0000741556-95-000013.txt : 19950821 0000741556-95-000013.hdr.sgml : 19950821 ACCESSION NUMBER: 0000741556-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950803 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-13763 FILM NUMBER: 95558679 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, 1995 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, 1995 ____________________________ ____________________________ Common stock, $.17 par value 15,844,507 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Balance Sheets--June 30, 1995 and March 31, 1994...........1 Condensed Statements of Income--Three months ended June 30, 1995 and June 30, 1994................................2 Condensed Statements of Cash Flows--Three months ended June 30, 1995 and June 30, 1994................................3 Notes to Condensed Financial Statements..............................4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..........................5,6 Part II - Other Information Item 1 - Legal Proceedings...........................................7 Item 2 - Exhibits and Reports on Form 8-K............................7 Signatures...........................................................7 TECHNOLOGY RESEARCH CORPORATION CONDENSED BALANCE SHEETS
June 30 March 31 1995 1995 __________ __________ (unaudited) * ASSETS ____________________________________ Current assets: Cash and cash equivalents $ 1,113,565 1,707,930 Short term investments(note 3) 3,945,677 2,742,128 Accounts receivable, net 2,930,146 3,335,726 Inventories: Raw material 3,280,373 2,707,054 Work in process 234,326 654,520 Finished goods 507,490 584,451 __________ __________ Total inventories 4,022,189 3,946,025 Prepaid expenses 60,874 36,863 Deferred income taxes 424,000 440,000 __________ __________ Total current assets 12,496,451 12,208,672 __________ __________ Property, plant, and equipment 5,719,771 5,536,933 Less accumulated depreciation 3,328,606 3,213,002 __________ __________ Net property, plant, and equipment 2,391,165 2,323,931 __________ __________ Deferred income taxes 228,000 228,000 Other assets 523 53,335 __________ __________ $ 15,116,139 14,813,938 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ____________________________________ Current liabilities: Current installments of long-term debt $ 75,000 75,000 Accounts payable 1,029,946 1,728,332 Dividends payable 316,890 - Accrued expenses 268,058 230,177 Income taxes payable 391,991 85,491 __________ __________ Total current liabilities 2,081,885 2,119,000 Long-term debt, excluding current installments 337,600 356,350 Total liabilities 2,419,485 2,475,350 __________ __________ Stockholders' equity: Common stock 2,693,566 2,675,398 Additional paid-in capital 7,349,855 7,322,923 Retained earnings 2,653,233 2,340,267 __________ __________ Total stockholders' equity 12,696,654 12,338,588 __________ __________ $ 15,116,139 14,813,938 ========== ========== *The balance sheet as of March 31, 1995, has been summarized from the Company's audited balance sheet as of that date. See accompanying notes to condensed financial statements.
TECHNOLOGY RESEARCH CORPORATION CONDENSED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended June 30 1995 1994 __________ __________ Operating revenues: Net sales $ 4,244,029 5,538,623 Royalties 171,961 189,000 __________ __________ 4,415,990 5,727,623 __________ __________ Operating expenses: Cost of sales 2,596,028 3,881,700 Selling, general, and administrative 638,721 610,520 Research, development and engineering 230,240 239,141 __________ __________ 3,464,989 4,731,361 __________ __________ Operating income 951,001 996,262 __________ __________ Other income (deductions): Interest and sundry income 69,565 27,050 Interest expense (10,896) (16,356) __________ __________ 58,669 10,694 __________ __________ Income before income taxes 1,009,670 1,006,956 Income taxes 379,814 361,000 __________ __________ Net income $ 629,856 645,956 ========== ========== Earnings per share $ 0.04 0.04 ========== ========== Weighted average number of common and equivalent shares outstanding 16,186,422 16,189,129 ========== ========== Dividend declared per share $ 0.02 - ========== ========== See accompanying notes to condensed financial statements.
TECHNOLOGY RESEARCH CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended June 30 1995 1994 __________ __________ Cash flows from operating activities: Net income $ 629,856 645,956 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (48,524) - Depreciation 115,604 107,703 Decrease(increase) in accounts receivable 405,580 (153,144) Decrease(increase) in inventories (76,164) 32,744 Increase in prepaid expenses (24,011) (45,935) Decrease in deferred income taxes 16,000 - Decrease in other assets 52,812 3,001 Increase(decrease) in accounts payable (698,386) 183,297 Increase(decrease) in accrued expenses 37,881 (162,056) Increase in income taxes payable 306,500 161,000 __________ __________ Net cash provided by operating activities 717,148 772,566 __________ __________ Cash flows from investing activities: Purchase of short-term investments (1,958,025) 2,312,589) Maturities of short-term investments 803,000 774,000 Capital expenditures (182,838) (152,970) __________ __________ Net cash used in investing activities 1,337,863) (1,691,559) __________ __________ Cash flows from financing activities: Principal payments on long-term debt (18,750) (418,750) Proceeds from exercise of stock options 45,100 - __________ __________ Net cash provided by(used in) financing activities 26,350 (418,750) __________ __________ Decrease in cash and cash equivalents (594,365) (1,337,743) Cash and cash equivalents at beginning of period 1,707,930 2,096,626 __________ __________ Cash and cash equivalents at end of period $ 1,113,565 758,883 ========== ========== See accompanying notes to condensed financial statements.
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, 1995, are not necessarily indicative of the results to be expected for the full year. 2. At March 31, 1995, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $994,000, which are available to offset future taxable income through 2003. The Company also has available tax credit carryforwards for Federal income tax purposes of approximately $214,000, which are available to offset future Federal income taxes through 2002. As a result of an ownership change in 1989, the Internal Revenue Code limits the income tax benefit of net operating loss and tax credit carryforwards to approximately $65,000 each year. 3. Short-term investments consist of U.S. Treasury Bills with a purchased maturity of greater than three months. 4. 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. TECHNOLOGY RESEARCH CORPORATION 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 Three Months Ended June 30, 1995 versus Three Months Ended June 30, 1994 Net revenues for the Company's first fiscal quarter ended June 30, 1995 were $4,415,990, compared to $5,727,623 reported in the same quarter of the prior year, a decrease of approximately 23%. Net income for the current quarter was $629,856, compared to net income of $645,956, for the prior year's quarter. The earnings per share for the current period were $.04 as compared to $.04 for the comparable period last year. Net income for the quarter exceeded TRC's expectation while revenues met the Company's objective, although revenues were down from the prior year's quarter. The positive effect of the recent expense reduction and cost control measures, and an improvement in gross margin, is reflected in the financial performance of the Company. The lower revenues were primarily due to commercial sales being down $820,944 over the prior fiscal quarter while military sales showed a decrease of $455,890. Commercial sales were primarily impacted by a provision in the National Electric Code permitting manufacturers of certain sprayer/washer products to use double-insulation instead of supplying a GFCI as part of their product. That provision will be eliminated in the National Electric Code, effective January 1996; however, the Company has no certainty that it will recover to its previous position in that market. Military product shipments continue to be impacted by the transition period from the previous to the new Tactical Quiet Generator Systems Program contract. The Company expects to begin shipments of product under the new contract in the April 1996 time frame, assuming successful First Article testing by the prime contractor. Sales to Xerox and its suppliers continued at previously reported levels. Because Xerox and its suppliers account for such a large percentage of the Company's revenue (approximately 35%), the loss of Xerox as a customer would have a material adverse effect on the Company's business. The Company continues to receive product from its Far East manufacturing subcontractor which supplies TRC with its high volume products. Although the Company is tooled for its major products in both the U.S. and in the Far East, any major disruption to the subcontractor's facility in the Far East would have a material adverse effect on the Company's business. Cost of sales was approximately 61%, versus 70% for the comparable period in the prior year due primarily to the cost control measures and the improvement in gross margin resulting from the additional products now being manufactured in the Far East. Selling, general and administrative expenses for the current quarter of $638,721 were up approximately 5%, versus the $610,520 in the same period last year. Selling expenses were $438,531 for the current quarter, compared to $361,133 in the prior year, an increase of approximately 21%, reflecting higher salary, travel, advertising and commission expenses. General administrative expenses were $200,190, compared to $249,387 in the prior period, down approximately 20% over comparable periods, due to expense reduction in all areas of administration. Research, development and engineering expenses for the current quarter were $230,239, compared to $239,141 for the same period in the prior year, reflecting comparable expenses period to period. Interest and sundry income, net of interest expense, for the current quarter was $58,669, as compared to $10,694 for the same quarter last year, reflecting the Company's increased short term investments and reduced borrowings. Liquidity and Capital Resources As of June 30, 1995, the Company's cash and cash equivalents decreased to $1,113,565 from the March 31, 1995 total of $1,707,930, and short term investments increased to $3,945,677 from the March 31, 1995 total of $2,742,128. The short term investments are comprised of U.S. Treasury Bills. On August 15, 1994, the Company's institutional lender renewed its commercial line of credit at $2,500,000 and extended the maturity date to August 15, 1996. In reducing the interest rate on the line of credit from 1% above the lender's prime rate of interest, the lender has given 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 has also made 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 first quarter, and the mortgage payable to the Company's institutional lender as of June 30, 1995 was $412,600, compared to $431,350 at March 31, 1995. The Company's working capital increased by $324,894 to $10,414,566 in the first quarter of fiscal 1996, compared to $10,089,672 at March 31, 1995. The Company believes that the 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. On May 10, 1995, the Company's Board of Directors approved the establishment of a cash dividend policy. Under the policy, a quarterly dividend of $.02 per share will be paid. The initial quarterly dividend will be paid to shareholders of record on June 30, 1995, with respect to the quarter ended on that date. Part II - Other Information Item 1. Legal Proceedings As reported in the Form 10-K, the Company, along with seven other defendants, was sued in Harris County, Texas in March 1995. 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 suit seeks unspecified compensatory and exemplary damages in excess of $100,000. The Company has both liability and umbrella liability insurance. The case is in the discovery stage. Management believes the ultimate disposition of this matter will not have a material adverse effect on the Company's financial position, results of operations or liquidity. 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. ___________________________________________ 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 3, 1995 Robert S. Wiggins _________________________ _______________________________ Date Robert S. Wiggins, Chairman and Chief Executive Officer, Principal Financial Officer (Duly Authorized Officer)