-----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, VYjLVqL1AO7ekeagmX5E9RZp9RBhLL5m8zLgRCs19Nshtu8+HLwhHMKtSQC+HBss PWZHoqohHeHpbkRCIInZgA== 0000357064-97-000004.txt : 19970222 0000357064-97-000004.hdr.sgml : 19970222 ACCESSION NUMBER: 0000357064-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 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: 97534537 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 December 31, 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 (State of other jurisdiction of 94-3026925 (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 December 31, 1996, 3,183,432 shares of Common Stock were outstanding. 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. 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, 1996, 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 three months ended December 31, 1996, are not necessarily indicative of results to be expected for the entire year ending September 30, 1997. TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Three Months Ended December 31 1996 1995 Revenues $10,668 $5,926 Operating costs and expenses: Cost of revenues 7,065 3,236 Marketing, general and administrative 3,487 2,557 10,552 5,793 Income from operations 116 133 Interest income, net 438 338 Income before provision for income taxes 554 471 Provision for income taxes 177 137 Net income $377 $334 Net income per share $.11 $.10 Shares used in per share computations 3,368 3,391 See accompanying Notes to Condensed Consolidated Financial Statements.
TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except per share amounts) December 31, September 30, 1996 1996 ASSETS Current assets Cash and cash equivalents $ 6,518 $ 7,249 (Includes restricted cash of $1,774 on Dec. 31, 1996, $1,896 on Sept 30, 1996) Short-term investments 13,038 15,529 Accounts receivable - Billed 4,994 1,922 Unbilled 5,768 4,715 Inventories 5,978 5,179 Prepaid expenses 823 830 Total current assets 37,119 35,424 Property and equipment, net 1,607 1,566 Long-term investments 1,786 1,788 Other assets 418 414 Total assets $40,930 $39,192 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $6,905 $6,123 Customer deposits and billings on uncompleted contracts in excess of revenue recognized 3,218 3,336 Accrued liabilities 4,363 3,719 Total current liabilities 14,486 13,178 Stockholders' equity: Common stock, par value $.01; authorized 5,000 shares; issued and outstanding 3,281 shares 11,780 11,780 Retained earnings 15,111 14,723 Valuation allowance-short -term investments (21) (34) Treasury shares at cost; 98 and 102 shares at Dec. 31, 1996 and Sept 30, 1996, respectively (426) (455) Total stockholders' equity 26,444 26,014 Total liabilities and stockholders' equity $40,930 $39,192 See accompanying Notes to Condensed Consolidated Financial Statements.
TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended December 31, (In thousands) 1996 1995 Cash provided by (used in): Operations: Net income $ 377 $ 334 Reconciliation to cash provided by operations: Depreciation 168 130 Changes in assets and liabilities: Accounts receivable (4,125) 1,700 Inventories (799) (321) Prepaid expenses 5 (417) Accounts payable 782 (14) Customer deposits/billing in excess of revenue (118) (808) Accrued liabilities 644 (713) Cash used in operations (3,066) (109) Investing activities: Purchases of property and equipment (174) (104) Purchases of short-term investments (2,116) (3,220) Proceeds from sale of short-term investments 4,620 4,582 Cash provided by investing activities 2,330 1,258 Financing activities: Stock options exercised 5 9 Cash provided by financing activities 5 9 Net increase (decrease) in cash and cash equivalents (731) 1,158 Cash and cash equivalents at beginning of period 7,249 3,598 Cash and cash equivalents at end of period $ 6,518 $ 4,756 See accompanying Notes to Condensed Consolidated Financial Statements
TCI INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 Inventories consist of the following (in thousands): December 31, September 30, 1996 1996 Material and component parts $4,764 $3,726 Work in process 1,214 1,453 $5,978 $5,179
Note 2 At December 31, 1996 there were outstanding standby letters of credit of approximately $3,442,000 serving as performance and payment bonds. The standby letters of credit expire at various dates through 2000; 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. TCI INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS First Fiscal Quarter of 1997 Compared to First Fiscal Quarter of 1996 Except for historical information contain herein, the matters discussed in this report contain forward-looking statements that involve risks and uncertainties which could cause future results to differ materially. Revenues for the first quarter of fiscal year 1997 were $10,668,000, reflecting an increase of approximately 80% over revenues of $5,926,000 for the same period a year ago. The increase in revenues is due to the timing of completion on a number of long term contracts. Because of the project-oriented nature of the business, the Company believes it may not be possible to generate revenues at a similar rate during the later half of fiscal year 1997. The Company's ability to maintain consistent revenue performance remains contingent upon its ability to secure adequate new business. Although revenue increased 80%, gross profit expressed as a percentage of revenue for the first three month period decreased from 45% to 34% when compared to the same period a year ago. This trend is attributable to the timing of execution of two inherently lower margin contracts in the Company's spectrum management product line. Due to reasons similar to those experienced in the first quarter of fiscal 1997, combined with fewer orders being received in other, more profitable areas of its business, the Company expects that gross profit expressed as a percentage of revenue may decline from the current levels during the remaining three quarters of the fiscal year. Marketing, general and administrative expenses increased by 36% from $2,557,000 in the first quarter of fiscal year 1996 to $3,487,000 in the first quarter of fiscal year 1997. This increase is a result of the Company's continuous investment in independent research and development, increased overall marketing efforts and increased administrative activity in the execution of its current contracts. Net income for the first quarter was $377,000 or $.11 per share, compared to $334,000 or $0.10 per share, for the same period in fiscal year 1996. Net income as a percentage of revenue decreased from 5.6% to 3.5%, due primarily to the decrease in profit margins. The Company's total backlog at December 31, 1996 was $26 million compared to $35 million at September 30, 1996. The total funded portion of the Company's backlog at December 31, 1996 was $25 million compared to $30 million at September 30, 1996. The Company's funded backlog excludes unfunded and unexercised options. The results of operations for the first three months in fiscal year 1997 are not necessarily indicative of future quarterly or annual performance expectations. 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, revenue 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 1995, the Company formed a wholly- owned subsidiary, 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. Since its formation, the Company has determined that an opportunity to provide a world-wide maritime communications network using elements of its proprietary products is not economically viable at the present time, and as a result, has ceased expenditures on this activity. The Company intends, however, to leverage its expertise in RF technology applications and its ability to conduct business in foreign markets by pursuing outside technology and business acquisitions which complement various characteristics of its existing core businesses. The Company expects that the future cost of this product diversification strategy may be significant enough to generate a loss from operations during any quarter between now and at least the end of fiscal 1998. Managing of Changing Business 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 internal 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. 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 acquire, develop and commercialize new products and penetrate new markets. In addition to the Company's ongoing efforts to diversify its product offerings within its core businesses such as the spectrum management system business, the Company intends to pursue a diverse, but focused product and market development initiative during the next three years. The Company believes that its general knowledge of RF technology and its related applications combined with its proven ability to conduct business in overseas markets can be exploited to return the Company to an aggressive growth posture. While not strictly limited to these product areas, the Company is currently pursuing various rural communication and telephony applications using its proprietary technology, certain transmitter product initiatives in the FM, TV and wireless cable TV markets which compliment the Company's antenna expertise, and certain RF technologies with potential application in the markets of tracking various kinds of assets in indoor and outdoor settings. 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. Should the Company expend funds to acquire outside entities or technology, there can be no assurance that sufficient returns will be realized to offset these investments. 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 revenue 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, the Company cannot always be assured of receiving full payment for work that it has performed due to unforeseen credit and political risks . 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. TCI INTERNATIONAL, INC. LIQUIDITY AND CAPITAL RESOURCES December 31, 1996 Compared to September 30, 1996 Consolidated cash, cash equivalents and marketable securities totaled $21,342,000 at December 31, 1996, compared to $24,566,000 at September 30, 1996. 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 year 1997. A significant portion of the Company's sales is associated with long-term contracts and programs in which there are significant inherent risks. These risks include the uncertainty of economic conditions, dependence on future appropriations and administrative allotments of funds, changes in governmental policies, difficulty of forecasting costs and work schedules, product obsolescence, and other factors characteristic of the industry. Contracts with agencies of the U.S. Government or with prime contractors working on U.S. Government contracts contain provisions permitting termination at any time for the convenience of the Government. No assurance can be given regarding future financial results as such results are dependent upon many factors, including economic and competitive conditions, incoming order levels, shipment volume, product margins and foreign exchange rates. The large size of certain of the Company's orders makes it possible that a single contract termination, cancellation, delay, or failure to perform could have a significant adverse effect on revenue, results of operations, and the cash position of the Company. A portion of the Company's revenue are derived from governments in areas of political instability. The Company generally attempts to reduce the risks associated with such instability by requesting advance payment if appropriate, as well as letters of credit or central government guarantees. Most of the Company's overseas contracts provide for payments in U.S. dollars. However, in certain instances the Company, for competitive reasons, must accept payment in a foreign currency. At December 31, 1996, the Company has standby letters of credit outstanding of approximately $3,442,000. The standby letters of credit are collateralized by the Company's cash or short-term investments. 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) /S/ John W. Ballard III John W. Ballard III Vice President , Chief Financial Officer (Duly authorized officer of the registrant and principal financial officer of the registrant) Date: February 13, 1997 EX-27 2
5 0000357064 TCI INTERNATIONAL, INC. 1,000 3-MOS SEP-30-1997 OCT-1-1996 DEC-31-1996 6,518 13,038 10,762 0 0 0 9,226 7,619 40,930 14,486 0 0 0 11,780 14,664 40,930 10,668 10,668 7,065 7,065 3,487 0 0 554 177 377 0 0 0 377 .11 .11
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