CCT Sets Loss at $22 Million
In a complex and admittedly incomplete financial report issued in the wake of its recently canceled sale of a troubled defense contracting subsidiary, Computer & Communications Technology on Tuesday reported a $22.6-million net loss for the first half ended June 28.
Revenues for the six months rose 27% to $45.6 million.
San Diego-based CCT was forced to rescind the sale of Santa Clara-based Zeta Laboratories to Whittaker Corp. in June when the Los Angeles-based defense contractor uncovered irregularities in cost data that was being used to negotiate government subcontracts at Zeta.
CCT reported a $7.6-million net loss and revenues that fell 46% to $17.4 million for the second quarter. A year ago the computer products manufacturer reported $177,000 in net income.
The second-quarter loss included a $5.4-million payment made in June to compensate Whittaker for the 14% of Zeta stock that Whittaker had purchased from other shareholders. And the second-quarter loss included a variety of costs generated by the decision to buy back Zeta.
The second-quarter loss included CCT’s previously reported decision to write off $14 million for its discontinued thin film media operation.
As a result of the Zeta sale cancellation, CCT restated its $6.2-million first-quarter profit to a $15-million net loss. The restatement reflected the return of $21 million that CCT had received from Whittaker in exchange for CCT’s 86% ownership stake in Zeta.
CCT probably hasn’t finished restating its figures for the first half because the company has not yet determined the “possible impacts” of cost accounting irregularities on CCT’s bottom line, CCT Chairman E.T. Bahre said Tuesday.
Those unknowns have raised concerns among industry analysts, who have watched CCT’s stock tumble from a high of 10 prior to the canceled Zeta sale. The stock responded to Tuesday’s loss announcement by falling three-eighths to 3 3/4.
“My impression is that (CCT’s managers) are fairly astute businessmen, but their reporting is such a mess that on Monday I decided to simply stop following them,” said Joseph Arsenio, an industry analyst with Birr, Wilson in San Francisco. “I decided there was no way I could make meaningful projections.”
An optimistic Bahre disagreed with that assessment, arguing that “we think we know which direction we’re going in, despite the unexpected impact of rescinding the Zeta sale. We’re getting our arms back around Zeta, and we expect its order activity to increase over the balance of the year.”
However, Bahre acknowledged that the firm’s core recording head business, which was profitable during the first half, will be “adversely impacted as a result of softening demand in the overall computer industry.”
In addition, CCT faces a court challenge from a former CCT shareholder who last month alleged that the company had artificially inflated its stock price by failing to report the billing irregularities that forced the cancellation of the Zeta sale.
