Transcrypt International suffers 4Q woes; lays off 24, considers company sale
A weak fourth quarter topped a difficult year for two-way radio and encryption device manufacturer Transcrypt International.
Responding to the quarterly results, on March 8 the company laid off 24 E. F. Johnson Company employees, 13% of its workforce, as part of an effort to cut costs. Johnson, Transcrypt’s two-way radio subsidiary, accounts for 80% of its sales
“Delays in the federal budget process adversely affected fourth- quarter sales, but more importantly, and like much of the rest of our industry, the company continues to face increasing pressures on the revenues and margins of its legacy products,” Michael E. Jalbert, Transcrypt’s chief executive, said.
The Lincoln, NE-based company saw its 2000 fourth-quarter revenue plummet to $7.3 million, compared to $15.8 million for the same quarter in 1999. Year-on-year revenues were $42.2 million for 2000 compared to $53.5 million for 1999.
The company has not completed its year-end audit. Nevertheless, the company predicted its net annual loss would be $10.8 million. The figure excludes potential adjustments related to a net deferred tax asset of $13.6 million and intangible assets valued at $13.6 million.
The weak fourth quarter 2000 performance has increased pressure on Transcrypt’s cash position. At year-end, Transcrypt had $11.4 million in cash, of which $10 million is pledged to secure a $10 million bank line of credit. On Dec. 31, 2000, Transcrypt had $8.3 million outstanding under the line of credit. The company anticipates that during the first quarter 2001 it will use $1.5 million of its cash to fund operations.
Without additional funding sources, the Transcrypt estimates that it currently needs $10 million in revenues per quarter to generate the necessary cash to finance its operations. The company anticipates revenues of about $9 million during the first quarter.
Along with expense reductions, the layoff and an effort to accelerate customer receivables, Transcrypt has asked its financial advisor, ING Barings, to evaluate opportunities for additional capital infusions or a sale of the company in whole or in part.
Shares in Transcrypt dropped from their close of 42 cents on March 7 to as low as 31 cents on March 9.