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 June 30, 1996
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 July 31, 1996
____________________________ ____________________________
Common stock, $.51 par value 5,318,902
TECHNOLOGY RESEARCH CORPORATION
INDEX
Part I - Financial Information Page
Condensed Balance Sheets--June 30, 1996 and March 31, 1996......... 1
Condensed Statements of Income--Three months ended
June 30, 1996 and June 30, 1995............................... 2
Condensed Statements of Cash Flows--Three months ended
June 30, 1996 and June 30, 1995............................... 3
Notes to Condensed 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......................................... 7
Item 2 - Exhibits and Reports on Form 8-K.......................... 7
Signatures......................................................... 8
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TECHNOLOGY RESEARCH CORPORATION
CONDENSED BALANCE SHEETS
<CAPTION>
June 30 March 31
1996 1996
----------- ---------
ASSETS (unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 323,437 341,601
Short term investments 4,109,982 4,084,698
Accounts receivable, net 2,027,574 2,607,152
Inventories:
Raw material 3,437,995 3,423,236
Work in process 915,398 945,795
Finished goods 859,241 857,731
---------- ----------
Total inventories 5,212,634 5,226,762
Prepaid expenses 202,082 94,205
Deferred income taxes 445,000 445,000
---------- ----------
Total current assets 12,320,709 12,799,418
---------- ----------
Property, plant, and equipment 6,157,849 6,120,341
Less accumulated depreciation (3,816,602) (3,698,692)
---------- ----------
Net property, plant, and equipment 2,341,247 2,421,649
---------- ----------
Deferred income taxes 145,000 159,000
Other assets 423 523
---------- ----------
$ 14,807,379 15,380,590
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 75,000 75,000
Accounts payable 912,931 1,236,591
Accrued expenses 232,552 219,044
Dividends payable 340,841 336,052
Income taxes payable - 991
---------- ----------
Total current liabilities 1,561,324 1,867,678
Long-term debt, excluding current installments 262,600 281,350
---------- ----------
Total liabilities 1,823,924 2,149,028
---------- ----------
Stockholders' equity:
Common stock 2,712,234 2,712,437
Additional paid-in capital 7,410,957 7,410,754
Retained earnings 2,860,264 3,108,371
---------- ----------
Total stockholders' equity 12,983,455 13,231,562
---------- ----------
$ 14,807,379 15,380,590
========== ==========
<FN>
<F1>
* The balance sheet as of March 31, 1996 has been summarized
from the Company's audited balance sheet as of that date.
<F2>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
- 1 -
<TABLE>
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended
June 30
1996 1995
---------- ----------
Operating revenues:
<S> <C> <C>
Net sales $ 3,279,337 4,244,029
Royalties 98,130 171,961
---------- ----------
3,377,467 4,415,990
---------- ----------
Operating expenses:
Cost of sales 2,304,931 2,596,028
Selling, general, and administrative 735,862 638,721
Research, development and engineering 278,133 230,240
---------- ----------
3,318,926 3,464,989
---------- ----------
Operating income 58,541 951,001
---------- ----------
Other income (deductions):
Interest and sundry income 55,462 69,565
Interest expense (8,976) (10,896)
---------- ----------
46,486 58,669
---------- ----------
Income before income taxes 105,027 1,009,670
Income taxes 34,000 379,814
---------- ----------
Net income $ 71,027 629,856
========== ==========
Earnings per share $ 0.01 0.12
========== ==========
Weighted average number of common
and equivalent shares outstanding 5,448,954 5,395,474
========== ==========
Dividends paid $ 0.06 0.06
========== ==========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
- 2 -
<TABLE>
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Three Months Ended
June 30
1996 1995
---------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 71,027 629,856
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of interest (51,943) (48,524)
Depreciation 117,910 115,604
Decrease in accounts receivable 579,578 405,580
Decrease(increase) in inventories 14,128 (76,164)
Increase in prepaid expenses (107,877) (24,011)
Decrease in deferred income taxes 14,000 16,000
Decrease in other assets 100 52,812
Decrease in accounts payable (323,660) (698,386)
Increase in accrued expenses 13,508 37,881
Increase(decrease) in income taxes payable (991) 306,500
---------- ----------
Net cash provided by operating activities 325,780 717,148
---------- ----------
Cash flows from investing activities:
Maturities of short-term investments 1,027,000 803,000
Purchase of short-term investments (1,000,341) (1,958,025)
Capital expenditures (37,508) (182,838)
---------- ----------
Net cash used in investing activities (10,849) (1,337,863)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (18,750) (18,750)
Proceeds from exercise of stock options - 45,100
Dividends paid (314,345) -
---------- ----------
Net cash provided by(used in)
financing activities (333,095) 26,350
---------- ----------
Decrease in cash and cash equivalents (18,164) (594,365)
Cash and cash equivalents at beginning of period 341,601 1,707,930
---------- ----------
Cash and cash equivalents at end of period $ 323,437 1,113,565
========== ==========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
- 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 three month period ended June
30, 1996, are not necessarily indicative of the results to be
expected for the full year.
2. Short-term investments consist of U.S. Treasury Bills with a
purchased maturity of greater than three months.
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 financial
statements.
Current Three Months Ended June 30, 1996 versus Three Months Ended
June 30, 1995
Operating revenues (net sales and royalties) for the Company's first quarter
ended June 30, 1996 were $3,377,467, compared to $4,415,990 reported in the
same quarter of the prior year, a decrease of approximately 24%. Net income
for the current quarter was $71,027, compared to net income of $629,856, for
the prior year's quarter, a decrease of approximately 89%. The earnings per
share for the current period were $.01 as compared to $.12 for the comparable
period last year.
The lower revenues were due to commercial sales being down $561,533, military
sales being down $403,159 and royalty income being down $73,831 over the prior
fiscal period. The Company believes that its revenue and profit will increase
in Fiscal Year 1997, compared to Fiscal Year 1996, thus the results of the
first fiscal quarter are not expected to be indicative of the full year. The
reduction in commercial sales was evenly distributed over sales to Xerox and
to the sprayer/washer and OEM markets. The Company expects sales to Xerox and
its OEM market to stabilize and increase as the fiscal year progresses, but
the Company does not anticipate increased sales to the sprayer/washer market,
as UL has not commented on when enforcement will begin for the change in the
National Electric Code requiring attached GFCI protection for these products.
Military product shipments continue to be impacted by the transition period
from the previous to the new Tactical Quiet Generator Systems Program contract;
however, First Article testing by the prime contractor is now complete, and
the Company will begin shipments of product under the new contract in the
second quarter of Fiscal Year 1997. The new contract covers approximately a
two-year period with a total expected value of $4,900,000. Royalty income was
down, as expected, due to less royalties from Windmere Corporation.
Because Xerox and its suppliers account for such a large percentage of the
Company's revenue (approximately 42% for the first fiscal quarter), the loss
of Xerox as a customer would have a material adverse effect on the Company's
business.
The Company is actively promoting the "Fire Shield" line of appliance cords
and extension cords to the market. This unique product helps prevent fires
caused by damaged or aging appliance and extension cords. Numerous customer
leads have been generated through the Company's product releases, direct
mailings, sales calls and advertising with samples being shipped to customers
for evaluation and qualification. The Company's proactive sales efforts are
targeting the consumer appliance manufacturers directly, the insurance industry
and the industry's regulating bodies; however, the Company does not expect such
efforts to generate significant revenues for the Company in Fiscal Year 1997.
- 5 -
The Company continues to develop a direct consumer sales initiative through the
use of independent distributors that specialize in selling products directly to
the household consumer. The safety package that will be marketed through this
facility will consist of several of the Company's products, including "Electra
Shield", "Fire Shield" and "Shock Shield", among other safety products related
to the home. The Company expects sales can be achieved through this marketing
strategy beginning in the third and fourth quarters of Fiscal Year 1997.
As noted in the Company's Form 10-K, the Company obtained an exclusive license
to manufacture, market and sell products inherent to two U.S. Patents. The
Company has named the line of products associated with these patents, "Drag
Strip", as the product is designed to protect power cord connections from
separation and damage. The Company expects, although with no assurances, the
"Drag Strip" products to add approximately $1 million dollars to its annual
sales each year.
Cost of sales was approximately 70% of net sales for the current quarter and
61% of net sales for the same period last year. The difference was due
primarily to the inefficiencies of maintaining direct labor for higher sales
levels.
Selling, general and administrative expenses for the current quarter were
$735,862, compared to $638,721 in the same period last year, an increase of
approximately 15%. Selling expenses were $512,106 for the current quarter,
compared to $438,531 in the same period last year, an increase of approximately
17%, reflecting higher salary, advertising and commission expenses. General
and administrative expenses were $223,756, compared to $200,190 in the same
period last year, an increase of approximately 12% over comparable periods,
reflecting higher salary and employee relation expenses.
Research, development and engineering expenses for the current quarter were
$278,133, compared to $230,239 for the same period in the prior year, an
increase of approximately 21%, reflecting higher salary and UL expenses.
Interest and sundry income, net of interest expense, for the current quarter
was $46,486, compared to $58,669 for the same period last year, reflecting
lower returns on the Company's short-term investments.
Liquidity and Capital Resources
As of June 30, 1996, the Company's cash and cash equivalents decreased to
$323,437 from the March 31, 1996 total of $341,601, and short term investments
increased to $4,109,982 from the March 31, 1996 total of $4,084,698. 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.
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 June 30, 1996 was
$337,600, compared to $356,350 at March 31, 1996.
- 6 -
The Company's working capital decreased by $172,355 to $10,759,385 at June 30,
1996, compared to $10,931,740 at March 31, 1996. The Company believes that
its 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.
The first quarter dividend of $.06 per share was paid on July 17, 1996 to
shareholders of record on June 30, 1996.
Part II - Other Information
Item 1. Legal Proceedings
In March 1995, the Company, along with seven other defendants, was sued in
Harris County, Texas. 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. 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. A trial date has been scheduled
for September 30, 1996.
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.
- 7 -
___________________________________________
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)
August , 1996 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> 3-MOS
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-START> Apr-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 323437
<SECURITIES> 4109982
<RECEIVABLES> 2027574
<ALLOWANCES> 0
<INVENTORY> 5212634
<CURRENT-ASSETS> 12320709
<PP&E> 6157849
<DEPRECIATION> 3816602
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<BONDS> 0
<COMMON> 2712234
0
0
<OTHER-SE> 10271221
<TOTAL-LIABILITY-AND-EQUITY> 14807379
<SALES> 3279337
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<CGS> 2304931
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<OTHER-EXPENSES> 278133
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<INTEREST-EXPENSE> 8976
<INCOME-PRETAX> 105027
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<INCOME-CONTINUING> 71027
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<EPS-PRIMARY> .01
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</TABLE>
