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 SEPTEMBER 30, 1995
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 October 31, 1995
- - ---------------------------- -------------------------------
COMMON STOCK, $.10 PAR VALUE 6,545,859
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FORM 10-Q
TECH-SYM CORPORATION
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1995
AND DECEMBER 31, 1994 .............................................. 1
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED
EARNINGS FOR THREE MONTHS ENDED SEPTEMBER 30,
1995 AND 1994 ...................................................... 2
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED
EARNINGS FOR NINE MONTHS ENDED SEPTEMBER 30,
1995 AND 1994 ...................................................... 3
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 ...................... 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................... 5-6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ................................ 7-9
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................. 10
SIGNATURES ............................................................. 11
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PAGE 1 FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tech-Sym Corporation
Consolidated Balance Sheet
September 30, December 31,
1995 1994
(restated)
--------- ---------
(stated in thousands)
Assets
Current assets:
Cash and cash equivalents .................... $ 15,932 $ 24,083
Marketable Securities ........................ 100 300
Receivables - net ............................ 45,843 46,870
Unbilled revenue ............................. 41,845 34,329
Inventories .................................. 53,202 42,507
Other ........................................ 7,106 3,979
--------- ---------
Total current assets ................... 164,028 152,068
Property, plant and equipment - net ............ 40,092 38,841
Long term receivables - net .................... 11,537 10,576
Goodwill and other assets ...................... 31,688 24,318
--------- ---------
Total assets ........................... $ 247,345 $ 225,803
========= =========
Liabilities
Current liabilities:
Notes payable ................................ $ 17,600 $ 10,985
Current maturities of long-term debt ......... 5,073 3,318
Accounts payable ............................. 11,519 13,566
Billings in excess of cost and
estimated earnings on uncompleted
contracts .................................. 7,151 7,636
Taxes on income .............................. 3,580 2,902
Accrued and other liabilities ................ 25,278 17,877
--------- ---------
Total current liablilites .............. 70,201 56,284
Long-term debt ................................. 18,875 21,587
Deferred income taxes .......................... 196 196
Other liabilities .............................. 11,162 12,035
--------- ---------
Total liabilities ...................... 100,434 90,102
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 7,852,651 and 7,797,651 shares 785 780
Additional capital ............................. 38,147 37,365
Accumulated earnings ........................... 119,997 109,734
Cumulative translation adjustments ............. (1,004) (1,164)
Common stock held in treasury at
cost (1,307,592 and 1,307,592 shares) ......... (11,014) (11,014)
--------- ---------
Total shareholders' investment ......... 146,911 135,701
--------- ---------
Total liabilities and
shareholders' investment .............. $ 247,345 $ 225,803
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 2 FORM 10-Q
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
For The Three Months
Ended September 30,
--------------------------
1995 1994
(restated)
--------- ---------
(stated in thousands except
for per share amounts)
Sales .......................................... $ 65,260 $ 54,830
--------- ---------
Costs and expenses:
Cost of sales .............................. 42,130 36,018
Selling, general and administrative
expenses ................................. 13,520 12,020
Company sponsored product
development .............................. 3,573 3,051
Interest expense ........................... 1,075 817
Interest and other (income)
expense - net ............................ (761) (1,352)
--------- ---------
59,537 50,554
--------- ---------
Income before income taxes ............. 5,723 4,276
Provision for income taxes ..................... 1,820 1,346
--------- ---------
Net income .............................. 3,903 2,930
Accumulated earnings:
Beginning of period ........................ 116,094 103,432
--------- ---------
End of period .............................. $ 119,997 $ 106,362
========= =========
Earnings per common share:
Net income .............................. $ .60 $ .45
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 3 FORM 10-Q
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
For the Nine Months
Ended September 30,
--------------------------
1995 1994
(restated)
--------- ---------
(stated in thousands except
for per share amounts)
Sales .......................................... $ 183,249 $ 154,850
--------- ---------
Costs and expenses:
Cost of sales .............................. 119,359 98,157
Selling, general and administrative
expenses ................................. 38,266 35,200
Company sponsored product
development .............................. 10,532 8,882
Interest expense ........................... 2,785 2,145
Interest and other (income)
expense - net ............................ (2,656) (2,322)
--------- ---------
168,286 142,062
--------- ---------
Income before income taxes ............. 14,963 12,788
Provision for income taxes ..................... 4,700 4,099
--------- ---------
Net income .............................. 10,263 8,689
Accumulated earnings:
Beginning of period ........................ 109,734 97,673
--------- ---------
End of period .............................. $ 119,997 $ 106,362
========= =========
Earnings per common share:
Net income .............................. $ 1.58 $ 1.34
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 4 FORM 10-Q
Tech-Sym Corporation
Consolidated Statement of Cash Flows
For the Nine Months
Ended September 30,
----------------------
1995 1994
(restated)
-------- --------
(stated in thousands)
Cash flows from operating activities:
Net income ......................................... $ 10,263 $ 8,689
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 8,193 7,136
Change in operating assets and liabilities:
Receivables ..................................... 2,860 (4,217)
Unbilled revenue ................................ (7,516) 4,553
Inventories ..................................... (10,693) (2,491)
Accounts payable and taxes on income ............ (2,481) (459)
Billing in excess and
other accrued liabilities ...................... 6,286 (2,563)
Other current assets ............................ (3,017) (1,082)
Long-term receivables - net and other assets .... (5,501) (1,643)
Other - net ..................................... (1,350) 250
-------- --------
Net cash provided by
(used for) operating activities .................. (2,956) 8,173
-------- --------
Cash flows from investing activities:
Capital expenditures ............................... (6,980) (5,761)
Payment for purchase of business,
net of cash acquired .............................. (3,534) (8,846)
Sales of investment securities ..................... 200 7,443
Other investing activities ......................... (412) (367)
-------- --------
Net cash used for investing activities ............. (10,726) (7,531)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) under
line of credit agreements ......................... 7,730 4,483
Proceeds from long-term debt ....................... 1,932 1,090
Payments on long-term debt ......................... (4,918) (2,719)
Proceeds from exercise of stock options ............ 787 413
Cash paid to acquire treasury shares ............... (801)
-------- --------
Net cash provided by financing activities .......... 5,531 2,466
-------- --------
Net increase (decrease) in
cash and cash equivalents .......................... (8,151) 3,108
Cash and cash equivalents at beginning of period ... 24,083 21,308
-------- --------
Cash and cash equivalents at end of period ......... $ 15,932 $ 24,416
======== ========
Cash flow from operating activities include:
Interest paid ...................................... $ 3,274 $ 2,543
Income taxes paid .................................. 5,281 6,010
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 5 FORM 10-Q
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 and nine month periods ended September 30, 1995 and 1994 and should
be read in conjunction with the financial statements and the notes thereto
included in the Company's 1994 annual report and Form S-4 dated May 19,
1995. 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 $53,202,000 at September 30, 1995, include raw
materials of $20,601,000 and work-in-process and finished goods of
$32,601,000.
3. Shares of common stock of the Company have been reserved at September 30,
1995 for issuance as follows:
30,200 shares for issuance upon exercise of options granted
under the 1980 Stock Option Plan of the Company.
28,300 shares for issuance upon exercise of options granted to
nonemployee directors.
689,570 shares for issuance upon exercise of options granted
or to be granted under the 1990 Stock Option Plan of the
Company.
3,646,565 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 nine month periods
ended September 30, 1995 and 1994 was equivalent to an effective rate of
32% and 35%, respectively, of earnings before income taxes. The difference
between the effective rate and the U.S. statutory rate is due principally
to tax benefits of foreign sales and research and development credits.
PAGE 6 FORM 10-Q
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Additionally, for both the 1995 and 1994 periods, foreign income taxes were
not accrued on certain foreign income due to operating loss carry forwards.
Also, during the nine month period ended September 30, 1995, the Company
received certain state income tax refunds due to overpayment in prior
periods.
5. Earnings per common share are based on the weighted average number of
shares outstanding during each period (6,535,000 and 6,500,000 for the
three months ended September 30, 1995 and 1994, respectively,and 6,513,000
and 6,503,000 for the nine month period ended September 30, 1995 and 1994,
respectively).
6. On June 30, 1995, the Company completed its acquisition of CogniSeis
Development, Inc. through the issuance of 737,781 shares of common stock.
CogniSeis develops, markets and licenses seismic processing and geologic
interpretation systems. The transaction was accounted for as a pooling of
interests. Accordingly, the financial information presented herein has been
restated to include the accounts of the Company and CogniSeis as of
September 30, 1994 and for the three and nine month periods then ended.
Separate results of operations of the combining entities for the periods
prior to the acquisition are as follows (in thousands):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Sales
Tech-Sym ........... $ 60,147 $ 51,328 $ 168,420 $ 143,335
CogniSeis .......... 5,113 3,502 14,829 11,515
--------- --------- --------- ---------
$ 65,260 $ 54,830 $ 183,249 $ 154,850
========= ========= ========= =========
Net Income
Tech-Sym ........... $ 3,696 $ 3,176 $ 10,102 $ 8,955
CogniSeis .......... 207 (246) 161 (266)
--------- --------- --------- ---------
$ 3,903 $ 2,930 $ 10,263 $ 8,689
========= ========= ========= =========
PAGE 7 FORM 10-Q
TECH-SYM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's operating activities used cash in the amount of $2,956,000 for the
nine months ended September 30, 1995, and provided cash in the amount of
$8,173,000 for the nine months ended September 30, 1994. During March, 1989, the
Company completed a long-term unsecured note financing in the principal amount
of $20,000,000. In March, 1995, the Company began to repay such amount in annual
principal installments of approximately $2,857,000. 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 September 30, 1995, the Company
had unused committed lines of credit which aggregated $40,800,000.
After working capital, the chief use of the Company's funds has normally been
capital expenditures. Capital expenditures for property, plant and equipment
were $6,980,000 and $5,761,000 for the nine months ended September 30, 1995 and
1994, 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 Nine
Three Months Ended Months Ended
September 30, Ended September 30,
1995 and 1994 1995 and 1994
----------------- ------------------
Increase(Decrease)
(stated in thousands)
Sales ........................................ $10,430 $28,399
Costs and expenses ........................... 8,983 26,224
------- -------
Income before income taxes ................... 1,447 2,175
Provision for income taxes ................... 474 601
------- -------
Net income ................................... $ 973 $ 1,574
======= =======
PAGE 8 FORM 10-Q
TECH-SYM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994:
Sales for the quarter ended September 30, 1995 increased 19.0% from the like
quarter of 1994 while costs and expenses increased 17.8% which resulted in an
increase in income before income taxes of 33.8%. The increase in sales for the
quarter as compared to the same quarter a year ago was primarily the result of
improved sales in the seismic exploration area ($8,241,000 or 55%) primarily due
to a general increase in demand for digital streamer systems as well as new
seismic cables and cable repairs. In addition, seismic processing software sales
also improved for the quarter ending September 30, 1995. The communications area
also contributed to the increase in sales for the quarter ($2,471,000 or 14%)
due to greater demand in general for commercial microwave components and, to a
lesser extent, strong foreign demand for high power broadcast equipment. The
sales in the defense systems area were essentially the same as the quarter in
the prior period. The above increases in sales were somewhat offset by a
decrease in sales in the environmental area ($1,045,000 or 19%) due to delays in
government implementation of environmental regulations resulting in decreased
demand for the Company's emissions monitoring systems.
Cost of sales increased 17% while selling, general and administrative expenses
increased 13% for the quarter. The increase in cost of sales for the 1995
quarter as compared to 1994 was primarily due to the increase in sales of 19%.
The pretax margins increased 12% from 7.8% to 8.8% primarily due to economies of
scale related to increased sales in the seismic exploration area although
somewhat offset by decreased margins in the defense systems and environmental
monitoring areas. Company sponsored product development increased 17% due to
increased projects in the seismic exploration area. Interest expense increased
primarily due to an increase in rates as well as a larger average principal
balance outstanding during the period for 1995.
A lower effective tax rate also contributed to the increase in net income. See
Note 4 of the Notes to the Consolidated Financial Statements contained on pages
5 and 6 of this report for income tax information.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994:
Sales for the nine month period ended September 30, 1995 increased 18.3% while
costs and expenses increased 18.4% which resulted in an increase of 17% in
income before income taxes. The increase in sales was attributable to increases
in sales in
PAGE 9 FORM 10-Q
TECH-SYM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
the (i) seismic exploration system area ($17,922,000 or 37%); (ii)
communications area ($9,477,000 or 19%); and (iii) environmental area
($2,385,000 or 22%) due to the acquisition of Anarad, Inc. effective July 8,
1994, which were offset somewhat by a decrease in sales of defense systems
($1,294,000 or 3%).
Cost of sales increased 22% as compared to the 18% increase in sales while
selling, general and administrative expenses increased 9% as compared to last
year. Company sponsored product development increased 19%, interest expense
increased 32% and interest and other income decreased 44%. The reason for the
changes for the nine month comparisons are substantially the same as for the
quarter comparisons described above.
PAGE 10 FORM 10-Q
TECH-SYM CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits to this report except for Exhibit 27 - Financial
Data Schedule which is deemed not to be filed for purposes of
liability under the federal securities laws.
(b) Two reports on Form 8-K were filed with the Commission during the
three months ended September 30, 1995, as follows:
(i) Form 8-K dated July 14, 1995, describing the completion of the
merger of CogniSeis Development, Inc., with CSD Merger, Inc., a
wholly owned subsidiary of the Registrant.
(ii) Form 8-K dated September 18, 1995, incorporating a press release
announcing the agreement of Continental Electronics Corporation,
a wholly owned subsidiary of the Registrant, to acquire all the
outstanding shares of TELEFUNKEN Sendertechnik GmbH from
Daimler-Benz Aerospace AG.
No financial statements were filed as a part of this report.
PAGE 11 FORM 10-Q
TECH-SYM CORPORATION
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: November 13, 1995 /s/ Wendell W. Gamel
Wendell W. Gamel, Chairman of
the Board and President
Date: November 13, 1995 /s/ Ray F. Thompson
Ray F. Thompson, Vice-President,
Treasurer, Controller and Chief
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 15,932
<SECURITIES> 100
<RECEIVABLES> 45,843
<ALLOWANCES> 0
<INVENTORY> 55,202
<CURRENT-ASSETS> 164,028
<PP&E> 40,092
<DEPRECIATION> 0
<TOTAL-ASSETS> 247,345
<CURRENT-LIABILITIES> 70,201
<BONDS> 0
<COMMON> 785
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 247,345
<SALES> 65,260
<TOTAL-REVENUES> 0
<CGS> 42,130
<TOTAL-COSTS> 59,537
<OTHER-EXPENSES> (761)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 878
<INCOME-PRETAX> 4,496
<INCOME-TAX> 1,400
<INCOME-CONTINUING> 3,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,096
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
