FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 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 000-21770
SIGNAL TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2758268
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
955 Benecia Avenue, Sunnyvale, CA 94086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 730-6318
----------------------------
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 Registrant's classes of
Common Stock as of the latest practicable date.
Class of Common Stock Outstanding at May 2, 1996
$.01 Par Value 6,985,163 shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
1996 1995
---- ----
Assets
Cash $ 1,454 $ 1,584
Accounts receivable, net 15,544 15,983
Inventory 27,960 25,598
Deferred taxes 2,403 2,202
Other assets 802 1,054
--------- ---------
Total current assets 48,163 46,421
--------- ---------
Property, plant and equipment 34,568 34,088
Less: accumulated depreciation (18,585) (17,647)
--------- ---------
Net property, plant and equipment 15,983 16,441
Other assets 3,153 3,255
--------- ---------
Total assets $ 67,299 $ 66,117
========= =========
Liabilities
Current maturities of long-term debt $ 375 $ 375
Accounts payable 7,127 6,159
Accrued expenses 6,110 5,292
Customer advances 2,727 3,856
--------- ---------
Total current liabilities 16,339 15,682
--------- ---------
Deferred income taxes 1,166 1,208
Long-term debt 17,909 17,283
Stockholder's Equity
Preferred stock --- ---
Common stock 70 69
Additional paid-in capital 11,514 11,432
Unearned compensation (41) (54)
Retained earnings 20,342 20,497
---------- ---------
Total stockholders' equity 31,885 31,944
---------- ---------
Total liabilities and stockholders' equity $67,299 $66,117
========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
Page 2
<PAGE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands except per share amounts)
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
Net Sales $ 22,048 $ 21,525
Cost of sales 17,573 17,249
--------- ---------
Gross profit 4,475 4,276
Selling, general and administrative expenses 4,148 4,308
Research and development expenses 202 476
--------- ---------
Operating income (loss) 125 (508)
Interest expense 341 242
--------- ---------
Loss before income taxes (216) (750)
Benefit from income taxes (61) (292)
--------- ---------
Net loss $ (155) $ (458)
========= =========
Net loss per share $ (0.02) $ (0.07)
========= =========
Shares used in calculating net loss per share 6,977 6,845
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3
<PAGE>
<TABLE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (155) $ (458)
Adjustments to reconcile net loss to net cash
provided by operations:
Depreciation and amortization 1,053 890
Loss on disposal of property, plant and equipment -- 4
Unearned compensation 13 13
Deferred taxes (243) (190)
Changes in operating assets and liabilities
Accounts receivable 439 765
Inventory (2,362) (2,240)
Other current assets 252 164
Accounts payable 968 1,495
Accrued expenses 818 593
Income taxes payable -- (40)
Customer advances (1,129) (630)
------- --------
Net cash provided (used) by operating activities (346) 366
------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (487) (211)
Proceeds from disposal of property, plant and equipment 2 --
Other assets (8) --
------- --------
Net cash used by investing activities (493) (211)
------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options 83 23
Borrowings under bank revolving credit facility 4,900 5,600
Repayments of borrowings under bank revolving
credit facility (4,200) (5,045)
Payments of long-term debt (74) (74)
------- -------
Net cash provided by financing activities 709 504
------- -------
Net increase (decrease) in cash (130) 659
Cash, beginning of period 1,584 1,669
------- -------
Cash, end of period $ 1,454 $ 2,328
======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
Page 4
<PAGE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
1. The consolidated financial statements of the Company as of March 31, 1996,
and for the three months ended March 31, 1996 and 1995 are unaudited. All
adjustments (consisting only of normal recurring adjustments) have been
made, which in the opinion of management are necessary for a fair
presentation. Results of operations for the three months ended March 31,
1996, are not necessarily indicative of the results that may be achieved for
the full fiscal year or for any future period. These financial statements
should be read in conjunction with the audited financial statements for the
fiscal year ended December 31, 1995, included in the Company's annual report
on Form 10-K. The year end condensed balance sheet data was derived from the
audited financial statements and does not include all the disclosures
required by generally accepted accounting principles.
The Company's fiscal quarters consist of a thirteen week period ending on
the Saturday closest to March 31. For ease of presentation, interim period
are designated to have ended on March 31.
2. Loss per share:
Loss per share has been computed based on the weighted average number of
shares of common stock outstanding during each period. Common stock
equivalent are not included in the per share calculation because of their
dilutive effect.
3. Details of certain balance sheet accounts are as follows:
March 31, 1996 December 31, 1995
-------------- -----------------
Inventory-
Raw materials $ 11,084 $ 11,135
Work in progress 22,340 18,030
Finished goods 272 341
--------- ---------
33,696 29,506
Less: unliquidated progress payments 5,736 3,908
--------- ---------
$ 27,960 $ 25,598
========= =========
Property, plant and equipment-
Land $ 722 $ 722
Building and improvements 8,354 8,340
Machinery and equipment 22,940 22,534
Furniture and fixtures 2,552 2,492
--------- ---------
$ 34,568 $ 34,088
========= =========
4. Supplemental cash flow information is as follows:
Three months ended
------------------
March 31, 1996 March 31, 1995
-------------- --------------
Interest paid $ 229 $ 156
Taxes paid $ 4 $ 190
Page 5
<PAGE>
5. Contingencies
The Company is involved from time to time in litigation incidental to its
business.
The Company has been notified that its facility in the Town of Weymouth,
Massachusetts (the "Town") has been classified as a tier 1A disposal site by
the Massachusetts Department of Environmental Protection ("DE"), as a result
of past releases of petroleum-based solvents. Environmental assessment
reports prepared by independent consultants indicate that contaminants
present in the Town well field across the street from the Weymouth facility
are similar to those reportedly released at the facility and still present
in the groundwater at the facility; however, these reports also indicate
that the contaminants do not exceed safe drinking water levels in the
finished water after normal treatment. Other contaminants which did not
originate at the facility have also been detected in the well field.
Although the Company believes that the majority of the releases occurred at
the facility prior to its acquisition of the facility in 1980, as the
present owner, the DEP has notified the Company of its potential
responsibility for past releases at the facility. The Company is continuing
to conduct investigations of the facility for soil and groundwater
contamination and operate a pilot remediation system in cooperation with the
DEP. It is not possible at this stage of the proceedings to predict what
additional remediations, if any, will be required.
Management believes that the outcome of current litigation and the matter
discussed above will not have a material adverse effect on the cash flow,
results of operations or financial condition of the Company
Page 6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 1996 and 1995
Net sales in the first quarter of 1996 increased $523 thousand, or 2%, as
compared to the first quarter of 1995. The increase was mainly attributable to
shipments from the record backlog posted at the end of l995 in both the
California facility and ST Olektron. Backlog increased to $102.8 million at
March 31, 1996, on new orders of $32 million. Backlog at December 31, 1995 was
$92.8 million. Significant new awards, predominately in the defense segment,
drove the increase in backlog from year end 1995.
Gross profits during the first quarter of 1996 increased $199 thousand, or 5%,
as compared to the first quarter of 1995. While gross profits were up from 1995,
the Company experienced cost growths on development contracts at the Arizona
facility and ST Keltec operations that adversely affected profitability.
Selling, general and administrative expenses decreased $160 thousand in the
first quarter of 1996 as compared to the first quarter of 1995 and as a
percentage of net revenues, decreased from 20% in 1995 to 19% in 1996. The
decrease is due principally to an overall decrease in spending as well as
slightly lower sales commissions.
Research and development activities declined in the first quarter of 1996 as
compared to the same period last year. Research and development expense for the
quarter was $202 thousand in 1996 versus $476 thousand for the quarter last
year. Research and development expenses for the remainder of 1996 are likely to
be less than in 1995 as the Company completed in 1995 development efforts on two
products designed for the commercial satellite communication market and plans no
new product developments for 1996.
Interest expense increased $99 thousand from $242 thousand in the first quarter
of 1995 to $341 thousand in the first quarter of 1996 primarily as a result of
higher levels of borrowings. Average borrowings outstanding during the first
quarter of 1996 were approximately $4.5 million higher than in the comparable
1995 period. Acquisitions in the last half of 1995 accounted for approximately
$4.1 million of additional debt. Higher levels of working capital also
contributed to the increase in outstanding debt.
Liquidity and Capital Resources
At March 31, 1996, the Company had working capital of $31.8 million as compared
to $30.7 million at December 31, 1995. Net debt (bank borrowings less cash on
hand) increased from $16.1 million at December 31, 1995 to $16.8 million at
March 31, 1996. Net cash used by operating activities during the first quarter
of 1996 totaled $346 thousand. Increases in inventory of approximately $2.4
million and reductions in customer advances of $1.1 million were the principal
contributors to the use of cash in the quarter and were funded primarily with
cash from accounts receivable, increases in accounts payable and accrued
expenses and $700 thousand in additional bank borrowings.
Page 7
<PAGE>
In addition to the cash on hand of approximately $1.5 million at March 31, 1996,
the Company had approximately $1 million available for borrowing under its bank
revolving credit facility. The Company has no material commitments for any
acquisitions, product requirements or for capital expenditures at March 31,
1996.
The Company believes it has adequate cash, working capital and available
financing facilities to meet its operating and capital requirements for the
foreseeable future and to continue its acquisition program.
Safe Harbor for forward-looking statements: forward-looking statements in
this document involve known and unknown factors and risks that may cause
future period results to be materially different from future performance
suggested in this document.
Factors that could cause actual results to differ materially from those
projected in this statement include but are not limited to government
spending on programs that incorporates our products and delays in
government funding. In addition, the ability to complete new product
development programs on-time and within budget can significantly effect
financial results.
Page 8
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
11. Statement regarding computation of net loss per share.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirement 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.
SIGNAL TECHNOLOGY CORPORATION
BY: /s/ Russ D. Kinsch
-------------------------------------------
DATE: May 2, 1996 Principal Financial and Accounting Officer
Page 9
EXHIBIT 1
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
COMPUTATION OF
NET LOSS PER SHARE
(In thousands, except per share amounts)
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
Net loss.......................................... $ (155) $ (458)
====== ======
Weighted average number of shares outstanding
during the period................................. 6,977 6,845
Net loss per share................................ $(0.02) $(0.07)
====== ======
Page 10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,454
<SECURITIES> 0
<RECEIVABLES> 15,710
<ALLOWANCES> 166
<INVENTORY> 27,960
<CURRENT-ASSETS> 48,163
<PP&E> 34,568
<DEPRECIATION> 18,585
<TOTAL-ASSETS> 67,299
<CURRENT-LIABILITIES> 16,339
<BONDS> 0
<COMMON> 70
0
0
<OTHER-SE> 31,815
<TOTAL-LIABILITY-AND-EQUITY> 67,299
<SALES> 22,048
<TOTAL-REVENUES> 22,048
<CGS> 17,573
<TOTAL-COSTS> 21,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 341
<INCOME-PRETAX> (216)
<INCOME-TAX> (61)
<INCOME-CONTINUING> (155)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
