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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 March 31, 2003
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.
Indicate by
check mark whether the registrant is an accelerated filer as
defined in rule 12b-2 of the Securities Exchange Act of
1934. Yes x No o.
The number of
shares of registrant's common stock outstanding at May 5, 2003, was
79,406,518.
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
March 31,
|
|
|
|
|
|
|
|
2003
|
|
2002
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
377,880
|
|
$
|
314,348
|
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
315,276
|
|
|
253,425
|
|
|
Selling, general and administrative
|
|
|
39,517
|
|
|
34,653
|
|
|
Research and development
|
|
|
2,368
|
|
|
2,447
|
|
|
Exit and restructuring charges and other (Note
2)
|
|
|
—
|
|
|
1,486
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
357,161
|
|
|
292,011
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
20,719
|
|
|
22,337
|
|
|
Interest
expense
|
|
|
(8,099
|
)
|
|
(8,322
|
)
|
|
Interest income
|
|
|
612
|
|
|
135
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes and cumulative effect of change
in
accounting
principle
|
|
|
13,232
|
|
|
14,150
|
|
|
Income tax
provision
|
|
|
5,293
|
|
|
6,237
|
|
|
|
|
|
|
|
|
Income from continuing
operations before cumulative effect of change in accounting
principle
|
|
|
7,939
|
|
|
7,913
|
|
|
Loss from discontinued
operations, net of tax benefit (Note 4)
|
|
|
(938
|
)
|
|
(1,426
|
)
|
|
Cumulative effect of
change in accounting principle, net of tax benefit (discontinued
operations)
(Note 3)
|
|
|
—
|
|
|
(40,111
|
)
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
|
7,001
|
|
|
(33,624
|
)
|
|
Dividend requirements on
preferred stock
|
|
|
(172
|
)
|
|
(172
|
)
|
|
|
|
|
|
|
|
Net income (loss)
applicable to common stock
|
|
$
|
6,829
|
|
$
|
(33,796
|
)
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before cumulative effect of change in
accounting principle
|
|
$
|
0.10
|
|
$
|
0.11
|
|
|
Loss from
discontinued operations, net of tax benefit
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
Cumulative
effect of change in accounting principle, net of tax benefit
(discontinued operations)
|
|
|
—
|
|
|
(0.57
|
)
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
0.09
|
|
$
|
(0.48
|
)
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
78,622
|
|
|
70,771
|
|
|
|
|
|
|
|
|
Diluted earnings (loss)
per share:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before cumulative effect of change in
accounting principle
|
|
$
|
0.10
|
|
$
|
0.11
|
|
|
Loss from
discontinued operations, net of tax benefit
|
|
|
(0.01
|
)
|
|
(0.03
|
)
|
|
Cumulative
effect of change in accounting principle, net of tax benefit
(discontinued operations)
|
|
|
—
|
|
|
(0.55
|
)
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
0.09
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
81,097
|
|
|
72,385
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
THE TITAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
data)
|
|
March
31,
2003
|
|
December 31,
2002
|
|
|
|
|
|
|
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
36,311
|
|
$
|
34,123
|
|
|
Restricted
cash
|
|
|
135
|
|
|
394
|
|
|
Accounts receivable—net
|
|
|
340,714
|
|
|
314,363
|
|
|
Inventories
|
|
|
31,383
|
|
|
31,280
|
|
|
Prepaid expenses and other
|
|
|
22,098
|
|
|
19,441
|
|
|
Deferred income taxes
|
|
|
103,258
|
|
|
108,046
|
|
|
Current assets of discontinued operations
|
|
|
100,166
|
|
|
103,871
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
634,065
|
|
|
611,518
|
|
|
Property and equipment — net
|
|
|
61,492
|
|
|
63,705
|
|
|
Goodwill
|
|
|
462,199
|
|
|
462,719
|
|
|
Other assets —
net
|
|
|
92,544
|
|
|
99,903
|
|
|
Deferred income
taxes
|
|
|
53,015
|
|
|
53,015
|
|
|
Non-current assets of
discontinued operations
|
|
|
6,836
|
|
|
6,582
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,310,151
|
|
$
|
1,297,442
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Current portion of amounts outstanding under line of
credit
|
|
$
|
3,500
|
|
$
|
3,500
|
|
|
Accounts payable
|
|
|
73,495
|
|
|
81,376
|
|
|
Current portion of long-term debt
|
|
|
855
|
|
|
847
|
|
|
Accrued compensation and benefits
|
|
|
79,879
|
|
|
66,639
|
|
|
Other accrued liabilities
|
|
|
82,281
|
|
|
87,602
|
|
|
Current liabilities of discontinued operations
|
|
|
46,273
|
|
|
49,143
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
286,283
|
|
|
289,107
|
|
|
|
|
|
|
|
|
|
Long-term portion of
amounts outstanding under line of credit
|
|
|
344,750
|
|
|
344,750
|
|
|
|
|
|
|
|
|
|
Other long-term
debt
|
|
|
1,817
|
|
|
2,045
|
|
|
|
|
|
|
|
|
|
Other non-current
liabilities
|
|
|
56,802
|
|
|
54,401
|
|
|
|
|
|
|
|
|
|
Non-current liabilities of
discontinued operations
|
|
|
43,700
|
|
|
44,826
|
|
|
|
|
|
|
|
|
|
Company obligated
mandatory redeemable convertible preferred securities of a
subsidiary trust whose sole assets are senior
subordinated debentures of
Titan
|
|
|
250,000
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Preferred stock: $1 par value, authorized 5,000,000
shares:
|
|
|
|
|
|
|
|
|
Cumulative convertible, $13,800 liquidation
preference, designated 1,068,102 shares: 688,129 shares issued
and
outstanding
|
|
|
688
|
|
|
688
|
|
|
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: 79,182,497 and
78,344,550 shares
|
|
|
792
|
|
|
783
|
|
|
Capital in excess of par value
|
|
|
652,371
|
|
|
647,752
|
|
|
Deferred compensation
|
|
|
(5,951
|
)
|
|
(8,791
|
)
|
|
Retained earnings (deficit)
|
|
|
(320,317
|
)
|
|
(327,318
|
)
|
|
Accumulated other comprehensive income (loss)
|
|
|
(115
|
)
|
|
(132
|
)
|
|
Treasury stock (245,750 shares), at cost
|
|
|
(669
|
)
|
|
(669
|
)
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
326,799
|
|
|
312,313
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders'
equity
|
|
$
|
1,310,151
|
|
$
|
1,297,442
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
THE TITAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
|
|
|
Three
months ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
2002
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Income from continuing
operations before cumulative effect of change in accounting
principle
|
|
$
|
7,939
|
|
$
|
7,913
|
|
|
Adjustments to reconcile
income from continuing operations to net cash provided by
operating
activities, net of effects of
businesses acquired and sold:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
4,878
|
|
|
4,660
|
|
|
Deferred
income taxes and other
|
|
5,801
|
|
|
5,286
|
|
|
Deferred
compensation
|
|
2,840
|
|
|
973
|
|
|
Changes in
operating assets and liabilities, net of the effects of businesses
acquired and sold:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(26,351
|
)
|
|
12,202
|
|
|
Inventories
|
|
935
|
|
|
28
|
|
|
Prepaid
expenses and other assets
|
|
1,901
|
|
|
(7,062
|
)
|
|
Accounts
payable
|
|
(7,881
|
)
|
|
21,388
|
|
|
Accrued
compensation and benefits
|
|
13,240
|
|
|
(1,761
|
)
|
|
Income
taxes payable
|
|
—
|
|
|
7,800
|
|
|
Other
liabilities
|
|
2,324
|
|
|
(3,963
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by
continuing operations
|
|
5,626
|
|
|
47,464
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations
|
|
(938
|
)
|
|
(1,426
|
)
|
|
Minority interest
attributable to discontinued operations
|
|
—
|
|
|
(112
|
)
|
|
Issuance of stock in
subsidiaries
|
|
—
|
|
|
130
|
|
|
Acquisition of businesses,
net of cash acquired
|
|
—
|
|
|
71
|
|
|
Deferred compensation
charge attributable to discontinued operations
|
|
—
|
|
|
3,890
|
|
|
Changes in net assets and
liabilities of discontinued operations
|
|
(1,080
|
)
|
|
(44,793
|
)
|
|
|
|
|
|
|
|
|
Net cash used for
discontinued operations
|
|
(2,018
|
)
|
|
(42,240
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
3,608
|
|
|
5,224
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(2,500
|
)
|
|
(5,378
|
)
|
|
Acquisition of businesses,
net of cash acquired
|
|
—
|
|
|
26,767
|
|
|
Proceeds from sale of
investments and business
|
|
—
|
|
|
1,500
|
|
|
Other
investments
|
|
(62
|
)
|
|
(945
|
)
|
|
Other
|
|
89
|
|
|
109
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used
for) investing activities
|
|
(2,473
|
)
|
|
22,053
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
Retirements of
debt
|
|
(220
|
)
|
|
(18,349
|
)
|
|
Issuance of stock by
subsidiaries
|
|
—
|
|
|
123
|
|
|
Deferred debt issuance
costs
|
|
—
|
|
|
(1,132
|
)
|
|
Decrease (increase) in
restricted cash
|
|
259
|
|
|
(1,104
|
)
|
|
Dividends paid
|
|
(172
|
)
|
|
(172
|
)
|
|
Proceeds from stock
issuances
|
|
1,233
|
|
|
2,605
|
|
|
Other
|
|
(64
|
)
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by (used
for) financing activities
|
|
1,036
|
|
|
(18,040
|
)
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
17
|
|
|
67
|
|
|
|
|
|
|
|
|
|
Net increase in cash and
cash equivalents
|
|
2,188
|
|
|
9,304
|
|
|
Cash and cash equivalents
at beginning of period
|
|
34,123
|
|
|
18,621
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
at end of period
|
|
$
|
36,311
|
|
$
|
27,925
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.