SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
X Quarterly report pursuant to Section 13 or 15(d) of the
- ----- Securities Exchange Act of 1934 for the quarterly period ended
March 31, 1998, or
Transition report pursuant to Section 13 or 15(d) of the
- ----- Securities Exchange Act of 1934
Commission file No.
0-18899
TEI, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0284783
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2900 N. LOOP WEST, SUITE 1230
HOUSTON, TEXAS 77092
(Address of principal executive office)
Registrant's telephone number, including area code: (713) 263-7283
10235 W. LITTLE YORK, SUITE 405
HOUSTON, TEXAS 77040
(713) 983-7160
(Former address and telephone number of principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period than 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 [ ]
The number of shares of Common Stock, par value $0.01 per share,
outstanding as of May 1, 1998 was 14,251,012.
Page 1
Index to Exhibits
appears on page 12
<PAGE>
TEI, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND
DECEMBER 31, 1997 (UNAUDITED)...................................... 3
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997 (UNAUDITED).......................... 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE
MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............................................. 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 12
PART III. SIGNATURES................................................................... 13
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..........................................$ 11,763,843 $ 12,810,100
Short-term investments............................................. 16,207,262 15,516,366
Accounts receivable, net........................................... 728,385 639,678
Deferred tax asset................................................. 588,148 515,611
Income tax receivable.............................................. 1,512,115 1,512,115
Other current assets............................................... 444,975 417,542
-------------- --------------
Total current assets.................................... 31,244,728 31,411,412
PROPERTY AND EQUIPMENT, NET.......................................... 4,855,454 4,789,141
INTANGIBLE ASSETS, LESS ACCUMULATED AMORTIZATION..................... 2,236,880 2,288,479
DEFERRED TAX ASSET................................................... 150,506 176,383
NET ASSETS OF DISCONTINUED OPERATIONS AND
OTHER ASSETS.............................................. 595,714 377,306
-------------- --------------
Total assets.......................................................$ 39,083,282 $ 39,042,721
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................$ 423,099 $ 344,040
Accrued liabilities................................................ 1,073,921 1,033,534
-------------- --------------
Total current liabilities............................... 1,497,020 1,377,574
COMMITMENTS AND CONTINGENCIES (See Note 9)
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value; 10,000,000 shares authorized;
no shares issued and outstanding........................ -- --
Common stock, $.01 par value; 100,000,000 shares authorized;
15,206,237 and 15,199,237 shares issued at
March 31, 1998 and December 31, 1997, respectively ..... 152,062 151,992
Additional paid-in capital......................................... 33,134,997 33,123,377
Retained earnings.................................................. 8,486,874 8,577,449
Treasury stock at cost, 955,225 shares, at March 31, 1998 and
December 31, 1997 ...................................... (4,187,671) (4,187,671)
-------------- --------------
Total shareholders' equity......................................... 37,586,262 37,665,147
-------------- --------------
Total liabilities and shareholders' equity.........................$ 39,083,282 $ 39,042,721
============== ==============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
TEI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
------------------------------
1998 1997
------------ --------------
REVENUES..........................................$ 730,421 $ 607,625
COST OF SERVICES.................................. 513,914 549,341
------------ -------------
Gross profit........................... 216,507 58,284
SELLING, GENERAL & ADMINISTRATIVE EXPENSES........ 739,582 658,353
------------ -------------
Loss from operations................... (523,075) (600,069)
OTHER INCOME...................................... 385,840 382,171
------------ -------------
Loss before income taxes............... (137,235) (217,898)
INCOME TAX BENEFIT................................ (46,660) (73,745)
------------ -------------
Net income (loss)......................$ (90,575) $ (144,153)
============ =============
BASIC AND DILUTED LOSS PER SHARE..................$ (0.01) $ (0.01)
============ =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................ 14,251,012 14,244,012
============ =============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
TEI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................................. $ (90,575) $ (144,153)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
ESI operating loss charged to reserve for
discontinued operations ................................. -- (717,037)
Depreciation and amortization ............................. 177,193 176,467
Net amortization of premiums and discounts on short-
term investments .......................................... (206,880) (151,356)
Loss on disposal of assets ................................ -- 5,327
Deferred income taxes ..................................... (46,660) (67,361)
Common stock issued as compensation to directors .......... 11,690 13,790
Change in assets and liabilities:
Decrease (increase) in accounts and note receivable,
net ................................................... 16,937 (182,657)
Increase in earnings in excess of billings .............. -- (42,342)
(Increase) decrease in other current assets ............. (81,893) 63,654
Decrease in accounts payable and accrued liabilities .... (150,146) (758,541)
------------ ------------
Total adjustments ................................... (279,759) (1,660,056)
------------ ------------
Net cash used in operating activities ............... (370,334) (1,804,209)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................... (191,907) (195,065)
Proceeds from the sale of assets ............................... -- 919,228
Purchase of short-term investments ............................. (9,775,787) (8,658,261)
Proceeds from maturities of short-term investments ............. 9,291,771 17,115,395
------------ ------------
Net cash (used in) provided by investing activities . (675,923) 9,181,297
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ............................ -- --
------------ ------------
Net cash used in financing activities ............... -- --
------------ ------------
Net (decrease) increase in cash and cash
equivalents ......................................... (1,046,257) 7,377,088
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD ......................................................... 12,810,100 11,421,710
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................... $ 11,763,843 $ 18,798,798
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
TEI, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The unaudited condensed consolidated financial statements include the
accounts of TEI, Inc. and its wholly owned subsidiaries (the "Company"). The
unaudited condensed consolidated financial statements have been prepared
consistent with the accounting policies reflected in the audited consolidated
financial statements included in the Company's Form 10-K filed with the
Securities and Exchange Commission on March 31, 1998, and should be read in
conjunction therewith.
In management's opinion, the unaudited condensed consolidated financial
statements include all adjustments necessary for a fair presentation of the
Company's consolidated financial position at March 31, 1998, the consolidated
results of its operations for the three-month periods ended March 31, 1998 and
1997, and its consolidated cash flows for the three-month periods ended March
31, 1998 and 1997. All such adjustments are of a normal recurring nature.
Interim results are not necessarily indicative of results for a full year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of TEI, Inc. and its wholly owned subsidiaries. All material
intercompany transactions and balances have been eliminated in consolidation.
All amounts related to the statement of operations are from continuing
operations unless otherwise indicated.
The Company is a holding company whose only current continuing business
is wastewater processing and waste oil recycling in the Central Eastern United
States.
SHORT-TERM INVESTMENTS
Short-term investments are those with maturities greater than three
months when purchased. The Company has classified all short-term investments as
available-for-sale. When purchased, securities are recorded at cost and adjusted
for unrealized holding gains and losses due to market fluctuations. Gains and
losses are recorded upon the sales of short-term investments based upon the
specific identification method.
INCOME TAXES
The Company utilizes the liability method for deferred income taxes. The
liability method requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events recognized in the Company's
financial statements or tax returns. All expected future events other than
changes in the law or tax rates, are considered in estimating future tax
consequences.
The provision for income taxes includes federal, state, and local income
taxes currently payable and those deferred because of temporary differences
between the financial statements and tax bases of assets and liabilities.
EARNINGS (LOSS) PER COMMON SHARE
In 1997, the Company adopted the provisions of SFAS No. 128, "EARNINGS
PER SHARE." All prior periods presented have been restated to conform to the new
requirements.
6
<PAGE>
TEI, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources and includes all changes in
equity during a period, except those resulting from investments by owners and
distributions to owners. SFAS No. 130 is effective for the Company for the year
ended December 31, 1998. Initial adoption of this standard had no impact on the
Company's financial statements.
2. DISCONTINUED OPERATIONS:
The Board of Directors of the Company elected to discontinue operations
at its ESI subsidiary as of December 31, 1995. Certain assets of ESI were sold
on December 23, 1997, for a $500,000 interest bearing note due in 2002. The
purchaser has also agreed to complete customer contracts that were in process at
the time of the sale; however, the Company remains primarily responsible for
completing such contracts. Should the purchaser's cost to complete the contracts
exceed the amounts collected from the customers, the Company is liable to
reimburse the purchaser for the excess contract completion costs. However,
should the amounts collected from the customers exceed the purchaser's cost to
complete the contracts, a portion of the collections in excess of the cost to
complete will be paid to the Company. The Company estimates that it will not
incur any additional losses with respect to contracts to be completed by the
purchaser; however, the Company has experienced significant changes in these
estimates in the past and it is reasonably possible that such changes could
occur in 1998. ESI's revenues and operating losses were $474,000 and $717,000,
respectively, for the three months ended March 31, 1997.
On October 25, 1996, the Company disposed of certain assets and
liabilities, which consisted of the stock of its wholly owned subsidiaries,
Tanknology Corporation International, including its cathodic protection division
d/b/a Tanknology Cathodic Protection, USTMAN Industries, Inc., and Tanknology
Canada (1988), Inc., collectively known as the "Tank Testing Group" to an
unrelated third party for $12 million in cash. The disposition of the Tank
Testing Group was made pursuant to a Stock Purchase Agreement (the "Agreement")
that calls for adjustments to the purchase price of up to $1 million for any
working capital deficiencies and of up to $1.25 million for liabilities relating
to services performed by the Tank Testing Group prior to October 25, 1996. A
liability totaling $829,000 has been accrued for potential liabilities related
to the Agreement.
7
<PAGE>
TEI, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS:
Additional information regarding certain balance sheet accounts at March
31, 1998 and December 31, 1997 is presented below:
March 31, December 31,
1998 1997
--------------- ---------------
(unaudited)
Other current assets:
Interest receivable...................$ 16,814 $ 19,401
Prepaid insurance..................... 96,206 190,484
Finished goods inventories............ 239,573 178,839
Other................................. 92,382 28,818
------------- -------------
Total other current assets.....$ 444,975 $ 417,542
============= =============
Accrued liabilities:
Compensation..........................$ 130,241 $ 123,364
Claims reserves....................... 829,435 829,435
Other taxes........................... 92,678 79,604
Other................................. 21,567 1,131
------------- -------------
Total accrued liabilities......$ 1,073,921 $ 1,033,534
============= =============
4. COMMON STOCK AND STOCK OPTIONS:
On January 1, 1998, the Company issued 7,000 shares of Restricted Stock
with a market value of $11,690 to seven directors of the Company, in accordance
with its 1991 Nonemployee Director Plan.
5. COMMITMENTS AND CONTINGENCIES:
The Company is involved in litigation and routine claims from time to
time. Certain of the Company's litigation and claims are covered by insurance
with a maximum deductible of $50,000. In addition, the Company is contingently
liable for up to $1.25 million for liabilities relating to services performed by
the Tank Testing Group prior to October 25, 1996. The Company has recorded an
$829,000 liability for that contingency as of March 31, 1998. In Management's
opinion, the litigation and claims in which the Company is currently involved
are not material to the Company's consolidated financial position, results of
operations or liquidity.
6. PROPOSED MERGER:
During April 1998, the Company entered into letters of intent with a
group of three financial service firms. Under the terms of the agreements, the
Company would organize a newly formed subsidiary corporation that would acquire
all ownership of the three firms in a stock-for-stock transaction. TEI would
file a proxy statement and registration statement with the SEC. Upon the
appropriate approvals of the SEC and Nasdaq for the registration and stock
listing, TEI would merge into the subsidiary. Current shareholders of TEI would
own slightly more than 50% of the new company, and current shareholders and
partners of the three financial service firms would own slightly less than 50%
of the new company. The letters of intent are subject to: i) approval of
shareholders of TEI, ii) receipt of approvals by all governmental organizations
having jurisdiction over the parties involved in the transaction, iii) receipt
of financial fairness opinion from an investment banking firm, iv) absence of
adverse changes in the financial condition of the parties involved in the
transaction, v) SEC and Nasdaq approvals for registration and listing of the new
company's shares, and vi) other related conditions.
The Company presently has no plans to dispose of its wastewater
treatment business. However, should circumstances change such that the Company
decided to sell rather than operate ERRI, the Company may not be able to recover
all of its investment.
8
<PAGE>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
TEI was incorporated in 1989 for the purpose of acquiring and operating
businesses involved in various aspects of underground and above ground tank
testing and related services. In 1994, the Company acquired its Energy Recovery
Resources, Inc. ("ERRI") subsidiary that performs wastewater treatment.
Beginning in 1995, the Company began disposing of its various tank testing
related businesses and completed this divestiture program in 1997. As of
December 31, 1997, the Company's continuing operations consist of ERRI and
various corporate activities. All of the Company's tank testing and related
services operations are presented as discontinued operations.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1997
Revenues from wastewater treatment and waste oil recycling services at
the Company's ERRI division increased by 20% from $608,000 during the three
months ended March 31, 1997 to $730,000 during the quarter ended March 31, 1998.
Such revenue improvement is mainly due to a greater volume of wastewater
processed during the first quarter of 1998 versus 1997.
Gross profit increased by 272% to $216,000 during the first three months
of 1998 from $58,000 during the prior-year period. When measured as a percentage
of sales, the gross margin increased to 21.6% during the 1998 quarter from 9.6%
during 1997. Such gross profit and margin improvement is due to the revenue
increase as well as improved operating efficiencies brought about by the
implementation of new processing techniques and the addition of new processing
equipment that have reduced such operating costs as chemicals and supplies,
utilities, and repairs and maintenance.
Selling, general and administrative expenses increased by $82,000 to
$740,000 during the first three months of 1998 from $658,000 during the
comparable period in 1997, principally due to increased legal costs associated
with the Company's lawsuit against the former owner of Mankoff, Inc., and to
higher payroll expenses caused by the addition of sales and marketing personnel
at ERRI.
Other income and expense, consisting mainly of interest earned on the
Company's investments, and gains and losses on the disposition of fixed assets,
grew to $386,000 during the first three months of 1998 from $382,000 during the
comparable prior-year period.
During the three months ended March 31, 1998, the Company recorded a net
loss of $91,000 compared to a loss of $144,000 during the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash, cash equivalents, and
short-term investments of $27,971,000 and had no significant cash commitments of
such funds in excess of requirements to operate the Company's continuing
operations. For the three months ended March 31, 1998, net cash used in
operations totaled $370,000 versus $1,804,000 during the same period in 1997.
Current year cash used in operations is the result of a net loss of $91,000,
non-cash expenses of $64,000, and working capital changes totaling $215,000.
Working capital changes during the January to March 1998 period include
an increase in other current assets primarily related to additional inventories
at ERRI and a decrease in accounts payable and accrued liabilities mainly due to
the payment of accrued expenses at ESI.
Capital expenditures for the first quarter of 1998 were $192,000, and
were mainly for the purchase of machinery and processing equipment at ERRI.
The Company is involved in litigation and routine claims from time to
time. Certain of the Company's litigation and claims are covered by insurance
with a maximum deductible of $50,000. In
9
<PAGE>
addition, the Company is contingently liable for up to $1.25 million for
liabilities relating to services performed by the Tank Testing Group prior to
October 25, 1996. The Company has recorded an $829,000 liability for that
contingency as of December 31, 1997. In Management's opinion, the litigation and
claims in which the Company is currently involved are not material to the
Company's consolidated financial position, results of operations or liquidity.
In December 1997, the Company sold certain assets of ESI for a $500,000
interest-bearing note due in 2002. The purchaser also agreed to complete
customer contracts in process at the date of sale; however, the Company remains
primarily responsible for these contracts. Should the purchasers' cost to
complete the contracts exceed the amount remaining to be collected from
customers of approximately $2,000,000, the Company will be required to reimburse
the purchaser, which will result in losses to the Company. Should the amounts
collected from customers exceed the costs to complete the contracts, a portion
of the excess collections will be paid to the Company resulting in income. The
Company does not expect to incur losses on the contracts; however, the estimates
of expected costs of such contracts have been significantly revised in the past
and it is reasonably possible that significant revisions could occur in the
future.
SEASONALITY
The Company experiences no noticeable seasonal variations in its
continuing business.
FACTORS THAT MAY AFFECT FUTURE RESULTS
During April 1998, the Company entered into letters of intent with a
group of three financial service firms. Under the terms of the agreements, the
Company would organize a newly formed subsidiary corporation that would acquire
all ownership of the three firms in a stock-for-stock transaction. TEI would
file a proxy statement and registration statement with the SEC. Upon the
appropriate approvals of the SEC and Nasdaq for the registration and stock
listing, TEI would merge into the subsidiary. Current shareholders of TEI would
own slightly more than 50% of the new company, and current shareholders and
partners of the three financial service firms would own slightly less than 50%
of the new company. The letters of intent are subject to: i) approval of
shareholders of TEI, ii) receipt of approvals by all governmental organizations
having jurisdiction over the parties involved in the transaction, iii) receipt
of a financial fairness opinion from an investment banking firm, iv) absence of
adverse changes in the financial condition of the parties involved in the
transaction, v) SEC and Nasdaq approvals for registration and listing of the new
company's shares, and vi) other related conditions.
The Company presently has no plans to dispose of its wastewater
treatment business. However, should circumstances change such that the Company
decided to sell rather than operate ERRI, the Company may not be able to recover
all of its investment.
FORWARD-LOOKING STATEMENT
The statements contained in this Form 10-Q for the quarter ended March
31, 1998 that are not historical facts, including, but not limited to,
statements found in this Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, are forward-looking statements
and involve a number of risks and uncertainties. The actual results of the
future events described in such forward-looking statements in the Form 10-Q
could differ materially from those stated in such forward-looking statements.
Among the factors that could cause actual results to differ materially are:
general economic conditions, competition, government regulation, and possible
future litigation, as well as the risks and uncertainties discussed in this Form
10-Q, including without limitation, the portions referenced above, and the
uncertainties set forth from time to time in the Company's other public reports
and filings and public statements.
ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other
10
<PAGE>
events and circumstances from nonowner sources and includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. SFAS No. 130 is effective for the Company for the year
ended December 31, 1998. Initial adoption of this standard had no impact on the
Company's financial statements.
YEAR 2000 IMPACT
The "Year 2000" problem refers to the inability of computer programs to
correctly interpret the century from a date in which the year is represented by
only two digits. A computer system that is not Year 2000 compliant would not be
able to correctly process certain data, or in extreme situations, could cause
the entire system to be disabled. In 1992, the Company purchased and developed
new software, which it has tested and believes is Year 2000 compliant. The
Company believes that its current systems, which are significant to operations
are or are expected to be Year 2000 compliant.
The Company has initiated discussions with its significant suppliers and
customers to determine the extent to which their failure to correct their own
Year 2000 issues could affect the Company. The Company cannot guarantee that
Year 2000 problems, if any, in other companies' systems on which it relies will
be timely resolved or that other companies' failure to resolve such problems, or
resolutions incompatible with the Company's systems, would not have a material
adverse effect on the Company.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation and routine claims from time to
time. Certain of the Company's litigation and claims are covered by insurance
with a maximum deductible of $50,000. In addition, the Company is contingently
liable for up to $1.25 million for liabilities relating to services performed by
the Tank Testing Group prior to October 25, 1996. The Company has recorded an
$829,000 liability for that contingency as of March 31, 1998. In Management's
opinion, the total estimated litigation liability and related insurance claims
are not material to the Company's consolidated financial position, results of
operations, or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on April 29, 1998.
At such meeting, the shareholders elected directors of the Company. No other
matters were voted on at the meeting.
The tabulation for the director nominees is as follows:
Nominee For Against Abstained Non votes
----------------- ----------- ------------ ------------ ---------
Tony Coelho 11,180,953 0 125,450 0
Samuel W. Rizzo 11,192,618 0 113,785 0
W. Blair Waltrip 11,192,018 0 114,385 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11.1A Computation of Earnings Per Common
Share for the Three Months Ended March
31, 1998 and 1997.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three-month
period ended March 31, 1998.
12
<PAGE>
PART III.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEI, INC.
By /s/ DONALD R. CAMPBELL
-----------------------------------
Donald R. Campbell
President,
Chief Executive Officer,
Chief Operating Officer, and Secretary
(Principal Executive, Financial, and
Accounting Officer)
Date May 14, 1998
-----------------------------------
13
EXHIBIT 11.1A
TEI, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
for the Three Months Ended March 31, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
Computation of basic and diluted earnings per common
share for the three monthsended March 31:
Net income (loss) applicable to common stock.......... $ (90,575) $ (144,153)
=============== ==============
Weighted average number of common shares outstanding.. 14,251,012 14,244,012
Common shares issuable under employee stock option plan -- --
Less shares assumed repurchased with proceeds......... -- --
--------------- --------------
Weighted average common shares outstanding........ 14,251,012 14,244,012
=============== ==============
Basic and diluted earnings (loss) per common share $ (0.01) $ (0.01)
=============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,763,843
<SECURITIES> 16,207,262
<RECEIVABLES> 746,111
<ALLOWANCES> 17,726
<INVENTORY> 239,573
<CURRENT-ASSETS> 31,244,728
<PP&E> 5,741,004
<DEPRECIATION> 885,550
<TOTAL-ASSETS> 39,083,282
<CURRENT-LIABILITIES> 1,497,020
<BONDS> 0
0
0
<COMMON> 152,062
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 39,083,282
<SALES> 0
<TOTAL-REVENUES> 730,421
<CGS> 513,914
<TOTAL-COSTS> 1,253,496
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (385,840)
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