 (Zip Code) (909) 719−2600 (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 No 9,024,993 shares of common stock of the Registrant were outstanding at June 30, 2002. CHANNELL COMMERCIAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (amounts in thousands, except per share data) Six months ended Three months ended June 30, June 30, 2002 2001 2002 2001 Net sales $ 45,664 $ 47,729 $ 25,823 $ 25,762 Cost of goods sold 29,194 32,834 15,835 17,379 Gross profit 16,470 14,895 9,988 8,383 Operating expenses Selling 4,961 7,102 2,792 3,368 General and administrative 6,655 5,967 4,654 2,905 Research and development 838 1,253 446 635 12,454 14,322 7,892 6,908 Income from operations 4,016 573 2,096 1,475 Interest expense, net (1,321) (1,713) (551) (896) Income (loss) before income taxes 2,695 (1,140) 1,545 579 Income taxes (benefit) 1,379 (221) 725 227 Net income (loss) $ 1,316 $ (919) $ 820 $ 352 Net income (loss) per share Basic $ 0.15 $ (0.10) $ 0.09 $ 0.04 Diluted $ 0.14 $ (0.10) $ 0.09 $ 0.04 Net income (loss) $ 1,316 $ (919) $ 820 $ 352 Other comprehensive income (loss), net of tax Foreign currency translation adjustments 615 (1,712) 681 333 Comprehensive net income (loss) $ 1,931 $ (2,631) $ 1,501 $ 685 1 CHANNELL COMMERCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share data) June 30, Dec. 31, 2002 2001 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 9,875 $ 8,762 Accounts receivable, net 11,378 13,301 Inventories 8,788 9,776 Deferred income taxes 803 1,473 Prepaid expenses and misc. receivables 676 1,238 Income taxes receivable — 5,076 Total current assets 31,520 39,626 Property and equipment at cost, net 30,953 38,718 Deferred income taxes 5,478 5,509 Intangible assets, net 1,463 1,463 Other assets 571 446 $ 69,985 $ 85,762 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 4,603 $ 5,090 Income taxes payable 750 — Short term debt (including current maturities of long term debt) 17,130 30,228 Current maturities of capital lease obligations 1,154 1,983 Accrued restructuring liability 1,535 2,420 Accrued expenses 4,542 3,939 Total current liabilities 29,714 43,660 Long term debt, less current maturities — 3,991 Deferred gain on sale leaseback transaction 604 — Capital lease obligations, less current maturities 239 614 Commitments and contingencies — — Stockholders’ equity Preferred stock — — Common stock, par value $.01 per share, authorized—19,000 shares; issued—9,269 shares; outstanding—9,025 shares in June 30, 2002 and 9,025 in December 31, 2001 93 93 Additional paid−in capital 28,334 28,334 Treasury stock—244 shares (1,871) (1,871) Retained earnings 14,938 13,622 Accumulated other comprehensive (loss)—Foreign currency translation (2,066) (2,681) Total stockholders’ equity 39,428 37,497 Total liabilities and stockholders’ equity $ 69,985 $ 85,762 2 CHANNELL COMMERCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (amounts in thousands) Six months ended June 30, 2002 2001 Cash flows from operating activities: Net income (loss) $ 1,316 $ (919) Depreciation and amortization 3,673 4,391 Deferred income taxes 670 (389) Loss on disposal of fixed assets 41 33 Foreign currency transaction gain — (369) Change in assets and liabilities: (Increase) decrease in assets: Accounts receivable 2,263 3,828 Inventories 1,274 511 Income taxes receivable 5,076 — Prepaid expenses 480 (530) Other assets (100) 42 Increase (decrease) in liabilities: Accounts payable (677) (754) Accrued expenses 301 (1,988) Accrued restructuring (942) — Income taxes payable 742 (1,105) Net cash provided by operating activities 14,117 2,751 Cash flows from investing activities: Acquisition of property and equipment (1,401) (936) Proceeds from the sale of a building 6,614 — Net cash provided by (used in) investing activities 5,213 (936) Cash flows from financing activities: Repayment of debt (17,089) (1,044) Proceeds from issuance of long term debt — 2,500 Repayment of obligations under capital lease (1,215) (1,390) Purchase of treasury stock — (147) Net cash used in financing activities (18,304) (81) Effect of exchange rates on cash 87 (37) Increase in cash and cash equivalents 1,113 1,697 Cash and cash equivalents, beginning of period 8,762 913 Cash and cash equivalents, end of period $ 9,875 $ 2,610 Cash paid during the period for: Interest $ 1,126 $ 1,665 Income taxes $ 244 $ 548 3 CHANNELL COMMERCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 2002 and 2001 (amounts in thousands, except per share data) 1. Unaudited financial statements: In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of Channell Commercial Corporation (the “Company”) as of June 30, 2002 and the results of its operations for the three months and six months ended June 30, 2002 and June 30, 2001 and its cash flows for the six months ended June 30, 2002 and 2001. The results of operations and cash flows for the six months ended June 30, 2002, are not necessarily indicative of the results to be expected for any other interim period or the full year. These consolidated financial statements should be read in combination with the audited consolidated financial statements and notes thereto for the year ended December 31, 2001. 2. Inventories: Inventories stated at the lower of cost (first−in, first−out method) or market are summarized as follows: June 30, December 31, 2002 2001 Raw Materials $ 3,415 $ 4,738 Work−in−Process 2,712 2,605 Finished Goods 2,661 2,433 $ 8,788 $ 9,776 3. Income (loss) per share: Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the six month period and the three month period ended June 30, 2002. Diluted income per share reflects the potential dilution that could occur if dilutive options to acquire common stock were exercised. Options to acquire the Company’s common stock were not included in the computation of diluted loss per share for the six months ended June 30, 2001 because they are anti−dilutive. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted income (loss) per share computations for the six months ended June 30 and the three months ended June 30 (shares in thousands): Six months ended June 30, 2002 2001 Per Per Share Share Shares Amount Shares Amount Basic income (loss) per Share 9,025 $ 0.15 9,057 $ (0.10) Effect of dilutive Stock options 61 $ (0.01) — — Diluted income (loss) per Share 9,086 $ 0.14 9,057 $ (0.10) 4 Three months ended June 30, 2002 2001 Per Per Share Share Shares Amount Shares Amount Basic income per Share 9,025 $ 0.09 9,056 $ 0.04 Effect of dilutive Stock options 76 0.00 — — Diluted income per Share 9,101 $ 0.09 9,056 $ 0.04 The following options were not included in the computation of diluted income (loss) per share due to their anti−dilutive effect: June 30, June 30, 2002 2001 Options to purchase shares of common stock 866 931 Exercise prices $6.50−$13.75 $6.50−$13.75 Expiration dates July 2006−May 2012 July 2006−May 2011 4. Segments: The Company’s predominant business is the manufacturing and distribution of telecommunications equipment. Currently, the Company is organized into four geographic regions: the United States, Europe / Middle East, Canada and Australia / Asia. The following tables summarize segment information for the six months ended June 30, 2002 and 2001 and the three months ended June 30, 2002 and 2001 (in thousands): Six Months Ended June 30, 2002 2001 Revenues from unrelated entitites(1): United States $ 35,106 $ 35,385 Europe/Middle East 4,208 6,708 Canada 3,004 1,863 Australia/Asia 3,346 3,773 $ 45,664 $ 47,729 5 Six Months Ended June 30, 2002 2001 Income (loss) from operations: United States $ 4,536 $ 4,246 Europe/Middle East (877) (2,575) Canada 463 85 Australia/Asia (106) (1,183) $ 4,016 $ 573 Interest expense, net: United States $ 1,055 $ 1,583 Europe/Middle East 136 143 Canada 38 (10) Australia/Asia 92 (3) $ 1,321 $ 1,713 Three Months Ended June 30, 2002 2001 Revenues from unrelated entitites (1): United States $ 19,927 $ 18,397 Europe/Middle East 2,360 4,330 Canada 1,684 804 Australia/Asia 1,852 2,231 $ 25,823 $ 25,762 Income (loss) from operations: United States $ 2,215 $ 2,543 Europe/Middle East (396) (910) Canada 277 40 Australia/Asia — (198) $ 2,096 $ 1,475 Interest expense, net: United States $ 425 $ 835 Europe/Middle East 70 64 Canada 19 (2) Australia/Asia 37 (1) $ 551 $ 896 (1) Note: Revenues from any individual foreign country did not exceed 10% of total revenues for the period.