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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
Mark One
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarterly Period Ended December 31, 1999
or
[ ] Transition Report Pursuant to 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.
(FORMERLY KNOWN AS SENSYS TECHNOLOGIES INC.)
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(Exact name of registrant as specified in its charter)
Delaware 38-1873250
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8419 Terminal Road, Newington, Virginia 22122-1430
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 550-7000
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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
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As of February 8, 2000, there were 4,003,667 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
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SENSYTECH, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
Pages
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<S> <C>
Condensed Consolidated Balance Sheets at
December 31, 1999 and September 30, 1999................................... 3-4
Condensed Consolidated Statements of Income for the
Three Months Ended December 31, 1999 and December 31, 1998................ 5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended December 31, 1999 and December 31, 1998................ 6
Notes to Condensed Consolidated Financial Statements............................ 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition................................... 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................... 9
Signatures ..................................................................... 10
</TABLE>
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SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
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(Unaudited) *
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,587,000 $ 3,076,000
Accounts receivable, net of allowance for doubtful
accounts of $617,000 at December 31,1999 and
$311,000 at September 30, 1999 3,482,000 3,215,000
Unbilled contract costs, net 5,744,000 4,924,000
Inventories (Note 2) 24,000 25,000
Deferred income taxes 863,000 717,000
Refundable income taxes 228,000 -
Other current assets 91,000 151,000
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TOTAL CURRENT ASSETS 12,019,000 12,108,000
PROPERTY AND EQUIPMENT 1,365,000 1,403,000
OTHER ASSETS
Deferred income taxes 54,000 54,000
Goodwill, net of accumulated amortization of
$29,000 at December 31, 1999 and $25,000 at
September 30, 1999 137,000 141,000
Other assets 76,000 81,000
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TOTAL ASSETS $ 13,651,000 $ 13,787,000
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</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.
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SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
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(Unaudited) *
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,327,000 $ 1,486,000
Accrued salaries, benefits, and related expenses 741,000 1,267,000
Deferred compensation 368,000 356,000
Other accrued expenses 1,125,000 634,000
Income taxes payable 91,000 355,000
Billings in excess of costs 368,000 466,000
Capital leases 43,000 42,000
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TOTAL CURRENT LIABILITIES 4,063,000 4,606,000
LONG-TERM LIABILITIES
Capital leases 57,000 69,000
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STOCKHOLDERS' EQUITY
Common stock, at December 31, 1999, $.01 par value, authorized 5,000,000
shares; issued and outstanding 4,003,667 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 7,169,000 7,099,000
Unearned stock-based compensation (115,000) (125,000)
Retained earnings 2,437,000 2,098,000
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9,531,000 9,112,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,651,000 $ 13,787,000
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</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.
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SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
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(Unaudited) (Unaudited)
<S> <C> <C>
REVENUE
Contract revenue $ 5,494,000 $ 6,022,000
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COSTS AND EXPENSES
Cost of revenues 4,132,000 4,630,000
General and administrative expenses 844,000 890,000
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Total costs and expenses 4,976,000 5,520,000
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INCOME FROM OPERATIONS 518,000 502,000
OTHER INCOME (EXPENSES)
Interest income (expense), net 29,000 (46,000)
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INCOME BEFORE INCOME TAXES 547,000 456,000
INCOME TAX PROVISION (208,000) (180,000)
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NET INCOME $ 339,000 $ 276,000
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PER SHARE AMOUNTS (Note 3)
Basic earnings per share $ 0.08 $ 0.07
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Diluted earnings per share $ 0.08 $ 0.07
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</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SENSYTECH, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
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(Unaudited) (Unaudited)
<S> <C> <C>
Net cash used in operating activities $ (1,435,000) $ (630,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net acquisitions of property and equipment (100,000) (102,000)
Proceeds from disposal of property held for sale - 1,446,000
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Net cash (used in) provided by investing activities $ (100,000) $ 1,344,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under line of credit $ - $ (438,000)
Principal payments on mortgage debt - (220,000)
Principal payments on capital lease obligations (11,000) (7,000)
Proceeds of stock option exercises 57,000 17,000
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Net cash provided by (used in) financing activities 46,000 (648,000)
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Net (decrease) increase in cash and cash equivalents (1,489,000) 66,000
Cash and cash equivalents, beginning of period 3,076,000 112,000
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Cash and cash equivalents, end of period $ 1,587,000 $ 178,000
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Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,000 $ 42,000
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Cash paid for income taxes $ 700,000 $ -
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</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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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-month period ended December 31, 1999, 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 3,998,582 and 3,968,271 for the three-month periods ended
December 31, 1999 and 1998, respectively. The weighted average number of shares
used in the diluted earnings per share calculation was 4,217,258 and 4,142,348
for the three-month periods ended December 31, 1999 and 1998, respectively.
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 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
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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
Revenue for the three months ended December 31, 1999, was $5,494,000 compared to
$6,022,000 for the three months ended December 31, 1998, resulting in a $528,000
or 8.8% decrease. The decrease was primarily due to the expiration of certain
long-term contracts. The Omnibus contract and a contract for a model STR-16807
products with the U.S. Government originated in fiscal years 1996 and 1998,
respectively. In the three months ended December 31, 1999, no revenue was
generated from these contracts compared to generating 10% of the total revenue
for the three months ended December 31, 1998.
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
December 31, 1999 and 1998, was $12,600,000 and $19,600,000, respectively. This
decrease is principally the result of reduced unauthorized backlog. The Company
is in negotiation for an additional authorization of approximately $5,000,000
on a major subcontract with the U.S. Navy. The majority of the authorized and
appropriated unfilled orders at December 31, 1999 are expected to be completed
within a year. Orders for new business for the Company's products and services
improved by 15% as of December 31, 1999, from December 31, 1998.
Cost of revenue, as a percentage of revenue, decreased from 76.9% for the three
months ended December 31, 1998 to 75.2% for the three months ended December 31,
1999. The decrease resulted from an improved mix of business and productivity
improvements in the operations. These gains are the result of the 1998 business
restructuring to focus on the Company's core business and productivity gains in
the current year.
For the three months ended December 31, 1999, general and administrative
expenses decreased from $890,000 to $844,000 or a 5.2% decrease. The decrease
was due principally to a decrease in salaries and related benefit expense.
Net interest income was $29,000 for the three months ended December 31, 1999,
compared to net interest expense of $46,000 for the three months ended December
31, 1998. The Company used the net proceeds from the sale of real estate on
December 1, 1998, to pay down its outstanding balance on its line of credit.
Income tax expense consists of federal and state income tax. The Company's
effective tax rate was 38.0% for the three months ended December 31, 1999,
compared to an effective tax rate of 39.5% for the three months ended December
31, 1998. The rate varied from the statutory rate primarily due to state taxes.
Net income for the three months ended December 31, 1999, increased to $339,000,
compared to net income of $276,000 for the three months ended December 31, 1998.
The increase of $63,000 was the result of the items discussed above.
LIQUIDITY AND SOURCES OF CAPITAL
Cash flows used in operating activities were $1,435,000 for the three months
ended December 31, 1999, compared to $630,000 for the three months ended
December 31, 1998. This increase was principally due to increased unbilled
receivables of $820,000 and $1,152,000 at December 31, 1999 and 1998,
respectively, relative to the initiation of new contracts. Also, in the three
months ended December 31, 1999, there was an
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increase in accounts receivable of approximately $884,000 due to delayed
turnover.
Cash flows used in investing activities were $100,000 for the three months ended
December 31, 1999, compared to cash provided by investing activities of
$1,344,000 for the three months ended December 31, 1998. In the three months
ended December 31, 1998, the Company disposed of property held for sale for
$1,446,000. The current quarter 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.
Net cash provided by financing activities was $46,000 for the three months ended
December 31, 1999, compared to cash used of $648,000 in the three months ended
December 31, 1998. The 1999 activity was principally the result of the proceeds
of stock option exercises offset by the payment of capital lease obligations.
The cash used in the three months ended December 31, 1998, principally consisted
of payments on the line of credit and mortgage debt. The Company's existing
$3,000,000 line of credit and related note payable with its bank expires on
February 28, 2001. At December 31, 1999, the Company was in compliance with the
covenants contained in the line of credit agreement, and there were no amounts
outstanding.
The Company believes that its existing funds, amounts generated by operations,
and amounts available for borrowing under its line of credit will be sufficient
to meet its working capital needs through the next twelve months.
IMPLICATIONS OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
internal business systems, facilities and products that have software, whether
installed or embedded, may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including among, other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. In addition, disruptions in the economy generally resulting
from Year 2000 issues could have a material adverse affect on the Company.
The Company began its assessment of the implications of the Year 2000 issue
during March 1998, by developing plans and a program to address the potential
impact of the Year 2000 on its internal business systems, facilities and
products which might include embedded software. The Company has substantially
completed its review of each of these areas for potential Year 2000 impact.
Based on current information, the Company believes there are no material
operational problems or expenses related to the Year 2000 problem.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned officers thereunto duly authorized.
SENSYTECH, INC.
February 14, 2000 By: /s/S. Kent Rockwell
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S. Kent Rockwell
Chief Executive Officer
& Chief Financial Officer
By: /s/Darla A. Cavaliere
------------------------------
Darla A. Cavaliere
Controller
10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,587
<SECURITIES> 0
<RECEIVABLES> 4,099
<ALLOWANCES> 617
<INVENTORY> 24
<CURRENT-ASSETS> 12,019
<PP&E> 3,933
<DEPRECIATION> 2,568
<TOTAL-ASSETS> 13,651
<CURRENT-LIABILITIES> 4,063
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 9,491
<TOTAL-LIABILITY-AND-EQUITY> 13,651
<SALES> 0
<TOTAL-REVENUES> 5,494
<CGS> 4,132
<TOTAL-COSTS> 4,976
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (29)
<INCOME-PRETAX> 547
<INCOME-TAX> 208
<INCOME-CONTINUING> 339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 339
<EPS-BASIC> .08
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