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, 1997 COMMISSION FILE NO. 0-3415
STV GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1698231
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
205 West Welsh Drive, Douglassville, Pennsylvania 19518
(Address of principal executive offices) (Zip Code)
(610) 385-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
(Title of class)
As of December 31, 1997, there were 1,821,246 shares of common stock of the
registrant outstanding.
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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
December 31, 1997 September 30, 1997
ASSETS
Current Assets
Cash $871,000 $1,153,000
Accounts Receivable 20,338,000 20,154,000
Costs and Estimated Profits of Uncompleted
Contracts in Excess of Related Billings 12,428,000 15,077,000
Prepaid Income Taxes 503,000 503,000
Other Current Assets 769,000 1,223,000
------- ---------
Total Current Assets 34,909,000 38,110,000
Property and Equipment 7,535,000 7,466,000
Less Accumulated Depreciation 6,284,000 6,127,000
--------- ---------
Net Property and Equipment 1,251,000 1,339,000
Deferred Income Taxes 1,660,000 1,660,000
Other Assets 650,000 716,000
------- -------
TOTAL $38,470,000 $41,825,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes and Accounts Payable $8,804,000 $16,567,000
Accrued Wages and Expenses 7,700,000 7,851,000
Billings on Uncompleted Contracts in Excess of
Related Costs 8,450,000 4,386,000
--------- ---------
Total Current Liabilities 24,954,000 28,804,000
Long-Term Debt 1,902,000 1,819,000
Stockholders' Equity
Preferred Stock 0 0
Common Stock 1,921,000 1,921,000
Capital Surplus 3,003,000 3,003,000
Retained Earnings 7,086,000 6,674,000
--------- ---------
Total 12,010,000 11,598,000
Less: Treasury Stock 271,000 271,000
Loans Receivable from Officers 125,000 125,000
------- -------
Total Stockholders' Equity 11,614,000 11,202,000
TOTAL $38,470,000 $41,825,000
=========== ===========
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
THREE MONTHS ENDED
December 31
1997 1996
Operating Activities
Net Income $412,000 $158,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and Amortization 185,000 218,000
Changes in Operating assets and liabilities
Accounts Receivable (184,000) (86,000)
Costs of uncompleted contracts in
excess of billings and prepaid expenses 3,103,000 (1,039,000)
Accounts Payable and accrued expenses (843,000) (1,816,000)
Billing in excess of related costs 4,064,000 448,000
Current Income Taxes 371,000 89,000
------- ------
Net Cash provided by operating activities $7,108,000 ($2,028,000)
Investing Activities
Purchase of Property and Equipment (69,000) (255,000)
Purchase of Software (7,000) (3,000)
Decrease (Increase) in other assets 45,000 17,000
------ ------
Net Cash provided (used) by investing activities ($31,000) ($241,000)
Financing Activities
Proceeds from line of credit and long term
borrowings 24,125,000 24,260,000
Principal payments on line of credit and long
term borrowings (31,484,000) (22,103,000)
----------- -----------
Net Cash (used) provided by financing
activities ($7,359,000) $2,157,000
Increase (decrease) in cash and equivalents (282,000) (112,000)
Cash and equivalents at beginning of year 1,153,000 28,000
--------- ------
Cash and equivalents at end of period $871,000 ($84,000)
======== ========
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
THREE MONTHS ENDED
December 31
1997 1996
Revenue
Total Revenue $24,135,000 $22,736,000
Less Subcontract and Procurement Costs 4,977,000 4,613,000
--------- ---------
Operating Revenue $19,158,000 $18,123,000
Costs and Expenses
Costs of Services and Sales 16,575,000 16,205,000
General and Administrative 1,530,000 1,249,000
Interest 259,000 327,000
------- -------
Total Costs and Expenses 18,364,000 17,781,000
Income Before Income Taxes 794,000 342,000
Income Taxes 382,000 184,000
------- -------
Net Income $412,000 $158,000
======== ========
Net Income per share: $0.22 $0.08
Weighted Average Number
of Shares Outstanding 1,905,744 1,898,705
Notes to Consolidated Condensed Financial Statement
December 31, 1997
1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the instruction to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles.
It should be understood that the foregoing interim results are not necessarily
indicative of the results of operations for the full fiscal year ending
September 30, 1998 due in part to increased reliance on estimates at interim
dates.
2 - EARNINGS PER SHARE
SFAS No. 128, "Earnings per Share," has been adopted by the Company. SFAS 128
replaces primary earnings per share (EPS) with basic EPS and fully diluted EPS
with diluted EPS. Basic 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
December 31, 1997 December 31, 1996
----------------- -----------------
Basic earnings per share $0.23 $0.09
Shares outstanding 1,821,246 1,821,246
Diluted earnings per share $0.22 $0.08
Shares outstanding 1,905,744 1,898,705
Item 2. Management Discussion and Analysis of the Results of Operation
Total revenues for the quarter ended December 31, 1997 (first quarter of fiscal
1998) increased 6.2% as compared to the first quarter of fiscal 1997 and
decreased 3.6% as compared to the previous quarter. Operating revenues (total
revenues excluding pass through costs) for the first quarter of fiscal 1998
increased 5.7% as compared to the first quarter of fiscal 1997 and increased
4.0% as compared to the previous quarter. The increase in operating revenues
reflects an increase in the demand for the firm's work, particularly in the
transportation area.
Pass-through costs, expressed as a percentage of total revenues increased to
20.6% as compared to 20.3% in the first quarter of fiscal 1997 and decreased
from 26.4% in the previous quarter. Pass-through costs will vary depending on
the need for specialty subconsultants and governmental subcontract requirements.
Cost of services, expressed as a percentage of operating revenues, decreased to
86.6% as compared to 89.5% for the first quarter of fiscal 1997 and 87.4% in the
fourth quarter of fiscal 1997. The decreases in the percentage for both quarters
is primarily due to operating revenues increasing at a greater pace than did
cost of services.
General and administrative expense, expressed as a percentage of operating
revenues, increased to 8.0% in the first quarter of fiscal 1998 from 6.9% in the
first quarter of fiscal 1997 and 7.6% in the previous quarter. This increase was
due mainly to an increase in labor related expenses.
Interest, expressed as a percentage of operating revenues, decreased to 1.4% for
the first quarter of fiscal 1998 from 1.8% of the first quarter of fiscal 1997
and 1.9% from the previous quarter. The decreases in the percentage for both
quarters is due to lower borrowings as a result of an improvement in cash
receipts.
Income tax expense for the first quarter of fiscal 1998 was 48.1% of pre-tax
income compared to 53.8% in the first quarter of fiscal 1997 and 49.7% in the
fourth quarter of 1997. The decrease is due to lower non-deductible expenses as
a percentage of a higher first and fourth quarter pre-tax income.
Earnings per common share calculated using the Treasury Stock Method for the
first quarter of fiscal 1998 were 22 cents based on 1,905,744 shares outstanding
which increased from 8 cents for the first quarter of fiscal 1997 based on
1,898,705 shares outstanding.
Financial Condition
Working capital increased to $9,955,000 from $9,306,000 in the previous quarter.
Capital resources available to the Company included an existing line of credit
for working capital. The current limit is a maximum of $16.5 million based on
accounts receivable and work-in-progress of which approximately $9.1 million is
currently available. The Company is in final discussions with its lender and
anticipates a reduction of $1.0 million in its line of credit and a reduction in
its interest rate of 1/2 percent to 1 percent above the prime rate. 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 as well as a new project management and accounting system.
The Company's backlog is approximately $120 million.
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
(Registrant)
February 11, 1998 By: /s/ Michael Haratunian
- --------------------- ----------------------
Date Michael Haratunian
Chairman, Chief Executive Officer
February 11, 1998 By: /s/ Peter W. Knipe
- --------------------- ----------------------
Date Peter W. Knipe
Secretary/Treasurer