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 March 31, 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 APRIL 30, 1994
Common Stock, $.10 par value 5,771,358
INDEX
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Page No.
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Part I. Financial Information:
Consolidated Balance Sheet March 31, 1994
and December 31, 1993 1
Consolidated Statement of Income and Accumulated
Earnings for Three Months Ended March 31,
1994 and 1993 2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1994 and 1993 3
Notes to Consolidated Financial Statements 4-5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
Page 1
PART I. FINANCIAL INFORMATION
Tech-Sym Corporation
Consolidated Balance Sheet
March 31, 1994 December 31, 1993
-------------- -----------------
(stated in thousands)
Assets
Current assets:
Cash and cash equivalents $23,085 $20,317
Marketable Securities 7,644 7,873
Receivables - net 32,796 30,095
Unbilled revenue 34,564 36,537
Inventories 31,140 31,642
Other 3,659 3,404
-------- --------
Total current assets 132,888 129,868
Property, plant and equipment - net 32,489 32,651
Long term receivables - net 8,900 9,218
Goodwill and other assets 14,079 13,130
-------- --------
Total assets $188,356 $184,867
======== ========
Liabilities
Current liabilities:
Notes payable and current maturities
of long-term debt $3,632 $3,442
Billings in excess of cost and
estimated earnings on uncompleted
contracts 4,474 5,346
Accounts payable 5,913 5,771
Taxes on income 3,714 2,264
Accrued and other liabilities 17,011 17,787
-------- --------
Total current liablilites 34,744 34,610
Long-term debt 23,624 23,317
Deferred income taxes 2,973 2,973
Other liabilities 9,426 9,423
-------- --------
Total liabilities 70,767 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
7,042,820 and 7,034,220 shares 704 703
Additional capital 34,592 34,432
Accumulated earnings 94,076 91,288
Cumulative translation adjustments (1,515) (1,537)
Common stock held in treasury at
cost (1,276,562 and 1,288,752 shares) (10,268) (10,342)
-------- --------
Total shareholders' investment 117,589 114,544
-------- --------
Total liabilities and
shareholders' investment $188,356 $184,867
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 2
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
For The Three Months
Ended March 31,
------------------------------
1994 1993
(stated in thousands except
for per share amounts)
Sales $43,678 $46,775
--------- ---------
Costs and expenses:
Cost of sales 27,853 30,931
Selling, general and administrative
expenses 9,588 10,094
Company sponsored product
development 1,718 1,381
Interest expense 661 777
Interest and other (income)
expense - net (380) (268)
--------- ---------
39,440 42,915
--------- ---------
Income before income taxes 4,238 3,860
Provision for income taxes 1,450 1,485
--------- ---------
Net income 2,788 2,375
Accumulated earnings:
Beginning of period 91,288 81,072
--------- ---------
End of period $94,076 $83,447
========= =========
Earnings per common share:
Net income $ .48 $ .42
===== =====
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
Tech-Sym Corporation
Consolidated Statement of Cash Flows
For the Three Months
Ended March 31,
--------------------
1994 1993
(stated in thousands)
Cash flows from operating activities:
Net income $2,788 $2,375
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,764 1,588
Deferred income taxes 551
Change in operating assets and liabilities:
Receivables (2,701) (4,555)
Unbilled revenue 1,973 (1,819)
Inventories 502 998
Accounts payable 142 (129)
Billing in excess and
other accrued liabilities (1,648) 1,891
Taxes on income 1,450 2,024
Long-term receivables - net 318
Other - net (1,185) (1,608)
----- -----
Net cash provided by operating activities 3,403 1,316
----- -----
Cash flows from investing activities:
Capital expenditures (1,476) (2,015)
Payment for purchase of businesses,
net of cash acquired
Purchases of investment securities (2,003)
Sales of investment securities 230 2,291
Other investing activities (119) (356)
----- -----
Net cash used for investing activities (1,365) (2,083)
----- -----
Cash flows from financing activities:
Net borrowings (payments) under
line of credit agreements 151 187
Proceeds from long-term debt 460
Payments on long-term debt (115) (129)
Proceeds from exercise of stock options 234 321
Cash paid to acquire treasury stock (314)
----- -----
Net cash provided by financing activities 730 65
----- -----
Net increase (decrease) in cash
and cash equivalents 2,768 (702)
Cash and cash equivalents at beginning of year 20,317 12,934
------ ------
Cash and cash equivalents at end of period $23,085 $12,232
====== ======
Cash flow from operating activities include:
Interest paid $1,172 $1,249
Income taxes paid 740 82
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
Tech-Sym Corporation
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 period ended March 31, 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 $31,140,000 at
March 31, 1994, include raw materials of $13,763,000 and
work-in-process and finished goods of $17,377,000.
3. Shares of common stock of the Company have been reserved at March
31, 1994 for issuance as follows:
58,200 shares for issuance upon exercise of options
granted under the 1980 Stock Option Plan of the
Company.
39,600 shares for issuance upon exercise of options
granted to nonemployee directors.
443,290 shares for issuance upon exercise of options
granted or to be granted under the 1990 Stock Option
Plan of the Company.
3,153,674 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 month period
ended March 31, 1994 and 1993 was equivalent to an effective rate
of 34% and 36%, respectively, of earnings before income taxes.
Page 5
5. Earnings per common share are based on the weighted average
number of shares outstanding during each period (5,760,000 and
5,617,000 for the three months ended March 31, 1994 and 1993,
respectively).
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Page 6
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
$3,403,000 for the three months ended March 31, 1994, and $1,316,000
for the three months ended March 31, 1993. During 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 March 31, 1994, the Company had unused committed
lines of credit which aggregated $27,800,000.
After working capital, the chief use of the Company's funds has
normally been capital expenditures. Capital expenditures for
property, plant and equipment were $1,476,000 and $2,015,000 for the
three months ended March 31, 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
Three Months
Ended March 31,
1994 and 1993
Increase(Decrease)
(stated in thousands)
Sales ($3,096)
Costs and expenses (3,474)
-------
Income before income taxes 378
Provision for income taxes (35)
-------
Net income $ 413
===
Page 7
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1994 AND 1993:
Sales for the period ended March 31, 1994 decreased 7% while costs and
expenses decreased 8% which resulted in an increase in income before
income taxes of 10%. 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 defense systems area ($3,396,000 or 22%) and
communications area ($940,000 or 5%). These decreases were partially
offset by an increase in the seismic survey systems equipment area
($1,249,000 or 11%).
Cost of sales decreased 10% which compares favorably with the 7%
decrease in sales. The higher gross margin percentage is the result
of the increased sales of the seismic survey systems equipment area
which historically carries a higher margin that the other product
areas. Selling, general and administrative expenses decreased 5%
which is generally in line with the sales decrease.
Company sponsored product development increased 24% 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.
<PAGE>
Page 8
PART II. OTHER INFORMATION
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 March 31, 1994.
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: May 13, 1994 /s/ Wendell W. Gamel
Wendell W. Gamel, Chairman of
the Board and President
Date: May 13, 1994 /s/ Ray F. Thompson
Ray F. Thompson, Vice-President,
Treasurer, Controller and Chief
Financial Officer
