-----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, C4pxPJrN9+G45O80rY56OJjrKjL1zOCQXCdsIifjb6eJX5AUqx0KlyISQryNSBDt qjbsB/KKiHvWuUV/R8kNRA== 0000741556-97-000003.txt : 19970225 0000741556-97-000003.hdr.sgml : 19970225 ACCESSION NUMBER: 0000741556-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970206 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: 1934 Act SEC FILE NUMBER: 000-13763 FILM NUMBER: 97519084 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, 1996 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 January 31, 1997 ____________________________ _______________________________ Common stock, $.51 par value 5,324,237 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Balance Sheets--December 31, 1996 and March 31, 1996..... 1 Condensed Statements of Income--Three months and nine months ended December 31, 1996 and December 31, 1995....................... 2 Condensed Statements of Cash Flows--Nine months ended December 31, 1996 and December 31, 1995....................... 3 Notes to Condensed 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..................................... 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 BALANCE SHEETS
December 31 March 31 1996 1996 ------------ --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 986,697 341,601 Short term investments 3,075,515 4,084,698 Accounts receivable, net 2,387,000 2,607,152 Inventories: Raw material 3,713,820 3,423,236 Work in process 891,755 945,795 Finished goods 616,700 857,731 ---------- ---------- Total inventories 5,222,275 5,226,762 Prepaid expenses 221,835 94,205 Deferred income taxes 403,000 445,000 ---------- ---------- Total current assets 12,296,322 12,799,418 ---------- ---------- Property, plant, and equipment 6,515,573 6,120,341 Less accumulated depreciation (4,068,059) (3,698,692) ---------- ---------- Net property, plant, and equipment 2,447,514 2,421,649 ---------- ---------- Deferred income taxes 125,750 159,000 Other assets 2,423 523 ---------- ---------- $ 14,872,009 15,380,590 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 75,000 75,000 Accounts payable 1,257,095 1,236,591 Accrued expenses 176,289 219,044 Dividends payable 345,918 336,052 Income taxes payable - 991 ---------- ---------- Total current liabilities 1,854,302 1,867,678 Long-term debt, excluding current installments 225,100 281,350 ---------- ---------- Total liabilities 2,079,402 2,149,028 ---------- ---------- Stockholders' equity: Common stock 2,715,361 2,712,437 Additional paid-in capital 7,409,580 7,410,754 Retained earnings 2,667,666 3,108,371 ---------- ---------- Total stockholders' equity 12,792,607 13,231,562 ---------- ---------- $ 14,872,009 15,380,590 ========== ========== * The balance sheet as of March 31, 1996 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 Nine Months Ended December 31 December 31 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Operating revenues: Net sales $ 3,802,003 4,136,934 10,632,575 12,552,751 Royalties 77,624 216,946 313,446 602,704 ---------- ---------- ---------- ---------- 3,879,627 4,353,880 10,946,021 13,155,455 ---------- ---------- ---------- ---------- Operating expenses: Cost of sales 2,729,293 2,756,469 7,395,698 8,132,547 Selling, general, and administrative 746,945 690,288 2,259,188 2,034,440 Research, development and engineering 235,294 233,581 809,000 718,849 ---------- ---------- ---------- ---------- 3,711,532 3,680,338 10,463,886 10,885,836 ---------- ---------- ---------- ---------- Operating income 168,095 673,542 482,135 2,269,619 ---------- ---------- ---------- ---------- Other income (deductions): Interest and sundry income 54,072 69,342 167,657 207,540 Interest expense (8,094) (10,151) (25,649) (32,625) ---------- ---------- ---------- ---------- 45,978 59,191 142,008 174,915 ---------- ---------- ---------- ---------- Income before income taxes 214,073 732,733 624,143 2,444,534 Income taxes 70,000 268,000 107,126 894,814 ---------- ---------- ---------- ---------- Net income $ 144,073 464,733 517,0174 1,549,720 ========== ========== ========== ========== Earnings per share $ 0.03 0.09 0.10 0.29 ========== ========== =========== ========= Weighted average number of common and equivalent shares outstanding 5,438,892 5,405,639 5,441,928 5,407,725 ========== ========== ========== ========== Dividend declared per share $ 0.06 0.06 0.18 0.18 ========== ========== ========== ========== See accompanying notes to condensed financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended December 31 1996 1995 ---------- ---------- Cash flows from operating activities: Net income $ 517,017 1,549,720 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (153,669) (166,953) Depreciation 369,367 349,595 Decrease in accounts receivable 220,152 484,505 Decrease (increase) in inventories 4,487 (982,904) Increase in prepaid expenses (127,630) (39,693) Decrease in deferred income taxes 75,250 48,000 Decrease (increase) in other assets (1,900) 52,812 Increase (decrease) in accounts payable 20,504 (193,638) Increase (decrease) in accrued expenses (42,755) 14,760 Decrease in income taxes payable (991) (60,500) ---------- ---------- Net cash provided by operating activities 879,832 1,055,704 ---------- ---------- Cash flows from investing activities: Maturities of short-term investments (3,001,148) (4,958,036) Purchase of short-term investments 4,164,000 3,832,000 Capital expenditures (395,232) (417,212) ---------- ---------- Net cash provided by (used in) investing activities 767,620 (1,543,248) ---------- ---------- Cash flows from financing activities: Principal payments on long-term debt (56,250) (56,250) Proceeds from exercise of stock options 1,750 64,263 Dividends paid (947,856) (629,308) ---------- ---------- Net cash used in financing activities (1,002,356) (621,295) ---------- ---------- Increase (decrease) in cash and cash equivalents 645,096 (1,108,839) Cash and cash equivalents at beginning of period 341,601 1,707,930 ---------- ---------- Cash and cash equivalents at end of period $ 986,697 599,091 ========== ========== 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 nine-month period ended December 31, 1996, are not necessarily indicative of the results to be expected for the full year. 2. Short-term investments consist of U.S. Treasury Bills with a purchased maturity of greater than three months. 3. 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. - 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 financial statements. Current Nine Months Ended December 31, 1996 versus Nine Months Ended December 31, 1995 Operating revenues (net sales and royalties) for the third quarter ended December 31, 1996 were $3,879,627, compared to $4,353,880 reported in the same quarter of the prior year, a decrease of approximately 11%. Net income for the current quarter was $144,073, compared to $464,733 for the prior year's quarter, a decrease of approximately 69%. The earnings per share for the current period were $.03 per share as compared to $.09 for the comparable period last year. Operating revenues (net sales and royalties) for the nine-month period ended December 31, 1996 were $10,946,021, compared to $13,155,455 reported in the same period for the prior year, a decrease of approximately 17%. Net income for the nine-month period was $517,017, compared to $1,549,720 for the same period in the prior year, a decrease of approximately 67%. The earnings per share for the nine-month period were $.10 per share as compared to $.29 for the comparable period last year. The lower revenues were due to commercial sales being down $1,568,811 over the prior nine-month period while military sales showed a decrease of $351,365. Royalty income was down by $289,258. The reduction in commercial sales was mainly due to the level of business with Xerox and, to a lesser extent, the sprayer/washer market. The revenues associated with Xerox were negatively impacted by another price reduction on October 1, 1996 and by the transition period of the Company supplying Xerox with its European product requirements instead of Temic Telefunken, which impacted the current quarter both in royalties from Temic and in shipments of piece parts to Temic which were used by Temic to manufacture finished product. This development should result in higher shipments to Xerox in the future. Military sales continued to improve in the current quarter with an increase of $389,330 over the same quarter of the prior year. The Company is now in full production of the products related to the Tactical Quiet Generator Systems program, which has an expected value of $4,900,000 over approximately two years. Royalty income was down, as expected, due to less royalties from Windmere Corporation and Temic Telefunken. - 5 - The Company's revenues have increased from quarter to quarter this fiscal year, and the Company believes that revenues will continue to improve in the fourth quarter. The Company has yet, however, to experience the anticipated revenues from the "Fire Shield" products and the consumer marketing initiative, which were needed, in addition to the Company's existing business, to achieve revenue growth over Fiscal Year 1996. The Company believes that the market for "Fire Shield" is large and that the consumer market for the Company's products provide significant opportunities for growth; therefore, the Company will continue to increase its expenditures in market development in this fiscal year and thereafter. The Company will be test marketing "Fire Shield" extension cords by way of a TV Infomercial which will be slated for viewing in four geographic areas in late February. The Company is aggressively pursuing ways to produce quality products at lower costs using automation and alternative sites of manufacturing so that the Company can continue to be successful in reducing product cost to maintain acceptable profit margins (See Item 5. Other Information for further detail). Cost of sales was approximately 72% of net sales for the current quarter and approximately 70% of net sales for the nine-month period ended December 31, 1996, compared to 67% and 65% for the same periods last year. The difference was primarily due to weaker profit margins resulting from a price reduction to Xerox Corporation, effective October 1, 1996, and due to the transition period of the Company shipping product directly to Xerox and its suppliers from China in the current quarter. This action will ultimately result in lower duty, freight and packaging costs to the Company, thus offsetting, in part, the effect of the price reduction. The Company, historically, has been successful in offsetting price reduction with product cost reduction in order to maintain acceptable margins with Xerox Corporation. Selling, general and administrative expenses for the current quarter were $746,945 and $2,259,188 for the nine-month period ended December 31, 1996, compared to $690,288 and $2,034,440 in the same periods last year, an increase of approximately 8% and 11%, respectively. Selling expenses were $460,009 for the current quarter and $1,453,769 for the nine-month period ended December 31, 1996, compared to $410,523 and $1,281,659 in the same period last year, an increase of approximately 12% and 13%, respectively, reflecting expenses related to the marketing of the "Fire Shield" products and the consumer marketing program. General and administrative expenses were $286,936 for the current quarter and $805,419 for the nine-month period ended December 31, 1996, compared to $279,765 and $752,781 in the same periods last year, an increase of approximately 3% and 7%, respectively, reflecting comparable expenses year to year. Research, development and engineering expenses for the current quarter were $235,294 and $809,000 for the nine-month period ended December 31, 1996, compared to $233,581 and $718,849 for the same periods in the prior year, an increase of approximately 13% for the nine-month period, reflecting higher salary related expenses. Interest and sundry income, net of interest expense, for the current quarter was $45,978 and $142,008 for the nine-month period ended December 31, 1996, compared to $59,191 and $174,915 for the same periods last year, reflecting lower returns and average balances on the Company's short-term investments. - 6 - Liquidity and Capital Resources As of December 31, 1996, the Company's cash and cash equivalents was $986,697, compared to the March 31, 1996 total of $341,601, and short term investments were $3,075,515, compared to the March 31, 1996 total of $4,084,698. The short term investments are comprised of U.S. Treasury Bills. On August 22, 1995, the Company's institutional lender renewed its commercial line of credit at $2,500,000 and extended the maturity date to August 15, 1997. The lender continues to give 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 also continues to make 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 period, and the mortgage payable to the Company's institutional lender as of December 31, 1996 was $300,100, compared to $356,350 at March 31, 1996. The Company's working capital decreased by $489,720 to $10,442,020 at December 31, 1996, compared to $10,931,740 at March 31, 1996. The Company believes that its 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. The third quarter dividend of $.06 per share was paid on January 21, 1997 to shareholders of record on December 31, 1996. Part II - Other Information Item 1. Legal Proceedings In March 1995, the Company, along with seven other defendants, was sued in Harris County, Texas. 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 parties to the lawsuit have agreed to an "out of court" settlement subject to final review and approval by the Court. The Company's product liability insurance will cover its portion of the settlement cost. - 7 - 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 On February 3, 1997, the Company's Board of Directors approved the incorporation of TRC Honduras, S.A., a wholly owned subsidiary of Technology Research Corporation, for the purpose of manufacturing the Company's high- volume products. This decision was made in line with the Company's goal of always striving to improve quality, profit margins and customer satisfaction. TRC Honduras, S.A. will reside in a leased 42,000 square foot building located in ZIP San Jose, a free trade zone and industrial park, in San Pedro Sula, Honduras. The lease will be for a term of five years with an option to extend the lease for another five years if desired. The benefits of being located in a free trade zone include no Honduran duties on imported raw materials or equipment, no sales or export tax on exported finished product, a twenty year federal income tax holiday and a ten year municipal income tax holiday for the profits generated by the Honduran subsidiary, and various other benefits. TRC Honduras, S.A. will be funded with equity at one million four hundred thousand dollars to be used for machinery, equipment and various start-up cost. The Company expects to receive significant benefit from its investment in the form of profits and positive cash flow with first product shipments expected to begin from Honduras in April 1997 and full production expected by the third quarter of Fiscal Year 1998. Although the Company has several options available for financing its Honduran subsidiary, including using its bank line of credit or its short term investments, the Company is also investigating additional financing through its institutional lender. 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 Securities 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) December 6, 1997 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-31-1997 Apr-01-1996 Dec-31-1996 986697 3075515 2387000 0 5222275 12296322 6515573 4068059 14872009 1854302 0 2715361 0 0 10077246 14872009 10632575 10946021 7395698 7395698 809000 0 25649 624143 107126 624143 0 0 0 517017 .10 0
-----END PRIVACY-ENHANCED MESSAGE-----