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 June 30, 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
incorporation or organization) identification no.)
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 July 25, 1997
$.01 Par Value 7,273,424 shares
<PAGE>
Page 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
June 30, December 31,
1997 1996
------- -------
Assets
Cash $ 904 $ 1,870
Accounts receivable, net 16,220 18,383
Inventories 27,195 24,293
Deferred taxes 2,989 2,989
Other assets 1,633 508
------- -------
Total current assets 48,941 48,043
------- -------
Property, plant and equipment, net 14,787 14,310
Intangible assets, net 3,131 3,374
Other assets 860 864
======= =======
Total assets $67,719 $66,591
======= =======
Liabilities
Current maturities of long-term debt $ 790 $ 1,321
Accounts payable 5,163 5,289
Accrued expenses 8,049 8,512
Income taxes payable -- 295
Customer advances 1,367 1,048
------- -------
Total current liabilities 15,369 16,465
------- -------
Deferred income taxes 1,809 1,809
Long-term debt, net of current maturities 14,760 13,408
Stockholders' Equity
Common stock 73 72
Additional paid-in capital 12,328 12,095
Retained earnings 23,380 22,742
------- -------
Total stockholders' equity 35,781 34,909
------- -------
Total liabilities and stockholders' equity $67,719 $66,591
======= =======
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Page 2
<PAGE>
<TABLE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(unaudited)
<CAPTION>
Quarter ended Six months ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 25,474 $ 27,371 $ 52,556 $ 49,419
Cost of sales 20,740 22,220 41,681 39,793
-------- -------- -------- --------
Gross profit 4,734 5,151 10,875 9,626
Selling, general and administrative expense 4,475 4,404 8,940 8,552
Research and development expense 157 99 391 301
-------- -------- -------- --------
Operating income 102 648 1,544 773
Interest expense 266 353 500 694
-------- -------- -------- --------
Income (loss) before income taxes (164) 295 1,044 79
Provision for (benefit from) income taxes (57) 125 406 64
-------- -------- -------- --------
Net income (loss) ($ 107) $ 170 $ 638 $ 15
======== ======== ======== ========
Net income (loss) per share ($ 0.01) $ 0.02 $ 0.08 $ 0.00
======== ======== ======== ========
Shares used in calculating net income (loss) per share 7,268 7,711 7,713 7,670
<FN>
The accompanying notes are an integral part of the condensed consolidated financial statements.
</FN>
</TABLE>
Page 3
<PAGE>
<TABLE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<CAPTION>
Six Months Ended
June 30, June 30,
1997 1996
-------- --------
<S> <C> <C>
Net cash provided by operating activities $ 121 $ 758
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (2,176) (971)
Proceeds from disposal of property, plant and equipment 2 186
Other assets 32 (10)
-------- --------
Net cash used by investing activities (2,142) (795)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options 234 339
Borrowing under bank revolving credit facility 17,400 10,929
Repayments of borrowings under bank revolving credit facility (15,900) (11,229)
Payments of long-term debt (679) (147)
-------- --------
Net cash provided (used) by financing activities 1,055 (108)
-------- --------
Net decrease in cash (966) (145)
Cash, beginning of period 1,870 1,584
-------- --------
Cash, end of period $ 904 $ 1,439
======== ========
Supplementary disclosure of noncash investing activities:
Building disposed of in exchange for note receivable $ 858
========
<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 June
30, 1997, and for the six months ended June 30, 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 six months
ended June 30, 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 June 30. For ease of presentation, interim periods
are designated to have ended on June 30.
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)
--------------------
June 30, December 31,
1997 1996
------- -------
Inventories
Raw materials $ 7,535 $ 8,225
Work in progress 21,074 18,912
Finished goods 297 307
------- -------
28,906 27,444
Less: unliquidated progress payments 1,711 3,151
------- -------
$27,195 $24,293
======= =======
Property, Plant and Equipment
Land $ 592 $ 592
Building and improvements 7,609 7,285
Machinery and equipment 25,395 24,217
Furniture and fixtures 2,436 2,285
------- -------
36,032 34,379
Less accumulated depreciation 21,245 20,069
------- -------
Net property, plant and equipment $14,787 $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.
A third party has filed a breach of contract suit against the Company
alleging that it has a contractual duty to indemnify the third party for
costs incurred as a result of environmental contamination and subsequent
remediation. The claim is based upon allegations that the Company assumed
certain liabilities when it acquired one of the divisions of the third
party. The Company believes it has meritorious defenses with respect to
this claim and intends to vigorously defend its position in the suit. The
Company also believes that the ultimate disposition will not materially
affect its financial position or results of operation.
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 June 30, 1997 and 1996
Net sales in the second quarter of 1997 decreased $1.9 million, or 6.9%, as
compared to the second quarter of 1996. Backlog increased from $86.4 million to
$87.2 million at June 30, 1997 on new orders of $26.3 million. This compares to
an increase in backlog from $102.8 million to $103.8 million on new orders of
$28.6 million in the second quarter of 1996.
The decrease in net sales for the second quarter of 1997 compared to the same
period in 1996 was due to the significantly lower shipments at the Keltec
Operation. Shipments were impacted by production inefficiencies including key
material shortages. The company has taken actions to correct the problems and
believes the problems will be resolved in the third quarter.
Gross profit during the second quarter of 1997 decreased $417 thousand or 8.1%,
as compared to the second quarter of 1996. Gross profit was adversely effected
by lower shipment levels and costs associated with the inefficiency mentioned
above, as well as additional costs incurred on several development contracts at
both the Keltec and Arizona Operations.
Selling, general and administrative expenses increased $71 thousand or 1.6% in
the second quarter of 1997 as compared to the second quarter of 1996 and as a
percentage of net revenues increased from 16.1% in 1996 to 17.6% in 1997.
Research and development activities increased in the second quarter of 1997 as
compared to the same period last year. Research and development expense for the
quarter was $157 thousand in 1997 versus $99 thousand for the second quarter of
last year.
Interest expense decreased $87 thousand or 24.6% from $353 thousand in the
second quarter of 1996 to $266 thousand in the second quarter of 1997 primarily
as a result of lower levels of borrowings. Average borrowings outstanding during
the second quarter of 1997 were approximately $3.3 million lower than in the
comparable 1996 period.
Results of Operations for the Six Months Ended June 30, 1997 and 1996
Net sales in the first six months of 1997 increased $3.1 million, or 6.3%, as
compared to the first six months of 1996. Backlog decreased to $87.2 million at
June 30, 1997 on new orders of $51.9 million. This compares to an increase in
backlog from $92.8 million to $103.8 million on new orders of $60.6 million in
the first six months of 1996.
The increase in net sales was attributable to increased shipments at all five of
the company's production facilities. The substantial increase in sales in the
first three months of 1997 was negatively impacted by the lower shipments at the
Keltec Operation in the second quarter as discussed above.
Gross profit during the first six months of 1997 increased $1.2 million or
13.0%, as compared to the first six months of 1996. Despite the additional costs
associated with several development contracts, gross margin as a percentage of
sales increased from 19.5% in 1996 to 20.7% in 1997.
Selling, general and administrative expenses increased $388 thousand or 4.5% in
the first six months of 1997 as compared to the first six months of 1996 and as
a percentage of net revenues decreased from 17.3% in 1996 to 17.0% in 1997.
Page 7
<PAGE>
Research and development activities increased in the first six months of 1997 as
compared to the same period last year. Research and development expense for the
six months was $391 thousand in 1997 versus $301 thousand for the six months of
last year.
Interest expense decreased $194 thousand or 28.0% from $694 thousand in the
first six months of 1996 to $500 thousand in the first six months of 1997
primarily as a result of lower levels of borrowings. Average borrowings
outstanding during the first six months of 1997 were approximately $3.2 million
lower than in the comparable 1996 period.
Liquidity and Capital Resources
At June 30, 1997, the Company had working capital of $33.6 million as compared
to $31.6 million at December 31, 1996. Net debt (bank borrowings less cash on
hand) increased from $12.9 million at December 31, 1996 to $14.6 million at June
30, 1997. Net cash provided by operating activities during the first six months
of 1997 totaled $121 thousand.
In addition to the cash on hand of approximately $904 thousand at June 30, 1997,
the Company had approximately $2.7 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 June 30, 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.
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.
Page 8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A third party has filed a breach of contract suit against the Company alleging
that it has a contractual duty to indemnify the third party for costs incurred
as a result of environmental contamination and subsequent remediation. The claim
is based upon allegations that the Company assumed certain liabilities when it
acquired one of the divisions of the third party. The Company believes it has
meritorious defenses with respect to this claim and intends to vigorously defend
its position in the suit. The Company also believes that the ultimate
disposition will not materially affect its financial position or results of
operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders was held on May 6, 1997.
(b) Not required. See Instruction 3.
(c) Set forth below is a brief description of each matter voted upon at the
meeting, including the number of votes cast for, against or withheld, as
well as the number of abstentions and broker non-votes as to each matter,
and including a separate tabulation with respect to each nominee for
office.
(i) Election of Directors:
Dale L. Peterson: 3,948,161 votes in favor and 101,386 against
James S. Walsh: 3,987,183 votes in favor and 62,364 against
Joseph Schneider: 3,947,199 votes in favor and 102,348 against
(ii) To ratify the action of the directors authorizing an increase in
the number of shares of Common Stock reserved for issuance under
the Company's 1992 Equity Incentive Plan, from 666,666 to
1,166,666.
For: 1,895,256 Against: 343,296
Abstain: 33,756 No-Vote: 1,737,239
(iii) To ratify the adoption by the directors on March 25, 1997, of an
Employee Stock Purchase Plan.
For: 2,083,270 Against: 159,083
Abstain: 29,955 No-Vote: 1,737,239
(iv) Ratification of the selection of Coopers & Lybrand L.L.P. as
independent accountants for the fiscal year 1997: 3,991,739 votes
in favor, 6,355 votes abstaining and 11,453 against.
Page 9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
11. Statement regarding computation of net income 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
/s/ Dale L. Peterson
-------------------------------------
Chief Executive Officer and President
DATE: July 28, 1997
Page 10
<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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) ($ 107) $ 170 $ 638 $ 15
======= ======= ======= =======
Weighted average number of shares outstanding during the period 7,268 7,034 7,228 7,005
Add:
Assumed exercise of common share options -- 1,094 889 1,101
Less:
Purchase of common stock under the treasury stock method -- (417) (404) (436)
------- ------- ------- -------
Common and common equivalent shares outstanding for purpose of
calculating primary income (loss) per share 7,268 7,711 7,713 7,670
Incremental shares to reflect full dilution -- -- -- --
------- ------- ------- -------
Total shares for purpose of calculating fully diluted income
(loss) per share 7,268 7,711 7,713 7,670
======= ======= ======= =======
Primary income (loss) per share ($ 0.01) $ 0.02 $ 0.08 $ 0.00
======= ======= ======= =======
Fully diluted income (loss) per share ($ 0.01) $ 0.02 $ 0.08 $ 0.00
======= ======= ======= =======
</TABLE>
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 904
<SECURITIES> 0
<RECEIVABLES> 16,220
<ALLOWANCES> 0
<INVENTORY> 27,195
<CURRENT-ASSETS> 48,941
<PP&E> 36,032
<DEPRECIATION> 21,245
<TOTAL-ASSETS> 67,719
<CURRENT-LIABILITIES> 15,369
<BONDS> 14,760
0
0
<COMMON> 73
<OTHER-SE> 35,708
<TOTAL-LIABILITY-AND-EQUITY> 67,719
<SALES> 52,556
<TOTAL-REVENUES> 52,556
<CGS> 41,681
<TOTAL-COSTS> 51,012
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 500
<INCOME-PRETAX> 1,044
<INCOME-TAX> 406
<INCOME-CONTINUING> 638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 638
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
