|
(Mark
One)
|
DELAWARE
|
|
48-1100390
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(IRS
employer identification number)
|
|
|
|
Six
Concourse Parkway, Suite 1900
Atlanta,
Georgia
|
|
30328
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
|
|
Registrant's
telephone number, including area code:
|
||
(678)
987-1700
|
Title
of Each Class
|
|
Number
of Shares Outstanding
at May
1, 2006
|
|
|
|
Common
Stock, $0.01 Par Value
|
|
28,752,168
|
Form
10-Q Item
|
|
Page
|
||
|
|
|
||
|
|
|
||
Part
I. Financial Information
|
|
|
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
13
|
||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
Part
II. Other Information
|
|
|||
|
|
|
|
|
|
|
21
|
||
21
|
||||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
|
|
21
|
||
|
|
|
|
|
|
|
|
22
|
|
March
31,
2006
|
December
31,
2005
|
|||||
|
|
|
|||||
Assets:
|
|||||||
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
33,227
|
$
|
40,098
|
|||
Accounts
receivable, net of allowance of $221 and $177
|
6,186
|
7,314
|
|||||
Other receivables
|
1,972
|
2,003
|
|||||
Inventory,
net
|
10,356
|
10,994
|
|||||
Prepaid
expenses
|
830
|
724
|
|||||
|
|||||||
Total
current assets
|
52,571
|
61,133
|
|||||
|
|||||||
Property
and equipment, net
|
7,088
|
6,482
|
|||||
Developed
technology, net of accumulated amortization of $1,502 and
$1,300
|
6,568
|
6,770
|
|||||
Goodwill
|
5,934
|
5,934
|
|||||
Covenant
not-to-compete, net of accumulated amortization of $306 and
$166
|
5,294
|
5,434
|
|||||
Other
assets
|
276
|
314
|
|||||
|
|||||||
Total
assets
|
$
|
77,731
|
$
|
86,067
|
|||
|
|||||||
Liabilities
and Stockholders' Equity:
|
|||||||
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
4,420
|
$
|
6,166
|
|||
Other
payables
|
1,445
|
1,445
|
|||||
Accrued
expenses
|
2,550
|
3,484
|
|||||
Future installments due on covenants not-to-compete
|
1,302
|
1,286
|
|||||
Deferred
revenue
|
1,834
|
2,278
|
|||||
Accrued
warranty
|
1,815
|
2,482
|
|||||
Deferred
rent
|
247
|
247
|
|||||
|
|||||||
Total
current liabilities
|
13,613
|
17,388
|
|||||
|
|||||||
Future
installments due on covenants not-to-compete, non-current
|
2,395
|
2,363
|
|||||
Deferred
rent, non-current
|
1,402
|
1,463
|
|||||
Other
liabilities
|
85
|
81
|
|||||
|
|||||||
Total
liabilities
|
17,495
|
21,295
|
|||||
|
|||||||
Commitments
and contingencies
|
|||||||
|
|||||||
Stockholders'
equity:
|
|||||||
Preferred
stock, $1 par value, authorized 5,000,000 shares, 0 shares
issued
|
--
|
--
|
|||||
Preferred
membership units exchangeable for shares of TurboChef common
stock
|
510
|
967
|
|||||
Common
stock, $.01 par value, authorized 100,000,000 shares,
issued
28,744,515 and 28,624,247 shares at March 31, 2006 and
December
31, 2005, respectively
|
287
|
286
|
|||||
Additional
paid-in capital
|
144,802
|
143,950
|
|||||
Accumulated
deficit
|
(85,363
|
)
|
(80,431
|
)
|
|||
|
|||||||
Total
stockholders' equity
|
60,236
|
64,772
|
|||||
|
|||||||
Total
liabilities and stockholders' equity
|
$
|
77,731
|
$
|
86,067
|
|
Three
Months Ended
March
31,
|
||||||
|
2006
|
2005
|
|||||
|
|
|
|||||
Revenues:
|
|||||||
Product
sales
|
$
|
9,107
|
$
|
19,720
|
|||
Royalties
and services
|
429
|
683
|
|||||
Total
revenues
|
9,536
|
20,403
|
|||||
|
|||||||
Costs
and expenses:
|
|||||||
Cost
of product sales
|
6,637
|
12,491
|
|||||
Research
and development expenses
|
1,159
|
1,049
|
|||||
Selling,
general and administrative expenses
|
6,971
|
5,584
|
|||||
Restructuring
charges
|
(41
|
)
|
--
|
||||
Total
costs and expenses
|
14,726
|
19,124
|
|||||
|
|||||||
Operating
(loss) income
|
(5,190
|
)
|
1,279
|
||||
|
|||||||
Other
income (expense):
|
|||||||
Interest
income
|
369
|
263
|
|||||
Interest
expense and other
|
(111
|
)
|
(21
|
)
|
|||
|
258
|
242
|
|||||
|
|||||||
Net
(loss) income
|
$
|
(4,932
|
)
|
$
|
1,521
|
||
|
|||||||
|
|||||||
Per
share data:
|
|||||||
Basic
|
$
|
(0.17
|
)
|
$
|
0.06
|
||
Diluted
|
$
|
(0.17
|
)
|
$
|
0.05
|
||
|
|||||||
Weighted average number of common
shares
outstanding:
|
|||||||
Basic
|
28,665,275
|
26,589,785
|
|||||
Diluted
|
28,665,275
|
28,989,040
|
|
Three
Months Ended
March
31,
|
||||||
|
2006
|
2005
|
|||||
Cash
flows from operating activities:
|
|
|
|||||
Net
(loss) income
|
$
|
(4,932
|
)
|
$
|
1,521
|
||
Adjustments
to reconcile net (loss) income to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
892
|
501
|
|||||
Amortization
of deferred rent
|
(61
|
)
|
--
|
||||
Amortization
of deferred loan costs
|
87
|
16
|
|||||
Non-cash
compensation expense
|
--
|
19
|
|||||
Provision
for doubtful accounts
|
45
|
38
|
|||||
Other
|
8
|
--
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Restricted cash
|
--
|
385
|
|||||
Accounts
receivable
|
1,083
|
1,161
|
|||||
Inventories
|
418
|
(1,160
|
)
|
||||
Prepaid
expenses and other assets
|
(63
|
)
|
(1,786
|
)
|
|||
Accounts
payable
|
(1,753
|
)
|
(1,146
|
)
|
|||
Accrued
expenses and warranty
|
(1,599
|
)
|
(126
|
)
|
|||
Deferred
revenue
|
(444
|
)
|
(968
|
)
|
|||
Net
cash used in operating activities
|
(6,319
|
)
|
(1,545
|
)
|
|||
|
|||||||
Cash
flows from investing activities:
|
|||||||
Acquisition
of business, net of cash acquired
|
--
|
(170
|
)
|
||||
Purchases
of property and equipment, net
|
(923
|
)
|
(1,091
|
)
|
|||
Other
|
--
|
119
|
|||||
Net
cash used in investing activities
|
(923
|
)
|
(1,142
|
)
|
|||
|
|||||||
Cash
flows from financing activities:
|
|||||||
Issuance
of common stock, net
|
--
|
54,840
|
|||||
Proceeds
from the exercise of stock options and warrants
|
396
|
880
|
|||||
Proceeds from notes receivable for stock issuances
|
--
|
46
|
|||||
Payment of deferred loan costs
|
(25
|
)
|
(156
|
)
|
|||
Other
|
--
|
(2
|
)
|
||||
Net
cash provided by financing activities
|
371
|
55,608
|
|||||
|
|||||||
Net
(decrease) increase in cash and cash equivalents
|
(6,871
|
)
|
52,921
|
||||
Cash
and cash equivalents at beginning of period
|
40,098
|
12,942
|
|||||
Cash
and cash equivalents at end of period
|
$
|
33,227
|
$
|
65,863
|
|||
|
|||||||
NON
CASH INVESTING AND FINANCING ACTIVITIES:
|
|||||||
|
|||||||
Issuance
of common stock in exchange for Enersyst preferred membership
units
|
$
|
457
|
$
|
5,379
|
|||
|
|
Three
Months Ended
March
31,
|
||||||
|
2006
|
2005
|
|||||
|
|
||||||
Numerator
for basic and diluted earnings per share:
|
|||||||
$
|
(4,932
|
)
|
$
|
1,521
|
|||
Denominator:
|
|||||||
Denominator
for basic income (loss) per share available to common stockholders
|
|||||||
Weighted
average common shares outstanding
|
28,665
|
26,590
|
|||||
Effect
of potentially dilutive securities
|
|||||||
Preferred
membership interests exchangeable for common stock
|
--
|
275
|
|||||
Dilutive
stock options and warrants
|
--
|
2,124
|
|||||
Shares
applicable to diluted income (loss) per share available to common
stockholders
|
28,665
|
28,989
|
Net
income:
|
||||
As
reported
|
$
|
1,521
|
||
Total
stock-based compensation expense
|
(1,048
|
)
|
||
Pro
forma
|
$
|
473
|
||
Net
income per share:
|
||||
Basic:
|
||||
As
reported
|
$
|
0.06
|
||
Pro
forma
|
0.02
|
|||
Diluted:
|
||||
As
reported
|
$
|
0.05
|
||
Pro
forma
|
0.02
|
|
March
31,
2006
|
December 31,
2005
|
|||||
|
|
|
|||||
Parts
inventory, net
|
$
|
6,065
|
$
|
6,635
|
|||
Finished
goods - ovens
|
3,779
|
3,891
|
|||||
Demonstration
inventory, net
|
512
|
468
|
|||||
|
|||||||
|
$
|
10,356
|
$
|
10,994
|
|
|
|
|
March
31,
2006
|
|
December
31,
2005
|
|
|||
|
|
Estimated
Useful Lives
(Years)
|
|
|
|
|
|
|||
Tooling
and equipment
|
|
|
3-7
|
|
$
|
4,453
|
|
$
|
3,533
|
|
Furniture
and fixtures
|
|
|
5
|
|
|
1,297
|
|
|
1,465
|
|
Leasehold
improvements
|
|
|
5-7.5
|
|
|
2,945
|
|
|
2,945
|
|
|
|
|
|
|
|
8,695
|
|
|
7,943
|
|
Less
accumulated depreciation and amortization
|
|
|
|
|
|
(1,607
|
)
|
|
(1,461
|
)
|
|
|
|
|
|
$
|
7,088
|
|
$
|
6,482
|
|
|
|
Three
Months Ended
March
31,
|
|
|||
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
$
|
2,482
|
|
$
|
2,586
|
|
Provision
for warranties
|
|
946
|
|
|
1,679
|
|
Warranty
expenditures
|
|
(1,613
|
)
|
|
(1,447
|
)
|
Balance
at end of period
|
$
|
1,815
|
|
$
|
2,818
|
|
NOTE
6.
|
RESTRUCTURING
CHARGES
|
Lease
Termination
And
Other
Related
Charges
|
|||||||
Balance
as of December 31, 2005
|
$
|
100
|
|||||
Payments
|
(6
|
)
|
|||||
Adjustments
|
(41
|
)
|
|||||
Balance
as of March 31, 2006
|
$
|
53
|
Three Months Ended March 31,
|
|||||||
2006
|
2005
|
||||||
Commercial:
|
|
|
|||||
Revenues
|
$
|
9,536
|
$
|
20,403
|
|||
Net
(loss) income
|
(1,124
|
)
|
5,032
|
||||
Residential:
|
|
|
|||||
Revenues
|
$
|
--
|
$
|
--
|
|||
Net
(loss)
|
(1,815
|
)
|
(923
|
)
|
|||
Corporate:
|
|
|
|||||
Revenues
|
$
|
--
|
$
|
--
|
|||
Net
(loss)
|
(1,993
|
)
|
(2,588
|
)
|
|||
Totals:
|
|
|
|||||
Revenues
|
$
|
9,536
|
$
|
20,403
|
|||
Net
(loss) income
|
(4,932
|
)
|
1,521
|
REGION
|
|
|
|
|
||||
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
$
|
7,119
|
|
$
|
16,015
|
|
Europe
and Asia
|
|
|
|
2,417
|
|
|
4,388
|
|
Totals
|
|
|
$
|
9,536
|
|
$
|
20,403
|
|
|
|||||||||||
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenues
|
|
100
|
%
|
100
|
%
|
||||||
Cost
of product sales
|
|
70
|
|
61
|
|
||||||
Research
and development expenses
|
|
12
|
|
5
|
|
||||||
Selling,
general and administrative expenses
|
|
73
|
|
28
|
|
||||||
Restructuring
charges
|
--
|
--
|
|||||||||
Total
costs and expenses
|
|
155
|
|
94
|
|
||||||
|
|
|
|
|
|||||||
Operating
(loss) income
|
|
(55
|
)
|
6
|
|||||||
Interest
income
|
|
4
|
1
|
||||||||
Interest
expense and other
|
|
(1
|
)
|
--
|
|
||||||
Total
other income, net
|
|
3
|
|
1
|
|||||||
Net
(loss) income
|
|
(52
|
) %
|
7
|
%
|
|
•
|
During
2004, we commenced the rollout of our Tornado oven to Subway franchisees.
We substantially completed the rollout in the first quarter of 2005.
Subway sales accounted for 44% and 81% of our total revenues during
the
three months ended March 31, 2006 and 2005, respectively. We expect
Subway
to be a meaningful contributor to future revenues.
|
|
|
|
|
•
|
During
the three months ended March 31, 2006, our non-Subway product
sales increased $1.8 million, or 55%, over the comparable period in
2005. We expect our non-Subway revenue to continue to increase in
2006. No
single customer, other than Subway, accounted for more than 10% of
our
total first quarter 2006 revenues. As our customer base continues
to grow,
we expect our customer concentration levels to decline.
|
|
•
|
Beginning
in 2005, we experienced an increase in our cost of product sales as
a
percentage of revenue (and gross margin percentage deterioration).
The
deterioration is primarily due to an increase
in warranty charges and, to a lesser extent, increases in
component pricing. In 2005, we experienced an increase of 5% in our
Tornado oven bill of materials due to increases in component pricing,
primarily the result of increased stainless steel pricing. Additionally,
we experienced increased freight and handling costs. In 2006, we
expect
gross profit percentages to improve as we anticipate no recurrence
of
product performance issues causing material warranty related charges,
and
we believe gross profit percentages will benefit from a favorable
sales
mix as we continue expansion of our customer base and as our recently
instituted price increases take full effect in early 2006.
|
|
|
|
|
•
|
During
the first quarter of 2006, we continued to invest in the development
of
our residential oven and commercial ovens and expect this trend to
continue throughout 2006.
|
|
|
|
|
•
|
During
the first quarter of 2006, we increased our selling, general and
administrative expenses by $1.4 million over the comparable period
in
2005. We continue to expect an increase in 2006, primarily due to
increased marketing costs related to the residential product launch.
|
|
|
|
•
|
increase
our Subway and non-Subway revenue;
|
|
|
|
|
•
|
reduce
our product warranty charges;
|
• | successful residential product line launch; | |
|
|
|
|
•
|
manage
costs related to the residential product
launch.
|
Increase
(Decrease) in
Research
and Development
Expenses
2006 to 2005
|
||||
Payroll
and related expenses
|
$
|
124
|
||
General
and administrative expenses
|
16
|
|||
Design,
prototype and other related expenses
|
(30
|
)
|
||
Total
increase
|
$
|
110
|
Increase
(Decrease) in
General
and Administrative
Expenses
2006 to 2005
|
||||
Payroll
and related expenses
|
$
|
693
|
||
Depreciation
and amortization
|
391
|
|||
Rent
and occupancy costs
|
319
|
|||
Selling,
marketing and related expenses
|
497
|
|||
Legal
and professional fees
|
(463
|
)
|
||
Other
|
(50
|
)
|
||
Total
increase
|
$
|
1,387
|
|
Payments
Due By Period
|
||||||||||||||||||||||||||
|
Total
|
|
April
-
December
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
Thereafter
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment
Payments
for
Covenants
Not-to-Compete
|
$
|
4,000
|
$
|
1,333
|
$
|
1,333
|
$
|
1,334
|
$
|
--
|
$
|
--
|
$
|
--
|
|||||||||||||
Operating
Leases
|
5,491
|
|
|
813
|
|
|
1,024
|
|
|
949
|
|
|
866
|
|
|
613
|
|
|
1,226
|
|
|||||||
Total
|
$
|
9,491
|
|
|
$
|
2,146
|
|
|
$
|
2,357
|
|
|
$
|
2,283
|
|
|
$
|
866
|
|
|
$
|
613
|
|
|
$
|
1,226
|
|
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
32
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant
to
Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
TURBOCHEF
TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
|
/s/
James A.
Cochran
|
|
James
A. Cochran
Chief
Financial Officer
(Duly
Authorized Officer and
Principal
Financial Officer)
|