UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended JUNE 30, 1996
Commission file number 1-6002
COMPUTER DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-0882982
(State or other jurisdiction (IRS Employer ID No.)
of incorporation or organization)
ONE CURIE COURT
ROCKVILLE, MARYLAND 20850-4389
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 921-7000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of
the Corporation at September 3, 1996 was $118,328,733, based on the closing
price of $21.50 per share. As of that date, 5,937,470 shares of Common Stock
were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART OF 10-K
Portions of the Definitive Proxy Statement
filed pursuant to Regulation 14A Part III, Items 10-13
<PAGE>
PART I
ITEM 1. BUSINESS
Principal Services Rendered
- ---------------------------
Computer Data Systems, Inc. (the "Corporation"), was incorporated in
the State of Maryland in 1968. The Corporation provides information technology
services and products including system integration, software engineering/re-
engineering, development and maintenance, data base support, data center
management and processing services, and telecommunications engineering. The
Corporation's products include CASE tools as well as financial and accounting,
debt management, loan and mortgage processing, and biometric identification
systems. The Corporation's 3,200 employees serve a wide array of government and
private industry customers with information technology expertise, systems, and
products. The Corporation provides information technology solutions on more
than 100 current contracts from 23 office locations.
The Corporation's operations are concentrated in two business
segments. In 1996, the Corporation reorganized these business segments into
two unincorporated operating companies, CDSI Information Technology Solutions
Company (CDSI ITS) and CDSI Business Applications Solutions Company (CDSI BAS).
Information with respect to such business segments may be found in Note 9 to
the Corporation's Consolidated Financial Statements.
Of these business segments, the larger CDSI ITS (formerly
Professional Services Group) primarily markets its expertise in software
programming and network engineering to those federal government agencies that
demand highly technical information technology solutions. CDSI ITS applies
proven information technology to design, implement, and operate data center
facilities, networks, imaging systems, interactive databases, automated
biometric identification tools, and information management and reporting
systems.
CDSI BAS (formerly Data Processing Support Services Group) provides
financial systems and services to include debt collection, pension trust fund
support, loan processing, cash management, mortgage servicing, and fulfillment
systems and services. In addition, CDSI BAS markets the Corporation's
proprietary software packages and CASE re-engineering tools. The suite of
CASE tools enhances the development and maintenance of COBOL programs
and increases operational reliability and maintainability. CDSI BAS also
operates a modern data center, which services the information processing
requirements, both mainframe and client-server, of numerous federal and
commercial clients. Data center services include the full range of associated
technical support: LAN administration, system and data security, data integrity,
user training, office automation support, hotline support, and courier services.
Recent awards include new contracts with the Lockheed Martin
Corporation, the Department of Transportation and the Federal Communications
Commission and subcontract work for Systems Research and Applications
Corporation. The Corporation also received two contracts for its i.e.FARS
system with the Department of Education and the Export Import Bank of the United
States. In addition, the Corporation was awarded a contract to continue to
provide facilities management support with the General Services Administration
Information Technology Service. The contract, covering over 900 current
employees, is for one year with four one year options and has a total estimated
value of $200 million through September 2001.
<PAGE>
In March 1995, the Corporation's Argentine subsidiary along with the
prime contractor NetStar S.A., was awarded a contract with the Banco Social de
Cordoba to automate the state-owned Quiniela lottery. However, after
successfully completing acceptance testing on the prototype and investing $11
million in hardware and software development in the contract, a decree was
issued by the outgoing Governor of Cordoba on his last day in office effectively
cancelling all work on the contract and reopening the bidding process from the
initial receipt of proposals. In July 1996, the contract was reinstated. The
Corporation is currently beginning the implementation schedule.
Most contracts are awarded on the basis of competitive bidding, and
are generally structured as time-and-materials, cost-plus-fixed-fee, fixed-
price, or unit-price contracts. Such contracts include specific objectives and
performance periods ranging upwards of several years.
Under time-and-materials contracts, the Corporation receives a fixed
hourly rate intended to cover salary costs attributable to work performed under
the contract, including related expenses and a specified profit margin. Under
cost-plus-fixed-fee contracts, the Corporation is reimbursed for allowable costs
and is paid a negotiated fee. Under fixed-priced and unit-priced contracts, the
Corporation bears the risk of increased or unexpected costs and benefits if its
costs are lower than estimated. Key factors in the award of such contracts have
been technical expertise, past performance, and pricing.
Market and Competition
- ----------------------
A substantial number of companies offer information technology
services and products that overlap and are competitive with those offered by the
Corporation. These include: (1) companies that offer one or more information
technology services as a main line of their business; (2) computer manufacturers
who offer the same information technology services as adjunct technical support
for their equipment or as separate functions; and (3) companies primarily
engaged in other businesses that also outsource their information technology
facilities, services and expertise.
The Corporation has many competitors in each of the areas in which
it does business. Some of its competitors are large, diversified firms having
substantially greater financial resources and larger technical staffs than the
Corporation. The primary competitive factors in the market are technical
qualifications, management performance, and price. Greater emphasis on value
rather than simply price considerations has been noted in recent contract
awards.
While the federal market for the Corporation's services is projected
to grow 5-8% annually, increasing federal regulation, continuing competition for
qualified technical personnel, and narrow profit margins are characteristic of
this highly competitive industry. In recent years, the trend toward
consolidation of existing contracts and an emphasis on fixed-price contracts has
grown. Economic uncertainty and federal budget pressures continued to affect
the marketplace in 1996.
<PAGE>
Dependence on Government Contracts
- ----------------------------------
The Corporation's business with the federal government is subject to
various risks, including the reduction or modification of contracts due to
changing government needs and requirements. The Corporation's contracts are not
subject to renegotiation of profits. In the event of termination for
convenience, the Corporation would be reimbursed for the costs of terminating
the contract.
In fiscal year 1996, CDSI ITS sales to the General Services
Administration were $93,249,900 (37%) and CDSI BAS sales to the Department of
Education were $67,376,900 (27%). In fiscal year 1995, CDSI ITS sales to the
General Services Administration and the Department of Energy were $89,117,600
(40%) and $46,160,400 (21%) respectively. CDSI BAS revenues from the Department
of Education were $25,642,500 (12%) in fiscal year 1995. In fiscal year 1994,
CDSI ITS sales to the General Services Administration and Department of Energy
were $82,837,900 (40%) and $48,491,600 (24%), respectively.
Backlog
- -------
As of June 30, 1996, the Corporation had a funded backlog of
approximately $161,073,400 compared to $179,998,200 as of June 30, 1995.
The Corporation expects that virtually all of the backlog will be fulfilled
during the current fiscal year. Most contracts are subject to termination at
the convenience of the government client.
Other Matters
- -------------
The Corporation is not materially dependent upon any raw materials
for its products and holds no material patents, licenses, or franchises.
However, the Corporation offers for license its proprietary software products:
Information Engineered Financial Accounting and Reporting System (i.e.FARS(TM));
Debt Management and Collection System (DMCS); Cash Management System (CMS);
Automated Biometric Identification System (ABIDS(TM)); Executive Information
Management System (Executive Touch(TM)) and a suite of re-engineering tools
including SCAN/COBOL, SUPERSTRUCTURE(R), RETOOL(C), COBOL-METRICS, and SLEUTH.
The Corporation does not experience any seasonal variations in its
levels of operations, and neither the Corporation nor its subsidiaries currently
have any significant foreign operations.
ITEM 2. PROPERTIES
The Corporation owns its corporate headquarters building at One
Curie Court, Rockville, Maryland. The 130,000 square foot facility is used by
both business segments.
The Corporation is a partner in a general partnership which owns a
25,000 square foot office building in California, Maryland. The building has
been leased to a tenant through September 1998.
<PAGE>
In connection with certain professional services contracts, the
Corporation leases general office space in the following locations: Huntsville
and Montgomery, Alabama; Rosslyn, Virginia; Atlanta, Georgia; Fort Worth and San
Antonio, Texas; Beavercreek, Ohio; Mt. Prospect, Illinois; Vicksburg,
Mississippi; Pensacola, Florida; Kansas City, Kansas; St. Louis, Missouri;
Denver, Aurora and Fort Collins, Colorado; Bedford, Indiana; New Orleans,
Louisiana; Cambridge Massachusetts; Cary, North Carolina; and Midwest City,
Oklahoma. The leases provide space ranging from 500 to 35,000 square feet and
annual extension options concurrent with the Corporation's current contract
performance periods.
In the opinion of management, the Corporation's current space is
adequate for its operating needs.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is party to various legal proceedings arising in the
normal course of its business. Management of the Corporation does not believe
that the outcome of any of these proceedings will have a material adverse effect
on the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Corporation's common stock, par value $.10 per share ("Common
Stock") is publicly traded on the Nasdaq Stock Market ("Nasdaq") and is quoted
under the symbol "CDSI."
As of September 3, 1996, there were 678 record holders of Common
Stock. The number of record holders was determined from the records of the
Corporation's transfer agent and does not include beneficial owners of Common
Stock whose shares are held in the names of various securities brokers,
dealers and registered clearing agencies. The Corporation estimates that there
are approximately 3,000 stockholders.
The following table sets forth the high and low sales prices on the
Nasdaq for the Common Stock and dividends per share paid for fiscal years 1995
and 1996.
<TABLE>
<CAPTION>
1995 - 1996 1994 - 1995 DIVIDENDS PER SHARE
Quarter High Low High Low 1996 1995
- ------- ---- --- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First $11 3/4 $ 9 5/8 $14 1/4 $10 3/4 $ .05 $ .05
Second 16 10 12 1/2 8 3/4
Third 19 1/4 11 3/4 10 1/2 8 1/2 .06 .05
Fourth 24 1/4 15 1/2 11 1/4 9 1/2
</TABLE>
The Corporation has paid semi-annual dividends since 1976. The
payment and amount of any future dividends will necessarily depend upon the
existing conditions, including the Corporation's earnings, financial condition,
working capital requirements, and other factors.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 251,098,700 $ 220,667,000 $ 205,923,300 $ 180,958,500 $ 141,698,600
Costs & expenses 235,368,600 207,903,800 193,706,500 172,245,800 136,296,900
-------------- -------------- -------------- -------------- --------------
Income from
operations 15,730,100 12,763,200 12,216,800 8,712,700 5,401,700
Interest and other
income, net 267,900 420,000 290,400 71,000 198,200
-------------- -------------- -------------- -------------- --------------
Income before
income taxes 15,998,000 13,183,200 12,507,200 8,783,700 5,599,900
Provision for
income taxes 6,228,800 5,132,300 4,777,800 3,276,300 2,088,800
-------------- -------------- -------------- -------------- --------------
Net Income $ 9,769,200 $ 8,050,900 $ 7,729,400 $ 5,507,400 $ 3,511,100
============== ============== ============== ============== ==============
Net Income per
Common Share $ 1.65 $ 1.36 $ 1.31 $ .97 $ .64
Dividends per
Common Share $ .11 $ .10 $ .09 $ .08 $ .075
Total assets $ 103,053,900 $ 84,923,000 $ 77,295,900 $ 68,189,300 $ 57,665,800
Long-term debt $ 4,533,300 $ 6,133,300 $ 10,905,200
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1996 Compared With 1995
- -----------------------
Revenues in fiscal year 1996 increased approximately 14% from 1995.
The increase resulted primarily from the CDSI BAS (formerly Data Processing
Support Services) Department of Education contract. CDSI BAS revenues grew 95%
primarily as a result of $42 million growth in the Department of Education
contract. The expiration of a large CDSI ITS (formerly Professional Services)
contract during 1995 and the reduced scope on the Department of Energy contract
partially offset the increase in revenues. In fiscal year 1996, CDSI ITS
accounted for 65% of consolidated revenues and 60% of income from operations.
CDSI BAS accounted for 35% of consolidated revenues and 40% of income from
operations for the year.
Costs and expenses increased approximately 13%. Costs which
contributed to the increase in expenses included a significant increase in
subcontractor costs primarily related to our Department of Education contract,
investments in software for the Corporation's internal systems, and continued
emphasis on marketing initiatives.
<PAGE>
Income from operations was $15,730,100 compared to $12,763,200 in
the prior period. Operating margins increased to 6.3% from 5.7%. Margins
increased principally as a result of higher volume levels on contracts in both
segments. Concurrent with the higher revenue volumes, reductions in i.e.FARS
proprietary development costs, proposal protest costs, and proposal costs
related to the Argentina gaming contract aided the margin improvement.
Interest and other income, net decreased by $152,000 due to higher
investment gains more than offset by increased interest expense arising from
larger borrowing under the Corporation's line of credit for equipment
commitments on the Argentina contract and accounts receivable growth.
The provision for income taxes increased due to higher operating
income before income taxes.
Net income increased by $1,718,300 due to improved operating
results.
1995 Compared With 1994
- -----------------------
Revenues in fiscal year 1995 increased approximately 7% from 1994.
The increase resulted primarily from the Data Processing Support Services
Group's Department of Education contract and growth on several contracts in the
Professional Services Group. Data Processing Support Services Group revenues
grew 70% primarily as a result of $14 million growth in the Department of
Education contract. The expiration of two large Professional Services Group
contracts during 1994 and the reduced contract scope resulting from the
settlement of the Department of Energy contract protest partially offset the
increase in revenues. In fiscal year 1995, Professional Services accounted for
80% of consolidated revenues and 89% of income from operations. Data Processing
Support Services accounted for 20% of consolidated revenues and 11% of income
from operations for the year.
Costs and expenses increased at approximately the same rate as the
growth in revenues. Costs which contributed to the increase in expenses
included corporate investments in software development, marketing initiatives,
and continuing development of Centers of Expertise. Increases in expenses were
mitigated by cost reduction efforts which included reduced interest expense
resulting from the repayment of the note payable ($370,600) and operating
efficiencies realized on the expanding contract base.
Income from operations was $12,763,200 compared to $12,216,800 in
the prior period. Operating margins decreased to 5.7% from 5.9%. Lower margins
in the initial phases of new contracts in the Data Processing Support Services
Group and the corporate investments noted above contributed to the decline in
operating margins.
Interest and other income, net increased by $129,600, principally
due to a $115,000 gain on the unwinding of an interest rate swap associated with
the note payable, prepaid in September 1994.
The provision for income taxes increased due to higher operating
income before income taxes and an increase from 38.2% to 38.9% in federal and
state tax rates.
Net income increased by $321,500 due to improved operating results.
<PAGE>
1994 Compared With 1993
- -----------------------
Revenues in fiscal year 1994 increased approximately 14% from 1993.
The increase resulted primarily from new contracts in the Professional Services
and Data Processing Support Services Groups and increased funding on several
major contracts in the Professional Services Group. The increase was tempered
by the loss of the General Services Administration Eastern Zone contract ($12
million annual revenues), which expired in March 1994. Data Processing Support
Services Group revenues grew 45% as the new Department of Education contract
more than offset reduced licensing and mainframe processing services. In fiscal
year 1994, Professional Services accounted for 87% of consolidated revenues and
85% of income from operations. Data Processing Support Services accounted for
13% of consolidated revenues and 15% of income from operations for the year.
Costs and expenses increased approximately 12%, a lower rate than
the increase in revenues. This resulted from operating efficiencies realized as
the Corporation's business base expanded, higher margins on new contracts
replacing previous contracts, and a $732,100 savings in interest expense charged
to other general and administrative expenses due to the April 1993 refinancing
of the headquarters building mortgage. The positive effects were offset in part
by increased bid and proposal expenses, legal costs associated with the
Department of Energy bid protest, and software development costs of $600,000.
Income from operations was $12,216,800 compared to $8,712,700 in the
prior period. Operating margins improved to 5.9% from 4.8%. The improvement is
attributable to higher margins on new contracts and operating efficiencies.
Interest and other income, net increased by $219,400 due to higher
available investment balances, reduced line of credit borrowings, and investment
gains.
The provision for income taxes increased due to higher operating
income and higher federal and state tax rates.
Net income increased by $2,222,000 due to the improved operating
results.
Liquidity
- ---------
The Corporation's working capital increased by $3,952,900 to
$29,966,700 at June 30, 1996. The increase was attributable to net income
retained after dividends paid of $633,000 offset by capital expenditures of
approximately $9.7 million including $4.7 million for the Argentina contract.
As the Corporation bids larger, more complex contracts in both the government
and commercial markets, capital expenditures may be required that are not
directly reimbursable. Such commitments and other working capital requirements
are expected to be met with internally generated funds. In addition, the
Corporation has $22 million available its bank line of credit facilities.
Increased win rates on contract proposals are an integral part of
the Corporation's long-term growth. The Corporation is continuing to invest in
its business development, marketing, and proposal resources.
<PAGE>
Capital Resources
- -----------------
Capital expenditures in fiscal year 1996 were approximately
$9,700,000 for data processing equipment and software and were funded
internally. Capital expenditures in fiscal year 1997 are expected to
approximate $4,000,000 and are anticipated to be funded from internally
generated working capital and existing credit facilities. However, in the event
the Corporation engages in any merger or acquisition activities, the additional
capital that may be required will be funded from external sources.
Impact of Recently Issued Accounting Standards
- ----------------------------------------------
In March 1995, the FASB issued Statement No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assests that are expected to be disposed of. The Corporation will adopt
Statement 121 in the first quarter of Fiscal Year 1997 and, based on current
circumstances, does not believe the effect of adoption will be material.
Effects of Inflation
- --------------------
The majority of the Corporation's contracts provide for annual
adjustments on prices. Increases in revenues are primarily the result of
increased levels of service and product sales rather than price increases.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors
Consolidated Statements of Operations for the years ended
June 30, 1996, 1995 and 1994
Consolidated Balance Sheets as of June 30, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity
for the years ended June 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the years ended
June 30, 1996, 1995 and 1994
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of Computer Data Systems, Inc.
We have audited the accompanying consolidated balance sheets of Computer
Data Systems, Inc. and subsidiaries, as of June 30, 1996 and 1995 and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the three years in the period ended June 30, 1996.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Computer Data
Systems, Inc. and subsidiaries at June 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended June 30, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Washington, D.C.
July 26, 1996
<PAGE>
<TABLE>
<CAPTION>
COMPUTER DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30
-------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues $ 251,098,700 $ 220,667,000 $ 205,923,300
Costs and Expenses: -------------- -------------- --------------
Salaries, wages and benefits 135,370,400 138,758,200 141,577,500
Subcontractors 78,481,000 47,469,900 31,791,900
Travel, relocation, and subsistence 2,786,400 2,600,500 2,293,200
Rental of space and equipment 1,961,900 4,058,000 3,295,100
Depreciation and amortization 3,419,500 2,937,500 2,089,400
Other operating and administrative costs 13,349,400 12,079,700 12,659,400
-------------- -------------- --------------
235,368,600 207,903,800 193,706,500
-------------- -------------- --------------
Income from operations 15,730,100 12,763,200 12,216,800
Interest and other income, net 267,900 420,000 290,400
-------------- -------------- --------------
Income before income taxes 15,998,000 3,183,200 12,507,200
Provision for income taxes: -------------- -------------- --------------
Current 6,453,100 4,678,300 4,946,100
Deferred (224,300) 454,000 (168,300)
-------------- -------------- --------------
6,228,800 5,132,300 4,777,800
-------------- -------------- --------------
Net Income $ 9,769,200 $ 8,050,900 $ 7,729,400
============== ============== ==============
Net income per common share $ 1.65 $ 1.36 $ 1.31
============== ============== ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPUTER DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
June 30
<S> 1996 1995
Assets ---- ----
Current Assets: <C> <C>
Cash and cash equivalents $ 3,639,600 $ 1,237,000
Trade accounts receivable 61,479,200 52,236,900
Deferred income taxes 1,252,300 456,600
Income tax refunds receivable 151,100 151,400
Prepaid expenses and deposits 1,255,300 1,948,300
-------------- --------------
Total Current Assets 67,777,500 56,030,200
Long-term investments 1,922,000 1,584,800
Land, building, and equipment 32,403,100 26,452,900
Other assets 951,300 855,100
-------------- --------------
Total Assets $ 103,053,900 $ 84,923,000
============== ==============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 23,149,400 $ 15,652,600
Accrued wages and related benefits 13,875,000 14,363,800
Current income taxes payable 786,400
-------------- --------------
Total Current Liabilities 37,810,800 30,016,400
-------------- --------------
Deferred compensation 4,583,500 4,245,500
Deferred income taxes 409,000 599,500
Stockholders' Equity
Common stock, par value $.10; 30,000,000
shares authorized; 5,867,330 shares
outstanding in 1996 and 5,737,842
shares in 1995 586,700 573,800
Capital in excess of par value 7,625,900 6,014,500
Retained earnings 52,037,100 43,473,300
-------------- --------------
Total Stockholders' Equity 60,249,700 50,061,600
Commitments and contingencies (Note 10) -------------- --------------
Total Liabilities and Stockholders'
Equity $ 103,053,900 $ 84,923,000
============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
COMPUTER DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30
-------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Income $ 9,769,200 $ 8,050,900 $ 7,729,400
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,419,500 2,937,500 2,089,400
Deferred income taxes (224,300) 454,000 (168,300)
Deferred compensation 679,600 849,100 682,200
Other (34,100) (121,800) (52,600)
Net cash provided by (used in) changes
in operating assets and liabilities:
Accounts receivable (9,242,000) (10,002,200) 3,498,300
Prepaid expenses and deposits (68,000) (677,400) 104,200
Accounts payable and accrued liabilities 8,239,100 3,326,200 1,352,000
Accrued wages and related benefits (488,800) 1,628,300 461,500
------------ ------------ ------------
Net cash provided by operating activities 12,050,200 6,444,600 15,696,100
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (9,729,600) (6,982,800) (6,101,400)
Proceeds from sale of equipment 217,400 207,100 23,800
Purchase of long-term investments (174,400) (166,800) (165,000)
Other (38,300) (33,700) (148,400)
------------ ------------ ------------
Net cash used in investing activities (9,724,900) (6,976,200) (6,391,000)
------------ ------------ ------------
Cash flows from financing activities:
Payments on notes payable (8,000,000) (7,633,300) (1,600,000)
Borrowings on note payable 8,000,000 1,500,000
Cash dividends (633,000) (571,600) (506,800)
Exercise of stock options 1,051,900 309,200 951,200
Payment of deferred compensation (341,600) (17,800) (68,600)
------------ ------------ ------------
Net cash provided by (used in) financing activities 77,300 (6,413,500) (1,224,200)
------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents 2,402,600 (6,945,100) 8,080,900
------------ ------------- ------------
Cash and cash equivalents at
beginning of year 1,237,000 8,182,100 101,200
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 3,639,600 $ 1,237,000 $ 8,182,100
============ ============
Supplemental cash flow information:
Interest paid $ 230,400 $ 95,100 $ 448,500
Income taxes paid $ 5,704,400 $ 4,513,100 $ 4,627,200
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
COMPUTER DATA SYSTEMS, INC.
Consolidated Statements of Changes in Stockholders' Equity
Years Ended June 30, 1996, 1995, and 1994
-----------------------------------------
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings Total
------ ------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1993 5,569,878 $ 557,000 $ 4,266,000 $ 29,276,300 $ 34,099,300
Exercise of stock options, net 120,041 12,000 926,600 (359,000) 579,600
Tax benefit arising from exercise
of non- qualified stock options 371,600 371,600
Cash dividends (506,800) (506,800)
Net income for the year 7,729,400 7,729,400
--------- ------------ ------------ ------------ ------------
Balance at June 30, 1994 5,689,919 569,000 5,564,200 36,139,900 42,273,100
Exercise of stock options, net 47,923 4,800 318,100 (145,900) 177,000
Tax benefit arising from exercise
of non-qualified stock options 132,200 132,200
Cash dividends (571,600) (571,600)
Net income for the year 8,050,900 8,050,900
--------- ------------ ------------ ------------ ------------
Balance at June 30, 1995 5,737,842 573,800 6,014,500 43,473,300 50,061,600
Exercise of Stock Options, net 129,488 12,900 867,900 (572,400) 308,400
Tax Benefit arising from exercise
of non-qualified stock options 743,500 743,500
Cash Dividends (633,000) (633,000)
Net Income for the year 9,769,200 9,769,200
--------- ------------ ------------ ------------ ------------
Balance at June 30, 1996 5,867,330 $ 586,700 $ 7,625,900 $ 52,037,100 $ 60,249,700
========= ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995, and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the
accounts of Computer Data Systems, Inc. and its wholly owned subsidiaries. All
intercompany transactions have been eliminated in consolidation.
Revenue Recognition. Revenues on time and material contracts are recorded at
the contractual rates as the labor hours and direct expenses are incurred.
Revenues on cost-type contracts are recorded as reimbursable costs are incurred.
Revenues on fixed-price contracts are recorded on the percentage of completion
basis, determined by the ratio of total incurred costs to anticipated total
costs of the project. Revenues on unit-price contracts are recorded at
contractual selling prices of work completed and accepted by the customer.
Contract award fees are recorded based on estimated current performance levels
and historical experience. Revenues on equipment and software sales are
recorded when the units are delivered and installed. Immediate recognition is
made of any anticipated losses.
Depreciation and Amortization. Furniture, computer equipment and software, and
leasehold improvements are recorded at cost and are depreciated over their
estimated useful lives on the straight-line basis. Building and improvements
are depreciated over a useful life of forty years. The useful lives of
furniture and equipment range from five to ten years.
Investments. Deferred annuity contracts included in long-term investments are
carried at cost plus accrued interest, which approximates fair market value.
Income Taxes. The Corporation computes deferred income taxes under the
liability method. Deferred taxes are based on timing differences between
financial statement and income tax purposes, using the enacted tax rates in
effect during the years in which the differences are expected to reverse.
Net Income Per Common Share. Net income per share of common stock is based on
the weighted average number of common and common stock equivalent shares
outstanding during each year. Common stock equivalent shares include the number
of shares issuable upon exercise of outstanding stock options, reduced by the
number of shares that could have been repurchased with the proceeds of such
options.
Statements of Cash Flows. For purposes of the statements of cash flows, the
Corporation considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Reclassifications. Certain reclassifications have been made to prior year
amounts to conform to current year classifications.
Stock Based Compensation. During 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." While SFAS No. 123 established financial accounting
and reporting standards for stock-based employee compensation plans using a fair
value method of accounting, it allows companies to continue to measure
compensation costs for those plans using the intrinsic value method of
accounting prescribed in Accounting Principles Board (APB) No. 25, "Accounting
for Stock Issued to Employees." As permitted by SFAS No. 123, the Corporation
will not change its method of accounting for stock options but will provide the
additional required disclosures beginning in fiscal 1997.
<PAGE>
Use of Estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions, in particular estimates of anticpated contract
costs and revenues utilized in the earnings recognition process, that affect the
reported amounts in the financial statements and accompanying notes. Actual
results could differ from these estimates.
2. ACCOUNTS RECEIVABLE Trade accounts receivable contain no allowance for
doubtful accounts. The components of trade accounts receivable are as follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
U.S. Government $ 59,099,700 $ 50,693,600
Commercial 2,379,500 1,543,300
------------ ------------
$ 61,479,200 $ 52,236,900
============ ============
Accounts receivable include unbilled costs and accrued profits on
contracts as follows:
June 30, 1996 June 30, 1995
------------- -------------
Excess of actual indirect costs over
amounts currently billable under cost
reimbursable contracts $ 1,293,800 $ 869,200
Contract retainages not currently
billable 269,900 364,000
Fixed price work not currently billable 1,877,000 6,856,600
------------ ------------
$ 3,440,700 $ 8,089,800
============ ============
</TABLE>
To the extent not billable at June 30, 1996 and 1995, unbilled costs and
accrued profits above are billable upon delivery or acceptance of services, upon
receipt of contract funding, or upon contract completion. Of the above unbilled
costs and accrued profits at June 30, 1996, approximately $1,562,800 are not
expected to be billed and collected within one year.
<PAGE>
3. LAND, BUILDING, AND EQUIPMENT
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Land $ 2,200,000 $ 2,200,000
Furniture 4,652,400 5,093,000
Computer equipment and software 29,563,200 21,728,000
Building and improvements 15,121,900 15,132,000
------------ ------------
51,537,500 44,153,000
Less accumulated depreciation
and amortization (19,134,400) (17,700,100)
------------ ------------
$ 32,403,100 $ 26,452,900
============ ============
</TABLE>
4. OTHER ASSETS The Corporation maintains a program to provide senior
executives with additional life insurance coverage, supplementing the coverage
available under the Corporation's group insurance plan. Under the program,
officers participate with the Corporation in the payment of premiums. The
Corporation has an interest in such policies to the extent of its accumulated
premium payments.
5. LINE OF CREDIT The Corporation has an $8 million, three-year revolving
credit and a $14 million demand facility. Interest rates on these unsecured
facilities are at LIBOR plus 110-120 basis points. Interest expense on the
Corporation's line of credit facilities was $185,400, $1,600, and $3,200 in
1996, 1995, and 1994 respectively. Such interest expense is included in the
interest and other income, net.
6. STOCK OPTIONS The Corporation has granted incentive and non-qualified stock
options to certain employees and non-employee directors under the 1982 plan,
which expired in 1992. The employee options are exercisable in cumulative
annual installments after one year and before the end of the fourth year from
date of grant. The non-employee director options become exercisable in annual
installments over a five-year period. At June 30, 1996, there are no options
available to purchase shares.
<PAGE>
The following table summarizes the changes in the number of common shares
under the 1982 option plan during fiscal years 1996, 1995, and 1994.
<TABLE>
<CAPTION>
Number Per Share
1982 Plan of Shares Option Price
- --------- --------- ------------
<S> <C> <C>
Outstanding Balance at June 30, 1993 189,836 $ 4.88 - $ 7.69
Exercised (117,734) 4.88 - 7.69
Expired (29,700) 4.88 - 7.69
-------- ------------------
Outstanding Balance at June 30, 1994 42,402 4.88 - 5.50
Exercised (32,400) 5.50
-------- ------------------
Outstanding Balance at June 30, 1995 10,002 4.88
Exercised (10,002) $ 4.88
======== ==================
</TABLE>
In November 1991, the stockholders approved a long-term incentive plan that
provides for the granting of incentive awards to various employees and officers
of the Corporation. The plan also provides for the annual grant of non-
qualified options for 1,500 shares to each of the non-employee directors. The
employee options are exercisable in cumulative annual installments after one
year and before the end of the fifth year. The non-employee directors' options
are fully exercisable one year after grant and before the end of the fifth year.
At June 30, 1996, options to purchase 166,017 shares are exercisable. The
following table summarizes the changes in the number of common shares under the
1991 option plan during fiscal years 1996, 1995, and 1994.
<TABLE>
<CAPTION>
Number Per Share
1991 Plan of Shares Option Price
- --------- --------- ------------
<S> <C> <C>
Outstanding Balance at June 30, 1993 298,150 $ 4.19 - $ 9.50
Granted 178,400 8.75
Exercised (35,983) 4.19 - 5.75
Expired (12,300) 4.19 - 9.50
--------- -------------------
Outstanding Balance at June 30, 1994 428,267 4.19 - 8.75
Granted 144,900 11.50 - 14.13
Exercised (29,600) 4.19 - 8.75
Expired (6,000) 8.75 - 14.13
--------- -------------------
Outstanding Balance at June 30, 1995 537,567 4.19 - 14.13
Granted 219,900 10.50 - 21.75
Exercised (148,050) 4.19 - 14.13
Expired (29,700) 4.19 - 14.13
--------- -------------------
Outstanding Balance at June 30, 1996 579,717 $ 4.19 - $21.75
========= ===================
</TABLE>
<PAGE>
Proceeds from the exercise of options are credited to the capital accounts
in the year the options are exercised. The Corporation received 28,564, 14,077,
and 41,676 shares in payment for the exercise of 104,168, 31,200, and 61,200
shares under option during the years ended June 30, 1996, 1995, and 1994,
respectively.
7. EMPLOYEE INCENTIVE PLANS The Corporation has incentive compensation plans
for officers and certain key employees. The incentive compensation plans'
formulas are reviewed and approved annually by the Board of Directors.
Operations were charged $2,742,200, $2,546,600, and $2,496,600 to fund the
incentive compensation plans for the years ended June 30, 1996, 1995, and 1994,
respectively. Under the terms of the incentive compensation plans, officers may
elect to defer payment of all or a portion of the amount awarded under the plan
until retirement or termination of employment with the Corporation. The
deferred amounts earn interest, compounded quarterly at the greater of the
current 13-week Treasury bill rate effective the beginning of each quarter, or
7%.
The Corporation has defined contribution retirement plans for eligible
employees. Contributions to the plans are discretionary as determined by the
Board of Directors. Operations were charged $2,079,300, $1,974,500 and
$2,083,300 to fund the plans in 1996, 1995, and 1994, respectively. Under terms
of the plans, contributions for the benefit of certain long-term employees are
made to a non-qualified supplemental deferred retirement account.
8. PROVISION FOR INCOME TAXES The income tax provision is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S>
Federal income taxes: <C> <C> <C>
Current $ 5,446,000 $ 4,210,500 $ 4,178,000
Deferred (189,300) 408,600 (150,600)
------------ ------------ ------------
Total federal income taxes 5,256,700 4,619,100 4,027,400
------------ ------------ ------------
State income taxes:
Current 1,007,100 467,800 768,100
Deferred (35,000) 45,400 (17,700)
------------ ------------ ------------
Total state income taxes 972,100 513,200 750,400
------------ ------------ ------------
Total income taxes provided $ 6,228,800 $ 5,132,300 $ 4,777,800
============ ============ ============
</TABLE>
<PAGE>
The difference between the tax provision and the amount computed by
applying the federal statutory income tax rate to income before income taxes is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S>
Income tax computed at <C> <C> <C>
federal statutory rate $ 5,599,800 $ 4,610,300 $ 4,274,900
Add:
State income tax,
net of federal tax benefit 629,000 522,000 502,900
------------ ------------ ------------
Total income taxes $ 6,228,800 $ 5,132,300 $ 4,777,800
------------ ------------ ------------
Effective tax rate 38.9% 38.9% 38.2%
============ ============ ============
</TABLE>
Deferred tax assets and liabilities on the balance sheets reflect the net
tax effect of temporary differences between carrying amounts of assets and
liabilities for financial statement purposes and the amounts used for income tax
purposes. The Corporation believes a valuation allowance is not required.
The components of the Corporation's deferred tax assets and liabilities at
June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Deferred Tax Assets (Liabilities)
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Deferred compensation $ 1,760,000 $ 1,613,300
Depreciation and amortization (2,085,000) (1,958,700)
Annuity interest (400,700) (381,200)
Accrued vacation benefits 618,100 674,200
Stock Options 779,800 39,200
Other 170,200 (129,700)
------------ -----------
Total deferred taxes, net $ 842,400 $ (142,900)
============ ===========
</TABLE>
9. BUSINESS SEGMENT INFORMATION The Corporation operates in two business
segments: CDSI ITS (formerly Professional Services) and CDSI BAS (formerly Data
Processing Support Services). CDSI ITS encompass consulting, systems
development, and programming. CDSI BAS includes a variety of activities
primarily concerned with the processing of data for customers who require
computer-based support services and equipment and software sales. Services
range from the complete processing and preparation of reports from data supplied
by customers, including related programming support, to individual specialized
services such as data entry.
<PAGE>
Financial information by business segment for the years ended June 30 is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S>
Revenues: <C> <C> <C>
CDSI ITS $ 163,433,700 $ 175,851,500 $ 179,519,200
CDSI BAS 99,361,700 54,879,000 34,683,800
Intersegment (11,696,700) (10,063,500) (8,279,700)
------------- -------------- -------------
Total Revenues $ 251,098,700 $ 220,667,000 $ 205,923,300
============= ============== =============
Income from operations:
CDSI ITS $ 9,462,600 $ 11,381,500 $ 10,332,700
CDSI BAS 6,266,500 1,381,700 1,884,100
------------- ------------- -------------
15,730,100 12,763,200 12,216,800
Interest and other income, net 267,900 420,000 290,400
------------- ------------- -------------
Income Before Income Taxes $ 15,998,000 $ 13,183,200 $ 12,507,200
============= ============= =============
Identifiable assets:
CDSI ITS $ 48,432,400 $ 42,293,200 $ 34,959,900
CDSI BAS 36,742,200 27,809,700 18,894,400
Corporate assets 17,879,300 14,820,100 23,441,600
------------- ------------- -------------
Total Assets $ 103,053,900 $ 84,923,000 $ 77,295,900
============= ============= =============
Depreciation and amortization expense:
CDSI ITS $ 200,900 $ 86,000 $ 27,000
CDSI BAS $ 2,492,600 $ 2,165,800 $ 1,405,400
Corporate assets $ 726,000 $ 685,700 $ 657,000
Capital expenditures:
CDSI ITS $ 5,193,100 $ 3,472,800 $ 120,800
CDSI BAS $ 3,714,500 $ 2,882,800 $ 5,393,200
Corporate assets $ 822,000 $ 627,200 $ 587,400
</TABLE>
For the years ended June 30, 1996, 1995, and 1994, substantially all CDSI ITS
revenues and 93%, 89%, and 81%, respectively, of CDSI BAS revenues were derived
from federal government agencies. CDSI ITS revenues from one government agency
under various contracts were $93,249,900 in 1996. CDSI BAS revenues from one
government agency were $67,376,900 in 1996. CDSI ITS revenues from two
government agencies under various contracts were $89,117,600 and $46,460,400 in
1995. CDSI BAS revenues from one government agency were $25,642,500 in 1995.
CDSI ITS revenue from two government agencies under various contracts were
$82,837,900 and $48,491,600 in 1994. No other customers account for 10% or more
of total revenues. Intersegment revenues represent primarily unit price costs
billed for general corporate purposes.
<PAGE>
10. COMMITMENTS AND CONTINGENCIES The Corporation leases office and warehouse
space and equipment under agreements that provide for minimum aggregate rentals
through 1999 as follows:
Fiscal Year Minimum Aggregate Rentals
----------- -------------------------
1997 $ 690,800
1998 214,900
1999 6,100
In addition, the office space leases provide for escalation and pass-through
of increases in operating expenses and renewal options.
Government contracts are subject to review and audit by various governmental
authorities in the normal course of the Corporation's business. Cost audits
have been completed through fiscal 1993. In management's opinion, any such
reviews and the results of cost audits for subsequent fiscal years will not have
a material effect on the Corporation's financial position or results of
operations.
The Corporation is a party to various legal proceedings arising in the normal
course of business. Management believes that the outcome of these proceedings
will not have a material adverse effect on the Corporation.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Income Before Net Net Income
Revenues Income Taxes Income Per Share
-------- ------------ ------ -----------
<S>
1995 - 1996 <C> <C> <C>
September 30 $ 59,873,000 $ 3,690,300 $ 2,251,000 $ .38
December 31 61,183,200 3,469,800 2,111,800 .36
March 31 64,199,300 4,332,200 2,649,300 .44
June 30 65,843,200 4,505,700 2,757,100 .47
1994 - 1995
September 30 $ 54,230,900 $ 2,762,100 $ 1,674,600 $ .28
December 31 51,968,400 2,362,400 1,426,600 .24
March 31 57,774,600 3,621,700 2,235,900 .38
June 30 56,693,100 4,437,000 2,713,800 .46
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information called for by this Item is set forth under the captions
"Item 1: Election of Directors," "Executive Officers," and "Other Matters" in
the Corporation's definitive proxy statement filed pursuant to Regulation 14A,
which information is hereby incorporated by reference and made a part hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this Item is set forth under the captions
"Compensation of Directors," "Summary Compensation Table," "Options Grants in
Last Fiscal Year," "Aggregate Option Exercises in Last Fiscal Year and Year-End
Option Values," and "Five-Year Stockholder Return Comparison" in the
Corporation's definitive proxy statement filed pursuant to Regulation 14A, which
information is hereby incorporated by reference and made a part hereof.
ITEM 12. SECURITY OWNERSHIP OF MANAGEMENT
Information called for by this Item is set forth under the captions
"Information With Respect to Certain Stockholders" and "Securities Ownership of
Directors and Executive Officers" in the Corporation's definitive proxy
statement filed pursuant to Regulation 14A, which information is hereby
incorporated by reference and made a part hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to Consolidated Financial Statements
Data submitted herewith under Item 8:
Consolidated Statements of Operations for the years ended June 30,
1996, 1995 and 1994
Consolidated Balance Sheets as of June 30, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended June 30,
1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity for the
years ended June 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the years ended June
30, 1996, 1995 and 1994
Schedules otherwise required to be listed under Item 14(d) are
inapplicable and therefore have been omitted.
(b) Reports on Form 8-K
On April 11, 1996, the Corporation filed a current Report on Form 8-
K pursuant to the Item 5 thereof, reporting that Peter A. Bracken
would join the Corporation as President and Chief Executive Officer
effective May 13, 1996.
On June 14, 1996, the Corporation field a current Report on Form 8-K
pursuant to Item 5 thereof, reporting (i) a reorganization of the
Corporation's businesses into two unincorporated divisions (CDSI
Information Technology Solutions Company and CDSI Business
Applications Solutions Company); and (ii) the reaward of the
Corporation's contract with the General Services Administration
Southeast Sunbelt and Great Lakes Regions.
(c) Exhibits
3.1 Restated Articles of Incorporation of the Corporation, as amended,
included as an exhibit to the Corporation's Form 10-Q Quarterly
Report for the three months ended December 31, 1988 filed February
14, 1989 are incorporated herein by reference.
3.2 By-laws of the Corporation, as amended, included as an exhibit to
the Corporation's Form 10-K Annual Report for the fiscal year ended
June 30, 1988 filed September 14, 1988 are incorporated herein by
reference.
10.1 Certificate of Limited Partnership and Limited Partnership Agreement
- M/GA Fields Roads Limited Partnership included as an exhibit on
Form 8 to Form 10-K filed March 1, 1989 are incorporated herein by
reference.
10.2 1982 Incentive Stock Option Plan, as amended and restated, which
appears as Exhibit A to the Prospectus in Registration Statement No.
33-27300 is incorporated herein by reference.
<PAGE>
10.3 1991 Long-Term Incentive Plan, as amended and restated as of July
12, 1994, included as an exhibit to the Corporation's Form 10-K
Annual Report for the fiscal year ended June 30, 1994, filed
September 28, 1994, is incorporated herein by reference.
10.4 Incentive Compensation Plan, restated as of July 1, 1994, included
as an exhibit to the Corporation's Form 10-K Annual Report for the
fiscal year ended June 30, 1994, filed September 28, 1994, is
incorporated herein by reference.
10.5 U.S. Department of Education Contract No. PM94017001 (portions of
which are subject to an Order for Confidential Treatment pursuant to
Rule 24b-2) included as an exhibit to the Form 10-Q/A filed August
24, 1994 is incorporated herein by reference.
*10.6 Letter agreement dated April 9, 1996 between the Corporation and
Gordon S. Glenn.
*11 Statement re: Computation of Per Share Earnings.
*13 1996 Definitive Proxy Materials of the Corporation (portions of
which are incorporated herein by reference).
*21 Significant Subsidiaries of the Corporation.
*23 Consent of Ernst & Young LLP, Independent Auditors.
*27 Financial Data Schedule.
___________________
* = Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Rockville, Maryland
on September 27, 1996.
Computer Data Systems, Inc.
By /s/ Peter A. Bracken
--------------------
Peter A. Bracken
President and Chief
Executive Officer
(Principal Executive Officer)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Peter A. Bracken
____________________ President and Chief Executive September 27, 1996
Peter A. Bracken Officer; Director
(Principal Executive Officer)
/s/ Wyatt D. Tinsley Executive Vice President;
____________________ Director September 27, 1996
Wyatt D. Tinsley Principal Financial and
Accounting Officer)
/s/ Clifford M. Kendall Chairman of the Board of September 27, 1996
_______________________ Directors; Director
Clifford M. Kendall
/s/ Raymond B. Hoxeng Director September 27, 1996
- ---------------------
Raymond B. Hoxeng
/s/ Hilliard W. Paige Director September 27, 1996
- ---------------------
Hilliard W. Paige
/s/ Elmer B. Staats Director September 27, 1996
- -------------------
Elmer B. Staats
/s/ Paul R. Ignatius Director September 27, 1996
- --------------------
Paul R. Ignatius
/s/ James A. Parker Director September 27, 1996
- -------------------
James A. Parker
</TABLE>
<PAGE>
EXHIBIT INDEX
Page Number
10.6 Letter Agreement dated April 9, 1996 between
the Corporation and Gordon S. Glenn.
11 Statement re: Computation of Per Share Earnings.
13 1996 Definitive Proxy Materials of the Corporation
(portions of which are incorporated by reference).
21 Significant Subsidiaries of the Corporation.
23 Consent of Ernst & Young LLP, Independent Auditors.
27 Financial Data Schedule.
Exhibit 10.6
------------
April 9, 1996
Gordon S. Glenn
10705 Stapleford Hall Drive
Potomac, Maryland 20854
Dear Gordon:
This letter confirms the agreement between you and CDSI regarding the
terms of your separation from employment.
CDSI'S OBLIGATIONS
CDSI agrees as follows:
1. Voluntary resignation. During the period between May 1, 1996 and July 31,
1996, you will hold the title of Senior Advisor and will be on paid status as a
full-time employee and available for consultation with CDSI. You agree to
resign from your positions as director and officer of CDSI, and from any
positions held in any subsidiary or corporate affiliate thereof, effective April
30, 1996. CDSI agrees that it will not contest your claim, if any, for
unemployment benefits.
2. Severance Payment. You will receive a one-time severance payment in the
amount of $100,000, less appropriate tax deductions on June 30, 1996. You
acknowledge that this severance payment constitutes special consideration in
exchange for your promises under this Agreement, and that CDSI is not otherwise
obligated to provide this payment. Payment of the amount due under this
paragraph will be made by check mailed to your home address.
3. Benefits and COBRA Coverage. Your employment benefits will not be
continued, except as required by law, beyond the time periods in which such
benefits would normally be paid under the terms of CDSI's employment benefits
plans for similarly situated employees terminated on July 31, 1996. You are
entitled to purchase continued medical and dental coverage under COBRA
(Consolidated Omnibus Budget Reconciliation Act) for a period of 18 months,
effective July 31, 1996. You will continue to receive a car allowance of $450
per month through June 30, 1996.
4. Options. Your outstanding options will be exercisable, and will expire,
pursuant to the terms of their respective stock option agreements.
5. Consulting Agreement. CDSI agrees to retain you as an independent
contractor at a fee of $21,500 per month from August 1, 1996 to May 31, 1997 in
order to permit CDSI at its discretion to take advantage of the specialized
knowledge and expertise that you have developed during your employment with
CDSI. You agree to hold yourself available for this ten-month period for
consultation with representatives of CDSI, it being understood that both CDSI
and you will act in good faith to enable you to provide services without
unreasonably interfering with your other obligations. This Consulting Agreement
shall terminate upon your securing full-time employment, or on May 31, 1997,
whichever occurs earlier.
<PAGE>
6. Bonus. You will be eligible for a bonus under the Executive Incentive
Compensation Program in the same manner as other individuals who are
participants in that program as of June 30, 1996.
7. Fiscal Year 1996 Executive Incentive, Retirement Allocation, and Ten-Year
Supplemental Contribution. You will receive the executive incentive, retirement
allocation and deferred compensation contribution for fiscal year 1996 in
accordance with the provisions of the CDSI Incentive and Compensation Plan (key
executives' plan), the retirement plan for employees of CDSI, and the
Supplemental Deferred Compensation Plan (Ten-Year, Highly Compensated Employees'
Plan), respectively, in accordance with each of those plans' provisions in the
same manner as other similarly situated participants in employment on June 30,
1996.
8. References. CDSI's Chairman, Clifford Kendall, will refer favorably to
your service for CDSI when he announces the new CEO, and in subsequent public
statements. He will also provide a favorable recommendation any time an
employer or prospective employer seeks an evaluation or reference pertaining to
you. Mr. Kendall will provide a favorable written recommendation (letter
reference) to you, if desired.
9. Secretarial Support and Mailing Address. CDSI will allow you to use
CDSI's corporate headquarters as a mailing address and provide limited telephone
and secretarial support for you through December 31, 1996 or such earlier date
as you secure alternative employment.
10. Equipment. Notwithstanding the terms of the Professional Agreement
regarding the return of CDSI property, you may retain the laptop and docking
station currently in your office at CDSI and the CDSI computer equipment
installed in your home as of the date of this Agreement. In the event you wish
to retain the monitor and printer currently in your office (in addition to the
monitor and printer installed in your home), you may purchase them from the
Company at a price equal to the value of such equipment as reflected in the
Company's books (approximately $2,000).
YOUR OBLIGATIONS
In consideration of CDSI's Agreement to provide the foregoing benefits and
payments to you, you agree as follows:
<PAGE>
11. General Release. On your own behalf and on behalf of your
representatives, heirs, successors, and assigns, you hereby release and forever
discharge CDSI, its officers, directors, representatives, agents, insurers and
employees from any and all causes of action, claims, contracts, agreements,
promises, liabilities, demands, costs or expenses of any nature, fixed or
contingent, known or unknown, accrued or unaccrued, that you may have arising
out of your employment with CDSI and your separation therefrom, up through the
date of your execution of this Agreement, including but not limited to any
action, claim or lawsuit based in tort, contract (expressed or implied), or
under common law principles, or any federal, state or local law, statute or
regulation (including but not limited to all claims under the Age Discrimination
in Employment Act, 29 U.S.C. section621 et seq., and all claims for any other
kind of employment discrimination, wrongful discharge, breach of contract, tort,
personal injury or attorney's fees). You further covenant and agree never to
join, participate in, encourage or commence any action, suit or proceeding in
law or in equity, or before any local, state or federal administrative agency,
against CDSI pertaining to any events which occurred prior to the date of
execution of this Agreement. It is expressly agreed and understood that this
Agreement is a General Release.
12. Covenant Not to Compete or Solicit. You agree that for an eighteen-month
period following your termination, you will not solicit or divert to a
competitor, or retain on behalf of a competitor, any individual or entity who is
a customer of CDSI, was a customer at any time during the preceding 12 months,
or was an individual or entity to whom CDSI was marketing during the 12 months
prior to your resignation. You further agree that for an eighteen-month period
following your termination, you will not, either directly or indirectly, employ
or seek to employ any person who is at the time or was within the previous six
months employed by CDSI, without the prior express permission of CDSI, which
CDSI may in its absolute discretion withhold.
13. Waiver of Employment Rights. You agree to waive any rights that you may
have to employment with CDSI, including any right that may be created by any
future legal action against CDSI.
14. Cooperation. You agree that you will cooperate in the future with CDSI,
if necessary, in the same manner you would have cooperated as an employee, in
connection with matters arising as a result of your former responsibilities with
CDSI.
OTHER PROVISIONS
Both you and CDSI agree as follow:
15. Confidentiality. You and CDSI agree to keep the existence and terms of
this Agreement confidential, except as may be required by law, such as when
disclosure is required by a legally served subpoena, audit of tax returns or
federal reporting requirements. Notwithstanding the foregoing, you may discuss
this Agreement with your attorneys, tax advisors and immediate family.
16. Mutual Non-Defamation. CDSI agrees that it will not slander or libel you
either in regard to the reasons for your separation from employment with CDSI,
or your job performance and conduct while still employed by CDSI. You agree
that you will not slander or libel CDSI or any of its directors, officers or
employees concerning either their conduct regarding your separation or their
conduct at any time during your period of employment with CDSI.
<PAGE>
17. Choice of Law and Severability. This Agreement shall be construed,
enforced and governed by the laws of Maryland, excluding its choice of law
provisions. In the event that any provision of this Agreement is later held to
be unenforceable, such holding will not affect any other provision of this
Agreement and the Agreement should be enforced as if the unenforceable provision
had not been included in it.
18. Nature of the Agreement. You and CDSI acknowledge that this is the sole
and entire separation agreement between you and CDSI. Furthermore, no
supplement, modifications or amendment of this Agreement shall be valid or
binding unless in writing and signed by both parties to this Agreement. In
making this Agreement, both you and CDSI certify that you only relied on the
representations included in this Agreement.
19. Non-Admissions. You and CDSI agree that this letter shall not be
construed as an admission of liability by you, CDSI, or CDSI's officers,
directors, agents or employees.
20. Confidential Information. You acknowledge that, by reason of your
employment, you have had access to confidential information about the Company,
its products, services and clients, including, without limitation, information
and knowledge pertaining to products, inventions, innovations, designs, ideas,
trade secrets, and proprietary information; research, development and test
results; specifications, data, know-how and formats; manufacturing, packaging,
advertising, distribution and sales methods; sales and profit figures; marketing
plans, business plans, strategies, forecasts, unpublished financial information
and budgets; personnel information; customer and client lists; and information
regarding the history of and relationships between the Company and dealers,
distributors, sales representatives, wholesalers, customers, clients, suppliers
and others ("Confidential Information").
You further acknowledge that such Confidential Information is a valuable and
unique asset of the Company and covenant that, following your resignation, you
will not disclose any Confidential Information to any person without the prior
written authorization of the Board of Directors. You agree that following your
resignation, you will promptly return to the Company any documents, files or
other materials in your possession or custody, with the exception of documents
relating to compensation or benefits to which you are entitled following the
termination of your employment.
Your signature below acknowledges that you have read this Agreement, understand
its terms and have entered into it knowingly and voluntarily.
Very truly yours,
COMPUTER DATA SYSTEMS, INC.
By: /s/ Clifford M. Kendall By: /s/ Hilliard W. Paige
----------------------- ----------------------
Clifford M. Kendall Hilliard W. Paige
Chairman of the Board Chairman of Audit/
of Directors Compensation Committee
ACCEPTED AND AGREED:
By: /s/ Gordon S. Glenn
-------------------
Gordon S. Glenn
Exhibit 11
----------
STATEMENT RE: COMPUTATION OF
PER SHARE EARNINGS
<TABLE>
<CAPTION>
Years Ended June 30
-------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Average shares outstanding 5,756,344 5,735,892 5,641,740
Dilutive effect of stock
options computed by use
of treasury stock method 179,178 166,527 274,758
------------ ------------ ------------
Average common and common
equivalent shares
outstanding 5,935,522 5,902,419 5,916,498
============ ============ ============
Computation of Earnings
Per Share = Net Income
divided by Average common and
common equivalent shares $ 9,769,200 $ 8,050,900 $ 7,729,400
outstanding 5,935,522 5,902,419 5,916,498
------------ ------------ ------------
Earnings Per Share $ 1.65 $ 1.36 $ 1.31
============ ============ ============
</TABLE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant(X)
Filed by a Party other than the Registrant( )
Check the appropriate box:
( ) Preliminary Proxy Statement
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to section 240.14a-11(c) or section
240.14a-12
Computer Data Systems, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii),14a-6(i), or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS, OCTOBER 22, 1996
The Annual Meeting of Stockholders of Computer Data Systems, Inc. ("CDSI")
will be held at the Corporation's headquarters located at One Curie Court,
Rockville, Maryland, on October 22, 1996 at 10:00 a.m., for the following
purposes:
1. To elect a Board of Directors comprised of eight persons to serve until
the next Annual Meeting and until their successors are duly elected and
qualified;
2. To consider approval of the appointment of Ernst & Young LLP as
independent auditors for the fiscal year ending June 30, 1997; and
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only holders of shares of Common Stock of record on the books of the
Corporation at the close of business on September 3, 1996 will be entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to be present at the Annual Meeting. IF YOU
CANNOT ATTEND, PLEASE EXECUTE AND MAIL PROMPTLY THE ENCLOSED FORM OF PROXY,
USING THE ENCLOSED RETURN ENVELOPE.
By Order of the Board of Directors,
/s/ Donald E. Ziegler
---------------------
Donald E. Ziegler
Secretary
One Curie Court
Rockville, Maryland 20850
September 17, 1996
<PAGE>
COMPUTER DATA SYSTEMS, INC.
ONE CURIE COURT
ROCKVILLE, MARYLAND 20850
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
General
- -------
The following information is submitted concerning the enclosed form of proxy
and the matters to be acted upon under authority thereof at the Annual Meeting
of Stockholders of the Corporation to be held on the 22nd day of October 1996,
commencing at 10:00 a.m., or at any adjournment thereof, pursuant to the
accompanying notice of said meeting. The Annual Meeting will be held at the
Corporation's headquarters located at One Curie Court, Rockville, Maryland
20850. The Corporation intends to mail this proxy statement and accompanying
proxy to all stockholders entitled to vote at the Annual Meeting on or about
September 17, 1996.
Solicitation And Revocability Of Proxies
- ----------------------------------------
The proxy is solicited on behalf of the Board of Directors of the
Corporation. It may be revoked by the stockholder at any time prior to the
exercise thereof by filing with the Secretary of the Corporation a written
revocation or a duly executed proxy bearing a later date. The proxy shall be
suspended if the stockholder shall be present at the meeting and elect to vote
in person. Attendance at the meeting will not, by itself, revoke a proxy.
Shares represented by proxies received will be voted. Where the stockholder has
specified his choice with respect to the proposal to be acted upon, the shares
will be voted in accordance with the specification so made, and in the absence
thereof will be voted by the proxy holders as directed by management.
The cost of solicitation of proxies will be borne by the Corporation. In
addition to solicitation by mail, certain directors, officers and regular
employees of the Corporation may solicit proxies by facsimile, telephone or
personal interview for which they will receive no additional compensation. In
addition, arrangements will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material for the meeting to
beneficial owners, and the Corporation will reimburse them for their reasonable
expenses in so doing.
Voting Rights And Oustanding Shares
- -----------------------------------
Only stockholders of record on the books of the Corporation at the close of
business on September 3, 1996, will be entitled to notice of and to vote at the
Annual Meeting. As of that date, there were 5,937,470 shares of Common Stock
issued and outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote for each matter submitted to the stockholders for approval.
<PAGE>
A majority of the outstanding shares entitled to vote must be present in
person or represented by proxy at the Annual Meeting to constitute a quorum.
Shares represented by properly executed proxies with respect to which a vote is
withheld, an abstention is indicated, or a broker does not vote ("broker
nonvotes") will be treated as shares that are present and entitled to vote for
purposes of determining a quorum, but those shares will not be treated as having
been voted for purposes of determining the approval of any matter submitted to
the stockholders for a vote. Unless otherwise noted in this proxy statement,
all matters to come before the meeting identified in the accompanying notice
require the affirmative vote of a majority of those shares, present in person or
by proxy and voting at the Annual Meeting, to be adopted, assuming that a quorum
is present.
<PAGE>
INFORMATION WITH RESPECT TO CERTAIN STOCKHOLDERS
The stockholders named in the following table are those known to the
Corporation to be the beneficial owners of 5% or more of the Corporation's
Common Stock. Unless otherwise indicated, the information is as of July 26,
1996. For purposes of this table, and as used elsewhere in this Proxy
Statement, the term "beneficial owner" means any person who, directly or
indirectly, has or shares the power to vote, or to direct the voting of a
security or the power to dispose, or to direct the disposition of, a security.
Except as otherwise indicated, the Corporation believes that each individual
owner listed below exercises sole voting and dispositive power over their
shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OWNERSHIP (SHARES) COMMON STOCK
- ---------------- -------------------- --------------
<S> <C> <C>
FMR Corporation 598,500 (1) 10.18%
82 Devonshire Street
Boston, Massachusetts 02109
Calvin S. Koonce 445,106 (2) 7.57%
6229 Executive Boulevard
Rockville, Maryland 20852
Clifford M. Kendall 342,634 (3) 5.83%
One Curie Court
Rockville, Maryland 20850
</TABLE>
__________________________________
(1) As reported on Schedule 13G, dated April 9, 1996. Includes sole
dispositive power over 598,500 shares. FMR Corp. beneficially owns the
shares through its wholly-owned subsidiary, Fidelity Management and
Research Corporation ("Fidelity"), an investment adviser to several
investment companies registered under the Investment Corporation Act of
1940 that own shares of CDSI (the "Fidelity Funds"). The Board of
Trustees of the Fidelity Funds has the authority to vote or direct the
voting of the shares under written guidelines established by the Board of
Trustees of the Fidelity Funds. FMR Corp. through control of Fidelity,
and each of the Fidelity Funds has sole power to dispose of shares held by
the Funds. Mr. Edward C. Johnson, Chairman of FMR Corp., reported in the
statement on Schedule 13G sole dispositive power with respect to the
shares owned by FMR Corp.
(2) As reported on Schedule 13D, dated April 27, 1992. Number of shares
adjusted to reflect the August 1993, 2-for-1 stock split effected in the
form of a dividend.
(3) Includes 123,994 shares held by Mr. Kendall's spouse and 13,000 shares
subject to acquisition by the exercise of options exercisable within 60
days.
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
- ---------------------
Eight directors, comprising the entire membership of the Board of
Directors of the Corporation, are to be elected at the Annual Meeting. If
elected, the directors will serve until the next Annual Meeting and until their
successors are duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the eight nominees shown below. Although it is not
contemplated that any nominee will decline or be unable to serve as a director,
in either such event, the proxies will be voted by the proxy holders for such
other person as may be designated by the present Board of Directors.
Each nominee for election is currently serving as a member of the Board.
With the exception of Mr. Bracken, each nominee has also previously been elected
by the stockholders. The names of the nominees and certain information about
them are set forth below. Except as indicated, the principal occupation for the
past five years of each nominee is as listed below.
<TABLE>
<CAPTION>
PRINCIPAL
NAME OCCUPATION ADDITIONAL INFORMATION
---- ---------- ----------------------
<S> <C> <C>
DR. RAYMOND B. HOXENG Retired Prior to his retirement in 1982,
Director since 1968 Tampa, FL Dr. Hoxeng was involved in university
Age 77 and hospital administration. His
earlier career was distinguished by
accomplishments in industrial
engineering and research.
CLIFFORD M. KENDALL Chairman of From 1970 to 1991, Mr. Kendall
Director since 1970 the Board served as Chief Executive Officer
Age 65 of the Corporation of the Corporation.
Member-Executive Committee
HILLIARD W. PAIGE Retired Mr. Paige is a former President of
Director since 1974 Washington, DC General Dynamics Corporation.
Age 76 Mr. Paige serves as a Director of The Member-
Executive, Atlantic Council of the United States,
Audit/Compensation Committees Washington, D.C.
ELMER B. STAATS Retired Mr. Staats is a former Comptroller
Director since 1981 Washington, DC General of the United States. Mr.
Age 82 Staats serves as Chairman of the
Member-Executive, Financial Accounting Standards
Audit/Compensation Committees Advisory Board, Washington, D.C.
<PAGE>
</TABLE>
<TABLE>
<CAPTION> PRINCIPAL
NAME OCCUPATION ADDITIONAL INFORMATION
---- ---------- ----------------------
<S> <C> <C>
WYATT D. TINSLEY Executive Mr. Tinsley serves as the Corporation's
Director since 1988 Vice President Chief Financial Officer.
Age 53
PAUL R. IGNATIUS Retired Mr. Ignatius is a former Secretary of
Director since 1991 Washington, DC the Navy. From 1987 to December
Age 75 1993, Mr. Ignatius served as the
Member-Executive, Chairman of the Board, Logistics
Audit/Compensation Committees Institute, Bethesda, MD.
JAMES A. PARKER President, Mr. Parker serves as President of
Director since 1991 Jay Parker & the Lincoln Institute for Research
Age 59 Associates, & Education, Inc., a non-profit
Member-Executive, Washington, DC public policy organization in
Audit/Compensation Committees (International Washington, D.C.
Consulting Firm)
PETER A. BRACKEN President and Mr. Bracken has served as President
Director since 1996 Chief Executive and Chief Executive Officer since
Age 55 Officer May 1996. Prior to joining CDSI, Mr.
Bracken served as President of
the Information Sciences Group of
Lockheed Martin Corporation.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD
- ------------------------------------
The Corporation has standing Executive and Audit/Compensation Committees
of the Board of Directors. The Board of Directors does not have a Nominating
Committee. The Board of Directors of the Corporation held four meetings during
the fiscal year ended June 30, 1996. All directors attended at least 75% of the
aggregate number of meetings of the Board of Directors and Committees on which
they served. Overall attendance at such meetings was 99%.
The Executive Committee has the power and authority of the Board of
Directors and meets several times during the year in months when the Board of
Directors does not meet. Messrs. Kendall, Paige, Staats, Ignatius and Parker
serve on the Executive Committee. In the fiscal year ended June 30, 1996, the
Executive Committee met five times.
<PAGE>
The Audit/Compensation Committee makes recommendations regarding the
engagement of the Corporation's independent auditors, reviews the arrangement
and scope of the audit, considers comments made by the independent auditors with
respect to the adequacy of the Corporation's internal accounting controls, and
reviews non-audit services provided by the firm. In addition, this committee
reviews and approves (or recommends to the full Board) the annual salary, bonus
and other benefits of senior management of the Corporation; reviews and makes
recommendations to the Board relating to executive compensation and plans; and
establishes, and periodically reviews, the Corporation's policy with respect to
management perquisites. The Audit/Compensation Committee also presently serves
as the committee of disinterested persons who administer the Corporation's 1991
Long-Term Incentive Plan. Messrs. Paige, Staats, Ignatius and Parker serve on
the Audit/Compensation Committee. During the fiscal year ended June 30, 1996,
the Audit/Compensation Committee met five times.
COMPENSATION OF DIRECTORS
- -------------------------
Directors who are employees receive no additional compensation for serving
as directors. In the fiscal year ended June 30, 1996, non-employee directors
received the following amounts for each meeting of the Board of Directors they
attended: Dr. Hoxeng received $2,000 per meeting and Messrs. Paige, Staats,
Ignatius, and Parker each received $1,200. Messrs. Paige, Staats, Ignatius, and
Parker also received a retainer of $12,000 each in the fiscal year ended June
30, 1996, for services rendered as members of the Executive and
Audit/Compensation Committees of the Board of Directors.
Pursuant to the Corporation's 1991 Long-Term Incentive Plan (the "Plan"),
non-employee directors of the Corporation also are granted stock options upon
being named a director and thereafter on an annual basis. In the fiscal year
ended June 30, 1996, each non-employee director was granted options to purchase
1,500 shares. The options become exercisable one year after the date of grant
and expire five years from the date of grant.
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF AUDIT/COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
- ----------------------------------------------------------------
The Audit/Compensation Committee of the Board of Directors, which is
composed of outside directors of the Corporation, is responsible for developing
and recommending to the Board of Directors the Corporation's general
compensation policies. The Committee approves the compensation plans for the
Corporation's executive officers, including the Chief Executive Officer (CEO),
and determines the compensation to be paid to the executive officers. The
Audit/Compensation Committee also is responsible for the granting of stock
options to the executive officers and the administration thereof.
The Audit/Compensation Committee has furnished the following report for
fiscal year 1996:
Compensation Philosophy. The following general principles have been adopted by
the Committee and represent the guidelines upon which compensation decisions are
based. Executive compensation is designed to:
Provide a competitive total compensation package that enables the
Corporation to attract and retain key executives who demonstrate
outstanding performance, technical expertise, business responsibility,
personal integrity, and professionalism.
Encourage cooperation and coordination among executives to meet the
Corporation's long-term business objectives and strategy.
Provide variable compensation that is directly linked with the financial
performance of the Corporation and the achievement of increased
stockholder value.
Executive Officer Compensation. The Corporation's executive compensation
program consists of three main components: (i) annual base salary, (ii) annual
incentive cash bonus, and (iii) equity participation. The executive officers,
including the CEO, are eligible for the same benefits, including group health
and life insurance and participation in the Corporation's Employee Retirement
Plan and 401(k) Savings Plan, as are available generally to the Corporation's
professional staff. The Corporation also provides whole life "split dollar"
insurance policies on the lives of the executive officers. The Corporation is
the beneficiary of the amount of its premiums paid with the remaining amounts
payable to the officers' estates. The executives may elect, under certain
circumstances, to convert the policy to an annuity based on the cash value less
premiums paid.
The compensation policies that are administered by the Committee are
further explained below:
Base Salary - Base salaries are competitive, but not excessive, assuring the
Corporation the ability to attract and retain qualified officers yet maintain a
relatively low cost structure for officer salaries. Base pay levels are
reviewed annually and established through comparisons with other professional
services firms of similar size and complexity.
<PAGE>
Annual Incentive - Executive officers participate as a team in an incentive
compensation program with awards based on the attainment of predetermined
financial targets set annually by the Committee and on individual performance.
For 1996, the targets were based on achieving certain Corporation pre-tax levels
of income. The objective is to reward executives for meeting the predetermined
targets and provide opportunities for above average earnings by attaining
superior financial results for the Corporation and the stockholders.
Equity Participation - Non-qualifying stock option awards are granted
annually based on performance and serve as an incentive to enhance stockholder
value. Options are issued to executive officers, (as well as other line
officers and key employees) who have substantial responsibility for the
management and growth of the Corporation. Options granted are evidenced by an
agreement setting forth the number of shares awarded, and such other
terms and conditions as determined by the Committee. Options vest and become
exercisable in annual installments of twenty-five percent of the shares covered
by each grant commencing on the first anniversary of the grant date and expire
in five years from the grant date. In setting the size of grants for the CEO
and other executives, the Committee considers their position, individual
performance, stock options presently held, and the total number of shares
available for the issuance under the Corporation's stock option plan.
Compensation of the Current and Former CEO. The annual salary for the President
and CEO is established by the Audit/Compensation Committee using the same
criteria as discussed above for the executive officers. The CEO's annual
incentive compensation payment is determined by the Committee largely based on
whether targets for the Corporation's pre-tax income are met. The amount of
stock options granted to the CEO are intended to align the future rewards of the
CEO with the interests of the stockholders.
Gordon S. Glenn, who served as President and CEO of the Corporation since
1991, resigned from this position effective April 30, 1996. Mr. Glenn's salary
for fiscal year 1996 was $256,231, which represents an increase of approximately
twenty-three percent over his salary for the previous year. The percentage of
increase reflects the Committee's desire to bring the Corporation's compensation
for its top executives more in line with industry standards. Mr. Glenn's cash
award for fiscal year 1996 (shown in the Bonus column of the Summary
Compensation Table) was determined based on the Corporation's performance with
respect to the targets for 1996 pre-tax profits. Mr. Glenn was also awarded
stock options at the beginning of fiscal year 1996. As part of his separation
agreement with the Corporation, Mr. Glenn continued to draw his regular salary
through the end of July 1996 and will continue to serve the Corporation as a
consultant during fiscal year 1997.
Peter A. Bracken, the current President and CEO, joined the Corporation on
May 13, 1996. His compensation package, including salary and grant of stock
options, was established by the Audit/Compensation Committee and is consistent
with the Corporation's philosophy for executive compensation set out above. Mr.
Bracken was not eligible for an incentive compensation payment for fiscal year
1996.
<PAGE>
Tax Compliance Policy. Section 162(m) of the Internal Revenue Code generally
limits to $1,000,000 the tax deductible compensation paid to the CEO and to each
of the four highest-paid executives employed as executive officers on the last
day of the fiscal year. However, the limitation does not apply to performance-
based compensation provided certain conditions are satisfied. The Committee
does not anticipate that in the foreseeable future any officer of the
Corporation will earn compensation in excess of $1 million that would not
qualify as performance-based compensation. Therefore, the Committee has not yet
determined a policy with respect to Section 162(m). The Committee intends to
review the implications of Section 162(m) when it becomes more relevant with
respect to the Corporation's executive compensation policies.
The Audit/Compensation Committee
Hilliard W. Paige Paul R. Ignatius
Elmer B. Staats James A. Parker
SEPARATION AGREEMENT WITH FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER
In April 1996, the Corporation entered into a separation agreement with
Gordon S. Glenn in connection with his resignation from CDSI. While Mr. Glenn
resigned as a Director and as President and Chief Executive Officer of CDSI,
and from all positions with CDSI subsidiaries and affiliates effective April 30,
1996, Mr. Glenn agreed to remain as a full-time employee of the Corporation
through July 31, 1996. Pursuant to the terms of the agreement, Mr. Glenn
received a one-time severance payment of $100,000 and certain other benefits.
In addition, Mr. Glenn agreed to continue to serve the Corporation as a
consultant for a portion of fiscal year 1997. The consultant fees payable to
Mr. Glenn under the agreement could reach $215,000, depending upon when Mr.
Glenn secures another full-time position.
<PAGE>
EXECUTIVE OFFICERS
- ------------------
CLIFFORD M. KENDALL, age 65, has been with CDSI since its founding in 1968 and
is currently the Chairman of the Board of Directors. From 1970 to 1991, Mr.
Kendall served as Chief Executive Officer of the Corporation.
PETER A. BRACKEN, age 55, joined the Corporation in May 1996 as President and
Chief Executive Officer. From 1986 to 1996, Mr. Bracken was employed by Martin
Marietta Corporation (now Lockheed Martin Corporation), most recently as
President of the Information Sciences Group. Before joining Martin Marietta in
1986, Mr. Bracken served as Director of Mission Operations and Data Systems for
NASA's Goddard Space Flight Center.
WYATT D. TINSLEY, age 53, is currently Executive Vice President and the
Corporation's Chief Financial Officer. Mr. Tinsley joined CDSI in 1969.
MARY ANN MAYHEW, age 44, is currently President of the CDSI Information
Technology Solutions Company, a division of the Corporation ("CDSI ITS"). Ms.
Mayhew joined CDSI in 1980.
THOMAS A. GREEN, age 50, is currently President of the CDSI Business
Applications Solutions Company, a division of the Corporation ("CDSI BAS"). Mr.
Green joined CDSI in 1976.
EDWARD D. JOHNSON, age 42, is currently Senior Vice President of CDSI ITS. Mr.
Johnson joined CDSI in 1981.
DONALD E. ZIEGLER, age 47, is currently Treasurer and Secretary of the
Corporation. Mr. Ziegler joined CDSI in 1982.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table reports the compensation paid or accrued during the
three fiscal years ended June 30, 1996, for those individuals serving as
President and Chief Executive Officer of CDSI during fiscal year 1996 and for
each of the four other most highly compensated CDSI executive officers.
<TABLE>
<CAPTION> ANNUAL COMPENSATION COMPENSATION
------------------- ------------
YEAR OTHER SECURITIES
NAME AND ENDED ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION 6/30 SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION(1)
- ------------------ ---- ------ ----- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
CLIFFORD M. KENDALL 1996 $178,769 $142,000 ----- 8,000 $ 17,290
Chairman of the Board 1995 $148,000 $148,000 ----- 6,000 $ 16,259
1994 $148,000 $148,000 ----- 8,000 $ 15,329
PETER A. BRACKEN 1996 $ 28,846 N/A $21,750(2) 40,000 $ 361
President and
Chief Executive Officer
WYATT D. TINSLEY 1996 $149,385 $118,500 ----- 12,000 $ 11,304
Chief Financial 1995 $131,846 $130,000 ----- 6,000 $ 10,336
Officer 1994 $126,769 $124,000 ----- 8,000 $ 9,749
MARY ANN MAYHEW 1996 $149,038 $118,500 ----- 12,000 $ 10,142
President, CDSI ITS 1995 $122,654 $121,000 ----- 6,000 $ 9,355
1994 $112,769 $110,000 ----- 8,000 $ 8,609
THOMAS A. GREEN 1996 $149,077 $118,500 ----- 12,000 $ 10,533
President, CDSI BAS 1995 $123,077 $121,000 ----- 6,000 $ 8,954
1994 $114,808 $ 66,000 ----- 6,000 $ 8,312
GORDON S. GLENN 1996 $256,231 $203,820 ----- 24,000 $111,927(3)
Former President and 1995 $208,231 $205,000 ----- 30,000 $ 11,124
Chief Executive Officer 1994 $199,615 $195,000 $40,298(4) 40,000 $ 13,031
</TABLE>
_________________________
(1) Amounts represent: (a) Corporation contributions to qualified and non-
qualified employee retirement plans (including matching contributions to
the 401(k) Savings Plan) and (b) Split Dollar Life Insurance. The values
for two component amounts for each named executive officer are as follows
for the fiscal year ended June 30, 1996: Mr. Kendall, (a) $10,480 and (b)
$6,810; Mr. Bracken, (a) $361 and (b) 0; Mr. Tinsley, (a) $10,268 and (b)
$1,036; Ms Mayhew, (a) $9,692 and (b) $450; Mr. Green, (a) $10,256 and (b)
$277; and Mr. Glenn, (a) $10,967 and (b) $960.
(2) Mr. Bracken joined the Corporation as President and CEO on May 13, 1996.
Amount shown represents fees paid to Mr. Bracken for consulting services
provided between April 10 and May 13.
(3) Mr. Glenn resigned as President and CEO as of April 30, 1996 and resigned
from the Corporation effective July 31, 1996. Amount includes $100,000
severance payment accrued before the close of fiscal year ended June 30,
1996.
(4) Amount includes the $35,000 initiation fee paid by the Corporation on
behalf of Mr. Glenn for membership in a local country club.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> POTENTIAL REALIZABLE VALUE AT
PERCENT OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM(4)
GRANTED EMPLOYEE IN PRICE EXPIRATION
NAME (#) FISCAL YEAR(1) ($/SHR)(2) DATE(3) 5%($) 10%($)
- ---- ------- -------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Clifford M. Kendall 8,000 3.6% $11.25 07/18/00 $ 24,817 $ 54,946
Peter A. Bracken 40,000 18.2% $21.75 05/13/01 $240,365 $531,144
Wyatt D. Tinsley 12,000 5.5% $11.25 07/18/00 $ 37,226 $ 82,419
Mary Ann Mayhew 12,000 5.5% $11.25 07/18/00 $ 37,226 $ 82,419
Thomas A. Green 12,000 5.5% $11.25 07/18/00 $ 37,226 $ 82,419
Gordon S. Glenn(5) 24,000 10.9% $11.25 10/31/96 $ 18,613 $ 41,209
</TABLE>
______________________________
(1) Stock options exercisable into 219,900 shares of Common Stock were granted
to all employees and non-employee directors of the Corporation as a group
during the fiscal year ended June 30, 1996.
(2) The exercise price is the closing market price on the date of grant.
(3) Options vest and become exercisable in annual installments of 25% of shares
covered by each grant commencing on the first anniversary of the grant date,
and expire in five years from the grant date.
(4) The dollar amounts under the potential realizable values columns use the 5%
and 10% rates of appreciation permitted by the SEC, and are not intended to
forecast actual future appreciation in the stock price. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Corporation's Common Stock. There can be no assurance the amounts
reflected in this table will be achieved. The assumed rates are compounded
annually to the full five-year term of the options.
(5) Mr. Glenn resigned from the Corporation effective July 31, 1996. Pursuant
to the terms of the Stock Option Agreement governing the July 18, 1995
grant, Mr. Glenn had until October 31, 1996 to exercise options for 6,000
shares which were exercisable on the date of his resignation. The remainder
of the options granted expired upon his resignation.
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
OPTIONS EXERCISED IN FY 1996 UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
---------------------------- AT 6/30/96 AT 6/30/96(2)
---------- -------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
Clifford M. Kendall 4,100 $ 21,860 5,500 / 18,500 $ 66,188 $211,563
Peter A. Bracken -0- -0- -0- / 40,000 -0- $ 20,000
Wyatt D. Tinsley -0- -0- 19,900 / 22,500 $316,913 $255,563
Mary Ann Mayhew 8,200 $ 87,938 5,500 / 22,500 $ 66,188 $255,563
Thomas A. Green -0- -0- 9,100 / 20,750 $131,869 $229,688
Gordon S. Glenn(3) 97,500 $1,621,563 -0- / 76,500 -0- $881,813
</TABLE>
______________________________
(1) Value is calculated based on the difference between the option price and
the closing market price of the Common Stock on the date of the exercise
multiplied by the number of shares to which the exercise relates.
(2) The closing price for the Corporation's Common Stock as reported by the
Nasdaq Stock Market on June 28, 1996 was $22.25. Value is calculated on
the basis of the difference between the option exercise price and $22.25,
multiplied by the number of shares of Common Stock underlying the option.
(3) Mr. Glenn resigned from the Corporation effective July 31, 1996. Options
for 43,000 shares, which were unexercisable as of that date, expired by
their terms upon his resignation.
<PAGE>
SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
ownership of the Corporation's Common Stock as of July 26, 1996 by: (i) each
director of the Corporation, (ii) each executive officer (and former executive
officer) named in the table above labeled Summary Compensation Table, and (iii)
all directors and executive officers of the Corporation as a group. This table
is based on information provided by the Corporation's directors and executive
officers. Unless otherwise indicated in the footnotes below, and subject to
community property laws where applicable, each of the named persons exercises
sole voting and dispositive power over his or her shares.
<TABLE>
<CAPTION>
NAME OF AMOUNT OF PERCENTAGE
BENEFICIAL BENEFICIAL OF OUTSTANDING
OWNER OWNERSHIP COMMON STOCK
- ---------- ---------- --------------
<S> <C> <C>
Peter A. Bracken 1,000 *
Gordon S. Glenn 143,846 (1) 2.45%
Thomas A. Green 23,904 (2) *
Raymond B. Hoxeng 40,000 (3) *
Paul R. Ignatius 11,500 (4) *
Clifford M. Kendall 342,634 (5) 5.83%
Mary Ann Mayhew 25,902 (6) *
Hilliard W. Paige 21,000 (7) *
James A. Parker 11,728 (8) *
Elmer B. Staats 27,500 (9) *
Wyatt D. Tinsley 37,563 (10) *
All directors & executive
officers as a group
(15 persons) 812,045 (11) 13.81%
</TABLE>
____________________________
* Less than one percent
(1) Mr. Glenn resigned from the Corporation effective July 31, 1996.
(2) Includes 14,250 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(3) Includes 3,000 shares subject to acquisition by the exercise of options
exercisable within 60 days. Shares are held in two revocable trusts, one in
Dr. Hoxeng's name (17,000 shares) and one in the name of Dr. Hoxeng's spouse
(20,000 shares). Dr. Hoxeng and his spouse are co-trustees of both trusts.
(4) Includes 5,000 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(5) Includes 123,994 shares held by Mr. Kendall's spouse and 13,000 shares
subject to acquisition by the exercise of options exercisable within 60
days.
(6) Includes 12,000 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(7) Includes 5,000 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(8) Includes 6,117 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(9) Includes 7,000 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(10) Includes 20,000 shares subject to acquisition by the exercise of options
exercisable within 60 days.
(11) Includes 105,267 shares subject to acquisition by the exercise of options
exercisable within 60 days.
<PAGE>
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Corporation's Common Stock, on an indexed basis,
against the cumulative total returns of the Nasdaq Stock Market - U.S. Index and
the S&P Computer Software and Services Index for the period of the Corporation's
last five fiscal years (June 30, 1991 = 100):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG COMPUTER DATA SYSTEMS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE S & P COMPUTER SOFTWARE & SERVICES INDEX
<TABLE>
<CAPTION>
6/91 6/92 6/93 6/94 6/95 6/96
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Computer Data Systems, Inc. 100 132 240 355 286 584
Nasdaq Stock Market - U.S 100 120 151 153 204 261
S&P Comptr Softwr & Svcs. 100 113 167 189 294 392
</TABLE>
* $100 INVESTED ON 06/30/91 IN STOCK OR INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
[The above data appears as a line graph in the version of this document
distributed to stockholders.]
ITEM 2: APPROVAL OF INDEPENDENT AUDITORS
At the Annual Meeting, the stockholders will be asked to approve the
appointment of Ernst & Young LLP as the Corporation's independent auditors for
the fiscal year ending June 30, 1997. The Audit/Compensation Committee has
recommended that the appointment of Ernst & Young LLP be approved by the
stockholders. Representatives of Ernst & Young LLP are expected to be present
at the Annual Meeting with the opportunity to make a statement if they desire to
do so, and such representatives are expected to be available to respond to
appropriate questions.
Approval of the selection of the independent auditors will require the
affirmative vote of holders of shares of Common Stock representing a majority of
the number of votes present in person or represented by proxy at the Annual
Meeting, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE
FOR APPROVAL OF THE INDEPENDENT AUDITORS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors and executive officers to file reports of ownership
and changes of ownership with the SEC and the Nasdaq Stock Market. The
Corporation believes that during the period from July 1, 1995 through June 30,
1996, its directors and executive officers complied with all applicable Section
16(a) filing requirements except that one Form 4 filed on behalf of Mr. Kendall
reporting the sale of securities in May 1996 was inadvertently filed four days
late.
<PAGE>
STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for the 1997 Annual
Meeting of Stockholders, it must be received by the Corporation at its offices
no later than May 23, 1997. All such stockholder proposals should be mailed to
the Corporation's headquarters and addressed to the attention of Donald E.
Ziegler, Secretary. To be eligible for inclusion in next year's proxy material,
such proposals must conform to the requirements set forth in Regulation 14A
under the Securities Exchange Act of 1934, as amended. In order to be
considered at an Annual Meeting, a stockholder proposal must be presented by the
proponents or their representatives in attendance at the meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented
at the Annual Meeting or action to be taken thereat except those set forth in
this Proxy Statement. If, however, any other business properly comes before the
Annual Meeting, the persons named in the proxy accompanying this Proxy Statement
will have the discretionary authority to vote upon such business, as well as
matters incident to the conduct of the Annual Meeting.
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF
COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS, THE
CORPORATION WILL PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-
K, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES,
REQUIRED TO BE FILED WITH THE SEC FOR THE CORPORATION'S MOST RECENT FISCAL YEAR.
ADDRESS REQUESTS TO DONALD E. ZIEGLER, SECRETARY, COMPUTER DATA SYSTEMS, INC.,
ONE CURIE COURT, ROCKVILLE, MARYLAND 20850.
<PAGE>
APPENDIX - Proxy Card PROXY 1996
(CDSI LOGO)
The undersigned hereby appoints Clifford M. Kendall, Peter A. Bracken, and
Wyatt D. Tinsley, and each of them, as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of Computer Data Systems, Inc.,
held of record by the undersigned on September 3, 1996, at the Annual Meeting of
Stockholders to be held October 22, 1996, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES AND FOR
PROPOSAL #2.
1. Election of Directors: Raymond B. Hoxeng, Clifford M. Kendall, Hilliard
W. Paige, Elmer B. Staats, Wyatt D. Tinsley, Paul R. Ignatius, James A.
Parker, Peter A. Bracken
--- FOR --- WITHHOLD AUTHORITY
all nominees for all nominees
FOR, EXCEPT AUTHORITY TO VOTE WITHHELD FOR THE FOLLOWING NOMINEE(S) ONLY:
____________________________________________
2. Approval of the appointment of Ernst & Young LLP as the Corporation's
independent auditors.
--- FOR --- AGAINST --- ABSTAIN
PLEASE SIGN YOUR NAME(S) ON THE REVERSE SIDE.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF PROPERLY
EXECUTED, IT WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES AND FOR PROPOSAL # 2. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
Please sign your name exactly as it appears below. If shares are held jointly,
all holders must sign. When signing in a fiduciary or representative capacity
(attorney, executor, administrator, trustee, guardian, officer of corporation,
etc.), please give full title as such. The signer hereby revokes all proxies
heretofore given by the signer to vote at such meeting or any adjournment
thereof.
Dated:......................, 1996
.......................................
Signature
.......................................
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Exhibit 21
----------
SIGNIFICANT SUBSIDIARIES OF THE CORPORATION
Active subsidiaries of Computer Data Systems, Inc. and their subsidiaries
as of June 30, 1996, are listed below. The names of certain subsidiaries, which
considered in the aggregate would not constitute a significant subsidiary, have
been omitted.
<TABLE>
<CAPTION>
State or
Name Country of Organization
---- -----------------------
<S> <C>
CDSI International, Inc. Delaware
CDSI Argentina, S.A. Argentina
</TABLE>
Exhibit 23
----------
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
33-47358) pertaining to the Computer Data Systems, Inc. 1991 Long Term Incentive
Plan of our report dated July 26, 1996, with respect to the consolidated
financial statements of Computer Data Systems, Inc. included in the Annual
Report (Form 10-K) for the year ended June 30, 1996.
/s/ Ernst & Young LLP
Washington, D.C.
September 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CDSI'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE
NOTES THERETO.
</LEGEND>
<CIK> 0000022989
<NAME> COMPUTER DATA SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,639,600
<SECURITIES> 0
<RECEIVABLES> 61,479,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,777,500
<PP&E> 32,403,100
<DEPRECIATION> 3,419,500
<TOTAL-ASSETS> 103,053,900
<CURRENT-LIABILITIES> 37,810,800
<BONDS> 0
0
0
<COMMON> 586,700
<OTHER-SE> 59,663,000
<TOTAL-LIABILITY-AND-EQUITY> 103,053,900
<SALES> 0
<TOTAL-REVENUES> 251,098,700
<CGS> 0
<TOTAL-COSTS> 235,368,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,400
<INCOME-PRETAX> 15,998,000
<INCOME-TAX> 6,228,800
<INCOME-CONTINUING> 9,769,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,769,200
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
</TABLE>
