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 December 31, 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 January 31, 1996
____________________________ _______________________________
Common stock, $.51 par value 5,293,170
TECHNOLOGY RESEARCH CORPORATION
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets--December 31, 1995 and
March 31, 1995
Condensed Statements of Income--Three months and
nine months ended December 31, 1995 and December 31, 1994
Condensed Statements of Cash Flows--Nine months ended
December 31, 1995 and December 31, 1994
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TECHNOLOGY RESEARCH CORPORATION
CONDENSED BALANCE SHEETS
December 31 March 31
1995 1995
__________ __________
(unaudited) *
ASSETS
____________________________________
Current assets:
Cash and cash equivalents $ 599,091 1,707,930
Short term investments 4,035,117 2,742,128
Accounts receivable, net 2,851,221 3,335,726
Inventories:
Raw material 3,696,595 2,707,054
Work in process 484,231 654,520
Finished goods 748,103 584,451
__________ __________
Total inventories 4,928,929 3,946,025
Prepaid expenses 76,556 36,863
Deferred income taxes 392,000 440,000
__________ __________
Total current assets 12,882,914 12,208,672
__________ __________
Property, plant, and equipment 5,954,145 5,536,933
Less accumulated depreciation 3,562,597 3,213,002
__________ __________
Net property, plant, and equipment 2,391,548 2,323,931
__________ __________
Deferred income taxes 228,000 228,000
Other assets 523 53,335
__________ __________
$ 15,502,985 14,813,938
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current liabilities:
Current installments of long-term debt $ 75,000 75,000
Accounts payable 1,534,694 1,728,332
Dividends payable 322,263 -
Accrued expenses 244,937 230,177
Income taxes payable 24,991 85,491
__________ __________
Total current liabilities 2,201,885 2,119,000
Long-term debt, excluding current installments 300,100 356,350
__________ __________
Total liabilities 2,501,985 2,475,350
__________ __________
Stockholders' equity:
Common stock 2,699,517 2,675,398
Additional paid-in capital 7,363,067 7,322,923
Retained earnings 2,938,416 2,340,267
__________ __________
Total stockholders' equity 13,001,000 12,338,588
__________ __________
$ 15,502,985 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 Nine Months Ended
December 31 December 31
1995 1994 1995 1994
__________ __________ __________ __________
Operating revenues:
Net sales $ 4,136,934 5,257,624 12,552,751 16,584,582
Royalties 216,946 250,512 602,704 663,835
__________ __________ __________ __________
4,353,880 5,508,136 13,155,455 17,248,417
__________ __________ __________ __________
Operating expenses:
Cost of sales 2,756,469 4,207,556 8,132,547 12,357,733
Selling, general, and administrative 690,288 770,212 2,034,440 2,072,174
Research, development and engineering 233,581 279,415 718,849 794,727
__________ __________ __________ __________
3,680,338 5,257,183 10,885,836 15,224,634
__________ __________ __________ __________
Operating income 673,542 250,953 2,269,619 2,023,783
__________ __________ __________ __________
Other income (deductions):
Interest and sundry income 69,342 38,271 207,540 102,615
Interest expense (10,151) (11,453) (32,625) (39,838)
__________ __________ __________ __________
59,191 26,818 174,915 62,777
__________ __________ __________ __________
Income before income taxes 732,733 277,771 2,444,534 2,086,560
Income taxes 268,000 100,000 894,814 632,000
__________ __________ __________ __________
Net income $ 464,733 177,771 1,549,720 1,454,560
========== ========== ========== ==========
Earnings per share $ 0.09 0.03 0.29 0.27
========== ========== ========== ==========
Weighted average number of common
and equivalent shares outstanding 5,405,639 5,392,333 5,407,725 5,392,659
========== ========== ========== ==========
Dividend declared per share $ 0.06 - 0.18 -
========== ========== ========== ==========
<FN>
See accompanying notes to condensed financial statements.
TECHNOLOGY RESEARCH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
December 31
1995 1994
__________ __________
Cash flows from operating activities:
Net income $ 1,549,720 1,454,560
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of interest (166,953) (73,742)
Depreciation 349,595 334,788
Decrease in accounts receivable 484,505 152,015
Increase in inventories (982,904) (83,199)
Increase in prepaid expenses (39,693) (52,082)
Decrease in deferred income taxes 48,000 -
Decrease in other assets 52,812 13,056
Increase(decrease) in accounts payable (193,638) 642,687
Increase(decrease) in accrued expenses 14,760 (123,278)
Increase in income taxes payable (60,500) (201,491)
__________ __________
Net cash provided by operating activities 1,055,704 2,063,314
__________ __________
Cash flows from investing activities:
Purchase of short-term investments (4,958,036) (4,197,108)
Maturities of short-term investments 3,832,000 1,557,000
Capital expenditures (417,212) (576,692)
__________ __________
Net cash used in investing activities (1,543,248) (3,216,800)
__________ __________
Cash flows from financing activities:
Principal payments on long-term debt (56,250) (456,250)
Proceeds from exercise of stock options 64,263 49,303
Dividends paid (629,308) -
__________ __________
Net cash provided by(used in)
financing activities (621,295) (406,947)
__________ __________
Decrease in cash and cash equivalents (1,108,839) (1,560,433)
Cash and cash equivalents at beginning of period 1,707,930 2,096,626
__________ __________
Cash and cash equivalents at end of period $ 599,091 536,193
========== ==========
<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 nine month period ended December
31, 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. For financial
reporting purposes, the tax benefit of these net operating loss and
tax credit carryforwards was recorded during the year ended March 31,
1995.
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.
Item 2. 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 Nine Months Ended December 31, 1995 versus Nine Months Ended
December 31, 1994
Operating revenues for the third quarter ended December 31, 1995 were
$4,353,880, compared to $5,508,136 reported in the same quarter of the prior
year, a decrease of approximately 21%. Net income for the current quarter was
$464,733, or $.09 per share, compared to net income of $177,771, or $.03 per
share, for the prior year's quarter, an increase of approximately 161%.
Operating revenues for the nine month period ended December 31, 1995 were
$13,155,455, compared to $17,248,417 reported in the same period in the prior
year, a decrease of approximately 24%. Net income for the nine month period
was $1,549,720, or $.29 per share, compared to net income of $1,454,560, or
$.27 per share, for the same period in the prior year, an increase of
approximately 7%.
The Company continues to control costs, the results of which are reflected in
the Company's earnings.
The lower revenues were primarily due to commercial sales being down $3,220,435
over the prior nine month period, while military sales showed a decrease of
$811,396. Royalty income was down by $61,131. Commercial sales continue to be
negatively impacted, as previously reported, by the sprayer/washer market and
by sales to Xerox. Military product shipments continue to be impacted by the
transition period from the previous to the new Tactical Quiet Generator Systems
Program contract. Assuming successful First Article testing by the prime
contractor, the Company expects to begin shipments of product under the new
contract in the June 1996 time frame.
Because Xerox Corporation and its suppliers account for such a large percentage
of the Company's revenue (approximately 30%), the loss of Xerox as a customer
would have a material adverse effect on the Company's business.
Royalties from Windmere Corporation may decline in Fiscal 1997, as a result of
ongoing negotiations which Windmere has initiated in an effort to reduce the
cost of their products due to competitive pressures.
During the third quarter, the Company received UL approval to manufacture the
first of several patented Fire Shield products, which offer protection against
insulation aging and arcing faults caused by damage to appliance cords and
extension cords, which can result in electrical fires. According to studies by
the United States Consumer Products Safety Commission (CPSC), fires from these
causes represent a major portion of electrical fires in the home, resulting in
several hundred civilian deaths and over one billion dollars in property damage
for the year studied.
Effective December 31, 1995, H. Jay Hill resigned from the Company to pursue
other interests, and Owen Jackson has been promoted to Vice President of Sales
and Marketing. Mr. Jackson has been with the Company for ten years in various
sales and marketing positions.
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 67% of net sales for the current quarter and
approximately 65% of net sales for the nine month period ended December 31,
1995, compared to 80% and 75% in the same periods last year. The improvement
was due primarily to better gross margins resulting from the additional
products now being manufactured in the Far East and the cost control measures
implemented at TRC's Clearwater facility.
Selling, general and administrative expenses were $690,288 for the current
quarter and $2,034,440 for the nine month period ended December 31, 1995,
compared to $770,212 and $2,072,174 in the same periods last year. Selling
expenses were $410,523 for the current quarter and $1,281,659 for the nine
month period, compared to $506,225 and $1,292,557 in the prior year, reflecting
comparable expenses period to period. General administrative expenses were
$279,765 for the current quarter and $752,781 for the nine month period,
compared to $263,987 and $779,617 in the prior year. The general administrative
expenses were higher in the current period because of expenses related to the
Company's move from the NASDAQ Small Cap Market to the NASDAQ National Market.
Research, development and engineering expenses for the current quarter were
$233,581 and $718,849 for the nine month period ended December 31, 1995,
compared to $279,415 and $794,727 for the same periods in the prior year,
reflecting a decrease primarily in salary expenses.
Interest and sundry income, net of interest expense, for the current quarter
was $59,191 and $174,915 for the nine month period ended December 31, 1995,
compared to $26,818 and $62,777 for the same periods last year, reflecting the
Company's increased short term investments and reduced borrowings.
Liquidity and Capital Resources
As of December 31, 1995, the Company's cash and cash equivalents decreased to
$599,091 from the March 31, 1995 total of $1,707,930, and short term
investments increased to $4,035,117 from the March 31, 1995 total of
$2,742,128. The short term investments are comprised of U.S. Treasury Bills.
On August 22, 1995, the Company's institutional lender renewed its commercial
line of credit at $2,500,000 and extended the maturity date to August 15, 1997.
The lender continues to give 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 also continues to make
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 period, and the
mortgage payable to the Company's institutional lender as of December 31, 1995
was $375,100, compared to $431,350 at March 31, 1995, reflecting the year to
date payments on principal.
The Company's working capital increased by $591,357, over the first three
periods of fiscal 1996, to $10,681,029, 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.
The third quarter dividend of $.06 per share was paid on January 16, 1996 to
shareholders of record on December 31, 1995. The Company has paid dividends of
$.18 per share year to date.
On November 3, 1995, NASDAQ approved the Company's application for listing on
the National Market, giving the Company's common stock a greater market in
which to trade. The Company has been listed on the NASDAQ Small Cap Market
since 1984.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the Company's 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
a. Exhibits
Exhibit 27. Financial Data Schedule
b. 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)
February 8, 1996 Robert S. Wiggins
___________________________ __________________________________
Date Robert S. Wiggins, Chairman and
Chief Executive Officer,
Principal Financial Officer
(Duly Authorized Officer)