Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
WTT > SEC Filings for WTT > Form 10-Q on 14-Nov-2011All Recent SEC Filings

Show all filings for WIRELESS TELECOM GROUP INC

Form 10-Q for WIRELESS TELECOM GROUP INC


14-Nov-2011

Quarterly Report


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

Wireless Telecom Group, Inc., and its operating subsidiaries, (collectively, the "Company"), develop, manufacture and market a wide variety of electronic noise sources, electronic testing and measuring instruments including power meters, voltmeters and modulation meters and high-power passive microwave components for wireless products. 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 May 7, 2010, the Company sold substantially all of the assets and liabilities of its foreign subsidiary, Willtek. Accordingly, the operating activities of Willtek for the nine-months ended September 30, 2010 are included in the Company's condensed consolidated statement of operations and condensed consolidated statement of cash flows as discontinued operations.

The financial information presented herein includes:
(i) Condensed Consolidated Balance Sheets as of September 30, 2011 (unaudited) and as of December 31, 2010 (ii) Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2011 (unaudited) and 2010 (unaudited) (iii) Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2011 (unaudited) and 2010 (unaudited) and
(iv) Condensed Consolidated Statement of Shareholders' Equity for the nine-month period ended September 30, 2011 (unaudited).

FORWARD LOOKING STATEMENTS

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. 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," "anticipates" or "continues" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on the Company's current expectations of future events and are subject to a number of risks and uncertainties that may cause the Company's actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, product demand and development of competitive technologies in our market sector, the impact of competitive products and pricing, the loss of any significant customers, the effects of adoption of newly announced accounting standards, the effects of economic conditions and trade, legal and other economic risks, among others. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. These risks and uncertainties are disclosed from time to time in the Company's filings with the Securities and Exchange Commission, the Company's press releases and in oral statements made by or with the approval of authorized personnel. The Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments.

CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of the financial condition and results of operations are based upon the Company's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments 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 amount of revenues and expenses for each period. The following represents a summary of the Company's critical accounting policies, defined as those policies that the Company believes are: (a) the most important to the portrayal of its financial condition and results of operations, and (b) that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Share-Based Compensation

The Company follows the provisions of Accounting Standards Codification (ASC) 718, "Share-Based Payment". The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. For the performance-based options granted, the Company takes into consideration guidance under ASC 718 and SEC Staff Accounting Bulletin No. 107 (SAB 107) when reviewing and updating assumptions. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of our shares using weekly price observations over an observation period of three years. The risk-free rate is based on the U.S. Treasury yield curve rate in effect at the time of grant for periods similar to the expected option life. The estimated forfeiture rate included in the option valuation was zero.

Revenue Recognition

Revenue from product shipments, including shipping and handling fees, is recognized once delivery has occurred provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Sales to international distributors are recognized in the same manner. If title does not pass until the product reaches the customer's delivery site, then recognition of revenue is deferred until that time. There are no formal sales incentives offered to any of the Company's customers. Volume discounts may be offered from time to time to customers purchasing large quantities on a per transaction basis. There are no material special post shipment obligations or acceptance provisions that exist with any sales arrangements.

Valuation of Inventory

Raw material inventories are stated at the lower of cost (first-in, first-out method) or market. Finished goods and work-in-process are valued at average cost of production, which includes material, labor and manufacturing expenses.

Allowances for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. A key consideration in estimating the allowance for doubtful accounts has been, and will continue to be, our customer's payment history and aging of its accounts receivable balance. If the financial condition of any of its customers were to decline, additional allowances might be required.

Income Taxes

The Company records deferred taxes in accordance with ASC 740, "Accounting for Income Taxes". This ASC requires recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax asset, a majority of which has been generated by a history of net operating losses and determines the necessity for a valuation allowance. The Company evaluates which portion, if any, will more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on its use of its net operating loss carry-forwards.

Uncertain Tax Positions

Under ASC 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

By adoption of ASC 740, the Company has analyzed its filing positions in all of the federal, state and foreign jurisdictions where it is required to file income tax returns. As of September 30, 2011 and December 31, 2010, the Company has identified its federal tax return, its state tax return in New Jersey and its foreign return in Germany as "major" tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition or disclosure in its condensed consolidated financial statements.

Based on a review of tax positions for all open years and contingencies as set out in the Company's notes to the consolidated financial statements, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740 during the periods ended September 30, 2011 and 2010.

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, 2010.

For the nine-months ended September 30, 2011 as compared to the corresponding period of the previous year, net sales increased to approximately $19,614,000 from approximately $17,928,000, an increase of approximately $1,686,000 or 9.4%. For the three-months ended September 30, 2011 as compared to the corresponding period of the previous year, net sales increased to approximately $7,065,000 from approximately $5,710,000, an increase of approximately $1,355,000 or 23.7%. The increases are primarily due a strong demand for the Company's RF and microwave components for distributed antenna systems ("DAS") and a general increase in order activity with government agencies and prime defense contractors.

Gross profit on net sales for the nine-months ended September 30, 2011 was approximately $9,001,000 or 45.9% as compared to approximately $8,455,000 or 47.2% of net sales for the nine-months ended September 30, 2010. Gross profit on net sales for the three-months ended September 30, 2011 was approximately $3,433,000 or 48.6% as compared to approximately $2,697,000 or 47.2% of net sales for the three-months ended September 30, 2010. Although gross profit dollars are higher for the nine-months ended September 30, 2011, as compared to the same period of the previous year, gross profit margins are lower primarily due to product mix, as the Company's microwave component products typically provide lower margins than its test and measurement instruments. Additionally, during the nine-months ended September 30, 2011, the Company carried excess inventory in the amount of approximately $270,000 relating to a recently discontinued product line. This inventory was sold in its entirety at cost which negatively impacted gross profit. Further, during the nine-months ended September 30, 2011, the Company incurred severance costs relating to the implementation of a cost reduction plan which included several manufacturing employees. The severance amount paid to these manufacturing employees during the first quarter was approximately $73,000.

The Company's products consist of several models with varying degrees of capabilities which can be customized to meet particular customer requirements. They may be incorporated directly into the electronic equipment concerned or may be stand alone components or devices that are connected to, or used in conjunction with, such equipment from an external site, in the factory or in the field. The Company can experience variations in gross profit based upon the mix of these products sold, as well as, variations due to revenue volume and economies of scale. Manufacturing overhead costs remained relatively consistent period over period. The Company continues to carefully monitor costs associated with material acquisition, manufacturing and production.

Operating expenses for the nine-months ended September 30, 2011 were approximately $7,792,000 or 40% of net sales as compared to approximately $7,863,000 or 44% of net sales for the nine-months ended September 30, 2010. Operating expenses are lower for the nine-months ended September 30, 2011 primarily due to a decrease in general and administrative expenses, offset by an increase in sales and marketing expenses and a slight increase in research and development expenses. Operating expenses for the three-months ended September 30, 2011 were approximately $2,734,000 or 39% of net sales as compared to approximately $2,737,000 or 48% of net sales for the three-months ended September 30, 2010. Operating expenses are slightly lower for the three-months ended September 30, 2011 primarily due to a decrease in sales and marketing expenses, offset by an increase in general and administrative expenses and a slight increase research and development expenses.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

The decrease in general and administrative expenses for the nine-months ended September 30, 2011 is primarily due to the reversal of a specific warranty accrual in the amount of $240,000 relating to product shipped in 2008, lower bonus accruals and a decrease in non-cash stock based compensation charges. The Company determined that there is a remote likelihood that any of these specific units will be returned and subsequently reversed the warranty accrual. Sales and marketing expenses were higher for the nine-months ended September 30, 2011 primarily due to severance paid to certain sales employees in connection with the cost reduction plan mentioned above, an increase in travel and related expenses, and higher, order-specific commissions paid to the Company's external, non-employee sales representatives.

Interest income decreased by approximately $8,000 and approximately $11,000 for the three and nine-months ended September 30, 2011, respectively, as compared to the corresponding periods of the previous year. Interest income is derived from the Company's cash investment account. Substantially all of the Company's cash is invested in money market funds.

Other income, net of other non-operating expense, decreased by approximately $75,000 for the three-months ended September 30, 2011 as compared to the corresponding period of the previous year. For the nine-months ended September 30, 2011, other income, net of other non-operating expense, increased by approximately $50,000 as compared to the corresponding period of the previous year. The increase in other income for the nine-months ended September 30, 2011 is primarily due to a realized gain from the sale of an investment security during the period. Other income was partially offset by non-operating expense incurred during the three and nine-months ended September 30, 2011 for services relating to the ground water testing being performed at the former site of the Company's subsidiary, Boonton. The Company has been testing the ground water in this site since 1982 in accordance with state regulations. The Company has hired a new environmental consultant to evaluate the results of the current remediation plan that has been in effect since 1982. The Company is diligently pursuing efforts to satisfy the requirements of the original plan and receive a new determination from the NJDEP. Management continues to be encouraged by recent test results which support improvements in ground water conditions over time. Overall data from recent testing in the Spring of 2011 indicates the continuation of a decreasing concentration trend at the site. The overall decrease supports the absence of a continuing source impacting ground water. The Company believes that its current practice and plan of groundwater testing will continue until an official notification from NJDEP is obtained and the Company is released from further obligations. While management anticipates that the expenditures in connection with this site will not be substantial in future years, the Company could be subject to significant future liabilities and may incur significant future expenditures if any additional contamination is identified and the NJDEP requires additional remediation.

The income tax benefit for the three and nine-months ended September 30, 2011 includes an adjustment to deferred taxes of approximately $202,000 and approximately $561,000, respectively, based upon estimated realizable amounts of the utilization of operating loss carryforwards, offset by state income tax expense. For the three and nine-months ended September 30, 2010, income tax expense includes state income tax expense and an adjustment to federal income taxes recoverable, partially offset by an adjustment to deferred taxes of approximately $404,000 and approximately $539,000, respectively. The Company has recorded a net deferred tax benefit for federal tax purposes in connection with its disposition of Willtek. This tax benefit is expected to be realized in future periods as taxable income in those periods will be offset by net operating loss carryforwards. Management has provided a valuation allowance in the deferred tax asset resulting from these net operating loss carryforwards based upon the expected benefit to be realized from the future utilization of these carryforward losses. In evaluating the recoverability of the deferred tax asset, management projects actual taxable income over the next five years. Accordingly, the recorded amount of the deferred tax asset is subject to judgment by management and could differ from the actual benefit.

For the three-months ended September 30, 2011, the Company realized income from continuing operations of approximately $827,000 or $0.03 per share on a diluted basis, as compared to income from continuing operations of approximately $39,000 or $0.00 per share on a diluted basis for the three-months ended September 30, 2010, an increase of approximately $788,000. For the nine-months ended September 30, 2011, the Company realized income from continuing operations of approximately $1,713,000 or $0.07 per share on a diluted basis, as compared to income from continuing operations of approximately $657,000 or $0.03 per share on a diluted basis for the nine-months ended September 30, 2010, an increase of approximately $1,056,000. These increases were primarily due to the analysis mentioned above.

For the nine-months ended September 30, 2010, net loss from discontinued operations was approximately $1,743,000 or $0.07 per share on a diluted basis. The loss for the nine-months ended September 30, 2010 was primarily due to approximately $431,000 of a loss recognized on the sale of Willtek and approximately $1,312,000 of operating losses in Willtek for this nine-month period.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

For the nine-months ended September 30, 2011, the Company realized net income of approximately $1,713,000 or $0.07 income per share on a diluted basis, as compared to a net loss of approximately $1,085,000 or $0.04 loss per share on a diluted basis for the corresponding period of the previous year, an increase of approximately $2,798,000. Net income was approximately $827,000 or $0.03 income per share on a diluted basis for the three-months ended September 30, 2011 as compared to net income of approximately $39,000 or $0.00 income per share on a diluted basis for the three-months ended September 30, 2010, an increase of approximately $788,000. The net income and loss fluctuation was primarily due to the impact of the divestiture of Willtek and the overall analysis above.

LIQUIDITY AND CAPITAL RESOURCES:

The Company's working capital has increased by approximately $531,000 to approximately $23,164,000 at September 30, 2011, from approximately $22,633,000 at December 31, 2010. At September 30, 2011, the Company had a current ratio of 11.4 to 1, and a ratio of debt to tangible net worth of .2 to 1. At December 31, 2010, the Company had a current ratio of 8.1 to 1, and ratio of debt to tangible net worth of .2 to 1.

The Company had cash and cash equivalents of approximately $12,023,000 at September 30, 2011, compared to approximately $13,643,000 at December 31, 2010. In January 2011, the Company paid approximately $874,000 in disposition fees relating to the sale of Willtek which were recorded as accrued expenses in the Company's consolidated balance sheet at December 31, 2010. Additionally, in 2011, the Company has to date repurchased approximately 824,000 shares of its outstanding common stock at a cost of approximately $567,000. The Company believes its current level of cash and cash equivalents is sufficient to fund the current operating, investing and financing activities.

The Company expects to realize tax benefits in future periods due to the available net operating loss carryforwards resulting from the disposition of Willtek in 2010. Accordingly, future taxable income is expected to be offset by the utilization of operating loss carryforwards and as a result, will increase the Company's liquidity as cash needed to pay Federal income taxes will be substantially reduced.

The Company used cash for operating activities of approximately $667,000 for the nine-month period ending September 30, 2011. The primary use of this cash was due to an increase in inventory, a decrease in accounts payable, accrued expenses and other current liabilities, and an increase in accounts receivable, partially offset by a decrease in prepaid expenses and other assets.

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 used cash for operating activities, including discontinued operations, of approximately $3,465,000 for the nine-month period ending September 30, 2010. The primary use of this cash was due to a loss from operations as well as a decrease in accounts payable, accrued expenses and other current liabilities, and an increase in inventory, partially off-set by a decrease in prepaid expenses and other assets, and a decrease in accounts receivable.

Net cash used for investing activities for the nine-months ended September 30, 2011 was approximately $336,000. The use of these funds was for capital expenditures. Net cash provided by investing activities for the nine-months ended September 30, 2010 was approximately $2,450,000. The source of these funds was from proceeds relating to the disposition of Willtek, off-set by capital expenditures.

Cash used for financing activities for the nine-months ended September 30, 2011 was approximately $618,000. The use of these funds was for the acquisition of treasury stock, which was approved by the Company's board of directors in 2010, and the periodic payments of a mortgage note. Cash used for financing activities for the nine-months ended September 30, 2010 was approximately $1,522,000. The use of these funds was for the re-payment of a bank loan and periodic payments of a mortgage note.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

The Company maintains a line of credit with its investment bank. The credit facility provides borrowing availability of up to 100% of the Company's money market account balance and 99% of the Company's short-term investment securities (U.S. Treasury bills) and, under the terms and conditions of the loan agreement, is fully secured by said money fund account and short-term investment holdings. Advances under the facility will bear interest at a variable rate equal to the London InterBank Offered Rate ("LIBOR") in effect at time of borrowing. Additionally, there is no annual fee and any amount outstanding under the loan facility may be paid at any time in whole or in part without penalty. As of September 30, 2011, the Company had no borrowings outstanding under the facility and approximately $6,000,000 of borrowing availability.

The Company believes that its financial resources from working capital are adequate to meet its current needs. However, should current global economic conditions deteriorate, additional working capital funding may be required which may be difficult to obtain due to restrictive credit markets.

OFF-BALANCE SHEET ARRANGEMENTS

Other than contractual obligations incurred in the normal course of business, the Company does not have any off-balance sheet arrangements.

INFLATION AND SEASONALITY

The Company does not anticipate that inflation will significantly impact its business or its results of operations nor does it believe that its business is seasonal.

  Add WTT to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for WTT - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.