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, 1998
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, 1998.
COMMON STOCK, $.01 PAR VALUE 8,705,944
(Class) (Number of Shares)
<PAGE>
CTA INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
PART 1. -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
Consolidated Statements of Operations
Three months ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997
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>
<CAPTION>
CTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's except for share amounts)
DECEMBER 31, 1997 MARCH 31, 1998
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, net 33,300 34,884
Other current assets 1,222 963
Recoverable income taxes 3,576 3,770
------- -------
Total current assets 38,098 39,617
Furniture and equipment, net 3,044 3,334
Other assets, net 4,146 3,719
------- -------
$45,288 $46,670
======= =======
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CTA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
($000's except for share amounts)
DECEMBER 31, 1997 MARCH 31, 1998
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--line of credit $7,445 $10,267
Current portion of long-term debt 1,667 1,667
Accounts payable 5,788 4,400
Accrued expenses 3,156 3,732
Excess of billings over costs and
contract prepayments 2,738 2,922
Other current liabilities 270 2,520
Accrued tender offer 2,019 -
Deferred income taxes 2,427 2,427
------ ------
Total current liabilities 25,510 27,935
------ ------
Long-term debt,
less current portion 3,333 2,916
Other long-term liabilities 635 568
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 10,000,000 shares issued 100 100
Capital in excess of par value 7,869 7,872
Retained earnings 14,528 14,197
------ ------
22,497 22,169
Notes receivable from employees (698) (698)
Treasury stock, at cost (1,248,980
shares in 1997 and 1,294,036
shares in 1998) (5,989) (6,220)
------ ------
Total stockholders' equity 15,810 15,251
------ ------
$45,288 $46,670
======= =======
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CTA INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's Except for Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED
March 31
1997 1998
<S> <C> <C>
Contract revenues $20,416 $25,318
Cost of contract revenues 17,462 19,976
Selling, general and
administrative expenses 1,402 3,238
Other expenses 77 608
----- -----
Operating profit 1,475 1,496
Interest expense 278 271
----- -----
Income before income taxes 1,197 1,225
Income taxes 449 459
----- -----
Incomefrom continuing operations 748 766
Loss from discontinued operations (710) (1,094) --
------ ------
Net income (loss) $ 38 $ (328)
====== ======
Earnings (loss) per share:
Continuing operations $ 0.08 $ 0.09
Discontinued operations (0.08) (0.13)
------ ------
$ 0.00 $(0.04)
====== ======
Earnings (loss) per share -
assuming dilution:
Continuing operations $ 0.08 $ 0.08
Discontinued operations (0.08) (0.12)
------ ------
$ 0.00 $(0.04)
====== ======
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CTA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1997 1998
<S> <C> <C>
Operating activities:
Net income (loss) $ 38 $ (328)
Non-cash expenses, net 1,203 1,877
Changes in assets and liabilities, net 7,557 (1,448)
----- -----
Net cash provided by operating activities 8,798 101
----- -----
Investing activities:
Investments in furniture and equipment (821) (204)
----- -----
Financing activities:
Net borrowings (repayments) under bank
line of credit agreement (6,335) 2,822
Purchases of treasury stock - (2,302)
Repayment of long-term debt - (417)
Other financing activities, net (94) -
----- -----
Net cash provided by (used in)
financing activities (6,429) 103
------ ------
Net increase (decrease) in cash and cash
equivalents $1,548 $ -
====== ======
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE>
CTA INCORPORATED
NOTES 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, 1998 and the results of its operations and
its cash flows for the periods ended March 31, 1997 and 1998. The results of
operations presented are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
The accompanying financial statements should be read in conjunction with
the audited financial statements for the year ended December 31, 1997 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.
The loss from discontinued operations for 1998 reflects the effect of
additional reserves booked by the Company, net of income taxes, for the
anticipated binding arbitration award regarding a former employee of the
Company's Space and Telecommunications business, which was sold in the third
quarter of 1997. Net revenues of the Space and Telecommunications business for
the three months ended March 31, 1997 were $20.4 million.
NOTE 2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
(In thousands, except
for share data)
<S> <C> <C>
Numerator:
Income from continuing operations $ 748 $ 766
Loss from discontinued operations (710) (1,094)
----- -----
Net income (loss) for both basic and
diluted earnings per share $ 38 $(328)
===== =====
Denominator:
Denominator for basic earnings per share ---
Weighted average shares outstanding 9,234,410 8,728,482
Dilutive potential common shares:
Employee stock options 391,022 453,132
--------- ---------
Denominator for diluted earnings per share ---
Adjusted weighted average shares and assumed
conversions 9,625,432 9,181,614
========= =========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains forward-
looking statements relating to such matters as anticipated financial
performance, business prospects and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking ststements. The risks
and uncertainties that may affect the operation, performance, development and
results of the Company's business include, but are not limited to, those matters
discussed herein in the section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The words "believe,"
"expect," "anticipate," "project" and similar expressions identify forward-
looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof.
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,
1997 1998
<S> <C> <C>
Contract revenues 100.0% 100.0%
Cost of contract revenues 85.5 78.9
Selling, general and administrative expenses 6.9 12.8
Other expenses 0.4 2.4
Operating profit 7.2 5.9
Interest expense 1.3 1.1
Income before income taxes 5.9 4.8
Provision for income taxes 2.2 1.8
Income from continuing operations 3.7 3.0
Loss from discontinued operations (3.5) (4.3)
Net income (loss) 0.2 (1.3)
</TABLE>
The following tables set forth certain items in the Company's Statements of
Operations by operating segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
<In thousands of dollars>
<S> <C> <C>
Contract revenues:
Federal $17,510 $17,539
Commercial 2,906 7,779
------- -------
$20,416 $25,318
======= =======
Operating profit (loss):
Federal $1,106 $1,254
Commercial 446 850
------ ------
1,552 2,104
Other expenses (77) (608)
------ ------
$1,475 $1,496
====== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1997
CONTRACT REVENUES. Contract revenues increased 24% to $25.3 million for
the three months ended March 31, 1998 from $20.4 million for the three months
ended March 31, 1997, as a result of a 268% increase in commercial contract
revenues.
Federal contract revenues were $17.5 million in the first quarter of both
1998 and 1997. An increase in contract revenue of $3.6 million on a medical
information systems contract for the Department of Defense and $1.3 million on
the General Services Administration (GSA) Federal Supply Service contract was
offset by the decrease of $1.6 million on the Technical Engineering and
Management Support IV (TEMS IV) program at Hanscom Air Force Base and $1.6
million on the GSA Eastern Zone contract and smaller decreases in other
Federal programs.
Commercial contract revenues increased to $7.8 million for the three
months ended March 31, 1998 from $2.9 million for the three months ended March
31, 1997. The increase is primarily attributable to new Year 2000 conversion
contracts with the States of Iowa, Kansas, Texas and others and commercial
companies such as Cessna Aircraft.
COST OF CONTRACT REVENUES. Cost of contract revenues increased to $20.0
million, or 78.9% of contract revenues, in 1998 from $17.5 million, or 85.5%
of contract revenues, in 1997. This decrease in cost of contract revenues as a
percentage of contract revenues resulted primarily from the increase of higher
margin commercial contracts as a percentage of overall contract revenues.
SG&A. Selling, general and administrative expenses (SG&A) for 1998
increased 231% to $3.2 million, or 12.8% of contract revenues, from $1.4
million, or 6.9% of contract revenues, in 1997. The increase in SG&A reflects
the Company's continued investment in infrastructure and in the initiatives
required to implement the Company's marketing strategies and increased focus
on commercial markets.
OTHER EXPENSES. Other expenses increased to $0.6 million in 1998 from
$0.1 million in 1997 due to additional reserves and write-downs of certain
contract receivables.
OPERATING PROFIT (LOSS). As a result of the foregoing, the Company had
an operating profit of $1.5 million in both 1998 and 1997.
LOSS FROM DISCONTINUED OPERATIONS. The loss from discontinued operations
for 1998 reflects the effect of additional reserves booked by the Company, net
of income taxes, for the anticipated binding arbitration award regarding a
former employee of the Company's Space and Telecommunications business, which
was sold in the third quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided $0.1 million of cash during the first quarter of
1998, primarily from the net loss after adjustment for non-cash expenses of
$1.5 million offset by the increase in accounts receivable of $1.3 million.
Cash used in investing activities was $0.2 million for purchases of
furniture and equipment. Cash provided by financing activities was $0.1
million, primarily from net borrowings under the bank line of credit
agreement of $2.8 million offset by $2.3 million for purchases of treasury
stock and $0.4 million for repayments of long-term debt.
The Company has a credit facility with a bank providing the availability
to borrow up to $20 million, including a revolving facility of $15 million and
a $5 million term facility. At March 31, 1998, there was $10.3 million
outstanding on the revolving facility and $4.6 million outstanding on the term
facility.
The Company believes that cash flow from operations and available bank
borrowings will provide adequate funds for continued operations for the next
twelve months.
<PAGE>
PART II. -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material developments during the quarterly period ended
March 31, 1998. Subsequent to March 31, 1998, the Company has been
advised by legal counsel of an anticipated arbitration award of $2.0
million regarding a profit sharing agreement with a former employee.
The Company expects to be formally notified of the binding arbitration
award before the end of the quarterly period ending June 30, 1998.
See Item 3 of the registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 for further discussion oflegal
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) Exhibits
<TABLE>
<CAPTION>
Number Document Location
<C> <C> <C>
3.1 Certificate of Incorporated by reference from Exhibit
Incorporation 3.1 to Amendment No. 4 to Form S-1
filed on April 3, 1992
3.2 By-laws Incorporated by reference from Exhibit
3.2 to Amendment No. 4 to Form S-1
filed on April 3, 1992
27 Financial Data Electronic Filing Only
Schedule
(b) No reports on Form 8-K were filed during the quarter ended March
31, 1998.
<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
MAY 15, 1998 /S/ GREGORY H. WAGNER
Gregory H. Wagner
Executive Vice President,
Chief Financial Officer,
Principal Accounting Officer
and Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CAPTION> RESTATED
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 38095 61273
<ALLOWANCES> 3211 3202
<INVENTORY> 0 0
<CURRENT-ASSETS> 39617 66709
<PP&E> 11088 26757
<DEPRECIATION> 7754 16800
<TOTAL-ASSETS> 46670 89061
<CURRENT-LIABILITIES> 27935 53368
<BONDS> 0 0
<COMMON> 100 50
0 0
0 0
<OTHER-SE> 15151 17691
<TOTAL-LIABILITY-AND-EQUITY> 46670 89061
<SALES> 25318 20416
<TOTAL-REVENUES> 25318 20416
<CGS> 19976 17462
<TOTAL-COSTS> 19976 17462
<OTHER-EXPENSES> 3846 1479
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 271 276
<INCOME-PRETAX> 1225 1197
<INCOME-TAX> 459 449
<INCOME-CONTINUING> 766 748
<DISCONTINUED> (1094) (710)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (328) 38
<EPS-PRIMARY> (.04) .00
<EPS-DILUTED> (.04) .00
</TABLE>
