UNITED STATES
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 AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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, ROCKVILLE, MARYLAND 20852
(Address of principal executive offices) (Zip Code)
(301) 816-1200
(Registrant's telephone number, including area code)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of JUNE 30, 1997.
COMMON STOCK, $.01 PAR VALUE 4,543,207
(Class) (Number of Shares)
<PAGE>
CTA INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PART 1. -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
Consolidated Statements of Operations
Three months and six months ended June 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996
Note to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. -- OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
* * * * * *
Signature
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's except for share amounts)
DECEMBER 31, 1996 JUNE 30, 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $16 $2,235
ACCOUNTS RECEIVABLE, NET 62,327 52,792
OTHER CURRENT ASSETS 4,228 4,289
RECOVERABLE INCOME TAXES 3,537 863
Total current assets 70,108 60,179
Furniture and equipment, net 10,075 9,645
COSTS IN EXCESS OF NET ASSETS
ACQUIRED, NET 5,048 4,755
Other assets, net 7,459 7,378
$92,690 $81,957
See accompanying note to the unaudited condensed consolidated financial
statements.
<PAGE>
CTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's except for share amounts)
DECEMBER 31, 1996 JUNE 30, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--line of credit $28,335 $20,514
ACCOUNTS PAYABLE 15,718 12,999
ACCRUED EXPENSES 4,041 5,976
EXCESS OF BILLINGS OVER COSTS
AND CONTRACT PREPAYMENTS 6,159 3,715
OTHER CURRENT LIABILITIES 757 757
CURRENT PORTION OF LONG-TERM DEBT -- 1,500
DEFERRED INCOME TAXES 1,377 1,377
Total current liabilities 56,387 46,838
Long-term debt, less current portion 15,000 13,500
OTHER LONG-TERM LIABILITIES 3,510 3,890
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $1.00 PAR VALUE,
1,000,000 SHARES AUTHORIZED AND
NONE ISSUED -- --
COMMON STOCK, $.01 PAR VALUE,
20,000,000 SHARES AUTHORIZED AND
5,000,000 SHARES ISSUED 50 50
CAPITAL IN EXCESS OF PAR VALUE 7,993 7,993
RETAINED EARNINGS 14,550 14,576
22,593 22,619
NOTES RECEIVABLE FROM EMPLOYEES (698) (698)
TREASURY STOCK, AT COST
(456,793 SHARES IN 1997 AND
447,352 SHARES IN 1996) (4,102) (4,192)
Total stockholders' equity 17,793 17,729
$92,690 $81,957
See accompanying note to the unaudited condensed consolidated financial
statements.
CTA INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's Except for Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
Contract revenues $23,496 $23,144 $47,567 $43,560
COST OF CONTRACT REVENUES 21,289 19,984 44,930 37,446
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,029 1,556 2,383 2,958
OTHER EXPENSES 326 261 346 338
Operating profit (loss) 852 1,343 (92) 2,818
INTEREST EXPENSE 277 267 527 543
Income (loss) before
income taxes 575 1,076 (619) 2,275
INCOME TAXES (BENEFIT) 715 402 (202) 853
Income (loss) from
continuing operations (140) 674 (417) 1,422
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS,
NET OF INCOME TAXES (508) (699) (3,170) (1,399)
Net income (loss) $(648) $(15) $(3,587) $23
Earnings (loss) per share:
Continuing operations $(0.03) $0.15 $(0.09) $0.31
DISCONTINUED OPERATIONS (0.12) (0.15) (0.73) (0.30)
Earnings (loss) per share $(0.15) $0.00 $(0.82) $0.01
Weighted average shares
outstanding 4,382,744 4,543,207 4,352,195 4,614,774
See accompanying note to the unaudited condensed consolidated financial
statements.
<PAGE>
CTA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's)
(Unaudited)
Six Months Ended
JUNE 30,
1996 1997
Operating activities:
Net income (loss) ($3,587) $ 23
NON-CASH EXPENSES, NET 1,059 2,679
CHANGES IN ASSETS AND
LIABILITIES, NET (5) 8,920
Net cash provided by (used in)
operating activities (2,533) 11,622
Investing activities:
Investments in furniture
and equipment (711) (1,492)
Financing activities:
Net borrowings (repayments) under
bank line of credit agreement 3,539 (7,821)
OTHER FINANCING ACTIVITIES, NET (415) (90)
Net cash provided by (used in)
financing activities 3,124 (7,911)
Net increase (decrease) in cash and
cash equivalents ($120) $2,219
SEE ACCOMPANYING NOTE TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
CTA INCORPORATED
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
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, 1997 and the results of its operations and
its cash flows for the periods ended June 30, 1996 and 1997. The results of
operations presented are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
The accompanying financial statements should be read in conjunction with
the audited financial statements for the year ended December 31, 1996 which
are contained in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
The provision for income taxes in the statements of operations has been
computed using the estimated annual effective tax rate expected to be
applicable for the full year.
Certain prior year balances have been reclassed to conform with the
current period presentation.
On July 11, 1997, the Company entered into an Asset Acquisition Agreement
with Orbital Sciences Corporation under which the Company will sell to Orbital
its Space and Telecommunications Systems business and its Mobile Information
and Communications Services business in exchange for $18 million (less
retained receivables of at least $6 million) in cash, subject to certain
adjustments and a $3 million holdback, and assumption by Orbital of certain
liabilities of the Company. In addition, Orbital will pay to certain lenders
of the Company an aggregate of $27 million in partial or full satisfaction of
the Company's obligations to such lenders. The condensed consolidated
statements of operations exclude the revenues and expenses of the discontinued
business segments from captions applicable to continuing operations. The
discontinued operations include an allocation of interest expense based on the
net assets of the business segments to be sold. The net assets to be sold as
of June 30, 1997 are approximately $30 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On July 11, 1997, the Company entered into an Asset Acquisition Agreement
with Orbital Sciences Corporation under which the Company will sell to Orbital
its Space and Telecommunications Systems business and its Mobile Information
and Communications Services business in exchange for $18,000,000 (less
retained receivables of at least $6 million) in cash, subject to certain
adjustments and a $3 million holdback, and assumption by Orbital of certain
liabilities of the Company. In addition, Orbital will pay to certain lenders
of the Company an aggregate of $27 million in partial or full satisfaction of
the Company's obligations to such lenders. The Company will also be entitled
to receive certain deferred consideration for future sales of STARBus
satellites and satellite buses and 3% of all cumulative revenues attributable
to GEMtrak tracking system in excess of a threshold amount of $50 million. The
Sale is subject to approval by the shareholders of the Company (which was
obtained on August 4, 1997), the satisfaction or the waiver of a number of
conditions and to certain regulatory matters. The Company expects the Sale to
be completed on or about August 15, 1997.
RESULTS OF OPERATIONS
The Company's Consolidated Statements of Operations have been
reclassified for all periods to present the operations sold to Orbital as
discontinued operations. Accordingly, revenues and expenses related to the
operations sold are excluded from continuing operations in the Consolidated
Statements of Operations and the following discussion of operating results.
The following tables set forth certain items in the Company's
Consolidated Statements of Operations as a percentage of contract revenues:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
<S> <C> <C> <C> <C>
1996 1997 1996 1997
Contract revenues.................. 100.0% 100.0% 100.0% 100.0%
Cost of contract revenues.......... 90.6 86.4 94.4 86.0
Selling, general and administrative
expenses......................... 4.4 6.7 5.1 6.8
Other expenses..................... 1.4 1.1 0.7 0.8
Operating profit (loss)............ 3.6 5.8 (0.2) 6.4
Interest expense................... 1.2 1.1 1.1 1.2
Income (loss) before income taxes.. 2.4 4.7 (1.3) 5.2
Provision (benefit) for income taxes 3.0 1.8 (0.4) 2.0
Income (loss) from continuing
operations....................... (0.6) 2.9 (0.9) 3.2
Income (loss) from discontinued
operations....................... (2.2) (3.0) (6.6) (3.2)
Net income (loss).................. (2.8) (0.1) (7.5) (0.0)
</TABLE>
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996
CONTRACT REVENUES. Contract revenues decreased 1.5% to $23.1 million for
the three months ended June 30, 1997 from $23.5 million for the comparable
period in 1996. Contract revenues decreased 8.4% to $43.6 million for the six
months ended June 30, 1997 from $47.6 million for the comparable period in
1996.
Increases in contract revenues on new programs in the 1997 periods were
more than offset by decreases in other programs. Contract revenues on the
Nebraska Year 2000 conversion contract increased in 1997 by $1.7 million and
$3.3 million for the three and six month periods ended June 30, respectively,
compared to the comparable periods in 1996. Contract revenues on the Kansas
Year 2000 conversion contract increased in 1997 by $1.2 million for both
periods compared to 1996. Contract revenues on the Defense Enterprise
Integration Services (DEIS) subcontract to Computer Sciences Corporation (CSC)
increased in 1997 by $0.9 million and $2.0 million for the three and six month
periods ended June 30, respectively, compared to the comparable periods in
1996.
Contract revenues on the Technical Engineering and Management Support IV
(TEMS IV) program at Hanscom Air Force Base decreased in 1997 by $2.8 million
and $6.4 million for the three and six month periods ended June 30,
respectively, compared to the comparable periods in 1996, as the program winds
down. Revenues on the Naval Air Weapons Center (NAWC) contract at China Lake,
California decreased in 1997 by $0.5 million and $5.0 million for the three
and six month periods ended June 30, respectively, compared to the comparable
periods in 1996. In the first quarter of 1996, the Company completed its five-
year contract with the NAWC, the last of the Company's significant contracts
awarded during its period of eligibility for small business awards which ended
in 1992. Although it was ineligible to rebid for this contract as the prime
contractor, the Company is a major subcontractor to the small business prime
contractor who was awarded the NAWC follow-on contract, from which the Company
receives approximately 45% of the contract revenues. Contract revenues on the
NAWC subcontract decreased by $0.2 million for the three months ended June 30,
1997 compared to the comparable period in 1996 and increased by $1.1 million
for the six months ended June 30, 1997 compared to the comparable period in
1996.
In the first quarter of 1996, the Company revised its estimates of the
full contract value and profitability of its Eastern Zone contract with the
GSA, resulting in a reduction in revenues and operating profit of $2.2
million, reflecting the Company's then current estimate of the contract's
profit at completion. The Eastern Zone contract incurred significant start-up
costs related to the establishment of nine new facilities required for
contract performance and to difficulties encountered in cost-effective
staffing of the personnel required under the contract. The use of subcontract
personnel to fill critical positions resulted in cost overruns.
The Company initially expected that future contract performance over the
full contract term at originally anticipated staffing levels would result in
profit sufficient to offset early program losses. However, revenues on the
contract have not been sufficient to offset these losses and the Company no
longer anticipates sufficient future contract value to recover its start-up
costs. The Company has submitted claims against the U.S. government seeking
recovery of $1.5 million of the overrun. The Company has recorded these claims
as an unbilled receivable, against which it has certain reserves.
Additionally, the Company has implemented program controls to reduce future
costs which it believes will serve to minimize any potential cost overruns
during the remainder of the contract, which is scheduled to be completed by
September 30, 1997.
COST OF CONTRACT REVENUES. Cost of contract revenues decreased 6.1% to
$20.0 million, or 86.4% of contract revenues, for the three months ended June
30, 1997, from $21.3 million, or 90.6% of contract revenues, for the
comparable period in 1996. Cost of contract revenues decreased 16.7% to $37.4
million, or 86.0% of contract revenues, for the six months ended June 30, 1997
from $44.9 million, or 94.4% of contract revenues, for the comparable period
in 1996. These decreases in cost of contract revenues as a percentage of
contract revenues resulted primarily from the effect of changes in the
estimated contract value and profitability on the Eastern Zone contract in
1996 and better margins on the Year 2000 conversion contracts.
SG&A. Selling, general and administrative expenses ("SG&A") increased
51.2% to $1.6 million, or 6.7% of contract revenues, for the three months
ended June 30, 1997, from $1.0 million, or 4.4% of contract revenues, for the
comparable period in 1996. Selling, general and administrative expenses
("SG&A") increased 24.1% to $3.0 million, or 6.8% of contract revenues, for
the six months ended June 30, 1997, from $2.4 million, or 5.1% of contract
revenues, for the comparable period in 1996. Increased bid and proposal costs
accounted for the increase in SG&A in 1997 and reduced revenues accounted for
the increase in SG&A as a percentage of contract revenues in 1997.
OTHER EXPENSES. Other expenses were approximately $0.3 million for both
the three months and the six months ended June 30, 1997 and 1996.
OPERATING PROFIT (LOSS). The Company had an operating profit of $1.3
million for the three months ended June 30, 1997 compared to an operating
profit of $0.9 million for the comparable period in 1996 and an operating
profit of $2.8 million for the six months ended June 30, 1997 compared to an
operating loss of $(0.1) million for the comparable period in 1996.
INTEREST EXPENSE. Interest expense was approximately $0.3 million for
the three months ended June 30, 1997 and 1996 and approximately $0.5 million
for the six months ended June 30, 1997 and 1996.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company had a provision for
income taxes of $0.4 million for the three months ended June 30, 1997 compared
to a provision for income taxes of $0.7 million for the comparable period in
1996 and a provision for income taxes of $0.9 million for the six months ended
June 30, 1997 compared to a $0.2 million income tax benefit for the comparable
period in 1996.
INCOME (LOSS) FROM CONTINUING OPERATIONS. The Company had income from
continuing operations of $0.7 million for the three months ended June 30, 1997
compared to a loss from continuing operations of $(0.1) million for the
comparable period in 1996 and income from continuing operations of $1.4
million for the six months ended June 30, 1997 compared to a loss from
continuing operations of $(0.4) million for the comparable period in 1996.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. The Company had a loss from
discontinued operations of $(0.7) million for the three months ended June 30,
1997 compared to a loss from discontinued operations of $(0.5) million for the
comparable period in 1996 and a loss from discontinued operations of $(1.4)
million for the six months ended June 30, 1997 compared to a loss from
discontinued operations of $(3.2) million for the comparable period in 1996.
Revenues of the discontinued operations were $16.0 million and $15.5 million
for the three months ended June 30, 1997 and 1996, respectively, and $36.4
million and $53.1 million for the six months ended June 30, 1997 and 1996,
respectively. The Company increased reserves for estimates of costs at program
completion on the Indostar program that resulted in a $2.8 million reduction
in revenues and operating profit in the first quarter of 1996. Interest
expense allocated to the discontinued operations was $0.9 million and $0.7
million for the three months ended June 30, 1997 and 1996, respectively, and
$1.8 million and $1.5 million for the six months ended June 30, 1997 and 1996,
respectively.
NET INCOME (LOSS). The Company had net losses of $(15) thousand and
$(648) thousand for the three months ended June 30, 1997 and 1996,
respectively and a net profit of $23 thousand for the six months ended June
30, 1997 compared to a net loss of $(3.6) million for the comparable period in
1996.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided $11.6 million of cash during the first six months of
1997, primarily from net earnings and non-cash expenses of $2.7 million, the
decrease in accounts receivable of $9.5 million, the decrease in recoverable
income taxes of $2.7 million, partially offset by the decrease in operating
liabilities of $3.2 million. Cash used in investing activities was $1.5
million for purchases of furniture and equipment. Cash used in financing
activities was $7.8 million for net repayments under the bank line of credit
agreement and $0.1 million for purchases of treasury stock.
The Company expects the Sale of its Space and Telecommunications Systems
business and its Mobile Information and Communications Services business to
Orbital Sciences Corporation to be completed on or about August 15, 1997. At
that time, the Company's subordinated debt of $15 million will be repaid and
approximately $21 million will be repaid on the revolving credit facility
with the bank. The Company will retain $6 million in receivables and Orbital
will hold back $3 million for approximately 45 days after the closing. The
Company expects to pay a partial liquidating distribution of approximately $5
million out of the proceeds of the Sale, together with other expenses related
to the Sale, approximately 45 days after the closing.
In December 1993, the Company and its subsidiaries entered into an
agreement with a bank for a revolving credit facility providing the
availability to borrow up to $30 million. The revolving line of credit expired
on December 9, 1996 but has been extended until September 15, 1997, providing
the availability to borrow up to $10 million while a new, longer-term credit
agreement is negotiated with the bank.
The Company believes that the proceeds of the Sale, working capital, cash
flow from operations, and available bank borrowings will provide adequate
funds for continued operations through the end of 1998.
<PAGE>
PART II. -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material developments during the quarterly period
ended June 30, 1997. See Item 3 of the registrant's Annual Report on Form
10-K for the year ended December 31, 1996 for further discussion of legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) None
(B) No reports on Form 8-K were filed during the quarter ended
June 30, 1997. A report on Form 8-K, dated July 11, 1997, was filed to report
the sale by the Company to Orbital Sciences Corporation of its Space and
Telecommunications Systems business and its Mobile Information and
Communications Services business.
<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, 1997 /S/ GREGORY H. WAGNER
Gregory H. Wagner
Executive Vice President,
Chief Financial Officer,
Principal Accounting Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2235
<SECURITIES> 0
<RECEIVABLES> 50030
<ALLOWANCES> 2762
<INVENTORY> 0
<CURRENT-ASSETS> 60179
<PP&E> 25394
<DEPRECIATION> 15749
<TOTAL-ASSETS> 81957
<CURRENT-LIABILITIES> 46838
<BONDS> 0
<COMMON> 50
0
0
<OTHER-SE> 17679
<TOTAL-LIABILITY-AND-EQUITY> 81957
<SALES> 43560
<TOTAL-REVENUES> 43560
<CGS> 37446
<TOTAL-COSTS> 37446
<OTHER-EXPENSES> 3296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 543
<INCOME-PRETAX> 2275
<INCOME-TAX> 853
<INCOME-CONTINUING> 1422
<DISCONTINUED> (1399)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
