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
Commission File Number: 1-7777
LOGICON, INC.
DELAWARE 95-2126773
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification number)
3701 Skypark Drive, Torrance, California 90505-4794
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 373-0220
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
previous 12 months (or for such shorter period that the registrant was required
to file) and (2) has been subject to such filing requirements for the past 90
days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 31, 1996.
$.10 par value Common - 13,949,743
<PAGE>
LOGICON, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(shares and dollars in thousands, except per-share data)
(unaudited)
For the Three Months For the Six Months
Ended September 30 Ended September 30
___________________ __________________
1996 1995 1996 1995
REVENUES:
Contract revenues $128,834 $114,086 $278,044 $225,753
Interest 842 536 1,577 1,076
_______ _______ _______ _______
129,676 114,622 279,621 226,829
_______ _______ _______ _______
COSTS AND EXPENSES:
Costs of contract revenues 105,129 96,023 231,278 190,701
Selling and administrative expenses 11,184 8,931 21,812 17,413
_______ _______ _______ _______
116,313 104,954 253,090 208,114
_______ _______ _______ _______
Income before taxes on income 13,363 9,668 26,531 18,715
Provision for taxes on income 5,522 3,910 10,963 7,589
_______ _______ _______ _______
NET INCOME 7,841 5,758 15,568 11,126
Retained earnings at beginning
of period 125,594 100,713 118,569 95,889
Cash dividends (Note 2) -835 -691 -1,537 -1,235
Purchase and retirement
of treasury shares -5,347 -5,347
_______ _______ _______ _______
Retained earnings at end of period $127,253 $105,780 $127,253 $105,780
======= ======= ======= =======
EARNINGS PER SHARE OF
COMMON STOCK $ 0.55 $ 0.41 $ 1.09 $ 0.79
======= ======= ======= =======
Cash dividends per share of
common stock (Note 2) $ 0.06 $ 0.05 $ 0.11 $ 0.09
Average number of common shares,
including common stock equivalents 14,182 14,209 14,259 14,146
See notes to consolidated financial statements.
<PAGE>
LOGICON, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
1996
__________________________
September 30 March 31
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 65,381 $ 37,802
Marketable securities 8,244
Accounts receivable 72,551 87,725
Prepaid expenses 2,196 2,447
Deferred income tax benefits 9,043 8,551
_______ _______
Total Current Assets 149,171 144,769
Property, plant and equipment, net 10,424 11,521
Other assets 971 1,085
Excess of purchase price over
net assets of businesses
acquired, net 35,169 36,063
_______ _______
$195,735 $193,438
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other
accrued liabilities $ 12,528 $ 17,995
Accrued salaries, wages and
employee benefits 35,578 38,522
Estimated taxes on income 854 1,023
_______ _______
Total Current Liabilities 48,960 57,540
_______ _______
STOCKHOLDERS' EQUITY:
Common stock $.10 par value - Authorized
40,000,000 shares, outstanding 13,938,000
and 13,975,000 shares 1,394 1,397
Other paid-in capital 22,329 18,853
Retained earnings 127,253 118,569
Unrealized loss on available for sale
securities - 13
Unearned compensation and notes receivable
under restricted stock purchase plan -4,201 -2,908
_______ _______
146,775 135,898
_______ _______
$195,735 $193,438
======= =======
See notes to consolidated financial statements.
<PAGE>
LOGICON, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
For the Six Months
Ended September 30
__________________
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,568 $11,126
Income charges (credits) not affecting cash--
Depreciation and amortization 3,650 2,517
Amortization of deferred compensation 159 293
Provision for (benefit from) deferred taxes -492 384
Changes in assets and liabilities--
Decrease (increase) in accounts receivable 15,174 -3,353
Decrease (increase) in prepaid expenses
and other assets 365 -1,288
Decrease in accounts payable and other
accrued liabilities -5,467 -3,883
Decrease in accrued salaries, wages
and employee benefits -2,944 -1,485
Decrease in income taxes payable -169 -1,583
_______ _______
Net cash provided from operating activities 25,844 2,728
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment -1,659 -2,013
Maturity of available for sale securities 8,257
_______ _______
Net cash provided from (used in)
investing activities 6,598 -2,013
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends -1,537 -1,235
Transactions of stock plans 2,297 2,239
Purchase and retirement of treasury shares -5,623
_______ _______
Net cash provided from (used in)
financing activities -4,863 1,004
_______ _______
Net increase in cash and cash equivalents 27,579 1,719
Cash and cash equivalents at beginning
of period 37,802 31,564
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $65,381 $33,283
======= =======
Cash paid for income taxes $ 10,617 $ 8,341
======= =======
See notes to consolidated financial statements.
<PAGE>
LOGICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. ACCOUNTING POLICIES.
The consolidated financial information included in this report has been
prepared in accordance with the accounting principles reflected in the
consolidated financial statements in Form 10-K filed with the Securities
and Exchange Commission for the year ended March 31, 1996. Results for
the six months ended September 30, 1996, are not necessarily indicative
of results for the entire year. In the opinion of Company management,
all adjustments consisting of recurring accruals and other normal month-end
adjustments necessary for a fair presentation of net income for the
unaudited six months ended September 30, 1996, and 1995 have been made.
NOTE 2. DIVIDENDS.
On August 5, 1996, the Board of Directors declared a quarterly cash
dividend of six cents per share, which was paid on October 15, 1996, to
stockholders of record as of September 19, 1996.
<PAGE>
LOGICON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUES AND BACKLOG
The following tables present an analysis of the company's revenues and
backlog by contract type:
Three Months Ended Six Months Ended
September 30 September 30
_______________________________________________________________________
(dollars in thousands) 1996 1995 1996 1995
Contract revenues:
Cost plus fixed fee $ 34,997 $ 31,057 $ 70,283 $ 61,186
Cost plus award and
incentive fee 39,215 36,485 79,298 72,647
Fixed-price 20,044 16,600 59,243 30,426
Time and material 34,578 29,944 69,220 61,494
_______ _______ _______ _______
$128,834 $114,086 $278,044 $225,753
======= ======= ======= =======
At
At September 30 March 31
________________________________________________________________________
(dollars in thousands) 1996 1995 1996
Backlog:
Firm Contracts:
Cost plus fixed fee $ 150,705 $ 118,123 $ 155,130
Cost plus award and
incentive fee 190,667 143,732 159,836
Fixed-price 47,765 42,326 42,705
Time and material 172,012 171,924 188,958
_________ _______ _______
561,149 476,105 546,629
_________ _______ _______
Contract options and
untasked indefinite
quantity contract values:
Cost plus fixed fee $ 515,077 $ 628,829 $ 620,261
Fixed-price 737,768 739,353 749,411
Time and material 288,075 123,411 121,498
_________ _______ _______
1,540,920 1,491,593 1,491,170
_________ _______ _______
Total Backlog $2,102,069 $1,967,698 $2,037,799
========= ======= =======
<PAGE>
REVENUES AND BACKLOG (CONT.)
Contract revenues during the first half of fiscal year 1997 were 23%
higher than in the first half of fiscal year 1996. Revenues from
Geodynamics, which was acquired on March 28, 1996, and increased sales
of hardware and software products under the I-CASE contract account for
a large share of the increase.
Backlog at September 30, 1996, including priced options, increased by
seven percent from backlog at September 30, 1995, and increased by three
percent from backlog at March 31, 1996. Booking highlights during the
second quarter include:
- $21 million for support on a classified contract
- $10 million for development of the U.S. Army's next generation
Command and control training simulation environment, called
WARSIM 2000
- $10 million for support of the Navy Center for Tactical
Systems Interoperability; and
- $8 million worth of products and services under the I-CASE
contract.
During the quarter, Logicon was also awarded two indefinite
delivery/indefinite quantity (ID/IQ) contracts: a five-year contract
from the National Institutes of Health for support of its Chief
Information Officer Solutions and Partners Program (CIOSP), under which
Logicon will compete with other information technology companies for
business worth an estimated $1 billion; and a five-year contract from
the Department of Justice for support of its Information Technology
Support Services (ITSS) 2001 Program, under which Logicon will compete
for business worth an estimated $100 million. The company's backlog is
not subject to any significant seasonal fluctuations, but is likely to
vary substantially as contracts near completion and in conjunction with
the execution of major contractual renewals or the award of major new
contracts. The company's contracts with the government are subject to
redirection or termination for convenience, or may not result in future
revenues due to events and actions taken by the customer outside of the
company's control.
Contract awards that authorize the company to provide services and
products are included in firm backlog. When such authorizations have
become inactive and the company reasonably anticipates no future revenue
from such awards, they are removed from firm backlog. Firm backlog may
be funded or unfunded. The funded backlog at March 31, 1996, was $225
million and the funded backlog at September 30, 1996 and 1995, was $225
million and $220 million, respectively.
Contract awards that allow the customer to contract for services and
products at specified values upon the issuance of contract
modifications, normally referred to as options or delivery orders, are
recorded in backlog at the value stated in the contract. These amounts
are not included in firm backlog until such future contract
modifications are issued. Accordingly, total backlog reflected above
may not result in future revenues. In recent years the company's
customers have increasingly entered into this form of contract.
<PAGE>
PROFIT MARGINS
Three Months Ended Six Months Ended
September 30 September 30
_______________________________________________________________________
1996 1995 1996 1995
Return on revenue before tax 10.3% 8.4% 9.5% 8.3%
Return on revenue after tax 6.0% 5.0% 5.6% 4.9%
Income tax rate 41.3% 40.4% 41.3% 40.6%
Net income for the second quarter of fiscal 1997 was increased by $0.7
million or 5 cents per share, as a result of adjustments on two
contracts. A one hundred percent award fee was received on one contract,
which exceeded prior estimates, and a second contract experienced a
significant reduction in the estimated costs to complete.
The profit margin for the first half of fiscal year 1996 was also lower
than the same period this year due to a lesser amount of interest income
earned on a smaller cash and marketable securities portfolio.
Days sales in receivables decreased to 48 days for September 30, 1996,
from 67 days for March 31, 1996. The company has adequate cash and
credit lines available to fund fluctuations in receivable balances.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities was $25.8 million in the first
half of fiscal 1997 and $2.7 million in the first half of fiscal 1996,
and is the company's primary source of liquidity. The company's working
capital increased to $100.2 million at September 30, 1996, from $87.2
million at March 31, 1996. The strong working capital position is
reflected in the current ratio of 3.0 to 1 at September 30, 1996. The
working capital improvement during the second quarter of fiscal 1997 was
due to increased collections of accounts receivables.
The company's Consolidated Balance Sheet is exceptionally strong, with
no debt. Management believes that the company's existing capital
resources are sufficient to provide for its operating needs and
continued growth. A $25,000,000 unsecured line of credit exists to
provide working capital for temporary requirements. There were no
borrowings under the line during the first half of fiscal year 1997.
PURCHASE OF TREASURY STOCK
The company purchased 208,700 shares for an aggregate cost of $5.6
million during the second quarter of fiscal year 1997. On August 5,
1996, the board of directors authorized the company to spend up to $20
million to purchase additional shares of the company's common stock in
open market transactions.
<PAGE>
FORWARD-LOOKING STATEMENTS
To the extent the information contained in this discussion and analysis
of consolidated financial condition and results of operations, as well as
the information included elsewhere in this Form 10-Q, for the quarter ended
September 30, 1996, are viewed as forward-looking statements, the reader
is cautioned that various risks and uncertainties exist that could cause
the actual future results to differ materially from that inferred by the
forward-looking statements. Since the company's primary customer is the
U.S. government, future results could be impacted by: the right of the
government to redirect, modify, terminate or otherwise cause work to be
stopped on contracts issued by it; government customer's budgetary
constraints; and the contracting practices of the company's current and
prospective customers. Some additional factors, among others, that also
need to be considered are: the likelihood that actual future revenues
that are realized may differ from those inferred from existing total
backlog; the ability of the company to attract and retain highly trained
professional employees; the availability of capital and/or financing;
and changes in the utilization of the company's leased facilities that
could result in higher costs. The reader is further cautioned that
risks and uncertainties exist that have not been mentioned herein due to
their unforeseeable nature, but which, nevertheless, may impact the
company's future operations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no pending or existing legal proceedings which, in the opinion
of company management, if decided against the company, would have any
material adverse effect on its financial position or results of
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Exhibit
No. Description
4 Instruments defining rights of security holders
(a) Common Stock Certificate (1)
(b) Stockholder Rights Plan (2)
11 Statement regarding computation of earnings per
share.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
September 30, 1996.
Note:
(1) Filed with the Securities and Exchange Commission in Form 8-A on
December 14, 1984, registration No. 1-7777.
(2) Filed with the Securities and Exchange Commission in Form 8-A on
May 7, 1990.
<PAGE>
LOGICON, INC.
SIGNATURE
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 thereunto duly authorized, in the City of Torrance, State of
California, on November 1, 1996.
LOGICON, INC.
registrant
RALPH L. WEBSTER
Ralph L. Webster,
Vice President -
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized to Sign
on Behalf of Registrant)
<PAGE>
Exhibit 11
LOGICON, INC.
COMPUTATION OF EARNINGS PER SHARE
(shares in thousands)
Earnings per share of common stock, including common stock equivalents,
have been computed based on the following weighted average number of
shares:
Three Months Ended Six Months Ended
September 30 September 30
1996 1995 1996 1995
Weighted average number
of shares outstanding
during the period 13,904 13,692 13,951 13,621
Net additional shares
issuable in connection
with dilutive stock
options based upon use
of the treasury stock
method based on average
market prices 278 517 308 525
_________ _________ _________ _________
Weighted average number
of common shares
including common stock
equivalents 14,182 14,209 14,259 14,146
========= ========= ========= =========
Fully diluted earnings per share of common stock are omitted because
there is less than 3% dilution in any period.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q,Q2, FY 1997 FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000311946
<NAME> LOGICON,INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 65,381
<SECURITIES> 0
<RECEIVABLES> 72,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 149,171
<PP&E> 43,713
<DEPRECIATION> 33,289
<TOTAL-ASSETS> 195,735
<CURRENT-LIABILITIES> 48,960
<BONDS> 0
0
0
<COMMON> 1,394
<OTHER-SE> 145,381
<TOTAL-LIABILITY-AND-EQUITY> 195,735
<SALES> 278,044
<TOTAL-REVENUES> 279,621
<CGS> 231,278
<TOTAL-COSTS> 253,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,531
<INCOME-TAX> 10,963
<INCOME-CONTINUING> 15,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,568
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
