SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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)
222 ROSEWOOD DRIVE, DANVERS, MA 01923-4502
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 774-2281
--------------------
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.
Common Stock Outstanding at May 12, 1999
$.01 Par Value 7,583,661 shares
<PAGE>
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
Item 3 Qualitative and Quantitative Disclosures About Market Risk 14
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 14
SIGNATURE 14
Page 2 of 14
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
<CAPTION>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31
1999 1998
-------------------- --------------------
<S> <C> <C>
Assets:
Cash $ 1,792 $ 2,366
Accounts receivable, net 13,218 12,894
Inventories 11,290 11,358
Deferred taxes 1,562 1,562
Refundable income taxes 2,294 2,319
Other current assets 355 208
-------------------- --------------------
Total current assets 30,511 30,707
-------------------- --------------------
Property, plant and equipment, net 14,698 14,935
Intangible assets, net 2,401 2,505
Other assets 834 836
-------------------- --------------------
Total assets $ 48,444 $ 48,983
==================== ====================
Liabilities and stockholders' equity:
Current maturities of long-term debt $ 480 $ 480
Accounts payable 3,133 3,067
Accrued expenses 6,626 7,456
Customer advances 100 3
-------------------- --------------------
Total current liabilities 10,339 11,006
-------------------- --------------------
Deferred income taxes 1,562 1,562
Long-term debt, net of current maturities 9,028 9,928
Stockholders' Equity
Common stock 77 75
Additional paid-in capital 13,334 12,947
Retained earnings 15,004 14,365
-------------------- --------------------
28,415 27,387
Less treasury stock (900) (900)
-------------------- --------------------
Total stockholders' equity 27,515 26,487
-------------------- --------------------
Total liabilities and stockholders' equity $ 48,444 $ 48,983
==================== ====================
<FN>
The accompanying notes are an integral part of the condensed consolidated financial statements.
</FN>
</TABLE>
Page 3 of 14
<PAGE>
<TABLE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
<CAPTION>
Quarter ended
March 31,
1999 1998
------------ -------------
<S> <C> <C>
Net sales $ 20,436 $ 23,687
Cost of sales 14,547 18,184
------------ -------------
Gross profit 5,889 5,503
Selling, general and administrative expense 4,574 4,864
Research and development expense 514 46
------------ -------------
Operating income 801 593
Interest expense 147 255
------------ -------------
Income before income taxes 654 338
Provision for income taxes 15 135
------------ -------------
Net income $ 639 $ 203
============ =============
Net income per share
Basic $ 0.09 $ 0.03
Diluted $ 0.08 $ 0.03
Shares used in calculating net income per share
Basic 7,503 7,411
Diluted 7,824 7,663
<FN>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</FN>
</TABLE>
Page 4 of 14
<PAGE>
<TABLE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
Quarter Ended
March 31,
1999 1998
-------------------- -------------------
<S> <C> <C>
Net cash provided by operating activities $ 352 $ 803
-------------------- -------------------
Cash flows from investing activities:
Additions to property, plant and equipment (417) (409)
Proceeds from disposal of property, plant and
equipment - 14
Other assets 2 3
-------------------- -------------------
Net cash used by investing activities (415) (392)
-------------------- -------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 313 -
Proceeds from Employee Stock Purchase Plan 76 89
Borrowings on bank revolving credit facility 4,300 8,200
Payments on bank revolving credit facility (5,100) (7,900)
Repurchase of treasury stock - (427)
Payments of long-term debt (100) (200)
-------------------- -------------------
Net cash used by financing activities (511) (238)
-------------------- -------------------
Net (decrease) increase in cash (574) 173
Cash, beginning of period 2,366 1,127
-------------------- -------------------
Cash, end of period $ 1,792 $ 1,300
==================== ===================
<FN>
The accompanying notes are an integral part of the condensed consolidated financial statements.
</FN>
</TABLE>
Page 5 of 14
<PAGE>
SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Notes To The Condensed Consolidated Financial Statements
(in thousands, except per share data)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of the Company as of
March 31, 1999, and for the three months ended March 31, 1999 and 1998
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, 1999, 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, 1998,
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 quarter 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. EARNINGS PER SHARE
The Company presents basic and diluted earnings per share ("EPS"). Basic
EPS is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period.
Diluted EPS is computed giving effect to all dilutive potential common
shares that were outstanding during the period. Dilutive potential common
shares consist of the incremental common shares issuable upon the
exercise of stock options for all periods using the treasury stock
method.
<TABLE>
In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of both basic and diluted
EPS is provided as follows:
<CAPTION>
Quarter ended March 31,
1999 1998
---- ----
<S> <C> <C>
Numerator - Basic and Diluted EPS
Net income $ 639 $ 203
================ ==============
Denominator - Basic EPS
Common shares outstanding 7,503 7,411
---------------- --------------
Basic earnings per share $ 0.09 $ 0.03
================ ==============
Denominator - Diluted EPS
Denominator - Basic EPS 7,503 7,411
Effect of Diluted Securities
Common Stock Options 321 252
---------------- --------------
Denominator - Diluted EPS 7,824 7,663
---------------- --------------
Diluted earnings per share $ 0.08 $ 0.03
================ ==============
</TABLE>
Page 6 of 14
<PAGE>
3. COMPREHENSIVE INCOME (LOSS)
There were no differences between net income and comprehensive income for
the quarters ended March 31, 1999 and 1998.
<TABLE>
4. Details of certain balance sheet accounts are as follows:
<CAPTION>
March 31, 1999 December 31, 1998
------------------------ ---------------------------
<S> <C> <C>
Net inventories:
Raw materials $ 2,819 $ 3,595
Work in progress 11,580 10,936
Finished goods 310 279
------------------------ ---------------------------
14,709 14,810
Less: unliquidated progress payments (3,419) (3,452)
------------------------ ---------------------------
$ 11,290 $ 11,358
======================== ===========================
Property, plant and equipment:
Land $ 992 $ 992
Building and improvements 9,999 9,986
Machinery and equipment 25,816 25,570
Furniture and fixtures 3,081 3,025
------------------------ ---------------------------
39,888 39,573
Less accumulated depreciation (25,190) (24,638)
------------------------ ---------------------------
Net property, plant and equipment $ 14,698 $ 14,935
======================== ===========================
</TABLE>
5. INCOME TAXES
In the first quarter of 1999, the Company recorded a provision for income
taxes of $15 for alternative minimum tax. The Company has provided a
valuation allowance for the full amount of its net deferred tax assets at
March 31, 1999 because it is more likely than not that the deferred tax
asset may not be realized.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved from time to time in litigation incidental to its
business.
Weymouth Environmental Contamination:
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 operate a pilot remediation system
in cooperation with the DEP. It is not possible at this stage of the
proceedings to predict exactly what additional remediation and the costs
thereby, if any, will be required. The Company has been informed by its
insurers that no recovery of costs incurred in the treatment of the ground
water at the facility is possible under existing insurance arrangements.
During 1998 the Company took a charge
Page 7 of 14
<PAGE>
for environmental remediation costs due to a settlement with the State of
Massachusetts and a revision to its estimates for future remediation costs
at the site.
Sunnyvale Indemnification Claim:
Eaton Corporation has filed a suit against the Company in United States
District Court, Northern District of California, alleging that it has a
contractual duty to indemnify Eaton Corporation 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 Eaton Corporation. The indemnification
claim was recently dismissed at the trial level, but may be the subject of
an eventual appeal. The Company believes that the ultimate disposition will
not materially affect its financial position or results of operations.
DeCoursey v. Signal Technology Corporation:
This class action was filed on August 25, 1998 in the United States
District Court for the District of Massachusetts. The Complaint alleges
that the Company and its former chief executive officer, Dale Peterson,
violated ss. 10(b) of the Security Exchange Act of 1934 and Rule 10b-5 and
seeks monetary damages. The Complaint alleges that various public
statements by the Company during 1997 and 1998 were false or misleading as
a result of alleged accounting irregularities.
L-3 Communications Corporation v. Signal Technology Corporation, et al:
This case was filed on September 3, 1998 in the Superior Court in Fulton
County, Georgia. The Complaint alleges that certain former employees of L-3
Communications now working for the Company unlawfully misappropriated
confidential and trade secret information on behalf of the Company and
unlawfully induced other L-3 Communications employees to join the Company.
L-3 Communications has brought claims for civil conspiracy, tortuous
interference with prospective and contractual relations, under both the
Georgia Deceptive Trade Practices Act and the Uniform Trade Secrets Act and
seeks monetary damages. The case is in the initial stages.
T-3 Contract:
The Company is currently committed to a long term contract at its Keltec
division (the T-3 contract) for amplifiers for Raytheon Company. The
current contract value is $764. If Raytheon Company exercises all of its
options within this contract, the total value could be in excess of
$19,000. Based on an assessment by management if all options are exercised
at current estimated costs and prices, the Company's loss could total up to
$4,000. In March 1999 the Company negotiated new prices and specifications
for the same amplifiers under a new contract and the Company believes
prices are at Keltec's manufacturing cost. The Company believes that other
future orders and options for T-3 amplifiers will be renegotiated.
Page 8 of 14
<PAGE>
7. SEGMENT INFORMATION
The Company is engaged in the engineering, manufacturing and marketing of
electronic components and subsystems. The Company has five operating
divisions; referred to as Arizona, California, Systems, Keltec and Olektron
and reports its operations within three segments: Microwave Components and
Subsystems (Arizona, California and Systems), Power Management Products
(Keltec) and Radio Frequency (RF) Components and Subsystems (Olektron). The
operations aggregated into the microwave components and subsystems segment
have similar products, production processes and types of customers.
The Company's reportable segments are as follows:
Microwave Components and Subsystems
Engaged in the design and manufacture of microwave oscillators, frequency
synthesizers and converters, space qualified microwave assemblies,
microwave amplifiers and microwave switch matrices.
Power Management Products
Engaged in the design and manufacture of military high and low voltage
power supplies, DC to DC converters and military high power amplifiers and
transmitters for use in radar systems.
Radio Frequency (RF) Components and Subsystems
Engaged in the design and manufacture of radio frequency and intermediate
frequency signal processing components, integrated multi-function devices,
and switching systems for the Space, Telecommunications and Military
markets.
The following tables display net sales and operating income by business
segment for each of the quarters ending March 31:
1999 1998
Net Sales
---------
Microwave Components & Subsystems $ 10,425 $ 12,479
Power Management Products 7,309 7,188
RF Components & Subsystems 2,702 4,020
------------- -------------
$ 20,436 $ 23,687
============= =============
Operating Income
----------------
Microwave Components & Subsystems $ 777 $ 945
Power Management Products 762 (320)
RF Components & Subsystems 86 576
Other (1) (824) (608)
------------- -------------
$ 801 $ 593
============= =============
(1) Other is primarily corporate selling, general and administrative
expenses that have not been allocated to the business segments.
Page 9 of 14
<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, 1999 and 1998
Net sales in the first quarter of 1999 decreased $3.3 million, or 13.7%, as
compared to the first quarter of 1998. Backlog increased to $71.4 million at the
end of the first quarter of 1999 from $64.8 million at December 31, 1998 on new
orders of $27.0 million compared to $11.7 million of new orders during the
fourth quarter 1998. The reduction in 1998 orders at the Microwave and RF
Components and Subsystems businesses was the primary reason for the decreased
sales in the first quarter of 1999 compared to the first quarter of 1998.
For the first quarter of 1999 gross profit as a percentage of sales increased to
28.8% from 23.2% in the first quarter of 1998. The increase in gross profit
percentage is primarily attributable to improved performance and increased
efficiencies at the Company's Power Management Products and Microwave Components
and Subsystems Businesses.
Selling, general and administrative expenses decreased to $4.6 million for the
first quarter of 1999 from $4.9 million in the first quarter of 1998. The
decrease in selling, general and administrative expense is primarily due to a
reduction in marketing costs and sales commissions. As a percentage of sales
selling, general and administrative expenses were 22.4% for the first quarter of
1999 and 20.5% for the first quarter of 1998.
Company-funded research and development increased to $0.5 million for the first
quarter of 1999 from $0.05 million in the first quarter of 1998. The Company has
instituted an enhanced research and development program for 1999.
Business Segments
The Company has five operating divisions referred to as Arizona, California,
Systems, Keltec and Olektron and reports its operations within three segments:
Microwave Components and Subsystems (Arizona, California and Systems), Power
Management Products (Keltec) and Radio Frequency (RF) Components and Subsystems
(Olektron).
<TABLE>
The following tables display net sales and operating income by business segment
for each of the quarters ending March 31:
<CAPTION>
(amounts in thousands) 1999 1998
- ------------------------------------------------------------------------- --------------
Net Sales
- ---------
<S> <C> <C>
Microwave Components & Subsystems $ 10,425 $ 12,479
Power Management Products 7,309 7,188
RF Components & Subsystems 2,702 4,020
------------- --------------
$ 20,436 $ 23,687
============= ==============
Operating Income
- ----------------
Microwave Components & Subsystems $ 777 $ 945
Power Management Products 762 (320)
RF Components & Subsystems 86 576
Other (1) (824) (608)
============= ==============
$ 801 $ 593
============= ==============
Page 10 of 14
<PAGE>
<FN>
(1) Other is primarily corporate selling, general and administrative expenses
that have not been allocated to the business segments.
</FN>
</TABLE>
Microwave Components & Subsystems
Net sales of Microwave Components and Subsystems decreased by 16% in the first
quarter of 1999 compared to the first quarter of 1998. The primary reason for
the decreased sales was a reduction in 1998 orders.
Operating income of Microwave Components and Subsystems decreased by 18% in the
first quarter of 1999 compared to the first quarter of 1998. Gross profit
reductions due to sales volume were offset by increased margins due to improved
cost performance. Company-funded research and development increased to $395
thousand for the first quarter of 1999 from $22 thousand for the first quarter
of 1998 offsetting a reduction in selling, general and administrative costs.
Power Management Products
Net sales of Power Management Products increased by 2% in the first quarter of
1999 compared to the first quarter of 1998.
Operating income of Power Management Products was $0.8 million for the first
quarter of 1999 compared to an operating loss of $0.3 million for the first
quarter of 1998. The $1.1 million increase in operating income in the first
quarter 1999 as compared to the first quarter 1998 is due to increased gross
profit resulting from efficiencies in manufacturing and changes in contract mix
as well as reductions to general and administrative expenses.
RF Components and Subsystems
Net sales of RF Components and Subsystems decreased by 33% in the first quarter
of 1999 compared to the first quarter of 1998. The primary reason for the
decreased sales was a reduction in 1998 and first quarter 1999 orders.
Operating income of RF Components and Subsystems was $0.1 million for the first
quarter of 1999 compared to $0.6 million for the first quarter of 1998. The $0.5
million decrease in operating income is mainly attributable to the above
mentioned decrease in sales volume for the first quarter 1999 and a $0.1 million
increase in company-funded research and development for the first quarter 1999
as compared to the first quarter 1998.
Interest expense was $0.1 million lower for the first quarter 1999 as compared
to the first quarter 1998 primarily due to lower levels of borrowings. Total
debt decreased to $9.5 million at March 31, 1999 from $14.0 million at March 31,
1998.
In the first quarter of 1999 the Company recorded a provision for income taxes
of $15 thousand for alternative minimum tax compared to a provision for income
taxes of $135 thousand in the first quarter of 1998. The tax is less than the
statutory rate principally due to the use of net-operating loss carryforwards.
The Company has provided a valuation allowance for the full amount of its net
deferred tax assets at March 31, 1999 because it is more likely than not that
the deferred tax asset may not be realized.
Liquidity and Capital Resources
At March 31, 1999, the Company had working capital of $20.2 million, including
cash of $1.8 million, as compared to working capital and cash of $19.7 million
and $2.4 million, respectively at December 31, 1998. In the first quarter of
1999, the Company repaid borrowings under the Company's revolving credit
facility of $0.8 million. Net cash flow from operations was $352
Page 11 of 14
<PAGE>
thousand for the first quarter of 1999 compared to $803 thousand for the first
quarter of 1998. Payment of deferred compensation during the first quarter of
1999 was the primary reason for the decrease in cash flow from operations.
The Company's borrowing arrangement requires the company to maintain certain
minimum balances and ratios, the most significant of which requires the
maintenance of a minimum net worth. The Company was in compliance with all debt
covenants at March 31, 1999. The Company and its bank have amended the loan
agreement as of October 20, 1998. Among other changes, the amendment increases
the interest charged on the revolving credit facility and the real estate term
loans from the bank's base rate to the base rate plus 1/2%. The amount
available for current borrowing is calculated on the Company's eligible
receivables as defined in the loan agreement but not to exceed $15 million. This
provision is not anticipated to have a material impact on the Company's cash
requirements in the foreseeable future.
The Company continues to investigate acquisition opportunities in complementary
businesses, product lines and markets, but has no agreements, understandings or
commitments for additional acquisitions at this time. The Company believes that
it has adequate cash, working capital and available financing to meet its
operating and capital requirements in the foreseeable future and to pursue
acquisition opportunities.
Impact of Year 2000
Management is aware of the potential software and hardware anomalies associated
with the upcoming date change commonly known as the Year 2000 problem (Y2K). A
comprehensive review of the Company's computer systems, software and internal
embedded systems has been undertaken and management is not aware at this time of
any significant year 2000 issues that will not be resolved prior to the year
2000. The Company is on schedule in its corporate-wide plan to achieve
compliance by the third quarter of 1999.
The Company is presently in the third phase of a five-phase plan to bring about
compliance in all of its products, internal systems, and suppliers and thus
mitigate against disruption of the Company's business at the turn of the
century. The five phases of the Company's plan are Awareness, Assessment,
Remediation, Testing, and Implementation. Awareness and Assessment have been
completed at this time. Remediation, the phase that the Company is presently in,
is scheduled to be completed by the end of May 1999. Testing, the fourth phase,
is scheduled to be completed by the end of July 1999. The last phase,
Implementation, is scheduled to be completed in September 1999. All of these
phases are concurrently undertaken. The areas of focus are: Products, Computer
Software, Computer Hardware, Embedded Systems, and Supplier Compliance. Each of
the Company's five operating divisions is separately implementing these phases
and because of the varied complexity of the areas of focus at each division,
some of the divisions are ahead of schedule.
The Company has evaluated all of its product lines and has found no product with
embedded date functions that the Company believes would cause any Y2K exposure.
As part of its overall plan, the Company has surveyed its suppliers to determine
their Y2K readiness. The Company understands that its suppliers are an integral
part of the Company's success. To the extent the Company believes certain
suppliers will not be Y2K compliant, it will seek alternate suppliers.
The projected costs of approximately $475 thousand associated with the Company's
overall plan are not expected to have a material effect on the Company's results
of operations or
Page 12 of 14
<PAGE>
financial position. Costs include internal labor, outside consultants and, to a
lesser extent, new computer hardware and software required to achieve Y2K
compliance. To date, the Company has expended approximately $200 thousand.
At this time, the Company has not developed a "worst case" scenario or an
overall year 2000 contingency plan and does not intend to do so unless, as a
result of its ongoing year 2000 review, management believes such plans are
warranted. The only contingency planning that is currently set to be implemented
will come as a result of a comprehensive survey of the Company's suppliers in
order to learn which will be impacted by the Y2K problem.
Risks associated with the Y2K problem include, among other things, (i) failure
of systems and software used by the Company's customers which will impact their
financial ability to purchase products from the Company, (ii) failure of systems
and software used by vendors and third-party service providers upon which the
Company relies for outsourced services and products, (iii) Y2K problems with the
Company's suppliers which could negatively impact the Company's ability to
fulfill its own orders promptly, and (iv) errors or failures of systems in which
the Company's devices are implemented which could result in improper interfacing
or operation of such devices.
Cautionary Note
This Form 10-Q may contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended including without limitation (i) the
anticipated outcome and impact of proceedings in which the Company is involved,
(ii) the impact of an amendment to the Company's credit facility on its
liquidity, (iii) the Company's ability to meet its operating and capital
requirement and to pursue acquisition opportunities, (iv) projected costs of
ameliorating risks associated with, and problems caused by, the Year 2000
problem, and (v) certain other statements identified or qualified by words such
as "likely", "will", "suggests", "may", "would", "could", "should", "expects",
"anticipates", "estimates", "plans", "projects", "believes", "is optimistic
about", or similar expressions (and variants of such words of expressions).
Investors are cautioned that forward-looking statements are inherently
uncertain. These forward-looking statements represent the best judgement of the
Company as on the date of this Form 10-Q, and the Company cautions readers not
to place undue reliance on such statements. Actual performance and results of
operations may differ materially from those projected or suggested in the
forward-looking statements due to certain risks and uncertainties including,
without limitation, risks associated with fluctuations in the Company's
operating results, volume and timing of orders received, changes in the mix of
products sold, competitive pricing pressure, the Company's ability to meet or
renegotiate customer demands, the ability to anticipate changes in the market,
the Company's ability to finance its operations on terms that are acceptable,
the Company's ability to attract and retain qualified personnel including the
Company's management, changes in the global economy, changes in regulatory
processes, the dependence on certain key customers (including the U.S.
Government), the Company's ability to realize sufficient margins on sales of its
products, the availability and timing of funding for the Company's current
products and the development of future products.
Page 13 of 14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not engage in trading market risk sensitive instruments or
purchasing hedging instruments or "other than trading" instruments that are
likely to expose the Company to market risk, whether interest rate, foreign
currency exchange, commodity price or equity price risk. The Company has not
purchased options or entered into swaps or forward or futures contracts. The
Company's primary market risk exposure is that of interest rate risk on
borrowings under its revolving credit facility, which are subject to interest
rates based on the bank's base rate plus 1/2%. The Company also has a
collateralized real estate loan at the bank's base rate and a change in the
applicable interest rate on these loans would affect the rate at which the
Company could borrow funds.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note 6 - Commitments and Contingencies to the Company's Condensed Consolidated
Financial Statements contained elsewhere in this Quarterly Report is
incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
Exhibits Description
-------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
The following report was filed during the quarter ended March 31, 1999:
Form 8-K Date of Event Description
-------- ------------- -----------
Item 5 January 26, 1999 Declaration of a dividend
distribution of one
common share purchase
right for each
outstanding share of
common stock of the
Company.
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/ Robert Nelsen
------------------------------------------------
Robert Nelsen
Chief Financial Officer and
Principal Accounting Officer
DATE: May 12, 1999
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000901119
<NAME> Signal Technology Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,792
<SECURITIES> 0
<RECEIVABLES> 13,218
<ALLOWANCES> 0
<INVENTORY> 11,290
<CURRENT-ASSETS> 30,511
<PP&E> 39,888
<DEPRECIATION> 25,190
<TOTAL-ASSETS> 48,444
<CURRENT-LIABILITIES> 10,339
<BONDS> 9,028
0
0
<COMMON> 77
<OTHER-SE> 27,438
<TOTAL-LIABILITY-AND-EQUITY> 48,444
<SALES> 20,436
<TOTAL-REVENUES> 20,436
<CGS> 14,547
<TOTAL-COSTS> 19,635
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 654
<INCOME-TAX> 15
<INCOME-CONTINUING> 639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 639
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.08
</TABLE>
