-----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, Oa13l+Ex5keDmOr//KUXUnLl1zQ+KWxbr/M9NlIijIcxQZhm66Qle4eYGRcXyof5 abcLoe1lAMHxYOraYRw5hQ== 0000741556-96-000042.txt : 19961104 0000741556-96-000042.hdr.sgml : 19961104 ACCESSION NUMBER: 0000741556-96-000042 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961101 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECHNOLOGY RESEARCH CORP CENTRAL INDEX KEY: 0000741556 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 592095002 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13763 FILM NUMBER: 96651937 BUSINESS ADDRESS: STREET 1: 5250 140TH AVE NORTH CITY: CLEARWATER STATE: FL ZIP: 34620 BUSINESS PHONE: 8135350572 MAIL ADDRESS: STREET 1: 5250 140TH AVENUE NORTH CITY: CLEARWATER STATE: FL ZIP: 34620 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 Commission File Number: 0-13763 TECHNOLOGY RESEARCH CORPORATION _______________________________ (Exact name of registrant as specified in its charter) Florida 59-2095002 _______________________________ ________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No,) 5250 140th Avenue North, Clearwater, Florida 34620 ____________________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (813) 535-0572 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 a 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 1996 ____________________________ ____________________________ Common stock, $.51 par value 5,318,902 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Balance Sheets--September 30, 1996 and March 31, 1996.... 1 Condensed Statements of Income--Three months and six months ended September 30, 1996 and September 30, 1995..................... 2 Condensed Statements of Cash Flows--Six months ended September 30, 1996 and September 30, 1995..................... 3 Notes to Condensed Financial Statements............................ 4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 5 Part II - Other Information Item 1 - Legal Proceedings......................................... 7 Item 4 - Submission of Matters to a Vote of Shareholders............8 Item 6 - Exhibits and Reports on Form 8-K.......................... 8 Signatures......................................................... 9 PART I - FINANCIAL INFORMATION Item 1. Financial Statements TECHNOLOGY RESEARCH CORPORATION CONDENSED BALANCE SHEETS
September 30 March 31 1996 1996 ------------ --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 164,136 341,601 Short term investments 4,083,660 4,084,698 Accounts receivable, net 2,190,381 2,607,152 Inventories: Raw material 3,828,357 3,423,236 Work in process 923,949 945,795 Finished goods 723,137 857,731 ---------- ---------- Total inventories 5,475,443 5,226,762 Prepaid expenses 203,667 94,205 Deferred income taxes 417,000 445,000 ---------- ---------- Total current assets 12,534,287 12,799,418 ---------- ---------- Property, plant, and equipment 6,296,915 6,120,341 Less accumulated depreciation (3,946,167) (3,698,692) ---------- ---------- Net property, plant, and equipment 2,350,748 2,421,649 ---------- ---------- Deferred income taxes 127,343 159,000 Other assets 2,060 523 ---------- ---------- $ 15,015,438 15,380,590 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 75,000 75,000 Accounts payable 1,109,714 1,236,591 Accrued expenses 222,577 219,044 Dividends payable 345,141 336,052 Income taxes payable 51,918 991 ---------- ---------- Total current liabilities 1,804,350 1,867,678 Long-term debt, excluding current installments 243,850 281,350 ---------- ---------- Total liabilities 2,048,200 2,149,028 ---------- ---------- Stockholders' equity: Common stock 2,712,640 2,712,437 Additional paid-in capital 7,410,551 7,410,754 Retained earnings 2,843,047 3,108,371 ---------- ---------- Total stockholders' equity 12,966,238 13,231,562 ---------- ---------- $ 15,014,438 15,380,590 ========== ========== * The balance sheet as of March 31, 1996 has been summarized from the Company's audited balance sheet as of that date. See accompanying notes to condensed financial statements.
- 1 - TECHNOLOGY RESEARCH CORPORATION CONDENSED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended September 30 September 30 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Operating revenues: Net sales $ 3,551,235 4,171,788 6,830,572 8,415,818 Royalties 137,692 213,797 235,822 385,757 ---------- ---------- ---------- ---------- 3,688,927 4,385,585 7,066,394 8,801,575 ---------- ---------- ---------- ---------- Operating expenses: Cost of sales 2,361,474 2,780,050 4,666,405 5,376,077 Selling, general, and administrative 776,381 705,430 1,512,243 1,344,151 Research, development and engineering 295,573 255,029 573,706 485,270 ---------- ---------- ---------- ---------- 3,433,428 3,740,509 6,752,354 7,205,498 ---------- ---------- ---------- ---------- Operating income 255,499 645,076 314,040 1,596,077 ---------- ---------- ---------- ---------- Other income (deductions): Interest and sundry income 58,123 68,633 113,585 138,197 Interest expense (8,579) (11,578) (17,555) (22,473) ---------- ---------- ---------- ---------- 49,544 57,055 96,030 115,724 ---------- ---------- ---------- ---------- Income before income taxes 305,043 702,131 410,070 1,711,801 Income taxes 3,126 247,000 37,126 626,814 ---------- ---------- ---------- ---------- Net income $ 301,917 455,131 372,944 1,084,987 ========== ========== ========== ========== Earnings per share $ 0.06 0.08 0.07 0.20 ========== ========== =========== ========= Weighted average number of common and equivalent shares outstanding 5,432,392 5,392,499 5,418,696 5,383,817 ========== ========== ========== ========== Dividend declared per share $ 0.06 0.06 0.12 0.12 ========== ========== ========== ========== See accompanying notes to condensed financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended September 30 1996 1995 ---------- ---------- Cash flows from operating activities: Net income $ 372,944 1,084,987 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (106,814) (104,998) Depreciation 247,475 233,295 Decrease in accounts receivable 416,771 673,058 Decrease(increase) in inventories (248,681) (622,776) Increase in prepaid expenses (109,462) (60,497) Decrease in deferred income taxes 59,657 32,000 Decrease in other assets (1,537) 52,812 Decrease in accounts payable (126,877) (338,561) Increase in accrued expenses 3,533 44,896 Increase(decrease) in income taxes payable 50,927 (85,491) ---------- ---------- Net cash provided by operating activities 557,936 908,725 ---------- ---------- Cash flows from investing activities: Maturities of short-term investments (3,001,148) (2,957,884) Purchase of short-term investments 3,109,000 1,803,000 Capital expenditures (176,574) (354,821) ---------- ---------- Net cash used in investing activities (68,722) (1,509,705) ---------- ---------- Cash flows from financing activities: Principal payments on long-term debt (37,500) (37,500) Proceeds from exercise of stock options - 58,013 Dividends paid (629,179) (316,890) ---------- ---------- Net cash provided by(used in) financing activities (666,679) (296,377) ---------- ---------- Decrease in cash and cash equivalents (177,465) (897,357) Cash and cash equivalents at beginning of period 341,601 1,707,930 ---------- ---------- Cash and cash equivalents at end of period $ 164,136 810,573 ========== ========== See accompanying notes to condensed financial statements.
- 3 - TECHNOLOGY RESEARCH CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) 1. The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of results for the interim period. The results of operations for the six-month period ended September 30, 1996, are not necessarily indicative of the results to be expected for the full year. 2. Short-term investments consist of U.S. Treasury Bills with a purchased maturity of greater than three months. 3. Earnings per share has been computed by dividing net income by the weighted average number of common and equivalent shares outstanding. Common share equivalents included in the computation represent shares issuable upon exercise of stock options which would have a dilutive effect in years where there are earnings. - 4 - Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial position and operating results during the periods included in the accompanying condensed financial statements. Current Six Months Ended September 30, 1996 versus Six Months Ended September 30, 1995 Operating revenues (net sales and royalties) for the second quarter ended September 30, 1996 were $3,688,927, compared to $4,385,585 reported in the same quarter of the prior year, a decrease of approximately 16%. Net income for the current quarter was $301,917, compared to $455,131, for the prior year's quarter, a decrease of approximately 34%. The earnings per share for the current period were $.06 per share as compared to $.08 for the comparable period last year. Operating revenues (net sales and royalties) for the six-month period ended September 30, 1996 were $7,066,394, compared to $8,801,575 reported in the same period for the prior year, a decrease of approximately 20%. Net income for the six-month period was $372,944, compared to $1,084,987, for the same period in the prior year, a decrease of approximately 66%. The earnings per share for the six-month period were $.07 per share as compared to $.20 for the comparable period last year. The lower revenues were due to commercial sales being down $844,550 over the prior six-month period while military sales showed a decrease of $740,695. Royalty income was down by $149,936. The reduction in commercial sales was evenly distributed over sales to Xerox and to the sprayer/washer and OEM markets. The Company expects sales to Xerox and its OEM market to stabilize and increase as the fiscal year progresses, but the Company does not anticipate increased sales to the sprayer/washer market, as UL has not commented on when enforcement will begin for the change in the National Electric Code requiring attached GFCI protection for these products. Military product shipments continue to be impacted by the transition period from the previous to the new Tactical Quiet (TQ) Generator Systems Program contract; however, the Company has now received firm releases from the prime contractor. The Company began shipping limited product under the new contract in the current quarter, but full production is not expected until the fourth quarter. The new contract covers approximately a two-year period with a total expected value of $4,900,000. Royalty income was down, as expected, due to less royalties from Windmere Corporation. The Company believes that revenues and profits will continue to improve as the fiscal year progresses; however, revenues from "Fire Shield" and TRC Consumer Marketing will be needed, in addition to the Company's existing business, to achieve growth over Fiscal Year 1996. The Company continues to actively promote the "Fire Shield" line of appliance cords and extension cords to the market. The "Fire Shield" extension cords are currently being sold through TRC Consumer Marketing and TRC Distribution in modest quantities; however, the - 5 - Company has yet to receive significant orders for this product. The Company also continues to develop a direct consumer sales initiative through the use of independent distributors that specialize in selling products directly to the household consumer. The Company expects modest sales can be achieved through this marketing strategy beginning in the third and fourth quarters of Fiscal Year 1997. The Company expensed over $250,000 in the "Fire Shield" and TRC Consumer Marketing programs in the first six months of the current fiscal year, and the Company will continue to invest in these programs in expectation of significant revenues being generated from them in the future. In addition, the Company will increase its expenses for sales and marketing in the OEM and TRC Distribution areas as they also represent opportunity for revenue growth. Cost of sales was approximately 66% of net sales for the current quarter and approximately 68% of net sales for the six-month period ended September 30, 1996, compared to 67% and 64% for the same periods last year. The Company expects cost of sales as a percent of sales to continue to remain stable throughout the fiscal year. The labor inefficiencies experienced in the first quarter of Fiscal Year 1997 are correcting themselves as the Company ramps up production for the TQ Generator Systems Program. The Company has given Xerox Corporation another price reduction, effective October 1, 1996; however, Xerox and its suppliers will start receiving product directly from China resulting in lower duty, freight and packaging costs to the Company, thus offsetting, in part, the effect of the price reduction. The Company, historically, has been successful in offsetting price reduction with product cost reduction in order to maintain acceptable margins with Xerox Corporation. Selling, general and administrative expenses for the current quarter were $776,381 and $1,512,243 for the six-month period ended September 30, 1996, compared to $705,430 and $1,344,151 in the same periods last year, an increase of approximately 10% and 13%, respectively. Selling expenses were $481,654 for the current quarter and $993,760 for the six-month period ended September 30, 1996, compared to $432,604 and $871,136 in the same period last year, an increase of approximately 11% and 14%, respectively, reflecting expenses related to the "Fire Shield" and TRC Consumer Marketing programs. General and administrative expenses were $294,727 for the current quarter and $518,483 for the six-month period ended September 30, 1996, compared to $272,826 and $473,015 in the same periods last year, an increase of approximately 11% and 10%, respectively, reflecting higher salary, employee relation and shareholder relation expenses. Research, development and engineering expenses for the current quarter were $295,573 and $573,706 for the six-month period ended September 30, 1996, compared to $255,029 and $485,270 for the same periods in the prior year, an increase of approximately 16% and 18%, respectively, reflecting higher salary related expenses. Interest and sundry income, net of interest expense, for the current quarter was $49,544 and $96,030 for the six-month period ended September 30, 1996, compared to $57,055 and $115,724 for the same periods last year, reflecting lower returns on the Company's short-term investments. - 6 - On August 20, 1996, the Company received a favorable ruling from the State of Florida regarding apportionment factors for state income tax purposes. As a result of this ruling, the Company is amending previously filed state income tax returns. Accordingly, the Company recorded a $240,000 state income tax credit, net of federal income taxes and adjustments in deferred taxes of $110,000, in the current quarter related to state income taxes paid in Fiscal Years 1993, 1994, 1995 and 1996. As long as the Company maintains "nexus" (doing business) outside the State of Florida, the Company's apportionment factors will result in a lower effective income tax rate. Liquidity and Capital Resources As of September 30, 1996, the Company's cash and cash equivalents decreased to $164,136 from the March 31, 1996 total of $341,601, and short term investments were $4,083,660, compared to the March 31, 1996 total of $4,084,698. The short term investments are comprised of U.S. Treasury Bills. On August 22, 1995, the Company's institutional lender renewed its commercial line of credit at $2,500,000 and extended the maturity date to August 15, 1997. The lender continues to give the Company the option of borrowing at the lender's prime rate of interest or the 30 day London Interbank Offering Rate(L.I.B.O.R.) plus 200 basis points. The lender also continues to make available a Banker's Acceptance agreement which gives the Company the option of borrowing up to $750,000 under the line of credit with the interest rate being determined by the lender's International Division at the time of borrowing. The Company did not use its line of credit in the current period, and the mortgage payable to the Company's institutional lender as of June 30, 1996 was $318,850, compared to $356,350 at March 31, 1996. The Company's working capital decreased by $201,803 to $10,729,937 at September 30, 1996, compared to $10,931,740 at March 31, 1996. The Company believes that its cash flow from operations, the available bank line, and its current cash position will be sufficient to meet its working capital requirements for the immediate future. The second quarter dividend of $.06 per share was paid on October 15, 1996 to shareholders of record on September 30, 1996. Part II - Other Information Item 1. Legal Proceedings In March 1995, the Company, along with seven other defendants, was sued in Harris County, Texas. The suit claims, among other things, that the Company's GFCI product was defectively designed and manufactured and caused the death by electrocution of an individual. The parties to the lawsuit have agreed to an "out of court" settlement subject to final review and approval by the Court. The Company's product liability insurance will cover the settlement cost. - 7 - Item 4. Submission of Matters to a Vote of Shareholders At the Company's annual meeting of shareholders held on August 22, 1996, the following matters were submitted for a vote by the shareholders: 1. To elect five members of the Board of Directors who will be elected to a one-year term of office. VOTES FOR VOTES AGAINST --------- ------------- Robert S. Wiggins 4,666,266 168,539 Raymond H. Legatti 4,668,100 166,705 Raymond B. Wood 4,668,033 166,772 Edmund F. Murphy, Jr. 4,666,133 168,672 Jerry T. Kendall 4,667,399 167,406 2. To ratify the selection by the Company's Board of Directors of KPMG Peat Marwick LLP, Certified Public Accountants, as independent auditors of the Company for its fiscal year ending March 31, 1997. VOTES FOR VOTES AGAINST VOTES ABSTAINED --------- ------------- --------------- To ratify auditors 4,730,148 7,463 34,523 3. To consider and vote upon a proposal to adopt the 1996 Stock Option Performance Plan. VOTES FOR VOTES AGAINST VOTES ABSTAINED --------- ------------- --------------- To approve plan 2,474,587 390,836 169,508 Item 6. Exhibits and Reports on Form 8-K The Company filed no reports on Form 8-K during the quarter covered by this Report. - 8 - ___________________________________________ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TECHNOLOGY RESEARCH CORPORATION (registrant) November 1, 1996 Scott J. Loucks ___________________________ __________________________________ Date Scott J. Loucks Chief Financial Officer, (principal financial, accounting and Duly Authorized Officer) - 9 - EX-27 2 ARTICLE 5 FDS FOR 2ND QTR 10-Q
5 1 6-MOS Mar-31-1997 Apr-01-1996 Sep-30-1996 164136 4083660 2190381 0 5475443 12534748 6296915 3946167 14807379 1804350 0 2712640 0 0 10253598 15014438 6830572 7066394 4666405 4666405 573706 0 17555 410070 37126 410070 0 0 0 372944 .07 0
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