FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 33-44510
CTA INCORPORATED
(Exact name of registrant as specified in its charter)
Colorado 84-0797618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6116 Executive Boulevard, Suite 800, Rockville, Maryland 20852
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (301) 816-1200.
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 or No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of June 30, 1996.
Common Stock $.01 par value 4,383,212
- --------------------------- ----------------
Class Number of Shares
<PAGE>
CTA INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income
Three months and six months ended June 30, 1996 and 1995
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and June 30, 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CTA INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
($000's Except for Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Contract Revenues $39,040 $60,882 $100,691 $103,524
Costs and Expenses:
Costs of Contract Revenues 35,819 56,111 99,180 94,994
Selling, General and
Administrative Expense 1,720 2,285 3,905 4,306
Interest and Other Expenses 1,682 829 2,943 1,916
------ ------ ------- -------
Total Costs and Expenses 39,221 59,225 106,028 101,216
Income/(Loss) Before
Income Taxes (181) 1,657 (5,337) 2,308
Provision for Income Taxes (78) 723 (2,295) 987
------ ----- ------- -----
Net Income/(Loss) (103) 934 (3,042) 1,321
====== ====== ======= =====
Earnings/(Loss) per Share $(0.02) $ 0.19 $ (0.66) $ 0.27
Weighted Average Number of
Common and Common
Equivalent Shares
Outstanding
During the Period 4,629,672 4,842,729 4,593,019 4,826,604
<FN>
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
CTA INCORPORATED
CONSOLIDATED BALANCE SHEETS
($000)
ASSETS
<CAPTION>
June 30, 1996 December 31, 1995
(Unaudited)
Current Assets
<S> <C> <C>
Cash and Cash Equivalents $6,504 $ 235
Accounts Receivable (Note 2) 49,278 58,586
Recoverable Income Taxes 5,020 2,521
Other Current Assets 5,783 3,697
------ ------
Total Current Assets 66,585 65,039
Furniture and Equipment, Net 8,025 6,784
Other Assets (Note 3) 8,371 6,812
GEMnet Investment 7,262 7,262
Cost in Excess of
Net Assets Acquired 5,340 5,633
------- -------
Total Assets $95,583 $91,530
<FN>
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<TABLE>
CTA INCORPORATED
CONSOLIDATED BALANCE SHEETS
($000)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, 1996 December 31, 1995
(Unaudited)
------------- -----------------
<S> <C> <C>
Current Liabilities
Accounts Payable $16,565 $13,910
Notes Payable - Line of Credit 20,000 16,324
Accrued Expenses 5,129 4,804
Excess of Billing Over Cost and
Contract Prepayments 5,380 4,603
Acquisition Notes Payable Current - 750
Deferred Income Taxes 4,642 4,642
Other Current Liabilities 279 293
------ ------
Total Current Liabilities 51,995 45,326
Subordinated Notes Payable 15,000 15,000
Other Long-Term Liabilities 3,127 2,431
------ ------
Total Liabilities 70,122 62,757
Stockholders' Equity
Common Stock, $.01 Par Value,
5,000,000 Shares Issued 50 50
Capital in Excess of Par Value 8,798 9,023
Retained Earnings 22,546 25,587
------ ------
31,394 34,660
Notes Receivable from Employees (362) -
Treasury Stock, at Cost
(616,788 Shares in 1996,
660,554 Shares in 1995) (5,571) (5,887)
------- -------
Total Stockholders' Equity 25,461 28,773
------ ------
$95,583 $91,530
======= =======
<FN>
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
CTA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's)
(Unaudited)
<CAPTION>
Six Months Ended
----------------------
June 30, June 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash Provided By (Used in) Operating Activities $5,815 $ (910)
Investing Activities:
Purchase of Furniture and Equipment (2,843) (816)
Financing Activities:
Net Borrowings Under Bank
Line-of-Credit Agreement 3,676 874
Proceeds From Deferred Lease Incentives 315 -
Repayment of Acquisition Notes (375) (464)
Purchase of Treasury Stock (355) (120)
Other Treasury Stock Sales 36 -
_____ _____
3,297 290
------ --------
Increase/(Decrease) in Cash $6,269 ($1,436)
====== ========
<FN>
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
CTA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE 1. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments necessary to present fairly the Company's financial
position as of June 30, 1996 and the results of its operations and its
cash flows for the periods ended June 30, 1996 and 1995. The results of
operations presented are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. Certain amounts in the
prior year financial statements have been reclassified to conform to the
1996 presentation.
The accompanying financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1995 which are
contained in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
NOTE 2. Allowance for Accounts Receivable
Accounts receivable balances are presented net of allowances of $2.8 million
in June 30, 1996 and $2.7 million in 1995.
NOTE 3. Other Assets
In May 1994, the Company entered into an agreement with EarthWatch, Inc.
("EarthWatch") pursuant to which it is manufacturing two EarlyBird remote
sensing satellites. Total consideration under this contract consists of
$4.075 million in cash and 1,018,748 shares of Earthwatch preferred
stock valued at $4.00 per share which is convertible into approximately
3.5 percent of Earthwatch's fully diluted equity. Other assets include
509,374 shares of such stock, carried on a cost basis at $2.0 million,
received as a milestone payment under the contract in March of 1996.
NOTE 4. Stockholders' Equity
The change in stockholders' equity during the six month period ended
June 30, 1996 consists of the issuance of 49,000 shares of treasury stock
pursuant to the Company's stock option plan, 39,515 shares in settlement
of acquisition debt, 1,052 shares in lieu of cash payment for certain
Director's fees, and the purchase of 49,614 shares and issuance of 3,813
shares under its existing Board of Directors approved stock plan.
NOTE 5. Income Taxes
The provision for income taxes in the statements of income has been
computed using the estimated annual effective tax rate expected to be
applicable for the full year.
<PAGE>
Item 2. Management's Discussion and Analysis
Results of Operations
<TABLE>
The following table (in thousands of dollars) provides certain financial
information for the Company's business segments:
<CAPTION>
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
Contract Revenues:
<S> <C> <C> <C> <C>
Information Technology $24,655 $29,630 $49,727 $55,044
Space & Telecommunications 14,385 13,630 28,597 30,858
Launch Support - 17,622 22,367 17,622
Communications Services - - - -
------- ------- -------- --------
$39,040 $60,882 $100,691 $103,524
======= ======= ======== ========
Operating Profit:
Information Technology $1,390 $1,355 $575 $2,508
Space & Telecommunications 552 395 (2,267) 980
Launch Support - 736 102 736
Communications Services (441) - (804) -
------ ------ -------- -------
Income/(Loss) from Operations 1,501 2,486 (2,394) 4,224
Other Expenses, Net 472 (31) 639 224
Interest Expense 1,210 860 2,304 1,692
------ ------ -------- ------
Income/(Loss) before Taxes ($181) $1,657 ($5,337) $2,308
====== ====== ======== ======
Backlog:
Information Technology $400,021 $357,169
Space & Telecommunications 135,050 192,090
-------- --------
$535,071 $549,259
======== ========
</TABLE>
<PAGE>
Six Months Ended June 30
- ------------------------
In the first six months of 1996, the Company completed its five-year prime
contract with the Naval Air Weapons Center ("NAWC") at China Lake,
California, the last of the Company's major contracts awarded during its
period of eligibility for small business awards which ended in 1992. This
contract represented $10.8 million in revenue in the six month period ended
June 30, 1995. Although it was ineligible to bid for this contract as a
prime, the Company supported the successful bid of an eligible prime
contractor as major subcontractor and, as a result, has retained approx-
imately 45 percent of contract revenues from the NAWC follow-on award,
representing $5.0 million in revenue for the first six months of 1996.
The remaining decrease in revenues was partially offset by increased revenues
on ongoing contracts and newly-awarded contracts, resulting in a net
decrease in contract revenues for the Information Technology Segment of
$5.3 million for the first six months of 1996 as compared to the corresponding
period in 1995.
The Company has revised its estimates of full contract value and profit-
ability of its Eastern Zone contract with the General Services Administration,
resulting in a $43.3 million reduction in unfunded backlog and a reduction in
revenue for the six month period of $2.2 million, reflecting the Company's
current estimate of profit at completion. The Company has begun discussions
with interested parties concerning a possible sale of this contract and
subsequent novation.
Contract revenues for the Space & Telecommunications Segment for the first
six months of 1996 increased five percent over the equivalent 1995 period.
An $8.0 million decline of activity in the final stages of a Small
Satellite Technology Initiative (SSTI) effort with NASA was offset
by a $5.0 million increase in the Indostar contract to build a direct
broadcast satellite for Indonesia. The decline was further offset by
$4.7 million in revenue from special payloads support done on the
NASA Goddard Space Flight Center Code 740 contract. However, operating
profit in the Segment for the six month period ended June 30, 1996 declined
$3.9 million from the equivalent six month period in 1995. This decline
was driven primarily by additions to reserves for estimates of costs at
program completion on Indostar that resulted in a $2.8 million decline in
reported profit on that program. These reserves were established to offset
potential cost, technical and schedule risk inherent in the Company's first
major Geostationary Earth Orbit (GEO) effort. In 1996, the Company reduced
its inception-to-date profit rate on the program because of cost growth
resulting from changes in the engineering design to meet weight requirements,
to ensure longer operational life, and to reduce operational risk.
Additionally, the program schedule has been extended to allow for additional
testing beyond that originally estimated.
The Company continued expenditures on the development of its Communications
Services Segment and charged $804 thousand against operations during the
first six months of 1996 on the development of this new business. No
resultant revenue is anticipated from these expenditures during the
remainder of 1996.
Other net expenses represent costs not allocable to contracts. These
expenses were lower in 1995 because of reversals of contractual allowances
provided in previous years. Interest expense increased $612 thousand in
1996 due to higher average bank line of credit balances.
During the first six months of 1996, the Company recorded new orders of
$177.1 million. Major awards in the Information Technology Segment
include awards of the following contracts: a $30.8 million order for the
Health Affairs Office of the Department of Defense, a $30.6 million follow-on
order for the GSA Federal Supply Services contract, a $33.0 million order
related to continuation of services for the NAWC in California, and a $22.0
million order with the State of Nebraska under a "Year 2000" code conversion
contract. In the Space & Telecommunications Segment, the Company was awarded
a $25.2 million order for the U.S. Air Force TSX-5 experimental
space satellite program and had orders under the Indostar contract of $20.7
million. The Company's backlog net of decreases and adjustments grew to
$535.1 million at June 30, 1996 from $510.8 million at December 31, 1995.
The backlog growth is derived from the $177.1 million in new orders less
revenue and other adjustments, including the $43.3 million adjustment on
Eastern Zone. Approximately $89.0 million of the June 30, 1996 backlog is
funded.
Three Months Ended June 30
- --------------------------
Contract revenues for the Information Technology Segment for the three
months ended June 30, 1996 decreased 16.8 percent from the comparable
1995 period for the same reasons as discussed above for the related six
month periods. Operating profit as a percentage of contract revenues
improved in 1996 because of the lower volume of Eastern Zone contract
revenue in 1996 compared to 1995. Profit related to revenue on this
contract was recorded at a break even level for both periods.
Contract revenues for the Space & Telecommunications Segment decreased
$16.9 million for the three months ended June 30, 1996 from the comparable
1995 period because of SSTI and Indostar launch related revenues in the 1995
period. Operating profit decreased $579 thousand primarily due to the
reduced profit rate on the Indostar program in 1996.
The Communications Services Segment incurred operating costs of $441
thousand in the three months ended June 30, 1996. Other net expenses and
interest expense for the three months ended June 30, 1996 increased over
the prior year for comparable reasons as for the six month periods ended
June 30, as discussed above.
Liquidity and Capital Resources
- -------------------------------
Operations provided $5.8 million of cash flow through June 30, 1996.
The net loss for 1996 was more than offset by the reduction of accounts
receivable and increase in accounts payable during the period. Accounts
receivable decreased $9.3 million largely because of lower revenues in
the second quarter.
Purchases of furniture and equipment in the first six months of 1996
increased $2.0 million over 1995 amounts for the same period. Much of
the increase was related to assets purchased and constructed for use in
the future growth of the Space & Telecommunications Segment. The Company's
line of credit increased $3.7 million during 1996 to finance operating and
investing activities. The large cash balance at June 30, 1996 is the
result of significant cash received just prior to the end of the quarter
that could not immediately be applied to the Company's line of credit.
Due to the adjustments to profit recorded in the first quarter of 1996,
the Company sought and received 90 day waivers to three of its restrictive
debt covenants from its debt holders effective March 31, 1996. Since that
time, the Company has concluded amendments to the covenant provisions of
the lending agreement with its senior lender, and has received additional
ninety day waivers to the applicable restrictive debt covenants of its
subordinated debt. The Company's performance through June 30, 1996
is in full compliance with the terms of the senior lending agreement, as
amended.
The Company considers that its cash flows from operations and borrowing
capacity will be sufficient to provide adequate funds for continued
operations. However, to continue its strategic initiatives of expanding
its Communication Services and Space & Telecommunications Segments, the
Company anticipates the need for additional sources of capital. The
Company has continued discussions with its advisors regarding the
identification of additional financing sources.
PART II. OTHER INFORMATION
CTA INCORPORATED
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
<PAGE>
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.
CTA INCORPORATED
August 14, 1996 /s/Gregory H. Wagner
--------------------
Gregory H. Wagner
Executive Vice President
and Chief Financial Officer
Signing on behalf of the registrant and as
principal financial officer
<TABLE> <S> <C>
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