UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994 *
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period N/A
Commission file number: 0-10877
TCI INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3026925
(State of other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
222 Caspian Drive, Sunnyvale, California 94089-1014
(Address of principal executive offices) (Zip Code)
(408)747-6100
(Registrant's telephone number, including area code)
* The Company is on a 52/53 week fiscal year. The quarter ended on January
1, 1995. For presentation purposes, the Company has indicated its quarter end
as December 31, 1994.
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 such 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 ___
As of January 31, 1995, 3,150,311 shares of Common Stock were outstanding.
<PAGE>
TCI INTERNATIONAL, INC.
PART I FINANCIAL INFORMATION
Condensed Consolidated Financial Statements
(Unaudited)
The unaudited condensed consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes the
information included herein, when read in conjunction with the financial
statements and related notes included in the Company's Annual Report on Form
10-K for the year ended September 30, 1994, filed with the Securities and
Exchange Commission, to be not misleading. Further, the following financial
statements reflect, in the opinion of management, all adjustments necessary to
present fairly the financial position and results of operations as of and for
the periods indicated.
The results of operations for the three months ended December 31, 1994, are
not necessarily indicative of results to be expected for the entire year
ending September 30, 1995.
<TABLE>
TCI INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
December 31,
1994 1993
<S> <C> <C>
Revenues $ 6,839 $ 5,981
Operating Costs and Expenses:
Cost of revenues 3,923 3,735
Marketing, general and administrative 2,678 2,186
6,601 5,921
Income from operations 238 60
Investment income, net 188 124
Income before provision for income taxes 426 184
Provision for income taxes 26 6
Income before change in accounting for
income taxes and extraordinary item 400 178
Change in accounting for income taxes
(SFAS 109) 0 1,511
Net Income $ 400 $ 1,689
Per Share:
Income before change in accounting
for income taxes and extraordinary
item $ 0.12 $ 0.05
Net income $ 0.12 $ 0.49
Shares used in per share computations 3,237 3,439
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
TCI INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
December 31, September 30,
1994 1994
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 5,579 $ 7,578
Short-term investments 14,348 11,938
Accounts receivable -
Billed 1,566 2,686
Unbilled 3,178 2,935
Refundable income taxes 172 739
Inventories 4,868 4,901
Prepaid expenses 497 490
Total current assets 30,208 31,267
Property and Equipment, net 1,805 1,889
Other Assets 89 85
Total Assets $32,102 $33,241
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,890 $ 2,168
Customer deposits and billings on
uncompleted contracts in excess of
revenue recognized 1,964 2,477
Accrued liabilities 4,063 4,524
Total current liabilities 7,917 9,169
Stockholders' Equity:
Common Stock:
Authorized - 5,000 shares, $.01 par value
Issued - 3,341 shares 11,993 11,993
Shares held in treasury at cost:
142 Shares in Dec. 1994 (590) (311)
78 Shares in Sept. 1994 0 0
Retained earnings 12,884 12,483
Valuation allowance - short-term
investments (102) (93)
Total stockholders' equity 24,185 24,072
Total Liabilities and
Stockholders Equity $32,102 $33,241
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<TABLE>
TCI INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
December 31,
1994 1993
<S> <C> <C>
Cash provided by (used in):
Operations:
Net income $ 400 $ 1,689
Reconciliation to cash provided by
(used in) operations:
Depreciation 153 206
Gain on sale of investments 0 (82)
Effect of change in accounting for
income taxes (SFAS 109) 0 (1,511)
Changes in assets and liabilities:
Accounts receivable 877 (2,051)
Refundable income taxes 567 0
Inventories 34 577
Prepaid expenses (11) (67)
Accounts payable (133) 282
Customer deposits (514) (746)
Accrued liabilities (606) (441)
Cash provided by (used in) operations 767 (2,144)
Investing activities:
Purchases of property and equipment (69) (4)
Purchases of short-term investments (2,419) (9,065)
Proceeds from sale of short-term investments 0 11,154
Other 0 38
Cash provided by (used in) investing activities (2,488) 2,123
Financing activities:
Repurchase of common stock for treasury stock (278) (24)
Cash used in financing activities (278) (24)
Net decrease in cash and cash equivalents (1,999) (45)
Cash and cash equivalents at beginning of year 7,578 5,739
Cash and cash equivalents at end of year $ 5,579 $ 5,694
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
TCI INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1
Inventories included in the consolidated balance sheet consist of the
following:
December 31, September 30,
1994 1994
(In thousands)
[S] [C] [C]
Material and component parts $ 3,182 $ 3,235
Work-in-Process 1,686 1,666
$ 4,868 $ 4,901
Note 2
At December 31, 1994, there were outstanding standby letters of credit of
approximately $3,100,000 serving as performance and payment bonds. The
standby letters of credit expire at various dates through 1996; however,
certain performance bonds are automatically renewable until canceled by the
beneficiary. These outstanding standby letters of credit are fully secured by
the Company's short term investments.
<PAGE>
TCI INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First Fiscal Quarter of 1995
Compared to First Fiscal Quarter of 1994
Revenues for the first three months of fiscal year 1995 were $6,839,000, an
increase of 14% over revenues of $5,981,000 for the same period in fiscal year
1994. The increase in revenues is due to increased material flows on various
fixed price contracts. Gross profit as a percentage of revenue for the first
quarter increased from 38% in fiscal year 1994 to 42% in fiscal year 1995
principally due to the recent completion of a significantly sized, long-term
contract which contributed little or no gross profit over each of the
respective reporting periods during the last four years.
Marketing, general and administrative expenses increased 23% from $2,186,000
in the first quarter of fiscal year 1994 to $2,678,000 in the first quarter of
fiscal year 1995. This increase is due to intensified marketing efforts as
well as an increase in independent research and development expenditures, a
portion of which are targeted to position the Company's products for sale into
related commercial markets.
Investment income, net for the first three months of fiscal year 1995 was
$188,000, an increase of 52% from investment income, net of $124,000 for the
same period in fiscal year 1994. This increase is due to the higher balance
of cash, cash equivalents and short-term investments as well as the benefit of
comparatively higher interest rates.
Net income for the first three months of fiscal year 1995 was $400,000, or
$0.12 per share, compared to net income of $1,689,000, or $0.49 per share for
the same period in fiscal year 1994. The net income for fiscal year 1994
included the benefit of $1,511,000, or $0.44 per share, to reflect the
cumulative effect of adopting SFAS No. 109 "Accounting for Income Taxes." The
average number of shares outstanding was 3,236,698 for the first three months
of fiscal year 1995, and 3,439,451 for the same period in fiscal year 1994.
The decline in the number of outstanding shares is a reflection of the
Company's continuing efforts to repurchase its stock under a stock repurchase
program initially authorized by its Board of Directors in December of 1993.
The results of operations for the first three months in fiscal year 1995 are
not necessarily indicative of future quarterly or annual performance
expectations.
FINANCIAL CONDITION
December 31, 1994 Compared to September 30, 1994
Consolidated cash, cash equivalents and marketable securities totaled
$19,927,000 on December 31, 1994, compared to $19,516,000 on September 30,
1994. The Company currently believes that its cash, cash equivalents and
short-term investments, together with expected revenues from operations, will
be sufficient to fund its operations through fiscal 1995.
As of December 31, 1994 , the Company has standby letters of credit
outstanding of approximately $3,100,000. The standby letters of credit are
collateralizedby the Company's short-term investments.
<PAGE>
TCI INTERNATIONAL, INC.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
10.6 First Amendment to Credit agreement between the Company and Wells
Fargo Bank, National Association
b. Reports on Form 8-K: None
No other applicable items.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TCI INTERNATIONAL, INC.
(Registrant)
Date: February 14, 1995
John W. Ballard III
Vice President,
Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer of the
registrant)
Exhibit 10.6
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of January 20, 1995, by and between TCI INTERNATIONAL, INC., a
Delaware corporation ("TCI"), TECHNOLOGY FOR COMMUNICATIONS INTERNATIONAL, a
California Corporation ("TC International"), BR COMMUNICATIONS, a California
corporation ("BRC"), ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank").
RECITALS
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of May 17, 1994, as amended from time to time ("Credit Agreement").
WHEREAS, Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and have agreed to amend the
Credit Agreement to reflect said changes.
NOW, THEREFORE, the Credit Agreement is hereby amended as follows:
1. The second paragraph of Section l.l(b) shall be deleted in its
entirety, and the following substituted therefor:
"Notwithstanding the foregoing, the outstanding principal balance of the Line,
to a maximum of the principal sum stated above, shall not at any time exceed
ninety percent (90%) of the fair market value of marketable securities pledged
to secure the Line of Credit with fair market value determined by Bank from
time to time in its sole discretion. Should, for any reason whatsoever, the
outstanding principal balance of the Line exceed said percentage, Borrowers
shall, immediately upon demand by Bank, pledge or cause to be pledged with
Bank additional marketable securities as
security for the Line, of a type and market value
satisfactory to Bank in its sole discretion.
2. The first paragraph of Section 1.4 shall be deleted in its entirety,
and the following substituted therefor:
"SECTION 1.4 COLLATERAL. As security for all indebtedness of Borrowers to
Bank pursuant to this Agreement, TC International grants to Bank security
interests of first priority in that certain Overland Express Money Market Fund
Account Number 2300422082 ("Overland Express Account") maintained with Bank.
Bank hereby confirms that, as of the date of this Agreement, the securities in
said account are of a type satisfactory to Bank and are of a fair market value
sufficient to meet the margin requirement set forth in Section 1.1 hereof. So
long as there exists no default under this Agreement, TCI, TC International,
or BRC as applicable, shall have the right to substitute securities in the
Overland Express Money Market Fund Account so long as said substituted
securities are of a type and market value satisfactory to Bank in its sole and
reasonable discretion and, immediately following such substitution, there
exists no violation of the margin requirement set forth in Section 1.1
hereof."
3. Except as specifically provided herein, all terms and conditions of
the Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.
4. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein.
Borrower further certifies that as of the date of this Amendment there exists
no Event of Default as defined in the Credit Agreement, nor any condition, act
or event which with the giving of notice or the passage of time or both would
constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
WELLS FARGO BANK,
TCI INTERNATIONAL, INC. NATIONAL ASSOCIATION
By: _______________________ By: _________________________
Title: ____________________ William H. Schenck
Assistant Vice President
TECHNOLOGY FOR COMMUNICATIONS INTERNATIONAL
By: _______________________
Title: ____________________
BR COMMUNICATIONS
By: _______________________
Title: ____________________
<PAGE>
ADDENDUM TO GENERAL PLEDGE AGREEMENT AND
THIRD PARTY PLEDGE AGREEMENT
THIS ADDENDUM is attached to and made a part of that certain General
Pledge Agreement and Third Party Pledge Agreement (collectively, "Agreement")
executed by TECHNOLOGY FOR COMMUNICATIONS INTERNATIONAL ("Debtor"), as of
January 20, 1995, in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
Debtor acknowledges and agrees as follows:
1. Collateral. Notwithstanding any reference in the Agreement to a
transfer, pledge or delivery to Bank, or a deposit with Bank, of the
Collateral and Proceeds defined in paragraph 1 of the Agreement, and
notwithstanding any reference in the Agreement to the possession, custody or
control by Bank of the Collateral or Proceeds, said Collateral includes
without limitation: (a) all securities (whether certificated or
uncertificated), bonds, documents, instruments, money, notes, repurchase
agreements, general intangibles, and all other property of whatever nature or
description, whether tangible or intangible, now or hereafter held on account
of or for Debtor in Debtor's Overland Express Money Market Fund Account Number
2300422082 with Bank ("Account"); (b) the Account itself and all replacements
and substitutions therefor; and (c) Proceeds of all of the foregoing; provided
however, that notwithstanding the generality of the foregoing, the term
"Collateral" does not include any and Bank disclaims a security interest in
all Collective Investment Funds (as hereinafter defined) now or hereafter in
the Account.
2. Security Interest. In accordance with and subject to the provisions
of the Agreement, and to secure all indebtedness of Debtor, TCI International,
Inc. or BR Communications, to Bank, Debtor grants and transfers to Bank a
security interest in all of the Collateral described in the Agreement and
paragraph 1 of this Addendum.
3. Account Activity. So long as no default exists with respect to the
indebtedness secured hereby, Debtor may sell, exchange, transfer or otherwise
dispose of assets in and withdraw assets from the Account and, provided
however that the Collateral Value of the Account, as hereinafter defined,
shall at all times be equal to or greater than one hundred percent (100t) of
the outstanding principal balance of the Letter of Credit Line granted by Bank
pursuant to Credit Agreement dated May 17, 1994, as amended from time to time.
In the event that the Collateral Value of the Account should, for any reason
and at any time, be less than the required amount, Debtor shall promptly
either make a principal reduction on the indebtedness secured hereby, or
deposit additional assets, of a nature satisfactory to Bank, in either case,
sufficient such that the Collateral Value of the Account achieves the required
amount, and subject to the possibility of providing cash collateral as
described in and pursuant to Section 1.1 of the Credit Agreement.
4. Priority. The terms of this Addendum override and take precedence
over any provision to the contrary in any other agreement or other
documentation relative to the opening and maintenance of the Account.
5. Defined Terms. All terms defined in the Agreement and used herein
shall have the same meaning when used in this Addendum. "Collective
Investment Funds" means a collective investment fund as described in 12 CFR
9.18 and includes without limitation a collective investment fund maintained
by Bank's Trust Department. "Collateral Value of the Account" means the sum
of: ninety percent (90%) of the market value of the Account, with market
value, in all instances, determined by Bank in its sole discretion and
excluding from such computation all WF Securities, Collective Investment Funds
or any other assets in which Bank does not have a first priority perfected
security interest now or hereafter in the Account.
IN WITNESS WHEREOF, the Debtor has exremedy hereunder shall affect or
operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or
the exercise of any other right, power, privilege or remedy. Any waiver,
permit, consent or approval of any kind by Bank of any default hereunder or
any such waiver of any provisions or conditions hereof, must be in writing and
shall be effective only to the extent set forth in writing. It is agreed that
public or private sales, for cash or on credit, to a wholesaler or retailer or
investor, or user of property of the types subject to this Agreement, or
public auction, are all commercially reasonable since differences in the sales
prices generally realized in the different kinds of sales are ordinarily
offset by the differences in the costs and credit risks of such sales. While
an Event of Default exists: (a) Bank may, at any time and at Bank's sole
option, liquidate any time deposits pledged to Bank hereunder, whether or not
said time deposits have matured and notwithstanding the fact that such
liquidation may give rise to penalties for early withdrawal of funds; (b)
Debtor will not dispose of any of the Collateral or Proceeds except on terms
approved by Bank; (c) Bank may appropriate the Collateral and apply ail
Proceeds toward repayment of the Indebtedness in such order of application as
Bank may from time to time elect; and (d) at Bank's request, Debtor will
assemble and deliver all Collateral and Proceeds, and books and records
pertaining thereto, to Bank at a reasonably convenient place designated by
Bank. For any Collateral or Proceeds consisting of securities, Bank shall
have no obligation to delay a sale of any portion thereof for the period of
time necessary to permit the issuer thereof to register such securities for
public sale under any applicable state or Federal law, even if the issuer
thereof would agree to do so.
11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or
any part of the Indebtedness, Bank may transfer all or any part of the
Collateral or Proceeds and shall be fully discharged thereafter from all
liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred; but with
respect to any Collateral or Proceeds not so transferred, Bank shall retain
all rights, powers, privileges and remedies herein given. Any proceeds of any
disposition of any of the Collateral or Proceeds, or any part thereof, may be
applied by Bank to the payment of expenses incurred by Bank in connection with
the foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect.
12. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in exercising any right, power, privilege or remedy conferred by this
Agreement or in the enforcement thereof, including any of the foregoing
incurred in connection with any bankruptcy proceeding relating to Debtor or
the valuation of the Collateral and/or Proceeds, including without limitation,
the seeking of relief from or modification of the automatic stay or the
negotiation and drafting of a cash collateral order. All of the foregoing
shall be paid by Debtor with interest at a rate per annum equal to the greater
of ten percent (10%) or the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto.
13. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid
in full, the power of sale and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be
exercised by Bank at any time and from time to time irrespective of the fact
that the Indebtedness or any part thereof may have become barred by any
statute of limitations, or that the personal liability of Debtor may have
ceased, unless such liability shall have ceased due to the payment in full of
all Indebtedness secured hereunder.
14. MISCELLANEOUS. The obligations of Debtor are joint and several;
presentment, protest, notice of protest, notice of dishonor and notice of
nonpayment are waived with respect to any Proceeds to which Bank is entitled
hereunder; any right to direct the application of payments or security for
Indebtedness of Debtor hereunder, or indebtedness of customers of Debtor, and
any right to require proceedings against others or to require exhaustion of
security are waived; and consent to extensions, forbearances or alterations of
the terms of Indebtedness, the release or substitution of security, and the
release of guarantors is given with respect to Proceeds subject to this
Agreement; provided however, that in each instance Bank believes in good faith
that the action in question is commercially reasonable in that is does not
unreasonably increase the risk of nonpayment of the Indebtedness to which the
action applies Until all Indebtedness shall have been paid in full, no Debtor
shall have any right of subrogation or contribution, and each Debtor hereby
waives any benefit of or right to participate in any of the Collateral or
Proceeds or any other security now or hereafter held by Bank.
15. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Agreement as Debtor hereby expressly agrees that recourse may be had against
his or her separate property for all his or her Indebtedness to Bank secured
by the Collateral and Proceeds under this Agreement.
16. NOTICES. All notices, requests or demands required under this
Agreement must be in writing, addressed to Bank at the address specified in
any other loan documents entered into between Debtor and Bank and to Debtor at
the address of its chief executive office (or residence, if applicable)
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (a) if personally delivered, upon delivery; (b) if sent by mail,
upon the earlier of the date of receipt or three (3) days after deposit in the
U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.
17. GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California, and shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of
the parties.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
Debtor warrants that its chief executive office (or residence, if
applicable) is located at the following address:
222 Caspian Drive, Sunnyvale, California 94089
IN WITNESS WHEREOF, this Agreement has been duly executed as of January 20,
1995
Technology for Communications International
By: _______________________________________
Title: ____________________________________
