SIGNAL TECHNOLOGY CORP - 10-Q Quarterly Report

Back to GetFilings.com

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

[ ] 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 000-21770

SIGNAL TECHNOLOGY CORPORATION
(Exact Name of Registrant As Specified In Its Charter)


DELAWARE (State Or Other Jurisdiction Of Incorporation Or Organization)		04-2758268 (I.R.S. Employer Identification No.)

222 ROSEWOOD DRIVE, DANVERS, MA (Address of principal executive offices)		01923-4502 (Zip Code)

Registrant’s telephone number, including area code: (978) 774-2281

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: [ ]

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock as of the latest practicable date.


Common Stock $.01 Par Value		Outstanding at November 1, 2002 10,508,928 shares

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets
	Condensed Consolidated Statements of Operations
	Condensed Consolidated Statements of Cash Flows
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
	SIGNATURE
CERTIFICATIONS PURSUANT TO ss.302 OF THE SARBANES-OXLEY ACT OF 2002
EX-99.1 Certificate Pursuant to Section 906
EX-99.2 Certificate Pursuant to Section 906

TABLE OF CONTENTS

SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20
ITEM 4.	CONTROLS AND PROCEDURES	20

PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	20
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	20

SIGNATURE		21

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002		22

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
(In thousands)


		September 30,			December 31,
		2002			2001

		(Unaudited)
ASSETS:
Cash and cash equivalents		$	14,517		$	10,849
Restricted cash			112			—
Accounts receivable, net			14,683			11,673
Inventories, net of progress payments			14,310			13,970
Deferred taxes			1,234			1,234
Refundable income taxes			3,681			2,298
Other current assets			928			447
Assets from discontinued operations			1,815			16,184

	Total current assets		51,280			56,655
Restricted cash			488			—
Property, plant and equipment, net			14,950			13,937
Goodwill			1,222			910
Intangible assets, net			635			8,124
Other assets			1,098			3,769

	Total assets	$	69,673		$	83,395

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Accounts payable		$	4,217		$	4,258
Accrued expenses			10,902			10,159
Customer advances			3,303			2,055
Other current liabilities			—			2,298
Current maturities of long-term debt			4,488			4,609
Liabilities from discontinued operations			503			1,671

	Total current liabilities		23,413			25,050
Deferred income taxes			1,234			1,234
Other long-term liabilities			1,230			3,003
Long-term debt, net of current maturities			523			545

	Total liabilities		26,400			29,832

Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock			106			105
Additional paid-in capital			56,887			55,845
Accumulated deficit			(12,749	)		(1,416	)

			44,244			54,534
Less treasury stock			(971	)		(971	)

	Total stockholders’ equity		43,273			53,563

	Total liabilities and stockholders’ equity	$	69,673		$	83,395

The accompanying notes are an integral part of the condensed consolidated financial statements.

SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)


					Three Months Ended						Nine Months Ended
					September 30,						September 30,

					2002			2001			2002			2001

Net sales					$	21,092		$	19,024		$	59,174		$	55,916
Cost of sales						12,716			12,269			38,344			37,143

				Gross profit		8,376			6,755			20,830			18,773

Operating expenses:
				Selling, general and administrative		3,468			5,046			13,613			13,987
				Research and development		1,883			656			5,150			901
			Impairment on long-lived assets			5,295			—			5,295			—

				Total operating expenses		10,646			5,702			24,058			14,888

Operating income (loss)						(2,270	)		1,053			(3,228	)		3,885
Interest expense						(90	)		(102	)		(274	)		(324	)
Interest income						56			113			173			679

Income (loss) from continuing operations before income taxes						(2,304	)		1,064			(3,329	)		4,240
Provision for income taxes						—			410			—			1,635

Income (loss) from continuing operations						(2,304	)		654			(3,329	)		2,605

Discontinued operations:
	Loss from discontinued operations, net of tax					(545	)		(16,780	)		(2,722	)		(19,407	)
	Loss on disposal of discontinued operations, net of tax					(1,901	)		—			(1,916	)		—

			Total discontinued operations			(2,446	)		(16,780	)		(4,638	)		(19,407	)

Loss before cumulative effect of change in accounting principle						(4,750	)		(16,126	)		(7,967	)		(16,802	)
Cumulative effect of change in accounting principle, net of tax						—			—			(3,366	)		—

Net loss					$	(4,750	)	$	(16,126	)	$	(11,333	)	$	(16,802	)

Per common share:
		Basic:
				Income (loss) from continuing operations	$	(0.22	)	$	0.06		$	(0.32	)	$	0.26
			Discontinued operations			(0.23	)		(1.67	)		(0.45	)		(1.94	)
				Cumulative effect of change in accounting principle, net of tax		—			—			(0.32	)		—

				Net loss	$	(0.45	)	$	(1.61	)	$	(1.09	)	$	(1.68	)

Per common share:
		Diluted:
				Income (loss) from continuing operations	$	(0.22	)	$	0.06		$	(0.32	)	$	0.24
			Discontinued operations			(0.23	)		(1.67	)		(0.45	)		(1.94	)
				Cumulative effect of change in accounting principle, net of tax		—			—			(0.32	)		—

				Net loss	$	(0.45	)	$	(1.61	)	$	(1.09	)	$	(1.68	)

Shares used in calculating net loss per share:
				Basic		10,473			10,024			10,420			9,981

				Diluted		10,473			10,675			10,420			10,678

The accompanying notes are an integral part of the condensed consolidated financial statements.

SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


		Nine Months Ended
		September 30,

		2002			2001

Net cash provided by operating activities from continuing operations		$	1,673		$	4,509

Cash flows investing activities from continuing operations:
	Purchases of property, plant and equipment		(2,263	)		(2,821	)
	Proceeds from sale of discontinued operations		3,400			—
	Proceeds from sale of property, plant and equipment		—			37
	Other assets		13			(1,480	)

Net cash provided by (used in) investing activities from continuing operations			1,150			(4,264	)

Cash flows from financing activities from continuing operations:
	Restricted cash		(600	)		—
	Proceeds from note payable		229			—
	Payments on short/ long-term debt		(422	)		(394	)
	Proceeds from exercise of stock options		326			200
	Proceeds from employee stock purchase plan		475			642

Net cash provided by financing activities from continuing operations			8			448

Net cash provided by continuing operations			2,831			693
Net cash provided by (used in) discontinued operations			837			(23,176	)

Net increase (decrease) in cash			3,668			(22,483	)
Cash and cash equivalents, beginning of period			10,849			31,024

Cash and cash equivalents, end of period		$	14,517		$	8,541

The accompanying notes are an integral part of the condensed consolidated financial statements.

SIGNAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(In thousands, except per share data)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements of the Company as of September 30, 2002 and for the three and nine months ended September 30, 2002 and 2001 are unaudited. All adjustments (consisting only of normal recurring adjustments) have been made, which in the opinion of management are necessary for a fair presentation. Results of operations for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be achieved for the full fiscal year or for any future period. These financial statements should be read in conjunction with the audited financial statements for the fiscal year ended December 31, 2001, included in our annual report on Form 10-K. The year-end condensed balance sheet data was derived from the audited financial statements and does not include all the disclosures required by generally accepted accounting principles. During the second quarter of 2002, we completed our adoption of Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” and recorded the impact retroactive to the first quarter of 2002, in accordance with the provisions of this standard. See Note 6 for the impact from this adoption. Our fiscal quarter consists of a thirteen-week period ending on the Saturday closest to September 30. For ease of presentation, interim periods are designated to have ended on September 30.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2002, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting (SFAS) No. 145, “Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.” Adoption of the standard is generally required in the fiscal year beginning after May 15, 2002, with certain provisions becoming effective for financial statements issued on or after May 15, 2002. Under the standard, transactions currently classified as extraordinary items will no longer be treated as such, but instead will be reported as other non-operating income or expenses. The Company does not expect any impact from the adoption of SFAS No. 145.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which supercedes the FASB’s Emerging Issues Task Force (“EITF”) 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The provisions of this Statement are required to be adopted for exit or disposal activities that are initiated after December 31, 2002. Under this standard, a liability for a cost associated with an exit or disposal activity formerly recognized upon the entity’s commitment to an exit plan are now recognized when the liability is incurred. This standard will impact any future restructuring the Company approves on or after January 1, 2003.

3. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of the incremental common shares that would be issued upon exercise of stock options and warrants for all periods using the treasury stock method.

A reconciliation of the numerator and denominator of both basic and diluted earnings (loss) per share is provided as follows:

Three Months Ended

Nine Months Ended

September 30,

2002

2001

2002

2001

Basic earnings (loss) per share

Numerator:

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

			In May 2002, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting (SFAS) No. 145, “Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.” Adoption of the standard is generally required in the fiscal year beginning after May 15, 2002, with certain provisions becoming effective for financial statements issued on or after May 15, 2002. Under the standard, transactions currently classified as extraordinary items will no longer be treated as such, but instead will be reported as other non-operating income or expenses. The Company does not expect any impact from the adoption of SFAS No. 145.

			In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which supercedes the FASB’s Emerging Issues Task Force (“EITF”) 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The provisions of this Statement are required to be adopted for exit or disposal activities that are initiated after December 31, 2002. Under this standard, a liability for a cost associated with an exit or disposal activity formerly recognized upon the entity’s commitment to an exit plan are now recognized when the liability is incurred. This standard will impact any future restructuring the Company approves on or after January 1, 2003.