Financial: Signal Technology Q2 1998 results - Company Financial Information

EDGE, On & About AT&T, Nov 2, 1998

Signal Technology Corp. (AMEX:STZ) Friday reported financial results for its second quarter and six-month period ended June 30, 1998. For the quarter, sales totaled $22.2 million, compared with $25.7 million for the second quarter of 1997, as restated. Net loss for the 1998 second quarter was $7.8 million, or $1.07 per diluted share, vs.

a net loss of $419,000, or $0.06 per diluted share, for the 1997 second quarter, as restated. As previously announced, the company has recorded a cumulative pre-tax charge of $11.0 million for this and all restated periods, of which $8.2 million applies to the second quarter of 1998. The charge is primarily attributable to contract adjustments and inventory write-downs. Approximately 85 percent of the charge relates to problems at Signal Technology's Keltec Operation in Ft. Walton Beach, Fla. For the first six months of 1998, the company achieved sales of $45.9 million, vs. $52.6 million for the first six months of 1997, as restated. Net loss for the 1998 period was $7.6 million, or $1.03 per diluted share, compared with a loss of $208,000, or $0.03 per diluted share, in 1997, as restated. "While we are encouraged by our overall progress for the quarter, we are obviously disappointed with having to take the charge against earnings," said George Lombard, Signal Technology's board chairman, president and chief executive officer. "The board and new management team believe this charge is necessary to accurately reflect the company's current financial position. "Further, we are optimistic that the corporatewide corrective actions we have taken in response will provide a basis for better performance assessment and financial reporting. We regard both the charge and the corrective measures to be in the very best interests of our shareholders." In response to developments this quarter, the company has strengthened its operating and financial controls, including tightening cash-flow management and establishing monthly performance reviews at all divisions. Commented Lombard: "In addition to operational improvements, we have assembled a new, strong group of senior managers. We recently named Gil Evangelist as Keltec's vice president of manufacturing process planning and analysis, a new position. Gil will be responsible for seeing that Keltec's manufacturing operations run smoothly and that on-time deliveries improve. As with other members of our management team, Gil is committed to Signal Technology's continued financial strength. "We also are very enthusiastic about the new contracts we recently were awarded: a two-year, $13.5-million strategic agreement with Raytheon Systems Co., as well as $1.2 million and $2.2 million contracts for our Space Center and Arizona Operation, respectively. This new business demonstrates the company's reputation as a leading supplier of defense and space electronics and, I believe, augers well for Signal Technology's future," added Lombard. The company intends to file its restated Form 10-K for the periods ended Dec. 31, 1996 and 1997, respectively, as well as its restated Form 10-Q for the quarter ended March 31, 1998, by Oct. 30. To date, the American Stock Exchange has not yet determined when it will resume trading of the company's common stock, which has been halted since Aug. 17. Signal Technology designs and produces sophisticated, state-of-the-art electronic components and systems for a variety of defense, space and communication applications, including communications networks, satellite communications, electronic countermeasures, intelligence and guidance systems. FMI: http://www.sigtech.com.

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
     (Unaudited)
       Quarter ended       Six months ended
          June 30,             June 30,
          (As restated)         (As restated)
      1998       1997       1998       1997
Net sales                $22,190    $25,713    $45,877    $52,594
Cost of sales             25,505     21,516     43,689     43,175
Gross profit              (3,315)     4,197      2,188      9,419
Selling, general
and administrative        4,652      4,475      9,516      8,940
Research and development      82        157        128        391
Operating income          (8,049)      (435)    (7,456)        88
Interest expense             242        266        497        500
Income (loss) before taxes(8,291)      (701)    (7,953)      (412)
Income tax expense (benefit)(459)      (282)      (324)      (204)
Net income (loss)        $(7,832)   $  (419)   $(7,629)   $  (208)
Net income (loss)
per share               $ (1.07)   $ (0.06)   $ (1.03)   $ (0.03)
Shares used in
per share calculations
(Basic and Diluted)       7,335      7,268      7,373      7,228
Condensed Consolidated Balance Sheets
   (in thousands)
                     June 30,     Dec. 31,
                       1998         1997
                              (As restated)
Assets:
Cash                                      $ 1,674      $ 1,127
Accounts receivable, net                   12,802       15,901
Inventory                                  14,460       20,205
Other current assets                        5,567        5,437
Total current assets                      34,503       42,670
Property, plant and equipment, net         15,501       16,400
Other assets                                3,556        3,770
Total assets                             $53,560      $62,840
Liabilities and Shareholders' Equity:
Current maturities of long-term debt      $   480      $   480
Accounts payable                            4,324        5,354
Accrued liabilities                         6,895        6,620
Customer advances                             867        1,177
Total current liabilities                 12,566       13,631
Deferred income taxes                       1,527        1,527
Long-term debt, net                        13,408       13,408
Shareholders' equity                       26,059       34,274
Total liabilities and shareholders' equity   $53,560  $62,840