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 SEPTEMBER 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 SEPTEMBER 30, 1997.
COMMON STOCK, $.01 PAR VALUE 4,543,207
(Class) (Number of Shares)
<PAGE>
CTA INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
PART 1. -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
Consolidated Statements of Operations
Three months and nine months ended September 30, 1997
and 1996
Condensed Consolidated Statements of Cash Flows
Nine months ended September 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
<PAGE>
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's except for share amounts)
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $16 $7
ACCOUNTS RECEIVABLE, NET 62,327 32,177
OTHER CURRENT ASSETS 4,228 9,959
RECOVERABLE INCOME TAXES 3,537 28
Total current assets 70,108 42,171
Furniture and equipment, net 10,075 2,284
COSTS IN EXCESS OF NET ASSETS
ACQUIRED, NET 5,048 --
Other assets, net 7,459 3,921
$92,690 $48,376
</TABLE>
See accompanying note to the unaudited condensed consolidated financial
statements.
<PAGE>
<TABLE>
CTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's except for share amounts)
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--line of credit $28,335 $6,906
ACCOUNTS PAYABLE 15,718 5,100
ACCRUED EXPENSES 4,041 4,244
EXCESS OF BILLINGS OVER COSTS
AND CONTRACT PREPAYMENTS 6,159 2,830
OTHER CURRENT LIABILITIES 757 287
CURRENT PORTION OF LONG-TERM DEBT -- 6,200
DEFERRED INCOME TAXES 1,377 1,377
Total current liabilities 56,387 26,944
Long-term debt, less current portion 15,000 --
OTHER LONG-TERM LIABILITIES 3,510 703
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 17,576
22,593 25,619
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 20,729
$92,690 $48,376
</TABLE>
See accompanying note to the unaudited condensed consolidated financial
statements.
<PAGE>
<TABLE>
CTA INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's Except for Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Contract revenues $23,162 $26,090 $70,729 $69,650
COST OF CONTRACT REVENUES 20,204 23,189 65,134 60,635
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,735 1,791 4,118 4,749
OTHER EXPENSES 293 203 639 541
Operating profit 930 907 838 3,725
INTEREST EXPENSE 314 786 841 1,329
Income (loss) before
income taxes 616 121 (3) 2,396
INCOME TAXES (BENEFIT) 202 46 (1) 899
Income (loss) from
continuing operations 415 75 (2) 1,497
Discontinued operations:
Loss from discontinued
operations, net of
income taxes (268) (91) (3,438) (1,490)
GAIN ON DISPOSAL, NET OF
INCOME TAXES -- 3,016 -- 3,016
Income (loss) from
discontinued operations (268) 2,925 (3,438) 1,526
Net income (loss) $147 $3,000 $(3,440) $3,023
Earnings (loss) per share:
Continuing operations $0.09 $0.01 $(0.00) $0.32
DISCONTINUED OPERATIONS (0.06) 0.65 (0.78) 0.33
Earnings (loss) per share $0.03 $0.66 $(0.78) $0.65
Weighted average shares
outstanding 4,608,553 4,543,207 4,397,973 4,684,184
</TABLE>
See accompanying note to the unaudited condensed consolidated financial
statements.
<PAGE>
<TABLE>
CTA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's)
(Unaudited)
<CAPTION>
Nine Months Ended
SEPTEMBER 30,
1996 1997
<S> <C> <C>
Net cash provided by (used in)
operating activities 320 (987)
Investing activities:
Proceeds from sale of discontinued
operations -- 11,689
Proceeds from sale of division -- 438
Investments in furniture
and equipment (4,815) (2,076)
Net cash provided by (used in)
investing activities (4,815) 10,051
Financing activities:
Net borrowings (repayments) under
bank line of credit agreement 5,699 (8,979)
OTHER FINANCING ACTIVITIES, NET (368) (94)
Net cash provided by (used in)
financing activities 5,331 (9,073)
Net increase (decrease) in cash and
cash equivalents $836 $(9)
</TABLE>
SEE ACCOMPANYING NOTE TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
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 September 30, 1997 and the results of its operations
and its cash flows for the periods ended September 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 sold 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 $6 million) in cash, subject to certain adjustments
and a $3 million holdback (the balance of the retained receivables and the
holdback are included in other assets at September 30, 1997), and assumption
by Orbital of certain liabilities of the Company. The sale was completed on
August 15, 1997. In addition, Orbital paid 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 balance of the long-term debt and accrued
interest not paid by orbital is included in current liabilities at September
30, 1997 and was paid in full in November 1997). 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
proportion of debt assumed by Orbital to the Company's total debt outstanding
at the time of the sale.
<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 sold 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 $6 million) in cash, subject to certain
adjustments and a $3 million holdback, and assumption by Orbital of
certain liabilities of the Company. The sale was completed on August 15, 1997.
In addition, Orbital paid 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.
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 NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
<S> <C> <C> <C> <C>
ITEM 1996 1997 1996 1997
Contract revenues............. 100.0% 100.0% 100.0% 100.0%
Cost of contract revenues..... 87.2 88.9 92.1 87.1
Selling, general and
administrative expenses..... 7.5 6.8 5.8 6.8
Other expenses................ 1.2 0.8 0.9 0.8
Operating profit (loss)....... 4.1 3.5 1.2 5.3
Interest expense.............. 1.4 3.0 1.2 1.9
Income (loss) before
income taxes................ 2.7 0.5 0.0 3.4
Provision (benefit) for
income taxes................ 0.9 0.2 0.0 1.3
Income (loss) from
continuing operations....... 1.8 0.3 0.0 2.1
</TABLE>
<PAGE>
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996
CONTRACT REVENUES. Contract revenues increased 12.6% to $26.1 million for
the three months ended September 30, 1997 from $23.2 million for the
comparable period in 1996. Contract revenues decreased 1.5% to $69.6 million
for the nine months ended September 30, 1997 from $70.7 million for the
comparable period in 1996.
Contract revenues from the Company's Year 2000 Century Date Change
conversion contracts increased 339% to $4.6 million for the three months ended
September 30, 1997 from $1.3 million in the comparable period in 1996. Year
2000 contract revenues increased 770% to $10.4 million for the nine months
ended September 30, 1997 from $1.3 million in the comparable period in 1996.
A new contract in 1997, providing program management and integration for
the Assistant Secretary of Defense for Health Affairs, generated revenues of
$3.3 million and $4.3 million for the three and nine month periods ended
September 30, 1997, respectively. Another new program, the Defense Enterprise
Integration Services (DEIS) subcontract to Computer Sciences Corporation (CSC)
generated revenues of $1.1 million and $3.1 million for the three and nine
month periods ended September 30, 1997, respectively.
These increases in contract revenues were offset by decreases on the
Technical Engineering and Management Support IV (TEMS IV) program at Hanscom
Air Force Base of $1.7 million and $8.1 million for the three and nine month
periods ended September 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 $5.0 million
for the nine month period ended September 30, compared to the comparable
period 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 $0.4 million for the three months ended
September 30, 1997 compared to the comparable period in 1996 and increased by
$0.7 million for the nine months ended September 30, 1997 compared to the
comparable period in 1996.
During 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 $2.6 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 were not sufficient to offset these losses and recover the 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. Contract
revenues on the Eastern Zone contract decreased by $1.1 million for the three
months ended September 30, 1997 compared to the comparable period in 1996 and
increased by $0.3 million for the nine months ended September 30, 1997
compared to the comparable period in 1996. The contract ended September 30,
1997.
During 1997 the Company sold its Advanced Information Systems Division
which had accounted for $1.2 and $2.2 million in contract revenues for the
three month and nine month periods ended September 30, 1996.
COST OF CONTRACT REVENUES. Cost of contract revenues increased 14.8% to
$23.2 million, or 88.9% of contract revenues, for the three months ended
September 30, 1997, from $20.2 million, or 87.2% of contract revenues, for the
comparable period in 1996. Cost of contract revenues decreased 6.9% to $60.6
million, or 87.1% of contract revenues, for the nine months ended September
30, 1997 from $65.1 million, or 92.1% 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 overall higher margins on commercial contracts in 1997.
SG&A. Selling, general and administrative expenses ("SG&A") increased
3.2% to $1.8 million, or 6.8% of contract revenues, for the three months ended
September 30, 1997, from $1.7 million, or 7.5% of contract revenues, for the
comparable period in 1996. SG&A increased 15.3% to $4.7 million, or 6.8% of
contract revenues, for the nine months ended September 30, 1997, from $4.1
million, or 5.8% of contract revenues, for the comparable period in 1996.
Increased bid and proposal costs accounted for the increase in SG&A in 1997
and higher revenues accounted for the decrease in SG&A as a percentage of
contract revenues for the three months ended September 30, 1997 and higher
costs and reduced revenues accounted for the increase in SG&A as a percentage
of contract revenues for the nine months ended September 30, 1997.
OTHER EXPENSES. Other expenses were approximately $0.2 million for the
three months ended September 30, 1997 compared to $0.3 million for the
comparable period in 1996 and approximately $0.5 million for the nine months
ended September 30, 1997 compared to $0.6 million for the comparable period in
1996.
OPERATING PROFIT (LOSS). The Company had an operating profit of $0.9
million for the three months ended September 30, 1997 and 1996 and an
operating profit of $3.7 million for the nine months ended September 30, 1997
compared to $0.8 million for the comparable period in 1996.
INTEREST EXPENSE. Interest expense was approximately $0.8 million for
the three months ended September 30, 1997 compared to $0.3 million for the
comparable period in 1996 and approximately $1.3 million for the nine months
ended September 30, 1997 and compared to $0.8 million for the comparable
period in 1996. As a result of the sale of the discontinued operations, the
Company accrued an additional $2.1 million of contingent interest on the
subordinated debt, of which approximately $1.6 million was allocated to
discontinued operations.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company had a provision for
income taxes of $0.05 million for the three months ended September 30, 1997
compared to a provision for income taxes of $0.2 million for the comparable
period in 1996 and a provision for income taxes of $0.9 million for the nine
months ended September 30, 1997 compared to a one thousand dollar income tax
benefit for the comparable period in 1996.
INCOME (LOSS) FROM CONTINUING OPERATIONS. The Company had income from
continuing operations of $0.1 million for the three months ended September 30,
1997 compared to $0.4 million for the comparable period in 1996 and income
from continuing operations of $1.5 million for the nine months ended September
30, 1997 compared to a loss from continuing operations of two thousand dollars
for the comparable period in 1996.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. The Company had a loss from
discontinued operations of $(0.1) million for the three months ended September
30, 1997 compared to a loss from discontinued operations of $(0.3) million for
the comparable period in 1996 and a loss from discontinued operations of
$(1.5) million for the nine months ended September 30, 1997 compared to a loss
from discontinued operations of $(3.4) million for the comparable period in
1996. Revenues of the discontinued operations were $32.9 million and $14.9
million for the three months ended September 30, 1997 and 1996, respectively,
and $69.3 million and $68.2 million for the nine months ended September 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 $1.9
million and $1.1 million for the three months ended September 30, 1997 and
1996, respectively, and $3.7 million and $2.6 million for the nine months
ended September 30, 1997 and 1996, respectively. As a result of the Sale of
its Space and Telecommunications Systems business and its Mobile Information
and Communications Services business to Orbital Sciences Corporation, the
Company realized a gain on the disposal of approximately $3.0 million.
NET INCOME (LOSS). The Company had net income of $3.0 million and $0.1
million for the three months ended September 30, 1997 and 1996, respectively
and a net profit of $3.0 million for the nine months ended September 30, 1997
compared to a net loss of $(3.4) million for the comparable period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities was $1.0 million during the first nine
months of 1997. Cash provided by investing activities was $10.1 million from
the proceeds of the sales of the discontinued operations and a division. Cash
used in financing activities was $9.1 million for net repayments under the
bank line of credit agreement of $9.0 million and $0.1 million for purchases
of treasury stock.
As a result of the Sale of its Space and Telecommunications Systems
business and its Mobile Information and Communications Services business to
Orbital Sciences Corporation, the subordinated debt of $15 million was repaid
and the balance on the revolving credit facility with the bank paid down. The
Company expects to make a tender offer for approximately 200,000 shares for
approximately $2 million to be paid out of the proceeds of the Sale. In
November 1997, the Company entered into a new three year agreement with the
bank for a revolving credit facility providing the availability to borrow up
to $15 million and a new $5 million term facility.
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 September 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 legalproceedings.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on August 4, 1997.
At the meeting the shareholders (1) elected Harvey D. Kushner,
Raymond V. McMillan, George W. Morganthaler, James M. Papada III,
Arturo Silvestrini, and Dr. C.E. "Tom" Velez directors; (2)
ratified the appointment of Ernst & Young LLP as independent
auditors for the year ending December 31, 1997; (3) ratified the
appointment of Legg Mason Wood Walker Incorporated as independent
appraisers for the year ending December 31, 1997; and (4) approved
the sale of the Space and Telecommunications business and the
Mobile Information and Communications Services business to Orbital
Sciences Corporation.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) None
(B) Reports on Form 8-K, dated July 11, 1997 and August 15, 1997,
were 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
NOVEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 28759
<ALLOWANCES> 3418
<INVENTORY> 0
<CURRENT-ASSETS> 42171
<PP&E> 10045
<DEPRECIATION> 7761
<TOTAL-ASSETS> 48376
<CURRENT-LIABILITIES> 26944
<BONDS> 0
<COMMON> 50
0
0
<OTHER-SE> 20679
<TOTAL-LIABILITY-AND-EQUITY> 48376
<SALES> 69650
<TOTAL-REVENUES> 69650
<CGS> 60635
<TOTAL-COSTS> 60635
<OTHER-EXPENSES> 541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1329
<INCOME-PRETAX> 2396
<INCOME-TAX> 899
<INCOME-CONTINUING> 1497
<DISCONTINUED> 1526
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3023
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
