-----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, UENltrCrMYJvp9/6AoeeNC3Oj28ycTiw1AIJj7A1Phcy0bUi1WZ2OE+IuIjLp+bx fFdqH+XSy32tF6lCQKLuyQ== 0000741556-97-000019.txt : 19971104 0000741556-97-000019.hdr.sgml : 19971104 ACCESSION NUMBER: 0000741556-97-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971103 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: SEC FILE NUMBER: 000-13763 FILM NUMBER: 97706431 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 September 30, 1997 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 (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 October 31, 1997 ____________________________ _______________________________ Common stock, $.51 par value 5,332,571 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Consolidate Balance Sheets - September 30, 1997 and March 31, 1997....................... 1 Condensed Consolidate Statements of Income--Three months and Six months ended September 30, 1997 and September 30, 1996.. 2 Condensed Consolidated Statements of Cash Flows - Six months ended September 30, 1997 and September 30, 1996.. 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
September 30 March 31 1997 1997 ------------ --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 626,228 1,307,567 Short term investments 1,985,786 3,031,013 Accounts receivable, net 2,639,921 2,304,449 Income tax receivable - 178,130 Inventories: Raw material 3,666,931 3,138,639 Work in process 687,057 1,309,312 Finished goods 924,264 694,817 ---------- ---------- Total inventories 5,278,252 5,142,768 Prepaid expenses 256,335 178,972 Deferred income taxes 517,361 411,400 ---------- ---------- Total current assets 11,303,883 12,554,299 ---------- ---------- Property, plant, and equipment 8,518,313 6,817,411 Less accumulated depreciation (4,156,469) (3,859,909) ---------- ---------- Net property, plant, and equipment 4,361,844 2,957,502 ---------- ---------- Deferred income taxes 102,120 102,120 Other assets 58,147 24,028 ---------- ---------- $ 15,825,994 15,637,949 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 1,475,100 652,999 Accounts payable 1,197,088 1,607,116 Accrued expenses 339,896 296,549 Dividends payable 356,189 346,490 ---------- ---------- Total current liabilities 3,368,273 2,903,154 Long-term debt, excluding current installments 168,750 206,250 ---------- ---------- Total liabilities 3,537,023 3,109,404 ---------- ---------- Stockholders' equity: Common stock 2,719,611 2,719,611 Additional paid-in capital 7,411,581 7,411,581 Retained earnings 2,157,779 2,397,353 ---------- ---------- Total stockholders' equity 12,288,971 12,528,545 ---------- ---------- $ 15,825,994 15,637,949 ========== ========== * The balance sheet as of March 31, 1997 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 Six Months Ended September 30 September 30 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating revenues: Net sales $ 4,489,085 3,551,235 9,129,138 6,830,572 Royalties 56,865 137,692 228,397 235,822 ---------- ---------- ---------- ---------- 4,545,950 3,688,927 9,357,535 7,066,394 ---------- ---------- ---------- ---------- Operating expenses: Cost of sales 3,152,129 2,361,474 6,303,936 4,666,405 Selling, general, and administrative 992,071 776,381 1,915,081 1,512,243 Research, development and engineering 295,365 295,573 564,639 573,706 ---------- ---------- ---------- ---------- 4,439,565 3,433,428 8,783,656 6,752,354 ---------- ---------- ---------- ---------- Operating income 106,385 255,499 573,879 314,040 ---------- ---------- ---------- ---------- Other income (deductions): Interest and sundry income 33,974 58,123 79,609 113,585 Interest expense (42,781) (8,579) (49,447) (17,555) ---------- ---------- ---------- ---------- (8,807) 49,544 30,162 96,030 ---------- ---------- ---------- ---------- Income before income taxes 97,578 305,043 604,041 410,070 Income taxes 23,559 3,126 203,707 37,126 ---------- ---------- ---------- ---------- Net income $ 74,019 301,917 400,334 372,944 ========== ========== ========== ========== Earnings per share $ 0.01 0.06 0.07 0.07 ========== ========== =========== ========= Weighted average number of common and equivalent shares outstanding 5,436,578 5,441,393 5,434,708 5,444,097 ========== ========== ========== ========== Dividends paid $ 0.06 0.06 0.12 0.12 ========== ========== ========== ========== See accompanying notes to condensed financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended September 30 1997 1996 ---------- ---------- Cash flows from operating activities: Net income $ 400,334 372,944 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (66,709) (106,814) Depreciation 296,560 247,475 Decrease(increase) in accounts receivable (335,472) 416,771 Increase in inventories (135,484) (248,681) Increase in prepaid expenses (77,363) (109,462) Decrease in income taxes receivable 178,130 - Decrease(increase) in deferred income taxes (105,961) 59,657 Increase in other assets (34,119) (1,537) Decrease in accounts payable (410,028) (126,877) Increase in accrued expenses 43,347 3,533 Increase in income taxes payable - 50,927 ---------- ---------- Net cash provided by(used in) operating activities (246,765) 557,936 ---------- ---------- Cash flows from investing activities: Maturities of short-term investments 2,112,000 3,109,000 Purchase of short-term investments (1,000,064) (3,001,148) Capital expenditures (1,700,902) (176,574) ---------- ---------- Net cash used in investing activities (588,966) (68,722) ---------- ---------- Cash flows from financing activities: Net borrowings under line-of-credit agreement 822,101 - Principal payments on long-term debt (37,500) (37,500) Dividends paid (630,209) (629,179) ---------- ---------- Net cash provided by(used in) financing activities 154,392 (666,679) ---------- ---------- Decrease in cash and cash equivalents (681,339) (177,465) Cash and cash equivalents at beginning of period 1,307,567 341,601 ---------- ---------- Cash and cash equivalents at end of period $ 626,228 164,136 ========== ========== 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 six-month period ended September 30, 1997, 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. 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 consolidated financial statements. Current Six Months Ended September 30, 1997 versus Six Months Ended September 30, 1996 The Company's operating revenues (net sales and royalties) for the second quarter ended September 30, 1997 were $4,545,950, compared to $3,688,927 reported in the same quarter of the prior year, an increase of approximately 23%. Net income for the current quarter was $74,019, compared to $301,917, for the prior year's quarter, a decrease of approximately 75%. The earnings per share for the current period were $.01 per share, compared to $.06 for the comparable period last year. The Company's operating revenues (net sales and royalties) for the six-month period ended September 30, 1997 were $9,357,535, compared to $7,066,394 reported in the same period of the prior year, an increase of approximately 32%. Net income for the six-month period was $400,334, compared to $372,944, for the same period in the prior year, an increase of approximately 1%. The earnings per share for the six-month period were $.07 per share, compared to $.07 for the comparable period last year. The Company's higher revenues were due to commercial sales increasing by $503,771 and military sales increasing by $1,794,795 over the prior six-month period. Royalty income was down $7,425. The increase in commercial sales was mainly due to the level of business with the Company's OEM customers, both domestic and international. Sales to the sprayer/washer market increased slightly while sales to Xerox Corporation and its suppliers decreased mainly due to a price reduction which went into effect August 1, 1997. Throughout Fiscal Year 1998, the Company expects commercial sales to remain stable and sales to Xerox to continue to be affected by the recent price reduction. The increase in Military sales was mainly due to the Company now being in full production of the products related to the Tactical Quiet Generator Systems program. Although the Company's revenues were higher for the current quarter, net income decreased for the following reasons: first, the Company's royalty income was down by $80,827 due to the completion of the Windmere Agreement; second, the Company had higher period expenses due to the Company's marketing programs and the additional costs associated with the start-up of the Company's Honduran subsidiary; and third, the Company's income tax expense was considerably higher in the current quarter, compared to the same period last year, due to a one-time income tax credit of $110,000 which the Company recorded in the prior year's quarter. - 5 - Total marketing expenses for "Fire Shield" and consumer marketing were $86,513 and $80,771 for the current quarter and for the six-month period ended September 30, 1997, $166,319 and $194,810, respectively. No significant sales have been recorded to date for the Company's "Fire Shield" products or as a result of the Company's consumer marketing program, although the Company added two additional distributorships in the second quarter for the distribution of the Company's "Safe Living/Smart Products" for the Tampa Bay, Florida area and for the state of Pennsylvania. The Company continues to believe that the market for "Fire Shield" is large and that the consumer market for the Company's products provide significant opportunities for growth. The Company's wholly owned subsidiary, TRC Honduras, S.A. de C.V., is currently producing the majority of the Company's high-volume products. The Company's subsidiary recorded a $24,020 loss for the second quarter and a $118,832 loss for the six-month period ended September 30, 1997. The Company expected its subsidiary to break even for the second quarter; however, it did not meet its plan for product shipments due to unexpected plant inefficiencies. The result was that additional product had to be produced at the Company's Clearwater facility using temporary labor and heavy overtime. The Company has taken steps to correct these inefficiencies, and the Company expects its subsidiary to produce a profit in the third quarter as the plant becomes more productive. The Company's goal for its Honduran subsidiary is to deliver product on-time with better quality and lower cost than what the Company was experiencing with its Far East contract manufacturer. The Company expects to achieve these targets by the end of its fiscal year. The subsidiary has passed Xerox certification and will go through ISO 9002 certification in early January 1998. The Company's gross profit margin on net sales was approximately 29% for the current quarter and approximately 31% for the six-month period ended September 30, 1997, compared to 34% and 32% for the same periods last year. The Company's gross profit margins were negatively impacted by the August 1st Xerox price reduction, by the costs associated with the Honduran plant start-up and by the additional costs incurred by the Clearwater facility as a result of the Honduran plant not meeting its plan for product shipments, as discussed above. Although the Company's profit margins will continue to be affected by the Xerox price reduction, the Company expects profit margins to improve as the Honduran plant improves its productivity and performs to plan. Selling, general and administrative expenses were $992,071 for the current quarter and $1,915,081 for the six-month period ended September 30, 1997, compared to $776,381 and $1,512,243 for the same periods last year, an increase of approximately 28% and 27%, respectively. Selling expenses were $632,878 for the current quarter and $1,241,404 for the six-month period ended September 30, 1997, compared to $481,654 and $993,760 for the same periods last year, an increase of approximately 31% and 25%, respectively, mainly reflecting expenses related to the "Fire Shield" and TRC Consumer Marketing programs. General and administrative expenses were $359,193 for the current quarter and $673,677 for the six-month period ended September 30, 1997, compared to $294,727 and $518,483 for the same periods last year, an increase of approximately 22% and 30%, respectively, reflecting higher salaries, insurance costs and professional fees of which 18% of these expenses were related to the Company's Honduran subsidiary. Research, development and engineering expenses were $295,365 for the current quarter and $564,639 for the six-month period ended September 30, 1997, compared to $295,573 and $573,706 for the same periods last year, reflecting comparable expenses year to year. - 6 - Interest expense, net of interest and sundry income, for the current quarter was $8,897 and interest and sundry income, net of interest expense, was $30,162 for the six-month period ended September 30, 1997, compared to interest and sundry income, net of interest expense, of $49,544 and $96,030 for same periods last year, reflecting lower returns and average balances on the Company's short-term investments. Liquidity and Capital Resources As of September 30, 1997, the Company's cash and cash equivalents decreased to $626,228 from the March 31, 1997 total of $1,307,567, and short term investments decreased to $1,985,786 from the March 31, 1997 total of $3,031,013. The short term investments are comprised of U.S. Treasury Bills. On September 10, 1997, the Company renewed its commercial line of credit at $2,500,000 with its institutional lender for one year, maturing in August 1998. The Company continues to have 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 Company also has 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's working capital decreased by $1,715,535 to $7,935,610 at September 30, 1997, compared to $9,651,145 at March 31, 1997. The decrease was primarily a result of the Company funding its Honduran subsidiary with its line of credit. The Company had expected to renew its line of credit in the second quarter for two years, causing the line of credit debt to be re-classed as long-term debt, thus improving the Company's working capital position; however, the Company opted to renew its line of credit for one year in order to maintain flexible loan covenants and lower non-usage costs. 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 September 30, 1997 was $243,750, compared to $281,250 at March 31, 1997, reflecting the Company's payments on principal for the six-month period. The second quarter dividend of $.06 per share was paid on October 22 1997 to shareholders of record on September 30, 1997 - 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 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) October 31, 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 2ND QTR 10-Q
5 1 6-MOS Mar-31-1998 Apr-01-1997 Sep-30-1997 626228 1985786 2639921 0 5278252 11303883 8518313 4156469 15825994 3368273 0 2719611 0 0 9569360 15825994 9129138 9357535 6303936 6303936 564639 0 49447 604041 203707 400334 0 0 0 400334 .07 0
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