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 MARCH 31, 1998 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 March 31, 1998, there were 1,869,308 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
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
Part II: OTHER INFORMATION
Item 1. Legal Proceedings........................................7
Item 2. Changes in Securities....................................7
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, 1997.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
March 31, 1998 September 30, 1997
ASSETS
Current Assets
Cash $1,641,000 $1,153,000
Accounts Receivable 21,190,000 20,154,000
Costs and Estimated Profits of Uncompleted
Contracts in Excess of Related Billings 14,397,000 15,077,000
Prepaid Income Taxes 503,000 503,000
Other Current Assets 618,000 1,223,000
------- ---------
Total Current Assets 38,349,000 38,110,000
Property and Equipment 7,513,000 7,466,000
Less Accumulated Depreciation 6,390,000 6,127,000
--------- ---------
Net Property and Equipment 1,123,000 1,339,000
Deferred Income Taxes 1,660,000 1,660,000
Other Assets 586,000 716,000
------- -------
TOTAL $41,718,000 $41,825,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes and Accounts Payable $8,913,000 $16,567,000
Accrued Wages and Expenses 9,798,000 7,851,000
Billings on Uncompleted Contracts in Excess of
Related Costs 8,919,000 4,386,000
--------- ---------
Total Current Liabilities 27,630,000 28,804,000
Long-Term Debt 1,967,000 1,819,000
Stockholders' Equity
Preferred Stock 0 0
Common Stock 1,989,000 1,921,000
Capital Surplus 3,227,000 3,003,000
Retained Earnings 7,581,000 6,674,000
--------- ---------
Total 12,797,000 11,598,000
Less: Treasury Stock 676,000 271,000
Loans Receivable from Officers 0 125,000
--------- -------
Total Stockholders' Equity 12,121,000 11,202,000
TOTAL $41,718,000 $41,825,000
=========== ===========
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
SIX MONTHS ENDED
March
1998 1997
Operating Activities
Net Income $907,000 $341,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and Amortization 363,000 452,000
Changes in Operating assets and liabilities
Accounts Receivable (1,036,000) 2,234,000
Costs of uncompleted contracts in
excess of billings and prepaid expenses 1,284,000 (1,369,000)
Accounts Payable and accrued expenses 1,581,000 (513,000)
Billing in excess of related costs 4,533,000 (173,000)
Current Income Taxes 796,000 (274,000)
------- --------
Net Cash provided by operating activities $8,428,000 $698,000
Investing Activities
Purchase of Property and Equipment (97,000) (468,000)
Purchase of Software (10,000) (23,000)
Decrease (Increase) in other assets 59,000 (230,000)
------ --------
Net Cash provided (used) by investing activities ($48,000) ($721,000)
Financing Activities
Proceeds from issuance of common stock 46,000 0
Proceeds from line of credit and long term
borrowings 48,700,000 46,760,000
Principal payments on line of credit and long
term borrowings (56,638,000) (46,310,000)
----------- -----------
Net Cash (used) provided by financing
activities ($7,892,000) $450,000
Increase (decrease) in cash and equivalents 488,000 427,000
Cash and equivalents at beginning of year 1,153,000 28,000
--------- ------
Cash and equivalents at end of period $1,641,000 $455,000
========== ========
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
THREE MONTHS ENDED SIX MONTHS ENDED
March 31 March 31
1998 1997 1998 1997
Revenue
Total Revenue $25,997,000 $22,311,000 $50,132,000 $45,047,000
Less Subcontract and Procurement Costs 6,201,000 4,130,000 11,178,000 8,743,000
--------- --------- ---------- ---------
Operating Revenue $19,796,000 $18,181,000 $38,954,000 $36,304,000
Costs and Expenses
Costs of Services and Sales 17,214,000 16,089,000 33,789,000 32,294,000
General and Administrative 1,492,000 1,350,000 3,022,000 2,599,000
Interest 100,000 358,000 359,000 685,000
------- ------- ------- -------
Total Costs and Expenses 18,806,000 17,797,000 37,170,000 35,578,000
Income Before Income Taxes 990,000 384,000 1,784,000 726,000
Income Taxes 495,000 201,000 877,000 385,000
------- ------- ------- -------
Net Income $495,000 $183,000 $907,000 $341,000
======== ======== ======== ========
Net Income per share: $0.25 $0.10 $0.47 $0.18
Weighted Average Number
of Shares Outstanding 1,958,444 1,902,851 1,932,094 1,900,778
Note: A 2-for-1 split was effected April 13, 1998, for shareholders of
record as of March 31, 1998. This split is not reflected in the above net
income per share and weighted average number of shares outstanding
calculations.
Notes to Consolidated Condensed Financial Statement
March 31, 1998
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 SIX MONTHS ENDED
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
-------------- -------------- -------------- --------------
Basic earnings per share $0.27 $0.10 $0.48 $0.19
Shares outstanding 1,829,304 1,821,246 1,869,308 1,821,246
Diluted earnings per share $0.25 $0.10 $0.47 $0.18
Shares outstanding 1,958,444 1,902,851 1,932,094 1,900,778
3. TREASURY STOCK TRANSACTION.
On March 17, 1998, the Company exchanged common stock shares into treasury stock
from certain Company officers, sufficient to pay off a $125,000 five year term
loan receivable from officers with interest, which had been secured by a stock
pledge agreement. This transaction was recorded as a treasury stock acquisition
and thus a reduction to stockholder's equity.
4. SUBSEQUENT EVENT.
A 2-for-1 split was effected April 13, 1998, for shareholders of record as of
March 31, 1998. This split is not reflected in the above basic earnings per
share and weighted average number of shares outstanding.
Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operation
Results of Operations
Total revenues for the quarter ended March 31, 1998 (second quarter of fiscal
1998) increased 16.5% as compared to the second quarter of fiscal 1997 and
increased 7.7% as compared to the previous quarter. Operating revenues (total
revenues excluding pass through costs) for the second quarter of fiscal 1998
increased 8.9% as compared to the second quarter of fiscal 1997 and increased
3.3% as compared to the previous quarter. The increase in operating revenues
reflects an increase in the services provided for transportation infrastructure
engineering.
Pass through costs, expressed as a percentage of total revenues, increased to
23.9% compared to 18.5% in the second quarter of fiscal 1997 and 20.6% in the
previous quarter. Pass through costs will vary depending on the need for
specialty subconsultants and governmental subcontract requirements.
Costs of services, expressed as a percentage of operating revenues, decreased to
87.0% for the second quarter of fiscal 1998 from 88.6% for the second quarter of
fiscal 1997 and increased from 86.6% for the first quarter of fiscal 1998. The
decreases in the percentage from the second quarter of fiscal 1997 is primarily
due to the increase in operating revenues noted above. The increase in the
percentage from the previous quarter is primarily due to costs associated with
the new project management system.
General and administrative expense, expressed as a percentage of operating
revenue, increased slightly to 7.5% in the second quarter of fiscal 1998 from
7.4% in the second quarter of fiscal 1997 and decreased from the 8.0% in the
previous quarter. The decrease in the percentage is primarily due to the
increase in operating revenues.
Interest, expressed as a percentage of operating revenues, decreased to .5% in
the second quarter of fiscal 1998 compared to 2.0% in the second quarter of
fiscal 1997 and 1.4% in the previous quarter. The decrease is due to lower
borrowings as a result of continued improvement in cash receipts.
Income tax expense for the second quarter of fiscal 1998 was 50.0% of pre-tax
income compared to 48.1% in the first quarter of fiscal 1998 and 52.3% of
pre-tax income for the same period last year. The increase from the first
quarter is due to higher non-deductible expenses and the decrease from last year
is due to non-deductible expenses being lower as a percentage of a higher second
quarter pre-tax income in 1998.
Earnings per common share, calculated using the Treasury Stock Method, for the
second quarter of fiscal 1998 were 25 cents based on 1,958,444 shares
outstanding compared to 10 cents in fiscal 1997 on 1,902,851 shares outstanding.
Financial Condition and Liquidity
Working capital increased to $10,719,000 from $9,955,000 in the previous
quarter. Capital resources available to the Company include 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 $10.5
million is currently available. The Company is in discussions with its lender
which may reduce its line of credit. The Company believes that its liquidity
needs can be met by expected operating cash flow and the availability of
borrowings under its credit facility, as amended, with its lender. The Company
is planning to continue its program of purchasing computer-assisted design and
drafting equipment as well as installing a new project management and accounting
system.
The Company's backlog is approximately $117 million.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Shareholders of STV Group, Incorporated was
held Tuesday, March 31, 1998 at which the following Directors were
elected for a term of three (3) years:
Maurice L. Meier
Dr. Harry Prystowsky
Dominick M. Servedio
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the quarter ended
March 31, 1998.
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)
May 15, 1998 By: /s/ Michael Haratunian
- ---------------- ----------------------
Date Michael Haratunian
Chairman, Chief Executive Officer
May 15, 1998 By: /s/ Peter W. Knipe
- ---------------- ----------------------
Date Peter W. Knipe
Secretary/Treasurer