FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 1-6035
The Titan Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-2588754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3033 Science Park Road, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (619) 552-9500
_____________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report.)
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
The number of shares of registrant's common stock outstanding at May 5,
1995, was 13,211,477.
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE TITAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Three months ended
March 31,
1995 1994
Revenues..........................................$ 30,165 $ 39,689
Cost of revenues.................................. 21,701 31,440
Gross profit...................................... 8,464 8,249
Selling, general and administrative expense....... 5,456 5,891
Research and development expense.................. 1,974 710
Operating profit.................................. 1,034 1,648
Interest expense.................................. (205) (447)
Interest income................................... 34 51
Income before income taxes........................ 863 1,252
Income tax provision.............................. 328 501
Net income........................................ 535 751
Dividend requirement on preferred stock........... 174 174
Net income applicable to common stock............ $ 361 $ 577
Average common shares outstanding................ 13,820 12,645
Net income per average common share.............. $ .03 $ .05
The accompanying notes are an integral part of these
consolidated financial statements.<PAGE>
THE TITAN CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
March 31, December 31,
1995 1994
Assets
Current assets:
Cash and cash equivalents......................$ 2,700 $ 5,129
Accounts receivable - net...................... 37,388 36,164
Inventories.................................... 8,016 7,155
Prepaid expenses and other current assets...... 1,222 2,430
Deferred income taxes.......................... 4,615 4,769
Total current assets......................... 53,941 55,647
Property and equipment - net...................... 13,613 12,932
Goodwill - net.................................... 3,962 4,103
Other assets...................................... 10,217 9,221
Total assets $ 81,733 $ 81,903
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...............................$ 9,537 $ 7,402
Lines of credit................................ 4,700 --
Current portion of long-term debt.............. 568 556
Accrued compensation and benefits.............. 7,440 11,000
Other accrued liabilities...................... 10,915 15,250
Total current liabilities.................... 33,160 34,208
Long-term debt.................................... 618 765
Other non-current liabilities..................... 8,649 8,162
Stockholders' equity:
Preferred stock; $1 par value; $13,897
liquidation preference; authorized
2,500,000 shares; issued and outstanding
694,872...................................... 695 695
Common stock; $.01 par value; authorized
30,000,000 shares; issued 14,698,272 and
14,632,458................................... 147 146
Capital in excess of par value................. 28,043 27,860
Retained earnings.............................. 15,032 14,671
Treasury stock (1,519,336 and 1,521,534 shares),
at cost...................................... (4,611) (4,604)
Total stockholders' equity.............. 39,306 38,768
Total liabilities and stockholders' equity...$ 81,733 $ 81,903
The accompanying notes are an integral part of these
consolidated financial statements.<PAGE>
THE TITAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
Three months ended
March 31,
1995 1994
Cash Flows From Operating Activities:
Net income........................................$ 535 $ 751
Adjustments to reconcile net income to net cash
provided by (used for) operations:
Depreciation and amortization................ 1,031 828
Deferred income taxes and other.............. 83 404
Changes in assets and liabilities:
Accounts receivable..................... (1,224) 9,480
Prepaid expenses and other assets....... 259 (532)
Inventories............................. (861) (323)
Accounts payable........................ 2,135 (2,576)
Accrued compensation and benefits....... (3,560) (1,759)
Other liabilities....................... (3,924) (5,015)
Net cash provided by (used for) operating
activities..................................... (5,526) 1,258
Cash Flows From Investing Activities:
Capital expenditures.............................. (1,604) (510)
Other............................................. 126 --
Net cash used for investing activities............ (1,478) (510)
Cash Flows From Financing Activities:
Reductions of debt................................ (135) (3,522)
Additions to debt................................. 4,700 --
Dividends paid.................................... (174) (174)
Proceeds from stock issuances..................... 184 1,107
Net cash provided by (used for) financing
activities..................................... 4,575 (2,589)
Net decrease in cash and cash equivalents......... (2,429) (1,841)
Cash and cash equivalents at beginning of period.. 5,129 5,374
Cash and cash equivalents at end of period........$ 2,700 $ 3,533
The accompanying notes are an integral part of these
consolidated financial statements. <PAGE>
THE TITAN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands of dollars, except per share data)
<TABLE>
Capital
in Excess
Preferred Common of Par Retained Treasury
Stock Stock Value Earnings Stock Total
Three months ended March 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $ 695 $ 146 $ 27,860 $ 14,671 $ (4,604) $ 38,768
Exercise of stock options and other 1 183 (7) 177
Dividends on preferred stock -
$.25 per share (174) (174)
Net income 535 535
Balances at March 31, 1995 $ 695 $ 147 $ 28,043 $ 15,032 $ (4,611) $ 39,306
Three months ended March 31, 1994
Balances at December 31, 1993 $ 695 $ 138 $ 24,974 $ 9,413 $ (5,899) $ 29,321
Exercise of stock options 4 1,103 1,107
Shares contributed to employee
benefit plans 804 804
Dividends on preferred stock -
$.25 per share (174) (174)
Net income 751 751
Balances at March 31, 1994 $ 695 $ 142 $ 26,077 $ 9,990 $ (5,095) $ 31,809
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements. <PAGE>
THE TITAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(Dollar amounts in thousands, except per share data)
Note (1) BASIS OF FINANCIAL STATEMENT PREPARATION
The accompanying consolidated financial information of The Titan Corporation
and its subsidiaries ("the Company" or "Titan") should be read in conjunction
with the Notes to Consolidated Financial Statements contained in the
Company's Annual Report on Form 10-K to the Securities and Exchange
Commission for the year ended December 31, 1994. The accompanying financial
information includes all subsidiaries on a consolidated basis and all normal
recurring adjustments which are considered necessary by the Company's
management for a fair presentation of the financial position and results of
operations for the periods presented. However, these results are not
necessarily indicative of results for a full year. Also, certain prior year
amounts have been reclassified to conform to the 1995 presentation.
Note (2) SALE OF APPLICATIONS GROUP
In April 1994, the Company sold its Applications Group (the Company's Army
training and simulation service business) as part of the Company's formal
plan of restructure adopted in early 1994. During the first quarter of 1994,
the Applications Group had revenues and operating profit of approximately
$11,000 and $900, respectively.
Note (3) OTHER FINANCIAL DATA
March 31, December 31,
1995 1994
Inventories:
Materials $ 3,494 $ 2,921
Work-in-process 1,363 1,287
Finished goods 3,159 2,947
$ 8,016 $ 7,155
Supplemental disclosure of cash payments (receipts) is as follows:
Three Months Ended
March 31,
1995 1994
Interest $ 8 $ 401
Income taxes (977) (108)
During the three months ended March 31, 1994, the Company utilized treasury
stock of $804 for benefit plan contributions.<PAGE>
THE TITAN CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Dollar amounts in thousands,
except per share data)
RESULTS OF OPERATIONS
Revenues for the first quarter of 1995 were $30,165, down from $39,689 in
the first quarter of 1994. The change in revenue primarily reflects the
impact of the sale of the Applications Group in April 1994. Commercial
business revenues increased approximately 50% quarter to quarter while
government business revenues, excluding the Applications Group business
previously mentioned, remained stable.
Gross margins increased from 21% of revenues in the first quarter of 1994
to 28% of revenues in the first quarter of 1995. The increase reflects a
more favorable business mix as commercial business revenues, which typically
generate higher gross margins than the Company's government business,
continue to increase as a percentage of total revenues. In addition, gross
margins in the government business areas increased quarter to quarter as
contract mix improved.
Selling, general and administrative ("SG&A") expense was $5,456 in the
first quarter of 1995 down from $5,891 in the first quarter of 1994. This
decrease reflects the impact of the sale of the Applications Group in April
1994 and savings due to the Company's specific actions to lower personnel
costs through headcount reductions in its mature business areas, partially
offset by increases in the commercial business areas. As the Company
continues to build the infrastructure required to support its rapidly
expanding commercial business, SG&A is expected to increase.
Research and development ("R&D") expense increased from $710 in the first
quarter of 1994 to $1,974 in the first quarter of 1995, or as a percentage of
revenues from 2% of revenues to 7% of revenues, respectively. The increase
reflects the Company's continuing focus on expanding commercial applications
of its technologies and developing certain defense communication
technologies.
Net interest expense decreased from $396 in the first quarter of 1994 to
$171 in the first quarter of 1995 primarily due to the lower average debt
outstanding under the Company's lines of credit.
The income tax provision is a 38% effective rate in the first quarter of
1995 versus a 40% effective rate in the first quarter of 1994. Both of these
effective rates approximate the expected combined Federal and state statutory
rates.
<PAGE>
THE TITAN CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of 1995 the Company utilized its line of credit with
Sumitomo Bank to provide cash needed for operating activities. Cash
requirements increased approximately $6,500 in the first quarter of 1995,
primarily reflecting an increase in accounts receivable coupled with a
decrease in customer advance payments, an increase in inventory requirements,
the timing of certain compensation payments, and funding of restructuring
activities. In the first quarter of 1995, the Company spent approximately
$1,600 on capital expenditures, with the majority spent in the commercial
business areas. Management believes that its cash flow from operations
combined with its line of credit will be sufficient to fund planned
investments and working capital requirements through 1995. The Company
continues to evaluate its capital requirements and sources for providing
additional funds for growth in its key business areas.
<PAGE>
THE TITAN CORPORATION
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a)(27) Financial Data Schedule
(b) None.
<PAGE>
THE TITAN CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 11, 1995
THE TITAN CORPORATION
/S/ ROGER HAY
By: Roger Hay
Senior Vice President,
Chief Financial Officer
/s/ JANE E. JUDD
By: Jane E. Judd
Vice President and
Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Titan Corporation Consolidated Balance Sheet as of March 31, 1995, and the
related Consolidated Statement of Income and Consolidated Statement of Cash
Flows for the three months ended March 31, 1995, and the accompanying notes,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,700
<SECURITIES> 0
<RECEIVABLES> 37,388
<ALLOWANCES><F1> 0
<INVENTORY> 8,016
<CURRENT-ASSETS> 53,941
<PP&E> 30,802
<DEPRECIATION> 17,189
<TOTAL-ASSETS> 81,733
<CURRENT-LIABILITIES> 33,160
<BONDS> 618
<COMMON> 147
0
695
<OTHER-SE> 38,464
<TOTAL-LIABILITY-AND-EQUITY> 81,733
<SALES> 30,134
<TOTAL-REVENUES> 30,165
<CGS> 21,701
<TOTAL-COSTS> 21,701
<OTHER-EXPENSES> 7,430
<LOSS-PROVISION><F1> 0
<INTEREST-EXPENSE> 205
<INCOME-PRETAX> 863
<INCOME-TAX> 328
<INCOME-CONTINUING> 535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 535
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
<FN>
<F1>Due to use of condensed financial statements for interim reporting,
this information is not compiled on a quarterly basis.
</FN>
</TABLE>
