SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
EXCHANGE ACT OF 1934
For the quarter Commission File
ended: March 31, 1997 Number: 000-23966
BDM International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 54-1561881
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1501 BDM Way, McLean, Virginia 22102-3204
(Address of principal executive office) (Zip Code)
Registrant's telephone number
including area code: 703-848-5000
Not Applicable
(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
As of the close of business on April 30, 1997, the registrant had outstanding
29,183,139 shares of Common Stock, par value $.01 per share.
<PAGE>
PART I
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
BDM International, Inc.:
Consolidated Balance Sheets as of
March 31, 1997 (Unaudited) and December 31, 1996..................2
Consolidated Statements of Operations for the
Three Months Ended March 31, 1997 and 1996 (Unaudited) ...........3
Condensed Consolidated Statements of Cash Flow for the
Three Months Ended March 31, 1997 and 1996 (Unaudited) ...........4
Notes to Consolidated Financial Statements (Unaudited) ....................5
<PAGE>
BDM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 54,762 $ 79,376
Accounts receivable, net 239,738 234,105
Prepaid expenses and other 6,295 7,695
----------------- ----------------
Total current assets 300,795 321,176
Property and equipment, net 54,767 48,519
Intangible assets, net 34,501 35,881
Deposits and other 8,106 9,586
Equity in and advances to affiliates 5,563 5,492
----------------- ----------------
Total assets $ 403,732 $ 420,654
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 148,018 $ 164,399
Debt currently payable 7,609 3,487
Income taxes payable 4,839 5,230
Deferred tax liability 7,180 11,155
----------------- ----------------
Total current liabilities 167,646 184,271
Deferred tax liability 2,557 2,544
Long term debt 14,464 22,813
Severance and other 12,137 13,911
Minority interest 31,669 29,860
----------------- ----------------
Total liabilities 228,473 253,399
----------------- ----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
500,000 shares authorized, none issued - -
Common stock, $.01 par value; 29,089,132
and 14,414,020 shares issued and
outstanding at March 31, 1997 and
December 31, 1996, respectively 290 144
Additional paid in capital 107,850 103,537
Retained earnings 71,340 64,465
Deferred compensation (1,207) (1,419)
Cumulative translation adjustment (3,014) 528
------------------ ----------------
Total stockholders' equity 175,259 167,255
----------------- ----------------
Total liabilities and stockholders' equity $ 403,732 $ 420,654
================= ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
BDM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
(unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenue $ 250,578 $ 225,107
------------ -----------
Cost of sales 208,209 188,892
Selling, general and administrative 24,285 20,441
Depreciation, amortization and other 4,317 4,058
------------ -----------
Operating profit 13,767 11,716
Interest (income) expense, net (909) (248)
Equity in earnings of affiliates (473) (451)
Minority interest 3,172 2,921
------------ -----------
Income before income taxes 11,977 9,494
Provision for income taxes 5,102 4,087
------------ -----------
Net income $ 6,875 $ 5,407
============ ===========
Earnings per common share
and common share equivalent:
Net income per share $ 0.23 $ 0.19
============ ===========
Weighted average common
shares and common share
equivalents outstanding 30,416 27,956
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
BDM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the three months ended March 31, 1997 and 1996
(unaudited, in thousands)
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net cash (used in) provided by operating activities $ (7,527) $ 12,155
---------- -----------
Cash flow from investing activities:
Additions to property and equipment (11,305) (4,349)
Purchase of business, net of cash acquired (1,754) (8,695)
Distributions from unconsolidated affiliates 50 300
---------- -----------
Net cash used in investing activities (13,009) (12,744)
---------- -----------
Cash flow from financing activities:
Net borrowings (repayments) of credit facility 1,766 (22,754)
Installment payment of acquisition debt (4,038) --
Proceeds from issuance of common stock 2,452 22,215
---------- -----------
Net cash provided by (used in) financing activities 180 (539)
---------- -----------
Effect of exchange rate changes on cash
and cash equivalents (4,258) (1,862)
---------- -----------
Net decrease in cash and cash equivalents (24,614) (2,991)
Cash and cash equivalents, beginning of period 79,376 69,143
---------- -----------
Cash and cash equivalents, end of period $ 54,762 $ 66,152
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General
-------
The accompanying financial statements of BDM International, Inc. and
its subsidiaries (BDM or the Company) as of March 31, 1997 and for interim
periods ended March 31, 1997 and 1996, are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The balance sheet data as of December 31, 1996, was derived from the Company's
audited financial statements. Certain other information and disclosures included
in the Company's annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the above referenced rules and regulations. It is suggested that these
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 accompanying consolidated financial statements reflect all
adjustments and reclassifications that, in the opinion of management, are
necessary for a fair presentation. All such adjustments and reclassifications
have been deemed to be of a recurring nature, except as described in this
report.
(2) Income Taxes
------------
The Company uses the estimated annual effective rate method for interim
income tax purposes. The difference between the combined statutory federal and
state income tax rate of 42% and the Company's actual effective income tax rate
of 43% for the three months ended March 31, 1997 and 1996, is primarily
attributable to goodwill amortization which is not deductible for federal income
tax purposes, thus resulting in the higher effective tax rate.
(3) Earnings Per Share
------------------
Net income per common share is net income divided by the weighted
average number of common shares and common share equivalents outstanding during
the period. The Company's common share equivalents consist entirely of stock
options.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS
128). FAS 128 simplifies the existing earnings per share (EPS) computations
under Accounting Principles Board Opinion No. 15, "Earnings Per Share," revises
disclosure requirements, and increases the comparability of EPS data on an
international basis. In simplifying the EPS computations, the presentation of
primary EPS is replaced with basic EPS, with the principal difference being that
common stock equivalents are not considered in computing basic EPS. In addition,
FAS 128 requires dual presentation of basic and diluted EPS. FAS 128 is
effective for financial statements issued for periods ending after December 15,
1997. Had FAS 128 been effective for the first quarter of 1997, EPS would have
been $0.24 and $0.21 for the three months ended March 31, 1997 and 1996,
respectively.
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4) Capital stock transactions
--------------------------
On February 21, 1997, the Company's Board of Directors declared a
two-for-one split of the Company's common shares, effected in the form of a
stock dividend, to shareholders of record as of the close of business on March
6, 1997. Distribution of the additional shares took place on March 20, 1997. In
connection with the split, the Company's Board of Directors approved the
increase in the number of shares of Common Stock authorized for issuance to
100,000,000 shares, subject to approval of shareholders which was received on
May 9, 1997. The shares and per share data in the consolidated financial
statements have been restated to reflect this stock split.
On March 27, 1996, the Company completed an offering of Common Stock to
the public in which 3,220,000 shares of Common Stock were sold at $36.50 per
share. Of the total number of shares offered, 450,000 shares were primary shares
and the remaining 2,770,000 shares were sold by certain of the Company's
shareholders, including 400,000 Class B shares, which were converted to Common
Stock immediately prior to the offering. The net proceeds of approximately $15.3
million were used for general corporate purposes and to finance acquisitions.
(5) Acquisitions
------------
During 1996, the Company completed several acquisitions. On February
20, 1996, the Company acquired three affiliated companies - CW Systems, Inc., IG
Systems, Inc. and Melco Systems, Inc. - for $18.5 million. The acquired
companies specialize in providing information technology systems and services to
large commercial organizations in various industries, as well as to various
state agencies. On November 4, 1996, the Company purchased the operations of
RGTI Systems Software, a company specializing in warehouse management solutions
for $18.4 million. Effective November 1, 1996, the Company acquired the assets
of two related companies, Advances Systems Design, Inc. (ASD) and Software
Engineering, Inc. (SEI) for $4.8 million. These companies provide services in
state and local government human services systems design and development.
These acquisitions were accounted for as purchases with aggregate
goodwill of approximately $25 million in 1996. The results of their operations
are included in the consolidated results of the Company from the dates of
acquisition.
On April 30, 1997, the Company acquired Largotim Holdings, Ltd., a
worldwide distributor and integrator of enterprise resource planning software
and solutions, for approximately $39 million. The transaction will be accounted
for as a purchase, resulting in goodwill of approximately $21 million to be
amortized over fifteen years. Included in the purchase price is the acquisition
of intangible assets of approximately $15 million, which will be amortized over
periods ranging from four to fifteen years. The transaction also provides
additional consideration to the sellers if certain profitability targets are met
by December 31, 1998.
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(6) Restructuring
-------------
The Company announced a new alignment of its business operations during
the third quarter of 1996. This new organization consists of five strategic
business units - Federal Systems, State and Local Systems, Integrated Supply
Chain Solutions, BDM Europe and Enterprise Management Services. In addition, the
new BDM Technologies will comprise development units focused on promising IT
areas. This organizational realignment resulted in a pre-tax restructuring
charge of $5.8 million to 1996 third quarter earnings, which included a
write-down of $3.1 million of certain assets of GCL, severance costs totaling
$1.8 million for approximately 40 employees across several subsidiaries, and the
accrual of approximately $0.9 million for certain facility expenses. The
write-down at GCL affected primarily goodwill and fixed assets, and was
determined based on analyses of future cash flow expected from that area of
business after changes in strategic direction resulting from the business
realignment. During the fourth quarter of 1996 and the first quarter of 1997,
the Company made payments of $452,000 and $448,000, respectively against the
restructuring reserve related primarily to severance and lease costs. At March
31, 1997, approximately $591,000 remained in the reserve balance.
(7) Other Matters
-------------
The Company has been informed that a civil "qui tam" lawsuit has been
filed against the Company and has received a copy of the Complaint in that
action. The matter is currently under Court seal. The Complaint alleges
violation under the Federal False Claims Act in connection with certain
mischarging under overseas government contracts administered by the U. S. Air
Force, related to certain housing rented in connection with overseas operations,
alleged improper hiring of and payments to certain employees, alleged improper
payments to a subcontractor, and alleged improper purchases and payments made in
support of client activities. Aggregate revenue from these contracts in calendar
year 1996 was approximately $41 million. In connection with this case, BDM has
received a subpoena for information in a civil investigation underway by the
Office of Inspector General of the Department of Defense and an Assistant U. S.
Attorney for the Eastern District of Virginia with respect to the matters
alleged in the Complaint. BDM will cooperate fully with the Government and
expects to make extensive document production in response to the subpoena.
<PAGE>
BDM INTERNATIONAL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(6) Other Matters, cont'd
---------------------
The Company is engaged in providing services and products under
contracts with the U. S. Government and, to a lesser degree, under foreign
government contracts, some of which are administered by the U. S. Government.
All such contracts are subject to extensive legal and regulatory requirements,
and the above mentioned investigation apparently focuses on whether the
Company's overseas operations in connection with the subject contracts were
conducted in accordance with such requirements. The lawsuit and related
investigation could result in administrative, civil or criminal liabilities,
including reimbursements, fines or penalties being imposed. Under the provisions
of the False Claims Act, a civil penalty of between $5,000 and $10,000 can be
assessed for each claim, plus three times the amount of any damages sustained by
the Government. The Complaint seeks such relief but does not specify the amount
of damages. In addition to damages, a finding of civil or criminal liability
could lead to suspension or debarment of the contractor if it is found to be not
currently responsible, which would make some or all of the contractor's
operations ineligible to be awarded U. S. Government contracts for a period of
time. Such civil or criminal liability or suspension or debarment could have a
material adverse effect on the Company. Management is unable to make a
meaningful estimate of the amounts or range of loss that could result from this
litigation, however, management does not anticipate that the ultimate resolution
of this litigation will have a material effect on the Company's consolidated
financial position.
<PAGE>
Item 2. Managements' Discussion and Analysis
- ------- ------------------------------------
OVERVIEW
With respect to the Company's financial results for the first quarter
of 1997, revenue was $250.6 million, up 11% for the three months ended March 31,
1997, compared to the first quarter of 1996. Net income was $6.9 million, up 27%
for the same period. Earnings per share of $0.23 for the three months ended
March 31, 1997, reflects a 21% increase over the previous year. Earnings per
share for both periods presented reflects the two-for-one stock split announced
in February of this year.
Once again, changes in exchange rates impacted the Company's results.
Excluding the effect of the changes in the German mark to the U.S. dollar,
revenue would have increased 14% for the three months ended March 31, 1997,
compared to the same period in 1996.
Revenue is presented below by strategic business unit, reflecting the
organizational changes made in the Company's realignment. In addition, the
categories for services provided have been revised to present more clearly the
business activities of the Company. BDM continues to broaden its revenue base,
increasing in both absolute and percentage terms the revenue derived from
commercial business and from information technology services and products. The
Company's contract backlog was $2.1 billion and proposal backlog was $1.2
billion as of March 31, 1997.
REVENUE
For the Three Months Ended March 31,
1997 1996
-------------- ---------------
(in millions, except percentages)
Client Category
U.S. Department of Defense $ 89.6 36% $ 82.8 37%
International Defense 73.0 29% 58.9 26%
Civil Government 40.5 16% 45.5 20%
Commercial 47.5 19% 37.9 17%
------ --- ------- ---
Total $ 250.6 100% $ 225.1 100%
====== === ======= ===
Services Provided
Information Technology $ 122.5 49% $ 104.6 47%
Technical Services 107.7 43% 99.5 44%
Enterprise Management 20.4 8% 21.0 9%
------ --- ------- ---
Total $ 250.6 100% $ 225.1 100%
====== === ======= ===
Strategic Business Unit
Federal Systems $ 118.9 47% $ 107.1 48%
Enterprise Management Services 56.6 23% 45.7 20%
BDM Europe 43.4 17% 52.2 23%
Integrated Supply Chain Solutions 12.3 5% 4.0 2%
State and Local Systems 10.0 4% 10.8 5%
BDM Technologies 9.4 4% 5.3 2%
------ --- ------- ---
Total $ 250.6 100% $ 225.1 100%
====== === ======= ===
<PAGE>
Revenue by Client Category
--------------------------
U.S. Department of Defense (DOD): Revenue derived from the U.S.
Department of Defense (DOD) increased 8% in the first quarter of 1997,
compared to the same period in 1996. There were a variety of
contributors to this growth including contracts for defense test and
evaluation and support for ballistic missile defense and other military
programs, much of which involves information systems architecture,
design, modeling, and testing. In addition, sales of hardware and other
equipment increased slightly over the prior year.
International Defense: Revenue from international defense business
increased 24% in 1997 over 1996, due to higher revenue from the
Company's contracts in Saudi Arabia. This growth in the Middle East
offset a reduction of revenue in Germany due to the end of "blanket
order agreements" with the German Ministry of Defense (MOD), which were
available for a three-year period following the acquisition of IABG in
late 1993. Effective January 1, 1997, each procurement with the MOD now
requires a new contract, which has proven to be an administratively
slower process. Such delays are not expected in the remainder of the
year. Exchange rate fluctuations also impacted the growth of the
Company's European activities as a result of a stronger U.S. dollar.
Excluding the impact of the exchange rate, international defense
revenue would have increased 28%.
Civil Government: Revenue from civil government contracts declined 11%
from the first quarter of 1997 compared to the same period in 1996.
This decline reflects the continuation of several factors mentioned in
earlier disclosures, including a decline in revenue generated from
environmental restoration and waste management programs for the
Department of Energy as a result of continued budget reductions. There
has also been a decline in revenue generated from state government
contracts due to a postponement of decisions on such contracts as
states assess the impact of the new Federal Welfare Reform law enacted
in 1996. In addition, the Company has experienced implementation
difficulties on one of its state contracts. The Company is currently in
discussions with the client. Until a resolution is reached, the Company
is not recognizing profit on the contract. The reduction in civil
government revenue also reflects lower pass-through contracts from the
German government and the decline of the German mark versus the U.S.
dollar. These reductions were partially offset by additional Job Corps
Center business.
Commercial: The increase of 25% in commercial revenue for the three
months ended March 31, 1997, reflects the growth from semiconductor
integration, warehouse automation, enterprise resource planning and
integration, business process transformation, and other services. This
growth was also fueled by revenue from various private sector customers
of companies acquired during 1996. The international commercial
business was impacted by the aforementioned fluctuations in the German
mark to U.S. dollar exchange rate. Excluding the impact of the currency
fluctuations, commercial revenue would have increased by 32% in the
first quarter of 1997.
Revenue by Services Provided
----------------------------
Starting with the first quarter of 1997, the Company defines
its revenue by service type in a different manner in an effort to more
clearly present the business activities of the Company. The new
categories include Information Technology, Technical Services, and
Enterprise Management.
Information Technology : Includes all activities where the principal
result of the effort (1) pertains to the requirements, design,
implementation, operation, or maintenance of an information system; (2)
utilizes one or more information technology products as the principal
means of producing results; or (3) relates directly to studies or
analysis wherein the dominant aspect is information technology or the
application of information technology. Revenue in this area increased
17% for the three months ended March 31, 1997, compared to the same
period in 1996. This increase was driven by organic growth in the
Integrated Supply Chain Solutions, Federal Systems and BDM Technologies
business units, as well as revenue from the companies acquired during
1996.
Technical Services : Includes a broad range of scientific, engineering,
technical assistance, and consulting services which are not encompassed
in the information category described above. The increase in Technical
Services revenue of 8% in the first quarter of 1997 is a result of
growth in a number of contracts including the expansion of work in
Saudi Arabia and technical support for a variety of military programs.
Enterprise Management: Represents business in which the Company manages
and operates research and development centers and other facilities on
behalf of its customers. An increase in the Company's Job Corps Center
business was offset by a decline due to the completion of a support
contract at a U.S. Air Force Base, resulting in slightly lower revenue
in this area for the first quarter of 1997.
Revenue by Strategic Business Unit
----------------------------------
Federal Systems: Revenue from Federal Systems grew 11%, reflecting
expanded work for a variety of federal agencies, most notably involving
information technology for various defense activities, and also
increased services and support in defense test and evaluation,
ballistic missile defense, and other military programs. Hardware sales
increased somewhat over the prior year, which also contributed to the
higher revenue. This was partially offset by a decline in work for the
U.S. Department of Energy.
Integrated Supply Chain Solutions: Revenue from Integrated Supply Chain
Solutions increased 208% over the previous year period. This growth
reflects a 118% increase in the Company's organic business as well as
revenue from the RGTI acquisition. This business unit also had
substantial contract awards and proposal backlog in the first quarter
of 1997.
Enterprise Management Services: Revenue from Enterprise Management
Services grew 24% as a result of higher revenue in most aspects of its
business, including its work in Saudi Arabia and additional Job Corps
Center revenue. This growth was partially offset by a reduction
resulting from the end of the Company's contract to manage a U.S. Air
Force Base.
BDM Europe: Revenue from BDM Europe declined due to the impact of
changes in the exchange rates, as well as a decline in revenue
denominated in local currency. The real decline in BDM Europe's revenue
is largely attributable to the end of "blanket order agreements" with
the German MOD. As mentioned above, the Company's German subsidiary has
experienced administrative delays with the new contracting process,
although this is expected to improve for the remainder of the year.
State and Local Systems: Revenue declined in the first quarter of 1997,
versus the same period in 1996 as described above under the Civil
Government section.
BDM Technologies: This business unit consists of several developmental
units including Year 2000+ development, Internet/Intranet Technology,
Network Security, and IT Services. Due to the developmental nature of
this unit, the quarterly results may be more variable than that of the
strategic business units.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected financial data:
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
---------------------------------------------------
1997 1996
------------------------ --------------------
(millions, except percentages)
<S> <C> <C> <C> <C>
Revenue $ 250.6 100.0% $ 225.1 100.0%
Cost of sales 208.2 83.1 188.9 83.9
Selling, general and administrative 24.3 9.7 20.4 9.1
Depreciation, amortization and other 4.3 1.7 4.1 1.8
---------- ------- ------ ------
Operating profit 13.8 5.5 11.7 5.2
Interest (income) expense, net (0.9) (0.4) (0.2) (0.1)
Equity in earnings of affiliates (0.5) (0.2) (0.5) (0.2)
Minority interest 3.2 1.3 2.9 1.3
----------- ------ ------ ------
Income before taxes 12.0 4.8 9.5 4.2
Provision for income taxes 5.1 2.0 4.1 1.8
----------- ------ ------ ------
Net income $ 6.9 2.8% $ 5.4 2.4%
========== ====== ======= ======
</TABLE>
COST OF SALES
Cost of sales, which includes salaries, benefits, subcontractor
expenses, materials and overhead costs, decreased as a percentage of revenue in
the three months ended March 31, 1997 compared to the three months ended March
31, 1996, driven by improved profit margins in a variety of the Company's
business areas. This profit margin improvement was partially offset by the
impact of a slight increase in hardware pass-throughs occurring in 1997. These
pass-throughs represent the procurement of computer hardware and other equipment
on behalf of customers, and often tend to attain lower profit margins than
revenue from services. Sales pertaining to such materials as a percent of
revenue were 5.7% in the first quarter of 1997 and 4.9% in the first quarter of
1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative (SG&A) expense, which includes the
Company's research and development costs (R&D), increased as a percentage of
revenue in the first quarter of 1997, compared to the same period in the
previous year. This increase was largely due to investments made for recruiting,
marketing, and research and development primarily related to software
development and enhancements. These investments were focused on the Company's
Year 2000 efforts and state child support and welfare systems. The increase also
includes the SG&A of several commercial companies acquired during 1996, which
have higher SG&A than BDM's government business units.
DEPRECIATION , AMORTIZATION AND OTHER
Depreciation, amortization and other costs increased in the first
quarter of 1997, compared to the first quarter of 1996. The depreciation
component remained relatively flat, reflecting the implementation of a new
financial and management information system in the fourth quarter of 1996 at
Federal Systems, offset by the impact of the German mark to U.S. dollar exchange
rate on depreciation related to fixed assets in Germany. Amortization expense
increased for the first three months of 1997, compared to the same period in the
prior year, reflecting amortization of goodwill and other intangible assets
associated with acquisitions completed during 1996.
INTEREST (INCOME) EXPENSE, NET
Net interest income increased for the three months ended March 31,
1997, compared to the comparable period in 1996, reflecting $15.3 million in net
proceeds from a public stock offering in March 1996. In addition, a currency
gain recognized on the settlement of borrowings in German marks also contributed
to higher interest income.
EQUITY IN EARNINGS OF AFFILIATES
Equity in earnings of affiliates represents the Company's share of
earnings from unconsolidated joint ventures. These amounts have remained stable
compared to the prior year period.
MINORITY INTEREST
The minority interest share of earnings increased for the three months
ended March 31, 1997, compared to the same period in the previous year, and was
unchanged as a percentage of revenue. This increase reflects improved
profitability of joint ventures in the Middle East.
PROVISION FOR INCOME TAXES
The difference between the combined statutory federal and state income
tax rate of 42% and the Company's actual effective income tax rate of 43% for
the three month periods ended March 31, 1997 and 1996, is primarily attributable
to certain goodwill amortization which is not deductible for federal income tax
purposes. This effective income tax rate also reflects the impact of the
Company's international expansion into countries with higher income tax rates
than the United States.
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
The Company's cash flow from operating activities reflects lower
advances from international customers received than in prior periods. Cash from
other aspects of operations partially offset this reduction in cash flow, and a
slight increase in borrowings on the Company's revolving credit agreement also
provided additional resources to cover peak cash needs during the period.
Cash flow related to investing activities primarily consists of capital
expenditures, as well as working capital infusions to and earnings distributions
from unconsolidated joint ventures. Included in the capital expenditures for the
period is a cash payment of approximately $7.6 million related to the purchase
of property by the Company's German subsidiary, IABG. Also included in investing
activities is approximately $1.7 million for payment related to the acquisition
of ASD.
Financing activities consisted primarily of changes in borrowings on
the Company's working capital facility and repayment of acquisition debt. In
addition, the Company continued to provide a benefit to employees by enabling
them to purchase shares of common stock through stock option exercises and an
employee stock purchase plan. Financing cash flow for the first quarter of the
prior year also included the net proceeds from a public stock offering of $15.3
million completed in March of 1996.
<PAGE>
***
The foregoing discussion of various factors that may impact 1997
performance contain certain forward looking statements. In addition, the Company
or its representatives from time to time may make or have made certain forward
looking statements. Those forward looking statements made by the Company or its
representatives are qualified in their entirety by reference to the discussion
in this press release, other public documents, and the discussion of important
factors that could cause the Company's actual results to differ materially from
those projected or discussed in those forward looking statements. It is intended
that the foregoing constitute meaningful cautionary statements so as to obtain
the protections of the safe harbor established for such statements by the
Private Securities Litigation Reform Act of 1995.
# # #
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits:
11. Statement of Computation of Earnings Per Share
(b) Reports on Form 8-K:
None.
<PAGE>
BDM INTERNATIONAL, INC.
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.
May 14, 1997 BDM INTERNATIONAL, INC.
C. Thomas Faulders, III
-----------------------
C. Thomas Faulders, III
Executive Vice President,
Treasurer and Chief Financial
Officer
<PAGE>
BDM INTERNATIONAL, INC.
INDEX TO EXHIBITS
Exhibit No.
11. Statement of Computation of Earnings Per Share
27. Financial Data Schedule
BDM INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
March 31,
1997 1996
------ ------
Net Income $6,875 $5,407
====== ======
Shares used for primary earnings per share:
Weighted averaged
shares outstanding 28,938 26,356
Dilutive effect of common
stock equivalents-noncontingent
stock options 1,478 1,600
------ ------
Total shares used for primary
earnings per share 30,416 27,956
====== ======
Additional shares used for fully diluted
earnings per share:
Increase for dilutive effect of
contingent stock options -- 142
-- ---
Total shares used for
fully diluted earnings per share 30,416 28,098
====== ======
Earnings per share:
Primary $0.23 $0.19
===== =====
Fully diluted $0.23 $0.19
===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 54,762
<SECURITIES> 0
<RECEIVABLES> 239,738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 300,795
<PP&E> 54,767
<DEPRECIATION> 0
<TOTAL-ASSETS> 403,732
<CURRENT-LIABILITIES> 167,646
<BONDS> 0
0
0
<COMMON> 290
<OTHER-SE> 174,969
<TOTAL-LIABILITY-AND-EQUITY> 403,732
<SALES> 250,578
<TOTAL-REVENUES> 250,578
<CGS> 208,209
<TOTAL-COSTS> 236,811
<OTHER-EXPENSES> 2,699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (909)
<INCOME-PRETAX> 11,977
<INCOME-TAX> 5,102
<INCOME-CONTINUING> 6,875
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,875
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
