SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 2000 COMMISSION FILE NO. 0-3415
STV GROUP, INCORPORATED
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1698231
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(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
205 West Welsh Drive, Douglassville, Pennsylvania 19518
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(Address of principal executive offices) (Zip Code)
(610) 385-8200
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(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 twelve 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
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As of December 31, 2000, there were 3,878,128 shares of common stock of the
registrant outstanding.
TABLE OF CONTENTS
Page
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS......................1
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements.........................................2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.....................................6
Item 3. Quantitative and Qualitative Disclosures about Market Risk...7
Part II: OTHER INFORMATION
Item 1. Legal Proceedings............................................8
Item 2. Changes in Securities........................................8
Item 3. Defaults Upon Senior Securities..............................8
Item 4. Submission of Matters to a Vote of Security Holders..........8
Item 5. Other Information............................................8
Item 6. Exhibits and Reports on Form 8-K.............................8
SIGNATURES.....................................................................9
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain oral statements made by management from time to time and certain
statements contained herein, including certain statements in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" such
as statements regarding the Company's ability to meet its liquidity needs and
control costs, certain statements in Notes to Condensed Consolidated Financial
Statements, and other statements contained herein regarding matters which are
not historical facts are forward looking statements (as such term is defined in
the Securities Act of 1933) and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to those discussed
below:
1. The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth.
2. The Company's continued ability to operate in a heavily regulated
government environment. The Company's government contracts are subject to
termination, reduction or modification as a result of changes in the
government's requirements or budgetary restrictions. In addition,
government contracts are subject to termination at the conveniences of the
government. Under certain circumstances, the government can also suspend or
debar individuals or firms from obtaining future contracts with the
government.
3. The level of competition in the Company's industry, including companies
with significantly larger operations and resources than the Company.
4. The Company's ability to identify and win suitable projects and to
consummate or complete any such projects.
5. The Company's ability to perform design/build projects which may include
the responsibility of ensuring the actual construction of a project for a
guaranteed price.
These and other factors have been discussed in more detail in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 2000.
1
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
STV GROUP, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, 2000 September 30, 2000
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ASSETS
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Current Assets:
Cash and cash equivalents $1,088,000 $3,382,000
Accounts receivable 37,776,000 36,282,000
Costs and estimated profits of uncompleted
contracts in excess of related billings 22,950,000 18,404,000
Prepaid expenses and other current assets 670,000 915,000
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Total Current Assets 62,484,000 58,983,000
Property and equipment 7,998,000 7,655,000
Less accumulated depreciation 5,038,000 4,767,000
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Net property and equipment 2,960,000 2,888,000
Deferred income taxes 3,061,000 2,852,000
Other assets 1,089,000 903,000
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TOTAL $69,594,000 $65,626,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Deferred compensation 95,000 100,000
Accounts payable $12,087,000 $9,025,000
Accrued expenses 10,260,000 11,839,000
Billings on uncompleted contracts in excess of
related costs and estimated profits 12,838,000 12,514,000
Deferred income taxes 2,172,000 1,983,000
Income tax payable 1,354,000 933,000
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Total Current Liabilities 38,806,000 36,394,000
Deferred compensation 4,299,000 3,886,000
Post-retirement benefits 1,200,000 1,200,000
Stockholders' Equity:
Common stock 2,063,000 2,053,000
Capital in excess of par 3,640,000 3,546,000
Retained earnings 20,357,000 19,318,000
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Total 26,060,000 24,917,000
Less: Treasury stock 771,000 771,000
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Total Stockholders' Equity 25,289,000 24,146,000
TOTAL $69,594,000 $65,626,000
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See notes to condensed consolidated financial statements.
2
STV GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
December 31
2000 1999
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Revenues
Total revenues $43,823,000 $34,245,000
Less subcontract and procurement costs 13,656,000 6,845,000
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Operating revenue $30,167,000 $27,400,000
Costs and expenses
Costs of services 25,977,000 22,903,000
General and administrative 2,273,000 2,130,000
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Total costs and expenses 28,250,000 25,033,000
Miscellaneous income, net 6,000 1,000
Interest expense (44,000) (38,000)
Interest income 83,000 93,000
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Income before income taxes 1,962,000 2,423,000
Income taxes 923,000 1,118,000
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Net income $1,039,000 $1,305,000
========== ==========
Basic earnings per share: $.27 $.34
Diluted earnings per share: $.25 $.31
See notes to condensed consolidated financial statements.
3
STV GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
December 31
2000 1999
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Operating Activities
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Net income $1,039,000 $1,305,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 364,000 270,000
Deferred income taxes (20,000) 0
Loss on disposal of property and equipment 1,000 0
Changes in operating assets and liabilities
Accounts receivable (1,494,000) (3,934,000)
Costs of uncompleted contracts in excess of billings,
other current assets and other assets (4,460,000) 1,350,000
Accounts payable and accrued expenses 1,891,000 (2,600,000)
Billings on uncompleted contracts in excess of related costs 324,000 (972,000)
Income taxes payable 421,000 377,000
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Net cash used in operating activities $(1,934,000) $(4,204,000)
Investing Activities
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Purchase of property and equipment $(348,000) $(518,000)
Purchase of software (116,000) (159,000)
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Net cash used in investing activities $(464,000) $(677,000)
Financing Activities
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Proceeds from issuance of common stock $104,000 $18,000
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Net cash provided by financing activities $104,000 $18,000
Decrease in cash and cash equivalents (2,294,000) (4,863,000)
Cash and cash equivalents at beginning of year 3,382,000 7,248,000
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Cash and cash equivalents at end of period $1,088,000 $2,385,000
========== ==========
See notes to condensed consolidated financial statements.
4
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended December 31, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 2001.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States require management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. EARNINGS PER SHARE
Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
Diluted EPS recognizes the potential dilutive effects of the future exercise of
common stock options.
THREE MONTHS ENDED
Dec. 31, 2000 Dec. 31, 1999
Basic earnings per share $0.27 $0.34
Shares outstanding 3,866,040 3,835,557
Diluted earnings per share $0.25 $0.31
Shares outstanding 4,203,835 4,234,123
4. RECLASSIFICATIONS
Certain amounts for 1999 in the accompanying consolidated financial statements
have been reclassified to conform to the 2000 presentation.
5
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operation
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Results of Operations
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Total revenues for the quarter ended December 31, 2000 (first quarter fiscal
2001) increased 28.0% as compared to the first quarter of fiscal 2000 and
increased 12.2% as compared to the previous quarter, primarily due to the
increase in revenues related to pass-through costs. Operating revenues (total
revenues excluding pass-through costs) increased 10.1% as compared to the first
quarter of fiscal 2000 and increased 3.5% as compared to the previous quarter.
Pass-through costs increased 99.5% compared to the first quarter of fiscal 2000
and increased 37.6% from the previous quarter. Pass-through costs vary depending
on the need for specialty subconsultants and governmental subcontract
requirements.
Costs of services, expressed as a percentage of operating revenues, increased to
86.1% for the first quarter of fiscal 2001 from 83.6% in the first quarter of
fiscal 2000 and is comparable to 86.2% in the previous quarter. The increase in
the percentage from the first quarter of fiscal 2000 was due mainly to an
increase in information technology expenses, labor and labor related costs.
General and administrative expense, expressed as a percentage of operating
revenue, is 7.5% in the first quarter of fiscal 2001, which is a decrease from
7.8% recorded in the first quarter of fiscal 2000 and is comparable to 7.6% in
the previous quarter. While the decrease in the percentage from the first
quarter of fiscal 2000 was due mainly to an increase in operating revenues noted
above, absolute costs increased due to an increase in corporate training
expenses.
Miscellaneous income, net increased to $6,000 for the first quarter of fiscal
2001 from $1,000 in the first quarter of fiscal 2000 and decreased from $28,000
in the previous quarter.
Interest income, net of interest expense, decreased to $39,000 for the first
quarter of fiscal 2001 from net interest income of $55,000 in the first quarter
of fiscal 2000 and increased from net interest income of $3,000 in the previous
quarter.
6
Income tax expense for the first quarter of fiscal 2001 was 47.0% of pre-tax
income compared to 46.1% in the first quarter of fiscal 2000 and 46.1% in the
previous quarter. The increase from the previous quarter is due to the previous
quarter's rate being reduced as a result of increased pre-tax income derived
from the proceeds of an insurance settlement, reducing the effect of
non-deductible expenses.
Diluted earnings per common share for the first quarter of fiscal 2001 was $.25
cents versus $.31 for the first quarter of fiscal 2000.
Financial Condition and Liquidity
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Working capital increased to $23,678,000 at December 31, 2000 from $22,589,000
at September 30, 2000. The Company has a $12,00,000 committed line of credit.
The agreement provides that the Company may borrow up to $10,000,000 and issue
letters of credit up to $2,000,000 and requires the Company to meet certain
financial covenants. Approximately $10,455,000 is available on the $12,000,000
line of credit. The Company believes that it and the lender will maintain a line
of credit adequate to meet the current and future financial needs of the
Company. The Company is planning to continue its program of purchasing
computer-assisted design and drafting equipment.
The Company's backlog at December 31, 2000 is approximately $240 million.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
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Market risk exposures to the Company are not material.
7
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Not applicable.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the quarter ended
December 31, 2000.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STV GROUP, INCORPORATED
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(Registrant)
February 14, 2001 By: /s/ Dominick M. Servedio
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Date Dominick M. Servedio
President and Chief Executive Officer
February 14, 2001 By: /s/ Peter W. Knipe
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Date Peter W. Knipe
Chief Financial Officer
9