UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission File Number: 0-13763
TECHNOLOGY RESEARCH CORPORATION
_______________________________
(Exact name of registrant as specified in its charter)
Florida 59-2095002
_______________________________ ________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No,)
5250 140th Avenue North, Clearwater, Florida 34620
____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 535-0572
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 (or for a 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
____________________________ ____________________________
Common stock, $.17 par value 15,844,507
TECHNOLOGY RESEARCH CORPORATION
INDEX
Part I - Financial Information Page
Condensed Balance Sheets--June 30, 1995 and March 31, 1994...........1
Condensed Statements of Income--Three months ended
June 30, 1995 and June 30, 1994................................2
Condensed Statements of Cash Flows--Three months ended
June 30, 1995 and June 30, 1994................................3
Notes to Condensed Financial Statements..............................4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................5,6
Part II - Other Information
Item 1 - Legal Proceedings...........................................7
Item 2 - Exhibits and Reports on Form 8-K............................7
Signatures...........................................................7
TECHNOLOGY RESEARCH CORPORATION
CONDENSED BALANCE SHEETS
June 30 March 31
1995 1995
__________ __________
(unaudited) *
ASSETS
____________________________________
Current assets:
Cash and cash equivalents $ 1,113,565 1,707,930
Short term investments(note 3) 3,945,677 2,742,128
Accounts receivable, net 2,930,146 3,335,726
Inventories:
Raw material 3,280,373 2,707,054
Work in process 234,326 654,520
Finished goods 507,490 584,451
__________ __________
Total inventories 4,022,189 3,946,025
Prepaid expenses 60,874 36,863
Deferred income taxes 424,000 440,000
__________ __________
Total current assets 12,496,451 12,208,672
__________ __________
Property, plant, and equipment 5,719,771 5,536,933
Less accumulated depreciation 3,328,606 3,213,002
__________ __________
Net property, plant, and equipment 2,391,165 2,323,931
__________ __________
Deferred income taxes 228,000 228,000
Other assets 523 53,335
__________ __________
$ 15,116,139 14,813,938
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current liabilities:
Current installments of long-term debt $ 75,000 75,000
Accounts payable 1,029,946 1,728,332
Dividends payable 316,890 -
Accrued expenses 268,058 230,177
Income taxes payable 391,991 85,491
__________ __________
Total current liabilities 2,081,885 2,119,000
Long-term debt, excluding current installments 337,600 356,350
Total liabilities 2,419,485 2,475,350
__________ __________
Stockholders' equity:
Common stock 2,693,566 2,675,398
Additional paid-in capital 7,349,855 7,322,923
Retained earnings 2,653,233 2,340,267
__________ __________
Total stockholders' equity 12,696,654 12,338,588
__________ __________
$ 15,116,139 14,813,938
========== ==========
<FN>
*The balance sheet as of March 31, 1995, has been summarized
from the Company's audited balance sheet as of that date.
See accompanying notes to condensed financial statements.
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
June 30
1995 1994
__________ __________
Operating revenues:
Net sales $ 4,244,029 5,538,623
Royalties 171,961 189,000
__________ __________
4,415,990 5,727,623
__________ __________
Operating expenses:
Cost of sales 2,596,028 3,881,700
Selling, general, and administrative 638,721 610,520
Research, development and engineering 230,240 239,141
__________ __________
3,464,989 4,731,361
__________ __________
Operating income 951,001 996,262
__________ __________
Other income (deductions):
Interest and sundry income 69,565 27,050
Interest expense (10,896) (16,356)
__________ __________
58,669 10,694
__________ __________
Income before income taxes 1,009,670 1,006,956
Income taxes 379,814 361,000
__________ __________
Net income $ 629,856 645,956
========== ==========
Earnings per share $ 0.04 0.04
========== ==========
Weighted average number of common
and equivalent shares outstanding 16,186,422 16,189,129
========== ==========
Dividend declared per share $ 0.02 -
========== ==========
<FN>
See accompanying notes to condensed financial statements.
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
June 30
1995 1994
__________ __________
Cash flows from operating activities:
Net income $ 629,856 645,956
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of interest (48,524) -
Depreciation 115,604 107,703
Decrease(increase) in accounts receivable 405,580 (153,144)
Decrease(increase) in inventories (76,164) 32,744
Increase in prepaid expenses (24,011) (45,935)
Decrease in deferred income taxes 16,000 -
Decrease in other assets 52,812 3,001
Increase(decrease) in accounts payable (698,386) 183,297
Increase(decrease) in accrued expenses 37,881 (162,056)
Increase in income taxes payable 306,500 161,000
__________ __________
Net cash provided by operating activities 717,148 772,566
__________ __________
Cash flows from investing activities:
Purchase of short-term investments (1,958,025) 2,312,589)
Maturities of short-term investments 803,000 774,000
Capital expenditures (182,838) (152,970)
__________ __________
Net cash used in investing activities 1,337,863) (1,691,559)
__________ __________
Cash flows from financing activities:
Principal payments on long-term debt (18,750) (418,750)
Proceeds from exercise of stock options 45,100 -
__________ __________
Net cash provided by(used in)
financing activities 26,350 (418,750)
__________ __________
Decrease in cash and cash equivalents (594,365) (1,337,743)
Cash and cash equivalents at beginning of period 1,707,930 2,096,626
__________ __________
Cash and cash equivalents at end of period $ 1,113,565 758,883
========== ==========
<FN>
See accompanying notes to condensed financial statements.
TECHNOLOGY RESEARCH CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management,
necessary for the fair statement of results for the interim period.
The results of operations for the three-month period ended June
30, 1995, are not necessarily indicative of the results to be
expected for the full year.
2. At March 31, 1995, the Company had net operating loss carryforwards
for Federal income tax purposes of approximately $994,000, which
are available to offset future taxable income through 2003. The
Company also has available tax credit carryforwards for Federal
income tax purposes of approximately $214,000, which are available
to offset future Federal income taxes through 2002. As a result
of an ownership change in 1989, the Internal Revenue Code limits
the income tax benefit of net operating loss and tax credit
carryforwards to approximately $65,000 each year.
3. Short-term investments consist of U.S. Treasury Bills with a
purchased maturity of greater than three months.
4. Earnings per share has been computed by dividing net income by the
weighted average number of common and equivalent shares outstanding.
Common share equivalents included in the computation represent
shares issuable upon exercise of stock options which would have a
dilutive effect in years where there are earnings.
TECHNOLOGY RESEARCH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying condensed financial statements.
Current Three Months Ended June 30, 1995 versus Three Months Ended
June 30, 1994
Net revenues for the Company's first fiscal quarter ended June 30, 1995
were $4,415,990, compared to $5,727,623 reported in the same quarter of
the prior year, a decrease of approximately 23%. Net income for the
current quarter was $629,856, compared to net income of $645,956, for
the prior year's quarter. The earnings per share for the current period
were $.04 as compared to $.04 for the comparable period last year.
Net income for the quarter exceeded TRC's expectation while revenues met
the Company's objective, although revenues were down from the prior
year's quarter. The positive effect of the recent expense reduction and
cost control measures, and an improvement in gross margin, is reflected
in the financial performance of the Company.
The lower revenues were primarily due to commercial sales being down
$820,944 over the prior fiscal quarter while military sales showed a
decrease of $455,890. Commercial sales were primarily impacted by a
provision in the National Electric Code permitting manufacturers of
certain sprayer/washer products to use double-insulation instead of
supplying a GFCI as part of their product. That provision will be
eliminated in the National Electric Code, effective January 1996;
however, the Company has no certainty that it will recover to its
previous position in that market. Military product shipments continue
to be impacted by the transition period from the previous to the new
Tactical Quiet Generator Systems Program contract. The Company expects
to begin shipments of product under the new contract in the April 1996
time frame, assuming successful First Article testing by the prime
contractor. Sales to Xerox and its suppliers continued at previously
reported levels.
Because Xerox and its suppliers account for such a large percentage of
the Company's revenue (approximately 35%), the loss of Xerox as a
customer would have a material adverse effect on the Company's business.
The Company continues to receive product from its Far East manufacturing
subcontractor which supplies TRC with its high volume products.
Although the Company is tooled for its major products in both the U.S.
and in the Far East, any major disruption to the subcontractor's
facility in the Far East would have a material adverse effect on the
Company's business.
Cost of sales was approximately 61%, versus 70% for the comparable
period in the prior year due primarily to the cost control measures and
the improvement in gross margin resulting from the additional products
now being manufactured in the Far East.
Selling, general and administrative expenses for the current quarter of
$638,721 were up approximately 5%, versus the $610,520 in the same
period last year. Selling expenses were $438,531 for the current
quarter, compared to $361,133 in the prior year, an increase of
approximately 21%, reflecting higher salary, travel, advertising and
commission expenses. General administrative expenses were $200,190,
compared to $249,387 in the prior period, down approximately 20% over
comparable periods, due to expense reduction in all areas of
administration.
Research, development and engineering expenses for the current quarter
were $230,239, compared to $239,141 for the same period in the prior
year, reflecting comparable expenses period to period.
Interest and sundry income, net of interest expense, for the current
quarter was $58,669, as compared to $10,694 for the same quarter last
year, reflecting the Company's increased short term investments and
reduced borrowings.
Liquidity and Capital Resources
As of June 30, 1995, the Company's cash and cash equivalents decreased
to $1,113,565 from the March 31, 1995 total of $1,707,930, and short
term investments increased to $3,945,677 from the March 31, 1995 total
of $2,742,128. The short term investments are comprised of U.S.
Treasury Bills.
On August 15, 1994, the Company's institutional lender renewed its
commercial line of credit at $2,500,000 and extended the maturity date
to August 15, 1996. In reducing the interest rate on the line of credit
from 1% above the lender's prime rate of interest, the lender has given
the Company the option of borrowing at the lender's prime rate of
interest or the 30 day London Interbank Offering Rate(L.I.B.O.R.) plus
200 basis points. The lender has also made available a Banker's
Acceptance agreement which gives the Company the option of borrowing up
to $750,000 under the line of credit with the interest rate being
determined by the lender's International Division at the time of
borrowing.
The Company did not use its line of credit in the current first quarter,
and the mortgage payable to the Company's institutional lender as of
June 30, 1995 was $412,600, compared to $431,350 at March 31, 1995.
The Company's working capital increased by $324,894 to $10,414,566 in
the first quarter of fiscal 1996, compared to $10,089,672 at March 31,
1995.
The Company believes that the cash flow from operations, the available
bank line, and its current cash position will be sufficient to meet its
working capital requirements for the immediate future.
On May 10, 1995, the Company's Board of Directors approved the
establishment of a cash dividend policy. Under the policy, a quarterly
dividend of $.02 per share will be paid. The initial quarterly dividend
will be paid to shareholders of record on June 30, 1995, with respect to
the quarter ended on that date.
Part II - Other Information
Item 1. Legal Proceedings
As reported in the Form 10-K, the Company, along with seven other
defendants, was sued in Harris County, Texas in March 1995. The suit
claims, among other things, that the Company's GFCI product was
defectively designed and manufactured and caused the death by
electrocution of an individual. The suit seeks unspecified compensatory
and exemplary damages in excess of $100,000. The Company has both
liability and umbrella liability insurance. The case is in the
discovery stage. Management believes the ultimate disposition of this
matter will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.
Item 6. Exhibits and Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter covered by
this Report.
___________________________________________
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNOLOGY RESEARCH CORPORATION
(Registrant)
August 3, 1995 Robert S. Wiggins
_________________________ _______________________________
Date Robert S. Wiggins, Chairman and
Chief Executive Officer,
Principal Financial Officer
(Duly Authorized Officer)