-----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, GXz+9TQT3dUPlI+c7JWqBQ5OEQwllYvvIVAWE/bdbov+zH9e6aJqLaFSR8C7bYpd aD9coOy3Q1XTxn8LeohxZw== 0000741556-99-000019.txt : 19991115 0000741556-99-000019.hdr.sgml : 19991115 ACCESSION NUMBER: 0000741556-99-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99749389 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, 1999 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 30, 1999 ____________________________ _______________________________ Common stock, $.51 par value 5,455,756 TECHNOLOGY RESEARCH CORPORATION INDEX Part I - Financial Information Page Condensed Consolidate Balance Sheets - September 30, 1999 and March 31, 1999....................... 1 Condensed Consolidate Statements of Income--Three months and Six months ended September 30, 1999 and September 30, 1998.. 2 Condensed Consolidated Statements of Cash Flows - Six months ended September 30, 1999 and September 30, 1998.. 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 1999 1999 ------------ --------- ASSETS (unaudited) * Current assets: Cash and cash equivalents $ 2,094,284 1,653,952 Accounts receivable, net 3,084,210 3,120,256 Income tax receivable 101,920 332,422 Inventories: Raw material 3,834,316 3,800,340 Work in process 436,599 242,683 Finished goods 952,835 681,159 ---------- ---------- Total inventories 5,223,750 4,724,182 Prepaid expenses 52,259 75,804 Deferred income taxes 484,511 515,010 ---------- ---------- Total current assets 11,040,934 10,421,626 ---------- ---------- Property, plant, and equipment 10,081,491 9,806,134 Less accumulated depreciation 5,586,715 5,205,162 ---------- ---------- Net property, plant, and equipment 4,494,776 4,600,972 ---------- ---------- Other assets 78,250 123,577 ---------- ---------- $ 15,613,960 15,146,175 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 2,525,100 2,525,100 Accounts payable 704,828 649,252 Accrued expenses 397,463 331,984 Dividends payable 70,171 15,613 ---------- ---------- Total current liabilities 3,697,562 3,521,949 Long-term debt, excluding current installments 18,750 56,250 ---------- ---------- Total liabilities 3,716,312 3,578,199 ---------- ---------- Stockholders' equity: Common stock 2,782,435 2,782,435 Additional paid-in capital 7,528,473 7,528,473 Retained earnings 1,586,740 1,257,068 ---------- ---------- Total stockholders' equity 11,897,648 11,567,976 ---------- ---------- $ 15,613,960 15,146,175 ========== ========== * The balance sheet as of March 31, 1999 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 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Operating revenues: Net sales $ 4,259,636 4,439,340 8,173,921 9,176,862 Royalties 26,793 27,692 47,025 43,571 ---------- ---------- ---------- ---------- 4,286,429 4,467,032 8,220,946 9,220,433 ---------- ---------- ---------- ---------- Operating expenses: Cost of sales 2,890,326 3,157,118 5,473,349 6,467,925 Selling, general, and administrative 844,594 847,340 1,649,191 1,599,824 Research, development and engineering 287,084 301,794 546,689 581,479 ---------- ---------- ---------- ---------- 4,286,429 4,306,252 7,669,229 8,649,228 ---------- ---------- ---------- ---------- Operating income 264,425 160,780 551,717 571,205 ---------- ---------- ---------- ---------- Other income (deductions): Interest and sundry income 18,998 26,877 38,428 44,961 Interest expense (46,018) (52,096) (89,915) (103,983) ---------- ---------- ---------- ---------- (27,020) (25,219) (51,487) (59,022) ---------- ---------- ---------- ---------- Income before income taxes 237,405 135,561 500,230 512,183 Income taxes 57,000 51,551 116,000 188,311 ---------- ---------- ---------- ---------- Net income $ 180,405 84,010 384,230 323,872 ========== ========== ========== ========== Basic earnings per share $ 0.03 0.02 0.07 0.06 ========== ========== ========== ========== Weighted average number of common and equivalent shares outstanding 5,455,756 5,424,946 5,455,756 5,410,774 ========== ========== ========== ========== Diluted earnings per share $ 0.03 0.02 0.07 0.06 ========== ========== ========== ========== Weighted average number of common and equivalent shares outstanding 5,464,014 5,424,946 5,463,609 5,410,774 ========== ========== ========== ========== Dividends paid $ 0.01 - 0.01 - ========== ========== ========== ========== See accompanying notes to condensed financial statements.
- 2 - TECHNOLOGY RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended September 30 1999 1998 ---------- ---------- Cash flows from operating activities: Net income $ 384,230 323,872 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest - (21,098) Depreciation 381,553 363,605 Decrease (increase) in accounts receivable 36,046 (428,892) Increase in inventories (499,568) (109,847) Decrease in prepaid expenses 23,545 178,533 Decrease in income taxes receivable 230,502 191,268 Decrease in deferred income taxes 30,499 35,052 Decrease (increase) in other assets 45,327 (90,234) Increase (decrease) in accounts payable 55,576 (390,657) Increase(decrease) in accrued expenses 65,479 (147,161) ---------- ---------- Net cash provided (used) by operating activities 753,189 (95,559) ---------- ---------- Cash flows from investing activities: Maturities of short-term investments - 1,055,000 Capital expenditures (275,357) (431,096) ---------- ---------- Net cash provided (used) by investing activities (275,357) 623,904 ---------- ---------- Cash flows from financing activities: Principal payments on long-term debt (37,500) (37,500) Proceeds from exercise of stock options - 135,348 Dividends paid - (10,000) ---------- ---------- Net cash provided (used) by financing activities (37,500) 87,848 ---------- ---------- Increase in cash and cash equivalents 440,332 616,193 Cash and cash equivalents at beginning of period 1,653,952 1,153,798 ---------- ---------- Cash and cash equivalents at end of period $ 2,094,284 1,769,991 ========== ========== 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, 1999 are not necessarily indicative of the results to be expected for the full year. 3. 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. - 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, 1999 versus Six Months Ended September 30, 1998 The Company's operating revenues (net sales and royalties) for the second quarter ended September 30, 1999 were $4,286,428, compared to $4,467,031 reported in the same quarter last year, a decrease of approximately 4%. Net income for the current quarter was $180,405, compared to $84,010, for the same quarter last year, an increase of approximately 115%. Basic and diluted earnings for the current period were $.03 per share compared to basic and diluted earnings of $.02 per share for the same quarter last year. The improvement in net income was due to a lower effective federal income tax rate and lower product costs, which were realized by moving more of the Company's U.S. manufacturing processes to its Honduran manufacturing facility in the second quarter. The Company's operating revenues (net sales and royalties) for the six-month period ended September 30, 1999 were $8,220,947, compared to $9,220,432 reported in the same period of the prior year, a decrease of approximately 11%. Net income for the six-month period was $384,230, compared to $323,872, for the same period in the prior year, an increase of approximately 19%. Basic and diluted earnings for the six-month period were $.07 per share compared to basic and diluted earnings of $.06 per share for the same period last year. Mr. Wiggins stated that, although revenues were down for the six-month period ended September 30, 1999, the Company continued to be profitable for the second straight quarter and generated 9% revenue growth over its first quarter ended June 30, 1999. Compared to the Company's first quarter, commercial sales were up by 2%, military sales by 4% and Xerox Corporation and its suppliers by 3%. The decline in revenues for the six-month period ended September 30, 1999, compared to the same period last year, was due to commercial sales being down by $1,125,159, while military sales and royalty income were up $122,220 and $3,454, respectively. The decrease in commercial sales was primarily due to the level of business with Xerox Corporation and its suppliers, which was down by $804,992, while commercial sales, other than Xerox, showed a decrease of $320,167. For the upcoming quarter, the Company expects total commercial sales to remain at current levels. 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 Tactical Quiet Generator (TQG) Systems program. In addition, direct military shipments of spare parts and of control devices for the C2V Armored Bradley Chassis Tactical Vehicle were stronger in the Company's second quarter. As previously reported, the Company expects military sales to remain strong for Fiscal Year 2000 with potential strengthening in the fourth quarter to the extent that shipments are made under the new 3KW TQG Program. - 5 - In recognition of the value of participating in the explosive E-Commerce market, the Company has opened two "Store Fronts" on the Internet in which on-line users can order the Company's products; the first at www.surgeguard.com, promoting electrical safety products to the recreational vehicle marketplace, and the second at www.fireshield.com, promoting the Company's electrical fire prevention products. In addition, the Company is pursuing reciprocal website affiliations ("Links") with companies whose customers may benefit from the Company's products. The Company is continuing its marketing effort to convince manufacturers of appliances to include an OEM Fire Shield power cord with their products to prevent dangerous fires. The Company is also continuing its public relations efforts to increase consumer awareness of its Safe Living/Smart Products which has resulted in opportunities in the Pet and Insurance industries for the Company's Fire Shield Smart Cord. The Company has also targeted the Electric Utility industry as a channel for selling the Company's Safe Living/Smart Products, and one major utility company is actively marketing these products to its customer base. The Company's gross profit margin on net sales was approximately 32% for the current quarter and approximately 33% for the six-month period ended September 30, 1999, compared to 29% and 30% for the same periods last year, reflecting lower manufacturing costs primarily due to the Company transferring additional manufacturing processes from its Clearwater, Florida plant to its plant in San Pedro Sula, Honduras. Selling, general and administrative expenses were $844,594 for the current quarter and $1,649,191 for the six-month period ended September 30, 1999, compared to $847,340 and $1,599,824 for the same periods last year. Selling expenses were $480,097 for the current quarter and $935,471 for the six-month period ended September 30, 1999, compared to $479,955 and $898,393 for the same periods last year, a decrease of approximately 24% and 28%, respectively, reflecting lower salary related expense, professional fees, travel expenses and advertising costs, all of which is in line with the Company's plan to reduce operating expenses and improve profitability in Fiscal Year 1999. General and administrative expenses were $364,497 for the current quarter and $713,720 for the six-month period ended September 30, 1999, compared to $367,385 and $701,431 for the same periods last year, reflecting comparable expenses year to year. Research, development and engineering expenses were $287,084 for the current quarter and $546,689 for the six-month period ended September 30, 1999, compared to $301,794 and $581,479 for the same periods last year, a decrease approximately 5% and 6%, respectively, reflecting lower salary related expenses due to a decrease in the number of employees in that department. Interest expense, net of interest and sundry income, for the current quarter was $27,020 and $51,487 for the six-month period ended September 30, 1998, compared to $25,219 and $59,022 for the same periods last year, reflecting comparable expense year to year. - 6 - Liquidity and Capital Resources As of September 30, 1998, the Company's cash and cash equivalents were $1,769,991, compared to cash and cash equivalents of $1,153,798 and short term investments of $1,033,902 at March 31, 1998. The short term investments at year end were comprised of U.S. Treasury Bills. The Company's cash is currently held in a money market fund whose yield is comparable to U.S. Treasury Bills. The decrease in overall cash was due primarily to capital equipment purchases during the six-month period. On September 15, 1998, the Company renewed its $2,500,000 commercial line of credit with its institutional lender for another year, maturing in September 1999. 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's debt from advances on its line of credit was $2,450,100 as of September 30, 1998. The Company's working capital increased by $263,995 to $7,139,674 at September 30, 1998, compared to $6,875,679 at March 31, 1998. The increase was primarily a result of the Company's continued profitability through its second fiscal quarter. 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, 1998 was $168,750, compared to $206,250 at March 31, 1998, reflecting the Company's payments on principal for the six-month period. The Company's Board of Directors did not declare a dividend for its second quarter ended September 30, 1998. The Company's Board of Directors will review the Company's dividend policy on a quarterly basis and make a determination at such time as to whether the Company will resume payment of a dividend based on the Company's cash and earnings position. Item 3. Quantitative and Qualitative Disclosure Regarding Market Risk The Company has no derivative securities as of March 31, 1999. 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. Year 2000 Issues The Year 2000 issue is a result of certain microprocessors and computer programs that were designed using two digits rather than four to define the applicable year. Computer programs that have time sensitive software may recognize a date using "00" as the year 1900 rather that the year 2000. This could result in a system failure or miscalculation causing disruptions to operations including, among other things, a temporary inability to process transactions, send invoices or engage in similar activities. The Company is continually working to resolve the potential risks and concerns of the Year 2000 issues. The Company has made progress in assessing and implementing systems to be Year 2000 ready, completing the conversion of its major business computer systems to be Year 2000 ready, on January 1, 1999 at its U.S. facility and on July 4, 1998 at its Honduran facility. None of the Company's products are Year 2000 sensitive, so the total cost of the Year 2000 project has been minimal so far at approximately $10,000. The Company expensed all costs associated with these system changes as the costs were incurred, and they were funded through operating cash flows. Since the Company's major computer systems are already Year 2000 compliant, the Company does not foresee the need of a contingency plan for those minor systems that are not significant enough to disrupt the Company's business. - 7 - The Company is also assessing the readiness of its significant suppliers, which if not Year 2000 ready, could have a material adverse effect on the Company's operations. The Company believes that if certain suppliers were not Year 2000 ready, then alternate arrangements could be made to alleviate any material impact on operations. Achieving Year 2000 compliance is dependent on many factors, some of which are not completely within the Company's control. There can be no assurances that the Company will be able to identify all aspects of its business that are subject to Year 2000 problems, specifically those related to suppliers that could have a material effect on the Company. As a contingency plan, the Company will maintain sufficient inventory of those parts with long lead times that are critical to the manufacturing process. Safe Harbor Statement The statements in this report that relate to future plans, expectations, events, performance and the like are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Actual results or events could differ materially from those described in the forward-looking statements due to a variety of factors, including those set forth in the Company's reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission. 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. - 8 - Item 4. Submission of Matters to a Vote of Security Holders At the Company's annual meeting of shareholders held on August 26, 1999, the following matters were submitted for a vote by the shareholders: 1. To elect five members of the Board of Directors who will be elected to a one-year term of office. VOTES FOR VOTES AGAINST --------- ------------- Robert S. Wiggins 4,955,058 89,989 Raymond H. Legatti 4,951,661 93,388 Raymond B. Wood 4,959,065 85,984 Gerry Chastelet 4,973,528 71,519 Russell Cleveland 4,978,630 66,419 Edmund F. Murphy, Jr. 4,468,064 576,985 Martin L. Poad 4,973,597 71,452 2. To ratify the selection by the Company's Board of Directors of KPMG Peat Marwick LLP, Certified Public Accountants, as independent auditors of the Company for its fiscal year ending March 31, 2000. VOTES FOR VOTES AGAINST VOTES ABSTAINED --------- ------------- --------------- To ratify auditors 5,017,395 9,151 23,452 3. To consider and act upon the proposal submitted by the Heartland Advisors, Inc. to amend the Bylaws of the Company to provide for a mandatory retirement policy for all members of the Boards of Directors at the age of 70. VOTES FOR VOTES AGAINST VOTES ABSTAINED --------- ------------- --------------- Mandatory retirement 982,896 1,924,366 514,245 Item 5. Other Information None. 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. - 9 - ___________________________________________ 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 12, 1999 Scott J. Loucks ___________________________ __________________________________ Date Scott J. Loucks Chief Financial Officer, (principal financial, accounting and Duly Authorized Officer) - 10 - EX-27 2 ARTICLE 5 FDS FOR 2ND QTR 10-Q
5 1 6-MOS Mar-31-2000 Apr-01-1999 Sep-30-1999 1769991 0 3139948 0 5435256 10835056 9464904 4840297 15620720 3695382 0 2782425 0 0 9049163 15620720 9176862 9220433 6467925 6467926 581479 0 103983 512183 188311 323872 0 0 0 323872 .06 .06
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