<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ___________________
To __________________
Nichols Research Corporation
_____________________
Commission File Number 0-15295
(Exact name of registrant as specified in its charter)
_____________________
DELAWARE 63-0713665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
4040 Memorial Parkway, South
Huntsville, Alabama 35802-1326
(205) 883-1140
(Address, including zip code, of principal offices)
_____________________
NO CHANGE
(Former name, address and 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 practical date.
COMMON STOCK, $.01 PAR VALUE
6,366,956 SHARES OUTSTANDING ON November 30 ,1995
_____________________
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<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
QUARTERLY REPORT FOR THE PERIOD ENDED NOVEMBER 30, 1995
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income for the Three Months Ended November 30,
1995 and November 30, 1994 (Unaudited)
Balance Sheets as of November 30, 1995 and August 31, 1995
(Unaudited)
Statements of Changes in Stockholders' Equity for the Three
Months Ended November 30, 1995 and November 30, 1994
(Unaudited)
Statements of Cash Flows for the Three Months Ended November
30, 1995 and November 30, 1994 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II.OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended
November 30, November 30,
1995 1994
----------------------------------
(amounts in thousands
except share data)
Revenues $ 49,030 $ 36,231
Costs and expenses:
Direct and allocable contract costs 41,671 31,638
General and administrative expenses 4,421 2,323
----------------------------------
Total costs and expenses 46,092 33,961
----------------------------------
Operating profit 2,938 2,270
Other income (expense):
Interest expense (39) -
Other income, principally interest 272 292
----------------------------------
Income before income taxes 3,171 2,562
Income taxes 1,157 934
----------------------------------
Net income $ 2,014 $ 1,628
==================================
Earnings per share $ .30 $ .27
==================================
Weighted average number of common
and common equivalent shares 6,642,305 6,136,567
==================================
NOTE: The Company has not declared or paid dividends in any of the
periods presented.
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
November 30, August 31,
1995 1994
----------------------------------
(amounts in thousands)
ASSETS
Current assets:
Cash and temporary cash investments $ 9,489 $ 17,196
Accounts receivable 59,920 53,103
Deferred income taxes 1,351 1,351
Other 1,863 1,593
----------------------------------
Total current assets 72,623 73,243
Long-term investments 4,518 4,530
Property and equipment:
Computers and related equipment 12,611 11,973
Furniture, equipment and improvements 5,611 5,149
Equipment-contracts 5,771 5,771
----------------------------------
23,993 22,893
Less accumulated depreciation 12,206 11,434
----------------------------------
Net property and equipment 11,787 11,459
Goodwill (net of accumulated amortization) 8,614 8,803
Other assets 3,226 2,844
----------------------------------
Total assets $ 100,768 $ 100,879
==================================
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CONTINUED
November 30, August 31,
1995 1995
---------------------------------
(amounts in thousands except
share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,148 $ 16,886
Accrued compensation and benefits 7,152 6,897
Income taxes payable 1,224 969
Current maturities of long-term debt 1,187 1,187
Other 823 531
---------------------------------
Total current liabilities 23,534 26,470
Deferred income taxes 1,195 1,195
Long-term debt:
Industrial development bonds 2,000 2,000
Long-term notes 3,126 3,366
---------------------------------
Total long-term debt 5,126 5,366
Stockholders' equity:
Common stock, par value $.01 per share
Authorized - 10,000,000 shares
Issued - 6,551,333 and 6,439,227 shares
respectively 65 64
Additional paid-in capital 25,308 24,258
Retained earnings 47,683 45,669
Less cost of treasury stock - 184,377
shares (2,143) (2,143)
---------------------------------
Total stockholders' equity 70,913 67,848
---------------------------------
Total liabilities and stockholders'
equity $ 100,768 $ 100,879
=================================
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Treasury Stockholders'
Shares Amount Capital Earnings Stock Equity
-------------------------------------------------------------
(amounts in thousands except share data)
For the Three Months Ended November 30, 1995
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 31,
1995 6,439,227 $ 64 $ 24,258 $ 45,669 $(2,143) $67,848
Exercise of stock
options 101,991 1 850 - - 851
Employee stock
purchases 10,115 - 200 - - 200
Net income - - - 2,014 - 2,014
-------------------------------------------------------------
Balance, November 30,
1995 6,551,333 $ 65 $ 25,308 $ 47,683 $(2,143) $70,913
=============================================================
For the Three Months Ended November 30, 1994
---------------------------------------------
Balance, August 31,
1994 6,262,137 $ 63 $ 22,528 $ 38,467 $(3,750) $57,308
Exercise of stock
options 35,125 - 205 - - 205
Employee stock purchases 12,112 - 128 - - 128
Sale of 70,000 shares of
treasury stock - - - - 815 815
Net income - - - 1,628 - 1,628
-----------------------------------------------------------
Balance, November 30,
1994 6,309,37 $ 63 $ 22,861 $ 40,095 $(2,935) $60,084
===========================================================
</TABLE>
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
November 30, November 30,
1995 1994
----------------------------
(amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,014 $ 1,628
Adjustments to reconcile net income to net
cash provided (used) by
operating activities:
Depreciation and amortization 1,017 599
Loss on sale of investments - 29
Changes in assets and liabilities net
of effects of acquisitions:
Accounts receivable (6,817) (1,933)
Other assets (296) 936
Accounts payable (3,738) (2,234)
Accrued compensation and benefits 255 1,045
Income taxes payable 255 (6)
Other current liabilities 292 -
----------------------------
Total adjustments (9,032) (1,564)
----------------------------
Net cash provided (used) by
operating activities (7,018) 64
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,100) (230)
Payment for non-compete agreement - (900)
Payments for acquisitions, net of cash
acquired - (905)
Payment for investment in HealthGate Date Corp. (400) -
Proceeds from sale of long-term investments - 289
----------------------------
Net cash used by investing activities (1,500) (1,746)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,051 333
Proceeds from sale of treasury stock - 734
Payments of long-term debt (240) (240)
----------------------------
Net cash provided by financing activities 811 827
----------------------------
Net decrease in cash and temporary cash
investments (7,707) (855)
Cash and temporary cash investments at
beginning of period 17,196 19,355
----------------------------
Cash and temporary cash investments at
end of period $ 9,489 $ 18,500
============================
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
CONTINUED
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Deferred compensation resulting from
the exercise of restricted stock
options and issuance of treasury stock $ - $ 81
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
November 30, 1995
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements (and all other
information in this report) have not been examined by independent
auditors, but in the opinion of the Company, all adjustments,
consisting of the normal recurring accruals necessary for a fair
presentation of the results for the period, have been made. The
condensed consolidated financial statements include the accounts
of Nichols Research Corporation and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation.
NOTE 2 - INVESTMENT
In October 1995, the Company entered into an agreement to purchase
1,000 shares of Series B Preferred Stock of HealthGate Data
Corporation (HealthGate). HealthGate provides a biomedical and
health information system on the World Wide Web. The agreement
provides for four equal purchase installments of $400,000,
contingent upon HealthGate achieving certain milestones as defined
in the agreement. The first installment was made in October 1995.
The 1,000 shares of Preferred Stock are convertible to 20% of the
common stock on a fully diluted basis at the date of the
agreement.
NOTE 3 - RECLASSIFICATION
Certain prior period amounts have been reclassified to conform
with the current period's presentation.
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The Company provides information systems and technology services
to agencies of the Department of Defense, non-defense federal
agencies, state governments and commercial entities. The major
portion of the Company's revenues result from services performed
under U.S. Government contracts, either directly or through
subcontracts.
The following tables set forth, for the periods indicated, the
percentage change in certain items in the consolidated statements
of income and the percentages such items bear to consolidated
revenues.
For the Three Months Ended
November 30, November 30, Amount of Percent
1995 1994 Change Change
------------------------------------------------
(amounts in thousands )
Revenues $ 49,030 $ 36,231 $12,799 35.3%
Costs and expenses:
Direct and allocable costs 41,671 31,628 10,033 31.7
General and administrative
expenses 4,421 2,323 2,098 90.3
------------------------------------
Total costs and expenses 46,092 33,961 12,131 35.7
------------------------------------
Operating profit 2,938 2,270 668 29.4
Other income (expense):
Interest expense (39) - 39 N/A
Other income, principally
interest 272 292 (20) (6.8)
------------------------------------
Income before income taxes 3,171 2,562 609 23.8
Income taxes 1,157 934 223 23.9
------------------------------------
Net income $ 2,014 $ 1,628 $ 386 23.7%
====================================
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
For the Three Months Ended
November 30,November 30,
1995 1994
--------------------------
Revenues 100.0% 100.0%
Costs and expenses:
Direct and allocable costs 85.0 87.3
General and administrative
expenses 9.0 6.4
--------------------------
Total costs and expenses 94.0 93.7
--------------------------
Operating profit 6.0 6.3
Interest expense (0.1) 0.0
Other income 0.6 0.8
--------------------------
Income before income taxes 6.5 7.1
Income taxes 2.4 2.6
--------------------------
Net income 4.1% 4.5%
==========================
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
Revenues for the three months ended November 30, 1995 increased
35.3%, or $12.8 million, as compared to the three months ended
November 30, 1994. The increase was primarily the result of the
revenues from an information technology services contract with a
commercial customer and the revenues contributed by two
information technology subsidiaries acquired late in the 1995
fiscal year. Revenue from Government Systems and Technologies
contracts was approximately $27,546,000 (56%), revenue from
Government Information Services contracts was approximately
$10,458,000 (21%) and revenue from Commercial/Healthcare
Information Services contracts was approximately $11,026,000 (23%)
for the three months ended November 30, 1995.
Costs and expenses increased to 94.0% of revenues for the three
months ended November 30, 1995 as compared to 93.7% for the three
months ended November 30, 1994. The reduction in direct and
allocable costs as a percentage of revenues is offset by increases
in general and administrative expenses which reflect the efforts
to use contract cost reductions to fund planned increases in
business development and marketing efforts.
Other income of $272,000 consists primarily of interest income.
Substantially all available cash is invested in interest bearing
accounts and fixed income instruments.
Income taxes were approximately 36.5% of pretax income for the
three months ended November 30, 1995, consistent with the same
period in the prior year.
Net income increased 23.7%, or $386,000, for the reasons discussed
above.
During the three months ended November 30, 1995, the Company won
new contract awards totaling approximately $16,458,000 as compared
to approximately $44,837,000 for the three months ended November
30, 1994. The new contract awards for the three months ended
November 30, 1994 included one contract award of $35,800,000.
The Company's backlog at November 30, 1995 and November 30, 1994,
was as follows:
1995 1994
---- ----
Base period contracts and
exercised options, net of
services provided $261,924,000 $273,428,000
Options 211,803,000 262,760,000
---------------------------
Total $473,727,000 $536,188,000
===========================
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
Backlog at November 30, 1995 decreased compared to November 30,
1994 due to the lower value of new contract awards. At November
30, 1995 the Company has proposals outstanding on several
substantial contracts for which the award dates have been delayed.
The Company's business is dependent upon its ability to win new
contracts, the funding levels of awarded contracts and the
Company's ability to perform under contract provisions.
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
FINANCIAL CONDITION
For the three months ended November 30, 1995, operating activities
used $7,018,000 in cash as compared to providing $64,000 during
the three months ended November 30, 1994. The increase in use of
cash was the result of the increase in sales and accounts
receivable. The Company realized proceeds from the issuance of
common stock during the three months ended November 30, 1995 of
$1,051,000 as compared to $333,000 during the three months ended
November 30, 1994. During the three months ended November 30,
1994 the Company reissued 70,000 shares of treasury stock,
providing cash of $734,000.
Working capital was $49,089,000 at November 30, 1995 as compared
to $45,989,000 at November 30, 1994. The Company also has
$4,518,000 invested primarily in fixed income instruments at
November 30, 1995, as compared to $7,576,000 at November 30, 1994.
The Company has a bank line of credit which provides for borrowing
up to $73,500,000, secured primarily by accounts receivable.
During the three months ended November 30, 1995, the Company had
no outstanding borrowings under the provisions of this line of
credit. Long-term debt includes a term note used to purchase
computer hardware for lease to a customer under a system
integration contract. The proceeds from an Alabama State
Industrial Development Bond are being used to expand information
technology programs.
Purchases of property and equipment were $1,100,000 during the
three months ended November 30, 1995, as compared to $230,000
during the three months ended November 30, 1994. The Company is
upgrading its enterprise information systems as well as replacing
capital assets in the normal course of business.
The Company is actively pursuing new contracts for information
system development and computer system integration activities
which could require to the Company to acquire substantial amounts
of computer hardware. The Company will also take advantage of
opportunities to make strategic acquisitions, should they arise.
The Company believes that its existing capital resources, together
with available borrowing capacity, are sufficient to fund these
objectives.
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) The Company has not filed any reports on Form 8-K for the three
months ended November 30, 1995.
<PAGE>
FORM 10-Q
NICHOLS RESEARCH CORPORATION
SIGNATURES
MANAGEMENT REPRESENTATION
The accompanying unaudited Consolidated Balance Sheets at
November 30, 1995, and August 31, 1995 as well as the Consolidated
Statements of Income, Consolidated Statements of Changes in
Stockholders' Equity and Consolidated Statements of Cash Flows for
the three months ended November 30, 1995 and 1994, have been
prepared in accordance with instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair
presentation have been included.
January 16, 1996 Allen E. Dillard
- ------------------------ -------------------------
Date Allen E. Dillard
Vice President and Chief
Financial Officer
(Principal Finance and
Accounting Officer)
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.
NICHOLS RESEARCH CORPORATION
January 16, 1996 By: Allen E. Dillard
- ------------------------ -------------------------
Date Allen E. Dillard
Vice President and Chief
Financial Officer
(Principal Finance and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> NOV-30-1995
<CASH> 9,489
<SECURITIES> 0
<RECEIVABLES> 59,920
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 72,623
<PP&E> 23,993
<DEPRECIATION> 12,206
<TOTAL-ASSETS> 100,768
<CURRENT-LIABILITIES> 23,534
<BONDS> 5,126
<COMMON> 65
0
0
<OTHER-SE> 70,848
<TOTAL-LIABILITY-AND-EQUITY> 100,768
<SALES> 49,030
<TOTAL-REVENUES> 49,030
<CGS> 41,671
<TOTAL-COSTS> 41,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 3,171
<INCOME-TAX> 1,157
<INCOME-CONTINUING> 2,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,014
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
