============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter period ended June 30, 1995
Commission File Number: 2-88617
QUESTECH, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-0844913
(State or other jurisdiction of incorporation or organization
(I.R.S. Employer I.D. No.)
7600A Leesburg Pike, Falls Church, Virginia 22043
(Address of principal executive offices) (Zip code)
(703) 760-1000
(Registrant's telephone number, including area code)
---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of the close of business August 1, 1995, the registrant had 1,568,000
shares of Common Stock outstanding, par value $.05 per share.
<PAGE>
QuesTech, Inc. and Subsidiaries
I N D E X
June 30, 1995
Page No.
PART I. Financial Information
Item 1 Financial Statements (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS - June 30, 1995
and December 31, 1994 2
CONSOLIDATED STATEMENTS OF EARNINGS - Three Months
ended June 30, 1995 and 1994; Six Months ended June 30,
1995 and 1994 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Six
Months ended June 30, 1995 and 1994 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Six
Months ended June 30, 1995 and 1994 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - June 30,
1995 and June 30, 1994 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 1 Legal Proceedings 12
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Officers' Signatures 14
EXHIBIT 10 - AMENDMENT NO. 10 TO LOAN AND SECURITY
AGREEMENT
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Appendix A
<PAGE>
<TABLE>
QuesTech, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
ASSETS
June 30 Dec. 31
1995 1994
(Unaudited) (Note)
CURRENT ASSETS
Cash and cash equivalents ................. $ 130,400 $ 261,900
Accounts receivable ....................... 7,697,100 9,232,900
Inventories ............................... -- --
Prepaid expenses and other ................ 266,000 335,500
Deferred income taxes ..................... 968,500 968,500
Total current assets ................. $ 9,062,000 $10,798,800
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - at
cost less accumulated depreciation and
amortization of $6,619,200 and
$6,503,800, respectively .................. 1,106,900 938,500
GOODWILL, less accumulated amortization of
$1,339,700 and $1,262,500, respectively ... 1,596,900 1,674,100
DEFERRED INCOME TAXES, net of valuation
allowance of $148,000 ..................... 805,200 805,200
OTHER ASSETS ................................ 2,077,200 1,542,700
TOTAL ASSETS $14,648,200 $15,759,300
NOTE: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
QuesTech, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30 Dec. 31
1995 1994
(Unaudited) (Note)
CURRENT LIABILITIES
<S> <C> <C>
Line of Credit ............................ $ 336,100 $ 254,200
Current maturities of long-term
obligations ............................. 54,100 51,100
Accounts payable .......................... 1,789,700 2,126,900
Accrued liabilities ....................... 4,097,900 5,344,300
Income taxes - Currently payable .......... 222,800 119,900
Total current liabilities ............ $ 6,500,600 $ 7,896,400
LONG-TERM OBLIGATIONS ....................... 184,800 213,300
INDEBTEDNESS TO RELATED PARTIES ............. 1,205,800 1,188,800
ACCRUED POST-RETIREMENT BENEFIT COST ........ 1,047,800 976,800
OTHER LONG TERM OBLIGATIONS ................. 794,000 831,300
Total Liabilities .................... $ 9,733,000 $11,106,600
STOCKHOLDERS' EQUITY
Common stock - authorized 3,000,000
shares of $.05 par value, issued
1,578,000 shares, outstanding
1,568,000 shares at June 30, 1995
and December 31, 1994 ................. 78,900 78,900
Additional paid in capital ................ 2,720,100 2,722,700
Retained earnings ......................... 2,553,000 2,313,600
Less Treasury Stock at cost ............... <30,000> <30,000>
Due from SECT ............................. <406,800> <432,500>
Total Stockholders' Equity ........... $ 4,915,200 $ 4,652,700
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,648,200 $15,759,300
NOTE: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
QuesTech, Inc. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<S> <C> <C> <C> <C>
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
Revenues ................................... $15,479,800 $13,666,700 $27,733,200 $25,447,500
Operating expenses
Salaries, wages and employee benefits .... 7,209,700 6,865,500 14,394,100 13,733,100
Other operating expenses ................. 7,665,800 6,486,100 12,440,200 11,121,000
Total operating expenses ........... $14,875,500 $13,351,600 $26,834,300 $24,854,100
Income from operations ............. 604,300 315,100 898,900 593,400
Other expense ............................ <223,000> -- <223,000> --
Interest expense ......................... <94,700> <81,400> <187,500> <195,300>
Earnings before income taxes ....... $ 286,600 $ 233,700 $ 488,400 $ 398,100
Provision for income taxes ................. 146,100 109,900 249,000 <187,200>
Net earnings ....................... $ 140,500 $ 123,800 $ 239,400 $ 210,900
Earnings per share:
Primary ................................. $ .10 $ .09 $ .17 $ .15
Fully diluted ........................... .09 .09 .16 .15
Weighted average number of common shares
outstanding:
Primary ................................. 1,425,570 1,385,520 1,415,718 1,374,026
Fully diluted ........................... 1,547,144 1,405,029 1,547,144 1,405,029
The accompanying notes are an integral part of these statements.
QuesTech, Inc. and Subsidiaries
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<S> <C> <C>
Six Months
Ended June 30
1995 1994
Increase <Decrease> in Cash and Cash Equivalents
Cash flows from operating activities:
Net Earnings .................................. $ 239,400 $ 210,900
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Depreciation and amortization ........... 306,700 332,000
Amortization of deferred credits ........ -- <103,000>
Other accrued costs ..................... -- <84,900>
Increase in fund values of nonqualifying
plan assets ........................... <102,000> <59,000>
Accrued post-employment benefits ........ 47,600 41,200
Accrued post-retirement benefits ........ 240,000 267,100
Changes in assets and liabilities ....... <362,200> 510,500
Net cash provided by operating activities $ 369,500 $ 1,114,800
Cash flows from investing activities:
Capital expenditures ...................... <459,300> <137,400>
Proceeds from return on investment in
whole life policies ..................... -- 90,000
Net cash used in investing activities ... <459,300> <47,400>
Cash flows from financing activities:
Increase/Decrease in Line of Credit ....... 81,900 <535,200>
Cash advance to SECT for stock acquisition <432,500>
Cash proceeds from exercise of stock
options ................................. 25,700 --
Repayment of long-term debt ............... <25,500> <72,900>
Repayment of indebtedness
to related parties ...................... <89,300> <83,600>
Repayment of other long-term debt ......... <34,500> <27,400>
Net cash used in financing activities ... <41,700> $<1,151,600>
Net decrease in cash .......................... $ <131,500> $ <84,200>
Cash, Beginning of period ..................... 261,900 172,500
Cash, End of period ........................... $ 130,400 $ 88,300
Cash payments for:
Interest ................................ $ 53,600 $ 72,000
Income taxes ............................ 155,800 435,100
The accompanying notes are an integral part of these statements.<PAGE>
</TABLE>
<PAGE>
<TABLE>
QuesTech, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Six Months
Ended June 30
1995 1994
<S> <C> <C>
Common Stock issued 1,578,000 shares
(including 10,000 treasury shares) ........ $ 78,900 $ 78,900
Additional paid in capital .................. $2,720,100 $2,722,700
Retained Earnings:
Balance at January 1 ...................... 2,313,600 1,995,800
Net Earnings .............................. 239,400 210,900
Balance at June 30 ........................ $2,553,000 $2,206,700
Cost of Treasury Stock:
Balance at June 30 ........................ $ <30,000> $ <30,000>
Due from SECT ............................... <406,800> <432,500>
Total Stockholders' Equity .................. $4,915,200 $4,545,800
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
QuesTech, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1995 and 1994
(Unaudited)
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in the annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Company believes that
the disclosures made are adequate to make the information presented not
misleading.
In the opinion of management, the accompanying condensed financial
statements reflect all necessary adjustments and reclassifications that are
necessary for fair presentation for the periods presented. It is suggested
that these condensed financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
company's latest annual report to the Securities and Exchange Commission on
Form 10-K. The results of operations for the three and six-month periods
ended June 30, 1995 are not necessarily indicative of the results to be
expected for the full year.
Earnings Per Share
Under the treasury stock method, per share earnings are calculated based
on weighted average shares, after accounting for dilutive common stock
equivalents, which consist of previously granted stock options with exercise
prices at $1.75, $1.875, and $4.00 per share. Outstanding shares are reduced
by the shares held by the Stock Employee Compensation Trust (SECT). See
Exhibit 11. For primary earnings per share, the computation for the period
prior to exercise is based on the average market price of common stock during
the period the exercised options were outstanding. For fully diluted earnings
per share, the computation for the period prior to exercise is based on the
market price of common stock when the options were exercised. Incremental
shares are weighted for the period that the options are outstanding. The bid
price of the stock at June 30, 1995 was $8.625 per share.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
The following table sets forth the percentages of major items reflected
in the Unaudited Consolidated Statements of Earnings as a percentage of
revenue.
<TABLE>
<S> <C> <C>
Six Months Ended
June 30
1995 1994
(restated)
Revenues 100.00% 100.00%
Operating Expenses 96.76 97.67
Income from operations 3.24% 2.33%
Other expense <.80> --
Interest <.68> <.77>
Provision for income taxes <.90> <.74>
Net Earnings .86% .82%
</TABLE>
For the quarter ended June 30, 1995, the Company posted revenues of $15.5
million, up by $1.8 million or 13% over last year; for the first half of the
year, revenues were $27.7 million, up $2.3 million or 9% over last year.
Continued business growth was due mainly to QuesTech Research Division
("QTRD"), which experienced a contract revenue increase of 19% for the quarter
and 16% for the half year, when compared to last year. Contract revenues rose
as a result of an increase in billable labor hours. QTRD was recently awarded
a five-year contract with a potential value of $300 million, the largest
contract in the Company's history. The contract calls for technical
engineering and fabrication support services for the Department of the Army.
Performance on this contract has stalled, pending the government's resolution
of an award protest filed by a competitor. Competitor bid protests are not
unusual in awards involving large contracts; although optimistic, management
does not provide any assurance of favorable results of the protest. QuesTech
Ventures, Inc., a subsidiary, did not report any sales during the quarter.
QuesTech Service Company continues to operate at half of last year's levels
but with improved margins.
Operating expenses were $14.9 million and $26.8 million for the quarter
and the half year, up $1.5 million and $2.0 million, respectively when
compared to last year. Most of the cost increase was driven by labor and
materials requirements of government contracts. Additional costs were
incurred in connection with the following: equipment set-up and other start-
up costs at QVI; site inspection and travel; on-going building repairs, moving
and re-arrangement expenses engendered by the consolidation of the
headquarters' staff in office space that has been reduced by over 60%; and new
employee relocation and recruitment. These expenses were mitigated in part by
cost savings arising from the renegotiated lease at the headquarters' facility
and from reduced B&P efforts.
<PAGE>
Income from operations increased 92% and 51% for the quarter and the half
year, respectively, due to the combined effects of improved project management
and corporate efforts to streamline and consolidate operations. Since 1989,
management has undertaken a massive cost-restructuring initiative which runs
the gamut from the downsizing of indirect costs and judicious B&P/IR&D
planning to renegotiation of its facility lease.
During the quarter, litigation involving the Company's former landlord
was concluded on terms unfavorable to the Company. The costs incurred on
these legal proceedings, amounted to approximately $222,000 and are reported
as Other Expense in the financial statements. These costs do not include any
provision for attorney's fees sought by the former landlord in a court
petition to be filed during the next quarter. See Part II, Item 1.
Interest expense rose during the quarter due to more frequent line of
credit borrowings to finance the growth in operations. The increase in
interest expense, coupled with Other Expense as described, scaled back the
quarterly earnings growth on both the pre-tax and net bases, which were up
22.6% and 13.5% respectively. For the six-month period pre-tax and net
earnings reflected slightly higher growth rates than the quarterly results due
to year-to-date interest cost savings.
Earnings per share calculation reflects, in its base, the inclusion of
13,200 shares released by the Stock Employee Compensation Trust and dilutive
common stock equivalents for 304,000 stock option shares. Reflecting full
dilution, earnings per share for the quarter were $0.09, which were the same
as last year, and $.16, up $.01 for the half year. Primary earnings per share
were $.10 and $.17, up $.01 and $.02, for the quarter and half year
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain financial data with respect to
changes in the Company's liquidity and capital resources since December 31,
1994: (in thousands of dollars except ratios)
<TABLE>
<S> <C> <C> <C>
6/30/95 12/31/94 NET CHANGES
Working capital $2,561 $ 2,903 $ <342>
Current assets 9,062 10,799 <1,737>
Current liabilities 6,501 7,896 <1,395>
Working capital ratio (1) 1.39 1.37 .02
</TABLE>
(1) Current assets over current liabilities.
During the second quarter, the Company benefited from improved cash flows
due to increased income from operations, supplemented by short-term
borrowings. The Company also received cash from certain officers and
<PAGE>
directors who exercised their options to purchase 13,200 shares of stock.
Shares held by the Stock Employee Compensation Trust were released
accordingly. Cash proceeds were applied towards the following:
- paydowns on long-term debt.
- capital acquisition and investments including leasehold improvements at
the corporate headquarters' office; new personal computers and furniture; and
facility and equipment build-out at QVI. These amounted to $459,300 in the
aggregate.
The Company is outfitting QVI's existing plant to begin production at a
capacity that will enable it to partially satisfy Munchkin's sales
requirements for infant bottle liners for next year. QVI is expected to
undertake a multi-million dollar investment in plant and machinery to meet its
contractual requirements. As an alternative to leasing a larger production
plant, management is exploring the financial viability of purchasing a
turnkey facility, developed according to certain technical specifications.
Financing terms through 10-year Industrial Revenue Bonds are currently being
negotiated subject to approval by the Board of Directors.
INFLATION
The impact of inflation on the Company's costs should be minimal due to
the fact that increased costs of this type are normally included in the
pricing structure or otherwise recovered through reimbursement of contract
costs incurred.
BACKLOG
The term "backlog" as used herein includes the aggregate contract
revenues, remaining to be earned at the stated time, to the extent of the
value of the contract award thereunder. Virtually all of the Company's
backlog is expected to be completed within four years. The following table
reflects the Company's funded and unfunded backlog as of June 30, 1995 and
June 30, 1994.
<TABLE>
Funded Backlog Unfunded Backlog
June 30 June 30
1995 1994 1995 1994
<C> <C> <C> <C>
$31,679,000 $33,300,000 *$472,071,000 $146,017,000
</TABLE>
*The unfunded backlog includes the $300 million contract value of the
recently awarded Department of the Army contract which is currently the
subject of a protest.
The term "funded" used herein refers to the portion of aggregate contract
revenues remaining to be earned that is covered by funding appropriations and
allotments to the contract by the procuring agency. The term "unfunded"
refers to the excess of the value of the contract award over the funded value.
Management does not provide any assurance that the customer will authorize
<PAGE>
funding amounts in addition to funding commitments existing as of the period
just ended.
<PAGE>
PART II
Item 1. Legal Proceedings
The following information is furnished regarding material pending
litigation involving the Company and specifically, proceedings which have been
terminated during the period covered by this Report. Litigation as reported
in the Company's 1994 Annual Report, in which there have been no material
developments during the second quarter, has been omitted.
a. QuesTech, Inc. v. 7600 Limited Partnership.
This civil action for damages against the Company's former landlord
at the Headquarters Building, 7600 Limited Partnership ("7600 L.P."), pending
in the Circuit Court for Fairfax County, Virginia, was concluded on May 22,
1995. In this case, the Company sought damages of approximately $500,000 as
a result of 7600 L.P. having charged the Company for 114,759 square feet of
office space which was an improper calculation under any recognized standard
for measuring space. The error caused the Company to be charged rent on
approximately 5,500 square feet it never received. The landlord originally
defended the case on the grounds that the Company's lease was unambiguous
because it set forth the amount of total square footage. After extensive
motions, practice and argument, the Circuit Court determined that the lease
was ambiguous in this regard and ordered the case for trial to take evidence
on the parties' intention on the amount of square footage. On May 22, 1995,
when the case was to be tried to a jury, the Circuit Court (a different judge
from the one that had ruled on the motion) overruled the first ruling, and
declared the lease to be unambiguous regarding the amount of square footage.
Accordingly, the case was dismissed on a motion before the jury was empaneled.
Management has determined not to take an appeal of the Court's
ruling on May 22, 1995 because it does not believe the expenditure of any
further attorney's fees and costs in the case is warranted, in view of the
chance of obtaining a new trial. The Company will have to defend 7600 L.P.'s
Petition for Attorneys' Fees which it expects to be filed in the next quarter.
b. QuesTech, Inc. v. 7600 Limited Partnership.
This civil action for damages sought in excess of $500,000 against
7600 L.P., and was pending in the Circuit Court for Fairfax County. The basis
of the case, concluded on June 14, 1995, was that under paragraph 19 of the
Company's Headquarters' lease, the Company was relieved of all liability for
9,250 square feet of the second floor of the Headquarters Building when it
entered into a sublease with Science Applications International Corporation
for that space in April, 1992. On 7600 L.P.'s motion for summary judgment in
the early stages of the case, the Circuit Court had ruled that the language of
paragraph 19 indicated that the Company had been released of liability for
this space and that 7600 L.P. had the burden of proving waiver or estoppel on
the part of the Company. The Company sought a trial by jury as to these
issues.
<PAGE>
On June 13-14, 1995, the circuit Court held a preliminary
evidentiary hearing on whether the provisions were ambiguous. The Court
decided that while paragraph 19 was ambiguous as to whether the Company was
released of liability, the subject language in effect should be disregarded;
therefore there was no release of the Company as to this space. The Company
objected to this ruling specifically because of the fact that it was made
without empaneling a jury to decide these issues.
The management of the Company has determined not to take an appeal
of the Circuit Court's decision because of its determination not to expand
further attorneys' fees and costs for this litigation. 7600 L.P. will be
filing the Petition for Attorneys' Fees in the next quarter which the Company
will actively defend.
The Company, including its subsidiaries, are not subject to any
other material pending legal proceedings, and none of the assets of the
Company or its subsidiaries are subject to any such proceedings, other than
what constitutes routine litigation incidental to the business and against
which the Company is either adequately insured or which is not material.
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10. Material Contracts
(z1) Loan and Security Agreement between the Company and Signet Bank
of Virginia dated May 31, 1995, Amendment No. 10.
ll. Statement of Computation of Earnings Per Share.
(b) Reports on Form 8-K:
No reports on Form 8-K were required to be filed during the second
quarter of 1995.
<PAGE>
S.E.C. FORM 10-Q
June 30, 1995
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.
QUESTECH, INC.
(Registrant)
Date: ______________________ ________________________________
Vincent L. Salvatori
Chief Executive Officer
and Chairman of the Board
Date: ______________________ ________________________________
Joseph P. O'Connell, Jr.
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 10
AMENDMENT NO. 10 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 10 TO LOAN AND SECURITY AGREEMENT (this "Amendment"),
dated as of the 31st day of May, 1995, is made by and among QuesTech, Inc., a
Virginia Corporation, QuesTech Service Company, a Virginia Corporation (the
"Borrowers") and SIGNET BANK/VIRGINIA, a Virginia banking corporation (the
"Lender").
RECITALS
A. The Lender and the Borrowers entered into a Loan and Security Agreement,
dated as of July 15, 1991, (as amended through the date hereof, the
"Agreement") pursuant to which the Lender has agreed to extend credit to the
Borrowers, and the Borrowers have agreed to obtain credit from the Lender, on
the terms and conditions set forth in such Agreement.
B. The Borrowers have requested that the Lender modify the Termination Date,
and the Lender has consented to such request subject to the execution of this
Amendment and the satisfaction of the conditions specified herein.
C. The Borrowers and the Lender now desire to execute this Amendment to set
forth their agreements with respect to the modifications to the Agreement.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lender and the Borrowers
agree as follows:
SECTION 1. Definitions. Capitalized terms used in this Amendment and
not defined herein are defined in the Agreement.
SECTION 2. Amendments to Agreement. The Agreement is hereby amended as
follows:
2.1 Amendments to Section 1. Section 1 of the Agreement
is amended as follows:
Termination Date. The definition of the term
Termination Date is replaced in its entirety with the following definition:
"Termination Date" means August 31, 1995, and
any extension or extensions hereof granted by the Lender in its sole
discretion.
SECTION 3. Representations and Warranties of Borrowers. The Borrowers
represent and warrant to the Lender that:
(a) They have the power and authority to enter into and to perform
this Amendment, to execute and deliver all documents relating to this
Amendment, and to incur the obligations provided for in this Amendment, all of
which have been duly authorized and approved in accordance with the Borrowers'
corporate documents;
<PAGE>
(b) This Amendment, together with all documents executed pursuant
hereto, shall constitute when executed the valid and legally binding
obligations of the Borrowers in accordance with their respective terms;
(c) Except with respect to events or circumstances occurring
subsequent to the date thereof and known to the Lender, all representations
and warranties made in the Agreement are true and correct as of the date
hereof, with the same force and effect as if all representations and
warranties were fully set forth herein;
(d) The Borrowers' obligations under the Loan Documents remain
valid and enforceable obligations, and the execution and delivery of the
amendment and the other documents executed in connection herewith shall not be
construed as a novation of the Agreement or any of the other Loan Documents;
and
(e) As of the date hereof, the Borrowers have no offsets or
defenses against the payment of any of the Obligations.
SECTION 4. Waiver of Claims. As a specific inducement to the Lender
without which the Borrowers acknowledge the Lender would not enter into this
Amendment and the other documents executed in connection herewith, the
Borrowers hereby waive any and all claims that it may have against the Lender,
as of the date hereof, arising out of or relating to the Agreement or any
other Loan Document whether sounding in contract, tort or any other basis.
SECTION 5. Conditions of Effectiveness. This Amendment shall become
effective when, and only when the Lender shall have received this Amendment,
executed and completed by the Borrowers.
SECTION 6. Miscellaneous.
6.1 Reference to Agreement. Upon the effectiveness of
this Amendment, each reference in the Agreement to 'this Agreement" and each
reference in the other Loan Documents to the Agreement, shall mean and be a
reference to the Agreement as amended hereby.
6.2 Effect on Loan Documents. Except as specifically
amended above, the Agreement and all other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed. Without limiting the
generality of the foregoing, all Collateral given to secure the Obligations of
the Borrowers under the Agreement and the other Loan Documents prior to the
date hereof does and shall continue to secure all Obligations of the Borrowers
under the Agreement, as amended hereby and the other Loan Documents, and,
except as provided in the Agreement and the other Loan Documents, no such
Collateral shall be released until all Obligations are satisfied and
completely discharged.
6.3 No Waiver. The execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right, power or remedy
of the Lender under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
<PAGE>
6.4 Costs, Expenses and Taxes. The Borrowers agree to
pay on demand all costs and expenses of the Lender in connection with the
preparation, reproduction, execution and delivery of this Amendment and the
other instruments and documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect hereto.
6.5 Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the Commonwealth of Virginia,
without giving effect to conflict of law provisions.
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Amendment to be signed by their duly authorized representatives under seal all
as of the day and year first above written.
QuesTech, Inc.
a Virginia corporation
ATTEST: By: _____________________
Name: ___________________
Title: ___________________
_________________________
(Secretary)
[corporate seal]
QuesTech Service Company,
a Virginia corporation
ATTEST: By: _____________________
Name: ___________________
Title: ___________________
_________________________
(Secretary)
[corporate seal]
SIGNET BANK/VIRGINIA, a
Virginia banking corporation
By: _______________________
Loriana Cipolletti
Vice President
<PAGE>
EXHIBIT 11
QuesTech, Inc.
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
Net income ................... $ 140,500 $ 123,800 $ 239,400 $ 210,900
Actual shares outstanding .... 1,568,000 1,568,000 1,568,000 1,568,000
Less: Shares held by the SECT <208,592> <221,792> <208,592> <221,792>
Number of shares used for
calculating earnings per
share ...................... 1,359,408 1,346,208 1,359,408 1,346,208
Weighted average number of
shares outstanding:
Primary .................... 1,425,570 1,385,520 1,415,718 1,374,026
Fully diluted .............. 1,547,144 1,405,029 1,547,144 1,405,029
Earnings per share:
Primary .................... $ .10 .09 .17 .15
Fully diluted .............. $ .09 $ .09 $ .16 $ .15
</TABLE>
<PAGE>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS (AS OF JUNE 30, 1995) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
<TABLE>
Appendix A To Item 601(c) of Registration S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
<S> <C> <C>
June 30, 1995
Item Number Item Description Y-T-D
5-02(1) Cash and cash items 130,400
5-02(2) Marketable securities 0
5-02(3)(a)(1) Notes and accounts receivable-trade 7,697,100
5-02(4) Allowances for doubtful accounts 0
5-02(6) Inventory 0
5-02(9) Total current assets 9,062,000
5-02(13) Property, plant and equipment 7,726,100
5-02(14) Accumulated depreciation 6,619,200
5-02(18) Total assets 14,648,200
5-02(21) Total current liabilities 6,500,600
5-02(22) Bonds, mortgages and similar debt 3,232,400
5-02(28) Preferred stock - mandatory
redemption 0
5-02(29) Preferred stock - no mandatory
redemption 0
5-02(3) Common stock 78,900
5-02(31) Other stockholders' equity 4,836,300
5-02(32) Total liabilities and stockholders'
equity 14,648,200
5-03(b)1(a) Net sales of tangible products 0
5-03(b)1 Total revenue 27,733,200
5-03(b)2(a) Cost of tangible goods sold 0
5-03(b)2 Total costs and expenses applicable
to sales and revenues 26,834,300
5-03(b)3 Other costs and expenses 223,000
5-03(b)5 Provision of doubtful accounts and
notes 0
5-03(b)(8) Interest and amortization of debt
discount 187,500
5-03(b)(10) Income before taxes and other items 488,400
5-03(b)(11) Income tax expense 249,000
5-03(b)(14) Income/loss continuing operations 239,400
5-03(b)(15) Discontinued operations 0
5-03(b)(17) Extraordinary items 0
5-03(b)(18) Cumulative effect-changes in
accounting principles 0
5-03(b)(19) Net income of loss 239,400
5-03(b)(20) Earnings per share - primary .17
5-03(b)(20) Earnings per share - fully diluted .16
(Added by Sec Act Rel No. 6977, eff 4/26/93.)
</TABLE>
