SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the
Transition Period from to .
Commission File Number: 0-22737
Advanced Communication Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 54-1421222
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10089 Lee Highway, Fairfax, Virginia 22030 (Address of
principal executive office and zip code)
(703) 934-8130
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 12 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 [ ]
As of the close of business on April 15, 1998, the registrant had outstanding
6,554,000 shares of Common Stock, par value $.01 per share.
<PAGE>
ADVANCED COMMUNICATION SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
March 31, 1998 and September 30, 1997 3
Condensed Consolidated Statements of Operations
for the Three Months and Six Months Ended March
31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
ADVANCED COMMUNICATION SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
March 31, September 30,
1998 1997
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents......................... $802 $2,744
Contract receivables.............................. 27,440 17,643
Other receivables................................. 621 154
Income taxes receivable........................... - 529
Prepaid expenses.................................. 805 296
Inventories....................................... 677 544
------------ ------------
Total current assets........................... 30,345 21,910
------------ ------------
Property and equipment, net....................... 5,157 1,261
Other assets:
Other related party receivables................... 152 86
Software development costs, net................... 1,568 950
Intangibles, net.................................. 19,333 1,706
Long-term deferred tax asset...................... - 147
Other non-current assets.......................... 233 152
------------ ------------
Total other assets............................. 21,286 3,041
------------ ------------
Total assets................................ $56,788 $26,212
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................. $84 $ -
Accounts payable.................................. 2,325 3,321
Accrued expenses and other current liabilities.... 9,224 8,838
Billings in excess of revenue..................... 245 225
Income taxes payable.............................. 331 -
------------ ------------
Total current liabilities...................... 12,209 12,384
Long-term debt.................................... 24,846 -
Deferred income tax liability..................... 778 -
------------ ------------
Total liabilities.............................. 37,833 12,384
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding.... - -
Common stock, $.01 par value, 40,000,000 shares
authorized, 9,450,000 shares issued at March
31, 1998 and 8,975,000 shares issued at
September 30,1997............................... 95 90
Paid-in-capital................................... 17,692 14,409
Retained earnings (deficit)....................... 1,205 (382)
Less - Treasury stock, 2,901,625 shares at March
31, 1998 and 2,945,000 shares at
September 30, 1997.............................. (37) (289)
------------ ------------
Total stockholders' equity..................... 18,955 13,828
------------ ------------
Total liabilities and stockholders' equity... $56,788 $26,212
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
<TABLE>
ADVANCED COMMUNICATION SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
---------- -------- --------- ----------
<S> <C> <C> <C> <C>
Revenues................................................ $18,380 $12,064 $32,550 $21,130
Direct costs............................................ 11,859 8,708 20,990 14,746
Indirect, general and administrative expenses........... 4,888 2,583 8,821 5,025
---------- -------- --------- ----------
Income from operations.................................. 1,633 773 2,739 1,359
Interest expense........................................ (289) (71) (378) (134)
Other income, net....................................... 4 29 15 44
---------- --------- -------- -----------
Income before taxes..................................... 1,348 731 2,376 1,269
Provision for income taxes.............................. 505 - 879 -
---------- --------- -------- ----------
Net income.............................................. $843 $731 $1,497 $1,269
========== ========= ======== ==========
Net income per share-basic.............................. $0.13 $0.23
========== ========
Net income per share-diluted............................ $0.13 $0.23
========== ========
Weighted average shares outstanding-basic............... 6,524 6,438
========== ========
Weighted average shares outstanding-diluted............. 6,636 6,558
========== ========
Pro forma statements of operations data
Income before taxes as reported......................... $731 $1,269
Pro forma income tax provision.......................... 285 495
---------- ---------
Pro forma net income.................................... $446 $774
========== =========
Pro forma net income per share-basic.................... $0.11 $0.18
========== =========
Pro forma net income per share-diluted.................. $0.10 $0.18
========== =========
Pro forma weighted average shares outstanding-basic..... 4,246 4,246
========== ===========
Pro forma weighted average shares outstanding-diluted... 4,346 4,346
========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ADVANCED COMMUNICATION SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
March 31
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net income...................................................... $1,497 $1,269
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation and amortization............................... 549 201
Changes in assets and liabilities:
Contract receivables................................... (2,249) (1,557)
Other receivables...................................... (406) (128)
Prepaid expenses....................................... (94) (307)
Inventories............................................ (133) -
Other related party receivables........................ (66) (123)
Long-term deferred tax asset........................... 147 -
Other assets........................................... (27) (54)
Accounts payable....................................... (2,083) 2,278
Accrued expenses and other current liabilities......... (1,010) 1,574
Billings in excess of revenue.......................... 20 83
Income taxes payable................................... 942 -
Deferred income taxes.................................. (363) -
----------- -----------
Net cash (used in) provided by operating activities.. (3,276) 3,236
----------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired.............................. (19,748) -
Purchases of property and equipment............................. (765) (350)
Capitalized software development costs.......................... (686) -
Deferred financing costs........................................ (101) -
----------- -----------
Net cash used in investing activities................ (21,300) (350)
----------- -----------
Cash flows from financing activities:
Net costs incurred in sale of common stock...................... (13) -
Net repayments from borrowings.................................. (866) -
Net borrowings (repayments) under line of credit................ 23,261 (2,688)
Sale of treasury stock.......................................... 252 38
----------- -----------
Net cash provided by financing activities.......... 22,634 (2,650)
----------- -----------
Net(decrease)increase in cash................................... (1,942) 236
Cash and cash equivalents, beginning of period.................. 2,744 1,177
----------- -----------
Cash and cash equivalents, end of period........................ $802 $1,413
=========== ===========
Income taxes paid............................................... $155 $0
=========== ===========
Interest paid................................................... $352 $134
=========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
ADVANCED COMMUNICATION SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet as of March 31, 1998 and
the statements of operations and cash flows for all periods presented have been
prepared by Advanced Communication Systems, Inc. ("the Company"), and have not
been audited. These financial statements, in the opinion of management, include
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of the financial position, results of operations and cash
flows for all periods presented. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto for the fiscal year ended September 30, 1997 included in the Company's
Annual Report on Form 10-K and in the Registration Statement on Form S-1.
Interim operating results are not necessarily indicative of operating results
for the full year.
2. Management's Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. Provision for Income Taxes
Prior to June 25, 1997, the Company elected to be treated as an S corporation
and was not subject to federal and certain state income taxes. As a result, no
provision for federal or state income taxes has been included in the historical
statements of operations prior to June 25, 1997. On June 25, 1997, in connection
with the initial public offering the S corporation status was terminated,
thereby subjecting future income of the Company to federal and state income
taxes at the corporate level. Subsequent to June 25, 1997, the Company has
provided for federal and state income taxes in the statements of operations
based on the effective tax rate.
4. Pro Forma Net Income Per Share
Pro forma net income is based on the assumption that the Company's S corporation
status was terminated at the beginning of the year. Pro forma net income per
share has been computed by dividing pro forma net income by the pro forma
weighted average number of common shares outstanding during the period.
5. Net Income Per Share
Effective December 31, 1997, the Company adopted the Financial Accounting
Standards Board Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share". This statement replaces the previously reported primary
and fully diluted net income per share with basic and diluted net income per
share. Unlike primary net income per share, basic net income per share excludes
any dilutive effects of stock options. Diluted net income per share is very
similar to the previously reported fully diluted net income per share. All net
income per share amounts have been restated to conform to SFAS No. 128. No
reconciling items existed between the net income used for basic and diluted net
income per share. The only reconciling item between the shares used for basic
and diluted net income per share related to outstanding stock options.
6. Acquisitions
Integrated Systems Control, Inc.
In November 1997, the Company acquired all the outstanding shares of Integrated
Systems Control, Inc. ("ISC") in exchange for 475,000 shares of the Company's
common stock. The acquisition has been accounted for as a purchase and
accordingly the total purchase price has been allocated to acquired assets and
liabilities assumed at their estimated fair values. The excess of the purchase
price over the net assets acquired is being carried as goodwill, in the amount
of approximately $1.3 million, which will be amortized over its estimated useful
life of thirty years.
Advanced Management, Inc.
In February 1998, the Company acquired all the outstanding shares of Advanced
Management, Inc. ("AMI") for $19.5 million in cash and additional contingent
payments for each of two consecutive twelve month periods following the closing
date of the acquisition up to a maximum of $5.25 million for each period. The
acquisition has been accounted for as a purchase, and accordingly, the purchase
price has been allocated to the acquired assets and liabilities assumed at their
estimated fair values. The excess of the purchase price over the net assets
acquired is being carried as intangible assets, including goodwill and customer
lists, in the amounts of approximately $12.2 million and $4.1 million,
respectively, which will be amortized over their estimated useful lives ranging
from 16 to 40 years.
The following unaudited pro forma summary presents information as if the
acquisitions had occurred at the beginning of each period presented. The pro
forma information does not necessarily reflect the actual results that would
have occurred nor is it necessarily indicative of future results of operations
of the combined companies.
(Unaudited)
Six Months Ended Year Ended
March 31, September 30,
1998 1997
--------------- ---------------
(in thousands, except per share data)
Revenues............................. $40,635 $88,620
Net income........................... $1,520 $3,066
Net income per share - basic......... $0.24 $0.59
Net income per share - diluted....... $0.23 $0.58
7. Long-Term Debt
Notes payable and line of credit consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Line of credit:
$35,000,000 line of credit with a
commercial bank expiring February 28, 2000..... $23,261 $ -
Notes payable:
Note payable to bank, interest at 9.9%,
due February 2005, secured by a First
Deed of Trust on an office building............ 971 -
Note payable to Urban Business Development
Corporation, interest at 8.575%, due January
2015, guaranteed by the Small Business
Administration and secured by a Second Deed
of Trust on an office building................. 698 -
------------ ------------
24,930 -
Less current maturities........................ 84 -
------------ ------------
$24,846 $ -
============ ============
</TABLE>
Line of Credit
In February 1998, the Company entered into a line of credit arrangement with a
commercial bank, refinancing the Company's then-existing line of credit and the
outstanding commercial bank debt of ISC. This line of credit consists of two
separate facilities, permitting the Company to borrow up to an aggregate of $35
million. The first facility, in an amount up to $15 million, may be used to
finance acquisitions, working capital, and other corporate purposes, and bears
interest at either the bank's prime rate or at a London interbank offered rate
("LIBOR") for one, two or three month periods, plus a percentage, not more than
2.2%, which depends on the Company's historical performance. The second
facility, in an amount up to $20 million, may be used to finance acquisitions,
and bears interest at either the bank's prime rate or at a LIBOR rate plus a
percentage, not more than 2.45%, which depends on the Company's historical
financial performance. Each facility expires on February 28, 2000. The credit
agreement contains various covenants requiring the Company and its subsidiaries,
on a consolidated basis, to maintain certain financial ratios, including debt to
net income, minimum net income and minimum net worth. The credit agreement also
prohibits the payment of dividends. As of March 31, 1998 the outstanding balance
on its line of credit was $23.3 million and the weighted average interest rate
for the six months ended March 31, 1998, was approximately 8.2%. The Company's
subsidiary, ISC, had three notes payable totaling $1,671,000 at the date of
acquisition, secured by accounts receivable, equipment and other assets, which
were repaid using the above mentioned facility in February 1998.
The Company had a line of credit arrangement with a commercial bank under which
it could borrow up to a maximum of $5 million. The borrowings were limited to
80% of eligible receivables, as defined, and 90% of eligible government
receivables, as defined, and were secured by all assets including inventory,
contract receivables and intangibles. Interest was paid monthly, at the bank's
prime rate plus a percentage, not more than 0.25%. The agreement contained
various covenants requiring the Company to maintain certain financial ratios,
each as defined, including tangible net worth, liabilities to tangible net
worth, funded debt to operating cash flow and debt service. The agreement also
restricted the payment of dividends. The line of credit arrangement expired on
February 28, 1998.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements based on management's
current expectations, estimates and projections about the Company's industry,
management's beliefs and certain assumptions made by management. These
forward-looking statements involve risks and uncertainties, and actual results
may differ materially from those anticipated or expressed in such statements.
Potential risks and uncertainties include, among others, those set forth under
the "Risk Factors" section of the Company's final prospectus dated June 27,
1997, as filed with the Securities and Exchange Commission. Except as required
by law, the Company undertakes no obligation to update any forward-looking
statement, whether as a result of new information, future events or otherwise.
Results of Operations
The following table sets forth certain statement of operations data as a
percentage of revenues for the periods indicated:
Three Months Six Months
Ended March 31, Ended March 31,
----------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ------------ ------------
Revenues..................... 100.0 % 100.0 % 100.0 % 100.0 %
Direct costs................. 64.5 72.2 64.5 69.8
Indirect, general and
administrative.............. 26.6 21.4 27.1 23.8
---------- ---------- ------------ ------------
Income from operations....... 8.9 6.4 8.4 6.4
Other income (expense), net.. (1.6) (0.3) (1.1) (0.4)
---------- ---------- ------------ ------------
Income before taxes.......... 7.3 6.1 7.3 6.0
Pro forma income taxes (1)... 2.7 2.4 2.7 2.4
---------- ---------- ---------- ------------
Pro forma net income........ 4.6 % 3.7 % 4.6 % 3.6 %
========== ========== =========== ============
____________________________________
(1) Prior to June 25, 1997,the Company elected to be treated as an S corporation
and was not subject to federal and certain state income taxes. The pro forma
income taxes data reflects federal and state income taxes based on estimated tax
rates, as if the Company had elected C corporation status for the periods
indicated. Amounts for the three month and six month periods ended March 31,
1998, are based on actual results.
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues increased 52.4%, or $6.4 million, to $18.4 million for the three months
ended March 31, 1998, from $12.0 million for the same period in 1997. The
increase was principally due to an increase in revenues from communication
systems, primarily under contracts with the U.S. Navy, resulting from the
Company's acquisitions of RFM and ISC, and information technology services,
resulting from the acquisition of AMI.
Direct costs include labor costs, related fringe benefits, subcontract costs,
material costs and other non-overhead costs directly related to a contract.
Direct costs increased to $11.9 million for the three months ended March 31,
1998 from $8.7 million for the same period in 1997 due primarily to increased
revenues from the Company's acquisitions. Direct costs, expressed as a
percentage of revenues, decreased to 64.5% for the three months ended March 31,
1998 from 72.2% for the same period in 1997, primarily due to a decrease in the
proportion of revenues coming from systems integration services. These services
have higher direct costs than the other services the Company provides because
the contracts generally require the Company to purchase hardware components as
part of the services.
Indirect, general and administrative expenses include fringe benefits, overhead,
selling and administrative costs, depreciation and amortization, bid and
proposal costs and research and development expenses. Indirect expense increased
to $4.9 million for the three months ended March 31, 1998, from $2.6 million for
the same period in 1997. The increase was due primarily to the higher level of
revenues discussed above. Indirect expenses, expressed as a percentage of
revenues, increased to 26.6% from 21.4% for the three months ended March 31,
1998, due to both the higher proportion of communication systems revenues, which
typically have higher associated indirect expenses, and to the amortization of
intangible assets, principally goodwill, from the acquisition of RFM, ISC and
AMI.
Income from operations increased 111.3%, to $1.6 million for the three months
ended March 31, 1998, from $773,000 for the same period in 1997, primarily due
to increased communication systems revenues and information technology services
revenues from the acquisition of AMI, RFM and ISC. As a percentage of revenues,
income from operations increased to 8.9% for the three months ended March 31,
1998, from 6.4% for the comparable period in the prior year, principally
attributable to increased revenues from fixed price and time-and-material
contracts of AMI which typically carry higher margins.
Other income (expense), net, consists of interest expense, offset in part by
interest income from short-term deposits of cash. Interest expense was $289,000
and $71,000 for the three-month periods ended March 31, 1998 and 1997,
respectively. Interest income was $4,000 and $29,000 for the three months ended
March 31, 1998 and 1997, respectively.
The Company's effective tax rate was 37.0% for the three months ended March 31,
1998. The Company's pro forma effective tax rate was 39.0% for the three months
ended March 31, 1997. This decrease is primarily due to lower state taxes.
Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997
Revenues increased 54.0%, or $11.4 million, to $32.6 million for the six months
ended March 31, 1998, from $21.1 million for the same period in 1997. The
increase was principally due to an increase in revenues from communication
systems, primarily under contracts with the U.S. Navy, resulting from the
Company's acquisitions of RFM and ISC, and information technology services,
resulting from the acquisition of AMI.
Direct costs increased to $21.0 million for the six months ended March 31, 1998,
from $14.7 million for the same period in 1997 due primarily to increased
revenues from the Company's acquisitions. Direct costs, expressed as a
percentage of revenues, decreased to 64.5% for the six months ended March 31,
1998, from 69.8% for the same period in 1997, primarily due to a decrease in the
proportion of revenues coming from systems integration services. These services
have higher direct costs than other services the Company provides because the
contracts generally require the Company to purchase hardware components as part
of the services.
Indirect expenses increased to $8.8 million for the six months ended March 31,
1998 from $5.0 million for the same period in 1997. The increase was due
primarily to the higher level of revenues discussed above. Indirect expenses,
expressed as a percentage of revenues, increased to 27.1% for the six months
ended March 31, 1998, from 23.8% for the comparable period last year, due to the
amortization of intangible assets, primarily goodwill, resulting from the
acquisition of RFM, ISC and AMI.
Income from operations increased 101.5%, to $2.7 million for the six months
ended March 31, 1998, from $1.4 million for the same period in 1997, primarily
due to increased communication systems and IT Services revenues from the
acquisition of RFM, ISC and AMI. As a percentage of revenues, income form
operations increased to 8.4% for the six months ended March 31, 1998, from 6.4%
for the comparable period in the prior year, principally attributable to
increased revenues from fixed-price and time-and-materials contracts which
typically carry higher margins.
Other income (expense), net, consists of interest expense, offset in part by
interest income from short-term deposits of cash. Interest expense was $378,000
and $134,000 for the six-month periods ended March 31, 1998 and 1997,
respectively. The increase in interest expense resulted primarily from the $19.5
million borrowed to fund the AMI acquisition. Interest income was $15,000 and
$44,000 for the six months ended March 31, 1998 and 1997, respectively.
The Company's effective tax rate was 37% for the six months ended March 31,
1998. The Company's pro forma effective tax rate was 39% for the six months
ended March 31, 1997. This decrease is primarily due to lower state taxes.
Liquidity and Capital Resources
The Company used cash from operating activities of $3.3 million for the six
months ended March 31, 1998, resulting primarily from net income, for increases
in contract receivables and decreases in accrued expenses and accounts payable.
The increase in contract receivables was due to increases in revenue recognized
on contracts for which billings had not been presented to the customer,
particularly on a contract with the Australian Navy. For the six months ended
March 31, 1997, the Company generated cash from operating activities of $3.2
million resulting primarily from net income, increases in accounts payable and
accrued expenses and partially offset by increases in contract receivables.
The principal use of cash for investing activities has been for the purchases of
computers and equipment and the acquisition of AMI. The purchases of computers
and equipment totaled $765,000 and $350,000 for the six-month period ended March
31, 1998 and 1997, respectively. Further the Company invested $686,000 in
software development costs for its communications products, including the latest
Microsoft Exchange-based product, INFORMATION 2000, in the six months ended
March 31, 1998. In February 1998, the Company acquired AMI for $19.5 million in
cash and additional contingent payments based on achievement of certain
financial goals.
In February 1998, the Company entered into a line of credit arrangement with a
commercial bank, refinancing the Company's then-existing line of credit and the
outstanding commercial bank debt of ISC. This line of credit consists of two
separate facilities, permitting the Company to borrow up to an aggregate of $35
million. The first facility, in an amount up to $15 million, may be used to
finance acquisitions, working capital, and other corporate purposes, and bears
interest at either the bank's prime rate or at a London interbank offered rate
("LIBOR") for one, two or three month periods, plus a percentage, not more than
2.2%, which depends on the Company's historical performance. The second
facility, in an amount up to $20 million, may be used to finance acquisitions,
and bears interest at either the bank's prime rate or at a LIBOR rate plus a
percentage, not more than 2.45%, which depends on the Company's historical
financial performance. Each facility expires on February 28, 2000. The credit
agreement contains various covenants requiring the Company and its subsidiaries,
on a consolidated basis, to maintain certain financial ratios, including debt to
net income, minimum net income and minimum net worth. The credit agreement also
prohibits the payment of dividends. As of March 31, 1998 the outstanding balance
on its line of credit was $23.3 million.
The Company currently anticipates that its current cash balances, amounts
available under its credit facility and net cash provided by operating
activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next twelve months.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on February 25, 1998.
(b) The matters voted upon at the meeting and the votes cast with respect
thereto were as follows:
(1) Election of Directors
Votes Votes
Nominee for Director Cast For Withheld
------------------------ ----------------- ----------------
Charles R. Collins..... 6,216,825 19,800
Thomas A. Costello..... 6,215,525 21,100
Charles G. Martinache.. 6,215,525 21,100
George A. Robinson..... 6,215,525 21,100
Wayne Shelton.......... 6,216,825 19,800
(2) The ratification of the appointment of Arthur Andersen LLP as
the Company's independent accountants for the current fiscal
year ending September 30, 1998 was ratified with 6,220,331
votes in favor, 4,140 votes against and 12,154 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11.1 Statement Regarding Computation of Per Share
Earnings
Exhibit 11.2 Statement Regarding Computation of Pro Forma
Per Share Earnings
Exhibit 27.1 Financial Data Schedule
(b) (i) On February 4, 1998, the Company filed a current report on
Form 8-K/A, containing the financial statements and pro forma
information required by Item 7 of Form 8-K with respect to the
November 26, 1997, acquisition of all the outstanding shares of
Integrated Systems Control, Inc.
(ii) On February 19, 1998, the Company filed a current report
on Form 8-K, Item 5, containing a press release dated February
18, 1998, reporting that the Company signed a definitive
agreement to acquire all the outstanding shares of Advanced
Management, Incorporated ("AMI") in exchange for $19.5 million
in cash and additional earn-out payments upon the achievement
of certain financial goals in the next twenty-four months.
(iii) On March 13, 1998, the Company filed a current report on
Form 8-K, Item 2, reporting that on February 26, 1998, it
completed the acquisition of AMI pursuant to a Stock Purchase
Agreement dated January 31, 1998. Additionally, the Company
replaced its $6.5 million credit facilities with a $35 million
revolving credit facility to finance the acquisition of AMI and
provide for its other working capital needs.
<PAGE>
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.
Date: May 15, 1998 ADVANCED COMMUNICATION SYSTEMS, INC.
/S/ George A. Robinson
-----------------------------------------------
George A. Robinson
Chairman, President
and Chief Executive Officer
/S/ Dev Ganesan
-----------------------------------------------
Dev Ganesan
Executive Vice President, Chief
Financial Officer and Treasurer
EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS
Advanced Communication Systems, Inc.
(in thousands, except per share data)
Three Months Six Months
Ended Ended
March 31, 1998 March 31, 1998
Basic: -------------- --------------
Total basic average shares outstanding... 6,524 6,438
============== ==============
Net income............................... $843 $1,497
============== ==============
Net income per share - basic............. $0.13 $0.23
============== ==============
Diluted:
Total basic average shares outstanding... 6,524 6,438
Plus dilutive stock options.............. 112 120
-------------- --------------
Total diluted average shares............. 6,636 6,558
============== ==============
Net income per share - diluted........... $0.13 $0.23
============== ==============
EXHIBIT 11.2 - COMPUTATION OF PRO FORMA PER SHARE EARNINGS
Advanced Communication Systems, Inc.
(in thousands, except per share data)
Three Months Six Months
Ended Ended
March 31, 1997 March 31, 1997
Basic: -------------- --------------
Basic average shares outstanding......... 3,767 3,767
Stock issued to satisfy S corporation
distribution in excess of preceding
twelve months earnings based on the
initial public offering price per share.. 479 479
-------------- --------------
Total basic average shares outstanding... 4,246 4,246
============== ==============
Pro forma net income..................... $446 $774
============== ==============
Pro forma net income per share - basic... $0.11 $0.18
============== ==============
Diluted:
Total basic average shares outstanding... 4,246 4,246
Plus dilutive stock options.............. 100 100
-------------- --------------
Total diluted average shares............. 4,346 4,346
============== ==============
Net income per share - diluted........... $0.10 $0.18
============== ==============
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 802
<SECURITIES> 0
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<ALLOWANCES> 0
<INVENTORY> 677
<CURRENT-ASSETS> 30,345
<PP&E> 8,454
<DEPRECIATION> 3,297
<TOTAL-ASSETS> 56,788
<CURRENT-LIABILITIES> 12,209
<BONDS> 0
0
0
<COMMON> 95
<OTHER-SE> 18,860
<TOTAL-LIABILITY-AND-EQUITY> 56,788
<SALES> 32,550
<TOTAL-REVENUES> 32,550
<CGS> 20,990
<TOTAL-COSTS> 29,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378
<INCOME-PRETAX> 2,376
<INCOME-TAX> 879
<INCOME-CONTINUING> 1,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,497
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
