-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vz3FWFHq3K7Mvx0lm4FW8htrr4WoMyO4xzDlltu4kh+L2dz3EABUUzOucMROvL0s VJRKfgw434pJDYe1BS4ATw== 0000357064-96-000011.txt : 19960813 0000357064-96-000011.hdr.sgml : 19960813 ACCESSION NUMBER: 0000357064-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TCI INTERNATIONAL INC CENTRAL INDEX KEY: 0000357064 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 943026925 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10877 FILM NUMBER: 96607650 BUSINESS ADDRESS: STREET 1: 222 CASPIAN DR CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087476100 MAIL ADDRESS: STREET 1: 222 CASPIN DRIVE CITY: SUNNYVALE STATE: CA ZIP: 94089 FORMER COMPANY: FORMER CONFORMED NAME: TECHNOLOGY FOR COMMUNICATIONS INTERNATIONAL INC DATE OF NAME CHANGE: 19880606 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 quarterly period ended June 30, 1996 * OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period N/A Commission file number: 0-10877 TCI INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 94-3026925 (State of other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 222 Caspian Drive, Sunnyvale, California 94089-1014 (Address of principal executive offices) (Zip Code) (408)747-6100 (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 X No ___ As of June 30, 1996, 3,179,431 shares of Common Stock were outstanding. PAGE 2 TCI INTERNATIONAL, INC. PART I FINANCIAL INFORMATION Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes the information included herein, when read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995, filed with the Securities and Exchange Commission, to be not misleading. Further, the following financial statements reflect, in the opinion of management, all adjustments necessary (consisting of normal recurring entries) to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the nine months ended June 30, 1996, are not necessarily indicative of results to be expected for the entire year ending September 30, 1996. PAGE 3 TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
Three Months Ended Nine Months Ended June 30 June 30 1996 1995 1996 1995 Revenues $ 8,559 $ 8,364 $22,295 $22,084 Operating costs and expenses: Cost of revenues 5,623 5,710 14,070 14,087 Marketing, general and administrative 2,932 2,627 8,049 7,725 8,555 8,337 22,119 21,812 Income from operations 4 27 176 272 Investment income, net 461 284 1,142 787 Income before provision for income taxes 465 311 1,318 1,059 Provision for income taxes 180 34 339 79 Net income $ 285 $ 277 $ 979 $ 980 Net income, per share $ .08 $ .08 $ .29 $ .29 Shares used in per share computations 3,363 3,316 3,373 3,366 See accompanying Notes to Condensed Consolidated Financial Statements.
PAGE 4 TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
June 30, September 30, 1996 1995 ASSETS Current assets Cash and cash equivalents $ 5,617 $ 3,598 (Includes restricted cash of $2,300 on June 30, 1996, $2,474 on Sept. 30, 1995) Short-term investments 20,848 15,068 Accounts receivable - Billed 2,547 3,529 Unbilled 4,602 3,831 Inventories 5,608 4,282 Prepaid expenses 641 382 Total current assets 39,863 30,690 Property and equipment, net 1,602 1,592 Other assets 413 91 Total assets $41,878 $32,373 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,381 $ 1,900 Customer deposits and billings on uncompleted contracts in excess of revenue recognized 7,470 1,754 Accrued liabilities 3,101 3,864 Total current liabilities 15,952 7,518 Stockholders' equity: Common stock, par value $.01; authorized 5,000 shares; issued and outstanding 3,281 shares 11,780 11,780 Retained earnings 14,646 13,702 Valuation allowance short-term investments (45) 7 Treasury shares at cost; 102 and 142 shares at June 30, 1996 and Sept. 30, 1995, respectively (455) (634) Total stockholders' equity 25,926 24,855 Total liabilities and stockholders' equity $41,878 $32,373 See accompanying Notes to Condensed Consolidated Financial Statements.
PAGE 5 TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended June 30, (In thousands)
1996 1995 Cash provided by (used in): Operations: Net income $ 979 $ 980 Reconciliation to cash provided by (used in) operations: Depreciation 402 474 Changes in assets and liabilities: Accounts receivable 211 (825) Refundable income taxes 0 739 Inventories (1,326) (102) Prepaid expenses (581) 79 Accounts payable 3,481 (262) Customer deposits/billing in excess of revenue 5,716 (469) Accrued liabilities (763) (511) Cash provided by (used in) operations 8,119 103 Investing activities: Purchases of property and equipment (412) (251) Purchases of short-term investments (20,758) (5,963) Proceeds from sale of short-term investments 14,926 1,360 Cash used in investing activities (6,244) (4,854) Financing activities: Repurchase of common stock for treasury stock 0 (707) Stock options exercised 144 0 Cash provided by (used in) financing activities 144 (707) Net increase (decrease) in cash and cash equivalents 2,019 (5,458) Cash and cash equivalents at beginning of period 3,598 7,578 Cash and cash equivalents at end of period $ 5,617 $ 2,120 See accompanying Notes to Condensed Consolidated Financial Statements
PAGE 6 TCI INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 Inventories consist of the following (in thousands): June 30, September 30, 1996 1995 Material and component parts $4,143 $3,336 Work in process 1,465 946 $5,608 $4,282 Note 2 At June 30, 1996 there were outstanding standby letters of credit of approximately $4,156,000 serving as performance and payment bonds. The standby letters of credit expire at various dates through 1997; however, certain performance bonds are automatically renewable until canceled by the beneficiary. These outstanding standby letters of credit are fully secured by the Company's cash or short term investment portfolio. PAGE 7 TCI INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Third Fiscal Quarter of 1996 Compared to Third Fiscal Quarter of 1995 Revenues for the frst nine months of fiscal year 1996 were $22,295,000, compared to revenues of $22,084,000 for the same period a year ago. Revenues for the third quarter increased 2% from $8,364,000 in fiscal year 1995 to $8,559,000 in fiscal year 1996. Gross profit expressed as a percentage of revenue for the fiscal 1996 nine month period remained flat compared to the same period from the prior year, and increased from 32% to 34% for the comparative third quarters. Gross profits were positively influenced by better than expected performance on selected long term, fixed price contracts as well by a one time favorable adjustment to revenues of approximately $450,000 without accompanying cost of revenues made possible by the favorable settlement of long-standing indirect rate proposals with the U.S. Government on selected cost plus contracts. Without these favorable contract adjustments, gross profit expressed as a percentage of revenue would have been 27% and 34% for the quarter and year to date periods respectively. It is expected that gross profit expressed as a percentage of revenue may decline further during the balance of the fiscal year due to competitive bidding pressures the Company experienced during the last 18 months in its pursuit of its broadcast and spectrum monitoring related contracts. Revenues from these contracts are expected to constitute substantially all of the Company's total of revenue during the remainder of the fiscal year, and as such, may serve to suppress overall profitability. Net interest income for the first nine months of fiscal year 1996 was $1,142,000, an increase of 45% over net interest income of $787,000 for the same period in fiscal year 1995. This increase is due to the benefit of a comparatively higher cash and short-term investment balance. Net income for the first nine months of fiscal year 1996 was $979,000 or $0.29 per share, compared to net income of $980,000 or $0.29 per share for the same period in fiscal year 1995. The Company's total backlog at June 30, 1996 was $40 million compared to $36 million at September 30, 1995. The total funded portion of the Company's backlog at June 30,1996 was $34 million compared to $26 million at September 30, 1995. The Company's funded backlog excludes unfunded and unexercised options which the Company believes are likely to be exercised. The results of operations for the first nine months in fiscal year 1996 are not necessarily indicative of future quarterly or annual performance expectations. This report contains forward looking statements regarding future events and the future performance of the Company that involve risks and uncertainties that could cause actual results to differ materially. We refer you to the documents of the Company filed from time to time with the Securities and Exchange Commission, such as the Company's Annual Report on Form 10-K, Current Reports on Form 8-K and other Quarterly Reports on Form 10-Q, which contain descriptions of certain factors that could cause actual results to differ from current expectations. See also "Factors That May Affect Future Operating Results". PAGE 8 FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS The Company operates in a highly competitive environment that involves a number of risks, some of which are beyond the Company's control. The following discussion highlights some of these risks. Fluctuations in Operating Results The Company's operating results may fluctuate from quarter to quarter and year to year for a number of reasons. While there is no seasonality to the Company's business, because of the Company's relative small size, combined with the extended delivery cycles of its long-term project-oriented business, revenues and accompanying gross margins are inherently difficult to predict. Because the Company plans its operating expenses, many of which are relatively fixed in the short term, based on the assumption of stable performance, a relatively small revenue shortfall may cause profitability from operations to suffer. Historically, the Company has endured periods of volatility in its revenue results due to a number of factors, including shortfalls in new orders, delays in the availability of new products, delays in subcontractor provided materials and services, and delays associated with foreign construction activities. Gross margins are strongly influenced by a mix of considerations,including pressures to be the low price supplier in competitive bid solicitations, the mix of contract material and non-recurring engineering services, and the mix of newly developed and existing product sold to various customers. The Company believes these historical challenges will continue to affect its future business. During fiscal year 1995, The Company formed a wholly-owned subsidiary, TCI Wireless, Inc. ("TCIW") to provide wireless communication services to the maritime and commercial aviation markets using proprietary equipment developed by the Company and facilities and bandwidth provided by various coast station operators around the world. The Company expects that the future cost of this and other development efforts may be significant enough to generate a loss from operations during any quarter between now and at least the end of fiscal 1997. Managing a Changing Business As detailed in the Company's most recent Annual Report, as part of its diversification efforts the Company intends to pursue at least three areas of product and market development. The Company is in the process of adopting a business management plan that includes substantial investments in its sales and marketing organizations, increased funding of existing research and development programs, and certain investments in corporate infrastructure that will be required to support the Company's diversification objectives during the next three years. Accompanying this process are a number of risks, including a higher level of operating expenses, the difficulty of competing with companies of larger size for talented technical personnel, and the complexities of managing a changing business. There also exists the risk the Company may inaccurately estimate the viability of any one or all of its diversification efforts and as a result, may experience substantial revenue shortfalls of a size so significant as to generate losses from operations. PAGE 9 Risk Associated with Expansion into Additional Markets and Product Development The Company believes that its future success is substantially dependent on its ability to successfully develop and commercialize new products and penetrate new markets. The Company intends to pursue at least three areas of product and market development during the next three years. The first area relates directly to proprietary elements of frequency management technology for use in commercial aviation and maritime communication applications. The second area relies on the Company's ability to use its expertise and knowledge in the Broadcast product area to conceive of, design, and implement propietary products for use in the overseas wireless cable TV market. The third area of diversification leverages the direction finding technology developed by the Company principally for military applications into a world-wide market for similar radio spectrum monitoring and surveillance equipment. There can be no assurance that the Company can successfully develop these or any other additional products, that any such products will be capable of being produced in commercial quantities at reasonable cost, or that any such products will achieve market acceptance. The inability of the Company to successfully develop or commercialize new products or failure of such products to achieve market acceptance would have a material adverse effect on the Company's business, financial condition and results of operations. Risks Associated with Conducting Business Overseas A substantial part of the Company's revenues are derived from fixed priced contracts with foreign governmental entities. With increasing frequency, the Company finds a demand for its products in third world countries and developing nations which have an inherently more volatile and uncertain political and credit risk profile than the U.S. Government market with which the Company is accustom to conducting its business. While the Company seeks to minimize the collection risks on these contracts by normally securing significant advanced payments with the balance secured by irrevocable letters of credit, due to unforeseen credit and political risks, the Company cannot always be assured of receiving full payment for work that it has performed. Should such a default on payments owed the Company ever occur, a significant effect on earnings, cash flows and cash balances may result. Competition Most all of the Company's products are positioned in niche markets which include strong elements of imbedded proprietary technology. In most of these markets, the Company competes with companies of significantly larger size, many of whom have substantially greater technical, marketing, and financial resources compared to similar resources available within the Company. This type of competition has resulted in and is expected to continue to result in significant price competition. PAGE 10 TCI INTERNATIONAL, INC. LIQUIDITY AND CAPITAL RESOURCES June 30, 1996 Compared to September 30, 1995 In the course of conducting its business, the Company normally requires advanced payments from its foreign customers. These advanced payments are typically secured by the Company's standby letter of credit or by a surety-backed bond. Because customer deposits are routinely used to satisfy the Company's working capital requirements, changes in customer deposit balances will usually be reflected as corresponding changes in cash, cash equivalents and short term investments. In January 1996, the Company received an advance of $8,586,000 serving as a customer deposit for a significantly-sized spectrum monitoring contract. At quarter end, this advance had been reduced by revenue taken on the same contract and represented approximately 90% of the total customer deposits. As progress is made on this contract, the size of this advance will continue to be reduced accordingly. The customer deposit is available for use as working capital and is secured by the Company's surety-backed bonding facility. The payment balance due on this contract will coincide with scheduled deliveries in fiscal year 1997. Directly related to the execution of this foreign contract is the growth the Company has experienced in its accounts payable balances. These balances are associated with certain subcontract costs having been accrued in advance of payment being made to particular vendors. Consolidated cash, cash equivalents and marketable securities totaled $26,465,000 at June 30, 1996, compared to $18,666,000 at September 30, 1995. The Company currently believes that its cash, cash equivalents and short-term investments, together with expected revenues from operations, will be sufficient to fund its operations through fiscal 1997. At June 30, 1996, the Company has standby letters of credit outstanding of approximately $4,156,000. The standby letters of credit are collateralized by the Company's cash or short-term investments. PAGE 11 TCI INTERNATIONAL, INC. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits: None b. Reports on Form 8-K: None No other applicable items. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TCI INTERNATIONAL, INC. (Registrant) __________________________________ John W. Ballard III Vice President , Chief Financial Officer (Duly authorized officer of the registrant and principal financial officer of the registrant) ___________________________ Date EX-27 2
5 This schedule contains summary financial information extracted from SEC Form 10Q for the quarter ending June 30, 1996, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS SEP-30-1996 OCT-01-1995 JUN-30-1996 5,617 20,848 7,149 0 5,608 39,863 8,963 7,362 41,878 15,952 0 0 0 11,325 14,601 41,878 22,295 22,295 14,070 14,070 8,049 0 0 1,318 339 979 0 0 0 979 .29 .29
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