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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: MARCH 31, 1997
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
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ANALYSIS & TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CONNECTICUT 95-2579365
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ROUTE 2 06359
P.O. BOX 220 (ZIP CODE)
NORTH STONINGTON, CONNECTICUT
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 599-3910
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, NO PAR
VALUE
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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 (Section 229.405 of this chapter) 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. [X]
The aggregate market value of the common stock held by shareholders
considered by the registrant for this purpose to be non-affiliates of the
registrant on June 1, 1997 was approximately $30,215,355, based upon the last
reported sales price of the common stock on The Nasdaq Stock Market, Inc. on
that date.
Number of shares of common stock, no par value, outstanding at June 6,
1997: 2,320,021
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are hereby incorporated herein by reference:
Certain information in Parts I and II of the Form 10-K is incorporated by
reference from the registrant's 1997 Annual Report to Shareholders.
Certain information in Part III of the Form 10-K is incorporated by
reference from the registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders to be held on August 5, 1997.
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PART I
ITEM 1. BUSINESS
GENERAL
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Analysis & Technology, Inc. (the "Company") was incorporated in Connecticut
in 1969. The Company initially provided tactical analysis to the Office of Naval
Research and sonar analysis to the Naval Underwater Systems Center, now known as
the Naval Undersea Warfare Center. During the past twenty-eight years, the
Company, including subsidiaries, has expanded its business to provide system and
engineering technologies services and products, interactive multimedia training
systems, and information technology services for the military, civil government
agencies, and private industry.
The Company is implementing a strategic plan to continue building its
business with the Department of Defense ("DOD") while transferring its expertise
in interactive multimedia training systems and information technologies to
additional government and commercial markets. In recent years, the Company has
created several new business units through internal development and acquisition
in connection with the implementation of this strategic plan and may create or
acquire additional business units in the future.
The Company has the following wholly owned subsidiaries:
- Interactive Media Corp ("IAM"), formerly named Applied Science
Associates, Inc., which designs and implements training programs for
private industry and government;
- Integrated Performance Decisions, Inc. ("IPD"), which develops and
implements performance decision software products for U.S. Navy (the
"Navy") customers and provides software and information technology
products and services for commercial customers. In fiscal 1995, IPD
formed a Canadian subsidiary, Numerical Decisions Group, Inc., to perform
similar work, primarily for the Canadian Government; and
- Analysis & Technology Australia Pty. Ltd. and Analysis & Technology
International Corporation, each of which provides training systems to
international markets.
The corporate office of the Company is located in North Stonington,
Connecticut. The Company presently employs 1,502 full-time employees in the
United States, Australia, and Canada.
In February 1986, the Company conducted an underwritten public offering of
its common shares. Since that time, the Company's stock has traded on The Nasdaq
Stock Market, Inc. under the symbol AATI.
SERVICES AND PRODUCTS
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The Company provides professional and technical services to commercial and
government clients. The three main categories of the Company's business are
system and engineering technologies services and products, interactive
multimedia training systems, and information technologies services. Although
separately described below, these categories overlap and should not be
considered separate and distinct areas of business. The Company is organized
along these service and product lines. The descriptions set forth below reflect
this organization.
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ENGINEERING SERVICES AND PRODUCTS
The Company provides system and engineering services and products primarily
to the Navy and, to a lesser extent, to other military and government agency
customers. The Company's engineering services are provided in the general areas
of engineering technologies and system technologies. Each area is described
below.
Engineering Technologies
The Company provides design, analytical, and experimental studies in
several engineering technology areas. These are performed primarily for the
Navy and to a lesser extent for commercial customers.
Company engineers and scientists support the Navy in engineering
technologies related to the development of submarines and surface ships.
The Company provides services in acoustics, applied mechanics, materials,
machinery research and development, and naval architecture. In acoustics,
the Company provides the full spectrum of noise control engineering,
structural acoustic analysis, and experimental acoustics support. Applied
mechanics engineers design, analyze, and test a wide variety of structures
and equipment in a multitude of dynamic environments with particular
emphasis on ship survivability. In materials, the Company's engineers
design treatments to reduce acoustic signature and design composite
structures for submarines and surface ships. The Company's machinery
research and development engineers are involved in analyzing and testing
advanced electrical and mechanical systems for naval applications. The
Company's naval architects offer professional naval architecture and marine
engineering services for the complete range of ships, submarines and
submersibles, advanced marine vehicles, small craft, and yachts. They also
develop and market naval architectural software packages, as well as custom
software applications for the commercial marine field.
Company engineers design, develop, implement, and analyze signal
processing algorithms related to submarine and surface ship combat systems.
The algorithms are developed to estimate target range, bearing, course,
speed, and depth, as well as other variables such as frequency of the
acoustic signal. Company engineers also develop, implement, and verify
digital signal processing systems for both military and commercial
customers. The work involves active and passive processing systems, custom
high-speed spectrum analyzers, and other software systems for commercial
off-the-shelf ("COTS") hardware. Company software and hardware engineers
integrate complex COTS products throughout the engineering process, from
research and development through installation and testing.
System Technologies
The primary areas of emphasis within system technologies are system
design, development, and life cycle support which include requirements
analysis, system engineering and integration, test and evaluation, training
and documentation, and in-service engineering support.
Requirements analysis includes assessment of mission requirements,
systems performance criteria, specifications review and development, and
trade-off analysis to determine cost versus performance benefits.
System engineering and integration tasks typically include system
design; prototype development, including modeling and simulation;
acquisition support; reliability, maintainability, and availability trade-
offs; hardware and software systems development to support combat systems'
operability; and new technology planning and implementation.
As a part of test and evaluation, Company engineers and analysts are
involved in the design and development of laboratory and at-sea test
procedures to assess functional and operational performance at the
hardware, software, and integrated systems level. Duties include dockside
and at-sea test conduct, data acquisition, and performance analysis of test
data.
In-service engineering support addresses the life cycle maintenance
and support of deployed systems. Company engineers and technicians are
involved in equipment installation and check-out; configuration
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management; integrated logistics support; system upgrades and
modifications; systems' grooming, repair, rebuilding and refurbishing
at-sea, dockside, and at Company facilities.
Company instructional designers and engineers support a broad range of
military training needs including training requirements analysis and
curricula development for enlisted and officer personnel addressing
maintenance, operability and tactics; training conducted ashore and at-sea;
and personnel performance evaluation and analysis.
Closely aligned to the Company's training tasks are the development
and revision of tactical documentation for the Navy's submarine, surface
ship, and air commands. Much of this work involves planning and evaluating
exercises at sea; deriving information on system, platform, and battle
group performance; and incorporating this information into applicable
tactical doctrine.
In response to acquisition reform initiatives within the DOD, Company
engineers integrate COTS technology into naval systems, controlling costs
while improving system performance. These efforts include COTS software
applications development; hardware fabrication; and prototype,
pre-production, and limited production custom product development to
support rapid COTS systems introduction to the fleet.
INTERACTIVE MULTIMEDIA TRAINING SYSTEMS
The Company employs interactive multimedia technology in designing,
developing, and implementing instructional training and delivery systems, and
performance support systems for defense, civil government, and commercial
customers. Interactive multimedia technology is computer-based and includes
computer-generated graphics and animation, full-motion video, and high-fidelity
audio. The Company's instructional design capability is utilized to ensure that
training materials developed will produce the desired learning result.
Instructional training and delivery systems employ interactive multimedia
technology in a stand-alone, networked, or embedded systems environment. These
systems allow students to proceed at their own pace, at their own work site and,
in general, achieve training objectives more quickly than with non-interactive
forms of training. The Company develops applications software, computer-based
networks, and enterprise-wide data bases to meet customer training objectives.
Company employees are experienced in web-based training, human factors
engineering, software engineering, graphic design, video production, distance
learning, and performance support systems. The Company's capabilities in
database development and networked communications are used in its web-based
training delivery work.
When developing performance support systems, the Company employs
interactive multimedia technology including interactive electronic documentation
to provide job aids, just-in-time training, and on-line reference materials.
Applications include engineering design, equipment maintenance, and systems
operability support. Company training specialists and engineers design, develop,
and implement performance support systems for both commercial and military
applications in order to improve productivity and leverage work experience and
system knowledge across the workforce.
The Company's training organization currently includes personnel within the
Company's defense-related operations and in the Company's subsidiary, IAM. The
Company plans to transfer training personnel from its defense-related operations
to IAM during fiscal 1998.
INFORMATION TECHNOLOGY
In the defense market, the Company provides information technology products
and services, largely for C(4)I (command, control, communications, computers,
and intelligence): the infrastructure of networks and data that enables military
personnel to make the best planning and combat decisions possible. The Company's
work involves software development, telecommunications/networking, database
systems, decision aids, COTS product integration, training, simulation and
modeling, data fusion, imaging systems, fleet support, and acquisition
management. The Company assists commercial customers in implementing networking,
groupware and document imaging and retrieval solutions.
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Company engineers and programmers create real-time, object-oriented
applications software in an open architecture environment. They design and
develop software for the event-triggered computation and analysis of
mission-critical data. They also develop, integrate, document, and test software
and develop tactical performance aids for submarines, surface ships, aircraft,
and land-based facilities. This software supports real-time data collection,
performance modeling, data analysis, and rapid decision making.
Communications and connectivity services involve distributing real-time
data across geographically dispersed sites to support decision making. For
example, Company-developed systems are used to process satellite meteorological
data with the primary goal of forecasting weather systems that would adversely
affect operations in and around a conflict area.
In addition, Company-developed modeling and simulation are used to train
combatants prior to exposure to actual operational environments. The training
materials include three dimensional graphical images that run on
Company-designed systems using COTS hardware and software.
Database management services are provided to support complex systems,
programs, and organizations for the Navy and other customers. Computerized
databases are developed to support acquisition strategy development, risk
analysis, decision making, and to fulfill extensive reporting requirements. They
also support program planning and scheduling, engineering change assessment and
control, inventory control, equipment maintenance, financial control and budget
justification, and documentation libraries.
The Company's IPD subsidiary is the largest provider of information
technology services within the Company.
Automation Software Incorporated ("ASI"), the Company's joint venture with
Brown & Sharpe Manufacturing Company, provides software to the precision
measurement (metrology) industry for data collection and analysis and to the
factory automation market for inspection and manufacturing operations.
CONTRACTS
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The Company generates a substantial amount of its revenue from contracts
with agencies of the U.S. Government (the "Government"). Government contracts
obtained by the Company are generally competitive in nature, and are usually
awarded on the basis of price and technical capability, and may be awarded to
more than one company. Contracts typically provide for either a general range of
tasks to be performed over a number of years or for specific services to be
provided over a shorter period. While task-type contracts have an absolute
dollar ceiling, the customer has complete discretion to allocate the funds among
the range of contracted tasks. Additionally, many of the Company's contracts
require the issuance of delivery orders, the periodic addition of funds, or the
exercise of annual options by the customer.
The Company's contracts with the Government typically are structured as one
of the following: (i) cost-reimbursement; (ii) time-and-materials; or (iii)
fixed-price.
Under cost-reimbursement contracts, the customer reimburses the Company for
contracted costs within cost categories permitted by Government regulations. The
Company is paid a fee in addition to its costs. Reimbursable costs include
direct labor and other direct costs, allocated overhead, and general and
administrative costs, but exclude interest expense, donations, and certain other
costs. Indirect costs are reimbursed at the lower of actual or estimated costs,
and if the Company revises its estimated costs, the revised cost estimates will
be applied prospectively to previously executed cost-reimbursement contracts.
The fee is either fixed at the time of award (fixed-fee), at a fixed hourly rate
paid as hours of service are provided (hourly-fee), or is awarded based on
performance, at the sole discretion of the Government (award-fee). The majority
of the Company's cost-reimbursement contracts are either cost-plus-fixed-fee or
cost-plus-hourly-fee contracts. The contracts may either require completion of
defined tasks or delivery of a specific number of hours of service. The current
trend continues to be to contracts of the latter type. The total of the cost and
the fee cannot exceed the ceiling set forth in the contract. If a contracted
task has not been completed or the specific number of hours of service have not
been delivered at the time the authorized cost is expended, the Company may be
required to complete the work and will be reimbursed for the additional costs
but will not
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receive an additional fee or the fee may be prorated proportionately to the
number of hours actually provided. To date, the impact of such revisions has not
been material.
Under time-and-materials contracts, the customer pays a fixed rate per hour
for a specified number of hours. These fixed rates are intended to cover salary
costs attributable to work performed on the contract and related indirect
expenses, as well as a fee. To the extent the Company's costs differ from those
assumed in the fixed rate, the Company may experience higher or lower profit
margins than anticipated, or may realize a loss. The Company is reimbursed
separately for other direct costs without any profit or fee.
Under fixed-price contracts, the customer pays a specific price for
services or products. The Company bears the risk that increased or unexpected
costs may reduce its profit or cause it to sustain a loss. Conversely, when
costs are lower than expected, the Company may realize additional profit.
The revenue and earnings of the Company could be substantially affected by
changes in Government procurement or fiscal policies, by reductions in
Government expenditures for services or products provided by the Company, or by
organizational changes within the Government or Navy which impact the Company's
customer base. Additionally, procedural changes may impact the timing of the
receipt of contracts, related funding, and cash payments by the Company.
Government contracts are subject to termination at the convenience of the
Government or for default. If a Government contract were to be terminated for
convenience, the Company would be reimbursed for its allowable costs to the date
of termination and be paid a proportionate amount of the stipulated profits or
fees attributable to the work actually performed. During the entire history of
the Company, the Government has never terminated any of the Company's contracts
for default.
The books and records of the Company are subject to audit by the Defense
Contract Audit Agency ("DCAA"), which can result in adjustments to contract
costs and fees as well as penalties and interest costs. The Government retains a
portion of the fee earned by the Company until contract completion and audit by
the DCAA. See Note 4 of "Notes to Consolidated Financial Statements" on page 23
of the Company's 1997 Annual Report to Shareholders. Audits of the Company by
DCAA have been completed for all fiscal years through 1995 without material
adjustments. In the opinion of management, the audits for fiscal years 1996 and
1997 will not result in adjustments having a material adverse effect on the
Company's financial position or results of operations. However, no assurances
can be given that future material adjustments will not be required.
Products developed by the Company under Government contracts are the
property of the Government.
The Company's commercial contracts occur primarily in its interactive
multimedia training systems and information technologies businesses. These
contracts typically are structured as time-and-materials or fixed-price.
Time-and-materials and fixed-price contracts in the commercial environment are
similar to those types of contracts with the Government as described above.
The following table gives the approximate percentages of the Company's
revenues realized from the three basic contract types during the periods
indicated for its continuing operations:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
MARCH 31,
----------------------
CONTRACT TYPE 1995 1996 1997
---------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Cost-Reimbursement.............................................. 71% 76% 80%
Time-and-Materials.............................................. 6 % 4 % 5 %
Fixed-Price..................................................... 23% 20% 15%
--- --- ---
Total Company......................................... 100% 100% 100%
=== === ===
</TABLE>
The Company often commits to provide non-labor items such as purchased
materials, computer services, travel, and work subcontracted as part of its
contract services. Non-labor items as a percentage of revenue from continuing
operations in fiscal 1995, 1996, and 1997 were approximately 23.5%, 21.1%, and
23.2%, respectively. The Company typically earns lower fees on non-labor items
than it does on labor services. The
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Company sometimes commits to subcontract a portion of its work to other
companies to obtain special services or materials when the Company believes that
such action will give it a competitive advantage. Subcontract costs are included
in the non-labor percentages provided above. Subcontracting expenses as a
percentage of revenue from continuing operations were approximately 9.9%, 7.7%,
and 9.5% in fiscal 1995, 1996, and 1997, respectively. In addition, the Company
receives subcontracts from other companies on which it earns a fee comparable to
a fee earned on work performed directly for the Government. In fiscal 1995,
1996, and 1997, the Company received subcontracted work from other companies for
amounts representing approximately 9.7%, 10.4%, and 14% of its revenue,
respectively.
Revenue under cost-reimbursement, time-and-materials, and fixed-price
contracts, including applicable fee or profit, are recognized concurrently with
costs incurred thereunder. Certain amounts not yet billed to customers are
included in recognized revenues and in contract receivables on the balance
sheet. See Note 4 of "Notes to Consolidated Financial Statements" on page 23 of
the Company's 1997 Annual Report to Shareholders.
BACKLOG
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The Company's total backlog represents the aggregate contract revenue
remaining to be earned by the Company at a given time over the life of its
contracts. When more than one company is awarded contracts for a given work
requirement, the Company includes in total backlog its estimate of the contract
revenue it expects to earn over the remaining life of the contract. Funded
backlog consists of the aggregate revenue remaining to be earned at a given time
under (a) contracts for which funding has been contractually committed to the
Company in writing by a procuring Government agency; (b) requests to the Company
from a procuring Government agency to commence work before execution of the
written authorization under which the work is to be done; and (c) contracts with
non-Government customers. Unfunded backlog is the difference between total
backlog and funded backlog.
Funding under the Company's contracts with the Government is dependent upon
congressional approval of program level funding and contracting agency approval
of the funding for the Company's work. There can be no assurance that any
program or contract will be funded in its entirety. During fiscal 1997, total
backlog varied between $463.9 million and $544.0 million. During the year, $19.5
million of backlog expired that was not funded. Backlog at March 31, 1997 was
$480.7 million, a 4.8% increase from $458.8 million a year ago. The funded and
unfunded backlog of the Company varies from time to time because delivery
orders, new contract awards, and extensions of existing contracts are executed
at various dates throughout the year with varying periods of performance. The
Company believes that year-to-year comparisons of backlog are not necessarily
indicative of any revenue trends but may be indicative of the Company's ability
to be competitive in its marketplaces.
For commercial contracts, total backlog and funded backlog are generally
the same, i.e., the contracts are usually fully funded.
The Company's total backlog at March 31, 1995, 1996, and 1997 was as
follows:
<TABLE>
<CAPTION>
MARCH 31,
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1995 1996 1997
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(IN THOUSANDS)
<S> <C> <C> <C>
Funded Backlog..................................... $ 33,583 $ 29,056 $ 40,701
Unfunded Backlog................................... 367,996 429,711 440,022
-------- -------- --------
Total.................................... $401,579 $458,767 $480,723
======== ======== ========
</TABLE>
Substantially all of the funded backlog at March 31, 1997 is expected to be
expended by the end of the Government's current fiscal year on September 30,
1997.
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CUSTOMERS
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The Navy is the Company's principal customer, accounting for approximately
80% of the Company's revenue. Within the Navy, the Company does business with
approximately 20 different contracting agencies; and in fiscal 1997, the Company
had approximately 100 contracts with ceilings in excess of $500,000. The Company
provides its services and products to numerous Navy customers including: (i)
several Navy laboratories, such as the Naval Undersea Warfare Center; Coastal
Systems Station, Dahlgren Division, Naval Surface Warfare Center; Carderock
Division, Naval Surface Warfare Center; and the Naval Research Laboratory, each
of which performs research, development, and test and evaluation functions; (ii)
acquisition commands which are responsible for procurement of ships, aircraft,
weapons, major systems and equipment, such as the Naval Sea Systems Command; and
(iii) operational commands which operate and maintain the ships, aircraft,
weapons, and systems, such as Commander-in-Chief, U.S. Atlantic Fleet; and
Commander Submarine Force, Atlantic. The degree of effect, if any, on the
Company's future revenue created by any changes in customer operations due to
facility closings or relocations cannot be determined at this time.
The Company also has contracts with civil government customers. The
principal civil government customer is the Office of Personnel Management which
contracts with the Company for training services. Working through the Office of
Personnel Management, the Company also provides training services to other
governmental entities.
Commercial customers tend to be large corporations such as Nortel,
Ameritech, and NYNEX which retain the Company for training and system
development support services or smaller companies which purchase information
technology services.
SALES AND MARKETING
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In the Company's defense business, marketing activities relating to
government contracts are conducted by its professional and technical staff
located in its various offices. This decentralized approach enables the
Company's customers to communicate directly with the employees of the Company
responsible for both sales and work performance and aids the Company in
maintaining an awareness of customer needs, developing new business
opportunities, and preparing project proposals. These marketing activities are
identified and coordinated through the Company's strategic planning process,
which includes the annual development and monthly update of operating plans for
each existing and prospective customer organization. In addition, for selected
high potential market areas, the Company designates strategic area leaders to
focus further its sales and marketing activities. The corporate marketing office
provides proposal development guidance, information systems, and training; data
on markets, competition, and internal capabilities; marketing literature; web
site maintenance; and trade show coordination.
Commercial interactive multimedia systems applications are sold to a wide
range of clients in the telecommunications, pharmaceutical, financial, and
aerospace industries. The Company is building a marketing and sales
infrastructure in its offices in Pennsylvania, the Washington, D.C. area,
Florida, California, and Connecticut to serve these clients.
COMPETITION
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The Company's business is very competitive. In the defense market, there
are a substantial number of large, diversified companies with greater financial
resources and larger technical staffs than those of the Company that are capable
of rendering services similar to those offered by the Company. The in-house
capabilities of the Company's governmental customers are also, in effect, in
competition with the Company since they may perform many of the types of
services that might otherwise be performed by the Company. In addition, there
are many smaller companies which have developed specialized capabilities who
compete with the Company for both defense and commercial business. As the
markets in which the Company operates continue to mature, other companies
continue to be attracted to them.
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It is not possible to predict the future intensity of competition which the
Company will encounter as a result of changing economic or competitive
conditions, customer requirements, or technological developments. However, to
the extent that defense budgets are reduced, competition for remaining defense
business can be expected to increase. The principal competitive factors for the
Company's businesses are technical capability, price, quality of services and
products, responsiveness, record of delivering on time and within budget, and
reputation and familiarity of the Company and its personnel with customers.
While the Company's ability to compete in defense markets is not dependent on
intangible property rights such as proprietary processes, patents, or licenses,
these factors do affect its ability to compete in commercial areas.
HUMAN RESOURCES
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The principal resource of the Company is its 1,502 full-time employees,
approximately 1,215 of whom are professional and technical personnel. Because
the Company is diversifying by transferring its core competencies to new
markets, the make-up of the professional and technical staff of the Company is
similar for Government and commercial work and includes engineers, scientists,
mathematicians, educators, analysts, and programmers.
The Company has no collective bargaining units and considers its employee
relations to be excellent.
GOVERNMENT REQUIREMENTS
- ----------------------------
The Company's ability to maintain its current base of defense and other
Government business is dependent on providing employees and facilities which
meet rigorous Government requirements. Each facility has a continuing program to
meet applicable Government requirements and to maintain employee awareness of
the paramount need for compliance.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
- -----------------------------------------
Except for historical matters, the matters discussed in this Form 10-K are
forward-looking statements that involve risks and uncertainties. These
statements are based on current expectations. The Company wishes to caution
readers that in addition to the important factors described elsewhere in this
Form 10-K, the factors listed below, among others, sometimes have affected, and
in the future could affect, the Company's actual results and could cause the
Company's actual consolidated results during fiscal year 1998, and beyond, to
differ materially from those contained in or indicated by any forward-looking
statements made by, or on behalf of, the Company. There may be additional
factors not enumerated which could have a similar impact, including factors
which affect business generally, such as economic conditions.
The factors identified elsewhere in this Form 10-K include but are not
limited to those described under the following headings in this Item 1: (a)
"Contracts," concerning the risks of engaging in the government contracting
business; (b) "Backlog," about the Company's dependence upon congressional and
contracting agency approvals; (c) "Customers," concerning the Company's
dependence on the Navy as the Company's principal customer; and (d)
"Competition," concerning the competitive nature of the Company's business.
Additional important factors include:
(a) Budget reductions and Navy program funding priorities: While spending
by the Navy, the Company's principal customer, is expected to be level for
several years, the Company continues to be susceptible to changes in the
Government's requirements and priorities. The Company's business can be
adversely affected by reductions in DOD programs that are important to the
Company.
(b) Product development and acceptance: The development of new
customer-purchased products is complex and involves many risks. The Company's
results could be adversely affected by such factors as development delays,
increases in costs, and delays in customer purchases.
(c) New ventures: The Company from time to time enters into new ventures,
including some with other companies. While the Company believes that these new
ventures are strategically important, there are
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substantial uncertainties associated with the development of new services,
products, and technologies. Initial timetables for development and introduction
of products may not be achieved. Cost and performance targets may not be
feasible. External factors, such as development of competitive alternatives or
government regulation, may cause anticipated markets not to develop or to evolve
in unexpected directions.
Certain portions of the Company's 1997 Annual Report to Shareholders
including "Management's Discussion and Analysis of the Financial Condition and
Results of Operations" are incorporated by reference into this Form 10-K. There
are additional important factors included therein, including those beginning on
page 14 that sometimes have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual consolidated
results during fiscal year 1998, and beyond, to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the
Company.
ITEM 2. PROPERTIES
The Company owns its corporate office building complex on approximately 19
acres of land in North Stonington, Connecticut. The complex includes 60,330
square feet of office space. The Company also owns buildings in New London,
Connecticut which provide 50,220 square feet of office and shop space, and a
building in Butler, Pennsylvania which provides 53,000 square feet of office and
storage space. The Company presently leases to tenants approximately 23,000
square feet of its Butler office space and 20,000 square feet of its New London
office space.
The Company leases office, shop, or warehouse space in 32 locations in 11
states, Australia, and Canada totaling approximately 290,000 square feet.
Approximately 12,000 square feet of leased office space is subleased to third
parties. A summary of the Company's principal leases is as follows:
<TABLE>
<CAPTION>
SQUARE
LOCATION FOOTAGE LEASE EXPIRATION
- ------------------- ------- ----------------
<S> <C> <C> <C>
Middletown, R.I. One Corporate Place 45,103 06/30/99
Arlington, VA Jefferson Davis Highway 33,958 09/05/98
Chesapeake, VA Greenbrier Circle 22,912 02/28/98
Rockville, MD Tower Oaks Boulevard 19,164 12/31/01
San Diego, CA Camino Del Rio North 16,468 08/31/99
McLean, VA Jones Branch Drive 15,779 10/31/01
</TABLE>
The Company believes its facilities and equipment are in good condition and
adequate for its current business needs. The Company has not experienced, and
does not anticipate experiencing, any difficulty in obtaining satisfactory
facilities.
For additional information on the Company's leases and rental expenses
thereunder, see Note 11 of "Notes to Consolidated Financial Statements" on page
28 of the Company's 1997 Annual Report to Shareholders.
ITEM 3. LEGAL PROCEEDINGS
The Company is not engaged in any legal proceeding which is material to the
business or financial condition of the Company nor is the property of the
Company subject to any such proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1997.
9
<PAGE> 11
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of the executive officers of the Company as of June 6,
1997 are set forth below, together with the primary positions held by each such
person.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- -----------------------------------------------------
<S> <C> <C>
Gary P. Bennett.......... 55 Chairman of the Board of Directors, President, and
Chief Executive Officer
David M. Nolf............ 54 Executive Vice President, Chief Financial and
Administrative Officer, Secretary, and Director
Jay W. Ryerson........... 62 Executive Vice President and Chief Operating Officer
James R. Lavoie.......... 50 Senior Vice President, General Manager of Information
Technologies Group, and President of the Company's
Integrated Performance Decisions, Inc. subsidiary
Joseph M. Marino......... 47 Senior Vice President, General Manager of System
Technologies Group, and Chairman of the Company's
Interactive Media Corp. subsidiary
Gerald Snyder............ 52 Senior Vice President, Planning, and Corporate
Manager of Finance and Management Information Systems
Stephen E. Johnston...... 55 Senior Vice President, Human Resources
V. Lehman Woods.......... 49 Senior Vice President, Contracts
Robert M. Gorman......... 55 Senior Vice President and General Manager of
Engineering Technologies Group
Richard P. Mitchell...... 49 Senior Vice President, Acquisitions
</TABLE>
Officers of the Company serve until the annual Board of Directors meeting
following the Annual Meeting of shareholders or until their successors are
chosen and qualify, or until earlier resignation or removal.
Gary P. Bennett has been employed by the Company since 1972. He was elected
Chairman of the Board in February 1997, President in May 1991 and served as
Chief Operating Officer from 1984 until he was named Chief Executive Officer in
November 1992. He was an Executive Vice President from 1978 to 1991. Mr. Bennett
has been a Director of the Company since 1979.
David M. Nolf has been employed by the Company since 1971 and served as
Senior Vice President, Finance and Administration from 1979 until May 1985, when
he was elected to serve as Executive Vice President, Chief Financial and
Administrative Officer and Secretary. Mr. Nolf has been a Director of the
Company since 1976 and served as Chairman of the Board of Directors from 1978 to
May 1985.
Jay W. Ryerson has been employed by the Company since 1972. Mr. Ryerson
served as department manager from 1982 until he became division manager in 1985.
He became a sector manager and was elected a Vice President in 1987, a Senior
Vice President in 1989, and was elected Executive Vice President in 1992. In
November 1992 he became the Chief Operating Officer.
James R. Lavoie has been employed by the Company since 1979. Mr. Lavoie
served as department manager from 1982 until his promotion to division manager
in 1985. He was elected Vice President and sector manager in 1987 and was
elected to Senior Vice President in 1993. He became the President of the
Company's subsidiary, IPD when it was formed in 1993. He is also the general
manager of the Company's Information Technologies Group.
Joseph M. Marino has been employed by the Company since 1980. Mr. Marino
served as a department manager from 1984 until 1987 when he became a division
manager. He was elected Vice President in 1991 and became an operations center
manager heading up the New England Operations Center in 1992. In 1994
10
<PAGE> 12
he was elected Senior Vice President. He is the general manager of the Company's
System Technologies Group and the Chairman of the Company's IAM subsidiary.
Gerald Snyder has been employed by the Company since 1984. Mr. Snyder
served as Corporate Manager of Finance and Budgets from 1984 until he was
elected Vice President, Planning in 1987. In 1991 he was elected Senior Vice
President, Planning.
Stephen E. Johnston joined the Company in 1990 as Vice President, Human
Resources. In November 1996 he was elected Senior Vice President, Human
Resources.
V. Lehman Woods has been employed by the Company since 1977. Mr. Woods
served as a department manager from 1981 until he became Vice President,
Contracts in 1985. In 1991 he was elected Senior Vice President, Contracts.
Robert M. Gorman joined the Company in 1989 as part of its acquisition of
Acoustics and Mechanics, Inc. Mr. Gorman became general manager of the Company's
Engineering Technologies Group upon its formation in 1992. He became a Vice
President when he joined the Company and was elected a Senior Vice President in
1991.
Richard P. Mitchell has been employed by the Company since 1982. Mr.
Mitchell served as a department manager from 1984 until 1989 when he became a
corporate administrator and cost center manager. He assumed responsibilities for
the Chesapeake division of the Company in 1990 and was named Vice President in
1991. In 1994 he was elected Senior Vice President. In 1995 he was assigned
responsibility for the Company's acquisition program.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Pursuant to General Instruction G to Form 10-K, the information required by
this Item is incorporated by reference to information set forth under Corporate
Information in the Company's 1997 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Pursuant to General Instruction G to Form 10-K, the information required by
this Item is incorporated by reference to information set forth under Selected
Financial Data: A Five-Year Summary in the Company's 1997 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pursuant to General Instruction G to Form 10-K, the information required by
this Item is incorporated by reference to information set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1997 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pursuant to General Instruction G to Form 10-K, the information required by
this Item is incorporated by reference to information set forth in the
"Consolidated Financial Statements" and notes on pages 17 through 29 of the
Company's 1997 Annual Report to Shareholders.
11
<PAGE> 13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G to Form 10-K, the information required by
this Item with respect to directors is incorporated by reference to the
information set forth under Item 1. ELECTION OF DIRECTORS in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on August 5, 1997.
Information concerning executive officers is set forth under Item 4A of this
Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G to Form 10-K, the information required by
this Item is incorporated by reference to information set forth under the
following headings: Compensation of Executive Officers; Option/SAR Grants in
Last Fiscal Year; Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values; Termination of Employment and Change in Control
Agreements; and Report of the Compensation Committee and the Stock Option
Committee on Executive Compensation in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on August 5, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G to Form 10-K, the information required by
this Item is incorporated by reference to information set forth under Security
Ownership of Management and 5% Shareholders in the Company's Proxy Statement for
the Annual Meeting of shareholders to be held on August 5, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
12
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
NUMBER IN
1997
ANNUAL
REPORT
---------
<C> <S> <C>
(a) 1. Financial Statements........................................................ 13-29
---------
Independent Auditors' Report................................................ 29
---------
Consolidated Balance Sheets as of March 31, 1997 and 1996................... 17
---------
Consolidated Statements of Earnings for Each of the Years in the Three-Year
Period Ended March 31, 1997................................................. 18
---------
Consolidated Statements of Shareholders' Equity for Each of the Years in the
Three-Year Period Ended March 31, 1997...................................... 19
---------
Consolidated Statements of Cash Flows for Each of the Years in the
Three-Year Period Ended March 31, 1997...................................... 20
---------
Notes to Consolidated Financial Statements.................................. 21-29
---------
(a) 2. Financial Statement Schedules
Not applicable.
(a) 3. Exhibits (* denotes filed herewith):
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C> <C>
3(i) -- Restated Certificate of Incorporation (incorporated by reference to Exhibit 3A
to the Registrant's Report on Form 10-Q, File No. 0-14161, for the quarter ended
September 30, 1990).
3(ii) -- By-laws, Amended and Restated to February 6, 1993 (incorporated by reference to
Exhibit 3(ii) to the Registrant's Report on Form 10-K, File No. 0-14161, for the
year ended March 31, 1993).
4A -- Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4A to
Amendment No. 1 to the Registrant's Registration Statement on Form S-1, No.
33-2314), Articles 6 and 7 of the Certificate of Incorporation and Article II,
Article III, Sections 3 to 6, Article VI, and Article VIII of the By-laws
(included in Exhibits 3(i) and 3(ii), respectively).
4B -- Amended and Restated Revolving Credit and Term Loan Agreement between Analysis &
Technology, Inc. and Shawmut Bank Connecticut, National Association formerly
known as The Connecticut National Bank, dated December 9, 1994 (incorporated by
reference to Exhibit 4A to the Registrant's Report on Form 10-Q, File No.
0-14161 for the quarter ended December 31, 1994).
4C -- Second Amendment to Revolving Credit and Term Loan Agreement and Revolving
Credit Note between Analysis & Technology, Inc. and Fleet National Bank of
Connecticut, formerly known as Shawmut Bank Connecticut, National Association,
dated November 29, 1995 (incorporated by reference to Exhibit 4 to the
Registrant's Report on Form 10-Q, File No. 0-14161 for quarter ended December
31, 1995).
4D(1) -- Third Amendment to Revolving Credit and Term Loan Agreement and Revolving Credit
Note between Analysis & Technology, Inc. and Fleet National Bank of Connecticut,
formerly known as Shawmut Bank Connecticut, National Association, dated November
13, 1996 (incorporated by reference to Exhibit 4 to the Registrant's Report on
Form 10-Q, File No. 0-14161 for quarter ended December 31, 1996).
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C> <C>
4E(1) -- Open-End Mortgage Deed and Security Agreement, dated November 25, 1987, and
related documents between Analysis & Technology, Inc. and The Connecticut
National Bank.
4F(1) -- Open-End Mortgage Deed and Security Agreement, dated May 30, 1986, and related
documents between Analysis & Technology, Inc. and The Connecticut National Bank.
4G(1) -- Open-End Mortgage, dated March 8, 1978, and related documents of Analysis &
Technology, Inc. to Groton Savings Bank.
4H(1) -- Notes payable, due in monthly installments, with various interest rates and
maturity dates, secured by equipment.
10A -- Analysis & Technology, Inc. 1983 -- 1986 Stock Option Plans, as amended
(incorporated by reference to Exhibits 28(b) through 28(g) of the Registrant's
Registration Statement on Form S-8, No. 33-17313).
10B -- Analysis & Technology, Inc. 1987 Stock Option Plan (incorporated by reference to
Exhibit A to Proxy Statement, dated July 6, 1987 of Analysis & Technology,
Inc.).
10C -- Analysis & Technology, Inc. 1988 Stock Option Plan (incorporated by reference to
Exhibit A to Proxy Statement dated July 1, 1988 of Analysis & Technology, Inc.).
10D -- Analysis & Technology, Inc. 1989 Stock Option Plan (incorporated by reference to
Exhibit A to the Proxy Statement dated July 3, 1989 of Analysis & Technology,
Inc.).
10E -- Analysis & Technology, Inc. 1990 Stock Option Plan (incorporated by reference to
Exhibit B to the Proxy Statement dated July 3, 1990 of Analysis & Technology,
Inc.).
10F -- Analysis & Technology, Inc. 1992 Stock Option Plan (incorporated by reference to
Exhibit A to Proxy Statement dated July 7, 1992 of Analysis & Technology, Inc.).
10G -- Analysis & Technology, Inc. 1994 Stock Option Plan (incorporated by reference to
Exhibit A to Proxy Statement dated July 8, 1994 of Analysis & Technology, Inc.).
10H -- Analysis & Technology, Inc. 1995 Stock Option Plan. (incorporated by reference
to Exhibit A to Proxy Statement dated July 7, 1995 of Analysis & Technology,
Inc.)
10I -- Analysis & Technology, Inc. 1997 Stock Option Plan. (incorporated by reference
to Exhibit A to Proxy Statement dated July 1, 1997 of Analysis & Technology,
Inc.)
10J -- Amendments, dated June 30, 1989, to the Analysis & Technology, Inc. 1981 -- 1986
Stock Option Plans (incorporated by reference to Exhibits 19B through 19G to the
Registrant's Report on Form 10-Q, File No. 0-14161, for the quarter ended June
30, 1989).
10K -- Amendment, dated June 30, 1989, to the Analysis & Technology, Inc. 1987 Stock
Option Plan (incorporated by reference to Exhibit 19H to the Registrant's Report
on Form 10-Q, File No. 0-14161, for the quarter ended June 30, 1989).
10L -- Amendment, dated June 30, 1989, to the Analysis & Technology, Inc. 1988 Stock
Option Plan (incorporated by reference to Exhibit 19I to the Registrant's Report
on Form 10-Q, File No. 0-14161, for the quarter ended June 30, 1989).
10M -- Amendment, dated August 12, 1996, to the Analysis & Technology, Inc. Savings &
Investment Plan effective October 1, 1996 (incorporated by reference to Exhibit
10 of the Registrant's Report on Form 10-Q, File No. 0-14161 for the quarter
ended September 30, 1996).
10N -- Amendment dated December 4, 1995, to the Analysis & Technology, Inc. Savings &
Investment Plan effective December 4, 1995, (incorporated by reference to
Exhibit 10 of the Registrant's Report on Form 10-Q, File No. 0-14161, for the
quarter ended December 31, 1995).
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C> <C>
10O -- Amendment dated September 9, 1995, to the Analysis & Technology, Inc. Savings &
Investment Plan effective September 30, 1995 (incorporated by reference to
Exhibit 10 of the Registrant's Report on Form 10-Q, File No. 0-14161 for the
quarter ended September 30, 1995).
10P -- Amendment dated December 1, 1994, to the Analysis & Technology, Inc. Savings &
Investment Plan effective January 1, 1995 (incorporated by reference to Exhibit
10 of the Registrant's Report on Form 10-Q, File No. 0-14161, for the quarter
ended December 31, 1994).
10Q -- Amended and Restated Analysis & Technology, Inc. Savings & Investment Plan
effective August 10, 1993 (incorporated by reference to Exhibit 3(ii) of the
Registrant's Report on Form 10-K, File No. 0-14161, for the year ended March 31,
1994).
10R -- Amended and Restated Analysis & Technology, Inc. Employee Stock Ownership Plan
dated November 21, 1994, effective January 1, 1994.
10S -- Analysis & Technology, Inc. Performance Incentive Compensation Plan dated
September 19, 1991 (incorporated by reference to Exhibit 19B of the Registrant's
Report on Form 10-Q, File No. 0-14161, for the quarter ended September 30,
1991).
10T -- Amended and Restated Analysis & Technology., Inc. Deferred Compensation Plan
effective June 5, 1996 (incorporated by reference to Exhibit 99A to the
Registrant's Registration Statement on Form S-8, No. 333-05267).
10U -- Analysis & Technology, Inc. 401(k) Restitution Plan, dated August 8, 1994,
effective April 1, 1994.
10V* -- Analysis & Technology, Inc. Form of Change in Control Agreement, dated March 6,
1997.
10W -- Joint Venture Agreement by and among Brown & Sharpe Manufacturing Company,
Analysis & Technology, Inc., and Automation Software Incorporated (incorporated
by reference to Exhibit 10H of the Registrant's Registration Statement on Form
S-1, No. 33-2314).
10X -- Group Medical Reimbursement Insurance for Officers (incorporated by reference to
Exhibit 10J of Amendment No. 1 to the Registrant's Registration Statement on
Form S-1, No. 33-2314).
10Y -- Analysis & Technology, Inc. Managers' Benefit Options Plan (incorporated by
reference to Exhibit 10J of the Registrant's Report on Form 10-Q, File No.
0-14161, for the quarter ended December 31, 1986).
10Z -- Analysis & Technology, Inc. Officers' Benefit Options Plan (incorporated by
reference to Exhibit 10L of the Registrant's Report on Form 10-K, File No.
0-14161, for the year ended March 31, 1989).
10aa -- Stock Purchase Agreement, dated June 1, 1989, among Analysis & Technology, Inc.,
Applied Science Associates, Inc. and the Sellers (as defined therein)
(incorporated by reference to Exhibit 2.1 on the Registrant's Report on Form
8-K, File No. 0-14161, dated June 1, 1989).
10bb -- Stock Purchase Agreement dated October 31, 1995, among Analysis & Technology,
Inc., General Systems Solutions, Inc. and the Buyers (as defined therein)
(incorporated by reference to Item 2 on the Registrant's Report on Form 8-K,
File No. 0-14161, dated October 31, 1995).
10cc -- Stock Purchase Agreement dated July 26, 1996, among Analysis & Technology, Inc.,
Vector Research Company, Inc. and the Sellers (as defined therein) (incorporated
by reference to Exhibit 2 on Form 8-K, file No. 0-14161 dated July 29, 1996).
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C> <C>
11* -- Earnings per share calculation.
13* -- Analysis & Technology, Inc. 1997 Annual Report to Shareholders (incorporated
portions).
21* -- List of Subsidiaries of Analysis & Technology, Inc.
23* -- Consent of KPMG Peat Marwick LLP with respect to the incorporation by reference
of its report dated May 2, 1997.
27* -- Financial Data Schedule.
</TABLE>
- ---------------
(1) Copies of these documents are not being filed as exhibits, since the
indebtedness represented thereby does not exceed 10% of the total assets of
the Company. The Company agrees to provide copies of these documents to the
Securities and Exchange Commission upon request.
(b) A report on Form 8-K, dated February 12, 1997 reporting Item 5 -- Other
Events, was filed by the Registrant on February 19, 1997.
16
<PAGE> 18
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.
Analysis & Technology, Inc.
By: /s/ GARY P. BENNETT
------------------------------------
Gary P. Bennett
President and
Chief Executive Officer
Date: June 23, 1997
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 dated indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ----------------------------------- --------------
<S> <C> <C>
/s/ GARY P. BENNETT President, Chief Executive Officer June 23, 1997
- ------------------------------------------ and Chairman of the Board
Gary P. Bennett (Principal Executive Officer)
/s/ DAVID M. NOLF Executive Vice President, Chief June 23, 1997
- ------------------------------------------ Financial and Administrative
David M. Nolf Officer and Director (Principal
Financial Officer and Principal
Accounting Officer
/s/ LARRY M. FOX Vice Chairman June 23, 1997
- ------------------------------------------
Larry M. Fox
/s/ JAMES B. FOX Director June 23, 1997
- ------------------------------------------
James B. Fox
/s/ NELDA S. NARDONE Director June 23, 1997
- ------------------------------------------
Nelda S. Nardone
/s/ THURMAN F. NAYLOR Director June 23, 1997
- ------------------------------------------
Thurman F. Naylor
/s/ DENNIS G. PUNCHES Director June 23, 1997
- ------------------------------------------
Dennis G. Punches
</TABLE>
17
<PAGE> 1
EXHIBIT 10V
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT entered into as of the 6th day of March, 1997 by and
between Analysis & Technology, Inc. (the "Company"), and _______________ (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the threat of, or the occurrence of, a Change in Control (as
hereinafter defined) can result in significant distraction of its key management
personnel because of the uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the
best interest of the Company and its shareholders to retain the services of the
Executive in the event of a threat, or occurrence of, a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, particularly in the event of a threat, or the occurrence of, a
Change in Control, the Company desires to enter into this Agreement with the
Executive to provide the Executive with certain benefits, in the event his
employment is terminated as a result of, or in connection with, a Change in
Control, including but not limited to the payment to the Executive of a
severance payment in the amount of two* times the Executive's base salary and
target bonus and continuation of the Executive's benefits for 24** months.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM.
a) The "Protected Period" shall commence on the first date during the
Term of this Agreement (as defined in Section 1(c) below) on which a
Change in Control (as hereinafter defined) occurs (the "Effective
Date") and shall expire on the second anniversary of the Effective
Date.
b) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to
the Effective Date and the Executive reasonably demonstrates that
such termination (1) was at the request of a Third Party (as
hereinafter defined) who has effectuated a Change in Control or
- ----------
* 2.0 is the multiplier for first tier executives; 1.50 is the multiplier for
second tier executives.
** 24 months is the period for first tier executives; 18 months for second
tier executives.
<PAGE> 2
(2) otherwise occurred in connection with, or in anticipation of,
a Change in Control, then for all purposes of this Agreement, the
Effective Date shall mean the day immediately prior to the date
of such termination of the Executive's employment.
c) The "Term" of this Agreement shall be the three (3) year period
commencing on the date hereof; provided, however, that the Term
shall be automatically extended for one (1) year on the
anniversary of the date hereof and on each year thereafter unless
the Company shall have given written notice to the Executive at
least ninety (90) days prior thereto that the Term shall not be
so extended; and provided further, however, that notwithstanding
any such notice by the Company not to extend, the Term shall not
end if prior to the expiration thereof any Third Party has
indicated an intention or taken steps reasonably calculated to
reflect a Change in Control, in which event the Term shall end
only after such Third Party publicly announces that it has
abandoned all efforts to effect a Change in Control.
2. TERMINATION FOLLOWING CHANGE IN CONTROL.
a) If a Change in Control of the Company shall have occurred while
the Executive is still an employee of the Company, the Executive
shall be entitled to the compensation provided in Section 3 of
this Agreement upon the subsequent termination of the Executive's
employment with the Company by the Executive or by the Company
unless such termination is as a result of (i) the Executive's
death; (ii) the Executive's termination by the Company for Cause
(as defined in Section 2(b) below); (iii) the Executive's
Disability (as defined in Section 2(c) below); or (iv) the
Executive's decision to terminate employment other than for Good
Reason (as defined in Section 2(d) below).
b) The Company may terminate the Executive's employment for "Cause."
A termination of employment is for "Cause" if the Executive (1)
has been convicted of a felony or (2) intentionally engaged in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise or (3) engaged in gross
misconduct; provided, however that no termination of the
Executive's employment shall be for Cause as set forth in clauses
(2) or (3) above until (i) there shall have been delivered to the
Executive a copy of a written notice setting forth that the
Executive was guilty of the conduct set forth in clause (2) or
(3) and specifying the particulars thereof in detail, and (ii)
the Executive shall have been provided an opportunity to be heard
by the Board (with the assistance of the Executive's counsel if
the Executive so desires). No act, nor failure to act, on the
Executive's part, shall be considered "intentional" unless he
has acted, or failed to act, with an absence of good faith and
without a reasonable belief that his action or failure to act was
in the best interest of the Company. Notwithstanding anything
contained in this Agreement to the contrary, no failure to
perform by the Executive after a Notice of Termination is given
-2-
<PAGE> 3
by the Executive shall constitute Cause for purposes of this
Agreement.
c) The Company may terminate the Executive's employment after having
established the Executive's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity
which impairs the Executive's ability to substantially perform
his duties under this Agreement which continues for a period of
at least one hundred eighty (180) consecutive days. The
Executive shall be entitled to the compensation and benefits
provided for under this Agreement for any period during the Term
hereof and prior to the establishment of the Executive's
Disability during which the Executive is unable to work due to a
physical or mental infirmity. Notwithstanding anything
contained in this Agreement to the contrary, until the
Termination Date specified in a Notice of Termination (as each
term is hereinafter defined) relating to the Executive's
Disability, the Executive shall be entitled to return to his
position with the Company as set forth in this Agreement in which
event no Disability of the Executive will be deemed to have
occurred; provided that the Executive provides the Company with a
report from his personal physician certifying that the Executive
is fit to return to work.
d) The Executive may terminate his employment for "Good Reason." For
purposes of this Agreement, "Good Reason" shall mean the occurrence
after a Change in Control of any of the events or conditions
described in Subsections (i) through (ix) hereof:
(i) a change in the Executive's title, position or
responsibilities (including, reporting responsibilities)
without the Executive's written consent which represents an
adverse change from his title, position or responsibilities
as in effect immediately prior thereto; the assignment to the
Executive of any duties or responsibilities which are
inconsistent with his title, position or responsibilities; or
any removal of the Executive from or failure to reappoint or
reelect him to any of such offices or positions, except in
connection with the termination of his employment for
Disability, Cause, as a result of his death, or by the
Executive other than for Good Reason;
(ii) a reduction in the Executive's Base Salary or any failure to
pay the Executive any compensation or benefits to which he is
entitled within ten days of the date due;
(iii) the Company's requiring the Executive to be based at any
place outside a 50-mile radius from the work location at
which the Executive was based on the Effective Date, except
for reasonably required travel on the Company's business
which is not greater than such travel requirements prior to
the Change in Control;
-3-
<PAGE> 4
(iv) the failure by the Company to provide the Executive with
compensation (including both Base Salary and bonus
compensation) and benefits, in the aggregate, at least equal
(in terms of benefit levels and/or reward opportunities) to
those provided for under the compensation or employee benefit
plans, programs and practices as in effect at any time within
ninety (90) days preceding the Effective Date or at any time
thereafter;
(v) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company;
(vi) any material breach by the Company of any provision of this
Agreement;
(vii) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of
Section 2(b); or
(viii) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any successor or assign
of the Company to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof.
(ix) The failure by the Company to provide equivalent or greater
vacation, holiday and sick leave to that available to the
Executive immediately prior to the effective date.
e) Any event or condition described in Section 2(d)(1)(i) through
(ix) which occurs prior to a Change in Control but which the
Executive reasonably demonstrates (A) was at the request of a
third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third
Party"), or (B) otherwise arose in connection with, or in
anticipation of a Change in Control, shall constitute Good Reason
for purposes of this Agreement notwithstanding that it occurred
prior to the Change in Control.
f) The Executive's right to terminate his employment pursuant to
Section 2(d) shall not be affected by his incapacity due to physical
or mental illness.
3. COMPENSATION UPON TERMINATION. Upon termination of the Executive's
employment during the Protected Period, the Executive shall be entitled
to the following benefits:
a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other
than for Good Reason, the Company shall pay the Executive all
amounts earned or accrued through the Termination Date but not
paid as of the Termination Date, including (i) Base Salary (as
hereinafter defined), (ii) reimbursement for reasonable and
necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii)
-4-
<PAGE> 5
vacation and holiday pay, and (iv) sick leave (collectively,
"Accrued Compensation"). In addition to the foregoing, if the
Executive's employment is terminated by the Company for
Disability or by reason of the Executive's death, the Company
shall pay to the Executive or his beneficiaries an amount equal
to the "Pro Rata Target Bonus" (as hereinafter defined). The
term "Base Salary" means the Executive's annual base salary as in
effect at any time within ninety (90) days preceding the
Effective Date, and as may be increased from time to time
(hereinafter referred to as the "Base Salary"). The "Pro Rata
Target Bonus" is an amount equal to the Executive's full Target
Bonus for the current fiscal year of the Company determined in
accordance with the Company's Incentive Compensation Plan (the
"Target Bonus") multiplied by a fraction the numerator of which
is the number of days in such fiscal year through the Termination
Date and the denominator of which is 365. The Executive's
entitlement to any other compensation or benefits shall be
determined in accordance with the Company's employee benefit
plans and other applicable programs and practices then in effect.
b) If the Executive's employment with the Company shall be terminated
(other than by reason of death), (1) by the Company other than for
Cause or Disability, or (2) by the Executive for Good Reason, the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued Compensation
and a Pro-Rata Target Bonus;
(ii) the Company shall pay the Executive as severance pay and in
lieu of any further compensation for periods subsequent to
the Termination Date, in a single payment an amount (the
"Severance Amount") in cash equal to two* times the sum of
(A) the Executive's Base Salary at the highest rate in effect
at any time subsequent to the 90th day prior to the Effective
Date and (B) the Executive's Target Bonus;
(iii) for twenty-four** (24) months (the "Continuation Period"),
the Company shall at its expense continue on behalf of the
Executive and his dependents and beneficiaries the life
insurance, disability, medical, dental and hospitalization
benefits provided to the Executive immediately prior to the
Termination Date (unless such termination is based on the
reduction in the Executive's benefits, in which case the
Executive's benefits shall be deemed to be those in effect
immediately prior to such reduction). The Company's
obligation hereunder with respect to the foregoing benefits
shall be limited to the extent that the Executive obtains any
such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may
- ----------
* 2.0 is the multiplier for first tier executives; 1.50 is the multiplier for
second tier executives.
** 18 months for second tier executives.
-5-
<PAGE> 6
reduce the coverage of any benefits it is required to provide
the Executive hereunder so long as the aggregate coverages
and benefits of the combined benefit plans is no less
favorable to the Executive than the coverages and benefits
required to be provided hereunder. This Subsection (iii)
shall not be interpreted so as to limit any benefits to which
the Executive, his dependents or beneficiaries may be
entitled under any of the Company's employee benefit plans,
programs or practices following the Executive's termination
of employment. Following the expiration of the Continuation
Period, the Company shall make available to the Executive
continuation of medical, dental and hospitalization insurance
coverage in accordance with the provisions of the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"). The
full cost of said COBRA coverage shall be paid by the
Executive in accordance with the Company's practice in
connection with such coverage;
(iv) the Company shall pay to the Executive in a single payment in
cash equal to the contribution which the Company would have
made to any defined contribution plan including, but not
limited to, the Company's Savings and Investment Plan and its
401(k) Restitution Plan assuming participation by the
Executive in any such plan to the maximum level permitted
thereunder for an additional period of two* (2) years;
(v) If not previously lapsed, the restrictions on any outstanding
stock options granted to the Executive under the Company's
Stock Option Plans shall lapse and all stock options granted
to the Executive shall become immediately exercisable and
shall become 100% vested; and
(vi) During the Continuation Period, the Company shall at its
expense provide outplacement services until the sooner of the
Executive's re-employment or 24* months following the date of
termination of employment to the Executive from an
outplacement agency selected by the Executive and reasonably
acceptable to the Company.
c) The amounts provided for in Sections 3(a) and 3(b)(i), (ii), (iii)
and (iv) shall be paid within ten days after the Executive's
Termination Date.
d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in
any subsequent employment except as provided in Section 3(b)(iii).
- ----------
* 18 months for second tier executives.
-6-
<PAGE> 7
e) The severance pay and benefits provided for in Sections 3(a) and
3(b)(i) and (ii) shall be in lieu of any other severance pay to
which the Executive may be entitled under any Company severance
plan, program or arrangement.
4. DEFINITIONS.
a) CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by
any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") except that a Person
shall not include any employee benefit plan maintained by the
Corporation) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty-five percent
(25%) or more of the combined voting power of the Company's
then outstanding Voting Securities;
(ii) The individuals who, as of the date of this Agreement are
members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds of the members of
the Board; provided, however, that if the election, or
nomination for election by the Company's common shareholders,
of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no
individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result
of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy
Contest; or
(iii) Approval by shareholders of the Company of:
(1) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger,
consolidation or reorganization of the Company where:
(A) the shareholders of the Company, immediately
before such merger, consolidation or
reorganization, own directly or indirectly
-7-
<PAGE> 8
immediately following such merger, consolidation
or reorganization, at least sixty percent (60%) of
the combined voting power of the outstanding
voting securities of the corporation resulting
from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their
ownership of the Voting Securities immediately
before such merger, consolidation or
reorganization,
(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds
of the members of the board of directors of the
Surviving Corporation, or a corporation
beneficially directly or indirectly owning a
majority of the Voting Securities of the Surviving
Corporation, and
(C) no Person other than (i) the Company, (ii) any
subsidiary, (iii) any employee benefit plan (or
any trust forming a part thereof) maintained by
the Company, the Surviving Corporation, or any
subsidiary, or (iv) any Person who, immediately
prior to such merger, consolidation or
reorganization had Beneficial Ownership of forty
percent (40%) or more of the then outstanding
Voting Securities), has Beneficial Ownership of
forty percent (40%) or more of the combined voting
power of the Surviving Corporation's then
outstanding voting securities.
(2) A complete liquidation or dissolution of the Company; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any
Person (other than a transfer to a subsidiary).
b) NOTICE OF TERMINATION. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement, if any, relied upon and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Any purported
termination by the Company or by the Executive shall be communicated
by written Notice of Termination to the other. For purposes of this
Agreement, no such purported termination of employment shall be
effective without such Notice of Termination.
-8-
<PAGE> 9
c) TERMINATION DATE. For purposes of this Agreement, "Termination
Date" shall mean in the case of the Executive's death, his date
of death, or in all other cases, the date specified in the Notice
of Termination subject to the following:
(i) If the Executive's employment is terminated by the Company
for Cause or due to Disability, the date specified in the
Notice of Termination shall be at least thirty (30) days
from the date the Notice of Termination is given to the
Executive, provided that in the case of Disability the
Executive shall not have returned to the full-time performance
of his duties during such period of at least thirty (30) days;
and
(ii) If the Executive's employment is terminated for Good Reason
the date specified in the Notice of Termination shall not be
more than thirty (30) days from the date the Notice of
Termination is given to the Company.
5. BENEFIT LIMITATIONS
a) In the event that any payment (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"), to the Executive or for his benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his employment
with the Company or a change in ownership or effective control of
the Company or of a substantial portion of its assets (a "Payment"
or "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the payments to
be paid to the Executive under Section 3 of this Agreement (the
"Severance Payments") shall be reduced to the largest amount that
will result in no portion of the Severance Payments being subject to
the excise tax imposed by section 4999 of the Code.
b) An initial determination as to whether a reduction of Severance
Payments is required pursuant to this Agreement shall be made at the
Company's expense by an accounting firm selected by the Company and
reasonably acceptable to the Executive which is designated as one of
the five largest accounting firms in the United States (the
"Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination"), together with detailed
supporting calculations and documentation to the Company and the
Executive within five days of the Termination Date if applicable, or
such other time as requested by the Company or by the Executive
(provided the Executive reasonably believes that any of the Payments
may be subject to the Excise Tax) and if the Accounting Firm
determines that no Excise Tax is payable by the Executive with
respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no
Excise Tax will be imposed with respect to any such Payment or
-9-
<PAGE> 10
Payments. Within ten days of the delivery of the Determination to
the Executive, the Executive shall have the right to dispute the
Determination (the "Dispute"). If there is no Dispute, the
Determination shall be binding, final and conclusive upon the
Company and the Executive subject to the application of Section 5(c)
below.
c) In the event the Accounting Firm shall determine that Payments would
constitute an "excess parachute payment" thereby necessitating that
Severance Payments be reduced in part, the Executive may consult
with the Company in determining the priority in which any benefit
payment shall be reduced. Any such joint determination must be made
no later than seven (7) days prior to the next regular full-pay
cycle, otherwise the Company's decision of which benefits shall be
reduced or eliminated shall be final.
6. SUCCESSORS AND ASSIGNS.
a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company
shall require any successor or assign to expressly assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession or assignment had taken place. The term "Company" as used
herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or
other entity acquiring all or substantially all the assets and
business of the Company (including this Agreement) whether by
operation of law or otherwise.
b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
7. FEES AND EXPENSES. The Company shall pay the reasonable legal fees and
related expenses (including the costs of experts, evidence and counsel)
incurred by the Executive as they become due as a result of (a) the
Executive's termination of employment (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination
of employment), (b) the Executive seeking to obtain or enforce any right
or benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which the Executive is or may be entitled
to receive benefits, or (c) the Executive's hearing before the Board as
contemplated in Section 2(b) of this Agreement; provided, however, that
the circumstances set forth in clauses (a) and (b) (other than as a result
of the Executive's termination of employment under circumstances described
in Section 1 (b)) occurred on or after a Change in Control.
-10-
<PAGE> 11
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly
given when personally delivered, delivered by a nationally recognized
overnight delivery service, or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last
given by each party to the other, provided that all notices to the Company
shall be directed to the attention of the Board with a copy to the
Secretary of the Company. All notices and communications shall be deemed
to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of
address shall be effective only upon receipt.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any
of its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company or any of its subsidiaries.
Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
subsidiaries shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.
10. SETTLEMENT OF CLAIMS. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, defense, recoupment, or other right
which the Company may have against the Executive or others.
11. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Connecticut without
giving effect to the conflict of law principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in
a court of competent jurisdiction in county of the State of Connecticut.
-11-
<PAGE> 12
13. SEVERABILITY. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect
the validity or enforceability of the other provisions hereof.
14. NO GUARANTEED EMPLOYMENT. The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the Executive by
the Company is "at will" and, prior to the Effective Date, may be
terminated by either the Executive or the Company at any time. Moreover,
if prior to the Effective Date, the Executive's employment with the
Company terminates, the Executive shall have no further rights under this
Agreement.
15. ARBITRATION. All disputes under this Agreement shall be resolved under
the then-current National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. The arbitration shall be before a
single Arbitrator appointed according to said rules and shall take place
within ten (10) miles of the geographic limit of the Town of North
Stonington, Connecticut, if the Executive was employed in Connecticut on
the day before the Effective Date or within ten (10) miles of the limits
of the municipality in which the Executive was employed on the day before
the Effective Date, if the Executive was employed on such date in any
other State. The Arbitrator shall have no authority to add to, subtract
from, amend, revise, enlarge or disregard any of the provisions of this
Agreement. Subject to law, the Arbitrator's award shall be final and
binding upon all parties and judgment upon said award may be enforced in
any court of competent jurisdiction.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
ANALYSIS & TECHNOLOGY, INC.
By:____________________________ By:____________________________
Title: (name)[Executive]
State of Connecticut
County of New London
Subscribed and sworn to (or affirmed) before me this 6th day of March, 1997.
____________________________
Notary Public
Date Commission Expires:
-13-
<PAGE> 14
CHANGE IN CONTROL AGREEMENT
List of Tier 1 and Tier 2 "Executives"
The following list of individuals comprise the "Executives" as of June 1, 1997,
who are parties to the Form of Change In Control Agreement filed as Exhibit 10V
hereto:
TIER 1:
Gary P. Bennett
David M. Nolf
Jay W. Ryerson
TIER 2:
Robert M. Gorman
Stephen E. Johnston
James R. Lavoie
Joseph M. Marino
Richard P. Mitchell
Gerald Snyder
V. Lehman Woods
<PAGE> 1
EXHIBIT 11
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
Computation of Earnings per Share
For the years ended March 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding 2,333,161 2,415,970 2,346,487
Net effect of dilutive stock options
based on the treasury stock method
using the average market price 72,779 77,781 122,661
Total 2,405,940 2,493,751 2,469,148
Net Earnings $3,375,536 $2,077,621 $2,773,144
Earnings per common and common
equivalent share $1.40 $0.83 $1.12
Fully Diluted:
Weighted average shares outstanding 2,333,161 2,415,570 2,346,487
Net effect of dilutive stock options
based on the treasury stock method
using the period end price 81,478 85,198 130,325
Total 2,414,639 2,500,768 2,476,812
Net earnings $3,375,536 $2,077,621 $2,773,144
Earnings per common and common
equivalent share $1.40 $0.83 $1.12
</TABLE>
<PAGE> 1
EXHIBIT 13
S E L E C T E D
------------------------------------------------------------------------
FINANCIAL DATA
REVENUE
Dollars in Millions
$131.2 95
$122.9 96
$142.5 97
Amounts in millions except per share data
<TABLE>
<CAPTION>
Year ended March 31 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue from continuing operations $142.5 $122.9 $131.2
Net earnings from continuing operations $ 3.4 $ 3.2* $ 3.0
Weighted average shares outstanding 2.41 2.49 2.47
Earnings per share from continuing operations $ 1.40 $ 1.28* $ 1.20
Dividend $ .30 $ .27 $ .26
Dividend yield 2.0% 2.0% 1.8%
Debt/equity ratio 7.0% 7.8% 19.5%
Shareholders' equity $ 40.0 $ 39.3 $ 37.2
Equity per common share $17.42 $16.10 $15.68
P/E ratio 10.5 10.4 12.1
</TABLE>
*w/o R&D tax credit
EARNINGS PER SHARE
*from continuing
operations w/o
R&D tax credits
$1.20 95
$1.28* 96
$1.40 97
Analysis & Technology, Inc.'s common stock is currently traded on the NASDAQ
National Market under the symbol AATI. The high and low sales prices of the
Company's common stock from April 1, 1995 through March 31, 1997 by quarter have
been as follows:
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- -------------------------------------------------------------
<S> <C> <C> <C>
1995: June 30 14.00 12.00
September 30 15.00 13.00
December 31 16.00 13.25
1996: March 31 14.25 12.25
June 30 15.00 12.31
September 30 15.00 12.63
December 31 15.25 13.75
1997: MARCH 31 15.63 13.79
</TABLE>
EQUITY PER COMMON SHARE
$15.68 95
$16.10 96
$17.42 97
The Company declared an annual dividend of $.30 per share, payable on April 18,
1997 to shareholders of record on March 31, 1997. The annual dividend for the
fiscal year ended March 31, 1996 was $.27 per share.
On May 15, 1997, there were approximately 305 shareholders of record and
2,309,157 shares of common stock outstanding.
1
<PAGE> 2
SELECTED FINANCIAL DATA: A FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
Years ended March 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts in thousands except per share
and employee data
Revenue from continuing operations $142,547 $122,924 $131,174 $129,359 $116,462
Costs and expenses 135,777 116,670 125,222 124,000 111,966
- ---------------------------------------------------------------------------------------------------------------------
Operating earnings from continuing
operations 6,770 6,254 5,952 5,359 4,496
Interest expense, net 319 512 542 554 434
Other, net 638 338 269 433 485
- ---------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes 5,813 5,404 5,141 4,372 3,577
Income taxes on earnings from
continuing operations 2,437 1,816 2,171 1,856 1,585
- ---------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations $ 3,376 $ 3,588 $ 2,970 $ 2,516 $ 1,992
- ---------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Loss from discontinued
operations, net of income tax
(expense) benefit -- (195) (197) (17) (13)
Loss on disposal of discontinued
operations, net of income tax benefit -- (1,316) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net earnings $ 3,376 $ 2,077 $ 2,773 $ 2,499 $ 1,979
- ---------------------------------------------------------------------------------------------------------------------
Earnings per common and
common equivalent share
Continuing operations $ 1.40 $ 1.44 $ 1.20 $ 1.07 $ 0.92
Discontinued operations -- (0.61) (0.08) (0.01) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
Net earnings $ 1.40 $ 0.83 $ 1.12 $ 1.06 $ 0.91
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares and
common equivalent shares outstanding 2,406 2,494 2,469 2,367 2,173
Dividends per share $ 0.30 $ 0.27 $ 0.26 $ 0.24 $ 0.22
- ---------------------------------------------------------------------------------------------------------------------
Working capital $ 16,578 $ 19,789 $ 15,610 $ 12,676 $ 10,290
Contract receivables $ 24,693 $ 24,250 $ 27,322 $ 24,174 $ 23,574
Total assets $ 57,813 $ 56,437 $ 61,003 $ 54,438 $ 51,793
Long-term debt (including current
installments) $ 2,803 $ 3,081 $ 7,242 $ 4,631 $ 4,653
Shareholders' equity $ 39,989 $ 39,279 $ 37,174 $ 34,442 $ 30,890
Equity per common share $ 17.42 $ 16.10 $ 15.68 $ 14.87 $ 14.34
Number of full-time employees 1,502 1,373 1,535 1,556 1,558
=====================================================================================================================
</TABLE>
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table shows the relationship of selected income statement items to
revenue and presents earnings per share for the last three years:
<TABLE>
<CAPTION>
Years Ended March 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of revenue:
Revenue from continuing operations 100.0% 100.0% 100.0%
Costs and expenses 95.3 94.9 95.5
Operating earnings from continuing operations 4.7 5.1 4.5
Earnings from continuing operations before income taxes 4.1 4.4 3.9
Income taxes on earnings from continuing operations 1.7 1.5 1.7
Net earnings from continuing operations without R&D tax credits 2.4 2.6 2.3
Net earnings from continuing operations including R&D tax credits 2.4 2.9 2.3
Discontinued operations:
Loss from discontinued operations, net of income tax benefit -- (0.2) (0.2)
Loss on disposal of discontinued operations, net of income
tax benefit -- (1.1) --
Net earnings 2.4% 1.7% 2.1%
Earnings (loss) per common and common equivalent share:
Continuing operations without R&D tax credits $ 1.40 $ 1.28 $ 1.20
Continuing operations including R&D tax credits $ 1.40 $ 1.44 $ 1.20
Discontinued operations -- (0.61) (0.08)
- ----------------------------------------------------------------------------------------------------------
Net earnings $ 1.40 $ 0.83 $ 1.12
==========================================================================================================
</TABLE>
FISCAL 1997 COMPARED WITH FISCAL 1996
The major factors in the comparison of fiscal 1997 with fiscal 1996 are as
follows:
- - Revenue from continuing operations increased 16.0%.
- - The acquisition of Vector Research Company, Inc. (Vector Research)
contributed $10.3 million to the revenue increase.
- - Operating earnings from continuing operations increased 8.3%.
- - Operating earnings from continuing operations as a percentage of revenue
(operating margins) decreased to 4.7% in fiscal 1997 from 5.1% in fiscal
1996.
- - Net earnings from continuing operations increased 5.9% before the
recognition of research and development (R&D) tax credits in fiscal 1996.
- - Net earnings increased by 62.5%. Fiscal 1996 net earnings were adversely
affected by the loss on the sale of a subsidiary.
- - Earnings per common and common equivalent shares from continuing
operations, not including R&D tax credits or the loss on the sale of a
subsidiary in fiscal 1996, increased 9.4% to $1.40 in fiscal 1997 compared
with $1.28 in fiscal 1996.
Revenue from continuing operations increased 16.0% to $142.5 million in fiscal
1997 from $122.9 million in fiscal 1996. Revenue for the Company's core defense
business increased $15.4 million or 14.9% from the prior year. The acquisition
of Vector Research on July 26, 1996 contributed $10.3 million to this increase.
Revenue for the Company's non-defense business increased 21.5% to $23.6 million
and now represents 16.6% of the Company's revenue. The Company's commercial
training business, the cornerstone of its non-defense business, grew 27.8% to
$10.0 million.
The Company's revenue is affected by non-labor related items such as purchased
components, computer usage, travel, and work subcontracted to other companies.
Non-labor related revenue totaled $33.0 million in fiscal 1997, a $7.1 million
increase as compared with fiscal 1996. Non-labor related revenue increased due
to an increase of work subcontracted to other companies and an increase in
purchased components by the Company under a contract to provide minesweeping
equipment to the U.S. Navy.
During the year, total backlog varied between $463.9 million and $544.0 million.
In fiscal 1997, $19.5 million of backlog expired without being funded, while in
fiscal 1996, $6.3 million of backlog expired without being funded. The backlog
used during fiscal 1997, plus the unfunded backlog that expired, was more than
offset by newly awarded contracts and backlog acquired with Vector Research.
Backlog as of March 31, 1997 was $480.7 million, a 4.8% increase from $458.8
million at the end of fiscal 1996. Government funding continues to be dependent
on congressional approval of program level funding and on contracting agency
approval for the Company's work. The extent to which backlog will be funded in
the future cannot be determined.
<PAGE> 4
Operating earnings from continuing operations increased 8.3% to $6.8 million
from $6.3 million in fiscal 1996. Operating margins from continuing operations
were 4.7% in fiscal 1997 compared with 5.1% in fiscal 1996. The decrease in
operating margins was primarily due to lower fees earned this year on
fixed-price contracts and to increased expenditures in the Company's training
business where the Company is building both its management and sales
capabilities.
Total other expenses as a percentage of revenue remained constant at 0.7% for
both fiscal 1997 and fiscal 1996. Interest expense decreased due to lower
borrowing levels under the Company's revolving credit agreement as a result of
cash generated by the sale of its subsidiary, General Systems Solutions, Inc.
(GSS) on October 31, 1995. Interest income decreased in fiscal 1997 as a result
of the Company's acquisition of Vector Research as discussed more fully below in
"Liquidity and Capital Resources." The Company's share of income from its joint
venture, Automation Software, Incorporated (ASI), was $90 thousand, a 74%
decrease from the prior year. ASI experienced a slowdown of sales during the
year due to the transition to a new Windows 95 compatible software product and
to fewer sales generated by the Company's joint venture partner.
Earnings from continuing operations before income taxes increased 7.6% to $5.8
million from $5.4 million in fiscal 1996. The Company's effective tax rate on
earnings before income taxes was 41.9% in fiscal 1997 compared with 33.6% in
fiscal 1996. The lower effective tax rate in fiscal 1996 was mainly the result
of the Company's recognition of federal and state research and development (R&D)
tax credits totaling $400,000.
Net earnings from continuing operations increased 5.9% to $3.4 million from $3.2
million in fiscal 1996, before the recognition of R&D tax credits. Earnings per
common and common equivalent share from continuing operations increased 9.4% to
$1.40 from $1.28 in fiscal 1996, also before the recognition of R&D tax credits.
Net earnings for fiscal 1997 increased by 62.5% to $3.4 million from $2.1
million in fiscal 1996, which included the R&D tax credits and the loss on the
sale of GSS. Earnings per common and common equivalent share increased to 68.7%
to $1.40, compared to $0.83 in the prior year. The weighted average number of
common and common equivalent shares outstanding decreased to 2.4 million
compared with 2.5 million in fiscal 1996. The decrease was due in part to the
repurchase of the Company's common shares as discussed more fully below in
"Liquidity and Capital Resources."
FISCAL 1996 COMPARED WITH FISCAL 1995
Revenue from continuing operations decreased 6.3% to $122.9 million in fiscal
1996 from $131.2 million in fiscal 1995. Revenue for the Company's core defense
operations was down 8.2% from the prior year. Although contractual backlog at
year end was up 14.2% to $458.8 million, uncertainty in Navy program funding
priorities and budget reductions in submarine torpedo programs slowed the flow
of funds to Company contracts. In addition, the year-to-year revenue comparison
was adversely affected by naval air work performed by a Company subsidiary in
fiscal 1995, some of which was completed and did not continue in fiscal 1996.
The decrease in revenue in fiscal 1996 is also attributable to a decrease in
non-labor related revenue. Non-labor related revenue generated by purchased
components, computer usage, travel, and work subcontracted to other companies
totaled $25.9 million in fiscal 1996, a $4.9 million dollar decrease as compared
with fiscal 1995. Non-labor related revenue decreased due to reduced purchases
of components by the Company under a contract to provide minesweeping equipment
to the U.S. Navy and due to reduced funding by the U.S. Navy for projects that
would have been subcontracted by the Company to others. Non-defense revenue in
fiscal 1996 was about level with the prior year at 15% of total revenue.
During fiscal 1996, total contractual backlog varied between $405.7 million and
$462.2 million. During the year, $6.3 million of backlog expired without being
funded, while in fiscal 1995, $10.7 million of backlog expired without being
funded. Backlog as of March 31, 1996 was $458.8 million, a 14.2% increase from
$401.6 million in fiscal 1995.
Operating earnings from continuing operations increased 5.1% to $6.3 million
from $6.0 million in fiscal 1995. Operating margins from continuing operations
were 5.1% in fiscal 1996 compared with 4.5% in fiscal 1995. The increase in
operating margins was due to higher fees earned on the Company's defense-related
work, as well as in its commercial interactive multimedia operations, including
higher than anticipated earnings on fixed-price contracts.
Total other expenses as a percentage of revenue increased to 0.7% in fiscal 1996
compared with 0.6% in fiscal 1995. Interest expense increased because of higher
interest rates and increased borrowing under the Company's revolving credit
agreement to fund investment in GSS software product development. This increase
was offset by interest income earned from investment of the GSS sale proceeds
(as discussed below). The Company's share of income from its joint venture,
Automation Software, Incorporated (ASI), was $346 thousand, a 7.7% increase from
the prior year. Other net expense increased to 0.6% of revenue in fiscal 1996
from 0.4% in fiscal 1995, primarily due to an increase in amortization expense
associated with the Company's past acquisitions.
Earnings from continuing operations before income taxes increased 5.1% to $5.4
million in fiscal 1996 from $5.1 million in fiscal 1995. The Company's effective
tax rate on earnings from continuing operations was 33.6% in fiscal 1996
compared with 42.2% in fiscal 1995. The lower effective tax rate for fiscal 1996
was primarily due to recognition of federal and state R&D tax credits totaling
$400,000. During the second quarter of fiscal 1996, the Company analyzed
research expenditures incurred in prior years by the Company and its
subsidiaries. As a result of this analysis, the Company determined it was
entitled to certain federal and state R&D credits.
<PAGE> 5
Net earnings from continuing operations increased 20.8% to $3.6 million from
$3.0 million in fiscal 1995. Net earnings from continuing operations were
affected positively by the R&D tax credits. Without R&D tax credits, earnings
per share from continuing operations in fiscal 1996 were $1.28, a 6.7% increase
from $1.20 in fiscal 1995. Earnings per share from continuing operations in
fiscal 1996 including the R&D tax credits were $1.44.
On October 31, 1995, the Company sold the commercial business of its GSS
subsidiary to GE Capital Corporation for $9.25 million in cash. The Company
accrued a $1.3 million after-tax loss ($0.53 per share) associated with the sale
during the second quarter of fiscal 1996. The operating results of GSS's
commercial business for fiscal 1996 and prior year periods have been reported
separately as discontinued operations in the Consolidated Statements of
Earnings. The after-tax loss from discontinued operations, excluding the loss
associated with the sale, totaled $195 thousand or $0.08 per share for fiscal
1996 as compared with $197 thousand or $0.08 per share for fiscal 1995.
Net earnings per share after deducting the loss from discontinued operations and
the loss on the disposal of discontinued operations were $0.83 in fiscal 1996
compared with $1.12 in fiscal 1995. The weighted average number of common and
common equivalent shares outstanding remained relatively constant at
approximately 2.5 million shares.
LIQUIDITY AND CAPITAL RESOURCES
For fiscal 1997, net cash provided by operating activities totaled $9.1 million.
The net cash increase resulted in part from earnings from continuing operations
of $3.4 million and a decrease in contract receivables of $2.7 million due to
faster payment by the government and to collection of receivables under firm
fixed-price contracts. Contract receivables totaled $24.7 million as of March
31, 1997, including those of Vector Research, $24.2 million and $27.3 million as
of March 31, 1996, and 1995 respectively, and represented approximately 43%,
43%, and 45% of total assets as of those dates. The average period of payment to
the Company was 58 days at March 31, 1997; 71 days at March 31, 1996; and 71
days at March 31, 1995.
Net cash used in investing activities for fiscal 1997 totaled $7.4 million. The
primary use of cash was for the acquisition of Vector Research. On July 26,
1996, the Company purchased all of the shares of Vector Research for
approximately $6.0 million plus related expenses and assumption of tax
liabilities. The purchase was made from existing cash and funds available under
the Company's revolving credit agreement.
Net cash used in financing activities for fiscal 1997 totaled $3.0 million. This
was primarily the result of the Company's repurchase of common shares. On March
25, 1996, the Company's Board of Directors announced that it had authorized the
repurchase of up to 200,000 common shares over a one year period. During fiscal
1997 the Company repurchased 175,700 shares under the repurchase program at
current market prices on the dates of purchases.
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 its revolving
credit agreement at March 31, 1997 were $20.0 million. There was no borrowing
under the Company's agreement as of March 31, 1997 and March 31, 1996.
Borrowings under the Company's agreements (including a line of credit that was
terminated as part of the sale of GSS) as of March 31, 1995 were $3.5 million.
The Company's working capital (excluding deferred taxes) was $17.2 million at
March 31, 1997 compared with $21.0 million at March 31, 1996. The Company's
current ratio was 2.3:1 at March 31, 1997 and 2.7:1 at March 31, 1996.
It is anticipated that the Company's existing cash, together with funds
generated from operations and borrowing under its revolving credit agreements,
will be sufficient to meet its normal working capital requirements for the
foreseeable future. As of March 31, 1997, the Company does not have any major
capital commitments.
The Company believes that inflation has not had a material effect on its
business.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, within the meaning of The
Private Securities Litigation Reform Act of 1995. These statements are based on
current expectations and are subject to a number of risks and uncertainties.
Forward-looking statements are set forth in the paragraphs above that discuss
the Company's backlog, liquidity, and capital resources. The Company cautions
readers that actual results could differ materially from those in the
forward-looking statements. The factors that could cause actual results to
differ materially include the following: general economic conditions, Navy
program funding priorities, budget reductions in defense programs, delays in the
development and acceptance of new products, and pricing pressures from
competitors and/or customers. A more complete discussion of business risk
factors is included in the Company's Form 10-K for the year ended March 31,
1997.
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of March 31, 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,977,058 $ 4,179,499
Contract receivables (note 4) 24,693,115 24,249,824
Notes and other receivables 422,031 1,259,500
Prepaid expenses 777,030 1,542,891
- ----------------------------------------------------------------------------------------------------
Total current assets 28,869,234 31,231,714
- ----------------------------------------------------------------------------------------------------
Property, buildings, and equipment, net (notes 5 and 6) 13,963,973 14,132,108
- ----------------------------------------------------------------------------------------------------
Other assets (note 5):
Goodwill, net of accumulated amortization 9,463,588 6,547,854
Product development costs, net of accumulated amortization 563,702 361,744
Deferred Compensation Plan investments (note 9) 3,033,271 2,601,020
Investment in joint venture 1,391,548 1,301,103
Deposits and other 409,965 261,565
Deferred income taxes (note 7) 117,599 --
- ----------------------------------------------------------------------------------------------------
14,979,673 11,073,286
- ----------------------------------------------------------------------------------------------------
Total assets $57,812,880 $56,437,108
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 6) $ 313,032 $ 179,906
Accounts payable 1,246,251 1,779,481
Accrued expenses (note 10) 9,375,659 7,648,023
Dividends payable 693,536 658,881
Deferred income taxes (note 7) 662,773 1,176,288
- ----------------------------------------------------------------------------------------------------
Total current liabilities 12,291,251 11,442,579
Long-term debt, excluding current installments (note 6) 2,489,652 2,900,787
Deferred income taxes (note 7) -- 113,571
Other long-term liabilities (note 9) 3,043,476 2,700,782
- ----------------------------------------------------------------------------------------------------
Total liabilities 17,824,379 17,157,719
- ----------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 4, 9, and 11)
Shareholders' equity (notes 8 and 9):
Common stock, $.125 stated value. Authorized 7,500,000
shares; issued and outstanding 2,295,787 shares in 1997
and 2,440,303 shares in 1996 286,974 305,038
Additional paid-in capital 8,009,386 9,964,210
Retained earnings 31,692,141 29,010,141
- ----------------------------------------------------------------------------------------------------
Total shareholders' equity 39,988,501 39,279,389
- ----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $57,812,880 $56,437,108
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years ended March 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue from continuing operations $142,547,174 $122,923,875 $131,173,804
Costs and expenses 135,777,206 116,669,930 125,222,189
- ------------------------------------------------------------------------------------------------------------------------
Operating earnings from continuing operations 6,769,968 6,253,945 5,951,615
- ------------------------------------------------------------------------------------------------------------------------
Other expense (income):
Interest expense 397,417 640,660 564,862
Interest income (77,803) (129,105) (22,980)
Equity in income of joint venture (90,445) (345,842) (321,252)
Other, net 728,281 684,309 589,762
- ------------------------------------------------------------------------------------------------------------------------
957,450 850,022 810,392
- ------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes 5,812,518 5,403,923 5,141,223
Income taxes on earnings from continuing operations (note 7) 2,436,982 1,815,542 2,171,031
- ------------------------------------------------------------------------------------------------------------------------
Net earnings from continuing operations $ 3,375,536 $ 3,588,381 $ 2,970,192
- ------------------------------------------------------------------------------------------------------------------------
Discontinued operations (note 3):
Loss from discontinued operations, net of income
tax benefit of $135,321 and $136,932 in 1996 and
1995, respectively -- (194,730) (197,048)
Loss on disposal of discontinued operations,
net of income tax benefit of $1,392,730 -- (1,316,030) --
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 3,375,536 $ 2,077,621 $ 2,773,144
========================================================================================================================
Earnings (loss) per common and common equivalent share:
Continuing operations $ 1.40 $ 1.44 $ 1.20
Discontinued operations -- (0.61) (0.08)
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 1.40 $ 0.83 $ 1.12
- ------------------------------------------------------------------------------------------------------------------------
Weighted average shares and common
equivalent shares outstanding (notes 2 and 8) 2,406,140 2,493,751 2,469,148
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock
------------------------- Additional Total
Stated paid-in Retained shareholders'
Years ended March 31, 1997, 1996, and 1995 Shares value capital earnings equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1994 2,315,620 $289,453 $ 8,718,008 $25,434,410 $34,441,871
Proceeds from sale of common stock 55,779 6,972 567,859 -- 574,831
Net earnings -- -- -- 2,773,144 2,773,144
Cash dividends declared - $.26 per share -- -- -- (616,153) (616,153)
- --------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1995 2,371,399 296,425 9,285,867 27,591,401 37,173,693
Proceeds from sale of common stock 68,904 8,613 678,343 -- 686,956
Net earnings -- -- -- 2,077,621 2,077,621
Cash dividends declared - $.27 per share -- -- -- (658,881) (658,881)
- --------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1996 2,440,303 305,038 9,964,210 29,010,141 39,279,389
Proceeds from sale of common stock 31,184 3,898 290,912 -- 294,810
Repurchase of common stock (175,700) (21,962) (2,297,238) -- (2,319,200)
Net earnings -- -- -- 3,375,536 3,375,536
Tax benefit of stock options exercised -- -- 51,502 -- 51,502
Cash dividends declared - $.30 per share -- -- -- (693,536) (693,536)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCES AT MARCH 31, 1997 2,295,787 $286,974 $ 8,009,386 $31,692,141 $39,988,501
================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended March 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 3,375,536 $ 2,077,621 $ 2,773,144
Adjustments to reconcile net earnings to net cash
provided by continuing operations
Loss associated with discontinued operations - 1,510,760 197,048
Equity in income of joint venture (90,445) (345,841) (321,252)
Tax benefit of stock options exercised 51,502 - --
Depreciation and amortization of property,
buildings, and equipment 2,528,929 2,670,248 2,262,468
Amortization of goodwill 562,257 452,840 429,727
Amortization of product development costs 113,908 116,142 69,322
Provision for deferred income taxes (744,685) 33,368 (524,164)
Loss on sale of equipment 243,832 275,958 78,970
Gain on sale of marketable securities (35,268) - --
Decrease (increase) in:
Contract receivables 2,691,895 3,072,552 (3,122,957)
Notes and other receivables 843,775 (117,309) (775,111)
Prepaid expenses 858,565 (599,582) (103,821)
Other assets (526,977) (161,970) (252,669)
Increase (decrease) in:
Accounts payable and accrued expenses 122,025 (2,815,471) 1,903,696
Other long-term liabilities (486,839) 298,103 268,229
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 9,508,010 6,467,419 2,882,630
Net cash provided by (used for) discontinued operations (400,000) (3,344,693) 1,860,751
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,108,010 3,122,726 4,743,381
- -------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Proceeds from sale of discontinued operations - 8,006,989 --
Additions to property, buildings, and equipment (2,327,142) (1,748,387) (2,258,138)
Product development costs - continuing operations (315,866) (277,283) (220,414)
Product development costs - discontinued operations - (1,124,560) (3,585,585)
Proceeds from the sale of equipment 20,991 5,937 6,563
Proceeds from sale of marketable securities 205,603 - --
Acquisition of business units (net of cash acquired) (4,932,757) (217,359) (987,222)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (7,349,171) 4,645,337 (7,044,796)
- -------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Net repayments of short-term borrowings - - (555,000)
Proceeds provided by long-term borrowings - - 2,895,000
Repayments of long-term borrowings (278,009) (4,161,739) (283,681)
Repurchase of common stock (2,319,200) - --
Proceeds from sale of common stock 294,810 686,956 574,831
Dividends paid (658,881) (616,153) (556,056)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (2,961,280) (4,090,936) 2,075,094
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (1,202,441) 3,677,127 (226,321)
Cash and cash equivalents:
Beginning of year 4,179,499 502,372 728,693
- -------------------------------------------------------------------------------------------------------------------------------
End of year $ 2,977,058 $ 4,179,499 $ 502,372
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
note 1 Description of Business and Acquisitions
Analysis & Technology, Inc. (A&T) initially provided tactical analysis
to the Office of Naval Research and sonar analysis to the Naval
Underwater Systems Center, now known as the Naval Undersea Warfare
Center. During the past 28 years, A&T and Subsidiaries (the Company)
have grown to provide system and engineering technologies, interactive
multimedia training systems, and information technologies for the
military, civil government agencies, and private industry. The Company
has the following wholly owned subsidiaries:
- Applied Science Associates, Inc. (ASA), which designs and implements
training programs for private industry and government;
- Integrated Performance Decisions, Inc. (IPD), which develops and
implements performance decision software products for U.S. Navy (the
Navy) customers and provides software and information technology
products and services for commercial customers. In fiscal 1995, IPD
formed a Canadian subsidiary, Numerical Decisions Group Inc., to
perform similar work, primarily for the Canadian Government; and
- Analysis & Technology Australia Pty. Ltd. and Analysis & Technology
International Corporation, each of which provides training systems
to international markets.
The Company typically performs its Department of Defense services
under cost reimbursement contracts whereby the U.S. Government
reimburses the Company for contracted costs and pays a fee. In fiscal
1997, 1996, and 1995, the amount of the Company's non-defense revenue
was $23.7 million, $20.2 million, and $19.5 million, respectively.
The Company has made the following acquisitions which were accounted
for as purchases, as described below:
In fiscal 1993, the Company purchased all the shares of Continental
Dynamics, Inc. (CDI), which specializes in manpower development
training, information resource management, engineering management,
program management, and engineering consulting. During fiscal 1994,
1995, and 1996, the Company completed its payment obligations under
the terms of the purchase agreement for CDI, by making contingent
payments of $100,000, $769,999, and $200,000, respectively, to the
former owners of CDI.
In fiscal 1995, the Company acquired certain assets of Design Systems
& Services, Inc., a Delaware company, operating a technology-based
engineering, professional service, and software business.
On July 26, 1996, the Company acquired all of the stock of Vector
Research Company, Inc. (Vector) of Rockville, Maryland for
approximately $6.5 million in cash plus related expenses and
assumption of tax liabilities. Vector provides engineering and
technical services to U.S. Navy customers. Goodwill totaling
approximately $3.4 million was recorded in connection with this
acquisition and is being amortized over 20 years. In connection with
the acquisition of Vector Research Company, Inc., assets acquired were
$4,472,752 and liabilities assumed were $1,541,835.
note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the
Company:
- PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of A&T and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
- CASH EQUIVALENTS - For financial statement purposes, the Company
considers all cash investments with original maturities of three
months or less at the time of purchase to be cash equivalents.
- FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the
Company's financial instruments including cash, accounts receivable,
accounts payable, accrued expenses, and dividends payable
approximate fair value due to the short term nature of these
instruments. The carrying value of notes and other receivables and
long term debt approximate fair value based on the instruments'
interest rate, terms, maturity date, and collateral, if any, in
comparison to the Company's incremental borrowing rate for similar
financial instruments.
- DEPRECIATION AND AMORTIZATION - Property, buildings, and equipment
are stated at cost. Depreciation of buildings and equipment is
provided over the estimated useful lives of the respective assets
using the straight-line method. Leasehold improvements are amortized
over the shorter of the term of the lease or the life of the asset.
- LONG-LIVED ASSETS - Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, was issued in March 1995. The
statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment, based upon undiscounted
future cash flows and appropriate losses be recognized, whenever the
carrying amount of an asset may not be recovered. The methodology
<PAGE> 11
set forth in Statement 121 is not significantly different from the
Company's existing policies, and therefore, the adoption during
fiscal 1997 had no impact on the consolidated financial statements.
- GOODWILL - Goodwill relating to the Company's acquisitions
represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over periods
ranging from two to thirty years. Determination of the straight-line
period is dependent on the nature of the operations acquired. The
Company evaluates the recoverability of goodwill on a periodic basis
to assure that changes in facts and circumstances do not suggest
that recoverability has been impaired. This analysis relies on a
number of factors, including operating results, business plans,
budgets, economic projections, and changes in management's strategic
direction or market emphasis. The test of recoverability for
goodwill is a comparison of the unamortized balance to expected
cumulative (undiscounted) operating income of the acquired business
or enterprise over the remaining portion of the amortization period.
If the book value of goodwill exceeds undiscounted future operating
income, the writedown is computed as the excess of the unamortized
balance of the asset over the present value of operating income
discounted at the Company's weighted average cost of capital over
the remaining amortization period.
- PRODUCT DEVELOPMENT COSTS - Product development costs represent
expenditures for software products that have been capitalized in
accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed. Amortization is computed on an individual
product basis and is the greater of (a) the ratio of current gross
revenues for a product to the total of current and anticipated
future gross revenues for that product or (b) the amount computed
using the straight-line method over the remaining economic useful
life of the product. The Company is currently using economic lives
ranging from two to five years for all capitalized product
development costs. Amortization of product development costs begins
when the software product is available for general release to
customers.
- ACCOUNTING FOR INVESTMENT IN JOINT VENTURE - The Company's 50%
investment in its joint venture, Automation Software, Incorporated,
is accounted for using the equity method of accounting.
- ACCOUNTING FOR STOCK-BASED COMPENSATION - In October 1995, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Statement 123 addresses the accounting for the cost of
stock-based compensation, such as stock options, and permits either
expensing the cost of stock-based compensation over the vesting
period or disclosing in the financial statement footnotes what this
expense would have been. This cost would be measured at the grant
date based upon estimated fair values, using option pricing models.
The Company adopted the disclosure alternative of Statement 123 as
of March 31, 1997.
- REVENUE RECOGNITION - The revenue from contract services is earned
under cost-reimbursement, time-and-material, and fixed-price
contracts. Revenue under such contracts, including applicable fees
and estimated profits, are recorded as costs are incurred on the
percentage of completion basis. If estimates indicate a probable
ultimate loss on a contract, provision is made immediately for the
entire amount of the estimated future loss. Profit and losses
accrued include the cumulative effect of changes in prior periods'
price and cost estimates.
- EARNINGS PER SHARE - Earnings per share have been computed on the
basis of the weighted average number of common and common equivalent
shares outstanding during the year. Options to purchase common stock
have been considered to be common stock equivalents. Fully diluted
earnings per share is not presented since the dilution is not
material. For the third quarter ended December 31, 1997, the Company
will be required to adopt the Statement of Financial Accounting
Standards No. 128, Earnings per Share, for calculating earnings per
share. The Company has determined that the impact of adopting
provisions of Statement 128 will not have a material impact on
earnings per share.
- DEFERRED COMPENSATION PLAN - The Company maintains a deferred
compensation plan for certain officers, directors, and salaried
employees. The plan is funded primarily through employee pretax
contributions. The Company has recorded the assets and liabilities
for the deferred compensation plan at the lower of cost or market in
the consolidated balance sheets. The participants in the plan bear
the risk of market value fluctuations of the underlying assets.
- USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from reported results using those estimates.
<PAGE> 12
note 3 DISCONTINUED OPERATIONS
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 for $9.25 million in cash. Of the
$9.25 million purchase price, approximately $8.0 million was paid to
A&T. The balance was paid to minority shareholders. GSS provided
On-Line Registration Systems (OLRS) and related services to vehicle
lease and rental companies, as well as car dealers. OLRS provided the
capability to register vehicles from personal computers networked to
GSS. GSS's Navy business was transferred to the Company prior to the
sale and its commercial business has been reclassified retroactively
as a discontinued operation. The Company accrued the pretax loss of
$2.7 million associated with the sale ($1,316,000 after tax or $0.53
per common share) during the second quarter of fiscal 1996.
Pursuant to the sales agreement, the Company committed to reimburse GE
Capital Corporation for a portion of possible uncollectible
receivables and for other items that could not be finalized until
after the closing. During fiscal 1997, the Company reimbursed GE
Capital $400,000. The Company had accrued this amount during fiscal
1996 as part of its accounting for the sale of GSS.
note 4 CONTRACT RECEIVABLES
note Contract receivables are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government:
Amounts due currently - prime contractor $ 11,722,320 $ 10,320,598
Amounts due currently - subcontractor 5,662,195 5,043,967
Retainage 744,617 1,326,541
- -------------------------------------------------------------------------------------------------
18,129,132 16,691,106
Commercial customers:
Amounts due currently 3,439,635 3,277,693
- -------------------------------------------------------------------------------------------------
Unbilled contracts in process:
Fixed-price contracts in progress, net of progress billings 285,863 3,064,979
Revenues recorded on work performed pursuant to
customer authorization but prior to execution of
contractual documents or modifications 2,838,485 1,216,046
- -------------------------------------------------------------------------------------------------
3,124,348 4,281,025
$ 24,693,115 $ 24,249,824
- -------------------------------------------------------------------------------------------------
</TABLE>
The Government retains a portion of the fee earned by the Company
(retainage) until contract completion and final audit by the Defense
Contract Audit Agency (DCAA). It is estimated that approximately
$290,000 of retainage at March 31, 1997 will be collected within one
year; the remainder will be collected in later years as DCAA completes
its audits.
All unbilled contract receivables, net of retainage, are expected to
be billed and collected within one year.
note 5 NON-CURRENT ASSETS
A summary of property, buildings, and equipment follows:
<TABLE>
<CAPTION>
Useful Life 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land - $ 376,839 $ 376,839
Buildings 31 years 11,451,313 11,045,198
Equipment 3 - 8 years 19,608,483 18,469,896
Leasehold improvements 1 - 5 years 1,682,494 1,550,088
- -----------------------------------------------------------------------------------------------------
33,119,129 31,442,021
Less accumulated depreciation and amortization (19,155,156) (17,309,913)
- -----------------------------------------------------------------------------------------------------
$ 13,963,973 $ 14,132,108
- -----------------------------------------------------------------------------------------------------
</TABLE>
Goodwill as of March 31, 1997 and 1996 was $9,463,588 and $6,547,854,
net of accumulated amortization of $2,566,475 and $2,004,218,
respectively. The amount of goodwill added in fiscal 1997 and 1996 was
$3,477,991 and $217,359, respectively. Amortization expense was
$562,257 in fiscal 1997, $452,840 in fiscal 1996, and $429,727 in
fiscal 1995.
Product development costs at March 31, 1997 and 1996 were $563,702 and
$361,744, net of accumulated amortization of $299,372 and $185,464,
respectively. The amount of product development costs capitalized was
$315,866 in fiscal 1997, and $277,283 in fiscal 1996. Amortization
expense was $113,908 in fiscal 1997, $116,142 in fiscal 1996, and
$69,322 in fiscal 1995.
<PAGE> 13
note 6 LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage payable to Fleet Bank bearing interest at 7.97%, due in monthly
installments of principal of $11,500 plus associated interest through
September 1, 2001, secured by certain
land and buildings with a depreciated cost of $2,835,761 $ 629,870 $ 740,666
Mortgage payable to Fleet Bank bearing interest at 8.29%, due in
monthly installments of principal and interest of $20,048 through January 1,
2007, secured by certain land and buildings with a
depreciated cost of $2,874,611 1,698,578 1,798,539
Mortgage payable to Chelsea Groton Bank bearing interest at 9.25%,
due in monthly installments of principal and interest of $4,477 through
March 2004, secured by certain land and buildings 264,149 292,013
Small Business Administration loan bearing interest at 8.5%, due in
monthly installments of principal and interest of $4,923 through May 2001 210,087 249,475
- -----------------------------------------------------------------------------------------------------------------
Total long-term debt 2,802,684 3,080,693
Less current installments of long-term debt 313,032 179,906
- -----------------------------------------------------------------------------------------------------------------
Total long-term debt, excluding current installments $ 2,489,652 $ 2,900,787
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has a $20,000,000 revolving credit and term loan agreement
that expires on October 31, 1998. Amounts drawn against the line of
credit may be converted into a term loan at the Company's discretion
at any time prior to the expiration of the loan agreement. If
converted, the term loan would be payable in 20 substantially equal
quarterly installments. The alternate rates of interest for the term
loan from which the Company can choose are the bank's base rate, the
bank's certificate of deposit rate plus 1%, or LIBOR plus 3/4%. There
is a commitment fee of 1/2% per annum on the average daily balance of
the unused portion of the first $5,000,000 of the commitment and 1/4%
per annum on the remaining unused portion of the commitment, payable
quarterly.
The revolving credit and term loan agreement places certain
restrictions on encumbering the Company's assets, incurring additional
debt, and disposing of any significant assets. It also requires that
the Company maintain at least $10,000,000 in working capital
(excluding deferred income taxes), tangible net worth of at least
$22,000,000, a debt-to-net-worth ratio of less than 2.5 to 1.0, an
interest coverage ratio of not less than two times interest paid or
accrued, and a debt service ratio of not less than 1.2 to 1.0. As of
March 31, 1997, the Company was in compliance with these covenants.
Under current agreements, principal payments due on long-term debt
during each of the five fiscal years subsequent to March 31, 1997 are
as follows: $313,032 in 1998, $328,646 in 1999, $345,338 in 2000,
$364,157 in 2001, and $338,710 in 2002.
The Company paid $397,417, $640,660 and $564,862 in interest on all
debts in fiscal 1997, 1996, and 1995, respectively.
<PAGE> 14
note 7 INCOME TAXES
Total income tax expense for the years ended March 31, 1997, 1996, and
1995 consisted of the following:
<TABLE>
<CAPTION>
Current Deferred Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997:
Federal $ 2,583,180 $ (507,257) $ 2,075,923
State 598,487 (157,198) 441,289
Foreign -- (80,230) (80,230)
- --------------------------------------------------------------------------------
Total continuing operations $ 3,181,667 $ (744,685) $ 2,436,982
- --------------------------------------------------------------------------------
1996:
Federal $ 1,195,813 $ 35,232 $ 1,231,045
State 586,361 (1,864) 584,497
- --------------------------------------------------------------------------------
Continuing operations 1,782,174 33,368 1,815,542
Discontinued operations 2,104,716 (3,632,767) (1,528,051)
- --------------------------------------------------------------------------------
Total $ 3,886,890 $(3,599,399) $ 287,491
- --------------------------------------------------------------------------------
1995:
Federal $ 1,687,995 $ 103,484 $ 1,791,479
State 1,007,190 (627,638) 379,552
- --------------------------------------------------------------------------------
Continuing operations 2,695,185 (524,154) 2,171,031
Discontinued operations (1,630,548) 1,493,616 (136,932)
- --------------------------------------------------------------------------------
Total $ 1,064,637 $ 969,462 $ 2,034,099
- --------------------------------------------------------------------------------
</TABLE>
Income tax expense from continuing operations differed from the amount
computed by applying the U.S. federal income tax rate of 34% to
earnings before income taxes as a result of the following:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed expected tax expense from continuing operations 1,976,256 1,837,333 1,748,016
Increase (decrease) in income taxes resulting from:
Amortization of goodwill 139,220 153,966 145,451
Equity in joint venture (30,751) (117,586) (109,226)
State income taxes (net of valuation allowance
and federal income tax benefit) 291,251 385,768 250,505
Research and development credits -- (400,000) --
Change in valuation allowance, exclusive of state tax (118,500) (29,830) 183,300
Other (net) 179,506 (14,109) (47,015)
- -------------------------------------------------------------------------------------------------
$ 2,436,982 $ 1,815,542 2,171,031
- -------------------------------------------------------------------------------------------------
</TABLE>
During the second quarter of fiscal 1996, the Company analyzed
research expenditures incurred in prior years by the Company and its
subsidiaries. As a result of this analysis, the Company determined it
was entitled to certain federal and state research and development tax
credits for which it has filed refund claims.
<PAGE> 15
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
March 31, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Uncollected receivables that are not yet deductible for tax purposes $ 80,632 $ 11,701
Compensated absences, principally due to accrual for
financial reporting purposes 1,014,609 844,578
Deferred compensation 1,092,088 1,006,708
Net operating loss carryforwards 236,275 275,918
- -------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 2,423,604 2,138,905
Less valuation allowance 61,437 153,470
- -------------------------------------------------------------------------------------------------------
Net deferred tax assets 2,362,167 1,985,435
- -------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Tax depreciation in excess of financial statement depreciation (855,738) (1,095,109)
Capitalized software product development costs (194,932) (127,555)
Unbilled contract revenue (1,802,907) (2,028,039)
Other (53,764) (24,591)
- -------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities (2,907,341) (3,275,294)
- -------------------------------------------------------------------------------------------------------
Net deferred tax liability $ (545,174) $(1,289,859)
- -------------------------------------------------------------------------------------------------------
</TABLE>
At March 31, 1997, the Company had federal and state net operating
loss carryforwards of approximately $300,000 and $1,375,000,
respectively. Such carryforwards have various expiration dates and
begin to expire in the year ended March 31, 1999. For financial
purposes, a valuation allowance of $61,437 and $153,470 has been
recognized to offset the deferred tax asset related to the portion of
these net operating losses which the Company believes will more likely
than not expire unutilized.
Management has evaluated the remaining temporary differences and
concluded that it is more likely than not that the Company will have
sufficient taxable income of an appropriate character within the
carryback and carryforward period permitted by current tax law to
allow for the utilization of the deductible amounts generating the
deferred tax assets and, therefore, no valuation allowance is required
as of March 31, 1997 and 1996.
The Company made federal and state income tax payments of $2,707,724,
$4,357,117, and $1,335,533 during fiscal 1997, 1996, and 1995,
respectively.
note 8 STOCK OPTIONS
A&T has granted common stock options to certain key employees under
its stock option plans. All plans provide that the fair value upon
which option exercise prices are based shall be the average of the
high and low sale prices of the Company's common stock as reported on
the NASDAQ National Market System on the day the option is granted.
Options awarded vest at a rate of 20% annually, commencing on the date
of award.
The transactions under the Company's stock option plan are summarized as
follows:
<TABLE>
<CAPTION>
Weighted
Shares Average Price Price Range
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at:
March 31, 1994 564,946 $10.89 $ 9.06 - $16.63
Granted 134,600 $14.98 $ 12.75 - $15.75
Exercised (59,161) $10.53 $ 9.06 - $15.00
Cancelled or expired (66,178) $12.63 $ 9.75 - $16.25
- -----------------------------------------------------------------
March 31, 1995 574,207 $11.69 $ 9.06 - $16.63
Granted 146,410 $14.10 $13.625 - $14.75
Exercised (70,204) $10.07 $ 9.75 - $10.50
Cancelled or expired (51,200) $13.30 $ 14.13 - $15.00
- -----------------------------------------------------------------
March 31, 1996 599,213 $12.33 $ 9.06 - $16.63
Granted 52,400 $14.07 $ 12.75 - $14.88
Exercised (34,179) $ 9.94 $ 9.06 - $11.50
Cancelled or expired (12,756) $14.26 $ 9.82 - $15.13
- -----------------------------------------------------------------
MARCH 31, 1997 604,678 $12.58 $ 9.75 - $16.63
- -----------------------------------------------------------------
</TABLE>
<PAGE> 16
The Company had shares reserved for stock options totaling 634,913;
669,788; and 642,547 at March 31, 1997, 1996, and 1995, respectively.
At March 31, 1997, 1996, and 1995 there were 432,672; 379,595; and
353,327 shares exercisable, respectively. The weighted average
remaining contractual life of the outstanding options at March 31,
1997 was 3.7 years.
Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair value at the grant date for awards
under those plans consistent with the requirements of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings As reported $ 3,375,536 $ 3,588,381
from continuing operations Pro forma $ 3,151,392 $ 3,364,229
Earnings per share As reported $ 1.40 $ 1.44
from continuing operations Pro forma $ 1.31 $ 1.35
</TABLE>
The fair value of each stock option grant has been estimated on the
date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 6.26% 5.29%
Expected life (years) 5.1 5.1
Expected volatility 32.78% 30.36%
Expected dividend yield 2.0% 2.0%
</TABLE>
The weighted-average fair values of options as of the date of grant
were $4.79 and $4.21, during 1997 and 1996, respectively.
In addition, the Company can grant stock options to certain key
employees totaling up to 19% of the authorized common stock of
Integrated Performance Decisions, Inc. (IPD), a subsidiary of the
Company, to purchase IPD's stock. The price of the options as of the
date of award and subsequent valuation is based on a calculation
considering book value per share and an earnings factor. Approximately
90% of the available options have been granted to date; none have been
exercised.
note 9 EMPLOYEE BENEFIT PLANS
The Company's Savings and Investment Plan is a discretionary
contribution plan as defined in the Internal Revenue Code, Section
401(a)(27). The plan covers substantially all of the Company's
full-time employees. The Company's contributions are made at the
discretion of the Board of Directors for any plan year. For the plan
years ended December 31, 1996, 1995, and 1994, the Company matched up
to 50% of a participant's contribution of up to a maximum of 6% of the
participant's compensation, depending on the business unit to which
the participant was assigned. The Company's matching contributions to
this plan were $1,767,992, $1,039,829, and $1,409,709 for the years
ended March 31, 1997, 1996, and 1995, respectively. The Company's
matching contributions to this plan related to GSS were $37,119 and
$62,232, for the years ended March 31, 1996 and 1995, respectively.
One of the investment options available under the Company's Savings
and Investment Plan is the purchase of the Company's stock. The Plan
owned 84,417; 72,692; and 40,162 shares of common stock of the Company
at March 31, 1997, 1996, and 1995, respectively.
The A&T Employee Stock Ownership Plan (ESOP) covers substantially all
full-time employees. Contributions to the plan are made at the
discretion of the Board of Directors for any plan year. The Company's
contributions to the plan amounted to $112,000, $100,000, and $80,900
for fiscal 1997, 1996, and 1995, respectively. The plan owned 380,879;
423,768; and 457,990 shares of common stock of the Company at March
31, 1997, 1996, and 1995, respectively, and all shares are allocated
to the participants of the ESOP and are included in outstanding shares
of common stock.
The Company's liability to employees for deferred compensation of
$3,033,271 and $2,601,020 as of March 31, 1997 and 1996, respectively,
is included in other long-term liabilities on the accompanying
consolidated balance sheets. The corresponding invested assets are
shown as deferred compensation plan investments.
<PAGE> 17
note 10 ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued vacation $ 4,077,079 $ 3,492,434
Accrued compensation and related taxes 3,168,086 2,381,537
Accrued benefits 1,356,712 938,367
Accrued taxes payable 81,929 --
Other 691,853 835,685
- --------------------------------------------------------------------------------------------------
$ 9,375,659 $ 7,648,023
- --------------------------------------------------------------------------------------------------
</TABLE>
note 11 COMMITMENTS AND CONTINGENCIES
The Company occupies certain office facilities and uses certain
equipment under lease agreements with terms that range from two to six
years. Many of the leases have renewal options with similar terms. All
of these agreements are accounted for as operating leases. Minimum
lease payments for which the Company is obligated are as follows (the
amounts are net of certain maintenance expenses, insurance, and
taxes):
<TABLE>
<CAPTION>
Years ending March 31:
- -------------------------------------------------------------------------------------------------
<S> <C>
1998 $ 5,519,609
1999 3,719,073
2000 1,943,994
2001 1,274,483
2002 699,786
- -------------------------------------------------------------------------------------------------
Total minimum lease payments $ 13,156,945
- -------------------------------------------------------------------------------------------------
</TABLE>
Lease expense amounted to approximately $5,137,461, $4,258,000, and $4,450,000
in fiscal 1997, 1996, and 1995, respectively.
The U.S. Government has the right to audit and make retroactive adjustments
under certain contracts. Audits through March 31, 1995 have been completed. In
the opinion of management, adjustments, if any, resulting from audits for the
years ended March 31, 1996 and 1997 will not have a material effect on the
Company's consolidated financial statements.
Under the terms of the Design Systems & Services, Inc. purchase agreement, the
Company is committed to make contingent payments up to $400,000 to the former
owner of the company. Contingent payments are based on 15% of revenue derived
from sales of a ship design software product made between the purchase date and
April 30, 1999. The Company made contingent payments to the former owner
totaling $42,727 and $30,935 during fiscal 1997 and fiscal 1996, respectively.
In fiscal 1995 and 1996, the Company received $200,000 under the terms of a
development agreement with a state-financed corporation, Connecticut
Innovations, Inc. (CII), to assist in funding the development of commercial
imaging processing products and services. Under the terms of the agreement, the
Company is required to remit quarterly royalty payments of up to 5% of the gross
sales of imaging products and services and 25% of the aggregate amount of
one-time license fees received through September 30, 1999. After September 1999,
royalty payments shall be made at the greater of the amount stated above or 2%
of the commercial sales of the Company's Engineering Technology Center Business
Unit, until cumulative royalty payments to CII reach $200,000. Royalty payments
will be deemed to be paid in full if at any time after October 1996, CII has
received a 25% annual compounded rate of return on all funds advanced to the
Company. Under the terms of the agreement the Company made royalty payments
totaling $16,253 in fiscal 1997 and $24,352 in fiscal 1996.
In fiscal 1997, the Company received $450,000 under the terms of a development
agreement with the Connecticut Department of Economic Development to fund
interactive multimedia development. Under the terms of the agreement, the
Company is required to pay royalties equal to 3% of gross sales of interactive
multimedia products initiated in Connecticut. Royalty payments will be deemed to
be paid in full when royalty payments are equal to a return on investment of 15%
and the Company has maintained a Connecticut presence. Under the terms of the
agreement, the Company made royalty payments totaling $94,695 in fiscal 1997.
In addition, government funding continues to be dependent on congressional
approval of program level funding and on contracting agency approval for the
Company's work. The extent to which backlog will be funded in the future cannot
be determined.
The Company may from time to time be involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
<PAGE> 18
note 12 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following summarizes quarterly results of operations for the years
ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Dollars in thousands except per share amounts
Quarter ended June 30 September 30 December 31 March 31 Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Revenues from continuing operations $ 32,488 $ 35,507 $ 35,653 $38,899 $ 142,547
Operating earnings from continuing operations 1,497 1,798 1,646 1,829 6,770
Net earnings from continuing operations 793 850 868 865 3,376
Earnings per share:
Continuing operations 0.33 0.35 0.36 0.36 1.40
Net earnings $ 0.33 $ 0.35 $ 0.36 $ 0.36 $ 1.40
Fiscal 1996
Revenues from continuing operations $ 31,335 $ 31,120 $ 29,353 $31,116 $ 122,924
Operating earnings from continuing operations 1,630 1,584 1,608 1,432 6,254
Net earnings from continuing operations 760 1,181 820 827 3,588
Loss from discontinued operations,
net of income tax benefit (46) (96) (53) -- (195)
Loss on the disposal of
discontinued operations,
net of income tax benefit -- (1,316) -- -- (1,316)
Net earnings (loss) 714 (231) 767 827 2,077
Earnings (loss) per share:
Continuing operations 0.31 0.47 0.33 0.33 1.44
Discontinued operations (0.02) (0.56) (0.02) -- (0.61)
Net earnings $ 0.29 $ (0.09) $ 0.31 $ 0.33 $0.83
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Analysis & Technology, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
Analysis & Technology, Inc. and Subsidiaries as of March 31, 1997 and
1996, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the years in the
three-year period ended March 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
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 Analysis & Technology, Inc. and Subsidiaries as of March 31, 1997
and 1996 and the results of their operations and their cash flows for
each of the years in the three-year period ended March 31, 1997 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
May 2, 1997
<PAGE> 19
COMPANY INFORMATION
Transfer Agent and Registrar
Chase Mellon Shareholder Services
111 Founders Plaza, Suite 1100
East Hartford, Connecticut 06108-3212
1-800-288-9541
Form 10-K
Copies of the Company's fiscal 1997 Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission, may be obtained at no charge by writing
to:
Elaine G. Beckwith
Investor and Media Relations Manager
Analysis & Technology, Inc.
Route 2, P.O. Box 220
North Stonington, CT 06359-0220
E-mail address: [email protected]
Auditors
KPMG Peat Marwick LLP, Hartford, Connecticut
Counsel
Cummings & Lockwood, Hartford, Connecticut
Annual Meeting
Analysis & Technology, Inc.'s annual meeting of shareholders will be held on
Tuesday, August 5, 1997 at 10:00 a.m. at The Mystic Hilton, 20 Coogan Boulevard,
Mystic, Connecticut.
Office Locations
ANALYSIS & TECHNOLOGY, INC.
CORPORATE OFFICE
Route 2, P.O. Box 220
North Stonington, CT
06359-0220
(860) 599-3910
CALIFORNIA
San Francisco
Monterey
San Diego
CONNECTICUT
North Stonington
New London
Mystic
FLORIDA
Orlando
Panama City
Panama City Beach
IDAHO
Bayview
MARYLAND
Arnold
Burtonsville
Patuxent River
Rockville
Stevensville
MICHIGAN
Wixom
MISSISSIPPI
Bay St. Louis
NEW JERSEY
Mt. Laurel
OKLAHOMA
Oklahoma City
PENNSYLVANIA
Pittsburgh
RHODE ISLAND
Newport
North Kingstown
SOUTH CAROLINA
North Charleston
VIRGINIA
Arlington
Chesapeake
Dahlgren
WASHINGTON, D.C.
AUSTRALIA
Fyshwick
CANADA
Victoria
Information in this fiscal year 1997 Annual Report to Shareholders may include
statements that are forward-looking as defined in the Private Securities
Litigation Reform Act of 1995. These statements involve risks and uncertainties
that could cause actual results to differ materially from those in the
forward-looking statements. Additional information and discussion concerning
factors that could cause actual results to differ materially from those in the
forward-looking statements is contained in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of this
Annual Report and in the Company's Form 10-K Annual Report.
Analysis & Technology, Inc. is an Affirmative Action/ Equal Opportunity
Employer.
<PAGE> 20
[PHOTO LARRY M. FOX]
LARRY M. FOX
Vice Chairman
Board of Directors
Larry M. Fox was elected vice chairman of Analysis & Technology's Board of
Directors on February 8, 1997. Larry has been a member of the Board for 19
years. He also serves as chairman of the Board's corporate governance committee.
On the same date, James B. Fox resigned as chairman of the board and Gary P.
Bennett was appointed to the additional post of chairman. J.B. Fox continues to
serve on the Board.
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
ANALYSIS & TECHNOLOGY, INC.
GARY P. BENNETT
Chairman, President and
Chief Executive Officer,
Analysis & Technology, Inc.
LARRY M. FOX
Vice Chairman
Analysis & Technology, Inc.
Programs Manager,
VTEL Corporation
JAMES B. FOX
Retired President,
Mobil Oil Credit Corporation
NELDA S. NARDONE
Retired Secretary,
Analysis & Technology, Inc.
THURMAN F. NAYLOR
Retired Chairman and
Chief Executive Officer,
Standard Thomson Corporation
DAVID M. NOLF
Executive Vice President,
Analysis & Technology, Inc.
DENNIS G. PUNCHES
Chairman/Director
Payco American Corporation
OFFICERS
- --------------------------------------------------------------------------------
ANALYSIS & TECHNOLOGY, INC.
GARY P. BENNETT
Chairman, President and
Chief Executive Officer
DAVID M. NOLF
Executive Vice President,
Chief Financial and
Administrative Officer,
Secretary
JAY W. RYERSON
Executive Vice President,
Chief Operating Officer
ROBERT M. GORMAN
Senior Vice President
STEPHEN E. JOHNSTON
Senior Vice President,
Human Resources
JAMES R. LAVOIE
Senior Vice President
JOSEPH M. MARINO
Senior Vice President
RICHARD P. MITCHELL
Senior Vice President
GERALD SNYDER
Senior Vice President,
Planning
V. LEHMAN WOODS
Senior Vice President,
Contracts
RICHARD C. CHAPMAN
Vice President
DOUGLAS L. CLARK
Vice President
MARK A. CLIFTON
Vice President
KATHRYN M. CONLON
Vice President
DANIEL R. CONWAY
Vice President
ANTHONY L. D'AMBROSIO
Vice President
RUSSELL J. DESIMONE
Vice President
JOSEPH DRAGO III
Vice President
JOHANN D. DRETCHEN
Vice President
LARRY FREEMAN
Vice President
DAVID C. GHEN
Vice President
SCOTT A. PRICE
Vice President
ROBERT F. URSO
Vice President
SUSAN C. VARNADOE
Vice President
NANCY S. HOBERT
Assistant Secretary
SUBSIDIARY OFFICERS
- --------------------------------------------------------------------------------
APPLIED SCIENCE ASSOCIATES, INC. (ASA)
SUSAN C. VARNADOE
President
LINDA M. EDWARDS
Vice President,
Chief Financial Officer
DAVID M. NOLF
Secretary
GARY M. BENEDETTI
Vice President
JOHN G. DRUGO
Vice President
JOHN T. MCCOY
Vice President
CHRISTINA MEINIG
Vice President
INTEGRATED PERFORMANCE DECISIONS, INC. (IPD)
JAMES R. LAVOIE
President
DAVID M. NOLF
Secretary
ELEANOR S. HOLMES
Vice President
DENNIS J. KELLY, JR.
Vice President
JAMES A. MCNITT
Vice President
ANALYSIS & TECHNOLOGY AUSTRALIA
PTY LIMITED
PAUL A. FOTHERGILL
Managing Director,
Secretary
A & T INTERNATIONAL CORPORATION (ATIC)
GARY P. BENNETT
Chairman, President and
Chief Executive Officer
V. LEHMAN WOODS
Executive Vice President,
Chief Financial Officer
DAVID M. NOLF
Secretary
WILLIAM A. REED
Vice President
JOINT VENTURE
- --------------------------------------------------------------------------------
AUTOMATION SOFTWARE, INCORPORATED (ASI)
BRYN EDWARDS
President and
Chief Executive Officer
STEPHEN E. LOGEE
Vice President
THOMAS KUNEMAN
Secretary and
Chief Financial Officer
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF ANALYSIS & TECHNOLOGY, INC.
<TABLE>
<CAPTION>
NAMES UNDER WHICH JURISDICTION OF
NAME DOING BUSINESS INCORPORATION
- ---- -------------- -------------
<S> <C> <C>
Analysis & Technology
Australia Pty Limited ----- Australia
Analysis & Technology
International Corporation ----- Delaware
Integrated Performance Decisions, Inc. ----- Delaware
Interactive Media Corp. ----- Delaware
Numerical Decisions Group, Inc. ----- Canada
JOINT VENTURES WITH ANALYSIS & TECHNOLOGY, INC.
Automation Software Incorporated ----- Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Analysis & Technology, Inc.
We consent to incorporation by reference in the registration statements (Nos.
333-05267, 333-04265, 33-86666, 33-86576, 33-59396, 33-52582, 33-37710,
33-34004, 33-31829, 33-25074, 33-17313, and 33-09067) on Form S-8 of Analysis &
Technology, Inc. of our report dated May 2, 1997, relating to the consolidated
balance sheets of Analysis & Technology, Inc. and subsidiaries as of March 31,
1997 and 1996, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-year
period ended March 31, 1997, which report appears in the March 31, 1997 annual
report on Form 10-K of Analysis & Technology, Inc.
In addition, we consent to incorporation by reference in the registration
statement (Nos. 333-05267, 333-04265, 33-86666, 33-86576, 33-59396, 33-52582,
33-37710, 33-34004, 33-31829, 33-25074, 33-17313, and 33-09067) on Form S-8 of
Analysis and Technology, Inc. of our report dated May 8, 1997, relating to the
statements of net assets available for plan benefits of the Analysis &
Technology, Inc. Savings and Investment Plan as of December 31, 1996 and 1995,
and the related statements of changes in net assets available for plan benefits
for the years then ended, and the related supplementary schedules, which report
appears in the December 31, 1996 annual report on Form 11-K of the Analysis &
Technology, Inc. Savings and Investment Plan.
KPMG Peat Marwick LLP
Hartford, Connecticut
June 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,977
<SECURITIES> 0
<RECEIVABLES> 24,693
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,869
<PP&E> 33,119
<DEPRECIATION> 19,155
<TOTAL-ASSETS> 57,813
<CURRENT-LIABILITIES> 12,291
<BONDS> 0
0
0
<COMMON> 287
<OTHER-SE> 39,702
<TOTAL-LIABILITY-AND-EQUITY> 57,813
<SALES> 0
<TOTAL-REVENUES> 142,547
<CGS> 0
<TOTAL-COSTS> 135,777
<OTHER-EXPENSES> 638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319
<INCOME-PRETAX> 5,813
<INCOME-TAX> 2,437
<INCOME-CONTINUING> 3,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,376
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>
