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 AND EXCHANGE ACT OF 1934 |
For the quarterly period ended September 26, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the Transition period from to
Commission File Number 0-10772
ESSEX CORPORATION
(Exact name of registrant as specified in its charter)
| Virginia | 54-0846569 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 9150 Guilford Road, Columbia, Maryland | 21046 | |
| (Address of principal executive offices) | (Zip Code) |
(301) 939-7000
(Registrant’s telephone number, including area code)
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 Act).
YES ¨ NO x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at October 25, 2004 | |
| Common Stock, no par value per share |
15,249,256 |
ESSEX CORPORATION
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
| 3 | ||
| 5 | ||
| 6 | ||
| • NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL INFORMATION |
7 | |
References hereinafter to the quarter(ly) and nine month periods represent the 13-week and 39-week periods, respectively, ending on the date indicated.
2
CONSOLIDATED BALANCE SHEETS
| September 26, 2004 |
December 28, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 18,729,738 | $ | 31,835,294 | ||||
| Accounts receivable, net |
10,649,801 | 3,969,601 | ||||||
| Prepayments and other |
748,707 | 146,517 | ||||||
| Total Current Assets |
30,128,246 | 35,951,412 | ||||||
| Property and Equipment |
||||||||
| Computers and special equipment |
2,101,952 | 1,226,349 | ||||||
| Furniture, equipment and other |
734,139 | 250,138 | ||||||
| 2,836,091 | 1,476,487 | |||||||
| Accumulated depreciation and amortization |
(1,390,892 | ) | (1,107,790 | ) | ||||
| Net Property and Equipment |
1,445,199 | 368,697 | ||||||
| Other Assets |
||||||||
| Goodwill |
11,836,993 | 2,998,000 | ||||||
| Other intangibles, net |
2,480,994 | 50,141 | ||||||
| Note receivable |
1,314,572 | — | ||||||
| Patents, net |
325,511 | 333,648 | ||||||
| Other |
234,928 | 23,764 | ||||||
| Total Other Assets |
16,192,998 | 3,405,553 | ||||||
| TOTAL ASSETS |
$ | 47,766,443 | $ | 39,725,662 | ||||
The accompanying notes are an integral part of these statements.
3
ESSEX CORPORATION
CONSOLIDATED BALANCE SHEETS
| September 26, 2004 |
December 28, 2003 |
|||||||
| (Unaudited) | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
$ | 4,832,353 | $ | 694,434 | ||||
| Note payable |
— | 100,000 | ||||||
| Accrued wages and vacation |
1,510,316 | 898,498 | ||||||
| Accrued retirement plans contribution payable |
315,696 | 298,551 | ||||||
| Advance payments |
614,252 | 462,000 | ||||||
| Other accrued expenses |
724,537 | 522,538 | ||||||
| Capital leases |
12,000 | 4,390 | ||||||
| Total Current Liabilities |
8,009,154 | 2,980,411 | ||||||
| Long-Term Debt |
||||||||
| Capital lease, net of current portion |
32,272 | — | ||||||
| Total Liabilities |
8,041,426 | 2,980,411 | ||||||
| Shareholders’ Equity |
||||||||
| Common stock, no par value; 50 million shares authorized; 15,210,066 and 15,241,257 shares issued and outstanding, respectively |
50,602,829 | 49,004,021 | ||||||
| Additional paid-in capital |
2,000,000 | 2,000,000 | ||||||
| Accumulated deficit |
(12,877,812 | ) | (14,258,770 | ) | ||||
| Total Shareholders’ Equity |
39,725,017 | 36,745,251 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 47,766,443 | $ | 39,725,662 | ||||
The accompanying notes are an integral part of these statements.
4
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
| Nine Month Period Ended Sept. 26, 2004 |
Nine Month Period Ended |
Quarterly Period Ended |
Quarterly Period Ended |
|||||||||||
| Revenues: |
||||||||||||||
| Services and products |
$ | 38,502,091 | $ | 11,220,333 | $ | 15,693,928 | $ | 4,070,392 | ||||||
| Purchased hardware |
13,000,092 | — | 964,170 | — | ||||||||||
| Total |
51,502,183 | 11,220,333 | 16,658,098 | 4,070,392 | ||||||||||
| Costs of goods sold and services provided: |
||||||||||||||
| Services and products |
28,889,372 | 7,041,896 | 11,686,243 | 2,379,954 | ||||||||||
| Purchased hardware |
12,773,834 | — | 935,637 | — | ||||||||||
| Total |
41,663,206 | 7,041,896 | 12,621,880 | 2,379,954 | ||||||||||
| Gross Margin |
9,838,977 | 4,178,437 | 4,036,218 | 1,690,438 | ||||||||||
| Selling, general and administrative expenses |
7,621,522 | 3,418,644 | 3,095,059 | 1,428,393 | ||||||||||
| Research and development |
671,376 | 337,804 | 224,161 | 111,764 | ||||||||||
| Amortization of other intangible assets |
347,988 | 295,360 | 185,689 | 121,343 | ||||||||||
| Operating Income |
1,198,091 | 126,629 | 531,309 | 28,938 | ||||||||||
| Interest income (expense), net |
182,867 | (60,915 | ) | 57,706 | (17,716 | ) | ||||||||
| Income Before Income Taxes |
1,380,958 | 65,714 | 589,015 | 11,222 | ||||||||||
| Provision for income taxes |
— | — | — | — | ||||||||||
| Net Income |
$ | 1,380,958 | $ | 65,714 | $ | 589,015 | $ | 11,222 | ||||||
| Basic Earnings Per Common Share |
$ | 0.09 | $ | 0.01 | $ | 0.04 | $ | 0.00 | ||||||
| Diluted Earnings Per Common Share |
$ | 0.08 | $ | 0.01 | $ | 0.04 | $ | 0.00 | ||||||
| Weighted Average Number of Shares |
||||||||||||||
| Basic |
15,207,952 | 8,393,338 | 15,213,447 | 8,585,607 | ||||||||||
| Effect of dilution - Stock options |
1,296,851 | 910,164 | 1,369,698 | 1,162,585 | ||||||||||
| Diluted |
16,504,803 | 9,303,502 | 16,583,145 | 9,748,192 | ||||||||||
The accompanying notes are an integral part of these statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
| Nine Months Ended Sept. 26, 2004 |
Nine Months Ended Sept. 28, 2003 |
|||||||
| Cash Flows From Operating Activities: |
||||||||
| Net Income |
$ | 1,380,958 | $ | 65,714 | ||||
| Adjustments to reconcile Net Income to Net Cash Provided By Operating Activities: |
||||||||
| Depreciation and amortization |
306,731 | 126,950 | ||||||
| Amortization of other intangible assets |
347,988 | 295,359 | ||||||
| Contract reserves/account allowance |
180,000 | — | ||||||
| Other |
— | 3,271 | ||||||
| Change in Assets and Liabilities: |
||||||||
| Accounts receivable |
(4,501,623 | ) | (822,638 | ) | ||||
| Prepayments and other assets |
(403,394 | ) | 91,681 | |||||
| Advance payments |
152,252 | — | ||||||
| Accounts payable |
3,948,295 | (140,869 | ) | |||||
| Accrued wages, vacation and retirement |
319,338 | 359,632 | ||||||
| Other liabilities |
166,743 | 113,341 | ||||||
| Net Cash Provided By Operating Activities |
1,897,288 | 92,441 | ||||||
| Cash Flows From Investing Activities: |
||||||||
| Acquisitions, net of cash acquired |
(14,120,225 | ) | (309,000 | ) | ||||
| Purchases of property and equipment |
(1,038,748 | ) | (143,710 | ) | ||||
| Net Cash Used In Investing Activities |
(15,158,973 | ) | (452,710 | ) | ||||
| Cash Flows From Financing Activities: |
||||||||
| Sales of common stock |
1,192,227 | — | ||||||
| Note receivable |
(1,314,572 | ) | — | |||||
| Note payable |
(100,000 | ) | 100,000 | |||||
| Exercise of stock options |
388,581 | 69,829 | ||||||
| Short-term borrowings/repayments, net |
— | 96,632 | ||||||
| Payment of capital lease obligations |
(10,107 | ) | (64,675 | ) | ||||
| Net Cash Provided By Financing Activities |
156,129 | 201,786 | ||||||
| Cash and Cash Equivalents |
||||||||
| Net decrease |
(13,105,556 | ) | (158,483 | ) | ||||
| Balance – beginning of period |
31,835,294 | 1,030,247 | ||||||