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, 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 000-49890
MTC TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 02-0593816 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 4032 Linden Avenue, Dayton, Ohio | 45432 | |
| (Address of principal executive offices) | (Zip Code) | |
(937) 252-9199
(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 ¨
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 of Common Stock, $0.001 par value, of the registrant outstanding as of August 1, 2003 was 13,110,146.
MTC TECHNOLOGIES, INC. AND SUBSIDIARIES
Index
| Page Number | ||||||
| Part I |
Financial Information | |||||
| Item 1. | Financial Statements | |||||
| Condensed Consolidated Balance Sheets at June 30, 2003 and December 31, 2002 |
3 | |||||
| 4 | ||||||
| 5 | ||||||
| 6-11 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12-22 | ||||
| Item 3. | 22 | |||||
| Item 4. | 22 | |||||
| Part II |
Other Information | |||||
| Item 1. | 23 | |||||
| Item 2. | 23 | |||||
| Item 4. | 23 | |||||
| Item 6. | 24 | |||||
| 25 | ||||||
| 26 | ||||||
2
MTC TECHNOLOGIES, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Dollars in Thousands Except Per Share Data)
| June 30, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 24,220 | $ | 21,950 | ||||
| Restricted cash |
2,767 | 2,503 | ||||||
| Accounts receivable, net |
33,865 | 30,638 | ||||||
| Costs and estimated earnings in excess of amounts billed on uncompleted contracts |
2,492 | 2,171 | ||||||
| Work-in-process inventory (Note A) |
2,127 | — | ||||||
| Prepaid expenses and other current assets |
1,178 | 1,343 | ||||||
| Total current assets |
66,649 | 58,605 | ||||||
| Property, plant and equipment, net |
1,649 | 1,652 | ||||||
| Goodwill, net |
7,157 | 7,029 | ||||||
| Intangible assets, net |
2,669 | 2,906 | ||||||
| Other assets |
1,295 | 1,296 | ||||||
| $ | 79,419 | $ | 71,488 | |||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 13,975 | $ | 12,445 | ||||
| Restricted funds payable to government |
2,767 | 2,503 | ||||||
| Compensation and related items |
6,978 | 6,500 | ||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts |
196 | 262 | ||||||
| Total current liabilities |
23,916 | 21,710 | ||||||
| Commitments and contingencies (Note H) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value; 50,000,000 shares authorized; 13,110,146 and 12,890,237 shares issued and outstanding, at June 30, 2003 and December 31, 2002, respectively |
13 | 13 | ||||||
| Paid-in capital |
51,244 | 49,834 | ||||||
| Retained earnings |
5,537 | 343 | ||||||
| Treasury stock |
(1,291 | ) | (412 | ) | ||||
| Total stockholders’ equity |
55,503 | 49,778 | ||||||
| $ | 79,419 | $ | 71,488 | |||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
MTC TECHNOLOGIES, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(Dollars in Thousands Except Share and Per Share Data)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||
| Revenue |
$ | 42,565 | $ | 27,134 | $ | 78,674 | $ | 50,991 | ||||||
| Cost of revenue |
35,381 | 21,769 | 65,147 | 41,551 | ||||||||||
| Gross profit |
7,184 | 5,365 | 13,527 | 9,440 | ||||||||||
| General and administrative expenses: |
||||||||||||||
| General and administrative expenses, excluding stock compensation expense |
2,453 | 1,829 | 4,857 | 3,925 | ||||||||||
| Stock compensation expense (Note D) |
— | — | — | 5,215 | ||||||||||
| Total general and administrative expenses |
2,453 | 1,829 | 4,857 | 9,140 | ||||||||||
| Intangible asset amortization |
118 | — | 237 | — | ||||||||||
| Operating income |
4,613 | 3,536 | 8,433 | 300 | ||||||||||
| Interest income (expense): |
||||||||||||||
| Interest income |
76 | 12 | 151 | 29 | ||||||||||
| Interest expense |
— | (261 | ) | — | (446 | ) | ||||||||
| Net interest income (expense) |
76 | (249 | ) | 151 | (417 | ) | ||||||||
| Income (loss) before income tax expense (benefit) |
4,689 | 3,287 | 8,584 | (117 | ) | |||||||||
| Income tax expense (benefit) (Note A) |
1,850 | (2,644 | ) | 3,390 | (2,644 | ) | ||||||||
| Net income |
$ | 2,839 | $ | 5,931 | $ | 5,194 | $ | 2,527 | ||||||
| Earnings per common share: |
||||||||||||||
| Basic |
$ | 0.22 | $ | 0.59 | $ | 0.40 | $ | 0.25 | ||||||
| Diluted |
$ | 0.22 | $ | 0.58 | $ | 0.40 | $ | 0.25 | ||||||
| Weighted average common shares outstanding: |
||||||||||||||
| Basic |
13,095,416 | 9,972,559 | 13,005,597 | 9,930,255 | ||||||||||
| Diluted |
13,137,871 | 10,155,328 | 13,127,131 | 10,013,349 | ||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
MTC TECHNOLOGIES, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
| Six months ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 5,194 | $ | 2,527 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Stock compensation expense |
— | 5,215 | ||||||
| Deferred income tax benefit |
— | (2,644 | ) | |||||
| Depreciation and amortization |
439 | 259 | ||||||
| Losses on marketable equity securities |
— | 11 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(3,227 | ) | (2,486 | ) | ||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
(321 | ) | (1,442 | ) | ||||
| Work-in-process inventory |
(2,127 | ) | — | |||||
| Prepaid expenses and other assets |
165 | (2,641 | ) | |||||
| Accounts payable |
2,630 | 4,095 | ||||||
| Compensation and related items |
478 | 690 | ||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts |
(66 | ) | 199 | |||||
| Other current liabilities |
— | 26 | ||||||
| Net cash provided by operating activities |
3,165 | 3,809 | ||||||
| Cash flows from investing activities: |
||||||||
| Proceeds from the sale of marketable equity securities |
— | 166 | ||||||
| Payments for business purchased |
(1,227 | ) | ||||||
| Purchase of property and equipment |
(199 | ) | (710 | ) | ||||
| Purchase of marketable equity securities |
— | (10 | ) | |||||
| Net cash used in investing activities |
(1,426 | ) | (554 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net borrowings on the revolving credit facility |
— | 3,621 | ||||||
| Proceeds from issuance of common stock |
1,410 | 338 | ||||||
| Capital contribution |
— | 2,000 | ||||||
| Repurchase of common stock |
(879 | ) | — | |||||
| Capital distribution to stockholder |
— | (9,218 | ) | |||||
| Net cash provided by (used in) financing activities |
531 | (3,259 | ) | |||||
| Net increase (decrease) in cash |
2,270 | (4 | ) | |||||
| Cash and cash equivalents at beginning of period |
21,950 | 60 | ||||||
| Cash and cash equivalents at end of period |
$ | |||||||