<PAGE>
U. S. 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 September 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-25844
TAITRON COMPONENTS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
CALIFORNIA 95-4249240
(State Or Other Jurisdiction of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
25202 ANZA DRIVE
SANTA CLARITA, CALIFORNIA 91355
(Address Of Principal Executive Offices)
(805) 257-6060
(Registrant's Telephone Number, Including Area Code)
NONE
(Former Name, Address and Fiscal Year, if Changed Since Last Report)
Check 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 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
--------- ---------
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
Class A Common Stock, $.001 par value, 5,774,312 shares outstanding as of
November 10, 1997
Class B Common Stock, $.001 par value, 762,612 shares outstanding as of
November 10, 1997
<PAGE>
TABLE OF CONTENTS
ITEM PAGE NO.
---- -------
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION 12
Item 6. Exhibits and Reports on Form 8-K 12
Page 2 of 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TAITRON COMPONENTS INCORPORATED
Balance Sheets
(Dollars in Thousands)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
------------ ------------
(Unaudited)
Current assets:
Cash and cash equivalents $79 300
Trade accounts receivable, net 5,892 4,109
Inventory 35,852 35,168
Prepaid expenses and other current assets 387 443
------------ ------------
Total current assets 42,210 40,020
Property and equipment, net 1,674 1,660
Deferred income taxes 748 612
Other assets 393 23
------------ ------------
Total assets $45,025 42,315
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 17 10,017
Trade accounts payable 5,990 3,737
Accrued liabilities 780 948
Income taxes payable -- 7
------------ ------------
Total current liabilities 6,787 14,709
------------ ------------
Long-term debt, less current portion 13,929 3,493
------------ ------------
Shareholders' equity:
Preferred stock, $.001 par value.
Authorized 5,000,000 shares; none issued
or outstanding -- --
Common stock, no par value. Authorized
10,000,000 shares; none issued and
outstanding. -- --
Class A common stock, $.001 par value.
Authorized 20,000,000 shares; issued and
outstanding 5,774,312 shares at 9/30/97 and
6,167,341 shares at 12/31/96 6 6
Class B common stock, $.001 par value.
Authorized, issued and outstanding
762,612 shares 1 1
Additional paid-in capital 13,260 14,531
Retained earnings 11,042 9,575
------------ ------------
Total shareholders' equity 24,309 24,113
------------ ------------
Total liabilities and shareholders'
equity $45,025 42,315
------------ ------------
------------ ------------
See accompanying notes to financial statements
Page 3 of 13
<PAGE>
TAITRON COMPONENTS INCORPORATED
Statements of Earnings
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------
Three months ended Nine Months ended
September 30, September 30,
------------------------------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 8,675 $ 6,944 $ 25,193 $ 22,832
Cost of goods sold 6,343 4,828 17,898 15,618
---------- ---------- ---------- ---------
Gross profit 2,332 2,116 7,295 7,214
Selling, general and administrative expenses 1,639 1,116 4,166 3,717
---------- ---------- ---------- ---------
Operating earnings 693 1,000 3,129 3,497
Interest expense, net 223 310 679 604
Other expense (income), net 6 7 (4) 23
---------- ---------- ---------- ---------
Earnings before income taxes 464 683 2,454 2,870
Income tax expense 187 274 987 1,152
---------- ---------- ---------- ---------
Net earnings $277 $409 $1,467 $1,718
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Net earnings per share $.04 $.06 $.22 $.25
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Weighted average common shares outstanding 6,658,000 6,930,000 6,638,000 6,939,000
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
See accompanying notes to financial statements
Page 4 of 13
<PAGE>
TAITRON COMPONENTS INCORPORATED
Statements of Cash Flows
(Dollars in thousands)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------ ------
(Unaudited)
Cash flows from operating activities:
Net earnings $ 1,467 $ 1,718
------- -------
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization 128 87
Deferred income taxes (136) (160)
Changes in:
Trade accounts receivable (1,783) 1026
Inventory (684) (7,546)
Prepaid expenses and other current assets 56 (10)
Other assets (370) (23)
Trade accounts payable 2,253 (10,702)
Accrued liabilities (168) (177)
Income taxes payable (7) (152)
------- -------
Total adjustments (711) (17,657)
------- -------
Net cash provided by (used in)
operating activities 756 (15,939)
------- -------
Cash flows from investing activities -
acquisitions of property and equipment (142) (144)
------- -------
Cash flows from financing activities:
Net borrowings (repayments) of notes payable 450 12,200
Proceeds from issuance of Convertible,
subordinated note 3,000
Repurchase of Class A Common Stock (1,271) --
Payments on long-term debt (14) (12)
------- -------
Net cash provided by (used in)
financing activities (835) 15,188
------- -------
Net increase (decrease) in cash
and cash equivalents (221) (895)
Cash and cash equivalents, beginning of period 300 1,145
------- -------
Cash and cash equivalents, end of period $ 79 250
------- -------
------- -------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 759 556
------- -------
------- -------
Cash paid for income taxes $ 1,180 1,464
------- -------
------- -------
See accompanying notes to financial statements
Page 5 of 13
<PAGE>
TAITRON COMPONENTS INCORPORATED
Notes to Financial Statements
(All amounts are unaudited except the balance sheet as of December 31, 1996)
(1) BASIS OF PRESENTATION
The financial information furnished herein is unaudited, but, in the
opinion of the management of Taitron Components Incorporated, includes all
adjustments (all of which are normal, recurring adjustments) in conformity
with the accounting principles reflected in the financial statements
included in the Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission for the year ended December 31, 1996. The results of
operations for interim periods are not necessarily indicative of results to
be achieved for full fiscal years.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. The financial statements and
notes should, therefore, be read in conjunction with the financial
statements and notes thereto in the Annual Report on Form 10-KSB for the
year ended December 31, 1996.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized upon shipment of the merchandise. Reserves for sales
allowances and customer returns are established based upon historical
experience and management's estimates as shipments are made. Sales returns
for the quarters ended September 30, 1997 and 1996 aggregated $255,000 and
$403,000, respectively and for the nine months ended September 30, 1997 and
1996 aggregated $756,000 and $1,351,000 respectively.
ALLOWANCE FOR SALES RETURNS AND DOUBTFUL ACCOUNTS
The allowance for sales returns and doubtful accounts at September 30, 1997
and December 31, 1996 aggregated $129,000 and $135,000, respectively.
INVENTORY
Inventory, consisting principally of products for resale, is stated at the
lower of cost or market, using the first-in, first-out method. The value
presented is net of valuation allowances of $1,176,000 and $988,000 at
September 30, 1997 and December 31, 1996, respectively.
(3) NET EARNINGS PER SHARE
Net earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each period.
Common stock equivalents consist of outstanding stock options and warrants
to purchase stock that have a dilutive effect on earnings per share. The
difference between primary and fully diluted earnings per share is
immaterial for all periods presented. The average number of shares of
common stock outstanding has been reduced by 397,863 shares repurchased by
the Company during the first nine months of 1997 at an average price of
$3.21 per share.
Page 6 of 13
<PAGE>
(4) SHAREHOLDERS' EQUITY
In March 1995, the Board of Directors authorized the filing of a
registration statement for an initial public offering of the Company's
common stock. In connection with the initial public offering, the Company
recorded a .891-for-1 reverse stock split of its common stock outstanding
at December 31, 1994. Accordingly, all references to the number of shares
outstanding have been adjusted to give effect to the aforementioned reverse
stock split.
Additionally, the Company:
- Authorized the issuance of up to 5,000,000 shares of Preferred
Stock, par value $.001 per share. The terms of the shares are
subject to the discretion of the Board of Directors.
- Authorized the issuance of up to 20,000,000 shares of Class A
Common Stock, par value $.001 per share. Each holder of Class A
Common Stock is entitled to one vote for each share held.
- Authorized the issuance of 762,612 shares of Class B Common
Stock, par value $.001 per share. Each holder of Class B Common
Stock is entitled to ten votes for each share held. The shares
of Class B common stock are convertible at any time at the
election of the shareholder into one share of Class A common
stock, subject to certain adjustments.
- Reclassified all of the shares of the Company's common stock
outstanding at December 31, 1994 for an equal number of shares of
Class A Common Stock.
- Authorized the exchange of all Class A Common Stock (762,612
shares) held by the Chief Executive Officer/Director for an equal
number of shares of Class B Common Stock. This exchange was
effected during 1995.
On April 19, 1995, the Company sold 2,530,000 shares of Class A Common
Stock at $5.25 per share in connection with its initial public offering.
The net proceeds from this offering aggregated approximately $11.3 million,
net of approximately $2 million of issuance costs, which proceeds were used
to pay off the previous bank line of credit, to retire long-term debt, to
expand inventory and for general corporate purposes.
During the nine months ended September 30, 1997 the Company repurchased
397,863 shares of Class A Common Stock, reducing the Additional paid in
capital by $1,270,000 from the balance at December 31, 1996.
(5) BORROWINGS
Long-term debt consists of the following:
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------- -----------
Second trust deed loan payable, bearing
interest at 6.359%, due December 1, 2013 $ 496,000 $ 510,000
Revolving line of credit, maximum of
$20 million, Expires June, 1999 10,450,000 10,000,000
Convertible subordinated debentures,
bearing interest at 8%, due May 18, 2001 3,000,000 3,000,000
----------- -----------
13,946,000 13,510,000
----------- -----------
Less current portion 17,000 10,017,000
----------- -----------
$ 13,929,000 $ 3,493,000
----------- -----------
----------- -----------
On May 6, 1997 the Company entered into a revolving line of credit
agreement which provided the Company up to $16 million for operating
purposes and up to an additional $4 million for business acquisition
purposes. Both credit facilities are provided by Comerica Bank -
California and mature on June 2, 1999. The agreement governing these
credit facilities contains covenants that require the Company to be in
compliance with certain financial ratios. As of September 30, 1997, the
Company was in compliance with all of the loan covenants.
Page 7 of 13
<PAGE>
(6) NON-RECURRING EXPENSE FROM IMPAIRMENT OF ASSET
During the quarter ended September 30, 1997, management made a decision
to discontinue using its computer application software, "Tolas",
developed by Transcomm Data Systems Incorporated a division of ADP, due
to several factors including integrity of the systems' data base files.
Included in Selling, General and Administrative expenses on the Statement
of Earnings is a non-recurring impairment of asset expense of $163,000 to
write-off costs previously capitalized on the balance sheet. In early
November, 1997, the Company filed a lawsuit for breach of contract naming
ADP, Transcomm Data Systems Incorporated and GSI Transcomm.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company distributes a wide variety of transistors, diodes and other
semiconductors and optoelectronic devices and beginning in 1997 passive
components to other electronic distributors and to original equipment
manufacturers that incorporate them in their products.
The following table sets forth, for the periods indicated, certain operating
amounts and ratios as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
(Dollars in thousands) 1997 1996 1997 1996
- ---------------------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
Net sales $8,675 $6,944 $25,193 $22,832
Cost of goods sold 6,343 4,828 17,898 15,618
Gross profit 2,332 2,116 7,295 7,214
% of net sales 26.9% 30.5% 29.0% 31.6%
Selling, general and administrative expenses 1,639 1,116 4,166 3,717
% of net sales 18.9% 16.1% 16.5% 16.3%
Operating earnings 693 1,000 3,129 3,497
% of net sales 8.0% 14.4% 12.4% 15.3%
Interest expense, net 223 310 679 604
% of net sales 2.6% 4.5% 2.7% 2.6%
Net earnings $ 277 $ 409 $ 1,467 $ 1,718
% of net sales 3.2% 5.9% 5.8% 7.5%
</TABLE>
Page 8 of 13
<PAGE>
THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1996
Net sales for the three months ended September 30, 1997 were $8,675,000,
compared with net sales for the three months ended September 30, 1996 of
$6,944,000, an increase of $1,731,000 or 24.9%. This increase was
attributable to a 31.3% increase in domestic sales volume, and a 55.8%
increase in export sales volume. Additionally, sales of the new line of
passive components reached an annualized sales level of $1,100,000 in the
quarter ended September 30, 1997. The increase in sales volume was
partially offset by a decrease in selling prices as a result of intense price
competition in the market place. The average selling price to domestic
customers decreased causing a decrease in revenue of 13.6% for similar
products sold in the three months ended September 30, 1997 compared to the
same period in 1996. Also, the mix of products sold had a slight effect on
the average selling price as certain products such as passive components
normally sell at lower prices. Gross margins decreased due to the reduction
of average selling prices and to lower margins on export sales for the three
months ended September 30, 1997 compared to the same period in 1996. The
Company is extremely reliant on UPS service for shipping to its customers.
During the strike in August the Company was able to find alternative means of
shipping and management does not believe that a significant amount of sales
were lost as a result of the strike.
Cost of goods sold increased by $1,515,000 to $6,343,000 for the three months
ended September 30, 1997, an increase of 31.4% from the three month period
ended September 30, 1996. Cost of goods sold as a percentage of net sales
was 73.1% in the three months ended September 30, 1997, an increase from
69.5% for the same period in 1996. Gross profits increased by $216,000 to
$2,332,000 for the three months ended September 30, 1997 from $2,116,000 for
the same period in 1996 principally as a result of the increase in volume.
Selling, general and administrative expenses increased by $523,000 or 46.9%
for the three months ended September 30, 1997 compared to the same period of
1996. $163,000 or 31.2% of this increase is attributable to the write-off of
the computer application software. Other factors causing the increase in
selling, general and administrative expenses are costs associated with
investing in three regional sales executives dedicated to expand revenues
through key OEM's, one National Distributor Manager dedicated to work with
key distribution customers and costs associated with the new office in
Taiwan. Also, the Company has expanded the engineering department to assist
customers with technical issues and to direct the process of obtaining ISO
9000 certification showing that the Company meets international quality
standards. These costs, as a percentage of net sales, increased to 18.9% for
the three months ended September 30, 1997 from 16.1% for the three months
ended September 30, 1996.
For the reasons discussed above, operating earnings decreased by $307,000 or
30.7% for the three months ended September 30, 1997 compared to the same
period in 1996, and declined as a percentage of sales from 14.4% to 8.0%.
Interest expense, net of interest income for the three months ended September
30, 1997 decreased $87,000 compared to the three months ended September 30,
1996. This decrease is due to lower average outstanding borrowings during
the three months ended September 30, 1997 compared to the three months ended
September 30, 1996.
Income taxes were $187,000 for the three months ended September 30, 1997,
representing an effective tax rate of 40.3%, compared to $274,000 for the
same period of 1996, an effective tax rate of 40.1%.
The Company had net earnings of $277,000 for the three months ended September
30, 1997 as compared with net earnings of $409,000 for the three months ended
September 30, 1996, a decrease of $132,000 or 32.3% as a result of all the
reasons discussed above. Net earnings as a percentage of net sales decreased
to 3.2% from 5.9%.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996
Net sales for the nine months ended September 30, 1997 were $25,193,000,
compared with the nine months ended September 30, 1996 of $22,832,000, an
increase of $2,361,000 or 10.3%. This increase was attributable to a 17.8%
increase in domestic sales volume, and a 161.0% increase in export sales
volume. Additionally, sales of the new line of passive components reached an
annualized sales level of $1,100,000 in the quarter ended September 30, 1997.
The increase in sales was partially offset as a result of intense price
competition in the market place. The average selling price to domestic
customers decreased causing a decrease in revenue of 11.1%. Also, the mix of
products sold has a slight effect on the average selling price as certain
products such as passive components normally sell at lower prices. Gross
margins decreased due to the reduction of average selling prices and to lower
margins on export sales for the nine months ended September 30, 1997 compared
to the same period in 1996.
Page 9 of 13
<PAGE>
Cost of goods sold increased by $2,280,000 to $17,898,000 for the nine months
ended September 30, 1997, an increase of 14.6% from the nine month period
ended September 30, 1996. Cost of goods sold , as a percentage of sales was
71.0% in the first nine months of 1997 and 68.4% in the same period of 1996.
Gross profits increased by $81,000 to $7,295,000 for the nine months ended
September 30, 1997 from $7,214,000 for the same period in 1996 principally as
a result of the increase in volume.
Selling, general and administrative expenses increased by $449,000 or 12.1%
for the nine months ended September 30, 1997 compared to the same period of
1996. $163,000 or 36.3 % of this increase is attributable to the write-off of
the computer application software. Other factors causing the increase in
selling, general and administrative expenses are costs associated with
investing in three regional sales executives dedicated to expand revenues
through key OEM's, one National Distributor Manager dedicated to work with
key distribution customers and costs associated with the new office in
Taiwan. Also, the Company has expanded the engineering department to assist
customers with technical issues and to monitor the process of obtaining ISO
9000 certification showing that the Company meets international quality
standards. These costs, as a percentage of net sales, were 16.5% for the
nine months ended September 30, 1997 and 16.3% for the nine months ended
September 30, 1996.
For the reasons discussed above, operating earnings decreased by $368,000 or
1.6% for the period ended September 30, 1997 compared to the same period of
1996 and decreased as a percentage of net sales to 12.4% from 15.3%.
Interest expense, net of interest income, for the nine months ended September
30, 1997 increased $75,000 compared to the nine months ended September 30,
1996. This increase is due primarily to higher average outstanding borrowings
during the first nine months of 1997 compared to the first nine months of
1996. The higher outstanding borrowings occurred principally in the first
three months of 1997 compared to the same period of 1996.
Income taxes were $987,000 for the nine months ended September 30, 1997,
representing an effective tax rate of 40.2% compared to $1,152,000 for the
nine months ended September 30, 1996, an effective tax rate of 40.1%.
The Company had net earnings of $1,467,000 for the nine months ended
September 30, 1997 compared to net earnings of $1,718,000 for the same period
in 1996, a decrease of $251,000 or 14.6% for the reasons discussed above.
Net earnings as a percentage of net sales decreased to 5.8% for the nine
months ended September 30, 1997 compared to 7.5% for the same period in 1996.
SUPPLY AND DEMAND ISSUES
For most of 1995 and continuing into early 1996, the demand for discrete
semiconductors, in general, was greater than the supply. Beginning in the
second quarter of 1996 the supply of most discrete semiconductors was greater
than the demand for these products. The Company believes that after the
second half of 1997 that the demand has finally caught up with the supply and
the lead time for purchasing some discrete components has increased.
BUSINESS STRATEGY AND NEW OPPORTUNITIES
Based upon the Company's perception of this trend, it initiated an expansion
of its nationwide sales force and reorganized its sales department to better
handle the needs of the customer. This reorganization will allow the sales
department to handle customer service and potential customers more
efficiently and at the same time focus more experienced salespersons on
solidifying relationships with and providing support to existing key OEM's
and key distributors who have more complex needs. From May through August,
the Company hired three regional sales executives assigned to work with
strategic OEM's in regions where they reside and to provide technical support
to the Company's network of independent sales representatives. In September,
the Company added a position of National Distributor Manager dedicated to
work with key distribution customers.
Page 10 of 13
<PAGE>
Additionally, in the third quarter the Company opened an office in Taiwan to
strengthen relationships with suppliers in the Far East and to expand export
sales along with the Company's office in Brazil. It has reorganized its
marketing department to focus on its newest product lines of opto electronic
devices introduced in 1994, passive devices introduced in 1996 and power
transistors which the Company has just recently started selling. The
engineering department has been expanded to improve technical assistance to
customers and to monitor the process of obtaining ISO 9000 certification. ISO
9000 demonstrates that a company meets international quality standards. This
process is targeted for completion by the end of 1998.
The Company recently signed an agreement with Oracle Corporation to purchase
its database tools and application software to replace the "Tolas"
application software. Conversion to Oracle is targeted for completion in the
first half of 1998.
During 1996, the Company test marketed passive components, such as resistors,
capacitors and inductors, a type of discrete component manufactured with
non-semiconductor materials. The results of the test marketing was
encouraging, although the sales volume was not significant in 1996. In 1997,
sales of passive components has reached an annualized sales level of
approximately $1,100,000. The Company believes that both passive components
and discrete semiconductors compliment each other and can be marketed through
existing channels, which in turn will reinforce the Company's current
relationship with its customers.
LIQUIDITY AND CAPITAL RESOURCES
Since 1993, the Company has satisfied its liquidity requirements principally
through cash generated from operations, short-term commercial loans and the
sale of equity securities, including its initial public offering in April
1995. A summary of the Company's cash flows provided by (used in) operating,
investing and financing activities for the nine months ended September 30,
1997 and 1996 were as follows:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
---- ----
(In thousands)
Operating activities............. $ 756 $(15,939)
Investing activities............. (142) (144)
Financing activities............. (835) 15,188
In positioning itself as a "Discrete Superstore", the Company has been
required to significantly increase its inventory levels over the past several
years. The Company expects that inventory levels may increase as the Company
adds new lines of product, such as passive components, and new suppliers.
The discrete semiconductor products distributed by the Company are mature
products, used in a wide range of commercial and industrial applications. As
a result, the Company has not experienced any material amounts of product
obsolescence. The Company also attempts to control its inventory risks by
matching large customer orders with simultaneous orders to suppliers.
Nonetheless, the high levels of inventory carried by the Company increase the
risks of price fluctuations and product obsolescence.
On May 6, 1997 the Company entered into a revolving line of credit agreement
which provided the Company up to $16 million for operating purposes and up to
an additional $4 million for business acquisition purposes. Both credit
facilities are provided by Comerica Bank - California and mature on June 2,
1999. The agreement governing these credit facilities contains covenants
that require the Company to be in compliance with certain financial ratios.
As of September 30, 1997, the Company was in compliance with all of the loan
covenants.
Page 11 of 13
<PAGE>
As of September 30, 1997 the Company's unused sources of funds consisted of
approximately $9.6 million in cash and borrowing capacity under the Company's
$16 million and $4 million revolving lines of credit. Both of these credit
facilities bear interest rates based on Comerica Bank - California's prime or
"Base Rate" as set by the bank from time to time, or at the option of the
Company at a fixed rate in excess of LIBOR. Both lines of credit are secured
by substantially all of the Company's assets, other than real property, which
is subject to a Trust Deed.
The Company believes that funds generated from operations and the bank
revolving lines of credit will be sufficient to finance its working capital
and capital expenditure requirements for the foreseeable future.
This document contains forward-looking statements regarding the intent,
belief and current expectations of the Company, its directors and its
officers, including statements with respect to trends affecting the Company's
financial condition and results of operations. Readers are cautioned that
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties and that actual results may differ materially
from those anticipated in these forward-looking statements as a result of
various factors.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
Page 12 of 13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TAITRON COMPONENTS INCORPORATED
Date: November 13, 1997 By: /s/ David M. Batt
-----------------------------------
David M. Batt
Chief Financial Officer
(Principal Financial Officer)
(Chief Accounting Officer)
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 79
<SECURITIES> 0
<RECEIVABLES> 5,763
<ALLOWANCES> 129
<INVENTORY> 35,852
<CURRENT-ASSETS> 42,210
<PP&E> 2,343
<DEPRECIATION> 669
<TOTAL-ASSETS> 45,025
<CURRENT-LIABILITIES> 6,787
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 24,302
<TOTAL-LIABILITY-AND-EQUITY> 45,025
<SALES> 25,193
<TOTAL-REVENUES> 25,193
<CGS> 17,898
<TOTAL-COSTS> 17,898
<OTHER-EXPENSES> 4,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 679
<INCOME-PRETAX> 2,454
<INCOME-TAX> 987
<INCOME-CONTINUING> 1,467
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,467
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
