SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000.
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 1-8502
Comptek Research, Inc.
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(Exact name of registrant as specified in its charter)
New York 16-0959023
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(State or other jurisdiction (I.R.S. Employee
of incorporation or organization) Identification No.)
2732 Transit Road, Buffalo, New York 14224-2523
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 677-4070
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check T whether the registrant (1) has filed all
reports required to be filed by Section 13 of 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
Class Outstanding at July 23, 2000
------------------------ -------------------------------
Common $.02 Par Value 6,277,028
COMPTEK RESEARCH, INC.
INDEX
Page
PART I. Financial Information Number
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
June 30, 2000, and March 31, 2000 3
Consolidated Condensed Statements of Income
Thirteen Weeks Ended June 30, 2000,
and July 2, 1999 4
Consolidated Condensed Statements of Cash Flows
Thirteen Weeks Ended June 30, 2000,
and July 2, 1999 5
Consolidated Statement of Changes in Shareholders'
EquityThirteen Weeks Ended June 30, 2000 6
Notes to the Consolidated Condensed
Financial Statements 7
Independent Accountants' Review Report 10
Item 2.Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
June 30, March 31,
2000 2000
------------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,367 $2,128
Receivables
43,052 37,866
Inventories
6,316 5,213
Other
3,596 5,373
------------- -----------
Total current assets 54,331 50,580
Equipment and leasehold improvements,
net of accumulated depreciation and 7,422 7,099
amortization of $11,313 at June 30,
2000, and $10,313 at March 31, 2000
Goodwill 39,882 40,337
Other assets 5,229 5,146
------------- -----------
Total assets $106,864 $103,162
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current installments on long-term $12,808 $12,959
debt
Accounts payable 3,985 6,126
Accrued salaries and benefits 12,042 12,957
Other accrued expenses 3,195 4,029
Customer advances 8,421 8,278
Deferred income taxes 1,666 1,612
------------- -----------
Total current liabilities 42,117 45,961
------------- -----------
Deferred income taxes 1,187 1,149
Long-term debt, excluding current
installments 31,761 26,058
Shareholders' equity:
Common stock 134 133
Additional paid-in capital 26,293 26,035
Stock related awards and loans
(95) (153)
Retained earnings
9,190 7,808
------------- -----------
35,522 33,823
Less cost of treasury shares (3,723) (3,829)
------------- -----------
Total shareholders' equity
Total shareholders' equity 31,799 29,994
========= ========
See accompanying notes to consolidated condensed financial
statements.
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Thirteen Weeks Ended
June 30, July 2,
2000 1999
--------- ---------
Net sales $34,453 $38,069
Operating costs and expenses:
Cost of sales 25,531 29,809
Selling, general and administrative 5,054 4,989
Research and development 747 768
--------- ---------
Operating profit 3,121 2,503
Interest expense, net 818 930
--------- ---------
Income before income taxes 2,303 1,573
Income taxes 921 538
--------- ---------
Net income $1,382 $1,035
--------- ---------
Net income per share:
Basic $0.22 $0.20
======= =======
Diluted $0.20 $0.18
======= =======
See accompanying notes to consolidated condensed financial
statements.
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Thirteen Weeks Ended
June 30 July 2,
2000 1999
-------- --------
Operating Activities:
Net income $1,382 $1,035
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 1,355 1,260
Deferred income taxes 92 60
Non-cash charges (4) 141
Changes in assets and liabilities
providing (using) cash, excluding effects
of acquisition:
Receivables (5,186) (7,297)
Inventories (1,103) (198)
Other current assets 1,780 (877)
Accounts payable and accrued (3,878) (338)
expenses
Customer advances 143 (987)
-------- --------
Net cash (used in) operating activities (5,419) (7,201)
Investing Activities:
Expenditures for equipment and leasehold (992) (686)
improvements
Software costs (317) (320)
Payment from officer for stock purchase 50 50
Proceeds from sale of assets - 23
-------- --------
Net cash used by investing activities (1,259) (933)
-------- --------
Financing Activities:
Net proceeds from revolving debt 6,321 8,669
Repayment of long-term debt (769) (990)
Repurchase of common stock (53) (306)
Proceeds from sale of common stock held in 234 -
treasury
Proceeds from issuance of common stock 184 33
-------- --------
Net cash provided by financing activities 5,917 7,406
-------- --------
Net decrease in cash and equivalents (761) (728)
Cash and cash equivalents at beginning of
year 2,128 2,376
-------- --------
Cash and cash equivalents at end of year $1,367 $1,648
======= =======
See accompanying notes to consolidated condensed financial
statements.
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
Thirteen Weeks Ended June 30, 2000
(Unaudited)
(In thousands)
Stock
Addi- Related
tional Awards
Common Paid-In and Retained Treasury
Stock Capital Loans Earnings Stock Total
-------------------------------------------------
Balance at March 31, $133 $26,035 $(153) $7,808 $(3,829) $29,994
2000
Net income - - - 1,382 - 1,382
Exercise of stock 1 183 - - - 184
options
Stock award - - 8 - - 8
Sale of common stock - 75 - - 159 234
Repurchase of common
stock - - - - (53) (53)
Payment from officer
for stock purchase - - 50 - - 50
---------------------------------------------------
Balance at June 30, $134 $26,293 $(95) $9,190 $(3,723) $31,799
2000
===================================================
See accompanying notes to consolidated condensed financial
statements.
Comptek Research, Inc. and
Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. In the opinion of Management, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments, consisting of normal recurring items, necessary
to present fairly the financial position, results of
operations and cash flows for the periods shown. It is the
Company's policy to end its first three quarterly accounting
periods on the last Friday of each quarter, which includes
thirteen weeks of operations. The fourth quarter ends on
March 31. The financial data included herein was compiled
in accordance with the same accounting policies applied to
the Company's audited annual financial statements, which
should be read in conjunction with these statements.
The results of operations for the thirteen weeks ended June
30, 2000, are not necessarily indicative of the results to
be expected for the full year.
2. Net Income Per Share
The following table reconciles the effect that potentially
dilutive securities have on net income per share (amounts in
thousands, except per share data):
Thirteen Weeks Ended
June 30, July 2,
2000 1999
---------- ----------
Basic Net Income Per
Share:
Net income $1,382 $1,035
======= ========
Weighted average shares 6,236 5,094
outstanding ======= ========
Basic net income per $0.22 $0.20
share ======= ========
Diluted Net Income Per
Share:
Net income $1,382 $1,035
After-tax equivalent of
interest expense on
8.5% convertible
subordinated
debentures 64 198
---------- ----------
Income for purposes of
computing diluted net
income per share $1,446 $1,233
======= ========
Weighted average shares
outstanding 6,236 5,094
Incremental shares from
assumed conversions:
Stock options 420 164
Convertible
subordinated
Debentures 526 1,579
---------- ----------
Weighted average shares
outstanding for purposes
of computing diluted
net income per share 7,182 6,837
======== ========
Diluted net income per
share $0.20 $0.18
======== ========
3. Inventories consist of (in thousands):
June 30, March 31,
2000 2000
--------- ----------
Parts $3,882 $2,989
Work-in-process 2,117 1,907
Finished goods 317 317
--------- ----------
Total $6,316 $5,213
========= ==========
4. During the thirteen weeks ended June 30, 2000, 3,400 common
shares of the Company's stock were purchased and placed into
Treasury stock. These shares were acquired pursuant to a
stock repurchase plan approved by the Company's Board of
Directors. Also, during the thirteen weeks, 20,159 common
shares were issued from the Company's treasury shares. The
total number of treasury shares as of June 30, 2000 was
453,351.
5. During the thirteen weeks ended June 30, 2000, the Company
granted 20,000 options, at the closing market price on the
date of grant, under its Equity Incentive Plans. The range of
exercise prices for the granted options was $12.50 to $16.00.
The Company did not grant any options under its Non-Employee
Directors Stock Option Plan. A total of 683,193 options and
197,000 options are outstanding under the Equity Incentive
Plans and the Non-Employee Directors Stock Option Plan,
respectively, as of June 30, 2000.
6. Business Segment Information
Thirteen Weeks Ended
June 30, July 2,
2000 1999
---------- ---------
Net Sales
Simulation and $12,724 $18,270
Training
Tactical Systems 11,793 10,581
Engineering and
Technical 9,936 9,218
Services ---------- ---------
Total Net Sales $34,453 $38,069
========== =========
Operating Profit
Simulation and $1,283 $779
Training
Tactical Systems 983 1,058
Engineering and
Technical 855 666
Services ---------- ---------
Total Operating Profit $3,121 $2,503
Interest expense, net (818) (930)
---------- ---------
Income before Income $2,303 $1,573
taxes ======== =========
7. On June 12, 2000, the Company entered into an Agreement and
Plan of Merger ("the Merger Agreement") with Northrop "Grumman
Corporation ("Northrop") and Yavapai Acquisition Corporation
("Yavapai"), a wholly owned subsidiary of Northrop, providing for
the merger of Yavapai with and into the Company (the "Merger").
Upon consummation of the Merger, (i) the Company will become a
wholly owned subsidiary of Northrop, and (ii) each outstanding
share of common stock of the Company will be converted into
common stock of Northrop and the right to receive cash in lieu of
fractional shares of Northrop common stock.
The amount of Northrop common stock to be received by the
Company's shareholders shall be determined by dividing
$20.75 by the average closing price on the New York Stock
Exchange for Northrop common stock during the 20 trading
days ending two business days prior to the expiration of the
exchange offer. In no event will the exchange ratio be more
than .2804:1 or less than .2470:1. Should the average
closing price of Northrop common stock fall below $74.00 per
share during this 20-day period, the Company has the right
to terminate the transaction, subject to Northrop's
discretionary right to enhance the exchange ratio so that
Company shareholders receive a minimum value of $20.75 per
common share.
Outstanding unvested options issued under the Company's 1992
Equity Incentive Plan, the 1998 Equity Incentive Stock Plan,
and the Non-Employee Director Stock Option Plan immediately
vest and become exercisable upon a change of control. In
addition, the Company will pay certain key executives
severance benefits on termination of employment following a
change of control. The aggregate cost associated with these
executives' severance benefits is approximately $2.4
million. The Company has also agreed to compensate these
executives for one half of the taxable income resulting from
exercise of stock options or from dispositions in connection
with a change of control. In addition, the Company has
agreed to reimburse these executives for excise tax, if any,
that result from a change of control. The Company's
obligation to these executives for tax consequences is not
expected to exceed $4.0 million.
The Company also has change of control severance agreements
with certain other employees that are triggered upon change
of control and termination of employment. The aggregate
costs of such benefits are not currently determinable.
Following the completion of the fiscal quarter ended June
30, 2000, and the issuance of 20,159 shares to the
participating employees, the Company's Employee Stock
Purchase Plan was suspended.
The Merger Agreement contains, among other things, customary
provisions requiring the operation of the business of the
company in the ordinary course consistent with past practice
pending closing.
The transaction is subject to the completion of certain
closing requirements by the parties and to the customary
regulatory approvals.
Independent Accountants' Review Report
The Board of Directors and Shareholders
Comptek Research, Inc.:
We have reviewed the consolidated condensed balance sheet of
Comptek Research, Inc. and subsidiaries as of June 30, 2000, and
the related consolidated condensed statements of income, changes
in shareholders' equity, and cash flows for the thirteen-week
periods ended June 30, 2000 and July 2, 1999. These consolidated
condensed financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the consolidated condensed
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the
consolidated balance sheet of Comptek Research, Inc. and
subsidiaries as of March 31, 2000, and the related consolidated
statements of income, shareholders' equity, and cash flows for
each of the years in the three-year period then ended (not
presented herein); and in our report dated May 17, 2000, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated condensed balance sheet as of March 31,
2000, is fairly presented, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/S/ KPMG LLP
KPMG LLP
Buffalo, New York
July 21, 2000
Management's Discussion and Analysis
Financial Condition and Results of Operations
General
Comptek designs and develops specialized systems, software, and
proprietary products intended for the global military electronics
market. These defense-related systems provide management
information and implement offensive and defensive responses in
combat situations. In addition, we supply EW
simulation/stimulation, training, and software validation systems
related to electronic surveillance. We also develop systems and
provide engineering and technical services for the maintenance
and upgrade of EW and command, control, communication, computers,
and intelligence (C4I) systems for several U.S. Air Force and
U.S. Navy platforms.
We conduct our operations as three business segments: Tactical
Systems, EW Simulation and Training Systems ("Simulation and
Training"), and Engineering and Technical Services ("Services").
We provide our products and services primarily through three
types of contracts: fixed-price, cost-reimbursement, and time-and-
materials. Fixed-price contracts require us to provide products
and perform services at a stipulated price. Under cost-
reimbursement contracts, we are reimbursed for all actual costs
incurred in performing the contract, to the extent that such
costs are within the contract ceiling and allowable under the
terms of the contract, plus a fee or profit. Time-and-materials
contracts reimburse us for the number of labor hours expended at
an established hourly rate negotiated in the contract, plus the
incurred cost of materials.
On June 12, 2000, Comptek entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Northrop Grumman Corporation
("Northrop") and Yavapai Acquisition Corporation ("Yavapai"), a
wholly owned subsidiary of Northrop, providing for the merger of
Yavapai with and into the Company (the "Merger"). Upon
consummation of the Merger, (i) Comptek will become a wholly
owned subsidiary of Northrop, and (ii) each outstanding share of
common stock of Comptek will be converted into common stock of
Northrop and the right to receive cash in lieu of fractional
shares of Northrop common stock. Additional information is
available in note 7 of the notes to the condensed consolidated
financial statements.
Contract backlog increased by 9.6% to $175.4 million at June 30,
2000, from $160.0 million March 31, 2000. This increase is due to
the receipt of several awards in our Simulation and Training
segment.
Results of Operations
Net Sales. Net sales decreased 9.5% to $34.5 million for the
thirteen weeks ended June 30, 2000, from $38.1 million for the
thirteen weeks ended July 2, 1999.
The Simulation and Training segment's net sales totaled $12.7
million for the first quarter ended June 30, 2000, compared with
$18.3 million for the first quarter ended July 2, 1999,a decrease
of 30.4%. This decrease is primarily due to the timing of work on
the current portfolio of contracts and their requirements,
specifically, material requirements during the period. In the
prior year, during the first quarter, a significant amount of
material was received under three large simulator contracts.
Based on the recent increases in orders for this segment, sales
are expected to increase in subsequent quarters.
The Tactical Systems segment's net sales increased to $11.8
million for the first quarter ended June 30, 2000, compared with
$10.6 million for the first quarter ended July 2, 1999, an
increase of 11.5%. This is the result of an increase in certain
product sales for the current year as compared to the prior year
as well as an overall increase in manpower to complete work under
current contracts.
The Services segment reported net sales for the first quarter
ended June 30, 2000 of $9.9 million, compared with $9.2 million
for the first quarter ended July 2, 2000, an increase of 7.8%.
This increase is associated with fluctuations in the timing of
contract performance and the associated receipt of delivery
orders under those contracts.
Gross Margin. Gross margin increased to $8.9 million for the
thirteen weeks ended June 30, 2000 from $8.3 million for the same
period in the prior year, representing an increase of 8.0%. Gross
margin percentage increased to 25.9% in the current year compared
to 21.7% in the prior year. Gross margin increased while sales
decreased due to the completion of higher margined work in the
current year. In addition, the Simulation and Training segment
recognized an incremental margin of approximately $400,000 on one
fixed-priced contract as certain development and test milestones
were completed at lower than anticipated costs.
Selling, General, and Administrative (SG&A) Expenses. SG&A
expenses rose to $5.1 million for the first quarter ended June
30, 2000 from $4.9 million for the first quarter ended July 2,
1999, representing an increase of 1.3%. Expenditures for the
quarter remained relatively constant from the prior year. As a
percentage of sales, SG&A increased primarily as a result of the
reduced net sales levels for the current quarter.
Research and Development (R&D) Expenses. R&D expenses remained
relatively constant at $747,000 for the first quarter ended June
30, 2000 compared with $768,000 for the first quarter ended July
2, 1999. R&D efforts in both periods were directed primarily at
enhancing and maintaining existing products and systems. R&D
efforts are concentrated mainly in the Tactical Systems and
Simulation and Training segments.
Operating Profit. Operating profit rose to $3.1 million for the
first quarter ended June 30, 2000 from $2.5 million for the first
quarter ended July 2, 1999, representing an increase of 24.7%. As
a percentage of sales, operating profit rose to 9.1% in the
current year from 6.6% in the prior year.
The Simulation and Training segment's operating profits increased
to $1.3 million for the first quarter ended June 30, 2000 from
$779,000 for the first quarter ended July 2, 1999, representing
an increase of 64.7%. This increase resulted primarily from
incremental margin of approximately $400,000 on a fixed-price
contract as development and test milestones were completed at
lower-than-anticipated costs. Also during the prior fiscal year's
third quarter, manpower and expenditure reductions were
implemented. These operating improvements were permanent changes
in the business and positively impacted the current year's first
quarter results, when compared with prior year first quarter.
The Tactical Systems segment's operating profits totaled $983,000
for the first quarter ended June 30, 2000 compared with $1.1
million for the first quarter ended July 2, 1999, representing a
decrease of 7.1%. In the prior year, this segment had higher
margined product sales which did not occur in the current year.
For the remainder of fiscal 2001, operating profits for this
segment are anticipated to be higher than that in the prior year.
The Services segment's operating profits amounted to $855,000 for
the first quarter ended June 30, 2000 compared with $666,000 for
the first quarter ended July 2, 1999, representing an increase of
28.4%. These increases resulted primarily from mix of work in the
current quarter when compared to the prior year. The Services
segment experienced increased work on higher-margin contracts.
Interest Expense. Interest expense decreased to $818,000 in the
first quarter ended June 30, 2000 from $930,000 for the first
quarter ended July 2, 1999, a decrease of 12.0%. We experienced a
decrease in interest expense primarily due to the conversion of
$10.0 million of our convertible subordinated debentures into
Comptek's common stock during the third and fourth quarter of
Fiscal 2000.
Income Taxes. Income taxes increased to $921,000 for the first
quarter ended June 30, 2000 from $538,000 for the first quarter
ended July 2, 1999, representing an increase of 71.2%. The
overall effective tax rate for the current year first quarter was
a rate of 40.0% compared with a rate of 34.2% for the first
quarter ended July 2, 1999. In the prior year we received a state
tax refund for $75,000 which was recorded as part of the
provision for income taxes during the first quarter.
Net Income. Net income rose to $1.4 million, or $0.20 per diluted
share, for the first quarter ended June 30, 2000 from $1.0
million, or $0.18 per diluted share, for the first quarter ended
July 2, 1999, representing an increase of 33.5%.
Liquidity and Capital Resources
Cash required from operating activities for the first quarter
ended June 30, 2000, was $5.4 million. In the prior year first
quarter ended July 2, 1999, operations required cash of $7.2
million. Operations required working capital, net of the effects
of acquisitions, of $8.2 million in the current year compared
with 9.7 million in the prior year. Current quarter requirements
were the result of increases in receivables of $5.2 million and
reductions in payables and accrued expenses of $3.9 million.
These requirements were the result of the timing of cash receipts
on certain programs and vendor payments at the quarter close.
The Company also purchased $992,000 of capital equipment and
invested $317,000 in software costs.
Operating and investing activities were funded by our existing
credit facility. We have a current available capacity of $36.5
million. At June 30, 2000, the revolving credit note had an
outstanding balance of $14.1 million. Furthermore, commitments
under letters of credit reducing availability under the revolving
credit agreement amounted to $12.5 million.
We are reviewing our current requirements for working capital,
capital expenditure demands, stock repurchases, and repayment of
long-term debt with a view to ensuring that cash flow from
operations and the available borrowing capacity are sufficient to
cover these requirements for the next fiscal year. We anticipate
that some modification, specifically, an increase in borrowing
capacity under the current credit facility will be required,
primarily because of the $10.0 million in subordinated notes due
March 26, 2001, and letter-of-credit requirements.
Impact of Year 2000
In prior years, we discussed the nature and progress of our plans
to become Year 2000-ready. In late 1999, we completed our
remediation and testing of systems. As a result of those planning
and implementation efforts, Comptek experienced no significant
disruptions in mission-critical information technology or non-
information technology systems and believes those systems to have
responded successfully to the Year 2000 date change. We know of
no material problems resulting from Year 2000 issues, either with
our products, our internal systems, or the products and services
of third parties. We will continue to monitor our mission-
critical computer applications and those of our suppliers and
vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
Forward-Looking Information and Cautionary Statement
The Management's Discussion and Analysis, contains forward-
looking statements about Comptek's plans and management's
expectations, including Comptek's role in the defense industry
and our views on the growth prospects for Comptek. These forward-
looking statements are subject to risks and uncertainties. Plans
may also change based upon changing business conditions. The
reader is cautioned that such risks and uncertainties could cause
actual future results to differ materially from those inferred by
the forward-looking statements. Since Comptek's primary customer
group is the U.S. Government (90% of revenues for 2000 are
attributable to DoD prime and subcontracts), future results could
be materially affected by: the Government's redirection, contract
modification or termination, or similar actions, to stop or delay
contract performance; Government budgetary actions; or
contracting and payment practices of current and future
customers. Some additional uncertainties, among others, that also
need to be considered are: the likelihood that actual future
revenues that are realized may differ from those inferred from
existing total backlog; the ability of Comptek to attract and
retain highly skilled technical and professional employees; the
availability of capital; the ability to expand sales in
international markets; and the ability to complete future
acquisitions without adversely affecting Comptek's financial
condition. Comptek may also be adversely affected by changes in
domestic and international economic conditions, technological
developments, and intense competition. The reader is further
cautioned that risks and uncertainties exist that have not been
mentioned herein due to their unforeseeable nature but which may
nevertheless impact Comptek's future operations and results.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.1 Agreement and Plan of Merger among Northrop Grumman Corporation,
Yavapai Acquisition Corp. and Comptek Research, Inc.
dated as of June 12, 2000. (Exhibit annexed to the Company's
Form 8-K filed June 22, 2000)
4.2 Amendment to Rights Agreement between
Comptek Research, Inc. and American Stock Transfer
& Trust Company. (Exhibit annexed to the
Company's Form 8-K filed June 22, 2000.)
10.3 Resolutions regarding Loan Agreement between Comptek Federal
Systems, Inc. (wholly-owned subsidiary of the Registrant) and
John J. Sciuto.
10.3a Employment letter between Registrant and Chris Boehm.
10.5 Amendment to M&T Bank Revolving Credit
and Term Loan Facilities to Comptek Research, Inc.
15 Letter Regarding Unaudited Interim Financial
Information.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
Form 8-K reporting date was June 12, 2000.
Item Reported:
Item 5. Other Events. On June 12, 2000, Comptek
Research, Inc., ("Comptek") entered into an Agreement
and Plan of Merger with Northrop Grumman Corporation
("Northrop") and Yavapai Acquisition Corp., a wholly
owned subsidiary of Northrop.
Form 8-K reporting date was June 22, 2000.
Items Reported:
Item 5. Other Events. On June 12, 2000, Comptek
Research, Inc. (the "Company") entered into an
Agreement and Plan of Merger, dated as of June 12, 2000
(the "Merger Agreement") with Northrop Grumman
Corporation ("Northrop") and Yavapai Acquisition Corp.,
a wholly owned subsidiary of Northrop (the "Merger
Sub"), providing for the merger of Merger Sub with and
into the Company (the "merger"). Upon consummation of
the Merger (i) the Company will become a wholly owned
subsidiary of Northrop and (ii) each outstanding share
of common stock of the Company will be converted into
common stock of Northrop and the right to receive cash
in lieu of fractional shares of Northrop common stock.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
99.1 Amendment to Rights Agreement between Comptek Research, Inc.
and American Stock Transfer & Trust Company.
99.2 Agreement and Plan of Merger among Northrop Grumman
Corporation, Yavapai Acquisition Corp. and Comptek Research, Inc.
dated as of June 12, 2000.
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.
COMPTEK RESEARCH, INC.
Date: August 10, 2000 By: /s/ John J. Sciuto
John J. Sciuto
Chairman, President and
Chief Executive Officer
Date: August 10, 2000 By: /s/ Laura L. Benedetti
Laura L. Benedetti
Chief Financial Officer, Vice
President of Finance and Treasurer
INDEX TO EXHIBITS
- - - - - - -
Exhibit Description of Exhibit Page
No. No.
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2.1 Agreement and Plan of Merger among Northrop n/a
Grumman corporation, Yavapai Acquisition
Corp. and Comptek Research, Inc. dated as
of June 12, 2000. (Exhibit annexed to the
Company's Form 8-K filed June 22, 2000.)
4.2 Amendment to Rights Agreement between n/a
Comptek Research, Inc. and American Stock
Transfer & Trust Company. (Exhibit annexed
to the Company's Form 8-K filed June 22,
2000.)
10.3 Resolutions regarding Loan Agreement 19
between Comptek Federal Systems, Inc.
(wholly-owned subsidiary of the Registrant)
and John J. Sciuto.
10.3a Employment letter between Registrant and 21
Chris Boehm
10.5 Amendment to M&T Bank Revolving Credit and 24
Term Loan Facilities to Comptek Research,
Inc.
15 Letter Regarding Unaudited Interim 33
Financial Information.
27 Financial Data Schedule 34
Exhibit 10.3
Resolutions Regarding Loan Agreement between
Comptek Federal Systems, Inc.
(a wholly-owned subsidiary of the Registrant)
and John J. Sciuto
The following resolutions were adopted at a special meeting of
the Board of Directors of Comptek Research, Inc., held on June
12, 2000 regarding payments to John J. Sciuto:
RESOLVED, that in connection with the consummation of the
Offer, the Corporation shall pay to John J. Sciuto within five
days of such date an amount equal to the current outstanding
balance of the loans provided by Comptek Federal Systems, Inc. to
John J. Sciuto represented by four promissory notes made by John
J. Sciuto dated July 9, 1996, February 3, 1999, February 3, 1999
and March 24, 1999, having an outstanding principal balance of
$129,325, plus an additional $64,662.50 as a tax gross-up
payment.
Exhibit 10.3a
Employment letter between Registrant and Chris Boehm
April 25, 2000
Mr. Christopher A. Boehm
4217 Kincaid Court
Chantilly, VA 20151
Dear Chris:
I am pleased to offer you the position of President of Comptek
Federal Systems, Inc. reporting directly to me and working
closely with Comptek's senior management. As we have discussed,
CFS is an operating subsidiary of Comptek Research, Inc. with
annual sales of approximately $42 million, representing
approximately 30% of Comptek's total sales. Your starting salary
will be $7,884.96 biweekly, which if annualized is $205,008.96.
In this capacity, you will be responsible for directing business
operations of CFS with full profit and loss responsibility. You
will be headquartered in the CFS Arlington, Virginia facility
that is located at: Two Crystal Park, 2121 Crystal Drive.
As part of your total compensation, our offer to you also
includes the following:
1. You will be a member of Comptek's Incentive Compensation
Plan at a $50,000 yearly bonus level for fiscal 2001. Payment of
the bonus is dependent on our achieving our fiscal 2001 earnings
target. I can review with you the details of this plan.
2. Stock options to purchase up to 25,000 shares of Comptek
common stock at the closing price on your date of hire. The
options will vest over a three-year period, at the rate of one-
third of the total amount per year, and are valid for a period of
ten years provided you are employed by Comptek at the time of
exercise. Because our stock option plan reserve is nearly
exhausted, we intend to add new shares at the 2000 Annual Meeting
of Shareholders. This grant to you, therefore, is contingent on
the shareholders approving the addition of shares to the plan
reserve. While this is a legal requirement we cannot avoid, I do
not anticipate any problem in obtaining the necessary approval.
Enclosed is a copy of our stock option plan and form of
agreement. We can review the details of the stock option plan at
your convenience. To the extent possible, these options will be
designated as "incentive stock options," which typically is more
advantageous to the employee. Under current tax law ISO grants
are limited to $100,000 of value per year.
3. As a full-time employee of Comptek, you will be eligible to
participate in our flexible benefits program. With Flex Plan,
you will receive core benefits of life and accidental death and
dismemberment insurance, sick days, short-term disability
benefits, holidays, and vacation. In addition, you will receive
flex credits to use in sharing the cost of other benefits
selected, such as medical and dental insurance, additional life,
dependent life and personal accidental insurance and long-term
disability insurance. A 401(k) Retirement Savings Plan and
Section 125 Reimbursement Accounts are available to you for tax
savings. You will also be eligible to participate in the
Employee Stock Purchase Plan, which allows you to purchase
Comptek common stock directly from Comptek Research at a
discounted rate.
We also have an Employee Assistance Program, should you wish to
avail yourself or a household member of the plan benefits.
4. On starting employment with CFS, you will receive a cash
payment of $20,000 (less applicable tax withholdings) and an
additional $20,000 (less applicable tax withholdings) on July 1,
2000. If you elect to voluntarily leave CFS' employ prior to
March 31, 2001, you will be required to repay $40,000 to CFS.
5. All employees become eligible to take vacation following six
months of employment. In your particular case, you will accrue
vacation on a monthly basis at the rate of 13.33 hours. The
equivalent annual amount is 160 hours or four weeks per year.
Comptek Research's aggregate annual sales for our fiscal year
completed March 31, 2000, were just under $150 million. Our
common stock is currently publicly traded on the American Stock
Exchange with a market capitalization of approximately $90
million. We are striving to create a $300 to $500 million-per-
year highly specialized nice market leader with substantial
market prominence and presence. In your new position, you will
have the opportunity to significantly affect the shaping of our
operations as we move into the next phase of our development.
As president of one of Comptek's principal business units you
will be considered an executive officer of Comptek Research and
will be indemnified by Comptek to the full extent allowed by New
York law for your good faith actions on behalf of Comptek. A
copy of our form of indemnification agreement is enclosed.
We anticipate your start date to be on Monday, May 15, 2000,
depending on your confirmation of an appropriate availability
date. Offers of employment are made contingent on the receipt
and maintenance of a required security clearance. To obtain this
clearance you will need to bring a certified copy of your birth
certificate on your first day of employment or a copy of your
DD214. To indicate your acceptance of this offer, please sign
and return the enclosed copy of this letter.
In addition, Donna Taylor, our Human Resources Administrator,
(716-677-0023, ext. 524) is available to you to review health and
welfare plan specifics.
Chris, we all look forward to having you join the team at
Comptek. It's our believe that you will contribute to the growth
and success of the company, while growing professionally and
personally. If you have any questions regarding this offer,
please do not hesitate to call me.
Sincerely,
/s/John J. Sciuto
John J. Sciuto
Chairman, President
and CEO
JJS:bb:052
Enc.
/s/Chris Boehm 5/1/2000
--------------------------------------------------------
Accepted Date
Exhibit 10.5
Amendment to M&T Bank Revolving Credit and
Term Loan Facilities to Comptek Research, Inc.
AMENDMENT AGREEMENT
This Amendment Agreement is made this 31st day of May
2000 between Manufacturers and Traders Trust Company, a New York
banking organization having its chief executive office at One M&T
Plaza, Buffalo, New York 14240, (the "Bank") and Comptek
Research, Inc., a New York business corporation having its chief
executive office at 2732 Transit Road, Buffalo, New York 14224,
(the "Borrower").
WHEREAS, the Bank and the Borrower previously entered
into a Corporate Revolving and Term Loan Agreement dated March
24, 1999 (the "Loan Agreement"); and
WHEREAS, the Bank and the Borrower now desire to amend
certain provisions of the Loan Agreement;
NOW, THEREFORE, effective on the date of this Amendment
Agreement, the Bank and the Borrower agree that:
1. Section 1rr of the Loan Agreement is amended to
read as follows:
rr. Revolving Loan Maturity Date. The
"Revolving Loan Maturity Date" means (i) June
30, 2001 or (ii) any subsequent June 30 to
which the date on which the Borrower is
required to repay the aggregate outstanding
principal amounts of all Revolving Loans is
extended by the Bank pursuant to Section 2k
of this Agreement.
2. Section 1ww of the Loan Agreement is amended to
read as follows:
ww. Term Loan I. "Term Loan I" means
collectively (i) the loan in the original
principal amount of $13,750,000 made by the
Bank to the Borrower on March 24, 1999
pursuant to Section 3a of this Agreement as
such Section 3a existed on such date and (ii)
the Additional Term Loan I Advance.
3. There is added to the Loan Agreement after Section
1yy thereof a new Section 1zz to read as follows:
zz. Additional Term Loan I Advance.
"Additional Term Loan I Advance" means the
loan by the Bank to the Borrower pursuant to
Section 3A of this Agreement.
4. The second sentence of Section 2a of the Loan
Agreement is amended to read as follows:
The principal amount of each Revolving
Loan shall be an integral multiple of
$10,000, and the Borrower shall not at any
time permit (i) the aggregate outstanding
principal amounts of all Revolving Loans to
exceed $30,000,000 minus the total of (A) the
aggregate face amounts of all letters of
credit issued for the account of any Related
Entity by the Bank and outstanding at such
time and (B) the aggregate amounts of all
draws under any letter of credit issued for
the account of any Related Entity by the Bank
for which the Bank has not been reimbursed at
such time, (ii) the aggregate outstanding
principal amounts of all Revolving Loans any
portion of the proceeds of which is to be
used for working capital of the Borrower or
any loan or advance by the Borrower to any
other Related Entity to be used for working
capital of such other Related Entity to
exceed $22,000,000 or (iii) the total at such
time of the amounts referred to in clauses
(i)(A) and (B) of this sentence to exceed
$12,000,000.
5. Section 3c of the Loan Agreement is amended to
read as follows:
c. Repayment. The Borrower shall
repay the outstanding principal amount of
Term Loan I on June 1, 2000 to the Bank in 60
installments, with the first of such
installments to become due on June 1, 2000
and one of such installments to become due on
the first day of each succeeding calendar
month through May 1, 2005, when the Borrower
shall repay the outstanding principal amount
of Term Loan I to the Bank and pay to the
Bank all interest payable pursuant to this
Agreement in connection with Term Loan I and
remaining unpaid and all other amounts
payable by the Borrower to the Bank pursuant
to this Agreement in connection with Term
Loan I and remaining unpaid. Each of the
first 59 of such installments shall be
$144,531.25, and the last of such
installments shall be $5,347,656.25.
6. There is added to the Loan Agreement after Section
3 thereof a new Section 3A:
3A. ADDITIONAL TERM LOAN I ADVANCE.
Upon and subject to each term and condition
of this Agreement, the Borrower shall obtain
the Additional Term Loan I Advance from the
Bank, and the Bank shall make the Additional
Term Loan I Advance to the Borrower. The
principal amount of the Additional Term Loan
I Advance shall be $1,875,000.
7. The reference to $27,000,000 in the second
sentence of Section 4a of the Loan Agreement is changed to
$30,000,000.
8. The Loan Agreement is changed by this Amendment
Agreement only to the extent that it is specifically amended by
this Amendment Agreement, and, as so amended, the Loan Agreement
shall remain in full force and effect. Effective on the date of
this Amendment Agreement, (a) references in the Loan Agreement to
"this Agreement" shall be deemed to be references to the Loan
Agreement as amended by this Amendment Agreement, (b) the
Revolving Loan Note referred to in clause (i) of Section 5d of
the Loan Agreement shall be deemed to be the Revolving Loan Note
referred to in Section 8a of this Amendment Agreement, and (c)
the Term Loan I Note referred to in clause (ii) of Section 5d of
the Loan Agreement shall be deemed to be the Term Loan I Note
referred to in Section 8b of this Amendment Agreement.
9. The effectiveness of this Amendment Agreement
shall be contingent upon the receipt by the Bank, upon the
execution and delivery to the Bank of this Amendment Agreement by
the Borrower, of the following, in form and substance
satisfactory to the Bank:
a. A Revolving Loan Note in the maximum principal
amount of $30,000,000, appropriately completed and duly executed
by the Borrower, in replacement of and in substitution for, but
not in payment of, a Revolving Loan Note, dated March 24, 1999,
in the original principal amount of $27,000,000 issued by the
Borrower to the Bank;
b. A Term Loan I Note in the principal amount of
$13,875,000, appropriately completed and duly executed by the
Borrower, in replacement of and in substitution for, but not in
payment of, a Term Loan I Note, dated March 24, 1999, in the
principal amount of $13,750,000 issued by the Borrower to the
Bank;
c. A Ratification of Continuing, Absolute and
Unconditional Guaranty Agreements, appropriately completed and
duly executed by (i) Comptek Federal Systems, Inc., a New York
business corporation, ("Comptek Federal"), (ii) Comptek Amherst
Systems, Inc., a New York business corporation, ("Comptek
Amherst"), (iii) Comptek Research International Corp., a New York
business corporation, ("Comptek International"), (iv) Comptek
Research, Ltd., a Virgin Islands business corporation, ("Comptek
Limited"), (v) PRB Associates, Inc., a Maryland business
corporation, ("PRB") and (vi) DeVoe and Matthews, L.C., a Florida
limited liability company, ("DeVoe");
d. A Ratification of Security Agreements,
appropriately completed and duly executed by the (i) Borrower,
(ii) Comptek Federal, (iii) Comptek Amherst, (iv) Comptek
International, (v) Comptek Limited, (vi) PRB and (vii) DeVoe;
e. A Ratification of Copyright Security Agreement,
appropriately completed and duly executed by Comptek Federal;
f. A Ratification of an Assignment of
Representations, Warranties, Covenants and Indemnities,
appropriately completed and duly executed by the Borrower;
g. An opinion of Christopher A. Head, internal
counsel to the Borrower;
h. A copy of the articles of incorporation and by-
laws of the Borrower certified by its Secretary to be complete
and accurate;
i. Evidence of the taking and the continuation in
full force and effect on the date of this Amendment Agreement of
each corporate or other action of the Borrower and each other
Person (as such term is defined in the Loan Agreement) necessary
to authorize the execution, delivery to the Bank and performance
of this Amendment Agreement and each instrument, agreement and
other writing contemplated to be executed and delivered to the
Bank in connection with this Amendment Agreement;
j. Payment by the Borrower to the Bank of a fee in
the amount of $30,000; and
k. Payment by the Borrower to the Bank of a fee in
the amount of $18,750.
IN WITNESS WHEREOF, the Bank and the Borrower have
caused this Amendment Agreement to be duly executed on the date
shown at the beginning of this Amendment Agreement.
MANUFACTURERS AND TRADERS TRUST COMPANY
By /s/Mark E. Hoffman VP
----------------------------------------
Title
COMPTEK RESEARCH, INC.
By /s/John J. Sciuto President
----------------------------------------
Title
ACKNOWLEDGMENTS
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the 31st day of May in the year 2000, before me, the
undersigned, a Notary Public in and for said State, personally
appeared John J. Sciuto personally known to me or proved to me
on the basis of satisfactory evidence to be the individual(s)
whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/
their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument.
/s/Christopher A. Head
Notary Public
Christopher A. Head
Notary Public, State of New York
Qualified in Erie County
My Commission Expires 4/30/2002
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the 3 day of July in the year 2000, before me, the
undersigned, a Notary Public in and for said State, personally
appeared Mark E. Hoffman personally known to me or proved to me
on the basis of satisfactory evidence to be the individual(s)
whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/
their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument.
/s/Barbara V. Rackley
Notary Public
Barbara V. Rackley No. 01RA4656559
Notary Public, State of New York
Qualified in Erie County
My Commission Expires June 30, 2001
BFLODOCS:284811_5 (63RF05)
Exhibit 15
The Board of Directors
Comptek Research, Inc.
Buffalo, New York
Gentlemen:
Registration Statement Nos. 33-54170, 33-82536, 333-62753 and 333-
86333
With respect to the subject registration statements, we
acknowledge our awareness of the use therein of our report dated
July 21, 2000, related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such
report is not considered part of a registration statement
prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of sections 7 and
11 of the Act.
/s/KPMG LLP
KPMG LLP
Buffalo, New York
August 10, 2000
