-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYs+aGzBF/R6yOn8VDCgQjdL7AWYA13P5l9SrpyR28s75rhgC1dKVWYp2fDD1Ih0 8ZxVSt6MP6A+cHlE2O9tfw== 0000912057-95-008914.txt : 19951026 0000912057-95-008914.hdr.sgml : 19951026 ACCESSION NUMBER: 0000912057-95-008914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951025 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANFORD TELECOMMUNICATIONS INC CENTRAL INDEX KEY: 0000725727 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 942207636 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11473 FILM NUMBER: 95584095 BUSINESS ADDRESS: STREET 1: 1221 CROSSMAN AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087450818 MAIL ADDRESS: STREET 1: 221 CROSSMAN AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94088-3733 10-Q 1 FORM 10-Q 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 EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 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 0-12734 STANFORD TELECOMMUNICATIONS, INC. --------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 94-2207636 -------- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 1221 CROSSMAN AVENUE, SUNNYVALE, CA 94089 ------------------------------------------ (Address of principal executives offices) (Zip Code) 408/745-0818 ------------ (Registrant's telephone number, including area code) -------------- (Former name, former address and former fiscal year, if changed since last report) 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 --- --- APPLICABLE ONLY TO CORPORATE USERS: Indicate the number of outstanding shares of each of the issuer's classes of common stock, as of the latest practical date. 6,287,321 as of October 20, 1995 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STANFORD TELECOMMUNICATIONS, INC. CONDENSED FINANCIAL STATEMENTS (Unaudited) The condensed financial statements included herein have been prepared by the company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the company believes the disclosures which are made are adequate to make the information presented not misleading. Further, the condensed financial statements have been prepared in all material respects in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods indicated. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Stanford Telecommunications, Inc. 1995 Annual Report. The results of operations for the first six months of fiscal year 1996 ended September 30, 1995 are not necessarily indicative of results to be expected for the entire year ending March 31, 1996. STANFORD TELECOMMUNICATIONS, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
ASSETS September 30, March 31, 1995 1995 ------------ --------- Current assets: (unaudited) Cash and cash equivalents $ 4,420 $ 2,910 Short-term investments 6,952 9,907 Accounts receivable 21,743 22,930 Unbilled receivables 12,066 16,891 Inventories 21,927 15,798 Prepaid expenses 7,300 3,558 ------- ------- Total current assets 74,408 71,994 ------- ------- Property and equipment at cost: Electronic test equipment 39,633 38,108 Furniture and fixtures 2,949 2,889 Leasehold improvements 3,494 3,052 ------- ------- 46,076 44,049 Less: Accumulated depreciation and amortization (30,380) (28,441) ------- ------- Net property and equipment 15,696 15,608 ------- ------- Other assets 546 403 ------- ------- $90,650 $88,005 ------- ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations $ 136 $ 158 Accounts payable 8,842 11,268 Advance payments from customers 1,390 963 Accrued liabilities 10,929 10,183 Accrued and current deferred income taxes 2,471 1,463 ------- ------- Total current liabilities 23,768 24,035 ------- ------- Long-term obligations, less current maturities 117 161 ------- ------- Other long-term liabilities 911 927 ------- ------- Deferred income taxes 681 785 ------- ------- Shareholders' equity: Common shares - par value $.01; 15,000 shares authorized Outstanding - 6,285 shares at September 30, 1995 63 62 - 6,234 shares at March 31, 1995 Paid-in capital 37,597 37,051 Retained earnings 27,513 24,984 ------- ------- Total shareholders' equity 65,173 62,097 ------- ------- $90,650 $88,005 ------- ------- ------- -------
See accompanying notes. STANFORD TELECOMMUNICATIONS, INC. CONDENSED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
Three Months Six Months Ended September 30, Ended September 30, ---------------------- ---------------------- 1995 1994 1995 1994 ------- ------- ------- ------- Revenues $35,597 $28,319 $71,549 $52,964 Cost of revenues 28,215 22,633 58,091 41,877 ------- ------- ------- ------- Gross profit 7,382 5,686 13,458 11,087 Expenses Research and development 2,050 2,302 3,843 4,334 Marketing and administrative 3,239 2,423 5,898 4,423 ------- ------- ------- ------- Total expenses 5,289 4,725 9,741 8,757 ------- ------- ------- ------- Operating income 2,093 961 3,717 2,330 Interest income, net 152 156 330 336 ------- ------- ------- ------- Income before income taxes 2,245 1,117 4,047 2,666 Provision for income taxes (842) (403) (1,518) (960) ------- ------- ------- ------- Net income $1,403 $714 $2,529 $ 1,706 ------- ------- ------- ------- ------- ------- ------- ------- Average shares and equivalents 6,346 6,244 6,308 6,232 Net income per share $0.22 $0.11 $0.40 $0.27 ------- ------- ------- ------- ------- ------- ------- -------
See accompanying notes STANFORD TELECOMMUNICATIONS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Six Months Ended September 30, ----------------- Cash flows from operating activities: 1995 1994 ---- ---- Net income $2,529 $1,706 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,484 2,152 Issuances of stock to employees under bonus and award plans 57 29 Provision for losses on receivables and contracts 621 120 Loss on sale of property and equipment (12) - (Increase) decrease in assets: Receivables billed and unbilled 5,692 (6,148) Inventories (6,898) 73 Prepaid expenses and other assets (3,885) (31) Increase (decrease) in liabilities: Accounts payable, advance payments, and accrued expenses (785) 64 Other long-term liabilities (16) 171 Accrued and deferred income taxes 904 (204) ------- ------- Net cash provided by (used in) operating activities 691 (2,068) ------- ------- Cash flows provided by (used in) investing activities: Purchase of short-term investments (1,952) - Proceeds from maturities of short-term investments 4,907 1,990 Purchase of property and equipment (2,770) (2,456) Proceeds from sale of property and equipment 210 - ------- ------- Net cash provided by (used in) investing activities 395 (466) ------- ------- Cash flows from financing activities: Payments on capital lease obligations (66) (79) Proceeds from transactions under stock plans 490 255 ------- ------- Net cash provided by financing activities 424 176 ------- ------- Net increase (decrease) in cash and cash equivalents 1,510 (2,358) Cash and cash equivalents at beginning of period 2,910 5,840 ------- ------- Cash and cash equivalents at end of period $4,420 $3,482 ------- ------- ------- -------
See accompanying notes. STANFORD TELECOMMUNICATIONS, INC. NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS 1. Net income per share Net income per share is computed using the weighted average number of shares of common stock and common stock equivalents outstanding during the periods. Common stock equivalents consist of the dilutive effect of outstanding options to purchase common stock. Fully diluted net income per share is substantially the same as reported net income per share. 2. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Cost includes materials, labor and related indirect expenses. General and administrative costs are only included in inventory for government contracts, as such costs are reimbursed by the government. The components of inventory are (in thousands):
SEPT 30, 1995 MARCH 31, 1995 ------------- -------------- Raw materials and supplies $159 $176 Work-in-progress 19,433 13,092 Finished goods 2,250 1,820 Allocated general and administrative costs 191 872 Less: progress billings (106) (162) ------- ------- $21,927 $15,798 ------- ------- ------- -------
3. Stock Purchase Rights On May 9, 1995 the Board of Directors adopted a Stockholders Rights Plan and declared a dividend of one Common Share Purchase Right (the "Right") for each share of the Company's common stock outstanding on May 25, 1995. Each Right entitles the holder thereof to purchase one share of the Company's common stock for $60. The Rights will be exercisable if a person or group acquires 15% or more of the Company's common stock. Upon such acquisition, each Right (other than those held by the acquiring person or group) will be exercisable for the number of shares of the Company's common stock having a market value at that time of twice the exercise price of the Right. If the Company subsequently enters into certain business combinations, each Right (other than those held by the acquiring person or group) will be exercisable for that number of shares of common stock of the other party to the business combination having a market value of two times the exercise price of the Right. The Rights are subject to redemption at the option of the Board of Directors at a price of $.01 per Right. The Rights expire on May 9, 2005. 4. Capital Stock On June 28, 1995, the Company's stockholders approved an amendment to Article 4 of the Company's Certificate of Incorporation to increase the number of authorized shares of common stock par value $0.01 per share ("common stock"), from 10,000,000 to 15,000,000 and to eliminate provisions authorizing the Board of Directors to issue the common stock in series, and to eliminate the Company's Series B common stock. 5. Credit Agreement On September 11, 1995 the expiration date of the Company's bank credit line agreement was amended from September 30, 1995 to November 30, 1995. The bank credit commitment of $15.0 million provides the Company to secure term loans and/or standby letters of credit. Under this credit line the Company must maintain certain financial covenants. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW - -------- Since the Company's inception in 1973, revenues have been generated primarily from sales to agencies of the U.S. Government, including the DoD, the U.S. Air Force, Army and Navy, NASA and the FAA, or their prime contractors. Such revenues are generated from many contracts including programs requiring multi- year hardware and software development and limited production of products and systems. The Company's contracts often require the design, production, operation and maintenance of sophisticated equipment and systems and provision of system integration services in the digital telecommunications and satellite communications fields. A substantial portion of the digital telecommunications and satellite communications research and development performed by the Company since its inception has been funded by its customers and recorded as revenues by the Company. Accordingly, the cost of performing this customer-funded research and development is included in "Cost of Revenues" in the Company's financial statements. The Company's government contracts are generally cost-reimbursement plus profit or fixed-price contracts. The Company generally recognizes revenues from its long-term government contracts on a percentage-of-completion basis. Commencing in the late 1980's, the Company began to pursue commercial opportunities utilizing its digital telecommunications technology developed and enhanced by the Company since its inception. Commercial revenues have risen from less than 6% of total revenues in fiscal 1989 to approximately 31% of total revenues in fiscal 1995. During fiscal 1995, commercial revenues which amounted to approximately $35.6 million included: (i) contract manufacturing revenues from the Company's electronics assembly business ($12.1 million); (ii) sales of ASICs, circuit boards and subsystems to the telecommunications industry ($9.1 million); (iii) sales of off-the-shelf products for secure voice transmissions and GPS instrumentation ($7.5 million); (iv) development programs for INTELSAT and for a vehicle tracking and information services system ($4.0 million); and (v) other commercial systems and product business ($2.9 million). During the first six months of fiscal 1996, commercial revenues amounted to approximately $31.9 million or 45% of total revenues reported. The Company includes in commercial revenues sales of standardized or off-the-shelf products such as the digital interfaces for secure voice transmissions or GPS simulators to any customers, including government customers. The Company's operating results have from time to time been adversely affected by non-recoverable cost overruns on certain fixed-price contracts, primarily fixed-price development contracts which have included significant software and hardware development. The Company's net income in fiscal 1993, 1994 and 1995 was adversely affected due to losses on a number of fixed-price development contracts. The Company has been instituting additional management controls to more closely monitor its bidding process and costs incurred on fixed-price development contracts, however, no assurance can be given that the Company will not incur losses on future fixed-price contracts or additional losses on existing contracts. The Company believes that development contracts are an important element in maintaining its technological leadership position in digital telecommunications. The Company plans to selectively bid on programs where it would be the sole provider or its technology leadership provides a competitive advantage. In addition, in order to position itself in the commercial marketplace, the Company may selectively enter into contracts with customers to deliver products where the Company will be funding a portion of the development costs. As a result, the company may incur losses on certain fixed- price contracts. Such losses will be charged against results of operations in the period when they first become known, typically near the initiation of the contract and may have a material adverse effect on the Company's results of operations. QUARTERLY RESULTS - ----------------- The following table presents the Company's financial results by quarter for fiscal 1995 and the first two quarters of fiscal 1996. These quarterly financial results are unaudited. In the opinion of management, however, they have been prepared on the same basis as the audited financial information and include all adjustments necessary for a fair presentation of the information set forth therein. The operating results for any quarter are not necessarily indicative of the results that may be expected for any future period. QUARTER ENDED (IN THOUSANDS, EXCEPT PER SHARE DATA)
----------------------------------------------------- ---------------------- FISCAL 1995 FISCAL 1996 ----------------------------------------------------- ---------------------- JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 -------- -------- ------- ------- ------- -------- STATEMENT OF INCOME DATA: Revenues $24,645 $28,319 $26,499 $34,921 $35,952 $35,597 Cost of revenues 19,244 22,633 24,689 29,113 29,876 28,215 ------- ------- ------- ------- ------- ------- Gross profit 5,401 5,686 1,810 5,808 6,076 7,382 ------- ------- ------- ------- ------- ------- Expenses: Research and development 2,032 2,302 1,345 2,044 1,793 2,050 Marketing and administrative 2,000 2,423 2,166 2,773 2,659 3,239 ------- ------- ------- ------- ------- ------- Total expenses 4,032 4,725 3,511 4,817 4,452 5,289 Operating income (loss) 1,369 961 (1,701) 991 1,624 2,093 Interest income, net 180 156 191 130 178 152 Arbitration settlement expenses -- -- (2,075) -- -- -- ------- ------- ------- ------- ------- ------- Income (loss) before (provision) 1,549 1,117 (3,585) 1,121 1,802 2,245 credit for income taxes (Provision) credit for income taxes (557) (403) 1,282 (393) (676) (842) ------- ------- ------- ------- ------- ------- Net income $ 992 $ 714 $(2,303) $ 728 $ 1,126 $ 1,403 ------- ------- -------- ------- ------- ------- ------- ------- -------- ------- ------- ------- Net income per share $ 0.16 $ 0.11 $ (0.37) $ 0.12 $ 0.18 $ 0.22 ------- ------- -------- ------- ------- ------- ------- ------- -------- ------- ------- ------- Weighted average common shares and equivalents 6,221 6,244 6,256 6,252 6,272 6,346
The Company's revenues and results of operations are subject to fluctuation from period to period. Factors that could cause the Company's revenues and operating results to vary from period to period include: underestimating costs on fixed- price contracts particularly for software and hardware development; timing, bidding activity and delivery of significant contracts and orders; termination of contracts; mix of products and systems sold, and services provided; historically reduced levels of operation during the holidays which occur in the Company's third fiscal quarter; disruptions in delivery of components or subsystems; regulatory developments; and general economic conditions. Revenues have generally improved during the periods shown as a result of increasing revenues from commercial activities. Revenues are generally lower during the third fiscal quarter ending December 31 because the Company reduces operations during the holiday period, and it expects to continue to reduce activities in future holiday periods. The Company's result of operations are adversely affected by losses on fixed-price development contracts. Cost of revenues were adversely affected during fiscal 1995 by cost overruns on certain fixed-price development contracts. Research and development expenses include both research and development costs as well as bid and proposal expenses. Bid and proposal expenses, which often make up a substantial portion of this expense category, vary significantly from period to period based on the number of proposals being prepared at any time. These requests for proposals are not received evenly during the year or in any predictable pattern. COMPARISON OF THE SECOND QUARTER ENDED SEPTEMBER 30, 1995 AND 1994 - ------------------------------------------------------------------ REVENUES. Revenues for the second quarter of fiscal 1996 increased by 26% to $35.6 million from the second quarter of the previous fiscal year. This increase was attributable to growth in commercial contracts. Commercial revenues during the second quarter of fiscal 1996 increased to approximately $16.7 million from approximately $9.0 million achieved during the second quarter of fiscal 1995. During the second quarter of fiscal 1996, the Company received approximately $7.4 million in revenues from its commercial contract manufacturing services compared with $2.8 million recognized during the second quarter of fiscal 1995. Revenues recognized for the INTELSAT contract increased to $2.4 million from $435 thousand during the second quarter of fiscal 1996 and 1995, respectively. Revenues recognized during the second quarter of fiscal 1996 on government contracts decreased approximately $453 thousand to $18.9 million from the comparable quarter of the previous fiscal year. COST OF REVENUES. Cost of revenues were $28.2 million and $22.6 million for the second quarter of fiscal 1996 and 1995, respectively, representing a 25% increase. The increase during the second quarter of fiscal 1996 was the result of the recognition of costs and revenues on low or no margin contracts such as INTELSAT and a U.S. Army satellite terminal contract and from the direct cost to support the higher levels of revenues. The Company's cost-to-complete on the INTELSAT and U.S. Army contracts will require the Company to recognize cost of revenues equal or near the level of revenues reported for these contracts. RESEARCH AND DEVELOPMENT. Research and development (R&D) costs which also include bid and proposal (B&P) expenses associated with the pursuit of government contracts and certain large commercial contracts were $2.1 million and $2.3 million in the second quarter of fiscal year 1996 and 1995, respectively. During the second quarter of fiscal 1996, the Company increased its B&P expenses and decreased its independent R&D expenses when compared with those components of overall research and development costs reported for the second quarter of fiscal 1995. The Company anticipates that it will increase the level of independent R&D expenses during the second half of fiscal 1996 to support new product developments. MARKETING AND ADMINISTRATIVE. Marketing and administrative expenses were $3.2 million and $2.4 million for the second quarter of fiscal 1996 and 1995, respectively, representing an increase of 34%. This increase is primarily a result of increasing the Company's technical marketing staff and increased marketing expenses in pursuit of commercial opportunities. OPERATING INCOME. Operating income was $2.1 million and $961 thousand for the second quarter of fiscal 1996 and 1995, respectively. The increase in operating income during the second quarter of fiscal 1996 was primarily attributable to a growth in revenues and increased gross margins. INTEREST INCOME. Interest income for the second quarter of fiscal 1996 was $152 thousand compared to $156 thousand for the second quarter of the previous fiscal year. Interest income generated during both periods was from short-term investments resulting from capital raised through the Company's secondary public offering of its common stock in January 1994. PROVISION FOR INCOME TAXES. Provision for income taxes was $842 thousand and $403 thousand for the second quarter of fiscal 1996 and 1995, respectively. This represents a provisional tax rate of 37.5% and 36.0% for the second quarter of fiscal 1996 and 1995, respectively. COMPARISON OF SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 - ---------------------------------------------------------- REVENUES. Revenues were $71.5 million and $53.0 million for the six months ended September 30, 1995 and 1994, respectively, representing an increase of 35%. This increase was attributable to growth in both commercial and government contracts. During the six months ended September 30, 1995, revenues generated by commercial activities represented approximately 45% of total revenues compared to approximately 34% in the same period of the prior year. The growth in the Company's commercial business has been supported in part by increased demand for the Company's contract manufacturing services. For the first six months of fiscal 1996, revenues from the Company's government business increased by 14% compared to revenues for the six months ended September 30, 1994. COST OF REVENUES. Cost of revenues were $58.1 million and $41.9 million for the six months ended September 30, 1995 and 1994 respectively, representing a 39% increase. The increase during the first six months of fiscal 1996 was the result of the recognition of costs and revenues on low or no margin contracts such as INTELSAT and a U.S. Army satellite terminal contract and from the direct cost to support the higher levels of revenues reported for both commercial and government contracts. The Company's cost-to-complete on the INTELSAT and U.S. Army contracts will require the Company to recognize cost of revenues equal or near the level of revenues reported for these contracts. The Company expects to complete these contract by the end of the first quarter of fiscal 1997. RESEARCH AND DEVELOPMENT. A substantial portion of the Company's research and development expenses consist of bid and proposal expenses associated with the pursuit of government contracts and certain large commercial contracts. Total research and development cost were $3.8 million and $4.3 million for the first six months of fiscal year 1996 and 1995, respectively. Bid and proposal expenses represented approximately 52% and 45% of total research and development cost for the first six months ended September 30, 1995 and 1994, respectively. The Company anticipates that it will increase the level of R&D expenses during the second half of fiscal 1996 to support new product developments. MARKETING AND ADMINISTRATIVE. Marketing and administrative expenses were $5.9 million and $4.4 million for the first six months of fiscal 1996 and 1995, respectively, representing an increase of 33%. This increase is primarily a result of increasing the Company's technical marketing staff and increased marketing expenses in pursuit of commercial opportunities. OPERATING INCOME. Operating income was $3.7 million and $2.3 million for the six months ended September 30, 1995 and 1994, respectively. The increase in operating income during the first six months of fiscal 1996 was primarily attributable to a growth in revenues. Gross margins during the first six months of fiscal 1996 have been adversely affected by low or no margin revenues recognized on the INTELSAT and U.S. Army satellite terminal contracts. INTEREST INCOME. Interest income for the first six months of fiscal 1996 and 1995 was $330 thousand and $336 thousand, respectively. Interest income generated during both periods was from short-term investments resulting from capital raised through the Company's secondary public offering of its common stock in January 1994. PROVISION FOR INCOME TAXES. Provision for income taxes was $1.5 million and $960 thousand for the first six months of fiscal 1996 and 1995, respectively. This represents a provisional tax rate of 37.5% and 36.0% for the first six months of fiscal 1996 and 1995, respectively. BOOKINGS AND BACKLOG - -------------------- Funded bookings were $41.1 million and $40.0 million for the second quarter of fiscal 1996 and 1995, respectively, and $79.8 million and $68.1 million for the six months ended September 30, 1995 and 1994, respectively. The increase in bookings were derived from both the Company's commercial operations as well as its government business sectors. The increase in bookings has resulted in the Company's backlog increasing from $74.3 million at the end of the second quarter of fiscal 1995 to $80.7 million at the end of the second quarter of fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital increased from $50.5 million to $50.6 million at September 30, 1994 and 1995, respectively and increased by $2.7 million from the end of fiscal 1995. Net cash provided by operating activities for the first six months of fiscal 1996, ended September 30, 1995, was $691 thousand compared to cash used in operating activities of $2.1 million for the first six months of fiscal 1995 ended September 30, 1994. During the first half of fiscal 1996, the Company increased its inventories by $6.9 million, decreased its billed and unbilled receivables by $5.7 million and increased its prepaid expenses and other assets by $3.9 million. During the first half of fiscal 1995, the Company increased its billed and unbilled receivables by $6.1 million. The Company utilized its cash for the purchase of property and equipment totaling $2.8 million and $2.5 million during the second quarter of fiscal 1996 and 1995, respectively. The Company has a bank credit commitment of $15.0 million which it has utilized to augment cash flow needs and to secure standby letter of credit or term loans not to exceed the lesser of $5.0 million, or the amount of fixed assets purchased during the preceding twelve months. Available borrowings under this line at September 30, 1995 were $15.0 million. Under this line of credit the Company must maintain certain financial covenants, including a minimum debt coverage for two consecutive fiscal quarters. As a result of not maintaining the minimum debt coverage during the third quarter of fiscal 1995, the Company is prohibited from utilizing the long term loan provision of its credit agreement for a minimum of six months unless a waiver is requested by the Company and granted by the bank. As of September 30, 1995, a waiver has not been requested. The credit arrangement expires on November 30, 1995. At September 30, 1995, the Company's long-term obligations (including current maturities) and other long-term liabilities totaled approximately $1.2 million. At September 30, 1995, cash and cash equivalents of $4.4 million were held in money market accounts and short-term investments of $7.0 million were held in U.S. Government Treasury instruments. The Company believes that its current cash position, funds generated from operations and funds available from its existing bank credit agreement, will be adequate to meet the Company's requirements for working capital, capital expenditures and debt service for the foreseeable future. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company's EDGAR Financial Data Schedule for the year-to-date period ending September 30, 1995 is attached to this Form 10-Q as an exhibit. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K During the quarter ended September 30, 1995 the Company was not required to file a Form 8-K with the Securities and Exchange Commission. SIGNATURES 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. Stanford Telecommunications, Inc. (Registrant) - ------------------------------------------ Gary Wolf Vice-President and Chief Financial Officer (Principal Financial and Accounting Officer) October 25, 1995 EX-27 2 FDS EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS MAR-31-1996 SEP-30-1995 4,420 6,952 33,809 0 21,927 74,408 46,076 30,380 90,650 23,768 0 63 0 0 65,110 90,650 71,549 71,549 58,091 67,832 0 0 0 4,047 1,518 2,529 0 0 0 2,529 0 0.40
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