FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(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, 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 September 30, 1996.
Common Stock $.01 par value 4,560,626
__________________________ _________
Class Number of Shares
<PAGE>
CTA INCORPORATED
FORM 10-Q/A
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements:
Consolidated Statements of Income
Three months ended September 30, 1996 and September 30, 1995
and Nine months ended September 30, 1996 and September 30, 1995
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and September 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 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
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 Nine Months Ended
September 30, September 30,
_________________ ___________________
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Contract revenues $38,102 $63,724 $138,793 $166,576
Costs and expenses:
Cost of contract revenues 32,899 56,597 132,079 150,803
Selling, general and admin
expenses 3,388 3,412 7,293 7,517
Other expenses, net 503 23 1,142 247
______ _______ _____ _____
Operating profit (loss) 1,312 3,692 (1,721) 8,009
Interest expense 1,094 1,404 3,398 3,096
______ _____ ______ _____
Income (loss) before income taxes 218 2,288 (5,119) 4,913
Provision (benefit) for income taxes
(Note 5) 71 842 (1,679) 1,965
______ ______ ______ _____
Income (loss) from continuing operations 147 1,446 (3,440) 2,948
Loss from discontinued operations
(net of income taxes) - (1,484) - (1,665)
______ _______ ______ _____
Net income/(loss) $147 ($38) ($3,440) $1,283
==== ===== ======== ======
Earnings/(loss) per share $0.03 ($0.01) ($0.78) $0.26
Weighted average shares
outstanding 4,608,553 4,866,360 4,397,973 4,868,057
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CTA INCORPORATED
CONSOLIDATED BALANCE SHEETS
($000)
<CAPTION>
ASSETS
- ------
September 30, 1996 December 31, 1995
__________________ ________________
(Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $1,071 $235
Accounts receivable (Note 2) 54,853 58,586
Other current assets 4,917 3,697
Recoverable income taxes 2,326 2,521
------ ------
Total current assets 63,167 65,039
Furniture and equipment, net 9,084 6,784
Costs in excess of net assets acquired 5,194 5,633
Other assets (Note 3) 8,218 6,812
GEMnet investment 7,262 7,262
------ -------
$92,925 $91,530
======= =======
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CTA INCORPORATED
CONSOLIDATED BALANCE SHEETS
($000)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<CAPTION>
September 30, 1996 December 31, 1995
__________________ _________________
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable - line of credit $22,037 $16,324
Accounts payable 12,814 13,910
Accrued expenses 6,132 4,804
Deferred lease incentives 272 293
Excess of billing over costs and
contract prepayments 5,328 4,603
Acquisition notes payable-current - 750
Deferred income taxes 2,929 4,642
------ ------
Total current liabilities 49,512 45,326
Subordinated notes payable 15,000 15,000
Other long-term liabilities 3,317 2,431
------ ------
Total liabilities 67,829 62,757
------ ------
Stockholders' equity (Note 4):
Common stock, $.01 par value,
5,000,000 shares issued 50 50
Capital in excess of par value 7,618 9,023
Retained earnings 22,149 25,587
------ ------
29,817 34,660
Notes receivable from employees (698) -
Treasury stock, at cost 439,374 shares
in 1996, 660,554 shares in 1995) (4,023) (5,887)
------ -------
Total stockholders' equity 25,096 28,773
------ -------
$92,925 $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>
Nine Months Ended
September 30,
1996 1995
________ ________
<S> <C> <C>
Cash provided by/(used in)
operating activities $320 ($1,270)
Investing Activities:
Purchase of furniture and equipment
and self-constructed assets (4,815) (1,505)
Financing Activities:
Net borrowings under bank
line of credit agreement 5,699 992
Repayment of acquisition notes (375) (375)
Proceeds from deferred lease incentives 315 150
Sale of treasury stock 37 -
Proceeds from exercise of stock options 10 12
Purchase of treasury stock (355) (1,365)
_____ _____
5,331 (586)
----- -------
Increase/(decrease) in cash $836 ($3,361)
==== ========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
CTA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 September 30, 1996 and the results of its operations and
its cash flows for the periods ended September 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 $3.1
million in 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 at 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 nine month period ended
September 30, 1996 consists of the issuance of 224,053 shares of treasury
stock pursuant to the Company's stock option plan, 39,515 shares in
settlement of acquisition debt, 3,313 shares in lieu of cash payment
for certain Director's fees, and the purchase of 49,614 shares and
issuance of 3,913 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. Had this rate been used in the prior quarters, results
reported would have been:
<TABLE>
<CAPTION>
Three months Three months Six months
ended ended ended
March 31, 1996 June 30, 1996 June 30, 1996
__________________ _________________ __________________
Reported Restated Reported Restated Reported Restated
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
taxes ($5,156) ($5,156) ($181) ($181) ($5,337) ($5,337)
Provision for income
taxes (2,217) (1,691) (78) (59) (2,295) (1,750)
Income (loss) from
continuing operations ($2,939) ($3,465) ($103) ($122) ($3,042) ($3,587)
======== ======== ====== ====== ======== ========
Loss per share ($0.64) ($0.80) ($0.02) ($0.03) ($0.66) ($0.83)
======= ======= ======= ======= ======= =======
Weighted average
shares outstanding 4,567,843 4,322,349 4,629,672 4,382,861 4,593,019 4,346,209
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
The following table (in thousands of dollars) provides certain financial
information for the Company's business segments:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
1996 1995 1996 1995
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Contract Revenues:
Information Technology $24,251 $27,791 $73,589 $82,163
Space & Telecommunications 13,851 19,886 46,139 50,744
Launch Support - 16,047 19,065 33,669
Communications Services - - - -
------- ------- ------- -------
$38,102 $63,724 $138,793 $166,576
======= ======= ======== ========
Operating Profit:
Information Technology $1,911 $2,041 $2,641 $5,298
Space & Telecommunications 174 1,040 (1,923) 1,588
Launch Support - 824 102 1,560
Communications Services (270) (190) (1,399) (190)
Other Expenses, net (503) (23) (1,142) (247)
------- ------- ------- -------
Operating profit (loss) $1,312 $3,692 ($1,721) $8,009
======= ======= ========= =======
Backlog:
Information Technology $376,816 $323,706
Space & Telecommunications 124,232 156,607
-------- --------
$501,048 $480,313
======== ========
</TABLE>
<PAGE>
Nine Months Ended September 30, 1996 compared with Nine Months Ended
September 30, 1995
The Company experienced a net loss of $3.4 million for the nine months ended
September 30, 1996. The loss resulted primarily from a first quarter
reduction in revenues and operating profit of $2.8 million ($1.7 million
after tax) due to additions to reserves from estimates of potential cost
increases at program completion on the Indostar contract and a $2.2
million ($1.3 million after tax) adjustment due to changes in the estimated
contract value on its Eastern Zone contract which was also recognized in
the first quarter of 1996.
The Company increased the reserves on the Indostar program to reflect the
risks inherent in the integration and test phases of this program.
Indostar represents the Company's first Geostationary Earth Orbit
(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 satellite launch in mid-1997.
The addition of these reserves in the first quarter effectively reversed
$2.8 million of previously recorded program profit, leaving $0.7 million
in program profit from inception to September 30, 1996.
Contract revenues declined 16.7% to $138.8 million for the nine months
ended September 30, 1996 from $166.6 million for the comparable period
in 1995 as a result of a $8.6 million net decrease in Information
Technology revenues and a decrease of $19.2 million in Space and
Telecommunications revenues.
In the first quarter 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 significant contracts awarded
during its period of eligibility for small business awards, which ended
in 1992. This contract represented $16.0 million in revenues for the
nine months ended September 30, 1995. 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 in April 1996, from which the
Company receives approximately 45% of the contract revenues. For the
nine months ended September 30, 1996, the Company received revenues
of $4.9 million from the original NAWC contract and $2.8 million in
revenues from the follow-on contract.
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 for the nine months
ended September 30, 1996 of $2.2 million, reflecting the Company's
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 unbilled costs of $3.3 million. However,
in the first quarter, the Company determined that future revenue would
not be sufficient to fully recover these costs. The Company has submitted
a claim against the US Government seeking recovery of $1.1 million of the
overrun. Also, the Company revised its profit estimate in the first
quarter of 1996 to record a contract loss of $2.2 million. Additionally,
the Company has implemented significant program controls to reduce future
costs which it believes will serve to minimize any potential cost overruns
during the remainder of the contract. The Company has recorded this claim
as an unbilled receivable against which it has certain general reserves.
Information Technology (IT) contract revenues for the nine months ended
September 30, 1996 decreased 10.4% to $73.6 million from $82.2 million
for the comparable period in 1995. This decline was primarily due to
a reduction of $8.3 million in revenue on the NAWC contract as outlined
above and a $5.3 million reduction in revenue on its Eastern Zone
contract, partially offset by increased revenues on new and existing
contracts. Revenues from contracts awarded in full and open competition
increased to $67.7 million or 92.0% of IT revenues for the nine months
ended September 30, 1996 from 63.1 million or 76.8% for the comparable
period in 1995.
The operating profit for IT for the nine months ended September 30, 1996
decreased 50.2% to $2.6 million from $5.3 million for the comparable
period in 1995. This decline resulted from the first quarter write
down of the Eastern Zone contract of $2.2 million and the loss of profit
caused by the reduced activity for the NAWC follow-on contract in which
the Company is now performing as a subcontractor.
Space and Telecommunications contract revenues for the nine months ended
September 30, 1996 decreased 22.8% to $65.2 million from $84.4 million
for the comparable period in 1995. Space and Telecommunications contract
revenues exclusive of Launch Support for the nine months ended September 30,
1996 decreased 9.1% to $46.1 million from $50.7 million for the comparable
period in 1995. A revenue increase on the Code 740 contract of $6.1
million and of $3.0 million on the Indostar contract was more than offset
by the $12.9 million decline in revenue on the SSTI contract. Launch
Support contract revenues for the nine months ended September 30, 1996
decreased 43.4% to $19.1 million from $33.7 million for the comparable
period in 1995. An increase of $0.7 million in Launch Support revenues for
the SSTI contract was more than offset by a $15.3 million decrease in the
launch related activities of the Indostar program.
Operating profit for Space and Telecommunications for the nine months
ended September 30, 1996 decreased to a loss of $1.8 million from a
profit of $3.1 million for the comparable period in 1995. Launch
Support activity accounted for $1.5 million of the decline. The other
principal reason was the write down of $2.8 million of profit on the
Indostar contract in the first quarter which resulted in a decline in
profit of $3.6 million from the comparable period in 1995.
The Company continued expenditures in its Communications Services segment
for the development of GEMtrak, an automated tracking and cargo status
data system and charged $1.1 million against operations during the nine
months ended September 30, 1996 on the development of this new business.
No resultant revenue is anticipated from these expenditures during the
remainder of 1996. Roll out of GEMtrak, this segment's first commercial
product, is currently scheduled for mid-1997. The GEMtrak product will
initially employ terrestrial-based communications systems but may be
expanded to include a future LEO satellite constellation, for which it
has applied for an FCC license.
Despite the loss of the Company's GEMstar staellite due to a launch
failute in 1995, the Company still retains related residual assets currently
valued at $7.3 million. The Company intends to utilize these assets in the
future development of a LEO satellite constellation. The Company's ability
to proceed is contingent upon receipt of the FCC license, additional
financing, and the success and viability of the GEMtrak business. The Company
is currently in discussions with certain international companies regarding
strategic alliances that would allow the Company to expand its coverage
internationally and to provide for all or a portion of the additional
financing needed to continue development of the constellation. Abesnt a
strategic partnership, the Company would be required to seek other capitali-
zation to allow it to continue development and future programs that employ
similar technology and components. The Company intends to utilize these
assets in either the development of GEMnet or in other satellite programs.
The cost of contract revenues for the nine months ended September 30, 1996
decreased to $132.1 million or 95.2% of contract revenues from $150.8
million or 90.5% for the comparable period in 1995. This increase in cost
of contract revenues as a percentage of contract revenues was driven
primarily by reduction in revenues related to reserves added to estimates
at completion on the Indostar program and reduction in revenues related
to changes in the estimated contract value on the Eastern Zone contract,
as well as from the replacement of expiring high-margin contracts
with new contracts bid at lower margins. New contracts awarded to
the Company reflect lower margins consistent with the more highly competitive
environment in which the Company now competes. As the Company has replaced
its older backlog of higher margin contracts previously awarded under
various small business programs with federal contracts awarded in full
and open competition, the cost of contract revenues as a percentage of
contract revenues has increased. Without giving effect to the reduction
in revenues due to the Indostar contract and the Eastern Zone contract,
the cost of contract revenues as a percentage of contract revenues for the
nine months ended September 30, 1996 was 92.3%.
Selling, general and administrative expenses ("SG&A") for the nine months
ended September 30, 1996 declined 3.0% to $7.3 million from $7.5 million
for the comparable period in 1995. Slightly higher than anticipated costs
in preparing and submitting bids in the 1995 period and improved indirect
cost control in 1996 accounted for the change.
Other expenses for the nine months ended September 30, 1996 increased
to $1.1 million from $0.2 million for the comparable period in 1995.
Lower expenses in 1995 resulted from the reversal of certain amounts of
reserves in 1995 set aside in 1994 and from the allocation of the receipt
of insurance proceeds received related to the loss of the Company's
GEMstar satellite due to a launch failure in August 1995.
The Company had an operating loss of $1.7 million for the nine months
ended September 30, 1996 compared to an operating profit of $8.0 million
for the comparable period in 1995.
Interest expense increased to $3.4 million for the nine months ended
September 30, 1996 from $3.1 million for the comparable period in 1995
due to higher average balances on the Company's Credit Facility due to
increased capital expenditures and the development of GEMtrak.
The Company had a $1.7 million tax benefit for the nine months ended
September 30, 1996 as compared to a $2.0 million tax provision for the
comparable period in 1995.
During the third quarter of 1995, the Company discontinued the operations
of its Simulation Division in Colorado. This division manufactured air
flight simulators for sale or lease. The $1.7 million loss represents a
loss of $2.8 million less applicable tax benefit of $1.1 million.
The Company had a net loss of $3.4 million for the nine months ended
September 30, 1996 compared to net income of $1.3 million for the
comparable period in 1995.
During the first nine months of 1996, the Company recorded new orders of
$181.0 million. Major awards in the Information Technology Segment
include awards of the following contracts: $30.8 million order for
health affairs policy matters for 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
Naval Air Weapons Center 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 continuation of the US Air Force experimental
space satellites program and had orders under the Indostar contract of
$20.7 million. The Company's backlog net of decreases and adjustments
increased from $480.3 million at September 30, 1995 to $501.0 million
at September 30, 1996. Approximately $115.9 million of the September 30,
1996 backlog is funded.
Three Months Ended September 30, 1996 Compared with Three Months ended
September 30, 1995
Contract revenues declined 40.2% to $38.1 million for the three months
ended September 30, 1996 from $63.7 million for the comparable period
in 1995, as a result of a $3.5 million net decrease in Information
Technology revenues and a decrease of $22.1 million in Space and
Telecommunications revenues.
IT contract revenues for the three months ended September 30, 1996
decreased 12.7% to $24.3 million from $27.8 million for the comparable
period in 1996. This decline was primarily due to the decline in
revenues on the NAWC contract discussed in the nine month period above.
The operating profit for IT for the three months ended September 30, 1996
decreased 6.4% to $1.9 million from $2.0 million for the comparable
period in 1995. This decline also resulted primarily from the decline in
the NAWC contract.
Space and Telecommunications contract revenues for the three months ended
September 30, 1996 decreased 61.5% to $13.9 million from $35.9 million for
the comparable period in 1995. Space and Telecommunications contract
revenues exclusive of Launch Support for the three months ended
September 30, 1996 decreased 30.3% to $13.9 million from $19.9 million
for the comparable period in 1995. This decrease resulted primarily
from a $1.6 million decline in the Indostar program and a $4.2 million
decrease on the SSTI program. There were no Launch Support contract revenues
for the three months ended September 30, 1996 compared to $16.0 million for
the comparable period in 1995.
Operating profit for Space and Telecommunications for the three months
ended September 30, 1996 decreased 90.7% to $0.2 million from $1.9
million for the comparable period in 1995. The lack of any Launch
Support revenues for the quarter accounted for $0.8 million of the
decline. Other factors were a $0.2 million reduction in profit from
a decline in activity approaching the end of the STEP contract and a
$0.7 million lower profitability on the Indostar program.
The Communications Services segment charged $0.3 million against
operations during the three months ended September 30, 1996 on the
development of this new business compared to $0.2 million for the
comparable period in 1995.
The cost of contract revenues for the three months ended September 30, 1996
decreased to $32.9 million or 86.3% of contract revenues from $56.6 million
or 88.8% for the comparable period in 1995. This decrease in cost
of contract revenues as a percentage of contract revenues is due
primarily to decreased activity on certain lower margin contracts in
1996 compared to 1995.
SG&A for the three months ended September 30, 1996 declined 0.7% to
$3.39 million from $3.41 million for the comparable period in 1995.
Other expenses for the three months ended September 30, 1996 increased
to $0.5 million from $23 thousand for the comparable period in 1995.
Lower expenses in 1995 resulted from classification as other income of
$477 thousand of the insurance proceeds received related to the loss of
the Company's GEMstar satellite due to a launch failure in August 1995.
The Company had an operating profit of $1.3 million for the three months
ended September 30, 1996 compared to an operating profit of $3.7 million
for the comparable period in 1995.
Interest expense decreased to $1.1 million for the three months ended
September 30, 1996 from $1.4 million for the comparable period in 1995.
Although interest expense from operations was actually $0.2 million
lower in 1995, $0.5 million of interest previously capitalized as part
of construction in process for its GEMnet program was charged to expense
in September 1995.
The Company had a $0.1 million tax provision for the three months ended
September 30, 1996 as compared to a $0.8 million tax provision for the
comparable period in 1995.
The loss from discontinued operations of $1.5 million in 1995 was related
to the disposal of the Simulation Division discussed above.
The Company had a net profit of $0.1 million for the three months ended
September 30, 1996 compared to a net loss of $38 thousand for the
comparable period in 1995.
Liquidity and Capital Resources
The Company's cash flow provided by (used in) operating activities was
$0.3 million for the nine months ended September 30, 1996 and ($1.3)
million for the comparable period in 1995. The principal factors
accounting for the provision of cash from operating activities for the
nine months ended September 30, 1996 was the net loss of $3.4 million
offset by $3.4 million of depreciation and amortization expense and a
net collection of accounts receivable of $1.4 million offset by other net
changes in working capital of $1.1 million.
Cash used for investing activities totaled $4.8 million for the nine months
ended September 30, 1996 compared to $1.5 million for the same period in
1995. Approximately $3.1 million of this related to purchases made on
behalf of the Indostar program, $1.6 million for laboratory equipment,
computer systems, software and furniture and leasehold improvements to
maintain and improve the Company's facilities and technological base,
and $0.1 million for software development.
Cash from financing activities of $5.3 million for the nine months ended
September 30, 1996 was primarily provided by borrowings under the Credit
Facility of $5.7 million and proceeds from certain lease incentives from
one of its facilities of $0.3 million. This was offset by the repayment
of acquisition notes for the remaining minority interest in its Space
Systems segment of $0.4 million and $0.3 million for the purchase of
treasury stock for the employee stock purchase plan.
Due to the adjustments to profit recorded in the first quarter of 1996,
the Company sought and obtained 90-day waivers to the applicable
restrictive debt covenants from its debt holders effective through
September 30, 1996. Since that time, the Company has concluded amendments
to the covenant provisions of its lending agreement under its line of
credit, and has received additional ninety day waivers to the applicable
restrictive debt covenants of its subordinated debt. The Company's
performance through September 30, 1996 is in full compliance with the
new terms of its line of credit agreement. The Credit Facility expires
on December 9, 1996, and the Company is renegotiating with lenders to
replace the existing Credit Facility. At September 30, 1996, $22.1 million
was outstanding under the Credit Facility and there were two letters of
credit outstanding totaling $0.2 million.
The Company considers that its cash flows from operations and borrowing
capacity will be sufficient to provide adequate funds for continued
operations. However, 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 & Telecommunications and its Mobile Information and Communications
Services businesses. Accordingly, the Company expects that it will need
to incur indebtedness or raise additional equity capital to fund its
anticipated growth. In September 1996, the Company filed a Registration
Statement on Form S-1 to sell three million shares of common stock in an
Initial Public Offering. The Company, together with its advisors, has
decided to defer the offering until some time in 1997 and has continued
discussions with its advisors regarding the identification of additional
financing sources and potential capital markets.
<PAGE>
PART II. OTHER INFORMATION
CTA INCORPORATED
Item 1. Legal Proceedings
On October 10, 1996, Plaintiff, an employee of the Company, filed suit
against the Company in the Circuit Court of Maryland for Montgomery County.
In his complaint, Plaintiff alleges breach of contract, breach of fiduciary
duty, tortious interference with contractual and business relationships,
fraud, and breach of duty of good faith and fair dealing, all in connection
with the Profit Sharing Agreement between Plaintiff and the Company.
Subsequently the litigation was stayed by agreement of the parties
because the Profit Sharing Agreement called for mandatory and binding
arbitration in the State of Virginia. Arbitrators have not yet been
selected by the parties.
The Company intends to vigorously defend itself against Plaintiff's claims.
However, as the arbitration is in its earliest stages, the Company is
unable to predict the outcome or its potential effect on the Company's
financial condition or results of operations. There can be no assurance,
that such arbitration, if adversely determined, would not have a material
adverse effect on the Company's financial condition or results of operations.
The Company is currently involved in certain other legal proceedings
incidental to the ordinary course of its business. The Company does not
believe that any liabilities relating to the legal proceedings to which
it is a party are likely to be, individually or in the aggregate, material
to its consolidated financial position or results of operations.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On Thursday, August 15, 1996, the Shareholders of CTA INCORPORATED met at
the Company's headquarters office located at 6116 Executive Boulevard,
Suite 800, Rockville, MD 20852, to vote on four matters as follows:
1. To elect certain individuals to CTA's Board of Directors, each for a
term of one year;
2. To ratify the selection of the Company's independent accountants; and
3. To ratify the selection of the Company's independent appraiser for the
valuation of CTA stock.
Notice of this Annual Meeting had been mailed on July 15, 1996 to all
shareholders of record as of May 31, 1996.
The Chairman called for a motion to elect the following, amended slate of
individuals to CTA's Board of Directors, each for a one-year term:
C.E. Velez Arturo Silvestrini
Ricardo de Bastos John Slack
Raymond V. McMillan George Morgenthaler
Harvey D. Kushner Emanuel Fthenakis
John Townsend, Jr. James M. Papada, III
Such a motion was made and seconded. After discussion, it was adopted,
by voice vote, by shareholders voting more than 50% of the Company's
outstanding shares.
The Chairman called for a motion to ratify the selection of Ernst & Young
as the Company's independent accountants. Such a motion was made and
seconded. After discussion, it was adopted, by voice vote, by
shareholders voting more than 50% of the Company's outstanding shares.
The Chairman then called for a motion to ratify the selection of Legg
Mason Wood Walker, Inc. as the Company's independent appraisers for the
valuation of CTA stock. Such a motion was made and seconded. After
discussion it was adopted, by voice vote, by shareholders voting more
than 50% of the Company's outstanding shares.
On Wednesday, September 18, 1996, the Shareholders of CTA INCORPORATED
met at the Company's headquarters office located at 6116 Executive
Boulevard, Suite 800, Rockville, MD 20852, to vote on the following issues:
1. To authorize 21,000,000 shares, which will consist of (i) 20,000,000
shares of Common Stock, par value $.01 per share, and (ii) 1,000,000
shares of undesignated preferred Stock, par value $.01 per share
(the "Preferred Stock"), with the Board of Directors having the right
to authorize the issuance of Preferred Stock without stockholder
approval and to determine the rights and preferences of each series
of such class of undesignated Preferred Stock;
2. To create a classified Board of Directors, whereby the directors
shall be divided into three classes, each to consist of one-third of
the total number of directors constituting the entire Board of Directors;
3. To remove provisions relating to the control and ownership of the
Company by Dr. Velez;
4. To authorize any anti-takeover provision to prohibit "business
combinations" involving the Company unless certain conditions are
met; and
5. To increase by 500,000 the number of shares of Common Stock eligible
for issuance to Company employees under the 1991 Stock Option Plan.
Notice of this Special Meeting had been mailed on August 19, 1996 to
all shareholders of record as of May 31, 1996.
The Chairman called for a motion to authorize 20,000,000 shares of
Common Stock and 1,000,000 shares of undesignated Preferred Stock.
Such a motion was made and seconded. After discussion, it was adopted,
by voice vote, by shareholders voting more than 66 2/3% of the
Company's outstanding shares. Two shareholders voted "no".
The Chairman called for a motion to create a classified Board of
Directors as follows:
The following Directors will be appointed to serve a one-year term:
C.E. Velez
John Townsend, Jr.
John Slack
James Papada, III
The following Directors will be appointed to serve a two-year term:
Raymond V. McMillan
Harvey Kushner
George Morgenthaler
The following Directors will be appointed to serve a three-year term:
Ricardo de Bastos
Arturo Silvestrini
Emanuel Fthenakis
Thereafter, all Directors will serve three-year terms.
Such a motion was made and seconded. After discussion, it was adopted,
by voice vote, by shareholders voting more than 66 2/3% of the Company's
outstanding shares.
The Chairman then called for a motion to remove provisions relating to
the control and ownership of the Company by Dr. Velez contained in the
Company's Articles of Incorporation. Such a motion was made and seconded.
After discussion it was adopted, by voice vote, by shareholders voting more
than 66 2/3% of the Company's outstanding shares.
The Chairman called for a motion to authorize an anti-takeover provision
to prohibit "business combinations" involving the Company unless certain
conditions are met. Such a motion was made and seconded. After discussion
it was adopted, by voice vote, by shareholders voting more than 66 2/3%
of the Company's outstanding shares. Three shareholders voted "no".
The Chairman then called for a motion to increase by 300,000 the number
of shares of Common Stock eligible for issuance to Company employees
under the 1991 Stock Option Plan. Such a motion to authorize 300,000
shares was made and seconded. After discussion it was adopted, by voice
vote, by shareholders voting more than 66 2/3% of the Company's outstanding
shares.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 1996.
<PAGE>
SIGNATURE
January 2, 1997 /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
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