-----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, B5UhpnQFXcMSaLKQiTRDlg9lqFiPgMzzekxOAdyy8ZV6LxEf0gZE9rT8v07Skru+ NmyDYEZc3XheoWQNPGTyCA== 0000950005-97-000670.txt : 19970804 0000950005-97-000670.hdr.sgml : 19970804 ACCESSION NUMBER: 0000950005-97-000670 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970801 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: 97650334 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 QUARTERLY REPORT 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 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 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. 12,874,249 as of July 15, 1997 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. 1997 Annual Report. The results of operations for the first three months of fiscal year 1998 ended June 30, 1997 are not necessarily indicative of results to be expected for the entire year ending March 31, 1998. STANFORD TELECOMMUNICATIONS, INC. CONDENSED BALANCE SHEETS (in thousands, except per share amount)
ASSETS June 30, March 31, 1997 1997 --------- ---------- (Unaudited) Current assets: Cash and cash equivalents $ 5,827 $ 8,235 Short-term investments 27,787 25,074 Accounts receivable 23,209 25,856 Unbilled receivables 20,424 19,754 Inventories, net of related progress billings 7,196 6,011 Prepaid expenses 4,752 4,201 --------- --------- Total current assets 89,195 89,131 --------- --------- Property and equipment at cost: Electronic test equipment 43,642 42,797 Furniture and fixtures 3,674 3,613 Leasehold improvements 3,816 3,722 --------- --------- 51,132 50,132 Less: Accumulated depreciation and amortization (36,929) (36,019) --------- --------- Net property and equipment 14,203 14,113 --------- --------- Other assets 291 274 --------- --------- $ 103,689 $ 103,518 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations $ 78 $ 88 Accounts payable 6,524 5,902 Advance payments from customers 1,716 1,581 Accrued liabilities 8,860 10,601 Accrued and current deferred income taxes 3,975 4,549 --------- --------- Total current liabilities 21,153 22,721 --------- --------- Long-term obligations, less current maturities 18 30 --------- --------- Other long-term liabilities 890 910 --------- --------- Deferred income taxes 108 151 --------- --------- Shareholders' equity: Common shares - par value $.01; 25,000 shares authorized Outstanding - 12,874 shares at June 30, 1997 129 128 - 12,833 shares at March 31, 1997 Paid-in capital 40,841 40,410 Retained earnings 40,550 39,168 --------- --------- Total shareholders' equity 81,520 79,706 --------- --------- $ 103,689 $ 103,518 ========= ========= See accompanying notes.
STANFORD TELECOMMUNICATIONS, INC. CONDENSED STATEMENTS OF INCOME (UNAUDITED) (in thousands, except per share amount) Three Months Ended June 30, ---------------------- 1997 1996 -------- ------- Revenues $ 35,331 $ 40,843 Cost of revenues 26,430 31,993 -------- -------- Gross profit 8,901 8,850 Expenses Research and development 3,031 2,229 Marketing and administrative 4,251 4,022 -------- -------- Total expenses 7,282 6,251 Operating income 1,619 2,599 Interest income, net 459 284 -------- -------- Income before income taxes 2,078 2,883 Provision for income taxes (696) (995) -------- -------- Net income $ 1,382 $ 1,888 ======== ======== Weighted average common shares and equivalents 13,073 13,048 Net income per share $ 0.11 $ 0.14 ======== ======== See accompanying notes STANFORD TELECOMMUNICATIONS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Three Months Ended June 30, ------------------ 1997 1996 -------- -------- Cash flows from operating activities: Net income $ 1,382 $ 1,888 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,365 1,244 Issuances of stock to employees under bonus and award plans 5 27 Provision for losses on receivables and contracts 140 472 (Increase) decrease in assets: Receivables billed and unbilled 1,972 (3,790) Inventories (1,320) 2,506 Prepaid expenses and other assets (568) (261) Increase (decrease) in liabilities: Accounts payable, advance payments, and accrued expenses (984) 2,843 Other long-term liabilities (20) (19) Accrued and deferred income taxes (617) (13) -------- -------- Net cash provided by operating activities 1,355 4,897 -------- -------- Cash flows from investing activities: Purchase of short-term investments (2,713) (968) Purchase of property and equipment (1,455) (1,269) -------- -------- Net cash used in investing activities (4,168) (2,237) -------- -------- Cash flows from financing activities: Payments on capital lease obligations (22) (25) Proceeds from transactions under stock plans 427 712 -------- -------- Net cash provided by financing activities 405 687 -------- -------- Net (decrease) increase in cash and cash equivalents (2,408) 3,347 Cash and cash equivalents at beginning of period 8,235 4,409 -------- -------- Cash and cash equivalents at end of period $ 5,827 $ 7,756 ======== ======== See accompanying notes.
STANFORD TELECOMMUNICATIONS, INC. Notes to Condensed Interim Financial Statements (Unaudited) June 30, 1997 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. In February 1997, the Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS 128) was issued and is effective for fiscal years ending after December 15, 1997. SFAS 128 requires companies to compute earnings per share under two different methods, basic and diluted, and to disclose the methodology used for the calculation. Pro forma earnings per share amounts calculated under SFAS 128 are as follows: Three months ended ------------------------------ June 30, 1997 June 30, 1996 ------------- ------------- Net income per share Basic $0.11 $0.15 Diluted $0.11 $0.14 Shares used in per share calculation (in thousands) Basic 12,842 12,699 Diluted 13,073 13,048 2. Comprehensive Income In July 1997, the Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS 130) was issued and is effective for fiscal years ending after December 15, 1997. The Company does not expect that the adoption of SFAS 130 will have a material effect on the financial statements. 3. 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): June 30, 1997 March 31, 1997 ------------- -------------- Work-in-progress $ 5,087 $ 3,721 Finished goods 2,322 2,318 Allocated general and administrative costs 87 118 Less: progress billings (300) (146) ------- ------- $ 7,196 $ 6,011 ======= ======= 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, or a unit shipped basis for production contracts. 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 year 1989 to approximately 41% of total revenues in fiscal year 1997. During fiscal year 1997, commercial revenues which amounted to approximately $68.5 million included: (i) contract manufacturing revenues from the Company's electronics assembly business ($34.0 million); (ii)sales of ASICs, circuit boards and subsystems to the telecommunications industry ($17.0 million); and (iii) other commercial systems and product business ($17.5 million). During the first quarter of fiscal 1998, commercial revenues amounted to approximately $13.7 million or approximately 39% of total revenues reported. The Company includes in commercial revenues sales of standard or off-the-shelf products such as GPS simulators and digital interfaces for secure voice transmissions 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 has instituted 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. Cautionary Statements In the interest of providing the Company's shareholders and potential investors with certain Company information, including management's assessment of the Company's future potential, certain statements set forth herein (a) contain or are based on projections of revenue, income, earnings per share and other financial items or (b) relate to management's future plans, expectations, and objectives or to the Company's future economic performance. Such statements are "forward-looking statements" within the meaning of Section 27A(i) of the Securities Act of 1933, as amended, and in Section 21E(i) of the Securities Exchange Act of 1934, as amended. Although any forward-looking statements contained herein or otherwise expressed by or on behalf of the Company are to the knowledge and in the judgment of the officers and directors of the Company, expected to prove true and to come to pass, management is not able to predict the future with absolute certainty. Accordingly, shareholders and potential investors are hereby cautioned that certain events or circumstances could cause actual results to differ materially from those projected or predicted herein. In addition, the forward-looking statements herein are based on management's knowledge and judgment as of the date hereof, and the Company does not intend to update any forward-looking statements to reflect events occurring or circumstances existing hereafter. For further information on the foregoing, reference is made to the Company's Securities and Exchange Commission report on Form 10-K. Quarterly Results The following table presents the Company's financial results by quarter for fiscal 1997 and the first quarter of fiscal 1998. 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 Statement of Operations Data (in thousands, except per share data) Fiscal 1997 Fiscal 1998 ------------------------------------------- ----------- June 30 Sept.30 Dec.31 Mar.31 June 30 ------- ------- ------ ------ ------- Revenues $ 40,843 $ 41,058 $ 42,028 $ 43,073 $ 35,331 Cost of revenues 31,993 30,889 32,305 32,245 26,430 -------- -------- -------- -------- -------- Gross profit 8,850 10,169 9,723 10,828 8,901 -------- -------- -------- -------- -------- Expenses: Research and development 2,229 3,444 2,903 3,292 3,031 Marketing and administrative 4,022 4,105 4,170 4,511 4,251 -------- -------- -------- -------- -------- Total expenses 6,251 7,549 7,073 7,803 7,282 Operating income 2,599 2,620 2,650 3,025 1,619 Interest income, net 284 298 342 412 459 -------- -------- -------- -------- -------- Income before provision for 2,883 2,918 2,992 3,437 2,078 income taxes Provision for income taxes (995) (1,007) (1,032) (1,185) (696) -------- -------- -------- -------- -------- Net income $ 1,888 $ 1,911 $ 1,960 $ 2,252 $ 1,382 ======== ======== ======== ======== ======== Net income per shar $ 0.14 $ 0.1 $ 0.15 $ 0.17 $ 0.11 ======== ======== ======== ======== ======== Weighted average common shares and equivalents 13,048 13,098 13,042 13,040 13,073
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; reduced levels of operation during the holidays which occur primarily in the Company's third fiscal quarter; disruptions in delivery of components or subsystems; regulatory developments; and general economic conditions. Research and development expenses include both research and development costs as well as bid and proposal expenses. Bid and proposal expenses 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 First Quarter Ended June 30, 1997 and 1996 Revenues. Revenues were $35.3 million and $40.8 million for the first quarter of fiscal years 1998 and 1997, respectively, representing a decrease of approximately 13%. Government revenues remained unchanged at approximately $21.6 million. Commercial revenues during the first quarter of fiscal 1998 totaled $13.7 million, a decrease of 29% from commercial revenues of $19.2 million recorded during the first quarter of fiscal 1997. The decrease can be mainly attributable to a decline in the Company's commercial manufacturing service revenue. During the first quarter of fiscal 1998, revenues from commercial contract manufacturing services totaled $4.2 million, down by $7.1 million from $11.3 million recorded for the first quarter of fiscal 1997. Revenues from the sale of commercial telecommunication chip and board level products totaled $3.8 million for the first quarter of fiscal 1998 compared to $4.0 million for the first quarter of the previous fiscal year. Other commercial revenues increased from $3.9 million in the first quarter of fiscal year 1997 to $5.7 million in the first quarter of 1998. Cost of Revenues. Cost of revenues were $26.4 million and $32.0 million for the first quarter of fiscal 1998 and 1997, respectively, representing a 17.5% decrease. This decrease is attributable to a lower revenue base experienced during the first quarter of fiscal 1998 compared to the first quarter of the previous fiscal year. The increase in gross profit percentage from 22% in the first quarter of fiscal year 1997 to 25% in the first quarter of fiscal year 1998 can be attributable to a decrease in lower margin commercial electronic contract manufacturing revenues and completion of higher margin fixed price contracts. Research and Development. During recent quarters, the Company has focused its available research and development funds on the development of commercial products. Research and development expenses, including bid and proposal expenses were $3.0 million and $2.2 million during the first quarter of fiscal 1998 and 1997, respectively. Excluding bid and proposal expenses, the Company's research and development expenses applied to the development of its products were $2.4 million and $1.8 million during the first quarter of fiscal 1998 and 1997, respectively. Bid and proposal expenses are largely the initial advanced technology development efforts directed toward a specific product or technical task for which the Company must show technical viability. The Company expects research and development expenses to increase in the future as it pursues additional commercial activities. Marketing and Administrative. Marketing and Administrative expenses were $4.3 million and $4.0 million for the first quarter of fiscal 1998 and 1997, respectively. This increase is primarily a result of personnel additions to its technical marketing staff and increased marketing expenses in pursuit of commercial opportunities. Operating Income. Operating income was $1.6 million and $2.6 million for the first quarter of fiscal 1998 and 1997, respectively. The decrease in operating income during the first quarter of fiscal 1998 compared to first quarter of fiscal 1997 was primarily attributable to an increase in research and development expenses and marketing and administrative expenses. Interest Income. Interest income for the first quarter of fiscal 1998 was $459 thousand versus $284 thousand for the first quarter of the previous fiscal year. The increase in interest income is primarily a result of the Company increasing its net cash provided by operating activities and investing that cash in short-term investments. Provision for Income Taxes. Provision for income taxes was $696 thousand and $995 thousand for the first quarter of fiscal years 1998 and 1997, respectively. This represents a provisional tax rate of 33.5% and 34.5% for the first quarter of fiscal 1998 and 1997, respectively. The Company expects its provisional tax rate to remain a 33.5% throughout fiscal 1998. Bookings and Backlog Funded bookings were $45.3 million and $41.2 million for the first quarter of fiscal 1998 and 1997, respectively, representing an increase of 10%. The increase in bookings has resulted in the Company's backlog increasing from $82.9 million at the end of the first quarter of fiscal 1997 to a record high $93.9 million at the end of the first quarter of fiscal 1998. Liquidity and Capital Resources Working capital increased from $59.0 million to $68.0 million at June 30, 1996 and 1997, respectively, and increased by $1.6 million from the end of fiscal 1997. Net cash provided by operating activities for the quarter ended June 30, 1997 was $1.4 million. During the first quarter of fiscal 1998, the Company realized net income of $1.4 million, increased its inventories by $1.3 million, decreased its billed and unbilled receivables by $2.0 million and decreased its accounts payable, advance payments and accrued expenses by $1.0 million. Net cash provided by operating activities for the quarter ended June 30, 1996 was $4.9 million. During the first quarter of fiscal 1997, the Company realized net income of $1.9 million, decreased its inventories by $2.5 million, increased its billed and unbilled receivables by $3.8 million and increased its accounts payable, advance payments and accrued expenses by $2.8 million. The Company utilized its cash for the purchase of property and equipment totaling $1.4 million and $1.3 million during the first quarter of fiscal 1998 and 1997, respectively. The Company has a bank credit commitment of $15.0 million which it can utilize to augment cash flow needs and to secure standby letters of credit. Available borrowings under this line at June 30, 1997 were $15.0 million. Under this line of credit the Company must maintain certain financial covenants. The Company was in compliance with all covenants throughout the first quarter of fiscal 1998. The credit agreement expires on December 5, 1997. At June 30, 1997, the Company's long-term obligations (including current maturities) and other long-term liabilities totaled approximately $1.0 million. At June 30, 1997, cash and cash equivalents of $5.8 million were held in money market accounts, short term investments of $27.8 million were held in U.S. 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 next several fiscal quarters. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 25, 1997 the Company held its annual meeting of shareholders. The following directors were elected to serve for the ensuing year: Michael Berberian John W. Brownie Dr. Val P. Peline Leonard Schuchman Dr. James J. Spilker, Jr. Dr. C. J. Waylan In addition, Arthur Andersen LLP was ratified as the Company's independent auditors for the current fiscal year. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No current Reports on Form 8-K were filed with the Securities and Exchange Commission during the period covered by this Form 10-Q. 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) /s/ Jerome F. Klajbor - -------------------------------------------- Jerome F. Klajbor Vice-President and Chief Financial Officer (Principal Financial and Accounting Officer) July 18, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 Appendix A to item 601(c) of Regulation S-X Commercial and Industrial Companies Article 5 of Regulation S-X Three month period Ending June 30, 1997 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. 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 5,827 27,787 43,633 0 7,196 89,195 51,132 36,929 103,689 21,153 0 0 0 129 81,391 103,689 35,331 35,331 26,430 33,712 0 0 0 2,078 696 1,382 0 0 0 1,382 0.11 0.11
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