Tel-Instrument Electronics Corp. (“Tel”, “Tel-Instrument” or the
“Company”) (NYSE American: TIK), a leading designer and
manufacturer of avionics test and measurement solutions, today
reported its financial results for the first quarter of fiscal year
2018.
Financial Results for First Quarter of Fiscal Year
2018
- Revenues decreased to $3.5 million from
$5.3 million in the first quarter of 2017.
- Gross profit decreased to $1.2 million
from $1.9 million in the first quarter of 2017.
- Operating expenses decreased 8% to
$706k as compared to $768k in the first quarter last year.
- Litigation expenses increased to $383k,
as compared to $144k in the first quarter of the prior fiscal
year.
- Engineering, research and development
expenses increased 5% to $615k or 17% of revenues.
- Operating loss was $463k compared to
operating income of $380k in the first quarter of 2017.
- Net loss was $286k versus net income of
$410k in the first quarter of fiscal year 2017.
Subsequent Events
- In July 2017, the court heard the
Company’s motion for reduction or elimination of the jury award as
well as conducting a hearing as to possible punitive damages. The
Company is currently awaiting the court’s decision.
Quarter Ended June 30, 2017 as Compared to June 30, 2016
For the quarter ended June 30, 2017, total net sales decreased
$1,800,292 (33.7%) to $3,542,077, as compared to $5,342,369
for the quarter ended June 30, 2016. Avionics government sales
decreased $1,899,294 (39.0%) to $2,972,326 for the quarter ended
June 30, 2017, as compared to $4,871,620 for the quarter ended June
30, 2016. The decrease in sales is mostly attributed to the
decrease in shipment of the U.S. Army TS-4530A Kits and Sets, CRAFT
and ITATS units associated with the U.S. Navy programs, which
contracts have now been completed. This decrease is partially
offset by the shipment of the T-47N and our Precision DME
("Distance Measuring Equipment”) test sets. Commercial sales
increased $90,002 (21.0%) to $569,751 for the quarter ended June
30, 2017 as compared to $470,749 for the quarter ended June 30,
2016. This increase is attributed to the increased sales of the
TR-220 and our recently introduced TR-36.
For the quarter ended June 30, 2017, total gross margin
decreased $635,363 (33.9%) to $1,241,290, as compared to
$1,876,653 for the quarter ended June 30, 2016, primarily as a
result of the lower volume as well as labor and overhead variances
as a result of the lower volume partially offset by higher selling
prices. The gross margin percentage for the quarter ended June 30,
2017 was 35.0%, as compared to 35.1% for the quarter ended June 30,
2016.
Selling, general and administrative expenses decreased $61,944
(8.1%) to $706,286 for the quarter ended June 30, 2017, as compared
to $768,230 for the quarter ended June 30, 2016. This decrease was
primarily attributed to lower salaries and related expenses, lower
accrued profit sharing expense and consulting expenses offset
partially by higher outside commission expenses.
Litigation expenses increased to $382,512 for the quarter ended
June 30, 2017 as compared to $143,514 for the quarter ended June
30, 2016 as a result of the trial expenses associated with the
Aeroflex Wichita, Inc. (“Aeroflex”) litigation.
Engineering, research and development expenses increased $30,396
(5.2%) to $615,273 for the quarter ended June 30, 2017 as compared
to $584,877 for the quarter ended June 30, 2016. The Company
continues to invest in new products by taking advantage of our
CRAFT and TS-4530A technology to develop smaller hand-held
products, which will broaden our product line for both commercial
and military applications. The Company is also developing its
T-47M5 Mode 5 test set, which we believe will compete effectively
in the international market.
The Company recorded a loss from operations of $462,781 for the
quarter ended June 30, 2017, as compared to income from operations
of $380,032 for the quarter ended June 30, 2016. Excluding the
litigation costs, the operating loss would have been $80,269 for
the first quarter of 2018 as compared operating income of $380,032
for the same quarter in fiscal year 2017.
Commenting on the results, Mr. Jeffrey O’Hara, President and CEO
of Tel, stated, “The first quarter’s results were impacted by lower
than expected gross margins and legal costs that approached $400k
as a result of the six week trial. Excluding these legal costs, the
Company would have reported a modest operating loss for the
quarter. We continue to aggressively pursue the international Mode
5 market and have several pending opportunities that could turn
into orders within the next 45 days. We are also in the process of
rolling out a new marketing incentive plan for our international
Mode 5 customers which should drive additional sales. New product
development for our new T-47M5 IFF test set is in the final stages,
and we are already accepting and have received orders for the
T-47M5 from three different international customers. This new test
set is expected to begin shipments early in the third quarter and
should generate increased sales revenues for the Company. We are
also receiving excellent reports on our new TR-36 Nav/Comm test set
from both domestic and international customers with one major U.S.
carrier ordering units in the second quarter. We are also seeing
increased market activity on our TR-220 air traffic control (“ATC”)
test set and we expect the commercial portion of our business to
continue to grow as a result of the 2020 FAA ADS-B mandate. The new
hand-held product is substantially completed from a mechanical
standpoint and the initial ADS-B only test set is expected to enter
production this fiscal year.
While the fiscal year 2018 revenues are predicted to decline
substantially from FY 2017 levels, and we are projecting further
decrease in the current quarter, we are forecasting a return to
operating profitability in the third and fourth quarters as
revenues are expected to rebound and gross margins should continue
to improve due to the completion of the major military programs. We
are forecasting increasing revenues and solid profitability in
fiscal year 2019 when the international and F-35 Mode 5 sales are
expected in volume as well as increasing sales from our new
hand-held products. This new test set will be half the size of
competitive test sets and should do extremely well in the
marketplace. The 2018 and 2019 projections are of course dependent
on our ability to finance the appeal process or pay the final
damages award.”
Concerning the current litigation, Mr. O’Hara commented,
“Depending on the outcome of hearings and the establishment of a
final damages amount, both sides have the ability to appeal the
decision or the judge could vacate the jury decision and schedule a
new trial. If the judge enters a final damages award, both sides
have approximately 30 days to file an appeal or request a new
trial. The appeal process would entail posting a bond which is
expected to be in excess of $1 million. Tel believes it has
excellent grounds for appeal which would likely take several years
to complete. Tel is actively working to arrange financing to cover
the cost of the expected appeal and/or pay the final damages award
depending on the amount of the final award.”
The Company encourages investors to read its full results of
operations as contained in our Quarterly Report on Form 10-Q filed
on August 17, 2017 at www.sec.gov.
Conference Call
The Company will host a conference call and webcast on Thursday,
August 17, 2017 at 9:00 a.m. Eastern Time to discuss the Company’s
fiscal first quarter 2018 results.
To access the live webcast, log onto the Tel-Instrument
Electronics’ website
at https://www.telinstrument.com/learn-about-telinstrument/investor-relations.html.
To participate in the call by phone, dial (877) 407-8035
approximately five minutes prior to the scheduled start time.
International callers please dial (201) 689-8035.
A replay of the teleconference will be available until September
17, 2017 and may be accessed by dialing (877) 481-4010.
International callers may dial (919) 882-2331. Callers should use
conference ID: 19960.
About Tel-Instrument Electronics
Corp.
Tel-Instrument is a leading designer and manufacturer of
avionics test and measurement solutions for the global commercial
air transport, general aviation, and government/military aerospace
and defense markets. Tel-Instrument provides instruments to test,
measure, calibrate, and repair a wide range of airborne navigation
and communication equipment. For further information please visit
our website at www.telinstrument.com.
This press release includes statements that are not historical
in nature and may be characterized as “forward-looking statements,”
including those related to future financial and operating results,
benefits, and synergies of the combined companies, statements
concerning the Company’s outlook, pricing trends, and forces within
the industry, the completion dates of capital projects, expected
sales growth, cost reduction strategies, and their results,
long-term goals of the Company and other statements of
expectations, beliefs, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that
are not historical facts. All predictions as to future results
contain a measure of uncertainty and, accordingly, actual results
could differ materially. Among the factors which could cause a
difference are: changes in the general economy; changes in demand
for the Company’s products or in the cost and availability of its
raw materials; the actions of its competitors; the success of our
customers; technological change; changes in employee relations;
government regulations; litigation, including its inherent
uncertainty; difficulties in plant operations and materials;
transportation, environmental matters; and other unforeseen
circumstances. A number of these factors are discussed in the
Company’s previous filings with the U.S. Securities and Exchange
Commission. The Company disclaims any intention or obligation to
update any forward-looking statements as a result of developments
occurring after the date of this press release. The safe harbor for
forward-looking statements contained in the Securities Litigation
Reform Act of 1995 (the “Act”) protects companies from liability
for their forward-looking statements if they comply with the
requirements of the Act.
TEL-INSTRUMENT
ELECTRONICS CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
June 30,2017
March 31,2017
(unaudited) ASSETS Current assets: Cash and cash equivalents
$ 234,804 $ 287,873 Accounts receivable, net 1,221,456 1,556,382
Inventories, net 4,165,330 4,208,179 Prepaid expenses and other
current assets 77,997 188,578 Total
current assets 5,699,587 6,241,012 Equipment and leasehold
improvements, net 161,411 161,427 Other long-term assets
33,509 33,509 Total assets 5,894,507
6,435,948 LIABILITIES &
STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities: Current
portion of long-term debt 186,252 291,991 Line of credit 400,000
200,000 Capital lease obligations – current portion 6,414 6,268
Accounts payable and accrued liabilities 1,875,577 2,072,955
Federal and state taxes payable 4,105 4,105 Deferred revenues –
current portion 63,165 123,720 Accrued legal damages 2,800,000
2,800,000 Accrued payroll, vacation pay and payroll taxes
501,030 527,413 Total current liabilities
5,836,543 6,026,452 Capital lease obligations – long-term
12,100 13,760 Long-term debt 534 2,124 Deferred revenues –
long-term 377,603 352,973 Warrant liability -
95,000 Total liabilities 6,226,780
6,490,309 Commitments Stockholders’ (deficit)
equity: Common stock, 4,000,000 shares authorized, par value $0.10
per share,
3,255,887 shares issued and outstanding,
respectively
325,586 325,586 Additional paid-in capital 8,115,548 8,107,369
Accumulated deficit (8,773,407 ) (8,487,316 ) Total
stockholders’ (deficit) equity (332,273 ) (54,361 )
Total liabilities and stockholders’ (deficit) equity $ 5,894,507
$ 6,435,948
TEL-INSTRUMENT
ELECTRONICS CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,2017
June 30,2016
Net sales $ 3,542,077 $ 5,342,369 Cost of sales
2,300,787 3,465,716 Gross margin
1,241,290 1,876,653 Operating expenses: Selling, general and
administrative 706,286 768,230 Litigation costs 382,512 143,514
Engineering, research and development 615,273
584,877 Total operating expenses 1,704,071
1,496,621 (Loss) income from operations
(462,781 ) 380,032 Other income (expense): Proceeds from
life insurance 92,678 - Amortization of deferred financing costs
(1,357 ) (1,356 ) Change in fair value of common stock warrants
95,000 217,203 Interest expense (9,631 ) (17,826 )
Total other income (expense) 176,690 198,021
(Loss) income before income taxes (286,091 ) 578,053
Income tax provision - 167,744
Net (loss) income $ (286,091 ) $ 410,309 Net
(loss) income per share: Basic (loss) income per common share $
(0.09 ) $ 0.13 Diluted (loss) income per common share $
(0.12 ) $ 0.10 Weighted average shares outstanding:
Basic 3,255,887 3,255,887 Diluted 3,266,540 3,274,829
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170817005341/en/
Tel-Instrument Electronics Corp.Joseph P. Macaluso,
201-933-1600orInstitutional Marketing Services (IMS)John Nesbett or
Jennifer Belodeau203-972-9200jnesbett@institutionalms.com
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