<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: Commission File Number:
June 30, 1998 333-36447
FEDERAL DATA CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 52-0940566
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation) Number)
4800 Hampden Lane, Bethesda, MD 20814
(Address of principal executive offices) (Zip Code)
(301) 986-0800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if
changed since last report)
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 of1934 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 July 31, 1998, the registrant had outstanding
2,917,521 shares of Common Stock, par value $.01 per share.
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<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
Part I. Financial Information
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1997
and June 30, 1998 (Unaudited)........................................................................3
Consolidated Statements of Operations for the Three Months Ended
June 30, 1997 and 1998 (Unaudited) and the Six Months Ended June
30, 1997 and 1998
(Unaudited)..........................................................................................4
Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 1997 and 1998 (Unaudited) and the Six Months Ended June
30, 1997 and 1998
(Unaudited)..........................................................................................5
Notes to Consolidated Financial Statements (Unaudited)...............................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................................8
Part II. Other Information
Item 5. Submission of Matters to a Vote of Security Holders................................................11
Item 6. Exhibits and Reports on Form 8-K...................................................................11
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Federal Data Corporation
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
<S> ----------- -----------
Assets (Unaudited)
<C> <C>
Cash and cash equivalents............................................ $6,327 $ 1,937
Accounts receivable.................................................. 96,074 116,510
Net investment in sales-type leases.................................. 6,839 7,179
Inventory ........................................................... 6,346 8,514
Other assets......................................................... 8,376 8,484
----------- ------------
Total current assets.................................... 123,962 142,624
Net investment in sales-type leases.................................. 1,203 1,168
Leased and other property and equipment.............................. 3,746 5,709
Goodwill and intangibles ............................................ 54,161 74,271
Other assets......................................................... 9,894 7,503
----------- ------------
Total assets .......................................... $ 192,966 $ 231,275
----------- ------------
----------- ------------
Liabilities and stockholders' equity (deficit)
Accounts payable and other liabilities.............................. $73,760 $ 74,219
Obligations under capital leases - nonrecourse....................... 2,636 2,367
----------- ------------
Total current liabilities............................... 76,396 76,586
Notes payable - recourse............................................. 113,000 153,925
Obligations under capital leases - nonrecourse....................... 359 --
Other liabilities.................................................... 2,194 2,817
----------- ------------
Total liabilities....................................... 191,949 233,328
----------- ------------
Stockholders' equity (deficit)
Common stock, $.01 par value: 8,000,000 shares authorized;
shares issued and outstanding, 2,910,896 in 1997 and 1998....... 29 29
Capital in excess of par value....................................... 40,300 41,710
Accumulated deficit.................................................. (39,312) (43,792)
----------- ------------
Total stockholders' equity (deficit).................... 1,017 (2,053)
----------- ------------
Total liabilities and stockholders' equity (deficit).... $192,966 $ 231,275
----------- -------------
----------- -------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
Federal Data Corporation
Consolidated Statements of Operations
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
1997 1998 1997 1998
---------------------- ------------------------
<S> <C> <C> <C> <C>
Revenues
Equipment and software sales....................... $28,468 $76,930 $42,035 $130,131
Maintenance and support services................... 27,722 50,586 44,029 88,796
Interest and other................................. 504 539 1,108 977
------------- ------------- ------------- --------------
Total revenues........................ 56,694 128,055 87,172 219,904
------------- ------------- ------------- --------------
Expenses
Cost of sales and services......................... 46,785 108,979 70,277 188,217
Selling, general and administrative................ 6,662 13,480 12,753 23,775
Goodwill and intangibles........................... 233 2,805 233 4,973
Interest........................................... 2,056 4,133 3,734 7,713
------------- ------------- ------------- --------------
Total expenses........................ 55,736 129,397 86,997 224,678
------------- ------------- ------------- --------------
Income (loss) before income tax provision (benefit)..... 958 (1,342) 175 (4,774)
Income tax provision (benefit).......................... 476 674 163 (294)
------------- ------------- ------------- --------------
Net income (loss)....................................... $482 ($2,016) $12 ($4,480)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
Federal Data Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $482 ($2,016) $12 ($4,480)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization............................ 496 3,411 642 6,279
Non-cash charge related to vesting of stock options...... - 1,422 - 1,422
Income (loss) recorded on sales-type leases.............. - (446) 455 (446)
Collections from sales-type leases....................... 1,120 912 1,853 1,223
Decrease (increase) in inventory......................... 1,140 1,707 1,140 (2,168)
Decrease (increase) in accounts receivable............... 5,490 (18,252) 15,535 (5,052)
(Decrease) increase in accounts payable and accrued
expenses........................................... (656) 13,187 (8,126) 1,584
Net change in other assets and liabilities............... (4,863) (4,853) (5,371) (3,007)
---------- ---------- ---------- ----------
Net cash flows from operating activities................ 3,209 (4,928) 6,140 (4,645)
---------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash received....... (58,125) - (58,125) (30,346)
Purchase of equipment for sales-type leases............ - (989) - (989)
Purchase of property and equipment..................... (749) (314) (1,088) (1,325)
---------- ---------- ---------- ----------
Net cash flows from investing activities............... (58,874) (1,303) (59,213) (32,660)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from borrowings............................... 55,400 - 55,400 -
Repayments of borrowings............................... (1,501) (551) (3,465) (551)
Net (repayments) borrowings under line of credit....... (15,387) 9,000 (15,487) 34,171
Proceeds from sale of common stock..................... 27,000 - 27,000 -
Recapitalization, stock issuance and debt
acquisition costs................................ (3,320) - (3,320) -
Repayments of capital lease obligations................ (360) (281) (970) (705)
---------- ---------- ---------- ----------
Net cash flows from financing activities............... 61,832 8,168 59,158 32,915
---------- ---------- ---------- ----------
Net change in cash and cash equivalents..................... 6,167 1,937 6,085 (4,390)
Cash and cash equivalents, beginning of period.............. 1,109 - 1,191 6,327
---------- ---------- ---------- ----------
Cash and cash equivalents, end of period.................... $7,276 $1,937 $7,276 $1,937
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
Federal Data Corporation
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Federal Data Corporation and its wholly-owned subsidiaries
(collectively, the Company) and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in the annual financial statements, prepared
in accordance with generally accepted accounting principles, have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all necessary adjustments and reclassifications (all of which
are of a normal, recurring nature) that are necessary for fair presentation for
the periods presented. It is suggested that these unaudited consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest annual report
to the Securities and Exchange Commission on Form 10-K 405 for the year ended
December 31, 1997.
The results of operations for the three month and six month periods ended June
30, 1998, are not necessarily indicative of the results to be expected for the
full fiscal year ending December 31, 1998.
All of the Company's direct and indirect wholly-owned subsidiaries have fully
and unconditionally guaranteed, on a joint and several basis, the Company's
obligations under its Senior Subordinated Notes. The Company is a holding
company with no assets or operations other than its investments in its
subsidiaries. The separate financial statements of the subsidiary guarantors are
not presented because the Company's management believes that such financial
statements are not material to investors.
Note 2 - Acquisitions
During the quarter ended June 30, 1997, the Company purchased all of the
outstanding shares of common stock of NYMA, Inc. (NYMA) and Sylvest Management
Systems Corporation (Sylvest) (collectively, the 1997 Acquisitions) for an
aggregate purchase price of $74,017. NYMA is a provider of high technology
engineering and information technology services under contracts with various
United States Government (the Government) agencies and subcontracts with large
government contractors. Sylvest is a leading reseller and technical services
vendor supporting open systems architecture within the federal marketplace.
In February and March 1998, the Company purchased all of the outstanding common
stock of R.O.W. Sciences, Inc. (R.O.W.) and Technical and Management Assistance,
Inc. (TMA) and also in March purchased all of the assets of Telos Information
Systems (TIS), a division of Telos Corporation, (collectively, the 1998
Acquisitions). The aggregate purchase price of the 1998 Acquisitions was
$32,692. The Company financed the 1998 Acquisitions principally through
borrowings under its existing line of credit facility. R.O.W. provides
information technology and health science research services to federal and
commercial clients. TMA provides software development services principally to
the air traffic management function within the Federal Aviation Administration.
TIS provides information technology and engineering services principally to NASA
and the Jet Propulsion Laboratory.
The Company recorded goodwill of $49,791 and $18,952 related to the 1997 and
1998 Acquisitions, respectively, which is being amortized over fifteen years.
The purchase price of the acquisitions includes intangible assets of $10,701 and
$4,830 for the 1997 and 1998 Acquisitions, respectively. The intangible assets
represent contract backlog at the acquisition date and is recorded at the
present value of the
6
<PAGE>
projected pretax profits. The present value of the contract backlog is being
amortized over the remaining terms of the acquired contracts in relation to the
recognition of related contract revenue.
Condensed unaudited pro forma operating data which gives effect to all of the
acquisitions described above for the year ended December 31, 1997 and the six
months ended June 30, 1997 and 1998 is provided below. Such condensed unaudited
pro forma operating data has been prepared as if the acquisitions occurred as of
the beginning of the reporting period. The Company is currently conducting an
analysis of the allocation of the purchase price for the 1998 Acquisitions. The
purchase price allocation may change during the year ending December 31, 1998 as
additional information concerning the net asset valuation is obtained.
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
1997 1997 1998
----------- ---------- -----------
<S> <C> <C> <C>
Revenues............................................................. $505,283 $219,972 $229,500
---------- ---------- ---------
---------- ---------- ---------
Loss before extraordinary item and income tax benefit............... ($5,056) ($5,828) ($4,870)
---------- ---------- ---------
---------- ---------- ---------
Loss before extraordinary item...................................... ($5,306) ($4,164) ($4,612)
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
In the opinion of management, the condensed unaudited pro forma operating data
is not indicative of the actual results that would have occurred had the
acquisitions been consummated at the beginning of 1997 or at the beginning of
1998 or of future operations of the combined companies under the ownership and
management of the Company.
Note 3 - Stockholders' Equity
During the three month period ended June 30, 1998, the Company modified its
Stock Option Plan for Executive and Other Key Employees by accelerating the
vesting of certain performance options. Accordingly, the Company recorded a
non-cash charge of $1.4 million and a related increase in capital in excess
of par value based on the difference between the exercise price of the stock
options and the current fair market value.
Note 4 - Recent Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130).
SFAS No. 130 establishes standards for the reporting and presenting of
comprehensive income and its components (revenue, expenses, gains and losses)
in a full set of general-purpose financial statements. At June 30, 1998,
there is no impact on the Company's financial reporting as a result of its
adoption of SFAS No. 130.
Also in June 1997, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131). SFAS No. 131 establishes standards for the
manner in which public business enterprises report information about operating
segments and the related disclosures about products and services, geographic
area, and major customers. SFAS No. 131 is effective for financial statements
issued for fiscal years beginning after December 15, 1997. The Company is
currently reviewing what effect this standard will have on future reporting.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 132, "Employers' Disclosure about Pensions and
Other Postretirement Benefits" (SFAS No. 132). SFAS No. 132 standardizes the
employers' disclosure requirements for pension and other postretirement
benefit plans. SFAS No. 132 is effective for financial statements issued for
fiscal years beginning after December 15, 1997. At June 30, 1998, there is no
impact on the Company's financial reporting as a result of its adoption of
SFAS No. 132.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
EXCEPT AS EXPRESSLY INDICATED, THE FOLLOWING DISCUSSION DOES NOT GIVE EFFECT TO
THE PRE-ACQUISITION OPERATIONS OF NYMA, SYLVEST, R.O.W., TIS AND TMA
(COLLECTIVELY, THE ACQUISITIONS) OR INCLUDE PRO FORMA FINANCIAL INFORMATION.
Results Of Operations
Three Months Ended June 30, 1998 Compared With Three Months Ended June 30, 1997
Revenues
Revenues for the three months ended June 30, 1998 were $128.1 million, up $71.4
million or 126% over the comparable period of 1997. The Acquisitions accounted
for $69.5 million of the increase in revenue over the comparable period of 1997.
Revenue from equipment and software sales was $76.9 million, up $48.5 million or
170% over the comparable period of 1997. The Acquisitions accounted for $51.5
million of the increase in equipment and software sales revenue over 1997.
Revenue from maintenance and support services was $50.6 million, up $22.9
million or 82% over the comparable period of 1997. The Acquisitions accounted
for $18.4 million of the increase in maintenance and support services revenue
over the comparable period of 1997.
Cost of Sales and Services
Cost of sales and services for the three months ended June 30, 1998 was $109.0
million, up $62.2 million or 133% over the comparable period of 1997. The
Acquisitions accounted for $60.3 million of the increase in cost of sales and
services over the comparable period of 1997. Cost of sales and services in 1998
was 85% of sales and services revenues compared with 83% of sales and services
revenues for the comparable period of 1997. The decrease in the gross margin
percentage primarily relates to increased influence of the commercial
off-the-shelf (COTS) products sold through the Company's Systems & Technology
Group including Sylvest, which generally have lower gross margin percentages
than product sales by the Company's Systems Integration Group as well as the
lower margins earned on the cost plus fee business of NYMA, R.O.W., TIS and TMA.
Selling, General and Administrative Expense
Selling, general and administrative expense for the three month period ended
June 30, 1998 was $13.5 million, up $6.8 million or 102% over the comparable
period of 1997. The Acquisitions accounted for $5.9 million of the increase in
selling, general and administrative expense over the comparable period of 1997.
During the three month period ended June 30, 1998, the Company modified its
Stock Option Plan for Executive and Other Key Employees by accelerating the
vesting of certain performance options. Accordingly, the Company recorded a
non-cash charge of $1.4 million and a related increase in capital in excess of
par value based on the difference between the exercise price of the stock
options and the current fair market value. Excluding the effect of the
Acquisitions and the non-cash charge related to the stock options, selling,
general and administrative expense for the three month period ended June 30,
1998 was 14% of revenues, compared with 15% in the comparable period of 1997.
This decrease in selling, general and administrative expense as a percent of
revenue was due primarily to economies of scale resulting from the increase in
revenues.
Amortization of Goodwill and Intangible Assets
The excess of the cost of the Acquisitions over the fair value of identifiable
net tangible and intangible assets acquired was $68.7 million and is being
amortized on a straight-line basis over fifteen years. The present value of the
contract profits of $15.5 million acquired in the Acquisitions is being
amortized over the remaining terms of the acquired contracts in relation to the
recognition of related contract revenue. Amortization of goodwill and intangible
assets for the three months ended June 30, 1998 was $2.8 million.
8
<PAGE>
Interest Expense
Interest expense for the three months ended June 30, 1998 was $4.1 million, up
$2.1 million, or 101% over the comparable period of 1997. Recourse interest
expense increased $2.4 million for the three months ended June 30,1998 over the
comparable period of 1997 primarily due to increased recourse debt used to
partially finance the Acquisitions. Interest expense on nonrecourse debt
declined $0.3 million for the three months ended June 30, 1998 from the
comparable period of 1997 due to a reduced level of capital leases. Interest
expense is expected to be higher in 1998 than in 1997, reflecting the higher
level of indebtedness to be outstanding for the full year, as a result of the
acquisitions of NYMA and Sylvest, and the additional indebtedness incurred to
finance the acquisitions of R.O.W., TIS and TMA.
Income Tax Provision
The income tax provision for the three month period ended June 30, 1998 is based
on an estimated annual effective rate, excluding expenses not deductible for
income tax purposes. Before giving effect to the Acquisitions, the effective tax
provision rate for the year ending December 31, 1998 is estimated to be 40%. The
Company believes that the nondeductibility of the additional amortization of
goodwill and the value related to contract backlog associated with the NYMA and
R.O.W. acquisitions and the nondeductibility of the non-cash charge related to
vesting of stock options will cause the annual effective tax rate for 1998 to be
higher than the annual effective tax rate in 1997.
Net Income / Loss
Net loss for the three months ended June 30, 1998 was $2.0 million, a $2.5
million change from the net income of $0.5 million recorded in the comparable
period of 1997 based on the reasons discussed above.
Six Months Ended June 30, 1998 Compared With Six Months Ended June 30, 1997
Revenues
Revenues for the six months ended June 30, 1998 were $219.9 million, up $132.7
million or 152% over the comparable period of 1997. The Acquisitions accounted
for $120.8 million of the increase in revenue over the comparable period of
1997. Revenue from equipment and software sales was $130.1 million, up $88.1
million or 210% over the comparable period of 1997. The Acquisitions accounted
for $79.9 million of the increase in equipment and software sales revenue over
1997. The remaining increase in revenue from equipment and software sales is
principally due to increased emphasis on the Company's sale of COTS products.
Revenue from maintenance and support services was $88.8 million, up $44.8
million or 102% over the comparable period of 1997. The Acquisitions accounted
for $41.3 million of the increase in maintenance and support services revenue
over the comparable period of 1997.
Cost of Sales and Services
Cost of sales and services for the six months ended June 30, 1998 was $188.2
million, up $117.9 million or 168% over the comparable period of 1997. The
Acquisitions accounted for $106.4 million of the increase in cost of sales and
services over the comparable period of 1997. Cost of sales and services in 1998
was 86% of sales and services revenues compared with 82% of sales and services
revenues for the comparable period of 1997. The decrease in the gross margin
percentage primarily relates to increased influence of the COTS products sold
through the Company's Systems & Technology Group including Sylvest, which
generally have lower gross margin percentages than product sales by the
Company's Systems Integration Group as well as the lower margins earned on the
cost plus fee business of NYMA, R.O.W., TIS and TMA.
Selling, General and Administrative Expense
Selling, general and administrative expense for the six month period ended June
30, 1998 was $23.8 million, up $11.0 million or 86% over the comparable period
of 1997. The Acquisitions accounted for $9.8 million of the increase in selling,
general and administrative expense over the comparable period of 1997. During
the three month period ended June 30, 1998, the Company modified its Stock
Option Plan for
9
<PAGE>
Executive and Other Key Employees by accelerating the vesting
of certain performance options. Accordingly, the Company recorded a non-cash
charge of $1.4 million and a related increase in capital in excess of par value
based on the difference between the exercise price of the stock options and the
current fair market value. Excluding the effect of the Acquisitions and the
non-cash charge related to the stock options, selling, general and
administrative expense for the six month period ended June 30, 1998 was 14% of
revenues, compared with 17% in the comparable period of 1997. This decrease in
selling, general and administrative expense as a percent of revenue was due
primarily to economies of scale resulting from the increase in revenues.
Amortization of Goodwill and Intangible Assets
The excess of the cost of the Acquisitions over the fair value of identifiable
net tangible and intangible assets acquired was $68.7 million and is being
amortized on a straight-line basis over fifteen years. The present value of the
contract profits of $15.5 million acquired in the Acquisitions is being
amortized over the remaining terms of the acquired contracts in relation to the
recognition of related contract revenue. Amortization of goodwill and intangible
assets for the six months ended June 30, 1998 was $5.0 million.
Interest Expense
Interest expense for the six months ended June 30, 1998 was $7.7 million, up
$4.0 million, or 107% over the comparable period of 1997. Recourse interest
expense increased $4.6 million for the six months ended June 30, 1998 over the
comparable period of 1997 primarily due to increased recourse debt used to
partially finance the Acquisitions. Interest expense on nonrecourse debt
declined $0.6 million for the six months ended June 30, 1998 from the comparable
period of 1997 due to a reduced level of capital leases. Interest expense is
expected to be higher in 1998 than in 1997, reflecting the higher level of
indebtedness to be outstanding for the full year, as a result of the
acquisitions of NYMA and Sylvest, and the additional indebtedness incurred to
finance the acquisitions of R.O.W., TIS and TMA.
Income Tax Benefit
The income tax benefit for the six month period ended June 30, 1998 is based on
an estimated annual effective rate, excluding expenses not deductible for income
tax purposes. Before giving effect to the Acquisitions, the effective tax
provision rate for the year ending December 31, 1998 is estimated to be 40%. The
Company believes that the nondeductibility of the additional amortization of
goodwill and the value related to contract backlog associated with the NYMA and
R.O.W. acquisitions and the nondeductibility of the non-cash charge related to
vesting of stock options will cause the annual effective tax rate for 1998 to be
higher than the annual effective tax rate in 1997.
Net Income / Loss
Net loss for the six months ended June 30, 1998 was $4.5 million, a $4.5 million
change from the net income of $12 thousand recorded in the comparable period of
1997 based on the reasons discussed above.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash provided by operations. The
Company's liquidity requirements generally vary seasonally with revenues, which
are generally higher in the third and fourth quarters of each fiscal year.
Historically, cash flow from the collection of accounts receivable from the
Government has generally been predictable and dependable. Cash and cash
equivalents were $1.9 million at June 30, 1998, down $4.4 million from December
31, 1997 primarily as a result of net cash flows used in operating activities of
$4.6 million and net cash flows used in investing activities of $32.7 million
being offset by net cash flows from financing activities of $32.9 million. Net
cash flows used in operating activities was primarily a result of an increase in
accounts receivable of $5.1 million. Increased focus on COTS products sold
through the Systems & Technology Group used $2.2 million in cash to increase
inventory over the December 31, 1997 levels. Net cash used in investing
activities amounted to $32.7 million for the six months ended June 30, 1998,
primarily as a result of the acquisition of R.O.W., TMA and TIS totaling $30.3
million and the purchases of property and equipment totaling $1.3 million. Net
cash flows from financing activities
10
<PAGE>
was $32.9 million for the six months ended June 30, 1998 primarily as a
result of net borrowings under the Company's working capital line of credit
of $37.9 million which was used primarily to finance the 1998 Acquisitions.
Additionally, this cash was used, in part, to repay and retire line of credit
balances of acquired companies of $3.8 million.
EBITDA represents the sum of income (loss) before income tax provision
(benefit), net recourse interest expense and depreciation and amortization.
EBITDA is not a measure of performance or financial condition under generally
accepted accounting principles, but is presented to provide additional
information related to debt service capability. EBITDA should not be considered
in isolation or as a substitute for other measures of financial performance or
liquidity under generally accepted accounting principles. While EBITDA is
frequently used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to the potential inconsistencies in the method
of calculation. The following presentation represents the Company's computation
of EBITDA (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1997 1998
---------- -----------
<S> <C> <C>
Income (loss) before income tax provision (benefit) $ 175 ($ 4,774)
Net recourse interest expense ..................... 2,986 7,482
Non-cash charge related to vesting of stock options -- 1,422
Depreciation and amortization ..................... 642 6,279
------- --------
EBITDA ............................................ $3,803 $ 10,409
------- --------
------- --------
</TABLE>
###
The foregoing discussion of various factors that may impact 1998 performance
contains certain forward-looking statements. In addition, the Company or its
representatives from time to time may make or have made certain forward-looking
statements. Those forward looking statements made by the Company or its
representatives are qualified in their entirety by reference to the discussion
in this document, other public documents, and the discussion of important
factors that could cause the Company's actual results to differ materially from
those projected or discussed in those forward looking statements. It is intended
that the foregoing constitute meaningful cautionary statements so as to obtain
the protections of the safe harbor established for such statements by the
Private Securities Litigation Reform Act of 1995.
###
Part II. Other Information
Item 5. Submission of Matters to a Vote of Security Holders
On July 14, 1998, the stockholders of the Company holding 2,332,493 shares of
common stock of the Corporation, which number of shares constitutes a majority
of the voting stock, took action by written consent without a meeting to approve
an increase in the number of shares subject to the Stock Option Plan for
Executive and Other Key Employees of Federal Data Corporation and its
Subsidiaries from 407,000 to 415,000.
Item 6 (a).Exhibits.
27 Financial Data Schedule.
Item 6 (b). Reports on Form 8-K.
11
<PAGE>
The Company filed a Form 8-K/A dated May 4, 1998 and May 14, 1998 related to the
acquisition of R.O.W. Sciences, Inc., and Telos Information Systems, a division
of Telos Corporation.
SIGNATURE
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 hereunto duly authorized.
FEDERAL DATA CORPORATION
/s/James M.Dean
By:
-------------------------------
James M. Dean
Vice President and
Chief Financial Officer
Date: August 14, 1998
12
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