-----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, OaXQdcZRUn6eoW9OL2a/cKShZ/7aY2pbUYsrZj53zbXEsnyt2fyxZQFFI/vsPS23 pVVw6hYk0Q8yysFlpTo7XQ== 0000357064-98-000008.txt : 19980518 0000357064-98-000008.hdr.sgml : 19980518 ACCESSION NUMBER: 0000357064-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 000-10877 FILM NUMBER: 98623824 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 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 March 31, 1998 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 incorporation or organization) 94-3026925 (I.R.S. Employer Identification Number) 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 March 31, 1998, 3,207,915 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 that 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, 1997, filed with the Securities and Exchange Commission, is 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 six months ended March 31, 1998, are not necessarily indicative of results to be expected for the entire year ending September 30, 1998. TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Three Months Ended Six Months Ended March 31, March 31, 1998 1997 1998 1997 Revenue $ 8,187 $ 9,472 $15,084 $20,140 Operating costs and expenses: Cost of revenue 5,482 6,635 9,942 13,700 Marketing, general and administrative 2,895 2,969 5,440 6,455 8,377 9,604 15,382 20,155 Income (loss) from operations (190) (132) (298) (15) Investment income, net 206 255 425 692 Income before provision for income taxes 16 123 127 677 Provision for income taxes 0 39 38 217 Net income $ 16 $ 84 $ 89 $ 460 Basic earnings per share: Net income, per share $ .00 $ .03 $ .03 $ .14 Shares used in per share computations 3,204 3,196 3,203 3,188 Fully dilutive earnings per share: Net income, per share $ .00 $ .02 $ .03 $ .14 Shares used in per share computations 3,284 3,361 3,307 3,364
See accompanying Notes to Condensed Consolidated Financial Statements. TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except per share amounts) March 31, September 30, 1998 1997 ASSETS Current assets Cash and cash equivalents $ 8,241 $ 10,439 (Includes restricted cash of $3,232 on March 31, 1998 $6,420 on Sept 30, 1997) Short-term investments 4,375 4,089 Accounts receivable - Billed 504 1,234 Unbilled 8,373 8,970 Inventories 1,399 2,118 Prepaid expenses 2,767 967 Total current assets 25,659 27,817 Property and equipment, net 1,692 1,623 Other assets 628 426 Total assets $ 27,979 $ 29,866 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,732 $ 3,560 Customer deposits and billings on uncompleted contracts in excess of revenue recognized 1,665 1,019 Accrued liabilities 3,927 4,738 Total current liabilities 7,324 9,317 Stockholders' equity: Common stock, par value $.01; authorized 5,000 shares; issued and outstanding 3,281 shares 11,780 11,780 Retained earnings 9,207 9,124 Valuation allowance-short -term investments (4) (4) Treasury shares at cost; 73 and 79 shares at Mar. 31, 1998 and Sept 30, 1997, respectively (328) (351) Total stockholders' equity 20,655 20,549 Total liabilities and stockholders' equity $ 27,979 $ 29,866
See accompanying Notes to Condensed Consolidated Financial Statements. TCI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended March 31, (In thousands) 1998 1997 Cash provided by (used in): Operations: Net income $ 89 $ 460 Reconciliation to cash provided by operations: Depreciation 246 304 Changes in assets and liabilities: Accounts receivable 1,327 (862) Inventories 719 (532) Prepaid expenses (1,800) 176 Other assets (202) 0 Accounts payable (1,828) (554) Customer deposits/billing in excess of revenue 646 (1,646) Accrued liabilities (811) 545 Cash used in operations (1,614) (2,109) Investing activities: Purchases of property and equipment (315) (228) Purchases of short-term investments (3,345) (5,777) Proceeds from sale of investments 3,059 8,290 Cash provided by (used in) investing activities (601) 2,285 Financing activities: Stock options exercised 17 68 Cash provided by financing activities 17 68 Net increase (decrease) in cash and cash equivalents (2,198) 244 Cash and cash equivalents at beginning of period 10,439 7,249 Cash and cash equivalents at end of period $ 8,241 $ 7,493
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): March 31, September 30, 1998 1997 Material and component parts $1,143 $1,535 Work in process 256 583 $1,399 $2,118 Note 2 At March 31, 1998 there were outstanding standby letters of credit of approximately $3,544,000 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. Note 3 Net Income Per Share Basic net income per share is computed using the weighted average number of common shares outstanding. Diluted net income per share is computed using the weighted average number of common shares outstanding and dilutive common share equivalents from the assumed exercise of options outstanding during the period, if any, using the treasury stock method. TCI INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Second Fiscal Quarter of 1998 Compared to Second Fiscal Quarter of 1997 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 six months of fiscal year 1998 were $15,084,000, a decrease of 25% over revenues of $20,140,000 for the same period a year ago. Revenues for the second quarter were $8,187,000, compared to $9,472,000 over the same period in fiscal year 1997, a decrease of 14%. This decrease in revenues reflects a lower level of business activity in general and is due to the timing of completion of several of long term contracts. The Company's ability to generate consistent revenue growth remains contingent upon its ability to secure adequate levels of new business from its core products and new business initiatives. The Company continues to experience delays in the receipt of some anticipated new orders from both business areas. As a result, the Company currently expects total revenue for fiscal year 1998 to be lower than fiscal year 1997 and revenue for the remaining periods of fiscal year 1998 to be lower than the first half of the fiscal year. Gross margins expressed as a percentage of revenue for the first six months of fiscal year 1998 were 34%, compared to 32% for the same period in fiscal year 1997. Gross margins could vary significantly among the diverse product lines and, combined with the project-oriented nature of the business, substantial fluctuations in both revenues and gross margins could occur from one quarter to the next. The Company expects gross margins expressed as a percentage of revenue to remain at the current level for the remainder of this fiscal year. An improvement in gross margins is not likely to occur until such time as the Company successfully secures a more profitable mix of new business opportunities. Marketing, general and administrative expenses decreased by $1,015,000 or 16%, for the first half of fiscal year 1998 compared to the first half of fiscal year 1997. This decrease is due to a reduction in sales representative commissions expensed during the current fiscal year. This reduction represents 91% of the decrease in marketing, general and administrative expenses in the current year. As a percentage of revenue, marketing, general and administrative expenses increased from 32% last year to 36% this year. Investment income for the first six months of the current fiscal year decreased $267,000 compared to the same period in fiscal year 1997 due to a lower cash and short-term investments balance. Net income for the second quarter was $16,000, compared to $84,000 for the same period in fiscal year 1997. Net income for the first six months of fiscal year 1998 was $89,000, compared to $460,000 for the same period in fiscal year 1997. Net income as a percentage of revenue decreased from 2.3% to .6% for the first six months of the current fiscal year. The Company's total backlog as of March 31, 1998, was $15 million compared to $23 million on September 30, 1997. The total funded portion of the Company's backlog on March 31, 1998, was $14 million compared to $20 million on September 30, 1997. The Company's funded backlog excludes unfunded and unexercised options. The results of operations for the first six months of fiscal year 1998 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. The Company intends to effect its product and market diversification strategy by leveraging its expertise in RF technology applications and its ability to conduct business in foreign countries in the pursuit of outside technology and business acquisitions which complement various characteristics of its existing core business. Combined with the operating pressures detailed above, the Company expects that the future cost of this product diversification strategy may be significant enough to generate a loss from operations during fiscal year 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 accustomed 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 March 31, 1998 Compared to September 30, 1997 Consolidated cash, cash equivalents and marketable securities totaled $12,616,000 at March 31, 1998, compared to $14,528,000 at September 30, 1997. The Company currently believes that its cash, cash equivalents and short-term investments, together with expected revenue from operations, will be sufficient to fund its operations through fiscal year 1998. 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 is 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 March 31, 1998, the Company has standby letters of credit outstanding of approximately $3,544,000. The standby letters of credit are collateralized by the Company's cash or short-term investments. TCI INTERNATIONAL, INC. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders: The following matters were acted upon at the Annual Meeting of Stockholders of TCI International, Inc. on February 10, 1998. a. Management's nominees for directors, as set forth in the TCI International, Inc. proxy statement dated January 9, 1998 and filed with the Commission, were all elected. Votes for the directors were as follows: John W. Ballard For 2,780,858 Against 189,962 Hamilton W. Budge For 2,781,581 Against 189,239 Directors whose term of office as a director continued after the meeting were Asaph H. Hall, E. M. T. Jones, Slobodan Tkalcevic, John W. Ballard III, Donald C. Cox and C. Alan Peyser. b. A proposal to ratify the selection of KPMG Peat Marwick LLP as independent public accountants for the fiscal year ending September 30, 1998 was approved. 2,954,004 votes were cast in favor, 14,713 votes were cast against, and 2,103 abstained. Item 6. Exhibits and Reports on Form 8-K a. Exhibits: Exhibit 27.1-Financial Data Schedule 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/ Mary Ann W. Alcon Chief Financial Officer (Duly authorized officer of the registrant and principal financial officer of the registrant) Date: May 15, 1998 EX-27 2
5 1,000 6-MOS SEP-30-1998 OCT-01-1997 MAR-31-1998 8,241 4,375 8,877 0 1,399 25,659 8,336 6,645 27,979 7,324 0 0 0 11,780 8,875 27,979 15,084 15,084 9,942 9,942 5,440 0 0 (298) 38 89 0 0 0 89 .00 .00
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