<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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 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 November
5, 1997, was 16,249,648.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
THE TITAN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
================= =================
<S> <C> <C> <C> <C>
Revenues............................. .. $ 41,973 $ 34,588 $127,212 $ 94,645
Costs and expenses:
Cost of revenues...................... 31,725 28,191 97,644 74,484
Selling, general and administrative
expense............................ 4,806 5,942 15,530 16,405
Research and development expense...... 1,740 1,055 4,997 2,190
===== ===== ====== ======
Total costs and expenses........... 38,271 35,188 118,171 93,079
===== ===== ====== ======
Operating profit (loss).................. 3,702 (600) 9,041 1,566
Interest expense......................... (1,361) (745) (3,887) (1,902)
Interest income.......................... 23 46 35 64
===== ===== ====== ======
Income (loss) from continuing operations
before income taxes................... 2,364 (1,299) 5,189 (272)
Income tax provision (benefit)........... 827 (503) 1,816 (106)
===== ===== ====== ======
Income (loss) from continuing operations. 1,537 (796) 3,373 (166)
Loss from discontinued operation,
net of taxes.......................... --- (1,173) (343) (3,414)
===== ===== ====== ======
Net income (loss)........................ 1,537 (1,969) 3,030 (3,580)
Dividend requirements on preferred stock. 219 219 656 585
===== ===== ====== ======
Net income (loss) applicable to
common stock.......................... $ 1,318 $ (2,188) $ 2,374 $ (4,165)
===== ===== ====== ======
Per weighted average common shares:
Income (loss) from continuing
operations.......................... $ .08 $ (.06) $ .17 $ (.05)
Loss from discontinued operation....... --- (.08) (.02) (.23)
===== ===== ====== ======
Net income (loss)........................ $ .08 $ (.14) $ .15 $ (.28)
===== ===== ====== ======
Weighted average common shares
outstanding........................... 16,676 16,107 16,311 14,981
===== ===== ====== ======
</TABLE>
<PAGE>
The accompanying notes are an integral part of these
consolidated financial statements.
THE TITAN CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except shares and par values)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
============ ============
<S> <C> <C>
Assets
Current assets:
Cash............................................$ 1,397 $ 2,052
Accounts receivable - net....................... 52,889 45,720
Inventories..................................... 13,667 12,419
Net assets of discontinued operation............ 8,896 1,304
Prepaid expenses and other...................... 1,726 1,708
Deferred income taxes........................... 4,961 6,037
Total current assets......................... 83,536 69,240
====== ======
Property and equipment - net....................... 18,838 19,984
Goodwill - net..................................... 20,333 21,348
Other assets....................................... 8,388 8,438
Net assets of discontinued operation............... 4,186 7,264
====== ======
Total assets $ 135,281 $ 126,274
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................$ 9,640 $ 8,018
Line of credit.................................. 14,650 ---
Note payable to related party................... --- 1,000
Current portion of long-term debt............... 1,076 1,010
Accrued compensation and benefits............... 5,962 8,061
Other accrued liabilities....................... 4,778 10,036
Total current liabilities.................... 36,106 28,125
====== ======
Long-term debt..................................... 39,218 40,071
Other non-current liabilities...................... 7,421 8,433
Series B cumulative convertible redeemable
preferred stock, $3,000 liquidation preference,
6% cumulative annual dividend, 500,000 shares
issued and outstanding.......................... 3,000 3,000
Stockholders' equity:
Preferred stock; $1 par value; authorized
2,500,000 shares:
Cumulative convertible, $13,897 liquidation
preference: 694,872 shares issued and
<PAGE>
outstanding............................... 695 695
Series A junior participating: authorized
250,000 shares: none issued............... --- ---
Common stock; $.01 par value, authorized
45,000,000 shares; issued and outstanding:
17,184,476 and 17,133,680.................... 172 171
Capital in excess of par value.................. 42,936 42,751
Retained earnings............................... 8,362 5,988
Treasury stock (985,894 and 1,106,114 shares),
at cost...................................... (2,629) (2,960)
Total stockholders' equity................... 49,536 46,645
Total liabilities and stockholders' equity......$ 135,281 $ 126,274
====== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
THE TITAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1997 1996
===== =====
<S> <C> <C>
Cash Flows From Operating Activities:
Income (loss) from continuing operations............... $ 3,373 $ (166)
Adjustments to reconcile income (loss) from continuing
operations to net cash used for continuing
operations:
Depreciation and amortization.................. 4,224 4,026
Deferred income taxes and other................ 1,775 (1,690)
Changes in operating assets and liabilities,
net of businesses sold:
Accounts receivable......................... (7,169) 9,684
Inventories................................. (1,348) (4,521)
Prepaid expenses and other assets........... (975) (338)
Accounts payable............................ 1,622 (2,739)
Accrued compensation and benefits........... (2,099) (3,539)
Restructuring activities.................... (815) (3,817)
Other liabilities........................... (5,023) (2,644)
===== =====
Net cash used for continuing operations.............. (6,435) (5,744)
===== =====
Loss from discontinued operation..................... (343) (3,414)
Changes in net assets of discontinued operation ..... (4,514) (1,290)
Net cash used for discontinued operation............. (4,857) (4,704)
===== =====
Net cash used for operating activities............... (11,292) (10,448)
===== =====
Cash Flows From Investing Activities:
Capital expenditures................................. (2,056) (3,656)
Payment for purchase of businesses, net of cash
acquired.......................................... --- (1,000)
<PAGE>
Proceeds, net of transaction costs, from sale of
businesses........................................ 200 2,492
Other................................................ 114 245
Net cash used for investing activities............... (1,742) (1,919)
===== =====
Cash Flows From Financing Activities:
Additions to debt.................................... 14,650 13,356
Retirements of debt.................................. (1,780) (3,436)
Dividends paid....................................... (656) (585)
Proceeds from stock issuances........................ 165 344
===== =====
Net cash provided by financing activities............ 12,379 9,679
===== =====
Net decrease in cash................................. (655) (2,688)
Cash at beginning of period.......................... 2,052 5,833
===== =====
Cash at end of period................................ $ 1,397 $ 3,145
===== =====
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
THE TITAN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Cumulative Capital
Convertible in Excess
Preferred Common of Par Retained Treasury
Stock Stock Value Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C>
Nine months ended September 30, 1997
====================================
Balances at December 31, 1996 $ 695 $ 171 $ 42,751 $ 5,988 $ (2,960) $ 46,645
Exercise of stock options and
other 1 171 172
Shares contributed to employee
benefit plans 14 331 345
Dividends on preferred stock -
Cumulative convertible, $.75
per share (521) (521)
Series B, 6% annual (135) (135)
Net income 3,030 3,030
Balances at September 30, 1997 $ 695 $ 172 $ 42,936 $ 8,362 $ (2,629) $ 49,536
==== ==== ==== ===== ===== ======
Nine months ended September 30, 1996
====================================
Balances at December 31, 1995 $ 695 $ 151 $ 31,148 $ 10,169 $ (3,524) $ 38,639
Stock issuance for acquisition 19 11,510 11,529
Exercise of stock options 405 (62) 344
Shares contributed to employee
benefit plans 466 624 1,090
Dividends on preferred stock -
Cumulative convertible, $.75
per share (521) (521)
Series B, 6% annual (64) (64)
Net loss (3,580) (3,580)
Balances at September 30, 1996 $ 695 $ 171 $ 43,529 $ 6,004 $ (2,962) $ 47,437
==== ==== ==== ==== ==== =====
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
THE TITAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
September 30, 1997
(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, 1996. 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.
The prior year financial statements have been restated to reflect
the discontinuance of an operation in 1997 (see Note 2). Also,
certain prior year amounts have been reclassified to conform to the
1997 presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Note (2) DISCONTINUED OPERATION
On April 11, 1997, the Company's Board of Directors adopted a plan
to divest the Company's broadband communications business in order
to focus on the Company's businesses that are better aligned with
its available resources and offer a greater opportunity for Titan
to create value for its shareholders. The results of the broadband
communications business have been accounted for as a discontinued
operation in accordance with Accounting Principles Board Opinion
No. 30, which among other provisions, anticipates that the plan of
disposal will be carried out within one year. Management
anticipates that the business will be sold by June 30, 1998.
Revenues for the broadband communications business were $8 and $266
for the three months and $537 and $543 for the nine months ended
September 30, 1997 and 1996, respectively. Included in the loss
from discontinued operation is a tax benefit of $604 for the three
months ended September 30, 1996 and $177 and $1,759 for the nine
months ended September 30, 1997 and 1996, respectively. The Company
deferred losses from the discontinued operation of $3,033 and
$6,324 in the third quarter and nine months ended September 30,
1997, which primarily represented amortization costs of intangible
assets, and to a lesser degree, operating costs of the business.
Included in the deferred losses is interest of $104 and $244 in the
three months and nine months ended September 30, 1997,
<PAGE>
respectively, allocated to the discontinued operation based on the
ratio of net assets to be sold to the sum of total net assets of
the Company. Net current assets of discontinued operation consist
primarily of accounts receivable, inventory, and deferred losses
from the date of discontinuance net of accounts payable, accrued
compensation and other current liabilities. Net noncurrent assets
of discontinued operation consist of property and equipment and
intangible assets, primarily capitalized software costs. Prior year
consolidated financial statements have been restated to present the
broadband communications business as a discontinued operation.
Note (3) DEBT
In May 1997, the Company completed an agreement with Sumitomo Bank
of California and Imperial Bank for a $24,000 line of credit
maturing May 31, 1998, amending and replacing the previous $14,000
line with Sumitomo Bank, and replacing the existing line of credit
with Crestar Bank. The Company has the option to borrow at a bank
prime rate or at LIBOR plus 2%. The agreement contains, among
other financial covenants, provisions which require the Company to
have annual net income, as defined, prohibits two consecutive
quarterly losses in aggregate of greater than $500, and contains
other financial covenants which require the Company to maintain
stipulated levels of net worth and minimum interest coverage, and
fixed charge coverage and quick ratios. Under the agreement, the
Company and its wholly owned subsidiaries, Titan Information
Systems Corporation ("TIS"), Eldyne and Unidyne, granted the banks
a security interest in substantially all of their non-real property
assets, including accounts receivable, inventory, equipment and
patents, and the Company pledged the stock of TIS, Eldyne and
Unidyne to the banks.
At September 30, 1997, borrowings outstanding under this agreement
were $14,650, at a weighted average interest rate of 7.92%. The
Company also had commitments under letters of credit under this
agreement of $1,177, which reduced availability under the line of
credit to $8,173. On May 23, 1997, the Company repaid in full the
line of credit agreement and equipment note with Crestar Bank. A
mortgage note with a balance of $1,228 at September 30, 1997,
remains outstanding with Crestar Bank.
At September 30, 1997, the Company was in compliance with all
financial covenants under its various debt agreements.
Note (4) RESTRUCTURING
<PAGE>
At December 31, 1996, the Company had $815 remaining in other
current liabilities related to a formal plan of restructuring
adopted in 1995. Charges against these restructuring reserves were
$815 and $991 in the first nine months of 1997 and 1996,
respectively. The charges to these reserves in 1997, which were
all incurred in the first quarter, were primarily related to costs
associated with the exiting of businesses, as well as the
termination of certain agreements.
Note (5) OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Inventories:
Materials $ 1,901 $ 1,998
Work-in-process 9,850 9,201
Finished goods 1,916 1,220
$ 13,667 $ 12,419
Supplemental disclosure of cash payments (receipts) is as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Interest $ 388 $ 471 $ 2,705 $ 1,475
Income taxes 51 (926) (9) (1,067)
</TABLE>
During the nine month periods ended September 30, 1997 and 1996,
the Company utilized treasury stock of $345 and $1,090,
respectively, for benefit plan funding and contributions.
The following tables summarize revenues and operating profit
(loss) by industry segment for the three months and nine months
ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Communications Systems $ 3,724 $ 629 $ 11,465 $ 2,193
Software Systems 4,310 3,306 12,206 13,986
Defense Systems 28,291 25,229 84,020 62,169
Emerging Technologies 5,648 5,424 19,521 16,297
$ 41,973 $ 34,588 $127,212 $94,645
Operating Profit (Loss):
Communications Systems $ 38 $ (596) $ (343) $(1,492)
Software Systems 1,192 (478) 2,620 (344)
Defense Systems 3,504 1,656 9,715 6,383
Emerging Technologies (58) 211 663 (56)
Segment operating profit
before Corporate 4,676 793 12,655 4,491
Corporate (974) (1,393) (3,614) (2,925)
$ 3,702 $ (600) $ 9,041 $ 1,566
</TABLE>
Note (6) RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS 128). The statement specifies the computation,
presentation, and disclosure requirements for earnings per share
(EPS). The statement is effective for financial statements for
periods ending after December 15, 1997. Earlier application is not
permitted. However, management believes that the proforma earnings
per share amounts computed using SFAS 128 would not be
significantly different than the earnings per share amounts
presented in the accompanying financial statements.
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
======================
Consolidated results:
Revenues for the third quarter of 1997 were $41,973, an
increase of 21% from revenues of $34,588 in the third quarter
of 1996. Revenues for the nine months ended September 30 were
$127,212 and $94,645 in 1997 and 1996, respectively. Revenue
increases in both the third quarter and nine months were
experienced in the Communications Systems, Defense Systems,
and Emerging Technologies segments. The Company reported net
income of $1,537 and $3,373 for the third quarter and nine
months of 1997 compared to net losses of $1,969 and $3,580 for
the third quarter and nine months of 1996. Included in the
nine months of 1997 is a loss from discontinued operation of
$343, compared to a loss from discontinued operation of $1,173
and $3,414 for the third quarter and nine months of 1996,
respectively. The Company deferred losses from the
discontinued operation of $3,033 and $6,324 in the third
<PAGE>
quarter and nine months ended September 30, 1997,
respectively, which primarily represented amortization costs
of intangible assets, and to a lesser degree, operating costs
of that business. Income from continuing operations in the
third quarter and nine months of 1997 was $1,537 and $3,373,
compared to losses of $796 and $166 in the third quarter and
nine months of 1996. The improvement in earnings was
primarily due to the impact of the increased revenues noted
above as well as the impact of cost reduction measures taken
by the Company.
Selling, general and administrative expense ("SG&A") as a
percentage of revenue decreased from 17% in the third quarter
of 1996 to 11% for the same period in 1997, and from 17% in
the nine months of 1996 to 12% for the same period in 1997.
These decreases were due primarily to the impact of cost
reductions measures taken across all business segments.
Research and development costs increased overall from $1,055
in the third quarter of 1996 to $1,740 for the same period in
1997, and from $2,190 for the nine months of 1996 to $4,997
for the same period in 1997, reflecting increased efforts in
the Company's commercial and defense satellite communications
businesses, specifically related to costs incurred to obtain
certification on the Company's compact satellite modem.
Net interest expense increased $639 and $2,014 in the third
quarter and nine months ended September 30, 1997,
respectively, compared to the comparable periods of 1996,
primarily from interest related to the convertible
subordinated debentures that the Company issued in November
1996.
The income tax provision is a 35% effective rate in 1997
compared to a 39% effective rate in 1996. These effective
rates approximate the expected combined federal and state
statutory rates, less expected credits, primarily R&D credits.
Business Segments:
==================
Three months ended September 30, 1997 and 1996:
Revenues in the Communications Systems segment increased
$3,095 from $629 in the third quarter of 1996 to $3,724 in the
third quarter of 1997, due to increased shipments made on the
Company's contract for a rural telephony system in Indonesia.
During the quarter, the Company completed delivery of
substantially all of the terminals under this initial order.
Operating income of $38 in the third quarter of 1997 as
<PAGE>
compared to a loss of $596 in the third quarter of 1996, is
principally due to the impact of the increased revenues.
Software Systems segment revenues increased $1,004 from $3,306
in the third quarter of 1996 to $4,310 in the third quarter of
1997, primarily due to an increased number of projects related
to the development and implementation of information networks.
The increase in operating income of $1,670 from an operating
loss of $478 in the third quarter of 1996 to operating income
of $1,192 in the third quarter of 1997 was principally a
result of the Company's cost reduction measures, as well as
the impact of the increased revenues.
In the Defense Systems segment, revenues grew $3,062, from
$25,229 in the third quarter of 1996 to $28,291 in the third
quarter of 1997. The increased revenues were principally
related to the Mini-DAMA satellite terminal production
contract as well as the impact of non-recurring credits
resulting from the reevaluation of estimates of certain
allowable contract costs based upon favorable developments
with certain government agencies. The increase of operating
income of $1,848, from $1,656 in the third quarter of 1996 to
$3,504 in the third quarter of 1997, resulted from the
increased revenues and non-recurring credits.
In the Emerging Technologies segment, revenues increased $224
from $5,424 in the third quarter of 1996 to $5,648 in the
third quarter of 1997 primarily due to revenues on the
Company's contract to provide a turnkey medical device
sterilization system for in-house manufacturing use. The
operating income decreased $269 from operating income of $211
in the third quarter of 1996 to an operating loss of $58 in
the third quarter of 1997, primarily due to decreased margins
on a contract in the Company's linear electron accelerator
business.
Nine months ended September 30, 1997 and 1996:
Revenues for the Communications Systems segment increased
$9,272 from $2,193 in the nine months ended September 30, 1996
to $11,465 in the nine months ended September 30, 1997, due to
increased shipments made on the Company's contract for a rural
telephony system in Indonesia. Segment operating loss
decreased $1,149 from $1,492 in the nine months ended
September 30, 1996 to $343 in the nine months ended September
30, 1997, principally due to the increased sales volume.
The Software Systems segment revenues decreased $1,780 from
$13,986 in the nine months ended September 30, 1996 to $12,206
<PAGE>
in the nine months ended September 30, 1997, principally due
to a reduction of revenues from a major telecommunications
customer, partially offset by growth in other custom software
business. Operating income improved $2,964 from an operating
loss of $344 in the nine months ended September 30, 1996 to
operating income of $2,620 in the nine months ended September
30, 1997, resulting from the impact of cost reduction measures
taken by the Company.
Defense Systems revenues increased $21,851 from $62,169 in the
nine months ended September 30, 1996 to $84,020 in the nine
months ended September 30, 1997. Increased revenues from
Eldyne, Unidyne and DCS of $23,490, and increased 1997
revenues related to the Mini-DAMA satellite terminal
production contract as well as non-recurring credits resulting
from the reevaluation of contract costs noted above were
partially offset by decreased revenues from the wind-down of
the work subcontracted to the buyer of the Applications Group
(sold in April 1994) and the impact of the sale of the
Electronics division in July 1996. Segment operating income
increased $3,332 from $6,383 in the nine months ended
September 30, 1996 to $9,715 in the nine months ended
September 30, 1997. This increase was due to the impact of the
non-recurring credits and the increase in revenues noted
above.
The Emerging Technologies segment revenues increased $3,224
from $16,297 in the nine months ended September 30, 1996 to
$19,521 in the nine months ended September 30, 1997, due
primarily to revenues on the Company's contract to provide a
turnkey medical device sterilization system as well as
revenues on a contract to build pulse generator systems.
Segment operating income increased $719 from an operating loss
of $56 in the nine months ended September 30, 1996 to
operating income of $663 in the nine months ended September
30, 1997, principally due to the increased sales volume.
LIQUIDITY AND CAPITAL RESOURCES
================================
During the nine months ended September 30, 1997, Titan used
$6.4 million cash for continuing operations. The Company's
increased investment in its government and commercial
satellite businesses, which reflects the growth in these
businesses, primarily resulted from an increase in receivables
and inventories of $7,169 and $1,348, respectively. Other
significant cash uses included funding requirements for
certain accrued compensation obligations of $2,099 and funding
of other liabilities which included approximately $1,500 in
payments of certain accrued acquisition costs of Eldyne,
<PAGE>
Unidyne and DCS. Cash was provided primarily by the Company's
line of credit, which provided $14,650, and by the timing of
vendor payments, which provided $1,622.
In May 1997, the Company completed an agreement with Sumitomo
Bank of California and Imperial Bank for a $24,000 line of
credit maturing May 31, 1998, amending and replacing the
previous $14,000 line with Sumitomo Bank, and replacing the
existing line of credit with Crestar Bank. The Company has
the option to borrow at a bank primate rate or at LIBOR plus
2%. The agreement contains, among other financial covenants,
provisions which require the Company to have annual net
income, as defined, prohibits two consecutive quarterly losses
in aggregate of greater than $500, and contains other
financial covenants which require the Company to maintain
stipulated levels of net worth and minimum interest coverage,
and fixed charge coverage and quick ratios. Under the
agreement, the Company and its wholly owned subsidiaries,
Titan Information Systems Corporation ("TIS"), Eldyne and
Unidyne, granted the banks a security interest in
substantially all of their non-real property assets, including
accounts receivable, inventory, equipment and patents, and the
Company pledged the stock of TIS, Eldyne and Unidyne to the
banks.
At September 30, 1997, borrowings outstanding under this
agreement were $14,650, at a weighted average interest rate of
7.92%. The Company also had commitments under letters of
credit under this agreement of $1,177, which reduced
availability under the line of credit to $8,173. On May 23,
1997, the Company repaid in full the line of credit agreement
and equipment note with Crestar Bank. A mortgage note with a
balance of $1,228 at September 30, 1997, remains outstanding
with Crestar Bank.
At September 30, 1997 the Company was in compliance with all
financial covenants under its various debt agreements.
FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
===========================================================
Certain statements contained in this Management's Discussion
and Analysis of Results of Operations and Financial Condition
that are not related to historical results are forward looking
statements. Actual results may differ materially from those
stated or implied in the forward looking statements. Further,
certain forward looking statements are based upon assumptions
of future events which may not prove to be accurate. These
forward looking statements involve risks and uncertainties
including but not limited to those referred to in the
<PAGE>
Company's Annual Report on Form 10-K for the year ended
December 31, 1996, regarding entry into commercial business,
reliance on a major software customer, and dependence on
defense spending.
THE TITAN CORPORATION
PART II - OTHER INFORMATION
Item 5. Other Information
On July 10, 1997, the Titan Corporation ("Titan") filed a
Certificate of Amendment (the "Amendment") to its Restated
Certificate of Incorporation with the Secretary of State
of the State of Delaware. The amendment increases the
number of Common Stock which Titan is authorized to issue
from 30,000,000 to 45,000,000. The additional shares of
Common Stock authorized by the Amendment will be used for
future financings, acquisitions and compensation programs.
The Amendment was approved by Titan's stockholders on May
15, 1997. A copy of such Certificate of Amendment is
attached hereto as an exhibit.
Item 6. Exhibits and Reports on Form 8-K
(a)(3.1)Certificate of Amendment of Restated
Certificate of Incorporation, dated June 30,
1997.
(27) Financial Data Schedule.
(b) None
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: November 12, 1997
THE TITAN CORPORATION
/s/ Eric M. DeMarco
=========================
By: Eric M. DeMarco
Senior Vice President,
Chief Financial Officer
/s/ Deanna H. Petersen
=========================
By: Deanna H. Petersen
Corporate Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
The Titan Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
The Titan Corporation resolutions were duly adopted setting forth
an amendment to the Restated Certificate of Incorporation of said
Corporation, declaring such amendment to be advisable and directing
that the amendments proposed be considered at the next annual
meeting of the stockholders of said Corporation.
The amendment amends the opening paragraph of Article
Fourth of the Restated Certificate of Incorporation, which
paragraph now reads as follows:
"Fourth: The Corporation is authorized to issue two
classes of stock, which shall be designated Preferred
Stock and Common Stock, respectively. The total number
of shares of all classes of stock which the Corporation
shall have the authority to issue shall be 32,500,000,
consisting of 2,500,000 shares of Preferred Stock of the
par value of $1.00 per share, and 30,000,000 shares of
Common Stock of the par value of $.01 per share."
so that from and after adoption of the amendment, said paragraph
shall read as follows:
"Fourth: The Corporation is authorized to issue two
classes of stock, which shall be designated Preferred
Stock and Common Stock, respectively. The total number
of shares of all classes of stock which the Corporation
shall have the authority to issue shall be 47,500,000,
consisting of 2,500,000 shares of Preferred Stock of the
par value of $1.00 per share, and 45,000,000 shares of
Common Stock of the par value of $.01 per share."
<PAGE>
SECOND: That thereafter, pursuant to resolution of
its Board of Directors, the annual meeting of the stockholders of
said Corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law of the
State of Delaware, at which meeting the necessary number of shares
as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, The Titan Corporation has caused this
Certificate to be signed by Gene W. Ray, its President and Chief
Executive Officer, and attested by Philip J. Englund, its
Secretary, this 30th day of June, 1997.
THE TITAN CORPORATION
/s/
=======================
Gene W. Ray
President and
Chief Executive Officer
ATTEST:
/s/
=======================
Philip J. Englund
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,397
<SECURITIES> 0
<RECEIVABLES> 52,889
<ALLOWANCES> 0<F1>
<INVENTORY> 13,667
<CURRENT-ASSETS> 83,536
<PP&E> 42,853
<DEPRECIATION> 24,015
<TOTAL-ASSETS> 135,281
<CURRENT-LIABILITIES> 36,106
<BONDS> 39,218
0
3,695
<COMMON> 172
<OTHER-SE> 48,669
<TOTAL-LIABILITY-AND-EQUITY> 135,281
<SALES> 127,025
<TOTAL-REVENUES> 127,212
<CGS> 97,644
<TOTAL-COSTS> 97,644
<OTHER-EXPENSES> 20,527
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 3,887
<INCOME-PRETAX> 5,189
<INCOME-TAX> 1,816
<INCOME-CONTINUING> 3,373
<DISCONTINUED> (343)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,030
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
<FN>
<F1>Due to the use of condensed financial statements for interim reporting, this
information is not compiled on a quarterly basis.
</FN>
</TABLE>
