-----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, J2hUczlOlj2QoH8EpyQBt22ASamfi01nQaFoMpV96T0ER74ecnVJ/NzRDfO3GZZ5 rU+Z3MVdwJ8ab+aNnCQYkw== 0000741556-98-000012.txt : 19980803 0000741556-98-000012.hdr.sgml : 19980803 ACCESSION NUMBER: 0000741556-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980731 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: SEC FILE NUMBER: 000-13763 FILM NUMBER: 98675415 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 June 30, 1998 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 33760 ____________________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (727) 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, 1998 ____________________________ ____________________________ Common stock, $.51 par value 5,455,737 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Consolidate Balance Sheets - June 30, 1998 and March 31, 1998............................ 1 Condensed Consolidate Statements of Income - Three months ended June 30, 1998 and June 30, 1997.......... 2 Condensed Consolidated Statements of Cash Flows - Three months ended June 30, 1998 and June 30, 1997.......... 3 Notes to Condensed Consolidated 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 2 - Changes in Securities..................................... 7 Item 3 - Defaults Upon Senior Securities........................... 7 Item 4 - Submission of Matters to a Vote of Shareholders............7 Item 5 - Other Information......................................... 7 Item 6 - Exhibits and Reports on Form 8-K...........................7 Signatures......................................................... 8 PART I - FINANCIAL INFORMATION Item 1. Financial Statements TECHNOLOGY RESEARCH CORPORATION CONDENSED BALANCE SHEETS
June 30 March 31 1998 1998 ----------- --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 784,714 1,153,798 Short term investments 1,047,647 1,033,902 Accounts receivable, net 3,040,002 2,711,056 Income tax receivable 136,061 253,019 Inventories: Raw material 4,358,270 4,499,524 Work in process 658,097 387,170 Finished goods 629,841 438,715 ---------- ---------- Total inventories 5,646,208 5,325,409 Prepaid expenses 299,607 235,595 Deferred income taxes 386,298 406,100 ---------- ---------- Total current assets 11,340,537 11,118,879 ---------- ---------- Property, plant, and equipment 9,105,880 9,033,808 Less accumulated depreciation (4,660,341) (4,476,692) ---------- ---------- Net property, plant, and equipment 4,445,539 4,557,116 ---------- ---------- Deferred income taxes 55,928 55,928 Other assets 54,070 14,895 ---------- ---------- $ 15,896,074 15,746,818 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of debt $ 2,525,100 2,525,100 Accounts payable 1,212,024 1,216,624 Accrued expenses 312,275 455,863 Dividends payable 35,613 45,613 ---------- ---------- Total current liabilities 4,085,012 4,243,200 Long-term debt, excluding current installments 112,500 131,250 ---------- ---------- Total liabilities 4,197,512 4,374,450 ---------- ---------- Stockholders' equity: Common stock 2,759,439 2,719,611 Additional paid-in capital 7,458,085 7,411,581 Retained earnings 1,481,038 1,241,176 ---------- ---------- Total stockholders' equity 11,698,562 11,372,368 ---------- ---------- $ 15,896,074 15,746,818 ========== ========== * The balance sheet as of March 31, 1998 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 June 30 1998 1997 ---------- ---------- Operating revenues: Net sales $ 4,737,522 4,640,053 Royalties 15,879 171,532 ---------- ---------- 4,753,401 4,811,585 ---------- ---------- Operating expenses: Cost of sales 3,310,807 3,151,806 Selling, general, and administrative 752,484 923,011 Research, development and engineering 279,685 269,274 ---------- ---------- 4,342,976 4,344,091 ---------- ---------- Operating income 410,425 467,494 ---------- ---------- Other income (deductions): Interest and sundry income 17,013 45,521 Interest expense (51,888) (6,666) Gain on foreign exchange 1,072 114 ---------- ---------- (33,803) 38,969 ---------- ---------- Income before income taxes 376,622 506,463 Income taxes 136,760 180,148 ---------- ---------- Net income $ 239,862 326,315 ========== ========== Basic earnings per share $ 0.04 0.06 ========== ========== Weighted average number of common and equivalent shares outstanding 5,377,051 5,332,571 ========== ========== Diluted earnings per share $ 0.04 0.06 ========== ========== Weighted average number of common and equivalent shares outstanding 5,393,711 5,433,320 ========== ========== Dividends paid $ 0.06 0.06 ========== ========== See accompanying notes to condensed financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended June 30 1998 1997 ---------- ---------- Cash flows from operating activities: Net income $ 239,862 326,315 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (13,745) (38,967) Depreciation 183,649 170,139 Increase in accounts receivable (328,946) (290,348) Increase in inventories (320,799) (247,226) Increase in prepaid expenses (64,012) (11,018) Decrease in income taxes receivable 116,958 178,130 Decrease in deferred income taxes 19,802 15,250 Increase in other assets (39,175) (37,136) Increase(decrease) in accounts payable (4,600) 406,015 Increase(decrease) in accrued expenses (143,588) 42,894 Increase in income taxes payable - 123,303 ---------- ---------- Net cash provided by (used in) operating activities (354,594) 637,351 ---------- ---------- Cash flows from investing activities: Maturities of short-term investments - 1,056,000 Purchase of short-term investments - Capital expenditures (72,072) (740,610) ---------- ---------- Net cash provided by(used in) investing activities (72,072) 315,390 ---------- ---------- Cash flows from financing activities: Net borrowings under line-of-credit agreement - 422,101 Principal payments on long-term debt (18,750) (18,650) Proceeds from exercise of stock options 86,332 - Dividends paid (10,000) (315,097 ---------- ---------- Net cash provided by financing activities 57,582 88,354 ---------- ---------- Increase(decrease) in cash and cash equivalents (369,084) 1,041,095 Cash and cash equivalents at beginning of period 1,153,798 1,307,567 ---------- ---------- Cash and cash equivalents at end of period $ 784,714 2,348,662 ========== ========== 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 three-month period ended June 30, 1998, are not necessarily indicative of the results to be expected for the full year. 2. The Company considers all of its investment securities (U.S. Treasury Bills) to be held-to-maturity. These securities are all classified in short-term investments on the consolidated balance sheets and mature within one year. 3. Basic earnings per share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted 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 periods where there are earnings. The Company adopted Statement of Financial Accounting Standards No. 128 ("Statement 128") "Earnings per Share" during the quarter ended December 31, 1997. In accordance with Statement 128, all previously presented earnings per share information has been calculated under the provisions of Statement 128, to the nature of the Company's capital structure, there was no difference between basic and diluted earnings per share calculated under Statement 128 and primary earnings per share calculated under APB Opinion No. 15. - 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 consolidated financial statements. Current Three Months Ended June 30, 1998 versus Three Months Ended June 30, 1997 The Company's operating revenues (net sales and royalties) for the first quarter ended June 30, 1998 were $4,753,401, compared to $4,811,585 reported in the same quarter last year, a decrease of approximately 1%. Net income for the current quarter was $239,862, compared to $326,315, for the same quarter last year, a decrease of approximately 26%. Basic and diluted earnings for the current period were $.04 per share compared to basic and diluted earnings of $.06 per share for the same quarter last year. The Company returned to profitability in its first fiscal quarter after recording losses for its fourth quarter and fiscal year ended March 31, 1998. The Company attributes this turnaround to lower operating expenses and better performance from its Honduran subsidiary as shipments improved from that facility during the quarter. Production should continue to make gains in the second quarter and productivity should improve which would be reflected in lower manufacturing costs. The slight decline in revenues, compared to the same quarter last year, was due to military sales and royalty income being down by $336,437 and $155,653, respectively, while commercial sales increased by $433,906. The decrease in Military sales was mainly due to the Company nearing completion of the current contract related to the Tactical Quiet Generator Systems program. However, several new Government Contracts have been awarded with the same control equipment requirements, and the Company has positioned itself with the Government Prime Contractors for continued participation in this business. Royalty income was higher in the prior year's quarter due to the Company recording a one-time final royalty payment of $100,000 from Windmere Corporation and a licensing fee of $50,000 from Yaskawa Control Company of Japan during that period. The increase in commercial sales was mainly due to the level of business with the Company's International OEM customers and the progress made by the Company in shipping backordered product to its domestic OEM customers. Sales to Xerox Corporation and its suppliers were down slightly. The Company believes it is making progress in convincing manufacturers of appliances to include an OEM Fire Shield power cord with their products to prevent dangerous fires, and the Company's public relations efforts to increase consumer awareness of Safe Living/Smart Products has resulted in opportunities in the Pet and Insurance industries for the Company's Fire Shield Smart Cord. The Company has also targeted the Electric Utility industry as a channel for selling the Company's Safe Living/Smart Products, and one major utility company is actively marketing these products to their customer base. - 5 - The Company's gross profit margin on net sales was 30% for the current quarter and 32% for the same quarter last year. The Company's gross profit margins were negatively impacted by the August 1, 1997 Xerox price reduction and by higher manufacturing costs, due to inefficiencies associated with the Honduran plant. Although the Company's profit margins will continue to be affected by the Xerox price reduction, the Company expects profit margins to improve as the Honduran plant improves its productivity which would be reflected in lower manufacturing costs. Selling, general and administrative expenses for the current quarter were $752,484, compared to $923,011 in the same quarter last year, a decrease of approximately 18%, which reflect the Company's efforts to lower period expenses and operate within reduce budgets. Selling expenses were $492,935 for the current quarter, compared to $608,526 the same quarter last year, a decrease of approximately 19%, reflecting lower professional fees, travel expenses and advertising costs. General and administrative expenses were $259,549, compared to $314,485 in the same quarter last year, a decrease of approximately 17%, reflecting lower salary related expenses. Research, development and engineering expenses for the current quarter were $279,685, compared to $269,274 for the same quarter last year, an increase of approximately 4%, reflecting comparable expenses over the respective periods. Interest expense, net of interest and sundry income, was $33,803 for the current quarter, compared to interest and sundry income, net of interest expense, of $38,969 for the same quarter last year, reflecting lower returns and average balances on the Company's short-term investments. Liquidity and Capital Resources As of June 30, 1998, the Company's cash and cash equivalents decreased to $784,714 from the March 31, 1998 total of $1,153,798, and short term investments increased to $1,047,647 from the March 31, 1998 total of $1,033,902. The short term investments are comprised of U.S. Treasury Bills. On September 15, 1998, the Company expects to renew its $2,500,000 commercial line of credit with its institutional lender for another year, maturing in August 1999. The Company continues to have 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 Company's debt from advances on its line of credit was $2,450,100 as of June 30, 1998. The Company's working capital increased by $379,846 to $7,255,525 at June 30, 1998, compared to $6,875,679 at March 31, 1998. The increase was primarily a result of the Company returning to profitability in its first fiscal quarter. The Company believes cash flow from operations, the available bank line, and its short term investments and current cash position will be sufficient to meet its working capital requirements for the immediate future. The mortgage payable to the Company's institutional lender as of June 30, 1998 was $187,500, compared to $206,250 at March 31, 1998, reflecting the Company's payments on principal for the three-month period. - 6 - The Company's Board of Directors did not declare a dividend for its first quarter ended June 30, 1998. The Company's Board of Directors will review the Company's dividend policy on a quarterly basis and make a determination at such time as to whether the Company will resume payment of a dividend based on the Company's cash and earnings position. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements in this report that relate to future plans, expectations, events, performance and the like are forward-looking statements, within the meaning of the Private Securities Litigation Act of 1995 and the Securities Exchange Act of 1934. Actual results or events could differ materially from those described in the forward-looking statements due to a variety of factors, including those set forth in the Company's reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission. Part II - Other Information Item 1. Legal Proceedings Not Applicable. Item 2. Changes in Securities Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information Not Applicable. 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. - 7 - ___________________________________________ SIGNATURES Pursuant to the requirements of the Security 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) July 31, 1998 Scott J. Loucks ___________________________ __________________________________ Date Scott J. Loucks Chief Financial Officer, (principal financial, accounting and Duly Authorized Officer) - 8 - EX-27 2 ARTICLE 5 FDS FOR 1ST QTR 10-Q
5 1 3-MOS Mar-31-1999 Apr-01-1998 Jun-30-1998 784714 1047647 3040002 0 5646208 11340537 9105880 4660341 15896074 4085012 0 2759439 0 0 8939123 15896074 4737522 4753401 3310807 3310807 279685 0 51888 376622 136760 239862 0 0 0 239862 .04 .04
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