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, 1997
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, 4,425,562 shares outstanding
as of September 30, 1997.
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 STATEMENTS OF INCOME
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
<S> <C> <C>
1997 1996
Revenues $ 5,665 $ 6,293
Costs and expenses 4,973 5,759
Operating income 692 534
Other income (expense):
Interest income 238 174
Interest expense 0 (42)
Other expense - net (70) (154)
Total other income (expense) - net 168 (22)
Income before taxes 860 512
Less provision for income taxes 326 189
Net Income $ 534 $ 323
Net Earnings per common
and common equivalent share $.12 $.07
Net Earnings per common share
assuming full dilution $.12 $.07
Primary weighted shares outstanding 4,493 4,514
Fully diluted shares outstanding 4,544 4,527
</TABLE>
See accompanying Notes to Condensed Consolidated Interim Financial Statements
<PAGE>2
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Sept. 30, 1997 June 30, 1997
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents $ 1,259 $ 5,595
Investments 12,321 9,311
Accounts receivable - net 2,251 3,523
Costs and estimated earnings in excess
of billings on uncompleted contracts 3,214 2,318
Inventory 1,998 1,984
Other current assets 741 438
Total Current Assets 21,784 23,169
Property:
Cost 16,765 16,694
Less accumulated depreciation and amortization 10,840 10,667
Property--net 5,925 6,027
Other Assets:
Cost in excess of value of net assets of
businesses acquired 222 224
Real estate held for sale 4,325 4,347
Investment in preferred stock 1,600 0
Other assets 220 247
Total Other Assets 6,367 4,818
Total Assets $ 34,076 $ 34,014
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 845 $ 1,050
Accrued expenses 985 1,122
Billings in excess of costs and estimated
earnings on uncompleted contracts 881 1,071
Income Taxes Payable 509 183
Estimated losses on uncompleted contracts 1,109 1,398
Other current liabilities 23 15
Total Current Liabilities 4,352 4,839
Stockholders' Equity:
Common stock 557 557
Paid-in capital 24,554 24,539
Retained earnings 23,687 23,153
Total 48,798 48,249
Treasury stock (19,074) (19,074)
Stockholders' Equity - net 29,724 29,175
Total Liabilities and Stockholders' Equity $ 34,076 $ 34,014
</TABLE>
See Notes to Condensed Consolidated Interim Financial Statements.
<PAGE>3
DBA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30.
<S> <C> <C>
1997 1996
Cash Flows from Operating Activities:
Net income $ 534 $ 323
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation & amortization 244 261
Gain on disposal of property 0 (13)
Decrease (increase) in current assets:
Accounts receivable 1,272 783
Costs and estimated earnings in excess of billing
on uncompleted contracts (896) (462)
Inventory (14) 113
Other current assets (303) (5)
Increase (decrease) in current liabilities:
Accounts payable (205) 312
Accrued expenses 189 (105)
Billings in excess of costs and estimated earnings on
uncompleted contracts (190) (422)
Estimated losses on uncompleted contracts (289) 389
Other current liabilities 8 (50)
Other - net 0 3
Net cash provided by operating activities 350 1,127
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 15 0
Net cash provided by financing activities 15 0
Cash Flows from Investing Activities:
Purchase of Investments (3,010) 0
Investment in preferred stock. (1,600) 0
Capital expenditures (91) (119)
Proceeds from sale of property 0 14
Net cash provided by (used in) investing activities (4,701) (105)
Net increase in cash during the period (4,336) 1,022
Cash and cash equivalents at beginning of period 5,595 2,699
Cash and cash equivalents at end of period $ 1,259 $ 3,721
</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 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, 1997, 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>
Sept. 30, 1997 June 30, 1997
(Unaudited) (Audited)
<S> <C> <C>
Finished Goods $ 1,815 $ 1,815
Work in Progress 125 103
Raw Materials 58 66
TOTAL $1,998 $ 1,984
</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 September 30,
1997 and 1996, weighted average shares were 4,493,000 and 4,514,000,
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 as
discussed below. 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
Over the past year the defense industry experienced further mergers and
consolidations of Government contractors. This trend is expected to increase
in pace but decrease in size as the pool of candidate merger companies
contracts. The U.S. general economy is enjoying an unprecedented boom period
with low interest rates, unemployment and inflation. On the other hand, the
Federal Government continues to decrease in size and increase the scrutiny of
its spending in the defense area as the country anticipates a "peace dividend"
resulting from the end of the Cold War. Therefore, competition for available
Government contracts remains intense, especially as merged firms are able to
muster greater resources in the development and proposal process. In response,
the Company continues its policy of aggressively managing costs while focusing
resources on new business opportunities with the greatest promise of success.
Liabilities remain at very low levels and liquid assets at very high levels
while the Company poises itself to expand by taking advantage of commercial
market opportunities. The Company is seriously seeking to acquire other
companies and/or product lines in its bid to broaden sales within core
competencies and enhance shareholder value. Indirect costs have been
maintained at low levels to enhance competitiveness in the fierce marketplace.
The Company will continue to maintain this posture as it marches through the
challenging transition period of capturing commercial markets. Meanwhile, the
Company's two long-term traditional Government customers that make up two-thirds
of the revenue base are projected to continue their current levels of revenues
in the foreseeable future.
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 regarding 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.
Results of Operations
During the three-month period ended September 30, 1997, DBA recorded revenues
of $5,665,000, down $628,000 from the $6,293,000 recorded in the comparable
three-month period in the prior fiscal year. While revenues increased by
$720,000 in Proprietary Imagery Exploitation (PIE) and $363,000 in Commercial
Imagery Exploitation (CIE), there were offsetting decreases of $1,374,000 in
Systems Engineering/Development (SED) and $339,000 in Tactical Imagery
Exploitation (TIE). System Engineering/Development revenue decreases were
mainly due to a revenue drop of $634,000 in IRTS, $273,000 in Avenger Tracker,
and $229,000 in Training and Simulation business. Each of these SED programs,
however, is expected to pick up in sales in the
<PAGE>6
coming quarters. Tactical Imagery Exploitation revenue decreases were due to
expected lower levels of material procured as the Common Imagery Ground/Surface
System (CIGSS) contract moved into its second year of performance. Proprietary
Imagery Exploitation revenue increases were due to recovery to full DBA
program manpower staffing levels as well as increased non-labor expenses in
updating software and hardware capabilities. Commercial Imagery Exploitation
revenue increases reflected growth from virtually no sales for the first
quarter last year to sales of $412,000 of software and digitizers for first
quarter FY 98.
Operating income was $692,000 during the current three-month period, up
$158,000 from $534,000 in the comparable period in the prior fiscal year.
The current quarter's operating margin was 12.2% as compared to the operating
margin of 8.5% in the prior year's comparable quarter. The increase in
operating profit was attributable primarily to an increase of $100,000 in
Proprietary Imagery Exploitation and $53,000 in Systems Engineering/Development
as compared to FY 97. Proprietary Imagery Exploitation enhanced performance
for first quarter FY 98 reflected an increase in revenues due to greater
contract material expenditures and labor as well as higher award fee. Systems
Engineering/Development's more favorable performance for first quarter FY 98
reflected successful completion of certain Avenger Tracker contracts.
During the three-month period ending September 30, 1997, the Company recorded
new business bookings of $2,521,000 as compared to $2,133,000 in the prior
year. As a result, the backlog at September 30, 1997 was approximately
$13,300,000, down $3,300,000 as compared to the June 30, 1997 balance of
approximately $16,600,000. An order is entered into backlog only when the
Company receives a definite commitment from a customer. The decreasing trend
in backlog is expected to reverse itself over the next two quarters as the
Company receives extensions to its contracts in the Proprietary Imagery
Exploitation ($6-7 million) and Tactical Imagery Exploitation ($3-4 million).
Furthermore, to date only $840,000 has been booked of the $10.6 million Asset
Monitor contract with Flash Comm which was announced on September 29, 1997.
Significant further bookings are expected to be taken before the year end as
this emerging market is penetrated.
Interest expense during the current period was $0 as compared to $42,000
recorded in the comparable quarter in the prior fiscal year since all remaining
debentures were liquidated in December 1996. The Company has no long term
debt. Interest income increased by $64,000 as the amount of the invested
cash averaged $1.4 million more during the first quarter of FY 98.
The Company currently accrues 38% of income before taxes to account for
federal and state income taxes.
As a result of the above factors, net income was $534,000 in the current
period as compared to $323,000 in the same period of the prior fiscal year.
Fully diluted earnings per share were $.12 for the three months ending
September 30, 1997 versus $.07 recorded in the comparable quarter in the
prior fiscal year.
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital of approximately
$17,432,000, down $898,000 or 4.9%, when compared to the $18,330,000 as of
June 30, 1997. Accounts receivable-net decreased $1,272,000 from $3,523,000
at June 30, 1997 to $2,251,000 at September 30, 1997 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 $2,318,000 at June 30, 1997 to $3,214,000
at September 30, 1997 was mainly due to timing differences with contract
material in Proprietary Imagery Exploitation .
The Company is seriously studying several further investment opportunities in
planning to utilize part of its remaining $14 million of cash in order to
increase return-on-equity and enable the
<PAGE>7
Company to grow in revenue and income. Additionally, recently the Company
engaged The Robinson-Humphrey Company, Inc., investment bankers from Atlanta,
to develop, evaluate and report to the Board of Directors on alternatives to
maximize shareholder value. The alternatives being evaluated by Robinson-
Humphrey are not constrained and they cover the gamut including sale of the
Company or a division thereof, merger acquisitions or divestitures, revising
the Company's capital structure, and identifying possible strategic partners.
In that vein, the Company has engaged in the past and continues to engage from
time to time in discussions with various parties with respect to possible
transactions as described above, but the Company has not entered into any
agreement to effect any such transaction, except the transactions with Flash
Comm, Inc. as discussed below.
In September 1997 the Company invested $1.6 million by purchasing convertible
preferred Series B stock in Flash Comm, Inc.(FCI). This investment will
result in 6.2% ownership of FCI, or 7.2% if DBA exercises outstanding
warrants. DBA is the manufacturing partner for FCI, a start-up company which
awarded a $10.6 million contract to DBA for the design, development, and
manufacturing of asset monitors for its truck-trailer location device.
The Company's $4,000,000 unsecured line of credit with a bank expires January
31, 1998 and is expected to be renewed. Amounts drawn on this line of credit
accrue interest at either the bank's prime rate or LIBOR plus 1.75% 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, 1997.
On February 26, 1997 the Company announced that its Board of Directors
authorized a stock repurchase program whereby the Company may repurchase up to
200,000 shares of its outstanding stock in the open market or in negotiated
transactions through August 31, 1997 and at such prices as the Company may
decide. This action was taken based on the assessment that DBA's common
shares were undervalued. During the authorized period, the Company
repurchased 1,500 shares of common stock on the open market.
During the quarter ending September 30, 1997, the Company acquired capital
equipment of approximately $91,000.
The Company believes liquidity and capital funding requirements for fiscal
1998 can be internally satisfied from working capital.
PART II -- OTHER INFORMATION
ITEM 5. -- OTHER INFORMATION
On September 29 the Company announced the signing of a $10.6 million
Agreement with Flash Comm, Inc. (FCI) for the design, development, and
manufacture of mobile sensor and transceiver asset monitor units to be
employed in a two-way, North American continent wireless data communications
system. The asset monitor units enable operators in the commercial
transportation market to track fixed and mobile assets such as trucks and
trailers. FCI is majority owned by HVFM-II, whose major investor is the Harris
Corporation. HVFM-II partners with Harris for Harris' commercial technology
spin-offs, counting among its accomplishments a portfolio of successful
startup commercial companies.
In July the Company announced the award of a $1 million two year contract by
US Army Communications/Electronics Command (CECOM) for depot level repair and
overhaul of Vertical Displacement Gyroscopes. The award of this contract
marks DBA's return to the gyro business and will position the Company to
pursue other depot level gyro repair contracts.
<PAGE>8
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: _____11/10/97____ By: _________(signature)________
John L. Slack
Chairman of the Board,
President and Chief Executive
Officer
Date: ______11/10/97___ By: ____(signature)__________
Edward M. Bielski
Corporate Controller and
Treasurer
<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>
<capiton>
Three Months Ended
September 30
1997 1996
<S> <C> <C>
Net Income (A) $ 534 $ 323
Weighted Average Shares Outstanding 4,422 4,483
Incremental Shares - Stock Options 71 30
Subtotal (B) 4,493 4,513
Incremental Shares - Stock Options 51 14
Total (C) 4,544 4,527
Net Earnings per Common and Common
Equivalent Share (A/B) $ .12 $ .07
Net Earnings per common share, Assuming
Full Dilution (Cannot be Antidilutive) (A/C) $ .12 $ .07
<PAGE>11
12
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 1,259
<SECURITIES> 12,321
<RECEIVABLES> 2,391
<ALLOWANCES> 140
<INVENTORY> 1,998
<CURRENT-ASSETS> 21,784
<PP&E> 16,765
<DEPRECIATION> 10,840
<TOTAL-ASSETS> 34,076
<CURRENT-LIABILITIES> 4,352
<BONDS> 0
0
0
<COMMON> 557
<OTHER-SE> 29,167
<TOTAL-LIABILITY-AND-EQUITY> 34,076
<SALES> 5,665
<TOTAL-REVENUES> 5,903
<CGS> 0
<TOTAL-COSTS> 4,973
<OTHER-EXPENSES> 70
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 860
<INCOME-TAX> 326
<INCOME-CONTINUING> 534
<DISCONTINUED>0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
