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 MARCH 31, 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 MARCH 31, 1997.
COMMON STOCK, $.01 PAR VALUE 4,543,207
(Class) (Number of Shares)
<PAGE>
CTA INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
PART 1. -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
Consolidated Statements of Operations
Three months ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 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 MARCH 31, 1997
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $16 $1,564
ACCOUNTS RECEIVABLE, NET 62,327 58,071
OTHER CURRENT ASSETS 4,228 3,950
RECOVERABLE INCOME TAXES 3,537 3,124
Total current assets 70,108 66,709
Furniture and equipment, net 10,075 9,957
COSTS IN EXCESS OF NET ASSETS
ACQUIRED, NET 5,048 4,901
Other assets, net 7,459 7,494
$92,690 $89,061
</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 MARCH 31, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable--line of credit $28,335 $22,000
ACCOUNTS PAYABLE 15,718 15,757
ACCRUED EXPENSES 4,041 5,462
EXCESS OF BILLINGS OVER COSTS
AND CONTRACT PREPAYMENTS 6,159 7,265
OTHER CURRENT LIABILITIES 757 757
CURRENT PORTION OF LONG-TERM DEBT -- 750
DEFERRED INCOME TAXES 1,377 1,377
Total current liabilities 56,387 53,368
Long-term debt, less current portion 15,000 14,250
OTHER LONG-TERM LIABILITIES 3,510 3,702
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 14,588
22,593 22,631
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 17,741
$92,690 $89,061
</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
MARCH 31,
1996 1997
<S> <C> <C>
Contract revenues $61,651 $40,834
COST OF CONTRACT REVENUES 62,379 36,224
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,167 3,081
OTHER EXPENSES 167 256
Operating profit (loss) (4,062) 1,273
INTEREST EXPENSE 1,094 1,212
Income (loss) before income taxes (5,156) 61
INCOME TAXES (BENEFIT) (2,217) 23
Net income (loss) ($2,939) $38
Earnings (loss) per share ($0.64) $0.01
Weighted average shares outstanding 4,567,843 4,617,205
</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>
Three Months Ended
MARCH 31,
1996 1997
<S> <C> <C>
Operating activities:
Net income (loss) ($2,939) $ 38
NON-CASH EXPENSES, NET 1,059 1,203
CHANGES IN ASSETS AND
LIABILITIES, NET (653) 7,557
Net cash provided by (used in)
operating activities (2,533) 8,798
Investing activities:
Investments in furniture
and equipment (711) (821)
Financing activities:
Net borrowings (repayments) under
bank line of credit agreement 3,539 (6,335)
OTHER FINANCING ACTIVITIES, NET (415) (94)
Net cash provided by (used in)
financing activities 3,124 (6,429)
Net increase (decrease) in cash and
cash equivalents ($120) $1,548
</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 March 31, 1997 and the results of its operations and
its cash flows for the periods ended March 31, 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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following tables set forth certain items in the Company's Statements of
Operations as a percentage of contract revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1997
<S> <C> <C>
Contract revenues........................... 100.0% 100.0%
Cost of contract revenues................... 101.2 88.7
Selling, general and administrative expenses 5.1 7.5
Other expenses.............................. 0.3 0.6
Operating profit (loss)..................... (6.6) 3.2
Interest expense............................ 1.8 3.0
Income (loss) before income taxes........... (8.4) 0.2
Provision (benefit) for income taxes........ (3.6) 0.1
Net income (loss)........................... (4.8) 0.1%
</TABLE>
The following tables set forth certain items in the Company's Statements
of Operations by business segment:
<TABLE>
<CAPTION>
Three months ended
MARCH 31,
1996 1997
(In thousands of dollars)
Contract revenues:
<S> <C> <C>
Information Technology Services... $24,813 $21,702
Space and Telecommunications
Systems......................... 17,774 16,760
Launch Support.................. 19,064 2,372
Mobile Information and Communications
Services......... _ _
$61,651 $40,834
Operating profit (loss):
Information Technology Services... $(769) $1,756
Space and Telecommunications
Systems......................... (2,635) 231
Launch Support.................. 102 6
Mobile Information and Communications
Services......... (593) (464)
Other expenses (167) (256)
$(4,062) $1,273
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1996
CONTRACT REVENUES. Contract revenues decreased 33.9% to $40.8 million for
the three months ended March 31, 1997 from $61.6 million for the three months
ended March 31, 1996, as a result of a $3.1 million decrease in IT revenues
and a $17.7 million decrease in Space and Telecommunications Systems revenues.
IT contract revenues decreased 12.5% to $21.7 million in 1997 from $24.8
million in 1996. An increase in IT revenue of $1.7 million on the Nebraska
Year 2000 conversion contract and $1.1 million on the Defense Enterprise
Integration Services (DEIS) subcontract to Computer Sciences Corporation
(CSC), which are new programs in the 1997 period, was more than offset by the
decrease of $3.9 million on the Technical Engineering and Management Support
IV (TEMS IV) program at Hanscom Air Force Base and $3.3 million on the Naval
Air Weapons Center (NAWC) contracts at China Lake, California
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.
Total Space and Telecommunications Systems contract revenues in 1997
decreased 48.1% to $19.1 million from $36.8 million in 1996. Space and
Telecommunications Systems contract revenues, exclusive of Launch Support,
decreased 5.7% to $16.8 million in 1997 from $17.8 million in 1996. An
increase of $2.6 million on the TSX-5 contract with the Air Force, which is a
new program in the 1997 period, was more than offset by a decrease of $1.6
million on the EarthWatch program and decreases on other Space and
Telecommunications Systems contracts. Launch Support contract revenues
decreased 87.6% to $2.4 million in 1997 from $19.1 million in 1996, primarily
due to $14.1 million in lower revenue as a result of one-time pass-through
launch-related costs on the Indostar program and $4.1 million on the NASA SSTI
program, offset by an increase of $1.4 million on the TSX-5 contract.
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. The Company
increased these reserves to reflect the risks inherent in the integration and
test phases of this program. Indostar represents the Company's first GEO
satellite effort and the integration and test phase are believed by management
to represent a critical element in the remaining portion of the program. In
establishing these additional reserves, the Company assessed identifiable
cost, schedule and technical risk elements. The Company believes its reserves
are adequate to cover potential risks that could arise prior to the expected
program completion in mid-1997. There can be no assurance, however, that
these reserves will be adequate to cover these risks.
The Mobile Information Communications Services business recorded no
revenues for the three months ended March 31, 1997 or 1996.
COST OF CONTRACT REVENUES. Cost of contract revenues decreased to $36.2
million, or 88.7% of contract revenues, in 1997 from $63.4 million, or 102.8%
of contract revenues, in 1996. This decrease in cost of contract revenues as a
percentage of contract revenues resulted primarily from the effect of reserves
added to estimates at completion on the Indostar program and changes in the
estimated contract value and profitability on the Eastern Zone contract in the
first quarter of 1996.
SG&A. Selling, general and administrative expenses ("SG&A") for 1997
decreased 2.7% to $3.1 million, or 7.5% of contract revenues, from $3.2
million, or 5.1% of contract revenues, in 1996. Improved cost control
accounted for the decrease 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 increased to $0.3 million in 1997 from
$0.2 million in 1996.
OPERATING PROFIT (LOSS). The Company had an operating profit of $1.3
million in 1997 compared to an operating loss of $(4.1) million in 1996.
INTEREST EXPENSE. Interest expense increased to $1.2 million in 1997
from $1.1 million in 1996 due to higher average balances on the Credit
Facility and higher effective interest rates on both the Credit Facility and
the subordinated debt.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company had a $23 thousand tax
provision for 1997 compared to a $2.2 million tax benefit for 1996.
NET INCOME (LOSS). The Company had net income of $38 thousand for the
three months ended March 31, 1997 compared to a net loss of $2.9 million for
the three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided $8.8 million of cash during the first quarter of
1997, primarily from net earnings and non-cash expenses of $1.2 million, the
decrease in accounts receivable of $4.2 million and the increase in operating
liabilities of $2.8 million. Cash used in investing activiies was $0.8 million
for purchases of furniture and equipment. Cash used in financing activities
was $6.3 million for net repayments under the bank line of credit agreement
and $0.1 million for purchases of treasury stock.
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 $30,000,000 which includes a facility for letters
of credit up to $10,000,000. The revolving line of credit expired on December
9, 1996 but has been extended until June 9, 1997. The current arrangement
provides an additional credit facility of $4,500,000 that is reduced or
eliminated upon collection of certain amounts on the Indostar contract,
completion of one or more private equity placements or at specified dates
through June 9, 1997.
The Company's cash flow during 1996 and the first quarter of 1997 has
been adversely impacted by a combination of a lack of significant operating
profits, required repayments under the bank line of credit agreement and
accounts receivable not billable until certain contract milestones are
reached. The Company expects its liquidity to improve substantially in the
second quarter of 1997 upon completion of testing and customer acceptance of
its Indostar-1 direct broadcast satellite for a commercial customer in
Indonesia. A delay in satisfaction of contract milestones or approval for
payment by the customer could have a material adverse effect on the Company's
liquidity.
The Company has been unable to comply with certain of the original
financial covenants of its bank credit facility and subordinated debt
agreements since March 31, 1996, due to operating losses incurred. The Company
and its bank have agreed to modifications of the covenants through the
original maturity of the credit facility on December 9, 1996 and have since
agreed to extensions of the credit facility through June 9, 1997 at negotiated
terms that include, among other things, a waiver of the financial covenants at
December 31, 1996, relaxed covenants for the quarter ended March 31, 1997
(which the Company has complied with) and a higher effective interest rate.
The Company and the holders of its subordinated debt have agreed to waivers of
the applicable financial covenants through December 31, 1997 in exchange for a
higher interest rate, the extent of which is based on whether the Company
raises new equity by June 30, 1997. The Company believes it has good
relationships with its lenders and that the lenders will continue to work with
the Company as it seeks to improve its financial condition. While the Company
anticipates that it will be able to enter into a new credit facility that
includes a long term revolving credit commitment, the inability of the Company
to renew its existing credit facility or to obtain a replacement credit
facility on the same or similar terms could have a material adverse effect on
the Company's liquidity, financial condition and results of operations.
The Company is pursuing various financing alternatives, including raising
additional equity capital, and, if necessary, would consider other
alternatives such as disposal of assets. The Company's future business
requirements and growth plans will require significant additional capital.
While the Company believes that working capital, cash flow from operations,
and available bank borrowings will provide adequate funds for continued
operations and any increased interest costs with respect to borrowings through
the end of 1997, additional sources of capital will be required to continue to
fund the Company's future business requirements and growth plans, including
its strategic initiatives of expanding its Space and Telecommunications
Systems and its Mobile Information and Communications Services businesses.
Accordingly, the Company expects that it will need to incur additional
indebtedness or raise additional equity capital to fund its anticipated
growth. There can be no assurance that the Company will be able to obtain such
financing on favorable terms or at all.
<PAGE>
PART II. -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material developments during the quarterly
period ended March 31, 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 March 31, 1997.
<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
APRIL 25, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1564
<SECURITIES> 0
<RECEIVABLES> 61273
<ALLOWANCES> 3202
<INVENTORY> 0
<CURRENT-ASSETS> 66709
<PP&E> 26757
<DEPRECIATION> 16800
<TOTAL-ASSETS> 89061
<CURRENT-LIABILITIES> 53368
<BONDS> 0
<COMMON> 50
0
0
<OTHER-SE> 17691
<TOTAL-LIABILITY-AND-EQUITY> 89061
<SALES> 40834
<TOTAL-REVENUES> 40834
<CGS> 36224
<TOTAL-COSTS> 36224
<OTHER-EXPENSES> 3337
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1212
<INCOME-PRETAX> 61
<INCOME-TAX> 23
<INCOME-CONTINUING> 38
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
