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, 1997
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, 1997
____________________________ ____________________________
Common stock, $.51 par value 5,332,571
TECHNOLOGY RESEARCH CORPORATION
INDEX
Part I - Financial Information Page
Condensed Consolidate Balance Sheets
- June 30, 1997 and March 31, 1997............................ 1
Condensed Consolidate Statements of Income
- Three months ended June 30, 1997 and June 30, 1996.......... 2
Condensed Consolidated Statements of Cash Flows
- Three months ended June 30, 1997 and June 30, 1996.......... 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......................................... 7
Item 2 - Changes in Securities..................................... 7
Item 3 - Defaults Upon Senior Securities........................... 7
Item 4 - Submission of Matters to a vote of Shareholders............7
Item 5 - Other Information......................................... 7
Item 6 - 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
1997 1997
----------- ---------
ASSETS (unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,348,662 1,307,567
Short term investments 2,013,980 3,031,013
Accounts receivable, net 2,594,797 2,304,449
Income tax receivable - 178,130
Inventories:
Raw material 3,789,302 3,138,639
Work in process 695,461 1,309,312
Finished goods 905,231 694,817
---------- ----------
Total inventories 5,389,994 5,226,762
Prepaid expenses 189,990 178,972
Deferred income taxes 396,150 411,400
---------- ----------
Total current assets 12,959,394 12,554,299
---------- ----------
Property, plant, and equipment 7,558,021 6,817,411
Less accumulated depreciation (4,030,048) (3,859,909)
---------- ----------
Net property, plant, and equipment 3,527,973 2,957,502
---------- ----------
Deferred income taxes 102,120 102,120
Other assets 61,164 24,028
---------- ----------
$ 16,624,830 15,637,949
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 1,075,100 652,999
Accounts payable 2,013,131 1,607,116
Accrued expenses 339,443 296,549
Dividends payable 351,347 346,490
Income taxes payable 123,303 -
---------- ----------
Total current liabilities 3,902,324 2,903,154
Long-term debt, excluding current installments 187,600 206,250
---------- ----------
Total liabilities 4,089,924 3,109,404
---------- ----------
Stockholders' equity:
Common stock 2,719,611 2,719,611
Additional paid-in capital 7,411,581 7,411,581
Retained earnings 2,403,714 2,397,353
---------- ----------
Total stockholders' equity 12,534,906 12,528,545
---------- ----------
$ 16,624,830 15,637,949
========== ==========
<FN>
<F1>
* The balance sheet as of March 31, 1997 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
1997 1996
---------- ----------
Operating revenues:
<S> <C> <C>
Net sales $ 4,640,053 3,279,337
Royalties 171,532 98,130
---------- ----------
4,811,585 3,377,467
---------- ----------
Operating expenses:
Cost of sales 3,151,806 2,304,931
Selling, general, and administrative 923,011 735,862
Research, development and engineering 269,274 278,133
---------- ----------
4,344,091 3,318,926
---------- ----------
Operating income 467,494 58,541
---------- ----------
Other income (deductions):
Interest and sundry income 45,521 55,462
Interest expense (6,666) (8,976)
---------- ----------
38,969 46,486
---------- ----------
Income before income taxes 506,463 105,027
Income taxes 180,148 34,000
---------- ----------
Net income $ 326,315 71,027
========== ==========
Earnings per share $ 0.06 0.01
========== ==========
Weighted average number of common
and equivalent shares outstanding 5,433,320 5,448,954
========== ==========
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
1997 1996
---------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 326,315 71,027
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of interest (38,967) (51,943)
Depreciation 170,139 117,910
Decrease(increase) in accounts receivable (290,348) 579,578
Decrease(increase) in inventories (247,226) 14,128
Increase in prepaid expenses (11,018) (107,877)
Decrease in income taxes receivable 178,130 -
Decrease in deferred income taxes 15,250 14,000
Increase(decrease) in other assets (37,136) 100
Increase(decrease) in accounts payable 406,015 (323,660)
Increase in accrued expenses 42,894 13,508
Increase(decrease) in income taxes payable 123,303 (991)
---------- ----------
Net cash provided by operating activities 637,351 325,780
---------- ----------
Cash flows from investing activities:
Maturities of short-term investments 1,056,000 1,027,000
Purchase of short-term investments - (1,000,341)
Capital expenditures (740,610) (37,508)
---------- ----------
Net cash provided by(used in)
investing activities 315,390 (10,849)
---------- ----------
Cash flows from financing activities:
Net borrowings under line-of-credit agreement 422,101 -
Principal payments on long-term debt (18,650) (18,750)
Dividends paid (315,097 (314,345)
---------- ----------
Net cash provided by(used in)
financing activities 88,354 (333,095)
---------- ----------
Increase(decrease) in cash and cash equivalents 1,041,095 (18,164)
Cash and cash equivalents at beginning of period 1,307,567 341,601
---------- ----------
Cash and cash equivalents at end of period $ 2,348,662 323,437
========== ==========
<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, 1997, are not necessarily indicative of the results to be
expected for the full year.
2. The Company considers all of its investment securities (U.S. Treasury
Bills) to be held-to-maturity. These securities are all classified in
short-term investments on the consolidated balance sheets and mature
within one year.
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 consolidated
financial statements.
Current Three Months Ended June 30, 1997 versus Three Months Ended
June 30, 1996
Operating revenues (net sales and royalties) for the first quarter ended
June 30, 1997 were $4,811,585, compared to $3,377,467 reported in the same
quarter of the prior year, an increase of approximately 42%. Net income for
the current quarter was $326,315, compared to $71,027, for the prior year's
quarter, an increase of approximately 359%. The earnings per share for the
current period were $.06 per share as compared to $.01 for the comparable
period last year, an increase of approximately 500%.
Higher revenues were due to commercial sales increasing by $413,507, military
sales increasing by $947,209 and royalty income increasing by $73,402 over the
prior fiscal period. The increase in commercial sales was mainly due to the
level of business with the Company's OEM customers. Sales to Xerox Corporation
and its suppliers remained steady while sales to the sprayer/washer market
showed a slight increase. The Company expects commercial sales to follow this
trend throughout Fiscal Year 1998 with sales to Xerox remaining under price
pressure. The increase in Military sales was mainly due to the Company now
being in full production of the products related to the Tactical Quiet
Generator Systems program. Royalty income was up due to royalties of $100,000
from Windmere Corporation and a licensing fee of $50,000 from Yaskawa Control
Company of Japan. Although the Company will not receive further royalties from
Windmere, the Company does expect to receive additional licensing fees from
Yaskawa, which will partially offset the loss of royalty income from Windmere.
Total marketing expenses for "Fire Shield" and consumer marketing were $79,806
and $114,039, respectively. No significant sales have been recorded to date
for the Company's "Fire Shield" products or as a result of the Company's
consumer marketing program. The Company continues to believe that the market
for "Fire Shield" is large and that the consumer market for the Company's
products provide significant opportunities for growth.
The Company's wholly owned subsidiary, TRC Honduras, S.A. de C.V., is currently
successfully producing several of the Company's Xerox products, and the
remainder of the Xerox products and several other of the Company's high-volume
products are scheduled to be produced in July and August, respectively. The
Company recorded a $94,792 loss for its subsidiary's first reporting period
ended June 30, 1997. The Company expects its subsidiary to break even in the
second quarter and produce a profit for the remainder of Fiscal Year 1998.
According to plan and as a result of the successful start-up of the Honduran
plant, the Company will close down its operation in the Far East at the end of
July 1997, leaving the Honduran plant responsible for the manufacturing of all
of the Company's high-volume products.
The Company's gross profit margin on net sales was 32% for the current quarter
and 30% for the same period last year. The increase was due to the profit
margins associated with the Company's increase in military sales.
- 5 -
Selling, general and administrative expenses for the current quarter were
$923,011, compared to $735,862 in the same period last year, an increase of
approximately 25%. Selling expenses were $608,526 for the current quarter,
compared to $512,106 the same period last year, an increase of approximately
19%, reflecting higher salary, professional fees and travel expenses primarily
associated with the "Fire Shield" and consumer marketing programs. General and
administrative expenses were $314,485, compared to $223,756 in the same period
last year, an increase of approximately 41% over comparable periods, of which
23% was associated with the administrative expenses of the Company's subsidiary
and 18% was associated with higher temporary wages, professional fees and
self-insured health costs of the parent company.
Research, development and engineering expenses for the current quarter were
$269,274, compared to $278,133 for the same period in the prior year, a
decrease of approximately 3%, reflecting comparable expenses over the
respective periods.
Interest and sundry income, net of interest expense, for the current quarter
was $38,969, compared to $46,486 for the same period last year, reflecting
lower returns and average balances on the Company's short-term investments.
Liquidity and Capital Resources
As of June 30, 1997, the Company's cash and cash equivalents increased to
$2,348,662 from the March 31, 1997 total of $1,307,567, and short term
investments decreased to $2,013,980 from the March 31, 1997 total of
$3,031,013. The short term investments are comprised of U.S. Treasury Bills.
On August 15, 1997, the Company expects to renew its commercial line of credit,
which is currently $2,500,000, with its institutional lender for another two
years, maturing in August 1999. Currently, the Company has 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 Company also has
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 began using its line of credit in the fourth quarter of Fiscal
Year 1997 to fund the start-up of its Honduran subsidiary, expected to total
$1,400,000, and as of June 30, 1997, the Company has drawn $1,000,000 on its
bank line for this purpose. The Company will pay down its line of credit as
cash is generated by higher inventory turns, which is an expected result of
manufacturing product in Honduras.
The mortgage payable to the Company's institutional lender as of June 30, 1997
was $262,600, compared to $281,250 at March 31, 1997, reflecting the Company's
payments on principal for the first quarter.
The Company's working capital decreased by $546,914 to $9,057,070 at June 30,
1997, compared to $9,603,984 at March 31, 1997. The decrease was a result of
the Company funding its Honduran subsidiary with its line of credit, which is
currently considered short-term debt since it expires in August 1997. Upon
renewal, the line of credit will be considered long-term debt, thus improving
the Company's working capital for the second quarter ended September 30, 1997.
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.
- 6 -
The first quarter dividend of $.06 per share was paid on July 15, 1997 to
shareholders of record on June 30, 1997
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.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
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 6, 1997 Scott J. Loucks
___________________________ __________________________________
Date Scott J. Loucks
Chief Financial Officer,
(principal financial, accounting and
Duly Authorized Officer)
- 8 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-START> Apr-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 2348662
<SECURITIES> 2013980
<RECEIVABLES> 2594797
<ALLOWANCES> 0
<INVENTORY> 5389994
<CURRENT-ASSETS> 12959394
<PP&E> 7558021
<DEPRECIATION> 4030048
<TOTAL-ASSETS> 16624830
<CURRENT-LIABILITIES> 3902324
<BONDS> 0
<COMMON> 2719611
0
0
<OTHER-SE> 9815295
<TOTAL-LIABILITY-AND-EQUITY> 16624830
<SALES> 4640053
<TOTAL-REVENUES> 4811585
<CGS> 3151806
<TOTAL-COSTS> 3151806
<OTHER-EXPENSES> 269274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6666
<INCOME-PRETAX> 506463
<INCOME-TAX> 180148
<INCOME-CONTINUING> 326315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 326315
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
