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 March 31, 1996
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 organization)
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 March 31, 1996.
Total number of sequentially numbered pages: 10
The Exhibit index appears on sequential page 9
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $5,418 $10,585 $14,914 $23,819
Costs and expenses 5,127 10,014 14,180 22,433
Operating income 291 571 734 1,386
Other income (expense):
Interest income 140 74 410 190
Interest expense (43) (48) (133) (158)
Other expense - net (90) (47) (189) (184)
Total other expense - net 7 (21) 88 (152)
Income before taxes 298 550 822 1,234
Less provision for income taxes 26 20 76 42
Net Income $ 272 $ 530 $ 746 $ 1,192
Net Earnings per common
and common equivalent share $ .06 $ .12 $ .17 $ .27
Net Earnings per common share
assuming full dilutition $ .06 $ .12 $ .17 $ .27
Primary weighted shares
outstanding. 4,488 4,524 4,486 4,446
Fully diluted shares
outstanding 4,488 4,524 4,486 4,450
</TABLE>
See accompanying notes.
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $10,532 $3,202
Investments 5,000
Accounts receivable - net 3,353 4,919
Costs and estimated earnings in
excess of billings on uncompleted
government contracts 4,306 4,164
Inventory 2,465 2,185
Other current assets 770 387
Total Current Assets 21,426 19,857
Property:
Cost 21,702 21,691
Less accumulated depreciation
and amortization 10,567 10,159
Property--net 11,135 11,532
Other Assets:
Cost in excess of value of net assets of
businesses acquired 233 239
Other assets 442 581
Total Other Assets 675 820
Total Assets $33,236 $32,209
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,690 $ 1,556
Accrued expenses 1,218 1,261
Billings in excess of costs and
estimated earnings on uncompleted
government contracts 631 694
Estimated losses on uncompleted contracts 340 241
Other current liabilities 144 107
Total Current Liabilities 4,023 3,859
Long-term Debt 1,926 1,926
Stockholders' Equity:
Common stock 554 551
Paid-in capital 24,432 24,307
Retained earnings 21,327 20,548
Total 46,313 45,406
Treasury stock (19,026) (18,982)
Stockholders' Equity - net 27,287 26,424
Total Liabilities and Stockholders' Equity $33,236 $32,209
</TABLE>
See accompanying notes.
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 746 $ 1,192
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 771 868
Gain on sale of assets 2
Decrease (increase) in current assets:
Accounts receivable 1,566 (2,455)
Costs and estimated earnings in excess of
billings on uncompleted contracts (142) (1,325)
Inventory (280) (12)
Other current assets (382) 656
Increase (decrease) in current liabilities:
Accounts payable 134 1,871
Accrued expenses (43) 211
Billings in excess of costs and estimated
earnings on uncompleted contracts (63) 239
Estimated losses on uncompleted contracts 99 349
Other current liabilities 37 21
Other - net 139 16
Net cash provided by operating activities 2,582 1,633
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of Investments 5,000
Capital expenditures (277) (386)
Proceeds from sale of property 25 1
Net cash provided by (used in) investing
activities 4,748 (385)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on long-term debt (0) (805)
Net cash used in financing activities (0) (805)
Net increase in cash during the period 7,330 443
Cash and cash equivalents at beginning of period 3,202 3,651
Cash and cash equivalents at end of period $10,532 $ 4,094
</TABLE>
See accompanying notes.
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>
March 31, 1996 June 30, 1995
(Unaudited) (Audited)
<S> <C> <C>
Finished Goods $1,130 $1,420
Work in Progress 921 348
Raw Materials 414 417
TOTAL $2,465 $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 March 31, 1996
and 1995, weighted average shares were 4,488,000 and 4,524,000,
respectively.
(5) In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" (FAS 121) effective for fiscal years beginning after March 15, 1995. FAS
121 requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment 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 (FAS) No. 123, "Accounting for
Stock Based Compensation" which will be effective for the Company beginning
after January 1, 1996. FAS No. 123 requires expanded disclosures of stock-
based arrangements based on their fair market value on the date of the grant.
For non-employee stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured based on
the fair market value of the equity instrument awarded. Companies are
permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No.
25 to its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.
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 March 31, 1996, DBA recorded revenues
of $5,418,000, down $5,167,000 from the $10,585,000 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 $291,000 during the current three-month
period, down $280,000 from $571,000 in the comparable period in the prior
fiscal year. The current quarter's operating margin was 5.4% as
in the prior year.
During the three-month period ending March 31, 1996, the Company recorded
new business bookings of $2,074,000 as compared to $3,217,000 in the prior
year. As a result, the backlog at March 31, 1996 was approximately
$24,150,000 ,up $7,250,000 or 42.9% 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.
Interest expense during the current period was $43,000 as compared to $48,000
recorded in the comparable quarter in the prior fiscal year.
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 $272,000 in the current period as
compared to $530,000 in the same period of the prior fiscal year. Fully
diluted earnings per share were $.06 for the three months ending
March 31, 1996 versus $.12 recorded in the comparable quarter in the prior
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had working capital of approximately
$17,403,000, up $1,405,000 or 8.8%, when compared to the $15,998,000 as
of June 30, 1995. Long term debt was $1,926,000 at March 31, 1996
unchanged from June 30, 1995. Accounts receivable-net decreased $1,566,000
from $4,919,000 at June 30, 1995 to $3,353,000 at March 31, 1996 due to
efficient collection of outstanding trade receivables, aggressive pursuit
of "past due" accounts. Costs and estimated earnings in excess of billings
on uncompleted contracts increased from $4,164,000 at June 30, 1995 to
$4,306,000 at March 31, 1996 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
March 31, 1996.
During the quarter ending March 31, 1996, the Company recorded additions
to capital equipment of approximately $28,000. 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit index filed with this report is on page 9.
(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: ____________________ By: Charles B. Robertson
(Signature)
Date: ____________________ By: Edward M. Bielski
(Signature)
DBA SYSTEMS, INC.
EXHIBIT INDEX
Page No.
Exhibit 11 - Computation of earnings per share 10
EXHIBIT 11
DBA SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Income (A) $ 272 $ 530 $ 746 $1,192
Weighted Average Shares Outstanding 4,459 4,405 4,442 4,374
Incremental Shares - Stock Options 29 119 4 72
Subtotal (B) 4,488 4,524 4,486 4,446
Incremental Shares - Stock Options - - - 4
Total (C) 4,488 4,524 4,486 4,450
Net Earnings per Common and
Common Equivalent Share (A/B) $ .06 $ .12 $ .17 $ .27
Net Earnings per common share, Assuming
Full Dilution (Cannot be
Antidilutive) (A/C) $ .06 $ .12 $ .17 $ .27
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996 JUN-30-1996
<PERIOD-END> SEP-30-1995 DEC-31-1995 MAR-31-1996
<CASH> 9,976 11,445 10,532
<SECURITIES> 0 0 0
<RECEIVABLES> 3,942 1,671 3,453
<ALLOWANCES> 100 100 100
<INVENTORY> 2,304 2,406 2,453
<CURRENT-ASSETS> 20,695 20,963 21,426
<PP&E> 21,827 21,888 21,702
<DEPRECIATION> 10,383 10,545 10,567
<TOTAL-ASSETS> 32,927 32,927 33,236
<CURRENT-LIABILITIES> 4,329 4,105 4,023
<BONDS> 1,926 1,926 1,926
<COMMON> 551 554 554
0 0 0
0 0 0
<OTHER-SE> 26,121 26,462 26,773
<TOTAL-LIABILITY-AND-EQUITY> 32,927 33,047 27,287
<SALES> 4,900 4,596 5,418
<TOTAL-REVENUES> 5,016 4,750 5,558
<CGS> 0 0 0
<TOTAL-COSTS> 4,667 4,386 5,127
<OTHER-EXPENSES> 74 115 133
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 41 49 43
<INCOME-PRETAX> 275 249 298
<INCOME-TAX> 16 34 26
<INCOME-CONTINUING> 259 215 272
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 259 215 272
<EPS-PRIMARY> .06 .05 .06
<EPS-DILUTED> .06 .05 .06
</TABLE>
