UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
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 0-4633
DBA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation or orgainization)
59-0996417
(I.R.S. Employer Identification No.)
1200 South Woody Burke Road, Melbourne, Florida 32901
(Address of principal executive offices) (Zip Code)
(407) 727-0660
(Registrant's telephone number, including area code)
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 such 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.
DBA Systems, Inc. Common Stock, $.10 par value, 4,458,975 shares
outstanding as of December 31, 1995.
Total number of sequentially numbered pages: 10
The Exhibit index appears on sequential page 9
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues ...................$4,596 $5,514 $9,496 $13,234
Costs and expenses ......... 4,386 5,141 9,053 12,419
Operating income ......... 210 373 443 815
Other income (expense):
Interest income ........... 154 70 270 116
Interest expense .......... (49) (53) (90) (110)
Other expense - net ....... (66) (106) (99) (137)
Total other expense - net 39 (89) 81 (131)
Income before taxes 249 284 524 684
Less provision for income tax 34 9 50 22
Net Income $ 215 $ 275 $ 474 $ 662
Net Earnings per common
and common equivalent share $ .05 $ .06 $ .11 $ .15
Net Earnings per common share
assuming full dilution $ .05 $ .06 $ .11 $ .15
Primary weighted shares
outstanding 4,478 4,440 4,486 4,407
Fully diluted shares
outstanding 4,478 4,451 4,486 4,412
</TABLE>
See accompanying notes
<PAGE>
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Dec. 31, 1995 June 30, 1995
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash & cash equivalents....................$11,445 $3,202
Investments 5,000
Accounts receivable - net ................. 1,671 4,919
Costs and estimated earnings in excess
of billings on uncompleted government
contracts ................................ 4,609 4,164
Inventory ................................. 2,406 2,185
Other current assets....................... 832 387
------ ------
Total Current Assets ..................... 20,963 19,857
Property:
Cost ...................................... 21,888 21,691
Less accumulated depreciation
and amortization ......................... 10,545 10,159
Property--net ........................... 11,343 11,532
Other Assets:
Cost in excess of value of net assets of
businesses acquired ...................... 236 239
Other assets .............................. 505 581
Total Other Assets ....................... 741 820
------- -------
Total Assets .............................. $33,047 $32,209
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ......................... $ 2,159 $ 1,556
Accrued expenses ......................... 1,083 1,261
Billings in excess of costs and
estimated earnings on uncompleted
government contracts .................... 567 694
Estimated losses on uncompleted contracts. 231 241
Other current liabilities ................ 65 107
Total Current Liabilities .............. 4,105 3,859
Long-term Debt ........................... 1,926 1,926
Stockholders' Equity:
Common stock .............................. 554 551
Paid-in capital ........................... 24,432 24,307
Retained earnings ......................... 21,056 20,548
Total .................................... 46,042 45,406
Treasury stock ............................ (19,026) (18,982)
Stockholders' Equity - net .............. 27,016 26,424
------- -------
Total Liabilities and Stockholders' Equity $33,047 $32,209
======= =======
</TABLE>
See accompanying notes.
<PAGE>
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ending
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 474 $ 662
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 511 577
Gain on sale of assets 1
Decrease (increase) in current assets:
Accounts receivable 3,248 590
Costs and estimated earnings in excess of
billings on uncompleted Government contracts (445) (335)
Inventory (221) (114)
Other current assets (445) 304
Increase (decrease) in current liabilities:
Accounts payable 603 355
Accrued expenses (218) (300)
Billings in excess of costs and estimated
earnings on uncompleted Government contracts (127) 164
Estimated losses on uncompleted contracts (10) 300
Other current liabilities 1 68
Other - net 114 (34)
Net cash provided by operating activities 3,485 2,238
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of Investments 5,000
Capital expenditures (263) (158)
Proceeds from sale of property 24 1
----- -----
Net cash provided by (used in) investing activities 4,761 (157)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on long-term debt (3) (60)
----- -----
Net cash used in financing activities (3) (60)
Net increase in cash during the period 8,243 2,021
Cash and cash equivalents at beginning of period 3,202 3,651
----- -----
Cash and cash equivalents at end of period $11,445 $ 5,672
======= =======
</TABLE>
See accompanying notes.
<PAGE>
DBA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
(1) The Condensed Consolidated Interim Financial Statements contained
herein reflect all adjustments of a normal recurring nature which
are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. The results of
operations for the interim periods contained herein are not
necessarily indicative of the results to be expected for the
fiscal year.
(2) Refer to the Company's Annual Consolidated Financial Statements
for the Year Ended June 30, 1995, for a description of accounting
policies, which have been continued without change. Also, refer
to the Notes included in those Consolidated Financial Statements
for additional details of the Company's financial condition,
results of operations and changes in financial position.
(3) Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1995
(Unaudited) (Audited)
<S> <C> <C>
Finished Goods $1,209 $1,420
Work in Progress 784 348
Raw Materials 413 417
------ ------
TOTAL $2,406 $2,185
</TABLE>
(4) Net earnings per common and common equivalent share are computed
by dividing net income by the weighted average number of common
shares and common equivalent shares outstanding during the period.
Common equivalent shares consist of common stock, which may be
issued upon exercise of outstanding stock options. For the three-
month periods ending December 31, 1995 and 1994, weighted average
shares were 4,478,000 and 4,451,000, respectively.
(5) In March 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
Imparement of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" (FAS 121) effective for fiscal years beginning after December 15, 1995.
FAS 121 requires that long lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for imparement
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Management believes that the
adoption of FAS 121 will not have a material impact on the company.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation" (FAS 123) effective for
fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize
compensation expense for employee stock-based arrangements based
on their fair market value on the date of the grant. For non-
employee stock-based aarrangements the company is required to
adopt the fair value method If the Company chooses not to adopt
FAS 123 it will be required to, in the footnotes of the financial
statements beginning in the fiscal year ending June 30, 1997.
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT
The defense industry continues to experience numerous mergers and
consolidations of companies doing business with the Government, and this
trend is expected to continue for the immediate future. As a result,
competition for available contracts is increasing. The Company must,
therefore, keep abreast of industry changes and selectively target
opportunities where the probabilities of success are the greatest.
Reduction in the Department of Defense budget, continued Congressional
and regulatory oversight of the Government procurement process,
increased competition and industrial consolidations within the Company's
traditional market niches, and the current Government procurement policy
to award contracts based primarily on price and not exclusively on
technical capabilities are all factors which may have a material effect
on the Company's future operating revenues and profit margins. The
Government's decisions of whether to exercise options presently held by
the Company under existing contracts may also have an impact on the
Company. These trends may result in delays in previously anticipated
contracts or the loss of anticipated business to competitors. As a
result, the reported financial information may not necessarily be
indicative of the Company's future operating results or financial
condition.
Significant Event
The Company had a $12.8 million contract with Advanced Medical
Management Systems, Inc. (AMMS) for the production and exclusive
worldwide distribution of its ImagClear(TM) medical digitizers. On July
17, 1995, the Company informed AMMS that they had 90 days to cure their
delinquent status in paying invoices or they would be in default of the
contract. AMMS failed to cure their delinquent status within the
specified time period and was terminated for default by DBA. The
Company is proceeding with plans to either replace AMMS with another
reseller or bring the digitizers to market on its own.
Results of Operations
During the three-month period ended December 31, 1995, DBA recorded
revenues of $4,596,000, down $918,000 from the $5,514,000 recorded in
the comparable three-month period in the prior fiscal year. The
decrease in revenues was primarily attributable to lower pass through of
material costs on certain government contracts while value added
revenues remained relatively constant. Operating income was $210,000
during the current three-month period, down $163,000 from $373,000 in
the comparable period in the prior fiscal year. The current quarter's
operating margin was 4.6% as compared to the operating margin of 6.8% in
the prior year's comparable quarter. The slight decrease in operating
margin was attributable to indirect cost accruals and other minor
fluctuations in indirect expense recognition.
During the three-month period ending December 31, 1995, the Company
recorded new business bookings of $16,163,000 as compared to $17,600,000
in the prior year. As a result, the backlog at September 30, 1995 was
approximately $27,516,000, up $10,616,000 or 62.8% as compared to the
June 30, 1995 balance of approximately $16,900,000. An order is entered
into backlog only when the Company receives a definite commitment from a
customer. The Company expects such timing differences in new business
bookings for the current fiscal year will reverse throughout the year,
and that overall, bookings will show a slight increase.
<PAGE>
Interest expense during the current period was $49,000 as compared to
$53,000 recorded in the comparable quarter in the prior fiscal year.
The reduction in interest expense was attributable to pay down of the
Company's long term debt during fiscal year 1995.
The Company currently has a net operating loss carryforward available
for federal tax purposes. The benefit of a tax loss carryforward will
be recorded when realized. The Company accrues a provision for state
income taxes based on current income and the prevailing state tax rates.
As a result the above factors, net income was $215,000 in the current
period as compared to $275,000 in the same period of the prior fiscal
year. Fully diluted earnings per share were $.05 for the three months
ending December 31, 1995 versus $.06 recorded in the comparable quarter
in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had working capital of approximately
$16,858,000, up $860,000 or 5.4%, when compared to the $15,998,000 as of
June 30, 1995. Long term debt was $1,926,000 at September 30, 1995,
unchanged from June 30, 1995. Accounts receivable-net decreased
$3,248,000 from $4,919,000 at June 30, 1995 to $1,671,000 at December
31, 1995 due to efficient collection of outstanding trade receivables,
aggressive pursuit of "past due" accounts and reversal of the AMMS
invoices. Costs and estimated earnings in excess of billings on
uncompleted contracts increased from $4,164,000 at June 30, 1995 to
$4,609,000 at December 31, 1995 as a result of progress payment type
billings and other more favorably negotiated billing terms on certain
contracts.
The Company has a $4,000,000 unsecured line of credit with a bank which
expires January 31, 1997. Amounts drawn on this line of credit accrue
interest at either the bank's prime rate or the bank's LIBOR plus 2.5%
as selected by the Company upon the utilization of any portion of the
line of credit. The Company had no borrowings against the line of
credit at December 31, 1995.
During the quarter ending December 31, 1995, the Company recognized
additions to capital equipment of approximately $126,000. The Company
believes capital requirements for fiscal 1996 can be internally
generated from working capital or lease financing arrangements.
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
From time to time, as is normal with respect to the nature and kind of
business in which DBA is engaged, various claims, charges and litigation
are asserted or commenced against DBA arising from or related to product
liability, patent, breach or warranty, contractual relations or employee
relations. The amounts claimed in such litigation may be substantial
but may not bear any reasonable relationship to the merits of the claim
or the extent of any real risk of court awards. In the opinion of
management, final judgments, if any, which might be rendered against DBA
in potential or pending litigation, would no have a material adverse
effect on its assets or business.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit index filed with this report is on page 10.
(b) Reports on Form 8-K - none.
Pursuant to the requirements of Section 13 and 15 (d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this Report to
be executed on its behalf by the undersigned, thereto duly authorized.
DBA SYSTEMS, INC.
Date: _Feb. 14, 1996__________ By: ___John L. Slack_____________
(Signature)
John L. Slack
Chairman of the Board, President,
Treasurer, Acting
and Chief Executive Officer
Date: _Feb. 14, 1996__________ By: ___Timothy L. Stull___________
(Signature)
Timothy L. Stull
Corporate Controller
DBA SYSTEMS, INC.
EXHIBIT INDEX
Page No.
Exhibit 11 - Computation of earnings per share 10
<PAGE>
EXHIBIT 11
DBA SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
In thousands, except per share information
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Income (A) $215 $275 $474 $662
Weighted Average Shares Outstanding 4,433 4,364 4,433 4,359
Incremental Shares - Stock Options 45 76 53 48
Subtotal (B) 4,478 4,440 4,486 4,407
Incremental Shares - Stock Options - 11 - 5
Total (C) 4,478 4,451 4,486 4,412
Net Earnings per Common and Common
Equivalent Share (A/B) $ .05 $.06 $.11 $.15
Net Earnings per common share, Assuming
Full Dilution (Cannot be
Antidilutive) (A/C) $ .05 $.06 $.11 $.09
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-END> SEP-30-1995 DEC-31-1995
<CASH> 9,976 11,445
<SECURITIES> 0 0
<RECEIVABLES> 3,942 1,671
<ALLOWANCES> 100 100
<INVENTORY> 2,304 2,406
<CURRENT-ASSETS> 20,695 20,963
<PP&E> 21,827 21,888
<DEPRECIATION> 10,383 10,545
<TOTAL-ASSETS> 32,927 32,927
<CURRENT-LIABILITIES> 4,329 4,105
<BONDS> 1,926 1,926
<COMMON> 551 554
0 0
0 0
<OTHER-SE> 26,121 26,462
<TOTAL-LIABILITY-AND-EQUITY> 32,927 33,047
<SALES> 4,900 4,596
<TOTAL-REVENUES> 5,016 4,750
<CGS> 0 0
<TOTAL-COSTS> 4,667 4,386
<OTHER-EXPENSES> 74 115
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 41 49
<INCOME-PRETAX> 275 249
<INCOME-TAX> 16 34
<INCOME-CONTINUING> 259 215
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 259 215
<EPS-PRIMARY> .06 .05
<EPS-DILUTED> .06 .05
</TABLE>
