UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 JULY 4, 2003 | ||
| 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 333-89756 | ||
ALION SCIENCE AND TECHNOLOGY CORPORATION
| DELAWARE (State or Other Jurisdiction of Incorporation or Organization) |
54-2061691 (I.R.S. Employer Identification No.) |
|
| 10 West 35th Street Chicago, IL 60616 (312) 567-4000 |
1750 Tysons Boulevard, Suite 1300 McLean, VA 22102 (703) 918-4480 |
(Address, including Zip Code and Telephone Number with
Area Code, of Principal Executive Offices)
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.
| [X] Yes | [ ] No |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes [ ] | No [X] |
The number of shares outstanding of Alion Science and Technology Corporation common stock as of July 4, 2003, was:
Common Stock |
2,731,842 |
ALION SCIENCE AND TECHNOLOGY CORPORATION
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JULY 4, 2003
| PART I – FINANCIAL INFORMATION | 1 | |||||
| Item 1. | Financial Statements | 1 | ||||
| Consolidated Balance Sheets | 1 | |||||
| Consolidated Statements of Operations | 2 | |||||
| Pro Forma Consolidated Statements of Operations | 3 | |||||
| Consolidated Statements of Shareholder’s Equity (Deficit) | 4 | |||||
| Consolidated Statements of Cash Flows | 5 | |||||
| Notes to Consolidated Financial Statements | 6 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition And Results of Operations | 15 | ||||
| Items 3. | Quantitative and Qualitative Disclosures About Market Risk | 32 | ||||
| Item 4. | Controls and Procedures | 33 | ||||
| PART II – OTHER INFORMATION | 33 | |||||
| Item 1. | Legal Proceedings | 33 | ||||
| Item 2. | Changes in Securities and Use of Proceeds | 35 | ||||
| Item 3. | Defaults Upon Senior Securities | 35 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 35 | ||||
| Item 5 | Other Information | 35 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 35 | ||||
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALION SCIENCE AND TECHNOLOGY
CORPORATION
Consolidated Balance Sheets
As of July 4, 2003 (unaudited) and September 30, 2002
(In thousands, except share information)
| July 4, | September 30, | ||||||||||
| 2003 | 2002 | ||||||||||
| (unaudited) | |||||||||||
Assets |
|||||||||||
Current assets: |
|||||||||||
Cash |
$ | 1,714 | $ | 6 | |||||||
Restricted cash |
5 | — | |||||||||
Accounts receivable, less allowance of $2,691 in 2003 |
38,478 | — | |||||||||
Note receivable from Trust |
1 | 1 | |||||||||
Other current assets |
2,986 | — | |||||||||
Total current assets |
43,184 | 7 | |||||||||
Fixed assets, net |
8,977 | — | |||||||||
Intangible assets, net |
25,145 | — | |||||||||
Goodwill |
62,960 | — | |||||||||
Other assets |
245 | — | |||||||||
Total assets |
$ | 140,511 | $ | 7 | |||||||
Liabilities and Shareholder’s Equity |
|||||||||||
Current liabilities: |
|||||||||||
Note payable to bank |
$ | — | $ | 10 | |||||||
Note payable to officer |
1 | 1 | |||||||||
Current portion of senior note payable |
6,250 | — | |||||||||
Trade accounts payable and accrued liabilities |
8,202 | — | |||||||||
Accrued payroll and related liabilities |
12,010 | 86 | |||||||||
Advance payments |
5 | — | |||||||||
ESOP liabilities |
1,238 | — | |||||||||
Billings in excess of costs and estimated earnings
on uncompleted contracts |
426 | — | |||||||||
Total current liabilities |
28,132 | 97 | |||||||||
Long-term debt, excluding current portion |
1,244 | — | |||||||||
Senior note payable, excluding current portion |
25,447 | — | |||||||||
Mezzanine note payable |
17,517 | — | |||||||||
Subordinated note payable |
33,254 | — | |||||||||
Agreement with officer |
738 | — | |||||||||
Accrued post retirement benefit obligation |
2,604 | — | |||||||||
Redeemable common stock warrants |
10,042 | — | |||||||||
Total liabilities |
118,978 | 97 | |||||||||
Shareholder’s equity: |
|||||||||||
Common
stock, $0.01 par value, 15,000,000 shares authorized, 2,737,090 shares and
100 shares issued and 2,731,842 and 100 shares outstanding at
July 4, 2003, and September 30, 2002, respectively |
27 | — | |||||||||
Additional paid-in capital |
27,464 | 1 | |||||||||
Treasury stock, 5,248 shares, at cost |
(58 | ) | — | ||||||||
Accumulated deficit |
(5,900 | ) | (91 | ) | |||||||
Total shareholder’s equity (deficit) |
21,533 | (90 | ) | ||||||||
Total liabilities and shareholder’s equity |
$ | 140,511 | $ | 7 | |||||||
See accompanying notes to consolidated financial statements.
1
ALION SCIENCE AND TECHNOLOGY CORPORATION
Consolidated Statements of Operations
For the 16-Week and 40-Week Periods Ended July 4, 2003 and July 5, 2002
(In thousands, except share and per share information)
(Unaudited)
| For the 16-Week Period | For the 40-Week Period | |||||||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||||
| July 4, 2003 | July 5, 2002 | July 4, 2003 | July 5, 2002 | |||||||||||||||
Contract revenue |
$ | 65,134 | $ | — | $ | 114,139 | $ | — | ||||||||||
Direct contract expense |
47,459 | — | 83,490 | — | ||||||||||||||
Gross profit |
17,675 | — | 30,649 | — | ||||||||||||||
Operating expenses: |
||||||||||||||||||
Indirect contract expense |
3,588 | — | 6,436 | — | ||||||||||||||
Research and development |
50 | — | 69 | — | ||||||||||||||
General and administrative |
8,046 | 38 | 13,355 | 38 | ||||||||||||||
Non
— recurring transaction expense |
174 | — | 726 | — | ||||||||||||||
Rental and occupancy expense |
2,541 | — | 4,634 | — | ||||||||||||||
Depreciation and amortization |
3,797 | — | 6,616 | — | ||||||||||||||
Bad debt expense (recovery) |
(700 | ) | — | (545 | ) | — | ||||||||||||
Total operating expenses |
17,496 | 38 | 31,291 | 38 | ||||||||||||||
Operating income (loss) |
179 | (38 | ) | (642 | ) | (38 | ) | |||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
9 | — | 12 | — | ||||||||||||||
Interest expense |
(2,603 | ) | — | (4,826 | ) | — | ||||||||||||
Other |
(278 | ) | — | (353 | ) | — | ||||||||||||
Loss before income taxes |
(2,693 | ) | (38 | ) | (5,809 | ) | (38 | ) | ||||||||||
Income tax expense |
— | — | — | — | ||||||||||||||
Net loss |
$ | (2,693 | ) | $ | (38 | ) | $ | (5,809 | ) | $ | (38 | ) | ||||||
Basic and diluted loss per share |
$ | (1.00 | ) | |||||||||||||||
Basic and diluted weighted
average common shares
outstanding |
2,693,056 | |||||||||||||||||
See accompanying notes to consolidated financial statements.
2
ALION SCIENCE AND TECHNOLOGY CORPORATION
Pro Forma Consolidated Statements of Operations
For the 16-Week and 40-Week Periods Ended July 4, 2003 and July 5, 2002
(In thousands, except share and per share information)
(Unaudited)
| Pro Forma | Pro Forma | |||||||||||||||||
| For the 16-week Period | For the 40-week Period | |||||||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||||
| July 4, 2003 | July 5, 2002 | July 4, 2003 | July 5, 2002 | |||||||||||||||
Contract
revenue |
$ | 65,134 | $ | 64,485 | $ | 161,404 | $ | 153,039 | ||||||||||
Direct contract expense |
47,459 | 46,967 | 118,145 | 111,890 | ||||||||||||||
Gross
profit |
17,675 | 17,518 | 43,259 | 41,149 | ||||||||||||||
Operating
expenses: |
||||||||||||||||||
Indirect
contract expense |
3,588 | 3,534 | 9,004 | 8,328 | ||||||||||||||
Research
and development |
50 | 196 | 105 | 401 | ||||||||||||||
General
and administrative |
8,046 | 5,999 | 18,240 | 15,372 | ||||||||||||||
Non—recurring
transaction expense |
174 | 2,122 | 6,562 | 3,200 | ||||||||||||||
Rental
and occupancy expense |
2,541 | 2,612 | 6,835 | 6,458 | ||||||||||||||
Depreciation
and amortization |
3,797 | 3,910 | 9,499 | 9,458 | ||||||||||||||
Bad
debt expense (recovery) |
(700 | ) | 90 | (425 | ) | 99 | ||||||||||||
Total
operating expense |
17,496 | 18,463 | 49,820 | 43,316 | ||||||||||||||
Operating
income (loss) |
179 | (945 | ) | (6,561 | ) | (2,167 | ) | |||||||||||
Other
income (expense): |
||||||||||||||||||
Interest
income |
9 | 9 | 34 | 24 | ||||||||||||||
Interest
expense |
(2,603 | ) | (3,071 | ) | (6,980 | ) | (7,406 | ) | ||||||||||
Other |
(278 | ) | (96 | ) | (374 | ) | (152 | ) | ||||||||||
Loss
before income taxes |
(2,693 | ) | (4,103 | ) | (13,881 | ) | (9,701 | ) | ||||||||||
Income
tax expense |
— | (168 | ) | (27 | ) | (534 | ) | |||||||||||
Net
loss |
$ | (2,693 | ) | $ | (4,271 | ) | $ | (13,908 | ) | $ | (10,235 | ) | ||||||
Pro
forma basic and diluted loss per share |
$ | (1.00 | ) | $ | (1.66 | ) | $ | (5.30 | ) | $ | (3.97 | ) | ||||||
Pro
forma basic and diluted weighted average common shares outstanding |
2,693,056 | 2,575,508 | 2,622,527 | 2,575,508 | ||||||||||||||
See accompanying notes to consolidated financial statements.
3
ALION SCIENCE AND TECHNOLOGY CORPORATION
Consolidated Statement of Shareholder’s Equity (Deficit)
For the 40-Week Period Ended July 4, 2003
(In thousands, except share information)
(Unaudited)
| Additional | |||||||||||||||||||||||||||||||||||
| Common | Common | Paid-in | Treasury | Treasury | Accumulated | ||||||||||||||||||||||||||||||
| Shares | Stock | Capital | Shares |
Stock | Deficit | Total | |||||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||||||||||
Balances
at September 30, 2002 |
100 | $ | — | $ | 1 | — |
$ | — | $ | (91 | ) | $ | (90 | ) | |||||||||||||||||||||
Issuance
of common stock to KSOP Trust at December 20, 2002 |
2,575,408 | 26 | 25,728 | — |
— | — | 25,754 | ||||||||||||||||||||||||||||
Issuance
of common stock to KSOP Trust at March 31 and May 31, 2003 |
161,582 | 1 | 1,735 | — |
— | — | 1,736 | ||||||||||||||||||||||||||||
Purchases
of 5,248 shares of common stock from KSOP Trust at June 25, 2003 |
— | — |
— |
5,248 |
(58 | ) | — | (58 | ) | ||||||||||||||||||||||||||
Net
loss, 40-week period ended July 4, 2003 |
— | — | — | — |
(5,809 | ) | (5,809 | ) | |||||||||||||||||||||||||||
| |
|||||||||||||||||||||||||||||||||||
Balances
at July 4, 2003 |
2,737,090 | $ | 27 | $ | 27,464 | 5,248 |
$ | (58 | ) | $ | (5,900 | ) | $ | 21,533 | |||||||||||||||||||||