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, 1996
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, 1996
------ -----------------------------
Common Stock, $.10 par value 6,576,531
<PAGE>
INDEX
Page No.
--------
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet March 31, 1996
and December 31, 1995 ........................................... 1
Consolidated Statement of Income and Accumulated
Earnings for Three Months Ended March 31,
1996 and 1995 ................................................... 2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 ...................... 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, December 31,
1996 1995
----------- ------------
(stated in thousands)
Assets
Current assets:
Cash and cash equivalents .................... $ 24,539 $ 20,715
Short-term investments ....................... 18,184 100
Receivables - net ............................ 54,187 54,199
Unbilled revenue ............................. 42,055 39,137
Inventories .................................. 71,896 59,492
Other ........................................ 2,049 4,675
--------- ---------
Total current assets ................... 212,910 178,318
Property, plant and equipment - net ............ 45,880 42,469
Long term receivables - net .................... 10,314 10,567
Other assets ................................... 37,515 33,672
--------- ---------
Total assets ........................... $ 306,619 $ 265,026
========= =========
Liabilities
Current liabilities:
Notes payable ................................ $ 30,276 $ 24,237
Current maturities of long-term debt ......... 7,211 4,861
Accounts payable ............................. 14,777 14,480
Billings in excess of cost and
estimated earnings on uncompleted
contracts .................................. 10,139 6,880
Taxes on income .............................. 2,865 1,366
Accrued and other liabilities ................ 20,720 22,737
--------- ---------
Total current liablilites .............. 85,988 74,561
Long-term debt ................................. 26,303 29,522
Deferred income taxes
Other liabilities .............................. 42,232 10,925
--------- ---------
Total liabilities ...................... 154,523 115,008
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
7,881,731 and 7,860,351 shares ................ 788 786
Additional capital ............................. 38,759 38,486
Accumulated earnings ........................... 125,134 122,855
Cumulative translation adjustments ............. (1,541) (1,095)
Common stock held in treasury at
cost (1,308,600 and 1,307,592 shares) ......... (11,044) (11,014)
--------- ---------
Total shareholders' investment ......... 152,096 150,018
--------- ---------
Total liabilities and
shareholders' investment .............. $ 306,619 $ 265,026
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 1
<PAGE>
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
For The Three Months
Ended March 31,
-------------------------
1996 1995
--------- ---------
(stated in thousands except
for per share amounts)
Sales .......................................... $ 71,685 $ 52,794
--------- ---------
Costs and expenses:
Cost of sales .............................. 45,494 35,063
Selling, general and administrative
expenses ................................. 16,745 12,508
Company sponsored product
development .............................. 5,447 3,390
Interest expense ........................... 1,263 878
Interest and other (income)
expense - net ............................ (643) (856)
--------- ---------
68,306 50,983
--------- ---------
Income before income taxes ............. 3,379 1,811
Provision for income taxes ..................... 1,100 653
--------- ---------
Net income .............................. 2,279 1,158
Accumulated earnings:
Beginning of period ........................ 122,855 109,820
--------- ---------
End of period .............................. $ 125,134 $ 110,978
========= =========
Earnings per common share:
Net income .............................. $ .35 $ .18
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 2
<PAGE>
Tech-Sym Corporation
Consolidated Statement of Cash Flows
For the Three Months
Ended March 31,
----------------------
1996 1995
-------- --------
(stated in thousands)
Cash flows from operating activities:
Net income ....................................... $ 2,279 $ 1,158
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................. 2,465 2,483
Change in operating assets and liabilities:
Receivables ................................... 25,977 (1,778)
Unbilled revenue .............................. (2,918) (2,646)
Inventories ................................... (2,313) (6,216)
Accounts payable and taxes on income .......... 863 4,984
Billing in excess and
other accrued liabilities .................... 3,259 4,810
Long-term receivables - net and
other assets ................................. (1,539) (1,783)
Other - net ................................... (10,983) (1,966)
-------- --------
Net cash provided by
(used for) operating activities ................ 17,090 (954)
-------- --------
Cash flows from investing activities:
Capital expenditures ............................. (5,310) (978)
Payment for purchase of business,
net of cash acquired ............................ 7,656
Purchase of investment securities ................ (18,084)
Other investing activities ....................... (42)
-------- --------
Net cash used for investing activities ........... (15,738) (1,020)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) under
line of credit agreements ....................... 8,137 5,485
Proceeds from long-term debt ..................... 81 1,610
Payments on long-term debt ....................... (5,991) (4,675)
Proceeds from exercise of stock options .......... 275
Cash paid to acquire treasury shares ............. (30)
-------- --------
Net cash provided by financing activities ........ 2,472 2,420
-------- --------
Net increase (decrease) in
cash and cash equivalents ........................ 3,824 446
Cash and cash equivalents at
beginning of period ............................. 20,715 24,083
-------- --------
Cash and cash equivalents at end of period ....... $ 24,539 $ 24,529
======== ========
Cash flow from operating activities include:
Interest paid .................................... $ 1,746 $ 1,404
Income taxes paid ................................ 30 281
The accompanying notes are an integral part of these consolidated financial
statements.
Page 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, 1996 and 1995 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 $71,896,000 at March 31, 1996, include raw materials of
$30,870,000 and work-in-process and finished goods of $41,026,000.
3. Shares of common stock of the Company have been reserved at March 31, 1996
for issuance as follows:
38,100 shares for issuance upon exercise of options granted under the
1980 Stock Option Plan of the Company.
20,000 shares for issuance upon exercise of options granted to
nonemployee directors.
670,890 shares for issuance upon exercise of options granted or to be
granted under the 1990 Stock Option Plan of the Company.
3,646,061 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, 1996 and 1995 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 1996 is due principally to
tax benefits of foreign sales.
Page 4
5. Earnings per common share are based on the weighted average number of shares
outstanding during each period (6,563,000 and 6,493,000 for the three months
ended March 31, 1996 and 1995, respectively).
6. Financial results for 1995 have been restated from those reported the same
period in the prior year to reflect the acquisition of CogniSeis
Development, Inc., in June 1995, which was accounted for as a pooling of
interests and to reflect the deferral of revenue recoginition on certain
sales where the right of exchange for credit existed.
Page 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 $17,090,000
for the three months ended March 31, 1996, and used cash in the amount of
$954,000 for the three months ended March 31, 1995. 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 (addi tional) 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, 1996, the Company had
unused committed lines of credit which aggregated $31,237,000.
After working capital, the chief use of the Company's funds has normally been
capital expenditures. Capital expenditures for property, plant and equipment
were $5,310,000 and $978,000 for the three months ended March 31, 1996 and 1995,
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,
1996 AND 1995
---------------
Increase(Decrease)
(stated in thousands)
Sales ........................................... $ 18,891
Costs and expenses .............................. (17,323)
--------
Income before income taxes ...................... 1,568
Provision for income taxes ...................... (447)
--------
Net income ...................................... $ 1,121
========
Page 6
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995:
Sales for the period ended March 31, 1996 increased 36% while costs and expenses
increased 34% which resulted in an increase in income before income taxes of 87%
over the like quarter of the previous year. This 23% increase in sales was the
result of (i) increase sales in the geoscience area ($8,545,000 or 53%) primar
ily due to shipments of the new 24-bit module, (ii) increased sales in the
communication area ($7,804,000 or 36%) primarily due to the acquisition of
TELEFUNKEN Sendertechnik GmbH effective January 1, 1996 and to a lesser extent,
greater demand for mi crowave components and antennas, and (iii) increased sales
in the defense system area ($3,179,000 or 25%) primarily due to the transition
of two major programs from the development stage into the production stage.
Cost of sales increased 30% while selling, general and adminis
trative expenses increased 34% as compared to the first quarter of 1995. These
increases compare favorably to the 36% in sales. Company sponsored product
development increased 61% for the current quarter due to increased projects in
the communications area and to a lesser extent in the geoscience area. Interest
expense increased 44% over the same quarter in the previous year due to an
increase in average debt outstanding for the period. Interest and other income
decreased 25% for the current quarter.
A lower effective tax rate also contributed to the increase in net income. See
Note 4 of the Notes to the Consolidated Finan cial Statements contained on pages
4 and 5 of this report for income tax information.
Page 7
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) Three reports on Form 8-K were filed with the Commission during the
three months ended March 31, 1996, as follows:
(i) Form 8-K dated January 15, 1996, with regard to the acquisition of
TELEFUNKEN Sendertechnik GmbH;
(ii) Form 8-K dated February 22, 1996, incorporating a press release
announcing 1995 year end financial re sults;
(iii) Form 8-K/A Amendment No. dated March 15, 1996, with regard to the
acquisition of TELEFUNKEN Sender technik GmbH.
No financial statements were filed as a part of this report.
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 13, 1996 /s/WENDELL W. GAMEL
Wendell W. Gamel, Chairman of
the Board and President
Date: May 13, 1996 /s/RAY F. THOMPSON
Ray F. Thompson, Vice-
President, Treasurer,
Controller and Chief
Financial Officer
Page 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM 10Q MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 24,539
<SECURITIES> 18,184
<RECEIVABLES> 54,187
<ALLOWANCES> 0
<INVENTORY> 71,896
<CURRENT-ASSETS> 212,910
<PP&E> 45,380
<DEPRECIATION> 0
<TOTAL-ASSETS> 306,119
<CURRENT-LIABILITIES> 85,988
<BONDS> 0
0
0
<COMMON> 788
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 152,096
<SALES> 71,685
<TOTAL-REVENUES> 0
<CGS> 45,494
<TOTAL-COSTS> 68,306
<OTHER-EXPENSES> (643)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,263
<INCOME-PRETAX> 3,379
<INCOME-TAX> 1,100
<INCOME-CONTINUING> 2,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,279
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
