Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ____________ .
COMMISSION FILE NUMBER 1-4371
TECH-SYM CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA 74 1509818
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10500 WESTOFFICE DRIVE, HOUSTON, TEXAS 77042
(Address of principal executive offices) Zip Code
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713/785-7790
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, 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.
COMMON OUTSTANDING AT JULY 31, 1994
Common Stock, $.10 par value 5,778,308
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Form 10-Q
Tech-Sym Corporation
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Balance Sheet June 30, 1994
and December 31, 1993 1
Consolidated Statement of Income and Accumulated
Earnings for Three Months Ended June 30,
1994 and 1993 2
Consolidated Statement of Income and Accumulated
Earnings for Six Months Ended June 30,
1994 and 1993 3
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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Page 1
PART I. FINANCIAL INFORMATION
Tech-Sym Corporation
Consolidated Balance Sheet
June 30, 1994 December 31, 1993
------------- -----------------
(stated in thousands)
Assets
Current assets:
Cash and cash equivalents $22,976 $20,317
Marketable Securities 5,452 7,873
Receivables - net 33,577 30,095
Unbilled revenue 36,350 36,537
Inventories 32,436 31,642
Other 5,548 3,404
-------- --------
Total current assets 136,339 129,868
Property, plant and equipment - net 32,890 32,651
Long term receivables - net 8,673 9,218
Goodwill and other assets 14,031 13,130
-------- --------
Total assets $191,933 $184,867
======== ========
Liabilities
Current liabilities:
Notes payable and current maturities
of long-term debt $4,910 $3,442
Billings in excess of cost and
estimated earnings on uncompleted
contracts 5,288 5,346
Accounts payable 6,567 5,771
Taxes on income 2,255 2,264
Accrued and other liabilities 16,172 17,787
-------- --------
Total current liablilites 35,192 34,610
Long-term debt 23,518 23,317
Deferred income taxes 2,973 2,973
Other liabilities 9,313 9,423
-------- --------
Total liabilities 70,996 70,323
Shareholders' Investment
Preferred stock - authorized 2,000,000
shares, without par value;
none issued
Common stock - authorized 20,000,000
shares, $.10 par value; issued
7,047,470 and 7,034,370 shares 705 703
Additional capital 34,699 34,432
Accumulated earnings 97,067 91,288
Cumulative translation adjustments (1,297) (1,537)
Common stock held in treasury at
cost (1,271,162 and 1,288,752 shares) (10,237) (10,342)
-------- --------
Total shareholders' investment 120,937 114,544
-------- --------
Total liabilities and
shareholders' investment $191,933 $184,867
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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Page 2
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
For The Three Months
Ended June 30,
----------------------------
1994 1993
(stated in thousands except
for per share amounts)
Sales $48,329 $50,365
------- -------
Costs and expenses:
Cost of sales 31,506 33,273
Selling, general and administrative
expenses 10,648 11,136
Company sponsored product
development 1,661 1,538
Interest expense 667 790
Interest and other (income)
expense - net (524) (406)
------- ---------
43,958 46,331
------- ---------
Income before income taxes 4,371 4,034
Provision for income taxes 1,380 1,545
------- ---------
Net income 2,991 2,489
Accumulated earnings:
Beginning of period 94,076 83,447
------- ---------
End of period $97,067 $85,936
======= =========
Earnings per common share:
Net income $ .52 $ .44
===== =====
The accompanying notes are an integral part of these consolidated
financial statements.
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Page 3
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
For The Six Months
Ended June 30,
----------------------------
1994 1993
(stated in thousands except
for per share amounts)
Sales $92,007 $97,140
------- -------
Costs and expenses:
Cost of sales 59,359 64,204
Selling, general and administrative
expenses 20,236 21,230
Company sponsored product
development 3,379 2,919
Interest expense 1,328 1,567
Interest and other (income)
expense - net (904) (674)
------- -------
83,398 89,246
------- -------
Income before income taxes 8,609 7,894
Provision for income taxes 2,830 3,030
------- -------
Net income 5,779 4,864
Accumulated earnings:
Beginning of period 91,288 81,072
------- -------
End of period $97,067 $85,936
======= =======
Earnings per common share:
Net income $ 1.00 $ .86
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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Page 4
Tech-Sym Corporation
Consolidated Statement of Cash Flows
For the Six Months
Ended June 30,
------------------------
1994 1993
(stated in thousands)
Cash flows from operating activities:
Net income $ 5,779 $ 4,864
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,559 3,565
Change in operating assets and liabilities:
Receivables (3,024) (1,660)
Unbilled revenue 1,581 (2,436)
Inventories (739) 215
Accounts payable (77) (20)
Billing in excess and
other accrued liabilities (3,160) 6,087
Taxes on income (9) 2,877
Long-term receivables - net 545 (1,980)
Other - net (1,940) (2,362)
--------- ---------
Net cash provided by operating activities 2,515 9,150
--------- ---------
Cash flows from investing activities:
Capital expenditures (3,442) (3,290)
Payment for purchase of business,
net of cash acquired (635)
Purchases of investment securities (1,000) (4,512)
Sales of investment securities 3,422 5,080
Other investing activities (243) (483)
--------- ---------
Net cash used for investing activities (1,898) (3,205)
--------- ---------
Cash flows from financing activities:
Net borrowings (payments) under
line of credit agreements 1,455 (583)
Proceeds from long-term debt 460
Payments on long-term debt (245) (270)
Proceeds from exercise of stock options 372 404
Cash paid to acquire treasury stock (451)
--------- ---------
Net cash provided by (used for)
financing activities 2,042 (900)
--------- ---------
Net increase in cash and cash equivalent 2,659 5,045
Cash and cash equivalents at beginning of period 20,317 12,934
--------- ---------
Cash and cash equivalents at end of period $ 22,976 $ 17,979
========= =========
Cash flow from operating activities include:
Interest paid $ 1,327 $ 1,429
Income taxes paid 3,735 2,609
The accompanying notes are an integral part of these consolidated
financial statements.
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Page 5
Notes to Consolidated Financial Statements
1. The unaudited consolidated financial statements include the accounts
of Tech-Sym Corporation and its subsidiaries ("the Company") for the
three month and six month periods ended June 30, 1994 and 1993 and
should be read in conjunction with the financial statements and the
notes thereto included in the Company's latest annual report. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of these
unaudited statements have been included. Such financial results,
however, should not be construed as necessarily indicative of future
earnings.
2. Inventories are valued at the lower of cost or market. Cost is
determined on the first-in, first-out method. Inventories
(principally electronic parts) which aggregated $32,436,000 at June
30, 1994, include raw materials of $15,559,000 and work-in-process
and finished goods of $16,877,000.
3. Shares of common stock of the Company have been reserved at June 30,
1994 for issuance as follows:
53,500 shares for issuance upon exercise of options granted under
the 1980 Stock Option Plan of the Company.
39,400 shares for issuance upon exercise of options granted to
nonemployee directors.
726,090 shares for issuance upon exercise of options granted or
to be granted under the 1990 Stock Option Plan of the Company.
3,297,674 shares for issuance upon exercise of common stock
purchase rights granted pursuant to the Company's Common Stock
Purchase Rights Plan adopted by the Board of Directors on June 1,
1988.
4. The Company provides deferred income taxes for temporary differences
arising when revenues or expenses are recognized in different periods
for financial and tax reporting purposes.
Provision for federal income taxes for the three and six month
periods ended June 30, 1994 and 1993 was equivalent to an effective
rate of 35% and 36%, respectively, of earnings before income taxes.
The difference between the effective rate and the U.S. statutory rate
is due principally to non-deductible amortization expenses of
goodwill. Additionally,
Page 6
foreign income taxes were not accrued on certain foreign income due
to operating loss carry forwards and certain state income taxes are
less for the current period due to an over payment in prior periods.
5. Earnings per common share are based on the weighted average number of
shares outstanding during each period (5,772,000 and 5,630,000 for
the three months ended June 30, 1994 and 1993, respectively, and
5,766,000 and 5,624,000 for the six month period ended June 30, 1994
and 1993, respectively).
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Page 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES:
The Company's operating activities provided cash in the amount of
$2,515,000 for the six months ended June 30, 1994, and $9,150,000 for the
six months ended June 30 1993. During March 1989, the Company completed a
long-term unsecured note financing in the principal amount of $20,000,000.
The Company is required to repay such amount in annual principal
installments of approximately $2,857,000 beginning in 1995. The terms of
the unsecured note financing impose limitations on future (additional)
borrowings. Given the current level of liquid assets and projected cash
flows from future operations, the Company does not presently anticipate the
need for future borrowings in excess of such limitations. Subsequent to the
completion of the note financing, the Company also negotiated new unsecured
bank lines of credit which, among other changes, removed the restrictions
as to amounts that may be distributed from subsidiaries to Tech-Sym
Corporation. At June 30, 1994, the Company had unused committed lines of
credit which aggregated $26,825,000.
After working capital, the chief use of the Company's funds has normally
been capital expenditures. Capital expenditures for property, plant and
equipment were $3,442,000 and $3,290,000 for the six months ended June 30,
1994 and 1993, respectively.
RESULTS OF OPERATIONS:
The following is management's discussion and analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying consolidated statements of income.
A summary of the period to period changes in the principal items included
in the consolidated statements of income is shown below:
Comparison of Comparison of
Three Months Six Months
Ended June 30, Ended June 30,
1994 and 1993 1994 and 1993
Increase (Decrease)
(stated in thousands)
Sales $(2,036) $(5,133)
Costs and expenses (2,373) (5,848)
------- -------
Income before income taxes 337 715
Provision for income taxes 165 240
------- -------
Net income $ 502 $ 915
======= =======
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Page 8
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1994 AND 1993:
Sales for the quarter ended June 30, 1994, decreased 4% from the like
quarter of 1993 while costs and expenses decreased 5% which resulted in an
increase in income before income taxes of 8%. The decrease in sales for the
quarter as compared to the same quarter a year ago was primarily the result
of decreased sales in the seismic survey system area ($2,393,000 or 17%)
and in the communication area ($1,735,000 or 9%). These decreases were
partially offset by an increase in the defense system area ($1,769,000 or
12%).
Cost of sales decreased 5% which compares favorably with the 4% decrease in
sales. This was primarily due to the operating improvements in the
communication area. Selling, general and administrative expenses decreased
4% which is generally in line with the decrease in sales.
Company sponsored product development increased 8% primarily due to an
increase in the cost of development programs in the seismic survey systems
area. Interest expense is slightly lower due to less borrowings and
interest and other income increased due to more funds available to invest
during the quarter. Net income was improved by a lower effective tax rate.
See Note 4 of the Notes to Consolidated Financial Statements contained on
pages 5 and 6 of this report for information on income taxes.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1994 AND 1993:
Sales for the six month period ended June 30, 1994 decreased 5% while costs
and expenses decreased 7% for the same period. This resulted in an increase
of 9% in income before income taxes. The decrease in sales was attributed
to decreased sales in all operating areas as follows: communications
($2,676,000 or 7%), defense systems ($1,627,000 or 5%) and seismic survey
equipment ($1,144,000 or 4%).
Cost of sales decreased 8% as compared to the 5% decrease in sales while
selling, general and administrative expenses decreased 4% for the same
period. Company sponsored product development increased 16%, interest
expense decreased 15% and interest and other income increased 34% as
compared to the same period a year ago. These changes were primarily due to
the same reasons discussed above for the quarterly comparisons.
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Page 9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The shareholders of Registrant took the following action at the Annual
Meeting held April 26, 1994:
1. Elected all nine management nominees for directors pursuant to
proxies solicited without opposition under regulation 14A, as
stated below:
Votes in Votes
Nominee Favor Withheld
------- -------- --------
W.L. Creech 4,705,514 52,288
A.A. Gallotta, Jr. 4,705,324 52,478
W.W. Gamel 4,705,424 52,378
C.C. Kraft, Jr. 4,704,929 52,873
R.E. Moore 4,704,829 52,973
C.J. Scribner 4,705,529 52,273
R.J. Sloan 4,703,229 54,573
J.A. Teresko 4,705,824 51,978
C.K. Watt 4,705,429 52,373
2. Ratified the appointment of Price Waterhouse as independent
accountants of the Registrant for the year ending December 31,
1994 (4,734,511 shares voted for, 7,728 shares voted against and
15,563 shares abstained).
3. Approved an amendment to the Tech-Sym Corporation 1990 Stock
Option Plan increasing the maximum number of shares of common
stock thereunder from 570,000 to 858,000 shares (4,002,094 shares
voted for, 687,448 shares voted against, and 68,260 shares
abstained).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
during the three months ended June 30, 1994.
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Page 10
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.
TECH-SYM CORPORATION
Registrant
Date: August 12, 1994 /s/ WENDELL W. GAMEL
--------------------
Wendell W. Gamel,
Chairman of the
Board and President
Date: August 12, 1994 /s/ RAY F. THOMPSON
-------------------
Ray F. Thompson, Vice-
President, Treasurer,
Controller and Chief
Financial Officer
