<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended January 29, 1995
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _______________
Commission File Number 0-14365
SYNERCOM TECHNOLOGY, INC.
-------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 76-0079338
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
333 Cypress Run, Suite 360, Houston, Texas 77094
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(Address of principal executive offices)
(713)-647-9941
--------------
(Issuer's telephone number)
Fiscal 1994 - October 31, 1994
------------------------------
(Former fiscal year)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common Stock, $.03 par value 5,919,596
Class Outstanding at March 15, 1995
Transitional Small Business Disclosure Format (Check one): Yes / / NO /X/
<PAGE>
SYNERCOM TECHNOLOGY, INC.
FORM 10-QSB
JANUARY 29, 1995
TABLE OF CONTENTS
Page No.
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PART I FINANCIAL INFORMATION........................................... 3
CONSOLIDATED BALANCE SHEET-JANUARY 29, 1995..................... 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED
JANUARY 29, 1995 AND JANUARY 31, 1994.......................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED
JANUARY 29, 1995 AND JANUARY 31, 1994.......................... 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................ 7
PART II-OTHER INFORMATION.............................................. 9
2
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYNERCOM TECHNOLOGY, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - JANUARY 29, 1995
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,662
Marketable securities 948
Notes receivable 1,000
Accounts receivable, net 7,160
Inventories, net 6,717
Prepaid expenses 812
--------
Total current assets 23,299
PROPERTY AND EQUIPMENT, at cost 5,040
Less - Accumulated depreciation and amortization 438
--------
Property and equipment, net 4,602
GOODWILL, net 1,725
OTHER ASSETS, net 1,713
--------
$ 31,339
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 3,281
Accrued compensation and related benefits 1,066
Other accrued liabilities 1,872
Current portion of long-term debt 357
Current portion of other long-term liabilities 896
--------
Total current liabilities 7,472
LONG-TERM DEBT 5,604
OTHER LONG-TERM LIABILITIES 1,612
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 1,378
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value; shares authorized 180,000 _
Common stock, $.03 par value; shares authorized 17,000,000;
issued 6,732,345 at January 29, 1995 and 6,727,345 at
October 31,1994 202
Additional paid-in capital 38,686
Retained earnings (deficit) (21,106)
Unrealized loss on marketable securities, net of income
taxes (138)
Treasury stock, at cost (802,749 common shares at January 29,
1995 and 544,249 common shares at October 31, 1994) (2,371)
--------
15,273
--------
$ 31,339
========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
SYNERCOM TECHNOLOGY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JANUARY 29, 1995 AND JANUARY 31, 1994
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
SALES $11,208 $4,710
COST OF SALES 8,208 3,521
------- ------
Gross profit 3,000 1,189
OPERATING EXPENSES
Research and development 243 150
Sales, general and administrative 2,558 1,092
------- ------
Total operating expenses 2,801 1,242
------- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS 199 (53)
INTEREST, INVESTMENT AND OTHER INCOME, 85 44
net
INTEREST EXPENSE (138) -
------- ------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE
PROVISION FOR INCOME TAXES AND 146 (9)
MINORITY INTEREST
PROVISION FOR INCOME TAXES-CONTINUING 51 23
OPERATIONS
------- ------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE
MINORITY INTEREST 95 (32)
MINORITY INTEREST IN CONSOLIDATED 6 -
SUBSIDIARY
INCOME FROM DISCONTINUED OPERATIONS, net
of income tax effect - 631
------- ------
NET INCOME $ 101 $ 599
======= ======
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Continuing operations before $ 0.02 $ 0.00
minority interest
Minority interest $ 0.00 $ 0.00
Discontinued operations $ 0.00 $ 0.10
------- ------
Net income $ 0.02 $ 0.10
======= ======
SHARES USED IN COMPUTING NET INCOME PER
SHARE 6,590 6,159
======= ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
SYNERCOM TECHNOLOGY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED JANUARY 29, 1995 AND JANUARY 31, 1994
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 101 $ 599
Adjustments to reconcile net
income to net cash provided (used)
by operating activities:
Net (income) from - (631)
discontinued operations
Deferred income taxes 10 -
Depreciation and amortization 194 64
Minority interest in earnings (6) -
of subsidiary
Changes in assets and liabilities:
(Increase) in marketable (11) -
securities -- trading
securities
Decrease in notes receivable 1,000 -
(Increase) decrease in 232 (129)
accounts receivable
(Increase) decrease in (886) 193
inventory
(Increase) decrease in (70) 49
prepaid expenses
(Increase) in goodwill (98) -
(Decrease) in accounts payable (140) (174)
(Decrease) in accrued (336) (176)
compensation and related
benefits
(Decrease) in other accrued (350) (152)
liabilities
(Decrease) in other long-term (306) -
liabilities
---------- --------
Total adjustments (767) (956)
---------- --------
Net cash (used) by continuing
operations (666) (357)
Net cash provided by - 536
discontinued operations
---------- --------
Net cash provided (used) by
operating activities (666) 179
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(767) (131)
Purchase of property and
equipment, net
(Decrease) in other assets, net 2 -
---------- --------
Net cash (used) by investing
activities (765) (131)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common 16 79
stock
Payments to repurchase common stock (1,388) -
Proceeds from debt 9,184 -
Payments on debt (7,125) -
---------- --------
Net cash provided by 687 79
financing activities
NET INCREASE (DECREASE) IN CASH AND (744) 127
CASH EQUIVALENTS
---------- --------
CASH AND CASH EQUIVALENTS, beginning of 7,406 1,932
year
---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 6,662 $ 2,059
========== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
SYNERCOM TECHNOLOGY, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
The consolidated financial statements include the accounts of Synercom
Technology, Inc. ("Synercom" or the "Company") and its wholly- and majority-
owned subsidiaries. The Company currently operates a one segment business which
designs, manufactures and sells electronic components. Wakefield Engineering,
Inc. ("Wakefield"), a wholly-owned subsidiary of the Company, is a designer and
manufacturer of thermal management products and metal fabrications. Uni-Star
Industries, Inc. ("Uni-Star"), an 80% owned subsidiary of the Company, is a
manufacturer and assembler of connectors, back-panels, cables and cable
assemblies for the aircraft, military and aerospace markets, as well as switches
for the automotive market.
In fiscal 1994, the Company sold its Information Solutions Segment ("ISS").
Accordingly, the ISS financial results for fiscal 1994 are presented as
discontinued operations.
The Company was incorporated in Delaware in 1983 and is a successor to a Texas
corporation incorporated in 1969.
(2) CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of the Company, the accompanying interim unaudited consolidated
financial statements contain all material adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial condition, the
results of operations and the changes in cash flows of Synercom Technology,
Inc., and Subsidiaries for interim periods. The results for such interim
periods are not necessarily indicative of results for a full year.
Users of financial information produced for interim periods are encouraged to
refer to the footnotes contained in the Annual Report to Stockholders when
reviewing interim financial results.
(3) INVENTORIES
<TABLE>
<CAPTION>
Inventories consisted of the January 29,
following as of (in thousands): 1995
-----------
<S> <C>
Raw materials and components $3,968
Work in process 1,813
Finished goods 1,108
------
6,889
Valuation reserve (172)
------
$6,717
======
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
For the first quarter of fiscal 1995 which ended on January 29, 1995, the
Company reported net income of $101,000 or $.02 per share on revenues of
$11,208,000 compared to a net loss of $32,000 related to continuing operations
for the first quarter of fiscal 1994. In addition, for the first quarter of
fiscal 1994, the Company reported net income from discontinued operations of
$631,000.
Revenues for the first quarter of fiscal 1995 were derived from Wakefield
Engineering, Inc. ("Wakefield"), a wholly-owned subsidiary of Synercom
Technology, Inc. ("Synercom"), and Uni-Star Industries, Inc. ("Uni-Star"), a
subsidiary in which Synercom owns 80% of the outstanding common stock. Revenues
from continuing operations for the first quarter of fiscal 1994 were $4,710,000
which were derived solely from Wakefield. Revenues from Wakefield for the first
quarter of fiscal 1995 compared to the first quarter of fiscal 1994 increased
due to the acquisition of the Aham Tor business (which was acquired on August
31, 1994) and the growth of the thermal management product line.
Prior to the acquisition of the Wakefield business in October of 1993,
Synercom's sole business was its Information Solutions Segment ("ISS"). In
fiscal 1994, Synercom sold ISS to Logica North America, Inc. Accordingly, the
ISS financial results for fiscal 1994 are presented as discontinued operations.
The Company's gross profit margin for the first quarter of fiscal 1995 was 26.8%
compared to 25.2% from continuing operations for the first quarter of fiscal
1994. The improvement in the gross profit margin was primarily attributable to
lower manufacturing overhead at Wakefield as a percentage of revenue offset
partially by increases in direct material and direct labor costs.
Research and development expenses for the first quarter of fiscal 1995 were
$243,000 compared to $150,000 for the first quarter of fiscal 1994. This
increase was primarily due to payroll, related benefit expenses and other costs
related to an increase in staff in this area.
Selling, general and administrative expenses for the first quarter of fiscal
1995 were $2,558,000, or 22.8% of sales, compared to $1,092,000, or 23.2% of
sales, for the first quarter of fiscal 1994. This increase of $1,466,000 was
primarily attributable to the Uni-Star and Aham Tor businesses which were
acquired in June of 1994 and August of 1994, respectively. In addition,
selling, general and administrative expenses for Wakefield, excluding the
effects of the Aham Tor business, increased approximately $430,000 in the first
quarter of fiscal 1995 compared to the first quarter of fiscal 1994 primarily
due to increases in commissions resulting from increased revenues and costs
related to certain marketing projects.
7
<PAGE>
Interest, investment and other income totaled $85,000 for the first quarter of
fiscal 1995 compared to $44,000 for the first quarter of fiscal 1994. This
increase was due to an increase in the average investment base.
The Company incurred interest expense of $138,000 in the first quarter of fiscal
1995 primarily due to the revolving credit facility, equipment term loan and
equipment credit facility related to a Loan and Security Agreement ("Loan
Agreement") entered into by Wakefield in June of 1994. Interest accrues at the
bank's corporate base rate plus three quarters of one percent.
Because the Company was able to utilize net operating loss carryforwards, the
effective federal income tax rate for the first quarter of fiscal 1995 was 8.9%.
Because of the acquisition of profitable businesses and the sale of ISS, the
Company reversed a portion of the valuation allowance for the deferred tax
assets in the fourth quarter of fiscal 1994 based on Management's current
estimate of the probable utilization of the tax benefit derived from net
operating loss carryforwards. For the first quarter of fiscal 1995, an
additional $36,000 of the valuation allowance was reversed due to operating
results. In addition to federal income taxes, the income tax provision for the
first quarter of fiscal 1995 includes $38,000 related to state income taxes.
The minority interest not acquired by the Company related to the Uni-Star
business was included in income before provision for income taxes on the
consolidated statement of operations and as a separate item on the consolidated
balance sheet and statement of cash flows. The Company owns 80% of the
outstanding common stock of Uni-Star.
Liquidity and Capital Resources
On January 29, 1995, cash and cash equivalents of the Company totaled
approximately $6,662,000. In addition, on January 29, 1995, the Company had
marketable securities with a market value of approximately $948,000.
The Company believes that its currently available cash and cash equivalents,
together with its anticipated future cash flow from operations and available
credit, should be sufficient to meet its cash requirements in the near-term
future. Because of the acquisition of the Aham Tor business, Wakefield is
renegotiating the Loan Agreement, related convenants and revolving credit
facility. In addition, Uni-Star may obtain debt financing secured by its
respective assets. The Company may utilize these funds along with existing
funds for internal growth and possible investment opportunities, including
business acquisitions and short-term investments in the securities market.
8
<PAGE>
In September of 1994, the Company announced its intention to spend up to
$2,500,000 to repurchase shares of its common stock. The repurchases may be
effected from time to time through solicited or unsolicited transactions in the
open market or in privately negotiated transactions at such times and in such
amounts as the Company's management deems appropriate. Subsequent to the
announcement and through March 16, 1995, the Company purchased 391,500 shares of
its common stock at an aggregate price of $2,028,000, an average price of $5.18
per share.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
For fiscal 1995, Synercom adopted a 52/53 week fiscal calendar ending on
the last Sunday of October, therefore the quarters for fiscal 1995 will end on
January 29, April 30, July 30 and October 29. Prior year results do not require
restatement due to immateriality.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement re Computation of Per Share Earnings for the quarters ended
January 29, 1995 and January 31, 1994.
(b) Reports on Form 8-K
There were no reports for Form 8-K filed by the Company during the quarter
ended January 29, 1995.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Synercom Technology, Inc.
-------------------------
(Registrant)
Date: March 16, 1995 By: /s/ Marshall D. Butler
____________________ __________________________
Marshall D. Butler
Chief Executive Officer
(Principal Executive Officer)
Date: March 16, 1995 By: /s/ Johnny J. Blanchard
____________________ __________________________
Johnny J. Blanchard
Chief Financial Officer
(Principal Financial and Accounting
Officer)
10
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
------- --------
11.1 Statement re Computation of Per Share Earnings for the quarters
ended January 29, 1995 and January 31, 1994.
11
<PAGE>
SYNERCOM TECHNOLOGY, INC., AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE QUARTERS ENDED JANUARY 29, 1995 AND JANUARY 31, 1994
(Unaudited)
(In Thousands, Except per Share Date)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Shares:
Weighted average common shares 6,099 5,826
outstanding
Net common shares issuable on
exercise of
stock options 491 333
------ ------
Weighted average common and common
equivalent
shares outstanding 6,590 6,159
------ ------
Income (loss) from continuing
operations before
minority interest $ 95 ($32)
Minority interest in consolidated 6 -
subsidiary
Discontinued operations - 631
------ ------
Net income $ 101 $ 599
====== ======
Net income per common and common
equivalent share:
Continuing operations before $ 0.02 $ -
minority interest
Minority interest - -
Discontinued operations - 0.10
------ ------
Net income $ 0.02 $ 0.10
====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET-JANUARY 29, 1995 AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
QUARTERS ENDED JANUARY 29, 1995 AND JANUARY 31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> OCT-29-1995 OCT-31-1994
<PERIOD-END> JAN-29-1995 JAN-31-1994
<CASH> 6,662 0
<SECURITIES> 948 0
<RECEIVABLES> 8,160 0
<ALLOWANCES> 0 0
<INVENTORY> 6,717 0
<CURRENT-ASSETS> 23,299 0
<PP&E> 5,040 0
<DEPRECIATION> 438 0
<TOTAL-ASSETS> 31,339 0
<CURRENT-LIABILITIES> 7,472 0
<BONDS> 5,604 0
<COMMON> 202 0
0 0
0 0
<OTHER-SE> 15,071 0
<TOTAL-LIABILITY-AND-EQUITY> 31,339 0
<SALES> 11,208 4,710
<TOTAL-REVENUES> 11,208 4,710
<CGS> 8,208 3,521
<TOTAL-COSTS> 8,208 3,521
<OTHER-EXPENSES> 2,801 1,242
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 138 0
<INCOME-PRETAX> 146 (9)
<INCOME-TAX> 51 23
<INCOME-CONTINUING> 95 (32)
<DISCONTINUED> 0 631
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 101 599
<EPS-PRIMARY> .02 .10
<EPS-DILUTED> 0 0
</TABLE>
