U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to ___________
Commission File Number 1-4142
TENNEY ENGINEERING, INC.
(Exact name of small business issuer as
specified in its charter)
NEW JERSEY 22-1323920
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1090 Springfield Road, Union, New Jersey 07083
(Address of principal executive offices)
(908) 686-7870
(Issuer's telephone number)
NONE
(Former name, former address and former fiscal year, if changed
since last report.)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Class Outstanding at September 30, 1997
Series A Common Stock
$.01 par value 3,714,842
Series B Common Stock
$.01 par value 3,714,842
Transitional Small Business Disclosure Format:
Yes ____ No X
TENNEY ENGINEERING, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1997
I N D E X
PAGE
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
September 30, 1997 3
Consolidated Condensed Statements of Operations -
Three and nine months ended September 30,
1997 and 1996 4
Consolidated Condensed Statements of Cash Flows -
Nine months ended September 30, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Part II - Other Information 19
TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(In thousands of dollars - unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 78
Accounts receivable - net 1,370
Current portion of installment note receivables 55
Inventories 617
Deferred tax asset 310
Total Current Assets 2,430
Plant and equipment, net 409
Installment note receivable, noncurrent portion 215
Other assets 205
Total Assets $ 3,259
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Note Payable - Bank 750
Accounts payable and other accrued liabilities 997
Current portion of long-term capital leases 40
Accrued payroll and payroll taxes 180
Billings in excess of estimated revenue on
long-term contracts 268
Pension obligation, current portion 73
Total Current Liabilities 2,308
Long-term debt, net of current portion 497
Total Liabilities 2,805
Commitments and contingencies
Stockholders Equity:
Preferred stock $.01 par value:
Authorized 5,000,000 shares
Issued and outstanding - none
Common stock $.01 par value:
Authorized 50,000,000 shares
Issued 3,727,980 shares Series A 37
Issued 3,727,980 shares Series B 37
Additional paid-in-capital 2,263
Retained earnings (deficit) (1,843)
494
Less treasury stock, 26,276 shares at cost 40
Total Stockholders Equity 454
Total Liabilities and Stockholders Equity $ 3,259
See Notes to Consolidated Financial Statements.
TENNEY ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)
(In thousands of dollars -
except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Net Revenue:
Product and product
related $1,002 $1,616 $3,904 $5,918
Service 253 304 742 681
Parts 104 140 381 495
License Fees 0 122 0 344
Totals 1,359 2,182 5,027 7,438
Cost of Sales:
Product and product
related 1,019 1,528 3,694 5,022
Service 136 197 450 459
Parts 79 60 245 194
Totals 1,234 1,785 4,389 5,675
Gross Profit 125 397 638 1,763
Selling and administrative
expenses 471 328 1,546 1,366
Income (loss) from
operations (346) 69 (908) 397
Other expense (income):
Interest expense 4 6 13 16
Other income, net (10) 0 (19) ( 5)
Totals ( 6) 6 ( 6) 11
Income (Loss) before
income taxes (340) 63 (902) 386
Income taxes (benefit) 0 ( 3) ( 30) ( 27)
Net Income (Loss) $ (340) $ 66 $ (872) $ 413
Net Income (Loss) per
Common Share:
Series A $(0.04) $ 0.01 $(0.12) $ 0.06
Series B (0.04) 0.01 (0.12) 0.06
Exercise of options would not be dilutative.
See Notes to Consolidated Condensed Financial Statements.
TENNEY ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(In thousands of dollars - unaudited)
1997 1996
Operating activities:
Net income (loss) $ (872) $ 413
Adjustments to reconcile income (loss) to
net cash provided by (used in) operations:
Depreciation and amortization 59 62
Tax asset (30) (31)
Changes in operating assets and liabilities:
Accounts and installments receivables 315 (351)
Inventories (152) (307)
Prepaid expenses and other current assets 55 43
Other assets 13 (38)
Accounts payable and other accrued
liabilities (463) (292)
Accrued payroll and payroll taxes 57 98
Billings in excess of estimated revenues (18) 124
Net cash used in operating activities (1,150) (279)
Investing activities:
Acquisition of equipment (167) (71)
Cash used in investing activities (167) (71)
Financing activities:
Exercise of options and issuance of
Common Stock 2 2
Proceeds from working capital line of credit 750 245
Payments of note payable and long-term
capital leases (100) 0
Acquisition of leases 82 0
Net cash provided by financing
activities 734 247
Net decrease in cash and cash equivalents (583) (103)
Cash and cash equivalents, beginning of year 661 223
Cash and cash equivalents, end of period $ 78 $ 120
Supplemental disclosure of cash flow
information:
Interest paid $ 53 $ 16
Income taxes paid $ 0 $ 0
See Notes to Consolidated Condensed Financial Statements.
Note 1:
Summary of Accounting Policies:
The financial information enclosed herewith as at September 30,
1997 and for the three and nine months ended September 30, 1997 is
unaudited, and, in the opinion of the Company, reflects all
adjustments (which included only normal recurring accruals)
necessary for a fair presentation of the financial position as of
September 30, 1997, the changes in cash flow for the nine months
ended September 30, 1997 and 1996 and the results of operation for
these periods.
This quarterly report should be read in conjunction with the
Company's 1996 Annual Report and the September 30, 1997
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Note 2:
Results of Operations:
The results of operations for the nine months ended September 30,
1997 are not necessarily indicative of the results to be expected
for the full year.
Note 3:
Financial Condition and Results of Operation:
As shown in the accompanying consolidated financial statements, the
Company incurred a net loss for the third quarter and year- to-date
period ended September 30, 1997 and earned income for the
corresponding quarter and year-to-date period ended September 30,
1996, from operations. The net loss has resulted in an erosion of
the Company's financial position.
Note 4:
License agreement:
During 1992 the Company entered into a six-year licensing agreement
with a manufacturer (the "Licensee") of environmental conditioning
equipment. The terms of the agreement, among others, provide for:
the Licensee to manufacture and sell environmental test chambers
and other equipment under the Tenney name with the Company also
retaining the right to manufacture such products; the Company to
receive license fees (up to a maximum of $1,900,000) equal to 5% of
qualifying sales during the term of the agreement with specified
minimum amounts payable annually; an option for the Licensee to
purchase the Company's rights, title and interest in the Tenney
trademark for $100,000 at the end of the license term in the event
the Company is no longer manufacturing such products; the Company
to perform all servicing and installation of the aforementioned
equipment.
In addition, the Company entered into a four-year consulting
agreement which expired in December, 1996, with the Licensee
whereby, for an annual fee of $120,000, the Company made the
services of the Company's president available to the licensee on a
part-time basis.
During November, 1996, the Company and Licensee agreed to
accelerate payment of license fees by having the Licensee prepay
$532,000, representing the amount remaining of the $1,900,000
maximum license fee. In addition, the "Tenney" trademark was sold
for the sum of $100,000.
Note 5:
Accounts receivable:
Accounts receivable consist of the following:
September 30,
1997
(In thousands
of dollars)
Accounts receivable, billed $ 804
Accounts receivable, unbilled 594
Allowance for doubtful accounts (28)
Totals $ 1,370
At September 30, 1997, sales recognized on the percentage of
completion method approximated $3,747,000.
Note 6:
Inventories:
Inventories consist of the following:
September 30,
1997
(In thousands
of dollars)
Raw materials $ 326
Work in process 551
Totals 877
Less:
Provision for write-downs to estimated
realizable value 260
Totals $ 617
Accumulated costs on long-term contracts recognized by the
percentage of completion method (see Note 5) were approximately
$3,678,000.
Note 7:
Property, Plant and Equipment:
Property, plant and equipment, which is stated at cost, is
summarized as follows at September 30, 1997:
September 30,
1997
(In thousands
of dollars)
Leasehold Improvements $ 70
Equipment 1,485
Equipment under capital leases 295
1,850
Accumulated depreciation (1,441)
Total property, plant and
equipment - net $ 409
The Company leases certain equipment for use in its operations
under capital leases. Plant and equipment at September 30, 1997,
included capital leases of $295,000 and related accumulated
depreciation of $100,000.
DynaTenn, Inc. (d/b/a "DynaVac"), a wholly owned subsidiary which
manufactures diversified industrial vacuum equipment, leases its
27,900 square-foot facility in Hingham, Massachusetts, under an
operating lease which became effective on January 1, 1997, for a
term of six years. Rent charged to operations under this lease for
the first three quarters of 1997 approximated $121,100. During
1996, DynaVac leased a 15,000 square feet facility in Weymouth,
Massachusetts, under an operating lease which expired on December
31, 1996. Rent charged to operations under this lease approximated
$46,250 for the first three quarters of 1996.
Tenney Engineering, Inc. leases its facility in Union, New Jersey,
under an operating lease which expires in December 1998. Rent
charged to operations under this lease approximated $70,500 and
$61,000 for the first three quarters of 1997 and 1996,
respectively.
At September 30, 1997, the aggregate minimum rental commitments
under non-cancelable leases for the period shown are as follows:
Year Capital Leases Operating Leases
(In thousands of dollars)
1997 $ 67 $ 177
1998 74 241
1999 74 157
2000 56 163
2001 25 169
2002 15 $ 907
Total $ 311
Less imputed interest 88
Present value of net
lease payments $ 223
Less current installments 40
Long-term debt obligation
at September 30, 1997 $ 183
Imputed interest was calculated using rates between 7.06% - 12.6%
Note 8:
Debt:
Debt maturing within one year consists of the following at
September 30,
1997 1996
(In thousands
of dollars)
Notes payable - bank $ 750 $ 0
Current portion of capital leases 40 55
Current portion of pension obligation 73 179
Total $ 863 $ 234
On September 12, 1996, the Company and Summit Bank (the "Bank")
entered into a Loan and Security Agreement for a $300,000 renewable
working capital line of credit expiring May 1, 1997, with interest
at 2% over the Bank's prime lending rate (the "Term Note"). The
Bank was granted a security interest in substantially all the
Company's assets. At February 20, 1997, the Bank granted a
temporary increase of $100,000 in the line of credit, raising it to
$400,000. On April 23, 1997, the Bank increased the line of credit
to $750,000 expiring on May 1, 1998, with interest at 1-3/4% over
the Bank's prime lending rate (8.5% at September 30, 1997). As at
September 30, 1997, the Company owed to the Bank the amount of
$750,000, under this working capital line of credit.
Long-term debt consists of the following at September 30,
1997
(In thousands
of dollars)
Capital lease obligations $ 223
Multi-employer pension obligation 387
Total long-term debt including
current maturities 610
Less: current maturities 113
Total long-term debt $ 497
Two new capital leases were entered into for equipment during the
third quarter of 1997.
The Company formerly had employees who were members of a union and
contributed to multi-employer pension plan for such employees in
accordance with a collective bargaining agreement based on monthly
hours worked. Due to the cessation of manufacturing operations at
the Company's Union facility, the Company ceased being a
participant in the multi-employer pension plan in February 1993.
Under the Multi-Employer Pension Plan Amendments Act of 1980, the
Company may, under certain circumstances, become subject to
liabilities in excess of contributions made under its collective
bargaining agreement.
The Company received a demand from the Sheet Metal Workers'
National Pension Fund (the "Fund") for payment of a withdrawal
liability in quarterly installments of $502,665 plus interest on
overdue installments, statutory liquidated damages, attorneys' fees
and injunctive relief.
The Company negotiated with the Fund the amount of the liability
and an installment payment schedule.
On September 6, 1996, the Company agreed to a settlement of the
matter proposed by the Fund and it executed a Settlement
Agreement(the "Agreement"). Among other matters, the Agreement
provides that the Company shall pay the Fund $720,090 (the "Settled
Amount") on account of the withdrawal liability, statutory interest
and counsel fees; provided, however, that if the Company pays to
the Fund the amount of $397,330 principal, plus interest of
$74,455, totaling $471,785 -- $75,000 upon signing and sixty (60)
monthly payments of $6,613.09 commencing October 1, 1996 -- the
Fund would accept the total of $471,785 in satisfaction of the
total withdrawal liability.
The Agreement contains various representations and warranties by
the Company. In the event that timely payments are not made or the
Company otherwise defaults under the Agreement, the Settled Amount
will be due the Fund, less any payments received. The Company has
made all payments to the Fund when they are due, and continues to
do so.
The Company had reserved on its balance sheet as at December 31,
1995, the sum of $581,835 for the withdrawal liability to the Fund.
The Company will charge all the payments made to the Fund to this
reserve account; and if all payments are made in accordance with
the provisions of the Agreement, any balance in the reserve will be
recognized as forgiveness of indebtedness when payments are
complete. At September 30, 1997, the reserve approximated $387,000.
Note 9:
Net Revenue:
Product and product-related net revenue includes revenue from the
Company's manufacturing operation, sales of reconditioned equipment
and rental income. Service revenue includes revenue from the
servicing and installation of equipment and from the services of
the Company's president provided to the Licensee during 1996 (see
Note 4). Parts revenue includes revenue from the sale of
replacement and spare parts for equipment previously manufactured
by the Company, as well as equipment currently being manufactured
under the "Tenney" name and competitors' equipment.
Note 10:
Income taxes:
Effective January 1, 1993, the Company has adopted the Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes." SFAS 109 requires the use of an
asset and liability approach in accounting for income taxes.
Deferred tax assets and liabilities are recorded based on
differences between the financial statement and tax bases of assets
and liabilities at the tax rates in effect when these differences
are expected to reverse.
Deferred tax assets are reduced by a valuation allowance if, based
on the weight of available evidence, it is more likely than not
that all or some portion of the deferred tax assets will not be
realized. The ultimate realization of the deferred tax asset
depends on the Company's ability to generate sufficient taxable
income in the future. While management believes that the total
deferred tax asset will eventually be fully realized by future
operations, as a result of the losses experienced prior to 1994,
management recorded a valuation allowance equal to 100% of the
deferred tax asset upon adoption of SFAS 109 on January 1, 1993.
As a result, the initial adoption of SFAS 109 had no impact on the
Company's consolidated financial statements.
At September 30, 1997, it was determined that the valuation
allowance should be increased. This determination was based
primarily on the Company's net loss during the first three quarters
of 1997 and management's belief that it is more likely than not
that the Company will generate sufficient taxable income to realize
these future tax benefits. As the Company achieves sufficient
profitability to realize the deferred tax assets, the assets will
be reduced through a charge to expense.
At September 30, 1997 and September 30, 1996, the Company utilized
net operating loss carryforwards of $0 and $410,000, respectively.
At September 30, 1997, the Company recognized an income tax benefit
from the net operating loss carryforward of $30,000. The income tax
(benefit) was allocated as follows:
1997 1996
(In thousands of dollars)
Current income tax expense $ 0 $ 4
Deferred income tax benefit (30) (31)
Net income tax (benefit) $ (30) $ (27)
As at September 30, 1997, the Company has available, for tax
reporting purposes, net operating loss carryforwards of
approximately $3,085,000 which expire through 2008.
A reconciliation of income tax provision at statutory rate to the
income tax provision at the effective tax rate is as follows: The
effective rate for 1997 and 1996 was 39%.
1997 1996
(In thousands of dollars)
Income taxes computed at the federal
statutory rates $ 0 $ 139
Federal Alternative Minimum Tax 0 4
State taxes (net of federal benefit) 0 35
Recognition of benefits of tax loss
carryforwards (30) (174)
Reduction of valuation allowance 0 (31)
Net income tax (benefit) $ (30) $ (27)
Note 11:
Common stock:
On March 11, 1997 the Board of Directors amended the Certificate of
Incorporation to provide that Common Stock may be issued in two
series, denominated Series A and Series B. All issued shares of
Common Stock on April 10, 1997 were classified Series B Common
Stock. The Board of Directors declared a distribution payable May
27, 1997 of one share of Series A Common stock for each share of
Series B Common Stock held of record at the close of business on
April 10, 1997.
Outstanding options were adjusted effective the close of business
April 10, 1997, so that Optionees have the right to buy a unit
consisting of one share of Series A Common Stock and one share of
Series B Common Stock for each share of Common Stock to which the
option relates at a price per unit equal to the price per share of
Common Stock specified in the outstanding option. The 1995
Incentive Stock Option Plan was amended to relate to an additional
330,000 shares of Series A Common Stock.
On May 26, 1995, at the annual meeting, a new ten-year incentive
stock option plan for officers and key employees was approved and
adopted relating to 400,000 share of Common Stock. The plan
provided that options could be granted from time to time at a price
of not less than 100% of the fair market value of the Common Stock
as of the date of grant for officers and employees who own less
than 10% of the voting stock of the Company and 110% of fair market
value for those officers and employees who own more than 10% of the
voting stock (affiliate employees). Options granted are exercisable
immediately and terminate no later than ten years from date of
grant (five years from date of grant for affiliate employees).
The fair value of each option granted is estimated on the grant
date using the Black-Scholes model. The following assumptions were
made in estimating fair value:
Assumption 1995 Plan
Dividend Yield 0%
Risk-free Interest Rate 7.50%
Expected Life 2 Years
Expected Volatility 59.75%
The Company applies APB Option 25 in accounting for its stock
compensation plan. Accordingly, no compensation cost has been
recognized for the 1995 Plan in 1997 or 1996. Had compensation cost
been determined on the basis of fair value pursuant to FASB
Statement No. 123, net income and earnings per share would have
been reduced as follows:
1997 1996
Net income
As reported (872,000) 347,000
Pro forma (898,000) 332,000
Primary earnings per share
As reported (0.24) 0.12
Pro forma (0.24) 0.12
Fully diluted earnings per share
As reported (0.24) 0.12
Pro forma (0.24) 0.12
Following is a summary of the status of the 1995 Plan during the
first three quarters of 1997 and the year ended December 31, 1996:
Weighted
Average
Number of Exercise
Shares/Units Price
Outstanding shares at 1/01/97 290,000 $ 0.57104
Granted 50,000 0.70468
Exercised (23,000) 0.23437
Canceled (10,000) 0.23437
Outstanding units at 9/30/97 307,000 $ 0.60896
Units exercisable at 9/30/97 307,000 $ 0.60896
Weighted average fair value
of options granted during
the first nine months of 1997 $3,196.00
Weighted
Average
Number of Exercise
Shares Price
Outstanding at 1/1/96 155,000 $ 0.24420
Granted 145,000 0.90075
Exercised (10,000) 0.23437
Canceled 0 0
Outstanding at 12/31/96 290,000 $ 0.57104
Options exercisable at 12/31/96 290,000 $ 0.57104
Weighted average fair value
of options granted during 1996 $6,449.00
Following is a summary of the status of options outstanding at September
30, 1997:
<TABLE>
Outstanding Units Exercisable Units
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
<S> <C> <C> <C> <C> <C>
$0.23437-$0.25781 112,000 2 years $0.24420 112,000 $0.24420
$0.85937-$0.94531 135,000 3 years $0.89789 145,000 $0.89789
$0.70468 50,000 3 years $0.70468 50,000 $0.70468
</TABLE>
Note 12:
Commitments and contingencies:
Lease commitments:
DynaTenn, Inc. (d/b/a "DynaVac"), a wholly owned subsidiary which
manufactures diversified industrial vacuum equipment, leases its
27,900 square-foot facility in Hingham, Massachusetts, under an
operating lease which became effective on January 1, 1997, for a
term of six years. Rent charged to operations under this lease
approximated $121,100 for the first three quarters ended September
30, 1997. During 1996, DynaVac leased a facility in Weymouth,
Massachusetts, under an operating lease which expired on December
31, 1996. Rent charged to operations under this lease approximated
$46,250 for the first three quarters ended September 30, 1996.
Tenney Engineering, Inc. leases its facility in Union, New Jersey,
under an operating lease which expires in December 1998. Rent
charged to operations under this lease approximated $70,500 for the
first three quarters ended September 30, 1997 and $61,000 for the
first three quarters ended September 30, 1996.
Non-Cash Activities:
During the third quarter ended September 30, 1997, the Company
entered into two capital leases for five years for equipment in the
amount of $41,000.
Contingencies:
The Company is not a party to any material pending legal
proceeding.
* * *
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
INTRODUCTION
The Company is engaged in the engineering, marketing and
manufacturing of diversified high-technology vacuum systems for
space simulation, optic coating and sputtering; and provides
service, refurbishing, upgrading, installation and sale or rental
of reconditioned test equipment.
LIQUIDITY
At September 30, 1997, the Company's cash and cash equivalents
totaled $78,000, a difference of $583,000 from the balance of
$661,000 as at December 31, 1996. Net cash used in operations
totaled $1,150,000. The primary uses of cash were the paying of
accounts payable $463,000, a decrease of accounts receivable of
$315,000, and $100,000 for paying capital leases. Cash was provided
primarily by short-term borrowings of $750,000 under the working
capital line of credit.
The amount borrowed under the Company's working capital line of
credit appears not to be sufficient to cover corporate and
associated administrative costs should the negative cash flow
continue. However, management believes that the timely completion
of the order backlog of $1,900,000 at September 30, 1997 will be
sufficient to cover corporate and associated administrative costs.
If the timely completion of the backlog is not accomplished, there
could be a material adverse effect on the Company.
RESULTS OF OPERATIONS
Total net revenue for the third quarter and year-to-date periods
ended September 30, 1997, of $1,359,000 and $5,027,000 compares to
net revenue of $2,182,000 and $7,438,000 in the corresponding 1996
period.
Product and product-related net revenue for the third quarter and
year-to-date periods ended September 30, 1997 was $1,002,000 and
$3,904,000, respectively, and compares to 1996 revenue of
$1,616,000 and $5,912,000 in the corresponding periods,
respectively. The change is due to the lower amount of revenue
recognized under the percentage of completion for long-term
projects that were being worked on in our DynaVac subsidiary.
Service-related revenue of $253,000 for the third quarter and
$742,000 for the year-to-date periods ended September 30, 1997,
compares to the same periods in 1996 of revenue of $304,000, and
$681,000, respectively. The year-to-date increase is due primarily
to the increase in service calls. Included in service revenue for
the third quarter and year-to-date 1996 periods was revenue from
the Licensee's agreement for the use of the services of the
Company's president of approximately $30,000 and $90,000,
respectively.
Revenue related to the sale of parts totaled $104,000 and $381,000
for the third quarter and year-to-date periods ended September 30,
1997, respectively. For the third quarter and year-to-date periods
ended September 30, 1996, revenue related to the sale of parts was
$140,000 and $495,000, respectively. The decrease was due to
receiving fewer parts orders.
Due to the receipt of the maximum royalty payments under License
agreement in November, 1996, there were no License fees earned
during the 1997 three-month and nine-month periods ended September
30, 1997. During the corresponding three-month and nine-month
periods ended September 30, 1996, $122,000 and $344,000 were earned
as license fees.
The Company's order backlog at September 30, 1997, December 31,
1996, and September 30, 1996 was approximately $1,900,000,
$2,440,000 and $1,400,000, respectively. The decrease from December
31, 1996 is due primarily to a general slow-down in receiving large
contract orders at the Company's DynaVac subsidiary.
The total cost of sales as a percentage of net revenue was 91%, and
87% for the third quarter and year-to-date periods ended September
30, 1997, and compares to 82% and 76% for the corresponding 1996
periods.
The third quarter and year-to-date periods ended September 30,
1997, cost of sales percentage of product and product-related sales
was 101% and 94%, respectively, and compares to a cost of sales of
88% and 80% during the same 1996 period. The increase is due to
higher labor costs associated with the move into larger facilities
at our DynaVac subsidiary.
Service cost of sale as a percentage of sales was 54% and 60% for
the 1997 third quarter and year-to-date periods ended September 30,
1997. This compares to 65% and 67% for the 1996 periods ended
September 30, 1996. The decrease is due to the increase in service
calls and the utilization of manpower more efficiently and overhead
cost containment programs.
Cost of sales as a percentage of sales for the third quarter and
year-to-date periods ended September 30, 1997 for parts was 76% and
64%, respectively, and compares to 43% and 39% for the 1996
corresponding periods. The increase was due to the sales mix of
parts sold.
Selling and administrative expenses for the third quarter and
year-to-date for the periods ended September 30, 1997 was $471,000
and $1,546,000, and compares to expenses of $328,000 and $1,366,000
in the 1996 periods.
Interest expense was $9,000 and $53,000, respectively, for the
third quarter and year-to-date periods ended September 30, 1997,
and compares to expense of $6,000 and $16,000, respectively, in the
1996 periods. The increase is due to the bank line of credit and
the increase in capital equipment leases.
The third quarter and year-to-date periods ended September 30, 1997
net loss was $(340,000) and $(872,000), respectively, and compares
to net income of $66,000 and $413,000 for the corresponding periods
ended September 30, 1996. During the first three quarters of 1997,
the Company at its DynaVac subsidiary, experienced higher than
normal manpower costs, along with a slow-down of receiving
long-term projects.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8K were filed during the quarter ended
September 30, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Tenney Engineering, Inc.
(Registrant)
s/Martin Pelman
_________________________
Martin Pelman
Vice President, Finance
Principal Finance Officer
Dated: November 13, 1997
2
18TENNEY ENGINEERING, INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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<PERIOD-END> SEP-30-1997
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