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, 1997
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 of (I.R.S. employer identification no.)
incorporation or organization)
975 Benecia Avenue, Sunnyvale, CA 94086-2805
(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 April 25, 1997
$.01 Par Value 7,264,090 shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
March 31, December 31,
1997 1996
------- -------
Assets
Cash $ 2,315 $ 1,870
Accounts receivable, net 17,044 18,383
Inventories 25,426 24,293
Deferred taxes 2,989 2,989
Other assets 421 508
------- -------
Total current assets 48,195 48,043
------- -------
Property, plant and equipment, net 14,767 14,310
Intangible assets, net 3,264 3,374
Other assets 862 864
------- -------
Total assets $67,088 $66,591
======= =======
Liabilities
Current maturities of long-term debt $ 1,321 $ 1,321
Accounts payable 6,751 5,289
Accrued expenses 8,568 8,512
Income taxes payable 178 295
Customer advances 677 1,048
------- -------
Total current liabilities 17,495 16,465
------- -------
Deferred income taxes 1,809 1,809
Long-term debt, net of current maturities 11,934 13,408
Stockholders' Equity
Common stock 73 72
Additional paid-in capital 12,290 12,095
Retained earnings 23,487 22,742
------- -------
Total stockholders' equity 35,850 34,909
------- -------
Total liabilities and stockholders' equity $67,088 $66,591
======= =======
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Page 2
<PAGE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(unaudited)
Three Months Ended
-------------------
March 31, March 31,
1997 1996
-------- --------
Net sales $ 27,082 $ 22,048
Cost of sales 20,941 17,573
-------- --------
Gross profit 6,141 4,475
Selling, general and administrative expense 4,465 4,148
Research and development expense 234 202
-------- --------
Operating income 1,442 125
Interest expense 234 341
-------- --------
Income (loss) before income taxes 1,208 (216)
Provision for (benefit from) income taxes 463 (61)
-------- --------
Net income (loss) $ 745 $ (155)
======== ========
Net income (loss) per share $ 0.10 $ (0.02)
======== ========
Shares used in calculating net income (loss) per share 7,714 6,977
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Page 3
<PAGE>
<TABLE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<CAPTION>
Three Months Ended
March 31, March 31,
1997 1996
------------------- --------------------
<S> <C> <C>
Net cash provided (used) by operating activities $3,032 $(346)
------------------- --------------------
Cash flows from investing activities:
Additions to property, plant and equipment (1,310) (487)
Proceeds from disposal of property, plant and equipment -- 2
Other assets 1 (8)
------------------- --------------------
Net cash used by investing activities (1,309) (493)
------------------- --------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 196 83
Borrowing under bank revolving credit facility 7,400 4,900
Repayments of borrowings under bank revolving credit
facility (8,800) (4,200)
Payments of long-term debt (74) (74)
------------------- --------------------
Net cash provided (used) by financing activities (1,278) 709
------------------- --------------------
Net increase (decrease) in cash 445 (130)
Cash, beginning of period 1,870 1,584
------------------- --------------------
Cash, end of period $2,315 $1,454
=================== ====================
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</FN>
</TABLE>
Page 4
<PAGE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
1. The condensed consolidated financial statements of the Company as of March
31, 1997, and for the three months ended March 31, 1997 and 1996 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, 1997, 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, 1996, 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 consists of a thirteen week period ending on
the Saturday closest to March 31. For ease of presentation, interim periods
are designated to have ended on March 31.
2. Income (Loss) Per Share
Income (loss) per share has been computed based on the weighted average
number of shares of common stock and common stock equivalents outstanding
during each period. Common stock equivalents are included in the per share
calculations where the effect of their inclusion would be dilutive.
Dilutive common stock equivalents consist of the incremental common shares
issuable upon conversion of the stock options and warrants using the
treasury stock method.
3. Details of certain balance sheet accounts are as follows:
(In thousands)
--------------------------
March 31, December 31,
1997 1996
------- -------
Inventories
Raw materials $ 7,967 $ 8,225
Work in progress 20,239 18,912
Finished goods 386 307
------- -------
28,592 27,444
Less: unliquidated progress payments 3,166 3,151
------- -------
$25,426 $24,293
======= =======
Property, Plant and Equipment
Land $ 592 $ 592
Building and improvements 7,468 7,285
Machinery and equipment 24,773 24,217
Furniture and fixtures 2,326 2,285
------- -------
35,159 34,379
Less accumulated depreciation 20,392 20,069
------- -------
Net property, plant and equipment $14,767 $14,310
======= =======
Page 5
<PAGE>
4. Contingencies
The Company is involved from time to time in litigation incidental to its
business.
In April 1996, the Company sold its facility in Weymouth, Massachusetts but
retained the environmental liability and responsibility associated with
groundwater contaminants present at the site. This facility has been
classified as a tier 1A disposal site by the Massachusetts Department of
Environmental Protection ("DEP"), as a result of past releases of petroleum
based solvents. Environmental assessment reports prepared by independent
consultants indicate that contaminants present in the Town of Weymouth well
field across the street from the 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.
The Company is continuing to conduct investigations of the facility for
soil and groundwater contamination and operates a pilot remediation system
in cooperation with the DEP. It is not possible at this stage of the
proceedings to predict what additional remediation, if any, will be
required.
Page 6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Results of Operations for the Three Months Ended March 31, 1997 and 1996
Net sales in the first quarter of 1997 increased $5,034 thousand, or 22.8%,
as compared to the first quarter of 1996. The increase was mainly
attributable to higher shipment levels at all operating units. Backlog
decreased to $86.4 million at March 31, 1997 on new orders of $25.6
million. Backlog at December 31, 1996 was $87.9 million.
Gross profit during the first quarter of 1997 increased $1,666 thousand or
37.2%, as compared to the first quarter of 1996 despite being adversely
affected by several development contracts at the Arizona and Keltec
operations.
Selling, general and administrative expenses increased $317 thousand in the
first quarter of 1997 as compared to the first quarter of 1996 but as a
percentage of net revenues decreased from 18.8% in 1996 to 16.5% in 1997.
Research and development activities increased in the first quarter of 1997
as compared to the same period last year. Research and development expense
for the quarter was $234 thousand in 1997 versus $202 thousand for the
quarter last year.
Interest expense decreased $107 thousand from $341 thousand in the first
quarter of 1996 to $234 thousand in the first quarter of 1997 primarily as
a result of lower levels of borrowings. Average borrowings outstanding
during the first quarter of 1997 were approximately $4.9 million lower than
in the comparable 1996 period.
Liquidity and Capital Resources
At March 31, 1997, the Company had working capital of $30.7 million as
compared to $31.6 million at December 31, 1996. Net debt (bank borrowings
less cash on hand) decreased from $12.9 million at December 31, 1996 to
$10.9 million at March 31, 1997. Net cash provided by operating activities
during the first quarter of 1997 totaled $3,032 thousand. Income for the
period and decreases in accounts receivable were the principal contributors
to the positive cash flow in the quarter.
In addition to the cash on hand of approximately $2.3 million at March 31,
1997, the Company had approximately $5.6 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, 1997.
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 incorporate 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 7
<PAGE>
Recent Pronouncements
During February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 128 "Earnings per share" (FAS 128) which
establishes standards for computing earnings per share ("EPS"). FAS 128
simplifies the standards for computing EPS and makes them comparable to
international standards. The Company has not yet determined the impact that
the adoption of FAS 128, which is effective for financial statements issued
for periods ending after December 15, 1997, will have on its EPS
calculation.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
11. Statement regarding computation of net income (loss) per share.
27. Financial Data Schedule.
(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
/s/ Russell D. Kinsch
-----------------------------------
Principal Financial and Accounting
Officer
DATE: April 25, 1997
Page 8
<TABLE>
EXHIBIT 11.
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
COMPUTATION OF
NET INCOME (LOSS) PER SHARE
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended
March 31,
1997 1996
-------------------- --------------------
<S> <C> <C>
Net income (loss) $745 $(155)
==================== ====================
Weighted average number of shares outstanding during the period
7,187 6,977
Add:
Assumed exercise of common share options 910 ---
Less:
Purchase of common stock under the treasury stock method
(383) ---
-------------------- --------------------
Common and common equivalent shares outstanding for purpose of
calculating primary income (loss) per share 7,714 6,977
Incremental shares to reflect full dilution --- ---
-------------------- --------------------
Total shares for purpose of calculating fully diluted income
(loss) per share 7,714 6,977
==================== ====================
Primary income (loss) per share $0.10 $(0.02)
==================== ====================
Fully diluted income (loss) per share $0.10 $(0.02)
==================== ====================
</TABLE>
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,315
<SECURITIES> 0
<RECEIVABLES> 17,044
<ALLOWANCES> 0
<INVENTORY> 25,426
<CURRENT-ASSETS> 48,195
<PP&E> 35,159
<DEPRECIATION> 20,392
<TOTAL-ASSETS> 67,088
<CURRENT-LIABILITIES> 17,495
<BONDS> 11,934
<COMMON> 73
0
0
<OTHER-SE> 35,777
<TOTAL-LIABILITY-AND-EQUITY> 67,088
<SALES> 27,082
<TOTAL-REVENUES> 27,082
<CGS> 20,941
<TOTAL-COSTS> 25,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234
<INCOME-PRETAX> 1,208
<INCOME-TAX> 463
<INCOME-CONTINUING> 745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 745
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
