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 June 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 July 31, 1997
Common Stock, $.10 par value 6,031,481
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Form 10-Q/A
Tech-Sym Corporation
INDEX
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Page No.
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Part I. Financial Information:
Consolidated Balance Sheet June 30, 1997
and December 31, 1996 1
Consolidated Statement of Income and Accumulated
Earnings for the Quarter Ended June 30,
1997 and 1996 2
Consolidated Statement of Income and Accumulated
Earnings for the Six Months Ended June 30,
1997 and 1996 3
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 4
Notes to Consolidated Financial Statements 5-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
Signatures 16
<PAGE>
Page 1 Form 10-Q/A
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tech-Sym Corporation
Consolidated Balance Sheet
(stated in thousands, June 30, December 31,
except share amounts) 1997 1996
----------- ------------
Assets (unaudited)
Current assets:
Cash and cash equivalents .................... $ 12,339 $ 20,450
Short-term investments ....................... 5,810 6,380
Receivables - net ............................ 60,712 62,217
Unbilled revenue ............................. 49,476 48,814
Inventories .................................. 90,792 82,808
Other ........................................ 11,069 6,098
--------- ---------
Total current assets ................... 230,198 226,767
Property, plant and equipment - net ............ 45,708 48,917
Long-term receivables - net .................... 12,666 16,695
Other assets ................................... 23,817 30,900
Net assets of discontinued operation ........... 12,385
--------- ---------
Total assets ........................... $ 324,774 $ 323,279
========= =========
Liabilities
Current liabilities:
Notes payable ................................ $ 38,798 $ 29,406
Current maturities of long-term debt ......... 7,089 4,251
Accounts payable ............................. 17,428 21,115
Billings in excess of cost and estimated
earnings on uncompleted contracts .......... 8,293 9,728
Taxes on income .............................. 4,721 5,201
Other accrued liabilities .................... 16,774 21,331
--------- ---------
Total current liablilites .............. 93,103 91,032
Long-term debt ................................. 18,016 13,974
Other liabilities and deferred credits ......... 39,010 43,022
--------- ---------
Total liabilities ...................... 150,129 148,028
Minority interest ................................ 15,532 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
7,964,181 and 7,941,231 shares ................ 796 794
Additional capital ............................. 40,083 39,753
Accumulated earnings ........................... 148,184 145,195
Cumulative translation adjustments ............. (2,303) (911)
Common stock held in treasury at cost
(1,936,400 and 1,905,400 shares) .............. (27,647) (26,759)
--------- ---------
Total shareholders' investment ......... 159,113 158,072
--------- ---------
Total liabilities and
shareholders' investment .............. $ 324,774 $ 323,279
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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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 Quarter
Ended June 30,
------------------------
1997 1996
--------- ---------
(unaudited)
Sales ............................................ $ 72,225 $ 65,780
--------- ---------
Costs and expenses:
Cost of sales .................................. 50,062 42,832
Selling, general and administrative
expenses ..................................... 16,155 14,723
Company-sponsored product development .......... 3,394 3,561
Interest expense ............................... 1,081 706
Gain on issuance of stock by subsidiary ........ (21,166)
Interest and other (income) - net .............. (1,824) (1,103)
--------- ---------
68,868 39,553
--------- ---------
Income from continuting operations
before income taxes, minority
interest and extraordinary item ......... 3,357 26,227
Provision for income taxes
from continuing operations ..................... 932 8,998
Minority interest expense
from continuing operations ..................... 242 246
--------- ---------
Income from continuing operations
before extraordinary item ............... 2,183 16,983
Discontinued operation:
Loss from discontinued operation net of
applicable income taxes of $425 and
$538 and minority interest expense of
$206 and $205, respectively .................. 740 932
--------- ---------
Income before extraordinary item .......... 1,443 16,051
Extraordinary item:
Extraordinary loss on early
extinguishment of debt net of
applicable income taxes of $557 .............. 1,035
--------- ---------
Net income ................................ 1,443 15,016
Accumulated earnings:
Beginning of period ............................ 146,741 125,134
--------- ---------
End of period .................................. $ 148,184 $ 140,150
========= =========
Earnings (loss) per common share:
Continuing operations before
extraordinary item ........................... $ 0.36 $ 2.58
Discontinued operation ......................... (0.12) (0.14)
Extraordinary item ............................. (0.16)
--------- ---------
Net income ................................ $ 0.24 $ 2.28
========= =========
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 Income and
Accumulated Earnings
(stated in thousands,
except per share amounts) For The Six Months
Ended June 30,
------------------------
1997 1996
--------- ---------
(unaudited)
Sales ............................................ $ 145,123 $ 131,588
--------- ---------
Costs and expenses:
Cost of sales .................................. 100,873 85,995
Selling, general and administrative
expenses ..................................... 31,594 28,704
Company-sponsored product development .......... 6,549 7,382
Interest expense ............................... 1,761 2,075
Gain on issuance of stock by subsidiary ........ (21,166)
Interest and other (income) - net .............. (2,133) (1,934)
--------- ---------
138,644 101,056
--------- ---------
Income from continuting operations
before income taxes, minority
interest and extraordinary item ......... 6,479 30,532
Provision for income taxes
from continuing operations ..................... 1,916 10,393
Minority interest expense
from continuing operations ..................... 338 246
--------- ---------
Income from continuing operations
before extraordinary item ............... 4,225 19,893
Discontinued operation:
Loss from discontinued operation net of
applicable income taxes of $713 and
$833 and minority interest expense of
$352 and $205, respectively .................. 1,236 1,563
--------- ---------
Income before extraordinary item .......... 2,989 18,330
Extraordinary item:
Extraordinary loss on early
extinguishment of debt net of
applicable income taxes of $557 .............. 1,035
--------- ---------
Net income ................................ 2,989 17,295
Accumulated earnings:
Beginning of period ............................ 145,195 122,855
--------- ---------
End of period .................................. $ 148,184 $ 140,150
========= =========
Earnings (loss) per common share:
Continuing operations before
extraordinary item ........................... $ 0.70 $ 3.03
Discontinued operation ......................... (0.20) (0.24)
Extraordinary item ............................. (0.16)
--------- ---------
Net income ................................ $ 0.50 $ 2.63
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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Page 4 Form 10-Q/A
Tech-Sym Corporation
Consolidated Statement of Cash Flows For the Six Months
(stated in thousands) Ended June 30,
---------------------
1997 1996
--------- ---------
(unaudited)
Cash flows from operating activities:
Net income ........................................... $ 2,989 $ 17,295
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization ..................... 6,836 6,019
Sale of equipment under operating lease ........... 731
Gain on issuance of stock by subsidiary ........... (21,166)
Gain on foreign currency denominated debt ......... (641)
Minority interest ................................. (14) 41
Change in assets and liabilities:
Receivables ....................................... (883) 23,528
Unbilled revenue .................................. (662) (6,038)
Inventories ....................................... (8,185) (15,175)
Accounts payable and taxes on income .............. (2,922) 14,777
Billing in excess and other accrued liabilities ... (9,785) (2,118)
Long-term receivables - net and other assets ...... (5,675) 885
Other liabilities and deferred credits ............ 2,512 (10,269)
-------- --------
Net cash provided by (used for) operating activities . (15,699) 7,779
-------- --------
Cash flows from investing activities:
Capital expenditures ................................. (5,965) (8,411)
Payment for purchase of business,
net of cash acquired ................................ 7,656
Sale of investment securities ........................ 570
Other investing activities ........................... 270 (342)
-------- --------
Net cash used for investing activities ............... (5,125) (1,097)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) under bank line
of credit agreements ................................ 9,392 (12,038)
Proceeds from long-term debt ......................... 2,432 3,406
Payments on long-term debt ........................... (2,759) (20,431)
Proceeds from sale of notes receivable ............... 7,848
Proceeds from exercise of stock options .............. 332 544
Acquisition of Tech-Sym and
GeoScience treasury shares .......................... (3,140) (30)
Proceeds from issuance of subsidiary common stock .... 39,525
Other ................................................ (1,392) (509)
-------- --------
Net cash provided by financing activities ............ 12,713 10,467
-------- --------
Net increase (decrease) in
Cash and cash equivalents ............................ (8,111) 17,149
Cash and cash equivalents at beginning of period ..... 20,450 20,715
-------- --------
Cash and cash equivalents at end of period ........... $ 12,339 $ 37,864
======== ========
Cash flow from operating activities include:
Interest paid ........................................ $ 1,921 $ 2,864
Income taxes paid .................................... 4,664 2,553
The accompanying notes are an integral part of these consolidated financial
statements.
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Page 5 Form 10-Q/A
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 ("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 six months ended
June 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).
The accompanying consolidated financial statements for the quarter and
six months ended June 30, 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 subsidiary. 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 and six
months ended June 30, 1997, are summarized as follows (in thousands,
except per share amounts):
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Page 6 Form 10-Q/A
Tech-Sym Corporation
Notes to Consolidated Financial Statements - Continued
Quarter Six months
ended ended
June 30, 1997 June 30, 1997
-------------------- ---------------------
As As
previously As previously As
reported restated reported restated
---------- -------- ---------- --------
Sales .......................... $ 73,725 $ 72,225 $147,423 $145,123
Income from
continuing
operations
before income
taxes, minority
interest and
extraordinary
item ......................... 5,287 3,357 9,799 6,479
Minority interest
expense from
continuing
operations ................... 307 242 496 338
Income from
continuing operations
before extraordinary
item ......................... 3,489 2,183 6,426 4,225
Net income ..................... 2,749 1,443 5,190 2,989
Earnings per common
share:
Continuing operations before
extraordinary item ......... $ .58 $ .36 $ 1.06 $ .70
Net income .................. $ .46 $ .24 $ .86 $ .50
Retained earnings at
June 30, 1997 ................ $150,385 $148,184 $150,385 $148,184
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. Management anticipates CogniSeis will
incur operating losses approximating $500,000 from the measurement date
through the disposal date. Such losses have been deferred due to the fact
that Management expects a gain on the sale of CogniSeis.
On July 15, 1997, GeoScience signed a letter of intent to sell CogniSeis
for cash and guaranteed future royalties with a combined estimated value
between $19.5 and $23 million. The proposed sale is subject to the terms of
a negotiated
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Page 7 Form 10-Q/A
Tech-Sym Corporation
Notes to Consolidated Financial Statements - Continued
definitive agreement which could vary from the letter of intent, and no
assurances can be made that this transaction will be completed.
Management's current estimate indicates that the total sale proceeds
from the disposal of CogniSeis will result in a gain on the
transaction. However, the ultimate financial impact of the negotiated
definitive agreement could differ from Management's current estimate.
The operating results (unaudited) of the discontinued operation are
summarized as follows (in thousands):
Quarter Ended
June 30,
1997 1996
--------------------
Revenue $5,575 $5,404
===== =====
Loss before provision for
income taxes 1,371 1,675
Provision for income taxes 425 538
Minority interest 206 205
------ ------
Net loss $ 740 $ 932
====== ======
Six Months Ended
June 30,
1997 1996
---------------------
Revenue $11,398 $11,281
======= =======
Loss before provision for
income taxes 2,301 2,601
Provision for income taxes 713 833
Minority interest 352 205
------- -------
Net loss $ 1,236 $ 1,563
======= =======
The net assets (unaudited) of the discontinued operation are summarized
as follows (in thousands):
June 30, 1997
-------------
Current assets $ 7,465
Property, plant and equipment, net 3,149
Other assets 5,747
Current liabilities (3,976)
-------
Net assets $12,385
=======
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Page 8 Form 10-Q/A
Tech-Sym Corporation
Notes to Consolidated Financial Statements - Continued
3. Inventories, stated at the lower of cost (first-in, first-out) or market,
are summarized as follows (in thousands):
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
Raw Materials $34,726 $28,613
Work in Process 33,259 30,680
Finished Goods 22,807 23,515
------- -------
Total inventories $90,792 $82,808
======= =======
4. Earnings per common share are based on the weighted average number of
shares outstanding during each period (6,032,000 and 6,579,000 for the
quarter ended June 30, 1997 and 1996 respectively, and 6,037,000 and
6,571,000 for the six month period ended June 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 were restated to 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
June 30,
1997 1996
-------------------
Pro-forma earnings per share
Earnings per common share $0.24 $2.28
Earnings per common share ----- -----
assuming dilution $0.23 $2.20
----- -----
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Page 9 Form 10-Q/A
Tech-Sym Corporation
Notes to Consolidated Financial Statements - Continued
Six Months Ended
June 30,
1997 1996
-------------------
Pro-forma earnings per share
Earnings per common share $0.50 $2.63
Earnings per common share ----- -----
assuming dilution $0.48 $2.53
----- -----
<PAGE>
Page 10 Form 10-Q/A
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. All prior year amounts have been restated.
RESULTS OF OPERATIONS - QUARTER ENDED JUNE 30, 1997 COMPARED TO THE QUARTER
ENDED JUNE 30, 1996
Revenue increased $6,445,000 or 10% to $72,225,000 for the quarter ended June
30, 1997. The increase in revenue resulted primarily from increased
shipments in the communications and geoscientific business which increased
from the same quarter in the prior year $7,096,000 and $3,326,000,
respectively. Within the communications business, shipments of broadcast
equipment, microwave products and weather radar systems demonstrated revenue
growth over the second quarter of 1996. In the geoscientific business, the
increase primarily resulted from increased shipments of land and ocean bottom
cables. The increases in the communications and geoscientific business more
than offset the $3,199,000 decrease in revenue in the defense systems
business which was a result of delayed bookings of government and foreign
orders.
The consolidated gross profit margin decreased from 35% to 31% of revenue for
the quarter ended June 30, 1997, compared to the same quarter in the prior
year. The majority of the decrease in gross profit margin was attributed to
the communications business. Within the broadcast area of the communications
business, the gross profit margin was negatively impacted by cost over-runs
on several long-term projects and initial start-up costs on a number of new
products. The gross profit margin of the microwave products' portion of the
communications business suffered due to production labor costs increasing at
a greater rate than the increase in product shipments and due to
inefficiencies and input errors relating to a new management information
system. Increased material costs on several contracts within the defense
systems business due to supplier problems also contributed to a lower than
customary gross profit margin. The gross profit margin of the geoscientific
business improved over the second quarter of 1996 primarily as a result of
reduced costs derived from improved manufacturing efficiencies and decreased
electronic
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Page 11 Form 10-Q/A
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
component prices related to the 24-bit seismic data acquisition module that
offset the increased engineering and manufacturing costs associated with
design changes to the 24-bit module and increased manufacturing costs within
the domestic seismic cable manufacturing facility.
Consolidated selling, general and administrative expenses increased 10% to
$16,155,000 during the second quarter of 1997. These expenses as a
percentage of revenue decreased slightly in comparison to the same quarter a
year ago. The majority of the $1,432,000 increase occurred within the
geoscientific business. The increase primarily resulted from additional
costs for support personnel and royalties associated with the overall growth
in the business and additional commissions associated with increased
international sales. Furthermore, expenses related to managing the
consolidated business and being a publicly traded company were added. The
Company-sponsored product development expenses were $3,394,000 for the
quarter ended June 30, 1997, compared to $3,561,000 for the quarter ended
June 30, 1996. The decrease was primarily in the communications business as
a result of the completion of several projects relating to broadcast and
antenna equipment that were under development in the second quarter of 1996.
The overall decreases exceeded the increases incurred within the
geoscientific business due to design changes to the 24-bit seismic data
acquisition module.
Interest expense increased to $1,081,000 during the second quarter of 1997
from $706,000 during the second quarter of 1996 as a result of the increase
in interest bearing debt incurred primarily to support the growth of the
business and, to a lesser extent, to fund the Company's stock buy-back
program. Other income increased to $1,824,000 from $1,103,000 primarily due
to foreign currency translation gains within the communications business.
The effective tax rate for the quarter ended June 30, 1997 was 30% compared
to 35% for the same period in the prior year. The Company's effective tax
rate is lower than statutory United States rate due principally to benefits
generated from foreign sales.
Minority interest expense from continuing operations for the quarter ended
June 30, 1997, was $242,000 compared to $246,000 for the quarter ended June
30, 1996. Minority interest expense reflects the portion of GeoScience
Corporation's net income from continuing operations of $1,111,000 and
$1,365,000 for the quarter ended June 30, 1997 and 1996, respectively, which
is attributable to minority shareholders.
<PAGE>
Page 12 Form 10-Q/A
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
Income from continuing operations before extraordinary item for the second
quarter of 1997 was $2,183,000 compared to $16,983,000 for the corresponding
quarter a year ago. The results of the second quarter of 1996 included a net
gain of $13,700,000 related to the sale to the public of common shares of
24.7% of GeoScience Corporation. The lower gross profit margin and higher
operating expenses as discussed above caused the income of continuing
operations for the current quarter to be less than that of the 1996 quarter
without the gain on the sale of GeoScience stock.
Loss from the discontinued operation for the quarter ended June 30, 1997,
decreased $192,000 or $.02 per share from the same quarter in the prior year
as a result of an increase in interest income recognized on contract
installment sales.
Net income for the quarter ended June 30, 1997, decreased 90% to $1,443,000
or $.24 per share compared to net income of $15,016,000 or $2.28 per share
for the same quarter in the prior year. The 1996 second quarter net income
included a net gain of $13,700,000 resulting from 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.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO JUNE 30,
1996
Revenue increased 10% to $145,123,000 for the six months ended June 30, 1997,
from $131,588,000 for the same period in the prior year. The increase in
revenue resulted from increased shipments in the communications and
geoscientific business of $10,737,000 and $7,783,000, respectively. Revenue
relating to the defense systems business decreased $4,032,000 from the same
period in the prior year due to continued delays in the receipt of new
government and foreign orders. Within the communications business, shipments
in all major product areas (broadcast equipment, microwave products and
weather radar systems) increased over the six months ended June 30, 1996.
Increased shipments of land, ocean bottom and marine seismic cables and
revenue relating to the technical data services provided to oil exploration
and production customers resulted in a 20% growth in the revenue of the
geoscientific business over the same period in the prior year.
The consolidated gross profit margin decreased from 35% to 30% of revenue for
the six months ended June 30, 1997. The overall decrease is primarily
related to the communications business.
<PAGE>
Page 13 Form 10-Q/A
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
The reasons for the decrease within the communications business
are essentially the same as those discussed for the quarter, along with a
change in the product mix within the broadcast area. The gross profit margin
for the geoscientific business decreased from 41% to 39% of revenue for the
six months ended June 30, 1997, compared to the six months ended June 30,
1996. The decrease was a result of (i) 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, (ii) increased engineering and manufacturing costs associated with
design changes to the 24-bit seismic data acquisition module and (iii)
increased manufacturing costs within the domestic seismic cable manufacturing
facility. The gross profit margin as a percent of revenue for the defense
systems business improved from 22% to 24% over the same period in the prior
year.
Consolidated selling, general and administrative expenses increased to
$31,594,000 for the period ended June 30, 1997, from $28,704,000. These
expenses as a percentage of revenue decreased slightly in comparison to the
same quarter in the prior year. The increase occurred in the geoscientific
business. The increase in the geoscientific business resulted from (i) the
growth in support personnel associated with the growth in the business, (ii)
additional royalty costs associated with the overall increase in revenue,
(iii) additional commissions associated with the increased international
sales and (iv) the added costs of managing the consolidated geoscientific
business as a publicly traded company. Company-sponsored product development
expenses were $6,549,000 for the period ended June 30, 1997 compared to
$7,382,000 for the period ended June 30, 1996. The decrease occurred
primarily within the broadcast area of the communications business. The
reasons for the decrease are as discussed in the results for the quarter
ended June 30, 1997.
Interest expense was $1,761,000 for the six month period ended June 30, 1997,
as compared to $2,075,000 for the six month period ended June 30, 1996. The
decrease was derived from the first three months of the year due to a
reduction in interest bearing debt that occurred in the second quarter of
1996 as a result of proceeds generated from the sale of stock of GeoScience.
Other income increased to $2,133,000 from $1,934,000 primarily due to foreign
currency transaction gains within the communications business that more than
offset the decrease in interest income on interest bearing receivables within
the geoscientific business.
The effective tax rate for the six months ended June 30, 1997 was
<PAGE>
Page 14 Form 10-Q/A
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
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 six months ended
June 30, 1997, was $338,000 compared to $246,000 for the six months ended
June 30, 1996. Minority interest expense reflects the portion of GeoScience
Corporation's net income from continuing operations of $1,535,000 and
$2,370,000 for the six months ended June 30, 1997 and 1996, respectively,
which is attributable to minority shareholders.
Income from continuing operations before extraordinary item for the six month
period of 1997 was $4,225,000 compared to $19,893,000 for the corresponding
period a year ago. The six months ended June 30, 1996 included a net gain of
$13,700,000 as discussed in the results for the quarter ended June 30, 1997.
The lower gross profit margin and higher operating expenses as discussed
above caused the income of continuing operations for the current six month
period to be less than that of the comparable 1996 period without the gain on
the sale of GeoScience stock.
Loss from the discontinued operation for the six months ended June 30, 1997
decreased $327,000 from the same period in the prior year as a result of an
increase in interest income recognized on contract installment sales and the
change in minority ownership interest between the two periods.
Net income for the six months ended June 30, 1997, decreased 83% to
$2,989,000 or $.50 per share compared to net income of $17,295,000 or $2.63
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 June 30, 1997 was $122,000,000 compared to $147,000,000 at June
30, 1996. The decrease occurred primarily in the defense systems business
and the broadcast area within the communications business. The decrease in
backlog may unfavorably affect the Company's operating results for the third
and fourth quarter if orders are not received in time to ship during the
respective periods.
<PAGE>
Page 15 Form 10-Q/A
Tech-Sym Corporation
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Continued
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 June 30, 1997, the Company's working capital balance
was $137,095,000 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
non-current asset at June 30, 1997 and an increase in inventory levels. Cash
used for operations was $15,699,000 for the six months ended June 30, 1997,
compared to cash provided by operations of $7,779,000 for the same period in
the prior year.
As of June 30, 1997, the Company had uncommitted bank lines of credit
aggregating approximately $84,295,000. Borrowings under these lines were
$38,798,000, including the discontinued operation. The Company had a working
capital ratio of 2.47 to 1.0 and debt to total capitalization of 29%. 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 $5,965,000 for the six
months ended June 30, 1997, compared to $8,411,000 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 $9,830,000. 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 16 Form 10-Q/A
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, 1997 /s/ WENDELL W. GAMEL
Wendell W. Gamel, Chairman of
the Board and President
Date: November 13, 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 FORM 10-Q/A 2ND QUARTER 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 12,339
<SECURITIES> 5,810
<RECEIVABLES> 60,712
<ALLOWANCES> 0
<INVENTORY> 90,792
<CURRENT-ASSETS> 230,198
<PP&E> 45,708
<DEPRECIATION> 0
<TOTAL-ASSETS> 324,774
<CURRENT-LIABILITIES> 93,103
<BONDS> 0
0
0
<COMMON> 796
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 324,774
<SALES> 145,123
<TOTAL-REVENUES> 0
<CGS> 100,873
<TOTAL-COSTS> 138,644
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,761
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,225
<DISCONTINUED> (1,236)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,989
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0
</TABLE>
