-----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, KR3WC8clddNHW/T5ctHVp5B77ZD8OMAPMiz+0dmKEZPTKaYHvjwA/AJ9rfanuPh3 Wv9SBHLFykwJyNxTiQs2RQ== /in/edgar/work/0000741556-00-000018/0000741556-00-000018.txt : 20001114 0000741556-00-000018.hdr.sgml : 20001114 ACCESSION NUMBER: 0000741556-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 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: 762136 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 September 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 October 31, 2000 Common stock, $.51 par value 5,437,497 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Consolidated Balance Sheets - September 30, 2000 and March 31, 2000............................. 1 Condensed Consolidated Statements of Operations--Three months and Six months ended September 30, 2000 and September 30, 1999........ 2 Condensed Consolidated Statements of Cash Flows - Six months ended September 30, 2000 and September 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............................................... 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 AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 March 31 2000 2000 ----------- --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 1,236,231 2,696,010 Accounts receivable, net 2,858,224 3,105,541 Income tax receivable 163,022 76,600 Inventories: Raw material 4,081,281 3,927,770 Work in process 638,232 351,964 Finished goods 1,137,284 928,855 ---------- ---------- Total inventories 5,856,797 5,208,589 Prepaid expenses 249,131 70,118 Deferred income taxes 468,974 477,100 ---------- ---------- Total current assets 10,832,379 11,633,958 ---------- ---------- Property, plant, and equipment 9,573,402 9,190,133 Less accumulated depreciation 5,177,805 4,911,305 ---------- ---------- Net property, plant, and equipment 4,395,597 4,278,828 ---------- ---------- Other assets 52,389 77,839 ---------- ---------- $ 15,280,365 15,990,625 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 1,312,345 805,342 Accrued expenses 320,748 349,962 Dividends payable 70,177 69,902 Deferred income 141,176 141,176 ---------- ---------- Total current liabilities 1,844,446 1,366,382 Long-term debt, excluding current installments 1,500,000 2,500,000 Deferred income 10,294 73,530 Deferred income taxes 34,659 60,655 ---------- ---------- Total liabilities 3,389,399 4,000,567 ---------- ---------- Stockholders' equity: Common stock 2,784,088 2,782,435 Additional paid-in capital 7,526,472 7,528,473 Retained earnings 1,620,551 1,679,150 ---------- ---------- 11,931,111 11,990,058 Treasury stock (40,145) - ---------- ---------- Total stockholders' equity 11,890,966 11,990,058 ---------- ---------- $ 15,280,365 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 Six Months Ended September 30 September 30 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Operating revenues: Net sales $ 4,335,928 4,259,636 9,079,095 8,173,921 Royalties 49,203 26,793 102,556 47,025 ---------- ---------- ---------- ---------- 4,385,131 4,286,429 9,181,651 8,220,946 ---------- ---------- ---------- ---------- Operating expenses: Cost of sales 3,320,075 2,890,326 6,637,202 5,473,349 Selling, general, and administrative 939,694 844,594 1,829,450 1,649,191 Research, development and engineering 329,368 287,084 621,691 546,689 ---------- ---------- ---------- ---------- 4,589,137 4,022,004 9,088,343 7,669,229 ---------- ---------- ---------- ---------- Operating (loss) income (204,006) 264,425 93,308 551,717 ---------- ---------- ---------- ---------- Other income (deductions): Interest and sundry income 21,024 18,998 48,829 38,428 Interest expense (30,320) (46,018) (70,330) (89,915) Loss on disposal of assets (2,293) - (4,480) - ---------- ---------- ---------- ---------- (11,589) (27,020) (25,981) (51,487) ---------- ---------- ---------- ---------- Income (loss) before income taxes (215,595) 237,405 67,327 500,230 Income taxes (benefit) expense (63,548) 57,000 17,208 116,000 ---------- ---------- ---------- ---------- Net (loss) income $ (152,047) 180,405 50,119 384,230 ========== ========== ========== ========== Basic earnings (loss) per share $ (0.03) 0.03 0.01 0.07 ========== ========== ========== ========== Weighted average number of common shares outstanding 5,440,444 5,455,756 5,441,795 5,455,756 ========== ========== ========== ========== Diluted earnings (loss) per share $ (0.03) 0.03 0.01 0.07 ========== ========== ========== ========== Weighted average number of common and equivalent shares outstanding 5,534,624 5,464,014 5,519,537 5,463,609 ========== ========== ========== ========== Dividends paid per share $ 0.01 0.01 0.02 0.01 ========== ========== ========== ========== See accompanying notes to condensed consolidated financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended September 30 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ 50,119 384,230 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 266,500 381,553 Decrease in accounts receivable 247,317 36,046 Decrease (increase) in income taxes receivable (86,422) 230,502 Increase in inventories (648,208) (499,568) Decrease (increase) in prepaid expenses (179,013) 23,545 Decrease (increase) in deferred income taxes (17,870) 30,499 Decrease in other assets 25,450 45,327 Increase in accounts payable 507,003 55,576 Increase(decrease) in accrued expenses (29,214) 65,479 Decrease in deferred income (63,236) - ---------- ---------- Net cash provided by operating activities 72,426 753,189 ---------- ---------- Cash flows from investing activities: Capital expenditures (383,269) (275,357) ---------- ---------- Net cash used in investing activities (383,269) (275,357) ---------- ---------- Cash flows from financing activities: Principal payments on long-term debt (1,000,000) (37,500) Dividends paid (108,791) - Purchase of treasury stock (40,145) - ---------- ---------- Net cash used in financing activities (1,148,936) (37,500) ---------- ---------- Increase (decrease) in cash and cash equivalents (1,459,779) 440,332 Cash and cash equivalents at beginning of period 2,696,010 1,653,952 ---------- ---------- Cash and cash equivalents at end of period $ 1,236,231 2,094,284 ========== ========== 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 six-month period ended September 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 September 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, results of operations or cashflows. 4. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133) effective for fiscal years beginning after June 15, 1999. SFAS 133 requires that derivatives be carried at fair value and provides for hedge accounting when certain conditions are met. In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" (SFAS 137) which deferred the effective date of adoption of SFAS 133 for one year. The adoption of SFAS 137 will not have an impact on the Company's financial position, results of operations or cashflows. - 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 September 30, 2000 versus Three Months Ended September 30, 1999 The Company's operating revenues (net sales and royalties) for the second quarter ended September 30, 2000 were $4,385,131, compared to $4,286,429 reported in the same quarter last year, an increase of approximately 2% even though sales to Xerox Corporation, and its suppliers, decreased $498,487. The Company had a net loss of $152,047, compared to net income of $180,405, for the same quarter last year. Basic and diluted losses for the current period were $(.03) per share compared to basic and diluted earnings of $.03 per share for the same quarter last year. The loss for the quarter was primarily the result of higher than expected start-up costs for both the new military 3KW Tactical Quiet Generator (TQG) program and the initial high volume production of the Fire Shield( Safety Extension Cords, resulting in lower profit margins. The Company also recorded a write-off for an uncollectable account receivable and a one-time expense related to securing a new general manager for its Honduran manufacturing plant, both of which have been typically non-recurring expenses for the Company and resulted in approximately $(.02) per share of the loss for the current quarter. The Company commenced delivery of the Inverter for the new 3KW TQG program and also delivered Fire Shield Safety Extension Cords to its customers on-time during the quarter. The Company believes the on-going sales activity for Fire Shield is encouraging and expects to continue to add new business for Fire Shield. The Company also expects to improve margins on the 3KW Inverter and Fire Shield Safety Extension Cords over the next several quarters by lowering material costs and improving productivity. The Company's operating revenues (net sales and royalties) for the six-month period ended September 30, 2000 were $9,181,651, compared to $8,220,946 reported in the same period of the prior year, an increase of approximately 12%. Net income for the six-month period was $50,119, compared to $384,230, for the same period in the prior year. Basic and diluted earnings for the six-month period were $.01 per share compared to basic and diluted earnings of $.07 per share for the same period last year. - 5 - The increase in revenues for the six-month period ended September 30, 2000, compared to the same period last year, was due to commercial sales improving by $277,585, military sales by $627,589 and royalty income by $55,531. The increase in commercial sales was due to an overall increase in the level of commercial business, including distribution, consumer and OEM sales except for Xerox Corporation and its suppliers, which decreased $613,242. The Company expects this trend in commercial sales to continue throughout the remainder of the fiscal year. The increase in military sales was mainly due to the Company being in full production of the control devices related to the 5/10/15/30/60KW TQG program in the Company's first quarter and the new 3KW TQG program in the second quarter. The Company will continue to be in full production of the Inverter for the new 3KW TQG program for the remainder of the fiscal year. The next production phase of the 5/10/15/30/60KW TQG program is scheduled to commence in the fourth quarter. The Company's gross profit margin on net sales was approximately 23% for the current quarter and approximately 27% for the six-month period ended September 30, 2000, compared to 32% and 33% for the same periods last year, reflecting higher manufacturing costs as mentioned above. Selling, general and administrative expenses were $939,694 for the current quarter and $1,829,450 for the six-month period ended September 30, 2000, compared to $844,594 and $1,649,191 for the same periods last year. Selling expenses were $508,876 for the current quarter and $1,030,268 for the six-month period ended September 30, 2000, compared to $480,097 and $935,471 for the same periods last year, an increase of approximately 6% and 10%, respectively, reflecting higher health insurance, advertising and commission expenses. General and administrative expenses were $430,818 for the current quarter and $799,182 for the six-month period ended September 30, 2000, compared to $364,497 and $713,720 for the same periods last year, an increase of approximately 18% and 12%, respectively, reflecting higher professional fees and the write-off of the account receivable mentioned above. Research, development and engineering expenses were $329,368 for the current quarter and $621,691 for the six-month period ended September 30, 2000, compared to $287,084 and $546,689 for the same periods last year, an increase of approximately 15% and 14%, respectively, reflecting higher UL fees and salary related expenses. Interest expense, net of interest and sundry income, for the current quarter was $9,296 and $21,501 for the six-month period ended September 30, 2000, compared to $27,020 and $51,487 for the same periods last year. This decrease reflects lower line of credit balances over the comparable periods. The Company's effective income tax rate was 26% for the six-month period ended September 30, 2000, compared to 23% for the same period last year. Liquidity and Capital Resources As of September 30, 2000, the Company's cash and cash equivalents decreased to $1,236,231 from the March 31, 2000 total of $2,696,010. The decrease in cash was due to capital expenditures of approximately $400,000 and the Company paying down its line of credit by $1,000,000. - 6 - On August 31, 2000, the Company renewed its $3,000,000 revolving credit loan with its institutional lender, extending the maturity date another year. 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 is currently using the L.I.B.O.R. option. The Company's debt from advances on its new line of credit was $1,500,000 as of September 30, 2000. The Company's working capital decreased by $1,279,643 to $8,987,933 at September 30, 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 its short term investments and current cash position will be sufficient to meet its working capital requirements for the immediate future. The record date for the Company's second fiscal quarter dividend of $.01 per share was September 30, 2000, and the Company paid that dividend on October 20, 2000. Item 3. Quantitative and Qualitative Disclosure Regarding Market Risk The Company has no derivative instruments as of September 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. - 7 - 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 At the Company's annual meeting of shareholders held on August 24, 2000, the following matters were submitted for a vote by the shareholders: 1. To elect seven members of the Board of Directors who will be elected to a one-year term of office. VOTES FOR VOTES AGAINST --------- ------------- Robert S. Wiggins 4,945,679 55,060 Raymond H. Legatti 4,951,918 48,821 Raymond B. Wood 4,947,068 53,671 Gerry Chastelet 4,952,612 48,127 Edmund F. Murphy, Jr. 4,948,420 52,319 Martin L. Poad 4,952,286 48,453 2. To ratify the selection by the Company's Board of Directors of KPMG LLP, Certified Public Accountants, as independent auditors of the Company for its fiscal year ending March 31, 2001. VOTES FOR VOTES AGAINST VOTES ABSTAINED --------- ------------- --------------- To ratify auditors 9,967,081 29,189 8,108 3. To approve and adopt the Technology Research Corporation 2000 Long Term Incentive Plan. VOTES FOR VOTES AGAINST VOTES ABSTAINED --------- ------------- --------------- Mandatory retirement 2,243,102 148,816 46,846 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) November 14, 2000 Scott J. Loucks ___________________________ __________________________________ Date Scott J. Loucks Chief Financial Officer, (principal financial, accounting and Duly Authorized Officer) - 9 - EX-27 2 0002.txt ARTICLE 5 FDS FOR 2ND QTR 10-Q
5 1 6-MOS Mar-31-2001 Apr-01-2000 Sep-30-2000 1236231 0 2920000 61776 5856797 10832379 9573402 5177805 15280365 1844446 0 2784088 0 0 9106878 15280365 9079095 9181651 6637202 6637202 621691 0 70330 67327 17208 50119 0 0 0 50119 .01 .01
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