<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 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 0-4161
ANALYSIS & TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Connecticut 95-579365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 2, North Stonington, Connecticut 06359
(Address of principal executive office)
(Zip Code)
(860) 599-3910
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of the close of business February 5, 1998, the registrant had
outstanding 3,604,325 shares of Common Stock.
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CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 5
PART II. OTHER INFORMATION REQUIRED IN REPORT
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 2. CHANGES IN SECURITIES 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 8
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTERS AND NINE-MONTH PERIODS ENDED DECEMBER 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 40,773 $ 35,653 $ 116,380 $ 103,648
Costs & expenses 38,466 34,007 110,782 98,707
--------- --------- --------- ---------
Operating earnings 2,307 1,646 5,598 4,941
--------- --------- --------- ---------
Other deductions (income):
Interest expense 105 129 208 303
Interest income (32) (2) (93) (62)
Gain on sale of joint venture -- -- (1,591) --
Equity in income of joint venture -- (101) (17) (123)
Other, net 337 194 753 533
--------- --------- --------- ---------
410 220 (740) 651
--------- --------- --------- ---------
Earnings before income taxes 1,897 1,426 6,338 4,290
Income taxes 826 558 3,267 1,780
--------- --------- --------- ---------
Net earnings $ 1,071 $ 868 $ 3,071 $ 2,510
========= ========= ========= =========
Basic earnings per common share $ 0.44 $ 0.37 $ 1.29 $ 1.07
========= ========= ========= =========
Diluted earnings per common
and common equivalent share $ 0.40 $ 0.36 $ 1.20 $ 1.03
========= ========= ========= =========
Weighted average shares and common
equivalent shares outstanding
Basic 2,378 2,334 2,339 2,340
Diluted 2,614 2,422 2,501 2,429
</TABLE>
See accompanying notes to the consolidated financial statements.
1
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ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, 1997 (UNAUDITED) MARCH 31, 1997
------ ----------------------------- --------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ -- $ 2,977
Contract receivables 30,056 24,693
Notes and other receivables 492 422
Prepaid expenses 1,258 777
--------------- ---------------
Total current assets 31,806 28,869
Property, buildings, and equipment, net 14,464 13,964
Other assets:
Goodwill, net of accumulated amortization 14,840 9,464
Product development costs, net
of accumulated amortization 333 564
Deposits and other 485 410
Deferred Compensation Plan investments 3,361 3,033
Investment in joint venture -- 1,392
Deferred income taxes 71 117
--------------- ---------------
19,090 14,980
--------------- ---------------
TOTAL ASSETS $ 65,360 $ 57,813
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 325 $ 313
Accounts payable 2,739 1,246
Accrued expenses 8,808 9,376
Dividends payable -- 693
Deferred income taxes 1,024 663
--------------- ---------------
Total current liabilities 12,896 12,291
Long-term debt, excluding current installments 5,465 2,490
Other long-term liabilities 3,361 3,043
--------------- ---------------
TOTAL LIABILITIES 21,722 17,824
--------------- ---------------
Shareholders' equity:
Common stock, $.125 stated value
Authorized 7,500,000 shares; issued and
outstanding, 2,387,269 shares at
December 31, 1997 and 2,295,787 at
March 31, 1997 298 287
Additional paid-in capital 8,577 8,010
Retained earnings 34,763 31,692
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 43,638 39,989
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 65,360 $ 57,813
=============== ===============
</TABLE>
See accompanying notes to the consolidated financial statements.
2
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ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE-MONTH PERIODS ENDED DECEMBER 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 3,071 $ 2,510
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET
CASH PROVIDED BY CONTINUING OPERATIONS:
Gain on sale of joint venture (1,591) --
Equity in income of joint venture (17) (123)
New product development write-off 281 --
Depreciation and amortization of fixed assets 1,867 1,904
Amortization of goodwill 492 404
Amortization of product development costs 108 81
Provision for deferred income taxes 87 429
Loss on sale of equipment 117 200
Decrease (increase) in:
Contract receivables (2,900) (623)
Notes and other receivables (50) 140
Prepaid expenses (28) (386)
Other assets (376) (372)
Increase (decrease) in:
Accounts payable and accrued expenses (178) (1,677)
Other long-term liabilities 318 (571)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,201 1,916
---------- ----------
INVESTING ACTIVITIES:
Additions to property, buildings, and equipment (2,126) (1,719)
Product development costs (107) (204)
Proceeds from the sale of equipment 9 18
Proceeds from sale of joint venture 3,000 --
Acquisition of business units (net of cash acquired) (7,826) (4,883)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (7,050) (6,788)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 3,220 3,162
Repayments of long-term debt (233) (199)
Proceeds from sale of common stock 1,261 191
Repurchase of common stock (683) (1,802)
Dividends paid (693) (659)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,872 693
---------- ----------
Decrease in cash and cash equivalents (2,977) (4,179)
CASH AND CASH EQUIVALENTS:
Beginning of period 2,977 4,179
---------- ----------
End of period $ -- $ --
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
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ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. The information furnished in the accompanying unaudited Consolidated
Statements of Operations, Consolidated Balance Sheets, and Consolidated
Statements of Cash Flows reflect all adjustments (consisting only of items
of a normal recurring nature) which are, in the opinion of management,
necessary for a fair statement of the Company's results of operations and
financial position for the interim periods. These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes included in the Company's Annual Report for the year
ended March 31, 1997.
2. Net earnings available to common shareholders is calculated by taking
overall net earnings and deducting the income attributable to the potential
exercise of stock options held by employees of the Company's subsidiary,
Integrated Performance Decisions. Basic earnings per share is net earnings
available to common shareholders divided by the weighted average number of
common shares outstanding. Diluted earnings per share is net earnings
available to common shareholders divided by the weighted average number of
common shares outstanding plus common stock equivalents. Common stock
equivalents are the number of shares that would be issued if A&T stock
options were converted to common shares at average market prices.
3. On July 18, 1997, the Company sold its interest in Automation Software,
Incorporated to its joint venture partner, Brown & Sharpe Manufacturing Co.
(NYSE:BNS) of Kingston, Rhode Island for $3 million. Net cash proceeds from
the sale were $1.8 million, and as a result of the company's investment of
approximately $1.4 million in the joint venture as of the date of the sale,
a net after-tax gain of $405 thousand was recognized in the second quarter
ended September 30, 1997.
4. On October 24, 1997, the Company entered into an Asset Purchase Agreement
whereby it acquired certain assets of Command Control Inc. ("CCI") related
to its command, control, communications, computers and intelligence
("C(4)I") service business.
5. On November 14, 1997, the Company entered into a Stock Purchase Agreement
whereby it acquired all of the stock of UP, Inc. ("UP") of Herndon,
Virginia, for $5.3 million in cash plus related expenses. The purchase
agreement provides for potential contingent payments totaling an estimated
$3.8 million through September 30, 1999. UP is a key provider of
technology-based interactive multimedia training to clients in
telecommunications, financial services and other industries.
Recent (1997) Accounting Pronouncements by the Financial Accounting Standard
Board
SFAS No. 130, "Reporting Comprehensive Income." The statement is effective for
fiscal years beginning after December 15, 1997, and will be adopted by the
Company in fiscal year 1999, which begins April 1, 1998.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The statement is effective for periods beginning after December
15, 1997, and will be adopted by the Company in fiscal year 1999.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
A summary of comparative results for the quarter and nine-month periods
ended December 31, 1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, Percent
1997 1996 Change
-------- -------- ------
<S> <C> <C> <C>
Revenue $ 40,773 $ 35,653 14.4
Operating earnings 2,307 1,646 40.2
Earnings before income taxes 1,897 1,426 33.0
Net earnings 1,071 868 23.4
Basic earnings per common share 0.44 0.37 18.9
Diluted earnings per common and
common equivalent share 0.40 0.36 11.1
Weighted average shares and common
equivalent shares outstanding:
Basic 2,378 2,334 1.9
Diluted 2,614 2,422 7.9
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, Percent
1997 1996 Change
--------- --------- -------
<S> <C> <C> <C>
Revenue $ 116,380 $ 103,648 12.3
Operating earnings 5,598 4,941 13.3
Earnings before income taxes 6,338 4,290 47.7
Net earnings 3,071 2,510 22.4
Basic earnings per common share 1.29 1.07 20.6
Diluted earnings per common and
common equivalent share 1.20 1.03 16.5
Weighted average shares and common
equivalent shares outstanding:
Basic 2,339 2,340 --
Diluted 2,501 2,429 3.0
</TABLE>
Revenue increased 14.4% to $40.8 million for the three months ended
December 31, 1997 from $35.7 million for the three months ended December 31,
1996. For the nine-month period ended December 31, 1997 (the first nine months
of fiscal 1998), revenue increased 12.3% to $116.4 million compared with $103.6
million in the prior year period. The revenue increase is attributable to
continued growth in both the Company's core defense business and in its
Interactive Media technology-based training business.
For the Company's core defense business, the prior year acquisition of
Vector Research Company, Inc. (Vector Research) on July 26, 1996, contributed
$8.4 million to the nine-month revenue increase. In addition, the purchase of
Command Control, Inc. (CCI) on October 24, 1997, an Army command, control,
communications, computers and intelligence (C(4)I) services company and the
acquisition of UP, Inc. (UP) on November 14, 1997, a commercial technology-based
training company, added $1.7 million to revenue for the quarter. For the quarter
and nine-month periods, the Company's commercial training revenue grew 43% and
31% respectively.
Contractual backlog at December 31, 1997 was $494 million, compared to $481
million as of March 31, 1997 and $528 million reported for the same period last
year. Backlog is above the Company's benchmark of 2.5 times current revenue.
5
<PAGE> 8
For the quarter and nine-month period ended December 31, 1997, operating
earnings were $2.3 million and $5.6 million, respectively, compared with $1.6
million and $4.9 million in the comparable quarter and nine-month prior year
periods. The operating earnings increase was due to the revenue increase and to
increased operating margins in both the Company's core defense business and in
its technology-based training subsidiary.
Operating margin was 5.7% for the current quarter compared with 4.6% for
the prior year quarter. The increase in operating margin was due in part to
higher fees earned on projects in the Company's core defense business and in its
technology-based training subsidiary and in part to increased revenue in the
training subsidiary which more fully covered fixed management and sales
expenses. Operating margins for the nine-month period ended December 31, 1997
and December 31, 1996 were 4.8%. For the current nine-month period, operating
margin was negatively affected by software charges totaling $530 thousand which
were recorded in the second quarter. Without this charge, operating margin for
the nine-month period would have been 5.3%.
For the quarter and nine-month period, total other expenses were affected
by the sale of the Company's interest in Automation Software, Incorporated (ASI)
to its joint venture partner. For the current nine-month period, the sale
resulted in a pre-tax gain of $1.6 million. In addition, the proceeds from the
sale decreased interest expense for the current quarter and nine-month period.
Total other expenses as a percentage of revenue were 1.0% for the current
quarter compared to 0.6% for the prior year quarter. Total other expenses were
lower in the prior year quarter due in part to income of $101 thousand from ASI.
Other net expense increased in the current quarter due in part to the
amortization of goodwill associated with the purchase of UP and CCI.
Earnings before income taxes increased 33.0% to $1.9 million for the third
quarter of fiscal year 1998 from $1.4 million in the third quarter of fiscal
1997. The increase for the quarter was largely due to higher revenue and
improved margins. For the first nine months of fiscal 1998, earnings before
income taxes including the ASI gain and software charges, increased 47.7% to
$6.3 million from $4.3 million for the same period in the prior fiscal year.
The Company's effective tax rate on earnings was 43.5% for the third
quarter and 51.5% for the first nine months of fiscal 1998 compared with 39.2%
and 41.5% for the third quarter and first nine months of fiscal 1997. The higher
effective tax rate in the current quarter was mainly due to an increase in
non-deductible amortization of goodwill associated with the UP acquisition. The
effective tax rate for the nine-month period ended December 31, 1997 was higher
due to the recognition of deferred taxes on undistributed earnings of the
Company's joint venture, ASI, as a result of the sale.
Net earnings for the quarter increased 23.4% to $1.1 million from $868
thousand for the prior year quarter. For the nine-month period, net earnings
increased 22.4% to $3.1 million from $2.5 million in the prior year. The revenue
increase and the operating margin increase both contributed to the net earnings
increase. The net effect of the sale of the Company's interest in its joint
venture and the software charges noted above was an after-tax gain of $87
thousand which is reflected in the current year nine-month results.
Basic earnings per share for the quarter increased 18.9% to $0.44 from
$0.37 in the prior year third quarter. Diluted earnings per share were $0.40
compared to $0.36 in the prior year third quarter. For the nine-month period,
basic earnings per share increased 20.6% to $1.29 from $1.07 in the prior year.
On a diluted basis, nine-month earnings per share were $1.20 compared to $1.03
in the prior year.
The weighted average number of common shares used to compute basic earnings
per share for the third quarter ended December 31, 1997 increased to 2.4 million
compared with 2.3 million for the current nine-month period and 2.3 million for
the prior year quarter and nine-month periods. The increase in the quarter was
due to the exercise of stock options. The weighted average number of common and
common equivalent shares used to compute diluted earnings per share increased to
2.6 million and 2.5 million for the third quarter and nine-month period ended
December 31, 1997 compared with 2.4 million for the same periods in fiscal 1997.
The number of shares used to compute diluted earnings per share in the current
quarter and nine-month period increased due to an increase in the number of
stock options outstanding and a higher average stock price.
6
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LIQUIDITY & CAPITAL RESOURCES
For the nine-month period ended December 31, 1997, net cash provided by
operating activities totaled $1.2 million. Cash generated by net earnings after
consideration of non-cash charges for depreciation and amortization was offset
in part by the need for cash to fund an increase in contract receivables of $2.9
million.
Contract receivables totaled $30.1 million, $24.7 million and $28.0 million
as of December 31, 1997, March 31, 1997, and December 31, 1996 and represented
46%, 43%, and 47% of total assets at each of those dates. The average period for
payment to the Company was 66 days at December 31, 1997, 58 days at March 31,
1997 and 72 days at December 31, 1996. The increase in collection period between
March and December 1997 was the result of an increase in unbilled receivables
under the Company's firm fixed price contracts that are billable only upon
completion of work.
Net cash used by investing activities for the nine months ended December
31, 1997 was $7.1 million. Cash provided from the sale of ASI of $3.0 million
was more than offset by facility expenditures and by the expenditure of $7.8
million for the Company's acquisitions of UP and CCI. Payments for the
acquisitions were made from existing cash and funds available under the
Company's revolving credit agreement.
Net cash provided by financing activities for the first nine months of
fiscal 1998 totaled $2.9 million. The primary sources of cash from financing
activities were from borrowing under the Company's revolving credit agreement
and from the exercise of stock options. The primary uses of cash from financing
activities were for the payment of dividends and the repurchase of the Company's
common shares. On May 30, 1997, the Company announced it had expanded its share
repurchase program. The Company's Board of Directors authorized the repurchase
of an additional 300,000 shares or a total of up to 500,000 shares in amounts
and at times and prices to be determined by the Company's management. Since the
program was initiated in March 1996, the Company has repurchased 217,000 shares.
Since March 31, 1997, the Company has repurchased 41,300 shares under this
repurchase program at market prices on the date of purchase. There are
approximately 2.4 million shares outstanding as of December 31, 1997.
Any capital needs not satisfied by cash generated from operations were, and
in the future will be, met with money borrowed by the Company under its
revolving credit agreement. The total funds available to the Company under this
credit agreement at December 31, 1997 were $20.0 million. The amounts borrowed
under this agreement were $3.2 million as of December 31, 1997 and December 31,
1996. There were no borrowings under this agreement as of March 31, 1997.
The Company has no definitive capital commitments as of December 31, 1997.
However, the Company will continue to seek strategic acquisitions that fit its
acquisition criteria.
It is anticipated that the Company's funds generated from operations and
borrowings under its revolving credit agreement will be sufficient to meet its
normal working capital requirements for the foreseeable future.
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.
7
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PART II. OTHER INFORMATION REQUIRED IN REPORT
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 2. CHANGES IN SECURITIES
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
4 FOURTH AMENDMENT TO REVOLVING CREDIT AND
TERM LOAN AGREEMENT AND REVOLVING CREDIT
NOTE DATED DECEMBER 17, 1997
11 EARNINGS PER SHARE CALCULATION
27 FINANCIAL DATA SCHEDULE
b. REPORTS ON FORM 8-K
A REPORT ON FORM 8-K, DATED NOVEMBER 25, 1997 REPORTING
ITEM 2 - ACQUISITION OF ASSETS AND ITEM 7 - FINANCIAL
STATEMENTS AND EXHIBITS AS FILED BY THE REGISTRANT ON
NOVEMBER 25, 1997.
A REPORT ON FORM 8-K, DATED DECEMBER 30, 1997 REPORTING
ITEM 5 - OTHER EVENTS AND ITEM 7 - FINANCIAL STATEMENTS
AND EXHIBITS AS FILED BY THE REGISTRANT ON DECEMBER 30,
1997.
8
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANALYSIS & TECHNOLOGY, INC.
Date: February 12, 1998 /s/Gary P. Bennett
Gary P. Bennett
President and CEO
Date: February 12, 1998 /s/David M. Nolf
David M. Nolf
Executive Vice President
9
<PAGE> 12
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS
4 FOURTH AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
AND REVOLVING CREDIT NOTE DATED DECEMBER 17, 1997
11 EARNINGS PER SHARE CALCULATION
27 FINANCIAL DATA SCHEDULE
i
<PAGE> 1
EXHIBIT 4
FOURTH AMENDMENT TO REVOLVING
CREDIT AND TERM LOAN AGREEMENT AND REVOLVING CREDIT NOTE
THIS AMENDMENT, dated as of December ___, 1997 (the "Amendment") to the
Amended and Restated Revolving Credit and Term Loan Agreement and the Revolving
Credit Note, both dated as of November 15, 1993 and amended pursuant to a
certain First Amendment to Revolving Credit and Term Loan Agreement and
Revolving Credit Note dated as of December 9, 1994, a Second Amendment to
Revolving Credit and Term Loan Agreement dated as of November 29, 1995 and a
Third Amendment to Revolving Credit and Term Loan Agreement dated as of November
13, 1996 (as so amended, the "Agreement" and the "Note" respectively), is
entered into by and between ANALYSIS & TECHNOLOGY, INC., a Connecticut
corporation (the "Company") and FLEET NATIONAL BANK, formerly known as Shawmut
Bank Connecticut, National Association, a national banking association (the
"Bank").
W I T N E S S E T H
WHEREAS, pursuant to the Agreement, the Bank has made certain advances
to the Company and the Company has made certain covenants to the Bank; and
WHEREAS, the Bank and the Company now desire to amend the Agreement to
provide for, among other things, a change in the net worth covenant and an
extension of the Termination Date.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged
<PAGE> 2
2
and pursuant to the requirements of the Agreement, the parties hereto hereby
agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings specified in, or by reference in, the
Agreement.
Section 2. Amendment to the Agreement.
(a) Section 1.1 of the Agreement is amended and restated to read
as follows:
Section 1.1 Amounts. Subject to the terms and conditions
contained in this Agreement, the Bank agrees to make loans (the
"Revolving Credit Loans" and individually, a "Revolving Credit Loan")
to the Company from time to time prior to October 31, 1999 (the
"Termination Date") in principal amounts not exceeding at any one time
outstanding the sum of $20,000,000 (such amount, as it may be reduced
from time to time as hereinafter provided, is herein called the
"Commitment") less the face amount of all Letters of Credit issued for
the account of the Company or any other party guaranteed by the Company
(the "Letters of Credit" and each individually a "Letter of Credit").
Each Revolving Credit Loan shall be either a Domestic Loan, a CD Loan,
or a Eurodollar Loan as the Company may elect subject to the provisions
of this Agreement. Notwithstanding anything herein to the contrary,
during the term of this Agreement, the sum of (i) the aggregate
outstanding principal amount of Revolving Credit Loans hereunder plus
(ii) the aggregate available face amount of all Letters of Credit,
shall not at any time exceed the Commitment.
(b) Section 1.3 of the Agreement is amended to change the maturity date
of the Term Loan from November 1, 2003 to November 1, 2004, by substituting the
reference to "November 1, 2003" with "November 1, 2004."
<PAGE> 3
3
(c) Section 7.15 of the Agreement is amended and restated to read as
follows:
Section 7.15. Tangible Net Worth. Permit consolidated Tangible
Net Worth to be less than $25,000,000 at any time as determined in
accordance with generally accepted accounting principles applied on a
consistent basis with that of the period ending March 31, 1997.
(d) Exhibits C, D, E and F to the Agreement are each amended and
restated to read in the form of Exhibits C, D, E and F respectively, attached
hereto and made a part hereof as Exhibits C, D, E and F.
Section 3. Conditions and Effectiveness. This Amendment shall become
effective when, and only when, the Bank and the Company have received
counterparts of this Amendment executed by the Bank and by the Company.
Section 4. Reference to and Effect on the Agreement.
(a) Upon the effectiveness of Section 2 hereof, on and after the date
hereof, (i) each reference in the Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import, and each reference to the Agreement
in the Revolving Credit Note and any other document relating to the Agreement,
shall mean and be in reference to the Agreement as amended hereby and (ii) each
reference in the Revolving Credit Note to "this Note, " "hereunder," "hereof,"
"herein," or words of similar import, and each reference in the Agreement to
"the Note" or "the Revolving Credit Note" shall mean and be in reference to the
Revolving Credit Note as amended hereby.
<PAGE> 4
4
(b) Except as specifically amended herein, the Agreement and the Note
shall remain in full force and effect and are hereby ratified and confirmed.
Section 5. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
Section 6. Execution and Counterparts. This Amendment may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which when taken together shall
constitute one in the same instrument.
Section 7. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Connecticut.
<PAGE> 5
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
ANALYSIS & TECHNOLOGY, INC.
By:
---------------------------------------
Name: David M. Nolf
Its: Executive Vice President
Chief Financial and
Administrative Officer
FLEET NATIONAL BANK
By:
---------------------------------------
Name: Matthew E. Hummel
Its: Vice President
<PAGE> 6
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBIT C
PERMITTED LIENS
I. REAL ESTATE
<TABLE>
<CAPTION>
Initial Present Balance
Mortgagor Description Amount*/ 9/30/97
<S> <C> <C>
Fleet Bank Mortgage loan dated May 30, 1986, as $1,345,000 $560,870
amended, secured by a mortgage on land and
buildings at Technology Park, North
Stonington, Connecticut.
Chelsea Groton Mortgage loan dated March 8, 1978, $522,800 $249,814
Savings Bank secured by a mortgage on land and
buildings at Technology Park, North
Stonington, Connecticut.
Fleet Bank Mortgage loan dated November 25, 1987, $2,300,000 $1,649,472
secured by a mortgage on land and buildings at
238-258 Bank Street, New London, Connecticut.
Connecticut Innovations, Rights in technology under an agreement $300,000 $200,000
Inc. (CII) dated October 19, 1994, to secure
royalties payable in conjunction with
grant for image processing business
development.
Connecticut Department Second mortgage on land and buildings at $450,000 $450,000
of Economic Development 238-258 Bank Street, New London,
(DED) Connecticut, to secure royalties payable
in connection with a grant for development of
IMM Connecticut based multimedia commercial
business.
</TABLE>
*/ Initial amounts reflect amount borrowed or maximum amount of grant, as
applicable.
1
<PAGE> 7
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBIT C (CONTINUED)
PERMITTED LIENS
II. LEASES
Nothing contained in the Amended and Restated Revolving Credit and Term
Loan Agreement shall be construed to limit the ability of the Company to
enter into leases of either real or personal property, including so called
"financing leases" of personal property.
2
<PAGE> 8
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBIT D
PERMITTED INDEBTEDNESS
I. REAL ESTATE
<TABLE>
<CAPTION>
Initial Present Balance
Mortgagor Description Amount*/ 9/30/97
<S> <C> <C>
Fleet Bank Mortgage dated May 30, 1986, as amended, $1,345,000 $560,870
payable with interest at 7.97% with monthly
installments of $11,500 through September 1,
2001, secured by a mortgage on land and
buildings.
Chelsea Groton 9 1/4% mortgage note dated March 8, $522,800 $249,814
Savings Bank 1978, payable in monthly installments of
$4,477 including interest through February
2003, secured by a mortgage on land and
buildings.
Fleet Bank Mortgage note dated November 25, 1987, $2,300,000 $1,649,472
payable with interest at 6.98% in
monthly installments of $18,826 through
November 1, 2002, secured by a mortgage
on land and building at 238-258 Bank
Street, New London, Connecticut.
II. SUBSIDIARY INDEBTEDNESS
A. INTERACTIVE MEDIA CORP.
Small Business Administration Loan, with interest at 8.5%, due in monthly
installments of principal and interest of $4,923 through May 2001, secured
by an interest in the ASA headquarters
building. $500,000 $189,106
======== ========
</TABLE>
*/ Initial amounts reflect amount borrowed.
3
<PAGE> 9
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBIT D (CONTINUED)
PERMITTED INDEBTEDNESS
III. LEASES
Nothing contained in the Amended and Restated Revolving Credit and Term
Loan Agreement shall be construed to limit the ability of the Company to
enter into leases of either real or personal property, including so called
"financing leases" of personal property.
4
<PAGE> 10
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBIT E
PERMITTED LOAN GUARANTEE
I. INTERACTIVE MEDIA CORP.
<TABLE>
<S> <C>
Small Business Administration Loan, with interest at 8.5% , due in monthly
installments of principal and interest of $4,923 through
May 2001, secured by an interest in the ASA building. $500,000
========
</TABLE>
*/ Initial amounts reflect amount borrowed.
5
<PAGE> 11
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBIT F
PERMITTED INTER-COMPANY LOANS, ADVANCES AND INVESTMENTS
I. OUTSTANDING LOANS, ADVANCES AND INVESTMENTS AS OF 09/30/97
<TABLE>
<CAPTION>
Amount
Interactive Media Corp.
<S> <C>
Purchase investments (ASA, Inc.) $ 7,691,292
Other investment 6,470,863
------------
$ 14,162,155
A&T Australia
Capital investment $ 100,000
Other investment 290,409
------------
$ 390,409
A&T International
Capital investment $ 52,174
Other investment 56,143
------------
$ 108,317
Integrated Performance Decisions
Capital investment $ 500,000
Other investment (1,698,224)
------------
$ (1,198,224)
II. ADDITIONAL LOANS, ADVANCES, AND INVESTMENTS
AUTHORIZED FOR EXPENDITURE AFTER 09/30/97
Interactive Media Corp. $ 500,000
A&T International, Inc. 0
A&T Australia 0
Available for allocation by A&T among A&T subsidiaries $ 600,000
------------
$ 1,100,000
------------
Total $ 14,562,657
============
</TABLE>
Revision Date: December 15, 1997
6
<PAGE> 1
Exhibit 11
ANALYSIS & TECHNOLOGY, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
FOR THE QUARTERS AND NINE-MONTH PERIODS ENDED DECEMBER 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic:
Weighted average shares
outstanding 2,377,781 2,333,670 2,339,007 2,340,331
=========== =========== =========== ===========
Net earnings $ 1,070,795 $ 867,322 $ 3,071,054 $ 2,509,629
Net effect of earnings attributable
to subsidiary stock options (19,527) -- (62,874) --
----------- ----------- ----------- -----------
Net earnings available to
common shareholders $ 1,051,268 $ 867,322 $ 3,008,181 $ 2,509,629
=========== =========== =========== ===========
Earnings per common share $ 0.44 $ 0.37 $ 1.29 $ 1.07
=========== =========== =========== ===========
Diluted:
Weighted average shares
outstanding 2,377,781 2,333,670 2,339,007 2,340,331
Net effect of dilutive stock
options based on the treasury
stock method using the
average market price 236,205 88,438 161,683 88,601
----------- ----------- ----------- -----------
Total 2,613,986 2,422,108 2,500,690 2,428,932
=========== =========== =========== ===========
Net earnings $ 1,070,795 $ 867,322 $ 3,071,054 $ 2,509,629
Net effect of earnings attributable
to subsidiary stock options (19,527) -- (62,874) --
----------- ----------- ----------- -----------
Net earnings available to
common shareholders $ 1,051,268 $ 867,322 $ 3,008,181 $ 2,509,629
=========== =========== =========== ===========
Earnings per common and
common equivalent share $ 0.40 $ 0.36 $ 1.20 $ 1.03
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 30,056
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,806
<PP&E> 35,343
<DEPRECIATION> 20,879
<TOTAL-ASSETS> 65,360
<CURRENT-LIABILITIES> 12,896
<BONDS> 0
0
0
<COMMON> 298
<OTHER-SE> 43,340
<TOTAL-LIABILITY-AND-EQUITY> 43,638
<SALES> 0
<TOTAL-REVENUES> 116,380
<CGS> 0
<TOTAL-COSTS> 110,782
<OTHER-EXPENSES> (855)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115
<INCOME-PRETAX> 6,338
<INCOME-TAX> 3,267
<INCOME-CONTINUING> 3,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,071
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.20
</TABLE>
