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, 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 APRIL 30, 1995
Common Stock, $.10 par value 5,773,878
<PAGE>
INDEX
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PAGE NO.
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Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet March 31, 1995
and December 31, 1994 .................................... 1
Consolidated Statement of Income and Accumulated
Earnings for Three Months Ended March 31,
1995 and 1994 ............................................ 2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1995 and 1994 ............... 3
Notes to Consolidated Financial Statements ................. 4-5
Item 2. 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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tech-Sym Corporation
Consolidated Balance Sheet
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
(stated in thousands)
Assets
Current assets:
Cash and cash equivalents ................ $ 23,046 $ 22,703
Marketable Securities .................... 255 300
Receivables - net ........................ 44,056 41,837
Unbilled revenue ......................... 36,975 34,329
Inventories .............................. 47,268 42,409
Other .................................... 5,110 3,808
--------- ---------
Total current assets ............... 156,710 145,386
Property, plant and equipment - net ........ 36,887 36,699
Long term receivables - net ................ 9,428 10,142
Goodwill and other assets .................. 23,565 23,011
--------- ---------
Total assets ....................... $ 226,590 $ 215,238
========= =========
Liabilities
Current liabilities:
Notes payable ............................ $ 15,772 $ 10,985
Current maturities of long-term debt ..... 3,912 3,318
Accounts payable ......................... 15,399 13,232
Billings in excess of cost and
estimated earnings on uncompleted
contracts .............................. 6,256 6,365
Taxes on income .......................... 5,243 3,074
Accrued and other liabilities ............ 19,413 17,328
--------- ---------
Total current liablilites .......... 65,995 54,302
Long-term debt ............................. 18,626 21,587
Deferred income taxes ...................... 196 196
Other liabilities .......................... 11,053 12,039
--------- ---------
Total liabilities .................. 95,870 88,124
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
7,064,620 and 7,059,870 shares ............ 706 706
Additional capital ......................... 35,144 35,063
Accumulated earnings ....................... 106,619 103,523
Cumulative translation adjustments ......... (735) (1,164)
Common stock held in treasury at
cost (1,307,592 and 1,307,592 shares) ..... (11,014) (11,014)
--------- ---------
Total shareholders' investment ..... 130,720 127,114
--------- ---------
Total liabilities and
shareholders' investment .......... $ 226,590 $ 215,238
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
1
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------
1995 1994
(stated in thousands except
for per share amounts)
Sales ........................................... $ 53,812 $ 43,678
-------- --------
Costs and expenses:
Cost of sales ................................. 36,197 27,853
Selling, general and administrative
expenses .................................. 10,981 9,588
Company sponsored product
development ............................... 2,051 1,718
Interest expense ............................ 878 661
Interest and other (income)
expense - net ............................. (791) (380)
-------- --------
49,316 39,440
-------- --------
Income before income taxes .............. 4,496 4,238
Provision for income taxes ...................... 1,400 1,450
-------- --------
Net income .............................. 3,096 2,788
Accumulated earnings:
Beginning of period ........................... 103,523 91,288
-------- --------
End of period ................................. $106,619 $ 94,076
======== ========
Earnings per common share:
Net income .............................. $ .54 $ .48
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
Tech-Sym Corporation
Consolidated Statement of Cash Flows
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1995 1994
(stated in thousands)
Cash flows from operating activities:
Net income .......................................... $ 3,096 $ 2,788
Adjustments to reconcile net income to net ..........
cash provided by operating activities:
Depreciation and amortization .................... 2,483 1,764
Deferred income taxes ............................
Change in operating assets and liabilities:
Receivables ...................................... (2,219) (2,701)
Unbilled revenue ................................. (2,646) 1,973
Inventories ...................................... (4,859) 502
Accounts payable ................................. 2,167 142
Billing in excess and
other accrued liabilities ....................... 1,976 (1,648)
Taxes on income .................................. 2,169 1,450
Long-term receivables - net and other assets ..... (112) 318
Other - net ...................................... (1,859) (1,185)
------- -------
Net cash provided by operating activities ........... 196 3,403
------- -------
Cash flows from investing activities:
Capital expenditures ................................ (2,268) (1,476)
Sales of investment securities ...................... 45 230
Other investing activities .......................... (132) (119)
------- -------
Net cash used for investing activities .............. (2,355) (1,365)
------- -------
Cash flows from financing activities:
Net borrowings (payments) under
line of credit agreements .......................... 5,485 151
Proceeds from long-term debt ........................ 1,611 460
Payments on long-term debt .......................... (4,675) (115)
Proceeds from exercise of stock options ............. 81 234
------- -------
Net cash provided by (used for)
financing activities .............................. 2,502 730
------- -------
Net increase in cash and cash equivalents ............. 343 2,768
Cash and cash equivalents at beginning of period .... 22,703 20,317
------- -------
Cash and cash equivalents at end of period .......... $23,046 $23,085
======= =======
Cash flow from operating activities include:
Interest paid ....................................... $ 1,404 $ 1,172
Income taxes paid ................................... 281 740
The accompanying notes are an integral part of these consolidated
financial statements.
3
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, 1995 and 1994 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 $47,268,000 at March 31, 1995, include raw materials of
$19,669,000 and work-in-process and finished goods of $27,599,000.
3. Shares of common stock of the Company have been reserved at March 31,
1995 for issuance as follows:
39,700 shares for issuance upon exercise of options granted under the
1980 Stock Option Plan of the Company.
38,600 shares for issuance upon exercise of options granted to
nonemployee directors.
720,020 shares for issuance upon exercise of options granted or to be
granted under the 1990 Stock Option Plan of the Company.
3,277,674 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, 1995 and 1994 was equivalent to an effective rate of 32% and 34%,
respectively, of earnings before income taxes. The difference between the
effective rate and the U.S. statutory rate for 1994 is due principally to
tax benefits of foreign sales and research and development credits.
4
Additionally, foreign income taxes were not accrued on certain foreign
income due to operating loss carry forwards.
5. Earnings per common share are based on the weighted average number of shares
outstanding during each period (5,755,000 and 5,760,000 for the three months
ended March 31, 1995 and 1994, respectively).
6. The Company signed a definitive agreement as of May 11, 1995, to acquire all
the outstanding shares of CogniSeis Development, Inc., for a total of
$20,000,000 in Tech-Sym Common Stock. It is intended that this acquisition
be accounted for on a pooling of interest basis.
5
ITEM 2. 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 $196,000 for
the three months ended March 31, 1995, and $3,403,000 for the three months ended
March 31, 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 March 31, 1995, the Company had unused committed
lines of credit which aggregated $17,000,000.
After working capital, the chief use of the Company's funds has normally been
capital expenditures. Capital expenditures for property, plant and equipment
were $2,268,000 and $1,476,000 for the three months ended March 31, 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
THREE MONTHS
ENDED MARCH 31,
1995 AND 1994
---------------------
Increase(Decrease)
(stated in thousands)
Sales ................................................. $ 10,134
Costs and expenses .................................... (9,876)
Income before income taxes ............................ 258
Provision for income taxes ............................ (50)
--------
Net income ............................................ $308
========
6
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1995 AND 1994:
Sales for the period ended March 31, 1995 increased 23% while costs and expenses
increased 25% which resulted in an increase in income before income taxes of 6%.
This 23% increase in sales was the result of (i) greater sales in the
communications area ($4,148,000 or 28%) primarily due to strong foreign demand
for high power broadcast equipment and greater demand in general for commercial
microwave components; (ii) increased sales of seismic exploration systems
($3,987,000 or 30%) primarily due to a large order for digital streamer systems
to be deployed on a new type of seismic vessel and the recently introduced
production of new seismic cables in addition to the existing cable repair
business; (iii) increased sales in the environmental monitoring area ($1,397,000
or 51%) due to the acquisition of Anarad, Inc. effective July 8, 1994; and (iv)
slightly increased sales in the defense systems area ($529,000 or 4%).
Cost of sales increased 30% while selling, general and administrative expenses
increased 15% as compared to the first quarter of 1994. The increase in cost of
sales for the 1995 quarter as compared to 1994 was primarily due to the increase
in sales as well as product mix in the seismic exploration area and lower gross
margins in the environmental monitoring area. The increase in selling, general
and administrative expense was in line with the increase in sales. Company
sponsored product development increased 19% 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. Interest and other income increased due to
principally an increase in rates.
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
4 and 5 of this report for income tax information.
7
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, 1995.
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 there unto duly authorized.
TECH-SYM CORPORATION
Registrant
Date: May 15, 1995 /s/WENDELL W. GAMEL
-----------------------------
Wendell W. Gamel, Chairman of
the Board and President
Date: May 15, 1995 /s/RAY F. THOMPSON
-----------------------------
Ray F. Thompson, Vice-
President, Treasurer,
Controller and Chief
Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
10-Q FOR THE PERIOD ENDED MARCH 31, 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> MAR-31-1995
<CASH> 23,046
<SECURITIES> 255
<RECEIVABLES> 44,056
<ALLOWANCES> 0
<INVENTORY> 47,268
<CURRENT-ASSETS> 156,710
<PP&E> 36,887
<DEPRECIATION> 0
<TOTAL-ASSETS> 226,590
<CURRENT-LIABILITIES> 65,995
<BONDS> 0
<COMMON> 706
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 226,590
<SALES> 53,812
<TOTAL-REVENUES> 0
<CGS> 36,197
<TOTAL-COSTS> 49,316
<OTHER-EXPENSES> (791)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 878
<INCOME-PRETAX> 4,496
<INCOME-TAX> 1,400
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<NET-INCOME> 3,096
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
