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UNITED
STATES
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 September 30, 2002
or
|
o
|
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 1-6035
THE
TITAN CORPORATION
(Exact name of registrant as specified in its charter)
|
DELAWARE
(State or other jurisdiction of
incorporation or organization)
|
|
95-2588754
(I.R.S. Employer
Identification No.)
|
3033
Science Park Road
San Diego, California 92121-1199
(Address of
principal executive offices, zip code)
(Registrant's telephone number, including area
code) (858) 552-9500
(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 o.
The number of
shares of registrant's common stock outstanding at November 1,
2002, was 78,022,197.
Part I—FINANCIAL INFORMATION
Item 1. Financial Statements
THE TITAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
|
|
|
Three
months ended
September 30,
|
|
Nine
months ended
September 30,
|
|
|
|
|
|
|
|
|
|
2002
|
|
2001
|
|
2002
|
|
2001
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
352,819
|
|
$
|
237,158
|
|
$
|
1,012,798
|
|
$
|
681,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
286,977
|
|
|
181,619
|
|
|
817,161
|
|
|
524,561
|
|
|
Selling, general and administrative expense
|
|
|
60,699
|
|
|
38,712
|
|
|
137,429
|
|
|
113,295
|
|
|
Research and development expense
|
|
|
3,954
|
|
|
2,953
|
|
|
7,051
|
|
|
7,147
|
|
|
Exit and restructuring charges and other (Note
3)
|
|
|
46,743
|
|
|
—
|
|
|
50,062
|
|
|
—
|
|
|
Acquisition and integration related charges and other
(Note 4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,847
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
398,373
|
|
|
223,284
|
|
|
1,011,703
|
|
|
672,850
|
|
|
|
|
|
|
|
1,095
|
|
|
|
|
Operating profit
(loss)
|
|
|
(45,554
|
)
|
|
13,874
|
|
|
1,095
|
|
|
8,668
|
|
|
Interest
expense
|
|
|
(8,262
|
)
|
|
(9,042
|
)
|
|
(24,270
|
)
|
|
(28,605
|
)
|
|
Interest income
|
|
|
565
|
|
|
745
|
|
|
816
|
|
|
1,294
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before income taxes, minority
interests,
extraordinary loss and
cumulative effect of change in accounting principle
|
|
|
(53,251
|
)
|
|
5,577
|
|
|
(22,359
|
)
|
|
(18,643
|
)
|
|
Income tax provision
(benefit)
|
|
|
(19,735
|
)
|
|
2,710
|
|
|
(6,918
|
)
|
|
(4,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before minority interests,
extraordinary loss and
cumulative effect of change in accounting principle
|
|
|
(33,516
|
)
|
|
2,867
|
|
|
(15,441
|
)
|
|
(14,078
|
)
|
|
Minority
interests
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
4,729
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before extraordinary loss and
cumulative effect of change in
accounting principle
|
|
|
(33,516
|
)
|
|
2,937
|
|
|
(15,441
|
)
|
|
(9,349
|
)
|
|
Loss from discontinued
operations, net of tax benefit (Note 6)
|
|
|
(191,782
|
)
|
|
(41,728
|
)
|
|
(209,729
|
)
|
|
(97,117
|
)
|
|
Extraordinary loss from
early extinguishment of debt, net of tax benefit
|
|
|
—
|
|
|
—
|
|
|
(5,408
|
)
|
|
—
|
|
|
Cumulative effect of
change in accounting principle, net of tax benefit
(discontinued operations)
(Note 5)
|
|
|
—
|
|
|
—
|
|
|
(40,111
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
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|
Net loss
|
|
|
(225,298
|
)
|
|
(38,791
|
)
|
|
(270,689
|
)
|
|
(106,466
|
)
|
|
Dividend requirements on
preferred stock
|
|
|
(172
|
)
|
|
(172
|
)
|
|
(517
|
)
|
|
(517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to
common stock
|
|
$
|
(225,470
|
)
|
$
|
(38,963
|
)
|
$
|
(271,206
|
)
|
$
|
(106,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from continuing operations before extraordinary loss
and
cumulative effect of change in accounting principle
|
|
$
|
(0.43
|
)
|
$
|
0.04
|
|
$
|
(0.21
|
)
|
$
|
(0.24
|
)
|
|
Loss from
discontinued operations, net of tax benefit
|
|
|
(2.46
|
)
|
|
(0.67
|
)
|
|
(2.79
|
)
|
|
(1.75
|
)
|
|
Extraordinary
loss from early extinguishment of debt, net of tax
benefit
|
|
|
—
|
|
|
—
|
|
|
(0.07
|
)
|
|
—
|
|
|
Cumulative
effect of change in accounting principle, net of tax benefit
(discontinued
operations)
|
|
|
—
|
|
|
—
|
|
|
(0.53
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2.89
|
)
|
$
|
(0.63
|
)
|
$
|
(3.60
|
)
|
$
|
(1.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
77,820
|
|
|
60,986
|
|
|
75,270
|
|
|
56,019
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss)
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from continuing operations before extraordinary loss
and
cumulative effect of change in accounting principle
|
|
$
|
(0.43
|
)
|
$
|
0.04
|
|
$
|
(0.21
|
)
|
$
|
(0.24
|
)
|
|
Loss from
discontinued operations, net of tax benefit
|
|
|
(2.46
|
)
|
|
(0.65
|
)
|
|
(2.79
|
)
|
|
(1.75
|
)
|
|
Extraordinary
loss from early extinguishment of debt, net of tax
benefit
|
|
|
—
|
|
|
—
|
|
|
(0.07
|
)
|
|
—
|
|
|
Cumulative
effect of change in accounting principle, net of tax benefit
(discontinued
operations)
|
|
|
—
|
|
|
—
|
|
|
(0.53
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2.89
|
)
|
$
|
(0.61
|
)
|
$
|
(3.60
|
)
|
$
|
(1.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
77,820
|
|
|
62,847
|
|
|
75,270
|
|
|
56,019
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
THE TITAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)
|
|
|
September 30,
2002
|
|
December 31,
2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
39,098
|
|
$
|
18,621
|
|
|
Restricted
cash
|
|
|
1,104
|
|
|
—
|
|
|
Accounts receivable—net
|
|
|
304,534
|
|
|
347,507
|
|
|
Inventories
|
|
|
30,586
|
|
|
23,922
|
|
|
Prepaid expenses and other
|
|
|
18,276
|
|
|
15,198
|
|
|
Deferred income taxes
|
|
|
27,750
|
|
|
53,941
|
|
|
Current assets of discontinued operations
|
|
|
51,627
|
|
|
106,075
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
472,975
|
|
|
565,264
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
— net
|
|
|
56,114
|
|
|
61,440
|
|
|
Goodwill
|
|
|
462,202
|
|
|
401,411
|
|
|
Other assets —
net
|
|
|
95,496
|
|
|
77,666
|
|
|
Deferred income
taxes
|
|
|
110,498
|
|
|
—
|
|
|
Non-current assets of
discontinued operations
|
|
|
103,893
|
|
|
346,138
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,301,178
|
|
$
|
1,451,919
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Current portion of amounts outstanding under credit
facility
|
|
$
|
3,500
|
|
$
|
12,813
|
|
|
Accounts payable
|
|
|
59,761
|
|
|
68,648
|
|
|
Acquisition debt
|
|
|
—
|
|
|
2,000
|
|
|
Current portion of long-term debt
|
|
|
776
|
|
|
1,275
|
|
|
Accrued compensation and benefits
|
|
|
76,257
|
|
|
66,473
|
|
|
Other accrued liabilities
|
|
|
78,378
|
|
|
65,309
|
|
|
Income taxes
payable
|
|
|
909
|
|
|
1,174
|
|
|
Current liabilities of discontinued operations
|
|
|
60,865
|
|
|
68,960
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
280,446
|
|
|
286,652
|
|
|
|
|
|
|
|
|
|
Long-term portion of
amounts outstanding under credit facility
|
|
|
346,500
|
|
|
317,187
|
|
|
|
|
|
|
|
|
|
Other long-term
debt
|
|
|
2,322
|
|
|
5,612
|
|
|
|
|
|
|
|
|
|
Other non-current
liabilities
|
|
|
67,387
|
|
|
44,462
|
|
|
|
|
|
|
|
|
|
Non-current liabilities of
discontinued operations
|
|
|
46,112
|
|
|
51,025
|
|
|
|
|
|
|
|
|
|
Company obligated
mandatory redeemable convertible preferred securities of a
subsidiary trust
whose sole assets are senior
subordinated debentures of Titan
|
|
|
250,000
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
—
|
|
|
23
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Preferred stock: $1 par value, authorized 5,000,000
shares:
|
|
|
|
|
|
|
|
|
Cumulative convertible, $13,800 liquidation
preference, designated 1,068,102 shares:
689,354
and 689,678 shares issued and outstanding
|
|
|
689
|
|
|
690
|
|
|
Series A junior participating: designated 1,000,000
authorized shares: None issued
|
|
|
—
|
|
|
—
|
|
|
Common stock: $.01 par value, authorized
200,000,000 shares, issued and outstanding:
78,244,249
and 70,128,582 shares
|
|
|
782
|
|
|
701
|
|
|
Capital in excess of par value
|
|
|
647,580
|
|
|
588,184
|
|
|
Deferred compensation
|
|
|
(11,631
|
)
|
|
(34,519
|
)
|
|
Retained earnings (accumulated deficit)
|
|
|
(328,445
|
)
|
|
(57,239
|
)
|
|
Accumulated other comprehensive income
|
|
|
105
|
|
|
128
|
|
|
Treasury stock (245,750 and 372,050 shares), at
cost
|
|
|
(669
|
)
|
|
(987
|
)
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
308,411
|
|
|
496,958
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders'
equity
|
|
$
|
1,301,178
|
|
$
|
1,451,919
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.