0000808220-95-000002.txt : 19950816 0000808220-95-000002.hdr.sgml : 19950816 ACCESSION NUMBER: 0000808220-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SSE TELECOM INC CENTRAL INDEX KEY: 0000808220 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 521466297 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16473 FILM NUMBER: 95564001 BUSINESS ADDRESS: STREET 1: 47823 WESTINGHOUSE DR CITY: FREMONT STATE: CA ZIP: 94539 BUSINESS PHONE: 5106577552 MAIL ADDRESS: STREET 1: 47823 WESTINGHOUSE DR CITY: FREMONT STATE: CA ZIP: 94539 10-Q 1 _______________________________________________________________________ _______ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________________________________________________________ _______ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JULY 1, 1995 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 33-10965 SSE TELECOM, INC. (Exact name of registrant as specified in its charter) Delaware 52-1466297 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite 710, 8230 Leesburg Pike Vienna, Virginia 22182 (Address of principal executive office) Registrant's telephone number, including area code: (703) 442-4503 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 ____ As of August 7, 1995, the following number of shares of each of the issuer's classes of common stock were outstanding: Common Stock 5,499,662 PART I - FINANCIAL INFORMATION Item 1. Financial Statements SSE TELECOM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS Assets October 1, July 1, 1995 1994 Current Assets (Unaudited) Cash and cash equivalents $6,118,201 $2,679,070 Short term investments -- 2,499,845 Accounts receivable net of allowance 9,153,903 10,002,261 for doubtful accounts of $93,647 at October 1, 1994, and $156,845 at July 1, 1995 Inventory 5,722,572 5,647,526 Other current assets 657,561 658,628 Total current assets 21,652,237 21,487,330 Net property, plant and equipment at cost 1,554,258 1,645,766 Other asset - Investments -- 14,268,934 Goodwill - Directsat 853,236 -- Other long term assets, net of product license amortization of $1,151,238 973,786 405,977 at October 1, 1994, and $1,176,363 at July 1, 1995 Total assets $25,033,517 $37,808,007 Liabilities and Stockholders' Equity Current Liabilities Notes payable $397,567 $-- Accounts payable 2,170,532 1,668,495 Accrued salaries and employee benefits 765,236 836,317 Other accrued liabilities 654,949 1,017,583 Total current liabilities 3,988,284 3,522,395 Other long term liabilities 112,186 4,646,554 Long term debt 9,570,228 9,348,428 Commitments -- -- Stockholders' Equity Common stock $.01 par value per share, 54,600 54,997 10,000,000 shares authorized; 5,459,996 and 5,499,662 shares issued in 1994 and 1995 respectively Additional paid in capital 6,409,562 6,532,762 Retained earnings 5,495,113 6,853,134 Investment appreciation -- 7,581,220 Stockholders' notes receivable (135,000) -- Treasury stock, at cost, 79,148 shares and 123,275 shares at October 1, 1994, and (461,456) (731,483) July 1, 1995 respectively Total stockholders' equity 11,362,819 20,290,630 Total liabilities & stockholders' $25,033,517 $37,808,007 equity See accompanying notes SSE TELECOM, INC. CONSOLIDATED INCOME STATEMENTS (Unaudited) For The Three Months and Nine Months Ended July 2, 1994 and July 1, 1995 Three Months Ended Nine Months Ended 7/2/94 7/1/95 7/2/94 7/1/95 Revenue $7,115,7 $9,180,02 $21,880,7 $25,508,5 29 0 57 40 Cost of revenue 4,889,21 6,054,397 14,545,72 16,922,46 4 1 3 Gross margin 2,226,51 3,125,623 7,335,036 8,586,077 5 Expense Research and 606,954 753,240 1,862,070 2,144,309 development Marketing, general and 1,070,09 1,475,873 3,425,349 4,076,717 administrative 0 Operating income 549,471 896,510 2,047,617 2,365,051 Amortization of an 8,375 8,375 502,069 25,125 intangible asset (Gain) on sale of -- -- (1,227,17 -- investment 9) Net interest expense and 50,179 112,092 169,465 400,905 other expense Income before income tax 490,917 776,043 2,603,262 1,939,021 Provision for income taxes 177,000 233,000 939,000 581,000 Net income $313,917 $543,043 $1,664,26 $1,358,02 2 1 Primary earnings per share $.06 $.10 $.30 $.24 Shares used in computing primary earnings per share 5,538,57 5,574,017 5,470,188 5,554,870 3 See accompanying notes SSE TELECOM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended July 2, 1994 and July 1, 1995 Increase (Decrease) In Cash Operating Activities: July 2, July 1, 1995 1994 Net income $1,664,262 $1,358,021 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 905,611 457,219 Changes in operating assets and liabilities: Accounts receivable (354,655) (848,358) Inventory (1,186,999) 75,046 Other current assets (214,684) (1,067) Accounts payable (42,866) (502,037) Other accrued liabilities 435,513 362,634 Accrued salaries and employee benefits 118,380 71,081 Net cash provided by operating 1,324,562 972,539 activities Investing Activities: Purchases of equipment (561,892) (523,602) Other long term assets (189,802) (720,240) Payment on product license (12,000) -- Short term investments -- (2,499,845) Net cash used by investing (763,694) (3,743,687) activities Financing Activities: Net payments under lines of credit (1,378,265) -- Borrowings under equipment note and other 328,400 -- notes Payment on notes payable (284,317) (656,553) Issuance of common stock upon exercise of stock options and warrants and related tax 1,316,414 123,597 benefit Treasury stock repurchase (270,027) -- Payment of stockholders' notes receivable -- 135,000 Sale of convertible debenture 2,750,000 -- Net cash provided (used) by 2,732,232 (667,983) financing activities Net increase (decrease) in cash and cash 3,293,100 (3,439,131) equivalents Cash and cash equivalents beginning of period 314,057 6,118,201 Cash and cash equivalents end of period 3,607,157 2,679,070 Short term investments end of period -- 2,499,845 Cash, cash equivalents and short term $3,607,157 $5,178,915 investments end of period See accompanying notes SSE TELECOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The financial information contained herein has been prepared by the Company without audit except for information as of October 1, 1994, which has been audited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows for the interim periods have been made. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's October 1, 1994, annual report on Form 10-K. The results of operations for the period ended July 1, 1995, are not necessarily indicative of the operating results for the full year. The Company operates on a 52/53 week accounting year. Fiscal 1994 included 53 weeks, and fiscal 1995 will include 52 weeks. The additional week during fiscal 1994 was added during the first quarter. 2. INVENTORY Inventory consists of manufacturing raw materials, work-in process and finished goods. Inventories are valued at the lower of cost or realizable current value. Cost is based on the average cost method, which approximates actual cost on the first-in, first-out ("FIFO") basis. At October 1, 1994, and July 1, 1995, inventory consisted of: October 1, July 1, 1995 1994 Manufacturing raw $3,877,216 $3,474,403 materials Work-in-process 1,640,241 1,845,259 Finished Goods 205,115 327,864 Total $5,722,57 $5,647, 2 526 3. INCOME TAXES Income taxes were accrued at a 30% rate for the quarter ended July 1, 1995, compared to 36% for the quarter ended July 2, 1994, due to an anticipated larger percentage of tax savings from the foreign sales corporation and state tax credits. 4. COMMITMENTS, NOTES PAYABLE AND LONG TERM DEBT The Company leases office and manufacturing space under leases that expire in March 1996. The terms of the leases provide for periodic escalation in rent payments that have been expensed on a straight line basis over the term of the lease. The Company also leases equipment under leases expiring in various amounts through 1997. The Company also has short term lease agreements related to office and manufacturing equipment. The Company maintains a secured operating line of credit with a national bank. The maximum available under the line of credit was the lesser of $5.0 million or 80% of qualified receivables. On July 1, 1995, the maximum available under the line of credit was approximately $4.3 million of which none was borrowed. Amounts borrowed under the line of credit and interest, which accrues at prime rate (9% at July 1, 1995), plus .75% are due on February 28, 1996. The Company is subject to and in compliance with certain financial convenants and requirements. During fiscal 1994, the Company sold to EchoStar Communications Corporation $8,750,000 of its 6.5% seven-year convertible subordinated debentures. Total interest expense accrued but not yet payable is $523,000 as of July 1, 1995, and is reflected in long term liabilities. The debentures are convertible into the Company's common stock at $12.00 per share. 5. SHORT TERM INVESTMENTS Effective October 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments in Debt and Equity Securities." Previously, the Company's securities investments were recorded at lower of cost or market. Under SFAS No. 115, the Company's securities investments, including the EchoStar investment, are classified as available-for-sale. Available- for-sale securities are stated at fair value with the unrealized gains and losses, net of taxes, reported in a separate component of stockholders' equity. Realized gains and losses, and declines in value judged to be other than temporary on available-for-sale securities, are included in other income. The cost of securities sold is based on the average cost method. Dividends on securities classified as available- for-sale are included in other income. On December 30, 1994, the Company completed the exchange of its 91.2% interest in Directsat for 1,216,957 shares of EchoStar Communications Corporation ("EchoStar"), Class A common stock, or approximately 2.5% of EchoStar. Prior to EchoStar offering its shares for public trading, a reverse split by EchoStar reduced the Company's holding to 912,717 shares. During the third quarter EchoStar's common stock began trading on the NASDAQ stock market under the symbol "DISH". As of June 30, 1995, (the last trading day of the quarter) the stock was trading for $15.25 per share. The Company has adjusted the value of the stock to $13,919,000, an increase of approximately $12,227,000 over the Company's initial investment in Directsat. This adjustment, net of deferred tax, is reflceted as a separate component of stockholders' equity. The Company announced on June 16, 1995, that SSE Telecom, Inc. and Paris based Alcatel Telspace ("Alcatel") agreed to invest up to $1,300,000 in Media4, Inc., ("Media4") located in Atlanta, Georgia. Media4 is developing new products for the distribution of multimedia information over wireless networks. The investment is to be funded equally by SSE and Alcatel and includes an equity interest as well as proprietary product development. As of the end of the quarter, the Company has invested $350,000 in Media4. INVESTMENT TABLE Estimated Cost Fair Value Available-for-Sale Due in one year or less $ $ 2,402,000 2,401,000 Due after one year 98,000 99,000 through three years Due after three years $ $ 2,500,00 2,500,000 0 Other assets-Equity $ $14,269,0 investments 2,042,00 00 0 In accordance with SFAS No. 115, prior period financial statements have not been restated to reflect the change in accounting principle. There was no cumulative effect of adopting SFAS No. 115, as of October 1, 1994. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the quarter periods ended the dates indicated, certain income and expense items expressed as an approximate percentage of the Company's total revenues: Three Month Nine Month 07/02/9 07/01/9 07/02/9 07/01/9 4 5 4 5 Revenue 100% 100% 100% 100% Gross margin 31% 34% 34% 34% Research and development 9% 8% 9% 8% expense Marketing, general and 15% 16% 16% 16% administrative expenses Operating income 7% 10% 9% 10% Amortization of product -- -- 2% -- license Gain on sale -- -- (6%) -- Net interest expense and 1% 1% 1% 2% other expense Income before income tax 6% 9% 12% 8% Provision for income 2% 3% 4% 2% taxes Net income 4% 6% 8% 6% Three Months Ended July 1, 1995, Compared With Three Months Ended July 2, 1994. SSE Telecom's revenues reached a new quarterly high and increased by 29% from $7,116,000 for third quarter 1994 to $9,180,000 for third quarter 1995. International revenue continues to average approximately eighty percent of total revenue. Gross margin for the third quarter of 1995 increased $899,000 or 40% from the same quarter fiscal 1994. The margin increase is attributable to a decrease in product cost from the previous year, higher revenue thus absorbing manufacturing overhead and a strong margin from the new Triband converter sales. Offsetting the margin increase was an issue with a supplier of a component that is included in one of the Company's products which caused some extra repair or replacement costs this year. These costs were higher than anticipated during the third quarter and had an unfavorable effect on the gross margin. In the aggregate as a percentage of revenue, gross margin increased from 31% to 34%. Research and development expense for the quarter increased $146,000 or 24%. Emphasis during the quarter was on final design of the Star series advanced satellite transceiver product and preparation of the new product for manufacturing transfer. Other research and development projects included final development of an outdoor Triband converter and system designs, on-line engineering change order software and processes, and ISO-9001 certification. During fiscal 1995, all departments of the Company have been working on ISO-9001 certification. The Company expects to complete the requirements for ISO-9001 certification during 1995. As a percentage of revenue, research and development expenses during the quarter was 8% in 1995 and 9% in 1994. Marketing, general and administrative expenses increased $406,000 or 38% from third quarter 1994. During the third quarter, the Company offered greater support to its customers by increasing staff in the areas of sales, marketing, and customer service. As a percentage of revenue, marketing, general and administrative expenses during the quarter was 16% in 1995 and 15% in 1994. The Company expects that marketing, general and administrative expenses will continue at the same level during the remainder of the year. As a result of improved gross margin, operating income increased $347,000 or 63% from third quarter 1994. As a percentage of revenue, operating income increased to 10% in 1995 from 7% in 1994. Amortization for the quarter of the Company's product license for the Nokia open network modem was the same in 1995 and 1994. Net interest expense and other expense increased $62,000 or 123% from third quarter 1994. This increase is primarily the result of additional interest expense of approximately $24,000 and an increase in warranty reserve of approximately $30,000. The Company has higher interest expense as a result of interest due on debentures sold to EchoStar during fiscal 1994. Currently, the Company's quarterly interest expense for the debentures is approximately $142,000. The Company's third quarter interest income of approximately $79,000 resulted from short term investment of excess funds in securities emphasizing fixed income and low risk. As a percentage of revenue, net interest expense and other expense was 1% in 1995 and 1994. Third quarter 1995 income before income tax increased $285,000 or 58%. As a percentage of revenue, income before income tax increased to 9% from 6% in 1994. Provision for taxes on income increased $56,000 or 32% in third quarter 1995 from the same quarter in 1994. Such an increase is attributed to the increase in quarterly income. The increase in provision for taxes on income was lessened by a lower tax rate of 30% in fiscal 1995 versus 36% in fiscal 1994. The lower tax rate reflects larger percentage tax savings from the Company's foreign sales corporation and state tax credits. Third quarter net income increased $229,000 or 73% from third quarter 1994. As a percentage of revenue, net income increased to 6% in fiscal 1995 from 4% in fiscal 1994. The Company had a backlog of firm orders of $6.7 million on July 1, 1995. Management expects substantially all orders to be delivered within fiscal 1995. The quarter ending backlog is representative of the historic product and customer mix. Backlog as of August 7, 1995, was $7.5 million. In addition, the Company has received approximately $1 million of orders for the new STAR series advance satellite transceivers that have not been added to backlog because delivery dates have yet to be finalized; firm delivery dates are currently being negotiated. The Company does not believe that backlog is necessarily indicative of future revenues. Timing differences from quarter to quarter as to the receipt of large orders and changes in factory production make meaningful quarter to quarter comparisons of backlog difficult. Nine Months Ended July 1, 1995, Compared With Nine Months Ended July 2, 1994 Revenue year to date fiscal 1995 is $25,509,000. Revenue increased $3,628,000 or 17% from the same time period in fiscal 1994. Gross margin increased $1,251,000 or 17% from the comparable period in 1994. As a percentage of revenue, gross margin was 34% in 1995 and 1994. During the third quarter of the year an issue with a supplier of a component that is included in one of the Company's products caused some extra repair or replacement costs which adversely effected the gross margin. The Company expects improved profitability with the commercial quantity production and shipment of the new STAR series advanced satellite transceiver. The Company continues to invest substantially in research and development. Research and development expense increased $282,000 or 15% during the first nine months from the same time period in 1994. The focus of research and development during fiscal 1995 has been on the completion of the Triband rack-mounted converters, the development of C-Star and K-Star transceivers and software to monitor and control equipment at remote sites. As a percentage of revenue, research and development expense year to date in 1995 is 8% and 9% in 1994. The Company anticipates similar levels of research and development expenses through the balance of fiscal 1995. Marketing, general and administrative expense increased $651,000 or 19% in the first nine months of 1995 compared to the same period in 1994. The Company added to the marketing department an Asia/Pacific regional sales manager, opened an European sales office, added internal sales and customer service support and increased marketing resources. The increase in sales and marketing expense was required, and will continue at similar levels, due to increased competition in the industry and the Company's desire to provide improved customer service. General and administrative cost also increased with the addition of personnel to support the growth of the Company in areas such as management information systems, cost accounting, and human resources. Marketing, general and administrative expense as a percentage of revenue during the first nine months was 16% in 1995 and 1994. As the result of the forgoing, operating income increased $317,000 or 16% year to date 1995 from year to date 1994. As a percentage of revenue, operating income was 10% in 1995 and 9% in 1994. Amortization of the Company's product license decreased $477,000 or 95% from the first nine months of 1994. During the second quarter of 1994, the Company made the decision to reduce the carrying value of the product license by $374,000 thereby reducing quarterly amortization from approximately $60,000 to $8,400. During fiscal 1994, the Company sold its approximate 8% minority equity ownership interest and creditor position in DBSC to EchoStar which resulted in a net gain of $1,227,000. This non-recurring gain cannot be compared to year to date fiscal 1995. As a percentage of revenue, the 1994 gain is 6%. Net interest expense and other expenses increased $231,000 or 137% from year to date 1994. This increase is from additional expenses of approximately $135,000 for interest, $70,000 for allowance for doubtful accounts and $50,000 warranty repair reserve. As a percentage of revenue, net interest and other expense was two percent during the first nine months of 1995 and one percent during the first nine months of 1994. Fiscal 1995 income before tax decreased $664,000 or 26% from 1994. The factor contributing to this decrease in income before income tax is the 1994 non-recurring gain. As a percentage of revenue, income before income tax decreased from 12% in 1994 to 8% in 1995. Provision for taxes on income decreased $358,000 or 38% in 1995 from the same time period in 1994. Such decrease resulted from a decrease in the Company's taxable income and a lower effective tax rate of 30% in fiscal 1995 versus 36% in fiscal 1994. The lower tax rate reflects a larger percentage tax savings from the Company's foreign sales corporation and state tax credits. As a result of the foregoing, year to date 1995 income decreased $306,000 or 18% from 1994 year to date results. As a percentage of revenue, net income decreased to 6% in fiscal 1995 from 8% in fiscal 1994. Liquidity and Capital Resources On July 1, 1995, the Company had working capital of $18 million, including $5.2 million of cash, cash equivalents and short term investments, compared with working capital of $11.8 million, including $3.6 million of cash and cash equivalents on July 2, 1994. Net cash provided by operating activities was $973,000 for nine month period ended July 1, 1995, compared to net cash provided by operating activities of $1,325,000 for the nine month period ended July 2, 1994. Accounts receivable increased $848,000 from year end 1994. During June 1995, the Company shipped record levels of equipment resulting in higher levels of accounts receivable. The Company has offered extended payment terms to certain customers. The Company has a policy of granting extended terms to credit worthy international customers which are usually backed by letters of credit or credit insurance. As of August 7, 1995, the accounts receivable balance was approximately $7,600,000. Inventory turnover (defined as annualized cost of revenues divided by quarter-end inventory balance) was 4.3 and 3.6 for the quarters ended July 1, 1995, and July 2, 1994. After inventory increases through the first six months of the year, inventory decreased $397,000 during the third quarter. This decrease is the result of a plan instituted during February 1995, to reduce inventory levels, while at the same time, stocking appropriate levels of inventory to support shipments and customer needs. The Company expects that the introduction of the Star series of advanced transceiver products will increase inventory levels through mid 1996, however it is still the goal of the Company to reduce overall total inventory value. The Company purchased $524,000 of fixed assets during the first nine months of fiscal 1995. These assets include test equipment for research and development, production, and additional computer equipment for information systems. The Company is currently self funding the purchase of assets. Total long term assets have increased $12,848,000 since year-end 1994, which is the primary result of the increase in the value of the EchoStar stock owned by the Company. On December 30, 1994, the Company completed the exchange of its 91.2% interest in Directsat for 1,216,957 shares of EchoStar, Class A common stock, or approximately 2.5% of EchoStar. Prior to EchoStar offering its shares for public trading, a reverse split by EchoStar reduced the Company's holding to 912,717 shares. During the third quarter EchoStar's common stock began trading on the NASDAQ stock market under the symbol "DISH". As of June 30, 1995, (the last trading day of the quarter) the stock was trading for $15.25 per share. The Company has adjusted the value of the stock to $13,919,000, an increase of approximately $12,227,000 over the Company's initial investment in Directsat. This adjustment, net of deferred tax, is reflected as a separate component of stockholders' equity, A second increase in long term assets occurred when the Company announced on June 16, 1995, that SSE Telecom, Inc. and Paris based Alcatel Telspace ("Alcatel") agreed to invest up to $1,300,000 in Media4, Inc., ("Media4") located in Atlanta, Georgia. Media4 is developing new products for the distribution of multimedia information over wireless networks. The investment is to be funded equally by SSE and Alcatel and includes an equity interest as well as proprietary product development. As of the end of the quarter, the Company has invested $350,000 in Media4. Other long term assets include some product development and construction in process ("CIP") which increased to $381,000. The Company is developing software to monitor and control its various products and other equipment at remote sites. This cost of development will be amortized over the useful life of the software. Current CIP projects are for automatic test stations for manufacturing, and teleconferencing equipment to link the Company's own facilities. Trade accounts payable decreased $502,000 from year-end 1994. A plan put in place during the second quarter to control inventory growth, resulted in slowed receipts of inventory which is the major contributing factor to the decrease in trade accounts payable. Accrued salaries and employee benefits increased $71,000 from year-end 1994. The increase is primarily the result of an increase in accrued payroll. Other accrued liabilities increased $363,000 from year-end 1994. Accrued taxes payable increased $367,000 and accrued interest decreased $103,000. The Company currently does not make interest payments to EchoStar for the $8,750,000 seven year 6.5% convertible debenture. During the third quarter this accrued interest from fiscal 1994 and 1995, for the EchoStar debenture was adjusted as a long term liability. Short term notes payable decreased $398,000. The Company paid off its current portion of its equipment line of credit. Other long term notes payable increased $4,313,000 compared to October 1, 1994. Deferred taxes increased $4,647,000, as a result of the unrealized gain in the value of the EchoStar investment. Long term notes decreased $820,000. Of this total $324,000 paid off the long term portion of the Company's equipment line of credit. The other long term liability primarily related to Directsat debt, $496,000, which was paid during the second quarter. Debenture interest, $523,000 was reclassified from short term debt to long term debt. The Company's capital resource commitments on April 1, 1995, primarily consisted of obligations under operating leases for the manufacturing facilities. During 1995, the Company intends to pursue strategic acquisitions and investments in the satellite communications and related markets that will complement and expand its current market position. The Company believes it has the necessary capital resources available to it for such a program. The Company's capital requirements could change in the event of factors such as lower-than anticipated demand for the Company's products or unanticipated limitations on debt financing. If any of these or other events should occur, the Company could experience a need to raise additional capital. The Company believes its current line of credit, internally generated funds and funds from the sales of debentures will be sufficient in fiscal 1995 to meet its operating and other capital requirements needs. PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits included herein (numbered in accordance with Item 601 of Regulation S-K) Exhibit Number Description Sequential Page Number 11 Computation of Per Share Page 14 Earnings (b) Reports on Form 8-K None 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 hereunto duly authorized. Dated: August 11, 1995 SSE TELECOM, INC. By: /s/ Frederick C. Toombs Frederick C. Toombs, President By: /s/ Daniel E. Moore Daniel E. Moore, Chief Financial Officer Attached and Made Part of Part II Of 10Q for the Quarters Ended July 2, 1994 and July 1, 1995 Three Months Nine Months Ended Ended 7/2/94 7/1/95 7/2/94 7/1/95 Primary Weighted common average shares outstanding before 5,218,3 5,399,6 5,060,7 5,401,7 repurchases 99 68 43 46 applying the treasury stock method Increase in weighted average shares due to repurchases applying the 320,174 174,349 409,445 153,124 treasure stock method for stock options and warrants Primary weighted average 5,538,5 5,574,0 5,470,1 5,554,8 shares 73 17 88 70 Primary net income $313,91 $543,04 $1,664, $1,358, 7 3 262 021 Net income per share $.06 $.10 $.30 $.24 Fully diluted Weighted common average shares outstanding before 5,218,3 5,399,6 5,060,7 5,401,7 repurchases 99 68 43 46 applying the treasury stock method Increase in weighted average shares due to repurchases applying the 320,174 189,180 409,445 212,749 treasure stock method for stock options and warrants Fully diluted weighted average 5,538,5 5,588,8 5,470,1 5,614,4 shares 73 48 88 95 Fully diluted net income $313,91 $543,04 $1,664, $1,358, 7 3 262 021 Fully diluted net income per $.06 $.10 $.30 $.24 share