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 September 30, 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 59-0996417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 South Woody Burke Road, Melbourne, Florida 32901
(Address of principal executive offices)
(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, 4,483,038 shares outstanding
as of September 30, 1996.
Total number of sequentially numbered pages: 11
The Exhibit index appears on sequential page 10
<PAGE>1
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
<S> <C> <C>
Revenues $6,293 $4,900
Costs and expenses 5,759 4,667
Operating income 534 233
Other income (expense):
Interest income 174 116
Interest expense (42) (41)
Other expense - net (154) (33)
Total other income (expense) - net (22) 42
Income before taxes 512 275
Less provision for income taxes 189 16
NET INCOME $ 323 $ 259
Earnings per common and common
equivalent share $.07 $.06
Earnings per common share assuming
full dilution $.07 $.06
Primary weighted shares outstanding 4,514 4,509
Fully diluted shares outstanding 4,527 4,509
</TABLE>
See accompanying Notes to Condensed Consolidated Interim Financial Statements
<PAGE>2
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPT. 30, 1996 JUNE 30, 1996
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,721 $ 2,699
Investments 9,887 9,888
Accounts receivable-net 1,803 2,586
Costs and estimated earnings in excess
of billings on uncompleted contracts 4,517 4,055
Inventory 2,405 2,560
Other current assets 542 537
Total Current Assets 22,875 22,325
Property:
Cost 16,963 16,862
Less accumulated depreciation and amortization 10,552 10,401
Property-net 6,411 6,461
Other Assets:
Cost in excess of value of net assets of
businesses acquired 230 232
Real estate held for sale 4,414 4,436
Other assets 368 397
Total Other Assets 5,012 5,065
Total Assets $34,298 $33,851
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,280 $ 968
Accrued expenses 1,190 1,295
Billings in excess of costs and
estimated earnings on uncompleted contracts 954 1,376
Estimated losses on uncompleted contracts 660 271
Other current liabilities 150 200
Total Current Liabilities 4,234 4,110
Long-term Debt 1,926 1,926
Stockholders' Equity:
Common stock 554 554
Paid-in capital 24,432 24,432
Retained earnings 21,755 21,432
Total 46,741 46,418
Treasury stock (18,603) (18,603)
Stockholders' Equity-net 28,138 27,815
Total Liabilities and Stockholders' Equity $34,298 $33,851
</TABLE>
See accompanying Notes to Condensed Consolidated Interim Financial Statements
<PAGE>3
DBA Systems, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30,
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 323 $ 259
Adjustments to reconcile net income to net cash
provided by (used in) activities:
Depreciation and amortization 261 253
Loss (gain) on disposal of property (13)
Decrease (increase) in current assets:
Accounts receivable 783 977
Costs and estimated earnings in excess of billings
on uncompleted contracts (462) 209
Inventory 113 (119)
Other current assets (5) (132)
Increase (decrease) in current liabilities:
Accounts payable 312 597
Accrued expenses (105) (240)
Billings in excess of costs and estimated earnings
on uncompleted contracts (422) 133
Estimated losses on uncompleted contracts 389 (33)
Other current liabilities (50) 13
Other - net 3 (6)
Net cash provided by operating activities 1,127 1,911
Cash Flows From Investing Activities
Proceeds from sales of investment 5,000
Proceeds from sale of property 14
Capital expenditures (119) (137)
Net cash provided by (used in) investing activities (105) 4,863
Net increase in cash during the period 1,022 6,774
Cash and cash equivalents at beginning of period 2,699 3,202
Cash and cash equivalents at end of period $3,721 $9,976
</TABLE>
See Notes to Condensed Consolidated Interim Financial Statements
<PAGE>4
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
three month periods ended September 30, 1996 and 1995. 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, 1996, 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) Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
Sept. 30, 1996 June 30, 1996
(Unaudited) (Audited)
<S> <C> <C>
Finished Goods $2,288 $2,509
Work in Progress 70 37
Raw Materials 47 14
TOTAL $2,405 $2,560
</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 ended September 30,
1996 and 1995, weighted shares were 4,527,000 and 4,509,000, respectively.
<PAGE>5
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The forward-looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations, which reflect
management's best judgment based on factors currently known, involve risks
and uncertainties. Actual results could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors. Forward-looking information provided by DBA Systems pursuant to
the safe harbor established by recent securities legislation should be
evaluated in the context of these factors.
Business Environment
The defense industry continues to experience numerous mergers and
consolidations of companies doing business with the Federal Government, and
this trend is expected to continue for the immediate future. In addition,
the Federal Government continues to decrease and scrutinize its spending in
the high technology and defense areas. As a result, competition for
available contracts in the Company's business areas is intense. In response,
the Company has significantly reduced its current and long-term liabilities
and reduced indirect cost, thereby reducing its indirect overhead rates.
Additionally, the Company has focused its primary marketing efforts in areas
where it has been the most successful and will attempt to translate its
success into commercial areas where its core technologies apply. The Company
will continue to pursue this strategy during fiscal year 1997 with increased
competitiveness as its primary goal.
Reduction in the Department of Defense budget, continued Congressional and
regulatory oversight of the Government procurement process, increased
competition 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 financial condition or operating results.
Significant Event
The Company had a $12.5 million contract with Advanced Medical Management
Systems, Inc. (AMMS) for the production and exclusive worldwide distribution
of its ImagClear(TM) medical digitizers. On August 10, 1995, the Company filed
suit in the U.S. District Court to recover liquidated damages which arose
from nonperformance of the contract by AMMS. On October 3, 1996 the court
awarded DBA a favorable judgment against Mr. Bob Wilson, the principal
financial backer of AMMS, for $9,375,000 plus attorney fees. In DBA's
opinion, collection on this judgment is problematic. The Company is
proceeding with plans to bring the medical digitizers to market through
partnership with another entity.
Results of Operations
During the three-month period ended September 30, 1996, DBA recorded revenues
of $6,293,000, up $1,393,000 from the $4,900,000 recorded in the comparable
three-month period in the prior fiscal year. The increase in revenues was
primarily attributable to new work on the Common Imagery Ground/Surface
System (CIGSS) contract award for $8.8 million received in June 1996.
The start of this contract has created a higher pass through of
<PAGE>6
material costs as well as a limited amount of increase in the level of direct
labor. The new project win on the CES program with TRW has also resulted in
additional direct labor. Operating income was $534,000 during the current
three-month period, up $301,000 from $233,000 in the comparable period in
the prior fiscal year. The current quarter's operating margin was 8.5% as
compared to the operating margin of 4.8% in the prior year's comparable
quarter. The increase in operating margin was attributable primarily to
successful completion of the Company's multi-year Avenger contract with the
Boeing Company, from which it was awarded the 1995 Subcontractor of the Year,
Small Business Administration Region IV Award. Revenues and earnings due to
the Company's two long-time successful core business programs, Proprietary
Image Exploitation and Tactical Image Exploitation, remain strong and are
expected to continue as such for the foreseeable future subject to the
vagaries of defense funding.
During the three-month period ending September 30, 1996, the Company recorded
new business bookings of $2,133,000 as compared to $4,235,000 in the prior
year. As a result, the backlog at September 30, 1996 was approximately
$24,306,000, down $4,094,000 as compared to the June 30, 1996 balance of
approximately $28,400,000. An order is entered into backlog only when the
Company receives a definite commitment from a customer. The decrease in
bookings from the first quarter of the prior year is attributable to certain
anticipated fiscal year 1996 bookings now expected to occur in the second
quarter instead of the first quarter. The Company expects such timing
differences in new business bookings for the current fiscal year will reverse
throughout the year, and that overall, backlog by the end of the current
fiscal year will be nearly the same as the end of the previous fiscal year.
Interest expense during the current period was $42,000 as compared to $41,000
recorded in the comparable quarter in the prior fiscal year. Long-term debt
of $1,926,000 is the same currently as compared to the same period last
fiscal year.
The Company currently has only a very limited net operating loss (NOL)
carryforward available for federal tax purposes, and thus will begin paying
significant federal income taxes this year. The benefit of the tax loss
carryforward will be recorded when realized. The Company accrues a provision
for state income taxes as income is recognized based on the current
prevailing state tax rates.
As a result of the above factors, net income was $323,000 in the current
period as compared to $259,000 in the same period of the prior fiscal year.
Fully diluted earnings per share were $.07 for the three months ending
September 30, 1996 versus $.06 recorded in the comparable quarter in the
prior fiscal year.
Liquidity and Capital Resources
At September 30, 1996, the Company had working capital of approximately
$18,641,000, up $426,000 or 2.3%, when compared to the $18,215,000 as of
June 30, 1996. Long term debt was $1,926,000 at September 30, 1996,
unchanged from June 30, 1996. The Board of Directors authorized redemption
of this long-term debt at its October 31, 1996 meeting. Accounts receivable-
net decreased $783,000 from $2,586,000 at June 30, 1996 to $1,803,000 at
September 30, 1996 due to efficient collection of outstanding trade
receivables and aggressive pursuit of "past due" accounts. Costs and
estimated earnings in excess of billings on uncompleted contracts increased
from $4,055,000 at June 30, 1996 to $4,517,000 at September 30, 1996 as a
result of progress payment type billings and other more favorably negotiated
billing terms on certain contracts.
<PAGE>7
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 September 30, 1996.
During the period ending September 30, 1996, the Company recognized additions
to capital equipment of approximately $161,000. The Company believes capital
requirements for fiscal 1997 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. Please refer to the Significant Event paragraph above
which discusses a recent judgement in DBA's favor received in the AMMS
lawsuit proceeding. 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 5. -- OTHER INFORMATION
In September 1996, 10 1/2 months after DBA's initial submission, the Company
received official notification from the FBI about its successful completion
of the Image Quality Specification (IQS), paragraph F, testing. Paragraph F
of the IQS is one of the most arduous levels on record, and numerous companies
have withdrawn their efforts from this approval cycle. DBA is one of only
two companies to achieve paragraph F of the IQS, and it is the only company
to pass with a scanner working in the high volume fingerprint card batch mode.
This achievement is a critical milestone in establishing the Company's
expertise and in penetrating the fingerprint card scanner market.
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.
<PAGE>8
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereto duly authorized.
DBA SYSTEMS, INC.
Date: __11-11-96__________ By: _____________________________
(signature)
John L. Slack
Chairman of the Board, President,
Treasurer, Acting and Chief
Executive Officer
Date: ___11-11-96_________________ By: _____________________________
(signature)
Edward M. Bielski
Corporate Controller
<PAGE>9
DBA SYSTEMS, INC.
EXHIBIT INDEX
Page No.
Exhibit 11 - Computation of earnings per share 11
<PAGE>10
EXHIBIT 11
DBA SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ending Sept. 30,
1996 1995
<S> <C> <C>
Net income (A) $323 $259
Weighted average shares outstanding 4,483 4,434
Incremental shares - stock options 30 75
Subtotal (B) 4,513 4,509
Incremental shares - stock options 14
Total (C) 4,527 4,509
Net earnings per common and common
equivalent share (A/B) $.07 $.06
Net earnings per common share, assuming
full dilution (A/C) $.07 $.06
</TABLE>
<PAGE>11
