<PAGE> 1
UNITED STATES
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 Quarterly Period Ended June 30, 2000
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from _______________ to ________________
Commission File Number 000-08193
SENSYTECH, INC.
---------------
(Exact name of small business issuer as specified in its charter)
Delaware 38-1873250
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8419 Terminal Road, Newington, Virginia 22122-1430
---------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number (703)550-7000
-------------
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
----- -------
As of July 28, 2000, there were 3,961,547 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE> 2
SENSYTECH, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited)
------
Pages
-----
<S> <C>
Condensed Consolidated Balance Sheets at
June 30, 2000 and September 30, 1999............................... 3-4
Condensed Consolidated Statements of Income for the
Three Months Ended June 30, 2000 and June 30, 1999,
And Nine Months Ended June 30, 2000 and June 30, 1999.............. 5-6
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 2000 and June 30, 1999.................. 7
Notes to Condensed Consolidated Financial Statements................... 8
Item 2. Management's Discussion and Analysis of Results of
------- Operations and Financial Condition............................ 9-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 11
-------
Item 4. Submission of Matters to a Vote of Security Holders........... 11-12
-------
Item 6. Exhibits and Reports on Form 8-K.............................. 12
-------
Signatures............................................................. 13
</TABLE>
2
<PAGE> 3
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
------------ ---------------
(Unaudited) *
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,156,000 $ 3,076,000
Accounts receivable, net of allowance for doubtful
accounts of $190,000 at June 30, 2000 and
$311,000 at September 30, 1999 2,646,000 3,215,000
Unbilled contract costs, net 6,628,000 4,924,000
Inventories (Note 2) 24,000 25,000
Deferred income taxes 609,000 717,000
Prepaid income taxes 794,000 -
Other current assets 184,000 151,000
------------- ---------------
TOTAL CURRENT ASSETS 13,041,000 12,108,000
PROPERTY AND EQUIPMENT 1,383,000 1,403,000
OTHER ASSETS
Deferred income taxes 54,000 54,000
Goodwill, net of accumulated amortization of
$37,000 at June 30, 2000 and $25,000 at
September 30, 1999 129,000 141,000
Other assets 75,000 81,000
------------- ---------------
TOTAL ASSETS $ 14,682,000 $ 13,787,000
============= ===============
</TABLE>
*The year-end balance sheet data was summarized from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
----------------------- ---------------------
(Unaudited) *
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 1,299,000 $ 1,486,000
Accrued salaries, benefits, and related expenses 1,153,000 1,267,000
Deferred compensation - 356,000
Other accrued expenses 1,059,000 634,000
Income taxes payable - 355,000
Billings in excess of costs 664,000 466,000
Capital leases 44,000 42,000
----------------------- ---------------------
TOTAL CURRENT LIABILITIES 4,219,000 4,606,000
LONG-TERM LIABILITIES
Capital leases 34,000 69,000
----------------------- ---------------------
STOCKHOLDERS' EQUITY
Common stock, at June 30, 2000, $.01 par value,
authorized 5,000,000 shares; issued and outstanding
4,021,500 shares; at September 30, 1999, $.01 par
value, authorized 5,000,000 shares; issued and
outstanding 3,987,940 shares 40,000 40,000
Additional paid-in capital 7,228,000 7,099,000
Unearned stock-based compensation (77,000) (125,000)
Retained earnings 3,448,000 2,098,000
Treasury stock, 54,000 shares in 2000, at
cost (210,000) -
----------------------- ---------------------
10,429,000 9,112,000
----------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,682,000 $ 13,787,000
====================== =====================
</TABLE>
*The year-end balance sheet data was summarized from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
June 30,
2000 1999
--------------------- -----------------------------------
(Unaudited) (Unaudited)
REVENUE
<S> <C> <C>
Contract revenue $ 6,257,000 $ 6,669,000
-------------------- -----------------------------------
COSTS AND EXPENSES
Cost of revenues 4,080,000 4,704,000
General and administrative expenses 1,396,000 1,075,000
-------------------- -----------------------------------
Total costs and expenses 5,476,000 5,779,000
-------------------- -----------------------------------
INCOME FROM OPERATIONS 781,000 890,000
OTHER INCOME
Interest income, net 43,000 9,000
-------------------- -----------------------------------
INCOME BEFORE INCOME TAXES 824,000 899,000
INCOME TAX PROVISION (312,000) (348,000)
-------------------- -----------------------------------
NET INCOME $ 512,000 $ 551,000
==================== ===================================
PER SHARE AMOUNTS (Note 3)
Basic earnings per share $ 0.13 $ 0.14
==================== ===================================
Diluted earnings per share $ 0.12 $ 0.13
==================== ===================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
2000 1999
------------------- ---------------
(Unaudited) (Unaudited)
REVENUE
<S> <C> <C>
Contract revenue $ 17,752,000 $ 20,207,000
------------------- ---------------
COSTS AND EXPENSES
Cost of revenues 12,455,000 14,926,000
General and
administrative expenses 3,216,000 3,191,000
------------------- ---------------
Total costs and expenses 15,671,000 18,117,000
------------------- ---------------
INCOME FROM OPERATIONS 2,081,000 2,090,000
OTHER INCOME (EXPENSES)
Interest income (expense),
net 86,000 (61,000)
------------------- ---------------
INCOME BEFORE INCOME
TAXES 2,167,000 2,029,000
INCOME TAX PROVISION (817,000) (788,000)
------------------- ---------------
NET INCOME $ 1,350,000 $ 1,241,000
=================== ===============
PER SHARE AMOUNTS (Note 3)
Basic earnings per share $ 0.34 $ 0.31
=================== ===============
Diluted earnings per share $ 0.32 $ 0.30
=================== ===============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
2000 1999
--------------------------------- ---------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net cash (used in) provided by
operating activities $ (582,000) $ 4,507,000
--------------------------------- ---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property and equipment (224,000) (313,000)
Proceeds from disposal of property held
for sale - 1,446,000
--------------------------------- ---------------------------------
Net cash (used in) provided by
investing activities $ (224,000) $ 1,133,000
--------------------------------- ---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under line of credit $ - $ (2,049,000)
Principal payments on mortgage debt - (220,000)
Principal payments on capital lease
obligations (33,000) (34,000)
Proceeds of stock option exercises,
including tax benefit 129,000 31,000
Purchase of treasury stock (210,000) -
Issuance of common stock - 43,000
--------------------------------- ---------------------------------
Net cash used in financing activities (114,000) (2,229,000)
--------------------------------- ---------------------------------
Net (decrease) increase in cash and cash
equivalents (920,000) 3,411,000
Cash and cash equivalents, beginning
of period 3,076,000 112,000
--------------------------------- ---------------------------------
Cash and cash equivalents, end of period $ 2,156,000 $ 3,523,000
================================= =================================
Supplemental disclosure of cash flow
information:
Cash received for income taxes $ 4,000 $ -
================================= =================================
Cash paid for interest $ 5,000 $ 68,000
================================= =================================
Cash paid for income taxes $ 1,745,000 $ 240,000
================================= =================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE> 8
SENSYTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information for commercial and industrial companies and
with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair presentation have
been included. Operating results for the three and nine month periods ended
June 30, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 2000. Intercompany accounts
and transactions have been eliminated in consolidation. For further
information, refer to SenSyTech, Inc.'s Annual Report on Form 10-KSB for the
year ended September 30, 1999.
2. INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method and consisted of component parts.
3. EARNINGS PER SHARE
The computation of net earnings per share is based on the weighted average
number of shares of common stock outstanding during the periods presented.
The weighted average number of shares used in the basic earnings per share
calculation was 4,002,565 and 3,981,131 for the three-month periods ended
June 30, 2000 and 1999, respectively, and 4,005,001 and 3,972,094 for the
nine-month periods ended June 30, 2000 and 1999, respectively. The weighted
average number of shares used in the diluted earnings per share calculation
was 4,139,373 and 4,201,956 for the three-month periods ended June 30, 2000
and 1999, respectively. The weighted average number of shares used in the
diluted earnings per share calculation was 4,181,490 and 4,180,504 for the
nine-month periods ended June 30, 2000 and 1999, respectively.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion provides information which management believes is
relevant to an assessment and an understanding of the Company's operations
and financial condition. This discussion should be read in conjunction with
the condensed consolidated financial statements and accompanying notes.
Forward-looking Statements
Statements in this filing which are not historical facts are
forward-looking statements under the provisions of the Private Securities
Litigation Reform Act of 1995. All forward-looking statements involve risks
and uncertainties. These statements are based upon numerous assumptions
about future conditions that could prove not to be accurate. Actual events,
transactions or results may materially differ from the anticipated events,
transactions or results described in such statements. The Company's ability
to consummate such transactions and achieve such events or results is subject
to certain risks and uncertainties. In addition to those specifically
mentioned above, such risks and uncertainties include, but are not limited
to, the existence of demand for and acceptance of the Company's products and
services, regulatory approvals and developments, economic conditions, the
impact of competition and pricing, results of financing efforts and other
factors affecting the Company's business that are beyond the Company's
control. The Company undertakes no obligation, and does not intend, to
update or revise these forward-looking statements to reflect future events or
circumstances.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999:
Revenue for the three months ended June 30, 2000 was $6,257,000 compared to
$6,669,000 for the three months ended June 30, 1999, resulting in a $412,000
or a 6.2% decrease. The decrease was primarily the result of reduced revenues
on the ESM Receiver contract with the U.S. Navy. This contract generated
18.1% of the revenue for the three months ended June 30, 1999 compared to
1.3% of the revenue for the three months ended June 30, 2000.
The total amount of negotiated backlog, including both unfilled firm orders
for the Company's products for which funding had been authorized and
appropriated by the customer, and firm orders for which funding had not been
appropriated as of June 30, 2000 and 1999 was $6,632,000 and $13,900,000,
respectively. This decrease is principally the result of delays in receiving
newly negotiated contract funding and the substantial completion of the ESM
Receiver contract.
Cost of revenue, as a percentage of revenue, decreased from 70.5% for the
three months ended June 30, 1999 to 65.2% for the three months ended June 30,
2000. The decrease primarily resulted from continuing productivity
improvements in the operations and in the profit margins under current
contracts.
For the three months ended June 30, 2000, general and administrative expenses
increased from $1,075,000 to $1,396,000 resulting in a $321,000 or a 29.8%
increase compared to the three-month period ended June 30, 1999. The
increase was due to an increase in severance costs in the current quarter.
Net interest income was $43,000 for the three months ended June 30, 2000,
compared to net interest income of $9,000 for the three months ended June 30,
1999. The increase was due to the absence of any outstanding debt in higher
daily cash equivalent balances during the current quarter.
9
<PAGE> 10
Income tax expense consists of federal and state income tax. The Company's
effective tax rate was 37.8% for the three months ended June 30, 2000,
compared to an effective tax rate of 38.7% for the three months ended June
30, 1999. The rate varied from the statutory rate primarily due to state
taxes.
Net income for the three months ended June 30, 2000 decreased to $512,000,
compared to a net income of $551,000 for the three months ended June 30,
1999. The decrease of $39,000 was the result of the items discussed above.
NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO NINE MONTHS ENDED JUNE 30, 1999:
Revenue for the nine months ended June 30, 2000 was $17,752,000 compared to
$20,207,000 for the nine months ended June 30, 1999, resulting in a
$2,455,000 or 12.1% decrease. The decrease was primarily the result of
reduced revenues on the ESM Receiver contract with the U.S. Navy. This
contract generated 28.0% of the revenue for the nine months ended June 30,
1999, compared to 7.4% of the revenue for the nine months ended June 30,
2000.
Cost of revenue, as a percentage of revenue, decreased from 73.8% for the
nine months ended June 30, 1999 to 70.1% for the nine months ended June 30,
2000. The decrease primarily resulted from an improved mix of business and
productivity improvements in the operations.
For the nine months ended June 30, 2000, general and administrative expenses
increased from $3,191,000 to $3,216,000 or a .7% increase compared to the
nine-month period ended June 30, 1999. The increase is due to a one-time
severance cost of $461,500 recorded in the third quarter. Without
consideration of this one-time non-recurrent severance cost, the general and
administrative expense would have been $2,754,500, a decrease of 13.7%,
compared to the nine-month period ending June 30, 1999.
Net interest income was $86,000 for the nine months ended June 30, 2000,
compared to net interest expense of $61,000 for the nine months ended June
30,1999. The Company was able to utilize its improved operating performance
and the net proceeds from the sale of real estate on December 1, 1998, to pay
down its outstanding balance on its line of credit throughout the three-month
period ended June 30, 2000, and earned interest on temporary cash
investments.
Income tax expense consists of federal and state income tax. The Company's
effective tax rate was 37.7% for the nine months ended June 30, 2000,
compared to an effective tax rate of 38.8% for the nine months ended June 30,
1999. The rate varied from the statutory rate primarily due to state taxes.
Net income for the nine months ended June 30, 2000 increased to $1,350,000,
compared to a net income of $1,241,000 for the nine months ended June 30,
1999. The increase of $109,000 was the result of the items discussed above.
10
<PAGE> 11
LIQUIDITY AND SOURCES OF CAPITAL
Cash flows used in operating activities were $582,000 for the nine months ended
June 30, 2000, compared to cash flows provided by operating activities of
$4,507,000 during the comparable nine-month period of fiscal year 1999. This
decrease was principally due to the payment of income taxes, an increase in
unbilled receivables, and terminating a deferred compensation plan, which
resulted in a payout to participants.
The net cash used for investing activities during the nine-month period ended
June 30, 2000 was $224,000, compared to net cash provided to the Company by
its investing activities of $1,133,000 during the first nine months of fiscal
year 1999. In the nine months ended June 30, 1999, the Company disposed of
property held for sale for $1,446,000. The current period expenditures were
related to the acquisition of property and equipment. The Company
anticipates that it will continue to incur capital expenditures at this
approximate rate through the end of the fourth quarter of fiscal year 2000.
The net cash used by the Company in financing activities during the
nine-month period ended June 30, 2000 was $114,000, compared to net cash used
by the Company in financing activities of $2,229,000 during the comparable
nine-month period of fiscal year 1999. The 2000 activity was principally the
result of the proceeds of stock option exercises offset by the payment of
capital lease obligations. For the nine-month period ended June 30, 1999,
the net cash used was primarily devoted to reducing to zero the Company's
line of credit and satisfying the mortgage on the real estate which was sold.
At June 30, 2000, the Company was in compliance with the covenants contained
in the line of credit agreement, and there were no amounts outstanding
thereunder.
The Company currently believes that its existing funds, amounts generated by
operations, and amounts available for borrowings under its line of credit will
be sufficient to meet its working capital needs through the next 12 months.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of, any
pending legal proceedings other than those which are incidental to the
ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the period covered by this report, the Company filed with the
Securities and Exchange Commission and delivered to its shareholders the
Company's Proxy Statement for its Annual Meeting of Stockholders held
February 9, 2000.
(a) The Company's Annual Meeting of Stockholders was held on February 9,
2000.
(b) The nominees for the Board of Directors are identified below.
(c) The inspector of election tabulated the following votes for the
nominees for the Board of Directors, each of whom was elected:
11
<PAGE> 12
Election of Directors
<TABLE>
<CAPTION>
Number of Votes Abstentions and Broker
Nominee for Office Number of Votes "For" "Against" Non-Votes
------------------ --------------------- --------- ---------
<S> <C> <C> <C>
Charles W. Bernard 2,504,067 7,559 - 0 -
John Irving 2,504,067 7,559 - 0 -
Thomas R. Ory 2,503,638 7,989 - 0 -
S. R. Perrino 2,499,867 11,760 - 0 -
Philip H. Power 2,504,067 7,559 - 0 -
S. Kent Rockwell 2,504,067 7,559 - 0 -
John D. Sanders 2,507,067 7,559 - 0 -
</TABLE>
The inspector of election tabulated the following votes for the ratification
of the selection of PricewaterhouseCoopers LLP as the Company's independent
accountants for the 2000 fiscal year:
<TABLE>
<CAPTION>
Abstentions and Broker
Number of Votes "For" Number of Votes "Against" Non-Votes
--------------------- ------------------------- ---------
<S> <C> <C>
2,503,989 -0- 7,638
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule
(b) The Company did not file any Reports on Form 8-K during this period.
12
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SENSYTECH, INC.
August 14, 2000 By:
/s/S. Kent Rockwell
--------------------------------
S. Kent Rockwell
Chief Executive Officer
By: /s/Lloyd B. Johnston
-------------------------------
Lloyd B. Johnston
Controller
13
