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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14161
ANALYSIS & TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Connecticut 95-2579365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 2, North Stonington, Connecticut 06359
(Address of principal executive office)
(Zip Code)
(860) 599-3910
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of the close of business August 5, 1996, the registrant had outstanding
2,341,615 shares of Common Stock.
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CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 5
PART II. OTHER INFORMATION REQUIRED IN REPORT
ITEM 1. LEGAL PROCEEDINGS 7
ITEM 2. CHANGES IN SECURITIES 7
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 7
ITEM 5. OTHER INFORMATION 7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 7
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
Revenue from continuing operations $32,488 $31,335
Costs and expenses 30,991 29,705
------- -------
Operating earnings from
continuing operations 1,497 1,630
------- -------
Other expense (income):
Interest expense 76 185
Interest income (37) (1)
Equity in income of joint venture (59) (64)
Other, net 162 194
------- -------
142 314
------- -------
Earnings from continuing operations
before income taxes 1,355 1,316
Income taxes on earnings from
continuing operations 562 556
------- -------
Net earnings from
continuing operations $ 793 $ 760
======= =======
Discontinued Operations:
Loss from discontinued
operations, net of income
tax benefit -- (46)
------- -------
Net earnings $ 793 $ 714
======= =======
Earnings (loss) per common and
common equivalent share:
Continuing operations $ 0.33 $ 0.31
Discontinued operations -- (0.02)
------- -------
Net earnings $ 0.33 $ 0.29
======= =======
Weighted average shares and
common equivalent shares
outstanding 2,422 2,455
======= =======
</TABLE>
See accompanying note to the consolidated financial statements.
1
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ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1996 (UNAUDITED) MARCH 31, 1996
------------------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,322 $ 4,179
Contract receivables 23,208 24,250
Notes and other receivables 1,115 1,260
Prepaid expenses 1,312 1,543
------- -------
Total current assets 27,957 31,232
Property, buildings, and equipment, net 14,163 14,132
Other assets:
Goodwill, net of accumulated amortization 6,443 6,548
Product development costs, net of accumulated
amortization 363 362
Deferred Compensation Plan investments 2,871 2,601
Investment in joint venture 1,360 1,301
Deposits and other 209 261
11,246 11,073
------- -------
TOTAL ASSETS $53,366 $56,437
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 186 $ 180
Accounts payable 1,243 1,779
Accrued expenses 6,197 7,648
Dividends payable -- 659
Deferred income taxes 1,076 1,176
------- -------
Total current liabilities 8,702 11,442
Long-term debt, excluding current installments 2,836 2,901
Deferred income taxes 85 114
Other long-term liabilities 2,942 2,701
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TOTAL LIABILITIES 14,565 17,158
------- -------
Shareholders' equity:
Common stock, $.125 stated value
Authorized 7,500,000 shares; issued
and outstanding 2,341,615 shares as of
June 30, 1996 and 2,440,303 shares
as of March 31, 1996 293 305
Additional paid-in capital 8,705 9,964
Retained earnings 29,803 29,010
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TOTAL SHAREHOLDERS' EQUITY 38,801 39,279
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $53,366 $56,437
======= =======
</TABLE>
See accompanying note to the consolidated financial statements.
2
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ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 793 $ 714
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Loss associated with discontinued operations -- 45
Equity of income of joint venture (59) (64)
Depreciation and amortization of fixed assets 621 636
Amortization of goodwill 115 112
Amortization of product development costs 18 154
Provision for deferred income taxes (129) 187
Loss on sale of equipment 13 251
Decrease (increase) in:
Contract receivables 1,042 1,149
Notes and other receivables 145 44
Prepaid expenses 231 316
Other assets (218) (89)
Increase (decrease) in:
Accounts payable and accrued expenses (1,987) (3,696)
Other long-term liabilities 241 164
------- -------
Net cash provided (used) by continuing operations 826 (77)
Net cash used by discontinued operations -- (25)
------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 826 (102)
------- -------
INVESTING ACTIVITIES:
Additions to property, buildings, and equipment (665) (372)
Product development costs - continuing operations (19) (185)
Product development costs - discontinued operations -- (620)
Proceeds from the sale of equipment -- 5
Acquisition of business units (net of cash acquired) (10) (117)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (694) (1289)
------- -------
FINANCING ACTIVITIES:
Net repayments of short-term borrowings -- 404
Proceeds provided by long-term borrowings -- 1,910
Repayments of long-term borrowings (59) (74)
Proceeds from sale of common stock 168 54
Repurchase of common stock (1,439) --
Dividends paid (659) (616)
------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,989) 1,678
------- -------
Increase (decrease) in cash and cash equivalents (1,857) 287
CASH AND CASH EQUIVALENTS:
Beginning of period 4,179 502
------- -------
END OF PERIOD $ 2,322 $ 789
------- -------
</TABLE>
See accompanying note to the consolidated financial statements.
3
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ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. The information furnished in the accompanying unaudited Consolidated
Statements of Operations, Consolidated Balance Sheets, and Consolidated
Statements of Cash Flows reflect all adjustments (consisting only of items
of a normal recurring nature) which are, in the opinion of management,
necessary for a fair statement of the Company's results of operations and
financial position for the interim periods. These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes included in the Company's Annual Report for the year
ended March 31, 1996.
2. On October 31, 1995, the Company sold the commercial business of its
Groton, Connecticut-based subsidiary, General Systems Solutions, Inc.
(GSS), to GE Capital Corporation. GSS's Navy business was transferred to
the Company prior to the sale and its commercial business was reclassified
retroactively as a discontinued operation. The accompanying Consolidated
Statement of Operations for the period ended June 30, 1995 has been
restated to present the GSS commercial results as discontinued operations.
3. On July 26, 1996 the Company purchased all the shares of Vector Research
Company, Inc. of Rockville, Maryland for approximately $6.5 million. Vector
Research Company, Inc. provides engineering and technical services
primarily to U.S. Navy customers. The acquisition will be accounted for as
a purchase.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
A summary of comparative results for the quarters ended June 30, 1996
and June 30, 1995 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
PERCENT
1996 1995 CHANGE
---- ---- -------
<S> <C> <C> <C>
Revenue from continuing operations $32,488,000 $31,335,000 3.7%
Operating earnings from continuing
operations 1,497,000 1,630,000 (8.2%)
Earnings from continuing operations
before income taxes 1,355,000 1,316,000 2.9%
Net earnings from continuing operations 793,000 760,000 4.3%
Loss from discontinued operations,
net of tax benefit -- (46,000) --
Net earnings 793,000 714,000 11.0%
Earnings (loss) per common and
common equivalent share
Continuing operations 0.33 0.31 6.5%
Discontinued operations -- (0.02) --
Net earnings 0.33 0.29 13.8%
Weighted average shares
and common equivalent
shares outstanding 2,422,000 2,455,000 (1.3%)
</TABLE>
Revenue from continuing operations increased 3.7% to $32.5 million for the
three months ended June 30, 1996 (the first quarter of fiscal 1997) from $31.3
million for the three months ended June 30, 1995. The increase in revenue is
mainly attributable to an increase in non-labor related revenue. Non-labor
related revenue generated by purchased components, computer usage, travel and
work subcontracted to other companies increased $1.1 million to $7.6 million in
the first quarter of fiscal 1997 from $6.5 million in the first quarter of
fiscal 1996. The increase was mainly due to work subcontracted to other
companies.
Operating earnings from continuing operations decreased 8.2% to $1.5
million for the three months ended June 30, 1996 from $1.6 million for the three
months ended June 30, 1995. Operating earnings from continuing operations as a
percentage of revenue (operating margins) decreased to 4.6% compared with 5.2%
in the previous year comparable quarter. The decrease in operating margins was
due primarily to higher than anticipated earnings on a large fixed price project
recorded in the first quarter of last year. If the additional earnings from this
project are excluded from the comparison, operating margins are consistent from
year to year.
Total other expenses as a percentage of revenue decreased to 0.4% for the
quarter ended June 30, 1996 as compared with 1.0% in the prior year first
quarter. The decrease was primarily due to a decrease in interest expense and an
increase in interest income as a result of the sale of the commercial business
of the Company's subsidiary, General Systems Solutions, Inc. (GSS), on October
31, 1995. The proceeds from the sale enabled the Company to repay amounts
borrowed under its revolving credit agreement and to increase cash and cash
equivalents.
Earnings from continuing operations before income taxes increased 2.9% to
$1.4 million in the first quarter of fiscal 1997 from $1.3 million in the first
quarter of fiscal 1996. The increase was primarily a result of lower interest
expense and an increase in interest income which more than offset the decrease
in operating earnings, as noted above.
5
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The Company's effective tax rate was 41.5% for the three-month period
ended June 30, 1996 compared with 42.4% for the three-month period ended June
30, 1995. The lower effective tax rate in fiscal 1997 was due, in part, to
earnings in Australia which were not taxed because of prior losses for which no
previous tax benefit had been recorded.
Net earnings from continuing operations for the first quarter of fiscal
1997 increased 4.3% to $793 thousand from $760 thousand in the first quarter of
fiscal 1996. Earnings per share from continuing operations were $0.33 for the
first quarter of fiscal 1997 compared with $0.31 in the first quarter of fiscal
1996. Upon the sale of GSS in October 1995, its commercial business was
reclassified retroactively as a discontinued operation. The after tax loss in
last year's quarter from discontinued operations was $46 thousand or $0.02 per
share.
Net earnings per share were $0.33 for the first quarter of fiscal 1997
compared with $0.29 for the first quarter of fiscal 1996 after deducting the
loss from discontinued operations. The weighted average number of common and
common equivalent shares outstanding decreased slightly to 2.42 million for the
current fiscal quarter compared with 2.46 million in fiscal 1996 first quarter.
The decrease was due in part to the repurchase of the Company's common shares as
discussed more fully below in liquidity & capital resources.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of fiscal 1997, net cash provided by operating
activities totaled $826 thousand. Cash generated by net earnings, and collection
of contract receivables was offset in part by payments to subcontractors and
material suppliers and reduction in other accrued expenses totaling nearly $2.0
million.
Contract receivables totaled $23.2 million at June 30, 1996, $24.2 million
at March 31, 1996, and $26.2 million at June 30, 1995 and represented 44%, 43%,
and 44%, respectively, of total assets at each of those dates. The average
period for payment to the Company was 65 days at June 30, 1996; 71 days at March
31, 1996; and 76 days as of June 30, 1995. The decrease in the average period
for payment to the Company was due in part to the billing and collection of
receivables under a firm fixed price contract.
Net cash used by financing activities in the first quarter of fiscal 1997
totaled $2.0 million. The primary use of cash from financing activities was the
repurchase of the Company's common shares. On March 25, 1996, the Company's
Board of Directors announced that it had authorized the repurchase of up to 200
thousand common shares over a one year period. Through June 30, 1996 the Company
had repurchased 115.6 thousand shares under this repurchase program at current
market prices on the date of purchase.
Any capital needs not satisfied by cash generated from operations were,
and in the future will be, met with money borrowed by the Company under its
revolving credit agreement. The total funds available to the Company under this
agreement at June 30, 1996 was $20.0 million. Borrowings under the Company's
borrowing agreements were $5.8 million at June 30, 1995. There were no
borrowings under the Company's revolving credit agreement at June 30, 1996 and
March 31, 1996.
It is anticipated that the Company's existing cash, together with funds
generated from operations and borrowings under its revolving credit agreement,
will be sufficient to meet its normal working capital requirements for the
foreseeable future.
On July 26, 1996 the Company purchased all the shares of Vector Research
Company, Inc. of Rockville, Maryland for approximately $6.5 million. The
purchase was made from existing cash and funds available under the Company's
revolving credit agreement.
As of June 30, 1996, the Company does not have any other major capital
commitments.
The Company believes that inflation has not had a material effect on its
business.
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PART II. OTHER INFORMATION REQUIRED IN REPORT
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 2. CHANGES IN SECURITIES
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
11 EARNINGS PER SHARE CALCULATION
27 FINANCIAL DATA SCHEDULE
b. REPORTS ON FORM 8-K
None.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANALYSIS & TECHNOLOGY, INC.
Date: August 12, 1996 /s/Gary P. Bennett
----------------------------------
Gary P. Bennett
President and CEO
Date: August 12, 1996 /s/David M. Nolf
----------------------------------
David M. Nolf
Executive Vice President
8
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
------------------------
FOR THE QUARTER ENDED: JUNE 30, 1996
COMMISSION FILE NUMBER: 0-14161
------------------------
ANALYSIS & TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<PAGE> 12
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS
- -------------- ------------------------
11 EARNINGS PER SHARE CALCULATION
27 FINANCIAL DATA SCHEDULE
i
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Exhibit 11
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
Computation of Earnings per Share
For the years ended March 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding 2,415,970 2,346,487 2,215,778
Net effect of dilutive stock options
based on the treasury stock method
using the average market price 77,781 122,661 150,692
Total 2,493,751 2,469,148 2,366,470
Net earnings $2,077,621 $2,773,144 $2,498,578
Earnings per common and common
equivalent share $ 0.83 $ 1.12 $ 1.06
Fully Diluted:
Weighted average shares outstanding 2,415,570 2,346,487 2,215,778
Net effect of dilutive stock options
based on the treasury stock method
using the period end price 85,198 130,325 186,579
Total 2,500,768 2,476,812 2,402,357
Net earnings $2,077,621 $2,773,144 $2,498,578
Earnings per common and common
equivalent share $ 0.83 $ 1.12 $ 1.04
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000310876
<NAME> ANALYSIS & TECHNOLOGY, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,322
<SECURITIES> 0
<RECEIVABLES> 23,208
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,957
<PP&E> 31,827
<DEPRECIATION> 17,664
<TOTAL-ASSETS> 53,366
<CURRENT-LIABILITIES> 8,702
<BONDS> 0
0
0
<COMMON> 293
<OTHER-SE> 38,508
<TOTAL-LIABILITY-AND-EQUITY> 53,366
<SALES> 0
<TOTAL-REVENUES> 32,488
<CGS> 0
<TOTAL-COSTS> 30,991
<OTHER-EXPENSES> 103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 1,355
<INCOME-TAX> 562
<INCOME-CONTINUING> 793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 793
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0
</TABLE>
