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, 1995
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 October 31, 1995
____________________________ _______________________________
Common stock, $.51 par value 5,284,836
<PAGE>
TECHNOLOGY RESEARCH CORPORATION
INDEX
Part I - Financial Information Page
Condensed Balance Sheets--September 30, 1995 and March 31, 1995......1
Condensed Statements of Income--Three months and six months ended
September 30, 1995 and September 30, 1994......................2
Condensed Statements of Cash Flows--Six months ended
September 30, 1995 and September 30, 1994......................3
Notes to Condensed Financial Statements..............................4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................5,6,7
Part II - Other Information
Item 1 - Legal Proceedings...........................................7
Item 2 - Exhibits and Reports on Form 8-K............................7
Signatures...........................................................8
<PAGE>
<TABLE>
TECHNOLOGY RESEARCH CORPORATION
CONDENSED BALANCE SHEETS
<CAPTION>
September 30 March 31
1995 1995
__________ __________
(unaudited) *
<S> <C> <C>
ASSETS
____________________________________
Current assets:
Cash and cash equivalents $ 810,573 1,707,930
Short term investments 4,002,009 2,742,128
Accounts receivable, net 2,662,668 3,335,726
Inventories:
Raw material 3,485,437 2,707,054
Work in process 475,663 654,520
Finished goods 607,701 584,451
__________ __________
Total inventories 4,568,801 3,946,025
Prepaid expenses 97,360 36,863
Deferred income taxes 408,000 440,000
__________ __________
Total current assets 12,549,411 12,208,672
__________ __________
Property, plant, and equipment 15,891,754 5,536,933
Less accumulated depreciation 3,446,297 3,213,002
__________ _________
Net property, plant, and equipment 2,445,457 2,323,931
__________ __________
Deferred income taxes 228,000 228,000
Other assets 523 53,335
_________ __________
$ 5,223,391 14,813,938
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current liabilities:
Current installments of long-term debt $ 75,000 75,000
Accounts payable 1,389,771 1,728,332
Dividends payable 316,890 -
Accrued expenses 275,073 230,177
Income taxes payable - 85,491
__________ __________
Total current liabilities 2,056,734 2,119,000
Long-term debt, excluding current installments 318,850 356,350
__________ __________
Total liabilities 2,375,584 2,475,350
__________ __________
Stockholders' equity:
Common stock 2,695,267 2,675,398
Additional paid-in capital 7,361,067 7,322,923
Retained earnings 2,791,473 2,340,267
__________ ________
Total stockholders' equity 12,847,807 12,338,588
__________ __________
$ 15,223,391 14,813,938
========== ==========
<FN>
*The balance sheet as of March 31, 1995, has been summarized
from the Company's audited balance sheet as of that date.
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
1995 1994 1995 1994
__________ __________ __________ __________
Operating revenues:
<S> <C> <C> <C> <C>
Net sales $ 4,171,788 5,788,335 8,415,818 11,326,958
Royalties 213,797 224,323 385,757 413,323
__________ __________ __________ __________
4,385,585 6,012,658 8,801,575 11,740,281
__________ __________ __________ __________
Operating expenses:
Cost of sales 2,780,050 4,268,478 5,376,077 8,150,178
Selling, general, and administrative 705,430 691,443 1,344,151 1,301,962
Research, development and engineering 255,029 276,170 485,270 515,311
__________ __________ __________ __________
3,740,509 5,236,091 7,205,498 9,967,451
__________ __________ __________ __________
Operating income 645,076 776,567 1,596,077 1,772,830
__________ __________ __________ __________
Other income (deductions):
Interest and sundry income 68,633 37,295 138,197 64,344
Interest expense (11,578) (12,029) (22,473) (28,385)
__________ __________ __________ __________
57,055 25,266 115,724 35,959
__________ __________ __________ __________
Income before income taxes 702,131 801,833 1,711,801 1,808,789
Income taxes 247,000 171,000 626,814 532,000
__________ __________ __________ __________
Net income $ 455,131 630,833 1,084,987 1,276,789
========== ========== ========== ==========
Earnings per share $ 0.08 0.12 0.20 0.24
========== ========== =========== =========
Weighted average number of common
and equivalent shares outstanding 5,432,392 5,392,499 5,418,696 5,383,817
========== ========== ========== ==========
Dividend declared per share $ 0.06 - 0.12 -
========== ========== ========== ==========-
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Six Months Ended
September 30
1995 1994
__________ __________
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,084,987 1,276,789
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of interest (104,998) (6,818)
Depreciation 233,295 215,933
Decrease in accounts receivable 673,058 432,779
Increase in inventories (622,776) (25,856)
Increase in prepaid expenses (60,497) (137,993)
Decrease in deferred income taxes 32,000 -
Decrease in other assets 52,812 7,095
Increase(decrease) in accounts payable (338,561) 549,630
Increase(decrease) in accrued expenses 44,896 (141,538)
Increase in income taxes payable (85,491) (201,491)
__________ __________
Net cash provided by operating activities 908,725 1,968,530
__________ __________
Cash flows from investing activities:
Purchase of short-term investments (2,957,884) (2,305,771)
Maturities of short-term investments 1,803,000 774,000
Capital expenditures (354,821) (296,382)
__________ __________
Net cash used in investing activities (1,509,705) (1,828,153)
__________ __________
Cash flows from financing activities:
Principal payments on long-term debt (37,500) (437,500)
Proceeds from exercise of stock options 58,013 49,303
Dividends paid (316,890) -
__________ __________
Net cash provided by(used in)
financing activities (296,377) (388,197)
__________ __________
Decrease in cash and cash equivalents (897,357) (247,820)
Cash and cash equivalents at beginning of period 1,707,930 2,096,626
__________ __________
Cash and cash equivalents at end of period $ 810,573 1,848,806
========== ==========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
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, 1995, are not necessarily indicative of the results to be
expected for the full year.
2. At March 31, 1995, the Company had net operating loss carryforwards
for Federal income tax purposes of approximately $994,000, which
are available to offset future taxable income through 2003. The
Company also has available tax credit carryforwards for Federal
income tax purposes of approximately $214,000, which are available
to offset future Federal income taxes through 2002. As a result
of an ownership change in 1989, the Internal Revenue Code limits
the income tax benefit of net operating loss and tax credit
carryforwards to approximately $65,000 each year. For financial
reporting purposes, the tax benefit of these net operating loss and
tax credit carryforwards was recorded during the year ended March 31,
1995.
3. Short-term investments consist of U.S. Treasury Bills with a
purchased maturity of greater than three months.
4. 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.
<PAGE>
TECHNOLOGY RESEARCH CORPORATION
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 Six Months Ended September 30, 1995 versus Six Months Ended
September 30, 1994
Operating revenues for the Company's second fiscal quarter ended September 30,
1995 were $4,385,585, compared to $6,012,658 reported in the same quarter of
the prior year, a decrease of approximately 27%. Net income for the current
quarter was $455,131, or $.08 per share, compared to net income of $630,833
or $.12 per share, for the prior year's quarter.
Operating revenues for the six month period ended September 30, 1995 were
$8,801,575, compared to $11,740,281 reported in the same period in the
prior year, a decrease of approximately 25%. Net income for the six month
period was $1,084,987, or $.20 per share, compared to net income of $1,276,789,
or $.24 per share, for the same period in the prior year.
The lower revenues were primarily due to commercial sales being down $2,264,614
over the prior six month period, while military sales showed a decrease of
$646,527. Royalty income was down by $27,565. Commercial sales were primarily
impacted by a provision in the National Electric Code permitting the
manufacturers of certain sprayer/washer products to use double-insulation
instead of supplying a GFCI as part of their product. That provision has been
eliminated in the National Electric Code, effective January 1996; however, the
Company has no certainty that it will recover its previous revenue level in
that market. Nevertheless, The Company will have the opportunity to recover
revenues in this market as Underwriter's Laboratory(UL) enforces the change
in the National Electric Code on the sprayer/washer manufacturers. UL has not
commented on how long this process will take. In addition, revenues from
Xerox were impacted as a TRC licensee increased its production to meet
Xerox's European requirements; however, the Company received a royalty for
the number of units shipped. The impact of the sprayer/washer market on
commercial sales has been greater than expected, and the Company does
not anticipate revenues to change significantly over the remainder of the
Company's fiscal year. Military product shipments continue to be
impacted by the transition period from the previous to the new Tactical
Quiet Generator Systems Program contract. Assuming successful First Article
testing by the prime contractor, the Company now expects to begin shipments
of product under the new contract in the June 1996 time frame, rather than
in the April 1996 time frame as previously reported.
Because Xerox and its suppliers account for such a large percentage of
the Company's revenue (approximately 35%), the loss of Xerox as a customer
would have a material adverse effect on the Company's business.
<PAGE>
The Company continued making progress in improving cost by moving two more of
its high volume product lines to its Far East sub-contracting facility as
well as designing and installing the first of two progressive assembly lines
in its Clearwater facility. Although revenues were down, the Company
continues to pay close attention to every aspect of cost, as reflected in
the Company's earnings.
Although the Company is tooled for its major products in both the U.S. and in
the Far East, any major disruption to the subcontractor's facility in the Far
East would have a material adverse effect on the Company's business.
Cost of sales was approximately 67%, versus 74% for the current quarter and
approximately 64%, versus 72% for the six month period ended September 30,
1995. The improvement was due primarily to better gross margins resulting from
the additional products now being manufactured in the Far East and the cost
control measures implemented at TRC's Clearwater facility.
Selling, general and administrative expenses were $705,430 for the current
quarter and $1,344,151 for the six month period ended September 30, 1995,
compared to $691,443 and $1,301,962 in the same periods last year. Selling
expenses were $432,604 for the current quarter, compared to $425,200 in the
prior year, an increase of approximately 2%, primarily due to higher travel
expense. General administrative expenses were $272,826, compared to $266,243
in the prior period, an increase of approximately 2%, primarily due to expense
related to the reverse split of the Company's common stock that is discussed
below.
Research, development and engineering expenses for the current quarter were
$255,029 and $485,270 for the six month period ended September 30, 1995,
compared to $276,170 and $515,311 for the same periods in the prior year,
reflecting a decrease primarily in salary expenses.
Interest and sundry income, net of interest expense, for the current quarter
was $57,055 and $115,724 for the six month period ended September 30, 1995,
compared to $25,266 and $35,959 for the same periods last year, reflecting the
Company's increased short term investments and reduced borrowings.
Liquidity and Capital Resources
As of September 30, 1995, the Company's cash and cash equivalents decreased
to $810,573 from the March 31, 1995 total of $1,707,930, and short term
investments increased to $4,002,009 from the March 31, 1995 total of
$2,742,128. 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.
<PAGE>
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 September 30,
1995 was $393,850, compared to $431,350 at March 31, 1995, reflecting
the current quarter's payments.
The Company's working capital increased by $403,005 to $10,492,677 over its
first two periods of fiscal 1996, compared to $10,089,672 at March 31, 1995.
The Company believes that the 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.
On August 23, 1995, at TRC's annual meeting, the Company's shareholder's
approved a one share for three share reverse stock split, by a majority vote
of 82.24%. The record date for the reverse split was September 15, 1995,
and all the Company's financial information now reflects the reverse split.
In addition, the second quarterly dividend of $.06 per share was paid on
October 17, 1995 to shareholders of record on September 30, 1995.
On November 3, 1995, NASDAQ approved the Company's application for listing
on the National Market, potentially giving the Company's common stock a greater
market in which to trade. The Company has been listed on the NASDAQ Small
Cap Market since 1984.
Part II - Other Information
Item 1. Legal Proceedings
As reported in the Company's Form 10-K, the Company, along with seven other
defendants, was sued in Harris County, Texas in March 1995. 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
suit seeks unspecified compensatory and exemplary damages in excess of $100,000.
The Company has both liability and umbrella liability insurance. The case is
in the discovery stage. Management believes the ultimate disposition of this
matter will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
covered by this Report.
<PAGE>
___________________________________________
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 3, 1995 /s/ Robert S. Wiggins
___________________________ __________________________________
Date Robert S. Wiggins, Chairman and
Chief Executive Officer,
Principal Financial Officer
(Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-START> Apr-01-1995
<PERIOD-END> Sep-30-1995
<CASH> 810573
<SECURITIES> 4002009
<RECEIVABLES> 2662668
<ALLOWANCES> 0
<INVENTORY> 4568801
<CURRENT-ASSETS> 12549411
<PP&E> 5891754
<DEPRECIATION> 3446297
<TOTAL-ASSETS> 15223391
<CURRENT-LIABILITIES> 2056734
<BONDS> 0
<COMMON> 2695267
0
0
<OTHER-SE> 10152540
<TOTAL-LIABILITY-AND-EQUITY> 15233391
<SALES> 8415818
<TOTAL-REVENUES> 8801575
<CGS> 5376077
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</TABLE>