-----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, IDVJhdTNb0CWLLfRGbJwvkNUcVHUqxTi7Kfn/+IzNRS0RgYhmVOyKN5HsGeDNy2/ vIeasQYteXmBuRzWZ+XhSg== 0000741556-99-000002.txt : 19990210 0000741556-99-000002.hdr.sgml : 19990210 ACCESSION NUMBER: 0000741556-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990209 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: 99526070 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 December 31, 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 January 29, 1999 ____________________________ _______________________________ Common stock, $.51 par value 5,455,737 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Consolidated Balance Sheets - December 31, 1998 and March 31, 1998 ............................ 1 Condensed Consolidated Statements of Income - Three months and nine months ended December 31, 1998 and December 31, 1997 ........................................... 2 Condensed Consolidated Statements of Cash Flows - Nine months ended December 31, 1998 and December 31, 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.............................................. 8 Item 2 - Changes in Securities.......................................... 8 Item 3 - Defaults Upon Senior Securities................................ 8 Item 4 - Submission of Matters to a vote of Shareholders................ 8 Item 5 - Other Information.............................................. 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 CONSOLIDATED BALANCE SHEETS
December 31 March 31 1998 1998 ------------ --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 1,767,769 1,153,798 Short term investments - 1,033,902 Accounts receivable, net 2,696,946 2,711,056 Income taxes receivable 161,097 253,019 Inventories: Raw material 4,208,196 4,499,524 Work in process 815,832 387,170 Finished goods 690,798 438,715 ---------- ---------- Total inventories 5,714,826 5,325,409 Prepaid expenses 21,736 235,595 Deferred income taxes 355,798 406,100 ---------- ---------- Total current assets 10,718,172 11,118,879 ---------- ---------- Property, plant, and equipment 9,675,409 9,033,808 Less accumulated depreciation (5,014,540) (4,476,692) ---------- ---------- Net property, plant, and equipment 4,660,869 4,557,116 ---------- ---------- Deferred income taxes 55,928 55,928 Other assets 79,561 14,895 ---------- ---------- $ 15,514,530 15,746,818 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 2,525,100 2,525,100 Accounts payable 924,472 1,216,624 Accrued expenses 212,759 455,863 Dividends payable 15,613 45,613 ---------- ---------- Total current liabilities 3,677,944 4,243,200 Long-term debt, excluding current installments 75,000 131,250 ---------- ---------- Total liabilities 3,752,944 4,374,450 ---------- ---------- Stockholders' equity: Common stock 2,782,425 2,719,611 Additional paid-in capital 7,484,115 7,411,581 Retained earnings 1,495,046 1,241,176 ---------- ---------- Total stockholders' equity 11,761,586 11,372,368 ---------- ---------- $ 15,514,530 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 CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Nine Months Ended December 31 December 31 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Operating revenues: Net sales $ 3,688,881 4,575,483 12,865,743 13,704,621 Royalties 25,517 82,630 69,088 311,027 ---------- ---------- ---------- ---------- 3,714,398 4,658,113 12,934,831 14,015,648 ---------- ---------- ---------- ---------- Operating expenses: Cost of sales 2,859,268 3,435,409 9,327,193 9,739,345 Selling, general, and administrative 748,991 1,040,719 2,348,815 2,955,800 Research, development and engineering 243,071 327,494 824,550 892,133 ---------- ---------- ---------- ---------- 3,851,330 4,803,622 12,500,558 13,587,278 ---------- ---------- ---------- ---------- Operating income (136,932) (145,509) 434,273 428,370 ---------- ---------- ---------- ---------- Other income (deductions): Interest and sundry income 61,240 29,415 101,200 109,025 Interest expense (84,284) (36,350) (183,267) (85,798) ---------- ---------- ---------- ---------- (23,044) (6,935) (82,067) 23,227 ---------- ---------- ---------- ---------- Income (loss) before income taxes (159,976) (152,444) 352,206 451,597 Income tax expense (benefit) (89,975) (22,000) 98,336 181,707 ---------- ---------- ---------- ---------- Net income (loss) $ (70,001) (130,444) 253,870 269,890 ========== ========== ========== ========== Basic earnings (loss) per share $ (0.01) (0.02) 0.05 0.05 ========== ========== =========== ========= Weighted average number of common shares outstanding 5,455,737 5,332,571 5,455,737 5,332,571 ========== ========== ========== ========== Diluted earnings (loss) per share $ (0.01) (0.02) 0.05 0.05 ========== ========== =========== ========= Weighted average number of common and equivalent shares outstanding 5,426,463 5,332,571 5,429,381 5,432,971 ========== ========== ========== ========== Dividends paid $ - 0.06 - 0.18 ========== ========== ========== ========== See accompanying notes to condensed financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended December 31 1998 1997 ---------- ---------- Cash flows from operating activities: Net income $ 253,870 269,890 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (21,098) (93,041) Depreciation 537,848 441,493 Decrease (increase) in accounts receivable 14,110 (999,849) Increase in inventories (389,417) (569,083) Decrease (increase) in prepaid expenses 213,859 (30,006) Decrease in income taxes receivable 91,922 178,130 Decrease (increase) in deferred income taxes 50,302 (127,960) Increase in other assets (64,666) (32,760) Decrease in accounts payable (292,152) (12,684) Decrease (increase) in accrued expenses (243,104) 37,770 ---------- ---------- Net cash provided by (used in) operating activities 151,474 (938,100) ---------- ---------- Cash flows from investing activities: Maturities of short-term investments 1,055,000 2,112,000 Purchase of short-term investments - (1,000,064) Capital expenditures (641,601) (2,001,470) ---------- ---------- Net cash provided by (used in) investing activities 413,399 (889,534) ---------- ---------- Cash flows from financing activities: Net borrowings under line-of-credit agreement - 1,622,101 Principal payments on long-term debt (56,250) (57,735) Proceeds from exercise of stock options 135,348 - Dividends paid (30,000) (945,407) ---------- ---------- Net cash provided by financing activities 49,098 618,959 ---------- ---------- Increase (decrease) in cash and cash equivalents 613,971 (1,208,675) Cash and cash equivalents at beginning of period 1,153,798 1,307,567 ---------- ---------- Cash and cash equivalents at end of period $ 1,767,769 98,892 ========== ========== See accompanying notes to condensed financial statements.
- 3 - TECHNOLOGY RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED 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 nine-month period ended December 31, 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. - 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 Nine Months Ended December 31, 1998 versus Nine Months Ended December 31, 1997 The Company's operating revenues (net sales and royalties) for the third quarter ended December 31, 1998 were $3,714,398, compared to $4,658,113 reported in the same quarter last year, a decrease of approximately 20%. The Company lost $70,001 for the current quarter, compared to a loss of $130,444, for the same quarter last year. Basic and diluted earnings for the current period were $(.01) per share compared to basic and diluted earnings of $(.02) per share for the same quarter last year. The decline in revenues for the three-month period ended December 31, 1998, as compared to the same period last year, was due to a decrease in commercial sales of $545,702, military sales of $340,900 and royalties of $57,113. The dip in commercial sales resulted from lower shipments to the Company's domestic OEM customers, including Xerox Corporation and its suppliers, which accounted for approximately $350,000. See comments below on military sales and royalties. The Company expects revenues to be higher in its fourth quarter, and the Company will continue its efforts to lower product costs and reduce operating expenses in order to remain profitable for the fiscal year. Operating expenses were reduced by approximately $376,000 for the three-month period and approximately $675,000 for the nine-month period ended December 31, 1998, compared to the same periods last year, which was part of the Company's commitment to reduce operating expenses by $800,000 for the fiscal year. The Company's operating revenues (net sales and royalties) for the nine-month period ended December 31, 1998 were $12,934,831, compared to $14,015,648 reported in the same period of the prior year, a decrease of approximately 8%. Net income for the nine-month period was $253,870, compared to $269,890, for the same period in the prior year, a decrease of approximately 6%. Basic and diluted earnings for the nine-month period were $.05 per share compared to basic and diluted earnings of $.05 per share for the same period last year. Revenues for the nine-month period ended December 31, 1998, as compared to the same period last year, decreased due to military sales and royalties being down by $1,150,147 and $241,939, respectively, while commercial sales increased by $311,269. The decrease in Military sales was mainly due to the Company completing the previous contract related to the Tactical Quiet (TQ) Generator Systems program; however, the Company has received an initial release under a new contract for the same TQ control equipment and deliveries began in December 1998. Royalty income was higher in the prior year's nine-month period due to licensing fees of $106,666 from Yaskawa Control Company of Japan and a one-time final royalty payment of $100,000 from Windmere Corporation in the first quarter of the prior year. The increase in commercial sales was mainly due to the level of business with the Company's domestic and international OEM customers, while sales to Xerox Corporation and its suppliers were down for the nine-month period due to weak sales during the third quarter. - 5 - The Company's manufacturing plant in San Pedro Sula, Honduras was not damaged by Hurricane Mitch, which devastated Honduras in late October. The plant operation, however, was adversely affected by delays in shipping and by the inability of its employees to travel to work due to heavy flooding, as previously reported on November 2, 1998. In addition to the Company's two web sites www.techrsrch.com and www.safeliving.com, the Company opened its first "Store Front" on the Web at www.surgeguard.com, specializing in sales for the recreational vehicle marketplace. Also, as a way for the Company to participate in the explosive E-Commerce market, it is pursuing reciprocal affiliations with companies whose customers may benefit from the Company's products. The Company's gross profit margin on net sales was approximately 22% for the current quarter and approximately 28% for the nine-month period ended December 30, 1998, compared to 25% and 29% for the same periods last year, respectively, primarily reflecting the effects of Hurricane Mitch on the Company's Honduran operations and the lower revenues in the third quarter. Selling, general and administrative expenses were $748,991 for the current quarter and $2,348,815 for the nine-month period ended December 31, 1998, compared to $1,040,719 and $2,955,800 for the same periods last year, a decrease of approximately 28% and 21%, respectively. Selling expenses were $414,400 for the current quarter and $1,312,794 for the nine-month period ended December 31, 1998, compared to $741,599 and $1,983,003 for the same periods last year, a decrease of approximately 44% and 34%, respectively, primarily reflecting lower travel expense, advertising costs and salary related expenses, due to fewer employees in the department. General and administrative expenses were $334,591 for the current quarter and $1,036,021 for the nine-month period ended December 31, 1998, compared to $299,120 and $972,797 for the same periods last year, an increase of approximately 12% and 6%, respectively, primarily reflecting higher salary related expenses and professional fees. The Company's Honduran subsidiary accounted for approximately 12% of the total general and administrative expenses for the nine-month period. Research, development and engineering expenses were $243,071 for the current quarter and $824,550 for the nine-month period ended December 31, 1998, compared to $327,494 and $892,133 for the same periods last year, a decrease of approximately 26% and 8%, respectively, primarily reflecting lower UL costs and salary related expenses, due to fewer employees in the department. Interest expense, net of interest and sundry income, for the current quarter was $23,044 and $82,067 for the nine-month period ended December 31, 1998, compared to interest expense, net of interest and sundry income of $6,935 and interest and sundry income, net of interest expense, of $23,227 for same periods last year, reflecting the Company's use of its line of credit. In accordance with FSAS 109, "Accounting for Income Taxes", the Company does not record deferred income taxes on the foreign undistributed earnings of an investment in a foreign subsidiary that is essentially permanent in duration. Accordingly, the Company's Honduras subsidiary was profitable which caused a decrease in the effective tax rate of the Company. If circumstances change, and it becomes apparent that some or all of the undistributed earnings of the subsidiary will be remitted in the foreseeable future, but U.S. income taxes have not been recognized by the Company, the Company will record as an expense of the current period the U.S. income taxes attributed to that remittance. - 6 - Liquidity and Capital Resources As of December 31, 1998, the Company's cash and cash equivalents were $1,767,769, compared to cash and cash equivalents of $1,153,798 and short term investments of $1,033,902 at March 31, 1998. The short term investments at year end were comprised of U.S. Treasury Bills. The Company's cash is currently held in a money market fund whose yield is comparable to U.S. Treasury Bills. The decrease in overall cash was due primarily to capital equipment purchases during the nine-month period. On September 15, 1998, the Company renewed its $2,500,000 commercial line of credit with its institutional lender for another year, maturing in September 1999. The Company has the option of borrowing at the lender's prime rate of interest minus 25 basis points or the 30-day London Interbank Offering Rate (L.I.B.O.R.) plus 175 basis points. The Company's debt from advances on its line of credit was $2,450,100 as of December 31, 1998. The Company's working capital increased by $164,549 to $7,040,228 at December 31, 1998, compared to $6,875,679 at March 31, 1998. The increase was primarily a result of the Company's profitability through the nine-month period. 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 December 31, 1998 was $150,000, compared to $206,250 at March 31, 1998, reflecting the Company's payments on principal for the nine-month period. The Company's Board of Directors did not declare a dividend for its third quarter ended December 31, 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 declaration of a dividend based on the Company's cash and earnings position. Year 2000 The "Year 2000 problem" arose because many existing computer programs use only the last two digits to refer to a year. Therefore, these computer programs do not properly recognize a year that begins with "20" instead of the familiar "19." If not corrected, many computer applications could fail or create erroneous results. To avoid any consequences of the Year 2000 issues, the Company has timely completed the conversion of its major date-sensitive computer systems to be Year 2000 compliant at its U.S. facility on January 1, 1999 and at its Honduran facility on July 4, 1998. None of the Company's products are Year 2000 sensitive, so the total cost of the project was minimal at approximately $10,000. The Company expensed all costs associated with these system changes as the costs were incurred, and they were funded through operating cash flows. By June of 1999, the Company expects to complete its efforts in evaluating the state of those suppliers which may materially adversely affect the Company if not Year 2000 ready. Since the Company's major computer systems are already Year 2000 compliant, the Company does not foresee the need of a contingency plan for those minor systems that are not significant enough to disrupt the Company's business. - 7 - Safe Harbor Statement 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. - 8 - ___________________________________________ 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) February 9, 1999 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 3RD QTR 10-Q
5 1 9-MOS Mar-31-1999 Apr-01-1998 Dec-31-1998 1767769 0 2696946 0 5714826 10718172 9675409 5014540 15514530 3677944 0 2782425 0 0 8979161 15514530 12865743 12934831 9327193 9327193 824550 0 183267 352206 98336 253870 0 0 0 253870 .05 .05
-----END PRIVACY-ENHANCED MESSAGE-----