UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: JUNE 18, 1997
(Date of earliest event reported)
COMPUTER DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-6002
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
--------------
<PAGE>
Item 1. N/A
Item 2. Acquisition or Disposition of Assets
On June 18, 1997, Computer Data Systems, Inc. ("CDSI")
completed the acquisition of Analytical Systems Engineering
Corporation, a Massachusetts corporation ("ASEC"). Under the
terms of the Amended and Restated Transaction Agreement (the
"Transaction Agreement) (previously filed as an exhibit to the
Form 8-K filed on June 27, 1997), CDSI acquired all of the
issued and outstanding capital stock of ASEC for approximately
$51 million. The shareholders of ASEC received ninety percent
of the purchase price in cash and ten percent in shares of
CDSI Common Stock valued for purposes of the Transaction
Agreement at $27.50 per share. The cash portion of the
purchase price was borrowed under a loan administered by
NationsBank, N.A. (a copy of the Credit Agreement was filed as
an exhibit to the Form 8-K filed on June 27, 1997).
In connection with the transaction, James W. Henderson,
President and previously the majority owner of ASEC, was
appointed to the Board of Directors of CDSI. ASEC will
continue its operations as a wholly-owned subsidiary of CDSI.
ASEC provides engineering and technical services to the
intelligence and defense agencies of the U.S. Government.
The foregoing discussion is qualified in its entirety by
reference to the exhibits to this Form 8-K (either attached
hereto or previously filed).
Items 3- 6. N/A
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
<PAGE>
Board of Directors
Analytical Systems Engineering Corporation
5 Burlington Woods Drive
Burlington, Massachusetts 01803
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Analytical
Systems Engineering Corporation and its subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of earnings and retained
earnings,and cash flows for the years then ended. These financial statements
are the responsibility of the Company'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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Analytical Systems
Engineering Corporation and its subsidiaries as of December 31, 1996 and 1995,
and the consolidated results of its earnings and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Anstiss & Co., P.C.
ANSTISS & CO., P.C.
January 29, 1997
<PAGE>
<TABLE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 5,599,400 $ 482,000
Account Receivable 12,639,000 8,738,700
Unbilled Contract Costs and Fees 1,249,300 1,730,000
Other Current Assets 1,333,100 1,248,800
Deferred Income Taxes 342,800 345,400
Total Current Assets 21,163,600 12,544,900
---------- ----------
Property and Equipment - Net 627,500 410,700
Other Assets:
Intangible and Deferred Assets 415,200 1,527,100
Investments 520,000 520,000
Other Assets and Deferred Charges 479,000 919,600
---------- ----------
Total Other Assets 1,414,200 2,966,700
Total Assets $23,205,300 $15,922,300
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 8,026,700 $ 3,156,900
Accrued Expenses and Other Current Liabilities 3,564,000 2,491,400
Billings in Excess of Costs and Fees 881,100 175,700
Current Maturities of Long-Term Debt 1,600,000 1,600,000
---------- ----------
Total Current Liabilities 14,071,800 7,424,000
Other Liabilities:
Long-term Debt 3,989,800 5,582,900
Deferred Income Taxes 986,200 892,900
Minority Interest in Subsidiary 72,500 22,500
---------- ----------
Total Liabilities 19,120,300 13,922,300
Commitments and Contingencies - -
Stockholders' Equity
Common Stock 8,400 8,300
Capital in Excess of Par Value 909,000 900,300
Retained Earnings 3,167,600 1,091,400
Total Stockholders' Equity 4,085,500 2,000,000
Total Liabilities and Stockholders' Equity $23,205,300 $15,922,300
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS & RETAINED EARNINGS
DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenue Earned $ 64,667,600 $ 43,520,600
Cost of Revenue Earned 46,846,400 28,832,700
---------- ----------
Gross Margin on Revenue Earned 17,821,200 14,687,900
Operating Expenses 13,651,900 12,267,100
---------- ----------
Earnings from Operations 4,169,300 2,420,800
---------- ----------
Other Expenses:
Interest - Net 698,300 975,300
Minority Interest in Subsidiary Net Income 50,100 1,500
---------- ---------
Total Other Expenses 748,400 976,800
---------- ---------
Earnings Before Provision for Income Taxes 3,420,900 1,444,000
Provision for Income Taxes 1,344,700 566,900
---------- ----------
Net Earnings 2,076,200 877,100
Retained Earnings at Beginning of Year 1,091,400 214,300
---------- ---------
Retained Earnings at End of Year $ 3,167,600 $ 1,091,400
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Earnings $ 2,076,200 $ 877,100
Adjustments to Reconcile Net Earning to Net Cash
Flows from Operating Activities:
Minority Interest in Subsidiaries 50,100 1,500
Depreciation and Amortization 1,317,400 1,289,700
Other 102,800 151,200
Changes in Assets and Liabilities:
(Increase) decrease in:
Accounts Receivable (3,900,300) 564,300
Unbilled Contract Costs and Fees 480,700 (299,800)
Other Current Assets 169,900 84,800
Intangible Assets - (74,300)
Increase (decrease) in:
Accounts Payable 4,869,800 21,200
Accrued Expenses and Other Current
Liabilities 1,163,600 (35,200)
Billings in Excess of Costs and Fees 614,400 20,300
---------- ---------
Net Cash from Operating Activities 6,944,600 2,600,800
---------- ---------
Cash Flows from Investing Activities:
Purchase of Property and Equipment (446,000) (197,500)
Current and Other Assets 210,000 (68,900)
---------- ---------
Net Cash Applied to Investing Activities (236,000) (266,400)
---------- ---------
Cash Flows from Financing Activities:
Payments on Debt Financing (1,600,000) (2,600,000)
Proceeds from Exercise of Stock Options 8,800 2,500
---------- ----------
Net Cash Applied to Financing Activities (1,591,200) (2,597,500)
---------- ----------
Net Increase (Decrease) in Cash and Cash
Equivalents 5,117,400 (263,100)
Cash and Cash Equivalents at Beginning of Year 482,000 745,100
Cash and Cash Equivalents at End of Year $ 5,599,400 $ 482,000
========== =========
Income Taxes Paid $ 1,249,900 $ 434,500
Interest Paid $ 779,400 $ 981,100
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - OPERATIONS
Analytical Systems Engineering Corporation (the Company) is a global
integration and technical service company providing system engineering
and integration services for telecommunications, information and
intelligence systems for the U.S. Department of Defense and other U.S.
and foreign government agencies.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPALS OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of its two wholly-owned subsidiaries, Public Systems Corporation (PSC)
and ASEC Limited, Inc. (ASEC Ltd.); and its three 80 percent owned
subsidiaries, ASEC International Incorporated (ASEC Int'l), ASEC Systems,
Inc. (ASEC Systems), and ASEC Security International, Inc. (ASEC
Security). All significant intercompany transactions and balances have
been eliminated in consolidation.
USE OF ESTIMATES
The financial statements are prepared in conformity with generally
accepted accounting principles which require management to make estimates
and assumptions that effect the reported amounts of assets, liabilities,
revenues and expenses for the reporting periods. Actual results could
differ from those estimates.
REVENUES
The Company derives revenues primarily from contracts with the United
States Department of Defense and other Federal agencies. Revenue on cost
reimbursable contracts is recognized based on costs incurred with a
proportionate amount of the fee. Revenue on time and material contracts
is recognized based on actual hours delivered at the contractual hourly
rate plus the cost of any materials incurred. Revenue of fixed price
contracts is recognized using the percentage of completion method wherein
a percentage of the total contract revenue is recognized based on the
relationship of costs incurred to total expected costs.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
The Company provides for an allowance for doubtful accounts based upon
anticipated collectibility of each contract billing. As of December 31,
1996 and 1995, no reserve was deemed necessary. For the years ended
December 31, 1996 and 1995, $0 and $22,300 of bad debts were charged
against earnings respectively. Accounts receivable includes contract
retentions of $266,200 and $378,300 at December 31, 1996 and 1995,
respectively.
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and
trade receivables. The Company's cash equivalents consist of U.S.
Government mutual funds placed with BayBank Capital Markets. Trade
receivables result primarily from contracts with the U.S. Department of
Defense and other Federal agencies. The credit risk associated with
financial instruments and trade receivables is considered to be minimal.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major improvements and
betterments are capitalized. Expenditures for maintenance and repairs
which do not extend the life of the applicable assets are charged to
expense as incurred. Furniture, equipment and computers are generally
depreciated over a five-year period using accelerated and straight-line
methods. Improvements to leased property are amortized over the shorter
of their estimated useful lives or the lease term. Depreciation and
amortization expense charged to current year operations was $229,200 and
$213,400 for the years ended December 31, 1996 and 1995, respectively.
<TABLE>
Property and equipment consisted of the following at December 31:
1996 1995
---- ----
<S> <C> <C>
Furniture and Equipment $ 1,471,300 $ 1,481,300
Computer Equipment 1,844,800 1,516,500
Leasehold Improvements 230,200 157,000
----------- -----------
Total 3,546,300 3,154,800
Less: Accumulated Depreciation
and Amortization 2,918,800 2,744,100
----------- -----------
Property and Equipment - Net $ 627,500 $ 410,700
=========== ============
</TABLE>
INTANGIBLE AND DEFERRED ASSETS
At December 31, 1996 and 1995 intangible and deferred assets consisted of
covenants not to compete, capitalized lease acquisition costs, software
development costs, and deferred financing costs in the amount of
$1,494,500 and $2,582,900 (net of accumulated amortization of $3,976,700
and $3,121,500), respectively. At December 31, 1996 and 1995 the long-
term portion was $415,200 and $1,527,100 and the current portion was
$1,079,300 and $1,055,800, respectively. Amortization is computed on the
straight-line method over periods ranging from five to eight years. The
amount of amortization charged to operations was $1,088,200 and
$1,076,300 for the years ended December 31, 1996 and 1995, respectively.
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED INCOME TAXES
Deferred income taxes are computed under the asset and liability approach
(FASB 109) whereby deferred taxes are recorded based on temporary
differences between the financial statement and tax basis of assets and
liabilities. Deferred income taxes are calculated using enacted tax
rates in effect for the year in which the differences are expected to
reverse. The principal assets and liabilities giving rise to such
differences are investments, accrued compensation, and accumulated
depreciation.
INCOME TAXES
Low income housing tax credits, passed through from an investment
interest in a limited partnership, are accounted for as a reduction of
income tax expense in the year the credit is available for use under the
flow-through method.
NOTE 3 - OTHER CURRENT ASSETS
<TABLE>
Other current assets consisted of the following at December 31:
1996 1995
---- ----
<S> <C> <C>
Intangibles (Note 2) $1,079,300 $1,055,800
Prepaid Expenses and Other Current Assets 253,800 193,000
$1,333,100 $1,248,800
========= =========
</TABLE>
NOTE 4 - INVESTMENTS
Investments consist of a less than five percent interest in the Harbor
Point Apartments Company Limited Partnership, (a low income housing
project), which is being carried at estimated net realizable value of
$389,300. The Company utilized for income tax purposes, partnership
losses of $202,500 and $151,400 and low income housing credits of $53,000
and $53,100 in 1996 and 1995, respectively. The Company also has a
forty-nine percent interest in a Saudi Arabian Limited Liability
Partnership recorded at a cost of $130,700. The equity method was not
utilized due to the significant influence exercisable by shareholders
representing a majority ownership.
NOTE 5 - DEBT
Note payable consisted of a revolving line of credit with BayBank which
permits borrowings up to $6,000,000, with interest payable monthly at the
bank's prime rate or at the Company's option the London Inter-Bank
Offering Rate (LIBOR) plus two and one half percent. The line expires on
April 30, 1997. At December 31, 1996 there was no balance outstanding on
this credit line.
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 5 - DEBT (CONTINUED)
The Company also has a letter of credit commitment with BayBank in the
amount of $1,000,000 which expires on April 30, 1997. At December 31,
1996 there were outstanding standby letters of credit in the amount of
$106,700.
Long term debt at December 31, 1996 consisted of term loan agreements
with BayBank and Massachusetts Capital Resource Company (MCRC). The
BayBank loan had an outstanding balance at December 31, 1996 of
$3,000,000. The loan requires principal payments of $200,000 per quarter
thorough September 30, 2000. Interest is payable monthly at the bank's
prime rate or the LIBOR rate plus two and three quarter percent.
BayBank has a security interest in substantially all assets of the
Company and its subsidiaries.
The loan agreement with Massachusetts Capital Resource Company (MCRC) had
an outstanding balance at December 31, 1996 of $2,600,000 (inclusive of
deferred interest of $10,200). Interest is payable quarterly at an
interest rate of 12%. MCRC's note is subordinated to BayBank's interest
and is secured by substantially all assets of the Company and its
subsidiaries. Principal payments of $200,000 are due quarterly, with
final maturity on March 31, 2000.
The aggregate minimum maturities of long-term debt as of December 31,
1996 for the next four years are: $1,600,000, $1,600,000, $1,600,000 and
$789,800.
The loan agreements with BayBank and MCRC contain covenants which, among
other things, require the Company to maintain certain financial ratios,
specified levels of equity, and other restrictions. At December 31, 1996
the Company was in compliance with all financial covenants.
NOTE 6 - STOCKHOLDERS' EQUITY
STOCK SPLIT
On July 2, 1995 the Board of Directors authorized a ten-for-one stock
split to be distributed to shareholders of record on July 2, 1995. In
addition, authorized shares were increased from 200,000 to 2,500,000.
All references in the financial statements to the number of shares have
been retroactively restated to reflect the increased number of common
shares outstanding.
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
At December 31, 1996 there were 2,500,000 shares of $.01 par value common
stock authorized, of which 838,540 shares were issued and outstanding,
and 390,000 shares were reserved for possible issuance under the
Company's stock option plans. During the current year 5,000 shares of
common stock were issued pursuant to the Company's stock option plans
resulting in an increase in common stock of $100 and capital in excess of
par value of $8,700. During 1995 the Company issued common stock in
exchange for a note receivable in the amount of $585,000.
WARRANTS
Massachusetts Capital Resource Company (MCRC) has 252,140 common stock
purchase warrants (warrants) which are exercisable at a per share price
of $4.92. The warrants expire on the later of March 31, 2000 or the date
the MCRC loan and accrued interest is paid in full. Under the terms of
the warrant agreement, the exercise price and/or the number of shares
exercisable are adjusted upon the occurrence of any event that would
result in a dilution of MCRC's present equity position.
STOCK OPTION PLANS
The Company has two active stock option plans.
The "1982 Stock Option Plan" was approved by the Board of Directors on
August 9, 1982. The option price per share could not be less than the
fair value of a share on the date the option was granted, and the maximum
term of an option could not exceed 10 years. Granting of options under
this plan expired in 1992.
The "1995 Combination Stock Option Plan" was approved by the Board of
Directors on July 2, 1995. The plan provides for the granting of a
maximum of 500,000 stock options to key employees. The option price per
share may not be less than the fair value of a share on the date the
option is granted, and the maximum term of an option may not exceed 10
years.
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
Information regarding the Company's stock option plans is summarized
below:
<TABLE>
Number Weighted
of Average
Options Exercise Price
------- --------------
<S> <C> <C>
Outstanding at December 31, 1994 175,000 $2.25
Granted 280,000 2.27
Less: Exercised 250,000 2.35
Less: Canceled 30,000 1.10
-------
Outstanding at December 31, 1995 175,000 2.33
Granted 20,000 4.92
Less: Exercised 5,000 1.75
-------
Outstanding at December 31, 1996
190,000 2.60
=======
</TABLE)
Options outstanding and exercisable at December 31, 1996 was as follows:
</TABLE>
<TABLE>
Number Remaining
of Contractual Exercise
Options Life (Years) Price
------- ------------ --------
<S> <C> <C> <C>
125,000 2.25 $2.60
30,000 8.50 1.60
20,000 9.00 4.92
15,000 .04 1.75
-------
190,000
=======
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had compensation cost
for the Company's stock option plans been determined in accordance with
the methodology prescribed under Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the Company's
net income would have been reduced by $0 and $11,600 for the years ended
December 31, 1996 and 1995. The weighted average fair value of options
granted during 1996 was estimated at $2.40 on the grant date using the
"minimum value option pricing model" with the following weighted average
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 7 - PROVISION FOR INCOME TAXES
assumptions: risk free interest rate of 5.6%, expected life of five
years, and no values assigned to dividend yield, volatility or
forfeitures. Restrictions placed on the options granted have been
incorporated in management's estimate of the market price of the
Company's stock on the grant date.
The provision for income taxes as of December 31, 1996 consisted of the
following:
<TABLE>
Current Tax Provision: Federal State
------- -----
<S> <C> <C>
Income taxes payable $1,052,100 $ 249,700
Less: Low income housing tax credit 53,000 -
--------- ---------
Adjusted Current Tax Liability 999,100 249,700
Deferred Tax Provision:
Partnership timing differences 67,700 20,900
Other timing differences 5,900 1,400
-------- --------
Total Deferred Tax Provision 73,600 22,300
Provision for Income Taxes $1,072,700 $ 272,000
========= ========
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company occupies certain office and storage facilities under lease
agreements with original terms ranging from one to five years. Many of
the leases have renewal options with similar terms. All of the lease
agreements are accounted for as operating leases. Approximate future
minimum rental payments for which the Company is obligated are as
follows:
<TABLE>
Year Amount
---- ------
<S> <C> <C>
1997 $1,000,700
1998 494,400
1999 50,200
</TABLE>
Net minimum rental expense charged to operations was approximately
$878,000 and $939,200 (net of sublease rentals of $148,500 and $133,700)
for the years ended December 31, 1996 and 1995, respectively. Future
anticipated minimum sublease rental income is $148,500 per year for 1997
and 1998 and $12,400 for 1999.
<PAGE>
ANALYTICAL SYSTEMS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
The U.S. Government has the right to audit and make retroactive
adjustments under certain contracts. Audits through 1993 have been
completed and in the opinion of management, adjustments, if any,
resulting from audits for the years 1994 through 1996 will not have a
material effect on the Company's financial position, results of
operations, or liquidity.
The Company has a noncancelable consulting agreement expiring in March
1999. The amount charged to operations in 1996 was $200,000 and the
minimum obligation remaining on the agreement as of December 31, 1996 was
approximately $433,000.
NOTE 9 - DEFERRED COMPENSATION PLANS
The Company maintains independently trusteed, and Internal Revenue
Service qualified, deferred compensation profit sharing and salary
reduction (401K) plans covering substantially all of its employees.
Contributions to the profit sharing plan are at the discretion of the
Board of Directors. For the years ended December 31, 1996 and 1995, the
Board of Directors voted a contribution of $600,000 and $465,000,
respectively. The 401K plan is funded entirely with employee
contributions.
NOTE 10 - RELATED PARTY TRANSACTIONS
At December 31, 1996 the Company had an unsecured loan receivable from a
stockholder in the amount of $485,000. Interest is payable annually at 6%
with the principal balance maturing on December 1, 2000. Accounts
receivable at December 31, 1996, in the amount of $244,900 are due from a
Saudi Arabian Limited Liability Partnership in which the Company has a
49% ownership interest.
<PAGE>
(b) Pro Forma financial information
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma consolidated balance sheet as of March 31,1997
presents the financial position of the Company as if the acquisition of
Analytical Systems Engineering Corporation ("ASEC") had occurred on March 31,
1997. The unaudited pro forma consolidated balance sheet as of March 31, 1997
combines, with appropriate adjustments, the Company s unaudited consolidated
balance sheet as of March 31, 1997 and the unaudited consolidated balance sheet
of ASEC as of March 31, 1997.
The unaudited pro forma consolidated statements of income for the nine months
ended March 31, 1997 and the year ended June 30, 1996 present the results of
operations of the Company for such period and such year as if the acquisition of
ASEC had occurred at the beginning of the periods presented (as of July 1,
1995). The unaudited pro forma consolidated statement of income for the nine
months ended March 31, 1997 combines, with appropriate adjustments, the
Company s and ASEC s unaudited consolidated results of operations for the nine
months ended March 31, 1997. The unaudited pro forma consolidated statement of
income for the year ended June 30, 1996 combines, with appropriate adjustments,
the Company s audited consolidated results of operations for its fiscal year
ended June 30, 1996 and the unaudited consolidated results of operations for
ASEC for the twelve months ended June 30, 1996. Certain reclassifications were
made to conform the historical financial statements of ASEC with the Company's
historical financial statements.
The unaudited pro forma consolidated financial statements have been prepared on
the basis of assumptions and estimates. The pro forma adjustments represent the
Company s determinations of these adjustments and are based on available
information and certain assumptions the Company considers reasonable under the
circumstances. Final amounts could differ from those set forth herein. The
unaudited pro forma consolidated financial statements might not be indicative
of the results of operations that would have been achieved if the acquisition
of ASEC had been effected on the dates indicated or which might be achieved in
the future. The unaudited pro forma consolidated financial statements and notes
thereto should be read in conjunction with the Company s "Selected Financial
Data," "Management s Discussion and Analysis of Financial Condition and Results
of Operations," and the annual consolidated financial statements of the
Company, not included herein, and ASEC, included herein.
<PAGE>
<TABLE>
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
(in thousands)
<CAPTION>
PRO FORMA
HISTORICAL ASEC Acquisition
---------------------- ------------------------
CDSI ASEC (A) Adjustments Ref Combined
---- -------- ----------- --- --------
ASSETS
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 13,229 $ 3,107 $ 16,336
Accounts receivable 67,151 11,898 (873) (B) 78,176
Deferred income taxes 1,252 343 1,994 (C) 3,589
Income tax refunds receivable 1,879 1,741 (C) 3,620
Prepaid expenses and deposits 1,712 1,586 (1,039) (B) 2,259
------- ------ ------- ------
Total Current Assets 85,223 16,934 1,823 103,980
Long-term investments 1,862 520 (339) (B) 2,043
Land, building, & equipment 26,326 742 27,068
Intangible assets 3,416 44,870 (D) 48,286
Other assets 4,451 568 (464) (B) 4,555
TOTAL ASSETS $121,278 $18,764 $ 45,890 $185,932
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued
liabilities $ 31,068 $ 3,614 $ 34,682
Accrued wages and related
benefits 15,173 4,402 (52) (B) 19,523
Current income taxes payable 156 156
Current portion of notes payable 1,600 5,254 (E) 6,854
------ ------ ------- -------
Total Current Liabilities 46,397 9,616 5,202 61,215
Long-term debt 3,591 37,555 (E) 41,146
Deferred compensation 4,156 4,156
Deferred income taxes 216 1,007 2,583 (F) 3,806
Minority interest in
subsidiaries 75 (75) (G) 0
------ ------ ------ ------
Total Liabilities 50,769 14,289 45,265 110,323
------ ------ ------ -------
Stockholders' equity:
Comon stock 605 8 11 (G) 624
Capital in excess of par value 11,252 918 4,163 (G) 16,333
Retained earnings 58,652 3,549 (3,549) (G) 58,652
------ ------ ------ -------
Total stockholders' equity: 70,509 4,475 625 75,609
------ ------ ------ -------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $121,278 $18,764 $45,890 $185,932
======= ====== ====== =======
See Notes to Pro Forma Consolidated Balance Sheet
as of March 31, 1997.
</TABLE>
<PAGE>
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
NOTE TO PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(A)
Information obtained from the March 31, 1997 unaudited consolidated balance
sheet of ASEC. Certain amounts reported in ASEC's historical financial
information have been reclassified to conform with the Company's
presentation in the Pro Forma Consolidated Balance Sheet.
(B)
Adjusts assets and liabilities to their respective fair values.
(C)
Reflects tax-related assets generated by exercise of all outstanding stock
options of ASEC coincident with closing of acquisition. Income tax assets
consist of effect of deductions for compensation triggered by option
exercises.
(D)
Reflects intangible assets, principally goodwill, originating from the
Company's purchase of all outstanding stock of ASEC. Represents the
allocation of the excess purchase price sing the purchase method of
accounting for the transaction after adjusting the assets acquired and
liabilities assumed to their respective fair values.
(E)
Adjusts for the Company's financing associated with the transaction and the
extinguishment of ASEC's existing debt coincident with the acquisition.
(F)
Reflects deferred taxes associated with the creation of the identifiable
intangible assets on acquisition of ASEC's stock.
(G)
Eliminates the equity of ASEC, ASEC's minority interest, and reflects the
CDSI stock, valued at $5.1 million, issued as part of the consideration for
the purchase of the outstanding shares of ASEC.
<PAGE>
<TABLE>
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(in thousands, except per share amounts)
<CAPTION>
PRO FORMA
HISTORICAL ASEC Acquisition
--------------------- --------------------------
CDSI ASEC (A) Adjustments Ref Combined
---- -------- ----------- --- --------
<S> <C> <C> <C> <C> <C>
Revenues $221,061 $53,123 $274,184
------- ------ -------
Costs & expenses:
Salaries, wages, and
benefits 110,319 21,422 $ (783) (B) 130,958
Subcontractors 77,750 21,275 99,025
Travel, relocation,
and subsistence 2,032 1,764 3,796
Rental of space and
equipment 1,117 1,404 2,521
Depreciation and
amortization 2,878 831 914 (C) 4,623
Other operating and
administrative
costs 13,555 3,234 (187) (D) 16,602
------- ------ ------ -------
Total costs and
expenses 207,651 49,930 (56) 257,525
------- ------ ------ -------
Income from
operations 13,410 3,193 56 16,659
Interest and other
income (expense),
net (51) (469) (1,601) (E) (2,121)
------ ------ ------ -------
Income before income
taxes 13,359 2,724 (1,545) 14,358
Provision for income
taxes 5,327 1,089 (618) (F) 5,798
------ ------ ------ -------
Net income $ 8,032 $ 1,635 $ (927) $ 8,740
====== ====== ====== =======
Net income per share $ 1.30 $ 1.38
====== =======
Weighted average
shares outstanding 6,169 6,354
====== =======
See Notes to Pro Forma Consolidated Statement of Income
for the Nine Months Ended March 31, 1997.
</TABLE>
<PAGE>
[CAPTION]
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1997
(A)
Information obtained from the unaudited interim financial statements of
ASEC for the nine months ended March 31, 1997. Certain amounts reported in
ASEC's historical financial information have been reclassified to conform
with the Company's presentation in the Pro Forma Consolidated Statement of
Income.
(B)
Reflects savings expected as a result of certain ASEC officers being paid
in accordance with new employment contracts.
(C)
Reflects the additional amortization of expense of approximately $1.7
million resulting from the allocation of the excess cost of the acquisition
to intangible assets (principally goodwill) after recording the fair value
of the assets acquired and the liabilities assumed, and the net reduction
in depreciation and amortization expense of approximately $.8 million as a
result of recording the ASEC assets at their respective fair values.
(D)
Reflects the reduction in outside services paid to consultants for
duplicative services.
(E)
Reflects $2.1 million in interest expense for the financing of the
transaction based upon the terms of the Company's term loan funded
specifically for this acquisition, and a $.5 million reduction in interest
expense on ASEC's debt that was extinguished in connection with the closing
of the acquisition.
(F)
Reflects the income tax effect for the pro forma adjustments at ASEC's
effective tax rate.
<PAGE>
<TABLE>
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1996
(UNAUDITED)
(in thousands, except per share amounts)
<CAPTION>
PRO FORMA
HISTORICAL ASEC Acquisition
--------------------- ---------------------------
CDSI ASEC (A) Adjustments Ref Combined
---- -------- ----------- --- --------
<S> <C> <C> <C> <C> <C>
Revenues $251,099 $47,099 $298,198
------- ------ -------
Costs & expenses:
Salaries, wages,
and benefits 135,371 25,144 $ (595) (B) 159,920
Subcontractors 78,481 12,738 91,219
Travel, relocation,
and subsistence 2,786 850 3,636
Rental of space and
equipment 1,962 1,553 3,515
Depreciation and
amortization 3,420 1,144 1,716 (C) 6,280
Other operating and
administrative costs 13,349 2,873 (300) (D) 15,922
------- ------ ------ -------
Total costs and
expenses 235,369 44,302 821 280,492
------- ------ ------ -------
Income from
operations 15,730 2,797 (821) 17,706
Interest and other
income (expense),
net 268 (844) (2,336) (E) (2,912)
------ ----- ------ -------
Income before income
taxes 15,998 1,953 (3,157) 14,794
Provision for income
taxes 6,229 781 (1,263) (F) 5,747
------ ----- ------ ------
Net income $ 9,769 $ 1,172 $(1,894) $ 9,047
======= ====== ====== =======
Net income per share $ 1.65 $ 1.48
======= =======
Weighted average
shares outstanding 5,936 6,121
======= =======
See Notes to Pro Forma Consolidated Statement of Income
for the Year Ended June 30, 1996.
</TABLE>
<PAGE>
COMPUTER DATA SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(A)
Information obtained from the unaudited interim financial statements of ASEC
for the 12 months ended June 30, 1996. Certain amounts reported in ASEC's
historical financial information have been reclassified to conform with the
Company's presentation in the Pro Forma Consolidated Statement of Income.
(B)
Reflects savings expected as a result of certain ASEC officers being paid in
accordance with employee contracts as opposed to salaries and bonuses
previously paid.
(C)
Reflects the additional amortization of expense of approximately $2.8
million resulting from the allocation of the excess cost of the acquisition
to intangible assets (principally goodwill) after recording the fair value
of the assets acquired and the liabilities assumed, and the net reduction in
depreciation and amortization expense of approximately $1.1 million as a
result of recording the ASEC assets at their respective fair values.
(D)
Reflects the reduction in outside services paid to consultants, primarily to
a former ASEC officer, for duplicative services.
(E)
Reflects $3.1 million in interest expense for the financing of the
transaction based upon the terms of the Company's term loan funded
specifically for this acquisition, and a $.8 million reduction in interest
expense on ASEC's debt that was extinguished in connection with the closing
of the acquisition.
(F)
Reflects the income tax effect for the pro forma adjustments at ASEC's
effective tax rate.
<PAGE>
(c) Exhibits
--------
Exhibit Description
------- ----------------------------
(2) Amended and Restated Transaction Agreement
dated as of June 11, 1997 by and among
Computer Data Systems, Inc., Analytical
Systems Engineering Corporation and the
shareholders of Analytical Systems
Engineering Corporation.
(23) Consent of Anstiss & Co., P.C.*
(27) Financial Data Schedule.*
(99.1) Press release published June 18, 1997.
(99.2) Credit Agreement dated as of June 13,
1997 by and between Computer Data
Systems, Inc. and NationsBank, N.A.,
as administrative agent.
(99.3) Subsidiaries Guarantee dated as of
June 13, 1997.
__________
*Filed herewith. Other exhibits listed above were included with the original
8-K, filed on June 27, 1997.
Items 8-9. N/A
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Rockville, Maryland on August 29,
1997.
Computer Data Systems, Inc.
By:/s/ Wyatt D. Tinsley
--------------------
Wyatt D. Tinsley
Executive Vice President
(Principal Financial and
Accounting Officer)
<PAGE>
[CAPTION]
EXHIBIT INDEX
-------------
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
(2) Amended and Restated Transaction Agreement,
dated as of June 11, 1997.
(23) Consent of Anstiss & Co., P.C.*
(27) Financial Data Schedule.*
(99.1) Press release published June 18, 1997
(99.2) Credit Agreement, dated as of June 13, 1997.
(99.3) Subsidiaries Guarantee, dated as of June 13, 1997.
__________
*Filed herewith. Other exhibits listed above included with the original 8-K,
filed on June 27, 1997.
<PAGE>
CONSENT OF ANSTISS & CO., P.C.
We consent to the incorporation by reference in the Registration
Statement of Computer Data Systems, Inc. (Form S-3 No. 333-17739) and in the
Registration Statement pertaining to the Computer Data Systems, Inc. 1991
Long-Term Incentive Plan (Form S-8 No. 33-47358) of our report dated
January 29, 1997, with respect to the consolidated financial statements of
Analytical Systems Engineering Corporation, included in the current report on
Form 8-K of Computer Data Systems, Inc.
/s/ Anstiss & Co., P.C.
Anstiss & Co., P.C.
Lowell, Massachusetts
August 19, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ASEC'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,599,400
<SECURITIES> 0
<RECEIVABLES> 12,639,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,163,600
<PP&E> 3,546,300
<DEPRECIATION> 2,918,800
<TOTAL-ASSETS> 23,205,300
<CURRENT-LIABILITIES> 14,071,800
<BONDS> 0
0
0
<COMMON> 8,400
<OTHER-SE> 4,085,500
<TOTAL-LIABILITY-AND-EQUITY> 23,205,300
<SALES> 0
<TOTAL-REVENUES> 64,667,600
<CGS> 0
<TOTAL-COSTS> 46,846,400
<OTHER-EXPENSES> 13,651,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 698,300
<INCOME-PRETAX> 3,420,900
<INCOME-TAX> 1,344,700
<INCOME-CONTINUING> 2,076,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,076,200
<EPS-PRIMARY> N/A
<EPS-DILUTED> N/A
</TABLE>
