Form 10-Q/A
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, 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 April 30, 1997
Common Stock, $.10 par value 6,035,781
<PAGE>
Form 10-Q/A
INDEX
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Page No.
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Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet March 31, 1997
and December 31, 1996 1
Consolidated Statement of Income and Accumulated
Earnings for Three Months Ended March 31,
1997 and 1996 2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
Signatures 10
<PAGE>
Page 1 Form 10-Q/A
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tech-Sym Corporation
Consolidated Balance Sheet
(stated in thousands, March 31, December 31,
except share amounts) 1997 1996
--------- ---------
Assets (unaudited)
Current assets:
Cash and cash equivalents .................. $ 18,996 $ 20,450
Short-term investments ..................... 4,025 6,380
Receivables - net .......................... 67,624 62,217
Unbilled revenue ........................... 51,922 48,814
Inventories ................................ 86,019 82,808
Other ...................................... 8,335 6,098
--------- ---------
Total current assets ................. 236,921 226,767
Property, plant and equipment - net .......... 49,041 48,917
Long-term receivables - net .................. 12,520 16,695
Other assets ................................. 27,322 30,900
--------- ---------
Total assets ......................... $ 325,804 $ 323,279
========= =========
Liabilities
Current liabilities:
Notes payable .............................. $ 34,496 $ 29,406
Current maturities of long-term debt ....... 6,696 4,251
Accounts payable ........................... 19,033 21,115
Billings in excess of cost and estimated
earnings on uncompleted contracts ........ 10,584 9,728
Taxes on income ............................ 5,135 5,201
Other accrued liabilities .................. 19,584 21,331
--------- ---------
Total current liablilites ............ 95,528 91,032
Long-term debt ............................... 16,995 13,974
Other liabilities and deferred credits ....... 38,635 43,022
--------- ---------
Total liabilities .................... 151,158 148,028
Minority interest .............................. 16,118 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
7,949,781 and 7,941,231 shares .............. 795 794
Additional capital ........................... 39,895 39,753
Accumulated earnings ......................... 146,741 145,195
Cumulative translation adjustments ........... (2,144) (911)
Common stock held in treasury at cost
(1,905,400 shares) .......................... (26,759) (26,759)
--------- ---------
Total shareholders' investment ....... 158,528 158,072
--------- ---------
Total liabilities and
shareholders' investment ............ $ 325,804 $ 323,279
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Page 2 Form 10-Q/A
Tech-Sym Corporation
Consolidated Statement of Income and
Accumulated Earnings
(stated in thousands,
except per share amounts)
For the Three Months
Ended March 31,
-------------------------
1997 1996
--------- ---------
(unaudited)
Sales .......................................... $ 78,721 $ 71,685
--------- ---------
Costs and expenses:
Cost of sales ................................ 53,255 45,494
Selling, general and administrative
expenses ................................... 18,150 16,745
Company-sponsored product development ........ 4,688 5,447
Interest expense ............................. 762 1,263
Interest and other (income) - net ............ (325) (643)
--------- ---------
76,530 68,306
--------- ---------
Income before income taxes
and minority interest ................. 2,191 3,379
Provision for income taxes ..................... 695 1,100
Minority interest (income) ..................... (50)
--------- ---------
Net income ............................. 1,546 2,279
Accumulated earnings:
Beginning of period .......................... 145,195 122,855
--------- ---------
End of period ................................ $ 146,741 $ 125,134
========= =========
Earnings (loss) per common share:
Net income .............................. $ 0.26 $ 0.35
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
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Page 3 Form 10-Q/A
Tech-Sym Corporation
Consolidated Statement of Cash Flows
(stated in thousands)
For the Three Months
Ended March 31,
--------------------
1997 1996
-------- --------
(unaudited)
Cash flows from operating activities:
Net income ........................................... $ 1,546 $ 2,279
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization ..................... 3,292 2,465
Minority interest ................................. (50)
Change in assets and liabilities:
Receivables ....................................... (3,186) 25,977
Unbilled revenue .................................. (3,108) (2,918)
Inventories ....................................... (3,211) (2,313)
Accounts payable and taxes on income .............. (2,148) 863
Billing in excess and other accrued liabilites .... (891) 3,259
Long-term receivables - net and other assets ...... 2,433 (1,539)
Other liabilities and deferred credits ............ (4,387) (10,983)
-------- --------
Net cash provided by (used for) operating activities . (9,710) 17,090
-------- --------
Cash flows from investing activities:
Capital expenditures ................................. (2,554) (5,310)
Payment for purchase of business,
net of cash acquired ................................ 7,656
Sale (purchase) of investment securities ............. 2,355 (18,084)
Other investing activities ........................... 434
-------- --------
Net cash provided by (used for) investing activities . 235 (15,738)
-------- --------
Cash flows from financing activities:
Net borrowings under bank line of credit agreements .. 4,669 8,137
Proceeds from long-term debt ......................... 15 81
Payments on long-term debt ........................... (1,976) (5,991)
Proceeds from exercise of stock options .............. 143 275
Acquisition of Tech-Sym and
GeoScience treasury shares .......................... (1,445) (30)
Proceeds from sale of notes receivable ............... 7,848
Other ................................................ (1,233)
-------- --------
Net cash provided by financing activities ............ 8,021 2,472
-------- --------
Net increase (decrease) in
Cash and cash equivalents ............................ (1,454) 3,824
Cash and cash equivalents at beginning of period ..... 20,450 20,715
-------- --------
Cash and cash equivalents at end of period ........... $ 18,996 $ 24,539
======== ========
Cash flow from operating activities include:
Interest paid ........................................ $ 819 $ 1,746
Income taxes paid .................................... 270 30
The accompanying notes are an integral part of these consolidated
financial statements.
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Page 4 Form 10-Q/A
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, 1997 and 1996 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.
The accompanying consolidated financial statements for the quarter ended
March 31, 1997, have been restated. The restatement reflects the higher cost
of revenue for certain engineering and manufacturing costs which were
erroneously capitalized at the Company's majority-owned GeoScience
subsidary. The restatement also corrects an overstatement in sales and
earnings at the Company's TRAK Microwave subsidiary that resulted from
errors associated with manual inputs made into a new management information
system. The restated consolidated statement of income and accumulated
earnings for the quarter ended March 31, 1997, is summarized as follows (in
thousands, except per share amounts):
Quarter ended March 31, 1997
As previously As
reported restated
----------------------------
Sales $79,521 $78,721
Income before income taxes
and minority interest 3,581 2,191
Minority interest
expense (income) 43 (50)
Net income 2,441 1,546
Earnings per common share $.40 $.26
Retained earnings at
March 31, 1997 $147,636 $146,741
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 $86,019,000 at March 31, 1997, include raw materials of
$30,836,000 and work-in-process and finished goods of $55,183,000.
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Page 5 Form 10-Q/A
Notes to Consolidated Financial Statements - Continued
3. Shares of common stock of the Company have been reserved at March 31, 1997
for issuance as follows:
600 shares for issuance upon exercise of options granted under the 1980
Stock Option Plan of the Company.
15,000 shares for issuance upon exercise of options granted to
nonemployee directors.
635,440 shares for issuance upon exercise of options granted or to be
granted under the 1990 Stock Option Plan of the Company.
3,347,711 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, 1997 and 1996 was equivalent to an effective rate of 31% and 32%,
respectively, of earnings before income taxes. The difference between the
effective rate and the U.S. statutory rate for 1997 is due principally to
tax benefits of foreign sales.
5. Earnings per common share are based on the weighted average number of shares
outstanding during each period (6,041,000 and 6,563,000 for the three months
ended March 31, 1997 and 1996, respectively).
6. 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 were restated to reflect both the asset and the
liability associated with this transaction.
7. 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
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Page 6 Form 10-Q/A
Notes to Consolidated Financial Statements - Continued
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
March 31,
1997 1996
----------------
Pro forma earnings per share
Earnings per common share $0.26 $0.35
----- -----
Earnings per common share
assuming dilution $0.25 $0.33
----- -----
8. Effective June 20, 1996, the Board of Directors authorized the Company to
repurchase up to 500,000 shares of its common stock. Effective August 15,
1996, the Board authorized a 250,000 share increase in the stock repurchase
plan, with a revised maximum amount of 750,000 shares. Through April 30,
1997, the Company had repurchased 610,200 shares at an average price of
$26.35 per share.
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Page 7 Form 10-Q/A
ITEM 2. 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 $9,710,000 for the
three months ended March 31, 1997, versus providing cash in the amount of
$17,090,000 for the three months ended March 31, 1996. Effective May 17, 1996,
the Company's subsidiary, GeoScience Corporation, completed an initial public
offering of 2,597,600 shares of its common stock. After the offering, the
Company owned 75.3% of this subsidiary. The net proceeds to the subsidiary were
$40.5 million of which $27.5 million was used to repay borrowings from the
Company. The Company, in turn, used these proceeds to reduce the outstanding
balance on a revolving credit facility and to prepay its senior unsecured notes
which were entered into in March of 1989. At March 31, 1997, the Company had
unused committed lines of credit which aggregated $52.9 million.
After working capital, the chief use of the Company's funds has normally been
capital expenditures. Capital expenditures for property, plant and equipment
were $2,554,000 and $5,310,000 for the three months ended March 31, 1997 and
1996, 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 statement of income.
A summary of the period to period changes in the principal items included in
the consolidated statement of income is shown below:
Comparison of
Three Months
Ended March 31,
1997 and 1996
-------------
Increase(Decrease)
(stated in thousands)
Sales ................................... $ 7,036
Costs and expenses ...................... 8,224
-------
Income before income taxes
and minority interest ................. (1,118)
Provision for income taxes .............. (405)
Minority interest income ................ 50
-------
Net income .............................. $ (733)
=======
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Page 8 Form 10-Q/A
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Continued
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996:
Revenue for the quarter ended March 31, 1997, increased 10% to $78,721,000 from
$71,685,000 for the year earlier period. Cost and expenses increased 12% to
$76,530,000 from $68,306,000. Income before income taxes and minority interest
decreased 35% to $2,191,000 from $3,379,000. The 10% increase in revenue was the
result of (i) increased sales in the geoscientific area ($4,403,000 or 18%), due
primarily to increased shipments of marine seismic cables and increased
maintenance and other revenue resulting from contract awards to provide
technical data services to bidders on oil exploration leases, which offset
revenue decreases resulting primarily from delayed placement of geoscientific
software orders by certain customers and (ii) increased sales in the
communications area ($3,641,000 or 12%), primarily due to greater demand for
microwave components, broadcast equipment, and weather radar equipment. The
increases in these areas more than offset the revenue decrease in the defense
systems area ($833,000 or 5%) due to delays in government orders.
Cost of revenue for the quarter ended March 31, 1997, increased $7,761,000 or
17% to $53,255,000 from $45,494,000. This increase was due to (i) the general
increase in sales over the year earlier period, (ii) increased costs on sales
within the communications area, primarily due to a greater amount of lower
margin cost plus fixed fee government contracts in the product mix for the
period and increased manufacturing costs on microwave products due to
inefficiencies related to the implementation of a new management information
system that created delays in product shipments, and (iii) a significant shift
in the product mix of the sales within the geoscientific business area which
included (w) larger shipments of marine seismic cables, which have higher
production costs in relationship to selling price as compared to the electronics
portion of the seismic data acquisition systems, (x) increased engineering and
manufacturing costs associated with design changes made to the 24-bit seismic
data acquisition module, (y) increased manufacturing costs within the domestic
seismic cable manufacturing facility, and (z) lower shipments of software
products, which generally have a very low cost of sales in comparison to
equipment products and maintenance and other service revenue.
Selling, general and administrative expenses increased $1,405,000 or 8% to
$18,150,000 from $16,745,000 in the like quarter last year. While the increase
compares favorably with the increase in revenue for the current period, it
occurred primarily in the geoscientific business area due to (i) higher
commissions relating to a large international sale and (ii) increased royalties
<PAGE>
Page 9 Form 10-Q/A
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Continued
relating to seismic equipment sales. Research and development expense for the
quarter decreased 14% to $4,688,000 from $5,447,000. The decrease was primarily
in the communications business area due to the completion of several projects
that were under development in the like period last year. The decrease also
reflected (i) the cost cutting measures initiated during the second half of 1996
within the geoscientific software business area and (ii) the reduction of field
testing expenses related to the Polyseis products within the geoscientific
equipment business area.
Interest expense decreased 40% to $762,000 from $1,263,000 as compared to the
prior year period as a result of the reduction of interest bearing debt due to
the proceeds from the initial public offering of 2,597,600 shares of the common
stock of the Company's subsidiary, GeoScience Corporation, as more fully
discussed in the Liquidity section of this Form 10-Q. Other income, net,
decreased 49% to $325,000 from $643,000 primarily due to (i) lower earnings on
investments and (ii) the like quarter in 1996 included a credit for investment
in foreign facilities.
The Company's software subsidiary, CogniSeis Development, Inc., posted a first
quarter pre-tax loss of $1,087,000. The Company is soliciting offers to acquire
the subsidiary and intends to sell it if the price and terms of an offer reflect
the intrinsic value and profit-making potential of the subsidiary and its
product lines.
<PAGE>
Page 10 Form 10-Q/A
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: November 12, 1997 /s/ Wendell W. Gamel
Wendell W. Gamel, Chairman of
the Board and President
(principal executive officer)
Date: November 12, 1997 /s/ Ray F. Thompson
Ray F. Thompson, Vice-
President and Treasurer
(principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TECH-SYM'S FORM 10-Q/A, 1ST QUARTER 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,996
<SECURITIES> 4,025
<RECEIVABLES> 67,624
<ALLOWANCES> 0
<INVENTORY> 86,019
<CURRENT-ASSETS> 236,921
<PP&E> 49,041
<DEPRECIATION> 0
<TOTAL-ASSETS> 325,804
<CURRENT-LIABILITIES> 95,528
<BONDS> 0
0
0
<COMMON> 795
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 325,804
<SALES> 78,721
<TOTAL-REVENUES> 0
<CGS> 53,255
<TOTAL-COSTS> 76,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 762
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,546
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0
</TABLE>
