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, 1997
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, Suite 200, 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, 1997
Common Stock, $.10 par value 6,051,581
<PAGE>
Form 10-Q
Tech-Sym Corporation
INDEX
Page No.
Part I. Financial Information:
Consolidated Balance Sheet September 30, 1997
and December 31, 1996 1
Consolidated Statement of Income and Accumulated
Earnings for the Quarter Ended September 30,
1997 and 1996 2
Consolidated Statement of Income and Accumulated
Earnings for the Nine Months Ended September 30,
1997 and 1996 3
Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
Part II. Other Information:
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
Page 1 Form 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tech-Sym Corporation
Consolidated Balance Sheet
(stated in thousands, September 30, December 31,
except share amounts) 1997 1996
--------- ---------
Assets (unaudited)
Current assets:
Cash and cash equivalents ................. $ 15,045 $ 20,450
Short-term investments .................... 5,802 6,380
Receivables - net ......................... 56,478 62,217
Unbilled revenue .......................... 54,997 48,814
Inventories ............................... 93,714 82,808
Other ..................................... 10,426 6,098
Net assets of discontinued operation ...... 12,018
--------- ---------
Total current assets ................ 248,480 226,767
Property, plant and equipment - net ......... 45,553 48,917
Long-term receivables - net ................. 10,125 16,695
Other assets ................................ 24,164 30,900
--------- ---------
Total assets ........................ $ 328,322 $ 323,279
========= =========
Liabilities
Current liabilities:
Notes payable and current maturities
of long-term debt ....................... $ 53,559 $ 33,657
Accounts payable .......................... 16,825 21,115
Billings in excess of cost and estimated
earnings on uncompleted contracts ....... 8,801 9,728
Taxes on income ........................... 3,627 5,201
Other accrued liabilities ................. 18,754 21,331
--------- ---------
Total current liablilites ........... 101,566 91,032
Long-term debt .............................. 17,374 13,974
Other liabilities and deferred credits ...... 35,824 43,022
--------- ---------
Total liabilities ................... 154,764 148,028
Minority interest ............................. 14,485 17,179
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
7,977,881 and 7,941,231 shares ............. 798 794
Additional capital .......................... 40,230 39,753
Accumulated earnings ........................ 148,913 145,195
Cumulative translation adjustments .......... (3,221) (911)
Common stock held in treasury at cost
(1,936,400 and 1,905,400 shares) ........... (27,647) (26,759)
--------- ---------
Total shareholders' investment ...... 159,073 158,072
--------- ---------
Total liabilities and
shareholders' investment ........... $ 328,322 $ 323,279
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 2 Form 10-Q
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
(stated in thousands,
except per share amounts) For The Quarter
Ended September 30,
-----------------------
1997 1996
--------- ---------
(unaudited)
Sales .............................................. $ 71,254 $ 83,181
--------- ---------
Costs and expenses:
Cost of sales .................................... 49,607 59,000
Selling, general and administrative
expenses ....................................... 15,979 14,108
Company-sponsored product development ............ 3,920 3,206
Interest expense ................................. 895 1,080
Interest and other expense (income) - net ........ 112 (563)
--------- ---------
70,513 76,831
--------- ---------
Income from continuting operations
before income taxes and
minority interest ......................... 741 6,350
Provision for income taxes
from continuing operations ....................... 311 2,058
Minority interest expense (income)
from continuing operations ....................... (299) 439
--------- ---------
Income from continuing operations
before extraordinary item ................. 729 3,853
Discontinued operation:
Loss from discontinued operation net of
applicable income taxes of $0 and $362
and minority interest expense of
$0 and $171, respectively ...................... 556
--------- ---------
Net income .................................. 729 3,297
Accumulated earnings:
Beginning of period .............................. 148,184 140,150
--------- ---------
End of period .................................... $ 148,913 $ 143,447
========= =========
Earnings (loss) per common share:
Continuing operations ............................ $ 0.12 $ 0.62
Discontinued operation ........................... (0.09)
--------- ---------
Net income .................................. $ 0.12 $ 0.53
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 3 Form 10-Q
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
(stated in thousands,
except per share amounts) For The Nine Months
Ended September 30,
------------------------
1997 1996
--------- ---------
(unaudited)
Sales ............................................ $ 216,377 $ 214,769
--------- ---------
Costs and expenses:
Cost of sales .................................. 150,480 144,995
Selling, general and administrative
expenses ..................................... 47,573 42,812
Company-sponsored product development .......... 10,469 10,588
Interest expense ............................... 2,656 3,155
Gain on issuance of stock by subsidiary ........ (21,166)
Interest and other (income) - net .............. (2,021) (2,497)
--------- ---------
209,157 177,887
--------- ---------
Income from continuting operations
before income taxes, minority
interest and extraordinary item ......... 7,220 36,882
Provision for income taxes
from continuing operations ..................... 2,227 12,451
Minority interest expense
from continuing operations ..................... 39 685
--------- ---------
Income from continuing operations
before extraordinary item ............... 4,954 23,746
Discontinued operation:
Loss from discontinued operation net of
applicable income taxes of $713 and
$1,195 and minority interest expense
of $352 and $376, respectively ............... 1,236 2,119
--------- ---------
Income before extraordinary item .......... 3,718 21,627
Extraordinary item:
Extraordinary loss on early
extinguishment of debt net of
applicable income taxes of $557 .............. 1,035
--------- ---------
Net income ................................ 3,718 20,592
Accumulated earnings:
Beginning of period ............................ 145,195 122,855
--------- ---------
End of period .................................. $ 148,913 $ 143,447
========= =========
Earnings (loss) per common share:
Continuing operations before
extraordinary item ........................... $ 0.82 $ 3.68
Discontinued operation ......................... (0.20) (0.33)
Extraordinary item ............................. (0.16)
--------- ---------
Net income ................................ $ 0.62 $ 3.19
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 4 Form 10-Q
Tech-Sym Corporation
Consolidated Statement of Cash Flows For the Nine Months
(stated in thousands) Ended September 30,
-------------------
1997 1996
-------- --------
(unaudited)
Cash flows from operating activities:
Net income ............................................. $ 3,718 $ 20,592
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization ....................... 10,812 9,476
Gain on issuance of stock by subsidiary ............. (21,166)
Gain on foreign currency denominated debt ........... (775)
Sale of equipment under operating lease ............. 1,172
Minority interest ................................... (313) 309
Change in assets and liabilities:
Receivables ......................................... 2,893 18,764
Unbilled revenue .................................... (6,183) (13,852)
Inventories ......................................... (10,952) (13,752)
Accounts payable and taxes on income ................ (5,298) 22,039
Billings in excess and other accrued liabilities .... (153) 1,505
Long-term receivables - net and other assets ........ (3,920) (4,944)
Other liabilities and deferred credits .............. (7,130) (12,850)
-------- --------
Net cash provided by (used for) operating activities ... (16,129) 6,121
-------- --------
Cash flows from investing activities:
Capital expenditures ................................... (9,081) (13,110)
Payment for purchase of business,
net of cash acquired .................................. 7,656
Sale (purchase) of investment securities ............... 578 (6,315)
Other investing activities ............................. 373 (434)
-------- --------
Net cash used for investing activities ................. (8,130) (12,203)
-------- --------
Cash flows from financing activities:
Net borrowings under bank line
of credit agreements .................................. 16,499 3,149
Proceeds from long-term debt ........................... 3,596 3,702
Payments on long-term debt ............................. (3,104) (20,887)
Proceeds from sale of notes receivable ................. 7,848
Proceeds from exercise of stock options ................ 481 760
Acquisition of Tech-Sym and
GeoScience treasury shares ............................ (4,156) (13,849)
Proceeds from issuance of subsidiary common stock ...... 40,381
Other .................................................. (2,310) (536)
-------- --------
Net cash provided by financing activities .............. 18,854 12,720
-------- --------
Net increase (decrease) in
Cash and cash equivalents .............................. (5,405) 6,638
Cash and cash equivalents at beginning of period ....... 20,450 20,715
-------- --------
Cash and cash equivalents at end of period ............. $ 15,045 $ 27,353
======== ========
Cash flow from operating activities include:
Interest paid .......................................... $ 3,107 $ 3,444
Income taxes paid ...................................... 5,211 2,703
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 5 Form 10-Q
Tech-Sym Corporation
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements of Tech-Sym
Corporation and its subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read
in conjunction with the financial statements and notes thereto appearing in
the Company's Annual Report for the year ended December 31, 1996.
In the opinion of the Company's management, all adjustments necessary for a
fair presentation of the results of operations for all periods reported
have been included. Such adjustments consist only of normal recurring
items.
The consolidated statements of income for the three and nine months ended
September 30, 1997, are not necessarily indicative of the results to be
expected for the full year ending December 31, 1997.
The consolidated financial statements have been restated to reflect the
geoscientific software subsidiary of the Company's majority owned
subsidiary, GeoScience Corporation ("GeoScience"), as a discontinued
operation in accordance with Accounting Principles Board Opinion No. 30
(see Note 2).
2. Effective June 30, 1997 (the "measurement date"), GeoScience adopted a plan
to sell its geoscientific software subsidiary, CogniSeis Development, Inc.
("CogniSeis"). Accordingly, CogniSeis is reported as a discontinued
operation for the periods presented.
On October 14, 1997 ("the disposal date"), the Company completed the sale
of CogniSeis to Paradigm GeoPhysical Corporation for $8.9 million in cash
plus future royalties ranging between $8.5 million and the net present
value as of the closing date of $12.0 million.
The Company expects to recognize a net gain for its ownership share of
approximately $3.0 million on the sale. Accordingly, the results of
CogniSeis' operations from the measurement date through the disposal date
have been deferred.
<PAGE>
Page 6 Form 10-Q
Tech-Sym Corporation
Notes to Consolidated Financial Statements - Continued
The operating results (unaudited) of the discontinued operation are
summarized as follows (in thousands):
Quarter Ended
September 30,
-----------------
1997 1996
------- -------
Revenue ................................................ $ $ 4,929
======= =======
Loss before provision for
income taxes .......................................... 1,089
Provision for income taxes ............................. 362
Minority interest ...................................... 171
------- -------
Net loss ............................................... $ $ 556
======= =======
Nine Months Ended
September 30,
-----------------
1997 1996
------- -------
Revenue ................................................ $11,398 $16,210
======= =======
Loss before provision for
income taxes .......................................... 2,301 3,690
Provision for income taxes ............................. 713 1,195
Minority interest ...................................... 352 376
------- -------
Net loss ............................................... $ 1,236 $ 2,119
======= =======
The net assets (unaudited) of the discontinued operation are summarized as
follows (in thousands):
September 30, 1997
------------------
Current assets ............................................. $ 7,770
Property, plant and equipment, net ......................... 2,923
Other assets ............................................... 5,310
Current liabilities ........................................ (3,985)
--------
Net assets ............................................ $ 12,018
========
3. Inventories, stated at the lower of cost (first-in, first-out) or market,
are summarized as follows (in thousands):
September 30, 1997 December 31, 1996
------------ ----------
(unaudited)
Raw Materials .............................. $37,690 $28,613
Work in Process ............................ 31,507 30,680
Finished Goods ............................. 24,517 23,515
------- -------
Total inventories ..................... $93,714 $82,808
======= =======
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Page 7 Form 10-Q
Tech-Sym Corporation
Notes to Consolidated Financial Statements - Continued
4. Earnings per common share are based on the weighted average number of
shares outstanding during each period (6,033,000 and 6,231,000 for the
quarter ended September 30, 1997 and 1996 respectively, and 6,036,000 and
6,452,000 for the nine month period ended September 30, 1997 and 1996,
respectively).
5. During the first quarter of 1997, the Company sold notes receivable in the
amount of $7,848,000 to a bank. In accordance with Statement of Financial
Accounting Standards No. 125 (FAS 125), TRANSFERS AND SERVICING OF
FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, the consolidated
financial statements reflect both the asset and the liability associated
with this transaction.
6. In 1997, Statement of Financial Accounting Standards No. 128 (FAS 128),
EARNINGS PER SHARE, was issued. FAS 128 is effective for earnings per share
calculations for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Adoption of FAS 128 is
not expected to have a material effect on the Company's financial position
or operational results.
Quarter Ended
September 30,
-------------------
1997 1996
-------- --------
Pro-forma earnings per share
Earnings per common share .................. $ 0.12 $ 0.53
-------- --------
Earnings per common share
assuming dilution ......................... $ 0.12 $ 0.51
-------- --------
Nine Months Ended
September 30,
-------------------
1997 1996
-------- --------
Pro-forma earnings per share
Earnings per common share .................. $ 0.62 $ 3.19
-------- --------
Earnings per common share
assuming dilution ......................... $ 0.60 $ 3.08
-------- --------
<PAGE>
Page 8 Form 10-Q
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
In June 1997, the Company's majority owned subsidiary, GeoScience Corporation
("GeoScience") adopted a plan to sell its geoscientific software subsidiary,
CogniSeis Development, Inc. ("CogniSeis"). CogniSeis is accounted for as a
discontinued operation. Accordingly, the consolidated financial statements have
been presented to report separately the operating results of the continuing
operations. The operating results of the discontinued operation from June 30,
1997 ("the measurement date") through October 14, 1997 ("the disposal date")
have been deferred as the Company expects to recognize a net gain on the sale.
All prior year amounts have been restated.
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO THE QUARTER
ENDED SEPTEMBER 30, 1996
Revenue decreased $11,927,000 or 14% to $71,254,000 for the quarter ended
September 30, 1997. The decrease in revenue resulted primarily from decreased
shipments in the geoscientific business area which decreased $9,845,000 or 35%
from the same quarter in the prior year due to the delay by certain customers in
placing anticipated orders. Revenue in the defense systems business area
decreased $3,026,000 or 16% as a result of delayed bookings of government and
foreign orders. Revenue in the communications business area grew slightly in
comparison to the third quarter of 1996 as increased shipments of weather radar
systems and microwave products were partially offset by decreased shipments of
broadcast equipment.
The consolidated gross profit margin increased from 29% to 30% of revenue for
the quarter ended September 30, 1997, compared to the same quarter in the prior
year. The increase in gross profit margin was due to shifts in the composition
of the product mix that resulted in increases within the communications and
defense systems business areas and decreases in the geoscientific business area.
The change in the composition of the product mix within the geoscientific
business area was the result of delayed customer orders for seismic data
acquisition modules.
Consolidated selling, general and administrative expenses increased 13% to
$15,979,000 during the third quarter of 1997. These expenses as a percentage of
revenue increased from 17% to 22% in comparison to the same quarter in the prior
year. The majority of the increase occurred in the geoscientific and
communications business areas. The increase in the geoscientific business area
primarily resulted from support personnel added at
<PAGE>
Page 9 Form 10-Q
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
the domestic manufacturing operations to support the anticipated growth in the
business and from higher consultant costs associated with increased seismic
cable sales and the implementation of a new management information system.
Within the communications business area, selling costs increased as a result of
marketing initiatives geared towards obtaining additional market share. The
Company-sponsored product development expenses were $3,920,000 for the quarter
ended September 30, 1997 compared to $3,206,000 for the quarter ended September
30, 1996. The increase related to the geoscientific business area and resulted
from design changes made to enhance the performance and reliability of the
24-bit seismic data acquisition module and from additional engineering efforts
on the PolySeis product to address customer demands through enhanced
capabilities.
Interest expense decreased to $895,000 during the third quarter of 1997 from
$1,080,000 during the third quarter of 1996 as a result of lower borrowings on
the Company's credit lines, primarily in the geoscientific business area.
Other expense for the quarter ended September 30, 1997 was $112,000 compared to
other income of $563,000 for the same quarter in 1996. The change resulted from
a reduction in interest income on interest bearing receivables.
The effective tax rate for the quarter ended September 30, 1997 was 30% compared
to 35% for the same period in the prior year. The Company's effective tax rate
is lower than the statutory United States rate due principally to benefits
generated from foreign sales.
Minority interest income from continuing operations for the quarter ended
September 30, 1997, was $299,000 compared to expense of $439,000 for the quarter
ended September 30, 1996. Minority interest expense/income reflects the portion
of GeoScience Corporation's net loss from continuing operations of $1,434,000
for the quarter ended September 30, 1997, and net income from continuing
operations of $1,865,000 for the quarter ended September 30, 1996, which is
attributable to minority shareholders.
Income from continuing operations before extraordinary item for the third
quarter of 1997 was $729,000 compared to $3,853,000 for the corresponding
quarter a year ago, reflecting the results of lower revenue, higher operating
expenses and lower interest income as discussed above.
<PAGE>
Page 10 Form 10-Q
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
The results of the discontinued operation for the quarter ended September 30,
1997, were deferred and will be included in the gain on disposal of the
discontinued operation. The sale of the discontinued operation was completed on
October 14, 1997.
Net income for the quarter decreased 78% to $729,000 or $.12 per share compared
to net income of $3,297,000 or $.53 per share for the same quarter in the prior
year.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
SEPTEMBER 30, 1996
Revenue increased 1% to $216,377,000 for the nine months ended September 30,
1997, from $214,769,000 for the same period in the prior year. The slight growth
in revenue resulted from increased shipments in the communications business area
of $11,524,000 or 13%. Revenue relating to the defense systems business area
decreased $7,058,000 or 14% from the same period in the prior year due to
continued delays in the receipt of new government and foreign orders. Within the
geoscientific business area, shipments decreased $2,062,000 or 3% as a result of
certain customers delaying the placement of anticipated orders for seismic data
acquisition modules.
The consolidated gross profit margin decreased from 32% to 30% of revenue for
the nine months ended September 30, 1997, primarily due to the increased
manufacturing costs of microwave products within the communications business
area. The increased costs resulted from the inefficiencies associated with the
general business growth and the implementation of a new management information
system. Additionally, the consolidated gross profit margin was affected by a
shift in the composition of the product mix created by certain geoscientific
customers delaying the placement of anticipated orders.
Consolidated selling, general and administrative expenses increased to
$47,573,000 for the period ended September 30, 1997, from $42,812,000. These
expenses as a percentage of revenue increased from 20% to 22% in comparison to
the same period in the prior year. The increase occurred primarily in the
geoscientific business area and to a lesser extent in the communications
business area. The primary reasons for the increase at the geoscientific
business area were (i) the additional support personnel costs associated with
the higher employment levels added in anticipation of accelerated business
growth, (ii) higher consulting costs associated with increased seismic cable
sales and the
<PAGE>
Page 11 Form 10-Q
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
implementation of a new management information system, and (iii) the additional
costs of managing the consolidated business and being a publicly traded company.
The increase in the communications business area resulted from increased selling
costs that compared favorably with the increase in revenue. Company-sponsored
product development expenses were $10,469,000 for the period ended September 30,
1997, compared to $10,588,000 for the period ended September 30, 1996. Increases
for design changes to the 24-bit seismic data acquisition module in the
geoscientific business area were offset by reductions in the broadcast equipment
product line of the communications business area, where the prior year period
included major design efforts for new low powered FM and AM transmitter products
and for digital video broadcast equipment.
Interest expense was $2,656,000 for the nine month period ended September 30,
1997, as compared to $3,155,000 for the nine month period ended September 30,
1996. The decrease was derived from a reduction in interest bearing debt as a
result of proceeds generated from the sale of stock of GeoScience Corporation to
the public during the second quarter of 1996. Other income decreased to
$2,021,000 from $2,497,000 primarily due to a reduction in interest bearing
receivables.
The effective tax rate for the nine months ended September 30, 1997 was 31%
compared to 34% for the same period in the prior year. The Company's effective
tax rate is lower than the statutory United States rate due principally to tax
benefits generated from foreign sales.
Minority interest expense from continuing operations for the nine months ended
September 30, 1997, was $39,000 compared to $685,000 for the nine months ended
September 30, 1996. Minority interest expense reflects the portion of GeoScience
Corporation's net income from continuing operations of $101,000 and $4,235,000
for the nine months ended September 30, 1997 and 1996, respectively, which is
attributable to minority shareholders.
Income from continuing operations before extraordinary item for the nine month
period of 1997 was $4,954,000 compared to $23,746,000 for the corresponding
period in the prior year. The nine months ended September 30, 1996, included a
net gain of $13,700,000 related to the sale of common stock of GeoScience
Corporation to the public. The lower gross profit margin, higher operating
expenses and lower interest income as discussed above caused the income from
continuing operations for the current nine
<PAGE>
Page 12 Form 10-Q
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
month period to be less than the comparable 1996 period without the gain on the
sale of GeoScience stock.
Loss from the discontinued operation for the nine months ended September 30,
1997, decreased $883,000 or $.13 per share from the same period in the prior
year as a result of a higher gross margin due to product sales mix and lower
operating expenses due to staffing reductions made during and after the third
quarter of 1996. The results of the discontinued operation from the measurement
date through the disposal date were deferred and will be included in the gain on
disposal of the discontinued operation to be recognized in the fourth quarter of
1997.
Net income for the nine months ended September 30, 1997, decreased 82% to
$3,718,000 or $.62 per share compared to net income of $20,592,000 or $3.19 per
share for the same period in the prior year. The 1996 results included a net
gain of $13,700,000 on the sale of common shares of GeoScience Corporation to
the public and a net loss of $1,035,000 for the premium paid on early
extinguishment of debt.
Backlog at September 30, 1997 was $142,531,000 compared to $173,678,000 at
September 30, 1996. The decrease occurred in the defense systems business area
and the broadcast equipment product line within the communications business
area.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently satisfying its working capital and capital expenditure
requirements through internally generated cash from operations and bank
borrowings. At September 30, 1997, the Company's working capital balance was
$146,914,000 compared to $135,735,000 at December 31, 1996. The increase in
working capital is a result of a decrease in liabilities which resulted from
segregating the net assets of the discontinued operation as a current asset at
September 30, 1997 and an increase in inventory levels. Cash used for operations
was $16,129,000 for the nine months ended September 30, 1997, compared to cash
provided by operations of $6,121,000 for the same period in the prior year.
As of September 30, 1997, the Company had uncommitted bank lines of credit
aggregating approximately $84,295,000. Borrowings under these lines were
$45,905,000, including the discontinued operation. The Company had a working
capital ratio of 2.45 to
<PAGE>
Page 13 Form 10-Q
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
1.0 and debt to total capitalization of 31%. The Company believes that its
current financial position and available lines of credit will provide ample
sources of funds to meet foreseeable requirements.
Purchases of property, plant and equipment totaled $9,081,000 for the nine
months ended September 30, 1997, compared to $13,110,000 for the corresponding
prior year period. The Company estimates that capital expenditures for property,
plant and equipment during the remainder of 1997 will be approximately
$7,905,000. Most of the anticipated capital expenditures are not subject to firm
commitments and the Company may modify its plans depending on future results of
operations or other factors.
Forward-looking statements in this document are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties, including, without limitation, risks associated with the
uncertainty of market acceptance of the Company's products, limited number of
customers, as well as risks of downturns in economic conditions generally, risks
associated with competition and competitive pricing pressures, and other risks
detailed in the Company's filings with the Securities and Exchange Commission.
<PAGE>
Page 14 Form 10-Q
Tech-Sym Corporation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In a previously reported patent infringement case filed in 1994 with
the United States District Court for the Northern District of
Alabama, Southern Division, by Thomcast A.G. ("Thomcast") against
the Company's subsidiary, Continental Electronics Corporation
("CEC") and its customer, Eternal Word Television Network, Inc., a
settlement agreement was entered into effective September 19, 1997.
Under the terms of the settlement agreement, all claims and
counterclaims of the parties have been settled with no admission of
liability by any party. CEC agreed to pay Thomcast a certain amount
of cash over three years, which amount is not material to the
consolidated financial condition of the Company. In addition,
Thomcast granted CEC, its subsidiaries, and a potential sublicensee
a worldwide license to twenty patents for use with CEC's solid state
switching amplifier in exchange for future royalties. Each party
agreed to bear its own costs and fees. CEC and Thomcast agreed to
submit to the District Court a joint motion to dismiss the suit with
prejudice.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 - Financial Data Schedule which is deemed not to be filed for
purposes of liability under the federal securities laws.
(b) Reports on Form 8-K.
Current Report on Form 8-K dated September 2, 1997 (Item 5. Other
Events -- reported the information set forth in the press release
dated September 2, 1997, concerning third quarter preliminary
results).
Current Report on Form 8-K/A dated September 2, 1997 (reported same
information as Current Report on Form 8-K dated September 2, 1997,
but amended EDGAR submission page).
<PAGE>
Page 15 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 14, 1997 /s/ Wendell W. Gamel
Wendell W. Gamel, Chairman of
the Board and President
Date: November 14, 1997 /s/ Ray F. Thompson
Ray F. Thompson, Vice-
President, Treasurer,
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TECH SYM'S 3RD QUARTER 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,045
<SECURITIES> 5,802
<RECEIVABLES> 56,478
<ALLOWANCES> 0
<INVENTORY> 93,714
<CURRENT-ASSETS> 248,480
<PP&E> 45,553
<DEPRECIATION> 0
<TOTAL-ASSETS> 328,322
<CURRENT-LIABILITIES> 101,566
<BONDS> 0
0
0
<COMMON> 798
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 328,322
<SALES> 216,377
<TOTAL-REVENUES> 0
<CGS> 150,480
<TOTAL-COSTS> 209,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,656
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,954
<DISCONTINUED> (1,236)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,718
<EPS-PRIMARY> .62
<EPS-DILUTED> 0
</TABLE>
