UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the fiscal year ended December 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1394.
For the transition period from _____________ to _____________
Commission file number 1-6035
DELFIN SYSTEMS 401(k) PLAN
THE TITAN CORPORATION
3033 Science Park Road
San Diego, CA 92121-1199
(Name and address of principal executive
office of issuer of securities)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: June 27, 2000
Deflin Systems 401(k) Plan
By /s/ Eric M. DeMarco
Eric M. DeMarco
-------------------------
Executive Vice President
Chief Financial Officer of
The Titan Corporation
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DELFIN SYSTEMS
401(K) PLAN
Index to Financial Statements and Supplemental Schedule
<S> <C>
Page
Report of Independent Public Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 1999 and 1998 2
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 1999 3
Notes to Financial Statements 4-7
Supplemental Schedule:
I Schedule of Assets Held for Investment Purposes as of December 31, 1999 8
Note: All other schedules have been omitted as they are not applicable or are not required.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustee and Plan Administrator of The Delfin Systems 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of THE DELFIN SYSTEMS 401(K) PLAN as of December 31, 1999 and 1998, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the Plan's management. Our responsibility is to
express an opinion on the financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
San Diego, California
June 27, 2000
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DELFIN SYSTEMS
401(K) PLAN
Statements of Net Assets Available for Benefits - December 31, 1999 and 1998
1999 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Investments (See Note 3) $18,213,592 $12,850,115
Receivables:
Employer contributions 51,791 361,533
Participant contributions 99,329 78,293
Participant loan interest 3,160 2,346
Dividend 3,741 2,638
----------------- -----------------
Total receivables 158,021 444,810
----------------- -----------------
Net assets available for benefits $18,371,613 $13,294,925
================= =================
The accompanying notes are an integral part of these financial statements.
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DELFIN SYSTEMS
401(K) PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1999
ADDITIONS:
<S> <C>
Investment income:
Dividends $ 418,921
Interest 31,987
Net realized gain on sale of investments (See Note 3) 2,288,370
Net unrealized appreciation in fair value of investments 1,480,170
-----------------
4,219,448
Contributions:
Employer 555,468
Participant 1,381,259
Rollover 107,630
-----------------
2,044,357
-----------------
Total additions 6,263,805
-----------------
DEDUCTIONS:
Deductions from net assets attributed to:
Benefits paid to participants 1,185,897
Administrative expenses 1,220
-----------------
Total deductions 1,187,117
-----------------
Net increase 5,076,688
Net assets available for benefits:
Beginning of year 13,294,925
-----------------
End of year $18,371,613
=================
The accompanying notes are an integral part of this financial statement.
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<PAGE>
DELFIN SYSTEMS
401(K) PLAN
Notes to Financial Statements
As of December 31, 1999 and 1998, and for the Year Ended December 31, 1999
1. Description of the Plan
The following description of the Delfin Systems 401(k) Plan (the
"Plan") provides only general information. Participants should refer to
the Plan Document for a more complete description of the Plan's
provisions.
General
The Delfin Systems 401(k) Plan is a defined contribution plan covering
all full-time eligible employees who are age 21 years or older.
Employees become eligible to participate in the Plan on the first day
of the Plan's fiscal quarter (January 1, April 1, July 1 and October 1)
after commencement of employment within the Company. The Plan was
established by Delfin Systems, Inc. (the "Company" or "Delfin"), a
wholly-owned subsidiary of The Titan Corporation ("Titan") on October
1, 1985, and amended as of January 1, 1992, and again on January 1,
1999. The Plan is subject to the Employee Retirement Income Security
Act of 1974 ("ERISA").
The Charles Schwab Trust Company (the "Trustee") was designated as the
trustee and recordkeeper, who is responsible for the administration of
the trust fund under the terms of a trust agreement, of the Plan
throughout 1999 and 1998.
Contributions
Each year, participants may contribute up to 15 percent of pretax
annual compensation, as defined in the Plan, limited by the maximum
dollar amount established by the IRS. Participants may also contribute
amounts representing distributions from other qualified defined benefit
or defined contribution plans ("rollovers"). Participants direct the
investment of their contributions into the various investment options
offered by the Plan. The Company may, at its discretion, match employee
contributions at a uniform percentage of the amount that each
participant contributes to the Plan. Participants may elect in which
funds to invest 50% of the employer matching contribution. The
remaining 50% of the employer contribution is mandatorily invested in
the Titan Common Stock Fund. Contributions are subject to certain
limitations. Contributions are accrued in the period in which they are
deducted from the compensation of participants in accordance with
salary deferral agreements.
Participant Accounts
Each participant's account is credited with the participant's
contributions and allocations of (a) the Company's contribution and (b)
Plan earnings, and charged with an allocation of Plan expenses.
Allocations are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
Vesting
Participants are vested immediately in their contributions plus actual
earnings thereon. Vesting in Company matching contributions is based
upon years of continuous service. All employer matching and
discretionary contributions vest in increments over the participant's
first five years of employment, after which full vesting occurs.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up
to a maximum of $50,000, or 50 percent of their vested account balance,
whichever is less. The loans are secured by the balance in the
participant's account and bear interest at the prime rate plus 1%. The
balance of loans outstanding was $285,888 and $338,934 at December 31,
1999 and 1998, respectively.
Payment of Benefits
Upon termination of service due to death, determination of a disability
as defined, or retirement, as well as termination of the Plan, a
participant's account balance will be distributed as specified by the
participant within the provisions of the Plan agreement. For
termination of service for other reasons, a participant may receive the
value of the vested interest in his or her account as a lump-sum
distribution. Forfeitures are first used to pay Plan expenses, any
remaining forfeitures then reduce the Company's matching contributions.
Administrative Expenses
Although it is not required to do so, the Company has borne expenses
associated with administering the Plan, except for those fees related
to participant loans and services rendered by Charles Schwab.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements are reported on the accrual basis of
accounting and investments are reflected at fair value. Plan assets are
invested with the Trustee, who determines fair values based upon quoted
market prices, except as indicated under Investment Valuation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan's management to make
estimates and assumptions that affect the reported amounts of net
assets available for benefits and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of changes in net assets available for benefits during the
reporting periods. Actual results could differ from those estimates.
Investment Valuation
The Plan's investments are stated at fair value. Quoted market prices
are used to value investments. Shares of mutual funds are valued at the
net asset value of shares held by the Plan at year end. Participant
loans are valued at their outstanding balances, which approximate fair
value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
3. Investments
The Plan's investments were held by the Charles Schwab Trust Company,
the trustee, during 1999 and 1998. The following investments represent
5 percent or more of the Plan's net assets at December 31, 1999 and
1998:
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Description of Investment 1999 1998
----------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Managers' Special Equity Fund $1,663,633 $ 670,417
Benham Income and Growth Fund 4,094,190 3,871,474
Invesco Equity Income Fund 1,671,487 1,542,479
Schwab Asset Director-Balanced Fund 1,207,493 804,630
Schwab S&P 500 Fund 4,659,937 3,831,099
Schwab Stable Value Fund 900,878 888,894
Scudder International Stock Fund 1,020,408 442,117
*Titan Common Stock Fund 2,118,038 -
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*Non-Participant Directed
For the year ended December 31, 1999, the Plan's net unrealized
appreciation in fair value of investments totaled $1,480,170, related
to the appreciation and value of the Titan Common Stock Fund. For the
year ended December 31, 1999, the Plan's realized gains on sale of
investments totaled $ 2,288,370 as follows:
Equity Investments $2,267,962
Titan Common Stock 20,408
---------------
$2,288,370
===============
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4. Non-participant Directed Investments
Effective January 1, 1999, 50% of all employer matching contributions
were invested in the Titan Common Stock Fund. The following is a
schedule listing non-participant directed investments:
December 31,
--------------------------------
1999 1998
--------------- -------------
Net Assets:
Titan Common Stock Fund $2,118,038 $ -
--------------- -------------
$2,118,038 $ -
=============== ==============
For the year ended
Changes in Net Assets: December 31, 1999
-----------------
Contributions $ 260,493
Transfers 371,962
Net appreciation 20,408
Net unrealized appreciation 1,480,170
Benefits paid to participants (14,995)
---------------
$2,118,038
===============
5. Investment Fund Activity
The following funds were the Plan participants' investment options as
of December 31, 1999 and 1998:
Name of Fund Type of Investments
Managers' Special Equity Fund Funds are invested in small companies
with average median market
capitalization of $1 billion or less
that sell for high prices relative to
their past earnings and book values.
Scudder International Stock Fund Funds are invested in stocks in
countries outside the United States.
Funds in this group tend to invest the
bulk of their assets in Japan and the
developed market of Europe. These funds
generally have limited exposure to
emerging markets in Latin America, the
Pacific and other regions of the world.
Benham Income and Growth Fund Funds are invested in high-yielding
sectors such as utilities, energy and
financial. These funds have median
market capitalization of greater than $5
billion.
Schwab Stable Value Fund Funds are invested in a diversified
portfolio consisting primarily of
insurance company guaranteed contracts,
bank deposit investment contracts,
arrangements commonly known as
"synthetic" investment contracts and
other investments which seek to maintain
principal value. The fund is managed by
Charles Schwab Trust Company, a
party-in-interest to the Plan.
Titan Common Stock Fund
(added in 1999) Fund consisting of The Titan Corporation
common stock, par value $.01 per share.
6. Related Party Transactions
The Charles Schwab Trust Company was the trustee of the Plan during
1999 and 1998. Fees paid to Charles Schwab amounted to $1,220 during
1999.
7. Plan Termination
The Company has the right under the Plan to discontinue its
contributions at any time and to amend or terminate the Plan subject to
provisions of ERISA. Should the Plan be amended, no amendment will
deprive any person of rights accrued prior to the enactment of the
amendment. In the event of Plan termination, participants would become
100 percent vested in their employer contributions.
8. Tax Status of Plan
The Internal Revenue Service has determined and informed the Company by
a letter dated December 31, 1997, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (the "Code"). Although the Plan has been amended since receiving
the determination letter, the Plan Administrator and the Plan's tax
counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Code.
9. Reconciliation to Form 5500
The following reconciles the Form 5500 to the Statement of Changes in
Net Assets Available for Benefits for the year ended December 31, 1999:
Line b(1)(G) Total Interest $ 32,081
Line b(1)(A) Interest bearing cash (94)
----------------
Interest per financial statements $31,987
================
Line b(4)(C) Net gain on sale of investments $20,408
Line b(6) Net investment gain from
common/collective trusts 46,147
Line b(10) Net investment gain 2,640,642
Line b(1)(A) Interest bearing cash 94
----------------
Total gain/appreciation per Form 5500 $2,707,291
================
Dividends $418,921
Net appreciation on gain of investments 2,288,370
----------------
Total gain/appreciation per
financial statements $2,707,291
================
10. Subsequent Event
On June 1, 2000 the Plan merged into The Titan Corporation Consolidated
Retirement Plan. All Plan assets were transferred as of June 1, 2000.
<PAGE>
SCHEDULE I
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DELFIN SYSTEMS 401(K) PLAN
(EIN 95-3110002, Plan 001)
Schedule of Assets Held for Investment Purposes
As of December 31, 1999
Identity of Issuer or Borrower Description of Investment Cost Market Value
------------------------------- ------------------------------------ ---------------- ---------------
<S> <C> <C> <C>
^Titan Common Stock Fund Corporate Common Stock $ 638,971 $ 2,118,039
Titan Stock Liquidity Fund Money Market Funds 583 583
Amcent: Benham GNMA Fund Registered Investment Company 613,799 591,054
Amcent: Benham Income & Growth Fund Registered Investment Company 2,941,495 4,094,190
Invesco Industrial Income Fund Registered Investment Company 1,605,736 1,671,487
*Schwab Managers Special Equity Fund Registered Investment Company 1,179,634 1,663,633
*Schwab Asset Directed Balance Fund Registered Investment Company 1,007,182 1,207,493
*Schwab S&P 500 Fund Registered Investment Company 3,041,547 4,659,938
Scudder International Stock Fund Registered Investment Company 798,376 1,020,408
*Schwab Stable Value Fund Common Collective Trust 824,784 900,879
Participant loans Interest rates ranging from
9.75% to 10.5% 285,888 285,888
--------------- -----------------
Total investments $12,937,995 $18,213,592
=============== =================
*Represents a party-in-interest.
^Non-participant directed investment.
The accompanying notes are an integral part of this schedule.
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INDEX TO EXHIBITS
Page
Exhibit A Consent of Independent Public Accountants................. 10
