-----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, F7wj+T7rFECipiu2A/5MifqYpH1fkbmGQNqLNUT8qUpoFsaFx5OqBez5imChaw3v WX/jLgqAJGNI+CHQng65Gg== /in/edgar/work/20000811/0000741556-00-000016/0000741556-00-000016.txt : 20000921 0000741556-00-000016.hdr.sgml : 20000921 ACCESSION NUMBER: 0000741556-00-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECHNOLOGY RESEARCH CORP CENTRAL INDEX KEY: 0000741556 STANDARD INDUSTRIAL CLASSIFICATION: [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: 694037 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 0001.txt 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, 2000 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, 2000 Common stock, $.51 par value 5,434,262 TABLE OF CONTENTS Part I - Financial Information Page Condensed Consolidated Balance Sheets - June 30, 2000 and March 31, 2000.................................. 1 Condensed Consolidated Statements of Operations - Three months ended June 30, 2000 and June 30, 1999................ 2 Condensed Consolidated Statements of Cash Flows - Three months ended June 30, 2000 and June 30, 1999................ 3 Notes to Condensed Consolidated Financial Statements..................... 4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 5 Item 3 - Quantitative and Qualitative Disclosure Regarding Market Risk... 7 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 AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 March 31 2000 2000 ----------- --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 1,822,427 2,696,010 Accounts receivable, net 3,165,621 3,105,541 Income tax receivable 30,723 76,600 Inventories: Raw material 3,615,143 3,927,770 Work in process 500,662 351,964 Finished goods 1,128,163 928,855 ---------- ---------- Total inventories 5,243,968 5,208,589 Prepaid expenses 266,165 70,118 Deferred income taxes 484,222 477,100 ---------- ---------- Total current assets 11,013,126 11,633,958 ---------- ---------- Property, plant, and equipment 9,419,224 9,190,133 Less accumulated depreciation 5,027,273 4,911,305 ---------- ---------- Net property, plant, and equipment 4,391,951 4,278,828 ---------- ---------- Other assets 54,264 77,839 ---------- ---------- $ 15,459,341 15,990,625 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 1,262,122 805,342 Accrued expenses 299,557 349,962 Dividends payable 70,131 69,902 Deferred income 141,176 141,176 ---------- ---------- Total current liabilities 1,772,986 1,366,382 Long-term debt, excluding current installments 1,500,000 2,500,000 Deferred income 41,176 73,530 Deferred income taxes 47,657 60,655 ---------- ---------- Total liabilities 3,361,819 4,000,567 ---------- ---------- Stockholders' equity: Common stock 2,782,439 2,782,435 Additional paid-in capital 7,528,469 7,528,473 Retained earnings 1,826,759 1,679,150 ---------- ---------- 12,137,667 11,990,058 Treasury stock (40,145) - ---------- ---------- Total stockholders' equity 12,097,522 11,990,058 ---------- ---------- $ 15,459,341 15,990,625 ========== ========== * The balance sheet as of March 31, 2000 has been summarized from the Company's audited balance sheet as of that date. See accompanying notes to condensed consolidated financial statements.
- 1 - TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended June 30 2000 1999 ---------- ---------- Operating revenues: Net sales $ 4,743,167 3,914,286 Royalties 53,353 20,232 ---------- ---------- 4,796,520 3,934,518 ---------- ---------- Operating expenses: Cost of sales 3,317,127 2,583,025 Selling, general, and administrative 889,756 804,597 Research, development and engineering 292,323 259,606 ---------- ---------- 4,499,206 3,647,228 ---------- ---------- Operating income 297,314 287,290 ---------- ---------- Other income (deductions): Interest and sundry income 25,022 18,221 Interest expense (40,010) (43,897) Gain on foreign exchange 596 1,211 ---------- ---------- (14,392) (24,465) ---------- ---------- Income before income taxes 282,922 262,825 Income taxes 80,756 59,000 ---------- ---------- Net income $ 202,166 203,825 ========== ========== Basic earnings per share $ 0.04 0.04 ========== ========== Weighted average number of common shares outstanding 5,446,636 5,455,756 ========== ========== Diluted earnings per share $ 0.04 0.04 ========== ========== Weighted average number of common and equivalent shares outstanding 5,503,603 5,461,762 ========== ========== Dividends paid $ .01 - ========== ========== See accompanying notes to condensed consolidated financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended June 30 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ 202,166 203,825 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 115,968 187,977 Increase in accounts receivable (60,080) (11,072) Increase in inventories (35,379) (221,410) Decrease in income taxes receivable 45,877 51,652 Decrease (increase) in prepaid expenses (196,047) 23,222 Increase in deferred income taxes (20,120) - Decrease in other assets 23,575 9,953 Increase in accounts payable 456,780 7,476 Increase (decrease) in accrued expenses (50,405) 29,230 Decrease in deferred income (32,354) - ---------- ---------- Net cash provided by operating activities 449,981 280,853 ---------- ---------- Cash flows from investing activities: Capital expenditures (229,091) (178,586) ---------- ---------- Net cash used by investing activities (229,091) (178,586) ---------- ---------- Cash flows from financing activities: Principal payments on long-term debt (1,000,000) (18,750) Dividends paid (54,328) - Purchase of treasury stock (40,145) - ---------- ---------- Net cash used by financing activities (1,094,473) (18,750) ---------- ---------- Increase (decrease) in cash and cash equivalents (873,583) 83,517 Cash and cash equivalents at beginning of period 2,696,010 1,653,952 ---------- ---------- Cash and cash equivalents at end of period $ 1,822,427 1,737,469 ========== ========== See accompanying notes to condensed consolidated financial statements.
- 3 - TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY 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 three-month period ended June 30, 2000, are not necessarily indicative of the results to be expected for the full year. 2. 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. 3. In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). The bulletin draws on existing accounting rules and provides specific guidance on how those accounting rules should be applied. SAB 101 was to be effective for the Company's quarter ended March 31, 2000. However, in March 2000, the SEC issued SAB 101A which delays the effective date to the Company's quarter ended June 30, 2000. Recently, the SEC indicated it would be providing further written guidance with respect to the adoption of specific issues addressed by SAB 101. Based on what is currently known by the Company, management does not believe that adoption of SAB 101 will have a material impact on its financial position or results of operations. - 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, 2000 versus Three Months Ended June 30, 1999 The Company's operating revenues (net sales and royalties) for the first quarter ended June 30, 2000 were $4,796,520, compared to $3,934,518 reported in the same quarter last year, an increase of approximately 22%. Net income for the current quarter was $202,166, compared to $203,825, for the same quarter last year. Basic and diluted earnings for the current period were $.04 per share compared to $.04 per share for the same quarter last year. The increase in revenues for the Company's first quarter ended June 30, 2000, compared to the prior year's quarter, was due to both commercial and military sales improving by $518,217 and $310,664, respectively. Royalty income was also up by $33,121. Although sales increased significantly, net income remained approximately the same due to higher operating expenses and lower adjusted gross profit margins for the current quarter. The increase in commercial sales over the first quarter of the prior year was primarily due to the level of OEM business, led by sales to the high pressure sprayer/washer market. The Company's distribution and consumer/retail business also showed growth, but sales to Xerox Corporation were down approximately 16%. The Company expects total commercial sales to show growth throughout the remainder of the fiscal year. The increase in military sales was primarily due to the Company being in full production of the control devices related to the 5/10/15KW Tactical Quiet Generator (TQG) System programs. Direct military shipments of spare parts were also strong in the first quarter. The Company expects military sales to strengthen throughout the fiscal year as shipments are made under the new 3KW TQG Program. Shipments under this program commenced in July 2000 and will ramp up to full production by October 2000. The Company's gross profit margin on net sales was 30% for the current quarter and 34% for the same quarter last year. Higher freight costs, inventory scrap and other manufacturing inefficiencies, which were primarily attributed to two new product lines, accounted for the lower margins. Selling, general and administrative expenses for the current quarter were $889,756, compared to $804,597 in the same quarter last year, an increase of approximately 11%, reflecting higher professional fees, health insurance, advertising, travel and salary related expenses. Selling expenses were $521,392 for the current quarter, compared to $455,374 the same quarter last year, an increase of approximately 14%, and General and administrative expenses were $368,364, compared to $349,223 in the same quarter last year, an increase of approximately 5%. Research, development and engineering expenses for the current quarter were $292,323, compared to $259,606 for the same quarter last year, an increase of approximately 13%, reflecting higher Underwriters Laboratory fees and salary related expenses. - 5 - Interest expense, net of interest and sundry income was $14,392 for the current quarter, compared to $24,465 for the same quarter last year, reflecting less interest on a lower line of credit balance in the current quarter compared to the prior year. 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. The Company recently hired Nelson M. Fernandez to replace Hamze M. Moussa as President and General Manager of the Company's Honduras manufacturing facility in San Pedro Sula, Honduras. Mr. Moussa was in Honduras on a temporary assignment for the past year, and he will now return to the Company's Clearwater operation. Mr. Fernandez has a BSIE Degree from the Universidad de Mexico, Guadalajara, Mexico and is a seasoned professional with extensive experience managing small to medium size organizations, both domestically and offshore. In addition to his manufacturing expertise, he has specialized skills and training in quality systems, including ISO 9000 and Ford's QOS system. Liquidity and Capital Resources As of June 30, 2000, the Company's cash and cash equivalents decreased to $1,822,427 from the March 31, 2000 total of $2,696,010. The decrease in cash was due to the Company paying down its line of credit $1,000,000 in the current quarter. On December 14, 1999, the Company closed on a $3,000,000 revolving credit loan with a new institutional lender. The term of the loan is for two years, and at the end of each year, the Company has the option to extend the maturity date another year. Similar to the previous line of credit, 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 200 basis points. The Company's debt from advances on its new line of credit was $1,500,000 as of June 30, 2000. The Company's working capital decreased by $1,027,436 to $9,240,140 at June 31, 2000, compared to $10,267,576 at March 31, 2000. The decrease was primarily due to the Company reducing its line of credit, as noted above. The Company believes cash flow from operations, the available bank line and current cash position will be sufficient to meet its working capital requirements for the immediate future. On August 30, 1999, the Company re-instituted its quarterly dividend policy at 1 cent per share with a annual cash dividend rate of 4 cents per share. The record date for the Company's first quarter dividend was June 30, 2000, and the Company paid that dividend on July 21, 2000. - 6 - On December 9, 1999, the Company's Board of Directors, at its regularly scheduled board meeting, voted to authorize the Company to buy back up to 500,000 shares of common stock from time to time at its discretion. In the first quarter ended June 30, 2000, the Company purchased 21,500 shares of common stock ranging in price from $1.81 and $2.00 per share. The Company now has 478,500 remaining shares that it may purchase. Item 3. Quantitative and Qualitative Disclosure Regarding Market Risk The Company has no derivative securities as of June 30, 2000. The Company is exposed to changes in interest rates as a result of its bank credit agreement, which is based on the London Interbank Offered Rate. A 10% increase in interest rates related to the Company's bank credit facility would not have a material effect on the Company's earnings over the next fiscal year or the bank credit agreement's fair value. Forward Looking Statement Some of the statements in this report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. These statements related to future events, other future financial performance or business strategies, and may be identified by terminology such as "may," "will," "should," "expects," "scheduled," "plans," "intends", "anticipates," "believes," "estimates," "potential," or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider the factors described throughout this report. We cannot be assured that future results, levels of activity, performance or goals will be achieved. 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) August 11, 2000 Scott J. Loucks ___________________________ __________________________________ Date Scott J. Loucks Chief Financial Officer, (principal financial, accounting and Duly Authorized Officer) - 8 - EX-27 2 0002.txt ARTICLE 5 FDS FOR 1ST QTR 10-Q
5 1 3-MOS Mar-31-2001 Apr-01-2000 Jun-30-2000 1773073 0 3219320 53699 5243968 11013126 9419224 5027273 15459341 1789920 0 2782439 0 0 9315083 15459341 4743167 4796520 3317127 3317127 292323 0 40010 282922 80756 202166 0 0 0 202166 .04 .04
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