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, 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 No.)
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 January 31, 1997.
$.10 par value Common - 13,977,736
<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 Nine Months
Ended December 31 Ended December 31
___________________ __________________
1996 1995 1996 1995
REVENUES:
Contract revenues $130,138 $120,605 $408,182 $346,358
Interest 899 659 2,476 1,735
_______ _______ _______ _______
131,037 121,264 410,658 348,093
_______ _______ _______ _______
COSTS AND EXPENSES:
Costs of contract revenues 106,699 99,532 337,977 290,233
Selling and administrative expenses 10,998 10,144 32,810 27,557
_______ _______ _______ _______
117,697 109,676 370,787 317,790
_______ _______ _______ _______
Income before taxes on income 13,340 11,588 39,871 30,303
Provision for taxes on income -5,505 -4,710 -16,468 -12,299
_______ _______ _______ _______
NET INCOME 7,835 6,878 23,403 18,004
Retained earnings at beginning
of period 127,253 105,780 118,569 95,889
Cash dividends (Note 2) -839 -694 -2,376 -1,929
Purchase and retirement
of treasury shares -5,347
_______ _______ _______ _______
Retained earnings at end of period $134,249 $111,964 $134,249 $111,964
======= ======= ======= =======
EARNINGS PER SHARE OF
COMMON STOCK $ 0.55 $ 0.48 $ 1.64 $ 1.27
======= ======= ======= =======
Cash dividends per share of
common stock (Note 2) $ 0.06 $ 0.05 $ 0.17 $ 0.14
Average number of common shares,
including common stock equivalents 14,290 14,241 14,269 14,178
See notes to consolidated financial statements.
<PAGE>
LOGICON, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
1996
__________________________
December 31 March 31
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 60,771 $ 37,802
Marketable securities 8,244
Accounts receivable 79,318 87,725
Prepaid expenses 2,064 2,447
Deferred income tax benefits 9,372 8,551
_______ _______
Total Current Assets 151,525 144,769
Property, plant and equipment, net 9,959 11,521
Other assets 971 1,085
Excess of purchase price over
net assets of businesses
acquired, net 34,639 36,063
_______ _______
$197,094 $193,438
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other
accrued liabilities $ 10,553 $ 17,995
Accrued salaries, wages and
employee benefits 31,754 38,522
Estimated taxes on income 444 1,023
_______ _______
Total Current Liabilities 42,751 57,540
_______ _______
STOCKHOLDERS' EQUITY:
Common stock $.10 par value - Authorized
40,000,000 shares, outstanding 13,957,000
and 13,975,000 shares 1,396 1,397
Other paid-in capital 22,777 18,853
Retained earnings 134,249 118,569
Unrealized loss on available for sale
securities - 13
Unearned compensation and notes receivable
under restricted stock purchase plan -4,079 -2,908
_______ _______
Total stockholders' equity 154,343 135,898
_______ _______
$197,094 $193,438
======= =======
See notes to consolidated financial statements.
LOGICON, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
For the Nine Months
Ended December 31
__________________
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,403 $18,004
Income charges (credits) not affecting cash--
Depreciation and amortization 5,666 5,060
Amortization of deferred compensation 281 409
Benefit from deferred taxes -821 -330
Changes in assets and liabilities--
Decrease (increase) in accounts receivable 8,407 -18,878
Decrease in prepaid expenses and other assets 497 1,017
Increase (decrease) in accounts payable and
other accrued liabilities -7,442 975
Decrease in accrued salaries, wages
and employee benefits -6,768 -3,890
Decrease in income taxes payable -579 -1,337
_______ _______
Net cash provided from operating activities 22,644 1,030
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment -2,680 -3,638
Maturity of available for sale securities 8,257
Payment for acquisition, net of cash acquired -3,074
_______ _______
Net cash provided from (used in)
investing activities 5,577 -6,712
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends -2,376 -1,929
Transactions of stock plans 2,747 3,634
Purchase and retirement of treasury shares -5,623
_______ _______
Net cash provided from (used in)
financing activities -5,252 1,705
_______ _______
Net increase (decrease) in cash and cash 22,969 -3,977
equivalents
Cash and cash equivalents at beginning
of period 37,802 31,564
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $60,771 $27,587
======= =======
Cash paid for income taxes $ 17,426 $11,771
======= =======
See notes to consolidated financial statements.
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 nine months ended December 31, 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 nine months ended December 31, 1996, and 1995 have been made.
NOTE 2. DIVIDENDS.
On December 13, 1996, the board of directors declared a quarterly cash
dividend of six cents per share, which was paid on January 14, 1997, to
stockholders of record as of December 24, 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 Nine Months Ended
December 31 December 31
_______________________________________________________________________
(dollars in thousands) 1996 1995 1996 1995
Contract revenues:
Cost plus fixed fee $ 32,179 $ 30,195 $ 102,462 $ 91,381
Cost plus award and
incentive fee 38,509 36,914 117,807 109,561
Fixed-price 18,494 22,444 77,737 52,870
Time and material 40,956 31,052 110,176 92,546
_______ _______ _______ _______
$130,138 $120,605 $408,182 $346,358
======= ======= ======= =======
December 31 March 31
__________________________________________________________________________
(dollars in thousands) 1996 1995 1996
Backlog:
Firm Contracts:
Cost plus fixed fee $ 157,481 $ 155,764 $ 155,130
Cost plus award and
incentive fee 191,200 171,518 159,836
Fixed-price 48,646 42,209 42,705
Time and material 167,326 208,663 188,958
_________ _______ _______
564,653 578,154 546,629
_________ _______ _______
Contract options and
untasked indefinite
quantity contract values:
Cost type 484,432 555,619 620,261
Fixed-price 723,630 724,606 749,411
Time and material 273,271 114,327 121,498
_________ _________ _________
1,481,333 1,394,552 1,491,170
_________ _________ _________
Total Backlog $2,045,986 $1,972,706 $2,037,799
========== ========== =========
REVENUES AND BACKLOG (CONT.)
Contract revenues during the first nine months of fiscal year 1997 were
18% higher than in the first nine months of fiscal year 1996. Revenues
from Geodynamics, which was acquired on March 28, 1996, and sales of
hardware and software products under the I-CASE contract account for a
large share of the increase.
Backlog at December 31, 1996, including priced options, increased by
four percent from backlog at December 31, 1995, and remained constant
when compared to the backlog at March 31, 1996. Booking highlights
during the third quarter include:
- $24 million for a contract option to support the U. S. Army's
Battle Command Training Program
- $10 million for work in support of the Human Engineering
Division of the Air Force's Armstrong Laboratory in Dayton, Ohio
- $8 million in products and services under the I-CASE
contract.
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 December 31, 1996 and 1995, was $267
million and $232 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 Nine Months Ended
December 31 December 31
_______________________________________________________________________
1996 1995 1996 1995
Return on revenue before tax 10.2% 9.6% 9.7% 8.7%
Return on revenue after tax 6.0% 5.7% 5.7% 5.2%
Income tax rate 41.3% 40.6% 41.3% 40.6%
Income for the third quarter and the nine month period ended December
31, 1996 was positively impacted by increased revenues from fixed-price
and time and material contracts that on average yield higher operating
profit margins than cost type contracts. Additionally, the profit margin
for the first nine months of fiscal year 1997 was higher than the same
period for 1996 due to a greater amount of interest income earned on a
larger cash and marketable securities portfolio.
Days sales in receivables decreased to 53 days for December 31, 1996,
from 67 days for March 31, 1996. The March 31, 1996 days sales
statistic includes the recording of the acquisition of Geodynamics
Corporation, under the purchase method, on March 28, 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 $22.6 million in the
first nine months of fiscal 1997 and $1 million in the first nine months
of fiscal 1996, and is the company's primary source of liquidity. The
company's working capital increased to $108.8 million at December 31,
1996, from $87.2 million at March 31, 1996. The strong working capital
position is reflected in the current ratio of 3.5 to 1 at December 31,
1996.
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 nine months of fiscal year
1997.
<PAGE>
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.
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 December 31, 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
customers' 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
December 31, 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 February 5, 1997.
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 Nine Months Ended
December 31 December 31
1996 1995 1996 1995
Weighted average number
of shares outstanding
during the period 13,951 13,871 13,951 13,704
Net additional shares
issuable in connection
with dilutive stock
options based upon use
of the treasury stock
method based on average
market prices 339 370 318 474
_________ _________ _________ _________
Weighted average number
of common shares
including common stock
equivalents 14,290 14,241 14,269 14,178
========= ========= ========= =========
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 Q3 FY97 FOR THE PERIOD ENDED DECEMBER 31, 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 60,771
<SECURITIES> 0
<RECEIVABLES> 70,318
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 151,525
<PP&E> 42,002
<DEPRECIATION> 32,043
<TOTAL-ASSETS> 197,094
<CURRENT-LIABILITIES> 42,751
<BONDS> 0
0
0
<COMMON> 1,396
<OTHER-SE> 152,947
<TOTAL-LIABILITY-AND-EQUITY> 197,094
<SALES> 408,182
<TOTAL-REVENUES> 410,658
<CGS> 337,977
<TOTAL-COSTS> 370,787
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,871
<INCOME-TAX> 16,468
<INCOME-CONTINUING> 23,403
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,403
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.64
</TABLE>
